balda half-year report 2011

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MobileCom segment: Intensified search for a joint venture partner / shareholding alreadydeclared as a continued business division

Sales revenues in the first half of the year in continued business divisions grow by 0.8 millionEuros to 28.9 million Euros (same period in the previous year: 28.1 million Euros)

Operating profit (EBIT) increases by 0.5 million Euros to 1.1 million Euros (same period in theprevious year: 0.6 million Euros)

Pre-tax profits (EBT) rise by 1.5 million Euros thanks to positive financial earnings, taking themto 10.4 million Euros (same period in the previous year: 8.9 million Euros)

Half-year Report 2 0 1 1

Key Figures of Balda Group 2Letter to the Shareholders 3Notes to the changed structure 4

Interim Management Report 5Selected explanatory notes 18Tables 25

Operative results in the first half of 2011 positive / MobileCom segment part of the discontinued business division

CONTENT

2

Key Figures of Balda Group

Brief profile of Balda

Technologies | Quality | Outstanding productsOur mission is to provide superior engineered products of the highest quality and a fast, flexible service to our customers at

a competitive price. Balda´s success is based on continual investment in R&D and the use of state-of-the-art, cost-efficient

technologies. The company will continue to invest in innovative technologies and in the skills of its employees. Our teams

from different countries and continents continually strive to produce the best possible product quality. Doing business with us

is easy and we work closely with our customers, ensuring added value for our employees, business partners and sharehol-

ders.

Key figures of Balda Group (continued operations)

in mio. EUR 1 Half-year 1 Half-year Change Q 2 Q 1 2011 20101 in percent 2011 20111

Revenues 28.9 28.1 2.8 15.5 13.4 Electronic Products 12.5 14.9 -16.1 5.8 6.7 Medical 16.5 13.1 26.0 9.8 6.7 Central Services 0.0 0.0 0.0 0.0 0.0

Total operating performance 34.4 34.6 -0.6 19.4 15.0

Operating result (EBIT) 1.1 0.6 83.3 2.3 -1.2

EBIT margin (in %) 3.3 1.8 11.9 -7.7

Earnings before taxes (EBT) 10.4 8.9 16.8 4.6 5.8

Earnings continued operations 10.2 9.2 10.9 4.3 5.9

Earnings discontinued operations -25.6 -4.1 -24.1 -1.5

Group result -15.4 5.1 -19.8 4.4

Earnings per share (in euro cent) 2 -26.1 9.9

Operational cash flow 7.7 -6.1

Employees 3 1,025 1,299

(1) Values adjusted to account for MobileCom (2) Number of shares on the balance sheet date in millions 58,891 (balance sheet date in the previous year: 54,157 millions) (3) Number of employees including continuously employed temporary agency staff, assistants and trainees – only continued business divisions

3

Letter to the shareholders

Letter to the shareholders

Dear shareholders,

As announced in the annual report for 2010, the time for making decisions above all for one issue arrived during the first half

of 2011: the search for a strong joint venture partner for the MobileCom segment. The segment has been a discontinued busi-

ness division since June, because it is foreseeable that the control will not remain with Balda.

However, this report shall first examine the development of the Balda Group during the first half of 2011. Taking a comparable

data basis with the two continued business divisions of Electronic Products and Medical, the Group sales before the planned

acquisition rose slightly in comparison with the previous year, standing at 28.9 million Euros. The operating result stood at 1.1

million Euros, in line with the previous year. Thanks to the extraordinarily positive financial profit, profits before tax (EBT) rose

to 10.4 million Euros. Also with consideration to the difficulties arising in the Electronic Products segment due to the delivery

of components from Japan, as a result of the Japanese disaster, we are satisfied with the operative business conducted during

the first six months of 2011. The business development in the Electronic Products and Medical segments is positive and ove-

rall profitable.

The search for a joint venture partner for the companies in the MobileCom segment is a logical consequence based on our

realtime and strict observation over the year. We have reported continuously on the issue. Despite repeated restructuring

attempts we have been unable to achieve the desired results in the volatile and highly competitive mobile telephone market.

Without taking on a strong joint venture partner it would have not been responsible to continue in this segment, also in your

interests, esteemed shareholder.

You may now ask yourself: After completion of a joint venture of the MobileCom segment, has the Balda Group undercut a certain

critical mass in terms of company size and sales? Can the Group successfully survive in just two segments?

The segments that make up our continued business divisions – Electronic Products and Medical – are an excellent foundation

upon which to develop the Group. They are technologically strong and overall profitable. With regards to the planned acquisi-

tion in the medical segment, the prerequisites for a potential takeover are now in place.

As shareholders of Balda AG one further subject concerns you: The Balda AG share stake in the touchscreen manufacturer

TPK. At the end of the half year, the holding period (i.e. the prohibition of assets sale) remained effective. The option of selling

of 50 percent of the shares in TPK would have been permitted in compliance with the Taiwan Stock Exchange rules and after

the expiration of the holding period on the 13th July 2011. Balda has also due to volatile market conditions with strong fluctua-

tions in the share price not issued any order to sell. But we are in close contact with banks, consultants and TPK concerning a

sale of shares in TPK.

What are the prospects for the operative business in 2011? We are predicting that the two active segments in the continued

business divisions – Electronic Products and Medical – will generate between 70 and 80 million Euros in sales with a slight

upturn in operative profit.

Dear shareholders, we would like to thank you for placing your confidence in us. I would like to assure you that we will work

together in order to do everything possible to continue safeguarding the inventory of the Balda Group and to further increase

the value of Balda AG.

Yours,

Rainer Mohr

(Sole Member of the Board of Directors)

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Notes to the changed structure of the half yearly report

The company management of Balda AG firms up its decision from the first half year to seek a strong joint venture partner for

the MobileCom segment. Despite repeated restructuring attempts, it was not possible for the segment to achieve the desired

results in the volatile and highly competitive mobile telephone market. The MobileCom segment is already included in the

discontinued business division in the half yearly report for 2011, because it is assumed that the control of the shares will not

remain with Balda.

With the half yearly report for 2011, the Balda Group structures its continued business divisions into just three segments:

Electronic Products

Medical

Central Services

Continued and discontinued operations

The following key figures presented for the first six months of 2011 are individual indications of the values of the continued

business divisions. The data for the first half year of 2010 presented in this report does not concur, in terms of the composi-

tion of the continued business divisions, with the values provided in the half yearly report for 2010.

In the interim report issued on the 30th June 2010 the MobileCom segment is still part of the continued business divisions. At

the end of the first half year of 2010 the Group’s former Indian segment was listed as a discontinued business division.

The information regarding the continued business divisions in this interim report is based primarily on the results of the follo-

wing operating companies:

Balda Solutions Malaysia Sdn, Bhd,

Balda Medical GmbH & Co, KG

Balda Solutions USA Inc,

The comments to the key figures in the following half yearly report are always related only to the continued business divisions.

Where comments are made in relation to the discontinued business divisions, this is expressly stated.

Where necessary this report presents appropriately adjusted and comparable figures from the previous period.

Half-year Financial Statements / 2011

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Interim management report

Macroeconomic developmentGlobal economy remains robust

During the first half of 2011 the global economy remains characterised by high economic dynamics. The strongest impetuses

continue to come from the emergent nations. During the first six months of the current financial year the BRIC countries

show growth of over 6 percent. Despite the restrained development witnessed in the USA and the debt crises of fringe

European countries, analysts are also forecasting a positive economic environment during the remainder of 2011.

Eurozone

The Eurozone economy experienced a decline in momentum during the first half of the year. The European region is suffe-

ring a debt crisis. The economic development of some countries inside the Eurozone is not progressing homogeneously.

Whilst the economy in Germany is booming, Spain is experiencing stagnation and Greece and Ireland are in the midst of a

slump. Given the prevailing problems of some peripheral countries, the estimated development within the Eurozone of a 2.1

percent rise in GDP during 2011 must however been viewed as positive overall.

Germany

During the first half of 2011 Germany has found itself experiencing a powerful upswing. According to the federal office for

national statistics (Destatis), Germany’s Gross Domestic Product (GDP) rose during the first quarter of 2011 by 1.5 percent in

comparison to the previous quarter. The growth is resulting primarily from foreign countries. According to financial experts,

the export surplus will contribute to around 1.5 percent of the growth of GDP during the first half year.

The consumer prices during the months of March and May both showed a rise of 2.7 percent, whilst there was a 2.8 percent

rise in April. In order to combat the rise in inflationary trends, the European Central Bank may once again implement a slight

increase in the base interest rate. In July 2011 the ECB increased the base interest rate by 1.5 percent. The unemployment

rate in Germany stood at 6.9 percent in June 2011 and was therefore lower than the rate of 7.5 percent during the previous

year.

The rate of inflation increased by 2.3 percent in June 2011 in comparison to the same period in 2010. Despite the rise in pri-

ces as well as the European debt crisis, economic experts predict that Germany’s economy will continue to experience

powerful development.

USA

The development of the market economy in the USA did not reflect the 2 percent in GDP growth forecast for 2011 by econo-

mic experts. The causes of this are the rise in oil prices as well as the delay in production resulting from the earthquake

disaster in Japan. The spending trend amongst US consumers weakened during the year. The difficult employment market is

also giving rise to concerns. In June 2011 the rate of unemployment rose to 9.2 percent. In May 2011 the trade deficit of the

United States of America stood at 50.2 billion US Dollars and was therefore at its highest since October 2008.

China

The People’s Republic of China stands under serious inflationary pressure. On the one hand, the country must battle to keep

inflation down, whilst on the other the government must avoid putting too excessive a brake on the economy. This would slow

the financial upturn of the global economy.

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The government continued with its tight monetary policies during the second quarter, in order to master the prevailing level

of inflation. In June inflation reached 6.4 percent and was therefore at its highest level for three years. During the first half of

2011 the rate of inflation stood at 5.4 percent.

Since the start of 2011 the Chinese Central Bank has increased the minimum reserve ratios four times and twice raised the

basic rate of interest. Despite Beijing’s intervention against the rate of inflation, the economy in China slowed less than antici-

pated during the second quarter of 2011. According to the office for national statistics in Beijing, growth in the People’s

Republic fell only slightly from 9.7 percent to 9.6 percent.

Sector situation

Electronic Products

The financial upturn was experienced in the demand for Electronic Products during the first half of 2011. The launch of new

products and technologies contributed to the positive trend. Touchscreens, 3D displays and more compact devices are being

acquired by a growing number of consumers worldwide. The increasing wealth of the population in the emergent nations is

intensifying this development.

Alongside Apple’s iPad, devices from ASUS and Acer are also enjoying growing popularity. According to the industry associa-

tion BITKOM, 78 percent of domestic high-tech companies recorded higher sales in the first quarter of 2011 than in the com-

parable quarter of the previous year. Around 87 percent of companies are predicting a continuation in rising sales during the

second half of 2011. Despite the negative influences of the nuclear disaster in Japan on the electronics industry, the progno-

sis for 2012 is also overwhelmingly positive.

Medical

Following on from the slight slump in the recessionary period, the German medical technology sector has witnessed rapid

recovery. The global demand for high quality medical devices from Germany has risen once again after experiencing a slight

decline in sales during 2009. Advanced engineering and the use of the best, most innovative components continue to secure

the leading position of domestic medical technology producers.

According to the industry association SPECTARIS, industry sales during 2010 had a value of around 20 billion Euros. This

equates to growth of approx. 10 percent in comparison to the previous year. This distinct rise was primarily the result of

increasing sales abroad. Exports to the USA rose in 2010 by 14 percent and in China by around 34 percent.

The mood amongst the producers is also positive in relation to the coming year. A growing global population and rising life

expectancy figures will also ensure high demand in the future according to market commentators. The gradual rise in the

spending power of consumers in countries such as China and India will further strengthen this development.


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Business developmentIn June 2011 the Balda Group embarked on the search for a joint venture partner and investor for the companies in the

MobileCom segment in Suzhou and Beijing.

The prospects of successful restructuring of the segment had become increasingly unlikely. The highly intensive competitive

situation in the supplier market of mobile telephone manufacturers resulted in extremely high pricing pressure. Market com-

petitors also demonstrated only minimal utilisation of production capacities. The production of Balda’s most important custo-

mer was heavily affected by the delay in the supply of components caused by the earthquake and subsequent nuclear disa-

ster in Japan. Also difficult was the fact that the segment received no new projects due to the intense competitive situation

and the stabilisation process initiated by Balda.

The MobileCom segment is included in the discontinued business division in the half yearly report for 2011. Brokers and con-

sultants in China have been tasked with the search for a joint venture partner for the companies in Suzhou and Beijing. The

reason for this development was the most recent forecast data. Predications indicate that just 30 percent of the original

sales planned for the segment in 2011 are likely to come to fruition.

Group earnings position

The manufacturing segments of the continued business divisions Medical and Electronic Products exhibited a positive situa-

tion during the first half of 2011, as did the Central Services segment, and are following a healthy course. Their profits lie wit-

hin the scope of planning. The Central Services segment recorded positive profits due to special influences.

During the first half of 2011 the sales of the Balda Group stood at a volume of 28.9 million Euros. This is an increase of 0.8

million Euros or 2.8 percent in comparison to the first six months of 2010. During the second quarter of 2011 the sales rose

slightly, to 15.5 million Euros following on from 13.4 million Euros in the first quarter. Balda first felt the effects of the disa-

ster in Japan during the second quarter, with this preventing stronger growth.

The positive trend in the sales was suppressed in the profit figures. The operating profit for the Group rose at the end of the

first half to 1.1 million Euros in comparison to a figure of 0.6 million Euros in the same period during the previous year. In

contrast, the profits before tax increased as a result of the positive financial results to 10.4 million Euros (previous year: 8.9

million Euros). The half yearly surplus in 2011 in the continued business divisions was 10.2 million Euros (previous year: 9.2

million Euros).

Electronic Products segment suffering from decline in deliveries from Japan

The sales in the Electronic Products segment declined from 14.9 million Euros during the first half of 2010 to 12.5 million

Euros in the same period of 2011. The primary reason for this development was the fallout from the earthquake and the

nuclear disaster in Japan. Essential electronic components from manufacturers in Japan for installation in electronic devices

were unavailable for delivery, in particular during the second quarter. This deficiency led to a decline in production in

Malaysia. The otherwise healthy order situation in this segment suffered considerable losses under these conditions.

However, despite the drop in sales, the segment succeeded in reducing the operating losses by 1.0 million Euros to 1.5 mil-

lion Euros (previous year: Minus 2.5 million Euros). Strict cost management and targeted improvements in production pro-

cesses led to this improvement in results.

The trend of business development in the segment is positive. The trend is accurate.

Medical segment growing in sales and profits

The sales in the Medical segment during the first half of 2011 stood at 16.5 million Euros and therefore demonstrated con-

siderable growth in comparison to the figure of 13.1 million Euros from the same period in the previous year. Business is

developing in line with planning in 2011. During the first six months of the year considerable outlay was required for the

8

development and expansion of production facilities for the start of production for new projects in the second half of 2011.

The operating profit for the segment stood at 1.3 million Euros after the first six months (previous year: 1.1 million Euros).

The pre-tax profit (EBT) was 1.2 million Euros (previous year: 1.0 million Euros). The Medical division is on target.

Central Services segment

The profits generated by the Central Services segment result from holding and financing services as well as leasing with pro-

perty in Bad Oeynhausen and development services of the Group subsidiary in the USA.

The overall performance of the Central Services segment stood at 8.1 million Euros after the first half of 2011. The operating

profit (EBIT) stood at 1.7 million Euros after the first six months (previous year: 2.7 million Euros). The ongoing EBIT inclu-

des one-off effects arising from reimbursed claims for damages (0.8 million Euros) and confirmed payments for the BenQ

insolvency administrator (net 2.0 million Euros). The same period during the previous year is affected by a one-off effect

amounting to 4.7 million Euros.

Including the financial results, the pre-tax profit (EBT) presents a similar picture to that of the previous year, standing at 11.0

million Euros in comparison to 10.9 in the previous year. With the change to the participation rights in October 2010, the

Central Services segment is free of bank debt. As such the segment is able to register positive financial results. The financial

results in 2011 include currency gains from internal financing of 9.1 million Euros. These currency gains are essentially the

result of loan granted in 2009 by Balda Investments Singapore (BIS) to Balda AG in US Dollars for the repayment of bank lia-

bilities. The gains result from the difference in currency exchange rates between US Dollars and Euros as calculated on the

date of exchange.

Following the loss of the decisive influence, no further pro rata results have been channelled into the segment from operating

activities since November 2010. During the same period during the previous year it was possible to show pro rata results

from operative activities and profits from the sale of shares to the associated company TPK totalling 9.7 million Euros.

Discontinued business division

The discontinued business division comprises the MobileCom segment. The values in the previous year also include results

from the former Indian segment. The missing amount in the first half year of the discontinued business division stood at

25.6 million Euros (previous year: Minus 4.1 million Euros). This includes special accounting devaluations amounting to 19.9

million Euros and the loss resulting from operative business in the first half year amounting to 4.2 million Euros as well as

expenditure for interest and tax in the amount of 1.5 million Euros. Following detailed analysis a devaluation of the net assets

of the companies took place, to attain proceeds considered to be realistic by the Board of Directors.

Asset situation

On the 30th June 2011 the Balda Group reported a balance sheet sum of 901.9 million Euros (31st December 2010: 810.5

million Euros). The increase is primarily attributable to the growth in value of the TPK shareholding. Counter effective to this

are devaluations of the recoverable amount of the assets in the MobileCom segment in combination with the pending com-

pletion of a joint venture in the companies in this segment.

There was an increase of 83.9 million Euros in the value of long-term assets in the first half of 2011, taking these to 795.5

million Euros (31st December 2010: 711.7 million Euros). This increase is due to the previously mentioned rise in value of

the TPK shareholding (130.5 million Euros). The price of the TPK shares rose from 670 Taiwanese Dollars on the 31st

December 2010 to 875 Taiwanese Dollars on the balance sheet date. In contrast, special devaluations and reclassifications

of long-term assets in the MobileCom segment in the short-term area (21.4 million Euros) have an adverse effect.

The net working capital. i.e. the current assets (excluding liquid assets) less the current liabilities (excluding bank liabilities)

decreased during the reporting period. Excluding the discontinued business division it stood at 6.4 million Euros on the 30th

June 2011 (reference date 2010: 14.8 million Euros). The change in the current assets and current liabilities is primarily

determined by the reclassification of the MobileCom values into the items assets held for sale and liabilities.


9


The Group’s equity increased by 99.2 million Euros to 849.0 million Euros (reference date 2010: 749.7 million Euros). The

revaluation of the TPK shares overcompensated for the negative effect due to currency exchange rate discrepancies and the

negative Group result.

The net financial liabilities of the Balda Group stood at minus 27.1 million Euros at the end of the first half year (reference

date 2010: Minus 23.5 million Euros). At the end of the first half of 2011, the ratio of net financial liabilities to equity (net

gearing) stood at minus 0.3 percent.

Further information on the individual items on the balance sheet on the 30th June 2011 is provided in the remarks on page

19 of the abbreviated annex.

Financial situation

Significant rise in operating cash flow

The cash flow statement has been drawn up in accordance with the IFRS for the Group – including the discontinued busi-

ness division. The figures for the discontinued business division are presented in the table in the annex, marked “of which”.

The inflow of funds from ongoing business activities of the Balda Group rose during the first half of 2011 to 7.7 million Euros.

During the comparable period in the previous year the Group recorded an outflow of funds of 6.1 million Euros. The primary

cause of the increase during the reporting period in 2011 was the reduction in working capital.

Balda Group investment activities accounted for 2.0 million Euros during the first half of the year. In the same period during

the previous year the cash flow arising from investment activities was characterised by the sale of shares in Group compa-

nies and stood at 4.9 million Euros.

Cash outflows due to financing activities in the first six months of 2011 totalled 9.2 million Euros and primarily related to the

repayment of credit lines in the MobileCom segment. In the previous year, cash flows totalling 1.1 million Euros resulted from

the utilisation of credit lines for financing activities.

The Group's liquid funds totalled as of the end of the first half year 42.3 million Euros (30th June 2010: 49.4 million Euros).

When applied to continued business divisions the liquid funds stood at 36.4 million Euros.

As a result of the consistently comfortable inventory of liquid funds, Balda is able to finance the operative business in 2011

using available equity.

10

Significant events in the second quarterAnnual General Meeting

At the Annual General Meeting on the 27th May 2011 the shareholders of Balda AG passed a resolution that reduced the

Supervisory Board to three members. Members of the Supervisory Board are: Dr. Michael Naschke (Chairman), lawyer and

partner in the law firm van Aubel, Berlin, Chun-Chen Chen (Deputy Chairman), Chairman of TVM Corporation and Touch

Video Monitor Corporation, Taipeh, and Yu-Sheng Kai, Managing Director of Eternal Union International Limited, Hong Kong.

Search for a joint venture partner for the MobileCom segment

Since June 2011 the MobileCom segment has been a discontinued business division of the Balda Group. The company com-

menced the search for a joint venture partner for the shareholdings in China.

Dividend

On the 9th June 2011 the Annual General Meeting of TPK agreed a resolution regarding the payment of a dividend in the

form of a dividend in kind through shares within the framework of a capital increase. Around 1.8 million shares are held by

Balda. The dividend payment is set to take place on the 2nd August 2011.

Changes in the shareholder structure

During the course of the second quarter of 2011 changes in the shareholder structure of Balda AG came into effect.

On the 10th June 2011 the major shareholder Senrigan Master Fund increased its interest in Balda AG to slightly above 5

percent. Its share in the voting rights at Balda AG now account for 5.09 percent.

On 23th June 2011 the UBS AG share in the voting rights at Balda AG exceeded the threshold of 3 percent.

InvestmentsDuring the current financial year the Balda Group had invested a total of 1.2 million Euros in fixed assets and intangible

assets up to the 30th June 2011. The comparable investment volumes during the first half of 2010 stood at around 0.9 mil-

lion Euros.

The investments are primarily replacement investments. The Balda Group invested around 0.4 million Euros on fixed assets

and machinery in the Electronic Products segment during the first six months of the current financial year. This is a consider-

able increase on the first half of 2010, where investments stood at around 0.2 million Euros. The investments in the Medical

sector of the Group between January and June 2011 accounted for around 0.5 million Euros (first half of 2010: Approx. 0.6

million Euros). The volume of investment in the Central Services segment stood at approx. 0.1 million Euros and was therefo-

re similarly small. The Balda Group spent around 0.2 million Euros in the Central Services segment on intangible assets.

The Balda Group invested a total of 0.6 million Euros in the discontinued business division of MobileCom. The object of this

was the infrastructure for the production site in Beijing. The comparable investment volumes during the first half of 2010

stood at around 4.0 million Euros. Of this total, around 3.5 million Euros was accounted for by the development of the pro-

duction site in Beijing.


11


Financial structure, Board of Directors and change of control

In accordance with the regulations of paragraph 289 (4) and paragraph 315 (4) of the German Commercial Code (HGB)

Balda AG is obliged to provide the following additional information:

Composition of subscribed capital

As of 30th June 2011 the company's registered capital amounted to 58,890,636 Euros and was dispersed in 58,890,636

individual share certificates with a proportional value of the registered capital of 1.00 Euros per share. Each individual share

is granted a vote at the company's Annual General Meeting.

Reduction in the Supervisory Board and change to the articles of association

Through a change to the articles of association and with effect from 3rd July 2011 the Annual General Meeting reduced the

Supervisory Board committee to three members. Members of the Supervisory Board are: Dr. Michael Naschke (Chairman),

lawyer and partner in the law firm van Aubel, Berlin, Chun-Chen Chen (Deputy Chairman), Chairman of TVM Corporation

and Touch Video Monitor Corporation, Taipeh, and Yu-Sheng Kai, Managing Director of Eternal Union International Limited,

Hong Kong.

Voting right restrictions or the assignment of shares

All of the company's shares are freely assignable in accordance with the statutes.

The company's Board of Directors is unaware of restrictions on voting rights or restrictions affecting the assignment of shares

as of the reporting date.

Shareholdings surpassing ten percent of the capital

As of 30th June 2011 the following shareholders held direct or indirect shareholdings in the company's registered capital that

entitled them to more than 10 percent of voting rights::

Yield Return Investments Ltd., Apia, Samoa: 27.60 percent of the capital and voting rights

Yun-Ling Chiang, Richmond, Canada: 27.60 percent of the capital and voting rights indirectly via Yield Return Investments Ltd.

Shareholders with privileges

There are no shares with privileges that grant control authority.

Special controlling of voting rights for employees

To the Board of Directors' knowledge, employees who hold shares in the company exercise their voting rights directly

Board of Directors' authority

Authorised capital:

The Board of Directors and the Supervisory Board are entitled to the same rights as of the 31st December 2010 with regard to

the authorised capital.

Authorisation for the purchase of own shares and recovery of the shares thus purchased:

The Annual General Meeting in 2011 empowered the Board of Directors of the company – with the approval of the

Supervisory Board – with acquiring its shares to the value of up to 10 percent of the share capital as at the time of the reso-

lution.

12

Main agreements in case of a change of control

There are various agreements at the level of Balda AG and in the Group's companies, which are subject to a change of con-

trol resulting from a bid for takeover. Since more detailed information concerning these agreements may put Balda AG at a

considerable disadvantage, they are not disclosed.

Compensation agreements in case of a bid for takeover

There are no compensation agreements with members of the Board of Directors or employees in case of a bid for takeover.

EmployeesPersonnel level reduced as a consequence of the search for a joint venture partner in the MobileCom seg-

ment

The number of employees fell further during the second quarter of 2011. The Balda Group employed as of the 30th June

2011 a total of 1,025 people in its continued operations. This is a reduction of 15 employees in comparison to the 31st

March 2011, at which time 1,040 personnel were employed. The reduction in numbers is primarily linked to further efficiency

enhancements in the Electronic Products segment, whilst Medical is slightly increasing its number of employees.

As a result of the reduction in employees the Balda Group improved its personnel expenses ratio in the second quarter of

2011 to 25.7 percent (31st March 2011: 29.2 percent).

Since the second quarter of 2011 the MobileCom segment

has been a discontinued business division and employed a

total of 583 members of staff on the 30th June 2011 (31st

March 2011: 635 employees). At the end of December 2010

the factories in China still employed 1,344 members of

staff.

As of the 30th June 2011 the Electronic Products segment employed a total of 789 people. On 31st March 2011, 809 people

remained employed in the production plants in Malaysia. The reduction of 20 employees or around 2.5 percent of personnel

was the result of temporary employees being released. The slight drop can also be attributed to improved production proces-

ses.

In contrast, a slight increase was witnessed in Medical. The

segment employed 213 people in Germany in the period

under review following on from 207 people as of the end of

the first quarter of 2011. New products are the reason

behind the slight rise in personnel numbers.

With 23 employees, the number employed in the Central

Services segment remained constant following on from the

level in the first quarter of 2011. On 31st March 2011 24

members of staff were employed in the holding companies

and the development centre in the USA.

1,025

1,040

Number of employees

0 500 1,000 1,500

30.06.2011

31.03.2011

25.7

29.2

Personnel expenses ratio (in percent)

0 10 20 30

30.06.2011

31.03.2011


13


Events after the reference dateAccording to the regulations of the Taiwanese Stock Exchange, the sale of 50 percent of the shares held in TPK would have

been permissible on the 13th July 2011, following the expiration of the holding period. Due to the recent volatile market con-

ditions, with severe stock price fluctuations, Balda has not issued any sale order to date. However, the company continues to

coordinate closely with banks, consultants and TPK regarding selling the TPK shares. The share price of TPK equated as of

the 1st August to around 21 Euros and an enterprise value for the Balda shareholding of more than 750 million Euros.

On the 11th July 2011, UBS AG increased their shareholding in Balda AG to 5.11 percent of the voting rights. On the 12th

July 2011, UBS AG reduced their shareholding in Balda AG to 3.84 percent of the voting rights. On the 15th July 2011, USB

AG undercut the threshold of 3 percent and now holds 2.48 percent of the Balda AG voting rights. On the 28th July 2011,

UBS AG increased their shareholding in Balda AG to 3.13 percent of the voting rights.

No further events occurred after the 30th June 2011, which are of major significance to the Balda Group and might result in

a different assessment of the company.

ForecastGlobal prospects for growth remain robust

The prospects of global economic growth in 2011 remain robust. According to the opinion of the IMF, the economic momen-

tum will grow by 4 percent. The strongest growth impetuses continue to come from the emergent nations. However, the eco-

nomic momentum is also set to improve considerably in the industrial countries. Similar growth development is forecast in

2012. The greatest risks for further overall economic development still lie in the potential escalation of the debt crisis in

Europe, the political unrest in North Africa and in the Middle East, as well as the strong rise in inflation in China, which will

lead to more restrictive monetary policy.

The early indications are that Europe has once again weakened. This will result in the financial upturn in countries in the

European Union being less vigorous in the second half of the year. The economic momentum continues to differ dramatically

from one Eurozone country to another. The economic upswing is predominantly apparent in the strong export countries,

Germany and France. The economy in countries such as Spain, Ireland and Portugal remains weak. Greece is in fact in the

midst of a serious recession. The introduction of austerity measures to the public budget is inhibiting domestic demand wit-

hin these countries.

However, the structural reforms introduced are increasing the chances of the European monetary union coming out of the

crisis in a stronger position. The IMF is expecting growth of around 2 percent in the Eurozone following on from 1.7 percent

in the previous year. The inflation rate in the EMU states has risen again due to higher energy prices. For 2011 as a whole,

the experts of MM Warburg & Co. are forecasting an inflation rate of around 2.8 percent following on from 1.6 percent in the

previous year.

Germany remains on course for growth during the second half of the year. The Ifo Business Climate Index is indicating that

the economic upswing will continue in the coming months. The most important German economic measure rose surprisingly

in June 2011 to 114.5 from 114.2 points in May 2011 and thereby attained the highest level since reunification. Thanks to

the recovering of the employment market as well as the domestic demand, Germany's economy will expand by 2.8 percent

in 2011 according to forecasts by the Ifo Institute. Government experts are expecting the German labour market to continue

to recover and a further fall in the unemployment rate to 7.0 percent following 7.7 percent in the previous year. German indu-

14

stry is also optimistic. According to the association of German industry [Bund Deutsche Industrie (BDI)], industrial production

will grow by more than 3 percent in the coming year. The causes are rising equipment investments by German companies,

strong exports and a growing domestic market.

The growth in the US economy is predicted to accelerate from 3.6 to 4.0 percent, according to statements by the IMF. Risk

factors remain the development of the property and employment markets as well as the rising levels of public debt in the

USA. Growth impetuses are resulting in particular from a rise in private consumption as well as increasing corporate investments.

The emergent nations will also remain drivers of growth for the global economy in 2011. The economic momentum of the

emergent nations has weakened slightly in recent months. As such, and in light of higher inflation rates, many note issuing

banks have increased interest rates.

The inflation rate for China will lie between 3.3 and 5 percent in 2011. Upon reaching the inflationary high point it will be

possible to once again relax monetary policy. The main impetus for growth in the emergent nations is provided by exports

and rising raw material prices. The experts of the IMF are expecting GDP growth to be around 9 percent in China following

on from 10.3 percent in 2010.

Electronic Products

The mood amongst the manufacturers of electronic products remains positive. According to the industry association Bitkom,

74 percent of high-tech companies in Germany expect further increases in sales in 2011. Around 54 percent of companies

actually intend to take on additional employees during this year. IT service providers and hardware suppliers are affected by

the positive development.

Alongside the good economic position, new and more compact products are also contributing to growth. The iPad from Apple

as well as modern tablet computers from other manufacturers such as Hewlett Packard, Acer and ASUS are appealing to an

increasing number of consumers. The high expectations of consumers are accompanied by the declining service lives of

devices and greater pricing pressure amongst suppliers in the electronics industry. Despite this, market commentators are

optimistic. New highlights, user-friendly devices and 3D screen formats are set to drive positive development in the sector

and will continue to do so in the coming years.

Medical

German medicine is considered highly innovative and of top quality around the world. The high level of acceptance enjoyed

by German medical engineering ensures consistently high demand, also in times of crisis. The demographic change in the

western industrialised nations as well as the growing populations in India and China, are set to intensify this momentum

according to market commentators. In 2011 the institute is forecasting an increase in the volume of sales of around 8 per-

cent. Experts from the industry association SPECTARIS are optimistic about the coming years despite an increasing deficien-

cy in the numbers of specialists.

Profiting from the increased life expectancies in industrialised nations are both large equipment items as well as small mobi-

le devices. Lightweight devices that are easy to use without medical assistance – such as blood sugar gauges – are set to

gain in popularity in the future.

Future corporate situation With the decision to search for a joint venture partner for the MobileCom segment, the Balda Group is withdrawing from the

increasingly competitive mobile telephone sector. Provisions have been made on the balance sheet for the first half of 2011,

and the assets have been adjusted to reflect the anticipated and attainable sale values. At the present time negotiations with

potential buyers are ongoing.


15


The Electronic Products segment has asserted a respectable position in the first half of 2011 despite the difficult consequen-

ces of the earthquake in Japan. Electronic Products continues to work in a targeted manner towards improving cost efficien-

cy. The strengths of the company, such as Bluetooth technology, acoustics/sound, the production of specific semiconductors

and the complete production of digital cameras remain consistently in demand on the market. Assuming smooth deliveries

from Japan, the Board is convinced that the segment will attain its goal in 2011 of achieving sales growth as well as a balan-

ced operating profit.

The sales in the Medical segment will increase considerably in the second half of 2011. The earnings position will continue to

improve. The serial production of various new projects in the second half of the year will gradually commence.

On the basis of the two operatively active Group segments in the continued business divisions, and following the decision for

the search of a joint venture partner of the MobileCom segment, the forecast for the Balda Group per the report for the first

quarter of 2011 requires adjustment. The Board of Directors is reckoning with sales of between 70 and 80 million Euros in

the financial year 2011. The operating result (EBIT) will be slightly positive. Any special devaluations and special effects are

not taken into account here. The pre-tax profit (EBT) is likely to lie above the level of the operating profit (EBIT). In the financi-

al year 2012 the Group is once again anticipating an increase in sales in the existing segments.

With regards to the planned acquisition in the Medical segment, the prerequisites for a potential takeover are now in place.

Risks and opportunities report The Balda Group identifies and assesses its opportunities and risks on a continuous basis. The Group management report

for the 2010 financial year describes the opportunities and risk for the Group in detail. Changes to the opportunities and

risks situation are also indicated in the interim report to the first quarter of 2011. During the first half of the ongoing financial

year the opportunities and risks position of the Group has shifted due to the following modified influential factors:

Financial risks

The uncertainties regarding the escalating national debts of a number of countries in the Eurozone have been shaping the

financial markets in the first half of 2011. Greece, Ireland and Portugal have already requested assistance from the European

Union. During the first six months of 2011 the crisis in Italy also heightened. Spain and Italy are also under threat from rising

interest and failing confidence of international lenders. The unclear situation resulted in high risk premiums for bonds of peri-

pheral European countries in the first few months of 2011. The high refinancing costs and the difficult implementation of

austerity measures in Greece could add to the severity of the situation in the coming months.

A further influential factor with potential for uncertainty is the USA. America’s rapidly rising national debt could lead to a

recession including global impacts. Predicted consequential scenarios indicate troubles on the global financial markets.

The drastic increase in the amount of money in circulation in 2009 and at the start of 2010, as well as the rising costs of

food and raw materials, are leading to higher inflation rates worldwide. The vast flows of capital from foreign investors increa-

se the risk of economic overheating in the emergent nations, and reduce the true buyer power of the population. These deve-

lopments could lead to additional risks for the Balda Group: Higher interest rates and particularly declining sales volumes in

the end consumer markets.

Financial market and financing risks

A negative development of the TPK share price is considered a risk for Balda AG. The assets position of the Group could be

threatened by a fluctuation in the stock value of the TPK share.

A repayment risk could arise in relation to the credit lines approved for use by the Group – above all in China – if the banks

refuse to extend the credit lines or terminate them prematurely. Balda remains in constant contact with the banks.

16

Currency risks

Further risks could arise due to the standard rate of exchange between the Euro and the US Dollar changing. A weakening of

the US Dollar might have a negative impact on the Balda Group's sales invoiced in the American currency. With regards to

the potential sale of TPK shares, risks might arise for the Group from fluctuations in the exchange rate with the Taiwanese

Dollar.

Risks on the procurement market

The difficult situation on the raw materials market and the delivery bottlenecks experienced with components from Japan

could place additional pressure on margins.

Customer risks

The Balda Group is dependent on few customers and their orders. The market success of customers continues to determine

the volume of order call-offs and therefore the number of system units to be produced by Balda. A failure to accept products

and any loss of market shares on the part of these customers could have a negative effect on the Group’s order volumes.

The Balda Group takes the opportunity to efficiently control this risk efficiently through driving technological diversity. The

Group reduces the risk of dependency on a few customers with the development of its own products for new customers in

the Electronic Products and Medical segments.

Macroeconomic risks

The natural disaster in Japan at the start of 2011 had a negative effect on the mood on the financial markets. The supply of

electronic components from Japan was also affected by the crisis.

The contamination of the region around the nuclear power plant in Fukushima led to a shift in energy policies in Germany

towards regenerative energy sources. This could lead to a considerable increase in energy prices and present an additional

risk factor for the Balda Group.

Overall risk

Based on the present level of information, there are no further risks for the growth or existence of the Group that go beyond

the risks described above. The Board of Directors currently has no further knowledge concerning the worsening or occurren-

ce of any of the above-mentioned risks.

Opportunities

The Group's risk can be summarised as follows. With its current level of liquid assets as of the end of the first half of 2011,

the company has the financial resources for further organic and strategic growth. Balda is well positioned for important pro-

jects, such as the implementation of planned investments or an acquisition.


17


Balda shareThe European debt crisis and the weakening US economy in the second quarter of 2011 resulted in volatile stock markets.

However, positive economic data from the USA as well as the conclusion of a rescue package for Greece at the end of the

first half of the year ensured that this quarter ended on firm footing.

The Dax opened the 2011 trading year at 6,973 points and on 30th June trading closed at 7,376 points. This represents a

rise of 5.8 percent in the first half year. The German index for small and mid caps, the SDax, in which Balda AG’s shares are

listed, recorded an increase of 4.6 percent during the reporting period.

The shares of Balda AG once again recorded significantly better share price development than the indexes. The share certifi-

cates opened the 2011 trading year with a price of 6.81 Euros on the Xetra trading platform of the Frankfurt Stock Exchange.

On the 30th June a closing price of 9.09 Euros was recorded. This equates to a rise of around 2.28 Euros or 33.5 percent.

The highest price recorded for the Balda share in the first half was 9.90 Euros (closing price on 19th May). The lowest price

was 6.65 Euros (closing price on 5th January). The turnover of Balda shares (Xetra) in the first six months of the current

financial year was 52.94 million shares (previous year: 35.58 million shares).

Balda AG's market capitalisation based on 58,890,636 million shares was 535.3 million Euros on the 30th June 2011 (31st

December 2010: 406.3 million Euros).

Open communication with investors, journalists and analysts is part of daily business for Balda AG. In the future the compa-

ny will continue to strengthen open and transparent communication regarding the development of the business.

During the reporting period the management of Balda AG met with funds managers and analysts within the framework of

road shows at the international financial centres of Frankfurt, London and New York. Additionally, Balda has been active on

various social media channels such as Facebook and YouTube since September 2010. The Group also advises of its publica-

tions and provides compact information on current news in the short message service Twitter.

January February March April May June

Share price January to June 2011in euro

6.0

7.0

8.0

9.0

10.0

Balda AG

SDAX

18

Selected explanatory notes

General explanationsThe headquarters of Balda Aktiengesellschaft are located in Bad Oeynhausen, Germany.

The interim report as of 30th June 2011 was prepared in compliance with the International Financial Reporting Standards

(IFRS), as they are to be applied within the European Union (EU). The accounting methods applied are in accordance with

the EU regulations for the accounting of consolidated financial statements.

All values stated are in Euros (KEUR), unless noted otherwise.

The financial statements of the companies included in the consolidated financial statements are based on uniform accoun-

ting and valuation principles that comply with the IFRS.

Changed basis of consolidationIn January 2011 the legal requirements for closing Balda Solutions (Xiamen) Ltd, Xiamen (China) were met. The company was

liquidated and is no longer included in the basis of consolidation.

The consolidated financial statements of the first six months of 2011 included, alongside Balda AG, six domestic and 10 foreign

subsidiaries within the scope of full consolidation.

Information about the accounting and valuation methodsThe interim consolidated financial statements as of the 30th June 2011 were prepared for the interim reporting taking into

account the International Financial Reporting Standards (IFRS), as they are to be applied within the European Union (EU). In

accordance with the regulations of IAS 34, a condensed report compared to the consolidated financial statements as of the 31st

December 2010 was selected. The interim consolidated financial statements were prepared applying the same accounting, valu-

ation and consolidation methods as in the consolidated financial statements for the 2010 financial year and comply with the IAS

34 regulations (interim reporting).

The principles and methods of the estimates for the interim report have not changed compared to the previous periods (IAS

34,16 (d)). A detailed account of the accounting, consolidation and valuation methods is given in the notes of the annual financi-

al statements as of the 31st December 2010. The exercising of options included in the IFRS is also addressed here.

The exchange rates taken as basis for the foreign exchange translation related to Euro 1 developed as follows:

Average spot-exchange rate on reference date Average exchange rate

30 June 31 December 1. Half-year

Currencies ISO Code 2011 2010 2011 2010

US Dollar USD 1.4391 1.3252 1.4014 1.3247

Chinese Renminbi CNY 9.3023 8.7336 9.1550 8.9558

Malaysian Ringgit MYR 4.3706 4.0800 4.2423 4.2483


19


Segment reportingThe segment reporting (see table in the annex) is prepared in accordance with the same principles as in the 2010 annual finan-

cial statements.

The values for the MobileCom segment are listed in this interim report under the discontinued business division and are therefo-

re no longer included in the segment reporting.

The Electronic Products, Medical and Central Services segments require reporting. The Electronic Products segment has been

focusing on the development and production of electronic products since the realignment. In the Medical segment the Group

manufactures complex plastic products for the medical sector. The Central Services segment includes expenditure and income

relating to holding functions and income from the shareholding in TPK.

In accordance with internal reporting, information on total output has been added to the segment reporting. The total output

comprises sales revenue, other operating income and changes in inventories of finished and unfinished goods. The development

of sales and the earnings situation of the individual Group segments are presented in detail in "Business development" (see

page 7).

Cash flow statementSignificant rise in operating cash flow

The cash flow statement has been drawn up in accordance with the IFRS for the Group – including the discontinued busi-

ness division. The figures for the discontinued business division are presented in the table in the annex, marked “of which”.

The inflow of funds from ongoing business activities of the Balda Group rose during the first half of 2011 to 7.7 million Euros.

During the comparable period in the previous year the Group recorded an outflow of funds of 6.1 million Euros. The primary

cause of the increase during the reporting period in 2011 was the reduction in working capital.

Balda Group investment activities accounted for 2.0 million Euros during the first half of the year. In the same period during

the previous year the cash flow arising from investment activities was characterised by the sale of shares in Group compa-

nies and stood at 4.9 million Euros.

Cash outflows due to financing activities in the first six months of 2011 totalled 9.2 million Euros and primarily related to the

repayment of credit lines in the MobileCom segment. In the previous year, cash flows totalling 1.1 million Euros resulted from

the utilisation of credit lines for financing activities.

The Group's liquid funds totalled as of the end of the first half year 42.3 million Euros (30th June 2010: 49.4 million Euros).

When applied to continued business divisions the liquid funds stood at 36.4 million Euros.

Balance sheet structureAssets

The Balda Group is reporting a balance sheet total of 901.9

million Euros as of the 30th June 2011. Compared to the

figure of 810.5 million Euros on the balance sheet date in

2010 (31st December 2010) the balance sheet total increa-

sed by 91.5 million Euros. The cause of this is the increase in

value of the TPK shareholding in financial assets with counter

effects arising from the devaluation of the assets held in the

MobileCom segment.

901.9

810.5

Group balance sheet totalin mio. euros

0 200 400 600 800 1,000

30.06.2011

30.12.2010

20

The equity ratio as of 30 June 2011 was 94.1 percent. The rise in the equity ratio to 92.5 percent as of the end of 2010 was

primarily due to the revaluation of the TPK shares.

On the balance sheet dated 31st December 2010 the figures for the MobileCom companies are included in the individual

balance sheet items. On the balance sheet dated 30th June 2011 the assets and liabilities of the MobileCom segment are

listed as separate items “Assets/liabilities held for sale” and are specified in the subsequent explanations pertaining to these

items.

On the assets side, the value of fixed assets fell as of the end of the first half of 2011 by 36.0 million Euros to 25.6 million

Euros (2010 reference date: 61.6 million Euros). This decline was the result of the devaluation of the forecast amount attai-

nable on the market for the assets in the MobileCom segment (19.9 million Euros). In June 2011 the Balda Group commen-

ced with the search of a joint venture partner of the MobileCom segment. With this activity, the classification is amended

from non-current to current assets.

Goodwill fell by the 30th June 2011 by 8.9 million Euros to 6.8 million Euros, primarily due to the devaluation of the goodwill

applicable to Balda Solutions Beijing.

Financial investments under the item financial assets recorded an increase of 130.5 million Euros taking them to 757.3 mil-

lion Euros as of the end of the period under review. The reason for this is the valuation of the TPK shares on the basis of the

stock exchange price as of the 30th June 2011 at 875 Taiwanese Dollars. As a result of reporting standards per the IFRS, the

balancing of the TPK share has not been reapportioned to the current assets despite the pending sale.

Overall, non-current assets increased by 83.9 million Euros as of the end of the first half of 2011 to 795.5 million Euros, fol-

lowing on from 711.7 million Euros on the 31st December 2010.

The stocks in the current assets decreased by the 30th June 2011 to 13.7 million Euros (reference date 2010: 18.6 million

Euros). The primary cause of this decline of 4.9 million Euros was the devaluation of the MobileCom segment as well as the

reclassification to the item Assets held for sale.

On the 30th June 2011 the item stocks and receivables arising from deliveries and services showed a decline of 18.1 million

Euros due to payments from customers in the MobileCom segment as well as the reclassification to the item Assets held for

sale, taking it to 7.7 million Euros (31st December 2010: 25.8 million Euros).

The liquid funds of the Balda Group fell by the 30th June 2011 to 36.4 million Euros (reference date 2010 including

MobileCom: 48.9 million Euros). The liquid funds belonging to the discontinued business MobileCom division as on the 30th

June 2011 are included in the item “Assets held for sale”.

The assets held for sale stood at 44.5 million Euros at the end of the first half of 2011 (reference date 2010: 0 million

Euros). This item refers to current and non-current assets in the MobileCom segment following devaluation to the anticipated

disposal proceeds for the shareholding of a joint venture partner.

mio. euros

Tangible assets 20.7

Inventories 4.3

Trade receivables 9.3

Other assets 4.3

Liquid funds 5.9

The rise in current assets to 106.4 million Euros, following on from 98.8 million Euros at the end of 2010, resulted primarily

from the reclassification of non-current assets in the MobileCom segment into the item “Assets held for sale”.


21


On the liability side, the equity increased by 99.2 million

Euros to 849.0 million Euros (reference date 2010: 749.7

million Euros). In addition to currency exchange rate diffe-

rences, in particular the revaluation of the TPK shares is

responsible for the increase.

The liabilities arising from deliveries and services fell from

21.6 million Euros on the reference date in 2010 to 5.1 mil-

lion Euros on 30th June 2011. This decrease was the result

of the reclassification of the MobileCom segment. The item advance payments received increased by 3.4 million Euros to 8.2

million Euros due to the increase in advance payments for tools and assembly units for new projects in the Medical segment.

The current liabilities owing to credit institutes and the current part of long-term loans reduced from 19.8 million Euros on

the reference date in 2010 to 6.0 million Euros on 30th June 2011. This drop can be attributed to the repayment of credit

lines as well as the reclassification in the MobileCom segment.

Within the framework of the search of a joint venture partner of the MobileCom segment, 26.3 million Euros fall under liabili-

ties in connection with the assets to be divested, and are as follows:

mio. euros

Trade payables 13.8

Current bank liabilities 7.2

Other current liabilities 2.1

Long-term bank liabilities 3.2

The current liabilities on 30th June 2011 stood at a value of 46.0 million Euros (31st December 2010: 54.8 million Euros).

The decline was primarily the result of the reduction in liabilities arising from deliveries and services at the end of the first

half of 2011.

The other balance sheet items have not changed significantly compared to the end of the previous year.

Income statementThe Balda Group generated sales of 28.9 million Euros in the

first half of 2011 compared to 28.1 million Euros in the same

period of the previous year. This equates to a rise of 0.8 Euros

or 2.8 percent. During the second quarter the Group recorded

a Group turnover of 15.5 million Euros in comparison to 16.3

million Euros in the previous year. The reason for the slight

decline in income in the second quarter of the current financi-

al year was the effects of the natural disaster in Japan, in par-

ticular in relation to the Electronic Products segment.

The business development including the result situation of the individual segments is presented in the interim management

report on page 7.

849.0

749.7

Equityin mio. euros

0 200 400 600 800 1,000

30.06.2011

31.12.2010

2011 28.9

2010 28.1

0 10 20 30

Group turnover 1. Half-year in mio. euros

22

The other operating income comprises 4.9 million Euros,

including income from claims for damages amounting to 0.8

million Euros (previous year: 4.7 million Euros) and around

2.0 million Euros of income from planned payments from the

remaining assets of BenQ. The Balda Group recorded overall

performance of 34.4 million Euros in the period under review

(same period for the previous year: 34.6 million Euros).

The cost of materials and services increased in the first half

of 2011 by 1.4 million Euros to 17.8 million Euros (same period for the previous year: 16.4 million Euros). The cost of materi-

als ratio, measured against Balda’s overall performance, stood at 51.8 percent in comparison to 47.4 percent in the first half

of 2010. The causes of this rise were the increased start-up costs in the Medical segment and the changed product mix in the

Electronic Products segment.

The personnel expenses in the first half of 2011 were lower than the value in the previous year, falling from 9.5 million Euros

to 8.8 million Euros. When measured against the overall performance, the personnel expenses ratio in the first half of the cur-

rent financial year stood at 25.7 percent in comparison to 27.5 percent in the 2010 reference period.

The cost of depreciation dropped in the first half of 2011 to 1.9 million Euros (same period during the previous year: 3.0 mil-

lion Euros). The reason for this was the restructuring of the MobileCom segment as well as the elimination of depreciation of

customer relations at Balda Solutions Malaysia.

Other operating expenses stood below the figure in the previous year, at 4.7 million Euros (first half of 2010: 5.1 million Euros).

The optimisation of the process chain in the Electronic Products segment, started during 2010, is having a positive effect here.

Earnings developmentDuring the reporting period, as a result of the positive deve-

lopment in the earnings position of the Electronic Products

and Medical segments, the Balda Group recorded operating

profit (EBIT) of 1.1 million Euros (same period during the pre-

vious year: 0.6 million Euros). During the second quarter the

EBIT stood at 2.3 million Euros (same period during the pre-

vious year: 3.4 million Euros).

The Group's financial earnings rose by 1.1 million Euros on

the 30th June 2011 to 9.3 million Euros. In the first half of

2010 the Group reported financial profits of 8.2 million

Euros. This increase is the result of a fall in interest pay-

ments due to the elimination of convertible participation

rights and moreover of currency gains of 9.1 million Euros

arising from internal financing.

The earnings of associated companies relating to the shareholding in TPK are no longer reported as financial assets after the

loss of significant influence and the change in the valuation method in October 2010. In the same period for the previous year

a figure of 9.7 million Euros was reported here.

The profits before taxes increased during the reporting period, due to the positive financial profits, from 8.9 million Euros in

the previous year to 10.4 million Euros.

2011 34.4

2010 34.6

0 10 20 30 40

Overall Group performance 1. Half-year in mio. euros

2011 1.1

2010 0.6

0 0.25 0.50 0.75 1.0

EBIT 1. Half-year in mio. euros

2011 10.4

2010 8.9

0 2.5 5.0 7.5 10

EBT 1. Half-year in mio. euros


The profit from continued business divisions (after

taxes) rose to 10.2 million Euros (previous year: 9.2

million Euros).

The Balda Group recorded a half-year loss in the

discontinued business divisions of 25.6 million Euros.

(Previous year: 4.1 million Euros). This includes special

accounting devaluations amounting to 19.9 million Euros and the loss resulting from operative business in the first half year

amounting to 5.7 million Euros. The special devaluations took place following thorough auditing, in order to reflect an appropri-

ate and attainable sale value.

The profit and loss account for the discontinued business divisions is as follows:

mio. euros

Overall operating performance 23.1

Cost of materials 15.0

Personnel expenses 4.9

Depreciation 1.9

Other operating expenses 5.5

Operating profit before special devaluation -4.2

Special devaluation -19.9

Operating profit after special devaluation -24.1

Half-yearly profit -25.6

Based on 58,891 million shares (as of the 30th June 2011), undiluted earnings per share of minus 26.1 cents are calculated

from the loss for the period. In the previous year the earnings per share based on 54,157 million shares were 9.9 cents.

Related partiesAlongside the companies included in the consolidated financial statements, there are companies and persons, as well as per-

sons in key positions of management that are related to the Balda Group according to IAS 24. In the period under review there

were no business relations with these persons or companies excepting the remuneration payments to the Board of Directors

and the Supervisory Board.

Other financial obligationsOther financial obligations, consisting mainly of letting and leasing obligations as well as purchase commitments for invest-

ments, amounted to 0.9 million Euros as of 30th June of the current financial year.

Events after the reference dateInformation on significant events after the reference date is presented in this report in "Events after the reference date" on

page 13.

Details on the preparation of the half-yearly reportThe consolidated balance sheet, the statements of comprehensive income, cash flow statements, the segment reports, the

statements of changes in equity, the interim management report and the condensed notes prepared as of 30th June 2011

have not been audited or subjected to an auditing review. They were prepared for the interim report.

23


2011 10.2

2010 9.2

0 2.5 5.0 7.5 10

Profits after tax from continued business divisions1. Half-year in mio. euros

24

Statements relating to the future contain fundamental uncertainties. This interim report contains statements, which also relate

to the future development of Balda AG. These statements are based on both assumptions and estimates. Although the Board

of Directors is convinced that these forward-looking statements are realistic, they cannot be guaranteed. The assumptions con-

tain risks and uncertainties, which may result in the actual events deviating from the expected events.

Responsibility statementTo the best of my knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the

interim consolidated financial statements give a true and fair view of the asset, financial and result situation of the Group, and

the interim management report of the Group includes a fair review of the development and performance of the business and

the position of the Group, together with a description of the significant opportunities and risks associated with the expected

development of the Group for the remaining months of the financial year.

Bad Oeynhausen, 4th August 2011

Rainer Mohr

(Sole Member of the Board of Directors)


25


Half-year Financial Statements 2011

26

Balance Sheet Group – Assets

in KEUR 30 June 2011 31 December 2010

A. Long-term assets

I. Tangible assets 25,584 61,601

1. Land and buildings 15,830 29,586 2. Machinery and equipment 7,459 29,317 3. Fixtures, furniture and office equipment 2,044 2,676 4. Advance payments and construction in progress 251 22

II. Goodwill 6,765 15,705

III. Intangible assets 431 900

IV. Financial assets 757,316 627,293

1. Investments 1 1 2. Financial Investments 757,315 626,812 3. Other financial assets 0 480

V. Deferred taxes 5,443 6,168

Long-term assets 795,539 711,667

B. Current assets

I. Inventories 13,731 18,616 1. Raw materials and supplies 4,000 5,357 2. Work in progress and finished goods and merchandise 4,998 10,399 3. Advance payments 4,733 2,860

II. Trade accounts receivable 7,706 25,772

III. Other current assets 3,681 4,830

IV. Tax refund 346 648

V. Cash and cash equivalents 36,443 48,937

VI. Assets held for sale 44,479 0

Current assets 106,386 98,803

Total assets 901,925 810,470

Balda Group – Balance Sheet as of 30 June 2011 – Assets

27

Balance Sheet Group – Total Liabilities and Shareholders’ Equity

in KEUR 30 June 2011 31 December 2010

A. Shareholders’ equity

I. Subscribed share capital 58,891 58,891

II. Reserves 620,567 505,944

III. Net profit 169,502 184,885

1. Earnings -15,383 94,584 2. Retained earnings 184,885 90,301

Equity of the shareholders of Balda AG 848,960 749,720

Total shareholders’ equity 848,960 749,720

B. Long-term liabilities

I. Long-term debt 126 440

1. Bank loans 126 440

II. Long-term finance lease obligations 282 222

III. Deferred taxes 6,536 5,172

IV. Long-term provisions/pension accruals 68 69

Long-term liabilities 7,012 5,903

C. Current liabilities

I. Trade accounts payable 5,137 21,643

II. Other current liabilities 2,914 6,038

III. Advance payments received 8,189 4,768

IV. Short-term debts and current portion of long-term debts 570 19,819

V. Current portion of finance lease obligation 131 179

VI. Tax liabilities 2,552 2,307

VII. Short-term provisions 113 93

VIII. Liabilities held for sale 26,347 0

Current liabilities 45,953 54,847

Total liabilities and shareholders’ equity 901,925 810,470

Balda Group – Balance Sheet as of 30 June 2011 – Total Liabilities and Shareholders’ Equity

28

Income Statement / Group-Total-Income-Statement

Balda Group – Income Statement – 1st 6-months 2011

in KEUR 2011 2010 1. Annual result total Group -15,383 5,0932. Other result 114,623 27,655

1. Discrepancy contribution from currency conversion --13,888 27,5182. Share of other result of at equity balanced associated companies 0 1373. Subsequent measurement of financial instruments 128,511 0

3.Total result of the period 99,240 32,748Total result of the period attributable to:

Shareholders of Balda AG 99,240 32,594Share of other associates 0 154

Group-Total-Income-Statement – 1st 6-months 2011

in KEUR Q 2 Q 2 Half-year Half-year 2011 20101 report 2011 report 20101

Revenues 15,491 16,271 28,943 28,056Other operating income 3,713´ 5,139 4,854 5,830Changes in inventories of finished goods and work in progress 184 61 637 675Total income 19,388 21,471 34,434 34,561Material expenses 9,614 9,691 17,821 16,366Material costs rate in % 49.6% 45.1% 51.8% 47.4%

Personnel expenses 4,443 4,863 8,838 9,508Ratio of personnel costs in % 22.9% 22.6% 25.7% 27.5%

Depreciations 947 1,538 1,928 2,999Other operating expensesn 2,086 2,013 4,709 5,051Operating income 2,298 3,366 1,138 637Operating income in % 11.9% 15.7% 3.3% 1.8%

Financial result 101 -660 231 -1,489Other financial costs 2,215 0 9,061 0Earnings from affiliated companies 0 4,442 0 9,720Total financial result 2,316 3,782 9,292 8,231Earnings before income taxes 4,614 7,148 10,430 8,868Taxes on income and on earnings -288 264 -183 371Net income – continued operations 4,326 7,412 10,247 9,239Earnings discontinued operations -24,076 -3,853 -25,631 -4,146Group result -19,750 3,559 -15,384 5,093

Annual income total Group added to: Shareholders of Balda AG -19,750 3,747 -15,384 5,352thereof from continued operations 4,326 7,600 10,247 9,239thereof from discontinued operations -24,076 -3,853 -25,631 -3,887Shares of other associates 0 -188 0 -259thereof from continued operations 0 0 0 0thereof from discontinued operations 0 -188 0 -259Earnings per Share: Average number of tradeable shares (undiluted) 58,891 54,157 58,891 54,157Average number of tradeable shares (diluted) 58,891 54,182 58,891 54,182Earnings per Share – Group - undiluted (EUR) -0.335 0.069 -0.261 0.099- diluted (EUR) -0.335 0.069 -0.261 0.099Earnings per Share – continued operations - undiluted (EUR) 0.073 0.140 0.174 0.171- diluted (EUR) 0.073 0.140 0.174 0.171(1

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29

Cash flow

Balda Group – Cash flow – 1st 6-months 2011

in KEUR 6-Month Report 6-Month Report 01.01.2011 - 01.01.2010 - 30.06.2011 30.06.2010

Net loss/income before income tax and financing costs – continued operations 1,138 637

Net loss/income before income tax and financing costs – discontinued operations -24,183 -2,714

+ Income from interest 183 235

- Interest payments -163 -663

+ / - Payments on tax on income and earnings 67 -256

+ / - Write-offs/write-ups on long-term assets (excluding deferred taxes) 22,267 5,688

+ / - Other non-cash affecting expenses and earnings 30 0

+ / - Increase/decrease in tax refund and tax liabilities -405 -6,316

+ / - Increase/decrease in provisions 19 -31

+ / - Increase/decrease in inventories, trade accounts receivable and other assets not itemised within investment or financing activities 9,022 -22,701

+ / - Increase/decrease in accounts payable and other liabilities not itemised within investment or financing activities -290 19,998

= Cash flow from operating activities 7,685 -6,123 thereof discontinued operations 6,663 3,890

Cash flow from investing activities

- Payments in intangible and tangible assets affecting payment 1 -2,039 -7,024

+ / - Change in financial assets affecting payment 0 -241

+ Cash inflow from the sales of shares of the group 0 12,131

= Cash flow from investing activities -2,039 4,866 thereof discontinued operations -377 -5,258

Cash flow from financing activities

+ / - Repayments of liabilities to financial institutions -9,187 1,210

+ / - Change in finance lease obligations affecting payment 12 -98

= Cash flow from financing activities -9,175 1,112 thereof discontinued operations -8,871 2 1,638

+ / - Change in cash and cash equivalents affecting payment -3,529 -145

+ Cash and cash equivalents at the beginning of the fiscal year 48,937 43,129

+ / - Impact of exchange rate differences on cash held in foreign currencies -3,068 6,410

= Cash and cash equivalents at the end of 1. Half-year including discontinued operations 42,340 49,394 Cash and cash equivalents at the end of 1. Half-year – discontinued operations 5,897 6,765

Cash and cash equivalents at the end of 1. Half-year including continued operations 36,443 42,629

Total financial resources at end of 1. Half-year Cash funds 42,340 49,394

1) Expenditures relate to some extend to the previous years

2) Including financing by Balda Investments Singapore PTE Ltd. (continued operations) amounted to 2,600 KEUR

Segment Reporting

30

Balda Group – Segment Reporting as of 30 June 2011

Result 1. Half-year 2011 Sum operating in KEUR Electronic Products Medical Central Services segments Transition (4) Corrections (5) Group

Revenues external 12,461 16,482 0 28,943 0 0 28,943

Revenues internal 22 0 491 513 -382 -131 0

Revenues total 12,483 16,482 491 29,456 -382 -131 28,943Change from previous year -16.1% 24.9% 611.6% 4.7% 3.2%

Total income 12,577 17,310 8,137 38,024 -1,737 -1,853 34,434Change from previous year -16.7% 23.8% -8.5% 0.1% -0.4%

EBIT -1,461 1,265 1,663 1,467 -329 0 1,138in % of total income -11.6% 7.3% 20.4%

EBT -1,397 1,162 10,994 10,759 -329 0 10,430in % of total income -11.1% 6.7% 135.1%

Investments 379 477 314 1,170 0 0 1,170

Segment assets (1)/(2) 33,848 17,478 810,793 862,119 -4,865 -5,600 851,654

Number of employees as 30.06. (3) 789 213 23 1,025 0 0 1,025



Revenues internal 0 88 0 88 -88 0 0

Revenues total 14,876 13,199 69 28,144 -88 0 28,056

Total income 15,096 13,983 8,890 37,969 -1,827 -1,581 34,561

EBIT -2,537 1,120 2,661 1,244 -607 0 637in % of total income -16.8% 8.0% 29.9%


Investments 173 621 112 906 0 0 906

Segment assets (1)/(2) 59,507 19,555 116,145 195,207 -4,375 -10,195 180,637

Number of employees as 30.06. (3)) 1,069 205 25 1,299 0 0 1,299

(1) Segment assets = Long-term plus short-term fixed assets excluding assets held for sale and excluding deferred tax and tax refund claims.

(2) Segment assets for "Central Services" with KEUR 757,315 (previous year KEUR 51.478) contains the equity of the associate TPK .

(3) Number of employees as at 30.06. = only continued operations including temporary employment agency workers and trainees.

(4) The amounts listed in the reconcilitation relate to assignments to the discontinued operation.

(5) The Inter-segment-adjustments relate to the revenues that have been reached between the segments, Group internal receivables and the elimination of Group Internaldividends between the segments.

31

Segment Reporting



Revenues internal 22 0 491 513 -382 -131 0

Revenues total 12,483 16,482 491 29,456 -382 -131 28,943Change from previous year -16.1% 24.9% 611.6% 4.7% 3.2%

Total income 12,577 17,310 8,137 38,024 -1,737 -1,853 34,434Change from previous year -16.7% 23.8% -8.5% 0.1% -0.4%

EBIT -1,461 1,265 1,663 1,467 -329 0 1,138in % of total income -11.6% 7.3% 20.4%


Investments 379 477 314 1,170 0 0 1,170

Segment assets (1)/(2) 33,848 17,478 810,793 862,119 -4,865 -5,600 851,654

Number of employees as 30.06. (3) 789 213 23 1,025 0 0 1,025



Revenues internal 0 88 0 88 -88 0 0

Revenues total 14,876 13,199 69 28,144 -88 0 28,056

Total income 15,096 13,983 8,890 37,969 -1,827 -1,581 34,561

EBIT -2,537 1,120 2,661 1,244 -607 0 637in % of total income -16.8% 8.0% 29.9%


Investments 173 621 112 906 0 0 906

Segment assets (1)/(2) 59,507 19,555 116,145 195,207 -4,375 -10,195 180,637

Number of employees as 30.06. (3)) 1,069 205 25 1,299 0 0 1,299

32

Changes to Shareholders’ Equity

Balda Group – Changes to Shareholders’ Equity – 2010 - 2011 – as of 1 January - 30 June

Available-for- Total Subscribed Capital Revenue Revaluation sale financial Currency Retained Balda AG Minority shareholders´in KEUR share capital reserves reserves reserve assets reserves earnings shareholders interest equity

Balance on 01.01.2010 54,157 154,432 976 905 0 4,230 -57,669 157,031 2,204 159,235

Group result - - - - - - 5,214 5,214 -121 5,093Other result - - 149 -149 - 27,380 - 27,380 275 27,655

Total result 0 - 149 -149 0 27,380 5,214 32,594 154 32,748

Disposal of inority shareholdingsthough share purchases - - - - - - - 0 -2,358 -2,358

Balance on 30.06.2010 54,157 154,432 1,125 756 0 31,610 -52,455 189,625 0 189,625

Balance on 01.01.2011 58,891 34,555 1,881 0 434,206 35,302 184,885 749,720 0 749,720

Group result - - - - - - -15,383 -15,383 0 -15,383Other result - - - - 128,511 -13,888 - 114,623 0 114,623

Total result 0 - 0 0 128,511 -13,888 -15,383 99,240 0 99,240

Balance on 30.06.2011 58,891 34,555 1,881 0 562,717 21,414 169,502 848,960 0 848,960

33

Balda Group – Changes to Shareholders’ Equity – 2010 - 2011 – as of 1 January - 30 June

Changes to Shareholders’ Equity

Available-for- Total Subscribed Capital Revenue Revaluation sale financial Currency Retained Balda AG Minority shareholders´in KEUR share capital reserves reserves reserve assets reserves earnings shareholders interest equity

Balance on 01.01.2010 54,157 154,432 976 905 0 4,230 -57,669 157,031 2,204 159,235

Group result - - - - - - 5,214 5,214 -121 5,093Other result - - 149 -149 - 27,380 - 27,380 275 27,655

Total result 0 - 149 -149 0 27,380 5,214 32,594 154 32,748

Disposal of inority shareholdingsthough share purchases - - - - - - - 0 -2,358 -2,358

Balance on 30.06.2010 54,157 154,432 1,125 756 0 31,610 -52,455 189,625 0 189,625

Balance on 01.01.2011 58,891 34,555 1,881 0 434,206 35,302 184,885 749,720 0 749,720

Group result - - - - - - -15,383 -15,383 0 -15,383Other result - - - - 128,511 -13,888 - 114,623 0 114,623

Total result 0 - 0 0 128,511 -13,888 -15,383 99,240 0 99,240

Balance on 30.06.2011 58,891 34,555 1,881 0 562,717 21,414 169,502 848,960 0 848,960

34

Shareholding of the Bodies

Shareholding of the Bodies as of 30 June 2011

30.06.2011 31.12.2010 Change

Share Capital 58,890,636 58,890,636 0

R. Mohr 0 0 0

Management Board Total 0 0 0

A. Chen 0 - 0

K. Kai 0 - 0

D. Kitzinger 54,000 49,000 5,000

M. Littlefield 0 0 0

T. Leonard 0 0 0

Dr. M. Naschke 21,000 21,000 0

Supervisory Board Total 75,000 70,000 5,000

Executive Body Total 75,000 70,000 5,000

in % of share capital 0.13 0.12

35

Investor Relations Contact

Clas Röhl

Phone +49 (0) 57 34 / 9 22 - 27 28

Fax +49 (0) 57 34 / 9 22 - 26 04

E-Mail [email protected]

Photography

Balda AG

The Half-year Report is available in German and English and can be downloaded on the Internet at www.balda.de.

Contact

Balda Aktiengesellschaft • Bergkirchener Str. 228 • D-32549 Bad OeynhausenTelephone +49 (0)5734 922-0 • Fax +49 (0)5734 922-2604 • www.balda.de • E-Mail [email protected]