Consolidation Group.
In addition to the parent company Wincor Nixdorf AG, the Group financial statements to September 30, 2005 essentially include all domestic and foreign subsidiaries in which Wincor Nixdorf AG possesses, either directly or indirectly, over 50 % of the shares or voting rights.

Other changes in shareholdings and changes as a result of new foundations and of business unit takeovers were as follows:

At October 1, 2004, Wincor Nixdorf acquired the remaining 49.99 % interest in the company Wincor Nixdorf Oy, Espoo, Finland, for an agreed consideration of € 909k. Additional contractually fixed purchase costs amounted to € 14k. The contributable equity as of October 1, 2004, came to € 1,439k resulting in an excess amount of € –516k. The acquisition can be characterized as a lucky buy. Therefore, the excess amount has been immediately recognized in profit and loss and is shown under other operating income.

The entity’s share in the net profit for the period is € 293k.

With effect December 1, 2004, 100 % of the shares in CXT Huolto Oy, Vantaa, Finland, have been acquired for a purchase price of € 89k. The company’s object of enterprise is the provision of services, and the acquisition adds to our service delivery capability on Wincor Nixdorf products in Finland. Moreover, directly attributable expenses of acquisition amounted to € 19k. Immediately before the first consolidation at December 1, 2004, the acquisition had the following impact on the financial position of Wincor Nixdorf Group:

The entity’s net share in the net profit for the period is € 46k. On September 30, 2005, the entity was merged with Wincor Nixdorf Oy, Espoo, Finland.

100 % of the company BEB Industrie-Elektronik AG, Burgdorf, Switzerland was acquired with effect January 1, 2005 for a consideration of CHF 10,000k. CHF 9,000k was paid to the sellers immediately. The remaining CHF 1,000k have been transferred to a blocked account and are available to the sellers beginning January 1, 2007. Moreover, directly attributable expenses of acquisition amounted to CHF 41k. The company is specialized in the development and production of sensor-based banknote readers designed for self-service terminals. It was fully consolidated into the Wincor Nixdorf Group financial statements for the first time on January 1, 2005. The acquisition had the following effect on the financial position of the Group as of January 1, 2005 immediately before the business combination:

The entity’s share in the net profit for the period is € 436k.

As of January 1, 2005 Wincor Nixdorf Dienstleistungs-GmbH, Paderborn was acquired for a consideration of € 27,5k.

As of July 15, 2005, Wincor Nixdorf Banking Services Ltd., Wokingham, United Kingdom has been newly founded with a subscribed capital of GBP 1.

Wincor Nixdorf S.A. de C.V., Mexico City, Mexico, and Wincor Nixdorf IT Support S.A. de C.V., Mexico City, Mexico, each with a subscribed capital of MXP 50k have been founded with effect August 17, 2005. The business commenced operation on October 1, 2005.

As of August 17, 2005, Wincor Nixdorf acquired Prinzipal 49th V.V. GmbH, Hamburg, with a subscribed capital of € 25k and renamed the company to Wincor Nixdorf Portavis GmbH by means of shareholders’ resolution of August 17, 2005. Following the increase in the company’s subscribed capital and the inclusion of new shareholders, WINCOR NIXDORF International GmbH now has a 51 % equity interest, HASPA Finanzholding, Hamburg, 38% and Sparkasse Bremen AG, Bremen, 11 %. In addition, the shareholders committed themselves to capitalize the company with capital reserves of € 4,900k in cash until September 30, 2005 in proportion to their shares. As of October 1, 2005, 130 employees of the shareholders moved to the new company.

In addition, the following new foundations took place in fiscal 2005:

• Wincor Nixdorf Customer Care GmbH, Paderborn, subscribed capital of € 25k
• Wincor Nixdorf Facility Services GmbH, Paderborn, subscribed capital of € 25k
• Wincor Nixdorf Banking Consulting GmbH, Paderborn, subscribed capital of € 25k

The companies have been put into operation as of October 1, 2005.

As of December 31, 2004, Wincor Nixdorf Retail and Banking Systems (Suzhou) Co. Ltd., Suzhou, China, has been liquidated and at the same time deconsolidated. Immediately before the liquidation, the company possessed liquid assets of € 3,857k. The deconsolidation resulted in a loss of € –1,728k.

Net sales in fiscal 2005 amounted to € 0k (previous year: € 0k), net profit for the period to € –113k (previous year: € –26k).

As of May 12, 2005, 3.5 % of the shares in Wincor Nixdorf S.A., Casablanca, Morocco, have been sold for a consideration of € 420k.

As a result, the consolidation Group at the year-end was made up of 60 companies, including Wincor Nixdorf AG, Paderborn.

Had the newly acquired businesses been fully consolidated on October 1, 2004, Group net sales would have been € 1,153k higher. The effect on Group profit and the book values of the acquired assets cannot be quantified as the costs are not comparable. Prior to initial consolidation, BEB Industrie-Elektronik AG, Burgdorf, compiled its accounts under Swiss statutory accounting regulations and CXT Huolto Oy, Vantaa, Finland, prior to initial consolidation under Finnish statutory accounting regulations.

Consolidation Principles.
The consolidated Group accounts are based on the annual accounts of companies forming part of the Group, such accounts having been compiled under uniform Group rules as of September 30, 2005 and, for the comparative period, as of September 30, 2004, duly audited and approved by KPMG or other auditing companies. By departure from this, we have used audited interim accounts in respect of four companies, as local statutory requirements dictate that these companies have fiscal years ending December 31.

Capital consolidation was carried out using the purchase method in accordance with IAS 27.22 (“Consolidated and Separate Financial Statements”) in conjunction with IFRS 3 for all acquisitions after October 1, 2003. The approach of quoting shares in the affiliated companies at their book value in the parent company is replaced by the assets at their settlement value and the debts of the consolidated companies. In this way, subsidiary companies’ equity is compared with the book value of the shares held by the parent company.

Goodwill arising from initial consolidation is no longer amortized over a prospective utilization period of 20 years since October 1, 2003. Moreover, goodwill is tested for impairment annually and eventually an impairment loss is recorded.

The interests in subsidiary companies that are not attributable to the parent company are shown under Group equity as “minority interests.” Other shareholders’ interests are calculated on the basis of the book values of the assets and liabilities attributable to them.

Mutual receivables and payables between companies included in the consolidated accounts are offset against each other.

Intra-group income and expenses are consolidated without effect on profit.

Intercompany profits arising from intra-group delivery of goods and services are eliminated with a corresponding effect on profit.

On consolidation transactions with effect on profit deferred taxes have been applied.

Currency Translation.
Annual accounts prepared in foreign currencies have been converted using the functional currency method. The functional currency is the currency in which a foreign entity primarily operates or settles payments. As Wincor Nixdorf Group companies undertake business dealings independently, they have been treated as foreign entities as defined by IAS 21 “The Effects of Changes in Foreign Exchange Rates.” Balance sheet items, including goodwill, are converted at the mid-exchange rate applicable on the balance sheet date, and income and expenses on the statement of income are converted using average exchange rates (annual averages). The variance so arising is offset against shareholders’ equity without affecting profit.

In the case of Wincor Nixdorf C.A., Venezuela, Wincor Nixdorf Soluções em Tecnologia da Informação Ltda., São Paulo, Brazil, Wincor Nixdorf Pte. Ltd., Singapore, as well as Wincor Nixdorf S.A. de C.V., Mexico City, Mexico, and Wincor Nixdorf IT Support S.A. de C.V., Mexico City, Mexico, the U.S. dollar and in the case of Wincor Nixdorf Bilgisayar Sistemleri A.S., Ayazaga, Turkey, the euro is used as the functional currency. The functional currency of Wincor Nixdorf Pte. Ltd., Singapore, has been changed to U.S. dollar due to corresponding legal changes in Singapore.

In the individual company reports included, foreign currency transactions are recorded at the exchange rates applicable at the time of the transactions. Resultant foreign currency receivables and payables are valued at the mid- exchange rate on the balance sheet date. The exchange rate profits or losses arising from the valuation or transaction of foreign currency items are shown in the statement of income.

The foreign exchange rates of the significant currencies for the Wincor Nixdorf group have developed as follows:

Accounting & Valuation Principles.
Assets and debts have been valued at historical acquisition/production cost less cumulative write-downs, with the exception of securities classified as “available for sale” and “held for trading” and derivatives, which have been included at their relevant market valuations.

In compiling the consolidated Group accounts, assumptions have been made, and estimates used, which have affected the value and reporting of capitalized assets and liabilities, of income and expenditure and of potential liabilities. The assumptions and estimates mainly relate to Group-wide setting of standard economic utilization periods of fixed asset items, to the valuation of manufacturing orders, to capitalization and valuation of accruals and also to the ability of future tax benefits to be realized. The actual values may vary in individual instances from the assumptions and estimates made. Changes are incorporated, with a corresponding effect on profit, once improved knowledge is obtained.

Fixed Assets.
Intangible assets are accounted for at cost and, as the useful lives are finite, amortized in a scheduled manner in equal annual amounts over the relevant utilization period. The amortization period for commercial patents, licenses and product know-how is a maximum of ten years. The remaining useful life of the product know-how is three years.

According to IFRS 3, goodwill is no longer amortized on a scheduled basis but only if a need for impairment loss exists.

Tangible assets are valued at cost of acquisition or production, less scheduled amortization. Production costs include direct costs as well as proportionate indirect costs. Business and factory premises are amortized over a maximum of 50 years, plant and machinery over an average of ten years, other fixed assets and office equipment mainly over five years and products leased to customers as per the terms of the relevant contract. Tangible fixed assets are mainly depreciated using the straight-line method in accordance with economic utilization. Plant and machinery used in the production process, and other fixed assets and office equipment are written down using front-loaded depreciation rates as a result of multi-shift operations.

As standard, financial assets are valued at acquisition cost or, if lower, at their settlement value on the balance sheet date. Interest-bearing loans are capitalized at nominal value.

Current assets.
Inventories are valued at purchase or production cost, or at lower net realizable value.

The purchase cost of raw materials, supplies and merchandise is calculated using the average valuation method.

In accordance with IAS 2 “Inventories,” pro-rata material costs and production overheads (assuming normal utilization), including depreciation on production equipment and production-related social security costs, are included along with production material and production wages in the production cost of finished and unfinished products. Interest on loan capital is not capitalized.

Write-downs for inventory risks are undertaken to an appropriate and adequate extent. Account was taken for loss-free valuation. Lower net realizable values are used where required.

As of the balance sheet date, there were no substantial orders that would require capitalization in accordance with IAS 11 “Construction Contracts.”

Receivables and other assets are valued at nominal value, at cost or at actual current value, where lower. Provisions for bad debts are taken in line with the probability of default and with country risks, with general risk of default and interest rate risks accounted for on the basis of past experience.

Securities classified as “available for sale” and “held for trading” are valued at fair value as per published prices on the day.

Liquid funds are accounted for at par value. Foreign currency stocks are valued at their mid-price on the balance sheet date.

Accruals & Liabilities.
In Germany, pension accruals in respect of employees’ and pensioners’ pension entitlements are created using actuarial principles and biometric data corresponding to the Projected Unit Credit method. This method takes account not only of known pensions and known earned future pension entitlements at the balance sheet date, but also of expected future increases in pensions and salaries having estimated the relevant influencing factors. Under this system, actuarial profits and losses are reported immediately in the relevant year’s net profit. Pension-like liabilities on the part of foreign companies are valued along the same lines.

In accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets,” accruals are created on the balance sheet in respect of legal or actual obligations where the outflow of funds to settle such obligations is probable and can be estimated reliably. The values used for such accruals are based on the amounts required to cover the Group’s future payment obligations, foreseeable risks and non-specific obligations. Where required, accruals are stated net of unaccrued interest.

Liabilities are shown at repayment value.

Impairment.
With the exception of inventories (see inventories) and deferred tax assets (see deferred tax assets), the book values of assets held by the Wincor Nixdorf Group are checked on the balance sheet date to see whether there are indicators favoring impairment. Where such indicators exist, the settlement value of the assets is estimated and devaluation is made with a corresponding charge to the statement of income.

Goodwill is tested for impairment annually by the execution of an impairment test according to IAS 36. In doing so the book value of a business unit is compared with the recoverable amount. The retail and banking business carved out of the Siemens Group as of October 1, 1999 is considered as one business unit (cash generating unit); all of the following acquisitions are treated individually as independent business units (cash generating units) according to IFRS 3/IAS 36. The recoverable amount equals the value in use, which is determined by the discounted cash flow method. Basis for the determination of future cash flow are data from the detailed group planning for the periods until 2007/2008 with subsequent transition to perpetuity. The assumptive continual growth of 1 to 2 % for perpetuity complies with the general expectation of the business development. The present value of cash flow is calculated by discounting the free cash flow with an interest rate between 8 and 10 % resembling the referring rate of r
eturn of the business units.

If the recoverable amount of a business unit is lower than its book value, a goodwill impairment loss is recorded in the amount of the difference.

Derivatives.
Wincor Nixdorf uses derivatives to limit existing interest rate fluctuation risks arising from financing and exchange rate risks of the Group. No derivatives are held for trading purposes. Nevertheless, derivatives not meeting the requirements for hedge accounting are valued as trading instruments.

Derivative transactions are accounted for at acquisition cost at the time they are entered into. They are then capitalized at a later date at their attributable market values. Resultant profits or losses flow through to profit for the period in question where the requirements for hedge accounting are not met. If hedging relationships are effective, the amounts of profit are credited (and losses charged) to equity, with no effect on accounting profit.

Leasing.
Wincor Nixdorf Group offers leasing of ATMs to external customers. According to IAS 17 “Leases,” such leasing arrangements predominantly qualify as operating leases. Arrangements that qualify as finance leases are presented at the present value of future minimum lease payments receivable under trade accounts receivable. In addition, the detail of certain contracts, such as company vehicle leases, result in the reporting of liabilities arising from financing leases. These are shown under financial liabilities and stated at the cash value of the minimum lease payments.

Public sector assistance.
Public sector financial assistance is reflected in our accounts in accordance with IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance” only where there is reasonable certainty of the associated conditions being met and the assistance provided. Assistance is reported as income, in effect simultaneously offsetting the expenses for which the assistance was provided. During the year, public sector assistance came to € 753k (previous year: € 309k) and is reported in the profit and loss statement under functional cost.

Net sales.
Net sales are recognized:

1. upon delivery of goods after transfer of risks and rewards
2. following provision of services
3. over the contract term in the case of maintenance agreements and products leased to customers

Cost of sales.
The cost of sales includes costs of the sale of products and services as well as purchase costs of the sale of merchandise. In addition to direct material and production costs the cost of sales comprise overheads including the pro-rata consumption of fixed assets.

Research & Development Expenses.
Under IAS 38, research and development expenses can only be capitalized when certain precise preconditions are met. Under these rules, capitalization is required wherever the development activity will, with an adequate degree of probability, result in future cash inflows which will cover the relevant development expenses in addition to normal costs. Moreover, certain criteria must also be met cumulatively in terms of the development project or the project or process to be developed.

These preconditions are not met, as the nature and dimension of characterizing research and development risks mean that the functional and commercial risk inherent in the products under development can as a rule only be estimated with sufficient reliability when

• development of the relevant products or processes has been completed, and
• post-development sales and marketing activities conducted during the pre-marketing stage (marketing and sale as a trial product) have proven that the products meet the technical and commercial requirements posed by the market.

Taxes.
Taxes on income and profit comprise both ongoing and deferred taxes. Taxes are recorded in the statement of income unless they refer to items directly recorded under shareholders’ equity, in which case the corresponding deferred taxes are also entered under shareholders’ equity without any effect upon profit.

Ongoing taxes are taxes expected to be payable for the year, on the basis of tax rates valid in the year in question, plus any tax corrections (back payments) for previous years.

Deferred taxes are reported in respect of temporary differences between the values, for tax purposes, of assets and liabilities and their values in the consolidated Group accounts. By departure from this, no deferred taxes are reported in respect of goodwill, amortization of which is non-tax-deductible. In addition, deferred taxes are also shown on the asset side of the balance sheet in respect of the future utilization of tax losses carried forward. The deferred taxes are shown at the rates of tax that will be effective under applicable law at the time at which the temporary differences are predicted to turn around or at which the tax losses carried forward can probably be used.

Deferred tax assets are only shown to the extent that it is probable that sufficient taxable income will be available in order to use them.

Net profit on operating activities was € 110,388k (previous year: € 85,044k). The budget plans of the respective entities produced under the premise of a “going concern” show positive final annual net profits for the coming years, even allowing for subsequent expenditure arising from the carve-out, thereby resulting in utilization of the existing tax losses carried forward.