Financial Report for the year ended 31 December 2009 and Management Report Francotyp-Postalia Holding AG, Birkenwerder

Francotyp-Postalia Holding AG, Birkenwerder

Balance Sheet to 31 December 2009

31.12.2009 31.12.2008TEUR TEUR

A. Fixed AssetsI. Intangible assets

Concessions, industrial property rights and similarrights and assets as well as licences to such rights 65 0

II. Tangible assetsOther equipment, operating and office equipment 4 4

III. Financial assets1. Shares in affiliated companies 9.666 27.4942. Loans to affiliated companies 21.123 21.123

30.789 48.61730.858 48.621

B. Current AssetsI. Accounts receivable and other assets

1. Receivables from affiliated companies 13.722 6.1232. Other assets 0 6

13.722 6.129

II. 600 315

III. Cash in hand and bank balances 3 314.325 6.447

C. Prepaid expenses 22 2145.205 55.089

Assets

Treasury shares

31.12.2009 31.12.2008TEUR TEUR

A. Shareholders' EquityI. Subscribed capital 14.700 14.700II. Capital reserves 48.600 48.600III. Revenue reserves

Reserve for treasury shares 600 315IV. Net loss -22.591 -11.105

41.309 52.510B. Provisions

1. Provisions for pensions and similar obligations 296 2802. Provision for tax 250 03. Other provisions 1.247 1.011

1.793 1.291

C. Liabilities1. Accounts payable 439 7762. Payables to affiliated companies 1.254 03. Other liabilities 410 512

2.103 1.288

45.205 55.089

Liabilities

1 January to 31 December

2009

1 January to 31 December

2008

TEUR TEUR1. 851 6492. 338 203. 1.424 1.5144. 4 25. 1.942 4.7686. 7.975 07. 0 12.1498. 1.267 1.2259. 58 1.085

10. 17.853 2.33711. 241 712. -10.975 -17.79813. 0 1.02014. 226 015. -11.201 -18.81816. Loss carried forward (in prev. yr profit carried forward) from previous year -11.105 9.62517. Appropriation of profit for the payment of a dividend 0 -2.15018. Withdrawals from the reserve for treasury shares 0 1.51519. Transfer to the reserve for treasury shares -285 -1.27720. Net loss -22.591 -11.105

Francotyp-Postalia Holding AG, Birkenwerder

Income StatementFor the Period from 1 January to 31 December 2009

Revenues

Other interest and similar income

Other operating expensesIncome from profit transfer agreements

Personnel costsOther operating income

Amortisation of intangible fixed assets and depreciation of tangible fixed assets

Expenses from loss transfer agreementsIncome from loans held as financial assets

Annual net loss

Extraordinary expensesIncome from ordinary operating activitiesInterest and similar expensesDepreciation on financial assets and securities held as current assets

Taxes on income and earnings

Notes to the Financial Statement for Francotyp-Postalia Holding AG, Birkenwerder, for the 2009 Financial Year I. General Information Francotyp-Postalia Holding AG, Birkenwerder (hereinafter also referred to as “FP Holding” or the “Company”) is the parent company of the Francotyp-Postalia Group (hereinafter also referred to as “Francotyp-Postalia”). The Company’s registered office is located at Triftweg 21-26, Birkenwerder. FP Holding is entered in the Register of Companies held at the District Court of Neuruppin under HRB 7649. The financial year is the same as the calendar year. Francotyp-Postalia is an international company operating in the sector of outgoing mail processing with a company history going back over eighty years. Its traditional business focuses on the development, manufacture and sale of franking machines, in particular, but also on inserting machines and the after-sales business. Thanks to its subsidiary, freesort GmbH, Langenfeld (freesort), which was acquired in November 2006, and its majority holding in internet access GmbH, Berlin, (iab), also acquired in November 2006, the Francotyp-Postalia Group is also able to offer its German customers sorting and consolidation services as well as hybrid mail products. Since 30 November 2006, all shares in FP Holding AG have been admitted for trading on the Official Market segment. At the same time, the shares were authorised for trading on the Prime Standard segment of the Frankfurt Stock Exchange where additional post-listing obligations apply. The shares are traded on the Frankfurt Stock Exchange under the Securities Identification Number FPH900. The annual financial statement was drawn up according to German Commercial Code rules, taking into account the special provisions relating to corporations (Kapitalgesellschaften) (Section 264 et seq. of the German Commercial Code) as well as the supplementary provisions of the German Stock Corporation Act. The Income Statement was prepared using the nature of expense method. The right to elect to use the provisions of the act introduced to modernise accounting law (German Accounting Law Modernisation Act), all of which apply to financial years starting after 31 December 2008, was not exercised. The annual financial statement has been drawn up in euros. For the purpose of clarity and comparability, all amounts in tables are indicated in thousands of euros (EUR 000s), unless otherwise stated, The rounding of individual items and percentages may lead to minor arithmetic differences. II. Accounting Principles The intangible fixed assets and the tangible assets are carried at cost less scheduled depreciation. As well as the direct costs, manufacturing costs include a reasonable proportion of the necessary material and production overheads. Depreciation is via the straight-line method. Shares in affiliated companies are carried at cost and loans, receivables and other assets are carried at their nominal values. Assets are subject to regular impairment testing. If a permanently lower value has to be assigned to the fixed assets as of the balance sheet date, a corresponding impairment is recognised. An estimate of the respective affiliated company’s future cashflow and an appropriate discount rate to calculate the cash value are required to calculate the fair values of shares in affiliated companies.

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Pursuant to Section 266, paragraph 2 B III 2 of the German Commercial Code, the treasury shares were assigned to securities held as current assets. If the historic cost exceeds the fair value on the balance sheet date, the shares will be written down to this fair value. If the fair value on the balance sheet date exceeds the current carrying value, then a write-up will be necessary up to a maximum of the total unscheduled write-offs, depreciation and amortisation to that date. If a write-down of treasury shares is necessary, a corresponding portion of the reserve for treasury shares will be released. Conversely, if a write-up is necessary, a corresponding portion will be allocated to the reserve for treasury shares. Expenses incurred before the balance sheet date are carried on the Assets side as prepaid expenses provided they represent expenditure relating to a specific time after that date, while income received before the balance sheet date is carried on the Liabilities side provided the income relates to a specific time after that date. Pursuant to Section 6a of the German Income Tax Act, provisions for pensions were formed on the basis of figures calculated on actuarial principles using the mortality tables (“Richttafeln 2005 G”) compiled by Prof. Dr. Klaus Heubeck and applying an interest rate of 6%. Other provisions cover all discernible risks and uncertain liabilities. They are formed on the basis of reasonable commercial judgement. All liabilities are carried at their repayment values. III. Notes to the Balance Sheet 1. Fixed Assets Changes during the 2009 financial year to the asset items carried on the balance sheet are set out in the Table of Assets in Appendix 1. Shares in Francotyp-Postalia GmbH, Birkenwerder, (FP GmbH), iab internet access GmbH (abbreviated as “iab”), iab-Verwaltungs- und Vertriebs GmbH (abbreviated as “iabv”), freesort GmbH (abbreviated as “freesort”) and FP InovolLabs GmbH i.G. are shown as financial assets. The list of the shareholdings is found in Appendix 2 to the Notes. FP Holding has a 51.01% share in iab and a 36.99% share in iabv, both of which have their headquarters in Berlin; the remaining approx. 63.01% of iabv is held directly by iab. The Company also has a long-term option to buy the remaining approx. 48.99% of the shares in iab by 31 December 2017. The acquisition cost for the two companies was EUR 7,500,000 plus overheads of EUR 123,000. Because iabv is no longer operationally active, the shares have been written off entirely. The shares in iab have a book value of EUR 5,755,000 on 31 December 2009 (2008: EUR 6,800,000). The shares were subject to an unscheduled write-down of EUR 1,045,000 in the last financial year. freesort GmbH, which is based in Langenfeld, is a wholly owned subsidiary of FP Holding. The purchase price, including incidental acquisition costs, was EUR 19,694,000. As the shares were subject to an unscheduled write-down of EUR 16,808,000 in the year under review, the book value of the shares in freesort on 31 December 2009 is now only EUR 2,886,000. The shares in FP GmbH continue to have a book value of EUR 1,000,000. In December 2009, FP InovoLabs GmbH was formed with its head office in Birkenwerder. The company’s business will be the provision of development, consultancy and on-line services, the acceptance and management of development projects, the sale of innovative products and the provision of staff. The company’s share capital amounts to EUR 25,000. At the end of the year, the company was not yet employing any staff of its own.

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The loans are unchanged in respect to the previous year at EUR 16,623,000 to FP GmbH and EUR 4,500,000 to freesort. A subordination agreement was issued for the loans to freesort. 2. Receivables from Affiliated Companies Receivables from affiliated companies chiefly comprise receivables from turnover tax consolidation, interest on loans, services rendered and from the ongoing settlement of accounts. Receivables increased by EUR 7,599,000 as compared to the previous year, mainly due to the assumption of turnover tax liabilities within the scope of turnover tax consolidation. As in the previous year, all receivables and other assets have a remaining term of less than one year. 3. Treasury Shares After the authorisation granted by the General Meeting of Shareholders on 16 October 2006, the Management Board of Francotyp-Postalia Holding AG decided on 20 November 2007 to embark on a programme to buy back Company shares in order to be in a position to acquire companies or shareholdings in companies using treasury shares as the acquisition currency. This authorisation expired on 15 April 2008. A total of 370,444 shares were purchased at a cost of EUR 1,829,000. As the treasury shares were worth EUR 600,000 by 31 December 2009 (2008: EUR 315,000), a write-up to this amount was necessary on the basis of the requirement to reinstate original values. Month of acquisition Number of treasury

shares acquired Amount of capital stock EUR 000s

Percentage share of capital stock

November 2007 December 2007 January 2008 February 2008 March 2008 April 2008

38,283 63,849 96,367 92,596 43,572 35,777

38,283 63,849 96,367 92,596 43,572 35,777

0.26% 0.43% 0.66% 0.63% 0.30% 0.24%

Total 370,444 370,444 2.52% 4. Shareholders’ Equity Currently the equity capital in Francotyp Postalia Holding AG is EUR 14,700,000 and is divided into 14,700,000 no-par value bearer shares with pro-rata entitlement to participate in the Company’s profits. Each share confers one vote at the General Meeting of Shareholders. The capital stockis fully paid up. On 30 November 2006, all shares in FP Holding AG were admitted for trading on the Official Market and, at the same time, the shares were authorised for trading on the Prime Standard segment of the Frankfurt Stock Exchange where additional post-listing obligations apply. At the initial public offering, FP Holding achieved gross proceeds totalling EUR 51,300,000 from the sale of 2,700,000 shares. The additional payments by the new shareholders totalling EUR 48,600,000 were shown in the capital reserves.

On 16 October 2006, the FP Holding General Meeting of Shareholders passed resolutions approving the creation of EUR 6.0 million in authorised capital and a corresponding change to the Articles of Association and a contingent increase in the capital stock of up to EUR 6.0 million through the issue of new no-par value bearer shares, each representing EUR 1.00 of the capital stock. The Management

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Board was also authorised to issue option bonds and convertible bonds with the possible exclusion of subscription rights pursuant to Section 186, paragraph 3, sentence 4 of the German Stock Corporation Act and to create contingent capital and a corresponding change to the Articles of Association. The Company was authorised, pursuant to Section 71, paragraph 1, No. 8 of the German Stock Corporation Act, to acquire and sell treasury shares at a rate of 10% of the Company’s capital stock. In November 2007, the Company decided to embark on a share buy-back programme, as a result of which 370,444 shares were purchased by the end of the previous year. This represents 2.52% of the capital stock. Pursuant to Section 272, paragraph 4 of the German Commercial Code, a treasury shares provision was formed for the same amount as the amount posted on the Assets side. On 18 June 2008, the General Meeting of Shareholders passed a further resolution authorising the purchase of treasury shares. Under this resolution, the Company was entitled, by 17 December 2009, to acquire treasury shares totalling up to 10% of the stock capital in existence at the time when the resolution was passed. The Company has not made use of this authorisation. A new authorisation was not issued by the General Meeting of Shareholders on 23 June 2009. The provision for treasury shares developed as follows in the 2009 financial year: EUR 000s

As at 1 January 2009 315

Reversal of impairment losses on the fair value 285

As at 31 December 2009 600 No dividend was paid in the year under review. Pursuant to Section 158 of the German Stock Corporation Act, the reconciliation of the net loss for the year with the accumulated loss is set out in the supplement to the Income Statement. 5. Provisions for Pensions and Similar Obligations EUR 295,000 (2008: EUR 279,000) of the provisions for pensions and similar obligations of EUR 296,000 (2008: EUR 280,000) relate to pension commitments to former Management Board members. 6. Other Provisions The other provisions of EUR 1,247,000 (2008: EUR 1,011,000) chiefly comprise provisions for anticipated losses on pending transactions of EUR 536,000 (2008: EUR 536,000), for premiums of EUR 302,000 (2008: EUR 184,000), for legal costs of EUR 116,000 (2008: EUR 0), for financial settlements of EUR 89,000 (2008: 0), for Supervisory Board remuneration of EUR 75,000 (2008: EUR 72,000), for outstanding invoices of EUR 50,000 (2008: EUR 97,000), for audit costs of EUR 44,000 (2008: EUR 79,000) and for outstanding paid leave of EUR 29,000 (2008: EUR 36,000). During 2009, provisions of EUR 52,000 (2008: EUR 18,000) were released and recognised as income. 7. Liabilities As in the previous year, all liabilities have a remaining term of up to one year. Liabilities to affiliated companies of EUR 1,254,000 (2008: EUR 0) are solely a result of settlements with FP GmbH which were used to finance the company. At the same time, the receivables from the profit transfer agreement with FP GmbH amounting to EUR 7,975,000 were set off on the balance sheet.

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The other liabilities mainly concern tax liabilities. Of these, EUR 27,000 (2008: EUR 33,000) relate to payroll tax and EUR 383,000 (2008: EUR 480,000) relate to as yet unpaid VAT. The increase in as yet unpaid VAT results from the VAT implications of the organisational structure involving four domestic subsidiaries. 8. Other Financial Liabilities Leases for company cars on the balance sheet date account for the other financial liabilities totalling EUR 52,000. The sum breaks down into EUR 18,000 in liabilities with a remaining term of up to one year. EUR 34,000 is for liabilities with a remaining term of between one and five years. 9. Contingency On 4 March 2005, with modification agreements on 13 April 2005, 23 January 2006 and 2 April 2009, FP Holding, as the parent company, and FP GmbH, as the borrower, entered into an agreement with BNP Paribas S.A., Frankfurt am Main, for a loan originally amounting to EUR 89.5 million to finance the acquisition of the mail processing system business. By 31 December 2009, EUR 51.1 million of the agreed loan amount had been drawn down by FP GmbH and EUR 0.3 million by the affiliated company, Francotyp-Postalia Inc., Addison, Illinois, USA. FP Holding furnished BNP Paribas S.A. with the following loan collateral: • Pledge of all shares in FP GmbH; • Assignment for security of all claims against third parties, in particular the claim arising from the

loan granted to FP GmbH; • Pledge of bank balances. Further loan collateral was furnished by the subsidiaries of FP Holding. After the successful stock market flotation in 2006, the collateral held by the banks was released, before being taken up again within the scope of a revised loan agreement. With effect from 11 March 2010, FP Holding issued a letter of comfort to its subsidiary, freesort GmbH, Langenfeld, to the effect that, until 30 June 2011, it would irrevocably and unreservedly undertake: • to immediately, on request, furnish freesort with additional liquidity or other funds in so far as

necessary to enable freesort to satisfy all its creditors’ claims and thus remedy any existing or impending insolvency and to avoid any existing over-indebtedness within the meaning of insolvency law,

• and to ensure that freesort GmbH remains in a position to substantially continue its business operations.

IV. Notes to the Income Statement 1. Revenues The revenues result exclusively from consultancy services under the service contract concluded with FP GmbH on 16 May 2006. 2. Other Operating Expenses

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The other operating expenses amounting to EUR 338,000 (2008: EUR 20,000) chiefly relate to the reversal of impairment losses on the fair value of the treasury shares totalling EUR 285,000 and the release of provisions totalling EUR 52,000 (2008: EUR 18,000). 3. Personnel Costs 2009

EUR 000s 2008

EUR 000s

Wages and salaries 1,186 1,307

Social security and pension and support costs 238 207

(of which pension costs) (16) (32)

1,424 1,514 4. Other Operating Expenses The breakdown of the other operating expenses, in comparison to the previous year, is as follows: 2009

EUR 000s 2008

EUR 000s

Legal and consultancy costs 891 3,659

Special audit costs 246 0

Marketing and publications 239 158

Travel costs 161 192

Supervisory Board 96 59

Other personnel costs 76 378

Audit fees 59 79

Rents and leases 41 159

Others 133 84

Total 1,942 4,768 5. Income from Profit Transfer Agreements or Loss Transfer Expenses The income from profit transfer agreements or, in 2008, the expenditure arising from a loss transfer relate to the profit, or in 2008 loss, incurred by FP GmbH as a result of a control and profit transfer agreement. 6. Income from Loans held as Financial Assets The income of EUR 1,267,000 (2008: EUR 1,255,000) from loans held as financial assets relates exclusively to affiliated companies. 7. Interest Income and Expenses The interest income of EUR 58,000 (2008: EUR 1,085,000) and the interest expenses of EUR 241,000 (2008: EUR 7,000) almost exclusively consist of interest relating to affiliated companies.

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8. Depreciation on Financial Assets and Securities held as Current Assets Unscheduled depreciation of EUR 17,853,000 (2008: EUR 2,337,000) relates to the unscheduled depreciation of the shares in freesort GmbH amounting to EUR 16,808,000 (2008: EUR 0) and in iab amounting to EUR 1,045,000 (2008: EUR 814,000) as the result of an impairment test. 9. Taxes on Income and Profit The tax expenditure relates to deferred amounts for corporation tax amounting to EUR 79,000 and for tax on profits amounting to EUR 147,000. V. Other Details 1. Average Number of Employees In addition to two Management Board members, the Company continued to employ an average of seven employees over the year. 2. Package to Secure the Company’s Future On 7 August 2009, the FP Group published a report on the conclusion of a far-reaching package with its employee representatives and IG Metall to secure the Company’s future. Based on current estimates in the FP Group, this extensive package of measures may result in cost savings of up to EUR 9 million in the next two years and contains a 24-month job guarantee for employees. The package to secure the Company’s future contains, among other things, the following provisions: • Conclusion of a works agreement on the introduction of short-time work for a maximum period of

two years, starting from 1 August 2009 • Salary cuts for employees working under collective wage agreements amounting to approx. 10%

by conclusion of collective agreements to secure the economic future of Francotyp-Postalia GmbH, Francotyp-Postalia Vertrieb und Service GmbH and FP Direkt Vertriebs GmbH

• Salary cuts of 15% for staff not covered by collective agreements • 20% reduction in Management Board earnings • No redundancies within the next 24 months • In the event of an application for insolvency, the provisions of the package of measures are invalid

with immediate effect. • In the event of a sale of any of the companies or parts of the companies involved in this

agreement, all special provisions on wages and provisions in relation to salary cuts on the part of the Management Board, staff not covered by collective agreements and executives will be invalid with regard to future arrangements.

In addition, the Supervisory Board will forgo part of its remuneration. 3. Management and Supervisory Board The Company’s Management Board currently consists of two persons.

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On 16 February 2009, the Supervisory Board of Francotyp-Postalia Holding AG dismissed Dr. Heinz-Dieter Sluma from his position as Chairman and member of the Management Board with immediate effect. On 23 February 2009, Mr. Andreas Drechsler was appointed as an additional member of the Management Board for one year. Mr. Drechsler was previously responsible for Foreign Sales and Investor Relations in the company. On the Management Board, he has taken responsibility for Sales, Marketing, Investor Relations, Quality Management and Internal Audits. At the same time, Mr. Hans Szymanski, Financial Director since December 2008, assumed responsibility for Business Development, Research and Development, Personnel, Law and Accounts. The following table lists the Management Board members during the 2009 financial year and their individual responsibilities: Name Date of initial

appointment Currently appointed until

Responsibilities

Hans Szymanski, Graduate Economist

December 2008 December 2011 • Finance, Controlling and Accounts

• IT • Supply Chain • Personnel and Law • Business Development • Research and Development

Andreas Drechsler, Graduate in Business Administration

February 2009 February 2012 • Sales • Marketing • Investor Relations • Quality Management • Internal Audit

Left in the year under review:

Dr. Heinz-Dieter Sluma, Dr. rer. nat. (Chairman)

January 2008 Appointment terminated in February 2009

• Sales • Marketing • Personnel and Law • Business Development • Research and Development • Quality Management

The Management Board members do not hold positions on any supervisory boards or other controlling bodies within the meaning of Section 125, paragraph 1, sentence 3 of the German Stock Corporation Act. Mr. Georg Marton, who had been one of three members of the Supervisory Board of Francotyp- Postalia Holding AG since 11 August 2006, resigned at the end of the last General Meeting of Shareholders. Dr. Claus Gerckens was appointed by the court as his successor on 12 August 2009; the appointment is limited until the next Annual General Meeting which will probably be held in July 2010. The following table lists the members of the Company’s Supervisory Board and gives details of their occupations outside the Company and other management board or supervisory board mandates with comparable German or foreign controlling bodies of commercial enterprises:

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Name Occupation Other management board or supervisory board mandates with comparable German or foreign controlling bodies

Prof. Dr. Michael J.A. Hoffmann (Chairman)

Executive partner in TMM Technology Marketing Management GmbH, Dortmund (abbreviated as “TMM”) and Managing Director in other companies in which TMM has a majority holding

Chairman of the Supervisory Board of • Curtis 1000 Europe AG,

Neuwied am Rhein • inframation AG, Dortmund Deputy Chairman of the Advisory Board of • KST-Motorenversuch

GmbH & Co. KG, Bad Dürkheim

Christoph Weise (Deputy Chairman)

Commercial employee of Quadriga Administration Ltd.

Managing Director of • QCR 1 GmbH

Dr. Claus Gerckens - Chairman of the Management Board of BÖWE SYSTEC AG, Augsburg (until 31 January 2009)

- Managing Director of GVG Industrieverwaltungs GmbH, Augsburg

Supervisory Board of • EUROKAI KGaA,

Hamburg Chairman of the Management Board of • Lasermax Roll Systems

AB, Ljungby, Sweden (until 16 April 2009)

Deputy Chairman of the Management Board of • Waltershof-Peute Hafen

Betriebs G.m.b.H., Hamburg

Left in the year under review: George Marton • President and CEO of

Global Video, LLC, Chicago, USA (until February 2009)

• CEO of BÖWE BELL & HOWELL, Inc., Durham, USA (from February 2009)

Glencoe Capital’s Business and Media Services Group, Chicago, USA

The remuneration of Management Board members is set at a reasonable level by the Supervisory Board on the basis of performance assessments of the persons concerned, while also taking into account any payments by Group companies. Criteria for determining the suitability of the remuneration include the duties of the Management Board member in question, his personal performance, the performance of the Management Board as a whole as well as the economic situation, success and future prospects of the Company giving due consideration to the Company’s peer group. The employment contracts concluded with the board members stipulate a fixed annual salary and a performance-related bonus, dependent on the cashflow and EBITA achieved. No bonuses were paid to the Management Board in the 2009 financial year, instead a provision of EUR 152,000 was formed for the last financial year. The direct remuneration paid to the Management Board members totalled EUR 533,000 (2008: EUR 651,000), of which EUR 486,000 (2008: EUR 586,000) comprised the fixed annual salaries and EUR 47,000 (2008: EUR 65,000) represented benefits in kind. The benefits in

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kind mainly consist of the value of company car use as determined in compliance with the provisions of tax law, as well as rent allowances and individual insurance contributions. With regard to the Remuneration Report pursuant to Section 315, paragraph 2, No. 4, sentence 1 of the German Commercial Code, please refer to the Consolidated Management Report. The Remuneration Report summarises the principles which apply to the calculation of the remuneration for the Management Board members of FP Holding and explains the amount and structure of the remuneration system for the Management Board members. In addition, the principles and amount with regard to the remuneration of the Supervisory Board are described as well as details of share ownership on the part of the Management Board and Supervisory Board. No share-based remuneration agreements were concluded and there continues to be no share option scheme for the 2010 financial year. The remuneration for the 2009 financial year is as follows: EUR 000s Fixed salary Benefits in kind

and allowances Bonuses

(provision) Total remuneration

Hans Szymanski 260 26 76 362

Andreas Drechsler (since February 2009)

179 15 76 270

Dr. Heinz-Dieter Sluma (until February 2009)

47 6 0 53

Total 486 47 152 685 A provision of EUR 1,279,000 (2008: EUR 1,078,000) was set aside to cover pension commitments towards the former Management Board members and their surviving dependents. None of the Management Board members’ immediate relatives had any business relationship with FP. Since the 2009 financial year, each member of the Supervisory Board receives a fixed payment of EUR 30,000 per annum in the last month of the financial year, in addition to the reimbursement of cash expenses and any VAT payable as a result of Supervisory Board duties. Starting from the 2009 financial year, the Chairman’s fixed remuneration is 150% and the Deputy Chairman’s fixed remuneration is 125% of the remuneration for a normal member of the Supervisory Board. The Deputy Chairman of the Supervisory Board, Mr. Christoph Weise, waived the remuneration payable to him for the years 2008 and 2009. The total remuneration of the Supervisory Board totalled EUR 66,000 in the year under review. 4. Auditor’s Fee recognised as Expenses On the basis of a recommendation from the Supervisory Board, the General Meeting of Shareholders chose the KPMG AG auditing firm to act as the auditor for the financial year from 1 January to 31 December 2009. The total fee charged by the auditor for the 2009 financial year is EUR 308,000. The fee is broken down as follows: EUR 000s

Auditing the consolidated and individual financial statements, including travelling expenses Tax consultancy

593

Other services 246

Total fee for 2009 308 The other services relate to a special investigation at the start of 2009 commissioned by the Supervisory Board. No other services to confirm reliability were provided in the year under review.

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5. Consolidated Financial Statement A consolidated financial statement is drawn up for FP Holding and its subsidiaries and second-tier subsidiaries. The statement is submitted to the electronic version of the German Federal Gazette for publication. 6. Corporate Governance The German Corporate Governance Code, as first adopted in February 2002 and in its currently prevailing version of 18 June 2009, contains recommendations and suggestions for the management and supervision of German listed companies in relation to shareholders, the general meeting of shareholders, the management board and supervisory board, transparency, rendering of accounts and auditing. The Management Board and Supervisory Board of Francotyp-Postalia Holding AG adhere to the Code’s goal of promoting responsible and transparent corporate management and supervision geared to bringing about a sustained increase in corporate value and are committed to the implementation of the recommendations and proposals of the Code, in particular where they concern shareholder interests, even if the Company does depart from the recommendations in some areas. These departures have been explained in more detail in the Management Board and Supervisory Board’s Declaration of Compliance with the 18 June 2009 version of the Code. In accordance with Section 161 of the German Stock Corporation Act, the Declaration of Compliance and the departures from the Code have been set out on the company website: http://www.francotyp.com/investoren/corporate-governance/entsprechenserklaerung/archiv/2009.html to enable shareholders to have permanent access to them. 7. Shareholder Structure During the 2009 financial year, Francotyp-Postalia Holding AG received the following notifications from its shareholders pursuant to Section 21, paragraph 1 of the German Securities Trading Act and published them pursuant to Section 26, paragraph 1 of the German Securities Trading Act: Announcement of 13 January 2009 Correction of the announcement on 1 December 2008 On 28 November 2008, Invesco UK Limited, London, United Kingdom, notified us that, via shares, its voting rights in Francotyp-Postalia Holding AG, Birkenwerder had, on 11 November 2008, fallen below the 5% voting rights threshold and now amount to 4.9949 % (corresponding to 734,250 voting rights). 4.9949% of the voting rights (corresponding to 734,250 voting rights) are to be allocated to the Company pursuant to Section 22, paragraph 1, sentence 1, No. 6 in connection with sentence 2 of the German Securities Trading Act. Announcement of 15 January 2009 Correction of the announcement of 12 September 2007 On 23 July 2007, Invesco Fund Managers Limited, London, United Kingdom, informed us that, via shares, its voting rights in Francotyp-Postalia Holding AG, Birkenwerder, Germany, had, on 17 July 2007, exceeded the 3% voting rights threshold and now amount to 3.9366% (corresponding to 578,687 voting rights). 3.9366% of the voting rights (corresponding to 578,687 voting rights) are to be allocated to the Company. Announcement of 2 February 2009 On 30 January 2009, Invesco Fund Managers Limited, London, United Kingdom, informed us that, via shares, its voting rights in Francotyp-Postalia Holding AG, Birkenwerder, Germany, had, on

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21 January 2009, fallen below the 3% voting rights threshold and now amount to 2.944% (corresponding to 432,861 voting rights). 2.944 % of the voting rights (corresponding to 432,861 voting rights) are to be allocated to the Company. Announcement of 12 February 2009 On 10 February 2009, Invesco Limited, London, United Kingdom, informed us that, via shares, its voting rights in Francotyp-Postalia Holding AG, Birkenwerder, Germany, had, on 20 January 2009, fallen below the 3% voting rights threshold and now amount to 1.036% (corresponding to 152,505 voting rights). All voting rights (corresponding to 152,505 voting rights) are to be allocated to the Company. Announcement of 7 May 2009 On 7 May 2009, Mr. Hartmut Neumann, Germany, informed us that, on 27 April 2009, his voting rights in Francotyp-Postalia Holding AG, Birkenwerder, Germany, had fallen below the 3% voting rights threshold and on this day amount to 3.13% (corresponding to 460,260 voting rights). Announcement of 25 June 2009 On 25 June 2009, Mr. Hartmut Neumann, Germany, informed us that his voting rights in Francotyp-Postalia Holding AG, Birkenwerder, Germany, had, on 25 June 2009, fallen below the 3% voting rights threshold and on this day amount to 2.97% (corresponding to 436,053 voting rights). The declaration pursuant to Section 264, paragraph 2, sentence 3 of the German Commercial Code has been published in the Management Report. Birkenwerder, 17 March 2010

Hans Szymanski Andreas Drechsler Management Board Management Board

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Francotyp-Postalia Holding AG, Birkenwerder

Movements of non-current assets in the 2009 financial year

1.1.2009 Additions Retirements 31.12.2009TEUR TEUR TEUR TEUR

I. Intangible assetsConcessions, industrial property rights and similar rightsand assets as well as licences to such rights and assets 60 69 0 129

II. Tangible assetsOther equipment, operating and business equipment

37 0 8 29

III. Financial assets1. Shares in affiliated companies 28.317 25 0 28.3422. Loans to affiliated companies 21.123 0 0 21.123

49.440 25 0 49.46549.537 94 8 49.623

Costs of purchase and production

Carrying values

1.1.2009

Depreciation for the financial

year Retirements 31.12.2009 31.12.2009 31.12.2008TEUR TEUR TEUR TEUR TEUR TEUR

60 4 0 64 65 0

33 0 8 25 4 4

823 17.853 0 18.676 9.666 27.4940 0,00 0 0 21.123 21.123

823 17.853 0 18.676 30.789 48.617916 17.857 8 18.765 30.858 48.621

Accumulated depreciation and amortisation

Francotyp-Postalia Holding AG, Birkenwerder

List of Shareholdings

Item Company Currency Capital share Earnings Equity OwnerNo. in % 2009 (Consec. No.)

1 Francotyp-Postalia Holding AG,Birkenwerder, Germany

List of Shareholdings

2 Francotyp Postalia GmbH, TEUR 100 0 1.000 1Birkenwerder, Germany

3 freesort GmbH, TEUR 100 -1.736 -6.201 1Düsseldorf, Germany

4 iab Internet Access GmbH, TEUR 51,01 329 1.559 1Berlin, Germany

5 iab-Verwaltungs- und Vertriebs GmbH, TEUR 100 -11 0 1 and 4Berlin, Germany

6 FP Direkt Vertriebs GmbH, TEUR 100 0 26 2Birkenwerder, Germany

7 Francotyp-Postalia Vertrieb & Service GmbH, TEUR 100 0 11.187 2Birkenwerder, Germany

8 Francotyp-Postalia International GmbH, TEUR 100 0 6.510 2Birkenwerder, Germany

9 Francotyp-Postalia N.V. TEUR 99,97 115 997 2Zaventem, Belgium

10 Francotyp-Postalia (Österreich) GesmbH TEUR 100 156 920 2Vienna, Austria

11 Ruys Handelsvereniging BV TEUR 100 740 934 8The Hague, the Netherlands

12 Italiana Audion S.r.l. TEUR 100 -141 519 8Milan, Italy

13 Francotyp-Postalia Ltd. TGBP 100 606 2.306 8Dartford, Great Britain

14 Francotyp-Postalia Inc. TUSD 100 3.830 23.345 2Lisle, Illinois, USA

15 Francotyp-Postalia Canada Inc. TCAD 100 -289 -3.350 14Markham, Canada

16 Francotyp-Postalia Unterstützungseinrichtung TEUR 100 0 4.441 2Berlin, Germany

17 Kara Technology Inc. TUSD 15 n.a. n.a. 2Houston, Texas, USA

18 Francotyp-Postalia Asia Pte. Ltd., TSGD 100 -65 151 2Singapore

19 FP Data Center Inc. TJPY 49 n.a. n.a. 2Osaka, Japan

20 FP Hanse GmbH TEUR 100 0 102 7Hamburg, Germany

21 Francotyp-Postalia InovoLabs GmbH TEUR 100 0 25 1Birkenwerder, Germany

The companies against numbers 2, 6, 7, 8 and 20 show balanced annual results based on profit transfer agreements.The shares in No. 5 are divided between No. 1 (36.99%) and No. 4 (63.01%).

Management Report of Francotyp-Postalia Holding AG for the financial year 2009

Business Activity Francotyp-Postalia Holding AG is the parent company of the FP Group (also referred to as FP or Francotyp-Postalia in the following). The subordinate German subsidiaries are Francotyp-Postalia GmbH, Birkenwerder, FP InovoLabs GmbH, Birkenwerder, and freesort GmbH, Langenfeld (freesort), with Francotyp-Postalia Hold-ing AG holding 100 % of each company, in addition to iab – internet access GmbH, Berlin (iab), in which Fran-cotyp-Postalia Holding AG has a 51 % stake. Francotyp-Postalia GmbH holds direct or indirect stakes in other significant subsidiaries, which are listed in the following table. Francotyp-Postalia Holding AG holds an indirect share in these companies. Name of company Location of company Share in %

Francotyp-Postalia Vertrieb & Service GmbH Germany Birkenwerder 100

Francotyp-Postalia International GmbH Germany Birkenwerder 100

Ruys Handelsvereniging B. V. Netherlands, The Hague 100

Francotyp-Postalia Ltd. Great Britain Dartford 100

Francotyp-Postalia Inc. USA Addison 100

A control and profit transfer agreement exists between FP Holding and Francotyp-Postalia GmbH (“FP GmbH”). FP GmbH also holds direct and indirect stakes in operational companies within the FP Group, and assumes man-agement responsibilities and significant development and manufacturing activities on behalf of the FP Group. FP Holding itself provides services in the field of strategic management, in particular business sector development, financing and capital procurement for FP GmbH. FP Holding has employed its own personnel since 1st January 2007. As in the previous year, two members of the Management Board and a total of seven members of staff were working for FP Holding as of 31st December 2009.

Market and Business Development Market FP Holding indirectly participates in the market activities and business development of the FP Group through its subsidiaries and second-tier subsidiaries. During the liberalisation of the postal markets, the company has been growing in strength, developing from a manufacturer of franking machines to a mail management supplier for outbound mail. The core business of the company remains its franking and inserting machines. However, the company is expanding its portfolio with new services such as the collection, sorting and consolidation of outgo-ing post and electronic hybrid solutions and now covers the entire value-creation chain in the outgoing mail market. The FP Group can therefore offer corporate clients tailor-made mail management solutions whatever the size of their company. The company sub-divides the business activities into three segments: Franking and insert-ing, software solutions and services. Within its traditional franking and inserting segment, the FP Group focuses on the development, manufacture, distribution and leasing of franking and inserting machines for small and medium-sized mailing volumes. The company also offers accompanying after-sales services and products.

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With its franking machines, the FP Group is represented in the most important markets worldwide, including Germany, the USA and Great Britain. With a total of around 260,000 installed franking machines, the global market share of the company is 9.9% The FP Group also operates with subsidiaries in new countries and trader networks in 44 countries. The company is particularly strongly represented in Germany and Austria: The market shares in these countries are 44 % and 48 % respectively. The increasing liberalisation of the postal markets has led to diverse opportunities for growth in the software solution and services segments. The FP Group began focussing on this segment when the German market be-came fully liberalised at the beginning of 2008, and has benefitted from the early development of its expertise in mail management. At the end of 2006, following the IPO, the company acquired freesort GmbH and a majority stake in iab - internet access GmbH for this purpose. iab is a software specialist in the field of digital mail processing. Using internet-based software, the company enables the outsourcing of all mail processing. A letter can be posted with a single click of the mouse, with top-level security standards guaranteed. iab handles letter printing in addition to inserting, franking and delivery. With its hybrid mail products, including webmail, business mail, system mail and inbound mail, iab covers the requirements of both small and large clients, and can thus save them an enormous amount in terms of both cost and time. As the letter is sent digitally from the workplace, costs for paper, envelopes and printers, labour costs and costs involved in transporting the letter to the post box are either eliminated or reduced. freesort, with nine branches in Germany, is one of the leading independent consolidators of outgoing mail in the German market, with reference clients such as Deutsche Rentenversicherung and the Bundesanzeiger, which each have high mailing volumes. The company collects the letters at the companies, sorts them by post code and then delivers them in bundles to a Deutsche Post mail sorting centre or alternative letter carriers. By using this service, companies increase the efficiency of their outgoing mail and save postal charges at the same time. Since liberalisation, Deutsche Post is required to give discounts of up to 26 % for postal deliveries which have been pre-sorted and franked. freesort passes part of the discount on to its customers, creating a win-win situation. Internal Management System The management system used by the Management Board includes a group-wide reporting system together with strategic group planning. The latter is established for a period of three or five years and is annually reviewed during the comprehensive budget process as well as being adapted in rotation several times a year. As part of the group-wide reporting, all subsidiaries submit a monthly report on sales, earnings and balance sheet figures. These are consolidated and included in the Group’s published quarterly and annual financial reports. The subsidiaries also submit a monthly assessment of the current and forecast business developments. The Group is managed on the basis of the key figures, sales, EBITDA, net working capital, free cash flow, an-nual profits and the number of franking machines sold on the market, weighted according to product type. In this way, the FP Group ensures that decisions always sufficiently balance growth, profitability and liquidity. Sales indicate success on the market. The Group measures the operative performance and success of the individ-ual business units on the basis of earnings before interest, taxes depreciation and amortisation (EBITDA). The Group furthermore uses the key figure EBITDA margin, which represents the EBITDA in relation to sales. The net working capital is calculated on the basis of the stocks plus trade receivables and minus liabilities from trade payables. By taking the free cash flow into account, the Group guarantees that the financial substance of the company is maintained. The free cash flow is calculated on the basis of the account balance of cash inflow from ongoing business minus investments made. The following components in particular secure compliance with the Group’s internal management system - regular Management and Supervisory Board meetings - regular meetings of all international and national managers - Risk and opportunity management - Liquidity planning - Monthly reports by subsidiaries

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- Internal auditing - Quality management Business Development Following the global financial and economic crisis, the global economy shrank by 2.2 % over the past year. Important markets for the FP Group were affected by the recession over the course of the year. In the USA, the economic performance fell by 2.5 % and by 3.9 % in the European states, while the German gross domestic product fell by 5 % in 2009, according to the Federal Statistics Office. Germany has therefore suffered the worst economic decline in almost 80 years. Although domestic consumption barely changed, companies paid 20 % less for new machines and facilities than in 2008. Additional charges for export and therefore also for the FP Group resulted from the temporary strong value of the Euro against the US Dollar. In the first quarter of 2009, however, the US Dollar consistently fell in value. The annual deficit fell from EUR 7,617,000 to EUR -11,201,000. This result was influenced by unscheduled depreciations and the profit transfer agreements with FP GmbH. As early as the beginning of the 2009 financial year, it was clear that the recession would affect the FP Group’s main business markets. The very weak economy, the hesitancy of many clients to invest and the corresponding drop in the demand for franking and insertion machines have had a negative effect on the FP Group’s sales de-velopment over the past financial year. The consequences of the situation described in the 2008 financial report, which led to the dismissal of a member of the Management Board for good cause, have also had a negative ef-fect on both the business management and economic development of the company over the past financial year. A detailed account is given in the risk report section of the group management report, in the chapter entitled “Legal and Fiscal Risks”. The FP Group traditionally specialises in the A and B segment for machines with small to medium mailing vol-umes. These markets show a very stable development, especially as companies are increasingly replacing large franking machines with smaller devices. In contrast, the FP Group was able to improve its operational earnings in 2009. This development was mainly the result of successful restructuring and consistent cost management. The increasing liberalisation of the postal markets has opened up attractive growth opportunities in this segment for service providers all over the world. The letter delivery monopoly expired on 1st January 2008. The basis for this is an EU directive which stipulates that all postal markets are to be open by 2011 in order to complement the domestic market for postal services. As a result of this liberalisation, companies can use alternative methods, such as consolidation and outsourcing, for their outgoing post in order to increase the efficiency of their mail processing. This creates attractive new markets. In the USA alone, the market volume for outsourcing outgoing post is around 2.5 billion Euros. The earnings of FP Holding were influenced by FP GmbH's profit transfer agreement. As the Management Board of FP Holding AG did not consider the sales and earnings development for the FP Group to be satisfac-tory, it decided to take further restructuring measures to sustainably increase the earnings power of the FP Group. On 7th August 2009, the FP Group published a notification regarding the conclusion of a far-reaching package with its employee representatives and IG Metall to secure the Company’s future . According to current esti-mates, this comprehensive package of measures may lead to cost savings of up to 9 million Euro in the FP Group over the next two years and in return contains a 24-month job guarantee for employees. The package to secure the Company’s future includes the following provisions, among others:

• Conclusion of an operational agreement regarding the introduction of short-time working for a maxi-

mum period of two years, starting from 1st August 2009

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• Salary cuts for employees working under collective wage agreements amounting to around 10 % by conclusion of collective agreements to secure the economic future of the companies Francotyp-Postalia GmbH, Francotyp-Postalia Vertrieb und Service GmbH and FP Direkt Vertriebs GmbH

• Salary cuts of 15 % for staff not covered by collective agreements • 20 % reduction in Management Board earnings • No redundancies within the next 24 months

The Supervisory Board will also forgo parts of its Supervisory Board remuneration. The individual financial statement of FP Holding was indirectly affected by the developments of its subsidiaries and second-tier subsidiaries insofar as no profit transfer agreement was directly or indirectly concluded.

Representation of the asset, financial and earnings position The economic situation of the company is fundamentally dependent on the development of the entire Group due to the existing profit transfer agreements. The balance sheet total of FP Holding fell by EUR 9,884,000 or 18% to EUR 45,205,000 in comparison with the last balance sheet date. The financing of the FP Group is mainly provided by FP GmbH. The receivables from associated companies increased by EUR 7,599,000 to EUR 13,755,000. Accounts receivable from FP GmbH resulting from a profit transfer of EUR 7,975,000 were set off on the balance sheet using the existing liabilities towards FP GmbH. Equity fell by EUR 11,201,000 to EUR 41,309. The book value of the financial assets fell by EUR 17,828,000 during the financial year. The change is due to the unscheduled depreciation of the participation in freesort amounting to EUR 16,808,000, an unscheduled depre-ciation in respect of iab amounting to EUR 1,045,000 and the foundation of Inovolabs GmbH, amounting to EUR 25,000. The financial assets correspond to around 68 % (in previous year 88 %) of the balance sheet total and 75 % (in previous year 93 %) of the equity. In November 2007, the company decided to introduce a share buy-back programme, whereby 370,444 shares with an acquisition cost of EUR 1,829,000 were purchased before the end of 2008. The com-pany’s own shares, which were written off on the balance sheet date at a market value of EUR 315,000, were credited by EUR 285,000 in 2009 to a value of EUR 600,000. The book value of the company’s own shares of EUR 600,000 is shown on the assets side in current assets. The net loss on the liabilities side was increased to form reserves for the company’s own shares pursuant to Section 272 (4) of the German Commercial Code (HGB). As of the balance sheet date, the equity ratio was 91 % in comparison with 95 % in the previous year. The li-abilities due in the near future will be fully covered by the asset values realisable in the short term. The other reserves increased by EUR 236,000 to EUR 1,247,000, which is mainly due to the creation of reserves in the personnel area. Trade payables fell by EUR 337,000 to EUR 439,000. Earnings from ordinary activities increased by EUR 6,823,000 to a deficit of EUR -10,975,000 (in previous year 17,798,000). The annual deficit fell from EUR 7,617,000 to EUR -11,201,000. This result was influenced by both the unplanned depreciation and profits transferred from FP GmbH of EUR 7,975,000 (in previous year loss transfer of EUR 12,149,000). The main reason for these earnings was the consistent cost management of the Group and the package to secure the future of the company concluded in August 2009. This led to significant personnel savings. The extraordinary earnings in 2009 amounted to EUR 0 (in previous year EUR -1,020,000). Over the previous financial year, taxes on income amounting to EUR 226,000 (in previous year: EUR 0) were accounted for. This led to a net loss for the year after taxes of EUR 11,201,000 (in previous year: EUR 18,818,000). Together with a debit carryover from the previous year of EUR 11,105,000, the allocation in the reserves for own shares of EUR 285,000, the net loss for the year equates to an accumulated loss of EUR -22,591,000.

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The earnings position in this financial year was also affected by the expansion of business operations. The sales revenue from consultation services for the subsidiaries increased by EUR 202,000 to EUR 851,000, while the personnel expenses fell by EUR 90,000 to EUR 1,424,000 compared to the previous year. The number of em-ployees remained unchanged. The appreciation in value of the company’s own shares was EUR 285,000 and the unplanned depreciation of the stakes in freesort and iab amounted to EUR 17,853,000. The interest income, including the long-term loan receivables, amounted to EUR 1,084,000 in 2009 (in previous year: EUR 2,303,000). The overall asset and financial situation of FP Holding is satisfactory. The financing of the FP Group is mainly provided by FP GmbH. The earnings position of the company was particularly negatively affected by the un-planned depreciation, so that a net loss of EUR 11,201,000 needed to be shown for this reporting year following a net loss of EUR 18.818,000 in the previous year.

Environmental and employee requirements Within the scope of the development of business operations, FP Holding was allocated an increasing number of managers and specialists from the FP Group’s HR, legal, financial and investor relations divisions in addition to the members of the Management Board. Environmental and resource protection are becoming increasingly important, both nationally and internationally. The FP Group consequently regards this as part of its responsibility towards employees, customers, partners and neighbours. The Group focuses on the responsible use of resources and materials. Strict environmental protec-tion criteria are applied to all processes and procedures so that the company is able to adhere to all environ-mental regulations at all times.

Development of equity / Disclosures pursuant to Section 289 (4) of the Ger-man Commercial Code (HGB) Composition of subscribed capital The company has capital stock of EUR 14,700,000, divided into 14,700,000 no-par value bearer shares (individ-ual share certificates) and with a proportional entitlement to the company’s profits. The proportional share in the company's capital stock is therefore EUR 1.00 per share. Each individual share certificate equates to one vote in the company's General Meeting of Shareholders. No shares with special rights have been issued. There are no limitations affecting the voting rights or the transfer of voting rights. The Management Board of Francotyp-Postalia Holding AG is not aware of any limitations which may result from agreements made between compa-nies. No employees hold shares in the capital. Authorised capital In a resolution passed on 16th October 2006, the General Meeting of Shareholders authorised the Management Board, with the approval of the Supervisory Board, to increase the company’s capital stock by 15th October 2011 by issuing up to 6,000,000 new bearer share certificates for cash or assets in kind once or several times, amounting to a total of EUR 6,000,000 (authorised capital). The new individual share certificates are in principle to be offered to the shareholders for acquisition. The Management Board was, however, authorised to exclude residual amounts from the shareholders’ buying option and to also rule out the shareholders’ buying option with the approval of the Supervisory Board. Conditional capital The General Meeting of Shareholders passed a resolution on 16th October 2006 to conditionally increase the company’s capital stock by up to EUR 6,000,000 by issuing bearer share certificates with a proportional amount of the capital stock of EUR 1.00 for each share (conditional capital).

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Share buy-back programme On 20th November, the Management Board of Francotyp-Postalia Holding AG resolved to implement a pro-gramme to buy back company shares on the basis of a resolution of the company’s General Meeting of Share-holders on 16th October 2006 authorising them to do so. Up to 500,000 company shares were to be acquired as authorised by the Annual General Meeting of 16th Octo-ber 2006. This corresponded to 3.40 % of the company's capital stock. The equivalent value per share (with no additional purchasing costs) paid by the company in the share buy-back programme was not to be 10 % over or under the market value in the XETRA trade on the Frankfurt Stock Exchange as determined by the opening auction on the day of trade. The share buy-back programme was completed by 15th April 2008 (inclusive). In the period from November 2007 to April 2008, 370,444 shares were bought at an acquisition cost of EUR 1,829,000. The company’s own shares had a market value of EUR 600,000 (in previous year EUR 315,000) on 31st December 2009 and equate to a proportion of 2.52 % of the capital stock as of 31st December 2009. Conversion rights and options The Management Board was authorised by a resolution of the Annual General Meeting on 16th October 2006, with the approval of the Supervisory Board, to issue warrants and/or convertible bonds (warrants and convertible bonds also referred to collectively as “partial debentures” in the following) with a total nominal value of up to EUR 200,000,000 and a duration of no longer than 30 years, either once or several times and as a full amount or in partial amounts, and to grant the holders of warrants options and/or the holders of convertible bonds conver-sion rights for bearer share certificates with a proportional amount of the company’s capital stock totalling up to EUR 6,000,000 according to the more detailed specifications of the terms and conditions of the loan. To this date, no shares have been issued using the authorised or conditional capital. Conversion rights and op-tions have not yet been issued. Payout of dividends No payout of dividends has taken place during the reporting year. EUR 2,150,000 was paid out in the previous year. Rules regarding amendments to the Articles of Association The Annual General Meeting passes its resolutions with a simple majority of the votes cast and, where the law requires a capital majority in addition to the majority of votes, with the simple majority of the capital stock rep-resented when passing the resolution unless the law or Articles of Association require a larger majority. Absten-tions from voting are regarded as uncast votes. Pursuant to Section 15 (2) of the Articles of Association, the Supervisory Board is furthermore only entitled to make changes to the Articles of Association which affect the current version. Appointment of Management and Supervisory Boards Pursuant to Section 6 (2) of the Articles of Association of Francotyp-Postalia Holding AG, the number of mem-bers on the Management Board, their appointment and the withdrawal of their appointment is determined by the Supervisory Board. Pursuant to Section 6 (3) of the Articles of Association, the Supervisory Board can entrust the conclusion, amendment and termination of employment contracts for members of the Management Board to a Supervisory Board committee. The Management Board and Supervisory Board work together closely to pursue their shared goal of a sustained increase in the company’s value. The Management Board and Supervisory Board regularly discuss the current status of the strategic orientation of the company, as determined by the Management Board, and its implementa-tion. The Management Board furthermore regularly informs the Supervisory Board about all matters relating to planning, business development, the risk situation, risk management and compliance which are relevant to the company. The Supervisory Board has stipulated the Management Board’s obligation to provide information and reports accordingly. The Supervisory Board has specified in the Management Board’s rules of procedures rights of veto for the benefit of the Supervisory Board concerning decisions or measures which fundamentally change

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the company’s assets, financial situation or earnings position and regarding transactions of significant impor-tance. The Management Board consists of one or more individuals in accordance with the Articles of Association. The number of members on the Management Board, their appointment and the withdrawal of their appointment is determined by the Supervisory Board. The Supervisory Board of Francotyp-Postalia Holding AG consists of three members to be elected by the An-nual General Meeting in accordance with the Articles of Association. All members have comprehensive knowl-edge and experience in order to fulfil their roles. Due to the size of the company and the number of members required for the Supervisory Board pursuant to the Articles of Association, the formation of committees and bodies is usually avoided. As long as the Supervisory Board consists of only three individuals, the entire Super-visory Board takes the role of an audit committee. According to the Articles of Association of Francotyp-Postalia Holding AG, the Chairman and Deputy Chairman of the Supervisory Board are selected from the Supervisory Board. It is therefore impossible to follow the rec-ommendation in the regulations of the German Corporate Governance Codex to make suggestions to the share-holders for an election of the Supervisory Board Chairman. Francotyp-Postalia Holding AG has arranged D&O insurance with no excess for the members of the Supervisory Board and Management Board. Disclosures pursuant to Section 289 (4) nos. 2, 4, 5, 8 and 9 of the German Commercial Code (HGB) were not required. Direct and indirect participation (for holdings over 10 % pursuant to Section 289 (4) of the German Commercial Code (HGB))

Share ownership as of 31st December 2009

Shareholders

Number of shares %

Quadriga Capital Private Equity Fund II L.P. 3,292,333 22.40

Quadriga Capital Limited 573,253 3.90

Amiral Gestion, Paris, France 1,660,679 11.30

Remuneration of Management Board and Supervisory Board members The remuneration of Management Board members is established by the Supervisory Board, including any com-pany benefits at a reasonable level on the basis of an assessment of performance. The criteria for the appropri-ateness of the remuneration in particular include the responsibilities of the respective Management Board mem-ber, their personal performance, the performance of the Management Board, the economic situation, the success and future prospects of the company in comparison with its peers. The employment contracts concluded with the Management Board define the fixed annual salary and a performance-related bonus. However, no bonuses were paid for the Management Board in the 2009 financial year. The direct remuneration of the Management Board amounted to a total of EUR 533,000, of which EUR 486,000 was for the fixed annual salary and EUR 47,000 for remunerations in kind. The remunerations in kind mainly consist of the values to be applied pursuant to fiscal requirements for the use of company cars, accommodation allowance and individual insurance contributions. EUR 296,000 was deferred for pension obligations for previous members of the Management Board. After ful-filling the conditions for a claim, old-age pension, disability benefits or surviving dependents’ pension is pro-vided as pension remunerations. The level of the remunerations is determined on the basis of the creditable time in service and creditable income.

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Share-based remuneration agreements have not been made. No share option programmes are available for the 2009 financial year either. Each member of the Supervisory Board received a fixed payment of EUR 30,000 in the final month of each financial year. The Chairman receives 150% and their Deputy receives 125% of the fixed remuneration. The Deputy Chairman of the Supervisory Board, Mr. Christoph Weise, waived his remuneration in 2008 and 2009. EUR 75,000 was deferred for outstanding Supervisory Board remunerations including expenses. Detailed information about the remuneration structure is available in the Annex to the Financial Statement.

Risk and opportunity management system Corporate activities involve opportunities and risks. The main opportunities and risks for Francotyp-Postalia Holding AG in particular result from the affiliated group. The main reasons for this are the profit transfer agree-ments existing within the group, the subordination statement submitted to freesort with regards to the loans of EUR 4,500,000 and the letter of comfort submitted to freesort until 30th July 2011. In order to be successful on the market in the long term, the FP Group must be able to recognise and manage the inherent risks of ongoing business. Effective risk management therefore has a huge influence on the success of the company. The FP Group’s risk policies aim to secure the continued existence of the company and to con-stantly improve the competitive position of the company. For this purpose, the Management Board has estab-lished an integrated opportunities and risk management system which is integrated into the value-orientated management system and organisational structures of the Group. Risk and opportunity management are closely connected in the FP Group. The company in particular bases its opportunities management on its strategic aims in order to achieve an appropriate balance between opportunities and risk. The management of each business segment and each subsidiary is responsible for identifying, assessing and organising opportunities at an early stage. The Group also works intensively with detailed market and com-petition analyses, progress scenarios, relevant cost drivers and critical success factors, including those relating to the political environment of the company. These are used to develop concrete potential opportunities for specific business segments. The FP Group constantly and systematically detects external and internal risk factors for all business segments and subsidiaries. The Management Board and managers analyse and assess possible risk areas, including the likelihood of risks occurring and possible levels of damage. The risks are also categorised with regard to internal company management options and the definition of areas of responsibilities according to the following risk ar-eas: Risk areas 1. Market-related risks

Macroeconomic risks Sector-specific risks Performance-related risks

2. Risks relating to company strategy 3. Performance-related risks

Procurement and purchasing risks Production-related risks Information-related risks Personnel risks

4. Financial risks

Currency risks

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Risks associated with interest rate changes Liquidity risks Risk of default

5. Other risks

Environmental risks Legal and fiscal risks Organisational risks Compliance risks

As a result of classifying and assigning risks according to sector, the Group has been able to create a risk index. Market-related, strategic company and performance-related risks and financial risks were identified for Franco-typ-Postalia Holding AG and its subsidiaries. The risks are listed and assigned according to specific areas of responsibility and operation within the Group. This ensures that existing responsibility parameters, information and reporting systems are taken into account in the risk management system. The risk management is therefore built on the fundamental processes and responsi-bilities of the entire Group and uses committees which have already been established. A risk manager has been appointed for the overall coordination of the risk management system (adjustment, further development of risk areas, preparation and post-processing, creation of reports etc.). In accordance with the legal requirements, this risk management system serves as a basis for information and decisions made by the Management Board. On this basis, the Supervisory Board and shareholders of the company are informed about current company devel-opment and any risk changes. A requirement for responsible managers to submit reports to the Management Board when established thresholds are reached has been established for risks which may threaten the existence of the company. All risks are regu-larly reviewed in a formal process. In principle, Francotyp-Postalia faces certain risks which also apply to the explicitly mentioned competitive strengths, unless these can be maintained. These risks could have significant disadvantageous effects on the business activities and asset, financial and earnings position of Francotyp-Postalia.

Risks and opportunities of future development Market and competition Significant risks for the FP Group and therefore for the company arise from the general economic development and exchange rate risks. Approximately a third of the company’s total sales are in the USA, Canada and Great Britain. As the FP Group is partially subject to the cyclical investment behaviour of customers, it is affected by economic development. The company’s history of over 85 years has, however, shown time and again that the risks of economic cycles can be overcome. Furthermore, around 68 % of the FP Group's turnover represents recurring sales, which are significantly less affected by the economic fluctuations than new business. Overall, no risks threatening the existence of the company can currently be identified from overall economic development. The opening of the European postal market to competition is regulated by the EU Directive (Directive 2002/39/EC) for the further liberalisation of the market for postal services in the Community. The required im-plementation of the Directive in national law is likely to mean that several postal service providers will be active in the national postal markets in the future. The German postal market has been completely liberalised since 1st January 2008. Since then, the Federal Net-work Agency for Electricity, Gas, Telecommunications, Post and the Railway (“Federal Network Agency”) has issued several hundred licences to various postal service providers. It cannot be ruled out that, during the course of the liberalisation in Germany, the new suppliers may expand their services into the area that was the exclusive reserve of Deutsche Post AG (“DPAG”) up until the end of 2007, may win market shares from DPAG and dis-

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patch their post with no prepayment, which would significantly reduce the general demand for franking ma-chines. Considerations by legislators, for instance, with regard to the amendment of the sales tax obligations for postal services, also have a large influence on the development of the liberalised postal market in Germany. This de-velopment may also take place in other European or international postal markets where Francotyp-Postalia is active. These risks could have significant disadvantageous effects on the business activities and asset, financial and earnings position of the company. The use of new technology in the outgoing post market and the increase in private post service providers may also reduce demand for franking machines. Along with a shift in the market towards smaller franking machines, this may result in changes to the market share and a different price structure. This risk is also associated with opportunities, as the FP Group is also participating in the liberalisation through its subsidiaries freesort and iab. By integrating its traditional franking and inserting business with mail management solutions such as consolida-tion, outsourcing and hybrid mail, the FP Group has created the conditions necessary to profit from this liberali-sation in the future. In this respect, developments in the area of private post services should also to be taken into account. The intro-duction of the minimum salary for postmen strongly influenced the liberalisation process and reduced the pres-sure of competition in the mail sector. In January 2010, the Federal Administrative Court in Leipzig decided that the minimum salary requirement was ineffective. It is unclear how this will develop in the future, but experts expect to see an improvement in opportunities for private mail and delivery services. The Group has also observed an increasing number of competitors in the collective communication segment, an important market for iab GmbH. The FP Group is confronting this risk with an increased integration of the mail-room and mail stream businesses, thereby bundling the potential strengths of the Francotyp-Postalia Group Nev-ertheless, both freesort GmbH and iab GmbH are young companies which are still in their growth phase. There is therefore a risk that it will not be possible to realise the growth targets, scale effects, cost savings, margin advantage or other synergy potentials. Risks relating to company strategy The FP Group aims for profitable and sustainable growth. This criterion is therefore essentially the decisive factor for investments and acquisitions and/or participations in companies. Company-strategic risks in principle involve misjudgements when making decisions about investments and possible M&A activities. Risks may also result from the failure to fulfil expectations associated with investments, for instance. The company limits such risks with an early analysis of opportunities and risks and highly qualified specialists in the decision-making phase, supported by external advisors where necessary. The FP Group is currently unaware of any strategic risks which could threaten the existence of the company. Corporate financing Within the scope of its business activities, the FP Group is exposed to specific financial risks involving currency fluctuations, changes to interest rates and bad debts. The higher-level risk management system of the company takes the unforeseeable nature of the financial markets into consideration and is designed to minimise negative effects on the profit position of the Group. The Group makes use of specific financial instruments to achieve this goal. These are generally implemented to hedge existing or anticipated underlying transactions. The trading framework, responsibilities, finance-related reporting and control mechanisms for financial instru-ments are established in internal group regulations. These include a division of functions between the acquisition and management of the financial instruments. The currency, interest rate change and liquidity risks of the FP Group are managed centrally. The company therefore considers the financial risks to be controllable. Francotyp-Postalia is combating the liquidity risk with a liquidity forecast on a fixed planning horizon for the entire Group and available credit lines which have not yet been used. The Group is required to adhere to a specific key financial figure according to a credit contract concluded with the banks (covenant), which is calculated on the basis of the relationship between the net debts and EBITDA,

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whereby these two values are corrected to a limited extent for specific positions in accordance with the credit contract definition. At the end of 2008, these key financial figures were adjusted following negotiations with the participating banks to match the current circumstances of the FP Group. A further reduction of the key financial figure compared to 31st December 2009 was also agreed. The agreed key financial figure had been adhered to as of 31st December 2009. According to the current situation it has been assumed that this key financial figure will also be adhered to in the future. However, if the future business development proved to be worse than currently expected, a breach of this key financial figure cannot be ruled out. The banking consortium would have the contractual right to demand payment of the credit as a result of non-adherence to the key financial figure. How-ever, it is assumed that if it is not possible to adhere to this key financial figure in the future, it will be possible to come to an agreement regarding the continuation of the credit with the participating banks during renegotiations, which may however lead to higher financing expenses. Compliance Compliance risks are risks of possible non-adherence to internal company regulations or the breach of valid laws and ordinances by managers or employees of the company. Purchasing and Sales Organisation are particularly critical divisions. Employees who are involved in divisions where the protection of confidential documents and information play a significant role are also affected. Employees who are entrusted with confidential or so-called insider information agree to adhere to the corresponding regulations, including the German Investor Protection Improvement Act, and to handle the information in a responsible manner. To minimise risks and safeguard com-pliance, the company will implement rules of conduct applying across the company and will offer corresponding training for all relevant divisions and employees. In principle, it is not possible to rule out the occurrence of events relevant to compliance. The company considers the risks to be controllable. Internal control and risk management system with regard to the accounting process The Management Board and Supervisory Board of the FP Group place great value on the safeguarding of propri-ety, accuracy and reliability of financial reporting for the recipients of financial reports within the company. Against this background, the internal control and risk management system is an integral part of a comprehensive company-wide risk management system. The FP Group’s internal control system is mainly based on a functioning internal management system on the basis of efficient processes and on organisational security measures integrated into processes, such as the limita-tions of access in IT and payment guidelines. Controls which are integrated into processes reduce the likelihood of errors occurring and support the discovery of errors which have already occurred. The Supervisory Board provides risk management advice and monitors the effectiveness of the risk management system, the internal control system, the accounting process, the annual audit and the independence of the auditor. The main characteristics of the internal control and risk management system with regard to the accounting proc-ess can be described as follows: There is a clear management and corporate structure in the FP Group. Inter-divisional key functions are managed centrally and the individual subsidiaries have a defined degree of independence. Through the employment of highly qualified expert personnel, targeted and regular training and development and a strict adherence to the four eyes principle, the FP Group guarantees strict adherence to the local and inter-national accounting regulations in the annual individual and consolidated financial statements. The departments and divisions taking part in the accounting process are suitably equipped and trained, both quantitatively and qualitatively. Accounting data that is received or passed on is constantly checked for completeness and accuracy. Suitable controls are installed for all processes relevant to accounting, such as the four eyes principle and ana-lytical reviews. All Group company annual reports which are included in the Group consolidation are subjected to an audit or auditor’s review at least once a year. Due to the obligation of all subsidiaries to submit their business figures in a standardised reporting format to the Group holding company on a monthly basis, deviations between target and actual figures during the year are recognised quickly, enabling a rapid response.

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By implementing its thorough risk management system, the FP Group has achieved the required level of trans-parency in order to deal responsibly with the risks, also with regard to financial reporting. The risk management process is integrated into the existing management systems and has been adapted accordingly. Overall statement regarding the risk situation of the FP Group In principle, Francotyp-Postalia Holding AG is exposed to the risks resulting from the affiliated group. In addi-tion to the financing risks described, the holding company faces the risk of further revaluation requirements in the case of its participations in freesort and iab if the business models of these companies, which are currently being developed, were not to play out as planned in the market. Taking the possible extent of damage and likelihood of occurrence into account, no risks can currently be identi-fied which could lead to a permanent significant impairment of the assets, financial situation or earnings position of the FP Group and therefore also Francotyp-Postalia Holding AG. Overall, the risks are controllable. From a current viewpoint, the continued existence of Francotyp-Postalia Holding AG is not under threat. The FG Group does not anticipate any fundamental changes to the risk situation. Organisationally, the company has created all conditions required to be informed of possible risk situations at an early stage.

Strategy / Outlook Overall economy The economy in the industrial countries in particular is recovering only slowly from the consequences of the global economic and financial crisis. The economic outlook of the International Monetary Fund published in January 2010 states that government support is still necessary to overcome the worst recession since the depres-sion of the 1930s. The IMF is expecting growth of 2.7 % in the USA and 1.0 % in the Euro zone (with growth of 1.6 % in 2011). The IMF has forecast a 1.5 % improvement in Germany during 2010 and growth of 1.9 % in 2011. All significant markets for the FP Group are therefore in a phase of slight recovery at the beginning of this year, but companies’ propensity to invest remains limited due to a lack of credit, underutilised capacity and a high level of unemployment. Developing countries are likely to develop significantly more dynamically in 2010, with estimated growth of 6 %, and will therefore continue to increase in economic significance. Economic experts predict a 7.7 % increase in the gross domestic product of India. By entering the Asian market at an early stage, the FP Group has created the conditions necessary to participate in this dynamic growth in the medium term. Future sector situation The economic environment and the regulatory framework conditions determine the future development of the outgoing post market. Globally, state-run monopoly companies are being restructured and the postal markets are becoming increasingly liberated. This liberalisation will be complete by 2011 in the EU. Although the German market has been liberated since the beginning of 2008, there are still several hurdles to overcome. For example, Deutsche Post still has the privilege VAT exemption. The weak economy influences the outgoing post market in two ways: On one hand, the weak propensity to in-vest also applies to the franking and inserting machine market. On the other hand, the cost pressures within the company increase the willingness to change outgoing post to cost-saving outsourcing solutions and work to-gether with professional service providers in this area. Strategy for the FP Group Against the background of the changing markets, the strategic redirection of the FP Group as a provider of mail management solutions has become fundamentally important. The Group is increasingly integrating its franking and inserting divisions into the software solutions and services divisions.

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As a globally active service provider for mail processing, the FP Group is pursuing a growth strategy with four focus points: 1. Development of the franking and inserting machine business in traditional markets with a previously small

market share. 2. Early entry into new markets with strong growth potential, in particular India, Singapore, Malaysia and

Indonesia 3. Development of the mail service business in Germany1 4. Realising growth opportunities by changing to new franking methods and new mail processing methods

(online letters and outsourcing) In order to benefit from further growth potential, the Francotyp-Postalia Group has developed its business in Asia to take part in the growth expected over the coming years and to further advance the global expansion of the company’s technology worldwide. The FP Group is determined to strengthen its opportunities for successful market cultivation by cooperating with suitable partner companies in the mail processing market. The FP Group is not planning any changes to the financing structure in 2010. However, discussions have been planned regarding additional financing for this year. There are also no plans to make significant changes to the company’s legal structure. General statement about future business development Due to the uncertainty regarding the development of the general and sector economy, it is currently impossible to make a quantitative forecast for this business year. In this difficult market environment, the company will focus on products and services with a strong margin to continue improving profitability in the medium and long term. The company anticipates organic growth in the franking and inserting divisions. Irrespective of the economic and legal framework conditions described, the Group considers there to be good opportunities for growth in the Software and Services divisions. This would have a correspondingly positive effect on Francotyp-Postalia Hold-ing AG. Overall, the Group expects a positive development of the overall turnover and earnings before interest, tax and depreciation (EBITDA) for the next two business years. This will also result in improved sales and earn-ings for Francotyp-Postalia Holding AG.

Events after the balance sheet date There were no significant events after the balance sheet date.

Management statement Management statement - corporate governance report The Management Board and Supervisory Board publish an annual Corporate Governance Report about the com-pany's corporate governance. This, along with the Declaration of Compliance, is an integral part of the statement regarding the management of the company pursuant to Section 289a (1) of the German Commercial Code (HGB). The German Corporate Governance Code aims to make the rules for the management and supervision of compa-nies applicable in Germany transparent for both domestic and international investors. The Code’s provisions and rules cover the areas of shareholder interests, the Management Board and Supervisory Board, the transpar-ency of company management and the duties of the auditor. The Management Board and Supervisory Board of

1 The Mail Services and Software Solutions divisions were still included in the Mailstream business division in the 2008 financial statement.

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Francotyp-Postalia Holding AG are committed to the implementation of the recommendations and proposals of the Corporate Governance Code (“Code”), in particular where they concern shareholder interests. In line with the principles of the social market economy, the Management Board and Supervisory Board also safeguard the company’s existence and ensure sustainable added value. The Management Board and Supervisory Board report on potential deviations from the Code recommendations in both the Declaration of Compliance and in the fol-lowing extensive disclosures with reference to the version of the Code dated 18th June 2009. 2010 Declaration of compliance with the German Corporate Governance Code Pursuant to Section 161 of the German Stock Corporation Act (Aktiengesetz), the Management Board and Su-pervisory Board of Francotyp-Postalia Holding AG hereby present its 2010 Declaration of Compliance, setting out the recommendations of the version of the German Corporate Governance Code dated 18th June 2009, as published by the Federal Ministry of Justice in the official section of the electronic version of the Federal Ga-zette, which it has been and is complying with and which recommendations have not been or are not being ap-plied. 3.8 The company has taken out D&O insurance for the Management Board and Supervisory Board. This

does not currently include any excess for the Management Board and Supervisory Board. In accordance with the statutory transitional provisions, the insurance will be modified to include an excess of 10% of the loss in respect of both the Management Board and the Supervisory Board with effect from 1st July 2010, limited to one and a half times the annual remuneration in each case.

4.2.1 In accordance with the Articles of Association, the Management Board of Francotyp-Postalia Holding

AG consists of one or more individuals. The Supervisory Board may appoint a Management Board member as Chairman. The Supervisory Board has not utilised this option as the Management Board of Francotyp-Postalia Holding AG currently only consists of two individuals who are responsible for the management of the entire company.

5.2 As long as the Supervisory Board continues to consist of only three individuals, no committees will be

formed in which the Supervisory Board Chairman or any other Supervisory Board member could oc-cupy an additional chairmanship role, as the composition of the committees would be identical to the Supervisory Board role.

5.3.1 For the same reason, so specialist committees will be formed. 5.3.2 As long as the Supervisory Board consists of only three individuals, the Supervisory Board as a whole

will take on the duties of an audit committee. 5.3.3 With regard to the formation of a nomination committee, the same circumstances apply as to the other

committees. 5.4.2 One Supervisory Board member is the economic owner of shares in the company. The Supervisory

Board considers the Supervisory Board's independence to be uncompromised. 5.4.3 Pursuant to Section 10 (1) of the company’s Articles of Association, the Chairman and Deputy Chair-

man of the Supervisory Board are elected from among the Supervisory Board’s members at its constitu-tive meeting. This meeting takes place after the Annual General Meeting of Francotyp-Postalia Hold-ing AG, during which the Supervisory Board members are chosen. Accordingly, the company cannot follow the recommendation that the candidate nominations for the Supervisory Board chairmanship be disclosed to the shareholders.

5.4.6 The Articles of Association do not provide for performance-related remuneration for members of the

Supervisory Board. A discussion on possible adjustments is planned. 7.1.2 As a consequence of the extensive consolidation work involved, the consolidated financial statement is

drawn up within four months of the end of the financial year. The quarterly and half-yearly reports are also published within two months of the end of the reporting period due to the extensive consolidation

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work involved, in accordance with the Stock Exchange Rules (Börsenordnung) and the implementation act on transparency guidelines (Transparenzrichtlinien-Umsetzungsgesetz).

Basic information on the structure and underlying rules of corporate management Francotyp-Postalia Holding AG is based in Birkenwerder and is therefore subject to German stock corporation law. German stock corporations are required to have a dual management system composed of a management board and supervisory board. In accordance with the Articles of Association, the Supervisory Board of Franco-typ-Postalia Holding AG consists of three members of the Management Board, to be elected by the Annual Gen-eral Meeting. The Chairman and Deputy Chairman are elected from among the Supervisory Board's members. It is therefore impossible to follow the recommendation pursuant to Section 5.4.3 of the Code to make suggestions to the shareholders for an election of the Supervisory Board Chairman. The Supervisory Board’s Rules of Proce-dure, drawn up by the committee for itself, govern its working methods. In accordance with the Articles of Association, the Supervisory Board of Francotyp-Postalia Holding AG holds four meetings per calendar year, two of which are to take place every six months. Extraordinary meetings are convened by the Supervisory Board Chairman if required after due assessment of the circumstances. Pursuant to the Articles of Association, the Supervisory Board may appoint one or more individuals to the com-pany’s Management Board. The Management Board of Francotyp-Postalia Holding AG currently consists of two members. The Management Board manages the company independently with the aim of creating sustainable added value while taking into account the concerns of shareholders, its employees and other groups affiliated with the company. In accordance with the Rules of Procedure for the Management Board issued by the Supervi-sory Board, the Management Board manages the company’s business in line with uniform plans and guidelines, whereby the Management Board bears joint responsibility for the management of the entire company. As part of the overall responsibility for managing the company, each Management Board member is required, within the remit of their allocated tasks, to cooperate with the other Management Board members in a collegial and trustful manner for the benefit of the company. The Management Board develops the strategic orientation of the company and coordinates this with the Supervi-sory Board. In addition to complying with statutory provisions and internal company guidelines, including those of the Group companies, the Management Board is also responsible for appropriate risk management and moni-toring within the company. More detailed information is available in the risk report contained in the Group man-agement report. Management Board meetings take place at regular intervals, every two weeks if possible. Supervisory Board Committees Due to the size of the company and the number of members required for the Supervisory Board pursuant to the Articles of Association, the formation of committees and bodies is usually avoided by the Supervisory Board. For this reason, the Supervisory Board as a whole decides on and monitors issues relating to the Management Board remuneration system, including the principle elements of contracts. Likewise, the Supervisory Board as a whole assumes the duties of an Audit Committee. The Chairman of the Supervisory Board also acts as Chairman of the Audit Committee. At least one member of the Supervisory Board has the required specialist knowledge in the area of accounting. Collaboration between the Management Board and Supervisory Board The ongoing increase in the company’s value is the shared goal in the close collaboration of the Management Board and Supervisory Board. The Management Board and Supervisory Board regularly discuss the current status of the strategic orientation of the company and its implementation as determined by the Management Board in collaboration with the Supervisory Board. The Management Board furthermore regularly informs the Supervisory Board of all matters relating to planning, business trends, the risk situation, risk management and compliance which are relevant to the company. In its reporting, the Management Board discusses and gives reasons for any discrepancies between the actual course of business and the company’s plans and targets. The Supervisory Board has drawn up Rules of Procedure setting out the details of the Management Board’s disclo-sure and reporting duties. The Management Board’s rules of procedures specify rights of veto for the benefit of the Supervisory Board concerning decisions or measures which fundamentally change the company’s asset, financial or earnings position and regarding transactions of significant importance.

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Until now, Francotyp-Postalia Holding AG has concluded D&O insurance with no excess for the members of the Supervisory Board and Management Board. In accordance with statutory transitional provisions, the D7O insur-ance taken out for the executive bodies of Francotyp-Postalia Holding AG will be modified to include an excess of 10% of the loss, limited to one and a half times the annual remuneration in each case, with effect from 1st July 2010. Remuneration of the Management Board and Supervisory Board

Francotyp-Postalia Holding AG adheres to the recommendation of the Code concerning disclosure of the remu-neration of individual Management Board and Supervisory Board members. The basic features of the remunera-tion system are presented in the remuneration report contained in the notes to the financial statement. Conflicts of interest When taking decisions and performing duties, the Management Board and Supervisory Board are bound to act in the company’s best interests and may neither pursue personal interests nor confer advantages on other persons or make personal use of business opportunities which are the purview of the company itself. All members of the Management Board must disclose any conflicts of interest to both the Supervisory Board and other members of the Management Board. Likewise, all members of the Supervisory Board must disclose conflicts of interest to the Supervisory Board. In its report, the Supervisory Board must notify the Annual General Meeting of any con-flicts of interest and how they have been dealt with. Shareholders and the Annual General Meeting The Management Board convenes an Annual General Meeting at least once a year. The purpose of the Annual General Meeting is to accept the adopted consolidated and/or company annual financial statements and associ-ated management reports, to decide on the appropriation of the net profit and to formally approve the actions of members of the Supervisory Board and Management Board. The Annual General Meeting is also responsible for choosing the auditor each year. At the AMG, the shareholders of Francotyp-Postalia Holding AG exercise their participation and control rights. They have the option of either exercising their voting rights personally or nominating an authorised representative of their choice, which may also be an association of shareholders, to exercise these rights on their behalf. To make it easier for shareholders to exercise their rights, the company also offers the services of a voting representative with whom they are also able to communicate during the Annual General Meeting. The documents required for the Annual General Meeting, including the agenda, are easily available to the share-holders on the company’s website. Wherever the corresponding authorisation has been granted, Francotyp-Postalia is glad to provide all domestic and foreign financial service providers, shareholders and shareholders' associations with an Invitation to the Annual General Meeting, along with the associated documents, in elec-tronic form. It is of course in the interest of both the company and the shareholders to conduct the business of the Annual General Meeting as swiftly as possible. In accordance with the Articles of Association, the meeting chairman is permitted to place reasonable limits on the time allotted to shareholders to post questions and exer-cise their right to speak. On cost grounds, and also due to the high degree of organisational effort involved, no complete internet transmission of the Annual General Meeting is planned. Transparency For Francotyp-Postalia Holding AG, corporate governance means responsible and transparent leadership and control of the company. In particular, this entails treating shareholders equally when it comes to the provision of information and its content. We disclose all new facts and circumstances to shareholders, financial analysts and the like without delay. This involves the dissemination of information in German and English, both on the Fran-cotyp-Postalia Holding AG website and through the use of systems which ensure the simultaneous publication of information within the country and abroad. All important regular publications and dates on the financial calendar are announced well in advance. Accounting practice The principle sources of information for shareholders and third parties are in the company’s consolidated finan-cial statement as well as, during the financial year, the quarterly and semi-annual reports. Contrary to the rec-

16

17

ommendations of the Code and due to the extensive consolidation work involved, Francotyp-Postalia’s consoli-dated financial statements are drawn up within four months of the end of the respective financial year. Due to the large amount of consolidation work involved, the quarterly and semi-annual reports are published within two months of the end of the reporting period at the latest, in compliance with the Stock Exchange Rules (Börsenordnung) and the implementation act on transparency guidelines (Transparenzrichtlinien-Umsetzungsgesetz). The consolidated financial statements and interim reports are drawn up in accordance with the International Financial Reporting Standards (IFRS). The individual financial statements required by law for tax and dividend payment purposes are drawn up in compliance with the provisions of the German Commercial Code (HGB). A list of relationships with shareholders qualifying as related parties in the sense of IAS 24 is published by the company in its consolidated financial statements. Audit Conclusion In accordance with the 2009 Annual General Meeting resolution, the Supervisory Board has appointed KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin to conduct the audit of the 2009 annual financial statement and consolidated financial statement. In accordance with the recommendations of the Code, it was agreed with the auditor that the Chairman of the Supervisory Board is to be immediately informed of any grounds for exclusion or bias which may arise during the audit, unless said grounds are eliminated without delay. The auditor is also required to immediately report any material findings or occurrences arising during the execution of the audit which may be relevant to the Supervisory Board’s performance of its duties. The auditor is further required to either notify the Supervisory Board or make a corresponding note in its audit report should it discover circum-stances indicating inaccuracies in the Declaration of Compliance with the Code specified by the Management Board and Supervisory Board pursuant to Section 161 of the German Stock Corporation Act (AktG).

Financial statement affidavit of the Management Board pursuant to § 289 (1) 5 of the German Commercial Code (HGB) “We affirm to the best of our knowledge that the financial statement conveys an accurate picture of the com-pany's asset, financial and earnings position corresponding to the actual circumstances and that in the manage-ment report the company’s business development, including the company’s financial results and position, is presented in such a way that it provides an accurate portrayal of the actual circumstances, and that the main opportunities and risks associated with the likely development of Francotyp-Postalia Holding AG have been described. Birkenwerder, 17th March 2010

Hans Szymanski Andreas Drechsler Management Board Management Board

ABCD�

Auditor’s Report�

We have audited the financial statement prepared by Francotyp-Postalia Holding AG, Birken-werder, consisting of the balance sheet, the income statement and the notes to the financial statement, taking into consideration the accounts and the management report, for the business year from 1st January to 31st December 2009. The accounts and the preparation of the financial statement and management report in accordance with the requirements of German commercial law are the responsibility of the company’s Management Board. Our responsibility is to express an opinion on the financial statement on the basis of the accounts and the management report.

We conducted our audit of the financial statement in accordance with section 317 of the German Commercial Code (HGB) and generally accepted standards in Germany for the auditing of fi-nancial statements as established by the Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer (IDW)). These standards require that the audit be planned and performed in such a way that inaccuracies and infringements materially affecting the presentation, in accor-dance with German principles of proper accounting,of the net assets, liabilities, financial posi-tion and profit or loss in the financial statement, and the management report, are detected with reasonable assurance. Knowledge about the business activities and the economic and legal envi-ronment of the Group, and expectations as to possible errors, are taken into account when de-termining auditing procedures. The effectiveness of the internal accounts control system and the evidence supporting the disclosures in the accounts, financial statement and the management report are examined primarily on a test basis within the framework of the audit. The audit in-cludes the assessment of the accounting principles used and significant estimates made by the Management Board, in addition to an evaluation of the overall presentation of the financial statement and management report. We believe that our audit provides a reasonably secure basis for our opinion.

Our audit has not led to any reservations.

7471-1273347 1

ABCD�

2 7471-1273347

In our opinion, based on the findings of our audit, the financial statement complies with the legal regulations and gives a true and fair view of the net assets, liabilities, financial position and profit or loss of Francotyp-Postalia Holding AG in accordance with German principles of proper accounting. The management report is consistent with the financial statement and as a whole provides an accurate picture of the Group's position and accurately conveys the opportu-nities and risks of future development.

Berlin, 17th March 2010

KPMG AG Wirtschaftsprüfungsgesellschaft

Dr. Großmann Public Auditor

Sternberg Public Auditor