Other Notes (Part 1)

The stock option plan introduced in 2005/06 provides for the issue of a total of 700,000 subscription rights to four different groups of employees in the MAGIX Group at the following conditions:

The subscription rights will be issued in annual tranches within a period of four years from the date of entering the conditional capital in the commercial register. The first tranche cannot exceed 50% of the total volume and the remaining tranches cannot exceed 30% of the total volume.

The shareholders’ meeting on March 23, 2007 reviewed the periods in which subscription rights can be granted. Accordingly, the individual tranches of the subscription rights can now be issued not only within a period of two months from the date of the Company’s shareholders’ meeting but also within two weeks of the date of publication of a quarterly or annual report.

In addition, the shareholders’ meeting clarified that subscription rights already issued that can no longer be exercised pursuant to Sec. 9 of the option conditions by the respective holders or – in the case of death of a holder – by those authorized to exercise the right, e.g. because the term has expired pursuant to Sec. 4 No. 2, due to non-exercise within the periods set out in Sec. 9 or after a legally valid waiver by the holder of the subscription rights granted, are reallocated to the total volume.

As far as the subscription rights are concerned

• one third can be exercised at the earliest after two years,
• a further third can be exercised at the earliest after three years, and
• the rest can only be exercised after four years

from the date of issue of the respective tranche.

Subscription rights can be exercised within three years of the end of the vesting period and lapse at the end of the corresponding period.

The subscription rights can only be exercised within ten trading days of the date of the Company’s shareholders' meeting or of the publication of a report by the Company on the business development in the second or third quarter of a fiscal year.

The subscription rights can only be exercised if the average closing rate of the Company’s share in electronic trading on the Frankfurt Stock Exchange during the twenty trading days preceding the respective exercise period has risen by an average of at least 0.8% per full month on the subscription price since the subscription rights were issued until the beginning of the exercise period.

To the extent that the shares are purchased by exercising subscription rights that were issued prior to the date of first-time listing of the Company’s shares on a stock exchange or within a period of one month from this date, the subscription price payable by the holders for the acquisition of the shares corresponds to the placement price set in the course of the first-time listing (EUR 16.40), or otherwise to the average closing rate of the Company’s share in electronic trading on the Frankfurt Stock Exchange during the ten trading days preceding the issue date of the subscription right. 

The shares purchased after the options are exercised have full voting rights and dividend entitlements.

The Company is entitled to fulfill its obligations to create shares after exercising of the subscription rights either by issue of shares from the conditional capital created for this purpose, by sale of treasury shares or by payment of the difference per share between the subscription price and the average closing rate of the Company’s shares in electronic trading on the Frankfurt Stock Exchange during the ten trading days preceding the exercise of the subscription right. If fulfillment takes the form of paying the difference, the holder is no longer obliged to pay the subscription price. 

The management board of the Company currently assumes that the stock options will be fulfilled by issuing shares from the conditional capital and use will only be made of the option to pay a settlement in cash in cases where it is not legally possible to grant subscription rights (foreign entities of the MAGIX Group).

A total of 76,000 subscription rights were issued in the past fiscal year, and 316,500 were issued in 2005/2006. 17,500 of those options had lapsed by September 30, 2007, and the number of subscription rights issued as of September 30, 2007 amounts to 375,500 options.

The following parameters were used in the Black Scholes model to measure the options:

Expected volatility was determined using a comparison with a peer group of companies, as there was no historical information on the MAGIX Group. The expected life used in the model was adjusted by management according to the best estimate in order to take into account the special aspects of employee options, in particular non-transferability, the restriction on exercise and the remuneration character.

The expense recorded for the stock option plan in the consolidated financial statements as of September 30, 2007 breaks down into the following tranches and option plans:

The expense recorded for the stock option plan in the consolidated financial statements as of September 30, 2006 breaks down into the following tranches:

Transactions with individuals or entities that could influence or be influenced by the reporting entity must be disclosed if the corresponding transactions have not already been included via the separate financial statements included in the consolidated financial statements.

The following transactions were carried out with related parties of the MAGIX Group:

Management Board of MAGIX AG:

Jürgen Jaron, Berlin (shareholder and management board member)
Dieter Rein, Berlin (shareholder and management board member)
Tilman Herberger, Dresden (shareholder and management board member)

Ongoing remuneration for the members of the management board for the fiscal year 2006/07 amounts to:

Remuneration of the management board 2006/2007

Management board members were also granted stock options as part of the new stock option plan. The fair value of stock options granted to management board members amounts to kEUR 60, of which kEUR 20 was posted as an expense in the fiscal year 2006/07.

Supervisory Board of MAGIX AG:

Mr. Karl-Heinz Achinger, business consultant, Munich (chairman of the Supervisory Board)
Dr. Peter Coym, banker, Frankfurt/Main (deputy chairman of the Supervisory Board)
Mr. Dierk Borchert, German public auditor and tax advisor, Frankfurt/Main (ordinary member of the Supervisory Board)

The remuneration for members of the Supervisory Board amounts to kEUR 90 in the fiscal year 2006/2007 (prior year: kEUR 90). Supervisory board members were not granted any stock options.

Mr. Karl-Heinz Achinger is or was a member of the Supervisory Boards of the following companies:

• eps, Unterföhring, Germany
• RWE Systems AG, Dortmund, Germany
• Software AG, Darmstadt, Germany (gave up his post on May 11, 2007)
• TDS Informationstechnologie AG, Neckarsulm, Germany
• teleson AG, Munich, Germany
• iGate Global Solutions Ltd., Bangalore, India
• Bundeswehr Informationstechnologie GmbH (BWI), Meckenheim (since January 1, 2007)
• inverto AG, Cologne, Germany (since January 1, 2007)

Dr. Peter Coym has been a member of the board of directors of State Street Corp., Boston, USA, since December 2006.

Mr. Dierk Borchert is not a member of any other Supervisory Boards.

Other Related Parties:

Titus Tost, Dresden (shareholder)
Erhard Rein, Rahden (shareholder)

tbg Technologie Beteiligungs GmbH, Bonn (shareholder)
Future GmbH, Munich (100% owned by the shareholders Jürgen Jaron and Dieter Rein)
Presto Capital Management GmbH & Co. KG, Berlin (100% owned by the shareholders Jürgen Jaron and Dieter Rein)
MN Soft (100% owned by Michael Niermann, an employee of Magix Computer Products International Corp., Reno, Nevada, USA)
Erso Media GmbH, Berlin (100% owned by the shareholder Erhard Rein)