artnet AG — Annual Report 2013

Mar 28, 2014

Annual Report 2013

Financial Key Figures artnet Group (in kEUR)

	12/31/2013	12/31/2012	Difference (Balance)
Revenue	12,968	13,488	(4%)
Profit from Operations	13	(670)	102%
Earnings Before Income Tax	45	(1,378)	103%
Earnings of Continued Operations	40	(1,399)	103%
Earnings of Discontinued Operations	-	(1,028)	100%
Earnings per Share of Earnings of Continued Operations	0.01	(0.25)	104%
Earnings per Share of Earnings of Discontinued Operations	-	(0.19)	100%
Weighted Number of Shares in Thousands	5,553	5,553	0%
Cash Flow from Operationg Activities	827	(457)	281%
Staff (Year End)	106	118	(10%)
Cash and Cash Equivalents	1,529	753	103%
Equity	2,214	2,368	(7%)
Total Assets	6,039	6,009	0%

Shares artnet AG (EUR) 2013

Table of Contents

• Letter to Shareholders
• Core Statement
• Company Development
• Company Background
• Report of the Supervisory Board
• Corporate Governance Report
• Responsibility Statement
• Group Management Report 2013
• Consolidated Financial Statements 2013
• artnet AG Consolidated Balance Sheet
• artnet AG Consolidated Statement of Comprehensive Income
• artnet AG Consolidated Statement Of Changes In Shareholders Equity (USD and EUR)
• artnet AG Consolidated Cash Flow Statement
• Notes to the Consolidated Financial Statements 2013
• English Translation of the Independent Auditors' Report
• Management
• artnet Authorities, Addresses, Investor Relations, artnet Stock

Jacob Pabst Chairman and CEO, artnet AG

Dear Shareholders,

I am pleased to report that 2013 marked a period of successful consolidation and a return to profitability for artnet.

Our auctions platform boasts buyers and sellers in over 75 countries, with almost 4,000 new registrants signing up to bid in 2013. Our client base is now broader and more diversified than ever. Last year, the average value of lots offered increased by 23%, and the number of high-value lots sold increased 42%. We hosted 80 special sales, up 50% from 2012.

artnet Auctions has a huge potential for growth, and the figures from the second half of 2013 support our conviction that we will soon reach our revenue targets. Even though revenue lagged behind expectations, due, in particular, to underwhelming results in the first six months, I expect a breakthrough in terms of revenue for this segment in the near future. Much like the artnet Price Database, which gradually earned the trust of our clients, and ultimately became the market's gold standard following its launch in 1989, the introduction of online auctions for art marks a fundamental change within the art world, which will gradually shift a significant share of transactions to this new channel.

Our database remains the market's trusted source for researching and valuing Fine Art, Design, and Decorative Art. The depth and quality of our vast data archive, combined with the speed at which new results are added to the database, give us a unique competitive edge. In the past year, we continued to develop the database, adding 1.2 million auction records from nearly 1,000 of the most renowned auction houses around the world. Our revenue has increased in this segment, partly due to two successful price increases.

Since many small and mid-size galleries struggle to prosper in the difficult economy and have had to cut their spending in recent years, we could not achieve our set revenue targets in 2013. Additionally, we saw more competitors entering the market who initially offered their services for free, and have only recently begun charging for them. However, thanks to improved service packages and an increase in prices, our revenue remained stable. In addition, 2013 saw the launch of artnet Galleries News, a newsletter highlighting exhibitions held around the world; artnet China News, featuring gallery members and exhibitions in China; and a Photography Newsletter, sent out to photography collectors to increase the visibility of galleries selling works in this category. These newsletters collectively reach almost 500,000 buyers, sellers, and art aficionados each month. I anticipate significant benefits for our member galleries with our redesigned website, which will be launched in phases beginning in the spring of 2014. The new site will introduce an attractive, contemporary interface and more intuitive navigation, and will ultimately allow more visibility for these galleries.

Revenue from advertising lags behind last year by 2% in US dollars, but we are confident that the upcoming introduction of artnet's redesigned website will help boost advertising sales. With over 2 million visits each month, artnet remains the most attractive online advertising outlet in the art world.

With the launch of artnet News in February 2014, we fulfilled our long-held objective of creating a single news platform for the international art market. Unique in its ambition and global scale, this platform is the first of its kind, and therefore fills a gap in the market. artnet News has already begun driving significant traffic to our site, benefitting all artnet products and services. artnet News constantly publishes analysis and reports about artists, art works, exhibitions, and the art world. Our editor-in-chief, Benjamin Genocchio, a renowned specialist with many years of experience, joined artnet with a team of some of the best writing talents and well-known journalists. Ben and his team made it possible for us to launch this entirely new platform in record time.

The annual result in 2013 shows that, following numerous changes and improvements, artnet is on the right track. Recent innovations and developments ahead of us will strengthen our brand, further expand our business operations, and reinforce the unmatched key leadership role we play in the art world.

Yours sincerely,

Jacob Pabst Chairman and CEO, artnet AG

Core Statement

artnet is the leading online resource for the international art market. Established in 1989, artnet provides reliable information and market transparency to art collectors. Our comprehensive suite of products include the artnet Price Database, which offers objective price information, and artnet Galleries, providing a global market overview to users around the world.

With 24/7 worldwide bidding, artnet Auctions was the first online marketplace for collecting art. Our auction platform allows for immediate transactions, with seamless flow between consigners, specialists, and collectors.

Company Development

artnet AG was formed in 1998 as an information service provider for the art market. It took over Artnet Worldwide Corporation, which was formed in New York in 1989, and had moved the artnet Price Database and artnet Galleries online by the mid-1990s.

More than any other company, artnet has modernized the art business. artnet products provide reliable information and transparent commercial terms for collectors, gallery owners, museums, and investors, and have become indispensable tools for independent market players. Through artnet Auctions, artnet has developed from a pure information service provider to a transaction platform, and has further expanded its leading position in the art market.

artnet has gradually built up its information services and transaction platform around its first product, the artnet Price Database Fine Art and Design. This database was set up in response to the decentralized art market of the late 1980s. At the time, the art market lacked transparency, which was a stumbling block for buyers in particular. The art business had, of course, always been international, but it was managed locally in a relatively inefficient market by tens of thousands of geographically disparate art dealers, galleries, auction houses, book publishers, museums, and collectors. The artnet Price Database provides these local markets with a global standard of comparison, listing Fine Art, Design, and Decorative Art auction results, including results for more than 300,000 artists and designers. The artnet Price Database contains over 8 million auction results from more than 1,600 international auction houses, dating back to 1985.

Another pillar of the artnet business is artnet Galleries, which was introduced in 1995. With 1,500 galleries and approximately 170,000 artworks by nearly 35,000 artists from around the globe, this product is the world's most comprehensive gallery network. artnet Galleries serves dealers and art buyers in equal measure by giving them an overview of the global market, prices, and price trends, and allowing them to be in direct contact with the gallery.

Created in 2008, artnet Auctions was the first online platform to buy and sell art. With faster turnaround and lower commissions, artnet Auctions is available around the clock at www.artnet.com/auctions. All aspects of the sale, including the processes of submitting a lot and bidding, take place in quick succession, in comparison to brick-and-mortar auction houses.

An office was opened in London on November 1, 2007, with the formation of artnet UK Ltd., the UK subsidiary of Artnet Worldwide Corporation. On July 3, 2008, Artnet Worldwide Corporation formed artnet France sarl. artnet AG and its subsidiaries employ a total of 106 people.

Company Background

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artnet.com AG was incorporated under the laws of Germany in 1998. In 1999, Management took the Company public on the Neuer Markt of the Frankfurt Stock Exchange. In 2002, artnet.com AG changed its name to artnet AG. On October 4, 2002, artnet AG left the Neuer Markt, and was then listed in the General Standard at the Frankfurt Stock Exchange, a segment of the EU regulated Geregelter Markt. Effective February 1, 2007, artnet AG is now listed in the Prime Standard of the Frankfurt Stock Exchange, the segment with the highest transparency standards. Its principal holding is its wholly owned subsidiary, Artnet Worldwide Corporation, a New York corporation that was founded in 1989. The consolidated financial statements are prepared in accordance with the International Financial Standards (IFRS).

Report of the Supervisory Board

The Supervisory Board held four formal meetings in 2013, which were all unanimously attended. Two of the meetings were held via telephone, following the exchange of relevant operating, technical, and financial information. Two were all-day, face-to-face meetings at the headquarters in Berlin, and at the offices in New York, NY. In addition, there were numerous informal telephone conferences and frequent email exchanges on specific business issues. We closely monitored the activities, decisions, and performance of Jacob Pabst, chairman and CEO of the Management Board, who assumed those responsibilities in late 2012. We also worked closely with Michael Probst, vice president of finance, who joined the Company in late 2012. At the meetings held in Berlin and New York, we dealt with strategic planning and budgets, and interviewed key management personnel concerning their general business outlook and projects.

The Supervisory Board received regular, detailed information throughout the entire year in written (email) form and oral reports from the Management Board on the Company's situation, the course of its business, and its strategy and important decisions. The quarterly and semi-annual reports, and the detailed results from the individual segments, were reviewed with the Management Board. In addition, the Management Board discussed issues of fundamental importance for corporate policy on an ongoing basis with the Supervisory Board. These included financial planning (cash management and expense management), technical (website) development, the progress of the auction segment, the stabilization of the gallery network, and the continued growth of the Price Database and the financial products segments. The Supervisory Board has not formed any committees.

2013 was a challenging year for artnet. Despite record-breaking auction prices making headlines, and the beginning of economic recovery in the United States, our art dealer customers continued to experience difficult economic conditions; recovery in Europe lagged; and our clients continued to face the challenges of the new art business, produced by rapid technological changes in consumer buying habits. The first quarter was a difficult time financially, with conference calls involving the Supervisory Board taking place on an almost-weekly basis. To compensate for potential cash flow shortcomings, the decision was made to take a loan from a stockholder in April 2013. Fortunately, it became clear in the following months that the loan was not needed to meet cash requirements.

The Supervisory Board's meetings focused on revenue and profit growth, the Company's liquidity, its major expenditure and human resources policies, international activities, and the future position of the individual segments. In addition, economic and technical issues for the individual divisions (the Price Database, online auctions, the gallery network, and financial products) were discussed in depth. Issues concerning corporate governance and compliance were also discussed.

Two members of the Supervisory Board resigned in 2013. Therefore, substantial time was spent updating the Procedures Manual (to acquaint new members on practices), and the Management Board provided logistical support and background to ensure that the new members were fully conversant with the issues and procedures of the Company.

The Management Board has been diligent in expense and cash management. The Supervisory Board reviews monthly figures within days of the end of each month to ensure prudent adherence to policies designed to build cash reserves, and to focus capital expenditures on product improvements that will result in increases in revenue. Cash on hand increased during the year, and expenses declined as a percentage of revenues. Without non-recurring items, artnet returned to profitability in 2013. The gallery network segment has stabilized, and is growing again after several years

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of decline. The Price Database also grew in 2013, and the auctions segment stabilized in the second half of 2013 after changes in the pricing structure.

As is the case with many tech companies, artnet continued to experience high turnover of employees in 2013. However, the reputation of the Company and its improving financial situation has enabled us to attract many individuals with proven records and the outstanding skills needed to grow our business.

In the first quarter of 2014, artnet will launch a completely redesigned website, presenting a new and more attractive layout to our customers. artnet continues to discuss strategic alliances with others in the art world to widen our market presence, enable us to create and adopt technical advances, and grow our core businesses with additional business development expenditures.

The annual financial statements (HGB) and the consolidated financial statements (IFRS), prepared by the Management Board for artnet AG for the 2013 fiscal year, together with the management report and group management report, were audited by the firm Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Hamburg. The Supervisory Board examined and concluded that the auditors are independent. The auditors determined that both the annual financial statements (HGB), as well as the consolidated financial statements in accordance with the provisions of IFRS, present a true and fair view of the financial position and results of operations for the financial year, and issued an unrestricted audit opinion in each case. After completing their audit, the auditors participated in the Supervisory Board's meeting to discuss the financial statements and report on the results of their audit. The Supervisory Board concurred with the results of the audit.

The Supervisory Board reviewed the annual financial statements and consolidated financial statements of artnet AG and the associated management reports. Having completed its own in-depth review, no objections were raised by the Supervisory Board. The Supervisory Board approved the annual financial statements for artnet AG prepared by the Board of Directors in the version audited by Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Hamburg, with a resolution on March 25, 2014. The annual financial statements as of December 31, 2013 are thus adopted. The consolidated financial statements as of December 31, 2013 were also approved by the Supervisory Board by way of a resolution on March 25, 2014.

The Supervisory Board would like to thank the Management Board and all of the Company's employees for their work in the past year.

Naples, FL, USA, March 25, 2014

John Hushon Chairman of the Supervisory Board

ROBERT RAUSCHENBERG, John (ruminations), 1999 Color etching with photogravure 29.5 x 38.85 in. Signed, numbered, and dated Edition 46. Printers Proof 2/3. Sold for US\$46,200 (with premium) on October 2, 2013 on artnet Auctions ©Robert Rauschenberg Foundation and ULAE/Licensed by VAGA, New York, NY Published by Universal Limited Art Editions

CHUCK CLOSE, Untitled (Kate—Large), 2008 Pigment print 51 x 21 in. Signed Edition 13/15 Sold for US\$60,000 (with premium) on October 18, 2013 on artnet Auctions ©Chuck Close, courtesy of Pace Gallery, New York, NY

ANDY WARHOL, Diamond Dust Shoes, 1980 Mixed media, synthetic polymer, silkscreen inks, and diamond dust on paper 40 x 60 in.

Sold for US\$240,000 (with premium) on September 30, 2013 on artnet Auctions ©2014 The Andy Warhol Foundation for the Visual Arts, Inc. / Artists Rights Society (ARS), New York, NY

RAYMOND PETTIBON, Untitled (Water is the Best Thing of All), 2004 Watercolor and ink on paper 29.5 x 22 in. Signed Sold for US\$59,400 (with premium) on November 14, 2013 on artnet Auctions

Courtesy of the artist and Regen Projects, Los Angeles, CA

Corporate Governance Report

artnet attaches great importance to corporate governance. artnet AG complies with the recommendations of the German Corporate Governance Code in the current version dated May 13, 2013 with the exception of the recommendations in No. 3.8 para. 3, No. 4.2.1 sent. 1, No. 5.1.2 para. 2 sent. 3, No. 5.3.1, No. 5.3.2, No. 5.3.3, and No. 5.4.1 para. 2 (age limit for members of the Supervisory Board). The Management and Supervisory Boards of artnet AG have adopted the declaration of conformity with the code detailed at the end of this report. It is published online at www.artnet.com/investor-relations/.

1. Supervisory Board

According to the German Aktiengesetz, artnet AG has a dualpronged management and control structure, comprising a sole member of the Management Board and the three-person Supervisory Board. Management and control functions are strictly split in the dual management system. It is not legally permissible to simultaneously work for the Management Board and the Supervisory Board. The tasks and responsibilities of these two bodies are clearly legally defined in each case.

The Supervisory Board monitors and advises the Management Board in conducting the business. The Supervisory Board discusses the business growth and forecasts, as well as the strategy and its implementation at regular intervals. In addition, the Supervisory Board adopts the annual financial statements and appoints the members of the Management Board. The Supervisory Board has defined approval requirements by the Supervisory Board for transactions of fundamental importance. These include decisions or activities that have a fundamental impact on the Company's financial position or results of operations. The Management Board provides the Supervisory Board with regular, up-to-the-minute, comprehensive information on all of the issues of relevance to the Company with regard to forecasting, business growth, risks, and risk management.

The members of the Supervisory Board are independent in their decision-making, and are not subject to instructions or specifications by third parties. In addition, consulting, service, and certain other agreements between artnet and the members of its Supervisory Board have to be approved by the Supervisory Board. According to Item 5.4.1 of the Code, the Supervisory Board shall specify concrete objectives regarding its composition which, whilst considering the specifics of the enterprise, take into account the international activities of the enterprise, potential conflicts of interest, an age limit to be specified for the members of the Supervisory Board, and diversity. These concrete objectives shall, in particular, stipulate an appropriate degree of female representation. The concrete objectives of the Supervisory Board and the status of the implementation shall be published in the Corporate Governance Report.

At the meeting on February 7, 2011 and in view of Item 5.4.1 of the Code, the Supervisory Board resolved the following objectives for its composition:

• • Consideration of the international activities of the enterprise: The Supervisory Board will pay attention to ensure that the Supervisory Board has a sufficient number of members with many years of international experience or many years' experience in the United States, the country in which the artnet Group performs most of its business activities.
• • Avoidance of potential conflicts of interest: Potential conflicts of interest are avoided in the Supervisory Board's election proposals to the General Meeting. The Supervisory Board does not include any former members of the Management Board or managing directors. In addition, when proposing candidates to the General Meeting, attention is paid to ensure that the respective candidate does not hold a management position or a position in the supervisory bodies of competitors, suppliers, lenders, or customers, in order to avoid conflicts of interest from the very outset. If any conflicts of interest result during the period of office of a member of the Supervisory Board, the affected member of the Supervisory Board must disclose this to the Supervisory Board, addressed to the chairman, and if there are material, non-temporary conflicts of interest, they must resign from their office.
• • Definition of an age limit: The Supervisory Board considers a provision of this nature to be inappropriate because general age limits would unduly limit the shareholders' discretionary powers when selecting members of the Supervisory Board.

• Consideration of diversity: The Supervisory Board's diversity is reflected in the various professional careers and activities of the members of the Supervisory Board. Female candidates must be given suitable consideration if they hold the same qualifications and are equally suitable. The Supervisory Board aims to have at least one female candidate proposed for election at the next Supervisory Board election in 2014.

The implementation status for the objectives detailed above regarding the composition of the Supervisory Board is as follows:

The objectives with regard to "Consideration of the international activities of the enterprise" and "Avoidance of potential conflicts of interest" have been put in place. The Supervisory Board is not pursuing the objective of the "Definition of an age limit"; as a result, together with the Management Board, it has declared that it will not follow this recommendation. The Supervisory Board believes that it has implemented the objective of "Consideration of diversity" to a great extent. However, there are not any female members of the Supervisory Board at present; as a result this objective has not yet been implemented. The goal of proposing at least one woman for the Supervisory Board has been already implemented in 2013 with the election of Mrs. Piroschka Dossi.

2. Management Board

The Management Board is responsible for the Company's management. It must follow the Company's interests and undertake to increase the sustained enterprise value. It is responsible for the Company's strategic orientation in agreement with the Supervisory Board. The Management Board cooperates closely with the Supervisory Board.

The Management Board ensures that statutory provisions are upheld and that there is suitable risk management and risk control at the Company.

3. Directors' Dealings Transactions And Shareholdings of Managing and Supervisory Board Members

During the past financial year, no purchases or sales of at least 5,000 EUR were executed by members of the Company's Management Board and Supervisory Board, or other executives who regularly have access to the Company's insider information and who are authorized to make material entrepreneurial decisions, and certain persons closely related to these persons.

On March 25, 2014, the Management Board and Supervisory Board held 1,576,605, or 28.39%, of the shares or financial instruments based thereupon.

Supervisory Board
Galerie Neuendorf AG	1,523,551 shares
John Hushon	53,054 shares

4. Stock Option Plan

The Company's 2009 stock option plan comprises 560,000 ordinary shares with a theoretical value of 1.00 EUR per share. Subscription rights for up to 30,000 shares can be issued to the members of the Company's Management Board, subscription rights for up to 240,000 shares to members of the management of affiliated companies, subscription rights for up to 10,000 shares to employees of the Company, and subscription rights for up to 280,000 shares to employees of affiliated companies.

The price to be paid for one share of artnet when exercising the subscription rights corresponds to the average closing price of shares of the Company in XETRA trading on the regulated market (Prime Standard) of Deutsche Börse AG, or, if this price has not been determined, in on-floor trading during the 10 stock market days prior to the respective allocation date for the subscription rights. The exercise price corresponds to at least the proportionate amount of the subscribed shares to the share capital. The options may not be exercised for a period of two years. In order for the subscription rights to be exercised, the closing price of shares of artnet AG in XETRA trading on the regulated market (Prime Standard) of Deutsche Börse AG in the period between the subscription rights being issued and exercised is at least 10% higher than the exercise price on at least one stock market day during the term of the subscription rights. Options may only be exercised in groups of at least 1,000 options.

5. Relationship with Shareholders

artnet AG reports to its shareholders four times each financial year on business growth and on the Group companies' financial position and results of operations. The annual General Meeting is held during the first eight months of each financial year. The General Meeting resolves on issues including the appropriation of profits, the ratification of the Management and Supervisory Boards, and the election of the auditor. Changes to the articles of incorporation and capitalization activities are resolved exclusively by the General Meeting.

6. Declaration of Conformity with the German Corporate Governance Code

As a rule, artnet AG complies with the recommendations of the German Corporate Governance Code as published in the official section of the electronic federal gazette, in the version dated May 13, 2013. artnet AG will continue to comply with these recommendations in the future.

The following recommendations are not applied:

1. Number 3.8, paragraph 3: "A similar deductible must be agreed upon in any D&O policy for the Supervisory Board." artnet AG does not believe that the due care and diligence that the members of its Supervisory Board exercise in discharging their duties could be increased further by agreeing to a deductible. For this reason, artnet AG does not intend to change existing D&O insurance policies that do not provide for such a deductible.

2. Number 4.2.1, sentence 1: "The Board of Directors shall be comprised of several people and have a chairman or spokesman." Since its establishment, the Board of Directors of artnet AG has been comprised of one person. By contrast, the management of the subsidiary Artnet Worldwide Corporation in New York, which is largely responsible for operations within the Group, is comprised of several people. To date, the Company has not increased the size of its Board of Directors for cost reasons.

3. Number 5.1.2, paragraph 2, sentence 3: "An age limit for members of the Board of Directors shall be specified."

artnet AG considers a provision of this nature to be inappropriate because general age limits would unduly limit the Supervisory Board's discretionary powers when selecting members of the Board of Directors.

1. Number 5.3.1., Number 5.3.2., and Number 5.3.3.: In these sections, the Code recommends that the Supervisory Board form an Audit Committee and a Nomination Committee. As the Supervisory Board of artnet AG is comprised of only three members, it does not make sense to form committees.

The tasks envisioned for the Audit Committee and the Nomination Committee are undertaken jointly by the Supervisory Board as a whole.

1. Number 5.4.1, paragraph 2: "The Supervisory Board shall specify concrete objectives regarding its composition which, whilst considering the specifics of the enterprise, take into account...an age limit to be specified for the members of the Supervisory Board...." artnet AG considers a provision of this nature to be inappropriate because general age limits and requirements for diversity would unduly limit the shareholders' discretionary powers when selecting members of the Supervisory Board.

• The Management Board and the Supervisory Board of artnet AG hereby declare that the recommendations of the Government Commission of the "German Corporate Governance Code," as amended on May 13, 2013, have generally been complied with since the last Declaration of Conformity dated February 28, 2014. The recommendations from No. 3.8 para. 3, No. 4.2.1 sent. 1, No. 5.1.2 para. 2 sent. 3, No. 5.1.3, No. 5.3.1, No. 5.3.2, No. 5.3.3, and No. 5.4.1 para. 2 were not applied.

Berlin, March 25, 2014

Jacob Pabst Chairman and CEO artnet AG

John Hushon Chairman of the Supervisory Board

Responsibility Statement

To the best of knowledge, and in accordance with the applicable reporting principles, the following consolidated financial statements give a true and fair view of the assets, liabilities, financial position, and profit or loss of the artnet Group. The Group Management Report includes a fair review of the development and performance of the business, as well as the position of the Group, along with a description of the principal opportunities and risks attributed to the expected Group development.

Berlin, March 25, 2014

Jacob Pabst Chairman and CEO, artnet AG

Group Management Report 2013

1. General Conditions of the Group

Business Model and artnet Group Organization

artnet AG is a holding company listed on the "Regulierter Markt" in the Prime Standard segment of the Frankfurt Stock Exchange. artnet AG's principal holding is its wholly-owned subsidiary, Artnet Worldwide Corporation, which was formed in 1989 in New York. artnet AG ("artnet" or the "Company") and Artnet Worldwide Corporation ("Artnet Corp.," collectively the "artnet Group" or the "Group") operate under the trade name "artnet."

Artnet Corp. has two wholly owned subsidiaries: artnet UK Ltd. and artnet France sarl. artnet UK Ltd. provides sales and client support in the United Kingdom. As part of our restructuring, the Paris office was closed in June 2012.

With a 2013 monthly average of 1.2 million unique visitors to its three domains, artnet.com, artnet.de, and artnet.fr, artnet offers the world's most comprehensive art market overview. The provision of timely information about artwork values, artists, galleries, price developments, exhibitions, news, and reviews enables collectors and art professionals to better navigate the art market.

As of December 31, 2013, artnet Galleries represented approximately 1,500 of the world's most prestigious art galleries from nearly 60 countries. Members of artnet Galleries are indexed by specialty and location, and feature 170,000 works by 35,000 artists. In addition to all forms of Contemporary, Modern, and Fine Art, artnet Galleries also offers Decorative Art and Design objects from the 1st century BC to the present. artnet Auction House Partnerships are the ideal way for an auction house to gain more international exposure for their auctions and drive a high volume of potential buyers directly to their own sites. With Auction House Partnerships, auction houses have the flexibility to post complete or partial sales on artnet, with the option of linking every lot on artnet back to the same lot in their own online catalogue. All lots are linked to artnet's upcoming auctions calendar and rank high in artnet and Google search results. Auction House Partnerships provide reporting and direct traffic from artnet to the auction house site.

The artnet Price Database, which is comprised of the artnet Price Database Fine Art and Design and the artnet Price Database Decorative Art, is an online database with more than 8 million color-illustrated auction results from more than 1,600 leading international auction houses. This product gives price transparency to an otherwise secretive market. Subscribers to the Price Database Fine Art and Design and the Price Database Decorative Art receive access to upcoming auction information, recent auction results, and auction records dating back to 1985, as well as the most up-to-date and impartial appraisal value for artworks they would like to buy or sell. Subscribers to the Price Database include appraisers, dealers, auctioneers, financiers, and private and government institutions (including the IRS and the FBI). Most importantly, it provides an illustrated "blue book" for private collectors with which to appraise the works they own, and measure opportunities at upcoming auctions or on the dealer market. Dealers and auctioneers also use comparable sales from the Price Database to support the valuation and sale of important works of art.

artnet Market Alert, a derivative of the artnet Price Database, informs subscribers via email when artworks by their favorite artists come up at auction, are featured in upcoming events, or are offered in artnet Galleries or on artnet Auctions.

artnet Analytics, which was launched in the spring of 2012, provides and visualizes art market information, and allows users to monitor the performance of artists and art movements, customer-specified groups of artworks, and art categories, with the option to compare market performance against financial indices, such as the Dow Jones or the S&P 500, or against other financial investments.

With artnet Auctions, artnet has become a business-to-customer transaction platform that also acts as an integrated information resource. The main advantages for buyers and sellers on artnet Auctions are the attractive prices and fast turnaround, which can be finalized in a few weeks, compared to the six months or a year required by brick-and-mortar art auctioneers. artnet Auctions routinely offers works by blue-chip Modern and Contemporary artists that sell in the five- and six-figure range.

artnet Monographs is an online art library developed in close collaboration with artists, estates, foundations, and art galleries. This growing resource of Modern and Contemporary artist monographs features comprehensive artwork selections and 148 biographies. artnet Monographs can be viewed free of charge on the artnet website.

Objectives and Strategies

artnet will remain faithful to its founding mission to increase transparency in the art market. Our goal is to maintain our leadership position in the increasingly competitive online art market, where we have operated for 25 years. artnet's management team is convinced that constant product improvements and innovations, such as the new platform artnet News, which was launched in February 2014, will continue to strengthen our brand.

Control System

Following the implementation of extensive restructuring measures in the previous year, artnet's management has been focused on achieving a sustainable increase in the Group's value. For the valuebased management of the Group, as well as the management of the individual segments, a standardized controlling and reporting system has been put into place. For the individual segments, the earnings before interest and taxes (EBIT) were compared to budget and numbers from previous years and determined as key financial data. Regarding the liquidity position, the Group focuses on the availability of liquid assets since the Group does not, as of yet, have credit lines.

Furthermore, leading economic indicators that may impact the business are monitored and evaluated. For artnet Galleries and the artnet Price Database, these indicators include the number of contract terminations and renewals. For artnet Auctions, the number of lots online, the number of lots sold, and average prices are the measured indicators. Another essential aspect of the management control system is the monitoring of ongoing traffic, in which important areas of web traffic are evaluated and analyzed. artnet monitors site visits on a daily, weekly, and monthly basis to obtain information about the development of each individual segment. This analysis allows us to respond effectively to changes.

Research and Development

The artnet website forms the foundation of the Group's products. It is of utmost importance to keep pace with the latest technologies, and to develop new products that increase benefits for customers. In this regard, our developers use software based on Microsoft technology, which gives them the flexibility required to adapt currently running applications to our customers' changing needs. In 2013, development activities were primarily related to the redesign of the website, which is expected to be released in the first quarter of 2014. During the reporting period, external development costs for the redesign, in the amount of 263,000 EUR, were the only costs to be capitalized as intangible assets.

2. Economic Report

2.1 Macroeconomic and Industry Conditions

Global Economic Situation

The development of world trade gained momentum over the course of 2013, and economic output increased by 2.4% worldwide. For the first time in four years, industrialized countries were the driving force behind this positive economic trend. In the United States, the debt reduction was further advanced in the private sector. This development was supported by an expansionary monetary policy of the Federal Reserve Bank. Europe's economy emerged from an ongoing recession in the second half of the year, and the uncertainty around the continued existence of the eurozone decreased slightly. Nevertheless, the countries affected by the economic crisis still struggle to compete due to weak demand and high unemployment. As a result of the easing of fiscal policies by the European Central Bank, refinancing conditions for the countries involved were eased significantly.

Although the outlook for industrialized countries in 2014 is particularly positive, growth could be jeopardized by the continuing weak condition of the economy of some member states in the eurozone, and by the possibility of rising interest rates due to a more stringent monetary policy of the central banks.

Art Market Development

2013 was a record year for the art market. The global Fine Art market grew by 5% over the previous year in terms of value sold, earning over 14.4 billion USD (10.6 billion EUR). This increase is even more remarkable considering the sluggish performance of the art market in China (-3%) and the United Kingdom (-4%). In particular, 2013 was marked by an extraordinary fourth quarter. In the fourth quarter, there was an increase of 20% over the same period last year. The United States (+27%), China (+13%), the United Kingdom (+11%), and France (+8%) achieved record results in the final months of the year. Of the top 10 works sold in 2013, seven were sold in the fourth quarter, led by the record-setting sale of Francis Bacon's Three Studies of Lucian Freud (1969), selling for 142.4 million USD at Christie's Post-War and Contemporary auction in New York. The second-highest selling lot was Andy Warhol's Silver Car Crash (Double disaster) (105.4 million USD), and the third-highest selling lot was Jeff Koons's Balloon Dog (Orange) (58.4 million USD). In 2013, a total of 113 artworks surpassed the 10-million USD mark, an increase of 10% compared to 2012, and a new auction record. Overall, these artworks achieved a total of 2.6 billion USD, which is equivalent to 18% of art sold worldwide in terms of value.

2.2 Significant Events in the 2013 Fiscal Year

In 2013, in an increasingly competitive market environment, artnet was tasked with restoring consumer and shareholder confidence following the major challenges of the previous year, which included restructuring, austerity measures, and a hostile takeover attempt.

With a considerably leaner cost structure, and continuous improvements to our products, the number of gallery members has stabilized. The necessary increase in subscription prices caused a temporary drop in this segment in the number of new members to the Price Database, but sales growth in US dollars has been achieved.

With the introduction of a more attractive commission model for high-priced artworks for artnet Auctions, as well as the listing fee implemented in July, the average price for offered and sold lots has increased.

We are pleased to announce that, over the summer, the Company's founder, Hans Neuendorf, and the author and curator Piroschka Dossi, have accepted positions as members of the Supervisory Board of artnet AG. Their extensive experience and knowledge of the international art scene make them welcome additions to the supervisory board.

We are excited to unveil a comprehensive redesign of our website, which we believe will mark a significant step forward in strengthening our brand. The new site will lead to an improved user experience, leverage traffic for our products, and engage visitors through a more dynamic interface, in line with our tradition of groundbreaking innovation. The completion of this project was scheduled for the end of 2013, but was postponed due to the launch of artnet News, and an internal change in leadership. artnet News is a 24-hour, online, global, art market newswire, with information about latest trends, events, and people in the art world. Utilizing information from the artnet Price Database, the gallery network, and the online auction platform, artnet Auctions, artnet News brings together the art industry's top writers who report on art world events from around the globe.

In 2013, artnet entered into a strategic partnership with the China Association of Auctioneers (CAA), the only national association for the auction industry in China. Through this partnership, the Chinese market was evaluated with a renewed emphasis on quality and accuracy of data, with the goal of creating a new standard of transparency. In December, artnet and CAA collaborated on the 2012 Global Chinese Antiques and Art Auction Market Annual Statistical Report, which took an in-depth look at the Chinese Art and Antiques market in 2012.

2.3 Result of Operations, Financial Position, and Net Assets

Result of Operations

Group earnings were mainly influenced by the austerity and restructuring measures initiated in 2012, the full effects of which were not felt until the 2013. Thus, the cost of sales and operating expenses were significantly reduced; the revenue in euros decreased due to exchange rate effects. In US dollars, the main currency of the Group, the total revenue remained at a constant level compared to 2012. Selling and marketing expenses decreased due to continuous cost reductions compared to the previous year, which was also the case for general administrative costs. The extensive work on the redesign of the website, as well as the continuous product optimization, resulted in an increase in expenses for product development. Overall, the total earnings compared to the same period last year increased significantly, and ultimately produced a slightly positive group result. The total earnings in 2012 were affected by expenses incurred by extraordinary impairments, and the loss coming from the discontinued operation, artnet Magazine. In the 2013 fiscal year, we successfully returned to profitability as planned, despite the fact that the expected sales growth was not realized. Financial stability was achieved by generating a positive operating cash flow, beginning in the second quarter of 2013. Therefore, management deemed the 2013 fiscal year, with respect to the earnings and liquidity trends, satisfactory.

Revenue Growth

In terms of revenue growth, 2013 was a year of consolidation. Even though revenue decreased in euros by 4%, attributable to exchange rate effects, it remained almost constant compared to the previous year in US dollars, the currency in which the Group's main business activities are processed. The predicted solid revenue growth in 2013 was not achieved. artnet is dealing with increasing competitive pressure for all products with ongoing product improvements and more personalized customer service.

artnet Galleries, the artnet Price Database Fine Art and Design, the artnet Price Database Decorative Art, and artnet Auctions generate approximately 92% of artnet's revenue. The Price Database Fine Art and Design and the Price Database Decorative Art source a broad range of data, offering reliable, up-to-the-minute price information, while artnet Galleries promotes artworks and other inventory available in galleries and auction houses around the world. The online platform artnet Auctions allows real-time transactions; the offered artworks come primarily from gallery members and art dealers.

artnet Auctions was unable to match the strong growth of previous years. In 2013, the product's revenue reached 2,099,000 EUR (2,787,000 USD), a decrease of 11% in euros (8% in US dollars) compared to the revenue in 2012 (2,367,000 EUR/3,042,000 USD). Although the average buyer and seller premium increased from 20% in the previous year to 23%, the average lot prices decreased in 2013 due to weak first and second quarters, from 7,885 USD to 6,954 USD. The implementation of a new commission model, particularly in the second half of the year, resulted, as expected, in a slight decrease in the number of transactions by approximately 8%. The stated goal of a step-by-step increase in the quality and value of the offered artworks was achieved through a new pricing structure, and will continue to be pursued in the future. In 2013, we could not meet the forecast of a double-digit revenue.

For artnet Galleries, revenue in US dollars decreased slightly, by 14,000 USD to 6,303,000 USD. In euros, revenue decreased more significantly due to currency exchange effects, by 168,000 EUR to 4,748,000 EUR. In previous years, artnet Galleries experienced a sharp decline in the number of memberships. However, in 2013, this decline was almost completely stopped due to improvements in customer service, as well as adjustments made to offered services. During the year, the number of gallery members decreased by only 76, compared to approximately 200 the previous year. The adjustment of service packages and an improved client services team lead to the lowest cancelation rate since 2008. Through gradual price adjustments and upgrades to client packages, it was possible to increase the average price paid and compensate for the drop in sales due to a declining number of memberships. The ongoing development of Auction House Partnerships was part of this positive trend. With improved customer service, the new design of the website, which is expected to be launched in the first quarter of 2014, and more marketing and sales initiatives, the popularity of this product will continue to grow.

Revenue for the artnet Price Database increased by 179,000 USD, or 3%, to 6,763,000 USD. In Euros, however, the revenue remained stable at 5,094,000 EUR due to currency exchange effects. In 2013, we maintained our leadership position in the market due to the accuracy, continuity, and expansion of our database. Many competitors offer similar services at lower costs, or free of charge, but those services are generally of much lower quality in comparison with our product. We came very close to achieving the forecasted increase in revenue for this core business area. artnet Analytics, which was launched in May 2012, contributed, to a lesser extent, to this result, and remained significantly below expectations. This product was not better marketed in 2013 due to an internal change in leadership, resulting in a weaker focus. In 2014, a relaunch of artnet Analytics, in conjunction with the redesign of the website, is planned, which we hope will lead to a significant increase in the level of awareness of this product.

Revenue for artnet Advertising fell by 2% in US dollars (and by around 5% in euros), from 1,391,000 USD (1,082,000 EUR) to 1,365,000 USD (1,028,000 EUR). Due to structural changes in marketing and sales, revenue was largely maintained compared to the previous year. However, the announcement of the redesigned website proved to be counterproductive in generating sales revenue. Therefore, the prediction of a marked increase in sales in 2013 was not met. Due to enhanced and targeted sales activities and more advertising space available on the redesigned site, coupled with the launch of artnet News, which will bring in more traffic, a marked revenue growth is expected.

Changes in Costs and Results

Gross profit in US dollars remained almost the same compared to the previous year, at 9,594,000 USD. In euros, gross profit decreased by 249,000 EUR, due to currency exchange effects, to 7,226,000 EUR. Essentially, the gross profit was influenced by moderate sales development. In US dollars, total sales were slightly below those of the previous year, decreasing by 116,000 USD. In euros, a decline of 4%, or 519,000 EUR, was recorded due to currency exchange effects. This was offset by a decrease in costs of sales compared to the same period in the previous year, by 104,000 USD (-1%), or 270,000 EUR (-4%), which was mainly a result of lower personnel expenses for artnet Auctions, in addition to lower depreciation. Through improvements made to administrative procedures, it was possible to cut positions. Furthermore, the position of the vice president of artnet Auctions remained unfilled in the second half of 2013. Due to the expiration of the useful life of hardware and software at the end of 2012, and fewer purchases made during the 2013 fiscal year, the write-offs were lower than the previous year.

Compared to the previous year, expenses for sales and marketing were reduced by 14% in euros (11% in US dollars). The budget for the marketing department was lower, and personnel costs were substantially lowered due to the consolidation of management functions for sales and marketing. Personnel expenses increased significantly for product development, in particular, for the website redesign. Administrative costs decreased compared to the previous year by 16% in euros (13% in US dollars). The costs for the previous year were largely influenced by the restructuring and the relocation to the new offices in New York.

Without the exceptional costs of restructuring, or the one-time charge coming from an extraordinary impairment for the Analytics product, earnings from continued operations improved significantly compared to the previous year. The optimized cost structure in 2013, which was realized by the reorganization started in 2012, together with the aforementioned discontinuation of exceptional charges in the previous year, lead to a better result of -1,399,000 EUR (-1,821,000 USD); compared to the previous year, earnings increased by 1,439,000 EUR (1,874,000 USD), to 40,000 EUR (54,000 USD).

Development of Segments

The improved cost structure had a positive impact on all business segments. In the 2013 fiscal year, earnings for artnet Galleries was 971,000 EUR (1,289,000 USD), a significant improvement of 621,000 EUR (840,000 USD) compared to the previous year, when it was 350,000 EUR (449,000 USD). This increase in earnings was achieved despite constant revenues in US dollars (a slight decrease of 3% in euros) due to lower costs of sales, and lower operating expenses. The segment artnet Price Database also achieved a significant increase in earnings. After a negative result of -479,000 EUR (-616,000 USD) was reported in the previous year, in the current fiscal year, a profit of 479,000 EUR (624,000 USD) was once again achieved. The result of the previous year was negatively affected by extraordinary depreciation for the newly launched artnet Analytics. The earnings of artnet Advertising improved with consistent revenue in US dollars (a slight decrease of 5% in euros), from 99,000 EUR (128,000 USD) in the previous year to 236,000 EUR (313,000 USD). Only the segment artnet Auctions reported a decreased result compared to the previous year by 268,000 EUR (419,000 USD), from -1,368,000 EUR (-1,753,000 USD) to -1,636,000 EUR (-2,172,000 USD). Reduced revenue and increased marketing expenses have negatively affected the segment's results.

Group Profit or Loss

In total, after a significant loss of 2,427,000 EUR (3,142,000 USD) in the previous year, a slightly positive net income of 40,000 EUR (54,000 USD) was achieved. Thus, the net result increased to 2,467,000 EUR (3,196,000 USD).

In 2013, the measures implemented and the investments made in 2012 led to a significant improvement in results. Due to the discontinuation of the magazine segment, expenses in the amount of 1,028,000 EUR (1,321,000 USD) were omitted compared to the previous year.

The continuous development of our products, combined with the cost-consciousness achieved in 2013, will be the basis for future growth and profitability.

The undiluted earnings per share were 0.01 EUR (0.01 USD), compared to -0.44 EUR (-0.57 USD) in the same period of the previous year.

Currency Conversion

Currency conversion in the consolidated statement of comprehensive income is based on the average exchange rate for the period from January 1 to December 31, 2013 and 2012, respectively. In 2013, the average exchange rate was 0.753 EUR/USD, compared to 0.778 EUR/USD in the 2012 fiscal year. This corresponds to an appreciation of 4% in the average exchange rate for the euro. Currency conversion for the balance sheet is based on the exchange rate at the end of the period. As of December 31, 2013, the rate was 0.726 EUR/USD, compared to 0.757 EUR/USD on December 31, 2012. This corresponds to an appreciation of 4%.

artnet is subject to exchange rate fluctuations because it invoices in euros, US dollars, and British pounds, but conducts most of its business in the United States. The Group works to reduce its exposure to differences in the exchange rates by billing European customers in euros and British customers in British pounds, and by paying vendors in the same currency with these cash funds.

Financial Position

In line with the improvement in earnings, cash flow development in 2013 was also decidedly positive. In the previous year, the artnet Group's cash flow from operating activities was negative, at -457,000 EUR, as compared to the positive operating cash flow in 2013, at 827,000 EUR. Operating cash flow from the previous year was additionally debited by the cash outflow of the discontinued operation, artnet Magazine in the amount of 953,000 EUR, and additionally by severance payments for employees from other departments. In 2013, the operating cash flow was positively impacted by lower costs of sales, cash inflows from receivables, higher customer advance payments, and a received payment of tax receivables from prior years. However, higher expenses for product development, and the reduction of liabilities for goods and services, had a negative impact on cash flow from operating activities.

In 2013, cash flow from investment activities of the Group was -304,000 EUR, as compared to -675,000 EUR in 2012. Investments in intangible assets in the amount of 292,000 EUR were minted in the year under review due to external development work, which cost 263,000 EUR, in conjunction with the website redesign. The new site is estimated to be completed during the first quarter of 2014. In 2013, investments in fixed assets were required, only to a limited extent, in the amount of 12,000 EUR. Due to the office relocation in New York, the investments in the previous year were much higher, totaling 339,000 EUR.

In the 2013 fiscal year, the cash flow for financing activities was 251,000 EUR, compared to -221,000 EUR in the previous year, and was significantly influenced by the shareholder loan in the amount of 500,000 EUR, granted in March 2013. The loan was a precautionary measure, taken to ensure financial stability due to a looming negative cash flow from operating activities in the first quarter of 2013. Beginning in the second quarter, the artnet Group generated a positive cash flow, and the provided loan was not needed. The inflow of liquid assets in financing activities as a result of the loan was offset, as in the previous year, by amounts paid for the redemption of liabilities of finance lease agreements for office equipment and hardware and software, in the amount of -249,000 EUR in 2013.

Total cash and cash equivalents increased, from 753,000 EUR (995,000 USD) as of December 31, 2012, to 1,529,000 EUR (2,105,000 USD) as of December 31, 2013. Cash outflow for investments were compensated due to the positive operating cash flow and the positive cash flow from financing activities.

The cash investment policy for the Group is conservative and based on short-term investments. This policy allows all cash to be liquid and available. As of December 31, 2013, the liquidity per share totaled 0.28 EUR (0.38 USD) based on an average of 5,552,986 shares in circulation, compared to 0.14 EUR (0.18 USD) as of December 31, 2012.

Financial Status

Consolidated total assets amounted to 6,039,000 EUR (8,315,000 USD) on December 31, 2013, compared to 6,009,000 EUR (7,944,000 USD) as of December 31, 2012, representing an increase of 1% in euros (5% in US dollars). This development is mainly the result of an increase in cash and cash equivalents of the Group.

Accounts receivable decreased by 294,000 EUR (353,000 USD), to 630,000 EUR (868,000 USD). Receivables were reduced by an improved claims management and dunning process in combination with increased credit card payments and almostconstant revenues. The decline was also influenced by the gradual clarification and correction of bad debts.

Other current assets decreased by 262,000 EUR (330,000 USD), from 558,000 EUR (738,000 USD) as of December 31, 2012, to 296,000 EUR (408,000 USD). This decrease was mainly caused by the refund of a VAT receivable for previous years by the tax office.

Fixed assets, which are comprised of intangible and tangible assets, decreased by 127,000 EUR (62,000 USD), to 1,918,000 EUR (2,640,000 USD). The Group's non-current assets are primarily held in US dollars. This decrease was due to scheduled depreciation, which was partly offset by the capitalization of development costs for the redesign of the website in the amount of 263,000 EUR (363,000 USD), as well as necessary hardware and software renewals in the amount of 115,000 EUR (172,000 USD).

The deferred tax assets, in particular, for anticipated future tax benefits coming from tax losses carried forward at Artnet Worldwide Corp., have been set in the unchanged amount of 1,908,000 USD. Due to a positive tax income, net loss carryovers have already been used in 2013, and increasing tax profits are anticipated for future financial periods. The amount of deferred tax assets is reported in euros, and increased by 57,000 EUR, to 1,386,000 EUR, due only to exchange rate effects.

Total current liabilities decreased from 3,072,000 EUR (4,060,000 USD) as of December 31, 2012, by 222,000 EUR, to 2,850,000 EUR (by 137,000 USD, to 3,923,000 USD). This decrease was due largely to the reduction of accounts payable and accruals and other liabilities. Due to the successive changeovers of customer contracts to annual prepayments, the deferred revenue increased. As a result of a new finance lease agreement for necessary software licenses, finance lease obligations remained largely consistent, despite scheduled repayments.

Non-current liabilities increased due to the shareholder's loan, made in March 2013, of 500,000 EUR plus 4% interest. The noncurrent liabilities resulting from finance lease agreements were reduced by scheduled repayments. In 2013, the amortization of rental-free periods related to the rental agreement signed in 2012 for the new offices in the Woolworth Building over the term of the rental agreement has increased as scheduled.

The artnet Group's consolidated equity was 2,214,000 EUR (3,048,000 USD) as of December 31, 2013, compared to 2,368,000 EUR (3,131,000 USD) as of December 31, 2012. This apparent decrease is caused solely by the exchange rate, as, in 2013, a positive result was achieved.

The artnet Price Database constitutes an intangible asset that has been developed by gathering auction information, with results dating back to 1985. This valuable asset to the Group has not been attributed full earnings recognition on the balance sheet due to accounting rules. Balance sheet assets would be substantially increased if this recognition were allowed by law.

Non-Financial Performance Indicators

Employees

As of December 31, 2013, there were 106 full-time employees in the Group, versus 118 in the previous year. Additionally, the artnet Group had seven part-time employees in 2013, as compared to 10 in the previous year. In sales and other departments, the Group had six freelance employees, compared to 10 freelance employees in 2012.

Personal expenses totaled 8,127,000 EUR (10,790,000 USD), compared to 7,929,000 EUR (10,190,000 USD) in the previous year. While personnel costs in terms of sales were reduced, costs in sales and marketing rose in general due to new hires. In terms of product development, expenses increased due to higher consulting expenses in connection with the redesign. In addition, no internal development costs were capitalized, as opposed to the previous year.

Other Non-Financial Performance Indicators

The quality of our services and the associated satisfaction of artnet Galleries and Price Database customers are of the utmost importance to our business. Criticism and reasons for contract cancellations are evaluated, for quality assurance purposes, through customer surveys. This allows us to respond to future cancellations in a timely and targeted manner.

For artnet Galleries, monitoring and controlling indicators include the number of contract cancellations and the number of new contracts. In 2013, cancellations were reduced by approximately 9%; new contracts increased by 40%.

For our subscription products, we monitor overall volume, and, in 2013, volume decreased by 6% compared to 2012; this was lower than predicted due to price increases by as much as 50%. We also monitor the revenue per user; thanks to the increase in price, revenue for the Price Database Fine Art and Design increased by 13%, and for the Price Database Decorative Art by 17%.

For the monitoring and controlling of artnet Auctions, the number of sold lots and their average prices are important indicators. Compared to 2012, both of these values declined. The average price decreased by 12%, and the number of sold lots by 8%. In particular, with the implementation of a new commission model, the average prices in the second half of the year increased by 14% over the same period last year; compared to the first half of the year, prices increased by 4%. The number of sold lots decreased as expected due to the implementation of the new commission model in the second half of the year.

The ongoing monitoring of web traffic is of paramount importance for artnet as an online service provider. Different figures for the existing domains are recorded and evaluated daily. While the number of unique visitors decreased by 21% after the closing of artnet Magazine, in 2014, the launch of artnet News will remedy this.

3. Disclosure of Takeover Provisions

Composition of Capital Stock

artnet AG's fully paid-in capital stock, as of December 31, 2013, totaled an unchanged 5,631,067 EUR, and comprises 5,631,067 no-par value bearer shares based on a notional common stock of 1.00 EUR per share. The Company's 5,631,067 registered shares were traded on the stock market for the first time on September 26, 2011.

Voting Limits or Assignment Limits

There are no restrictions on voting rights or transfer for these shares.

Direct or Indirect Shareholdings which Exceed 10% of Voting Rights

Direct or indirect shareholdings which exceed 10% of voting rights for artnet AG are held by Galerie Neuendorf AG, Berlin, at 27.06%, as of December 31, 2013.

Shareholders with Privileges

There are no shareholders with privileges.

Voting Rights Monitoring in the Event of Employee Holdings Any employee with holdings in artnet AG is obliged to exercise his or her control rights directly.

Appointment and Dismissal of Members of the Executive Board, Amendments

Members of the Supervisory Board are appointed and dismissed according to §§ 84, 85 of the German Stock Corporation Act (AktG). The amendments were made in accordance with §§ 133, 179 AktG.

Authorization of the Executive Board to Issue and Repurchase Shares

The Shareholder's Meeting of artnet AG on July 15, 2009, authorized the Management Board, with the approval of the Supervisory Board, to increase the capital stock by up to 2,800,000 EUR before July 14, 2014, through the issue of 2,800,000 new no-par value bearer shares in exchange for cash contributions, or contributions in kind (Authorized Capital 2009/I). No shares were issued from the authorized capital during the fiscal year, or in prior years.

The capital stock was increased by 560,000 EUR through the issue of up to 560,000 new no-par value bearer shares, which can be issued to members of the Company's Management Board, members of the management of affiliated entities, and employees of artnet AG or its affiliated entities (Conditional Capital 2009/I) by way of a resolution by the General Meeting on July 15, 2009. The conditional capital increase serves to grant subscription rights to the members of artnet AG's Management Board, members of affiliated companies (§ 15 of the German Stock Corporation Act), employees of artnet AG, and employees of affiliated companies, in line with the issuing authorization for the Management Board from the General Meeting on July 15, 2009.

The new shares shall carry dividend rights from the beginning of the fiscal year in which they are issued. The conditional capital increase is only performed to the extent that subscription rights are exercised.

The Shareholders' Meeting of artnet AG on July 14, 2010, authorized the Management Board, with the approval of the Supervisory Board, to acquire its own shares of up to a maximum of 10% of the current capital stock by July 13, 2015. The acquired shares may not account for more than 10% of the share capital together with the other shares held by the Company, or due to the Company, according to § 71a. et seq. of the German Stock Corporation Act (AktG). This time limit only applies to the acquisition of the shares and not to holding them.

4. Declaration of Conformity with the German Corporate Governance Cods of § 161 AktG

The current Declaration of Compliance with the German Corporate Governance Code according to § 161 of the German Stock Corporation act (AktG) can be viewed online at www.artnet.com/investor-relations/declaration-of-compliance.

5. Remuneration Report

This remuneration report is based on the recommendations of the German Corporate Governance Code. It summarizes the principles that apply to defining the remuneration for artnet AG's Management Board, and explains the amount and structure of the Management Board's remuneration. In addition, it describes the principles behind, and amount of, remuneration for the Supervisory Board. Furthermore, the remuneration report includes information that also forms part of the notes to the consolidated financial statements according to § 314 of the German Commercial Code (HGB), or the Group management according to § 315 of the German Commercial Code (HGB).

a) Remuneration of the Management Board

The Supervisory Board is responsible for setting the remuneration of the Management Board. Setting remuneration for artnet AG's Management Board is based on the Company's size and activities, its economic and financial position, and the amount and structure of remuneration for the Management Board at comparable companies. Remuneration must be set such that it is competitive in the international market for highly qualified executives, and that it offers an incentive for additional work.

Remuneration for the sole member of the Management Board, Jacob Pabst, comprised of fixed basic remuneration and current short-term incentive, is described below:

Fixed basic remuneration: The fixed remuneration in the amount of 25,000 USD (300,000 USD p.a.) is paid out as a monthly salary. In addition, the Company continues to pay health insurance in the amount of 450 EUR per month, and has taken out accident insurance with cover for invalidity (300,000 EUR) and death (150,000 EUR). In the 2013 fiscal year, the fixed cash remuneration for the Management Board member, Jacob Pabst, totaled 231,000 EUR (307,000 USD).

Short-term variable incentive: In addition to the fixed basic remuneration, the Management Board receives a shortterm variable remuneration component. The amount of this component is at the discretion of the Supervisory Board. The basis for calculation of the variable component is 100,000 USD. The remuneration should not exceed 200,000 USD. The amount of the short-term variable remuneration component is dependent on the degree to which each of the following events takes place:

1. Share Price Performance

In the event that the share price in the fiscal year outperforms the SDAX by 10% to 15%, the variable remuneration totals 100% of one-third. If the share price is better than 15%, the remuneration increases on a straight-line basis to a maximum of 150% of one-third. In the event that the share price in the fiscal year outperforms the SDAX by 5% to 10%, the variable remuneration totals 75% of one-third. If the share price performs in parallel to the SDAX, remuneration totals 50% of one-third. In contrast, if the Company's share price underperforms the SDAX, one-third of the variance remuneration is not paid.

2. Revenue Development

In the event that the Company's revenues in the fiscal year increase by 5%, the variable remuneration totals 50% of onethird. If revenues increase by 5% to 10%, 100% of one-third of the variance remuneration is paid. If revenues are 10% to 15% higher than in the previous year, variance remuneration totals 125% of one-third. If revenues increase by more than 15%, 150% of one-third of the variable remuneration is paid. If revenue does not increase, one-third of the variance remuneration is not paid.

3. Development of Earnings (EBITDA)

If the Company records profits (EBITDA) of 1 million USD, 100% of one-third of the variance remuneration is paid. If the Company does not record any profits but the cash flow from operating activities is positive, 50% of one-third of the variance remuneration is paid. If EBITDA totals 2 million USD, 150% of one-third of the variance remuneration is paid. If the Company does not record positive EBITDA in the year under review, onethird of the variable remuneration is not paid.

In the 2013 fiscal year, the operating cash flow of the Company was positive. Thus, the conditions of the third part of the variable compensation (development of earnings) are partially met. The resultant claim is 16,667 USD. The sole Management Board member, Jacob Pabst, renounced the variable remuneration for the 2013 fiscal year.

In the event that the employment relationship ends prematurely, the employment agreement with the board member does not include an express agreement on compensation. However, compensation may be paid based on an individual cancellation agreement that may be reached.

b) Remuneration of the Supervisory Board

The remuneration of the Supervisory Board is defined by the General Meeting based on a proposal by the Management Board and the Supervisory Board. It is regulated in the articles of incorporation.

Remuneration of the Supervisory Board is based on the Company's size, the tasks and responsibilities of the members of the Supervisory Board, and the Company's economic situation and performance.

The members of the Supervisory Board receive a fixed remuneration every year. The chairman of the Supervisory Board receives 50,000 EUR, the deputy chairman receives 37,500 EUR, and the third member of the Supervisory Board receives 25,000 EUR.

6. Risk and Opportunity Report

Risk Report

Risk Management

The artnet Group has introduced a risk management system to identify and constantly monitor the Group's operating and financial risks. This system, which aims to alleviate the impact of any unforeseen events, is largely comprised of the following four components:

• 1) Finance, which monitors the actual results of business activities, provides forecast/actual comparisons as part of monthly reporting, and provides comparisons with the previous year
• 2) IT infrastructure, which ensures and monitors the 24/7 availability and functionality of the website
• 3) Project management, which monitors the development and progress of the individual technology projects
• 4) Ongoing traffic monitoring, which evaluates and tracks the key areas of web traffic

The risk management system ensures that critical information is passed on to the Group's Management Board directly and in good time.

Early Warning System Ensures Identification of Potential Risks

As a rule, in order to measure, monitor, and control its business growth and risks, the artnet Group uses a spreadsheet-based management and control system, which is mostly based on financial accounting data. The risk inventory and handbook, which are developed based on this document, list the key existing threats and allocate levels of responsibility within the artnet Group. Existing risk potential is observed on an ongoing basis; suitable activities to limit risks are put in place whenever possible. The risk management system includes regular internal reporting on the course of business, current market developments, and customer relationships, as well as a group-wide budget process, which deals with operating risks and changes in the business environment. This process is supported by regular analysis of the market and competition.

Dealing with Major Potential Risks

Operating Management is directly responsible for the early recognition, control, and communication of risks. As a result, the artnet Group can react to potential risks in a comprehensive manner. Risks policy is geared to generate sustained growth and secure enterprise value over the long term, and to avoid any reasonable risks.

Accounting-Related Internal Control System with Regard to Group Accounting Process

The Management Board has set up an internal control system for the wide range of organizational, technical, and economic workflows in the Group. A key competency is the principle of the segregation of duties, which aims to ensure that executive (e.g. sales) and booking (e.g., IT administration) are not united in the same place. The principle of dual control ensures that no material workflows go uncontrolled.

Expectations of the Management Board are defined and documented by regular, targeted agreements. The implemented risk management system ensures that critical information and data will pass directly to the management.

The preparation of the consolidated financial statement was made by the finance director of Artnet Worldwide Corp., who has many years of experience and special expertise in consolidation issues.

Risks

The Group has identified the following risks:

External Risks

Art Market Economic Trends

artnet is subject to fluctuations in the art market. This market is impacted by conditions in domestic and global economies. The extent to which these developments will also impact the art market in the future is still unclear.

Operating Risks

IT System Infrastructure

Interruptions to the website's functions can reduce artnet's ongoing revenues and profits, and can also possibly impact future revenues and earnings.

Frequent or sustained interruptions to service can give existing or interested users cause to believe that the Group's systems are not reliable. This can have a negative impact on the Group's image and reputation. Any such interruption increases the work required in the IT department, which, in turn, leads to a delay in launching new functions and services. Even though the Group's systems have been designed so that periods of interruption, in the event of a power outage or catastrophe, are low, they remain susceptible to damage or disruption from flooding, fire, and power outages, or interruptions to telecommunications services due to terrorist attacks, computer viruses, or other unforeseen events. artnet's web servers are located in an extremely secure external facility.

Product Development

artnet's future success depends on how fast the Group can adjust to technological changes and new industry standards. The Management Board intends to further improve the functionality and reliability of the website, and to launch new products that benefit existing and potential customers. The Group observes market trends and focuses on product developments. As a result, artnet has reinforced its development team over the past few years. The staff increases will allow artnet to meet its customers' growing needs, and to increase growth potential by launching new products.

There is a risk that product innovations and further product developments, such as artnet Analytics or the news service, artnet News, will not be accepted as quickly as planned, and that the associated goals will not be met. In the case of achieving lower revenue, artnet's results of operations would be impacted by increasing costs for product developments and higher ongoing costs.

There are risks in product development due to a growing number of Internet startups entering the market, which are directly competing with one or more of our product segments.

Traffic to the Website

Website visits (traffic) are of key importance to artnet. A downturn in visitor numbers could reduce revenues for all product lines. artnet monitors traffic on a daily, weekly, and monthly basis in order to ensure that this meets expectations. To further increase traffic, the Group also needs larger financial involvement for advertising and marketing. To the extent possible, artnet monitors visitor figures and revenue generated via the website, and compares these with the corresponding advertising and marketing expenses, in order to assess the success of advertising and marketing activities.

Legal Risks

Trademark Laws

artnet protects itself through the trademark of the artnet name in the Group's key market areas, in particular, the United States, Germany, France, and the European Union. Trademark infringements are costly and are subject to review from national authorities, which can result in a negative outcome for the Group. Additionally, the Group must defend itself against copyright and other legal claims, which can also result in a negative outcome for the Group.

Protection of Customer Data

artnet stores customer data in compliance with all current laws and regulations. However, if a third party were to succeed in bypassing the artnet security measures and obtain customer information, artnet could be liable for any damages incurred.

Financial Risk

Foreign Currency Fluctuation, Default, and Liquidity Risks

artnet conducts a portion of its business outside of the United States, thereby facing exposure to adverse movements in currency exchange rates. As exchange rates are subject to fluctuation, revenues and operating expenses may differ substantially from expectations. artnet does not currently engage in exchange rate hedging against these risks. Instead, the Group accepts payments from customers in euros and British pounds, and pays their suppliers in Europe in these currencies. This reduces the exchange rate risks.

artnet has no significant concentration of default risk for financial assets because the exposure is averaged over a large number of customers, including individuals and entities dealing in the Fine Art market. Nevertheless, the global economic downturn could negatively influence the solvency of the Group's customers, leading to an increase in the average credit period, or, at worst, leading to an increase in customer default. This would negatively affect the Group's earnings, as well as its financial position; artnet tries to counter such risks by agreeing to upfront payments with customers whenever possible.

As the artnet Group only has interest-bearing debts in the form of finance leases and shareholder loans, the risk of changes to interest rates is to be regarded as insignificant. The artnet Group does not use further financial derivative instruments to protect risks, as it does not appear to make economic sense in terms of the manageable currency risks and insignificant interest rate risks.

Other Risks

Key Employees

The market for skilled and motivated managers is highly competitive. As a result of artnet's relatively small size, the loss of employees in key positions could have a negative impact.

There is a possibility that the above list does not outline all risks to which artnet is exposed. Unrecognized and unreported risks could arise, negatively impacting business performance. The Group continues to monitor its environment and review the effectiveness of the risk management systems. Despite continuous adjustments to the risk management system, it is not possible to entirely quantify the probability of risks occurring or their financial impact.

Opportunities

The online art market is characterized by a dynamic environment, with constant opportunities for artnet. The size of the Company and short decision-making processes allow us to respond quickly to current circumstances and reversals, weighing the potential risks. Opportunities may arise from the internal or external environment.

The development of the international art market is closely linked to the economy of industrial countries. Changes in economic circumstances will have an impact on our business activities. If the global economy, and in particular the European economy, recovers more sustainably than expected, this could have a positive effect on our earnings.

The confidence of buyers and sellers in the Internet as a transaction platform is growing steadily, including confidence in transactions for high-priced artworks. In 2013, the online sector of the art market grew by approximately 20%. We are expecting a similar development for the next year. If this sector is growing faster than currently expected, we could surpass our midterm prospects, particularly for the segment artnet Auctions.

The Company's success depends, to a large extent, on our ability to provide our customers innovative solutions and improved products. Thus, we continue to increase the effectiveness of our products, and implement website developments. If we make better progress than is currently expected, we will be able to implement product improvements faster. This could have a positive effect on our revenue and earnings.

The news portal artnet News, launched in February 2014, adds to artnet's current product package, with the aim to increase the market transparency and the number of unique visitors to our website. If the number of visitors increases more than expected, the attractiveness of buying advertisement banners would be higher. This could have a positive effect on revenue and earnings, especially for our advertising product.

artnet AG Annual Report 2013

7. Subsequent Report

In the period from the balance sheet, as of December 31, 2013 to March 25, 2014, the news service artnet News was launched, on February 23, 2014. There were no more reportable events of significance after the balance sheet date that could have a material impact on the artnet Group's financial position or results of operations.

8. Outlook

In spring 2014, we will unveil our redesigned website, which was put on hold as we prepared to launch artnet News. Through a more intuitive navigation, an attractive and contemporary interface, and an all new search function, the redesign will facilitate the integration of all artnet products and services, increasing their accessibility and usability, to improve the entire customer experience. This will mark a significant step forward in strengthening our brand.

We forecast a strong increase in advertising revenue in 2014, thanks to expanded sales initiatives and more advertising opportunities, both on artnet News and on the redesigned website.

Under the leadership of Roxanna Zarnegar, who joined artnet in January 2014, artnet Auctions will continue to benefit from increased buyer confidence when it comes to purchasing art online. Among other positions, Roxanna was chief operating officer of Christie's Americas, and comes to artnet with the experience in strategic planning and operations required to further develop and expand artnet Auctions. Roxanna's team has, on average, over 18 years of experience, across more than 10 areas of expertise, allowing artnet to feature an increasingly diverse and curated array of artists, artwork categories, and media.

The success of our auctions in 2012 was partly due to factors that could not be replicated in 2013, and total revenue for the year remained largely unchanged. However, the trend in the second half of the year was such that we went into 2014 on a clear upswing, and we predict double-digit growth for this year. It is widely anticipated that art sales online will continue to expand, and, as the market leader, we are confident that we will benefit immensely from that growth.

Galleries are an essential part of our business. Following a price increase and the emergence of new competitors, many of whom offer their services free of charge, we lost clients in 2011 and 2012. However, we managed to stabilize the number of gallery memberships and overall revenue, while increasing profitability at the same time. With gallery members in nearly 60 countries, the artnet gallery network remains without peer in terms of the access and exposure it grants to galleries of all sizes. In an environment that remains very competitive, we maintain our prediction of small revenue growth for artnet Galleries in 2014.

artnet has an international client base. In the coming year, artnet plans to release a version of our website in Mandarin, making our data more accessible to clients in China. artnet has also joined forces with the China Association of Auctioneers (CAA), which screens data from Chinese auction houses for accuracy. We consider it vitally important to be part of the process of publishing clear and accurate information in China. Through this collaboration, artnet hopes to continue providing subscribers with the most reliable data from the region, while encouraging auction houses operating in China to adopt a higher level of transparency.

We continue to develop and expand the Price Database, one of our core products. We created artnet Analytics based on the database, enabling our clients to analyze larger amounts of data very efficiently. Following a moderate start for the product, it is now gaining recognition among our clients due to targeted marketing efforts. Through the publication of artnet Analytics Reports in datadriven news articles, more art enthusiasts have become aware of the benefits of these detailed and in-depth market analyses. We believe that this product will be used more often to reach buying and selling decisions for artworks. Despite our forecast of a clear increase in revenue in 2013, only a slight increase was achieved for the Price Database segment in US dollars, our main currency. This is partly due to competitors offering similar services free of charge for marketing purposes. We believe this strategy by our competitors has little prospect for success in the long run. Because of the increasing perception of art as an asset class, and the accompanying demand for precise data, we expect a small revenue increase for this business segment in 2014.

In 2014, we expect clear revenue growth, to between 19.5 million USD and 20.5 million USD (14 million EUR to 15 million EUR) overall. Operating costs are also anticipated to increase considerably, due to the development of artnet News, as well as significantly higher sales and marketing expenses. While we anticipate our cash position to increase only moderately compared to 2013 because of our planned investments, we still expect our annual result to increase to 800,000 USD (600,000 EUR). Having returned to profitability, we now look forward to tackling our ambitious objectives in 2014.

Berlin, March 25, 2014

Jacob Pabst Chairman and CEO, artnet AG

Consolidated Financial Statements as of December 31, 2013

artnet AG Consolidated Balance Sheet

As of December 31, 2013

	Notes No.	12/31/13 USD	12/31/12 USD	12/31/13 EUR	12/31/12 EUR
Assets
Current Assets
Cash and Cash Equivalents	3	2,104,778	994,773	1,528,763	752,546
Accounts Receivable	4	867,645	1,221,058	630,197	923,730
Other Current Assets	5	408,200	737,968	296,488	558,273
Total Current Assets		3,380,623	2,953,799	2,455,448	2,234,549
Non-Current Assets
Property, Plant, and Equipment	6	1,021,334	1,374,634	741,826	1,039,911
Intangible Assets	7	1,618,905	1,327,877	1,175,859	1,004,539
Security Deposit		386,167	379,921	280,485	287,410
Deferred Tax Assets	8	1,907,577	1,907,577	1,385,530	1,443,082
Total Non-Current Assets		4,933,983	4,990,009	3,583,700	3,774,942
Total Assets		8,314,606	7,943,808	6,039,148	6,009,491
Equity and Liabilities
Current Liabilities
Accounts Payable	9	641,167	844,777	465,699	639,074
Accrued Expenses and Other Liabilities	10	851,754	986,751	618,654	746,477
Provisions	11	164,770	170,041	119,677	128,636
Liabilities from Finance Leases	12	302,797	297,649	219,931	225,171
Deferred Revenue	14	1,962,823	1,760,941	1,425,657	1,332,152
Total Current Liabilities		3,923,311	4,060,159	2,849,618	3,071,510
Long-Term Liabilities
Office Rent Amortization	13	352,645	267,896	256,137	202,663
Long-Term Liabilities from Finance Leases	12	281,414	484,933	204,399	366,852
Loans	28	709,044	-	515,000	-
Total Long-Term Liabilities		1,343,103	752,829	975,536	569,515
Total Liabilities		5,266,414	4,812,988	3,825,154	3,641,025
Shareholders' Equity
Common Stock	15	5,941,512	5,941,512	5,631,067	5,631,067
Treasury Stock	15	(269,241)	(269,241)	(264,425)	(264,425)
Additional Paid-In Capital		52,252,827	52,240,459	50,872,189	50,862,873
Accumulated Deficit		(54,925,977)	(51,784,190)	(53,909,439)	(51,482,744)
Current Net Profit		53,731	(3,141,787)	40,470	(2,426,695)
Foreign Currency Translation		(4,660)	144,067	(155,868)	48,390
Total Shareholders' Equity		3,048,192	3,130,820	2,213,994	2,368,466
Total Liabilities and Total Shareholders' Equity		8,314,606	7,943,808	6,039,148	6,009,491

artnet AG Consolidated Statement of Comprehensive Income

For the Fiscal Year from January 1 to December 31, 2013

	Notes No.	2013 USD	2012 USD	2013 EUR	2012 EUR
Revenue
artnet Galleries		6,303,210	6,317,417	4,747,578	4,915,582
artnet Price Database		6,763,373	6,584,047	5,094,173	5,123,047
artnet Advertising		1,364,505	1,390,884	1,027,745	1,082,247
artnet Auctions		2,786,725	3,041,606	2,098,961	2,366,673
Total Revenue	25	17,217,813	17,333,954	12,968,457	13,487,549
Cost of Sales		7,624,174	7,727,830	5,742,528	6,013,025
Gross Profit		9,593,639	9,606,124	7,225,929	7,474,525
Operating Expenses
Selling and Marketing		2,435,450	2,747,212	1,834,381	2,137,606
General and Administrative		4,397,610	5,068,442	3,312,280	3,943,752
Product Development		2,731,460	2,472,396	2,057,335	1,923,771
Non-Cash Compensation	18	12,368	179,145	9,316	139,393
Total Operating Expenses		9,576,887	10,467,195	7,213,312	8,144,522
Operating Income	22	16,752	(861,071)	12,617	(669,997)
Interest Expenses	22	(66,074)	(58,036)	(49,767)	(45,158)
Interest Income	22	1,250	413	942	321
Non-Scheduled Depreciation	7	-	(830,000)	-	(627,895)
Other Income/(Expenses)	22	108,314	(44,787)	81,582	(34,849)
Earnings Before Taxes		60,242	(1,793,481)	45,374	(1,377,578)
Income Taxes	8	(6,511)	(27,209)	(4,904)	(21,171)
Net Profit from Continued Operations		53,731	(1,820,690)	40,470	(1,398,749)
Loss from Dicontinued Operations	23, 24	-	(1,321,097)	-	(1,027,946)
Net Profit		53,731	(3,141,787)	40,470	(2,426,695)
Other Comprehensive Income
OCI Recycled:
Differences from Foreign Currency Translation		(148,727)	(60,941)	(204,258)	(96,662)
Total Comprehensive Income		(94,996)	(3,202,728)	(163,788)	(2,523,357)
Earnings Per Share
Basic and Diluted		0.01	(0.57)	0.01	(0.44)
Earnings Per Share from Continued Operations
Basic and Diluted		0.01	(0.33)	0.01	(0.25)
Earnings Per Share from Discontinued Operations
Basic and Diluted		-	(0.24)	-	(0.19)

artnet AG Consolidated Statement Of Changes In Shareholders Equity (USD)

For the Fiscal Year from January 1 to December 31, 2013

	Common Stock
	Issued Shares	Amount	Treasury Stock	Additional Paid-In Capital	Accumulated Defecit	Foreign Currency Translation	Total
Balance as of 12/31/2011	5,631,067	5,941,512	(269,241)	52,061,314	(51,784,190)	205,008	6,154,403
Net Profit (Loss)	-	-	-	-	(3,141,787)	(60,941)	(3,202,728)
Remuneration from Stock Options	-	-	-	179,145	-	-	179,145
Balance as of 12/31/2012	5,631,067	5,941,512	(269,241)	52,240,459	(54,925,977)	144,067	3,130,820
Net Profit (Loss)	-	-	-	-	53,731	(148,727)	(94,996)
Remuneration from Stock Options	-	-	-	12,368	-	-	12,368
Balance as of 12/31/2013	5,631,067	5,941,512	(269,241)	52,252,827	(54,872,246)	(4,660)	3,048,192

artnet AG Consolidated Statement Of Changes In Shareholders Equity (EUR)

For the Fiscal Year from January 1 to December 31, 2013

	Common Stock
	Issued Shares	Amount	Treasury Stock	Additional Paid-In Capital	Accumulated Defecit	Foreign Currency Translation	Total
Balance as of 12/31/2011	5,631,067	5,631,067	(264,425)	50,723,480	(51,482,744)	145,052	4,752,430
Net Profit (Loss)	-	-	-	-	(2,426,695)	(96,662)	(2,523,357)
Remuneration from Stock Options	-	-	-	139,393	-	-	139,393
Balance as of 12/31/2012	5,631,067	5,631,067	(264,425)	50,862,873	(53,909,439)	48,390	2,368,466
Net Profit (Loss)	-	-	-	-	40,470	(204,258)	(163,788)
Remuneration from Stock Options	-	-	-	9,316	-	-	9,316
Balance as of 12/31/2013	5,631,067	5,631,067	(264,425)	50,872,189	(53,868,969)	(155,868)	2,213,994

artnet AG Consolidated Cash Flow Statement

For the Fiscal Year from January 1 to December 31, 2013

	Notes No.	2013 USD	2012 USD	2013 EUR	2012 EUR
Cash Flow from Operating Activities
Net Profit/(Loss)		53,731	(3,141,787)	40,470	(2,426,695)
Net Profit/(Loss) from Continued Operations		53,731	(1,820,690)	40,470	(1,398,749)
Net Profit/(Loss) from Discontinued Operations	23	-	(1,321,097)	-	(1,027,946)
Adjustments to Reconcile Net Profit to Net Cash provided by (used in) Operating Activities:
Depreciation and Amortization	22	583,806	1,509,418	439,723	1,174,479
Impairment/Write-Offs for Receivables	4	279,296	228,560	210,366	177,842
Non-Cash Compensation from Stock Options	18	12,368	179,145	9,316	139,393
Other Non-Cash Transactions		(169,005)	(88,923)	(129,604)	(68,109)
Changes in Operating Assets and Liabilities:
Accounts Receivable		74,117	(231,644)	55,825	(180,242)
Other Current Assets		329,768	(61,720)	248,381	(48,024)
Security Deposits		(6,246)	254,577	(4,704)	198,086
Accounts Payable		(203,610)	340,568	(153,359)	264,996
Provisions		(5,271)	170,041	(3,970)	132,309
Accrued Expenses and Tax Liabilities		(50,248)	216,400	(37,847)	162,594
Deferred Revenue		201,882	21,835	152,058	16,517
Total Adjustments		1,046,857	2,538,257	786,184	1,969,841
Cash Flow Provided by (used in) Operating Activities		1,100,588	(603,530)	826,654	(456,854)
Net Cash provided by/(used in) Operating Activities Continued Operations		1,100,588	621,708	826,654	496,503
Net Cash provided by/(used in) Operating Activities Discontinued Operations		-	(1,225,238)	-	(953,357)
Cash Flow from Investing Activities
Purchase of Property and Equipment	6, 12	(16,248)	(435,135)	(12,238)	(338,579)
Purchase and Development of Intangible Assets	7, 12	(387,061)	(432,455)	(291,534)	(336,493)
Net Cash used in Investing Activities		(403,309)	(867,590)	(303,772)	(675,072)
Proceeds from/used in Continued Operations		(403,309)	(867,590)	(303,772)	(675,072)
Proceeds from/used in Discontinued Operations		-	-	-	-
Cash Flow from Financing Activities
Repayment of Finance Leases	12	(330,354)	(284,282)	(248,822)	(221,200)
Loans Received	28	685,213	-	(500,000)	-
Net Cash used in Financing Activities		354,859	(284,282)	251,178	(221,200)
Proceeds from/used in Continued Operations		354,859	(284,282)	251,178	(221,200)
Proceeds from/used in Discontinued Operations		-	-	-	-
Effects of Exchange Rate Changes on Cash		57,866	14,655	2,158	(6,697)
Change in Cash and Cash Equivalents		1,110,005	(1,740,747)	776,217	(1,359,822)
Cash and Cash Equivalents—Start of Period		994,773	2,735,520	752,546	2,112,368
Cash and Cash Equivalents—End of Period		2,104,778	994,773	1,528,763	752,546
Supplemental Discosures of Cash Flow
Income Tax Receipts/(Payments)		(6,511)	(27,209)	(4,904)	(21,171)
Interest Payments		(46,159)	(58,036)	(34,767)	(45,158)
Interest Receipts		1,250	413	942	321

Notes to the Consolidated Financial Statements 2013

1. Corporate Information and Statement of Compliance

artnet AG (hereinafter referred to as "artnet AG" or the "Company") is a publicly traded corporation headquartered in Berlin, Germany. The address of its registered office is Oranienstraße 164, 10969 Berlin, Germany. artnet AG was incorporated under the laws of Germany in 1998.

artnet AG holds 100% of the shares in Artnet Worldwide Corporation ("Artnet Corp."), which is located in New York, NY, USA. Artnet Corp. holds 100% of the shares in artnet UK Ltd. and artnet France sarl. artnet AG and Artnet Corp., together with the latter's wholly owned subsidiaries, are referred to as the "artnet Group" or the "Group."

The Group's business is to provide art collectors, galleries, publishers, auction houses, and art enthusiasts with a website where individuals can research artists and art prices, and find artworks that are currently available in artnet Galleries or on artnet Auctions.

Applying § 315a of the German Commercial Code (HGB), accompanying consolidated financial statements as of December 31, 2013, financial statements for the parent and subsidiary companies were prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations of the International Accounting Standards Board (IASB) effective within the EU. The consolidated financial statements were authorized for issuance by the chairman and CEO on March 14, 2014.

2. Summary of Significant Accounting Policies

Basis of Accounting and Reporting Currency

Amounts included in the consolidated financial statements and notes to the consolidated financial statements are stated as required by German law in euros (EUR), unless otherwise noted. The reporting currency is the euro.

Due to rounding, amounts presented may not add up precisely. The currency of the primary economic environment in which artnet operates is US dollars. For convenience purposes, especially for our United States investors, the consolidated statement of financial position, statement of comprehensive income, cash flow statement, and statement of changes in equity are also presented in US dollars.

The consolidated financial statements have been prepared on a historical cost basis. The balance sheet date is December 31, 2013. The principal accounting policies adopted are set out below.

Basis of Consolidation and Consolidated Companies

The consolidated financial statements include the legal parent company, artnet AG, its wholly owned subsidiary, Artnet Corp., as well as the subsidiaries of the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity, so as to obtain benefits from its activities.

On February 23, 1999, artnet AG entered into a transaction with Artnet Corp., which was treated as a recapitalization of Artnet Corp., with Artnet Corp. as the acquirer of artnet AG. The Company accounted for the business combination of artnet AG and Artnet Corp. as a reverse acquisition in accordance with IFRS 3.

On November 1, 2007, Artnet Corp. established artnet UK Ltd., which is a wholly owned subsidiary of Artnet Corp. artnet UK Ltd. conducts sales and provides customer support for Artnet Corp. in the United Kingdom.

On July 3, 2008, Artnet Corp. established artnet France sarl, which is a wholly owned subsidiary of Artnet Corp. Until June 2012, arntet France sarl was responsible for the French website, artnet.fr, and for sales and customer support in France. The active business operation of artnet France sarl was discontinued after the closure of the online magazine and the transfer of other tasks. Since this time, these tasks were taken over by Artnet Worldwide Corporation and artnet AG.

All significant inter-company transactions, balances, income, and expenses are eliminated in full on consolidation.

Reporting Period

The consolidated financial statements were prepared for the reporting period, from January 1, 2013 through December 31, 2013. The financial year for all Group companies coincides with the calendar year.

Revenue Recognition

Revenue for services is recognized when services are rendered, the amount of revenue can be measured reliably, and collection of the related receivable is reasonably assured. Revenue for contracts in which the service has not yet been provided are deferred and recorded as revenue when the service is performed.

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts for services provided in the normal course of business, net of discounts, VAT, and other sales taxes.

Financial Assets

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans, and receivables, held to maturity, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. The Group's financial assets are cash and cash equivalents, accounts receivable, and rent security deposits. These financial assets are classified under the category "Loans and Receivables."

Cash and Cash Equivalents

The Company considers all highly liquid investments with less than three-month maturity from the date of acquisition to be cash equivalents. Cash and cash equivalents are measured at cost.

Accounts Receivable

Accounts receivable are non-derivative financial assets with fixed or determinable payments that are not listed in an active market. They are included in current assets, with the exception of maturities greater than 12 months after the end of the reporting period, which are classified as non-current assets. Accounts receivable are recorded at the invoiced amount and do not bear interest. Accounts receivable include credit card transactions, which have already been settled, but for which no payment has been received. The accounts receivable balance is shown net of allowance for doubtful accounts. The allowance for doubtful accounts involves significant management judgment, and review of individual receivables based on individual customer credit worthiness, current economic trends, and analysis of historical bad debts on a portfolio basis. Actual results could differ from those estimates.

Tangible Fixed Assets

Tangible assets are valued at historical cost minus accumulated depreciation. The artnet Group computes depreciation and amortization using the straight-line method. Computer equipment, furniture and fixtures, and office equipment are depreciated over an estimated useful life of three to seven years. Leasehold improvements are amortized over the lesser of the term of the related lease or its estimated useful life, which is up to 10 years. Maintenance expenses that neither enhance the value of an asset nor prolong the useful life are expensed as incurred.

Intangible Assets Including Website Development Costs

Intangible assets are comprised of purchased software and website development costs. Intangible assets are recorded as historical costs and amortized on a straight-line basis over their estimated useful life of three to 10 years. All intangible assets have a limited useful life. Costs related to the research, planning, and post-implementation phases of the Group's websites, such as minor enhancements and maintenance or development efforts, are expensed as incurred. Direct costs incurred in the development phase are capitalized if:

• • The product or process is technically and commercially feasible
• • There is a market for the result of the website development
• • The attributable expenditure can be reliably measured
• • The Group has sufficient resources to complete development

The market condition is substantiated, as only expenditures related to website development projects, material expansions, and capitalized improvements to the website are expected to generate future revenues.

Impairment

The Group reviews tangible and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In addition, tangible and intangible assets, as well as intangible assets not yet available for use, are subject to an annual impairment test. Recoverability of assets is measured by the comparison of the carrying amount of the asset to the recoverable amount, which is the higher of the asset's value in use and its fair value minus the cost to sell. Where the asset does not generate cash flows that are independent from other assets, the impairment test is not performed at an individual asset level; instead, it is performed at the level of the cash-generating unit to which the asset belongs. If the recoverable amount of the cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized as an expense immediately. The asset's value in use, either at an independent level or a cash-generating unit level, is measured by discounting the asset's estimated future cash flows. If there is an indication that the reasons that caused the impairment loss no longer exist, the Group will assess the need to reverse all or a portion of the impairment, not to exceed the original carrying amount.

Income Taxes and Deferred Taxes

The current tax expense is determined on the basis of the taxable income of each of the Group's companies for the fiscal year. The taxable income is adjusted for items that are non-taxable or tax deductible. The current tax expense is calculated based on the applicable tax rates on the balance sheet date.

Deferred taxes are recognized under the asset and liability method in respect to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available, against which deductible temporary differences and tax loss or tax credit carryforwards can be utilized.

Deferred tax assets and liabilities are measured using enacted or substantially enacted statutory tax rates for the years in which the differences are expected to reverse.

Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available, against which the deductible temporary differences, unused tax losses, and unused tax credits can be utilized. The recognition of deferred tax assets on tax loss carryforwards is based on a planning period of three years. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority, on either the same taxable business or different taxable businesses where there is an intention to offset the balances on a net basis.

Foreign Currency Translation and Business Transactions

The currency of the primary economic environment in which the artnet Group operates is US dollars, which is the functional currency of the operating subsidiary Artnet Corp. Transactions in currencies other than US dollars are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses from foreign currency transactions are recognized as other income/expenses.

On consolidation, the assets and liabilities of the Group's operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. The accumulated gains and losses resulting from translation are recorded as a separate component of the Group equity.

Currency exchange rates significant to the artnet Group are the translation of US dollars to euros, and of US dollars to British pounds (GBP). The following exchange rates have been used for the currency translation in the years presented:

	USD to EUR		USD to GBP
	12/31/2013	12/31/2012	12/31/2013	12/31/2012
Current Rate Year End	0.726	0.757	0.606	0.619
Average Rate for the Year	0.753	0.778	0.640	0.631

Financial Liabilities

The artnet Group measures financial liabilities at amortized cost using the effective interest method, which is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Provisions

Provisions are recognized when the Group has a current obligation arising from a past event; is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are recognized at present value by discounting the expected future cash flow at a pretax rate that reflects current market assessments of the time value of money.

Leasing

Group as Lessee

Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. Scheduled depreciation is recorded over the economic useful life or shorter contractual period, using the depreciation method that also applies for comparable assets acquired or manufactured. The finance lease obligation is shown separately in the consolidated balance statement under liabilities from finance leases.

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability so as to achieve a constant rate of interest on the remaining balance of the liability. Contingent lease payments are charged as expenses in the periods in which they occur.

Operating lease payments are recognized as an expense in the statement of comprehensive income on a straight-line basis over the term of the lease. Benefits received and receivable, as an incentive to enter into an operating lease, are spread over the lease term on a straight-line basis.

Discontinued Operations

Discontinued operations relate to a division (component of an entity) that is discontinued and can be clearly delimited from the entity's other activities, from both an operating perspective and also for financial reporting purposes. In addition, the division qualifying as discontinued operations must represent a major business line or specific geographic division of the group. The result from the discontinued operations is disclosed separately in the Group's statement of comprehensive income as discontinued operations. The cash flows from discontinued operations are disclosed separately in the cash flow statement.

Pension Provisions

Artnet Corp. offers a defined contribution benefit plan, which qualifies under Section 401(k) of the Internal Revenue Code. Payments made by Artnet Corp. are charged as an expense.

Share-Based Payments

artnet AG provided equity-settled share-based payments to executive management and to certain employees of Artnet Corp. The equity-settled share-based payments are measured at fair value at the date of the grant. The fair value determined at the grant date, minus the fair value of any consideration received at the grant date, is expensed over the vesting period based on the estimated amount of shares that will eventually vest. The fair value of the equity-settled share-based payments is measured using the binomial model.

Treasury Stock

The Group's equity will be reduced by the acquisition costs of artnet's treasury stock.

New and Amended Standards and Interpretations for the Fiscal Year

In the 2013 fiscal year, the Group did not apply any standards or interpretations that led to any changes.

The following new or amended standards and interpretations for which application was mandatory in fiscal 2013 did not have any material impact on the Company's consolidated financial statements:

(IFRIC)	Standard (IFRS) or Interpretation	Mandatory Application in the EU	Endorsed by the European Commission
IFRS 1*	First-time Adoption of IFRS—Government Grants	1/1/2013	12/29/2012
IFRS 1*	Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters	1/1/2013	12/11/2012
IFRIC 20	Stripping Costs in the Production Phase of a Surface Mine	1/1/2013	12/29/2012
IAS 1	Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income	1/7/2012	6/6/2012
IAS 12*	Income Taxes: Deferred Tax— Recovery of Underlying Assets	1/1/2013	12/29/2012
IAS 19	Employee Benefits	1/1/2013	6/6/2012
IFRS 13	Measurement at Fair Value	1/1/2013	12/29/2012
IFRS 1*	Government Loans	1/1/2013	3/5/2013
IFRS 7*	Financial Instruments: Disclosures— Offsetting Financial Assets and Financial Liabilities	1/1/2013	12/29/2012
Various	Annual Improvement Project of IASB 2009–2011	1/1/2013	3/28/2013

* Amendments (changes to existing standards)

Not Yet Applied New or Revised Standards and Interpretations The following standards, interpretations, and amendments, which were not yet mandatory or had not yet adopted by the EU on December 31, 2013, have not been applied. Unless otherwise indicated, the Group currently expects that the adoption of these standards will have no significant impact on the accounting and presentation of the consolidated financial statement.

	Standard (IFRS) or Interpretation (IFRIC)	Mandatory Application in the EU	Endorsed by the European Commission
IFRS 10	Consolidated Financial Statements	1/1/2014	12/29/2012
IFRS 11	Joint Arrangements	1/1/2014	12/29/2012
IFRS 12	Disclosure of Interests in Other Entities	1/1/2014	12/29/2012
IAS 27*	Consolidated and Separate Financial Statements	1/1/2014	12/29/2012
IAS 28*	Shares in Associated Companies	1/1/2014	12/29/2012
IAS 32*	Financial Instruments: Presentation— Offsetting Financial Assets and Financial Liabilities	1/1/2014	12/29/2012
Amend. IFRS 10, IFRS 12, IAS 27	Separate Financial Statements— Exception of Duty to Consolidation of Investment Companies	1/1/2014	11/20/2013
IAS 36*	Impairment of Assets—Information on the Recoverable Amount of Non Financial Assets	1/1/2014	Exp. Q1/2014
IAS 39*	Novation of Derivatives	1/1/2014	Exp. Q4/2013
IFRIC 21	Information	1/1/2014	Exp. Q1/2014
IFRS 9	Financial Instruments	N/A	N/A

Use of Estimates

The preparation of the consolidated financial statements in accordance with IFRS necessitates estimates and assumptions that influence assets and liabilities, income, and expenses, as well as information in the notes to the financial statements. Actual results and developments may differ from those estimates and assumptions.

Estimates made by management that have a significant effect on the consolidated financial statements include the recognition of deferred tax assets and development costs, the impairment of capitalized development costs, the measurement of provisions and accruals, the useful lives of non-current assets, and the assessment of bad debt provisions on accounts receivable.

3. Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash and bank balances. Cash and bank balances are stated at fair value.

4. Accounts Receivable

Net accounts receivable consist of the following:

	12/31/13 EUR	12/31/2012 EUR
Gross Accounts Receivables	922,158	1,298,798
Less: Allowance for Value Adjustment Accounts Receivable	(291,962)	(375,068)
Receivables After Impairment	630,197	923,730

All accounts receivable are due within one year.

There is no concentration of credit risk with respect to accounts receivable, as the Group has a diversified customer base. The carrying amount of accounts receivables is equal to their fair value.

Receivables by maturity:

	12/31/13 EUR	12/31/12 EUR
Overdue but not Impaired Receivables Between 0 and 60 days	523,293	718,631
Carrying Amounts of Impaired Receivables	-	-
Overdue Between 61 and 90 days	28,496	78,335
Overdue More than 90 days	78,408	126,764
	106,904	205,099
Receivables After Impairment	630,197	923,730

* Amendments (changes to existing standards)

The allowance for doubtful accounts is the Group's best estimate of the amount of probable credit losses in the Group's existing accounts receivable. Accounts receivable that are less than 60 days overdue are not provided for. Accounts receivable that are more than 60 days overdue, are provided for on a grading scale, based on the age of the individual receivable, with allowances between 10% and 90% of the nominal value. The Group does not hold any collateral for accounts receivable balances.

Allowance for doubtful accounts developed as follows:

	12/31/2013 EUR	12/31/2012 EUR
Balance at the Beginning of the Fiscal Year	375,068	260,178
Balance at the Beginning of the Fiscal Year	210,366	179,212
Write-off of Bad Debts	(366,741)	(55,344)
Currency Exchange Differences	(13,140)	(8,978)
Balance at the End of the Fiscal Year	203,496	375,068

5. Payments in Advance and Other Current Assets

Other current assets decreased compared to last year due to a tax refund received in 2013 for the 2010 and 2011 fiscal years. These assets primarily contain the designated restricted bank balances for defined contribution pension plans and health care plans in the amount of 118,296 EUR (2012: 102,742 EUR). For software contracts and insurance deposits, payments have been made in the amount of 134,710 EUR (2012: 37,832 EUR). In addition, there are claims on tax payments in Germany and the United Kingdom amounting to 41,606 EUR (2012: 310,199 EUR).

6. Tangible Assets

Tangible fixed assets developed in the 2012 and 2013 fiscal years as follows:

	Computer and Hardware EUR	Operating and Office Equipment EUR	Leasehold Improvement EUR	Total EUR
Acquisition Costs
As of December 31, 2011	1,600,318	494,297	123,900	2,218,515
Exchange Differences	(32,760)	43,355	(19,851)	(9,256)
Disposals	(808,084)	(118,485)	(113,346)	(1,039,915)
Additions	214,941	271,028	334,897	820,866
As of December 31, 2012	974,415	690,195	325,600	1,990,210
Exchange Differences	11,935	(42,569)	60,781	30,148
Disposals	(425,006)	-	-	(425,006)
Additions	9,668	2,134	-	11,802
As of December 31, 2013	571,013	649,760	386,381	1,607,154
Depreciation
As of December 31, 2011	1,301,680	189,867	115,075	1,606,622
Exchange Differences	(26,569)	14,125	(5,386)	(17,830)
Disposals	(757,498)	(114,567)	(112,795)	(984,860)
Additions	213,008	108,868	24,492	346,368
As of December 31, 2012	730,621	198,292	21,386	950,299
Exchange Differences	6,996	32,917	29,669	69,583
Disposals	(425,006)	-	-	(425,006)
Additions	142,039	89,592	38,821	270,452
As of December 31, 2013	454,651	320,802	89,876	865,328
Carrying Amount
As of December 31, 2012	243,794	491,903	304,214	1,039,911
Includes: Finance Leases	239,782	363,694	-	603,476
As of December 31, 2013	116,362	328,959	296,505	741,826
Includes: Finance Leases	76,148	222,994	-	299,142

The depreciation expense of tangible assets is included in the cost of sales.

7. Intangible Assets

Intangible assets in the 2012 and 2013 fiscal years developed as follows:

	Development Costs EUR	Software EUR	Total EUR
Acquisition Costs
As of December 31, 2011	3,146,915	601,496	3,748,411
Exchange Differences	(18,583)	(10,955)	(29,538)
Disposals	(1,951,558)	(493,900)	(2,445,458)
Additions	346,002	192,457	538,459
As of December 31, 2012	1,522,776	289,098	1,811,874
Exchange Differences	(60,729)	(11,529)	(72,259)
Disposals	-	(45,737)	(45,737)
Additions	267,798	112,856	380,654
As of December 31, 2013	1,729,845	344,688	2,074,532
Depreciation
As of December 31, 2011	1,914,690	546,762	2,461,452
Exchange Differences	13,938	(5,465)	8,473
Disposals	(1,951,558)	(493,900)	(2,445,458)
Additions	718,235	64,633	782,868
As of December 31, 2012	695,305	112,030	807,335
Exchange Differences	(27,728)	(4,468)	(32,196)
Disposals	-	(45,737)	(45,737)
Additions	64,695	104,576	169,271
As of December 31, 2013	732,272	166,401	898,673
Carrying Amount
As of December 31, 2012	827,471	177,068	1,004,539
Includes: Finance Leases	-	190,632	190,632
As of December 31, 2013	997,573	178,286	1,175,859
Includes: Finance Leases	-	150,591	150,591

In previous years, the manufacturing costs of artnet Analytics, which is allocated to the artnet Price Database segment, were capitalized as an internally generated, intangible asset. Until the launch of the product in May 2012, capitalized development costs totaled 1,339 kEUR. Because sales expectations were not met, an impairment test was performed on December 31, 2012. The identified use value amounted to 630 kEUR, and the value of the asset capitalized was adjusted by unscheduled depreciation.

The artnet Analytics product constitutes a cash-generating unit, as directly allocable income is generated with this asset. This income is independent of the income generated with other artnet products.

The underlying sales assumptions of the impairment test carried out last year were missed in 2013. The unsatisfactory sales trend was interpreted as a triggering event, calling for artnet Analytics to be subjected to another impairment test as of December 31, 2013. Despite reduced budget assumptions, the utility of the amortized cost resulting from this impairment test was higher by 539 kEUR.

The discount rate used for cash flow was 19.45% (2012: 17.28%) before tax, and 12.08% (2012: 12.36%) after tax.

In the impairment test, the recoverable amount of the cashgenerating unit was determined by its value in use. The value in use is the present value of the future cash flows that are expected to be obtained from the cash-generating unit over the remaining useful life. The value in use is determined from an internal company perspective via underlying cash flow forecasts. These are based on the medium-term forecast, which is applied on the date of the impairment test, and relates to the remaining useful life of the asset, which was still eight years and five months on the balance sheet date. The cash flow forecasts include previous experiences, as well as expectations for future market developments. If the discount interest rate for the impairment test were increased by 1%, it would lead c.p. to a lower recoverable amount by 40,000 EUR. If the planned revenue for all planned periods in the impairment test were reduced by 10%, it would lead c.p. to a lower recoverable amount by 280,000 EUR, and an unscheduled depreciation of this amount.

In the 2013 fiscal year, additional costs for the redesign of the website in the amount of 263 kEUR were capitalized; the capitalized development costs totaled 454 kEUR. The website redesign included an end-to-end restructuring of the architecture for the German, English, and French websites, which changes the structure and organization of the pages, as well as the navigation. In addition, the introduction of a new semantic search function brings additional benefits for visitors to the website. Management believes that these far-reaching changes to the website, and the addition of new functions, will attract a significant number of new clients, in particular, in the Galleries segment, and the development costs will thus contribute directly to generating positive cash flows in the future. Only directly allocable costs from external developers were capitalized. Internal development costs were not capitalized as it was not possible to allocate these with sufficient reliability. This project, which was expected to be finalized during the third quarter of 2013, was delayed when the decision was made to act on the opportunity to build artnet News (news.artnet.com), launched on February 23, 2014. The news site was programmed in the new design. The completion of the redesign is now expected by the end of the first quarter of 2014.

The amortization expenses for intangible assets are included in the cost of sales. The impairment losses for the development costs of the product artnet Analytics in the previous year were reported as a separate item in the statement of comprehensive income.

As of December 31, 2013, the Group did not have any material contractual obligations for the acquisition of intangible assets.

8. Taxes and Deferred Taxes

Income tax expense/(benefit) consists of the following:

	2013 kEUR	2012 kEUR
Current Income Taxes Income Tax Payments in France and Great Britain	8	21
US Corporate Tax (Federal, State) and Income Tax
Expenses of Other Consolidated Companies	19	-
Tax Refunds from Previous Years Total Current Income Taxes	(22)	-
Deferred Tax Assets on Tax Loss Carryforwards	5 75	21 (131)
Temporary Differences	(75)	131
Total Deferred Taxes	-	-
Total Income Taxes	5	21

Due to its tax loss carry forwards, Artnet Corp. only has to pay the alternative minimum corporation tax.

Deferred Tax Asset

As of the 2013 balance sheet date, Artnet Corp. has total tax loss carry forwards of 27.8 million EUR available for offset against future profits. As of December 31, 2012, these tax loss carryforwards amounted to 21.2 million EUR (28.0 million USD). A deferred tax asset of 1,366 kEUR (1,350 kEUR as of December 31, 2012) is recognized in the financial statements for the existing tax loss carryforwards of Artnet Corp. The tax rate used is 43% (2012: 43%) and represents the average income tax rate of Artnet Corp. The subsidiary has generated a taxable profit, and partly utilized tax loss carryforwards. The recognition of deferred tax assets on tax loss carryforwards is based on a three-year budget. Tax loss carryforwards can be used over a period of 20 years. Tax loss carryforwards of Artnet Corp. in the amount 2.1 million EUR (2.8 million USD) will expire in 2018. The remaining unused tax loss carryforwards of Artnet Corp. will expire in subsequent years. In addition, artnet AG has tax loss carryforwards in the total amount of 29.7 million EUR (29.7 million EUR as of December 31, 2012) for corporate income tax, as well as for trade tax. Under German tax law, these tax loss carryforwards cannot be utilized due to the organizational structure of the artnet Group.

In total, deferred taxes recognized relate to the following balance sheet items:

	Deferred Tax Assets 12/31/2013 kEUR	Deferred Tax Assets 12/31/2012 kEUR
Deferred Tax Assets	1,336	1,350
Fixed Assets	-	(134,000)
Accounts Receivable	8	161
Accrued Liabilities and Other Liabilities	42	66
Total	1,386	1,443

Tax Rate Reconciliation

The following table reconciles the expected income tax expense/ (income) to the income tax expense presented in the financial statements.

The tax rate of 43% (2012: 43%) is the average income tax rate of the operating group Artnet Corp., because Artnet Corp. generates the taxable income of the Group companies.

	2013 TEUR	2012 TEUR
Earnings Before Tax from Continued
Operations	45	(1,396)
Expected Income Tax Expense/(Benefit)—Tax
Rate 43%	20	(600)
Non-Deductible Expenses and Other Effects	7	22
Tax Refunds from Previous Years	(22)	-
Non-Recognition of Deferred Tax Assets of
Loss Carryforwards in Germany and the United
States, and Tax Rate Differences	-	551
Income Tax Expense/(Benefit) as Presented on
the Consolidated Statement of Comprehensive
Income	5	27

9. Accounts Payable

Accounts payable is principally comprised of amounts outstanding for trade accounts and current costs. The average credit period taken for accounts payable is 30 days. The carrying amount of accounts payable approximates their fair value.

10. Accruals and Other Liabilities

Accruals and other liabilities consist of the following for the years presented:

	12/31/13 EUR	12/31/12 EUR
Outstanding Invoices	168,888	209,269
Accrued Vacation Pay	142,307	168,619
Taxes and Social Security	115,396	158,601
401(k) Payments	102,498	102,178
Bonuses and Severance Payments	69,001	74,262
Other	20,563	33,548
Total	618,654	746,477

11. Provisions

The provisions in the amount of 119,677 EUR (2012: 128,636 EUR) were essentially created for a legal dispute with a former consultant. The outcome of this litigation cannot yet be predicted.

12. Liabilities from Finance Leases

In addition to the lease agreements concluded in previous years, in 2013, Artnet Corp. concluded one additional finance lease agreement with a three-year term. At the end of the respective contractual period, there is a purchase option for Artnet Corp. The liabilities from finance leases are carried at the present value of the future lease payments using the discount rate on which the lease agreement is based. The leased assets include a server, other computer equipment, software, and new office and operating equipment. The minimum lease payments were reconciled to the present value as follows:

12/31/2013	Total	< 1 year EUR	> 1–3 years EUR
Present Value of Minimum
Lease Payments	424,330	219,931	204,399
Interest Portion	40,099	24,571	15,528
Minimum Lease Payments	464,429	244,502	219,927
12/31/2012	Total	< 1 year EUR	> 1–3 years EUR
Present Value of Minimum
Lease Payments	592,023	225,171	366,852
Interest Portion	66,256	36,750	29,506
Minimum Lease Payments	658,279	261,921	396,358

The carrying amount of liabilities from finance leases corresponds to their fair value.

13. Deferral Rent Incentive

Non-current liabilities from deferrals for the rent incentive relate to the advantages from rent-free periods in the amount of 256,137 EUR (2012: 202,663 EUR) for the office premises rented in New York as of December 31, 2013. These are to be deferred over the term of the rental agreement.

14. Deferred Revenue

Customers make advance payments for certain service contracts with artnet. The prepaid amounts are realized as sales revenue only when artnet provides the agreed service and includes the amount in the deferred revenue liabilities appropriate to the period. Deferred revenue as of December 31, 2013 amounted to 1,425,657 EUR compared to 1,332,152 EUR in the previous year.

15. Equity

	12/31/2013	12/31/2012
Authorized No-Par Value Shares (accounting par value 1.00 EUR per share)	5,631,067	5,631,067
Issued and Fully-Paid No-Par Value Shares (accounting par value 1.00 EUR per share)	5,552,986	5,552,986
Treasury No-Par Value Shares	78,081	78,081

artnet AG has one class of ordinary bearer shares that carry no right to fixed income.

Authorized Capital

The Shareholders' Meeting of artnet AG on July 15, 2009, authorized the Board of Directors, with the approval of the Supervisory Board, to increase the capital stock by up to 2,800,000 EUR before July 14, 2014, through the issue of 2,800,000 new no-par value bearer shares in exchange for cash contributions or contributions in kind (Authorized Capital 2009/I).

So far, no ordinary shares were issued from the Authorized Capital 2009/I.

Conditional Capital

The Shareholders' Meeting on July 15, 2009, conditionally increased the capital stock by 560,000 EUR through the issue of up to 560,000 new no-par value bearer shares to members of the Company's Board of Directors, members of the management of affiliated entities, and employees of artnet AG or its affiliated entities (Conditional Capital 2009/I). No shares have yet been issued from conditional capital.

Treasury Shares

As of December 31, 2013, artnet AG held 78,081 of its own shares, representing 1.4% of common stock. The Shareholders' Meeting of artnet AG on July 14, 2010, authorized the Board of Directors, with the approval of the Supervisory Board, to acquire its own shares until the end of July 13, 2015, up to a 10% stake in current share capital. At no point may the acquired shares, together with other shares owned by the Company or attributable to the Company under Articles 71 et seq. AktG (German Stock Corporation Act), constitute more than 10% of the share capital. The time limit applies only to acquiring—and not holding—the shares.

16. Capital Management

The capital structure of the artnet Group consists essentially of current liabilities from current business transactions, longterm finance lease obligations, a shareholder's loan, and equity. Equity is attributable to the shareholders of the parent company, and consists primarily of issued shares, capital reserve, and accumulated results of the Group. In addition, Artnet Corp. entered into various finance lease arrangements in the fiscal year and in the previous years, which will require payments over the next three to four years. In addition, Artnet Corp. entered into an operating lease agreement for new office space, which will require payment over the next nine years. All other business activities are currently financed by the cash balance and the operating cash flows.

17. Financial Instruments and Risks Arising from Financial Instruments

Categories of Financial Instruments

The artnet Group's financial assets are cash and cash equivalents, accounts receivable, and rent security deposits. These financial assets are classified under the category "Loans and Receivables."

The Group's financial liabilities are accounts payable, other liabilities, and liabilities arising from finance leases. Accounts payable and other liabilities are measured at amortized cost. Liabilities arising from finance leases are measured with their present value in accordance with IAS 17.

Both the carrying amounts of financial assets and the carrying amounts of financial liabilities are a reasonable approximation of their fair value. No financial assets or financial liabilities were designated at fair value.

In the business years 2013 and 2012, the artnet Group did not use any derivative financial instruments.

Net Results from Financial Assets and Liabilities

The following chart shows the net results arising from financial assets and liabilities:

	Net Results 2013 EUR	Net Results 2012 EUR
Loans and Receivables	(99,395)	(152,492)
Financial Liabilities	(13,798)	(42,517)
Total	(113,193)	(195,009)

The components of the net results are interest income and expenses, gains or losses from exchange rate differences, and bad debt expenses for doubtful accounts and write-offs.

Credit Risk

Credit risk refers to the risk in which a counterparty defaults on its contractual obligations, resulting in financial loss to the Group. The financial assets represent the artnet Group's maximum exposure to credit risk.

The artnet Group's credit risk is primarily attributable to its accounts receivable. The amount presented in the balance sheet is net of allowances for doubtful accounts, estimated by management, based on the aging of the receivable portfolio and customer payment trends.

artnet has no significant concentration of default risk because the exposure is distributed over a large number of customers, including individuals and entities dealing in the Fine Art market. Nevertheless, the global economic downturn could negatively influence the solvency of the Group's customers, leading to an increase in the average credit period, or, at worst, leading to an increase in customer default. This would negatively affect the Group's earnings, as well as its financial position. artnet tries to counter such risks by agreeing to upfront payments with customers whenever possible.

Liquidity and Interest Risk

The liquidity risk is the risk that the artnet Group cannot meet financial obligations on the due date. Therefore, the aim is to provide sufficient liquidity to meet liabilities on time. To this end, the artnet Group is reliant on generating a positive cash flow from operating activities. Liquidity risk is constantly (daily) revalued by using a deviation analysis of current and monthly cash equivalents as reported in the liquidity planning, which ensures a quick response to changes in the risk potential. Management expects a positive operating cash flow for the 2014 fiscal year, based mainly on planned sales increases. If the expected revenue increases do not occur, planned investments may be rescheduled, or their implementation may be extended.

The artnet Group faces no material interest rate risk. The Group's companies have several interest-bearing finance lease agreements in the amount of 424,330 EUR (2012: 592,023 EUR) and a shareholder loan in the amount of 500,000 EUR (2012: 0). Other current liabilities and accrued expenses have a remaining term of less than one year.

The gross cash flows arising from financial liabilities, including anticipated interest payments, are shown in the following chart:

12/31/2013	Carrying Amount EUR	Gross Cash Flow EUR	Gross Cash Flow EUR	Gross Cash Flow EUR
		Total	< 1 Year	> 1 Year
Liabilities at Amortized
Costs	1,239,149	1,265,816	724,149	541,667
Liabilities from Finance
Leases	424,330	464,429	244,502	219,927
12/31/2012	Carrying Amount EUR	Gross Cash Flow EUR	Gross Cash Flow EUR	Gross Cash Flow EUR
		Total	< 1 Year	> 1 Year
Liabilities at Amortized
Costs	956,153	956,153	956,153	-

As of December 31, 2013, liabilities at amortized cost included the shareholder loan, including accrued interest in the book value of 515,000 EUR.

Market Risk—Interest Rate Risk

Market risks are mainly relevant in the form of foreign currency exchange risks for the Group's companies, as most of the revenues are generated in US dollars, but a certain amount of the costs of the Group's companies have to be paid in euros. The artnet Group controls these currency exchange risks by invoicing its European customers in euros, and using these cash payments to fulfill its obligations in the foreign currency. Besides the US-dollar-to-euro exchange rate risk, the artnet Group is also exposed to the USdollar-to-British-pound exchange rate risk, but on a smaller scale.

The carrying amounts of the Group's monetary assets and monetary liabilities, denominated in currencies other than the US dollar at the reporting date, are as follows:

		Financial Assets		Financial Liabilities
Foreign Currency	12/31/2013 kEUR	12/31/2012 kEUR	12/31/2013 kEUR	12/31/2012 kEUR
EUR	1,057	497	710	278
GBP	344	212	3	17

The following table details the Group's sensitivity to a 10% increase and decrease of the US dollar against the euro and the British pound. The sensitivity analysis includes only outstanding foreign-currency-denominated monetary items, and adjusts their translation at the balance sheet date in accordance with a 10% change in foreign currency rates. A positive number below indicates an increase in profit and other equity.

Against USD	12/31/2013 kEUR	12/31/2012 kEUR	12/31/2013 kEUR	12/31/2012 kEUR
+10%
Result	(74)	(31)	(25)	(16)
Equity	59	11	(1)	(2)
-10%
Result	90	38	31	19
Equity	(72)	(14)	1	3

Interest Rate Risk

The finance leases of the Group bear a fixed interest rate. As of December 31, 2013, floating-rate liabilities are solely comprised of the interest rate limit of the shareholder loan. Therefore, the artnet Group is currently exposed only to an insignificant interest rate risk.

18. Share-Based Payments

Stock Option Plan

Conditional Capital 2009/I serves as the basis for the stock option plan, also resolved by the Shareholders' Meeting on July 15, 2009 (2009 stock option plan), comprising 560,000 shares of common stock with a nominal value of 1.00 EUR each. Of this amount, up to 290,000 shares are available for the granting of options to employees of the Company and affiliated entities; up to 240,000 shares are available for the granting of rights to the members of management of entities affiliated with artnet AG; and up to 30,000 shares are available for issue to the Board of Directors.

In 2009 and 2010, stock option plans were granted to the management and employees of the subsidiary Artnet Corp. from the 2009 stock option programs.

The number of outstanding options remained constant each year at 323,907, as no options were granted in 2012, no options were forfeited, and no options granted in previous years were waived. As was the case in the previous year, the outstanding options could not be exercised. The weighted average exercise price for the outstanding options totaled 4.85 EUR on December 31, 2013, unchanged from the previous year. The outstanding options on December 31, 2013 had a weighted average remaining term of 6.14 years (December 31, 2012: 7.14 years).

The fair value of the stock options was calculated in 2009 and 2010 for the date on which the options were granted based on the binomial model, on the basis of the assumptions of financial statements of prior years.

The options can be exercised for the first time at the end of two years, beginning at midnight on the option allotment date, and then up until the end of their term; they expire 10 years after the grant date. Rights may not be exercised in the period from two weeks before the end of the quarter until the end of the first trading day after publication of the quarterly results, and also may not be exercised in the period from two weeks before the end of the fiscal year until the end of the first trading day after publication of the results for the past fiscal year.

The plan also sets out that rights may only be exercised if the closing market price determined before the date of the planned exercise of the option exceeds the exercise price by at least 10%. If this performance target has been reached on one occasion, the options can be exercised during the exercise periods, independently of further price development of the artnet shares over their term.

9,316 EUR was spent on share-based payment in the 2013 fiscal year, while 139,393 EUR was spent in 2012.

The significant reduction compared to the previous year is based on the ending of the distribution period for the majority of the options granted.

19. Personnel Expenses

The consolidated statement of comprehensive income includes personnel expenses of discontinued divisions for the fiscal years stated in the following expense categories:

Personnel Expenses by Expense Category	2013 kEUR	2012 kEUR
Cost of Sales	3,867	4,344
Sales and Marketing	1,228	1,039
General and Administrative Expenses	1,370	1,168
Product Development	1,665	1,378
Total Personnel Expenses	8,127	7,927

The total personnel costs in the 2013 and 2012 fiscal years include social security expenses of 880 kEUR and 834 kEUR, and 401(k) expenses of 116 kEUR and 103 kEUR.

As of December 31, 2013, there were 106 full-time employees, as compared to 118 in the previous year. Additionally, the Group employed 6 part-time employees in 2013, as compared to 10 in the previous year.

The average number of employees in the 2013 and 2012 fiscal years was 125 and 118, respectively. The employees were engaged in the following activities:

	2013	2012
Cost of Sales	76	92
Sales and Marketing	18	11
General and Administrative Expenses	13	9
Product Development	18	6
Total	125	118

20. Defined Contribution Plans

The subsidiary Artnet Corp. has a savings plan, which qualifies under Section 401(k) of the Internal Revenue Code of the United States for all qualifying employees. The assets of the plan are held separately from those of Artnet Corp. in funds under the control of the trustees. Participating employees may contribute up to 100% of their annual salary, but not more than statutory limits. Artnet Corp. has a discretionary matching contribution each year. In 2013, the matching contributions were 116 kEUR, compared to 103 kEUR in the previous year.

21. Earnings Per Share

Basic earnings per share are calculated by dividing net income by the weighted average number of outstanding common shares during the year.

Diluted earnings per share are calculated in the same manner as basic earnings per share, with the exception that the average number of outstanding shares increases by adding the potential number of shares from stock option conversions.

The calculation of earnings per share is based on the following data:

	2013 EUR	2012 EUR
Numerator (Earnings): Net income for the fiscal year	40,470	(2,426,695)
Denominator (Number of Shares): Weighted average number of ordinary shares used to calculate basic earnings per share (issued and fully paid ordinary shares)	5,552,986	5,552,986
Effect of potential dilutive shares from stock options	-	-
Weighted average number of ordinary shares used to calculate dilutive earnings per share	5,552,986	5,552,986

The weighted average share price of stock options (4.85 EUR) is higher than the weighted average exercise price in 2013 (2.68 EUR). As a result, there are no diluted shares.

22. Other Disclosures on the Consolidated Statement of Comprehensive Income

Net Operating Income

The net operating income stated results after the deduction of the following operating expenses:

	2013 kEUR	2012 kEUR
Scheduled Amortization/Depreciation	440	501
Personnel Expenses	8,127	7,929

Scheduled depreciation and amortization are presented in the consolidated statement of comprehensive income as part of the cost of sales. The breakdown of the amortization of intangible assets and tangible assets is listed in sections 6 and 7 of the consolidated notes.

Other Income and Expenses

During the year under review, other income and expenses mainly include the realized and unrealized income from exchange rate fluctuations in the amount of 96 kEUR, and an insurance reimbursement in the amount of 12 kEUR. This income is offset by period expenses in the amount of 32 kEUR. In 2012, other income included, in particular, income from the reversal of provisions amounting to 160 kEUR, which was offset by expenses for litigation in the amount of 92 kEUR, and other non-operating expenses in the amount of 116 kEUR.

Financial Result

The financial result in 2013 primarily includes interest expenses for liabilities from finance leases in the amount of 35 kEUR (2012: 43 kEUR), and for the shareholder loan of 15 kEUR, granted in 2013.

23. Discontinued Operations

In June 2012, the management of the Company decided to discontinue artnet Magazine. In the 2013 fiscal year, the discontinued operation incurred no further expenses.

The result from discontinued operations in the previous year is shown under a separate item in the consolidated statement of comprehensive income.

No more assets were to be allocated to the artnet Magazine division (discontinued operations) as of December 31, 2013. In contrast, 36 kEUR (2012: 52 kEUR) of the provisions were due to the discontinued operations.

24. Segment Reporting

The Group reports on the operating segments in the same way it reports operating segment information to the Management and Supervisory Boards.

The Group's reporting is based on the following four segments:

• • The artnet Galleries segment presents artwork from member galleries' online
• • The artnet Price Database comprises all database-related products, including the artnet Price Database Fine Art and Design and the artnet Price Database Decorative Art, as well

as the products based thereupon, including artnet Market Alert, artnet Market Reports, artnet Monographs, and, since 2012, artnet Analytics

• • artnet Advertising produces banner as well as national and international advertising on the website
• • artnet Auctions provides a platform to buy and sell artworks online

The segment artnet Magazine was discontinued in June 2012 and reported as a discontinued operation in the previous year.

The other segments are shown, in total, as continued operations.

Segment performance is evaluated based on profit or loss before taxes. Non-directly attributable expenses are allocated to the reportable segments, based primarily on the headcount and revenue for each reportable segment.

An assignment of assets or liabilities for each reportable segment is not provided to the management. Therefore, segment-related assets and liabilities are not shown.

Presentation of Segment Reporting

artnet	artnet	artnet	artnet
Galleries	Price Database	Auctions	Advertising	Total
4,747,578	5,094,173	2,098,961	1,027,745	12,968,457
1,520,509	1,840,028	2,064,893	317,097	5,742,528
3,227,068	3,254,144	34,068	710,648	7,225,929
601,121	773,202	334,729	125,329	1,834,381
1,024,447	1,244,755	826,745	216,292	3,312,280
636,334	773,147	513,511	134,344	2,057,335
2,881	3,501	2,325	608	9,316
2,264,825	2,794,604	1,677,310	476,573	7,213,312
962,244	459,541	(1,643,242)	234,075	12,617
10,132	12,310	8,176	2,139	32,757
972,375	471,851	(1,635,066)	236,214	45,374
(1,517)	(1,843)	(1,224)	(320)	(4,904)
970,859	470,008	(1,636,290)	235,894	40,470

2012	artnet	artnet	artnet	artnet
EUR	Galleries	Price Database	Auctions	Advertising		Continued Operations Discontinued Operations
Revenue	4,915,582	5,123,047	2,366,673	1,082,247	13,487,549	46,555
Cost of Sales	1,508,476	2,009,209	2,185,483	309,857	6,013,025	848,637
Gross Profit	3,407,106	3,113,839	181,190	772,390	7,474,524	(802,082)
Operating Expenses
Sales and Marketing	817,116	854,876	285,713	179,901	2,137,606	-
General and Administrative	1,493,671	1,326,653	794,572	328,856	3,943,752	225,862
Product Development	663,805	696,603	417,216	146,147	1,923,771	-
Remuneration from Stock	48,097	50,475	30,231	10,590	139,393	-
Options
Total Operating Expenses	3,022,689	2,928,607	1,527,732	665,494	8,144,522	225,862
Operating Result	384,417	185,232	(1,346,542)	106,896	(669,997)	(1,027,944)
Net Interest Income and Other Income/Expenses	(27,495)	(656,750)	(17,283)	(6,054)	(707,581)	(2)
Profit Before Tax	356,922	(471,518)	(1,363,825)	100,842	(1,377,578)	(1,027,946)
Income Taxes	(7,305)	(7,666)	(4,592)	(1,608)	(21,171)	-
Result	349,617	(479,184)	(1,368,417)	99,234	(1,398,749)	(1,027,946)
Result from Discontinued Operations					(1,027,946)
Consolidated Result					(2,426,695)

The individual segments mostly include the following non-cash expenses:

2013 EUR	artnet Galleries	artnet Price Database	artnet Auctions	artnet Advertising	Total
Scheduled Amortization	136,006	165,248	109,755	28,714	439,723
Allowance for Bad Debts	77,012	82,634	34,048	16,671	210,366

2012 EUR	artnet Galleries	artnet Price Database	artnet Auctions	artnet Advertising	Total
Scheduled Amortization	174,021	182,813	108,351	36,156	501,341
Non-Scheduled Depreciation	-	627,895	-	-	627,895
Allowance for Bad Debts	61,731	64,850	38,436	12,826	177,843

25. Information by Geographic Region

The Group's operations are primarily located in the United States, represented by the subsidiary, Artnet Corp.

The following table provides an analysis of the Group's revenue by geographic market:

Revenue	2013 kEUR	2012 kEUR
United States	6,483	7,505
Europe	3,994	4,650
Other	2,491	1,333
Total	12,968	13,488

Assets by Geographic Region

The following table presents an analysis of the carrying amount of the Group's assets, and additions to property and equipment and intangible assets, analyzed by the geographic region in which the assets are located.

		Carrying Amounts of Assets		Additions to Fixed Assets
	12/31/2013 EUR	12/31/2012 EUR	12/31/2013 EUR	12/31/2012 EUR
United States	5,814,965	5,497,769	392,455	1,342,976
Germany	173,703	447,022	-	16,349
Great Britain	27,001	26,674	-	-
France	23,479	38,026	-	-
Total	6,039,148	6,009,471	392,455	1,359,325

The segment results and liabilities of the Group are not allocated by geographic region, as this is not possible in a meaningful way.

The Group's companies' scheduled amortization/depreciation was mostly due to the Group's non-current assets in the United States in the amount of 416 kEUR (2012: 462 kEUR).

26. Operating Leases and Other Obligations

Artnet Corp. has rented its offices in New York as part of noncancelable leases (operating leases) with a term through April 30, 2022.

For the office in Berlin, the Group has the option to renew the lease by up to six years. artnet UK Ltd. leases its London office as part of an anytime-cancelable lease.

As of December 31, 2013 and 2012, under the existing rental agreements result, the minimum rental payments are required in the following amounts:

Lease Payments	12/31/2013 EUR	12/31/2012 EUR
Expiring in less than One Year	665,169	648,185
Expiring Between Two and Five Years	2,771,535	2,762,083
Expiring in more than Five Years	3,302,873	4,302,947
Total	6,739,577	7,713,215

Rent expenses for the Group in the fiscal year were 730,534 EUR, and 738,493 EUR in the previous year. Proceeds from the sublease amounted to 0 EUR in 2013 and 4,306 EUR in 2012.

27. Auditor's Fees

Auditor's fees and expenses for the audit of the statutory financial statements of the Company and the consolidated financial statements amounted to 60,000 EUR, and 68,204 EUR in the previous year. In addition, the Company recorded 22,426 EUR in 2012, and 33,520 EUR in 2012, for other services. All fees are recognized as expenses in 2013 and 2012, respectively.

28. Related Party Transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Management Board

Jacob Pabst is the chairman and CEO of artnet AG, and is sole director of Artnet Corp.

In the 2013 and 2012 fiscal years, Mr. Pabst received from the Management Board of Artnet Corp. the following remuneration:

	2013 EUR	07/12–12/31/2012 EUR
Fixed Salary	225,960	106,989
Value of Additional Payments (Health Insurance)	5,400	2,475
Fixed Remuneration Components	231,360	109,464
Bonus (Variable Compensation)	-	-
Total	231,360	109,464

The previous sole Management Board member, Mr. Hans Neuendorf, announced his resignation during the annual General Meeting on August 8, 2012. During the transition period, two members were working for the Company.

In the previous year, Mr. Neuendorf received from artnet AG the following remuneration:

	01/01–08/08/2012 EUR
Fixed Salary	265,223
Value of Additional Payments (Company Car)	4,575
Fixed Remuneration Components	269,798
Bonus (Variable Compensation)	-
Total	269,798

Supervisory Board

• • John D. Hushon, Naples, Florida, USA, Chairman
• • Prof. Dr. Walter Rust, Berlin, Germany, Deputy Chairman until July 31, 2013
• • Dr. Jochen Gutbrod, Potsdam, Germany until April 30, 2013
• • Hans Neuendorf, Berlin, Germany, Member since June 12, 2013, Deputy Chairman since August 1, 2013
• • Piroschka Dossi Munich, Germany since August 1, 2013

For the period from May 1 to June 12, 2013, only two positions of the Supervisory Board were filled.

Mr. Neuendorf, and companies under his control, own 1,523,551 shares of artnet AG.

Remunerations in the following amounts were paid to the members of the Supervisory Board in the 2013 and 2012 fiscal years:

	2013 EUR	2012 EUR
John D. Hushon	50,000	50,000
Prof. Dr. Walter Rust	21,875	37,500
Dr. Jochen Gutbrod	8,333	25,000
Hans Neuendorf	18,750	-
Piroschka Dossi	10,417	-
Total	109,375	112,500

Mr. Hushon holds 53,054 shares of artnet AG. He has sold artworks on artnet Auctions, and paid vender commissions to Artnet Corp. in the amount of 6,100 USD in the previous year.

The remuneration report outlines the principles used for determining the compensation of the Supervisory Board of artnet AG. In addition, the report describes the policies and levels of compensation paid to Supervisory Board members.

Other Transactions with Related Parties

On August 10, 2012, a consulting agreement was concluded with Galerie Neuendorf AG for a two-year period. Hans Neuendorf is Galerie Neuendorf's CEO. Based on this agreement, Mr. Neuendorf shall provide his ongoing strategic advice concerning product development and business growth, in particular, at an international level. The agreement has an annual lump-sum remuneration of 360,000 EUR. The consultancy contract was, with the inclusion of the Supervisory Board's activities by Mr. Neuendorf, terminated on June 12, 2013. A consulting fee of 160,500 EUR, and reimbursement for out-of-pocket expenses in the amount of 8,153 EUR, has been expensed to date for 2013. As of December 31, 2013, liabilities to Galerie Neuendorf AG totaled 160,500 EUR. With an agreement signed on March 31, 2013, Mr. Neuendorf deferred his claims accrued from the consultancy contract until March 31, 2014. On October 8, 2013, both parties agreed that fees payable in the initial agreement shall be suspended as of June 12, 2013, and that fees payable prior to that time (but not paid by artnet) will be paid in nine monthly installments, starting in October 2013.

On March 28, 2013, the majority shareholder of the Company, Hans Neuendorf, granted a loan in the amount of 500,000 EUR, repayable by May 1, 2014. The loan is subject to a floating interest rate (30-day LIBOR plus 200 basis points), with a minimum interest rate of 4% per year. The interest expense for this loan amounted to 15,000 EUR in 2013. The accrued interest as of December 31, 2013 was not paid. In December 2013, both parties agreed to extend the loan agreement until May 1, 2015 under the existing conditions.

Ms. Sophie Neuendorf, a related party of Mr. Neuendorf, works for artnet AG as a social media account manager. In the 2013 fiscal year, her salary totaled 44,146 EUR, and 36,707 EUR in 2012.

Ms. Caroline Neuendorf, who is also related party of Mr. Neuendorf, was paid commission for the sale of artnet Monographs in 2013 in the amount of 800 EUR (2012: 800 EUR).

29. Accounting Estimates and Judgments

The preparation of the Group's consolidated financial statements requires management estimates and assumptions that affect reported amounts and related disclosures. All estimates and assumptions are made to the best of management's knowledge and belief in order to fairly present the Group's financial position and results of operations. The following accounting policies are significantly impacted by management's estimates and judgments:

Deferred Tax Assets

At each balance sheet date, the Group assesses whether the realization of future tax benefits is sufficiently probable to recognize deferred tax assets. This assessment requires the exercise of judgment on the part of management with respect to, among other things, benefits that could be realized from available tax strategies and future taxable income, as well as other positive and negative factors. The amount of deferred tax assets could be reduced if projected future taxable profits are lowered.

Capitalized Costs of Website Development

Capitalized website development costs relate to new products, material additions, or improvements to the website that the Company anticipates will produce revenue in the future. These costs include consulting fees and salaries. The revenue projections for these new products are based on management's best estimates, but actual results could vary from projections.

Impairment Test for artnet Analytics

The impairment test is based on assumptions concerning future cash inflows. Cash flow expectations are based on the management's best estimates. However, the actual amounts could differ from those projected.

30. Notifications According to the Wertpapierhandelsgesetz (WpHG -German Securities Trading Act)

August 20, 2013

1. Redline Capital Management S.A. with its registered office in Luxemburg, Luxemburg, informed us that its share of the voting rights in artnet AG fell below the threshold of 5% on August 13, 2013, and on this date amounts to 3.73% (210,035 voting rights of the total of 5,631,067 voting rights in artnet AG).

2. Instacom International S.A. SPF, with its registered office in Luxemburg, Luxemburg, informed us that its share of the voting rights in artnet AG fell below the threshold of 5% on August 13, 2013 and on this date amounts to 3.73%, (210,035 voting rights of the total of 5,631,067 voting rights in artnet AG). The entire voting rights are attributable to Instacom International S.A. SPF via Redline Capital Management S.A. pursuant to Section 22 para. 1 sent. 1 no. 1 WpHG.

3. Mr. Vladimir Evtushenkov, Russia, informed us that his share of the voting rights in artnet AG fell below the threshold of 5% on August 13, 2013 and on this date amounts to 3.73%, (210,035 voting rights of the total of 5,631,067 voting rights in artnet AG). The entire voting rights are attributable to Mr. Vladimir Evtushenkov via Redline Capital Management S.A. and Instacom International S.A. SPF pursuant to Section 22 para. 1 sent. 1 no. 1 WpHG.

October 28, 2013

1. Artis Capital Management, L.P., with its registered office in San Francisco, California, United States of America, informed us on October 23, 2013 that its share of the voting rights in artnet AG fell below the threshold of 5% on September 24, 2013 and on this date amounts to 4.47% (251,818 voting rights of the total of 5,631,067 voting rights in artnet AG). All such voting rights are attributed to Artis Capital Management, L.P. pursuant to section 22 (1) sent. 1 no. 6 WpHG, inter alia through other entities managed by Artis Capital Management, L.P., all of which hold less than 3% of the voting rights.

2. Artis Capital Management, Inc., with its registered office in San Francisco, California, United States of America, informed us on October 23, 2013 that its share of the voting rights in artnet AG fell below the threshold of 5% on September 24, 2013 and on this date amounts to 4.47% (251,818 voting rights of the total of 5,631,067 voting rights in artnet AG). The entire voting rights of 4.47% are attributable to Artis Capital Management, Inc. pursuant to Section 22 (1) sent. 1 no. 6 WpHG in connection with Section 22 (1) sent. 2 WpHG.

3. Mr. Stuart L. Peterson, United States of America, informed us on October 23, 2013 that his share of the voting rights in artnet AG fell below the threshold of 5% on September 24, 2013 and on this date amounts to 4.47% (251,818 voting rights of the total of 5,631,067 voting rights in artnet AG). The entire voting rights of 4.47% are attributable to Mr. Stuart L. Peterson pursuant to Section 22 (1) sent. 1 no. 6 WpHG in connection with Section 22 (1) sent. 2 WpHG.

November 19, 2013

1. Weng Fine Art AG with its registered office in Krefeld, Germany, informed us on November 15, 2013 that its share of the voting rights in artnet AG exceeded the threshold of 3% on November 14, 2013 and on this date amounts to 4.53% (255,000 voting rights of the total of 5,631,067 voting rights in artnet AG).

2. Mr. Rüdiger K. Weng, Germany, informed us on November 15, 2013 that his share of the voting rights in artnet AG exceeded the thresholds of 3% on November 14, 2013 and on this date amounts to 4.53% (255,000 voting rights of the total of 5,631,067 voting rights in artnet AG). The entire voting rights are attributable to Mr. Rüdiger K. Weng pursuant to sec. 22 para. 1 sent. 1 no. 1 WpHG via Weng Fine Art AG.

November 20, 2013

1. Weng Fine Art AG with its registered office in Krefeld, Germany, informed us on November 19, 2013 that its share of the voting rights in artnet AG exceeded the threshold of 5% on November 15, 2013 and on this date amounts to 5.33% (300,000 voting rights of the total of 5,631,067 voting rights in artnet AG).

2. Mr. Rüdiger K. Weng, Germany, informed us on November 19, 2013 that his share of the voting rights in artnet AG exceeded the thresholds of 5% on November 15, 2013 and on this date amounts to 5.33% (300,000 voting rights of the total of 5,631,067 voting rights in artnet AG). The entire voting rights are attributable to Mr. Rüdiger K. Weng pursuant to sec. 22 para. 1 sent. 1 no. 1 WpHG via Weng Fine Art AG.

3. Artis Capital Management, L.P., with its registered office in San Francisco, California, United States of America, informed us on November 19, 2013 that its share of the voting rights in artnet AG fell below the threshold of 3% on November 14, 2013 and on this date amounts to 0.00% (0 voting rights of the total of 5,631,067 voting rights in artnet AG).

4. Artis Capital Management, Inc., with its registered office in San Francisco, California, United States of America, informed us on November 19, 2013 that its share of the voting rights in artnet AG fell below the threshold of 3% on November 14, 2013 and on this date amounts to 0.00% (0 voting rights of the total of 5,631,067 voting rights in artnet AG).

5. Mr. Stuart L. Peterson, United States of America, informed us on November 19, 2013 that his share of the voting rights in artnet AG fell below the threshold of 3% on November 14, 2013 and on this date amounts to 0.00% (0 voting rights of the total of 5,631,067 voting rights in artnet AG).

Berlin, March 25, 2014

Jacob Pabst Chairman and CEO, artnet AG

English Translation of the Independent Auditors' Report

We have audited the consolidated financial statements prepared by artnet AG, Berlin, comprising the consolidated statement of financial position, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of cash flows, and the notes to the consolidated financial statements, together with the Group management report for the business year from January 1 to December 31, 2013. The preparation of the consolidated financial statements and group management report in accordance with IFRS as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315a (1) German Commercial Code (HGB) are the responsibility of the legal representatives of the Company. Our responsibility is to express an opinion on the consolidated financial statements and on the Group management report based on our audit.

We conducted our audit of the consolidated financial statements in accordance with § 317 HGB [Handelsgesetzbuch; "German Commercial Code"] and German generally accepted standards for the audit of financial statements promulgated by the Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer – IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position, and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework, and in the Group management report, are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group, and expectations as to possible misstatements, are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the Group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in the consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used, and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the Group management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRS as adopted by the EU and the additional requirements of German Commercial Law pursuant to § 315a (1) HGB, and give a true and fair view of the net assets, financial position, and results of operations of the Group, in accordance with these requirements. The Group management report is consistent with the consolidated financial statements, as a whole provides a suitable view of the Group's position, and suitably presents the opportunities and risks of future development.

Hamburg, March 25, 2014

Ebner Stolz GmbH & Co. KG

Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft

Thomas Götze Wirtschaftsprüfer Dirk Schützenmeister Wirtschaftsprüfer

Management

Left to Right: Michael Probst, Thierry Dumoulin, Jacob Pabst, Lindsay Moroney, and Saumin Patel

Jacob Pabst

Chairman and CEO, artnet AG CEO, Artnet Worldwide Corp.

Jacob Pabst held various leadership roles at artnet before taking on the position of chairman and CEO. In 2000, Jacob came to artnet with a background in economics, and began doing sales in Europe. He quickly became involved as a leader in product development and new technologies. He was appointed chief information officer in 2009, and became responsible for product development, engineering, content management, SEO, and quality assurance. Jacob held this position until January 2012, at which time he became president of Artnet Worldwide Corporation, and led operations in New York. Under his direction, artnet launched several new products, including artnet Auctions, artnet News, and artnet Analytics.

Thierry Dumoulin

Vice President of Marketing & Sales, Artnet Worldwide Corp.

The vice president of marketing and sales, Thierry Dumoulin, joined artnet from Saatchi & Saatchi X, where he was the managing director of their New York office. He has previously worked at global communications networks such as Bates, JWT, and Imagination, as well as at Sotheby's. He works to increase awareness of the artnet brand and products among our key target groups, as well as to generate revenue from galleries around the world.

Benjamin Genocchio

Editor in Chief of artnet News, Artnet Worldwide Corp.

The editor-in-chief of artnet News, Benjamin Genocchio, is a widely respected writer and editor, with two decades of experience in both the print and online art news business. He began his career in his native Australia as a reporter, critic, and later correspondent, for The Australian newspaper before moving to New York in 2002 to write for The New York Times. In 2010, he became editorial director of Louise Blouin Media, assuming the posts of editor-in-chief of Art + Auction magazine and the website BLOUIN ARTINFO. In January 2014, Ben joined artnet to build, staff, and launch artnet News, the first 24-hour global art news and market website. He holds a PhD in art history, and is the author and editor of several books on Contemporary Art and artists.

Lindsay Moroney

Vice President of Operations, Artnet Worldwide Corp.

The vice president of operations, Lindsay Moroney, has an art history degree and experience working at a Contemporary Art gallery in New York. In 2013, she completed her master's thesis, and received an MA in Contemporary Art. She has worked in various departments across artnet during her nine years at the company. Lindsay launched and managed artnet's technology operations department, content and SEO department, and business intelligence team. In 2012, she led the operational restructuring for improved efficiency and streamlined business operations. She currently oversees operations globally and works to increase profitability across all products.

Saumin Patel

Vice President of Technology, Artnet Worldwide Corp.

The vice president of technology, Saumin Patel, has 16 years of experience in various technologies and industries, including entertainment and healthcare. He has been with artnet for six years, and before coming to artnet, he was a software architect at A.D.A.M. Inc. Saumin is responsible for managing the technology department, which is comprised of a software development team, an IT operations team, and a product management team. He leads the development, execution, and delivery of product and technology strategy.

Michael Probst

Vice President of Finance, Artnet Worldwide Corp.

The vice president of finance, Michael Probst, has a degree in economics and law from Lüneburg University in Germany, with a focus on tax advisory and auditing. He brings a wealth of experience in financial planning and analysis. It is his responsibility to enhance the company's profitability through more insightful and rigorous financial processes, such as optimized treasury management.

Roxanna Zarnegar

Senior Vice President of artnet Auctions, Artnet Worldwide Corp.

The senior vice president of artnet Auctions, Roxanna Zarnegar, has a wealth of experience and a proven track record, both within the art world and with Fortune 500 clients. Before helping world-renowned branding agency Baron and Baron optimize their business, Roxanna was a chief operating officer at Christie's Americas, where she was responsible for client services, auction and gallery operations, logistics, and production. Since joining artnet in January 2014, Roxanna leads the client experience, strategy, and development of artnet Auctions & Private Sales.

artnet AG

Supervisory Board

John Hushon, Chairman Hans Neuendorf, Deputy Chairman Piroschka Dossi

Management Board Jacob Pabst, Chairman and CEO

Artnet Worldwide Corporation

Jacob Pabst, CEO

artnet France sarl

Jacob Pabst, CEO

artnet UK Ltd.

Jacob Pabst, CEO

Addresses

artnet AG

Oranienstraße 164 10969 Berlin info@artnet.de T: +49 (0)30 209 178-0 F: +49 (0)30 209 178-29

Artnet Worldwide Corporation

233 Broadway, 26th Floor New York, NY 10279 USA info@artnet.com T: +1-212-497-9700 F: +1-212-497-9707

artnet UK Ltd.

Morrell House 98 Curtain Road London EC2A 3AF Great Britain info@artnet.co.uk T: +44 (0)20 7729 0824 F: +44 (0)20 7033 9077

Investor Relations

You can find information for investors and the annual financial statements at www.artnet.com/investor-relations.

If you have further queries, please send an email to ir@artnet.com or send your inquiry by mail to one of our offices.

German Securities Code Number

The common stock of artnet AG is traded on the Prime Standard of the Frankfurt Stock Exchange under the symbol "ART." You can find notices of relevant company developments at www.artnet.com/investor-relations.

Wertpapier-Kenn-Nummer

[WKN] A1K037 ISIN DE000A1K0375

Concept and Production Artnet Worldwide Corporation

©2014 artnet AG, Berlin