annual report 2003 gfk. growth from knowledge turning

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Annual Report 2003 � GfK. Growth from KnowledgeTurning market opportunities into success

O U R C O R P O R AT E VA L U E S

�

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Client-driven

Our clients’ needs drive our business. We continuously seek tobetter understand our clients’ needs, improve all aspects of existing research products, offer innovative products and to be anintegral part of our clients’ information systems. Accuracy, soundmethodology, excellent client service, flexibility, timely deliveryand cost effectiveness all ensure that we meet and even exceedour clients’ expectations. We build long-term partnerships withour clients, contributing to their success.

Our people

People are our main asset. Development through training, sharing ideas and sound experience is essential to our business.Our people have the freedom to explore and develop their talents and are empowered to achieve our common goals. Weencourage and reward initiative, dedication and hard work. Fairness, good communication and working relationships at alllevels and locations are key to our success.

Innovation

We recognize that investing in continuous innovation in both the process and the end product is a prerequisite to meeting clients’ requirements. Our aim is to be at the cutting edge withour key business activities. Clients’ needs, evolving markets, newtechnology and the expertise and ideas of our people throughoutthe world are what drive innovation.

Global expertise – local knowledge

We respect and learn from local business practices and culturesand provide knowledge tailored to local needs. Our global networkcomprises international teams, tools and products to provide multinational clients with consistent services. As proud membersof the GfK Group, we share local and international expertise tocontinually improve all aspects of our business.

Growth

Profitable growth results in greater opportunities. As individuals,teams and business units, we are aware of the impact of our decisions and actions at all levels. We use financial and non-financial measurements to review and improve performance on an ongoing basis. Our growth provides investors with a fair return on the financial resources they have entrusted to us.

III

Brought to you by Global Reports

� G O O D F

Opportuni

Sales

ebitda

ebit before inparticipations

ebit after incoparticipations

Margin2)

Consolidated tbefore minorit

Tax ratio

Consolidated t

Earnings per s

Dividend per s

Cash flow from

business activ

Investment

Return on equ

Return on cap

Sales return

Net indebtedn

Ratio of net into cash flow

Equity ratio

Gearing

No. of employe

GfK Grou

1) GfK Group ac

2) ebit after inco

3) Proposal to th

� Sales up m

� ebit after ieur 69.5 m

� Margin incone of the

� HealthCareand the us

� Non-Food and prepar


O V E R V I E W O F T H E F I V E B U S I N E S S

In Noinforand sthe w

F O C� Ac

co� Ex

seg� Pre

Throwith and a22 coof all

F O C� Ha� De

da� Im

Sales eur 89.8 million + 4.4 %

Operating profit eur 3.5 million + 44.8 %

Margin1) 3.9 % + 1.1 %2)

No. of employees 829 – 3.9 %

2003 in figures

We p

the a

with

divis

mark

in Eu

2

Sales eur 166.7 million + 21.4 %

Operating profit eur 36.1 million + 47.3 %

Margin1) 21.6 % + 3.8 %2)

No. of employees 1,517 + 8.8 %

2003 in figures

1) Operating profit in relation to sales2) Change in percentage points

C O N

N O N

�

�


Through our Media division, we provide clients in throughout Europe with information services on thand nature of media usage and media acceptance.covers both the classic media such as television, routdoor advertising as well as Internet and the newoffline media.

F O C U S O F A CT I V I T I E S 2003� Establishment of TV panel in the Ukraine� Start of metering of audience ratings for digital T

in Germany � Metering of radio ratings in Switzerland and the

on a test basis in Germany and France

Through our Ad Hoc Research division, we provid28 countries around the world and via partnership63 countries with information services for their opstrategic marketing decisions. These include tests product and pricing policy, brand management, codistribution and customer loyalty.

F O C U S O F A CT I V I T I E S 2003� Restructuring of business operations in Italy� Establishment of key account management syste� Successful business development in Germany, th

and Eastern Europe

Through the subsidiaries in our HealthCare divisiowe provide clients with information services relatidevelopment, communication, image and price coWe also provide analyses of market positioning ansatisfaction in the healthcare sector as well as the materials and products used in the dental and vete

F O C U S O F A CT I V I T I E S 2003� Acquisition of majority in us company v2 GfK� Establishment of HealthCare division with intern� Immediate start on strategic direction for the div

integration of subsidiaries

M E D I A

A D H O C R E S E A R C H

H E A LT H C A R E

�

�

�


4

tv research contract

in Austria extended in

advance: fessel-GfK

will continue to measure

tv ratings on behalf of

Austrian tv and radio

broadcasters orf until

2006. Contract volume:

eur 11.5 million.

A survey carried out

by GfK rus shows

that France, Germany

and Japan have an

above-average image

among the majority of

Russians.

Official start of the

implementation of the

newly designed GfK

logo. Corresponding

revision of publications,

website, presentation

materials and docu-

ments.

Due to the resegmen

tation of Deutsche

Börse, GfK shares are

now listed on the s-d

rather than the m-dax

Establishment of GfK

Media Ltd., a media

research company, in

the uk. The aim is to

carve out a niche in

the uk, a key Europe

media market.

GfK participation –

stand and specialist

presentations – at the

Advertising Research

Foundation’s annual

conference, one of th

two biggest industry

events of the year.

2 0 0 3 AT A G L A N C E

01 02 03


GfK Marketing Services

Deutschland, which is

part of the Non-Food

Tracking division,

acquires a majority

stake in the Retail

Research division of

media control GfK

International based in

Baden-Baden. This divi-

sion specializes in retail

research for books,

videos, cds and film.

“Innovation: top or flop

– consumers decide”

was the theme of

the 53rd GfK Annual

Conference, where

around 600 marketing

experts came together

to discuss the success

factors involved in

innovation strategies.

GfK acquires the

majority stake in v2

(now v2 GfK), Blue Bell,

Philadelphia, an

American company

specializing in pharma

market research, and

gains access to the

most important pharma

market worldwide.

Establishment of the

HealthCare division,

where 13 GfK com-

panies, the new majority

acquisition v2 GfK

included, supply in-

formation services for

the pharmaceutical,

human and veterinary

medicine sectors.

Extension of radio

research contract in

Switzerland, which

means that iha GfK will

record Swiss radio

ratings on behalf of srg

ssr idée suisse until

2008. Sales volume:

eur 8.3 million.

With specialist

presentations and an

exhibition stand, GfK

takes part in the ann

conference of Europe

market research

association esomar

in Prague, which is

attended by over

1,000 experts from

60 countries worldwi

The GfK paper, “A ne

generation of brand

controlling” is award

the best methodolog

paper at the esomar

conference 2003,

making GfK the first

prize-winner to subm

the best paper two

years in a row.

In Manager Magazin

yearly ranking of ann

reports, GfK achieves

third place in the s-d

category and is there

fore among the top 2

best annual reports o

2003.

07 08 09


6

T H E S U P E R V I S O R Y B O A R D

Peter Zühlsdorff

Chairman of the Supervisory Board

Managing Director of Bewerbungs-

komitee Leipzig 2012 GmbH, Leipzig

Managing shareholder of

dih Deutsche Industrie-Holding GmbH,

Frankfurt/Main

Dr. Christoph Achenbachfrom 13 June 2003

Chairman of the Management Board of

Quelle ag, Fürth and Neckermann Versan

Frankfurt/Main

Member of the Management Board of

Karstadt Quelle ag, Essen

Jörg Bandtfrom 13 June 2003

Data Collection Manager,

GfK Aktiengesellschaft

Dr. Wolfgang C. Berndt Member of the Board of Directors of

Cadbury Schweppes plc, London, uk

Peter Danzluntil 13 June 2003

Kerstin Döpfertfrom 13 June 2003

Independent Works Council representativ

GfK Aktiengesellschaft


R E P O R T B Y T H E S U P E R V I S O R Y B O A

In financial year 2003, the Supervisory Board kept itself i

GfK Group’s business development, income and financial

and impending investments. It has monitored and advise

Management Board and discussed all significant busines

The Supervisory Board met five times in

the Management Board’s reports and th

were discussed in depth. The main topi

the GfK Group and its international acq

and approval of the annual accounts for

2004. Another main topic was the form

and the new regulation adopted at the e

npd Group, usa, in the Non-Food Tracki

Chairman of the Supervisory Board was

Board.

The term “corporate governance” stand

and control geared towards long-term v

dealt intensively with the rules of the G

Management Board and Supervisory Bo

efficiently for a long time. A large numb

proposals correspond with long-standin

the Supervisory Board issued a declara

the German Stock Corporation Act (Akt

separate section of this annual report o

Essentially, the deviations concern the

vidual members of the Management Bo

to publication deadlines for the annual

The Management Board and Superviso

down of remuneration according to fixe

well as stock options at executive level.

present.

The Supervisory Board supports the me

tions on business development. In 2004

weeks earlier than in 2003 and the qua

than required by the Code. As before, o

lines from 2005 onwards, without detrim

the adoption of its declaration of compl

appoint a Compliance Officer (see page


8

The Supervisory B

which met four tim

development, incom

Additional focal po

resources, issues o

system and interim

The Personnel Com

remuneration of th

part of the review o

GfK Group’s person

In August 2003, th

Committee to deal

2003 and discusse

In accordance with

has employed audi

audit mainly conce

over the duties of t

of duties, working

On the basis of the

for monitoring man

the Finance Comm

Corporate Governa

At the Annual Gene

the Supervisory Bo

thank him for his m

the proposal of the

Dr. Christoph Ache

therefore benefit fr

goods. The end of

term of office of Su

a new term of offic

their willingness to

few years. The term

end of the Annual

Board for financial


The annual financial statements and management report

Group for financial year 2003 have been audited by kpm

gesellschaft Aktiengesellschaft, Wirtschaftsprüfungsgese

taking into account the book-keeping, and provided with

report. All members of the Supervisory Board received c

report in good time ahead of the accounts meeting. The

plenum discussed these documents in its accounts meet

Committee of the Supervisory Board at its preparatory m

meetings were attended by the auditors who signed the

financial statements. They reported on the audit in gene

stipulated in the audit mandate, and gave detailed respo

the members of the Supervisory Board.

The Supervisory Board has noted the audit report and, fo

examination of the annual financial statements drawn up

Board, has given its approval. The financial statements a

The Supervisory Board has seconded the proposal of the

for appropriation of the profits.

The Supervisory Board would like to thank the members

Board, the Works Councils, all GfK ag staff and the staff

for their hard work and commitment.

Nuremberg, 6 April 2004

Peter Zühlsdorff

Chairman of the Supervisory Board


10

Dr. Klaus L. Wübbenhorst

Chief Executive Officer of GfK ag

T O O U R S H A R E H O L D E R S A N D B U S I N

In times of econom

to prove their stren

enterprise. I am ve

120 companies in 5

by exceeding our q

year’s annual repor

In terms of growth

the sector as a who

The figures speak f

� We increased ou

� Our earnings bef

were up by almo

� Our margin of 11

company in the w

However, it was no

a number of strateg

opportunities into

important here.

Firstly, GfK has con

business over rece

v2 (now v2 GfK), th

this as an opportun

business division.

Secondly, our Non

cooperation with u

regions. We have n

Central and South


America, the industry’s largest market, became our cent

beginning of 2004 with the acquisition of Arbor (now Gf

careful negotiations during the previous year. This takes

to our strategic objective of having a significant presenc

and our consolidated sales in 2004 are likely to be well o

Our business: turning the market opportunities of clie

Over the past three years, our clients in the worldwide b

pharmaceuticals, retail and service sectors have faced di

The insecurity and economic weakness triggered by Sep

subsequent events in Afghanistan, Iraq and elsewhere in

it even more difficult to compete in an already stagnant

Matters were not helped by the dotcom sector’s failure t

the rate its protagonists had predicted. But once again w

are hard, market research becomes all the more importa

undoubtedly less volatile than those of other sectors of t

industry.

We performed relatively well because our clients’ surviv

identifying opportunities in new and existing segments o

demands a great deal of vision, marketing flair and busin

takes professional analysis and know-how to qualify and

opportunities of market decisions – and this is precisely

we, as a market research company, provide.

Corporate Governance: our duty to our shareholders

We aim to achieve constant growth in the value of our co

for the benefit of clients, shareholders, employees, and s

before and after our ipo in 1999, we have shown that we

and dynamism to grow and be profitable even in difficul

price has outperformed the market average, reflecting o

in us, for which we are very grateful.


12

We are also commi

Code, which lays d

management. We c

to ensure that GfK’

of open and transp

The Supervisory an

be proposing a div

June 2004. This rep

The future builds

GfK celebrates its 7

industry has its roo

and GfK is one of t

Since then, we hav

founding fathers W

rapid growth over

research company,

brand is one of the

maintain and devel

We published and

of young managers

logo, a major miles

Outlook: achievingmarket opportunit

In financial year 20

targets. With no ch

by 5.8 per cent to e

(acquired as at 1 Jan

including GfK Arbo


Once again we intend to outperform the sector, in which

growth will be slightly up on last year at between 3 per c

We plan to increase our overall earnings by a higher rate

achieve a margin of just over 12 per cent.

What all this means is that GfK’s management and empl

world will be working hard to turn market opportunities

shareholders, and the company itself.

I am very grateful to all the staff who contributed to our

and I hope they will continue to show the same dedicatio

behalf in the future.

Nuremberg, 20 March 2004

Dr. Klaus L. Wübbenhorst

Chief Executive Officer


Chief Executive Offi

born 23 February 19

� Professional back

Since 1992 Memb

since 1998 spoke

Executive Officer

Appointed until 2

Since 1997 Memb

since 2002 Chairm

of adm, the worki

social research in

1992 – 1997 Mem

of GfK ag, respon

Financial Controll

General Administ

Production, it, Da

1991 – 1992 Mem

of kba-Planeta ag

1984 – 1991 Empl

Gütersloh, latterly

of the Druck- & V

Ges. mbH Nfg. kg

� Training

1984 Doctorate fr

Darmstadt

1981 Graduated in

Universität-Gesam

�

Responsible for S

Public Affairs an

Method and Prod

Management Dev

Dr. Klaus L

T H E M A NB O A R D

14


Responsible for Financial Services,

Personnel Services and Central Services

� Dr. Franz X. Merl

Chief Financial Officer (cfo)

born 7 April 1949 in Regenstauf

� Professional background

Since 2002 Member of the Management Board

of GfK ag, appointed until 2007

1990 – 2002 Member of the Management Board

of Bayerische Treuhandgesellschaft Aktien-

gesellschaft Wirtschaftsprüfungsgesellschaft

Steuerberatungsgesellschaft, Munich

1988 – 2002 Partner at kpmg Deutsche

Treuhandgesellschaft, Berlin and Frankfurt

1996 – 2000 Member of the working group

Rechnungslegung von Stiftungen (accounting for

foundations) at idw

1986 – 2002 Managing Director of rtg Revisions

und Treuhandgesellschaft mbH, Munich

1973 – 1986 rtg Revisions und Treuhand-

gesellschaft, Wirtschaftsprüfungsgesellschaft

Steuerberatungsgesellschaft, Munich

� Training

1983 Qualified as auditor

1979 Doctorate from the University of Munich

1978 Qualified as tax consultant

1973 Graduated in economics from the University

of Munich


born 19 January 195

France

� Professional back

Since 1999 Memb

of GfK ag, appoin

1998 – 2000 Chai

Association (afm)

1988 – 1998 Gene

France

1984 – 1998 Mana

then General Man

France

1978 – 1984 Empl

Research, Paris, F

� Training

1978 Doctorate fr

1975 Graduated fr

(icn)

Responsible for t

Non-Food Tracki

� Dr. Gérard

16


born 13 December 1951

in Mölln

� Professional background

Since 2000 Member of the Management Board

of GfK ag, appointed until 2009

1993 – 1999 Managing Director of GfK

Marktforschung GmbH

1989 – 1999 Managing Director of GfK

Testmarktforschung GmbH

1978 – 1989 Employee of GfK, responsible for the

development of GfK BehaviorScan in Germany

and building up GfK Testmarktforschung

� Training

1977 Graduated in economics from the Freie

Universität Berlin

Responsible for the Ad Hoc Research

division

� Heinrich A. Litzenroth


18

C O R P O R AT E G O V E R N A N C E

Since 2002, the Germand ideas, has beenwill promote and strstaff and the public management and co

GfK’s existing practof the Code. Thus foment Board and Supissued quarterly repconference on the Inthe us gaap internatto exercise their votextended further. Assupplied on the Inte

Pursuant to Section Board and Superviswhich they have comof the Government Cthe Federal Ministrywhich recommendato be made available

The German Corporbinding. In additionrecommendations frare then obliged to also contains suggebe disclosed. The Mdecided to continuefrom recommendati

On 16 December 20declared that they htions of the Governmversion of 21 May 2in the official sectionot been applied:

1. Recommendation

Point 4.2.3. deals wBoard. With regardto agree a limitatio(see p. 130 et seq. f


GfK’s stock option programme does not include such a cap.potential profit would necessarily bring with it a similar limis not in the interests of the company. GfK’s management stnot an additional remuneration element, but replaces existicomponents. This means that eligible persons decide irrevovariable remuneration in favour of receiving stock options. Ohave been reached, and only then, do they receive the stockvariable remuneration component is paid once targets have cannot be exercised during the first two years. The strike prissued to date are as follows:

t1: eur 55.20

t2: eur 41.71

t3: eur 24.14

t4: eur 18.53

The risk/reward profile is therefore balanced and it is not pooption conditions for tranches which have already been subexisting management stock option programme comes to anThe company is preparing a further programme, which will next Annual General Meeting.

Pursuant to point 4.2.4, the Management Board remunereach individual member (for further details see p. 139).

The remuneration for the members of the Management Boadown into fixed and variable components and stock optionslong-term incentives). These details are material to the assesplit into guaranteed and performance-related portions is aremuneration structure provides the intended incentive for members. There are no plans to produce a more detailed br

Pursuant to point 5.4.5, the remuneration for the Supervbe reported for each individual member in the Notes to tstatements. Performance-related remuneration should albased on long-term company performance (see p. 139 for

As with the breakdown for the Management Board remunerBoard remuneration is shown broken down into fixed and vThe Supervisory Board members do not participate in the mprogramme. The variable component is based on the propoprofits passed by the Annual General Meeting and in 2002 wthan the fixed remuneration component. The appropriation proposal submitted to the Annual General Meeting by the MSupervisory Board. This procedure ensures that there is comlong-term financing requirements of the company and the lon capital employed from the point of view of the shareholdnot currently believe that it is necessary to introduce any adremuneration to the long-term success of the company.


20

Point 7.1.2 regulatewithin 90 days and

The company is aimpublishing the Annustatements, two weepublished a detailedyear and outlined thwith regard to businrequired deadlines ashareholders.

The company has bethis was not compufive days beyond theto shorten the respe

2. Suggestions

Point 2.3.3 sets outa representative toinstructions; such pMeeting.

In the past, the comas instructed and wshares is assumed iagenda and on GfK’General Meeting is solution to securely such a system.

Pursuant to point 2to follow the Annu(e.g. on the Interne

Since GfK has been been broadcast on tthe Management Bomeeting in order to to refrain from doin

The Compliance Off16 December 2003responsible for monthis to the Superviso

GfK will continue toas the public. The a

Compliance Officer

Bernhard Wolf

Tel. +49 911 395 2012

Fax +49 911 395 4075

[email protected]


Financial year 2003: broad upturn

Following three loss-making years, the German dax ended 2first time since 1999.

However, during the first quarter of 2003, the negative perfyears initially continued. The Iraq war and its uncertain coneconomy deterred many investors from putting their money 2003, the dax had fallen to 2,189, its lowest level since 1995of 8,136 points in March 2000, the index had dropped to almwithin three years. There had never before been such a fall the entire history of the German stock exchange.

However, following the official end of the Iraq war, the stocto a number of factors. Economic expectations improved mand Europe, interest rates remained stable and company prAs at the year-end, from the March low, the dax had risen bpoints.

In 2003, German stocks were well ahead compared to the rethe dax was able to record a rise of over 37 per cent over thDow Jones stoxx 50, the European index, added just 10.5 pjust over 13 per cent and the cac 40 in Paris over 15 per centhe American Dow Jones Industrial Average, which rose by Japanese Nikkei Index which was up 24.5 per cent. Howevethe year for the second-tier stock indices which significantlyThe mdax gained almost 48 per cent and the tec-dax rose bThe sdax, on which GfK is listed, increased the value of its 51 per cent. By contrast, the Dow Jones stoxx Media, whicindex, added just 11.7 per cent.

Highest and lowest values of GfK shares from January 2003 to Decemb

26

23

20

17

14

11

8

Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug

Highest and lowest values Monthly closing prices

13.90

11.009.51 10.55 11.01

13.3014.90

15.87

17.6

12.52 12.46

17.9618.26

20.29 20.3

G f K S H A R E S

13.39


22

From IPO toIn 2003 15.03.20041)

GfK ag + 78.1% + 47.0 %

Dax + 37.1% – 27.3 %

SDax + 51.3% – 1.5 %

dj Stoxx Media + 11.7% – 37.9 %

GfK share price performance

January 2003 April 20

29

24

19

14

9

GfK share price performance comparison

1) Issue price during Initial Public Offering (ipo) on23.09.1999: eur 18.50

GfK shares: in the

In 2003, following aagain. With a rise ofably above the dax aentirely different. Foprice fell by 25 per crose sharply by 166November. As at 31price at the time of tonce again on 23 Juwas between a low o

As at year-end 2003have seen their shainterest on the invegross dividends, incat 30 December 200the same period, an yield of 4.6 per cent

Share evaluation: t

GfK attracted intereoperating business price. The excellent

1) All values are indexed to the GfK


1) Before acquisitions, other investments and asset disposals

GfK shares: key indicators Unit

High EUR

Low EUR

Close EUR

Average daily volume traded No.

Number of no-par shares No.

Market capitalization as at 31.12. EUR m

Rank in SDax by salesby market capitalizationIndex weighting by market capitalization in %

Dividend EUR

Total dividend EUR m

Earnings per share EUR

Free cash flow1) per share EUR

tier stock in 2003. At the same time, the consolidation procedepartments of banks was largely completed. The slump in financial institutions to offset falling revenue by downsizingments. In some cases monitoring of whole sectors has been

At year-end 2003, only ten of the previous 15 institutions rasince the start of 2004 two more banks began covering our twelve respected institutions regularly publish assessmentsGfK shares. GfK is carrying out other discussions with interindependent reporting on the financial market is guarantee

Shareholder structure: free float spread internationally

Over the past year, the GfK shareholder structure has not alGfK Nürnberg e.V. is still the largest shareholder with a 64

The total free float of 36 per cent breaks down as follows: ththe Supervisory Board still hold 2.3 per cent of the share cais in the hands of private investors, representing a rise of 2.the previous year. This increase is attributable to institutionfell by 21.4 per cent to 19.1 per cent. At year-end 2003, 57 iheld investments in GfK shares. 6.2 per cent of all shares winvestors from the usa (2002: 5.2 per cent), 5.8 per cent frocent), 3.4 per cent from Germany (2002: 5.4 per cent) and 2(2002: 2.2 per cent).


24

Current shareholder str

GfK-N

Institu

of whi

Private

Manag

GfK shares in sdax: p

As at 24 March 2003, adownsized the mdax frGfK shares have been l

On the sdax, since thising market capitalizatioin March to 3.8 per cenNovember. At year-endits average trading voluaverage of 16,030 sharbusiest periods were A20,000 shares a day.

Dividends: another in

At the Annual General will propose a sharehoprevious year of 25 pereur 5.2 million to eursuccess of the companon the stock market. Th92 per cent compared 19.5 per cent.


Stock option programme: continues to be attractive

At year-end 2003, management staff once again had the oppart of their bonus for stock options. A total of 605,193 optio485,002 options were subscribed. This corresponds to an accent.

This subscription is based on the stock option programme aGeneral Meeting on 13 June 2002. After this year’s Annual G2004, three tranches may be exercised: tranche 1 of 389,165eur 55.20 and tranche 2 of 375,725 options at a price of eucomprises 380,300 options at a price of eur 24.14. The highthat the first two tranches are not in cash, unlike the third trimpossible to know in advance how many options will be exagreed in the terms and conditions that the sales are carriedsafeguard the shareholders’ as well as the company’s intereprices. Based on current demand for GfK shares, GfK is antcan be easily placed.


26

I N V E S T O R R E L AT I O N S

In 2003, as in previoinvestors, investmeof Investor Relationensuring efficient fofuture prospects for

Shareholders: mor

Around 400 sharehoGeneral Meeting in of all shares. As in pvia the Internet up ufinancial statementsGfK shareholders apof the company netw

Other events atten

� Seven internation

� Two dvfa analyst

� Nine roadshows iGermany

� Nine teleconferen

� 93 individual con

� Invest 2003 in Stu

� Munich stock exc

GfK website: Inves

GfK continues to plaThe Investor Relatioreports, presentatiopress conference, aAdditionally, interesbeyond the minimuupdated Internet veGerman stock exchacomparable indicesvolume of capped oincome from personpurchase, both in acharts, the chart an


Publications: consulted and recognized

The annual report is the most important printed presentatiofor GfK. The efforts in recent years aimed at improving the presentation have paid off. In the overall evaluation of annuManager magazine in Germany, the Annual Report 2002 scthird place among the 50 companies in the sdax and nineteof almost 200 annual reports from listed companies on the sand tec-dax.

In addition to the annual report, GfK publishes three quarteextensive information on the various company divisions. At GfK also published the provisional annual result.

Since May 2003, GfK has regularly published a shareholderfollowing publication of the quarterly figures, thereby increprivate shareholders. The newsletter provides information, business development, share price performance and anythithe GfK Group and the market research sector. It is mainly dinvestors may subscribe to it by e-mail at investor relations@at www.gfk.de. Back issues may be downloaded.

Furthermore, for anything important, GfK contacts its sharead hoc notifications, post and teleconference.

15 April 2004 Accou

15 April 2004 Ana

19 May 2004

15 June 2004 Ann

19 August 2004

18 November 2004 Qua

24 February 2005 Provisio

31 March 2005 Accou

31 March 2005 Ana

13 May 2005

24 May 2005 Ann

12 August 2005

15 November 2005 Qua

Provisional key dates in the financial calendar

1) Publication is scheduled for before the start of the trading session


B U S I N E S S D I V I S I O N S S P E C I A L

I N D E X

GfK. Growth from KnowTurning market opportuIdentifying and utilizing market opportunities at ancrucial than ever when it comes to the success andin consumer goods markets. This applies to global depends largely on knowledge of the attitudes, behusers of brands, products and services.

Modern marketing research, such as that conducteretail, media and the service sector by providing thconsumers necessary to turn market opportunities

An interview with an expert on the future of brandwell as reports on the five GfK divisions and the ththe ways in which marketing research fulfils this fu

Alof

AcanHomtoansu

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How Nerino Grassi made it to the top

How hosiery manufacturer Goldestayed up in a falling market

Golden Lady, which is part of Eurleading hosiery manufacturing groperfect example of the fact that tim

�

28


Trust, teamwork, flat hierarchies and consumer consideration

According to Kasper Rorsted, hp’s ManagingDirector for Europe, Middle East and Africa,

thabcoth

Page

44The hp formula for success: innovation and intuition

The hard facts about selling magazinessuccessfully at Budapest-based Sanoma

The Hungarian publishing house, Sanoma,combines comprehensive market and media research to ensure its survival in

thAm

Page

52Cutting through the competitive jungle

Market research to support McDonald’swith their new brand image

Eating habits change and young peoplehave different ideas on what they want

friscren

Page

60Winning over the client with new ideas

Pfizer’s consistent quality, innovation andmarket analysis

The pharma market is one of the most complex and fiercely competitive markets.

Fhaao

Page

68Spotlight on the healthcare system and the interests of doctors and patients

Innovative ways of making media planning more efficient and effective for Kraft Foods

In a world of shifting consumer habits, coffee brand manufacturers are constantly

bhaCm

Page

76Making yourself heard in the hubbub of advertising


Allen Rosenshine, Chairman and ceo of bbdocommunication and marketing research today

Our mission is to get atteof our clients

“Branding requires understanding our audience and why

Rosenshine, head of the most awarded agency network i

largest global advertising organization, Omnicom.

Allen Rosenshine, one of the top advertisingexperts worldwide, describes the challenges faced by traditional and new forms of advertisingtoday and outlines the significance of marketingresearch for successful brand communication.

Please define the key role of advertising andcommunication.

To the extent that advertising is the business ofbranding, the focus of advertising has to be onclient audiences. The ultimate targets are the purchasers of the brand. At the risk of being overlysimplistic, I believe that our job as communicatorsin advertising and in the general communicationbusiness is to provide the competitive reasons whyone brand is superior or should be purchased rather than another.

It is important to draw a distinction between classicadvertising in classic media and new forms of brandcommunication, which have become available to us through new technologies and which areincreasingly becoming part of the communicationmix. By advertising I mean classical advertising in mass media, such as television, print, outdoorand radio. When we talk about integrated com-munications or other forms of advertising, I thinkof everything associated with below-the-line activities. Whether direct response, point of purchase, new customer relationship managementmodels and, of course, the Internet, these activitieshave become more and more poignant.

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The principles behind successful brand communication

do not really change.

»Our biggest concern is how to take a givenbudget and apply it in such a way that his brand will be best communicated to the cowho has increased choice but no more timbefore.«

brand. To the extent that brand relatioto be built on emotion, I cannot concewe will replace the capacity of film or sight, sound and motion to create an ebond.


not give up one for another. They may shift overtime and spend more time with one than another.However, there are only a limited number of hoursin the day.

For us as communicators, the issue is therefore to understand how consumers are managing their time. A colleague uses the expression “attention economy”, meaning that our mission as advertisers is to get attention on behalf of our clients. To do this, we need to be able tomanage a diverse set of media, which did not exist fifty, twenty or even ten years ago. Our biggest concern is how to take a given client’sbudget and apply it in such a way that his particular brand will be best communicated to

the consumer, who has increased choice but nomore time than before. It is no longersimply a matter of statistics – i.e. the highestrating of a TV show for the lowest possible price. It is now about reaching people not only in terms of overall impressions, but in terms oftheir receptiveness and willingness to consider the message at a given point in time.

How would you define the interplay betweenmarketing research and advertising?

In my view, the need for fundamental under-standings produced by market research is greater than ever. Our information requirementsmay have changed, and also the need for market research that goes beyond the “left-brainapproach” to understand consumers by includingpsychographics and aspects that drive consumersemotionally as well as rationally. These needs arecritical and their role in market research is notless, but in fact more prominent than in the past.

Advethat tthink some– deshave

If thenew pa conwant,reject

Thereconsu

»Advertisers cannot make consumers do somedo not intrinsically want to do – despite whatadvertising might have you believe.«


34

products, positioning them and then cing them has never been greater. Thisinterplay between the disciplines is abcritical. Marketing instinct is needed, ability to quantify and predict how theand the consumers will react.

What is your take on “Think global, versus “Think local, act global”?

If I had to choose between “Think globor “Think local, act global”, I believe tlocal, act global” is more realistic in vglobalization. The notion that the worldstandardized as originally outlined by Levitt has proved wrong. Standardizathuman condition is not what globaliza“Think global, act local” means that ifglobally you are thinking in terms of staand executing that standardization evThe fact is that this is not feasible. Peonot give up their heritage, their nationidentity – even in the context of the EuUnion and the Euro. Ultimately, none aspects is going to eliminate the fact thave to think local and not just act loclocal, act global” is the more relevant iterations. You first need to understanand this means understanding them loOnce you understand the differences, successfully act globally. �

»Marketing instinct is needed,predict how the marketplace


Global marketing and ad

In 2003, advertisers spent an

estimated usd 751.5 billion on

advertising, below-the-line

activities, pr and market research.

The usa is by far the largest

national advertising market world-

wide, followed by quite some

distance by Japan and then – again

by quite some distance – Germany

and the uk.

In 2002, Procter&Gamble spent a

total of usd 45 billion on advertising

and is therefore the No. 1 advertiser

worldwide.

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How Nerinomade it to th� Staying up in a falling market


38

Staying up in a falling market

How Nerino Gra

The Italian company, Golden Lady S

also be times of opportunity. In a rec

has been able to win market share,

The key factors behind this success

as consumer consideration.

When a market shrinks by 50 per centthan ten years, it is not only pessimistof giving it up as a bad job, and withdNot so for a full-blooded entrepreneurin the worst possible market conditionthe competition for dust with their figred and off-season sales on brands anGenerating growth and quietly makingthe top. This is the story of Nerino Graand Managing Director of Golden Ladthe Italian Castiglione delle Stiviere, pthe women’s hosiery market.

Grassi started up his Golden Lady brawith 50 hosiery machines. This was theasy profits for producers of tights anThe material-saving trend of fashion dwhich found its form in mini-skirts all the demand of the woven textile with

Mini-skirts pushed up

the demand for tights.


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were Hollywood beauties such as Rita Hayworthand Jane Russell , who showed on screen how shapely legs could look in stockings – and thenegative effect of ladders.

Over the years, however, fierce competition amonghosiery brands in Europe and overseas resulted in falling prices. While many initially successfulmanufacturers gave up, Golden Lady persisted and slowly but surely made its way to the top, firstin Italy. In 1978, Grassi acquired another brand –La Omsa – and expanded into Germany. Productionsites were later set up in France and the uk, withsales companies at work in France, Germany, theuk and Spain. With its three brands, Golden Lady,La Omsa and Sisi, and Nerino Grassi and acommitted team of managers at the helm, GoldenLady S.p.a. is among the market leaders or evenleading the way in most European countries. Russia, for example, is the second largest marketfor the Golden Lady Group after Italy.

In 12 of the 15 eu countries the hosiery market isstable, even showing signs of slight growth, with manufacturers achieving sales worth almost eur 2.5 billion every year. However, the market isstill experiencing a downward trend. In Germany,the market total for 2003 was eur 0.40 billion, eur 0.52 billion less than in 2002.

Succe

Grassthe A


40

The latest production technology and contin

control are key success factors

largest manufacturer, Kayser Roth, wibrand “No Nonsense” and designer b(including Calvin Klein). With 150 millsold, the company represents 18 per cmarket. 1,500 employees helped geneof usd 250 million, which is exactly thamount as before the takeover, but wifewer staff.

Excluding its us subsidiary, the GoldeGroup has a staff complement of 3,000generates sales of eur 310 million in sfactories. These cover 300,000m2 and 250 million pairs of tights and other pare manufactured on 3,800 machines.has three key principles by which he rbusiness:


It was exactly in the difficult years from 1989to 1992 that Golden Lady launched a lavishadvertising campaign. Hollywood star KimBasinger was the legs of Golden Lady, raisingthe Italian brand’s profile on screen. Today, an Italian star communicates the Golden Ladymessage of being ”best friend to millions ofwomen in Italy and Europe.“ Grassi invests 18 per cent of the company’s sales revenue inadvertising and promotion every year.

Reasons why the market sagged

It goes without saying that market research as aninstrument plays a major role in all activities. GfK supplies the required data in many countries,including for example monthly base figures for the hosiery market. “We monitor our position inthe individual markets very carefully,” adds Grassi. “Given that we invest a lot of money incommunication, we obviously want to know how successful this has been, as well as how ourbrand value is developing.”

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42

»Given that we invest a lot of we obviously want to know hbeen, as well as how our bra

Golden Lady

products are sold

throughout Europe,

in modern retail

outlets as well as . . .

. . . in markets and

street stalls in Italy

and other major

Southern and

Eastern European

countries

Having conquered one market, it was move into others, and this sparked proof lingerie, as well as ladies trouser soacquisition of the Filodoro brand fromLee Corporation is a further marker ofLady’s expansion plans. Grassi has a hahead of him, however. In the underw


Market positioning

GfK Consumer Tracking ranks2nd in Europe in the area of continuous consumer researchand is the market leader inAustria, the Benelux countries,Germany, Italy, Scandinavia,Switzerland and the Central andEastern European countries.

Our key services

We offer information services,advice and solutions providingsupport for the marketing decisions of manufacturers,retailers and the service sector,which enable these to success-fully operate in the markets for fmcg, consumer goods andservices.

In detail

We provide clients with con-tinuous information about purchasing and consumer behaviour. As part of our panelswe regularly record consumerpurchases over long periods of time and collect such in-formation from the panel households.

The findings based on this information comprise soundanalyses of

� the structure of markets andhow these change

� changes in preferences withregard to manufacturer andretail brands in all relevantproduct categories and buyerstructures over time

� brand loyalty and shoppingoutlet preference

� the efficiency of promotionaland advertising activities in terms of sales and theattractiveness of brands.

The adevelspeciconsudata obility.numeanalyscopeare tafocussegm

The ianalyGfK CGfK Cdifferbased

GfK ChousepanelcountpartnEuropation countvides charapenetbrandconsumore

GfK Csystement clientoptimin coo

GfK’sof serabouton texwell atelecoThe dand mcount

Consumer Tracking division:

Specializing in the purcof end consumers


44


The hp forminnovation a� Trust, teamwork, flat hierarchies an


46

Trust, teamwork, flat hierarchanalysis as prerequisites

The hp formula finnovation and i

The it sector will continue to excel

for information for decades to come

up from 17,000 in fiscal year 2002. T

double the rate of fiscal year 2002. A

worldwide cooperation with GfK hel

at the right time, to structure its pro

HP is much more than

just a manufacturer

of printers and pcs.

The company offers

a range of different

it products and

services to both

corporate clients and

individual users.

The Managing Director of hp for EuroEast and Africa (emea) does not like toinstructions if presented old-style. ThiKasper Rorsted has recently gotten hia new mobile phone and dispensed wcomplicated model purchased from anmobile manufacturer. “Intuitive usabilwhat Rorsted demands and in doing ssums up an essential core value that isthe basic operating code of it compan“Our actions and decisions are alwaysthe customer in mind.”

“Uncompromising integrity” is anotheBy this, the people at hp understand oand honesty in all business relationshbasis of client trust. The set of values “groundbreaking innovations” and “sp


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Innovations still set us apart

“You would actually have to merge eds, Dell, sun and Sony to be this broadly based,” says Rorsted. “This creates challenges but also opportunities. I say opportunities because we have a lot to offer and because this broad rangeguarantees widespread brand awareness.” At the same time, the emea boss of hp makes nosecret of his dislike of the widely held theory that most products these days are largely inter-changeable from a technological point of view and could be sold purely by means of brand image and services. “We are a technology-basedcompany and have a fundamental belief that it is still possible to set yourself apart through technological innovation.” Rorsted is firmly convinced that customers will be prepared to pay for innovations in the future.

hp invested nearly usd 4 billion in research anddevelopment in 2003, a clear link to how it achieved such rapid patent growth worldwide lastyear. This also attests to the uninterrupted vitalityof the company founded in 1939 by William R.Hewlett and David Packard in Palo Alto, California.Writing history, the two Stanford graduates set �


48

Aldo de Smedt,

Product Manager Europe Office Equipment, G

Marketing Services, manages the hp account. T

requires information services relating to it con

markets in 18 countries.

Customized mainframe computers and serve

stock exchanges and commodities exchange

the standards that still apply in the it sThey built their first product in a disusan electronic test instrument used by engineers. A fitting backdrop to the tathe first customers for the audio oscillno less than Walt Disney Studios, whicto develop and test an innovative sounfor the film “Fantasia”.

From its humble beginnings in a Palo hp became a major global player, takinforward in 2002 when it merged with tComputer Corporation. From its found1982, Compaq had risen rapidly to becinnovative supplier with a philosophy that of hp. Today, hp is the number 1 c


»Our aim is to provide products and services ohighest quality to our customers that earn threspect and loyalty.«

Technology is so vital to their business and personal lives that they demand and expect muchmore from their technology and their technologypartners. hp believes customers want innovationand price, functionality and simplicity, stability andagility, security and connection, and affordabilityand high customer satisfaction.

With its award-winning global brand campaign,“Everything is possible”, which was launched in November 2002, hp showed how the corporatestrategy is put into practice. For example, ads illustrate how the company helps animators atDreamWorks to create a new animation genera-tion, how FedEx makes use of the company’s products to deliver packages on time and over-night, and how birdwatchers in Finland log the gps position of rare birds – all thanks to hp.

“Nowadays most people think of hp as a largeprinter and pc company. We are certainly proud to occupy a leading position in these fieldsbut when you consider that hp equips over 100

shares and commodities markets and supports 95 per cent of all securities transactions world-wide, processes two thirds of all credit card

transasupplmedia whoSenioCommcamp

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consu"chanprise chang

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Whetdevelany cinformlarge offer wordcan wuse oRorst


50

. . . at work and

at home

»When it comes to understanding the marketsno stone unturned. This is why we have a hugresearch department at global and regional le

Rorsted continues: “We make extensivGfK as a source of mediation and infoAldo de Smedt, Commercial Director aManager of Europe Office Equipment,sels, adds “hp has been a client of our15 years in 18 countries around the woareas in which our client operates, in is proud that hp uses the trends identiGfK to help make decisions about proand distribution channels.


Market positioning

The Non-Food Tracking divisionis the market leader in Europe,Asia and the Pacific, the MiddleEast and, in conjunction withour us partner, npd Intellect, inthe usa.

Our key services

We provide our clients fromretail and industry with com-prehensive retail information on the innovative consumertechnology markets, which aremarked by rapid technologicaladvances, and support them in their sales, marketing andlogistics operations and strategy.

In detail

Our clients receive regular information based on continuoussurveys and analyses of salesdevelopment and product-related characteristics for consumer durables at the pointof sale. In addition, we offer special analyses, in particular ofnew products and new markets.

We work with all the major retailers in 48 countries world-wide, who supply most of thesales information that we analyzein electronic form. We also collateand categorize all the market-relevant product and technicalfeatures of the various consumertechnology models and itemsand combine them with the sales-related information taken fromretailers using our databasesystem.

We trconsuware nicatiphotoing, dhealthtoys, as wecds, dvideo

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Non-Food Tracking:

Specializing in dynamic markets worldwide


52


Cutting throthe competi� The hard facts about selling magaz


54

The hard facts about selling m

Cutting throughthe competitive

Ildikó Csejtei sees herself in a pioneer“We are trailblazers in our home markemphasizes the Marketing and pr Diremedia company Sanoma Budapest Kiaof praise for her team: “Our market reare professionals who know their stuffjust ‘order’ market research from a coinstead work closely with the researcha competent business partner.” And athe company’s team of researchers woclosely with GfK Hungaria in BudapesCsejtei has a huge requirement for mamedia research. As Hungary’s third-lacompany, Sanoma has a share of 32 pthe country’s magazines market, saleseur 64 million, over 400 employees anfierce competition. The main competitGermany’s Axel Springer Verlag and tHungarian Group, Néppszabadság/RinAnother competitor from Germany is tGroup from Essen, which has five regpapers (circulation: 225,000) in four oHungarian administrative districts.

Budapest-based Sanoma, a Finnish-H

and media research to ensure its sur

strategy – on the strength of its gen

over 30 per cent in Hungary.


million. Unlike Germany, in Hungary the tv andradio segments are predominantly the realm of private stations such as rtl, tv 2 and Magyar atvand ten private radio stations. The three publicservice tv providers m1, m2 and Duna Tv and theradio stations Kossuth, Petofi and Bartok are less significant. These stations are directly state-funded, i.e. users do not pay a licence fee to theprovider, a system that has been the subject ofmuch debate.

26 titles on the market

As everywhere else, in Hungary too, competitionto win viewers, listeners, readers and advertisingclients is tough. Sanoma, which was taken over in 1992 by Dutch media giant vnu and has beenowned by the Finnish Sanoma wsoy Corporationsince 2001, faces the challenge of selling its 26different general interest and financial magazinesto a big enough readership in a country with a

popuis espmagaIldikóof a wtwo ghigh 400,0a cru

The rwhichis havLatkisThe Gmarkwith ea dailrangilifestywell a


56

In addition to original Hungarian titlesalso publishes international magazinelicence, such as Cosmopolitan, which respectable circulation of of 40,000 anmarket researcher Ildikó Csejtei explathis high-end magazine is sold at the sin Hungary as in wealthier countries land the uk.” The prestigious lifestyle Beau Monde, which has its origins in lands, and the well-reputed National Gfrom the usa are two of the more amblicensed titles Sanoma publishes in Hu

Ákos Kozák,

Managing Director of GfK Hungária, Budapes

“We have over 1,000 titles in Hungary today –

situation that calls for efficient market and rea

research.”


Sanoma Budapest

One of the leading media companies in Hungary,

specializing in magazines and journals and Internet

products. The company is the market leader in this

segment.

Established in 1992 as a joint venture with vnu in the

Netherlands, the company has been part of the Finnish

publishing group Sanoma wsoy Corporation since 2001

and today trades under the name Sanoma Budapest.

Mission statement

� To create and continuously develop top quality magazine

brands and multi-media extensions that offer sustainable

profitability and growth

� To be the clear number one in the chosen markets

and become a top 3 player in the European consumer

magazine market

� To offer a creative, dynamic and inspiring working

environment to the employees who are key in reaching

the company’s objectives

� To create a long term shareholders’ value taking

the interests of all the company’s stakeholders into

permanent and careful consideration

Media offering and coverage

The company publishes more than 20 magazines which

target consumers on the one hand and readers of the

financial press on the other. Flagship titles include women’s

magazine Nök Lapja, the rainbow press women’s magazine

Meglepetés and weekly financial magazine Figyel.

Sanoma’s range of magazines is supplemented by licensed

titles such as Cosmopolitan and National Geographic.

Sanoma also offers parallel Internet products and a media

portal, Startlap. In addition, the company is a major event

and conference organizer.

Sanoma has a share of 30 per cent of the print market in

Hungary, selling around ten million magazines to approx.

5.5 million people every month. Five of the most popular

women’s magazines in Hungary are published by Sanoma

Budapest.

Nevethe suothermagaexistiwith nall, ceis a st

IldikóIn addall maalso cmagaactiviacquieditoCsejteand sshe sreseacomp

In mabuyer

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58

Sanoma’s licensed

version of Lifestyle is

an aspirational luxury

not everyone can afford

in Hungary

This list is by no means exhaustive anresearchers are constantly seeking anaspects such as research, creativity, adeffectiveness and efficiency. In order tIldikó Csejtei and her teams put to woresources at their disposal. The markecommunicate with customers via extecentres to establish customer loyalty aany comments and suggestions. In adSanoma’s own test shop is used to anacustomer-facing facts of real day-to-damagazines. The collected data is usededitorial improvement, develop more targeted sales campaigns and devise mcient marketing strategies.

“We are constantly monitoring the madetermine any gaps and opportunitieswould enable us to enter a wholly newsummarizes Ildikó Csejtei. “Market rehelps us to define the usp of each magestablish what quality is required for tand information provided. In this respplays a key role within our company a

»Market research helps us to dmagazine and establish the rand information provided.«


Market positioning

We are the global leader in innovative electronic meteringtechnology in quantitative tvand radio reach research, theEuropean market leader in quantitative tv research (reachresearch). We are also the No. 1in media research in Austria,Germany, the Netherlands, Switzerland and the Ukraine.

Our key services

We offer information services on media consumer behaviourand attitudes. Services includequantitative analyses of viewer,reader and listener reach andqualitative surveys on acceptance,preference and recall of mediacontent.

In addition to the classic medialike print, radio, tv and outdooradvertising, we also survey the new media which have become established thanks tothe Internet, global networkingand digitization.

In detail

� Electronic, daily updatedinformation on tv ratings inseven European countries

� Regular surveying of theprint, radio, tv, outdooradvertising and Internet sectors in 20 countriesthroughout Europe

� Continuous electronic radioresearch using Radiocontroltechnology in two Europeancountries

� Special ad hoc surveys of attitudes, acceptance and preferences relating to mediaand media content

In addand sreseaproceincludequipwatchdevelMedimeterthe reoutdomediaenablconsu

The b

Meditv anwell amagause itstructmediaagenctheir to thifrom help smedia

Our c

On thprise their countcompnet seadveragencworki(Televship) Partnpre asic inBelgiFrancstatiocompradio (Swisland, Endepublis

Media division:

Providing the technologmedia consumption


60


Winning ovewith new id� Market research to support McDon

restaurant sector, with their new b


62

Market research to support Min the restaurant sector, with

Winning over thwith new ideas

Eating habits change and young peo

restaurants and so McDonald’s is tai

customers. A different, more contem

uniforms, more extensive menus an

on course to continue the Group’s ex

contribution to the new direction.

As Jim Cantalupo, Chairman and ChieOfficer of McDonald’s, the biggest restin the world, puts it: “The world has cOur guests have changed. And we needHe is throwing his energy into converinto deeds with the new global strategto win”.

Pulsating hip hop type music, visuals emotional appeal depicting exciting snof life and the slogan “I’m lovin’ it” arMcDonald’s change from fast food reslifestyle choice.

Sabine Ullrich,

Director of Strategic Planning & Research for

McDonald’s Germany: “Without a doubt, a fac

our success is the autonomy of our managers

different countries, although of course, they m

lose sight of the corporate philosophy and ove

strategy.”


»We need to change,” said McDonald’s ChairmJim Cantalupo eighteen months ago. Customecaught on: they’re lovin’ it.«

satisfaction, so that the kids and the young at heart will identify even more strongly with theworld of McDonald’s. The Five Ps: “People, Products, Place, Price and Promotions” all have to be right.

“People” means employees, who do their utmostto ensure that customers feel at home. It alsoincludes self-motivation and enjoying their work.“Products” reflects the continuous improvementand upholding of the self-imposed quality targetsfor existing products and the expansion of the product range. “Place” signifies cleanliness, a pleasant atmosphere and innovative restaurantinterior design. “Promotions” mean leadership in marketing and also open and transparent communication of the corporate philosophy to the public and within the company. The companyhas also demonstrated its innovative approach inits new brand campaign, “I’m lovin’ it”. However,new offerings, such as the deluxe lines have provided another advance taste of the new varietyof products on offer. New restaurant design and

unifothan jMcDofor evtailor

This hwhichMcDoBerna


64

to global empire with a small step in 1Neil Fox became the first franchisee inArizona. However, major success onlywith Ray Kroc, who bought the sole rithe McDonald’s system in 1961, havinacquired the exclusive rights to grant 1954.

Jürgen Hofmann,

Research Manager Brand and Image Research

Communication Research for GfK Marktforsch

has been on the development team of the new

“I’m lovin’ it” brand campaign in Germany fro

start.

McDonald’s is a

classic kids’ birthday

venue, with the

Ronald McDonald

clown attaining

cult status for many

youngsters and

young at heart


Market research to identify opportunities andtheir optimum exploitation

An important aid to decision-making processessuch as those currently taking place at McDonald’sis provided by market researchers, including GfKfor the German market. GfK has been carrying out fast track daily consumer surveys since 1985.Those surveyed are in the 14–49 age group and they are asked about their attitudes, theiradvertising recall, their opinions on image andtheir impressions of their most recent visit to whatis popularly known as the “home from home forfast food”. In addition, consumers are also askedabout their opinions on the latest McDonald’s promotions. As Jürgen Hofmann, Research Manager Brand and Image Research/Communi-cation Research at GfK, reports: “Fast track surveys are real currency at McDonald’s, sincethey not only impact on advertising decision-making, but by quantifying customer satisfactionlevels, they can also be used as a controllinginstrument.” Hofmann’s remit includes monthlyreporting updates and quarterly reports by individual market as well as an annual summary.

GfK and other institutes also carry out additionalimportant ad hoc surveys. In this way, GfK researchers support management decisions atMcDonald’s. It was also Hofmann who, two yearsago, on the basis of fast track data, contributed to McDonald’s decision to rethink their nationalbrand image.

“I’m

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»Our target group is young people of all ages.whether they are the kids themselves, or the taking them there, or, indeed, the whole fami


Consistently high

product quality

and the most

stringent clean-

liness standards

are all part of the

McDonald’s recipe

for success

66

McDonald’s ad agency in Germany focame up with the basis for the McDoncampaign. But Sabine Ullrich insists tthere is an overall framework which pwhat is mandatory in commercials, busays what is open to adaptation to natlocal linguistic and cultural characteriprocess already starts with the claim m

»An important aid to decision-making procesuch as those currently taking place at McDis provided by market researchers, includinfor the German market.«

English version, “I’m lovin’ it”, but whtranslated into different languages anythe management and national ad agencountry concerned thinks this is the riof action. In Germany, a deliberate demade in favour of a German-language“ich liebe es” and this is what the tv sflyers and the new website all carry.

Even the music is tailored to different tastes, although it will not deviate fromcreative line of depicting McDonald’s company which is youthful, dynamic, and full of fun.


Market positioning

GfK Ad Hoc Research is one ofthe world’s leading suppliers ofinformation services, particularlyin product development andbrand and communication research. The division offersadvice and support on customersatisfaction programmes. Interms of business volume, GfK Ad Hoc Research is rankedNo. 7 in the world and No. 5 inEurope.

Our key services

In Ad Hoc Research, we offerour clients tailor-made inform-ation services for segmenting,developing, positioning andmaintaining products and services, aimed at optimizing the mix of marketing policy activities and managing productand corporate brands, as well asimplementing customer loyaltyprogrammes.

In detail

We offer a modular system ofinstruments and tailor-madesolutions for every phase in thebrand, product and service lifecycle. The system relatesmainly to services where data is gathered through surveys and tests. Clients can opt to takeup the entire service spectrum,or just individual modules.

All these services are offered byGfK subsidiaries in 28 countriesin Europe and the USA, as wellas cooperation partners in a further 63 countries worldwide.

Our kcomp

� Maeva

� Ma

� Co

� Pacpri

� Adv

� Tesfor

� Brame

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Manyfor admaintdecaddatabsurvealreadserve surve

In addreseacompbusinservictelecogoodstextile

The be

Clientbasis relatinlong tand tosucceterm. from ideas to subcomm

Ad Hoc Research division:

Identifying, maintainingof our clients


68


Spotlight onsystem and doctors and � Pfizer ensuring the success of the c

innovation and market analysis


70

Pfizer ensuring the success oinnovation and market analys

Spotlight on thethe interests of d

Whilst the global healthcare marke

per cent per annum offers good bus

and fiercely competitive. For Pfizer,

the rigorous application of the corpo

with the aid of every available mark

Walter Köbele, Chairman of the ManaBoard of Pfizer Germany in Karlsruhe aim to make a contribution to ensurinbeings can grow old in good health.”Hthis is only a part of his vision of the flonger term, the company hopes to “efear of becoming ill”. And according toapplies equally to major threats like caand Alzheimer’s, as it does to high bloor – mega male worry – erectile dysfu

For this reason, Pfizer has taken a firmall over the world, including Germanynecessary, filled any gaps in expertise companies, especially recently. In Gerthe Pfizer Group includes distinguishelike Pfizer Germany, Gödeke, Parke-DConsumer Healthcare, Pharmacia andPharma.

The start was a pleasant-tasting anttreatment

The pharmaceutical division accountsbillion out of Pfizer’s total sales in Gerwhich amounts to eur 1.7 billion. Conhealthcare brands like Olynth, ListerinYxin and chemists’ cosmetic line, Clai

»In the longer term, we want to eliminatepeople have of becoming ill. This appliesthreats like cancer, Aids, Alzheimer’s, asit does to high blood pressure or – megaworry – erectile dysfunction«


Cousins, Karl Christian Friedrich Pfizer, a chemistand Karl F. Erhart, a master patissier, immigrantsfrom Ludgwigsburg in Germany, founded the chemicals company, Pfizer and Co. in New York in1848. Their first product was a pleasant tastingand therefore successful anti-parasite treatment.All the rest tasted so bitter that children wouldresolutely refuse to take them, despite the effortsof their parents. And this is where the patisserietalents of Karl F. Erhart ensured that help was athand. However, the core of the business was supplying raw chemicals to the pharmaceuticaland food industries. From the outset, the foundershad already identified two corporate aims, whichstill today form the basis of the healthcare group:the quality and innovation appreciated by customers.

Only ensur

The mPfizermassfor mwide.globaand aEuropPfizerand itin moengagwork.billio


72

Peter Eichhorn,

Managing Director of GfK HealthCare German

“Our service package encompasses product-s

market research. We also supply information o

issues relating to health policy and other data

for the operational management of pharmaceu

businesses.”

biggest budget in the biomed sector athe world, which is used for around 20projects and work on more than 100 nproducts. Pfizer products are sold in acountries.

Köbele comments: “Our characteristicare our values. Right at the top is qualalong with innovation, customer use, t


Above all, Köbele and his management team lend growing importance to primary market research, which is continuous data gathering onconsumer behaviour and attitudes and people who work in the healthcare sector. Accordingly,the collaboration has continued to develop over the years. Peter Eichhorn, Managing Director of GfK HealthCare Germany, reports: “The main focus of the service package evidentlyconcentrates on product-specific market research.In addition, GfK HealthCare supplies informationon issues relating to health policy and other data required for operational management of pharmaceutical businesses.”

Here, Eichhorn includes projects which comeunder the heading of “Best Field Force”, whichprovide information on the levels of satisfaction of the Pfizer field force with the equipment and materials provided to them and their workwith other Pfizer departments. GfK has also been commissioned by Pfizer to carry out basicsurveys on healthcare supply, infrastructure andreforms.

This includes marketing issues. On the one hand, there are surveys which deal with marketpotential and on the other, there are tracking studies, which check and analyze the success of marketing concepts on a continuous basis. The focus here is on erectile dysfunction, anti-biotics, mycology, thrombosis treatments, calciumantagonists, all of which are handled by GfKHealthCare for Pfizer.

In the self-medicating sector, GfK supplies PfizerConsumer Healthcare with GPI advertising stati-stics on “public health media” with the software,as well as GPI advertising statistics on “chemists”

and tsoftwwith tProVi

The sshare

Pfizeris so increaholde

Pfi

Pfi

lea

Est

Ge

Pfi

pha

Mi

We

pat

par

We

hea

ceu

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In

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em

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Pfi


»Markets are becoming increasingly compleso looking after stakeholders is following snot only have to convince doctors, but mube aware of the politicians’ views and the of the health services, not to mention mainan appropriate relationship with patients.«

74

convince doctors, but also the politiciaaware of the agendas of the health serultimately, we also have to maintain arelationship with patients, who are bemore vociferous.”

This statement leads Köbele directly tPfizer’s corporate aims: “If we are theholders’ best and most valuable partnthe same applies for our shareholders

In addition to medical products for humans, Pfizer manufactures

and veterinary products.


Market positioning

The newly established HealthCaredivision ranks GfK among thethree leading providers of adhoc information services in global pharma market research.

We are No.1 in Germany for our doctors’, chemists’ and con-sumer-related panel research in communication research andfor our information services fordental and veterinary medicinesales data we are also rankedNo.1 in Germany, France, the uk and Ireland.

Our key services

The HealthCare business divisionsupplies information and con-sultancy services to clients in the pharmaceutical industry, as well as in the private andpublic sector health services, tosupport them in their strategicand operational management.

In detail

Our information services are tailored to suit client require-ments in order to help themdevelop innovative concepts and identify both qualitative and quantitative solutions tostrategic and operational issues.The services relate to marketingat every stage of the product or service lifecycle, in particularthe clinical product develop-ment stage. GfK HealthCareoffers consultancy services andsurvey research on a globalbasis, as well as panel researchin Germany, France, the uk andIreland.

In detthe foconsu

� Neandproma

� Starecim

� Brapri

� Aneffsaltar

� Cosalme

� Moactceubotpro

The b

We htheir how aWith sions measeffect

Our cl

Our coperalocalldentamarkbase nies lAventand B

HealthCare division:

Using local competence opportunities


76


Making youthe hubbub � Innovative ways of making media

for Kraft Foods


78

Innovative ways of making mfor Kraft Foods

Making yourselfof advertising

In a world of falling prices and shift

faced with new challenges. Kraft Fo

the market position of “Jacobs Coffe

tools. In cooperation with GfK, the G

from every conceivable source so as

for ad campaigns.

Frederick the Great of Prussia was cerwith the will to impose his own plans resistance he might encounter but everecognize that he was up against a briit came to curbing the thirst of his subinvigorating cup of coffee. Introducingtax proved to be of no avail and so it wthat he dispatched government agentsillegal coffee-roasting by individuals inhomes. On the contrary, this aromatic from distant lands had begun its irresto the top of the popularity scale. Thathas remained to this day and nowherethan among Germans, who lead the wconsumption rankings. Thus, Germanminister Hans Eichel can still rely on ttax introduced by Frederick to bring iof around a billion euros a year.

Though that might seem like small chcompared to receipts from oil taxes, thCoffee Association proudly proclaims “the second biggest commodity in womain source of hard currency for man

Kraft Foods is one of

the world’s leading

food manufacturers.

Established for over

a hundred years, it

owns 35 of the world’s

most lucrative brands


»We imppart

In the old port of Bremen,

stacks of containers

stretching over half a

mile hold coffee beans

waiting to be dispatched

for roasting.

Cost of petrol and cost of coffee: two favouritetopics of conversation for the German consumer

The process of making coffee from roasted beans is first attested with certainty in an Arabicmanuscript dating from 1587, since which time the popularity of this drink has spread through-out Europe, making it a very special luxury. In Germany, there is fierce competition betweenbrands like Jacobs Coffee, Tschibo, Eduscho,Melitta and Dallmayr, all battling it out for theirshare of a market worth 3.5 billion euros a year(including vat and the separate coffee tax).

The German Coffee Association notes that “coffeetends to become a public talking point wheneverthe price moves sharply in one direction or theother,” its only rival for this place of honour beingthe price of petrol.

One of the major players in the German coffeemarket is the Bremen-based corporation, KraftFoods. With brands like Jacobs Coffee, Onko andKaffee hag, it has been one of the most successfulroasting companies for many years. Other Kraftbrands from the various divisions of the same stable – Milka, Toblerone, Miracoli, Philadelphiaand Miracle Whip – are similar success stories intheir own markets. The corporate philosophy is “tocreate brands that bring joy every day,” a messagevery much in line with the thinking of the foundingfathers of the Group – James Lewis Kraft, JohannJacobs and Johann Jakob Tobler.

However, “creating brands” is no easy businessand especially not in the highly competitive foodmarkets. That lesson is clear from the example of one of the jewels of the Kraft portfolio, JacobsCoffee, the brand with the tempting aroma to spoilyourself with, according to the advertising slogan.Over the past ten years, raw coffee consumptionhas been on a downward trend, falling from 7.5 kgper capita in 1992 to 6.6 kg in 2002. At the sametime, the retail price has also slipped down frombetween 4.10 and 4.60 euros a pound to the present level of around three euros.

ConsRemiManaenormting bconsucompterm acrosthe “sSociawith d


Andrea Scharrenbroch,

Division Manager Research Consulting & Devel

GfK Fernsehforschung, is in charge of the inno

data merger projects at Kraft Foods Germany.

target groups based simply on demogconsumption are losing their power ofin the marketing process. In consequetask of putting advertising messages amass target groups is becoming ever

Remitz refers to a number of other diffacing brand communication. The conmedia and the introduction of digital thave opened up new opportunities foreliminate advertising. For example, sewith their own hard drive permit themtheir tv viewing in such a way as to skblocks of commercials. Nevertheless, possible for advertisers to turn the newto their advantage. Integrated commuapproaches with interactive offers genhigher degree of involvement and thisprerequisite for ads to generate a lasti

Standing out from the crowd

Despite falling consumption, fierce prpetition and the absence of any directexperience, the marketing strategists Coffee still manage to keep their bran

80


Kraft Foods

One of the world’s leading brand manufacturers in the

food industry

Kraft Foods celebrated its 100th birthday in 2002. The

Group is a conglomerate consisting of well-known indivi-

dual companies such Suchard, Jacobs, Kraft, Kaffee Hag

and Tobler.

Mission

Kraft’s mission is to be widely recognized as the undispu-

ted leader of the global food and beverage industry. To

earn that recognition, we strive to be:

� the first choice of our consumers

� an indispensable partner to our retailers and other

customers

� the most desirable partner for strategic alliances

� the employer of choice in our industry

� a responsible citizen in our communities

� a top tier performer for our investors

Product range and reach

In 2003, the 109,000 people employed by the Group in

19,000 production facilities and commercial representa-

tions in 150 countries worldwide generated sales of USD

31 billion.

Kraft Foods offers a wide range of products in the five

segments snacks, beverages, cheese, convenience meals

and grocery.

Kraft Foods has one of the most powerful brand portfolios

in the whole of the consumer goods industry. The Group

owns 35 lucrative brands established for over a century.

The top brands are Milka, Carte d’Or and Toblerone in the

chocolate market; Jacobs, Carte Noire and Kenco in the

coffee market; and Philadelphia, Miracle Whip, Miracoli

and Kraft Ketchup in the delicatessen market.

Here,gatheAs AnReseaforschCoffeproblof anyprimaconsuplannlevelsand d

Accothe gthe avplannthougimpacshoulpartica difftogetoriencomp

Schartogetmedia

»Defion dlosinthe


82

»The citizens of the Federal Rcoffee even more than their bof four cups a day (160 litresone small bottle (125 litres p

Merging data leads to effective planinstruments

The whole trick lies in merging data okinds or what the GfK marketing reseaIntegrated Intelligence. According to TMüller: “On the one hand, we have anset of data to show tv usage, the mainset being the socio-demography. On twe have tracking, that is to say regulathe success of our advertising campaiother people are asked how much impadvertising generated with consumersalso able to determine the extent of thimpact or quantify the impact on eachconsumer, then a criterion of enormouce would be available to us in the seletv strategy. This is precisely what we do within the framework of the integragence approach by simultaneously gafrom advertising impact studies carriecontinuous basis. The data obtained o


�


1. General comments

The following report refers to the GfK Group. The managemen

report and annual financial statements for GfK Aktiengesellsch

are published separately and can be downloaded from the web

site at www.gfk.de or ordered from GfK.

The GfK Group is presenting its consolidated financial state-

ments for financial year 2003 in accordance with the United

States Generally Accepted Accounting Principles (us gaap). Th

previous year’s figures were also reported according to these

principles.

All the financial data for the business divisions and regions is

drawn from the management information system and, like the

consolidated financial statements, is also reported according

to us gaap. Minority participations are not taken into account

and in each case, operating profit therefore excludes net incom

from participations.

Where statements refer to the number of staff or employees

this in principle means the number of full-time posts. The term

full-time employees, staff, employees and persons are used

synonymously.

Companies mentioned in the management report are referred t

by their abbreviated names. The “Additional information” secti

of the Annual Report includes a list of all companies indicated

the management report and their full names.

2. The economy

Overall economic development: upturn has begun

During 2003, the global economic climate improved slightly bu

economic progress remained patchy. Overall the global econom

only grew by a modest 3.4 per cent (Euroframe Forecast, 2002

3.0 per cent). Following either negative or flat economic growt

the first signs of an upturn appeared during the second half of

the year. This was primarily the result of dynamic expansion

in the usa and continuing strong macro-economic growth in

Asia. Japan is on the verge of moving out of a long phase of

stagnation. Only Europe, particularly the Euro zone, is lagging

behind the general trend.

A decisive factor in the upturn was the fact that the governmen

in both the usa and in Asian countries have for some time bee

embracing large-scale, expansionist economic policies. These

have been directed against the main pressures which have

influenced the global economy over the past three years: soarin

oil prices which have affected both commercial profitability and

the purchasing power of private individuals, and dramatic losse

on the stock exchanges. The end of the war in Iraq and recove

M A N A G E M E N T R E P O R T F O R T H E G


reforms, the future of the German state pension and national

insurance. This is very clearly reflected in the rise and fall of th

GfK propensity to buy indicator which GfK researches on beha

of the European Commission (see table).

Consumer attitudes during the reform debate in 2003Results of the GfK consumer climate survey1)

Month Opinion Propensity Change Consumer Changeof trend to buy2) from previ- climate from previpublication ous month indicator3) ous month4

January Hoping for2003 better times – 31.2 + 9.8 4.3 – 0.6

February Scarcely any light2003 at the end of the

tunnel – 30.6 + 0.6 3.9 – 0.4

March 2003 Outlook stillgloomy – 26.6 + 4.0 3.7 – 0.2

April 2003 Upturn in sight? – 32.3 – 5.7 3.6 – 0.1

May 2003 Consumer spend-ing still low – 39.9 – 7.6 3.8 + 0.2

June 2003 About to turnthe corner? – 29.7 + 10.2 4.1 + 0.3

July 2003 Consumer con-fidence fickle – 33.9 – 4.2 4.4 + 0.3

August Consumer con-2003 fidence unchanged – 33.2 + 0.7 4.6 + 0.2

September Consumer con-2003 fidence showing

cautiousimprovement – 31.6 + 1.6 5.0 + 0.4

October Consumer con-2003 fidence remains low – 30.9 + 0.7 5.1 + 0.1

November Consumer con-2003 fidence recover-

ing slightly – 25.8 + 5.1 5.1 0.0

December Christmas period2003 fails to attract

consumers – 32.2 – 6.4 5.2 + 0.1

January Frosty mood2004 – 41.7 – 9.5 5.2 0.0

1) These are the findings of the survey, “GfK-Wirtschaftsdienst Konsum- und Sparklima” (GfK financial services, consumer and savings climate), published by GfK Marktforschung. The results are based on monthly consumer interviews, which GfK has been carrying out on behalf of the eu Commission since 1980. In the first half of each month, around 2,000representatively selected people are asked about their perceptions of the overall economic situation, their propensity to buy and their income expectations.

2) The indicator on consumer confidence is based on the following question to consumers: ‘Do you think it is advisable to make major purchases at the moment?’ (good time – neithergood nor bad time – bad time). The values shown above are deviations from the long-term average value. The historic maximum value is + 58.0 in April 1987 (Western Germany only;Germany as a whole +36.5 in April 1999), whilst the historic minimum value is –55.4 inNovember 2002.

3) The consumer climate indicator is used to describe private consumption. Key factors are income expectations and buying propensity. The economic outlook has a more indirect effect on the consumer climate, generally as a result of income expectations. The historic maximumvalue for the indicator was 27.9 in March 1999, whilst the historic minimum value was –8.7in February 1994.

4) Index points.


86

Organization combined with a fixed exchange rate and almost

stable prices. In South-East Asia, gdp increased by 6.4 per cen

(2002: 6.9 per cent) and in China by as much as 8.6 per cent

(2002: 8.0 per cent).

In 2003, after years of stagnation, japan’s economy experience

an upturn. This particularly applied to exports where Japan

benefited, among other things, from the dynamic growth in the

countries in South-East Asia. By contrast, growth in private

consumption was only slight and according to diw (Deutsches

Institut für Wirtschaftsforschung) was even negative by the end

of the year. Experts attribute this weak growth in vital element

of gdp mainly to the over-stretched state of the labour market

and the uncertainties perceived by the Japanese people regard

ing their national insurance system. In 2003, gdp increased by

2.1 per cent (2002: 0.1 per cent).

The market research sector: facing weak global economy

In the 1990s, the market research sector reported high levels o

growth and its sales volume almost trebled worldwide. Howeve

the global economic downturn of the past two years has also le

to a marked decline in the growth of market research. Accordin

to esomar, sales rose by 4.5 per cent in us dollar terms, but by

–0.6 per cent in euro terms. This large discrepancy is mainly d

to the difference in currency trends between the us dollar and

the euro: approx. 40 per cent of global sales of market research

services is apportioned to the us dollar and almost the same

amount is concluded in euros. The actual growth in the nationa

currencies of each of the five main countries for market resear

reveals a different picture. The sector grew by 1 per cent in the

usa and uk respectively, by 3 per cent in France and by 2 per

cent in Germany. In Japan, sales for market research fell by 2 p

cent. Experts are forecasting sector growth of between 2 and 3

per cent for 2003.

Market research marketsby region and by country (in %)

2001 2002

America 46.0 45.0of which usa 39.0 38.0

Asia and the Pacific 13.0 13.0of which Japan 7.0 6.0

Europe 40.0 41.0of which uk 10.0 11.0of which Germany 9.0 9.0of which France 8.0 8.0

Middle East/Africa 1.0 1.0


3. Economic and financial development of the GfK Group

Sales and income: above-average growth in income

With a 6.4 per cent rise, GfK has increased its sales from

eur 559.4 million in 2002 to eur 595.3 million. This represents

organic growth of 3.7 per cent, exceeding that of the market

research sector, which increased sales by an estimated 2 to 3

per cent. A substantial part of the increase of 6.1 percentage

points came from subsidiary companies consolidated for the

first time in the year under review. These include v2 GfK in

the usa and media control GfK International in Germany.

Another factor was that ifr in France and Significant GfK in

Belgium had only been included pro rata in the figures for

2002 but were consolidated for the full year in financial year

2003.

Earnings1)

2002 2003 ChangeIn eur million Actual Actual in %

Sales 559.4 595.3 + 6.4

Operating costs – 512.1 – 528.0 + 3.

Operating profit 47.2 67.3 + 42.4

Other income less otherexpenses – 3.6 – 0.9 – 74.5

ebitda 68.5 91.2 + 33.0

as percentage of sales 12.2 15.3 –

ebit before income 43.6 66.4 + 52.1from participations


Net income from participations 6.4 3.1 – 51.3

ebit after incomefrom participations 50.0 69.5 + 38.9


Net interest income – 2.3 – 2.0 – 13.3

Net otherfinancial income – 2.4 – 1.2 – 50.8

Result from ongoing businessactivity 45.3 66.3 + 46.4

Taxes on incomeand earnings – 15.3 – 25.2 + 65.0

Consolidated total incomebefore minority interests 30.0 41.1 + 36.9

Minority interests’ shareof total income – 4.3 – 7.7 + 78.7

Consolidated total income 25.7 33.3 + 29.8

1) Rounding differences may occur


88

was affected by expenses resulting from the waiver on a loan

to mmxi Europe in the Netherlands of eur 1.2 million and the

residual depreciation of the holding in an American company,

Jupiter Media Metrix Inc., of eur 0.7 million.

Overall this led to a rise in the result from ongoing busines

activity of 46.4 per cent from eur 45.3 million in 2002 to eur

66.3 million in 2003.

The income tax rate increased compared to the previous

year from 33.7 per cent to 38.0 per cent. There were two main

reasons for this: firstly, in 2003 there was a one-off rise of

1.5 percentage points in the corporation tax charge in Germany

and secondly, a tax provision was set up for the current tax aud

in Germany.

The GfK Group has increased its consolidated total income

before minority interests by 36.9 per cent from eur 30.0

million in 2002 to eur 41.1 million in 2003.

Net of minority interests, GfK’s consolidated total income

increased by 29.8 per cent compared with the previous year

to eur 33.3 million (2002: eur 25.7 million). earnings per

share amounted to eur 1.28 compared with eur 0.98 in 2002.

Asset and capital situation: equity ratio increased to

over 40 per cent

Compared with the previous year, the GfK Group’s total asse

increased by eur 32.4 million to eur 502.0 million. On the asse

side, the increase of eur 21.2 million was attributable to growth i

fixed assets. Acquisitions and the topping-up of shareholding

increased goodwill by 19.3 per cent as at 31 December 2003

from eur 135.6 million in 2002 to eur 161.8 million in 2003.

Fixtures and fittings and tenants’ fittings fell by eur 2.3 million

ebit after income from participations Consolidated total income before minority interests

GfK Group: ebit after income from participations and consolidated total incomebefore minority interests 1999 – 2003 in eur million1)

19992)

2000

2001

2002

2003

26.713.7

39.4 25.4

32.75.5

50.030.0

69.541.1

1) Up to 2000, in accordance with the German Commercial Code (hgb). From 2001 in accordance

with us gaap.

2) Excluding ipo costs


minority interests increased by eur 7.9 million and stood

at eur 25.5 million as at 31 December 2003. This rise is

attributable to both improved consolidated income and the sale

of a 5 per cent business share in GfK Non-Food Tracking

Holding in Germany to The npd Group in the usa, as well as

the first-time consolidation of media control GfK International

Germany and v2 GfK in the usa, in which minority shareholder

also have holdings.

The remaining level of other provisions and liabilities were

virtually unchanged. provisions rose by eur 5.1 million,

primarily as a result of higher tax provisions and the change

in the scope of consolidation. financial liabilities fell by

eur 6.3 million. trade payables were reduced by eur 8.2

million. More than a third of the increase of eur 6.7 million in

liabilities on orders in progress arises from subsidiary com-

panies, which have been consolidated for the first time.

Investment and financing: low net indebtedness

In 2003, GfK investments totalled eur 47.7 million (2002:

eur 76.6 million). This related essentially to two items: eur 24

million for the acquisition of consolidated companies, other

business units and the addition of other participations, as well

as eur 20.9 million for the acquisition of software, fixtures and

fittings and other tangible assets.

Change in free cash flow1)

ChangeIn eur million 31.12.2002 31.12.2003 in %

Cash flow from ongoing business activity 69.3 69.2 – 0.1

Capital expenditure – 28.6 – 20.9 – 26.6

Free cash flow before acquisitions,other investments and assetdisposals 40.7 48.3 + 18.5

Acquisitions – 47.0 – 24.8 – 47.3

Other financial investments – 1.0 – 2.0 + 98.8

Asset disposals 3.4 5.0 + 47.0

Free cash flow after acquisitions,other investments and assetdisposals – 3.9 26.5 – 780.8



90

The GfK Group used eur 35.0 million for soft facts in 2003,

eur 2.8 million more than in 2002. These intangible assets

are not capitalized but are charged directly to the income

statement. They include, in particular, expenses for setting up

and maintaining panels, non-capitalized costs of proprietary

software as well as the costs of training and continuous

professional development. This investment is essential to

securing the long-term success of the company, as it contribut

to the creation of market entry barriers.

The increase in costs for the recruitment and payment of

panel households and retailers produced higher panel costs.

In addition to a number of international projects, the rise in

development costs of proprietary software is attributable to the

startrack analysis and production system which is now in the

final stages of development.

4. Business divisions

The GfK Group provides services in its business divisions

Consumer Tracking, Non-Food Tracking, Media, Ad Hoc

Research and the new business division, HealthCare, which

was set up in mid-2003 (further details on p. 101). To facilitate

a comparison between the figures for 2003 and 2002, the

figures for HealthCare business in 2002 are shown separately.

In the 2002 Annual Report, these were still reported under

Ad Hoc Research and Other. Following the reorganization, the

division Other mainly comprises GfK ag central services for

subsidiary companies, participations and partners.

Expenses for soft facts

ChangeIn eur million 2002 2003 in %

Costs of maintaining panels(including recruitment) 19.5 20.8 + 6.2

Software development costs 7.1 8.5 + 19.7

Training and continuousprofessional development 5.0 5.0 + 0.5

Other 0.6 0.7 + 28.4

Total 32.2 35.0 + 8.7

Source: Management Information System


During financial year 2003, GfK’s Consumer Tracking

division continued its positive growth trend. Sales rose from

eur 86.0 million to eur 89.8 million. 6.2 percentage points

were attributable to organic growth, with business from the

Benelux countries providing the main impetus. There was no

acquisitions-related growth. Currency effects reduced sales

growth by 1.8 per cent.

At the same time, the operating profit from the business divisio

improved. Operating profit rose by 44.8 per cent to eur 3.5 mi

lion compared to eur 2.4 million in 2002. The margin stood

at 3.9 per cent (2002: 2.8 per cent). This is mainly attributable

to the consistent measures taken to restructure the business

division and to the savings achieved by the new standard

production system, aTRACKtive. The largest contribution to

the positive growth in operating profit came from Germany, the

Benelux countries and Northern Europe.

At the end of 2003, the Consumer Tracking division employed

829 personnel in a total of 23 subsidiary companies (2002: 863

This represents 16 per cent of the total GfK workforce. Nearly

70 per cent worked in 21 countries outside Germany. The

number of employees fell by 34 compared with the previous ye

due mainly to the reduction in staffing levels in data collection

services in Germany.

Non-Food Tracking: most successful business division

Via its subsidiaries, participations and business partners, GfK’s

Non-Food Tracking division provides clients with information

services regarding sales of consumer durables and services,

particularly in the it, consumer electronics, telecommunication

household appliances and photographic markets in 48 countrie

The entertainment market sector was added to the list in 2003

(further details on p. 51).

Sales Operating profit

Consumer Tracking: breakdown of growthin sales and operating profit 20031)

Total growth

Growth through acquisitions

Organic growth

Exchange rate effects

+ 44.8 %

0.0 %0.0 %

+ 4.4 %

+ 48.6 + 6.2 %

– 3.8 %– 1.8 %



92

The Non-Food Tracking division employs 1,517 staff (2002:

1,394) in 47 subsidiaries representing around 30 per cent of

the GfK workforce. 80.7 per cent of the staff in the Non-Food

Tracking division were employed in GfK companies abroad.

Media: operating profit and margin show significant

improvement

The Media division provides its clients with information service

on the intensity and nature of media usage and media acceptan

(further details on p. 59) in 22 countries. With the establishme

of GfK Media in Ruislip/Eastcote near London in March 2003,

GfK has reinforced its presence in the uk.

Following a poor year in 2002, the media research market

failed to recover in 2003. Consolidated sales fell accordingly

by 4.9 per cent to eur 58.3 million (2002: eur 61.3 million).

Currency effects depressed sales growth by 1.1 per cent. There

was no growth relating to acquisitions. The low demand for

media research services due to a weak economy, was only

partially offset by stability in the number of long-term contract

for continuous tv and radio ratings research which generate

around 60.9 per cent of the Media division’s sales. In 2003,

GfK extended two long-term tv research contracts: the 3 year

contract for continuous tv research in Austria and the contract

for continuous radio research in Switzerland. GfK therefore has

long-term tv and radio research surveys in place in a total of

8 different countries.

Despite the drop in sales, GfK increased its operating profit in

the Media division by 23.6 per cent to eur 7.5 million. The

margin rose from 9.9 per cent to 12.8 per cent, which is mainly

attributable to consistent cost management.

Media:key figures


Sales 61.3 58.3 – 4.9


Margin in %1) + 9.9 + 12.8 + 2.92

Number of employees 345 328 – 4.9

of which abroad 199 206 + 3.5

1) Operating profit in relation to sales2) Percentage points


Despite unfavourable exchange rates, GfK operating profit

from the Ad Hoc Research division showed a clear increase of

20.4 per cent to eur 15.4 million (2002: eur 12.8 million). The

drop of 4.1 per cent owing to currency effects was more than

offset by strong organic growth of 22.6 per cent. The margin

increased from 5.7 to 7.0 per cent. Restructuring of business

activities in the uk, Sweden and Italy combined with active cos

management and the key account management system for maj

clients all contributed to this result.

As at 31 December 2003, the Ad Hoc Research division employe

1,706 staff (2002: 1,648 people), representing 34 per cent of the

total GfK workforce. Around 78 per cent of the staff belong to

GfK companies outside Germany. The number of staff increase

by 58 employees compared to the previous year. Most of this

increase is due to the setting up of a field sales network at the

Turkish company, Procon GfK.

HealthCare: in the start-up phase

The HealthCare division of GfK offers information and advisory

services on drugs, bio-technology, diagnostics, clinical equip-

ment, laboratory and surgery accessories as well as dental and

veterinary medicine in a total of 12 European countries and the

usa (for further details see p. 75).

Sales in the HealthCare division rose by 37.7 per cent from eur 35

million to eur 49.3 million. The growth was entirely due to

additions, primarily the acquisition of v2 GfK as at 1 July 2003

The company, which specializes in pharmaceutical market

research, reinforces GfK’s position in the usa, the largest mark

in the world in the pharmaceutical, bio-technology and medica

diagnostics sectors. In terms of organic growth, sales were

unsatisfactory with a drop of 17.4 per cent. This is mainly due t


Ad Hoc Research: breakdown of growthin sales and operating profit 20031)

Total growth


Organic growth


+ 20.4 %– 1.6 %

+ 1.8 %+ 0.9 %

+ 22.6 %+ 1.3 %

– 4.1 %– 3.8 %



94

Other: services for subsidiaries, participations and partners

The Other division primarily comprises the Group Services of

GfK ag, GfK Data Services/Business Solutions & Processing

as well as GfK Methoden- und Produktentwicklung (Method

and Product Development) that provide services for subsidiary

companies in the GfK Group, participations and their business

partners.

In 2003, the Other division achieved sales of eur 10.4 million,

a reduction of 27.9 per cent compared to the previous year

(2002: eur 14.5 million). The result was attributable mainly to

the lower volume of services of around eur 3 million which

GfK Data Services/Business Solutions & Processing provided fo

iri/GfK.

The division recorded an operating loss of eur 1.4 million

(2002: eur –2.4 million) in 2003. In the year under review, the

operating result was adversely affected, in particular, by the

consultancy costs incurred in connection with acquisitions and

the reduction in services provided to iri/GfK.

The Other division mainly employs staff in Germany. At the

end of 2003, it employed a total of 458 full time personnel

(2002: 462).

Other:key figures


Sales 14.5 10.4 – 27.9

Operating profit – 2.4 – 1.4 + 40.4

Margin in %1) – 16.8 – 13.9 – 2.92

Number of employees 462 458 – 0.9

of which abroad 105 106 + 1.0


Other: breakdown of growthin sales and operating profit1)

Total growth


Organic growth


+ 40.4 %– 27.9 %

0.0 %0.0 %

+ 37.2 %– 26.9 %

+ 3.2 %– 0.9 %




Compared with 2002, GfK increased its sales in its home marke

by 8.3 per cent from eur 204.7 million to eur 221.7 million,

thereby achieving a total of 37.2 per cent of the consolidated sa

of the GfK Group in 2003. Of this, 3.5 percentage points were

attributable to organic growth due, in particular, to pleasing

growth in the Non-Food Tracking division. This offset the drop

sales by GfK Data Services/Business Solutions & Processing an

the Media division. Growth arising from acquisitions amounted

to 4.8 per cent. Specifically, this refers to the acquisition as at

1 July 2003 of the retail tracking business of media control GfK

International in the entertainment market segment, as well as t

the two companies, GfK HealthCare and GPI Kommunikations-

forschung, which were both consolidated for the full year for

the first time in 2003.

During the period under review, there was an overproportional

rise in GfK’s operating profit in Germany in relation to sales

of 27.1 per cent to eur 22.9 million (2002: eur 18.0 million).

Most of this growth was organic (18.2 per cent) and is mainly

due to success in the Non-Food Tracking division. The sales-

related margin in Germany increased from 8.8 per cent to

10.3 per cent.

As at 31 December 2003, GfK employed 1,459 full-time

personnel in its German subsidiaries (2002: 1,465), representin

28.8 per cent of the total workforce.


Germany: breakdown of growthin sales and operating profit1)

Total growth


Organic growth


+ 27.1 %+ 8.3 %

+ 8.9 %+ 4.8 %

+ 18.2 %+ 3.5 %

0.0 %0.0 %

Germany:key figures


Sales 204.7 221.7 + 8.3

Operating profit 18.0 22.9 + 27.

Margin in %1) + 8.8 + 10.3 +1.52

Number of employees 1,465 1,459 – 0.4




96

At the end of 2003, the GfK Group employed 486 personnel in

Northern Europe (2002: 500). This represents 9.6 per cent of th

total workforce.

The western and southern europe region, which comprise

40 subsidiaries in 10 countries, represents the next most

important region for the GfK Group in terms of sales after

Germany. At eur 204.7 million (2002: eur 196.7 million),

GfK increased its sales in this region by 4.1 per cent, of which

0.9 percentage points were attributable to organic growth.

Acquisitions-related growth amounted to 4.1 per cent and is

mainly attributable to the fact that the companies ifr Group

in France, and Significant GfK in Belgium, were only partially

consolidated in 2002, but were consolidated for the full year in

2003. Currency effects reduced sales by 0.8 per cent.

Operating profit for the region also rose more sharply than sale

and was up 39.3 per cent from eur 19.7 million in 2002

to eur 27.5 million in 2003. Of this, 24.7 percentage points

were attributable to organic growth primarily due to the positiv

trend in the Non-Food Tracking division and to earnings-orient

measures in the Consumer Tracking and Ad Hoc Research

divisions. Growth from acquisitions accounted for 15.6 percenta

points. The margin increased from 10.0 per cent in 2002 to

13.4 per cent in 2003.

GfK market position in the European countries

Ranking

1 Germany, Croatia, Netherlands, Austria, Switzerland

2 Bulgaria, Romania, Russia, Slovakia, Czech Republic,Ukraine

3 Belgium, Denmark, Poland, Portugal, Spain, Turkey

4 France, Greece, Italy, Hungary

5 Sweden

8 uk

10 Norway

Western and Southern Europe:key figures


Sales 196.7 204.7 + 4.1


Margin in %1) + 10.0 + 13.4 + 3.42

Number of employees 1,787 1,810 + 1.3



At the end of 2003, the number of full-time employees was 697

63 more than at the end of 2002. This corresponds to a 13.8 pe

cent share of the worldwide workforce.

America: market position improved through acquisitions

In 2003, GfK was represented in America by 3 subsidiaries, all

with headquarters in the usa. These were GfK Custom Researc

which was acquired in 1999, a majority holding in Martin

Hamblin Research acquired as at 1 May 2001 and also a major

holding in v2 GfK acquired as at 1 July 2003.

GfK increased its sales in America in 2003 by 20.4 per cent

from eur 40.4 million to eur 48.6 million. Of this, 36.9 per cen

results from the acquisition of v2 GfK. Currency effects reduce

sales by 16.7 per cent, whilst organic growth rose 0.2 per cent

over the previous year. The unsatisfactory rise in organic sales

growth was largely attributable to the poor business performanc

of Martin Hamblin Research.

Nevertheless, GfK achieved a clear increase in its operating

profit in this region as well, which was up 43.5 per cent to

eur 4.4 million (2002: eur 3.1 million). As with sales, the grow

in operating profit was entirely due to the acquisition of v2 GfK

The weak us dollar reduced operating profit by 17.4 per cent.


Central and Eastern Europe: breakdown of growthin sales and operating profit1)

Total growth


Organic growth


+ 42.6 %+ 11.6 %

0.0 %0.0 %

+ 20.9 %

– 11.7 %– 9.3 %

+ 54.4 %

America:key figures


Sales 40.4 48.6 + 20.4


Margin in %1) + 7.7 + 9.2 + 1.52

Number of employees 138 204 47.8




98

Despite unfavourable exchange rates, the region improved its

operating profit in the reporting year from eur 3.0 million to

eur 5.6 million. This increase was largely attributable to organ

growth. Currency effects reduced operating profit by 11.3 per ce

The margin also rose markedly from 10.1 per cent to 16.3 per

cent.

At the year-end, there were 410 people employed in the Asia a

the Pacific region, an increase of 55 over the previous year. Th

corresponds to an 8.1 per cent share of the worldwide workforc

The GfK network: further expansion

In 2003, the GfK Group continued to expand its international

network. The following table lists the main activities in 2003.


Asia and the Pacific: breakdown of growthin sales and operating profit1)

Total growth


Organic growth


+ 83.5 %+ 14.1 %

+ 1.6 %+ 1.5 %

+ 24.9 %

– 11.3 %– 12.3 %

+ 93.1 %


Company Classification Business Region/country Share-division holdin

GfK Media Established Media uk 100 %

Inform Business Acquisition Non-Food Australia 100 %Development Tracking

v2 GfK Acquisition HealthCare usa 51 %

media control GfK Acquisition Non-Food Germany 51 %International Tracking


Hardware and software: more user-friendly with extended

functionality and improved efficiency

Data collection methods have undergone a huge change with

the advent of new communication technologies. In 2003, GfK

worked on two new processes in particular.

new forms of data collection technology. In Sweden sinc

mid 2003, Consumer Tracking has regularly been using a data

collection system which it developed in-house. Known as e-cpo

(Electronic Consumer Panel Online), it gathers information on

the purchasing behaviour of households and individuals by means

of a whole range of electronic technologies such as Internet

applications, Personal Digital Assistants (pdas) and mobile phones

Tests in Switzerland using a refined system have been underwa

since November 2003. The new procedures are all compatible

with aTRACKtive, the production platform also developed by Gf

and now in use throughout Europe.

user-based media research. At the end of 2003, the GfK

subsidiary, Telecontrol Switzerland, which is part of the Media

division, launched a measuring device which it has developed.

Known as MediaWatch, it measures the media consumption to

which consumers are daily exposed.

The device captures data when the survey participants come

into contact with the electronic media of television, radio and

cinema, as well as poster advertising, newspapers, magazines

and other printed matter. Following extensive, in-house testing

the device will be used for the first time in a pilot study of clien

at the beginning of 2004. This innovative technical solution use

a new approach to media research, which to date has been

media-based and has therefore specialized in specific areas of

the media. This instrument means that for the first time it will

be possible to collect data on media consumption which is

user-based and facilitates an analysis of the overall multi-media

complexity to which people are subjected.

In addition, two of GfK‘s central production and analysis system

were refined during 2003.

online access to gfk databases. The first of these platforms,

atracktive.web, involves the consumer panel, ConsumerScan,

via which major clients have direct access to GfK’s databases.

In 2003, Consumer Tracking launched an update of the analysis

system which, on the customer side, can be used by a wide

range of users and not just by the market research specialists a

has been the case to date. This allows any member of staff from

marketing, sales and controlling departments to access GfK raw

data at any time for analysis purposes.


100

Consequently, staffing levels grew most in America with an

increase of 47.8 per cent. As at 31 December 2003, 204 people

were employed in the region compared to 138 people in 2002.

The number of staff in Asia and the Pacific rose by 15.5 per

cent to 410 (2002: 355) mainly due to the expansion of busines

activities in China. Growth of 9.9 per cent in Central and Easte

Europe, which had 697 employees (2002: 634) at the year-end,

was primarily the result of expanding GfK’s own interviewer

network in Turkey.

Of the business divisions it was HealthCare, which showed an

above-average rise in staffing levels of 36.5 per cent to 228

employees (2002: 167). In the Non-Food Tracking division the

number of staff rose by 8.8 per cent and now comprises 1,517

people (2002: 1,394). This is due to the expansion of business

China and the acquisition of the retail research division for the

entertainment segment of media control GfK International,

Germany.

Staff turnover: a marked drop

The rate of staff turnover in the GfK Group, expressed as the ra

of notices given by employees to the total number of employee

was 7.7 per cent in 2003 (2002: 9.1 per cent). In Germany it

was just 2.4 per cent compared with 3.6 per cent in 2002. This

indicates a clear fall compared with the previous year.

Management Guidelines: global harmonization

For 3 years, the Management Board has been appointing the

members of what is known as the Excellence Team. This group

was tasked with working on a particular strategic project as pa

of a programme for promoting high-fliers. Since compulsory ne

Corporate Values were developed and implemented for all staff

in 2002, one of the aims in 2003 was to develop a basis for

Number of employees by division 2003

in % Full-time

Consumer Tracking 16 829

Non-Food Tracking 30 1,517

Media 7 328

Ad Hoc Research 34 1,706

HealthCare 4 228

Other 9 458

Total 100 5,066



8. Organization and administration

With its business model as a ‘pure’ market research company,

GfK offers information services to industry, retailers, the

pharma sector, media and service providers. The company has

consistently adapted its organization and administration to mee

the demands of worldwide growth. This includes decentralizing

all services to ensure optimal business performance in the

individual companies. In addition to the parent company, the

GfK Group comprises 161 subsidiaries and participations.

GfK ag acts both as a holding company and as an operating

unit. The Group has its head office in Nuremberg. In the GfK

Group annual accounts GfK has fully consolidated 92 majority

holdings. Additionally, 20 significant associated companies

have been included in the annual result according to the equity

method (see page 121 in the Notes to the consolidated financia

statements).

Management Board and divisional executive bodies

The company is headed by the Management Board which

comprises a total of six members. The Chief Executive Officer

(ceo) is responsible for Strategy, Investor Relations, Internal

Audit, GfK Methoden- und Produktentwicklung, Public Affairs

and Communications, as well as GfK Data Services/Business

Solutions & Processing. The Chief Financial Officer (cfo) is

responsible for Financial Services, Personnel Services and

Central Services.

GfK is organized on a matrix basis. Each Management Board

member is responsible for certain companies and a particular

business division. HealthCare and Consumer Tracking come

under the responsibility of the same Management Board

member. The managing directors report directly to the Manage

ment Board members responsible for their company.

Each business division has its own executive body known

as Board, comprising the responsible Management Board

member and selected managing directors who can call upon a

number of specialist teams. The task of the Board members is

to develop global divisional strategies and to allocate resources

for international projects.

Sales and operating profit are collated along regional and

divisional lines. Hurdle rates for operating profit in relation

to sales are applied to each business division as target and

management indicators. These are used as set targets at

divisional level. The Chief Information Officer (cio) is responsib

for advising the Management Board on worldwide harmonizati


102

Outside Germany, these functions are the responsibility of the

relevant departments at the individual GfK companies.

Sub-holdings

As at the year-end, GfK had further expanded its collaboration

with the npd Group to cover new regions. Organizational

changes have paved the way for further improvement in global

services. In future three regionally based holding companies

and a Coordination Board will regulate international collabor-

ation:

1. for Europe, Asia and the Middle East (share of the GfK Grou

95 per cent)

2. for the usa, Canada and Mexico (share of the GfK Group

25 per cent)

3. for Latin America, which primarily includes Brazil, Chile and

Argentina (share of the GfK Group 65 per cent).

The Coordination Board is responsible for developing global

concepts for company policy and services as well as coordinati

relationships between clients and partner companies within ea

regional holding.

The GfK Group primarily maintains additional sub-holdings in:

� Austria for most of the Central and Eastern European GfK

companies

� Switzerland for the companies in the iha GfK Group and

� Singapore for all companies in the Non-Food Tracking divisio

in Asia and the Pacific, excluding Japan.

9. Purchasing

As an international market researcher, most of GfK’s purchasin

concerns raw data and additional services. This involves

anonymous data provided by retail companies and private

individuals. These are either periodically retrieved in electronic

form or – depending on the respective task in hand – gathered

using other methods such as surveys or studies.

In the traditional purchasing markets, GfK is only involved to

any great extent in the it sector.

High technical standards for data retrieval and processing enab

GfK to guarantee superior quality combined with cost efficienc

Alongside these technical measures GfK has laid down relevan

guidelines to optimize the procurement of data as well as the


� the Imaging Summit, organized every two years in Nurember

by the Non-Food Tracking division, with 300 clients from the

photographic industry and retail industry worldwide.

In addition, in 2003 the “Academies” in the Consumer Tracking

HealthCare and Ad Hoc Research divisions offered their clients

over 20 specialist events covering special instruments and

services. The GfK Group and the individual companies also too

part in numerous conventions, specialist conferences and trade

fairs delivering specialist lectures and company presentations.

pr: reaching a wide audience

The focus of the pr work of the GfK Group comprised tradition

press releases on business performance, acquisitions and othe

topics particularly relevant to the financial community. Here,

Public Affairs and Communications worked closely with Investo

Relations (for further details see page 26 et seq.). GfK also regula

issued press releases on the findings of GfK surveys. These

include GfK’s consumer climate surveys which are published

monthly in Germany and the uk as well as the findings of inter

national surveys. With almost 10,000 articles in Germany alone

covering GfK or its surveys or quoting them, the level of press

coverage rose by 42 per cent compared to the previous year.

GfK’s website is also becoming increasingly popular with a wid

audience and visits increased by 26 per cent with a daily avera

of around 2,300 hits in 2003.

Corporate image: an expression of company culture

The GfK Group has visibly altered its corporate image in recen

years. The climax of this process was the redesign of the GfK

logo. The Management Board took the decision at the end of

2002 and began implementing the corporate design for the new

logo in February 2003. This changeover process has been larg

completed in Germany. In order to keep down the costs of the

transition, companies outside Germany were allowed a genero

timescale for the changeover.


104

risk awareness among staff. Relevant information materials and

workshops have been implemented with the aim of raising risk

awareness.

responsibilities and functions. As part of its overall

responsibility for the risk management system, the Manageme

Board appointed a risk management committee to continually

extend the Group’s arrangements for efficient and feasible

risk management. This body is responsible not just for the

planning and ongoing methodical development of the system,

but also for ensuring its functionality. Another core task is

identifying Group-related risks and reporting to the Manageme

Board and Supervisory Board on the current risk situation in

the Group.

As a result of the Group’s decentralized structure, direct

responsibility for early identification, management and commu

nication of risks rests locally with the operational managers of

the individual GfK companies. Risk management coordinators

in the companies ensure that the central regulations are applie

in the respective organization and promote risk awareness. A

risk owner is appointed for each identified risk, whose job it is

to make and implement the necessary decisions to overcome

the risk.

processes. Thanks to its integrated risk management concept,

the GfK Group is able to ensure complete and comprehensive

risk identification. The concept covers the identification and

management of strategic and operational risks at the level of th

individual GfK companies as well as at regional, divisional and

Group level.

GfK integrated

risk management

system

Group level Company level

Divisional level


sector risks. The sustained weakness in the global economy

has again confirmed that the market research sector is less

prone to cyclical fluctuations. It is also evident that, with regar

to growth in sales and total income, the GfK Group is well

positioned even in times of difficult economic conditions.

Moreover, as GfK operates worldwide and acts as a full-service

provider, it is able to compensate for fluctuations in orders in

a particular region or division. The division-related risks detaile

below are therefore unlikely to fundamentally jeopardize busine

growth in the GfK Group.

The difficulties in the print media industry caused a drop in sa

in the Media division during 2003. It was not possible to offset

this fully through long-term contracts for tv and radio ratings

research with fixed volume orders. Advertising activities in the

print media will be boosted when the economy recovers and G

is assuming that the demand for its services will increase again

in this sector. Major sporting events such as the Olympic Game

in Athens and the European Soccer Championship in Portugal

offer the prospect of further impetus.

In the Consumer Tracking division, although the overall incom

situation again improved considerably in 2003 as a result

of extensive cost-cutting programmes, the market situation

remains difficult partly because of the pressure of internationa

competition. Nevertheless, GfK is convinced that in the medium

to long-term this division will be a mainstay of its financial and

customer-related strategic growth.

With the establishment of the HealthCare division the GfK Grou

is set to further expand its market share and the possibility

of associated risks cannot be excluded. However, longstanding

knowledge of the sector and experience in integrating new

companies into the Group should help to minimize potential ris

The formation of an internationally staffed HealthCare committ

was fundamental to optimizing GfK’s range of services and

establishing the HealthCare area as a profitable, forward-lookin

division.

In all divisions, the ongoing process of concentration among

clients through mergers and company takeovers continues. Th

has resulted in the marketing budgets of some clients being

reduced and this has been offset by increased acquisition of

new clients and expanding services. Furthermore, the changed

market conditions have produced new major clients. However,


106

Besides the option of borrowing, GfK ag has access to authorize

capital of 8.2 million in no-par shares to increase the equity

base. Further liquid funds are available from the Group.

Financing is therefore available on a broad and secure basis.

There are currently no risks in this area.

Since 65 per cent of consolidated sales was generated by

companies in the Euro zone, the risks from currency effects

within the GfK Group are limited. The weakness of the dollar

and the poor exchange rate for the yen as well as other

currency effects over the course of 2003 have reduced growth

in sales and operating profit for the Group by 3.3 per cent.

legal risks. Many countries are trying to restrict apparent

self-employment. This would mean that GfK’s interviewers and

other freelance workers would be subject to compulsory social

security payments, which would increase costs. GfK is respon-

ding with appropriate measures mainly involving adapting term

of employment to these changes. Legal proceedings initiated in

Austria were settled in favour of GfK.

At the present time, there are no significant risks in respect of

pending legal actions or compensation claims.

GfK is currently working on optimizing the insurance cover for

all GfK companies worldwide.

risks of acquisitions. The acquisition of new companies and

their integration into the Group is always associated with risks

GfK prepares for such risks by extensive due diligence checks

prior to any acquisitions and acquisition supporting measures.

The specialist team that carries out these tasks can call on

outside consultants when necessary. Comprehensive integratio

plans facilitate the smooth integration of new companies into

the GfK Group.

The Supervisory Board of GfK ag actively monitors acquisitions

through regular reports presented in its meetings. In 2003 it al

set up a Mergers and Acquisitions Committee.


The GfK Group has acquired the business of arbor inc. usa

effective retroactively from 1 January 2004. The newly named

company, GfK Arbor, provides clients with ad hoc research

services with particular emphasis on communication and mark

research and carries out tracking surveys on brand equity and

value, market segmentation and corporate image evaluations.

With 92 employees, the company generated sales of usd 24.9

million in 2003.

On 24 February 2004, the Supervisory Board extended the

contract of Heinrich A. Litzenroth, the Management Board

member responsible for the Ad Hoc Research division, for

a further five years. Litzenroth joined GfK in 1978 and was

appointed to GfK’s Management Board in 2000. Since taking

over responsibility for Ad Hoc Research, he has played a pivota

role in accelerating the internationalization of the division.

14. Outlook

Economic conditions

the economy in general. According to economic research

institutes, the global economy will pick up in 2004 and then

remain stable in 2005. Many governments are adopting

expansionist financial policies to stimulate the economy. The

optimism of employers, investors and, ultimately, consumers

is set to grow. Global growth depends mainly on economic

growth in the usa. The accelerated growth rate observed durin

the second half of 2003 is likely to continue. However, even

an economic downturn during 2004 would hardly affect the

powerful influence of the usa on overall economic growth. Suc

a development is based on two assumptions. Firstly that there

no renewed deterioration in the international political situation

and secondly, that there are no marked currency fluctuations.

In addition to the usa, south east-asia and the countries

joining the european union in May 2004 will see a boom.

Once again, no dynamic upturn is expected in germany in 200

However, according to experts, two factors may contribute to

positive growth. Firstly, following years of caution, demand for

investment is rising again in 2004, secondly, possible growth i

private consumption resulting from tax cuts.


108

Employees

GfK expects that with no change in the scope of consolidation

the number of employees will slightly increase in 2004.

Essential personnel measures include optimizing the organi-

zational structure and procedures in staff management and

consistently implementing the sap standards. Another importan

step will be to develop and launch GfK’s global hr strategy

throughout the Group’s worldwide network of companies.

A working party of personnel managers and members of the

Excellence II team will define the new GfK management

guidelines over the next two years (see p. 100), communicate

these throughout the GfK network and promote their gradual

adoption in daily working practices, using the appropriate

instruments.

Research and development

Over the coming years, research and development will focus

on fine-tuning procedures for merging and integrating data

from different sources and optimizing the measuring and

forecasting quality of such procedures. In addition, high priorit

will be given to the ongoing development of electronic meterin

technology and analysis software. GfK intends to use technical

innovation to enhance the reliability, precision and efficiency

of data collection processes relating to consumer habits in term

of consumption, use and purchasing behaviour. Developing

and optimizing the information systems and analysis methods

available to clients, which provide ever more flexible analysis

options through direct access to GfK’s databases, constitute

another priority for GfK.

Organization and administration

In 2004 and 2005, GfK will continue to work on meeting the

deadlines specified in the German Corporate Governance Code

with regard to the publication of annual and interim reports.

Preparations are also under way to change the accounting in

accordance to us gaap in line with the rules of the Internationa

Financial Reporting Standards (ifrs).


An additional capital requirement is anticipated only in

connection with the financing of acquisitions. As before, GfK

aims to match this with the relevant periods by using its free

cash flow and existing credit lines. With authorized capital of

8.2 million no-par shares, GfK also has sufficient self-financing

capacity.

Risks

The risk assessment carried out as part of the risk inventory

for 2003 has not revealed any risks which may jeopardize the

future existence and further development of the GfK Group.

As a result, the GfK Group is in a position to consistently explo

any market opportunities on the basis of a risk-aware approach

The individual short and medium-term risks identified in the

monthly reporting are carefully monitored and every effort

is made to find immediate solutions to eliminate these. GfK

assumes that there are no risks which could materially affect th

Group’s business development.

GfK Group: corporate growth

GfK has had a good start to financial year 2004. By the end of

February, it had already invoiced or posted 48 per cent of this

year’s sales target as existing orders or incoming orders. This

figure is slightly higher than that of the previous year which w

47 per cent.

In 2004, the GfK Group intends to once again increase both sa

and total income and outperform the market research sector. Wit

no change in the scope of consolidation, the Group forecasts

sales of eur 630 million from organic growth, which represents

an increase of 5.8 per cent.

On the basis of the full consolidation of the sales of GfK’s new

subsidiary, GfK Arbor, from 1 January 2004, the sales target ha

been revised upwards by a further eur 20 million to eur 650

million. GfK expects to further increase consolidated sales with

the acquisition of additional companies.

The GfK Group is also aiming to increase ebit including incom

from participations once again. The growth rate here is set to

outstrip that for organic growth. The target margin, that is the

ebit including income from participations in relation to sales, i

just over 12 per cent.


110

Strategy: exploiting market potential, continued expansion

Two of the main strategic aims of GfK are the expansion of

its business in new countries and regions and the extension of

services to provide a wide-ranging offering, tailored to the

changing requirements and demands of clients. Since its ipo in

1999, the GfK Group has made significant progress towards

achieving these aims and creating the basis for future success.

In 2004, priority will be given to the following aims:

consolidating and expanding the us market presence.

Following its ipo in 1999, GfK established itself in the usa, the

biggest individual market research industry in the world, and

systematically expanded its position in this market. GfK’s us

subsidiaries, GfK Custom Research, v2 GfK, Martin Hamblin

Research and the new GfK Arbor are forecast to generate sales

of just over usd 110 million in the usa in 2004. This means

that GfK is among the top 15 providers in the biggest national

marketing research market in the world. It is expected that GfK

will achieve 14 per cent of its overall sales in this key market in

the current financial year.

rapid expansion of non-food tracking business in south

america. In 2002, GfK acquired a minority shareholding in

Indicator GfK in Brazil. This year, a key activity will be to expa

the Non-Food Tracking business in this region.

harmonized, integrated services. Over the past two years,

GfK has systematically expanded its HealthCare activities.

Following the acquisition of us-based v2 GfK, the Group set

up a new division. The most important task in 2004 will be

to harmonize the range of services, while at the same time

effectively expanding the customer relationship management

system on an efficient basis and ensuring its integration.

This applies to the other divisions as well: key account manage

ment systems, standardization of services and the further

development of optimized information systems and instrument

based on cutting edge technology for the benefit of clients hav

top priority.

divisional expansion strategies. GfK assumes that in 2004

the Consumer Tracking division, which operates throughout

Europe, will once again benefit from optimized workflows

throughout the corporate network and the introduction of the

uniform production system, aTRACKtive. Ad Hoc Research,

Non-Food Tracking and HealthCare are aiming to achieve glob

expansion and service targets and will be continuing to exploit

any potential acquisition opportunities. The Media division wil

continue to focus its acquisition-related activities on Europe.


�


Sales

Cost of sales

Gross income from sales

Selling and general administrative expenses

Operating income

Other income less other expenses

ebit before income from participations

Net income from participations

ebit after income from participations

Net interest income

Net other financial income

Result from ongoing business activity

Taxes on income and earnings

Consolidated total income before minority interests

Minority interests’ share of total income

Consolidated total income

Earnings per share, undiluted (in eur)

The Notes below form an integral part of the consolidated fina

Consolidated income statementfor the period 1 January to 31 December 2003 in eur’000


AssetsIntangible assets

Tangible assets

Financial assets

Fixed assets

Inventories

Trade receivables

Other accounts receivable and other assets

Securities

Liquid funds

Current assets

Deferred taxes

Prepaid expenses

Total assets

of which short-term

Shareholders’ equity and liabilitiesSubscribed capital

Capital reserve

Retained earnings

Other comprehensive income

Shareholders’ equity

Minority interests

Provisions

Financial liabilities

Trade payables

Liabilities on orders in progress

Other liabilities

Provisions and liabilities

Deferred taxes

Deferred income

Total liabilities

of which short-term

Total shareholders’ equity and liabilities


Consolidated balance sheet as at 31 December 2003 in eur’000


114

Consolidated total income before minority interests

Write-down/write-up of intangible assets

Write-down/write-up of tangible assets

Write-down/write-up of financial assets

Change in deferred taxes

Income from companies valued at equity, not affecting paymen

Profit/loss from the disposal of fixed assets

Net interest income affecting payment

Increase/decrease in provisions

Other expenses/revenue not affecting payment

Increase/decrease in inventories, receivables and other assets,not attributable to investment or financing activity

Increase/decrease in liabilities and other liabilities,not attributable to investment or financing activity

a) Cash flow from ongoing business activity

Cash outflows for investment in intangible assets

Cash outflows for investment in tangible assets

Cash outflows from the acquisition of consolidated companies

Cash outflows for investment in other financial assets

Cash inflows from disposal of intangible assets

Cash inflows from disposal of tangible assets

Cash inflows from disposal of consolidated companies and othe

Cash inflows from disposal of other financial assets

b) Cash flow from investment activity

Cash outflows to company owners

Cash inflows from/outflows to minority interests

Net interest income

Cash inflows from the raising of loans

Cash outflows from the repayment of loans

c) Cash flow from financing activity

Changes in liquid funds affecting payment (total of a), b) and c

Changes in liquid funds owing to exchange gains/losses, scope

Liquid funds at the start of the period

Liquid funds at the end of the period


Consolidated funds statementfor the period 1 January to 31 December 2003 in eur’000


No. of shares Subscribed C(in thousand) capital re

As at 1 January 2002 26,122 66,872 8

Dividend

Consolidated total income after tax

Other changes

Other comprehensive

income

As at 31 December 2002 26,122 66,872 8

Dividend

Consolidated total income after tax

Other changes

Other comprehensive

income

As at 31 December 2003 26,122 66,872 8

The Notes below form an integral part of the consolidated financial statemen

Changes in consolidated shareholders’ equityfor the period 1 January 2002 to 31 December 2003 in eur’000


116

General information

The consolidated financial statements of GfK Aktiengesell-schaft (GfK ag) include the company itself and all consolidatedsubsidiaries (the GfK Group). The statements have been prepared in accordance with the United States GenerallyAccepted Accounting Principles (us gaap) and all figures aregiven in eur thousand, unless specified otherwise. Theincome statement has been prepared using the cost of salesaccounting format.

Since financial year 2002, the GfK Group has no longer preparits consolidated financial statements in compliance with theaccounting principles of the German Commercial Code (hgb).The us gaap consolidated financial statements are supplementby a management report and other required information, so that, pursuant to § 292 a hgb, the GfK Group is exempt from thduty to prepare consolidated financial statements in accordancwith hgb.

The annual financial statements of the parent company, GfK aghave been prepared in accordance with hgb and are filed withthe Commercial Register at the district court of Nurembergunder hr b 9398.

Pursuant to § 264b hgb, GfK Marketing Services GmbH & Co. kNuremberg, is exempt from preparing annual financial statementand a management report, having these audited and disclosingthese in accordance with the provisions for corporations under§§ 264 et seq.

Methods of consolidation

The annual financial statements of GfK ag and all material subsidiaries over which control is exercised directly or indirectare included in the consolidated financial statements of GfK agCompanies in which the GfK Group has a participation of notmore than 50%, but over which significant influence can be exercised, are generally accounted for at equity as associatedcompanies. All other companies in the GfK Group are reportedat acquisition cost.

Capital consolidation is carried out in accordance with theStatement of Financial Accounting Standards (sfas) 141 on the basis of the purchase accounting method, whereby theacquisition costs of the participation are charged against theparent company’s pro rata share in the newly valued equity capital of the subsidiary at the time of purchase. Any positive difference arising on the balance sheet is reported under fixedassets as goodwill.

All transactions and balances between the companies of the GfK Group which are included in the consolidated financial statements are eliminated when preparing the consolidatedfinancial statements. Differences arising from debt consolidatioare treated as income. Intercompany results and asset move-ments are eliminated with impact on the income statement ifthey are significant.

Associated companies that are included at equity (one-line consolidation) are generally included for the first time at thetime of acquisition. The initial valuation takes place similarly to full consolidation. Any difference on the assets side arisingfrom offsetting the book value of the participation against the

N O T E S T O T H E C O N S O L I D AT E D F I N


Recognition of sales

The method of recognizing sales depends on the nature of the underlying transaction. For business involving panels, theGfK Group recognizes its sales according to the progress prorata temporis of the project (proportional performance methodBusiness in the Ad Hoc Research division is valued by the per-centage of completion method.

In the case of the proportional performance method, the salesfor a project are distributed evenly over its duration. Each monduring the term of a contract the same sales are recognized in terms of amount. Where over 50% of the costs occur in the following month, the sales are recognized with one month’sdelay.

When applying the percentage of completion method, the salesare recognized in accordance with the actual progress of theproject. Progress on the project is determined as the ratio of thactual costs incurred to the costs expected overall for the projecThe estimate of total cost is continuously checked during the liof the project. Changes in the estimate of total cost flow into thcalculation of recognizable sales at the point in time at whichthey can be anticipated.

The costs to be included in this calculation comprise all directcost of sales and personnel expenses as well as pro rata indirecosts. Provisions are set up for anticipated losses on orders inprogress when they can be anticipated.

In all other business transactions the completed contract methis used, according to which sales are only recognized once thework has been completed and invoiced.

Earnings per share

The earnings per share (eps) reported in the consolidated income statement show the proportion of consolidated total income which theoretically relates to each share issued.

There is no dilution effect arising from the stock options issuedas at 31 December 2003.

Stock options for employees and executives of the GfK Group

The GfK Group applies apb (Accounting Principles Board)Opinion No. 25 and associated interpretations to depict the existing Stock Option Plan in the consolidated financial state-ments. According to apb 25, expenditure for employee stockoptions with no intrinsic value on the balance sheet date cannobe recognized.

The following table shows the effects on consolidated total income and the eps which would have resulted had sfas 123“Accounting for Stock-Based Compensation” been applied to all issued options.


118

Other intangible assets

In addition to other intangible assets this item includes paymenon account for intangible assets. Apart from the payments onaccount, the other intangible assets are subject to scheduledstraight-line amortization. The amortization period is governedby the contract term or the useful life, applying the shorter of the two periods.

Tangible assets

Tangible assets are valued at acquisition or manufacturing costless cumulative depreciation. Cumulative depreciation includesscheduled straight-line depreciation up to the balance sheet daand any extraordinary depreciation recorded. The depreciationperiod corresponds to the useful life. Payments on account andassets in the course of construction are not subject to regulardepreciation.

The GfK Group normally applies the following useful life periods:

In cases involving a capital lease, the leased asset is capitalizedand a corresponding lease commitment is carried as a liability.The period of depreciation is equivalent to the shorter of thecontract period and useful life.

Available-for-sale securities

Available-for-sale securities are valued at fair value on the balancsheet date. Each security is considered individually. These aresecurities which are not treated as part of the trading securitieThe GfK Group only shows trading securities under currentassets; all other securities are reported under fixed assets asavailable-for-sale securities.

In the case of lasting impairment of value, available-for-salesecurities are written down and charged to income under net other financial income on the income statement. In the casof a temporary fall or rise in value, the new valuation of thesesecurities is reported as other comprehensive income withinequity with no impact on income.

Asset Useful life in year

Software and otherintangible assets 3 to 10

Administrative buildings 50

it equipment 3 to 5

Cars and other vehicles 5

Office equipment 3 to 5

Office furniture 10 to 13


Provisions

In principle, provisions are set up when there is an obligation to a third party which is likely to be enforced and the level can be estimated reliably. If the obligation contains an interestportion, the provision will be stated at the present value.

Provisions for pensions according to sfas 87 are valued in accordance with the projected unit credit method, in which future compensation increases are taken into account.

Financial liabilities

Financial liabilities contain liabilities of a financial nature, particularly loans from banks and other lenders, liabilities fromcapital leases and long-term liabilities from the acquisition ofcompanies or business units. They are stated at the repaymentamounts.

Liabilities on orders in progress

Liabilities on orders in progress comprise payments on accounand accrued amounts from the recognition of sales. Sales areaccrued within this item which have arisen from contractuallyagreed invoices for prepayments or payments in advance,but cannot yet be recognized as sales according to the abovedescribed sales recognition methods.

Derivative financial instruments

Derivatives are reported as assets or liabilities on the balancesheet (sfas 133 and sfas 149) and carried at fair value. Dependinon their type, changes in the fair value of the derivative financiinstruments are recognized in the relevant period either in incomor, if they have no impact on income, in other comprehensiveincome.

Consolidated funds statement

The funds statement shows the changes to the balance sheetitem liquid funds resulting from cash flows from ongoing business activity, investment activity and financing activity.

Some entries in the consolidated funds statement are derivedindirectly from changes to balance sheet entries. These are adjusted for the effects of currency translations and changes inthe scope of consolidation. As a consequence, only a limitedreconciliation is possible between the changes in the balancesheet items according to the consolidated funds statement regarding the arithmetical changes in the consolidated financiastatements, the fixed assets schedule and other information frothe notes to the financial statements.


120

In October 2003, fasb Staff Position fin 46-6, “Effective Date of fasb Interpretation No. 46, Consolidation of Variable InteresEntities”, was published. This revises the effective date ofStatement fin 46, which deals with the treatment of “VariableInterest Entities”. The GfK Group has no variable interest entities.

In November 2003, Interpretation eitf 03-1, “The Meaning ofOther-Than-Temporary Impairment and Its Application to CertaInvestments”, was adopted. This requires the provision of additional information in the notes to the financial statements isecurities are devalued without income statement impact due ta temporary fluctuation in value. The reason for the devaluatiomust be set out, and the devaluation amount as well as the fairvalue of the affected securities must be stated. The Interpretatiapplies to the financial years ending after 15 December 2003.The GfK Group has undertaken no material devaluations of securities without income statement impact.

In December 2003, the fasb published fasb Staff Position fin45-2, “Whether fasb Interpretation No. 45, Guarantor’sAccounting and Disclosure Requirements for Guarantees,Including Indirect Guarantees of Indebtedness of Others,Provides Support for Subsequently Accounting for a GuarantorLiability at Fair Value”. This clarifies that fin 45 governs thevaluation of guarantees granted at the fair value only at the timof their issue and not for any later date. For later dates, guarantees must be valued according to the general accounting princples. To date, fsp fin 45-2 has had no impact on the GfK Grou

fasb Staff Position fin 46-8, “Evaluating Whether as a Group the Holders of the Equity Investment at Risk Lack the Direct or Indirect Ability to Make Decisions about an Entity’s Activitiethrough Voting Rights or Similar Rights under fasb InterpretatiNo. 46, Consolidation of Variable Interest Entities”, was alsopublished in December 2003. In accordance with fin 46, variabinterest entities are concerned and are to be consolidated byinterest groups which do not participate in the equity of thecompany, when external third parties rather than the holders othe equity investment have the ability to take important decisioconcerning the entity. fsp fin 46-8 provides more details abouhow the criterion of the lack of the ability of the holders of theequity investment to make decisions is to be interpreted. TheGfK has no variable interest entities.

A further publication in December 2003 was that of the revisedStandard sfas 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits – an amendment of fasbStatements No. 87, 88 and 106”. This significantly expands thepension provision details that are to be included in the Notes tthe financial statements, especially concerning the plan assets.In the case of listed companies, sfas 132 already applies in principle for financial years ending after 15 December 2003.Specific disclosure obligations apply only with effect from financial years ending after 15 June 2004. GfK has expanded the Notes to its 2003 financial statements to comply with thenecessary disclosure requirements of sfas 132.


Encodex b.v., Amstelveen, Netherlands, was liquidated on 1 January 2003. Borell Market Research ab, Stockholm, Swedehas been in liquidation since September 2003. The business of adval sarl, Issy les Moulineaux, France, was taken over on 1 January 2003 by Institut de Sondage Lavialle (isl) s.a., Issy les Moulineaux, France; the company was wound up on 30 September 2003. The business of ps – Martin HamblinLimited, London, uk, has been carried on since 1 January 2003by Martin Hamblin GfK Limited, London, uk. The four companiewere deconsolidated for these reasons.

Companies of minor importance

The GfK Group did not include 35 (2002: 31) companies in theconsolidated financial statements during the reporting yearbecause they were only of minor significance for the net assetsfinancial position and results of operations of the Group.

Following the acquisition of further shares in the former “otheparticipation” gral-iteo trzne raziskave d.o.o., Ljubljana,Slovenia, GfK now has a majority stake in this company.However, as a company of minor importance it has not beenconsolidated in the year under review.

ps – Martin Hamblin Limited, London, uk, was deconsolidated,because it is no longer trading. Borell Market Research ab, Stocholm, Sweden, was deconsolidated due to the commencement of bankruptcy proceedings.

These companies are of minor importance to GfK’s consolidatefinancial statements for the above reasons.

In Brussels, Belgium, GfK – european opinion research centre eeig was established. As part of the acquisition of medcontrol GfK international GmbH, Baden-Baden, its subsidiariMedia Control ag, Zurich, Switzerland, and Media ControlMarketing Research España, s.l., Madrid, Spain, became part of the GfK Group. These companies are of minor importance.

prisma Projekt-Beratung GmbH, Hamburg, was merged with GfK prisma Institut für Handels-, Stadt- und RegionalforschungGmbH & Co. kg, Hamburg.

The participation in i+g Infratest Medical Research Inc., RhodeIsland, usa, was reduced, so that the company is now classifiedas an associated company.

The majority interest in i+g Infratest & GfK Gesundheitsforschu(Suisse) GmbH, Basel, Switzerland, was disposed of during theyear under review.

On aggregate, external sales, total assets and net income for the year of these companies amount to less than 2 % of the corresponding figures from the consolidated financial statemenin each case.


122

1. Other income less other expenses

The breakdown of other income and expenses is as follows:

Miscellaneous other income essentially contains income fromfurther offsetting and transitory items (eur 288 thousand) andinsurance recoveries (eur 154 thousand).

Miscellaneous other expenses essentially comprise personnel-related expenses (eur 129 thousand), charitable donations (eur129 thousand) and bank charges (eur 123 thousand).

2. Net income from participations

Net income from participations is as follows:

2002 2003

Income from participations in affiliated companies 55 18

Income from participations in associated companies 2,846 4,167

Profits from the disposal of participations in associatedcompanies and other participations 3,606 1,569

Income from other participations 8 21

Income from participations 6,515 5,775

Expenses from loss transfer from affiliatedcompanies 78 55

Depreciation on participations in affiliated and associated companies 35 2,550

Losses from the disposal of participations in affiliated and associated companies 24 62

Expenses on participations 137 2,667

Net income from participations 6,378 3,108

2002 2003

Exchange gains 2,166 6,219

Income from deconsolidation 197 447

Income from rental and lease agreements 500 500

Income from previous reporting periods 913 280

Profits from the disposal of tangible andintangible assets 188 213

Miscellaneous 1,060 811

Other income 5,024 8,470

Exchange losses 4,259 6,246

Expenses from deconsolidation 441 1,237

Losses from the disposal of tangible and intangible assets 208 391

Expenses under rental and lease agreements 488 370

Expenses from previous reporting periods 25 303

Miscellaneous 3,230 848

Other expenses 8,651 9,395

Other income less other expenses – 3,627 – 925


4. Net other financial income

Net other financial income breaks down as follows:

Income from derivative financial instruments arise mainly fromthe valuation at the balance sheet date of a Swiss franc crosscurrency swap.

The write-downs on loans to associated companies relate to loato the bwv Group, Switzerland (eur 888 thousand) and loans toCaribou Lake Software, llc, Minneapolis, usa (eur 1,052 thousan

The loss of eur 1,194 thousand reported in the previous yearfrom the disposal of loans to associated companies related to twaiver of a loan to mmxi Europe b.v., Amsterdam, Netherlandsin connection with the disposal of the participation.

5. Taxes on income and earnings

The result before income taxes is divided between Germany anabroad as follows:

2002 2003

Income from derivative financial instruments 0 616

Profits from securities held as current assets 111 156

Write-ups on securities held as current assets 2 123

Miscellaneous other financial income 29 0

Other financial income 142 895

Write-downs on loans to associatedcompanies 0 1,940

Losses from securities held as current assets 1,331 98

Losses from disposal of loans to associatedcompanies 1,194 0

Miscellaneous other financial expenses 13 36

Other financial expenses 2,538 2,074

Net other financial income – 2,396 – 1,179

2002 2003

Germany (after consolidation measures) 32,444 19,130

Abroad (after consolidation measures) 12,837 47,139

Result from ongoing business activity 45,281 66,269


124

The following table contains a reconciliation of the anticipatedincome tax expense to the income tax expense stated in financyear 2003. To calculate the anticipated tax expenses, the tax raof the parent company, GfK ag, valid during the financial year multiplied by the pre-tax result.

In 2002, the stated tax expenses of eur 15,277 thousand wereeur 2,756 thousand less than the anticipated tax expenses ofeur 18,033 thousand. The difference resulted essentially fromtax-free income from the disposal of participations (eur –1,652thousand), miscellaneous tax free profits (eur –817 thousand) as well as other non-deductible expenses (eur 2,446 thousand)and tax rate differences (eur –2,631 thousand).

2003

Total tax rate 41.118%

Expected income tax 27,248

Increase/reduction in income tax debt resulting from:differences in tax rates – 4,281

change in permanent differences – 3,021

tax-exempt income from the disposal of participations – 552

adjustment of deferred tax due totax rate changes – 156

income from participations valued at equity,not eligible for tax 78

change in valuation allowance for deferred tax assets 298

consolidation of taxable income from participations 315

additional tax payments or refunds from previous years 1,303

deviating tax base 617

other tax-exempt income – 803

other non-deductible expenses 4,184

other – 22

Tax expenses reported 25,208


The total income tax expenses in shareholders’ equity are as follows:

As at 31 December 2003, the Group had domestic tax loss carryforwards amounting to eur 2,106 thousand (2002: eur 2,386 thousand) and foreign tax loss carryforwards of eur 14,344 thousand (2002: eur 15,875 thousand). The domestic loss carryforwards can be carried forward withoutrestriction in terms of date and amount. Among the foreign loss carryforwards, the amount of eur 9,611 thousand may be carried forward without limit or for a period of more than 15 years, and the amount of eur 4,733 thousand is available for carryforward until 2013 or earlier.

The estimate of their future realizability governs the valuation deferred tax assets. This is dependent on the creation of futuretaxable profits during accounting periods in which tax valuatiodifferences are reversed and tax loss carryforwards can be applied. In view of expected future performance, it is assumedmore likely than not that the relevant benefits of the recognizedeferred tax credits will be realized – according to the provisioof us gaap. For the portion of deferred tax assets not covered by these assumptions, a corresponding valuation allowanceamounting to eur 1,780 thousand (2002: eur 1,691 thousand)was applied. The eur 89 thousand increase in the valuation allowance on deferred tax assets is essentially due to the changin deferred tax assets at the affected companies.

Deferred tax liabilities on retained earnings of foreign subsidiarieare not included in the balance sheet because these earnings aintended to remain permanently invested.

6. Earnings per share

2002 2003

Tax expenses reported 15,277 25,208

Tax expenses on components of the othercomprehensive income 216 66

Total income tax expenses in shareholders’ equity 15,493 25,274

2002 2003

Consolidated total income 25,673 33,322

Number of shares outstanding– non-diluted – 26,121,998 26,121,998

Number of shares outstanding– diluted – 26,121,998 26,121,998

Earnings per share in eur 0.98 1.28

Earnings per share (diluted) in eur 0.98 1.28


126

Consolidated fixed assets schedule in eur’00

Brought

forward to Currency of

1.1.2003 effects

I. Intangible assets

1. Software 53,919 – 1,580

2. Goodwill 177,195 – 190

3. Other intangible assets 10,639 – 1,405

241,753 – 3,175

II. Tangible assets

1. Land, land rights andbuildings, includingbuildings on landowned by third parties 31,885 – 850

2. Other equipment,fixtures and fittings 122,754 – 2,079

3. Leased items 27,442 – 16

182,081 – 2,945

III. Financial assets

1. Shares in affiliatedcompanies 5,222 – 36

2. Loans to affiliatedcompanies 200

3. Participations in associatedcompanies 14,523 – 1,033

4. Loans to associatedcompanies 6,311 – 50

5. Other participations 2,143 – 11

6. Payments on account for shareholdings

7. Available-for-sale-securities 753 – 9

8. Other loans 8,868 – 23

38,020 – 1,162

461,854 – 7,282

acquisition and manufact


Change

Brought in scope

forward to Currency of consoli-

1.1.2003 effects dation Additions

27,815 – 629 543 8,502

41,555 – 261

9,335 – 1,325 344

78,705 – 1,954 282 8,846

9,391 – 323 903

90,174 – 1,157 – 83 12,990

12,798 – 2 5 2,038

112,363 – 1,482 – 78 15,931

1,172 – 34 318 1,549

19 – 7

4,233 – 358 1,940

1,520

36 – 1 19

6,980 – 400 318 3,508

198,048 – 3,836 522 28,285

cumulative depreciation/amortization


128

The expected amortization expenses for intangible assets withithe next five financial years are as follows:

8. Tangible assets

Leasing

The GfK Group leases office premises and business equipmentunder long-term lease agreements. As a rule, the lease paymenconsist of a minimum lease payment plus a contingent lease payment whose level is governed by the level of use of the leased assets. In cases in which the GfK Group substantiallybears the risks and opportunities arising from the use of the leased assets, these are capitalized (capital lease). Otherwise the lease payments are carried as an expense (operating lease)There are no significant sub-leases.

a) Operating leases

The following payments under operating lease agreements wercarried as expenses:

The future minimum lease payments arising from such agreements are due as follows as at 31 December 2003:

Expected amortization expenses

2004 6,432

2005 4,977

2006 2,563

2007 1,950

2008 1,370

2002 2003

Minimum lease payment 16,129 15,092

Contingent lease payment 544 391

Less sub-lease payments received – 157 – 469

Lease payments 16,516 15,014

2004 14,766

2005 11,121

2006 8,644

2007 6,881

2008 5,396

Subsequent years 10,124

Future minimum lease payments under operating leases 56,932


Loans

Loans to affiliated and associated companies include value-adjusted loans with a disbursed amount of eur 6,455 thousand(2002: eur 5,165 thousand). The accumulated write-downs onthese loans amount to eur 5,827 thousand (2002: eur 4,252thousand).

Securities

The following table shows an overview of the acquisition costsfair values and unrealized profits and losses of the portfolio ofavailable-for-sale securities:

The equity securities held in the portfolio at the end of the yeahave a remaining term of over one year.

The proceeds from the sale of available-for-sale securities forfinancial year 2003 amount to eur 5 thousand (2002: eur 83thousand).

Company name and registered office Net incomefor the yea

emer GfK, s.l., Valencia, Spain 245

fessel-GfK Institut für Marktforschung Ges.m.b.H., Vienna, Austria 1,147

GfK Asia Pte Ltd., Singapore, Singapore 1,712

GfK consumer and business informationitaly S.p.A., Milan, Italy – 600

GfK Custom Research Inc., Minneapolis, usa 992

GfK Danmark A/S, Frederiksberg, Denmark – 34

GfK Marketing Services GmbH & Co. kg, Nuremberg 8,498

GfK Marketing Services Japan k.k., Tokyo, Japan 1,225

GfK Marketing Services Ltd., West Byfleet, Surrey, uk 2,423

GfK Marketing Services s.a., Rueil-Malmaison, France 2,018

GfK Panelservices Benelux b.v., Dongen, Netherlands 1,160

GfK Sofema International sarl, Rueil-Malmaison, France 942

GfK Sverige Aktiebolag, Lund, Sweden – 1,32

gpi Kommunikationsforschung Gesellschaft fürPharma-Informationssysteme mbH, Nuremberg 953

iha Italia S.p.A., Milan, Italy – 352

iha-GfK ag, Hergiswil, Switzerland 4,126

Institut de Sondage Lavialle (isl) s.a., Issy les Moulineaux, France 270

Institut Français de Recherche – ifr s.a., Viroflay, France 3,209

Intomart b.v., Hilversum, Netherlands 488

Martin Hamblin GfK Limited, London, uk 31

v2 GfK llc, Blue Bell, Pennsylvania, usa*) 2,524

Equity securities 31.12.2002 31.12.2003

Acquisition costs 753 734

Fair value 717 714

Unrealized profit 0 29

Unrealized loss 7 7

*) Net income for the year relates to the period from 1 July 2003 to 31 December 2003


130

12. Valuation allowances

Valuation allowances developed as follows:

13. Securities

The trading securities reported under current assets are carrieat fair value. During the year under review, write-downs of eur98 thousand and write-ups of eur 123 thousand were booked tthe income statement.

14. Shareholders’ equity

Subscribed capital

As at 31 December 2003, the subscribed capital of GfK Aktien-gesellschaft remains unchanged at eur 66,872 thousand. Thesubscribed capital is divided into 26,121,998 no-par bearer shares. Each share represents a portion of the subscribed capitequivalent to eur 2.56. GfK Aktiengesellschaft does not hold any of its own shares. As the main shareholder, GfK-nürnbergGesellschaft für Konsum-, Markt- und Absatzforschung e.V.,Berlin, holds 64 % of the shares.

Authorized and contingent capital

The Management Board is authorized, subject to the approval the Supervisory Board, to increase the company’s subscribedcapital on one or more occasions up to 12 June 2007, by issuinnew no-par shares in return for cash or non-cash contributionsup to a maximum amount of eur 21,000 thousand.

OtheTrade receivable

receivables and asset

As at 31.12.2001 3,677 1,011

Changes in the scopeof consolidation 422 0

Additions 3,053 563

Utilization – 301 0

Release – 573 0

Currency difference – 27 – 1

As at 31.12.2002 6,251 1,573

Changes in the scopeof consolidation 10 0

Additions 2,212 26

Utilization – 604 – 10

Release – 1,495 0

Reclassification 11 0

Currency difference – 53 – 1

As at 31.12.2003 6,332 1,588


between the respective previous accounts press conferenceand the Annual General Meeting or if it is higher, the price of the share in the Xetra closing auction on the trading dayon which the respective tranche is issued, plus a premium 5 %. Trading days are those days on which the Frankfurt stexchange determines a price for the company’s shares.

The application of the new option terms has been resolved fotranche 3 (issue and exercise) and for all subsequent tranche

Stock options

The development of the stock options issued has been as follows:

During financial year 2003, the Stock Options Programme involved no personnel expenses.

Of which ExerciseTranche Term Total Manage- price Exercisable Option

options ment board in eur from to exercised

1 2000/2005 389,165 76,5123) 55.20 20021) 20051) –

2 2001/2006 375,725 85,2153) 41.71 20031) 20061) –

3 2002/2007 380,300 85,2153) 24.14 20042) 20072) –

4 2003/2008 465,574 149,9993) 18.53 20052) 20082) –

5 2004/2009 471,1174) 133,3324) TBA 20062) 20092) –

6 2005/2010 500,0024) 133,3324) TBA 20072) 20102) –

1) Exercise of options commences after the General Meeting. Options may be exercised during tfollowing periods: from the third trading day on the Frankfurt stock exchange after the GeneraMeeting of GfK ag until 30 June (inclusive) and from the first day after publication of the half-yearly figures until 30 September (inclusive) and from the first day after publication of q3 figuuntil 14 days before the financial year ends (inclusive).

2) Exercise of options commences after the General Meeting. Options may not be exercised during the 14 days before publication of quarterly, half-yearly, annual or preliminary annual figures. The company may set further periods during which options may not be exercised.

3) Including members of the Management Board who have since left the company.

4) Subscribed; entitlement to options does not yet exist; options not yet issued.

2002 2003Average Averaexercise exerc

Number of price Number of prOptions in eur/share options in eur/sh

Balanceat start of year 764,890 48.57 1,145,190 40

Options granted 380,300 24.14 465,574 18

Exercised – – –

Expired – – –

Repayments – – –

Balanceat year-end 1,145,190 40.46 1,610,764 34

Exercisableat year-end 389,165 55.20 764,890 48


132

Proposed appropriation of profits

In accordance with the German Stock Corporation Act, the dividenthat may be distributed is determined by the retained profitreported in the annual financial statements of GfK ag. Theseare prepared under the provisions of the German CommercialCode (hgb). A proposal will be made to the General Meeting todistribute a dividend of eur 6,530 thousand (eur 0.25 per no-pshare) to shareholders out of the retained profit for 2003 ofeur 71,841 thousand and transfer eur 37,605 thousand to revenureserves.

15. Provisions

The breakdown of provisions is as follows:

31.12.2002 31.12.2003Total > 1 year Total > 1 yea

Provisionsfor pensions 19,235 17,939 19,045 18,470

Provisions for taxes 5,788 607 9,651 0

Other provisions 44,613 4,356 46,046 5,517

Provisions 69,636 22,902 74,742 23,987

Unrealized profits/losses from market valuation of available-for-sale securities:

Change in unrealized profits/losses

Realized profits/losses owing to reclassification

Differences from currency conversion

Total unrealized profits/losses from available-for-sale securities

Change in unrealized profits/losses from derivative financial instruments

Difference from pension valuation

Difference from currency translation: capital consolidation and equity valuation

Change in other comprehensive income

Other comprehensive income

The changes in other comprehensive income are as follows:


The following table shows the development of plan assets:

The measurement date for plan assets in Germany is 31 Decemb2003. The anticipated contributions for the following yearamount to eur 5 thousand. Due to the minor importance of the German pension fund, the supplementary disclosuresaccording to sfas 132 have not been provided.

The following table shows the reconciliation from the financingstatus of the plan assets to the amounts stated in the consolidatbalance sheet:

2002 2003Germany Abroad Germany Abroad

Fair value of plan assetsas at 1.1. 34 547 404 486

Price differences – – 37 – – 34

Actual return onplan assets – 3 1 10 – 2

Employer contributions 368 73 16 7

Participant contributions 5 – – –

Benefits paid – – 20 – – 5

Settlements – – 78 – 337 – 99

Fair valueof plan assetsas at 31.12. 404 486 93 371

2002 2003Germany Abroad Germany Abroad

Extent to which the pensionplan is financed 18,689 1,126 19,241 1,324

Unrealizedactuarialgains/losses – 519 – 84 – 1,230 – 242

Non-amortized amountfrom initialapplication of sfas 87or sfas 106 11 – 67 10 – 58

Net figure reported 18,181 975 18,021 1,024

Included in the balance sheet

Prepaidpension costs – 79 – – –

Pension provision 18,260 975 18,021 1,024

Minimum pensionliability in othercomprehensiveincome – – – –

Net figurereported 18,181 975 18,021 1,024


134

Other provisions

The breakdown of other provisions is as follows:

The provisions for employees comprise mainly commitments for the payment of bonuses (eur 11,636 thousand), holiday arrears (eur 8,567 thousand), severance payments (eur 4,735thousand), partial retirement (eur 1,785 thousand) flexitimebalances (eur 1,691 thousand) and anniversary expenses (eur1,585 thousand).

Miscellaneous other provisions mainly comprise amounts owedto suppliers (eur 556 thousand) and obligations to related parties (eur 525 thousand).

16. Financial liabilities

Financial liabilities are as follows:

31.12.2002 31.12.2003

Personnel 29,821 31,337

Invoices outstanding 1,838 2,882

Commitments to authorities and insurancecompanies 1,525 2,560

Sales 3,515 2,223

External accounting and auditing costs 1,704 1,930

Commitments to households,respondents etc. 34 1,065

Commitments due to the letter of comfort 0 700

Lawyers’ and consultants’ fees 1,003 693

Financial instruments 544 686

Interest on payment of taxes for prior years 2 325

Anticipated losses on pending transactions 1,275 122

Miscellaneous 3,352 1,523

Other provisions 44,613 46,046

31.12.2002 31.12.2003

Amounts due to banks 24,221 17,014

Liabilities under capital leases 2,305 1,491

Bills of exchange payable 2,013 0

Other financial liabilities 5,503 3,617

Short-term liabilities with a term ofup to 1 year 34,042 22,122

Amounts due to banks 22,923 27,948

(of which with a remaining term of over 5 years) (4,688) (4,898

Liabilities under capital leases 13,455 15,596

(of which with a remaining term of over 5 years) (10,380) (11,158

Other financial liabilities 2,462 941

(of which with a remaining term of over 5 years) (1,658) (0

Long-term liabilities with a term ofover 1 year 38,840 44,485

Financial liabilities 72,882 66,607


17. Trade payables

Trade payables are as follows:

18. Other liabilities

The other liabilities comprise the following:

As at 31 December 2003, there were other liabilities amountingto eur 133 thousand (2002: eur 3,093 thousand) with a remainiterm of over one year.

31.12.2002 31.12.2003Remaining Remaining

Total term > 1 year Total term > 1 yea

Trade payables

owed to third parties 35,326 413 26,690 –

owed to affiliatedcompanies 734 – 1,147 –

owed to associatedcompanies 240 – 319 –

owed to other participations 18 – – –

Trade payables 36,318 413 28,156 0

31.12.2002 31.12.2003

Tax liabilities 15,502 14,17

Liabilities in connection with social security 5,651 6,436

Wages and salaries 1,928 1,922

Accounts payable to insurance companies 1,026 1,673

Accounts payable to clients 134 700

Other accounts payable tohouseholds, respondents, interviewers 90 657

Other accounts payable torelated parties 24 2,463

Accounts payable to employees 1,937 520

Other accounts payable toaffiliated companies 335 476

Other accounts payable toassociated companies 136 138

Other accounts payable toother participations 0 48

Miscellaneous liabilities 1,900 1,31

Other liabilities 28,663 30,515


136

Ms Margaret Martin, Mr Derek Martin and Mr Allan Bowditchare minority shareholders and managing directors of MartinHamblin GfK Limited, London, uk. As at the balance sheet datethere were other loans totalling eur 1,612 thousand relating to Ms Margaret Martin, with a remaining term of more than one year. The interest income from these amounted to eur 50thousand. There were other loans totalling eur 3,724 thousandwith a remaining term of more than one year relating to MrDerek Martin. The interest on these amounted to eur 115thousand. There were other loans with a remaining term of more than one year totalling eur 2,749 relating to Mr AllanBowditch. The interest on these amounted to eur 85 thousand

As part of an asset deal, the entire business of mr Russia,Moscow, Russia, was acquired for eur 660 thousand. Themanagement of mr Russia is identical in part with that of GfK-rus Gesellschaft mbH, Moscow, Russia, which is a consolidated affiliated company of the GfK Group.

There were loan liabilities amounting to eur 2,663 thousand in respect of the members of the management of various subsidiaries.

The receivables and liabilities in respect of related parties havea remaining term of up to one year, unless indicated otherwise

21. Contingencies and other financial commitments

The contingencies and other financial commitments that are not carried as liabilities in the consolidated balance sheet are reported at nominal values and represent the followingamounts:

31.12.2002 31.12.2003

Commitments arising from

maintenance, service and licence agreements 12,194 8,784

guarantees and sureties 701 573

furnishing collateral for third parties 375 0

ongoing investment projects 1,202 0


The counterparty risk resulting from the positive fair values ofthe derivatives is deemed to be insignificant, as transactions aronly carried out with banks with top ratings.

The carrying amounts and fair values of the financial instrumeof the GfK Group are shown in the following table.

The derivative financial instruments are valued on a marking-tomarket basis by the respective banks.

As at 31 December 2003, the GfK Group’s portfolio included currency hedging contracts to hedge against the Japanese yenthe Hungarian forint, the Polish zloty, the Swiss franc and theAustralian dollar. The nominal amount of the currency hedgestotalled eur 1,765 thousand, of which eur 350 thousand with a residual term of over one year.

In addition, as at the end of the financial year, the GfK Grouphad contracts to hedge against interest rate risks with a totalnominal value of eur 21,358 thousand, with a residual term of over one year. Of this amount, a nominal volume of eur 8,50thousand relates to interest rate swaps with a residual term of4.5 years, which are classified as cash flow hedges.

In the case of derivatives utilized for cash flow hedging, fluctuations in fair value are reported as other comprehensiveincome. For the year under review, the amount booked underother comprehensive income was eur 149 thousand beforetaxes.

Gains or losses from derivative financial instruments which arenot reported as part of the hedge accounting are booked in netinterest income or net other financial income respectively.

In total, the income from these financial instruments amountedto eur 794 thousand, whilst expenses amounted to eur 17thousand.

31.12.2002 31.12.2003Carrying Fair Carrying Faiamount value amount value

Financial instruments other than derivatives

Financial investments 31,040 31,040 29,760 29,760

Securities 7,350 7,350 7,538 7,538

Liquid funds 45,167 45,167 53,241 53,24

Financial liabilities 72,882 72,882 66,607 66,607

Derivative financial instruments

Assets

Currency hedging contracts 0 0 19 19

Interest rate hedging contracts 0 0 167 167

Liabilities

Currency hedging contracts 203 203 17 17

Interest rate hedging contracts 735 735 181 18


138

The segment information for financial years 2002 and 2003is as follows:

Sales by region are as follows:

During the reporting year and in the previous year, none of thesegments recorded sales with any single client exceeding 10 %of consolidated sales.

24. Pro forma statements in accordance with sfas 141

Due to company acquisitions and other changes in the scope ofconsolidation, the previous year’s figures cannot be compareddirectly with the figures for the consolidated financial statemenas at 31 December 2003. To facilitate a comparison, the influenceresulting from changes are eliminated in the following pro formstatements in accordance with sfas 141.

The following pro forma statement prepared in accordance with sfas 141 shows selected items from the income statementfor 2003 on the assumption that all significant acquisitions andadditional acquisitions concerning affiliated companies whichtook place during the past financial year, had already taken placon 1 January 2003. In the pro forma statement, the followingtransactions are taken into account:

2002 2003

Germany 204,664 221,696

Northern Europe 59,123 54,131

Western and Southern Europe 196,661 204,735

Central and Eastern Europe 28,484 31,792

America 40,366 48,601

Asia and the Pacific 30,075 34,327

Total 559,373 595,282

Reconciliation 0 0

Group 559,373 595,282

Sales

Consumer Tracking 85,987

Non-Food Tracking 137,339

Media 61,280

Ad Hoc Research 224,513

HealthCare 35,793

Other 14,461

Total 559,373

Reconciliation 0

Group 559,373

Due to the HealthCare segment now being shown separately, the figures for the pre


25. Pending litigation and claims for compensation

Neither GfK ag nor any of its subsidiaries were involved in anysignificant legal disputes as at 31 December 2003.

26. Events after the balance sheet date

On 16 February 2004, negotiations for the tv research contractwith the Arbeitsgemeinschaft Fernsehzuschauerforschung(Television Research Partnership) for Germany were successfuconcluded. The contract will run for at least seven years from 1 January 2005 to 31 December 2011. In addition, the parties tothe contract have agreed an option to extend the contract for a further two years. The total value of the contract amounts tomore than eur 90 million.

With effect from 1 January 2004, the GfK Group acquired theentire business of Arbor Inc., Media, usa. The business wastransferred to GfK Arbor, llc, Media, usa, which was establishat the same time. This puts GfK among the top 15 providers ofmarket research services in the usa.

27. Changes since the previous year

The accounting and valuation methods used in the consolidatefinancial statements for the previous year have been retained.The changes in the scope of consolidation have already beenoutlined above.

28. Supplementary disclosures

Personnel expenses – information pursuant to § 314 Para. 1No. 4 hgb (German Commercial Code)

The expense items of the income statement contain the followipersonnel expenses:

Number of employees

The GfK Group employed 5,000 (2002: 4,778) staff on averageduring the year under review. The average number of employeover the year was determined on the basis of full-time employeThe calculation of the average was carried out using the keydates 31 March, 30 June, 30 September and 31 December.

2002 2003

Wages and salaries 199,030 210,180

Social security contributions 45,090 46,464

Personnel expenses 244,120 256,644


140

Peter Zühlsdorff Chairman

Managing Director of BewerbungskomiteeLeipzig 2012 GmbH, Leipzig

Managing shareholder of dih DeutscheIndustrie-Holding GmbH, Frankfurt/Main

Chairman of the Supervisory Board of Merck KGaA, DarmstadtEscada ag, Munich

Member of the Supervisory Board ofDeutz ag, CologneKaiser’s Tengelmann ag, ViersenTV Loonland ag, Munich

Chairman of the Board of Administration oGfK-nürnberg Gesellschaft für Konsum-,Markt- und Absatzforschung e.V., Berlin

Klaus Hehl Deputy ChairmanMarket Researcher

Member of the Board of Administration ofGfK-nürnberg Gesellschaft für Konsum-, Markt- und Absatzforschung e.V., Berlin

Dr. Christoph Chairman of the Management BoardAchenbach of Quelle Aktiengesellschaft, Fürth(from 13 June 2003) and Neckermann Versand ag,

Frankfurt/Main

Member of the Management Board ofkarstadt quelle ag, Essen

Member of the Supervisory Board ofKaiser’s Tengelmann ag, ViersenNeckermann Versicherung ag, FürthNeckermann Lebensversicherung ag, Fürt

Member of the comparable controlling bodof karstadt quelle Information Service GmbEssen

Jörg Bandt Scope Data Collection Manager,(from 21 May 2003) GfK Aktiengesellschaft, Nuremberg

Dr. Wolfgang Chairman of the Board of Directors of theC. Berndt Institute For The Future, Menlo Park,

California, usa

Member of the Board of Directors of Cadbury Schweppes plc, London, ukLloyds tsb Bank plc, London, ukLloyds tsb Group plc, London, uk

Member of the Board of Administration of GfK-nürnberg Gesellschaft für Konsum-, Markt- und Absatzforschung e.V., Berlin

Supervisory Board


Dr. Klaus L. Chief Executive OfficerWübbenhorst

Deputy Chairman of the Board of Administration of R. OldenbourgGmbH & Co. kg, Munich

Chairman of the Board of Directors of GfK Holding, Inc., Wilmington, usaProcon GfK Arastirma Hizmetleri a.s.,Istanbul, Turkey

Petra Heinlein Responsible for the Media division

Member of the Board of Administration ofTelecontrol ag, Hergiswil, SwitzerlandLiechti ag, Kriegstetten, SwitzerlandModata ag, Hergiswil, Switzerland

Dr. Gérard Hermet Responsible for the Non-Food Tracking division

Member of the Supervisory Board of g.e. Marketing Research, s.a., Valencia,SpainGfK Marketing Services s.a., Rueil-Malmaison, FranceGfK Sofema International sarl, Rueil-Malmaison, FranceFinancière isl s.a., Issy les Moulineaux,FranceInstitut de Sondage Lavialle (isl) s.a., Issy les Moulineaux, Franceifr France s.a., Viroflay, France

Heinrich A. Responsible for the Ad Hoc Research Litzenroth division

Chairman of the Board of Directors of GfK Custom Research Inc., Minneapolis, us

Chairman of the Board of Administration oGfK consumer and business information italy S.p.A., Milan, Italy

Deputy Chairman of the Supervisory Boardof GfK macon ag, Waghäusel

Member of the Board of Directors ofGfK Holding, Inc., Wilmington, usaIndicorp Participações s.a., São Paulo, Bra

Member of the Supervisory Board of MarketingScan snc, Rueil-Malmaison,FranceGfK Ad Hoc Research worldwide, BrusseBelgium

Management Board


142

Shareholdings of the GfK GroupAs at 31 December 2003

1) Profit and loss transfer agreement2) Details as per commercial balance

sheet II

3) Fully indirect shareholding

4) Partially indirect shareholdin5) Details not available6) Details as per provisional fin

drawn up under national law

Company name and registered office

Affiliated companies (Germany) included in the consolidated fstatements (all details according to hgb commercial balance s

encodex International GmbH, Nuremberg

enigma GfK Medien- und Marketingforschung GmbH, Wiesbad

GfK cee Finance GmbH, Nuremberg

GfK macon ag, Waghäusel

GfK Marketing Services GmbH & Co. kg, Nuremberg

GfK Non-Food Tracking Holding GmbH, Nuremberg

GfK prisma Institut für Handels-, Stadt- und RegionalforschungGmbH & Co. kg, Hamburg

GfK u.s. Equity GmbH, Nuremberg

gpi Kommunikationsforschung Gesellschaft für Pharma- Informationssysteme mbH, Nuremberg

media control GfK international GmbH, Baden-Baden

Media Markt Analysen GmbH & Co. kg, Frankfurt/Main

Modata GmbH, Berlin

Affiliated companies (abroad) included in the consolidated fistatements (all details according to us gaap commercial balan

Adware Media Solutions b.v., Hilversum, Netherlands

Aspemar-GfK Société Anonyme, Brussels, Belgium

audimedia sarl, Issy les Moulineaux, France

Audimetrie n.v., Brussels, Belgium

Eiphos Holding ag, Hergiswil, Switzerland

emer GfK, s.l., Valencia, Spain

Encodex Japan k.k., Osaka, Japan

fessel-GfK Institut für Marktforschung Ges.m.b.H., Vienna, Au

Financière isl Société Anonyme, Issy les Moulineaux, France

g.e. Marketing Research, s.a., Valencia, Spain

GfK - Centar za istrazivanje trzista d.o.o., Zagreb, Croatia

GfK - memrb Marketing Services Limited, Nicosia, Cyprus

GfK (u.k.) Ltd., West Byfleet, Surrey, uk

GfK Animal Healthcare Limited, West Byfleet, Surrey, uk

GfK Asia Pte Ltd., Singapore, Singapore

GfK Benelux Marketing Services b.v., Amstelveen, Netherlands

GfK consumer and business information italy S.p.A., Milan, Italy

GfK Custom Research Inc., Minneapolis, usa

GfK Danmark a/s, Frederiksberg, Denmark

GfK Great Britain Ltd., London, uk

GfK Holding, Inc., Wilmington, usa

GfK Hungaria Piackutató Kft., Budapest, Hungary

GfK Immobilier Société a responsabilité limitée, Rueil-MalmaisFrance

GfK Market Research (Shanghai) Co. Ltd., Shanghai, China

GfK Marketing Services (Malaysia) Sdn. Bhd., Kuala Lumpur, M

GfK Marketing Services (Thailand) Limited, Bangkok, Thailand

GfK Marketing Services Australia Pty. Ltd., Sydney, Australia

GfK Marketing Services Hong Kong Limited, Hong Kong, China

GfK Marketing Services Italia S.r.l., Milan, Italy



GfK Marketing Services Japan k.k., Tokyo, Japan

GfK Marketing Services Korea Limited, Seoul, Korea

GfK Marketing Services Ltd., Hong Kong, China

GfK Marketing Services Ltd., West Byfleet, Surrey, uk

GfK Marketing Services Société Anonyme, Rueil-Malmaison, F

GfK Media Ltd., London, uk

GfK Norge a/s, Oslo, Norway

GfK Panelservices Benelux b.v., Dongen, Netherlands

GfK Panelservices Benelux Holding b.v., Dongen, Netherlands

GfK Polonia Instytut Badania Opinii Sp. z o.o., Warsaw, Poland

GfK portugal – Marketing Services, Limitada, Lisbon, Portuga

GfK Praha, s.r.o., Prague, Czech Republic

GfK Romania-Institut de Cercetare de Piata Srl, Bucharest, Rom

GfK Slovakia Institút pre prieskum trhu s r.o., Bratislava, Slovakia

GfK Sofema International sarl, Rueil-Malmaison, France

GfK Sverige Aktiebolag, Lund, Sweden

GfK-Bulgaria, Institut für Marktforschung EGmbH, Sofia, Bulga

GfK-rus Gesellschaft mbH, Moscow, Russia

GfK-Ukrainian Surveys & Market Research (usm), Kiev, Ukraine

ifr Europe Ltd., London, uk

ifr France s.a., Viroflay, France

ifr Italia S.r.L., Milan, Italy

ifr Marketing España s.a., Madrid, Spain

iha Italia S.p.A., Milan, Italy

iha-GfK ag, Hergiswil, Switzerland

incoma Research, s.r.o., Prague, Czech Republic

Inform Business Development Pty. Ltd., Sydney, Australia

Informark Pty. Ltd., Braddon, Australia

Institut de Recherche d’Informations statistiques (irdis) sarl, Montigny le Bretonneux, France

Institut de Sondage Lavialle (isl) s.a., Issy les Moulineaux, Fra

Institut Français de Recherche-ifr s.a., Viroflay, France

intercampus-recolha, tratamento e distribuição de informação, Limitada, Lisbon, Portugal

Intomart b.v., Hilversum, Netherlands

Intomart GfK Belgium n.v., Brussels, Belgium

Intomart GfK Group b.v., Hilversum, Netherlands

Liechti ag, Kriegstetten, Switzerland

market analysis e.p.e., Athens, Greece

Martin Hamblin GfK Limited, London, uk

Martin Hamblin Research Inc., Hartford, Connecticut, usa

metris-métodos de recolha e investigação social, lda, Lisbon, Portugal

mmo Media-Market-Observer GmbH & Co kg, Vienna, Austria

Modata ag, Hergiswil, Switzerland

Orange Interactive Research ab, Stockholm, Sweden

Oz Toys Marketing Services Pty. Ltd., Sydney, Australia

Procon GfK Arastirma Hizmetleri a.s., Istanbul, Turkey

pt GfK Marketing Services Indonesia, Jakarta, Indonesia


sheet II





144


Romtec-GfK Ltd., Maidenhead, Berkshire, uk

Significant GfK bvba, Heverlee, Belgium

Strateji GfK Research Services a.s., Istanbul, Turkey

Telecontrol ag, Hergiswil, Switzerland

v2 GfK llc, Blue Bell, Pennsylvania, usa

Affiliated companies (Germany), not included in the consolidfinancial statements (all details according to hgb commercia

GfK Data Services GmbH, Nuremberg

GfK Fernsehforschung GmbH, Nuremberg

GfK International Consultancy & Development GmbH, Nuremb

GfK Marketing Services Verwaltungs-GmbH, Nuremberg

GfK Marktforschung GmbH, Nuremberg

GfK Panel Services Consumer Research GmbH, Nuremberg

GfK prisma Verwaltungs-GmbH, Hamburg

ifr Monitoring Deutschland GmbH, Düsseldorf

Media Markt Analysen Verwaltungs-GmbH, Frankfurt/Main

Affiliated companies (abroad), not includedin the consolidated financial statements

Adfinders b.v., Hoofddorp, Netherlands

Borell Market Research ab, Stockholm, Sweden

caticall – recolha de informação assistida por computador, lda, Lisbon, Portugal

cmi Field sarl, Viroflay, France

dragon eye Ltd., Hergiswil, Switzerland

GfK - european opinion research centre eeig, Brussels, Belg

GfK Ad Hoc Research worldwide eig, Brussels, Belgium

GfK Belgium s.a., Brussels, Belgium

GfK Belgrade d.o.o., Belgrade, Federal Republic of Yugoslavia

GfK do Brasil s/c Ltda., São Paulo, Brazil

GfK InfoScan Sverige ab, Lund, Sweden

GfK Marketing Services South Africa (Proprietary), Sandton, So

GfK npd Marketing Services Worldwide b.v., Amstelveen, Neth

GfK Panel Arastirma Hizmetleri a.s., Istanbul, Turkey

GfK Stratégie et développement Groupement d'interest EconomRueil-Malmaison, France

gral-iteo trzne raziskave d.o.o., Ljubliana, Slovenia

ifr Nederland b.v., Amsterdam, Netherlands

ifr Polska Sp. z o.o., Warsaw, Poland

ifr u.k. Ltd., London, uk

Intomart DataCall b.v., Hilversum, Netherlands

Media Control ag, Zurich, Switzerland

Media Control Marketing Research España, s.l., Madrid, Spain

mmo Media-Market-Observer GmbH, Vienna, Austria

mmxi Switzerland GmbH, Hergiswil, Switzerland

Procon GfK Ltd., Baku, Azerbaijan

ps - Martin Hamblin Limited, London, uk


sheet II






Associated companies (Germany) (all details accordingto hgb commercial balance sheet i)

Consumerscope International gie, Nuremberg

Ernst und GfK Grundstücksgesellschaft, Nuremberg

Information Resources GfK GmbH, Nuremberg

Associated companies (abroad)

Brand Index vof, Hilversum, Netherlands

bwv Holding ag, St. Gallen, Switzerland

Caribou Lake Software, llc, Minneapolis, usa

Common Technology Centre eeig, London, uk

Europanel Raw Database gie, Brussels, Belgium

European Flash Surveys eeig, Brussels, Belgium

GfK-Media Research Middle East ag, Hergiswil, Switzerland

i + g Infratest Medical Research Inc., Rhode Island, usa

iha·ims Health GmbH, Hergiswil, Switzerland

incoma Consult, s.r.o., Prague, Czech Republic

Indicorp Participações s.a., São Paulo, Brazil

Information Resources-GfK b.v., Dongen, Netherlands

Jan Schipper Compagnie b.v., Bussum, Netherlands

m2a s.a., Saint Aubin, France

MarketingScan snc, Rueil-Malmaison, France

Media Focus (arge), Hergiswil, Switzerland

net survey szonda ipsos és GfK Hungária Internet Kutató Intézete Kft., Budapest, Hungary

npd Intelect, l.l.c., Port Washington, New York, usa

org-GfK Marketing Services (India) Private Limited, Mumbai, I

Sports Tracking Europe b.v., Amstelveen, Netherlands

St. Mamet Saisie Informatique (smsi) sarl, Saint Mamet-la SalFrance

ufo Veld b.v., Amsterdam, Netherlands

Unified Fieldwork Organisation ufo v.o.f., Amsterdam, Nether

v.o.f. Projectbureau Politiemonitor, Hilversum, Netherlands

Other participations (abroad)

Bureau voor Reclame Statistiek Hoofddorp b.v., Hoofddorp, Neth

iri Infoscan Ltd., Maidenhead, Berkshire, uk


sheet II





146

Notes to the consolidated financial statements pursuant to § 292a hgb

Accounting in accordance with us gaap, which is the methodapplied by the GfK Group, differs from accounting under hgb(German Commercial Code).

Any differences which have a material impact on the consolidatefinancial statements of the GfK Group are explained below.

Intangible assets

In accordance with hgb, only intangible assets acquired for consideration may be capitalized. In accordance with us gaap,self-produced intangible assets must be capitalized in specificcircumstances (especially software).

Goodwill

In principle, goodwill from the first-time consolidation of subsidiaries is determined similarly in both accounting systems. accordance with hgb, there is the option to either offset goodwillagainst reserves with no impact on the result and disclose thisor to write down over the anticipated useful life or over fouryears by means of regular amortization. In accordance with usgaap, goodwill should not be subject to regular amortization but should be subject to an annual impairment test, which mayinvolve the application of extraordinary amortization.

Leases

The criteria in accordance with which in hgb accounting a leaseasset must be capitalized by the lessee are based on taxationrules. They therefore differ from the criteria of us gaap. As aresult, capitalization duties for the lessee under us gaap (capitaleases) are more extensive than under hgb.

Reinstatement of original values

In certain cases, it is prescribed in accordance with hgb thatwrite-downs of an asset to a lower attributable value must bereversed by reinstating the original value when the reasons forthe earlier write-down cease to exist. us gaap does not permitthe reinstatement of original values.

Recognition of sales

In accordance with hgb, a sale may only be recognized when tservice has been completed and invoiced. Ongoing orders arereported as inventories until such time. In accordance with usgaap, the recognition of sales is determined by the portion of the service that has already been delivered. Sales may thereforalso be recognized before the completion of the service to bedelivered and when services have not yet been invoiced.


Scope of consolidation

In accordance with hgb, subsidiaries are included in the consolidated financial statements if the parent company holdsthe majority of the voting rights or if the companies are underthe uniform control of the parent company. A company is assumed to be an associated company if, in the event of a participation quota of at least 20%, a determining influence is actually exercised on its business and financial policies. Inaccordance with us gaap, the consolidation of subsidiariesdepends on the possibility of control being exercised by theparent company. The rights of minority shareholders in particular have to be examined to determine whether they hinder the control by the parent company. A minimum participation of 20% in accordance with us gaap is not a precondition for qualification as an associated company. By contrast with the corresponding hgb provision, it is only aquestion of the possibility of exercising a determining influenc

Minority interests

The minority interests in accordance with hgb are included in the consolidated shareholders’ equity. In accordance with us gaap, these are reported in a separate item between shareholders’ equity and liabilities.


148

We have audited the consolidated financial statements, comprisinthe balance sheet, the income statement and the statements of changes in shareholders’ equity and cash flows as well as thnotes to the financial statements prepared by the GfK Aktien-gesellschaft, Nuremberg for the business year from 1 January 20to 31 December 2003. The preparation and the content of theconsolidated financial statements in accordance with AccountinPrinciples Generally Accepted in the United States of America(us gaap) are the responsibility of the Company’s managementOur responsibility is to express an opinion on these consolidatefinancial statements based on our audit.

We conducted our audit of the consolidated financial statemenin accordance with German auditing regulations and Germangenerally accepted standards for the audit of financial statemenpromulgated by the Institut der Wirtschaftsprüfer (idw). Thosestandards require that we plan and perform the audit such that it can be assessed with reasonable assurance whether the consolidated financial statements are free of material misstatements. Knowledge of the business activities and theeconomic and legal environment of the Group and evaluations of possible misstatements are taken into account in thedetermination of audit procedures. The evidence supporting thamounts and disclosures in the consolidated financial statemenis examined on a test basis within the framework of the audit.The audit includes assessing the accounting principles used ansignificant estimates made by management, as well as evaluatithe overall presentation of the consolidated financial statementWe believe that our audit provides a reasonable basis for ouropinion.

A U D I T O R S ’ R E P O R T


O O


G L O S S A R Y O F F I N A N C I A L T E R M I N

AAffiliated companiesCompanies which are controlled by theparent company. As a rule, the parentcompany holds the majority of the votingrights and capital of the company.

Asset structureThe asset structure describes the relationship between fixed assets and current assets. It is determined by multiplying the ratio of fixed assets to current assets by 100.

Associated companies� Minority participations in companieson whose business or company policy adecisive, but not controlling influence isexercised. Associated companies are inprinciple valued at equity.

CCash flowBalance of funds inflow and outflow affecting payment.

Cost of salesAll types of operating costs which can bedirectly allocated to clients’ orders. Theseinclude in particular costs for externaldata procurement, costs for intervieweesand interviewers.

Cost of sales accountingForm of income statement which showsthe income achieved in the market duringthe accounting period. Opposite: total cost accounting. Here the total operatingincome for the period is shown, wherebythe sales and changes in inventories areshown against the total cost. Both forms of accounting produce the same incomefor the accounting period.

Current assetsAssets intended for short-term use in business operations.

DDeferred taxesTax assets or chabalance sheet to ebetween the tax dand the commercon the accountingus gaap for the cThe basis for deteis the difference bthe assets and liabalance sheet in aand the local tax

Dividend yieldDividend per shaannual closing pr

EebitAbbreviation for eand taxes calculaincome plus � otexpenses.

ebitdaEarnings before idepreciation and calculated as � eand amortization

ebit marginebit in relation toindicator, the hig

Equity ratioOn balance sheetassets. The highethe level of indeb

FFixed assetsAssets intended fbusiness operatio

Free cash flowCash flow from oless maintenanceexpenses.

Free floatFree float is the pstock company mtotal number of snot held by major36 per cent of thefloat.


Net interest incomeInterest income less interest expenses.This item includes interest income andexpenses on bank credits and liabilities,loans, securities, liabilities under leasesand other accounts receivable and payable.

OOperating income � Gross income from sales less � salesand general administrative expenses.

Operating profitSales less operating costs according to theManagement Information System. Themost important internal income indicator.

Other expensesExpenses in connection with ongoingbusiness activity, excluding financialexpenses not attributable to � cost ofsales or � sales and general adminis-trative expenses. Examples are lossesfrom the disposal of fixed assets andexchange losses.

Other financial incomeFinancial income which is not attributableto � income from participations or � netinterest income. Examples are profits orlosses on the disposal of securities andwrite-downs on loans.

Other incomeIncome from ongoing business activity,excluding financial income, which does not represent sales. Examples areprofits on the disposal of fixed assets andexchange gains.

Other participationsCompanies in which a participation is heldbut on whose business policy no decisiveinfluence is exercised. The participationquota is below 20%.

PPay-out ratioTotal dividend in relation to consolidatedtotal income.

Profit to sales ratConsolidated totainterests in relatio

RRatio of net indeNet indebtednessflow.

Return on equityConsolidated totaaverage sharehold

SSales and generaexpensesOperating costs wrelated to individuas costs for generand for accountin

Stock option proProfit-sharing prowhereby managecomponents and Options can be exafter two years wfor options to be entitled must achtargets.

TTax ratioTaxes on income to income from o

Total return on eebit after incomerelation to averag

Uus gaapAbbreviation for UAccepted Accoun


152

BBorell Market Research, SwedenBorell Market Research ab, Stockholm,Schweden.

bwv Gruppe, Switzerlandbwv Holding ag, St. Gallen, Switzerlandbwv it solutions ag, St. Gallen, Switzerlanddm michelotti ag, Rotkreuz, Switzerland.

CCaribou Lake Software, usaCaribou Lake Software, llc, Minneapolis,usa.

GGfK Ad Hoc Services, GermanyGfK Aktiengesellschaft, Bereich Ad HocServices, Germany.

GfK AG, GermanyGfK Aktiengesellschaft, Nuremberg,Germany.

GfK Animal Health ukGfK Animal Healthcare Limited, WestByfleet, Surrey, uk.

GfK arbor usaGfK arbor, llc, Media, usa.

GfK Custom Research, usaGfK Custom Research Inc., Minneapolis,usa.

GfK Data Services/bsp, GermanyGfK Aktiengesellschaft, GfK Data Services and GfK Business Solutions &Processing, Germany.

GfK do Brasil, BrazilGfK do Brasil s/c Ltda., São Paulo, Brazil.

GfK HealthCare, GermanyGfK Aktiengesellschaft, HealthCare,Germany.

GfK Marktforschung, GermanyGfK Marktforschung GmbH, Nürnberg,Germany.

GfK Media, ukGfK Media Ltd., London, uk.

GfK Non-Food Tracking Holding,GermanyGfK Non-Food Tracking Holding GmbH,Nuremberg, Germany.

GPI KommunikaGermany gpi KommunikatiGesellschaft für Psysteme mbH, Nu

Gral Iteo, Slovengral-iteo trzne rLjubliana, Sloven

Iifr, Franceifr France s.a., VInstitut Français Viroflay, France.

ifr-Gruppe, Francmi Field sarl, VInstitut Français Viroflay, Franceifr Europe Ltd., Lifr France s.a., Vifr Italia S.r.L., Mifr Marketing EsSpainifr Monitoring DDüsseldorf, Germifr Nederland b.vNetherlandsifr Polska Sp. z oifr u.k. Ltd., Lon

iha·ims GfK Heaiha·ims Health GmSwitzerland.

iha-GfK-Gruppe,bwv Holding ag, Eiphos Holding aiha-GfK ag, Hergiha·ims Health GSwitzerlandiha Italia S.p.A., Liechti ag, Kriegsdragon eye Ltd., Media Focus (argSwitzerlandModata ag, HergModata GmbH, BTelecontrol ag, H

Inform BusinessInform Business Sydney, Australia

Infratest + GfK GGermanyInfratest + GfK GGmbH & Co., Ber

S H O R T - F O R M G f K C O M PA N Y N A M E


G L O S S A R Y O F S P E C I A L I S T M A R K E

AAd Hoc ResearchSystematic, empirical research, used as the basis for marketing decisions. Ad Hoc Research is one of GfK’s businessdivisions.

Advertising effectiveness researchAnalysis of the success of an advertisingmeasure in terms of brand awareness,advertising recall and, in the case ofrecalled elements, media-specific advertising recall and attitudes towardsthe advertised product. This is the basisfor changing the recording values in linewith specific endogenous or exogenousfactors.

Advertising test Testing of ads, commercials and otheradvertising media before or after they arepublished or shown.

agf (Television Research Partnership)The body for which GfK Fernsehforschungcarries out continuous television audienceresearch in Germany. Founded in 1988,the agf now comprises the tv networksard, ProSiebensat.1 Media ag, rtl andzdf.

agf/GfK tv panel� tv panel.

atracktiveA software package used to carry outstandard and one-off analyses of data fromthe � consumer panel � ConsumerScan.aTRACKtive*web is the Internet-compatibleversion of aTRACKtive, giving clients andemployees anywhere in the world accessto the � ConsumerScan databases at anytime.

Bbass (Brand ASsessment System)Example of an instrument relating to the� Integrated Intelligence approach. Thiscombines data from the � consumerpanel � ConsumerScan and from �image and brand research in order tomonitor the psychological and monetaryvalue of a brand; � data merging.

Below-the-line mCollective term foother than the clapress, radio, tv, cadvertising. In cosales promotionsadvertising etc.

Brand and campStandard instrummeasurement of ness of campaigninto advertising rrecall, brand awarecall of advertisibrands, slogans, ieffectiveness rese

Brand SimulatorA model based oused to optimize

CCategory ManagA concept whereretailers set joint develop strategiecategory and thethese. The aim isincome.

CatmanGuideGfK services for �of fast moving co

Concept ChallenConcept test agawith market shar

Concept test, coTools used to assproduct or adverta verbal descriptbefore a � produ

Consumer panelA � sample of horegular informati� ConsumerScop� aTRACKtive, �diary.

ConsumerScan� Consumer panpurchasing behavindividuals is recof nearly all fast goods. Householusing an � electr� household pan� bass.


154

FFast TrackA � tracking system for the continuousmonitoring of promotional and advertisingrecall, customer satisfaction and brandimage as perceived by consumers.

HHousehold panelA representative sample of householdswhich regularly report on their purchases;� Consumer Tracking, � ConsumerScan,� panel.

HealthCareSpecialist area of market research forpharmaceutical companies and healthcareinstitutions operating in human, dentaland veterinary medicine. Set up in mid-2003, HealthCare is the newest GfKbusiness division.

IImage and brand researchInformation gathering relating to theimage of a company or specific product orservice; � bass.

Integrated communicationsTerm used to convey the idea of aligningall corporate communications disciplines,such as ci/cd, pr advertising, sales promotions and sponsoring in order toachieve synergetic effects and improveefficiency.

Integrated IntelligenceService segment which specializes in integrating data from several sources within and outside the GfK Group andusing it for complex consumer marketingsurveys covering several areas; � data merging, � bass.

MMail panelA postal survey of units of the same sample which is repeated at regular intervals; � ConsumerScope.

Market segmentDivison of an ovemarkets using difSegmentation canprice classes, geosocio-economic lvalue categories.

Media planningMedia planning ihow best to allocin terms of advermedia. The aim ofind the ideal solucommunication a

MediaWatchAn electronic metinto a wristwatchof various electroRadiocontrol, � rresearch, � porta

Media researchSystematic, empia basis for mediacompanies and thThis form of reseof GfK’s Media b� reach, � reach� Radiocontrol.

moveName of a � datawhereby the � Cof GfK Panel Servof � agf/GfK Fermerged. The aimadvertising markegroup differentiatadvertising effect

NNon-Food TrackiSurveys of sales ocarried out at regFood Tracking is divisions; � retai� startrack.

PPanelA survey of indivcompanies etc. tosubject at regularperiod, using thecarried out usingtime; � tv panel,� ConsumerScop� cf. tracking.


Retail research� Retail tracking.

Retail trackingContinuous, systematic monitoring of salesin the markets of consumer technologygoods and services. These product move-ments are recorded in all relevant saleschannels and distribution forms in theretail trade; � tracking, � Non-FoodTracking, � retail panel.

SstartrackSysTem to Analyse and Report onTRACKing data. A host-free it platformfor the production and analysis of datafrom the GfK � Non-Food Tracking division; � data warehouse.

Share of noiseThe level of advertising impact an advertiser has to exert in order to drawattention to a particular brand/ad in themarket.

Store testTest carried out in selected, real stores to make subsequent recommendations for new products, product changes andother measures such as placement, promotion and price changes. The testincludes measuring unit sales.

TTelecontrol xlThe latest generation of � tv meters produced by GfK subsidiary, Telecontrol.

Test market researchSystematic, empirical research of testmarkets which is used as the basis formarketing decisions, especially regardingthe marketing mix.

Test market forecast� Test market research.

TrackingSurveys of individuals, households andcompanies, repeated at regular intervalsand using the same interview methodeach time. Unlike a � panel, the data isnot necessarily collected from the samesources each time, but the structure of the sample is the same in each case; � Consumer Tracking, � retail tracking.

tv meterAn electronic insperson’s tv viewiin Germany and Aa second-by-seco� Telecontrol xl

tv panelA representative selected using statv viewing is conGfK Fernsehforscbasis for audiencfigures; � tv me


156

1999 2000 2001eur million

Key indicators – balance sheet f

Fixed assets 97.9 77.2 208.6

Change in % on previous year 29.6 – 21.2 170.1

Current assets 177.2 190.4 189.8

Change in % on previous year 91.2 7.4 – 0.3

Asset structure in % 55.3 40.6 109.9

Investments 44.3 35.2 108.3

thereof in tangibleand intangibile assets 39.2 23.2 31.1

thereof in financial assets 5.2 11.9 77.2

Shareholders’ equity 143.8 132.7 163.1

Equity ratio 52.3 49.6 39.5

Borrowings 129.7 133.1 243.3

Gearing ratio 47.1 49.7 58.9

Total assets 275.2 267.6 413.1

Net indebtedness – – – 23.7

Liquidity ratio I in% 152.6 136.9 62.6

Liquidity ratio II in% 234.4 257.5 127.5

Liquidity ratio III in% 245.2 268.0 131.1

Key indicators –

income statement

Total performance (from 2001 sales) 380.4 469.0 482.1

thereof Consumer Tracking2) 82.4 89.4 84.8

thereof Non-Food Tracking2) 100.9 112.9 119.5

thereof Media2) 47.9 53.6 56.5

thereof Ad Hoc Research2) 128.4 183.5 199.6

thereof HealthCare2) – – –

thereof Other2) 21.4 30.2 21.6

Proportion from outsideGermany in % 56.9 62.4 60.1

Personnel expenses 167.1 206.7 209.7

Personnel cost ratio in % 43.9 44.1 43.5

Depreciation/amortization3) 20.5 16.6 37.0

ebitda 38.7 53.0 52.8

ebitda margin in % 10.2 11.3 10.9

ebit before income from participations 15.0 36.4 15.8

Net income from participations 3.2 3.0 3.7

ebit after income from participations 18.2 39.4 19.5

ebit margin in %4) 4.8 8.4 4.0

Result from ongoing businessactivity 18.6 37.1 3.9

Consolidated total income before minority interests 9.4 25.4 – 6.1

Tax ratio in % 43.1 28.0 260.3

Consolidated total income 8.7 22.9 – 4.7

F I V E - Y E A R O V E R V I E W O F K E Y P E R F O R M A N

Accounting as per hgb


156

1999 2000 2001eur million

Key indicators – balance sheet f

Fixed assets 97.9 77.2 208.6

Change in % on previous year 29.6 – 21.2 170.1

Current assets 177.2 190.4 189.8

Change in % on previous year 91.2 7.4 – 0.3

Asset structure in % 55.3 40.6 109.9

Investments 44.3 35.2 108.3

thereof in tangibleand intangibile assets 39.2 23.2 31.1

thereof in financial assets 5.2 11.9 77.2

Shareholders’ equity 143.8 132.7 163.1

Equity ratio 52.3 49.6 39.5

Borrowings 129.7 133.1 243.3

Gearing ratio 47.1 49.7 58.9

Total assets 275.2 267.6 413.1

Net indebtedness – – – 23.7

Liquidity ratio I in% 152.6 136.9 62.6

Liquidity ratio II in% 234.4 257.5 127.5

Liquidity ratio III in% 245.2 268.0 131.1

Key indicators –

income statement

Total performance (from 2001 sales) 380.4 469.0 482.1

thereof Consumer Tracking2) 82.4 89.4 84.8

thereof Non-Food Tracking2) 100.9 112.9 119.5

thereof Media2) 47.9 53.6 56.5

thereof Ad Hoc Research2) 128.4 183.5 199.6

thereof HealthCare2) – – –

thereof Other2) 21.4 30.2 21.6

Proportion from outsideGermany in % 56.9 62.4 60.1

Personnel expenses 167.1 206.7 209.7

Personnel cost ratio in % 43.9 44.1 43.5

Depreciation/amortization3) 20.5 16.6 37.0

ebitda 38.7 53.0 52.8

ebitda margin in % 10.2 11.3 10.9

ebit before income from participations 15.0 36.4 15.8

Net income from participations 3.2 3.0 3.7

ebit after income from participations 18.2 39.4 19.5

ebit margin in %4) 4.8 8.4 4.0

Result from ongoing businessactivity 18.6 37.1 3.9

Consolidated total income before minority interests 9.4 25.4 – 6.1

Tax ratio in % 43.1 28.0 260.3

Consolidated total income 8.7 22.9 – 4.7

G f K G R O U P : F I V E - Y E A R - O V E R V I E W

Accounting as per hgb


M

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the

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an

P R O V I S I O N A L K E Y D AT E S I N T H E F I N A N C I A L C A L E N D A R

1) Publication is scheduled for before the start of the trading session.

15 April 2004Accounts press conference, Nuremberg

15 April 2004Analysts’ conference, Frankfurt/Main

19 May 2004Quarterly report as at 31 March1)

15 June 2004 Annual General Meeting, Nuremberg

19 August 2004Interim report as at 30 June1)

18 November 2004Quarterly report as at 30 September1)

24 February 2005Provisional result for financial year 20041)

31 March 2005Accounts press conference, Nuremberg

31 March 2005Analysts’ conference, Frankfurt/Main

13 May 2005Quarterly report as at 31 March1)

24 May 2005Annual General Meeting, Nuremberg

12 August 2005Interim report as at 30 June1)

15 November 2005Quarterly report as at 30 September 1)

�

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If you wish to order further copies of the Annual Report or have any queries, please contact:

Public Affairs and CommunicationsDr. Ulrike SchönebergTel. +49 (0) 911- 395 26 45Fax +49 (0) 911- 395 40 [email protected]

Investor RelationsBernhard WolfTel. +49 (0) 911- 395 20 12Fax +49 (0) 911- 395 40 [email protected]

Publisher:GfK agNordwestring 10190319 Nuremberghttp://www.gfk.de

Editorial support services:Medienservice Peter Reichard, Ebersberg

Design:Scheufele Kommunikationsagentur GmbH, Frankfurt/Main

Photography:Annette Hornischer, Frankfurt

Lithography:Mainteam, Aschaffenburg

Translation:

AGET Limited, London, UK

Printing:Mediahaus Biering GmbH, Munich

The English language version is a translationof the audited German Annual Report.

Printed on unchlorinated bleached paper

C O N TA C T S

VII


annual report 2003 gfk. growth from knowledge turning

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