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1 ANNUAL REPORT 2010

2 Headlines 2010 n Revenue +20% to EUR 1,683 million n Organic revenue growth +12% (at constant exchange rates) n Added-value margin from 58.9% to 59.7% n Operating profit (EBITA) +82% to EUR million n Net profit before amortisation +116% to EUR million n Earnings per ordinary share before amortisation +116% to EUR 1.10 n Decrease in net debt; sharp drop leverage ratio to 2.3 n Industrial Services very profitable n Flow Control retains margins and strengthens market positions n Acquisition Conbraco Industries in the United States

4 Locations Industrial Services Flow Control

5 Annual report 2010

7 Contents Aalberts Industries at a glance 6 Key figures 7 Profile and markets 8 Strategy 9 Objectives 11 The share 14 Personal Details Report of the Management Board 18 Introduction by the President & CEO 20 Financial results 22 Industrial Services very profitable 25 Flow Control retains margins and strengthens market positions 29 Developments in personnel and organisation 30 Corporate sustainability 34 Outlook 35 Management Board declaration Report of the Supervisory Board 38 Financial statements 2010 and dividend proposal 38 Composition of the Supervisory Board 38 The work of the Supervisory Board 39 Corporate governance 40 Remuneration policy 41 Note of thanks General information 44 Health, safety and the environment 44 Personnel and organisation 45 Managerial aspects and risk profile 47 Corporate governance 48 Decision making Financial statements Consolidated balance sheet 51 Consolidated income statement 52 Consolidated statement of comprehensive income and changes in equity 53 Consolidated cash flow statement 54 Notes to the consolidated financial statements 80 Company balance sheet and income statement 81 Notes to the company financial statements 85 Independent auditor s report 86 List of group companies

8 Aalberts Industries at a glance

10 6 Annual report 2010 Key figures Result (in EUR million) Revenue 1, , , , ,440.3 Added-value* 1, , Operating profit (EBITDA) Operating profit (EBITA) Net profit before amortisation Depreciation Cash flow** (net profit+depreciation) Cash flow from operations Balance sheet (in EUR million) Intangible fixed assets Property, plant and equipment Capital expenditure Net working capital Total equity Net debt Total assets 1, , , , ,278.9 Number of staff at year-end Industrial Services 4,026 3,706 4,253 4,356 4,086 Flow Control 7,494 6,276 6,608 6,544 5,264 Other Total 11,536 9,999 10,880 10,918 9,370 Ratios Added-value* as a % of revenue EBITDA as a % of revenue EBITA as a % of revenue Interest cover ratio (twelve months-rolling) Net profit** as a % of revenue Total equity as a % of balance sheet total Net debt / total equity Leverage ratio (twelve months-rolling) Shares issued (million) Ordinary shares (average) Ordinary shares (at year-end) Cumulative preference shares Figures per ordinary share (in EUR) Cash flow** Net profit** Dividend** Share price at year-end * Added value = revenue minus raw materials and work subcontracted ** Before amortisation

11 Aalberts Industries belongs to the global market leaders and is continually looking for new opportunities which will lead to sustainable and profitable growth, both organically and via acquisitions. Profile and markets 7 Aalberts Industries at a glance Profile Aalberts Industries, founded in 1975 and quoted on the stock exchange since 1987, is an internationally active specialist in industrial products and systems with high-quality technical knowledge. The company develops solutions for diverse customer needs, divided into the group activities Industrial Services and Flow Control. Industrial Services supplies specialised products, processes and systems to specific market segments including the semiconductor and automotive industry, the metal & electronics industry and precision engineering, the medical sector, the aerospace industry, defence and the (sustainable) energy sector. Flow Control concentrates on the development, production and assembly of products and systems for the distribution and regulation of liquids and gases. This group activity is focused on inter alia the housing market, commercial buildings, private and public newbuilds and renovation, utility networks, district heating and cooling, fire protection, irrigation systems, the beer and soft drinks industry, laboratory systems and industrial markets. Added-value Aalberts Industries belongs to the global market leaders and is continually looking for new opportunities which will lead to sustainable and profitable growth, both organically and via acquisitions. Industrial Services and Flow Control have their own market development and strategic approach characteristics. However, in both group activities customers are concentrating increasingly on suppliers who have proven themselves as a reliable and innovative partner. Aalberts Industries plays on this development as a financially solid, flexible and technically high-quality specialist. Innovation of products, processes and systems and collaboration with customers receive constant attention. There is also a clearly recognisable trend for individual products and components to integrated systems on the one hand and complete product packages on the other hand. To achieve this Aalberts Industries is working intensively with customers who are also reaping the benefits of strengthened internal collaboration. Sharing knowledge, expertise and sales and distribution channels of the group companies lead to higher added-value for the customer and for Aalberts Industries to increased efficiency and new options for further growth as well as higher added-value. Employees and organisation Approximately 11,500 employees work at Aalberts Industries in more than 140 group companies in over 30 countries. The company has a flat organisational structure. The group companies are largely responsible for day-to-day operations in which strategy is determined together with the holding company. This approach leads to an enterprising culture where innovation of products and active market approach are continuously worked on. Mutual knowledge sharing, exchange of technology, using each other s sales and distribution

FIRE SPRINKLERS Sprinkler systems are used to fight fires in commercial and public buildings, warehouses, car parks, hotels, ships and many other places.

12 FIRE SPRINKLERS Sprinkler systems are used to fight fires in commercial and public buildings, warehouses, car parks, hotels, ships and many other places. VSH Fittings (NLD) supplies complete systems consisting of copper, plastic and steel combinations. The most important markets are in Western and Eastern Europe, the United States and the Middle East. 8 Annual report 2010 channels and joint product development (best practice) contribute towards product renewal and expansion of the product portfolio. A detailed overview of Aalberts Industries activities can be found on Strategy General Aalberts Industries strategy is aimed at achieving sustainable and profitable growth, both organically and through acquisitions. The strategy is formulated primarily by the holding company, supported by the group companies. The strategy is discussed and evaluated structurally and at various levels within the organisation. Industrial Services Industrial Services works on strengthening its market positions by increasing the application possibilities of innovative and high-value technologies. This group activity is mainly focused on specialised products, systems and processes for various markets. The products, systems and processes offered include various types of heat and surface treatment of parts used in the automotive industry, systems for the semiconductor industry and advanced medical equipment and precision stamping parts for the metal & electronics industry. Aalberts Industries is a precision engineering expert in the production and heat and surface treatment of metal and plastic parts. It supplies the aerospace industry with (treatment of) parts for fuselage, wings, jet engines and landing gears. This also applies to the (gas) turbine industry and the energy sector where fitted systems must be vacuum-welded in an extremely accurate manner. KEY FIGURES AALBERTS INDUSTRIES (in EUR million) Difference Revenue 1, , % Operating profit (EBITDA) % EBITDA as a % of revenue Operating profit (EBITA) % EBITA as a % of revenue Capital expenditure % Depreciation (2%) Average number of employees (x1) 11,042 10,241 8% Number of employees at year-end (x1) 11,536 9,999 15%

Often several products, systems and processes are supplied at the same time, targeted at the specific customer need, based on a mix of technologies.

13 Often several products, systems and processes are supplied at the same time, targeted at the specific customer need, based on a mix of technologies. Aalberts Industries is developing increasingly as a strategic partner; generally, several products, systems and material treatment processes are supplied at the same time, targeted at the specific customer need and based on a mix of technologies. Direct involvement in the development of customers new products and processes at as early a stage as possible enables Industrial Services to deliver maximum added-value. Production mainly takes place in Western Europe with additional locations in North America, Eastern Europe and Asia. 9 Aalberts Industries at a glance Flow Control Flow Control provides a complete package of products and systems for the distribution and regulation of fluids and gases. The product and system offer contains a comprehensive package of metal and plastic piping systems, a range of valves for gas and water, systems to improve water circulation, sprinkler systems and equipment for pressure and temperature regulation of water flows. There is an important trend towards more comfort and regulation and energy-efficient systems for the distribution of heat and cool air. The focus lies on cross-selling group products meaning that local sales and distribution networks in the various countries and market segments sell each other s products. Local organisations are used as a sales platform for products which are produced in competence centres, supported by strong product brands (multi-branding). Products are specified by the prescribing bodies, such as product developers, architects and installers. Flow Control continually strives to fill the gaps in its product portfolio in the different market segments and countries, in particular in Western and Eastern Europe and North America. Innovation Research, development and (technological) innovation form a crucial cornerstone and result in entirely new products and improvements to existing products and technologies. Annually Aalberts Industries spends around 3% of revenue on research and development. The company introduces new products, processes and technologies each year, always based on specific wishes of the customers who also profit from the increasing technological and knowledge exchange between Industrial Services and Flow Control. Innovation and increased internal collaboration contribute not only to revenue and result but also to strengthening distinctive market positions. Objectives Aalberts Industries strives for stable growth that exceeds the market average. The company has been working on the objectives explained here below for several decades. Stable profit growth per share The primary objective is a stable growth of average earnings per share over several years.

ON THE ROAD Metalis, with branches in Western and Eastern Europe and in China, produces various parts, which are used in the automotive industry such as connectors for electrical windows and roofs.

14 ON THE ROAD Metalis, with branches in Western and Eastern Europe and in China, produces various parts, which are used in the automotive industry such as connectors for electrical windows and roofs. Mifa Aluminium (NLD) supplies metal parts including surface treatment for shock absorbers for motorbike manufacturers, including KTM. 10 Annual report 2010 Stable revenue growth Stable revenue growth is essential for the long-term retention of market positions and the achievement of profit growth. This revenue growth is achieved through both organic growth and by acquisitions. In 2010, the organic revenue growth was 12% (at constant exchange rates) compared to Balanced distribution of the result Aalberts Industries realises a balanced distribution of the result across geographical markets, market segments and customers to limit the dependence on a specific market or customer and distribute risk, which benefits the continuity of the company. Leading market positions Aalberts Industries strives for a leading position in specific market segments. In many European countries and in North America, the company is market leader or well placed. The market need for solid technological high-quality partners which has become clearly stronger, particularly since 2009, continued in This meant that Aalberts Industries could strengthen its positions in a number of important market segments. Solid balance sheet ratios In order to implement the chosen strategy successfully the available financing possibilities are constantly being optimised. The financial objectives are: n total equity consisting of at least 30% of the balance sheet total; n an interest cover ratio (EBITDA / net interest cost) of at least 4; n the gearing (net debt / total equity) may not exceed 1.5. Revenue (in EUR million) Operating profit (in EUR million) EBITDA EBITA Net profit before amortisation (in EUR million) 1,800 1,600 1,400 1,200 1, ,

Aalberts Industries key objective is stable growth. Solid balance sheet ratios were maintained in 2010 despite the takeover of Conbraco.

At the end of 2010 total equity was 42.0% of the balance sheet total; the interest cover ratio amounted to 10.4 and the gearing 0.8.

Market. In addition, in 2006 Euronext.liffe introduced options in Aalberts Industries shares. At year-end 106,683,292 ordinary shares with a nominal value of EUR 0.

15 Aalberts Industries key objective is stable growth. Solid balance sheet ratios were maintained in 2010 despite the takeover of Conbraco. Despite the takeover in 2010 of the American company Conbraco the healthy balance sheet ratios were maintained and the three financial objectives were amply achieved. At the end of 2010 total equity was 42.0% of the balance sheet total; the interest cover ratio amounted to 10.4 and the gearing Aalberts Industries at a glance The share Listing Since 1987 Aalberts Industries has been quoted on the Amsterdam stock exchange where it is included in the AMX index of NYSE Euronext Securities Market. In addition, in 2006 Euronext.liffe introduced options in Aalberts Industries shares. At year-end 106,683,292 ordinary shares with a nominal value of EUR 0.25 were in circulation and the market capitalisation amounted to EUR 1,683 million (at the end of 2009: EUR 1,070 million). Dividend policy Aalberts Industries will continue its dividend policy which has not changed and wants to designate approximately 75% of the net profit before amortisation achieved in 2010 for further growth and to strengthen the financial position; approximately 25% will be distributed to shareholders by way of an option dividend. The dividend can be paid out in cash or in shares. Shareholders interests More than 70% of the ordinary shares are freely tradable. Based on the Disclosure of Major Holdings and Capital Interests in Securities-Issuing Institutions Decree and in accordance with the Financial Supervision Act that prescribes that shareholders holding more than 5% of the Capital expenditure (in EUR million) Cash flow from operations (in EUR million) Number of employees (at year-end) ,000 11, , , , , ,

REGULATING FLOWS Backflow valves are an example of the (stainless) steel and bronze products which Conbraco (USA) produces and which form part of Aalberts Industries product portfolio.

16 REGULATING FLOWS Backflow valves are an example of the (stainless) steel and bronze products which Conbraco (USA) produces and which form part of Aalberts Industries product portfolio. The valves, with a maximum diameter of around 25 cm, prevent water or other fluids from flowing back. The systems are used by the chemical industry, oil, gas and energy companies and pulp and paper factories. Backflow valves with smaller dimensions are also used in irrigation installations and fire protection systems. 12 Annual report 2010 outstanding ordinary shares must be disclosed, the following holders of ordinary shares are disclosed: Name % of the total capital interest Date of report Stichting Administratiekantoor Dutch (Aalberts Family) 13.27% Ameriprise Financial Inc 5.04% FMR LLC 5.13% OppenheimerFunds, Inc. 5.09% Conditional awarding of shares to the Management Board and group company managers Remuneration for long-term performance of the management is in the form of a conditional awarding of shares. The remuneration depends on the strategic plan and the creation of value over a period of three years after which the degree to which the targets have been achieved is evaluated and the number of shares to be awarded is determined. Prevention of misuse of insider information In 2009, revised rules regarding the notification and regulation of transactions in shares became effective for Supervisory Board members, Management Board members, group company managers and other designated persons such as holding company employees. A record of all insiders is kept by the compliance officer. Aalberts Industries has a so-called Whistleblower Scheme; the full text is on Investor Relations on the company s website. STOCK EXCHANGE INFORMATION Highest share price (in EUR) Lowest share price (in EUR) Closing share price at year-end (in EUR) Price/earnings ratio at year-end Average stock exchange revenue per day (in EUR thousand) 4,905 4,432 7,035 8,324 4,908 Number of outstanding shares at year-end (in million) Average number of outstanding shares (in million) Market capitalisation at year-end (in EUR million) 1,683 1, ,387 1,609

Our policy is to pay out approximately 25% of the net profit before amortisation as dividend. This means an increase of 115% compared to 2009.

17 Our policy is to pay out approximately 25% of the net profit before amortisation as dividend. This means an increase of 115% compared to Financial calendar provisional 24 March 2011 Registration date for the General Meeting 20 April 2011 Trading update (before start of trading) 21 April 2011 General Meeting in the Okura hotel in Amsterdam, starting 2 p.m. 27 April 2011 Quotation ex dividend 29 April 2011 Record date 02 to 17 May 2011 Dividend option period (stock or cash dividend) 18 May 2011 Stock dividend conversation ratio notification* (after close of trading) 20 May 2011 Paying out dividend and issuing new ordinary shares 17 August 2011 Publication of half-year figures 2011 (before start of trading) 27 October 2011 Trading update (before start of trading) 23 February 2012 Publication of annual figures 2011 (before start of trading) 26 April 2012 General Meeting 13 Aalberts Industries at a glance * The stock dividend conversion ratio is determined on the basis of the volume-weighted average price of all Aalberts Industries N.V. traded shares as of 12, 13, 16, 17 and 18 May 2011, in such a way that the value of the dividend in ordinary shares is virtually the same as that of the cash dividend Share price course ordinary share (in EUR) Aalberts Industries AEX Earnings per ordinary share before amortisation (in EUR) Dividend per ordinary share before amortisation (in EUR)

18 VIBRATION FREE PRODUCTION Wafers are discs of advanced material used in producing integrated switches. For optimal processing, insulation and vibration systems are needed which ensure that the platform can move in semiconductor production machines without vibration. IDE (DEU/USA) produces these systems. Mogema (NLD) produces and tests the advanced vacuum chambers where parts are assembled for the semiconductor industry. 14 Annual report 2010 Personal Details Supervisory Board A.B. (Dries) van Luyk (1945) Dutch nationality. Former Managing Director Passage Division KLM Royal Dutch Airlines. First appointed Current term ends Other relevant functions: Chairman Supervisory Board Jetair W.W. AG, Chairman Advisory Board Key Technology, Inc., Member Advisory Board Deerns Group and Member of the Supervisory Board Orfeo kliniek. M.C.J. (Martin) van Pernis (1945) Dutch nationality. Former President Siemens Groep in the Netherlands, former Chairman of the Management Board of Siemens Nederland N.V. First appointed Current term ends Other relevant functions: Chairman of the Supervisory Board of Dutch Space B.V., Member of the Supervisory Board of Batenburg Beheer N.V., Feyenoord Rotterdam N.V., ASM International N.V., Chairman of the Supervisory Board of GGZ-Delfland and Vlietland Ziekenhuis, President of the Dutch Royal Institute of Engineers KIVI NIRIA and Chairman of the board Vernieuwing Bouw. H. (Henk) Scheffers (1948), Chairman Dutch nationality. Former Management Board Member SHV Holdings N.V. First appointed Current term ends Other relevant functions: Vice-chairman Supervisory Board Flint Holding N.V., Member Supervisory Board Royal FrieslandCampina N.V., Koninklijke BAM Groep N.V., Wolters Kluwer N.V., Made in Scotland and Member Investment Committee NPM Capital N.V. and Board Member of the foundation Stichting Administratiekantoor Aandelen KAS BANK. W. (Walter) van de Vijver (1955) Dutch nationality. CEO of Reliance Industries E&P International. First appointed Current term ends No other relevant functions.

The company has an enterprising culture where innovation of products and active market approach are continuously worked on. 15 Management Board J.

(John) Eijgendaal (1964), Chief Financial Officer Dutch nationality. Employed by the Aalberts Industries Group since 1989: current position held since 1999. No other relevant functions. W.A. (Wim) Pelsma (1963), Chief Operating Officer Dutch nationality.

19 The company has an enterprising culture where innovation of products and active market approach are continuously worked on. 15 Management Board J. (Jan) Aalberts (1939), President & Chief Executive Officer Dutch nationality. Founder Aalberts Industries in First appointed No other relevant functions. Aalberts Industries at a glance J. (John) Eijgendaal (1964), Chief Financial Officer Dutch nationality. Employed by the Aalberts Industries Group since 1989: current position held since No other relevant functions. W.A. (Wim) Pelsma (1963), Chief Operating Officer Dutch nationality. Employed by the Aalberts Industries Group since 1999: current position held since No other relevant functions. Operational Management Industrial Services O. (Oliver) Jäger (1967) Material Technology P. (Pierre) Petitjean (1966) Metalis H.A. (Erik) Zantinge (1965) Industrial Products Flow Control M.A.B. (Michiel) Boehmer (1969) Flow Control Northern Europe D. (Dale) Dieckbernd (1951) Elkhart Products E. (Eddy) Hendrickx (1962) Henco Industries D.W. (David) Lease (1955) Taprite G.H. (Georg) Lechtenböhmer (1959) Flow Control Germany J.C. (Jack) McDonald (1961) LASCO Fittings G.L. (Glenn) Mosack (1964) Conbraco Industries M.J. (Mike) Saunders (1956) Flow Control United Kingdom & Middle East

20 Report of the Management Board

22 18 Annual report 2010 Introduction by the President & CEO Dear Reader, A good year Aalberts Industries recovered well and developed further in As already indicated, based on our continued strategy and business operations we expected to emerge strengthened from the difficult market situation of This expectation was confirmed. Revenue and net profit greatly increased. The added-value margin improved from 58.9% to 59.7% of the revenue. The net cash flow was positive. Stringent cost management and active control of working capital contributed largely to further strengthening the company s financial position. We won ground in various markets, also as the result of the introduction of innovative products, closer collaboration with customers and combining sales and distribution power. The takeover of Conbraco Industries was an important step towards strengthening the North American market position. The acquisition led to strengthening of the product offer and provides numerous new market opportunities and technological possibilities to increase efficiency. Market positions strengthened Not all markets that are important to us recovered to the same extent and at the same speed. Despite this both group activities, Industrial Services and Flow Control, showed clear volume growth and improvement in added-value margin and results. The EBITA margin at Industrial Services strongly recovered compared to 2009 and was 12.5% (2009: 1.8% negative). Flow Control achieved an EBITA margin of 10.0% (2009: 10.1%). The favourable course of affairs at Industrial Services was mainly thanks to the positive developments in particular on the semiconductor, automotive and precision engineering markets, combined with increased innovation and commercial power efforts. At Flow Control in particular the recovery on a number of markets, the intensive collaboration between the group companies, the accelerated combination of sales and distribution power and improvement in price levels in a number of product segments contributed towards the improved course of affairs, despite the reticent character in 2010 of most markets which this group activity focuses on. Prospect of further growth By combining powers in product development, production, sales and distribution, Aalberts Industries is expanding the product portfolio, decreasing costs and serving customers faster with the best possible solutions. We are looking for close connection to trends which are standing out more prominently all the time: the consolidation on the customer side in a number of important markets, the growing need in particular at large customers for strong partnerships and integral systems and complete product solutions and support from their international expansion policy. In 2010, we increased and invested in particular in commercial management in various European countries and the United States in order to stimulate the growth in systems and complete solutions. We support customers whose activities are

23 We are convinced that in 2011 we will again live up to the confidence that customers and partners have in us. increasing locally such as in China and India. As we already announced on the takeover of Conbraco we are giving additional attention to further growth in the United States. We also continue to work continuously on expanding activities in Western and Eastern Europe. After the substantial capital expenditure of an average of EUR 100 million per year in the period and EUR 45 million in 2009, EUR 63.2 million was invested in Report of the Management Board Fixed, sustainable course Aalberts Industries has a strong year behind it. We remain committed to our strategy and objectives, continue to keenly observe costs, put extra energy into the further expansion of our commercial activities and endeavour to serve our customers with high-quality, innovative products and excellent service. In 2010, we also took initiatives to improve reporting in the field of the sustainability performances of our group. Confidence Just as in the troublesome 2009, a year in which on balance 900 employees left the company, our employees were not deterred in In addition, on behalf of the other members of the Management Board we would like to thank everyone for their efforts and the huge amount of work that was carried out. We are convinced that in 2011 we will again live up to the confidence that customers and partners have in us. Langbroek, 22 February 2011 Jan Aalberts

Design and production take place at Comap (FRA). The systems are mainly sold in the Benelux, France and Germany; for 2011 further expansion on the Eastern European markets is on the agenda.

24 GROWTH IN RENOVATION AND BUILDING Meibes (DEU) produces and assembles complete hot water tap systems, including heat exchangers and valves. Biofloor is the brand name for floor heating systems used for various surfaces. The complete system consists of floorboards, distributors, plastic piping systems and valves. Design and production take place at Comap (FRA). The systems are mainly sold in the Benelux, France and Germany; for 2011 further expansion on the Eastern European markets is on the agenda. 20 Annual report 2010 Financial results Revenue The revenue for 2010 was EUR 1,683 million (2009: EUR 1,405 million), an increase of 20%. The organic revenue growth was 12% (at constant exchange rates). Added-value The added-value (revenue minus raw materials and work subcontracted) amounted to EUR 1,004.2 million in 2010 and rose to 59.7% of revenue (2009: EUR million, 58.9% of the revenue). Operating profit The operating profit before depreciation and amortisation (EBITDA) rose by 47% to EUR million (2009: EUR million). The EBITDA margin was 14.8% of the revenue (2009: 12.0%), at Flow Control 13.3% (2009: 13.8%) and at Industrial Services 18.7% (2009: 6.8%). Depreciation and amortisation in 2010 amounted to 81.2 million (2009: EUR 82.7 million). The operating profit after depreciation and before amortisation (EBITA) in 2010 increased by 82% to EUR million (2009: EUR 98.9 million). Industrial Services achieved an EBITA margin of 12.5% (2009: 1.8% negative) and Flow Control achieved an EBITA margin of 10.0% (2009: 10.1%). Net finance cost In 2010 the net finance cost was EUR 27.5 million (2009: EUR 34.6 million) of which net interest cost was EUR 26.7 million (2009: EUR 32.3 million). This decrease was thanks to the average lower interest percentages and lower surcharges of the banks due to the strongly improved leverage ratio. GEOGRAPHICAL SPREAD OF REVENUE (in EUR million) 2010 % 2009 % Germany Benelux United States France United Kingdom Eastern Europe Scandinavia Spain & Portugal Other European countries Other countries outside of Europe Total 1, ,

The three financial objectives with regard to total equity, interest cover ratio and gearing were amply achieved in 2010. Tax on profits In 2010 the total tax on profits was EUR 33.

25 The three financial objectives with regard to total equity, interest cover ratio and gearing were amply achieved in Tax on profits In 2010 the total tax on profits was EUR 33.1 million (2009: EUR 9.5 million); the effective tax rate was 23.7% (2009: 18.4%), which is mainly explained by better results in countries where a higher tax percentage applies. 21 Report of the Management Board Net profit The net profit before amortisation for 2010 amounted to EUR million (2009: EUR 54.2 million), an increase of 116%. Earnings before amortisation per issued ordinary share in 2010 were EUR 1.10 (2009: EUR 0.51), an increase of 116%. Profit appropriation The number of issued ordinary shares at the end of 2010 was million (at the end of 2009: million). The increase was the result of the stock dividend over It will be proposed to the General Meeting that the dividend over 2010 be fixed at EUR 0.28 in cash per ordinary share or according to the shareholders preference in ordinary shares. This is consistent with Aalberts Industries policy of paying out around 25% of the achieved net profit before amortisation as dividend. This means an increase of 115% in 2010 compared to The stock dividend will be fixed on 18 May 2011 based on the volume-weighted average share price of all ordinary shares in as of 12, 13, 16, 17 and 18 May 2011 in such a way that the value of the dividend in ordinary shares is virtually equivalent to the cash dividend. Capital expenditure and cash flow In 2010 capital expenditure amounted to EUR 63.2 million (2009: EUR 45.1 million) of which EUR 21.6 million related to Industrial Services and EUR 41.6 million to Flow Control. At the end of 2010, the net working capital was EUR million (at the end of 2009: EUR million). The cash flow (net profit plus depreciation and amortisation) amounted to EUR million in 2010 (2009: EUR million). The cash flow from operations for 2010 was EUR million (2009: EUR million). This clearly indicates the strong cash flow generating ability of Aalberts Industries. Balance sheet ratios At the end of 2010, total equity amounted to EUR million (2009: EUR million), 42.0% of the balance sheet total (2009: 39.7%). The net debt at the end of the year was EUR million (2009: EUR million). Solid balance sheet ratios were maintained which is also evidenced by the development of the three ratios important for the company: the leverage ratio improved from 3.4 to 2.3; the interest cover ratio went from 5.8 to 10.4 and the gearing was 0.8 compared to 1.0 in 2009.

Machinefabriek Technology Twente (NLD) designed the dermatological equipment used for skin transplants in hospitals and burn wound centres.

26 AMBITIONS IN THE MEDICAL AREA Nowak (FRA) en Eurocast (NLD) design and produce composed knee prostheses. Pressure regulation valves for the required gas or oxygen bottles are also supplied by Aalberts Industries. Machinefabriek Technology Twente (NLD) designed the dermatological equipment used for skin transplants in hospitals and burn wound centres. Medical applications and equipment are an important growth area for Aalberts Industries. 22 Annual report 2010 Industrial Services very profitable Revenue and results In 2010 Industrial Services revenue increased by 29% to EUR million (2009: EUR million), of which 27.9% organic. The operating profit before depreciation and amortisation (EBITDA) was EUR 86.8 million (2009: EUR 24.4 million), 18.7% of the revenue compared with 6.8% in The EBITA was EUR 58.1 million (2009: EUR 6.4 million negative). The added-value margin of this group activity was 79.5%. As a whole, Industrial Services demonstrated excellent volume growth and improvements in efficiency, quality and service. Various new customers were welcomed also thanks to the more intensive attention paid to the market and entrepreneurship. Management was reinforced in a number of countries. The number of employees increased to 4,026 (2009: 3,706). Strong recovery in various markets The considerable volume growth at existing and new customers in 2010 led to a rapid recovery of profitability. In particular, the improvements on the semiconductor, automotive and precision machine building markets meant a strong increase in demand. The semiconductor industry developed well in There was a strong demand for engineering, production and assembly of systems for this industry and frames for new machines. Both the number of systems supplied as well as the quantity of heat treatment projects grew strongly. Systems were also delivered for a new generation of machines which can make larger and more efficient wafers. In this field, Industrial Services is a distinctive technology partner. KEY FIGURES INDUSTRIAL SERVICES (in EUR million) Difference Revenue % Operating profit (EBITDA) % EBITDA as a % of revenue Operating profit (EBITA) 58.1 (6.4) EBITA as a % of revenue 12.5 (1.8) Capital expenditure % Depreciation (7%) Average number of employees (x1) 3,911 3,847 2% Number of employees at year-end (x1) 4,026 3,706 9%

27 Industrial Services showed a rapid recovery of profitability, mainly thanks to considerable volume growth at new as well as existing customers. The demand from the automotive industry showed a strong recovery in practically all countries, in particular the high-quality car segment in Germany. Various new products and processes were introduced and the collaboration between companies within the group was reinforced by more intensive key account management. Examples of this include the handling of exhaust systems for lorries so that they become resistant against sulphuric acid formation and the surface treatment of turbo parts. Alignment and heat treatment of the rear axis of passenger cars was also carried out in large volumes. 23 Report of the Management Board The precision engineering market showed healthy recovery during the year, in particular for industrial products. This occurred to a lesser extent in the field of heat and surface treatment. This was mainly caused by the considerably long lead times of new projects at customers. New precision stamping parts were developed in various European countries. Various successful initiatives were undertaken in the medical segment to expand market positions. New products were also introduced which can lead both to new customers as well as to more revenue at existing customers. Initiatives were taken to increase the revenue in metal prostheses at companies in France and the Netherlands. These prostheses are developed, moulded, processed and assembled. An innovative product was also developed to remove layers of skin for skin transplants. The activity level within the aerospace construction industry at the end of 2010 was less than the levels for 2008 and The number of profitable projects was limited and the production of construction parts was less than in As the year progressed the number of orders that aircraft builders received increased slowly. The order portfolio is expected to improve in the coming years. Revenue (in EUR million) Operating profit (in EUR million) EBITDA EBITA Capital expenditure (in EUR million) Number of employees (at year-end) , ,000 3,000 4, , ,

28 DISTRICT HEATING Aalberts Industries provides valves for district heating projects in Western, Northern and Eastern Europe and China. The steel valves, sold under the brand name Ballomax, are used in piping systems, distribution stations and energy generation. Insulated valves are also supplied for regulating and distributing gas, both in Europe and in North America. 24 Annual report 2010 The development of the turbine industry in the United States was favourable. Heat treatment of parts in the North American branches took place on a large scale in 2010, in particular due to an increase of activities for the overhaul of gas turbines. Parts for a recently introduced aircraft jet engine were also treated. Industrial Services will provide various parts for this new type of engine in the next few years and the growth potential is considerable. The market remained stable in the defence area. This also applied for the energy sector even though the number of new products on this market increased, in particular in the field of sustainable provision of energy. Customers are increasingly globally active Industrial Services customers are increasingly globally active and investments are more and more being made from that perspective. Upcoming markets such as China, India and Brazil show strong growth in investments from our customers. In China Industrial Services was particularly successful with flat springs for the metal & electronics industry. These are highly accurate precision stamping parts that use technology from Western Europe for globally active customers in China. Sales organisations in France and Germany were reinforced and various new products and processes were introduced with a view to future growth. Overmoulding showed strong growth in Eastern Europe. This technology is used to extrusion coat precision stamping parts with plastic into a complete finished product. Many new customers were acquired in this growing activity which is mainly targeted at the automotive and metal & electronics market. The commercial processing of the local markets was further increased in the production locations in Slovakia and Poland. In Poland, the volume for the surface treatment of piston parts also grew strongly; close cooperation with customers played a prominent role. In the second half of the year, the activities in the area of heat treatment increased in the United Kingdom and Spain. The intensive market approach, increased service in combination with an increased volume and new management in these countries led to better results. More intensive collaboration The collaboration between the companies of Industrial Services was further strengthened. Further steps were taken in the field of customer exchange, key account management and offering precision stamping parts together with treatment processes. This approach will be intensified in In addition, the development and delivery of integrated systems will be taken to a higher level in order to offer customers more total solutions. The activities in vibration systems in particular form a focal point for further high-quality, profitable growth.

With this in mind various companies within Industrial Services are increasingly using each other s knowledge and experience in the upcoming markets.

29 Companies within Industrial Services are increasingly using each other s knowledge and experience in the upcoming markets. The Industrial Services customers are organising their strategy from a more global perspective. With this in mind various companies within Industrial Services are increasingly using each other s knowledge and experience in the upcoming markets. Cross selling and technical cooperation with Flow Control is also taking shape. Many products, for example press and compression fittings, are given a heat treatment by Industrial Services. New developments have started to improve special coatings fittings and valves. The cooperation between Industrial Services and Flow Control is also making a mark in the field of roll forming. 25 Report of the Management Board Future The strategic policy lines which were pursued in 2010 will remain applicable in the future. Offering a mix of technologies with the highest possible added-value for Industrial Services and customers will be further intensified. Joint key account management will be increasingly implemented, as will an intensive cooperation in the group and acceleration of the introduction of new products. Flow Control retains margins and strengthens market positions Revenue and results In 2010 Flow Control achieved a revenue of EUR 1,218.0 million (2009: EUR 1,043.9 million), an increase of 17%, of which 7.5% was organic. The operating profit before depreciation and amortisation (EBITDA) amounted to EUR million (2009: EUR million) and therefore 13.3% of the revenue (2009: 13.8%). The EBITA amounted to EUR million (2009: EUR million), an increase of 16%. The added-value margin of this group activity was 52.1%. Closer cooperation in purchasing, sales and distribution led to substantial efficiency improvements. The collaboration within Flow Control was also given more substance and led to many product introductions in Europe, the Middle East and the United States. The number of employees increased to 7,494 at year-end (2009: 6,276). This was mainly thanks to the takeover of the American company Conbraco. Markets: mixed image The introduction of new products and strengthening of both collaboration between group companies and market orientation resulted in growth of the market share in a number of market segments. Nonetheless the developments on various markets, seen both from the market area as well as geographically showed a mixed image. With regard to the developments per market area, the residential new-build market remained at a low level whereas the renovation and maintenance market showed a stable

EMERGENCY AND EYE BATHS If employees in factories or laboratories for example are unfortunate enough to be exposed to chemical substances, they can use an emergency shower or eye bath.

30 EMERGENCY AND EYE BATHS If employees in factories or laboratories for example are unfortunate enough to be exposed to chemical substances, they can use an emergency shower or eye bath. These systems are produced by BROEN (DNK) and sold worldwide. 26 Annual report 2010 picture. The decrease in the commercial building market could be compensated by the increased quantity of products per project. Developments were clearly positive in the field of utility networks and district heating. This was also visible in the activities in the field of floor heating for buildings. The product offer for water regulation systems was expanded and to an increasing extent combined with energy-efficiency systems. Thanks to this, customers profit from lower energy consumption and more comfort. New activities for fire protection had an excellent start, mainly focused on Europe and the United States. In shipbuilding new contracts for the supply of sprinkler systems were entered into. In addition, the warm spring in the United States meant that the number of projects in the irrigation industry grew. The development of activities for the beer and soft drinks industry likewise showed a positive picture, also because of improved collaboration between group companies in Europe and the United States. New products were launched and the customer base was increased. The worldwide laboratory market also developed well, partly because of a stimulating government policy and the demand for integrated systems. Northern and Eastern Europe In the Netherlands, despite the small number of new-build projects, sales were somewhat compensated by the introduction of new products and an increase in sales in floor heating, plastic and metal piping systems, sanitary systems and balancing valves. The utilities market also showed favourable development, in particular from the second quarter onwards; new gas and plastic piping systems were put onto the market. The product package was expanded for the utility market in Belgium that is developing favourably. Floor heating activities also increased there and many new projects were realised. Meanwhile Henco is using various sales and distribution channels within Aalberts Industries. KEY FIGURES FLOW CONTROL (in EUR million) Difference Revenue 1, , % Operating profit (EBITDA) % EBITDA as a % of revenue Operating profit (EBITA) % EBITA as a % of revenue Capital expenditure % Depreciation % Average number of employees (x1) 7,115 6,376 12% Number of employees at year-end (x1) 7,494 6,276 19%

At Flow Control substantial efficiency improvements and many product introductions took place in Europe, the Middle East and the United States.

31 At Flow Control substantial efficiency improvements and many product introductions took place in Europe, the Middle East and the United States. After a hesitant start in Scandinavia market circumstances improved halfway through the year. In Sweden and Norway positions on the utility markets were strengthened and the first orders for the new fibre-reinforced composite piping systems were recorded. In Norway new metal push fittings were also introduced. Moreover in several Scandinavian countries additional products such as automatic balancing valves and plastic piping systems were put onto the market. Various measures were taken in the region to strengthen the joint sales and distribution power with more emphasis on project specifications. Management was also strengthened in various places. 27 Report of the Management Board The severe winter in Eastern Europe as well as the limited liquidity had a restraining effect during the first months of the year on various activities. However, a positive trend was seen in Russia, Poland and the Czech Republic from mid 2010 which continued further throughout the year. In Russia the district heating market developed very favourably where a local production facility became fully operational in the first quarter. This also meant that the already strong market positions were built on. The markets for hot water tap systems also developed well. In the Eastern European region a lot of energy was put into combining sales and distribution power and intensifying cross selling. Germany, Austria and Switzerland Healthy growth was recorded in Germany despite a reticent market, in particular due to the increased revenue from many sister company products. Commercial organisation was increased in various places and combined more. The organisations in the countries in question are focusing further on supplying a total package of products combined with clear segment choices, product specifications and training end-users. Key account management in collaboration with the group based on the broad product portfolio offers many opportu- Revenue (in EUR million) Operating profit (in EUR million) EBITDA EBITA Capital expenditure (in EUR million) Number of employees (at year-end) 1, ,000 1,200 1, , ,000 4,000 2,000 7,

INTELLIGENT ENERGY SAVING Aalberts Industries develops, produces and supplies customerspecific energy-efficiency systems, consisting of hot water tap, measuring and regulation systems and balancing

These react automatically to temperature changes and communicate radiographically with other thermostats. This intelligent temperature control ensures energy savings up to 30%.

Increasing efficiency in production and logistics in many places in Germany was worked hard on, as well as strengthening the commercial efforts.

32 INTELLIGENT ENERGY SAVING Aalberts Industries develops, produces and supplies customerspecific energy-efficiency systems, consisting of hot water tap, measuring and regulation systems and balancing valves to optimise energy consumption. Comap (FRA) and Pegler Yorkshire (GBR) supply the programmable thermostat systems. These react automatically to temperature changes and communicate radiographically with other thermostats. This intelligent temperature control ensures energy savings up to 30%. 28 Annual report 2010 nities for substantial growth in this region. Increasing efficiency in production and logistics in many places in Germany was worked hard on, as well as strengthening the commercial efforts. A reinforced sales organisation was set up with new management in Austria where sales and distribution of group products will be further combined. In Switzerland mainly the water segment grew and sales of hot water tap systems and metal piping systems increased. United Kingdom and Middle East In the United Kingdom the housing and commercial market remained at a low level; the renovation and maintenance market maintained a stable level. Market shares were strengthened and various new products were put onto the market. These included hot water systems, supplementary sanitary tap systems, plastic piping systems, heating regulation equipment and valves for the commercial market. Halfway through 2010 a new extrusion line for brass rods was put into operation. These are delivered to other companies within the group. In the second half of the year further expansion of the activities in plastic piping systems and the introduction of Conbraco s products package was worked hard on. A new distribution centre will be ready in the first quarter of The markets in the Middle East showed strong growth. The market positions were further expanded, inter alia with additional sanitary tap systems and many group products. Preparations were also made to bring sales efforts and organisation for 2011 to a higher level. Southern Europe In France, the sales organisation was reinforced in various areas. The sales of group products were further shaped by improved product specification and performance of projects. Efficiency further increased due to cost reductions and higher production. Various product development processes were put into effect which should lead to extra revenue in the coming years. In close collaboration with other group companies in 2011 further efficiency improvements will be carried out for various product groups. In view of the many initiatives to stimulate sales and the increased number of cross selling projects healthy revenue growth is expected in France. In Spain and Portugal market conditions remained bad. The new-build housing market and utility market were bad compared to the somewhat better renovation and maintenance markets. New sanitary products that were introduced sold well and were also successfully exported to North Africa and the Middle East. Market circumstances were difficult in Italy and Greece. Costs were reduced and efficiency was improved in both countries. The Italian production facility showed a healthy growth by expansion of the product package.

More intensive collaboration between group companies, concentration of production and progressive automation will lead to higher results at Flow Control.

The industrial market grew strongly as did the irrigation market although growth was delayed in the second half of the year. A positive impulse was felt on the acquisition of Conbraco.

33 More intensive collaboration between group companies, concentration of production and progressive automation will lead to higher results at Flow Control. United States Despite price pressure in the United States margins were maintained in a number of segments. The industrial market grew strongly as did the irrigation market although growth was delayed in the second half of the year. A positive impulse was felt on the acquisition of Conbraco. The portfolio was further expanded with a number of strong branded products and additional market segments could be penetrated. A start was also made on combining the sales organisations of various activities in the United States and the offer of complete product packages for specific market segments. In addition the exchange of production technology between Conbraco and other companies at Flow Control commenced. The activities in consumer products were combined within one commercial organisation, which now serves the market with a complete product portfolio. 29 Report of the Management Board Future Because of the increasingly closer cooperation between the group companies the number of product introductions in 2011 will continue to rise. Moreover, in order to further improve the efficiency the production of specific product groups is more concentrated. In combination with progressive automation of production these initiatives will lead to higher results, so that the course of 2010 can be continued. Developments in personnel and organisation Organisation closer to the market Both the general and commercial management was increased with a view to further improvement of market orientation. Within the European activities of Flow Control the GEOGRAPHICAL SPREAD OF EMPLOYEES 2010 % 2009 % United States 2, , Germany 2, , Benelux 1, , France 1, , Eastern Europe 1, , United Kingdom 1, , Scandinavia Spain & Portugal Other Total 11, ,

PROGRESS IN MATERIAL TECHNOLOGY Duralloy (DEU/CHE) focuses on heat and surface treatment of amongst others ball bearings, which are used for many applications, for example in large machines.

34 PROGRESS IN MATERIAL TECHNOLOGY Duralloy (DEU/CHE) focuses on heat and surface treatment of amongst others ball bearings, which are used for many applications, for example in large machines. The company developed a coating, which coats the surface with a chrome layer micrometres thick and ensures extreme hardness and resistance against chemical substances. AHC is also specialised in surface treatment, inter alia anodising inspection systems. 30 Annual report 2010 general management in the Benelux and Scandinavian region was strengthened and in Germany the commercial power was further reinforced. In addition, in the United Kingdom, France and the Middle East commercial management was increased and became more focused. Moreover in various countries new management was recruited to accelerate the growth in specific market segments, such as sprinkler piping systems and energy-efficiency systems. In the United States after the takeover of Conbraco intensive commercial collaboration commenced between the companies. The objective is to form market and customer focused organisations which will supply total packages of products and systems for specific market segments. At Industrial Services the management of the surface treatment activities is enhanced by giving more attention to key account management. More staff The average number of employees grew from 10,241 to 11,042. At the end of 2010 the number of employees was 11,536 (at the end of 2009: 9,999). This increase was mainly due to the takeover of more than 1,000 employees from Conbraco in the United States. Corporate sustainability Departure points Aalberts Industries is firmly grounded in society. The company depends on society and is strongly aware of its own role and responsibilities which extend further than merely financial and economic business operations. Aalberts Industries recognises the impact which the company has on employees, the environment and society. After all, the company works on a daily basis with suppliers, customers and other partners as participants in social and economic life. Obviously Aalberts Industries activities impact the environment. The company uses raw materials and semifinished products, consumes energy and generates waste. Aalberts Industries is also a people organisation. The development of employees and the continual attention for a safe and healthy work environment are key. Aalberts Industries therefore endorses the OESO en ILO guidelines with regard to corporate sustainability. Stakeholders Aalberts Industries has defined the most important stakeholders for the company s success. Internally these are the employees, externally the shareholders, customers, suppliers, authorities and society. The company and the group companies dialogue with the stakeholders in order to examine social policy. The table here below shows an overview of the objectives. As well as the stakeholders below, in 2010 Aalberts Industries also approached the Dutch Association of Investors for Sustainable Development (VBDO) to ask for its view of Aalberts

35 Aalberts Industries is strongly aware of its own responsibilities which extend further than merely financial and economic business operations. Industries corporate sustainability activities. It indicated that Aalberts Industries should work towards a systematic approach and should stay close to core processes. Moreover at the beginning of 2011 in its points for attention letter, the VBDO informed Aalberts Industries of its focal points for 2011: remuneration, biodiversity and social policy. Also based on the dialogue with the VBDO a decision was taken to further tighten up the policy framework as set out here below, explain the social policy better (see under health and safety, human resources policy and Aalberts Industries in society ) and to include more quantitative data. 31 Report of the Management Board Remuneration based on results in the field of corporate sustainability is not yet on the agenda also because of the fact that Aalberts Industries wants to start collecting quantitative control information in 2011 as a first reference date. Biodiversity is a supply chain matter for Aalberts Industries as the company mainly works with semifinished products. The sections on Supply Chain Responsibility and use and reuse of materials here below describe the current situation. Stakeholders Expectations Aalberts Industries objectives Employees Safe, healthy and inspiring work environment Consciously dealing with the welfare of the employees by creating a healthy, safe and pleasant environment where everyone s potential can be realised. Shareholders Sustainable profit growth Aalberts Industries strives towards sustainable profit growth with good margins, inter alia by optimising collaboration between the group companies. Customers High-quality and durable products. Realisation of projects and installations using Aalberts Industries innovations Aalberts Industries strives towards supplying ever-increasing added-value to its customers. This is realised by combining specialised group companies, technologies and high-quality service provision in the form of innovative systems, production processes and products. Suppliers Authorities Society Reliable partner Long-term relationship Compliance with law and legislation Involved with the local community Aalberts Industries endeavours towards entering into a long-term relationship in order to source products as locally as possible. Observance of the applicable statutory provisions and regulations. Where possible doing more than is asked. Active dialogue with the local community.

PARTNER FOR THE AVIATION INDUSTRY Accurate Brazing (USA) is specialised in high-quality vacuum welding, assembling and heat treatment of end caps for gas turbines.

36 PARTNER FOR THE AVIATION INDUSTRY Accurate Brazing (USA) is specialised in high-quality vacuum welding, assembling and heat treatment of end caps for gas turbines. In addition, various products are vacuum welded and fitted into aircraft jet engines. SGI (FRA) is specialised in treating fuselage parts of aircrafts, which includes tracking down the smallest irregularities using innovative blue edge technology. 32 Annual report 2010 The current social policy Aalberts Industries current social policy is decentralised. Responsibilities in the field of energy, waste, purchasing, personnel, health and safety lie with the group companies. Because of the group s decentralised character and the complementary skills it can very easily adapt to local circumstances. The holding company provides the framework for action and fulfils a coaching role. The final responsibility with regard to the social policy lies with the Management Board. In view of the significance afforded to corporate sustainability by Aalberts Industries, the ambition has been expressed to further tighten up the policy with regard to corporate sustainability in the coming years. Results Energy and emissions Energy plays an important role in the manufacture of Aalberts Industries products. The company sees it as its responsibility to realise energy-saving where possible. This will result in a decrease in CO2 emissions and a reduction in energy costs. Studies in 2010 at four group companies showed that countless measures have already been taken to reduce energy consumption. These included redesigning the production process, so that efficiency increased, and recalibrating and adjusting equipment. Video conference equipment has also been invested in at the holding company and a number of group companies meaning that the number of flights is limited. Use and reuse of materials The supply of raw materials and semifinished products is essential to Aalberts Industries production process. The products are subject to high requirements because this also determines the quality of the finished product. Recycling and reusing raw materials is an important topic in Aalberts Industries policy. Materials and raw materials are sourced insofar as possible locally. Where possible production locations use a closed loop system so that remaining waste is used again in the production process. Reuse and recycling were given full attention again in Waste Aalberts Industries has the objective of producing a minimum amount of waste. Where possible waste is reused. Supply chain responsibility Corporate sustainability is taken into account in tenders. On the one hand that means purchasing locally insofar as possible and making efforts to offer products which contribute to durable installation and long-term use. Installation ease, safety and the lifespan of the products are key here.

Aalberts Industries has expressed the ambition to further tighten up the policy and practice with regard to corporate sustainability in the coming years.

This is realised by investing in technologies and high-quality service provision in the form of innovative systems, (production) processes and products.

37 Aalberts Industries has expressed the ambition to further tighten up the policy and practice with regard to corporate sustainability in the coming years. Aalberts Industries as a supplier Aalberts Industries strives towards supplying ever-increasing added-value to its customers. This is realised by investing in technologies and high-quality service provision in the form of innovative systems, (production) processes and products. The result is high-quality products, characterised by installation ease, use efficiency and a long lifespan. Aalberts Industries products contribute towards matters such as a heat/cold storage, solar collectors, irrigation systems and water facilities. In addition Aalberts Industries wishes to increase the lifespan of many metals by applying a heat and/or surface treatment for example. 33 Report of the Management Board Certification Many of the group companies have had their management system certified according to the ISO 9001 standard for quality management. In addition the safety management systems have been designed according to the standards of OHSAS Finally, there are group companies that have had their environmental management systems certified according to the ISO standard and have obtained certificates specifically for the automotive industry and the aerospace industry. Health and safety The company is committed to continually improving performance in the field of health and safety for all employees and persons involved and an integral part of Aalberts Industries policy is the will to excel in all aspects of health and safety. This means that Aalberts Industries policy is focused on performing all work in such a way that not only statutory requirements are met but also so that: n any form of personal injury and damage to personal health is prevented; n negative effects on the environment and damage to property of third parties or Aalberts Industries are avoided; and n company processes are performed in a controlled manner and continually improved. No Aalberts Industries employees died in 2010 as a result of an industrial accident. Aalberts Industries makes a link between absolute numbers of industrial accidents with leave and worked hours using the lost time injury frequency ratio the ratio of the number of industrial accidents per million hours worked. Aalberts Industries uses a group wide definition to compare the mutual performances of company divisions. It remains a challenge for group companies that perform less well compared to other company divisions to improve. In line with previous years the percentage absence due to illness is low at 2.9% and lies well below the national and sector averages of the countries where Aalberts Industries is active. Human resources policy Recruiting and keeping talent is very important. In 2010 Aalberts Industries was able to reduce staff turnover by offering development plans and challenging career prospects and giving employees operational responsibility. In addition to a talented employee base,

ACCELERATED INDUSTRIAL MAINTENANCE Metalis produces precision stamping parts from zirconium that are mechanically resistant against nuclear radiation. The grid shown is approximately 4 metres long.

34 Annual report 2010 diversity is also paramount. By offering equal opportunities, irrespective of sex, faith or creed, Aalberts Industries hopes to progress further in this area.

38 ACCELERATED INDUSTRIAL MAINTENANCE Metalis produces precision stamping parts from zirconium that are mechanically resistant against nuclear radiation. The grid shown is approximately 4 metres long. The valve shown, which can be opened from above, is produced by Conbraco (USA). The major advantage is that machines can be maintained without the valve having to be removed. 34 Annual report 2010 diversity is also paramount. By offering equal opportunities, irrespective of sex, faith or creed, Aalberts Industries hopes to progress further in this area. Aalberts Industries in society Increasing local involvement of group companies is most important in Aalberts Industries donation policy. Donations by group companies often concern a local project. An open house is held regularly and other local projects are developed. For example, in a group company local project in the United Kingdom disadvantaged youth from the area are being given the opportunity to learn a trade at Aalberts Industries, giving them the chance of a better future. Further, Aalberts Industries supports local vocational training. In doing so the company hopes to be able to contribute towards the quality of technical education. Legion of opportunities Aalberts Industries sees a legion of opportunities in the field of sustainability. The company can enter new sustainable markets with sustainable innovations and keep current customers by energy saving and saving costs by recycling. The high level of attention for health and safety makes it an attractive employer. In 2010 Aalberts Industries decided to further work out the policy framework for corporate sustainability. The objective of this policy framework is to establish whether the current initiatives and efforts in the field of corporate sustainability contribute towards operational objectives and also to establish what new initiatives would have to be developed. The group companies are also helped by more effectively substantiating the policy framework by way of activities which are focused on corporate sustainability. For questions about the policy with regard to corporate sustainability please contact cr@aalberts.nl. Outlook A wider recovery in various markets, an active market approach and the increased order position will lead to further improvement of the earnings per share in 2011 barring unforeseen circumstances. Solid balance sheet ratios remain maintained due to the continuing large amount of attention given to profitability and the control of working capital and costs.

A wider recovery in various markets, an active market approach and the increased order position will lead to further improvement of the earnings per share in 2011 barring

the financial statements as included in this report provide a true and fair view of the assets, liabilities, financial position and profit for the financial year of Aalberts

the annual report as included in this report provides a true and fair view of the situation on the balance sheet date and the business development during the financial year

39 A wider recovery in various markets, an active market approach and the increased order position will lead to further improvement of the earnings per share in 2011 barring unforeseen circumstances. Management Board declaration 35 Report of the Management Board The Management Board declares that, to the best of its knowledge: 1. the financial statements as included in this report provide a true and fair view of the assets, liabilities, financial position and profit for the financial year of Aalberts Industries N.V. and the group companies included in the consolidated statements; 2. the annual report as included in this report provides a true and fair view of the situation on the balance sheet date and the business development during the financial year of and the affiliated group companies included in the financial statements. The annual report provides information regarding the material risks to which Aalberts Industries is exposed. Langbroek, 22 February 2011 Jan Aalberts, President & CEO John Eijgendaal, CFO Wim Pelsma, COO

40 Report of the Supervisory Board

42 38 Annual report 2010 Financial statements 2010 and dividend proposal The financial statements for the financial year ending 31 December 2010 were prepared by the Management Board and signed by the Management Board and Supervisory Board. The Independent Auditor s Report from PricewaterhouseCoopers Accountants N.V. is included on page 85 of the financial statements. The Management Board will present the 2010 financial statements to the General Meeting for adoption. The Supervisory Board advises the General Meeting to adopt these financial statements, including the proposed dividend of EUR 0.28 per ordinary share. Composition of the Supervisory Board In 2010 Mr M.C.J. (Martin) van Pernis acceded to the Supervisory Board of Aalberts Industries. Mr Van Pernis, nominated during the General Meeting on 22 April 2010, was President of the Siemens Group in the Netherlands and chairman of the Management Board of Siemens Nederland N.V. for seven years. Prior to that he was active for Siemens in other positions in the Netherlands and internationally. Mr van Pernis has held various Supervisory Board memberships and a number of societal positions. In 2011 Mr A.B. (Dries) van Luyk will resign from his membership of the Supervisory Board. In that year Mr Van Luyk will have been affiliated with Aalberts Industries as a member of the Supervisory Board for fifteen years. The company is most grateful to him for the manner in which he has fulfilled his office. In 2011 Stichting Prioriteit will propose to the General Meeting that Mr R. (René) van der Bruggen, President & CEO of Imtech N.V. be appointed as a member of the Supervisory Board of Aalberts Industries. Mr Van der Bruggen (1947) has ample board experience, in particular at larger organisations and has fulfilled several supervisory positions at Dutch companies. At the end of the General Meeting in 2011 H. (Henk) Scheffers and W. (Walter) van de Vijver will resign according to retirement schedule; both are reelectable and the Stichting Prioriteit intends to put Messrs Scheffers and Van de Vijver forward for reappointment. The work of the Supervisory Board In 2010 the Supervisory Board met six times. One of the meetings took place at group company Pegler Yorkshire in Doncaster, United Kingdom. A meeting was also held in the absence of the Management Board during which the performance of the Management Board and the Supervisory Board was discussed. The course of affairs and developments with regard to result and markets were discussed with the Management Board. This also included the half-yearly and annual figures and the

43 The takeover of Conbraco Industries was an important step towards strengthening the North American market position. dividend policy. With regard to the business strategy, acquisition policy and the takeover of Conbraco were paid special attention. The business risks, organisational structure and developments in staff policy were also discussed in detail. The Supervisory Board established that Aalberts Industries showed a strong ascending line in 2010 after a difficult Excellent progress was made with regard to cost and work capital management, revenue, results and added-value. The Supervisory Board approved the operational strategy and the objectives for Report of the Supervisory Board Corporate governance The Board ascertained that the corporate governance structure functioned well throughout the entire range of regulations and procedures as applicable within Aalberts Industries. The Management Board and Supervisory Board discussed the updating of the Dutch Corporate Governance Code (Tabaksblat Code) presented by the Corporate Governance Code Monitoring Committee (Frijns Committee and Streppel Committee) and the potential effect of the revisions on Aalberts Industries. Independence In the Supervisory Board s opinion the composition of the Board is such that the members can operate critically and independently of each other and the Management Board as stipulated in the Corporate Governance Code and Article 4 of the Rules. This means that the legal and statutory duties of the Supervisory Board are being fulfilled, including providing the Management Board with solicited and unsolicited advice and support. Remuneration and Audit Committees In accordance with Article 8 of the Rules the Supervisory Board has not set up separate committees but fulfils the tasks of these committees as a whole. In this context, in 2010 the Board during the meeting focussed on performance appraisal, financial reporting and the prevailing remuneration policy. Furthermore, the Board drew up the remuneration policy explained here below for the Management Board and the General Meeting approved the proposal on 22 April Performance appraisal During a closed meeting the Supervisory Board evaluated its own performance and that of the members. At this meeting the performance of the Management Board as a whole and each individual member was also evaluated. External auditor As is customary for Aalberts Industries, the Supervisory Board discussed the half-yearly and annual figures with the external auditor. On both occasions the discussions included the work that had been carried out, the internal risk management and control systems, the figures to

SWING HEAD FOR IRRIGATION LASCO Fittings (USA) produces swing heads for irrigating golf fields and sports fields and municipal and holiday parks.

44 SWING HEAD FOR IRRIGATION LASCO Fittings (USA) produces swing heads for irrigating golf fields and sports fields and municipal and holiday parks. The company also supplies a complete package of plastic fittings and valves for various markets including irrigation, industry, commercial buildings, swimming pools & spas and to a limited extent housing. 40 Annual report 2010 be published, the manner in which the Board executed its supervisory role and the role of the external auditor. It has been decided to propose to the General Meeting on 21 April 2011 to reappoint PricewaterhouseCoopers Accountants N.V. for the financial year Remuneration policy Introduction In accordance with the Articles of Association the Supervisory Board establishes the remuneration of the Management Board members. The remuneration of the individual Management Board members (including remuneration based on shares) must be in accordance with the policy approved by the General Meeting. Within the framework of the best practice principles contained in the Monitoring Committee Corporate Governance Code, the Supervisory Board has brought the remuneration policy further in line with Aalberts Industries strategy, risks and financial objectives. This aims at a good balance between the fixed and variable remuneration and the short and long-term remuneration. Aim The objective of the remuneration policy is to recruit, motivate and retain qualified and experienced directors with industry experience. The remuneration structure for the Management Board is aimed at an optimal balance between the company s short-term results and long-term goals. The total remuneration of the Management Board members comprises the following components: n a fixed basic salary; n a short-term variable income in cash for short-term (one year) performance; n a long-term variable income in shares for long-term (three years) performance; n a pension plan. Basic salary Once a year the Supervisory Board will determine whether and to what extent the basic salary will be adjusted taking developments in the market as well as the Aalberts Industries results into account. Short-term variable income The variable income is an important component of the remuneration package. Management Board members can be awarded an annual bonus for the achievement of targets set in advance (including earnings per share, net working capital and organic revenue growth). The targets are set by the Supervisory Board at the beginning of each financial year. The variable income package is, to an important extent, performance-based and can, if the targets are achieved, add a maximum of 75% to the basic salary.

The Supervisory Board establishes that Aalberts Industries has been able to withstand the difficult circumstances of 2009 and to close 2010 profitably.

These performance targets are focused on the strategic plan and the creation of added-value over a period of three years after which the Supervisory Board assesses the extent to which the performance

45 The Supervisory Board establishes that Aalberts Industries has been able to withstand the difficult circumstances of 2009 and to close 2010 profitably. Long-term variable income The long-term variable income of Management Board members is in the form of a conditional awarding of shares. These performance targets are focused on the strategic plan and the creation of added-value over a period of three years after which the Supervisory Board assesses the extent to which the performance targets have been achieved and decides how many shares will be awarded unconditionally. Shares awarded conditionally must be held for at least five years or until termination of employment if this is sooner, unless the Compliance Officer can be shown that shares are sold to pay tax obligations related to the awarding of these shares. 41 Report of the Supervisory Board Pension plan The Management Board participates in a pension plan (career average or defined contribution pension scheme) with a retirement age of 65. Management Board members are responsible for payment of a third of the contribution. Amendment Each year, the Supervisory Board will review the Management Board remuneration policy and assess its market conformity. Amendments will be put before the General Meeting. Note of thanks The Supervisory Board establishes that Aalberts Industries has been able to withstand the difficult circumstances of 2009 and to close 2010 more profitably and with increased market positions. The Board thanks all employees of Aalberts Industries for the resilience shown and the huge amount of work that was done. Langbroek, 22 February 2011 Dries van Luyk Martin van Pernis Henk Scheffers, Chairman Walter van de Vijver

46 General information

48 44 Annual report 2010 Health, safety and the environment Aalberts Industries examines its production processes and methods each year and adjusts these as necessary to amended circumstances or statutory requirements. The company sets itself the objective of restricting noise nuisance, soil, water and air pollution and the generation of residual material and hazardous substances. The following departure points and objectives have been formulated for employees and management: n Current statutory provisions and regulations should be complied with and where possible exceeded if this contributes towards the achievement of the environmental and safety objectives. n Continuous raising of awareness and clear, practical guidelines ensure that health, safety and the environment are paid constant attention and dealt with in the right way. n An approach that is continuously focused on the prevention or limiting of soil, water and air pollution, noise nuisance, the production of residual materials and restricting or completely eliminating the use of hazardous substances. n Reduction of material and raw material use by developing new products and processes, stimulating reuse and implementing modern production and assembly techniques. n Stimulating energy and water-saving measures, inter alia by reusing released energy and/or used cooling water. Safety and quality of working conditions are a priority at Aalberts Industries. The group companies all employ their own health policy and practically all have their own environmental and safety policy. This policy is judged each year for its merits and specific results are discussed with the Management Board. Day-to-day implementation of the policy is based on a number of group principles: n employee training and education; n clear communication and guidelines including safeguarding; n regular audits and immediate follow-up of any actions ensuing therefrom; n regular listing and evaluation of the risks; n structural exchange of knowledge and experience between the group companies. Personnel and organisation Aalberts Industries strives to rank amongst the preferred employers in the various markets and geographical areas. The company is very ambitious and has a decentralised organisation structure; the company is therefore mainly focused on recruiting, keeping and developing talented and enterprising people. Maintaining and increasing management potential is put into practice by personal development plans, challenging career prospects and far-reaching operational responsibility. Aalberts Industries has been following this approach for years so that local management teams are very motivated to increase the result of their own company and that of the group.

49 Aalberts Industries is strongly focused on recruiting, keeping and developing talented, enterprising people. The following principles apply for the human resources policy: n stimulating an entrepreneurial culture; n a focus on the environment, safety and social developments; n training and education of employees and management; n creation of challenging career prospects; n a market-conforming salary structure and employment conditions. 45 General information These principles form the basis of the human resources policy within each group company. Given the diversity of employees, cultures and nationalities, the local management is further substantiated within these frameworks. The group management and management of the subsidiaries regularly discuss business development and the human resources policy and any appointments at management team level. Increasing the underlying collaboration and synergy remains a strategic focal point, while retaining the decentralised structure and responsibilities mainly at the level of the various group companies. The company stimulates cross selling possibilities and knowledge sharing in areas such as sales, efficiency improvement, safety and environment. Group companies are also encouraged to purchase semifinished products or processes from each other (cross production) rather than from third parties because this positively contributes directly to improvement of the group s capacity utilisation and margin. Increasing the underlying collaboration is given permanent attention in order to strengthen both the individual companies and the group as a whole. Managerial aspects and risk profile Operational Aalberts Industries is susceptible to a number of operating risks. These are mainly the technological condition and continuity of the production resources and environmental control and safety. Aalberts Industries invests annually in the most up-to-date production technologies and development of new products and processes. Operational management follows the statutory developments in the field of environment and industrial innovations closely and where possible takes proactive steps. The markets which Aalberts Industries is active on are diverse and distinctive. That also applies to the countries and geographical regions where the company has a presence. Price developments, economic trends and the development of raw material and energy prices are essential for Aalberts Industries in organising risk policy. Aalberts Industries attempts to manage the volatility on financial results by processing price increases in the end prices in a short time period. The price policy is further discussed here below in the paragraph Financial.

COOL QUALITY For barrel manufacturers and beer brewers DSI Getränkearmaturen (DEU) produces complete tap systems consisting of heads, insulated tubes and pipes.

50 COOL QUALITY For barrel manufacturers and beer brewers DSI Getränkearmaturen (DEU) produces complete tap systems consisting of heads, insulated tubes and pipes. The tap head is fitted with a bayonet catch and eyepiece and can be cooled automatically. This also applies for the pipes, which are often in warm rooms. This system ensures optimum hygiene and that product quality is maintained longer. 46 Annual report 2010 With regard to the purchasing policy purchase volumes are consolidated and dynamic purchase contracts with suppliers are entered into in terms of prices, volumes and periods. Reducing material use and managing energy costs are also important points. Aalberts Industries plays on developments on sales markets by worldwide distribution of the activities over a large number of customers, products and markets as well as possible. Further increase of the diversification of Aalberts Industries is an important strategic objective. This is given a lot of attention in both the investment policy as well as any operational business operations. Financial Aalberts Industries has a solid balance sheet and implements an active policy of optimising the balance sheet ratios. This limits the financial risks and financial solidity is maintained in the long term. The stock exchange quotation makes it possible for acquisitions to make a well-considered choice in determining the best financing mix. Aalberts Industries is susceptible to financial risks which are worked out in detail on pages 59 to 61 of the financial statements. The most significant are currency, credit and interest rate risks. By coordinating the currency streams at holding company level and consolidating purchase and sales streams in certain currencies regionally, the group neutralises sensitivity to exchange rate fluctuations insofar as possible. In general Aalberts Industries is most sensitive for exchange rate fluctuations in the British pound, the US dollar, the Polish zloty and the Russian rouble. As far as credit risks are concerned the group follows a restrictive policy in which the creditworthiness of customers is repeatedly checked and most of the accounts receivable portfolio is credit insured. The interest rate risk is relatively limited and the group has various options for actively managing interest rate fluctuations actively. The research and development expenditure, necessary to increase the portfolio qualitatively and quantitatively, is directly charged to the income statement. Legal On 20 September 2006 Aalberts Industries and two of its group companies were fined EUR million for an alleged infringement of competition regulations. After a thorough legal analysis of the arguments and in view of the opinion, based on the facts, that Aalberts Industries had not infringed any competition regulations, the Management Board, in consultation with its legal advisors, filed an appeal with the Court of First Instance in Luxembourg. The hearing took place on 2 February 2010 and the judgment is expected on 24 March The Management Board continues to believe that no competition regulations were infringed and therefore no provision has been formed for this matter. In January 2007 Aalberts Industries provided the European Commission with a bank guarantee which was extended for two years in January Risk management The internal risk management system is intended to identify the most important risks and to take effective measures. Rapid, practical applicability within the decentralised structure of Aalberts Industries therefore forms the most important criterion. The financial reporting is

Aalberts Industries has a solid balance sheet and implements an active policy of optimising the balance sheet ratios. formulated within a strict framework of budgeting and reporting.

This report is discussed in detail with the Management Board, which assesses the accuracies and completeness of this report including compliance with the prescribed risk management policy.

51 Aalberts Industries has a solid balance sheet and implements an active policy of optimising the balance sheet ratios. formulated within a strict framework of budgeting and reporting. The individual group companies report regularly to the Management Board including on associated risks. This report is discussed in detail with the Management Board, which assesses the accuracies and completeness of this report including compliance with the prescribed risk management policy. Accurate risk management and control systems do not offer absolute certainty that mistakes, fraud, losses or illegal transactions can be prevented. The Management Board is of the opinion that the risk management and control systems offer a reasonable level of certainty that the financial reporting does not contain any material misstatement. The Management Board has no indications that the systems did not function properly in Likewise the Management Board has no reason to assume that the risk management and control systems will not continue to function adequately during the current financial year, as worded on page 35 in the Management Board s declaration. 47 General information Corporate governance In the opinion of the Supervisory Board and Management Board Aalberts Industries pursues a consistent corporate governance policy, based on the Dutch Corporate Governance Code. Aalberts Industries endorses the principles of the Corporate Governance Code and applies virtually all the best practice provisions of this Code. On a limited scale these have been adjusted to specific circumstances of Aalberts Industries. These adjustments are explained under Investor Relations on the company s website. This also includes all exceptional regulations and rules drawn up with regard to the applicable corporate governance structure. The main amendments to the Corporate Governance Code relate to the following topics: 1. Management Board: The company wants to offer such employment conditions that the right person is recruited for the right position. The term of the appointment is unlimited. Management Board members must obtain the approval of the Supervisory Board before accepting supervisory positions at other companies. Irrespective of the ordinary shares in, private investments do not have to disclosed. On dismissal the existing employment conditions and regulations are taken into account; this also applies to new appointments. 2. Members of the Supervisory Board: Not prohibited from holding shares in Aalberts Industries. A former director may be a member of the Supervisory Board and can also be Chairman of that Board. With regard to expertise the Supervisory Board must be composed such that together the members of the Board can fulfil their responsibilities. The maximum duration of membership is three terms of four years but in the interests of the company deviation from this is possible. Aalberts Industries does not specify the maximum number of Supervisory Board memberships that may be held by a member of its Supervisory Board but strives to apply a qualitative check. Before accepting an appointment or reappointment as a member of the Supervisory Board of another company, a member of Aalberts Industries Supervisory Board must consult the Supervisory Board

PRECISION PARTS FOR THE METAL & ELECTRONICS INDUSTRY Metalis extrusion coats (overmoulds) precision stamping parts for use in switch and distribution boxes for example which are processed in various

48 Annual report 2010 and the President of the Management Board in order to establish whether the acceptance of this appointment or reappointment is compatible with membership of Aalberts Industries

Provision of information: New information will be disseminated simultaneously and equally. Individuals are provided with information based on the above principle.

52 PRECISION PARTS FOR THE METAL & ELECTRONICS INDUSTRY Metalis extrusion coats (overmoulds) precision stamping parts for use in switch and distribution boxes for example which are processed in various types of connectors. Designing, assembling and overmoulding takes place at subsidiaries in France and Slovakia. The parts are sold in Western and Eastern Europe and in China. 48 Annual report 2010 and the President of the Management Board in order to establish whether the acceptance of this appointment or reappointment is compatible with membership of Aalberts Industries Supervisory Board. 3. Company secretary: The nature and size of the group is such that the creation of the position of company secretary is deemed unnecessary. 4. Provision of information: New information will be disseminated simultaneously and equally. Individuals are provided with information based on the above principle. The external auditor will not be invited to attend the General Meeting unless this is legally required or the Supervisory Board decides otherwise; the company will enable questions regarding the audit to be submitted to the external auditor in writing prior to this meeting. The Management Board believes that with the explanatory notes as published on the website it has complied in full with the principle of apply or explain. All the regulations pursuant to the Code that are applicable to Aalberts Industries in respect of reporting and transparency of information have been incorporated in this annual report and on Aalberts Industries website. During 2010 there were no changes to the corporate governance structure at Aalberts Industries. Decision making The tasks and powers of the General Meeting, the Supervisory Board, the Management Board and the Stichting Prioriteit have been defined in such a way that a well-balanced allocation has been achieved in respect of the participation and influence of the company bodies. In doing so Aalberts Industries has ensured insofar as this is possible that when essential decisions are made the interests of all the company s stakeholders are taken into account and that the decision-making process can, at all times, be conducted in a prudent manner.

Full Year Aalberts Industries more than doubles earnings per share

Full Year Aalberts Industries more than doubles earnings per share Full Year 2010 Aalberts Industries more than doubles earnings per share Today s agenda Headlines 2010 Profile Objectives Financial review Operational developments The Aalberts Industries share Outlook