Barconet N.V. (New) Barco N.V

DEMERGER OF BARCO N.V. INTO

BARCONET N.V. (NEW) BARCO N.V.

ADMISSION TO LISTING OF ALL SHARES AND VVPR STRIPS OF BARCONET N.V. AND (NEW) BARCO N.V. ON THE FIRST MARKET OF EURONEXT BRUSSELS

On September 1, 2000, the Board of Directors of Barco N.V. ("Barco"), a Belgian public limited liability company, with registered office in Poperinge, Belgium, decided to propose to the shareholders of Barco to demerge the company into two new Belgian public limited liability companies, namely:

· BarcoNet N.V. ("BarcoNet"), which will carry out the existing "Barco Communication Systems" activity of Barco and its subsidiaries ("Barco Group"), and

· (new) Barco N.V. ("New Barco"), which will carry out the remaining business activities of Barco Group, and which will carry on the name "Barco".

The demerger proposal will be submitted to an extraordinary shareholders' meeting of Barco to be held on October 20, 2000 or, if the required quorum shall not have been obtained for this meeting, to a subsequent extraordinary shareholders' meeting to be held on November 9, 2000. The demerger of Barco will be effective (the "Closing of the Demerger") upon approval of the demerger proposal and the incorporation of BarcoNet and New Barco by the shareholders of Barco representing at least 75 % of the votes validly cast at the aforementioned shareholders' meeting. Upon Closing of the Demerger, Barco will cease to exist. The demerger of Barco will for tax and accounting purposes, however, have retroactive effect as of July 1, 2000.

Upon Closing of the Demerger, all the 12,410,479 outstanding shares of Barco will need to be exchanged into 24,820,958 new shares of BarcoNet and 12,410,479 new shares of New Barco. As a result, each holder of shares of Barco will receive two new shares of BarcoNet and one new share of New Barco per share of Barco.

On the date of this prospectus, Barco's shares include 1,894,512 shares that can benefit from a reduced withholding tax rate ("verminderde voorheffing" / "précompte réduit" or "VVPR") on dividends of 15 % instead of 25 %. The tax advantage resulting from the VVPR status has been incorporated in VVPR strips that are listed separately on the First Market of Euronext Brussels. Barco is of the opinion that there are reasonable arguments to defend that the shares of Barco that can benefit from the reduced 15 % withholding tax, will not lose their VVPR status pursuant to the demerger of Barco. Upon Closing of the Demerger, therefore, all 1,894,512 VVPR strips of Barco will need to be exchanged into 3,789,024 VVPR strips of BarcoNet and 1,894,512 VVPR strips of New Barco. As a result, each holder of VVPR strips of Barco will receive two VVPR strips of BarcoNet and one VVPR strip of New Barco per VVPR strip of Barco.

The shares and VVPR strips of Barco are currently traded on the First Market of Euronext Brussels under the symbol "BAR". Application has been made for the admission to listing of all of the shares and VPPR strips, including the shares and VVPR strips that will be issued upon exercise of warrants, options and convertible bonds, of BarcoNet and New Barco on the First Market of Euronext Brussels. The shares of BarcoNet and New Barco (together the "Shares") are expected to be admitted to listing on the First Market of Euronext Brussels under the symbols "BARN" and "BAR" respectively. The VVPR strips of BarcoNet and New Barco (together the "VVPR Strips") will be listed separately on the First Market of Euronext Brussels upon admission to listing of the Shares.

Subject to approval by the Market Authority of Euronext Brussels, it is expected that on or about the first banking day following the Closing of the Demerger, the Shares, respectively VVPR Strips, will be listed jointly as a single unit under the symbol "BAR" of Barco, whereby each unit will represent two new shares, respectively two new VVPR strips of BarcoNet and one new share, respectively one new VVPR strip, of New Barco. Separate listing and trading of the shares, respectively VVPR strips, of BarcoNet and New Barco is expected to commence on or about the second banking day following the Closing of the Demerger. Prior to the listing of the Shares and VVPR Strips on the First Market of Euronext Brussels, there will be no public market for the Shares and VVPR Strips. ______

This document is issued solely in connection with the admission to listing of the Shares and VVPR Strips on the First Market of Euronext Brussels upon Closing of the Demerger. It does not constitute, nor does it form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or any other securities of Barco, BarcoNet or New Barco or any options thereon or rights therein, nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with, or act as any inducement to enter into, any contract therefor. ______

The listing of, and the trading and/or investing in, the Shares and VVPR Strips involve risks that are described in the "Risk Factors" section beginning on page 19 of this prospectus. ______

Organized by the Joint Global Coordinators:

Petercam Robertson Stephens International

With the Cooperating Banks:

Bank Degroof Bank Brussels Lambert Fortis Bank KBC Bank / CBC Banque

On October 6, 2000, the Belgian Banking and Finance Commission for ("Commissie voor het Bank- en Financiewezen" / "Commission Bancaire et Financière" or "CBF") approved this prospectus in respect of the admission to listing of the Shares and VVPR Strips on the First Market of Euronext Brussels, by virtue of article 29ter §1 of the Belgian Royal Decree No. 185 of July 9, 1935, as amended. The approval of this prospectus does not imply any judgment by the Belgian Banking and Finance Commission on the merits or the quality of the transaction, and neither does it render any judgment on the position of the persons realizing the transaction. The notice prescribed by article 29 §1 of the aforementioned Royal Decree has been published in the Belgian press. The admission to listing of the Shares and VVPR Strips on the First Market of Euronext Brussels and this prospectus have not otherwise been notified, or submitted for approval, to any supervisory authority outside Belgium. This prospectus may therefore not be distributed to the public outside Belgium and no steps may be taken that would constitute, or result in, a public offering of the Shares and VVPR Strips outside Belgium.

Date of this prospectus: October 6, 2000 LEGENDS AND DISCLAIMERS

Disclaimers

No dealer, salesperson or other person has been authorized to give any information or to make any representation not contained in this prospectus and, if given or made, such information or representation must not be relied upon as having been authorized in any way whatsoever.

Statements herein are made as of the date hereof. Without prejudice to applicable laws requiring supplements to this prospectus under certain circumstances, neither the delivery, nor the subsequent admission to listing of the Shares and VVPR Strips on the First Market of Euronext Brussels, shall under any circumstance create an implication that there has been no change in the affairs of Barco, BarcoNet or New Barco since the date hereof or that the material information contained herein is correct as of any time subsequent to the date thereof.

Restrictions

The distribution of this prospectus and the offer or sale of the Shares and VVPR Strips subsequent to the admission to listing on the First Market of Euronext Brussels, if any, may be restricted by law in certain jurisdictions. Neither Barco, BarcoNet and New Barco, nor the Joint Global Coordinators represent that this prospectus may be lawfully distributed, or that the Shares and VVPR Strips may be lawfully offered, in compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to any exemption available thereunder, or assume any responsibility for facilitating such distribution or offering. Accordingly, the Shares and VVPR Strips may not be offered or sold, directly or indirectly, and neither this prospectus nor any advertisement or other material may be distributed or published, in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the Shares and VVPR Strips to any person in any jurisdiction in which it is unlawful to make such offer or solicitation to such person. Persons in whose possession this prospectus or any Shares and VVPR Strips come, must inform themselves about, and observe, any such restrictions.

This prospectus may not be supplied to the public in any jurisdiction outside Belgium in which any registration, qualification or other requirements exist or would exist in respect of the admission to listing of the Shares and VVPR Strips on the First Market of Euronext Brussels or any (public) offering of the Shares and VVPR Strips and, in particular, may not be distributed to the public in the United States, Canada, Japan and the United Kingdom. Any failure to comply with these restrictions may constitute a violation of U.S., Canadian, Japanese or U.K. securities laws or the securities regulations of other jurisdictions.

The admission to listing of the Shares and VVPR Strips on the First Market of Euronext Brussels occurs outside the United States in reliance on Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act"). The Shares and VVPR Strips will not be registered under the Securities Act, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

This prospectus may not be issued or passed on in the United Kingdom to any person other than to a person who is of a kind described in Article 11(3) of the United Kingdom Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) or who is a person to whom this prospectus may otherwise be lawfully issued or passed on.

This prospectus may only be passed on in Canada or any of its provinces or in Japan or any of its territories to persons to whom the prospectus may lawfully be passed on in accordance with statutory exemptions in each relevant jurisdiction in Canada or Japan or pursuant to a discretionary exemption granted by the relevant Canadian and/or its provinces' or Japanese and/or its territories' securities regulatory authority.

2 Language of the Prospectus

Pursuant to Belgian law, Barco is required to prepare this prospectus in Dutch. The Dutch version is the only version having evidential value in Belgium in connection with the admission of the Shares and VVPR Strips to listing on the First Market of Euronext Brussels. An English and summary French translation of the Dutch version of the prospectus has also been made. Barco has verified and is responsible for, and upon Closing of the Demerger BarcoNet and New Barco will be responsible for, the conformity of the English and summary French translation of the Dutch version of the prospectus.

Availability of the Prospectus

The Dutch version and the English and the summary French translation of the prospectus will be made available to the public at no costs with the Joint Global Coordinators and the Cooperating Banks.

An electronic version of this prospectus is also available, for information purposes only, via the Internet on the Web-sites of Barco (address: www.barco.com), BarcoNet (address: www.barconet.com) and Petercam N.V. (address: www.petercam.be). Only the printed prospectus, published in Belgium in accordance with the applicable rules and legislation, is legally valid and Barco, and upon Closing of the Demerger, BarcoNet and New Barco, will take no responsibility for the accuracy or correctness of the prospectus available via the Internet. Information contained on Barco and BarcoNet's Internet Web-site or any other Web-site, does not form part of this prospectus.

Need to Consult a Professional Advisor

The public, including possible investors, if any, must rely on their own examination of Barco, BarcoNet and New Barco, and the admission to listing of the Shares and VVPR Strips on the First Market of Euronext Brussels, including the merits and risks involved.

Any summary or description set forth in this prospectus of legal provisions, corporate structurings or contractual relationships is for information purposes only and should not be construed as legal or tax advice as to the interpretation or enforceability of such provisions or relationships.

In case of any doubt about the contents or the meaning of the information contained in this document, one should consult an authorized or professional person who specializes in advising on the acquisition of financial instruments.

The Shares and VVPR Strips have not been recommended by any federal or state securities commission or regulatory authority in Belgium or elsewhere.

Forward-Looking Statements

This prospectus contains forward-looking statements, including without limitation, statements containing the words "believes", "plans", "anticipates", "expects" and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, financial condition, performance or achievements of BarcoNet and New Barco, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such a difference, include, but are not limited to, those discussed in the Section "Risk Factors". Given these uncertainties, the public is cautioned not to place any undue reliance on such forward- looking statements. Without prejudice to applicable laws requiring supplements to this prospectus under certain circumstances, Barco, BarcoNet and New Barco disclaim any obligation to update any such forward-looking statements in this prospectus to reflect future events or developments.

3 Enforcement of Liabilities and Service of Process by Persons not Resident in Belgium

Barco is, and upon Closing of the Demerger, BarcoNet and New Barco will be, incorporated under the laws of Belgium. Several of Barco's directors and executives are, and upon Closing of the Demerger BarcoNet and New Barco's directors and executives will be, residents of Belgium, and a substantial portion of the assets of Barco, and upon Closing of the Demerger BarcoNet and New Barco, and such persons will be located in Belgium. As a result, it may not be possible to effect service of process outside Belgium upon Barco, and upon Closing of the Demerger BarcoNet and New Barco, or such persons, or to enforce judgments against them based upon the securities or other laws of jurisdictions other than Belgium. Moreover, under Belgian law there may exist certain restrictions on the enforceability in Belgium in original actions, or in actions of enforcement of judgments rendered against BarcoNet, New Barco or such persons in a court outside a jurisdiction that is a party to the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, as amended. Actions for enforcement of such judgments may be successful only if the Belgian court confirms the substantive correctness of the judgment of such court, and is satisfied:

· that the judgment is not contrary to the principles of public policy in Belgium or rules of Belgian public law;

· that the judgment did not violate the rights of the defendant;

· that the judgment is final under applicable law;

· that the court did not accept its jurisdiction solely on the basis of the nationality of the plaintiff; and

· as to the authenticity of the text of the judgment submitted to it.

A judgment rendered in the courts of parties to the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, as amended, will be enforceable by the courts of Belgium without re-examination of the merits of the case provided such judgment is final and otherwise satisfies all of the conditions provided for in this Convention. If proceedings have been brought in one country, however, new proceedings in another country may be barred.

The Brussels Stock Exchange and Euronext

Application has been made for the admission to listing of the Shares and VVPR Strips on the First Market of Euronext Brussels, formerly known as the "Brussels Exchanges" or "BXS", which in view of the recent creation of Euronext and the merger of the Société des Bourses Françaises, Amsterdam Exchanges and Brussels Exchanges has been renamed into "Euronext Brussels". For further information on the merger of Brussels Exchanges into Euronext, reference is made to Section 3.6 of Chapter I of this prospectus.

4 TABLE OF CONTENTS

Legends and Disclaimers ...... 2

Table of Contents...... 5

Prospectus Summary ...... 7

Risk Factors...... 19

Chapter I General Information and Information concerning the Demerger of Barco ...... 22 1. General Information ...... 22 1.1 Persons Responsible for the Contents of the Prospectus ...... 22 1.2 Persons Responsible for the Audit of Financial Statements...... 22 1.3 Registration and Available Information ...... 23 1.4 Legal Advisors...... 23 1.5 Date of Publication ...... 23 2. The Demerger of Barco into BarcoNet and New Barco...... 24 2.1 The Proposal to Demerge Barco ...... 24 2.2 Rationale of the Demerger...... 24 2.3 Modalities of the Demerger...... 25 2.4 Available Information in respect of the Demerger...... 28 3. General Information about the Shares and VVPR Strips and the Admission to Listing...... 30 3.1 Information concerning the Shares and the VVPR Strips...... 30 3.2 Exchange of the Shares and VVPR Strips ...... 41 3.3 Application for Admission to Listing of the Shares and VVPR Strips...... 42 3.4 Trading of the Shares and VVPR Strips on the First Market of Euronext Brussels...... 42 3.5 Costs of the Exchange of the Shares and Listing...... 45 3.6 Merger of the Brussels Stock Exchange into Euronext...... 45 3.7 Exchange Controls and Other Limitations Affecting Holders of the Financial Instruments...... 46 3.8 Lock-up for the Principal Shareholder ...... 46 4. Risks related to the Demerger and the Listing of the Shares and VVPR Strips...... 48 Chapter II BarcoNet ...... 52 1. General Information about BarcoNet...... 52 1.1 General Information about BarcoNet ...... 52 1.2 General information about BarcoNet's Capital ...... 53 1.3 Control over the Company...... 63 1.4 Investments and Shares in other Companies...... 64 2. Information concerning the Business of BarcoNet ...... 66 2.1 General...... 66 2.2 Industry Background...... 66 2.3 BarcoNet's Solution ...... 70 2.4 BarcoNet's Strategy ...... 74 2.5 Research and Development ...... 76 2.6 Manufacturing and Suppliers...... 77 2.7 Sales and Marketing ...... 77 2.8 Competitive Position...... 80 2.9 Employees...... 81 2.10 Patents, Licenses and other Intellectual Property...... 82 2.11 Legal Proceedings...... 82 2.12 Description of Property...... 82 2.13 Investment Policy...... 82 2.14 Environmental Matters ...... 83 2.15 Arrangements between BarcoNet and New Barco ...... 83

5 3. Risks related to the Business of BarcoNet...... 85 4. Financial Information of BarcoNet ...... 92 4.1 General...... 92 4.2 Management's Discussion and Analysis of the Financial Condition and Result of Operations...... 93 4.3 Management's Responsibility for Financial Reporting ...... 99 4.4 Detailed Financial Statements in accordance with US GAAP...... 100 5. Administration, Management and Supervision of BarcoNet...... 122 5.1 Members of the Administrative, Management and Supervisory Bodies...... 122 5.2 Executive Remuneration and Remuneration of the Statutory Auditor on a Consolidated Basis ...... 124 5.3 Management Agreements ...... 125 5.4 Indemnification of Directors, Executives and Managers ...... 125 5.5 Potential Conflicts of Interest ...... 126 5.6 Certain Relationships and Related Transactions...... 126 5.7 Corporate Governance Considerations...... 127 Chapter III New Barco ...... 129 1. General Information about New Barco...... 129 1.1 General Information about New Barco ...... 129 1.2 General Information about New Barco's Capital ...... 130 1.3 Control over the Company...... 131 1.4 Investments and Shares in other Companies...... 131 2. Information concerning the Business of New Barco ...... 136 2.1 General...... 136 2.2 Barco Projection Systems...... 136 2.3 BarcoView ...... 137 2.4 Barco Graphics ...... 138 2.5 BarcoVision ...... 139 2.6 Barco Specialized Subcontracting...... 139 3. Risks related to the Business of New Barco ...... 140 4. Financial Information of New Barco...... 143 4.1 General...... 143 4.2 Pro Forma Consolidated Financial Statements - Balance Sheets...... 144 4.3 Comments on the Pro Forma Consolidated Balance Sheets ...... 146 4.4 Pro Forma Consolidated Financial Statements – Income Statements...... 149 4.5 Comments on the Pro Forma Consolidated Income Statements ...... 151 4.6 Principles of Consolidation...... 153 4.7 Summary of the Valuation Rules of New Barco Group...... 154 4.8 Recent Developments and Prospects...... 157 4.9 Auditor's Report...... 159 5. Administration, Management and Supervision of New Barco...... 163 5.1 General...... 163 5.2 Members of the Administrative, Management and Supervisory Bodies...... 163 5.3 Executive Remuneration and Remuneration of the Statutory Auditor on a Consolidated Basis ...... 167 5.4 Certain Relationships and Related Transactions...... 168 5.5 Corporate Governance Considerations...... 168 Lexicon ...... 169

6 PROSPECTUS SUMMARY

The following summary is qualified in its entirety, and should be read in conjunction with, the detailed information and financial statements, including the notes thereto, appearing elsewhere in this prospectus.

The Demerger of Barco

Barco is a Belgium-based multinational company, listed on the First Market of Euronext Brussels (formerly the Brussels Stock Exchange) since 1986 under the symbol "BAR". As of 1991, Barco's shares are included in the Bel 20 Share Index, which is an index of the 20 leading Belgian "blue chip" securities that are listed on Euronext Brussels. Since the inception of its predecessor the "Belgian American Radio Corporation" in 1934 as a mass producer of radios, Barco has witnessed a dramatic growth and diversification of its activities. Barco currently consists of six activities: "Barco Communication Systems", "Barco Projection Systems", "BarcoVision", "Barco Graphics", "BarcoView" and "Barco Specialized Subcontracting".

On September 1, 2000, the Board of Directors of Barco decided to propose to the shareholders of Barco to demerge the company into two new Belgian public limited liability companies, namely:

· BarcoNet N.V. ("BarcoNet"), which will carry out the existing "Barco Communication Systems" activity of Barco Group, and

· (new) Barco N.V. ("New Barco"), which will carry out the remaining business activities of Barco Group, and which will carry on the name "Barco".

The demerger proposal will be submitted to an extraordinary shareholders' meeting of Barco to be held on October 20, 2000, or if the required quorum shall not have been obtained for this meeting, to a subsequent extraordinary shareholders' meeting to be held on November 9, 2000. The demerger of Barco will be effective upon approval of the demerger proposal of the Board of Directors of Barco, and the incorporation of BarcoNet and New Barco (the "Closing of the Demerger"), by the shareholders of Barco representing at least 75 % of the votes validly cast at the aforementioned shareholders' meeting. Upon Closing of the Demerger, Barco will cease to exist. The demerger will for tax and accounting purposes, however, have retroactive effect as of July 1, 2000.

Upon Closing of the Demerger, all the outstanding 12,410,479 shares of Barco will need to be exchanged into 24,820,958 new shares of BarcoNet and 12,410,479 new shares of New Barco. As a result, per share of Barco, each shareholder will receive two new shares of BarcoNet and one new share of New Barco.

7 BarcoNet

BarcoNet designs, manufactures, markets and supports multimedia distribution solutions, targeting the three converging markets of the communications industry: cable, broadcast and telecom. BarcoNet's products and solutions can be used to provide audio, video and data services over cable, satellite, telecom and wireless networks. BarcoNet mainly focuses towards broadband operators worldwide, and aims to capitalize on the trends towards digital TV and the use of cable networks to provide data-based services to the end-user's home, relying on the current technology and customer base of the Barco Communication Systems activity of Barco.

BarcoNet's main product line consists of Headends, fiber optic Backbones, Digital TV distribution solutions and Network management systems. These products can either be sold separately or together, forming an end-to-end solution for the transmission of data, video and voice content to broadband subscribers. BarcoNet's end-to-end headend, backbone and digital TV distribution solutions run on internally developed hardware and software, which facilitate a high degree of system integration. The network management system on the other hand, is supported by BarcoNet's individual products and facilitates the installation and operation of BarcoNet's systems, and allows operators to construct fully redundant systems ensuring high quality of service and reliability. In addition to its main product line, BarcoNet also maintains a broad range of broadcast display products and audio distribution solutions. All products of BarcoNet are built according to currently available open, worldwide industry standards.

BarcoNet believes that it has one of the widest ranges of end-to-end solutions for headends, backbones, digital TV distribution and network management equipment available on the market today, and it intends to become a leading worldwide provider of such products and services. One of the key elements of BarcoNet's strategy will be to continue to grow and support its market position and large customer base on the basis of its existing strong line of products. In addition, BarcoNet intends to expand its business into the growing market segments of data over cable and fixed wireless access via, amongst other things, research and development and an active acquisition strategy. On the basis of the foregoing and through the expansion of its existing sales and service networks, BarcoNet intends to obtain leverage for further growth in Europe and Asia. Furthermore BarcoNet intends to pursue an aggressive growth in North America through partnerships and acquisitions.

New Barco

New Barco will continue to carry out the current business activities of Barco, except for the "Barco Communication Systems" activity, which upon Closing of the Demerger shall be transferred to BarcoNet. Consequently, New Barco's activities will continue to focus on the strategic key areas of advanced electronics developed by Barco: "Barco Projection Systems", "BarcoView", "Barco Graphics", "BarcoVision" and "Barco Specialized Subcontracting".

On September 26, 2000, Barco announced that it commenced exclusive negotiations in respect of a possible management buy-out of "Barco Graphics". The goal of such management buy-out would be to allow Barco Graphics to further develop as an independent company. If successful, the negotiations could lead to a definitive agreement during the month of December 2000. The proposed management buy-out of Barco Graphics is part of Barco's strategy to achieve more rapid growth by giving greater autonomy to each of its activities.

8 The Admission to Listing of the Shares and VVPR Strips on the First Market of Euronext Brussels

Barco: Barco N.V., with registered office at Frankrijklaan 18, 8970 Poperinge, Belgium. Barco is registered with the Commercial Registry of Ieper, Belgium, under number 28.186, and with the Belgian VAT authorities under number BE 421.577.737. Upon Closing of the Demerger, Barco will cease to exist.

Barco Group: Barco and its subsidiaries.

BarcoNet: The new legal entity BarcoNet N.V., which upon Closing of the Demerger will be incorporated by the shareholders of Barco, with registered office at Luipaardstraat 12, 8500 Kortrijk, Belgium.

BarcoNet Group: BarcoNet and its subsidiaries.

New Barco: The new legal entity Barco N.V., which upon Closing of the Demerger will be incorporated by the shareholders of Barco, with registered office at Kennedypark 35, 8500 Kortrijk, Belgium.

New Barco Group: New Barco and its subsidiaries.

The Shares: Upon Closing of the Demerger, the 12,410,479 shares of Barco will need to be exchanged into 24,820,958 new shares of BarcoNet and 12,410,479 new shares of New Barco. As a result, each holder of shares of Barco will receive two new shares of BarcoNet and one new share of New Barco per share of Barco.

The VVPR Strips: On the date of this prospectus, Barco's shares include 1,894,512 shares that can benefit from a reduced withholding tax rate ("verminderde voorheffing" / "précompte réduit" or "VVPR") on dividends of 15 % instead of 25 %. The tax advantage resulting from the VVPR status has been incorporated in VVPR strips that are listed separately on the First Market of Euronext Brussels. Barco is of the opinion that there are reasonable arguments to defend that the shares of Barco that can benefit from the reduced 15 % withholding tax, will not lose their VVPR status pursuant to the demerger of Barco. Upon Closing of the Demerger, therefore, all 1,894,512 VVPR strips of Barco will need to be exchanged into 3,789,024 VVPR strips of BarcoNet and 1,894,512 VVPR strips of New Barco. As a result, each holder of VVPR strips of Barco will receive two VVPR strips of BarcoNet and one VVPR strip of New Barco per VVPR strip of Barco. The VVPR strips of BarcoNet and New Barco will be listed separately on the First Market of Euronext Brussels upon admission to listing of the Shares.

The Admission of the Shares Application has been made with the Market Authority of Euronext and VVPR Strips to Listing on Brussels for the admission to listing on the First Market of Euronext the First Market of Euronext Brussels of: Brussels: · all of the shares (under the symbol "BARN") and VVPR strips of BarcoNet, and

9 · all of the shares (under the symbol "BAR") and VVPR strips of New Barco.

The VVPR strips of BarcoNet, respectively New Barco, will be listed separately.

Application has also been made for admission to listing of the shares and VVPR strips of BarcoNet and New Barco that will be issued upon exercise of warrants, options and convertible bonds of BarcoNet and New Barco.

Trading of the Shares and Subject to approval by the Market Authority of Euronext Brussels, it is VVPR Strips: expected that on or about the first banking day following the Closing of the Demerger, the Shares, respectively VVPR Strips, will be listed jointly as a single unit under the symbol "BAR" of Barco, whereby each unit will represent two new shares, respectively two new VVPR strips, of BarcoNet and one new share, respectively one new VVPR strip, of New Barco.

Separate listing and trading of the shares, respectively VVPR strips, of BarcoNet and New Barco is expected to commence on or about the second banking day following the Closing of the Demerger. Prior to the listing of the Shares and the VVPR Strips on the First Market of Euronext Brussels, there will be no public market for the Shares and VVPR Strips.

Currency of Trading: Upon admission to listing on the First Market of Euronext Brussels, the Shares and VVPR Strips will be traded in Euro.

Initial Reference Price of the As prior to the listing of the shares of BarcoNet and New Barco, there will Shares: be no public market for such shares, the Market Authority of Euronext Brussels will decide on an initial reference price of the shares of BarcoNet and New Barco, upon which separate trading of the shares will start, as follows:

· the initial reference price of the shares of BarcoNet will be determined on the basis of a valuation performed by Petercam N.V., and

· the initial reference price of the shares of New Barco will be determined as the difference between the closing price of the shares of BarcoNet and New Barco as a single unit on the last banking day preceding their separate listing, and twice the initial reference price of the shares of BarcoNet.

It should be noted that the initial reference price of the respective shares might not be indicative for the prices that might prevail upon the start of the separate trading of the Shares. In addition, the price of the shares of Barco may also not be indicative for the price of the shares following their first listing on the First Market of Euronext Brussels.

Expected Initial Reference Absent substantial changes in market conditions between the date of this Price of the Shares of prospectus and the start of trading, the initial reference price of the shares BarcoNet: of BarcoNet upon start of trading is expected to be comprised in a range between EUR 15.6 and EUR 18.3. As market conditions may differ upon the start of trading of the shares of BarcoNet, the aforementioned expected reference price range may differ from the actual initial reference price that

10 will be established upon start of trading.

The Principal Shareholder: GIMV N.V., a company incorporated under the laws of Belgium, with registered office at Karel Oomsstraat 37, 2018 Antwerp, Belgium. On August 31, 2000, GIMV N.V. confirmed that it held directly 3,558,632 shares and indirectly via its affiliate VIM N.V., a company incorporated under the laws of Belgium, 589,652 shares, or in total 4,148,284 shares, which represents 33,43 % of the existing shares of Barco or 31.72 % on a fully diluted basis. The rest of the shares of Barco are held by the public. GIMV N.V. confirmed that 70 % of its shares are held by the Vlaamse Participatiemaatschappij, 100 % of which is held by the Flemish Government ("Vlaamse Gewest"). The Flemish Government recently made public that it intends to reduce its stake in GIMV N.V. with a percentage ranging between 30 and 40 %.

Joint Global Coordinators: · Petercam N.V., acting on its own behalf and/or on behalf of its affiliate Petercam Securities N.V. Both Petercam N.V. and Petercam Securities N.V. are companies incorporated under the laws of Belgium, with registered office at St. Goedeleplein 19, 1000 Brussels, Belgium.

· Robertson Stephens International Ltd., a company incorporated under the laws of England and Wales, with offices at 39 Victoria Street, London SW1H 0RS, United Kingdom.

The Cooperating Banks: · Bank Degroof N.V., a company incorporated under the laws of Belgium, with registered office at Nijverheidsstraat 44, 1040 Brussels, Belgium.

· Bank Brussels Lambert S.A., a company incorporated under the laws of Belgium, with registered office at Marnixlaan 24, 1000 Brussels, Belgium.

· Fortis Bank N.V., a company incorporated under the laws of Belgium, with registered office at Warandeberg 3, 1000 Brussels, Belgium.

· KBC Bank N.V., a company incorporated under the laws of Belgium, with registered office at Havenlaan 2, 1080 Brussels, Belgium.

· CBC Banque S.A., a company incorporated under the laws of Belgium, with registered office at Grote Markt 5, 1000 Brussels, Belgium.

(Nominal) Value per Share: Each share of BarcoNet, respectively New Barco, will have no nominal value and will represent the same fraction value of the share capital of BarcoNet, respectively New Barco.

Dividends and Dividend Policy The shares of BarcoNet are entitled to dividends, if any, payable with of BarcoNet: respect to the first fiscal year of BarcoNet, starting on July 1, 2000 and ending on December 31, 2000, and any subsequent fiscal year which will start on January 1 and end on December 31 of each calendar year.

11 While the aim of BarcoNet will be to compensate its shareholders in an adequate way as soon as its results and growth perspectives make this possible, BarcoNet expects to retain earnings, if any, over the next few years for the development of its activities. Thereafter, the distribution of dividends will depend on BarcoNet's operating results, financial condition, capital requirements and other factors deemed relevant by the Board of Directors and the shareholders' meeting.

Dividends and Dividend Policy The shares of New Barco are entitled to dividends, if any, payable with of New Barco: respect to the first fiscal year of New Barco, starting on July 1, 2000 and ending on December 31, 2000, and any subsequent fiscal year which will start on January 1 and end on December 31 of each calendar year.

New Barco will, to the extent permitted, continue the dividend policy of Barco and therefore distribute dividends in accordance with the evolution of the company's earnings.

Dividends of Barco for the Six Barco has prepared statutory and consolidated financial statements as of Month Period ended on June June 30, 2000 and for the six month period then ended in accordance with 30, 2000: Belgian GAAP. These financial statements have been audited by the statutory auditor of Barco, Ernst & Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke, which delivered an unqualified opinion. Said statutory and consolidated financial statements, as well as the report by the statutory auditor will be submitted to a separate extraordinary general shareholders' meeting of Barco to be held on October 20, 2000.

It is expected that no dividends will be distributed to the holders of shares of Barco with regard to the period starting on January 1 and ending on June 30, 2000.

Lock-up: The number of shares of BarcoNet and New Barco available for sale in the public market following the admission to listing will be limited by lock-up agreements to be entered into in connection with this listing, with BarcoNet, respectively New Barco's, Principal Shareholder, GIMV N.V.

GIMV N.V. has agreed not to offer, sell, contract to sell, pledge or otherwise dispose of its shares of BarcoNet for a period of 180 days from the date of the first listing of the shares of BarcoNet. Furthermore, GIMV N.V. will deposit 1.241.047 shares of BarcoNet with Petercam N.V. for a period of 30 days after the date of the first listing of the shares of BarcoNet. Petercam N.V. can sell all or part of these shares in the market at a price that is not lower than the lower limit of the indicative valuation as set out in this prospectus or any complement hereto, unless otherwise agreed between GIMV N.V. and Petercam N.V. If and to the extent that Petercam N.V. has sold any of these shares, it can buy-back such shares in the market for the account of GIMV N.V. and support the market price, however,only at such prices that said sales and purchases do not result in a loss for GIMV N.V. After the 30 days period, GIMV N.V. will be entitled to receive the remaining shares and the result on the transactions, and an announcement on the use of these shares will be published. The purpose of this is to stabilize the market and increase the liquidity of the

12 shares of BarcoNet in the first days of the separate listing.

GIMV N.V. further agreed that, for a period of 180 days from the date of the first listing of the shares of New Barco, it will not, without the prior consent of Petercam N.V., sell or otherwise dispose of any of its shares of New Barco.

Petercam N.V. may release all or any portion of the shares that are subject to the aforementioned lock-up agreements.

Available Information: Prior to the demerger, Barco has filed its Articles of Association with the Registrar of the Commercial Court of Ieper, Belgium, where they are publicly available. Pursuant to Belgian law, Barco is subject to annual reporting requirements. In accordance herewith it has filed its statutory and consolidated financial statements with the Belgian National Bank where such statements are publicly available.

Upon the Closing of the Demerger, BarcoNet, respectively New Barco, will file its Articles of Association with the Registrar of the Commercial Court of Kortrijk, Belgium, where they will be publicly available. Pursuant to Belgian law, BarcoNet and New Barco will be subject to annual reporting requirements. In accordance herewith, BarcoNet and New Barco will file their statutory and consolidated financial statements with the Belgian National Bank where such statements will be publicly available.

Copies of the statutory and consolidated financial statements and the annual reports of Barco for the fiscal years ended on December 31, 1997, 1998 and 1999, and for the six month period ended on June 30, 2000, as well as the other documents mentioned in this prospectus or related to the proposal of the Board of Directors of Barco in respect of the demerger of Barco and that are available for inspection by the public as indicated elsewhere in this prospectus, will be made available to the public at no cost upon prior written request addressed to the registered office (Frankrijklaan 18, 8970 Poperinge, Belgium) or the administrative seat of Barco (Kennedypark 35, 8500 Kortrijk, Belgium, for the attention of Mr. JP Tanghe, Vice-President and Director of Corporate Communication and Investor Relations, tel. +32 (0)56 26.29.07). Some of these documents will also be made available via the Web-site of Barco (address: www.barco.com).

13 Selected Summary Financial Data of BarcoNet Group in accordance with US GAAP

The following table sets forth summary consolidated financial information of BarcoNet Group as of December 31, 1998, and December 31, 1999, and for the years then ended, and as of June 30, 2000 and for the six month period then ended, presented in accordance with United States generally accepted accounting principles or "US GAAP". This information is based on the pro forma consolidated financial statements of BarcoNet that are included in Section 4 of Chapter II of this prospectus. The pro forma consolidated financial statements as of December 31, 1998, and December 31, 1999, and for the years then ended have been audited by Arthur Andersen Bedrijfsrevisoren C.V.B.A., represented by Mr. Dirk Van Vlaenderen. The pro forma consolidated financial statements as of June 30, 2000, and for the six months then ended, are unaudited, but have been subject to a limited review by Arthur Andersen Bedrijfsrevisoren C.V.B.A., in accordance with the guidelines prescribed by the Belgian Institute of Company Auditors.

The data set forth below are qualified by reference to, and should be read in conjunction with, the pro forma consolidated financial statements and notes thereto of BarcoNet Group and the discussion thereof included herein.

in thousands of Euro

Six Months Ended Year Ended December 31, CONSOLIDATED STATEMENT OF OPERATIONS June 30, 2000 1999 1998 (unaudited) (audited) Net sales 50,992 90,074 77,965 Gross profit 28,183 49,215 40,770 Net (loss) income 3,741 5,712 (2,979)

December 31, CONSOLIDATED BALANCE SHEET June 30, 2000 1999 1998 (unaudited) (audited) Cash and cash equivalents 438 905 651 Total current assets 82,251 78,385 91,773 Total current liabilities 28,515 26,882 32,188

Total assets 105,486 99,673 113,979

Total shareholders' equity 74,406 70,857 66,164

BarcoNet will prepare its statutory financial statements in accordance with Belgian generally accepted accounting principles or "Belgian GAAP", and upon Closing of the Demerger will apply with the Belgian Banking and Finance Commission to prepare and publish its consolidated financial statements in US GAAP.

14 Summary Financial Data of New Barco Group in accordance with Belgian GAAP

The following table sets forth summary consolidated financial information of New Barco Group as of December 31, 1997 (only in respect of the balance sheet), December 31, 1998, December 31, 1999, and for the years then ended, and as of June 30, 2000 and for the six month period then ended, presented in accordance with Belgian GAAP. This information is based on the pro forma consolidated financial statements of New Barco that are included in Section 4 of Chapter III of this prospectus and that have been derived from the consolidated financial statements of Barco, which have been prepared in accordance with Belgian GAAP and which have been audited by Ernst & Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke. The pro forma consolidated financial statements of New Barco Group are unaudited, but have for the year ended on December 31, 1999, and for the six month period ended on June 30, 2000, been subject to a limited review by Ernst & Young Bedrijfsrevisoren C.V., in accordance with the guidelines prescribed by the Belgian Institute of Company Auditors.

The pro forma consolidated financial statements of New Barco Group have been established as follows:

· Firstly, Barco prepared unaudited pro forma consolidated financial statements of BarcoNet in accordance with Belgian GAAP, whereby the same valuation and consolidation principles have been applied as with respect to the consolidated financial statements of Barco.

· Secondly, the unaudited pro forma consolidated financial statements of BarcoNet according to Belgian GAAP have been deducted from the consolidated financial statements of Barco.

· Thirdly, in the pro forma consolidated statements as established above, bookings were made with respect to the following accounts in order to reverse some eliminations made in the consolidation of Barco and BarcoNet, to the extent that they related to BarcoNet:

· receivables and payables, · revenues and costs, and · unrealized profits, i.e. margins on inventory.

The data set forth below is qualified by reference to, and should be read in conjunction with, the consolidated financial statements and notes thereto of New Barco and the discussion thereof included herein.

in thousands of Euro

Six Months Ended Year Ended December 31, CONSOLIDATED STATEMENT OF OPERATIONS June 30, 2000 1999 1998 (unaudited) (unaudited) Turnover 353,474 627,445 584,177 Net income 22,933 44,448 75,798

December 31, CONSOLIDATED BALANCE SHEET June 30, 2000 1999 1998 1997 (unaudited) (unaudited) Total current assets 504,878 484,874 433,947 429,021 Total equity 449,258 421,688 394,585 340,443 Total assets 800,599 768,609 721,770 648,290

New Barco will prepare its statutory and consolidated financial statements in accordance with Belgian GAAP.

15 Selected Information in respect of the Shares of Barco, BarcoNet and New Barco

The graph and tables set forth below contain information in respect of the shares, and related ratios, of Barco, BarcoNet and New Barco. Information in respect of the ratios of Barco, BarcoNet and New Barco has been provided by Petercam N.V. It should be noted that the price of the shares, respectively the ratios, of Barco may not be indicative for the price of the shares, respectively the ratios, of BarcoNet and New Barco following their first listing on the First Market of Euronext Brussels. Furthermore, subject to the comments relating to forward- looking statements in the section "Risk Factors" in this prospectus, the ratios of Barco for the years 2000 and 2001 rely on a number of estimates and assumptions that, while considered reasonable, are inherently subject to significant business, financial and economic uncertainties and contingencies, and cannot be regarded as a representation by Barco, BarcoNet, New Barco and Petercam N.V. that these estimates and assumptions are correct or accurate. In addition, the latter ratios do not yet take into account the consequences of the demerger and some of the recent development referred to elsewhere in this prospectus. The public is therefore cautioned not to place undue reliance on this information.

The following graph shows the evolution of the stock price of the shares, as well as the trading volumes thereof, of Barco on the First Market of Euronext Brussels (formerly Brussels Exchanges) up to September 18, 2000, as compared with the evolution of the Bel 20 Share Index.

Percentage 500 1,400,000 Volume (Number of Shares) 450 1,200,000 400

350 1,000,000

300 800,000

250

600,000 200

150 400,000

100 200,000 50

0 0 31/01/1995 31/05/1995 29/09/1995 31/01/1996 31/05/1996 30/09/1996 31/01/1997 30/05/1997 30/09/1997 30/01/1998 29/05/1998 30/09/1998 29/01/1999 31/05/1999 30/09/1999 31/01/2000 31/05/2000 18/09/2000

Monthly volume Stock price Barco Bel 20

16 On October 5, 2000, Barco's market capitalization amounted to EUR 1,654 million, based on a price of EUR 133.3 per share and 12.4 million shares. As of the same date, Barco was priced at the price-earnings and enterprise value-based ratios set forth below.

For the year For the 2000 year 2001

Price / Earnings ("P/E") ...... 21.2 x 18.3 x Enterprise value / Sales ("EV/Sales") ...... 1.8 x 1.6 x Enterprise value / Earnings before interest, taxes, depreciation and amortization ("EV/EBITDA") ...... 8.1 x 7.4 x Price / Cash flow ("P/CF") ...... 10.1 x 9.1 x

(Source: estimates by Petercam N.V.)

Below is a table showing some selected pro forma information in respect of the shares of BarcoNet, respectively New Barco, for the periods ended on December 31, 1998 and 1999, and for the six month period ended on June 30, 2000.

Amounts in Euro For the twelve month period For the six month ended on December 31, period ended on 1998 1999 June 30. 2000

BarcoNet

Pro forma net earnings per share ...... (0.12) 0.23 0.15 Pro forma net cash flow per share (*) ...... 0.06 0.41 0.24 Pro forma earnings before interest, taxes, depreciation and amortization ("EBITDA") per share ...... 0.19 0.55 0.32

New Barco

Pro forma net earnings per share ...... 6.11 3.58 1.85 Pro forma net cash flow per share (*) ...... 10.93 9.35 4.93 Pro forma EBITDA per share ...... 13.28 10.64 6.02

(*) The net cash flow per share has been calculated as the sum of pro forma net earnings, depreciation and amortization, divided by the number of shares of BarcoNet, respectively New Barco.

17 Exchange Rates

The reporting currency of the statutory and consolidated financial statements of Barco, and the pro forma statutory and consolidated financial statements of BarcoNet and New Barco, for the years ended on December 31, 1997, December 31, 1998 and December 31, 1999, and for the six month period ended on June 30, 2000, where applicable, is the Belgian franc ("BEF"). The reporting currency of BarcoNet and New Barco will be the Euro ("EUR" or "€"). For the convenience of the reader, amounts in Euro have been converted from Belgian franc into Euro, using the fixed official exchange rate of BEF 40.3399 for EUR 1.00.

18 RISK FACTORS

Following Admission to Listing of the Shares and VVPR Strips on the First Market of Euronext Brussels, trading and/or investing in the Shares and/or VVPR Strips will involve certain risks and uncertainties. Prior to making any investment decision, if any, prospective purchasers of the Shares and/or VVPR Strips should consider carefully all of the information set forth in this prospectus and, in particular, the risks referred to below. Any of these and other risks could adversely affect BarcoNet, respectively New Barco's, business, competitive position and financial results. In that event, the respective trading prices of the Shares and/or VVPR Strips could decline and an investor could lose all or part of his investment. The cautionary statements made in this prospectus should be read as being applicable to all forward-looking statements wherever they appear in this prospectus.

Risks related to the Demerger

The risks related to the demerger of Barco, can be summarized as follows:

· Following the Closing of the Demerger, creditors of Barco could demand additional guarantees from BarcoNet and New Barco to secure their rights.

· Following the Closing of the Demerger, New Barco will provide certain transitional services to BarcoNet.

· It cannot be guaranteed that following the demerger of Barco, the remaining activities of New Barco will be legally separated or spun-off.

For a detailed description of the above risks, further reference is made to Section 4 of Chapter I of this prospectus.

Risks related to the Listing of the Shares and VVPR Strips

The risks related to the listing of the Shares and VVPR Strips, can be summarized as follows:

· There has been no prior market for the Shares and VVPR Strips.

· Following the listing of the Shares, the price of the Shares may decline due to sales or the appearance of sales of large numbers of Shares.

· There can be no assurance that Euronext, following the merger between Société des Bourses Françaises, Amsterdam Exchanges and Brussels Exchanges, will develop into a stable and liquid market for the Shares and VVPR Strips.

· The trading price of the Shares and VVPR Strips may be volatile.

· Certain provisions of BarcoNet and New Barco's Articles of Association and of Belgian Law may make a take-over of BarcoNet and New Barco more difficult.

For a detailed description of the above risks, further reference is made to Section 4 of Chapter I of this prospectus.

19 Risks related to the Business of BarcoNet

The risks related to the business of BarcoNet, can be summarized as follows:

· BarcoNet depends on cable operators and broadcasters' capital spending for substantially all of its revenue.

· BarcoNet may be unable to manage the risks and challenges resulting from acquisitions.

· The operating results of BarcoNet are likely to fluctuate significantly and may fail to meet or exceed the expectations of securities analysts or investors, causing the trading price of the shares to decline.

· BarcoNet depends on its international sales and is subject to the risks associated with international operations.

· The market in which BarcoNet operates is intensely competitive and BarcoNet's competitors, some of whom are larger and more established, may have a competitive advantage.

· Broadband communications markets are relatively immature and characterized by rapid technological change.

· BarcoNet could be adversely affected if broadband communications do not continue to grow with a high rate.

· BarcoNet needs to develop and introduce new and enhanced products and technology in a timely manner to remain competitive.

· Competition for qualified personnel is intense, and BarcoNet may not be successful in attracting and retaining personnel.

· Sales forecasted for a particular period may not be realized in that period due to the unpredictable sales cycles of its products.

· BarcoNet's failure to adequately protect its proprietary rights may adversely affect the company.

· BarcoNet purchases several key components, subassemblies and modules used in the manufacturing or integration of its products from sole or limited sources, and is increasingly dependent on contract manufacturers.

· Due to the concentration in the field of cable operators, BarcoNet's customer base will consist of a smaller number of customers and the loss of one or more key customers would harm its business.

· BarcoNet must be able to manage expenses and inventory risks associated with meeting the demand of its customers.

· BarcoNet needs to effectively manage its growth.

· BarcoNet may need additional capital in the future and may not be able to secure adequate funds in terms acceptable to it.

For a detailed description of the above risks, further reference is made to Section 3 of Chapter II of this prospectus.

20 Risks related to the Business of New Barco

The risks related to the business of New Barco, can be summarized as follows:

· Following the demerger of Barco, New Barco will carry on the remaining activities of Barco.

· Technology markets are generally characterized by rapid technological change and intense competition.

· New Barco may need additional capital in the future and may not be able to secure adequate funds in terms acceptable to it.

· New Barco needs to effectively manage its further growth and operations and may be unable to manage the risks and challenges resulting from acquisitions.

· New Barco faces a number of risks associated with international operations, any or all of which could result in a disruption of its business and a decrease in its revenue.

· New Barco purchases several key components, subassemblies and materials used in the manufacturing or integration of its products from sole or limited sources.

· The operating results of New Barco are likely to fluctuate and may fail to meet or exceed the expectations of securities analysts or investors, causing the trading price of the shares to decline.

For a detailed description of the above risks, further reference is made to Section 3 of Chapter III of this prospectus.

Forward-Looking Statements

Except for the historical information set forth elsewhere in this document, this prospectus contains forward- looking statements, such as in the section relating to the indicative valuation of BarcoNet Group, and the sections relating to the business and financial information of BarcoNet and New Barco, including without limitation, statements containing the words "believes", "plans", "anticipates", "expects" and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, financial condition, performance or achievements of BarcoNet and New Barco, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences are discussed in more detail in the sections relating to risk factors and elsewhere in this prospectus. Given these uncertainties, the public is cautioned not to place any undue reliance on such forward-looking statements.

All information regarding the size and growth of the different markets, the market shares of BarcoNet, respectively New Barco, and of the competitors has been estimated by the management on the basis of available studies, information from trade associations and interviews performed in the market. In addition, it should be noted that independent market studies referred to in this prospectus rely on a number of estimates and assumptions that, while to some extent expressed with numerical specificity and considered reasonable by BarcoNet, respectively New Barco, are inherently subject to significant business, financial, economic and other uncertainties and contingencies. Furthermore, references to market studies cannot be regarded as a representation by BarcoNet, respectively New Barco, that these studies and the figures reflected therein are correct or accurate. The public is therefore cautioned not to place undue reliance on this information.

21 CHAPTER I

GENERAL INFORMATION AND INFORMATION CONCERNING THE DEMERGER OF BARCO

1. GENERAL INFORMATION

1.1 PERSONS RESPONSIBLE FOR THE CONTENTS OF THE PROSPECTUS

Barco N.V., a Belgian public limited liability company with registered office at Frankrijklaan 18, 8970 Poperinge, Belgium, takes responsibility for the contents of this prospectus.

Barco, represented by its Board of Directors, declares that, to the best of its knowledge, the information given in this prospectus is accurate in all material respects and is not misleading and contains no omission of any information that could make any statement herein materially misleading.

Upon Closing of the Demerger, the liability for the contents of this prospectus will be transferred to BarcoNet and New Barco.

1.2 PERSONS RESPONSIBLE FOR THE AUDIT OF FINANCIAL STATEMENTS

Ernst & Young Bedrijfsrevisoren C.V., a civil company incorporated under the laws of Belgium, having the form of a cooperative company, with registered office at Marcel Thirylaan 204, 1200 Brussels, Belgium, represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke, has been appointed as statutory auditor of Barco for a term that will end upon Closing of the Demerger.

The statutory and consolidated financial statements of Barco as of December 31, 1998 and 1999, and for the fiscal years then ended, and as of June 30, 2000, and for the six month period then ended, have been prepared in accordance with Belgian generally accepted accounting principles or "Belgian GAAP", and have been audited by, Ernst & Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke, which delivered unqualified opinions.

The pro forma consolidated financial statements of BarcoNet Group that are included in Section 4 of Chapter II of this prospectus, have been prepared in accordance with United States generally accepted accounting principles or "US GAAP". The pro forma consolidated financial statements as of December 31, 1998 and 1999, and for the years then ended have been audited by Arthur Andersen Bedrijfsrevisoren C.V.B.A., a civil company incorporated under the laws of Belgium, having the form of a cooperative company with limited liability, with registered office at Warandeberg 4, 1000 Brussels, Belgium, represented by Mr. Dirk Van Vlaenderen, which has delivered an unqualified opinion. The pro forma consolidated financial data as of June 30, 2000, and for the six months then ended, are unaudited, but have been subject to a limited review by Arthur Andersen Bedrijfsrevisoren C.V.B.A., in accordance with the guidelines prescribed by the Belgian Institute of Company Auditors.

The pro forma consolidated financial statements of New Barco Group that are included in Section 4 of Chapter III of this prospectus, have been prepared in accordance with Belgian GAAP. They have been derived from the consolidated financial statements of Barco, which have been audited by Ernst & Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke. The pro forma consolidated financial statements of New Barco Group are unaudited, but have for the year ended on December 31, 1999, and for the

22 six month period ended on June 30, 2000, been subject to a limited review by Ernst & Young Bedrijfsrevisoren C.V., in accordance with the guidelines prescribed by the Belgian Institute of Company Auditors.

The pro forma statutory balance sheets of BarcoNet and New Barco as of June 30, 2000, and for the six months then ended, that are included in the demerger proposal of the Board of Directors of Barco, and a summary of which has been included in Section 2 of Chapter I of this prospectus, have been prepared in accordance with Belgian GAAP, and are unaudited. The statutory auditor of Barco, Ernst & Young Bedrijfsrevisoren C.V., however, prepared several reports in connection with the demerger, including the demerger proposal and the information contained therein, as required by the Belgian Company Law.

The extraordinary shareholders' meeting of Barco that will be proposed to decide on the demerger and incorporation of BarcoNet and New Barco, will be proposed to elect Arthur Andersen Bedrijfsrevisoren C.V.B.A., represented by Mr. Dirk Van Vlaenderen, as statutory auditor of BarcoNet, and Ernst & Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke, as statutory auditor for New Barco, each for a term of three years until the annual general shareholders' meeting of the company concerned to be held in 2003.

1.3 REGISTRATION AND AVAILABLE INFORMATION

Barco has been registered with the Registry of Commerce of Ieper, Belgium. Its Articles of Association have been filed with, and copies thereof are available to the public at, the Registrar of the Commercial Court of Ieper, Belgium. Barco's statutory and consolidated financial statements have been filed with, and copies thereof are made available to the public at, the Belgian National Bank.

BarcoNet and New Barco will be registered with the Registry of Commerce of Kortrijk, Belgium. Their Articles of Association will be filed with, and copies thereof will be available to the public at, the Registrar of the Commercial Court of Kortrijk, Belgium. BarcoNet and New Barco's statutory and consolidated financial statements will be filed with, and copies thereof will be made available to the public at, the Belgian National Bank.

Copies of the statutory and consolidated financial statements and the annual report of Barco for the fiscal years ended on December 31, 1997, 1998 and 1999, as well as of other documents mentioned in this prospectus or related to the proposal of the Board of Directors of Barco in respect of the demerger of Barco and that are available for inspection by the public as indicated elsewhere in this prospectus, will be made available to the public at no cost upon prior written request addressed to the administrative seat of Barco (Kennedypark 35, 8500 Kortrijk, Belgium, for the attention of Mr. JP Tanghe, Vice-President and Director of Corporate Communication and Investor Relations, tel. +32 (0)56 26.29.07). Some of these documents will also be made available via the Web-site of Barco (address: www.barco.com).

1.4 LEGAL ADVISORS

Certain legal matters regarding Belgian law in connection with the admission to listing of the Shares and VVPR Strips on the First Market of Euronext Brussels are handled for Barco, BarcoNet and New Barco by Baker & McKenzie, Brussels, Belgium.

1.5 DATE OF PUBLICATION

The date of publication of this prospectus is set out on the first page of this document.

23 2. THE DEMERGER OF BARCO INTO BARCONET AND NEW BARCO

2.1 THE PROPOSAL TO DEMERGE BARCO

On September 1, 2000, the Board of Directors of Barco decided to propose to the shareholders of Barco to demerge the company into two new Belgian public limited liability companies, namely:

· BarcoNet, which will carry out the business activities of the existing "Barco Communication Systems" activity of Barco Group, and

· New Barco, which will carry out the remaining business of Barco Group, and which will carry on the name "Barco".

The objective of the proposed transaction is to spin-off the "Barco Communication Systems" activity, i.e. one of the six activities of Barco next to "Barco Projection Systems", "BarcoView", "Barco Graphics", "BarcoVision" and "Barco Specialized Subcontracting".

2.2 RATIONALE OF THE DEMERGER

The Board of Directors of Barco is of the opinion that the demerger of Barco into BarcoNet and New Barco is an essential part of Barco's new strategy to redefine its current structure and adapt it to a continuously changing economic and financial environment.

Currently, Barco encompasses six different activities: "Barco Communication Systems", "Barco Projection Systems", "BarcoVision", "Barco Graphics", "BarcoView" and "Barco Specialized Subcontracting". According to Barco, each of these activities is well-focussed, and has an autonomous and experienced management team, an independent structure for research and development, manufacturing, marketing and sales, and the necessary expertise for a worldwide market approach.

Barco believes that the respective activities have reached the size and maturity to be independent in a time when they can have exciting opportunities in their respective markets. Barco therefore believes that it is the ideal time for its activities to accelerate their organic growth by increasing their market share and entering new application fields. In addition, Barco is of the opinion that there is also ample opportunity for each of its activities to grow through mergers and acquisitions.

To take full advantage of these opportunities, Barco considers that its current activities need to become still more independent by becoming legally separate and, possibly, listed companies. Only then would the different activities be able to fully unfold their potential and develop into agile and independent companies.

It is the firm belief of Barco that separate listings of the Barco entities, if any, would not only result in specific price-earnings or "P/E" ratios for each of these entities, but would also allow peer benchmarking. Barco believes that the different P/E ratios would be higher than the current P/E ratio of Barco with its current discount for being a diversified group. As a result, the independent, possibly listed, companies would be in a better position to finance acquisitions by using their own shares. The creation of "specialized" shares, if any, for each of the companies is also expected to better enable them to attract and retain highly qualified personnel through the issuance of stock-options or other share based incentives. Finally, the addition of the value of the "specialized" shares is believed to be higher than the value of the conglomerated Barco share, which would typically allow the creation of shareholder value. The possibility of creating shareholder value forms part of Barco's conviction that

24 financial markets currently prefer specialized shares and are no longer prepared to pay a premium for risk-spread through conglomerate companies.

In view of the foregoing, BarcoNet will be the first Barco activity that would become a separate company, not only because of the current window of opportunities to enter new markets, but also because the present organization of Barco and BarcoNet, is facing important challenges. Of all Barco activities, its Communication Systems activity is believed to face the fastest change in the business environment: revolutionary new applications with a high business impact are emerging, the customer base is being consolidated, and the competitive structure is changing on a worldwide basis.

Following the demerger, New Barco will consider the further reorganization of the remaining activities. In connection herewith, Barco announced that it commenced exclusive negotiations with CVC Capital Partners in respect of a possible management buy-out of "Barco Graphics". If successful, these negotiations could lead to a definite agreement in December 2000. A definite or specific timing for the reorganization of the other activities has not yet been determined. Each new step would in any case require separate board and/or shareholders' decisions.

2.3 MODALITIES OF THE DEMERGER

2.3.1 Legal Basis

From a legal point of view, the demerger of Barco will be effected through a corporate "demerger", with incorporation of two new legal entities, in accordance with the procedure provided for in the articles 174/45 and following of the Belgian Company Law Act (the "Belgian Company Law").

2.3.2 Allocation of Barco's Assets and Liabilities

Pursuant to the demerger proposal, all assets and liabilities of Barco, including Barco's participations in subsidiaries, will as a general rule be allocated to BarcoNet, and New Barco as follows:

· all assets and liabilities, including participations in subsidiaries, that relate to the Barco Communication Systems activity, will be allocated to BarcoNet; and

· all other assets and liabilities, including participations in subsidiaries, will be allocated to New Barco.

Barco believes that the assets and liabilities will be allocated in such a manner that BarcoNet and New Barco should be able to continue their activities autonomously. Be that as it may, in order to ensure the continuity of their respective businesses, BarcoNet and New Barco will enter into a separate agreement covering various issues such as transitional services, manufacturing and suppliers, and software and trademark ownership and licenses, during an interim period following the Closing of the Demerger. For further information in this respect, reference is made to Section 2.15 of Chapter II of this prospectus.

The allocation of assets and liabilities of Barco to BarcoNet and New Barco has been summarized for information purposes only, in the balance sheet set forth below. This balance sheet is a summary version of the statutory balance sheet of Barco and the pro forma statutory balance sheets of BarcoNet and New Barco, all as of 30 June 2000 and for the six month period then ended, which have been set forth in the demerger proposal of the Board of Directors, and which have been prepared by the Board of Directors of Barco in accordance with Belgian generally accepted accounting principles or "Belgian GAAP". The statutory balance sheet of Barco as of June 30, 2000, and for the period then ended, has been audited by the statutory auditor of Barco, Ernst &Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke, which delivered an unqualified opinion. The pro forma statutory balance sheets of BarcoNet and New Barco as of June 30, 2000,

25 and for the period then ended, are unaudited. Ernst & Young Bedrijfsrevisoren C.V., however, prepared several reports in connection with the demerger, including the demerger proposal and the information contained therein, as required by the Belgian Company Law.

The balance sheet below is presented in such a way that the assets and liabilities as per 30 June 2000, for Barco, equal the sum of the respective assets and liabilities that will be allocated to BarcoNet, respectively New Barco.

In thousands of Euro Barco BarcoNet New Barco

Fixed Assets ...... 509,988 69,202 440,786

II. Intangible fixed assets ...... 30,579 7,353 23,226 III. Tangible fixed assets ...... 39,320 3,437 35,883 IV. Financial fixed assets ...... 440,089 58,412 381,677

Current Assets ...... 209,377 23,022 186,355

VI. Stocks and contracts in progress ...... 92,716 11,227 81,489 VII. Amounts receivables within one year ...... 109,377 11,774 97,603 IX. Cash at bank and in hand ...... 5,412 16 5,396 X. Deferred charges and accrued income ...... 1,872 5 1,867

Total Assets ...... 719,365 92,224 627,141

Equity ...... 414,349 79,752 334,597

I. Capital ...... 65,717 12,658 53,059 II. Share premium account ...... 149,128 28,724 120,404 III. Re-evaluation capital gains ...... 63 0 63 IV. Reserves ...... 7,876 1,517 6,359 V. Result carried forward ...... 166,483 30,467 136,016 Result for the period ...... 23,852 6,196 17,656 VI. Capital subsidies ...... 1,230 190 1,040

Provisions, Deferred Taxes ...... 14,003 1,446 12,557

Creditors ...... 291,013 11,026 279,987

VIII. Amounts payable after one year ...... 136,410 1,287 135,123 IX. Amounts payable within one year ...... 152,513 9,566 142,947 X. Deferred charges and accrued income ...... 2,090 173 1,917

Total Liabilities ...... 719,365 92,224 627,141

For further information in respect of the above balance sheets and the demerger proposal, reference is made to the documents that are made available to the public in respect of the demerger of Barco, and that are referred to below under Section 2.4.

2.3.3 Exchange of Shares and VVPR Strips

On the date of this prospectus, Barco has 12,410,479 shares. These shares include 1,894,512 shares which can benefit from a reduced withholding tax rate ("verminderde voorheffing" / "précompte réduit" or "VVPR") on dividends of 15 % instead of 25 %. The VVPR tax advantage has been incorporated in VVPR strips that are listed separately on the First Market of Euronext Brussels.

In consideration of the allocation of assets and liabilities of Barco to BarcoNet, respectively New Barco, all the outstanding 12,410,479 shares of Barco will need to be exchanged into 24,820,958, new shares of

26 BarcoNet and 12,410,479 new shares of New Barco. As a result, each holder of shares of Barco will receive two new shares of BarcoNet and one new share of New Barco per share of Barco.

Barco is of the opinion that there are reasonable arguments to defend that the shares of Barco that can benefit from the reduced 15 % withholding tax, will not lose their VVPR status pursuant to the demerger of Barco. Upon Closing of the Demerger, therefore, all 1,894,512 VVPR strips of Barco will need to be exchanged into 3,789,024 VVPR strips of BarcoNet and 1,894,512 VVPR strips of New Barco. As a result, each holder of VVPR strips of Barco will receive two VVPR strips of BarcoNet and one VVPR strip of New Barco per VVPR strip of Barco.

For further information in respect of the exchange of the shares and VVPR strips of BarcoNet and New Barco, and the rights and benefits attached thereto, reference is made to Section 3 of Chapter I of this prospectus.

Apart from the aforementioned shares and VVPR strips, Barco has, at the date of this prospectus, also a number of outstanding convertible bonds, warrants and options. For further information in respect of consequences of the proposed demerger in respect of these securities, reference is made to Section 1.2 of Chapter II of this prospectus.

2.3.4 Closing of the Demerger

The Demerger of Barco will be effective upon approval of the demerger proposal of the Board of Directors of Barco, and the incorporation of BarcoNet and New Barco, by the shareholders representing at least 75 % of the votes validly cast at the aforementioned shareholders' meeting. Upon Closing of the Demerger, Barco will cease to exist. The demerger will for tax and accounting purposes, however, have retroactive effect as of July 1, 2000.

2.3.5 Special Remuneration

In respect of the demerger of Barco, the Board of Directors instructed the statutory auditor of Barco, Ernst & Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke, to prepare certain reports in accordance with article 174/29 of the Belgian Company Law. The special remuneration for this task amounts to BEF 600,000 (EUR 14,873.61), all as further explained in the demerger proposal of the Board of Barco of September 1, 2000.

The members of the Board of Directors of Barco, BarcoNet and New Barco will not receive any special remuneration in view of the demerger of Barco.

2.3.6 Dividends of Barco for the Six Month Period ended on June 30, 2000

Barco has prepared statutory and consolidated financial statements as of June 30, 2000 and for the six month period then ended in accordance with Belgian GAAP. These financial statements have been audited by the statutory auditor of Barco, Ernst & Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke, which delivered an unqualified opinion. Said statutory and consolidated financial statements, as well as the report by the statutory auditor, will be submitted to a separate extraordinary general shareholders' meeting of Barco to be held on October 20, 2000.

It is expected that no dividends will be distributed to the holders of shares of Barco with regard to the period starting on January 1 and ending on June 30, 2000.

27 2.4 AVAILABLE INFORMATION IN RESPECT OF THE DEMERGER

In respect of the demerger and other proposals that will be submitted to the extraordinary shareholders' meeting, the following documentation has been made available to the shareholders of Barco in accordance with the Belgian Company Law:

(a) the demerger proposal, prepared by the Board of Directors of Barco in accordance with articles 174/47 and 174/27 of the Belgian Company Law;

(b) a special report prepared by the Board of Directors of Barco in respect of the demerger in accordance with articles 174/47 and 174/29 §1 of the Belgian Company Law;

(c) a report prepared by the statutory auditor of Barco, Ernst & Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke, in accordance with articles 174/47 and 174/29 §2 of the Belgian Company Law;

(d) a report prepared by the statutory auditor of Barco, in respect of the contribution in kind to the capital of BarcoNet, respectively New Barco, in accordance with article 29bis of the Belgian Company Law;

(e) the financial statements of Barco for the fiscal years ended on December 31, 1997, 1998 and 1999;

(f) the annual reports of the Board of Directors of Barco for the fiscal years ended on December 31, 1997, 1998 and 1999;

(g) the reports of the statutory auditor of Barco on the financial statements for the fiscal years ended on December 31, 1997, 1998 and 1999;

(h) the financial statements of Barco for the six month period ended on June 30, 2000;

(i) the report of the statutory auditor of Barco on the financial statements for the six month period ended on June 30, 2000;

(j) a special report prepared by the Board of Directors of Barco in accordance with article 33bis §2 of the Belgian Company Law in respect of the proposal to provide for the authority of the Board of Directors of BarcoNet to increase the capital of BarcoNet within the framework of the authorized capital ("toegestaan kapitaal" / "capital autorisé");

(k) a special report prepared by the Board of Directors of Barco in accordance with article 33bis §2 of the Belgian Company Law in respect of the proposal to provide for the authority of the Board of Directors of New Barco to increase the capital of New Barco within the framework of the authorized capital;

(l) a special report by the Board of Directors of Barco in respect of the proposal to issue additional warrants of BarcoNet, in accordance with articles 34bis §4 and §4bis and 101ter §2 of the Belgian Company Law;

(m) a special report by the Board of Directors of Barco in respect of the proposal to issue additional warrants of New Barco, in accordance with articles 34bis §4 and §4bis and 101ter §2 of the Belgian Company Law;

28 (n) a special report by the statutory auditor of Barco, in respect of the proposal to issue additional warrants of BarcoNet, in accordance with article 34bis §4 and §4bis of the Belgian Company Law; and

(o) a special report by the statutory auditor of Barco, in respect of the proposal to issue additional warrants of New Barco, in accordance with article 34bis §4 and §4bis of the Belgian Company Law.

The original Dutch version of the reports referred to above can be obtained, at no cost, by the shareholders of Barco at the registered office (Frankrijklaan 18, 8970 Poperinge, Belgium) or the administrative seat of Barco (Kennedypark 35, 8500 Kortrijk, Belgium, for the attention of Mr. JP Tanghe, Vice-President and Director of Corporate Communication and Investor Relations, tel. +32 (0)56 26.29.07).

As of September 20, 2000, the documents sub (a) to (d) and (j) to (o) are also sent to the holders of registered shares of Barco, and to the holders of bearer shares who have complied with the formalities required by the Belgian Company Law and the Articles of Association of Barco in order to be admitted to the extraordinary shareholders' meeting that will decide on the demerger of Barco and the incorporation of BarcoNet and New Barco.

The documents referred to sub (h) to (i) are sent as of October 3, 2000 to holders of registered shares of Barco and will be sent to the holders of bearer shares who have complied with the formalities required by the Belgian Company Law and the Articles of Association of Barco in order to be admitted to the extraordinary shareholders' meeting that will decide on the financial accounts for the six month period ended on June 30, 2000.

The demerger proposal referred to sub (a) above has also been filed with the Registrar of the Commercial Court of Ieper on September 4, 2000, where it is available for the public.

The text of the Dutch version, and a free English translation for information purposes, of the documents referred to sub (a) to (b) will also be made available through the Web-site of Barco (address: www.barco.com).

29 3. GENERAL INFORMATION ABOUT THE SHARES AND VVPR STRIPS AND THE ADMISSION TO LISTING

3.1 INFORMATION CONCERNING THE SHARES AND THE VVPR STRIPS

3.1.1 Description of the Rights attached to the Shares

Set forth below is a summary of the rights attached to the shares of BarcoNet and New Barco, based on certain provisions contained in the Articles of Association of BarcoNet and New Barco, certain provisions of the Belgian Company Law Act ("Belgian Company Law"), and certain other Belgian laws applicable to the formation, organization and operation of public limited liability companies ("naamloze vennootschap - N.V." / "société anonyme - S.A."). The following description is a summary for information purposes only and does not purport to be complete, and should not be construed as legal advice as to the interpretation or enforceability of the relevant provisions of the Articles of Association of BarcoNet, respectively New Barco, and Belgian law.

(a) Voting Rights

Each holder of shares of BarcoNet, respectively New Barco, is entitled to one vote per share, without prejudice to specific restrictions on the shareholders' voting rights in the Articles of Association of BarcoNet, respectively New Barco, and Belgian Company Law, including restrictions for non-voting shares. Voting rights may be suspended with respect to shares:

· which have not been fully paid-up in spite of a request of the company's Board of Directors,

· which are owned by more than one person, except if a sole representative has been appointed and notified to the company with respect to the exercise of voting rights,

· which entitle their holder to voting rights in excess of any threshold of 3 %, and subsequently 5 %, or of any multiple of 5 % of the total voting rights existing at the date of the shareholders' meeting concerned, except if the holder of such shares has notified the company and the Belgian Banking and Finance Commission, at least 45 days before the date of the shareholders' meeting at which the votes are cast (see (f) "Transparency Rules"), and

· for which voting rights have been suspended by a decision of a competent court.

The shareholders have sole authority regarding such matters as:

· the approval of the company's annual accounts,

· the election or dismissal of the company's Directors and statutory auditor(s),

· the granting of discharge from liability of the Directors and the statutory auditor(s),

· the determination of the Directors' and statutory auditor(s)' remuneration in connection with their mandate,

· the allocation of profits,

· the filing of a derivative suit against Directors,

30 · decisions relating to the dissolution, merger and certain other reorganizations of the company, and

· any amendment to the Articles of Association.

Pursuant to Belgian Company Law, increases of the company's share capital that are not decided by the Board of Directors within the framework of the authorized capital, resolutions for the dissolution, merger and certain other reorganizations of the company, the amendment of the Articles of Association (other than the amendment of the corporate purpose), and certain other matters provided by Belgian Company Law do not only require the presence or representation of a quorum of at least 50 % of the company's outstanding share capital, but also the approval of at least 75 % of the share capital represented at the meeting. Any amendments to the corporate purpose clause of the company require the approval of at least 80 % of the votes validly cast at the shareholders' meeting, which meeting may, in principle, only validly decide if a double quorum representing at least 50 % of the company's share capital and at least 50 % of the company's profit shares, if any, is present or represented. If the aforementioned quorum requirements are not met at the first general meeting, a new notice convening a new meeting is required, addressed to all shareholders, in which case the second and new general meeting may deliberate and validly resolve, irrespective of any quorum (except in case of a proposal to transform the legal form of the company).

(b) Dividend Rights

Under Belgian Company Law, the shareholders decide on the distribution of profits at the annual shareholders' meeting based on the latest annual audited accounts of the company established in accordance with Belgian generally accepted accounting principles or Belgian GAAP and on the basis of a (non-binding) proposal of the Board of Directors.

Dividends can only be paid provided, and to the extent that, following the declaration and payment of the dividend, the amount of the company's net assets (including profits carried forward), reduced by the non-amortized portion of its incorporation cost and capitalized research and development costs, will not fall below the amount of the company's paid up capital, increased by the amount of its non-distributable reserves. Dividends may be paid either in cash or in kind. Dividends are payable at the dates and places fixed by the shareholders' meeting or the Board of Directors. Before declaring and paying a dividend for any given year, however, the company must first allocate at least 5 % of its (distributable) net profits for the fiscal year concerned to a reserve account ("legal reserves"). The obligation to make such an annual allocation to the legal reserve prior to declaring any dividend no longer applies once such reserve has reached an amount equal to 10 % of the Company's share capital.

The Articles of Association of BarcoNet, respectively New Barco, will authorize the Board of Directors to pay interim dividends, subject to the rules of Belgian Company Law. According to these rules, such interim dividends may only be distributed provided that:

· the interim dividends only relate to the profits of the then current fiscal year, to be decreased or increased with the losses, respectively the profits carried forward, but without decreasing the reserves that need to be formed by the company,

· the Board of Directors has determined the amount of the profits of the then current fiscal year on the basis of a statement of assets and liabilities of the company, which has been established not earlier than two months prior to the decision of the Board of Directors to distribute interim dividends, and which has been reviewed by the company's statutory auditor,

· the Board of Directors may only decide to distribute interim dividends at the earliest of 6 months following the end of the preceding fiscal year, and upon condition that the financial accounts for that year have been approved, and

31 · new interim dividends may only be distributed at the earliest of 3 months following a previous distribution of interim dividends.

If the aggregate amount of distributed interim dividends for a given fiscal year exceeds the amount of the annual dividends for the fiscal year concerned, which will be established by the annual meeting of shareholders, the excess of the distributed interim dividends will be considered an advance to dividends for subsequent fiscal years.

The shares of BarcoNet will be entitled to dividends, if any, payable with respect to the first fiscal year of BarcoNet starting on July 1, 2000, and ending on December 31, 2000, and any subsequent fiscal year, which shall start on January 1 and end on December 31 of each calendar year. The same will apply to the shares of New Barco.

With respect to bearer shares, the Belgian Act of July 24, 1921, provides that, if the payment of dividends on bearer shares is not requested by the legitimate holder thereof, the company may deposit these dividends with the "Deposito- en Consignatiekas" / "Caisse de Dépôts et Consignation". The right to claim the distribution of dividends so deposited expires after 30 years, at which time the dividends become the property of the Belgian State. With respect to registered shares, the right to payment of any dividend expires 5 years after the Board of Directors declared such dividend payable.

BarcoNet and New Barco will be created for an indefinite period of time. BarcoNet, respectively New Barco, may be dissolved by a resolution approved by 75 % of the votes validly cast at a shareholders' meeting of the company concerned where at least 50 % of the share capital is present or represented.

If the ratio of the company's net assets to share capital (under Belgian legal and accounting rules) falls below 50 %, the Board of Directors must, within two months following the date where it discovered or should have discovered this under-capitalization, convene a shareholders' meeting at which the Board must propose either the dissolution or a plan for the continued operation of the company. Shareholders representing at least 75 % of the votes validly cast at this meeting, where at least 50 % of the company's outstanding share capital is present or represented, may then instruct the Board of Directors to continue or dissolve the company.

If the ratio of net assets to share capital falls below 25 %, the same procedure must be followed, provided that shareholders representing only 25 % of the votes present at the meeting may then instruct the Board of Directors to liquidate the company. In addition, if the company's net assets value falls below BEF 2.5 million, i.e. the minimum share capital (EUR 61,973.38), any interested party such as creditors of the company, may petition the competent Belgian court to dissolve the company. In case such a proceeding is initiated, the company concerned may present a plan for its continued operation. It is in the court's discretion to order that the company be dissolved. The court may grant the company a grace period to take remedial action. Upon Closing of the Demerger, BarcoNet and New Barco will have net assets substantially in excess of the minimum share capital.

In the event that the company is dissolved, the assets or the proceeds from the sale of assets remaining after payment of all debts, liquidation expenses and taxes, must be distributed on a pro rata basis to the shareholders, subject to preferential liquidation rights of shares having such rights. Upon Closing of the Demerger, BarcoNet and New Barco will not have issued any shares having such preferential liquidation rights.

(d) Capital Increases and Preferential Subscription Rights

The shareholders' meeting can decide at any time to increase or decrease the company's capital or to issue warrants or convertible bonds, provided that 50 % of the company's capital is present or represented at the meeting and the decision is approved by at least 75 % of the votes present and validly cast.

32 Under Belgian Company Law, the shareholders' meeting can, by the same qualified majority as referred to above, confer the right upon the Board of Directors to increase the company's capital without further shareholders' approval, within certain limits. This is the so-called "authorized capital" ("toegestaan kapitaal" / "capital autorisé"). This authorization must be limited in time (i.e. a maximum term of five years, renewable) and in scope (i.e. the authorized capital of public companies cannot exceed the outstanding capital of the company).

At the occasion of any capital increase in cash, or any issue of convertible bonds or warrants, the shareholders have a preferential subscription right. Such preferential subscription right is proportioned to the capital represented by the shares held by the shareholder at the time of the capital increase or issuance of warrants or convertible bonds.

In case of a capital increase decided by the shareholders' meeting, the preferential subscription right can be restricted or cancelled by a resolution approved by 75 % of the votes validly cast at a shareholders' meeting where at least 50 % of the company's share capital is present or represented. In case of a capital increase decided by the Board of Directors in the framework of the authorized capital, the preferential subscription right may be restricted or cancelled by a resolution of the Board of Directors. Generally, however, the authority of the Board of Directors to increase the subscribed capital through contributions in cash with the elimination or the limitation of the preferential subscription rights of the existing shareholders is suspended as from the date of notification to the company by the Belgian Banking and Finance Commission of a public take-over bid on the shares of the company. Nevertheless, a special shareholders' authorization may authorize the Board of Directors to increase in such case the capital by issuing an amount of shares that may not exceed 10 % of the company's outstanding shares at the time of such take-over bid. The shareholders of Barco that will decide on the demerger of Barco and incorporation of BarcoNet and New Barco, will be proposed to expressly authorize the Board of Directors of BarcoNet, respectively New Barco, to increase BarcoNet, respectively New Barco's capital, including in case of a public take-over bid. For a more detailed description of the authorized capital of BarcoNet and New Barco, reference is made to Chapter II, Section 1.2.7 and Chapter III, Section 1.2.

(e) Right to Attend and Vote at the Shareholders' Meetings

Annual shareholders' meetings of BarcoNet will be held at the registered office of BarcoNet or as otherwise indicated in the notices convening the meeting, on the fourth Wednesday of April of each year at 5 p.m. Annual shareholders' meetings of New Barco will be held at the registered office of New Barco or as otherwise indicated in the notices convening the meeting, on the second Wednesday of May of each year at 5 p.m.

Prior to the annual shareholders' meeting, shareholders are entitled to receive a copy of the audited accounts and of the annual report required under Belgian Company Law. At the annual shareholders' meeting, the Board of Directors submits the audited accounts of the company for approval, together with the proposed allocation of profits or losses, a proposal for the discharge of the Board of Directors' and the statutory auditor's liability, and, if necessary, the election or dismissal of the statutory auditor. The Board of Directors also submits an annual report describing the activities of the company over the past fiscal year, any capital increase or decrease or issue of convertible bonds and warrants, any material event that has occurred since the close of the fiscal year, any developments that are likely to have a significant impact on the company's business, and the work that was performed regarding research and development. No quorum is required under Belgian Company Law for annual shareholders' meetings. The validly convened general meeting represents all shareholders including those who did not agree with the decision taken by the meeting, or those who did not participate in the meeting. Decisions taken by the meeting are binding for all shareholders, including those who were absent or voted against any proposal.

Extraordinary shareholders' meetings may be convened by the Board of Directors or by the statutory auditor at any time the company's interests so require. An extraordinary general shareholders' meeting must be convened at any time when shareholders representing at least 20 % of the company's capital so request.

33 Every shareholder is entitled to attend and vote at the shareholders' meeting, either in person or by proxy. The proxy holder does not need to be a shareholder. Draft proxies, if any, prepared by the Board of Directors, must be deposited at the indicated place, at least 5 days prior to the meeting.

A notice for a general shareholders' meeting must indicate the place, date and time of the meeting, as well as the agenda. Such agenda must specify in detail the proposed resolutions at the meeting. Items that were not mentioned on the agenda cannot be validly decided upon, unless all shareholders are present or represented at the meeting and unanimously agree to include the item in the agenda.

Under Belgian law, the notice must be published once in the Belgian Official Gazette (at least 8 days prior to the meeting) and twice in a nation-spread newspaper and one newspaper from the region in which the registered office is established (the first notice at least 8 days before the second, and the latter at least 8 days before the meeting). In addition, holders of registered shares, if any, are given notice by mail.

Holders of bearer shares, must deposit their share certificates at the registered office of the company or at any other place indicated in the notice at least 4 but not more than 6 business days prior to the meeting and must provide proof, satisfactory to the shareholders' meeting, that their share certificates will remain so deposited until after the meeting. Owners of registered shares may be required to inform the company of their intention to attend the meeting, in writing, at least 4 but not more than 6 business days prior to the meeting.

Before taking part in a shareholders' meeting, the shareholders or their representatives must sign the attendance list setting out the identity of the shareholders, and, if applicable, the identity of the proxy holder and the number of shares they represent.

(f) Transparency Rules

According to the applicable regulations and the Articles of Association of BarcoNet, respectively New Barco, each legal or natural person who directly or indirectly acquires or disposes of voting financial instruments of the company, whether or not representing the capital, is obliged to notify the company and the Belgian Banking and Finance Commission within two business days from the date of such acquisition or disposal, of the total number of voting financial instruments held by such person following such acquisition or disposal, in all cases where the proportion of voting financial instruments held directly or indirectly by such person following the transaction exceeds or falls below the threshold of 3 %, and subsequently 5 % or any multiple of 5 % of all outstanding voting financial instruments of the company. If the number of voting rights held is equal to or in excess of 20 %, the notification relating to increases or decreases of shareholdings must also contain a description of the policy in the framework of which the acquisition or transfer takes place, as well as how many shares have been acquired over the last 12 months, and in which manner. The company shall, at the latest the first working day following receipt of the aforementioned declaration, disclose the declaration to the public, except in case of a special exemption granted by the Belgian Banking and Finance Commission if such publicity would be seriously detrimental to the company. A person or legal entity who fails to fulfill the disclosure requirements described above at least 45 days prior to a general shareholders' meeting, is not entitled to vote with the shares that were subject to a disclosure obligation.

(g) Right to Participate in the Election of the Board of Directors

As a general rule, the Directors are elected by the majority of the votes cast at a validly convened shareholders' meeting, for a (renewable) term of maximum 6 years. Directors can at all times be dismissed by the majority of the votes cast at a validly convened shareholders' meeting.

Pursuant to the Articles of Association, at least two Directors of BarcoNet, respectively New Barco, shall be "Independent Directors", i.e. Directors

34 · who are not or have not been in the recent past an employee of the company or any of its subsidiaries, or of a shareholder of the company or any of its subsidiaries, with a beneficial interest in three percent or more of the financial instruments of the company;

· who are not a shareholder with a beneficial interest in three percent or more of the financial instruments of the company; or

· who do not have a relationship with the company or one of its subsidiaries, which in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a member of the Board of Directors.

In addition, each of BarcoNet and New Barco shall respect and apply the rules proposed by the Belgian Banking and Finance Commission and the Market Authority of Euronext Brussels relating to the corporate governance of companies listed on Euronext Brussels.

(h) Appointment of the Statutory Auditors

Under Belgian Company Law, the shareholders of companies that fulfill certain requirements as to their size must have one or more statutory auditors for Belgian accounting requirements. A statutory auditor appointed in accordance with Belgian Company Law, audits the annual accounts of a company to ensure that they accurately and fairly represent the financial condition of the company for Belgian accounting purposes. Statutory auditors serve for terms of three years, must be elected by the shareholders and may only be removed by the shareholders during said term for cause at a meeting where this item is specifically mentioned on the agenda.

The general shareholders' meeting of Barco that will decide on the demerger of Barco and the incorporation of BarcoNet and New Barco, will be proposed to appoint Arthur Andersen Bedrijfsrevisoren C.V.B.A., represented by Mr. Dirk Van Vlaenderen, as statutory auditor of BarcoNet and Ernst & Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke, as statutory auditor of New Barco for a term of three years, until the annual general shareholders' meeting of the company concerned to be held in 2003.

(i) Right of Inspection

There is a statutory obligation for companies to file their financial statements with the National Bank of Belgium within 30 days after their approval by the shareholders at the annual meeting. A copy of these financial statements may be obtained by any shareholder.

The Board of Directors must also submit a management or annual report to the annual shareholders' meeting as to the management during, and the financial situation of the company at the end of, the preceding fiscal year. Subsequently, the statutory auditor must submit a report regarding the financial statements and the annual report prepared by the Board of Directors. On the basis of their respective reports and the audited financial statements, the general shareholders' meeting is invited to vote on the approval of the accounts and on the discharge of the Directors and the statutory auditor from liability incurred in the course of the performance of their mandates.

(j) Anti-take-over Effect of Provisions of Belgian Company Law and Other Belgian Laws

The Articles of Association of BarcoNet and New Barco will contain provisions that may have the effect to enable the respective companies' management to resist a take-over.

The Board of Directors of BarcoNet, respectively New Barco, shall be permitted, within its authorized capital ("toegestaan kapitaal" / "capital autorisé") to issue additional shares, convertible bonds and warrants upon such terms as it deems appropriate, without the prior approval of the shareholders, up to five years after the date of publication of the company's Articles of Association in the annexes to the Belgian Official Gazette. In the

35 absence of an express authorization by the general shareholders' meeting to the Board of Directors, the authority of the Board of Directors to increase the subscribed capital through contributions in cash with the elimination or the limitation of the preferential subscription rights of the existing shareholders, or through contributions in kind, is suspended as from the date of notification to the company by the Belgian Banking and Finance Commission of a public take-over bid on the shares of the company. Such authority will re-emerge immediately after the closing of such public take-over bid. The general shareholders' meeting of Barco that will decide on the demerger of Barco and the incorporation of BarcoNet and New Barco, will be proposed to expressly authorize the Board of Directors of BarcoNet, respectively New Barco, for a term of three years, to increase the subscribed capital in one or several times, as from the date of notification by the Belgian Banking and Finance Commission to the company concerned of a public take-over bid on the shares of the company, through contributions in cash with the elimination or the limitation of the preferential subscription right of the existing shareholders or through contributions in kind in accordance with article 33bis, §4 of the Belgian Company Law. The ability of BarcoNet, respectively New Barco, to issue such securities in such a manner could enable the Board of Directors of BarcoNet, respectively New Barco, to prevent changes in the management or the control of the company.

Furthermore, the Articles of Association of BarcoNet, respectively New Barco, will authorize the Board of Directors of the company to repurchase shares of the company concerned in accordance with article 52bis of the Belgian Company Law, in order to prevent imminent and serious harm to the company's interest during a period of three years after the publication of the Articles of Association in the annexes to the Belgian Official Gazette (see also (k) "Rights of the Company to Repurchase its own Shares").

In addition, there are several provisions under Belgian Company Law and certain other provisions of Belgian law which may apply to BarcoNet and New Barco and which may make an unfriendly tender offer, merger or other change in control of BarcoNet and New Barco more difficult.

Pursuant to the applicable regulations and Articles of Association of BarcoNet, respectively New Barco, each legal or natural person who directly or indirectly acquires or disposes of voting financial instruments of the company, whether or not representing the capital, could be required to inform the company of such acquisition or disposal, depending on whether certain thresholds are met. Further reference in this respect is made to point (f) above ("Transparency Rules").

Public take-over bids are subject to the supervision of the Belgian Banking and Finance Commission. If the Belgian Banking and Finance Commission determines that the take-over bid constitutes an infringement of the provisions of article 15, or the provisions taken on the basis of article 15, of the Belgian Act of March 2, 1989, it may suspend the take-over bid for a maximum of 72 hours and request the President of the Commercial Court to prohibit the bid and suspend the exercise of the rights attached to any shares that were acquired in accordance therewith.

Public take-over bids must be made for all the outstanding voting securities issued by BarcoNet, respectively New Barco, as well as for all other securities issued by BarcoNet, respectively New Barco, which entitle the holder(s) thereof to the subscription to, the acquisition or the conversion in such voting securities. Prior to making a bid, a bidder must issue and disseminate a prospectus, which must be approved by the Belgian Banking and Finance Commission. The Belgian Competition Act requires the prior approval by the Belgian Competition Council of a public take-over bid if the aggregate turnover in Belgium of the undertakings concerned exceeds EUR 40 million and if each of at least two of the undertakings concerned generates a turnover in Belgium of at least EUR 15 million.

In the event that an individual or a company intends to acquire the joint or exclusive control of a public company through one or several transactions relating to the shares of the company, the acquirer must notify the Belgian Banking and Finance Commission of the contemplated transaction at least five days before the completion of the transaction. If the price of the contemplated transfer includes a control premium, the acquirer must offer to all other shareholders the opportunity to sell their shares at the same price (if the control is acquired through a single acquisition of securities) or at the highest price offered by the acquirer for the shares of the company

36 during the twelve months preceding the acquisition of control of the company (if the control is acquired through several acquisitions of securities). The acquirer must give the other shareholders this opportunity within 30 days after its acquisition of control either in the form of a public take-over bid, or, under certain conditions, pursuant to an undertaking to support the stock price on the relevant stock exchange.

All these measures and provisions are designed to reduce the vulnerability of BarcoNet and New Barco to unsolicited acquisition proposals, and may therefore have the effect of substantially discouraging a take-over bid by a third party. Such provisions, however, may also have the effect of depriving the shareholders of selling their shares with a premium.

(k) Rights of the Company to repurchase its own Shares

Under Belgian Company Law, BarcoNet, respectively New Barco, may repurchase its own shares only pursuant to a special resolution approved by a shareholders' meeting by a vote of at least 80 % of all shares present or represented and with a quorum requirement of at least 50 % of the outstanding shares and of at least 50 % of the outstanding profit shares, if any. Approval by the shareholders is not necessary if the shares are repurchased with a view to distributing them to the company's personnel.

The general shareholders' meeting of Barco that will decide on the demerger of Barco and the incorporation of BarcoNet and New Barco, will be proposed to:

· authorize the Board of Directors of BarcoNet to repurchase and sell a maximum of 10 % of the company's shares during a period of 18 months at a minimum price equal to the fraction value of the company's shares, and at a maximum price equal to EUR 60, and

· authorize the Board of Directors of New Barco to repurchase and sell a maximum of 10 % of the company's shares during a period of 18 months at a minimum price equal to the fraction value of the company's shares, and at a maximum price equal to EUR 120.

The Articles of Association of BarcoNet and New Barco will also contain an authorization for the Board of Directors to repurchase and sell the shares but only in cases where such redemption or sale is necessary to prevent imminent and serious harm to the company's interests. This authorization will be valid for a period expiring three years after the publication in the Belgian Official Gazette of the respective decision of the extraordinary shareholders' meeting.

By virtue of Belgian Company Law, any offer to repurchase shares must be made to all of the company's shareholders on an equal basis unless in respect of the redemption of shares which has been decided unanimously by a meeting of shareholders at which all shareholders were present or represented or unless in respect of the redemption of shares listed on Euronext Brussels. Shares may be repurchased only with funds that would otherwise be available for distribution to shareholders as a dividend. The total amount of repurchased shares held at any time by the company concerned may not exceed 10 % of its share capital.

3.1.2 Certain Belgian Tax Considerations

The following summary is based on tax laws of Belgium as in effect on the date of this prospectus and is subject to changes in Belgian law including changes that could have retroactive effect. This summary does not take into account or discuss the tax laws of any country other than Belgium. Members of the public should consult their own tax advisors (a) as to the Belgian and other tax consequences of the demerger of Barco and (b) as to the Belgian and other tax consequences of the purchase, ownership and disposition of the shares of BarcoNet, respectively New Barco, in general.

This summary does not describe Belgian federal and regional estate and gift tax considerations. Furthermore, it does not address Belgian tax considerations relevant to potential purchasers, subject to taxing

37 jurisdictions other than, or in addition to, Belgium, and does not address all possible categories of securities' holders, some of whom may be subject to special rules.

(a) Tax Consequences of the Demerger of Barco

· Ruling by the Belgian Central Tax Administration

Pursuant to article 345 of the Belgian Income Tax Code, Barco submitted a ruling request to the Belgian Central Tax Administration requesting to confirm that the demerger of Barco meets legitimate financial or economic needs within the meaning of article 211, §1, second paragraph, 3° of the Belgian Income Tax Code. On September 11, 2000, the Central Tax Administration confirmed that the demerger of Barco meets legitimate financial or economic needs within the meaning of article 211, §1, second paragraph, 3° of the Belgian Income Tax Code. As the other requirements provided for in article 211 Belgian Income Tax Code are also fulfilled, the demerger of Barco should be a tax neutral event.

· Barco's Shareholders

The demerger of Barco has no tax consequences for the shareholders of Barco because of its tax neutral effect.

· The Exchange of Shares

Barco is of the opinion that the exchange of shares of Barco into shares of BarcoNet and New Barco pursuant to the demerger of Barco should not be considered as a purchase or sale of shares, nor as an acquisition in return for consideration in respect of the law regarding the tax on the stock exchange transactions. Barco is also of the opinion that the exchange of shares of Barco should not be qualified as a delivery of publicly issued shares. As a consequence, the exchange of shares of Barco into shares of BarcoNet and New Barco itself should not trigger any tax on stock exchange transactions.

· Delivery of the Shares

Barco is of the opinion that there are reasonable arguments to defend that the tax on the physical delivery of bearer securities is not due in case a holder of physical bearer shares of Barco would demand the physical delivery of bearer shares of BarcoNet, respectively New Barco, pursuant to the demerger of Barco.

(b) General Tax Consequences of the Purchase, Ownership and Disposition of the Shares

Notwithstanding the particular rules in respect of tax consequences of the demerger of Barco set forth above under (a), the Belgian and other tax consequences of the purchase, ownership and disposition of the shares of BarcoNet, respectively New Barco, in general, can be summarized as follows hereafter.

· Taxation of Dividends

For Belgian income tax purposes, the gross amount of all distributions made by BarcoNet, respectively New Barco, to its shareholders (other than the repayment of paid-up capital carried out in accordance with Belgian Company Law) are generally taxed as dividends. The gross amount paid by the company to repurchase shares owned by a shareholder and the distributions made by the company to its shareholders as a result of the company's complete dissolution and liquidation, are also taxed as dividends to the extent that the payment exceeds the fully paid-up capital of the company. In principle, however, no Belgian withholding tax is levied on such redemption and liquidation distributions.

38 In general, a Belgian withholding tax of (currently) 25 % is levied on dividends. Under certain conditions, the 25 % rate can be reduced to 15 %. Currently, Barco has 1,894,512 shares, which can benefit from such reduced withholding tax rate ("verminderde voorheffing" / "précompte réduit" or "VVPR") on dividends of 15 % instead of 25 %. As mentioned under Section 3.1.2 (a) "Tax consequences of the demerger of Barco", Barco is of the opinion that there are reasonable arguments to defend that the shares of Barco that can benefit from the reduced 15 % withholding tax, will not be affected as a result of the demerger of Barco. As a result, a total of 3,789,024 shares of BarcoNet and 1,894,512 shares of New Barco should benefit from the reduced 15 % withholding tax rate. To the extent that BarcoNet and New Barco are liable according to Belgian tax law to pay the withholding tax, BarcoNet and New Barco shall assume the responsibility thereof.

For private investors who are tax resident in Belgium and for Belgian legal entities subject to the "Rechtspersonenbelasting" / "Impôt des personnes morales", the Belgian withholding tax constitutes, in general, the final tax in Belgium on their dividend income.

For Belgian resident companies and for companies with their tax residence outside Belgium holding shares of BarcoNet, respectively New Barco, through a permanent establishment or fixed base in Belgium, the gross dividend income must be added to their taxable income, which is, in principle, taxed at the income tax rate of (currently) 40.17 % (under certain conditions, reduced rates apply). For this purpose, the gross dividend income includes the actually levied dividend withholding tax. If such a company holds an equity participation of at least 5 % or with an acquisition value of at least BEF 50,000,000 (EUR 1,239,467.60) at the time of the dividend distribution, 95 % of the gross dividend received can in principle be deducted from the taxable income. This is the so-called "participation exemption". The participation exemption also applies, even if the quantitative criteria are not fulfilled, if the corporate investor is identified as a credit institution mentioned in article 56, §1 of the Belgian Income Tax Code (1992), as an insurance company mentioned in article 56, §2, 2°, h of the Belgian Income Tax Code (1992), as a stockbroker company mentioned in article 47 of the Belgian Act of April 6, 1995 or as an investment company as defined in article 2, §2, 6° of the Belgian Income Tax Code (1992).

Belgian resident companies and companies with their tax residence outside Belgium holding shares through a permanent establishment or a fixed base in Belgium are, under certain conditions, entitled to credit the dividend withholding tax against their corporate income tax liability and to claim the reimbursement of the withholding tax that exceeds this liability.

A non-resident shareholder that does not hold shares of BarcoNet, respectively New Barco, through a permanent establishment or fixed base in Belgium, will not be subject to any Belgian income tax other than the dividend withholding tax, which constitutes the final Belgian income tax. Belgian tax law provides for certain exemptions from withholding tax on Belgian source dividends distributed to non-resident investors. No Belgian withholding tax is due on dividends attributed to a non-resident investor identified as a "non-resident saver" not carrying on a business profit-making activity and exempt from income tax in his country of residence. If no exemption applies, the Belgian withholding tax may be reduced for non- resident investors pursuant to double taxation treaties concluded by the Kingdom of Belgium and their State of residence.

· Capital Gains

Belgian resident individuals are in principle not liable for Belgian income tax on capital gains realized upon the sale, exchange, redemption or other transfer of shares of BarcoNet, respectively New Barco, unless the Belgian Tax Administration demonstrates that the capital gain is the result of speculation, or if the gain is otherwise realized outside the scope of the normal management of one's own private estate, or if, under certain conditions, the capital gain is realized upon the sale to certain non-residents of shares belonging to an important shareholding of 25 % or more.

39 Belgian legal entities subject to the "Rechtspersonenbelasting" / "Impôt des personnes morales" are in principle not liable for Belgian income tax on capital gains realized upon the sale, exchange, redemption or other transfer of shares.

Belgian resident companies and companies with tax residence outside Belgium holding shares of BarcoNet, respectively New Barco, through a permanent establishment or a fixed base in Belgium, are generally not liable for Belgian income tax on capital gains realized upon the sale, exchange, redemption or other transfer of shares.

Capital losses realized upon the sale, exchange, redemption or other transfer of shares are generally not tax deductible under Belgian tax law.

A non-resident shareholder who does not hold shares of BarcoNet, respectively New Barco, through a permanent establishment or fixed base in Belgium, will generally not be subject to any Belgian income tax on capital gains realized upon the sale, exchange, redemption or other transfer of shares.

· Tax on Stock Exchange Transactions

The purchase, sale or acquisition in return for remuneration in Belgium, through a "professional intermediary", of existing shares of BarcoNet, respectively New Barco, is subject to the tax on stock exchange transactions in the amount of 0.17 % (but limited to BEF 10,000 per transaction and per party). The delivery in Belgium, through a "professional intermediary", of newly and publicly issued shares of BarcoNet, respectively New Barco is subject to this tax in the amount of 0.35 % (but limited to BEF 10,000 or EUR 247,89 per transaction and per party).

The tax on stock exchange transactions is not due by "professional intermediaries" mentioned in article 2 of the Act of April 6, 1995, acting for their own account, insurance companies mentioned in article 2, § 1 of the Act of July 9, 1975, acting for their own account, pension funds mentioned in article 2, § 3, 6° of the Act of July 9, 1975, acting for their own account, collective investment institutions mentioned in the Act of December 4, 1990, acting for their own account, or by non-residents upon delivery of a certificate of non-residence.

· Tax on the Physical Delivery of Bearer Securities

Generally, a special tax on the physical delivery of bearer securities applies, amounting to 0.2 % of the value of the relevant securities. As discussed above under Section 3.1.2 (a), Barco is of the opinion that there are reasonable arguments to defend that the tax on the physical delivery of bearer securities is not due in case a holder of physical bearer shares of Barco would demand the physical delivery of bearer shares of BarcoNet, respectively New Barco, pursuant to the demerger of Barco.

3.1.3 Form and Transferability of the Shares

The shares of BarcoNet and New Barco will be issued in the form of bearer shares or as registered shares.

Until their physical delivery, bearer shares will be represented by one or more global certificates and only book-entry settlement will be possible.

Belgian Company Law and the Articles of Association of BarcoNet and New Barco shall entitle shareholders to request, at their expense, the physical delivery of their bearer shares. Such request would imply that an individualized physical bearer certificate be delivered (separate from the global certificate(s) concerned) to the shareholder concerned. A special tax on the physical delivery of bearer shares would be imposed, amounting to 0.2 % of the value of the relevant shares (see also under Section 3.1.2 (b) above). Barco is of the

40 opinion, however, that the tax on the physical delivery of bearer securities is in any event not due in case of a delivery of shares pursuant to the demerger of Barco (see also under Section 3.1.2 (a) above).

As soon as legally authorized, the shares of BarcoNet, respectively New Barco, may be converted into dematerialized shares in accordance with the relevant provisions in the Articles of Association of BarcoNet, respectively New Barco.

The shares of BarcoNet and New Barco will be freely transferable and will be fully paid up.

3.1.4 Paying Agents

Bank Brussels Lambert S.A., Bank Degroof N.V., Fortis Bank N.V., KBC Bank N.V., and Petercam N.V. will act as a paying agent for the shares of BarcoNet, respectively New Barco, free of charge for the shareholders. The cost of distributing dividends through the paying agent, if any, will be paid by BarcoNet, respectively New Barco. For further information on the possible costs that may be charged by other financial intermediaries for the distribution of dividends, shareholders are invited to consult their financial intermediary. Any changes, deletions or additions to the list of paying agents will be announced in the Belgian financial press.

3.2 EXCHANGE OF THE SHARES AND VVPR STRIPS

Upon Closing of the Demerger, all the 12,410,479 outstanding shares of Barco will be exchanged into 24,820,958 new shares of BarcoNet and 12,410,479 new shares of New Barco, and all 1,894,512 VVPR strips of Barco will need to be exchanged into 3,789,024 VVPR strips of BarcoNet and 1,894,512 VVPR strips of New Barco. The procedure to exchange the shares and VVPR strips can be summarized as follows:

· Registered shares of Barco

Following the Demerger, all registered shares of Barco will be exchanged into new registered shares of BarcoNet and new registered shares of New Barco, unless within one month following the Closing of the Demerger, holders of registered shares notify BarcoNet, respectively New Barco that they wish to receive bearer shares. The exchange into registered shares of BarcoNet, respectively New Barco, will be recorded in the respective shareholders' register of BarcoNet and New Barco.

· Physical bearer shares and VVPR strips of Barco

Holders of physical bearer shares and VVPR strips of Barco will be requested to deposit their shares, respectively VVPR strips with Petercam N.V. and the Cooperating Banks. Bearer shares for which physical delivery is requested, will be exchanged into physical bearer shares of BarcoNet and New Barco and be made available for collection at the counters of Petercam N.V. and the Cooperating Banks within 3 months following the Closing of the Demerger. As it is not intended that physical VVPR strips of BarcoNet and New Barco be printed, these will only be available in book-entry form. Pending the physical delivery of individual bearer shares, the newly issued shares will be available in book-entry form. If no physical delivery is requested, the bearer shares of Barco will be exchanged into shares of BarcoNet and New Barco and delivered in book-entry form.

· Bearer shares and VVPR strips of Barco in book-entry form

Bearer shares and VVPR strips held in book-entry form will, on or about the second banking day following the Closing of the Demerger, automatically be exchanged into shares, respectively VVPR strips, of BarcoNet and New Barco and delivered in book-entry form.

41 The costs relating to the exchange of the Shares and VVPR Strips with Petercam N.V. and the Cooperating Banks, excluding taxes on the physical delivery of bearer shares, if any, will be borne by BarcoNet and New Barco. For further information on the possible costs that may be charged by other financial intermediaries for the exchange of the shares and VVPR strips, shareholders are invited to consult their financial intermediary.

3.3 APPLICATION FOR ADMISSION TO LISTING OF THE SHARES AND VVPR STRIPS

Barco applied for the admission to listing of all of the shares and VVPR strips of BarcoNet and New Barco, including the shares and VVPR strips that will be issued upon exercise of options, warrants and convertible bonds of BarcoNet and New Barco, on the First Market of Euronext Brussels. The shares of BarcoNet are expected to be admitted to listing on the First Market of Euronext Brussels under the symbol "BARN", whereas the shares of New Barco are expected to be admitted to listing under the symbol "BAR". Upon admission to listing of the shares and VVPR strips of BarcoNet and New Barco, the shares and VVPR strips of Barco will be de-listed.

Apart from the admission to listing of the shares of BarcoNet and New Barco that will be issued in exchange of the existing shares of Barco, no additional new shares of BarcoNet or New Barco will be issued or publicly offered by BarcoNet, New Barco or their Principal Shareholder. As such, there will be no underwriting.

3.4 TRADING OF THE SHARES AND VVPR STRIPS ON THE FIRST MARKET OF EURONEXT BRUSSELS

3.4.1 Start of Trading

Separate listing and trading of the shares, respectively VVPR strips, of BarcoNet and New Barco is expected to commence on or about the second banking day following the Closing of the Demerger.

Prior to the listing of the Shares and the VVPR Strips on the First Market of Euronext Brussels, there will be no public market for the Shares and VVPR Strips.

3.4.2 Currency of Trading

The Shares and VVPR Strips will be traded in Euro.

3.4.3 The Initial Reference Price of the Shares upon Start of the First Separate Trading of the Shares

As prior to the listing of the shares of BarcoNet and New Barco, there will be no public market for such shares, the Market Authority of Euronext Brussels will decide on an initial reference price of the shares of BarcoNet and New Barco upon which separate trading of the shares will start, as follows:

· the initial reference price of the shares of BarcoNet will be determined on the basis of a valuation performed by Petercam N.V., as described below; and

42 It should be noted that the initial reference price of the respective shares may not be indicative for the prices that might prevail upon the start of the separate trading of the Shares. In addition, the price of the shares of Barco may also not be indicative for the price of the shares following their first listing on the First Market of Euronext Brussels.

3.4.4 Indicative Valuation of BarcoNet Group

Subject to the comments relating to forward-looking statements in the section "Risk Factors" in this prospectus, the discussion below relates to an indicative valuation of BarcoNet Group by Petercam N.V., which relies on a number of estimates and assumptions that, while considered reasonable, are inherently subject to significant business, financial, economic and other uncertainties and contingencies, and cannot be regarded as a representation by BarcoNet or Petercam N.V. that these estimates and assumptions are correct or accurate.

(a) Methodology

In view of the determination of the initial reference price of the shares of BarcoNet, Petercam N.V. performed a valuation of BarcoNet Group according to two methods commonly used by financial analysts to assess the value of a company, namely

· the discounted cash flows or "DCF" method, which is based on the discounting of the operating free cash flows that a company is expected to generate, and

· the peer benchmarking method, which is based on market valuation ratios of a selected group of listed comparable companies.

(b) Discounted Cash Flow Method

The "DCF" valuation relies on BarcoNet's revenues and costs forecasts for a period of five years from 2000 to 2004. For the period as of 2005 to 2012, it is assumed that BarcoNet Group's expansion gradually converges towards a perpetual growth rate, which has been applied beyond 2012. A number of additional assumptions regarding the balance sheet are made in order to estimate the expected operating free cash flow of BarcoNet Group, which is defined as the operating result after taxes plus depreciations and other non-cash items minus working capital needs and capital expenditures.

These cash flows are discounted using the weighted average cost of capital ("WACC") of 9.45 %, based on a long-term risk free interest rate of 5.70 %, an equity market risk premium of 3 % and assumptions such as the evolution of the gearing ratio of BarcoNet and a beta factor of 1.25.

A sensitivity analysis has been carried out on the long term constant growth rate, varying between 1.5 % and 2 %. Depending on the growth rate and based on the aforementioned assumptions, the valuation obtained through the "DCF" method results in a range comprised between EUR 522 and EUR 544 million.

The valuation obtained with the "DCF" method has been confirmed by valuing BarcoNet Group according to selected ratios of comparable listed companies, namely

· enterprise value ("EV", i.e. market capitalization plus net financial debt) / sales, · EV / earnings before interest, taxes, depreciation and amortization ("EBITDA"), · EV / earnings before interest and taxes ("EBIT"), and · price / earnings.

43 The ratios have been calculated for the years 2000 and 2001, based on analysts' forecasts for a group of peers and on the stock prices as of October 5, 2000. This peer group consists of four U.S. companies (ADC Telecommunications Inc - USD 28.7, C-Cor.net Corporation – USD 15.2, Harmonic Inc. – USD 12.9 and Scientific Atlanta Inc. – USD 56.5), one Norwegian company (Tandberg Television Asa – NOK 72.5) and one company in Finland (Teleste Oyj – EUR 33.6), which were selected based on the comparability of their activities, growth perspectives and margins.

The following table gives the average and median price-earnings and enterprise value-based ratios of BarcoNet's peer group, applicable as of October 5, 2000.

Average Median 2000 2001 2000 2001

P/E ...... 51.7 x 38.5 x 48.0 x 39.9 x EV/Sales ...... 3.4 x 2.6 x 3.5 x 2.8 x EV/EBITDA ...... 21.5 x 16.6 x 22.9 x 16.7 x EV/EBIT ...... 25.1 x 17.6 x 28.0 x 19.2 x

The above ratios have been applied to BarcoNet's corresponding projected financial data for the years 2000 and 2001, which led to a valuation range comprised between EUR 390 and EUR 530 million. The lower end of this range is retained in order to take into account the smaller market capitalization of BarcoNet as compared to its peer group.

(d) Conclusion

Based on the two methods described above, BarcoNet's equity is valued at an estimated range between EUR 390 and EUR 460 million, i.e. EUR 15.7 and EUR 18.5 per share of BarcoNet, as compared to the market capitalization of Barco, which on October 5, 2000, amounted to EUR 1,654 million, based on a price of EUR 133.3 per share and 12.4 million shares. On a fully diluted basis, taking into account the number of potential new shares resulting from conversion of the convertible bonds, bond issued with warrants and the options and warrants granted under the existing stock option plans, and using a set of assumptions (assuming all BarcoNet employees would convert their New Barco options to BarcoNet options whereas no New Barco employees would convert their BarcoNet options to New Barco options; further assuming first closing prices of BarcoNet around the middle of the indicative price range), the indicative valuation on a fully diluted basis gives a value per share of BarcoNet between EUR 15.6 and EUR 18.3.

(e) Valuation Update

Absent substantial changes in market conditions between the date of this prospectus and the start of trading, the initial reference price of the shares of BarcoNet upon start of trading is expected to be comprised in a range between EUR 15.6 and EUR 18.3. As market conditions may differ upon start of trading of the shares of BarcoNet, the initial price reference that will be established upon start of trading may not be comprised within the aforementioned expected range. As such, the expected initial reference price range is purely indicative.

Prior to the separate listing of the shares of BarcoNet, Petercam N.V. will perform a new valuation of BarcoNet Group in accordance with the principles set forth above. If the initial reference price range that will result from this valuation update should substantially differ from the aforementioned expected initial reference price range, this will be published in the Belgian financial press prior to the first separate listing of the shares of BarcoNet.

3.4.5 Trading and Price Stabilization

Barco and Petercam N.V. agreed that Petercam N.V. may engage in transactions that stabilize, maintain or otherwise affect the price of the shares of BarcoNet and New Barco following their admission to listing, as

44 permitted. In particular, Petercam N.V. may sell and purchase shares of BarcoNet, respectively New Barco, for its own account, and it may use some of the shares of BarcoNet that will be held by the Principal Shareholder for such purpose (see also Section 3.8 below). Finally, Petercam N.V. committed to actively assist Barco, BarcoNet and New Barco in organizing the listing and exchange of their shares and VVPR strips upon Closing of the Demerger.

The Joint Global Coordinators and some of the other Cooperating Banks may engage in other transactions with, and perform services for, BarcoNet and New Barco in the ordinary course of business. Furthermore, Petercam N.V. and some of the Cooperating Banks have been engaged, in commercial banking and investment banking transactions with Barco for which they have received customary compensation.

3.5 COSTS OF THE EXCHANGE OF THE SHARES AND LISTING

The costs related to the demerger, exchange of Shares and VVPR Strips and admission to listing of the Shares and VVPR Strips (including administrative costs, filing fees, auditors', financial advisors' and legal costs) are estimated at approximately EUR 2.9 million, including the costs for the financial intermediaries (which are expected to amount to approximately EUR 1.8 million), the costs of Arthur Andersen Bedrijfsrevisor C.V.B.A. (which are expected to amount to approximately EUR 52,000), and the special remuneration of Ernst & Young Bedrijfsrevisoren C.V. in respect of the demerger (which amounts to BEF 600,000 (EUR 14,873.61), as referred to in Section 2.3.5 of Chapter I of this prospectus).

3.6 MERGER OF THE BRUSSELS STOCK EXCHANGE INTO EURONEXT

Prior to September 22, 2000, the Belgian securities market operated as a Belgian limited liability company under the name "Brussels Exchanges" or "BXS", which included the Belgian futures and options market or "Belfox", the Brussels Stock Exchange and the clearing agency ("BXS-CIK").

As of September 22, 2000, Société des Bourses Françaises ("SBF"), Amsterdam Exchanges ("AEX") and Brussels Exchanges ("BXS") have been merged into "Euronext", whereby the three national exchanges have been renamed into respectively "Euronext Paris", "Euronext Amsterdam" and "Euronext Brussels". The following paragraphs summarize Barco's understanding of Euronext.

Euronext is to be a totally integrated cross-border single-currency European stock and derivatives market. Euronext will provide for various market segments. Companies listed on Euronext can be placed in various market segments, depending on the selection criteria of the segments concerned.

Some of the most important segments will be the "Euronext 100", "Next 150", "Next Economy" and the "Prime Market" segments. The "Euronext 100" segment will include the shares of the 100 largest companies listed on Euronext, selected according to market capitalization and fulfilling certain minimum liquidity criteria (also known as "blue chips"). The "Next 150" segment will include the shares of the next 150 largest companies listed on Euronext, selected according to market capitalization and fulfilling certain minimum liquidity criteria (also known as "large caps"). The "Next Economy" segment will include those listed companies specializing in high technology, computer related activities, Internet based activities and other e-commerce businesses and telecommunications. The "Prime Market" segment, finally, will include small and mid cap companies operating in traditional sectors. Companies included in the "Next Economy" and "Prime Market" segments will have to fulfill specific transparency requirements such as quarterly reporting in English, using International Accounting Standards or "IAS", or United States generally accepted accounting principles or "US GAAP", and analysts reports.

45 Based on the aforementioned segments, Euronext intends to launch five new indices, i.e. the Euronext 100 index, the Next 150 index, the Next Economy All Shares index, a Next Economy index, which will be a subset of the Next Economy All Shares index, and the Prime index.

On the date of this prospectus, companies seeking a listing on one or more of the local exchanges (i.e. Euronext Paris, Euronext Amsterdam and Euronext Brussels), are still subject to the listing requirements of the relevant local exchanges that they wish to access and the respective national securities regulations. Companies already listed, remain subject to local listing requirements, national securities regulation and supervision by their local securities regulator. In addition, companies that are already listed on one or more of the respective exchanges, will remain so listed and will not be required to transfer their shares or listing to another exchange in order for their shares or other financial instruments to be traded on the Euronext trading platform. Subject to local regulations and legislation, Euronext intends, however, to harmonize in due course the listing requirements of the three exchanges.

Subject to admission to listing of the Shares and VVPR Strips, Barco expects that the shares of BarcoNet and New Barco will be part of the "Next Economy" segment of Euronext. It is possible that the shares of BarcoNet and New Barco will also be admitted to the "Next 150" index of Euronext.

Since 1991, Barco's shares are included in the Bel 20 Share Index, which is an index of the 20 leading Belgian "blue chip" securities listed on Euronext Brussels. On the date of this prospectus the shares of Barco represented 1.57 % of the Bel 20 Share Index. Based on information available to it on the date of this prospectus, Barco expects, but cannot guarantee, that the shares of New Barco will, upon their admission to listing on the First Market of Euronext Brussels, remain included in the Bel 20. It is, however, possible that in view of the demerger of Barco, the weight of New Barco in the Bel 20 will be re-evaluated. Furthermore, it cannot be guaranteed whether the Bel 20 Share Index will be continued and/or changed in view of the merger of the Brussels Exchanges into Euronext. Barco, however, understands that Euronext Brussels intends to continue to calculate and publish the Bel 20 Share Index for the time being.

3.7 EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING HOLDERS OF THE FINANCIAL INSTRUMENTS

There are no Belgian exchange control restrictions on investments in, or payments on, the shares of BarcoNet and New Barco. From time to time, the Belgian authorities may proceed to implement embargoes promulgated at European and/or United Nations level. Such embargoes may have an impact on the (continued) capacity of investors falling within the scope of the embargo to hold shares, and to exercise the corresponding rights, as well as on the payment flows relating to such shareholdings.

Other than as referred to in Section 3.1.1 of this Chapter I ("Description of the Rights attached to the Shares"), there are no special restrictions under Belgian Law or in the proposed Articles of Association of BarcoNet, respectively New Barco, that limit the right of shareholders who are not citizens or residents of Belgium to hold, or to exercise the rights attached to, the shares of BarcoNet, respectively New Barco.

3.8 LOCK-UP FOR THE PRINCIPAL SHAREHOLDER

The number of shares of BarcoNet and New Barco available for sale in the public market following the admission to listing will be limited by lock-up agreements to be entered into in connection with this listing, with BarcoNet, respectively New Barco's, Principal Shareholder, GIMV N.V.

46 N.V. will deposit 1.241.047 shares of BarcoNet with Petercam N.V. for a period of 30 days after the date of the first listing of the shares of BarcoNet. Petercam N.V. can sell all or part of these shares in the market at a price that is not lower than the lower limit of the indicative valuation as set out in this prospectus or any complement hereto, unless otherwise agreed between GIMV N.V. and Petercam N.V. If and to the extent that Petercam N.V. has sold any of these shares, it can buy-back such shares in the market for the account of GIMV N.V. and support the market price , however only at such prices that said sales and purchases do not result in a loss for GIMV N.V. After the 30 days period, GIMV N.V. will be entitled to the remaining shares and the result on the transactions and an announcement on the use of these shares will be published. The purpose of this is to stabilize the market and increase the liquidity for the shares of BarcoNet in the first days after the separate listing.

Petercam N.V. may release all or any portion of the shares that are subject to the aforementioned lock-up agreements.

47 4. RISKS RELATED TO THE DEMERGER AND THE LISTING OF THE SHARES AND VVPR STRIPS

The following "risk factors" should be read together with the risk factors set forth elsewhere in this prospectus.

Risks related to the Demerger

Following the Closing of the Demerger, creditors of Barco could demand additional guarantees from BarcoNet and New Barco to secure their rights.

According to Belgian Company Law, within two months following the publication of the demerger of Barco in the annexes to the Belgian Official Gazette, creditors of Barco whose claims vis-à-vis Barco pre-date the publication of the demerger of Barco and whose claims have not yet been paid or expired, are entitled to demand additional guarantees from BarcoNet and New Barco to secure their original claims or rights.

The new legal entity or debtor (i.e. BarcoNet or New Barco) to which the relevant claim will have been allocated, will be entitled to reject such demand for additional guarantees by paying the discounted value, if any, of the claims concerned. If no agreement is reached on the demand for additional guarantees or the payment of the discounted value of the original claim, the creditor and the new debtor concerned will each be entitled to submit their dispute to the President of the Commercial Court of Kortrijk, Belgium. The dispute will be dealt with such as in summary proceedings. The President of the Commercial Court can decide in his discretion either to impose additional guarantees or to reject the demand for additional guarantees, taking into account the original guarantees that have already been granted to the creditor, or the solvency of the new debtor. If the President imposes additional guarantees, and if the additional guarantees are not provided within the term set forth by the Court, the original claim will become immediately due. In that event, both New Barco and BarcoNet will be held jointly and severally liable to pay the original claim.

Following the Closing of the Demerger, New Barco will provide certain transitional services to BarcoNet.

Although measures will be taken to enable BarcoNet to be an autonomous entity from New Barco following the demerger of Barco, New Barco will continue to provide certain transitional services to BarcoNet in order to allow a smooth transition for BarcoNet. BarcoNet and New Barco will enter into a separate agreement, which, subject to signing, will cover various issues such as transitional services, manufacturing and suppliers, and software and trademark ownership and licenses, during an interim period following the Closing of the Demerger. The contractual obligations under the agreement could temporarily create a certain degree of dependency of BarcoNet towards New Barco. Furthermore, although New Barco will be contractually obliged to provide BarcoNet with these services, it cannot be excluded that these services may not always be provided at the same level as when the Barco Communication Systems activity was still part of Barco, and BarcoNet may not be able to obtain the same benefits. In addition, even though the transitional agreement will be entered into in view of a smooth transition of BarcoNet, it cannot be guaranteed that upon termination of the agreement, BarcoNet will be able to replace the transitional services, if needed, in a timely manner and/or on terms and conditions, including costs, as favorable, if at all, as those under the agreement with New Barco.

48 It cannot be guaranteed that following the demerger of Barco, the remaining activities of New Barco will be legally separated or spun-off.

The demerger of Barco into BarcoNet and New Barco is, in the opinion of Barco's Board of Directors, an essential part of Barco's new strategy to redefine its current structure and adapt it to a continuously changing economic and financial environment. Barco believes that its activities have reached a level of size and maturity to be independent, and that in order to grow and take advantage of present and future opportunities in their respective markets, the activities need to become still more independent through a full legal separation and, possibly, a separate listing. Furthermore, Barco believes that a separate listing, if any, would not only result in specific price/earnings ratios for each of the respective companies, which are believed to be higher than Barco's existing price/earnings ratio, but also in the creation of specialized shares for investors in certain types of markets. This should be to the benefit of each of the respective Barco activities, and ultimately the shareholders of Barco. In view hereof, Barco proposes to spin-off its "Barco Communication Systems" activity by means of the demerger of Barco. The same rationale also applies to the possible management buy-out of the "Barco Graphics" activity, in respect of which Barco has started exclusive negotiations.

The foregoing rationale is based on certain analyses, estimates and assumptions of the economic, commercial and financial condition of Barco and market perspectives in general, which at the time of this prospectus appear reasonable to Barco, but which are inherently subject to significant business, economic, financial and competitive uncertainties and contingencies, many of which are beyond the control of Barco, and which are subject to potentially substantial changes at the time that the demerger proposal will be submitted to shareholder approval.

Furthermore, it cannot be guaranteed that the other activities of Barco will be separated in the same manner as "Barco Communication Systems", and possibly "Barco Graphics". The decision whether other activities will be legally separated from New Barco, following the demerger can, amongst other things, depend on the following factors:

· the financial condition of New Barco,

· the financial and economic condition and ability of each of the activities concerned to subsist as an independent legal entity, separate from New Barco,

· the condition of the market in which the activities concerned operate,

· the condition of national and international stock markets and the markets for technology companies in particular,

· to the extent required, shareholder and/or board approval for a spin-off, and

· the perception by the market and market analysts of a further reorganization of the activities of Barco.

In addition, it cannot be guaranteed that the separation of the other activities of Barco will take the form of a demerger with separate listing of the shares of the new entities. It is possible that New Barco will be able to transfer the assets or shares of the activity concerned to third parties at commercial and financial conditions that, in the opinion of New Barco, are more favorable to New Barco and/or its shareholders than those that would prevail on the stock markets and markets for technology companies in particular at the time of the proposed transfer.

49 Risks related to the Listing of the Shares and VVPR Strips

There has been no prior market for the Shares and VVPR Strips.

Except for the listing of the shares and VVPR strips of Barco on the First Market of Euronext Brussels, prior to the listing of the Shares and VVPR Strips on the First Market of Euronext Brussels, there will be no public market for the Shares and VVPR Strips, and no assurance can be given that any market for the Shares and VVPR Strips will develop or be sustained. Furthermore, the initial reference price of the shares of BarcoNet and New Barco upon which separate trading of the shares will start and that will be determined by the Market Authority of Euronext Brussels may not be indicative for the prices that might prevail upon the start of the separate trading of the Shares. In addition, the price of the shares of Barco may also not be indicative for the price of the shares following their first listing on the First Market of Euronext Brussels.

Following the listing of the Shares, the price of the Shares may decline due to sales or the appearance of sales of large numbers of Shares.

Sales of substantial amounts of the shares of BarcoNet, respectively New Barco, in the public market following the listing, or the appearance that a large number of such shares is or will be available for sale, could cause the price for the shares to decline. Furthermore, it should be noted that the number of shares of BarcoNet and New Barco available for sale in the public market following the admission to listing will be limited by lock-up agreements to be entered into in connection with this listing, with BarcoNet, respectively New Barco's, Principal Shareholder, GIMV N.V., as further explained in Section 3.8 of Chapter I of this prospectus.

In addition to the adverse effect a price decline could have on holders of the shares of BarcoNet, respectively New Barco, such decline would likely impede BarcoNet, respectively New Barco's, ability to raise capital through the issuance of additional shares or other equity securities.

There can be no assurance that Euronext, following the merger between Société des Bourses Françaises, Amsterdam Exchanges and Brussels Exchanges, will develop into a stable and liquid market for the Shares and VVPR Strips.

An application has been made for admission to listing of all Shares and VVPR Strips on the First Market of Euronext Brussels. There can be no assurance that Euronext will develop into a stable and liquid market for securities or that price fluctuations on Euronext will not have a negative impact on the market price for the Shares and/or VVPR Strips.

The trading price of the Shares and VVPR Strips may be volatile.

The trading price of the shares and VVPR strips of BarcoNet, respectively New Barco, is likely to be highly volatile and could be subject to wide fluctuations in response to factors such as actual or anticipated variations in BarcoNet, respectively New Barco's, operating results, announcements of technological innovations, or new services by BarcoNet, respectively New Barco, or its competitors, changes in financial estimates by securities analysts, announcements by BarcoNet, respectively New Barco, or its competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments, additions or departures of key personnel, sales of shares or other securities of BarcoNet, respectively New Barco, in the open market, and other events or factors, many of which are beyond the BarcoNet, respectively New Barco's, control.

Furthermore, the stock markets in general and the market for technology companies and Internet- infrastructure related companies, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. The trading prices of some technology companies' shares reflect substantially high valuations. There can be no assurance that these trading prices and valuations will be sustained. Furthermore, following the demerger, a substantial reshuffling of the Shares could take place as a result of which the volatility and liquidity of the Shares and VVPR Strips could be

50 higher, respectively lower, than ordinarily. These and other broad market and industry factors may materially and adversely affect the market price of the Shares and VVPR Strips, regardless of BarcoNet or New Barco's operating performance.

Certain provisions of BarcoNet and New Barco's Articles of Association and of Belgian Law may make a take-over of BarcoNet and New Barco more difficult.

The Articles of Association of BarcoNet, respectively New Barco, will contain provisions that may have the effect to enable the respective companies' management to resist a take-over, such as:

· the Board of Director's right, within the framework of the authorized capital ("toegestaan kapitaal"/"capital autorisé") to issue additional shares, convertible bonds and warrants upon such terms as it deems appropriate, with or without cancellation or limitation of the preferential subscription rights of the existing shareholders or through contributions in kind;

· the Board of Directors' right to repurchase shares in order to prevent serious harm to the company's interests.

In addition, there are several provisions of Belgian Company Law and certain other provisions of Belgian law, such as the obligation to disclose important shareholdings, merger control and public take-over regulations, that may apply to the companies and which may make an unfriendly tender offer, merger, change in management or other change in control, more difficult.

51 CHAPTER II

BARCONET

1. GENERAL INFORMATION ABOUT BARCONET

1.1 GENERAL INFORMATION ABOUT BARCONET

Corporate Name: BarcoNet

Registered Office: The registered office of BarcoNet will be located at Luipaardstraat 12, 8500 Kortrijk, Belgium. BarcoNet's telephone number will be +32 (0)56 44.50.00; its fax number will be +32 (0)56 44.50.10.

Date and Duration of The extraordinary shareholders' meeting that will decide on the demerger of Incorporation: Barco, will be proposed to incorporate BarcoNet for an unlimited duration of time.

VAT Number: Upon Closing of the Demerger and incorporation of BarcoNet, the company will apply for a registration with the Belgian VAT authorities.

Registry of Commerce: Upon Closing of the Demerger and incorporation of BarcoNet, the company will apply for a registration with the Registry of Commerce of Kortrijk, Belgium.

Legislation under which the BarcoNet will be incorporated under, and be subject to, the laws of the Kingdom Company shall operate: of Belgium.

Legal Form: BarcoNet will have the legal form of a "naamloze vennootschap - N.V." / "société anonyme - S.A.".

Liability of the Pursuant to Belgian Company Law, the liability of the shareholders will be Shareholders of BarcoNet: limited to the amount of their committed contribution to the capital of BarcoNet.

Corporate Purpose: Pursuant to article 3 of the Articles of Association, the corporate purpose of BarcoNet shall be: the design, the development, the production, the assembly, the sale, the installation and/or implementation of any technological product and system whatsoever, hardware and software, accessories, components and parts, in any kind of material, in connection with, amongst other things, the reception, processing, transport and display of multimedia signals through broadband channels and domains evolving therefrom, in Belgium as well as abroad, in the broadest sense, as well as anything which is, directly or indirectly, related thereto.

The company may, by any method, acquire, grant, exploit, capitalize and transfer all intellectual rights, trademarks, drawings, models, licenses and patents.

52 The company may, in any way whatsoever, participate in businesses, enterprises or companies having the same, a similar or related corporate purpose, or that may enhance the development of the company's business, provide it with raw materials or that may facilitate the sale of the company's products.

The company may, directly or indirectly, participate in the management of other companies, enterprises, businesses or partnerships and associations and may grant securities and guarantees, advances and credits, mortgages and other securities.

The aforementioned enumeration is not exhaustive and is to be construed in the widest sense thereof.

Furthermore, the company's purpose, in Belgium as well as abroad, is to acquire and/or hold, in any way whatsoever, participations in companies, enterprises, businesses, partnerships and associations, existing or to be incorporated. It may manage, capitalize on and valorize its participations, amongst other things, by participating in the management and control of the enterprise in which it holds a participation and by providing it technical, administrative, legal and financial assistance.

The company intends to stimulate, plan and coordinate the future favorable development of the companies in which it participates, amongst other things, by means of reorganizations and restructurings.

In addition, the company may, directly or through its affiliates in Belgium and abroad, acquire or sell financial assets in the framework of its asset management.

Moreover, the company may engage in any activity, which may, directly or indirectly, contribute to the realization of its corporate purpose, in the broadest sense.

1.2 GENERAL INFORMATION ABOUT BARCONET'S CAPITAL

The following description of the terms of Barco's, and upon Closing of the Demerger, BarcoNet's, capital and other instruments is not exhaustive, but only contains those elements that BarcoNet believes to be material for the purposes of this prospectus.

1.2.1 Barco's Capital prior to the Demerger

Since June 27, 2000, Barco's registered capital, amounts to EUR 65,716,650.70, represented by 12,410,479 shares, each representing 1/12,410,479th of the share capital.

53 The following table shows the history of Barco's capital, excluding issuance premiums paid, if any, during the past three fiscal years. Amounts in the table relating to dates before May 10, 2000, were originally in Belgian francs, but are presented in Euro for the reader's convenience, at the official exchange rate of BEF 40.3399 for EUR 1.00.

Date Transaction Capital Number of Total capital Number of increase shares outstanding shares (€) issued (€) outstanding

June 24, 1997...... Exercise warrants and warrants attached 321,170.55 60,542 64,941,661.92 12,264,382 to bonds December 27, 1997 ..... Exercise of options (under article 45 of 129,418.86 24,396 65,071,080.79 12,288,778 the Act of December 27, 1984) June 30, 1998...... Exercise warrants attached to bonds 230,360.91 43,424 65,301,441.69 12,332,202 December 22, 1998 ..... Exercise of options (under article 45 of 117,864.74 22,218 65,419,306.44 12,354,420 the Act of December 27, 1984) June 29, 1999...... Exercise warrants attached to bonds 101,732.48 19,177 65,521,038.92 12,373,597 December 23, 1999 ..... Exercise of options (under article 45 of 13,511.63 2,547 65,534,550.55 12,376,144 the Act of December 27, 1984) February 15, 2000 ...... Exercise warrants attached to bonds 121,037.09 22,816 65,655,587.64 12,398,960 May 10, 2000...... Incorporation of available reserves into 12.37 0 65,655,600 12,398,960 the capital June 27, 2000...... Exercise warrants attached to bonds 61,050.70 11,519 65,716,650.70 12,410,479

1.2.2 BarcoNet's Capital

The extraordinary general shareholders' meeting of Barco that has to decide on the demerger and the incorporation of BarcoNet and New Barco, will be proposed to set the registered capital of BarcoNet at EUR 12,658,036.39, represented by 24,820,958 shares, each representing 1/24,820,958th of the share capital.

In addition, the shareholders will be proposed to provide for a number of convertible bonds, warrants and options of BarcoNet as set forth in the following paragraphs. In the formulas set forth below in respect of the determination of the exercise price of warrants and options, reference will be made to the first closing price of shares following the start of trading of the shares of BarcoNet and New Barco. It is to be noted that such first closing price is to be understood as the respective closing prices of the shares of BarcoNet and New Barco at the end of the first day, following the Closing of the Demerger, when for both the shares of BarcoNet and New Barco, a separate closing price on the First Market of Euronext Brussels will be established.

1.2.3 Convertible Bonds

(a) General

On November 29, 1995, Barco issued a loan for an amount of BEF 269,600,000 (or EUR 6,683,209.43). The loan is represented by 80,000 convertible bonds, none of which have already been converted. The nominal value of each convertible bond is equal to BEF 3,370 (or EUR 83.54). The convertible bonds can take the form of registered or bearer bonds. The convertible bonds have a term of 10 years. The applicable annual interest rate amounts to 7.48 %. The convertible bonds are freely transferable. The holders of the convertible bonds can request the conversion of the bonds on a monthly basis. The conversion ratio for the bonds is equal to 1 convertible bond for 1 share of Barco. The holders of the convertible bonds are entitled to request the immediate repayment of the bond, for an amount equal to the nominal value of the outstanding convertible bonds, decreased by a certain discount. The convertible bond is not secured by a specific security. The issuance conditions of the

54 convertible bonds provide for some adjustment mechanisms applicable in case of certain capital operations of Barco. No specific mechanism is provided for a demerger.

(b) Split of the Convertible Bonds

Subject to the Closing of the Demerger, the convertible bond loan will be split in two separate convertible bond loans, one of which will be assumed by BarcoNet and one of which will be assumed by New Barco. The terms of the convertible bond loans will remain substantially the same, subject to a change in the price at which the bonds can be converted into shares, which will be based on the ratio applied to split the net assets of Barco.

Based on the aforementioned ratio, BarcoNet will assume, subject to the Closing of the Demerger, a convertible loan for an amount of BEF 51,929,101 (or EUR 1,287,288.79). The convertible loan will be represented by 160,000 convertible bonds entitling the holder thereof to convert the bonds into 160,000 ordinary shares of BarcoNet pursuant to substantially the same conditions as the initial conditions of the convertible bonds, it being understood that the conversion price will be equal to BEF 324.41 (or EUR 8.04).

New Barco on the other hand will assume, subject to the Closing of the Demerger, a convertible loan for an amount of BEF 217,670,899 (or EUR 5,395,920.64). The convertible loan will be represented by 80,000 convertible bonds entitling the holder thereof to convert the bonds into 80,000 ordinary shares of New Barco pursuant to substantially the same conditions as the initial conditions of the convertible bonds, it being understood that the conversion price will be equal to BEF 2,721.14 (or EUR 67.46).

The interest accrued on the bonds at the time of the demerger, will be paid by New Barco and BarcoNet in proportion to the amount of the convertible loan on the day when normally due.

1.2.4 Bond issued jointly with Warrants

(a) General

On February 8, 1995, Barco issued one bond with two installments, i.e. one installment for an amount of BEF 6,500,000 (or EUR 161,130.79) (hereafter the "first installment") and a second installment of BEF 19,999,500 (or EUR 495,774.65) (hereafter the "second installment").

The second installment is still outstanding and is represented by 13,333 bonds with a nominal value of BEF 1,500 (or EUR 37.18) per bond. Certain employees of Barco subscribed to the issuance of the second installment. The bond has a term of ten years, starting as of March 9, 1995. The applicable annual interest rate amounts to 5 %. Holders of the bonds do not benefit from any specific security rights attached to the bonds. A total of 15 warrants were attached to each bond. The warrants can be separated from the bond. Both the bonds and the warrants are bearer instruments. Each warrant entitles the holder to subscribe to one newly issued share of Barco at an exercise price equal to the average of the closing price of one share of Barco during the last 30 days preceding the day on which the issuance took place, i.e. BEF 2,377 (or EUR 58.92). The warrants can be exercised in different installments: per bond, 2 warrants per year can be exercised between 1997 and 2002 and 1 warrant per year between 2003 and 2005. Once the warrants are exercisable, they can be exercised between January 20 and February 7 or between June 1 and June 20 of the relevant year. Subject to certain exceptions, the bonds and the warrants are not transferable. On July 31, 2000, 70,968 of the warrants were exercised. A total of 129,027 warrants are therefore still outstanding.

(b) Split of the Bond and the Warrants

Upon the Closing of the Demerger, the second installment of BEF 19,999,500 (or EUR 495,774.65) will be entirely assumed by New Barco. Subject to the Closing of the Demerger, each warrant will be converted into three warrants, i.e. two warrants entitling the holder thereof to subscribe to one share of BarcoNet per warrant and

55 one warrant entitling the holder thereof to subscribe to one share of New Barco. The terms of the warrants will remain substantially the same, subject to the appropriate change of the exercise price of the warrants.

Following the demerger of Barco, the exercise price of the warrants entitling the holder to subscribe to one share of BarcoNet will be determined as the result of the initial exercise price of the warrant of Barco before the demerger, multiplied by a fraction, the numerator of which is equal to the first closing price that will be established following the start of trading for one share of BarcoNet, and the denominator of which is equal to the sum of the first closing prices that will be established following the start of trading for two shares of BarcoNet and one share of New Barco.

The exercise price of the warrants entitling the holder to subscribe to one share of New Barco will be determined as the result of the initial exercise price of the warrant of Barco before the demerger, multiplied by a fraction, the numerator of which is equal to the first closing price that will be established following the start of trading for one share of New Barco, and the denominator of which is equal to the sum of the first closing prices that will be established following the start of trading for two shares of BarcoNet and one share of New Barco.

The above formulas to calculate the exercise price of the warrants of BarcoNet and New Barco can be summarized as follows:

æ TA ö æ TB ö PA = PO ´ç ÷ PB = PO ´ ç ÷ è (2´TA) + TB ø è (2´TA)+ TB ø

Whereby:

PO = The initial exercise price of the warrant of Barco before the demerger.

PA = The exercise price of the warrant entitling the holder to subscribe to one share of BarcoNet.

PB = The exercise price of the warrant entitling the holder to subscribe to one share of New Barco.

TA = The first closing price that will be established following the start of trading for one share of BarcoNet.

TB = The first closing price that will be established following the start of trading for one share of New Barco.

The respective exercise prices will be expressed in Euro and will be rounded to two decimals after the comma. Even though the exact number of warrants of BarcoNet and New Barco will be established upon the Closing of the Demerger, the exercise price of the respective warrants will only be determined once the first respective closing prices of the shares of BarcoNet and New Barco have been established following the start of trading on the First Market of Euronext Brussels.

1.2.5 Stock Option Plans

The following discussion under (a) to (c) below relates to the consequences of the demerger of Barco in respect of the existing stock option plans of Barco, which consist of options granted pursuant to article 45 of the Belgian Act of December 27, 1984, and warrants. These stock option plans provide for certain stock based incentives for primarily employees and other staff of Barco, and therefore will undergo a different split and conversion mechanism as opposed to the convertible bonds and bonds issued jointly with warrants that are

56 referred to above under 1.2.3 to 1.2.4. In the absence of specific legal provisions and commentaries by the Belgian tax authorities on the tax impact of the split and conversion of warrants and options, Barco has requested a ruling from the Central Tax Administration to confirm that the particular split and conversion mechanism for the warrants / options is a tax neutral event. On the date of this prospectus, however, no decision has been obtained.

In addition, as discussed below under (d), upon Closing of the Demerger, the extraordinary shareholders' meeting that will decide on the demerger of Barco and the incorporation of BarcoNet and New Barco, will be proposed to issue new warrants for BarcoNet, respectively New Barco.

(a) General Description of the Options

On March 30, 1992, the shareholders of Barco approved a model agreement to be used in order to grant a total of 100,000 options pursuant to article 45 of the Belgian Act of December 27, 1984. On June 30, 1996, Barco also approved a similar model agreement to be used in order to grant a total of 150,000 options pursuant to article 45 of the Belgian Act of December 27, 1984.

The options have been granted to a number of employees of Barco. At present, a total of 52,400 options are still outstanding. The exercise price of the options was determined pursuant to the price journal, issued by the tax administration pursuant to the Royal Decree of December 16, 1926 and the Royal Decree of March 31, 1936, in accordance with article 45 of the Belgian Act of December 27, 1984, of the month preceding the month in which the option agreement was signed. The options cannot be exercised within the first two years following the date of the grant. The options have a term of six years starting as of the date of the grant. The options can be exercised each year between December 1 and December 15. The options become null and void in case the option holder is no longer employed by Barco or by any of its subsidiaries.

The following table provides an overview of some relevant details relating to the options that have already been granted:

Period Total number Exercised Expired Exercisable Average exer- granted cise price (€)

From 1986 to 1991 ...... 136,402 89,272 47,130 0 29.95 From 1992 to 1996 ...... 94,639 88,809 7,101 4,090 59.52 From 1996 to 1997 ...... 61,235 12,925 0 48,310 144.72

Total ...... 292,276 191,006 54,231 52,400

(b) General description of the Warrants

On June 7, 1999, Barco approved the possibility to grant a total of 400,000 warrants over a period of 5 years to certain staff members. The warrants are used as stock options in order to implement a stock option plan for Barco.

The decision to grant the warrants is taken by the Board of Directors and a special committee decides on the number and allocation of the warrants to certain staff members, non-executive Directors and other persons who contribute to the success of Barco. By decision of the Board of Directors of September 16, 1999 and May 16, 2000, a total of 153,870 warrants have been granted to a number of staff members, amongst which employees in the United States of America, and non-executive Directors. On July 13, 2000, the Board of Directors of Barco decided to grant a maximum number of 243,240 warrants to a number of staff members, non-executive Directors and other persons who contribute to the success of Barco. Of these warrants, 165,045 warrants have already been granted, of which 156,131 have been accepted. In addition, Barco considers granting 5,166 warrants to staff members of subsidiaries in the United Kingdom.

57 Each warrant entitles the holder thereof to subscribe to one newly issued share of Barco. The grant of the warrants itself is free of charge. The exercise price of the warrants is determined by the committee when the warrant is granted to a certain individual and is:

· for staff members, equal to:

· the lower of (i) the average trading price for the shares on Euronext Brussels during the thirty days preceding the day of the offer of the warrants, or (ii) the latest closing price preceding the day of the offer of the warrants, or

· such exercise price as shall be applicable under the legislation in force for qualified stock option plans in the countries where the stock option plan is executed;

· for individuals other than staff members, equal to the average price for the shares on Euronext Brussels during the thirty days preceding the day of the offer of the warrants.

The warrants have a term of maximum 10 years. The warrants are registered warrants. The conditions of the warrants provide for certain rules applicable in case of retirement, resignation, dismissal and death of the holder of the warrants. Except in certain circumstances, the warrants are not transferable. The warrants can be exercised as of the fourth calendar year following the year in which the warrants were granted. If the warrants are exercisable, they can be exercised during the following periods: between June 1 and June 15, September 1 and September 15 and December 1 and December 15 of each year.

The following table provides an overview of some relevant details relating to the warrants that have already been granted:

Period Total number Exercised Expired Exercisable Average exer- Granted cise price (€)

From 1999 to September 20, 2000...... 318,915 0 0 0 118.27

Upon the Closing of the Demerger, each warrant / option will be converted into three warrants / options, i.e. two warrants / options each entitling the holder thereof to subscribe to one share of BarcoNet and one warrant / option entitling the holder thereof to subscribe to one share of New Barco. The terms and conditions of the warrants / options will remain substantially the same, subject to the appropriate change of the exercise price of the warrants / options.

Following the demerger of Barco, the exercise price of the warrants / options entitling the holder thereof to subscribe to one share of BarcoNet, will be determined as the result of the initial exercise price of the warrants / options of Barco before the demerger, multiplied by a fraction, the numerator of which is equal to either the first closing price that will be established following the start of trading, or the average of the closing prices during the first 30 trading days following the demerger of Barco, for one share of BarcoNet, and the denominator of which is equal to the sum either of the first closing prices that will be established following the start of trading, or of the average of the closing prices during the first 30 trading days following the demerger, for two shares of BarcoNet and one share of New Barco.

The exercise price of the warrants / options entitling the holder thereof to subscribe to one share of New Barco, will be determined as the result of the initial exercise price of the warrants / options of Barco before the

58 demerger, multiplied by a fraction, the numerator of which is equal to either the first closing price that will be established following the start of trading, or the average of the closing prices during the first 30 trading days following the demerger of Barco, for one share of New Barco, and the denominator of which is equal to the sum either of the first closing prices that will be established following the start of trading, or of the average of the closing prices during the first 30 trading days following the demerger, for two shares of BarcoNet and one share of New Barco.

In determining the exercise price of the warrants / options, the decision to apply either the first closing price of the shares of BarcoNet and New Barco that will be established following the start of trading, or the average of the closing prices during the first 30 trading days following the demerger of Barco, in the above formulas, will, unless decided otherwise by the extraordinary shareholders' meeting that will decide on the demerger of Barco and the incorporation of BarcoNet and New Barco, be made by the Board of Directors of BarcoNet and New Barco, depending, amongst other things, on the results of the ruling which Barco has applied for in respect of the particular split and conversion mechanism for the warrants / options (see also above under Section 1.2.5).

The above formulas to calculate the exercise price of the warrants / options of BarcoNet and New Barco can be summarized as follows:

æ TA ö æ TB ö PA = PO ´ç ÷ PB = PO ´ ç ÷ è (2´TA) + TB ø è (2´TA)+ TB ø

Whereby:

PO = The initial exercise price of the warrant / option of Barco before the demerger.

PA = The exercise price of the warrant / option entitling the holder to subscribe to one share of BarcoNet.

PB = The exercise price of the warrant / option entitling the holder to subscribe to one share of New Barco.

TA = Either the first closing price that will be established following the start of trading, or the average of the closing prices during the first 30 trading days following the demerger of Barco, for one share of BarcoNet.

TB = Either the first closing price that will be established following the start of trading, or the average of the closing prices during the first 30 trading days following the demerger of Barco, for one share of New Barco.

The exercise price so determined will be expressed in Euro and will be rounded to two decimals after the comma.

59 Following the demerger of Barco, some staff members will be employed by BarcoNet Group, whereas others will be employed by New Barco Group. As a result of the conversion of the warrants / options of Barco into warrants / options of BarcoNet and New Barco, the holders of initial warrants / options of Barco will also hold warrants / options on shares of a (parent) company for which they no longer work. In view hereof, the holders of the warrants / options have been requested to make the following choice:

· in respect of options that have been granted in accordance with the Belgian Act of December 27, 1984:

· either to exercise, during the first exercise period following the demerger of Barco, the options on shares of the (parent) company for which they no longer work following the demerger and which have been granted pursuant to article 45 of the Belgian Act of December 27, 1984, and to keep the remaining options on shares of the (parent) company for which they work following the demerger ("Alternative A"),

· or to convert the options on shares of the (parent) company for which they no longer work, into options on shares of the (parent) company for which they work following the demerger, and to keep the remaining options on shares of the (parent) company for which they work ("Alternative B");

· in respect of the warrants:

· either to keep both the warrants of the (parent) company for which they no longer work following the demerger and the warrants of the (parent) company for which they work following the demerger ("Alternative A"),

· or to convert the warrants of the (parent) company for which they no longer work, into warrants of the (parent) company for which they work following the demerger, and to keep the remaining warrants of the (parent) company for which they work ("Alternative B").

The alternatives described above in respect of the options that have been granted in accordance with the Belgian Act of December 27, 1984, are different from the alternatives in respect of the warrants, since the latter Act provides that a persons exercising an option on the shares of a company, should be an employee of such company or a subsidiary thereof.

Holders of warrants / options are to inform Barco of their choice prior to the Closing of the Demerger.

If an individual opts for Alternative B, the exercise price will be re-stated in accordance with the formula described above. The number of warrants / options will also be restated. The total number of warrants / options that will be held by an individual who will be employed by BarcoNet following the demerger of Barco, will be equal to the initial number of warrants / options granted to him before the demerger, multiplied by a fraction, the numerator of which is equal to the sum either of the first closing prices that will be established following the start of trading, or of the average of the closing prices during the first 30 trading days following the demerger, for two shares of BarcoNet and one share of New Barco, and the denominator of which is equal to either the first closing price that will be established following the start of trading, or the average of the closing prices during the first 30 trading days following the demerger of Barco, for one share of BarcoNet.

The total number of warrants / options that will be held by an individual who will be employed by New Barco following the demerger, will be equal to the initial number of warrants / options granted to him before the demerger, multiplied by a fraction, the numerator of which is equal to the sum either of the first closing prices that will be established following the start of trading, or of the average of the closing prices during the first 30 trading days following the demerger, for two shares of BarcoNet and one share of New Barco, and the denominator of

60 which is equal to either the first closing price that will be established following the start of trading, or the average of the closing prices during the first 30 trading days following the demerger of Barco, for one share of New Barco.

In determining the total number of warrants / options, the decision to apply either the first closing price of the shares of BarcoNet and New Barco that will be established following the start of trading, or the average of the closing prices during the first 30 trading days following the demerger of Barco, in the above formulas, will, unless decided otherwise by the extraordinary shareholders' meeting that will decide on the demerger of Barco and the incorporation of BarcoNet and New Barco, be made by the Board of Directors of BarcoNet and New Barco, depending, amongst other things, on the results of the ruling which Barco has applied for in respect of the particular split and conversion mechanism for the warrants / options (see also above under Section 1.2.5).

The above formulas to calculate the total number of warrants / options that will be held by individuals who will be employed by either BarcoNet or New Barco following the demerger of Barco, can be summarized as follows:

æ (2 ´TA) + TB ö æ (2 ´TA)+ TB ö NA = NO ´ ç ÷ NB = NO ´ ç ÷ è TA ø è TB ø

Whereby:

NO = The initial number of warrants / options that are granted to an individual employed by Barco before the demerger of Barco.

NA = The total number of warrants / options that will be held by an individual who will be employed by BarcoNet following the demerger of Barco.

NB = The total number of warrants / options that will be held by an individual who will be employed by New Barco following the demerger of Barco.

If the outcome of the aforementioned formulas is not a rounded figure, the new number of warrants / options will be rounded to the first higher, respectively lower, number depending on whether the outcome of the formula is higher or equal, respectively lower, than 0.5 after the comma.

Both the number of warrants / options granted by New Barco and BarcoNet following the demerger of Barco and the exercise price of the warrants / options granted in the context of the stock option plans can only be determined during the course of the month following the Closing of the Demerger.

(d) Additional Warrants

The extraordinary shareholders' meeting of Barco that will decide on the demerger and incorporation of BarcoNet and New Barco, will be proposed to approve a new stock option plan for BarcoNet, respectively New Barco. These plans will provide for the grant, free of charge, of a total of 1,000,000 warrants of BarcoNet and 400,000 warrants of New Barco, over a period of 5 years, to staff members and non-executive Directors of BarcoNet Group, respectively New Barco Group, and certain other individuals who have an important part in the

61 expansion and the success of BarcoNet, respectively New Barco. The exercise price of the warrants is determined by the committee when the warrant is granted to a certain individual and is:

· for staff members, equal to:

· such exercise price as shall be applicable under the legislation in force for qualified stock option plans in the countries where the stock option plan will be executed, it being understood that such price must be as close to the exercise price to be established in accordance with the foregoing principles;

· for individuals other than staff members, equivalent to the average price for the shares on Euronext Brussels during the thirty days preceding the day of the offer of the warrants.

The warrants will have a term of maximum 10 years. The conditions of the warrants provide for certain rules applicable in case of retirement, resignation, dismissal and death of certain holders of warrants.

1.2.6 VVPR Status of Certain Shares

The following sections describe Barco's understanding of the VVPR status of certain shares issued by Barco and the impact of the demerger of Barco on the VVPR status of these shares.

(a) General

(b) VVPR status following the Demerger of Barco

Barco believes that there are reasonable arguments to defend that the shares that currently benefit from a reduced withholding tax rate or VVPR, will not lose their VVPR status pursuant to the demerger of Barco, on the basis of the tax neutrality and continuity principle governing demergers.

Upon Closing of the Demerger and subject to what is stated below, each VVPR strip will be converted into two VVPR strips relating to the shares of BarcoNet and one VVPR strip relating to the shares of New Barco. The VVPR strips will not be delivered in bearer instrument

1.2.7 Authorized Capital

The shareholders' meeting of Barco that will decide on the demerger of Barco and the incorporation of BarcoNet and New Barco, will be proposed to authorize the Board of Directors of BarcoNet to increase the share capital of BarcoNet with a maximum amount of EUR 6,400,000. The authorization expires on the fifth anniversary of the date of publication in the Belgian Official Gazette of the resolution. The authorization can be renewed.

The Board of Directors will be authorized to increase the capital of BarcoNet, subject to certain restrictions of Belgian Company Law, through the issuance of shares payable by contribution in cash or in kind with or

62 without issuance premium, as well as by incorporation of the company's reserves into its share capital, with or without the issuance of shares. The Board can also increase the company's capital through the issuance of non- voting shares, convertible bonds, warrants, obligations cum warrants or other subscription rights to shares of the company. Issuance premiums, if any, shall serve as guarantee for third parties in the same manner as capital and shall be allocated to an unavailable account, which can only be decreased or booked away by means of a shareholders' resolution passed in the manner required to change the Articles of Association.

On the occasion of a capital increase within the framework of the authorized capital, the Board of Directors is authorized, subject to a unanimous vote within the Board, to cancel or restrict the preferential subscription rights of the existing shareholders in the interest of the company and in accordance with the provisions of article 34bis of the Belgian Company Law, in respect of one or more identified persons, irrespective of whether any such person is an employee of BarcoNet or its subsidiaries. No unanimity of votes is required in case of cancellation or restriction of the preferential subscription rights of the shareholders for the benefit of board and staff members of BarcoNet Group or in the framework of stock option plans for employees, non-executive Directors and other individuals who contribute to the success of the company.

The Board of BarcoNet could use the aforementioned authority to increase the company's capital if the convening of a general shareholders' meeting would be inappropriate for the company's interests, given the flexibility that can be obtained by means of the authorized capital. The Board will be able to use its authority for the purpose of, amongst other things, financing the company's further growth, diversification and/or acquisitions, attracting new partners, and creating incentives for the company's personnel, all as further explained in the report prepared by the Board of Directors of Barco pursuant to article 33bis of the Belgian Company Law. The Board of BarcoNet will also be able to use the aforementioned authority to issue stock option plans for the employees and/or consultants of the company or its subsidiaries.

Generally, the aforementioned authority of BarcoNet's Board of Directors to increase the company's capital through contributions in cash with the elimination or the limitation of the preferential subscription rights of the existing shareholders, or through contributions in kind, is suspended as from the date of notification to the company by the Belgian Banking and Finance Commission of a public take-over bid on the shares of the company. Such authority will re-emerge immediately after the closing for such public take-over bid. The general shareholders' meeting that will decide on the demerger of Barco and the incorporation of BarcoNet and New Barco will, however, be proposed to expressly authorize the Board of Directors of BarcoNet to increase the company's capital in one or several times, as from the date of notification by the Belgian Banking and Finance Commission to the company of a public take-over bid on the shares of the company, through contributions in cash with the elimination or the limitation of the preferential subscription right of the existing shareholders or through contributions in kind in accordance with article 33bis, §4 of the Belgian Company Law. This authority will be granted for a term of three years.

1.3 CONTROL OVER THE COMPANY

On August 31, 2000, GIMV N.V. confirmed that it held directly 3,558,632 shares and indirectly via its affiliate VIM N.V., a company incorporated under the laws of Belgium, 589,652 shares, or in total 4,148,284 shares, which represents 33,43 % of the existing shares of Barco or 31.72 % on a fully diluted basis. The rest of the shares of Barco are held by the public. Upon Closing of the Demerger, GIMV N.V. will receive two new shares of BarcoNet per share of Barco that it will hold. Part of these shares will be subject to a lock-up agreement, all as discussed further in Section 3.8 of Chapter I of this prospectus.

Pursuant to a management agreement dated December 17, 1990 between Barco and its Principal Shareholder GIMV N.V., the latter provides any kind of advice that may relate and be relevant to the general management of Barco, in particular in respect of legal matters and optimal acquisition structures. This agreement will, upon Closing of the Demerger be allocated in its entirety to New Barco.

63 For further information relating to the rules applicable to change of control over BarcoNet, reference is made to Section 3 of Chapter I, and in particular Section 3.1.1, (a) ("Voting Rights"), (f) ("Transparency Rules"), and (j) ("Anti-take-over Effect of Provisions of Belgian Company Law and other Belgian Laws").

1.4 INVESTMENTS AND SHARES IN OTHER COMPANIES

Set forth below is a summary of the respective subsidiaries in which BarcoNet is expected to hold an interest upon Closing of the Demerger.

Entity Shares Shares held through held by subsidiaries or associates BarcoNet (%) Entity (%)

EUROPE Denmark BarcoNet A/S ...... 100 Emdrupvej 26, 2100 Copenhagen

France BarcoNet S.A...... 99.99 Six individuals 0.01 6, Bd de la Libération, Z.A. Urbaparc 1, 93200 St.-Denis Sereli S.A...... 99.99 BarcoNet S.A. 99.99 5 Av. Louis Pasteur, Zone d'activités de Third parties 0.01 Gillainville, F 28630 Gillainville SHFI S.A.R.L...... Sereli S.A. 99.99 5 Av. Louis Pasteur, Zone d'activités de Third parties 0.01 Gillainville, F 28630 Gillainville

Germany BarcoNet GmbH ...... 100 Karl-Heinz-Beckurts-Strasse 7, 52428 Jülich

Spain BarcoNet S.A...... 100 Basauri 17B, Bajos, 28023 Madrid

ASIA China BarcoNet Ltd...... BarcoNet A/S 100 Flat B, 6/F Wing Wong, Commercial Bldg., 557- 559 Nathan Road, Kowloon, Hong Kong

India BarcoNet Pvt. Ltd...... BarcoNet A/S 100 9/1, Kodambakkam High Road, Chennai – 600034

Malaysia BarcoNet Sdn. Bhd...... BarcoNet A/S 100 1303 A, Level 13 A, Uptown 2, 2 Jalan SS21/37, Damansara Uptown, 47400 Petaling Jaya, Selangor Darul Ehsan

Singapore BarcoNet Pte. Ltd...... 100 Block 750E Chai Chee Rd., #05-03/04, Techno Park @ Chai Chee, 469005 Singapore

64 NORTH-AMERICA United States of America BarcoNet Inc...... 100 Town Point Drive 3240, Atlanta, Georgia 30144

SOUTH-AMERICA Brazil BarcoNet Ltda...... BarcoNet A/S 100 Rua do Rocio 351-8° andar, CEP 04552-000, Vila Olimpia, Sao Paulo

AUSTRALIA BarcoNet Pty. Ltd...... BarcoNet A/S 100 8 Prohasky Street, Port Melbourne, Vic, 3207

In addition to the foregoing, following the demerger of Barco, BarcoNet expects to establish a branch office in the United Kingdom.

Upon Closing of the Demerger, BarcoNet is also expected to hold shares in the following company:

ASIA Taiwan TranSystem Inc...... 19.1 2F, n° 10-12, Prosperity Road 11, Hsinchu Science-Base Park, Hsinchu

65 2. INFORMATION CONCERNING THE BUSINESS OF BARCONET

2.1 GENERAL

BarcoNet designs, manufactures, markets and supports multimedia distribution solutions, targeting the three converging markets of the communications industry: cable, broadcast and telecom. BarcoNet's products and solutions can be used to provide audio, video and data services over cable, satellite, telecom and wireless networks. BarcoNet mainly focuses towards broadband operators worldwide. BarcoNet aims to capitalize on the trends towards digital TV and the use of cable networks to provide data-based services to the end-user's home, relying on the current technology and customer base of the Barco Communication Systems activity of Barco.

2.2 INDUSTRY BACKGROUND

2.2.1 Introduction

The building blocks for public networks have traditionally been public switched telephone networks or "PSTNs". These networks were designed to support short voice communications between fixed locations on the network. Over time, communication networks have evolved and been upgraded, not only for the provision of mere telephone services, but also for the transmission, over fixed and wireless networks, of other content and services such as data and video. These advanced networks and services are often referred to as "broadband networks" and "broadband services" because the delivery of such services generally requires the high-speed transmission of large volumes of information over networks that need to have a high bandwidth or capacity to carry such information.

Generally, there are a number of alternative technologies or network architectures that can be used to support broadband services. Some of the main types of networks are:

· hybrid fiber coax or "HFC" networks, which mainly rely on a combination of fiber optic cable and coax cable to carry broadband services,

· traditional telecom networks that have been upgraded with digital subscriber line or "xDSL" techniques, such as Video DSL or "VDSL", and a-symmetric DSL or "ADSL", to allow for high- speed data transmission on telephone lines which ordinarily only support the slower transmission of small quantities of information,

· satellite networks that can have a global or large regional span, and

· wireless access networks, using, amongst other things, satellite transmission, wireless access protocols or "WAP", or mobile telephony techniques.

Each of the above technologies can serve as the main building block of public and private network. In some instances, however, combinations of the technologies are used to provide broadband access over large geographical areas or large groups of subscribers, depending on factors such as the availability of pre-existing network infrastructure, density of subscribers and geographical span of the network.

"HFC" networks typically have a high bandwidth or information carrying capacity. Over the years many cable operators therefore have deployed "HFC" networks to provide cable TV and other broadband services to their subscribers. BarcoNet believes that "HFC" networks have inherent bandwidth advantages, making them better suited for broadband access than some of the alternative networks. However, other architectures such as

66 telecom networks that have been upgraded with "xDSL" technology, and wireless access networks can also be applied to provide broadband access. These applications therefore exist next to "HFC" networks to provide broadband services, whether as a complementary element to the "HFC" network of a singly broadband operator, or as the network of competing broadband operators or overbuilders who deploy new networks on top of existing networks.

BarcoNet provides software and hardware solutions, such as backbones, headends, digital TV distribution systems and network management systems, that enable broadband operators to bring content, such as video, data and voice, to their subscribers transported on two-way networks allowing interactivity between the network operator and their subscribers. Current content providers consist of both national and local TV stations, Internet service providers, or "ISPs", and telephone companies. BarcoNet mainly focuses on broadband operators, most often consisting of cable TV operators, who use hybrid fiber coax or "HFC" networks as their broadband or cable networks. Be that as it may, BarcoNet's headends, network management systems and digital TV distribution systems can also be used on other network architectures such as "xDSL" and wireless broadband access. Furthermore, BarcoNet believes that wireless access networks will gain in importance. BarcoNet therefore intends to also develop solutions for wireless broadband networks.

The following introductory paragraphs provide a short description of what "HFC" broadband or cable networks are, and where BarcoNet's products can be found on such network.

Content and End-User applications Access Network devices End-Users

Hub Television content

Node PC The Cable Internet HeadendHeadend HubHub Splitter modem HFC coax Set-top box TV

Backbone Local content Hub

Network management

Figure: Hybrid fiber coax or "HFC" networks

An important element for the distribution of content such as video, data and voice, over a network consists of the so-called "headend". A headend is a device in which content from the respective content providers is received. Content providers are generally connected to the headend by means of a fiber optic cable, a telecom connection, satellite transmission or wireless radio or micro wave transmission.

A headend can receive content that is formatted in different signals, such as digital signals, analog signals or radio frequencies. These signal formats are often different from the format that is needed to transfer the initial signal over the network to the subscribers to the network. The headend will therefore process these initial signals into another format for distribution over the network. During this signal processing, the headend can also generate additional local content, which can be transmitted together with the originally received content. This process of local content generation can for instance take place in respect of "video-on-demand" or "VoD" services. This new service allows a subscriber to order video movies or other television programs via the network and have them electronically delivered via the same network for his personal viewing.

In order to transmit the content that is received and processed in the headend, to the respective subscribers of a cable network, the headend is connected to several "hubs" that are located on the main fiber optic network

67 or "backbone". The backbone is the main artery of a cable network that usually covers a large geographic area or region, and sometimes even the whole of a country.

The hubs are the main connection points where content is tapped from the backbone for distribution over (mostly) fiber optic cable to several "nodes". The nodes serve as a local distributor of content to the respective subscribers. On average, one node can connect between 500 and 2,000 homes to the cable network by means of a (usually copper) coax cable. The use of both fiber optic cable (for the backbone) and coax cable (to connect the subscribers to the local nodes) is the reason why these networks are generally referred to as "hybrid fiber coax" or "HFC" networks. Subscribers can also be connected to a node by means of a wireless access techniques, such as local multi-point distribution service or "LMDS" and multi-channel multi-point distribution or "MMDS", which rely on micro-wave radio frequencies to carry broadband information. Such solutions could, depending on local circumstances, serve as an alternative for coax connections to connect remote or less densely populated areas to the backbone.

In order to maintain the proper operation of a cable network and to guarantee quality of service, cable networks are typically equipped with "network management" systems. These systems include both hardware and management software to monitor and maintain the network and the quality of signals.

2.2.2 The Cable Networks Market

The cable network industry has emerged in different parts of the world at different speeds and often with different driving forces, competitors and dynamics. According to a study carried out by Baskerville Communications Corp., dated January 2000, globally, in 1999, about 262 million households out of a total of 1,008 million TV households were connected to a cable network.

In North America, competition and (de-) regulation were the main driving forces for the cable network market. New cable TV channels (HBO, CNN, etc.) originally competed primarily with national broadcasters (NBC, ABC, CBS) for market share (or viewers) and advertisement revenues. Cable TV networks also started to compete with telecom operators for voice telephony and most recently, high-speed Internet access has become the focus of competition. Fueled by the intense competition between content providers and network operators, the United States have the highest percentage of cable subscribers throughout the world. In 1999 roughly 75 million households in North America were connected to cable networks on a total of 110.5 million households (source: Baskerville Communications Corp.).

In Europe, the market situation is much more fragmented. Early "cable TV adopters" were those countries where cable TV allowed subscribers to receive more on-air channels than traditional terrestrial TV reception, using roof top antennas. Small and/or multilingual countries like Belgium, the Netherlands and Switzerland, became "wired" in the late seventies / early eighties and are still, after several technical upgrades, leading in the number of homes that can be connected to the cable, i.e. the number of "homes passed", as well as the number of homes actually connected, i.e. the number of "homes connected". Whereas the large majority of the households have a cable television subscription, other cable network services, such as Internet and telephony, are still in a growing phase due to the traditionally state owned telecom monopolies, which are only recently disappearing. In larger European countries such as France and Spain, the cable access market is still in its initial growth phase, often with huge regional differences in service offering and penetration. Driving forces in those larger European countries, however, appear to be telecom deregulation and the emergence of new, commercially oriented operators such as NTL, UPC and Callaghan Associates, which offer new broadband services such as Internet access and voice telephony. In the United Kingdom, broadband services, such as data, voice and video, are offered by a few major operators. Very active competition from satellite, broadcasting and telecom operators make it an active and growing market place with currently approximately 14 % households connected. In total, in 1999, Western Europe had 45 million homes connected, which amounts to approximately 30 % of the total number of households.

68 Eastern Europe has only recently started to deploy a broadband infrastructure. In 1999, only 17 million households were connected to the cable, which represents about 15 % of all TV households. According to BarcoNet, Eastern Europe therefore still offers a considerable growth potential.

Cable penetration in the Asia Pacific region reached 22 % of the TV households in 1999. China, India, Japan and Taiwan have the highest number of cable subscribers. BarcoNet believes that the whole region should be bound for impressive growth, mainly driven by Japan, China and India.

According to a study carried out in 2000 by Paul Kagan Associates Inc., the penetration of cable TV, as compared to satellite TV can be summarized as follows: of all households in the United States in 1999, 68 % was connected to a cable network, whereas 11 % had a satellite TV access. In Western Europe, the percentages of households connected to cable, respectively satellite TV represented 30 %, respectively 7 % of all households. In Eastern Europe, the percentages of households connected to cable, respectively satellite TV represented only 15 %, respectively 1 % of all households.

2.2.3 Driving Forces in the Market

Notwithstanding differences in levels of development of the global cable TV and broadband market, the demand for broadband access has increased significantly over the recent years, due in large part to the growth of the Internet and e-commerce and the emergence of new interactive video services, such as "video-on-demand". This evolution creates considerable revenue potential for broadband network operators, as has been illustrated by recent acquisitions of networks at prices amounting to several thousands of United States dollars per subscriber to the network (source: Paul Kagan Associates Inc., 2000). BarcoNet has also estimated that additional investments in equipment to deploy a fully broadband network vary between 150 and 300 United States dollars per subscriber. BarcoNet believes that the fierce competition between cable operators will cause them to invest heavily in upgrading their networks, which will allow for an accelerated deployment of broadband services. The driving forces behind this market evolution can be summarized as follows.

· As the use of cable and Internet increases, the number of broadband services that can be offered increases as well.

The early success of cable modems being installed at homes and businesses and the emergence of industry standards such as Data Over Cable Services Interface Specification or "DOCSIS" and Digital Video Broadcast / Digital Audio-Visual Council or "DVB/DAVIC", have resulted in an increasing number of, and market potential for, advanced cable services, such as fast Internet access, "voice over IP" or "VoIP", video over Internet or "streaming video", MP3 music distribution, the use of Web cameras and software distribution by downloading from the Internet.

· The migration of analog TV to digital TV will improve the quality and offering of services over TV networks.

Traditional cable TV systems are based on analog signals being transported to the end-user. The emergence of the "Digital Video Broadcast" or "DVB" standard for digital TV in Europe and the "Open Cable" initiative in the United States, however, have opened the door for digital TV distribution. Furthermore, BarcoNet understands that by mid 2002, U.S. commercial broadcasters will have a legal obligation to be able to distribute digital signals, as well as only analog signals. Digital TV enables the improvement of quality and the distribution of several hundreds of compressed TV channels, "video-on- demand" and other interactive services. Combining data and digital video technologies also creates new possibilities, such as Web-TV and interactive TV. BarcoNet believes that a commercial breakthrough of these applications will involve more than merely upgrading existing TV networks, but will also include a change of marketing strategies, the provision of content and customer acceptance. This is already demonstrated by media companies that are combining forces for broadband access initiatives, and local test projects in several countries in respect of "video-on-demand" and "voice over IP" or "VoIP".

69 · Advanced networks will allow more programming and digital distribution of content.

Conventional broadcasting is also changing. National, state owned broadcasters are under pressure from commercial channels, aiming at larger audiences and corresponding advertising revenues. Theme- channels and pay-channels with or without advertising aim at quality programming, whereas local interest channels, sports, business and/or news channels further contribute to the segmentation of the broadcasting market. These developments result in more programming and more (digital) distribution of content.

· The demand for broadband services will require current networks to be upgraded, which in turn will allow the transmission of more and better broadband services.

Investments in hybrid fiber coax or "HFC" network upgrades, backbones, fiber networks and digital subscriber line, or "xDSL", deployment will further contribute to the offering of broadband services and the competition between traditional, or state-owned telecom operators, new telecom operators, traditional cable operators, new cable operators, overbuilders who deploy new networks next to existing networks, and new broadband access providers.

· The increasing use for broadband services will increase the demand for reliability of services.

The new broadband services will generate additional revenue for the cable operators. Moreover, a considerable amount of these services are typical for advanced commercial or business applications (e.g. e-commerce). Consequently, BarcoNet believes that cable networks will have to achieve a higher availability or quality of service, or "QoS", than is currently the case. As a result, BarcoNet expects an increased need for network management and monitoring.

· The increased use of wireless access will be complementary to the development of broadband via fixed networks.

Cable modems and digital subscriber lines or "xDSL" have, by far, captured the majority of the broadband access market. BarcoNet believes, however, that wireless technology will be complementary to the development of broadband access via fixed networks for the following reasons:

· Ability to serve untapped demand - Limitations in the geographical reach of "xDSL" networks and the need to upgrade cable systems for broadband access have effectively precluded many isolated areas from broadband access, whereas wireless networks can be deployed rapidly in both urban and rural areas. Wireless applications furthermore offer portable and mobile access, which is impossible for wired solutions.

· Fast and low-cost deployment - Wireless broadband requires less network infrastructure, which results in less expensive and considerably faster network roll-out.

· Incremental deployment - "HFC" and "xDSL" providers must deploy and install wired networks prior to signing up customers, whereas operators using wireless networks can establish wireless links as customers sign up, keeping down up-front capital expenditures.

2.3 BARCONET'S SOLUTION

BarcoNet main product line consists of Headends, fiber optic Backbones, Digital TV distribution solutions and Network management systems. These products can either be sold separately or together, forming an end-to- end solution for the transmission of data, video and voice content to broadband subscribers. BarcoNet's end-to-end

70 headend, backbone and digital TV distribution solutions run on internally developed hardware and software, which facilitate a high degree of system integration. The network management system on the other hand, is supported by BarcoNet's individual products and facilitates the installation and operation of BarcoNet's systems, and allows operators to construct fully redundant systems ensuring high quality of service and reliability. In addition to its main product line, BarcoNet also maintains a range of broadcast display products and audio distribution solutions. All products of BarcoNet are built according to currently available open, worldwide industry standards.

2.3.1 Headends

BarcoNet provides headend solutions serving both analog and digital TV services over broadband networks. Headends serve as a gateway for data, video and voice services from global networks such as Internet service providers or "ISPs" and telecom backbones. All these services are gathered in the headend for redistribution to various parts of the broadband access network.

BarcoNet has a wide product range in headend equipment and supports most interactive video services available today such as "video-on-demand" and "pay-per-view". BarcoNet's headends can, as an additional feature, be controlled by BarcoNet's ROSA network management system. Through this management system, the headend can be made fully auto-redundant for most services passed through the headend. One of the key characteristics of the ROSA management system is the automation of repetitive and time consuming processes such as the alignment of radio frequency levels that are generated in the "HFC" network, which ensures high quality and reliable services to the subscribers.

Figure: Cable access system that reliably supports today and tomorrow's cable operator needs

In general, BarcoNet's line of headends consists of digital TV and data headends, as well as traditional analog headends.

· Digital Headends

Digital TV headends gather and process signals for use in digital TV services. The core of BarcoNet's digital headend is the GALAXY platform. This is a compact platform combining the following elements:

· input adapters, which interface incoming TV programs, whether digital or analog, for further processing into digital TV signals;

71 · processing and (re-) multiplexing processes, which prepare all received programs for redistribution on the network, such as adding conditional access features to define user access to services such as "pay-per-view" and "video-on-demand", and generating so-called "program bouquets" such as movie channels, news channels, learning channels, etc.; and

· output adapters, which transform the processed TV program signals for distribution to the particular network types, such as "HFC" network, wireless network, telecom network etc.

The digital headend equipment can be used in a variety of broadband networks including cable TV networks, "xDSL" networks, terrestrial wireless networks, such as "DVB-T", and microwave networks, such as "LMDS" and "MMDS" networks.

· Data Headends

Data headends serve as a gateway to provide high-speed Internet data services to Internet subscribers. Currently, BarcoNet has only a limited data headend product range consisting of so-called up- converters, which are appliances that enable "IP" transmission via cable networks. BarcoNet intends, however, to develop a full end-to-end data headend solution.

· Analog Headends

A considerable amount of cable networks are currently still based on analog systems or hybrid analog/digital systems, offering both analog and digital services to their subscribers. BarcoNet has been, and still is, an important supplier of key products in this area.

2.3.2 Fiber Optic Backbones

Due to consolidation amongst operators, systems are clustered together to form larger service areas, which allow network operators to write-off their systems over a larger amount of subscribers. This is an important factor since investments in new interactive services for video and "IP" data generally tend to be considerable. This evolution has lead operators to develop the concept of so-called "master headends" and "regional hubs". Whereas the master headends concentrate all key equipment necessary for video, data and even voice services for distribution over the backbone, the remote hubs enable the distribution of these services to local access "HFC" networks or other types of broadband networks.

BarcoNet provides the backbone solution LYNX to meet the cable TV broadband operators' demands for backbones supporting high-speed transmission of large quantities of data, such as TV channels and Internet data, using a Dense Wavelength Division Multiplexing or "DWDM" technology in order to optimize the bandwidth per fiber. BarcoNet's LYNX system is auto-redundant for failures in the optical transmission path. This entails that in case of ruptures or distortions on a certain optical fiber, LYNX allows the network to automatically fall back on other optical fibers, thus ensuring reliability and continuity of service. BarcoNet's ROSA network management system enables LYNX to provide for redundancy or automatic fall-back mechanisms for all the services transmitted in the backbone. As part of its growth strategy, BarcoNet intends to launch upgrades of its existing LYNX product. The new "iLYNX" will be optimized for transporting large numbers of TV channels, as well as data on "IP" traffic (including Internet) and "voice over IP".

72 video HFC Content Provider Hub

Backbone Telco Network Master headend voice

IP data

Figure: Backbone interconnecting hubs each serving a local "HFC" network

2.3.3 Network Management Systems

Network management and the monitoring of the active elements in a network is an essential factor in providing reliable services to subscribers.

BarcoNet's network management product line contains two groups of products: one for headend management and one for network monitoring. Both product lines use COPERNICUS as the network management controller. BarcoNet's management system ROSA is at the heart of its network management solution. It allows network equipment to be remotely monitored, via NETSENSE or third party transponders, thus reducing the need of local servicing and monitoring personnel and related operating costs. In addition, ROSA enables the coordination of a multitude of network sensing devices, simplifying the fault-detecting process. Furthermore the automatic back up of faulty equipment in the headend which can be detected by devices such as BarcoNet's LM860, can render the headend auto-redundant. ROSA also automates the alignment of the modulators in an "HFC" network, resulting in substantially lower operating costs. The ROSA management system supports several products and management systems of other vendors that can be integrated into ROSA. Given these features, ROSA has become the de facto standard for operations support systems or "OSS" of many operators, such as NTL and UPC.

BarcoNet strongly encourages open standards and performs a leading role in standards setting for communication between network elements from different vendors. This is encouraged by CableLabs and the Society of Cable TV Engineers or "SCTE", both leading organizations representing cable operators in the United States. Operators throughout Europe also encourage these standards.

2.3.4 Digital TV Distribution

BarcoNet has a variety of products to distribute signals from TV program providers or broadcasters to broadband networks. Generally, primary distribution of programs to broadband networks takes place through telecom and satellite networks because of their inherent global span.

An important highly-specialized niche in the market of digital TV distribution consists of point-to-point transmission of TV signals for program backhaul and exchange between broadcast studios. This technique is applied in digital satellite news gathering or "DSNG" for on-site coverage of news and sports events. In September, for example, the European Broadcast Union applied BarcoNet's digital TV distribution solutions to coordinate to coverage and broadcast of the Olympic Games 2000 in Sydney to Europe.

73 BarcoNet's product line includes encoders, decoders, statistical multiplexers for optimal use of the limited bandwidth capacity and interfaces of TV networks. All these products are also supported by BarcoNet's ROSA network management system.

As of 2000, the four largest U.S. broadcasters provide digital TV transmission in the largest cities in the United States. BarcoNet understands that by mid 2002, U.S. commercial broadcasters will have a legal obligation to be able to distribute digital signals, as well as only analog signals. BarcoNet has already installed its digital TV distribution solution in certain parts of the United States to enable this migration from analog TV to digital TV. For the future, BarcoNet expects that it will be able to further capitalize on this trend.

2.3.5 Other Products

Apart from the aforementioned main product lines, BarcoNet also maintains the following products.

· Broadcast Display Products

BarcoNet has a broad range of high quality displays for monitoring TV signals in a TV production environment, which are generally applied for critical evaluation of the source material. BarcoNet's monitor product line excels in color accuracy and stability. All monitors accept both analog and digital video sources in broadcast studio's and production houses. BarcoNet maintains two product lines, the CVM series of master control monitors and the ADVM series of hybrid analog/digital monitors for master control and viewing. Both series carry almost all screensizes ranging between 10 and 16 inch.

· Audio Distribution Solutions

Several European countries are operating national, state owned radio stations. These national radio networks are often interconnected via a telecom network. BarcoNet provides the CAPELLA codec to transmit these radio signals over the telecom network.

2.4 BARCONET'S STRATEGY

· Continued growth on the basis of strong product lines

BarcoNet intends to continue its growth and service to its large customers in Europe and Asia by supporting its existing line of strong product solutions.

· Digital TV headends - At the nerve center of an "HFC" network, the main headend re- assembles all incoming signals into digital transport streams of data. BarcoNet will continue to provide a full range of source and channel coding equipment used in headends and hubs on the network.

74 · Fiber optic backbones - BarcoNet successfully deployed fiber optic equipment to connect the main headend with multiple regional hubs, thereby ensuring a reliable network backbone for television and data signal transmission. In connection herewith, BarcoNet intends to launch upgrades of its existing LYNX product. The new "iLYNX" will be optimized for transporting large numbers of TV channels, as well as data on "IP" traffic (including Internet) and "voice over IP".

· Network management - BarcoNet provides well-established software for the monitoring and management of headends and network elements. BarcoNet plans to further develop this software to include full network control and management. In connection herewith, BarcoNet intends to explore to what extent cooperation with hardware and software vendors in this field could be possible.

· Digital TV distribution - BarcoNet has an in-depth knowledge of MPEG2 encoding for high picture quality level, including High Definition TV. BarcoNet intends to further develop this technology to allow broadcasters to transfer high picture level signals from traditional telecom networks to "HFC" networks, using asynchronous transfer mode or "ATM" and traditional synchronous digital hierarchy or "SDH" network protocols.

In order to support the above strategy, BarcoNet plans to continue to re-invest over 10 % of its revenues into research and product development centers in Belgium, Denmark, the United Kingdom, India and North America.

· Growth by expanding BarcoNet's business into growth segments of the market

BarcoNet intends to enhance and expand its current product range into the emerging market segments, such as data over cable and fixed wireless broadband access.

· Data headends - New multimedia networks use standardized cable modems and set-top boxes to enable subscribers to such new applications as broadband Internet access, and voice telephony, and services in respect of which several larger scale pilot projects have been started, such as "voice over IP" and "video-on-demand". BarcoNet will further develop and expand a product range of data headends to support these new data over cable applications.

· Fixed wireless broadband access technology - BarcoNet will explore the possibility to use microwave technology in a "wireless node" concept to allow wireless network operators a faster roll-out of their network in less populated areas or in locations where fast marketing strategies are essential for the operator to build his market share. BarcoNet's headend and backbone technology should allow wireless providers to combine the delivery of digital video and high-speed data. Although a fairly new technology, BarcoNet believes it can combine its know-how in modulation schemes with partners active in microwave transmitters and launch attractive solutions adding a wireless "last mile" to the "HFC" network.

In order to support the above strategy, BarcoNet will rely on, and expand, its existing research and development centers. In addition, BarcoNet intends to explore possibilities to acquire or license additional technology through partnerships with, or acquisitions of, third party vendors.

· Leverage of BarcoNet's position in Europe and Asia

As a third pillar of its growth strategy, BarcoNet intends to expand its sales and service network. For this purpose, BarcoNet will rely on its existing network of sales and service subsidiaries and system integration facilities currently operational in France and Germany. The service centers in Belgium and

75 Malaysia currently provide customer support on a 24 hours, 7 days a week basis. Their operations are complemented by a large number of system integrators, consultants, dealers and distributors, working on a contract basis in over 70 countries worldwide. On the basis of its sales and service network, BarcoNet will consider further expanding its operations in European countries such as Spain, Germany and the United Kingdom. Other emerging markets such as South America and parts of Asia will be handled through a combination of new BarcoNet sales offices and cooperation with local suppliers and integrators to achieve an active presence on these markets.

· Growth in the United States through partnerships and acquisitions

The huge United States market for broadband networks currently appears to be dominated by a few major network equipment suppliers such as Scientific-Atlanta, Harmonic and Motorola. BarcoNet's U.S. activities are currently handled by BarcoNet's Atlanta-based sales and service center. BarcoNet believes that the United States market still offers important opportunities and that it has the necessary technological know-how to adapt its products, where needed, for the United States broadband market. In order to accelerate growth, BarcoNet plans to explore cooperation with other companies that can provide BarcoNet with an established market access in the United States.

2.5 RESEARCH AND DEVELOPMENT

2.5.1 Product Concept and Strategies

BarcoNet's main focus will be to continue to expand the product lines for digital headends with a stronger offering to support interactive services like "video-on-demand". Furthermore, BarcoNet intends to develop Internet gateways for headends in accordance with international standards.

With respect to backbones, BarcoNet is currently changing from a specific, tailor made proprietary system to a system using "SONET"/"SDH" standards, and aims at providing a fully standardized "IP" solution. BarcoNet intends to apply the same strategy also for digital TV distribution solutions, since it believes that network operators will upgrade current "ATM" networks into networks using Internet protocol or "IP" transmission only.

In connection with network management and monitoring, BarcoNet will develop products in accordance with new international open standards for network monitoring devices for use on a broader range of network infrastructures.

2.5.2 Recent History of Relevant Developments in BarcoNet

BarcoNet's success in designing, developing, manufacturing and selling new or enhanced products is based on BarcoNet's ability to swiftly adapt to new market demands, BarcoNet's close contacts with most of the key operators worldwide and inventive highly motivated research and development teams in various countries worldwide. The most recent significant developments relate to BarcoNet's modulator products, both for analog and digital TV, BarcoNet's digital modular platform GALAXY, BarcoNet's digital scrambling products, BarcoNet's backbone product line LYNX, BarcoNet's MPEG2 technology resulting in MPEG2 encoders for standard TV and high definition TV or "HDTV", BarcoNet's statistical multiplexing technology and BarcoNet's network management system ROSA.

2.5.3 Recent Research and Development Expenditure

In the past, over 10 % of the total sales revenue of the Barco Communication Systems activity was spent on research and development. BarcoNet intends to continue this pattern.

76 2.6 MANUFACTURING AND SUPPLIERS

2.6.1 Manufacturing

BarcoNet operates two manufacturing sites: one in BarcoNet's product base in Belgium and one in BarcoNet's product base in Denmark. A smaller manufacturing facility has been set up at BarcoNet Inc., in the United States.

In every site, an independent quality assurance team monitors all manufacturing and enables feedback of crucial information to engineering, manufacturing, subcontractors and suppliers. Production for the larger volume product NETSENSE is totally subcontracted to TranSystem Inc., a Taiwan-based publicly listed company, in which BarcoNet has a 19.1 % stake. This allows for competitive pricing, but also generates an additional risk. In case TranSystem Inc. would not be able to fulfill its obligations towards BarcoNet in terms of adequate supply of products, BarcoNet would face a temporary halt in supplying this product to BarcoNet's customers, whereby switching to another supplier might take at least six months.

The manufacturing site in Belgium is mainly producing BarcoNet products that are engineered in Belgium, India and the United Kingdom. Printed circuit board or "PCB" manufacturing, surface mount device or "SMD" mounting and production of mechanical parts are subcontracted to highly specialized third party manufacturers. Mounting of non-"SMD" components (such as connectors), assembly, final alignment, testing and quality control are performed by highly trained personnel applying advanced electronic equipment and automated test programs.

The manufacturing site in Denmark is only producing BarcoNet products that are engineered in Denmark. Printed circuit board or "PCB" manufacturing, "SMD" mounting and mounting of non-"SMD" components, production of mechanical parts and mechanical assembly are subcontracted to highly specialized third party manufacturers. Highly trained personnel applying advanced electronic equipment and automated test programs perform final alignment, testing and quality control.

2.6.2 Suppliers

In general, BarcoNet works with respected suppliers of components and subassemblies in order to guarantee the final quality of its products. Some components, subassemblies and modules necessary for the manufacture and integration of BarcoNet's products are obtained from a sole supplier or a limited group of suppliers. This represents a certain risk as described in the "Risk Factors".

2.7 SALES AND MARKETING

2.7.1 Customers

BarcoNet's products and solutions are sold to a variety of cable operators, telecom operators and broadcasters. In most instances, BarcoNet's solutions are sold as an integrated suite of products or system, tailored to meet customers' demands, rather than as separate components, which entail that a individual comparison of sales of each of BarcoNet's respective product lines does not accurately reflect its activities.

Whereas part of BarcoNet's sales are based on large single investments by customers, most of BarcoNet's sales are based on repeat orders from customers, upgrading and extending their networks on a regular basis.

Historically BarcoNet's sales were spread over a large number of customers. In 1998 the five most important customers accounted for 16 % of BarcoNet's total sales, and no single customer accounted for more than 4 % of BarcoNet's sales. In 1999 the 5 most important customers accounted for 28 % of BarcoNet's total sales, and no single customer accounted for more than 6 % of BarcoNet's total sales. In the first half of 2000, the 5 most

77 important customers accounted for 23 % of BarcoNet's sales, and no single customer accounted for more than 8 % of BarcoNet's total sales.

Below is a representative list of BarcoNet's customers in 1998 and 1999 according to geographical region:

Europe:

· Austria (ORF) · Belgium (Electrabel, Telenet, ACM, Belgacom) · Eastern Europe (UCP) · France (NTL, Lyonnaise, Vivendi) · Germany (Deutsche Telekom, PrimaCom) · Italy (Telecom Italia, TelePiu, RAI, Sienna) · Ireland (RTE, NTL) · Netherlands (UPC, Castel, KPN) · Russia (Comcor) · Spain (Telefonica, Endesa-Retevision, Madritel, Gallejo de Cable) · Switzerland (Cablecom, Swisscom, SRG) · United Kingdom (Telewest, NTL, CWC, Energys, British Telecom)

Australia and Asia

· Australia (Optus, Telstra, Austar) · China (Anhui Broadcast Bureau, Bejing CATV Station, Chongqing Broadcast Bureau) · Korea (Korea Telecom and Korea Broadcast Station) · Malaysia (Telecom Malaysia and Astro-Measat) · Philippines (Skycable) · Singapore (SCV and TCS) · Taiwan (Cycloria, ChungHua) · Thailand (TOT and UBC)

North, Middle and South America

· Argentina (MultiCanal) · Brazil (Infovias, Telepar, Telemig, Globo Cabo, CRT) · Peru (Telefonica) · United States (Time Warner, AT&T, Media One, Comcast, GLA, Clear Source, State of Ohio, State of Mississippi)

78 Geographically, BarcoNet‘s sales in 1998 and 1999 and the first six months of 2000 have mostly been realized in Europe, as can be demonstrated by the table below:

In thousands of Euro June 30, December 31, 2000 1999 1998

Net Sales: Europe ...... 33,487 (66%) 61,366 (68%) 47,410 (61%) North America...... 4,501 (9%) 11,408 (13%) 9,449 (12%) Asia...... 7,089 (14%) 12,800 (14%) 17,065(22%) Other...... 5,915 (11%) 4,500 (5%) 4,041 (5%)

Total...... 50,992 90,074 77,965

In the future, BarcoNet expects its sales to be more balanced between the regions while continuing to grow in Europe. With respect to the sales in the United States, BarcoNet is still in an emerging phase, which explains the intention of BarcoNet’s management to expand on the U.S. market through partnerships and/or acquisitions. The variation in the 1999 and 2000 sales for the United States is mainly due to the general fact that the signing of high value contracts in one accounting period instead of in another accounting period can result in important variations in revenue over the periods concerned.

As the cable TV and telecom industry experiences an important merger and acquisition activity, BarcoNet expects a corresponding customer concentration in the future. This would imply that the amount of customers would not necessarily increase but that the sales generated per customer, in any event, would increase. This evolution would also imply certain risks, as a failure by BarcoNet to book orders from these large customers could affect its results.

BarcoNet estimates the worldwide network equipment market for headends, fiber optic backbones, network management systems and digital TV distribution solutions today at around 900 million U.S. dollar. This estimation is based on several independent and publicly available market studies. On the basis of the foregoing and taking into account BarcoNet's current sales, BarcoNet believes that it has a worldwide market share of around 10 % for headends, fiber optic backbones, network management systems and digital TV distribution solutions.

2.7.2 Sales and Services

BarcoNet sells its products and solutions through a worldwide sales and services network based on BarcoNet's national organizations or "NOs", independent distributors, agents, systems integrators and OEM's. It is BarcoNet's policy to employ, as much as possible, local people in BarcoNet's "NOs", limiting the number of expatriate associates. Exceptions are made during the start-up period of new offices.

BarcoNet distinguishes two main organizations: organizations in the United States and elsewhere.

· United States

Based on the size and the potential of the U.S. market for its products and solutions BarcoNet decided to establish a local company (BarcoNet Inc.) that is responsible to organize sales, project and application engineering and customer services activities such as installation, commissioning and training. Today BarcoNet Inc. is fully operational and works directly with major end-users like multiple system operators or "MSOs", who operate more than one network, and broadcasters. A limited amount of BarcoNet's products are sold through a dealer network in the United States. BarcoNet intends, however, to increase sales in the United States through expanding its own U.S. organization and independent dealer network in order to achieve a better market coverage.

79 · The rest of the world

BarcoNet will operate its own sales and service organizations in the following markets : Argentina, Australia, Belgium, Brazil, China, Denmark, France, Germany, Hong Kong, India, Japan, Korea, Malaysia, the Netherlands, Russia, Singapore, Spain, Taiwan and the United Kingdom. Some of these national organizations do not only perform sales and services activities in their own countries, but also support neighboring countries to enable swift communication with the end-users. A Belgium-based centralized project engineering and application engineering team supports BarcoNet's sales channels and works closely with customers to design solutions and manage projects to optimize economic benefit for the operators. Customer service activities include installation, commissioning, training and other post-sales actions. Most national organizations as well as the larger distributors organize their own customer services activities. A centralized customer services organization also works with the sales channels to arrange for adequate support to BarcoNet's customers.

2.7.3 Marketing Communications

BarcoNet's local sales and service organizations are responsible for organizing their own marketing communications depending on the needs of their markets, supported by a centralized marketing communications organization to ensure a common company image. The main marketing communications tools used, are trade shows, consisting of both small local shows as well as large international events such as Western Show, NAB, IBC and ECC.

2.7.4 Product Management

In each product base a highly specialized product management team manages the various product lines and develops roadmaps. The team analyses the market needs in close cooperation with the worldwide sales team. Based on the information gathered, the product managers generate project proposals that serve as development assignment for the engineering teams. Regular project meetings allow for company wide follow-up of running projects. Modifications to project proposals may also take place during the various development phases of the project based on changing market or engineering inputs.

2.8 COMPETITIVE POSITION

BarcoNet's main competitors for headends include established suppliers such as Scientific-Atlanta, Harmonic, Motorola (GI/FUBA), Tandberg, Philips, Thomson and Teleste. Some of these competitors, however, do not offer analog headend solutions.

With respect to backbones, BarcoNet's main competitors are ADC, Teleste and Scientific-Atlanta. There are many other smaller companies offering backbone solutions, but BarcoNet believes that these are currently not primarily focussed on the broadband cable TV markets like BarcoNet. Subject to certain modifications to their products, however, these companies could become potential competitors.

With respect to BarcoNet's digital TV distribution systems, BarcoNet's main competitors are Tandberg, Harmonic, Philips, Thomson, Scopus, Motorola and Tiernan.

80 With respect to network management systems, BarcoNet's main competitors are Wavetek/Cheetah, AM communications and Tollgrade. New players are, however, emerging such as Teleste, mostly on the European market.

Several of BarcoNet's competitors are considerably larger than BarcoNet. They have greater financial, technical, marketing and other resources than BarcoNet. BarcoNet is, however, of the opinion that due to its ability to quickly respond to customers' demands for tailor made solutions, it is able to successfully compete with these larger companies. In addition, BarcoNet believes that its worldwide presence provides it an additional competitive edge, since it is present in around twenty countries with its own sales and service organizations, whereby approximately half of BarcoNet's staff is employed outside Belgium.

Many of BarcoNet's larger competitors are better positioned to withstand a significant reduction in capital spending by cable operators and other broadband service providers. Be that as it may, BarcoNet believes that it is unlikely that all operators in all continents would demonstrate the same capital spending patterns. Moreover, as BarcoNet is present in all continents, BarcoNet does not regard this as a disadvantage. Nevertheless, many of BarcoNet's competitors have longer-standing and better-established relationships with the cable operators, specifically in the North American marketplace.

2.9 EMPLOYEES

On September 1, 2000, BarcoNet Group employed 627 full time equivalent employees worldwide, of which 305 are employed in Belgium, 142 in Denmark, 39 in the United States, 30 in the United Kingdom and 29 in France. The remaining 82 are distributed over other sales and services offices worldwide. Of the total number, 167 are employed in research and development, 194 in production, 116 in marketing and sales, 59 in customer services, 43 in operations and 38 in finance and administration. Of all 305 employees based in Belgium, 79 have a university or equivalent degree and 88 have a professional degree. Of all employees in Belgium, there are 149 blue-collar workers (paid at an hourly rate) and 156 white-collar workers (paid on a monthly basis).

Every industry sector in Belgium has its own Joint Labor Committee in which employee and employer representatives on a national level negotiate certain terms and conditions of employment in the sector, including minimum wages, working hours, work rules and certain other matters. Moreover, Belgian law requires companies employing an average of 100 or more employees, to establish a Works Council which is composed of representatives of the company's employees and the employer (head of the company) assisted by a number of members of the management personnel. The employee representatives serving in such a body are nominated by a representative union organization and elected by the employees of the company. The Works Council has, amongst other things, an advisory function, is entitled to certain corporate, financial, commercial and personnel information, and must be involved in case of collective dismissal procedures. BarcoNet will establish its Works Council based on the results of the elections held at Barco in May 2000. In addition, Belgian labor law provides for substantial minimum terms of notice in case of termination of employment agreements. The applicable notice is evaluated in function of the age, seniority and salary level of the employee, and may sometimes exceed one year. The company has the option between (i) termination, subject to a prior notice of termination (i.e. notice period during which the employee continues to perform his/her function) or (ii) an immediate discontinuation of the employment relationship, subject to the payment of an indemnity in lieu of notice, i.e. the salary which the employee would have otherwise earned during the notice period. The indemnity in lieu of notice is to be calculated on the basis of the monthly base salary including fringe benefits such as end of the year premium, double vacation allowance, employer's group insurance premium, advantages in kind, etc.

In all other countries BarcoNet respects all requirements with regard to social law and relevant legislation on information to be provided to its employees.

81 2.10 PATENTS, LICENSES AND OTHER INTELLECTUAL PROPERTY

BarcoNet regards the protection of its technological know-how, patents, patent applications and patent licensing as critical to its future success, and relies on a combination of patents, patent applications and licensing laws as well as contractual restrictions to establish and protect its proprietary rights in products and services. BarcoNet also holds licenses for the use of patents, patent applications, and other industrial property right of third parties that enable it to use these rights in the framework of its activities. BarcoNet currently does not hold any trademarks.

BarcoNet holds some patents and is licensing its technology for SCTE Standard Compliance Transponders to partner companies such as WISI in Germany. With respect to MPEG2 technology, BarcoNet has been licensed the patent protected technology of the MPEG-LA-Group.

With respect to the "Method and Apparatus for the Compression and/or Transport and/or Decompression of a Digital Signal", a European patent application has been filed on May 21, 1999. The same patent has also been filed in the United States on May 19, 2000.

With respect to the "Method for Separating Chrominance and Luminance Signals from a Composite Video Signal", BarcoNet has filed a patent under number CA-1170760, that expires in 2001.

2.11 LEGAL PROCEEDINGS

At the date of this prospectus, there is no material claim or pending litigation against or by BarcoNet or relating to the Barco Communication Systems activity that will be carried out by BarcoNet upon Closing of the Demerger.

2.12 DESCRIPTION OF PROPERTY

BarcoNet will own land and a building located at Luipaardstraat 12, 8500 Kortrijk, Belgium. The property is entirely used by BarcoNet, solely for engineering, sales and marketing, manufacturing and general administration purposes. During the previous years, the property was occupied by Barco Communication Systems for the same purposes, but under a leasehold agreement. A building permit will be applied for in view of the further expansion of the facilities, mainly for the purpose of relocating all manufacturing operations in Belgium in the same location.

BarcoNet Group will own a building in Jülich, Germany. A part of the building is sub-leased to a German company. The lease agreement provides for a notice period of 3 months. The remainder of the property is entirely used by BarcoNet for sales and marketing, system integration and general management purposes.

BarcoNet Group will also own a building in France pursuant to the acquisition of Sereli S.A.

BarcoNet owns the following tangible fixed assets categories: machinery, measuring equipment, tools and moulds, computer equipment, next to other categories. BarcoNet holds acquired know-how in connection with MPEG2 technology. The acquisition dates back to April 1997 and is depreciated over a five year period.

2.13 INVESTMENT POLICY

During the latest three years, Barco Communication Systems invested in above-mentioned building in Kortrijk, Belgium, combined with predominant investments in machinery, measuring equipment, tools and moulds and computer equipment.

82 2.14 ENVIRONMENTAL MATTERS

BarcoNet believes that its production and related activities are of such nature that their impact on environment is minimal or non-existing.

On the existing sites, chemicals are used on a small scale. Mainly degreasing products and glues are to be considered. No accidents and/or accidental leakage have been noticed. Concerning the building of new premises in the Luipaardstraat in Kortrijk, Belgium, building permits and environment permits will be applied for. BarcoNet expects, but can, however, not guarantee that these permits will be delivered in time. The new premises will be equipped with a sprinkler installation and full fire detection. BarcoNet also foresees that chemicals will be stored in convenient chemical cabinets and the container park shall be constructed in conformity with applicable norms.

2.15 ARRANGEMENTS BETWEEN BARCONET AND NEW BARCO

Barco believes that all assets and liabilities of Barco will be allocated in such a manner that BarcoNet, as well as New Barco, should be able to carry on their activities autonomously. However, in order to ensure continuity of their respective businesses, BarcoNet and New Barco will enter into an agreement covering various arrangements dealing with the period after the Closing of the Demerger. It is expected that the agreement will, amongst other things and subject to signing, deal with the following issues:

· Transitional Services

In order to allow a smooth transition for BarcoNet, New Barco will, on a worldwide basis, provide some services to BarcoNet on a temporary basis following the demerger. The initial term for the transition period covers a period of one year starting upon Closing of the Demerger. This term can, however, be extended or shortened in respect of specific services. Generally, the transitional services will include logistics, information technology services, as well as financial and other administrative functions. In addition, some employees of New Barco's central services department will also be allocated to BarcoNet. Notwithstanding the foregoing, it cannot be excluded that BarcoNet may occasionally provide services to New Barco as well.

Services will generally be charged on a cost-plus basis, to be determined at arm's length, it being understood, however, that the addition charge should not exceed 10 % of the overall costs.

BarcoNet and New Barco can extend the scope of their initial agreement to additional transitional services, which inadvertently or unintentionally could have been omitted from the specified services, but for which a particular need could arise after the demerger.

· Manufacturing and suppliers

Currently, Barco has a special activity called "Barco Specialized Subcontracting", which mainly supplies components to other Barco activities. Only a limited part of the turnover of the Specialized Subcontracting activity relates to supplies to third parties. Upon Closing of the Demerger, the "Specialized Subcontracting" activity will be allocated to New Barco, and will for a specified term continue to supply components to BarcoNet. In view hereof, BarcoNet and New Barco will determine separate commercial rates that will apply to the supply of components to BarcoNet subsequent to the demerger of Barco.

83 · Software Ownership and License

BarcoNet and New Barco will agree on the use by BarcoNet, in accordance with the applicable legislation and contractual clauses, of different software-applications that will remain property of New Barco.

· Trademark Ownership and License

Upon Closing of the Demerger, the "Barco" trade name will remain exclusive property of New Barco. BarcoNet will not be allowed to use the name "Barco" unless in the combination "BarcoNet" and subject to express approval by New Barco. BarcoNet and New Barco intend, however, to enter into a separate agreement to provide for a transitional period during which BarcoNet could temporarily use the "Barco" logo and label on existing products.

· Taxes

BarcoNet and New Barco intend to provide for a special compensation or reimbursement mechanism in respect of future tax liabilities relating to the period prior to July 1, 2000. As a general rule, BarcoNet will be held liable for all tax issues relating to the "Barco Communication Systems" activities prior to July 1, 2000, whereby all other tax liabilities will be borne by New Barco.

· Confidential Disclosure

Both BarcoNet and New Barco intend not to disclose each other's confidential information, without each other's prior written consent.

· Indemnification

BarcoNet and New Barco intend to provide for an indemnification and settlement mechanism according to which BarcoNet, respectively New Barco, could recover damages from New Barco, respectively BarcoNet, if any liabilities should arise in respect of events occurring on or before the Closing of the Demerger, including events occurring in connection with activities to implement the demerger and the admission to listing.

· No Solicitation

Both BarcoNet and New Barco intend not to directly solicit or recruit employees of each other without each other's consent during a term of two years after the Closing of the Demerger. This arrangement would not apply to general recruitment efforts carried out through public or general solicitation campaigns or if the solicitation is initiated on initiative of employees themselves.

· Insurance

As a general rule, New Barco intends to maintain appropriate insurance coverage that, until December 31, 2000, will also be extended to BarcoNet, whereby insurance premiums are to be borne by BarcoNet in accordance with usual allocation rates. Unless agreed otherwise, as of January 1, 2001, New Barco and BarcoNet will have separate insurance policies.

84 3. RISKS RELATED TO THE BUSINESS OF BARCONET

The following "risk factors" should be read together with the risk factors set forth elsewhere in this prospectus.

BarcoNet depends on cable operators and broadcasters' capital spending for substantially all of its revenue.

Historically, Barco Communication Systems has supplied transmission equipment to cable operators in Europe, Asia and the Americas as well as compression, transmission and monitoring equipment to broadcasters.

While it is expected that the relative importance of BarcoNet's future sales to cable operators will increase over sales to broadcasters, the sales to both cable operators and broadcasters will depend to a large extent upon the magnitude and timing of capital spending by cable operators and broadcasters. The capital spending patterns of cable television operators and broadcasters are dependent on a variety of factors, including, but not limited to:

· overall demand for cable television services and the acceptance of new broadband services and the growth in broadcast programming;

· competitive pressures (including the availability of alternative video delivery technologies such as satellite broadcasting); and

· access to financing by cable operators and broadcasters;

· annual budget cycles of cable television operators and broadcasters;

· the status of federal, local and foreign government regulation of telecommunications and television broadcasting;

· discretionary customer spending patterns and general economic conditions.

BarcoNet may be unable to manage the risks and challenges resulting from acquisitions.

Recently, the Barco Communication Systems activity has experienced a significant growth, partly through the acquisitions of RE Technology A/S (Denmark) (now operating as BarcoNet A/S) in 1997 and Sereli S.A. (France) in July 2000. These acquisitions have placed, and are expected to continue to place, a significant strain on BarcoNet's personnel, management and other resources.

Although acquisitions have in the past successfully been incorporated in the Barco Communication System activity, it cannot be assured that BarcoNet will be able to successfully address the challenges that these acquisitions present. BarcoNet could have difficulties in assimilating or retaining the acquired companies' personnel and operations or in integrating the acquired technology or products into BarcoNet's. BarcoNet's failure to do so would likely materially and adversely affect its business, financial condition and operating results. Moreover, BarcoNet's profitability may suffer because of acquisition related costs or amortization costs for acquired goodwill and other intangible assets.

BarcoNet is expected to grow through acquisitions in areas such as data over cable and wireless access and to review other potential acquisition opportunities that would strengthen its existing product offerings or enhance

85 its technical capabilities. Any future transaction of this nature could require potentially significant amounts of capital. Funds may not be available at the time or at the times needed, or available on terms acceptable by BarcoNet. If adequate funds are not available, or are not available or acceptable terms, BarcoNet may not be able to take advantage of market opportunities, to develop new products or to otherwise respond to competitive pressures. Furthermore, BarcoNet may have to incur debt or issue securities to pay for any future acquisitions the issuance of which could be dilutive to its shareholders. If BarcoNet is unable to address any of these risks, its business, financial condition and operating results could be harmed.

The operating results of BarcoNet are likely to fluctuate significantly and may fail to meet or exceed the expectations of securities analysts or investors, causing the trading price of the shares to decline.

The operating results of the Barco Communication Systems activity have fluctuated in the past and are likely to continue to fluctuate in the future, on an annual and a quarterly basis, as a result of several factors, many of which are outside of the control of BarcoNet. Some of the factors that may cause these fluctuations include:

· the level of capital spending of BarcoNet's customers in Europe, the Americas, Asia, Australia and in other foreign markets;

· changes in market demand;

· the timing and amount of customer orders;

· competitive market conditions;

· BarcoNet's unpredictable sales cycles;

· new product introductions by BarcoNet or its competitors;

· changes in domestic and international regulatory environments;

· market acceptance of new or existing products;

· the cost and availability of components, subassemblies and modules;

· the mix of BarcoNet's customer base and sales channels;

· the mix of BarcoNet's products sold;

· BarcoNet's development of custom products;

· the level of international sales; and

· economic conditions specific to the cable television industry and general economic conditions.

BarcoNet depends on its international sales and is subject to the risks associated with international operations.

In 1998, BarcoNet's sales were spread over Europe (61 %), the America's (14.4 %), and Asia and Australia (24.6 %). In 1999, these percentages were 68.4 %, 13.9 % and 17.8 % respectively. BarcoNet's international operations are subject to a number of risks, including:

· changes in foreign government regulations and telecommunications standards;

86 · import and export license requirements, tariffs, taxes and other trade barriers;

· fluctuations in currency exchange rates;

· difficulty in collecting accounts receivable;

· the burden of complying with a wide variety of foreign laws, treaties and technical standards;

· difficulty in staffing and managing foreign operations; and

· political and economic instability.

BarcoNet's international sales are typically denominated in Euro and United States dollars. BarcoNet does not hold forward exchange contracts or other hedging instruments to exchange foreign currencies to offset currency rate fluctuations that might affect its obligations in relation to its repayment from operations out of income from sales. BarcoNet aims at matching expenditures in a certain currency by income in the same currency. Such "natural hedging", however, is not always possible. Fluctuations in currency exchange rates could cause BarcoNet's products to become relatively more expensive to customers in a particular country, leading to a reduction in sales or profitability in that country. Gains and losses on the conversion to Euro of accounts receivable, accounts payable and other monetary assets and liabilities arising from international operations may contribute to fluctuations in operating results.

The market in which BarcoNet operates is intensely competitive and BarcoNet's competitors, some of whom are larger and more established, may have a competitive advantage.

The markets for cable TV equipment and other broadband communications equipment are extremely competitive and characterized by rapid technological change. The principal competitive factors in these markets include product performance, reliability, price, width of product line, network management capabilities, sales and distribution capability, technical support and service, capability to provide system level integration and relationships with network operators around the world. BarcoNet's main competitors are mostly global players who not only cover different product areas, but who also have a geographically global scope, as further discussed in Section 2.8 of Chapter II of this prospectus. Several of BarcoNet's competitors are considerably larger than BarcoNet. They have greater financial, technical, marketing and other resources than BarcoNet. BarcoNet is, however, of the opinion that it offers a higher degree of flexibility as compared to its larger competitors, which enables it to successfully compete with these larger companies. In addition, BarcoNet believes that its worldwide presence provides it an additional competitive edge, since it is present in around twenty countries with its own sales and service organizations, whereby approximately half of BarcoNet's staff is employed outside Belgium.

Additional competition could also come from new entrants in the broadband communications equipment market. It cannot be assured that BarcoNet will be able to compete successfully in the future or that competition will not harm its business.

If any of BarcoNet's competitors' products or technologies were to become the industry standard or if any of its smaller competitors were to enter into or expand relationships with larger companies through mergers,

87 acquisitions or otherwise, BarcoNet's business could be seriously harmed. Furthermore, BarcoNet's competitors may bundle their products or incorporate functionality into existing products in a manner that discourages users from purchasing BarcoNet's products.

Broadband communications markets are relatively immature and characterized by rapid technological change.

Broadband communications markets are relatively immature, making it difficult to accurately predict the markets' future growth rate, size and technological direction. In view of the evolving nature of these markets, it is possible that cable operators, telephone companies or other suppliers of broadband wireless and satellite services will decide to adopt alternative architectures or technologies that are incompatible with BarcoNet's current or future products. If BarcoNet is unable to design, develop, manufacture and sell products that incorporate or are compatible with these new architectures or technologies, BarcoNet's business would suffer. BarcoNet's future revenue growth and operating profit will therefore depend in part upon its ability to enhance its current products and develop products to distinguish themselves from the competitors and to meet customer's changing needs.

BarcoNet could be adversely affected if broadband communications do not continue to grow with a high rate.

BarcoNet's core products are network transmission equipment for vital "HFC" networks, as well as for broadcasting networks. These networks can be used to transport Internet, telephony, "video-on-demand", and digital television. A significant part of the current demand for BarcoNet's products depends on BarcoNet's customers' desire to upgrade their existing networks and offer Internet and telephony services in addition to cable television service. There are, however, competing technologies such as direct broadcast satellite, digital subscriber line and local multi-point distribution services that can also provide these upgraded services to end-users. It is also not clear whether important applications such as "video-on-demand", will obtain general consumer and industry acceptance in the future. Improvements in a competing technology could result in significant price and/or performance advantages for that technology which, in turn, could reduce demand for BarcoNet's products.

BarcoNet needs to develop and introduce new and enhanced products and technology in a timely manner to remain competitive.

Broadband communication markets are characterized by continuing technological advancement, changes in customer requirements and evolving industry standards. To compete successfully, BarcoNet must design, develop, manufacture and sell new or enhanced products that provide increasingly higher levels of performance and reliability. However, BarcoNet may not be able to successfully develop or introduce these products. Moreover, these products may not achieve broad commercial acceptance and may have lower gross margins than BarcoNet's other products.

In addition, to successfully develop and market its products and technology, BarcoNet may be required to enter into technology development or licensing agreements with third parties. It cannot be assured that BarcoNet will be able to enter into any necessary technology development or licensing agreement on terms acceptable to it, or at all. The failure to enter into technology development or licensing agreements when necessary could limit BarcoNet's ability to develop and market new products and, accordingly, could materially and adversely affect BarcoNet's business and operating results.

Competition for qualified personnel is intense, and BarcoNet may not be successful in attracting and retaining personnel.

BarcoNet's future success will depend on its ability to retain and motivate highly qualified personnel, in addition to attracting new personnel. Competition for qualified technical and other personnel is intense and BarcoNet may not be successful in attracting and retaining such personnel.

88 While management requires substantial part of the employees to enter into confidentiality agreements, agreements with respect to ownership of inventions and, to a lesser extent, non-compete covenants, competitors and others have in the past and may in the future attempt to recruit BarcoNet's employees. The loss of the services of any of BarcoNet's key personnel, the inability to attract or retain qualified personnel in the future or delays in hiring required personnel, particularly engineers and other technical personnel, could negatively affect its business.

Sales forecasted for a particular period may not be realized in that period due to the unpredictable sales cycles of its products.

While generally customers send periodic forecasts as to their future requirements, these forecasts may not accurately reflect future purchase orders. In addition, the sales cycles of many of BarcoNet's products, particularly its newer products and products sold internationally, are typically unpredictable and usually involve:

· a significant technical evaluation by the customers concerned;

· a commitment of capital and other resources by cable and other network operators;

· delays associated with cable and other network operators' internal procedures to approve large capital expenditures;

· time required to engineer the deployment of new technologies or services within broadband networks; and

· testing and acceptance of new technologies that affect key operations.

For these and other reasons, sales cycles generally last three to six months, but can last up to twelve months or more. In addition, because a limited number of customers account for a significant portion of BarcoNet's sales, the timing of orders by BarcoNet's customers could cause significant fluctuation in BarcoNet's quarterly operating results. A portion of BarcoNet's expenses for any given quarter is typically based on expected sales and if sales are below expectations in any given quarter, the negative impact on BarcoNet's operating results may be increased if BarcoNet is unable to adjust its spending to compensate for the lower sales. Accordingly, if orders forecasted for a specific customer for a particular quarter do not occur in that quarter, BarcoNet's operating results for that quarter could be substantially lower than anticipated.

BarcoNet's failure to adequately protect its proprietary rights may adversely affect the company.

BarcoNet currently holds a number of European patents, and has a number of patent applications pending. Although BarcoNet will attempt to protect its intellectual property rights through patents, trademarks, copyrights, maintaining certain technology as trade secrets and other measures, it cannot be assured that any patent, trademark, copyright or other intellectual property right owned by BarcoNet will not be invalidated, circumvented or challenged, that such intellectual property right will provide competitive advantages to BarcoNet or that any of BarcoNet's pending or future patent applications will be issued with the scope of the claims sought by it, if at all. It cannot be assured that others will not develop technologies that are similar or superior to BarcoNet's technology, duplicate BarcoNet's technology or design around the patents that BarcoNet owns. In addition, effective patent, copyright and trade secret protection may be unavailable or limited in certain foreign countries in which BarcoNet does business or may do business in the future.

The future success of BarcoNet's business may depend on BarcoNet's ability to translate the technological expertise and creativity of its personnel into new and enhanced products. Generally confidentiality or license agreements are entered into with employees, consultants, vendors and customers as needed, and generally access to, and distribution of, proprietary information is limited. Nevertheless, it cannot be assured that the steps taken by BarcoNet will prevent misappropriation of its technology. In addition, BarcoNet may take in the future, legal

89 action to enforce its patents and other intellectual property rights, to protect its trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could harm BarcoNet's business and operating results.

As is common in BarcoNet's industry, from time to time the company receives notification from other companies of intellectual property rights held by those companies upon which BarcoNet's products may infringe. Any claim or litigation, with or without merit, could be costly, time consuming and could result in a diversion of management's attention, which could harm BarcoNet's business. If BarcoNet were found to be infringing on the intellectual property rights of any third party, it could be subject to liabilities for such infringement, which could be material, and could be required to seek licenses from other companies or to refrain from using, manufacturing or selling certain products or using certain processes. Although holders of patents and other intellectual property rights often offer licenses to their patent or other intellectual property rights, it cannot be assured that licenses would be offered, that the terms of any offered license would be acceptable to BarcoNet or that failure to obtain a license would not cause operating results to suffer.

BarcoNet purchases several key components, subassemblies and modules used in the manufacturing or integration of its products from sole or limited sources, and is increasingly dependent on contract manufacturers.

Some components, subassemblies and modules necessary for the manufacture or integration of BarcoNet's products are obtained from a sole supplier or a limited group of suppliers. BarcoNet's reliance on sole or limited suppliers, particularly foreign suppliers, and its increasing reliance on subcontractors involves several risks, including a potential inability to obtain an adequate supply of required components, subassemblies or modules and reduced control over pricing, quality and timely delivery of components, subassemblies or modules. Certain key elements of BarcoNet's products are provided by a sole foreign supplier. Generally there are no long-term agreements with any of BarcoNet's suppliers or subcontractors. An inability to obtain adequate deliveries or any other circumstance that would require BarcoNet to seek alternative sources of supply could affect its ability to ship its products on a timely basis, which could damage relationships with current and prospective customers and harm BarcoNet's business. BarcoNet will attempt to limit this risk by maintaining safety stocks of these components, subassemblies and modules. As a result of this investment in inventories, BarcoNet may be subject to an increasing risk of inventory obsolescence in the future, which could harm its business.

Part of the components for products currently manufactured by the "Barco Communication Systems" activity are manufactured by the "Barco Specialized Subcontracting" activity. Upon Closing of the Demerger, the Barco Specialized Subcontracting activity will be transferred to New Barco. BarcoNet, however, will continue to purchase components from Barco Specialized Subcontracting, but due to the demerger of and the creation of two new autonomous groups, i.e. BarcoNet Group and New Barco Group, BarcoNet will not have the same degree of control over Barco Specialized Subcontracting than it used to have as a part of Barco Group.

Due to the concentration in the field of cable operators, BarcoNet's customer base will consist of a smaller number of customers and the loss of one or more key customers would harm its business.

Only recently, a significant amount of sales is realized with relatively few cable operators and broadcasters in Europe, the Americas, Asia and other regions. Sales to the five largest customers increased from 16 % in 1998 to 28 % in 1999 of net sales. During the past 18 months, there has been significant consolidation of ownership of cable systems. A similar trend is expected for the future. As a result, it is expected that the BarcoNet's sales will be concentrated to a smaller number of customers for the foreseeable future. BarcoNet's sales are generally made on a purchase order basis and relatively few of BarcoNet's customers have entered into long-term agreements requiring them to purchase BarcoNet's products.

90 If BarcoNet does not find other customers who generate significant future revenues, the unforeseen loss of one or more of its major customers, or the inability to maintain reasonable profit margins on sale to any of these customers, would have a material adverse effect on BarcoNet's results of operations and financial condition.

BarcoNet must be able to manage expenses and inventory risks associated with meeting the demand of its customers.

BarcoNet will receive indications from the market, particularly its customers as to their future plans and requirements to ensure that BarcoNet will be prepared to meet their demand for products. In the past, Barco has received such indications but, on occasion, did not ultimately receive purchase orders for its products. BarcoNet must be able to effectively manage expenses and inventory risks associated with meeting potential demand for its products. In addition, if BarcoNet fails to meet customers' supply expectations, it may lose business from such customers. If BarcoNet expends resources and purchases materials to manufacture products and such products are not purchased, its business and operating results could suffer.

BarcoNet needs to effectively manage its growth.

The growth in BarcoNet's business has placed, and is expected to continue to place, a significant strain on personnel, management and other resources. BarcoNet's ability to manage any future growth effectively will require it to attract, train, motivate and manage new employees successfully, to integrate new employees into BarcoNet's overall operations, to retain key employees and to continue to improve operational, financial and management systems. If BarcoNet fails to manage its future growth effectively, its business could suffer.

BarcoNet may need additional capital in the future and may not be able to secure adequate funds in terms acceptable to it.

It is anticipated that existing cash balances and cash flow, that are expected to be generated from future operations, as well as lines of credit that could be set up, will be sufficient to meet BarcoNet's liquidity needs for at least the next twelve months. However, BarcoNet may need to raise additional funds if its estimates change or prove inaccurate or in order for it to respond to unforeseen technological or marketing hurdles or to take advantage of unanticipated opportunities.

91 4. FINANCIAL INFORMATION OF BARCONET

4.1 GENERAL

The following sections set forth the pro forma consolidated financial information of BarcoNet Group as of December 31, 1998, and December 31, 1999, and for the years then ended, and as of June 30, 2000 and for the six month period then ended, presented in accordance with United States generally accepted accounting principles or US GAAP. The pro forma financial statements as of December 31, 1998, and December 31, 1999, and for the years then ended, have been audited by Arthur Andersen Bedrijfsrevisoren C.V.B.A., represented by Mr. Dirk Van Vlaenderen. The pro forma consolidated financial statements as of June 30, 2000, and for the six months then ended, are unaudited, but have been subject to a limited review by Arthur Andersen Bedrijfsrevisoren C.V.B.A., in accordance with the guidelines prescribed by the Belgian Institute of Company Auditors.

BarcoNet will prepare its statutory financial statements in accordance with Belgian generally accepted accounting principles or Belgian GAAP.

On the date of this prospectus, Barco qualifies, and upon Closing of the Demerger BarcoNet and New Barco will each qualify, as a "portfolio company" in accordance with the Belgian Royal Decree No. 64 of November 10, 1967 as amended, since Barco has, and upon Closing of the Demerger each of BarcoNet and New Barco will have, participations in subsidiaries under its control for a total value of at least BEF 500 million (or EUR 12,395,676.23) or 50 % of its net assets. By virtue of the Belgian Royal Decree of September 1, 1986, as amended, portfolio companies must prepare their statutory and consolidated financial statements in accordance with Belgian GAAP.

Barco applied with the Belgian Banking and Finance Commission to be authorized to present the pro forma consolidated financial statements of BarcoNet Group in this prospectus in accordance with US GAAP instead of Belgian GAAP, for the following reasons:

· BarcoNet's most important competitors are located in the United States of America.

· BarcoNet's management intends to access international financial markets to finance its further growth.

· Whereas more than 85 % of the BarcoNet sales are realized outside Belgium, BarcoNet considers the further expansion of its activities in the United States as one of the key elements of its strategy. Therefore, it intends to pursue an aggressive growth in North America through partnerships and acquisitions.

· The application of US GAAP to present BarcoNet's consolidated financial accounts is particularly useful to access international financial markets and to compare the company with other companies that are active in the same industry.

On 13 September 2000, Belgian Banking and Finance Commission for Banking and Finance authorized Barco to present the pro forma consolidated accounts of BarcoNet Group in this prospectus in accordance with US GAAP, provided that:

· the pro forma consolidated financial statements fully comply with US GAAP, unless to the extent that the use of US GAAP is contrary to the mandatory accounting principles set forth in the European accounting Directives;

92 · the auditor of BarcoNet verifies and confirms the foregoing in his report on the pro forma consolidated statements; and

· the reasons for the authorization are referred to in the notes to, or the report on, the pro forma consolidated accounts.

Upon Closing of the Demerger, BarcoNet will apply with the Belgian Banking and Finance Commission to be authorized to prepare and publish its consolidated financial statements in accordance with US GAAP.

4.2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULT OF OPERATIONS

4.2.1 Overview

The following discussion should be read together with the consolidated financial statements, the notes thereto and other financial information appearing elsewhere in this section.

BarcoNet designs, manufactures, markets and supports multimedia distribution solutions targeting the three converging markets of the communications industry i.e. cable, broadcast and telecom. BarcoNet's products and solutions can be used to provide audio, video and data services by way of cable, satellite, telecom and wireless networks. BarcoNet mainly focuses on broadband operators throughout the world.

· Revenues and Earnings

As indicated elswhere in this prospectus, the main share of BarcoNet's sales has been realized in Europe. Sales in Asia and Australia and in North, Middle and South America (13.8 % in 1999), however, have been significant too. As discussed elsewhere in this prospectus, it is BarcoNet's intention to increase sales in all regions and particularly in North America.

BarcoNet designs, manufactures, markets and supports the following product lines: Headends, fiber optic Backbones, Digital TV distribution solutions and Network management systems. In addition, BarcoNet has a broad range of high quality displays (Broadcast Display Products) and it also maintains a codec solution (Audio Distribution Solutions) to transmit radio signals over the telecom network. BarcoNet expects that particularly the first four product lines will contribute to the anticipated increase in revenues.

· Research and Development

Research and development are one of the cornerstones of BarcoNet's competitive position. Consequently, substantial resources are invested therein amounting to more than 10% of BarcoNet's sales revenue.

BarcoNet forecasts to realize a growth of around 20 % in sales over 2000 as compared to 1999. This upward trend in sales appears to be confirmed by the order book amount per August 31, 2000, which equaled approximately EUR 26.1 million. Management expects that growth in sales will be supported by a further growth in the sales of backbones and the increasing success of BarcoNet's digital headends and network management.

Management believes that this growth rate is in line with the average market growth, which can be estimated, according to market studies, to range between 18 % and 20 % per year. Management assumes that BarcoNet's expansion will be able to keep pace with the market growth, and that BarcoNet's sales growth could be accelerated to an even higher level due to a more aggressive expansion in the United States and due to the

93 introduction of new products for emerging and fast growing market segments such as data over cable and fixed wireless solutions.

It is furthermore expected that BarcoNet’s income after taxes will, for the year 2000, increase with approximately 50 % as compared to 1999. Whereas for 2000, the increase of the income after taxes is expected to exceed the growth of sales, management expects that, for the following years, the increase of income after taxes would be more in line with the expected growth in sales, mainly because in the following years BarcoNet is not only likely to incur additional expenses as a stand-alone company (as opposed to being part of Barco Group), but might also choose to accelerate expenditures in research and development in order to maximize expansion into new product areas and applications.

The following discussion is based on the consolidated results of operations for the years ended December 31, 1998 and 1999, as well as for the first six months of 2000 and should be read together with the consolidated financial statements included elsewhere in this prospectus.

4.2.2 Consolidated Statements of Income

1998 Compared to 1999

· Net Sales

BarcoNet recorded in 1999 an increase in sales of 15.5 %, from an amount of EUR 78.0 million in 1998 up to an amount of EUR 90.1 million in 1999. This growth is largely due to the increased success of BarcoNet's fiber optic backbone solutions, as well as its monitoring and management system. The development of both product lines is increasingly stimulated by the emerging market trend of providing "data over cable". The trend of cable operators offering subscribers interactive media, such as telephony and Internet, has a thriving impact on three of the main application areas: cable TV headends, backbones and digital TV distribution, especially digital terrestrial television.

For BarcoNet A/S (Denmark) (formerly known as "RE Technology A/S"), the change towards an upward trend was already apparent in 1998, and has been confirmed in 1999. A cost reduction program has considerably decreased the overall cost level. Combined with the introduction of new, highly advanced products, this cost reduction progress was the key to a positive turnaround of BarcoNet A/S.

After the expansion of the North American operations in 1998, business increased significantly in 1999, with the most noticeable growth recorded in cable TV headends. The slackening economy in both South America and Asia, however, has lead to a delay in and sometimes even the cancellation of projects, which resulted in an overall decrease of sales in both regions.

· Gross Profit

Gross profit increased from EUR 40.8 million in 1998 (52.3 % of sales) to EUR 49.2 million in 1999 (54.6 % of sales). Write-offs on inventory were lower in 1999, largely due to exceptional write-offs in 1998 in relation to the reorganization of activities at BarcoNet A/S. The refocus of BarcoNet A/S implied that certain ETSI products (which are based on standards for video codecs accepted by the European Telecommunications Standards Institute) were phased out and were replaced by transmission equipment that was based on the MPEG2 standard which is largely replacing the ETSI standard in the communications and broadcast industry. The decrease in write-offs, however, was largely offset by a higher material cost due to changes in the product mix and specific sales conditions in some emerging markets.

94 · Research and Development

Research and development expenses decreased to EUR 9.9 million (11.0 % of sales) in 1999, down from EUR 11.0 million (14.1 % of sales) in 1998. The decrease is mainly a result of the management's decision to re-focus developments at BarcoNet A/S to products and solutions that are more in line with BarcoNet's focus on cable networks. This means, amongst other things, that the development efforts for audio distribution and video contribution applications for broadcast are decreased and that more efforts are invested in the development of digital TV distribution. (See also Chapter II, Section 2.3. "BarcoNet's solution"). At the same time, development and prototyping work that previously was subcontracted to third parties, was reduced considerably.

The reduction in expenses for research and development in Denmark was partially offset by an expansion of the development teams in the United Kingdom and the start-up of a development team in the United States. Development expenses in Belgium also increased.

· Selling and Administration

Selling and administration expenses increased from EUR 28.7 million in 1998 to EUR 29.4 million in 1999. The increase in expenses can be attributed to the expansion of the sales and service organization, particularly in Belgium and North America. Part of the extra investments was offset by cost reductions at BarcoNet A/S.

· Goodwill Amortization

The amortized goodwill relates to the acquisition of the Danish subsidiary BarcoNet S/A (formerly RE Technology) in July 1997. The amount of amortized goodwill remained the same as in 1998 as there were no acquisitions with respect to the BarcoNet activity in 1999.

· Net Income (After Tax)

BarcoNet realized a net profit of EUR 5.7 million (6.3 % of net sales) in 1999, as compared to a loss of EUR 3.0 million (3.8 % of net sales) in 1998. This increase in profit is a result from an increase of net sales, while maintaining and even slightly improving the gross profit margin. Cost reductions at BarcoNet A/S attributed also to an improved profit margin.

First Six Months of 2000 compared to 1999

· Net Sales

Net sales increased in the first six months of 2000 to EUR 51.0 million, up from EUR 44.4 million in the same period of 1999, which amounts to an increase of 14.8 %.

The steady growth of BarcoNet's sales is largely driven by Internet-over-cable and other interactive digital services, such as "video-on-demand" and "pay-per-view".

BarcoNet sold digital headends to major customers in the United Kingdom, France, Switzerland, Germany, Italy, Indonesia, and several other countries. The success of BarcoNet's GEMINI and SIRIUS up- converters for high-speed Internet transport over cable continued from last year.

Interactive services, such as Internet and telephony, can be seen as driving the consolidation of networks, which in turn leads to the interconnection of headends to obtain joint service offerings. In this respect, BarcoNet's LYNX fiber optic backbone solutions have been successful. Major orders and repeat orders were obtained in Spain, Italy, Belgium, Switzerland, and several new projects are being negotiated.

95 As network management becomes increasingly important for digital TV and interactive service offerings, BarcoNet's ROSA management system appears to be gaining in significance. Special interest was shown at the launch in June 2000 of PHOENIX, a new network monitoring product that provides a direct communication link between several vendors' network devices and any management system. BarcoNet is playing a key role in developing industry interoperability standards for open interface solutions.

As for the broadcast monitor line, the ADVM viewing monitor family has been very successful in the first half of this year. ADVM is a hybrid analog/digital monitor that was launched last year and is especially designed to ensure the smooth transition from analog to digital viewing in today's changing studio environments.

Within the product line for TV contribution and distribution applications, mainly BarcoNet's new platform of MPEG2 compression solutions has grown substantially. This positive trend is expected to continue in the foreseeable future. BarcoNet also took steps to re-direct the focus of the compression solutions towards more cable TV oriented applications.

From a regional perspective, sales in Asia, and specifically China, soared. Also business in Brazil has clearly picked up after the liberalization of the cable TV distribution market in 1998. Major orders include contracts from Globo Cabo, the country's largest cable operator, and Infovias, which operates mainly in the State of Minas Gerais. BarcoNet remains a relatively small player in the United States market as compared to some of its U.S. competitors. In Asia, China in particular scores high. Most operators still provide only analog TV, but the first trials with digital TV have been started, and orders have come in for both digital cable TV and terrestrial applications. Noteworthy are some important new reference steps that have been realized with several German cable operators that have ordered headends.

Several segments of the electronics market need similar basic components. Due to the worldwide growth of these electronic markets, the supply of basic components has been under pressure in recent months. This situation could result in some temporary limitations in the manufacturing and supply of systems of BarcoNet.

· Gross Profit

Gross profit over the first six months of 2000 amounted to EUR 28.2 million (55.3 % of sales), up from 54.6 % of sales over the total of 1999. The improvement in gross profit margin can be attributed to changes in product mix, as well as the fact that more sales were realized via wholly-owned sales organizations instead of via dealers and distributors. New sales and service subsidiaries in Spain and Australia have contributed to this trend.

· Research and Development

Expenses for research and development amounted in the first half of 2000 to EUR 5.4 million, which equals 10.6 % of sales as compared to a 11.0 % of sales in 1999. Increase of research and development expenses took place in Belgium, in particular due to increased development efforts in fiber optic backbones (LYNX), and in the United Kingdom due to an expansion in the development of digital headends. BarcoNet invested also in additional capacity for software development in all development locations. This also included an extension of the software development team in India.

96 In the last three years substantial research and development efforts have been spent on:

· developping the digital headend concept called GALAXY, which includes technologies to support conditional access systems, digital compression systems and statistical multiplexers to increase the amount of data that can be transmitted over a broadband network. Although the MPEG2 technology in the digital TV distribution market has been weak so far, it is expected for revenue to grow substantially in 2000, as management believes that it is a better integrated product in the total digital headend offering. The other digital headend products have showed a steady growth in revenue over the last two years. Management believes that 2000 is a break-through year for digital headend systems.

· developping the fiber optic backbone products called LYNX, whereby BarcoNet is currently developping a next generation of iLYNX products. Revenue for the LYNX product has grown substantially over the past two years.

· developping the network management products, whereby ROSA, which is the principal product, which has been both a revenue generator on itself and a revenue enabler for BarcoNet's other product lines.

· developping a new broadcast display product-line, called the ADVM series, which is a "hybrid" monitor handling both analog as well as digital TV signals in TV studios, and in respect of which BarcoNet already generated revenue in 2000.

· developping high definition encoders. Although a substantial amount of research and development resources were spent on this product, no substantial revenue has been generated.

· Selling and Administration

Selling and administration expenses over the first six months of 2000 amounted to EUR 16.7 million (32.7 % of sales as compared to 32.7 % of sales in 1999). BarcoNet invested in the further growth of its international network of sales and service offices with investments in Belgium, the United States, Brazil, the United Kingdom and Spain. The Asian organization was expanded with a customer service center in Malaysia.

· Goodwill Amortization

The amortized goodwill relates to the acquisition of the Danish subsidiary BarcoNet S/A (formerly RE Technology) in July 1997. The amount of amortized goodwill remained the same as in 1999, as there were no acquisitions with respect to the BarcoNet activity in the first half of 2000.

· Net Income

Net profit of BarcoNet over the first six months of 2000 increased to EUR 3.7 million (7.3 % of sales in 2000), as compared to a profit of EUR 5.7 million in 1999. The growth of net profit is mainly due to an increase of gross profit.

97 4.2.3 Consolidated Statements of Cash Flows

Operational Activities

· Decrease in Net Receivables

The net receivables comprise trade receivables and other receivables. Between 2000 and 1999, trade receivables decreased because December 1999 was a record sales month, which explains the high level of receivables on December 31, 1999.

Between 1999 and 1998, the other receivables substantially decreased because of a compensation that took place between receivables and payables towards Barco. For this reason, the variance in receivables needs to be analyzed in combination with the decreased payables under financing activities (proceeds from debt).

· Increase in Net Inventories

Whereas the level of inventory remained practically identical in 1999 as compared to 1998, there is a substantial increase between 1999 and the first six months of 2000. It was mainly in Denmark (and to a much lesser extent in Belgium and in the U.S.) that inventory levels increased.

For Denmark, the high stocks in 2000 are mainly due to the fact that there were not many shipments.

The increase in Belgium was due to:

· higher sales (due to the fact that a production planning for bigger volumes is necessary), whereby the rotation as compared to sales increased slightly;

· the seasonal change, since the plant is closed in December in order to perform physical counts, which typically reduces the level of inventory on December 31, as compared to June 30, when there is a full production schedule.

The increase for the U.S. was primarily due to a relatively low turnover.

Investing Activities

The investments that took place in 2000 (property and equipment additions) are mainly explained by the purchase of the building at the Luipaardstraat, Kortrijk, Belgium, which was previously rented.

Financing Activities

For the decrease of the proceeds from debt reference is made to the decrease in net receivables above.

In addition, the short-term borrowings have substantially increased in 2000 because of a loan between the Barco Coordination Center and BarcoNet S.A. (France) relating to a cash pool that was set up.

Cumulative Translation Adjustment

The slight decrease over 1998 to June 30, 2000, is mainly explained by the introduction of the Euro as single European currency.

98 4.3 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The management of Barco is responsible for the preparation, integrity and objectivity of all financial statements and other information contained in these financial statements. To ensure reliability of financial data, Barco has established and maintains, and upon Closing of the Demerger, BarcoNet will establish and maintain, an internal control system, which provides reasonable assurance that financial reports do not contain any material misstatement.

The Audit Committee of the Board of Directors of Barco and, upon Closing of the Demerger, BarcoNet, is responsible for reviewing and evaluating the overall performance of the company's financial reporting and accounting practices. The committee meets periodically and independently with management, internal auditors and the independent public accountants to discuss the company's internal accounting controls, auditing and financial matters. The internal auditors and independent public accountants have unrestricted access to the Audit Committee.

Barco believes that the financial statements and related notes in this report are presented fairly in all material respects, and that they were prepared according to generally accepted accounting principles.

99 4.4 DETAILED FINANCIAL STATEMENTS IN ACCORDANCE WITH US GAAP

AUDITOR'S REPORT

To the Shareholders of Barco N.V.

We have examined the accompanying consolidated balance sheets of Barco Communication Systems activity of Barco (incorporated under the name BarcoNet upon Closing of the Demerger) as of December 31, 1999 and 1998, and the related consolidated statements of income, cash flows, equity attributable to the activity and the notes for the years then ended. These consolidated pro forma financial statements have been prepared under the responsibility of the Board of Directors. The balance sheet total as of December 31, 1999 and 1998 is EUR 99,673 (000) and EUR 113,979 (000), and the profit/loss for the years then ended is respectively EUR 5,712 (000) and EUR (2,979) (000).

OPINION, WITHOUT RESERVATION, ON THE CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS

Our examinations were made in accordance with the auditing standards of the Belgian Institute of Company Auditors. These require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. In accordance with these standards, we have taken into consideration the administrative and accounting procedures and system of internal control of the company. We have examined, on a test basis, evidence supporting the amounts in the consolidated pro forma financial statements. We also assessed the valuation rules, the principles of consolidation, significant accounting estimates and the presentation of the consolidated pro forma financial statements as a whole. We received from the management the information and explanations we requested. We believe that these procedures provide a reasonable basis for our opinion.

In our opinion, the accompanying consolidated pro forma financial statements present fairly the financial position of Barco Communication Systems activity of Barco, N.V. as of December 31, 1999 and 1998 and the results of its operations and its cash flow for the years then ended, fully in conformity with accounting principles generally accepted in the United States of America.

ADDITIONAL STATEMENTS

We complete our report with the following additional statements which do not modify the scope of the above-mentioned opinion on the pro forma financial statements :

- The Commission for Banking and Finance authorized the company to prepare and present its consolidated pro forma financial statements in accordance with accounting principles generally accepted in the United States of America instead of the accounting principles generally accepted in Belgium. These statements are also in accordance with the mandatory accounting principles described in the European accounting directives.

- We reviewed the consolidated pro forma interim financial statements as of June 30,2000. These statements are prepared by the management of the company.

100 Our review was based upon the guidelines of the Belgian Institute of Company Auditors and mainly consist of an analytical review of the statements and discussion with management.

The scope of this review is substantially less than an audit in accordance with generally accepted auditing standards.

Our review, however, did not reveal any elements that would cause the pro forma interim financial statements as of June 30, 2000 not to be in accordance with the accounting principles of the company.

The Auditor,

ARTHUR ANDERSEN Bedrijfsrevisoren

______/s/ Dirk Van Vlaenderen

September 4, 2000

101 BARCONET GROUP

CONSOLIDATED BALANCE SHEETS

In thousands of Euro Notes June 30, December 31, 2000 1999 1998 (unaudited)

ASSETS Current assets: Cash and cash equivalents ...... 438 905 651 Accounts receivable, net of reserves of 932, 843 and 657 ...... 4 54,355 56,805 70,518 Inventories, net of reserves of 4,465, 4,005 and 4,497 ...... 5 25,057 17,351 17,767 Prepaid expenses ...... 2,401 3,324 2,837 ______Total current assets ...... 82,251 78,385 91,773 Property and equipment, net ...... 6 8,966 7,266 6,997 Other assets ...... 5,317 5,099 4,469 Intangible assets, principally goodwill ...... 7 8,952 8,923 10,740 ______Total assets ...... 105,486 99,673 113,979 ______

LIABILITIES AND SHAREHOLDERS ' INVESTMENT Current liabilities: Accounts payable ...... 7,920 7,486 7,135 Accrued liabilities ...... 8 11,430 13,701 16,435 Accrued and deferred income taxes ...... 12 2,401 3,324 2,837 Note payable and current maturities of long-term debt ...... 9 6,764 2,371 5,781 ______Total current liabilities ...... 28,515 26,882 32,188 Long-term debt, net ...... 9 2,565 1,934 15,627 ______Total liabilities ...... 31,080 28,816 47,815 Equity attributable to the activity ...... 74,406 70,857 66,164 ______Total liabilities and shareholders' investment ...... 105,486 99,673 113,979 ______

The accompanying notes are an integral part of these consolidated financial statements.

102 BARCONET GROUP

CONSOLIDATED STATEMENTS OF INCOME

In thousands of Euro Note June 30, December 31, 2000 1999 1998 (unaudited)

Net sales ...... 50,992 90,074 77,965 Cost of goods sold ...... 22,809 40,859 37,195 Gross profit ...... 28,183 49,215 40,770 ______Research and development ...... 5,418 9,918 10,972 Selling and administration ...... 16,671 29,424 28,670 Goodwill amortization ...... 370 740 740 ______Total expenses ...... 22,459 40,082 40,382 ______

Operating income ...... 5,724 9,133 388 Non-operating income (expense), net ...... 471 258 (879) ______Income before income taxes ...... 6,195 9,391 (491) Provisions for income taxes ...... 12 (2,454) (3,679) (2,488) ______Net income ...... 3,741 5,712 (2,979) ______Pro forma earnings per share, basic and diluted ...... 0.15 0.23 (0.12) ______Average common shares outstanding, basic and diluted ...... 24,820,958 24,820,958 24,820,958 ______

Pro forma earnings per share are computed using the number of shares issued upon formation (as upon the Closing of the Demerger) for all periods presented.

The accompanying notes are an integral part of these consolidated financial statements.

103 BARCONET GROUP

CONSOLIDATED STATEMENTS OF EQUITY ATTRIBUTABLE TO BARCONET

In thousands of Euro Common Paid-in Retained Comprehen- stock Capital Earnings sive Income Shares (Loss)

Balance, December 31, 1997 ...... 24,820,958 12,658 55,206 731 Net income ...... (2,979) Translation adjustments ...... 548

Balance, December 31, 1998 ...... 24,820,958 12,658 52,227 1279 Net income ...... 5,712 Translation adjustments ...... (1,019)

Balance, December 31, 1999 ...... 24,820,958 12,658 57,939 260 Net income (unaudited) ...... 3,741 Translation (192) adjustments(unaudited) ......

Balance, June 30, 2000 ...... 24,820,958 12,658 61,680 68

The accompanying notes are an integral part of these consolidated financial statements.

The amount recorded as paid-in capital represents the legal capital of BarcoNet upon Closing of the Demerger.

104 BARCONET GROUP

CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands of Euro June 30, December 31, 2000 1999 1998 (Unaudited) Operating Activities: Net income ...... 3,741 5,712 (2,979) Reconciliation of net income to net cash from operating activities: Depreciation and amortization ...... 2,188 4,568 4,424 Net capital (gain) / loss on disposal of assets ...... 28 12 (12) Changes in assets and liabilities: Decrease / (increase) in net receivables ...... 2,450 13,713 (5,132) Decrease / (increase) in net inventories ...... (7,706) 416 (2,954) Decrease / (increase) in prepaid expenses ...... 923 (487) (369) Increase / (decrease) in accounts payable ...... 434 351 5,931 Increase / (decrease) in accrued liabilities ...... (2,271) (2,734) 4,965 Increase / (decrease) in deferred income taxes ...... (923) 487 369 ______Total cash from operating activities ...... (1,136) 22,038 4,243

Investing Activities: Property and equipment additions, net ...... (3,365) (3,284) (3,256) Other assets ...... (408) (1,648) (732) Intangible assets, principally goodwill ...... (580) 252 536 ______Total cash used for investing activities ...... (4,353) (4,680) (3,452)

Financing Activities: Proceeds from increase of debt ...... 805 240 371 Payment of debt ...... (174) (13,933) (900) Increase / (decrease) in short-term borrowings ...... 4,393 (3,410) (297) ______Total cash from (used for) financing activities ...... 5,024 (17,103) (826)

Cumulative effect of foreign currency translation on cash ...... (2) (1) 5 Changes on Cash ...... (467) 254 (30) ______Increase / (Decrease) in Cash and Cash Equivalents ...... (467) 254 (30) Cash and Cash Equivalents, Beginning of Period ...... 905 651 681 Cash and Cash Equivalents, End of Period ...... 438 905 651 ______Supplemental Disclosures: Income taxes paid ...... 2,401 3,324 2,837 Interest paid ...... 733 1,283 1,586 ______

The accompanying notes are an integral part of these consolidated financial statements.

105 BARCONET GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Business and Organization

BarcoNet has operated historically as a division of Barco N.V. ("Barco" or the "Parent"). BarcoNet designs, manufactures, markets and supports the following product lines: Headends, fiber optic Backbones, Digital TV distribution solutions and Network management systems. In addition, BarcoNet has a broad range of high quality displays (Broadcast Display Products) and it also maintains a codec solution (Audio Distribution Solutions) to transmit radio signals over the telecom network. BarcoNet expects that particularly the first four product lines will contribute to the anticipated increase in revenues.

On July 1, 1997, Barco acquired RE Technology A/S (now operating under the name BarcoNet A/S), a Danish company that manufactures and installs audio, video and data equipment to the cable television and telecommunication markets. The Danish company was merged into the BarcoNet activity.

On September 1, 2000, the Board of Directors of Barco proposed to the shareholders of Barco to demerge the company into two new Belgian public limited liability companies. BarcoNet N.V. is comprised of the existing Barco Communication Systems division of Barco and its subsidiaries. Barco N.V. will be comprised of the remaining divisions and activities of the Parent.

BarcoNet Group will operate through the following BarcoNet subsidiaries and/or branch office:

COUNTRY NEW ENTITY

Belgium BarcoNet N.V. (parent) Germany BarcoNet GmbH (100 % held by BarcoNet N.V.) UK branch of BarcoNet N.V. (100 % held by BarcoNet N.V.) France SHFI S.A.R.L. (99.99 % held by Sereli S.A. in France) Sereli S.A. (99.99 % held by BarcoNet S.A. in France) BarcoNet S.A. (100 % held by BarcoNet N.V.) Spain BarcoNet S.A. (100 % held by BarcoNet A/S) USA BarcoNet Inc. (100 % held by BarcoNet N.V.) Singapore BarcoNet Private Ltd. (100 % held by BarcoNet N.V.) India BarcoNet Private Ltd. (100 % held by BarcoNet A/S) Brazil BarcoNet Ltda. (100 % held by BarcoNet A/S) Denmark BarcoNet A/S . (100 % held by BarcoNet N.V.) China (Hong Kong) BarcoNet Ltd. (100 % held by BarcoNet A/S) Malaysia BarcoNet Sdn. Bhd. (100 % held by BarcoNet A/S) Australia BarcoNet Pty. Ltd. (100 % held by BarcoNet A/S)

106 BARCONET GROUP

Note 2 - Basis of Presentation

As the de-consolidation and demerger of Barco will become effective upon Closing of the Demerger, the BarcoNet activity did not prepare separate historical financial statements in accordance with accounting principles generally accepted in the United States (US GAAP) in the normal course of its operations. However, these financial statements have been prepared in accordance with US GAAP for purposes of this prospectus. The financial statements of the BarcoNet activity of Barco are presented on a carve out basis, which reflect the assets, liabilities, revenues and expenses directly attributable to the BarcoNet activity as well as allocations deemed reasonable by management to present the financial position, results of operations and cash flows of the BarcoNet activity of Barco on a stand-alone basis.

As a result of the carve out, the balance sheet presents the item "equity attributable to the activity" consistent with the fact that the spun-off activity did not operate as a stand-alone company. This item represents the net investment in the spun-off activity by Barco and the accumulated retained earnings of the activity.

The accompanying financial statements have been prepared on a going concern basis. BarcoNet received funding and administrative support from the Parent. BarcoNet will continue to maintain certain agreements with Barco. Amounts specifically identified as corporate-advances or borrowings by BarcoNet are reflected in the financial statements.

Sales of BarcoNet are specifically identifiable from the sales of Barco. Sales to Barco entities and purchases from Barco entities are recorded on terms that the parties believe to approximate the terms that would have been negotiated by unaffiliated parties.

BarcoNet has recorded all costs incurred by the Parent that are directly attributable to BarcoNet. These include staff costs related to employees wholly engaged in the business, advertising costs, amortization of intangible assets, depreciation attributable to fixed assets used in the business, and provisions for risks such as bad debts. In addition, indirect staff and related costs, as well as facilities, information technology and other related costs have been allocated based on management’s estimate of the relative usage by BarcoNet. BarcoNet believes that the allocation of such costs has been calculated on a reasonable basis and that the total amount of costs recognized in the statements of income approximates what its actual costs would have been as a stand-alone entity.

The financial statement provision and the related tax payments or refunds are reflected in the financial statements as if BarcoNet was operating on a stand-alone basis. As a result, amounts of taxes payable or refundable are comparable to those that would have resulted if BarcoNet had filed separate tax returns.

Where assets were obtained or liabilities were incurred for the benefit of BarcoNet activities, but are not specifically attributable to activities, an allocation to BarcoNet of such assets and liabilities has not been made.

Historically, BarcoNet has not maintained separate cash accounts and therefore all cash receipts and payments have been handled by the Parent. The statements of cash flows have been prepared as if the cash receipts and payments had been received and paid by BarcoNet.

Because of the allocations referred to above and the proposed changes in the structure and financing of the activities going forward, these financial statements should not be relied upon as being representative of the future financial position or performance of BarcoNet.

107 BARCONET GROUP

Note 2 - Basis of Presentation (continued)

In particular, the operating costs attributed to the activities for the years ended December 31, 1999 and 1998 are not representative of the costs which will be incurred after the demerger as they represent the carve out costs incurred by the Parent in managing integrated businesses. The business of the spun-off activity on a stand- alone basis may be restructured following the demerger which may result in certain costs being duplicated, other costs being avoided altogether and yet other costs being incurred. For this reason, the reported result for the years ended December 31, 1999 and 1998 may not be representative of the amounts of those items for the spun-off activity following the demerger.

The subsidiaries and branches described in Note 1 are fully consolidated in the pro forma financial statements.

Note 3 - Summary of Significant Accounting Policies

The consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (US GAAP). The accounting principles used are also in conformity with the mandatory accounting principles described in the European accounting Directives.

The following is a summary of the significant accounting policies used in the preparation of the financial statements.

(a) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.

(b) Cash Equivalents

Cash equivalents represent all highly liquid investments with an original maturity of three months or less. The carrying amounts of these investments approximate their fair value due to their short maturities.

Inventories include material, labor and overhead and are stated at the lower of first-in, first-out cost or market price. An obsolescence provision is recorded when it is determined that the net realizable value is less than the carrying amount.

108 BARCONET GROUP

Note 3 - Summary of Significant Accounting Policies (continued)

(d) Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives or, in the case of leasehold improvements, over the term of the lease, if shorter. The economic lives of the major classes of property and equipment are as follows:

Type Estimated Economic Life

Buildings ...... 20 years Operating equipment ...... 3 - 10 years Office furniture and equipment ...... 3 - 10 years

(e) Goodwill

The excess of the purchase price paid over the fair value of the net assets acquired in business combinations is recorded as goodwill and is amortized on a straight-line basis over its expected useful life, ranging from 10 to 15 years. Management periodically assesses the amortization period and recoverability of the carrying amount of goodwill based upon an estimate of future cash flows from related operations.

(f) Research and Development Costs

BarcoNet capitalizes software development costs upon the establishment of technological feasibility until the product is introduced to the market. Capitalized software development costs are monitored and amortized on a project-by-project basis beginning at the time the product is available for general release. The costs are based on current and future revenue with an annual minimum equal to the straight-line amortization, which does not exceed five years.

Costs incurred in the research and development of new hardware products in which software is incidental and related product enhancements are charged to expense as incurred until the technological feasibility of the product or enhancement has been established through the development of a working model.

(g) Income Taxes

Historically, BarcoNet has been included in the income tax filings of Barco. Barco has then charged an allocation of the current tax expense to BarcoNet through the inter-company accounts.

BarcoNet applies the liability method of accounting for income taxes. Deferred tax liabilities or assets are recognized for the expected future tax consequences of temporary differences between the book and tax bases of assets and liabilities. Deferred income taxes are recorded using enacted tax law and rates for the years in which the taxes are expected to be paid. They are consequently adjusted for changes in tax law or rates. A valuation allowance is recorded to reduce the carrying value of deferred tax assets when management determines that it is more likely than not that the asset will not be used.

(h) Revenue Recognition

BarcoNet recognizes revenue only if evidence of a contractual agreement exists, the amount due to BarcoNet is fixed and determinable and the collection of amounts due from customers is probable. The specific revenue recognition policies are as follows.

109 BARCONET GROUP

Note 3 - Summary of Significant Accounting Policies (continued)

Revenue from sales of equipment such as headends, etc. with incidental software, is recognized at time of delivery and customer acceptance, and after consideration of all the terms and conditions of the sales arrangement. Revenue is recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured. Revenue from the sale of equipment as part of long-term systems integration contracts is recognized using the percentage of completion method.

Revenue from services consists of fees for systems requirements definition, system design and analysis, customization and installation services, ongoing system management, system enhancements, service bureau processing, facilities management and maintenance fees. Services revenue is recognized as the services are performed, primarily on a time and materials basis and to a lesser extent on a fixed fee basis over the term of the services provided. Revenue from maintenance contracts is recognized ratably over the term of the agreement, which is generally not more than one year.

Revenue from the licensing of software rights is recognized at the time of delivery of the product to the customer, provided that BarcoNet has no remaining service obligations, collectibility is considered probable and the fees are fixed and determinable. Where there are service obligations that are essential to the functionality of the software installed, license fees are recorded over the term of the license period.

(j) Foreign Currency Translation

BarcoNet translates the assets and liabilities of foreign subsidiaries from their local functional currency to Euro at exchange rates in effect at the balance sheet date and shareholders' equity of foreign subsidiaries at historical exchange rates. Income statements of foreign subsidiaries are translated from the functional currency to Euro at the average exchange rate during the period. Differences arising from foreign currency translation are recorded in comprehensive income, which is a separate component of shareholders' investment.

(j) Foreign Currency Transactions

Foreign currency transactions are translated into Euro at the rate of exchange applicable at the transaction date. At year-end, monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate prevailing at that date. Unrealized exchange rate gains and losses from this translation are recorded in current period earnings.

(k) Concentrations of Credit Risk

On December 31, 1999, there was only one customer for which the account receivable balance exceeded 10 % of the total accounts receivable (10.8 %). There were no customers representing balances in excess of 10 percent of BarcoNet's total accounts receivable at December 31, 1998. Furthermore, sales to the 5 largest customers represented 28 % of total revenues (turnover) for the year ended December 31, 1999. Sales to the 5 largest customers represented 16 % of total revenues for the year ended December 31, 1998. The sales to the 2 largest customers represented respectively only 5.7 and 3.7 % of total revenues for the year ended December 31, 1998.

Management performs ongoing credit analyses of the accounts of its customers and provides allowances as deemed necessary. The provision for doubtful accounts is always set up on a specific customer by customer basis.

110 BARCONET GROUP

Note 3 - Summary of Significant Accounting Policies (continued)

(l) Financial Instruments

BarcoNet's financial instruments, except for long-term debt, are primarily short-term in nature, and accordingly, the carrying value approximates fair value.

BarcoNet may use a restricted number of derivative financial instruments with the only intent to manage the risk arising from fluctuations in exchange rates. The company may not engage in speculative transactions through derivative financial instruments. If the derivatives meet hedge accounting criteria, including the specific identification of the risk being hedged and continued effectiveness of the hedge, the derivative financial instrument is recorded at cost, with no adjustment for changes in the fair value of the instrument. If hedge accounting criteria are not met, the derivative financial instrument is recorded on the balance sheet at fair value, with changes in the fair value recorded in current period earnings. BarcoNet did not use any derivative financial instruments during the periods presented in these financial statements.

(m) Advertising Expense

BarcoNet expenses advertising costs when the advertising occurs.

(n) Valuation of Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If undiscounted expected future cash flows are lower than the carrying amount of the asset, a loss is recognized for the difference between the carrying amount and the fair value of the asset.

(o) Stock Based Compensation

Employees working for the BarcoNet activity of Barco have been granted options to acquire shares of Barco stock. Barco does not prepare its consolidated financial statements in accordance with US GAAP and has not recognized any compensation expense related to these options. For purposes of these carve-out financial statements, BarcoNet has applied the intrinsic value method as prescribed by Accounting Principle Board Opinion N° 25 to account for the Barco stock options granted to BarcoNet employees in the periods presented. The stock option plan of Barco has been determined to be non compensatory based on the criteria of APB N° 25, and, accordingly no related compensation expense has been recorded.

(p) Introduction of the Euro

BarcoNet operates primarily in countries that have adopted the Euro as their official currency as of January 1, 1999. Accounting records that have been prepared in those national currencies have been translated into Euro using the official fixed exchange rates since January 1, 1999 (EUR 1 = BEF 40.3399)

111 BARCONET GROUP

Note 3 - Summary of Significant Accounting Policies (continued)

(q) Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities", which establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS No. 133 requires the recognition of all derivatives as either assets or liabilities and the measurement of those instruments at fair value. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of FASB Statement No. 133", which defers the effective date of SFAS No. 133 to January 1, 2001. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities – an amendment of FASB Statement No. 133", which amends certain aspects of SFAS No. 133. Management estimates that the implementation of SFAS No. 133 will not have a significant impact on BarcoNet's financial position or results of operations.

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation – an Interpretation of Accounting Principles Board ("APB") No. 25" ("FIN No. 44"). The Interpretation provides guidance in certain issues relating to stock compensation involving employees that arose in applying APB Opinion No. 25. Among other things, this Interpretation clarifies (a) the definition of an employee for purposes of applying APB No. 25, (b) the criteria for determining whether a plan qualifies as a non-compensatory plan, and (c) the accounting for an exchange of stock compensation awards in a business combination. The provisions of FIN No. 44 are generally effective July 1, 2000, except for certain provisions that apply to modifications to stock awards made after December 15, 1998. BarcoNet does not expect the adoption of FIN No. 44 to have a significant impact on its financial position or results of operations.

(r) Earnings per share

In absence of data to compute the dilution resulting from the various stock option plans (available after listing of the Shares on Euronext Brussels) the basic and diluted pro forma earnings per share are computed using the number of shares issued upon formation for all periods presented.

Note 4 - Accounts Receivable

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Trade receivables...... 20,009 26,692 28,232 Other receivables ...... 35,278 30,956 42,943 Less: Reserve for doubtful accounts ...... (932) (843) (657) ______Total...... 54,355 56,805 70,518

112 BARCONET GROUP

Note 4 - Accounts Receivable (continued)

Changes in the reserve for doubtful accounts for the period ended June 30, 2000 and the years ended December 31, 1999 and 1998 are as follows:

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Beginning balance ...... 843 657 530 Additions to reserve charged to expense ...... 98 212 357 Write-offs and other reductions...... (9) (26) (230) ______Total...... 932 843 657

Note 5 - Inventories

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Purchased materials...... 7,893 7,213 7,685 Work-in-process...... 8,047 5,805 5,002 Finished goods...... 13,582 8,338 9,577 Less: Valuation reserve ...... (4,465) (4,005) (4,497) ______Total...... 25,057 17,351 17,767

The additions to the valuation reserve charged to expense were EUR 580 (000), EUR 1,348 (000) and EUR 2,297 (000) for the periods ended June 30, 2000 and for the years ended December 31, 1999 and 1998, respectively.

Note 6 - Property and Equipment, Net

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Land and buildings ...... 5,476 2,645 2,930 Machinery and equipment...... 16,618 18,562 17,049 Furniture and fixtures ...... 4,937 3,598 1,542 Assets under construction...... 1,111 0 12 ______Total...... 28,142 24,805 21,533 Less accumulated depreciation and amortization...... (19,176) (17,539) (14,536) ______Total, net ...... 8,966 7,266 6,997

Depreciation and amortization on property and equipment charged to expense was EUR 1,637 (000), EUR 3,003 (000) and EUR 2,667 (000) for the period ended June 30, 2000 and for the years ended December 31, 1999 and 1998, respectively.

113 BARCONET GROUP

Note 7 - Intangible Assets

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Goodwill ...... 11,102 11,102 11,102 Developed technology ...... 0 831 831 Acquired technology and patents ...... 1,771 1,766 1,765 Other...... 371 216 277 Less accumulated amortization ...... (4,292) (4,992) (3,235) ______Total, net ...... 8,952 8,923 10,740

Goodwill results from the acquisition of RE in 1997, a Danish company that manufactures and installs audio, video and data equipment on the cable television and telecommunication markets. Barco paid EUR 17,263 (000) in cash to effect the transaction. The fair value of the net assets acquired was EUR 6,161 (000), resulting in goodwill of EUR 11,102 (000), which was recorded as an intangible asset. Goodwill is being amortized over 15 years, which approximates its useful economic life.

Technology acquired in the RE acquisition was recorded at its fair value at the acquisition date. The technology that was acquired relates to the MPEG standards. The acquired technology is amortized over 3 years, which approximates its useful economic life.

Amortization expense of goodwill and other intangible assets was EUR 551 (000), EUR 1,565 (000) and EUR 1,757 (000) for the period ended June 30, 2000 and for the years ended December 31, 1999 and 1998 respectively.

Note 8 - Accrued Liabilities

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Accrued compensation and benefits...... 3,935 3,439 3,301 Technical warranty...... 1,043 873 715 Other accrued liabilities ...... 4,418 6,248 10,674 Non income taxes...... 2,034 3,141 1,745 ______Total...... 11,430 13,701 16,435

114 BARCONET GROUP

Note 9 - Long-term Debt

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Total financial debt...... 9,329 4,305 21,408 Less: Amounts due in current year...... (6,764) (2,371) (5,781) ______Total long term financial debt...... 2,565 1,934 15,627

The contractual maturity of long-term debt as of June 30, 2000, December 31, 1999 and 1998 is as follows:

Amounts due in:

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Less than one year ...... 6,764 2,371 5,781 1 – 5 years...... 1,207 536 14,149 Thereafter ...... 1,358 1,398 1,478 ______Total...... 9,329 4,305 21,408

The weighted average interest rate on debt outstanding was 5.5 %, 4.15 % and 5 % for the period ended June 30, 2000 and for the years ended December 31, 1999 and 1998, respectively. All of BarcoNet's debt carried fixed rate of interest.

Interest expense, net on long-term debt was EUR 654 (000), EUR 1,260 (000) and EUR 1,514 (000) for the period ended June 30, 2000 and for the years ended December 31, 1999 and 1998, respectively.

Barco issued a loan on November 29, 1995 for an amount of EUR 6,683 (000), represented by 80,000 convertible bonds. The convertible bonds have a term of 10 years, have an applicable annual interest rate of 7.48 % and are transferable. A portion of this loan has been deemed to have been issued to finance the BarcoNet activity of Barco. Accordingly, the convertible bonds is split in two separate convertible bonds, one of which will be assumed by BarcoNet and one of which will be assumed by Barco.

The amount of the convertible loan allocated to BarcoNet is EUR 1,287 (000). The convertible loan will be represented by 160,000 convertible bonds entitling the holder thereof to convert the bonds into 160,000 ordinary shares of BarcoNet pursuant to substantially the same conditions as the initial conditions of the convertible bonds, it being understood that the conversion price will be equal to BEF 324.41 (or EUR 8.04).

Prior to the Closing of the Demerger, the convertible loan is convertible into Barco stock only. Had the allocated portion of the convertible loan been convertible into BarcoNet shares, the diluted pro forma earnings per share for the year ended December 31, 1999 would have been 0.23.

115 BARCONET GROUP

Note 10 - Bonds issued jointly with Warrants

On February 8, 1995 Barco issued a bond loan with two installments, i.e. a first installment of EUR 161 (000) and a second installment of EUR 496 (000). The second installment is still outstanding and is represented by 13,333 bonds, a total of 15 warrants were attached to each bond. As of July 31, 2000, 70,968 of the warrants were exercised. A total of 129,027 warrants is therefore still outstanding.

As a result of the demerger, the second installment of EUR 496 (000) will be entirely assumed by New Barco. However, subject to the closing of the demerger each warrant will be converted into three warrants, i.e. two warrants entitling the holder thereof to subscribe to one share of BarcoNet per warrant and one warrant entitling the holder thereof to subscribe to one share of New Barco.

Note 11 - Employee Benefit Plans

Retirement Savings Plan

The company has a defined contribution pension plan for all its workers and employees. The net periodic pension cost for the defined contribution pension plan was approximately EUR 89 (000), EUR 154 (000) and EUR 146 (000) for the period ended as of June 30, 2000 and for the years ended December 31, 1999 and 1998, respectively.

Stock Award Plans

The employees of the BarcoNet activity of Barco prior to the demerger have been eligible to participate to the following plans:

· On March 30, 1992 and June 30, 1996 the shareholders of Barco approved a model agreement to grant a total of respectively 100,000 and 150,000 options pursuant to article 45 of the Belgian Act of December 27, 1984. The options have been granted to a number of employees of Barco. At present, a total of 52,400 options are still outstanding.

· On June 7, 1999, Barco approved the possibility to grant a total of 400,000 warrants over a period of 5 years to certain staff members. The warrants are used as stock options in order to implement a stock option plan for Barco. As of today, a total of 151,870 warrants have been granted. On July 13, 2000, the Board of Directors of Barco decided to grant a maximum of 243,240 warrants to a number of staff members, non-executive Directors and other persons who contribute to the success of Barco. Of these warrants, 165,045 warrants have already been granted, of which 156,131 have been accepted. In addition, Barco considers granting 5,166 warrants to staff members of subsidiaries in the United Kingdom.

SFAS No. 123, "Accounting for Stock-Based Compensation", encourages, but does not require, a fair value based method of accounting for employee stock options or similar equity instruments. As permitted under the standard, BarcoNet has accounted for employee stock options using the intrinsic value method (i.e. the difference paid by the employee for the option on the one hand, and the fair value of the option on the other) outlined in APB Opinion No. 25. Accordingly, BarcoNet has recognized no compensation expense for the Employee Stock Option Plan or its Non-employee Director Stock Option Plan.

116 BARCONET GROUP

Note 11 - Employee Benefit Plans (continued)

The following table shows the weighted-average fair value for options granted to Barco employees on December 31, 1999, 1998 and 1997.

Date of issuance December 31, 1997 1998 1999

January 31, 1993 ...... 135.22 207.59 N/A March 31, 1994 ...... 112.68 183.92 82.66 January 31, 1995 ...... 111.06 180.83 79.85 June 30, 1996 ...... 71.22 132.39 31.94 January 31, 1997 ...... 67.38 126.09 40.12 December 8, 1997 ...... 57.29 111.46 34.21 September 16, 1999 ...... N/A N/A 65.00

The fair value was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

December 31, 1997 1998 1999

Risk-free interest rate (1 year) ...... 5.12 % 3.31 % 3.65 % Volatility factor ...... 29.50 % 35.70 % 37.10 % Spot share (EUR) ...... 168.57 240.46 139

Had Barco applied the fair value method to determine compensation expense on these options granted to employees, a portion of the expense would have been allocated to BarcoNet. The allocation is based upon the number of employees working for the BarcoNet activity of Barco as compared to total employees. However, as the exercise price of options granted during the period 1996 until 1999 exceeded the fair value of those options on the grant date, Barco would not have recognized any compensation expense using the fair value method. Accordingly, there would be no allocation of expense to BarcoNet for these periods.

Prior to the Closing of the Demerger, all employee stock options are exercisable in Barco stock only. Upon the demerger, employees may choose to keep stock options exercisable in Barco stock or in BarcoNet stock. It is not possible to predict how many, if any, employees will choose to change their options to be exercisable in BarcoNet stock. Accordingly, BarcoNet cannot estimate the dilutive effect of these stock options in earnings per share calculations.

117 BARCONET GROUP

Note 12 - Income Taxes

The components of the provision for income taxes are as follows:

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Current taxes payable ...... 3,225 4,193 3,703 Deferred...... (771) (514) (1,215) ______Total provision...... 2,454 3,679 2,488

The effective income tax rate differs from the federal statutory rate as follows:

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Federal statutory rate ...... 40.17 40.17 40.17 Research and development tax credits ...... (7.94) (5.52) (8.80) Goodwill amortization ...... 3.0 4.10 4.40 Effect of losses in other jurisdictions...... - - 468.98 Other, net...... 4.36 0.42 1.97 ______Effective income tax rate ...... 39.59 39.17 506.72

Deferred tax assets (liabilities) of BarcoNet as of June 30, 2000 and December 31, 1999 and 1998 are composed of the following:

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Current deferred tax assets ...... 10,652 8,945 10,090 Asset valuation reserves ...... (9,894) (8,821) (9,959) Accrued liabilities ...... (625) (431) (392) ______Total 133 (307) (261)

Non-current deferred tax assets (liabilities): Intangible assets...... 1,994 1,691 1,310 Depreciation...... (516) (545) (744) Other...... - 1 21 ______Total...... 1,478 1,147 587

118 BARCONET GROUP

Note 13 - Related Party Transactions

BarcoNet received from Barco as charges EUR 14,616 (000), EUR 15,547 (000) and EUR 8,469 (000) for the years ended December 31, 1998 and 1999 and for the period ended June 30, 2000. These charges relate mainly to management fees, maintenance and repairs, personnel, data processing and housing. These charges include at the maximum a mark-up of 10 %. In the future a comparable mark-up is considered.

Note 14 - Commitments and Contingencies

Operating Leases:

A portion of BarcoNet's operations are conducted using leased equipment and facilities. These leases are non-cancelable and renewable, with expiration dates ranging through the years 2000 until 2004. The rental expense included in the accompanying consolidated statements of income was EUR 1,004 (000), EUR 1,744 (000) and EUR 1,895 (000) for 2000, 1999 and 1998, respectively.

The following is a schedule of future minimum rental payments required under non-cancelable operating leases as of December 31, 1999:

In thousands of Euro 2000 18 2001 24 2002 29 2003 34 2004 and thereafter 39

Total 144

Contingencies:

Barco has been named as a defendant in other lawsuits in the normal course of business which are related to activities and operations of BarcoNet. Management believes that the ultimate resolution of these matters will not have a material adverse effect on BarcoNet's financial condition or results of operations.

119 BARCONET GROUP

Note 15 - Segment Information

The Barconet activity of Barco has been previously managed as a separately identifiable business segment of Barco. The management of BarcoNet continues to consider that BarcoNet is comprised of only one business segment. Accordingly, BarcoNet has presented only the enterprise-wide disclosures as required by SFAS N° 131, "Disclosures about Segments of an Enterprise and Related Information".

Geographic Information

In thousands of Euro June 30, December 31, 2000 1999 1998 (unaudited)

Net Sales: Europe ...... 33,487 (66%) 61,366 (68%) 47,410 (61%) North America...... 4,501 (9%) 11,408 (13%) 9,449 (12%) Asia ...... 7,089 (14%) 12,800 (14%) 17,065(22%) Other...... 5,915 (11%) 4,500 (5%) 4,041 (5%) ______Total...... 50,992 90,074 77,965

Property and Equipment, Net: Europe ...... 8,138 (91%) 6,439 (89%) 6,462 (92%) North America...... 602 (7%) 601 (8%) 379 (5%) Asia ...... 134 (1%) 130 (2%) 95 (2%) Other...... 92 (1%) 96 (1%) 61 (1%) ______Total...... 8,966 7,266 6,997

Note 16 - Subsequent Events

The extraordinary shareholders' meeting of Barco that will decide on the demerger and incorporation of BarcoNet and Barco after the demerger (“New Barco”), will be proposed to approve a new stock option plan for BarcoNet, respectively New Barco. These plans will provide for the grant, free of charge, of a total of 1,000,000 warrants of BarcoNet and 400,000 warrants of New Barco, over a period of 5 years, to staff members and non- executive Directors of BarcoNet Group, respectively New Barco Group, and certain other individuals who have an important part in the expansion and the success of BarcoNet, respectively New Barco. The warrants will have maximum term of 10 years.

Certain employees of BarcoNet have been granted stock options in prior periods by Barco. Upon the split of BarcoNet from Barco, each option will be converted into three options, i.e. two options each entitling the holder thereof to subscribe to one share of BarcoNet and one warrant / option entitling the holder thereof to subscribe to one share of Barco. The terms and conditions of the warrants / options will remain substantially the same, subject to the appropriate change of the exercise price of the warrants / options.

Following the demerger of Barco, the exercise price of the options entitling the holder to subscribe to one share of BarcoNet will be determined as the result of the initial exercise price of the options of Barco before the demerger, multiplied by a fraction the numerator of which is equal to the first closing price that will be established following the start of trading, or the average of the closing prices of during the 30 trading days following the demerger of Barco, for one share of BarcoNet, and the denominator of which is equal to the sum of the first closing prices that will be established following the start of trading, or of the average of the closing prices of during the 30 trading days following the demerger, for two shares of BarcoNet and one share of Barco.

120 BARCONET GROUP

Note 16 - Subsequent Events (continued)

BarcoNet accounts for stock options granted to employees using the intrinsic value method as permitted by Accounting Principles Board (APB) Opinion No. 25. The stock option plan of Barco has been determined to be non-compensatory based on the criteria in APB Opinion No. 25. Based on a specific exemption that applies to an equity restructuring from spin-offs included in FASB Interpretation No. (FIN) 44, Accounting for Certain Transactions involving Stock Compensation, there has been no change in the grantee status from that of an employee under APB 25 to that of a non-employee as a direct result of a spin-off transaction. Accordingly, the spin-off does not change BarcoNet's accounting method from APB 25 to the fair value method for stock options or awards previously granted to the grantee as an employee of Barco.

BarcoNet has closed a contract with Jean Pierre and Marie-Hélène Simi for the acquisition of a French company and its subsidiary. The contract has been signed on July 27, 2000 and has as its subject the full capital and voting rights of Société d'études et de réalisations pour l'électronique et l'informatique – Sereli (the parent company holding the lease of the building) and 100 % of the capital and the voting rights of Sereli Hufaco Industries – SHFI, which manufactures and sells specific components for cable head-ends in addition to distributing and installing total solutions provided by companies as Barco and Tandberg. The capital of Sereli consists of 694 shares and that of SHFI consists of 10,000 shares, of which 5,000 shares are the ownership of Sereli. The acquisition price has been determined as approximately EUR 2.7 million. This price consists out of a share price for Sereli, SHFI and an amount for the goodwill (approximately EUR 1.1 million) and is calculated upon audited financial statements as of March 31, 2000.

The turnover of SHFI increased from EUR 3,488,000 in 1998 to EUR 4,847,000 in 1999 up to EUR 6,066,000 in 2000 (fiscal year ending March 31). Its net result in 1998 amounted to EUR 139,000, which then increased to EUR 313,000 in 1999 up to EUR 565,000 in March 2000. SHFI employs an average of 25 employees.

Note 17 - Employees

The average number of employees working for BarcoNet has continuously increased over the period between 31 December 1997 until 31 December 1999: there were approximately 485 employees in 1997, which substantially increased to approximately 532 employees in 1998 up to approximately 556 employees in 1999. On September 1, 2000, there were 627 employees worldwide.

121 5. ADMINISTRATION, MANAGEMENT AND SUPERVISION OF BARCONET

5.1 MEMBERS OF THE ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES

5.1.1 Board of Directors and Key Management

The Board of Directors of BarcoNet will initially be composed of the following 7 Directors, appointed for a term of two years by the general shareholders' meeting of Barco that will decide on the demerger and the incorporation of BarcoNet.

Name Age Position Philippe Bodson ...... 55 Chairman of the Board of Directors Joost Verbrugge ...... 45 Chief Executive Officer (CEO) Erik Dejonghe ...... 53 Director Erik Verkest ...... 34 Director Antoon Van Petegem ...... 53 Director Alex Brabers ...... 35 Director Bart Diels ...... 31 Director

Whereas Mr. Brabers and Mr. Diels will be presented by GIMV N.V., Mr. Bodson and Mr. Verkest will be presented as Independent Director.

It is expected that upon Closing of the Demerger, Mr. Bodson will be appointed by the Directors as Chairman of the Board of Directors .

The key management of BarcoNet will consist of the following individuals:

Name Age Position Joost Verbrugge ...... 45 Chief Executive Officer (CEO) Jos Vancoppernolle ...... 38 Chief Operational Officer (COO) Carl Peeters ...... 43 Chief Financial Officer (CFO) Stefaan Verhelst ...... 43 Vice President Sales and Services Nick Fielibert ...... 41 Senior Vice-President Henrik Nørrelyke ...... 40 Vice-President E-Business and Marketing Communication Marc Poot ...... 50 Vice-President Operations and IT

Philippe Bodson - After having obtained a degree in civil engineering at the University of Liege, Belgium (1967) and a Master of Business Administration at INSEAD, France (1969), Mr. Bodson held several positions in engineering and consulting before joining Glaverbel, where he became CEO in 1980. From 1989 to 1999, Mr. Bodson was CEO at Tractebel until 1999. Mr. Bodson is currently President of the Board of Directors at Diamant Boart, and a Director in various companies such as Glaverbel, Immobel and British Telecom Belgium.

Joost Verbrugge - Mr. Verbrugge will be the Chief Executive Officer of BarcoNet. He has a 20 year career with Barco Group, with senior management positions in engineering as well as marketing. Mr. Verbrugge has been based for several years in Hong Kong from which he spearheaded the expansion of Barco in Asia. Mr. Verbrugge holds a Bachelor of Science degree of the Technical College in Kortrijk, Belgium, and completed the

122 Advanced Management Program / International Senior Management Program ("AMP / ISMP") at Harvard Business School, United States.

Erik Dejonghe - Mr. Dejonghe is the Senior Vice President and Chief Operating Officer of Barco Group, and will hold the same position at New Barco. In addition, he will be Director of BarcoNet. Mr. Dejonghe started with Barco in 1982. Before, he worked several years as a researcher at the University of Ghent, Belgium, and occupied different senior positions in service, marketing and sales with a major company active in electronics. Mr. Dejonghe holds a Doctor degree in applied sciences and has a Bachelor of Science degree. Further reference is made to Section 5.1 of Chapter III of this prospectus.

Erik Verkest - Mr. Verkest holds a degree of Applied Economics at the Catholic University of Leuven, Belgium (1988). He joined the corporate finance department of Petercam N.V. in 1990 where he is currently a manager. He is member of the board of directors of several companies.

Antoon Van Petegem - Mr. Van Petegem graduated as a Commercial Engineer at the Catholic University of Leuven, Belgium. He started his career at Douwe Egberts and joined Acec as a controller. From 1987 till 1995, he was a member of the Board of Directors of Wavefront Technologies (California) where he was involved in several restructuring, merger, private placement, initial public offering and secondary offering projects until their acquisition by Silicon Graphics. He was a board member of Xeikon N.V. from end 1995 till 1999 and in this position, he was involved in the initial public offering of Xeikon N.V. Since 1986 he is Vice-President and Chief Financial Officer (CFO) of Barco and secretary of the Board of Directors, and will hold the same position at New Barco. Further reference is made to Section 5.1 of Chapter III of this prospectus.

Alex Brabers - Mr. Brabers joined GIMV N.V. as Investment Manager in 1990. He worked previously at a Belgian bank on international money markets and strategic planning. He holds an Economics degree from the Catholic University of Leuven, Belgium. Currently, he is also member of the Board of Directors of several companies both in Belgium and abroad. Last year he was appointed investment director of Venture Capital-ICT.

Bart Diels - Mr. Diels holds a degree in Applied Economics (1991) and a Master of Business Administration (1993) at the University of Antwerp, Belgium. He joined GIMV N.V. as Investment Manager in 1995 and became Senior Investment Manager in 1998. He worked previously as a research assistant at the University of Antwerp, Belgium, and as an internal auditor at a Belgian bank. Currently, he holds a number of board seats, amongst others in LMS International and Metris.

Jos Vancoppernolle - Mr. Vancoppernolle will be the Chief Operating Officer of BarcoNet. He was one of the founders of the Barco Communication Systems activity. As General Manager of this activity, he has guided it to one of the fastest growing activities of Barco and to a leader in the European Broadband Access market. Mr. Vancoppernolle holds a Bachelor of Science degree of the BME Technical College in Ghent, Belgium.

Carl Peeters - Mr. Peeters will be the Chief Financial Officer of BarcoNet. He joined Barco in 1987 after holding marketing positions at Agfa. He was a Division Manager of Barco Graphics and was Managing Director of its German subsidiary. Since 1996, Mr. Peeters was responsible for mergers and acquisitions of Barco Group. He holds an MBA from the University of Ghent, Belgium.

Stefaan Verhelst - Mr. Verhelst will be Vice-President sales and services, responsible for the international sales organization of BarcoNet. He started his career in 1977 at Barco after graduating from the "Vrij Hoger Technisch Instituut" in Kortrijk, Belgium. In 1990 he joined Barco Communication Systems as sales engineer for the Benelux area. End of 1992 he became Sales Manager for a large part of the European market. In 1995 Mr. Verhelst joined the management group of Barco Communication Systems, where he was responsible for sales and market development in the Eastern and Central Europe and the Latin American markets.

Nick Fielibert - Mr. Fielibert will be Senior Vice-President, responsible for the two manufacturing and production bases in Belgium and Denmark. He started his career in 1985 at Barco after graduating from the

123 University of Ghent, Belgium, in electronics engineering. In 1992 Mr. Fielibert joined Barco Communication Systems to start the development of the Australian and Asian markets. In 1996 he joined the management group of Barco Communication Systems, where he was responsible for market development in the North American and the Australian and Asian markets.

Henrik Nørrelykke - Mr. Nørrelykke will be Vice-President e-business and marketing communication. He has a 15 years career in sales, marketing and general management and joined Barco through the acquisition of the Danish RE Technology A/S where he has guided the integration of this company into Barco Group. Mr. Nørrelykke holds a Bachelor of Science degree from the engineering high school of Aarhus Teknikum, Denmark.

Marc Poot - Mr. Poot will be Vice-President operations and information technology. He has a 26 year experience within Barco in respect of logistics and manufacturing. He started his career in warehousing, followed by production planning. From 1980 onwards he was responsible for materials management. In 1990 he became manufacturing manager for Barco Video and Communications and has been appointed Operations Manager (including purchasing) in 1995 for Barco Communication Systems. Mr. Poot had the lead of several ERP implementations within Barco Group worldwide.

5.1.2 Board Committees

Following the demerger of Barco, the Board of Directors of BarcoNet will set up the following committees:

· Remuneration Committee

The Board of Directors of BarcoNet will set up a remuneration committee (the "Remuneration Committee") of which at least one member will be an "Independent Director". The Chairman of the Board of Directors will also be part of this committee. Executive Directors cannot be members of the Remuneration Committee.

· Audit Committee

The Board of Directors of BarcoNet will also set up an audit committee (the "Audit Committee"), the majority of the members of which will be "Independent Directors".

· Stock Option Committee

It is expected that the members of the aforementioned committees will be appointed by, and from amongst, the Board of Directors of BarcoNet following the demerger of Barco.

5.2 EXECUTIVE REMUNERATION AND REMUNERATION OF THE STATUTORY AUDITOR ON A CONSOLIDATED BASIS

5.2.1 Board of Directors

The extraordinary general shareholders' meeting that will decide on the demerger of Barco and the incorporation of the BarcoNet and New Barco, will be proposed to determine the overall gross remuneration of the Board of Directors of BarcoNet at EUR 126,427, excluding the overall remuneration of the members of the Remuneration and Audit Committee (see also 5.2.3 below). Based on information available at the date of the prospectus, the Directors will own in the aggregate 27,402 shares and 108,673 warrants and other options of BarcoNet upon the Closing of the Demerger. BarcoNet does not exclude that additional warrants will be granted to the Directors in the near future.

124 5.2.2 Key Management

Barco has concluded management and/or employment agreements in the past with key executives amounting to EUR 842,838 in the aggregate. Each key executive is also entitled to a variable remuneration to be paid in March of each year. The amount of this remuneration is based on the performances of each manager over the past fiscal year, according to the formula "A" x "C", whereby "A" stands for a sum formally agreed upon with each beneficiary, and "C" represents a factor ranging between 0 and 2. The factor "C" will primarily be determined in view of the results obtained in the realization of the profit plan and the strategic plan of BarcoNet. If for all key managers the factor "C" would be the maximum (i.e. 2), the total variable remuneration paid could reach 40 % of the annual aggregate fixed gross remuneration. The rights and obligations under these management and/or employment agreements will, upon Closing of the Demerger, be transferred to BarcoNet. Based on information available at the date of the prospectus, the key executives will own in the aggregate 7,197 warrants and other options of BarcoNet upon the Closing of the Demerger.

5.2.3 The Remuneration, Audit and Stock Option Committee

It will be proposed to determine the overall gross remuneration of the members of the Remuneration and Audit Committee at respectively EUR 14,873 and EUR 22,310 for the first year. The members of the Stock Option Committee will not receive any special remuneration.

5.2.4 Auditor

The remuneration of the statutory auditor, Arthur Andersen Bedrijfsrevisoren C.V.B.A., represented by Mr. Dirk Van Vlaenderen, to be elected for a term of three years until the annual general shareholders' meeting to be held in 2003, will amount to EUR 76,850 per annum.

5.3 MANAGEMENT AGREEMENTS

Nearly all key executives will have an employment agreement. All key executives have signed non-compete covenants.

5.4 INDEMNIFICATION OF DIRECTORS, EXECUTIVES AND MANAGERS

Under Belgian Company Law, Directors and statutory auditors may be liable for damages to the company, a receiver in bankruptcy and third parties in case of improper performance of their duties, violation of the Articles of Association or Belgian Company Law, or tortuous misconduct. Under certain circumstances, Directors may also be criminally liable. One or more shareholders holding at least one per cent of the outstanding shares of the capital of the company or holding shares representing a fractional value of the company's outstanding capital of at least BEF 50 million (EUR 1,239,467) can, under certain conditions provided in Belgian Company Law, sue the Directors and the statutory auditors derivatively on behalf of the company.

A simple majority of the shareholders at a duly convened shareholders' meeting may discharge Directors and statutory auditors from liability to the company relating to the performance of their respective duties after the presentation of a management or annual report and the annual accounts by the Directors and presentation of the statutory auditors' report to the shareholders of the company. In principle, this discharge prohibits shareholders from bringing derivative suits on behalf of the company on such grounds. A general discharge of Director or statutory auditor liability does not relieve such persons from liability to third parties or for violations of Belgian Company Law or the Articles of Association. Liability for violations of the Articles of Association may only be discharged if specifically identified by the shareholders. Notwithstanding a general discharge, Directors and statutory auditors may be held liable for willful misconduct and fraud in the performance of their duties for the company.

125 The Articles of Association of BarcoNet do not prevent the company to indemnify and insure its Directors and officers to the fullest extent permitted by Belgian Company Law for the financial consequences of their liability in the performance of their duties. The extraordinary shareholders meeting deciding on the demerger of Barco and the incorporation of BarcoNet and New Barco will be proposed to authorize BarcoNet to enter into an indemnification agreement with each of its Directors and to do so for its future Directors. Generally, each indemnification agreement aims at providing the maximum protection permitted by the Belgian Company Law with respect to the indemnification of the Director concerned. The indemnification agreements will provide that BarcoNet will indemnify the Directors for certain amounts incurred by such Directors in connection with any civil or criminal action or proceeding to the extent permitted by law where the individual's involvement is by reason of the fact that he is or was a Director. Such amounts include, to the maximum extent permitted by law, attorneys fees, judgments, civil or criminal fines, settlement amounts and other expenses customarily incurred in connection with legal proceedings. Under the indemnification agreements, a Director will not receive indemnification if he is found not to have acted in good faith in the reasonable belief that his action was in the best interest of the company.

The company also plans to obtain directors' liability insurance for its Directors.

5.5 POTENTIAL CONFLICTS OF INTEREST

Article 60 of the Belgian Company Law governs the situations where Directors have a direct or indirect opposite interest of a financial nature. The Director involved has to inform his fellow Directors and the statutory auditor of his conflict of interest prior to the taking of the decision by the Board of Directors. The minutes of the meeting must contain a description of the conflicting interests, the nature of the decision or transaction concerned as well as the financial consequences thereof for the company. The minutes as a whole must be included in the annual board report. The annual report of the Board of Directors as well as the statutory auditor's report must describe the financial consequences of such a decision or transaction.

In companies who make and have made an appeal to the public savings ("Public Companies"), Directors who have a conflicting interest are not entitled to participate in the deliberations and the voting. BarcoNet will for the purpose of the Belgian Company Law need to be considered as a Public Company.

Article 60bis of the Belgian Company Law governs the situations where certain decisions, which are within the powers of the Board of Directors, could entail a direct or indirect financial advantage to a shareholder who has a decisive or significant influence on the election of Directors. The Board of Directors must appoint three Directors, assisted by an expert, who are all appointed for this purpose due to their independence vis-à-vis the decision or planned transaction, in order to describe the financial consequences of the decision or planned transaction for the company and to provide a motivated evaluation thereof. Said description and motivation must indicate the interest of the decision or transaction for the company and its shareholders, as well as the absence of any benefit existing of a direct or indirect preferential compensation for a shareholder. The Board of Directors must then take a decision, taking into account the reports of the three independent directors and the expert. Directors who have a conflict of interest are not entitled to participate in the deliberations and voting. The conclusions of the aforementioned reports and description of the decision by the Board of Directors must be included in the annual board report. The reports and the decision of the Board of Directors must be notified to the company's statutory auditor.

5.6 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Since 1990, Barco has a management agreement with its Principal Shareholder GIMV N.V. This agreement will, upon Closing of the Demerger be allocated in its entirety to New Barco. For further information in this respect, reference is made to Section 5.4 of Chapter III of this prospectus.

126 5.7 CORPORATE GOVERNANCE CONSIDERATIONS

BarcoNet shall respect and apply the rules and recommendations proposed by the Belgian Banking and Finance Commission and the Market Authority of Euronext Brussels, if any, relating to the corporate governance of companies listed on Euronext Brussels.

Subject to approval of the Articles of Association of BarcoNet, the key principles of corporate governance that will be applied by BarcoNet can, for information purposes, be summarized as follows:

· General rules governing the Election and Re-election of Directors

According to the Articles of Association of BarcoNet, the general shareholders' meeting elects the Directors of BarcoNet, who may be shareholders for a term, which may not exceed 6 years. Directors may be dismissed at any time by a general shareholders' meeting. Directors who have reached the end of their term of office, may be re-elected. The age limit for the office of Director will be 65. In the event of one or more vacancies, the Board of Directors, consisting of the remaining Directors, shall manage and represent the company until the vacancies are filled. The Chairman of the Board of Directors and the Chief Executive Officer, or CEO, propose new Directors. The main selection criteria that will be taken into account when proposing new Directors, will be the international business experience and experience in professional electronics. GIMV N.V. will be entitled to propose its representatives within the Board of Directors of BarcoNet. According to the Articles of Association, at least two members of the Board of Directors of BarcoNet, including the Chairman of the Board of Directors, shall be "Independent Directors". Further reference is made to item (g) under Section 3.1.1 of Chapter I ("Right to participate in the Election of the Board of Directors").

· Operation of the Board of Directors

The Board of Directors of BarcoNet is authorized to undertake all actions which are necessary or useful to achieve the goals and objectives of the company, except for those where according to the law sole authority lies with the general shareholders' meeting. Generally, a minimum of five Board meetings is to be held throughout the year. Board members receive the relevant information in a timely fashion in order to prepare the meetings. At every meeting the Board is updated on the various activities of the company. Key data are made available to the Board within the first week of every month, while detailed financial reporting with consolidated key figures at group level is available within a month. The uniformity of this reporting permits comparison over time and between various activities. If one or more of the Directors want to obtain advice from an independent expert, such request will be presented to the entire Board of Directors. In the case of a positive decision by the Board of Directors, the company will pay the costs for such advice.

· General Rules concerning Decision-making within the Board of Directors

Meetings of the Board of Directors will be presided by the Chairman, to be elected from amongst the Directors. If the Chairman is unable to attend, the other Directors will select a Director to replace him. Generally, the Board of Directors can only validly deliberate and take resolutions on matters that are on the agenda of a validly convened meeting and only when at least a majority of its members is present or represented at the meeting. Notwithstanding the foregoing, however, the Board of Directors can validly deliberate and take resolutions on matters that are not mentioned on the agenda, if all members are present at the meeting and agree thereto. In addition, in certain extraordinary circumstances and to the extent permitted by Belgian Company Law, the Board can decide on certain matters by means of a written resolution, without convening a special Board meeting. The resolutions of the Board of Directors are taken by a simple majority of votes. In the event of a tied vote, the Director chairing the meeting will have a casting vote.

127 · Way in which the Board supervises Day-to-Day Management of the Company

No executive committee will be set up within the Board of Directors. Active management will be held by the Chief Executive Officer or CEO and the Chief Operational Officer or COO. For general matters, they are assisted by an internal executive committee, which consists of other key managers, to which extended powers can be delegated. These key managers can also be invited to the main Board meetings of BarcoNet to give information on the results of their activity, the short-term and long-term planning and important investment projects.

· Rules and Procedures for establishing the Directors' Remuneration

The general shareholders' meeting determines the overall remuneration to the Directors, which will be charged to the general costs. For the executive directors, the remuneration committee proposes the remuneration within the scope established by the shareholders' meeting. The variable part of this remuneration, including the number of stock options granted to them, is stipulated in function of the increase of profits and the evolution of the long-term growth potential of the company. The Board of Directors is entitled to provide a special remuneration to Directors entrusted with special functions or tasks. These are charged as general costs. Further reference is made to Section 5.2.2 above.

· Board Committees

The Board of Directors shall set up committees to which it shall delegate specific tasks, the most important of which are the following:

· The Audit Committee - the Audit Committee maintains control on financial reporting and ensures that administrative procedures are respected. The majority of this committee shall consist of Independent Directors. The executive Director(s) and the Chief Financial Officer or CFO are invited to the meetings. The statutory auditor shall generally also be invited to the meetings. The internal auditor receives his tasks from the audit committee and reports directly to the audit committee. Other members of the management can also be invited in respect of specific subjects. The Audit Committee pays particular attention to the half-yearly and yearly reporting to shareholders. In general, the aim of the Audit Committee will be to report and to give recommendations to the Board of Directors. The functions performed by the Audit Committee will include reviewing the scope of internal controls and reviewing the implementation by BarcoNet's management of recommendations made by the statutory auditor

· The Remuneration Committee - The Remuneration Committee shall consist of one Independent Director. This committee shall make recommendations on the fair remuneration of employees of BarcoNet Group, and shall implement decisions taken by general shareholders' meetings and the Board of Directors.

· The Stock Option Committee - The extraordinary shareholders' meeting of Barco held on June 7, 1999, has set-up a Stock Option Committee. Such committee will also be set-up by the Board of Directors of BarcoNet.

Depending on the circumstances, the Board of Directors can set up other "ad hoc" committees.

128 CHAPTER III

NEW BARCO

1. GENERAL INFORMATION ABOUT NEW BARCO

1.1 GENERAL INFORMATION ABOUT NEW BARCO

Corporate Name: Barco

Registered Office: The registered office of New Barco will be located at Kennedypark 35, 8500 Kortrijk, Belgium. New Barco's telephone number will be +32 (0)56 26.26.11; its fax number will be +32 (0)56 26.22.62.

Date and Duration of The extraordinary shareholders' meeting that will decide on the Demerger of Incorporation: Barco, will be proposed to incorporate New Barco for an unlimited duration of time.

VAT Number: Upon Closing of the Demerger and incorporation of New Barco, the company will apply for a registration with the Belgian VAT authorities.

Registry of Commerce: Upon Closing of the Demerger and incorporation of New Barco, the company will apply for a registration with the Registry of Commerce of Kortrijk, Belgium.

Legislation under which the New Barco will be incorporated under, and be subject to, the laws of the Company shall operate: Kingdom of Belgium.

Legal Form: New Barco will have the legal form of a "naamloze vennootschap - N.V." / "société anonyme - S.A.".

Liability of the Pursuant to Belgian Company Law, the liability of the shareholders will be Shareholders of New limited to the amount of their committed contribution to the capital of New Barco: Barco.

Corporate Purpose: Pursuant to article 3 of the Articles of Association, the corporate purpose of New Barco shall be: the design, the development, the production, the assembly, the sale, the installation and/or implementation of any technological product and system whatsoever, hardware and software, accessories, components and parts, in any kind of material, in Belgium as well as abroad, in the broadest sense, as well as anything which is, directly or indirectly, related thereto.

The company may, by any method, acquire, grant, exploit, capitalize and transfer all intellectual rights, trademarks, drawings, models, licenses and patents.

The company may, in any way whatsoever, participate in businesses, enterprises

129 or companies having the same, a similar or related corporate purpose, or that may enhance the development of the company's business, provide it with raw materials or that may facilitate the sale of the company's products.

The aforementioned enumeration is not exhaustive and is to be interpreted in the widest sense thereof.

The company intends to stimulate, plan and coordinate the future favorable development of the companies in which it participates, amongst other things, by means of reorganizations and restructurings.

In addition, the company may directly or through its affiliates in Belgium and abroad, acquire or sell financial assets in the framework of its asset management.

Moreover, the company may engage in any activity, which may, directly or indirectly, contribute to the realization of its corporate purpose, in the broadest sense.

1.2 GENERAL INFORMATION ABOUT NEW BARCO'S CAPITAL

The extraordinary general shareholders' meeting of Barco that has to decide on the demerger and the incorporation of BarcoNet and New Barco, will be proposed to set the registered capital of New Barco at EUR 53,058,614.32, represented by 12,410,479 shares, each representing 1/12,410,479th of the share capital.

For a detailed description of the capital of Barco, and the split of Barco's outstanding convertible bonds, warrants and options, further reference is made to Section 1.2 of Chapter II of this prospectus.

The shareholders' meeting of Barco that will decide on the demerger of Barco and the incorporation of BarcoNet and New Barco, will also be proposed to authorize the Board of Directors of New Barco to increase the share capital of New Barco with a maximum amount of EUR 26,600,000. The terms and conditions according to which the Board of New Barco may exercise this authority, are substantially similar to the terms and conditions of the authorized capital of BarcoNet. Further reference is therefore made to Section 1.2.7 of Chapter II of this prospectus and the report of the Board of Directors of Barco pursuant to article 33bis of the Belgian Company Law.

130 1.3 CONTROL OVER THE COMPANY

On August 31, 2000, GIMV N.V. confirmed that it held directly 3,558,632 shares and indirectly via its affiliate VIM N.V., a company incorporated under the laws of Belgium, 589,652 shares, or in total 4,148,284 shares, which represents 33,43 % of the existing shares of Barco or 31.72 % on a fully diluted basis. The rest of the shares of Barco are held by the public. Upon Closing of the Demerger, GIMV N.V. will receive one new share of New Barco per share of Barco that it will hold. These shares will be subject to a lock-up agreement, all as further discussed in Section 3.8 of Chapter I of this prospectus.

Since 1990, Barco has a management agreement with GIMV N.V. This agreement will, upon Closing of the Demerger be allocated in its entirety to New Barco. For further information in this respect, reference is made to Section 5.4 of Chapter III of this prospectus.

For further information relating to the rules applicable to change of control over New Barco, reference is made to Section 3 of Chapter I, and in particular Section 3.1.1, (a) ("Voting Rights"), (f) ("Transparency Rules"), and (j) ("Anti-take-over Effect of Provisions of Belgian Company Law and other Belgian Laws").

1.4 INVESTMENTS AND SHARES IN OTHER COMPANIES

Set forth below is a summary of the respective subsidiaries in which New Barco is expected hold an interest upon Closing of the Demerger.

Entity Shares Shares held through Shares held by held by subsidiaries others New Barco (%) Entity (%) Entity (%)

EUROPE Belgium Aesthedes N.V...... 99.87 Barco Graphics N.V. 0.13 Tramstraat 69, 9052 Ghent Barco Coordination Center N.V...... 99.12 Barco Graphics N.V. 0.01 Frankrijklaan 18, 8970 Poperinge Barco Creative Syst. 0.87 Barco Creative Systems N.V...... 99.99 Barco Graphics N.V. 0.01 Tramstraat 69, 9052 Ghent Barco Elbicon N.V...... 99.99 Barco Graphics N.V. 0.01 Industrieterrein Nieuwland, 3200 Aarschot Barco Graphics N.V...... 99.99 0.01 Tramstraat 69, 9052 Ghent Barco Medix N.V...... 82.85 Barco Graphics N.V. 0.01 VUB 17.14 Th. Sevenslaan 106, 8500 Kortrijk Elbicon Industries N.V...... 99.99 Barco Elbicon N.V. 0.01 Industrieterrein Nieuwland, 3200 Aarschot Barco Picotron N.V...... 0.01 Barco Graphics N.V. 99.99 P. Kennedypark 35, 8500 Kortrijk Barco Silex N.V...... 99 Barco Graphics N.V. 1 Rue du Bosquet 7, 1348 Louvain-la-Neuve

Austria Barco Graphics GmbH ...... 100 Furth 13B, 4076 St. Marienkirchen

Czech Republic Barco Graphics sro ...... Barco Graphics B.V. 100 Bieblova 19, 150 00 Prague 5, Smichov Barco Manufacturing sro ...... Barco Holding B.V. 100 Billundska 2756, 272 01 Kladno - Krocehlavy

131 Denmark Barco A/S ...... 100 Emdrupvej 26, 2100 Copenhagen

France Barco S.A...... 99.99 Six indivi- 0.01 6, Bd de la Libération, Z.A. Urbaparc 1, 93200 duals St.-Denis Barco Graphics S.A...... 99.99 Six indivi- 0.01 6, BD de la Libération, Z.A. Urbaparc 1, 93200 duals St.-Denis

Germany Baasel-Scheel Lasergraphics GmbH ...... Barco Graphics GmbH 90.13 Individual 9.87 Gasstrasse 16, 25524 Itzehoe Barco Graphics GmbH ...... Barco Graphics N.V. 100 Wilhelm-Franz-Strasse 1, 77971 Kippenheim BarcoView GmbH ...... 100 Wilhelm-Franz-Strasse 1, 77971 Kippenheim Dr Seufert GmbH ...... 100 An der Rossweid 5, 76229 Karlsruhe GIL – Gesellschaft für industrieelle Leittechnik mit Dr. Seufert GmbH 100 beschränkter Haftung ...... Technologiepark, Friedrich-Ebert-Strasse, 51429 Bergisch Gladbach Barco GmbH ...... 100 Wilhelm-Franz-Strasse 1, 77971 Kippenheim Gerber Systems GmbH ...... ETS Inc. 100 Wilhelm-Franz-Strasse 1, 77971 Kippenheim Barco Sedo GmbH ...... 100 Neuwies 1, 35794 Mengerskirchen Artios Deutschland GmbH ...... Barco Graphics N.V. 100 Frankfurter Strasse 168-176, 63263 Neu- Isenburg Asona Audio-Technic GmbH ...... Barco GmbH 100 Wilhelm-Franz-Strasse 1, 77971 Kippenheim

Italy Barco srl ...... 100 Via Monferrato 7, 20094 Corsico, Milano B&B International srl ...... Barco Graphics Inc. 20 Via A. Serena, 45/a4, 31044 Montebelluna (TV) Barco Loepfe srl ...... Gebruder Loepfe AG 100 Via el Alamein 2/6, Como 22 100

The Netherlands Barco Graphics B.V...... 100 Marinus van Meelweg 20, 5657 EN Eindhoven Barco B.V...... Barco Holding B.V. 100 Marinus van Meelweg 20, 5657 EN Eindhoven Barco Holding B.V...... 100 Marinus van Meelweg 20, 5657 EN Eindhoven Pulsarr Industrial Research B.V...... Barco Holding B.V. 100 Marinus van Meelweg 20, 5657 EN Eindhoven

Norway Barco Graphics Kongsberg A/S ...... Barco Graphics B.V. 100 Kirkegardsveien 45, 3600 Konigsberg

Poland Barco Sp Zoo ...... 99.75 Individual 1 Ul. Borowskiego 2, 03-475 Warsaw

132 Russia Barco N.V. – Representative Office Moscow ...... 100 Novorogozhkaya Ul. 32, Stroyeniye 1, 109544 Moscow

Spain Barco Electronic Systems S.A...... 100 Travessera de Les Corts 371, 08029 Barcelona Barco Service SL ...... Barco Electronic 100 Travessera de Les Corts 371, 08029 Barcelona Systems s.a.

Switzerland Gebrüder Loepfe A.G...... Barco Holding B.V. 99.99 Individual 0.01 Kastellstrasse 10, Postfach 582, CH-8623 Individual 0.01 Wetzikon Barco A.G...... Barco A/S 99.88 Individual 0.04 Soodstrasse 55, 8134 Adliswill Individual 0.04 Individual 0.04

United Kingdom Barco Ltd...... 99.99 Individual 0.01 50 Suttons Business Park, Reading, Berkshire, RG6 1AZ Gerber Systems Ltd...... Barco Ltd. 100 50 Suttons Business Park, Reading, Berkshire, RG6 1AZ Oldois Ltd...... Barco Elbicon N.V. 41.79 Bessemer Way, Harfreys Industrial Estate, Great Omniward Ltd. 58.21 Yarmouth, NR 31 OLX Barco Graphics Ltd...... 1 Moons Park, Burnt Meadow Road, North Moons Moat, Redditch, Worcs B98 P9A Omniward Ltd...... Barco Elbicon N.V. 100 Bessemer Way, Harfreys Industrial Estate, Great Yarmouth, NR 31 OLX

ASIA China Barco Electronic Systems Ltd...... 99.99 Barco Sedo GmbH 0.01 17/F Yen Sheng Centre, 64 Hoi Yen Road, Kwun Tong, Kowloon, Hong Kong Gerber Systems Corporation Ltd...... ETS Inc. 100 17/F Yen Sheng Centre, 64 Hoi Yen Road, Kwun Tong, Kowloon, Hong Kong Barco Trading Co. Ltd. (Shanghai) ...... 100 Suite 1802, China Merchants Tower, 66 Lujiazui Road, Pudong, Shanghai 200120

India Barco Electronic Systems Pvt. Ltd...... 100 E-17 East of Kailash, New Delhi – 110065 Barco Hotline Pvt. Ltd...... Barco Electronic 100 I-72, sector 9, 201 301 Noida U.P. Systems Pvt Ltd Branch of Barco Pte. Ltd. (Singapore) ...... Commercial Unit n° 15/39, first floor, Cambridge Road, Ulsoor, Bangalore 560 008

Israel Barco Electronic Systems Ltd...... 99.71 Barco Graphics N.V. 0.29 Merkazim Building, Maskit Street, Industrial Area, P.O. Box 2211, Herzliya 46120

133 Japan Barco Co., Ltd...... 100 Toho-Seimei Building 1F, 3-28-2 Takada, Toshima-ku, Tokyo 171-0033 Barco Graphics Co., Ltd...... 60 Altech 40 Kikyotake Bld., 1-15-5 Skinkawa, Chuo-Ku, Co., Ltd. Tokyo 104-0033 S.I.S. Corporation ...... Barco Inc 25 Takara Building, 2-6-2, Kigashikanda, Chiyodaku, Tokyo 101-0031

Malaysia Barco Electronic Systems Sdn. Bhd...... 100 1303A, level 13A, Uptown 2, 2 Jalan SS21/37, Damansara Uptown, 47400 Petaling Jaya, Selangor Darul Ehsan

Singapore Barco Pte. Ltd...... 100 Block 750E Chai Chee Rd., # 05-03/04, Chai Chee Industrial Park, 469005 Singapore BarcoView Pte. Ltd...... 100 Block 750E Chai Chee Rd., # 05-03/04, Chai Chee Industrial Park, 469005 Singapore Barco Graphics Pte. Ltd...... 100 Block 750E Chai Chee Rd., # 05-03/04, Chai Chee Industrial Park, 469005 Singapore

South-Korea Barco Ltd...... 100 3F Dansan-Nonhyun Building, 216-8 Nonhyun- dong, Kangnam-ku, Seoul, 135-010

Taiwan Barco Electronic Systems Ltd...... 94 Barco Graphics N.V. 1 16F, Cheng Loong Plaza, 33 Min Sheng Road, Barco Pte Ltd 1 Sec. 1, Panchiao City, Taipei Hsien, R.O.C. Barco Silex sa 1 Barco Elbicon N.V. 1 Gebrüder Loepfe AG 1 Barco A/S 1

NORTH-AMERICA United States of America Barco Inc...... 1209 Orange Street, Wilmington, Delaware 19801 BarcoVision Inc...... 100 1209 Orange Street, Wilmington, Delaware 19801 Barco Graphics Inc...... 100 1209 Orange Street, Wilmington, Delaware 19801 Barco Electronic Tooling Systems Inc...... 100 1209 Orange Street, Wilmington, Delaware 19801 BarcoView Inc...... 100 1209 Orange Street, Wilmington, Delaware 19801 Electronic Image Systems Inc...... Barco Inc. 100 600, Bellbrook Avenue, Xenia, Ohio 45385

SOUTH-AMERICA Argentina Barco Ltda Sucursal Argentina ...... Barco Ltda, Brasil

134 Suipacha 268, Piso 12o, Capital Federal, Argentina

Brazil Barco Ltda...... 99.99 Barco Graphics N.V. 0.01 Rua de Rocia 351, 8th floor, Sao Paulo

Colombia Branch Barco Graphics N.V...... Tranversal 15, No. 118 A-06 Of. 304, Santafé de Barco Graphics N.V. 100 Bogota D.C.

AUSTRALIA Barco Pty Ltd...... 100 8 Prohasky Street, Port Melbourne, Vic, 3207 Elbicon Pacific Pty. Ltd...... 100 27 Kingtel Place, Queensland 4034

Set forth below is a summary of other companies in which New Barco is expected hold an interest or shares upon Closing of the Demerger.

Entity Shares Shares held through held by subsidiaries New Barco (%) Entity (%)

EUROPE Belgium Xeikon N.V. (1)...... 3.6 Vredebaan 72, 2640 Mortsel Flabel Corporation N.V...... 25 Auguste Reyerslaan 80, 1030 Schaarbeek Bedrijvencentrum Regio Kortrijk N.V...... 6.2 Vlamingstraat 4, 8560 Wevelgem Innovatie- en Incubatiecentrum Kortrijk N.V...... 8.3 Baron Ruzettelaan 33, 8130 Brugge/Assebroek Bedrijvencentrum Leuven N.V...... Barco Elbicon N.V. 0.28 Interleuvenlaan 62/62a, Zone 2 – 3001 Heverlee Bedrijvencentrum Zaventem N.V...... Barco Elbicon N.V. 0.36 Leuvensesteenweg 613, 1930 Zaventem Zuid 7

Note 1 - Market Capitalization of Xeikon N.V.

On September 15, 2000, the market capitalization of Xeikon N.V. amounted to USD 16,729,375, based on a total of 1,029,500 issued and outstanding shares.

135 2. INFORMATION CONCERNING THE BUSINESS OF NEW BARCO

2.1 GENERAL

On September 26, 2000, Barco announced that it commenced exclusive negotiations with CVC Capital Partners in respect of a possible management buy-out of "Barco Graphics". If successful, these negotiations could lead to a definite agreement in December 2000.

2.2 BARCO PROJECTION SYSTEMS

Barco Projection Systems, with research and development and manufacturing facilities in Belgium, Germany, the United States and India, has been a world leader in large screen projection technology for nearly 20 years. Barco's product line of large screen projectors, peripheral devices and visual sub-systems can be used in a broad range of applications such as home theater and digital cinema, presentation and training, entertainment and infotainment, rental and staging, process control and surveillance, and simulation and virtual reality. Barco Projection Systems consists of five business units: "Barco Projection Products", "Barco Control Rooms", "Barco Simulation Products", "Barco Daylight Display System" and "Barco Digital Cinema". Below is an overview some recent developments within each of these business units.

In September 1999, the different product lines of the "Barco Projection Products" business unit was reorganized into three main product ranges in order to become more customer oriented: corporate (presentation, point-of-sale, leisure and entertainment), rental and staging, and home theater. Recently, a fourth product range, BarcoNexxis, was added. BarcoNexxis will be supported by a highly market-oriented team that will cooperate across borders, gathering expertise from various New Barco operations. A first step in that direction will be the parallel development of software and hardware in Reading, United Kingdom, and Kuurne, Belgium.

With a portfolio of high quality products and a good geographic coverage, New Barco believes that the "Barco Control Rooms" business unit is well positioned to effectively enter new market sectors. At the occasion of the recent NAB trade show in Las Vegas, United States, Barco Control Rooms launched iSTUDIO, a new solution for intelligent broadcast monitoring. New Barco believes that iSTUDIO will significantly facilitate and improve their digital television services. Multiple orders are therefore expected in the near future.

New Barco noted that the synergy of the three product groups within the "Barco Simulation Products" business unit had a positive effect on sales and orders, and it believes that the geographical location of the product groups in Europe and the United States strongly contributes to the worldwide expansion of this business unit.

After an excellent launch and start-up in the fourth quarter of 1999, the "Barco Daylight Display Systems" business unit experienced a continuing and considerable growth during the first half of 2000.

The "Barco Digital Cinema" business unit has recently been successful in obtaining one of only three official worldwide licenses on a new digital projection technology for the cinema industry designed by Texas Instruments . It is one of the first technologies to be approved by the Hollywood film industry as a replacement

136 for the traditional 35-mm film technology. The new digital projection technology offers several advantages for studios, film distributors and cinema operators alike, and offers the potential for New Barco to replace the estimated 114,000 film projectors worldwide with new digital cinema projectors over the next decade. Barco Digital Cinema is expected to introduce its own projectors based on this digital technology in the second half of 2000.

The strategic focus of Barco Projection Systems is to reinforce its position as a reference in large screen, high performance projection systems for a number of markets. A first market consists of indoor and outdoor events, for which projection as well as daylight displays can be used. A second important market for "Barco Projection Systems" is the market for control rooms and monitoring centers, and for simulation and virtual reality applications. Another market consists of company conference and boardrooms, in which Barco's INTELLIROOM product features. INTELLIROOM is a solution for conference and meeting rooms, combining projection, information and data communication technology in order to provide immediate access to internal and external information sources, which can be integrated and projected on high resolution wall-displays. The home entertainment market, finally, covers home theater and the emerging digital cinema market and includes digital projectors control and distribution (hardware and software) systems for cinemas. In each of these markets Barco Projection Systems intends to work on a worldwide basis with the best technologies available.

2.3 BARCOVIEW

BarcoView, until recently operating under the name "Barco Display Systems", has research and development and manufacturing facilities in Belgium and the United States, which are fully equipped for in-house design, development, testing and manufacturing. BarcoView also has a software team in India.

BarcoView designs and manufactures high resolution display systems, displays, graphic controllers and display subsystems for demanding niche markets such as avionics (with a range of displays with critical information used by the pilots in their cockpits), air and vessel traffic control, information management for military operations, vehicle electronics, maritime applications, pre-press applications and medical imaging. In the medical market, BarcoView offers total solutions for softcopy diagnosis, including premium quality grayscale and color displays, high resolution imaging boards, video-processing solutions and quality assurance software. BarcoView consists of several divisions: "Avionics", "Rugged Displays", "Industrial and Vetronics", "Chromatics", "Medical Imaging Systems" and "Color Imaging Systems". Below is an overview of some recent developments within each of these divisions.

The "Avionics" division produced the first prototypes of a multi-function cockpit display for engine monitoring.

The "Rugged Displays" division maintains an important position in the market of information management for military operations, with a strong and growing demand from system integrators for its broad range of displays.

The "Industrial and Vetronics" division successfully commenced series production with a range of vetronics (vehicle electronics) liquid crystal displays, typically used for observation and reconnaissance purposes on board of armored and utility vehicles, locomotives and trains. In air traffic control, the division strengthened its solid display reputation by signing important orders from major airports all over Europe.

The "Chromatics" division successfully entered the new millennium by enhancing its global market position in air traffic control with new orders, several follow-on contracts for its graphics controllers and important maintenance contracts.

The "Medical Imaging Systems" division continues its strong market expansion. The division considerably increased market share with its broad range of diagnostic displays, medical imaging boards, quality assurance

137 software, and customized image computing solutions. The geographical clusters set-up in 1999 (Europe, United States, Asia and Japan) all contributed to the improved penetration in the medical imaging market.

Finally, the "Color Imaging Systems" division noted an excellent level of acceptance of color-accurate display in niche markets such as pre-press, digital photography, and cinematography.

BarcoView aims at further expanding its worldwide industrial presence with local research and development, manufacturing and marketing and sales.

2.4 BARCO GRAPHICS

Barco Graphics, with centers of competence in Belgium, the United States, Singapore and Japan, consists of four business units. Three of these business units, i.e. "Packaging Systems", "Commercial Printing", and "Industrial Printing", are specialized in software and hardware for the graphic arts industry, whereas one business unit offers complete solutions for the electronic manufacturing industry, namely "Electronic Tooling Systems".

The "Packaging Systems" business unit is the first of the graphic arts business units and provides solutions for design and pre-production of packaging. The "Commercial Printing" business unit serves the document based market, including commercial, book, magazine and newspaper printers, cartography, variable information printing or "VIP" applications and the original equipment manufacturing or "OEM" business of PRINTSTREAMER. The "Industrial Printing" business unit focuses on decoration and security applications, and on "the.factory" (to be pronounced as "the dot factory"), which is a unique and extremely powerful digital inkjet press for industrial, variable and high-speed digital color printing.

The "Electronic Tooling Systems" business unit is an important supplier to the electronic manufacturing industry with complete pre-production engineering software solutions, as well as powerful imaging and inspection technology for generating and managing all tools required for the production of printed circuit boards or "PCBs".

Barco Graphics intends to enhance its position as the world leader in pre-press and structural design for the packaging industry, and aims at strengthening its leadership in the emerging market for industrial digital printing with the introduction of "the.factory". Furthermore, Barco Graphics intends to remain a major supplier for pre-press and digital printing components for commercial printing, and a leader in hardware and software for optical inspection, imaging and pre-production of electronic printed circuit boards. In general, Barco Graphics' objective is to pursue further growth as a major innovator in each of these markets.

On September 26, 2000, Barco announced that it has initiated exclusive talks with CVC Capital Partners, an international firm, specialized in buy-out operations with offices in 11 European countries, in respect of a possible management buy-out or "MBO" of Barco Graphics. The goal of such management buy-out would be to allow Barco Graphics to further develop as an independent company. If successful, the negotiations could lead to a definitive agreement during the month of December 2000.

The proposed management buy-out of Barco Graphics is part of Barco's strategy to achieve more rapid growth by giving greater autonomy to each of its activities. In view hereof, Barco decided to start negotiations with CVC Capital Partners, so that it could organize a management buy-out together with the management of Barco Graphics within a short time.

The Board of Directors of Barco and, following the demerger, New Barco will not make any decision on the allocation of the funds that could become available as a result of the management buy-out, before the negotiations have been finalized. However, the aim will always remain to permanently increase the shareholder value with the funds available. Currently available funds will be used in the first place to develop opportunities for the remaining activities of Barco and, following the demerger, New Barco. These are in particular Barco Projection Systems and BarcoView, which performed excellently in the first half of 2000 and provided the greatest

138 growth whereby for Barco Projection Systems turnover increased with 41% and EBIT with 75%, and for BarcoView turnover increased with 32% and EBIT with 115%. Present funds could also be used for the further specialization of BarcoVision into the area of visual inspection applications. Along with Barco Specialized Subcontracting, these three activities will continue to form the central core of Barco and, following the demerger, New Barco.

2.5 BARCOVISION

With over 30 years of experience BarcoVision, the result of the merger of the former Barco Automation and Barco Machine Vision activities, is a leader in optical detection and inspection systems, sorting machines and computerized production management systems. BarcoVision has research and development and manufacturing facilities in Belgium, the Netherlands, Germany, the United Kingdom and Switzerland.

The "Sensors and Systems" division supplies sensors and computerized production-management systems to the textile and plastics processing industry.

The "Visual Sorting and Inspection Systems" division for the food, tobacco and textile industry, strengthened its position as an important market leader in the potato-processing industry with the Pulsarr camera sorter. New Barco believes that its laser sorters, which are used for sorting shrimp, frozen vegetables, raisins, and other products, are a success on the United States market.

BarcoVision aims at becoming a world-wide business partner for visual inspecting and sorting in major industries such as textile, food processing, plastics, and pharmaceuticals, using a full range of technologies, such as color camera, X-ray, laser, red and infrared light, and acoustics.

2.6 BARCO SPECIALIZED SUBCONTRACTING

Barco Specialized Subcontracting consists of the "Barco Interconnection Technologies" division and the "Barco Special Components" division.

"Barco Interconnection Technologies" ("BIT") has four main area's of activity. The first area covers high quality printed circuit boards or "PCBs" (single sided, double sided and multi-layer "PCBs") in prototype or in serial production. The second area relates to surface mounting. In the field of microelectronics, BIT is a subcontractor for thickfilm hybrids following specific customer needs. BIT is specialized in chip on board and die and wire bonding. With Silex, based in Louvain-La-Neuve, Belgium, BIT also has a specialized design house for field programmable gate arrays or "FPGAs" and "ASICs". The research and development capacity of the Silex design house has been expanded in the first half of 2000.

The "Barco Special Components" division manufactures mechanical and plastic parts, coils, transformers and extra-high voltage units for both New Barco and third companies. Rapid prototyping and small series have become the primary target. The "Barco Machine and System Building" sub-unit, which was launched in December 1999, provides a total service during development and prototyping and assures subsequent fully tested production at the customer's request. New Barco believes that the expertise in development and project management across the divisions and the ability to do everything in-house at Barco Special Components enables service to be accelerated and the added value of the project to be increased.

In general, Barco Specialized Subcontracting believes that the markets in which it is active, are changing due to a growing demand for prototyping, small series, fast delivery and total subcontracting. Barco Specialized Subcontracting therefore intends to pursue a strategic focus by anticipating this change in its markets, and by providing the highest level of responsiveness to its customers.

139 3. RISKS RELATED TO THE BUSINESS OF NEW BARCO

The following "risk factors" should be read together with the risk factors set forth elsewhere in this prospectus.

Following the demerger of Barco, New Barco will carry on the remaining activities of Barco.

Following the demerger of Barco, New Barco will carry on the remaining activities of Barco. As a stand- alone entity, New Barco will be subject to risks that are similar to those of Barco and other stand-alone companies. In addition, potential investors should carefully consider the risk factors set forth hereinafter. In any event, it should be noted that each of the activities of New Barco is already to a large extent managed and run as an autonomous unit, with separate profit and loss responsibilities. In view hereof, it is possible that some risks will not have the same impact on the respective activities. Furthermore, it is possible that the overall operating results of New Barco may not be substantially affected by certain of these risks that only apply to certain of its activities.

Technology markets are generally characterized by rapid technological change and intense competition.

Technology markets are generally characterized by rapid technological change. If the respective activities of New Barco are unable to design, develop, manufacture and sell products that incorporate or are compatible with new technologies and changing customers' needs, New Barco's business would suffer.

In connection herewith, New Barco will attempt to protect its intellectual property rights through patents, trademarks, copyrights, maintaining certain technology as trade secrets and other measures. It can, however, not be assured that any patent, trademark, copyright or other intellectual property right owned by New Barco will not be invalidated, circumvented or challenged, that such intellectual property right will provide competitive advantages to New Barco or that any of New Barco's pending or future patent applications will be issued with the scope of the claims sought by it, if at all. As a result, a failure to adequately protect its proprietary rights could negatively affect New Barco's business. On the other hand, it is possible that New Barco may be found to infringe upon third parties' proprietary rights. Any claim or litigation, with or without merit, could be costly, time consuming and could result in a diversion of management's attention, which could harm New Barco's business

New Barco may also be required to enter into technology development or licensing agreements with third parties. It cannot be assured that New Barco will be able to enter into any necessary technology development or licensing agreement on terms acceptable to it, or at all. The failure to enter into technology development or licensing agreements when necessary could limit New Barco's ability to develop and market new products and, accordingly, could materially and adversely affect its business and operating results.

Finally, New Barco's future success will also depend on its ability to retain and motivate highly qualified personnel, in addition to attracting new personnel. Competition for qualified technical and other personnel is intense and New Barco may not be successful in attracting and retaining such personnel.

New Barco may need additional capital in the future and may not be able to secure adequate funds in terms acceptable to it.

It is anticipated that existing New Barco's cash balances and cash flow will be sufficient to meet New Barco's liquidity needs for at least the next twelve months. However, New Barco may need to raise additional funds if its estimates change or prove inaccurate or in order for it to respond to unforeseen technological or marketing hurdles or to take advantage of unanticipated opportunities.

140 New Barco needs to effectively manage its further growth and operations and may be unable to manage the risks and challenges resulting from acquisitions.

New Barco's activities will make investments in complementary companies, products or technologies. New Barco's failure to successfully manage future acquisitions could seriously harm its operating results. In the event of future purchases, New Barco may face additional financial and operational risks, including difficulties in assimilating the operations, technology and personnel of acquired companies, disruption in its business because of allocation of resources to consummate these transactions and the diversion of management's attention from existing businesses, difficulty in retaining key technical and managerial personnel from acquired companies, assumption of operating losses, increased expenses and liabilities, and weakening or termination of relationships with existing employees, customers and business partners as a result of these transactions.

New Barco faces a number of risks associated with international operations, any or all of which could result in a disruption of its business and a decrease in its revenue.

New Barco's business is subject to a number of international risks, any or all of which could result in a disruption of its business and a decrease of its revenues. These include:

· foreign exchange risks, the improper management of which could result in large cash losses,

· inconsistent regulations and unexpected changes in regulatory requirements,

· difficulties and costs of staffing and managing international operations,

· potential adverse tax consequences,

· wage and price controls,

· uncertain protection of intellectual property rights,

· imposition of trade barriers,

· differing technology standards,

· political instability, and

· social unrest.

New Barco purchases several key components, subassemblies and materials used in the manufacturing or integration of its products from sole or limited sources.

Even though Barco's Specialized Subcontracting activity already manufactures many components for the other activities of Barco, some components, subassemblies and materials necessary for the manufacture or integration of New Barco's products are obtained from sole suppliers or a limited group of suppliers. New Barco's reliance on sole or limited suppliers, particularly foreign suppliers, involves several risks, including a potential inability to obtain an adequate supply of required components, subassemblies or materials and reduced control over pricing, quality and timely delivery.

141 The operating results of New Barco are likely to fluctuate and may fail to meet or exceed the expectations of securities analysts or investors, causing the trading price of the shares to decline.

The operating results of the respective activities of Barco have fluctuated in the past and are likely to continue to fluctuate in the future, on an annual and a quarterly basis, as a result of several factors, many of which are outside of the control of New Barco. If the operating results of New Barco fail to meet the expectations of securities analysts or investors, this could cause the trading price of the shares of New Barco to decline. Be that as it may, since all activities of Barco enjoy already to a large extent financial, managerial and commercial autonomy as separate profit and cost centers, it is expected that the separation of Barco Communication Systems from Barco will not have a substantial impact on the operating results of the other activities of New Barco.

142 4. FINANCIAL INFORMATION OF NEW BARCO

4.1 GENERAL

The following sections set forth the pro forma consolidated financial statements of New Barco Group as of December 31, 1997 (only Balance Sheet), December 31, 1998, December 31, 1999, and for the years then ended, and as of June 30, 2000 and for the six month period then ended, in accordance with Belgian GAAP. These have been derived from the consolidated financial statements of Barco, which have been prepared in accordance with Belgian GAAP and which have been audited by Ernst & Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke. The pro forma consolidated financial statements of New Barco Group are unaudited, but have for the year ended on December 31, 1999, and for the six month period ended on June 30, 2000, been subject to a limited review by Ernst & Young Bedrijfsrevisoren C.V., in accordance with the guidelines prescribed by the Belgian Institute of Company Auditors.

The pro forma consolidated financial statements of New Barco Group have been established as follows:

· Secondly, the unaudited pro forma consolidated financial statements of BarcoNet according to Belgian GAAP have been deducted from the consolidated financial statements of Barco.

· receivables and payables, · revenues and costs, and · unrealized profits, i.e. margins on inventory.

The pro forma consolidated balance sheets and income statements should be read together with the comments set forth below in this section.

For further information, reference is also made to the audited statutory and consolidated financial accounts of Barco as of December 31, 1997, 1998 and 1999, and for the years then ended, and the audited statutory and consolidated financial accounts as of June 30, 2000, and for the six month period then ended.

143 4.2 PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - BALANCE SHEETS

In thousands of Euro Six Months Year Ended December 31 Ended June 30, 2000 1999 1998 1997

FIXED ASSETS 295,721 283,735 287,823 219,270

II. Intangible fixed assets 44,547 36,942 32,147 23,183

III. Consolidation differences 134,116 139,320 150,006 109,448

IV. Tangible fixed assets 110,945 101,592 100,580 74,368

A. Land and buildings 60,560 54,312 50,031 38,235 B. Plant, machinery and equipment 29,518 29,189 30,738 23,247 C. Office furniture and vehicles 13,528 13,290 14,794 10,629 D. Leasing and other similar rights 531 462 461 154 E. Other tangible fixed assets 2,214 2,421 1,857 1,437 F. Assets under construction and 4,594 1,918 2,699 667 advance payments

V. Financial fixed assets 6,113 5,881 5,090 12,270

A. Group companies 0 0 0 0 Shares 0 0 0 0 B. Other enterprises 6,113 5,881 5,090 12,270 1. Shares 3,882 3,780 3,660 11,015 2. Amounts receivable and cash 2,231 2,101 1,430 1,255 guarantees

CURRENT ASSETS 504,878 484,874 433,947 429,021

VI. Amounts receivable after 1 year 1,753 894 15,070 13,990

A. Trade debtors 848 559 936 26 B. Other amounts receivable 905 335 14,134 13,963

VII. Stocks and contracts in progress 140,070 108,843 112,986 101,075

A. Stocks 137,218 105,322 110,365 99,113 1. Raw materials 59,835 52,220 49,839 41,615 2. Work in progress 42,193 26,559 25,286 23,968 3. Finished goods 35,142 26,523 35,226 33,531 6. Prepayments 48 20 14 0 B. Contracts in progress 2,852 3,520 2,621 1,962 0 0 0 0 VIII. Amounts receivable within one year 211,946 192,211 178,968 145,929

A. Trade debtors 184,528 179,807 145,319 134,697 B. Other amounts receivable 27,416 12,404 33,648 11,232

IX. Investments 104,592 115,597 79,226 120,828

X. Cash at bank and in hand 37,037 56,653 37,101 38,467

XI. Deferred charges and accrued income 9,480 10,676 10,596 8,732

TOTAL ASSETS 800,599 768,609 721,770 648,290

144 In thousands of Euro Six Months Year Ended December 31 Ended June 30, 2000 1999 1998 1997

EQUITY 449,257 421,688 394,585 340,443

I. Capital 53,059 52,876 52,762 52,413

II. Share premium account 120,404 118,563 117,373 113,160

IV. Reserves 265,343 242,279 220,022 168,152

VI. Translation differences 7,025 5,670 729 3,497

VII. Investments grants 3,427 2,300 3,699 3,221

MINORITY INTEREST 273 708 717 1,049

VIII. Minority interests 273 708 717 1,049

PROVISIONS, DEFERRED TAXES AND 48,657 47,372 45,914 34,697 LATENT TAXATIONS

IX. A. Provisions for liabilities and charges 39,237 38,036 37,246 27,729

1. Pensions and similar obligations 3,294 3,085 2,473 1,574 2. Major repairs and maintenance 3,245 2,262 1,803 1,842 3. Other liabilities and charges 32,698 32,689 32,970 24,313

B. Deferred taxes and latent taxations 9,420 9,336 8,668 6,968

CREDITORS 302,412 298,841 280,554 272,102

X. Amounts payable after 1 year 20,314 15,935 14,583 16,325 A. Financial debts 17,731 13,258 13,131 13,214 1. Subordinated loans 642 0 47 47 2. Bonds 12,170 11,864 11,195 11,544 3. Long term leases and similar 463 364 160 138 obligations 4. Credit institutions 4,456 1,030 1,729 1,484 5. Other debt 0 0 0 0 D. Other amounts payable 2,583 2,677 1,452 3,112

XI. Amounts payable within 1 year 258,983 261,000 245,584 240,290 A. Current portion of amounts payable after 1 year after 1 year 1,987 2,539 783 1,659 B. Financial debts 56,088 53,497 63,768 47,515 Credit institutions 56,088 53,497 63,768 47,515 C. Trade debts 70,987 67,140 49,234 66,740 1. Suppliers 70,864 67,057 49,144 66,690 2. Bills of exchange payable 123 83 90 50 D. Advances received on contracts in 22,597 19,955 16,487 12,897 Progress E. Taxes, remuneration and social security 66,428 66,459 53,394 43,560 1. Taxes 29,684 31,579 23,730 16,136 2. Remuneration and social security 36,744 34,880 29,664 27,423 F. Other amounts payable 40,895 51,410 61,918 67,919

XII. Accrued charges and deferred income 23,114 21,906 20,387 15,487

TOTAL LIABILITIES 800,599 768,609 721,770 648,290

145 4.3 COMMENTS ON THE PRO FORMA CONSOLIDATED BALANCE SHEETS

4.3.1 Intangible Fixed Assets

The intangible fixed assets include research and development costs, as well as software purchased, entered as assets.

· Research and Development

The research and development costs entered as assets, mainly include direct salary costs. To a certain extent, materials used for prototypes and other directly attributable costs are entered as research and development assets. Research and development expenditures that are expected to generate a return over a period that is clearly longer than the fiscal year, will be entered at the direct cost price and written-off over a maximum period of 3 years using the linear method. If it should appear that no future return is to be expected, the costs entered as assets will be written-off in full.

During the years covered in the aforementioned consolidated pro forma balance sheet of New Barco, research and development have been treated with paramount importance. For a niche marketeer as Barco in a world of high technological products and systems, it is vital to create and commercialize unique concepts at the right time.

A noteworthy event in 1997 is the acquisition of know-how in the field of optics and sensors, which plays an increasingly important role in respect of the various activities of New Barco. For example, optics- related know-how is essential for the unique performance of projectors, whereas knowledge about sensors is particularly important for the inspection systems manufactured by the BarcoVision activity.

The trend towards optics and opto-electronics was continued in 1998. The further development of plate-setters of Barco Graphics and the projectors of Barco Projection Systems were concrete examples of this evolution. Next to software, the development of digital hardware (and especially programmable components) remains also an important factor, such as in respect of the successful high-resolution displays for medical purposes, as well as the image treatment electronics for processing ultrasound images.

Although a trend was already visible before, in 1999 Barco applied many new technologies to build its new Intranet, containing applications such as a generic security system, a navigation system, an internal bulletin board and a document repository system.

In 1999, Barco Graphics further deepened the technology of infrared and ultraviolet lighting techniques for its image setters. Furthermore, it did extensive research with regards to advanced inkjet printing techniques.

Still in 1999, BarcoVision expanded its know-how in the field of sensors, resulting in several new patents and new products. It also developed advanced equipment for efficient food inspection. In addition, BarcoVision did further research on the use of X-rays, in connection with which it developed special high voltage feedings.

BarcoView as well as Barco Projection Systems examined various future-oriented display techniques, which resulted in various new products. Barco also introduced "light emitting diode" or LED display technology, which enables the visualization of images with a high brightness on large surfaces, for applications indoors as well as in open air.

Most of the aforementioned efforts have been continued in 2000. The capitalized research and development costs increased in the first half of 2000 by 21 % as compared to 1999, due to a significant

146 rise in internal development costs, as well as external development costs in the digital cinema area, and in particular the license on the new projection technology designed by Texas Instruments.

· Software

Software mainly includes administrative software packages and is written-off over a period of 5 years using the linear method.

4.3.2 Consolidation Differences

Consolidation differences fell with 4 % as compared to 1999, due to additional write-offs, while in the first six months of 2000 there were no acquisitions.

The following table provides an overview of the goodwill over the recent years (in thousands of Euro).

Activity Year acquisition Original goodwill Balance as per June 30, 2000

Barco Graphics ...... 89-90-93-96-98-99 137,687 74,730 Barco Projection Systems and BarcoView ...... 89-90-93-95-96-97-98-99 50,014 31,939 BarcoVision ...... 89-90-93-94-95-97-98 46,909 27,446 Barco Specialized Subcontracting ...... 93-95-98 412 0

Total...... 235,022 134,116

4.3.3 Tangible Fixed Assets

The tangible fixed assets include fixed assets relating to installations, production machines, measurement equipment, apparatus and models, furniture, office equipment, mobile equipment, computer equipment and costs for the decoration of rented buildings. The tangible fixed assets also include assets under construction. Land, buildings, installations, machines, equipment, furniture and office equipment are valued at the purchase price, including all additional costs, provided these costs increase the value of the patrimony.

As compared to 1999, the tangible fixed assets rose significantly with 9 %, in particular with regard to land and buildings.

4.3.4 Financial Fixed Assets

The financial fixed assets are valued at their purchase price. Any additional costs are to be deducted from the result. Depreciations are to be entered and deducted from the result based on the decision made by the Board of Directors in which account was taken of shareholders' equity, profitability and future expectations of the company concerned and movements in the exchange rate. Reversals or depreciations are entered and recorded as part of the results when the development of the company concerned justifies it.

There were no noteworthy variances between the first six months of 2000 as compared to 1999 with respect to the financial fixed assets.

4.3.5 Stocks and Contracts in Progress

The stocks and contracts in progress include raw materials and additives, goods in progress and semi- finished products, spare parts, finished products and orders in progress. Raw materials, items purchased, semi-

147 finished products, orders in progress and finished products are valued at the purchase price of the last known order or the direct manufacturing price. Obsolete and slow-rotating stocks are systematically written-off.

Stock levels increased considerably as compared to 1999. In addition to the strong rise in orders, this is due to selective shortages of components, which were holding-up the scheduled delivery of finished products. The increase in stock levels is also the main reason for the decrease of available cash resources.

4.3.6 Amounts Receivable Due within One Year

The amounts receivable due within one year include trading receivables, debit balances and advance payments to suppliers, depreciation on trading debtors and other receivables. Receivables are valued at their nominal value. Depreciations are made if there is any doubt about the ability to collect the receivable and after comparison with the realization value.

4.3.7 Deferred Charges and Accrued Income

The deferred charges and accrued income mainly include costs to be brought forward for matters such as insurance.

4.3.8 Provisions for Liabilities and Charges

The provisions for liabilities and charges include provisions for pension obligations, major maintenance and repairs, pending disputes, technical warranty commitments, deferred taxes and other risks and costs. The provision for remaining risks and costs includes, among other things, buy-back commitments and provisions for technical warranty commitments that are established at 1 % of the turnover.

With respect to the provisions, there were no noteworthy variances between the first six months of 2000 as compared to 1999.

4.3.9 Amounts Payable after One Year

The amounts payable after one year include two bond loans. The remaining balance relates to prototype credits.

There were no noteworthy variances between the first six months of 2000 as compared to 1999 with respect to the payables over one year.

4.3.10Amounts Payable within One Year

The amounts payable within one year include debts of more than one year, which are due within the year, as well as financial debts, trading debts vis-à-vis third parties, royalties to be paid, social debts and taxes, advance payments received, dividends owed and other debts vis-à-vis third parties.

There were no noteworthy variances between the first six months of 2000 as compared to 1999 with respect to the payables within one year.

148 4.4 PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS – INCOME STATEMENTS

In thousands of Euro Six months ended For the year ended December 31 June 30, 2000 1999 1998

I. Operating activities 412,070 683,801 686,407

A. Turnover 353,474 627,445 584,177 B. Increase, decrease in stocks of finished goods, work in Progress and contracts in progress 27,720 (5,340) 7,247 C. Fixed assets own construction 24,943 37,526 31,582 D. Other operating income 5,933 24,170 63,401

II. Operating charges (-) (368,670) (607,133) (568,698)

A. Raw materials, consumables and goods for resale 147,819 206,075 202,535 1. Purchases 156,790 207,364 210,128 2. Increase, decrease in stocks (8,971) (1,289) (7,593) B. Services and other goods 67,391 117,160 121,142 C. Remuneration, social security costs and pensions 112,934 205,281 180,679 D. Depreciation and amounts written-off on formation Expenses, intangible and tangible fixed assets 31,292 55,323 47,152 E. Increase, decrease in amounts written-off on stocks Contracts in progress and trade debtors 5,613 15,548 15,346 F. Increase, decrease in provisions for liabilities and 328 3,650 (1,628) Charges G. Other operating charges 3,293 4,096 3,472

III. Operating profit 43,400 76,668 117,709

IV. Financial income 13,771 20,536 18,351

A. Income from financial fixed assets 67 23 385 B. Income from current assets 3,503 5,182 6,071 C. Other financial income 10,201 15,331 11,895

V. Financial charges (-) (19,493) (26,368) (27,375)

A. Interest and other debt charges 1,801 3,604 3,627 B. Depreciation on consolidation differences 6,960 13,022 12,711 D. Other financial charges 10,732 9,742 11,037

VI. Profit on ordinary activities before income taxes on 37,678 70,836 108,685 the consolidated enterprises

VII. Extraordinary income 0 2,627 1,045

C. Write-back of amounts written-off financial fixed assets 0 0 54 E. Gains on disposal of fixed assets 0 2,627 991 F. Other extraordinary income 0 0 0

149 VIII. Extraordinary charges (-) (952) (5,000) (260)

B. Extraordinary depreciation on consolidation Differences 0 3,302 0 E. Losses on disposal of fixed assets 0 226 260 F. Other extraordinary charges 952 1,471 0

IX. Profit for the period before income taxes of the Consolidated enterprises 36,726 68,463 109,470

X. A. Transfer to deferred taxes and latent taxations (-) (373) (924) (1,997)

X. Income taxes (-) (13,420) (23,091) (31,675)

A. Income taxes (-) (13,689) (23,290) (32,003) B. Adjustments of income taxes and write-back of tax 269 199 328 Provisions

XI. Profit of the consolidated enterprises 22,933 44,448 75,798

Share of the minority interests 77 (55) 74 Share of the group 22,856 44,503 75,724

150 4.5 COMMENTS ON THE PRO FORMA CONSOLIDATED INCOME STATEMENTS

4.5.1 General

The most important increase in turnover in the first half of 2000 can be accounted to the projection and displays activities of Barco Projection Systems and BarcoView. Barco Graphics, on the other hand, saw a decrease in turnover. Geographically the total increase in turnover for the first half of 2000 was distributed evenly.

The increase of the results are mainly due to the following two factors:

· Barco Projection realized for the first time since the fire in 1998 a considerable increase in turnover. This easily compensated for the termination of fire insurance payments, which still amounted to EUR 9.9 million in the first half of 1999.

· In addition, BarcoView succeeded in repeating the excellent performance achieved in the second half of 1999, which was complemented by an important increase in long term orders. Especially the medical displays department performed well.

Only Barco Graphics performed less well than last year in the run-up to the DRUPA 2000 trade show (second half of May 2000), which caused potential customers to delay their purchase orders, if any, until after DRUPA 2000, as further explained below.

In thousands of Euro Turnover EBIT (*)

December 31, June 30, December 31, June 30, 1998 1999 2000 1999 2000

Barco Projection Systems ...... 215,592 225,859 145,410 21 (**) 19 Barco Graphics ...... 155,531 181,044 80,119 5 2 BarcoView ...... 81,662 99,195 58,284 15 14 BarcoVision ...... 106,441 94,130 49,733 13 12 Barco Specialized Subcontracting ...... 64,899 56,691 50,846 -2 0 Eliminations ...... -39,948 -29,474 -30,918

Total ...... 584,177 627,445 353,474 14 13

* Current EBIT: profit before the amortization of goodwill, exceptional results, interest and taxes.

** Including fire insurance payments.

The other exceptional costs are due to the preparations for the restructuring of Barco.

Even more than in 1999, Barco has made great efforts to attract as many trained associates as possible in a difficult labor market in order to achieve the results and to realize the growth that was forecast.

Temporary shortages of components caused delays in deliveries in various domains throughout the first half of the year. The increases in the cost of components, caused in part by variations in exchange rates, negated the positive effect of these variations on sales.

4.5.2. Barco Projection Systems

The turnover generated by Barco Projection Systems increased with 41 % and EBIT with 75% in the first half of 2000 as compared to the same period in 1999. This increase confirms the significance of the structural

151 changes that were implemented in September 1999, when Barco Projection Systems was split into 5 business units. This resulted in each unit adopting a more market-oriented approach. Orders increased with 52 % as compared to the first half of 1999.

The increase in sales of Barco Projection Products is due to the thorough market penetration achieved by its most important product lines.

For the second year in succession, Barco Control Rooms achieved a significant increase that is purely a consequence of the growth of internal turnover (as opposed to external turnover, such as through acquisitions).

Within Barco Simulation Virtual and Augmented Reality achieved the highest level of growth.

After an excellent launch and start in the fourth quarter of 1999, Barco Daylight Display Systems continued its exceptionally healthy growth in the first half of 2000.

A noteworthy event in the first half of 2000 was Barco Digital Cinema's acquisition of one of the three worldwide licenses on Texas Instruments' DLP Cinema technology. The presentation of Barco Digital Cinema projectors based on this technology, is planned for the second half of this year.

4.5.3 BarcoView

BarcoView, formerly Barco Display Systems, started 2000 excellently. The number of orders received increased with 29 %, turnover increased with 32 % and EBIT with 115% in comparison with the first half of 1999. All departments reinforced their respective market niches.

The Medical Imaging Systems Division doubled its orders during the first six months of 2000.

The leading position of Barco's Chromatics Division in Air Traffic Control is shown by the favorable sales figures achieved.

The Rugged and Industrial Division experienced strong growth.

Finally, Barco's Avionics Division won an important contract for cockpit display screens for various types of Russian civil aviation aircraft.

4.5.4 BarcoVision

BarcoVision experienced a 19 % increase in orders as compared to the first half of 1999, while turnover increased with 3 % as compared to the same period last year. The major portion of the range offered now, consists of vision solutions geared to quality inspection. New Barco expects the importance of visual inspection technologies to increase further in the future.

The revitalization of investments in textile machinery has resulted in more orders from textile machinery manufacturers. On the other hand, the sorting and control systems department received a great deal of attention as a result of its latest developments, including a unique combination in a single system of laser and camera technology.

4.5.5 Barco Graphics

Turnover of the three graphics business units of Barco Graphics (Packaging Systems, Printer Systems and Digital and Special Printing) was influenced negatively by DRUPA 2000, one of the largest graphics trade shows, that was held in Düsseldorf, Germany, from May 18 to 31, 2000. The Electronic Tooling Systems or "ETS"

152 business unit launched a series of new products at the IPC 2000 trade show in California, United States of America.

In New Barco's experience, potential buyers delay their important purchasing decisions until they have visited all major trade shows in order to gain a broad impression of the new products and recently developed technologies. This caused a 10 % decrease in turnover and a 7 % decrease in orders as compared to the first half of 1999. On the other hand, it is expected that these trade shows will contribute to orders and turnover in the second half of 2000 and all of 2001.

An important development for the digital printing technology market presented at DRUPA, was "the.factory" (to be pronounced as "the dot factory"). This new digital inkjet printing machine is specifically designed for the industrial printing market for applications such as decoration (wallpaper, laminate, etc.) and security paper.

4.5.6. Barco Specialized Subcontracting

The Barco Specialized Subcontracting operation as a whole achieved an increase in sales of 57 %, while orders rose with 31 % as compared to the first half of 1999. Great efforts were made at Barco Interconnection Technologies or "BIT" to achieve better quality and production levels of Barco Prints and Barco Surface Mounting. At Barco Special Components, the primary goal has become the fast production of prototypes and small series. Barco Machine and System Building was founded in December 1999.

4.6 PRINCIPLES OF CONSOLIDATION

The pro forma consolidated financial statements of New Barco Group are prepared in accordance with the principles of consolidation that are applied by Barco, and can be summarized as follows.

The consolidation is carried out according to the principle of integral consolidation, in view of the fact that Barco exercises the majority of the voting rights attached to the shares in all the companies, excluding those in which Barco only has a minority interest.

The annual accounts of the Belgian and foreign companies included in the consolidation are prepared in accordance with the legislation and regulations applicable in the countries of incorporation, using valuation rules, which, as far as possible, correspond to the valuation rules defined at group level. Where differences exist that can have a major impact, adjustments are made at the consolidation level. These include in particular the standardization of depreciation percentages on fixed assets and the setting up of specific provisions for liabilities and charges.

The reciprocal accounts of consolidated enterprises are eliminated by compensating receivables and payables as well as costs and income. The consolidated figures therefore reflect only transactions with third parties.

The unrealized profit element contained in stocks purchased from other group companies has been eliminated, in so far as the purchased products still remain in inventory in their original state.

No eliminations are made on contracts in progress.

Unrealized earnings on tangible fixed assets purchased from other enterprises in the group are eliminated when these purchases are recurrent in nature.

153 Positive first consolidation differences are entered under the assets heading "consolidation differences". These consolidation differences are written-off over 10 years for distribution companies and over a period of 20 years for companies with their own development and production.

Negative first consolidation differences are entered under the liabilities heading "consolidation differences". Consolidation differences are booked to the individual assets and liabilities headings only where significant amounts are involved.

Third parties' share in net assets is recorded under "minority interests", and their share in profit for the period is recorded under "Share of minority interests" in the consolidated income statement.

A provision for deferred taxes is set up for major timing differences, regardless of their duration. In this case the "variable transfer method" is used, i.e. deferred taxes are calculated on the basis of the last known tax rate at year end closing date.

The consolidated balance sheet is drawn up after profit distribution.

4.7 SUMMARY OF THE VALUATION RULES OF NEW BARCO GROUP

4.7.1 Assets

Depreciation on fixed assets is charged on a full-year's basis, regardless of at what point in the year the assets involved were acquired.

· Formation Expenses

All formation expenses are immediately charged to the results of the financial year in which they are incurred.

· Consolidation Differences

See indications under "Principles of consolidation" (4.6).

· Intangible Fixed Assets

The costs of research and development expected to generate profit for a longer period than the current financial year, are capitalized at their direct cost price and amortized over three years on a straight- line basis. If subsequently it appears that future returns should no longer be expected, the remaining amounts are written-off immediately. All other intangible fixed assets are valued at purchase price and amortized over five years using the straight-line method.

· Tangible Fixed Assets

Land, buildings, installations, machinery, equipment, furniture and office equipment are valued at purchase price, including all related costs, with the exception of those costs that do not entail an appreciation of assets, and are depreciated by the straight-line method.

154 Depreciation

Term in years / % first year

Buildings ...... 20/5 Installations ...... 10/10 Production machinery ...... 5/20 Measurement equipment ...... 4/25 Tools and models ...... 3/33 Furniture ...... 10/10 Office equipment ...... 5/20 Computer equipment ...... 3/33 Vehicles ...... 5/20

Renovation work on leased buildings is depreciated over the remaining term of the leasing agreement, with a maximum of 20 years. Tangible fixed assets acquired under leasing agreements are entered as assets for the total value of the principal amount included in the lease installments. These assets are depreciated at the same rate as compared to non-leased assets. If by the end of the leasing agreement the purchase option has not been exercised, the balance of the principal portion entered as assets, is immediately and entirely written-off. Where the purchase option is exercised, the cost of this option is depreciated over the remaining depreciation period of the asset. Assets under construction are valued at the nominal amount of the costs already incurred. For work undertaken internally, only the direct costs are charged. Upon completion, these assets are posted to the proper asset heading. No depreciation is taken on assets under construction. Advance payments on fixed assets include advances already paid on planned investments. No depreciation is taken on these advance payments. It is the company policy not to revalue assets.

· Financial Fixed Assets

Shares held in companies, which are neither consolidated nor accounted for by the equity method, are valued at acquisition cost. Any auxiliary costs are charged immediately to the income statement. Write- offs are recorded and charged against income by decision of the Board of Directors, taking into account the equity, profitability and future prospects of the company in question and exchange rate developments. Write-offs are reversed and written back into income whenever this is justified by the evolution of the company in question. It is the company policy not to revalue assets.

· Stocks and Contracts in Progress

Raw materials, goods purchased, semi-finished articles, contracts in progress and finished goods are valued at their most recent purchase price or direct manufacturing cost. Obsolete stock and stock items with a slow turnaround are systematically written down.

· Receivables

Receivables are valued at nominal value. Reductions in value are recorded whenever the collectability of a receivable is in doubt and after comparison with the market value of the receivable.

· Cash Investments

Short term investments in the form of term deposits are recorded at nominal value. Reductions in value are recorded if necessary. Marketable securities purchased as short-term investments are valued at purchase cost, excluding acquisition expenses, which are charged immediately to earnings. At the end of

155 the year, the purchase cost of these securities is compared with the last known listed price or inventory value. Where this is lower than the purchase cost, the difference is charged to earnings.

· Deferred Accounts

This item records both:

· that portion of expenditure incurred during the current or earlier financial years, and which applies to - and is charged to the income statement in - one or more of the following financial years;

· that portion of income recognized in the income statement during the current financial year but which will be collected only in later years.

4.7.2 Liabilities

· Equity

Equity includes:

· the share capital and the share premium account of the parent company, · reserves, · translation differences, · investment grants.

Investment grants are entered on the liabilities side of the balance sheet once the conditions for obtaining the subsidy are met. The corresponding asset item is a claim on the government, which is credited when payment is received. The grant is then credited to income at the same annual percentage rate as the depreciation on the corresponding fixed asset.

The reserves are the results of:

· the reserves and the results carried forward of the parent company, · the group's share in the reserves of its subsidiaries and branches, · the impact on the reserves of the uniformization of the percentages and methods of depreciation of tangible and intangible fixed assets, · the impact on the reserves of the elimination of inter-company earnings not yet acquired at group level on closing date.

The translation differences arise from the conversion of the participations, equity and income statement of the foreign subsidiaries.

· Minority Interests

This item records third parties' share in the shareholders' equity of the consolidated companies.

· Provisions for Liabilities and Charges

Provisions for liabilities and charges are based on an estimate at the date of the financial statement. For technical guarantees a provision is made based on turnover for the accounting year.

156 · Creditors

Creditors are valued at nominal value. Liabilities for taxes and social security are recorded at the most likely amount payable. The provision for employee holiday pay is determined in accordance with tax legislation in this matter.

· Deferred Accounts

The expenses to be charged and the deferred revenue are valued at the amount pertaining to the closing financial year or to the subsequent financial years.

· Foreign Currencies

For balance sheet entries in foreign currencies other than participations, the value booked in Euro is compared, currency by currency, with the hedging rate or with the indicative rate calculated by the European Central Bank in the last working day of the year. The balance of the conversion differences per currency is adjusted through earnings in the case of a negative balance and through deferred income in the case of a balance. For Belgian companies, this is undertaken on a consolidated level.

· Conversion of Financial Statements in Foreign Currency

Balance sheets denominated in foreign currencies are converted into Euro at the indicative rate calculated by the European Central Bank on the last working day of the period. The conversion difference on the share in the net asset value of the company in question is entered under "Translation differences". The income statement is converted at the average conversion rate for the period. The exchange rate difference is also entered under "Translation differences".

· Deferred Taxes and Latent Taxations

For the deferred taxes reference is made to article 35 of the Belgian Royal Decree dated October 8, 1976, introduced by the Belgian Royal Decree dated December 30, 1991. For the latent taxations, reference is made to art. 40 of the Belgian Royal Decree dated March 6, 1990.

· Recognition of Sales

Sales are recognized whenever three basic conditions have been fulfilled:

· the goods or services have been dispatched or delivered, · all the costs are known and booked, · corresponding invoices have been issued.

Where orders are delivered in installments, sales are recognized insofar as the above conditions have been fulfilled. With every intermediate closing of the accounts, a prudently calculated margin is recorded.

4.8 RECENT DEVELOPMENTS AND PROSPECTS

Management of New Barco expects that the current results of New Barco before taxes and before amortization of consolidation goodwill for 2000 will increase with 10 %, as compared to 1999. For the following years, Barco forecasted an average annual growth in profits of 15 %, but given the strategy to give more autonomy to its activities, it is believed that this growth percentage could be accelerated.

157 On September 26, 2000, Barco announced that it commenced exclusive negotiations in respect of a possible management buy-out of "Barco Graphics". The goal of such management buy-out would be to allow Barco Graphics to further develop as an independent company. If successful, the negotiations could lead to a definitive agreement during the month of December 2000. The proposed management buy-out of Barco Graphics is part of Barco's strategy to achieve more rapid growth by giving greater autonomy to each of its activities. In view hereof, Barco decided to start negotiations with CVC Capital Partners, so that it could organize a management buy-out together with the management of Barco Graphics within a short time. For further information in this respect, reference is made to Section 2.4 of Chapter III of this prospectus.

158 4.9 AUDITOR'S REPORT

LIMITED REVIEW REPORT OF THE AUDITOR ON THE PRO FORMA CONSOLIDATED BALANCE SHEETS AND INCOME STATEMENTS OF NEW BARCO GROUP AS OF DECEMBER 31, 1999 AND JUNE 30, 2000.

1. MISSION

In view of the proposed demerger of Barco into two new Belgian public limited liability companies, BarcoNet and New Barco, we have been engaged to perform limited review procedures on the pro forma consolidated balance sheets and income statements of New Barco Group as of December 31, 1999 and June 30, 2000.

2. PERFORMED PROCEDURES

We performed a review of the attached pro forma consolidated balance sheets and income statements of New Barco Group as of December 31, 1999 and for the year then ended, and as of June 30, 2000 and for the six month period then ended, in accordance with the guidelines issued by the Belgian Institute of Company Auditors.

These pro forma consolidated balance sheets and income statements are the responsibility of Barco's management.

Our review of the pro forma consolidated balance sheets and income statements consisted of applying analytical procedures to financial data and making inquiries with management, which is in accordance with the guidelines issued by the Belgian Institute of Company Auditors. Our review was made in respect of the proposed demerger of Barco and the nature and the extent of our review procedures have been defined for this specific purpose.

Our review procedures performed were substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in Belgium, the objective of which would be the expression of an opinion regarding the financial statements taken as a whole.

The pro forma consolidated balance sheets and income statements have been prepared in accordance with Belgian generally accepted accounting standards, the Belgian consolidation legislation, and by applying Barco's accounting principles in a consistent manner in respect of each of the periods concerned.

3. CONCLUSION

We have performed limited review procedures on the pro forma consolidated balance sheets and income statements of New Barco Group as of:

· December 31, 1999 and for the year then ended, showing total assets of EUR 768.609 (000) and a net income for the year of EUR 44.448 (000);

· June 30, 2000 and for the six month period then ended, showing total assets of EUR 800.599 (000) and a net income for the period starting January on 1, 2000 until June 30, 2000, of EUR 22.933 (000).

159 Our review procedures of the pro-forma consolidated balance sheets and income statements have been performed in respect of the proposed demerger of Barco into two new Belgian public limited liability companies, BarcoNet and New Barco. Consequently our review consisted principally of applying analytical procedures to the supplied information and making inquiries with the management, which is in accordance with the guidelines issued by the Belgian Institute of Company Auditors. Since this is substantially less in scope than an audit conducted in accordance with the generally accepted auditing standards in Belgium, we do not express an opinion on the balance sheets and income statements.

Based on our review, we are not aware of any material modifications that should be made to New Barco Group pro forma consolidated balance sheets and income statements as of December 31, 1999 and June 30, 2000 for them to be in conformity with Belgian generally accepted accounting standards, Belgian consolidation legislation or Barco's accounting principles, applied in a consistent manner in respect of each of the periods concerned.

Brussels, September 25, 2000

Ernst & Young Bedrijfsrevisoren C.V. represented by

______/s/ Ludo Swolfs /s/ Marc Van Hoecke Partner Partner

160 Annex 1/2 to the Auditor's Report

NEW BARCO GROUP PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND JUNE 30, 2000

In thousands of Euro June 30, 2000 and December 31, 1999 and the six-month period the twelve-month then ended period then ended

Fixed Assets ...... 295,721 283,736

Intangible fixed assets ...... 44,577 36,942 Consolidation differences ...... 134,116 139,320 Tangible fixed assets ...... 110,916 101,593 Financial fixed assets ...... 6,113 5,881

Current Assets ...... 504,878 484,874

Amounts receivable after one year ...... 1,753 894 Inventories ...... 140,070 108,843 Amounts receivable within one year ...... 211,946 192,211 Investments ...... 104,592 115,597 Cash at bank and in hand ...... 37,037 56,653 Deferred charges ...... 9,480 10,676

Total Assets ...... 800,599 768,609

Minority Interests ...... 273 708

Provisions and Deferred Taxes ...... 48,657 47,373

Liabilities ...... 302,412 298,841 Amounts payable after one year ...... 20,314 15,935 Amounts payable within one year ...... 258,983 261,000 Accrued charges and deferred income ...... 23,114 21,906 Total Liabilities ...... 351,342 346,922 Equity ...... 449,258 421,688 Total Equity and Liabilities ...... 800,599 768,609

161 Annex 2/2 to the Auditor's Report

NEW BARCO GROUP PRO FORMA CONSOLIDATED INCOME STATEMENT AS OF DECEMBER 31, 1999 AND JUNE 30, 2000

In thousands of Euro June 30, 2000 and the December 31, 1999 and six-month period then the twelve-month ended period then ended

Operating income ...... 412,070 683,801 Operating charges ...... (368,670) (607,133)

Operating Profit ...... 43,400 76,668

Financial income ...... 13,772 20,536 Financial charges ...... (19,494) (26,368)

Profit on Ordinary Activities before Income Taxes ...... 37,678 70,836

Extraordinary income ...... 2,627 Extraordinary charges ...... (952) (5,000)

Profit for the Period before Income Taxes ...... 36,726 68,463

Income taxes and deferred taxes ...... (13,794) (24,015)

Profit for the Period ...... 22,933 44,448

162 5. ADMINISTRATION, MANAGEMENT AND SUPERVISION OF NEW BARCO

5.1 GENERAL

Following the demerger of Barco, the management, supervision and control of New Barco will be continued along substantially the same rules and principles as those that apply to the management, supervision and control of Barco.

5.2 MEMBERS OF THE ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES

5.2.1 Board of Directors and Key Management

The Board of Directors of New Barco will initially be composed of the following 10 Directors, appointed by the general shareholders' meeting of Barco that will decide on the demerger and the incorporation of New Barco, for a term as set forth opposite their respective names.

Name Age Position Term expires Herman Daems ...... 54 Director 2006 Marc Vercruysse ...... 41 Director 2006 Jozef Cornu ...... 55 Director 2004 Erik Van Zele ...... 52 Director 2004 Marc Ooms ...... 48 Director 2004 Robert Verhoeven ...... 57 Director 2004 Hugo Vandamme ...... 54 President and Chief Executive Office (CEO) 2002 Erik Dejonghe ...... 53 Senior Vice-President and Chief Operating 2002 Officer (COO) Gerard Van Acker ...... 56 Director 2002 Karel Vinck ...... 62 Director 2002

Whereas Mr. Daems, Mr. Vercruysse and Mr. Van Acker will be presented by GIMV N.V., Mr. Cornu, Mr. Van Zele, Mr. Vinck and Mr. Verhoeven will be presented as Independent Director.

It is expected that the Chairman of the Board of Directors will be appointed by, and from amongst, the Board of Directors of New Barco upon Closing of the Demerger.

The key management of New Barco will consist of the following individuals:

Name Age Position Senior Group Management Hugo Vandamme ...... 54 President and Chief Executive Office (CEO) Erik Dejonghe ...... 53 Senior Vice-President and Chief Operating Officer (COO) Antoon Van Petegem... 53 Vice-President and Chief Financial Officer (CFO) Bernard Dursin ...... 53 Senior Vice-President Donald Defoort ...... 49 Vice-President Human Resources and Corporate Affairs Managers of Barco's Activities Bruno Pairon ...... 43 Vice-President and Managing Director of Barco Graphics

163 Frans Claerbout ...... 56 Senior Vice-President and Managing Director of Barco Projection Systems Luc Vandenbroucke .... 50 Vice-President and Managing Director of BarcoView Bernard Cruycke ...... 48 Vice-President and Managing Director of BarcoVision Patrick Luyssen ...... 37 General Manager of Barco Interconnection Technologies Willy Maes ...... 54 Vice-President and Managing Director of Barco Special Components Regional Presidents Dany Claeys ...... 46 President of Barco America Frédéric Verhaeghe ..... 39 President Barco Asia Jacques Bertrand ...... 39 President Barco Japan Group Management André De Clercq ...... 64 Vice-President Research and Development JP Tanghe ...... 49 Vice-President and Director Corporate Communications and Investor Relations Emile Schamp ...... 44 Vice-President Information Technologies Bernard Versavel ...... 62 Vice-President Operation Control

Herman Daems - Mr. Daems is Professor of International Management and Strategy at the Department of Applied Economics of the Catholic University of Leuven, Belgium. He is Chairman of the Board of Directors of GIMV N.V. and Barco. He is also member of the Board of Directors of other Belgian companies. During his career he occupied senior positions in government and in several universities.

Marc Vercruysse - Mr. Vercruysse joined GIMV N.V. in 1982 and held positions as internal auditor and senior investment manager before he became responsible for the structured finance activities of GIMV N.V. in 1995. Mr. Vercruysse is currently Chief Financial Officer and member of the executive committee of GIMV N.V. He is also member of the board of directors at Kinepolis and different other companies.

Jozef Cornu - Mr. Cornu is Director of Alcatel. He holds degrees in Electronic and Mechanical Engineering and also holds a master's degree in Engineering and a Ph.D. from Carleton University, Ottawa, Canada. After three years of research at the Brown Boveri research laboratories in Baden, Switzerland, he started his career within ITT in 1973. During his career, he occupied different general management positions.

Erik Van Zele - Mr. Van Zele is currently President and Chief Executive Officer (CEO) of Telindus N.V. He holds a master's degree in Electronic and Mechanical Engineering from the Catholic University of Leuven, Belgium, as well as a postgraduate degree in Business Management from Stanford University, United States of America. Prior to joining Telindus, Mr. Van Zele was Vice President of Raychem Corporation (United States) and Managing Director of Raychem N.V. (Belgium).

Marc Ooms - Mr. Ooms is Managing Director of Petercam Securities N.V. and Petercam N.V. After he graduated in Financial and Commercial Sciences, he did three years of research on the efficiency of the Brussels Stock Market at the Catholic University of Leuven, Belgium. He started his career in 1980 with the GIMV N.V. and joined Petercam Securities N.V. in 1988.

Robert Verhoeven - Mr. Verhoeven is Chief Executive Officer (CEO) of the Belgium-based BMT Group since 1990. Before, he occupied several senior management positions in the connector industry during 20 years. Robert Verhoeven holds degrees in Engineering, Economics and Finance.

Gerard Van Acker - Mr. Van Acker is President and Chief Executive Officer (CEO) of GIMV N.V. since 1980. He holds a Doctor of Law degree and a master's degree in Political and Administrative Sciences. Gerard Van Acker is member of the Board of Directors of several companies.

164 Karel Vinck - Mr. Vinck is Executive Chairman of the Board of Directors of Union Minière. He holds a master's degree in Electronic and Mechanical Engineering, he did two years of research at the University of Ghent, Belgium, and he also holds a Master of Business Administration degree. In 1965 he started his career at Fina Engineering and after occupying general management positions at different companies, he joined Union Minière in 1996.

Hugo Vandamme - Mr. Vandamme is the President and Chief Executive Officer (CEO) of Barco Group since 1989, and will hold the same position at New Barco. After having obtained a MSc in electronic engineering and a MSc in industrial management (1969) and after a short experience in an industrial environment, he started with Barco in 1974. Mr. Vandamme occupied different management positions in manufacturing, marketing and sales and product management and was appointed as CEO of Barco Industries in 1983.

Erik Dejonghe - Mr. Dejonghe is the Senior Vice President and Chief Operating Officer of Barco Group, and will hold the same position at New Barco. He started with Barco in 1982. Before, he worked several years as a researcher at the University of Ghent, Belgium, and occupied different senior positions in service, marketing and sales with a major company active in electronics. Mr. Dejonghe holds a Doctor degree in applied sciences and has a Bachelor of Science degree. Mr. Dejonghe will also be Director of BarcoNet. Further reference is made to Section 5.1 of Chapter II of this prospectus.

Antoon Van Petegem - Mr. Van Petegem is Vice-President and Chief Financial Officer of Barco Group, and will hold the same position at New Barco. After his studies as a commercial engineer (1970), he occupied different financial senior management positions. In 1986, he started with Barco as Chief Financial Officer and Controller. Since 1989, he is Secretary of the Board of Directors. In his position of CFO, Mr. Van Petegem is, amongst other things, responsible for corporate finance, all financial and accounting departments worldwide, the legal department, internal audit and acquisitions. Mr. Van Petegem will also be Director of BarcoNet. Further reference is made to Section 5.1 of Chapter II of this prospectus.

Bernard Dursin - Mr. Dursin is Senior Vice-President of Barco Group, and will hold the same position at New Barco. He is responsible for managing all subsidiaries in Europe and Asia. After a commercial education, completed during his career with different management courses, he joined Barco in 1969. He took up different commercial top positions at Barco. Mr. Dursin has been closely involved in the commercial expansion from, amongst other things, the projectors' activity and the American sales organization.

Donald Defoort - Mr. Defoort is Vice-President Human Resources and Corporate Affairs of Barco Group, and will hold the same position at New Barco. He is responsible for the human resources management, company estate and public relations. He started with Barco in 1973. Mr. Defoort, holds a degree in social sciences and a postgraduate degree in business management.

Bruno Pairon - Mr. Pairon is Vice-President of Barco Group and Managing Director of Barco Graphics, and will hold the same position at New Barco. He holds a Master of Science in electronic engineering (specialty computer science) (1979) and a MBA from the University of Ghent, Belgium. For more than 11 years, he took up various positions in engineering and engineering management in a large global communications company. He joined Barco in 1990. After various senior positions, Mr. Pairon became Managing Director of Barco Graphics in 1998.

Frans Claerbout - Mr. Claerbout is Senior Vice-President of Barco Group and Managing Director of Barco Projection Systems, and will hold the same position at New Barco. During a 27 year career within Barco, he occupied different management positions in research and development and general management. Mr. Claerbout holds a Bachelor of Science degree of the Technical College at Ostend, Belgium, and a Management degree at the University of Ghent, Belgium.

Luc Vandenbroucke - Mr. Vandenbroucke is Vice-President of Barco Group and Managing Director of BarcoView, and will hold the same position at New Barco. He started with Barco in 1975 and occupied different

165 positions in marketing and sales, specifically focussed on starting up and internationalizing industrial products. Before taking up his current position, he was responsible for New Business during several years. Mr. Vandenbroucke holds a degree in commercial engineering business economics and informatics (1973).

Bernard Cruycke - Mr. Cruycke is Vice-President of Barco Group and Managing Director of BarcoVision, and will hold the same position at New Barco. After his education as an industrial engineer in textile and electronics, he joined Barco in 1973. He held different senior positions in research and development and sales and services. Mr. Cruycke was involved in the start-up of the first American activity for Barco Group in 1979.

Patrick Luyssen - Mr. Luyssen is General Manager of Barco Interconnection Technologies, and will hold the same position at New Barco. After having finished his agricultural engineering studies and having obtained a degree in industrial management, he started with Barco in 1988. Mr. Luyssen headed the operations division of BarcoVision. Thereafter, he coordinated the introduction of the Barco ERP program.

Willy Maes - Mr. Maes is Vice-President of Barco Group and Managing Director of Barco Special Components, and will hold the same position at New Barco. After his industrial engineering studies, he started with Barco as a development engineer (1967). Later on, he switched to Barco's manufacturing department and was responsible for the introduction of a quality control system and the expansion of a production organization meeting the highest quality standards. In his current position, Mr. Maes heads the external subcontracting activity and the delivery of components to all Barco activities.

Dany Claeys - Mr. Claeys is President of Barco America, and will hold the same position at New Barco. After having finished studies as civil engineer and business engineer at the University of Ghent, Belgium, and several years of experience with other companies, he joined Barco Group in 1983. After a short training period, he took up the responsibility for the BarcoVision activities in the United States. Since 1993, Mr. Claeys heads all Barco operations in the United States.

Frédéric Verhaeghe - Mr. Verhaeghe is President of Barco Asia, and will hold the same position at New Barco. He holds a Bachelor of Diplomatic Sciences degree (1983) and a Bachelor of European Law degree (1984). He acquired his first professional experience in a diplomatic and, later on, in a banking function. In 1989, he joined Barco and was responsible for the creation and expansion of the Asian liaison office in Hong Kong. In 1995, Mr. Verhaeghe was appointed Managing Director and later on President of Barco Asia.

Jacques Bertrand - Mr. Bertrand is President of Barco Japan, and will hold the same position at New Barco. He started with Barco in 1986 after having finished studies in industrial engineering. He acquired his first experience in sales and services and, after a number of years, became responsible for the start up and expansion of Barco Graphics in Singapore. At the beginning of 2000, Mr. Bertrand was appointed as President of Barco Japan.

André De Clercq - Mr. De Clercq is Vice-President Research and Development, and will hold the same position at New Barco. During his 35 year career, he has been continuously involved in the technological innovation process at Barco. Mr. De Clercq holds a Bachelor of Science degree and was a visiting scholar and research associate at the Stanford University, United States of America

JP Tanghe - Mr. Tanghe is Vice-President and Director Corporate Communications and Investor Relations of Barco Group since 1998, and will hold the same position at New Barco. After a career as a consultant in marketing and human resources, he started with Barco in 1991 as manager human resources and general affairs of Barco Graphics. In 1995, he was appointed international human resource manager for Barco Group. Mr. Tanghe holds a degree in philosophy and literature (1973).

Emile Schamp - Mr. Schamp is Vice-President Information Technologies of Barco Group, and will hold the same position at New Barco. After his studies in civil electro-technical engineering, he obtained a Bachelor in Informatics degree (1980). He took up several senior management positions in informatics with different

166 companies. Mr. Schamp joined Barco in 1995 and is since 1996 responsible for information technologies of Barco Group.

Bernard Versavel - Mr. Versavel is Vice-President Operation Control, and will hold the same position at New Barco. He is in charge of the coordination of operations, investments and purchasing. He holds a degree in civil engineering and a postgraduate degree in business management. He joined Barco in 1963 after one year of professional experience in the United States. During his career, Mr. Versavel had different general management positions within Barco.

5.2.2 Board Committees

Following the demerger of Barco, the Board of Directors of New Barco will set up the following committees:

· Remuneration Committee

The Board of Directors of New Barco will set up a remuneration committee (the "Remuneration Committee") of which at least one member will be an "Independent Director". The Chairman of the Board of Directors will also be part of this committee. Executive Directors cannot be members of the Remuneration Committee.

· Audit Committee

The Board of Directors of New Barco will set up an audit committee (the "Audit Committee"), the majority of the members of which will be "Independent Directors".

· Stock Option Committee

It is expected that the members of the aforementioned committees will be appointed by, and from amongst, the Board of Directors of New Barco following the demerger of Barco.

5.3 EXECUTIVE REMUNERATION AND REMUNERATION OF THE STATUTORY AUDITOR ON A CONSOLIDATED BASIS

5.3.1 Board of Directors

The extraordinary general shareholders' meeting that will decide on the demerger of Barco and the incorporation of BarcoNet and New Barco, will be proposed to determine the overall gross remuneration of the Board of Directors of New Barco at EUR 580,071, excluding the overall remuneration of the members of the Remuneration and Audit Committee (see also 5.3.3 below). Based on information available at the date of the prospectus, the Directors will own in the aggregate 19,546 shares and 120,379 warrants and other options of New Barco upon the Closing of the Demerger. New Barco does not exclude that additional warrants of New Barco will be granted to the directors in the near future.

5.3.2 Key Management

Barco has concluded management and/or employment agreements in the past with nearly all key executives amounting to EUR 3,073,948 in the aggregate. Each key executive is also entitled to a variable remuneration to be paid in March of each year. The amount of this remuneration is based on the performances of each manager over the past fiscal year, according to the formula "A" x "C", whereby "A" stands for a sum formally agreed upon with each beneficiary, and "C" represents a factor ranging between 0 and 2. The factor "C" will primarily be determined in view of the results obtained in the realization of the profit plan and the strategic plan of the

167 respective activities of New Barco concerned. If for all key managers the factor "C" would be the maximum (2), the total variable remuneration paid could reach 60 % of the annual aggregate fixed gross remuneration. The rights and obligations under these management and/or employment agreements will, upon Closing of the Demerger, be transferred to New Barco. Based on information available at the date of the prospectus, the key executives will own in the aggregate 82,285 warrants and other options of New Barco upon the Closing of the Demerger.

5.3.3 The Remuneration, Audit and Stock Option Committee

It will be proposed to determine the overall gross remuneration of the members of the Remuneration and Audit Committee at respectively EUR 14,874 and EUR 29,747 for the first year. The members of the Stock Option Committee will not receive any special remuneration.

5.3.4 Auditor

The remuneration of the statutory auditor, Ernst & Young Bedrijfsrevisoren C.V., represented by Mr. Ludo Swolfs and Mr. Marc Van Hoecke, to be elected for a term of three years until the annual general shareholders' meeting to be held in 2003, will amount to EUR 396,629 per annum.

5.4 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to an agreement dated December 17, 1990, by and between Barco and GIMV N.V., GIMV N.V. provides advisory and other services which may relate and be relevant to the general management of Barco, particularly in respect of legal issues and optimal acquisition structures. Upon Closing of the Demerger, the management agreement will be allocated to New Barco.

5.5 CORPORATE GOVERNANCE CONSIDERATIONS

New Barco shall continue to respect and apply the guidelines on corporate governance applied by Barco and the rules and recommendations proposed by the Belgian Banking and Finance Commission and the Executive Committee of Euronext Brussels.

The key principles of corporate governance that will be applied by New Barco, are similar to those that will be applied by BarcoNet. Further reference in this respect is made to Section 5.7 of Chapter II of this prospectus.

As to the indemnification of Directors, executives and managers and potential conflicts of interest, the same principles that apply in respect of BarcoNet, will also apply to New Barco. Further reference is therefore made to Section 5.4 and 5.5 of Chapter II of this prospectus.

168 LEXICON

The lexicon set forth below contains a summary and short explanation for information purposes only of technical terms of art and jargon frequently used in this prospectus. It does not purport to be complete nor should it be construed as an exhaustive scientific explanation of the terms concerned.

ATM (Asynchronous Transfer A universal transmission standard for high-bandwidth transmission Mode): of voice, video and data.

ATSC (Advanced Television Systems A United States organization issuing industry standards for digital Committee): and high definition television (DTV and HDTV) in the U.S. and other countries.

Audio Codec: BarcoNet's encoder / decoder (codec) to compress and send radio programs over fixed and wireless transmission networks while maintaining quality of the transmitted data.

Backbone: The main artery or link for a private or public network, to which other, tributary networks are connected. Typically, a backbone contains significant bandwidth capacity.

Bandwidth: The information carrying capacity of an optical fiber.

Coax Cable: A cable consisting of a central (often copper) conductor surrounded by and insulated from another conductor. It is the standard cable used in current cable systems, giving greater channel capacity, but less than optic fiber.

Conditional Access: a system with which cable TV subscribers can obtain access to cable TV services, subject to payment for these services.

Digital Satellite News Gathering: An application to send signals digitally from mobile studios, via satellite, to a TV studio, often used for the fast distribution of TV images of major news or sports events.

DVB-T standard (Digital Video A European standard for digital TV broadcasting. Broadcasting):

DAVIC (Digital Audio-Visual An international organization the main purpose of which is to Council): promote the success of emerging digital audio-visual applications and services by providing internationally agreed specifications with respect to open interfaces and protocols maximizing interoperability across countries and applications/services.

DOCSIS (Data Over Cable Service An international standard defining interface requirements for cable Interface Specification): modems at the subscriber's end and the cable modem termination system at the headend side of a network for high-speed date distribution over cable networks.

DSL (Digital Subscriber Line): A network system to carry both voice and data signals at the same time, in both directions, as well as signaling data used for call

169 information and customer data.

DWDM (Dense Wavelength Division A technique used to combine laser light with different colors or Multiplexing): wavelengths on one optic fiber in order to increase the data transmission capacity of the fiber optic cable.

Flexigrid: A printed circuit board of "PCB" with fixed and flexible parts.

HDTV (High Definition Television): Television with sharper images than current standard definition television.

Headend: An installation or device in which broadband services are received and processed for transmission on hybrid fiber coax or "HFC" networks.

HFC network (Hybrid Fiber Coax A network for delivering content (voice, video and data services) to network): the home via the coax cable, whereby fiber optic cables are used for long-haul transmission over the network to the nodes on the backbone, and (usually copper) coax cables are used for short-haul delivery to the individual homes.

Hub: A main gateway on the backbone of a cable network, receiving content from the headends and distributing content to the respective nodes on the network.

IP (Internet Protocol): A protocol between networks requiring that routed information contains addressing information and some control information.

ISP (Internet Service Provider): An operator of a data communications network that provides communication links to the Internet and the World Wide Web (WWW) for its users.

LMDS (Local Multi-point A low power, (very) high frequency, local and bi-directional micro- Distribution Service): wave distribution system for information signals.

MMDS network (Multi-channel A wireless cable system capable of transmitting more than 30 Multi-point Distribution Service channels of television programming (including pay-per-view), high- network): speed computer data, high definition TV and facsimile services

MPEG (Moving Picture Experts An organization creating industrial standards for data reduction or Group): compression of video signals. Industrial standards created by MPEG include "MPEG2", which is widely used standard to define access rates, compression and conditional access to video content.

Multiplexing: Combining two or more signals or information streams (data) into one single channel for transmission. A multiplexer (or mux) combines several signals onto one single channel or line.

Node: A major distribution or branching point on a network serving a sector of a cable franchise.

Optic Fiber: A very thin, pliable tube of glass or plastic to carry information as pulses of light on wide bands or frequencies, consisting of a core

170 (inner region), a cladding (outer region) and a protective coating.

PCB (Printed Circuit Board): A platform in which connections between standard and other electronic elements that can be placed on the platform, are printed. Printed circuit boards form the base element of most electronic equipment.

PPV (Pay-Per-View): A service whereby individual programs (usually major sports events or blockbuster movies) are delivered to the customer subject to the payment of a specific fee other than the monthly subscription fee.

SDH (Synchronous Digital A protocol and data format, similar to SONET to transport a wide Hierarchy): range of signals or digital communication services on fiber optic networks.

SMD (Surface Mounting Device): A device or component that is mounted or placed on a printed circuit board.

SONET (Synchronous Optical A North American protocol and data format to transport a wide network): range of signals or digital communication services on fiber optic networks.

PSTN (Public Switched Telephone An integrated telephone network available for public use, consisting Network): of switching, transmission and access equipment, as well as operation support systems for network management.

Terrestrial wireless TV network: The traditional TV network that uses wireless transmission of signals, which are received by end-users through roof-top antennas.

Thickfilm: An electronic circuit printed on a ceramic carrier.

VOD (Video-On-Demand): A service whereby TV programs are transmitted to a customer exactly at the time chosen by him.

VoIP (Voice over Internet Protocol): A specialized data transmission code or protocol to send audio and voice signals over the Internet.

Wire (and die) bonding: A method used in the manufacturing of electronic chips, whereby an individual piece of processed silicon (which is forms the primary material for the chip) is electronically connected to a surface or packaging by means of metal wires.

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