In the retail banking sector, we foresee continued investment in the established markets of Western Europe and North America aimed at optimizing and expanding private-client business. This outlook is reinforced by the successful repositioning of the retail banking sector.

The main focus of investment is likely to remain on strengthening branch operations. This creates additional demand for automated systems combining hardware and software with modern IT support concepts and for other solutions that can help optimize branch systems to deal with a rapidly increasing number of transactions. By adopting such an approach, the banks endeavor to improve their customer support by offering new products and to enhance process efficiency. The trend toward outsourcing branch IT operations is likely to become more pronounced, with a corresponding increase in the need for high-quality IT services. Additional product growth is assured by the installation of new self-service systems, especially by off-premises providers. Growth will also be driven by investment in new infrastructure. Many banks are introducing multifunctional high-end systems that offer improved customer service or a greater level of automation. Wincor Nixdorf also sees potential for growth in moves by financial service providers to expand their sales channels. For banks, the challenge is to find a single software architecture that incorporates all these different channels. Wincor Nixdorf offers just such a software architecture that makes it possible to integrate individual channels step by step.

We also expect to benefit from investments by major retailers in new ePOS systems and in process optimization, especially in Western Europe and the United States. There is likely to be further growth in demand for automated systems and modern self-service concepts. We also foresee an increasing trend for international retail groups to standardize their branch IT systems by introducing uniform software platforms with extended branch functionality.

Both the banking and retail sectors continue to invest heavily in the fast-growing economies of Eastern Europe, Asia and Latin America. However, we also see significant potential for growth in developing countries such as India. Demand for our products should rise in line with the strong economic growth in these countries together with a higher standard of living, increasing urbanization and the development of a modern infrastructure.

Exchange Rates.
We expect exchange rate movements to have an impact on our competitive position throughout fiscal 2006/2007 and 2007/2008, as our competitors’ production facilities are mostly located in the U.S. dollar zone. Thanks to the global structure of our Group, we are able to take the necessary steps (choice of suppliers and locations) to create a natural form of hedging that will cover our activities to a large extent. This strategy will be supported by further international expansion planned over the next few years. Our remaining currency exposure will be hedged by appropriate transactions on the forward currency market.