Corporate Governance Report

The Management Board and the Supervisory Board of MAGIX AG support the principle of proper and responsible company management as stated in the German Corporate Governance Code (short: the Code). Compliance with the national and international standards set out in the Code is crucial in strengthening the confidence in corporate management of investors, employees, business partners and the public, thus contributing to sustained economic success of the company.

Declaration of conformity

Since the last declaration of conformity from January 2011, MAGIX AG has followed and continues to follow the recommendations of the "Governing Commission of the German Corporate Governance Code" in its version from May 26, 2010, or since its validity with the following exceptions:

• Cost sharing in D&O liability insurance for the Supervisory Board (section 3.8 of the Code): The company assumes that the arrangement of cost sharing in the D&O insurance for the Supervisory Board members has no effect on behavior, and is not in a position to influence motivation and responsibility. For this reason, the D&O insurance for the Supervisory Board Members does not include cost sharing.
• Taking into account the personal achievement in measuring variable compensation of members of the Management Board (section 4.2.2 of the Code): Compensation of Management Board members is dependent on their individual achievements and tasks. In measuring the variable compensation, a dependency on individual goals has not been considered. On the one hand, the areas of responsibility of Management Board members of MAGIX AG are interrelated to such an extent, making it impossible to define company goals for each area of competency. On the other, the basis for the company's success lies precisely in the collective responsibility of the Management Board.
• Determination of a settlement cap during signing of Management Board contracts in the event of premature termination of the Management Board duties (section 4.2.3, paragraph 4 and 5 of the Code): A regulation of the settlement payment in the event of premature termination of Management Board duties is deemed impractical. It would contradict the principle, that contracts made for a certain duration may not be terminated at an earlier date. Additionally, such a regulation is considered inappropriate to accommodate the circumstances of the situation surrounding the particular event. Finally, the company will not be able to enforce such a limitation ex parte. 
• Adequate inclusion of women in the composition of the Management Board and the Supervisory Board (section 5.1.2 and 5.4.1 of the Code): In accordance with requirements of stock corporation law, it is the opinion of the Supervisory Board of MAGIX AG that filling positions in the Management Board and the Supervisory Board of MAGIX AG should be guided by whether candidates possess the skills, expertise, and experience necessary for the Board's work. Although the Supervisory Board expressly endorses diversity, it considers criteria such as the candidate's sex secondary. For this reason, an adequate inclusion of women in the Management Board is not considered a priority. Similarly, the concrete goals set out by the Supervisory Board for its own composition do not provide for an adequate inclusion of women. This aim is not taken into consideration in candidate proposals the Supervisory Board makes to the shareholders' meeting.
• Age limit of the Management Board (section 5.1.2 of the Code): Due to the age structure of the Management Board of MAGIX AG, such regulation is currently deemed unnecessary.
• Formation of Supervisory Board committees (section 5.3 of the Code): The Supervisory Board of MAGIX AG currently consists of three board members, making it impossible to form committees.
• Definition of performance-related remuneration of the Supervisory Board (section 5.4.6 of the Code): It is the opinion of the company that the Supervisory Board will fulfill its legal obligation as an independent supervisory body better without its remuneration being linked to the success of the company, as this serves to guarantee interest neutrality.
• Publication of the consolidated financial statement and interim reports within the limits set forth in the Code (section 7.1.2 of the Code): The company will publish preliminary, unaudited quarterly and annual results within the time limits set forth in the Code. With regard to the consolidated financial statement and interim reports, however, the company regards the requirements as sufficient for companies listed in the Prime Standard of the Frankfurt Stock Exchange.

Stock held by board members

At the time of the report's publication in January 2012, the stock currently held by the members of the Management Board and the Supervisory Board was as follows:

** The limited liability capital of Presto Capital Management GmbH & Co. KG is owned by Jürgen Jaron and Dieter Rein each to 50%. Thus, Jürgen Jaron and Dieter Rein collectively directly or indirectly hold approximately 58.30% of the company's voting rights.

Transactions by members of the MAGIX AG management subject to notification since September 30, 2010

The following transactions subject to notification have been conducted by members of MAGIX AG management:

Remuneration of the Management Board

The members of the Management Board receive an annual remuneration that consists of success-related, success-independent as well as long-term success-dependent elements. 

Irrespective of the success of the company the members of the Management Board receive a fixed salary as well as fringe benefits. Such mainly include use of a company car, travel expenses and telephone costs. The bonus is determined by the Supervisory Board based on the revenue and profit goals for the current fiscal year. In the event of extraordinary achievements, the Supervisory Board may also approve a special bonus.

Total compensation of the Management Board in the 2010/2011 fiscal year comprised kEUR 534. Success-independent components totaled kEUR 450 (fixed salaries: kEUR 421, fringe benefits: kEUR 29). The success-dependent share of remuneration of the management board amounted to kEUR 84. No stock options rights were allotted to the Management Board members during the period of the report. Loans or similar services were not given. In addition, Board members were not promised or granted benefits by third parties with regard to their activity as members of the Management Board.

The remunerations were apportioned as follows (in kEUR):

Remuneration of the Supervisory Board

In accordance with Section 13, paragraph 1 of the MAGIX AG Articles of Association concluded at the Shareholders' Meeting, the Supervisory Board of the company is to receive a fixed remuneration per financial year. This is to be decided at the Shareholders' Meeting. Furthermore, the expenses of the Supervisory Board will be refunded. These also include the value added tax added to the remuneration insofar the member of the Supervisory Board is entitled to invoicing VAT separately. In addition, an appropriate liability insurance (D&O insurance) for the members of the Supervisory Board has been purchased at the expense of the company.

The following remuneration was paid to the members of the Supervisory Board (in kEUR):

Objectives of the Supervisory Board regarding its composition and implementation status

The by-laws of the Supervisory Board include, among other things, the Supervisory Board's objectives for its composition and refers to the MAGIX AG Articles of Association regarding composition, term of office, substitute memberships, and resignations of the Supervisory Board. Other concrete goals set out by the Supervisory Board for its composition are based mainly on the Corporate Governance Code. Candidate proposals made by the Supervisory Board for the appointment of Supervisory Board members by the Shareholders' Meeting should take these objectives into consideration.

In accordance with its by-laws, the Supervisory Board is guided by the following objectives regarding its composition:
a. members of the Supervisory Board should possess the knowledge, skills, and professional experience necessary for the proper accomplishment of the Board's duties. The individual skills, knowledge, and experience of the members can complement each other to obtain this objective;
b. the Supervisory Board should include at least one member who is particularly qualified for handling the company's international activities (for example, due to foreign nationality or relevant experience abroad);
c. the Supervisory Board should not include more than two former members of the Management Board;
d. members of the Supervisory Board should not exercise advisory functions or serve on the Board of major competitors of the company;
e. the Supervisory Board should include at least one member who does not have business or personal relations with the company or its Management Board that may create a conflict of interest;
f. the Supervisory Board should include at least one member who is independent and possesses expertise in accounting or financial statements (section 100, paragraph 5 of the Stock Corporation Act (AktG));
g. Supervisory Board members who serve on the management board of a listed stock corporation should not possess more than three seats on the Supervisory Board of listed companies that do not form part of the group's company on whose Board they serve, or in supervisory bodies of companies with comparable requirements;
h. members of the Supervisory Board should, as a rule, not be in office longer than until the end of the Shareholders' Meeting which follows their seventy-fifth birthday.

The Supervisory Board is of the opinion that the above-mentioned goals are fulfilled with its current composition.

Due to their long-standing careers with different backgrounds, the members of the Supervisory Board possess an exceptionally large amount of skills, knowledge, and professional experience useful in the proper performance of the Supervisory Board's duties, particularly by mutually complementing each other. With Mr. Dierk Borchert, public accountant, the Supervisory Board includes an independent expert in accounting and financial statements among its members. Additionally, all members of the Supervisory Board possess considerable experience abroad. Furthermore, the three members of the Supervisory Board meet the requirements set out in items c, d, e, g, and h.

Stock Option Plan

No stock options were granted to employees of MAGIX AG in the 2010/2011 fiscal year.

Berlin, January 2012
For the Supervisory Board Karl Heinz Achinger
For the Management Board Jürgen Jaron