Consolidated and annual report 1999 CENTROTEC HOCHLEISTUNGSKUNSTSTOFFE AG

Transcription

1 Consolidated and annual report 1999 CENTROTEC HOCHLEISTUNGSKUNSTSTOFFE AG 1 1

2 History of the company 1973 Initial plastics processing activities 1981 Founded as producer of plastic semi-finished products and prefabricated parts 1985 Introduction of CNC technology for chip removal 1990 Acquisition of Centroplast Kunststofferzeugnisse GmbH & Co. by current owner 1991 Start of production of films and panels by means of calendering 1992 Initial successes with high-performance plastics (PVDF) Development of French, Swiss and Austrian markets 1993 Start of production of calibrated hollow rods 1994 Founding of Centrotherm GmbH (gas flue systems) Sales activities are launched in Great Britain, the Netherlands and Benelux 1995 Gas flue development project with the backing of technology development programmes Accreditation to DIN ISO 9002 Sales activities launched in Scandinavia 1996 Construction approval granted by Deutsches Institut für Bautechnik (IFBT) for rigid gas flue systems Development and marketing of Centropack transport systems 1997 New high-performance thermoplastics added to range Entire group of companies accredited to DIN ISO 9001 Construction approval granted by Deutsches Institut für Bautechnik (IFBT) for flexible gas flue systems 1998 Prefabricated parts production in Marsberg extended Conversion into a joint stock company Listed on the Neuer Markt segment of the Frankfurt Stock Exchange 1999 Market breakthrough for plastic gas flue systems Acquisition of Ubbink Systemtechnik Represented throughout Europe by own subsidiaries 2

3 Overview Consolidated in DM mn change in % Sales total 34,3 26,5 29% Engineering plastics (Semi-finished and prefabricated plastic products*) 22,2 22,3-1% Plastic Systems (gas flue systems) 13,5 4,9 174% Earnings EBIT 4,0-0,2 Earnings before tax 3,9-0,9 Net income 3,4-1,1 Net income** 3,4 2,5 36% Earnings per share (3,6 Mill.shares; DM) 0,96-0,32 Earnings per share (3,6 Mill.shares; DM)** 0,94 0,69 36% Employees Number (Average) % Personnel expenses 7,6 6,1 26% Sales per employee 0,34 0,31 10% Sales per industrial employee 0,40 0,37 8% Assets Fixed assets (excl. financial assets) 6,9 5,5 25% Current assets 16,6 20,0-17% - therof liquid funds 1,3 10,7-88% Total assets 39,8 25,7 55% Cash flow/investments Cash flow I** 4,6 3,3 39% Depreciation 1,2 0,7 56% Investments (without aquisition) 2,6 2,2 17% * Internal sales with gas flue systems ,3 Mill. DM, ,7 Mill. DM. ** 1998 adjusted by one-off expenses incurred by the IPO. Courtesy Translation This report is a courtesy translation. Legally valid is only the original German text. CENTROTEC is not liable for mistakes due to the translation. (Figures are written in German manner; e.g. DM 1.000,000 = DM one thousand) 3

4 Report of the supervisory board for fiscal year 1999 The Supervisory Board is able to look back on a very successful fiscal The group recorded its highest sales and profits in its history. The potential for growth that was anticipated above all for new types of plastic gas flue systems has materialised. As a result of the acquisition of Ubbink Systemtechnik at the end of the financial year, the company has entered a new dimension. We congratulate the Managing Board and the management of the operative companies on this success, and in particular all employees, who have once again shown exceptional commitment. During the 1999 fiscal year, the Supervisory Board was informed regularly and comprehensively of the company s business progress, and in particular of the development in its sales, orders, earnings, net worth and financial situation and of the company s discernible risks and opportunities, through both written and oral reports. The Supervisory Board has, in accordance with legal requirements and the articles of incorporation, performed the tasks which fall due to it, and has in particular regularly monitored and advised the Managing Board. On the basis of the Managing Board s reports, the commercial position and progress of the company, together with its risks, were regularly discussed with the Managing Board. Wherever ratification by the Supervisory Board was required, the proposals of the Managing Board were studied and approved by the members of the Supervisory Board. The topics discussed at the meetings of the Supervisory Board focused on the fundamental business policies of the parent company and its subsidiaries. their unqualified certification thereof. The auditors report, a copy of which was sent to each member of the Supervisory Board, was discussed at length in the meeting of the Supervisory Board which had the purpose of approving it. The auditors attended this meeting and reported on the principal findings of their audit. The Supervisory Board examined the annual financial statements, management report and consolidated financial statements, including group management report, as drawn up by the Managing Board, as well as the dependence report. The examination by the Supervisory Board revealed no cause for objection. The annual financial statements issued by the Managing Board were granted the unqualified approval of the Supervisory Board, and are thus established pursuant to 172 Sentence 1 of AktG (German Stock Corporation Law). In accordance with the statutes of incorporation, the Managing Board and Supervisory Board have resolved to allocate the amount of DM 1,015, to the revenue reserves from the net income for the year of DM 2,138, and the accumulated losses brought forward of DM 108,046.16, leaving a distributable profit for the year of DM 1,015, The Supervisory Board endorses the proposal by the Managing Board to allocate the distributable profit to the revenue reserves. We would like to thank all employees and the Board of Management for their deep commitment throughout in fiscal Marsberg, March 2000 The accounts, annual financial statements, management report, consolidated financial statements and group management report for Centrotec Hochleistungskunststoffe AG as at December 31, 1999 have been examined by the auditors, Arthur Andersen Wirtschaftsprüfungsgesellschaft, Hanover, who have given The Supervisory Board Guido A. Krass (Chairman) 5

5 Group management report for Centrotec Hochleistungskunststoffe AG, Marsberg for the 1999 fiscal year The Group headed by Centrotec Hochleistungskunststoffe AG is able to look back on a highly successful 1999 fiscal year. We were able to achieve an extensive market breakthrough in Germany in our expanding business field of plastic gas flue systems, in particular thanks to securing exclusive supply agreements with leading boiler manufacturers. We made considerable progress in building up the structures and investments that this enormous growth entails. Finally, we entered an entirely new dimension towards the end of the year with the takeover of Ubbink Systemtechnik, a move which represented a quantum leap in raising us to the status of Europe's leading supplier of gas flue systems. The price of Centrotec Hochleistungskunststoffe AG's shares mirrored these achievements, rising by 71.9 % from EUR on April 1, 1999 to EUR 98 on December 31, 1999 (prior to splitting at a ratio of 1:3). The situation, risks and future expectations of our company are presented individually below. A. Business progress 1. Development of the branch and the general economy weak first half followed by dynamic second half The companies within the group headed by Centrotec Hochleistungskunststoffe AG are active in the markets for plastic gas flue systems and engineering plastics. Sharp rise in demand for plastic gas flue systems in Germany This new type of plastic gas flue system achieved a general market breakthrough in Germany last year. In addition to product benefits such as ease of installation and environmental compatibility, it was undoubtedly to our advantage that it became increasingly clear to the market that traditional metal systems are susceptible to corrosion in conjunction with modern condensing boilers, whereas plastic systems are resistant to such effects. This fuelled demand for plastic systems. Following the changeover by innovative small and medium-sized boiler manufacturers to plastic in recent years, the larger manufacturers are following suit in adopting plastic technology, now that it is fully mature. Plastic gas flue systems for condensing boilers are currently in widespread use only in Germany, Austria and Switzerland. However, even in these countries, metal systems have only been supplanted to less than 50 %. The market for condensing boiler technology, on which our gas flue systems are based, is likewise enjoying dynamic growth. Following the introduction of tougher pollution controls in Germany, this significantly more economical and pro-environmental heating technology is being chosen in preference to traditional heating systems. As in recent years, this will once again produce growth in the order of 30 % in Germany alone. As a result of the substitution effect within the field of condensing boiler technology, signalling a shift from metal to plastic systems, we anticipate market growth for plastic systems in the order of 50 % to 100 % over the next two years in Germany. The emphasis of growth will then shift to other European markets, where the energy-saving condensing boiler technology on which our systems are based is still in its infancy in view of lower environmental awareness. Temporary first-half slump in demand for investment goods now overcome Engineering plastics components are destined primarily for the investment goods market. This sector was 6

6 characterised by marked reticence in the first half of 1999, among other things as a result of the change of government in Germany. This temporary slump had an adverse effect on our business. In the second half of the year, our business gathered considerable momentum; we believe this is attributable on the one hand to the recovery in the economy, and on the other to the sales campaign which we launched at the start of We expect the economy to become even more buoyant in this sector in 2000, with the expectation of lower relief for companies bolstering investment spending in particular. 2. Development in sales and orders vigorous growth Consolidated sales rose by 29.4 % in the year under review, from DM 26.5 million to DM 34.3 million. Gross performance actually rose by an even higher 38.1 %, from DM 27.3 million to DM 37.7 million. Particularly in the light of the weakness of the economy as a whole, this highly satisfactory situation is attributable to the steady development in sales for engineering plastics, despite the temporary market slump, and a sharp rise in sales of plastic gas flue systems. Over 170 % increase in plastic gas flue systems Sales of plastic gas flue systems rose by 174 % in the fiscal year, from DM 4.9 million to DM 13.5 million. This increase in sales is attributable to healthy developments in three areas. First, an exclusive supply agreement was clinched with the European market leader for boilers. We in addition attracted eight further large, medium and small new customers. Finally, the volume of sales to existing customers rose on account of the expanding market. We once again expect sales to grow by almost 100 % in On the one hand, the market will continue to grow at a similar rate, and on the other hand we look forward to further growth from the new customers that we have already secured, as well as from other potential customers. Development in sales for engineering plastics stable, despite lower prices for raw materials and retail prices trend positive Sales for the Engineering Plastics segment fell short of our expectations, declining by 0.8 % from DM 22.3 million to DM 22.2 million (including internal sales of plastic gas flue systems of DM 0.7 million, as against DM 1.3 million), but nevertheless remained largely stable. However, the raw material prices for plastic fell considerably in 1999, in specific by around 20 % for the principal grades we use. The lower prices we are able to secure on the purchasing side are traditionally passed on to the customer, as are price increases. Although this development has, on the face of the matter, led to a marginal sales decline, following adjustment for the fall in prices, sales for 1999 would have risen. Mio DM 30 22,8 CENTROTEC AG Turnover Umsatz 26,5 34,3 Mio DM 12 Abgassysteme Plastic flue Turnover Umsatz 13,5 Mio DM 20 Kunststoffhalbzeuge Engineering und Plastics* -fertigteile* Umsatz Turnover 19,5 22,3 22, ,9 3, * Internal saleswith gas flue systems 1999: 1,3 Mio. DM, 1998: 0,7 Mio. DM 7

7 The development in sales moreover suffered from the weakness of the market in the first half of the year, as the figures for the two half-years reveal. Whereas sales revealed a year-on-year decrease of 5.8 % over the first six months, they rose by 4.5 % in the second half of the year. Bearing this in mind, the sales trend in this segment is clearly positive. On the basis of our past experience and the level of incoming orders in the first two months of 2000, we believe that double-digit growth for 2000 is probable. 3. Products and production further progress in efficiency Production operations benefited from advances in efficiency. For example, sales per blue-collar worker rose by 8.1 % from DM 373,600 to DM 403,900. This improvement is attributable to more efficient processes, the greater level of bought-in pre-assembled components, and investments in machinery. In the year under review, a quality audit was likewise conducted with highly successful results (all operative group companies have ISO accreditation). 4. Procurement purchasing achievements The adjusted materials ratio for the group (cost of raw materials less change in inventories as a percentage of sales) fell from 47.1 % to 46.2 %. This figure was affected by the lower raw material prices, which were passed on to our customers in the same way that price increases are. We were moreover able to secure more advantageous purchasing terms. On the one hand, design improvements brought improvements in efficiency for our suppliers, and on the other hand we were also able to obtain price discounts by buying in greater bulk. The change in the sales mix had an opposite effect, as the materials ratio for gas flue systems is generally higher. basis is secure. To optimise our ability to supply goods to our customers and in response to the rise in sales, we have built up our stock level. 5. Investments extended capacity for prefabricated parts and start of construction project for new logistics centre As we have built up an intelligent network of suppliers around Centrotec, the impact on our capital of our rapid growth has been relatively modest. In 1999, a total of DM 2.6 million was invested in tangible assets. The focal points of our investment activities were tools for the manufacture of specialised components, some of which are patented, for plastic gas flue systems, and the technological broadening of our Prefabricated Parts Division. For example, Centrotec was able to present its new five-dimensional processing technology at the Nortec exhibition early in Centrotec made what is undoubtedly the most significant financial investment in the history of the company in acquiring Ubbink Systemtechnik at the end of In view of the strategic and financial significance of this move, extensive due diligence investigations were carried out and the company valued. The valuation was examined by the auditors Arthur Andersen. The auditors confirmed that the value of the company is at least equivalent to the value of the amount being paid. The takeover was ratified by the shareholders at the Extra- As there are at least two sources of supply for all key groups of materials, we can assume our procurement 8

8 ordinary Shareholders' Meeting convened for this purpose on December 14, As the transfer of the shareholding was not notarised until December 22, the Ubbink sub-group was consolidated for the first time on January 1, The financial statements for 1999 therefore show only the financial participation in the intermediate holding company Ubbink Holding b.v., Amstelveen, at a book value of DM 16 million. The priority investments for 2000 will be the construction of a modern logistics centre for plastic gas flue systems, product investments in the gas flue sector and investments for enhancing the efficiency of Ubbink's production operations in the Netherlands. The largest single investment is likely to be the construction and furnishing of the new logistics centre, which is estimated to cost around DM 7 million and will be financed by development loans from the Reconstruction Loan Corporation and the state of North Rhine-Westphalia. 6. Financing Ubbink takeover without capital increase As part of the Ubbink takeover, the stock corporation's credit line, which had been reduced as customary following the initial public offering, was increased again, with amounts due to banks rising from DM 6.1 million to DM 13.9 million. Cash on hand was reduced in parallel, totalling DM 1.3 million at December 31, 1999, as against DM 10.7 million on December 31, The Ubbink sub-group will moreover contribute its own financing structure to the enlarged group. All in all, it was possible to finance the takeover soundly without the need for a capital increase; this had a correspondingly beneficial effect on the earnings per share. Further details are provided under "Financial position". 7. Personnel and welfare our recruitment drive 1999 was another year in which staffing levels rose in line with sales. The average employee total grew by 23.2 %, from 87 in 1998 to 101 in The response to our employment advertisements demonstrated that we are an attractive prospective employer, especially after our stock market success. We are a young company, with the average age of our employees 34. Our employees feel a strong sense of commitment to the company and, as in previous years, employee fluctuation was exceptionally low, with only 6 employees leaving in the course of the year. Of our 101 employees, 78.3 % are employed in production and maintenance and 21.7 % in sales, research and development, and administration. With this split, Centrotec easily merits its label of a "lean organisation". 8. Environmental protection the driving force behind our growth Environmental matters are often viewed as a source of risks. In our case, environmental protection is emphatically one of the cornerstones of our growth prospects. In view of the chemical composition of the plastics we process and the techniques we use, Centrotec's production operations are rated as a low environmental risk. In keeping with our ISO-accredited quality management and occupational safety requirements, we nevertheless take care to minimise potential environmental risks. As the largest prevailing risk at our plant is that of fire, we have taken suitable fire protection measures. On the product side, in view of the types of material processed and the purposes for which they are used, we again consider the liability risks in environmental terms to be minor. In fact, in the overall energy and environmental picture our plastic systems fare much better than their metal counterparts. Growth in plastic gas flue systems has moreover recei- 9

9 ved an added boost from the German government's drive to cut CO 2 emissions. In this respect, environmental protection is actually contributing towards our growth. 9. Research and development new products in the gas flue sector Innovative new products were successfully launched on the market in the past fiscal year. Examples include a novel, translucent gas flue system which is not only attractive to look at, but also promotes reliability of fitting because the position of the seals is visible from the outside, and a new design of roof duct with minimum flue-gas recirculation, that is resistant to icing-up and is distinguished from competitor products by its innovative longitudinal expansion element. success, coupled with increasing demand from end users, helped our plastic gas flue systems to achieve their market breakthrough in the course of the year. The impressive growth rate rendered it necessary to extend our internal structures in this field of business. The completion of the new logistics centre by mid will constitute a further landmark for this business area. In the field of engineering plastics, we were able to round off our Europe-wide presence by securing a sales partner in Spain and Portugal. In this business area, which accounted for 45 % of exports in 1999, we have close contractual ties with our sales partners in France, Switzerland, Scandinavia and Benelux. There are also dealers for these products in many other countries. The main aspects of current research and development work are systems for low-energy houses, cascade systems for the connection of several boilers that can be switched on and off for optimum energy utilisation, and a radically different design of gas flue system which is much easier to fit. We have established contacts with various research bodies to ensure that we are involved in the development process of fuel technologies from an early stage. One important advantage for the development team is its physical proximity to the semi-finished products and prefabricated parts specialists, who have built up a unique resource of expertise in the handling of hightemperature polymers over more than twenty years. 10. Important developments in the fiscal year now European leader for plastic gas flue systems At the start of the past fiscal year, we were able to report an exclusive agreement, due to run for several years, with the European market leader for boilers. This However, this sales channel is not suitable for spreading our sales of plastic gas flues throughout Europe. As gas flue systems are everywhere subject to stringent state controls, which may nevertheless be interpreted differently from country to country, we need to have our own experts in situ in the core consumer countries. We have established this basis through the takeover of Ubbink Systemtechnik. Ubbink has already been operating successfully in the sector for gas flue systems for many years, via its national subsidiaries in the Netherlands, Belgium, Great Britain and France. The products and market openings of Ubbink and Centrotec complement each other well. Whereas Centrotec supplies only plastic systems for gas condensing boilers to boiler manufacturers, Ubbink has a broad range of products for all forms of heating, and supplies both boiler manufacturers and retail organisations under its established brand name. The plastic system in Ubbink's range has been supplied exclusively by Centrotec since

10 In addition to gas flue systems, Ubbink is also a leading supplier of plastic ventilation systems and plastic lighting and roofing systems in the above countries. We currently regard the lighting/roofing area predominantly as a cash flow generator, as Ubbink has already achieved a high level of market penetration in its product areas. The ventilation systems area, which has likewise already achieved a significant market position, offers fresh potential for growth in the medium term: once the scope for saving energy through insulating and optimising heating systems has been exhausted, the emphasis of efforts to save energy will shift to intelligent ventilation systems. Ubbink positioned itself in this sector early on, with a hybrid ventilation system. Over and above reaping synergy benefits both in the market for gas flue systems and for purchasing and production operations the acquisition of Ubbink opens up an entirely new dimension to our expansion. Whereas sales in the past fiscal year totalled DM 34.3 million, we expect our sales volume for 2000 to be in excess of DM 120 million. This represents an increase of approx. 250 %. Earnings will likewise enter a new dimension. as Ubbink's company have traditionally been highly profitable. B. Situation 11. Net worth position further fixed assets acquired As a result of the company's high level of investment, tangible assets were bolstered by 25.3 % net, from DM 5.5 million to DM 6.9 million. The working capital was also topped up in line with sales. Inventories and accounts receivable rose by 63.8 %, from DM 9.3 million to DM 15.3 million, though the reporting date has an arbitrary effect in view of daily fluctuations. 12. Financial position equity ratio of 50 % The group's equity rose by DM 3.4 million in the fiscal year on account of accumulated profits, from DM 16.3 million to DM 19.7 million. The equity ratio at the end of the fiscal year was 50 % of the balance sheet total. Amounts owed to banks accounted for 35 % of the balance sheet total. The capital structure, which is still too equity-intensive, will change with the first-time consolidation of Ubbink. By mid-200, we expect that equity and funds with an equity character (secondary, liable vendor loan) will amount to approx. 30 % of the balance sheet total, and amounts owed to banks to about 45 %. No capital increase was therefore required for the takeover of Ubbink. The equity ratio attained is within our target range. In the interests of profitability, in the medium term we are aiming for an equity ratio of %. In the event of any significant balance-sheet extension as a result of a takeover, we will increase equity accordingly. 13. Affiliated company arm's-length principle Legal transactions with companies in which the Chairman of the Supervisory Board and members of his family hold an interest were conducted out in the fiscal year. As a precautionary measure, a dependence report was therefore issued by the Managing Board. Concluding remark from the dependence report: Pursuant to 312 Para. 3 of German Stock Corporation Law, we declare that, on the basis of the circumstances known at the time when legal transactions with affiliated companies were conducted, our company received adequate consideration for each legal transaction and was not placed at a disadvantage. 11

11 14. Earnings situation earnings boosted by over 30 % Our highly successful business progress is also reflected by the sales and earnings figures. Consolidated sales were boosted by 29 %, from DM 26.5 million to DM 34.3 million. Gross performance rose by 38 %, from DM 27.3 million to DM 37.7 million. Compared with the previous year, when the earnings situation was already excellent, profits rose even more sharply than sales. This is all the more satisfactory in that this success was achieved despite the high costs for the acquisition of Ubbink and despite the market reversal in the first half of the year. Profits after taxes rose by 36 %, from DM 2.5 million (1998 figure after adjustment for one-off expenses in connection with the initial public offering) to DM 3.4 million. Pre-tax profits rose by 39 % (DM 2.8 million to DM 3.9 million; 1998 figure adjusted). Cash flow I, the more modern measure of a company's appreciation in value, actually rose by 39 % from DM 3.3 million (1998 figure adjusted) to DM 4.6 million. The cost of raw materials did not rise as fast as sales. The adjusted materials ratio for the group (cost of raw materials less change in inventories as a percentage of sales) fell from 47.1 % to 46.2 %. We were able to secure purchasing advantages by virtue of the higher purchasing volume and improvements to our designs. Personnel costs rose by 26 %, and therefore slower than sales, from DM 6.1 million to DM 7.6 million. As we invested last year in new employees, in anticipation of future growth, we expect that the personnel costs ratio in this area will improve further in years to come. Depreciation rose by a disproportionately high rate in the year under review, increasing by 56 % from DM 0.7 million to DM 1.2 million. The impact of the forwardlooking investments of 1998 and 1999, which will correspondingly boost earnings in future years, is in evidence here. Other operating expenses rose by 63 %, from DM 3.6 million to DM 5.9 million (1998 figure adjusted for IPO; 1999 figure adjusted for one transitory item of DM 1.6 million which was simultaneously booked to other operating earnings). Expenses in connection with the acquisition of Ubbink were the largest item here, and include the cost of consultancy services as well as of an extraordinary shareholders' meeting. Costs specific to the stock corporation, which were not incurred in 1998 prior to the IPO, were a further factor. These include statutory measures (listing fees, costs of convening the shareholders' meetings, statutory publications) on the one hand, and spending on investor relations measures on the other. The financial result improved from DM 0.8 million to DM 0.1 million thanks to the high level of cash on Mio DM 4 Pre Gewöhnliche Tax Profits Geschäftstätigkeit 3,9 Mio DM 3 Jahresüberschuß After Tax Profits nach Steuern 3,4 2,5 * 2 2,8 * 1,5 1,4 1, * Adjusted by one-off expenses incurred by the IPO 12

12 hand following the IPO, and the temporarily reduced lines of credit. C. Key risks Our growth and business progress were very positive, and we are able to look to the future with considerable optimism. During the past fiscal year, we nevertheless considered in depth the risks with which our company is confronted. Our most resounding success simultaneously led to a relevant risk on the market side: our newly secured largest customer accounted for 24 % of sales volume in However, this dependency will be reduced following the acquisition of Ubbink, as the largest customer is likely to account for only 10 % of total sales in A degree of dependence on the fortunes of the market for technical semi-finished products and prefabricated parts likewise transpired in the past fiscal year. However, the positive progress in the second half of the year, and our past experience even more so, demonstrate that market fluctuations can be overcome relatively swiftly thanks to the spread of potential applications. The newly acquired Ubbink Group is likewise dependent on the fortunes of the market to some degree, though it has so far always shown a profit even in years when the economy in general has been weak. Thanks to our technology, quality and value for money, we have attained a solid market position in all business segments. It is nevertheless conceivable that new market entrants, more intense competition, increased consumer power and substitute products could lessen our operational efficiency. Internally, we perceive potential risks in the production sector. We implement suitable safety regulations and take precautionary measures to prevent possible accidents and plant breakdowns. All plant is moreover insured in line with its value. However, the failure of critical plant could result in noticeable losses. In the IT sector, no problems arose as a result of the date change; classic data safeguarding measures are taken on an ongoing basis. We introduced a new computer system for goods management and bookkeeping in the fiscal year under review. Problems were encountered with its introduction, but we now regard these as solved. However, the possibility cannot be excluded that further problems that have not yet been identified will arise, or that problems already solved will recur. Likewise we cannot exclude the possibility that a problem in the IT sector could lead to a loss of data, despite ongoing data safeguarding, causing considerable damage. As the company is still relatively small, there is moreover a degree of dependence on certain key employees. However, as we expand so will our base of highly qualified employees, with the result that this risk will gradually dwindle. The project that is under way on the construction of a new logistics centre could likewise entail risks. Problems could in particular take the form of delays in completion, or could arise upon occupation of the new premises. All measures are currently proceeding according to schedule. A further risk could arise in connection with the purchase of the land purchase; a notarised purchase agreement exists but no entry has yet been made in the land registry; we expect that it will be made within the usual processing time scale. Due to pressure of time, we have therefore already commenced construction work. Now that we have invested the funds received as a result of the initial public offering, our lower equity ratio 13

13 makes us more susceptible to fluctuations in our earnings. Models of various scenarios (including Ubbink) have indicated that it would only be necessary to increase equity if sales were to slump sharply, in contrast to the forecast growth in sales. The integration of the newly acquired Ubbink Group of course harbours a classic risk. Negative examples have shown that the synergy benefits anticipated from takeovers often fail to materialise. For this reason, we based the purchase price of Ubbink Systemtechnik purely on a stand-alone valuation. As we have enjoyed a successful partnership with Ubbink stretching back to 1996, we are optimistic at the prospects for its successful integration. Finally, our vigorous growth undoubtedly harbours risks. Internal structures in particular must be repeatedly and rapidly adjusted to the requirements of a growing organisation. We created a workable basis for this in the past year by reorganising our growth area of plastic gas flue systems. Through the acquisition of Ubbink, we have moreover purchased an established structure which can perform many of the new tasks with which we will be confronted. D. Outlook We will enter an entirely new dimension in 2000, with sales for the year forecast to reach DM 120 million. Profits will likewise make a quantum leap. The driving force behind this leap in growth, alongside the initial consolidation of the newly acquired Ubbink sub-group, is our intrinsic, sustained growth. In view of our positive expectations of the economy in general and the excellent progress made by sales and earnings particularly in the second half of 1999, we are highly optimistic about the prospects for 2000 of the group as reported on here. The position of the Ubbink Group, which will be consolidated for the first time in 2000, is likewise healthy. The context of the latter and its prospects for growth, particularly in France and Benelux, are very good. Thanks to the new products that Ubbink is currently launching and its market synergies with Centrotec, Ubbink's trend towards profitable growth will hold up in the long term. We have started 2000 with a package of measures to promote our organic growth. These include the "Grow Together Program" with Ubbink, a comprehensive integration programme that includes both enhancing efficiency and developing further potential for growth. Our new logistics centre in Germany will provide a new basis for our growth area of plastic gas flue systems. We will tackle the emerging markets for our plastic systems in Great Britain and Italy with purpose-designed systems. We have already taken the first hurdle in securing the British company Vokèra as a new customer. In addition to product innovations in the field of gas flues, we have also launched a new product campaign in the areas of ventilation systems and lighting/roof systems. 14

14 We aim to add momentum to our organic growth over the next few years through strategic acquisitions. In this light, we believe that our company will continue to make very healthy progress. Marsberg, February 24, 2000 CENTROTEC Hochleistungskunststoffe AG Hans-Lothar Hagen Chairman of the Managing Board Dr. Alexander Kirsch Board Member for Finance 15

15 Consolidated Balance for the 1999 fiscal year CENTROTEC Hochleistungskunststoffe AG, Marsberg Consolidated Balance sheet at december 31, 1999 ASSETS DM DM A. FIXED ASSETS I. Intangible assets Industrial rights and similar rights , ,00 II. Tangible assets 1. Land and buildings , ,54 2. Technical equipment and machinery , ,46 3. Other equipment, operating and office equipment , ,00 4. Paymnents on account , , , ,00 III. Financial assets Shareholdings in affiliated companies ,21 0, , ,00 B. CURRENT ASSETS I. Inventories 1. Raw materials, consumables and supplies , ,52 2. Work in process , ,55 3. Finished goods and merchandise , , , ,39 II. Receivables and other assets 1. Trade receivables , ,69 2. Receivables from affiliated companies ,85 0,00 3. Other assets , , , ,01 III. Cash-in-hand, postal giro and bank balances , ,76 C. PREPAID EXPENSES 4.738,00 321, , ,58 16

16 EQUITY AND LIABILITIES DM DM A. EQUITY I. Subscribed capital , ,00 II. Capital reserve , ,00 III. Revenue reserves , ,90 IV. Consolidated net loss , , , ,69 B. PROVISIONS 1. Provisions for taxes , ,11 2. Other provisions , , , ,11 C. LIABILITIES 1. Due to banks , ,93 2. Trade payables , ,52 3. Other liabilities , ,33 thereof taxes: DM 261, (previous year: DM 324,852.09) thereof relating to social security and similar obligations: DM 184, (previous year: DM 163,612.53) , , , ,58 17

17 Consolidated statement of income for the fiscal year 1999 CENTROTEC Hochleistungskunststoffe AG, Marsberg Consolidated Statement of income for the fiscal year DM DM 1. Sales revenues , ,71 2. Increase or decrease in finished goods , ,86 3. Own work capitalised ,00 0,00 4. Other operating income , ,31 5. Cost of materials Cost of raw materials, consumables and supplies and of purchased merchandise , ,57 Cost of purchased services , ,50 6. Personnel expenses Wages and salaries , ,80 Social security costs , ,31 7. Depreciation on intangible and tangible assets , ,26 8. Other operating expenses , ,79 9. Other interest and similar income , , Interest and similar expenses , , Result from ordinary operations , , Taxes on income , , Other taxes , , Consolidated net profit/net loss for the year , , Accumulated losses brought forward , , Allocation to revenue reserves ,27 0, Consolidated net loss , ,21 18

18 Cash flow statement TDM TDM Net cash provided by/used in operating activities Consolidated net profit/-loss Corrections for reconcilliation of net income/-loss to income/expenses Depreciation on intangible assets Depreciation on tangible assets Cash flow I Decrease/Increase of assets, increase/decrease of liabilities Inventories Tradereceivables Other assets Provisions for taxes Other provisions Trade payables Other liabilities Net Cash used in operating activities Net Cash used in investment activities Investments in intangible assets Investments in tangible assets Net Cash provided by/-used in financial activties Increase/-decrease of medium and long-term liabilities to banks Increase of subscribed capital Increase of subscribed capital by capital reserves Increase of capital reserve Investments in financal assets Increase/-decrease of prepaid expenses Increase/-decrease of liquid funds Liquid funds at the beginning of the fiscal year Liquid funds at the end of the year Composition of liquid funds at the end of the year Checks, cash-in-hand, postal giro, and bank balances Short-term liabilities to banks

19 20

20 Notes to the consolitdated financial statements for 1999 fiscal year CENTROTEC Hochleistungskunsstoffe AG, Marsberg A. GENERAL INFORMATION ON AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE COMPANIES INCLUDED IN CONSOLI- DATION 1. Consolidated companies At the balance sheet date, Centrotec Hochleistungskunststoffe AG, Marsberg, was the parent company pursuant to 290 of German Commercial Code (HGB) for the following listed subsidiaries, which are thus also affiliated companies pursuant to $ 271 Para. 2 of HGB. The companies were included in the consolidated financial statements in accordance with the provisions applying to full consolidation. Holding Name and registered office of the companys in % Centroplast Kunststofferzeugnisse GmbH & Co., Marsberg 100 Centrotherm Abgastechnik GmbH, Marsberg 100 Centroplast Kunststofferzeugnisse Verwaltungs GmbH, Marsberg 100 Pursuant to Para. 1 No. 2 of HGB, the sub-group Ubbink Systemtechnik notarially acquired on December 22, 1999 was not included in the consolidated companies, as the need to obtain the full details required for the consolidated financial statements would have resulted in undue delays. The parent company of this sub-group, the intermediate holding company Ubbink Holding B.V., a private limited company according to the laws of the Netherlands and with its registered office in Amstelveen, the Netherlands, has been reported as an affiliated company. The company's equity following the capital increase of December 22, 1999 totals DM 15,991 thousand; Centrotec Hochleistungskunststoffe AG is the sole owner. The company is reported at equity. Ubbink Holding B.V. has a direct, fully owned subsidiary in Ubbink Nederland B.V., a private limited company subject to the laws of the Netherlands, with its registe- red office in Doesburg, the Netherlands. This company had nominal capital of DM 90 thousand and equity of DM 17,773 thousand at December 31, 1998; the net profit for 1998 was DM 3,239 thousand. This company has two fully owned subsidiaries: Ubbink (U.K.) Limited, a private limited company subject to the laws of England and Wales, with registered office in Brackley, England, which had nominal capital of DM 97 thousand and equity of DM 2,687 thousand at December 31, 1998, and which reported a net profit of DM 845 thousand for that year; and Ubbink NV/SA, a private limited company according to Belgian law, with registered office in Mariakerke, Belgium, which had nominal capital of DM 276 thousand and equity of DM 3,292 thousand at December 31, 1998 and which reported a net profit of DM 587 thousand for that year. It moreover owns a 96.6 % shareholding in Ubbink Distribution S.a.r.l., a private limited company according to French law, with its registered office in Nantes, France, which had nominal capi- 21

21 tal of DM 15 thousand and equity of DM 32 thousand at December 31, 1998; its equity was raised by DM 283 thousand on February 17, The net profit of this company for the 1998 financial year was DM 14 thousand. The Ubbink sub-group is to be consolidated for the first time on January 1, Centrotec Hochleistungskunststoffe AG is moreover sole owner of Rega Ubbink Ltd., a private limited company according to the laws of England and Wales, with registered office in Sandy, England. This company had nominal capital of DM 3 thousand and equity of DM 1,101 thousand at December 31, 1998; its net loss for the 1998 financial year was DM 82 thousand. Centrotec Hochleistungskunststoffe AG in addition owns all the shares of Ubbink International B.V., a private limited company according to the laws of the Netherlands, with registered office in Amstelveen, the Netherlands, which had equity of DM 39 thousand following its establishment in October These companies were likewise reported as affiliated companies and omitted from the consolidated financial statements pursuant to 296 Para. 1 No. 2 of German Commercial Code. 2. Closing date of the consolidated financial statements The consolidated financial statements were prepared as at December 31, This date is the balance sheet date for all consolidated companies in the group. 3. Consolidation, accounting and valuation principles When preparing the consolidated financial statements, Centrotec Hochleistungskunststoffe AG, Marsberg, complies with the provisions of HGB, German Stock Corporation Law (AktG) and the principles of adequate and orderly accounting and consolidation as regards accounting, valuation and disclosure. To the extent that tax regulations require corresponding disclosure in the annual financial statements, Centrotec Hochleistungskunststoffe AG, Marsberg, complies with these tax provisions. Consolidated companies' assets and liabilities that are included in the consolidated financial statements pursuant to 300 Para. 2 of HGB have been valued uniformly according to the principles applied for the financial statements of the parent company. The date of acquisition of the holdings in the subsidiaries was generally taken as the reference date for the offsetting of the holdings owned by the parent company against the amount represented by these holdings in the equity of the subsidiaries (capital consolidation). 3.1 Capital consolidation Capital consolidation is performed using the book value method in accordance with 301 Para. 1 Sentence 2 No. 1 of HGB, by offsetting the acquisition costs of the shareholding against the pro rata capital subject to mandatory consolidation at the time of initial consolidation. This includes the subscribed capital, reserves, outstanding contributions and the retained earnings/accumulated losses brought forward. Capital consolidation was carried out on the basis of the equity as of August 1, Capital consolidation of Centroplast Kunststofferzeugnisse Verwaltungs GmbH, Marsberg, was performed as at January 1, Differences from capital consolidation arose as a result of differences between the costs of acquisition of the investments in the other consolidated companies, and the capital of these companies subject to mandatory consolidation at the time of first inclusion of the subsi- 22

22 diary in the consolidated financial statements. unless prescribed otherwise by law. The resulting difference on the assets side was added to the assets of the respective subsidiaries to be carried in the consolidated balance sheet to the extent that their value was higher than the previous valuation. The remaining difference after this addition is disclosed as goodwill from capital consolidation. The goodwill from capital consolidation is written down over a period of 5 years. 3.2 Consolidation of intercompany balances Receivables and liabilities between the consolidated affiliated companies have been eliminated. There was no difference arising from this elimination. 3.3 Consolidation of intercompany profits Intercompany profits within the group to be eliminated in accordance with 304 HGB amounted to DM 35 thousand. 3.4 Consolidation of income and expenses Intercompany sales were eliminated during the consolidation of income and expenses of the related companies. 3.5 Tax deferrals There was no requirement in the group to set up tax deferrals in accordance with 306 HGB. 3.6 Accounting and valuation principles Accounting methods The annual financial statements of Centrotec Hochleistungskunststoffe AG, Marsberg, and the other companies included in the consolidated financial statements have been prepared in accordance with uniform accounting and valuation methods. The consolidated financial statements contain all assets, liabilities, prepaid expenses and deferred income, expenses and income, The intangible and current assets, equity, liabilities, prepaid expenses and deferred income are disclosed separately in the consolidated balance sheet and adequately classified. Provisions were only set up within the limits permitted by 249 HGB. Prepaid expenses and deferred income are carried in accordance with the provisions of 250 HGB Valuation principles The assets and liabilities are valued individually as at the balance sheet date. Cautious valuations are applied, and take particular account of all foreseeable risks and losses arising before the balance sheet date. Intangible assets acquired for consideration are capitalised at their cost of acquisition and written down over a period of 4-5 years using the straight-line method. Tangible assets are valued at their cost of acquisition or manufacture, less regular depreciation over the standard useful life at the company. Low-value assets are written down in full in the year of their addition. The half-yearly simplification rule for depreciable movable assets is applied. Extraordinary depreciation is applied in those cases where it is necessary to apply a lower value. Inventories are valued using the lower of cost or market value. Receivables and other assets are carried at their principal value. All discernible risks are covered by write-downs. A global value adjustment of between 2 % and 2.5 % is applied to take account of the general credit risk. When calculating provisions for contingent liabilities, suitable and adequate account is taken of all discernible risks. Liabilities are carried at their redemption amount. Foreign currency liabilities are valued at the historical rate or at the higher rate prevailing at the closing date. 23

23 B. SPECIAL DISCLOSURES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Consolidated balance sheet 1.1 Assets Fixed assets The classification and movements of fixed assets are shown in the following Assets Movement Schedule: CENTROTEC Hochleistungskunststoffe AG, Marsberg Development in Consolidated Fixed Assets in the 1999 Fiscal Year ACQUISITION AND MANUFACTURING COST Additions Disposals Transfers DM DM DM DM DM INTANGIBLE ASSETS 1. Industrial rights and similar rights , , ,67 0, ,88 2. Goodwill from capital consolidation ,00 0,00 0,00 0, , , , ,67 0, ,88 TANGIBLE ASSETS 1. Land and buildings , ,46 0,00 0, ,29 2. Technical equipment and machinery , ,84 0, , ,41 3. Other equipment, operating and office equipment , , ,70 0, ,53 4. Payments on account , ,35 0, , , , , ,70 0, ,58 FINANCIAL ASSETS 1. Shareholdings in affiliated companies 0, , ,99 0, ,21 0, , ,99 0, , , , ,36 0, ,67 24

24 ACCUMULATED DEPRECIATION NET BOOK VALUES Additions Disposals DM DM DM DM DM DM , , , , , , ,00 0,00 0, ,00 0,00 0, , , , , , , , ,46 0, , , , , ,30 0, , , , , , , , , ,00 0,00 0,00 0,00 0, , , , , , , , ,00 0,00 0,00 0,00 0, ,21 0,00 0,00 0,00 0,00 0, ,21 0, , , , , , ,00 25

25 1.1.2 Current assets Receivables and other assets The receivables and other assets do not contain any items with more than one year to maturity. Receivables from affiliated companies totalling DM 3,228 thousand include trade receivables totalling DM 2,293 thousand. 1.2 Equity and liabilities Equity The subscribed capital at December 31, 1999 totalled EUR 3,600,000.-, divided into 1,200,000 bearer individual share certificates. Approved capital was in addition created. The Managing Board is, with the approval of the Supervisory Board, authorised to raise the capital stock by up to EUR 1,533, (approved capital) through the issue of new bearer shares in the form of individual share certificates on one or more occasions, in return for contributions in cash or in kind, by August 31, The new shares are to be accepted by banks, with the undertaking to offer them for subscription to the shareholders. The Managing Board is, however, authorised to exclude residual amounts from the shareholders' subscription right. The Managing Board is moreover authorised, with the approval of the Supervisory Board, to exclude the subscription right of the shareholders in order to issue new shares against contribution in kind. The Managing Board is moreover authorised to exclude the subscription right of the shareholders in order to issue up to 300,000 new shares at a price which does not significantly undercut the stock market price for the company's shares at the time the issue price is determined by the Managing Board. The capital stock has moreover been raised by an unissued amount of EUR 270,000. The increase of authorised but unissued capital only becomes definitive insofar as the bearers of the option certificates issued by the company pursuant to the authorisation of the Shareholders' Meeting of September 9, 1998 exercise their subscription right to ordinary bearer shares in the company (option right). The new shares qualify for profits from the start of the financial year in which they are issued through the exercising of option rights. The authorised but unissued capital was divided into up to 90,000 individual share certificates on December 31, With effect from July 1, 1999, 32,130 options (before share split) were issued for employees, management and board members, at the exercise price of EUR The options may be exercised from July 1, 2001 to July 1, The exercising of the options is tied to certain conditions and targets. They may only be exercised if the daily quotation at the Frankfurt Stock Exchange has risen by at least 30 % since the granting of the option. The exercising of the option is moreover tied to the attainment of individual targets by employees, management and board members. It is therefore uncertain what proportion of the options issued will be exercised in practice. Pursuant to the resolution of the Shareholders' Meeting of May 11, 1999 the subscribed capital was denominated in euro, individual share certificates were introduced and the capital stock was raised by means of a capital increase of EUR 532, from company funds, from EUR 3,067, or DM 6,000,000.- to EUR 3,600,000.-; to this end, the capital reserves of this amount shown in the balance sheet at December 31, 1998 were converted into capital stock. As of February 15, 2000, the shares were split at a ratio of 1 to 3 pursuant to the resolution of the Shareholders' Meeting of May 11, Since the split, the subscribed capital has consequently been divided into 26

26 3,600,000 individual share certificates, and the authorised but unissued capital into 270,000 individual share certificates; after splitting, the number of options already issued on the authorised but unissued capital is 96,390. The consolidated financial statements are prepared in DM. The euro exchange rate is EUR 1 = DM The capital stock of Centrotec Hochleistungskunststoffe AG, Marsberg, totals DM 7,041 thousand, the capital reserve DM 20,259 thousand and the revenue reserves DM 1,058 thousand. As a result of a consolidated net loss of DM 8,615 thousand due principally to accumulated losses carried forward, the group's equity at December 31, 1999 totals DM 19,743 thousand. The parent company Centrotec Hochleistungskunststoffe AG, Marsberg, had equity totalling DM 29,374 thousand at December 31, The company has allocated an amount of DM 1,015 thousand from the net income for the year to the revenue reserves Other provisions The other provisions primarily include amounts for covering legal and consultancy costs, claims for outstanding vacation entitlements, costs of the Shareholders' Meeting, industrial accident insurance contributions, warranty obligations and credit notes to be issued Liabilities The remaining maturities are shown in the following table: (Prior-year figures in brackets) The collateral provided for liabilities to banks consists principally of global assignments of receivables, storage assignments of inventories, assignments of technical equipment and machinery as security, and a mortgage on the site of the Centroplast GmbH & Co. plant in Marsberg, amounting to DM 5,000 thousand. At the closing date, DM 13,901 thousand of the liabilities were covered by collateral. Thereof with a remaining maturity of less than one between one more than At Dec. 31, 1999 year and five years five years DM '000 DM '000 DM '000 DM '000 Due to banks (6.089) (1.197) (429) (4.463) Trade payables (1.188) (1.188) (0) (0) Other liabilities (1.013) (1.013) (0) (0) (8.290) (3.398) (429) (4.463) 27

27 2. Consolidated statement of income Sales revenues Sales revenues are made up as follows: TDM Semi-finished products Finished products Gas flue systems Other 314 Less Internal sales Discounts -420 Reduction of proceeds -261 Total C. CASH FLOW STATEMENT The fall in the level of funds in the financial year is largely the result of the negative cash flow from investment activities. In the financial year, the group invested predominantly in technical equipment and machinery, and in the acquisition of the Ubbink group of companies. The positive cash flow from ongoing business operations was unable to compensate for this outflow of funds as a result of investment activities. D. SEGMENT REPORTING In line with its internal reporting structure, the company is organised into the Engineering Plastics and Systems segments. The combined sales revenues from external customers for these two areas exceed 10 % of total external and inter-segmental sales revenues. The Engineering Systems Other Total Plastics DM DM DM DM Sales revenues - from external third parties inter-segmental revenues Segment result including - Depreciation Other items not affecting payments Result from shareholdings in associated companies Income from other shareholdings Interest earnings Interest expenditure Taxes on income Assets (incl. shareholdings) Investments in long-term assets Liabilities

28 segment results are quoted as the net income for the year. The "Engineering Plastics" segment covers the activities in markets for semi-finished and finished products of engineering and high-temperature plastics. The "Systems" segment covers those product groups which are sold as complete systems. The segment currently consists of plastic gas flue systems for heating systems. With the inclusion of Ubbink Systemtechnik, the product lines of ventilation systems and lighting/roof systems will be added to this segment. The "Miscellaneous" segment consists primarily of services performed by the holding company and which are charged to the segments. There is one customer accounting for more than 10% of sales (24%). Inter-segmental business has been eliminated according to the "arm's length principle". E. OTHER PARTICULARS 1. Contingent liabilities The customary guarantee obligations are taken on in the context of normal business operations. As part of the takeover of the Ubbink Group, it was agreed that Centrotec Hochleistungskunststoffe AG or a subsidiary would do all in its power to help sales representatives be released from rental guarantees. The rental agreements in question are an agreement in England for annual rent of currently GBP 148,000 (DM 468 thousand), due to run until 2008, and a rental agreement in England for an annual rent of currently GBP 80,000 (DM 253 thousand), due to run until Centrotec Hochleistungskunststoffe AG moreover releases its designated sponsors, M.M. Warburg & CO KG aa, Hamburg and Gontard & Metallbank AG, Frankfurt a.m. from liability in connection with their sponsoring activities, subject to this liability not resulting from gross negligence or fault on the part of the designated sponsor. 2. Other financial obligations Leasing contracts result in financial obligations for the minimum leasing period of DM 288 thousand, including DM 145 thousand for Financial obligations totalling DM 29 thousand exist as a result of current agreements. No material financial obligations were entered into by the group companies vis-à-vis and on behalf of Ubbink Holding b.v. other than the employment of equity. 3. Own shares Pursuant to the resolution of the Shareholders' Meeting of May 11, 1999 the company is authorised to acquire own shares up to an amount not exceeding ten percent of the capital stock. The price paid for these shares may not be more than 15 % above or below the average of the daily quotations at the Frankfurt Stock Exchange over the last ten trading days preceding the acquisition of the shares. The Managing Board is authorised to sell these shares publicly or call them in without the need for a further resolution by a shareholders' meeting. In the financial year under review, between June 10, 1999 and June 17, 1999, a total of 5,140 own shares were acquired on the stock market at a price of DM to DM The purpose of acquiring these shares was to reduce the liquidity of the market in that particular trading phase. Later in the financial year, these own shares were sold again via the stock market at prices of between DM and DM This was done in preparation for the impending takeover of Ubbink, for which liquid funds were created to pay the purchase price. The maximum level of own shares held 29

29 during the financial year was equivalent to 0.43 percent of the capital stock, i.e. these shares represented DM 30,158 of the capital stock. No own shares were held at the end of the financial year. 4. Average number of employees Over the period from January 1 to December 31, 1999, the group had an average of 101 employees, plus two board members and one managing director. 5. Management and supervisory bodies The Managing Board members in the financial year were Dipl.-Ing. Hans-Lothar Hagen, engineer, Altenbeken (Chairman) and Dr. Alexander Kirsch, businessman, Mülheim an der Ruhr. Herr Hagen is entitled to act as sole representative of the company and is exempt from the restrictions of 181 of German Civil Code. Dr. Kirsch is entitled to act as sole representative of the company. 6. Total remuneration of corporate bodies Remuneration of the Supervisory Board totalled DM 13.5 thousand in the financial year. The remuneration of the two board members of the parent company pursuant to 314 I No. 6a of HGB was not disclosed by analogous application of the protective clause of 286 IV of HGB, as the remuneration paid to each individual member of the Managing Board and to the managing director can easily be deduced from this information. Marsberg, February 24, 2000 CENTROTEC Hochleistungskunststoffe AG Hans-Lothar Hagen Dr. Alexander Kirsch Chairman of the Board Member Managing Board for Finance The members of the Supervisory Board were Guido A. Krass, entrepreneur (Chairman), Wadhurst, England, Dr. Bernhard Heiss, lawyer, Munich, and Dipl.-Kfm. Hans Thomas, consultant businessman, Hofheim. In addition to belonging to the corporate bodies of Centrotec Hochleistungskunststoffe AG, the following members of the Managing and Supervisory Boards also sit on other supervisory boards of stock corporations: Dr. A. Kirsch: Pari Capital AG, Munich. G.A. Krass: COS Community Online Service AG, Munich, Cloppenburg Automobil AG, Düsseldorf, pre-ipo AG, Hamburg, Pari Capital AG, Munich. Dr. B. Heiss: ArtMerchandising & Media AG, Munich, OPUS-1 Vermögensverwaltungs AG, Munich. No personnel changes to the company's executive and Supervisory Boards occurred in the financial year. 30

30 Independent auditor s report INDEPENDENT AUDITOR S REPORT We have examined the annual financial statements, including the accounts, and the management report compiled by Centrotec Hochleistungskunststoffe AG, Marsberg, for the fiscal year from January 1 to December 31, The accounts and the preparation of the annual financial statements and management report in accordance with the requirements of German commercial law and the supplementary regulations contained in the articles of incorporation is the responsibility of the company's legal representatives. Our task is to pass judgement on the annual financial statements, including the accounts, and on the management report on the basis of our audit. We have carried out our audit of the annual financial statements in accordance with 317 of German Commercial Code, observing the principles of proper auditing as laid down by the German Institute of Auditors (IDW). These principles state that an audit shall be planned and conducted such that it is possible to identify with sufficient accuracy any misrepresentations and violations which could have a significant impact on the presentation of the company's net worth, financial position and earnings situation in the annual financial statements, based on the principles of proper accounting, and in the management report. The scope of the audit was determined on the basis of a knowledge of the business activities and the economic and legal context of the company, as well as the likelihood with which particular errors were to be expected. In the context of the audit, the effectiveness of the internal controlling system and evidence of the details provided in the accounts, annual financial statements and management report are examined predominantly through random checks. The audit encompasses an assessment of the accounting principles and of key judgements made by the legal representatives; it in addition includes an appraisal of the overall presentation of the annual financial statements and management report. We are of the opinion that our audit constitutes a sufficiently reliable basis for our findings. No objections are made on the basis of our audit. We are convinced that the annual financial statements present, in compliance with adequate and orderly accounting principles, a true and fair view of the net worth, financial position and earnings situation of the company. The management report as a whole provides an accurate picture of the company's position and of the risks to its future development. ARTHUR ANDERSEN Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft mbh Steinweg Nebelung Independent auditor Independent auditor Hanover, February 24,

31 32

32 CENTROTEC Hochleistungskunststoffe AG, Marsberg IAS-Überleitungsrechnung (Konzern) Centrotec Hochleistungskunststoffe AG, Marsberg IAS reconciliation accounts for consolidated net income and consolidated equity, together with explanations of the principal differences to HGB financial statements 1. First-time preparation of accounts according to IAS The International Accounting Standards (IAS) were applied for the first time to the consolidated financial statements at January 1, Adjustments were made according to Interpretation 8 of the Standing Interpretations Committee (SIC), in the form of a retroactive restatement with no effect on the operating result as at January 1, IAS consolidation principles The purchase method of valuation proportionate to the shareholding was applied in the context of full consolidation acc. to IAS 22 (revised 1998) Business Combinations for the IAS consolidated financial statements. A positive balance from the consolidation of capital is capitalised as goodwill following the exposure of undisclosed reserves and encumbrances, and written down by the straight-line method over a useful economic life of 5 years; a negative balance results in the realisation of income, subject to the conditions laid down in IAS 22 (revised 1998). Intra-group receivables and liabilities were eliminated in the consolidated financial statements pursuant to IAS 27 in the context of the consolidation of debts, as were intermediate results and intra-group expenses and income. Deferred taxes for outstanding balances were charged to subsequent tax years. 3. Principal differences between German Commercial Code and IAS There are several fundamental differences between the provisions of HGB and the IAS. According to IAS principles, the consolidated equity at December 31, 1999 and the consolidated net income for fiscal 1999 would change as follows: 33

33 a) IAS reconciliation accounts for consolidated equity The following summary shows the adjustments that are required in order to reveal consolidated equity for the consolidated financial statements at December 31, 1999 in accordance with IAS, as opposed to German Commercial Code. Note DM '000 DM '000 Consolidated equity acc. to HGB 19,743 16,296 Leasing (aa) Development expenses (bb) Valuation of inventories (cc) Tax deferrals: - from differences between IAS and HGB for accumulated losses brought forward (dd) 889 2,143 Consolidated equity acc. to IAS 20,599 18,429 b) IAS reconciliation accounts for consolidated net income The following summary shows the adjustments that are required in order to reveal consolidated net income for the consolidated financial statements at December 31, 1999 in accordance with IAS, as opposed to German Commercial Code. Note DM '000 DM '000 Consolidated net income acc. to HGB 3,447-1,144 Leasing (aa) Development expenses (bb) Valuation of inventories (cc) Tax deferrals: - from differences between IAS and HGB for accumulated losses brought forward (dd) -1, Consolidated net income acc. to IAS 2, c) Notes to the reconciliation accounts (aa) Leasing In the consolidated financial statements acc. to IAS 17 (revised 1997) Leases, a leased asset is to be capitalised by the lessee where the risks and rewards incident to ownership of the leased asset rest with the lessee. Capitalisation by the lessee is based on the undertaking to write down the leased asset according to the straight-line method and on constant interest charges on the liabilities proceeding from the leasing agreement. The difference compared with leasing expenses in the HGB consolidated financial statements is to be adjusted with an effect on the operating result, with delimiting of deferred taxes. 34

34 (bb)development expenses According to IAS 38, development expenses are to be capitalised as Intangible Assets insofar as the six criteria stated in IAS 38 are met cumulatively. In the year of capitalisation, the development expenses are to be reduced by the appropriate amount. Capitalised development expenses are written down by the straight-line method over a useful economic life of 5 years, once market maturity has been attained. No development expenses were capitalised in fiscal 1999, as the development projects did not meet the requirements of technical maturity at the balance sheet date. In this case, IAS 38 prohibits capitalisation. Government grants in the form of investment subsidies and grants are distinguished on the assets side from capitalised development expenses in the IAS consolidated financial statements, in agreement with IAS 20 (reformatted 1994) Accounting for Government Grants. (cc) Valuation of inventories According to IAS 2, the costs of general administration are not to be included in the cost of manufacture. General administrative costs which cannot be capitalised pursuant to IAS 2 have been adjusted with an effect on the operating result. (dd)deferral of taxes to accumulated losses brought forward According to IAS 12 (revised 1996) Income Taxes, taxes on the assets side are to be deferred to accumulated losses brought forward insofar as it is probable that the scope for carrying forward can be exploited, bearing in mind the future earnings situation and the limitations governing the periods and amounts for carrying forward. Tax claims from accumulated losses brought forward amounting to DM 889 thousand (previous year: 2,143 thousand) are to be capitalised in the IAS consolidated financial statements. This results in a negative contribution to profits of DM 1,254 thousand in the reconciliation accounts. (ee) Tax rate In accordance with Accounting Standard RS 2 of the German Institute of Auditors' Ruling Committee, the tax rate has been based on the corporation income tax distribution rate plus solidarity surcharge and trade earnings tax. Costs of the initial public offering In the previous year, in a departure from SIC 17 Interpretation, the costs of the initial public offering were not booked against the capital reserve, as this interpretation had not yet been approved at that time. Independent Auditors Report We have exercised due care and attention in examining the IAS reconciliation accounts presented to us on the basis of the HGB consolidated financial statements of Centrotec Hochleistungskunststoffe AG, Marsberg, as at December 31, 1999, which were audited by us. We confirm that the net income for 1999 of DM 2,170 thousand carried in the reconciliation accounts and the equity at December 31, 1999 of DM 20,599 thousand have been calculated in accordance with IAS principles. Hanover, February 24, 2000 ARTHUR ANDERSEN Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft mbh Michael Steinweg Hannes Nebelung Independent auditor Independent auditor 35

35 Management report for the 1999 fiscal year CENTROTEC Hochleistungskunsstoffe AG, MARSBERG Centrotec Hochleistungskunststoffe AG is able to look back on a highly successful 1999 fiscal year. We were able to achieve an extensive market breakthrough in Germany in our expanding business field of plastic gas flue systems, in particular thanks to securing exclusive supply agreements with leading boiler manufacturers. We made considerable progress in building up the structures and investments that this enormous growth entails. Finally, we entered an entirely new dimension towards the end of the year with the takeover of Ubbink Systemtechnik, a move which represented a quantum leap in raising us to the status of Europe's leading supplier of gas flue systems. The price of Centrotec Hochleistungskunststoffe AG s shares mirrored these achievements, rising by 71.9 % from EUR on April 1, 1999 to EUR 98 on December 31, 1999 (prior to splitting at a ratio of 1:3). The situation, risks and future expectations of our company are presented individually below. A. BUSINESS PROGRESS The companies of which Centrotec Hochleistungskunststoffe AG holds the shares operate in the markets for engineering plastics and plastic gas flue systems. These operative affiliated companies were once again highly successful in their respective market segments, in view of the growth of the market and their strong position in each case. The activities of the stock corporation involve exercising a function as a strategic and financial holding company for the operative affiliated companies. in acquiring Ubbink Systemtechnik at the end of In view of the strategic and financial significance of this move, extensive due diligence investigations were carried out and the company valued. The valuation was examined by the auditors Arthur Andersen. The auditors confirmed that the value of the company is at least equivalent to the value of the amount being paid. The takeover was ratified by the shareholders at the Extraordinary Shareholders Meeting convened for this purpose on December 14, As the transfer of the shareholding was not notarised until December 22, the Ubbink sub-group was consolidated for the first time on January 1, The financial statements for 1999 therefore show only the financial participation in the intermediate holding company Ubbink Holding b.v., Amstelveen, at a book value of DM 16 million. 2. Financing Ubbink takeover without capital increase As part of the Ubbink takeover, the stock corporation s credit line, which had been reduced as customary following the initial public offering, was increased again, with amounts due to banks rising from DM 6.1 million to DM 13.9 million. Cash on hand was reduced in parallel, totalling DM 1.3 million at December 31, 1999, as against DM 10.7 million on December 31, The Ubbink sub-group will moreover contribute its own financing structure to the enlarged group. All in all, it was possible to finance the takeover soundly without the need for a capital increase; this had a correspondingly beneficial effect on the earnings per share. Further details are provided under Financial position. 1. Investments acquisition of Ubbink Systemtechnik Centrotec made what is undoubtedly the most significant financial investment in the history of the company 36

36 B. SITUATION C. KEY RISKS 3. Net worth position further fixed assets acquired As a result of the acquisition of Ubbink Systemtechnik, the financial assets have risen by DM 11.1 million, from DM 11.6 million to DM 27.7 million. Our growth and business progress were very positive, and we are able to look to the future with considerable optimism. During the past fiscal year, we nevertheless considered in depth the risks with which our company is confronted. 4. Financial position equity ratio of 65% The group s equity rose by DM 2,1 million in the fiscal year on account of accumulated profits, from DM 27,2 million to DM 29,4 million. The equity ratio at the end of the fiscal year was 65% of the balance sheet total. Amounts owed to banks accounted for 31% of the balance sheet total. 5. Affiliated company arm's-length principle Legal transactions with companies in which the Chairman of the Supervisory Board and members of his family hold an interest were conducted out in the fiscal year. As a precautionary measure, a dependence report was therefore issued by the Board of Management. Concluding remark from the dependence report: Pursuant to 312 Para. 3 of German Stock Corporation Law, we declare that, on the basis of the circumstances known at the time when legal transactions with affiliated companies were conducted, our company received adequate consideration for each legal transaction and was not placed at a disadvantage. 6. Earnings situation rise in earnings by the operative units As the profits of the affiliated companies were distributed only in part to the parent company which holds their shares, the result of the latter does not reflect the highly successful business progress of the former. Our most resounding success simultaneously led to a relevant risk on the market side: our newly secured largest customer accounted for 24 % of the group s sales volume in However, this dependency will be reduced following the acquisition of Ubbink, as the largest customer is likely to account for only 10 % of total sales in A degree of dependence on the fortunes of the market for technical semi-finished products and prefabricated parts likewise transpired in the past fiscal year. However, the positive progress in the second half of the year, and our past experience even more so, demonstrate that market fluctuations can be overcome relatively swiftly thanks to the spread of potential applications. The newly acquired Ubbink Group is likewise dependent on the fortunes of the market to some degree, though it has so far always shown a profit even in years when the economy in general has been weak. Thanks to our technology, quality and value for money, we have attained a solid market position in all business segments. It is nevertheless conceivable that new market entrants, more intense competition, increased consumer power and substitute products could lessen our operational efficiency. Internally, we perceive potential risks in the production sector. We implement suitable safety regulations and take precautionary measures to prevent possible accidents and plant breakdowns. All plant is moreover in- 37

37 sured in line with its value. However, the failure of critical plant could result in noticeable losses. In the IT sector, no problems arose as a result of the date change; classic data safeguarding measures are taken on an ongoing basis. We introduced a new computer system for goods management and bookkeeping in the fiscal year under review. Problems were encountered with its introduction, but we now regard these as solved. However, the possibility cannot be excluded that further problems that have not yet been identified will arise, or that problems already solved will recur. Likewise we cannot exclude the possibility that a problem in the IT sector could lead to a loss of data, despite ongoing data safeguarding, causing considerable damage. As the company is still relatively small, there is moreover a degree of dependence on certain key employees. However, as we expand so will our base of highly qualified employees, with the result that this risk will gradually dwindle. The project that is under way on the construction of a new logistics centre could likewise entail risks. Problems could in particular take the form of delays in completion, or could arise upon occupation of the new premises. All measures are currently proceeding according to schedule. A further risk could arise in connection with the purchase of the land purchase; a notarised purchase agreement exists but no entry has yet been made in the land registry; we expect that it will be made within the usual processing time scale. Due to pressure of time, we have therefore already commenced construction work. Now that we have invested the funds received as a result of the initial public offering, our lower equity ratio makes us more susceptible to fluctuations in our earnings. Models of various scenarios (including Ubbink) have indicated that it would only be necessary to increase equity if sales were to slump sharply, in contrast to the forecast growth in sales. The integration of the newly acquired Ubbink Group of course harbours a classic risk. Negative examples have shown that the synergy benefits anticipated from takeovers often fail to materialise. For this reason, we based the purchase price of Ubbink Systemtechnik purely on a stand-alone valuation. As we have enjoyed a successful partnership with Ubbink stretching back to 1996, we are optimistic at the prospects for its successful integration. Finally, our vigorous growth undoubtedly harbours risks. Internal structures in particular must repeatedly and rapidly be adjusted to the requirements of a growing organisation. We created a workable basis for this in the past year by reorganising our growth area of plastic gas flue systems. Through the acquisition of Ubbink, we have moreover purchased an established structure which can perform many of the new tasks with which we will be confronted. D. OUTLOOK We will enter an entirely new dimension in 2000 through our affiliated companies. The driving force behind this leap in growth, alongside the initial consolidation of the newly acquired Ubbink sub-group, is our intrinsic, sustained growth. In view of our positive expectations of the economy in general and the excellent progress in the sales and earnings of our affiliated companies, particularly in the second half of 1999, we are highly optimistic about the prospects for The position of the Ubbink Group, which was recent acquired, is likewise healthy. The con- 38

38 text of the latter and its prospects for growth, particularly in France and Benelux, are very good. Thanks to the new products that Ubbink is currently launching and its market synergies with Centrotec, Ubbink s trend towards profitable growth will hold up in the long term. We have started 2000 with a package of measures to promote the organic growth of our affiliated companies. These include the Grow Together Program with Ubbink, a comprehensive integration programme that includes both enhancing efficiency and developing further potential for growth. Our new logistics centre in Germany will provide a new basis for our growth area of plastic gas flue systems. We will tackle the emerging markets for our plastic systems in Britain and Italy with purpose-designed systems. In addition to product innovations in the field of gas flues, we have also launched a new product campaign in the areas of ventilation systems and lighting/roof systems. We aim to add momentum to our organic growth over the next few years through strategic acquisitions. In this light, we believe that our company will continue to make very healthy progress. Marsberg, February 24, 2000 CENTROTEC Hochleistungskunststoffe AG Hans-Lothar Hagen Chairman of the Managing Board Dr. Alexander Kirsch Board Member for Finance 39

39 Consolidated balance sheet CENTROTEC Hochleistungskunststoffe AG Consolidated balance sheet December 31, 1999 AKTIVA DM DM A. FIXED ASSETS Financial assets Shareholdings in affiliated companies , ,46 B. CURRENT ASSETS I. Receivables and other assets 1. Receivables from affiliated companies , ,43 of which with a maturity of more than one year: DM 0.00 (previous year: DM 0.00) 2. Other assets , , , ,51 II. Bank balances , , , , , ,51 40

40 EQUITY AND LIABILITIES DM DM A. EQUITY I. Subscribed capital , ,00 II. Capital reserve , ,00 III. Revenue reserves , ,90 IV. Net profit/net loss , , , ,74 B. PROVISIONS Other provisions , ,00 C. LIABILITIES 1. Due to banks , ,38 2. Due to company members ,80 0,00 3. Other liabilities , ,39 - thereof taxes: DM 183, (previous year: DM 21,590.49) - thereof relating to social security and similar obligations: DM 8, (previous year: DM 3,252.72) , , , ,51 41

41 Statement of income for the 1999 fiscal year CENTROTEC Hochleistungskunststoffe AG, Marsberg Statement of income December 31, DM DM 1. Other operating income , ,15 2. Personnel expenses a) Wages and salaries , ,38 b) Social security costs , ,16 3. Depreciation on tangible assets 257,76 0,00 4. Other operating expenses , ,28 5. Income from shareholdings , ,76 - of which from affiliated companies DM 1,355, (previous year: DM 2,844,277.76) 6. Other interest and similar income , ,45 - of which from affiliated companies DM 714, (previous year: DM 0.00) 7. Interest and similar expenses , ,19 8. Result from ordinary operations , ,65 9. Other taxes 0, , Net income/net loss for the year , , Retained profits/accumulated losses brought forward , , Allocation to revenue reserves ,27 0, Net profit/net loss , ,16 42

42 Notes to the annual financial statements for the 1999 fiscal year CENTROTEC Hochleistungskunsstoffe AG, Marsberg A. GENERAL INFORMATION The company is a large company as defined by 267 Para. 3 of HGB (German Commercial Code), on the strength of its stock exchange listing. The format of the balance sheet and the statement of income is based on the provisions of 264 ff. HGB applicable to corporations. It applies the type of expenditure (total cost) format defined in 275 Para. 2 of HGB to the statement of income. B. ACCOUNTING AND VALUATION PRINCIPLES 1. Tangible assets Tangible assets are carried at their cost of acquisition, less regular depreciation. 2. Financial assets Financial assets are valued at their cost of acquisition or at the lower applicable value. 3. Receivables Receivables are carried at their principal amount or at the lower applicable value. 4. Provisions Other provisions are set up for contingent liabilities. They are carried at the amount dictated by sound business judgement. 5. Liabilities Liabilities are carried at their redemption amount. 43

43 C. SPECIAL INFORMATION AND NOTES 1. Balance sheet 1.1 Assets Fixed assets The classification and movements of fixed assets are shown in the following Assets Movement Schedule: ACQUISITION COST Additions Disposals DM DM DM DM TANGIBLE ASSETS Other equipment, operating and office 1.251,20 257,76 257, ,20 FINANCIAL ASSETS Shares in affiliated companies , , , , , , , ,87 44

44 ACCUMULATED DEPRECIATION NET BOOK VALUES Additions Disposals DM DM DM DM DM DM 1.251,20 257,76 257, ,20 0,00 0,00 0,00 0,00 0,00 0, , , ,20 257,76 257, , , , Current assets Receivables and other assets: The receivables and other assets do not contain any items with more than one year to maturity. Receivables from affiliated companies totalling DM 17,392 thousand include trade receivables totalling DM 2,429 thousand. 1.2 Equity and liabilities Equity The subscribed capital at December 31, 1999 totalled EUR 3,600,000.-, divided into 1,200,000 bearer individual share certificates. Approved capital was in addition created. The Managing Board is, with the approval of the Supervisory Board, authorised to raise the capital stock by up to EUR 1,533, (approved capital) through the issue of new bearer shares in the form of individual share certificates on one or more occasions, in return for contributions in cash or in kind, by August 31, The new shares are to be accepted by banks, with the undertaking to offer them for subscription to the shareholders. The Managing Board is, however, authorised to exclude residual amounts from the shareholders subscription right. The Managing Board is moreover authorised, with the approval of the Supervisory Board, to exclude the subscription right of the shareholders in order to issue new shares against contribution in kind. The Managing Board is moreover authorised to exclude the subscription right of the shareholders in order to issue up to 300,000 new shares at a price which does not significantly undercut the stock market price for the company s shares at the time the issue price is determined by the Managing Board. 45

45 The capital stock has moreover been raised by an unissued amount of EUR 270,000. The increase of authorised but unissued capital only becomes definitive insofar as the bearers of the option certificates issued by the company pursuant to the authorisation of the Ordinary Shareholders Meeting of September 9, 1998 exercise their subscription right to ordinary bearer shares in the company (option right). The new shares qualify for profits from the start of the financial year in which they are issued through the exercising of option rights. The authorised but unissued capital was divided into up to 90,000 individual share certificates on December 31, With effect from July 1, 1999, 32,130 options (before share split) were issued for employees, management and board members, at the exercise price of EUR The options may be exercised from July 1, 2001 to July 1, The exercising of the options is tied to certain conditions and targets. They may only be exercised if the daily quotation at the Frankfurt Stock Exchange has risen by at least 30 % since the granting of the option. The exercising of the option is moreover tied to the attainment of individual targets by employees, management and board members. It is therefore uncertain what proportion of the options issued will be exercised in practice. Pursuant to the resolution of the Shareholders Meeting of May 11, 1999 the subscribed capital was denominated in euro, individual share certificates were introduced and the capital stock was raised by means of a capital increase of EUR 532, from company funds, from EUR 3,067, or DM 6,000,000.- to EUR 3,600,000.-; to this end, the capital reserves of this amount shown in the balance sheet at December 31, 1998 were converted into capital stock. As of February 15, 2000, the shares were split at a ratio of 1 to 3 pursuant to the resolution of the Shareholders Meeting of May 11, Since the split, the subscribed capital has consequently been divided into 3,600,000 individual share certificates, and the authorised but unissued capital into 270,000 individual share certificates; after splitting, the number of options already issued on the authorised but unissued capital is 96,390. The individual financial statements are prepared in DM. The euro exchange rate is EUR 1 = DM The capital stock of Centrotec Hochleistungskunststoffe AG, Marsberg, totals DM 7,041 thousand, and the capital reserve DM 20,259 thousand. The company has allocated an amount of DM 1,015 thousand from the net income for the year to the revenue reserves, which now total DM 1,058 thousand. As a result of its distributable profit for the year of DM 1,015 thousand, the company s equity at December 31, 1999 totals DM 29,373 thousand Other provisions The other provisions primarily include amounts for covering legal and consultancy costs, claims for outstanding vacation entitlements, costs of the Shareholders Meeting, industrial accident insurance contributions, warranty obligations and credit notes to be issued. 46

46 1.2.3 Liabilities The remaining maturities are shown in the following table: (Prior-year figures in brackets) thereof with a remaining maturity of At Dec. 31, 1999 less than between one more than one year and five years five years DM '000 DM '000 DM '000 DM '000 Due to banks (4.999) (107) (429) (4.463) Trade payables (0) (0) (0) (0) Other liabilities (144) (144) (0) (0) (5.143) (251) (429) (4.463) The collateral provided for liabilities to banks consists principally of global assignments of receivables, storage assignments of inventories, assignments of technical equipment and machinery as security, and a mortgage on the site of the Centroplast GmbH & Co. plant in Marsberg, amounting to DM 5,000 thousand. At the closing date, DM 13,901 thousand of the liabilities were covered by collateral. D. OTHER PARTICULARS 1. Contingent liabilities The company is liable for the liabilities of Centroplast Kunststofferzeugnisse GmbH & Co., Marsberg, on account of its shareholder status. As part of the takeover of the Ubbink Group, it was agreed that Centrotec Hochleistungskunststoffe AG or a subsidiary would do all in its power to help sales representatives be released from rental guarantees. The rental agreements in question are an agreement in England for annual rent of currently GBP 148,000 (DM 468 thousand), due to run until 2008, and a rental agreement in England for an annual rent of currently GBP 80,000 (DM 253 thousand), due to run until Centrotec Hochleistungskunststoffe AG moreover releases its designated sponsors, M.M. Warburg & CO KG aa, Hamburg and Gontard & Metallbank AG, Frankfurt a.m. from liability in connection with their sponsoring activities, subject to this liability not resulting from gross negligence or fault on the part of the designated sponsor. 47

47 2. Other financial obligations Leasing contracts result in financial obligations for the minimum leasing period of DM 288 thousand, including DM 145 thousand for Financial obligations totalling DM 29 thousand exist as a result of current agreements. No material financial obligations were entered into by the group companies vis-à-vis and on behalf of Ubbink Holding b.v. other than the employment of equity. 3. Own shares Pursuant to the resolution of the Shareholders Meeting of May 11, 1999 the company is authorised to acquire own shares up to an amount not exceeding ten percent of the capital stock. The price paid for these shares may not be more than 15 % above or below the average of the daily quotations at the Frankfurt Stock Exchange over the last ten trading days preceding the acquisition of the shares. The Managing Board is authorised to sell these shares publicly or call them in without the need for a further resolution by a shareholders meeting. In the financial year under review, between June 10, 1999 and June 17, 1999, a total of 5,140 own shares were acquired on the stock market at a price of DM to DM The purpose of acquiring these shares was to reduce the liquidity of the market in that particular trading phase. Later in the financial year, these own shares were sold again via the stock market at prices of between DM and DM This was done in preparation for the impending takeover of Ubbink, for which liquid funds were created to pay the purchase price. The maximum level of own shares held during the financial year was equivalent to 0.43 percent of the capital stock, i.e. these shares represented DM 30,158 of the capital stock. No own shares were held at the end of the financial year. 4. Average number of employees Over the period from January 1 to December 31, 1999, the company had an average of one employee, plus two board members. In the previous year, there was an average of one employee (board member). 5. Management and supervisory bodies The Managing Board members in the financial year were Dipl.-Ing. Hans-Lothar Hagen, engineer, Altenbeken (Chairman) and Dr. Alexander Kirsch, businessman, Mülheim an der Ruhr. Herr Hagen is entitled to act as sole representative of the company and is exempt from the restrictions of 181 of German Civil Code. Dr. Kirsch is entitled to act as sole representative of the company. The members of the Supervisory Board were Guido A. Krass, entrepreneur (Chairman), Wadhurst, England, Dr. Bernhard Heiss, lawyer, Munich, and Dipl.-Kfm. Hans Thomas, consultant businessman, Hofheim. In addition to belonging to the corporate bodies of Centrotec Hochleistungskunststoffe AG, the following members of the Managing and Supervisory Boards also sit on other supervisory boards of stock corporations: Dr. A. Kirsch: Pari Capital AG, Munich. G.A. Krass: COS Community Online Service AG, Munich, Cloppenburg Automobil AG, Düsseldorf, pre-ipo AG, Hamburg, Pari Capital AG, Munich. Dr. B. Heiss: ArtMerchandising & Media AG, Munich, OPUS-1 Vermögensverwaltungs AG, Munich. No personnel changes to the company's Managing and Supervisory Boards occurred in the financial year. 6. Total remuneration of corporate bodies Remuneration of the Supervisory Board totalled DM 13.5 thousand in the financial year. The remuneration of the two board members and the one managing director was not disclosed by analogous application of the protective clause of 286 IV of HGB, as the remuneration paid to each individual member of the Mana- 48

48 ging Board can easily be deduced from this information. 7. Shareholdings The company owned holdings in the following companies at the balance sheet date: Holding Name/registered office % Centroplast Kunststofferzeugnisse GmbH & Co., Marsberg 100 Centrotherm Abgastechnik GmbH, Marsberg 100 Centroplast Verwaltungs-GmbH, Marsberg 100 Ubbink Holding B.V., Doesburg, Niederlande 100 Ubbink International B.V., Amstelveen, Niederlande 100 Rega Ubbink Ltd., Sandy, England 100 The equity of these subsidiaries and their result for the past financial year are not indicated here, on the basis of 286 Para. 3 No. 2 HGB. Marsberg, February 24, 2000 CENTROTEC Hochleistungskunststoffe AG Hans-Lothar Hagen Chairman of the Managing Board Dr. Alexander Kirsch Board Member for Finance 49