Poolworks (Germany) Ltd

VZnet Netzwerke Limited

Berlin

Jahresabschluss zum Geschäftsjahr vom 01.01.2010 bis zum 31.12.2010

Report and Financial Statements 31 December 2010

Directors

Jodok Batlogg (appointed 4 February 2010, resigned 14 July 2010)

Thomas Baum (appointed 4 February 2010)

Markus Berger-de Leon (resigned 4 February 2010)

Dr Michael Brockhaus (appointed 1 May 2010, resigned 31 December 2010)

Dr Johann George Butting (appointed 27 October 2010)

Claas van Delden

Dr Jochen Gutbrod (resigned 30 April 2010)

Dr Clemens Riedl

Markus Schunk (appointed 5 January 2011)

Martin Weber (resigned 6 October 2010)

Secretary

Taylor Wessing Secretaries Limited
5 New Street Square
London
EC4A 3TW

Auditors

Ernst & Young LLP
Apex Plaza
Forbury Road
Reading
RG1 1YE

Registered office

5 New Street Square
London
EC4A 3TW

Contents

Directors' report

Statement of directors' responsibilities

Independent auditors' report

Profit and loss account

Statement of total recognised gains and losses

Balance sheet

Notes to the financial statements

Directors' report

The directors present their report and financial statements for the year ended 31 December 2010

Results and Dividends

The loss for the year 2010 after taxation amounted to € 2,330,879 (2009 - loss of € 7,607,423) The directors do not recommend the payment of an extraordinary dividend (2009 - €ml)

Principal activities and review of the business

The principal activity of the company is the development and commercialisation of diverse communication and contact-platforms based on internet-run social networks

The company's key financial performance indicators during the year were as follows

The company's turnover went up by 70 % due to higher advertisement revenues In 2010 for the first time, the company received fees for the integration of so-called "applications" on its platform This also led to additional revenues As a consequence, the year on year loss decreased

Shareholder' deficit increased by 9 % year on year as a loss of € 2,330,879 was posted The main reason was the buildup of personnel resources and the purchase of external engineering services Both measures were taken to improve the website and to boost and to support the user base A growing number of users and a higher activity of users can be converted into better advertisement revenue in the future

On 19 May 2010 the company acquired the capital stock of a shell entity for a consideration of €27,500 Following the investment of further €1,000,000 into this entity, it is now trading as VZmobil GmbH

Future Developments

The company will go on investing in product features and marketing to increase the number and the activity of users Likewise, it will continue to convert the expanding community of users into growing advertising revenues

Principal Risks and Uncertainties

Liquidity is maintained by advertising revenues and loans from the parent company There is a long-term loan agreement with the parent company which guarantees liquidity for more than a year from the date of these financial statements

The company monitors cash flow as part of their day to day control procedures

Company policies are aimed at minimising credit risk and require that deferred terms are only granted to customers who satisfy credit worthiness procedures

All operations, cash inflows and outflows are transacted in Euros and therefore the company does not have any exposure to foreign exchange rate fluctuations

Going Concern

The company's business activities, results of operations and principal risks are described above

After making enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future Accordingly, they continue to adopt the going concern basis in preparing these financial statements The validity of this assumption depends on the continued support of the parent company (Holtzbrinck Digital Strategy GmbH, formerly Holtzbrinck Networks GmbH), who have confirmed they will continue to provide financial support to enable the company to meet its financial obligations as they fall due

Liabilities owed to the parent company total €31,509,183 (2009 - €23,528,178) and include €13,840,000 (plus €1,482,970 interest) due on demand and €15,500,000 (plus €686,213 interest) drawn down on a total facility of €19,500,000, made available to the company until 31 December 2012 The parent company has issued a letter of subordination stating that the amounts due on demand will only be repaid from future gains or a liquidity surplus The directors consider that this facility will be adequate to meet the working capital requirements of the company for the foreseeable future

Directors' Indemnities

The company has granted an indemnity to one or more of its directors against liability in respect of proceedings brought by third parties, subject to the conditions set out in section 234 of the Companies Act 2006 Such qualifying third party indemnity provision remains in force as at the date of approving the directors' report

Directors

The directors who served during the year were as follows

Jodok Batlogg (appointed 4 February 2010, resigned 14 July 2010)

Thomas Baum (appointed 4 February 2010)

Markus Berger-de León (resigned 4 February 2010)

Dr Michael Brockhaus (appointed 1 May 2010, resigned 31 December 2010)

Dr Johann George Butting (appointed 27 October 2010)

Claas van Delden

Dr Jochen Gutbrod (resigned 30 April 2010)

Dr Clemens Riedl

Martin Weber (resigned 6 October 2010)

Disclosure of information to the auditors

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the auditor is unaware Having made enquiries of fellow directors and the group's auditor, each director has taken all the steps that he is obliged to take as a director in order to make himself aware of any relevant audit information and to establish that the auditor is aware of that information

On behalf of the board

Statement of directors' responsibilities

The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations

Company law requires the directors to prepare financial statements for each financial year Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period In preparing those financial statements, the directors are required to

The directors are responsible for keeping proper accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006 They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities

Independent auditors' Report

to the members of VZnet Netzwerke Ltd

We have audited the financial statements of VZnet Netzwerke Limited for the year ended 31 December 2010 which comprise the Profit and Loss Account, the Balance Sheet, the Statement of Total Recognised Gains and Losses and the related notes 1 to 19 The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice)

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 4, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error This includes an assessment of whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed, the reasonableness of significant accounting estimates made by the directors, and the overall presentation of the financial statements In addition, we read all the financial and non-financial information to the annual report to identify material inconsistencies with the audited financial statements If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report

Opinion on financial statements

In our opinion the financial statements

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion

Reading

Profit and loss account for the year ended 31 December 2010

All operations relate to continuing activities

Statement of total recognised gains and losses

There are no other recognized gains and losses other than the loss of € 2,330,879 (2009 loss of € 7,607,423) attributable to the shareholders for the year ended 31 December 2010

Balance sheet at 31 December 2010

The financial statements were approved and authorised for issue by the board and were signed on its behalf on

Notes to the accounts for the year ended 31 December 2010

1. Accounting policies

Basis of preparation of financial statements

The financial statements are presented in Euros and have been prepared under the historical cost convention and in accordance with applicable accounting standards

The financial statements have been prepared on the going concern basis which assumes that the company will continue in operational existence for the foreseeable future The validity of this assumption depends on the continued support of the parent company, who have confirmed they will continue to provide financial support to enable the company to meet its financial obligations as they fall due

Liabilities owed to the parent company total €31,509,183 (2009 - €23,528,178) and include €13,840,000 (plus €1,482,970 interest) due on demand and €15,500,000 (plus €686,213 interest) drawn down on a total facility of €19,500,000, made available to the company until 31 December 2012 The parent company has issued a letter of subordination stating that the amounts due on demand will only be repaid from future gains or a liquidity surplus The directors consider that this facility will be adequate to meet the working capital requirements of the company for the foreseeable future

The Company is exempt from preparing Group financial statements under Section 400 of the Companies Act 2006 The financial statements present information about the Company as an individual undertaking and not about its group

The parent company of the smallest group into which the results of the Company are consolidated is Georg von Holtzbrinck GmbH & Co KG, Stuttgart, registered in Germany The consolidated financial statements are published in the "elektronischer Bundesanzeiger", Germany

Turnover

Turnover arises mainly from commercialisation of advertising space on the Internet pages which are operated by the company Turnover is realised in the period when the advertisement is delivered

Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost less depreciation Depreciation is provided at rates calculated to write off the cost of fixed assets, less their estimated residual value, over their expected useful lives on the following basis

Investments

Investments are shown at cost less provision for impairment

Operating leases

Rentals under operating leases are charged on a straight line basis over the lease term

Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight line basis over the period until the date the rent is expected to be adjusted to the prevailing market rate

Stocks

Stocks are valued at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving stocks

2. Turnover

100% of the company's turnover (2009 - 100 0%) is attributable to geographical markets outside the United Kingdom

3. Other operating income

4. Operating loss

This is stated after charging

5. Staff Costs

The monthly average number of employees during the year were as follows

6. Directors' remuneration

Included in the €866,638 total emoluments figure above is a balance of €235,000 paid out to Directors as compensation for loss of office

7. Interest payable

8. Taxation

The company has certified tax residency in Germany and therefore the disclosures below take into account German Corporate tax rates

9. Tangible assets

10. Investments

Investments relate exclusively to investments in subsidiaries

At 31 December 2010, the only subsidiary was VZmobil GmbH, a company registered in Germany VZmobil GmbH has issued ordinary shares VZnet Netzwerke Ltd holds 100 % of the shares and also has 100 % of the voting rights

11. Debtors

12. Creditors: amounts falling due within one year

Included within Amounts owed to group undertakings is an amount of € 13,840,000 (plus € 1,482,970 interest) drawn under a loan facility which is due on demand A letter of subordination has been issued by the parent company indicating that repayment will only be required from future gains or a liquidity surplus

13. Creditors: amounts falling due after more than one year

The above amount represents € 15,500,000 (plus £ 686,213 interest) drawn under a loan facility totalling € 19,500,000 which is repayable on 31 December 2012

14. Provisions

A provision of €376,500 has been recognized for expected claims and associated legal costs in respect of ongoing legal matters

15. Share Capital

16. Reconciliation of shareholders' funds and movement of reserves

17. Operating lease commitments

At 31 December 2010 the company had annual commitments under non-cancellable operating leases as follows

These commitments relate to server use and office rentals

18. Related party transactions

In accordance with Financial Reporting Standards Number 8, Related Party Disclosures, the company is exempt from disclosing transactions with entities that are part of, or investees of Georg von Holtzbrinck GmbH & Co KG, as it is a qualifying subsidy of a parent publishing consolidated accounts There were no other related party transactions to be disclosed

19. Ultimate parent undertaking and controlling party

Throughout the current and previous year the company has been a subsidiary of Holtzbrinck Digital Strategy GmbH, formerly Holtzbrinck Networks GmbH, a company registered in Germany

The directors regard Georg von Holtzbrinck GmbH & Co KG, a company registered in Germany, as the ultimate parent and controlling party

The smallest and largest parent undertaking for which consolidated accounts are prepared and of which VZnet Netzwerke Limited is a member is Georg von Holtzbrinck GmbH & Co KG