Linamar Hungary Rt

LINAMAR HUNGARY RT.

INTERIM REPORT FOR THE FIRST SIX MONTHS ENDED JUNE 30, 2005

LINAMAR HUNGARY RT. Orosháza, 5901 Csorvási út 27.

To the Shareholders LINAMAR HUNGARY RT.

Sales for the six months ended June 30, 2005 were HUF 11,983 million. This is a HUF 1,704 million increase compared to sales of HUF 10,279 million for the same period of the previous year. The sales increase of 16.6% is comprised of increases of HUF 1,392 million in the agricultural equipment and general machinery segment and HUF 311 million in the automotive component and precision machining segment.

The operating earnings for the six months ended June 30, 2005 were HUF 753 million, a significant increase of 135.5% compared to the operating earnings of 320 million a year earlier. The Company’s operations were profitable in both segments; the 20.5% increase in gross profit exceeded the 16.6% increase in sales. Also, due to the successful collection of overdue receivables, the release of the related provision meant further improvement in earnings.

The net earnings for the first six months of 2005 were HUF 667 million compared to HUF 413 million for the same period of the previous year, an increase of 61.5%. The increase is mainly related to the improvement in operating earnings.

The management of LINAMAR HUNGARY RT. has ensured that all of the data and information that is necessary to properly evaluate the Company’s position has been included in this interim report and that all of the data and information is true and factual.

János Ivanics György Furár General Manager Chief Financial Officer

LINAMAR HUNGARY RT. Notes to the Financial Statements For the first six months ended June 30, 2005 and 2004 (NON AUDITED)

1. Management prepared these financial statements in accordance with generally accepted accounting principles using the historical cost basis of accounting and approximations and estimates based on professional judgement. These interim financial statements contain all adjustments that management believes are necessary for a fair presentation of the Company's financial position, results of operations and changes in cash flows.

2. The accounting policies used in preparing these interim financial statements are consistent with those used in preparing the annual financial statements. These statements should be used in conjunction with the Company's most recent annual financial statements.

3. The share capital of the Company as at June 30, 2005 was 8,580,000 units (June 30, 2004 8,580,000).

4. Segmented Sales Information

Six Months Ended June 30 2005 2004

Export Sales Automotive Components and Precision Machining Europe – EU Member Countries 5,466,829 5,340,409 North America 640,715 825,681 Europe – non EU Member Countries 37,292 4,264 Other Export 385,340 216,435 Total Automotive Components and Precision Machining Export Sales 6,530,176 6,386,789

Agricultural Equipment and General Machinery Segment Europe – EU Member Countries 1,873,372 1,670,766 North America 1,807,346 825,280 Europe – non EU Member Countries 121,691 120,314 Other Export - - Total Agricultural Equipment and General Machinery Segment Export Sales 3,802,409 2,616,360 Total Export Sales 10,332,585 9,003,149

Domestic Sales Automotive Components and Precision Machining 1,342,751 1,174,989 Agricultural Equipment and General Machinery Segment 307,578 101,354 Total Domestic Sales 1,650,329 1,276,343 Total Sales 11,982,914 10,279,492

MANAGEMENT'S ANALYSIS AND OTHER REQUIRED DISCLOSURE

Explanation of the main changes in the balance sheet

The tangible fixed assets have decreased by HUF 1,345 million from June 30, 2004, resulted from the depreciation exceeding the capital investment in automotive and precision machining programs.

Trade accounts receivable increased by 15.1%, which is less than the 16.6% sales increase, to HUF 4,974 million compared to the correspondent period of 2004. The HUF 652 million increase mainly relates to the agricultural segment where the Company experienced favourable sales growth.

The Company continues to operate with minimal cash balances as any excess amounts are used to reduce bank debt. Cash, bank balances and short-term deposits increased by 58.1%, from HUF 234 million to HUF 370 million.

The level of inventories was 3.1% lower at June 30, 2005 compared to the previous year. Inventories decreased from HUF 4,112 million to HUF 3,986 million. The HUF 126 million decrease is the net of the HUF 503 million increase in agricultural equipment and general machinery segment and the HUF 629 million decrease in automotive component and precision machining segment. The increase in agricultural inventories relates to the higher volume of orders.

The total amount of loans decreased from HUF 6,636 million as of June 30, 2004, to HUF 5,305 million. The lower level of investments and the higher profit had favourable effect on the Company’s indebtedness. The Company’s short-term bank loans decreased by 14.5% from HUF 2,820 million to HUF 2,410 million compared to the same period of the last year. The current portion of long-term debt decreased from HUF 1,770 million to HUF 795 million over last year. Of the HUF 1,770 million repayable amount, HUF 1,087 million related to the loan for operating funds, HUF 633 million related to the investment and HUF 50 million related to the government supported interest free loans, while HUF 795 million related to a loan for operating funds in 2005. The Company plans to manage its 2005 financing requirements with a combination of long-term and short-term loans. The Company's banks continue to express their support.

The Company's long-term debt increased from HUF 2,046 million to HUF 2,100 million.

Accounts payable decreased from HUF 3,008 million to HUF 2,999 million.

Explanation of the main changes in the statement of earnings

Sales

LINAMAR HUNGARY RT.’s sales increased by 16.6% to HUF 11,983 million in the first six months of 2005 compared to sales of HUF 10,279 million in the first six months of 2004. Changes by business segment, as discussed below, can be seen under item 4 of the Notes to the Financial Statements.

Automotive component and precision machining sales increased by HUF 311 million to HUF 7,873 million comparing to the same period of 2004, while agricultural and general machinery sales increased by HUF 1,392 million, or 51.2%.

Sales are segmented as follows: 65.7% automotive component and precision machining and 34.3% agricultural equipment.

The automotive component and precision machining export sales increased by HUF 143 million or 2.2%, mainly as a result of the increasing proportion of common rail systems parts and components and the higher level of sales related to a project for transmission components.

Domestic automotive component and precision machining sales were HUF 1,343 million, which is a 14.3% increase compared to the previous year due to the increased volume of common rail components sold.

Agricultural export sales increased by HUF 1,186 million or by 45.3%, to HUF 3,802 million compared to the first six months of last year. Sales growth to EU-member countries was mainly driven by the sales of snapping units to a combine manufacturer in Poland while the North American growth related to the higher sales of track modules, elevator platforms and corn heads.

Domestic agricultural sales increased by 203,5% to HUF 308 million compared to the same period of last year due primarily to the higher corn head sales.

Cost of sales

LINAMAR HUNGARY RT.’s cost of sales decreased from 88.1% of sales to 87.7%. Improvement occurred in the agricultural and general machinery segment where the cost of sales decreased due to the higher volumes and the favourable change in product mix.

Exchange gain (loss)

The Company experienced an exchange gain of HUF 66 million in the first six months of 2005, compared to an exchange gain of HUF 146 million in the same period of 2004. Last year the exchange gain was mainly related to the Euro denominated loans of the Company as a result of the continuous strengthening of the Forint, while in the first six months of 2005 the HUF rate stagnated compared to the year end rate.

Selling, general and administrative costs

In the first six months of 2005 selling, general and administrative costs amounted to HUF 902 million or 7.5% of sales, compared to HUF 810 million or 7.9% of sales for the same period of 2004. The favourable change in SG&A costs mainly relates to the decrease in general and administrative costs as a percent of sales.

Other income/expense

Other income in the first six months of 2005 was HUF 179 million compared to the HUF 117 million expense of the previous year. Other income/expense includes the exchange differences related to the revaluation of accounts receivables and accounts payables in the amount of HUF 86 million gain in the first six months of 2005 (2004: HUF 39 million loss) and it also includes the amounts related to the reversal of provisions. The reversal of provisions amounted to HUF 217 million in 2005 (2004: HUF 30 million), which improved the earnings by HUF 58 million. At the end of the year provision was made for overdue receivables and potential contractual losses regarding a customer and inventories. Due to the successful collection of receivables and customer negotiations, these provisions were partially released.

Operating earnings

Operating earnings increased from the last year’s HUF 320 million to HUF 753 million. Operating earnings as a percent of sales increased from 3.1% to 6.3%. The increase in gross profit had the most significant impact upon operating earnings.

Net earnings

The Company’s net earnings for the six months ended June 30, 2005 were HUF 667 million or 5.6% of sales, an increase of 61.5% compared to the HUF 413 million, or 4.0% of sales, in the same period of 2004. The increase in operating earnings and the change in exchange gain related to loans (2004: HUF 185 million exchange gain, 2005: HUF 20 million exchange loss) had the most significant impact upon net earnings.

Explanation of the main changes in the cash flow statement

In the first six months of 2005, the purchases of fixed assets amounted to HUF 408 million. The cash payments during the first six months related to purchases of fixed assets totalled HUF 356 million. These investments mainly related to the automotive components and precision machining business segment.

Information on shares

The Company does not currently hold any of its own shares and has not held any in the past.

The Company, fulfilling its obligations by law, started the dematerialization procedure for its shares. The dematerialization of the shares of Linamar Hungary Rt. was done on December 1, 2004. During the procedure altogether 885 share certificates were not submitted. There was a possibility for the owners of the non-submitted shares to give these printed shares to Linamar Hungary Rt. In this case the Company transferred the dematerialized shares to the owner’s account.

As per the decision of the Board of Directors the sale of the 152 pieces dematerialized shares, which substitute the nullified, non submitted shares for dematerialization was done on May 13, 2005. The proceeds from the sale of shares can be taken at the Corporate Office of the Company (Orosháza, 5900, Csorvási út 27.) on working days from 8.00 am. to 2.00 pm. On June 14, 2005 the printed share certificates were demutualited.

Commitments

As at June 30, 2005, the Company has outstanding commitments for fixed assets under purchase orders and contracts of approximately HUF 35 million.

Major events

The Company held its Annual General Meeting on April 14, 2005.

Other information

Organizational structure

In the first six months of the year, there were no changes in the Company’s organizational structure.

Senior officers

There were no changes in the Board composition during the first six months of 2005.

Senior management

There were no changes in the senior management composition during the first six months of 2005.

Share Option Program

There are no outstanding share options under the share option program of the Company.

Company name: Linamar Hungary Autóipari és Gépgyártó Részvénytársaság Telephone: 68-411-203 Company address: 5900 Orosháza Csorvási út 27. Fax: 68-412-988 Sector: 34.30 E-mail address: [email protected] Reporting period: 01.01.2005 – 06.30.2005 Investor relations manager: György Furár

PK1. General information about financial data

Yes No Audited X Consolidated X

Accounting principles Hungarian IFRS X Other

PK2. Consolidated companies

Name Equity/Registered Interest held Voting right1 Classification 2 Capital (%) - - - - - 1 Voting rights for decision making at the consolidated company’s General Meeting 2 Full (L); Jointly Managed (K); Associated (T)

PK3. Balance Sheet (expressed in thousands of Hungarian Forints) Six Months Ended Change June 30 % 2005 2004 ASSETS Non-Current Assets Property, plant and equipment 9,816,401 11,178,723 (12.2) Intangible assets 75,497 58,069 30.0 9,891,898 11,236,792 (12.0) Current Assets Inventories 3,986,015 4,112,441 (3.1) Trade receivables 4,973,535 4,321,872 15.1 Due from related parties 612,473 479,412 27.8 Recoverable value added tax 203,722 650,010 (68.7) Other current assets 451,620 70,949 536.5 Cash and cash equivalents 369,690 233,798 58.1 10,597,055 9,868,482 7.4

Total Assets 20,488,953 21,105,274 (2.9)

SHAREHOLDERS’ EQUITY Share capital 858,000 858,000 - Capital reserve 5,026,774 5,026,774 - Accumulated profit 6,088,495 5,293,002 15.0 11,973,269 11,177,776 7.1 LIABILITIES Non-Current Liabilities Long-term bank borrowings 2,099,835 2,045,924 2.6 Deferred government grants 138,428 150,790 (8.2) 2,238,263 2,196,714 1.9

Current Liabilities Short-term bank borrowings 2,410,403 2,820,197 (14.5) Current portion of long-term bank borrowings 794,876 1,769,574 (55.1) Trade payables 1,966,127 2,244,437 (12.4) Due to related parties 42,863 92,058 (53.4) Other current liabilities 990,255 671,818 47.4 Provisions 72,897 132,700 (45.1) 6,277,421 7,730,784 (18.8)

Total Liabilities 8,515,684 9,927,498 (14.2)

Total Equity and Liabilities 20,488,953 21,105,274 (2.9)

Statement of Changes in Shareholders’ Equity for the six months ended June 30, 2004 and 2005 (Expressed in Thousands of Hungarian Forints)

Capital Accumulated Share Capital Total Reserves Reserve Profit

Balance as at 31/12/2003 801,600 4,500,562 4,879,797 10,181,959 Capital Increase 56,400 526,212 - 582,612 Result for the period - - 413,205 413,205 Balance as at 30/06/2004 858,000 5,026,774 5,293,002 11,177,776

Capital Accumulated Share Capital Total Reserves Reserve Profit

Balance as at 31/12/2004 858,000 5,026,774 5,421,288 11,306,062 Capital Increase - - - - Result for the period - - 667,207 667,207 Balance as at 30/06/2005 858,000 5,026,774 6,088,495 11,973,269

PK4. Profit and Loss Statement (expressed in thousands of Hungarian Forints except per share figures)

Six Months Ended Change Three Months Ended June 30 % June 30 2005 2004 2005 2004

Sales 11,982,914 10,279,492 16.6 6,691,358 5,503,456 Cost of Sales 10,505,942 9,054,273 16.0 5,727,361 4,701,924 Gross Profit 1,476,972 1,225,219 20.5 963,997 801,532

Selling expenses 390,293 359,758 8.5 216,776 176,665 General expenses 256,812 193,551 32.7 121,209 111,701 Administrative expenses 255,243 257,139 (0.7) 116,469 131,876 Other operating income/expenses (178,612) 116,696 (253.1) 2,064 17,637 Government grants - (21,750) (100.0) - (10,875) Profit from Operations 753,236 319,825 135.5 507,479 374,528

Exchange (loss) / gain from financial operations - net (19,988) 185,293 (110.8) (6,307) (77,344) Interest expense – net (66,041) (91,913) (28.1) (33,800) (47,797) Profit before Tax 667,207 413,205 61.5 467,372 249,387

Income taxes - - - - -

Net Income 667,207 413,205 61.5 467,372 249,387

Earnings per Share Basic HUF 78 HUF 49 HUF 54 HUF 29

PK5. Cash-Flow Report (expressed in thousands of Hungarian Forints) Six Months Ended June 30 2005 2004

Net Income 667,207 413,205

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,026,805 932,373 Impairment – net (179,034) - Provision for warranty and other obligations (decrease) (37,727) (37,664) Net (gain)/loss on sale of property, plant and equipment 2,826 (5,730)

Changes in operating assets and liabilities: (Increase)/decrease in inventories 284,363 (779,021) Increase in accounts receivable (1,918,996) (1,046,739) Increase in due from related parties (306,415) (182,239) Decrease in tax receivable 293,944 255,155 (Increase)/decrease in other current assets (108,149) 62,408 Decrease in accounts payable (1,315,908) (426,368) Decrease in due to related parties (97,590) (179) Increase in other current liabilities 222,106 32,095 Net cash provided by/(used in) operating activities (1,466,568) (782,704)

Cash-flows from investing activities Purchase of property, plant and equipment and intangibles (356,801) (720,379) Proceeds on sales of property, plant and equipment 3,050 76,546 Net cash used in investing activities (353,751) (643,833)

Cash-flows from financing activities Proceeds from issue of shares - 582,612 Repayments of long-term debt-interest free loan (15,800) (34,070) Proceeds from new long-term loans 52,340 1,118,468 Proceeds from other short-term loans 1,140,433 1,874,737 Repayment of other short-term loans - (2,722,059) Net cash provided from financing activities 1,176,973 819,688

Net decrease in cash and cash equivalents (643,346) (606,849) Cash and cash equivalents at the beginning of the period 1,013,036 840,647 Cash and cash equivalents at the end of the period 369,690 233,798

PK6. Significant off-balance sheet items 1

Description (HUF million) Value Welding robot 35

1 Any financial liabilities of material importance in respect of financial evaluation not reflected in the balance sheet (e.g. surety, guarantees given, liabilities under lien, etc.)

RS1. Ownership structure, Ratio of Holdings

Description of owner Total equity Opening Closing at 1st January % Qty % Qty Domestic institution/company 17.25 1,479,897 17.25 1,479,897 Foreign institution/company 64.23 5,510,810 64.23 5,510,810 Domestic individual 10.03 860,729 10.08 864,655 Foreign individual 0.06 5,420 0.02 1,494 Employees, senior officers 8.43 723,144 8.43 723,144 Treasury shares 0 0 0 0 Government held owner 0 0 0 0 International Development 0 0 0 0 Institutions Other 0 00 0 TOTAL 100.00 8,580,000100.00 8,580,000

Notes:

1. All of Linamar Hungary Rt.'s shares are listed on the Budapest Stock Exchange. 2. Each shares entitles the shareholder to one vote.

RS2. Volume (qty) of treasury shares held in the year under review

1 January 31 March 30 June 30 September 31 December Company - - - - - Subsidiaries - - - - - TOTAL - - - - -

RS3/1. List and description of shareholders with more than 5% (at the end of the period) in reference to listed series

Name Nationality 1 Activity 2 Quantity Interest (%) Remarks Linamar K C 5,030,800 58.63 strategic Corporation investor

Each share entitles the shareholder to one vote.

Linamar Corporation’s head quarters are located in Guelph, Ontario, Canada, along with a significant percentage of the Company’s manufacturing capacity. Linamar Corporation is a global manufacturer of precision machined components, assemblies and castings primarily for automotive industry.

1 Domestic (B), Foreign (K) 2 Custodian (L), Government (Á), International Development Institute (F), Institutional (I), Corporate (C), Individual (M), Employee, Senior Officer (D)

RS3/2. List and description of shareholders with more than 5% (at the end of the period) in reference to the total share capital

The listed series corresponds to the total share capital, information can be found on the RS3/1 table.

TSZ2/1. Changes in the headcount (number of persons) employed by the

End of reference period Current period opening Current period closing Company 1,606 1,629 1,661 Group n.a. n.a. n.a.

TSZ3. Senior officers, strategic employees

Type 1 Name Position Beginning of End/ No. of shares assignment termination held of assignment

IT Frank J. Hasenfratz Chairman of the Board 04.15.1999 05.31.2008 315,000 IT Linda Hasenfratz Director 04.15.1999 05.31.2008 97,000 IT Tibor Antalpéter Independent Director 04.15.1999 05.31.2008 - IT Márton Havasi Director 04.15.1999 05.31.2008 58,944 IT Csaba Havasi Director 04.15.1999 05.31.2008 - IT János Ivanics General Manager, 01.16.1992 05.31.2008 250,200 Member of the Board FB Keith Wettlaufer Chairman of the 09.17.2004 05.31.2008 - Supervisory Board FB Rezső Bándy Dr. Member 04.15.1999 05.31.2008 - FB Sándor Csontos Member 04.15.1999 05.31.2008 - SP György Furár Chief Financial 06.30.1997 UNDEFINED 2,000 Officer SP Zoltán Laskai Human Resources 03.06.2002 UNDEFINED - Manager Own share property (pcs) TOTAL: 723,144

1 Employee in strategic position (SP), Board Member (IT), Supervisory Board Member (FB)

ST1. Extraordinary reports published in the period under review

Date Place of Subject matter, brief summary publication 01.04.2005 Magyar Tőkepiac Disclosure of change in share ownership of a person having special relationship with Linamar Hungary Rt.

01.07.2005 Magyar Tőkepiac Announcement about Linamar Hungary Rt. and OPEL Hungary Powertrain Ltd. came to an agreement in regards of the terminated CVT Project. 02.11.2005 Magyar Tőkepiac Interim Report for the quarter ended December 31, 2004.

02.18.2005 Magyar Tőkepiac Notice of the Annual General Meeting.

03.04.2005 Magyar Tőkepiac Announcement about the sales of the dematerialized shares, which substitute the nullified, non submitted share certificates for dematerialization. 04.18.2005 Magyar Tőkepiac Resolutions of the Annual General Meeting.

04.29.2005 Magyar Tőkepiac Announcement about the completion of the Annual Report for 2004.

04.29.2005 Magyar Tőkepiac Annual Report for the year ended December 31, 2004.

05.03.2005 Magyar Tőkepiac Declaration in connection with the Corporate Governance Recommendations published by the Budapest Stock Exchange Company Limited by Shares regarding corporate governance practices. 05.13.2005 Magyar Tőkepiac Interim Report for the I. quarter ended March 31, 2005

06.01.2005 Magyar Tőkepiac Announcement about the sale of the dematerialized Linamar Hungary Rt. shares replacing the non presented printed share certificates. 06.13.2005 Magyar Tőkepiac Announcement about the expected earnings in 2005.