GOOGLE IRELAND LIMITED (THE “COMPANY") DIRECTORS’ REPORT AND FINANCIAL STATEMENTS FINANCIAL YEAR ENDED 31 DECEMBER 2009 19t65434.2 Certified to be a true copy of the Auditor's Report, Directors’ Report, Profit & Loss Account and Balance Sheet as sent to the sole member of the Company in accordance with the European Communities (Single-Momber Private Limited Companies) Regulations, 1994. Directoraia aa a8 38 aa BB Sea yr Google Ireland Limited Directors’ Report and Financial Statements Year Ended 31 December 2009 Ernst & Young 3Y] ERNST & YOUNGGoogle Ireland Limited Directors’ Report and Financial Statements 2009 CONTENTS Page DIRECTORS AND OTHER INFORMATION 2 DIRECTORS’ REPORT 3-6 INDEPENDENT AUDITORS' REPORT 7-8 PROFIT AND LOSS ACCOUNT 9 BALANCE SHEET 10 NOTES TO THE FINANCIAL STATEMENTS. 11-27Google Ireland Limited se DIRECTORS AND OTHER INFORMATION Board of Directors Noel Kelly (resigned 30 April 2009) Ronan Harris (appointed 28 May 2009) John Herlihy Graham Law (UK) Lloyd Martin (USA) John Walker (USA) Secretary and Registered Office Matsack Trust Limited Gordon House Barrow Streot Dublin 4 Registered Number 368047 Auditors, Emst & Young Chartered Accountants Emst & Young Building Harcourt Centre Harcourt Street Dublin 2 Solicitors Matheson Ormsby Prentice 70 Sir John Rogerson's Quay Dublin 2 Bankers. Aled trish Banks plc PO Box 452 Ballsbridge Dublin 4 Citigroup ple clo 1 Northwall Quay Dublin 4Google Ireland Limited DIRECTORS’ REPORT The directors present their annual report and audited financial statements for the year ended 31 December 2009. Principal activities and review of the development and pertormance of the business Google Ireland Limited ("the company") is a wholly owned subsidiary of DoubleClick Internet Ireland Limited, whose ultimate parent undertaking is Google inc. ("Google"). ‘The company's automated search technology helps users obtain near instant access to relevant information from its vast online index. The company generates revenue by delivering relevant, cost-effective, online advertising, Businesses use the AdWords program to promote their products and services with targeted advertising. In addition, the thousands of third-party websites that comprise the Google network use the Google AdSense program to deliver relevant advertisements that generate revenue and enhance the user experience. ‘The company is focused on ensuring continued and sustainable growth. Headcount increased from 1,316 to 1,387 in 2009, an increase of 5.4%. The company operates a top class facility in Dublin and believes that it attracts the best and brightest people for a common purpose - its mission is to organise the world's information and make it universally accessible and useful. The company's investment in its human capital and ‘campus-like workplace has been recognised by the Great Places to Work Institute. Position during the financial year There were no new products or services introduced during the financial year ended 31 December 2009 that had a material impact on the financial statements. There were no other special factors or exceptional items that affected performance in the year under review. Review of key performance indicators Turnover Tumover increased from €6,739 million to €7,869 million in 2009, an increase of €1,130 millon, This increase {s due to a number of factors: + The continued rapid growth in the online advertising market since the prior year, and ‘+ The continued emphasis on developing the business in the European and Asia Pacific markets. The advertising revenue growth resulted primarily from increases in the total number of paid clicks and ads displayed through Google's program, rather than from changes in the average fees realised. The increase in the number of paid clicks was due to an increase in aggregate traffic both on Google's web sites and those of Google Network members, an increase in the number of Google Network members, certain improvements in the monetisation of traffic on Google's web sites and those of Google Network Member web sites and the continued expansion of Google's advertiser base, Cost of sales Cost of sales increased from €2,063 million to €2,356 million in 2009, an increase of €293 million, Cost of ‘sales consists primarily of traffic acquisition costs. These costs consist of amounts ultimately paid to Google Network members, as well as to partners who direct search queries to Google's websites. These amounts are primarily based on revenue share arrangements under which the company pays its Google Network members and other partners a portion of the fees it receives from advertisers. Tho increase in the year under review was primarily the result of additional traffic acquisition costs, additional data centre costs, additional credit card and other transaction fees and additional expenses related to acquiring content on Google's web sites.Google Ireland Limited DIRECTORS’ REPORT - continued Review of key performance indicators - continued Administrative expenses Administrative expenses increased from €4,674 million to €5,468 million, an increase of €794 milion in 2009. This increase is related to a number of factors: ‘* An increase in headcount necessary to support the growth of the business; ‘+ Anincrease in sales and marketing efforts across the EMEA region: and ‘+ Anincrease in the royalties paid as a result of increases in recorded turnover. Tho profit and loss account and balance sheet are set out on pages 9 and 10, respectively. The profit for the financial year, amounting to €30.2 millon (2008: €2.5 million), has been added to reserves which will be carried forward to the following year. ‘The directors do not recommend the payment of a dividend. Principal risks and uncertainties facing the business The company operates in a market which is characterised by continuous change. As a result, the company faces risks and uncertainties which may have a significant impact on its ability to achieve continued success, within its market. These risks and uncertainties are summarised as follows: ‘+ Competition from traditional media companies may not be included in the adverts advertisers, which could harm its operating results; ‘+ If Google does not continue to innovate and provide products and services that are useful to users it may ot remain competitive and revenues and operating results could be impacted; + Tumover is generated almost entirely from advertising and the reduction in spending by or loss of advertisers could seriously harm the business; ‘+ There is a reliance on Google Network members for a significant portion of revenues and benefit rom association with them, The loss of these members could adversely affect the business; ‘+ The business depends on continued and unimpeded access to the intemet by the company and by users. Intemet access providers may be able to block, degrade, or charge for access to certain of the company's, products and services, which could lead to additional expenses and the loss of users and advertisers. + The business depends on a strong brand, and if the company is unable to maintain and enhance the brand, the ability to expand the base of users, advertisers and Google Network members will be impaired and the business and operating results will be harmed; ‘+ Acquisitions and investments of Google could resuit in operating difficulties, dilution, and other harmful ‘consequences to the company; ‘+ Privacy concems and breached security measures relating to the company’s technology could damage the company’s reputation and deter current and potential users from using the company’s products and services; ‘+ Google is, and may in the future be, subject to intellectual property rights claims, which could limit the ‘company's ability to use certain technologies in the future; + I the company fails to detect click fraud or other im advertisers, which would cause the business to sutter; and ‘+ The company's business and operations are experiencing rapid growth. if the company fails to effectively manage its growth, its business and operating resulls could be harmed. 8, it could lose the confidence of itsGoogle Ireland Limited Pe a ase SE aE eet te LESSEE Stree eee eee Hee DIRECTORS' REPORT - continued Donations The company did not make any political donations during the year. Research and development The company has incurred €18.8 million (2008: €19.5 million) in research and development expenditure during the year, Future developments The directors do not anticipate any changes in the nature of the business in the forthcoming year. Important events since the year end There have been no important events since the year end. Directors and secretary and their interests. The present directors are as listed on page 2 and, unless otherwise indicated, have served throughout the year. {In accordance with the Articles of Association, the directors are not required to retire by rotation. Neither the directors, the company secretary, their spouses nor minor children had any interest in the shares of the company, its parent undertakings or other group undertakings at the beginning of the year, or date of appointment, if later, and the end of the year with the exception of those listed below: A131 December 2009 At31 December 2008 Number of Number of Number of Number of restricted options —_—_restricted options. stock units, stock units Ronan Harris 2,030 2,410 1,922" 1,610" John Herfihy 9,488 17,000 : 17,000 Graham Law 220 870 180 770 Lloyd Martin 300 1,991 160 2,130 John Watker 19,743 13,353 27,991 12,334 “at date of appointment All shares or options to acquire shares relate to Class A Common Stock of US$0.001 par value in Google inc. Books of account The directors are responsible for ensuring that proper books and accounting records, as outlined in Section 202 of the Companies Act, 1990, are kept by the company. The measures taken by the directors to achieve this include the implementation of necessary policies and procedures for recording transactions, the ‘employment of competent accounting personnel with appropriate expertise and the provision of adequate resources to the financial function. ‘The appropriate accounts and returns are kept at Gordon House, Barrow Street, Dublin 4. | 1 | | i | | /Google Ireland Limited SS . DIRECTORS’ REPORT - continued Statement of directors’ responsibilities in respect of the financial statements The directors are responsible for preparing the financial statements in accordance with applicable Irish law and Generally Accepted Accounting Practice in Ireland including the accounting standards issued by the Accounting Standards Board and promulgated by Chartered Accountants Ireland. Company aw requires the directors to prepare financial statements for each financial year which give a true ' ‘and fair view of the state of the affairs of the company and of the profit or loss of the company for that year. In : preparing these financial statements the directors are required to: * select suitable accounting policies and apply them consistently; ‘+ make judgements and estimates that are reasonable and prudent; and * prepare the financial statements on the going concem basis unless it is inappropriate to presume that the ‘company will continue in business. The directors are responsible for keeping proper books of account that disciose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements are prepared in accordance with accounting standards generally accepted in Ireland and comply with the Companies Acts, 1963 to 2009. They are also responsible for safeguarding the assets of the company and Q hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Auditors : The auditors, Emst & Young, Chartered Accountants, will continue in office in accordance with Section 160(2) of the Companies Act, 1963. On behalf of the board Director | Puy ove (Cn F) vate: 39-04:10ERNST & YOUNG iw INDEPENDENT AUDITORS’ REPORT TO THE MEMBER OF GOOGLE IRELAND LIMITED We have audited the company's financial statements of Google Ireland Limited for the year ended 31 December 2009 which comprise the Profit and Loss Account, the Balance Sheet and the related notes 1 to 27. These financial statements have been prepared under the ‘accounting policies set out therein. This report is made solely to the company's member, as a body, in accordance with section 193 of the Companies Act, 1990. Our audit work has been undertaken so that we might state to the company’s member those maiters we are required to state to it in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibilty to anyone other than the company and the company’s member as a body, for ‘our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors ‘The directors are responsible for the preparation of the financial statements in accordance with applicable Irish law and Accounting Standards issued by the Accounting Standards Board and promulgated by the Institute of Chartered Accountants in Ireland (Generally Accepted Accounting Practice in Ireland) as set out in the Statement of Directors! Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and Intemational Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Acts, 1963 to 2009. We also report to you our opinion as to: whether proper books of account have been kept by the ‘company; whether, at the balance sheet date, there exists a financial situation which may require the convening of an extraordinary general meeting of the company; and whether the information given in the Directors’ Report is consistent with the financial statements. In addition, we state whether we have obtained all the information and explanations necessary {or the purposes of our audit and whether the financial statements are in agreement with the books of account. We also report to you if, in our opinion, any information specified by law regarding directors’ remuneration and other transactions is not disclosed and, where practicable, include such information in our report. We read the Directors’ Report and consider the implications for our report if we become ‘aware of any apparent misstatements within it Basis of audit opinion We conducted our audit in accordance with Intemational Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's cireumstances, consistently applied and adequately disclosed. Continued/.wt meoeekane INDEPENDENT AUDITORS’ REPORT TO THE MEMBER OF GOOGLE IRELAND LIMITED (Continued) Basis of audit opinion (Continued) We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sulficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion {n our opinion the financial statements give a true and fair view, in accordance with Generally Accepted Accounting Practice in Ireland, of the state of affairs of the company as at 31 December 2009 and of its profit for the year then ended and have been properly prepared in accordance with the )Companies Acts, 1963 to 2009. ‘We have obtained all the information and explanations we consider necessary for the purposes of our audit. In our opinion proper books of account have been kept by the company. The financial statements are in agreement with the books of account. In our opinion the information given in the Directors’ Report is consistent with the financial statements. In our opinion, the balance sheet does not disclose a financial situation which under section 40(1) of the Companies (Amendment) Act, 1983 would require the convening of an extraordinary general ‘meeting of the company. E mt« Young, Emst & Young ‘Chartered Accountants and Registered Auditors Dubin 2 September 2010Google Ireland Limited PROFIT AND LOSS ACCOUNT For the Year Ended 31 December 2009 2009 Notes € ‘Tumover - continuing operations 2 7,868,530,282 Cost of sales (2,355,528,337) Gross profit 5,513,001,945 Administrative expenses (5,467 849,736) Operating profit - continuing operations 45,152,209 Interest receivable and similar income 4 2,263,347 Q Interest payable and similar charges 5 : Profit on ordinary activities before taxation 6 AT AN5,556 Tax on profit on ordinary activities 10 (17,173,369) Profit for financial year 20 30,242,187 2008 € 6,739,273,989 (2,063,108, 170) 4,676,165,819 (4,873,505,383) 2,660,496 12,096,127 (4,651,745) 10,104,818 573,890) 2,530,928 Turaver and operating profit arose solely {rom continuing operations. There is no difference between the profit before taxation and the profit for financial year stated above and their historical cost equivalents. ‘There are no recognised gains or losses in either year other than the profit attributable to the shareholder of the company, and therefore, no separate statement of total recognised gains and losses has been prepared. ‘On behait of the board Director i = 6E ir Dates 80.06 1Google Ireland Limited BALANCE SHEET As at 31 December 2009 Fixed assets Tangible assets Financial assets Current assets Stocks Debtors Cash at bank and in hand Creditors (amounts falling due within one year) Net current assets Total assets less current liabilities Creditors (amounts falling due after more than one year) Net assets Capital and reserves Called up share capital Capital contribution Non-distributable reserve Other reserves Profit and loss account Shareholders’ funds (On behalf of the board over pe YS Dates 40.08 10 Notes 1 12 13 4 15 16 7 BS888s 20 30,995,200 23,383,165 54,378,365 558,465 1,436,361,229 292,774,290 1,729,693,984 (1,620,537,233) 109,156,751 163,535,116 (15,821,370) 147,713,746 2,400,001 44,365,528 5,100,000 58,718,411 37,129,806 147,713,746 65,559,095 65,559,095 902,108 1,463,000,226 223,309,702 1,686,612,036 (1,833,830,138) 118,340,993 (17,819,085) 100,521,908 2,400,001 44,365,528 3,300,000 41,768,760 8,687,619 100,521,908Google Ireland Limited NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies Basis of preparation The financial statements are prepared under the historical cost convention in accordance with applicable Irish law and Generally Accepted Accounting Practice in Ireland (“Irish GAAP") including the Accounting Standards issued by the Accounting Standards Board and promulgated by Chartered Accountants Ireland, Group accounts The company has availed of the exemption in Regulation 9A of the European Communities (Companies: Group Accounts) Regulations, 1992 from preparing and delivering consolidated financial statements. The results of the company and all of its subsidiaries are included in the consolidated financial statements of its ultimate parent, Google inc., which have been prepared in accordance with US GAAP, Turnover Tumover represents the total invoiced value, excluding value added tax, of sales made during the year. Most of the company’s revenue is derived from advertisers through the AdWords and AdSense programs. Google AdWords is an online self-service program that enables advertisers to place targeted text-based ads on Google web sites. The company recognises as turnover the fees charged to advertisers each time their ads are displayed on the Google Network member sites. Google AdSense is the program through which Google distribute advertisers’ ads for display on the websites of Google Network members. The company recognises as tumover the fees charged to advertisers each time a user clicks on one of the text-based ads that is displayed next to the search results ‘or on the content pages of Google Network members’ web sites and, for those advertisers who use cost er impression pricing, the fees charged to advertisers each time an ad is displayed on its members’ sites. This tumover along with that related to the fees charged to advertisers for ads published in the magazines of Google Network mambers is reported on a gross basis primarily because the company is the primary obligor to the advertisers. ‘The company also generates fees from search services through a variely of contractual arrangements, which include per-query search fees and search service hosting fees. Tumover from set-up and support fees and search service hosting fees is recognised on a straight-line basis over the term of the contract, which is the expected period during which these services will be provided. The company recognises turover from per-query search fees in the period queries are made and results are delivered. The company further provides search services pursuant to certain AdSense agreements. The company believes that search services and revenue share arrangements operate independently of each other. These separate services are provided simultaneously to the Google Network member and are recognised ‘as turnover in the period provided, ‘The company also generates fees from the sale and license of Google Search Appliances, which include hardware, software and 12 to 24 months of post-contract support. For transactions where the elements are not sold separately, reliable fair values cannot be established for the allocation of turnover. As a result, commencing with the delivery of the hardware and software, the fee for the entire arrangement is recognised rateably over the term of the post-contract support arrangement. Deferred income is recorded when payments are received in advance of the performance in the underlying agreement, This income is recognised as the services are performed, " EE Se elt ee se ee nee SCS eet en eu ee ean ut ine ee tee ee ceeGoogle reland Limited NOTES TO THE FINANCIAL STATEMENTS - continued 1 Accounting policies - continued Tangible fixed assets and depreciation ‘Tangible fixed assets are stated at cost less accumulated depreciation. The charge for depreciation is calculated to write down the cost of tangible fixed assets to their estimated residual values by equal annual instalments at the following annual rates: Leasehold improvements 20% (or lease term, if shorter) Production equipment 93.99% Office equipment 20% to 33% ‘Assets in course of construction ‘no depreciation as assets are not currently in use The carrying values of tangible fixed assets are reviewed for impairment if events or changes in circumstances in the year indicate that the carrying value may not be recoverable. Stocks ‘Stocks are stated at the lower of cost and net realisable value. Net realisable value is based on estimated selling price tess any further costs expected to be incurred to its disposal. Taxation ‘The charge for taxation is based on the profit or loss for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax, or a right to pay less tax, in the future, have occurred at the balance sheet date, Deferred tax assets are recognised only to the extent that the directors consider that it is more likely than ot that there will be suitable taxable profits from which the future reversal of the underiying timing differences can be deducted. Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. Pensions. Contributions by the company to a defined contribution pension scheme are charged to the profit and loss account in the year to which they relate, Foreign currencies The financial statements are expressed in Euro ("€") Transactions denominated in foreign currencies relating to tumover, costs, monetary assets and liabilities and non-monetary assets and liabilities are translated at the rates of exchange ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are then re-translated at the rate of exchange ruling at the balance sheet date. The resulting exchange differences are dealt with in the profit and loss account. Financlal instruments The company enters into foreign exchange contracts to reduce its exposure to market risks from changes in foreign exchange rates. These forward contracts have maturities of no more than 12 months and are entered into for the sole purpose of hedging exposure arising from normal course of business. Gains and tosses on derivative contracts used to hedge foreign exchange trading exposures are recognised in the profit and loss account when the hedged transactions settle. The company does not apply fair value accounting rules and has not adopted the provisions of Financial Reporting Standard 26, “Financial Instruments: Measurement’ and Financial Reporting Standard 29," Financial Instruments: Disclosures”. 12Google Ireland Limited —_——_— —— NOTES TO THE FINANCIAL STATEMENTS - continued 1. Accounting policies - continued Government grants Employment grants are credited to the profit and loss account to offset the matching expenditure when received. Research and development Expenditure on research and development is written off in the year in which it is incurred. Financial fixed asseta Financial fixed assets are shown at cost less provision for permanent impairment in value. Cash flow statement ‘The company has availed of the exemption under Financial Report Standard (Revised 1996), “Cash Flow Statement’, from preparing a cash tlow statement as it is a wholly owned subsidiary of a company that prepares consolidated financial statements that are publicly available, Leasing Operating lease rentals are charged to the profit and loss account on a straight-line basis over the lease term. Share-based payment Equity settled transactions ‘The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined using an appropriate pricing model. In valuing equity-settied transactions, no account is taken of any vesting conditions, other than conditions finked to the price of the shares of the company (market conditions). No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satistied, provided that all other performance conditions are satisfied. At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest or in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in ‘cumulative expense since the previous balance sheet date is recognised in the profit and loss account, with a corresponding entry in equity (Other Reserves" account). Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification, No reduction is recognised if this difference is negative. Cash-setted transactions ‘The company does not have share-based payment resulting from cash-settled transactions, Reclassification Certain amounts from prior periods have been reclassified to conform to the current period presentation. 13Google Ireland Limited iii) NOTES TO THE FINANCIAL STATEMENTS - continued 2° Turnover ‘Tumover represents net sales to customers and excludes value added tax. The total tumover of the ‘company for the year has been derived from its principal activity, the delivery of relevant, cost-effective, ‘online advertising. 3. Segmental analysis ‘An analysis of turnover, profit before tax and net assets by class of business and geographical area is not provided since, in the opinion of the directors, the disclosure of this information would be prejudicial to the interests of the company. 4 Interest receivable and similar Income Deposit interest (On amounts owed to other group undertakings Bank interest expense 6 Profit on ordinary activities before taxation ‘The profit on ordinary activities before taxation is artived at after charging (crediting): ‘Auditors’ remuneration Depreciation on tangible fixed assets Loss on disposal of tangible fixed assets Foreign exchange (gain) loss Government grants ‘Operating lease rentais - other than plant and machinery Research and development 2,263,347 12,096,127 2009 2008 € € . 259,202 + 4,392,543 = 4,651,745 2009 2008 € € 267,500 350,000 22,452,517 21,159,210 941,072 2,747,575 (1,828,945) 27,721,349 (69,326) (228,981) 8,188,994 7,986,615, 18,756,273 19,529,425 1 : 14Google Ireland Limited NOTES TO THE FINANCIAL STATEMENTS - continued 7 Statt numbers and costs ‘The average number of persons employed by the company (including executive directors) during the year, analysed by category, was as follows: Sales Engineering Finance ‘Administration ‘The aggregate payroll costs of these persons were as follows: Wages and salaries Social weltare costs Pension costs Share-based payment 8 Directors’ remuneration Fees Other emoluments: Pension contributions. 9 Pension information Pension costs Contributions to pension scheme 2009 Number 1,016 76 143 152 1,387 100,151,337 10,132,195 3,024,294 16,949,651 180,257,477 2009 € 2,500 998,851 35.059 976,410 2009 3,024,204 2008 Number 809 350 4 63 1,316 84,232,902 9,637,191 2,803,185 18,793,357 115,466,605 10,000 2,803,185 ‘The company operates a defined contribution scheme for directors and certain employees. The pension entitlements of employees are secured through contributions by the company to a separately ‘administered pension fund. Annual contributions are based on the advice of a professionally qualified actuary. The pension liability at 31 December 2009 was €247,126 (2008: €324,828). 15Google Ireland Limited NOTES TO THE FINANCIAL STATEMENTS - continued 10 Tax on profit on ordinary activities 2009 2008 € € Current tax Tax on profit on ordinary activities, 9.613502 7,779,693 Foreign withholding tax 7,977,168 : Adjustments in relation to prior years 760,745 __379,280 Total current tax 18,351,413 8,152,913 Deferred taxation Origination and reversal of timing differences (note 18) (1,178,044) _ (579,023) 17,173,369 _7,573,890 Factors affecting tax charge for the year Tho tax assessed for the year Is different than the standard rate of corporation tax in Ireland. The differences are explained below: 2009 2008 € € Profit on ordinary activities before tax 47,415,556 10,104,818 Tax on profit on ordinary activities at the standard rate of corporation tax of 12.5% (2008: 12.5%) 5,926,945, 1,263,102 Effects of: Expenses not deductible for tax purposes 2,304,856 4,261,220 Depreciation for year in excess of capital allowances: 641,621 431,390 Income tax withheld 457,162 305,905, Interest received taxable at higher rate 282,918 1,512,016 Foreign withholding tax 7,977,166 - ‘Adjustments in relation to prior years 760,745 __379,280 Total current tax 18,951,413 8,152,913 ener a en en ssntnetnnnaseseeeeanenesseenetntttesthatnnitetennttnnenenetntnnteGoogle Ireland Limited Ss NOTES TO THE FINANCIAL STATEMENTS - continued 11 Tangible fixed assets Leasehold Production Office Assets in Total improvements equipment equipment course of ‘construction € € € € € Cost Att January 2009 15,877,666 56,710,282 34,504,762 28,239,149 135,331,859 Additions 1,937,689 248,524 5,640,717 11,016,659 18,843,589 Intercompany transfers . i + (28,239,149) (28,239,149) Disposals of (8,973,471) (943, 1 16) - (7,916,587) At31 December 2009 17,815,355 _49,985,335 39,202,363 11,016,659 118,019,712 Depreciation ‘Att January 2009 7,349,555 40,973,236 22,049,973 + 69,772,764 ‘Charge for he year 2,429,899 12,903,412 7.119.206 + 22,452,517 Disposals. : (5,157,636) (43,133) Be (5,200,769) At31 December 2009 48,119,012 _ 29,126,046 - _87,024,512 Net book values At 31 December 2009 8,035,901 1,866,323 10,076,317 11,016,659 30,995,200 At 31 December 2008 8,528,111 16,337,046 12,454,789 28,299,149 65,559,095 12 Financial fixed assets Investments in ‘subsidiaries € Unilsted, at cost At beginning of year 7 Additions during the year 23,383,165 Atend of year 23,383,165 Additions - investments In subsidiaries ‘On 22 October 2009, the company acquired a 100% shareholding in DoubleClick Hispania S.L. from DoubleClick International internet Advertising Limited ("DCIIAL), for €1.4 million, by way of a promissory note. ‘On 22 October 2009, the company acquired a 100% shareholding in DoubleClick Sweden AB from DCIIAL for €0.6 milion, by way of a promissory note, On 22 October 2009, the company acquired a 100% shareholding in DoubleClick Intemational Holding ULC from DCIIAL for €20.7 million (US$29.8 million), by way of a promissory note. On 6 July 2009, the company acquired a 100% shareholding in Google Advertising (Shanghai) Limited for €0.7 million (USS1.0 milion) in cash. 7‘winjes Tenuve eu 0} pepuedde Ajotezedes oq im sennue enoqe eyt 01 voTeje/ UI 986) ‘(ley IMoUIpLOWY) seILedwOD BY) Jo 91 UoNDag kq Pesnbe: uoHieUNO}Y dup eUIuD reyBueug 0 o1jgnday s,9jdooq ouisip meu epungy Leo - Log wun 299018 poywiry 001 Peoy uentey ag Sulsmenpe jousoiu (euBueys) Buiserpy 916005 Pouewy 10861 oxemejeq, yo sereig pewun uO}GUNUIIN teas eBueI0 6021 6001 equeg sri uoneiodion Susmionpe jewel) 977 BupIOH euoNeWiewU) yoIDeIGNOg vepems, UHOUFOOIS 12 LL 6001 09 ue}ebsjenures J9}se Wy Bursiuenpe reuse} BY UepeME YOIDEIGNOG ureds, PUPEW 9082 ewueidenua var 7 6008 Bug|iaised B] ep ooseq Busmanpe jouraiuy “TS BURKS ¥IDeIQNO| ‘Sbuprerepun AePpISsaNS: prey woneiodsoou) uoppodoig 40 Ayunog, BoIYO pesersiBoy Ayanse pedyoursg eweN Penunuod - siasse poxy jeOUEULY ZL PenUuNUod - SINSWALVLS TWIONYNId SHI O1 S3LON Perry puejay) 9168005Google Iretand Limited NOTES TO THE FINANCIAL STATEMENTS - continued 13 Stocks 2009 2008 € € Finished goods 558,465, 302,108 ‘The replacement cost of finished goods does not differ significantly from the figures stated above, 14 Debtors (amounts falling due within one year) 2009 2008 € € Trade debtors 1,006,044,693 806,565,220 ‘Amounts owed by parent undertaking 2,927,387 111,952,643 ‘Amounts owed by subsidiary undertaking 10,750 - Amounts owed by other group undertakings 269,675,044 474,297,856 VAT refundable 8,262,368 12,583,705 Deferred tax (note 18) 6,368,943 5,190,899 Prepayments 140,099,920 52,533,252 Corporation tax 2,972,124 476,651 1,436,361,229 1,463,000,226 ‘Amounts due to group undertakings are unsecured, interest free and are repayable on demand. 15 Cash at bank and in hand Included in cash at bank and in hand at 31 December 2009 are time deposits amounting to €22.5 million ‘maturing within one year. The fair market value of such time deposits does not materially differ from the disclosed cost. Cp 18 Creditors (amounts ating due within one year) 2009 2008 € € Trade creditors 10,379,884 6,814,631 ‘Amounts owed to parent undertakings 102,789,563 72,365,891 ‘Amounts owed to subsidiary undertakings 4,749 - ‘Amounts owed to group undertakings 4,229,122,104 4,387,136,109 PAYEJPRS! 5,122,104 2,433,117 ‘Accruals and deterred income 273,118,829 195,080,490 1,620,597,233 1,633,890,138 ‘Amounts due to group undertakings are unsecured, interest free and are repayable on demand. 19 “seen sertanntneer-emetnan maetiet niet aateeponratttenteaareneunnnis tren nettanepannansnneennnmenpetibtin een tenetGoogle Ireland Limited NOTES TO THE FINANCIAL STATEMENTS - continued 17 Creditors (amounts falling due after more than one year) Deferred income Deferred rent Other long-term liabilities 18 Deferred tax asset At beginning of year Transfer from intercompany ‘Credited to the profit and loss account (Note 10) Atend of year ‘The deferred tax asset is analysed as follows: Timing differences between depreciation and capital allowances Other short-term timing differences 19 Called up share capital Authorised 5,000,000 ordinary shares of €1 each Allotted, called up and fully paid 2,400,001 ordinary shares of €1 each 2009 € 6,868,686 3,484,190 5,468,494 15,821,370 2009 € 5,190,899 1,178,044 6,368,943, 4,447,253 1,921,690 6,368,943, 2009 5,000,000 2,400,001 2008 € §,094,625 11,347,671 2008 4,316,768 295,108 579,023 5,190,899 3,052,740 5,190,899 5,000,000 2,400,001 20siuawoeiBe 11816 Auedwoo oy) wim Aidwoo 0) Senseses e1genquis|p-UOU o} SBUIWIE® PAUTEIe! WOH] peLE/SUe: SEM UOH|U! g'19 Jo IUNOWE UY ‘senso801 JOUN0 0} S10}SUBI, ezs's9e'rr —L00'008'z 6002 soquioseg te 1 isyereor = 7 000'008"t zai'2ve'oe : : ; : 806'12S'001 O9Z'e9z'ty —000‘00e'E —azs'sae'yy —100'00r'2 Beers = Beera = eee'oes'z © ezs'0Es'z . ‘e29's9e'rr : - ses'soe'ry = seo'zee're —te9'9S1'9 —eOr'sus'zz © ODD'00E'E Loo'oor'z 3 2 3 3 3 2 Seniesa qunoose sso] senieses —eiqeingujsip uonnquiuoo—jeyideo fer PUB 1YOd 200 -UON rendeo ereus SeA989) U] SIUAWEAOW PUR SPUN} ,sep|OYaZEYs Ul jUALIEAOW Jo LONEIIOUCIEH OZ PenunUed - SINSWALVLS TVIONVNIS 3HL OL SALON 6 QO PemWrT pueren a16005Google Ireland Limited —s — NOTES TO THE FINANCIAL STATEMENTS - continued 21 Share-based payment The company's ultimate parent undertaking, Google Inc. ("Google"), maintains the 1998 Stock Pian, the 2000 Stock Plan, the 2003 Stock Plan, the 2003 Stock Plan (No. 2), the 2003 Stock Plan (No. 3), the 2004 Stock Plan, and plans assumed through acquisitions, all of which are collectively referred to as the “Stock Plans.” Under the Stock Plans, incentive and nonqualified stock options or rights to purchase common stock may be granted to eligible participants. Options are generally granted for a term of 10 years. Except ‘or options granted pursuant to the Exchange discussed below, Options granted under the Stock Plans generally vest 25% after the first year of service and rateably each month over the remaining 36 month Period contingent upon employment with the company on the vesting date. Options granted under Stock Plans other than the 2004 Stock Plan may be exercised prior to vesting. In March 2009, Google completed an offer to exchange certain employee stock options ("the Exchange") issued under its 2004 Stock Plan. Certain previously granted options were exchanged for new options with a lower exercise price granted on a one-for-one basis. Options granted pursuant to the Exchange have an exercise price of $308.57 per share, the closing price of Google Class A common stock as reported by The Nasdaq Global Select Market on 6 March 2009. Options granted pursuant to the Exchange have a new vesting schedule determined by adding 12 months to each vesting date under the QD exchanged options’ original vesting schedul. In adétion, new Options will vest no sooner than six months after the date of the Exchange. The Exchange resulted in a modification charge of €7,366,917 which is being recognised over the vesting periods of the new options. Under the Stock Plans, Googie has also issued Restricted Share Units (“RSUs") and restricted shares. An ASU award is an agreement to issue shares of Google's stock at the lime of vest. RSUs issued to new employees vest over four years with a yearly cliff contingent upon employment with the company on the dates of vest. These ASUs vest from zero to 50.0% of the grant amount at the end of each of the four years from date of hire based on the employee's performance. RSUs under the Founders’ Award programs are issued to individuals on teams that have made extraordinary contributions to Google. These awards vest quarterly over four years contingent upon employment with the company on the vesting dates. ‘Google estimated the fair value of each option award on the date of grant using the Black-Scholes-Merton (BSN1) option pricing model. Assumptions about stock-price volatility have been based exclusively on the implied volatilities of publicly traded options to buy Google's stock with contractual terms closest to the ‘expected life of options granted to employees. Assumptions about the expected term are estimated based upon the historical exercise behaviour of employees. The risk-free interest rate for periods within the Q contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The exercise price disclosures are given in USS as this is the currency in which the options are exercisable and the underlying shares are quoted. Tho following table presents inputs to the model used for the years ended 31 December 2009 and 2008: 2009 2008 Risk-free interest rate (%) 2.6% 3.2% Expected share price volatility (96) 37% 35% Expected life of option (years) 58 53 Option term (years) 10.0 10.0 Dividend yield (96) 0% 0% Weighted average fair value of options granted uss242.59 _US$206.86Google Ireland Limited NOTES TO THE FINANCIAL STATEMENTS - continued 21 Share-based payment - continued The following table illustrates the number and weighted average exercise prices ("WAEP*) of, and movements in, share options for the years ended 31 December 2009 and 2008: 2009 2008 2008 2008 Number of WAEP Number of WAEP shares under US$ shares under uss option option Outstanding at 1 January 247,920 434.54 189,197 401.27 Granted during the year 164,838 321.17 88,973 49171 Forfeited during the year (166,981) 506.64 (14,734) 484.51 Exercised during the year (25,551) 204.07 (7,763) 108.27 Expired during the year : : (702) 408.79 Transferred during the year 15; 434.54 (7.051 401.27 Outstanding at 31 December 204,934 308.73 247,920 434.54 Exercisable at 31 December 76,480 271.89 «99,648 329.48 The following table summarises additional information regarding options outstanding at the year end: 2009 2009 2008 2008 Total Number WAEP Total Number WAEP of Shares, US$ of Shares, uss US$5.00 - US$94,80 4,491 40.34 10,845 36.74 US$117.84 - US$198.41 20,305 188.28 30,669 189.12 Us$219.78 - US$298.86 8,291 279.96 14,151 275.90 US$300.97 - US$399.00 7 147,520 309.38 26,052 931.02 US$401.78 - US$499.07 17,757 437.07 27,917 452.41 US$500.03 - US$594.05 6,520 538.22 198,683 543.77 US$615.95 - US$698.51 50 675.00 1,793 668.30 US$710.84 - US$792.94 : : 810 725.57 204,934 247,920 ‘The expense recognised for share-based payment in respect of employee services received during the year ended 31 December 2009 is €16,949,651 (2008: €18,793,357). ‘The weighted average remaining contractual life of options outstanding at year end was 7.4 years (2008: 8.1 years), 23Google Iretand Limited NOTES TO THE FINANCIAL STATEMENTS - continued 21 Share-based payment - continued The following table illustrates the activity of the unvested RSUs and restricted shares for the years ended 31 December 2009 and 2008: 2009 2009 2008 2008 Total Number Weighted Total Number Weighted ofShares average at of Shares average at grant date grant date fair value fair value uss uss Outstanding at 1 January 50,811 450.05 41,889 452.40 Granted during the year 65,075 449.02 23,997 439.30 Vested during the year (15,611) 438.47 (12,855) 492.12 Forfeited during the year (6,590) 450.05 (4579) 436,50 Transferred during the year * (8,042) 430.89 2.959 452.40 Outstanding at 31 December 85,643 459.12 50,811 450.05 Expected to vest after 31 December ** 77.164 453.12 46,721 450.05 * Net of transfers to other group undertakings. “+ RSUs and restricted shares expected to vest reflect an estimated forfeiture rate. The following table summarises additional information regarding unvested RSUs and restricted shares at the year end: Range of Exercise Prices 2009 2009 2008 2008 Total Number WAEP Total Number WAEP of Shares US$ of Shares. uss $219.78 - $298.96 1,092 287.38 3,551 286.99 $300.22 - $399.00 15,269 366.26 8,841 955.77 $402.00 - $499.07 51,330 440.03 26,375, 452.99 $500.03 - $584.39 17,043 568.98 10,022 536.71 $615.18 - $699.20 763 668.29 1,634 669.62 $710.84 - $732.94 146 728.25 388 727.13, 85,643 50,811 ‘The weighted average share price for options exercised during the year was US$468.04 (2008: US8464.85). 24Google Ireland Limited en eee eter eee oe NOTES TO THE FINANCIAL STATEMENTS - continued 22 Commitments Capital commitments ‘The company had no capital commitments at the balance sheet date. Operating lease commitments At 31 December 2009 the company had annual commitments under non-canceliable operating leases which expire as follows: Land and buildings Within one year - Between two and five years : After more than five years ‘The rentals payable under leases in respect of land and buildings are subject to renegotiation at various intervals specified in the leases, Guaranteed minimum revenue share payments {mn connection with the AdSense revenue share agreements, the company is periodically required to make non-cancellable guaranteed minimum revenue share payments to a small number of Google Network Google Network members achieving defined performance terms, such as the number of advertisements displayed or search queries. In some cases, certain guaranteed amounts wil be adjusted downward if Google Network members do not meet their performance terms and, in some cases, these amounts will be adjusted upward if they exceed their performance terms. In all of these AdSense agreements, if a Google Network member were unable to perform under the contract, such as being unable to provide Search queries, as defined under the terms of that agreement, then the company would not be obligated to make any non-canceliable guaranteed minimum revenue share payments to that member. At 31 December 2009, aggregate outstanding non-cancellable guaranteed minimum revenue share Commitments totalled €2,044,718 through 31 December 2010. itis difficult to forecast with certainty the {oes that the company will earn under agreements with guarantees, and sometimes the fees the company ams fall short of the guaranteed minimum payment amounts. 25Google ireland Limited SS NOTES TO THE FINANCIAL STATEMENTS - continued 22 Commitments - continued Forward contracts At the balance sheet date the company had entered into forward exchange contracts to sell the following currencies: 2009 2008 € € British Pound 166,783,588 314,019,977 Japanese Yen 163,035,791 116,951,316 Indian Rupee 67,034,113 37,900,875 Australian Dollar 64,520,101 92,634,008 Chinese Yuan Renmi 43,646,353 14,917,695 ‘Swedish Krona 18,491,712 8,337,540 Danish Krone 17,465,022 9,784,866 Polish Zloty 13,442,661 9,154,421 Hong Keng Dollar 11,826,463 7,129,526 Norwegian Kroner 10,189,629 4,699,577 Taiwan Dollar 7,875,379 32,151,760 Swiss Franc 7,391,763 20,293,306 ‘South Korean Won 5,936,832 4,240,355 Turkish Lira, 5,033,000 3,686,328 New Zealand Dollar 4,910,921 2,872,309 Russian Rubles 3,274,242 : ‘South African Rand 9,139,965, : Czech Republic Koruna 2,949,448 : Israeli New Shekel 2,944,494 5,506,557 Singapore Dollar 2,172,528 2,959,414 Hungarian Forint 1,942,511 : Romanian New Lei 1,884,717 : Malaysian Ringgit - 625,891,253 All of the above contracts mature within twelve months of balance sheet date. At the balance sheet date the unrealised foreign exchange gain relating to the above contracts amounted to €72,923. 23 Contingent liabilities A liability may arise to repay, in whole or in part, revenue grants received from the Industrial Development Authority to date, amounting to €5.1 milion, if certain events occur as detailed in the grant agreements. In terms of these grant agreements the company is required to transfer an amount equal to the grants received to a non-distributable reserve. The company has an open letter of credit for €20.4 million with Citibank. 26Google Ireland Limited NOTES TO THE FINANCIAL STATEMENTS - continued 24 Related party transactions | Common with other companies which are members of a group of companies, the financial statements reflect the effect of such membership. The company has availed of the exemption available under Financial Reporting Standard No, 8 “Related Party Disclosures", for subsidiaries with 100% of whose voting rights are controlled within the group, from the requirement to give details of transactions with entities that are part of the Google Inc. group. 25 Parent undertaking and controlling party 26 Important events since the year end ‘There have been no important events since the year end. 27 Approval of financial statements. ‘The board of directors approved these financial statements and authorised them for issue on 30.06-(©) ar