CLOSE-UP Annual Report 2011 CLOSE-Up Annual report 2011

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Tv Sd AgTv SdCLOSE-UPAnnual Report2011GermanyMunich USAPhiladelPhiaSouth Africa CAPE TOWN33 55' s 18 25' E39 57' N 75 10' w48 09' N 11 35' EIndiaNew delhi28 40' N 77 13' ETv Sd AGWestendstr. 19980686 Munich / Germanyphone:// +49 (0)89 5791-0fax:// +49 (0)89 5791-1551mail:// info@tuev-sued.de: // Tuev-Sued.comImprIntPublished byTVSD AG Westendstr. 199 80686 Munich / Germanyphone / +49 (0)89 5791-0 fax / +49 (0)89 5791-1551mail / info@tuev-sued.de web / www.tuev-sued.com TV SD AG / Munich. All rights reserved.Corporate CommunicationsMatthias Andreesen Viegas Jrg RiedleCorporate Finance & AccountingReinhold HaasPhotographySouth Africa Frederic Streicher Corbis: Angelo CavalliGermany Tillmann Franzen Corbis: Ocean, Paul Russel, Stevens Fremont India Sorin Adrian Morar Corbis: Rob Melnychuk, Photo AltoDesignStrichpunkt GmbH, Stuttgart and Berlinwww.strichpunkt-design.deProduction G. Peschke Druckerei GmbH, MunichTv Sd Ag: // Tuev-Sued.COM Tv Sd AgAnnuAl RepORT 2011CloSe-Uptv SdCLOSE-UpAnnual report2011195195 212 2121660050COunTRIeSlOCATIOnSeMplOYeeS17,16148 09' N 11 35' E33 55' s 18 25' E28 40' N 77 13' E39 57' N 75 10' wTv Sd AgTv Sd AgTv Sd AGWestendstr. 19980686 Munich / Germanyphone:// +49 (0)89 5791-0fax:// +49 (0)89 5791-1551mail:// info@tuev-sued.deAnnuAl RepoRt 2011Close-Up: // Tuev-Sued.comTv SdCLOSE-UPAnnual Report2011GermanyMunich USAPhiladelPhiaSouth Africa CAPE TOWN33 55' s 18 25' E39 57' N 75 10' w48 09' N 11 35' EIndiaNew delhi28 40' N 77 13' E60050COUNTRIESLOCATIONSEMPLOYEES17,161210 21015 195ImprIntPublished byTVSD AG Westendstr. 199 80686 Munich / Germanyphone / +49 (0)89 5791-0 fax / +49 (0)89 5791-1551mail / info@tuev-sued.de web / www.tuev-sued.com TV SD AG / Munich. All rights reserved.Corporate CommunicationsMatthias Andreesen Viegas Jrg RiedleCorporate Finance & AccountingReinhold HaasPhotographySouth Africa Frederic Streicher Corbis: Angelo CavalliGermany Tillmann Franzen Corbis: Ocean, Paul Russel, Stevens Fremont India Sorin Adrian Morar Corbis: Rob Melnychuk, Photo AltoDesignStrichpunkt GmbH, Stuttgart and Berlinwww.strichpunkt-design.deProduction G. Peschke Druckerei GmbH, MunichDivision Strategic business segment InDuSTRY SeRVICeSReAl eSTATe SeRVICeSRAIlInDuSTRYTV SDPRODuCT SeRVICeSMAnAGeMenT SeRVICeSACADeMYCeRTIFICATIOn 1,2711,356 1,410 1,553 1,67820072008 2009*2010*2011** From continuing operationsF 01 tV SD StrUCtUrEF 04 rEVEnUE (In mILLIOnS)F 03 rEVEnUE BY StrAtEGIC BUSInESS SEGmEnt (%)AuTO SeRVICeSAuTOMOTIVeMOBIlITYlIFe SeRVICeSF 02 HEADCOUnt13,185200714,138200816,0582010*14,4592009* 2011*17,161t 01 KEY FIGUrESTHe GROuP AT A GlAnCe2007 2008 2009* 2010* 2011*IFRS IFRS IFRS IFRS IFRSBusiness development (in millions)Revenue 1,270.7 1,365.2 1,409.9 1,552.5 1,677.7Personnel expenses 725.7 795.2 847.0 900.1 986.2Cash flow from operating activities 123.6 178.8 150.4 144.9 154.6Capital expenditures 39.7 68.5 45.5 52.2 64.4Income before taxes 115.9 106.7 101.6 123.4 133.6Consolidated net income 52.1 68.6 72.4 74.6 107.2eBT margin (%) 9.1 7.8 7.2 7.9 8.0eBT margin, adjusted (%) 8.0 8.7 8.2 7.2 7.2eBIT margin (%)** 9.1 8.9 8.7 9.2 9.5eBIT margin, adjusted (%)** 10.2 9.8 9.7 8.5 8.5Assets (in millions)non-current assets 716.2 749.0 761.7 823.2 824.1Current assets 377.5 413.6 494.0 551.3 605.9Total assets 1,093.7 1,162.6 1,255.7 1,374.5 1,430.0equity ratio (%) 26.9 32.5 32.0 34.3 37.7Employees (annual average) Full-time equivalents 12,360 13,122 13,748 14,662 16,018Employees (as of December 31)Headcount 13,185 14,138 14,459 16,058 17,161* From continuing operations** eBIT: earnings before interest, before currency translation gains/losses from financing measures and before income taxes; including income from participationsCeRTIFICATIOn 24.9 InDuSTRY 39.6 MOBIlITY 35.4OTHeR 0.12011* Before taxes1,677.7 133.6 64.4 revenue income*capital expenditures ImprIntPublished byTVSD AG Westendstr. 199 80686 Munich / Germanyphone / +49 (0)89 5791-0 fax / +49 (0)89 5791-1551mail / info@tuev-sued.de web / www.tuev-sued.com TV SD AG / Munich. All rights reserved.Corporate CommunicationsMatthias Andreesen Viegas Jrg RiedleCorporate Finance & AccountingReinhold HaasPhotographySouth Africa Frederic Streicher Corbis: Angelo CavalliGermany Tillmann Franzen Corbis: Ocean, Paul Russel, Stevens Fremont India Sorin Adrian Morar Corbis: Rob Melnychuk, Photo AltoDesignStrichpunkt GmbH, Stuttgart and Berlinwww.strichpunkt-design.deProduction G. Peschke Druckerei GmbH, MunichDivision Strategic business segment InDuSTRY SeRVICeSReAl eSTATe SeRVICeSRAIlInDuSTRYTV SDPRODuCT SeRVICeSMAnAGeMenT SeRVICeSACADeMYCeRTIFICATIOn 1,2711,356 1,410 1,553 1,67820072008 2009*2010*2011** From continuing operationsF 01 tV SD StrUCtUrEF 04 rEVEnUE (In mILLIOnS)F 03 rEVEnUE BY StrAtEGIC BUSInESS SEGmEnt (%)AuTO SeRVICeSAuTOMOTIVeMOBIlITYlIFe SeRVICeSF 02 HEADCOUnt13,185200714,138200816,0582010*14,4592009* 2011*17,161t 01 KEY FIGUrESTHe GROuP AT A GlAnCe2007 2008 2009* 2010* 2011*IFRS IFRS IFRS IFRS IFRSBusiness development (in millions)Revenue 1,270.7 1,365.2 1,409.9 1,552.5 1,677.7Personnel expenses 725.7 795.2 847.0 900.1 986.2Cash flow from operating activities 123.6 178.8 150.4 144.9 154.6Capital expenditures 39.7 68.5 45.5 52.2 64.4Income before taxes 115.9 106.7 101.6 123.4 133.6Consolidated net income 52.1 68.6 72.4 74.6 107.2eBT margin (%) 9.1 7.8 7.2 7.9 8.0eBT margin, adjusted (%) 8.0 8.7 8.2 7.2 7.2eBIT margin (%)** 9.1 8.9 8.7 9.2 9.5eBIT margin, adjusted (%)** 10.2 9.8 9.7 8.5 8.5Assets (in millions)non-current assets 716.2 749.0 761.7 823.2 824.1Current assets 377.5 413.6 494.0 551.3 605.9Total assets 1,093.7 1,162.6 1,255.7 1,374.5 1,430.0equity ratio (%) 26.9 32.5 32.0 34.3 37.7Employees (annual average) Full-time equivalents 12,360 13,122 13,748 14,662 16,018Employees (as of December 31)Headcount 13,185 14,138 14,459 16,058 17,161* From continuing operations** eBIT: earnings before interest, before currency translation gains/losses from financing measures and before income taxes; including income from participationsCeRTIFICATIOn 24.9 InDuSTRY 39.6 MOBIlITY 35.4OTHeR 0.12011* Before taxes1,677.7 133.6 64.4 revenue income*capital expenditures For almost 150 years, TVSD experts have been working to make our world a safer place. Their aim: to maintain a decisive technological edge on the com-petition. Each and every day, more than 17,000 employees give serious consid-eration to the issues that concern people today and that will concern them in years to come. Our experts and engineers share the common goal of bringing together people, technology and the environment. At more than 600 locations in some 50 countries, they increase safety and add economic value for our customers. Leveraging innovative services, they optimize technology, systems and expertise. In a series of close-ups, this annual report examines some of the specific questions our employees have been concerned with during the past year and that, we believe, concern people the world over: How, given the growing popula-tion, can we enable mobility in the future? What has to be done to make sure the new energy concept succeeds? How do we ensure the safety and quality of food? And, in addition to all this, how can we get even closer to our customers? We invite you to check out our close-ups and join us on a voyage of discovery through the world of TV SD.Management and Supervisory Board 1Close-up2Group Management Report3Consolidated Financial Statements421 2 3 4 ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS50 I Business operations 58 I Macroeconomic development and developments in relevant markets 63 I Business review and economic situation 66 I Net assets, financial position and results of operations82 I Non-financial performance indicators93 I Risk report 100 I Subsequent events 100 I Foundation 101 I Opportunities and outlook 6 I Message from the Board of Management10 I On site worldwide12 I Supervisory Board report16 I E-Mobility The future is an open road24 I EnErgy The untapped resource32 I FooD Our daily bread40 I growth In Africa106 I Consolidated income statement 107 I Consolidated statement of comprehensive income 108 I Consolidated statement of financial position109 I Consolidated statement of cash flows110 I Consolidated statement of changes in equity112 I Notes to the consolidated financial statements162 I Auditors report 163 I Corporate boards taBle oF ContentS3TV SD ANNUAL REPORT 201141 2 3 4 ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentSContentPage 6Message froM the Board of ManageMentPage 10on site worldwidePage 12supervisory Board reportChapter 1Management and Supervisory BoardContentPage 6Message froM the Board of ManageMentPage 10on site worldwidePage 12supervisory Board reportaxel Stepkenpeter kleindirk eilerSHorSt SCHneiderkarSten xanderMeSSage FroM tHe Board oF ManageMentladieS and gentleMen,Throughout the world, 2011 was characterized by economic and political changes. TVSD developed well in this environment in the past year. Our company recorded organic growth of almost 10%. Overall, our growth totaled more than 8%, as we sold some subsidiaries in Asia and Europe for strategic reasons in 2011. At just under 1.7 billion, revenue reached a new record level, with all strategic business segments again contributing to this positive development. Since 2007, our revenue has increased by 32%. Income before taxes also increased by more than 8% year-on-year to 134 million in 2011. The return on sales, calculated using income before taxes, stands at 8%. Consolidated net income for the year also increased significantly in 2011. These figures show that growth and earnings power go hand in hand at TV SD. We want to grow profitably and we have achieved this goal yet again in 2011.We generated around 35% of our revenue outside Germany in 2011 two percentage points more than the prior year. We aim to increase this figure to 40% in the medium term. The economic performance of TVSD is also reflected in the statement of financial position. Our equity ratio increased again in 2011 and now stands at almost 38%. This creates power and independ-ence for TV SDs future development.We are leveraging this power to continue investing in the companys future: we spent some 64 million for this purpose in 2011. The investment volume for 2011, excluding business acquisitions, was there-fore some 23% up on the prior-year figure. 7TV SD ANNUAL REPORT 2011Our sustainable growth also received external recognition in the past year: in the fall of 2011, TVSD won the bronze medal in the coveted TOP 500 Award presented by Die Welt publishing group, placing us third among Germanys leading companies. The jury praised our sustainable revenue and earnings growth during the past five years as well as the innovative power and successful globalization of our business. Before that, TVSD had won strategy consulting firm Roland Bergers Best of European Business award for its successful expansion strategy in South-East Asia in February 2011. Our economic strength is also the basis for safeguarding jobs and increasing headcount. TVSD created around 1,100 new jobs in the past year most of them abroad, and around 400 in Germany. At year-end, 17,161 people worked for our company worldwide. TVSD is increasingly regarded as an attractive employer: in 2011, we placed high in several respected employer rankings ahead of our competitors. We are very proud of this result, because we know that TV SDs success is due above all to the knowledge and hard work of our employees all around the world. They guarantee the success of this company. As the Board of Management of TV SD, we would like to thank all employees for their efforts in 2011. Business development in 2011 shows that our company is in a good position. The strategic realignment of the past years is bearing fruit. We pressed ahead with this process in 2011 and began streamlining our service portfolio as part of the TVSD FIT 2012+ program. This gives us the scope to target investments in the strategic growth areas and thus continue our international expansion. We are concentrating our strengths in our core competencies. To this end, we have taken another step toward focusing our activities through divestitures, including the sale of the TVSD Life Science division and the student training business. At the same time, we are creating opportunities for our future growth through targeted acquisitions.We are currently working systematically on improving our position in international growth markets and want to win new market segments and develop new target groups. In the past year, we further strengthened our international competitiveness, above all in Asia, South Africa, Western Europe and North America, by stepping up the globalization of our activities. ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS81 2 3 4 In addition to developing new markets, we are using systematic innovation management to tap into the potential of future technologies. Whether in electromobility, renewable energies, embedded systems or energy efficiency our customers of today can count on our knowledge and understanding of the technologies of tomorrow. But thats not all: we actively help shape these disciplines and make our knowledge available to others. For example, we have been active in the field of electromobility for several years. In 2011, our activities included developing a worldwide network of battery test labs with its main facility in Garching near Munich. At this lab, which provides more than 1,000 square meters of laboratory space and considerably more than 100 test stations, we test batteries for safety, power and reliability under extreme conditions. The new test lab in Germany supplements our facilities in the USA, Canada, Singapore, China and the UK. Other facilities in Korea and China will follow in 2012. Our goal is clear: we want to become the top international provider of testing and certification services for safety in electromobility. We are working every bit as systematically on many other fields of innovation. For example, we are active in the area of embedded systems. These integrated systems are playing a key role in our increasingly automated and networked world. They are the brain of many devices and systems, and are deployed for measuring, controlling and regulation tasks in all sectors. Our group-wide compe-tence center in Munich already offers a large number of services in this area for example, for the development of smart electricity grids. We add value for our customers with our innovations and tried-and-tested products. This standard applies just as much today as it did when our company was founded almost 150 years ago. Munich, april 26, 2012tHe Board oF ManageMent oF tvSd ag9TV SD ANNUAL REPORT 201101ggerMany01 rEgionaMeriCaS02 rEgionweStern europe03 rEgionCentral & eaStern europe04 rEgionMiddle eaSt/aFriCa05 rEgionSoutH aSia06 rEgiongreater CHina07 rEgionaSean08 rEgionkorea09 rEgionjapanon Site worldwideManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS101 2 3 4 g020306050407090811TV SD ANNUAL REPORT 2011SUPERVISORY BOARD REPORTLADIES AnD GEnTLEmEn,TVSD continued its successful business development in 2011. The strategic realignment of the TVSD Group initiated in 2009 has delivered further results.Even in a year characterized by great political and economic uncertainty as well as a number of far-reaching changes, TVSD proved itself to be robust and profitable.In the reporting year, the Supervisory Board performed the tasks required of it by law and the articles of incorporation and bylaws. We regularly monitored the Board of Managements leadership of the company and offered advice as required on the strategic development of the TVSD Group as well as on significant current measures, particularly the acquisitions and divestitures performed in the fiscal year 2011. The Board of Management provided us with regular, comprehensive and timely written and verbal reports on the general situation of the TVSD Group, current business development, business planning, strategy orientation, and the risk situation, including risk management. Quarterly reports supplemented the flow of information. Variances from planning were explained to us in detail. In addition, the Board of Management discussed the TVSD Groups strategic orientation with us.At the four meetings in 2011, we discussed, among other things, the separate and consolidated financial statements for 2010, as well as group strategy, and planning for 2012 to 2014.We dealt in detail with the various business acquisitions and divestitures as well as risk manage-ment. One particular focus of our meetings was on supporting the TVSD FIT 2012+ efficiency program initiated by the Board of Management. Important progress was made in implementing the program, which aims to increase competitiveness and further enhance efficiency. The systematic focus on the core business of the TVSD Group and targeted business combinations will further strengthen the company for the future. Personal meetings were also held on a regular basis between the Chairman of the Supervisory Board and the Chairman of the Board of Management. This ensured that the Supervisory Board was kept informed in detail about the companys situation and plans.The separate financial statements of TVSD AG, the consolidated financial statements and the combined management report were audited by KPMG AG Wirtschaftsprfungsgesellschaft, 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 Boards closing meeting on April 26, 2012, in the presence of the auditor, who presented a report on ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS121 2 3 4 the main results of the audit. We conducted an extensive review of the financial statements of TVSD AG, the consolidated financial statements and the combined management report.We agreed with the findings of the auditor and have no objections following the final result of our review. We approve the financial statements and consolidated financial statements. We recommend that the shareholders ratify the financial statements, approve the consolidated financial statements and the combined management report, and the proposal from the Board of Management for the appropriation of profits.Changes were made to the composition of the Supervisory Board in 2011: Mr. Zygmunt Mierdorf retired from the Supervisory Board after the annual general meeting on May 13, 2011. Dr. Christine Bortenlnger, member of the Board of Management of Bayerische Brse AG, was elected to the Supervisory Board in his stead. As of December 31, 2011, Mr. Johann Schwaiger retired from the company and from the Supervisory Board of TVSD AG on reaching retirement age. Employee representative Mr. Reinhold Rieger joined the Supervisory Board as his elected replacement. The Supervisory Board thanks Mr. Mierdorf and Mr. Schwaiger for their work and trustful cooperation, and wishes the newly appointed members of the Supervisory Board, Dr. Bortenlnger and Mr. Rieger, every success in their tasks.On behalf of the Supervisory Board, I would like to thank the members of the Board of Management, executives, employees and employee representatives for their successful work and exemplary com-mitment in the fiscal year 2011.proF. dr.-ing.HanS-jrg BullingerChairman of the Supervisory Board of tvSd agMunich, april 26, 201213TV SD ANNUAL REPORT 2011ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS141 2 3 4 ContentPage 16E-MobilityPage 24ENERGyPage 32FooDPage 40GRoW tHChapter 2Close-UPContentPage 16E-MobilityPage 24ENERGyPage 32FooDPage 40GRoW tHGermanyMunichPage 18SingapOREpagE 23E-MOBILITYSouth KoreaSeoulPage 2301 17' N 103 50' E48 09' N 11 35' E37 34' N 126 59' Ee-mobilitY01 17' N 103 50' E48 09' N 11 35' E37 34' N 126 59' EGermanyMunichPage 18SingapOREpagE 23E-MOBILITYSouth KoreaSeoulPage 2301 17' N 103 50' E48 09' N 11 35' E37 34' N 126 59' EJrn Kieckbusch loves extremes: when the 36-year-old sets to work on his test pieces, they have to withstand temperature fluctuations of 200 degrees Celsius. In the course of endurance tests, they are jolted and shaken, exposed to extreme humidity and dryness, and pushed to their very limits and, in the best case scenario, they function just as well afterwards as they did before. Jrn Kieckbusch is an electrical engineer and tests batteries of the kind used, for instance, in electric vehicles.This sector is a real live wire: management consultants A.T. Kearney anticipate the future global market for electric vehicles to be worth as much as 280 billion. They forecast that by 2020 one in ten new vehicles could be an electric or hybrid. In view of these prospects, its no surprise that almost every major manufacturer is working intensively on getting e-mobiles ready for series produc-tion. Also, the big auto shows in Frankfurt am Main, Geneva, Detroit and Beijing all focused on this revolution in mobility.One-Of-a-kind cOmpetency centerThe beating heart of any e-vehicle concept is the battery, says Stefan Rentsch, who, together with his colleague Daniel Quinger, heads up the business of TVSD Battery Testing. The TVSD joint venture with development service provider LION smart specializes in putting batteries for electric vehicles through their paces.To this end, TVSD has set up a competence center which is quite likely the only one of its kind: a highly skilled team of 50 experts, working within a worldwide network of e-Mobilitythe future is an open roadHow can we ensure mobility for future generations? electric vehicles, which automakers worldwide are currently researching, are one sure-fire solution. and tVSd is playing a pioneering role with this new technology. taKe it to the liMitmanfred Stelz prepares parts of a battery for testing. Various driving cycles will later be simulated under different climatic conditions in the environmental chamber.19TV SD ANNUAL REPORT 2011Munich / 48 09' noRTh, 11 35' EAST aMbitious goal Jrn kieckbusch has been with tVSd Battery testing right from the start. With a skilled team, general managers daniel Quinger and Stefan rentsch (photo right) aim to make the company the global market leader in battery testing. eleCtriCity: the Driving forCethe battery is the beating heart of any electric vehicle. it must be robust, efficient and have a long life. after all, it accounts for almost 70% of the cost of an e-vehicle. the batteries are put through their paces using special test equipment. between the electrical energy storage devices, the battery management system and the temperature management system. When the process is complete, automobile manufacturers know exactly whether they can use their batteries as planned or whether additional development is required. Today, almost everything tested by TVSD Battery Testing is top secret. When it comes to e-mobility, the automobile industry is not generally talkative. That makes the praise with which vehicle manufacturer Volkswagen thanked the TVSD experts all the more impressive: Our collaboration on the safety qualification of battery cells was characterized by a particular cooperativeness. The project was conducted with great dedication and to our complete satisfaction.test centers, takes a long hard look at all kinds of modern electrical energy storage products from small cell-phone batteries to battery packs for electric sports cars, which can easily weigh half a metric ton. At test facilities in the USA and Canada, Great Britain, Germany, Singapore and China, the experts test the safety of electrical storage equipment in accordance with international standards as well as manufacturers specific requirements and provide information on their capacity and reliability in use.We test everything from individual cells, to modules, right through to complete systems, explains Rentsch. One key aspect is whether the batteries are protected against overcharging or mechanical stresses and how they respond when subjected to vibration or humidity. At system level, the main focus is on smooth interaction Munich / 48 09' noRTh, 11 35' EAST201 2 3 4 ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 SEoul / 37 34' noRTh, 126 59' EAST SingApoRE / 01 17' noRTh, 103 50' EAST unpreCeDenteD aDvanCes50 years ago, South koreas economy was dominated by agriculture. today, the country is one of the most important and wealthy industrial nations in the world. islanD of KnowleDgeSingapore is one of South-east asias growth centers. numerous high-tech companies and scientific and research institutes are based in the city.Drive by wireseoul Todays cars are safer than ever before: manufac-turers are focusing in particular on safety-related functions, such as braking systems. Partly to reduce the weight of the cars of the future, manufacturers are conducting in-depth research into how these systems can be controlled electrically. But what happens when multiple systems of this kind are operated exclusively by wire and when, for example, the steering is no longer linked mechanically to the front wheels? Published in 2011, the international ISO 26262 standard, governs electrical and electronic safety-relevant systems for installation in series production cars. The aim is to meet the current high standards and develop them further. ISO 26262 was developed in close collaboration with TVSD. Among those leveraging this expertise is a major Korean manufacturer, who is applying it to develop its future electric vehicle fleet: TVSD provides advice and assistance throughout the entire development process for new safety systems, keeping a close eye on factors including how hardware and software compo - nents interact with other electronic components inside or outside the vehicle. All this helps ensure that safety remains the top priority in the age of electromobility.Charging networksingapore How can e-mobility make the transition from niche product to a mass product? In addition to efficient and affordable vehicles, infrastructure will play a key role: electric vehicles have to be able to be charged quickly, easily and just about anywhere.In Singapore, TVSD is taking part in a project that has set itself precisely these goals. As part of a pilot project, the South-East Asian city state, which considers itself a pioneer in the field of electromobility, is currently examining the requirements that have to be met by a close-knit, functioning network of electrical charging stations. On behalf of the government, Robert Bosch GmbH developed an overall solution for charging e-vehicles and a close-knit network of charging stations, including the design of and technology for the charging stations. And Bosch called in TV SD to provide expert advice. The challenge: to demonstrate that the charging network complies with Singapores stringent safety standards no mean feat given the totally new nature of the technology. Following comprehensive tests and safety checks, TVSD gave the green light: And the streets between Orchard Road and Singapore River are now ideally equipped for drivers of electric vehicles.23TV SD ANNUAL REPORT 2011energYIndiaNew delhiPage 2620 54' N 74 46' EIndiashivajinagarPage 3128 40' N 77 13' EenergY20 54' N 74 46' E28 40' N 77 13' EenergYIndiaNew delhiPage 2620 54' N 74 46' EIndiashivajinagarPage 3128 40' N 77 13' ESolar panels on the roof of the taj palace Hotel heat service water. energy manger aalta moitra and anudeep Hajela from tVSd have calculated the resulting energy savings.neW delHi / 28 40' n, 77 13' e HarneSSing tHe Sun261 2 3 4 ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 nEw dElhi / 28 40' noRTh, 77 13' EASTEvery day, Anudeep Hajela fights to secure the energy supply of tomorrow. The 29-year-old TVSD South Asia employee has one goal: to ensure that electricity, heating and cooling remain available and affordable in the future. To this end, he promotes a totally new way of using energy to companies, private individuals and government offices around the Indian megacity of New Delhi. Hajela is trying to enlist customers to use a vast energy source. In every power plant, company and building, there are huge resources waiting to be tapped. Just how large they actually are no-one can say, not even Anudeep Hajela. The International Energy Agency estimates that they could add up to between 15% and 30% of global energy consumption each and every year. Whats more, these resources are totally environmentally and climate friendly, and relatively easy to harness. They are spread evenly across all the regions of the world and are inexhaustible on every continent.What we are talking about here is not some new, particularly sustainable form of energy generation. The vast resource in question is energy efficiency. Every day, Anudeep Hajela, regional manager for energy and environmental services in north India, convinces his customers that it pays to invest in more efficient cooling systems, more modern production facilities or better insulated office buildings. For some time now, developing economies above all the densely populated countries of India and China have been using more energy than the OECD countries. energythe untapped resourceWith the earths fossil resources becoming scarcer and global demand rising, where will the energy of the future come from? the time is ripe for the dawn of a new energy era.27TV SD ANNUAL REPORT 2011nEw dElhi / 28 40' noRTh, 77 13' EASTSaVingS WitHOut SacrificeSTake New Delhi, for example. The luxury Taj Palace Hotel in the up-market Chanakypuri district is one of the Indian capitals finest addresses and part of the global Taj Hotels Resorts and Palaces chain, which has some 100 high-class hotels on all continents. In a process lasting several weeks, consultants from TVSD subjected the energy consumption of the Taj Palace Hotel to close scrutiny from the air-conditioning system for more than 400 rooms, to the entire electricity supply, through to service facilities such as the hotels own laundry. In the end, the Taj Palace Hotel received an overview showing precisely where energy consumption was greatest and where tangible energy savings were economically feasible. Around 15% of the energy could be saved through manageable investment, says Anudeep Hajela. And, equally impor-tantly, these savings were achievable without making a stay at the Taj Palace Hotel any less comfortable or pleasant for guests.Because there is rising global demand for services like those of the Taj Palace Hotel, TVSD has pooled its services relating to energy efficiency in a comprehen-sive approach. To ensure that energy remains available and affordable in the future, the Group offers worldwide support from consulting for companies, to testing and certification of efficiency measures, through to training and seminars. The benefits: TVSD experts provide customers from all sectors with support for forward-looking energy concepts within the company, and an objective analysis of the costs and benefits of investing in more efficient systems. After all, energy efficiency should make economic sense. For many companies, it is every bit as important to document their sustainability for their own customers and employees, says Hajela. The fact that TVSD provides independent and impartial assessments means that our services enjoy a high level of acceptance. the CrMe De la CrMethe luxury taj palace Hotel is the finest address in the indian capital, new delhi. for todays guests, its no longer just excellent service that counts; sustainability is also becoming increasingly important. a gliMpse behinD the sCenesabove: guests dont normally see the hotels service facilities, for example the in-house tailors shop. right: the electricity for these facilities, like that for the guests, is supplied and controlled centrally.281 2 3 4 ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 nEw dElhi / 28 40' noRTh, 77 13' EASTShivAjinAgAR / 20 54' noRTh, 74 46' EASTlife-giverWithout the sun, there would be no life on earth. modern technologies and large-scale projects make it possible to use the sun to help generate electricity on a large scale.Catching the sun shivajinagar Savings through enhanced efficiency are one way of ensuring there is sufficient energy for future generations. Restructuring the energy supply by shifting the focus from fossil fuels to renewable energies is another. The United Nations target is for 30% of the energy consumed worldwide to be provided by wind, sun, water or geothermal energy by 2030. At present, these sources account for about 13%.A landmark project for the new energy concept is being implemented in the Indian state of Maharashtra, where the worlds largest photovoltaic power plant is taking shape near Shivajinagar. In the first construction phase, a rated capacity of 125 megawatts is planned to meet the electricity needs of around 400,000 people in the region. Two different technologies are being used. Crystalline silicone modules will be deployed in three blocks, each with a capacity of 25 megawatts, and thin-film modules in two further blocks. The entire power plant comprises five blocks that are networked with each other. TVSD is delivering support for the large-scale project. The experts are responsible for quality assurance throughout the entire construction process, through to commissioning of the plant. The companys tasks include testing the individual photovoltaic modules, handling quality assurance during construction, and monitoring the connection of the module blocks to each other and to the grid factors that are critical for the functionality and performance of the power plant as a whole. The costs for erecting the Shivajinagar Sakri power plant total INR20billion (some 300 million).Admittedly, solar energy still plays a relatively minor role in the global energy mix a mere 0.1% of the electricity consumed globally is generated using the sun. However, major projects like the photovoltaic power plant in Shivajinagar make an effective contribution to achieving the IEAs target of 5% by 2030.31TV SD ANNUAL REPORT 2011FOODIndiaBANGALOREpAGE 34USAPhiladelPhiaPage 3912 57' N 77 37' E39 57' N 75 10' wFOOD12 57' N 77 37' E39 57' N 75 10' wFOODIndiaBANGALOREpAGE 34USAPhiladelPhiaPage 3912 57' N 77 37' E39 57' N 75 10' wWhen Namrata Gupta reaches for a pot of strawberry yoghurt, shes not generally interested in the taste or the creamy consistency. Instead of enjoying spoon after spoon of the dairy product, the 32-year-old uncompromis-ingly puts it to the test: using alcohol, chloroform, benzene, ether and dozens of other chemicals, Gupta breaks the foodstuff down and examines its innermost structure to determine its precise composition. How much sugar does that sparkling orange soft drink really contain? Are these potato chips really organic, or are traces of pesticide detectable? And just how fresh is that appetizing, red-colored salami?Everyone has to eat and drink. We need at least some 100 kilojoules equivalent to roughly 20 grams of rice for each kilogram of body weight every day. Our metabolic rate increases depending on what we do for example, during hard physical work or sport. In addition, our metabo-lism requires at least one-and-a-half liters of liquid a day in order to function normally. How healthy is that soft drink really? And are these potato chips really organic, or do they contain traces of pesticides?foodour daily bread fooD testJunk food or healthy snack? Only painstaking analysis of food can reveal just how much fat, sugar and vitamins a product really contains.theres a saying that you are what you eat. So its hardly surprising that people increasingly want insight into the quality of the food we eat every day. companies like tVSd provide answers through a global test and monitoring network.35TV SD ANNUAL REPORT 2011bAngAloRE / 12 57' noRTh, 77 37' EASTbAngAloRE / 12 57' noRTh, 77 37' EASTdeSire fOr Safety and cOntrOlSo you could say that food is life. Small wonder, then, that the desire to know what exactly we are eating is on the rise worldwide. Experts estimate the market as a whole for testing, certification and monitoring of food, food producers and supply chains to be worth more than 3billion. Manufacturers, retailers and consumers around the globe want precise information on the contents of their food in industrialized nations and in emerging and developing countries alike. The issue of safety in other words, food and drink that is in pristine condition and does not pose a health hazard plays just as great a role as that of the composition, i.e., the exact amount of fat, carbohydrate or vitamins contained. Calls for monitoring and safety are fueled not only by global trade, but also by the growing importance of convenience foods and by a growing desire among consumers for quality and organic foodstuffs.With is network of test facilities across the world, TVSD is supporting this trend. On behalf of manufac-turers and retailers, hundreds of staff at state-of-the-art laboratories provide transparency with regard to food no matter whether fresh fish, milk powder or candy. In addition to its labs in North America and Europe, the company has systematically invested in test facilities in Asia in recent years, for example in Shenzhen, China, and in Bangalore and New Delhi in India. The importance of South America is also set to increase in the future. Whether Italian red wine, beef steak or exotic curry powder: TVSD ensures safety and increases transpar-ency. After all, food is more than a basic necessity: it keeps body and soul together, as the Greek philosopher Socrates put it more than 2,500 years ago. And theres one thing it should never do damage peoples health.All over the world, people want to know whats in their day-to-day food. an eye for DetailSafety is more important with food than with almost any other product. the ingredients of honey or mineral water are absorbed directly by our bodies. 361 2 3 4 ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 bAngAloRE / 12 57' noRTh, 77 37' EASTWhether local specialty or convenience foods for the world market, all the products that find their way to our tables are put to the test at tVSds food laboratories.BangalOre / 12 57' n, 77 37' e fOOd cHain37TV SD ANNUAL REPORT 2011philAdElphiA / 39 57' noRTh, 75 10' wESTQuality you can tastephiladelphia It takes good ingredients to manufacture good food products. But excellent meat, fresh water and high-quality grain dont automatically add up to food that is tasty and healthy. How food is processed, transported and stored is every bit as important as the ingredients. Whether in the local butchers store or a major food corpora-tion, it is the quality of the processing that determines the quality of the end product. At Keystone Foods, they take this quality very seriously. The company is one of the largest food manufacturers in the world. 55 operational facilities in North America, Europe, the Middle East and Asia are managed from group headquarters in a suburb of Philadelphia in the US state of Pennsylvania. Every year, around 13,000 employees in 13 countries process more than one million metric tons of meat and fish to create finished products including chicken nuggets, fish fingers or hamburger patties, which are then prepared at fast-food outlets, restaurants or cafeterias.To promote and provide proof of quality at seven of its US facilities, Keystone Foods called in support from TVSD, one of the largest service providers for quality management systems in the food sector. In a process lasting just under a year, the experts from TVSD America inspected all relevant Keystone plants, supported the implementation of a quality and crisis-management system and ultimately gave the green light. Since March, Keystone Foods USA has been certified to the BRC Global Standard for Food Safety, which provides objective and independent verification with regard to hygiene, safety regulations, staff and quality. By tasking TVSD with the certification, Keystone Foods chose a company with a strong expertise in this field. The company is, among other things, a leading provider of certification services for IFS (International Food Safety Standard) and the international ISO 22000 standard for foodstuffs and animal feed. TVSD also supports food manufacturers and retailers with its own quality seals. For example, retailers in Germany can demonstrate their commitment to hygiene and service by means of FilialQualitt (store quality) certification. All of this means that, when consumers next eat out, they can be sure they have the best possible product on their plate. enjoy your Mealabove: keystone foods provides convenience foods for customers including fast-food chains and cafeterias. the lanD of plentyleft: indian curry, mexican tacos, and italian pasta our supermarkets have long been part of the globalized food industry.39TV SD ANNUAL REPORT 2011South AfricaMiddelburgPage 42GrowthSouth Africa Cape Townpage 4725 54' s 29 14' E33 55' s 18 25' EGROWTH25 54' s 29 14' E33 55' s 18 25' ESouth AfricaMiddelburgPage 42GrowthSouth Africa Cape Townpage 4725 54' s 29 14' E33 55' s 18 25' EWith practiced efficiency, Braam Botha attaches his ultrasound test device to an area marked in white on the steam line in unit 4. The electricity generation unit of the Duvha power plant in the northeast of South Africa one of a total of six usually produces 600 megawatts of power. From here, ESKOM, Africas largest energy provider, supplies electricity to cities including Johannes-burg and Pretoria. But for some six months now, the gigantic boiler area, which towers to a height of more than 80 meters, has been cold: due to serious turbine damage in February 2011, unit 4 is currently offline and undergoing a major overhaul. For Braam Botha, the unscheduled downtime is an excellent opportunity to minutely examine the otherwise scorching-hot pipes that channel hot steam at temperatures of more than 500 degrees during normal operations, and to check them for material defects.Braam Botha is an NDT advisor a specialist in non-destructive testing of plant sections at Pro-Tec Inspection & NDT Services. Armed with ultrasound, sonar or x-ray technology, he is out in the field every day working for safety: constantly seeking out invisible dents in metal pipes, hairline cracks inside pressure vessels, or weak points that are undetectable to the human eye. If he discovers irregularities, he raises the alarm and the power plant management at Duvha or one of the other plants he tests can rapidly initiate appropriate repairs.growth in africa280 people now work for tVSd in South africa. their mission: to increase safety in the country at africas southern tip. the golDen ageSouth africas economy is the largest in africa. Braam Botha from tVSd subsidiary pro-tec helps make sure that the countrys energy requirements can be met at all times.43TV SD ANNUAL REPORT 2011MiddElbuRg / 25 54' SouTh, 29 14' EAST gerMan, english, afriKaansSouth-africa-born norman van Oudtshoorn has been in charge of tVSd South africa since 2010. Before this, van Oudtshoorn held a variety of positions at tVSd in europe for more than 15 years. a BOOming cOuntry in tHe SOutH Of africaWith the acquisition of Pro-Tec, TV SD has instantly become one of the most important companies in the field of non-destructive testing in the whole of Africa, says Norman van Oudtshoorn, CEO of TV SD South Africa. Conditions in South Africa provide an excellent basis for driving business development: with some 275 billion GDP, the country is the continents largest economy by far. South Africa is rich in mineral resources such as chrome, gold and hard coal and is now, two decades after the end of apartheid, considered one of the most stable democracies in the continent. TVSD in South Africa: a blueprint for developing new markets Pro-Tec has been a member of the TV SD Group since September 2011. Founded in 1995, and with its registered office in Middelburg, an industrial city with over 100,000 inhabitants some 150 kilometers east of Johannesburg, the company is South Africas largest provider of non-destructive testing. Its customers include global players such as Mittal Steel, paper manufacturer Saapi, and ESKOM. The range of services delivered by Pro-Tecs approxi-mately 180-strong workforce is an ideal fit for TV SD: almost 150 years ago, testing the safety of steam boilers was at the heart of the TV associations of the time. And today, testing plant subject to inspection requirements, such as power plants, chemical facilities or filling stations, remains the service providers core business. safety heaDQuartersthe city of middelburg lies in the heart of South africas coal-producing mpumalanga province. the city is built around Walter Sisulu Street. pro-tecs headquarters are also located in the center of town. 441 2 3 4 ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 MiddElbuRg / 25 54' SouTh, 29 14' EASTafricas largest energy provider eSkOm supplies electricity to the south of the continent. Working hand in hand with power plant staff, tVSd ensures that the lights between cape town and Johannesburg dont go out.middleBurg / 25 54' S, 29 14' e gOOd cOllaBOratiOn45TV SD ANNUAL REPORT 2011MiddElbuRg / 25 54' SouTh, 29 14' EASTLess than two years after founding its South African subsidiary, TV SD already has a workforce of 280, and aims to generate revenue of more than one hundred million rand some 10 million for 2012. The company offers its customers services from all of TV SDs strategic business segments.This is a success story, emphasizes Norman van Oudtshoorn. Born in South Africa, he has worked in various international positions at TV SD for more than 15 years, and regards his companys commitment in South Africa as a blueprint for developing new markets. The strategy: TV SD cooperates with successful local partners that have been in business for several years. The South African companies bring excellent contacts and in-depth knowledge of the local market to the table. Meanwhile, TV SD contributes its global network, plus the expertise and experience of more than 17,000 colleagues. Our goal is to grow together in South Africa and on the continent as a whole, says van Oudtshoorn.tHe SignS pOint tO grOWtHIt wasnt just Braam Bothas employers that were persuaded by this point of view. WAC Projects from Cape Town and Johannesburg, the South African market leader in elevator testing, recently joined the TV SD Group. TV SD is also active in the area of vehicle testing. In 2010, the company acquired shares in AVTS Roadworthy Stations, the largest independent provider of vehicle testing in the Western Cape province. The seven branches around Cape Town have a regional market share of more than 20 percent. In coming years, it is planned to increase market share in the Western Cape province considerably. Our goal is to grow together in South Africa and on the continent as a whole.TV SDs commitment in the field of vehicle testing is a topic close to the hearts of Norman van Oudtshoorn and his colleagues: every year, more than 15,000 people die in car or motorcycle accidents on South Africas roads. In relation to the number of vehicles, this is almost 20 times the number of fatalities in Germany. The dedication of TV SDs employees could contribute to increasing safety on South Africas roads. After all, for almost 150 years, the companys mission has been protecting people, the environment and property from the negative effects of technology and that applies equally in Europe, Asia and Africa. heaDlight CheCKleft: aVtS is the market leader in the Western cape province. the company operates six service stations in and around the provincial capital cape town. a lanDMarK on the Capeabove: the new soccer stadium in cape town, one of the venues for the 2010 fifa World cup, is among the citys most striking landmarks.47TV SD ANNUAL REPORT 2011cApE Town / 33 55' SouTh, 18 25' EAST48ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 ContentPage 50Business oper ations Page 58MacroeconoMic developMent and developMents in relevant MarketsPage 63Business review and econoMic situationPage 66net assets, financial position and results of oper ationsPage 82non-financial perforMance indicatorsPage 93risk report Page 100suBsequent eventsPage 100foundationPage 101opportunities and outlookChapter 3Group Management ReportContentPage 50Business oper ations Page 58MacroeconoMic developMent and developMents in relevant MarketsPage 63Business review and econoMic situationPage 66net assets, financial position and results of oper ationsPage 82non-financial perforMance indicatorsPage 93risk report Page 100suBsequent eventsPage 100foundationPage 101opportunities and outlookTVSD is a global technical services provider. We bring together people, technology and the environment with a long-term perspective, in a sustainable manner and adding value. This is the standard that shapes our work today, just as it has done since our company was founded almost 150years ago.Our range of services covers consulting, testing, certification and training. More than 17,000employees at more than 600 locations on five continents increase safety and add economic value for our custom-ers. As dedicated and responsible specialists with wide-ranging industry expertise, we develop made-to-measure solutions for retail customers as well as for industry, trade and government. As consultants, we optimize technology, systems and know-how, while focusing on the entire value added chain. We always strive to maximize added value for our customers and take an international, interdisciplinary and cross-industry approach to our work. The result is an end-to-end, one-stop portfolio that gives our customers major benefits in terms of added value and increased efficiency. TVSD today operates in some 50countries around the world. We are systematically expanding our international presence in order to get even closer to our customers. At the same time, we are laying the foundation for the Groups continued profitable growth, enabling us to be not only a reliable partner, but also a strong one.In our globally networked competence centers, we are today making the very latest knowledge available to our customers across national borders. In this way, we are actively shaping the future in fields such as electromobility, the new energy concept and global value added chains. In 2011, we took the next logical step in this development with an innovation project focusing on embedded systems. Our three strategic business segments INDUSTRY, MOBILITY and CERTIFICATION combine sound specialist knowledge and industry expertise. Each strategic business segment is headed up by a member of the Board of Management. The OTHER business segment was finally wound up on July 1, 2011 when TVSD Life Services was assigned to the MOBILITY strategic business segment. Prior to this, TVSD Life Science, which was also presented under the OTHER business segment, was sold to the Italian CROM group at the start of the second quarter.We have prepared the consolidated financial statements for 2011 on the basis of this structure. Regional stRuctuRe moRe than 600 locations woRldwideTVSD has branches all over the world. As of August 1, 2011, we restructured our business in Asia: instead of the previous ASIA PACIFIC region, five regions are now responsible for business activities in the area. This change reflects the increased significance of our business activities in Asia and is intended to enable the regions to make even greater use of existing growth potential in the area. < >see the innovation reportFigure F 05tVsd structureBusiness opeRations50ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 In addition to our home market of Germany, we have pooled our activities in nine regions: WESTERN EUROPE comprises the UK, France and the Benelux states, Spain, as well as Switzerland, Austria, Italy and Scandinavia. The region is managed from Munich, Germany. CENTRAL & EASTERN EUROPE unites the remaining European states, including Russia and Turkey. This region is headquartered in Prague, Czech Republic.F 05 TVSD STruCTure664 (600)5,943 (5,474)services for the safe, reliable operation and optimization of industrial plant, build-ings and infrastructure facilities. services for the planning, construction, operation and dismantling of plant and facilities, refineries and power plants. services for retail customers at more than 300 services centers from drivers license tests, roadworthiness tests and exhaust-gas analyses, to appraisals for obtaining classic car registration.services for corporate customers: used car processes, vehicle fleet management and testing of quality standards at car dealerships. services across the entire supply chain for product market readiness: from simple toys to complex pharmaceuticals, from domestic appliances through to tools or machines.infrastructure services and services for the real estate sector as well as for customers from industry and commerce in the areas of structural engineering, materials handling, electrical engineering and real estate valuation.optimization of products and processes for the automobile industry: support with the development and testing of new models and vehicle components, type approval in accordance with international regulations, consulting on safety issues.certification of quality, eco and safety management systems for all industries throughout the world.inspection, homologation, consulting and authorization management for rail vehicles, signaling technology, technical equipment and rail infrastructure with regard to functionality and safety.driving suitability tests for private individuals.advice and assistance in all fields of occupational health and safety, this division helps its customers establish complex corporate health management solutions. education and training in the fields of technology and management. certification and training of persons.industRYindustRY seRVices auto seRVices pRoduct seRVicesReal estate seRVices automotiVe management seRVicesRail life seRVices academY593 (551)4,889 (4,706)moBilitYtVsd418 (399)4,211 (3,832)ceRtificationRevenue in million 2011 (2010) headcounts 2011 (2010) divisionsstrategic business segment51TV SD ANNUAL REPORT 2011 MIDDLE EAST/AFRICA comprises the African continent and the Arabian Peninsula. Since March 2012, headquarters for this region have been in Abu Dhabi, United Arab Emirates. AMERICAS covers the two Americas, from Canada to the southern tip of South America. The headquarters of this region are in Boston, USA. ASEAN comprises the states of Singapore, Indonesia, Malaysia, Thailand, the Philippines and Vietnam. The region is managed from Singapore. GREATER CHINA comprises the Peoples Republic of China (including Hong Kong) as well as Taiwan. The region is managed from Shanghai, China. JAPAN, with registered offices in Tokyo, Japan, is responsible for local activities on the Japanese islands. KOREA is managed from Seoul, South Korea. SOUTH ASIA unites the national subsidiaries in India, Sri Lanka and Bangladesh. The region is managed from Mumbai, India.An overview of the regional structure is provided on p.10 of this annual report. For the sake of clarity, the regions ASEAN, GREATER CHINA, JAPAN, KOREA and SOUTH ASIA will be grouped together as the ASIA PACIFIC region in the remainder of this annual report. As a result, the financial information is comparable with that for the prior year.efficient seRVice oRganization foR finance and accounting as well as pRocuRementIn order to harmonize processes in finance and accounting as well as in procurement, the actual processes in Germany were recorded and analyzed during the reporting period. On this basis, we have developed standardized target processes, taking into consideration strict segregation of duties, in order to meet the requirements arising from our internal control system and corporate compliance. By implementing the target processes, we expect to optimize quality and operations, thereby enhancing the efficiency of our business processes. Harmonizing business processes across different divisions and entities also enables future acquisitions to be integrated rapidly and smoothly. We will also establish the defined target processes at international level within the company. The existing shared service centers for accounting and procurement for the various entities in Germany will be combined in TVSD Administration Services GmbH, Munich, as of 2012. The same approach is being implemented for the UK. < >see page 1052ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 legal stRuctuRe guaRantees independenceTVSD stands for independence and impartiality. This is ensured by the unique legal structure of the Group. In its capacity as management holding company, the parent company, TVSDAG with registered offices in Munich, manages its subsidiaries around the world through the divisions and regions. The beneficial owners of TVSD shares are TVSD e.V., Munich, and the TVSD Foundation, Munich. Both have transferred their shares in TVSDAG, Munich, to the independent TVSD Gesellschafterausschuss GbR, a shareholder committee with registered offices in Munich. The purpose of this civil law association is to hold and manage this shareholding under stock corporation law.Figure F 06legal structurestRategY: masteRing change and leVeRaging associated oppoRtunitiesOur strategy is directed toward growth, globalization and a constant increase in the value of the company. Thanks to consistently applied measures, we have succeeded in growing profitably in recent years. We intend to continue this trajectory. We have already invested heavily in developing the company and will continue to do so. Our aim is to further increase our growth rate. And the market offers good conditions for doing this. F 06 LegAL STruCTure74,9%tVsd e.V.25,1%tVsd foundation100%gesellschafteRausschuss gBRtVsdaggeRmanYameRicaswesteRn euRopecentRal & easteRn euRopeaseanJapansouth asiagReateR chinaKoReamiddle east/afRicaindustRY | moBilitY | ceRtificationone or more subsidiaries instrategic business segment53TV SD ANNUAL REPORT 2011TVSD operates in the attractive global TIC market (testing, inspection, certification). This market is characterized by continuous change, which therefore also shapes our activities. Technological progress, increasing globalization of the economy, ever more complex products and systems, and ever shorter innovation and product life cycles all of these factors constantly pose new challenges for our company. At the same time, they continually give rise to new opportunities for business and growth. Increased demand for our services is also fueled by consumers and legislators demands for higher standards of quality and safety both as regards individual products and the processes used to produce them.The safety and manageability of technical products, as well as trust in the quality of management processes, are key to our customers success. Our customers are facing ever greater challenges: not only do they have to be aware of and comply with requirements relating to the safety and quality of technologies, products and processes. They also have to accurately demonstrate and document their compliance with these requirements.In light of this, many companies are now engaging external service providers like TVSD to handle these tasks. In order to keep the number of their service providers manageable, they systematically seek providers that cover the entire value added process as process partners. Moreover, companies that operate on the international stage want a partner that is not only familiar with the distinctive characteristics of individual countries, but that can also support globalization efforts via its own global presence. TVSD is well equipped for these challenges and ideally positioned in the competitive environment. Growth and added value as GoalsWe add economic value for our customers. To this end, we systematically invest in our skills and our expertise. We strive to achieve a leading market position in each of our fields of activity and have already achieved this target in many of our core markets. Through systematic globalization of our activities and strategic innovation management, we are also establishing ourselves as a strong provider of technical services in new markets. At the same time, we maintain our neutrality and independence.F 07 Key SuCCeSS FACTorS To mAKe TVSD FiT For The FuTuretVsdagcultuRal deVelopmentoptimize the poRtfolioincRease inteRnationalizationBetteR leVeRage potential foR efficienciespotential-oRiented goalspRoactiVe m&aenhance hR managementdRiVe innoVationchange management, customer focus, culture of innovationdivisions, markets, products, subsidiariesfocus on asia Best practices, shared service centersmarket and competitionhighly effective process wind, photovoltaic, embedded systems, electromobility54ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 We initiated the TVSD FIT 2012+ optimization and efficiency enhancement program back in 2010. The cornerstones of the program relate to enhancing efficiency and reducing costs, streamlining product and entity portfolios, and further standardizing administrative processes. These aspects are intended to support our growth trajectory.To date, we have generated sales proceeds of 35.5million from portfolio streamlining through the sale of entities within the scope of TVSD FIT 2012+. A total of 22 entities were sold, merged or liquidated. Corporate manaGement the aim is to add value ContinuouslyWhen it comes to managing the company, we act in accordance with the requirements placed on publicly traded companies by the German Corporate Governance Code. Our aim is to manage TVSD according to these standards. Our management system chiefly consists of an integrated controlling system, the corporate governance system in its various forms, and the risk management system.Our integrated controlling system is aimed at safeguarding existing assets, continuously increasing the value added of the TVSD Group and promoting development of earnings benchmarked against the competition. It is based on a group-wide management information system and harmonized global accounting in accordance with IFRSs. The focus is on financial targets and performance indicators: we want to continuously increase revenue and earnings, and optimize capital employed. We have included another value-based indicator adapted to the requirements TVSD economic value added (EVA) in our integrated controlling system since last year. This indicator measures the value added by the Group in different periods; it integrates all the relevant key figures and shows the dependencies between earnings and the cost of capital used to generate this income. Value-based corporate leadership will be established in all core management processes, including the remuneration systems and boards within TVSD in the medium term, in order to further strengthen value orientation within the Group. The EVA concept shows the value added by an entity, a project or capital expenditure or business combinations in a particular period. To determine EVA, we compare the net operating profit after tax (NOPAT) with the associated cost of capital. We calculate the Groups cost of capital as the product of average capital employed and the weighted average cost of capital (WACC), which we derive from capital market data. We define capital employed as non-current operating assets as well as inventories and receivables, less selected non-interest-bearing liabilities. Figure F 07Key success factors to make tVsd fit for the future55TV SD ANNUAL REPORT 2011We calculate NOPAT from EBIT additionally adjusted for impairment of goodwill and after deducting income tax. We take income tax into account using an average rate of 30%. We define EBIT as earnings before interest, before currency translation gains/losses from financing measures and before income tax, but after income from participations. In contrast to the prior year, the EBIT definition in the fiscal year no longer includes currency translation gains/losses from financing measures. Figure F 08eBit 2010/2011With the help of EVA, we measure the sustainable increase in the value of the company, make value-adding decisions, promote profitable growth and determine the extent to which we have achieved our growth targets. Accordingly, we measure our acquisition and capital expenditure projects with this indicator and use it to calculate their specific contribution to value added for our company. In the fiscal year, the TVSD Group generated markedly positive economic value added, which was significantly higher than the prior-year figure. All the strategic business segments contributed to this positive figure with their business development.The aim of TVSDs corporate governance system is to ensure corporate governance and control that is responsible, transparent and aimed at adding value. In this connection, we set ourselves high standards comparable to those on which we base our business operations of testing and certification for our customers. More information on the corporate governance system can be found in the corporate governance report. Our risk management system is a fundamental component of our control system and is part of the regulatory framework for management and supervision. It enables us to identify and evaluate risks at an early stage, allowing us to implement appropriate controls and take preventive measures or countermeasures, and apply safety precautions. For more details on risk management, please refer to the risk report. < >see the corporate governance report < >see the risk report142.1million 142.8million 159.9millioneBit 2010 not adJustedeBit 2010 adJustedeBit 2011F 08 eBiT 2010/201156ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 The financial reporting internal control system (ICS) comprises principles, procedures and measures aimed at making sure that group financial reporting is compliant. It is intended to ensure the reliability of financial reporting and, in particular, the correct preparation of the published financial statements.We had estimated the effectiveness of some controls applicable for the entire consolidated financial statements in the prior year. In addition to group-wide controls, we also monitored the effectiveness of the financial reporting ICS for the entities based in Germany in 2011 from a risk-oriented perspective. To this end, the key controls considered to be material were identified and control activities for standard-ized execution were documented in control descriptions and rolled out. The effectiveness assessment is performed on the basis of a self-assessment by the control owner, which is verified on a sample basis by an internal third-party audit. As we did not determine any significant control weaknesses, the financial reporting controls are effective. We will continue to monitor the effectiveness of financial reporting ICS using a standardized procedure that will be deployed at all locations in the course of the international rollout of harmonized business processes.We are constantly working on evolving our integrated corporate management system. We adapt it to changes within the company and in the companys environment, as well as to amended legal provisions and national and international standards. In addition, we perform regular benchmarking.57TV SD ANNUAL REPORT 2011macRoeconomic deVelopment and deVelopments in ReleVant maRKets macRoeconomic deVelopmentThe global economy was characterized by uncertainty and varied regional development in 2011. Although global economic output was up by 3.8% on the prior year, the growth rate slowed down considerably from the middle of the year. This development was seen in virtually all regions, particularly in the emerging markets. The situation on the global financial markets was characterized by uncertainty, lack of confidence and correspondingly high volatility. Due to the weak economic climate, at the end of the year the European Central Bank reversed the interest rate increases decided at the beginning of the year. As a result, the key interest rate was again at the record low of 1.0% in December 2011. Figure F 09economic growthreCovery in europe After a dynamic start, the economic climate in the euro zone became increasingly gloomy. Significant budgetary difficulties and the high public debt of some EU member states adversely affected economic development. The status of the euro as the key currency was called into question.In this environment, the individual economies demonstrated varying degrees of resilience. While Greece, Spain, Portugal and Ireland have to contend with high unemployment and a sharp decline in private consumption, Germany proved to be relatively robust. Germany TVSDs core market again saw an above-average year-on-year increase in economic output of 3.0%. Strong export activity once more formed the basis for this development. F 09 eCoNomiC groWTh iN Key mArKeTS WorLDWiDe (%)+0%3.03.6germany1.51.7euro zone10.09.2china9.87.4india1.72.8usa3.84.8world asia(without Japan)9.37.92011201058ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 moderate Growth in the usaIn contrast to the weak development worldwide, the US economy picked up in the second half of the year. At 1.7%, however, US economic growth in 2011 remained merely moderate. The tense situation concerning the public budget led to the USAs credit rating being downgraded in the course of the year. This had a sustained negative impact on the financial markets and the general economic climate. upswinG Continues in asian emerGinG CountriesIn 2011, the emerging economies in south and east Asia were once again the growth drivers of the global economy, albeit at a slower pace than in prior years.In China, the regions largest economy, for example, economic development slowed down, particularly in the second half of the year. However, year-on-year growth remained significant at 9.2%. In India, the pace of economic development slackened in the course of 2011. With economic growth of 7.4% in 2011, however, development of the subcontinents economy was above average from an international perspective.exChanGe rates hiGhly volatileThe currency markets continued to be characterized by high volatility in 2011. Interest focused above all on the US dollar exchange rate: after reaching its highest level in May (USD 1.48 per euro), the exchange rate of the single European currency was markedly weaker in the further course of the year. At year-end 2011, the exchange rate was 1.29 per US dollar. The euro also fell slightly in value compared to the pound sterling in the course of 2011. The value of the Singapore dollar against the European key currency increased by 2.2% after the euro had been considerably stronger in the course of the year. The Turkish lira, by contrast, lost 18.1% in value for the year as a whole, and was trading at TRY 2.44 per euro at the end of the year.deVelopments in ReleVant maRKetsWe offer our services the testing and certification of products, industrial plant and systems, as well as consulting and training in an international market environment. Demand for our services comes from economically strong, export-dependent countries, particularly in Europe and Asia, but also in the Americas. New sales markets for our services are also appearing in many emerging and developing countries. These markets are highly diverse and shaped by their disparate business environments and regional developments. The following factors are particularly significant:59TV SD ANNUAL REPORT 2011 Globalization: The elimination of trade and customs barriers is giving companies access to new markets. The relocation of activities to countries that offer competitive advantages is opening up additional opportunities. At the same time, international trade is growing strongly. Companies want and need to provide evidence that they meet international standards, particularly in emerging and developing economies. The corresponding certificates help them to document the safety and quality of their work. Against this background, it is becoming ever clearer that our customers with global activities are increasingly seeking a partner who likewise has a global presence and can offer one-stop, end-to-end services. Liberalization: The trends toward liberalization and deregulation are creating new opportunities for us. At the same time, removing market barriers also intensifies competition and puts greater pressure on prices in our business. Outsourcing: Companies around the world are making use of the opportunity to outsource services that do not belong to their core competencies, thereby making their cost structures more efficient. Technological development: Our times are characterized by increasing technological development. But business and society at large will only accept and apply new technologies if they are considered safe, environmentally friendly and manageable. Demographic change: Age structures are changing all over the world. This entails risks, especially in countries with an aging population. In those countries, TVSD will also increasingly encounter difficulties in recruiting suitable employees. On the other hand, opportunities arise for our company wherever the changed age distribution raises demand for our services. Increasing consolidation of markets: The consolidation of the market for technical services will continue. TVSD will leverage its economic strength to secure its future in the long term by making targeted investments.influence of macRoeconomic deVelopment and maRKet chaRacteRistics on ouR BusinessThe effect of macroeconomic development and market characteristics on our business activities varied from segment to segment and region to region in 2011.The recovery in order intake following the economic collapse in 2009 had largely been completed by spring 2011. Otherwise, the development of the global economy in 2011 was slowed down not least by the natural disaster and reactor catastrophe in Japan and the European sovereign debt crisis. In 60ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Germany, the Fukushima effect led to a rethink of the phasing-out of nuclear power. The early shutdown of older types of nuclear power plant adversely affects our business development in the German market. By contrast, the European sovereign debt crisis has not impacted our core market of Germany, where orders are developing positively. Our order situation is also stable in the peripheral states of the euro zone.In order to provide our customers around the globe with local contacts, we are continuing to invest in growth markets, including through business combinations. This year, we focused our expansion strategy particularly on South Africa, where we are systematically extending our core competencies in road safety, energy technology and energy efficiency. We see long-term growth potential in these areas, including in the field of renewable energies. In view of the global increase in the price of crude oil, renewable energies are of key importance for future energy supply. The development of our business is supported worldwide by the increasing mobilization of the global community. In the long term, there will be an above-average rise in vehicle density in the developing and emerging markets (OECD: 403% by 2030). These countries are also increasingly starting to introduce vehicle safety standards. The market for our vehicle inspection expertise is growing. Our presence in the MOBILITY strategic business segment in India, for example, increased with the opening of our first service station in the country. Electromobility is one way of meeting individuals increasing need for mobility in an environmentally compatible manner. Here we are systematically stepping up our activities in the area of battery testing. A worldwide network of battery test labs is currently being set up. The topic of electromobility is also highly relevant to the German market. Rising commodity prices and the federal governments stated goal of having around onemillion electric vehicles on Germanys streets by 2020 are providing positive impetus. This offers us the opportunity of specifying benchmarks and standards in our home market for a future lead market with global prospects.The changeover to an urbanized society can already be observed in the conurbations of Asia and South America. Infrastructure projects designed to shape local public transport, such as the metro in Mecca, where we were appraisers for the entire system, will become increasingly important. We will leverage our experience in the field of rail systems and technology to successfully position ourselves in this area. In this connection, greater importance will also be given to sustainable design of buildings and public areas. Here, energy efficiency, building technology and safety, the use of renew-able materials, and building climate are core issues to which we will contribute through our service portfolio. We further enhanced our expertise in this field by acquiring global player Wallace Whittle Holdings Ltd., Glasgow, during the year. 61TV SD ANNUAL REPORT 2011In addition to supporting the sparing use of energy, we consider our market to be in renewable energies. Here we mainly operate in the areas of photovoltaic and wind power. Asia, and in particular China, is an attractive growth market for our services relating to wind power. China is already one of the largest wind power markets and is the worlds leading manufacturer of wind turbines. In light of this, we entered into a strategic alliance with the China Electric Power Research Institute (CEPRI) during the fiscal year in order to jointly test prototypes and perform inspections and training measures in the area of wind power. Our largest photovoltaic project is currently in progress in India, where we have been tasked with quality assurance from planning through to implementation of a photovoltaic power plant in Shivajinagar, Maharashtra. The uneven development of the global economy is also reflected in our regions. Germany demonstrated robust development. In WESTERN EUROPE, we are mainly represented in countries that are affected only slightly by the euro debt crisis, if at all. In CENTRAL & EASTERN EUROPE, the tense economic situation in the Czech Republic impacted the development of our business. We immediately countered this by implementing cost-saving measures. Business development in the AMERICAS was stable, following positive impetus in the prior year through our acquisition of global player Global Risk Consultants Corp., Wilmington, (the GRC group). In ASIA PACIFIC, the moderate economic upswing supported our business. However, our focus on advanced training business meant that we had to accept losses as we sold our school education activities. We benefit from our broad service portfolio, which ranges from food safety to advanced training through to renewable and conventional energy, and also covers the requirements of the internal market.62ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Business ReView and economic situationIn 2011, we continued the strategic realignment of the Groups organizational structures. As part of the TVSD FIT 2012+ program, we streamlined our service portfolio. This gave us scope to systematically invest in the strategic growth areas and thus press on with our international expansion. Thanks to our international presence and high-quality service portfolio, we remained successful in 2011 despite the disparate development of the global economy.focused appRoach cReates scope foR actionWith the sale of the Msource group in April 2011, we successfully took the first step in focusing our service portfolio. In the further course of the fiscal year, we systematically pursued this consolidation strategy. For example, in June, we sold PSB Academy Pte. Ltd., Singapore (PSB Academy), whose activities focus on training and university education. At the same time, we sold our participation in James Cook Australia Institute of Higher Learning Pte. Ltd., Singapore (JCU). The company mainly operates a private school in Singapore. This streamlining has enabled us to focus our management capacity more firmly on developing our basic and further training offering in the field of personnel certification and on the open seminar business of the CERTIFICATION strategic business segment. In June 2011, we also sold our shares in PSB Technologies Pte. Ltd., Singapore (PSB Technologies). In the MOBILITY strategic business segment, we sold our share in e4t transportation for electronics s.r.o., Prague (e4t), in October 2011. In September 2011, we sold our participation in Hannover Leasing Automotive GmbH, Pullach (HLA), to co-shareholder Hannover Leasing GmbH & Co. KG. Still in September 2011, we also sold the crash test system of TVSD Czech s.r.o., Prague. acquisitions in the moBilitY stRategic Business segmentWe continued our international expansion with a clear focus on our strategic growth areas. The acquisition of CGP Christof Gerhard & Partner, Olpe (CGP), in January 2011 extends our service offering for car dealerships and workshops in the field of international used car strategy. We now offer our major customers in the dealership and workshop sector a comprehensive range of services in line with international standards from used car management through to registration service.In May 2011, we acquired an investment in Fleet Logistics International NV, Vilvoorde (Fleet Logistics group), as well as 100% of the shares in the German subsidiary Fleet Logistics Deutschland GmbH, Mainz (FLD). This strategic investment makes us the European market leader in independent fleet management. The Fleet Logistics group offers fleet management for leased vehicles at European level, thus supplementing the service offering of our existing subsidiary FleetCompany GmbH, Oberhaching (FleetCompany), which offers these services for customers own fleets.Figure F 07Key success factors to make tVsd fit for the future63TV SD ANNUAL REPORT 2011Together with partner SIXT AG, we established TVSD Car Registration Services GmbH, Munich (CRS). The company offers large-scale fleet operators the entire range of services related to registering and deregistering vehicles with the German authorities. It is planned to extend the service offering to retail customers.In November 2011, we acquired the Italian company Stima System s.r.l., Genoa, as part of an asset deal. With its close-knit network of test engineers, the company offers comprehensive services for dealerships, manufacturers and fleets in Italy.Through targeted acquisitions, the establishment of new companies and integration into an extensive network of TVSD entities, we can ensure comprehensive coverage for our major customers and key accounts in the MOBILITY strategic business segment in Europe and throughout the world. expansion of actiVities in the ceRtification stRategic Business segmentIn January 2011, we acquired Innovative Testing Solutions Ltd., Newmarket (ITS), in Canada. The company is an accredited test lab for batteries and electrical products. It performs environmental and mechanical testing to determine the useful life of these products. ITS is a welcome addition to our CERTIFICATION strategic business segments global network of test facilities for electromobility. As a result, we are the first independent test and inspection provider to offer customers a comprehensive international network of battery test labs for electric vehicles.inteRnational expansion in the industRY stRategic Business segmentFacility management and energy technology were one focus of the business combinations in the INDUSTRY strategic business segment in the fiscal year 2011.The acquisition of Wallace Whittle Holdings Ltd., Glasgow, UK (Wallace Whittle), in July 2011 enhances our range of services by adding sustainability and energy efficiency for the construction industry. The company, which operates internationally, offers comprehensive consulting services in the field of cost-effective building technology, and renewable and low-emission energies. The service portfolio also includes sustainability certification in accordance with internationally recognized standards.We further increased our investment in South Africa in October 2011 with the acquisition of Pro-Tec Boiler Inspection & NDT Services (Pty) Ltd., Middelburg (Pro-Tec), the local market leader in non-destructive testing and inspections for the energy industry. This also enabled us to strengthen our service offering in the field of energy technology and pursue our internationalization efforts.64ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 RestRuctuRing of the stRategic Business segments and RegionsThe TVSD Life Services division was assigned to the MOBILITY strategic business segment as of July 1, 2011. With its portfolio of medical/psychological services for vehicle drivers, TVSD Life Services ideally complements the MOBILITY strategic business segments range of services. At the same time, the OTHER business segment was finally discontinued following the sale of the Life Science division.In terms of geographical organization, we now divide the former ASIA PACIFIC region into five regions: ASEAN (with Singapore, Indonesia, Malaysia, Thailand, the Philippines and Vietnam), SOUTH ASIA (with India, Sri Lanka and Bangladesh), GREATER CHINA, JAPAN and KOREA. This reorganization reflects the continuously increasing significance of these growth regions. For reporting purposes, however, we will continue to use the ASIA PACIFIC region as a unit in the following.ReVenue and eaRnings up on the pRioR YeaRTVSD benefited from the robust economic development in Germany. The stable economy in Asia and other emerging market in the Middle East and Africa supported development of our companys revenue in these regions. With the revenue generated in 2011, we reached the upper end of the range of our prior-year forecast. Despite the divestitures in the CERTIFICATION strategic business segment in ASIA PACIFIC, we again increased international revenue, thus coming closer to our goal of increasing the share of international revenue to 40%. All strategic business segments saw positive revenue growth, thereby meeting expectations. Revenue growth in the regions also matched our expectations. Earnings before interest, currency translation gains/losses from financing measures and income taxes, but after income from participations increased significantly as expected by 12.0% to 159.9million. At 133.6million, consolidated income before taxes was up 8.3% on the prior-year figure and exceeded the 5% increase in earnings expected in the last management report.Income before taxes in 2011 was again positively influenced by one-off effects. These are attributable in particular to the strategic divestitures aimed at streamlining our service portfolio in the ASIA PACIFIC region. Opposite effects resulted from impairment losses on our shares in the Spanish ATISAE Asistencia Tcnica Industrial S.A.E, Tres Cantos (ATISAE group), and the currency translation gains/losses from financing measures.65TV SD ANNUAL REPORT 2011net assets, financial position and Results of opeRationsResults of opeRationsWe increased our revenue by 125.2million or 8.1% to 1,677.7million in fiscal year 2011. Organic growth in the existing service business accounted for revenue growth of 148.3million. The revenue rise from organic growth, including currency effects, was 9.1% (prior year: 7.9%). Adjusted for currency effects, acquisitions and divestitures, revenue from organic growth increased by 9.6%. Additions to the scope of consolidation from previously held entities contributed 12.4million to organic growth. Exchange rate effects reduced consolidated revenue by 8.1million or 0.5%. Adjusted for exchange rate effects, revenue growth totaled 8.6%. By contrast, business combinations and divestitures of consolidated companies resulted in a net revenue decrease of 15.1million. Most of this figure is attributable to the divestitures of PSB Academy and PSB Technologies in Singapore, which led to revenue losses of 22.5million.Despite portfolio streamlining during the year, we have surpassed our planned organic revenue growth in the range of 6% to 8%. In Germany, in particular, we recorded positive development of orders due to the good economic situation. We generated 45.9% or 57.5million (prior year: 24.7%) of the additional revenue in Germany. 54.1% of additional revenue was generated in other countries (prior year: 75.3%), which translates into a 67.7million increase in revenue. Despite the portfolio streamlining in other countries, the share of total revenue generated in other countries increased and now amounts to 34.6% (prior year: 33.0%). Purchased service cost increased slightly in relation to revenue. The ratio of purchased service cost to revenue thus increased slightly from 13.3% in the prior year to 13.4%. Personnel expenses rose by 9.6% in 2011 to 986.2million. The ratio of personnel expenses to revenue rose by 0.8 percentage points from 58.0% in the prior year to 58.8% in 2011. The expenses for wages and salaries including social security contributions rose by 9.0%. This was principally attributable to the collective wage increase in Germany and the expansion of the workforce by hiring new people, business combinations and first time consolidation of previously held entities. In fiscal year 2011, the retirement benefit costs increased by 17.9% compared to the prior year to 69.8million. The prior-year figure included a positive one-off effect of 9.0million due to the Gesetz zum Neuen Dienstrecht in Bayern [Act on New Public Sector Employment Law in Bavaria], which led to a positive past service cost when measuring the pension provisions in the prior year.The increase in other expenses (9.7%) was higher than the change in consolidated revenue. As a percentage of revenue, other expenses rose slightly by 0.3 percentage points to 19.0% as a result. 66ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Higher travel expenses, caused in particular by the further increase in flat mileage rates, as well as higher costs for rent and building maintenance contributed to this development. In addition, there was an increase not only in legal and advisory costs, particularly in connection with the divestiture of the Asian subsidiaries and for projects aimed at increasing efficiency and optimizing processes, but also in certification costs for the new energy efficiency laboratory of TVSD America Inc., Danvers, in Peabody. Other income increased significantly by 81.5% compared to the prior year to 65.5million. The gain on deconsolidation of 27.5million of PSB Academy is included here as a significant item.The financial result decreased by 16.3million in the fiscal year 2011 to 30.1million (prior year: 13.8million).The income from investments accounted for using the equity method came to 1.5million (prior year: 6.5million). This decrease was due in particular to the lower profit contribution made by the Turkish joint venture companies. Moreover, the lack of income from the Spanish ATISAE group, which has been reported as a participation at cost since the start of the year, also had an effect.The income/loss from participations decreased by 5.9million to 4.6million in a year-on-year comparison. At 8.7million, gains on disposal of participations could not compensate for the write-downs on participations, in particular on the Spanish ATISAE group of 12.5million. The remaining financial result, comprising net interest expenses and currency translation gains/losses from financing measures, fell by 6.9million to 26.3million in the reporting year. Falling interest income and simultaneously rising interest expenses resulted in a year-on-year decrease of 4.0million in net interest to 22.7million. The lower expected return on plan assets, and interest costs from pension provisions at almost the same level as in the prior year, resulted in an increasing rate of net finance costs for pension provisions. The expected return on plan assets for 2011 amounted to 40.3million (expected rate of return: 4.8%). In 2011, as in the prior year, the discount rate for the net pension expense in Germany was 5.25%. In the prior year, the higher expected return on plan assets and the expected decreasing discount rate, which affects the interest cost of pension obligations, had led to lower net finance costs for pension provisions.On the other hand, the interest expense for the drawn portion of the syndicated credit line decreased due to better terms. The development of the exchange rate between the US dollar and Turkish lira was mainly responsible for the negative change of 2.9million in the currency translation gains/losses from financing measures to 3.6million. This is due to external financing in US dollars at our Turkish subsidiary TVSD Bursa Tasit Muayene Istasyonlari Isletim A.S., Osmangazi-Bursa, (TVSD Bursa).67TV SD ANNUAL REPORT 2011Income before taxes came to 133.6million in the fiscal year 2011. This constitutes an increase of 8.3% on the prior year. Despite the increased income before taxes, the income tax expense decreased by 8.3million to 26.9million. The tax rate in 2011 was 20.1% and therefore significantly lower than the prior-year rate of 28.5%. In 2011, valuation allowances of 9.7million on deferred taxes recognized on tax loss carryforwards were released as it had become unlikely that these loss carryforwards would be utilized in the future. Moreover, income before taxes in 2011 was influenced by tax-free gains on disposals that are only partially offset by tax-neutral write-downs. Overall positive one-off effects also influenced earnings development in 2011. They totaled 13.2million (prior year: 11.5million). The adjusted one-off effects comprise taking into account the costs to sell the gains on disposal of the fully consolidated entities PSB Academy and PSB Technologies in Singapore, and of the non-consolidated participation in JCU totaling 32.6million. The write-down on the participation in the Spanish ATISAE group of 12.5million was also eliminated here. Finally, the exchange rate effects from the fluctuations between the US dollar and Turkish lira were eliminated for the financing denomi-nated in US dollars (6.9million) during the fiscal year. The adjustment of this effect from the Turkish joint venture companies influences earnings before interest and taxes (EBIT) through the income from investments accounted for using the equity method. On the other hand, the adjustment from the financing of our Turkish subsidiary TVSD Bursa affects net interest and thus influences only income before taxes.In the prior year, the Gesetz zum Neuen Dienstrecht in Bayern [Act on New Public Sector Employment Law in Bavaria] led to a positive one-off effect of 9.0million due to the remeasurement of the pension obligations. Furthermore, the contribution of assets as plan assets to TVSD Pension Trust e.V. resulted in a write-up to the higher fair market value with an effect on income (4.2million). By contrast, the closure costs recorded for PT PSB Intellis, Jakarta, reduced earnings by a total of 1.7million, thus reducing the one-off effects, which were positive on the whole.EBIT, i.e., earnings before interest, currency translation gains/losses from financing measures and income taxes, but after income from participations increased by 12.0% to 159.9million. The EBIT margin increased by 0.3 percentage points to 9.5%. Adjusted EBIT came to 143.3million in the fiscal year 2011 (prior year: 131.3million). The one-off effects had a total impact of 16.7million in the operating result and in the income from investments accounted for using the equity method. The adjusted EBIT margin remained constant at 8.5% as in the prior year. Adjusted EBITDA defined as EBIT before depreciation and amortization increased slightly by 5.3% to 195.6million (prior year: 185.9million). Adjusted for the aforementioned one-off effects, income before taxes amounted to 120.4million (prior year: 111.8million). 68ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 The return on sales, calculated using earnings before taxes (EBT) increased slightly in the fiscal year. At 8.0%, it is slightly up on the prior-year figure. The adjusted return on sales (EBT margin), which is more suited for assessing earnings, is also unchanged compared to the prior year at 7.2%. Profit/loss from discontinued operations contains the remaining proceeds from the settlement of the divestiture of the TVSD Life Science division. In 2010, 13.6million had been recognized. In the prior year, the profit/loss from discontinued operations contained negative effects totaling 13.9million that had to be eliminated. These mainly contained impairment losses on goodwill and on intangible assets recognized in the course of the purchase price allocation. This results in overall one-off effects to be eliminated of 13.2million (prior year: +2.3million). As a result, the adjusted consolidated net income of 94.0million is 17.0million (22.1%) higher than the adjusted prior-year figure of 77.0million.The consolidated net income reported at 107.2million is 43.7% higher than the prior-year figure of 74.6million. For further analyses of significant items of the consolidated income statement, we refer to notes 7 through 16 of the notes to the consolidated financial statements of TVSDAG.financial positionprinCiples of finanCe manaGement/finanCial strateGy Through our financing activities, we aim to maintain a sound financial profile at all times. At the same time we want to ensure liquidity reserves are always sufficient to meet TVSDs payment obligations.Further objectives of the corporate treasury function include managing the foreign exchange exposure effectively and optimizing interest rates on an ongoing basis. Due to the significant volume of assets set aside to cover pension obligations, the investment and risk management of these positions is of very great importance for us. Cash flows from operating activities are the primary source of liquidity. The available cash and cash equivalents are supplemented by a syndicated credit line of 200million, with a term until mid-2016, to give us the financial flexibility necessary to reach our growth targets. USD 75million (54.7million) of the credit line provided by eight primary banks had been drawn on by the end of the reporting period. At the end of the second quarter before the outbreak of the euro debt crisis , we used the opportunity to renegotiate the terms of the syndicated loan of 200million with the banks involved. We achieved a further significant reduction in comparison to the credit margin negotiated in the prior year. The contractually agreed credit line has a term of another five years; an option, which can be exercised by TVSD in the first and second year of the term, to extend the term by one year at a time was also agreed. < >see notes to the consolidated financial statements69TV SD ANNUAL REPORT 2011Together with this credit facility, the available funds and the annual free cash flow, TVSD has sufficient liquidity to finance its planned external growth.TVSD strives to ensure its credit rating remains in the good investment grade.Capital expenditures The volume of capital expenditure excluding financial assets, securities and business combinations, came to 64.4million in the fiscal year (prior year: 52.2million).At 20.4million, the most extensive investments were made in the MOBILITY strategic business segment, mostly for property, in particular service stations and the technology and environmental center (TUZ) in Pfungstadt in the German state of Hesse. We invested 16.5million and 9.3million in the CERTIFICATION and INDUSTRY strategic business segments respectively. While investments were made in expanding laboratory capacities in the CERTIFICATION strategic business segment, the focus in the INDUSTRY strategic business segment was on industrial plant. Other investments in the fiscal year that were not allocated to the strategic business segments included investments in property as well as hardware and software.We invested 44.2million (68.6%) in our home market of Germany in 2011. The corresponding figures for the WESTERN EUROPE, CENTRAL & EASTERN EUROPE and MIDDLE EAST/AFRICA regions were 2.3million, 0.8million and 0.5million respectively. Our capital expenditure amounted to 9.8million in the ASIA PACIFIC region, with 6.8million spent in the AMERICAS region. The investment volume increased significantly across all regions, with the exception of the CENTRAL & EASTERN EUROPE region, where we invested less than in the prior year. As of the end of the reporting period, there were no material outstanding capital commitments.We invested 27.3million in entities and participations in 2011 (prior year: 80.5million). These investments include cash paid for the acquisition of investments in consolidated affiliated companies and for the acquisition of additional investments in non-consolidated affiliated companies. In the INDUSTRY strategic business segment, the significant acquisitions in terms of amounts were made in the WESTERN EUROPE and MIDDLE EAST/AFRICA regions. liquidity analysis The liquidity situation improved again in fiscal year 2011 cash and cash equivalents amounted to 245.3million and therefore account for 17.2% of total assets (prior year: 13.8%). The development of cash and cash equivalents in the fiscal year is presented in detail in the consolidated statement of cash flows on page 109 of the notes to the consolidated financial statements.Consolidated net income, as the basis for deriving cash flows, was significantly up on the prior-year level in the fiscal year. Adjusted for gains on disposal of fully consolidated entities and business units as well as on disposal of financial assets of 35.9million, the comparable basis is slightly below the < >see page 10970ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 prior-year level. The other non-cash reconciliation positions amortization, depreciation, impairment losses and write-ups were roughly at the prior-year level and include the write-down of the participation in the ATISAE group in 2011 and in 2010 the impairment loss on goodwill from the acquisition of the Msource group. The change in non-cash income and expenses mainly results from a write-up with an effect on income of 4.2million for the assets contributed to TVSD Pension Trust e.V. As in the prior year, the changes in working capital and the other assets and other liabilities resulted in a cash inflow. The capital employed in current assets was considerably lower, despite the invoicing of a large-scale order at the end of the year. By means of receivables management, days sales outstanding (DSO) were kept constant, although trade receivables increased as a result of the significant growth in revenue. Cash flow from operating activities increased by 9.6million (6.6%) to 154.6million. The cash outflow from investing activities fell by 64.5million to 102.3million. This fall is essentially attributable to the significant decrease in cash paid for business combinations compared to the prior year when the GRC group was acquired. Due to the portfolio measures carried out in 2011, there was a cash inflow totaling 13.7million (prior year: outflow of 80.5million) from business combinations and divestitures less cash acquired or disposed of. This positive effect on the cash flow from investing activities was partially offset by the increase in cash paid for investments in intangible assets and property, plant and equipment, not least due to the expansion of worldwide laboratory capacities and investments in new technologies as well as software solutions. Moreover, net cash receipts from investments in financial assets decreased by 15.7million compared to the comparative period, largely due to the repayment of 25.0million of the loan to TVSD e.V. in 2010. An amount of 12.5million was invested in non-current securities in the fiscal year; as a result, the portfolio increase was slightly below the prior-year level of 15.2million. Contribution to pension plans was slightly up on the prior-year value and primarily consists of the contribution of cash to TVSD Pension Trust e.V. in return for the reimbursement of pension payments made in advance. 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 cash outflow from financing activities primarily results from dividend payments and the increase of the US dollar loan used to finance the earn-out agreement of the GRC group acquired in the prior year. The loan taken out to finance this acquisition represented the major inflow in the prior year, which was partially offset by the repayment of the cash pool liability to TV Fderation, which is a loan by nature. Other payments contain payments to non-controlling interests for the acquisition of their shares as well as earn-out payments made. Cash and cash equivalents of 245.3million consisting of checks, cash in hand, bank balances and securities with an original term of less than three months have therefore again improved considerably. With the securities disclosed in other financial assets which can be liquidated at all times, there are available cash and cash equivalents totaling 327.8million (prior year: 260.5million). Additional financing flexibility is provided by the credit line still available as of December 31, 2011 in the amount of 145.3million from the syndicated loan agreement. 71TV SD ANNUAL REPORT 2011assets, equity and liabilitiesTotal assets increased to 1,430.0million in the fiscal year. This represents a rise of 4.0%.Assets increased by 55.5million. Overall, non-current assets changed only slightly; however, there were major shifts in their composition. Current assets rose by 54.6million. The increase is mainly attributable to trade receivables (+27.2million) and cash and cash equivalents (+56.1million). By contrast, other receivables and other assets (18.0million) and non-current assets and disposal groups held for sale that include the discontinued operations (16.2million) were down.The rise in intangible assets is chiefly attributable the change in goodwill and the carrying amounts of trademarks, customer relationships and licenses stemming from business combinations during the year. Property, plant and equipment increased in particular due to the investments in laboratories for battery and energy efficiency testing in the AMERICAS region (+1.9million).Investments accounted for using the equity method decreased by 39.2million. This is mainly attributable to the change in measurement of the shareholding in the ATISAE group. As of January 1, 2011, the carrying amount of the ATISAE group of 36.0million is carried at cost instead of using the equity method, as in the prior year, as the TVSD Group no longer has significant influence over the management. Furthermore, the profit contributions from our Turkish joint venture affected the level of investments accounted for using the equity method.The increase in other financial assets from 102.5million to 123.3million is also attributable to the change in the measurement and presentation of the ATISAE group. Following the transfer of the share-holding, an impairment loss of 12.5million on the investment in the ATISAE group was necessary on account of the expected future business development.net assetsComposition of the statement of finanCial position of the tvsd Group59.9 40.134.8 30.9 34.3non-current assetsnon-current liabilities current liabilities equitycurrent assets57.6 42.425.3 37.737.02010201120102011assetsequity and liabilitiesF 10 ASSeTS/equiTy AND LiABiLiTieS (%)Figure F 10assets/equity and liabilities72ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 In 2011, trade receivables rose by 10.2% and thus increased slightly more than revenue. The rise was largely due to expansion of the scope of consolidation through business combinations and to the invoicing of the large-scale contract in the USA that was completed at the end of the year. The growth in receivables from the measurement of unbilled work in process of 7.0million is likewise influenced by large-scale projects, particularly those of TVSD Industry Service, Madagascar S.A., Madagascar, and Jiangsu TV Product Service Ltd., Wuxi, and Kocen Consulting & Services Inc., Seongnam-si. Before taking into account the receivables measured using the percentage-of-completion method, trade receivables increased by 20.2million or 9.2% in the fiscal year. The days sales outstanding in Germany improved in comparison to the prior year by means of intensive receivables management. However, this was offset by large-scale contracts in the USA. As a result, the days sales outstanding was kept constant.Other receivables and other current assets decreased by 18.0million to 53.1million. This change was largely due to the decrease in receivables from cash pooling due from TVSD e.V. Following the divestiture of the Life Science division and the disposal of assets of two fully consoli-dated companies, no significant non-current assets and disposal groups held for sale are presented. Equity rose by 67.8million to 539.0million in the fiscal year. The equity ratio climbed by 3.4percentage points to 37.7%, thus well above our target ratio of 25%. The equity increase is largely attributable to the consolidated net income of the reporting year.On the other hand, actuarial losses from pension obligations and plan assets, after taking into account deferred taxes, reduced equity by 25.6million. Non-current liabilities increased by 50.0million to 528.9million. The main effect stemmed from the non-current financial debt which increased by a total of 55.2million. The majority of this amount (58.0million) resulted from the reclassification of the partially used syndicated credit line from current financial debt. This amount was used to finance the GRC group, which was purchased in the prior year. The non-current liabilities also include the USD 10.0million (7.3million) increase of this USdollar loan used to settle the earn-out obligation from the acquisition of the GRC group. This was offset by the provisions for pensions and similar obligations, which fell by 8.1million or 2.0% to 386.3million. While plan assets increased by 22.3million, defined benefit obligations rose by 14.2million. The only slight increase in the amount of the obligations resulted in particular from the fact that the discount rate used to calculate benefit obligations in Germany remained unchanged compared to the prior year. Obligations in other countries decreased due to the payment of most of the obligations of the GRC group, which had been acquired in the prior year, resulting in a reduction of plan assets in the same amount. 73TV SD ANNUAL REPORT 2011Moreover, the development of plan assets is characterized by actuarial losses as the returns actually generated in fiscal 2011 were significantly lower than the expected average long-term return. The percentage of pension obligations funded by plan assets (69.2%) increased slightly in comparison to the prior year (68.2%). The return on total plan assets in 2011 was below the expected average long-term return for Germany of 4.8%. This gave rise to actuarial losses of 19.8million. In order to extend the external financing of pension obligations in Germany, TVSD has transferred operating assets to TVSD Pension Trust e.V., established for this purpose, since 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 trust assets of 782.3million are to be treated as plan assets, and are therefore offset against pension obligations. As of the reporting date, there are additional plan assets totaling 86.2million, essentially from pension funds in Germany and pension plans in other countries.In 2011, the capital market was heavily influenced by the events in Fukushima and the debt crisis in Europe. Investors sought refuge in secure government bonds in particular, leading to a further fall in returns on German government bonds from the second quarter of 2011, while investors called for high markups on government bonds of critical euro zone countries. In the stock market, many indices also suffered the effects of the European debt crisis. Both the leading share index in Germany DAX and the broader EuroStoxx index lost around 15% in 2011. The effects of the European debt crisis have not adversely affected the substance of the plan assets. A return of 1.9% (+13.1million) was generated by the Oktagon fund in the fiscal year. For a detailed presentation of the development of pension obligations and plan assets, please refer to Note 30 in the notes to the consolidated financial statements.Current liabilities decreased by 62.4million to 362.0million. The main reason for this was the changed presentation of an amount of 58.0million from the syndicated credit line. Other current liabilities decreased by 5.8million, mainly due to the payment of the contractual earn-out obligations from prior-year business combinations. overview: development of strateGiC business seGments and reGionsIn 2011, we again increased revenue in all three strategic business segments. Our home market of Germany in particular and almost all regions, with the sole exception of CENTRAL & EASTERN EUROPE, recorded positive revenue growth. This enabled us to perform well worldwide in a difficult economic environment.Figure F 11Revenue by strategic business segment 2010/2011 (%)74ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 The TVSD Life Services division was assigned to the MOBILITY strategic business segment. The prior-year figures have been restated accordingly. Within the CERTIFICATION strategic business segment, Food was also reclassified from the Management Services division to the Product Services division and the prior-year figures were restated accordingly. The OTHER business segment was wound up after the final disposal of the Life Science division and transfer of the TVSD Life Services division to the MOBILITY strategic business segment. In 2011, the INDUSTRY strategic business segment again made the largest contribution to the Groups revenue growth. The strategic business segments revenue increased by a nominal amount of 64.7million or 10.8% compared to the prior year. TVSD Industry Services is the division of the INDUSTRY strategic business segment with the highest volume of revenue, accounting for 70.7% of revenue. The TVSD Real Estate Services division achieved a revenue contribution of 23.6%. The acquisition in the UK during the year accounted for a significant portion of this figure. The highest growth rate was again recorded by the TVSD Rail division (28.1%).The 5,707 employees (on average) in the INDUSTRY strategic business segment generated revenue of 664.4million and accounted for 39.6% of TVSDs consolidated revenue.The MOBILITY strategic business segment achieved revenue growth of 41.6million (+7.5%) thereby contributing significantly to the revenue growth of the Group. The most significant contribution was from the TVSD Auto Services division, which saw an increase of 39.2million. As a result, this division has the highest volume of revenue within the MOBILITY strategic business segment (82.8%). The TVSD Automotive division generated 8.4% of revenue. The TVSD Life Services division, which was reassigned to the MOBILITY strategic business segment, saw a slight decrease in revenue of -2.4%. Nevertheless, it contributed 8.8% to the total revenue of this strategic business segment. The 4,818 employees (on average) of the MOBILITY strategic business segment generated 35.4% or 593.1million of TVSDs total revenue.ceRtification 24.9 ceRtification 25.7 industRY 39.6 industRY 38.6 moBilitY 35.4moBilitY 35.6otheR 0.1 otheR 0.120112010F 11 reVeNue By STrATegiC BuSiNeSS SegmeNT 2010/2011 (%)75TV SD ANNUAL REPORT 2011The revenue of the CERTIFICATION strategic business segment amounted to 18.7million (+4.7%) and developed less than expected compared to the prior years. At 24.9%, the contribution to consolidated revenue was below the prior-year figure of 25.7%. The main reasons for this were the strategic divestitures of companies in the ASIA PACIFIC region. The TVSD Product Services division had the highest revenue growth (+8.8%) and also contributed most to the revenue of the CERTIFICATION strategic business segment (59.1%). The TVSD Management Services division contributed 7.6% to the positive revenue development. The TVSD Academy division is significantly affected by the divestiture of PSB Academy in Singapore. The division suffered a 13.4% decrease in revenue compared to the prior year and contributed only 14.2% to the total revenue of the strategic business segment.The 4,114 employees (on average) of the CERTIFICATION strategic business segment generated revenue of 417.8million.We recorded 65.4% of consolidated revenue in our home market of Germany with 9,178 employees (on average) here. In the WESTERN EUROPE region, we raised revenue by 8.8%. The 821 employees there generated revenue of 151.5million.We saw a slight decrease in revenue of 0.7% in the CENTRAL & EASTERN EUROPE region. The main reasons for this were the divestiture of the Czech entity e4t, the sale of the crash-test laboratory, and the difficult overall economic situation in the Czech Republic. The 815 employees (on average) generated revenue of 58.6million.Despite the strategic divestitures, the ASIA PACIFIC region recorded 9.3% revenue growth, once again increasing its share in the total consolidated revenue. At 12.7%, the ASIA PACIFIC region made the highest revenue contribution, after Germany. The 3,972 employees (on average) generated total revenue of 212.5million.The AMERICAS regions increased its share in total revenue to 8.2%. The 25.3% jump in revenue was thanks first and foremost to the GRC group, which was consolidated for the first full fiscal year. The 1,006 employees (on average) in this region generated revenue of 138.0million. Figure F 12Revenue by region 2010/2011 (%)asia pacific 12.5 asia pacific 12.7geRmanY 67.0 geRmanY 65.4westeRn euRope 9.0 westeRn euRope 9.0 ameRicas 7.1 ameRicas 8.2centRal & easteRn euRope 3.8 centRal & easteRn euRope 3.5middle east/afRica 0.6 middle east/afRica 1.2 2010 2011F 12 reVeNue By regioN 2010/2011 (%)76ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Our smallest region, MIDDLE EAST/AFRICA, demonstrated its importance as a growth market with revenue growth of 100.0%, albeit on the basis of a very low prior-year figure. The marked increase in revenue primarily resulted from the acquisition during the year of Pro-Tec. The 226 employees (on average) contributed 19.6million to consolidated revenue.For an overview of the development of revenue in the divisions and regions, please refer to note 7 in the notes to the consolidated financial statements.summaRY ReView of net assets, financial position and Results of opeRationsIn 2011, we were again able to increase revenue and achieved this entirely through organic growth. The stable development of the global economy, and in particular the economic recovery in Germany, supported our revenue growth, with the result that we exceeded our forecast revenue target in the range of 6% to 8%, despite divestitures.As in the prior year, all strategic business segments made a positive contribution to consolidated revenue. With the exception of the CENTRAL & EASTERN EUROPE region, which saw a slight decrease in revenue, all the other regions and our core market of Germany recorded positive revenue growth. EBIT adjusted for one-off effects increased by 9.1% year-on-year. By contrast, the adjusted EBIT margin remained constant at 8.5% compared to the prior year. Adjusted earnings before tax were also higher in the fiscal year, and the adjusted EBT margin was likewise unchanged compared to the prior year at 7.2%. These key indicators clearly show that the development of earnings at TVSD currently remains at a consistently high level, despite positive revenue growth.The clearly positive change in cash and cash equivalents including a rise in non-current securities available for short-term sale demonstrates that we are well positioned for further growth. We pursue a strategy of offering a balanced product portfolio of high-quality, sophisticated services across industries and national borders while maintaining impartiality and objectivity. We therefore intend to continue achieving positive business performance in the coming years. To be able to respond to any changes in market expectations, we review this strategy regularly and update it as and when necessary. Business at TVSD developed well in terms of revenue, earnings and liquidity in 2011. < >see notes to the consolidated financial statements77TV SD ANNUAL REPORT 2011Operating performance decreased by 5.4million to 44.3million in fiscal 2011. This decrease is primarily due to the change in the reporting of offsetting between divisions; the income is presented in other operating income in the reporting period. On the other hand, there was an increase in income realized from the offsetting relating to trademarks and management services with subsidiaries. tVsdagTVSDAG is the management holding company of the TVSD Group. In fiscal year 2011, the Group comprised a total of 65 legal entities in Germany and 148 in other countries. In addition to providing support to the investment companies, the company provides central services, in particular in the areas of law, HR, finance and controlling and procurement, innovation, organization, and sales and marketing. The real estate owned by the company is leased at arms length via an agency agreement with TVSD Immobilien Service GmbH, Munich, primarily to entities in the TVSD Group. The companys income thus stems from distributions and profit and loss transfer agreements of the investment companies, income from the leased real estate, income from investments, income from offsetting relating to trademarks, offsetting between divisions for central control, as well as management and other services. The following summary of the net assets, financial position and results of operations is based on the German GAAP financial statements.net assets, financial position and Results of opeRationsresults of operationsin million 2011 2010revenue 44.3 49.7operating performance 44.3 49.7other operating income 23.6 16.7personnel expenses 24.3 23.0amortization and depreciation 10.5 11.9other operating expenses 60.0 56.4operating result 26.9 24.9financial result 57.3 66.6result from ordinary activities 30.4 41.7extraordinary income 0.0 75.3extraordinary expenses 0.0 14.9extraordinary result 0.0 60.4income before taxes 30.4 102.1income taxes 13.0 22.5net income for the year 17.4 79.6profit carried forward 37.7 12.7contributions to other revenue reserves 46.4 52.5retained earnings 8.7 39.8T 02 iNCome STATemeNTTABLe T 02income statement78ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Other operating income increased by 6.9million to 23.6million. The increase is also primarily due to the change in the reporting of offsetting between divisions. Personnel expenses increased by 1.3million to 24.3million compared to the prior year. The main reasons for this were the increased headcount and pay increases under collectively bargained wage agreements. Other operating expenses grew by 3.6million to 60.0million. The key cost drivers were higher maintenance expenses, marketing expenses, and services in connection with offsetting between divisions. On the other hand, the year-on-year reduction in legal expenses and consulting fees for various group-wide projects had a positive effect. The financial result decreased by 9.3million to 57.3million. Income/loss from participations developed positively compared to the prior year, as the impairment loss recognized on the share in TVSD Life Science GmbH, via which the entities in the Msource group were held, and the write-down to fair value of the participation in ARMAT Hessen GmbH & Co. KG no longer had an effect.Income and expenses related to the contractual trust agreement (CTA) are presented net in the interest result. The interest result was clearly negative due to the excess of interest expenses for the CTA, mainly due to the considerably smaller increase in value of the Oktagon fund compared to the prior year. The income from financial assets decreased as a result of the sale of securities to subsidiaries in the course of the year and of the higher expenses for currency hedges compared to the prior year. At 30.4million, the result from ordinary activities was 11.3million lower than the prior-year figure of 41.7million.Due to the first-time application of the BilMoG [Bilanzrechtsmodernisierungsgesetz: German Accounting Law Modernization Act], an extraordinary result of 60.4million was recorded in the prior year. Income taxes amounted to 13.0million, which was 9.5million less than in the prior year. Measured in terms of the result from ordinary activities, the tax rate decreased from 54.0% to 42.8%. The decrease is largely due to the write-down to fair value of shares, which could not be recognized for tax purposes in the prior year.Net income for the year amounts to 17.4million is therefore significantly lower (by 62.2million) than the prior-year figure of 79.6million. 79TV SD ANNUAL REPORT 2011Under fixed assets, intangible assets and property, plant and equipment decreased largely due to amortization and depreciation. The change of 1.4million in financial assets was immaterial. The capital contributions of 57.2million in total including at TVSD Management Service GmbH, TUVSUD South Africa Holding (Pty) Ltd., Cape Town, and TVSD Umwelt GmbH, the write-up of the shares in TVSD Automotive GmbH, and the higher total loans to affiliated companies were partially offset by the decrease in securities and other loans. Securities decreased due to sale to the environmental companies as well as maturity.Receivables and other assets decreased by 10.4million to 12.7million. The decrease is attributable to factors including the change in the settlement method for trademarks and offsetting between divisions owing to the reporting date, as well as to the cash pool repayments of TVSD e.V.net assetsin million dec. 31, 2011 dec. 31, 2010assetsintangible assets 5.5 8.2property, plant and equipment 109.7 110.6financial assets 680.2 681.6fixed assets 795.4 800.4inventories 0.1 0.1trade receivables and other assets 12.7 23.1cash and cash equivalents 130.7 102.9Current assets 143.5 126.1prepaid expenses 1.0 1.2total assets 939.9 927.7equity and liabilities capital subscribed 26.0 26.0capital reserve 124.4 124.4Revenue reserves 379.5 333.1Retained earnings 8.7 39.8equity 538.6 523.3special item with an equity portion 10.0 10.0provisions for pensions and similar obligations 11.2 17.2tax provisions 2.1 3.8other provisions 11.3 8.4provisions 24.6 29.4liabilities 366.7 365.0total equity and liabilities 939.9 927.7T 03 STATemeNT oF FiNANCiAL PoSiTioNTABLe T 03statement of financial position80ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 The provisions for pensions and similar obligations fell by 6.0million to 11.2million. This change was essentially due to the increase in covering assets. The 2.9million increase in other provisions mainly results from outstanding invoices for services already received for the modernization of a building in Stuttgart.The 1.7million increase in liabilities to 366.7million is due to various, almost offsetting effects. TVSD Asia Pacific Holding Ltd., Singapore, granted TVSDAG a current loan for a time deposit of 36.9million. At the same time, the cash pool liabilities of TVSD Auto Service GmbH and TVSD Industrie Service GmbH decreased due to the capital increases performed at the environ-mental companies. finanCial position, equity and liabilitiesThe key goals of our financial management are to maintain solvency at all times and continuously optimize liquidity. Cash and cash equivalents rose by 27.8million to 130.7million. The operating companies positive profit contributions, most of which are received as a result of profit and loss transfer agreements, and the time deposit made by TVSD Asia Pacific Ltd., Singapore, granting a liability, were key factors. Investments in participations, directly or indirectly via loans, as well as in securities for subsidiaries had the opposite effect.Equity rose by 15.3million to 538.6million. The change stems from the net income for the year of 17.4million less the profit distribution of 2.1million to TVSD Gesellschafterausschuss GbR.In terms of the increase in total assets by 12.2million to 939.9million, the equity ratio rose from 56.4% to 57.3%. overall statement on the Companys situationWe are pleased with how the fiscal year developed in terms of revenue, earnings and liquidity. We expect the net assets, financial position and results of operations to remain stable in the future.81TV SD ANNUAL REPORT 2011non-financial peRfoRmance indicatoRsmaRKeting and communications focusing on BRand ValueAn excellent reputation and a strong brand are an invaluable competitive advantage for a service provider such as TVSD. For our customers and the public, our companys brand name and the blue octagon represent safety and certainty, reliability and independence. To ensure that stays this way, we together with the VdTV association are giving the utmost attention to protecting the TV brand and strengthening the positive perception of the brand.proteCtinG the brand and the quality seal zero toleranCe strateGy The TVSD brand is officially registered with the German Patent and Trade Mark Office (DPMA), the Office for Harmonization in the Internal Market (OHIM) and numerous foreign trade mark offices and thus enjoys legal protection in almost every country in the world. The TVSD octagon containing the TVSD logo is also a protected word/image mark. Since October 2010, the blue octagon has also been registered separately from the word mark with the OHIM. In a ruling of August 2011, the German Federal Court of Justice (BGH), Germanys highest court for civil and criminal proceedings, strengthened our brand considerably. The BGH confirmed the high awareness of the TV brand. At the same time, the court emphasized that TV is not a generally accessible designation for test services, even if the term is sometimes used as a synonym for test services and quality checks. This means that in the future, as in the past, only TV companies may use the designation. When it comes to protecting our quality seal, we pursue a strict zero-tolerance strategy. This is not merely in our own interest; it is also in the interest of consumers, who rely on our quality seal. TVSD is a founding member of the Certification Industry Against Counterfeiting (CIAC), an association of leading international product certification companies, formed in 2010. Coordinated by Interpol, the members are tackling product piracy and quality-seal fraud worldwide. international marketinG establishedBy means of comprehensive marketing activities, we aim to raise awareness of TVSD even further, above all in the international environment. We initiated conceptual preparation to this end in 2011, and the activities will be gradually implemented from 2012.The focus is primarily on sharpening the brand profile and positioning the TVSD brand in the competitive environment. By means of an internationally known, strong brand, we also want to contribute to making TVSD even more attractive as an employer. In 2011, we also laid the organizational groundwork for achieving these objectives. An international marketing unit was established in March 2011. Based in both Munich and Singapore, it promotes marketing activities in close collaboration with the divisions and the people responsible in the respective countries.82ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 positive perCeption throuGh Corporate CommuniCationsThe key tasks of the corporate communications are fostering TVSDs public image and driving change within the corporate culture. The function not only manages communications within the TVSD Group worldwide, but also coordinates and implements TVSDs central public relations activities.innoVations RepoRtSystematic development of new services is a decisive success factor for a technical service provider like TVSD. The aim is to translate external impetus from technological progress or increasing globalization into innovative, marketable products and services, thereby enhancing our portfolio. The expertise of our employees and our global presence provide the ideal basis for achieving this. The overarching aim of our innovations management is to achieve a marked and sustainable increase in the share of new products and services. To this end, we have set ourselves the goal of 15 by 15: our objective is to grow the share of consolidated revenue generated with products and services that have been on the market for less than five years to 15% by 2015.Figure F 13promotion of culture of innovationIn the fiscal year 2011, TVSD spent 5.4million on research and development, 14.9% or 0.7million more than in the prior year. In addition, TVSD invested more than 7.6million on setting up laboratories and test facilities for new services in the fields of battery testing, embedded systems and energy efficiency. Moreover, many projects with high potential for innovation are being driven forward within the strategic business segments and at division level. TVSDs central innovations management coordinates activities throughout the Group and promotes the culture of innovation within the company. The range of innovative topics is every bit as varied as our business. The current focus is on four areas: electromobility, renewable energies, embedded systems and the challenges posed by mega cities.F 13 PromoTioN oF CuLTure oF iNNoVATioNmeasuRes foR pRomoting cultuRe of innoVationinnonet discussion toolinnolunchtVsd x-changetechnologY daYs innofaiRinnoVation paRtneRshipsgroup-wide online portal networking with external experts management forum at the munich locationResearch institutes at tVsd make innovations visible partnerships with associations and within research projects83TV SD ANNUAL REPORT 2011eleCtromobility potential reCoGnized at an early staGeWe see the promising electromobility market with battery-driven electric cars, fuel cell vehicles and hybrid vehicles as offering particular opportunities for our company. We are convinced of the potential of these new technologies and began systematically tapping into this at an early stage. Our wide-ranging activities in recent years have ensured that we are already in a good competitive position. Our goal is to take the leading position among test and certification service providers worldwide in this field.We further expanded our global network of test facilities for electromobility in 2011. Our new battery test lab in Garching, near Munich, went into operation in August, for example. Further labs, in South Korea, China and western Europe, will follow in 2012. Together with the existing facilities in the USA, Canada and Singapore, this makes TVSD the only global test and inspection service provider with a comprehensive international network of battery test facilities for electrical vehicles, with a consistent level of quality and a global network of experts. We want to help actively shape the future of electromobility. Developing our own standard for determining the range of electric cars (TVSD E-Car Cycle) is just one of the ways in which we have contributed to strengthening customer confidence in electrical cars. TVSD is advancing the development of standards for inductive charging and is conducting its own analyses of efficiency and environmental compatibility. Moreover, our company is safety partner for the development of DC rapid charging stations and, of course, for conventional charging stations. In the various pilot regions and in future electromo-bility lighthouse projects, TVSD experts will also contribute to the fields of fleet management and carbon footprint as well as testing of new mobility options, such as car sharing concepts. renewable enerGy is boominGIn the field of renewable energies, we support our customers as a service partner in all areas of technology, across the entire value added chain.Here, too, we have made important advances during the reporting period. With successfully implement-ed projects, we forged ahead with the global roll-out of our service portfolio in the photovoltaic, water and wind power sectors. For example, in 2011, we were tasked with design evaluation, construction supervision and acceptance for a 125 megawatts photovoltaic plant in Shivajinagar in the Indian state of Maharashtra. This is not only the first large-scale plant of its kind in India but also the largest photovoltaic power plant in the world. At the Swiss company Alstom Hydro, our activities focus on developing company-wide CE compliance processes for hydro-electric components and power plants. We are implementing the associated CE compliance processes at the sites in France, Spain and Switzerland and providing the customer with consulting on specific CE questions.In the field of wind energy, we were able to double our business volume and now offer the entire spectrum of services thanks to the establishment of an offshore center in Hamburg.84ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 embedded systems a Cross-industry teChnoloGy with Great potentialEmbedded systems are microprocessors that perform diverse tasks as parts of devices, systems and machines. The spectrum of potential applications for these systems ranges from household appliances to automotive technology through to aerospace.As a cross-industry technology, embedded systems are particularly significant for TVSD. Growing demands regarding information transfer between networked systems are giving rise to new questions and tasks relating to the security and availability of these systems and networks. Events such as the appearance of the Stuxnet virus in 2010 and 2011 bear striking testimony to this. We want to support our customers in all aspects of deploying embedded systems: from checking the conformity of individual components, to analyzing communication between devices and integration in the system, through to the overall system security concept.We pursue an interdisciplinary, cross-divisional approach and participate in relevant committees and research projects. We pool our employees expertise in competence centers, enabling us to support our customers across national borders and industry boundaries.By setting up a Smart Grid Competence Center in 2011, we have taken the first important step in the field of smart electricity grids. At the diagnosis lab for tests in accordance with IEC 61850, we test and certify problem-free communications between devices and systems within the grid on behalf of our customers. Our commitment in this area is supported by comprehensive training measures for our employees. We are constantly training smart grid consultants in order to offer these new services worldwide.Other competence centers focusing on the deployment of embedded systems, for example in industrial IT security, will follow. We intend to establish TVSD as the leading service provider for secure deployment of embedded systems mirroring our achievement in the field of electromobility. masterinG the ChallenGe of meGa CitiesWith increasing urbanization and global population growth, the number of mega cities with more than 10million inhabitants is steadily rising particularly in Asia. In 2010, there were already some 30 cities of this kind worldwide.Each of these mega cities poses new challenges in terms of infrastructure, public health, energy supply and environmental protection. In view of our broad service portfolio, this opens up attractive prospects for our company. The aim is to pool existing products and service packages specifically for mega cities. In addition, within the scope of our innovations management, we are systematically seeking new products that enable us to clearly differentiate ourselves from the competition in this attractive new market.An international team commenced its work in 2011 and conducted an internal analysis to define the corresponding service portfolio for TVSD. There is considerable potential here, particularly in the 85TV SD ANNUAL REPORT 2011area of sustainability. Activities were rounded out by numerous preliminary meetings with external partners and research institutes.emploYeesSkilled, motivated employees are the foundation for growth and successful globalization. This is why we want to recruit new, skilled employees for TVSD and retain and train existing employees. Extensive training measures are designed to enable employees to take on new tasks quickly and flexibly. In this way, we secure the future of our company and create the conditions for sustainable growth. As of the end of 2011, TVSD had a total of 16,451 employees (full-time equivalents). This constitutes growth of 7.3% compared to the prior-year figure of 15,333 employees. The 2011 figure no longer includes the employees of the divested Life Science division. Headcount decreased by 250 (full-time equivalents) as a result of the sale of the Asian subsidiaries. On the other hand, headcount increased by 591 through acquisitions and due to changes in the scope of consolidation. The existing companies created 935 new jobs in 2011: 255 in Germany and 680 in other countries.The average number of full-time equivalents (FTEs) for the year 2011 was 16,018, 9.2% up on the prior year. More than 80% of new employees work outside Germany, where the average number of FTEs rose by 19.6%. ChanGes in headCount in the strateGiC business seGments The INDUSTRY strategic business segment continues to account for the largest number of TVSD employees (5,943 employees as of the end of 2011). This is 8.6% up on the figure as of the prior-year reporting date. The increase is due above all to the acquisition of the South African company Pro-Tec.At end of 2011, the MOBILITY strategic business segment employed a total of 4,889 employees, 3.9% up on the prior year. In this strategic business segment, new jobs were created particularly in Germany. Figure F 14development of employeesFigure F 15changes in headcount by strategic business segment12,360200713,90914,8742009 201013,1222008 201116,018F 14 DeVeLoPmeNT oF emPLoyeeS (ANNuAL AVerAge heADCouNT)86ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Headcount in our CERTIFICATION strategic business segment increased despite the divestitures in ASIA PACIFIC. 4,211 persons were employed here as of the end of 2011, 9.9% more than a year earlier. In the other companies, headcount increased in 2011 by 87 (+6.6%) to a total of 1,408 (prior year: 1,321). This figure includes the 215 employees of the management holding company TVSDAG (prior year: 197).headCount inCreasinG in all reGions Overall, 42.7% of the entire TVSD workforce is employed outside Germany, where the average annual headcount is 6,840.In both percentage and absolute terms, headcount increased most in the MIDDLE EAST/AFRICA region due to the acquisition of South African company Pro-Tec. TVSD now has 435 employees in this region, 327 more than in the prior year. Europe is subdivided into the WESTERN EUROPE region with 918 employees (+23.3%) and the CENTRAL & EASTERN EUROPE region, where our Group employs 748 persons (4.2%). This decrease was caused primarily by the divestiture of the Czech entity e4t and the sale of our Czech crash-test facility. We continue to have the largest number of employees in Germany. At the end of 2011, TVSD had 9,331 employees here, 3.4% more than in the prior year. In the AMERICAS region, headcount rose by 7.4% to 989. Headcount in the ASIA PACIFIC region increased by 7.4% in the reporting period. TVSD now employs 4,030 persons in this region. foCus on attraCtiveness as an employerIn 2011, we took important steps to further increase TVSDs attractiveness as an employer.As a technical services provider, TVSD competes with other organizations worldwide to recruit the best minds in the industry, particularly engineers and technical specialists. In order to find and attract the right employees for our company in this environment, we have been active at institutions of higher education for many years. Moreover, TVSD is expanding its support for young talent through cooperation with universities in Germany and beyond, including Tongji University in Shanghai, China, and TU Dresden in Germany. Figure F 16changes in headcount by region 5,4743,8324,7065,9434,2114,889+8.6%+3.9%+9.9%industRYmoBilitYceRtificationF 15 ChANgeS iN heADCouNT By STrATegiC BuSiNeSS SegmeNT2010 20112010 20112010 201187TV SD ANNUAL REPORT 2011We regularly present the TVSD Group at graduate job fairs, specialist presentations and special in-house events, and cooperate closely with student initiatives. The trend here is toward increasingly focusing on the target group and entering into dialogue with potential applicants at an early stage. Moreover, as part of the Deutschlandstipendium initiative, we have been supporting students of various disciplines at Munich University of Applied Sciences since 2011. The TVSD Foundation plays an active role in the Deutschlandstipendium at TU Dresden in degree courses in various technical disciplines.In addition to these measures, which are of a more long-term nature, we also make use of conventional channels in our search for new employees. These include the job bulletin board on our website, publishing job advertisements and internet job exchanges. TVSDs attractive benefits, such as a healthy work-life balance, variable salary components and company pensions, opportunities for an international career and our many and varied options for training give us a competitive edge.According to the latest rankings, TVSD is already among Germanys most attractive employers for engineers. We are also striving to achieve a leading international position in terms of employer attractiveness. This plays a central role in the globalization of our marketing activities and will increasingly shape TVSDs external communication going forward. Figure F 17employer ranking9211087453,7537819,0259894359184,0307489,331+7.3%+7.4%+302.8%4.2%+23.3%+3.4%ameRicasasia pacific*middle east/afRicacentRal & easteRn euRopewesteRn euRopegeRmanYF 16 ChANgeS iN heADCouNT By regioN2010 20112010 20112010 20112010 20112010 20112010 2011* asean, gReateR china, Japan, KoRea, south asia88ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 traininG as a Competitive faCtorLifelong learning is a mandatory part of employee development at technical service provider TVSD. Employees have to be able to adapt to new technologies, the challenges of the markets, and the continuing international expansion of the Group.TVSD assists its employees with a high-quality training program comprising seminars, workshops and courses. We consider training to be the joint responsibility of the company and each and every employee. In light of this, TVSDs internal employee academy gives our company an important competitive edge. 6,124 employees completed one of a total of 598 interdisciplinary or specialist training courses in 2011. TVSD is increasingly deploying new learning technologies, including virtual classrooms that employees can log into by computer and phone at any TVSD location. This not only eliminates travel time and expenses, it also enables employees of various subsidiaries to participate in the same seminars across continents and national borders a key factor in the increasing globalization of our business. preparinG manaGement for international tasksWhen it comes to developing our managers, we primarily utilize systematic personnel development within the Group. We provide our managers with training to prepare for secondments abroad or changes of function. For junior managers, there are special programs that deliver the knowledge and skills required for future management tasks.These include the TVSD Jump! program. Through this 12-month program, TVSD has been fostering high potentials who wish to further their personal development and are interested in a position with international challenges since 2010. Rank25303540455055606570universum student survey (enGineerinG) universum professional survey trendenCe institute45 i 24 i 56 34 i 24 i 52 35 i 35 i 64 31 i 23 i 4520112010F 17 emPLoyer rANKiNg2008 200989TV SD ANNUAL REPORT 2011In Asia, CHAMP (Corporate High Achievers Management Programme) for high potentials and the MDP (Management Development Programme) support targeted personnel development.It is also intended to offer CHAMP in the USA and Europe in the future.trainees at tvsdMore than 114 trainees at TVSD were prepared for their careers in 2011 (prior year: 120). In addition to traditional vocational training, TVSD offers high school graduates the opportunity to participate in dual track courses in collaboration with universities of cooperative education for vehicle engineering and services marketing. A large percentage of our trainees have chosen this option to combine theory and practice in the best possible way. reConCilinG family and CareerReconciling the demands of career and family is a key component of our corporate social responsibility. To achieve this, the Groups Beruf und Familie initiative was launched Germany in 2009. The initiative is to be expanded during the coming years, also at international level. Since January 2009, we have been offering our employees throughout Germany assistance with searches for child care or with nursing for sick relatives via the external service provider pme Familienservices.Measures include a corresponding seminar offering from TVSD Academy. Since 2011, we have been offering our employees specialized seminars for parents-to-be. In addition, we provide information on the support available in the event of family members falling sick or requiring care.We reached further important milestones in 2011, with the adoption of works agreements in the areas of care and corporate integration management.The excellent response to these initiatives is proof that our commitment is valued. In 2011, we saw another year-on-year increase in the number of people taking advantage of the pme Familienservices offerings. coRpoRate goVeRnance RepoRtActively practicing corporate governance is an integral part of our corporate culture. We are convinced that this forms the basis for our success. This is why TVSD subscribes to responsible and transparent corporate governance and control.This goal finds concrete expression in clearly defined policies and rules, which apply throughout the company and without exception. We regularly review these principles and adapt them in line with new findings, changed legal provisions, and national and international standards. In this connection, we are guided by the requirements placed on publicly traded companies by the German Corporate Governance Code.90ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Our corporate governance system is essentially based on our dual management system, risk manage-ment system and compliance management system, including the TVSD Code of Ethics. Dual management and control system: As a German stock corporation (Aktiengesellschaft), TVSDAG maintains a dual management and control system. This is 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 companys strategic orientation, coordinates the same with the Supervisory Board, and ensures it is implemented accordingly. The Supervisory Board monitors and advises the Board of Management on the conduct of its business. Its agreement is required for fundamental decisions. The Supervisory Board of TVSDAG comprises 16 members. In accordance with German law, half of the members are employee representatives and half are representatives of business and the general public. An overview of the members of the Board of Management and Supervisory Board can be found in the the consolidated financial statements.Appropriate controlling and risk management system: We see efficient risk management and a responsible approach to risks as inseparable from good corporate governance. This is why the Board of Management continued to ensure appropriate risk management and risk controlling within the company in the reporting year. Moreover, the Board of Management regularly reports to the Supervisory Board on current risks and their development.Our systematic risk management enables us to detect and evaluate risks at an early stage, allowing us to contain any risks. Risk management comprises strategic corporate planning, the internal reporting system, a compliance system, and an internal control system designed to monitor and manage risks. Corporate compliance: Compliance with the law and regulations as well as internal company policies referred to in short as corporate compliance is a core element of the corporate governance system at TVSDAG. Through a large number of measures, it ensures that the conduct of the company and its employees in doing business always meets the highest standards because we are aware that our success is based to a great extent on the integrity of our company and of each and every employee. This is why we take great care to ensure compliance with the law and regulations. The relevant company policies and business processes are constantly reviewed and, where necessary, updated.Through comprehensive compliance training which was also provided in the reporting period , we ensure that our corporate compliance requirements are put into practice within the company. In this way, we want to increase all employees understanding of responsible corporate governance geared to adding sustainable value. Our business activities aim to avoid conflicts of interest and corruption, comply with competition and anti-trust law, with tax law, as well as with trade control and embargo regulations. Our internal policies use specific examples to provide our employees with guidance to help them recognize critical situations in good time, avoid them and ensure compliance with ethical < >see page 16391TV SD ANNUAL REPORT 2011and legal principles. Employees are required to confirm their adherence to corporate compliance in writing. In this way, we protect our company, every individual employee and the business partners of TVSD, thus enhancing trust in our integrity.Employees and business partners can also report breaches of the TVSD code of conduct 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.In order to implement the TVSD corporate compliance program and clarify all associated issues, the Board of Management has appointed a Chief Compliance Officer. He supervises and monitors the implementation of the corporate compliance program on his own initiative. The Chief Compliance Officer is actively involved in the risk reporting processes. As a member of the risk committees of the strategic business segments as well as for group-wide issues, he also took part in their meetings during the reporting period. The Chief Compliance Officer works closely with the internal audit function, receives its reports and is involved in its yearly planning. In the fiscal year 2011, he prepared a compliance report for the Board of Management of TVSDAG. Among other things, this reports on the further development of the corporate compliance program and provides information on events of relevance. This compliance report is a component of reporting by the Board of Management to the Supervisory Board. In the reporting period, the corporate compliance team was enhanced by the addition of a new Global Compliance Officer. In conjunction with the new appointment, the compliance organization was aligned with the new global requirements within the Group. The new TVSD compliance organization is intended to meet the demands placed on compliance organizations within compliance management systems and ensure standard compliance measures worldwide. As part of the optimization of global compliance measures, training was stepped up, particularly in the new markets, and adapted in line with local requirements. To also meet the stringent demands of international anti-corruption law, a new company regulation governing business relationships with third parties was passed, which is valid worldwide.92ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 RisK RepoRtRisK management at tVsd With our comprehensive risk management system, we continually and systematically monitor external and internal risks for all strategic business segments, their divisions and subsidiaries. We use standardized criteria to evaluate risks throughout the Group in terms of potential loss and likelihood of occurrence. We identify risks on the basis of current standards with risk categorization according to TVSD-specific criteria.Reporting on identified risks and implemented countermeasures is an integral component of our standardized corporate planning and monitoring processes. It is incorporated in TVSDs information and communication system. Risk reports are submitted to the Board of Management and Supervisory Board on a quarterly basis. Over and above these standardized reporting processes, significant issues are communicated to company management in ad hoc reports.We review our risk management system on a regular basis, develop it, and continually adapt it to changes in legal or economic conditions, not least through regular benchmarking. In addition, TVSDs early warning system for the detection of risk is audited by the independent group auditor in the course of the annual audit of the financial statements.Risk management is firmly rooted in the Groups management process. Each of the three strategic business segments has a risk committee. Group-wide issues are handled by the corporate risk committee. These four risk committees meet every quarter to analyze and evaluate the risk situation in the respective strategic business segments, and initiate corresponding measures for risk minimization and avoidance, if necessary. Final approval of the significant risks is given within the risk committees in agreement with the member of the Board of Management responsible and the Chief Financial Officer (CFO) of TVSDAG. The significant risks identified and approved in this way are reported to the Groups risk management board. In the following, material risks that could significantly impact the net assets, financial position and results of operations are discussed according to the categorization used by risk management.industry and systemiC risks TVSD is exposed to industry and systemic risks that could negatively affect the revenue and earnings of all three strategic business segments, in particular in its core European market. These risks mainly relate to sales and arise from the liberalization and deregulation of the European market, such as possible changes in the legal framework for medical products or the authorization of local public-sector technical services providers to perform appraisals for the issue of vehicle operating licenses. The changes in the business environment have led to tougher competition in the business segments affected. We have successfully mitigated these risks for years by continuously optimizing our business processes, developing and implementing sales and marketing concepts, and diversifying the portfolio of products and services.93TV SD ANNUAL REPORT 2011Part of our business (e.g., the inspection of plant that requires monitoring) is subject to special provi-sions of the law. Changes to this legal framework also have an effect on the development of business at TVSDs strategic business segments. New opportunities and risks can arise for our business activities as a result. We therefore monitor our markets closely and take an active role in the public debate on relevant topics. In this way, we seek to identify risks at an early stage and offset their effects.We identify individual industry-specific and systematic risks in the three strategic business segments.In the course of the sovereign debt crisis and the euro crisis in Europe, most European economies and the USA have initiated a program of savings in order to consolidate budgets. Drastic government cost-cutting could affect our business in all strategic business segments. Our customer base is generally very diverse. However, government cost cuts also impact the private sector, and ultimately every individual.industRY strategic business segment The INDUSTRY strategic business segment is particularly affected by the revision of the German ordinance on industrial health and safety which is under discussion. This provides for changes in the regular mandatory inspection of elevators subject to monitoring. TVSD leverages its presence on various bodies and working groups such as the German Engineering Federation [Verband Deutscher Maschinen- und Anlagenbau e.V.: VDMA] to contribute experience gained in its day-to-day testing activities and actively help shape the revision of the legislation. We endeavor in this way to ensure the greatest possible safety for people. Uncertainties arising from possible changes in the legal basis for UN projects are placing a burden on the area of climate protection projects in the INDUSTRY strategic business segment. Risk minimization measures have already been initiated. In addition to intensive quality management, these encompass a more targeted selection of projects.moBilitY strategic business segmentIn the MOBILITY strategic business segment, there are numerous obligations for the license holders TVTURK Kuzey Tasit Muayene Istasyonlari Yapim Ve Isletim A.S., Istanbul, (TVTURK Kuzey) and TVTURK Gney Tasit Muayene Istasyonlari Yapim Ve Isletim A.S., Istanbul, (TVTURK Gney) arising from the concession agreement on vehicle inspections with the Turkish ministry of transport. Quality management ensures compliance with the concession obligations. The equity contributed to the joint venture companies is safeguarded against political risks by the Federal Republic of Germanys guarantee for capital investments.At present, the Technische Prfstelle (accreditation which authorizes TVSD to operate the road vehicle technical inspectorate and the official inspection body) is solely responsible for appraising vehicles prior to issuing an operating license pursuant to Section 21 StVZO [Strassenverkehrszulassungs-ordnung: German road traffic licensing regulations]. If this responsibility is extended to local public-sector technical services providers, this could lead to losses of our market share in the MOBILITY strategic business segment.94ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 The current lease agreement for a crash-test facility expires in the medium term. There is a risk of it not being possible to conclude a new lease agreement at economically feasible terms or of not finding suitable alternative premises. If neither alternative is successful, the crash-test facility would have to be closed with corresponding consequences for employees, customers and market share. ceRtification strategic business segmentIn the CERTIFICATION strategic business segment, our business development is influenced signifi-cantly by the economic situation. For example, the rapid economic recovery in Germany, with the associated decrease in unemployment figures, resulted in a decrease in revenue in the subsidized academy business. At the same time, demand for further training increased in the open market. The loss of a key account to the competition or due to insourcing of formerly outsourced activities is a potential risk faced by all our strategic business segments. We systematically mitigate this through active customer care and by integrating customers into our global key account management. At the same time, we maintain close contact with our customers in order to tailor our services as closely as possible to their specific requirements.The European Commission is currently looking into EU institutions assuming responsibility for the approval of medical devices and medical products. To date, the European legal framework for the approval and monitoring of medical products and medical devices provided for an inspection by an accredited private-sector company (notified body). This reform brings uncertainties for the business model of the CERTIFICATION strategic business segment. We are already developing further areas of activity and are in direct contact with ECOMED and EUTOP GmbH. Together with other notified bodies, we are developing a joint code of conduct and are applying the highest quality standards in order to ensure patient safety. operatinG risksThe strength of the TVSD brand and the great trust that our company enjoys worldwide are decisive competitive advantages. Unprofessional or defective performance would damage our reputation significantly. This is particularly the case with regard to the general public, which does not draw distinctions when it comes to the TV brand name. Extensive and clearly defined quality management worldwide and efficient and consistent order controlling ensure that recognizable risks are identified at an early stage and countermeasures are implemented promptly. In addition, we continually draw attention to the various market participants with the TV brand name in our PR work. The commitment, motivation and skills of its employees are key success factors for TVSD. We see our employees training and international orientation as well as their ability to translate innovations into customer benefits as personnel-related opportunities. However, risks arise if we are unable to recruit suitable staff or retain high performers. We have implemented a large number of measures to ensure the appeal of TVSD as an employer and support the long-term retention of employees within the Group. 95TV SD ANNUAL REPORT 2011information teChnoloGy risks Information processing plays a key role in our business activities. All major strategic and operational functions and processes are supported to a large extent by information technology (IT) at TVSD. Even in an intact IT environment, it is not possible to preclude risks entirely. The IT security measures described below serve to protect the systems against risks and threats, to avoid damage and to reduce risks to an acceptable level.IT security at the TVSD Group is firmly established within the organization of the parent company. The IT security officer, who reports directly to TVSDAGs Head of Corporate IT, is involved from an early stage in all projects that are of relevance for IT. The same applies to the data protection officer where personal data is concerned.Our internal IT security policies are based on national and international standards. They are regularly updated and reviewed with regard to their effectiveness. We monitor the regulations and compliance on an ongoing basis in order to guarantee the target level of security. The central IT systems are monitored in such a way as to enable us to respond quickly to any disruption. Our corporate data are protected by adequate measures according to the level of protection required for the respective data. We use appropriate technology measures to protect our IT system against viruses and other harmful codes and make sure that the antivirus systems are kept up to date at all times.Extensive contingency measures are in place to ensure that we remain operative in the event of extensive damage to our IT infrastructure for example, through fire, environmental influences or by force majeure. Comprehensive backups of the central systems also ensure that we can resume operations for the respective applications within an acceptable time frame.finanCial risks The financing of TVSD and its operating companies is handled centrally by TVSDAG. Its role is to provide sufficient reserves of liquidity for short- and medium-term financing requirements. The financing of the Group is ensured by the above financing elements, together with the volume of 327.8million of cash and securities (prior-year reporting date: 260.5million) available as of the reporting date, and the existing credit line, which has largely not been used. For details on cash and securities please refer to the notes to the consolidated financial statements. foreign exchange risk As a global organization, the TVSD Group is exposed to foreign exchange risks from transactions and currency translation.transaction risksTransaction risks can arise from every existing or forecast receivable or liability denominated in foreign currency. The value of such receivables or liabilities fluctuates in line with changes in the respective exchange rate.96ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 In particular, the volatility of the US dollar to the Turkish lira has effects on the result of the vehicle inspection operations of our Turkish subsidiary due to existing financing in US dollars. At the same time, the exchange rate fluctuations also affect our share in profit or loss of the Turkish joint venture. Here, too, there are loans in US dollars that affect our income from investments accounted for using the equity method.An internal policy requires all group companies to monitor their foreign exchange risks and hedge them if they reach a certain volume. Forward exchange transactions are primarily used for hedging purposes. The corporate treasury department is responsible for and enters into these transactions. translation risksTranslation risks arise from the carrying amounts of participations denominated in foreign currency and the related net income or loss for the year. TVSD prepares the consolidated financial statements in euro. For the consolidated financial statements, the statements of financial position and income statements of the entities located outside of the euro zone must be translated to the euro. The effects of fluctuation in the exchange rates are disclosed in the appropriate items within equity in TVSDs consolidated financial statements. As the participations are generally of a long-term nature, we monitor this risk, but do not hedge the net assets position. Another reason for this decision is that the current and foreseeable effects on the consolidated statement of financial position are immaterial. When borrowing in order to finance business combinations, however, we generally ensure the loan is taken out in matched currencies to eliminate risk from fluctuations in exchange rates as far as possible. interest rate and price risks Interest rate risks arise from interest-bearing items and items that are directly linked to interest rates; for securities, transaction risks arise from the market prices of the various investment instruments. In principle, a distinction is made between the risk from the pensions portfolio and the operations of the TVSD Group. The risk strategy in the pensions portfolio is designed to limit some of the market risk from pension obligations by means of structured, dedicated financial assets. Another objective is to compensate for the interest cost of the hedged pension obligations wherever possible and to increase coverage over time by generating a return on assets with the trustors waiving their pension reimbursements. More than two thirds of the pension obligations are covered by financial assets that are segregated from operating assets as a result of the contractual trust agreement (CTA) in order to reduce risks associated with pension liabilities and allow an investment policy that reflects the obligations. The domestic segregated pension assets are almost entirely managed in trust by TVSD Pension Trust e.V., founded in 2005. They are invested by external investment companies in accordance with specific investment principles. Interest rate and price risks relating to special non-current capital investment funds are partly hedged by derivative financial instruments. The portfolios market value is subject to fluctuations resulting from changes in interest rates and share prices. Should the actual return on plan assets fall short of expectations, the resulting actuarial losses are charged to equity. At the same time, 97TV SD ANNUAL REPORT 2011when measuring pension obligations, changes in the interest rate spread in particular can influence the discounting of pension obligations accordingly and thereby have consequences on equity. A reduction in the discount rate for determining pension obligations could have a significant effect on the structure of the Groups equity. Another negative effect could arise from a potential reduction in the average return on plan assets. This constitutes a corporate risk within the scope of risk management.To counteract this risk, we have already started implementing a liability-driven investment strategy, which involves adjusting the term of the investments in government and corporate bonds to the term of the obligations. During the fiscal year, end-to-end management of the pension portfolio was implemented at TVSD Pension Trust e.V. This is based on the holistic risk budget specified by the TVSDAG Board of Management for the first time for 2011. Alerts are displayed using a traffic light system when predefined thresholds are reached. These alerts enable the individuals responsible at TVSD Pension Trust e.V. to take (hedging) measures to ensure compliance with the risk budget. The implementation of all hedging measures, i.e., hedging measures based on the risk concept as well as tactical measures via the investment committee, are performed in a newly established control segment. This fiscal year, TVSD Pension Trust e.V. began the step-by-step introduction of a sustainability strategy for cash investments. The aim of the sustainability strategy is to further increase yield while minimizing risk. In the Oktagon fund, the first segment with corporate bonds and mortgage bonds has been converted to a sustainability approach. The fund manager works with sustainability rating agency Oekom Research. Oekom Research assesses the sustainability of securities with a ranking from A+ to D-. The managers only purchase securities that are rated as sustainable according to the best-in-class principle. In addition, TVSD Pension Trust e.V. has specified exclusion criteria, including corruption, accounting fraud and child labor, for the purchase of securities. Additional segments will be converted to sustainability at the beginning of 2012. One segment with predominantly long-term bonds will then also be managed according to the Oekom Research criteria and the exclusion criteria defined by TVSD. The other segments that hold shares or fixed-interest securities in their portfolio will now additionally be managed in accordance with the TVSD exclusion criteria. Sustainable investment management is firmly enshrined in the relevant TVSD regulations.Following these conversions, 80% of assets in the Oktagon fund of TVSD Pension Trust e.V. will be sustainably managed. During the course of the year, appropriate concepts will be developed for the remaining segments, which are not yet managed sustainably.With regard to operating activities, financial derivatives are used exclusively to hedge underlying transactions on a case-by-case basis. Interest rate swaps are our main hedging instrument. In the case of the operators license for the vehicle inspection business at TVSD Bursa Tasit Muayene 98ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Istasyonlari Isletim A.S., Osmangazi-Bursa, which is financed in US dollars, the floating interest rate has been swapped for a fixed rate via a cash flow hedge. The loan at the joint venture TVTURK Istanbul is also hedged at a fixed interest rate.The purchase price financing for the purchase of the US-based GRC group was handled via a syndicate of eight banks. Fifty percent of the floating-rate financing was changed to a fixed rate via multiple interest rate swaps. Effects from changes in market value are recognized in the corre-sponding item within equity. brand risksWe continued our systematic, intensive brand management in 2011, thereby reinforcing our market position. With its ruling of August 17, 2011, the German Federal Court of Justice (BGH) confirmed the position of TVSD and prohibited the use of the TV brand name by competitors in their company names or product/service designations. The corresponding corporate risk therefore no longer exists. ComplianCe and other leGal risks As of the end of the reporting period, several legal proceedings were still pending in connection with services rendered by TVSD. Due to the existing global insurance cover, there were no material risks. Sufficient provisions have been recognized to cover the remaining risk. overall statement on the risks faCed by the Group From a group perspective, we are giving particularly close attention not only to the equity risk from the development of pension obligations and plan assets, but also to the revision of the German ordinance on industrial health and safety. This affects the INDUSTRY strategic business segment. The risk involving the greatest exposure the changes in the measurement of pension obligations due to a change in the interest rate of the pension obligations with effect on equity and a possible reduction in the expected long-term return of plan assets is a corporate risk. As the result of a German Federal Court of Justice (BGH) ruling, the corporate risk relating to protecting the brand no longer exists. Considered cumulatively, the CERTIFICATION strategic business segment has the gross risks involving the highest exposure, ahead of the INDUSTRY and MOBILITY strategic business segments.Considered by risk category, financial risks involve the highest exposure, followed by systemic and industry risks. With regard to the next two years, the risk management system set up by TVSD does not currently indicate any risks that could seriously impact on TVSDs net assets, financial position and results of operations. All the organizational preconditions necessary to recognize developing risks at an early stage have been met.99TV SD ANNUAL REPORT 2011RisK RepoRt of tVsdagTVSDAG is an investment and management holding company. As such, its risk situation is primarily determined by the economic situation of its participations. In addition, there are financial risks in the form of interest rate risks, currency risks and price risks. Interest rate risks arise in conjunction with liquidity management and refinancing. To hedge these risks, derivative financial instruments in the form of interest rate swaps are also used. Foreign currency risks can arise from any existing or forecast receivable or liability denominated in foreign currency. They are mainly hedged using forward exchange contracts. Price risks arise from changes in the market price of diverse securities. Industry and systemic risks arising from the market conditions in the strategic business segments and regions are recorded using market and competitive analyses and discussed in strategy meetings. suBsequent eVentsAs of March 27, 2012, no significant events had occurred that could significantly influence the TVSD Group. foundationAt the end of 2009, TVSD e.V. set up a non-profit foundation, the TVSD Foundation, and made an initial endowment of 500,000. The purpose of the foundation is to promote science and research, education, environmental protection and accident prevention. As a result, TVSD e.V. transferred 25.1% of its beneficial ownership in the shares of TVSDAG to the TVSD Foundation as of January 1, 2010 by granting the foundation a participation in TVSD Gesellschafterausschuss GbR. In the internal relationship between the shareholders, TVSD e.V. and the TVSD Foundation hold a share of 74.9% and 25.1%, respectively, in the assets of TVSD Gesellschafterausschuss GbR. The registered offices of TVSD e.V. were relocated from Mannheim to Munich at the same time. In the future, the foundation will be funded primarily by the dividend paid on the shares it holds in TVSDAG. The non-profit TVSD Foundation commenced its activities in 2010. It was presented to the public at large at a ceremony on May 6, 2010. Three funded projects intended to arouse young peoples inter-est in technology and the natural sciences are currently in progress. The TVSD Foundation Kids 100ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 project aims to make technology and the natural sciences accessible to children through play. Experiments are used to kindle the childrens enthusiasm and enable them to experience technology firsthand. In addition, the TVSD Foundation Visiting Professorship has been created at Technische Universitt Mnchen (TUM). Within the scope of the project, the university can invite internationally renowned scientists and specialists in areas such as energy efficiency, climate protection, testing techniques, product and industrial plant safety, and risk and compliance management to participate in the exchange program. The Im Dschungel (In the Jungle) exhibition staged at the Kinder- und Jugendmuseum Mnchen (museum for children and young people in Munich) is another project chosen for funding in 2011. oppoRtunities and outlooKfutuRe deVelopment of the tVsd gRoupoutlook for 2012 and 2013 The three-year budgetary planning for the period from 2012 to 2014, which was created by the Board of Management, was approved by the Supervisory Board of TVSD in December 2011. This forms the basis of the following statements on the outlook for the next two fiscal years. We have regularly examined possible effects of the renewed financial and economic crisis on the strategic business segments. These findings have been included in the outlook, along with the requirements from the strategy planning process and the measures of the TVSD FIT 2012+ program. We assume that the global economy will develop at a slower pace. The economies of Asia will no longer develop so rapidly, though they will continue to grow significantly. Economic development in the USA will tend to be more moderate, but will be seen as more positive on the whole. In the euro zone, the European debt crisis, the associated cost cuts and the populations increasing distrust in the entire banking system will continue to dampen economic development. However, following a down-ward trend and a forecast recovery in the second half of 2012, the German economy is expected to buck the trend in the euro zone and continue to grow slightly. We therefore expect global economic development to stabilize overall for 2012 and 2013.For 2012, we expect to generate consolidated revenue of approximately 1.8 billion with existing entities. For 2013, we expect a continued revenue increase in the range of 6% to 8%. Possible effects of business combinations and disposals are not taken into account here.The non-German entities share of consolidated revenue is expected to increase further over the next two years. In the medium term, we aim to generate more than 40% of consolidated revenue outside Germany.101TV SD ANNUAL REPORT 2011Following a good fiscal year 2011, the INDUSTRY strategic business segment will feel the effects of the early phasing out of nuclear power in the forecast period, particularly in Germany. Corresponding provisions have been taken in this area and are taken into account in our planning. We therefore expect annual revenue to grow in the middle single-digit range in the forecast period. This does not take further business combinations into account.We see potential for worldwide growth in the field of technical solutions for clean energy generation and renewable energies. There are additional growth opportunities in our service portfolio for the chemicals and petrochemicals industry in our core market of Germany and in the AMERICAS region, as well as through the expansion of our activities relating to supply chain management. Sustainability is also the focus of our services for the real estate sector. Energy efficiency and resource-efficient buildings will be future growth drivers. With our new offerings in the areas of infra-structure, facility management and consulting during construction, we are systematically addressing the ASIA PACIFIC and MIDDLE EAST/AFRICA regions, where construction is booming. The rail transport and signaling technology segment will continue its dynamic growth. Here we are planning to expand our offering for urban rail transport and energy technology. Following a successful year in 2011, we expect the MOBILITY strategic business segment to see high single-digit growth rates in 2012 and 2013 respectively.Our offering for retail and business customers in Germany will remain a key driver, particularly roadworthiness tests and exhaust-gas analyses, fleet management and professional vehicle services. At the same time, we will apply the winning vehicle inspection model, which we have already successfully developed in Turkey, to other growth markets where private transport is on the rise. A first step has already been taken: in January 2012, we established a pilot service station in New Delhi, India, where vehicle inspections are expected to begin in mid-2012. Services relating to homologation and functional safety will increasingly contribute to revenue not only in our home market of Germany but also in WESTERN EUROPE and ASIA PACIFIC. Following the sale of our subsidiary e4t and the crash-test laboratory, we expect a decrease in revenue in the CENTRAL & EASTERN EUROPE region, which will be offset in the medium term by the establishment of a new airbag test lab.We plan to continuously increase revenue in the areas of healthcare management, occupational health and safety, and traffic psychology and medicine. There will be positive effects, particularly at the end of the forecast period, due to an expected fees increase in the area of public-sector traffic psychology and medicine services. We again expect the highest percentage increase in the forecast period to be recorded in the CERTIFICATION strategic business segment, where we forecast a low double-digit growth rate in revenue in each year. 102ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Our service offering relating to the market readiness of industrial products is the key growth driver. Additional impetus comes from the extension of our activities in the new fields of photovoltaic, battery testing as well as medical and consumer products, particularly in the area of textiles. By creating a global laboratory network, we enhance efficiency through optimized capacity utilization and also satisfy the requirements of our customers with global operations. Growth in the ASIA PACIFIC and AMERICAS regions is enabled by investments in laboratory capacities and the hiring of expert personnel.In the area of certification of quality, eco and safety management systems for all industries, we are continuing to systematically expand our service offering. The focus here is on food safety, energy and sustainability. Following the portfolio streamlining in our basic and advanced training business, which primarily includes the divestiture of PSB Academy in Singapore, we expect almost double-digit revenue growth on average for 2012 and 2013. The offering relating to personnel certification and in the open seminar business will be the main growth driver not only in Germany, but also in ASIA PACIFIC. For the coming years, we expect revenue growth in all regions. Specifically, we anticipate an increase in the middle single-digit range in EUROPE and forecast a slightly higher growth rate in the AMERICAS region. However, we expect significantly stronger revenue growth in the ASIA PACIFIC and MIDDLE EAST/AFRICA regions. In these regions, we expect an annual increase in the low double-digit range at the existing entities. further inCrease in earninGs plannedThe development of earnings at TVSD is decisively influenced by our ability to satisfy the require-ments of our customers with our services and innovations, and to meet customer needs through flexible working models, as well as taking an active approach to efficiently shaping our cost structures. External factors, such as the development of the US dollar exchange rate against the euro, impact directly on the earnings of TVSD operating subsidiaries. Potential exchange rate fluctuations also influence the financial result as they change the net risk exposure of our investment in vehicle inspection in Turkey. A subsidiary domiciled there and a joint venture that we account for using the equity method are financed in US dollars. We expect to be able to increase consolidated income before taxes at least in line with revenue in 2012, and expect a further increase for 2013. We estimate that consolidated income before taxes will continue to be influenced by the low interest level on the capital market in the long term. We expect the application of the new IAS 19 to give rise only to low effects on earnings as of 2013. The return on plan assets expected for 2012 approximates the discount rate used for pension obligations. Actual deviations from the expected return will be recognized in equity pursuant to IAS 19.103TV SD ANNUAL REPORT 2011Earnings before interest, currency translation gains/losses from financing measures and income taxes, but after income from participations (EBIT) increase continually as a consequence of our strategic orientation toward technical and geographic growth markets. The positive development of earnings depends on various factors that are not interdependent. Influencing factors include the trend toward stability in the global economy, the systematically implemented goals of the TVSD FIT 2012+ program, the successful integration of the companies acquired in 2011, as well as the increasing economic significance of innovative technical services. The continuous development of the TVSD FIT 2012+ program will continue to help us achieve our Groups goals in the future. We expect the EBIT margin to improve constantly in the two following years up to our strategic target of approximately 11% for 2013.Please note that actual events in the course of the coming fiscal years could deviate from our expectations. We have included the possible effects of the euro debt crisis in our forecast as well as developments in the global economy which could also affect us. We do not expect a significant one-off effect on income before taxes in the forecast period.We will continue to systematically implement our corporate strategy in the coming years. We are concentrating our activities on attractive technologies and industries with long-term growth prospects. The regional focus is on markets characterized by high economic growth and a reliable business environment. In Germany, our activities are primarily aimed at maintaining high market shares, while in the ASIA PACIFIC, AMERICAS and MIDDLE EAST/AFRICA regions we want to expand the range of competencies and services. We are expanding our market position outside Germany in particular through targeted acquisitions and using the opportunities that arise in promising, profitable markets. We will make every effort to increase our profitability worldwide, but also and above all to further the development of our employees because their knowledge and experience are the key to TVSDs success. TVSD developed well in 2011. The positive underlying mood of the German economy, our focus on our technical core competencies, streamlining of the service portfolio, and targeted acquisitions have fueled the companys growth. In the coming years, we will continue to focus our efforts on achieving our defined strategic goals. The development of the TVSD Group to date confirms that the course we have taken is the right one. We firmly believe that TVSD will continue to develop successfully and positively in the future. 104ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 ContentPage 106Consolidated inCome statementPage 107Consolidated statement of Comprehensive inComePage 108Consolidated statement of finanCial positionPage 109Consolidated statement of Cash flowsPage 110Consolidated statement of Changes in equityPage 112notes to the Consolidated finanCial statementsPage 162auditors reportPage 163Corpor ate boardsChapter 4ConsolidatedFinancial StatementsEarnings before interest, currency translation gains/losses from financing measures and income taxes, but after income from participations (EBIT) increase continually as a consequence of our strategic orientation toward technical and geographic growth markets. The positive development of earnings depends on various factors that are not interdependent. Influencing factors include the trend toward stability in the global economy, the systematically implemented goals of the TVSD FIT 2012+ program, the successful integration of the companies acquired in 2011, as well as the increasing economic significance of innovative technical services. The continuous development of the TVSD FIT 2012+ program will continue to help us achieve our Groups goals in the future. We expect the EBIT margin to improve constantly in the two following years up to our strategic target of approximately 11% for 2013.Please note that actual events in the course of the coming fiscal years could deviate from our expectations. We have included the possible effects of the euro debt crisis in our forecast as well as developments in the global economy which could also affect us. We do not expect a significant one-off effect on income before taxes in the forecast period.We will continue to systematically implement our corporate strategy in the coming years. We are concentrating our activities on attractive technologies and industries with long-term growth prospects. The regional focus is on markets characterized by high economic growth and a reliable business environment. In Germany, our activities are primarily aimed at maintaining high market shares, while in the ASIA PACIFIC, AMERICAS and MIDDLE EAST/AFRICA regions we want to expand the range of competencies and services. We are expanding our market position outside Germany in particular through targeted acquisitions and using the opportunities that arise in promising, profitable markets. We will make every effort to increase our profitability worldwide, but also and above all to further the development of our employees because their knowledge and experience are the key to TVSDs success. TVSD developed well in 2011. The positive underlying mood of the German economy, our focus on our technical core competencies, streamlining of the service portfolio, and targeted acquisitions have fueled the companys growth. In the coming years, we will continue to focus our efforts on achieving our defined strategic goals. The development of the TVSD Group to date confirms that the course we have taken is the right one. We firmly believe that TVSD will continue to develop successfully and positively in the future. ContentPage 106Consolidated inCome statementPage 107Consolidated statement of Comprehensive inComePage 108Consolidated statement of finanCial positionPage 109Consolidated statement of Cash flowsPage 110Consolidated statement of Changes in equityPage 112notes to the Consolidated finanCial statementsPage 162auditors reportPage 163Corpor ate boardsConsolidated inCome statementT 04 ConsolidaTed inCome sTaTemenT for The period from January 1 To deCember 31, 2011 in 000 note 2011 2010continuing operationsRevenue (7) 1,677,739 1,552,484own work capitalized 2,498 103Purchased services 224,960 206,443Operating performance 1,455,277 1,346,144Personnel expenses ( 8 ) 986,153 900,053amortization, depreciation and impairment losses (9) 52,386 54,560other expenses (10) 318,502 290,407other income (11) 65,492 36,079Operating result 163,728 137,203income from investments accounted for using the equity method (13) 1,472 6,482interest income (13) 4,670 5,796interest expenses (13) 27,399 24,560other financial result (13) 8,859 1,555Financial result 30,116 13,837Income before taxes 133,612 123,366income taxes (14) 26,865 35,193Profit/loss from continuing operations 106,747 88,173discontinued operationsProfit/loss from discontinued operations (after taxes) (15) 451 13,556Consolidated net income 107,198 74,617attributable to:owners of tVsdaG 100,466 68,976non-controlling interests (16) 6,732 5,641106ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Consolidated statement of ComPrehensiVe inComeT 05 ConsolidaTed sTaTemenT of Comprehensive inCome for The period from January 1 To deCember 31, 2011in 000 2011 2010Consolidated net income 107,198 74,617actuarial gains and losses from defined benefit pension plans and similar obligations 22,965 30,453available-for-sale financial assetsChanges from unrealized gains and losses 532 190Changes from realized gains and losses 9 523 242 432Currency translation differencesChanges from unrealized gains and losses 1,885 16,699Changes from realized gains and losses 6,010 4,125 0 16,699Cash flow hedgesChanges from unrealized gains and losses 991 703Changes from realized gains and losses 0 991 0 703investments accounted for using the equity methodChanges from unrealized gains and losses 34 0Changes from realized gains and losses 0 34 0 0deferred taxes 2,742 11,777Other comprehensive income 30,266 3,112Total comprehensive income 76,932 71,505attributable to:owners of tVsd aG 70,120 65,504non-controlling interests 6,812 6,001for more information please refer to note 17107TV SD AnnuAl RepoRT 2011Consolidated statement of finanCial Positionin 000 note dec. 31, 2011 dec. 31, 2010*assetsintangible assets (18) 231,707 226,941Property, plant and equipment (19) 367,110 352,418investment property (20) 5,798 5,375investments accounted for using the equity method (21) 23,849 63,096other financial assets ( 22 ) 123,251 102,509other non-current assets (23) 4,402 4,283deferred tax assets (14) 67,938 68,550Non-current assets 824,055 823,172inventories (24) 3,230 2,625trade receivables (25) 293,115 265,946income tax receivables 11,183 6,281other receivables and other current assets (26) 53,102 71,085Cash and cash equivalents (27) 245,285 189,225non-current assets and disposal groups held for sale (28) 6 16,183Current assets 605,921 551,345Total assets 1,429,976 1,374,517equity and liabilitiesCapital subscribed (29) 26,000 26,000Capital reserve (29) 124,354 124,354revenue reserves (29) 354,661 282,746other reserves (29) 1,365 6,125Equity attributable to the owners of TVSD AG 506,380 439,225non-controlling interests 32,642 31,995Equity 539,022 471,220Provisions for pensions and similar obligations (30) 386,307 394,381other non-current provisions (31) 27,480 29,520non-current financial debt (32) 73,294 18,055other non-current liabilities (34) 13,206 13,739deferred tax liabilities (14) 28,627 23,189Non-current liabilities 528,914 478,884Current provisions (31) 117,416 118,636income tax liabilities 10,195 11,112Current financial debt (32) 9,739 57,305trade payables (33) 68,264 67,280other current liabilities (34) 156,426 162,206liabilities directly associated with non-current assets and disposal groups held for sale (28) 0 7,874Current liabilities 362,040 424,413Total equity and liabilities 1,429,976 1,374,517* Prior-year figures restated, please refer to note 6T 06 ConsolidaTed sTaTemenT of finanCial posiTion as of deCember 31, 2011108ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Consolidated statement of Cash flowsT 07 ConsolidaTed sTaTemenT of Cash flows for The period from January 1 To deCember 31, 2011in 000 2011 2010*Consolidated net income 107,198 74,617amortization, depreciation, impairment losses and write-ups of intangible assets, property, plant and equipment and investment property 52,386 56,167impairment of goodwill from discontinued operations 0 12,167impairment losses and write-ups of financial assets 14,164 3,083Change in deferred tax assets and liabilities recognized in the income statement 3,184 2,422Gain/loss on disposal of non-current assets 8,700 1,532Gain/loss on sale of shares in fully consolidated entities and business units 27,164 0other non-cash income/expenses 2,524 6,125Change in inventories, receivables and other assets 9,449 15,935Change in liabilities and provisions 20,416 24,918Cash flow from operating activities 154,559 144,938Cash paid for investments in intangible assets, property, plant and equipment und investment property 64,395 52,234financial assets 3,843 0securities 38,556 22,949business combinations (net of cash acquired) 27,332 80,492Cash received from disposals ofintangible assets and property, plant and equipment 3,848 6,856financial assets 7,370 19,204securities 26,042 7,745shares in fully consolidated entities and business units (net of cash disposed of) 41,081 0Contribution to pension plans 46,533 44,982Cash flow from investing activities 102,318 166,852dividends paid to owners of tVsd aG 2,080 1,040dividends paid to non-controlling interests 3,196 3,170Proceeds from loans/repayments of loans including exchange rate effects 8,677 27,552other payments 3,880 47Cash flow from financing activities 479 23,295Net change in cash and cash equivalents 51,762 1,381reclassifications to held for sale 0 2,817effect of currency translation differences and change in scope of consolidation on cash and cash equivalents 4,298 2,155Cash and cash equivalents at the beginning of the period 189,225 188,506Cash and cash equivalents at the end of the period 245,285 189,225additional information on cash flows included in cash flow from operating activities:interest paid 3,305 3,015interest received 4,328 4,686income taxes paid 30,961 31,507income taxes refunded 1,059 13,688dividends received 1,105 1,388for more information please refer to note 40* Prior-year figures restated, please refer to note 6109TV SD AnnuAl RepoRT 2011Consolidated statement of ChanGes in equityT 08 ConsolidaTed sTaTemenT of Changes in equiTy for The period from January 1 To deCember 31, 2011 revenue reserves* other reserves*in 000CapitalsubscribedCapitalreserveactuarial gains and losses from definedbenefit pensionplans other revenuereservesCurrencytranslationdifferences available-for-sale financial assets Cash flow hedgesinvestments accounted for using the equity methodEquity attributable to the owners of TVSD AG non- controlling interestsTotal equityAs of January 1, 2010 26,000 124,354 76,196 159,076 8,200 311 1,100 0 376,637 25,555 402,192total comprehensive income 18,586 68,976 15,867 302 451 65,504 6,001 71,505dividends paid 1,040 1,040 3,170 4,210Changes in scope of consolidation 1,823 1,823 3,609 1,786other changes 53 53 53As of December 31, 2010 26,000 124,354 57,610 225,136 7,667 9 1,551 0 439,225 31,995 471,220total comprehensive income 25,586 100,466 4,500 365 652 27 70,120 6,812 76,932dividends paid 2,080 2,080 3,196 5,276Changes in scope of consolidation 681 681 2,971 3,652other changes 204 204 2 202As of December 31, 2011 26,000 124,354 32,024 322,637 3,167 374 2,203 27 506,380 32,642 539,022* Prior-year figures restated; for more information please refer to note 6110ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 revenue reserves* other reserves*in 000CapitalsubscribedCapitalreserveactuarial gains and losses from definedbenefit pensionplans other revenuereservesCurrencytranslationdifferences available-for-sale financial assets Cash flow hedgesinvestments accounted for using the equity methodEquity attributable to the owners of TVSD AG non- controlling interestsTotal equityAs of January 1, 2010 26,000 124,354 76,196 159,076 8,200 311 1,100 0 376,637 25,555 402,192total comprehensive income 18,586 68,976 15,867 302 451 65,504 6,001 71,505dividends paid 1,040 1,040 3,170 4,210Changes in scope of consolidation 1,823 1,823 3,609 1,786other changes 53 53 53As of December 31, 2010 26,000 124,354 57,610 225,136 7,667 9 1,551 0 439,225 31,995 471,220total comprehensive income 25,586 100,466 4,500 365 652 27 70,120 6,812 76,932dividends paid 2,080 2,080 3,196 5,276Changes in scope of consolidation 681 681 2,971 3,652other changes 204 204 2 202As of December 31, 2011 26,000 124,354 32,024 322,637 3,167 374 2,203 27 506,380 32,642 539,022* Prior-year figures restated; for more information please refer to note 6111TV SD AnnuAl RepoRT 2011Basis of PreParation1 | GENERAl INFORmATIONTVSD is a global technical services provider operating in the strategic business segments INDUSTRY, MOBILITY and CERTIFICATION. Apart from our domestic market in Germany, TVSD has a presence in the regions WESTERN EUROPE, CENTRAL & EASTERN EUROPE, MIDDLE EAST/ AFRICA, ASIA PACIFIC and AMERICAS. The range of services covers consulting, testing, certification and training. TVSD Aktiengesellschaft, with registered offices in Munich, Germany, is entered in the commercial register of Munich District Court under the number HRB 109326, as the parent company of the Group. TVSD AG prepared its consolidated financial statements as of December 31, 2011 in accordance with the International Financial Reporting Standards (IFRSs) by exercising the option under Section 315a (3) HGB [Handelsgesetzbuch: German Commercial Code]. All IFRSs that are binding for the fiscal year 2011 and the pronouncements issued by the International Financial Reporting Standards Interpretations Committee (IFRS IC) have been applied to the extent that these have been adopted by the European Union.On March 27, 2012, TVSD AGs Board of Management approved the 2011 consolidated financial statements for submission to the Supervisory Board.2 | SCOPE OF CONSOlIDATIONIn addition to TVSD AG, the consolidated financial state-ments as of December 31, 2011 include all material domestic and foreign companies in which TVSD AG holds either a direct or indirect majority of voting rights, or whose financial and operating policy it controls in some other manner. Special purpose entities (SPEs) which were formed for a closely defined purpose and where the Group does not have the majority of voting rights are allocated to subsidiaries if they are controlled by the Group from a substance over form perspective. This is the case especially when the business activities are exercised in accordance with TVSD AGs special requirements, TVSD AG has the power to obtain the majority of the benefits from the entitys activities, and the majority of the residual and ownership risks associated with the special purpose entity are retained by TVSD AG. The entities are included in the consolidated financial statements from the date on which the Group obtains the possibility of control.Associated companies are accounted for in the consolidated financial statements using the equity method. Entities in which TVSD together with other venturers undertakes an economic activity that is subject to joint control (joint ventures) are also accounted for using the equity method.notes to the Consolidated finanCial statements112ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 The number of fully consolidated subsidiaries comprises three special purpose entities as in the prior year. They have been included in the consolidated financial statements in accordance with IAS 27 in conjunction with SIC 12 because the benefits from the entities activities and the residual and ownership risks are exclusively attributable to TVSDAG on the basis of the contractual agreements despite the fact that it does not hold the majority of voting rights in the entities. The scope of consolidation was extended in 2011 to include five entities acquired in 2011 one entity founded in 2011 nine entities previously not consolidated which were consolidated for the first time due to their increased materiality. The disposals of fully consolidated entities relate to the sale of eleven entities, four mergers into other group entities and the removal of an entity without operations from the scope of consolidation.The disposals of associated companies accounted for using the equity method result from the sale of one entity and the change in how the ATISAE group is included. Despite a 45.2% share in voting rights, TVSDs actual involvement in the financial and operating policy decisions is no longer sufficient to claim or substantiate significant influence. As a result, the ATISAE group is measured at cost from January 1, 2011 and reported in other financial assets under participations. number of entities Germany other countries totalTVSD AG and fully consolidated subsidiariesJanuary 1, 2011 43 61 104additions 4 11 15disposals (including mergers) 5 11 16December 31, 2011 42 61 103Associated companies accounted for using the equity methodJanuary 1, 2011 1 4 5additions 0 0 0disposals 1 1 2December 31, 2011 0 3 3Joint ventures accounted for using the equity methodJanuary 1, 2011 0 3 3additions 0 0 0disposals 0 0 0December 31, 2011 0 3 3 TotalJanuary 1, 2011 44 68 112additions 4 11 15disposals (including mergers) 6 12 18December 31, 2011 42 67 109The scope of consolidation changed as follows in the fiscal year 2011: T 09 sCope of ConsolidaTion113TV SD AnnuAl RepoRT 2011Entities that are not material for the presentation of a true and fair view of the net assets, financial position and results of operations of the Group were not included in the consolidated financial statements. The impact of the option to forgo full consolidation amounts to a 0.7% fall in consolidated revenue (prior year: 1.0%) and a 0.3% increase in consolidated equity (prior year: 0.3%). Moreover, nine associated companies (prior year: eight) were not consolidated due to immateriality. The separate financial statements of the subsidiaries, associated companies and joint ventures included in the consolidated financial statements were all prepared for the same period as the consolidated financial statements with the exception of those of one associated company (separate financial statements as of September 30). The affiliated companies, associated companies and joint ventures included in the consolidated financial statements are listed in note 44 Consolidated entities along with the consolidation method applied. The list of the Groups 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 AND DISPOSAlSBusiness combinations in the 2011 fiscal yearIn fiscal 2011, TVSD made seven acquisitions which were immaterial individually and collectively had the following effect on the consolidated financial statements (based on the amounts as of the respective acquisition dates):Hidden reserves totaling 15,298thousand were identified in the order backlog, customer relationships and in accredi-tations with useful lives of between two and 15 years. The goodwill arising on these acquisitions includes expected synergy effects in particular. Earn-out agreements were concluded with a term ending between December 31, 2011 and December 31, 2014. The future purchase price payments from the earn-out agreements, which depend on reaching specified revenue and earnings targets, were taken into account at their fair value. The fair value of the individual earn-out obligations was calculated as the respective present value of pay-out scenarios weighted according to their probability.The assets acquired include trade receivables with a fair value of 4,185thousand as of the acquisition date. The gross volume of the contractual receivables amounted to 4,264thousand.Acquisition-related costs of 439thousand were incurred and were recognized in other expenses in the income state-ment in the reporting year and in the prior year. in 000Carrying amount before revaluationfair value as of acquisition dateintangible assets and property, plant and equipment 2,242 17,540other assets (net of cash) 6,656 6,656Cash and cash equivalents 2,494 2,494Current liabilities 6,570 6,570non-current liabilities 158 4,272Total net assets acquired 4,664 15,848Interest in net assets acquired 15,848Goodwill arising on acquisitions 16,221Consideration transferred in the business combinations (cash consideration) 32,069less fair value of contingent considerations 2,243less cash acquired 2,494Net cash paid for business combinations 27,332T 10 neT asseTs aCquired, goodwill and purChase priCe of business CombinaTions in fisCal year 2011114ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 in 000Carrying amount before revaluationfair value as of acquisition dateintangible assets and property, plant and equipment 2,433 46,786other assets (net of cash) 28,681 29,490Cash and cash equivalents 8,339 8,339Current liabilities 24,102 24,102non-current liabilities 1,373 16,710Total net assets acquired 13,978 43,803Interest in net assets acquired 40,553Goodwill arising on acquisitions 58,556Consideration transferred in the business combinations (cash consideration) 99,109less fair value of contingent considerations 10,278less cash acquired 8,339Net cash paid for business combinations 80,492Acquisitions contributed 13,748thousand to revenue and 1,377thousand to the operating result of TVSD in the past fiscal year. If the acquisitions had taken place as of January 1, 2011, the entities acquired would have contributed 29,228thousand to consolidated revenue and 2,829thousand to the Groups operating result for the twelve months ended December 31, 2011.As of December 31, 2011, the calculation of the fair values of the assets acquired, the liabilities and contingent liabilities assumed and the goodwill for three out of seven business combinations was not yet complete. This means that the amounts presented are provisional.The acquisitions described above are expected to result in goodwill of 1,101thousand that will be tax deductible.It is not possible to provide information on business combi-nations with an acquisition date after the reporting date but prior to completion of these financial statements, as audited opening statements of financial position as of the acquisition date are not yet available.Business combinations in the 2010 fiscal yearIn the fiscal year 2010, TVSD acquired 100% of the shares in Global Risk Consultants Corp., Clark (headquarters), USA (the GRC group). In addition, TVSD acquired seven other entities that were not material individually.As of the acquisition date, the acquisitions collectively affected the consolidated financial statements as follows:Hidden reserves totaling 44,353thousand were identified in order backlog, customer relationships, databases, brands and licenses at the acquirees and acquired operations. Order backlog, customer relationships and databases are amortized over a useful life of between one and 20 years. On a case-by-case basis, we assume indefinite useful lives for licenses and brands, as the licenses make up the basis of business in each case and the brands will remain in use indefinitely.The assets acquired included trade receivables with a fair value of 9,630thousand as of the acquisition date. The gross volume of the contractual receivables amounted to 9,911thousand.Acquisition-related costs of 1,053thousand were incurred and were recognized in other expenses in the income state-ment in fiscal year 2010. In fiscal 2011, there were no major adjustments to the presen-tation of business combinations considered provisional as of December 31, 2010.T 11 neT asseTs aCquired, goodwill and purChase priCe of business CombinaTions in fisCal year 2010115TV SD AnnuAl RepoRT 2011Business disposals in the 2011 fiscal yearAs of April 15, 2011, TVSD sold all shares in the Msource group to the Italian CROM group. The activities of the Msource group were reported in the consolidated financial statements as of December 31, 2010 under discontinued operations or non-current assets and disposal groups held for sale as well as associated liabilities. The removal of the Msource group (which was written down to an expected selling price of 4,000thousand as of December 31, 2010) from the scope of consolidation led to income of 370thousand, which was reported in the income statement as profit from discontinued operations. As part of the portfolio streamlining the fully consolidated subsidiaries PSB Academy Pte. Ltd., Singapore (PSB Academy), and PSB Technologies Pte. Ltd., Singapore (PSB Technologies), were sold in June 2011. These transactions do not meet the criteria in IFRS 5 for reporting discontinued operations. The assets and liabilities of the entities were not reported under non-current assets and disposal groups held for sale as of December 31, 2010, as the entities were not yet available for immediate sale in their condition at that time. Removing PSB Academy from the scope of consolidation resulted in a gain before selling costs of 27,546thousand in total, which is reported under other income. The loss of 923thousand from removing PSB Technologies from the scope of consolidation is included in other expenses. In fiscal 2011, TVSD also sold e4t electronics for transportation s.r.o., Czech Republic (e4t), as well as Novo Quality Services (Malaysia) Sdn. Bhd., Malaysia (Novo Quality Services), which both were deconsolidated at the beginning of October 2011. The assets and liabilities of both entities were reported in non-current assets and disposal groups held for sale as well as associated liabilities as of December 31, 2010. The gain on deconsolidation of the two entities amounted to 171thousand and is included in other income. Based on the figures as of the respective selling date, the disposals affected the consolidated financial statements of TVSD AG as follows: Business disposals in the 2010 fiscal yearThere were no disposals in fiscal 2010. T 12 deConsolidaTion effeCTs from disposals in 2011 in 000 msourcePsB academyPsB technologies other totalintangible assets and property, plant and equipment 4,188 18,822 6,859 143 30,012other assets (net of cash) 6,095 4,477 8,566 1,233 20,371Cash and cash equivalents 1,094 4,657 6,389 700 12,840Current liabilities 5,818 9,300 12,057 1,117 28,292non-current liabilities 1,357 933 241 6 2,537Total net assets disposed of 4,202 17,723 9,516 953 32,394accumulated other comprehensive income 172 3,310 1,569 299 4,752non-controlling interests 0 0 0 438 438Gain (+) / loss (-) on deconsolidation 370 27,546 923 171 27,164Sales prices 4,400 41,959 7,024 985 54,368thereof settled by cash payments 4,400 41,959 6,577 985 53,921116ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 4 | CONSOlIDATION PRINCIPlESThe consolidated financial statements are based on the annual financial statements of TVSD AG and the subsidi-aries included in consolidation, prepared in accordance with uniform accounting policies. The acquisition of subsidiaries and businesses is accounted for using the acquisition method. The cost of a business combination is measured based on the fair value of the assets acquired and liabilities assumed or entered into as of the acquisition date. The acquisition-related costs of a business combination are accounted for as expenses in the periods in which the costs are incurred. The identifiable assets acquired and liabilities assumed (including contingent liabilities) in a business combination are measured at their fair values at the acquisition date regardless of the extent of any non-controlling interests. Uniform accounting policies are used for this purpose. Any adjustments of contingent consideration that were reported as a liability at the time of the acquisition are posted through the income statement. The only exception is for adjustments within twelve months of the acquisition date if more accurate findings lead to information on adjusting events relating to the circumstances as of the transaction date. These result in an adjustment of cost and thus of goodwill. Non- controlling interests are measured either at the fair value of assets acquired and liabilities assumed (full goodwill method) or at the fair value of their proportionate share. After initial recognition, profits and losses are allocated in proportion to the shareholding and without restriction. Consequently non-controlling interests may also have a negative balance. For business combinations achieved in stages, the shares held are remeasured at their fair value on the date control is obtained. Revenue, expenses and income as well as receivables and liabilities between consolidated entities are eliminated. Intercompany prof-its from transactions within the Group are also eliminated.5 | CuRRENCy TRANSlATIONAll 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. Items of the statement of financial position are therefore translated using the mean rate at the end of the reporting period. This does not include equity, which is translated using historical rates. Expense and income items are stated using mean annual exchange rates. Exchange rate differences are treated as other comprehensive income and recognized under other reserves within equity.In the subsidiaries separate financial statements, monetary items in foreign currency are translated using the closing rate as of the end of the reporting period, 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 annual average ratedec. 31, 2011 dec. 31, 2010 2011 2010us dollar (usd) 1.2939 1.3362 1.3916 1.3267Pound sterling (GBP) 0.8353 0.8608 0.8678 0.8580singapore dollar (sGd) 1.6782 1.7153 1.7485 1.8076turkish lira (try) 2.4432 2.0694 2.3349 1.9982T 13 seleCTed exChange raTes117TV SD AnnuAl RepoRT 20116 | ACCOuNTING POlICIESRevenue mainly consists of income from services and is recorded as soon as the services have been provided. Revenue from longer-term contracts is recognized pursuant to IAS 18.20 using the percentage of completion method. This involves recognizing costs and revenue in line with the degree to which the contract has been completed. 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 service contract cannot be determined reliably, revenue is only recognized at the amount of the contract costs incurred (zero profit method). Contract costs are rec-ognized as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately. Own work capitalized is recognized for expenses incurred in the past fiscal year for internally generated intangible assets or self-constructed assets. Own work that can be capitalized is recognized at cost and written down over the useful life of the asset.Contract-related goods and services are recognized as purchased services.Discontinued operations are reported as soon as a component of an entity is classified as held for sale or has already been disposed of and if the component represents a separate major line of business or geographical area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale. The profit/loss from discontinued operations is reported separately in the consolidated income statement and includes both the earnings from the business activities and the sale of the operations as well as the profits and losses from the measurement of the operations at fair value less costs to sell and the respective taxes incurred. Intangible assets include goodwill as well as acquired and internally generated intangible assets. Goodwill arising on a business combination is recorded as an asset when the Group obtains control (acquisition date). It corresponds to the amount by which the acquisition cost of a business combination exceeds the net fair value of the identifiable assets, liabilities and contingent liabilities on the date of the business combination. Goodwill is not subject to amortization but is tested for impairment at least once a year or whenever there is any indication of impairment, and written down if appropriate (impairment only approach). This impairment test is based on cash generating units (CGUs) and compares the recoverable amount with the carrying amount. Where the cash generating units carrying amount exceeds its recoverable amount, an impairment loss is recognized on goodwill to account for the difference. Impairment losses recognized on goodwill are not reversed. The cash generating units correspond to the Groups divisions which are managed on a worldwide basis as of 2010. The recoverable amount is the higher of fair value less costs to sell and value in use. The fair value less costs to sell is derived from managements approved three-year plan, with the aid of the discounted cash flow method. The key assumptions made in determining fair value are the growth rates of the operating results in the planning period, the CGU-specific cost of capital and the forecast sustainable growth rate after the end of the planning period. Cost of capital is based on the weighted average cost of capital (WACC) of the TVSDGroup adjusted for the specific risks inherent in the cash flows budgeted for the cash generating unit in question. The sustainable growth rate used is the forecast long-term rate of the cash generating units market growth. 118ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Other intangible assets acquired for a consideration, such as software or accreditations, are valued at cost. This item also includes assets such as customer relationships, brand name rights and non-compete agreements identified in the course of purchase price allocations.Internally generated intangible assets, such as software or development costs, are stated at cost if it is probable that the economic benefits arising from the intangible asset will flow to the entity and the costs can be measured reliably and that both the technical feasibility and the sale or use of the newly developed assets is guaranteed. Cost comprises the costs directly and indirectly allocable to the development process. Research costs are expensed as incurred. Intangible assets with finite useful lives are amortized using the straight-line method over a period of three to 20 years. Intangible assets with an indefinite useful life are tested for impairment each year instead of being amortized. Property, plant and equipment are accounted for at cost less accumulated 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 five and 15 years, and furniture and fixtures over a period of between eight and 13 years. 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 TVSD (finance leases) are recognized in the statement of financial position 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 leases are charged to the income statement over the term of the lease.TVSDs investment properties that are mainly held for rental to third parties are stated at cost less accumulated depreciation. Buildings and parts of buildings are depreciated using the straight-line method over a maximum period of 40years.At each reporting 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 the income statement. For all assets other than goodwill, the following rule applies: 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 assets or cash generating units 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 the income statement.119TV SD AnnuAl RepoRT 2011Investments 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 proportionate net income, 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 measurement of investments accounted for using the equity method. Any goodwill is assessed in connection with impair-ment tests for the equity investment (IAS 39) or joint venture. Goodwill is not amortized. Interim financial statements for periods ended no more than three months prior to the end of the reporting period are used for the measurement of invest-ments 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. By definition, the category of financial assets at fair value through profit or loss includes derivative financial instruments for which no hedge accounting is applied. TVSD does not use this category for any other financial instruments. There are also no financial instruments that are held to maturity by TVSD. The available-for-sale financial assets category includes shares in non-consolidated affiliated companies, participations and non-current and current 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 released to income, 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 par-ticipations, they are measured at 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 statement of financial position 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 is sufficiently certain. Deferred taxes are calculated on the basis of the anticipated tax rates at the time of realization. Deferred tax assets and liabilities are netted out for each entity and/or tax group. 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. Trade receivables from unbilled service contracts are accounted for using the percentage-of-completion method in accordance with IAS 18.20. Anticipated losses from ongoing contracts are taken into account if they can be reliably estimated, and are directly deducted from the corresponding receivables. Any negative balance is posted to liabilities according to the percentage-of-completion method. Advance payments received for client orders are stated without offsetting in current liabilities. 120ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Other receivables and other assets are valued at cost less valuation allowances. Specific valuation allowances are recognized in relation to the anticipated default risks. Derivative financial instruments are mainly used to hedge interest and exchange rate risks. The range of instruments used comprises forward exchange transactions, combined interest rate and currency swaps as well as interest rate swaps. Derivative financial instruments are held without an intention to sell and serve to hedge underlying transactions. They are recognized as an asset or liability when the transaction is entered into and are subsequently generally measured at fair value in accordance with the categories set forth in IAS39. Derivative financial instruments are measured using generally accepted valuation techniques and instrument-specific market parameters. The input parameters used in the net present value models are the relevant market prices and interest rates as of the reporting date. Hedge accounting is only used for significant transactions in the TVSDGroup. With respect to existing cash flow hedges that are used to hedge against risks from fluctuation in future cash flows, the effective portion of the change in fair value of the derivative is initially recognized in other comprehensive income. Where hedge effectiveness is outside the range of 80% to 125%, the hedging relationship is released. 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 and disposal groups held for sale relate to assets that can be sold in their present condition and whose sale is highly probable. The management must be committed to a plan to sell the asset. The sales transaction is expected to be completed within one year from classification. This can involve individual non-current assets, groups of assets (disposal groups) or components of an entity (discontinued operations). Liabilities to be sold together with assets in a single transaction are part of a disposal group or discontinued operations and are reported separately as liabilities associated with non-current assets and disposal groups held for sale. Non-current assets held for sale are no longer amortized or depreciated. Instead they are stated at their fair value less costs to sell from the date of classification provided that this is lower than the carrying amount. 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 statement of financial position represents the current value of the pension obligation after offsetting the fair value of plan assets as of the reporting date. The calculation is based on actuarial reports and biometric assumptions. Actuarial gains and losses are recognized in full in the fiscal year in which they occur. They are charged directly against revenue reserves, taking deferred taxes into account, and reported outside of the income statement as a component of other comprehensive income in the statement of comprehensive income. They do not affect the income statement in the subsequent periods either. The interest portion of pension expenses and the expected return on plan assets are posted to the financial result. 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 their value can be determined reliably. They are valued using the best estimate of the settlement value, and cannot be offset against reimbursement claims. Provisions due in more than one year are discounted where the effect of the time value of money is material. Provisions for restructuring measures are recognized to the extent that a detailed formal restructuring plan has been prepared and communicated to the parties concerned. 121TV SD AnnuAl RepoRT 2011Financial debt is measured at amortized cost using the effec-tive interest method. Transaction costs are also taken into account when determining acquisition cost. 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.Trade payables and other liabilities are recognized at amor-tized cost, except for derivative financial instruments.Contingent liabilities are possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the TVSDGroup. A present obligation also constitutes a contingent liability when an outflow of resources embodying economic benefits is not sufficiently probable in order to recognize a provision or the amount of the obligation cannot be measured with sufficient reliability. Contingent liabilities are not recorded in the statement of financial position; they are disclosed in the notes to the financial statements instead. The carrying amounts are based on a best estimate of the expenses expected to meet the contingent liability. estimatesThe preparation of the consolidated financial statements requires that assumptions or estimates be made for some items which have an effect on the values reported in the statement of financial position, the disclosure of contingent liabilities and the recognition of income and expenses. This particularly relates to the measurement parameters for pension obligations and other provisions, goodwill and deferred tax assets recognized on tax loss carryforwards. Actual amounts may differ from the estimates. Goodwill is tested for impairment at least once a year. Key estimate parameters include the sustainable long-term growth rates as well as the cash flows allocable to cash generating units and the risk adjustment per cash generating unit of the TVSDGroups weighted average cost of capital. A 10% reduction in the cash flows used to calculate the cash generating units fair value less costs to sell would not result in an impairment loss within the continuing operations. The same applies for an increase in the weighted average cost of capital by one percentage point or a decrease in the sustainable growth rate by one percentage point.The defined benefit obligations and the pension expenses for the subsequent year are calculated using the actuarial parameters given in note 30. As in the prior year, the discount rate in Germany is calculated in accordance with the procedure developed by the Groups global actuary Towers Watson Deutschland GmbH, Wiesbaden, to determine the discount rate for the measurement of pension obligations (global rate link).Increasing or decreasing the discount rate by 0.5% would result in a decrease/increase in pension obligations by 77million/85million. Discrepancies between the anticipated development of salaries and pensions and actual collective wage increases and between expected and actual return on plan assets in the respective fiscal year would produce a much lower effect. 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 items of the statement of financial position, a change to the original basis for estimation results in a change to the respective item, with an effect on income.restatement of prior-year figuresIndividual prior-year figures were restated in their present format for better comparability. 122ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 In the statement of financial position as of December 31, 2011, actuarial gains and losses from defined benefit pension plans after taxes were allocated directly to revenue reserves in accordance with IAS 19.93D. The corresponding prior-year amount of 57,610thousand was reclassified from other reserves to revenue reserves within equity. To increase transparency, a couple of lines have been added to the statement of cash flows. The prior-year presentation was adjusted to the presentation used in the reporting year. accounting standards adopted for the first time in the reporting yearThe amendments to IAS 24 introduced an option for exemption from disclosing transactions with certain related parties and adjusted the definition of a related party. The TVSDGroup is not affected by the new exemption option. Neither has the group of TVSD AGs related parties changed as of the reporting date based on the new definition. Apart from minor content changes, the regulations from the annual improvement project (20082010) mainly include clarifications on recognition, measurement and presentation of financial statements items. The changes do not have any material impact on TVSD AGs consolidated financial statements.The other new accounting standards are not relevant for the consolidated financial statements of TVSD AG as of December 31, 2011.new accounting standards that are not yet mandatoryThe application of the following standard, which was issued by the IASB and adopted by the EU prior to the preparation of TVSDs consolidated financial statements, is only mandatory for reporting periods beginning on or after July 1, 2011. TVSD decided not to early adopt this standard on a voluntary basis.standard / interpretation Effective dateanticipated impact on tVsd aGs consolidated financial statements amendments to ifrs7 financial instruments: disclosures transfers of financial assets July 1, 2011no significant consequences are expected for the consolidated financial statements. T 14 new aCCounTing sTandards and inTerpreTaTions ThaT are noT yeT mandaTory123TV SD AnnuAl RepoRT 2011The main amendment to IAS 19 Employee Benefits is the abolition of the option when recognizing unexpected fluctuations in pension obligations and plan assets, referred to as actuarial gains and losses. In the past, these could either be taken into account in the income statement, in other comprehensive income without effect on income, or in a subsequent period using what was referred to as the corridor method. In future, immediate recognition in other comprehensive income is the only permissible method. This new regulation does not have any effect on TVSD, as the prescribed method is already used in the consolidated financial statements. In addition, the expected return on plan assets is currently calculated based on the subjective expectations of management when calculating the value of the investment portfolio. IAS 19 (revised 2011) now only provides for a standardized return on plan assets at the current discount rate for pension obligations. TVSD only expects minor effects from this amendment.Furthermore, additional disclosures on the characteristics of the pension plans and the associated risks for the entity are required.standard / interpretation Effective dateanticipated impact on tVsd aGs consolidated financial statements amendments to ias 1 Presentation of financial statements Presentation of items of other Comprehensive income July 1, 2012 the presentation of the items of other comprehensive income will be adjusted. amendments to ias 12 deferred tax recovery of underlying assets January 1, 2012no consequences are expected for the consolidated financial statements. amendments to ias19 employee Benefits January 1, 2013 the effects are currently under review. amendments to ias 27 separate financial statements January 1, 2013no consequences are expected for the consolidated financial statements. amendments to ias28 investments in associates and Joint Ventures January 1, 2013no consequences are expected for the consolidated financial statements. amendments to ias 32 financial instruments: Presenta-tion offsetting financial assets and financial liabilities January 1, 2014no significant consequences are expected for the consolidated financial statements. Change to ifrs 1 first-time adoption of international financial reporting standards - severe hyperinflation and removal of fixed dates for first-time adopters July 1, 2011 no consequences are expected for the consolidated financial statements. amendments to ifrs7 financial instruments: disclosures offsetting financial assets and financial liabilities January 1, 2013no significant consequences are expected for the consolidated financial statements. ifrs 9 financial instruments: Classification and measurement" January 1, 2015 the effects are currently under review.ifrs 10 Consolidated financial statements January 1, 2013 the effects are currently under review.ifrs 11 Joint arrangements January 1, 2013 the effects are currently under review.ifrs 12 disclosures of interests in other entities January 1, 2013 the effects are currently under review.ifrs 13 fair Value measurement January 1, 2013 the effects are currently under review.ifriC 20 stripping Costs in the Production Phase of a surface mine January 1, 2013no consequences are expected for the consolidated financial statements. T 15 new aCCounTing sTandards and inTerpreTaTions noT yeT adopTed by The eu ThaT are noT yeT mandaToryThe 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 Section 315a HGB.124ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 IFRS 9 Financial Instruments is the result of the first of three phases of the project to replace IAS 39. IFRS 9 amends the recognition and measurement rules for financial instruments. In future, financial assets will be classified and measured in just two groups: at amortized cost and at fair value. The rules for financial liabilities will be more or less taken from IAS 39 without change. The final regulations on impairment of financial instruments and hedge accounting (phases two and three) are still outstanding. The adoption of IFRS 9 will have an effect on the accounting for financial instruments, which is reviewed on a continuous basis. There are no plans for early adoption of this standard.Three new standards on consolidation and joint arrangements were issued as IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosures of Interests in Other Entities. At the same time, amended versions of IAS 27 Separate Financial Statements and IAS 28 Invest-ments in Associates and Joint Ventures were also issued. IFRS 10 redefines the concept of control in detail. This new standard could have an effect on the scope of consolidation; this potential effect is currently being reviewed.IFRS 11 provides new rules for accounting for jointly controlled activities. Based on the new concept, it is necessary to distin-guish between a joint operation and a joint venture. In the case of joint operations, the individual rights and obligations must be recognized in the consolidated financial statements in relation to the interest held in the arrangement. By contrast, investments in joint ventures must be accounted for using the equity method. This new regulation is not expected to have any effects, but a conclusive review is still needed.IFRS 12 extends the existing disclosure requirements in relation to interests in other entities and summarizes these in one standard. IFRS 13 Fair Value Measurement contains a definition of fair value as well as rules on how to calculate fair value if other IFRSs prescribe measurement at fair value. The new standard can lead to fair values that differ from those calculated using previous standards.125TV SD AnnuAl RepoRT 2011notes to the Consolidated inCome statement7 | REVENuEConsolidated revenue was generated by the individual divisions and regions as follows: Revenue relates mainly to service contracts recognized using the percentage-of-completion method. In 2011, the TVSD Life Services division was moved from Other to the strategic business segment MOBILITY. In addition, within the CERTIFICATION strategic business segment, Food was reclassified from the TVSD Management Services division to the TVSD Product Services division. The respective prior-year figures were restated accordingly. in 000 2011 2010*tVsd industry services 469,624 422,782tVsd real estate services 156,478 146,987tVsd rail 38,267 29,933Total INDuSTRy 664,369 599,702tVsd auto services 490,870 451,713tVsd automotive 50,206 46,494tVsd life services 52,046 53,284Total mOBIlITy 593,122 551,491tVsd Product services 246,986 226,910tVsd management services 111,367 103,516tVsd academy 59,522 68,628Total CERTIFICATION 417,875 399,054other 2,373 2,2371,677,739 1,552,484* Prior-year figures restatedin 000 2011 2010Germany 1,097,410 1,039,955western euroPe 151,539 139,202Central & eastern euroPe 58,626 59,014middle east/afriCa 19,602 9,837asia PaCifiC 212,525 194,383ameriCas 138,037 110,093 1,677,739 1,552,484T 16 revenue by divisionT 17 revenue by region126ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 8 | PERSONNEl ExPENSEST 18 personnel expensesin 000 2011 2010wages and salaries 797,455 728,455social security contributions and other benefit costs 104,267 98,507retirement benefit costs 69,838 59,245incidental personnel costs 14,593 13,846986,153 900,053Personnel expenses include expenses totaling 10,658thou-sand (prior year: 12,597thousand) for leasing civil servants from the German state of Hesse. These employees are assigned the same operational tasks as employees of TV Technische berwachung Hessen GmbH, Darmstadt, in the review of plant and equipment requiring inspection and in vehicle inspections and driving tests under the accreditation which authorizes TVSD to operate the road vehicle tech-nical inspectorate and the official vehicles inspection body.The rise in wages and salaries including social security and other benefit costs is a result of the expansion of the workforce in Germany and other countries, due among other things to changes in the scope of consolidation, and also of collective wage increases which became effective in the reporting period.Retirement benefit costs also include employer contributions to state pensions. The year-on-year rise is mainly due to the fact that the prior-year expense was reduced by 9,062thou-sand on account of a special effect from the pronouncement of the Gesetz zum Neuen Dienstrecht in Bayern [Act on New Public Sector Employment Law in Bavaria], which provides for a higher retirement age for civil servants in Bavaria. The TVSDGroup had an average headcount of 16,018 employees in the reporting year (prior year: 14,874 employees). Of the prior-year figure, 212 employees were accounted for by discontinued operations. The Groups workforce mainly comprises salaried employees. 9 | AmORTIzATION, DEPRECIATION AND ImPAIRmENT lOSSES T 19 amorTizaTion, depreCiaTion and impairmenT losses in 000 2011 2010amortization and depreciationof intangible assets 13,667 14,443of property, plant and equipment 38,093 35,839of investment property 99 92impairment losses 527 4,18652,386 54,560The impairment losses relate to brands and customer relationships acquired in the course of business combinations. The prior-year figure stemmed primarily from write-downs to lower fair value for land and buildings in Germany. 127TV SD AnnuAl RepoRT 201110 | OThER ExPENSESin 000 2011 2010rental and maintenance expenses 71,964 65,429travel expenses 71,230 62,581Cost of purchased administrative services 31,202 29,315telecommunication costs 18,033 18,520marketing costs 17,294 16,817fees, contributions, consulting and audit costs 17,177 13,096it costs 16,459 14,881other taxes 7,371 6,613impairment losses on trade receivables (including amounts derecognized) 4,533 5,640miscellaneous other expenses 63,239 57,515318,502 290,407in 000 2011 2010income from the deconsolidation of PsB academy 27,546 0income from the reversal of provisions 6,673 7,484income from other transactions not typical for the company 4,244 3,943Currency translation gains 4,129 3,624Gain on the disposal of non-current assets 2,639 1,536reimbursements under the German phased retirement scheme 1,038 1,634miscellaneous other income 19,223 17,85865,492 36,079T 20 oTher expensesT 21 oTher inCome11 | OThER INCOmEA figure of 1,620thousand of other expenses relates to costs incurred in connection with the sale of the two subsidiaries PSB Academy and PSB Technologies as well as the loss on deconsolidation of PSB Technologies amounting to 923thousand.The increase in other income is essentially due to the gain on deconsolidation of PSB Academy. Miscellaneous other income encompasses a large number of individual matters. Among other things, the prior-year figure included income of 4,208thousand from the transfer of plan assets to TVSD Pension Trust e.V., in the course of which the land and buildings of Armat Sdwest GmbH Co.KG were written up to fair value.12 | GOVERNmENT GRANTSIn the reporting period, government grants totaling 1,409thousand (prior year: 1,005thousand) were released to income. The grants are not contingent on any further conditions being met. 128ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 13 | FINANCIAl RESulTT 22 finanCial resulTThe drop in income from investments accounted for using the equity method from 6,482thousand to 1,472thousand is primarily due to the lower proportionate net income of 607thou-sand generated by the Turkish joint venture companies (prior year: 4,482thousand). In particular, this is because of negative exchange rate effects from the devaluation of the Turkish lira against the US dollar and euro. ATISAE Asistencia Tcnica Industrial S.A.E., Spain, is no longer accounted for using the equity method since January 1, 2011. In the prior year, the entity contributed 1,470thousand to the income from investments accounted for using the equity method.The total interest income from assets and liabilities not measured at fair value through profit or loss amounted to 4,670thousand (prior year: 5,796thousand). The corresponding total interest expense amounted to 4,233thousand in the fiscal year 2011 (prior year: 6,023thousand). It also includes costs of 774thousand (prior year: 2,156thousand) for the credit line. Net finance costs for pension provisions consist of interest costs for pension and termination benefit obligations amounting to 63,496thousand (prior year: 64,395thousand) and an expected return on plan assets totaling 40,330thou-sand (prior year: 45,858thousand).The income/loss from participations chiefly includes the gain on disposal of the participation in James Cook Australia Institute of Higher Learning Pte. Ltd., Singapore (JCU), amount-ing to 7,573thousand. The finance costs from participations relate first and foremost to the impairment of the interests in the ATISAE group totaling 12,500thousand. These impairment losses were recognized to account for the effects of the economic crisis in Spain on business develop-ment and business outlook of the participation. In addition, the consequences of the financial crisis had a negative impact on the returns of Spanish government bonds and thus on the cost of capital used for measurement purposes. in 000 2011 2010Income from investments accounted for using the equity method 1,472 6,482interest income from securities 2,642 2,531interest income from loans 29 1,049other interest and similar income 1,999 2,216Interest income 4,670 5,796net finance costs for pension provisions 23,166 18,537interest cost from finance leases 188 186other interest and similar expenses 4,045 5,837Interest expenses 27,399 24,560income/loss from participations financial income from participations 8,767 2,481 finance costs from participations 13,318 4,551 1,138 1,343 Currency translation gains/losses from financing measuresCurrency translation gains 7,243 4,774Currency translation losses 10,844 3,601 5,472 698sundry financial resultsundry financial income 327 0sundry finance costs 1,034 707 2,200 2,200Other financial result 8,859 1,555 30,116 13,837129TV SD AnnuAl RepoRT 201114 | INCOmE TAxESCurrent tax expenses for the fiscal year 2011 include income of 541thousand for current taxes from prior periods (prior year: expenses of 407thousand).The following reconciliation for the TVSDGroup presents a summary of the individual entity-specific reconciliations prepared using the respective local tax rates taking consoli-dation entries into account. The expected income tax expense from continuing operations is reconciled to the effective income tax expense from continuing operations as reported.T 24 Tax reConCiliaTionin 000 2011 2010Profit/loss from continuing operations before income taxes 133,612 123,366expected tax rate 30.2% 30.2%Expected income tax expense 40,351 37,257tax rate differences 8,457 491tax reductions due to tax-free income 9,160 4,805tax increases due to non-deductible expenses 10,673 5,498tax effect on accounting for associated companies and joint ventures using the equity method 445 1,876Current and deferred taxes for prior years 622 47Changes in valuation allowances on deferred taxes and unrecognized deferred tax assets on tax loss carryforwards 7,245 188effect of changes in tax rate 241 76other differences 285 549Income tax expense from continuing operations as presented in the income statement 26,865 35,193Effective tax rate 20.1% 28.5%T 23 inCome Taxesin 000 2011 2010Current taxes 26,335 37,833deferred taxes on temporary differences 7,340 2,935 on tax loss carryforwards 6,810 530 295 2.640 26,865 35,193Currency translation gains/losses from financing measures stem from the measurement as of the reporting date of loans in foreign currency and the corresponding hedging effects. The measurement of the US dollar loan of TVSD Bursa A.S., Osmangazi-Bursa, Turkey (TVSD Bursa), led to a currency translation loss of 3,464thousand (prior year: loss of 470thousand). For better transparency, for the first time the currency gains/losses from financing measures are shown separately within the other financial result. In particular, the sundry financial result contains impairment losses on loans.130ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 The rise in tax rate differences and tax-free income compared to the prior year is attributable in the main to the gains on disposal of subsidiaries and participations. The tax-neutral impairment of the interests in the ATISAE group is responsible for the higher tax increases due to non-deductible expenses. Valuation allowances on deferred taxes on tax loss carryforwards of 9,684thousand were reversed in the current period, as it has become probable that these loss carryforwards can be used in future. The expected tax rate of 30.2% (prior year: 30.2%) is unchanged in its components compared to the prior year and results from applying the German corporate income tax rate of 15.0% plus the solidarity surcharge of 5.5% and a trade tax rate of 14.4% based on an average trade tax multiplier of 410%.Deferred taxes are generally recognized based on the tax rates applicable at each individual entity. For 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.Deferred tax assets and liabilities result from the following items of the statement of financial position and tax loss carryforwards:Deferred taxes amounting to 40,053thousand (prior year: 37,311thousand) were charged directly to equity. They are deferred taxes that were recognized on actuarial gains and losses for pension provisions, the fair value reserve for available-for-sale financial assets and cash flow hedges. The deferred tax effect recognized in other comprehensive income reduced equity by 2,742thousand in the fiscal year 2011 (prior year: increased equity by 11,777thousand). Valuation allowances are recorded on deferred tax assets if the future realization of the corresponding tax benefits is unlikely. The taxable income considered likely on the basis of the respective entitys planning for the subsequent years is taken as the basis for the assessment. As of the reporting date, the TVSDGroup held tax loss carryforwards in Germany for corporate income tax and solidarity surcharge amounting to 57,041thousand (prior year: 56,953thousand) and for trade tax of 46,823thousand (prior year: 46,540thousand). No deferred taxes were recognized on corporate income tax loss carryforwards of 26,110thousand (prior year: 54,611thousand) and trade tax loss carryforwards of 16,002thousand (prior year: 44,199thousand), because realization is not expected at present. These loss carryforwards can be carried forward for an indefinite period. Tax loss carryforwards in other countries amount to 21,044thousand as of December 31, 2011 (prior year: 16,577thousand). No deferred taxes were recognized on tax loss carryforwards in other countries of 11,155thousand (prior year: 2,947thousand). Of these tax T 25 deferred Taxes by iTem of The sTaTemenT of finanCial posiTiondeferred tax assets deferred tax liabilitiesin 000 dec. 31, 2011 dec. 31, 2010 dec. 31, 2011 dec. 31, 2010non-current assets 6,356 6,613 53,693 46,827Current assets 2,135 944 10,436 13,596non-current liabilities Pension provisions 66,527 72,062 122 188other non-current liabilities 5,189 6,022 4,027 4,359Current liabilities 16,682 20,965 1,253 1,070 96,889 106,606 69,531 66,040offsetting per tax group 40,904 42,851 40,904 42,851Deferred taxes on temporary differences 55,985 63,755 28,627 23,189deferred taxes on tax loss carryforwards 20,955 20,277 Valuation allowances recognized on deferred taxes on tax loss carryforwards 9,002 15,482 67,938 68,550 28,627 23,189131TV SD AnnuAl RepoRT 2011loss carryforwards, 4,051thousand (prior year: 1,957thou-sand) can be used indefinitely and 4,608thousand (prior year: 821thousand) will be lost in five years or more. Differences on investments in subsidiaries totaling 8,396thousand (prior year: 4,847thousand) did not give rise to deferred tax liabilities because the differences are not expected to reverse in the near future by way of realization (distribution or sale of the entity).15 | PROFIT/lOSS FROm DISCONTINuED OPERATIONSThe Msource group, reported under discontinued operations since the prior year, was sold in April 2011. The profit/loss from discontinued operations reported in the consolidated income statement relates to the following earnings components of the Msource group: in 000 2011 2010revenue 4,519 21,163expenses/income 4,507 30,323Income/loss before taxes 12 9,160income taxes 69 283Net income/loss for the period from discontinued operations 81 8,877Gain (+)/loss () on fair value measurement less costs to sell 370 4,900income taxes on fair value measurement less costs to sell 0 221451 13,556in 000 2011 2010Cash flow from operating activities of discontinued operations 4 110Cash flow from investing activities of discontinued operations 0 80Cash flow from financing activities of discontinued operations 101 997 199The profit from discontinued operations of 451thousand (prior year: loss of 13,556thousand) is allocable to the owners of TVSD AG in full. The net change in cash and cash equivalents reported in the statement of cash flows includes the following changes that relate to the discontinued operations of the Msource group:16 | NON-CONTROllING INTERESTSThe non-controlling interests of 6,732thousand (prior year: 5,641thousand) in the net income for the year are primarily attributable to profit shares in Jiangsu TV Product Service Ltd., Wuxi, China, and TV Technische berwachung Hessen GmbH, Darmstadt.T 26 profiT/loss from disConTinued operaTions (afTer Taxes)T 27 Cash flow from disConTinued operaTions132ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 notes to the Consolidated statement of ComPrehensiVe inCome17 | DEFERRED TAxES RElATING TO OThER COmPREhENSIVE INCOmEDeferred taxes relating to the components of other comprehensive income developed as follows:2011 2010in 000 Before taxdeferred tax expense/income after tax Before taxdeferred tax expense/income after taxactuarial gains and losses from defined benefit pension plans and similar obligations22,9652,91625,88130,45311,39519,058available-for-sale financial assets 523 158 365 432 130 302Currency translation of foreign subsidiaries 4,125 0 4,125 16,699 0 16,699Cash flow hedges 991 339 652 703 252 451investments accounted for using the equity method 34 7 27 0 0 0Other comprehensive income 27,524 2,742 30,266 14,889 11,777 3,112Actuarial gains and losses from defined benefit pension plans after tax include non-controlling interests of 295thousand (prior year: 472thousand).T 28 deferred Taxes relaTing To oTher Comprehensive inCome 133TV SD AnnuAl RepoRT 2011notes to the Consolidated statement of finanCial Position18 | INTANGIBlE ASSETST 29 developmenT of inTangible asseTsPurchased intangible assets in 000Goodwilllicenses and similar rights and customer relationships other intangibleassetsinternally generated intangible assets intangible assets under developmentTotalcostAs of January 1, 2010 110,894 59,680 54,142 3,238 1,013 228,967Currency translation differences 4,797 1,614 385 132 3 6,925Change in scope of consolidation 2,885 21 478 0 0 3,384acquisitions of subsidiaries 58,556 44,060 2,905 0 0 105,521additions 1,072 4,244 9,992 334 1,134 16,776disposals 3,761 1,202 7,446 0 40 12,449reclassifications to held for sale 12,167 7,038 571 0 0 19,776reclassifications 4 0 1,086 37 741 378As of December 31, 2010/January 1, 2011 162,272 101,379 60,971 3,741 1,363 329,726Currency translation differences 3,121 2,185 85 67 1 953Change in scope of consolidation 16,987 16,631 794 788 0 35,200acquisitions of subsidiaries 15,648 15,903 19 0 0 31,570additions 264 147 2,903 787 4,140 8,241disposals 1 39 117 2 37 192reclassifications 0 0 236 395 624 7As of December 31, 2011 164,317 98,574 63,303 4,070 4,841 335,105amortization As of January 1, 2010 27,232 20,245 42,923 1,710 0 92,110Currency translation differences 1,855 2,684 256 112 0 4,907Change in scope of consolidation 0 1 283 0 0 284acquisitions of subsidiaries 0 0 2,783 0 0 2,783amortization 0 7,505 7,057 603 0 15,165impairment losses 8,000 0 60 0 0 8,060disposals 2,420 387 6,553 0 0 9,360reclassifications to held for sale 8,000 2,554 456 0 0 11,010reclassifications 0 342 498 2 0 154As of December 31, 2010/ January 1, 2011 26,667 27,836 45,855 2,427 0 102,785Currency translation differences 834 261 49 38 0 584Change in scope of consolidation 0 12,388 390 792 0 13,570acquisitions of subsidiaries 0 0 6 0 0 6amortization 0 6,470 6,709 488 0 13,667impairment losses 0 527 0 0 0 527disposals 0 39 562 0 0 601As of December 31, 2011 27,501 22,145 51,667 2,085 0 103,398Carrying amount as of December 31, 2011 136,816 76,429 11,636 1,985 4,841 231,707Carrying amount as of December 31, 2010 135,605 73,543 15,116 1,314 1,363 226,941134ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 The carrying amounts of goodwill are principally allocated to the following cash generating units: T 30 goodwillin 000 dec. 31, 2011 dec. 31, 2010industry services 79,973 76,908auto services 15,705 10,414Product services 16,484 22,187academy 645 12,013real estate services 12,356 2,416other 11,653 11,667136,816 135,605The item licenses and similar rights and customer relationships includes expenses of 17,466thousand for the license for regular vehicle inspections by TVSD Bursa, Turkey (prior year: 21,811thousand). The operators license is amortized over its term until August 2027 using the straight-line method. The carrying amount of the licenses and brands with indefi-nite useful lives acquired when purchasing the GRC group totals 8,114thousand as of the reporting date (prior year: 7,916thousand). Impairment losses were recognized according to the impair-ment only approach in accordance with IAS 36 Impairment of Assets. As in the prior year, the annual impairment test on goodwill did not give rise to any impairment losses in continuing operations.In the fiscal year, impairment losses of 527thousand were recognized on brands and customer relationships acquired in the course of business combinations. The calculation of fair value less costs to sell per cash generating unit was based on a discount rate of between 6.2% and 7.5% taking business taxes into account (prior year: between 6.4% and 8.2%). The sustainable growth rate remained unchanged compared to the prior year at 1.0% for all cash generating units. Research and development expenses totaling 5,429thousand were recognized in the income statement in the reporting year (prior year: 4,663thousand).135TV SD AnnuAl RepoRT 201119 | PROPERTy, PlANT AND EquIPmENTT 31 developmenT of properTy, planT and equipmenT in 000 land and buildingstechnical equipment and machineryother equip-ment, furniture and fixtures assets under constructionTotalcostAs of January 1, 2010 438,334 96,872 179,777 3,080 718,063Currency translation differences 3,170 6,815 2,442 10 12,437Change in scope of consolidation 143 1,335 2,074 0 3,552acquisitions of subsidiaries 1,911 1,349 3,573 0 6,833additions 5,054 5,927 20,579 3,898 35,458disposals 2,721 2,327 18,940 24 24,012reclassifications to held for sale 2,015 772 420 0 3,207reclassifications 2,475 115 27 2,942 379As of December 31, 2010/January 1, 2011 446,351 109,314 189,058 4,022 748,745Currency translation differences 54 2,340 453 155 2,894Change in scope of consolidation 5,422 1,135 3,327 77 7,537acquisitions of subsidiaries 691 1,577 2,377 0 4,645additions 13,271 9,064 23,267 10,463 56,065disposals 7,848 2,971 8,227 5 19,041reclassifications 5,427 1,211 335 8,131 1,158As of December 31, 2011 452,416 121,670 203,936 6,591 784,613depreciation As of January 1, 2010 168,248 71,017 125,113 0 364,378Currency translation differences 1,290 5,420 1,894 0 8,604Change in scope of consolidation 56 939 1,159 0 2,154acquisitions of subsidiaries 487 780 2,962 0 4,229depreciation 11,473 6,767 17,751 0 35,991impairment losses 4,075 0 51 0 4,126disposals 849 2,189 18,175 0 21,213reversals of impairment losses 372 0 0 0 372reclassifications to held for sale 582 346 323 0 1,251reclassifications 7 12 314 0 319As of December 31, 2010/January 1, 2011 183,833 82,376 130,118 0 396,327Currency translation differences 258 1,718 328 0 2,304Change in scope of consolidation 2,511 88 2,380 0 4,979acquisitions of subsidiaries 129 378 1,830 0 2,337depreciation 11,493 7,332 19,268 0 38,093disposals 4,353 2,866 7,804 0 15,023reversals of impairment losses 431 402 6 0 839reclassifications 779 58 4 0 717As of December 31, 2011 187,639 88,506 141,358 0 417,503Carrying amount as of December 31, 2011 264,777 33,164 62,578 6,591 367,110Carrying amount as of December 31, 2010 262,518 26,938 58,940 4,022 352,418136ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 The impairment losses were recognized in accordance with IAS 36 Impairment of Assets.The carrying amounts of finance lease assets recognized under property, plant and equipment break down as follows: T 32 reCognized asseTs under finanCe leasesin 000 dec. 31, 2011 dec. 31, 2010land and buildings 1,208 1,340technical equipment and machinery 120 187other equipment, furniture and fixtures 64 1331,392 1,660The corresponding liabilities from finance leases are presented under financial debt, note 32. 20 | INVESTmENT PROPERTy T 33 developmenT of invesTmenT properTyin 000 2011 2010cost As of January 1 8,201 47,105Currency translation differences 0 8acquisitions of subsidiaries 0 201additions 89 0disposals 0 39,083reclassifications 1,768 30As of December 31 10,058 8,201depreciation As of January 1 2,826 6,274acquisitions of subsidiaries 0 4depreciation 99 92disposals 0 3,520reclassifications 1,335 24As of December 31 4,260 2,826Carrying amount as of December 31 5,798 5,375 As of December 31, 2011, investment properties had a market value of 10,849thousand (prior year: 10,401thousand). If current market data is not available, the market values for real estate are determined using the capitalized earnings method. The land value is derived from the purchase prices for comparable properties or the standard land value pursuant to the BauGB [Baugesetzbuch: German Federal Building Act]. In order to determine the value of a building, the annual net proceeds from the property in question, reduced by interest on the land value, are determined on the basis of the expected net rent and recognized over its estimated remaining useful life. The interest rate used is a standard land value derived from the market. Characteristics affecting the market value of the respective investment property are taken into account in each valuation step. Rental income totaling 595thousand (prior year: 575thou-sand) was generated in fiscal 2011 from investment properties while the related expenses for repair and maintenance came to 2,862thousand (prior year: 1,059thousand). As in the prior year, otherwise no expenses were incurred in connection with investment properties that did not generate rental income.21 | INVESTmENTS ACCOuNTED FOR uSING ThE EquITy mEThODThe separate financial statements of associated companies that are accounted for using the equity method give the following financial information; this information has not been adjusted to the share held by the Group.T 34 assoCiaTed Companies in 000 dec. 31, 2011 dec. 31, 2010aggregated assets 21,547 293,574aggregated liabilities 13,687 217,076total amount of unrecognized gains of the period 0 0accumulated total amount of unrecognized losses 0 0in 000 2011 2010aggregated revenue 32,074 191,746aggregated net income for the year 2,501 5,730There were two disposals in the reporting year of associated companies accounted for using the equity method. The participation in the ATISAE group is measured at cost since January 1, 2011, as there is no longer significant influence 137TV SD AnnuAl RepoRT 2011over the group. In addition, the participation in Hannover Leasing Automotive GmbH, Pullach, was sold as of September 9, 2011. The following table summarizes financial information on the Groups joint ventures. The information relates to the Groups interest in the respective joint ventures. T 35 JoinT venTures in 000 dec. 31, 2011 dec. 31, 2010aggregated current assets 27,459 25,799aggregated non-current assets 149,910 190,027aggregated current liabilities 8,916 11,480aggregated non-current liabilities 141,862 174,805in 000 2011 2010aggregated revenue 114,808 110,056aggregated net income for the year 478 2,776The financial data disclosed is on the one hand from the two Turkish joint venture entities TVTURK Kuzey, Istanbul, and TVTURK Gney, Istanbul. The venturers of the joint ventures are the Dogus group, Turkey, the TVSDGroup and Test A.S., Istanbul, an entity of the Bridgepoint group, UK, which each have a one-third stake in the joint ventures. In 2007, the TVTURK joint venture companies concluded a concession agreement with the Turkish government, governing the implementation of regular vehicle inspections throughout Turkey. Using different contractual partners, the joint venture is the exclusive provider of vehicle inspections in Turkey for the 20-year term of the contract. In 2011, 6.1million (prior year: 5.4million) inspections were performed, generating revenue of TRY 739.3million or 316.6million (prior year: TRY 605.0million or 302.8million). On the other hand, the table includes the financial data of the operating company in the vehicles inspection business TVTURK Istanbul, Istanbul. This entity was established in 2007 and has been included in the consolidated financial statements using the equity method since that time. The interests are held by the same three venturers with equal shareholdings of 16.8% each and by TVTURK Kuzey and TVTURK Gney, which acquired 49.6% of the shares in June 2010 via a capital increase performed in return for the issue of new shares. In the reporting year, the unilateral capital increase from the prior year meant that a carrying amount of 2,501thousand was recorded as of the reporting date, in spite of the remaining share in losses and the negative market development of the cash flow hedge.In 2011, the TVTURK joint venture companies recorded a consolidated overall profit of 1,435thousand (prior year: 4,435thousand). The reduction in comparison to prior year principally results from the unfavorable exchange rate between the US dollar and the Turkish lira and thus from a currency translation loss from financing measures. In the course of financing the project in Turkey, the share-holders concluded a share pledge agreement, pledging all shares in the Turkish joint venture companies to UniCredit Bank AG (formerly: 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.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. 138ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 22 | OThER FINANCIAl ASSETS T 36 oTher finanCial asseTsin 000 dec. 31, 2011 dec. 31, 2010investments in affiliated companies 3,866 9,972loans to affiliated companies 215 1,080loans to associated companies 27,565 1,177other participations 400 0non-current securities 90,654 77,543share of policy reserve from employer's pension liability insurance 84 12,735other loans 467 2123,251 102,509Other participations in the reporting year contain the shares in the ATISAE group, which were reported under investments accounted for using the equity method in the prior year.An amount of 8,104thousand (prior year: 6,343thousand) of the non-current securities are pledged under a trust agree-ment concluded to secure the value of the settlement claims for employees in the block model of the phased retirement scheme (Altersteilzeit).The policy reserve of the Alters- und Hinterbliebenen- Versicherung der Technischen berwachungsvereine VVaG fulfils the prerequisites for plan assets for the first time in 2011 and is thus netted accordingly with the pension provisions as of the reporting year.23 | OThER NON-CuRRENT ASSETSOf other non-current assets totaling 4,402thousand (prior year: 4,283thousand), 389thousand (prior year: 362thousand) relates to forward exchange transactions recorded at market value. 24 | INVENTORIESInventories amounting to 3,230thousand (prior year: 2,625thousand) primarily consist of supplies.25 | TRADE RECEIVABlEST 37 Trade reCeivablesin 000 dec. 31, 2011 dec. 31, 2010receivables according to the percentage-of-completion method 62,337 55,320other trade receivables 230,778 210,626293,115 265,946Valuation allowances on trade receivables are recognized on separate accounts and amount to 9,468thousand as of the reporting date (prior year: 9,396thousand).The maturity profile of other trade receivables is as follows:T 38 maTuriTy sTruCTurein 000 dec. 31, 2011 dec. 31, 2010Other trade receivables 230,778 210,626thereof neither impaired nor past due 149,744 130,724thereof not impaired but past due by up to 30 days 50,226 54,38731 to 60 days 13,493 9,62961 to 90 days 5,726 5,24591 to 180 days 4,854 4,142181 to 360 days 1,615 1,919more than 360 days 1,376 881thereof impaired as of the reporting date 3,744 3,699There is no indication that customers might not be able to settle their obligations regarding receivables that are neither impaired nor past due. 139TV SD AnnuAl RepoRT 201126 | OThER RECEIVABlES AND OThER CuRRENT ASSETS Miscellaneous financial assets include in particular deferred interest and other receivables from cost allocations. Miscellaneous non-financial assets essentially include deferred expenses.27 | CASh AND CASh EquIVAlENTSThis item includes cash in hand, checks and bank balances as well as current securities with an original term of a maximum of three months. An amount of 2thousand (prior year: 1,665thousand) of the cash and cash equivalents is pledged under a trust agreement concluded to secure the value of the settlement claims for employees in the block model of the phased retirement scheme (Altersteilzeit).28 | NON-CuRRENT ASSETS AND DISPOSAl GROuPS hElD FOR SAlE AS wEll AS ASSOCIATED lIABIlITIESThe prior-year figure included the assets and liabilities of the Msource group, of e4t and of Novo Quality Services. Those entities were sold in 2011. The deconsolidation effects are explained in note 3 Business combinations and disposals. The prior-year figure also included the carrying amount of the investment accounted for using the equity method, Hannover Leasing Automotive GmbH, Pullach, as well as the carrying amounts of the assets allocable to a crash test lab that have now also been sold.The income and expenses from currency translation allocable to the disposal groups held for sale and reported directly in equity amounted to 763thousand in the prior year.29 | EquITyThe capital subscribed of TVSD AG is divided into 26,000,000 no-par value bearer shares.The capital reserve mainly includes the premium for various capital increases carried out since 1996. 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 in other comprehensive income in connection with the first-time application of IFRSs. Furthermore, actuarial gains and losses from defined benefit pension plans and similar obligations were for the first time allocated directly to revenue reserves during the reporting period, taking into in 000 dec. 31, 2011 dec. 31, 2010receivables from affiliated companies 2,567 3,567receivables from other participations 1,066 2,819Cash pool receivables from related parties 887 5,301fair values of derivative financial instruments 319 1,584receivables from the federal employment agency 3,223 3,892miscellaneous financial assets 20,916 23,854Other receivables and other current financial assets 28,978 41,017refund claims against insurance 13,918 17,915miscellaneous non-financial assets 10,206 12,153Other current non-financial assets 24,124 30,06853,102 71,085T 39 oTher reCeivables and oTher CurrenT asseTs140ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 account the related deferred taxes. This reflects the fact that these amounts will not be reclassified to the income statement in future periods. Other reserves record the differences arising from the currency translation of foreign subsidiaries separate financial state-ments without effect on income, effects from the measurement of securities and cash flow hedges without effect on income and the income and expenses recognized without effect on income arising from investments accounted for using the equity method, in each case less the corresponding deferred taxes.In addition to ensuring the continued existence of the company as a going concern, TVSDs 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.TVSD AG is not subject to any statutory capital requirements. 30 | PROVISIONS FOR PENSIONS AND SImIlAR OBlIGATIONS T 40 provisions for pensions and similar obligaTions in 000 dec. 31, 2011 dec. 31, 2010Provisions for pensions in Germany 364,934 377,413Provisions for pensions in other countries 16,609 13,246Provisions for similar obligations in other countries 4,764 3,722386,307 394,381Pension provisions are recorded as a result of benefit plans for old age, disability and surviving dependants pension com-mitments. The Groups obligations vary according to legal, fiscal and economic 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 in other countries.The Groups 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 a 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 2011 they amounted to a total of 49,845thousand (prior year: 48,009thousand).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 for new hires in 1981 and 1992 respectively. Pension obligations were then granted temporarily in accord-ance 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 discon-tinued in 1996. New employees currently receive direct guarantees at TV Hessen only. Cover is provided in part directly, and in part by legally independent pension and welfare institutions. The assets of the welfare institutions are reported as plan assets.In order to extend the external financing of pension obligations in Germany, operating assets were transferred to TVSD Pension Trust e.V., established for this purpose, in 2006 as part of a contractual trust agreement. The funds are adminis-tered 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. 141TV SD AnnuAl RepoRT 2011There are defined benefit pension plans in the UK whose amount depends among other things on salary and on length of service. Benefit entitled employees have an obligation to make additional contributions. These pension schemes were closed for new employees joining the company. To fully fund the obligations, there is a company-based pension plan according to which the plans assets can only be used to settle the pension obligations under a contractual trust agreement. If, calculated in accordance with actuarial principles, there is a shortfall in these pension plans, the sponsoring employer TVSD (UK) Ltd., Fareham Hants, UK, and the trustee must agree on a restructuring plan that has to be presented to The Pension Regulator (TPR) in the UK for approval. To finance the shortfall of around 20.9million determined at the end of 2011, in addition to the regular contributions by the employer, the sponsoring employer is to make an annual contribution over a period of ten years.The amounts of the pension obligation (actuarial present value of earned benefit entitlements, defined benefit obligation) are based on actuarial assumptions. The defined benefit obli-gation was calculated on the basis of the following actuarial assumptions:T 41 aCTuarial assumpTions for deTermining The defined benefiT obligaTions dec. 31, 2011 dec. 31, 2010in % Germany other countries Germany other countriesdiscount rate 5.25 4.80 5.25 5.17future salary increases 2.25 3.31 2.25 3.24future pension increases 2.00 3.15 2.00 3.05Adjustment 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 discount rate as of the respective reporting date, from changes in the portfolio and deviations of actual developments from the assumptions made in the valuation (e.g., salary or pension increases). As of the reporting date, actuarial gains and losses after tax are posted to other comprehensive income.The assumptions used to calculate the defined benefit obliga-tion 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 2011 are therefore already defined as of the reporting date December 31, 2010. 142ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 T 42 aCTuarial assumpTions for deTermining pension expensesshare in plan assetsin % dec. 31, 2011 dec. 31, 2010shares 15.9 17.6fixed-interest securities 66.0 70.5real estate and similar assets 5.6 5.5other (including cash and cash equivalents) 12.5 6.4T 43 porTfolio sTruCTure of plan asseTs as of measuremenT daTe 2011 2010in % Germany other countries Germany other countriesdiscount rate 5.25 5.17 5.50 5.71future salary increases 2.25 3.24 2.25 3.50future pension increases 2.00 3.05 2.00 3.30return on plan assets 4.80 5.10 5.50 6.25The 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. The actual portfolio structure as of the reporting date is as follows:The key assumptions in calculating pension expenses are presented in the following overview:In 2011, the capital markets were first affected by the disaster in Fukushima and then later in the year by the euro debt crisis. The share portfolio was hedged on a case-by-case basis as a result. After the spiraling of the euro debt crisis, there were times when the share portfolio was hedged completely, with the exception of the emerging markets mutual funds newly acquired at the beginning of the year. While significant losses were recorded on the shares, in some cases these were offset by profits from the hedges. The bonds in the Oktagon fund once again did not include any government bonds from Greece, Ireland and Portugal. The share of Spanish and Italian bonds was reduced substantially compared with the benchmark. The percentage of corporate bonds was increased to substitute government bonds.143TV SD AnnuAl RepoRT 2011The funded status of defined benefit obligations as well as a reconciliation to the amounts recognized in the statement of financial position is shown in the table below:Changes in defined benefit obligations and plan assets are as follows:Around 57% of the defined benefit obligation is allocable to pensioners, and 43% to active employees. The duration of the obligations is 13.5 years (prior year: 13.6 years). The development of the defined benefit obligation is influenced particularly by the pay-out of the majority of the obligations of the GRC group acquired in the prior year from the available plan assets as part of the contractually agreed settlement of these obligations (retroactive plan amendments and other). Because the discount rate for obligations in Germany has not changed since the prior year, there were only comparatively small actuarial effects. While actuarial gains were recorded in Germany due to the development of the parameters of statutory health insurance and due to changes in the portfolio, actuarial losses were recorded for the obligations in other countries, principally on account of the changed discount rate in the UK. Germany other countries totalin 000 2011 2010 2011 2010 2011 2010defined benefit obligation 1,183,266 1,166,247 71,586 74,364 1,254,852 1,240,611fair value of plan assets 818,332 788,834 50,213 57,396 868,545 846,230Net obligation = carrying amount as of December 31 364,934 377,413 21,373 16,968 386,307 394,3812011 2010in 000 Germany other countries total Germany other countries totalDefined benefit obligation as of January 1 1,166,247 74,364 1,240,611 1,134,615 48,701 1,183,316service cost 16,322 2,728 19,050 16,540 1,805 18,345interest cost 59,743 3,753 63,496 60,963 3,432 64,395Benefits paid 55,718 2,904 58,622 54,676 2,569 57,245Contributions by the beneficiaries 0 739 739 0 781 781retroactive plan amendments and other 0 12,456 12,456 0 0 0actuarial gains () and losses (+) 3,328 6,537 3,209 17,867 4,417 22,284Past service cost 0 2,365 2,365 9,062 26 9,036Change in scope of consolidation 0 137 137 0 17,207 17,207Currency translation differences 0 1,053 1,053 0 564 564Defined benefit obligation as of December 31 1,183,266 71,586 1,254,852 1,166,247 74,364 1,240,611thereof unfunded 198,619 4,122 202,741 227,903 3,414 231,317thereof partially funded 984,647 67,464 1,052,111 938,344 70,950 1,009,294T 44 funded sTaTus of The defined benefiT obligaTion T 45 developmenT of defined benefiT obligaTion 144ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Total benefits paid of 61,700thousand are expected for fiscal 2012. 2011 2010in 000 Germany other countries total Germany other countries totalFair value of plan assets as of January 1 788,834 57,396 846,230 719,443 35,017 754,460expected return on plan assets 37,423 2,907 40,330 42,868 2,990 45,858actuarial gains (+) and losses () 19,759 3 19,756 9,799 1,630 8,169Contributions by the employer 58,924 3,537 62,461 82,875 3,115 85,990Contributions by the beneficiaries 0 739 739 0 781 781Benefits paid 47,090 2,886 49,976 46,553 2,567 49,120retroactive plan amendments and other 0 12,456 12,456 0 0 0Change in scope of consolidation 0 0 0 0 15,962 15,962Currency translation differences 0 973 973 0 468 468Fair value of plan assets as of December 31 818,332 50,213 868,545 788,834 57,396 846,230actual return on plan assets 17,664 2,910 20,574 33,069 4,620 37,689T 46 developmenT of plan asseTs T 47 neT pension expense for defined benefiT plans 2011 2010in 000 Germany other countries total Germany other countries totalservice cost 16,322 2,728 19,050 16,540 1,805 18,345interest cost 59,743 3,753 63,496 60,963 3,432 64,395expected return on plan assets 37,423 2,907 40,330 42,868 2,990 45,858Past service cost 0 2,365 2,365 9,062 26 9,03638,642 1,209 39,851 25,573 2,273 27,846The actuarial losses of 19,759thousand incurred in Germany in 2011 (prior year: 9,799thousand) are primarily attributable to the Oktagon fund. The actual return of 1.9% in total (prior year: 4.3%) was below the target return expected for fiscal 2011, which is based on the expected average long-term return of 4.9% for plan assets. The fixed-interest securities, including government and corporate bonds, resulted in returns of between 3.9% and 7.3% in 2011. The losses in the shares were reduced substantially thanks to hedging strategies in the Oktagon fund. In Germany, the pension plan is usually funded by recon-tributing refunded benefit payments to the plan. The actual contribution is determined each year by resolution of the Board of Management. The Group intends to make a payment of 45,779thousand towards the defined benefit plan in the next fiscal year (prior year: 44,015thousand) in order to reduce the existing shortfall in cover. The total net pension expense for defined benefit pension plans (expenses less income) recorded in the income statement for the fiscal years 2011 and 2010 breaks down as follows:145TV SD AnnuAl RepoRT 2011Net actuarial losses totaling 22,965thousand were recorded in fiscal 2011, which are a result of actuarial losses from pension obligations totaling 3,209thousand and actuarial losses from plan assets totaling 19,756thousand. These were recorded in other comprehensive income, net of deferred taxes. Net actuarial losses of 30,453thousand were recorded in the prior year, 22,284thousand of which related to pension obligations and 8,169thousand to plan assets.Adjusted for currency fluctuation, cumulative net actuarial gains amounting to 73,731thousand (prior year: 96,355thousand) were recognized in other comprehensive income by the end of the reporting year. The defined benefit obligation, plan assets, funded status and experience adjustments for this fiscal year and prior fiscal years are as follows: The personnel provisions mainly pertain to variable remuner-ation 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. The provisions for litigation costs, warranty and similar obligations are counterbalanced by claims for reimbursement from insurance companies totaling 13,918thousand (prior year: 17,915thousand) that have been recognized as current assets.The provisions for restructuring costs mostly relate to adopted and announced restructuring measures in the TVSD Industry Services division.31 | OThER PROVISIONST 48 developmenT of funded sTaTus and experienCe adJusTmenTs in 000 2011 2010 2009 2008 2007defined benefit obligation 1,254,852 1,240,611 1,183,316 1,087,214 1,138,452Plan assets 868,545 846,230 754,460 701,511 689,599funded status 386,307 394,381 428,856 385,703 448,853experience increase (+)/decrease () of the present value of defined benefit obligation 5,656 26,124 17,781 28,446 123experience increase (+)/decrease () of the fair value of plan assets 19,756 8,169 11,238 16,853 18,042T 49 oTher provisionsdec. 31, 2011 dec. 31, 2010 in 000 totalthereof current totalthereof currentPersonnel provisions 100,452 79,657 99,876 80,708litigation, warranty and similar obligations 18,865 18,865 23,230 23,230restructuring provisions 12,234 11,736 11,645 7,400miscellaneous provisions 13,345 7,158 13,405 7,298144,896 117,416 148,156 118,636146ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 32 | FINANCIAl DEBTFinancial debt includes all interest-bearing liabilities of the Group. Financial debt breaks down as follows:Liabilities to banks chiefly include the loan obligations of TUVSUD Invest LP, Atlanta, amounting to 57,964thousand or USD75million (prior year: 49,394thousand or USD66million) and of TVSD Bursa, amounting to 16,236thousand or USD21million (prior year: 18,677thousand or USD25million). While the loan due to TVSD Bursa with annual repayment of USD4million has a term that runs until 2017, TUVSUD Invest LPs loan takes the form of a money market loan with a renewable term of three months. This money market loan is prolonged as part of the syndicated loan for a total of 200million that has a fixed term until July 2016. TVSD intends to take advantage of the extension agreement for the long term and therefore reports the loan as a non-current item. In the prior year, TVSD planned to decide each quarter on whether to renew it and thus reported it as a current item. An amount of 773thousand (prior year: 3,735thousand) of the liabilities to banks is due in more than five years, and 914thousand (prior year: 1,139thousand) of the liabilities from finance leases is due in more than five years.Other provisions developed as follows in the reporting year: in 000Personnel provisionslitigation, warranty and similar obligationsrestructuring provisionsmiscellaneous provisionsOther provisionsBalance as of January 1, 2011 99,876 23,230 11,645 13,405 148,156Currency translation differences 619 40 6 84 669Change in scope of consolidation 621 0 0 118 739additions 70,775 2,028 1,911 5,124 79,838utilization 64,119 1,642 1,251 4,129 71,141reversals 6,078 4,711 77 1,018 11,884unwinding of the discount 0 0 0 3 3Balance as of December 31, 2011 100,452 18,865 12,234 13,345 144,896T 50 developmenT of oTher provisions non-current Current totalin 000 dec. 31, 2011 dec. 31, 2010 dec. 31, 2011 dec. 31, 2010 dec. 31, 2011 dec. 31, 2010liabilities to banks 71,575 16,229 8,027 54,910 79,602 71,139liabilities from finance leases 1,719 1,826 218 245 1,937 2,071Cash pool liabilities to affiliated companies 0 0 501 287 501 287Cash pool liabilities to other related parties 0 0 993 1,863 993 1,86373,294 18,055 9,739 57,305 83,033 75,360T 51 finanCial debT147TV SD AnnuAl RepoRT 201133 | TRADE PAyABlEST 52 Trade payablesin 000 dec. 31, 2011 dec. 31, 2010liabilities according to the percentage-of-completion method 22,808 21,616other trade payables 45,456 45,66468,264 67,28034 | OThER lIABIlITIES non-current Current totalin 000 dec. 31, 2011 dec. 31, 2010 dec. 31, 2011 dec. 31, 2010 dec. 31, 2011 dec. 31, 2010liabilities to affiliated companies 0 0 2,008 1,827 2,008 1,827liabilities to other participations 0 0 433 2,020 433 2,020fair values of derivative financial instruments 2,918* 2,123* 2,331 129 5,249 2,252outstanding invoices 0 0 22,424 18,047 22,424 18,047miscellaneous financial liabilities 9,236* 9,192* 12,168 19,279 21,404 28,471Other financial liabilities 12,154 11,315 39,364 41,302 51,518 52,617advance payments received 0 0 25,607 30,932 25,607 30,932Vacation claims, flexitime and overtime credits 0 0 43,401 39,787 43,401 39,787other taxes 0 0 32,101 32,573 32,101 32,573social security liabilities 1,052 2,424 3,455 4,069 4,507 6,493miscellaneous non-financial liabilities 0 0 12,498 13,543 12,498 13,543Other non-financial liabilities 1,052 2,424 117,062 120,904 118,114 123,32813,206 13,739 156,426 162,206 169,632 175,945* thereof due in more than five years: 3,713thousand (prior year: 3,725thousand)T 53 oTher liabiliTiesMiscellaneous financial liabilities contain both current and non-current contingent consideration from business combinations. Miscellaneous non-financial liabilities include in particular accrued expenses and deferred income.148ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 35 | CONTINGENT lIABIlITIESTVSD AG and its subsidiaries have issued or have had issued guarantees or warranties in favor of customers or creditors. The following table presents the contingent liabili-ties for which the main debtor is not a consolidated entity: T 54 ConTingenT liabiliTiesin 000 dec. 31, 2011 dec. 31, 2010Guarantee obligations 4,843 5,053Contingent liabilities arising from litigation risks 757 2,409miscellaneous contingent liabilities 11 115,611 7,473Apart from the contingent liabilities reported, TVSD has assumed joint and several liability in relation to interests in civil law associations, other partnerships and joint ventures. 36 | lEGAl PROCEEDINGSTVSD AG and its subsidiaries are not involved in any litigation which could have a material impact on the economic or financial situation of the individual entities or the Group as a whole. The group entities concerned have formed provisions at suitable amounts to account for any burdens from other litigation. There are refund entitlements from insurance policies for some of these items. 37 | OThER FINANCIAl OBlIGATIONSThe following minimum lease payments will be due in future on the basis of existing rental and lease agreements: Rental and lease expenses amounted to 41,226thousand in fiscal 2011 (prior year: 38,237thousand).There are also other financial obligations amounting to 8,882thousand (prior year: 9,182thousand), which are mainly attributable to maintenance agreements. To close the shortfall in cover for old-age pensions in the UK, the sponsoring employer TVSD (UK) Ltd. agreed to pay an annual contribution of GBP 1.7million over a period of ten years.T 55 oTher finanCial obligaTions as of deCember 31, 2011T 56 oTher finanCial obligaTions as of deCember 31, 2010 in 000due in less than 1 year due in 1 to 5 years due in more than5 yearsdec. 31, 2011totalfuture obligations from rental and lease agreements for real estate 33,390 79,592 45,536 158,518future obligations from other operating leases 4,947 6,783 0 11,73038,337 86,375 45,536 170,248 in 000due in less than 1 year due in 1 to 5 years due in more than5 yearsdec. 31, 2010totalfuture obligations from rental and lease agreements for real estate 30,867 70,706 57,533 159,106future obligations from other operating leases 4,037 4,284 2 8,32334,904 74,990 57,535 167,429149TV SD AnnuAl RepoRT 2011other notes38 | ADDITIONAl INFORmATION ON FINANCIAl INSTRumENTSThe following tables show financial assets and liabilities by measurement categories relevant under IFRS 7 on the basis of the items of the statement of financial position:measurement categories in accordance with IAS 39Financial assets/ liabilities held for trading loans and receivables Available- for-sale financial assetsFinancial liabilitiesin 000Carrying amountdec. 31, 2011at fair valuethrough profit or loss at amortized cost*at fair value recognized in equity at amortized cost* assetsNon-current assetsother financial assets 123,251 securities 90,654 90,654 loans and other receivables 1,166 1,166 financial instruments that do not fall in the scope of ifrs 7 31,431 other non-current assets 4,402 miscellaneous financial assets 4,013 4,013 financial derivatives 389 389 Current assets trade receivables 293,115 293,115 other receivables and other current assets 53,102 other receivables and other financial assets 28,659 28,659 financial derivatives 319 319 other non-financial assets 24,124 Cash and cash equivalents 245,285 Cash 245,284 245,284 short-term securities 1 1 equity and liabilities Non-current liabilities non-current financial debt 73,294 73,294other non-current liabilities 13,206 other financial liabilities 9,236 9,236financial derivatives 2,918 2,918 other non-financial liabilities 1,052 Current liabilities Current financial debt 9,739 9,739trade payables 68,264 68,264other current liabilities 156,426 other financial liabilities 37,033 37,033financial derivatives 2,331 2,331 other non-financial liabilities 117,062 Total by measurement category in accordance with IAS39assets 708 572,237 90,655liabilities 5,249 197,566* the carrying amount approximates fair value. T 57 finanCial insTrumenTs by measuremenT CaTegory150ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 measurement categories in accordance with IAS 39Financial assets/ liabilities held for trading loans and receivables Available- for-sale financial assetsFinancial liabilitiesin 000Carrying amountdec. 31, 2010at fair valuethrough profit or loss at amortized cost*at fair value recognized in equity at amortized cost* assetsNon-current assetsother financial assets 102,509securities 77,543 77,543loans and other receivables 13,817 13,817 financial instruments that do not fall in the scope of ifrs 7 11,149 other non-current assets 4,283 miscellaneous financial assets 3,921 3,921 financial derivatives 362 362 Current assets trade receivables 265,946 265,946 other receivables and other current assets 71,085 other receivables and other financial assets 39,433 39,433 financial derivatives 1,584 1,584 other non-financial assets 30,068 Cash and cash equivalents 189,225 Cash 189,224 189,224 short-term securities 1 1equity and liabilities Non-current liabilities non-current financial debt 18,055 18,055other non-current liabilities 13,739 other financial liabilities 9,192 9,192financial derivatives 2,123 2,123 other non-financial liabilities 2,424 Current liabilities Current financial debt 57,305 57,305trade payables 67,280 67,280other current liabilities 162,206 other financial liabilities 41,173 41,173financial derivatives 129 129 other non-financial liabilities 120,904 Total by measurement category in accordance with IAS39assets 1,946 512,341 77,544liabilities 2,252 193,005* the carrying amount approximates fair value. 151TV SD AnnuAl RepoRT 2011In the case of current loans and receivables and of 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 non-current items, the nominal value less impairment losses approximates their fair values. Invest-ments in affiliated companies and participations reported under other financial assets are measured at amortized cost because their fair value cannot be reliably measured. Financial instruments that are recognized at fair value in the statement of financial position are required to be allocated to the following three levels of the fair value hierarchy. The hierarchy levels reflect the significance of the inputs used in determining fair value and the extent to which they are observable on the market. The hierarchy levels are as follows: Quoted prices in active markets for identical assets or liabilities (level 1) Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) (level 2) Inputs that are not based on observable market data (level 3) Financial assets and liabilities that are recognized in the statement of financial position at fair value are allocated as follows to the three levels of the fair value hierarchy:fair value hierarchyin 000 level 1 level 2 level 3 totalFinancial assets at fair value available-for-sale financial assets 90,655 0 0 90,655financial derivatives 0 708 0 70890,655 708 0 91,363Financial liabilities at fair value financial derivatives* 0 5,249 0 5,2490 5,249 0 5,249* thereof with a hedging relationship: 2,918thousandfair value hierarchyin 000 level 1 level 2 level 3 totalFinancial assets at fair value available-for-sale financial assets 77,544 0 0 77,544financial derivatives 0 1,946 0 1,94677,544 1,946 0 79,490Financial liabilities at fair value financial derivatives* 0 2,252 0 2,2520 2,252 0 2,252* thereof with a hedging relationship: 2,123thousandT 58 fair value hierarChy as of deCember 31, 2011T 59 fair value hierarChy as of deCember 31, 2010152ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 net gains and losses by measurement categoryThe net gains and losses on the financial instruments recognized in the income statement, by measurement category, are as follows: The net gains and losses were mainly attributable to effects from currency translation, impairment losses and the disposal of available-for-sale financial assets. The net gains and losses recorded for assets and liabilities measured at fair value through profit or loss result from mark-ing hedging instruments to market.The loans and receivables category mainly comprises the impairment losses on trade receivables and loans. It also includes exchange rate gains and losses from measuring foreign currency receivables. In the available-for-sale financial assets, the net gains and losses relate to impairment losses on participations and non-consolidated affiliated companies. These are countered by income from the disposal of participations. The net losses of the liabilities measured at amortized cost are attributable in particular to effects from the translation of foreign currency liabilities as of the reporting date. In the fiscal year 2011, this is mainly the effect of the exchange rate losses from the measurement of the US dollar loan of TVSD Bursa as of the reporting date. Interest on financial instruments and the impairment losses on other securities, loans and participations are posted under other financial result. Impairment losses on trade receivables and other receivables are recorded in other expenses. Exchange rate gains and losses from currency translation are either reported in the financial result under currency translation gains/losses from financing measures or as other expenses or other income, depending on the economic nature of the factors that gave rise to them. in 000 2011 2010financial assets/liabilities at fair value through profit or loss 1,538 1,562loans and receivables 4,478 8,428available-for-sale financial assets 4,420 1,124liabilities measured at amortized cost 3,802 41014,238 9,276T 60 neT gains and losses by measuremenT CaTegory153TV SD AnnuAl RepoRT 201139 | FINANCIAl RISkSThe TVSDGroup faces financial risks in the form of credit risks, liquidity risks and market risks. The principles of risk management are defined by TVSDs internal finance policy as well as numerous binding strategies and guidelines and are discussed in more detail in the management report.Credit risks (default risks) exist with regard to the operating business as well as to available-for-sale financial assets and derivative financial instruments. Depending on the nature and extent of the respective transaction, risk-mitigating measures must be taken for all transactions relating to the operating business. These include obtaining collateral, credit ratings or track records of prior business relations, particularly payment behavior. Recognizable risks are taken into account through appropriate valuation allowances on receivables that are based on objective indications in individual cases, or the maturity profile and actual default history.Trade receivables, percentage-of-completion receivables and loans may be defaulted at most to the value of their carrying amount as of December 31, 2011. Trade receivables that are past due are listed in note 25 Trade receivables.The maximum credit risk at the time of the disposal of available-for-sale assets and derivative financial instruments corresponds to their market value as of December 31, 2011. 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 purchased. In spite of the euro debt crisis, the TVSDGroup has not recorded any default T 61 developmenT of valuaTion allowanCes on finanCial asseTsin 000 other financial assetsother non-current assets trade receivables other receivables and other financial assetsTotalValuation allowances as of January 1, 2010 6,627 370 7,504 3,109 17,610Currency translation differences 488 0 312 547 1,347Change in scope of consolidation 378 0 431 0 809additions 1,745 34 5,296 275 7,350utilization 444 116 2,448 0 3,008reversals 0 50 1,635 0 1,685reclassifications to held for sale 0 0 64 0 64Valuation allowances as of December 31, 2010 8,794 238 9,396 3,931 22,359Currency translation differences 80 0 34 76 38Change in scope of consolidation 2,093 0 102 350 2,341additions 14,164 13 4,464 105 18,746utilization 2,912 154 1,829 94 4,989reversals 0 0 2,631 11 2,642Valuation allowances as of December 31, 2011 17,873 97 9,468 3,657 31,095impairment losses 2011 14,164 13 4,533 0 18,710impairment losses 2010 3,088 34 5,466 174 8,762Valuation allowances on financial assetsThe development of the valuation allowances on financial assets as well as the impairment losses recognized in the income statement in the fiscal year are as follows: 154ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 on securities. Derivative financial instruments are only con-cluded with partners that have a very high rating and where a breach of contractual obligations is thus not expected.According to internal trading policies, derivative financial transactions may only be concluded in close consultation with the corporate treasury department and in connection with an underlying transaction. To limit risks, subsidiaries are prohibited from purchasing securities without approval from the corporate treasury department.In order to manage liquidity risks, the TVSDGroup always has up-to-date liquidity planning and sufficient liquidity reserves in the form of cash and credit lines. Bank balances are held solely at banks with excellent credit ratings. In addition, maximum investment limits are set for investment funds at various banks based on their credit rating in order to avoid cluster risks. Risks relating to current securities are also minimized by widely diversifying issuers. In addition to cash and securities, the liquidity reserve comprises a syndicated credit line for 200million. Approximately 55million of this credit line guaranteed by a syndicate of banks until July 2016 had been utilized as of the reporting date. The maturity profile of the anticipated undis-counted cash flows is detailed under note 32 Financial debt.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 TVSDs 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 to hedge intra-group loans in foreign currencies.Derivative financial instruments are marked to market on the basis of market conditions as of the end of the reporting period. Market valuations provided by banks are additionally checked for plausibility on the basis of internal calculations.The amounts recognized for the derivative financial instruments of the TVSDGroup are presented in the table below.T 62 derivaTive finanCial insTrumenTsin 000 dec. 31, 2011 dec. 31, 2010assetsforward exchange transactions and cross-currency swaps 708 1,946interest rate swaps 0 0708 1,946equity and liabilitiesforward exchange transactions and cross-currency swaps 2,331 129interest rate swaps 2,918 2,1235,249 2,252Currency risks as of the reporting date are assessed using sensitivity analyses. The sensitivity analysis approximately quantifies the risk that may arise under the assumptions made if certain parameters change. With respect to the currency risks, it is analyzed what effect would arise from an increase or decrease of 10% in the value of the euro against all other currencies as of the reporting date.With regard to trade receivables and payables, a 10% increase or decrease in the value of the euro against all other currencies as of December 31, 2011 would only have an immaterial effect on consolidated net income for the year. In the event of a 10% decrease in value of the euro, the market value of forward exchange transactions would fall by 5,529thousand (prior year: 3,073thousand). The market value of cross-currency swaps would drop by 382thousand (prior year: 1,032thou-sand) 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 4,524thousand (prior year: 2,514thousand). The market value of cross-currency swaps would increase by 313thousand (prior year: 844thousand) accordingly.Interest rate risks may arise for investments in fixed-interest securities. A 1% increase in interest rates would result in a decrease in market value of 1,095thousand (prior year: 911thousand). A 1% decrease in interest rates would lead to an increase in market value of 1,129thousand (prior year: 937thousand). Financial debt may also be exposed to an 155TV SD AnnuAl RepoRT 2011interest rate risk. Derivative financial instruments are used on a case-by-case basis to hedge against the interest rate risk. As of the reporting date, there are interest rate swaps that hedge against future increases in interest rates for the floating-interest loans financing the operators license for the vehicle inspection business in Turkey as well as the acquisition of the GRC group. Both of these are cash flow hedges designated as such for hedge accounting purposes in accordance with IAS 39. The variable cash flows from these loans are exchanged for fixed-interest cash flows via interest rate swaps. For financing of the operators license, the hedge will be in place permanently until the end of 2017 and interest is payable every six months. Approximately 45% of cash flows have been hedged until May 2015 for financing the acquisition of the GRC group. Both cash flow hedges were effective as of the reporting date. The recog-nized negative fair value of these interest rate swaps amounts to 2,918thousand as of the reporting date (prior year: 2,123thousand). A negative amount of 991thousand was recognized in other comprehensive income in the fiscal year 2011 (prior year: 703thousand). This change in value reflects the effective portion of the hedges.40 | NOTES TO ThE STATEmENT OF CASh FlOwSThe cash and cash equivalents presented in the statement of cash flows contain all highly liquid items shown in the statement of financial position, i.e., cash in hand, checks and bank balances as well as current securities that are available within three months. An amount of 2thousand (prior year: 1,665thousand) of the cash is pledged. The net change in cash and cash equivalents that relate to discontinued operations is presented separately in note 15. The change in liabilities and provisions relates to pension payments of 43,144thousand made by trustors and refunded by TVSD Pension Trust e.V. (prior year: 42,472thousand). The trustors subsequently made further payments to TVSD Pension Trust e.V. again. Together with further additions to other plan assets, these payments constitute contributions to pension plans and are allocable to the cash flow from investing activities.41 | RElATED PARTIESrelated companiesRelated parties as defined by IAS 24 are legal entities or natural persons who can exercise significant influence or control over TVSD AG and its subsidiaries or, alternatively, are subject to the control or significant influence of TVSD AG or its subsidiaries.The ultimate parent companies of the TVSDGroup are TVSD e.V., Munich, and TVSD Stiftung, Munich (TVSD Foundation). Both TVSD e.V. and the TVSD Foundation have transferred their shares in TVSD AG to the independent shareholder committee, TVSD Gesellschafterausschuss GbR. The purpose of the civil law association TVSD Gesellschafter-ausschuss GbR, the interests in which are held by TVSD e.V., the TVSD Foundation and other natural persons as partners, is to hold and manage investments under German stock corporation law held in TVSD AG. Internally, TVSD e.V. and the TVSD Foundation hold 74.9% and 25.1% stakes in the assets of TVSD Gesellschafterausschuss GbR. Within the framework of agency contracts, the activities under the accreditation which authorizes TVSD to operate the road vehicle technical inspectorate and the official vehicles inspection body in Baden-Wrttemberg are carried out by the operating companies of the TVSDGroup for TVSD e.V., as principal and recognized contractor. Business is conducted on behalf of, at the instruction of and in the name of TVSD e.V. All transactions and business processes are carried out in the TVSDGroup. The Group maintains personnel and material in the scope necessary for the activities and operation. From the cost center accounting, the revenue and costs allocable to TVSD e.V. are calculated and transferred or invoiced. The total volume charged to TVSD e.V. for the provision of personnel and material came to 122,989thousand in 2011 (prior year: 119,919thousand). TVSD e.V. recorded revenue of 124,400thousand (prior year: 118,729thousand) from this source.As of December 31, 2011, TVSD AG recorded a cash pool receivable of 868thousand (prior year: 5,301thousand) due from TVSD e.V. Cash pool receivables of 19thousand (prior 156ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 year: 0thousand) from and cash pool liabilities of 294thou-sand (prior year: 1,104thousand) to subsidiaries of TVSD e.V. are reported as of the reporting date. In the fiscal years 2011 and 2010, the TVSDGroup had business relationships with non-consolidated subsidiaries, associated companies and joint ventures that qualify as related parties. In the course of ordinary operations, all service transactions with these entities were carried out at arms length conditions. In 2011, transactions were carried out with material related parties that led to the following items in the consolidated financial statements: Impairment losses of 374thousand (prior year: 633thou-sand) were recognized on loans to non-consolidated subsidiaries. Receivables from non-consolidated subsidiaries include impairment losses amounting to 3,522thousand (prior year: 3,890thousand). Financial debt to non-consolidated subsidiaries stems from the central borrowing or investment of cash at TVSD AG (cash pooling). There is also a cash pool liability of 699thou-sand (prior year: 759thousand) due to the welfare association Belegschafts-Untersttzungsverein des TV Bayern e.V., Munich.The business relationships with joint ventures are based primarily on a license agreement between TVTURK Kuzey and TVTURK Gney (licensors) and TVSD Bursa (licensee). The dividend distributions by associated companies totaled 581thousand in the fiscal year 2011 (prior year: 1,048thou-sand). Transactions with TVSD Pension Trust e.V. are explained in note 30 Provisions for pensions and similar obligations and note 40 Notes to the statement of cash flows. TVSD AG issued letters of comfort for two related companies. No other guarantees were made for related parties in the reporting year (prior year: 953thousand). remuneration of the active Board of management and supervisory Board The remuneration of key management personnel in the Group that is subject to mandatory disclosure pursuant to IAS 24 comprises the remuneration of the active Board of Manage-ment and Supervisory Board. The remuneration of the active members of the Board of Management amounted to a total of 3,778thousand in fiscal 2011 (prior year: 4,015thousand including the severance payment for a member who left the Board of Management during the year). The additional service cost incurred for pension obligations amounted to 146thousand (prior year: 73thousand). The present value of the defined benefit obligation calculated in accordance with IFRSs amounted to 2,994thou-sand as of the reporting date (prior year: 2,682thousand). The active members of the Supervisory Board received total remuneration of 838thousand in fiscal 2011 (prior year: 923thousand). non-consolidated subsidiaries associated companies Joint venturesin 000 dec. 31, 2011 dec. 31, 2010 dec. 31, 2011 dec. 31, 2010 dec. 31, 2011 dec. 31, 2010loans 215 1,080 0 0 0 0receivables 2,567 3,567 96 307 0 1,813financial debt 501 287 0 0 0 0liabilities 2,008 1,827 56 11 176 1,821T 63 iTems of The sTaTemenT of finanCial posiTion from TransaCTions wiTh non-ConsolidaTed subsidiaries, assoCiaTed Companies and JoinT venTures157TV SD AnnuAl RepoRT 2011As in the prior year, no loans or advances were granted to members of the Board of Management or Supervisory Board as of the reporting date. Also, as in the prior year, no contingent liabilities were assumed in favor of these persons.remuneration of former members of the Board of management and supervisory BoardThe total remuneration of former members of the Board of Management and their surviving dependants including pension payments and other payments (advisory services) amounted to 953thousand (prior year: 933thousand). Pension obligations (DBOs) amounting to 11,376thousand (prior year: 11,718thousand) are in place with regard to former members of the Board of Management and their surviving dependants.Former members of the Supervisory Board did not receive any remuneration in the reporting year.42 | PROPOSAl FOR ThE APPROPRIATION OF PROFITSThe Board of Management and Supervisory Board will propose to the annual general meeting to distribute 2,080thousand from the retained earnings under German GAAP of TVSD AG totaling 8,713thousand. That is equivalent to 0.08 per share. The remaining amount of 6,633thousand is to be transferred to other revenue reserves. 43 | AuDITORS FEESThe following fees for services rendered by KPMG AG Wirtschaftsprfungsgesellschaft in the fiscal year 2011 were recognized as an expense in accordance with Section 314 (1) No. 9 HGB:T 64 audiTors feesin 000 2011 2010*audits of the financial statements 723 697other attestation services 24 49tax advisory services 1,144 998other services 335 7182,226 2,462* restated prior-year figuresIn the prior year, the fees disclosed related to KPMG AG and to its affiliated companies in KPMG Europe LLP. According to a changed interpretation of the HGB provision, the disclosure is only supposed to refer to the legally independent entity of the auditor appointed. The prior-year figures were restated accordingly.158ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 44 | CONSOlIDATED ENTITIEST 65 ConsolidaTed enTiTiesshare in capital % name and registered offices of the entityfully consolidated affiliated companies germanyarmat Gmbh & Co. KG, Pullach i. isartal *) SPE 100armat hessen Gmbh & Co. KG, Pullach i. isartal *) SPE 100armat sdwest Gmbh & Co. KG, Pullach i. isartal *) SPE 100auto-Pflegezentrum Gmbh & Co. KG, darmstadt *) 100eCoPlan deutschland institut fr umweltschutz Gmbh, donzdorf 100elektro-Beratung Bayern Gmbh, landwirtschaftlicher Prfdienst, munich 100fld fleet logistics deutschland Gmbh, mainz F 100fleetCompany Gmbh, oberhaching 100lsG-elaB Gmbh, siegen 100lsG-hygiene institute Gmbh, neu-isenburg 75Penders & Janen Gmbh, oberhausen F 100Pima-mPu Gmbh, munich *) 100siGnon deutschland Gmbh, Berlin 74.95tV ecoplan umwelt Gmbh unternehmensgruppe tVsddeutschland, munich 100tV hanse Gmbh tVsd Gruppe, hamburg *) 90tV hessen mobilitt und Beratung Gmbh, Bad homburg v.d.h. 100tVsd administration services Gmbh, munich 100tVsd akademie Gmbh, munich *) 100tVsd auto Partner Gmbh, hamburg *) 100tVsd auto Plus Gmbh, stuttgart 100tVsd auto service Gmbh, stuttgart *) 100tVsd automotive Gmbh, munich *) 100tVsd Battery testing Gmbh, Garching F 70tVsd Car registration & services Gmbh, munich F 50tVsd Chemie service Gmbh, leverkusen *) 100tVsd Cleancert Gmbh, Bergisch Gladbach *) 100tVsd energie und umwelt Gmbh, munich 100tVsd energietechnik Gmbh Baden-wrttemberg, filderstadt *) 100tVsd immobilien service Gmbh, munich *) 100tVsd immowert Gmbh, munich *) 100tVsd industrie service Gmbh, munich *) 100tVsd informatik und Consulting services Gmbh, munich *) 100tVsd life service Gmbh, munich *) 100tVsd management service Gmbh, munich *) 100tVsd Pluspunkt Gmbh, munich *) 100tVsd Product service Gmbh, munich 100tVsd rail Gmbh, munich 100tVsd senton Gmbh, straubing 100tVsd umwelt Gmbh, munich 100tVsd umwelt messtechnik Gmbh, munich 100tV technische berwachung hessen Gmbh, darmstadt 55159TV SD AnnuAl RepoRT 2011share in capital % name and registered offices of the entityfully consolidated affiliated companies other countriesarise inc., wilmington, delaware, usa 100mi-tVsd minsggvi s Biztonsgtechnikai Korltolt felelssg trsasg, szentendre, hungary 62.13Global risk Consultants Corp., wilmington, delaware, usa 100Global risk Consultants ltd., west Byfleet, surrey, uK 100GrC merlin holdings, inc., wilmington, delaware, usa 100Jiangsu tV Product service ltd., wuxi, China 51Kocen Consulting & services, inc., seongnam-si, south Korea 100laidler associates Consulting service limited, farham hants, uK 100magyar tVsd mszaki szakrtoi Korltolt felelssg trsasg, szentendre, hungary 100nuclear technologies plc., Gloucester, uK 100PetroChem inspection services inc., Pasadena, texas, usa 100Pro-tec Boiler inspection & ndt services (Pty) ltd., middelburg, south africa F 100PsB management Consulting (shanghai) Co. ltd., shanghai, China 100safety systems technology limited, farham hants, uK 100siGnon schweiz aG, Berne, switzerland F 100tV italia s.r.l., milan, italy 100tVsd (uK) ltd., fareham hants, uK 100tVsd amrica de mxico s.a. de C.V., monterrey n.l., mexico 100tVsd america inc., danvers, massachussets, usa 100tuVsud asia ltd., shatin, hong Kong 100tuVsud asia Pacific Pte. ltd., singapore 100tuVsud Bangladesh (Pvt.) ltd., dhaka, Bangladesh F 100tVsd Benelux B.V.B.a., Baal, Belgium 100tVsd Bursa tasit muayene istasyonlari isletim a.s., osmangazi-Bursa, turkey 100tVsd Canada inc., Guelph, ontario, Canada 100tVsd Central eastern europe s.r.o., Prague, Czech republic 100tuVsud China holding ltd., shatin, hong Kong 100tVsd Czech s.r.o., Prague, Czech republic 100tVsd france s.a.s., ecully, france F 100tuVsud hong Kong ltd., shatin, hong Kong 100tVsd lberia, s.l.u., Barcelona, spain 100tuVsud industry service, inc., dover, delaware, usa 100tuVsud industry services madagascar s.a., antananarivo (renivohitra), madagascar F 100tuVsud invest lP, atlanta, Georgia, usa 100tuVsud invest management llC, dover, delaware, usa 100tVsd Japan ltd., tokyo, Japan 100tuVsud Korea ltd., seoul, south Korea 100tVsd landesgesellschaft sterreich Gmbh, Jenbach, austria 100tuVsud middle east llC (qatar), doha, qatar 100tuVsud middle east llC, abu dhabi, united arab emirates 51tuVsud nel limited, Glasgow, uK 100tVsd Polska sp. z.o.o., warsaw, Poland 100tuVsud Product service ltd., fareham hants, uK 100160ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 Munich, March 27, 2012TVSD AGThe Board of Management Dr. Axel Stepken Dirk Eilers Dr. Peter Klein Horst Schneider Karsten Xandershare in capital % name and registered offices of the entitytuVsud PsB (malaysia) sdn. Bhd., Kuala lumpur, malaysia 100tuVsud PsB (thailand) ltd., Pathumthani, thailand 100tuVsud PsB learning Pte. ltd., singapore 100tVsd PsB Products testing (shanghai) Co., ltd, shanghai, China F 100tuVsud PsB Pte. ltd., singapore 100tuVsud PsB Vietnam Co. ltd., ho Chi minh City, Vietnam 100tVsd romania s.r.l., Bucharest, romania 100tVsd russland o.o.o., moscow, russia F 100tVsd sava d.o.o., ljubljana, slovenia 100tuVsud serbia d.o.o., Belgrade, serbia F 100tVsd slovakia s.r.o., Bratislava, slovakia 100tuVsud south africa holding (Pty) ltd., Cape town, south africa F 100tuVsud south asia Pte. ltd., mumbai, india 100tVsd sZa sterreich technische Prf-Gmbh, Vienna, austria 50tVsd teknik Gvenlik ve Kalite denetim ticaret ltd. sirketi (tGK), esentepe (istanbul), turkey 100wallace whittle (holdings) limited, Glasgow, uK F 100wallace whittle limited, Glasgow, uK F 100ZwP - Zerstrungsfreie werkstoffprfung Gmbh, Vienna, austria 100 consolidated associated companies other countriesseCta socit europenne de Contrle technique automobile s.a., Courbevoie Cedex, france 38.22swiss ts technical services aG, wallisellen, switzerland 49.01tVsd ohtama ltd., tokyo, Japan 50 consolidated joint ventures other countriestVturK Gney tasit muayene istasyonlari yapim ve isletim a.s., istanbul, turkey 33,33tVturK istanbul tasit muayene istasyonlari yapim ve isletim a.s., istanbul, turkey 16.80tVturK Kuzey tasit muayene istasyonlari yapim ve isletim a.s., istanbul, turkey 33.33f = first-time consolidationsPe = special Purpose entity*) the domestic subsidiary meets the requirements of section 264 (3) hGB or section 264b hGB, and takes advantage of the corresponding exemption regulations.161TV SD AnnuAl RepoRT 2011auditors rePortWe have audited the consolidated financial statements pre-pared by TV SD AG, Munich, comprising the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, con-solidated statement of cash flows, consolidated statement of changes in equity and the notes to the consolidated financial statements, together with the combined management report of TV SD Group and TV SD AG for the business year from January 1 to December 31, 2011. The preparation of the consolidated financial statements and the group manage-ment 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 companys management. Our responsibility is to express an opinion on the consolidated financial statements and on the management report based on our audit.We conducted our audit of the consolidated financial state-ments in accordance with 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprfer [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.Our audit has not led to any reservations.In our opinion, based on the findings of our audit, the consoli-dated 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 Groups position and suitably presents the opportunities and risks of future development.Munich, March 27, 2012KPMG AG Wirtschaftsprfungsgesellschaft huBER SANDhAASWirtschaftsprfer Wirtschaftsprferin [German Public Auditor] [German Public Auditor]162ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4 CorPorate BoardssuPerVisory BoardPROF. DR.-ING. hANS-JRG BullINGER Chairman President of Fraunhofer-GesellschaftFRANz hOlzhAmmER*Deputy Chairman Chairman of the central works council of TVSD AG FRANk-PETER ARNDTMember of the Board of Management of BMW AG JOSEF BIChlER*Head of Corporate Controlling of TVSD AGDR. ChRISTINE BORTENlNGERMember of the Board of Management of Bayerische Brse AG (since May 13, 2011)wOlFGANG DEhENChairman of the Board of Management of OSRAM AGmIChAEl DICkMember of the Board of Management of AUDI AGThOmAS EDER*Chairman of the works council of TVSD Auto Service GmbHPETER kARDEl*Chairman of the works council of TVSD Industrie Service GmbHThOmAS kOPPOlD* Expert at TVSD Industrie Service GmbHzyGmuNT mIERDORFMember of the Board of Management of METRO AG (retired), (until May 13, 2011)REINhOlD RIEGER*Expert at TV SD Industrie Service GmbH (since January 1, 2012)DIETRICh SChAllEhN*Trade union secretary for sector 13 Special services on the national executive board of ver.diEDGAR SChERNER*Former chairman of the central works council of TVSD AGJOhANN SChwAIGER*Chairman of the works council of TVSD Industrie Service GmbH (until December 31, 2011)GEROlD TANDlERMember of the Board of Management of Linde AG (retired)DR. EBERhARD VEITChairman of the Board of Management of Festo AGDR. mANFRED wITTENSTEINChairman of the Board of Management of WITTENSTEIN AG* Employee representativeBoard of manaGementDR.-ING. AxEl STEPkENChairman of the Board of ManagementDIRk EIlERSMember of the Board of Management DR. PETER klEIN Member of the Board of ManagementhORST SChNEIDERMember of the Board of ManagementkARSTEN xANDER Member of the Board of Management163TV SD AnnuAl RepoRT 2011ImprIntPublished byTVSD AG Westendstr. 199 80686 Munich / Germanyphone / +49 (0)89 5791-0 fax / +49 (0)89 5791-1551mail / info@tuev-sued.de web / www.tuev-sued.com TV SD AG / Munich. All rights reserved.Corporate CommunicationsMatthias Andreesen Viegas Jrg RiedleCorporate Finance & AccountingReinhold HaasPhotographySouth Africa Frederic Streicher Corbis: Angelo CavalliGermany Tillmann Franzen Corbis: Ocean, Paul Russel, Stevens Fremont India Sorin Adrian Morar Corbis: Rob Melnychuk, Photo AltoDesignStrichpunkt GmbH, Stuttgart and Berlinwww.strichpunkt-design.deProduction G. Peschke Druckerei GmbH, MunichDivision Strategic business segment InDuSTRY SeRVICeSReAl eSTATe SeRVICeSRAIlInDuSTRYTV SDPRODuCT SeRVICeSMAnAGeMenT SeRVICeSACADeMYCeRTIFICATIOn 1,2711,356 1,410 1,553 1,67820072008 2009*2010*2011** From continuing operationsF 01 tV SD StrUCtUrEF 04 rEVEnUE (In mILLIOnS)F 03 rEVEnUE BY StrAtEGIC BUSInESS SEGmEnt (%)AuTO SeRVICeSAuTOMOTIVeMOBIlITYlIFe SeRVICeSF 02 HEADCOUnt13,185200714,138200816,0582010*14,4592009* 2011*17,161t 01 KEY FIGUrESTHe GROuP AT A GlAnCe2007 2008 2009* 2010* 2011*IFRS IFRS IFRS IFRS IFRSBusiness development (in millions)Revenue 1,270.7 1,365.2 1,409.9 1,552.5 1,677.7Personnel expenses 725.7 795.2 847.0 900.1 986.2Cash flow from operating activities 123.6 178.8 150.4 144.9 154.6Capital expenditures 39.7 68.5 45.5 52.2 64.4Income before taxes 115.9 106.7 101.6 123.4 133.6Consolidated net income 52.1 68.6 72.4 74.6 107.2eBT margin (%) 9.1 7.8 7.2 7.9 8.0eBT margin, adjusted (%) 8.0 8.7 8.2 7.2 7.2eBIT margin (%)** 9.1 8.9 8.7 9.2 9.5eBIT margin, adjusted (%)** 10.2 9.8 9.7 8.5 8.5Assets (in millions)non-current assets 716.2 749.0 761.7 823.2 824.1Current assets 377.5 413.6 494.0 551.3 605.9Total assets 1,093.7 1,162.6 1,255.7 1,374.5 1,430.0equity ratio (%) 26.9 32.5 32.0 34.3 37.7Employees (annual average) Full-time equivalents 12,360 13,122 13,748 14,662 16,018Employees (as of December 31)Headcount 13,185 14,138 14,459 16,058 17,161* From continuing operations** eBIT: earnings before interest, before currency translation gains/losses from financing measures and before income taxes; including income from participationsCeRTIFICATIOn 24.9 InDuSTRY 39.6 MOBIlITY 35.4OTHeR 0.12011* Before taxes1,677.7 133.6 64.4 revenue income*capital expenditures Tv Sd AgTv SdCLOSE-UPAnnual Report2011GermanyMunich USAPhiladelPhiaSouth Africa CAPE TOWN33 55' s 18 25' E39 57' N 75 10' w48 09' N 11 35' EIndiaNew delhi28 40' N 77 13' ETv Sd AGWestendstr. 19980686 Munich / Germanyphone:// +49 (0)89 5791-0fax:// +49 (0)89 5791-1551mail:// info@tuev-sued.de: // Tuev-Sued.comImprIntPublished byTVSD AG Westendstr. 199 80686 Munich / Germanyphone / +49 (0)89 5791-0 fax / +49 (0)89 5791-1551mail / info@tuev-sued.de web / www.tuev-sued.com TV SD AG / Munich. All rights reserved.Corporate CommunicationsMatthias Andreesen Viegas Jrg RiedleCorporate Finance & AccountingReinhold HaasPhotographySouth Africa Frederic Streicher Corbis: Angelo CavalliGermany Tillmann Franzen Corbis: Ocean, Paul Russel, Stevens Fremont India Sorin Adrian Morar Corbis: Rob Melnychuk, Photo AltoDesignStrichpunkt GmbH, Stuttgart and Berlinwww.strichpunkt-design.deProduction G. Peschke Druckerei GmbH, MunichTv Sd Ag: // Tuev-Sued.COM Tv Sd AgAnnuAl RepORT 2011CloSe-Uptv SdCLOSE-UpAnnual report2011195195 212 2121660050COunTRIeSlOCATIOnSeMplOYeeS17,16148 09' N 11 35' E33 55' s 18 25' E28 40' N 77 13' E39 57' N 75 10' w