Annual Report 2005/2006 Kgaa/Group

CONTENTS

KEY FIGURES AT A GLANCE Page 2

PROLOGUE: “Borussia will remain…” Page 4

MANAGEMENT'S GREETING Page 6

1909 1949 Page 8

REPORT OF THE SUPERVISORY BOARD Page 12

GOVERNING BODIES AND CORPORATE STRUCTURE Page 15

1956 1957 1963 Page 16

THE BVB SHARE Share price performance Page 20 Shareholder structure Page 21 Investor Relations Page 22 Corporate governance report Page 24

THE 2005/2006 SEASON Page 30 Tradition • Passion • Success 1965 1966 Page 32

MANAGEMENT REPORT GROUP MANAGEMENT REPORT OF OF BORUSSIA DORTMUND GmbH & Co. KGaA BORUSSIA DORTMUND GMBH & CO. KGaA Business and framework conditions Page 36 Business and framework conditions Page 88 Results of operations, financial position and net assets Page 48 Results of operations, financial position and net assets Page 102 Supplementary report Page 53 Supplementary report Page 107 Risk report Page 55 Risk report Page 109 Forecast report Page 58 Forecast report Page 112 Other disclosures Page 61 Other disclosures Page 115

1971 1976 1989 Page 62 2000 2002 2006 Page 116

ANNUAL FINANCIAL STATEMENTS OF BORUSSIA CONSOLIDATED FINANCIAL STATEMENTS OF DORTMUND GmbH & Co. KGaA BORUSSIA DORTMUND GMBH & CO. KGaA Balance sheet Page 66 Consolidated balance sheet Page 120 Income statement Page 68 Consolidated income statement Page 121 Notes Page 69 Notes to the consolidated financial statements Page 125

• ss • ssion Succe AUDITORS’ REPORT Page 83 AUDITORS’ REPORT Page 154 Tradition Pa

1995 1996 1997 Page 84

IMPRINT / FINANCIAL CALENDAR Page 155

Business Report Borussia Dortmund, July 2005 – June 2006 Business Report Borussia Dortmund, July 2005 – June 2006 2005 – June Dortmund, July Business Report Borussia CONTENTS

KEY FIGURES AT A GLANCE Page 2

PROLOGUE: “Borussia will remain…” Page 4

MANAGEMENT'S GREETING Page 6

1909 1949 Page 8

REPORT OF THE SUPERVISORY BOARD Page 12

GOVERNING BODIES AND CORPORATE STRUCTURE Page 15

1956 1957 1963 Page 16

THE BVB SHARE Share price performance Page 20 Shareholder structure Page 21 Investor Relations Page 22 Corporate governance report Page 24

THE 2005/2006 SEASON Page 30 Tradition • Passion • Success 1965 1966 Page 32

1971 1976 1989 Page 62 2000 2002 2006 Page 116

• ss • ssion Succe AUDITORS’ REPORT Page 83 AUDITORS’ REPORT Page 154 Tradition Pa

1995 1996 1997 Page 84

IMPRINT / FINANCIAL CALENDAR Page 155

Business Report Borussia Dortmund, July 2005 – June 2006 Business Report Borussia Dortmund, July 2005 – June 2006 2005 – June Dortmund, July Business Report Borussia KEY FIGURES AT A GLANCE IMPRINT / FINANCIAL CALENDAR 2006/2007

IMPRINT

Published by: Photos: Borussia Dortmund 2005/2006 2004/2005 Borussia Dortmund GmbH & Co. KGaA Heymann archives, GmbH & Co. KGaA 30 June 2006 30 June 2005 EUR millions EUR millions Rheinlanddamm 207-209, Kolbe archives, Equity 52.9 27.5 44137 Dortmund, Germany BVB archives, Internet: www.borussia-aktie.de Investments 11.3 46.0 Press office of the City of Dortmund Email: [email protected] Depreciation DPA, and amortisation 7.7 19.2 Firo sportphoto, Gross revenue 90.0 78.5 Responsible party Goeke, Lars Schauer Operating loss -12.0 -75.8 Horstmüller, Net finance costs -1.0 -2.9 Hubert, Communication design: Laryea, Net loss for the year -3.9 -78.7 K-werk, Uwe Landskron, Lüning, Extraordinary income 10.2 0.0 Agentur für Kommunikation, www.K-werk.de Rauchensteiner, Earnings before interest and taxes (EBIT) -12.0 -75.8 Reimann, Earnings before interest, taxes, depreciation Editors Prologue/History: Rzepka, and amortisation (EBITDA) -4.3 -56.5 Boris Rupert Schöning, Cash flow 25.4 -1.7 Fritz Lünschermann Simon Number of shares (in thousands) 43,875 29,250

Borussia Dortmund 2005/2006 2004/2005 Group 30 June 2006 30 June 2005 EUR millions EUR millions FINANCIAL CALENDAR 2006/2007

Equity 37.6 28.5

Investments -11.3 -2.4 26 November 2006 Members Meeting of BV. Borussia 09 e. V. Dortmund, Dortmund

Depreciation and amortisation 14.2 25.6 28 November 2006 Annual General Meeting of Borussia Dortmund GmbH & Co. KGaA Gross revenue 92.7 78.0 for the 2005/2006 financial year, Dortmund

Operating loss -11.2 -41.5 February 2007 Half-year report for the 2006/2007 financial year

Net finance costs -11.4 -13.8

Net loss for the year -20.8 -54.5 Further information is available on the Internet at: www.borussia-aktie.de

Extraordinary income 0.0 0.0

Earnings before interest and taxes (EBIT) -11.2 -41.6

Earnings before interest, taxes, depreciation and amortisation (EBITDA) 3.0 -15.9

Cash flow 25.8 -6.6

Number of shares (in thousands) 29,835 26,730

Earnings per share ( in EUR ) -0.70 -2.04

155

The eleven founders of the club in 1909.

“... Borussia will remain” from the club song from 1909

3 “... Borussia will remain” from the club song from 1909

“ Borussia, you embody the region, for some and usually rose from them like a phoenix of us you are even a religion. Many look up to from the ashes. BVB was the first German you, you always find a way, you always get football club to win a European Cup (1966, the back up.” This is one line from the text of the Cup Winners’ Cup) and was the first German “Borussia” club song, written by cabaret club to win the UEFA Champions League artist, Bruno Knust. In just two sentences it (1997). The business card of the 1997 winner of expresses the close bond between the Club the Intercontinental Cup shows six German and the fans, which distinguishes BVB and its championships, two DFB Cup victories, four supporters: Borussia Dortmund is more than European finals and many other successes a football club, it is a way of life. that go right down to its youth teams. No other Bundesliga club has played so many talents Founded almost 100 years ago, in 1909, Borus- from its own youth academy in this and in sia Dortmund has been through some troughs, recent seasons as Borussia Dortmund.

THE MARCH THROUGH THE DIVISIONS BVB's history began at the very bottom, in 1911, in the C class. In 1921, following three promotions, the district league (Kreisliga) was reached, and then in 1926 the regional league (Bezirksliga), which at that time was the top German football division. The following year, the Club suffered the first of only two relegations in its history. In 1936 the Club was promoted to the district league of Westphalia (Gauliga Westfalen), and after the end of the Second World War, the western regional league (Oberliga West) was created, in which BVB played as the most successful club until 1963. This was followed by the creation of the football Bundesliga, in which Borussia Dortmund has always played except for the period between 1972 and 1976.

The following diagram shows BVB's positions on the table during the course of its history. The vertical lines show changes into another division, while the stars represent the major successes. 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959

4 PROLOGUE

1909 1949 Page 8

1956 1957 1963 Page 16

1965 1966 Page 32

1971 1976 1989 Page 62

1995 1996 1997 Page 84

2002 2006 Page 116 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

5 Dear Shareholders,

You and Borussia Dortmund GmbH & Co. KGaA again have considerably more discretion in can look back on a financial year in 2005/2006 that making our business decisions. will go down in the annals of our Company's history as a very special year indeed. It will go In mid October 2005, we succeeded in imple- down in history as the year in which we succeeded menting the first cornerstone of our concept as first in overcoming the life-threatening situation Borussia Dortmund GmbH & Co. KGaA signed facing the Company and also in largely com- an agreement with the renowned insurance and pleting our restructuring process. financial services provider, SIGNAL IDUNA Gruppe, Dortmund/Hamburg on the rights to the One could certainly speak of a “landmark event” name of the Westfalenstadion. The agreement when, on 7 June 2006, i.e., in the last month of runs for a fixed term from December 2005 (since the 2005/2006 financial year, BVB KGaA and the then, the stadium has been called “SIGNAL US investment bank Morgan Stanley signed a IDUNA PARK”) until 30 June 2011. deal for loan facilities totalling EUR 79.2 million with a term of 15 years. As to the question of who would succeed E.ON as the new main sponsor, we were able to settle This loan agreement enabled us to buy back the that issue in early March 2006. RAG Aktien- remaining 51.2% of the shares in our stadium, Gesellschaft, Essen, will be Borussia Dortmund's which at the time was still in the hands of the main sponsor and jersey sponsor for the Molsiris real estate investment fund. Thus, the 2006/2007 and 2008/2009 seasons. Thus, we will BVB Group was able to regain full title to the have one of the Ruhr area's most important com- stadium. In addition, the agreement with Morgan panies on our side. This co-operation represents Stanley enabled us to eliminate existing liabilities yet another step on the road to a successful future of EUR 21.7 million. The bank also granted our that opens up new prospects for BVB. Company a credit line of EUR 10 million. The same is true for the cash capital increase As a result of the restructuring process now being under which all 14,625,000 new shares were able continued on a new basis, the creditor agreement to be placed at an issue price of EUR 2 each, dated March 2005 was able to be cancelled generating new liquid funds of EUR 29.25 million and the Steering Committee that had been for our Company. established at that time dissolved. What this means for our Company is that approximately 16 The 2005/2006 financial year is the first financial months after being faced with a situation that year for which BVB's new management consisting threatened our continued existence, we once of Chairman Hans-Joachim Watzke and second

6 GREETING

managing director Thomas Treß takes full respon- These figures encourage us in our efforts, sibility and credit. knowing full well that there is no substitute for disciplined and consistent management, to which With net income for the year of EUR –3.9 mil- Borussia Dortmund's management, governing lion, our Company showed an improvement in bodies and employees are committed. the 2005/2006 financial year of EUR 74.8 million over the year prior. Sales revenues, including In the area of sports, our core business, we merchandising, increased from EUR 73.9 million believe that as a result of moderate investments in to EUR 87.4 million. This represents an increase the professional squad, we have established all the in revenues of 18.2%. Net liabilities declined elements necessary for a successful season by EUR 32.2 million to EUR 53.8 million. 2006/2007 and thus a return to football on an The Company's objective for the 2006/2007 international level. financial year is a positive figure for the net income for the year. Yours faithfully

Hans-Joachim Watzke Thomas Treß

7 A region of immigrants Foundation 1909

Borussia in stripes – on 5 January 1911 in blue/white with a red sash.

FROM THE “WHITE MEADOW” TO THE “RED EARTH”

The restaurant “Zum Wildschütz”, near Borsig- platz, was the “birthplace” of BV Borussia 09 e.V. Dortmund on 19 December 1909. The name “Borussia” was taken from the brewery “Borussia Brauerei”, which is today's Dort- munder Actien Brauerei (DAB). The founding members had to prevail against resistance, and the Club was accepted into the West German Sports Association only at the end of 1910; The founders: Julius Jacobi and Wilhelm Jacobi shortly afterwards, on 15 January 1911, BVB's first official game was played. The match was played at the Weiße Wiese (“white meadow”). With great effort, the facility was expanded to become the “Borussia Sports Field”. A lot of sweat and money flowed, not least to create a strong team that was promoted into the regional distract them from their purpose. The same can league, the top German division to that time, be said of the restrictive interference during the only to be promptly relegated from it. rule of the National Socialists, whose attitude towards the workers' club was very reserved and However, the men of action surrounding the who relocated it to the Rote Erde (“red earth”) first president, Franz Jacobi, and his successor, stadium during the expansion of the Hoesch Heinrich Schwaben, did not allow this to steel factory.

8 1909 1949

CHRONOLOGY 1909

JANUARY

24 January: In a number of Prussian cities, more than 200,000 people demand the introduction of free, secret and universal suffrage.

JUNE

2 June: Karl Liebknecht is released prematurely from his detention and becomes a member of the Prussian Parliament.

29 June: In London, hundreds of mili- tant “suffragettes” storm the Parliament building in order to stress their demand for the introduction of women's suffrage. For those days, a large number of viewers watch the first BVB match on the NOVEMBER “white meadow”, which was won by Borussia 9:3.

14 November: US President Taft announces in Washington that Pearl Harbour in Hawaii is to be expanded to become the largest naval base in the Pacific.

DECEMBER

7 December: Gustav Krupp von Bohlen und Halbach becomes the chairman of the Supervisory Board of Krupp-Werke in Essen. He agrees with Hugenberg that all social democratic and union efforts must be suppressed, if necessary, using police force.

19 December: Foundation of BVB in the restaurant “Zum Wildschütz”. First championship game in history on 10 September 1911: BVB 1 - 0 Castrop-Rauxel.

From 1913 to 1919, the so-called “wild” Borussia players wore BVB women's handball team in 1920: Even a simple “B” on their breast as a symbol of their club. then, Borussia was already more than just a sports club (see chronology, 29 June 1909)

9 With hope into the future Promotion from the regional league

or BVB, the War literally entailed great Fbloodletting, as it lost a large number of talented players. In light of this, the early post- war years were all the more remarkable; for example, in 1947 Borussia broke the long-term dominance of the Schalke “miners” with a 3:2 victory in the Westphalia championship final and in 1949, Borussia reached the German final for the first time, where it lost against VfR Mannheim in Stuttgart in extra time in a legendary battle, but was enthusiastically celebrated by its fans following its return to 1949: With this kick-off, the British General bombed-out Dortmund. The people had suf- Byrnes returned the Olympiastadion in Berlin to fered a great deal, and BVB provided them with the Germans. Left in the picture, the Borussia a new support. players Adi Preißler and August Lenz.

This team was promoted to the highest division in 1935/36, the Westphalia regional division.

The sold-out Neckarstadion in Stuttgart, with some temporary stands.

10 1909 1949

The new era begins together with the media. Second place in 1949: The people put the past behind them with Borussia on the bombed-out Hansaplatz.

CHRONOLOGY 1949

FEBRUARY

28 February: First “Rose Monday” Carnival Parade (Rosenmontagszug) in Cologne since the end of the War.

MAY

10 May: The Parliamentary Council selects Bonn as the provisional capital of the Federal Republic of Germany. The vote is tight, with 33 votes for Bonn and 29 for Frankfurt am Main.

23 May: The Federal Constitution of the Entry of the gladiators: The Captains Henninger and Koschmieder Federal Republic of Germany lead their teams onto the field of the Neckarstadion. (Grundgesetz) is promulgated.

30 May: The constitution of the GDR is adopted in the Soviet zone.

AUGUST

14 August: Election for the first German Federal Lower House (Bundestag).

OCTOBER

7 October: Foundation of the GDR.

From this point forward, two German states will exist side by side for the next 40 years.

SEPTEMBER

30 September: After 277,000 aid flights, Down for the count: Rau, Koschmieder, Michallek (No. 4) the Allies end the Berlin Airlift. and to the far right, Schanko. p. 16

11 REPORT OF THE SUPERVISORY BOARD

n the 2005/2006 financial year, the Super- developments in the business as well as material Ivisory Board dealt intensively with the events and transactions as they occurred. condition and further development of the Com- pany and the Group. The Supervisory Board The Supervisory Board met seven times in the exercised its rights and duties under the law and 2005/2006 financial year (on 6 October 2005, 22 the Company's articles of association without November 2005, 16 December 2005, 3 March restriction. 2006, 17 May 2006, 29 May 2006 and 14 June 2006). Resolutions of the Supervisory Board were adopted in accordance with statutory pro- WORK OF THE SUPERVISORY BOARD, visions as well as the provisions of the Company's MEETINGS articles of association. The Supervisory Board is The Supervisory Board supervised the trans- composed of six persons. Since committees must action of the Company's business by the general consist of three persons in order to have a quo- partner and its managing directors. During the rum, no Committees were created in view of the reporting period, the Supervisory Board kept size of the Supervisory Board. There exists no management informed in a timely and compre- information subject to disclosure concerning the hensive manner specifically by providing periodic frequency of Supervisory Board members' atten- oral and written reports within the meaning of dance at meetings. § 90 German Stock Corporation Act (AktG). The reports focused on financial and sporting per- The subject matter of the Supervisory Board's formance, the liquidity situation and financial resolutions essentially involved its approvals for position, planned investments and equity acqui- utilisation of authorised capital (as a result of sitions, corporate planning, as well as the risk sit- which the Company's share capital was increased uation of the Company and the Group. from EUR 29.25 million to EUR 43.875 million), Deviations in the course of business from plans for the acquisition by Group affiliates of MOL- and objectives were explained in detail to the SIRIS Vermietungsgesellschaft's limited partner Supervisory Board, which then reviewed and dis- share with a face value of approximately EUR 7.2 cussed these with management. Transactions million in Westfalenstadion Dortmund GmbH & material for the Company were reviewed based Co. KG (“stadium share”) and for taking out on reports by management and discussed in loans (EUR 79.2 million to finance the acquisi- detail; this applies specifically to those measures tion costs for the stadium share and repatriation requiring the Supervisory Board's consent. The of existing liabilities as well as a working capital Supervisory Board was also kept informed credit line of EUR 10 million) from the invest- between sessions with written documentation. ment bank Morgan Stanley. The Supervisory Outside of meetings, the chairman of the Board also dealt with corporate governance Supervisory Board was also in regular contact issues and management matters, accounting for with management and was kept apprised of the 2004/2005 financial year and preparation of

12 REPORT OF THE SUPERVISORY BOARD

the ordinary General Shareholders' Meeting in management of the general partner and the the year prior; it also resolved rules of procedure Supervisory Board issued its Statement of and confidentiality for the Supervisory Board. Compliance (Entsprechenserklärung) with the German Corporate Governance Code, taking into account the amendments in the version dated PERSONNEL MATTERS 2 June 2005. This statement was made perma- Wolfgang Burgard, Dr. Georg Kottmann and nently available to the shareholders through pub- Dr. Michele Puller left the Supervisory Board at lication in the Internet under www.borussia- the close of the General Shareholders' Meeting aktie.de. Other details and information in this on 22 November 2005. Ruedi Baer, Othmar regard will be provided in a separate section in Freiherr von Diemar, Bernd Geske, Harald the Annual Report (Corporate Governance Re- Heinze, Patrick Albert Lynch and Gerd Pieper port) in accordance with Section 3.10 of the were appointed to the Supervisory Board by the German Corporate Governance Code. General Shareholders' Meeting on 22 November 2005. In the constituent meeting on 22 Novem- ber 2005, the Supervisory Board then again AUDIT OF THE ANNUAL AND appointed Gerd Pieper as chairman and Harald CONSOLIDATED FINANCIAL Heinze as deputy chairman of the Supervisory STATEMENTS 2005/2006 Board. The annual financial statements of Borussia Dortmund GmbH & Co. KGaA and the con- Hans-Joachim Watzke was at first the sole man- solidated financial statements as at 30 June 2006 aging director of the general partner, Borussia as well as the summarised management report Dortmund Geschäftsführungs-GmbH, in the for the Company and the Group, which were 2005/2006 financial year. For the period from 1 prepared and timely submitted by management, January 2006, the Executive Committee of were audited along with the accounts in Borussia Dortmund Geschäftsführungs-GmbH accordance with statutory provisions by the appointed Thomas Treß as an additional manag- appointed auditor, BDO Westfalen-Revision ing director. The term of office for both manag- GmbH Wirtschaftsprüfungsgesellschaft (formerly ing directors runs until the end of 2008. “WESTFALENREVISION GMBH Wirtschafts- prüfungsgesellschaft Steuerberatungsgesellschaft”), Dortmund, and were issued an unqualified opin- CORPORATE GOVERNANCE ion (uneingeschränkter Bestätigungsvermerk). The Supervisory Board and the management of the general partner act in the knowledge that The annual financial statements, the consolidated good corporate governance is in the interest of financial statements and the summarised our shareholders, the capital market and, thus, management report along with the risk report the Company as well. In December 2005, the and the corresponding auditor's reports were

13 REPORT OF THE SUPERVISORY BOARD

provided to the members of the Supervisory Based on the final result of its review, the Board and discussed in the auditor's presence at Supervisory Board raised no objection to the the Supervisory Board meeting held on 6 general partner's statement at the conclusion of October 2006 where the auditor personally pre- the dependent company report. The Supervisory sented the key results of his audit. Board approved and took note of the results of the auditor's review of the dependent company The Supervisory Board is in agreement with the report. results of the auditor's review and based on the final result of its own examination has no objec- The Supervisory Board recommends that the tions. The Supervisory Board adopted the annual General Shareholders' Meeting adopt the annual financial statements of Borussia Dortmund financial statements as at 30 June 2006. The GmbH & Co. KGaA and the consolidated finan- Supervisory Board also recommends ratification cial statements as at 30 June 2006 at its meeting (Entlastung) of the acts of the general partner, on 6 October 2006. Borussia Dortmund Geschäftsführungs-GmbH, for the 2005/2006 financial year. Furthermore, the Supervisory Board conducted its own audit of the report prepared by the The Supervisory Board wishes to thank manage- general partner pursuant to § 312 AktG con- ment and all the employees for their work over cerning relationships with affiliated enterprises the past financial year and for their exceptional (dependent company report) for the 2005/2006 efforts on behalf of the Company. Many thanks financial year. The dependent company report also to the business partners, shareholders and was also reviewed by the auditor and the following fans of Borussia Dortmund for the confidence auditor's opinion was issued thereon: they have shown in us. “Pursuant to our duly conducted audit and evaluation we hereby confirm that Dortmund, 6 October 2006 1. the factual information in the report is The Supervisory Board accurate; 2. with respect to the reported transactions, the consideration paid by the Company was not unreasonably high, or any disadvantages have been settled; 3. with respect to the reported actions taken, no facts or circumstances exist that would argue for any assessment substantially Gerd Pieper different than that made by management.” Chairman

14 GOVERNING BODIES AND CORPORATE STRUCTURE

GOVERNING BODIES

BV. BORUSSIA 09 e.V. DORTMUND

Management Board Dr. Reinhard Rauball President Dr. Albrecht Knauf Vice President Dr. Reinhold Lunow Treasurer

BORUSSIA DORTMUND GmbH & Co. KGaA

Supervisory Board Gerd Pieper Chairman Proprietor and managing director of Stadtparfümerie Pieper GmbH, Herne

Harald Heinze Deputy chairman since 22 November 2005 Chairman of the management board of DSW 21 Dortmunder Stadtwerke AG, Dortmund

Bernd Geske Member since 22 November 2005 Managing partner of Bernd Geske Lean Communication, Meerbusch

Ruedi Baer Delegate to the board of directors and Chief Executive Officer (CEO) of mobilzone-Gruppe, Regensdorf (Switzerland)

Patrick Albert Lynch Member since 22 November 2005 Bank employee

Othmar Freiherr von Diemar Proprietor and manager of Othmar von Diemar Vermögensverwaltung + Beratung, Cologne

Departed from the Supervisory Board

Wolfgang Burgard Deputy Chairman until 22 November 2005 Chairman of the management board of Holsten-Brauerei AG, Hamburg

Dr. Georg Kottmann until 22 November 2005 Former speaker and member of the management board of Westfälische Hypothekenbank AG i.R., Dortmund

Dr. Michele Puller until 22 November 2005 Chairman of the management board of Miro Radici AG, Bergkamen

BORUSSIA DORTMUND GESCHÄFTSFÜHRUNGS-GmbH

Hans-Joachim Watzke Managing Director (Chairman) since 1 January 2006

Thomas Treß Managing Director since 1 January 2006

CORPORATE STRUCTURE

BORUSSIA DORTMUND GmbH & Co. KGaA

100.00% BVB Stadionmanagement GmbH (formerly: Westfalenstadion Dortmund Verwaltungs-GmbH) 100.00% goool.de sportswear GmbH 100.00% Sports & Bytes GmbH 100.00% BVB Merchandising GmbH (formerly: Borussia Dortmund Beteiligungs-GmbH) 99.74% BVB Stadion GmbH (formerly: Westfalenstadion Dortmund GmbH & Co. KG) 94.90% BVB Beteiligungs GmbH 51.00% B.E.S.T. - Borussia Euro Lloyd Sports Travel GmbH 33.33% Orthomed GmbH

15 The golden decade 1956-1963

Old entry tickets are now sought-after collectors' items.

BORUSSIA DORTMUND - GERMAN CHAMPION

The era of the “economic miracle” was also the era of Borussia Dortmund. In 1956, BVB qualified for a German final for the second time in the Club's history. This time the opponent was Karlsruher SC. With their goals, Niepieklo, Kelbassa, Preißler and Peters turned a 0:1 deficit into a comfortable 4:1 lead. The final score was 4:2, and BVB returned from the final in Berlin to Dortmund as the Ger- man champion. The black-and-yellows were at the peak of their powers. In the following year, coach Schneider even allowed himself the luxury of leaving national player Aki Schmidt on the bench in order to defend the title with exactly the same team as in 1956. This time Hamburger SV, with the World Cup winner Posipal, was demolished in Hamburg 4:1. Kelbassa and Niepieklo shared the goals between them.

Adi Preißler, the captain and playmaker, with the champion's trophy in 1956 and in a tackle.

16 1956 1957 1963

The heroes enter the field – 1956 final.

CHRONOLOGY 1956

NOVEMBER

14 November: The demonstrations against the Soviet regime that commenced in Hungary on 23 November and the immediate negotiations concerning withdrawal of the Soviet troops demanded by President Imre Nagy are suppressed by a bloody attack on the Feats of magic with mines in the background – there can hardly be capital, Budapest. any better illustration of football in the Ruhr area.

As a result, after the people of East Berlin had gone to the streets on 17 June 1953 to protest the regime of the USSR, a second petition for a referen- dum by Member States of the Warsaw Pact had been suppressed by the use of tanks and violence.

The epitome of Dortmund’s playing culture in the 1950s: Preißler, Kelbassa and Niepieklo. Known as the “three Alfredos”.

17 The golden decade 1956-1963

People lovingly archive their After the 4:2 victory in the final in 1956 against memories of moving moments Karlsruhe, “Jockel” Bracht leads the celebration. in their lives.

he ravages of time had taken their toll on the CHRONOLOGY 1961 heroes, while the legacy of the War did the rest, T MARCH so the team had to be rejuvenated, which was achieved within a relatively short period. As early as 18 March: Franz-Josef Strauß is elected 1961, it again played in the final, but lost against 1. the new chairman of the Christian Social FC Nürnberg. Many held coach Merkel responsible, Union (CSU). who had the team doing fitness training the day AUGUST before the final. Coach Eppenhoff was more 13 August: The building of the Berlin successful, taking Borussia in 1963 into the last Ger- Wall fully cuts off West Berlin from man final before creation of the Football Bundesliga. land access. The GDR refuses its citizens The final score was 3:1 against 1. FC Köln. Kurrat, any access to the western world. 28 Wosab and Schmidt scored the goals. The German years later – on 10 November 1989 – champion then also played strongly in the European the Wall fell. Cup, and was only knocked out in the semi-final against Inter Milan.

1957 championship: In Hanover, BVB defeated HSV 4:1.

18 1956 1957 1963

Helmut Bracht's original A powerful shot on goal by "Sully" Peters. contract: In those days, a BVB player earned DEM 160.

German champion 1956: Heroes with CHRONOLOGY 1963 flowers and the championship trophy - NOVEMBER Sandmann and Niepieklo. 22 November: The American President, John F. Kennedy, is shot dead in Dallas/Texas. America mourns a man who had previously overcome the Cuban missile crisis by preventing the stationing of rockets on Fidel Castro's sugarcane island through a sea blockade. Kennedy had become famous due to his statement before the Schöneberger Town Hall: “Ich bin ein Berliner!” With this statement he had underpinned the USA's loyalty to Germany and the special situation in the divided city.

Willi Burgsmüller with a blood-soaked Borsigplatz 1956: Successes have always been headband after winning the champi- celebrated with particular passion at BVB's birthplace. onship title on 29 June 1963 in Stuttgart: 3:1 against Cologne. p. 32

19 Borussia Dortmund

THE BVB SHARE

SHARE PRICE PERFORMANCE

The share price performance of Borussia but then found support at EUR 2.20. Following Dortmund GmbH & Co. KGaA substantially the General Shareholders' Meeting on 22 reflects the sporting and financial efforts taken November 2005, the price jumped in response to in the 2005/2006 financial year in order to make the improved mood and in the space of six the turnaround. The share started off the trading days climbed to EUR 2.60 (30 November 2005/2006 financial year at EUR 2.40 and moved 2005), which turned out to be the high for the within a price corridor of EUR 2.40 - EUR 2.30 financial year. In the period from December until the start of the season. Even the early elimi- 2005 until the start of the second half of the nation by Sigma Olmütz in the UI Cup had little season at the end of January 2006, the share price effect on the share price and turnover with the fell to EUR 2.33. exception of the Monday after the 1:1 match against Olmütz (18 July 2005) when turnover in After a recovery phase lasting through the end of our share tripled (82,000 shares in XETRA). February, during which the price hovered around EUR 2.50, the BVB share took a downward trend As the season got underway, the price continued again until mid-May 2006 and found support at to move within a corridor of EUR 2.30 - EUR 2.30. The announcement of capital measures EUR 2.40, although it steadily crept toward the in the ad hoc notice of 18 May 2006 led as expected upper threshold of EUR 2.40. The BVB share to a share price approaching the subscription price price dropped sharply the day after BVB was elim- of EUR 2.0 for the capital increase. Following the inated from the DFB Cup in the Eintracht Braun- placement of 14,625,000 shares (ad hoc notice of schweig match (23 August 2005 , EUR 2.29 with 12 June 2006), the price climbed back up to EUR 95,000 shares in XETRA), which was also tanta- 2.30 by the end of the financial year. mount to the highest turnover figures for the 2005/2006 financial year. In the period following, The following charts illustrate the price per- the price experienced a slight downward trend formance and turnover in BVB shares.

20 THE BVB SHARE

Price performance

2.7

2.6

2.5

2.4

2.3

2.2

2.1

2.0

1.9

1.8

1.7 7/1/05 8/1/05 9/1/05 10/1/05 11/1/05 12/1/05 1/1/06 2/1/06 3/1/06 4/1/06 5/1/06 6/1/06 7/1/06

SHAREHOLDER STRUCTURE

At the start of the 2005/2006 financial year, On 17 May 2006, the management of the Borussia Dortmund's share capital was EUR general partner, with the consent of the 29.25 million and was divided into 29.25 million Supervisory Board of Borussia Dortmund GmbH shares, each representing a notional share in the & Co. KGaA, resolved to utilise the authorised share capital of EUR 1.00. capital created by the General Shareholders' Meeting in November 2005. In so doing, Changes in the shareholder structure during the the Company's share capital was increased period from November 2005 to February 2006 against cash contributions by EUR 14,625,000 related to shifts within FM Fund Management to EUR 43,875,000 by issuing up to 14,625,000 Limited, George Town, Grand Cayman (Cayman new bearer shares, each representing a notional Islands) and the transfer of FM Fund Manage- share in the share capital of EUR 1.00. ment Ltd. into Absolute Capital Management Holdings Limited, George Town, Grand Cayman Upon the successful completion of the capital (Cayman Islands). increase in June 2006 and in accordance with the

21 Borussia DortmundKonzernlagebericht der Borussia Dortmund GmbH & Co. KGaA für das Geschäftsjahr 2005/2006

disclosures pursuant to § 21 German Securities The total number of invitations to the General Trading Act (WpHG), the shareholder structure Shareholders' Meeting in November 2005 sent as of the close of the financial year is as follows: out by credit institutions suggests that the number of shareholders in Borussia Dortmund • Absolute Capital Management Holdings Limited 20.62% GmbH & Co. KGaA is in the range of 47,000. • Blue Bay Asset Management 17.09% • BV. Borussia 09 e.V. Dortmund 10.94% • Bernd Geske 7.66% • Och-Ziff Management Europe 7.56% • Free float 36.13%

INVESTOR RELATIONS

As in previous financial years, a great deal of cember 2005 and in an annual report for the investor relations work was also done in the entire financial year (1 July 2005 – 30 June 2006). 2005/2006 financial year. Market players were As in previous years, the interim report was not updated comprehensively and in a timely manner issued in print form, but rather posted online on on the developments of Borussia Dortmund the website www.borussia-aktie.de. GmbH & Co. KGaA. Since the start of this year, the “Annual The most important medium in this regard was Document” (Jährliches Dokument) pursuant to our IR-website, www.borussia-aktie.de, where § 10 German Securities Prospectus Act (Wert- potential investors and shareholders can find all papierprospektgesetz) provides an overview at a relevant information on the BVB share, including glance of all the disclosures required over the basic information, ad hoc disclosures, informa- course of the financial year. This overview pro- tion on the General Shareholders' Meeting, the vides investors and shareholders with all ad hoc interim report etc. This homepage receives notices, directors' dealings disclosures, notices approximately 300,000 hits per month. We also regarding voting interests as well as information have a newsletter, which provides registered regarding subscription offers etc. This document users with the latest information via the website is deposited with the German Federal Financial www.borussia-aktie.de. Supervisory Authority (Bundesanstalt für Finanz- dienstleistungsaufsicht, “BaFin”) and is also to be The Company's financial figures were published made available on the Company's homepage by Borussia Dortmund GmbH & Co. KGaA in its www.borussia-aktie.de -> Corporate Governance interim report for the period 1 July – 31 De- -> Jährliches Dokument.

22 THE BVB SHARE

Turnover

100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

7/1/05 8/1/05 9/1/05 10/1/05 11/1/05 12/1/05 1/1/06 2/1/06 3/1/06 4/1/06 5/1/06 6/1/06 7/1/06

The most important event during the reporting increased liquidity in the BVB share and consis- period was the General Shareholders' Meeting tent price quality by submitting buy and sell held on 22 November 2005. The approximately orders into the electronic trading system five-hour meeting was attended by approxi- XETRA. Through guaranteed continuous trading mately 1,000 limited liability shareholders (repre- at appropriate prices in XETRA, Borussia senting 52.6% of the share capital). The focus of Dortmund was able to develop a more stable and the meeting was the reorganisation concept, transparent platform for trading in the BVB which had already begun to show initial results. share. Particularly for institutional Investors, Hans-Joachim Watzke introduced the further liquid trading in XETRA is an important pre- steps of the concept, at the same time enlisting requisite for potential investment decisions. The “trust and patience”. consistent liquidity of its own share, the permanent price position and trading with an open By procuring a designated sponsor, Borussia order book over the entire trading day from 9.00 Dortmund GmbH & Co. KGaA was able to fur- am to 5.30 pm, including all auctions and ther improve the attractiveness of the BVB share volatility calculations should also promote share for investors. The Munich securities investment price performance in the long run. bank Gebhard & Co. was retained to ensure

23 CORPORATE GOVERNANCE REPORT

Corporate Governance stands for transparent “Company”), Borussia Dortmund Geschäfts- and responsible corporate management and führungs-GmbH's management and the Super- supervision aimed at achieving long-term visory Board of our Company are guided by the shareholder value. As the general partner of principles of good corporate governance, as Borussia Dortmund GmbH & Co. KGaA (the reported below.

GENERAL INFORMATION ON CORPORATE GOVERNANCE AT BORUSSIA DORTMUND GmbH & Co. KGaA

The German “Law on Transparency and Many of the Code's recommendations (“should” Disclosure in Stock Corporation Law” (Gesetz provisions) are tailored exclusively to stock corpo- über Transparenz und Publizität im Aktienrecht, rations and are at most applicable by analogy to “TransPuG”) announced in the Federal Law partnerships limited by shares (Kommandit- Gazette (Bundesgesetzblatt) on 25 July 2002 gesellschaften auf Aktien, “KGaA”), i.e. to our instituted § 161 of the German Stock Corporation Company. Act (AktG). Section 161 AktG requires the Management Board and Supervisory Board of any A KGaA is a hybrid corporate form combining listed company to issue an annual statement as to elements of a German stock corporation whether and to what extent recommendations by (Aktiengesellschaft) and a limited partnership the “Government Commission for the German (Kommanditgesellschaft). A KGaA is a separate Corporate Governance Code” (Regierungskom- legal entity whose share capital is divided into mission Deutscher Corporate Governance Kodex) shares which are held by at least one shareholder contained in the German Corporate Governance (the general partner) that has unlimited liability as Code (the “Code”) as published in the official against creditors of the Company and limited section of the Electronic Federal Gazette (elektro- liability shareholders (Kommanditaktionäre) that nischer Bundesanzeiger) were followed in the are not personally liable for the debts of the past and are being or will be followed now or in Company (§ 278 (1) AktG). The key differences the future. between a KGaA and a German stock corporation can be characterised as follows: As a rule, the Code is reviewed once annually and amended as required. It contains basic statu- • Borussia Dortmund GmbH & Co. KGaA tory provisions on the management and supervi- has no Management Board. Instead the sion of German listed companies based on inter- general partner, Borussia Dortmund Ge- nationally and nationally recognised standards for schäftsführungs-GmbH, is solely responsible good and responsible corporate governance. The for its management and representation. This Code aims to make the German system of corpo- company, in turn, is represented by one or more rate governance transparent and understandable managing directors; Ballspielverein Borussia 09 in an effort to boost the confidence of interna- e.V. Dortmund is the sole shareholder of this tional and national investors, customers, employees company. and the general public in the management and supervision at German listed companies. • The rights and duties of the KGaA's

24 CORPORATE GOVERNANCE REPORT

Supervisory Board, which is appointed by the Compliance as scheduled in December 2006; General Shareholders' Meeting, are limited. then, the amendments to the Code from 12 June Specifically, it has no authority with respect to 2006. With respect to the Statement of matters involving personnel, i.e., the authority Compliance from December 2005, the following to appoint and dismiss managing directors at key measures taken to date regarding corporate Borussia Dortmund Geschäftsführungs-GmbH governance should be mentioned: or to regulate the terms of their contracts. Nor is the Supervisory Board authorised to adopt inter- • The Supervisory Board of our Company, which nal rules of procedure for the general partner or consists of six members elected by the General any list of transactions requiring its consent. Shareholders' Meeting, issued rules of proce- Instead, such rights and duties are vested in the dure and confidentiality pursuant to a resolu- governing bodies of Borussia Dortmund Ge- tion dated 3 March 2006. schäftsführungs-GmbH, namely the Advisory Board established there and the Executive • In the 2005/2006 financial year, the manage- Committee created by this Advisory Board. ment of Borussia Dortmund Geschäfts- führungs-GmbH consisted of only one person • Additional distinctions exist with respect to the (Hans-Joachim Watzke) from July until General Shareholders' Meeting of the KGaA, December 2005. Since January 2006, manage- which are primarily controlled by §§ 285 and ment consists of Hans-Joachim Watzke (man- 286 (1) AktG and the Articles of Association of aging director/chairman) and Thomas Treß our Company. (managing director). Since the service agreements are sufficiently specific with respect to Consequently, the management of the general the business divisions, and the managing partner and the Supervisory Board of Borussia directors otherwise act jointly in close co-opera- Dortmund GmbH & Co. KGaA are required to tion with one another in the exercise of their provide a Statement of Compliance (Entspre- authority under law and in accordance with chenserklärung) pursuant to § 161 AktG, taking the Articles of Association, the responsible into account the organisational distinctions of governing bodies of Borussia Dortmund the legal form of a KGaA and their expression in Geschäfts- führungs-GmbH have thus far the Articles of Association. The Statement of deemed it unnecessary to provide separate Compliance must be made permanently available rules of procedure for management as well. to the shareholders. This is done by publishing the Statement of Compliance on our Company's • The consolidated financial statements have Investor Relations website. The Statement of for the first time for the 2005/2006 financial Compliance (including explanation of any devia- year been prepared in accordance with inter- tions from the Code's recommendations), which nationally recognised accounting principles. was provided in December 2005, is reproduced at the conclusion of this Corporate Governance Report. This first corporate governance report herewith submitted by our Company will be published in The general partner's management and the the Annual Report for the 2005/2006 financial Supervisory Board will issue the next Statement of year and on our website at www.borussia-aktie.de.

25 Transparency Our Company informs the limited liability share- Compensation benefits paid to members of man- holders and shareholder associations, financial ana- agement are set out in the notes to the annual and lysts and the interested public regularly as to the consolidated financial statements in the aggregate Company's condition and any material changes in and broken down by individual. its business. In particular, the ad hoc notices and directors' dealing disclosures we receive and the Supervisory Board compensation current version of the Articles of Association and the Pursuant to § 13 sub-section 1 of the Articles of financial calendar are all published on our website. Association, members of the Supervisory Board The Annual Document under § 10 WpPG, which is receive only a fixed compensation, which is set also available on the website www.borussia-aktie.de at a comparatively low amount of EUR 7,000 under “Corporate Governance (CG) / Jährliches annually; the chairman receives twice this Dokument” provides an overview of the Company's amount and the deputy chairman receives one key publications during the 2005/2006 financial year. and a half times this amount. The Supervisory The financial calendar contains key Company Board members donated their compensation events and can also be viewed on the website for the 2005/2006 financial year to the youth www.borussia-aktie.de under “Veranstaltungen”. academy of Ballspielverein Borussia 09 e.V. Borussia Dortmund GmbH & Co. KGaA's ordinary Dortmund. General Shareholders' Meeting will be held on Tuesday, 28 November 2006 in Dortmund. In mid- Supervisory Board members' compensation is February we will publish the interim report for the set out in the notes to the consolidated financial period 1 July – 31 December 2006. statements. In the interest of simplicity and in view of the information presented above, this Management compensation information is provided only as an aggregated Compensation for members of management is not amount rather than being broken down by indi- stipulated by the Supervisory Board of our vidual. In the 2005/2006 financial year, the Company but rather by the Executive Committee Company did not pay members of the Supervisory of the general partner. Board any additional compensation or grant them any additional benefits. Management compensation comprises two components: A fixed amount and a variable component. The fixed compensation component is Ownership, acquisition or disposal of stipulated by contract and is paid out in twelve shares of the Company by members of equal monthly instalments. The variable compen- management or the Supervisory Board sation component is based on the performance of (Directors' Dealings) the business and is granted as a bonus contingent As of 30 June 2006, one member of management on the consolidated net income for the year before held 4,545 shares in our Company. As of the same taxes and managing director's bonuses. date, members of the Supervisory Board held a total of 3,000,311 shares. In total, the shareholdings of Any additional non-cash or ancillary benefits members of management and the Supervisory granted primarily include insurance benefits at Board constitute more than 1% of the shares issued standard market conditions and the provision of a by Borussia Dortmund GmbH & Co. KGaA. company car. The following disclosures were made in the There are no stock option plans or similar incen- 2005/2006 financial year with respect to the acqui- tive plans. The compensation components provided sition and sale of shares by executives pursuant to § are reasonable in and of themselves and overall. 15a German Securities Trading Act (WpHG):

26 CORPORATE GOVERNANCE REPORT

DIRECTORS’ DEALINGS DISCLOSURES CONCERNING TRANSACTIONS BY EXECUTIVES PURSUANT TO § 15A WPHG

Information on company subject to disclosure duties Issuer: Borussia Dortmund GmbH & Co. Kommanditgesellschaft auf Aktien Rheinlanddamm 207-209, 44137 Dortmund, Germany ISIN: DE0005493092 Listing: Official market in Frankfurt (General Standard); Over-the-counter (Freiverkehr) in Berlin-Bremen, Stuttgart, Munich, Hamburg, Düsseldorf

Notice dated 9 June 2006 Information on party subject to disclosure duties Name: AK Industriebeteiligung GmbH Function: Legal entity closely related to an Advisory Board member At: Borussia Dortmund Geschäftsführungs-GmbH as the general partner of the issuer

Information on transaction subject to disclosure Description of the financial instrument: Inhaberstammaktie/Stückaktie ISIN/WKN of the financial instrument: DE000A0H52E8 Type of transaction: Purchase/subscription of new shares under the private placement Date: 9 June 2006 Price: 2.00 Currency: EUR Number of shares: 669,362 Total volume: EUR 1,338,724 Place: off exchange Published on 9 June 2006

Notice dated 9 June 2006 Information on party subject to disclosure Name: AK Industriebeteiligung GmbH Function: legal entity closely related to an Advisory Board member At: Borussia Dortmund Geschäftsführungs-GmbH as general partner of the issuer

Information on transaction subject to disclosure Description of the financial instrument: Ordinary bearer share/no-par value share ISIN/WKN of the financial instrument: DE000A0H52E8 Type of transaction: Purchase/exercise of pre-emptive rights on new shares Date: 8 June 2006 Price: 2.00 Currency: EUR Number of shares: 124,000 Total volume: EUR 248,000 Place: off exchange Published on 9 June 2006

Notice dated 7 June 2006 Information on party subject to disclosure Surname: Geske First name: Bernd Function: Member of the Supervisory Board At: Issuer

Information on transaction subject to disclosure Description of the financial instrument: Ordinary bearer share/no-par value share ISIN/WKN of the financial instrument: DE000A0H52E8 Type of transaction: Purchase/exercise of pre-emptive rights on new shares Date: 7 June 2006 Price: 2.00 Currency: EUR Number of shares: 350,000 Total volume: EUR 700,000 At: Frankfurt Published on 9 June 2006

27 STATEMENT OF COMPLIANCE BY THE MANAGEMENT AND SUPERVISORY BOARD OF BORUSSIA DORTMUND GmbH & Co. KGaA UNDER § 161 AKTG (DECEMBER 2005)

The management of the general partner (Borussia pensation equivalent to 3% of any otherwise accruing Dortmund Geschäftsführungs-GmbH) and the annual net income for the year of the Company. Supervisory Board of Borussia Dortmund GmbH & Compensation and the compensation system for Co. KGaA hereby state in accordance with § 161 AktG, managing directors of Borussia Dortmund Ge- that since the last Statement of Compliance issued in schäftsführungs-GmbH are otherwise determined by December 2004, Borussia Dortmund GmbH & Co. its Executive Committee. In the future, the managing KGaA has been in compliance with the recommenda- directors will receive compensation consisting of tions of the German Corporate Governance Code (the fixed and variable components (in accordance with “Code”) in the version dated 21 May 2003 and that the Section 4.2.3 sentence 1); information was and will Code's recommendations in the amended version be provided hereto in the notes to the consolidated dated 2 June 2005 will be complied with in the future; financial statements broken down by individual (in excepted herefrom are the following deviations which accordance with Section 4.2.4). Compensation con- in part are due to organisation distinctions specific to sisting of components that are long-term or risk- the legal form of the KGaA and their expression in the based in nature, such as stock options for managing Articles of Association: directors, was not and is not being provided and thus no further information or explanations primarily tar- As to Section 3.8 sentence 3: The D&O insurance geted thereto was or will be made. (Deviation from does not provide for any deductible. Based on our Section 4.2.3 sentences 2 and 5 - 10 and Section understanding, such an agreement would not be 7.1.3).5 bis 10 sowie Ziff. 7.1.3). suitable as an incentive, nor would it strengthen the sense of responsibility with which members of cor- As to Section 4.3.4 sentence 3: Material transac- porate bodies conduct their duties and functions. tions between the general partner and certain related parties on the one hand, and the Company on the As to Section 3.10 sentences 1 and 2 and Section other, within the meaning of §§ 89, 112 in conjunc- 6.6 sentence 6: A corporate governance report will tion with § 278 (3), 283 No. 5 AktG (e.g., loans) be published in the Company's Annual Report for the require the involvement of the Supervisory Board. In 2005/2006 financial year. This recommendation was this respect, the recommendation was and is being fol- not complied with in the Annual Report for the lowed. In addition, the Supervisory Board is not autho- 2004/2005 financial year. rised to adopt a list of transactions requiring its consent for the general partner or its managing directors. As to Section 4.2.1: The Supervisory Board of Borussia Dortmund GmbH & Co. KGaA has no As to Section 4.3.5: Because the Supervisory Board authority with respect to personnel matters; this is the lacks authority in matters involving personnel, the purview of the Executive Committee of Borussia Dort- Advisory Board at Borussia Dortmund Geschäfts- mund Geschäftsführungs-GmbH, whose management führungs-GmbH is responsible for approving any side consisted of only one person for the period 9 – 15 activities of the managing directors of the general February 2005 and July through December 2005; for partner. As such, the recommendation was and is the period after January 2006, the Executive Com- being followed mutatis mutandis. mittee appointed a second managing director. Ma- nagement in this new composition will regulate the As to Section 5.1.2 sentences 2, 5 and 6: These Code division of responsibilities and its co-operation in future recommendations directed toward the Supervisory in rules of procedure. Board of stock corporations are at most applicable by analogy to our Company, whose Supervisory Board does As to Sections 4.2.2 and 4.2.3 and Section 7.1.3: not have any authority with respect to personnel matters. Section 7 of our Company's Articles of Association The managing directors and the Executive Committee at provides that the general partner is entitled to reim- Borussia Dortmund Geschäftsführungs-GmbH are bursement of personnel and property costs incurred responsible for ensuring successors over the long term in connection with managing the Company, plus com- (in accordance with Section 5.1.2 sentence 2). With this

28 CORPORATE GOVERNANCE REPORT

in mind, the term of office of Hans-Joachim Watzke Supervisory Board's compensation only as an aggre- as managing director was already extended in gate figure in the notes to the consolidated financial advance in October 2005 (in deviation from Section statements. The Supervisory Board members are 5.1.2 sentence 5) beyond 31 December 2006 until donating their compensation for the 2004/2005 and the end of 2008. The Executive Committee has and 2005/2006 financial years to the youth academy of will have in the future the discretion to decide in the Ballspielverein Borussia 09 e.V. Dortmund. case of pending (re)appointments of managing directors on the age limit for managing directors of As to Section 5.5.3 sentence 1: The recommen- the general partner without this generally needing dation that the Supervisory Board inform the to be stipulated (in deviation from Section 5.1.2 sen- General Shareholders' Meeting in its report of any tence 6). conflicts of interest that may arise and how these are handled is not being followed. The principle of con- As to Section 5.1.3: The Company's Supervisory fidentiality of discussions within the Supervisory Board will soon adopt its first rules of procedure. Board (see, § 116 sentence 2 AktG and Section 3.5 of the Code) is accorded priority over this. As to Section 5.4.1 sentence 2: There has been no set age limit for Supervisory Board members to As to Section 7.1.1 sentence 3: The consolidated date, nor will there be any in the future. The Super- financial statements will be prepared in compliance visory Board feels that such a limitation is not justi- with internationally recognised accounting princi- fied as against other criteria for proposed candidates ples for the first time from the 2005/2006 financial for the election of Supervisory Board members. year and the interim financial statements will be prepared according to these principles from the As to Section 5.4.3 sentence 3: Proposals for can- 2006/2007 financial year didates for the chair of the Supervisory Board have not been made public in the past, nor will they be As to Section 7.1.2 sentence 3: The annual finan- made public in the future, because the Supervisory cial statements for the reporting period of Board feels that the individual election of its mem- 2004/2005 were published with a slight delay on 14 bers already conducted is sufficient and does not October 2005. The interim financial statements feel that a vote in the General Shareholders' were and will be published within a reasonable period, Meeting for or against a given candidate is practica- which in the individual case may exceed 45 days ble in view of its position on the Supervisory Board. after the end of the reporting period.

As to Section 5.4.7 sentences 3, 4, 6 and 7: As to Section 7.1.5: In accounting under IFRS, Pursuant to § 13 Section 1 of the Articles of relationships to closely related persons will be Association, the members of the Supervisory Board included in the notes from the 2005/2006 financial receive only a comparatively low annual fixed com- year. Thus far, no information has been provided on pensation of EUR 7,000; the chairman receives this with the exception of statements regarding the twice this amount and the deputy chairman receives dependent company report made by the general one and a half times this amount. It was and is con- partner in its management report as well as in the sidered sufficient to provide the information on the report of the Supervisory Board.

Dortmund, December 2005

On behalf of On behalf of the Supervisory Board Borussia Dortmund Geschäftsführungs-GmbH Gerd Pieper Hans-Joachim Watzke

29 Borussia DortmundKonzernlagebericht der Borussia Dortmund GmbH & Co. KGaA für das Geschäftsjahr 2005/2006

A roller coaster season – higher aims for the new season

n the end, Borussia Dortmund was a mere two youth, and played the youngest ever BVB eleven Ipoints short of UI Cup qualification, but its during the home game against Bayern Munich makeshift team still finished the 2005/2006 season (1:2) on 17 December 2005. In the return match, with a respectable performance. Bert van Marwijk BVB played with the youngest Bundesliga mid- gave “Kudos to the team” on the 34th match day field. The youngest ever, of course. These are following a 3:3 draw in the Munich Allianz Arena, superlatives that also apply to Nuri Sahin (at 16 summing up the 2005/2006 season. This match – years, the youngest player, and the youngest goal first in the lead, then two goals behind, scoring the scorer at 17 years of age). equaliser in the end – reflected a season that was like a roller coaster. Thus it was all the more remarkable that on the 27th match day, Borussia Dortmund had the same In summer 2005, the coach had stated his goal as number of points and goal difference as the fifth being a place “between fifth and twelfth”: fifth placed team in the table. Given these circum- place if no key players were injured for a long stances, it was a successful season that began with period; twelfth place if the bad luck with injuries a curiosity: BVB was knocked out of the UI Cup from previous years was repeated. undefeated and without an opponent having been able to score a goal. This is because Jan Koller With seventh place, the team achieved the top scored an own goal in the home game against third of its wide-ranging aims. And this despite Olmütz. After scores of 1:1 and 0:0, both teams had the fact that it was not immune to setbacks. On the same number of points and the same goal the contrary: With Jan Koller, possibly the most difference, meaning that the away goal decided the important player was absent due to injury for tie in favour of the opponent from the Czech 23 games. And Lars Ricken was still the second Republic. top scorer in the team until the 31st round despite the fact that he had played only seven In the Bundesliga, following away draws in times and, like Koller, had torn a cruciate liga- Wolfsburg and Duisburg, the first victory came on ment early in the season. “We were unable to the fourth match day, where 1. FC Köln was compensate for those two losses”, confirmed defeated 2:1. Lars Ricken scored both goals, but sport director Michael Zorc. Moreover, at the he, too, suffered the aforementioned cruciate end of the first half of the season, crucial pillars ligament tear a few weeks later – another handicap in the defence were also injured. As an emer- for the team's offence. Fortunately, Ebi Smolarek gency measure, Van Marwijk had to turn to leapt into the breach, scoring eleven times in the

30 THE 2005/2006 SEASON

Sebastian Kehl David Odonkor Christoph Metzelder

first half of the season alone, and helping to secure top strikers have been contracted, while South important victories with his goals, such as those African national player Steven Pienaar will pull against Mönchengladbach (2:1) or Berlin (2:0). the strings in the midfield.

During the 2:1 victory in Nuremberg, Nuri Sahin If one includes the newly joined players Frei and became part of Bundesliga history as the youngest Valdez, Borussia Dortmund had a total of ten play- goal scorer of all time. This was to be the last time ers involved in the 2006 World Cup – the largest that Borussia won all three points until the winter sporting event of all time. Borussia Dortmund break, because the loss of players (amongst others, players were also responsible for the fact that the Wörns and Kehl were also unavailable) could no German national team played extremely refreshing longer be compensated for. and successful football: Together with the Hanover player Per Mertesacker, Christoph Metzelder was Following the return of some important players, part of the strongest central defender duo of the the black-and-yellows celebrated an outstanding tournament. Sebastian Kehl was first used as a start to the second half of the season with two substitute, but even played the full ninety minutes victories (against Wolfsburg and Duisburg) and a in the semi-final against Italy and in the third place draw in Schalke, but nevertheless did not remain playoff against Portugal (kicker-Sportmagazin: immune to injuries and sporting setbacks. Never- “Kehl better than the original in the Ballack theless, there were some highlights such as the role...”), while David Odonkor, who had joined the thrilling 4:2 triumph in Hamburg. In the end, this World Cup bandwagon at the last moment, sprinted promising team reached seventh place and has into the fans' hearts when he started the moves that higher aims for the new season. With World Cup led to the German goals in the matches against players Alexander Frei and Nelson Valdez, two Poland and Argentina.

31 National & international honours DFB Cup and European Cup

GERMANY'S FIRST EUROPEAN CUP WINNER

From Münster to Glasgow. In the late summer of 1964, a 1:0 victory against SC Preußen Münster was the starting point for the greatest triumph in the Club's history to that time. The unspectacular victory was won in the first Cup round on a national level. BVB reached the final against Alemannia Aachen after victories against TeBe Berlin, Braun- schweig and Nuremberg, and won the final 2:0. One year later, BVB was the first German club to win a European Cup.

Aki Schmidt in 1965 with the DFB Cup.

The celebrated homecomers: After the DFB The then German President, Heinrich Lübke, Cup victory in 1965, the people of Dortmund presents the DFB Cup to Aki Schmidt. gave a rapturous reception to their heroes and Alemannia Aachen had been defeated 2:0 in captain “Aki” Schmidt. the final..

32 1965 1966

CHRONOLOGY 1966

JANUARY

7 January: In a statement, the Federal Government supports the USA's enter- ing the Vietnam War.

JUNE

15 June: The first screening in East Berlin of the film “The Trace of Stones” (Spur der Steine), with Manfred Krug in one of the leading roles. The film can- didly shows the conflicts on a large building site in the GDR. Shortly after the premiere, the film was removed With or without a hat: from the GDR cinema programs and The BVB fans are thrilled. was only shown again in 1990.

JULY

2 July : France conducts its first atomic weapons test on Mururoa Atoll in the South Pacific.

SEPTEMBER

10 September: The German European boxing champion, Karl Mildenberger, is defeated in the Frankfurt Wald- stadion by heavyweight world champion Muhammad Ali.

DECEMBER

1 December: Kurt Georg Kiesinger (CDU) becomes the first Chancellor of a grand coalition. The alliance between CDU/CSU and SPD will guide the fate of the Federal Republic of Germany for the next three years.

The miniskirt is introduced in England. The moptop becomes a fashionable hair- cut – thanks to the Beatles.

The “boss” and his favourite stu- dent: “Aki” Schmidt speaks with national coach, Sepp Herberger.

33 Sigi Held in the final International honours versus Liverpool on 5 European Cup May 1966 in Glasgow.

loriana La Valetta was not a big hurdle. The Record for all time: F results in the first round were 5:1 and 8:0. But In the European Cup BVB already had to tremble against CSKA Sofia Winner's Cup Lothar because the 3:0 from the first leg almost wasn't Emmerich scored a enough; the return leg ended 2:4. And it continued total of 14 goals in to be exciting. Atletico Madrid was beaten 1:1 and 1965/1966. 1:0, while there were two victories in the semi-final against West Ham United (2:1 and 3:1); then Borussia Dortmund actually flew to Glasgow, where the highly-favoured English champion, FC Liverpool, was waiting as the opponent in the The “goal of the cen- legendary Hampden Park on 5 May 1966. At that tury”: “Emma” scores time, FC Liverpool was considered “invincible”. In the equalizer against defence, goalkeeper Tilkowski and defender Paul Spain from an almost outdid themselves, while upfront Held and Libuda impossible angle at both scored. Libuda scored a “goal of the century” the 1966 World Cup. with his wonderful chip in the 106th minute, which meant that Borussia Dortmund was the first Ger- man team to win a European Cup, giving a region in which structural change was slowly taking place a new self-belief. Hundreds of thousands were on the move to give the “heroes” a huge reception the following day.

The captain of the “Heroes of Glasgow”, Wolfgang Paul, is the first German player ever to hold a European Cup in his hands.

BVB on record: European Cup winners 1966.

34 1965 1966

Coach “Fischken” Multhaup on the players' shoulders.

The then German Chancellor, Ludwig Erhard (middle), beside BVB President Willi Steegmann (right) before the award of the Silver Laurel to the Dortmund team that had won the European Cup.

BVB is the first German team to win the European Cup in 1966.

ZDF Sportstudio with Wim Thoelke (left) and the Borussia players Sigi Held, Lothar Emmerich, Heinz Storck, Jockel Bracht and Erich Schanko (standing).

p. 62

35 Borussia Dortmund GmbH & Co. KGaA

BUSINESS AND FRAMEWORK CONDITIONS

FINANCIAL YEAR 2005/2006 IN REVIEW

FINANCIAL DEVELOPMENT (utilisation of authorised capital with a nominal amount of up to EUR 14,625,000) with an issue amount of Restructuring to secure the future EUR 29,250,000. This entire amount was used for a On 7 June 2006, a loan agreement was signed further reduction of existing liabilities in July 2006. between Borussia Dortmund GmbH & Co. KGaA, and its subsidiaries, and the US investment bank Decisive progress has therefore been made in Morgan Stanley for credit facilities amounting in total restructuring the liability side of the balance sheet, to EUR 79.2 million with a term of 15 years. A total with the aim of strengthening equity resources, of EUR 57.5 million of the loan was used for the pay- achieving a more manageable debt maturity structure ment to MOLSIRIS Vermietungsgesellschaft mbH & and improving interest-rate terms. In particular, the Co. Objekt Westfalenstadion KG of the price for the repurchase of the shares in the stadium has achieved repurchase of the limited partner's share in West- a reduction in the high rental expenses for the stadium, falenstadion Dortmund GmbH & Co. KG and for which would have significantly restricted BVB's room related incidental costs. The remaining loan amount for manoeuvre from 2007 onward. of EUR 21.7 million was used for the purpose of reducing and refinancing the existing liabilities of Borussia Dortmund GmbH & Co. KGaA (“BVB- Earnings development KGaA”). In addition, BVB-KGaA was granted a Der für die Borussia Dortmund GmbH & Co. KGaA revolving credit line amounting to EUR 10.0 million. The loss for the financial year ended 30 June 2006 for Borussia Dortmund GmbH & Co. KGaA amounted Ownership of the SIGNAL IDUNA PARK has there- to EUR -3.9 million (the comparative figure for the fore been almost completely regained. As part of the previous year was a loss of EUR -78.7 million). The restructuring process, the creditors' agreement of improvement in earnings was principally the result March 2005 was annulled and the steering committee of the increase in sales amounting to EUR 9.3 mil- set up at that time was dissolved. Furthermore, this lion, savings in personnel expenses (EUR 8.6 million, created the essential conditions for the implementa- of which EUR 5.2 million related to the professional tion of the capital increase resolved in May 2006 squad), lower depreciation and amortisation in

UI Cup UI Cup 16 July 2006 23 July 2005 BVB 1 – 1 Sigma Olmütz Sigma Olmütz 0 – 0 BVB

Jan Koller scored an own goal in The disappointing goalless draw against the first leg against Sigma Olmütz. the Czech team in Olmütz meant an exit 36 from the UI Cup. MANAGEMENT REPORT

particular of the carrying amounts of player registra- DEVELOPMENT OF THE MARKET tions (EUR 11.3 million), a fall in other operating AND COMPETITIVE ENVIRONMENT expenses (EUR 28.8 million) and an improvement in net finance costs (EUR 1.9 million). During last season as well, the German Football Bundesliga again gained considerable value as a The loss from ordinary activities improved by around brand. It not only regularly thrills millions of people EUR 65.7 million to EUR -12.9 million from EUR - in front of the screen, but also attracts hundreds of 78.7 million. Earnings before interest and taxes thousands of fans to the stadiums each week. Last (EBIT) amounted to a loss of EUR 12.0 million, season there was a further increase in the record following the loss amounting to EUR 75.8 million number of tickets sold that had already been set the recorded in the previous year. previous year. In this respect, with an average crowd of 71,378, Dortmund remains the public's favourite.

Development of equity The continuing enthusiasm for football can also be Following the implementation of the capital increase seen in the revenues generated for the clubs by TV resolved in May 2006, in which 14,625,000 new shares marketing. The combination of free-to-air program- were placed at an issue price of EUR 2.00 each, equity ming and exclusive live television rights enabled amounted to EUR 52.9 million (prior year EUR 27.5 Bundesliga clubs to generate considerable additional million) after taking into account the loss for the year. revenues, in which respect, the new TV agreements The equity position of Borussia Dortmund GmbH & applicable from July 2006 even made a further Co. KGaA will improve further following the imple- increase possible. mentation in the 2006/2007 financial year of the capital increase for cash and non-cash contributions resolved Nor has the Bundesliga lost any radiance as an adver- by the extraordinary General Shareholders' Meeting tising forum. On the contrary, the clubs can look back on 15 August 2006, and following the significant on a successful season with further increases in improvement in operating earnings that we expect. income from sponsoring and other revenue sources.

1st round 2nd round 6 August 2005 13 August 2005 Wolfsburg 2 – 2 BVB BVB 1 – 2 Schalke

Bundesliga debut at the age of 16 years Hot blooded tackle at a Ruhr Area and 335 days: Nuri Sahin, youngest derby: Odonkor pits himself against player of all time. Bajramovic. 37 Borussia Dortmund GmbH & Co. KGaA

Group structure and business

Borussia Dortmund GmbH & Co. KGaA

94.9% BVB Stadion GmbH 100% goool.de sportswear GmbH 5.10% 94.9% BVB 5.10% BV. Borussia 09 Beteiligungs-GmbH e.V. Dortmund 100% BVB Stadionmanagement GmbH

100% BVB Merchandising GmbH

100% Sports & Bytes GmbH

51% B.E.S.T. 49% Euro Lloyd Reisebüro Borussia Euro Lloyd Sports Travel GmbH GmbH & Co. KG

33.33% 66.67% Orthomed GmbH Miscellaneous

In addition to the core business of football, Borussia Borussia Euro Lloyd Sports Travel GmbH (51%) and Dortmund is involved in lines of business related to in the medical service centre Orthomed GmbH football. At present, the Company holds interests in (33,33%). In addition, BVB’s consolidated group also BVB Merchandising GmbH (formerly Borussia includes the wholly-owned subsidiary BVB Stadion- Dortmund Beteiligungs-GmbH; 100%), in the sports management GmbH (formerly Westfalenstadion articles manufacturer goool.de sports-wear GmbH Dortmund Verwaltungs-GmbH) and the stadium (100%), in the Internet company Sports & Bytes holding company BVB Stadion GmbH (formerly GmbH (100%), in the travel company B.E.S.T. Westfalenstadion Dortmund GmbH & Co. KG).

DFB Cup 3rd round 22 August 2005 28 August 2005 Braunschweig 2 – 1 BVB Duisburg 1 – 1 BVB

Christian Wörns’ efforts in vain: Lars Ricken shot BVB into the lead BVB is knocked out of the Cup in the against MSV. His thunderbolt was 38 first round. unstoppable in the right corner. MANAGEMENT REPORT

ORGANISATION OF MANAGEMENT The remuneration of the Managing Directors is com- AND CONTROL posed of fixed and success-based components. The latter are based on contractual agreements and on The general partner, Borussia Dortmund Ge- resolutions of the Advisory Board of the Executive schäftsführungs-GmbH, is responsible for manage- Committee of Ballspielverein Borussia 09 e.V. ment and representation of Borussia Dortmund Dortmund. GmbH & Co. KGaA. This limited liability company (“GmbH”) is in turn represented by its Managing The following chart shows the structures and respon- Directors Hans-Joachim Watzke and, since 1 January sibilities as between Ballspielverein Borussia 09 e.V. 2006, Thomas Treß; its sole shareholder is Ball- Dortmund, Borussia Dortmund GmbH & Co. KGaA spielverein Borussia 09 e.V. Dortmund. and Borussia Dortmund Geschäftsführungs-GmbH.

Ballspielverein Borussia 09 e.V. Dortmund

Management Council of Board economic affairs Borussia Dortmund elects appoints Geschäftsführungs-GmbH Members Meeting (General Partner) appoints and supervises

Advisory Board Managing Directors Borussia Dortmund

GmbH & Co. KGaA (Consisting of members of the Management Board and Council of economic affairs) Supervisory Board No right of appointment, only right of supervision elects

General Shareholders’ Meeting

4th round 5th round 11 September 2005 17 September 2005 BVB 2 – 1 Cologne Bremen 3 – 2 BVB

Van der Gun against Mokhtari: Klose scores past Degen (left) and Metzelder The BVB striker ruptured his cruciate to make it 1:1 for Bremen. In the end, Werder ligament directly after this scene. had the upper hand with a 3:2 scoreline. 39 Borussia Dortmund GmbH & Co. KGaA

The rights and duties of the Supervisory Board of the Since the General Shareholders' Meeting on 22 limited partnership (“KGaA”) elected by the General November 2005, the following persons have been Shareholders' Meeting are limited. In particular, it members of the Supervisory Board:

has no personnel-related powers, i.e. no respon- Gerd Pieper (Chairman) sibility for appointing and dismissing managing direc- Proprietor and Managing Director of tors of Borussia Dortmund Geschäftsführungs- Stadtparfümerie Pieper GmbH, Herne GmbH and with regard to their contractual terms. In Harald Heinze (Deputy Chairman) addition, the Supervisory Board is not authorised to Chairman of the Management Board of DSW 21 issue for the general partner rules of procedure or a Dortmunder Stadtwerke AG, Dortmund list of transactions requiring approval. Rather, such Ruedi Baer rights and duties lie with the governing bodies of Delegate to the board of directors and Chief Borussia Dortmund Geschäftsführungs-GmbH, Executive Officer (CEO) of mobilzone-Gruppe, Regensdorf (Switzerland) namely its Advisory Board and the Executive Com- mittee created by the Advisory Board. Othmar Freiherr von Diemar Proprietor and manager of Othmar von Diemar Vermögensverwaltung + Beratung, Cologne

Bernd Geske Managing partner of Bernd Geske Lean Communication, Meerbusch

Patrick Albert Lynch Bank employee, London

Within Borussia Dortmund GmbH & Co. KGaA, there are four independent areas of responsibility below the management, namely, communications, sports, finance and organisation. The responsible employees and the divisions for which they are responsible can be seen from the following chart.

6th round 7th round 21 September 2005 24 September 2005 BVB 2 - 0 Bielefeld Mainz 1 - 1 BVB

Against Bielefeld, Borussia was often Discussion with referee Weiner concer- just a little faster. Here Kringe ning an unfair penalty. Degen, 40 Krupnikovic gets away. Weidenfeller, Kehl and Kringe. MANAGEMENT REPORT

BORUSSIA DORTMUND GmbH & Co. KGaA

Management Management Hans-Joachim Watzke Thomas Treß (Chairman)

Communications Sports Finance Organisation J. Schneck M. Zorc M. Knipping Dr. C. Hockenjos

Corporate Professional Finances and General communications football accounting organisation

Sport communications Amateurs Controlling Stadium management

Publications Youth Investor relations Match organisation

IT (Information Fan support Handball V.I.P. – Hospitality Technology) Stadium announcements and Table tennis Personnel Sportfive program (sponsors)

PR work Training fields Merchandising Events

Complaints Risk Management DFB/DFL management

Interests Ticketing

Sportfive (Commission Real estate processing)

Third party events

Member support

8th round 9th round 2 October 2005 15 October 2005 BVB 0 – 0 Stuttgart Kaiserslautern 3 – 3 BVB

It was almost impossible for BVB to get This scene is misleading: Ebi Smolarek through Stuttgart's close-meshed defen- was not down and out, he was on top, sive network (Rosicky against Soldo). scoring a hat trick against FCK. 41 Borussia Dortmund GmbH & Co. KGaA

DEVELOPMENT OF THE MARKET AND the auditors Deloitte & Touche, an average of only COMPETITIVE ENVIRONMENT IN 33,900 viewers attend games in the English premier GERMAN PROFESSIONAL FOOTBALL league, while 27,800 viewers attend matches in the Spanish Primera Division. Even 43 years after its creation, the Bundesliga has a charisma like almost no other brand in Germany Despite these imposing figures, the top German divi- and beyond. On the one hand, it is a regional sion also recorded new attendance records in the last sporting event with 36 clubs throughout Germany, season: The first half of the season attracted which attracts hundreds of thousands of fans to the 5,708,999 paying fans to the stadiums, which repre- most modern stadiums in the world each match day. sented a further increase of 7.5 percent compared to On the other hand, it is a national television event, the figures from the previous year (5,311,927). Thus which provides television broadcasters with millions the Bundesliga remained ahead of the other top of viewers. While firmly rooted in the sport’s values, European leagues. Viewer magnet number one it is also entertainment produced in a modern way: remained Borussia Dortmund. This is a situation that makes German professional football unique. This positioning plays a major role in the success of the Bundesliga, which finds itself in TV marketing global entertainment competition for media revenues The Bundesliga is also a viewer magnet on televi- and sponsor interest, and ensures that there are stable sion. In a study commissioned by DFL Deutsche framework conditions. Fußball Liga GmbH, questions were asked not only concerning interest in individual types of sport, but Ticketing also as to how often these are followed on televi- The Bundesliga is the football division that attracts sion. In this respect, football was the number one the greatest number of viewers on the Continent. In sport on television ahead of Formula 1 and winter the 2004/2005 season, the fourth consecutive ticket sports. However, the remarkable aspect is some- sales record was achieved. In the 2004/2005 season, thing different: While 52 percent of the population 10,765,974 viewers streamed into the stadiums. stated that they were interested in football, 50 per- Compared with 2003/2004 (10,724,586), this repre- cent also stated that they follow matches or high- sents growth of only 0.4 percent, but it constitutes a lights weekly/regularly or at least several times a healthy increase of 10.25 percent compared to the month. Thus football is considerably more success- 2002/2003 season (9,764,735). In this respect, it is ful than other types of sport in mobilising its fol- also interesting to consider tickets purchased per lowers. This fact is also undoubtedly attributable to match: 35,183 paying viewers per game represent a the wide-ranging availability of football and the level not achieved by any other league in all of broadcasting structures that have been learnt over Europe. By comparison: according to an analysis by decades.

10th round 11th round 23 October 2005 29 October 2005 BVB 1 – 1 Hamburg BVB 2 – 1 Mönchengladbach

Metzelder scored with a spectacular Ebi Smolarek scores in the 90th minute diving header against HSV, whose goal- to make it 2:0 against Borussia Mönchen- 42 keeper Wächter loses out. gladbach. Zé Antonio comes too late. MANAGEMENT REPORT

For the Bundesliga's TV partners, this means excel- season, could be generated – more than the lent ratings. Probably the most important free-to- German professional clubs ever received from air TV format, the ARD-Sportschau, achieved mar- exploitation rights. ket share of 26.9 percent in the 2004/2005 season in the target group of viewers aged three and above Sponsoring – even achieving 30.2 percent in the special target The continuing attractiveness and the strong televi- group of men between 14 and 49 years of age. sion presence also ensure great interest in the These figures are also remarkable in terms of their advertising industry. This is proved by advertising absolute penetration: What other program reaches revenues, which have rapidly increased in recent almost six million viewers aged three and above on years. This sector has already been the greatest 30 weekends? In this respect, the popularity of the source of income for German professional football Saturday Bundesliga roundup was given additional since the 2003/2004 season. This is a development impetus by the comeback of Sportschau in the that is even more worthy of note in light of the cur- 2003/2004 season. With market share of 26.7 per- rently stagnating - and in some sectors even receding cent in the target group of three years and above, - advertising market. in the second half of the current season Sportschau is approximately 29 percent ahead of the ratings In total, German professional football (Lizenz- generated by “ran” of Sat.1. The other free-to-air Fußball) had advertising earnings of EUR 415.6 mil- TV formats are also doing well. Thus the Aktuelles lion in the last season. Compared to 2003/2004 (EUR Sportstudio in ZDF achieved market share of 12 373.2 million), this represents an increase of 11.38 percent last season, while the DSF roundup of percent. Given that advertising earnings in the Sunday matches was particularly successful in the 1998/1999 season were EUR 173 million, this means men's target group (14 to 49 years of age), where it that advertising earnings have increased by 140 per- achieved 11 percent. cent over the last six years.

In December 2005, the television broadcasting In the 2004/2005 season, the ratio of advertising to rights for the period through summer 2009 were total earnings was 27.43 percent, a level that has awarded. The league is sticking with the tried and changed only slightly compared to 2003/2004 (29.25 tested partners, ARD, DSF and ZDF in free-to-air percent) and 2002/2003 (27.87 percent). Whatever television, and with Deutsche Telekom AG in the applies to professional football as a whole naturally Internet sector. The live television rights have been also applies to the Bundesliga per se: The top 18 awarded for the first time to the company arena; clubs received EUR 357.5 million in the sponsoring similarly, with betandwin.com, which will operate segment, which was also a peak. Compared to the as a foreign marketer, a “newbie” is on board. A 2003/2004 season, the top division was able to total of EUR 1.26 billion, i.e. EUR 420 million per increase its advertising earnings by 7.44 percent.

12th round 13th round 5 November 2005 19 November 2005 Leverkusen 2 – 1 BVB BVB 2 – 0 Berlin

Duel of star up and coming talents: The youngsters Sahin (in the backgro- Leverkusen's Castro is not so delicate in und) and Kruska (right, against Bastürk) taking out David Odonkor... performed superbly against Hertha. 43 Borussia Dortmund GmbH & Co. KGaA

The Bundesliga is also the leading European league million) and the French Ligue 1 (EUR 144 million). in Europe in terms of advertising revenues. If one The figures for the English Premier League consoli- compares the figures from the 2003/2004 season – dated revenues from advertising and other revenues more recent figures from other top leagues are not (merchandising etc.), meaning that no clear state- yet available – the top German league was already ment can be made here. One reason for the high number 1 with EUR 326 million. The Bundesliga - sponsoring income is undoubtedly the high free to whose income, as reported above, has again air television presence - a situation that will also be increased – is ahead of the Spanish Primera Division maintained in coming seasons due to the new TV (EUR 200 million), the Italian Serie A (EUR 161 agreements.

CORPORATE MANAGEMENT

INTERNAL MANAGEMENT SYSTEM although no unknown risks will be taken. There will be no new debt in order to strengthen the team. Sports management The great challenge for the future will be to play Financial management football successfully with a cost-optimised budget. One of the main aims of BVB's management is to In order to achieve this aim, BVB will in future increase profitability in the long-term and thus to continue to have a strong, competitive team and, further improve Borussia Dortmund GmbH & Co. in this respect, will back young players across the KGaA's equity resources. In addition, there is a board, who will create a healthy mixture with the focus on financial strength. In addition to a constant seasoned players. This creates a realistic chance of improvement in the operating result, generating qualifying for international competitions. positive cash flow is therefore the most important financial objective of our Company. We are seeking The sporting aims will be aligned with financial to optimise cash flow by concentrating on circumstances. This means that the salary budget the impacting factors of “operating results” and will generally be tied to realistic sporting aims and “investments”. that the target set by the sporting management - Hans-Joachim Watzke, Michael Zorc and the coach The operating result is the most important ratio for - in this regard is qualifying for the UEFA Cup measuring success. For us, operating result means again in the near future. This would increase the earnings before interest and taxes (EBIT). Therefore financial flexibility for acquiring new players, we are constantly monitoring the operating results

14th round 15th round 26 November 2005 3 December 2005 Nuremberg 1 – 2 BVB BVB 0 – 2 Hanover

Document of the times: Nuri Sahin BVB – here with Buckley against goes down in Bundesliga history Balitsch – could hardly make an 44 with this shot. impression inside the penalty area. MANAGEMENT REPORT

in all lines of business and areas of responsibility without undue delay an extraordinary General based on monthly comparisons between the budget Shareholders' Meeting in the event of a loss and the actual situation. The most important driver equivalent to half of the registered share capital. for the operating result is further improvement in Therefore capital management includes, in particu- sales revenues in the major revenue sources of lar, constant monitoring of the equity capital of the ticketing, sponsoring, TV marketing and merchan- KGaA as determined in accordance with the pro- dising, and a disciplined management of operating visions of the German Commercial Code (Handels- expenses. gesetzbuch, “HGB”). As a result of the capital increase implemented or resolved and a consistent In coming years we will concentrate on achieving pursuit of the reorganisation concept and success- the best possible balance between limiting operat- ful restructuring of the liability side of the balance ing expenses and, at the same time, generating sales sheet, the registered share capital is not only fully growth. In this respect, the decisive factor is quali- paid in, but also secured by reserves. Taking the fying for international competitions. reserves and cumulative losses into account, the relevant equity capital in the KGaA's individual We are determined to further improve the effec- HGB financial statements is approximately EUR tiveness of investments, which, in this context, 52.9 million. applies particularly to investments in the professional squad. Following implementation of the capital increase for cash/non-cash contributions in the 2006/2007 financial year resolved by the extraordinary General Kapitalmanagement Shareholders' Meeting on 15 August 2006 and the Following implementation of the capital increase expected improvement in operating earnings to more resolved in May 2006, the share capital of Borussia than EUR 4.0 million, Borussia Dortmund GmbH & Dortmund GmbH & Co. KGaA increased from Co. KGaA's equity position will stabilise further, i.e. EUR 29,250,000.00 to EUR 43,875,000.00. Fol- improve. lowing implementation of the capital increase for cash/non-cash contributions in the 2006/2007 In addition to securing the KGaA's equity as deter- financial year resolved by the extraordinary Ge- mined in accordance with HGB provisions, the neral Shareholders' Meeting on 15 August, the management's capital management also includes share capital will be further increased to EUR stabilisation and an increase of consolidated equity 17,550,000.00. as determined in accordance with IFRS provisions. We will reach these targets, in particular, by im- Pursuant to § 92 (1) of the German Stock proving the operating result and through effective Corporation Act (“AktG”), we are obliged to call investments.

16th round 17th round 10 December 2005 17 December 2005 Frankfurt 2 – 0 BVB BVB 1 – 2 Munich

Frankfurt's Chris demands a penalty - Weidenfeller cleverly tightens the angle Rosicky and Kehl (right) saw the scene against Lucio and prevents a goal by quite differently... Bayern Munich. 45 Borussia Dortmund GmbH & Co. KGaA

Overview of the key financial indicators for Borussia Dortmund GmbH & Co. KGaA

(in EUR millions) 2005/06 2004/05 30 June 2006 30 June 2005

Sales 83.2 73.9 Gross revenue 90.0 78.5 Loss for the year -3.9 -78.7 Loss from ordinary activities -12.9 -78.7 Operating loss (EBIT) -12.0 -75.8 EBITDA -4.3 -56.5 Cash flow 25.4 -1.7 of which from/used in operating activities -5.5 39.4 of which used in investing activities -1.1 -30.7 of which from/used in financing activities 32.0 -10.3 Equity 52.9 27.5

We plan to further increase gross revenue in the mid- We expect that the operating result will significantly term. The first steps in bringing us closer to this goal improve in coming years. Our aim is to generate have been taken with the marketing of the stadium positive results already in the 2006/2007 financial name, the new principal sponsor agreement with year. RAG and conclusion of the new television agreement by DFL. Moreover, further significant revenues Borussia Dortmund GmbH & Co. KGaA's cash flow potential can be found in qualification for inter- is expected to stabilise on a sustainable basis as a national competitions, which would have a positive result of an improvement in the operating result of effect on all revenue sources of Borussia Dortmund. dependent, moderate investments, particularly in the Therefore in the 2006/2007 season, the realistic tar- professional squad. As a result, the Company's equi- get is 5th place in the Bundesliga, which would mean ty base will also increase further, meaning that in the qualification for the main round of the UEFA Cup. mid-term we could also consider dividend payments Moreover, we are expecting better performance in the to our shareholders following further reduction of DFB Cup, which would also have a positive effect. our liabilities.

18th round 19th round 28 January 2006 4 February 2006 BVB 3 – 2 Wolfsburg Schalke 0 – 0 BVB

Body contact: Kehl and Klimowicz Schalke’s Krstajic kicks Salvatore focus on the ball. BVB wrestles Gambino’s foot, but the referee did not 46 Wolfsburg to the ground 3:2. give the deserved penalty. MANAGEMENT REPORT

CORPORATE STRATEGY • A football company can only be financially successful if it enjoys sporting success in the Borussia Dortmund's aim is to establish itself as the long-term. In order to make financial success less leading German football club after FC Bayern dependent on short-term sporting success in the Munich. Following successful implementation of the future, Borussia Dortmund will push ahead reorganisation, a restructuring of financial liabilities further with national and international marketing and the first moderate investments in the profes- of its brand name. sional squad, we are on the right path. • Germany continues to be Europe's largest The financial base of the first and to date only German football market, which, however, is behind listed football company was expanded by the exclusive some other European markets in financial marketing right for SIGNAL IDUNA PARK, more terms. This provides great growth potential. effective use of the “Borussia Dortmund” brand and the establishment of football-related lines of business. All financial activities at Borussia Dortmund are However, the core business will in future also be oriented around the target group that is relevant for professional football together with it classic income a football club: Its fans, members and business part- sources of TV marketing, sponsoring, ticketing and ners. Products and services should be tailored to merchandising. For the following reasons, BVB is these groups in the best way possible. Through its convinced that it will be able to further stabilise and brand potential, Borussia Dortmund wants to utilise expand its position as a leading football company in all commercial opportunities presented by profes- North-Rhine Westphalia: sional club football in an international context for the benefit of the shareholder. • Borussia Dortmund is in sporting terms one of the most successful, well known and most popu- The current business strategy can principally be lar German football clubs with an outstanding fan summarised as follows: base that provides BVB with the greatest average number of viewers in all of Europe. • Stabilisation of the financial situation

• Sustainable adjustment of sporting perspectives

• Intensifying the promotion of up and coming talent

• Fan involvement

• Use of the “Borussia Dortmund” brand

20th round 21st round 7 February 2006 12 February 2006 BVB 2 – 0 Duisburg Cologne 0 – 0 BVB

Hot-blooded tackle between the Close to the man: Cologne's Benschneider Duisburg player Markus Kurth attacks Rosicky early. The BVB playma- and BVB defender Philipp Degen. ker was hardly able to display his talents. 47 Borussia Dortmund GmbH & Co. KGaA

RESULTS OF OPERATIONS, FINANCIAL POSITION AND NET ASSETS

RESULTS OF OPERATIONS

EARNINGS DEVELOPMENT Sales in EUR millions

Earnings for Borussia Dortmund GmbH & Co. 100 KGaA amounted to EUR -3.9 million for the 2005/2006 financial year, representing an improvement of EUR 74.8 million over the previous year. This improvement in earnings was mainly the result 12.4 0.7 of the EUR 9.3 million increase in sales, savings in 75 the professional squad and lower depreciation and

amortisation in particular of the carrying amounts of 11.7 14.4 player registrations. The improvement was therefore principally achieved in the operating activities with the result that the loss from ordinary activities and 14.8 14.9 50 EBIT showed significant positive development compared with the previous year, which was characterised by drastic reorganisation measures.

27.2 26.4 Our expectation is that earnings will continue to develop positively in the coming financial years and 25 that we will be able to achieve a turnaround in the operating area as early as the 2006/2007 financial

year. The precondition for this is that the BVB pro- 17.2 17.5 fessional squad achieves renewed sporting successes. Qualification for the UEFA Cup and successful 0 participation in the DFB Cup would represent 2005/06 2004/05 potential sales opportunities in the short term. Transfer income SALES DEVELOPMENT Merchandising/catering (incl. Other income) TV marketing Sales in the five major revenue sources developed as Sponsoring follows in the last two financial years: Ticketing

22nd round 23rd round 18 February 2006 25 February 2006 BVB 0 – 1 Bremen Bielefeld 1 – 0 BVB

On top of his man: Christian Covering all the angles: Bielefeld's Wörns challenges Bremen's Naldo. Zuma spreads himself between 48 Werder are fortunate to win 1:0. Borussia's Brzenska (l.) and Rosicky. MANAGEMENT REPORT

Sales rose significantly from EUR 73.9 million to SIGNAL IDUNA PARK in the media and the attrac- EUR 83.2 million (an increase of 12.6%) despite the tive and varied range of sponsoring have in recent lack of participation in international competitions and years resulted in a high degree of customer retention. BVB's early exit from the DFB Cup in the 2005/2006 season. This reflected the positive effects for Borussia The marketing of football stadiums includes a wide Dortmund GmbH & Co. KGaA of the 2006 FIFA range of advertising opportunities covering all aspects World Cup as well as the lucrative transfer of Tomas of sporting events. In addition to the jersey sponsor Rosicky to Arsenal London, among other factors. The and the equipment supplier, perimeter board adver- development of the individual revenue sources is tising and cam carpets divide up the space on the described in the following sections. pitch between them. Sponsor walls and stands act as advertising media during interviews at half-time and Income from ticketing after the match. TV-related advertising was expanded Borussia Dortmund generated income amounting to by rearranging the front rows of the stands, for EUR 17.2 million in the financial year under review example, which created attractive new advertising from match day takings, i.e. sales of season and day space. But newly developed forms of marketing also tickets, and participation in friendly games. This offer further potential for existing and new sponsors represents a decline of almost EUR 0.4 million com- in the next few years. pared with the previous year, which reflected lower takings from the DFB Cup following the first-round The great atmosphere at the games played during the exit against Eintracht Braunschweig and a slight drop 2006 World Cup showed that SIGNAL IDUNA in attendance figures. PARK is one of the most sought-after sporting and marketing locations in Germany. Income from sponsoring Borussia Dortmund recorded income from spon- Income from TV marketing soring in the order of EUR 27.2 million and so Income from TV marketing in the financial year improved on the prior-year figure of EUR 26.4 mil- under review amounted to EUR 14.8 million, which lion by a further EUR 0.8 million. This was because was almost at the same level as the previous year. the loss of income resulting from penalties based on Borussia's position on the Bundesliga table was more The exit in the first round of the DFB Cup and the than made up for by the signing of the agreement for relegation of the amateur squad to the Westphalia the rights to the stadium name with the SIGNAL regional league (Oberliga Westfalen) resulted in a loss IDUNA Group and contract extensions of existing of income of around EUR 0.5 million, despite the long-term sponsorship agreements. In addition to the income resulting from the Cup match being broad- large number of viewers, the constant presence of cast live.

24th round 25th round 4 March 2006 11 March 2006 BVB 1 – 1 Mainz 05 Stuttgart 0 – 0 BVB

Borussia celebrate in the snow: Wörns Perfectly in step: Dortmund's Ebi Smolarek (centre) and Smolarek (right). But in the and Stuttgart's Markus Babbel were still end Mainz were celebrating a 1:1 draw. dreaming of the UEFA Cup. 49 Borussia Dortmund GmbH & Co. KGaA

An increase in income from Bundesliga TV mar- tions, advance booking fees and licence fees for events keting of almost EUR 0.5 million compared with the at SIGNAL IDUNA PARK on non-match days. previous year was achieved thanks to the improved position on the table throughout the whole season. Other income, which consists principally of income This resulted from an increase in the amount used from rentals and leases, recorded growth of EUR 2.8 to calculate the club's share of national TV income. million to EUR 4.3 million. The main factors behind This amount is calculated in accordance with each the increase were the two international matches held club's current league position and can thus vary. at SIGNAL IDUNA PARK before the 2006 FIFA This fully compensated for the loss of income men- World Cup, a portion of the rental income generated tioned above. by the World Cup and the oncharging of costs incurred during the World Cup games. After the TV rights until summer 2009 were awarded for a total amount of around EUR 1.26 billion in December 2005, it is already certain that Transfer income there will be an increase in income from national TV Income from transfer activities amounted to EUR marketing in the coming seasons, despite a new 12.4 million in the financial year under review, an basis of allocation. amount that was EUR 11.7 higher than in the previous year (EUR 0.7 million). In addition to the sale of the transfer rights for Enrique Ewerthon to Real Income from merchandising Saragossa and Niclas Jensen to Fulham at the start of and catering (incl. Other income) the financial year, transfer income also reflects in Borussia Dortmund achieved income from mer- particular the sale of the transfer rights for Tomas chandising and catering of EUR 7.4 million in the Rosicky to Arsenal as of 23 May 2006. 2005/2006 financial year compared with EUR 12.9 million in the 2004/2005 financial year. The reason for this decline, in addition to the sale of the team DEVELOPMENT OF SIGNIFICANT hotel, hotellennhof, as part of the strategy of fo- OPERATING EXPENSES cusing on Borussia Dortmund's core business, was the transfer of the entire fan merchandise business Personnel expenses line, including the granting of product licences, to A reduction of EUR 8.6 million in personnel expenses BVB Merchandising GmbH as of 01 July 2005. The was achieved from EUR 45.9 million in the income generated is therefore no longer reported 2004/2005 financial year to EUR 37.3 million, by the KGaA. This item continues to include income although the figure for the current 2005/2006 finan- from catering on match days, the sale of publica- cial year includes around EUR 3 million for tax risks

26th round 27th round 18 March 2006 25 March 2006 BVB 2 – 1 Kaiserslautern Hamburg 2 – 4 BVB

Florian Kringe celebrates his winning Solo run to success: Tomas Rosicky and goal in the home game against the BVB bench (in the background) 50 1. FC Kaiserslautern, final score 2:1. celebrate a goal even before it's scored... MANAGEMENT REPORT

from prior years. Personnel expenses for the profes- Other operating expenses sional squad alone recorded a fall amounting to EUR Other operating expenses amounted to EUR 57.0 5.2 million. The sale of the team hotel, hotellennhof, million in the 2005/2006 financial year compared and the transfer of the merchandising activities also with EUR 85.8 million in the previous year. In contributed to the reduction in personnel expenses. addition to expenses for match operations and administration, the principal items were marketing Depreciation and amortisation expenses and legal and advisory costs, which arose Depreciation and amortisation fell as planned by in connection with the capital increase and the EUR 11.5 million compared with the previous year repurchase of the stadium. Operating expenses also to EUR 7.7 million. The major reasons for this were include the residual book values of the transfer lower investments in the professional squad and the rights sold as an offsetting item to the transfer sale of the hotellennhof. income reported.

FINANCIAL POSITION

ANALYSIS OF CAPITAL STRUCTURE The proportion of short-term debt (including deferred income), which amounted in total to EUR The equity ratio for Borussia Dortmund GmbH & 94.4 million, rose from 41.3% to 52.2% as at 30 June Co. KGaA increased compared with 30 June 2005 2006. We expect to be in a position to reduce the from 18.1% to 29.2 %. Following the implementa- amount of short-term debt significantly in the com- tion of the capital increase resolved in May 2006, in ing financial year after applying the cash inflows which 14,625,000 new shares were placed at an issue from the capital increase already carried out and price of EUR 2.00 each, and after taking into implementing the capital increase for cash and non- account the loss for the year, equity rose by EUR cash contributions resolved by the extraordinary 25.3 million to EUR 52.9 million. General Shareholders' Meeting on 15 August 2006 The proportion of medium- and long-term debt, in the 2006/2007 financial year, and as a result of which amounted to EUR 33.7 million, was significant- the significant improvement we anticipate in the ly below the previous year's level (40.6%) at 18.6%. operating results.

28th round 29th round 1 April 2006 8 April 2006 Mönchengladbach 2 – 1 BVB 1 – 2 Leverkusen BVB

Christian Wörns' protests are heard, and Going nowhere: Leverkusen's veteran Bernd Jeff Strasser's foul does not go unpunis- Schneider brings the powerful Dede to a hed – penalty! halt. The Brazilian hits the ground hard. 51 Borussia Dortmund GmbH & Co. KGaA

ANALYSIS OF INVESTMENTS ANALYSIS OF LIQUIDITY

Information relating to the analysis of investments Borussia Dortmund GmbH & Co. KGaA had cash made by Borussia Dortmund can be found in the funds of EUR 39.6 million available at 30 June 2006. statement of changes in non-current assets, which This represents an increase of EUR 36.6 million com- forms part of the notes. pared with 30 June 2005, which mainly reflected the effects of the capital increase and receipts of transfer Additions to intangible assets amounting to EUR 4.4 income. This high level of liquidity will be used to a million relate almost entirely to investments in the pro- large extent for the further repayment of debt at the fessional squad. Additions to tangible assets amounting beginning of the 2006/2007 financial year. to EUR 8.7 million relate principally to the moderni- Information relating to the payment flows from sation of SIGNAL IDUNA PARK and its environs in operating, investing and financing activities can be connection with the 2006 FIFA World Cup. found in the cash flow statement in the notes.

NET ASSETS

The total net assets of Borussia Dortmund GmbH & player registrations within intangible assets as a Co. KGaA rose from EUR 151.3 million to EUR 181.0 result of amortisation and lower non-current trade million. The proportion of this accounted for by - receivables. At the same time, current assets were non-current assets fell from 82.4% to 69.0%. The EUR 29.5 million higher mainly as a result of the principal reasons for this reduction were lower increase in cash funds.

GOVERALL SUMMARY OF RESULTS OF OPERATIONS, FINANCIAL POSITION AND NET ASSETS

The results of operations, financial position and net improvement in the operating result and the equity assets of Borussia Dortmund GmbH & Co. KGaA resources, which once again allows BVB room for showed significant positive development following manoeuvre in its future sporting development. the successful implementation of the cost-cutting We will be able to achieve a turnaround in the ope- reorganisation measures and the largely completed rating result in the 2006/2007 financial year in the restructuring of the liability side of the balance event of corresponding sporting successes by the sheet. Mention should be made above all of the professional squad.

30th round 31st round 15 April 2006 22. April 2006 Berlin 0 – 0 BVB BVB 2 – 1 Nuremberg

Appealing to a higher authority didn't Florian Kringe scores two (great!) goals work: Amoah missed a good chance. But for the first time in a Bundesliga game 52 Marcelinho (r.) did no better... in the 2:1 win over Nuremberg. MANAGEMENT REPORT

SUPPLEMENTARY REPORT

Thanks to the euphoria of the World Cup, the Furthermore, BVB may once again freely dispose Bundesliga sees another record year ahead. As in the over the rights to the Borussia Dortmund name and last few years already, Borussia Dortmund, having logo. By November, Borussia Dortmund will also sold roughly 45,000 season tickets, has maintained its redeem, to the extent possible, the security in the top position in the Bundesliga. Therefore, as regards players that had been assigned in the past. ticketing, we can expect high utilisation of the stadium in the coming season. In sponsoring, Borussia Dortmund's new Champion Partner is Sparda-Bank West eG, with its registered After the balance sheet date, BVB made some other office in Düsseldorf. The agreement initially runs for important personnel decisions. The contract with a period of two years. The signing of this agreement head coach Bert van Marwijk as well as the entire again proves that BVB has lost none of its attractive- coaching staff was prematurely extended by another ness for sponsors. What is more, we have hereby also year until 30 June 2008. Furthermore, Brazil inter- increased the number of our Champion Partners over national Tinga signed a three-year contract running the previous season and will generate additional until 30 June 2009 after the 28-year old midfield revenues in this area. player (whose full name is Paulo Cesar Fonseca do Nascimento) had won the South American Cham- On 15 August 2006 the extraordinary General Share- pions League “Copa Libertadores” with SC holders' Meeting resolved to increase the registered International Porto Alegre. Compared with the pre- share capital of Borussia Dortmund GmbH & Co. vious season, the quality of the professional squad was KGaA by up to EUR 17,550,000. The limited liabili- also improved through the further new acquisitions ty shareholders are entitled to a subscription right in Steven Pienaar, Nelson Valdez, Alexander Frei and the ratio of 5:2 for new shares against a cash contri- Martin Amedick. For this reason qualification for the bution of EUR 2.00 per share. To the extent that the UEFA Cup in the 2006/2007 season seems a realistic limited liability shareholders should not exercise the assumption. indirect subscription right, then, pursuant to the resolution on the capital increase, Morgan Stanley & Co. It seems that this goal can be achieved in spite of the International Ltd., London, United Kingdom will be rather subdued start to the season and the sale of the permitted to subscribe for up to 12,307,600 new transfer rights for Germany international David shares against a non-cash contribution (contribution Odonkor to the Spanish first-league team Betis of a receivable from the Company at the nominal Sevilla. Moreover, it should be possible to reach the value of EUR 2.20 per share). second main round of the DFB Cup. The opponent in the first round will be TSG Thannhausen, a team The KGaA shareholders exercised their indirect sub- from the Bavarian regional league. scription right on 7,567,585 new shares within the

32nd round 33rd round 2 May 2006 6 May 2006 Hanover 1 – 2 BVB BVB 1 – 1 Frankfurt

In a splendid performance, substitute goal- Fight for the ball: Christoph Metzelder keeper Dennis Gentenaar ensured that BVB attacks Frankfurt's Stefan Lexa. Eintracht grabbed three points in Hanover. takes home one point. 53 Borussia Dortmund GmbH & Co. KGaA

subscription period and subscribed such shares In addition, the extraordinary General Shareholders' against cash contribution at the issue price in the total Meeting resolved to create authorised capital of amount of EUR 15,135,170.00. Morgan Stanley & EUR 21,937,500, which is limited in time until 31 Co. International Ltd., United Kingdom, will sub- July 2011. scribe for the other 9,982,415 shares. The capital contribution will be made through assignment to In order to hedge against future interest rate risks, a Borussia Dortmund GmbH & Co. KGaA of a partial fixed interest rate swap was executed in August 2006 receivable of its associated company, Morgan Stanley in relation to the EUR 79.2 million variable interest Bank International Ltd. in the nominal amount of rate loan on the basis of six months EURIBOR plus EUR 21,961,313.00. 2 per cent as at the balance sheet date. This interest rate hedge with a term of 15 years will, in future, We are of the opinion that BVB's reorganisation can result in an interest burden that is independent of be completed through the approval of the capital the actual interest rate development and is based on increase and the full subscription thereof, given the an interest rate of 6.195 per cent. The interest rate increased liquidity and further significant reduction hedge may be terminated by both parties for the first of the debt level that was thus made possible. time after 5 years against a settlement payment in the amount of the market value of the swap.

34th round 1st round 13 May 2006 11 August 2006 Munich 3 – 3 BVB Munich 2 – 0 BVB

Koller plays in Munich (here against Ismael) from On 11 August Borussia Dortmund played the beginning of the match for the first time after the opening game at FC Bayern München 54 his cruciate ligament injury and scores two goals! – and lost by 0:2. MANAGEMENT REPORT

RISK REPORT

RISK MANAGEMENT SYSTEM

Borussia Dortmund's business, which primarily to create running checklists that sensitise the respon- revolves around sports and related marketing and sible employees to the risk situation and thus merchandising, is exposed to a number of specific establish a basis for the early recognition of risks and risks arising externally as well as in the ordinary opportunities. course of business that could adversely effect its development in the future. Current corporate planning and controlling in Borussia Dortmund's finance division also makes it It is the responsibility of management to recognise possible to assess potential risks and initiate appro- these risks early and to monitor them. Our primary priate countermeasures if necessary. The integrated objective is to minimise risk and consistently capi- ERP system, which covers all corporate divisions, talise on opportunities presenting themselves in the also makes analyses possible that serve to support the course of Borussia Dortmund's business develop- early recognition process. ment. This task is pursued with the support of responsible employees involved in the management Borussia Dortmund's financial condition and results of of risks and opportunities. operations could be adversely affected by the risks set forth below. In this regard it should be taken into con- Business risks arise as a result of external or internal sideration that the corporate environment is also events that may impact the achievement of short- characterised by a variety of economic factors that are term goals or long-term strategies as well as the incalculable, such as low economic growth, high unem- Company's financial situation. The monitoring and ployment, particularly in the Ruhr area, or increased controlling of risks associated with current and competitive pressure in the region. Taking into account future business development is carried out by a risk all the opportunities and risk factors, Borussia management system that is refined on an ongoing Dortmund's management is continually adapting basis. This system is made up of both quantitative both its short-term corporate planning as well as its and qualitative components, which make it possible medium-term and long-term business strategy.

2nd Round DFB Cup 19 August 2006 9 September 2006 BVB 1 – 1 Mainz Thannhausen 0 – 3 BVB

Bundesliga premiere: In his 1st match TSG Thannhausen brought about many Martin Amedick heads the ball to make opportunities, but BVB won 3:0. it 1:0. 55 Borussia Dortmund GmbH & Co. KGaA

SPECIFIC RISKS

STRATEGIC RISKS PERSONNEL RISKS

The most important challenge in professional sports Borussia Dortmund's future financial and sporting management is to reconcile sporting and financial development is substantially dependent on the objectives. Essentially, this means working with a performance of its employees. In this regard the limited financial budget to achieve sporting goals that professional squad is of critical importance. Bad could lead to greater financial leverage in the future. investments in this area would have far-reaching To this end, Borussia Dortmund's management has effects on sporting, and thus, financial objectives. In undertaken not to enter into any financial risks that addition, major problems with injured BVB players could jeopardise the existence of BVB. could have an adverse effect on the sporting and financial objectives of Borussia Dortmund GmbH & The financial and business development is largely Co. KGaA. dependent on sporting success. Since sporting suc- The Company's success rests on making business cess cannot be planned, the best management can do decisions and implementing them. BVB is dependent is to create a foundation for success. Investments, on qualified specialists and executives in order to realise particularly in the professional squad, are therefore a its objectives. Particularly in the area of risk manage- necessary prerequisite for achieving sporting objec- ment, the responsible employees must develop an tives, such as qualifying for the UEFA Cup. However, entrepreneurial mindset and approach capable of in order to meet financial goals, planned investments meeting the special challenges of this division. The and decisions must under certain circumstances be organisational structure of Borussia Dortmund, with its postponed since these might only be possible by clear structures and areas of responsibility, serves as the incurring new debt. Moreover, a player may be sold foundation instrumental for this. based on financial considerations in cases where this would not have happened had the decision been COMPETITIVE RISKS made based solely on sporting criteria. Thus, a conflict, or a situation where the sporting In order to stand up to the competition, particularly development and financial development each adver- in advance of the FIFA World Cup 2006, football sta- sely affects the other, is created between the pursuit diums were constructed and renovated throughout of financial interests and sporting interests, particu- Germany. In contrast to many of its competitors, larly when the business continually falls short of its Borussia Dortmund could not rely on public subsi- sporting goals. In such case, management weighs the dies for the expansion and renovation of the SIG- opportunities and risks to find a reasonable solution NAL IDUNA PARK, which means that Borussia that takes into account strategic objectives for the Dortmund bears a greater risk than its competitors. medium-term. In addition, the state of North Rhine Westphalia has

3rd round 4th round 26 August 2006 26 August 2006 Stuttgart 1 – 3 BVB BVB 1 – 0 Hamburg

The team celebrates victory with its fans Steven Pienaar is attacked in Stuttgart. by Hamburg's Mathijsen. 56 MANAGEMENT REPORT

an unusually high concentration of competitors with or a showing of inability to meet financial criteria, currently seven teams playing in the (First) Bun- this could result in automatic relegation. The effects desliga and four teams in the Second Bundesliga, of an automatic relegation on earnings and liquidity which could have an adverse effect with respect to would jeopardise the Company's existence. acquiring sponsors based in the region. Through the implementation of reorganisation SALES RISKS measures, debt restructuring, the new main sponsorship deal with RAG, the marketing of SIGNAL If the team failed to have sporting success over an IDUNA PARK as well as moderate net investments extended period of time, this could have a material in the professional squad, we have been able to sig- adverse effect on the marketing potential of nificantly reduce the risk of not being granted a Borussia Dortmund. This would have a direct effect licence, so that in our opinion the licensing proce- on the revenue sources of ticketing, sponsoring as dure will no longer be a direct threat to the per- well as the merchandising business in the form of formance or the existence of the Company. DFL sales declines because these are directly dependent deutsche Fußball Liga GmbH informed us on 20 on the sporting performance of BVB and are cur- April 2006 that it deems the criteria for a licence for rently at a very high level. In addition, if we were to the 2006/2007 season to be met. The DFL's deci- fall short of our sporting objectives, we would also sion is not connected with any conditions for be unable to realise additional earnings potential Borussia Dortmund. It contains only the standard primarily in the area of TV marketing at UEFA administrative conditions relating to reporting and Champions League and UEFA Cup matches. documentation obligations.

RISKS JEOPARDISING PERFORMANCE As a result of the implementation of the capital AND CONTINUED EXISTENCE increase resolved on 15 August 2006 and the repayment of other financial debt thereafter, Borussia's In order to participate in Bundesliga matches, debt restructuring has now been completed. Borussia Dortmund requires a licence from the German Football League (DFL) which is issued for Thus, we believe that we have finally overcome the each season. If the licence were to be revoked or risk to the Company's existence that had existed in denied because of failure to comply with conditions years past.

5th round 6th round 22 September 2006 29 September 2006 Gladbach 1 – 0 BVB BVB 2 – 2 Hanover

Frei misses: Keller hooks the ball away Kruska, Kringe and Pienaar celebrate from the foot of the BVB striker. the two goals by Ebi Smolarek. 57 Borussia Dortmund GmbH & Co. KGaA

THE RISK SITUATION IN SUMMARY

Compared to the previous year, we have been able to involved in competitions on an international level definitively eliminate those risks threatening perfor- does not jeopardise Borussia Dortmund's existence. mance or the Company's continued existence which If we succeed in qualifying for the UEFA Cup or the are subject to disclosure thanks to reorganisation Champions League, our financial condition and efforts and debt restructuring. The fact that we are not results of operations will improve even further.

FORECAST REPORT

ANTICIPATED DEVELOPMENT OF THE GROUP

After having completed the reorganisation, the debt We will continue on the course we have set for our- restructuring of Borussia Dortmund GmbH & Co. selves on a solid equity base and without exposing KGaA and the selective strengthening of its profes- ourselves to any incalculable financial risks, so that sional squad, Borussia Dortmund is once more able BVB will once more become a leading football club in to compete for one of the first five places on the Germany and preferably also in Europe. Bundesliga table.

EXPECTED GENERAL ECONOMIC ENVIRONMENT

Professional football in Germany is booming as never media contracts only entered into effect in July 2006. before. The Bundesliga's unfailing popularity with the As the KirchGruppe had been the chief source of fans and the resulting interest of media companies and money for the clubs, its insolvency presented them sponsors has also made it a commercial success story. with a major challenge. Now, five years down the line, Since the formation of the League Association the league is in a better position than ever before. (Ligaverband) in 2000, the clubs and corporations of Professional football has emerged all the stronger from professional football have not been able to produce the crisis of the television and advertising markets. any figures as good as those in the past football season. Tough cutbacks on the one hand and the sustainabili- And this although the increase of the TV revenues is ty of operations coupled with the preparedness to not yet included in the present figures because the invest in the future on the other are starting to pay off.

58 MANAGEMENT REPORT

EXPECTED RESULTS OF OPERATIONS

ANTICIPATED EARNINGS ANTICIPATED SALES DEVELOPMENT DEVELOPMENT

We are expecting to achieve a turnaround in the It is expected that sales revenues in the 2006/2007 operating result (EBIT) already in the 2006/2007 financial year will amount to approximately EUR 80 season. Compared to 2005/2006, there will be a sig- million, without taking into account any further nificant improvement in the result from ordinary transfer revenues or any extraordinary success in the activities as well as the overall company result. DFB Cup. Sales revenues could clearly rise to above From a realistic perspective, the objective for the EUR 85 million as a result of a qualification for the season is qualifying for the UEFA Cup. If we are UEFA Cup and the firm establishment of BVB in indeed able to attain this objective, then earnings international competitions over the medium term. would continue to improve substantially beginning in Participation in the UEFA Champions League would the 2007/2008 season due to the higher income presumably increase the sales potential to above generated through ticketing, sponsoring, TV mar- EUR 95 million. keting and catering.

ANTICIPATED DEVELOPMENT EXPECTED DIVIDENDS OF MATERIAL OPERATING EXPENSES Against the background of the very high cumulated Operating expenses will continue to decrease in the losses in past years, we are not planning any dividend 2006/2007 financial year. In the area of legal and distributions in the next financial years despite a advisory costs, for example, we are expecting a drop marked improvement in earnings. Given the fact of approximately EUR 4.0 million following the that for the time being there are to be further successful implementation of the reorganisation and substantial reductions in the indebtedness, we will the restructuring of the liability side of the balance consider the distribution of dividends subject to the sheet. Another important factor in reducing operating condition of sustainable profits, which can only be expenses is the contractual readjustment of the realised through participation in international stadium rent. competitions.

59 Borussia Dortmund GmbH & Co. KGaA

EXPECTED FINANCIAL POSITION

FINANCIAL PLANNING Borussia Dortmund and, in this respect, will not be taking any incalculable financial risks. In essence, As a result of the improved earnings situation and the this means that we will only be incurring capital debt restructuring, which also includes, in particular, expenditure to the extent permitted by the antici- long-term financing of the stadium shares we expect pated financial leeway. As part of capital expenditure that we will be in a position to achieve a further sub- planning, we will thus not include any uncertain stantial reduction in our liabilities. This will be imple- sporting successes which, if they failed to materialise, mented, in particular, through the repayment in would lead to substantial new indebtedness. ratable amounts of the long-term stadium financing as from the 2007/2008 financial year, while the ANTICIPATED DEVELOPMENT development of the other liabilities in the course of OF LIQUIDITY operating activities will be relatively constant. Following the implementation of the capital increase CAPITAL EXPENDITURE PLANNING resolved on 15 August 2006, the further reduction in debt consequent thereto and the expected improve- In future, our capital expenditures will be focussed ment in earnings, we will as from the 2007/2008 on the professional squad, further modernisations of financial year be in the position to generate substan- the SIGNAL IDUNA PARK and its environs as well tial financial net income, which will clearly improve as the possible expansion of our new training centre. Borussia Dortmund's room for manoeuvre and its Thus we will concentrate on the core business of competitive edge.

OPPORTUNITIES

Borussia Dortmund's greatest opportunities lie in financial effects produced thereby also depend, to a unlocking and exploiting additional revenue poten- large extent, on the luck of the draw. tials by participating in international competitions, such as the UEFA Cup and the UEFA Champions Borussia Dortmund's professional squad, which in- League. The mere participation in the UEFA Cup cludes a large number of young and talented players, group phase would already result in additional rev- has enormous potential. In the future, players such as enues of around EUR 5 million, generated through David Vrzogic, Nuri Sahin, Sebastian Tyrala, being additional TV, ticketing and sponsoring revenues. young players from BVB's own youth camp, estab- According to our estimations, we would generate at lished regular players such as Christoph Metzelder, least EUR 10 million in additional sales if we were to Sebastian Kehl, Roman Weidenfeller, Christian reach the group phase of the UEFA Champions Wörns or Dede and new acquisitions such as Steven League. In addition, an international presence would Pienaar, Nelson Valdez, Tinga and Alexander Frei will almost certainly have a positive impact on the mer- be able to push BVB once more to the top in chandising business. Germany and maybe even further. In addition to the sporting success we are striving for, this team enables Participation in the national cup matches, the DFB us to achieve a significant increase of earnings po- Cup and the DFL League Cup, represents yet tential and offers tremendous transfer potentials for another significant earnings potential. However, the the future.

60 MANAGEMENT REPORT

DEVELOPMENT FORECAST IN SUMMARY

Since the completion of the reorganisation and the In our continued development, we will not enter restructuring focusing on the buyback of the stadi- into any further financial risks that could jeopardise um share, BVB is once again in a position to make the existence of Borussia Dortmund. Profits gener- investments in the professional squad, which will ated will be prerequisite to any further investments significantly improve the quality of the team. The in the professional squad. We are convinced that we contracts with national players Steven Pienaar, are on the right road – the one that will lead us back Alexander Frei, Nelson Valdez and Tinga are an to the top of the Bundesliga. impressive demonstration of this. Qualifying for the UEFA-Cup in the 2006/2007 season is a realistic goal, which will enable us to further strengthen Borussia Dortmund's earnings potential.

OTHER DISCLOSURES

CONCLUDING STATEMENT TO THE DEPENDENT COMPANY REPORT

The Dependent Company Report prepared by year that was reasonable under the circumstances Borussia Dortmund GmbH & Co. KGaA pursuant known at the time such transactions were entered into. to § 312 AktG sets out the relationships to BV. No other measures within the meaning of § 312 (1) Borussia 09 e.V. Dortmund as the controlling entity. AktG were taken or omitted during the financial year.

With respect to transactions set out in the report concerning relationships with affiliated enterprises, Dortmund, 8 September 2006 the Company received consideration in the financial Borussia Dortmund Geschäftsführungs-GmbH

Hans-Joachim Watzke Thomas Treß Managing Director (chairman) Managing Director

61 Fall and rise Four years in the second division

1974: Opening of the Westfalenstadion, today SIGNAL IDUNA PARK, with BVB v Schalke.

THE DROP INTO THE SECOND DIVISION PROMOTION AND INCONSISTENT YEARS Borussia Dortmund's club history has many highlights, but it also is marked by setbacks. Yet BVB The impetus for the renaissance of Borussia in the has remarkably emerged stronger from every mid-1970s was the Westfalenstadion, which was trough it has experienced. This was also the case in completed in 1974. Conceived as a pure football the 1971/72 season, when Borussia had to over- stadium, it set new standards, not so much through come its first and only Bundesliga relegation. comfort (more than two thirds of the 54,000 places are standing room), but rather through a proximity Borussia Dortmund was in no way able to profit to the pitch that was previously unknown in from the glory that came with being the first Ger- Germany. More than 50,000 fans trailed to the new man winner of a European Cup. On the contrary: temple on Strobelallee during the days in the In the early 1970s, a downwards trend that would second division, and on 23 June 1976 the return to never have been considered possible set in. Things the top flight had been settled in the second went rapidly downhill, not only in sporting terms, relegation game against the second placed southern but also financially. The consequences were catas- team, 1. FC Nürnberg. trophic: The last aces such as Willi Neuberger or Siegfried Held left BVB, and unknown amateurs from the region were supposed to plug the gaps. This could never work. After 13th place in the previous year, the downward spiral became increas- ingly dramatic in the 1971/72 season. In that season, BVB lost 1:11 against Bayern Munich, while the hopes of those in charge that BVB would nevertheless remain in the Bundesliga due to the “Bundesliga scandal”, which did not involve Borus- sia Dortmund, were not fulfilled. BVB was relegated In the 1970s, the Samson Lion after finishing in 17th place with 20 defeats. For adorned the BVB jersey. four long years, the opponents were teams such as Barmbek-Uhlenhorst, Olympia Wilhelmshaven or FC Mülheim-Styrum.

62 1971 1976 1989

CHRONOLOGY 1972

AUGUST/SEPTEMBER

26 August to 11 September: The XX Summer Olympics are held in Munich and Kiel.

DECEMBER

10 December: The Nobel Prize for Literature is awarded to Heinrich Böll in Stockholm.

CHRONOLOGY 1976

JUNE

1 June: RAF terrorist Andreas Baader is arrested. “Thank you Otto” Coach Otto Rehhagel with Ede Kasperski (left) and Horst Bertram (right) after the nailbiting promotion match on 25 June 1976. 7 June: RAF terrorist Gudrun Ensslin is arrested.

15 June: RAF terrorist Ulrike Meinhof is arrested.

JULY

7 July: The former German President Gustav Heinemann dies aged 76.

OCTOBER

29 October: Erich Honecker is elected chairman of the State and Defence Councils. As a result, as General Secre- tary of the Socialist Unity Party, he held the three highest posts in the GDR.

DECEMBER

15 December: The German Lower House re-elects Helmut Schmidt as Dream becomes reality: Lothar Huber (left) and Horst Bertram celebrate Chancellor of the Federal Republic promotion following the victory against Nuremberg. of Germany.

Team poster 1976 following promotion into 1982 – Return to the UEFA Cup against the Bundesliga. Glasgow Rangers.

63 New triumphs Cup victory 1989

ven though the black-and-yellows enjoyed Esome highlights in the years that followed promotion, those years were characterised by sporting mediocrity. However, the fans' loyalty has always been legendary, so it was fitting that the return to the European football stage should take place before sold-out stands. On 15 September 1982, 52,000 viewers saw the first European Cup match after almost 16 years of abstinence. The first-round Party on Friedensplatz: Cup victory. home leg in the UEFA Cup against Glasgow Rangers finished 0:0. This was also to be the last appearance in a European club competition for another five years. On 20 October 1984, only 12,000 visitors watched the Bundesliga match against Karlsruher S.C., the second-lowest attendance ever recorded in the Westfalenstadion. Borussia had lean years, but also celebrated another title: The victory in the DFB Cup in 1989. The freshly operated Norbert Dickel had himself included in the line-up after a knee injury and scored two goals; the “hero of Berlin” was born.

In 1989, BVB wins the DFB Cup for the second time in its history.

Parade through Dortmund after the Cup triumph in 89: Andy Möller holds the Cup in his hands.

The original goalkeeper gloves of Teddy de Beer from the final.

64 1971 1976 1989

The “bowl” in Berlin in black and yellow hands.

In 1989, BVB also wins the Super Cup.

A photo that became CHRONOLOGY 1989 famous: “Nobby” Dickel JANUARY after his equalizer for 1:1. The “hero of Berlin” 20 January: The Republican George chose this motif for his Bush succeeds Ronald Reagan as the st autograph card. 41 President of the United States of America.

JULY

14 July: At the same time as the celebrations for the 200th anniversary of France, the 15th World Economic Forum is held in Paris.

SEPTEMBER

Today's sports director, Michael Zorc 30 September: Foreign Minister Hans- holding the DFB Cup in 1989. Dietrich Genscher (FDP) announces on the balcony of the German Embassy in Prague that all GDR refugees in the German embassies in Prague and Warsaw may emigrate.

OCTOBER

7 October: Mikhail Gorbachov takes part in the celebrations for the 40th anniversary of the GDR and warns of reforms with a sentence that made history: “He who is too late will be punished by life”.

NOVEMBER

10 November: The wall comes down: Germany rejoices and thanks Joined BVB in 1990: Flemming Mikhail Gorbachov. Povlsen (left), here with Frank Mill. p. 84

65 Borussia Dortmund GmbH & Co. KGaA Balance sheet

A S S E T S 30 June 2006 30 June 2005 EUR EUR thousands A. Fixed assets

I. Intangible assets 1. Concessions, industrial and similar rights and assets and licences in such rights and assets 3,530,191.35 14,777.1 2. Payments on account 3,125,200.00 0.0 6,655,391.35 14,777.1

II. Tangible assets 1. Land, land rights and buildings on third-party land 21,959,674.59 19,094.5 2. Other equipment, operating and office equipment 8,063,598.97 5,716.5 3. Payments on account and assets under construction 466.46 4,589.1 30,023,740.02 29,400.1

III. Financial assets 1. Shares in affiliated companies 55,329,247.37 44,498.2 2. Loans to affiliated companies 23,763,531.19 23,630.9 3. Other equity investments 95,632.18 95.5 4. Other loans 200,703.82 121.9 79.389,114.56 68,346.5

B. Current assets

I. Inventories 1. Merchandise 52,187.44 613.0 2. Payments on account 1,404.60 0.0 53,592.04 613.0

II. Receivables and other assets 1. Trade receivables 19,815,852.43 24,321.8 2. Receivables from affiliated companies 3,352,509.16 3,008.9 3. Other assets 1,527,953.61 6,504.7 24,696,315.20 33,835.4

III. Securities Own shares 54,425.88 59.1

IV. Cash-in-hand and bank balances 39,551,503.95 2,992.8

C. Prepaid expenses 610,503.87 1,280.2

181,034,586.87 151,304.2

66 ANNUAL FINANCIAL STATEMENTS

E Q U I T Y A N D L I A B I L I T I E S 30 June 2006 30 June 2005 EUR EUR thousands A. Equity

I. Subscribed capital 43,875,000.00 29,250.0 II. Capital reserves 14,625,000.00 0.0 III. Revenue reserves Reserve for own shares 54,425.88 59.1 IV. Net accumulated losses -5,679,000.60 -1,770.7

52,875,425.28 27,538.4

B. Provisions

1. Provisions for taxes 2,899,200.00 102.3 2. Other provisions 23,011,300.00 20,678.0

25,910,500.00 20,780.3

C. Liabilities

1. Liabilities to banks 64,782,592.56 30,055.4 2. Trade payables 8,229,651.93 17,069.5 3. Liabilities to affiliated companies 6,355,295.91 5,859.7 4. Other liabilities 13,998,168.53 36,019.7

93,365,708.93 89,004.3

D. Deferred income 8,882,952.66 13,981.2

181,034,586.87 151,304.2

67 Borussia Dortmund GmbH & Co. KGaA Income statement

7/2005 - 6/2006 7/2004 - 6/2005 EUR EUR thousands

1. Sales 83,255,581.53 73,947.4

2. Other operating income 6,750,784.31 4,597.4 90,006,365.84 78,544.8

3. Cost of materials 0.00 3,317.8

4. Personnel expenses a) Wages and salaries 35,702,134.04 43,746.2 b) Social security and other pension costs 1,623,917.72 37,326,051.76 2,177.5

5. Depreciation and amortisation 7,700,819.33 19,219.9

6. Other operating expenses 56,962,607.53 85,847.9

7. Income from investments 60,813.13 73.8 of which from affiliated companies: 2005/2006: EUR 60,813.13 / 2004/2005: EUR 40,405.13

8. Income from profit and loss transfer agreements 119,429.06 0.0

9. Income from other securities and long-term loans 1,417,583.16 2,143.9 of which from affiliated companies: 2005/2006: EUR 1,417,583.16 / 2004/2005: EUR 114,764.40

10. Other interest and similar income 2,016,805.43 1,590.3 of which from affiliated companies: 2005/2006: EUR 0.00 / 2004/2005: EUR 0.00

11. Write-downs of financial assets and securities classified as current assets 2,541.93 8.4

12. Expenses from profit and loss transfer agreements 271,292.87 0.0

13. Interest and similar expenses 4,310,139.15 6,710.1 of which to affiliated companies: 2005/2006: EUR 0.00 / 2004/2005: EUR 0.00

14. Loss from ordinary activities -12,952,455.95 -78,675.0

15. Extraordinary income 10,195,794.96 0.0

16. Taxes on income 588,500.00 0.0

17. Other taxes 567,821.61 5.6

18. Net loss for the year -3,912,982.60 -78,680.6

19. Accumulated losses brought forward -1,770,730.22 -73,302.4

20. Withdrawals from capital reserves 0.00 150,212.3

21. Withdrawals from revenue reserves 4,712.22 0.0

22. Net accumulated losses -5,679,000.60 -1,770.7

68 ANNUAL FINANCIAL STATEMENTS Notes

GENERAL DISCLOSURES TO THE ANNUAL FINANCIAL STATEMENTS

The annual financial statements of Borussia therefore regarded indirectly as a controlling Dortmund GmbH & Co. KGaA for the 2005/2006 company, Borussia Dortmund GmbH & Co. financial year have been prepared in accordance KGaA qualifies as a dependent company within with the requirements of the German Commercial the meaning of § 17 AktG and accordingly is Code (Handelsgesetzbuch, “HGB”) and the required to prepare a Dependent Company Re- particular accounting requirements of the Ger- port in accordance with § 312 AktG. This report man Stock Corporation Act (Aktiengesetzbuch, must also contain the statutory concluding “AktG”). There is an additional obligation in accor- statement required in accordance with § 312 dance with § 315a (1) HGB to prepare consolidated AktG which must be included in the manage- financial statements applying international finan- ment report. cial reporting standards (IFRS). In contrast to previous years, the notes to each set of financial With effect from 1 June 2005, the Company has statements are presented separately rather than on transferred the merchandising division to a whol- a combined basis. ly-owned subsidiary. As a result of this, the figures for the period reported on relating to the items The balance sheet classifications comply with the “inventories”, “sales” and “cost of materials” are classification format under commercial law in not fully comparable with those for the previous accordance with § 266 HGB, while the income year. In the 2005/2006 financial year, the subsi- statement has been prepared in the vertical format diaries goool.de sportswear GmbH and BVB using the nature of expense method in accordance Beteiligungs-GmbH acquired the shares in BVB with § 275 HGB. The additional information to be Stadion GmbH (formerly: Westfalenstadion provided in accordance with the statutory require- Dortmund GmbH & Co. KG).In order to reflect ments is presented in the notes for reasons of the inclusion of the latter in the group of affiliated clarity and accessibility. companies, the previous year's figures in respect of the items “loans to affiliated companies”, “lia- As a result of the fact that BV. Borussia 09 e.V. bilities to affiliated companies” and “income from Dortmund holds 100% of the shares in Borussia loans - of which from affiliated companies” have Dortmund Geschäftsführungs-GmbH and is been restated.

ACCOUNTING POLICIES

Fixed assets Intangible assets are measured at cost less amorti- August 1992, I R 24/91 and the FIFA Regulations sation based on their expected useful lives or at the for the Status and Transfer of Players contained in lower fair value. Player registrations reported in circular no. 769 of 24 August 2001 which came into these financial statements are measured at cost, force on 21 September 2001, and are amortised on taking into account the decision of the Federal a straight-line basis in accordance with the term of Court of Finance (Bundesfinanzhof, “BFH”) of 26 the individual contracts for professional players.

69 Borussia Dortmund GmbH & Co. KGaA

Tangible assets are measured at cost less accu- Cash and balances with banks are recognised at mulated depreciation. Low-value items are fully their nominal amounts. written off in the year of acquisition. Depreciation is based on the useful lives authorised for tax Prepaid expenses consist principally of prepay- purposes. ments relating to the professional squad and Financial assets are measured at cost. insurance premiums. The amounts are reversed ratably over the terms/lives of the individual items. Inventories Inventories are measured at cost less any dis- Provisions counts, subject to the strict lower of cost or market Provisions for taxes and other provisions are principle. recognised in appropriate amounts for all identifiable uncertain liabilities on the basis of careful Receivables and other assets, estimates. securities, cash funds and prepaid expenses Liabilities Receivables and other assets are measured at their Liabilities are recognised at their nominal nominal amounts. General valuation allowances amounts or at the repayment amount. are made for the overall credit and interest-rate risk while separate allowances are recognised for Deferred income identifiable individual risks. Non-interest-bearing Deferred income comprises receipts from ticket items with a remaining maturity over one year are sales, sponsorship and licences relating to the reported at their discounted present value. 2006/2007 season. The amounts are reversed ratably over the periods to which they relate. Securities classified as current assets are measured at cost or the lower fair value taking account of the lower of cost or market principle.

70 ANNUAL FINANCIAL STATEMENTS

NOTES TO THE BALANCE SHEET

Fixed assets The breakdown of fixed assets is as follows:

(in EUR thousands) 30 June 2006 30 June 2005

Intangible assets 6,655 14,777

Tangible assets 30,024 29,400

Financial assets 79,389 68,347

116,068 112,524

Computer software, purchased trademark rights Dortmund Public Utilities Group (Dortmunder and player registrations are reported as intangible Stadtwerke) and let to the Company on a long- assets. The reduction in this item in the 2005/2006 term lease. financial year was mainly the result of the amortisation of player registrations and disposals. The Financial assets, in addition to the direct equity players Ewerthon, Jensen and Rosicky were sold investments described in more detail in the list of in return for transfer payments, while the players shareholdings (see page 125), principally comprise Amoah, Degen and Valdez (payment on account) the tenant's loan to BVB Stadion GmbH (formerly: were signed up. Westfalenstadion Dortmund GmbH & Co. KG) reported under loans to affiliated companies. Tangible assets consist principally of real property in the stadium site and the adjoining area “Am The change in financial assets compared with the Luftbad”. They also include the commercial previous year mainly reflects the transfer of the premises constructed on land subject to hereditary merchandising division in return for the grant of building rights and buildings and sporting facilities rights in the transferee company with a fair value at the training ground, the youth centre, the ca- of EUR 10,831,000. tering extensions and other movable components of the stadium, as well as operating and office Internally generated trademark rights, claims in equipment at these facilities and at the adminis- respect of future transfer and insurance compen- trative headquarters. sation relating to player registrations, land, land rights, equity investments and loans granted have The increase in tangible assets is mainly attributa- been assigned or charged as security for loans. ble to the completion of the “Am Luftbad” parking area and investments in the stadium in connection The development of gross fixed assets and of accu- with the 2006 World Cup. The training ground was mulated depreciation and amortisation for the constructed in the 2005/2006 financial year by the individual items of fixed assets are shown in the following analysis.

71 Borussia Dortmund GmbH & Co. KGaA Changes in fixed assets

Cost

At At 01 July 2005 Additions Disposals Reclassifications 30 June 2006 EUR EUR EUR EUR EUR

I. Intangible assets 1. Concessions, industrial and similar rights and assets and licences in such rights and assets 71,540,242.32 1,232,759.50 34,821,023.74 0.00 37,951,978.08 2. Payments on account 0.00 3,125,200.00 0.00 0.00 3,125,200.00 71,540,242.32 4,357,959.50 34,821,023.74 0.00 41,077,178.08

II. Tangible assets 1. Land, land rights and buildings on third-party land 22,320,711.24 209,750.47 0.00 3,118,233.05 25,648,694.76 2. Other equipment, operating and office equipment 14,504,291.58 947,482.32 1,044,508.45 2,935,558.87 17,342,824.32 3. Payments on account and assets under construction 4,589,082.70 1,585,917.23 120,741.55 -6,053,791.92 466.46 41,414,085.52 2,743,150.02 1,165,250.00 0.00 42,991,985.54

III. Financial assets 1. Shares in affiliated companies 44,498,237.27 10,831,010.10 0.00 0.00 55,329,247.37 2. Loans to affiliated companies 23,630,897.01 132,634.18 0.00 0.00 23,763,531.19 3. Other equity investments 95,509.32 122.86 0.00 0.00 95,632.18 4. Other loans 121,883.64 101,999.96 23,179.78 0.00 200,703.82 68,346,527.24 11,065,767.10 23,179.78 0.00 79,389,114.56

181,300,855.08 18,166,876.62 36,009,453.52 0.00 163,458,278.18

Current assets Current assets are made up as follows:

(in EUR thousands) 30 June 2006 30 June 2005

Inventories 54 613 Receivables and other assets 24,696 33,835 - of which with a remaining term over 1 year: EUR 8,852,000 (2004/2005: EUR 12,207,000) Securities 54 59 Cash-in-hand and bank balances 39,552 2,993

64,356 37,500

The reduction in inventories reflects the fact that amount represents the material value of decora- the Company transferred its merchandising tive shares in the form of printed physical share division to a wholly-owned subsidiary at the certificates, measured at cost. beginning of the financial year. The remaining

72 ANNUAL FINANCIAL STATEMENTS

Accumulated depreciation and amortisation Net book values

At At At At 01 July 2005 Additions Disposals 30 June 2006 30 June 2006 30 June 2005 EUR EUR EUR EUR EUR EUR

56,763,165.75 5,949,888.51 28,291,267.53 34,421,786.73 3,530,191.35 14,777,076.57 0.00 0.00 0.00 0.00 3,125,200.00 0.00 56,763,165.75 5,949,888.51 28,291,267.53 34,421,786.73 6,655,391.35 14,777,076.57

3,226,184.25 462,835.92 0.00 3,689,020.17 21,959,674.59 19,094,526.99

8,787,840.16 1,288,094.90 796,709.71 9,279,225.35 8,063,598.97 5,716,451.42 0.00 0.00 0.00 0.00 466.46 4,589,082.70 12,014,024.41 1,750,930.82 796,709.71 12,968,245.52 30,023,740.02 29,400,061.11

0.00 0.00 0.00 0.00 55,329,247.37 44,498,237.27 0.00 0.00 0.00 0.00 23,763,531.19 23,630,897.01 0.00 0.00 0.00 0.00 95,632.18 95,509.32 0.00 0.00 0.00 0.00 200,703.82 121,883.64 0.00 0.00 0.00 0,00 79,389,114.56 68,346,527.24

68,777,190.16 7,700,819.33 29,087,977.24 47,390,032.25 116,068,245.93 112,523,664.92

Receivables and other assets declined largely as a shares in the form of printed physical share certifi- result of payments received in respect of transfer cates which are freely transferable and tradable. In receivables and receivables from the jersey sponsor such cases, shareholders' subscription rights are and main sponsor. Individual trade receivables, as excluded in accordance with § 71 (1) No. 8 AktG. In well as future claims from season ticket sales for the period between the date of admission of the the 2007/2008 season (excluding the hospitality Company's shares to trading (31 October 2000) and area), TV income and the agreement for the rights the balance sheet date, the Company acquired a to the stadium name, have been assigned as secu- total of 34,000 no par value shares and sold 10,129 rity for loans. no par value shares off-market in the form of printed physical share certificates. The gain on disposal has The securities item includes the Company's own been reported separately under other operating shares relating to the decorative share certificates. income. At the balance sheet date, the Company's Under the terms of a resolution of the General holding of its own securities consisted of 23,871 no Shareholders' Meeting held on 16 November 2004, par value shares. They were measured at the rate the Company is authorised to sell its own shares prevailing on the balance sheet date. A reserve for either on or off the stock market. Off-market sales own shares in the amount of the asset item has are permitted, among other purposes, for the sale of been set up in accordance with § 272 (4) HGB.

73 Borussia Dortmund GmbH & Co. KGaA

Further disclosures required in accordance with § income from the sale of shares has been included in 160 AktG are given in the following overview, the the loss from operating activities:

Purchases of Sales of own Holding of own no par no par value own no par Amount of Percentage of Purchase Sale Month value shares shares value shares share capital share capital price price EUR % EUR EUR

Holding as of June 2005 24,138 24,138 0.083

July 2005 - December 2005 -184 -184 0.001 2,024.00

Holding as of December 2005 23,954 23,954 0.082

January 2006 - June 2006 -83 -83 0.000 913.00 Holding as of June 2006 23,871 23,871 0.054

Bank balances amounting to EUR 3,608,000 (2004/2005: EUR 465,000) have been pledged as security for loans.

Prepaid expenses Prepaid expenses consist principally of personnel expenses relating to the professional squad and insurance premiums paid in advance.

Equity

(in EUR thousands) 30 June 2006 30 June 2005 Subscribed capital 43,875 29,250 Capital reserves 14,625 0 Revenue reserves 54 59 Net accumulated losses -5,679 -1,771 52,875 27,538

The Company's subscribed capital amounts to amount of the issue was added to capital reserves. EUR 43,875,000 and is divided into 43,875,000 no The capital increase was entered in the commercial par value shares, each representing a notional share register on 23 June 2006. in the share capital of EUR 1.00. In addition, a conditional increase in the share On the basis of the authorisation granted by the capital of up to EUR 14,625,000 was resolved by General Shareholders' Meeting on 22 November the General Shareholders' Meeting on 22 No- 2005 and the approval of the Supervisory Board of vember 2005. The purpose of the conditional capi- 17 May 2006, the general partner resolved to utilise tal is to cover the grant of option rights and the the authorised capital to increase the share capital agreement of option obligations and the settlement by up to EUR 14,625,000 to up to EUR 43,875,000 of conversion rights and obligations, in all cases by the issue of up to 14,625,000 new bearer shares, issued by the Company during the period until 31 with subscription rights for shareholders. The October 2010 on the basis of the authorisation capital increase was fully subscribed at an issue granted by the General Shareholders' Meeting on price of EUR 2.00 for each no par value share. The 22 November 2005. To date, no use has been made premium of EUR 14,625,000 over the nominal of the authorisation referred to.

74 ANNUAL FINANCIAL STATEMENTS

The development of reserves was as shown below:

(in EUR thousands) 01 July 2005 Additions Withdrawals 30 June 2006

Capital reserves 0 14,625 0 14,625 Revenue reserves (Reserve for own shares) 59 0 -5 54

The premium from the capital increase amounting to EUR 14,625,000 resolved in May 2006 was added to capital reserves. The withdrawal relates to the adjustment of reserves to reflect the current holding of own shares.

Changes in equity were as follows:

Changes in capital (in EUR thousands) 01 July 2005 Additions/ Loss 30 June 2006 withdrawals for the year Subscribed capital 29,250 14,625 0 43,875 Capital reserves 0 14,625 0 14,625 Revenue reserves 59 -5 0 54 Net accumulated losses -1,771 5 -3,913 -5,679 27,538 29,250 -3,913 52,875

The annual financial statements for 2004/2005 were approved at the General Shareholders' Meeting held on 22 November 2005.

Provisions

(in EUR thousands) 30 June 2006 30 June 2005 Provisions for taxes 2,899 102 Other provisions 23,012 20,678 25,911 20,780

The provisions for taxes mainly comprise the employer's liability insurance schemes, bonuses expected additional payments resulting from a and one-off payments etc, other provisions include wages tax audit for the period 1 July 2000 – 30 June provisions for cost and supplier invoices not yet 2004. received. In addition, provisions were recognised for expected losses from pending transactions in In addition to staff-related obligations such as connection with the partial reversal of trademark unclaimed holiday entitlements, contributions to rights amounting to EUR 17,487,000.

75 Borussia Dortmund GmbH & Co. KGaA

Liabilities The maturities and security granted in respect of liabilities reported at 30 June 2006 are shown in the following overview.

(in EUR thousands) of which with a remaining term of: Total up to 1 – 5 more than 1 year years 5 years

1. Liabilities to banks 64,783 41,588 5,210 17,985 2. Trade payables 8,230 8,230 0 0

3. Liabilities to affiliated companies 6,355 1,123 5,232 0

4. Other liabilities - of which from taxes: EUR 2,552,000 (2004/2005: EUR 3,873,000) - of which relating to social security: EUR 24,000 (2004/2005: EUR 195,000) 13,998 8,683 2,357 2,958 93,366 59,624 12,799 20,943

Security has been granted in respect of liabilities Deferred income to banks and other lenders amounting to EUR Deferred income includes income from licences 67,196,000 (2004/2005: EUR 64,453,000) in the and sponsorship in addition to payments received form of the real property liens, assignments and in respect of season ticket sales. pledges described in more detail above. Other financial obligations and contin- As well as short- to medium-term loans amounting gent liabilities to EUR 8,129,000, other liabilities consist mainly At the balance sheet date, there were financial of wages and salaries outstanding at the end of the obligations resulting from rental, leasing, heredi- financial year and the associated social security tary lease, licence and rights of use agreements. contributions. In addition, there are liabilities re- The classification by maturity is shown in the lating to wages tax and VAT. following table:

(in EUR thousands) of which with a remaining term of Total up to 1 – 5 more than 1 year years 5 years

Stadium rent 111,568 6,459 24,916 80,193 Marketing fees 33,296 8,324 24,972 0 Rental and leasing 36,827 3,041 12,065 21,721 Purchase commitments 7,101 5,294 1,807 0 Other 2,164 45 178 1,941 190,956 23,163 63,938 103,855

In connection with the repurchase of the shares in to EUR 57,500,000, which are secured by real the stadium by subsidiaries, there were contingent property liens, assignments and pledges granted by liabilities at the reporting date from guarantee agree- Borussia Dortmund GmbH & Co. KGaA. ments in favour of affiliated companies amounting

76 ANNUAL FINANCIAL STATEMENTS

NOTES TO THE INCOME STATEMENT

Sales The following table shows sales classified by area of activity as required by the German Football League (Deutsche Fußball Liga GmbH, “DFL”) for the licensing procedure.

(in EUR thousands) 2005/2006 2004/2005 Ticketing 17,190 17,505 Sponsoring 27,170 26,416 TV marketing 14,843 14,884 Transfer income 12,399 729 Merchandising*, catering, licences 5,736 12,907 Other sales 5,918 1,506

* The merchandising division was transferred to a subsidiary at the beginning of the financial year. 83,256 73,947 Sales from this activity amounted to EUR 4,142,000 in 2005/2006.

An increase in sales of EUR 9.3 million was The costs associated with the transfer activities achieved compared with the previous year, or such as the write-off of the book values of EUR 13.5 million including the merchandising assets sold and incidental costs of disposal are division transferred during the year. The princi- reported under other operating expenses. In- pal contribution to the increase was made by come from the rental of the stadium during the income from the sale of transfer rights in respect 2006 World Cup also resulted in significant of the players Ewerthon, Jensen and Rosicky. increases in sales.

Personnel expenses The breakdown of personnel expenses is as follows:

(in EUR thousands) 2005/2006 2004/2005

Wages and salaries 35,702 43,746

Social security and other pension costs 1,624 2,178

37,326 45,924

77 Borussia Dortmund GmbH & Co. KGaA

The Company's personnel expenses in the most EUR 5.2 million from EUR 36.6 million to EUR 31.4 recent financial year were reduced by EUR 8.6 mil- million. After adjusting for expenses for tax risks re- lion from EUR 45.9 million to EUR 37.3 million. lating to earlier periods amounting to around EUR 3 This reflects the positive effect of savings in million contained in this item, expenditure on the expenditure on the professional squad which fell by professional squad amounted to EUR 28.4 million.

Other operating expenses

(in EUR thousands) 2005/2006 2004/2005 Match operations 18,748 26,603 Advertising and marketing 9,437 13,084 Transfers 7,772 2,763 Media and printing 1,291 1,929 Administration 13,408 11,734 Other 6,307 29,735

56,963 85,848

Other operating expenses fell by EUR 28.9 million Extraordinary income in comparison with the previous year. The major Borussia Dortmund GmbH & Co. KGaA trans- contributory factors were, firstly, the reduction in ferred the merchandising division to an existing expenses for trademark risks from EUR 24 million wholly-owned subsidiary with retrospective to EUR 2.7 million, and secondly, as a result of effect as of 1 July 2005 at fair values, thereby revised agreements, the EUR 4.1 million decline realising an extraordinary non-cash gain amounting in marketing fees and the EUR 9.6 million fall in to EUR 10.2 million. rental expenses for the stadium. This was offset in particular by an increase of EUR 1.4 million in Taxes expenses from the disposal of fixed assets and a Taxes on income and other taxes consist mainly of rise of EUR 1.6 million in valuation allowances on prior-period expenses relating to tax audits, some receivables. Legal and advisory costs were almost of which have now been concluded. unchanged at EUR 5.4 million as a result of the reorganisation and restructuring of equity and debt capital carried out in the 2005/2006 financial year; the costs for the restructuring measures in respect of equity and debt capital amounted in total to EUR 3.5 million.

78 ANNUAL FINANCIAL STATEMENTS

OTHER DISCLOSURES

Corporate Governance The recommendations of the Government and Supervisory Board in accordance with § 161 Commission for the German Corporate Govern- AktG, which states that the recommendations ance Code published by the Federal Ministry of were followed in the past and are being or will be Justice contain internationally and nationally followed now or in the future or which reports recognised standards for good and responsible which recommendations have not been, are not corporate governance. The Statement of Com- being or will not be, applied, was issued on 31 pliance with the Corporate Governance Code December 2005 and made available to the share- required to be given by the Management Board holders.

EXECUTIVE BODIES

General partner The general partner is Borussia Dortmund Ge- naging Directors of this company are Mr. Hans- schäftsführungs-GmbH, whose registered office is Joachim Watzke (Dipl.-Kfm.) (Chairman) and, in Dortmund and which does not have an interest since 1 January 2006, Mr. Thomas Treß (Dipl.-Kfm.), in the Company's share capital. It is exempt from each of whom has sole power to represent the com- the restrictions contained in § 181 of the German pany. In the most recent financial year, the mem- Civil Code (Bürgerliches Gesetzbuch, “BGB”) and bers of the board received the following amounts is listed in the commercial register of the Local for their activities, including responsibilities re- Court of Dortmund, HRB No. 14206. The Ma- lating to subsidiary companies:

(in EUR thousands) 2005/2006 2004/2005 Hans-Joachim Watzke (since 15 February 2005)

fixed components - fixed remuneration 400 0 - other remuneration (payments in kind etc.) 11 0 variable component - bonus payments 250 0

Thomas Treß (since 1 January 2006)

fixed components - fixed remuneration 200 - other remuneration (payments in kind etc.) 19 variable component - bonus payments 250

Dr. Gerd Niebaum (until 9 February 2005)

fixed component - fixed remuneration 597

Michael Meier (until 30 June 2005)

fixed components - fixed remuneration 545 - other remuneration (payments in kind etc.) 8

79 Borussia Dortmund GmbH & Co. KGaA

Supervisory Board recent financial year, the Supervisory Board received remu- The current members of the Supervisory Board of the neration amounting to EUR 52.500, which it has donated to Company, their names, occupations and further responsibili- BV. Borussia 09 e.V. Dortmund for the purpose of promoting ties in other management bodies are listed below. In the most its youth work.

Gerd Pieper Harald Dr. Michele Othmar Bernd Geske Ruedi Baer Patrick Wolfgang Dr. Georg (Dipl.-Kfm.) Heinze Puller Freiherr von Albert Burgard Kottmann Diemar Lynch

Chairman Deputy Chairman until since since since since Deputy Chairman until since 22 Novem- 22 November 14 March 22 November 14 March 22 November until 22 Novem- 22 November ber 2005 2005 2005 2005 2005 2005 ber 2005 2005 Occupation

Proprietor and Chairman of the Chairman of the Proprietor and Managing Delegate to the Bank employee, Chairman of the Former Managing Management Management manager of Partner of Board of London Management Spokesman and Director of Board of DSW Board of Miro- Othmar von Bernd Geske Directors and Board of Member of the Stadtparfü- 21 Dortmunder Radici AG, Diemar Vermö- Lean Chief Executive Holsten- Management merie Pieper Stadtwerke AG, Bergkamen gensverwaltung Communication, Officer (CEO) of Brauerei AG, Board of GmbH, Herne Dortmund + Beratung, Meerbusch mobilzone- Hamburg Westfälische Managing Cologne Gruppe, Hypothekenbank Director of Regensdorf AG, Dortmund Radici CHI-MICA (Switzerland) Deutschland GmbH, Tröglitz Other responsibilities

Member of the Chairman of the Member of the Chairman of the Chairman Member of the Member of the Member of the Supervisory Supervisory Supervisory Supervisory of the Board of Supervisory Supervisory Advisory Boards Board of Beauty Board of Board of Sulzer Board of Infor- Directors of Board of Boards of of Deutsche Alliance Dortmunder Textil AG, mium AG, mobilzone AG Ploucquet Feldschlösschen Bundesbank, Regensdorf (CH) Deutschland Energie- und CH-Rüti ZH Cologne Holding GmbH, AG, Dresden and Düsseldorf GmbH & Co. KG, Wasserversor- Chairman Unterföhring Uranus AG, Regional Office Bielefeld gung GmbH, - of the Board of Hamburg and Dortmund Directors of glo- NETCO GmbH, balzone AG Frankfurt Member of Chairman of the Chairman of the Member of the Regensdorf (CH) the Supervisory Supervisory Advisory Board Supervisory Chairman Board of Board of Gelsen- of TWD-GmbH, Board of 004 of the Board of Sparkasse wasser AG, Deggendorf Beratungs- und Directors of Eu- Herne Gelsenkirchen Dienstleistungs ropea Trade AG GmbH, Regensdorf (CH) Member of the Aschaffenburg Chairman Supervisory of the Board of Board of E-M-S Directors of new media AG, Destination Dortmund Travel AG, Liebefeld (CH) Member of the Chairman Supervisory of the Board of Board of Ent- Directors of sorgung Dort- B&B Beratungs mund GmbH, AG, Watt (CH) Dortmund Chairman of the Member of the Board of Direc- tors of Bablo Supervisory Immobilien AG, Board of WV Watt (CH) Energie AG, Frankfurt/Main Member of the Board of Chairman of the Directors of Supervisory Loeb Service AG, Bern (CH) Board of Flughafen Member of the Dortmund Board of GmbH, Directors of Dortmund Immoplaza AG, Regensdorf (CH)

Employees The average number of employees during the year was 193 cuts and the transfer of employment contracts to subsidiaries. (previous year: 356). The reduction is mainly the result of staff

80 ANNUAL FINANCIAL STATEMENTS

List of shareholdings The following table gives summarised information relating to companies in which the Company has a shareholding of more than 20%:

Company Location Capital Shareholding % Equity Profit/loss

BVB Stadionmanagement GmbH (formerly: Westfalenstadion Dortmund Verwaltungs GmbH) Dortmund DM 100,000 100.00 EUR 176,189.34 EUR 3,628.98 goool.de sportswear GmbH Dortmund EUR 260,000 100.00 EUR 40,590,876.26 EUR -1,342,519.26 B.E.S.T. Borussia Euro Lloyd Travel GmbH Dortmund EUR 50,000 51.00 EUR 127,398.19 EUR 77,398.19 BVB Merchandising GmbH * Dortmund EUR 75,000 100.00 EUR 10,881,010.10 EUR 0.00 Sports & Bytes GmbH Dortmund EUR 200,000 100.00 EUR 170,473.42 EUR 55,680.28 BVB Stadion GmbH (formerly: Westfalenstadion Dortmund GmbH & Co. KG) ** Dortmund EUR 25,500 99.74 EUR 5,868,375.57 EUR -3,614,756.89 BVB Beteiligungs-GmbH ** Dortmund EUR 25,500 94.90 EUR 14,513.78 EUR -10,986.22 Orthomed Medizinisches Leistungs- und Rehabilitations- zentrum GmbH Dortmund EUR 51,600 33.33 EUR 386,389.18 EUR 149,081.49

* There is a profit and loss transfer agreement with this company. The short financial year 1. January - 30 June 2006 generated a loss of EUR -271,292.87 ** These are indirect shareholdings. The profit/loss figures for BVB Stadion GmbH and BVB Beteiligungs-GmbH relate to short financial years

Information relating to expenses recognised for audit fees for the single-entity and consolidated financial statements The audit fees recognised in the income statement in the 2005/2006 financial year were made up as follows:

(in EUR thousands) 2005/2006 Audit of the consolidated, interim and single-entity financial statements 300 Other audit-related work 50 Tax advice 47 Other services 32

Notifiable shareholdings under § 160 (1 ) No. 8 AktG together with § 21 of the German Securities Trading Act (Wertpapierhandelsgesetz, “WpHG”) We have been informed of the following notifiable shareholdings:

(in %) Absolute Capital Management Holding Limited 20.62 Blue Bay Asset Management 17.09 BV. Borussia 09 e.V. Dortmund 10.94 Bernd Geske 7.66 Och-Ziff Management Europe 7.56 Free float 36.13 100.00

81 Borussia Dortmund GmbH & Co. KGaA

Cash flow statement are defined as cash-in-hand plus bank balances less The following additional information is given in relation to the restricted funds amounting to EUR 3,608,000 (previous cash flow statement: year: EUR 465,000) and overdraft facilities used amounting Cash funds for the purposes of the cash flow statement to EUR 8,000,000 (previous year: EUR 0).

2005/2006 2004/2005 EUR thousands EUR thousands Net loss for the year -3,913 -78,681 Depreciation and amortisation 7,701 19,220 Extraordinary income from the hive-down of Company divisions -10,196 0 Profit from disposals of fixed assets -5,857 -681 Loss from disposals of fixed assets 0 5,139 Changes in balance sheet items Provisions 5,131 16,428 Inventories 560 -167 Trade receivables and other assets 11,543 18,364 Prepaid expenses 669 1,201 Deferred income -5,098 -9,068 Trade payables and other liabilities -2,866 -174 Change in restricted funds -3,143 67,788 Cash flow from operating activities -5,469 39,369

Proceeds from the disposal of tangible assets 121 0 Proceeds from the disposal of intangible assets 9,988 0 Payments for investments in tangible assets -6,032 -1,672 Payments for investments in intangible assets -4,976 -868 Proceeds from the disposal of financial assets 23 15,266 Payments for investments in financial assets -247 -43,465 Cash flow from investing activities -1,123 -30,739

Cash inflows and outflows from new borrowings and repayments of borrowings - new borrowings 27,253 0 - repayments of borrowings -24,496 -34,712 Changes in equity and capital and revenue reserves 29,250 24,375 Cash flow from financing activities 32,007 -10,337

Net change in cash funds 25,415 -1,707

Cash funds at the beginning of the financial year 2,528 4,235

Cash funds at the end of the financial year 27,943 2,528

Dortmund, 8 September 2006

Borussia Dortmund GmbH & Co. KGaA Borussia Dortmund Geschäftsführungs-GmbH Hans-Joachim Watzke Thomas Treß

82 ANNUAL FINANCIAL STATEMENTS

AUDITORS’ REPORT

We have audited the annual financial statements – ties and the economic and legal environment of consisting of the balance sheet, income statement the Company and expectations as to possible and notes – together with the bookkeeping system misstatements are taken into account in the deter- and the management report of Borussia Dort- mination of audit procedures. The effectiveness mund GmbH & Co. KGaA, Dortmund, for the of the accounting-related internal control system financial year from 1 July 2005 to 30 June 2006. and the evidence supporting the disclosures in The maintenance of the bookkeeping system and the books and records, the annual financial the preparation of the annual financial statements statements and the management report are and management report in accordance with examined primarily on a test basis within the German commercial law and the supplementary framework of the audit. The audit includes asses- provisions in the Articles of Association is the res- sing the accounting principles used and ponsibility of the Company’s legal representatives. significant estimates made by the Company's Our responsibility is to express an opinion on the legal representatives, as well as evaluating the annual financial statements, together with the overall presentation of the annual financial bookkeeping system, and on the management statements and the management report. We be- report, based on our audit.. lieve that our audit provides a reasonable basis for our opinion. We conducted our audit of the annual financial statements in accordance with § 317 of the Our audit has not led to any reservations. German Commercial Code (Handelsgesetzbuch, HGB)and the generally accepted standards for In our opinion, based on the results of our audit, the audit of financial statements in Germany pro- the annual financial statements comply with the mulgated by the German Institute of Chartered statutory requirements and the supplementary Accountants (Institut der Wirtschaftsprüfer, IDW). provisions in the Articles of Association and give a Those standards require that we plan and perform true and fair view of the net assets, financial posi- the audit such that misstatements materially tion and results of operations of the Company in affecting the presentation of the net assets, finan- accordance with German principles of proper cial position and results of operations in the accounting. The management report is consistent annual financial statements in accordance with with the annual financial statements, provides as a German principles of proper accounting and in whole a suitable view of the Company's position the management report are detected with reason- and suitably presents the opportunities and risks of able assurance. Knowledge of the business activi- future development.

Dortmund, 8 September 2006

BDO WESTFALEN-REVISION GmbH Wirtschaftsprüfungsgesellschaft A. Rumphorst ppa. J. Königshoven Wirtschaftsprüfer Wirtschaftsprüfer

83 The dream comes true BVB soars

The German Post issued special stamps on the occasion of the championships in 1995 and 1996.

Did full justice to his name: “Turbo” Möller scored the quickest goal by a German team in the Champions League in 1995 against Juventus Turin in the first minute of the game.

FROM BORSIGPLATZ TO HITZFELD

Under coach Ottmar Hitzfeld, who was previously unknown and taken under contract in 1991, Borus- German champion again after 32 years: sia Dortmund enjoyed its most successful era in Michael Zorc presents the trophy in 1995. sporting terms. In 1992, BVB unexpectedly came second in the German league, while in the following season BVB just as surprisingly reached the finals of the UEFA Cup, but then lost to Juventus Turn with a clear 1:3 and 0:3. Borussia established itself in this European club competition, where it celebrated great triumphs as well as competing on a national level with the record-holding champion, Bayern Munich. The team, which had been strengthened step-by-step with top stars from Ger- many and abroad, brought the German championship to Dortmund on 17 June 1995 for the first time after 32 years and even defended its title the following year.

Rejoicing on the provisional “champions' balcony” in 1996: As in the previous year, Michael Zorc (this time unshaven) holds the trophy for the best German football team aloft.

84 1995 1996 1997

A city in ecstasy: The best fans of the Bundesliga give BVB a magnificent reception.

CHRONOLOGY 1995

MAY

7/9 May: President Roman Herzog and Chancellor Helmut Kohl are for the first time invited to the celebrations of the victorious powers 50 years after the end of the Second World War.

NOVEMBER

16 November: After a crucial vote, the SPD elects Oskar Lafontaine as the new party chairman.

CHRONOLOGY 1996

JULY

7 July: In Constance on Lake Con- Jürgen Kohler on 11 May 1996 in the Munich Olympiastadion. stance, the attorney Horst Frank is the first Green-party politician to become mayor of a German city.

AUGUST

28 August: The British couple and heirs to the throne, Prince Charles and Princess Diana, divorce after 15 years of marriage.

DECEMBER

17 December: The UN General Assembly elects Kofi Annan as the new Secretary- General. He succeeds Boutros Boutros- Gali, who loses the election due to a veto by the USA.

85 The dream comes true BVB soars

For fans, BVB is a real way of life.

The coach on top: Ottmar Hitzfeld after winning the Champions League.

orussia Dortmund made football history on 28 BMay 1997. BVB was the first German team to win the UEFA Champions League, the most important title of all, with a 3:1 scoreline against the big favourites, Juventus Turin. Karlheinz Riedle On a walkabout - the triumphal parade (2) and Lars Ricken scored the goals. On 2 Decem- through the city. ber 1997, BVB completed a total triumph by winning the Intercontinental Cup 2:0 in Tokyo against Cruzeiro Belo Horizonte (Goals: Herrlich, Zorc).

Bathing in the post-match spa pool – here with the trophy. Winning mood: Jürgen Kohler during an advertising appearance.

86 1995 1996 1997

BVB is the first German team to win the Champions League Cup in 1997. CHRONOLOGY 1997

JANUARY

20 January: In Washington, Bill Clinton is sworn in for his 2nd term as President of the USA.

JUNE

ARD broadcasts the film “Das Todesspiel” by Heinrich Breloer. The piece describes the events surrounding the abduction and subsequent murder of the then president of the Federal Union of Employer Associations, Hanns-Martin Schleyer, in autumn 1977.

JULY

27 July: Jan Ullrich becomes the first German to win the world's most difficult cycling race, the Tour de France.

Matthias Sammer – German and European BVB wins the Intercontinental Cup in Tokyo against Belo Horizonte. footballer of the year in 1996.

p. 116

87 Borussia DortmundKonzernlagebericht der Borussia Dortmund GmbH & Co. KGaA für das Geschäftsjahr 2005/2006

BUSINESS AND FRAMEWORK CONDITIONS

FINANCIAL YEAR 2005/2006 IN REVIEW

FINANCIAL DEVELOPMENT issue amount of EUR 29,250,000. This entire amount was used for a further reduction of existing liabilities Restructuring to secure the future in July 2006. On 7 June 2006, a loan agreement was signed between Borussia Dortmund GmbH & Co. KGaA, and Decisive progress has therefore been made in its subsidiaries, and the US investment bank Morgan restructuring the liability side of the balance sheet, Stanley for credit facilities amounting in total to EUR with the aim of strengthening equity resources, 79.2 million with a term of 15 years. A total of EUR achieving a more manageable debt maturity structure 57.5 million of the loan was used for the payment to and improving interest-rate terms. In particular, the MOLSIRIS Vermietungsgesellschaft mbH & Co. repurchase of the shares in the stadium has achieved Objekt Westfalenstadion KG of the price for the a reduction in the high rental expenses for the stadi- repurchase of the limited partner's share in West- um, which would have significantly restricted BVB's falenstadion Dortmund GmbH & Co. KG and for room for manoeuvre from 2007 onward. related incidental costs. The remaining loan amount of EUR 21.7 million was used for the purpose of reducing and refinancing the existing liabilities of Earnings development Borussia Dortmund GmbH & Co. KGaA (“BVB- Calculated according to the International Financial KGaA”). In addition, BVB-KGaA was granted a Reporting Standards (IFRS) for the first time, con- revolving credit line amounting to EUR 10.0 million. solidated loss for the year was EUR -20.8 million (the comparable prior-year figure was EUR -54.5 mil- Ownership of the SIGNAL IDUNA PARK has there- lion). The improvement in earnings was principally fore been almost completely regained by the BVB the result of the increase in sales amounting to EUR Group. As part of the restructuring process, the credi- 14.4 million, savings in personnel expenses (EUR 6.9 tors' agreement of March 2005 was annulled and the million, of which EUR 5.2 million related to the pro- steering committee set up at that time was dissolved. fessional squad), lower depreciation and amortisa- Furthermore, this created the essential conditions for tion in particular of the carrying amounts of player the implementation of the capital increase resolved registrations (EUR 11.3 million) and an improve- in May 2006 (utilisation of authorised capital with a ment in net finance costs (EUR 2.4 million). Other nominal amount of up to EUR 14,625,000) with an operating expenses, on the other hand, increased

UI-Cup UI-Cup 16 July 2005 23 July 2005 BVB 1 - 1 Sigma Olmütz BVB 0 - 0 Sigma Olmütz

Jan Koller scored an own goal in The disappointing goalless draw against the first leg against Sigma Olmütz. the Czech team in Olmütz meant an exit 88 from the UI Cup. GROUP MANAGEMENT REPORT

(EUR 3.1 million), mainly as a result of prior-year DEVELOPMENT OF THE MARKET AND bad debt losses and valuation allowances on re- COMPETITIVE ENVIRONMENT ceivables (EUR 2.1 million). During last season as well, the German Football Earnings before income taxes (EBT) improved by Bundesliga again gained considerable value as a around EUR 32.7 million to EUR -22.6 million from brand. It not only regularly thrills millions of people EUR -55.3 million. Earnings before interest and taxes in front of the screen, but also attracts hundreds of (EBIT) amounted to a loss of EUR 11.2 million, fol- thousands of fans to the stadiums each week. Last lowing the loss amounting to EUR 41.5 million season there was a further increase in the record recorded in the previous year. number of tickets sold that had already been set the previous year. In this respect, with an average crowd of 71,378, Dortmund remains the public's favourite. Development of equity Following the implementation of the capital increase The continuing enthusiasm for football can also be resolved in May 2006, in which 14,625,000 new seen in the revenues generated for the clubs by TV shares were placed at an issue price of EUR 2.00 marketing. The combination of free-to-air program- each, consolidated equity amounted to EUR 37.6 ming and exclusive live television rights enabled million (prior year EUR 28.5 million) after taking into Bundesliga clubs to generate considerable additional account the consolidated loss for the year. The equity revenues, in which respect, the new TV agreements position of the BVB Group will improve further applicable from July 2006 even made a further following the implementation in the 2006/2007 finan- increase possible. cial year of the capital increase for cash and non-cash contributions resolved by the extraordinary General Nor has the Bundesliga lost any radiance as an adver- Shareholders' Meeting on 15 August 2006, and tising forum. On the contrary, the clubs can look following the significant improvement in operating back on a successful season with further increases in earnings that we expect. income from sponsoring and other revenue sources.

1st round 2nd round 6 August 2005 13 August 2005 Wolfsburg 2 - 2 BVB BVB 1 - 2 Schalke

Bundesliga debut at the age of 16 years Hot blooded tackle at a Ruhr area and 335 days: Nuri Sahin, youngest derby: Odonkor pits himself against player of all time. Bajramovic. 89 Borussia Dortmund

GROUP STRUCTURE AND BUSINESS

LEGAL GROUP STRUCTURE (33,3%). In addition, the consolidated group also includes the wholly-owned subsidiary, BVB Sta- The group management report is based on the con- dionmanagement GmbH (formerly Westfalenstadion solidated group of Borussia Dortmund GmbH & Co. Dortmund Verwaltungs-GmbH). The stadium holding KGaA. In addition to the core business of football, company BVB Stadion GmbH (formerly West- Borussia Dortmund is involved in lines of business falenstadion Dortmund GmbH & Co. KG) has related to football. At present, the Company holds already been incorporated into the consolidated interests in BVB Merchandising GmbH (formerly financial statement of Borussia Dortmund GmbH & Borussia Dortmund Beteiligungs-GmbH; 100%), in Co. KGaA in accordance with IFRS provisions since the sports articles manufacturer goool.de sportswear 1 July 2004. Following the buyback of the stadium GmbH (100%), in the Internet company Sports & shares and the reorganisation of Westfalenstadion Bytes GmbH (100%), in the travel company B.E.S.T. Dortmund GmbH & Co. KG into BVB Stadion Borussia Euro Lloyd Sports Travel GmbH (51%) and GmbH, the group structure as at 30 June 2006 is in the medical service centre Orthomed GmbH as follows.

Business of subsidiaries that have operating businesses

Borussia Dortmund GmbH & Co. KGaA

94.9% BVB Stadion GmbH 100% goool.de sportswear GmbH 5.10% 94.9% BVB 5.10% BV. Borussia 09 Beteiligungs-GmbH e.V. Dortmund 100% BVB Stadionmanagement GmbH

100% BVB Merchandising GmbH

100% Sports & Bytes GmbH

51% B.E.S.T. 49% Euro Lloyd Reisebüro Borussia Euro Lloyd Sports Travel GmbH GmbH & Co. KG

33.33% 66.67% Orthomed GmbH Miscellaneous

DFB Cup 3rd round 22 August 2005 28 August 2005 Braunschweig 2 - 1 BVB Duisburg 1 - 1 BVB

Christian Wörns’ efforts in vain: Lars Ricken shot BVB into the lead BVB is knocked out of the Cup in the against MVS. His thunderbolt 90 first round. was unstoppable in the right corner. GROUP MANAGEMENT REPORT

BVB Merchandising GmbH In addition to equipping team sports, goool.de will With retroactive financial effect per 1 July 2005, the in future focus even more on positioning itself in the management of Borussia Dortmund GmbH & Co. sportswear segment. In addition to more than 2,000 KGaA transferred the merchandising division to a team sport customers - mainly sport clubs in the current, wholly-owned subsidiary. This resulted in amateur segment - goool.de equips a club from the further concentration of the Group's business on the Second Bundesliga with a long-standing tradition, marketing of merchandising articles. Hierarchies in Kickers Offenbach. this division were evened out and decision-making processes were shortened, meaning that it is possible In addition, following the buyback of the stadium to react more quickly to changed customer behaviour shares, the subsidiary directly and indirectly holds and market conditions. Moreover, the creation of an 99.74% of the shares in BVB Stadion GmbH. independent unit means that, where applicable, it is possible to create new lines of business and establish Sports & Bytes GmbH co-operations with other companies. In the financial year running from 1 July 2005 to 30 June 2006, Sports & Bytes GmbH again generated a BVB Merchandising GmbH's sales in the 2005/2006 profit for the year. Despite a fall of approximately financial year were EUR 4.1 million and were thus at EUR 118,000, this year's profit of EUR 56,000 approximately the same level as the previous year, reached the level of the 2003/2004 financial year. when sales were still recorded at Borussia Dortmund GmbH & Co. KGaA. In its operating business, BVB The wholly-owned subsidiary of Borussia Dortmund Merchandising GmbH generated an earnings contri- GmbH & Co. KGaA largely focused its business in bution to consolidated earnings of EUR 0.6 million. the past financial year on supporting the Borussia Dortmund Group in its entirety in technical and goool.de sportswear GmbH structural matters. The sports article manufacturer closed the 2005/2006 financial year with a loss of EUR 1.3 mil- In addition to conceiving and developing BVB lion (previous year: EUR 1.0 million loss). This com- Merchandising GmbH's Internet shop, technical sup- pany's loss in the last financial year is attributable, port is a focus here as well, especially following the on the one hand, to high depreciation of existing start-up. This must be co-ordinated with the internal receivables and inventory (EUR 0.7 million), while ERP system in order to constantly ensure operation on the other hand, the loss resulted from very limited of the completely integrated solution and to imme- sales activities in spring 2005, which led to a sig- diately accommodate new demands and changes. nificant fall in sales revenues in the 2005/2006 financial year exacerbated by delivery problems of a principle supplier in summer 2005.

4th round 5th round 11 September 2005 17 September 2005 BVB 2 - 1 Cologne Bremen 3 - 2 BVB

Van der Gun against Mokhtari: Klose scores past Degen (left) and The BVB striker ruptured his cruciate Metzelder to make it 1:1 for Bremen. ligament directly after this scene. In the end, Werder had the upper hand 91 with a 3:2 scoreline. Borussia Dortmund

BVB Stadionmanagement GmbH formation of the company, namely, to depend as (formerly: Westfalenstadion Dortmund little as possible on the sporting success of Borussia Verwaltungs-GmbH) Dortmund’s professional player department and BVB Stadionmanagement GmbH (formerly West- to generate earnings from other income sources, falenstadion Dortmund Verwaltungs GmbH) finished was achieved. The company concluded the financial the consolidated financial year from 1 July 2005 to 30 year with a profit of EUR 77,000 (previous year: June 2006 with a profit of EUR 113,000. EUR 92,000).

The wholly-owned subsidiary of Borussia Dortmund Orthomed GmbH GmbH & Co. KGaA focuses its business on the provi- Borussia Dortmund has a 33.4 percent interest in sion of security services for BVB's Bundesliga home Orthomed Medizinisches Leistungs- und Rehabili- matches. In the financial year under review, security tationszentrum GmbH. Orthomed offers an all services were also provided for the World Cup matches round concept for medical rehabilitation, particu- in Dortmund. larly for competitive athletes. The service package offered is divided into prophylactic measures and B.E.S.T. Borussia Euro Lloyd Sports training-related measures. It goes without saying Travel GmbH that all of Borussia Dortmund's sporting depart- In February 2000, Borussia Dortmund formed the ments are also attended to by Orthomed. In the last travel agency Borussia Euro Lloyd Sports Travel financial year, net income for the year was EUR GmbH (B.E.S.T.) together with Euro Lloyd Reisebüro 149,000 (per 31 December 2005) (previous year: GmbH & Co. KG. BVB has a 51 percent interest in the EUR 82,000). company. In addition to general travel agency services, B.E.S.T. offers the conception, planning and imple- BVB Stadion GmbH mentation of events, conferences and congresses. BVB Westfalenstadion Dortmund GmbH & Co. KG was provides B.E.S.T. above all with the contacts and busi- reorganised as BVB Stadion GmbH in June 2006 with ness relations it has with numerous enterprises. retroactive effect per 1 January 2006.

B.E.S.T.'s business development continued to be sta- Following the buyback of the stadium shares, the ble in the first half of the 2006 financial year as well. holding company for SIGNAL IDUNA PARK is The travel company still has a solid business founda- almost wholly-owned by the BVB Group. B.V. tion, and by changing the focus to the actual core Borussia 09 e.V. Dortmund holds 5.1% of the shares in business - business travel services – the aim upon BVB Beteiligungs-GmbH, which, in turn, holds 5.1%

6th round 7th round 21 September 2005 24 September 2005 BVB 2 - 0 Bielefeld Mainz 1 - 1 BVB

Against Bielefeld, Borussia was often Discussion with referee Weiner just a little faster. concerning an unfair penalty. 92 Here Kringe Krupnikovic gets away. Degen, Weidenfeller, Kehl and Kringe. GROUP MANAGEMENT REPORT

in BVB Stadion GmbH. Therefore the club has an ORGANISATION OF MANAGEMENT indirect 0.26% holding in BVB Stadion GmbH as a AND CONTROL minority shareholder. The remaining 99.74% is held by the BVB Group via goool.de sportswear GmbH The general partner, Borussia Dortmund Ge- and BVB Beteiligungs-GmbH. schäftsführungs-GmbH, is responsible for management and representation of Borussia Dortmund The former Westfalenstadion Dortmund GmbH & GmbH & Co. KGaA. This limited liability company Co. KG has already been included in Borussia (“GmbH”) is in turn represented by its Managing Dortmund GmbH & Co. KGaA’s IFRS consolidated Directors Hans-Joachim Watzke and, since 1 January financial statement since 1 July 2004, meaning that 2006, Thomas Treß; its sole shareholder is Ball- the previous year's figures for the BVB Group also spielverein Borussia 09 e.V. Dortmund. include the consolidation of the stadium company. The remuneration of the Managing Directors is The company object of BVB Stadion GmbH is the composed of fixed and success-based components. creation and maintenance of a hereditary building The latter are based on contractual agreements and right in the properties and ancillary space where on resolutions of the Advisory Board of the Executive SIGNAL IDUNA PARK is located, structural expan- Committee of Ballspielverein Borussia 09 e.V. sion of the stadium to make it a multi-functional Dortmund. stadium, including ancillary space, and the lease of SIGNAL IDUNA PARK; the focus of the stadium's The following chart shows the structures and respon- use is on football. sibilities as between Ballspielverein Borussia 09 e.V. Dortmund, Borussia Dortmund GmbH & Co. KGaA BVB Stadion GmbH concluded the period from 1 and Borussia Dortmund Geschäftsführungs-GmbH. July 2005 to 30 June 2006 with a loss for the year determined in accordance with IFRS provisions of approximately EUR 9.9 million (previous year: EUR –3.8 million). The increase in the net loss for the year is attributable in particular to the recognition in the income statement of the fair value of the compensation claim of the MOLSIRIS limited partners, whose interest in the stadium was reported under minority interests until the repurchase of shares in the stadium by BVB.

8th round 9th round 2 October 2005 15 October 2005 BVB 0 - 0 Stuttgart Kaiserslautern 3 - 3 BVB

Ballspielverein Borussia 09 e.V. Dortmund

Management Council of Board economic affairs Borussia Dortmund elects appoints Geschäftsführungs-GmbH Members meeting (General Partner) appoints and supervises

Advisory Board Managing Directors Borussia Dortmund

GmbH & Co. KGaA (Consisting of members of the Management Board and Council of economic affairs) Supervisory Board No right of appointment, only right of supervision elects

General Shareholders’ Meeting

The rights and duties of the Supervisory Board of the Since the General Shareholders' Meeting on 22 limited partnership (“KGaA”) elected by the General November 2005, the following persons have been Shareholders' Meeting are limited. Specifically, it has members of the Supervisory Board:

no authority with respect to matters involving per- Gerd Pieper (Chairman) sonnel, i.e., the authority to appoint and dismiss Proprietor and Managing Director of managing directors at Borussia Dortmund Ge- Stadtparfümerie Pieper GmbH, Herne schäftsführungs-GmbH or to regulate the terms of Harald Heinze (Deputy Chairman) their contracts. Nor is the Supervisory Board autho- Chairman of the Management Board of DSW 21 rised to adopt internal rules of procedure for the Dortmunder Stadtwerke AG, Dortmund general partner or any list of transactions requiring Ruedi Baer its consent. Rather, such rights and duties lie with Delegate to the board of directors and Chief the governing bodies of Borussia Dortmund Ge- Executive Officer (CEO) of mobilzone-Gruppe, Regensdorf (Switzerland) schäftsführungs-GmbH, namely its Advisory Board and the Executive Committee created by the Othmar Freiherr von Diemar Proprietor and manager of Othmar von Diemar Advisory Board. Vermögensverwaltung + Beratung, Cologne

Bernd Geske Managing partner of Bernd Geske Lean Communication, Meerbusch

Patrick Albert Lynch Bank employee, London

10th round 11th round 23 October 2005 29 October 2005 BVB 1 - 1 Hamburg BVB 2 - 1 Mönchengladbach

Metzelder scored with a spectacular Ebi Smolarek scores in the 90th minute diving header against HSV, whose goal- to make it 2:0 against Borussia Mönchen- 94 keeper Wächter loses out. gladbach. Zé Antonio comes too late. GROUP MANAGEMENT REPORT

Within Borussia Dortmund GmbH & Co. KGaA, tions, sports, finance and organisation. The responsi- which is responsible for the Group's operating busi- ble employees and the divisions for which they are ness, there are four independent areas of responsi- responsible can be seen from the following chart. bility below the management, namely, communica-

BORUSSIA DORTMUND GmbH & Co. KGaA

Management Management Hans-Joachim Watzke Thomas Treß (Chairman)

Communications Sports Finance Organisation J. Schneck M. Zorc M. Knipping Dr. C. Hockenjos

Corporate Finances and General Professional football communications accounting organisation

Sport communications Amateurs Controlling Stadium management

Publications Youth Investor relations Match organisation

IT (Information Fan support Handball V.I.P. – Hospitality Technology) Stadium announcements and Table tennis Personnel Sportfive program (sponsors)

PR work Training fields Merchandising Events

Complaints management Risk Management DFB/DFL

Interests Ticketing

Sportfive (Commission Real estate processing)

Third party events

Member support

12th round 13th round 5 November 2005 19 November 2005 Leverkusen 2 - 1 BVB BVB 2 - 0 Berlin

DEVELOPMENT OF THE MARKET AND the auditors Deloitte & Touche, an average of only COMPETITIVE ENVIRONMENT IN 33,900 viewers attend games in the English premier GERMAN PROFESSIONAL FOOTBALL league, while 27,800 viewers attend matches in the Spanish Primera Division. Even 43 years after its creation, the Bundesliga has a charisma like almost no other brand in Germany and Despite these imposing figures, the top German divi- beyond. On the one hand, it is a regional sporting sion also recorded new attendance records in the last event with 36 clubs throughout Germany, which season: The first half of the season attracted attracts hundreds of thousands of fans to the most 5,708,999 paying fans to the stadiums, which repre- modern stadiums in the world each match day. On sented a further increase of 7.5 percent compared to the other hand, it is a national television event, which the figures from the previous year (5,311,927). Thus provides television broadcasters with millions of the Bundesliga remained ahead of the other top viewers. While firmly rooted in the sport’s values, it is European leagues. Viewer magnet number one also entertainment produced in a modern way: This remained Borussia Dortmund. is a situation that makes German professional football unique. This positioning plays a major role in the success of the Bundesliga, which finds itself in global TV marketing entertainment competition for media revenues and The Bundesliga is also a viewer magnet on televi- sponsor interest, and ensures that there are stable sion. In a study commissioned by DFL Deutsche framework conditions. Fußball Liga GmbH, questions were asked not only concerning interest in individual types of sport, but Ticketing also as to how often these are followed on televi- The Bundesliga is the football division that attracts sion. In this respect, football was the number one the greatest number of viewers on the Continent. In sport on television ahead of Formula 1 and winter the 2004/2005 season, the fourth consecutive ticket sports. However, the remarkable aspect is some- sales record was achieved. In the 2004/2005 season, thing different: While 52 percent of the population 10,765,974 viewers streamed into the stadiums. stated that they were interested in football, 50 Compared with 2003/2004 (10,724,586), this repre- percent also stated that they follow matches or sents growth of only 0.4 percent, but it constitutes a highlights weekly/regularly or at least several times healthy increase of 10.25 percent compared to the a month. Thus football is considerably more suc- 2002/2003 season (9,764,735). In this respect, it is cessful than other types of sport in mobilising its also interesting to consider tickets purchased per followers. This fact is also undoubtedly attributable match: 35,183 paying viewers per game represent a to the wide-ranging availability of football and the level not achieved by any other league in all of broadcasting structures that have been learnt over Europe. By comparison: according to an analysis by decades.

14th round 15th round 26 November 2005 3 December 2005 Nuremberg 1 - 2 BVB BVB 0 - 2 Hanover

Document of the times: Nuri Sahin BVB – here with Buckley against goes down in Bundesliga history with this Balitsch – could hardly make an 96 shot. impression inside the penalty area. GROUP MANAGEMENT REPORT

For the Bundesliga's TV partners, this means excel- could be generated – more than the German pro- lent ratings. Probably the most important free-to-air fessional clubs ever received from exploitation TV format, the ARD-Sportschau, achieved market rights. share of 26.9 percent in the 2004/2005 season in the target group of viewers aged three and above – even Sponsoring achieving 30.2 percent in the special target group of The continuing attractiveness and the strong televi- men between 14 and 49 years of age. These figures sion presence also ensure great interest in the adver- are also remarkable in terms of their absolute tising industry. This is proved by advertising revenues, penetration: What other program reaches almost six which have rapidly increased in recent years. This sec- million viewers aged three and above on 30 week- tor has already been the greatest source of income for ends? In this respect, the popularity of the Saturday German professional football since the 2003/2004 Bundesliga roundup was given additional impetus season. This is a development that is even more by the comeback of Sportschau in the 2003/2004 worthy of note in light of the currently stagnating - and season. With market share of 26.7 percent in the tar- in some sectors even receding - advertising market. get group of three years and above, in the second half of the current season Sportschau is approxi- In total, German professional football (Lizenz- mately 29 percent ahead of the ratings generated by Fußball) had advertising earnings of EUR 415.6 mil- “ran” of Sat.1. The other free-to-air TV formats are lion in the last season. Compared to 2003/2004 (EUR also doing well. Thus the Aktuelles Sportstudio in 373.2 million), this represents an increase of 11.38 ZDF achieved market share of 12 percent last sea- percent. Given that advertising earnings in the son, while the DSF roundup of Sunday matches was 1998/1999 season were EUR 173 million, this means particularly successful in the men's target group (14 that advertising earnings have increased by 140 per- to 49 years of age), where it achieved 11 percent. cent over the last six years.

In December 2005, the television broadcasting In the 2004/2005 season, the ratio of advertising to rights for the period through summer 2009 were total earnings was 27.43 percent, a level that has awarded. The league is sticking with the tried and changed only slightly compared to 2003/2004 (29.25 tested partners, ARD, DSF and ZDF in free-to-air percent) and 2002/2003 (27.87 percent). Whatever television, and with Deutsche Telekom AG in the applies to professional football as a whole naturally Internet sector. The live television rights have been also applies to the Bundesliga per se: The top 18 clubs awarded for the first time to the company arena; received EUR 357.5 million in the sponsoring seg- similarly, with betandwin.com, which will operate as ment, which was also a peak. Compared to the a foreign marketer, a “newbie” is on board. A total of 2003/2004 season, the top division was able to increase EUR 1.26 billion, i.e. EUR 420 million per season, its advertising earnings by 7.44 percent.

16th round 17th round 10 December 2005 17 December 2005 Frankfurt 2 - 0 BVB BVB 1 - 2 Munich

Frankfurt's Chris demands a penalty - Weidenfeller cleverly tightens the angle Rosicky and Kehl (right) against Lucio and prevents a goal saw the scene quite differently... by Bayern Munich. 97 Borussia Dortmund

The Bundesliga is also the leading European league Serie A (EUR 161 million) and the French Ligue 1 in Europe in terms of advertising revenues. If one (EUR 144 million). The figures for the English compares the figures from the 2003/2004 season – Premier League consolidated revenues from adver- more recent figures from other top leagues are not tising and other revenues (merchandising etc.), yet available – the top German league was already meaning that no clear statement can be made here. number 1 with EUR 326 million. One reason for the high sponsoring income is The Bundesliga - whose income, as reported above, undoubtedly the high free to air television presence has again increased – is ahead of the Spanish - a situation that will also be maintained in coming Primera Division (EUR 200 million), the Italian seasons due to the new TV agreements.

GROUP MANAGEMENT

INTERNAL MANAGEMENT SYSTEM

Sports management Financial management The great challenge for the future will be to play foot- One of the main aims of BVB's management is to ball successfully with a cost-optimised budget. In increase profitability in the long-term and thus to fur- order to achieve this aim, BVB will in future continue ther improve the Group's equity resources. In addi- to have a strong, competitive team and, in this tion, there is a focus on the Group's financial strength. respect, will back young players across the board, who In addition to a constant improvement in the operating will create a healthy mixture with the seasoned result, generating positive cash flow is therefore the players. This creates a realistic chance of qualifying most important financial objective of our Group. We for international competitions. are seeking to optimise cash flow by concentrating on the impacting factors of “operating results” and The sporting aims will be aligned with financial cir- “investments”. cumstances. This means that the salary budget will generally be tied to realistic sporting aims and that The operating result is the most important ratio for the target set by the sporting management - Hans- measuring the Group's success. For us, operating Joachim Watzke, Michael Zorc and the coach - in this result means earnings before interest and taxes regard is qualifying for the UEFA Cup again in the (EBIT). Therefore we are constantly monitoring the near future. This would increase the financial flexi- operating results in all lines of business and areas of bility for acquiring new players, although no unknown responsibility based on monthly comparisons between risks will be taken. There will be no new debt in order the budget and the actual situation. The most impor- to strengthen the team. tant driver for the operating result is further

18th round 19th round 28 January 2006 4 February 2006 BVB 3 - 2 Wolfsburg Schalke 0 - 0 BVB

Body contact: Kehl and Klimowicz focus Schalke’s Krstajic kicks Salvatore on the ball. BVB wrestles Wolfsburg to Gambino’s foot, but the referee did not 98 the ground 3:2. give the deserved penalty. GROUP MANAGEMENT REPORT

improvement in sales revenues in the major revenue capital increase implemented or resolved and a con- sources of ticketing, sponsoring, TV marketing and sistent pursuit of the reorganisation concept and suc- merchandising, and a disciplined management of cessful restructuring of the liability side of the balance operating expenses. sheet, the registered share capital is not only fully paid in, but also secured by reserves. Taking the reserves In coming years we will concentrate on achieving the and cumulative losses into account, the relevant equity best possible balance between limiting operating in the KGaA's individual HGB financial statements is expenses and, at the same time, generating sales approximately EUR 52.9 million.. growth. In this respect, the decisive factor is qualifying for international competitions. Taking the reserves and cumulative losses into account, group equity determined in accordance We are determined to further improve the effective- with IFRS provisions amounts to EUR 37.6 million ness of investments, which, in this context, applies par- (previous year: EUR 28.5 million). Following imple- ticularly to investments in the professional squad. mentation of the capital increase for cash/non-cash contributions in the 2006/07 financial year resolved by the extraordinary General Shareholders' Meeting Capital management on 15 August 2006 and the expected improvement in Following implementation of the capital increase operating earnings to more than EUR 4.0 million, resolved in May 2006, the share capital of Borussia the BVB Group's equity position will stabilise Dortmund GmbH & Co. KGaA increased from EUR further, i.e. improve. 29,250,000.00 to EUR 43,875,000.00. Following implementation of the capital increase for cash/non-cash con- In addition to securing the KGaA's equity as deter- tributions in the 2006/2007 financial year resolved by mined in accordance with HGB provisions, the the extraordinary General Shareholders' Meeting on 15 management's capital management also includes August, the share capital will be further increased to stabilisation and an increase of consolidated equity EUR 17,550,000.00. as determined in accordance with IFRS provisions. We will reach these targets, in particular, by im- Pursuant to § 92 (1) of the German Stock Corporation proving the operating result and through effective Act (“AktG”), we are obliged to call without undue investments. delay an extraordinary General Shareholders' Meeting in the event of a loss equivalent to half of the registered share capital. Therefore capital management includes, in particular, constant monitoring of the equity capital of the KGaA as determined in accordance with the provisions of the German Commercial Code (Handelsgesetzbuch, “HGB”). As a result of the

20th round 21st round 7 February 2006 12 February 2006 BVB 2 - 0 Duisburg Cologne 0 - 0 BVB

Hot-blooded tackle between the Close to the man: Cologne's Benschneider Duisburg player Markus Kurth and attacks Rosicky early. The BVB playma- BVB defender Philipp Degen. ker was hardly able to display his talents. 99 Borussia Dortmund

Overview of the key financial indicators for the Borussia Dortmund Group

(in EUR millions) 2005/06 2004/05 30 June 2006 30 June 2005

Sales 89,1 74,7 Consolidated earnings -20,8 -54,5 Loss from ordinary activities -22,6 -55,3 Operating loss (EBIT)) -11,2 -41,5 EBITDA 3,0 -15,9 Cash flow 25,7 -6,6 of which from/used in operating activities -5,1 -2,5 of which used in investing activities -1,1 14,1 of which from/used in financing activities 31,9 -18,2 Consolidated equity 37,6 28,5

We plan to further increase gross revenue in the mid- We expect that the operating result will signifi- term. The first steps in bringing us closer to this goal cantly improve in coming years. Our aim is to ge- have been taken with the marketing of the stadium nerate positive results already in the 2006/2007 name, the new principal sponsor agreement with RAG financial year. and conclusion of the new television agreement by DFL. Moreover, further significant revenues potential The BVB Group's cash flow is expected to stabilise on can be found in qualification for international a sustainable basis as a result of an improvement in the competitions, which would have a positive effect on all operating result of dependent, moderate investments, revenue sources of Borussia Dortmund. Therefore in particularly in the professional squad. As a result, the the 2006/2007 season, the realistic target is 5th place in Group's equity base will also increase further, meaning the Bundesliga, which would mean qualification for that in the mid-term we could also consider dividend the main round of the UEFA Cup. Moreover, we are payments to our shareholders following further re- expecting better performance in the DFB Cup, which duction of our liabilities. would also have a positive effect.

22nd round 23rd round 18 February 2006 25 February 2006 BVB 0 - 1 Bremen Bielefeld 1 - 0 BVB

On top of his man: Christian Covering all the angles: Bielefeld's Wörns challenges Bremen's Naldo. Zuma spreads himself between 100 Werder are fortunate to win 1:0. Borussia's Brzenska (l.) and Rosicky. GROUP MANAGEMENT REPORT

GROUP STRATEGY • A football company can only be financially successful if it enjoys sporting success in the long- Borussia Dortmund's aim is to establish itself as the term. In order to make financial success less leading German football club after FC Bayern dependent on short-term sporting success in the Munich. Following successful implementation of the future, Borussia Dortmund will push ahead fur- reorganisation, a restructuring of financial liabilities ther with national and international marketing of and the first moderate investments in the profes- its brand name. sional squad, we are on the right path. • Germany continues to be Europe's largest football The financial base of the first and to date only market, which, however, is behind some other German listed football company was expanded by European markets in financial terms. This pro- the exclusive marketing right for SIGNAL IDUNA vides great growth potential. PARK, more effective use of the “Borussia Dortmund” brand and the establishment of football- All financial activities at Borussia Dortmund are ori- related lines of business. However, the core business ented around the target group that is relevant for a will in future also be professional football together football club: Its fans, members and business part- with it classic income sources of TV marketing, spon- ners. Products and services should be tailored to soring, ticketing and merchandising. For the fol- these groups in the best way possible. Through its lowing reasons, BVB is convinced that it will be able brand potential, Borussia Dortmund wants to utilise to further stabilise and expand its position as a leading all commercial opportunities presented by profes- football company in North-Rhine Westphalia: sional club football in an international context for the benefit of the shareholder. • Borussia Dortmund is in sporting terms one of the most successful, well known and most popular The current business strategy can principally be German football clubs with an outstanding fan summarised as follows:

base that provides BVB with the greatest average • Stabilisation of the financial situation number of viewers in all of Europe. • Sustainable adjustment of sporting perspectives • Intensifying the promotion of up and coming talent • Fan involvement • Use of the “Borussia Dortmund” brand

24th round 25th round 4 March 2006 11 March 2006 BVB 1 - 1 Mainz 05 Stuttgart 0 - 0 BVB

Borussia celebrate in the snow: Wörns Perfectly in step: Dortmund's Ebi (centre) and Smolarek (right). But in the Smolarek and Stuttgart's Markus Babbel end Mainz were celebrating a 1:1 draw. were still dreaming of the UEFA Cup. 101 Borussia Dortmund

RESULTS OF OPERATIONS, FINANCIAL POSITION AND NET ASSETS

RESULTS OF OPERATIONS

EARNINGS DEVELOPMENT Sales in EUR millions

Consolidated earnings amounted to EUR -20.8 mil- 100 lion for the 2005/2006 financial year, representing an improvement of EUR 33.7 million over the previous year. This improvement in earnings was mainly the 12.4 result of the EUR 14.4 million increase in sales, 0.7 savings in the professional squad and lower depre- 75 ciation and amortisation in particular of the carrying 17.2 amounts of player registrations. The improvement 15.0 was therefore principally achieved in the operating activities with the result that the loss from ordinary activities and EBIT showed significant positive de- 14.8 14.9 50 velopment compared with the previous year, which was characterised by drastic reorganisation measures.

Our expectation is that earnings will continue to 27.4 26.6 develop positively in the coming financial years and that we will be able to achieve a turnaround in the 25 operating area as early as the 2006/2007 financial year. The precondition for this is that the BVB professional squad achieves renewed sporting successes. 17.2 17.5 Qualification for the UEFA Cup and successful participation in the DFB Cup would represent 0 2005/06 2004/05 potential sales opportunities in the short term.

SALES DEVELOPMENT Transfer income Merchandising/catering (incl. Other income)

Sales in the five major revenue sources developed as TV marketing follows in the last two financial years: Sponsoring Ticketing

26th round 27th round 18 March 2006 25 March 2006 BVB 2 - 1 Kaiserslautern Hamburg 2 - 4 BVB

Florian Kringe celebrates his winning Solo run to success: Tomas Rosicky and goal in the home game against the BVB bench (in the background) 102 1. FC Kaiserslautern, final score 2:1. celebrate a goal even before it's scored... GROUP MANAGEMENT REPORT

Sales rose significantly from EUR 74.7 million to media and the attractive and varied range of spon- EUR 89.1 million (an increase of 19%) despite the soring have in recent years resulted in a high degree lack of participation in international competitions and of customer retention. BVB's early exit from the DFB Cup in the 2005/06 season. This reflected the positive effects for the BVB The marketing of football stadiums includes a wide Group of the 2006 FIFA World Cup as well as the range of advertising opportunities covering all aspects lucrative transfer of Tomas Rosicky to Arsenal of sporting events. In addition to the jersey sponsor and London, among other factors. The development of the equipment supplier, perimeter board advertising the individual revenue sources is described in the and cam carpets divide up the space on the pitch following sections. between them. Sponsor walls and stands act as advertising media during interviews at half-time and after the Income from ticketing match. TV-related advertising was expanded by rear- Borussia Dortmund generated income amounting to ranging the front rows of the stands, for example, which EUR 17.2 million in the financial year under review created attractive new advertising space. But newly from match day takings, i.e. sales of season and day developed forms of marketing also offer further poten- tickets, and participation in friendly games. This tial for existing and new sponsors in the next few years. represents a decline of almost EUR 0.4 million compared with the previous year, which reflected lower The great atmosphere at the games played during the takings from the DFB Cup following the first-round 2006 World Cup showed that SIGNAL IDUNA PARK exit against Eintracht Braunschweig and a slight drop is one of the most sought-after sporting and marketing in attendance figures. locations in Germany.

Income from sponsoring Income from TV marketing Borussia Dortmund recorded income from sponsoring Income from TV marketing in the financial year under in the order of EUR 27.4 million and so improved on review amounted to EUR 14.8 million, which was the prior-year figure of EUR 26.6 million by a further almost at the same level as the previous year (EUR EUR 0.8 million. This was because the loss of income 14.9 million). resulting from penalties based on Borussia's position on the Bundesliga table was more than made up for by The exit in the first round of the DFB Cup and the the signing of the agreement for the rights to the sta- relegation of the amateur squad to the Westphalia dium name with the Signal Iduna Group and contract regional league (Oberliga Westfalen) resulted in a loss extensions of existing long-term sponsorship agree- of income of around EUR 0.5 million, despite the ments. In addition to the large number of viewers, the income resulting from the Cup match being broad- constant presence of SIGNAL IDUNA PARK in the cast live.

28th round 29th round 1 April 2006 8 April 2006 Mönchengladbach 2 - 1 BVB BVB 1 - 2 Leverkusen

Christian Wörns' protests are heard, Going nowhere: Leverkusen's veteran and Jeff Strasser's foul does not go unpunis- Bernd Schneider brings the powerful Dede to hed – penalty! a halt. The Brazilian hits the ground hard. 103 Borussia Dortmund

An increase in income from Bundesliga TV mar- Other income, which consists principally of in- keting of almost EUR 0.5 million compared with the come from rentals and leases, recorded growth of previous year was achieved thanks to the improved EUR 1.0 million to EUR 5.2 million. The main fac- position on the table throughout the whole season. tors behind the increase were the two international This resulted from an increase in the amount used matches held at SIGNAL IDUNA PARK before the to calculate the club's share of national TV income. 2006 FIFA World Cup, a portion of the rental income This amount is calculated in accordance with each generated by the World Cup and the oncharging of club's current league position and can thus vary. costs incurred during the World Cup games. This fully compensated for the loss of income mentioned above. Transfer income Income from transfer activities amounted to EUR After the TV rights until summer 2009 were awarded 12.4 million in the financial year under review, an for a total amount of around EUR 1.26 billion in amount that was EUR 11.7 higher than in the pre- December 2005, it is already certain that there will vious year (EUR 0.7 million). In addition to the sale be an increase in income from national TV mar- of the transfer rights for Enrique Ewerthon to Real keting in the coming seasons, despite a new basis of Saragossa and Niclas Jensen to Fulham at the start allocation. of the financial year, transfer income also reflects in particular the sale of the transfer rights for Tomas Income from merchandising Rosicky to Arsenal as of 23 May 2006. and catering (incl. Other income) Borussia Dortmund achieved income from merchandising and catering of EUR 12.0 million in the DEVELOPMENT OF SIGNIFICANT OPER- 2005/2006 financial year compared with EUR 14.0 ATING EXPENSES million in the 2004/2005 financial year. The reason for this decline was the sale of the team hotel, hotel- Personnel expenses lennhof, as part of the strategy of focusing on A reduction of EUR 6.9 million in personnel Borussia Dortmund's core business. This item expenses was achieved from EUR 46.7 million in the includes income from the sale of merchandise and the 2004/05 financial year to EUR 39.8 million, granting of product licences, income from catering on although the figure for the current 2005/06 finan- match days, the sale of publications, advance booking cial year includes around EUR 3 million for tax risks fees and licence fees for events at SIGNAL IDUNA from prior years. Personnel expenses for the pro- PARK on non-match days. fessional squad alone recorded a fall amounting to

30th round 31st round 15 April 2006 22 April 2006 Berlin 0 - 0 BVB BVB 2 - 1 Nuremberg

Appealing to a higher authority didn't Florian Kringe scores two (great!) goals work: Amoah missed a good chance. But for the first time in a Bundesliga game 104 Marcelinho (r.) did no better... in the 2:1 win over Nuremberg. GROUP MANAGEMENT REPORT

EUR 5.2 million. The sale of hotellennhof also Other operating expenses contributed to the reduction in personnel expenses. Other operating expenses amounted to EUR 46.3 million in the 2005/2006 financial year compared with Depreciation and amortisation EUR 43.2 million in the previous year. In addition to Depreciation and amortisation fell as planned by expenses for match operations and administration, the EUR 11.4 million compared with the previous year principal items were marketing expenses and legal and to EUR 14.2 million. The major reasons for this were advisory costs. Operating expenses also include the lower investments in the professional squad and the residual book values of the transfer rights sold as an sale of the hotellennhof. offsetting item to the transfer income reported.

FINANCIAL POSITION

ANALYSIS OF CAPITAL STRUCTURE ernisation of the stadium in the run-up to the FIFA World Cup. The equity ratio for the BVB Group increased compared with 30 June 2005 from 11.1% to 13.6%. The proportion of short-term debt fell from 38.4% Following the implementation of the capital increase as at 30 June 2005 to 36.0% as at 30 June 2006. At resolved in May 2006, in which 14,625,000 new EUR 99.7 million, short-term debt increased by shares were placed at an issue price of EUR 2.00 EUR 1.7 million compared with the previous year. each, and after taking into account the consolidated We expect to be in a position to reduce the amount loss for the year, group equity rose by EUR 9.1 mil- of short-term debt significantly in the coming finan- lion to EUR 37.6 million. cial year after applying the cash inflows from the capital increase already carried out and imple- The proportion of long-term debt was at the pre- menting the capital increase for cash and non-cash vious year's level (50.5%) at 50.5%. The absolute contributions resolved by the extraordinary General increase of approximately EUR 11.1 million prima- Shareholders' Meeting on 15 August 2006 in the rily results from long-term financing of the invest- 2006/2007 financial year, and as a result of the sig- ments made regarding the new training ground nificant improvement we anticipate in the operating (finance lease under IAS 17) as well as the mod- results.

32nd round 33rd round 2 May 2006 6 May 2006 Hanover 1 - 2 BVB BVB 1 - 1 Frankfurt

In a splendid performance, substitute goal- Fight for the ball: Christoph Metzelder keeper Dennis Gentenaar ensured that attacks Frankfurt's Stefan Lexa. Eintracht BVB grabbed three points in Hanover. takes home one point. 105 Borussia Dortmund

ANALYSIS OF INVESTMENTS ANALYSIS OF LIQUIDITY

Information relating to the analysis of investments The BVB Group had cash and cash equivalents of made by the BVB Group can be found in the state- EUR 41.0 million available at 30 June 2006. This rep- ment of changes in non-current assets, which forms resents an increase of EUR 36.9 million compared part of the notes. with 30 June 2005, which mainly reflected the effects Additions to intangible assets amounting to EUR of the capital increase and receipts of transfer income. 4.4 million relate almost entirely to investments in This high level of liquidity will be used to a large extent Borussia Dortmund's professional squad. Additions for the further repayment of debt at the beginning of to property, plant and equipment amounting to EUR the 2006/2007 financial year. 14.1 million relate principally to investments regarding the new training centre (EUR 5.1 million) as Information relating to the payment flows from oper- well as the modernisation of the stadium and its envi- ating, investing and financing activities can be found rons in connection with the 2006 FIFA World Cup. in the consolidated cash flow statement in the notes.

NET ASSETS

The total net assets of the BVB Group rose from intangible assets as a result of amortisation and EUR 255.4 million to EUR 277.4 million. The pro- lower non-current trade receivables. At the same portion of this accounted for by non-current assets time, current assets were EUR 31.5 million higher fell from 89.5% to 78.9%. The principal reasons for mainly as a result of the increase in cash and cash this reduction were lower player registrations within equivalents.

GOVERALL SUMMARY OF RESULTS OF OPERATIONS, FINANCIAL POSITION AND NET ASSETS

The results of operations, financial position and net and the Group's equity resources, which once again assets of the BVB Group showed significant positive allows BVB room for manoeuvre in its future sporting development following the successful implementa- development. We will be able to achieve a turn- tion of the cost-cutting reorganisation measures and around in the operating result in the 2006/2007 finan- the largely completed restructuring of the liability cial year in the event of corresponding sporting side of the balance sheet. Mention should be made successes by the professional squad. above all of the improvement in the operating result

34th round 1st round 13 May 2006 11 August 2006 Munich 3 - 3 BVB Munich 2 - 0 BVB

Koller plays in Munich (here against Ismael) from On 11 August Borussia Dortmund played the beginning of the match for the first time after the opening game at FC Bayern München 106 his cruciate ligament injury and scores two goals! – and lost by 0:2. GROUP MANAGEMENT REPORT

SUPPLEMENTARY REPORT

Thanks to the euphoria of the World Cup, the Furthermore, BVB may once again freely dispose Bundesliga sees another record year ahead. As in the over the rights to the Borussia Dortmund name and last few years already, Borussia Dortmund, having logo. By November, Borussia Dortmund will also sold roughly 45,000 season tickets, has maintained its redeem, to the extent possible, the security in the top position in the Bundesliga. Therefore, as regards players that had been assigned in the past. ticketing, we can expect high utilisation of the stadium in the coming season. In sponsoring, Borussia Dortmund's new Champion Partner is Sparda-Bank West eG, with its registered After the balance sheet date, BVB made some other office in Düsseldorf. The agreement initially runs for important personnel decisions. The contract with a period of two years. The signing of this agreement head coach Bert van Marwijk as well as the entire again proves that BVB has lost none of its attractive- coaching staff was prematurely extended by another ness for sponsors. What is more, we have hereby also year until 30 June 2008. Furthermore, Brazil inter- increased the number of our Champion Partners over national Tinga signed a three-year contract running the previous season and will generate additional until 30 June 2009 after the 28-year old midfield revenues in this area. player (whose full name is Paulo Cesar Fonseca do Nascimento) had won the South American Cham- On 15 August 2006 the extraordinary General pions League “Copa Libertadores” with SC Inter- Shareholders' Meeting resolved to increase the national Porto Alegre. Compared with the previous registered share capital of Borussia Dortmund season, the quality of the professional squad was also GmbH & Co. KGaA by up to EUR 17,550,000. The improved through the further new acquisitions limited liability shareholders are entitled to a sub- Steven Pienaar, Nelson Valdez, Alexander Frei and scription right in the ratio of 5:2 for new shares Martin Amedick. For this reason qualification for the against a cash contribution of EUR 2.00 per share. To UEFA Cup in the 2006/2007 season seems a realistic the extent that the limited liability shareholders assumption. should not exercise the indirect subscription right, then, pursuant to the resolution on the capital It seems that this goal can be achieved in spite of the increase, Morgan Stanley & Co. International Ltd., rather subdued start to the season and the sale of the London, United Kingdom will be permitted to transfer rights for Germany international David subscribe for up to 12,307,600 new shares against a Odonkor to the Spanish first-league team Betis non-cash contribution (contribution of a receivable Sevilla. Moreover, it should be possible to reach the from the Company at the nominal value of EUR 2.20 second main round of the DFB Cup. The opponent per share). in the first round will be TSG Thannhausen, a team from the Bavarian regional league.

2nd round DFB Cup 19 August 2006 9 September 2006 BVB 1 - 1 Mainz Thannhausen 0 - 3 BVB

Bundesliga premiere: In his 1st match TSG Thannhausen brought about many Martin Amedick heads the ball to make opportunities, but BVB won 3:0. it 1:0. 107 Borussia Dortmund

The KGaA shareholders exercised their indirect sub- In addition, the extraordinary General Shareholders' scription right on 7,567,585 new shares within the Meeting resolved to create authorised capital of subscription period and subscribed such shares EUR 21,937,500, which is limited in time until 31 against cash contribution at the issue price in the total July 2011. amount of EUR 15,135,170.00. Morgan Stanley & Co. International Ltd., United Kingdom, will sub- In order to hedge against future interest rate risks, a scribe for the other 9,982,415 shares. The capital fixed interest rate swap was executed in August 2006 contribution will be made through assignment to in relation to the EUR 79.2 million variable interest Borussia Dortmund GmbH & Co. KGaA of a partial rate loan on the basis of six months EURIBOR plus receivable of its associated company, Morgan Stanley 2 per cent as at the balance sheet date. This interest Bank International Ltd. in the nominal amount of rate hedge with a term of 15 years will, in future, EUR 21,961,313.00. result in an interest burden that is independent of the actual interest rate development and is based on an We are of the opinion that BVB's reorganisation can interest rate of 6.195 per cent. The interest rate be completed through the approval of the capital hedge may be terminated by both parties for the first increase and the full subscription thereof, given the time after 5 years against a settlement payment in the increased liquidity and further significant reduction amount of the market value of the swap. of the debt level that was thus made possible.

3rd round 4th round 26 August 2006 26 August 2006 Stuttgart 1 - 3 BVB BVB 1 - 0 Hamburg

The team celebrates victory with its fans Steven Pienaar is attacked by in Stuttgart. Hamburg's Mathijsen. 108 GROUP MANAGEMENT REPORT

RISK REPORT

RISK MANAGEMENT SYSTEM

Borussia Dortmund's business, which primarily re- lists that sensitise the responsible employees to the volves around sports and related marketing and risk situation and thus establish a basis for the early merchandising, is exposed to a number of specific recognition of risks and opportunities. risks arising externally as well as in the ordinary course of business that could adversely effect the Current corporate planning and controlling in the development of the BVB Group in the future. BVB Group's finance division also makes it possible to assess potential risks and initiate appropriate coun- It is the responsibility of management to recognise termeasures if necessary. The integrated ERP system, these risks early and to monitor them. Our primary which covers all corporate divisions, also makes analy- objective is to minimise risk and consistently capi- ses possible that serve to support the early recogni- talise on opportunities presenting themselves in the tion process. course of Borussia Dortmund's business development. This task is pursued with the support of Borussia Dortmund's financial condition and results responsible employees involved in the management of operations could be adversely affected by the of risks and opportunities. risks set forth below. In this regard it should be taken into consideration that the corporate environ- Business risks arise as a result of external or internal ment is also characterised by a variety of economic events that may impact the achievement of short-term factors that are incalculable, such as low economic goals or long-term strategies as well as the Group's growth, high unemployment, particularly in the financial situation. The monitoring and controlling of Ruhr area, or increased competitive pressure in the risks associated with current and future business region. Taking into account all the opportunities and development is carried out by a risk management sys- risk factors, Borussia Dortmund's management is tem that is refined on an ongoing basis. This system is continually adapting both its short-term corporate made up of both quantitative and qualitative compo- planning as well as its medium-term and long-term nents, which make it possible to create running check- business strategy.

5th round 6th round 22 September 2006 29 September 2006 Mönchengladbach 1 - 0 BVB BVB 2 - 2 Hanover 96

Frei misses: Keller hooks the ball Kruska, Kringe and Pienaar celebrate away from the foot of the BVB striker. the two goals by Ebi Smolarek. 109 Borussia Dortmund

SPECIFIC RISKS

STRATEGIC RISKS PERSONNEL RISKS

The most important challenge in professional sports Borussia Dortmund's future financial and sporting management is to reconcile sporting and financial development is substantially dependent on the per- objectives. Essentially, this means working with a formance of its employees. In this regard the profes- limited financial budget to achieve sporting goals that sional squad is of critical importance. Bad invest- could lead to greater financial leverage in the future. ments in this area would have far-reaching effects on To this end, Borussia Dortmund's management has sporting, and thus, financial objectives. In addition, undertaken not to enter into any financial risks that major problems with injured BVB players could have could jeopardise the existence of BVB. an adverse effect on the sporting and financial objectives of the BVB Group. The financial and business development is largely dependent on sporting success. Since sporting suc- The Company's success rests on making business cess cannot be planned, the best management can do decisions and implementing them. BVB is dependent is to create a foundation for success. Investments, on qualified specialists and executives in order to particularly in the professional squad, are therefore a realise its objectives. Particularly in the area of risk necessary prerequisite for achieving sporting objec- management, the responsible employees must develop tives, such as qualifying for the UEFA Cup. However, an entrepreneurial mindset and approach capable of in order to meet financial goals, planned investments meeting the special challenges of this division. The and decisions must under certain circumstances be organisational structure of the BVB Group, with its postponed since these might only be possible by clear structures and areas of responsibility, serves as incurring new debt. Moreover, a player may be sold the foundation instrumental for this. based on financial considerations in cases where this would not have happened had the decision been COMPETITIVE RISKS made based solely on sporting criteria. In order to stand up to the competition, particularly Thus, a conflict, or a situation where the sporting in advance of the FIFA World Cup 2006, football sta- development and financial development each ad- diums were constructed and renovated throughout versely affects the other, is created between the Germany. In contrast to many of its competitors, the pursuit of financial interests and sporting interests, Borussia Dortmund Group could not rely on public particularly when the business continually falls short subsidies for the expansion and renovation of the of its sporting goals. In such case, management SIGNAL IDUNA PARK, which means that Borussia weighs the opportunities and risks to find a reasona- Dortmund bears a greater risk than its competitors. ble solution that takes into account strategic objec- In addition, the state of North Rhine Westphalia has tives for the medium-term. an unusually high concentration of competitors with

110 GROUP MANAGEMENT REPORT

currently seven teams playing in the (First) or a showing of inability to meet financial criteria, Bundesliga and four teams in the Second Bundesliga, this could result in automatic relegation. The effects which could have an adverse effect with respect to of an automatic relegation on earnings and liquidity acquiring sponsors based in the region. would jeopardise the Company's existence.

SALES RISKS Through the implementation of reorganisation measures, debt restructuring, the new main spon- If the team failed to have sporting success over an sorship deal with RAG, the marketing of SIGNAL extended period of time, this could have a material IDUNA PARK as well as moderate net investments adverse effect on the marketing potential of Borussia in the professional squad, we have been able to sig- Dortmund. This would have a direct effect on the nificantly reduce the risk of not being granted a revenue sources of ticketing, sponsoring as well as the licence, so that in our opinion the licensing proce- merchandising business in the form of sales declines dure will no longer be a direct threat to the per- because these are directly dependent on the sporting formance or the existence of the Company. DFL performance of BVB and are currently at a very high deutsche Fußball Liga GmbH informed us on 20 level. In addition, if we were to fall short of our April 2006 that it deems the criteria for a licence for sporting objectives, we would also be unable to realise the 2006/2007 season to be met. The DFL's deci- additional earnings potential primarily in the area of sion is not connected with any conditions for TV marketing at UEFA Champions League and Borussia Dortmund. It contains only the standard UEFA Cup matches. administrative conditions relating to reporting and documentation obligations. RISKS JEOPARDISING PERFORMANCE AND CONTINUED EXISTENCE As a result of the implementation of the capital increase resolved on 15 August 2006 and the re- In order to participate in Bundesliga matches, payment of other financial debt thereafter, the BVB Borussia Dortmund requires a licence from the Group's debt restructuring has now been completed. German Football League (DFL) which is issued for Thus, we believe that we have finally overcome the each season. If the licence were to be revoked or risk to the Group's financial position that had existed denied because of failure to comply with conditions in years past.

THE RISK SITUATION IN SUMMARY

Compared to the previous year, we have been able to are not involved in competitions on an international definitively eliminate those risks threatening per- level does not jeopardise Borussia Dortmund's exis- formance or the Company's continued existence tence. If we succeed in qualifying for the UEFA Cup which are subject to disclosure thanks to reorganisa- or the Champions League, our financial condition tion efforts and debt restructuring. The fact that we and results of operations will improve even further.

111 Borussia Dortmund

FORECAST REPORT

ANTICIPATED DEVELOPMENT OF THE GROUP

After having completed the reorganisation, the debt We will continue on the course we have set for our- restructuring of the BVB Group and the selective selves on a solid equity base and without exposing strengthening of its professional squad, Borussia ourselves to any incalculable financial risks, so that Dortmund is once more able to compete for one of BVB will once more become a leading football club in the first five places on the Bundesliga table. Germany and preferably also in Europe.

EXPECTED GENERAL ECONOMIC ENVIRONMENT

Professional football in Germany is booming as never tracts only entered into effect in July 2006. As the before. The Bundesliga's unfailing popularity with the KirchGruppe had been the chief source of money for fans and the resulting interest of media companies and the clubs, its insolvency presented them with a major sponsors has also made it a commercial success story. challenge. Now, five years down the line, the league is Since the formation of the League Association in a better position than ever before. Professional foot- (Ligaverband) in 2000, the clubs and corporations of ball has emerged all the stronger from the crisis of the professional football have not been able to produce any television and advertising markets. Tough cutbacks on figures as good as those in the past football season. And the one hand and the sustainability of operations cou- this although the increase of the TV revenues is not yet pled with the preparedness to invest in the future on included in the present figures because the media con- the other are starting to pay off.

EXPECTED RESULTS OF OPERATIONS

ANTICIPATED ANTICIPATED EARNINGS DEVELOPMENT SALES DEVELOPMENT

We are expecting to achieve a turnaround in the It is expected that sales revenues in the 2006/2007 operating result (EBIT) already in the 2006/2007 financial year will amount to approximately EUR 85 season. Compared to 2005/2006, there will be a sig- million, without taking into account any further nificant improvement in the result from ordinary transfer revenues or any extraordinary success in the activities as well as the overall group result. DFB Cup. Sales revenues could clearly rise to above From a realistic perspective, the objective for the EUR 90 million as a result of a qualification for the season is qualifying for the UEFA Cup. If we are UEFA Cup and the firm establishment of BVB in indeed able to attain this objective, then earnings international competitions over the medium term. would continue to improve substantially beginning in Participation in the UEFA Champions League the 2007/2008 season due to the higher income - would presumably increase the sales potential to generated through ticketing, sponsoring, TV marketing, above EUR 100 million. merchandising and catering.

112 GROUP MANAGEMENT REPORT

ANTICIPATED DEVELOPMENT EXPECTED DIVIDENDS OF MATERIAL OPERATING EXPENSES Against the background of the very high cumulated Operating expenses will continue to decrease in the losses in past years, we are not planning any dividend 2006/2007 financial year. In the area of legal and distributions in the next financial years despite a advisory costs, for example, we are expecting a drop marked improvement in earnings. Given the fact that of approximately EUR 4.0 million due to the suc- for the time being there are to be further substantial cessful implementation of the reorganisation and reductions in the indebtedness, we will consider the the restructuring of the liability side of the balance distribution of dividends subject to the condition of sheet. Furthermore, without any further player sustainable profits, which can only be realised transfers, we expect a decrease in operating expenses through participation in international competitions. of EUR 5 million compared with the 2005/2006 financial year. We will stabilise this level of expenses on a sustainable basis, dependent on future sales development.

EXPECTED FINANCIAL POSITION

FINANCIAL PLANNING Borussia Dortmund and, in this respect, will not be taking any incalculable financial risks. In essence, this As a result of the improved earnings situation and the means that we will only be incurring capital expendi- debt restructuring, which also includes, in particular, ture to the extent permitted by the anticipated finan- long-term financing of the stadium shares we expect cial leeway. As part of capital expenditure planning, that we will be in a position to achieve a further sub- we will thus not include any uncertain sporting suc- stantial reduction in our liabilities. This will be imple- cesses which, if they failed to materialise, would lead mented, in particular, through the repayment in to substantial new indebtedness. ratable amounts of the long-term stadium financing as from the 2007/2008 financial year, while the ANTICIPATED DEVELOPMENT development of the other liabilities in the course of OF LIQUIDITY operating activities will be relatively constant. Following the implementation of the capital increase CAPITAL EXPENDITURE PLANNING resolved on 15 August 2006, the further reduction in debt consequent thereto and the expected improve- In future, our capital expenditures will be focussed ment in earnings, we will as from the 2007/2008 on the professional squad, further modernisations of financial year be in the position to generate substan- the SIGNAL IDUNA PARK and its environs as well tial financial net income, which will clearly improve as the possible expansion of our new training centre. Borussia Dortmund's room for manoeuvre and its Thus we will concentrate on the core business of competitive edge.

113 Borussia Dortmund

OPPORTUNITIES

Borussia Dortmund's greatest opportunities lie in effects produced thereby also depend, to a large unlocking and exploiting additional revenue poten- extent, on the luck of the draw. tials by participating in international competitions, such as the UEFA Cup and the UEFA Champions Borussia Dortmund's professional squad, which League. The mere participation in the UEFA Cup includes a large number of young and talented play- group phase would already result in additional ers, has enormous potential. In the future, players revenues of around EUR 5 million, generated such as David Vrzogic, Nuri Sahin, Sebastian Tyrala, through additional TV, ticketing and sponsoring being young players from BVB's own youth camp, revenues. According to our estimations, we would established regular players such as Christoph generate at least EUR 10 million in additional sales if Metzelder, Sebastian Kehl, Roman Weidenfeller, we were to reach the group phase of the UEFA Christian Wörns or Dede and new acquisitions such Champions League. In addition, an international as Steven Pienaar, Nelson Valdez, Tinga and presence would almost certainly have a positive Alexander Frei will be able to push BVB once more impact on the merchandising business. to the top in Germany and maybe even further. In addition to the sporting success we are striving for, Participation in the national cup matches, the DFB this team enables us to achieve a significant increase Cup and the DFL League Cup, represents yet another of the BVB Group's earnings potential and offers significant earnings potential. However, the financial tremendous transfer potentials for the future.

DEVELOPMENT FORECAST IN SUMMARY

Since the completion of the reorganisation and the In our continued development, we will not enter restructuring focusing on the buyback of the stadi- into any further financial risks that could jeopardise the um share, BVB is once again in a position to make existence of Borussia Dortmund. Profits generated will investments in the professional squad, which will be prerequisite to any further investments in the significantly improve the quality of the team. The professional squad. We are convinced that we are on contracts with national players Steven Pienaar, the right road – the one that will lead Borussia Alexander Frei, Nelson Valdez and Tinga are an Dortmund back to the top of the Bundesliga. impressive demonstration of this. Qualifying for the UEFA-Cup in the 2006/2007 season is a realistic goal, which will enable us to further strengthen the Group's earnings potential.

114 GROUP MANAGEMENT REPORT

OTHER DISCLOSURES

CONCLUDING STATEMENT TO THE DEPENDENT COMPANY REPORT

With respect to transactions set out in the report concerning relationships with affiliated enterprises, Dortmund, 8. September 2006 the Company received consideration in the financial Borussia Dortmund Geschäftsführungs-GmbH

Hans-Joachim Watzke Thomas Treß Managing Director (Chairman) Managing Director

115 “... Borussia will remain” from the club song from 1909

The central motif of the share: the Champions The share – issued on the Frankfurt Stock League victory in 1997. Exchange in October 2000.

AND WE ALWAYS GET BACK UP UEFA Cup against the team trained by Bert van Marwijk, Feyenoord Rotterdam (2:3). The overaged team slid down several places, “complacent” from its successes, and even had to To date, this has been the last highlight in the worry about remaining in the first division in the glorious history of BVB. Since then, for almost two 1999/2000 season. However, it turned out that years headlines have been made in the financial Borussia Dortmund knows how to take strength section of papers rather than in the sports section. from crises: In 2002, BVB won its sixth German In February 2005, Borussia Dortmund was facing championship to date, and reached the final of the insolvency.

Losers in the UEFA Cup final in Rotterdam Winners in the Bundesliga: Jens Lehmann with against Feyenoord: Christian Wörns after the 2:3 the trophy after winning the title on 4 May 2002 on 8 May 2002. against Werder Bremen.

116 2000 2002

CHRONOLOGY 2002

JANUARY

1 January: The monetary union, which was commenced in 1999, is completed with the issue of Euro banknotes and Euro coins in twelve European countries.

FEBRUARY

1 February: The Lower House resolves to end atomic energy. The so-called Nuclear Consensus provides that the last of the 19 German atomic energy plants will be shut down in 2021.

APRIL

8 April: The enterprise owned by media Matthias Sammer – today pointing the way to the future mogul Leo Kirch (born 1926) files for at the German Football Association (DFB). insolvency due to debts amounting to EUR 6.5 billion.

JUNE

30 June: Germany loses the final of the World Cup in Japan/South Korea 0:2 against Brazil.

SEPTEMBER

22 September: The SPD remains the strongest party at the Federal elections.

OCTOBER

22 October: The 15th Federal Parliament re-elects Gerhard Schröder as German Chancellor.

Ewerthon’s goal to make it 2:1 against Bremen decides the 2002 German championship in BVB's favour.

117 “... Borussia will remain” from the club song from 1909

The equipment supplier, NIKE, is picking up on the notion of a return to past values in its current cam- paign: “Back to the roots”. The fact that insolvency could be averted and that Borussia Dortmund has since again sewn the seeds for a successful sporting and financial future is owed to the new management surrounding Dr. Reinhard Rauball (President of the registered club, BV Borussia 09 e.V.) and Hans-Joachim Watzke (Management Chairman of Borussia Dort- mund GmbH & Co. KGaA). The management has succeeded in creating new trust in BVB's strengths amongst creditors and investors, sponsors and fans “Artistic” BVB: and in revamping the enterprise. Borussia as an aesthetic dimension.

The sporting goal for the 2006/2007 season is fifth place in the Bundesliga and therefore qualification for international competition. A clear interim target had been achieved on 18 September 2006: For the first time in almost three years BVB was again in fourth position on the Bundesliga table…

Borussia and the Brazilian failure (Amoroso as a sausage seller).

Borussia and Brazilian rejoicing (here, Dede and Amoroso with the Czech, Jan Koller).

118 2002 2006

CHRONOLOGY 2004

FEBRUARY

8 February: US President George W. Bush concedes that he incorrectly assessed the existence of weapons of mass destruction based on secret service reports prior to the Iraq war.

JULY

4 July: Greece becomes European champion under Coach Otto “Rehakles” Rehhagel in Portugal following a 1:0 victory against the host in the final.

DECEMBER

6 December: Angela Merkel is confirmed as CDU Chairwoman with 88.4 percent of the votes at the federal party conference.

Solidarity and enthusiasm - it starts with the youth.

The “Temple of Bliss” and its heart, the southern stand.

Focus of interest – the game and its flashing speed.

Always a local derby: Black-and-yellow versus blue-and-white.

119 Borussia Dortmund Consolidated balance sheet

A S S E T S Note* 30 June 2006 30 June 2005 EUR thousands EUR thousands Non-current assets

Intangible assets (1) 5,913 14,135 Property, plant and equipment (2) 200,184 200,444 Investments in associates (3) 176 132 Non-current financial assets (4) 201 122 Non-current trade receivables and other assets (5) 8,852 12,207 Deferred tax assets (17) 3,672 1,518

218,998 228,558 Current assets

Inventories (6) 1,172 1,431 Trade receivables and other assets (5) 16,242 21,358 Cash and cash equivalents (7) 41,001 4,093

58,415 26,882 277,413 255,440

E Q U I T Y A N D L I A B I L I T I E S

Equity (8)

Subscribed capital 43,875 29,250 Reserves -6,412 -728 Own shares -143 -145 Equity attributable to shareholders 37,320 28,377 Minority interest 304 83

37,624 28,460 Non-current liabilities (12)

Non-current financial liabilities (9) 128,694 118,740 Other non-current liabilities (10) 5,027 0 Non-current income tax liabilities (17) 5,232 5,012 Deferred tax liabilities (17) 1,103 5,242

140,056 128,994 Current liabilities (12)

Current financial liabilities (9) 62,563 3,211 Compensation entitlement of limited partners (11) 0 53,502 Trade payables 9,519 17,494 Other current liabilities (10) 23,425 23,396 Current income tax liabilities (17) 4,226 383

99,733 97,986 277,413 255,440

* The relevant sections in the notes can be found on the following pages: (1), (2) – p. 137, (3)– p. 138, (4), (5), (6)– p. 139, (7), (8)– p. 140, (9) – p. 141, (10) – p. 143, (11) – p.144, (12) – p. 145, (17) – p. 147

120 CONSOLIDATED FINANCIAL STATEMENTS Consolidated income statement

Note* 2005/06 2004/05 EUR thousands EUR thousands

Revenues (13) 89,055 74,697

Other operating income 3,619 3,336

Cost of materials -3,557 -4,078

Personnel expenses (14) -39,768 -46,652

Depreciation and amortisation (15) -14,227 -25,623

Other operating expenses (16) -46,326 -43,185

Loss from operating activities -11,204 -41,505

Income from investments in associates (3) 44 21

Income from other securities 0 463

Other interest and similar income 2,045 2,253

Interest and similar expenses -9,476 -10,984

Expense from the transfer of profit shares to limited partners (11) -74 -3,476

Expense from the increase in the fair value of minority limited partners' compensation entitlement (11) -3,898 -2,072

Net finance costs -11,359 -13,795

Loss before taxes -22,563 -55,300

Income taxes (17) 1,786 824

Consolidated net loss for the year -20,777 -54,476

- of which attributable to shareholders: -20,801 -54,521

- of which minority interest: 24 45

Earnings per share: (21) -0.70 -2.04

* The relevant sections in the notes can be found on the following pages: (3) – p. 138, (11) – p. 144, (13), (14), (15), (16) – p. 146, (17) – p. 147, (21) – p. 150

121 Borussia Dortmund Consolidated statement of changes in equity

Reserves

in EUR thousands Subscribed Capital Other Revenue Revaluation Total capital reserves reserves reserve reserves

1 July 2004 19,500 135,575 -95,464 205 40,316 Consolidated net loss for the year -54,521 -54,521 Dividends Decrease in revaluation reserve from disposals -205 -205 Capital increase 9,750 13,469 13,469 Sale of own shares Withdrawal from capital reserves to offset net accumulated losses -149,044 149,044 0 Other changes 213 213 30 June 2005 29,250 0 -728 0 -728 Consolidated net loss for the year -20,801 -20,801 Dividends Capital increase 14,625 14,230 14,230 Sale of own shares Other changes 887 887 30 June 2006 43,875 14,230 -20,642 0 -6,412

Statement of changes in non-current assets

Cost At At 01 July 2005 Additions Disposals Reclassifications 30 June 2006 EUR thou. EUR thou. EUR thou. EUR thou. EUR thou.

Intangible assets Player registrations 69,880 1,221 34,815 0 36,286 Industrial property rights and similar rights 1,445 12 0 0 1,457 Payments on account for player registrations 0 3,125 0 0 3,125 71,325 4,358 34,815 0 40,868 Property, plant and equipment Land, land rights and buildings including buildings on third-party land 203,342 333 0 3,118 206,793 Other equipment, operating and office equipment 14,804 6,118 2 2,936 23,856 Payments on account and assets under construction 4,589 1,586 121 -6,054 0 222,735 8,037 123 0 230,649 Investments in associates 132 44 0 0 176 Non-current financial assets 122 102 23 0 201 294,314 12,541 34,961 0 271,894

122 CONSOLIDATED FINANCIAL STATEMENTS

Equity Own attributable to Minority Consolidated shares shareholders interest equity

-148 59,668 77 59,745 -54,521 45 -54,476 0 -39 -39

-205 -205 23,219 23,219 3 33

00 213 213

-145 28,377 83 28,460 -20,801 24 -20,777 0 -44 -44 28,855 28,855 2 22 887 241 1,128 -143 37,320 304 37,624

Depreciation and amortisation Book values At At At At 01 July 2005 Additions Disposals 30 June 2006 30 June 2006 30 June 2005 EUR thou. EUR thou. EUR thou. EUR thou. EUR thou. EUR thou.

56,085 5,718 28,285 33,518 2,768 13,795

1,105 332 0 1,437 20 340

0 0 0 0 3,125 0 57,190 6,050 28,285 34,955 5,913 14,135

13,239 6,690 0 19,929 186,864 190,103

9,052 1,487 3 10,536 13,320 5,752

0 0 0 0 0 4,589 22,291 8,177 3 30,465 200,184 200,444

0 0 0 0 176 132 0 0 0 0 201 122 79,481 14,227 28,288 65,420 206,474 214,833

123 Borussia Dortmund Consolidated cash flow statement

in EUR thousands Note (18)* 2005/06 2004/05

Loss for the period before interest payments -16,414 -43,860

Depreciation and amortisation of non-current assets +14,227 +25,623

Other non-cash income and expense -1,398 -3,339

Profit/loss from disposals of non-current assets -5,857 +5,139

Share of profit/loss of financial assets accounted for at equity -44 -21

Changes in other assets not classified as from investing or financing activities +15,182 +20,011

Changes in other liabilities not classified as from investing or financing activities -3,176 -9,763

Interest paid -4,452 -11,903

Change in restricted funds -3,143 +15,652

Cash flows from operating activities -5,075 -2,461

Payments for investments in intangible assets -4,975 -69

Proceeds from disposals of intangible assets +9,988 +0

Payments for investments in property, plant and equipment -6,179 -1,692

Proceeds from the disposal of property, plant and equipment +121 +0

Payments for investments in financial assets -102 -614

Proceeds from the disposal of financial assets +0 +15,166

Interest received +89 +1,287

Cash flows from investing activities -1,058 +14,078

Proceeds from increases in capital +28,855 +23,219

Dividends paid to minority shareholders -44 -39

Proceeds from finance raised +84,752 0

Repayments of financial liabilities -81,665 -41,387

Cash flows from financing activities +31,898 -18,207

Net change in cash funds +25,765 -6,590

Changes in cash funds from remeasurement +0 -63

Cash funds at beginning of period +3,628 +10,281

Cash funds at end of period +29,393 +3,628

* see Note (18) – p. 148

124 CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

BASIC PRINCIPLES

POLICIES AND METHODS

Borussia Dortmund GmbH & Co. KGaA The IASB has also issued the following standards, (“BVB”) has its headquarters at Rhein-land- interpretations and amendments to existing stan- damm 207-209, Dortmund, Germany. BVB's dards whose adoption is not yet mandatory. No professional team has participated in the use has been made of the option of early adop- Bundesliga for three decades. In addition, BVB tion. The result of a general review was that, Group companies are engaged in the sale of mer- unless otherwise indicated, the standards listed chandise, the manufacture and sale of sporting below are not expected to result in any material articles under the “goool.de” brand name, the additional disclosures for the BVB Group: provision of internet and travel agency services, the running of a medical rehabilitation centre • IFRS 6 “Exploration for and evaluation of and the operation of the football stadium in mineral assets” (effective from 1 January 2006) Dortmund, trading under the name SIGNAL IDUNA PARK and 99.74% owned by the BVB • IFRS 7 “Financial instruments: disclosures” Group as of 30 June 2006. (effective from 1 January 2007) The IASB published IFRS 7 in August 2005. As a result of the adoption of the Regulation of This standard summarises the disclosures for the European Parliament and of the Council of financial instruments, which were previously 19 July 2002, BVB as a publicly traded company governed by IAS 30 “Disclosures in the finan- is required to prepare its consolidated financial cial statements of banks and similar financial statements in accordance with International institutions” and IAS 32 “Financial instru- Financial Reporting Standards (IFRS) for finan- ments: disclosure and presentation”. Indi- cial years beginning after 31 December 2004. vidual disclosure requirements have been changed or supplemented. The standard, These consolidated financial statements for BVB's which must be applied by all companies, will financial year from 1 July 2005 to 30 June 2006, probably require additional disclosures by the including the information relating to the previous BVB Group in respect of overdue receivables. year, have therefore been prepared for the There were no material overdue receivables at first time in accordance with IFRS. The term 3 June 2006. “IFRS” includes International Financial Re- porting Standards (IFRS) and International • IFRIC 4 “Determining whether an arrangement Accounting Standards (IAS) issued by the contains a lease” (effective from 1 January 2006) International Accounting Standards Board (IASB) in London as well as interpretations of the • IFRIC 5 “Rights to interests arising from International Financial Reporting Interpretations decommissioning, restoration and environ- Committee (IFRIC) and the Standing Inter- mental rehabilitation funds” (effective from 1 pretations Committee (SIC). January 2006)

125 Borussia Dortmund

• IFRIC 6 “Liabilities arising from participating By a resolution dated 8 September 2006, the con- in a specific market - waste electrical and elec- solidated financial statements and the Group tronic equipment” (effective from 1 December management report were authorised by the 2005) Company's management for submission to the Supervisory Board. • IFRIC 7 “Applying the restatement approach under IAS 29 Financial reporting in hyper- inflationary economies” (effective from FIRST-TIME ADOPTION OF IFRS 1 January 2006) With effect as of 1 July 2004, BVB has adopted • IFRIC 8 “Scope of IFRS 2” (effective from IFRS for the first time, taking particular account 1 May 2006) of IFRS 1. The Company has made use of the exemption options relating to retrospective appli- • IFRIC 9 “Reassessment of embedded deriva- cation under IFRS 1 in respect of the require- tives” (effective from 1 June 2006) ments for business combinations (IFRS 3). In addition, the stadium buildings have been • Amendments to IAS 19 “Employee benefits” measured at their fair value in the context of the (effective from 1 January 2006) transition to IFRS accounting in accordance with the option allowed by IFRS 1.16. • Amendment to IAS 39 “Financial instruments: recognition and measurement (fair-value The following reconciliations for the consolidated option)” (effective from 1 January 2006) balance sheet at 30 June 2005 and the consolidated income statement for the 2004/2005 finan- • Amendments to IAS 39 and IFRS 4 “Financial cial year show the changes resulting from the guarantee contracts” (effective from 1 January conversion from HGB to IFRS accounting. 2006) Material items are explained in more detail in the subsequent paragraphs. In order to improve the clarity and usefulness of the financial information, certain items in the income statement and the balance sheet have been combined. These items are reported separately and explained in the notes. The income statement was prepared in accordance with the nature of expense method.

The consolidated financial statements are presented in thousands of euros.

The consolidated financial statements and the Group management report are required to be deposited with the Company's Registration Court, the Local Court of Dortmund, HRB No. 14217.

126 CONSOLIDATED FINANCIAL STATEMENTS

1) Effects of the conversion to IFRS on the consolidated balance sheet

30 June 2005

in EUR thousands HGB Adjustments IFRS Intangible assets 14,935 -800 14,135 Property, plant and equipment 29,435 171,009 200,444 Non-current financial assets 66,736 -66,482 254 111,106 103,727 214,833 Inventories 1,431 0 1,431 Trade receivables 25,608 -98 25,510 Securities 59 -59 0 Cash and cash equivalents 3,243 850 4,093 Other assets and prepaid expenses 7,989 66 8,055 38,330 759 39,089 Deferred tax assets 0 1,518 1,518 Assets 149,436 106,004 255,440

Equity 25,546 2,914 28,460 Provisions 20,884 -20,884 0 Trade payables 17,296 198 17,494 Financial liabilities 30,075 91,876 121,951 Compensation entitlement of limited partners 0 53,502 53,502 Other liabilities and deferred income 55,635 -32,239 23,396 Income tax liabilities 0 5,395 5,395 103,006 118,732 221,738 Deferred tax liabilities 0 5,242 5,242 Equity and liabilities 149,436 106,004 255,440

The differences between the consolidated bal- inclusion of BVB Stadion GmbH (formerly: ance sheet at 30 June 2005 in accordance with Westfalenstadion Dortmund GmbH & Co. KG German accounting requirements and the con- (“WFS KG”)) in BVB's consolidated financial solidated balance sheet at the same date in accor- statements in accordance with IAS 27 together dance with IFRS are the result of the following with SIC-12. Conversely, financial assets were material items: reduced by the elimination on consolidation of the investment in WFS KG (EUR 44,714,000) Property, plant and equipment and the tenant's loan from BVB to WFS KG The increase of EUR 171,009,000 in property, amounting to EUR 21,768,000. plant and equipment relates entirely to the

127 Borussia Dortmund

Cash and cash equivalents and other assets as liabilities under IFRS. Accordingly, they have The changes relate exclusively to the inclusion of been reclassified as other liabilities. WFS KG in the group of consolidated companies. Financial liabilities Deferred taxes The increase in financial liabilities amounting to Deferred tax assets and liabilities are recognised EUR 91,876,000 reflects the inclusion of WFS KG for all temporary and quasi-temporary differences (EUR 52,113,000) in the consolidated financial between the tax base of items and their carrying statements and the reclassification of interest- amounts under IFRS. Deferred tax assets are also bearing loans from other liabilities to financial lia- recognised in respect of tax loss carry-forwards bilities (EUR 39,763,000). utilisable in future years. Compensation entitlement of limited Provisions partners The provisions reported in the HGB consoli- The financial statements include the entitlement dated financial statements amounting to EUR to compensation of other partners in WFS KG, 20,884,000 fulfil the requirements for recognition measured at fair value.

2) Effects of the conversion to IFRS on consolidated equity

The effects of the conversion to IFRS on equity at ciled with their corresponding presentation in the the 1 July 2004 and 30 June 2005 reporting dates balance sheet, because they represent only the net were as follows. The amounts cannot be recon- effects on equity.

in EUR thousands 30 June 2005 01 July 2004

Equity under HGB 25,546 80,759 Measurement of securities at fair value +0 +340 Classification of financial liabilities -3,500 -27,500 Expansion of the group of consolidated companies +9,479 +11,453 Remeasurement of financial liabilities +518 +0 Other effects on equity +141 +610 Deferred tax on differences between the tax base and IFRS -5,200 -6,356 Deferred tax assets recognised in respect of loss carry-forwards +1,476 +439 Equity under IFRS 28,460 59,745

128 CONSOLIDATED FINANCIAL STATEMENTS

3) Effects of the conversion to IFRS on the consolidated income statement for 2004/2005

2004/05

in EUR thousands HGB Adjustments IFRS Revenues 75,275 -578 74,697 Other operating income 3,891 -555 3,336 Cost of materials -4,078 0 -4,078 Personnel expenses -46,652 0 -46,652 Depreciation and amortisation -19,404 -6,219 -25,623 Other operating expenses -85,682 42,497 -43,185 Income from investments 268 -268 0 Income from investments in associates 21 0 21 Income from other securities and loans 2,029 -1,566 463 Other interest and similar income 1,602 651 2,253 Write-downs of financial assets and securities classified as current assets -8 8 0 Interest and similar expenses -6,740 -4,244 -10,984 Expense from the transfer of profit shares to limited partners 0 -3,476 -3,476 Expense from the increase in the fair valueof minority limited partners' compensation entitlement 0 -2,072 -2,072 Loss from ordinary activities -79,478 24,178 -55,300 Taxes on income -65 889 824 Other taxes -6 6 0

Consolidated net loss for the year -79,549 25,073 -54,476

The effects on the net loss for the year resulting from the conversion to IFRS can be analysed as follows:

in EUR thousands 2004/05

Consolidated net loss for the year under HGB -79,549 Expansion of the group of consolidated companies -1,692 Classification of financial liabilities +24,000 Income from the remeasurement of financial liabilities +518 Losses from transactions with own shares and from write-downs of own shares +148 Net costs of capital increase charged against equity +1,156 Change in deferred taxes affecting profit or loss +1,656 Other changes -713 Consolidated net loss for the year under IFRS -54,476

129 Borussia Dortmund

The expansion of the group of consolidated com- The classification of financial liabilities in the panies to include WFS KG resulted in an increase IFRS opening balance sheet resulted in a positive in the consolidated net loss for the year amounting effect from a provision for expected losses from in total to EUR 1,692,000. The major factors risks relating to trademark rights recognised as an having a negative effect on the consolidated net expense in the 2004/2005 HGB consolidated loss were the increase in the compensation financial statements. entitlement of minority limited partners (EUR 2,072,000), the transfer of profit shares to these The deferred tax benefit resulting from dif- limited partners recognised in accordance with ferences between the IFRS financial statements IAS 32 (EUR 3,476,000) and the higher depre- and the tax base is principally explained by the ciation charge resulting from the revaluation of recognition of deferred tax assets in respect of the stadium (EUR 3,432,000). These items were utilisable tax loss carry-forwards. offset by positive effects resulting from the net profit for the year of WFS KG and a provision for Under IFRS, the transactions costs of the capital in- rental payments (EUR 3,740,000) no longer crease carried out in 2004/2005 were taken directly required because it has now become an intra- to equity net of tax, so that a net expense amounting Group liability. to EUR 1,156,000 was charged against equity.

4) Effects of the conversion to IFRS on the consolidated cash flow statement

The inclusion of WFS KG in the IFRS consolidated statements but which is not presented as a cash financial statements at 30 June 2005 had signifi- outflow from investing activities in the IFRS cash cant effects on the cash flows from operating and flow statement, because WFS KG had already investing activities. In addition to the inclusion of been fully consolidated in the IFRS opening the operating cash flows of WFS KG in accordance balance sheet at 1 July 2004. with IFRS, this was mainly the result of the purchase of additional shares in WFS KG, which was treated as a cash outflow from investing activities in Cash funds at 30 June 2005 under HGB and IFRS the previous year's HGB consolidated financial are reconciled as follows:

in EUR thousands 30 June 2005

Cash funds in the HGB consolidated financial statements 3,243 + cash and cash equivalents of WFS KG included in the IFRS consolidated financial statements 850 - cash and cash equivalents subject to restrictions as a result of existing pledges -465

Cash funds under IFRS 3,628

130 CONSOLIDATED FINANCIAL STATEMENTS

GROUP OF CONSOLIDATED COMPANIES accordance with those requirements, WFS KG was fully consolidated in the IFRS opening In addition to Borussia Dortmund GmbH & Co. balance sheet on the grounds that it was already KGaA, the consolidated financial statements controlled by Borussia Dortmund GmbH & Co. included seven (prior year: six) subsidiary compa- KGaA in economic substance and from a legal nies and one associated company accounted for at point of view. equity. BVB Beteiligungs GmbH, which was founded during the 2005/2006 financial year, was Orthomed GmbH, in which the Group holds included in the consolidation for the first time from 33.33% of the shares and of the voting rights, has the date of its foundation. been included in the consolidated financial statements as an investment in associates under the WFS KG, in which Borussia Dortmund GmbH & equity method in accordance with IAS 28. Co. KGaA had an indirect interest of 6.0% (1 July 2004), 48.8% (30 June 2005) and 99.74% (30 June 2006), was fully consolidated on the basis of the The list of shareholdings at 30 June 2005 was requirements of IAS 27 together with SIC-12. In as follows:

Gesellschaft Location Shareholding %

BVB Stadionmanagement GmbH (formerly: Westfalenstadion Dortmund Verwaltungs-GmbH) Dortmund 100.00

goool.de sportswear GmbH Dortmund 100.00

Sports & Bytes GmbH Dortmund 100.00

BVB Merchandising GmbH (formerly: Borussia Dortmund Beteiligungs GmbH) Dortmund 100.00

BVB Stadion GmbH (formerly: Westfalenstadion Dortmund GmbH & Co. KG) Dortmund 99.74

BVB Beteiligungs GmbH Dortmund 94.90

B.E.S.T. Borussia Eurolloyd Sports Travel GmbH Dortmund 51.00

CONSOLIDATION PRINCIPLES The reporting date for the consolidated financial statements is the reporting date of the parent com- The annual financial statements of the companies pany. Where companies consolidated have a dif- included in BVB's consolidated financial statements ferent balance sheet date, interim financial state- are prepared in accordance with IFRS using con- ments have been prepared at the reporting date of sistent accounting policies. the parent company.

131 Borussia Dortmund

Intercompany revenues, income and expenses, ACCOUNTING POLICIES and all receivables and liabilities between companies included in the consolidated financial state- Intangible assets ments are eliminated on consolidation and provi- Purchased intangible assets are measured at cost sions relating to other Group companies are less amortisation based on their expected useful reversed. lives or at the lower fair value. Player registrations reported in these financial statements are The Company has made use of the option allowed measured at cost, taking into account the FIFA by IFRS 1.15 in the context of the transition to Regulations for the Status and Transfer of Players IFRS not to apply IFRS 3 retrospectively. In contained in circular no. 769 of 24 August 2001 preparing the IFRS opening balance sheet at 1 which came into force on 21 September 2001, July 2004, goodwill arising on the first-time con- and are amortised on a straight-line basis in solidation of WFS KG was netted against consoli- accordance with the term of the individual con- dated reserves in accordance with the provisions tracts for professional players. of IFRS 1.IG27(c). In principle, the purchase method of acquisition accounting is applied to new Computer software for commercial and technical purchases of equity interests; however, there were applications is amortised on a straight-line basis no further acquisitions of companies either in the over three years. year under review or in the comparable period.

Associates over which the Group has a significant Property, plant and equipment but not a controlling influence are accounted for The SIGNAL IDUNA PARK stadium buildings are using the equity method and initially recognised measured at their fair value in accordance with the at cost. The Group's investment in an associate option allowed by IFRS 1.16 in the context of the also includes goodwill arising on acquisition. The transition to IFRS accounting. The valuation was Group's share of profits and losses of associates is carried out by an independent external expert. The recognised in the income statement from the date stadium building was recognised in the IFRS of acquisition, while the share of changes in opening balance sheet at 1. July 2004 at a carrying reserves is reflected in consolidated reserves. The amount of EUR 177,200,000, while at the same carrying amount of the investment is adjusted to date the remaining HGB book value amounted to reflect the cumulative changes since the date of EUR 81,128,000. As a consequence of the measure- acquisition. There were no unrealised gains at any ment of the stadium building at fair value, deferred date from transactions between Group companies tax liabilities amounting to EUR 37,927,000 were and associates which would have been required to recognised at 1 July 2004. The net effect, after be eliminated on consolidation. It was not neces- deducting deferred taxes, of the measurement of sary to make any changes to the accounting poli- SIGNAL IDUNA PARK at fair value in accordance cies employed by associates. with IFRS 1.16 is reported in revenue reserves.

132 CONSOLIDATED FINANCIAL STATEMENTS

Land, the other buildings and the remaining items tion. Repair and maintenance costs are recognised of property, plant and equipment are measured at in the income statement as expenses in the cur- cost less depreciation. As a general principle, costs rent period. of borrowing are not capitalised as part of the cost of property, plant and equipment. Low-value Depreciation, mainly on a straight-line basis, is items are fully written off in the year of acquisi- based on the following useful lives:

Useful life in years

Stadion 30 Other buildings 25 to 50 Technical equipment and machinery 4.5 to 15 Other equipment, operating and office equipment 7 to 15

Significant parts of the stadium building are depreciated over their respective specific useful lives (component approach).

Impairment testing Leased assets in respect of which substantially all The useful lives of intangible assets and items of the risks and rewards of ownership have been property, plant and equipment are all finite. If transferred to the Group (finance lease) are recog- there are specific indications of impairment, nised at the present value of the lease payments impairment tests are carried out. An impairment or at the lower fair value in accordance with IAS loss is recognised for the amount by which the 17 and depreciated over the useful life or the carrying amount exceeds the recoverable amount. shorter lease term. In the case of leases of land The recoverable amount is the higher of net dis- and buildings, the components of the land and posal proceeds and value in use. If the reason for buildings are considered separately for the pur- an impairment write-down recognised in prior pose of the classification of the leases. years no longer exists, the impairment loss is reversed until the carrying amount of the asset, The payment obligations resulting from finance net of depreciation and amortisation, equals the lease agreements are recognised as a liability; the amount that would have been determined if an lease payments are apportioned between the impairment loss had not been recognised. interest expense and the reduction of the lease obligation using the effective interest method. If Leases substantially all the risks and rewards of owner- The Group's leases relate in particular to de- ship remain with the lessor (operating lease), the veloped land and operating and office equipment. lease payments are recognised as an expense in the financial year.

133 Borussia Dortmund

Financial instruments Originated financial instruments Under the terms of IAS 32 , a financial instrument Loans and financial liabilities originated by the is any contract that gives rise to a financial asset of BVB Group are measured at amortised cost since one entity and a financial liability or equity instru- they are not related to hedging instruments. ment of another entity. As part of the now completed reorganisation A financial instrument is initially measured at cost. scheme, the Company's borrowing terms were Transaction costs are included in the cost of the renegotiated in the context of a creditors' morato- asset or liability, except in the case of a remeasure- rium. Where the renegotiated terms differed sub- ment through profit or loss. stantially from the existing terms, the item was treated in the same manner as a repayment of prin- Financial instruments are subsequently measured cipal and a new liability on the revised terms and either at fair value or at amortised cost, depending conditions was subsequently recognised. The on their classification according to the following terms of the agreement are considered to be sub- categories: stantially different if the present value of the cash flows under the new terms of the agreement, using • financial assets at fair value through the original effective interest rate, varies by at least profit or loss 10% from the present value of the remaining cash • held-to-maturity investments flows associated with the original financial liability. • loans and receivables In such cases, the replacement of the debt instru- • available-for-sale securities ment or the change in the terms of the agreement is accounted for in the same manner as a repay- Market or quoted prices were available for all ment of principal which results in corresponding financial instruments recognised at fair value. effects on the income statement. Amortised cost includes repayments of principal, impairment losses, and the cumulative amortisa- Liabilities from finance leases reported under tion of differences between cost and the amounts other liabilities are recognised at their present value, repayable at maturity. calculated using the effective interest method.

If the maturity of a financial instrument is less Available-for-sale securities are measured at their than 12 months after the balance sheet date, it is fair value. Unrealised gains and losses from subse- reported in the balance sheet under current assets quent remeasurement are recognised directly in or liabilities. equity net of deferred taxes until the security is sold or suffers permanent impairment. If evidence of permanent impairment is established in the course of regular impairment testing, the relevant expense is immediately recognised in profit or loss.

The Group held no derivative financial instruments at the balance sheet dates.

134 CONSOLIDATED FINANCIAL STATEMENTS

Deferred taxes financial statements because it was possible to Deferred tax assets and liabilities are recognised in determine the amount and timing of all obligations accordance with IAS 12 for all temporary and quasi- exactly, with the result that these obligations have temporary differences between the tax base and been reported under liabilities. the IFRS carrying amounts as well as in respect of certain consolidation adjustments. Deferred tax Contingent liabilities which do not meet the crite- assets are recognised for tax loss carry-forwards if ria for recognition as a provision are disclosed in it is probable that they will be able to be utilised. the notes, unless the probability of an obligation The measurement of deferred tax assets and occurring is remote. liabilities is based on the tax laws currently applicable or expected to apply. Compensation entitlement of limited partners Where permitted, deferred tax assets and liabili- The shares in WFS KG held by third parties at the ties are netted against each other. date of the IFRS opening balance sheet on 1 July 2004 and at the balance sheet date for the compa- Deferred taxes are measured within the BVB rable period (30 June 2005) have been classified as Group at a uniform tax rate of 39.9%. liabilities in accordance with IAS 32, because the minority shareholders in WFS KG have an inalien- Inventories able legal right to sell their shares, with a corre- Inventories consist principally of merchandising sponding entitlement to compensation from the articles and goods held by the subsidiary company Company. This compensation obligation was goool.de. Inventories are measured at cost less any recognised as a liability at fair value at the date of individual allowances for goods whose cost may the transition to IFRS and has been adjusted not be recoverable. through profit or loss in subsequent periods in accordance with IAS 39; deferred taxes have been Own shares recognised as appropriate. The full amount paid for the purchase of own shares is reported as an item deducted from equity. Following the increase in the BVB Group's interest The Company has the right to reissue own shares in WFS KG to 99.74% in 2006, WFS KG was purchased by it at a later date. Proceeds of resale converted into BVB Stadion GmbH, entailing a in excess of cost are added to capital reserves, change of legal form. The remaining shareholder at while shortfalls are taken to revenue reserves. the 30 June 2006 balance sheet date, BVB 09 e.V., holds an indirect interest of 0.26% in BVB Stadion Provisions and contingent liabilities GmbH via BVB Beteiligungs GmbH. This minority In accordance with IAS 37, provisions are recog- interest is now reported within consolidated equity nised where a present obligation exists to third as a result of the conversion of WFS KG into parties arising from a past event, which is expected a corporation. to result in an outflow of resources but whose amount cannot be reliably determined. No provisions have been reported in these consolidated

135 Borussia Dortmund

Revenue recognition SEGMENT REPORTING Revenues are measured at the fair value of the consideration received or receivable and repre- Borussia Dortmund's business activities consist of sent amounts for goods delivered and services the operation of a football club including a profes- provided in the ordinary course of business, less sional football team. There are no further business rebates, VAT and other taxes arising in relation segments with distinguishable components and to revenues. risks and rewards different from those of other business segments. The business activities of the Interest income is allocated to the period to which subsidiary companies do not meet the criteria for it relates, taking into account the outstanding reportable segments in IAS 14 as a result of their amount of the loan and the effective interest rate to lack of economic significance and are therefore not be applied. The effective interest rate is the discount subject to the obligation to prepare segment rate at which the present value of the estimated reporting. future cash receipts over the term of the financial asset is equal to its net carrying amount.

Dividend income from investments is recognised when the shareholder's legal right to receive payment is established.

Revenues Income from the sale of transfer rights in respect of player registrations is reported gross within revenues. The expenses associated with the transfer activities such as the book values of assets sold and incidental costs of disposal are not netted against income and are reported under other operating expenses.

136 CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED BALANCE SHEET

(1) Intangible assets

in EUR thousands 30 June 2006 30. June 2005

Player registrations 2,768 13,795 Industrial property rights and similar rights 20 340 Payments on account for player registrations 3,125 0

5,913 14,135

Intangible assets consist of purchased player Internally generated trademark rights and claims registrations and computer software. The reduc- in respect of future transfer and insurance com- tion in this item in the 2005/2006 financial year pensation payments relating to player registra- was mainly the result of the amortisation of player tions have been assigned as security for loans. registrations and disposals. The players Ewerthon, Jensen and Rosicky were sold in return for trans- Changes in intangible assets are presented in a fer payments, while the players Amoah, Degen separate overview forming part of the notes to the and Valdez (payment on account) were signed up. consolidated financial statements.

(2) Property, plant and equipment

in EUR thousands 30 June 2006 30. June 2005

Land, land rights and buildings including buildings on third-party land 186,864 190,103 Other equipment, operating and office equipment 13,320 5,752 Payments on account and assets under construction 0 4,589 200,184 200,444

Property, plant and equipment consists principal- Additions to property, plant and equipment relate ly of the stadium and commercial premises and mainly to the completion of the “Am Luftbad” the adjoining area “Am Luftbad”, and also the parking area and investments in the stadium in facilities at the training ground in Dortmund- connection with the 2006 World Cup. Brackel, the youth centre, catering extensions and items of operating and office equipment at these facilities and at the administrative headquarters.

137 Borussia Dortmund

Property, plant and equipment include the following assets subject to finance leases:

Net book values in EUR thousands 30 June 2006 30. June 2005

Buildings 2,115 0 Operating and office equipment 2,935 0

5,050 0

The items of property, plant and equipment re- The Company's right of disposal over its property cognised in the balance sheet as a result of finance is subject to extensive restrictions in the form of leases consist of buildings and other facilities at charges or real property liens amounting to EUR the Dortmund-Brackel training ground; the lease 206,884,000. in respect of the land at the training ground, on the other hand, is classified as an operating lease. Changes in property, plant and equipment are The Company has an option to purchase the entire presented in a separate overview forming part of site following the expiry of the lease term. the notes to the consolidated financial statements.

(3) Investments in associates

in EUR thousands 30 June 2006 30. June 2005

At the beginning of the year 132 144 Share of profits +44 +21 Dividends received +0 -33 At the end of the year 176 132

The Group's share of the profits of its associated company Orthomed GmbH and its share of the assets and liabilities are as follows:

in EUR thousands 31 Dec. 2005 31 Dec. 2004

Share of assets 231 187 Share of liabilities 56 74 Share of revenues 1,045 972 Share of profit for the year 50 27

138 CONSOLIDATED FINANCIAL STATEMENTS

(4) Financial assets

Financial assets consist in particular of a tenant's The carrying amounts generally reflect market loan relating to an operating lease agreement and values. various employee loans.

(5) Trade receivables and other assets

in EUR thousands 30 June 2006 30 June 2005

Trade receivables 22,117 26,458 less: allowances -589 -948 Trade receivables - net 21,528 25,510

Other assets 3,566 8,055 25,094 33,565

less: non-current portion -8,852 -12,207 current portion 16,242 21,358

The carrying amounts of trade receivables generally expenses. Impairment losses amounting to EUR reflect their market values. The effective interest 50,000 (previous year: EUR 1,313,000) were rate applied for non-interest-bearing non-current reversed; the relevant income was reported under receivables is 5.5%. Approximately 62% (previous other operating income. year: approx. 68%) of the trade receivables re- The large majority of trade receivables, as well ported relate to a single debtor. as future claims from season ticket sales for the During the 2005/2006 financial year, the BVB 2007/2008 season (excluding the hospitality area), Group recognised impairment losses in respect of TV income and the agreement for the rights receivables amounting to EUR 2,827,000 (pre- to the stadium name, have been assigned as secu- vious year: EUR 1,188,000) under other operating rity for loans.

(6) Inventories

in EUR thousands 30 June 2006 30. June 2005

Inventories 1,760 1,457 - impairment losses -672 -26 payments on account 84 0 Inventories - net 1,172 1,431

Impairment losses amounting to EUR 646,000 of materials; sales of impaired items of inventories were recognised during the financial year in cost did not result in a reduction in cost of materials.

139 Borussia Dortmund

(7) Cash and cash equivalents Subscribed capital Of the cash and cash equivalents reported at the The subscribed capital of Borussia Dortmund balance sheet date amounting to EUR 41,001,000 GmbH & Co. KGaA is divided into no par value (previous year: EUR 4,093,000), EUR 3,608,000 shares with a notional share in the share capital of (previous year: EUR 465,000) were subject to EUR 1.00 per share. The shares are fully paid-up; restrictions on the Company's right of disposal. the number of shares issued and the number of shares in circulation changed as follows: (8) Equity The development of equity and minority interests is presented in the statement of changes in equity.

Own In Number of shares Issued shares circulation

1 July 2004 19,500,000 -24,583 19,475,417 Capital increase 2004 9,750,000 Change in holding of own shares 445 30 June 2005 29,250,000 -24,138 29,225,862

Capital increase 2006 14,625,000 Change in holding of own shares 267 30 June 2006 43,875,000 -23,871 43,851,129

In the period between the date of admission of EUR 29,250,000 by the issue of up to 9,750,000 the Company's shares to trading (31 October new bearer shares with subscription rights for 2000) and the balance sheet date, the Company shareholders. The capital increase was fully sub- acquired a total of 34,000 no par value shares and scribed at an issue price of EUR 2.50 for each no sold 10,129 no par value shares off-market in the par value share. The premium of EUR 14,625,000 form of printed physical share certificates. At the in excess of the nominal amount was added to balance sheet date, the Company's holding capital reserves net of the costs of the placement amounted to 23,871 no par value shares, repre- (EUR 1,156,000). The capital increase was entered senting 0.05% of the share capital. in the commercial register in October 2004.

On the basis of the authorisation granted by the On the basis of the authorisation granted by the General Shareholders' Meeting on 17 October General Shareholders' Meeting on 22 November 2000 and the approval of the Supervisory Board of 2005 and the approval of the Supervisory Board 16 September 2004, the general partner resolved of 17 May 2006, the general partner resolved to utilise the authorised capital to increase the to utilise the authorised capital to increase the share capital by up to EUR 9,750,000 to up to share capital by up to EUR 14,625,000 to up to

140 CONSOLIDATED FINANCIAL STATEMENTS

EUR 43,875,000 by the issue of up to 14,625,000 after deducting the net costs of the placement. new bearer shares with subscription rights for The capital reserves existing at 30 June 2005 were shareholders. The capital increase was fully sub- used to offset the net loss for the year and the scribed at an issue price of EUR 2.00 for each no accumulated losses brought forward. par value share. The premium of EUR 14,625,000 in excess of the nominal amount was added to The remaining reserves consist entirely of other capital reserves net of the costs of the placement revenue reserves. Revenue reserves comprise (EUR 395,000). The capital increase was entered profits generated and not distributed by Group in the commercial register in June 2006. companies in the current year and previous years and accumulated losses. In addition, the net effect, taking account of subsequent adjustments, Reserves of the remeasurement of SIGNAL IDUNA Capital reserves consist exclusively of transfers in PARK in accordance with IFRS 1.16 is reported respect of premiums on the issue of new shares under this item.

(9) Financial liabilities

in EUR thousands 30 June 2006 30 June 2005

non-current Liabilities to banks 123,379 72,475 Other loans 5,315 46,265 128,694 118,740

current Liabilities to banks 62,162 2,702 Other loans 401 509 62,563 3,211 191,257 121,951

Financial liabilities amounting to EUR The moratorium agreed with the Company's 185,541,000 represent liabilities to banks and financial creditors with effect as of 1 January 2005 EUR 104,404,000 of that amount relates to the was lifted in 2006 in the context of the refinancing financing of the stadium. Obligations to other of the large majority of the Company's financial lenders amounting to EUR 5,716,000 have also liabilities. been incurred. As part of the restructuring of the Company's finances, loan repayments were made In the 2005 financial year, a major programme of after the balance sheet date in an amount equal to refinancing and new borrowing was implemented the proceeds from the capital increase in June by the Group, including in particular a floating- 2006 (EUR 29,250,000). rate loan provided by Morgan Stanley & Co.

141 Borussia Dortmund

International Ltd., London, England. The loan 4,424,000 were treated as having been repaid and provides for repayments beginning in 2007 and were subsequently recognised in the financial rising annually until 2021. Additional repayments statements again on the basis of the renegotiated must also be made if defined thresholds for surplus terms of the loan agreement. Because of the fact liquidity are exceeded. The Group has agreed to be that, as a consequence of the new terms of the bound by corresponding restrictions on the pur- loan, the present value of the future cash flows chase and sale of significant assets. In addition, from these liabilities, discounted at the original the loan conditions include covenants relating effective interest rate, differs by more than 10% to the observance of a number of financial indica- from the present value of the remaining cash flows tors whose values vary over the term of the loan. of the original financial liabilities, the difference in The financial liabilities are secured in an the present values amounting to EUR 518,000 has amount of EUR 170,104,000 (previous year: EUR been recognised as income. 110,601,000) by the real property liens, assignments and pledges described in greater detail above. The interest-rate risks and contractual interest In the 2004/2005 financial year, existing finan- reset dates associated with the financial liabilities cial liabilities with a carrying amount of EUR were as follows at the balance sheet dates:

in EUR thousands 30 June 2006 30 June 2005

6 months or less 139,423 0 6-12 months 0 0 1-5 years 873 75,804 Over 5 years 50,961 46,147 191,257 121,951

Attention is drawn to the notes concerning events after the balance sheet date in respect of interest- rate hedging measures implemented after the reporting date.

The maturities of non-current financial liabilities were as follows:

in EUR thousands 30 June 2006 30 June 2005

Between 1 and 5 years 27,771 75,173 Over 5 years 100,923 43,567 128,694 118,740

The carrying amounts of financial liabilities generally reflect their market values. All financial liabilities are denominated in euros.

142 CONSOLIDATED FINANCIAL STATEMENTS

(10) Other liabilities

in EUR thousands 30 June 2006 30 June 2005

non-current Liabilities from finance leases 5,027 0

current Advance payments received from season ticket sales 7,487 8,141 Advance payments received from sponsors 1,323 4,248 Other taxes 6,224 4,015 Outstanding salaries 1,289 1,035 Social security 129 195 Holiday entitlements 264 245 Liabilities from finance leases 100 0 Other 6,609 5,517 23,425 23,396 Other liabilities, total 28,452 23,396

The minimum lease payments from finance leases are due for payment as follows:

in EUR thousands 30 June 2006 30 June 2005

Up to 1 year 439 0 Over 1 year and up to 5 years 2,051 0 Over 5 years 6,229 0 8,719 0 Future finance charges from finance leases -3,592 0

Present value of liabilities from finance leases 5,127 0

The change in the maturity structure of the present values of liabilities from finance leases was as follows:

in EUR thousands 30 June 2006 30 June 2005

Up to 1 year 100 0 Over 1 year and up to 5 years 793 0 Over 5 years 4,234 0 5,127 0

143 Borussia Dortmund

(11) Compensation entitlement of limited partners

WFS KG is included in the IFRS consolidated deferred by the shareholders of WFS KG in the financial statements as a subsidiary company in context of the creditors' moratorium. The corre- accordance with IAS 27 together with SIC-12. The sponding increase in the fair value of the com- consequence of this is that the 94% of the shares pensation entitlement is similar in nature to an in WFS KG held by Molsiris Vermietungs- accrual of interest payable and has been recog- gesellschaft mbH & Co., Objekt Westfalenstadion nised as an expense as a separate item in the KG (“Molsiris”) at 1 July 2004 are attributed in income statement. The increase in the compensa- substance to the BVB Group. The shares in WFS tion entitlement resulted in an additional expense KG held by Molsiris at the date of the IFRS of EUR 3,898,000 in the year under review (pre- opening balance sheet on 1 July 2004 and at the vious year: EUR 2,072,000). Because the com- balance sheet date for the comparable period (30 pensation obligations are not recognised for tax June 2005) are classified as liabilities in accor- purposes, their recognition as a liability gives rise dance with IAS 32, because Molsiris has an to corresponding deferred tax assets from the inalienable legal right to sell its shares, with a point of view of the Group. corresponding entitlement to compensation from the Company. This compensation obligation was The dividends paid by WFS KG to Molsiris in the recognised as a liability at fair value at the date of 2004/2005 financial year (EUR 3,476,000) and the the transition to IFRS and has been adjusted 2005/2006 financial year (EUR 74,000) have been through profit or loss in subsequent periods in treated as expenses relating to a financial liability accordance with IAS 39. in keeping with IAS 32.35 and presented separately in the consolidated income statement. The purchase price paid by the BVB Group in March 2005 for the acquisition of a further 42.8% Following the increase in the BVB Group's of the shares in WFS KG was used as the basis for interest in WFS KG to 99.74% in 2006, WFS KG the determination of the fair value of the shares in was converted into BVB Stadion GmbH, entailing WFS KG held by Molsiris at the date of the IFRS a change of legal form. As a result of the change of opening balance sheet at 1 July 2004. The measure- legal form, the remaining minority shareholders ment of Molsiris' remaining minority shareholding, at the 30 June 2006 balance sheet date are now from the Group's point of view, in WFS KG at 30 reported as a separate item within equity, also in June 2005 also took into account dividends accordance with IAS 32.

144 CONSOLIDATED FINANCIAL STATEMENTS

(12) Overall summary of non-current and current liabilities

The differences between the liabilities of the BVB Group in a pro forma set of HGB consolidated financial statements and in these IFRS consolidated financial statements can be reconciled as follows:

HGB pro forma Reclassifi- IFRS- IFRS in EUR thousands 30 June 2006 cations adjustments 30 June 2006

Provisions Provisions for taxes 7,073 -7,073 0 Other provisions 22,231 -22,231 0 29,304 -29,304 0 0 Financial liabilities Liabilities to banks 167,691 19,900 -2,050 185,541 Other loans 0 5,716 5,716 167,691 25,616 -2,050 191,257

Payments on account received 15 -15 0 Trade payables 9,519 9,519 Other liabilities 20,133 3,170 5,149 28,452 Income tax liabilities 0 9,458 9,458 Deferred tax liabilities 0 1,103 1,103

29,667 12,613 6,252 48,532

Deferred income 9,555 -8,925 -630 0

236,217 0 3,572 239,789

Differences in the classification and amount of lia- lating to finance leases, which are also in- bilities between the pro forma HGB and the IFRS terest-bearing, in other liabilities as defined consolidated financial statements result in particu- under IFRS. lar from: (c) the reduction of financial liabilities by the (a) the reclassification of provisions as liabilities amount of the costs incurred in connection with because they meet the requirements for re- raising new borrowings in the 2005/2006 finan- cognition as liabilities under IFRS. cial year; under IFRS, these are amortised (b) the reclassification of interest-bearing other through profit or loss over the term of the finan- liabilities as financial liabilities and, at the cial liabilities using the effective interest same time, the recognition of liabilities re- method.

145 Borussia Dortmund

NOTES TO THE CONSOLIDATED INCOME STATEMENT

(13) Revenues

in EUR thousands 2005/06 2004/05

Ticketing 17,190 17,505 Sponsoring 27,417 26,635 TV marketing 14,843 14,884 Transfer income 12,399 729 Merchandising, catering, licences 12,046 13,931 Other 5,160 1,013 89,055 74,697

(14) Personnel expenses

in EUR thousands 2005/06 2004/05

Wages and salaries 37,660 44,350 Social security contributions 2,108 2,302 39,768 46,652

Average number of employees 279 361

(15) Depreciation and amortisation

in EUR thousands 2005/06 2004/05

Amortisation of intangible assets 6,050 17,514 Depreciation of property, plant and equipment 8,177 8,109 14,227 25,623

No write-downs for impairment were required to be recognised either in the year under review or in the prior-year period.

(16) Other operating expenses

in EUR thousands 2005/06 2004/05

Match operations 11,144 9,342 Advertising 9,622 12,736 Transfers 7,772 2,763 Media and printing 1,321 1,949 Leasing 1,671 1,510 Administration 6,707 7,662 Other 6,197 7,110 Other taxes 1,892 113 46,326 43,185

146 CONSOLIDATED FINANCIAL STATEMENTS

(17) Income taxes and deferred taxes

Income tax liabilities developed as follows:

in EUR thousands 2005/06 2004/05

Income tax liabilities non-current 5,232 5,012 current 4,226 383 9,458 5,395

Non-current income tax liabilities relate to trade principally reflect the trade tax liability on the resale tax resulting from the sale of limited partners' of the shares in WFS KG by Molsiris to BVB. shares in WFS KG to Molsiris in 2002. In both years, the City of Dortmund agreed to defer set- The deferred tax assets and liabilities reported in tlement of the liability beyond the following the consolidated balance sheet relate to the fol- balance sheet date. Current income tax liabilities lowing items:

30 June 2006 30 June 2005 in EUR thousands Assets Passiva Assets Passiva

Recognition and measurement of non-current assets 42 20,289 Trade receivables and other assets 41 240 Financial liabilities 818 206 Compensation entitlement of limited partners 17,030 Other liabilities 285 1,537 Tax loss carry-forwards 3,631 1,476 Netting of deferred tax assets and liabilities -17,030 -17,030

3,672 1,103 1,518 5,242

The changes in deferred taxes were as follows:

in EUR thousands 30 June 2006 30 June 2005

At the beginning of the year + deferred tax assets 1,518 477 - deferred tax liabilities -5,242 -6,394 Net amount of deferred taxes at the beginning of the year -3,724 -5,917

Deferred taxes recognised directly in equity 911 537 Tax benefit recognised in the consolidated income statement 5,382 1,656 Net amount of deferred taxes at the balance sheet date 2,569 -3,724

147 Borussia Dortmund

The income tax expense was made up as follows:

in EUR thousands 2005/06 2004/05

Income taxes for the current period -3,596 -832 Deferred taxes 5,382 1,656 1,786 824

The income tax expense for the 2005/2006 finan- At the balance sheet date, the BVB Group had cor- cial year relates mainly to the trade tax liability poration tax loss carry-forwards amounting to EUR resulting from the sale of limited partners' shares 139,697,000 and trade tax loss carryforwards in WFS KG and to the tax effect of the costs of the amounting to EUR 162,810,000 for which no capital increase taken directly to equity. deferred tax assets have been recognised. The theoretical income tax benefit which would The recognition of deferred tax assets in respect of result from applying the normal tax rates for the tax loss carry-forwards resulted in a reduction in individual Group companies can be reconciled the tax expense of EUR 2,155,000 (prior year: with the actual income tax benefit reported in the EUR 1,037,000). consolidated income statement as follows:

in EUR thousands 2005/06 2004/05 Consolidated loss before taxes -22,563 -55,300 Theoretical tax rate in % 39.9% 39.9%

Expected income tax benefit 9,003 22,065 Tax effect of non-deductible expenses and income not subject to tax -1,996 -6,343 Taxes relating to earlier periods -329 0 Trade tax effect of change in partners of WFS KG -2,270 0 Effect from supplementary tax balance sheets 856 856 Tax losses for which no deferred tax assets were recognised -3,478 -15,754 Tax benefit recognised in the consolidated income statement 1,786 824 Actual tax rate in % 7.9% 1.5%

(18) Consolidated cash flow statement

Cash and cash equivalents reported in the balance sheet are reconciled to cash funds in the consolidated cash flow statement as follows:

in EUR thousands 30 June 2006 30 June 2005

Cash and cash equivalents 41,001 4,093 - cash and cash equivalents pledged -3,608 -465 - short-term overdrafts -8,000 0 Cash funds 29,393 3,628

148 CONSOLIDATED FINANCIAL STATEMENTS

OTHER DISCLOSURES

(19) Auditors' fees

in EUR thousands 2005/06

Audit of the financial statements 340 Other audit and advisory work 50 Tax advice 47 Other services 33

(20) Other financial obligations

Due after up to 1-5 more than 30 June 2006 (in EUR thousands) Total 1 year years 5 years

Rental and lease payments (operating leases) 19,469 1,786 6,607 11,076 Purchase commitments for investments in property, plant and equipment and for intangible assets 7,101 5,294 1,807 0 Marketing fees 33,296 8,324 24,972 0 Other obligations 2,164 45 178 1,941

62,030 15,449 33,564 13,017

Due after up to 1-5 more than 30 June 2005 (in EUR thousands) Total 1 year years 5 years

Rental and lease payments (operating leases) 20,407 1,510 5,213 13,684 Purchase commitments for investments in property, plant and equipment and for intangible assets 500 500 0 0 Marketing fees 45,000 9,000 36,000 0 Other obligations 1,967 40 159 1,768

67,874 11,050 41,372 15,452

The minimum lease payments from operating and the offices. Rental payments from the non- leases relate mostly to lease agreements for offices, cancellable period of a sub-lease agreement are the land at the Dortmund-Brackel training ground expected to amount to EUR 907,000 (previous and various motor vehicles. The Company has year: EUR 1,210,000). purchase options for the Dortmund-Brackel site

149 Borussia Dortmund

(21) Earnings per share increases in October 2004 and June 2006 did not include any material bonus elements. Accordingly, Earnings per share are calculated in accordance the new shares issued as a result of the capital with IAS 33 (Earnings per share) by dividing the increases were taken into account in the calcula- net profit or loss for the period attributable to the tion of the average number of shares outstanding shareholders by the weighted average number of on a time-weighted basis. Since there are no shares in circulation. The earnings per share potential ordinary shares, the diluted and undi- relate only to shares in the parent company. The luted earnings per share are the same. new shares issued as a result of the capital

2005/06 2004/05

Weighted average number of shares outstanding 29,835,371 26,729,806

Consolidated net loss for the year (in EUR thousands) -20,777 -54,476 Earnings attributable to minority shareholders 24 45 Earnings attributable to BVB Group shareholders -20,801 -54,521

Earnings per share (in EUR) -0.70 -2.04

(22) Transactions with related parties

The general partner in Borussia Dortmund Dortmund, in its capacity as the sole shareholder in GmbH & Co. KGaA is Borussia Dortmund Ge- Borussia Dortmund Geschäftsführungs GmbH. schäftsführungs-GmbH. The latter is responsible Both Borussia Dortmund Geschäftsführungs- for the management and legal representation of GmbH and Ballspielverein Borussia 09 e.V. Dort- Borussia Dortmund GmbH & Co. KGaA. The mund, and all their affiliated companies, there- power to appoint and remove members of staff fore qualify as related parties within the meaning rests with Ballspielverein Borussia 09 e.V. of IAS 24.

in EUR thousands 2005/06 2004/05

Transactions with BVB 09 e.V. Rental income 25 68 Income from other services 38 44 One-time contribution to operating funds for 3 subsequent seasons -450 0

Transactions with Borussia Dortmund Geschäftsführungs-GmbH Expense from costs recharged -1,113 -1,160

Transactions with Orthomed GmbH Expense from other services -270 -270

150 CONSOLIDATED FINANCIAL STATEMENTS

Outstanding items in respect of related parties:

in EUR thousands 30 June 2006 30 June 2005

Other current assets Intercompany account with BVB 09 .eV. 1,268 1,183

Other current liabilities Intercompany account with Borussia Dortmund Geschäftsführungs-GmbH -461 -67

(23) Management

The remuneration of the Company's management was made up as follows:

in EUR thousands 2005/06 2004/05

Hans-Joachim Watzke (since 1 February 2005) fixed remuneration 400 0 other remuneration 11 0 variable remuneration 250 0

Thomas Treß (since 1 January 2006) fixed remuneration 200 other remuneration 19 variable remuneration 250

Dr. Gerd Niebaum (until 9 February 2005) fixed remuneration 597

Michael Meier (until 30 June 2005) fixed remuneration 545 variable remuneration 8 1,130 1,150

The remuneration paid to the Company's management consists exclusively of short-term benefits.

151 Borussia Dortmund

(24) Supervisory Board

The current members of the Supervisory Board of the muneration amounting to EUR 52,500 (previous year: Company, their names, occupations and further responsibili- EUR 52,500) which it has donated to BV. Borussia 09 e.V. ties in other management bodies are listed below. In the most Dortmund for the purpose of promoting its youth work. recent financial year, the Supervisory Board received re-

Gerd Pieper Harald Dr. Michele Othmar Bernd Geske Ruedi Baer Patrick Wolfgang Dr. Georg (Dipl.-Kfm.) Heinze Puller Freiherr von Albert Burgard Kottmann Diemar Lynch

152 CONSOLIDATED FINANCIAL STATEMENTS

(25) Events after the balance sheet date (26) Notifiable shareholdings under § 21 of the German Securities Trading Act (Wertpapierhandelsgesetz, “WphG”) In order to hedge against future interest-rate risks, the Company entered into a fixed interest rate We have been informed of the following notifiable swap in August 2006 for the variable interest rate shareholdings: loan on the basis of 6-month EURIBOR provided 1. Absolute Capital Management Holdings by Morgan Stanley & Co. International Ltd., Limited (20.62%) London as at the balance sheet date. The result of 2. Blue Bay Asset Management (17.09%) this interest-rate hedging transaction is an overall 3. BV. Borussia 09 e.V. Dortmund (10.94%) future rate of interest payable of 6.195%, irre- 4. Mr. Bernd Geske (7.66%) spective of changes in market rates of interest. 5. Och-Ziff Management Europe (7.56%)

On 15 August 2006 the extraordinary General Shareholders' Meeting resolved to increase the (27) Corporate Governance registered share capital of Borussia Dortmund GmbH & Co. KGaA by up to EUR 17.550,000. The management and Supervisory Board of The limited liability shareholders are entitled to a Borussia Dortmund GmbH & Co. KGaA issued subscription right in the ratio of 5:2 for new shares the declaration of conformity with the German against a cash contribution of EUR 2.00 per share. Corporate Governance Code required by § 161 of To the extent that limited shareholders do not exer- the German Stock Corporation Act (Aktiengesetz, cise their subscription rights, the resolution autho- “AktG”) in December 2005 and made it per- rising the capital increase grants Morgan Stanley manently available to shareholders on the BVB & Co. International Ltd., London the right to sub- website at www.bvb.de. scribe for up to 12,307,600 new shares in return for a contribution in kind (contribution of a receivable from the Company at the nominal value of EUR 2.20 per share). In addition, the extraordi- Dortmund, 8 September 2006 nary General Shareholders' Meeting resolved to create authorised capital amounting to EUR Borussia Dortmund GmbH & Co. KGaA 21,937.5,000 for a period expiring on 31 July 2011. Borussia Dortmund Geschäftsführungs-GmbH

Hans-Joachim Watzke Thomas Treß Managing Director (Chairman) Managing Director

153 Borussia Dortmund CONSOLIDATED FINANCIAL STATEMENTS

AUDITORS’ REPORT

We have audited the consolidated financial state- Group and expectations of possible misstatements ments – consisting of the balance sheet, income are taken into account in the determination of statement, statement of changes in equity, cash audit procedures. The effectiveness of the internal flow statement and notes – prepared by Borussia accounting control system and the evidence sup- Dortmund GmbH & Co. KGaA, Dortmund porting the disclosures in the consolidated finan- and the Group management report for the financial statements and the Group management report cial year from 1 July 2005 to 30 June 2006. The are examined primarily on a test basis within the preparation of the consolidated financial state- framework of the audit. The audit includes the ments and Group management report in accor- assessment of the annual financial statements of dance with IFRS as adopted in the EU and the the companies included in the consolidated finan- additional requirements of commercial law to be cial statements, the definition of the group of con- applied under § 315a (1) of the German Com- solidated companies, the accounting and consoli- mercial Code (Handelsgesetzbuch, “HGB”) as dation principles used and significant estimates well as the supplementary provisions in the made by the legal representatives, as well as the Articles of Association is the responsibility of the evaluation of the overall presentation of the con- Company’s legal representatives. Our responsi- solidated financial statements and the Group bility is to express an opinion on the consolidated management report. We believe that our audit pro- financial statements and the Group management vides a reasonable basis for our opinion. report, based on our audit. Our audit has not led to any reservations. We conducted our audit of the consolidated financial statements in accordance with § 317 HGB and In our opinion, based on the results of our audit, the generally accepted standards for the audit of the consolidated financial statements comply with financial statements in Germany promulgated by IFRS as adopted in the EU and the additional the German Institute of Chartered Accountants requirements of commercial law to be applied (Institut der Wirtschaftsprüfer, IDW). Those stan- under § 315a (1) HGB as well as the supplemen- dards require that we plan and perform the audit tary provisions in the Articles of Association and such that misstatements materially affecting the give a true and fair view of the net assets, financial presentation of the net assets, financial position position and results of operations of the Group in and results of operations in the consolidated finan- accordance with these requirements. The Group cial statements in accordance with the relevant management report is consistent with the con- financial reporting standards and in the Group solidated financial statements, provides as a whole management report are detected with reasonable a suitable view of the Group's position and assurance. Knowledge of the business activities suitably presents the opportunities and risks of and the economic and legal environment of the future development.

Dortmund, 8 September 2006

BDO WESTFALEN-REVISION GmbH Wirtschaftsprüfungsgesellschaft A. Rumphorst ppa. J. Königshoven Wirtschaftsprüfer Wirtschaftsprüfer

154 IMPRINT / FINANCIAL CALENDAR 2006/2007

IMPRINT

Published by: Photos: Borussia Dortmund GmbH & Co. KGaA Heymann archives, Rheinlanddamm 207-209, Kolbe archives, 44137 Dortmund, Germany BVB archives, Internet: www.borussia-aktie.de Press office of the City of Dortmund Email: [email protected] DPA, Firo sportphoto, Responsible party: Goeke, Lars Schauer Horstmüller, Hubert, Communication design: Laryea, K-werk, Uwe Landskron, Lüning, Agentur für Kommunikation, www.K-werk.de Rauchensteiner, Reimann, Editors Prologue/History: Rzepka, Boris Rupert Schöning, Fritz Lünschermann Simon

FINANCIAL CALENDAR 2006/2007

26 November 2006 Members Meeting of BV. Borussia 09 e. V. Dortmund, Dortmund

28 November 2006 Annual General Meeting of Borussia Dortmund GmbH & Co. KGaA for the 2005/2006 financial year, Dortmund

February 2007 Half-year report for the 2006/2007 financial year

Further information is available on the Internet at: www.borussia-aktie.de

155 CONTENTS

KEY FIGURES AT A GLANCE Page 2

PROLOGUE: “Borussia will remain…” Page 4

MANAGEMENT'S GREETING Page 6

1909 1949 Page 8

REPORT OF THE SUPERVISORY BOARD Page 12

GOVERNING BODIES AND CORPORATE STRUCTURE Page 15

1956 1957 1963 Page 16

THE BVB SHARE Share price performance Page 20 Shareholder structure Page 21 Investor Relations Page 22 Corporate governance report Page 24

THE 2005/2006 SEASON Page 30 Tradition • Passion • Success 1965 1966 Page 32

1971 1976 1989 Page 62 2000 2002 2006 Page 116

• ss • ssion Succe AUDITORS’ REPORT Page 83 AUDITORS’ REPORT Page 154 Tradition Pa

1995 1996 1997 Page 84

IMPRINT / FINANCIAL CALENDAR Page 155

Business Report Borussia Dortmund, July 2005 – June 2006 Business Report Borussia Dortmund, July 2005 – June 2006 2005 – June Dortmund, July Business Report Borussia