2005

---

mobilezone holding ag

FINANCIAL

REPORT

2005 Group financial statements Consolidated income statement

30

Consolidated balance sheet

31

Consolidated cash flow statement

32

Consolidated statement of changes in equity

33

Notes to the consolidated financial statements

34

Report of the Group Auditors

55

mobilezone holding ag financial statements Income statement

56

Balance sheet

57

Notes to the financial statements

58

Proposal by the Board of Directors

61

Report of the Statutory Auditors

62

This Financial Report is published in German and English. The German original is binding. The English version is a translation.

Annual report 2005 mobilezone holding ag

29

mobilezone Group

C O N S O L I D AT E D

for the years ended December 31 ( in CHF 000 )

2005 Notes

Total Group

Gross sales revenues Sales deductions including VAT Net sales

1

2005

2004

Continuing operations

2005

2004

Discontinuing operations

261,831

288,709

261,831

268,094

20,615

– 18,241

– 19,789

– 18,241

– 17,433

– 2,356

243,590

268,920

243,590

250,661

18,259

291

855

291

593

262

Other operating income Cost of goods and materials

2004

I N C O M E S TAT E M E N T

– 183,594

– 209,732

– 183,594

– 194,032

– 15,700

Personnel costs

2

– 25,672

– 25,375

– 25,672

– 23,692

– 1,683

Other operating costs

3

– 12,091

– 11,281

– 12,091

– 9,975

– 1,306

22,524

23,387

22,524

23,555

– 168

8

– 2,467

– 2,747

– 2,467

– 2,650

– 97

10

– 1,226

– 1,326

– 1,226

– 1,326

0

4

0

173

0

0

173

18,831

19,487

18,831

19,579

– 92

Operating profit before depreciation & amortization ( EBITDA ) Depreciation of property, plant & equipment Amortization of intangible assets Net result of discontinued operations Operating profit before interest & tax ( EBIT ) Share of the results of associated companies

9

0

272

0

272

0

Other financial income

5

770

894

770

892

2

Financial expense

6

Profit / loss before income taxes Income tax expenses

7

Net profit / loss

– 325

– 214

– 325

– 139

– 75

19,276

20,439

19,276

20,604

– 165

– 3,868

– 3,711

– 3,868

– 3,711

0

15,408

16,728

15,408

16,893

– 165

( in CHF )

( in CHF )

( in CHF )

( in CHF )

( in CHF )

Earnings per share

16

0.43

0.47

0.43

0.47

0.00

Earnings per share – diluted

16

0.43

0.46

0.43

0.46

0.00

30

Annual report 2005 mobilezone holding ag

mobilezone Group

C O N S O L I D AT E D

as of December 31 ( in CHF 000 )

BALANCE SHEET

2005

2004

8

5,168

5,385

10

2,697

2,413

Notes

ASSETS Property, plant & equipment Intangible assets Deferred tax assets

7

219

303

Securities

11

1,635

0

Other accounts receivable

14

Fixed assets

72

72

9,791

8,173

Inventories

12

20,568

21,796

Trade accounts receivable

13

28,111

22,030

Other accounts receivable

14

3,935

5,078

Cash & cash equivalents

15

14,485

24,593

Current assets

67,099

73,497

Total Assets

76,890

81,670

358

369

9,737

21,219

LIABILITIES AND SHAREHOLDERS’ EQUITY Share capital

16

Additional paid-in capital ( share premium ) Retained earnings

35,603

20,195

Shareholders’ equity

45,698

41,783

1,980

2,206

Deferred tax liabilities

7

Advances received

208

376

Long-term liabilities

2,188

2,582

Trade accounts payable

20,884

27,285

4,284

5,366

100

850

Current tax liabilities Current provisions

17

Other current liabilities

18

3,736

3,804

Current liabilities

29,004

37,305

Total Liabilities and shareholders’ equity

76,890

81,670

Annual report 2005 mobilezone holding ag

31

mobilezone Group

C O N S O L I D AT E D

for the years ended December 31 ( in CHF 000 ) Profit / loss before income taxes Interest income and expenses, net Depreciation & amortization Gain on sale of property, plant & equipment Changes in provisions, net Changes in value adjustments, net Income from associates accounted for using the equity method Gain on sale of investments in associates Other expenses not involving the movement of funds Changes in trade accounts receivable other accounts receivable inventories trade accounts payable other current liabilities Income taxes paid Net cash from operating activities Acquisitions of property, plant & equipment intangible assets securities in fixed assets Proceeds from disposals of property, plant & equipment investments in associated companies Cash flow relating to divestiture of subsidiaries 1 Interest received Net cash from investing activities Interest paid Capital increase Reduction in par value Purchase of treasury shares Sale of treasury shares Issuance of call-options on own shares Net cash from financing activities

2005

2004

19,276 – 90 3,693 0 – 750 523 0 0 0 22,652

20,439 – 10 4,073 2 130 360 – 272 – 145 – 191 24,386

13 14 12

– 6,081 1,143 705 – 6,401 – 58 – 5,161 6,799

9,982 946 – 829 – 10,980 – 668 – 2,982 19,855

8 10 11

– 2,273 – 1,510 – 1,635

– 2,599 – 758 0

8 9

23 0 0 41 – 5,354

30 1,000 – 1,537 37 – 3,827

– 60 637 0 – 12,366 236 0 – 11,553

– 61 9,592 – 3,216 – 10,646 390 591 – 3,350

0

– 26

– 10,108 24,593 14,485

12,652 11,941 24,593

Notes

8, 10 17 9 9

16 16 16 16

Translation adjustments on cash & cash equivalents Net decrease / increase in cash & cash equivalents Cash & cash equivalents at January 1 Cash & cash equivalents at December 31 1

32

C A S H F L O W S TAT E M E N T

15

Details on assets and liabilities acquired and disposed of are disclosed in the notes under “ Scope of consolidation ” on page 37.

Annual report 2005 mobilezone holding ag

mobilezone Group

C O N S O L I D AT E D

S TAT E M E N T O F C H A N G E S I N E Q U I T Y

Movements of shareholders’ equity ( in CHF 000 )

Share capital

Additional paid-in capital

Retained earnings

Cumulative translation adjustment

Total

At December 31, 2003

3,560

21,317

3,467

– 75

28,269

43

9,549

9,592

– 10,238

– 10,256

Capital increase from options exercised Reduction in par value Purchase of treasury shares

– 3,216 – 18

Issuance of call-options on own shares

– 3,216 591

591

Translation adjustments from deconsolidation Net profit At December 31, 2004

75

75

0

41,783

16,728 369

21,219

20,195

16,728

Capital increase from employee options exercised

7

630

637

Purchase of treasury shares

– 18

– 12,112

– 12,130

358

9,737

Net profit At December 31, 2005

15,408 35,603

15,408 0

45,698

The previous year’s line items “Additional paid-in capital” and “Retained earnings” have been adjusted by the reclassification of CHF 591,000 ( income from issuance of call-options on own shares ). The line item “Retained earnings” includes legally restricted reserves in the amount of CHF 1,597,000 ( 2004 : CHF 1,602,000 ) that are not available for distribution. Such legal reserves are established based on the legal requirements of the Swiss Code of Obligations. The transaction costs and taxes of CHF 108,000 ( 2004 : CHF 272,000 ) related to the issuance of share capital were deducted from additional paid-in capital. The transaction costs of CHF 121,000 ( 2004 : CHF 112,000 ) related to the purchase of treasury shares were debited to the reserves. Additional information on the share capital is provided in Note 16.

Annual report 2005 mobilezone holding ag

33

mobilezone Group

NOTES

TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Segment information Consolidated income statement ( in CHF 000 )

Gross sales revenues with third parties Gross sales revenues with other segments

mobilezone Group

Commerce

Fixed-line telecommunications

Discontinued operations

Other / eliminations

2005

2004

2005

2004

2005

2004

2005

2004

2005

2004

261,831

288,709

248,768

252,031

13,063

16,063

—

20,615

0

0

0

0

0

0

175

686

—

0

– 175

– 686

Sales deductions including VAT

– 18,241

– 19,789

– 17,322

– 16,274

– 919

– 1,159

—

– 2,356

0

0

Net sales

243,590

268,920

231,446

235,757

12,319

15,590

—

18,259

– 175

– 686

291

855

284

922

–1

23

—

262

8

– 352

– 183,594

– 209,732

– 176,183

– 183,510

– 7,421

– 11,057

—

– 15,700

10

535

Other operating income Cost of goods and materials Personnel costs

– 25,672

– 25,375

– 24,048

– 22,690

– 373

– 286

—

– 1,683

– 1,251

– 716

Other operating costs

– 12,091

– 11,281

– 12,077

– 10,003

– 1,185

– 1,174

—

– 1,306

1,171

1,202

22,524

23,387

19,422

20,476

3,339

3,096

—

– 168

– 237

– 17

Operating profit before depreciation & amortization ( EBITDA ) Depreciation of property, plant & equipment

– 2,467

– 2,747

– 2,455

– 2,638

– 12

– 12

—

– 97

0

0

Amortization of intangible assets

– 1,226

– 1,326

– 940

– 1,135

– 286

– 191

—

0

0

0

Net result of discontinuing operations Operating profit before interest and tax ( EBIT )

0

173

0

0

0

0

—

173

0

0

18,831

19,487

16,027

16,703

3,041

2,893

—

– 92

– 237

– 17

Consolidated balance sheet ( in CHF 000 )

mobilezone Group

2005 Fixed assets

2004

2005

Fixed-line telecommunications 2004

2005

Discontinued operations

Other / eliminations

2004

2005

2004

2005

2004

9,791

8,173

7,364

7,141

573

729

—

0

1,854

303

Current assets

67,099

73,497

65,472

61,288

6,758

5,265

—

0

– 5,131

6,944

Total Assets

76,890

81,670

72,836

68,429

7,331

5,994

—

0

– 3,277

7,247

Liabilities

31,192

39,887

22,393

28,343

1,765

3,227

—

0

7,034

8,317

Net assets

45,698

41,783

50,443

40,086

5,566

2,767

—

0

– 10,311

– 1,070

5,418

3,357

3,641

3,142

142

210

—

5

1,635

0

Investments in fixed assets

The segment “ Commerce ” consists of mobilezone ag and Europea Trade AG. The segment “ Fixed line telecommunications ” includes globalzone ag and mobilezone international ag. The segment “ Discontinued operations ” consisted of the German companies Tebbe Harms Kleen GmbH & Co. KG, Kleen Vertriebs GmbH & Co. KG, and Kleen Handels GmbH (all until May 31, 2004).

34

Commerce

Annual report 2005 mobilezone holding ag

Except for the trading activities in the segment “Commerce”, the segment operations are limited to their respective geographical markets. In 2005 in the segment “Commerce” trading revenues in the EU markets came to CHF 0.8 million (previous year CHF 21.3 million).

Annual report 2005 mobilezone holding ag

35

mobilezone Group

Principles of the Group accounting

General The mobilezone Group conducts business in the area of mobile and fixed-line telecommunications. The core activity lies in the segment Commerce with mobilezone ag, which was established in May 1999 and now has a total of 104 retail stores with locations in every bigger Swiss city, and Europea Trade AG, which is active in the wholesale business. The business model is based on agreements with the three providers active in Switzerland that pay mobilezone for finding new clients for them (one-time commissions ). Due to these commissions, mobilezone is able to provide its clients with mobile phones at very low prices or even at no charge. The segment “fixed-line telecommunications” consists of globalzone ag and mobilezone international ag. These so-called “switchless” retailers offer their customers fixed-line telecommunications services. Under the brand name “fair value” the newly founded mobilezone net ag has been offering mobile subscription service based on its own pricing plan since January 2006. The parent company of mobilezone Group is mobilezone holding ag, Riedthofstrasse 124, 8105 Regensdorf / Switzerland. The company is listed on the Swiss Exchange SWX. The consolidated financial statements of mobilezone provide a true and fair picture of its financial position, the results of operations, and cash flows in accordance with the International Financial Reporting Standards ( IFRS ) and comply with Swiss law. They have been prepared on a historical cost basis except for derivative financial instruments and marketable securities that are listed at fair market value. The reporting currency is the Swiss franc ( CHF ). The preparation of financial statements in conformity with IFRS requires assessments, estimates, and assumptions on the part of management that affect the reported amounts on the reporting date of the financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and also in future periods if the revision affects them. No positions with a significant risk of material adjustment due to changes in assessments and estimates are known. In 2003 the International Accounting Standards Board (IASB) published a revised version of IAS 32 “Financial Instruments: Disclosure and Presentation”, a revised version of IAS 39 “Financial Instruments: Recognition and Measurement” as well as “Improvements in International Accounting Standards”, which affected 14 existing Standards. In 2004 the IASB published IFRS 2 “Share-based payments”, IFRS 3 “Business Mergers”, IFRS 4 “Insurance Contracts”, IFRS 5 Fixed Assets held for Sale and Discontinued Operations”, the revised IAS 36 “Impairment of Assets”, and IAS 38 “Intangible Assets” and additional changes in IAS 39. The Group has adopted all of the new and revised Standards and Interpretations as of January 1, 2005. The adoption of these new and revised Standards and Interpretations had no material effect on the Group’s shareholders’ equity, net income, or cash flow statement. No adjustments in prior years’ figures were necessary, but the changes required additional disclosures in the Notes.

36

Annual report 2005 mobilezone holding ag

NOTES

TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The following IFRS standards were adopted in 2005, but they will not take effect until later and were not yet used in preparing this set of consolidated financial statements. No material effects on the financial statements of mobilezone are expected.

Standard / Interpretation

First-time adoption :

Changes to IAS 19, Employee Benefits

January 1, 2006

Changes to IAS 39, Financial Instruments

January 1, 2006

Changes to IAS 21, Foreign exchange rates

January 1, 2006

IFRS 6, Exploration for and Evaluation of Mineral Resources

January 1, 2006

IFRIC 4, Determining whether an Arrangement Contains a Lease

January 1, 2006

IFRIC 6, Waste Electrical and Electronic Equipment

January 1, 2006

IFRIC 7, Financial Reporting in Hyperinflationary Economies

January 1, 2007

IFRIC 8, Scope of IFRS 2

January 1, 2007

IFRS 7, Financial Instruments: Disclosures

January 1, 2007

Changes to IAS 1, Presentation of Financial Statements : Disclosures regarding Equity

January 1, 2007

Scope of consolidation The scope of consolidation is set out in Note 4 to the financial statements of mobilezone holding ag on page 56. In the previous year the scope of consolidation was reduced as per May 31, 2004, when Tebbe Harms Kleen GmbH & Co. KG, Kleen Vertriebs GmbH & Co. KG and Kleen Handels GmbH were sold. The transaction price amounted to CHF 15,000 and was received in cash. These companies’ 2004 ( 5 months ) contribution to operating income are presented separately in the column "Discontinued Operations" of the consolidated income statement. Assets and liabilities as of the date of disposal consisted of : Disposals

2004

( in million CHF ) Cash & cash equivalents

1.5

Other current assets

1.6

Property, plant & equipment

0.4

Bank and other interest-bearing liabilities

0.0

Liabilities ( excluding Group loans )

– 3.9

Translation adjustments

0.0

(Gain) / Loss from deconsolidation

– 0.4

Net cash outflow from deconsolidation ( cash & cash equivalents derecognized )

– 1.5

Jamba ! AG ( Schweiz ), which was included in the consolidated financial statement using the equity method, was sold as of October 1, 2004, for CHF 1 million, at an accounting profit of CHF 145,000.

Annual report 2005 mobilezone holding ag

37

mobilezone Group

Discontinued operations On January 20, 2004, mobilezone announced in a press release that it had decided to discontinue its German activities. In June 2004 the remaining companies in Germany were sold (Kleen Group). Accordingly, this segment was presented in the previous year as a discontinued operation. The result of this unit is disclosed separately in the income statement. Cash flows from operating activities, from investing activities, and from financing activities in 2004 amounted to CHF 0.0 million. In the previous year the deconsolidation of the discontinued operations led to a net gain of CHF 173,000, which was included in the income statement under “Net result of discontinued operations”. The net result did not have any effect on income taxes.

Principles of consolidation The consolidated financial statements of mobilezone include the financial statements of mobilezone holding ag and all the subsidiaries it controls directly or indirectly by majority of votes or other means. Those entities are fully consolidated, whereby assets, liabilities, income, and expenses are incorporated fully in the consolidated accounts. Investments and joint ventures, on which mobilezone exercises significant influence but no control, are recorded according to the equity method and disclosed as “investments in associated companies”. The share in the profit or loss of associated companies is presented separately in the income statement. Significant positions and transactions with such investments and joint ventures are disclosed separately as items relating to associated companies. Capital consolidation is based on the purchase method, whereby the acquisition cost of subsidiaries is offset at the time of acquisition against the fair market value of the net assets acquired, determined according to uniform corporate valuation principles. During the year under review companies acquired or disposed of are consolidated as of the date of acquisition and deconsolidated as of the date of disposal. Any gain or loss from deconsolidation is recognized in the income statement. Accounts payable to, accounts receivable from, and income and expenses between the companies included in the consolidation are eliminated. Intercompany profits within the Group are also eliminated upon consolidation.

Foreign currency translation The consolidated financial statements are prepared in Swiss francs. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rates effective on the balance sheet date. Transactions in foreign currencies are recorded using exchange rates prevailing at the time of the transaction. Gains or losses arising from the settlement of these transactions are included in current year’s income statement. Assets and liabilities of subsidiaries that do not report in Swiss francs are translated into Swiss francs for consolidation purposes at the exchange rate in effect on the balance sheet date. The income statement, cash flow statement, and other movements are translated at the average rate of the reporting

38

Annual report 2005 mobilezone holding ag

NOTES

TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

period. Currency translation differences resulting from the translation of the balance sheet and income statements of subsidiaries and from the translation of equity-like corporate loans denominated in foreign currencies are recognized directly in equity capital and presented separately as cumulative translation adjustments.

Financial risk management and derivative financial instruments Approximately 55 % of mobilezone’s purchases for Switzerland are paid in euro. Due to the short-term nature of payments and the high inventory turnover, the Group generally does not hedge any foreign currency risks on purchases. Accordingly, the Group used only few derivative financial instruments with a short maturity during the year under review. As of the balance sheet date, any open contracts are valued at fair market value with any changes in fair market value recognized in the income statement.

Property, plant & equipment Property, plant, and equipment are stated at historical cost less accumulated depreciation. Depreciation is charged to the income statement on a straight-line basis over the following estimated useful lives of items of property, plant, and equipment : Office equipment and furniture incl. EDP

2 to 5 years

Shop equipment

5 to 8 years

Vehicles

3 to 5 years

Intangible assets Acquired rights such as contracts with clients, lessors, and suppliers and similar rights that are generating a positive cash flow are capitalized and amortized over the estimated useful live of 5 years. Goodwill arising from acquisitions, determined as the difference between the purchase price and the fair market value of the net assets acquired, and other intangible assets with an indefinite useful live are not amortized but will be tested annually for impairment.

Securities Initially, securities are recognized at fair market value. Subsequent changes in fair market value are recognized in the income statement. If there is no active market or the fair market value cannot be determined reliably, securities are stated at amortized cost less necessary valuation adjustments.

Impairment of fixed assets The value of property, plant, and equipment and other fixed assets, including goodwill and other intangible assets, is reexamined whenever changes in circumstances or events make an overvaluation of the book values appear likely. When the book value exceeds the realizable value, an accelerated depreciation is recorded on the income statement against the value that seems recoverable based on discounted, anticipated future revenues or on the estimated net sale value.

Annual report 2005 mobilezone holding ag

39

mobilezone Group

Inventories Inventories are stated at the lower of cost or net realizable value, whichever is lower. The cost of inventories is calculated using the weighted average cost method. Goods with long storage periods are subject to appropriate value adjustments. Net realizable value is the estimated selling price in the ordinary course of business, less selling expenses. The price of the mobile communications product is determined based on whether the product is sold on a stand-alone basis or in conjunction with a provider subscription. Net realizable value therefore takes into account both components. In addition, price protection arrangements with certain suppliers are also considered in determining the need for any value adjustments.

Trade and other accounts receivable Trade and other accounts receivable are stated at their nominal amounts less any valuation adjustments for credit risks.

Cash & cash equivalents Cash & cash equivalents are stated at nominal value. They include cash on hand, postal and bank accounts, and money market deposits with original maturity of three months or less.

Provisions for liabilities and contingencies Provisions are set aside for current or future legal or de facto obligations when on the balance sheet date, as a result of past events, reasonable estimates regarding the future transfer of economic values are possible and when such a transfer is likely. The provisions are determined based on the best possible estimate of the expenditures. In cases of considerable importance, provisions are determined by discounting the expected future cash flow on the balance sheet date at a rate that reflects current market assessments of the risks specific to the liability. Contingent liabilities are disclosed in the attachments hereto if a future obligation is possible or if a present obligation exists, but an outflow of funds is not probable or the amount cannot be reliably estimated.

Leasing Lease contracts are recognized in the balance sheet when the significant risks and rewards of ownership are assumed by the Group. Lease payments are divided according the annuity-method into interest and principal payments. Leased assets are depreciated over the lower of either the lease term or the estimated useful life. Payments made under operating leases are recognized in the income statement on a straight-line basis over the term of the lease. Lease incentives are recognized in the income statement as a reduction of the total lease expense. Revenue-based and other contingent leases are accrued on an estimated basis.

40

Annual report 2005 mobilezone holding ag

NOTES

TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Retirement benefits For all relevant risks the mobilezone Group companies have joined a multi-employer plan established under Swiss law as a defined contribution plan, which has reinsured all risks at a large insurance company. The plan is funded by employees’ and employers’ contributions. Nevertheless, the plan qualifies in Switzerland as a defined benefit plan according to I AS 19. The financial impact of this plan, including accompanying provisions, on the consolidated financial statements is determined based on the projected unit credit method. In accordance with IAS 19, the difference between plan assets and defined benefit obligation is principally recognized as an asset or a liability on the consolidated balance sheet. However, a pension surplus is recognized as an asset only if the asset embodies future funds that are actually available to the Group in the form of refunds or reductions in future contributions. Actuarial gains and losses arising from the periodical reassessments by external actuaries are recognized if and to the extent that they exceed 10 % of the higher of either the projected benefit obligation or the fair market value of plan assets. The amount exceeding this “corridor” is amortized over the expected average remaining working lives of the employees participating in the plan.

Revenues Net sales include all revenues from the sale of goods and services, less rebates, discounts, VAT, and write-offs of trade accounts receivable. Revenues from sale of goods are included in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. One-time commissions from providers are recognized upon conclusion of the contract. The recurring airtime profit-sharing commissions are normally based on the subscribers’ monthly payments of mobile phone bills to the providers. These amounts are recorded in the income statement based on the providers’ invoices on an accrual basis.

Income tax Current income taxes are determined on the taxable income for the year and are recorded in the income statement. Deferred income taxes are calculated using the balance sheet liability method on any temporary differences between the book value of assets and liabilities for financial reporting purposes and the value used for tax purposes. Deferred tax is calculated using tax rates enacted or substantially enacted on the balance sheet date and will be offset in future tax periods. Deferred tax loss carryforwards and deferred earnings tax credits are activated only to the extent that it is probable that they will be realized in the future.

Annual report 2005 mobilezone holding ag

41

mobilezone Group

Notes to the consolidated income statement

1

Net sales

2005

2004

96,984

121,745

135,154

116,813

11,452

14,903

0

15,459

243,590

268,920

2005

2004

Wages and salaries

22,481

22,408

Social security costs

1,957

2,067

Pension costs

627

519

Other employee benefit costs

607

381

25,672

25,375

317

309

( in CHF 000 ) Mobile communication products One-time commissions and recurring “airtime” profit-sharing commissions from providers Fixed line telecommunication revenues and telephone cards Kiosk merchandise Total Net sales

2

Personnel costs ( in CHF 000 )

Total Personnel costs Number of employees at balance sheet date ( based on full-time employment )

Option program An option program for members of the Board of Directors, the executive committee, and upper man-agement was in effect until 2002. In 2003 that option program was replaced with a bonus plan. In 2001 and 2002 the following options were granted to beneficiaries under the old plan according to the conditions set out below : Grant year

2002

2001

Number

989,000

1,720,000

Maturity

April 15 , 2005

Nov. 29 , 2004

Exercise ratio

1: 1

1: 1

Exercise price

1.275

3.650

Due to the reduction of nominal value in 2004 and the repurchase of shares during 2004 and 2005, the exercise price was reduced in accordance with the provisions of the program by a total of CHF 0.16 ( grant year 2001) and CHF 0.23 respectively ( grant year 2002 ) per option. These reductions correspond to the theoretical decline in the fair market value of these options due to the above-mentioned equity capital transactions.

42

Annual report 2005 mobilezone holding ag

NOTES

TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The allocated options vest over 3 years from grant date. The issuance of the options, except for the social security contribution, is not recognized in the consolidated financial statements. By December 31, 2005, the following options had been exercised : Grant year 2002

Number

By June 2, 2004

137,800

Exercise price 1. 275

∅ share price 3.15

By December 7, 2004

175,000

1. 115

4.10

By March 10, 2005

543,600

1. 115

4.80

By April 6, 2005

132,600

1. 045

4.80

Total

989,000

Grant year 2001 On December 7, 2004

Number 1,720,000

Exercise price 3.49

∅ share price 4.05

Employee retirement benefits The actuarial calculation performed in accordance with IAS 19 as of 12 / 31/2005 resulted in the following situation : Components of pension costs

2005

2004

1,121

987

( in CHF 000 ) Current service costs Interest costs Expected return on plan assets Recognized actuarial loss in the current year

169

225

– 143

– 134

31

13

Pension cost, gross

1,187

1,091

Less employees’ contributions

– 555

– 486

623

605

2005

2004

– 7,797

– 5,914

6,661

5,214

Pension costs, net

Funded status and recognized net assets ( in CHF 000 ) Present value of defined benefit obligation Fair market value of plan assets Excess of obligations over assets

– 1,136

– 700

Unrecognized actuarial losses

1,254

817

Adjustment due to IAS 19 para. 58

– 118

– 117

0

0

Recognized pension assets / liabilities

Annual report 2005 mobilezone holding ag

43

mobilezone Group

Itemized changes in retirement fund assets

2005

2004

( in CHF 000 ) Pension assets / liabilities as of January 1

0

0

Pension costs

– 1,178

– 1,092

Contributions

1,179

951

–1

141

0

0

The following assumptions were applied :

2005

2004

Discount rate

2.9 %

3.25 %

Expected return on plan assets

2.5 %

2.25 %

0 – 1.5 %

0 – 1.5 %

Change of adjustment due to IAS 19 para. 58 Pension assets / liabilities as of December 31

Future salary increases Future benefit increases Fluctuation rate Average remaining service years Number of insured employees as of December 31

3

Other operating costs

0%

0%

up to 21.9 %

up to 21.9 %

7.3

7.3

329

306

2005

2004

6,294

6,556

14,637

15,763

6,062

6,802

– 14,902

– 17,840

12,091

11,281

( in CHF 000 ) Operating lease costs Marketing Repair and maintenance, general and administrative costs less : contributions received from third parties Total Other operating costs

Marketing costs are mostly covered out of cost contributions and location contributions of business partners; the same applies to operating lease costs, though to a lesser extent.

4

Net result of discontinued operations

2005

2004

( in CHF 000 ) Book gain from disposal of investments

0

423

Provisions made for litigation claims

0

– 250

Total Net result of discontinued operations

0

173

The net result did not affect income taxes in any way.

44

Annual report 2005 mobilezone holding ag

NOTES

5

TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Other financial income

2005

2004

( in CHF 000 ) Interest on bank accounts Book gain from disposal of Jamba ! AG ( Schweiz )

6

115

39

0

145

Foreign exchange differences

655

710

Total Other financial income

770

894

2005

2004

25

29

Financial expense ( in CHF 000 ) Interest on bank loans Bank commissions and foreign exchange differences

300

185

Total Financial expenses

325

214

In the year under review, as in the previous year, there were no significant interest-bearing debts.

7

Income tax expenses

2005

2004

4,009

4,104

( in CHF 000 ) Current income taxes Deferred income taxes

– 141

– 393

Total Income tax expenses

3,868

3,711

Current income taxes are based solely on the profit of the year under review. Deferred income taxes are based solely on changes in temporary differences and the recognition of tax loss carry-forwards. Taxes on capital are included under “Other operating costs”.

Annual report 2005 mobilezone holding ag

45

mobilezone Group

Income tax reconciliation

2005

2004

Profit before taxes

19,276

20,439

Average applicable tax rate

21.2%

21.1%

Expected tax expense

4,082

4,310

( in CHF 000 or as indicated )

Impact on tax expense from : tax-exempt income effect of previously unrecognized tax losses now utilized

0

– 65

– 69

– 221

unrecognized tax loss carry-forwards on current losses

5

125

recognition of tax loss carry-forwards of previous periods

0

– 303

effect of tax rate changes

– 150

– 135

Effective income tax expense

3,868

3,711

Deferred tax assets

2005

2004

219

303

( in CHF 000 ) Tax benefits of loss carry-forwards

In addition, the Group has tax benefits of loss carry-forwards of CHF 270,000 ( 2004 : CHF 368,000 ) that were not recognized previously due to the uncertainty as to whether future taxable profit will be available against which the Group will be able to utilize such benefits. The related tax loss carryforward of CHF 3,465,000 expires in 2009.

Deferred tax liabilities

2005

2004

120

131

1,509

1,670

329

382

( in CHF 000 ) Intangible assets Inventories Trade accounts receivable Provisions Total Deferred tax liabilities

22

23

1,980

2,206

As in the previous year, no income taxes were recognized directly in shareholders’ equity.

46

Annual report 2005 mobilezone holding ag

NOTES

TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Notes to the consolidated balance sheet

8

Property, plant & equipment ( in CHF 000 )

Shop equipment

Other property, plant & equipment

Total

11,670

2,505

14,175

2,446

153

2,599

– 804

– 196

Cost : At December 31, 2003 Additions Disposals Changes in scope of consolidation Translation adjustment At December 31, 2004 Additions Disposals At December 31, 2005

– 1,000

– 2,349

– 2,349

– 40

– 40

10,923

2,462

13,385

2,008

265

2,273

– 729

– 145

– 874

12,202

2,582

14,784

6,803

1,368

8,171

2,166

581

2,747

– 804

– 164

Accumulated depreciation : At December 31, 2003 Additions Disposals Changes in scope of consolidation Translation adjustment At December 31, 2004 Additions Disposals

– 968

– 1,916

– 1,916

– 34

– 34

6,215

1,785

8,000

2,033

434

2,467

– 729

– 122

– 851

7,519

2,097

9,616

At December 31, 2004

4,708

677

5,385

At December 31, 2005

4,683

485

5,168

At December 31, 2005 Book Value :

The fire insurance value of property, plant & equipment as per December 31, 2005, amounted to CHF 11,000,000 ( 2004 : CHF 10,600,000 ).

Annual report 2005 mobilezone holding ag

47

mobilezone Group

9

Investments in associated companies Share of equity in associated companies

( in CHF 000 ) At December 31, 2003

583

Share of net results

272

Disposals

– 855

At December 31, 2004

0

Additions / Disposals

0

At December 31, 2005

0

The previous year’s entry concerned the 49.9 % investment in Jamba ! AG ( Schweiz ). An accounting profit of CHF 145,000 resulted from the sale.

10

Intangible assets ( in CHF 000 )

Acquired shop locations

Acquired goodwill

Customer list

Total

3,471

28,980

2,143

34,594

Cost : At December 31, 2003 Additions

403

Disposals Changes in scope of consolidation At December 31, 2004 Additions Disposals At December 31, 2005

355 – 28,980

–6 3,868

758 – 28,980 –6

0

1,284

2,498

6,366

226

1,510

– 551

– 551

4,601

0

2,724

7,325

2,041

28,980

592

31,613

483

1,326

Accumulated amortization : At December 31, 2003 Additions

843

Disposals Changes in scope of consolidation At December 31, 2004 Additions Disposals At December 31, 2005

– 28,980

– 28,980

–6 2,878

–6 0

450

1,075

3,953

776

1,226

– 551

– 551

2,777

0

1,851

4,628

At December 31, 2004

990

0

1,423

2,413

At December 31, 2005

1,824

0

873

2,697

Book value :

48

Annual report 2005 mobilezone holding ag

NOTES

11

TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Securities

2005

2004

( in CHF 000 ) Listed capital-protected investment certificates 1 Shares not listed 2 Total Securities 1 2

12

1,535

0

100

0

1,635

0

2005

2004

21,181

22,106

Stated at market value; maturity date: April 18, 2008 Stated at amortized cost less valuation adjustments

Inventories ( in CHF 000 ) Inventories, gross Less valuation adjustments Total Inventories

– 613

– 310

20,568

21,796

The carrying amount of inventories carried at fair value less costs to sell amounted to CHF 2,053,000 ( 2004 : CHF 1,293,000 ). In the year under review value adjustments in the cost of goods and materials were made in the amount of CHF 523,000 ( previous year : CHF 310,000 ). As in the previous year, no value adjustment transfers were made.

13

Trade accounts receivable

2005

2004

28,352

23,555

24

11

– 265

– 1,536

28,111

22,030

( in CHF 000 ) Accounts receivable from third parties Accounts receivable from associated companies Value adjustments Total Trade accounts receivable

The value adjustment has decreased because it was set off with receivables not affecting the income statement.

14

Other accounts receivable

2005

2004

3,758

4,815

249

335

4,007

5,150

– 72

– 72

3,935

5,078

( in CHF 000 ) Accruals Other accounts receivable less : long-term accounts receivable Total Other accounts receivable ( current )

Annual report 2005 mobilezone holding ag

49

mobilezone Group

15

Cash & cash equivalents

2005

2004

14,485

15,593

0

9,000

14,485

24,593

( in CHF 000 ) Cash on hand, at banks and in postal accounts Fixed-term deposits Total Cash & cash equivalents

Cash and cash equivalents are not subject to any restrictions on disposal. The effective interest rate on fixed-term deposits was 0.45 %.

16

Share capital Bearer shares

CHF 0.01 par value

CHF 0.10 par value

Issued and fully paid-in at December 31, 2003

0

35,601,944

Capital increase from employee options exercised

0

137,800

35,739,744

– 35,739,744

1,895,000

0

Partial reduction of nominal value from CHF 0.10 to 0.01 per share Capital increase from employee options exercised Capital increase from shareholder options exercised

1,000,000

0

Number of shares issued at December 31, 2004

38,634,744

0

Less treasury shares : from share repurchase 2004, scheduled for destruction

– 1,776,326

Held for trading purposes Number of shares issued and outstanding at December 31, 2004

– 5,273 36,853,145

Number of shares issued at December 31, 2004

38,634,744

Destruction of repurchased shares

– 3,537,948

Capital increase from employee options exercised Number of shares issued at December 31, 2005 Less treasury shares : Held for trading purposes Number of shares issued and outstanding at December 31, 2005

676,200 35,772,996 – 7,990 35,765,006

In 2004 and 2005 the Company bought a total of 3,537,948 of its own shares by means of a share buy-back program with tradable put options. According to the resolution of the Annual General Meeting of April 14, 2005, these shares were destroyed in the year under review. More details regarding the share repurchase are included in Note 3 to the annual financial statements of mobilezone holding ag on page 59. The treasury shares do not have any dividend or voting rights at the Annual General Meeting. All other shares issued are equally entitled to dividends and voting.

50

Annual report 2005 mobilezone holding ag

NOTES

TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Details regarding treasury shares and contingent and authorized capital are included in Note 3 to the annual financial statements of mobilezone holding ag on page 59.

Calculation of earnings per share

17

2005

2004

Consolidated net profit

CHF

15,408,000

16,728,000

Weighted average number of shares outstanding

Pieces

35,952,000

35,437,000

Earnings per share

CHF

0.43

0.47

Consolidated net profit

CHF

15,408,000

16,728,000

Weighted average number of outstanding and potential shares

Pieces

36,141,000

36,158,000

Earnings per share – diluted

CHF

0.43

0.46

Provisions Litigation and warranty claims

Discontinuing Operations

Total 2005

Total 2004

At January 1

100

750

850

720

Additions

0

0

0

250

Used

0

– 750

– 750

0

( in CHF 000 )

0

0

0

– 120

At December 31

Reversed

100

0

100

850

Of these current

100

0

100

850

The increase in provisions in the previous year was due to claims related to the discontinued business activities in Germany. The amount was paid in cash based on a final settlement. The provision for litigation and warranty claims is mainly for expected warranty claims from the sale of mobile phones.

18

Other current liabilities

2005

2004

( in CHF 000 ) Deferrals

2,031

2,349

Other current accounts payable

1,705

1,455

Total Other current liabilities

3,736

3,804

Annual report 2005 mobilezone holding ag

51

mobilezone Group

Other disclosures

19

Operating leases As of December 31, 2005, mobilezone Group operated 104 shops all of which were leased. Leases typically have fixed terms between 3 and 5 years, with an option to renew for several years. Future payments under fixed-term operating leases as of balance sheet date will become due as follows :

At December 31

2005

2004

6,734

6,148

19,029

16,411

4,428

5,414

30,191

27,973

( in CHF 000 ) Less than one year Between one and five years More than five years Total

The expected lease income from sublease arrangements amounts to CHF 166,000 ( 2004 : CHF 390,000 ). During the year under review, CHF 6,294,000 were recognized as an expense from operating leases in the income statement ( 2004 : CHF 6,556,000 ). These expenses included revenue-based rents in the amount of CHF 67,000 ( 2004 : CHF 89,000 ).

20

Contingent liabilities and future commitments, capital commitments and restrictions of ownership As of December 31, 2005, and December 31, 2004, no items had to be reported under this heading.

21

Financial instruments Credit risk The Group is exposed to credit risks in the ordinary course of its operating activities. Due to industry practice – most sales are paid in cash – there are relatively few receivables outstanding as compared to total sales. Since Swiss law limits the number of network operators, these outstanding receivables are due from a small number of telecommunication providers. The company meets such risks by negotiating relatively short payment terms.

52

Annual report 2005 mobilezone holding ag

NOTES

TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Foreign currency risk The revenues in the retail business and in the fixed-line telecommunications business are all denominated in local currency. Approximately 55 % of purchases in the retail business are denominated in euro. The Group decided generally not to hedge the currency risk on purchases due to the short payment terms and the high inventory turnover. The wholesale business is not exposed to any currency risks. Open put options to sell euros In the year under review put options with short maturity were sold that give the counterpart the right to sell euros at the agreed upon-basis price. The premiums earned were used to reduce the price for the Group’s euro purchases. As of December 31, 2005, there were three open contracts at a value of euro 6,000,000 ( 2004 : none ). The fair market value ( price to settle the options ) was minus CHF 8,454. Interest-rate risk No long-term financial liabilities exist. The interest-rate risk arising from long-term securities is insignificant. Fair market value of financial assets and liabilities The fair market values of the Group’s financial assets and liabilities approximate the corresponding book values.

22

Transactions with related parties and companies Related parties are Members of the Board of Directors, Group Management, their close relatives, and key shareholders including companies controlled by them. The total cash compensation (including pension contributions) to Directors and the Group Management ( including those working on a mandate basis ) amounted to CHF 1,687,000 ( prior year CHF 1,985,000 ). As in the previous year, there were no share-based payments, other long-term benefits, or severance benefits paid. Hans-Ulrich Lehmann, Member of the Board of Directors, and Rudolf Baer, CEO, are the owners of Immoplaza AG. This company rents the central warehouse and the administrative building in Regensdorf to mobilezone. Hans-Ulrich Lehmann is the owner of Autronic AG, Samtel AG, and Mobile Solutions AG. The first two companies are distributors of Nokia and Samsung mobile phones in Switzerland. They supply mobilzone ag with mobile phones and pay marketing contributions to mobilezone ag. Mobile Solutions AG develops content for mobile phone applications. All transactions are effected at arm’s length.

Annual report 2005 mobilezone holding ag

53

mobilezone Group

NOTES

TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Transactions and balances with related parties

2005

2004

41,054

60,006

159

410

( in CHF 000 ) Purchases of mobile phones from Autronic AG Marketing contributions from Samtel AG Service fees from Mobile Solutions AG

283

159

Operating lease expenses to Immoplaza AG

284

293

Accounts payable to Autronic AG

3,419

8,220

Accounts receivable from Samtel AG

24

11

Accounts receivable from Mobile Solutions AG

51

85

Payments for consulting services from members of the Board of Directors or their related law offices amounted to CHF 155,000 ( prior year : CHF 160,000 ).

23

54

Post-balance-sheet events There have been no events that significantly affect the consolidated financial statements. The Board of Directors approved the consolidated financial statements for publication on March 6, 2006. The consolidated financial statements must still be approved by the Annual General Meeting on April 13, 2006.

Annual report 2005 mobilezone holding ag

mobilezone Group

REPORT

OF THE

GROUP AUDITORS

Report of the Group Auditors to the General Meeting of mobilezone holding ag, Regensdorf As group auditors, we have audited the consolidated financial statements presented on pages 30 to 54 ( balance sheet, income statement, statement of changes in equity, cash flow statement and notes ) of mobilezone holding ag for the year ended December 31, 2005. These consolidated financial statements are the responsibility of the board of directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence. Our audit was conducted in accordance with Swiss Auditing Standards and with the International Standards on Auditing ( ISA ), which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the International Financial Reporting Standards ( IFRS ) and comply with Swiss law. We recommend that the consolidated financial statements submitted to you be approved.

KPMG Fides Peat

Fredy Luthiger

Claudius Rüegsegger

Swiss Certified Accountant Auditor in Charge

Swiss Certified Accountant

Zurich, March 6, 2006

Annual report 2005 mobilezone holding ag

55

mobilezone holding ag

January 1 to December 31

INCOME

2005

S TAT E M E N T

2004

( in CHF 000 ) Dividend income

0

7,399

Financial income

1,189

2,483

Reversal of provisions and value adjustments Gain from disposal of investments

389

570

0

501

Income from services provided and other income

1,608

1,764

Total Income

3,186

12,717

Administrative expenses

1,814

1,888

Financial expenses

92

61

Set aside for provisions and value adjustments

30

263

Total Expenses

1,936

2,212

Net profit

1,250

10,505

The presentation of the income statement has been slightly changed in the year under review and the prior year’s figures have been adjusted accordingly to allow comparison.

56

Annual report 2005 mobilezone holding ag

mobilezone holding ag

BALANCE

S H E E T B E F O R E A P P R O P R I AT I O N O F AVA I L A B L E E A R N I N G S

as of December 31 ( in CHF 000 )

2005

2004

Notes

ASSETS Cash & cash equivalents Treasury shares

820

7,083

31

10,256

25

25

Accounts receivable from Third parties Group companies Accruals and deferrals Current assets Investments

2

Securities

0

1,122

0

1

876

18,487

31,076

30,576

1,634

0

Fixed assets

32,710

30,576

Total Assets

33,586

49,063

279

238

5,500

2

LIABILITIES AND SHAREHOLDERS’ EQUITY Current accounts payable to Third parties Group companies Accruals and deferrals Current liabilities Provisions Share capital General reserves Reserve for own shares

501

299

6,280

539

0

750

358

386

15,162

26,627

31

10,256

10,505

0

Available earnings Balance brought forward Net profit Shareholders’ equity Total Liabilities and shareholders’ equity

3

1,250

10,505

27,306

47,774

33,586

49,063

Annual report 2005 mobilezone holding ag

57

mobilezone holding ag

Except for the comments that follow, there are no further facts that require disclosure in accordance with Art. 663b of the Swiss Code of Obligations.

1

Contingent liabilities at December 31

2005

2004

0

643

( in CHF 000 ) Letters of postponement issued in favor of subsidiaries Additional guarantees in favor of subsidiaries Joint and several liability from VAT – group taxation

2

0

99

p. m.

p. m.

Scope of consolidation and significant investments in subsidiaries and associates Investment held Paid-in capital ( %) ( in CHF 000 )

Consolidation

Switzerland mobilezone ag, Regensdorf

100

2,850

C

Europea Trade AG, Regensdorf

100

100

C

mobilezone net ag, Regensdorf ( since September 20, 2005 )

100

500

C

globalzone ag, Regensdorf

100

100

C

mobilezone international ag, Regensdorf

100

200

C

Jamba ! AG ( Schweiz ), Regensdorf ( until September 30, 2004 )

E

Germany Tebbe Harms Kleen GmbH & Co. KG, Hausham ( until May 31, 2004 )

C

1

Kleen Vertriebs GmbH & Co. KG, Hausham ( until May 31, 2004 )

C

2

Kleen Handels GmbH, Hausham ( until May 31, 2004 )

C

2

C = Fully consolidated E = Included in the consolidated financial statements according to the equity method.

58

1

Indirectly owned subsidiary of mobilezone holding ag (via Kleen Vertriebs GmbH)

2

Management company not engaged in operations

Annual report 2005 mobilezone holding ag

NOTES

3

TO T H E F I N A N C I A L S TAT E M E N T S

Shareholders’ equity Share capital, authorized and conditional capital increases As of December 31, 2005, the ordinary share capital consists of 35,772,996 bearer shares at a par value of CHF 0.01 each. As of the balance sheet date, there was authorized share capital in the amount of CHF 30,000 ( 2004 : CHF 30,000 ). Conditional share capital amounting to CHF 132,910 ( 2004 : CHF 139,672 ) is earmarked for the exercise of employee stock options ( up to CHF 22,910 ), for the exercise of conversion and option rights relating to any debenture loans ( up to CHF 100,000 ) and for the exercise of other options ( up to CHF 10,000 ). As of balance sheet date there were no options outstanding ( 2004 : 676,200 options outstanding for the purchase of 676,200 bearer shares at a par value of CHF 0.01).

Change in number of treasury shares Amount of bearer shares At January 1, 2004

Purchases from stock repurchase program 2004

Price in CHF Maximum Average Minimum

0

Total ( in CHF 000 ) 0

1,776 326

5.70

5.70

5.70

10,124

Other purchases at cost

99,229

4.40

4.13

3.81

410

Disposals at sale prices

– 93,956

4.37

4.16

4.04

– 390

At December 31, 2004

1,781,599

Purchases from stock repurchase program 2005

1,761,622

Transaction costs relating to stock repurchase program

112

10,256

6.81

6.81

6.81

Transaction costs relating to stock repurchase program Destruction of purchased shares

11,997 121

– 3,537,948

– 22,355

Other purchases at cost

50,165

5.50

4.94

4.34

248

Disposals at sale prices

– 47,448

5.60

4.97

4.36

– 236

At December 31, 2005

7,990

Annual report 2005 mobilezone holding ag

31

59

mobilezone holding ag

NOTES

TO T H E F I N A N C I A L S TAT E M E N T S

Significant shareholders According to the information to the Board of Directors, as per year-end the following shareholders controlled more than 5% of the share capital : At December 31

2005

2004

Hans-Ulrich Lehmann / Lehmann-Holding AG

16

22

Schroders Plc., GB-London

10

10

Rudolf Baer / B & B Beratungs AG

6

8

Bestinver Gestión SA, E-Madrid

6

0

( in %)

Asialand Holding Corp., VG-Tortola

60

5

5

Martin Lehmann

—

5

Erich Traber

—

5

Total

43

55

Annual report 2005 mobilezone holding ag

mobilezone holding ag

PROPOSAL

BY THE

BOARD

OF

DIRECTORS

Proposal by the Board of Directors 2005

2004

( in CHF ) Balance brought forward Net profit Available earnings at the disposal of the Annual General Meeting

10,505,455

0

1,249,922

10,505,455

11,755,377

10,505,455

The proposal of the Board of Directors of mobilezone holding ag to the Annual General Meeting, to be held on April 13, 2006, is to dispose of the available earnings as follows : Payment of a dividend of CHF 0.25 per bearer share entitled to dividends

8,943,249

0

To be carried forward

2,812,128

10,505,455

11,755,377

10,505,455

Total

In addition, the Board of Directors submit a motion to the General Meeting to assign CHF 15,062,103 from general reserves to free reserves.

Annual report 2005 mobilezone holding ag

61

mobilezone holding ag

REPORT

OF THE

S TAT U TO RY A U D I TO R S

Report of the Statutory Auditors to the General Meeting of mobilezone holding ag, Regensdorf As statutory auditors, we have audited the accounting records and the financial statements presented on pages 56 to 61 ( balance sheet, income statement and notes ) of mobilezone holding ag for the year ended December 31, 2005. These financial statements are the responsibility of the board of directors. Our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence. Our audit was conducted in accordance with Swiss Auditing Standards, which require that an audit be planned and performed to obtain reasonable assurance about whether the financial statements are free of material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accounting records and financial statements and the proposed appropriation of available earnings comply with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.

KPMG Fides Peat

Fredy Luthiger

Claudius Rüegsegger

Swiss Certified Accountant Auditor in Charge

Swiss Certified Accountant

Zurich, March 6, 2006

62

Annual report 2005 mobilezone holding ag

Company addresses mobilezone holding ag Riedthofstrasse 124 CH-8105 Regensdorf Tel. ++ 41 ( 0 ) 43 388 77 11 Fax ++ 41 ( 0 ) 43 388 77 12 E-mail: mobilezoneholding @ mobilezone.ch www.mobilezoneholding.ch Investor Relations : Wolfgang Gross Media Relations : Ruedi Baer

mobilezone ag Riedthofstrasse 124 CH-8105 Regensdorf Tel. ++ 41 ( 0 ) 43 388 77 11 Fax ++ 41 ( 0 ) 43 388 77 12 E-mail: info @ mobilezone.ch www.mobilezone.ch

Europea Trade AG Riedthofstrasse 124 CH-8105 Regensdorf Tel. ++ 41 ( 0 ) 43 388 76 70 Fax ++ 41 ( 0 ) 43 388 76 77 E-mail: manuel.nieto @ europea.ch

globalzone ag Riedthofstrasse 124 CH-8105 Regensdorf Tel. ++ 41 ( 0 ) 43 388 77 11 Fax ++ 41 ( 0 ) 43 388 77 97 E-mail : info @ globalzone.ch www.globalzone.ch

mobilezone international ag Riedthofstrasse 124 CH-8105 Regensdorf Tel. ++ 41 ( 0 ) 43 388 77 11 Fax ++ 41 ( 0 ) 43 388 77 12 E-mail: info @ mobilezone.ch www.mobilezone.ch

mobilezone net ag Riedthofstrasse 124 CH-8105 Regensdorf Tel. ++ 41 ( 0 ) 43 388 77 11 Fax ++ 41 ( 0 ) 43 388 77 12 www.mobilezonenet.ch