For a cleaner environment

Transcription

1 Innovative Recycling Systems ANNUAL REPORT 2001 Innovative Recycling Systems For a cleaner environment

2 CONTENTS 1 CHAIRMAN S STATEMENT REPORT OF THE BOARD OF DIRECTORS CONSOLIDATED BALANCE SHEET CONSOLIDATED INCOME STATEMENT CONSOLIDATED CASH FLOW STATEMENT COMPANY BALANCE SHEET COMPANY INCOME STATEMENT NOTES TO THE COMPANY BALANCE SHEET RECONCILIATION BETWEEN DUTCH GAAP AND US GAAP SUPPLEMENTARY INFORMATION REPORT OF THE AUDITORS ENVIPCO S OFFICES DISTRIBUTOR HELICOPTER MAINTENANCE OFFICES... 43

3 2 CHAIRMAN S STATEMENT CHAIRMAN S STATEMENT 3 Dear Shareholders, 2001 has been a difficult year. The Group did not perform as expected and the losses for the year were significantly higher despite increase in the revenue of about 11%. The deposit law in Germany has been delayed until January Even though the Israeli deposit law came into force in the fourth quarter of 2001 its implementation has been further delayed until the first quarter of Continuing with the changes initiated in the previous year, the implementation process was restricted and slow which contributed to the higher losses for the year The main reasons for this include bankruptcy of a major customer, exceptional cost of maintaining property from an earlier discontinued activity and additional provision for old inventory. In Brazil, the start-up costs of the PET recycling plant and also the integration costs of the two acquisitions made during the year in the USA. I believe that we have come a long way and these problems of restructuring and changes, although late, are now almost behind us. On the positive side: The property from the discontinued activity was disposed of and no further costs are anticipated; Sorepla, the French subsidiary completed the installation of its second wash line, doubling its capacity to 43,000 metric tons; The successful installation of the Brazilian PET plant was completed and production started in March 2002; Acquisition and integration into the Group of a commodity pick-up and processing business based in New York was completed; Acquisition and integration into the Group of a helicopter engine maintenance company was successfully completed; Negotiations were successfully completed with Fuji Electronic Co. Ltd. of Tokyo, Japan by concluding a fifty-fifty Joint Venture, in February 2002; All our operations have been stream lined. Sorepla, the French PET recycler and the Posada Group are expected to show much higher profits for 2002 with moderate profits from the US pick up and processing business. The operation in Brazil and the recycling activities in the USA are expected to achieve at least break-even position for the year Despite the losses incurred in 2001, I am very optimistic about the long term prospects of the Group. I thank all our employees and shareholders for their trust and co-operation in creating a solid platform for growth and prosperity. G. B. Santchurn Chairman and Chief Executive Officer 31 st of May 2002

4 4 REPORT OF THE BOARD OF DIRECTORS REPORT OF THE BOARD OF DIRECTORS 5 FINANCIAL RESULTS Despite an increase in total revenues of about 11% to 60.5million ( million), the Group posted a significantly lower EBITDA of 2.1million for the year 2001 as compared to 7.8million (net of exceptional and extraordinary items) for the year The higher than expected losses in 2001 were due mainly to adverse factors affecting our operations in the USA and Germany, start up costs in Brazil and transition costs of two new acquisitions in the USA. The bankruptcy of a major customer in the USA together with exceptional cost of maintaining property from a discontinued operations, additional provisions for receivables and inventories of parts relating to older generation machines all contributed to a significantly higher operating loss of 3.5million (2000 Profit 2.8million). In addition there were increased losses in Germany also due to the write off of inventory and old equipment and in Brazil due to start up costs of the PET recycling plant. Furthermore, costs of integrating and reorganising the two new acquisitions, one for the commodity pick up and processing business in New York and the other for the helicopter maintenance business in Arizona, impacted negatively during the year. No dividend is proposed for distribution. PRINCIPAL ACTIVITIES The Group s Principal Activities during the year were: The design, development, manufacture and sale or lease of reverse vending machines ("RVM") as the foundation of recycling systems for the collection and processing of used beverage containers. The provision of technical support, RVM maintenance and accounting services to retail stores, bottlers and distributors for containers redeemed through the company s machines. The processing of used PET and HDPE plastics for recycling. Operating authorised helicopter maintenance centres for Rolls Royce Allison, Bell Helicopters Textron, HR Textron,Agusta, and Honeywell in the United Kingdom, Malta and the United States. REVIEW OF OPERATIONS NORTH AMERICAS USA Environmental Products Corp. ("EPCUS") revenues decreased by 11% to 25.3million due mainly to a reduction in the number of Reverse Vending Machines sold during the year and to the reduction in fees from Redemption Program Services attributable to the bankruptcy of one of its a major customers. The result for the year showed a loss of 4.4million, an increase of 2.0million over the previous year. Cost reductions in some areas were offset by cost increases in others. Approximately 1.5million of costs in 2001 were exceptional and should not recur in future. In addition, a cost reduction exercise in 2002 will result in further cost reductions of around 1.5million. Increased revenues from Redemption Program Services and from sales of reverse vending machines are also anticipated with the result that EPCUS is forecasting a break-even position in In the longer term, EPCUS will benefit from sales of Reverse Vending Machines in markets developing throughout the World, some of which are referred to elsewhere in this report. The Directors are confident that EPCUS will return to profitability by Up to 31 st of December 2001, EPCUS was responsible for the collection of redeemed beverage containers from Retailers and a significant portion of its sales revenue was generated from this activity. From January 2002, this function has been transferred to Envipco Pickup & Processing Services Inc., ("EPPSI"), a wholly owned subsidiary, which acquired the business of Metropolitan Mining Company Inc, New York, in October The integration of the commodity pickup and processing activities of both businesses should result in reduced costs and hence increased profitability. New management has been recruited for EPPSI with the objective of focussing on improving efficiency and expanding the business of Pickup and processing of commodities.

5 6 REPORT OF THE BOARD OF DIRECTORS REPORT OF THE BOARD OF DIRECTORS 7 EUROPE GERMANY Germany had another disappointing year with a loss of 1,400,000 ( Loss 400,000). A large part of the loss was attributable to additional provisions for receivables and to write off of inventory and old equipment, which will be replaced by new equipment. In addition to the operational difficulties there was uncertainty in the market due to the delay in enacting the one-way container deposit law through the German parliament. This led to the postponement of a number of projects to 2002 as the German deposit legislation for one-way containers is now expected to take effect from 1 st of January Additional volume is expected in 2002 as German machines are modified to accept the one-way containers and/or replaced by Combi machines, which accept both one-way and refillable containers. FRANCE Sorepla, the French plastic recycler continued to perform well, as expected, despite the downturn of the virgin resin market in the last quarter of After a positive start and sustained demand for the first threequarters, demand in this sector declined in the fourth quarter resulting in a 30% drop in the prices. This sluggishness in the market did not adversely influence the general tendency of increased bottle collection in Europe. The volume of containers collected in France increased by 40% during Thanks to the strict controls and improvements made to its manufacturing process, Sorepla remains a leading post consumer PET processor in the market. Revenue increased by 23% to 7,857,000 while net profit after tax increased by 6% to 454,000. The production of PET and HDPE flakes was up 19% while the production of HDPE granules increased by 4%. The installation of the 7,770,000 new line was completed in December 2001, and after successful tests full-scale production started in March The market for recycled PET and HDPE continues to develop in the major industrialised countries. With the increase in its production capacity and the introduction of new technologies, Sorepla will be able to maintain its leadership in this market.turnover is expected to increase by more than 70% in 2002 and net income by 60%. SOUTH AMERICAS BRAZIL Envipco strengthened its position as the market leader for providing automated recycling systems in Brazil after acquiring its distributor Red Line Equipamentos Especiais Ltda in January 2001.The number of Envipco Reverse Vending Machines (RVMs) doubled during the year and is expected to grow rapidly in the coming years due to the enactment of deposit laws in 2002, regulating the state and municipal collection and final treatment of packaging containers. These laws are now being closely followed by the bottlers, supermarkets and the manufacturers of packaging materials all of whom are showing intense interest in our RVMs, which are proven in the market for providing automated recycling solutions. During the year Envipco Plastics LTDA, an 80% owned subsidiary was incorporated to exploit the huge potential for recycling plastic PET containers in the Brazilian market. A 65,000 square feet facility was secured, and a state of the art PET processing and washing line has been installed. Installation of this line was completed on target in February 2002 and the production of a high quality flake has been started. This state of the art plant is seeking a leading position in the market as a major recycler of plastics based on its large production capacity and a high quality product. Both these operations are expected to become profitable in the second half of MEXICO The company has initiated pilot programmes for Reverse Vending Machines (RVMs), which are proving successful. The results are encouraging and these tests are expanded on a larger scale.we expect significant revenues from 2003/2004.

6 8 REPORT OF THE BOARD OF DIRECTORS REPORT OF THE BOARD OF DIRECTORS 9 FAR EAST JAPAN Envipco Holding N.V. and Fuji Electric Co. Limited (our former distributors) realising the huge market potential in Japan had been exploring the possibility of a Joint Venture during the year After successful negotiations we are pleased to announce the formation of a long-term strategic alliance between the parties through the execution of a fifty-fifty Joint Venture in February The newly formed Joint Venture Company, Fuji Envipco Co. Limited with an initial capital of 200 million Japanese Yen commenced operations on 1 st of April HELICOPTER MAINTENANCE ACTIVITIES The helicopter maintenance group continues to make a significant contribution to Envipco s group profitability. The group achieved a post tax profit of 1,009,000, which was lower than in 2000 due to initial losses, and the reorganisation of the newly acquired subsidiary Aeromaritime America Inc. ("AAI").This acquisition has strengthened the group s position in the USA, the largest market in the world for the Rolls Royce Allison 250 series engine. The general order situation remains good including a multi-million dollar order from the US Army received at the end of year 2001 and as a result substantially increased sales and profits are anticipated in The group intends to continue with its policy of growth by acquisition and at the date of this report, a company with complimentary activities has been identified as a possible target. DIRECTORS AND THEIR INTERESTS The Directors and their interests in the share capital of the Group were as follows: ORDINARY SHARES REPRESENTED BY DEPOSITORY RECEIPTS December 31 Dr. Theodor Leipold 441, ,681 Mr. Jean Jacques Nardin(*) 99,730 99,730 Mr. Christian Crépet - - Mr. Bhajun Santchurn - - Mr. Guy Lefebvre - - Mr. Dick Stalenhoef (*) - - Mr. Neil Turpie (*) - - There are no contracts of significance between the Group and any of the Directors. (*) Mr. Dick Stalenhoef and Mr. Neil Turpie were appointed as directors on 2 nd of April Mr. Jean Jacques Nardin resigned from the Board on the 22 nd of April SALARIES AND REMUNERATION The Board of Directors received remuneration totalling 407,065 and 494,289 during 2001 and 2000 respectively.

7 10 REPORT OF THE BOARD OF DIRECTORS SUBSTANTIAL SHAREHOLDING The Group has been notified of, or is aware of the following interests at 31 st of December 2001 and 2000, representing 3 per cent or more of the Group s issued share capital. December 31 Number Percentage Number Percentage of Shares of Shares Mediterranée Investment Bank 970, % 970, % Banque Saradar 1,702, % 1,002, % Seament Holding SAL 13,342, % 12,875, % POST BALANCE SHEET EVENTS Details of the post balance sheet events are given in Note 16 of the Notes to the Consolidated Financial Statements. Secretary of the Board 31 st of May 2002 FINANCIAL STATEMENTS 2001

8 12 CONSOLIDATED BALANCE SHEET after appropriation of net loss CONSOLIDATED INCOME STATEMENT 13 (ALL AMOUNTS IN EURO THOUSANDS) Notes 31 December December 2000 ASSETS Fixed assets Tangible assets, net of depreciation 2 21,994 19,929 Intangible assets, net of amortisation 3 1, Investments ,238 20,679 Current assets Net assets of discontinued operations 4-3,269 Inventories 5 12,758 11,085 Trade receivables, net of allowances for doubtful debts 5,495 10,067 Other receivables and prepayments 6 10,062 3,992 Cash and cash equivalents 7 2,443 3,148 30,758 31,561 Total assets 53,996 52,240 EQUITY AND LIABILITIES Capital and reserves 8 Ordinary shares Share premium 25,170 25,305 Translation reserve 3,412 2,278 Accumulated deficit (18,511) (13,144) 10,179 14,547 Minority Non-current liabilities Debts, net of current portion 10 21,363 22,573 Deferred income ,683 22,986 Current liabilities Trade and other payables 12 15,235 13,416 Bank overdraft and loans Current portion of long term debts 10 5, ,502 14,386 Total equity and liabilities 53,996 52,240 (ALL AMOUNTS IN EURO THOUSANDS) Year ended Year ended 31 December 31 December Notes Revenues 17 60,455 54,389 Cost of sales (46,116) (36,672) Leasing depreciation 2 (3,696) (3,495) Gross profit 10,643 14,222 Operating expenses (12,195) (9,877) Depreciation other 2/3 (1,997) (1,580) Operating income (3,549) 2,765 Interest expenses (2,377) (2,046) Interest income Profit/(Loss) before tax (4,985) 1,151 Tax (378) (510) Profit/(Loss) from ordinary activitie (5,363) 641 Extraordinary item 19 - (985) Minority interest 8 (3) (60) Net loss for the period (5,367) (404) Net loss brought forward (13,144) (12,740) Net loss carried forward (18,511) (13,144)

9 14 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December (ALL AMOUNTS IN EURO THOUSANDS) Net cash provided by / (used in) operational activities Year ended Year ended 31 December 31 December Notes Operating income (3,549) 2,765 Adjustments for: Depreciation and amortisation 2/3 5,692 5,075 Realisation of deferred income (93) (107) Change in trade and other receivables (1,498) (3,716) Change in assets of discontinued operations 3, Change in inventories (1,673) (1,628) Changes in trade and other payables 1,819 1,194 Changes in working capital items, net 1,917 (3,770) Cash provided by / (used in) operations 3,967 3,963 Interest received Interest paid (2,377) (2,046) Income taxes paid (378) (510) Restructuring paid - (359) (1,814) (2,483) Net cash provided by operational activities 2,153 1,480 Net cash used in investment activities Acquisition of consolidated subsidiary 1,673 (778) Net investment in property, plant and equipment (7,129) (3,235) Net cash used in investment activities (5,456) (4,013) Net cash provided by financing activities Cancellation of share of stock, net - (14) Increase / (Decrease) in long term borrowings and capital lease obligations 2,402 4,055 Net cash provided by financing activities 2,402 4,041 Net cash flow for the period (901) 1,508 Foreign currency differences and other changes (238) (289) Cash flow from newly consolidated subsidiaries - - Changes in cash and cash equivalents, net of bank overdrafts for the period (1,139) 1, ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below: GENERAL 1.1 BASIS OF PREPARATION The consolidated financial statements are prepared in accordance with generally accepted accounting standards in The Netherlands (Dutch GAAP) as set out in the Provisions of Book 2 of the Dutch Civil Code. The consolidated financial statements are prepared under the historical cost convention as modified by the revaluation of certain property, plant and equipment, marketable securities and investment properties. 1.2 DESCRIPTION OF BUSINESS Envipco Holding N.V. is a public limited liability company incorporated in accordance with the laws of The Netherlands, with its registered address at 548 Herengracht, Postbus 990, 1000 AZ Amsterdam,The Netherlands. Envipco Holding N.V. and Subsidiaries ("the Company" or "Envipco") is engaged principally in two sectors Recycling and Helicopter Engine Maintenance. Recycling remains the core business of the Company in which it develops, manufactures, assembles, leases, sells, markets and services a line of "reverse vending machines" (RVMs) in the United States of America and Europe; and collects or acquires, cleans, processes and resells recycled plastic and derivative products. The Company acquired Posada Holding B.V. in August 1999, which runs through its subsidiaries approved helicopter maintenance centres in the USA, Malta and UK for Agusta, Bell, HR Textron, Honeywell/Allied Signal, Parker Stratoflex, Robinson and Rolls-Royce Allison.

10 DiskArt 1988 DiskArt 1988 DiskArt 1988 DiskArt 1988 DiskArt DESCRIPTION OF BUSINESS (CONTINUED) Deposit Redemption Programmes Under deposit redemption programmes, the Company is responsible for the operation of systems to redeem, collect, account for and dispose of used beverage containers. In connection with these programmes, participating retailers lease or purchase reverse vending machines from the Company.The Company then acts in a clearinghouse capacity to collect deposits and handling fees on redeemed containers from participating beverage distributors and to distribute deposit refunds and handling fees to participating retailers. Accordingly, deposits and handling fees are not included as revenue and expense or included within receivables and payables in the consolidated financial statements. The Company earns its revenues through leasing and selling machines to retailers and other participants, and through various services provided to distributors and retailers, including container collection, disposition, and accounting services. Plastics Processing Programme The Company operates a plastic processing facility in France, which produces plastic "flake" a product derived from post-consumer plastic beverage containers. The plastic product is sold to various customers for packaging and fibre applications. 1.3 PRINCIPLES OF CONSOLIDATION Consolidated and affiliated companies The consolidated financial statements include the accounts of the parent company Envipco Holding N.V. and those companies in which the parent company owns more than 50% of the issued share capital and/or has management control. Subsidiaries acquired or sold during the year are included in the profit and loss account as of the date of acquisition, or up to the date of sale. Envipco and its consolidated subsidiaries are structured as set out in the chart next page. Elimination of inter-company transactions All inter-company transactions including receivables and liabilities have been eliminated in consolidation. Envipco Pickup & Processing Services Inc. EM Geratebau Rücknahmesysteme GmbH & Ko KG 1% 100% EM Geratebau Rücknahmesysteme Verwaltungs GmbH Envipco Finance Co. Ltd 100% Envipco Management Services Inc. 100% 99% Envipco GmbH Aeromaritime UK Ltd Middle Earth Recycling Company Inc. 100% 100% 100% Connecticut Massachusetts 100% Iowa Maine Michigan Environmental Products Corporation 100% Envipco Holding N.V. Posada Holding B.V. Aeromaritime Mediterranean Corp. Aeromaritime America Inc. Middle Earth Recycling Partnership Envipco do Brazil LTDA 100% 100% 100% 100% Oregon New York Vermont California 51% 100% 100% 100% 40.82% Aeromaritime Mediterranean Ltd Sorepla Technologie S.A. Red Line Equipamentos Especiais LTDA Envipco do Plastics LTDA 59.18% 29% Sorepla Industrie S.A. 56%

11 USE OF ESTIMATES The preparation of the consolidated financial statements in conformity with Dutch accounting standards requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Actual figures may eventually differ from those estimates. 1.5 VALUATION OF ASSETS AND LIABILITIES Unless stated otherwise, assets and liabilities are carried at face value, net of allowances, where necessary. 1.6 FOREIGN CURRENCIES AND FINANCIAL INSTRUMENTS Foreign currency transactions within Envipco are accounted for at the exchange rates prevailing at the date of transaction: gains and losses resulting from settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. Such balances are translated at year-end exchange rates unless hedged by forward foreign exchange contracts, in which case the rates specified in such forward contracts are used. Currency translation of foreign subsidiaries financial statements Balance sheet items are translated using year-end exchange rates. Income and expense items are translated using an average exchange rate for the period. The Company s share of translation gains or losses is deferred under Translation Reserves as part of Shareholders Equity. 1.7 RECLASSIFICATIONS Certain prior year amounts have been reclassified for comparative purposes. BALANCE SHEET 1.8 GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the excess of the cost of an acquisition over the fair value of the Company s share of the net assets of the acquired entity at the date of acquisition. Goodwill on acquisitions occurring during the year was previously written off against equity according to Dutch GAAP. Due to a change in Dutch GAAP accounting rules, as of January 2001, goodwill will be capitalised and amortised over a period not exceeding 20 years.the impact of this charge on 2001 results is not material. The shares in subsidiary companies are eliminated on consolidation. The difference between the purchase price of consolidated subsidiaries and the underlying net assets of such companies at the date of acquisition is allocated to the appropriate captions of the consolidated balance sheet based on fair values. The difference was recognised in the balance sheet as Goodwill, which was written off against equity. Debt issuance costs are amortised over the respective term of the debt not exceeding 5 years. Other intangible assets consist primarily of patents. Legal and acquisition costs relating to the acquisition of patents are capitalised when incurred. After patents are granted, costs are amortised on a straight-line basis over forty years. The carrying amount of each intangible asset is reviewed annually and adjusted for permanent impairment where it is considered necessary. 1.9 RESEARCH AND DEVELOPMENT Research and development costs are recognised as an expense except for costs incurred on developing separately identifiable specific projects, which are recognised as development assets (intangible assets) to the extent that such expenditures are expected to have future benefits. However, development costs initially recognised as an expense are not recognised as an asset in a subsequent period. Development costs that are capitalised are amortised from the commencement of the commercial production of the product to which they relate on a straight-line basis over the period of its expected benefit not to exceed 5 years.

12 COMPUTER SOFTWARE DEVELOPMENT COSTS Generally, costs associated with developing computer software programs are recognised as an expense as incurred. However, costs that are clearly associated with an identifiable and unique product, which will be controlled by the Company and has a probable benefit exceeding the cost beyond one year, are recognised as an intangible asset. Associated costs include staff costs of the development team and an appropriate portion of relevant overheads. Expenditure that enhances and extends the benefits of computer software programs beyond their original specifications and lives is recognised as a capital improvement and added to the original cost of the software. Computer software development costs recognised as assets are amortised using the straightline method over their useful lives, not to exceed 3 years PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are included at cost, net of depreciation. Depreciation is calculated on the straight-line method to write off the cost of each asset to its residual value over its estimated useful life as follows: Buildings Plant and machinery Equipment and motor vehicles years 3-10 years 3-8 years Land is not depreciated as it is deemed to have an indefinite life. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposal of property, plant and equipment are determined based on the difference between the sales price and the carrying amount and are taken into account in determining operating profit. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised, during the period of time that is required to complete and prepare the property for its intended use, as part of the cost of the asset ACCOUNTING FOR LEASES Assets leased out under operating leases are included in property, plant and equipment in the balance sheet. They are depreciated over their expected useful lives on a basis not exceeding seven years, consistent with similar fixed assets. Rental income is recognised on a straight-line basis over the lease term GOVERNMENT GRANTS Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to the income statement on a straight-line basis over the expected lives of the related assets Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined by the first-in, firstout (FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads, but excludes interest expense. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses. Inventory of recycled material to be processed or for sale is stated at estimated market value CASH AND CASH EQUIVALENTS For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits held at call with banks, and investments in money market instruments and other short term investments with a maturity of less than three months, net of bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings in current liabilities. INCOME STATEMENT 1.16 REVENUE RECOGNITION Sales are recognised upon delivery of products and customer acceptance, if any, of performance of services, net of sales taxes and discounts, and after eliminating sales within the Group. Revenues generated from leasing arrangements are recognised over the periods of the leases.

13 REVENUE RECOGNITION (CONTINUED) Other revenues earned by the Company are recognised on the following bases: Royalty income on an accruals basis in accordance with the substance of the relevant agreement. Interest income as it accrues (taking into account the effective yield on the related asset) unless collectibility is in doubt CORPORATE INCOME TAXES Corporate income tax payable is calculated on the results disclosed in the income statement, using various tax rates in effect in different countries, allowing for current tax relief facilities. Deferred income tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Currently enacted tax rates are used to determine deferred income tax. Under this method the Company is required to make provision for deferred income taxes on the revaluation of certain non-current assets and, in relation to an acquisition, on the difference between the fair values of the net assets acquired and their tax base. Provision for taxes, mainly withholding taxes, which could arise on the remittance of retained earnings, principally relating to subsidiaries, is only made where there is a current intention to remit such earnings. The principal temporary differences arise from depreciation on property, plant and equipment, revaluation of non-current assets, provisions for pensions and tax losses carried forward. Deferred tax assets relating to the carry forward of unused tax losses is recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. 2. TANGIBLE FIXED ASSETS Reverse Land Plant Vehicle Vending & & & Machines Buildings Machinery Equipment Total Year ended 31 December 2001 Opening net book amount 14,603 2,564 2, ,929 Translation effect (30) 1,075 Additions 1, , ,323 Disposals (743) - (263) (8) (1,014) Depreciation charge (3,696) (149) (1,335) (139) (5,319) Closing net book amount 12,850 2,527 6, ,994 Net Book Value Cost 41,965 3,583 15,896 1,312 62,756 Accumulated depreciation (29,115) (1,056) (9,747) (844) (40,762) At 31 December ,850 2,527 6, ,994 At 31 December ,603 2,564 2, ,929 Certain lenders have a fixed and floating charge over these assets (see Note 9) 3. INTANGIBLE FIXED ASSETS (ALL AMOUNTS ARE SHOWN IN EURO THOUSANDS UNLESS OTHERWISE STATED) Debt Other Issuance Intangible Goodwill Costs Assets Total Year ended 31 December 2001 Opening net book amount Translation effect Additions Disposals - - (67) (67) Amortisation charge - (285) (88) (373) Net Book Amount ,243 Net Book Value Cost 514 1,134 1,336 2,984 Accumulated amortisation - (819) (922) (1,741) At 31 December ,243 At 31 December Certain lenders have a fixed and floating charge over these assets (see Note 9)

14 24 25 (ALL AMOUNTS ARE SHOWN IN EURO THOUSANDS UNLESS OTHERWISE STATED) 4. NET ASSETS OF DISCONTINUED OPERATIONS Fixed Assets Tangibles - 3,195 Current Assets /(Liabilities) Debtors and Inventory - 74 Creditors - - Net Current Asset ,269 Less: write-off provisions - - Net assets of discontinued operations - 3,269 During the year the US subsidiary s remaining assets of the discontinued operation were disposed of recording a net loss of 119 ($106). 5. INVENTORIES Machine parts and components at cost 11,303 9,631 Finished goods Work in progress 1,257 1,233 Details of charges over inventory are given in note OTHER RECEIVABLES AND PREPAYMENTS 12,758 11,085 Other receivables 2,926 2,905 Prepayments 7,119 1,019 Deferred tax ,062 3, CASH AND CASH EQUIVALENTS Consolidated Bank Balances 2,443 3,148 An amount of 44,000 is blocked and therefore not freely available. 8. SHARE CAPITAL AND RESERVES Reference is made to the note 4 in the Company balance sheet for the changes in equity for the years ended 31 st of December 2001and MINORITY (ALL AMOUNTS ARE SHOWN IN EURO THOUSANDS UNLESS OTHERWISE STATED) Changes in minority interest during the year ended 31 st of December 2001 were as follows: At beginning of period Acquisitions/(elimination) Result for the period 3 60 Translation reserve 65 - At end of period DEBT AND CAPITAL LEASE OBLIGATIONS Environmental Products Corporation, USA entered into a Revolving line of credit of up to USD 12.5 million on 18 th of May 2001, bearing interest at a certain margin over prime.this facility is secured by a fixed and floating charge over the assets of Environmental Products Corporation, USA. Balance outstanding USD 6,755,639 7,591 9,344

15 DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED) Environmental Products Corporation, USA entered into a term loan of USD 4,118,000 on 18 th of May 2001, bearing interest at a certain margin over prime; this loan has been reduced by a one-time payment of USD 2,915,000 and was repayable in consecutive equal monthly instalments of USD 62,575 which have been reduced to USD 50,000 after the one-time payment was made, plus interest with a balloon payment for the balance in April This facility is secured by a fixed and floating charge over the assets of Environmental Products Corporation, USA. Balance outstanding, USD 777, ,719 Sorepla Industrie S.A. entered into a loan of FF. 2,000,000 in 1994 bearing interest at a certain margin over PIBOR, repayable in equal annual instalments of FF. 100,000 plus interest. The loan is secured by a charge over inventory. Balance outstanding Nil - 46 Sorepla Industrie S.A. entered into an unsecured loan agreement of 381,122 with no interest, repayable in equal annual instalments of 76,224 as from year Balance outstanding 304, Posada Holding B.V. entered into an unsecured loan agreement of 1,025,000 with interest at a certain rate over the 12mth $ LIBOR, repayable at 31 st of December Balance outstanding - 1,071,000 1,071 1,025 EM Geratebau Rucknahmesysteme GmbH & Co KG entered into a variable balance unsecured loan agreement with no interest, repayable at the demand of the lender Balance outstanding DM 746, Envipco GmbH entered into an unsecured loan agreement of DM300,000 with no interest, repayable at the demand of the lender Balance outstanding DM 300, Environmental Products Corporation entered into an unsecured loan agreement of USD 1,249,000 with interest at a certain rate over the $ LIBOR, repayable at the demand of the lender Balance outstanding USD 772, , DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED) Envipco Holding N.V. entered into an unsecured loan agreement of 500,000 with its main shareholder with interest at a certain rate over the 12mth Euribor, repayable at the demand of the Lender on 31 st of December Balance outstanding - 500, Envipco Holding N.V. entered into an unsecured loan facility with its main shareholder, with interest at a certain rate over the 12mth Euribor repayable at 31 st of December 2002, the balance of this facility was fixed in Euro on 1 st of April 2001 Balance outstanding - 8,379,694 8,380 5,452 Other loans 7, Total 27,194 23,541 Future payments under long term debt Current 5, Due within 2 to 5 years 21,363 22,544 Due after 5 years - 29 Total Debt 27,194 23,541 Schedule of Movement At beginning of period 23,541 18,329 Increase/(Redemption) 2,402 4,055 Translation effect 1,251 1,157 At end of period 27,194 23,541 Effective 18 th of May 2001 the USA company entered into a financing agreement (the Agreement) to refinance its outstanding revolving line of credit and term loan. The new revolving line of credit has a maximum limit of $12,500,000 subject to availability under the "borrowing base" as defined within the agreement, and matures in May Borrowings under the Agreement bear interest at the prime rate plus a certain margin. The US company and its holding company are each required to meet certain covenants under the Agreement.As at 31 st of December 2001 Environmental Products Corporation, USA breached some of its financial covenants for which it subsequently received waivers, details of which are given in Note 16.

16 28 29 (ALL AMOUNTS ARE SHOWN IN EURO THOUSANDS UNLESS OTHERWISE STATED) 11. DEFERRED INCOME These represent grant assistance received during the period to 31 st of December 1999 by a consolidated subsidiary aggregating to 1,693,000 for the acquisitions of Plant and Machinery. The grants are amortised over five years and any unamortised amount is shown as a deferred liability. Unamortised balance TRADE AND OTHER PAYABLES Trade payables 9,325 9,822 Other payables 975 1,574 Accruals 4,046 1,430 Tax and social security Pension contributions 4 3 Provision against Investment Deferred taxation COMMITMENTS AND CONTINGENCIES 15,235 13,416 With respect to the manufacture and assembly of reverse vending machines in the United States, there existed purchase order commitments, at 31 st of December 2001, of approximately 1.9m ( m). Operating lease commitments-where a Group company is the lessee The future minimum lease payments under non-cancellable operating leases as of 31 st of December 2001 and 2000 were as follows: Current to 5 years Greater than 5 years , COMMITMENTS AND CONTINGENCIES (CONTINUED) Operating lease commitments-where a Group company is the lessor The future minimum lease payments receivable under non-cancellable operating leases as of 31 st of December 2001and 2000 were as follows: Current 4,328 4,546 2 to 5 years 5,371 6,894 Greater than 5 years - - 9,699 11,440 Lease revenues for the year ended 31 st of December 2001 were approximately 5,780,000 (2000 5,628,000). As at 31 st December 2001 the long term asset related to the royalty agreement has been written off. Legal Proceedings Group companies are parties in various legal actions that are incidental to the conduct of business. The company is not aware of any legal proceedings that can have a material impact on the accounts. Contingent Liabilities Aeromaritime (UK) Limited has given a guarantee in favour of HM Customs and Excise of 98,039 ( 60,000). 14. RELATED PARTY TRANSACTIONS Affiliates (ALL AMOUNTS ARE SHOWN IN EURO THOUSANDS UNLESS OTHERWISE STATED) A subsidiary, Envipco USA, engages in various transactions with affiliates including the payment of royalties. These activities do not have a significant impact on the operations of the Group. EM Geratebau Rucknahmesysteme GmbH & Co KG sources its equipment and supplies from a related party.

17 RELATED PARTY TRANSACTIONS (CONTINUED) Patent sale and Royalty agreements In November 1982, Envipco USA acquired substantially all rights to certain patents for aluminium recycling equipment and processes from the Company's founder. In consideration thereof, he is entitled to receive 7.5% of the annual net profits of the company which are attributable to reverse vending processes arising out of the use of the products incorporating such patents or technical knowledge, and before allowance for or deduction of income taxes, for a period of 20 years, commencing No royalty expense has been due in 2001 and 2000.The company's founder has assigned 45.33% of the royalty to an affiliate of the majority shareholder and 9.33% to another shareholder. Others A former director and executive vice president of Envipco USA, is a director and shareholder of a law firm that serves as general counsel to the US subsidiary. During the year ended 31 st of December 2001 the legal fee of 79,887 ( ,140) was incurred from this law firm. 15. ACQUISITIONS In January 2001 a new holding company Envipco do Brasil Ltda. with majority ownership (51%) was incorporated, to take advantage of the vast potential in the Brazilian market. This Brazilian holding company was used to acquire a 100% ownership in an existing distributor, Red Line Equipamentos Especiais Ltda, to cover the RVM operations, and also to incorporate Envipco Plastics Ltda for the plastic processing operations in Brazil.The Brazilian holding company owns 40.82% of Envipco Plastics Ltda whilst the remaining 59.18% is held directly by Envipco Holding N.V. resulting in an effective 80% ownership.the Brazilian group has a capitalisation of about 2.0m (3.8m Brazilian Reals). On 29 th of October 2001 Envipco Holding N.V. acquired 100% of the business of Metropolitan Mining Company Inc., "MetroMining," by a newly formed wholly-owned (100%) U. S. subsidiary, Envipco Pickup and Processing Services Inc. There was no cash payment made and the consideration for this acquisition is to be settled by the issue of a certain number of "Depository Receipts" of Envipco Holding N.V. upon fulfilment of certain conditions as described in the Asset Purchase Agreement. This company has been involved in the pick up and processing of Used Beverage Containers (UBCs) supplied from Reverse Vending Machines (RVMs) placed in major stores, and manual collection for small and medium sized stores. On 2 nd of January 2001 Posada Holding B.V. through its subsidiary Aeromaritime Mediterranean Corporation purchased all of the issued and outstanding shares of Aeropower Resources Inc. (subsequently renamed Aeromaritime America Inc. or "AAI") for an amount of $2,186, POST BALANCE SHEET EVENTS New Markets In early March 2002 we signed a strategic alliance in the form of a Joint Venture Agreement with Fuji Electric Co. Ltd of Tokyo, Japan. We have joined forces with this Japanese company through a newly formed entity, Fuji Envipco Co. Ltd to allow us to integrate our strengths for the greater benefit of the whole of the Japanese market for innovative recycling systems. The relationship developed as a result of strong interest within the Japanese market for Reverse Vending Machines (RVMs). Envipco US Debt Environmental Products Corporation was in violation of the adjusted tangible net worth, debt to EBITDA and cash ratio covenants as of 31 st of December Also the Company was in violation of the cash ratio covenant under the agreement with Ark as of 28 th of February Until 21 st of March 2002 the company received a waiver of such covenants. 17. SEGMENT INFORMATION GEOGRAPHICAL SEGMENTS Recycling Although the Group's business segments represent two separate lines of business - reverse vending and plastics processing, they operate in several different geographical areas, as follows: The Netherlands is the home country of the parent company, which operates as a holding company. Germany and France are the home countries of EM and Sorepla, respectively, and their main areas of operation are, respectively, the sale of reverse vending machines (primarily for refillable containers), and the processing and sale of plastic products. The United States operates reverse vending systems (primarily for one-way containers). Other regions include the Far East, primarily Japan, and Latin America. Activity in these areas has to date been minimal, and involves the sale of reverse vending machines.

18 32 33 (ALL AMOUNTS ARE SHOWN IN EURO THOUSANDS UNLESS OTHERWISE STATED) 17. SEGMENT INFORMATION (CONTINUED) Helicopter Maintenance The Netherlands is the home country of Posada Holding B.V. that holds the three subsidiaries operating in this Sector. Worldwide market is covered from the three bases in the USA, UK and Malta. Recycling Year ended December 31 Revenue Assets Revenue Assets The Netherlands - 1, France 7,857 9,972 4,839 5,694 Germany including Austria ,520 2,225 United States 25,747 22,502 27,784 30,425 Brazil 324 2, Other Countries , ,729 37,036 36,705 39,873 Helicopter Maintenance The Netherlands - 1,083-1,128 Malta 3 3, ,317 United Kingdom 3,606 3,524 4,129 4,137 United States 16,358 8,558 7,222 2,785 Other Countries 5,759-6,326-25,726 16,960 17,684 12,367 Total 60,455 53,996 54,389 52,240 Sales revenue as depicted above is based on the country in which the customer is located. The total assets are shown by the geographical area in which the assets are located. 17. SEGMENT INFORMATION (CONTINUED) Recycling Year ended December 31 Sales of goods 10,885 6,445 Service revenue 17,902 18,283 Plastics 162 6,349 Leasing fees 5,780 5,628 34,729 36,705 Helicopter Maintenance (ALL AMOUNTS ARE SHOWN IN EURO THOUSANDS UNLESS OTHERWISE STATED) Sale of parts 9,052 8,730 Engine overhaul and maintenance 16,674 8,954 25,726 17,684 Total 60,455 54,389

19 34 COMPANY BALANCE SHEET after appropriation of net loss 35 (ALL AMOUNTS ARE SHOWN IN EURO THOUSANDS UNLESS OTHERWISE STATED) 18. STAFF COSTS Wages and Salaries 11,633 11,506 Social Security Costs 2,577 2,873 Pension Costs ,293 14,468 The directors' remuneration aggregating 407,065 ( ,289) was paid during the year. Average Number of Employees The average number of employees during the year 2001 on a full-time equivalent basis was 314. The breakdown by country is as follows: France Germany 13 8 Malta United Kingdom United States Recycling United States Helicopter Maintenance EXTRAORDINARY ITEM The extraordinary item in the year 2000 of 985,000 relates to the restructuring charge for Environmental Products Corporation, USA. (ALL AMOUNTS IN EURO THOUSANDS) Notes 31 December December 2000 ASSETS Financial fixed assets 3 Group companies 15,703 9,878 Loans to group companies 6,859 11,472 Current assets Receivables, net of allowances for doubtful debts Cash and cash equivalents , Total assets 23,698 22,181 EQUITY AND LIABILITIES Capital and reserves 4 Ordinary shares Share premium 25,170 25,305 Translation reserve 3,412 2,278 Accumulated loss (18,511) (13,144) 10,179 14,547 Long term loans 10,936 5,953 Current liabilities Payables and accruals 2,583 1,681 2,583 1,681 Total equity and liabilities 23,698 22,181 COMPANY INCOME STATEMENT after appropriation of net loss (ALL AMOUNTS IN EURO THOUSANDS) 31 December December 2000 Net loss from participating interests (4,588) (578) Other income and expenses (779) 174 Net loss for the period (5,367) (404)

20 36 NOTES TO THE COMPANY BALANCE SHEET NOTES TO THE COMPANY BALANCE SHEET ACCOUNTING POLICIES For the accounting policies applied reference is made to the notes to the consolidated financial statements. Group companies are carried at their net asset value. 2. GENERAL Only those items that are not disclosed in the consolidated balance sheet are explained below. The income statement has been included in abridged form, since the group financial statements are included in the company financial statements (in accordance with Section 402,Title 9, Book 2, of the Netherlands Civil Code). 3. FINANCIAL FIXED ASSETS Group companies This item relates to majority-owned subsidiaries as referred to in the notes to the consolidated financial statements. Movements in this item during the years-ended 31 st of December 2001 and 2000 were as follows: ALL AMOUNTS IN EURO THOUSANDS Opening Balance 9,878 16,725 Acquisitions 1, Exchange differences 1, Dividends (1,446) (6,447) Investments 9,468 - Treasury stock (157) - Other movements (260) (225) Loss of group companies (4,587) (578) Goodwill written off - (246) Balance at 31 st of December 15,703 9,878 Loan to group companies These are long-term subordinated loans to the subsidiary companies. 4. CAPITAL AND RESERVES Share capital and reserves At 31 st of December 2001 the company has an authorised share capital of NLG 469,886, divided into; 21,500,000 Class A shares each with a nominal value of NLG ,500,000 Class B shares each with a nominal value of NLG ,000,000 of which all the 18,488,622, Class A shares and 5,319,189 of Class B shares have been issued and fully paid. Changes in shareholders' equity for the year ended 31 st of December 2001 were as follows: ALL AMOUNTS IN EURO THOUSANDS Share capital Share Translation Accumulated Total A Shares B Shares premium reserve Deficit equity Opening Balance ,305 2,278 (13,144) 14,547 Net loss for the period (5,367) (5,367) Translation differences ,134-1,134 Other movements - - (135) - - (135) Balance at 31 December ,170 3,412 (18,511) 10,179 On 26 th of June 1998 Stichting Administraiekantoor Envipco Holding N.V., ("the Trust Office"), with its registered address at 548 Herengracht, Postbus 990, NL 1000 AZ Amsterdam, issued bearer Depository Receipts in exchange for Class A shares in Envipco Holding N.V. 5,000,000 Depository Receipts in representation of an equal number of Class B Shares were issued at NLG 10 (BEF 185) each under an Initial Public Offering on 29 th of June In July 1998 the capital was increased by issue of another 319,189 Class B Shares at NLG 10 (BEF 185) each.