®

The 2014 business year for the Gauselmann Group

www.gauselmann.com

Games makers worldwide

2014

The business year for the Gauselmann Group

Gauselmann Group – Key Figures

€ million

2014

2013

Volume of business

1,942

1,847

Sales (fully consolidated)

1,286

1,191

– of which in Germany

725

706

– of which international

561

485

Economic equity

611

567

– of which shareholders’ equity

559

517

– of which silent partnership contributions

19

25

– of which Gauselmann family loan

33

25

187

208

Work places at year’s end

8,458

8,161

(full-time equivalents)

6,848

6,706

– of which in Germany

5,789

5,645

– of which international

2,669

2,516

– of which temporary employment

358

271

– of which apprentices and trainees

218

192

Investments

Philosophy

We are an internationally active family-owned company, committed to providing leisure-time entertainment and gaming fun with small stakes and prizes, true to our motto “More than a game”. Our core competences – content, technology and operating – enable us to offer top-quality games anywhere and at any time based on the respective legislative framework. We stand for responsible gaming – the latest insights into prevention and consumer protection continually flow into our product range. Alongside our products, our employees play a major role in ensuring that our entire offering sets high benchmarks. We are

®

01

Contents

Philosophy

01

To our business partners

04

Games makers worldwide

08

MERKUR DIVISION

12

Development, production and sales of amusement and gaming machines and money management systems in Germany Games makers in Germany (Lübbecke)

20

Development and sales of amusement and gaming machines and money management systems internationally

24

Cash and ticketing activities

30

Research and development

36

Games makers in the UK

40

SPIELOTHEK DIVISION

44

Operation of entertainment centres in Germany

44

Operation of entertainment centres internationally

52

Games makers in Germany (Limburg an der Lahn) Operation of casinos

02

12

56 60

Games makers in India

64

NEW MEDIA

68

Online gaming

68

Financial services

71

Sports betting

72

Games makers in Spain

74

Prevention

78

Employees and training

82

Corporate commitment to the region

86

Outlook on the business development

90

Paul Gauselmann’s birthday

92

Gauselmann Family Council

96

Management Board

97

Supervision and advice

98

Supervisory Board

99

Publishing details

100

03

UMWELTSCHUTZ

To our business partners

The Gauselmann Group’s greatest asset is our games and the fun factor that accompanies them. They are why millions of players every day visit our arcades and casinos, play on our coin-op gaming machines or take advantage of our online gaming offerings. Our product portfolio in the meantime includes several hundred games. But, of course, people have different tastes. Men or women, young or old, in Germany, Spain or South America: players’ interests differ, sometimes quite significantly. To take just one example: in Germany, 7 is a lucky number, while in Asia it’s unlucky. Another factor when developing games is the sometimes very divergent legal stipulations that have to be adhered to. It may sound paradoxical at first, but the foundation for all the creative, colourful and entertaining games is mathematics. Maths provides a framework and acts as a driver at the same time. Building on this are the graphics and sound, which in today’s world of full HD and Dolby Digital are expected to meet the most exacting quality standards. The games are then packaged in a technical solution. In the past, this would generally have been a classic coin-op gaming machine, but nowadays the trend is towards online gaming. In many regions of the world today it has become perfectly normal to enjoy gaming on your laptop, tablet or smartphone. You don’t need to be a prophet to figure out that games with small stakes and prizes are also increasingly being enjoyed online.

04

Umweltschutz

Paul Gauselmann

05

TO OUR BUSINESS PARTNERS

We invest millions of euros every year in the development of our games and technical solutions. We currently employ a staff of over 450 developers, who are the guarantors for the high quality of our games. The majority of them work at our development and production site in Lübbecke, but some also belong to one of the 16 game design teams worldwide. This is because to be in with a chance of creating successful games, it’s essential to be familiar with the respective markets and the mentality of the players. We would like to use this Business Report as an opportunity to give you a brief insight into the world of the “Game Makers”. In six special chapters spread throughout the Report we therefore introduce you to our development units in Germany, the UK, Spain and India. The games themselves are, of course, also one of the key factors behind our company’s continued commercial success, enabling us to close the 2014 financial year on a positive note – despite severe legal restrictions on “small-scale” commercial gaming in the German core market. These in some cases had a significantly negative impact on business development, but were more than compensated for by prospering international business in nearly all segments. The total business volume – taking all Group entities into account – with our internationally well-known “laughing Merkur sun” trademark grew by more than 5 percent to over 1.94 billion euros. This goes hand in hand with the positive development of fully consolidated sales, which increased to 1.29 billion euros – over 90 million euros higher than in the previous year. Despite all the restrictions, earnings remain satisfactory. Although the prevailing conditions make it impossible for us to reach our target of a 10 percent return on sales, we can at least record a sustained rate in excess of 5 percent. I am, however, less than happy about the current legislative parameters in Germany, which are threatening to drive leisure-time gamers into illegality. Absurdly exaggerated restrictions such as extended barred periods, entrance control systems or non-smoking laws are spoiling the gaming experience at our arcades for many of our playing guests, who are turning in their droves to unregulated – and therefore illegal in Germany – foreign gaming products that are available on the Internet, from the comfort of their sofas. Consequently, we are intensifying our activities on international markets, for example in the UK or Spain, where reliable legal parameters create a secure environment for providers and clients. We have already become successfully established in these markets. The successful development of international business in 2014 was made possible thanks to investments to the tune of 187 million euros, as well as the creation of numerous new jobs, increasing the total number of employees by around 300 to a good 8,500. In Germany, the legal situation provides no scope for the creation of jobs or for larger investments. From an entrepreneurial point of view, this would be irresponsible. Our shift towards markets outside Germany is, as it were, literally being imposed on us by law.

06

Nevertheless, with completion of the new “Hall 8” at the Lübbecke development and production site in mid-2014, the largest construction project in the history of the Gauselmann Group was successfully concluded. The expansion of the facility will greatly help to optimise processes and cut costs in the area of logistics, so that the new building will amortise within a foreseeable period. One ray of light in Germany is our first state-licensed casino, which we opened in Saxony-Anhalt at the end of 2014 after a successful tendering procedure. On the other hand, the granting of sports betting licences for the German market is still pending. Despite winning the tendering procedure with the highest number of points, we have been waiting for nearly three years now to get started under German law, with costs already running into the double-digit millions. This is a totally unsatisfactory and intolerable situation. For the first time ever, the equity of the Gauselmann Group surpassed the 600-million-euro mark in 2014, equivalent to an equity ratio of over 50 percent. Our credo has always been to reinvest profits, a policy that given the difficult German market is now paying off. As a company, we are in excellent shape, with outstanding employees and over 200 trainees who make sure day in, day out that our products and services set the highest possible standards. This is something we are very proud of. Only recently, our CASINO MERKUR-SPIELOTHEK subsidiary received “Focus” magazine’s Top Employer of the Year Award. Alongside numerous TÜV certifications in the areas of gaming machine manufacture and arcades, such an award is further testimony to our high quality standards. As a family of entrepreneurs, we will continue to do everything in our power to defend ourselves against the injustice in Germany caused by the competitive stance of individual federal states. This is a great incentive to continue to forge ahead with political negotiations, litigations and entrepreneurial activities and ensure the company’s success moving forward. Yours sincerely,

Paul Gauselmann

07

Games makers worldwide

Germany

UK

Research and development play a particularly important role within the Gauselmann Group. From hardware development and game design with the core elements mathematics, graphics and sound, via software development, through to quality management – with its innovative products the Group consistently sets new industry standards. With 450 staff members working in this field worldwide, approximately 60 percent of whom are employed in Germany, the Group underscores its professional competence in the modern gaming products segment.

In total, 16 game design teams around the world are involved in creating new games content for the Gauselmann Group. The centrepiece and link between the international development locations is adp Gauselmann GmbH in Lübbecke, where nearly all of the basic technology for the Group is developed. This is where everything comes together. And this is where, every Thursday, Management Board Chairman Paul Gauselmann is to be found, when the entire product development and the permanent evaluation of the performance data of the machines are analysed and assessed and targets for the future set.

Germany

India Spain

Interview with Dr Werner Schroer, Board of Management member for Technoloy

“The most important thing is always the game. Our games database provides access to several hundred games.” Dr Werner Schroer

As Board of Management member for Technology, Dr Werner Schroer is responsible for Research and Development within the Gauselmann Group. The engineering and e­ conomics graduate joined adp Gauselmann GmbH on 1 December 2000 as Head of Development and was appointed to the Management Board in 2010. During this time, he has supervised, among other things, the ground-breaking introduction of LED and full-HD technology on gaming machines, as well as the replacement of classic reel-based machines by modern multigamers. Dr Schroer, what, from the development perspective, makes a good product? The most important thing is always the game. Everything else serves to present the games to players as optimally as possible. Of course, an ergonomic cabinet, functioning and appealing haptics, technical stability and protection against tampering are all important factors, but it’s always the games that are decisive. Generally, you can imagine the whole thing rather like a theatre stage. In order to put on a play in the best possible way, you need a stage with all the corresponding lighting and sound technology. But it’s the actual production and not the stage that will enthral the audience.

Ultimately, the stage merely supports the contents that the director, or scriptwriter, has dreamt up. Even the best technical effects can’t turn a bad theatre play into a good one. What are the decisive factors when developing games? The primary task is to create a harmonious whole from the various components of a game, such as video graphics, sound, usability and the game system itself. Another important factor in game development is giving consideration to cultural differences. For example in Asia – unlike in Europe – the colour white is the colour of mourning and the number seven is considered unlucky. The challenge for development is to identify and address these local specificities. By the same token, in Europe games with less frequent, but higher prizes are very popular, whereas in South America and the US, by contrast, so-called time-on-device games with a high entertainment value and lots of small prizes have the greatest chances of success.

To what extent does legislation influence the development process?

What technical innovations will shape the gaming markets in the future?

A big challenge is especially the many different locally applicable laws. The task for the Gauselmann Group is to create the best game systems we can within the limits of the laws. Above all on the German market the amendment of the Gaming Ordinance presents us with new challenges, both from a technical point of view and with regard to the game systems. But we are already excellently positioned to comply with the legislative framework that will apply in the future.

In the long term, man and machine will move even more closely together. The interaction between player and machine will experience ­decisive changes. Be it eye-tracking or purely touch devices – there are still strides to be made in the fields of monitor technology and design.

What role does monitoring the market play in games development? Monitoring the market generally plays a very important role in research and development. It allows us to draw conclusions about future gaming trends, as well as for our own game systems development. As operators of our own gaming arcades, both nationally and internationally, the Gauselmann Group receives direct feedback from the market with respect to the performance of our own developments. This permanent, continuous exchange flows into ongoing product development and helps us to adapt the products to the needs of our playing guests.

Development within the Gauselmann Group adp Gauselmann GmbH (D) MEGA Spielgeräte Entwicklungs- und Vertriebsgesellschaft mbH und Co. KG (D) Kaiser Spiele GmbH (D) HESS Cash Systems GmbH & Co. KG (D) GeWeTe Geldwechsel- und Sicherheitstechnik GmbH & Co. KG (D) edict eGaming GmbH (D) Merkur Win S.R.I. (D) Blueprint Gaming Ltd. (GB) Blueprint Gaming Inc. (RP) Blueprint Gaming (USA) Betcom Ltd. (GB) Dosniha Gaming S.L. (E) Merkur Gaming India Pvt Ltd. (IND) Lucky Nugget Gaming Pvt Ltd. (IND) Cashpoint Agentur & IT-Service GmbH (A) Merkur Gaming GmbH (A) Titan Gaming (A)

MERKUR DIVISION “In order to reduce our dependency on our German home market, we are systematically advancing the internationalisation of our corporate group. Our aim in doing so is to make the Merkur sun just as well known and successful internationally as it is in Germany!” Jürgen Stühmeyer, Board of Management member

Development, production and sales of amusement and gaming machines and money management systems in Germany adp Gauselmann GmbH adp Gauselmann GmbH is the innovation and market leader in all aspects of gaming with small stakes and prizes, innovative technology and first-class service. The company has been a pioneer in the areas of development, production and sales of innovative machines, fascinating games, as well as complementary cutting-edge technologies and services for over four decades. In 2014, massive legal restrictions were imposed on commercial gaming in Germany. The ensuing limitations of the state arcade laws, such as longer barred periods, entrance control systems and non-smoking laws, have adversely impacted the market situation. Nevertheless, adp Gauselmann managed to hold on to its market share of a good 50 percent of the approximately 250,000 coin-op gaming machines installed in Germany and thus continued to lead the industry. Classic reel-based machines were almost completely replaced by state-of-the-art multigamers, both in entertainment centres and in the bars and restaurants segment. In this segment, too, the triumph of video-based multigamers is almost complete. Only 5 percent of the coin-op machines installed in the hospitality segment are still classic reel-based machines. adp Gauselmann’s high standards in the areas of quality management, environmental protection and occupational health and safety are confirmed in regular audits carried out by TÜV Rheinland. From Gauselmann Großhandel, development, the service provider adp merkur service, through to production – adp Gauselmann GmbH complies with internationally recognised quality standards endorsed by TÜV certification in accordance with DIN EN ISO 9001:2008. Within the scope of its environmental management,

12

the company was also certified in accordance with the DIN EN ISO 14001:2004 standard in 2013 and with the BS OHSAS 18001 standard in 2014, which attest to optimum occupational health and safety management. Another milestone for adp Gauselmann in the past financial year was the completion of the new logistics centre at the Lübbecke production site. With more than 21,000 square metres of useable space, this represents the largest construction project in the Gauselmann Group’s history. With its warehousing technology and processes, the new building is one of the most modern warehouses in Germany and significantly helps optimise logistics processes and reduces costs for managing external warehouses. In addition to logistics, the location expansion provides additional space for research and development, production and service. Right at the beginning of the 2014 financial year, adp Gauselmann impressively demonstrated its innovative strength at the IMA, the industry’s leading trade fair, with its highlight, the “Merkur Ideal Vision Slant Top SL”. Thanks to the new “Merkur Profitech HD” technology, brilliant 2.1 stereo sound and a series of new ergonomic developments, the “Merkur SL” guarantees the ultimate in entertainment. Together with the integrated proprietary elevator technology for money payouts, adp Gauselmann is also setting new standards in efficient cash management. As an exclusive premium product, adp Gauselmann successfully established the “Merkur Ideal Space” gaming orb in 2014. With its futuristic design, swivel-mounted full-HD monitor and crystal clear sound, the striking cabinet has proved popular especially where individual machines are installed.

13

MERKUR DIVISION

The “Merkur Ideal Space” gaming orb sets new trends in arcades

The company’s innovative strength was also demonstrated by the “Merkur Bet Book” sports betting terminal. On two 27-inch monitors designed to look like an open book, all sports betting content is displayed in an easy-to-read format. What’s more, the terminal is extremely user-friendly and well-designed. The “Merkur Bet Book” is also available in a solo version, with just one monitor. adp Gauselmann’s product portfolio is characterised by the quality and variety of the games on offer. A global network of 16 development teams is continuously working on creating new content. In 2014, the company launched a total of 14 new Merkur-Magie games packages with up to 70 games onto the market. The further development of the “My Top Game” feature, which as of last year is included as standard in the 60-games packages, has proved highly popular. The gaming library – unique in the world – enables direct access to over 200 games. The longer life cycle of the gaming packages is a reflection of their outstanding quality and the positive market acceptance. In December 2014, adp Gauselmann GmbH reached another new milestone in its corporate history when the 2 millionth gaming machine rolled off the assembly line at its Lübbecke adp production site. Long-standing customer retention is a key success factor for adp Gauselmann GmbH. This loyalty is honoured with the Merkur sun bonus system. This exclusive premium system regularly gives customers of the Gauselmann Group access to attractive offers and promotions, making it unique in the industry and consequently of high value. Operating companies can check their current sun account balance at any time on the adp Internet portal. Behind the popularity of the products from adp Gauselmann is a strong brand – Merkur-Magie. Over 85,000 Merkur-Magie Facebook fans and the popular Merkur-Magie app substantiate this recipe for success.

14

Development, production and sales of amusement and gaming machines and money management systems in Germany

Paul Gauselmann (right) and Wilfried Berkenbrink proudly present the two millionth gaming machine to leave the assembly line at the Lübbecke production site

The penetration and expansion of the Merkur-Magie Event portfolio also contributed to the successful brand management of adp Gauselmann GmbH in 2014. An outlook on the future was provided in the second half of the 2014 financial year at the annual adp industry summit. Under the motto “Status quo – tradition and passion”, the Gauselmann Group presented an impressive combination of product novelties, interesting specialist presentations by high-profile speakers and an exclusive entertainment programme at the Frankfurt Congress Center. As well as the products, the focus of the two-day in-house industry event was on specialist presentations on topics such as marketing, TÜV certification, sports betting and research into luck. In 2015, adp Gauselmann intends to launch “Merkur Roulette” and thus become the first company to introduce real-bowl roulette with a licence from the Physikalisch-Technische Bundesanstalt (PTB) for entertainment centres in Germany, providing a genuine roulette experience with small stakes. The novel slot machine roulette with its mechanical bowl and roll of the ball will bring a new dimension in entertainment to arcades. Again in 2015, adp Gauselmann GmbH will live up to its reputation as an innovation leader with ground-breaking products and a service-oriented services portfolio.

adp merkur service

adp merkur service is the service provider within the Gauselmann Group. Alongside maintenance and service of coin-operated gaming machines, adp merkur service also offers its customers a comprehensive range of accessory products, an extensive seminar programme, as well as a nationwide network of service technicians within the “free&easy” system.

15

MERKUR DIVISION

Direct dialogue with the client is an integral part of the corporate policy. Since 2011, the Technical Merkur Advisory Board has been an important instrument for promoting the exchange of thoughts and ideas and at the same time a valuable advisory body for adp Gauselmann and adp merkur service. The technical managers from the companies represented on the Board meet around three times a year to discuss special topics. adp merkur service is a sought-after service provider in the area of modern money processing technology. Since its market introduction in 2008, the “Merkur Dispenser 100”, a modular, intelligent banknote recycler, has been part of the gaming machine specialist’s portfolio. The success of this piece of technical wizardry was once again demonstrated at the IMA in 2014 with the auctioning off of the 100,000th “Merkur Dispenser 100” for charity. To mark this anniversary occasion, the successful product received a new addition to the family: the latest development is the “Merkur Dispenser 100 Gold”. As well as a new, more powerful CPU, optimised product features include additional light barriers for improved security. adp merkur service also faced new, far-reaching challenges in the past business year as a result of the state arcade laws. New in the product portfolio, for example, was the “Merkur Check-In” entrance control system, a practical and ideal solution for ensuring compliance with the statutory requirements where these are now prescribed by law. In addition to direct OASIS blacklist synchronisation, the system also offers the possibility to maintain local blacklists, as well as easy blacklisted document management. From the complete set-up to activating all entrance control components, as well as the certification activation for the state of Hesse, adp merkur service proved to be a competent partner in 2014. In 2014, adp merkur service also broke new ground with “MerkurNet”. Networking structures have seen enormous growth in recent years. This has prompted adp merkur service to introduce the new “MerkurNet”

16

Development, production and sales of amusement and gaming machines and money management systems in Germany

Hall 8

1 2 3 4 5 6 7 8

Logistics Development Merkur Service Production Warehouse Dispenser production National Sales International Sales

The “Hall 8” expansion at the Lübbecke production site (see circle) was completed in 2014

onto the market. The server-based system features a dynamic menu that can be customised to meet the requirements of the respective amusement arcade or catering establishment, providing the operator with all relevant data at a glance. With the “Little Helper” service app introduced in 2011, adp merkur service has offered its clients the possibility to retrieve all important machine data anytime, anywhere, directly on their smartphone. In August 2014, the company relaunched the app in a new design and with numerous new features. In addition to current information, technical notices and the programme status of their own machine pool, clients can now also use the “Little Helper” to conveniently retrieve validation codes. For either Apple or Android devices many features have been redesigned, taking into account customer feedback and the latest trends in IT development. 2014 also brought a change of location as well as organisational changes for adp merkur service. The company’s relocation to the office facilities at the new logistics centre in Lübbecke and the opening of a new customer centre at the headquarters will in future bring enormous benefits in the value chain and for operational workflows.

Gauselmann Großhandel

Gauselmann Großhandel is the sales organisation within adp Gauselmann GmbH. With a network of currently 11 branch offices and the complementary adp Internet portal, customers of Gauselmann Großhandel can take advantage of the product and services offerings of the entire Gauselmann Group. Nationwide presence and local customer proximity are the cornerstones for competent and qualified advice. Sales staff are offered regular training courses, thus guaranteeing the high level of advice and service.

17

MERKUR DIVISION

Already a tradition: the industry summit in Frankfurt “made by Merkur”

Apart from the industry summit and IMA key events, another important instrument for customer retention in the past financial year was the in-house fairs held in winter, spring and autumn at the Gauselmann Großhandel branch offices and other venues.

Schneider wholesale company

For decades, Schneider Automaten has been the largest full-range supplier in the realm of gaming and amusement machines and constitutes another important sales partner for adp Gauselmann GmbH. The company primarily sells adp products, but also offers all other well-known brands of amusement and gaming machines in its product range. The wholesaler operates nine branch offices across Germany. In 2014, the Cologne-based wholesaler celebrated its 30th anniversary with a festive boat cruise on the Rhine.

MEGA Spielgeräte and Kaiser Spiele

MEGA Spielgeräte Entwicklungs- und Vertriebsgesellschaft mbH & Co. KG is a recognised specialist for the development of jackpot systems and games centres. Based in Limburg, Hesse, the company has made a name for itself both nationally and internationally with its innovative games systems. The devices and systems are produced at adp Gauselmann GmbH’s Lübbecke production site. MEGA is most well-known for its popular Jackpot Centres, such as “Monopoly”, “Golden Nugget” and “Who wants to be a millionaire”. In 2014, the Limburg-based company captured the German market with the two new games centres “El Dorado” and “Seven”. The enormous potential offered in particular by “Seven” already became clear at the IMA. The introduction of the four-machine unit at the beginning of the year was followed in autumn 2014 by the market launch of the “Seven” two-machine unit. In less than a year, the “Seven” system was able to secure significant market shares among the German games centres.

18

Development, production and sales of amusement and gaming machines and money management systems in Germany

MEGA achieved similar successes on the Dutch market in 2014 with its “Games Unlimited” multigame line. In the Netherlands, products from MEGA are among some of the most popular multigamers. The company is also striving to establish itself on the Czech market. The MEGA Web GmbH subsidiary develops coin-operated Internet terminals. Both the software and the hardware for the terminals proven in tens of thousands of applications are the product of the company’s own think tank.

Merkur Freizeit Leasing (MFL)

For close on three decades, Merkur Freizeit Leasing GmbH has been known as the leading financial services provider in the gaming machine industry with a clear emphasis on customer orientation. The rent, leasing and licensing models in the portfolio of the Gauselmann Group’s manufacturer financing company are geared without exception towards the needs of the market and are flexibly adapted accordingly. With supplementary products such as machine insurance, MFL also provides additional value. With the introduction of paperless contract and invoice processing, the financial services provider is treading new ground. Between April 2013 and the end of 2014, as much as 75 percent of all rent, leasing and licensing contracts had been converted to the new digital format. Since September 2014, MFL customers have also been able to benefit from the advantages of sending invoices electronically.

19

Games makers in Germany adp Gauselmann GmbH

adp Gauselmann GmbH subsumes under one roof research, development, production and sales of games with small stakes and prizes, as well as amusement machines with and without money payouts. The central development and production site in Lübbecke is also home to the adp games design team and its Head of Mathematics Edgar Rensinghoff.

With his team of ten, Edgar Rensinghoff focuses primarily on the conceptual design of new games systems for the international games library, which currently includes well in excess of 200 titles. He and his colleagues are also very much involved in the licensing process of the games and games packages with the Physikalisch-Technische Bundes­ anstalt (PTB) in Berlin. Without such a licence, for example, it is not permitted to install coin-op ­gaming machines in arcades or bars and restaur­ ants in Germany.

adp Gauselmann GmbH

“We write the scripts for the games.” Edgar Rensinghoff

Graduate mathematician Edgar Rensinghoff has been with the company for over 30 years and was appointed personally by Paul Gauselmann and his son Michael.

What role does legislation play in games development? “The laws and regulations provide the scope ­within which we are able to move with our ideas. In Germany, this scope is very narrow. Compared to other countries like the UK or Spain, our legis­ lation here is very restrictive. Stakes, duration of play, maximum prizes and loss limits are all precisely defined and controlled by the Physika­ lisch-Technische Bundesanstalt (PTB) before the games are launched onto the market.”

Since the end of 2014 a new Gaming ­Ordinance has been in force. What does this mean for you? Quite simply that our entire games library of over 200 games has to be brought into line with the new, much more stringent regulations. Every game has to be reprogrammed or adapted accordingly and subsequently resubmitted to the PTB for approval. However, we are confident that we will be able to continue to offer our customers attractive games in the future.

What role does mathematics play in the development of the games? It may sound like a contradiction, but as mathem­ aticians we write the scripts for the games. It is always fascinating for me to see how with the help of mathematics you can bring a game, the figures and the contents to life, so that it becomes and remains as exciting as possible for the players.

MERKUR DIVISION

Development and sales of amusement and gaming machines and money management systems internationally Merkur Gaming For over 20 years, the Gauselmann Group has consistently and successfully promoted the company’s internationalisation. This includes the development and sales of amusement machines and casino machines with payouts, as well as video lottery terminals (VLTs), server-based gaming (SBG) systems and jackpot solutions for the international gaming and prize games markets. The business activities of Merkur Gaming GmbH formed the central pivot and focal point when it came to tapping into new European and global sales markets, as well as developing growth in already established international markets in the 2014 business year. The products of the Gauselmann Group have always stood for reliability and quality. With this in mind, we apply the same high standards for international target markets as we do for the German market. For the national as well as the global markets, production is carried out by adp Gauselmann GmbH at the Lübbecke location in accordance with the internationally applicable high quality standards for development, manufacture and sales as set out and defined by DIN EN ISO 9001. In a highly competitive market environment, the Gauselmann Group custom develops innovations tailored to each country’s specific needs. To this end, the company maintains a continuous dialogue with operating companies, playing guests and developers. This invaluable feedback from the market flows directly into the development processes and leads to ongoing product improvement and optimisation. In order to remain internationally competitive and efficiently leverage opportunities for growth, it is essential to be able to adapt to legal and social parameters, individual customer preferences, as well as local market characteristics and gaming habits in the corresponding sales markets.

24

Development and sales of amusement and gaming machines and money management systems internationally

The Gauselmann Group shows international presence at trade fairs: London, Las Vegas, Madrid

In the 2014 financial year, the strategic goal was first and foremost to consolidate activities and concentrate on defined core markets. Merkur Gaming consistently implemented this strategy, increased its international market expertise and demonstrated a high level of innovative strength, thus providing valuable new impulses for growth. The core markets in the 2014 business year, apart from Europe, were mainly Central and South America, as well as South Africa. Countries like Peru, Colombia and Mexico developed especially well and saw a significant rise in sales activities. With its Merkur Gaming Peru subsidiary, the company is very well positioned in terms of infrastructure and organisation. In Peru and Mexico, where the legal situation has in the meantime stabilised again, Merkur machines achieved a stable, above-average performance. As a result of this, the sales volume in these countries almost doubled. Top products from Merkur Gaming in the 2014 business year included above all the “Evolution” and “Highflyer” cabinets. The presentation of the new “Avantgarde SLT” cabinet featuring full-HD technology also proved highly successful and promises to further strengthen the company’s market position internationally in 2015. The Gauselmann Group also recorded growth in the segments for VLT and SBG solutions in 2014. Because they are permanently linked to a central server under the watchful eye of the respective authorities, these networked gaming systems comply with the highest security requirements for the information flow.

25

MERKUR DIVISION

In the 2014 financial year, the Group also strengthened its presence in the international casino markets. While the company was able to expand its market position in Romania and Serbia, there was also a sharp increase in demand in Switzerland. The “Highflyer” cabinet is especially popular in the Alpine region. The Group also stepped up its business activities on the German casino market, among other things at its own Merkur Spielbank in Leuna-Günthersdorf, which is considered to be technically the most advanced casino in Germany. Following the first-time installation of Merkur Gaming products in two shipboard casinos on MSC cruise ships in October 2013, business relations with the cruise line were intensified and expanded further in the completed business year. The goal for 2015 is to continue on this course of strategic expansion and to make investments in new sales markets. Successful test installations were already made in 2014 in Panama, Russia and Hungary, among other countries. One important factor with a view to generating sales and enhancing relations with key accounts and business partners, as well as generally monitoring the market, is the company’s presence at trade fairs. The Gauselmann Group has been presenting its product portfolio at the leading international industry shows for many years. Among the major shows to be held in 2014 were the ICE in London and the G2E in Las Vegas. In order to meet the expectations of its customers, the company relies on a strong global team. In-house training opportunities, regular product training and foreign language courses contribute significantly to consolidating and strengthening the Group’s international positioning in the market.

26

Development and sales of amusement and gaming machines and money management systems internationally

Moving forward, the Gauselmann Group will establish itself even more strongly than before as a driver of innovation. In the 2015 financial year, the focus will first and foremost be on consistently intensifying and optimising market development in those international and regulated markets in which the Gauselmann Group is already active. Core markets here include Europe, Central and South America, as well as Africa. In the medium term, laying the groundwork for market entry into North America will significantly determine business activities.

Successful in Europe

The Gauselmann Group successfully maintained its strong track record in 2014 especially in the UK, the Netherlands and Spain, where it further enhanced its market penetration. These target markets are gaining increasing importance for the Gauselmann Group. In the Netherlands, the Group profited from its strong market position. Since entering the market in March 2012, it has seen continuous growth in sales of the “Games Unlimited” multigame line, giving it a leading edge in terms of machine performance in the video-based multigamer segment. The same as in Germany, gaming machines in the Netherlands are strictly regulated by law. The Dutch market has a comparatively low number of entertainment centres and arcade operators, but at the same time permits a high density of gaming machines at the operating sites. In 2014, the Gauselmann Group gained additional market shares above all with the “Games Unlimited 1” and “Games Unlimited 2” products in the vision slant-top cabinet. The “Casino WB5” and “Highflyer” cabinets also further established themselves. Under the “Games Unlimited“ multigame line four different games packages are offered, one of which has been especially developed for a multiplayer multigamer machine – a gaming machine for several players.

27

MERKUR DIVISION

The Gauselmann Group also further enhanced its presence in the UK during the past business year. With its Blueprint Gaming subsidiary, the company has continued to promote the switchover from classic reel-based machines to video-based multigamers in the pub and arcade market. Blueprint Gaming is one of the leading multi-platform developers for digital games. True to the company’s philosophy “It’s all about the games”, Blueprint Gaming develops games for stationary and server-based markets, as well as for the online and mobile segments. The machine cabinets are manufactured at the Gauselmann Group production site in Lübbecke. In 2014, Blueprint Gaming was able to exploit the digital switchover with the innovative “Genie” cabinet and successfully position the video-based multigamer in the British category C market. Here, Blueprint Gaming can draw on the experience gained by the Gauselmann Group on the German market as a manufacturer and operator of multigamers. The Group already holds pole position in the British market for video-based multigamers. In the British arcade market, the Gauselmann Group has been represented through its Praesepe subsidiary since 2012. The well-known arcade chain owns over 170 entertainment centres and bingo clubs, including Europe’s largest bingo club – Beacon Bingo in Cricklewood. In the 2014 financial year, the Gauselmann Group further strengthened its presence in the UK market through targeted acquisitions. The purchase of gaming software developer Betcom Ltd. reinforces the company’s position in the UK development segment. The takeover opens up new prospects for the Group for tapping this market. Betcom Ltd. has specialist development expertise in the analogue segment, creating a link between classical gaming and the digital world.

28

Development and sales of amusement and gaming machines and money management systems internationally

The Group will continue to pursue its strategy of meaningful growth among other things with the acquisition of the business operations of the British company Sceptre Leisure. Sceptre Leisure is one of the two big amusement machine operators in the UK and specialises in supplying equipment to the highly competitive pub segment. Sceptre Leisure operates approximately 22,000 machines in the UK pub market, around 11,500 of which are AWPs. In future, it is planned to further accelerate the market penetration in the British pub segment with machines from the Gauselmann think tank. In the Spanish gaming market, the Gauselmann Group has in the meantime successfully established itself with its Dosniha subsidiary. Dosniha is responsible within the Group for the development and sales of multigamers in Spain. In 2014, Dosniha set up a branch office in Madrid. With its feel for the Spanish entertainment market, Dosniha Gaming has quickly become the industry leader in the Spanish arcade sector. The extensive product portfolio comprising “Monopoly Jackpot”, successful multigamer packages such as “Merkur Magic” and “Merkur Magic 2” and VLT/SBG solutions with the “Merkur Magic Exclusiva”, is now to be complemented by a product designed especially for the hospitality sector. At the Fer Interazar gaming trade fair, the company for the first time presented the “Genie” cabinet and the two excellent games packages “Merkur Multi” and “Rey de la Suerte” for the Spanish bar and restaurant sector. Roulette also plays an important role on the Spanish market. Here, Dosniha cooperates as an exclusive distributor with the Slovenian company Interblock.

29

MERKUR DIVISION

Cash and ticketing activities The business activities of the Gauselmann subsidiaries GeWeTe and HESS are subsumed in the cash and ticketing segment. The core business activities of both companies focus on the development, production and sales of money-changing systems for casinos and arcades, coin-operated self-service solutions for banks and savings banks, as well as payment systems for the public sector, retail companies and other economic sectors. The modern and innovative systems from GeWeTe and HESS are developed and manufactured in Germany and Austria and are characterised by their high quality, practicality and user-friendliness. Alongside the continued further development of existing products, the focus is on developing new technologies and systems. Thanks to the configurability of the software, technology and place of use, all products can be adapted to meet individual customer requirements. Both GeWeTe and HESS are growing, export-oriented companies, which in addition to developing existing markets are looking to expand into new markets and further move ahead with internationalisation. GeWeTe and HESS systems have already been successfully installed in over 50 countries worldwide, with every second machine in the meantime being sold abroad. The number of employees in the cash and ticketing activities segment grew slightly in 2014.

GeWeTe GeWeTe has been developing, manufacturing and selling money-changing machines, pay stations and Kiddie Rides both nationally and internationally since 1993. In Germany, the company is uncontested market leader for money-changing machines in the arcades sector and is also one of the largest suppliers of pay stations and ticketing systems. The company employs a staff of nearly 100 at its development and production headquarters in Mechernich near Cologne.

30

Cash and ticketing activities

Product quality and the wide range of products are important USPs of the money-changing specialist. The product range extends from small change machines that change banknotes into coins to the high-end PC-controlled “Maxi-CashRecycler“ product that counts, validates and sorts bulk coins and recycles them for further use. Proprietary hardware and software development maximises GeWeTe’s flexibility to quickly implement customised solutions, giving the company a decisive advantage over its competitors in the fields of project business, pay stations and ticketing and Kiddie Rides. As in all Gauselmann Group companies, GeWeTe products meet the highest demands of quality, security and user-friendliness, as documented by quality and environmental management certification in accordance with DIN EN ISO 9001 and 14001. The main customer groups for GeWeTe’s money-changing systems are arcades and casinos. As a result of the political constraints and the almost non-existent establishment of new arcades, expansion activities and the willingness to invest saw a marked decline in the German arcade industry in 2014. The pay station segment and international business on the other hand grew significantly, so that the company was able to close the 2014 financial year on a positive note overall.

31

MERKUR DIVISION

The importance of national and international business with arcades and casinos is documented among other things by attendance at numerous trade fairs, usually together with Merkur Gaming. The positive feedback on the products showcased at these trade fairs demonstrates that international arcade and casino operators are also relying more and more on the innovative “made in Germany” solutions from GeWeTe. The main sales markets are still the UK, Italy and Spain, where GeWeTe in each case has its own local customer service representatives and technicians. A further focus is Scandinavia. Apart from arcades and casinos, GeWeTe’s money-changing technology is also used throughout the world in department stores, libraries, ticketing machines for public transport and other facilities. Another steadily increasing business sector is the field of sports betting. Similar to arcade operators, sports betting operators rely upon efficient and effective money management. As the licences for sports betting in Germany have so far only been issued in Schleswig-Holstein, GeWeTe is placing its focus on international sales. Here, a large number of cash handling systems have already been installed in sports betting shops across Europe. A new field of business is the retail sector with deposit systems and cash handling for transport companies and car wash facilities. Here, too, 2014 saw a new machine innovation with the “Deposit-Compact”. GeWeTe pay stations are used internationally as admission control systems for swimming baths and stadiums, as well as ticket machines for rail and ferry travel, baggage claim machines at airports and in the municipal sector. Besides its core business sectors, GeWeTe is continually developing innovative technologies that help it to tap into new sales markets. Under the Merkur Kids brand, GeWeTe develops, manufactures and sells machines specifically tuned to the needs of children. The product portfolio includes the “Happy Kids” touchscreen entertainment machine, numerous Kiddie Rides, as well as driving simulators. All products meet the highest safety standards. GeWeTe is the only manufacturer with a Disney licence for Kiddie Rides. In addition to the UK, Italy, Spain and Scandinavia, the main sales markets in this area are Australia and the Middle East.

32

Cash and ticketing activities

Within the Gauselmann Group, GeWeTe change machine systems are used in the CASINO MERKURSPIELOTHEK arcades in Germany, in the CASINO MERKUR International entertainment centres in other European countries, as well as at Merkur Win in Italy, the UK arcade chain Cashino and Cashpoint sports betting offices. GeWeTe is expecting a positive development of international business for the 2015 financial year, especially in the pay station and money-changing system segments. There are also plans to further develop the international distributor network and reinforce own operations in the UK, Italy and Spain. With respect to change machine systems for arcades in the German market, we must first await the outcome of political and legal developments.

HESS Group The HESS Group is made up of HESS Cash Systems GmbH & Co. KG and its subsidiaries HESS Schweiz, HESS Austria and HESS Latam and develops, manufactures and sells hardware and software solutions centred around coin and cash handling for banks, retail companies and casinos, as well as payment systems for public institutions and authorities. The company was founded in 1885 and has belonged to the Gauselmann Group since 2001. HESS currently employs over 190 staff. The company is certified in accordance with DIN EN ISO 9001 and 14001 for exemplary quality and environmental standards and is also a permanent member of the CEN/ISSS XFS Committee for Standardisation and Definition of Coin Handling Processes at Bank Data Centres, as well as various other committees and institutions. These include GS1 Germany as “Solution Provider Cash Logistics” and OLAF (Office de Lutte Anti Fraude), the European Anti-Fraud Office.

33

MERKUR DIVISION

HESS products and OEM components are characterised by their high quality, availability and durability. They are developed and produced at the company’s headquarters in Magstadt/Germany and for the Austrian market in Gratkorn/Austria, where the HESS Austria subsidiary is headquartered. All new developments in the core fields of “coin” and “payment” systems are developed on HESS’ proprietary software and hardware platforms and go through the entire product life cycle within the company. One important component of the business model is the fact that HESS offers both sales and service of its own products, which has attained a high level of acceptance from the market. With the attribute “made in Germany”, HESS stands for quality, efficiency and precision, as well as its own high quality standards. This is complemented by a pinch of “Swabian inventive talent” that characterises the company, as well as its products and services. The main products in the cash handling segment are coin pay-in machines, OEM products, coin-roll dispensers and deposit systems that are mostly used in the self-service areas of banks and savings banks, as well as in the retail sector. The main sales markets served by HESS apart from the home market of Germany are Switzerland and Austria, as well as France, the Netherlands and Australia. These are complemented by numerous projects successfully implemented on all continents. In the banking sector in 2014, HESS developed and intensified the cooperation agreements entered into with ATM manufacturers NCR and Wincor Nixdorf in the national and international spheres. The market share in the payment systems sector in Germany – as a second mainstay of business – is around 55 percent and is constantly being developed further. As many as 520 projects with the HESS “Multipay” payment system have been implemented for example in municipal offices and public libraries over the past 20 years, with energy suppliers and public utility companies alone accounting for 110 payment systems and pay stations in use. More time for service, user-friendliness and individual configuration possibilities, as well as flexible counter opening hours are just some of the advantages use of payment systems with pay stations offers. In 2014, this sector was also added to the portfolio of the HESS subsidiaries, thus making it an integral part of the offering in all core markets in Germany, Austria and Switzerland (D-A-CH).

34

With the further development of the “CoinIn” pay-in machine family, HESS was able to set new standards on the market in 2014, not only in terms of technology with the TopCoin® product, but also with the typical

Cash and ticketing activities

Alexander Martin, Board of Management member (left), and Ulrich Bauer, HESS Managing Director, present an innovative coin pay-in machine

HESS design. Thanks to a uniform conceptual approach – taking account of all relevant stakeholders – a new generation of machines with a modular design has been developed that is not only easier and cheaper to produce, but is also easier to service after installation and commissioning – both with regard to hardware and software. Moreover, the system can be flexibly adapted to the needs of the market or even individual customers without excessive customisation – from the basic machine through to the fully equipped model. The new coin pay-in machine was presented to industry professionals for the first time at the FI-Forum, the in-house trade fair of the German savings banks, in November 2014 and received very positive feedback. Building on the core coin sorting technology (TopSort), an additional core technology was developed for the retail sector with coin recycling (TopRec), thus extending the current product portfolio with a new proprietary HESS back-office solution for retail companies. Compared to the prior period, the HESS Group achieved sales growth in the 2014 financial year. The ATM manufacturers’ expectations of successfully developing coin business featuring HESS technology with major national and international banks were not met to the extent anticipated in 2014. On the other hand, the fact that growth in the payment systems segment increased significantly both nationally and internationally is an encouraging sign. This contributes to an essential diversification of the product range and market segmentation within the HESS Group. HESS also significantly expanded its service business, which in the meantime accounts for an important and steady share in the sales and earnings of the HESS Group. With three HESS casino machines from the HESS “Scorpion” product line, a card-based cash and ticketing system was integrated into the casino system at the new Merkur Spielbank in Leuna-Günthersdorf. In the ongoing development of core technologies and solutions for banking, retail and payment systems, the HESS Group took a valuable innovative step in the 2014 business year. This necessitated key investments that will significantly contribute to the Group’s business success in 2015. Projections linked above all to the global marketing of new coin-based products and OEM components are pointing to a positive trend with considerable potential for the HESS Group in 2015 and beyond.

35

MERKUR DIVISION

Research and development The cornerstone of a successful product is a high standard of research and development work. The research and development department within the Gauselmann Group has always played a key role as the basis for trouble-free hardware and software functionality, as well as the development of appealing and successful games. Over 450 employees are currently engaged Group-wide in creating the successful products of the eastern Westphalian games makers, and with their many years of experience they make a vital contribution to the technology leader’s success. The Gauselmann Group stands for quality “made in Germany” and produces most of its machine components at the adp Gauselmann GmbH headquarters in Lübbecke. When it comes to research and development, the company also relies on quality from within its own ranks, with nearly all basic technologies being developed close to production in-house. This outstanding quality of the products manufactured by Gauselmann is documented by certification in accordance with DIN EN ISO 9001:2008, as well as numerous proprietary patents. The areas of activity in this segment are varied and cover a wide range of disciplines, for example mechanical construction of the cabinets, development of hardware components, software development and games system development in the area of game design including mathematics, video graphics and sound design. Final quality controls and the registration and administration of patent rights also fall within the remit of this department. As industry and technology leader, the family-owned company is continually raising the standard of innovative machine components. In the 2014 business year alone, the research and development department grew by 50 new jobs. The construction of “Hall 8” as part of the facility expansion at the company’s

36

Research and development

headquarters in Lübbecke created new office space. This has made a decisive improvement to the work environment and at the same time made it possible to build three new sound studios. The company also has a broad basis internationally in the field of research and development. Sixteen game design teams around the world contribute significantly to the development of the successful products from the Gauselmann think tank. Proximity to the market and the right feel for what customers want are decisive success factors for the eastern Westphalian games makers. A broadly diversified development basis also enables the company to focus directly on the different laws, technical requirements or player preferences in the respective national markets. Furthermore, the growing shortage of skilled labour in Germany was the reason behind the continued expansion of development activities outside Germany, which are focused primarily on game design. However, as a family-owned company with strong regional roots, the Gauselmann Group continues to place great emphasis on performing the lion’s share of its development work in Germany and only contracting out development activities to external partners to cover peaks in demand. In the past business year, development work concentrated largely on an innovative cabinet for the German market that is to be presented to the general public in 2015. Complete conversion of the machines to fullHD technology, the foundation for which was laid two years ago, was another important focus of activities. Following several years of development work, the family-owned company from eastern Westphalia was able to reap the fruits of its labour in December 2014 with the licensing of another highlight – “Merkur Roulette”. This probably best-known and most popular of all casino games is now set to take German arcades by storm and create a genuine casino feeling with its free roll of the ball. As the first “real” roulette with prizes and a construction type licence from the Physikalische-Technische Bundesanstalt (PTB) for commercial gaming, this game sets another milestone in the eastern Westphalian family-owned company’s history.

37

MERKUR DIVISION

Other successful games such as “Lucky Pharao“ from Blueprint Gaming or the hybrid reel game “Over the Top” from Kaiser Spiele also demonstrate that besides technical features such as full-HD or hybrid technology, the sophisticated game systems offered by the Gauselmann Group take entertainment to a whole new level. The restrictive German market also required capacities in 2014 for developments following the adoption of the new Gaming Ordinance, as well as the new technical directive that came into force in November 2014. Hardware and software components have to be adapted to the stricter legislation, without compromising on the attractiveness of the games. Moreover, from May 2015, applications for new construction licences are required to be accompanied by a security report confirming that the machine has been built to be tamper-proof according to the state of the art. With a transitional period until February 2016, legislators are also requiring technology enabling tamper-free collection of fiscal data. With the additional changes to specific games parameters, the new Gaming Ordinance has therefore presented a number of challenges for the development teams not only in 2014, but also in 2015 and beyond. In the context of the ongoing internationalisation of the Gauselmann Group, the past business year also saw a series of new developments for the international markets. The focus was mainly on the core markets Spain, the UK, the Netherlands, as well as South America. As in the case of the German market, these in some cases heavily regulated sales markets require a lot of sensitivity and country-specific know-how on the part of the Group to enable it to comply with the far-reaching legal requirements and provide new impetuses as a trendsetter for the industry. Above all the successful trade fair presentations of the “Avantgarde SLT” cabinet and the eye-catcher “Ozone” last year showed that the eastern Wesphalian Gauselmann Group is fully capable of meeting these challenges.

38

Research and development

Research and development are an integral part of the Gauselmann corporate philosophy and a guarantee of the company’s success

As the name suggests, the futuristic “Avantgarde SLT” stands for progressive design and technology – making it ideal for innovative and modern arcades. The clear-cut design with flashing LED elements is both stylish and classy. A further highlight: in the “Avantgarde SLT”, the latest HD games are already integrated. The innovative “Ozone” orb also attracted a lot of attention on the part of international trade insiders. It promises an exclusive gaming experience with rich 2.1 stereo sound effects and brilliant images in full-HD technology. The secret to the success of the developments made by Gauselmann lies in consistent monitoring of the market. As a manufacturer and operating company, the Group has timely and valid input available from its own operating segment, enabling it to track developments that have been introduced or respond promptly to changing requirements and trends in the respective markets. With new initiatives such as the Merkur Advisory Board or employing games scouts, the games makers have always promoted active and continuous dialogue between manufacturer, operating companies and final customers. New challenges for research and development have also arisen in the server-based gaming (SBG) systems, video lottery terminals (VLTs) and jackpot solutions segments. Here, the trend is moving away from stand-alone machines in favour of outsourcing the functionalities to a central server. Although this is not yet licensed in all national markets, the advantages speak for themselves: complete networking for example means that software in the individual machines needs to be replaced less frequently and business processes across machines or locations become more transparent. It also provides additional protection against manipulation attempts. In 2015, research and development work will continue to focus on implementing the new Gaming Ordinance, as well as on the ongoing internationalisation of the Gauselmann Group. In addition to the continued further development of stationary games on gaming machines, the development of online and mobile games is gaining increasing importance.

39

Games makers in the UK Blueprint Gaming Ltd.

As a developer of digital gaming content, ­Blueprint Gaming is in high demand in the UK and beyond. The Blueprint product portfolio includes games for land-based and server-based markets, as well as for the online and mobile ­sectors. The company is also one of the leading UK suppliers of gaming machines and has ­offices in the UK, the US and in the Philippines.

At Blueprint Gaming, a team of 65 is working ­continuously to maintain and strengthen the ­company’s market position as an innovation driver of the digital revolution.

Blueprint Gaming Ltd.

“Video-based multigamer products are opening up new market opportunities.”

Matt Cole is Managing Director of Digital ­Gaming at Blueprint Gaming and has significantly contributed to the company’s successes in the online sector.

Matt Cole

How is the UK gaming market currently developing? Although the introduction of the new POC (point of consumption) tax of 15 percent for online gaming has impacted revenues in this sector, the general gaming market in the UK is progressing well at the moment, thanks to the improving economic situtation.

Is there a difference when developing products for arcades or the pubs and restaurants sector? In the UK land-based business, historically there have been significant differences between games that work well in arcades and the games offering for the pubs/restaurants sector. More recently, however, there is a trend emerging whereby the growing success of video-based multigamer products in the pub market is driving a shift towards slot games that previously were only successful in the arcade and betting shops market.

What role does the online gaming market play at Blueprint Gaming? Globally, the online gaming sector is expanding strongly and the nature of the business enables us to enter a broader range of markets, and although the ­European core markets are becoming more mature and competitive, Blueprint Gaming is m ­ anaging to increasing its market share.

UMWELTSCHUTZ

SPIELOTHEK DIVISION “Spielothek has been the trendsetter in modern entertainment centres for 40 years! In Germany, we are continuously driving the development of our offering forward in order to strengthen our market leadership. However, tapping into and developing new target markets internationally, as well as testing completely new entertainment concepts, are also becoming more important than ever.” Dieter Kuhlmann, Board of Management member

Operation of entertainment centres in Germany In the 2014 financial year, CASINO MERKUR-SPIELOTHEK celebrated its 40th anniversary. With the opening of the first MERKUR-SPIELOTHEK in Delmenhorst in 1974, company founder Paul Gauselmann took leisure-time entertainment with gaming and amusement machines to a whole new level as the first in the industry to rely on four success factors that are still pivotal to the company’s success today: state-ofthe-art products, qualified staff, optimum customer service and a stylish atmosphere. As a provider of firstclass entertainment centres, the Gauselmann CASINO MERKUR-SPIELOTHEK subsidiary leads the market in Germany. In 2014, 234 modern entertainment centres were in operation under the logo of the laughing Merkur sun. In Germany, 3,200-plus committed employees play an important role in positively shaping the image of the CASINO MERKUR-SPIELOTHEK arcades. In 2015, CASINO MERKURSPIELOTHEK is the only company in the industry to receive a “Top Employer” award

44

Despite numerous restrictions on commercial gaming, the Spielothek Division closed the 2014 financial year on a positive note. The effects of the First State Treaty on the Amendment of the State Treaty on Gambling in Germany (“First Amended Interstate Gambling Treaty”) signed in December 2011, the respective state arcade laws, additional restrictions and tax increases particularly impacted the operating result. Under the provisions of the First Amended Interstate Gambling Treaty, arcades whose gaming licence was issued after 28 October 2011, and in particular those with multi-concessions, have been granted a five-year transition period. State arcade laws in various forms have been in force in all federal states since July or December 2012 respectively. These stipulate extended closing times, as well as distance regulations of between 100 and 500 metres (depending on the state) between arcades and social facilities. The advertising presentation of arcades is also subject to different regulations, depending on the state or municipality. For example, entertainment centres must in future be referred to as “arcades”, and it is no longer permitted to use the term “Spielothek”

Umweltschutz

Anniversary – Spielothek turns 40 A journey back in time …

Bold colours set the tone in the early years

Modern entertainment centre 2014

or “casino”. Especially restrictive laws apply for Berlin and Hamburg. These require one supervisor per concession to be present, who is, however, not permitted to perform all the duties of a service employee. This, in turn, has a demotivating effect on the staff. In Berlin, it is also prohibited to serve food and drink. Although in contradiction to the national Gaming Ordinance, the Berlin state government passed a law requiring the number of gaming machines to be reduced from 12 to eight per concession from August 2014. A similar law applies in Hamburg, but its effects were successfully mitigated through court proceedings. In the state of Hesse, entrance control systems had to be installed in all arcades effective from 1 May 2014. Tax increases were an additional burden in 2014. Amusement tax was raised by 7.5 percent compared to 2013, which led to an increase in costs of several million euros. The constitutionality of the provisions of the arcade laws and of the Interstate Gambling Treaty has been reviewed and an appeal filed, but with no concrete outcome as yet. On 8 December 2014, the Seventh Gaming Ordinance came into force, introducing numerous additional restrictions. Due to a transitional arrangement, the impacts for machine installation are not expected to be felt until 2018. As was already the case in the previous business year, the restrictions severely impacted expansion activities of CASINO MERKUR-SPIELOTHEK. In 2014, new entertainment centres were opened only in Wuppertal, Hamelin and Moers. At the 234 German locations, a total of 10,871 machines were in operation, more than 10,000 of which are gaming machines and the rest amusement machines without prizes. Due to the increasingly difficult parameters for commercial gaming, CASINO MERKUR-SPIELOTHEK is branching out into more and more new fields of activity such as Planet Lasertag, run by the Gauselmann World of Game and Internet (WGI) subsidiary.

45

SPIELOTHEK DIVISION

Anniversary – Spielothek turns 40

Introduction of standardised outdoor advertising in 1978

Amusement machines such as Flipper were very popular in the early years

Since the end of 2014, Planet Lasertag arenas have opened in Oberhausen and Hanover, respectively. Lasertag is still a relatively unknown form of leisure-time entertainment in Germany. The Planet Lasertag arenas feature a course that players run through either in group or individual games. With so-called markers – also known as phasers – they target other participants with infrared lasers and collect points. For the overall concept experts were drawn on from different CASINO MERKUR-SPIELOTHEK departments. Planet Lasertag also builds on the successful mix of service, well-trained staff, state-of-the-art equipment and a modern atmosphere. In the course of CASINO MERKUR-SPIELOTHEK’s 40-year existence, the alignment of the four success factors has been continuously adapted and enhanced in line with the needs of the market. This applies above all to the numerous training and further education measures offered to staff. Over the decades the training programme has been continuously professionalised and extended. Since 2008, the company has offered industry-specific IHK professional training as “coin-op service technician” and “coin-op specialist”, the recognition of which was promoted by company founder Paul Gauselmann. Staff working at CASINO MERKUR-SPIELOTHEK entertainment centres with no professional qualifications, or no longer working in the profession they have learned, are given the opportunity to additionally take a so-called “external exam” and, providing they meet certain criteria, obtain the fully fledged IHK professional qualification as “coin-op service

46

Operation of entertainment centres in Germany

Early uniform

In 1986, the Gauselmann Group opened its first international entertainment centre in Amsterdam (the Netherlands)

Driving and flight simulation become more complex

technician”. 40 employees passed the external exam in 2014. The concept, developed by CASINO MERKUR-SPIELOTHEK in 2012 in cooperation with the TÜV Rheinland Academy and the Employment Agency as sponsors, has proved popular and is now offered for the entire coin-op sector. Furthermore, employees from CASINO MERKUR-SPIELOTHEK entertainment centres can take an in-house training course and qualify as a “casino service specialist (IHK)”. In 2014, 79 employees successfully completed this oneyear training course. The company training and further education portfolio is rounded off by training in new products, extensive induction training for new management staff at the flagship store in Espelkamp and socalled kick-off events for new employees. A regular “qualifying campaign” is also organised, during which all staff from the service headquarters and the branches are informed about current topics and developments. The offering has a positive effect on staff satisfaction. This was also reflected in 2014 by the nomination as “Top Employer” in the industry. CASINO MERKUR-SPIELOTHEK was thus among the 800 awardwinning companies in Germany whose staff particularly enjoy their work. The “Top National Employers” were determined by “Focus” magazine. Closely linked to the “training and further education success factor” is the first-class service that sets CASINO MERKUR-SPIELOTHEK apart from its competitors. In 2013, the company was voted “Service-Champion Bronze 2013” and came first in the “Arcades” category within the context of a nationwide service study by the newspaper “Die Welt”. The training offerings as well as these

47

SPIELOTHEK DIVISION

Paul Gauselmann invented the modern arcade. He constantly developed the branch concept, here together with his son Michael

“Sunny’s Bar” was the precursor to the subsequent Casino bar

awards enable CASINO MERKUR-SPIELOTHEK to promote staff loyalty and thus counter the increasing shortage of specialised staff. A stylish atmosphere and state-of-the-art products round off the successful CASINO MERKURSPIELOTHEK concept. The high-quality and sophisticated interiors of the entertainment centres are devised by the “Creative and Design Development” department in Espelkamp, taking account of corporate design guidelines. In terms of exterior design, the company also relies on a modern, distinctive design. In the past, the installation of photovoltaic (PV) systems on the roofs of entertainment centres has addressed the issue of environmental protection. In 2014, the company invested in further PV systems on its own buildings and in this way continued the trend towards utilising renewable energy sources. In terms of products, guests at CASINO MERKUR-SPIELOTHEK arcades are always offered a wide range of state-of-the-art gaming machines featuring a variety of games. The majority of products are developed and produced by Gauselmann’s adp subsidiary. More than 7,500 games packages were replaced in the CASINO MERKUR-SPIELOTHEK arcades in 2014 in total, ensuring guests are offered cutting-edge entertainment at all times. In early 2015, the “Merkur Roulette” with real roll of the ball was also introduced for the first time.

48

Operation of entertainment centres in Germany

Anniversary – Spielothek turns 40

The first obligatory uniform in the Merkur entertainment centres was mauve

For the external design of the branches Spielothek developed poster frames with replaceable sheets – here the Easter decorations for the branches in 1992

Pool was especially popular with guests in the 1990s and early 2000s

The high standard of quality at CASINO MERKUR-SPIELOTHEK is not only reflected in the four success factors, but also through certification of the company by TÜV Rheinland in accordance with DIN EN ISO 9001:2008. The main company office was certified in 2013 and the process was extended to the operating companies and entertainment centres from September 2014. As part of the certification, processes and procedures were described and reviewed in regular internal and external audits. The official TÜV certificate was received in February 2015. For CASINO MERKUR-SPIELOTHEK, responsibility towards the guests plays an important role. High priority is therefore given to responsible gaming and prevention. For many years, the responsible officers at CASINO MERKUR-SPIELOTHEK have cooperated in this field within the framework of external courses with experts from the Caritasverband für das Erzbistum Berlin e.V. (Caritas Association for the Archdiocese of Berlin). The subject is also part of the further education and training measures. Further courses are planned in 2015. The requisite social programmes were created for all federal states in 2013.

49

SPIELOTHEK DIVISION

Anniversary – Spielothek turns 40

In the 1990s, the new uniform was blue and yellow

The “Trendy” amusement machine came onto the market in 2001 and attracted new customer groups

Thanks to excellent preparation, converting the machines from D-mark to euro was child’s play

Despite all the constraints and restrictions, business developed positively in 2014. In light of the attractive portfolio offered by CASINO MERKUR-SPIELOTHEK, this trend can be expected to continue in 2015, accompanied by the generation of new customers. Here the company continues to rely on the four success factors personnel, customer service, products and atmosphere. Nevertheless, the next financial year will also be impacted by restrictions and negative influences. For example, following the example of Hesse, additional entrance control systems will be required. These are expected to be installed in RhinelandPalatinate in Q3 2015 and similar plans are also being considered in Baden-Württemberg. Experiences already made in Hesse can serve in future to optimise the implementation of such controls. As in the 2014 financial year, negative impacts will come from the further increase in the amusement tax, which at some locations already has a stranglehold effect. For 2015, this is expected to burden all locations to the extent of 14.6 percent of earnings. Based on legal opinions, the company will contest the level of amusement tax before the courts.

50

Operation of entertainment centres in Germany

The “Kasino-Bar” in the 2000s

CASINO MERKUR-SPIELOTHEK has always stood for an exclusive atmosphere. The interior design of the arcades conforms to the spirit of the times

The company installs photovoltaic systems on the roofs of its own Spielothek premises

The political situation poses new challenges for the commercial gaming sector. The task at hand is to adapt existing structures to the changing circumstances and develop new, innovative areas of activity. In 2015, the company plans to test new types of arcade branches. One focus in the development of new business areas lies on Planet Lasertag. Here, the company intends to open new Planet Lasertag arenas. Furthermore, it aims to leverage the decades of experience gained by CASINO MERKUR-SPIELOTHEK in the area of branch management by assuming these tasks for external arcade operators.

51

SPIELOTHEK DIVISION

Anniversary – Spielothek turns 40

Armin Gauselmann congratulates the best trainees nationwide

CASINO MERKUR-SPIELOTHEK celebrates new openings with a spectacular programme – here the “Ehrlich Brothers”

Staff wearing the latest uniform

Operation of entertainment centres internationally The Gauselmann Group opened its first international entertainment centre in Amsterdam in 1986. In 2005, Merkur Casino GmbH was founded to promote international arcade expansion. It was later renamed and currently trades as CASINO MERKUR International GmbH. Under the logo of the laughing Merkur sun and brand images adapted to the respective market, CASINO MERKUR International GmbH in the past business year operated 218 modern entertainment centres in nine European countries with a total of 2,165 employees in Bulgaria, the UK, Croatia, the Netherlands, Austria, Serbia, Slovakia, Spain and the Czech Republic. The number of employees thus grew significantly in the 2014 financial year. Just as in the German affiliate CASINO MERKUR-SPIELOTHEK, the emphasis for international arcades is also placed on the four success factors products, employees, customer service and atmosphere, with the range individually tailored to the needs and cultural specificities of the respective local markets. Due to the heterogeneous general conditions in the different countries, the company once again faced diverging market situations in 2014. In all countries, the offering found increasing acceptance in the entertainment centres. Following the takeover of the British Praesepe Group in 2012, which represented the largest acquisition in the company’s history, the development of business in 2014 was even more positive compared to the prior year. The company also forged ahead with the integration of Praesepe. The arcades in Romania and in Granada on the Spanish mainland were sold, generating improved earnings. New entertainment centres were opened in Teplice (Czech Republic), in Košice and Bratislava (Slovakia), in Sofia (Bulgaria) and in

52

Operation of entertainment centres internationally

CASINO MERKUR-SPIELOTHEK also sponsors TuS N-Lübbecke

For many CASINO MERKUR-SPIELOTHEK arcades the company has already received the “Golden Jack” industry “Oscar”

Aalsmeer (the Netherlands). On the whole, expansion activities in all countries were very restrained, as developments with respect to the regulatory framework were difficult to gauge. In Italy, the so-called shops – a combination of sports betting shop and entertainment centre – were sold because of the unattractive legal parameters. In all countries, increasing political pressure on the part of the authorities could still be detected, due mainly to the negative reputation and the abuse of the legal system by a few arcade operators. CASINO MERKUR International saw a greater need for discussion regarding tougher regulations and higher taxes, the external image of entertainment centres and licence extensions in 2014. Above all in the Czech Republic and the Netherlands, increased requirements were imposed with respect to entrance controls with capture of guests’ personal data. In the Czech Republic and Slovakia, communication with the respective authorities was improved, avoiding further closures in 2014. High competition density can be observed in the Netherlands and Slovakia, and in the Netherlands protection of non-smokers had a strong negative impact. Increased fees and taxes led on the one hand to market consolidation, accompanied for CASINO MERKUR International by a reduction in earnings. In terms of the gaming offering, an increasing trend towards online gaming could be observed in some countries, which led to the migration of customers away from arcades. The trend towards video lottery

53

SPIELOTHEK DIVISION

Anniversary – Spielothek turns 40

International business is expanding continuously

CASINO MERKUR-SPIELOTHEK sponsors the Wok world championship

There are also several branches on the sunny island of Majorca

terminals (VLTs) and server-based gaming (SBG) systems that are permanently linked to a central server and are operated under the direct online supervision of the respective finance ministry continued. Products from the Gauselmann subsidiary Merkur Gaming, as well as jackpot systems, were increasingly implemented in foreign arcades. The products from the Gauselmann Group are adapted to take account of local conditions and the gaming preferences of the guests in the respective country and are constantly being refined. They found wide acceptance especially in the UK, Spain and the Netherlands. In the Netherlands this was particularly the case for the Merkur multigamers, and in Serbia the innovative “High Flyer” gaming machine with its “floating” monitor proved extremely popular. In the field of new technologies, the company is trying out a self-designed and self-developed playing card system, initially in the Czech Republic. To ensure it is well-positioned to weather future challenges, CASINO MERKUR International optimised its internal structures and processes. This involved developing international guidelines and organisational charts, holding regular central and decentralised alignment meetings and implementing a new regional controlling system. As with the German affiliate CASINO MERKUR-SPIELOTHEK, staff training and further education, as well as the service philosophy, played an important role at CASINO MERKUR International. The offering was therefore further optimised in 2014 and new staff training and promotion concepts were introduced. Based on the concepts and many years of experience of CASINO MERKUR-SPIELOTHEK in Germany, induction training courses were organised for new management staff in the flagship stores of the respective country. These were complemented by ongoing training in the product segment, as well as – initially in Slovakia – management and personality seminars. As in Germany, staff were also sensitised to the topic of “consumer protection” and offered corresponding training. In the Czech Republic and Serbia, team-building events were held aimed at strengthening staff quality and loyalty.

54

Operation of entertainment centres internationally

TÜV Rheinland certifies the headquarters of CASINO MERKUR-SPIELOTHEK GmbH to DIN EN ISO 9001:2008

“Exceptional” is the motto of CASINO MERKUR-SPIELOTHEK since 2014

CASINO MERKUR International also relies on exclusive interior and exterior design of its branches, as here in Almere (the Netherlands)

In addition to the extensive training offerings, CASINO MERKUR International also optimised the quality of its customer service by developing and implementing detailed and binding customer service concepts. Innovative communication concepts were developed aimed at improving the customer approach. In Slovakia, modern technology such as digital signage was used to communicate advertising and information on electronic posters in and at the branches. In the Czech Republic, a proprietary Web radio was introduced for the first time which offered music and information tailored to the players’ interests. The company also made increasing use of communication channels such as Twitter and Facebook in many countries and provided information via the CASINO MERKUR International website. In the Netherlands, where the first-class customer service at the CASINO MERKUR International arcades enjoys a particularly good reputation, the company extended the DEKRA certification in order to place even greater emphasis on the unique quality of the entertainment centres. Despite the challenges described above, the 2014 financial year was a positive one overall for CASINO MERKUR International. In 2015, the focus will be on consolidation, with expansion continuing at a very restrained pace. Optimisation of clear and binding structures and processes, as well as improved cost structures, will also have high priority in 2015. In this context, the company will continue to align with its CASINO MERKUR-SPIELOTHEK affiliate. In this way, it is intended to achieve or expand the market leadership in some countries. The company is also aiming to develop new markets outside Europe, and carefully examines and analyses the existing markets in which it operates.

In 2013, CASINO MERKURSPIELOTHEK received the “Service Champion Bronze” award and was distinguished as the sole company from the industry

55

Games makers in Germany

MEGA Spielgeräte Entwicklungs- und Vertriebsgesellschaft mbH und Co. KG

MEGA Spielgeräte Entwicklungs- und Vertriebs­ gesellschaft mbH & Co. KG was founded in 1988 in Limburg an der Lahn. The company specialises in the development of jackpot systems, multigamers for the Dutch market and games for the Merkur-Magie multigamer portfolio. The products developed in Limburg are manufactured in accordance with ISO 9001 standards at the adp Gauselmann GmbH headquarters in Lübbecke. The company currently employs a staff of around 30.

MEGA Spielgeräte Entwicklungs- und Vertriebsgesellschaft mbH und Co. KG

“Gaming is characterised by uncertainty.” Dr Jörg Bewersdorff

Dr Jörg Bewersdorff is Head of Development and co-founded the company 27 years ago. Apart from his job at MEGA, the holder of a doctorate in mathematics is also a Managing Director of the Gauselmann subsidiary GeWeTe.

What is the fascination of gaming as far as you are concerned? Gaming – quite generally – is characterised by uncertainty. The immediate future of the microcosm you find yourself in lies in the dark and that creates excitement and entertainment.

MEGA is market leader for jackpot systems in Germany and for multigamers in the Dutch market. What is the basis for this success? Slot gaming is extremely diverse. The decisive elements are the game, the rules and the progress of the game. But ultimately, only those who find the right combination of hardware, software, legal requirements, mathematics, graphics, video design and sound are successful.

To what extent does your personal taste influence the development? In fact the reverse is true: you mustn’t let your personal taste interfere, and have to base your decisions on objective criteria based on the ­results of the iterative development process as well as on market research.

SPIELOTHEK DIVISION

Operation of casinos The Gauselmann Group has been active in the casino sector since 2013. The company was granted licences to operate public casinos in Germany for the first time in 2014. In 2013, Merkur Spielbanken Sachsen-Anhalt GmbH & Co. KG won the tender for the licence to operate public casinos in the state of Saxony-Anhalt and thus prevailed in the context of a Europe-wide bid for tenders. In Saxony-Anhalt it is permitted to open a total of two casinos and four coin-op machine arcades. The company’s partner is Swiss Stadtcasino Baden AG, which operates Switzerland’s largest casino. Decisive reasons for the choice were criteria such as professionalism in the field, economic soundness, as well as social concepts and location strategies. In the same year, Merkur Spielbanken Sachsen-Anhalt received the licensing assurance and, in 2014, the licence to operate public casinos in Saxony-Anhalt was granted. In December 2014, the Merkur Spielbank in Leuna-Günthersdorf (Saxony-Anhalt) opened its doors. It is Germany’s most modern casino, with a unique concept combining classic games such as blackjack, poker and roulette with slot machine games. Ten casino tables and 120 gaming machines are available altogether. There is also a stage for events and a lounge and bar area where food is served. Designed by renowned architects Günter Merckle and Axel Jung, the casino is located in a roof-only building flanked by two pavilions, close to a large shopping centre and the A9 motorway.

60

Operation of casinos

The first Merkur Spielbank was opened in Leuna-Günthersdorf (Saxony-Anhalt)

For the operating company, being modern also means that guests are welcome to come in the clothes they feel comfortable in. While guests are expected to dress appropriately, it is not compulsory to wear a suit and tie. At the Merkur Spielbank in Leuna-Günthersdorf, professionally trained staff and first-class customer service are top priorities. The opening of the casino has led to the creation of more than 40 new jobs, and this number is likely to increase. All staff have received extensive training, and have been intensively prepared for their new tasks. However, it is not just the first-class service and the games and entertainment offered that make the Merkur Spielbank in Leuna-Günthersdorf the most modern of its kind in Germany. Use of state-of-the-art technology in all areas is also part of the concept. For example, the Merkur Spielbank in Leuna-Günthersdorf (Saxony-Anhalt) is the only casino in the world to feature a special ticketing system that is used not only for slot machines, but also for classic games, making the traditional cash counter redundant. The intelligent “idrop” system, comprising a banknote acceptor, a ticket printer and a touchscreen display, is integrated into all casino tables in the classic games area. The dealers at the tables accept either cash or tickets, which they then exchange directly for chips. Chips can be paid out again quite simply by the dealer issuing a ticket with the corresponding value. The guest can then use the ticket at another table, to play electronic roulette or on the coin-op machines. A ticket printed out on one of the gaming machines can be used directly at the tables in classic game play. Anybody wishing to have their ticket paid out in cash can do so conveniently at the “Scorpion” brand multifunctional system from the Gauselmann subsidiary HESS. Three of these machines are installed at the casino in Leuna-Günthersdorf.

61

SPIELOTHEK DIVISION

The ticketing system offers guests greater convenience, freedom of choice and flexibility. For the Merkur Spielbank in Leuna-Günthersdorf the ticketing system also has numerous advantages. For example, all gaming options – from the gaming machines, via electronic roulette to classic game play – are linked via the system. At the classic casino tables the amount put in is available at all tables in real time. Chips stay on the tables. This means less than half the amount of chips are needed in the casino. While traditionally in casinos chips are bought and paid out at cash counters and consequently there are not many chips at the tables, in the Merkur Spielbank they remain at the tables. The ticketing system therefore offers greater security and playing comfort. High security standards are additionally set in the Merkur Spielbank with 150 surveillance cameras in the indoor and outdoor areas. The Merkur Spielbank in Saxony-Anhalt is also the first casino in Europe to undergo accreditation by the internationally renowned Global Gambling Guidance Group (G4), thus breaking new ground with respect to the issue of responsible gaming. As part of the accreditation process, which started before the casino opened, the G4 experts examined the effectiveness of the responsible gaming measures put in place for the Merkur Spielbanken Sachsen-Anhalt and controlled their conformity with the strict G4 accreditation guidelines, for example compliance with the statutory requirements, integration of responsible gaming guidelines into internal processes and responsibility for their implementation. The accreditation process consisted of several

62

Operation of casinos

stages. First, all player protection measures had to be listed in detail in an accreditation concept, described and submitted to the G4. This was followed by several on-site accreditation audits, in which all measures and their internal implementation were assessed and examined. On the occasion of the opening event, the spokesman of the G4 Group Management Board presented the G4 accreditation for player protection to the Directors of the Merkur Spielbank in Leuna-Günthersdorf. To enable it to also live up to the claim of being Germany’s most modern casino in the future, the operating company is intending to continue to invest in the Leuna-Günthersdorf location. In 2015, it is planned to open a casino in Magdeburg.

63

Games makers in India

Merkur Gaming India Pvt. Ltd., Lucky Nugget Gaming Pvt. Ltd.

India is considered to be one of the world’s strongholds for research and development in the fields of IT and software. The Gauselmann Group has been present on the Indian subcontinent with its two ­subsidiaries Merkur Gaming India and Lucky Nugget Gaming for nearly three years. Merkur Gaming India and Lucky Nugget Gaming are

active in many areas for the Gauselmann Group, especially in app development and game design. The range of tasks extends from creating new games and gaming products, via technical implementation and programming, to success monitoring and marketing support.

Merkur Gaming India Pvt. Ltd. Lucky Nugget Gaming Pvt. Ltd.

“Reliable technology ‘made in Germany’ meets creative content ‘made in India’.” Pankaj Bhatia

Pankaj Bhatia is Managing Director of the two ­subsidiaries and collaborates with a highly motivated and talented team of around 60 designers, technicians and engineers. The trained IT specialist has worked in the gaming industry for over ten years, and is a co-founder of both Lucky Nugget Gaming and Merkur Gaming India.

What characterises India as a location – ­especially in the area of games development? The Indian and Asian cultures are in general strongly influenced by their artistic history, which is still evident today from the high affinity for art and ­design. In addition to this, India boasts a highly ­qualified and specialised pool of IT professionals. These are impor­tant factors that are particularly­­advantageous in areas such as software ­development and game design. At Merkur Gaming­India and Lucky Nugget Gaming, reliable technology “made in Germany”

meets creative content “made in India”. The result is exciting and entertaining gaming products that are played all over the world. So you would describe the German-Indian collaboration as successful? I can answer that with a definite yes. Right from the start of the first joint projects we had regular on-site visits and meetings, in both locations, of course. This active exchange provided new stimuli and ­enormously enhanced the development of in­­­­­­­­­­­­­­no­va­ tive products within the Gauselmann Group.

What role do gaming trends play in development? We firmly believe in the success of each and every product and game that we bring to the market. In an increasingly globalised gaming world, trends are no longer as ground-breaking or regional in scope as they used to be. There are also countless niche products that are enormously successful. And to a lesser extent it still depends on whether a game is launched at the right time, with the right components and on the right market.

NEW MEDIA “The online gaming market is continuing to grow rapidly, offering customers as it does the possibility to enjoy their favourite games anytime, anywhere. Within the Gauselmann Group we have taken the right measures to allow us to successfully leverage this potential on regulated and licensed markets.” Alexander Martin, Board of Management member

Online gaming Online gaming is one of the major growth markets in the gaming industry and harbours enormous potential for the market participants. The Gauselmann Group has been active in this segment with its subsidiary edict eGaming GmbH as a specialist for online casino solutions since 2008. edict eGaming GmbH specialises in the development and sales of turnkey systems and games platforms for the online casino market. Apart from pure software licensing, the company also assumes responsibility for overall technical operation of the system as well as monitoring for its customers. The flexible system architecture also means the design of the respective portals can be realised completely independently of the software. Platform development is sited in Germany, while operation and marketing are managed from the Isle of Man. The necessary gaming licence was granted by the Isle of Man Gambling Supervision Commission in 2010. The business activities of the Hamburg-based software company cover the entire European market, with a particular focus on sales within the licensed markets within the European Union, such as Malta, the UK, Spain and Schleswig-Holstein. edict eGaming GmbH sells its products exclusively in the B2B segment. The company has no plans to operate its own online casino platform under the edict eGaming brand so long as this is prohibited in Germany. The market for online casino solutions is subject to many differing regional and national gaming regulations. While these rules constitute statutes relating to the operation of online casino portals in end-customer business,

68

The “New Media” Division includes online gaming, financial services and sports betting

they nevertheless also have repercussions for providers of system and games platforms. edict eGaming GmbH therefore continuously improves its software in compliance with the respective statutory requirements and adapts its products to the constantly changing requirements of the market. In the 2014 financial year, edict developed the market for game supplies with the “edict game bridge”, a so-called remote game server. This is an extension of the existing product offering and enables games to be delivered to other online casino systems via a remote game server. This enables edict to supply games to customers that do not operate with the turnkey solution, a customisable software suite for the operation of online casinos. With this new business segment, the company is primarily addressing customers that already have an existing online casino system and merely wish to extend their casino platform with additional games. The “edict game bridge” has received an extremely positive response from the market and opens up new customer potential for the company. Just as with the server landscape for the turnkey solution, the remote game server also uses only state-of-the-art high-performance technologies and equipment. The edict turnkey solution is currently also used in the operation of the Group-own online casinos of the Gauselmann subsidiaries Cashpoint Malta Ltd. and Praesepe Plc. This concerns the portals www.merkur-spielcasino.de and www.cashino.com. While www.cashino.com is directed at adult end users resident in the UK, www.merkur-spielcasino.de gives adult users resident in Schleswig-Holstein the possibility to play legally for money prizes. After having successfully passed the extensive audits carried out in 2012 by the Schleswig-Holstein Ministry of the Interior in connection with the issuing of sports betting and online casino licences, Cashpoint started operating its online casino in Schleswig-Holstein in 2013 under the portal www.merkur-spielcasino.de.

69

NEW MEDIA

For the 2015 business year, the company intends to realise an online casino in Spain to be operated by the Gauselmann Group. Furthermore, in the first half-year it is also planned to import games into the system of Merkur Interactive Italia via the “edict game bridge”. In addition to the “edict game bridge”, the company released more than 28 new games in the 2014 financial year. As in the previous years, the game releases were all successful, which was reflected in the positive development of gaming revenues on the part of the customer portals. In the completed business year, a number of measures were taken aimed at optimally preparing the planned market entry in Spain in 2015 and ensuring the company’s ability to comply with the modified licensing conditions in the UK. Corresponding licence applications were submitted in both countries and work on necessary software modifications got underway. Moreover, the company was able to tap new markets, for example Malta, in 2014 thanks to the new “edict game bridge”. One of the biggest challenges in the past business year was again the tense situation on the market for IT specialists. Attempts were made to counter this by stepping up recruitment activities and initiating measures aimed at enhancing staff motivation. Thus the staff level at edict remained stable in 2014. The successful concept for promoting and training junior staff was continued. Despite a significant growth in sales in 2014, earnings fell short of expectations as a result of legal uncertainties in some European countries and the attendant problems for existing customers. Based on the continuing increase in sales coupled with the high demand for the “edict game bridge” and the resulting acquisition of new customers, edict eGaming GmbH expects the positive business development to continue in the medium term – and that the planned product extension of the turnkey solution and the release of a higher number of new games will contribute significantly to sales development and consequently to positive figures in the black.

70

Financial services

Financial services The market for payments via the Internet and mobile devices is growing rapidly worldwide. Online commerce is enjoying uninterrupted dynamism. With the increasing use of mobile end devices, methods of payment are also adapting to the new digital age, with as many as a quarter of all online purchases already being made via smartphones or tablets. With the acquisition of a majority shareholding in the Euro Payment Group (EPG) in 2014, the Gauselmann Group has tapped the financial services business segment. The payment services company headquartered in Frankfurt am Main operates worldwide in the areas of online payment, mobile payment and gateway services, specialising in the digital entertainment market. The main business activities of EPG in the past financial year focused on the markets in Germany, the US and the UK. On the whole, the company achieved a positive business performance, with sales up by 20 percent over the previous year. In 2014, the focus was primarily on further development of the “iCushy” product in order to enhance user-friendliness and acceptance among retailers and users. “iCushy“ is a secure and convenient app-based method of payment that enables mobile users to simplify online payments by entering a PIN. By leveraging a variety of marketing measures and the existing network of business partners, the company was able to steadily increase awareness of the “iCushy” brand in the digital entertainment sector. For 2015, the goal is to obtain the Financial Institution Licence and the Electronic Money Institution Licence (sub-bank licence) in Malta, which will open up new possibilities in the gaming sector. The Gauselmann Group aims to handle all financial services transactions via the services offered by EPG in future. By extending the portfolio with inclusion of alternative methods of payment, for example Giropay, Sofortüberweisung (instant transfer), paysafecard and Neteller, EPG has strengthened its competitiveness and in 2015 will continue to expand in the online commerce and digital entertainment sectors.

71

NEW MEDIA

Sports betting shop in Kiel

Sports betting The Austrian company Cashpoint has belonged to the Gauselmann Group since 2005. Cashpoint is a provider of sports betting services. Cashpoint’s products are sold in the target markets online, in its own betting shops and via franchise partners. Cashpoint also operates as an agency for bookmaker and IT services. The focus of activities is in Germany, Austria and Denmark, and Cashpoint is also active in Belgium and the UK. The company is present in these markets with its Cashpoint and X-TiP brands. Since the Amended Interstate Gambling Treaty came into force in Germany in mid-2012, the government has no longer had a monopoly on sports betting. Since then, those federal states that signed the Amended Interstate Gambling Treaty have sought to issue licences to reliable services providers. Due to the ban on sports betting in casinos, this main sales channel for Cashpoint in Germany dried up completely after 2012, leading to corresponding losses. However, so far Schleswig-Holstein is the only state to have granted licences, among others to Cashpoint. This paved the way for the opening of two initial sports betting shops in mid-2014 under the newly created “X-TiP” brand label, the first in Kiel, and a second in Rendsburg. In the other 15 federal states, the licensing procedure is still ongoing. On 2 September 2014, the top 20 companies foreseen for a so-called E15 licence on the grounds of their compelling application procedure, with the Gauselmann Group as frontrunner, were announced. However, those not considered for a licence immediately took legal action and brought the licensing procedure to a standstill. Hence the legal situation in Germany remains unclear. This is a particular concern because cost-intensive sponsoring contracts have been signed with the German premier league football clubs Hertha BSC Berlin and VfL Wolfsburg, as well as with the German Ice Hockey League (DEL), among others. In the other markets, i.e. Denmark and Austria, the legal situation was clarified years ago, so that both bricks-and-mortar and online business related to sports betting has continuously evolved. In Denmark, for example, Cashpoint has established itself as the second-largest provider in the stationary sector after the government provider. In Austria, Cashpoint is one of the leading providers thanks to its long-standing presence in the market.

72

Sports betting

“Merkur Bet Book”

The software systems needed for marketing and administration of sports betting, both on- and offline, is designed and developed by a dedicated development team. This makes it possible to respond flexibly and dynamically to changing market situations at all times. The Cashpoint system also offers a wide range of application possibilities in both the stationary and online sectors. End customers have the option to utilise all services seamlessly, whether on- or offline, including mobile devices, with a special loyalty card. The launch of the new “Merkur Bet Book” sports betting terminal last year marked the market debut of a new adp Gauselmann product family. In collaboration with the Fraunhofer Institute, Cashpoint developed a user interface for selling sports bets, the “BetApp”, especially for this innovative machine. The combination of future-oriented hardware with an optimum user interface concept generated much positive feedback from the market and a high level of acceptance with end users. On the whole, the business development in 2014 was very positive in all markets. Total sales increased by 53 percent over the previous year. Besides the positive effect from the Football World Cup, the growth in sales is a result of the continuous further development of the product portfolio. As well as a complete upgrade of the software for the self-service terminals, the functions and the user interface of the cash systems for betting agencies were also revised. The Trading Department (bookmakers) also took on additional new staff. Thanks to these newly created resources the range of betting services was extended significantly in all areas, which also had a positive impact on the sales development. For 2015, substantial sales growth is expected. Above all in Germany the goal is to draw level with the current market leader with the “X-Tip” brand. It is also planned to continuously expand the sales network in Austria and Denmark. In addition to bricks-and-mortar betting shops, more attention will also be given to developing the company’s online presence in 2015. In this context, an extensive marketing strategy has already been developed and the financial resources earmarked. The company also plans to evaluate new sales channels in the B2B market in 2015 in order to open up new markets and business segments.

73

Games makers in Spain Dosniha Gaming S.L.

Dosniha Gaming is one of the most traditional gaming companies in Spain. To enable it to ­optimally leverage the opportunities offered by the Spanish market, the Gauselmann Group acquired the family-owned company based in Majorca in 2012, which in addition to selling

­ ultigamers and roulettes, through Dosniha Casinos m also has access to a group-own location in Palma de Majorca. The development capacities for the Spanish market are also consolidated within the subsidiary. On Majorca, the Gauselmann Group employs a staff of around 50.

Dosniha Gaming S.L.

“The Spanish are real gaming enthusiasts and we get a lot of positive feedback about our products.”

Uwe Horn

Uwe Horn is responsible for development at Dosniha Gaming and heads up the Stella game design team. He began his Gauselmann career in 1988 as a software developer. During his time in the gaming industry his motivation hasn’t changed: to develop interesting games that he also enjoys playing.

into the corporate group nearly three years ago, the ­location has been constantly further ­expanded. What’s more, last year Dosniha established a branch on the Spanish mainland, in Madrid, enabling it to offer customers ideal service and technical support.

Majorca is the headquarters of Dosniha Gaming and is regarded as the Germans’ favourite island – is there some kind of connection?

The Spanish gaming market is known for its regionally differentiated legislation. Is the effort worth it?

It might be logical to assume so, but the fact that the company has its headquarters in Palma de Mallorca is down to the long tradition of the Dosniha family company. Since being integrated

To come straight to the point: yes, it’s worth it. The Spanish are real gaming enthusiasts and we get a lot of positive feedback about our products. But it’s also true to say that legislation with respect to ­gaming in the Spanish market is extremely complex.

Because it is the responsibility of the individual ­autonomous regions, there are 17 different regu­ latory regimes altogether that – to a greater or lesser degree – all differ from one another. Rules apply in particular to the maximum stakes and prizes, the minimum payout and the playing time. Within the regions, the law differentiates between market s­ egments. Different requirements apply, for example, depending on whether machines are installed in bars (bar machines) or in arcades (salón ­machines). There are also other special require­ ments, for example for Exclusiva machines and machines for bingo halls or casinos. All of these regulations have to be taken into consideration when designing new products and games.

What are the prospects for Dosniha ­Gaming with the products from the ­Gauselmann Group on the Spanish ­market? The strong divergence in the requirements and habits in the market gives rise to a wealth of ­different gaming machines. Therefore, with our products we try to offer a broad range of ­different games systems. In particular the current shift from classic reel-based machines to video-based multigamers – that has already happened in Germany, for example – opens up enormous potential for the Gauselmann Group in Spain.

PREVENTION

For many years, the Gauselmann Group has set standards for the operation of safe and modern entertainment centres. The goal is to ensure that all forms of gaming are a lastingly positive experience for the guests. The eastern Westphalian family-owned company stands for a regulated and attractive games offering. However, legal gaming can only differentiate itself successfully if, within the statutory framework, it is able to position itself in line with the market. The basic prerequisite for this is the acceptance of gaming as a social phenomenon and not, as in the past, stigmatising all forms of gaming as being something potentially fraught with risks that needs to be countered with sanctions and interventions. Only if this is a given is regulation meaningful in the interests of effective consumer protection.

David Schnabel is Responsible Gaming Officer of the Gauselmann Group

78

The Gauselmann Group is committed to consumer protection and to dealing responsibly with potential risks associated with gaming: these issues therefore play a major role within all forms of gaming facility (arcades, casinos and sports betting shops). The management and staff of the Gauselmann Group are very aware of the specific challenges related to the issue of prevention. All games products are therefore strictly oriented towards the regulatory guidelines and the self-defined company mission statement.

Umweltschutz

External experts on the Responsible Gaming Commission: Prof. Jörg Häfeli (Lucerne University of Applied Sciences and Arts, Switzerland), Roman Neßhold (Institute of Gambling and Addiction, Austria) and Pieter Remmers (Assissa Consultancy Europe, the Netherlands)

The most important starting point when it comes to consumer protection is a diversified and comprehensive information policy that enables those affected and their families, as well as staff and the general public, to address the topic in a differentiated and goal-oriented way.

Central prevention department

The central prevention department was set up in 2010 to coordinate and manage all consumer protection activities of the Group. It also advises the management on all questions related to this topic. The main tasks of the central prevention department include developing, updating and implementing the necessary social concepts for the different gaming products, regular internal and external reporting, as well as continuous dialogue with the responsible authorities, industry associations and staff at operational level.

Responsible Gaming Commission

In-house know-how is supplemented by a nationally and internationally recognised team of experts who advise and support the Gauselmann Group in all matters relating to consumer protection. In cooperation with the central prevention department, the commission continually assesses the prevention activities of the Group, develops new measures and integrates its national and international research findings and practical experience into the social concepts and internal guidelines.

79

PREVENTION

Youth and player protection

According to various studies carried out in recent years, the number of problematic and pathological players in Germany is consistently at a very low level compared to the rest of Europe. Over 99 percent of players use the games offered by the Group responsibly and appreciate the extensive and safe gaming offer for small stakes and prizes as a fun leisure-time activity. Notwithstanding this fact, as an arcade operator that prides itself on good practice, the Gauselmann Group focuses particularly on people at risk and consistently advocates compliance with the statutory regulations. Respecting and implementing youth protection laws is taken just as seriously as providing support for players whose gaming behaviour has led to personal, social and financial difficulties. Implementing and ensuring compliance with these regulations in a professional and competent manner is just one of the many tasks performed by the staff at our arcades.

Employee training

Continuous training and raising awareness among staff is the cornerstone for successful prevention work and ensuring that the legal regulations and in-house player protection measures are implemented consistently in the entertainment centres. The differing national training requirements are met by approved external training facilities and ideally supplemented by numerous in-house awareness and training modules. These include player protectionoriented communication training, kick-off events for new staff recruits, regular qualifying campaigns and an interactive e-learning module. Consistently establishing this thematic focus in all areas of training and qualification, as well as adopting corresponding measures, documents the high priority given to this issue within the corporate Group.

80

Helpline database

In order to successfully refer guests with problematic or pathological gaming behaviour to the help system, an extensive contact database at local level is needed. Since mid-2011, the Gauselmann Group has maintained its own helpline database of initially 700 addresses which is updated every year and in the meantime contains over 900 addresses. This address list is made available to players and their families via a query tool on the Group website. The database is also used by the entertainment centres to create their individual player protection flyers, thus ensuring that all entertainment centres have an individual player protection flyer, where necessary in several languages (Turkish, Italian, French and English). Like this, every player and/or relative can in principle be shown directly where to find help in their local vicinity.

Entrance systems

Alongside extensive employee qualification, the Group has for many years promoted the development of innovative technologies, not only in terms of the gaming products offered, but for example also for entrance systems, where these are required by law. The “Merkur Check-In” was the first entrance control system to qualify and be approved by the Hessian Ministry of the Interior for use in accordance with the requirements of the Hessian arcade law. Additional enhanced systems designed to technically support prevention work and automation of the various regulatory requirements are currently under development and will further optimise the topic of player protection over the next few years.

81

Employees and training

In addition to a competent management team, one of the key factors in our company’s success is above all motivated and capable employees. With their know-how and commitment, they have contributed significantly to the sustained success story of the products and services offered by the Gauselmann Group. The entrepreneurial family and the Management Board of Gauselmann AG would like to take this report on the 2014 business year as an opportunity to express our thanks and appreciation to all employees for the commitment shown.

Kay Nico Horn (l.) was honoured by the President of the Association of German Chambers of Industry and Commerce, Dr Eric Schweitzer, as the best coin-op specialist of 2014

82

At the end of the past business year, there were 8,458 employees working for the Gauselmann Group altogether, 5,789 in Germany alone. At the reporting date, 31 December 2014, 218 young people were undergoing training nationwide with the Gauselmann Group. Training qualified junior talent in administrative and commercial/technical professions has been integral to the philosophy of the family-managed Group for many decades. Because all training offerings are needsbased, trainees can be offered interesting job prospects after they have completed their training. Like this, the Gauselmann Group at the same time foresightedly helps to combat the impending shortage of skilled labour within the industry. Additional exemplary and modern personnel development measures further help to strengthen staff loyalty and identification with Gauselmann as a “model employer”.

In the completed 2014 financial year, 38 young trainees completed their two-, three- or even three-anda-half-year apprenticeship with the company and started out on the career ladder. Some of these trainees excelled as best in class with outstanding grades in regional chamber districts, at federal state level and repeatedly also at national level. Echoing the achievements of 2011 and 2012, the national winner in 2014 was a graduate in the industry-specific apprenticeship profession “coin-op specialist”. The Gauselmann Group was instrumentally involved in the conceptual design and introduction of this new profession, which is why this renewed national best apprentice award can also be viewed as an endorsement of the excellent training management within the Gauselmann Group. The industry-specific apprenticeship professions “coin-op specialist” and “coin-op service technician” were officially recognised and approved in 2008 after years of campaigning on the part of well-known lobby groups, institutions and companies. In its role as the industry’s largest training company, the Gauselmann Group has also contributed its extensive expertise to the restructuring of the training guidelines for industry-specific training in the coin-op gaming industry, which will take effect in the course of 2015.

Nelly Baur was honoured by Federal Minister Kristina Schröder as the best national graduate apprentice of 2012

83

EMPLOYEES AND TRAINING

The Gauselmann Group offers needs-based training

The “Merkur Senioren Club” cultivates its ties to the company

On 4 August 2014, a total of 78 trainees began their training in the Gauselmann Group, 47 of them as “coin-op service technicians” and two as “coin-op specialists”. The number of training places in the administrative and commercial/technical fields, including dual training courses, also remained unchanged at the previous years’ level in the past business year. All places in the 15 apprenticeship professions were filled in 2014. Qualified training of junior talent in line with the specific needs of the company over the long term is not just an integral part of the corporate philosophy; it also underscores the social competence of one of the region’s main employers. For many years, the Gauselmann Group has demonstrated its high level of social competence as an employer: whether company sports association, health management or “Merkur Senioren Club” (“Merkur Seniors Club”), the family-run Gauselmann Group is also a model employer outside the work environment. The “Betriebssportgemeinschaft MERKUR Gauselmann e.V.” (company sports association) with its approximately 1,000 members and 23 disciplines, is not only the largest in the Minden-Lübbecke district; it is also one of the nine largest in the whole of North Rhine-Westphalia. Health care and prevention also play an important role within the company. As part of the “Fit & Fun by Gauselmann” occupational health management system introduced in 2008, sporting and medical initiatives are continuously being offered and promoted. Whether courses to improve back health, encourage people to quit smoking or preventive medical check-ups such as skin screening, flu jabs or stroke prophylaxis – the measures implemented to support employee health help to foster a healthy climate among the workforce.

84

60 employees were honoured for their 25 and 40 years of service with the company

The BSG footballers have won many national and international tournaments

These diverse activities dedicated to serving our employees are rewarded by a high degree of loyalty towards the company. At last year’s annual anniversary celebration, Paul and Armin Gauselmann thanked 60 people celebrating service anniversaries and selected pensioners for their loyalty and commitment to the company. To give employees the possibility to remain part of the eastern Westphalian games makers after retirement, the “Merkur Senioren Club” was founded in 1998. Joint meetings and group trips are a great way to stay in touch with former colleagues and for them to maintain ties with their former employer. Since the Club was set up, attending the annual general meeting of the “Merkur Senioren Club” has been a firm fixture in company founder Paul Gauselmann’s appointments diary. As guest of honour, he regularly reports to the Seniors on the latest developments in the Group and the industry. The “Merkur Senioren Club” currently has 96 active members.

85

Corporate commitment to the region

The eastern Westphalia-Lippe region and particularly the Altkreis Lübbecke district as the location of the company’s headquarters have always been especially close to the hearts of the Gauselmann entrepreneurial family. This regional commitment is manifested in support for clubs and charitable institutions, preventive health care initiatives, as well as investments in the preservation and restoration of local buildings and monuments. Countless examples show that for the Gauselmann family it has always been an affair of the heart to give something back to the region and share their corporate success with the local population. In 2012, for example, Paul Gauselmann among other things donated 1 million euros to save the hospital in Rahden from closure. Endowment to the Young Enterprise company at Rodenbeck School

The latest testimony to this exemplary commitment is the doubling of the endowment capital of the Gauselmann Foundation to mark the 80th birthday of Senior Director Karin Gauselmann. The Gauselmann Foundation was created by Paul Gauselmann in 1999 on the occasion of his 65th birthday. As the Chairwoman of the Board of Trustees since its inception, Karin Gauselmann recently raised the Foundation’s capital from 5 to 10 million euros. In 2014 alone, the Gauselmann Foundation donated around 150,000 euros for over 100 projects in the region and has become an integral part of the social fabric of the town of Espelkamp and the Altkreis Lübbecke district. Following the capital increase, the Foundation will in future be called the Paul and Karin Gauselmann Foundation. Apart from this, the “Stiftung Kinderfamilien-Hilfe” (“Children-Family Support Foundation”) was founded in 2008 and is specifically dedicated to helping families with underage children that are experiencing financial difficulties because one or both parents have temporarily fallen victim to an exaggerated passion for gaming on AWPs.

86

Paul Gauselmann presents an ultrasound imaging device to the hospital in Lübbecke

The Gauselmann family of entrepreneurs is also actively involved in sports and supports a large number of smaller local clubs in the amateur and professional leagues that are dependent on sponsoring or donations in order to fund projects and investments. In the professional sphere, the region has for decades boasted firstclass handball in the top national division. As the main sponsor of TuS N-Lübbecke, the eastern Westphalian Gauselmann Group, together with the many other local sponsors, contributes to the team’s success not only with financial support but also through the outstanding personal engagement on the part of family members. Company founder Paul Gauselmann in particular has devoted himself to tennis. As West German runner-up in the Men’s 75 team in 2013 and 2010 German champion in the Men’s 65 team, he is a keen sponsor of the “Tennisverein Espelkamp-Mittwald e. V.” (regional tennis club), whose 1st Men’s team has played in the national tennis league for the past 12 years, as well as of supra-regional tennis tournaments such as the international ATP 500 Gerry Weber Open tennis tournament. The company also sponsors Tommy Haas and the world’s fourth seed in wheelchair tennis, Sabine Ellerbrock. Other sports such as football (for example FC Preußen Espelkamp, DSC Arminia Bielefeld), shooting or riding enjoy the entrepreneurial family’s goodwill and benefit from the sponsoring of the Gauselmann Group. In 2014, Paul Gauselmann was the first

87

CORPORATE COMMITMENT TO THE REGION

Armin Gauselmann (r.) and the museum team

German Coin-Op Museum – Gauselmann Collection at Schloss Benkhausen

member in the club’s history to be honoured by FC Preußen Espelkamp e.V. with the Golden Honorary Pin for his exceptional commitment. However, the games makers also support more exotic sports, for example in the past business year world record winner Matthias König from VfB Fabbenstedt, who set both the six-hour world record on a recumbent bike in the fully faired aerodynamics class and the 100-mile world record on a recumbent bike in the unfaired aerodynamics class. Projects or institutions in the field of preventive health care also receive special attention. As long-standing chairman and board member of the “‘Schlaganfall’ – Neurologische Klinik Minden e. V. Förderverein” (“Charitable Trust for the Minden Stroke – Neurological Clinic”), Paul Gauselmann last year among many other local projects not only supported the annual “Schlaganfall-Info-Tour” (“Stroke Info Tour”), which offers citizens of the region a free risk check, he also donated 60,000 euros to the Urological Unit of Lübbecke Hospital to allow a new ultrasound imaging device to be bought. A further focus lies on preserving the region’s cultural heritage. Paul Gauselmann personally financed the restoration of the 500-year-old Schloss Benkhausen. In a three-year restoration project, the old castle belonging to the Wittekindshof Foundation was converted into an ultra-modern and exclusive conference venue with an adjoining guesthouse. Offering 11 seminar rooms and 38 single/double rooms with a total of 50 beds, it is used as a training centre for the Group or rented out for external seminars and events. Visitors can also experience historical flair at the “Deutsches Automatenmuseum – Sammlung Gauselmann” (“German Coin-Op Museum – Gauselmann Collection”). Around 200 selected historical coin-op machines from previous centuries are presented in a permanent exhibition open to the public at the museum’s new premises in Schloss Benkhausen.

88

Schloss Benkhausen, seminar and training centre of the Gauselmann Group

The English Garden at Schloss Benkhausen is a popular destination above all for nature lovers. An old stock of trees planted by the aristocratic former owners, coupled with a newly landscaped park, provides a unique setting to linger and relax. The unique castle garden, one-of-its-kind in the region, has recently been enhanced by the planting of two new trees, an 80-year-old common oak tree and an equally old tulip tree, to mark the milestone birthdays of Paul and Karin Gauselmann. In order to bring the cultural treasures and riches of the castle to life for the general public, the family burial tombs of the barons of Schloss Benkhausen with the moat ring and yew tree tunnel were restored in 2014. In addition to a varied artistic and cultural programme, a stop at the cafe/restaurant “Die Rentei” completes a visit to Schloss Benkhausen. During the week, “Die Rentei” mainly provides evening meals for the hotel guests and at the weekend it opens its doors to visitors to the castle grounds and the German Coin-Op Museum.

89

Outlook on the business development for 2015/2016

As one of the world’s leading gaming companies, the family-managed Gauselmann Group is continuously exposed to new challenges. Thus the State Treaty on Gambling in Germany that came into force on 1 July 2012, including its enforcement and state arcade laws – some of which are already applied today, but which are to come into force at the latest from 1 July 2017 – as well as the related increases in the municipal amusement tax are putting pressure on the entire gaming industry in Germany and stifling its economic prospects. In order to compensate any revenue losses this situation may bring about, the company, as it has in the past, will continue in the future to tap into new and international markets and business segments and develop numerous innovative and attractive amusement machines and gaming software that repeatedly set benchmarks in the gaming industry both nationally and internationally. Furthermore, unviable companies and branches were sold or closed in 2014. Moving forward, the company intends to expand more selectively than before, especially on international markets. Building on this strategic objective, the Gauselmann Group will continue to expand steadily and generate encouraging growth going forward. Although the regulatory restrictions already had a pronounced impact on the business development in some areas in 2014, growing international business and strong product innovations made it possible to more than compensate the negative effects in nearly all segments, so that the 2014 financial year closed on a positive note. Accordingly, the Gauselmann Group is anticipating a continued positive trend in the three business divisions, Merkur, Spielothek and New Media for the coming years. The Merkur Division – which is split into national and international business – is the most important for the Gauselmann Group. Despite the difficult political parameters that have prevailed over the past few years, sales revenues in the national segment developed positively in the 2014 financial year. However, the market trend moving forward remains unclear due to the political discussions and uncertainties on the part of customers as to the future of the industry, making planned growth in the national market dependent in the medium term on the regulatory framework. The international trading companies in the Merkur Division on the whole posted a positive result. The Gauselmann Group succeeded in penetrating the market with its products especially in the UK and Spain, and achieved excellent revenues and earnings in these markets. It is planned to expand business activities here in 2015. The Spielothek Division also operates both nationally and internationally. National business of CASINO MERKUR-SPIELOTHEK developed significantly better than the cautious planning based on the restrictive legal parameters had indicated. At federal state level, the divergent legal situations led to very different development trends in the regions. Despite the difficult environment, for example stricter smoking bans, longer closing times, restricted service possibilities and the requirement to compare player data with a central player ban file in Hesse, as well as the reduction in the number of machines from 12 to eight machines per concession in accordance with the Berlin and Hamburg state arcade laws, revenue generated by the existing locations was up overall on the previous year. This can be accounted for by the optimum management – based on a first-class

90

atmosphere, innovative products, excellent service and qualified employees. In order to reduce the dependency on the Amended Interstate Gambling Treaty and safeguard the continued existence and success of this business segment in the long term, the company is looking to tap into new markets. Merkur Spielbanken Sachsen-Anhalt, which won the tendering procedure for casino licensing rights in Saxony-Anhalt last year, opened its first casino in Leuna-Günthersdorf on 22 December 2014. Merkur Casino’s international arcade segment proved highly successful. The desired synergy effects resulting from the acquisition of the British Praesepe Group, which owns both arcades and bingo halls, were confirmed in the 2014 financial year, so that the Praesepe Group has become one of the main pillars of international arcade business alongside the Czech and Dutch companies. The installation of Blueprint machines at Praesepe has a knock-on effect for the entire UK market and will lead to additional sales with third parties in future. Through its investment in the UK firm Sceptre Leisure, the Gauselmann Group is represented in all the main segments of the UK market – development and sales of amusement machines and corresponding software, operating of arcades and the much coveted pub segment. Business activities will be further expanded here in the coming years in order to generate additional synergy effects. In the New Media Division, statutory impulses for the sports betting segment in Germany are unfortunately still lacking, with valid licences so far only having been issued in Schleswig-Holstein. Consequently, it was only possible to open betting shops there in 2014. In the other federal states it was still not possible to use the so-called E15 licence for operating sports betting terminals, leading to an unsatisfactory development of the revenue and earnings situation in the sports betting segment. The procedure for issuing E15 licences has been ongoing since 4 September 2012. Legal action against the granting of licences announced in September 2014 – among others to Cashpoint – has been taken by unsuccessful applicants, so that the legal situation remains unclear and the issuing of the licences has again been postponed indefinitely. This means high costs for sports betting providers for maintaining the necessary infrastructure and the required personnel. The free resources are currently being used to develop international markets in the land-based and online segments. With the decisions taken in the past and the groundwork for the strategic direction laid, the Gauselmann Group sees itself well-positioned to attain its ambitious goals in the coming years.

91

PG 80

1936 Paul Gauselmann as a 2-year-old with his father and four older brothers

1953 The 19-year-old Paul Gauselmann with his apprentice piece in Frankfurt

1960 Paul Gauselmann at a cigarette machine that he converted into a stockings machine

1964 DIY juke boxes led Paul Gauselmann into the gaming industry

From part-time installation technician to global corporate leader Mettle, innovative spirit, hard work and inventiveness – these are the main cornerstones on which Paul Gauselmann’s exceptional life’s work is built. On 26 August 2014, the company founder and Management Board Chairman of the eastern Westphalian Gauselmann Group celebrated his 80th birthday. Born near Münster (Westphalia) in 1934 as the son of a craftsman, Paul Gauselmann was called upon to demonstrate his assertiveness and talent for improvisation from an early age. His early years were overshadowed by the Second World War and the period of post-war reconstruction. With great enthusiasm, Paul Gauselmann started his apprenticeship as a telecommunications inspector with the company “Telefonbau und Normalzeit” (T+N), after graduating from school in Münster in 1950 as best in class. Here, he was able to demonstrate his technical skills and understanding, completing both his apprenticeship and the subsequent six-month special training course with distinction. At the tender age of 21, not only was Paul Gauselmann the youngest inspector at T+N; he was also already married and a father of two. However, despite a relatively good income and a number of other privileges as a successful inspector, Paul Gauselmann sought new challenges. In March 1956, he gave up his “secure” future and ventured into unchartered terrain as a technician with a general importer of American Wurlitzer jukeboxes from Coesfeld. With this move, he immediately doubled his salary, but at the same time had to work much harder. In his rare free time, Paul Gauselmann nevertheless devoted every spare minute to realising his own ideas. With success: the development of a remote selection box with a telephone dial for a new German jukebox production, which up to then could only be found on American jukeboxes, was to mark the formative start of his future career and beyond for

92

Umweltschutz

“MERKUR B“, the first proprietary Gauselmann AWP was licensed at Christmas 1976

Video gaming machines were very successful in the 1980s

1984: discs instead of reels – “Merkur Disc“ Gauselmann AWP led to market leadership

the young technician. This remote selection box made entrepreneurial history for the young technical visionary as his first invention and first patent, several hundred more of which were since to follow. His invention also brought him into contact with the Harting company in Espelkamp, where he was immediately offered a position in the development department. So at the end of 1956, Paul Gauselmann moved to what was then the rural town of Espelkamp. His family followed in early 1957. A few years later, aged just 26, Paul Gauselmann was appointed head of coin-op vending machine development and masterminded the development of the first electric cigarette dispensing machine produced in Germany. In 1957, Paul Gauselmann took another bold step in his life when on top of his normal 48-hour week he started up a sideline installing jukeboxes with 17 Bergmann/Harting jukeboxes and 100,000 D-mark in crossed bills of exchange. Thus the foundation stone for the Gauselmann Group was laid. His sideline led to full-time self-employment in 1964, along with two of his brothers and 20 employees. Together they founded the company “Gebrüder Gauselmann”, which still exists today. In the mid-1970s, Paul Gauselmann paved the way for the CASINO MERKUR-SPIELOTHEK arcade chain, which today is the undisputed number 1 in Germany with far in excess of 200 entertainment centres. With the opening of the first “Merkur Spielothek” in Delmenhorst, Lower Saxony, in 1974, the company founder marked the “invention” of the modern arcade. From the very outset, the recipe for success was a customer-oriented range of products, a unique atmosphere and above all well-trained, friendly and competent staff.

93

BIRTHDAY

Regular consultation between the members of the Family Council is part of the successful Gauselmann business model

In 2003, Paul Gauselmann received the 1st Class Cross of Merit of the Order of Merit of the Federal Republic of Germany from Andreas Wiebe (3rd from left)

Since 2004, Paul Gauselmann has been an honorary citizen of the towns of Espelkamp and Lübbecke

In 1986, the Gauselmann Group opened its first international entertainment centre in the Netherlands, paving the way for continuous further expansion of arcades across Europe. Today, the Group operates around 500 modern outlets in ten European countries. With the “MERKUR B” in 1977, the first proprietary amusement with prizes (AWP) machine developed by Gauselmann was born and enthused players with spectacular new games contents. The huge success of the “MERKUR B” was at the same time synonymous with the relentless rise to fame of the Gauselmann Group and pioneered the Merkur trademark. Within just a short time, the AWPs from Lübbecke occupied a dominant position in the market. The company soon became a force to be reckoned with in the market and successfully continued on its path of innovation. Just seven years later – in 1984 – the Gauselmann Group had become market leader with a more than 50 percent market share and the highly innovative “Disc 100” game system. With the foundation of more companies and the acquisition of existing companies the Gauselmann Group went from strength to strength. In 1980, Paul Gauselmann founded Gauselmann AG as a holding company for many of the companies that had been formed by then. From a manufacturer of classic electrical/mechanical reel-based machines, the Gauselmann Group advanced to become a provider of highly developed electrical multigamers containing up to 200 highly interesting games, with internationally recognized quality standards endorsed by TÜV certification to DIN EN ISO 9001:2008. Varied features and consideration of customer and player needs when developing gaming content remain the basis for all Gauselmann products to this day. “The top priority for me when developing new machines has always been having an ear to the market and looking into the hearts of the players. Whether development, production, sales or service – customer satisfaction is the basic prerequisite for success in the gaming industry,” Paul Gauselmann says. Even at the age of 80, the entrepreneur is still a sought-after ideas provider, developer and technician, who knows exactly what products the market is waiting for. The decision to enthuse international markets for games and technology “made by Gauselmann” at the beginning of the 1990s marked a new strategic positioning for the Group. Since then, internationalisation has proceeded apace and the Gauselmann Group has grown to become a leading international AWP and vending machine developer and manufacturer and entertainment centre operator. This development reached its peak in 2012 with acquisition of the 170 locations of the British Praesepe arcade chain, marking the most significant acquisition in the company’s history.

94

Paul Gauselmann

To mark his 80th birthday, the street in which the production site in Lübbecke is located was renamed Paul-Gauselmann-Straße

In 2014, Paul Gauselmann, together with his wife and many guests, opened the new logistics centre at the Lübbecke site

Apart from his own corporate success Paul Gauselmann is always mindful of the prosperity of the coin-op amusement and vending machine industry as a whole. Through his commitment he has decisively shaped industry policy in the associations since the 1960s – especially against the background of the prevailing regulatory framework in Germany. For the past 34 years, Paul Gauselmann has been President of the “Verband der Deutschen Automatenindustrie e. V. (VDAI)” – (“German Association of Coin-Op Amusement and Vending Machines”). Further testimony to his engagement for the industry is the establishment of the two specific IHK (Chamber of Industry and Commerce) apprenticeship professions “coin-op specialist” and “coin-op service technician”. As Management Board Chairman of a globally operating empire with regional roots, Paul Gauselmann stands for entrepreneurial responsibility and at the same time demonstrates social, cultural and sporting engagement – with a focus on the Altkreis Lübbecke district, but also beyond. On the occasion of his 65th birthday, Paul Gauselmann founded the present-day Paul and Karin Gauselmann Foundation with current endowment capital of 10 million euros, which specifically promotes and supports social and cultural causes in his home region, Altkreis Lübbecke. For his outstanding social commitment, as well as his untiring efforts on behalf of the German amusement and gaming machine industry, Paul Gauselmann was decorated with the German Federal Cross of Merit in 1993 and a decade later he received the higher-graded First Class Cross of Merit of the Order of Merit of the Federal Republic of Germany. Furthermore, on the occasion of his 70th birthday the towns of Lübbecke and Espelkamp made the entrepreneur an honorary citizen in recognition of his unerring efforts to promote the interests of the region. Behind the successful entrepreneur is also a strong and supportive family that has played a key role in the success of the company today. First and foremost his wife, Karin, who has stood by him with advice, support and encouragement since 1967. All four sons have held positions within the company. Today, his sons Armin and Karsten are active in the company, Armin as Vice-Chairman of the Management Board and Karsten as a member of the Supervisory Board. Material strategic decisions are taken by the entrepreneurial family – which in the meantime also counts nine grandchildren – at the regular meetings of the Family Council.

95

Gauselmann Family Council

From left to right: Armin, Karin, Karsten, Paul and Michael Gauselmann

Underlying strategic issues and topics are regularly discussed amongst the owners within the Gauselmann entrepreneurial family and corresponding decisions taken. Alongside Paul Gauselmann as Chairman of the Family Council, the other co-owners are Karin Gauselmann, Michael Gauselmann, Armin Gauselmann and Karsten Gauselmann.

96

Management Board

1st row, from right: Paul Gauselmann, Chairman of the Management Board Armin Gauselmann, Vice-Chairman of the Management Board 2nd row: Dr Werner Schroer, Technology 3rd row, from right: Jürgen Stühmeyer, Merkur Division Manfred Stoffers, Marketing • Communications • Political Affairs 4th row: Dieter Kuhlmann, Spielothek Division 5th row, from right: Alexander Martin, New Media Alexander Vleeming, Finance

97

Supervision and advice

The Supervisory Board was kept regularly informed through oral and written reports about the development of the company’s business and its financial situation. All material business events and transactions were discussed with the Management Board in regular meetings. The consolidated financial statements as at 31 December 2014 and the Gauselmann Group Management Board Report were audited and approved and issued a closing statement by Dr. Woelke TreuhandGesellschaft mbH, Herford. After reviewing the consolidated financial statements and Management Board Report, the Supervisory Board concurs with the audit opinion of the auditor and raises no objections. The Supervisory Board hereby approves the financial statements prepared by the Management Board. The Supervisory Board thanks the Family Council, the Management Board and the company’s senior executives for their successful entrepreneurial work, as well as all employees for their outstanding commitment and excellent achievements in 2014. The positive overall result cannot be taken for granted given the background of the difficult conditions in the German core market. Espelkamp, April 2015

Manfred Grünewald Chairman of the Supervisory Board

98

Supervisory Board

Manfred Grünewald Chairman, former Managing Partner of tobaccoland GmbH & Co. KG

Karsten Gauselmann Hotelier and co-owner of the Gauselmann Group

Max Walberer Entrepreneur

Dr Wolf-Albrecht Prautzsch Banker, retired

Richard Trachok Attorney (USA)

Gerhard Böger Banker, retired

99

Publishing details Published by:

Gauselmann AG Communications Department Responsible for content: Mario Hoffmeister M.A. Merkur-Allee 1–15 32339 Espelkamp Germany www.gauselmann.com Project manager: Nils Rullkötter Project assistant: Ilka Ahlers Editors: Claudia Hecke, Mario Hoffmeister, Katrin Koch, Mareike Kording, Irina Sophie Pötzschke, Nils Rullkötter, Sina Treichel, Katrin Welland

Concept and design: Schoeller GmbH Corporate Communications, Hamburg Photographs:

Marco Moog, Hamburg Foto Pescht, Lübbecke Franz Bischof, Hanover Onno Brandis, Bielefeld Claudia Schiffner, Bremen Christof Haake, Hamburg Oliver Krato, Lübbecke Thomas Lottermoser, Herford Ilex Media, Lübbecke Fotografie Frei, Ostfildern near Stuttgart ISO K° Photography, Hanover Markus Jäger, Bielefeld Jens Schicke, Berlin Judith Wagner, Düsseldorf

Litho:

Hamann Kölling GmbH, Hamburg

Printing:

altmann-druck GmbH, Berlin Printed on Maxisatin, FSC® -certified Espelkamp 2015

100

Gauselmann Group – Key Figures

€ million

2014

2013

Volume of business

1,942

1,847

Sales (fully consolidated)

1,286

1,191

– of which in Germany

725

706

– of which international

561

485

Economic equity

611

567

– of which shareholders’ equity

559

517

– of which silent partnership contributions

19

25

– of which Gauselmann family loan

33

25

187

208

Work places at year’s end

8,458

8,161

(full-time equivalents)

6,848

6,706

– of which in Germany

5,789

5,645

– of which international

2,669

2,516

– of which temporary employment

358

271

– of which apprentices and trainees

218

192

Investments

®

The 2014 business year for the Gauselmann Group

www.gauselmann.com

Games makers worldwide

2014

The business year for the Gauselmann Group