Centrotec SE

Consolidated and annual report 1999

CENTROTEC HOCHLEISTUNGSKUNSTSTOFFE AG

1 1 History of the company

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

2 Overview Consolidated in DM mn 1999 1998 change in %

Sales total 34,3 26,5 29% Engineering plastics (Semi-finished and prefabricated plastic products*) 22,2 22,3 -1% Plastic Systems (gas flue systems) 13,5 4,9 174%

Earnings EBIT 4,0 -0,2 Earnings before tax 3,9 -0,9 Net income 3,4 -1,1 Net income** 3,4 2,5 36% Earnings per share (3,6 Mill.shares; DM) 0,96 -0,32 Earnings per share (3,6 Mill.shares; DM)** 0,94 0,69 36%

Employees Number (Average) 101 87 16% Personnel expenses 7,6 6,1 26% Sales per employee 0,34 0,31 10% Sales per industrial employee 0,40 0,37 8%

Assets Fixed assets (excl. financial assets) 6,9 5,5 25% Current assets 16,6 20,0 -17% - therof liquid funds 1,3 10,7 -88% Total assets 39,8 25,7 55%

Cash flow/Investments Cash flow I** 4,6 3,3 39% Depreciation 1,2 0,7 56% Investments (without aquisition) 2,6 2,2 17%

* Internal sales with gas flue systems 1999 1,3 Mill. DM, 1998 0,7 Mill. DM.

** 1998 adjusted by one-off expenses incurred by the IPO.

Courtesy Translation This report is a courtesy translation. Legally valid is only the original German text. CENTROTEC is not liable for mistakes due to the translation. (Figures are written in German manner; e.g. DM 1.000,000 = DM one thousand)

3 Report of the supervisory board for fiscal year 1999

The Supervisory Board is able to look back on a very their unqualified certification thereof.The auditors’ re- successful fiscal 1999.The group recorded its highest port, a copy of which was sent to each member of the sales and profits in its history.The potential for growth Supervisory Board, was discussed at length in the mee- that was anticipated above all for new types of plastic ting of the Supervisory Board which had the purpose gas flue systems has materialised. As a result of the ac- of approving it.The auditors attended this meeting and quisition of Ubbink Systemtechnik at the end of the fi- reported on the principal findings of their audit.The nancial year, the company has entered a new dimensi- Supervisory Board examined the annual financial state- on.We congratulate the Managing Board and the ma- ments, management report and consolidated financial nagement of the operative companies on this success, statements, including group management report, as and in particular all employees, who have once again drawn up by the Managing Board, as well as the de- shown exceptional commitment. pendence report.The examination by the Supervisory Board revealed no cause for objection.The annual fi- During the 1999 fiscal year, the Supervisory Board was nancial statements issued by the Managing Board were informed regularly and comprehensively of the com- granted the unqualified approval of the Supervisory pany’s business progress, and in particular of the deve- Board, and are thus established pursuant to § 172 Sen- lopment in its sales, orders, earnings, net worth and fi- tence 1 of AktG (German Stock Corporation Law). nancial situation and of the company’s discernible risks and opportunities, through both written and oral re- In accordance with the statutes of incorporation, the ports.The Supervisory Board has, in accordance with le- Managing Board and Supervisory Board have resolved gal requirements and the articles of incorporation, per- to allocate the amount of DM 1,015,251.27 to the reve- formed the tasks which fall due to it, and has in particu- nue reserves from the net income for the year of DM lar regularly monitored and advised the Managing Bo- 2,138,548.70 and the accumulated losses brought for- ard. On the basis of the Managing Board’s reports, the ward of DM 108,046.16, leaving a distributable profit commercial position and progress of the company, to- for the year of DM 1,015,251.27.The Supervisory Board gether with its risks, were regularly discussed with the endorses the proposal by the Managing Board to allo- Managing Board.Wherever ratification by the Supervi- cate the distributable profit to the revenue reserves.We sory Board was required, the proposals of the Mana- would like to thank all employees and the Board of Ma- ging Board were studied and approved by the mem- nagement for their deep commitment throughout in bers of the Supervisory Board.The topics discussed at fiscal 1999. the meetings of the Supervisory Board focused on the fundamental business policies of the parent company and its subsidiaries. Marsberg, March 2000

The accounts, annual financial statements, management report, consolidated financial statements and group management report for Centrotec Hochlei- The Supervisory Board stungskunststoffe AG as at December 31, 1999 have been examined by the auditors, Arthur Andersen Wirt- Guido A. Krass schaftsprüfungsgesellschaft, Hanover, who have given (Chairman)

5 Group management report for Centrotec Hochleistungskunststoffe AG, Marsberg for the 1999 fiscal year

The Group headed by Centrotec Hochleistungskunst- sing boilers, whereas plastic systems are resistant to stoffe AG is able to look back on a highly successful such effects.This fuelled demand for plastic systems. 1999 fiscal year.We were able to achieve an extensive Following the changeover by innovative small and me- market breakthrough in Germany in our expanding bu- dium-sized boiler manufacturers to plastic in recent siness field of plastic gas flue systems, in particular years, the larger manufacturers are following suit in ad- thanks to securing exclusive supply agreements with opting plastic technology, now that it is fully mature. leading boiler manufacturers.We made considerable Plastic gas flue systems for condensing boilers are cur- progress in building up the structures and investments rently in widespread use only in Germany, Austria and that this enormous growth entails. Finally, we entered Switzerland. However, even in these countries, metal sy- an entirely new dimension towards the end of the year stems have only been supplanted to less than 50 %. with the takeover of Ubbink Systemtechnik, a move which represented a quantum leap in raising us to the The market for condensing boiler technology, on which status of Europe's leading supplier of gas flue systems. our gas flue systems are based, is likewise enjoying dy- The price of Centrotec Hochleistungskunststoffe AG's namic growth. Following the introduction of tougher shares mirrored these achievements, rising by 71.9 % pollution controls in Germany, this significantly more from EUR 57.00 on April 1, 1999 to EUR 98 on Decem- economical and pro-environmental heating technolo- ber 31, 1999 (prior to splitting at a ratio of 1:3). gy is being chosen in preference to traditional heating systems. As in recent years, this will once again produce The situation, risks and future expectations of our com- growth in the order of 30 % in Germany alone. As a re- pany are presented individually below. sult of the substitution effect within the field of condensing boiler technology, signalling a shift from metal A. Business progress to plastic systems, we anticipate market growth for plastic systems in the order of 50 % to 100 % over the next 1. Development of the branch and the general two years in Germany.The emphasis of growth will economy – weak first half followed by dynamic then shift to other European markets, where the ener- second half gy-saving condensing boiler technology on which our The companies within the group headed by Centrotec systems are based is still in its infancy in view of lower Hochleistungskunststoffe AG are active in the markets environmental awareness. for plastic gas flue systems and engineering plastics. Temporary first-half slump in demand for investment Sharp rise in demand for plastic gas flue systems in goods now overcome Germany This new type of plastic gas flue system achieved a ge- Engineering plastics components are destined primari- neral market breakthrough in Germany last year. In ad- ly for the investment goods market.This sector was dition to product benefits such as ease of installation and environmental compatibility, it was undoubtedly to our advantage that it became increasingly clear to the market that traditional metal systems are susceptible to corrosion in conjunction with modern conden-

6 characterised by marked reticence in the first half of ment was clinched with the European market leader 1999, among other things as a result of the change of for boilers.We in addition attracted eight further large, government in Germany.This temporary slump had an medium and small new customers. Finally, the volume adverse effect on our business. In the second half of of sales to existing customers rose on account of the the year, our business gathered considerable momen- expanding market. tum; we believe this is attributable on the one hand to the recovery in the economy, and on the other to the We once again expect sales to grow by almost 100 % in sales campaign which we launched at the start of 1999. 2000. On the one hand, the market will continue to We expect the economy to become even more grow at a similar rate, and on the other hand we look buoyant in this sector in 2000, with the expectation of forward to further growth from the new customers lower relief for companies bolstering investment spen- that we have already secured, as well as from other po- ding in particular. tential customers.

2. Development in sales and orders – Development in sales for engineering plastics stable, vigorous growth despite lower prices for raw materials and retail pri- Consolidated sales rose by 29.4 % in the year under re- ces – trend positive view, from DM 26.5 million to DM 34.3 million. Gross Sales for the Engineering Plastics segment fell short of performance actually rose by an even higher 38.1 %, our expectations, declining by 0.8 % from DM 22.3 mil- from DM 27.3 million to DM 37.7 million. Particularly in lion to DM 22.2 million (including internal sales of pla- the light of the weakness of the economy as a whole, stic gas flue systems of DM 0.7 million, as against DM this highly satisfactory situation is attributable to the 1.3 million), but nevertheless remained largely stable. steady development in sales for engineering plastics, However, the raw material prices for plastic fell consi- despite the temporary market slump, and a sharp rise derably in 1999, in specific by around 20 % for the prin- in sales of plastic gas flue systems. cipal grades we use.The lower prices we are able to secure on the purchasing side are traditionally passed on Over 170 % increase in plastic gas flue systems to the customer, as are price increases. Although this Sales of plastic gas flue systems rose by 174 % in the development has, on the face of the matter, led to a fiscal year, from DM 4.9 million to DM 13.5 million.This marginal sales decline, following adjustment for the fall increase in sales is attributable to healthy develop- in prices, sales for 1999 would have risen. ments in three areas. First, an exclusive supply agree-

CENTROTEC AG AbgassystemePlastic gas flue KunststoffhalbzeugeEngineering undPlastics* -fertigteile* TurnoverUmsatz TurnoverUmsatz UmsatzTurnover Mio Mio Mio DM DM DM 34,3 30 12 13,5 20 22,3 22,2 19,5 26,5 22,8

15 6 10 4,9 3,3

1997 1998 1999 1997 1998 1999 1997 1998 1999 * Internal saleswith gas flue systems 1999: 1,3 Mio. DM, 1998: 0,7 Mio. DM 7 The development in sales moreover suffered from the basis is secure.To optimise our ability to supply goods weakness of the market in the first half of the year, as to our customers and in response to the rise in sales, the figures for the two half-years reveal.Whereas sales we have built up our stock level. revealed a year-on-year decrease of 5.8 % over the first six months, they rose by 4.5 % in the second half of the 5. Investments – extended capacity for prefabrica- year. Bearing this in mind, the sales trend in this seg- ted parts and start of construction project for ment is clearly positive. On the basis of our past experi- new logistics centre ence and the level of incoming orders in the first two As we have built up an intelligent network of suppliers months of 2000, we believe that double-digit growth around Centrotec, the impact on our capital of our ra- for 2000 is probable. pid growth has been relatively modest. In 1999, a total of DM 2.6 million was invested in tangible assets.The 3. Products and production – focal points of our investment activities were tools for further progress in efficiency the manufacture of specialised components, some of Production operations benefited from advances in effi- which are patented, for plastic gas flue systems, and ciency. For example, sales per blue-collar worker rose the technological broadening of our Prefabricated by 8.1 % from DM 373,600 to DM 403,900.This impro- Parts Division. For example, Centrotec was able to pre- vement is attributable to more efficient processes, the sent its new five-dimensional processing technology at greater level of bought-in pre-assembled components, the Nortec exhibition early in 2000. and investments in machinery. In the year under review, a quality audit was likewise conducted with high- Centrotec made what is undoubtedly the most signifi- ly successful results (all operative group companies ha- cant financial investment in the history of the company ve ISO accreditation). in acquiring Ubbink Systemtechnik at the end of 1999. In view of the strategic and financial significance of this 4. Procurement – purchasing achievements move, extensive due diligence investigations were car- The adjusted materials ratio for the group (cost of raw ried out and the company valued.The valuation was materials less change in inventories as a percentage of examined by the auditors Arthur Andersen.The audi- sales) fell from 47.1 % to 46.2 %.This figure was affec- tors confirmed that the value of the company is at least ted by the lower raw material prices, which were pas- equivalent to the value of the amount being paid.The sed on to our customers in the same way that price in- takeover was ratified by the shareholders at the Extra- creases are.We were moreover able to secure more ad- vantageous purchasing terms. On the one hand, design improvements brought improvements in efficiency for our suppliers, and on the other hand we were also able to obtain price discounts by buying in greater bulk.The change in the sales mix had an opposite effect, as the materials ratio for gas flue systems is generally higher.

As there are at least two sources of supply for all key groups of materials, we can assume our procurement

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

9 ved an added boost from the German government's success, coupled with increasing demand from end drive to cut CO2 emissions. In this respect, environ- users, helped our plastic gas flue systems to achieve mental protection is actually contributing towards our their market breakthrough in the course of the year. growth. The impressive growth rate rendered it necessary to extend our internal structures in this field of business. 9. Research and development – The completion of the new logistics centre by mid- new products in the gas flue sector 2000 will constitute a further landmark for this busin- Innovative new products were successfully launched ess area. on the market in the past fiscal year. Examples include a novel, translucent gas flue system which is not only In the field of engineering plastics, we were able to ro- attractive to look at, but also promotes reliability of fit- und off our Europe-wide presence by securing a sales ting because the position of the seals is visible from partner in Spain and Portugal. In this business area, the outside, and a new design of roof duct with mini- which accounted for 45 % of exports in 1999, we have mum flue-gas recirculation, that is resistant to icing-up close contractual ties with our sales partners in France, and is distinguished from competitor products by its Switzerland, Scandinavia and Benelux.There are also innovative longitudinal expansion element. dealers for these products in many other countries.

The main aspects of current research and development However, this sales channel is not suitable for sprea- work are systems for low-energy houses, cascade sy- ding our sales of plastic gas flues throughout Europe. stems for the connection of several boilers that can be As gas flue systems are everywhere subject to stringent switched on and off for optimum energy utilisation, state controls, which may nevertheless be interpreted and a radically different design of gas flue system differently from country to country, we need to have which is much easier to fit.We have established contac- our own experts in situ in the core consumer countries. ts with various research bodies to ensure that we are We have established this basis through the takeover of involved in the development process of fuel technolo- Ubbink Systemtechnik. Ubbink has already been opera- gies from an early stage. ting successfully in the sector for gas flue systems for many years, via its national subsidiaries in the Nether- One important advantage for the development team is lands, Belgium, Great Britain and France. its physical proximity to the semi-finished products and prefabricated parts specialists, who have built up a The products and market openings of Ubbink and Cen- unique resource of expertise in the handling of high- trotec complement each other well.Whereas Centrotec temperature polymers over more than twenty years. supplies only plastic systems for gas condensing boilers to boiler manufacturers, Ubbink has a broad range 10. Important developments in the fiscal year – of products for all forms of heating, and supplies both now European leader for plastic gas flue boiler manufacturers and retail organisations under its systems established brand name.The plastic system in Ubbink's At the start of the past fiscal year, we were able to re- range has been supplied exclusively by Centrotec since port an exclusive agreement, due to run for several 1999. years, with the European market leader for boilers.This

10 In addition to gas flue systems, Ubbink is also a leading 12. Financial position – equity ratio of 50 % supplier of plastic ventilation systems and plastic lighting and roofing systems in the above countries.We The group's equity rose by DM 3.4 million in the fiscal currently regard the lighting/roofing area predomi- year on account of accumulated profits, from DM 16.3 nantly as a cash flow generator, as Ubbink has already million to DM 19.7 million.The equity ratio at the end achieved a high level of market penetration in its pro- of the fiscal year was 50 % of the balance sheet total. duct areas.The ventilation systems area, which has like- Amounts owed to banks accounted for 35 % of the ba- wise already achieved a significant market position, of- lance sheet total. fers fresh potential for growth in the medium term: once the scope for saving energy through insulating and The capital structure, which is still too equity-intensive, optimising heating systems has been exhausted, the will change with the first-time consolidation of Ubbink. emphasis of efforts to save energy will shift to intelli- By mid-200, we expect that equity and funds with an gent ventilation systems. Ubbink positioned itself in equity character (secondary, liable vendor loan) will this sector early on, with a hybrid ventilation system. amount to approx. 30 % of the balance sheet total, and amounts owed to banks to about 45 %. No capital in- Over and above reaping synergy benefits – both in the crease was therefore required for the takeover of Ub- market for gas flue systems and for purchasing and bink.The equity ratio attained is within our target ran- production operations – the acquisition of Ubbink ge. In the interests of profitability, in the medium term opens up an entirely new dimension to our expansion. we are aiming for an equity ratio of 25 – 30 %. In the Whereas sales in the past fiscal year totalled DM 34.3 event of any significant balance-sheet extension as a million, we expect our sales volume for 2000 to be in result of a takeover, we will increase equity accordingly. excess of DM 120 million.This represents an increase of approx. 250 %. Earnings will likewise enter a new di- 13. Affiliated company – arm's-length principle mension. as Ubbink's company have traditionally been Legal transactions with companies in which the Chair- highly profitable. man of the Supervisory Board and members of his fa- mily hold an interest were conducted out in the fiscal B. Situation year. As a precautionary measure, a dependence report was therefore issued by the Managing Board. 11. Net worth position – further fixed assets acquired ”Concluding remark from the dependence report: As a result of the company's high level of investment, Pursuant to § 312 Para. 3 of German Stock Corporation tangible assets were bolstered by 25.3 % net, from DM Law, we declare that, on the basis of the circumstances 5.5 million to DM 6.9 million.The working capital was known at the time when legal transactions with affilia- also topped up in line with sales. Inventories and ac- ted companies were conducted, our company received counts receivable rose by 63.8 %, from DM 9.3 million adequate consideration for each legal transaction and to DM 15.3 million, though the reporting date has an was not placed at a disadvantage.“ arbitrary effect in view of daily fluctuations.

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

PreGewöhnliche Tax Profits JahresüberschußAfter Tax Profits Geschäftstätigkeit nach Steuern Mio Mio DM DM 4 3 3,4 3,9 2,5* 2,8* 2 1,5

1,4 1,0

1997 1998 1999 1997 1998 1999

* Adjusted by one-off expenses incurred by the IPO

12 hand following the IPO, and the temporarily reduced li- dents and plant breakdowns. All plant is moreover in- nes of credit. sured in line with its value. However, the failure of criti- cal plant could result in noticeable losses. C. Key risks Our growth and business progress were very positive, In the IT sector, no problems arose as a result of the da- and we are able to look to the future with considerable te change; classic data safeguarding measures are ta- optimism. During the past fiscal year, we nevertheless ken on an ongoing basis.We introduced a new compu- considered in depth the risks with which our company ter system for goods management and bookkeeping in is confronted. the fiscal year under review. Problems were encounte- red with its introduction, but we now regard these as Our most resounding success simultaneously led to a solved. However, the possibility cannot be excluded relevant risk on the market side: our newly secured lar- that further problems that have not yet been identified gest customer accounted for 24 % of sales volume in will arise, or that problems already solved will recur. Li- 1999. However, this dependency will be reduced follo- kewise we cannot exclude the possibility that a pro- wing the acquisition of Ubbink, as the largest customer blem in the IT sector could lead to a loss of data, despi- is likely to account for only 10 % of total sales in 2000. te ongoing data safeguarding, causing considerable damage. A degree of dependence on the fortunes of the market for technical semi-finished products and prefabricated As the company is still relatively small, there is moreo- parts likewise transpired in the past fiscal year. Howe- ver a degree of dependence on certain key employees. ver, the positive progress in the second half of the year, However, as we expand so will our base of highly quali- and our past experience even more so, demonstrate fied employees, with the result that this risk will gra- that market fluctuations can be overcome relatively dually dwindle. swiftly thanks to the spread of potential applications. The newly acquired Ubbink Group is likewise depen- The project that is under way on the construction of a dent on the fortunes of the market to some degree, new logistics centre could likewise entail risks. Pro- though it has so far always shown a profit even in years blems could in particular take the form of delays in when the economy in general has been weak. completion, or could arise upon occupation of the new premises. All measures are currently proceeding accor- Thanks to our technology, quality and value for money, ding to schedule. A further risk could arise in connec- we have attained a solid market position in all business tion with the purchase of the land purchase; a notari- segments. It is nevertheless conceivable that new mar- sed purchase agreement exists but no entry has yet ket entrants, more intense competition, increased con- been made in the land registry; we expect that it will sumer power and substitute products could lessen our be made within the usual processing time scale. Due to operational efficiency. pressure of time, we have therefore already commen- ced construction work. Internally, we perceive potential risks in the production sector.We implement suitable safety regulations and Now that we have invested the funds received as a re- take precautionary measures to prevent possible acci- sult of the initial public offering, our lower equity ratio

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

14 We aim to add momentum to our organic growth over the next few years through strategic acquisitions. In this light, we believe that our company will continue to make very healthy progress.

Marsberg, February 24, 2000

CENTROTEC Hochleistungskunststoffe AG

Hans-Lothar Hagen Dr. Alexander Kirsch

Chairman of the Managing Board Board Member for Finance

15 Consolidated Balance for the 1999 fiscal year

CENTROTEC Hochleistungskunststoffe AG, Marsberg Consolidated Balance sheet at december 31, 1999

ASSETS 1999 1998 DM DM

A. FIXED ASSETS I. Intangible assets Industrial rights and similar rights 215.154,00 213.862,00

II. Tangible assets 1. Land and buildings 3.440.013,54 3.474.454,54 2. Technical equipment and machinery 2.243.126,00 1.462.968,46 3. Other equipment, operating and office equipment 617.490,00 500.368,00 4. Paymnents on account 590.350,35 49.800,00 6.890.979,89 5.487.591,00

III. Financial assets Shareholdings in affiliated companies 16.030.148,21 0,00 23.136.282,10 5.701.453,00

B. CURRENT ASSETS I. Inventories 1. Raw materials, consumables and supplies 960.761,57 356.010,52 2. Work in process 2.162.066,78 998.841,55 3. Finished goods and merchandise 4.747.165,76 3.852.184,32 7.869.994,11 5.207.036,39

II. Receivables and other assets 1. Trade receivables 3.959.093,76 3.527.154,69 2. Receivables from affiliated companies 3.227.627,85 0,00 3. Other assets 257.266,74 612.824,32 7.443.988,35 4.139.979,01

III. Cash-in-hand, postal giro and bank balances 1.326.043,93 10.672.204,76

C. PREPAID EXPENSES 4.738,00 321,42 39.781.046,49 25.720.994,58

16 EQUITY AND LIABILITIES 1999 1998 DM DM

A. EQUITY I. Subscribed capital 7.040.988,00 6.000.000,00 II. Capital reserve 20.259.012,00 21.300.000,00 III. Revenue reserves 1.058.299,17 43.047,90 IV. Consolidated net loss -8.614.875,83 -11.046.926,21 19.743.423,34 16.296.121,69

B. PROVISIONS 1. Provisions for taxes 259.796,57 17.479,11 2. Other provisions 979.500,00 1.117.010,00 1.239.296,57 1.134.489,11

C. LIABILITIES 1. Due to banks 13.901.480,04 6.089.329,93 2. Trade payables 3.822.578,50 1.187.572,52 3. Other liabilities 1.074.268,04 1.013.481,33 thereof taxes: DM 261,511.57 (previous year: DM 324,852.09) thereof relating to social security and similar obligations: DM 184,392.56 (previous year: DM 163,612.53) 18.798.326,58 8.290.383,78

39.781.046,49 25.720.994,58

17 Consolidated statement of income for the fiscal year 1999

CENTROTEC Hochleistungskunststoffe AG, Marsberg Consolidated Statement of income for the fiscal year 1999

1999 1998 DM DM

1. Sales revenues 34.329.115,13 26.528.047,71 2. Increase or decrease in finished goods 925.395,01 471.055,86 3. Own work capitalised 32.610,00 0,00 4. Other operating income 2.377.301,68 342.995,31 5. Cost of materials Cost of raw materials, consumables and supplies and of purchased merchandise -16.788.915,59 -12.972.202,57 Cost of purchased services -582.042,66 -434.630,50 6. Personnel expenses Wages and salaries -6.276.525,41 -4.968.636,80 Social security costs -1.368.866,26 -1.083.194,31 7. Depreciation on intangible and tangible assets -1.167.303,87 -742.567,26 8. Other operating expenses -7.491.681,76 -7.302.152,79 9. Other interest and similar income 326.030,76 12.580,75 10. Interest and similar expenses -397.586,01 -764.556,05

11. Result from ordinary operations 3.917.531,02 -913.260,65

12. Taxes on income -457.988,04 -216.369,53 13. Other taxes -12.241,33 -14.527,59

14. Consolidated net profit/net loss for the year 3.447.301,65 -1.144.157,77

15. Accumulated losses brought forward -11.046.926,21 -9.902.768,44 16. Allocation to revenue reserves -1.015.251,27 0,00 17. Consolidated net loss -8.614.875,83 -11.046.926,21

18 Cash flow statement

31.12.99 31.12.98 TDM TDM Net cash provided by/used in operating activities Consolidated net profit/-loss 3.447 -1.144

Corrections for reconcilliation of net income/-loss to income/expenses Depreciation on intangible assets 86 43 Depreciation on tangible assets 1.081 700

Cash flow I 4.614 -401

Decrease/Increase of assets, increase/decrease of liabilities Inventories -2.663 -972 Tradereceivables -432 -876 Other assets -2.872 -603 Provisions for taxes 242 -230 Other provisions -137 243 Trade payables 2.635 -88 Other liabilities 61 -1.709

Net Cash used in operating activities 1.448 -4.636

Net Cash used in investment activities Investments in intangible assets -87 -224 Investments in tangible assets -2.485 -1.949

Net Cash provided by/-used in financial activties Increase/-decrease of medium and long-term liabilities to banks -101 1.798 Increase of subscribed capital 0 2.500 Increase of subscribed capital by capital reserves 0 -1.000 Increase of capital reserve 0 21.300 Investments in financal assets -16.030 0 Increase/-decrease of prepaid expenses -4 0 -17.259 17.789 Increase/-decrease of liquid funds -17.259 17.789 Liquid funds at the beginning of the fiscal year 9.475 -8.314 Liquid funds at the end of the year -7.784 9.475 Composition of liquid funds at the end of the year Checks, cash-in-hand, postal giro, and bank balances 1.326 10.672 Short-term liabilities to banks -9.110 -1.197 -7.784 9.475

19 20 Notes to the consolitdated financial statements for 1999 fiscal year CENTROTEC Hochleistungskunsstoffe AG, Marsberg

A. GENERAL INFORMATION ON AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE COMPANIES INCLUDED IN CONSOLI- DATION 1. Consolidated companies At the balance sheet date, Centrotec Hochleistungs- kunststoffe AG, Marsberg, was the parent company pursuant to § 290 of German Commercial Code (HGB) for the following listed subsidiaries, which are thus also affiliated companies pursuant to $ 271 Para. 2 of HGB. The companies were included in the consolidated financial statements in accordance with the provisions applying to full consolidation.

Holding Name and registered office of the companys in % Centroplast Kunststofferzeugnisse GmbH & Co., Marsberg 100 Centrotherm Abgastechnik GmbH, Marsberg 100 Centroplast Kunststofferzeugnisse Verwaltungs GmbH, Marsberg 100

Pursuant to 3 296 Para. 1 No. 2 of HGB, the sub-group red office in Doesburg, the Netherlands.This company Ubbink Systemtechnik notarially acquired on Decem- had nominal capital of DM 90 thousand and equity of ber 22, 1999 was not included in the consolidated com- DM 17,773 thousand at December 31, 1998; the net panies, as the need to obtain the full details required profit for 1998 was DM 3,239 thousand.This company for the consolidated financial statements would have has two fully owned subsidiaries: Ubbink (U.K.) Limited, resulted in undue delays.The parent company of this a private limited company subject to the laws of Eng- sub-group, the intermediate holding company Ubbink land and Wales, with registered office in Brackley, Eng- Holding B.V., a private limited company according to land, which had nominal capital of DM 97 thousand the laws of the Netherlands and with its registered offi- and equity of DM 2,687 thousand at December 31, ce in Amstelveen, the Netherlands, has been reported 1998, and which reported a net profit of DM 845 thou- as an affiliated company.The company's equity follo- sand for that year; and Ubbink NV/SA, a private limited wing the capital increase of December 22, 1999 totals company according to Belgian law, with registered offi- DM 15,991 thousand; Centrotec Hochleistungskunst- ce in Mariakerke, Belgium, which had nominal capital of stoffe AG is the sole owner.The company is reported at DM 276 thousand and equity of DM 3,292 thousand at equity. December 31, 1998 and which reported a net profit of DM 587 thousand for that year. It moreover owns a 96.6 Ubbink Holding B.V. has a direct, fully owned subsidiary % shareholding in Ubbink Distribution S.a.r.l., a private in Ubbink Nederland B.V., a private limited company limited company according to French law, with its regi- subject to the laws of the Netherlands, with its registe- stered office in Nantes, France, which had nominal capi-

21 tal of DM 15 thousand and equity of DM 32 thousand To the extent that tax regulations require correspon- at December 31, 1998; its equity was raised by DM 283 ding disclosure in the annual financial statements, Cen- thousand on February 17, 1999.The net profit of this trotec Hochleistungskunststoffe AG, Marsberg, com- company for the 1998 financial year was DM 14 thou- plies with these tax provisions. sand. Consolidated companies' assets and liabilities that are The Ubbink sub-group is to be consolidated for the first included in the consolidated financial statements pur- time on January 1, 2000. Centrotec Hochleistungs- suant to § 300 Para. 2 of HGB have been valued uni- kunststoffe AG is moreover sole owner of Rega Ubbink formly according to the principles applied for the fi- Ltd., a private limited company according to the laws of nancial statements of the parent company. England and Wales, with registered office in Sandy, England.This company had nominal capital of DM 3 The date of acquisition of the holdings in the subsi- thousand and equity of DM 1,101 thousand at Decem- diaries was generally taken as the reference date for ber 31, 1998; its net loss for the 1998 financial year was the offsetting of the holdings owned by the parent DM 82 thousand. Centrotec Hochleistungskunststoffe company against the amount represented by these AG in addition owns all the shares of Ubbink Internatio- holdings in the equity of the subsidiaries (capital con- nal B.V., a private limited company according to the la- solidation). ws of the Netherlands, with registered office in Amstel- veen, the Netherlands, which had equity of DM 39 3.1 Capital consolidation thousand following its establishment in October 1999. Capital consolidation is performed using the book va- These companies were likewise reported as affiliated lue method in accordance with § 301 Para. 1 Sentence companies and omitted from the consolidated financi- 2 No. 1 of HGB, by offsetting the acquisition costs of the al statements pursuant to § 296 Para. 1 No. 2 of German shareholding against the pro rata capital subject to Commercial Code. mandatory consolidation at the time of initial consolidation.This includes the subscribed capital, reserves, 2. Closing date of the consolidated financial outstanding contributions and the retained statements earnings/accumulated losses brought forward. The consolidated financial statements were prepared as at December 31, 1999.This date is the balance sheet Capital consolidation was carried out on the basis of date for all consolidated companies in the group. the equity as of August 1, 1990. Capital consolidation of Centroplast Kunststofferzeug- 3. Consolidation, accounting and valuation nisse Verwaltungs GmbH, Marsberg, was performed as principles at January 1, 1998. When preparing the consolidated financial statements, Centrotec Hochleistungskunststoffe AG, Marsberg, Differences from capital consolidation arose as a result complies with the provisions of HGB, German Stock of differences between the costs of acquisition of the Corporation Law (AktG) and the principles of adequate investments in the other consolidated companies, and and orderly accounting and consolidation as regards the capital of these companies subject to mandatory accounting, valuation and disclosure. consolidation at the time of first inclusion of the subsi-

22 diary in the consolidated financial statements. unless prescribed otherwise by law.

The resulting difference on the assets side was added The intangible and current assets, equity, liabilities, pre- to the assets of the respective subsidiaries to be carried paid expenses and deferred income are disclosed sepa- in the consolidated balance sheet to the extent that rately in the consolidated balance sheet and adequate- their value was higher than the previous valuation.The ly classified. Provisions were only set up within the li- remaining difference after this addition is disclosed as mits permitted by § 249 HGB. Prepaid expenses and goodwill from capital consolidation.The goodwill from deferred income are carried in accordance with the capital consolidation is written down over a period of 5 provisions of § 250 HGB. years. 3.6.2 Valuation principles 3.2 Consolidation of intercompany balances The assets and liabilities are valued individually as at Receivables and liabilities between the consolidated af- the balance sheet date. Cautious valuations are applied, filiated companies have been eliminated.There was no and take particular account of all foreseeable risks and difference arising from this elimination. losses arising before the balance sheet date. Intangible assets acquired for consideration are capitalised at 3.3 Consolidation of intercompany profits their cost of acquisition and written down over a peri- Intercompany profits within the group to be eliminated od of 4-5 years using the straight-line method.Tangible in accordance with § 304 HGB amounted to DM 35 assets are valued at their cost of acquisition or manu- thousand. facture, less regular depreciation over the standard useful life at the company. Low-value assets are written 3.4 Consolidation of income and expenses down in full in the year of their addition. Intercompany sales were eliminated during the consolidation of income and expenses of the related compa- The half-yearly simplification rule for depreciable mo- nies. vable assets is applied. Extraordinary depreciation is applied in those cases where it is necessary to apply a 3.5 Tax deferrals lower value. Inventories are valued using the lower of There was no requirement in the group to set up tax cost or market value. Receivables and other assets are deferrals in accordance with § 306 HGB. carried at their principal value. All discernible risks are covered by write-downs. A global value adjustment of 3.6 Accounting and valuation principles between 2 % and 2.5 % is applied to take account of 3.6.1 Accounting methods the general credit risk. The annual financial statements of Centrotec Hochlei- stungskunststoffe AG, Marsberg, and the other compa- When calculating provisions for contingent liabilities, nies included in the consolidated financial statements suitable and adequate account is taken of all discerni- have been prepared in accordance with uniform ac- ble risks. Liabilities are carried at their redemption amo- counting and valuation methods.The consolidated fi- unt. Foreign currency liabilities are valued at the histo- nancial statements contain all assets, liabilities, prepaid rical rate or at the higher rate prevailing at the closing expenses and deferred income, expenses and income, date.

23 B. SPECIAL DISCLOSURES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Consolidated balance sheet 1.1 Assets 1.1.1 Fixed assets The classification and movements of fixed assets are shown in the following Assets Movement Schedule:

CENTROTEC Hochleistungskunststoffe AG, Marsberg Development in Consolidated Fixed Assets in the 1999 Fiscal Year

ACQUISITION AND MANUFACTURING COST

01.01.1999 Additions Disposals Transfers 31.12.1999 DM DM DM DM DM INTANGIBLE ASSETS 1. Industrial rights and similar rights 352.529,78 87.133,77 2.995,67 0,00 436.667,88 2. Goodwill from capital consolidation 3.497.164,00 0,00 0,00 0,00 3.497.164,00 3.849.693,78 87.133,77 2.995,67 0,00 3.933.831,88

TANGIBLE ASSETS 1. Land and buildings 6.272.561,83 179.340,46 0,00 0,00 6.451.902,29 2. Technical equipment and machinery 9.445.512,57 1.358.317,84 0,00 49.800,00 10.853.630,41 3. Other equipment, operating and office equipment 1.682.432,89 357.240,34 84.103,70 0,00 1.955.569,53 4. Payments on account 49.800,00 590.350,35 0,00 -49.800,00 590.350,35 17.450.307,29 2.485.248,99 84.103,70 0,00 19.851.452,58

FINANCIAL ASSETS 1. Shareholdings in affiliated companies 0,00 31.094.860,20 15.064.711,99 0,00 16.030.148,21 0,00 31.094.860,20 15.064.711,99 0,00 16.030.148,21 21.300.001,07 33.667.242,96 15.151.811,36 0,00 39.815.432,67

24 ACCUMULATED DEPRECIATION NET BOOK VALUES

1.1.1999 Additions Disposals 31.12.1999 31.12.1999 1.1.1999 DM DM DM DM DM DM

138.667,78 85.841,77 2.995,67 221.513,88 215.154,00 213.862,00 3.497.164,00 0,00 0,00 3.497.164,00 0,00 0,00 3.635.831,78 85.841,77 2.995,67 3.718.677,88 215.154,00 213.862,00

2.798.107,29 213.781,46 0,00 3.011.888,75 3.440.013,54 3.474.454,54 7.982.544,11 627.960,30 0,00 8.610.504,41 2.243.126,00 1.462.968,46 1.182.064,89 239.720,34 83.705,70 1.338.079,53 617.490,00 500.368,00 0,00 0,00 0,00 0,00 590.350,35 49.800,00 11.962.716,29 1.081.462,10 83.705,70 12.960.472,69 6.890.979,89 5.487.591,00

0,00 0,00 0,00 0,00 16.030.148,21 0,00 0,00 0,00 0,00 0,00 16.030.148,21 0,00 15.598.548,07 1.167.303,87 86.701,37 16.679.150,57 23.136.282,10 5.701.453,00

25 1.1.2 Current assets far as the bearers of the option certificates issued by Receivables and other assets the company pursuant to the authorisation of the Sha- The receivables and other assets do not contain any reholders' Meeting of September 9, 1998 exercise their items with more than one year to maturity. subscription right to ordinary bearer shares in the company (option right).The new shares qualify for profits Receivables from affiliated companies totalling DM from the start of the financial year in which they are is- 3,228 thousand include trade receivables totalling DM sued through the exercising of option rights.The aut- 2,293 thousand. horised but unissued capital was divided into up to 90,000 individual share certificates on December 31, 1999. 1.2 Equity and liabilities 1.2.1 Equity With effect from July 1, 1999, 32,130 options (before The subscribed capital at December 31, 1999 totalled share split) were issued for employees, management EUR 3,600,000.-, divided into 1,200,000 bearer individu- and board members, at the exercise price of EUR 44.30. al share certificates. Approved capital was in addition The options may be exercised from July 1, 2001 to July created.The Managing Board is, with the approval of 1, 2006.The exercising of the options is tied to certain the Supervisory Board, authorised to raise the capital conditions and targets.They may only be exercised if stock by up to EUR 1,533,875.64 (approved capital) the daily quotation at the Frankfurt Stock Exchange has through the issue of new bearer shares in the form of risen by at least 30 % since the granting of the option. individual share certificates on one or more occasions, The exercising of the option is moreover tied to the at- in return for contributions in cash or in kind, by August tainment of individual targets by employees, manage- 31, 2003.The new shares are to be accepted by banks, ment and board members. It is therefore uncertain with the undertaking to offer them for subscription to what proportion of the options issued will be exercised the shareholders.The Managing Board is, however, aut- in practice. horised to exclude residual amounts from the shareholders' subscription right.The Managing Board is moreo- Pursuant to the resolution of the Shareholders' Mee- ver authorised, with the approval of the Supervisory ting of May 11, 1999 the subscribed capital was deno- Board, to exclude the subscription right of the sha- minated in euro, individual share certificates were in- reholders in order to issue new shares against contri- troduced and the capital stock was raised by means of bution in kind.The Managing Board is moreover autho- a capital increase of EUR 532,248.71 from company rised to exclude the subscription right of the sharehol- funds, from EUR 3,067,751.29 or DM 6,000,000.- to EUR ders in order to issue up to 300,000 new shares at a pri- 3,600,000.-; to this end, the capital reserves of this amo- ce which does not significantly undercut the stock mar- unt shown in the balance sheet at December 31, 1998 ket price for the company's shares at the time the issue were converted into capital stock. price is determined by the Managing Board. As of February 15, 2000, the shares were split at a ratio The capital stock has moreover been raised by an unis- of 1 to 3 pursuant to the resolution of the Sharehol- sued amount of EUR 270,000.The increase of authori- ders' Meeting of May 11, 1999. Since the split, the sub- sed but unissued capital only becomes definitive inso- scribed capital has consequently been divided into

26 3,600,000 individual share certificates, and the authori- 1.2.2 Other provisions sed but unissued capital into 270,000 individual share The other provisions primarily include amounts for co- certificates; after splitting, the number of options alrea- vering legal and consultancy costs, claims for outstan- dy issued on the authorised but unissued capital is ding vacation entitlements, costs of the Shareholders' 96,390. Meeting, industrial accident insurance contributions, warranty obligations and credit notes to be issued. The consolidated financial statements are prepared in DM.The euro exchange rate is EUR 1 = DM 1.95583. 1.2.3 Liabilities The remaining maturities are shown in the following The capital stock of Centrotec Hochleistungskunststof- table: fe AG, Marsberg, totals DM 7,041 thousand, the capital (Prior-year figures in brackets) reserve DM 20,259 thousand and the revenue reserves DM 1,058 thousand. As a result of a consolidated net loss of DM 8,615 thousand due principally to accumu- The collateral provided for liabilities to banks consists lated losses carried forward, the group's equity at De- principally of global assignments of receivables, stora- cember 31, 1999 totals DM 19,743 thousand. ge assignments of inventories, assignments of technical equipment and machinery as security, and a mortgage The parent company Centrotec Hochleistungskunst- on the site of the Centroplast GmbH & Co. plant in stoffe AG, Marsberg, had equity totalling DM 29,374 Marsberg, amounting to DM 5,000 thousand. thousand at December 31, 1999.The company has allo- cated an amount of DM 1,015 thousand from the net At the closing date, DM 13,901 thousand of the liabili- income for the year to the revenue reserves. ties were covered by collateral.

Thereof with a remaining maturity of less than one between one more than At Dec. 31, 1999 year and five years five years DM '000 DM '000 DM '000 DM '000 Due to banks 13.902 9.110 429 4.363 (6.089) (1.197) (429) (4.463)

Trade payables 3.823 3.823 0 0 (1.188) (1.188) (0) (0)

Other liabilities 1.074 1.074 0 0 (1.013) (1.013) (0) (0) 18.799 14.007 429 4.363 (8.290) (3.398) (429) (4.463)

27 2. Consolidated statement of income C. CASH FLOW STATEMENT Sales revenues Sales revenues are made up as follows: The fall in the level of funds in the financial year is largely the result of the negative cash flow from invest- TDM ment activities. In the financial year, the group invested Semi-finished products 14.904 predominantly in technical equipment and machinery, Finished products 7.376 and in the acquisition of the Ubbink group of compa- Gas flue systems 13.733 nies.The positive cash flow from ongoing business Other 314 operations was unable to compensate for this outflow Less of funds as a result of investment activities. Internal sales -1.317 Discounts -420 D. SEGMENT REPORTING Reduction of proceeds -261 Total 34.329 In line with its internal reporting structure, the company is organised into the Engineering Plastics and Sy- stems segments.The combined sales revenues from external customers for these two areas exceed 10 % of total external and inter-segmental sales revenues.The

Engineering Systems Other Total Plastics 31.12.99 31.12.99 31.12.99 31.12.99 DM DM DM DM Sales revenues - from external third parties 19.531 13.481 0 33.012 - inter-segmental revenues 1.317 0 0 1.317

Segment result 1.304 1.352 791 3.447 - including - Depreciation 854 313 0 1.167 - Other items not affecting payments 564 437 238 1.239 - Result from shareholdings in associated companies 0 0 1.355 0 - Income from other shareholdings 0 0 0 0 - Interest earnings 3 2 1.036 326 - Interest expenditure 602 147 364 398 - Taxes on income 295 168 8 458

Assets (incl.shareholdings) 13.086 7.521 19.174 39.781 Investments in long-term assets 1.546 1.026 16.030 18.602 Liabilities 1.328 1.689 15.782 18.798

28 segment results are quoted as the net income for the in connection with their sponsoring activities, subject year. to this liability not resulting from gross negligence or fault on the part of the designated sponsor. The "Engineering Plastics" segment covers the activities in markets for semi-finished and finished products 2. Other financial obligations of engineering and high-temperature plastics.The "Sy- Leasing contracts result in financial obligations for the stems" segment covers those product groups which minimum leasing period of DM 288 thousand, inclu- are sold as complete systems.The segment currently ding DM 145 thousand for 2000. Financial obligations consists of plastic gas flue systems for heating systems. totalling DM 29 thousand exist as a result of current With the inclusion of Ubbink Systemtechnik, the pro- agreements. duct lines of ventilation systems and lighting/roof systems will be added to this segment.The "Miscella- No material financial obligations were entered into by neous" segment consists primarily of services perfor- the group companies vis-à-vis and on behalf of Ubbink med by the holding company and which are charged Holding b.v. other than the employment of equity. to the segments. 3. Own shares There is one customer accounting for more than 10% Pursuant to the resolution of the Shareholders' Mee- of sales (24%). ting of May 11, 1999 the company is authorised to acquire own shares up to an amount not exceeding ten Inter-segmental business has been eliminated accor- percent of the capital stock.The price paid for these ding to the "arm's length principle". shares may not be more than 15 % above or below the average of the daily quotations at the Frankfurt Stock E. OTHER PARTICULARS Exchange over the last ten trading days preceding the acquisition of the shares.The Managing Board is autho- 1. Contingent liabilities rised to sell these shares publicly or call them in with- The customary guarantee obligations are taken on in out the need for a further resolution by a shareholders' the context of normal business operations. As part of meeting. the takeover of the Ubbink Group, it was agreed that Centrotec Hochleistungskunststoffe AG or a subsidiary In the financial year under review, between June 10, would do all in its power to help sales representatives 1999 and June 17, 1999, a total of 5,140 own shares we- be released from rental guarantees.The rental agree- re acquired on the stock market at a price of DM 86.64 ments in question are an agreement in England for an- to DM 88.01.The purpose of acquiring these shares nual rent of currently GBP 148,000 (DM 468 thousand), was to reduce the liquidity of the market in that parti- due to run until 2008, and a rental agreement in Eng- cular trading phase. Later in the financial year, these land for an annual rent of currently GBP 80,000 (DM own shares were sold again via the stock market at pri- 253 thousand), due to run until 2012. Centrotec Hoch- ces of between DM 107.62 and DM 109.96.This was do- leistungskunststoffe AG moreover releases its designa- ne in preparation for the impending takeover of Ub- ted sponsors, M.M.Warburg & CO KG aA, Hamburg and bink, for which liquid funds were created to pay the Gontard & Metallbank AG, Frankfurt a.M. from liability purchase price.The maximum level of own shares held

29 during the financial year was equivalent to 0.43 per- suant to § 314 I No. 6a of HGB was not disclosed by cent of the capital stock, i.e. these shares represented analogous application of the protective clause of § 286 DM 30,158 of the capital stock. No own shares were IV of HGB, as the remuneration paid to each individual held at the end of the financial year. member of the Managing Board and to the managing director can easily be deduced from this information. 4. Average number of employees Over the period from January 1 to December 31, 1999, the group had an average of 101 employees, plus two Marsberg, February 24, 2000 board members and one managing director. CENTROTEC Hochleistungskunststoffe AG 5. Management and supervisory bodies The Managing Board members in the financial year were Dipl.-Ing. Hans-Lothar Hagen, engineer, Altenbeken (Chairman) and Dr. Alexander Kirsch, businessman, Mül- Hans-Lothar Hagen Dr. Alexander Kirsch heim an der Ruhr. Herr Hagen is entitled to act as sole Chairman of the Board Member representative of the company and is exempt from the Managing Board for Finance restrictions of § 181 of German Civil Code. Dr. Kirsch is entitled to act as sole representative of the company.

The members of the Supervisory Board were Guido A. Krass, entrepreneur (Chairman),Wadhurst, England, Dr. Bernhard Heiss, lawyer, Munich, and Dipl.-Kfm. Hans Thomas, consultant businessman, Hofheim. In addition to belonging to the corporate bodies of Centrotec Hochleistungskunststoffe AG, the following members of the Managing and Supervisory Boards also sit on other supervisory boards of stock corporations: Dr. A. Kirsch: Pari Capital AG, Munich. G.A. Krass: COS Commu- nity Online Service AG, Munich, Cloppenburg Automo- bil AG, Düsseldorf, pre-IPO AG, Hamburg, Pari Capital AG, Munich. Dr. B. Heiss: ArtMerchandising & Media AG, Munich, OPUS-1 Vermögensverwaltungs AG, Munich. No personnel changes to the company's executive and Supervisory Boards occurred in the financial year.

6. Total remuneration of corporate bodies Remuneration of the Supervisory Board totalled DM 13.5 thousand in the financial year.The remuneration of the two board members of the parent company pur-

30 Independent auditor’s report

INDEPENDENT AUDITOR’S REPORT praisal of the overall presentation of the annual financial statements and management report.We are of the We have examined the annual financial statements, in- opinion that our audit constitutes a sufficiently reliable cluding the accounts, and the management report basis for our findings. compiled by Centrotec Hochleistungskunststoffe AG, Marsberg, for the fiscal year from January 1 to Decem- No objections are made on the basis of our audit. ber 31, 1999.The accounts and the preparation of the annual financial statements and management report in We are convinced that the annual financial statements accordance with the requirements of German commer- present, in compliance with adequate and orderly ac- cial law and the supplementary regulations contained counting principles, a true and fair view of the net in the articles of incorporation is the responsibility of worth, financial position and earnings situation of the the company's legal representatives. Our task is to pass company.The management report as a whole provides judgement on the annual financial statements, inclu- an accurate picture of the company's position and of ding the accounts, and on the management report on the risks to its future development. the basis of our audit.

We have carried out our audit of the annual financial ARTHUR ANDERSEN statements in accordance with § 317 of German Com- Wirtschaftsprüfungsgesellschaft mercial Code, observing the principles of proper audit- Steuerberatungsgesellschaft mbH ing as laid down by the German Institute of Auditors (IDW).These principles state that an audit shall be plan- ned and conducted such that it is possible to identify with sufficient accuracy any misrepresentations and Steinweg Nebelung violations which could have a significant impact on the Independent auditor Independent auditor presentation of the company's net worth, financial position and earnings situation in the annual financial statements, based on the principles of proper accounting, Hanover, February 24, 2000 and in the management report.The scope of the audit was determined on the basis of a knowledge of the business activities and the economic and legal context of the company, as well as the likelihood with which particular errors were to be expected. In the context of the audit, the effectiveness of the internal controlling system and evidence of the details provided in the accounts, annual financial statements and management report are examined predominantly through random checks.The audit encompasses an assessment of the accounting principles and of key judgements made by the legal representatives; it in addition includes an ap-

31 32 CENTROTEC Hochleistungskunststoffe AG, Marsberg IAS-Überleitungsrechnung (Konzern)

Centrotec Hochleistungskunststoffe AG, Marsberg 1. First-time preparation of accounts according IAS reconciliation accounts for consolidated net in- to IAS come and consolidated equity, together with expla- The International Accounting Standards (IAS) were ap- nations of the principal differences to HGB financial plied for the first time to the consolidated financial sta- statements tements at January 1, 1997. Adjustments were made according to Interpretation 8 of the Standing Interpre- tations Committee (SIC), in the form of a ”retroactive re- statement” with no effect on the operating result as at January 1, 1997.

2. IAS consolidation principles The purchase method of valuation proportionate to the shareholding was applied in the context of full consolidation acc. to IAS 22 (revised 1998) ”Business Com- binations“ for the IAS consolidated financial statements. A positive balance from the consolidation of capital is capitalised as goodwill following the exposure of undisclosed reserves and encumbrances, and written down by the straight-line method over a useful economic life of 5 years; a negative balance results in the realisation of income, subject to the conditions laid down in IAS 22 (revised 1998).

Intra-group receivables and liabilities were eliminated in the consolidated financial statements pursuant to IAS 27 in the context of the consolidation of debts, as were intermediate results and intra-group expenses and income. Deferred taxes for outstanding balances were charged to subsequent tax years.

3. Principal differences between German Commercial Code and IAS There are several fundamental differences between the provisions of HGB and the IAS. According to IAS principles, the consolidated equity at December 31, 1999 and the consolidated net income for fiscal 1999 would change as follows:

33 a) IAS reconciliation accounts for consolidated equity The following summary shows the adjustments that are required in order to reveal consolidated equity for the consolidated financial statements at December 31, 1999 in accordance with IAS, as opposed to German Commercial Code. Note 1999 1998 DM '000 DM '000 Consolidated equity acc. to HGB 19,743 16,296 Leasing (aa) -46 - 44 Development expenses (bb) 100 27 Valuation of inventories (cc) -112 0 Tax deferrals: - from differences between IAS and HGB 25 7 - for accumulated losses brought forward (dd) 889 2,143 Consolidated equity acc. to IAS 20,599 18,429

b) IAS reconciliation accounts for consolidated net income The following summary shows the adjustments that are required in order to reveal consolidated net income for the consolidated financial statements at December 31, 1999 in accordance with IAS, as opposed to German Commercial Code. Note 1999 1998 DM '000 DM '000 Consolidated net income acc. to HGB 3,447 - 1,144 Leasing (aa) -2 13 Development expenses (bb) 74 - 20 Valuation of inventories (cc) -112 0 Tax deferrals: - from differences between IAS and HGB 17 3 - for accumulated losses brought forward (dd) -1,254 667 Consolidated net income acc. to IAS 2,170 - 481

c) Notes to the reconciliation accounts straight-line method and on constant interest charges (aa) Leasing on the liabilities proceeding from the leasing agree- In the consolidated financial statements acc. to IAS 17 ment.The difference compared with leasing expenses (revised 1997) ”Leases“, a leased asset is to be capitali- in the HGB consolidated financial statements is to be sed by the lessee where the risks and rewards incident adjusted with an effect on the operating result, with to ownership of the leased asset rest with the lessee. delimiting of deferred taxes. Capitalisation by the lessee is based on the undertaking to write down the leased asset according to the

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

35 Management report for the 1999 fiscal year CENTROTEC Hochleistungskunsstoffe AG, MARSBERG

Centrotec Hochleistungskunststoffe AG is able to look in acquiring Ubbink Systemtechnik at the end of 1999. back on a highly successful 1999 fiscal year.We were In view of the strategic and financial significance of this able to achieve an extensive market breakthrough in move, extensive due diligence investigations were car- Germany in our expanding business field of plastic gas ried out and the company valued.The valuation was flue systems, in particular thanks to securing exclusive examined by the auditors Arthur Andersen.The audi- supply agreements with leading boiler manufacturers. tors confirmed that the value of the company is at least We made considerable progress in building up the equivalent to the value of the amount being paid.The structures and investments that this enormous growth takeover was ratified by the shareholders at the Extra- entails. Finally, we entered an entirely new dimension ordinary Shareholders’ Meeting convened for this pur- towards the end of the year with the takeover of Ub- pose on December 14, 1999. As the transfer of the sha- bink Systemtechnik, a move which represented a quan- reholding was not notarised until December 22, the tum leap in raising us to the status of Europe's leading Ubbink sub-group was consolidated for the first time supplier of gas flue systems.The price of Centrotec on January 1, 2000.The financial statements for 1999 Hochleistungskunststoffe AG’s shares mirrored these therefore show only the financial participation in the achievements, rising by 71.9 % from EUR 57.00 on April intermediate holding company Ubbink Holding b.v., 1, 1999 to EUR 98 on December 31, 1999 (prior to split- Amstelveen, at a book value of DM 16 million. ting at a ratio of 1:3). 2. Financing – The situation, risks and future expectations of our com- Ubbink takeover without capital increase pany are presented individually below. As part of the Ubbink takeover, the stock corporation’s A. BUSINESS PROGRESS credit line, which had been reduced as customary following the initial public offering, was increased again, The companies of which Centrotec Hochleistungs- with amounts due to banks rising from DM 6.1 million kunststoffe AG holds the shares operate in the markets to DM 13.9 million. Cash on hand was reduced in paral- for engineering plastics and plastic gas flue systems. lel, totalling DM 1.3 million at December 31, 1999, as These operative affiliated companies were once again against DM 10.7 million on December 31, 1998.The Ub- highly successful in their respective market segments, bink sub-group will moreover contribute its own finan- in view of the growth of the market and their strong cing structure to the enlarged group. All in all, it was position in each case. possible to finance the takeover soundly without the need for a capital increase; this had a correspondingly The activities of the stock corporation involve exerci- beneficial effect on the earnings per share. Further de- sing a function as a strategic and financial holding tails are provided under ”Financial position“. company for the operative affiliated companies.

1. Investments – acquisition of Ubbink Systemtechnik Centrotec made what is undoubtedly the most significant financial investment in the history of the company

36 B. SITUATION C. KEY RISKS

3. Net worth position – Our growth and business progress were very positive, further fixed assets acquired and we are able to look to the future with considerable As a result of the acquisition of Ubbink Systemtechnik, optimism. During the past fiscal year, we nevertheless the financial assets have risen by DM 11.1 million, from considered in depth the risks with which our company DM 11.6 million to DM 27.7 million. is confronted.

4. Financial position – Our most resounding success simultaneously led to a equity ratio of 65% relevant risk on the market side: our newly secured lar- The group’s equity rose by DM 2,1 million in the fiscal gest customer accounted for 24 % of the group’s sales year on account of accumulated profits, from DM 27,2 volume in 1999. However, this dependency will be re- million to DM 29,4 million.The equity ratio at the end duced following the acquisition of Ubbink, as the lar- of the fiscal year was 65% of the balance sheet total. gest customer is likely to account for only 10 % of total Amounts owed to banks accounted for 31% of the ba- sales in 2000. lance sheet total. A degree of dependence on the fortunes of the market 5. Affiliated company – for technical semi-finished products and prefabricated arm's-length principle parts likewise transpired in the past fiscal year. Howe- Legal transactions with companies in which the Chair- ver, the positive progress in the second half of the year, man of the Supervisory Board and members of his fa- and our past experience even more so, demonstrate mily hold an interest were conducted out in the fiscal that market fluctuations can be overcome relatively year. As a precautionary measure, a dependence report swiftly thanks to the spread of potential applications. was therefore issued by the Board of Management. The newly acquired Ubbink Group is likewise depen- dent on the fortunes of the market to some degree, ”Concluding remark from the dependence report: though it has so far always shown a profit even in years Pursuant to § 312 Para. 3 of German Stock Corporation when the economy in general has been weak. Law, we declare that, on the basis of the circumstances known at the time when legal transactions with affilia- Thanks to our technology, quality and value for money, ted companies were conducted, our company received we have attained a solid market position in all business adequate consideration for each legal transaction and segments. It is nevertheless conceivable that new mar- was not placed at a disadvantage.“ ket entrants, more intense competition, increased consumer power and substitute products could lessen our 6. Earnings situation – operational efficiency. rise in earnings by the operative units As the profits of the affiliated companies were distribu- Internally, we perceive potential risks in the production ted only in part to the parent company which holds sector.We implement suitable safety regulations and their shares, the result of the latter does not reflect the take precautionary measures to prevent possible acci- highly successful business progress of the former. dents and plant breakdowns. All plant is moreover in-

37 sured in line with its value. However, the failure of criti- nings. Models of various scenarios (including Ubbink) cal plant could result in noticeable losses. have indicated that it would only be necessary to increase equity if sales were to slump sharply, in contrast In the IT sector, no problems arose as a result of the da- to the forecast growth in sales. te change; classic data safeguarding measures are taken on an ongoing basis.We introduced a new compu- The integration of the newly acquired Ubbink Group of ter system for goods management and bookkeeping in course harbours a classic risk. Negative examples have the fiscal year under review. Problems were encounte- shown that the synergy benefits anticipated from ta- red with its introduction, but we now regard these as keovers often fail to materialise. For this reason, we ba- solved. However, the possibility cannot be excluded sed the purchase price of Ubbink Systemtechnik purely that further problems that have not yet been identified on a stand-alone valuation. As we have enjoyed a suc- will arise, or that problems already solved will recur. Li- cessful partnership with Ubbink stretching back to kewise we cannot exclude the possibility that a pro- 1996, we are optimistic at the prospects for its succes- blem in the IT sector could lead to a loss of data, despi- sful integration. te ongoing data safeguarding, causing considerable damage. Finally, our vigorous growth undoubtedly harbours risks. Internal structures in particular must repeatedly As the company is still relatively small, there is moreo- and rapidly be adjusted to the requirements of a gro- ver a degree of dependence on certain key employees. wing organisation.We created a workable basis for this However, as we expand so will our base of highly quali- in the past year by reorganising our growth area of pla- fied employees, with the result that this risk will gra- stic gas flue systems.Through the acquisition of Ub- dually dwindle. bink, we have moreover purchased an established structure which can perform many of the new tasks The project that is under way on the construction of a with which we will be confronted. new logistics centre could likewise entail risks. Pro- blems could in particular take the form of delays in D. OUTLOOK completion, or could arise upon occupation of the new premises. All measures are currently proceeding accor- We will enter an entirely new dimension in 2000 ding to schedule. A further risk could arise in connec- through our affiliated companies.The driving force be- tion with the purchase of the land purchase; a notari- hind this leap in growth, alongside the initial consolida- sed purchase agreement exists but no entry has yet tion of the newly acquired Ubbink sub-group, is our in- been made in the land registry; we expect that it will trinsic, sustained growth. be made within the usual processing time scale. Due to pressure of time, we have therefore already commen- In view of our positive expectations of the economy in ced construction work. general and the excellent progress in the sales and earnings of our affiliated companies, particularly in the se- Now that we have invested the funds received as a re- cond half of 1999, we are highly optimistic about the sult of the initial public offering, our lower equity ratio prospects for 2000.The position of the Ubbink Group, makes us more susceptible to fluctuations in our ear- which was recent acquired, is likewise healthy.The con-

38 text of the latter and its prospects for growth, particularly in France and Benelux, are very good.Thanks to the new products that Ubbink is currently launching and its market synergies with Centrotec, Ubbink’s trend towards profitable growth will hold up in the long term.

We have started 2000 with a package of measures to promote the organic growth of our affiliated companies.These include the ”Grow Together Program“ with Ubbink, a comprehensive integration programme that includes both enhancing efficiency and developing further potential for growth. Our new logistics centre in Germany will provide a new basis for our growth area of plastic gas flue systems.We will tackle the emerging markets for our plastic systems in Britain and Italy with purpose-designed systems. In addition to product innovations in the field of gas flues, we have also launched a new product campaign in the areas of ventilation systems and lighting/roof systems.

We aim to add momentum to our organic growth over the next few years through strategic acquisitions. In this light, we believe that our company will continue to make very healthy progress.

Marsberg, February 24, 2000

CENTROTEC Hochleistungskunststoffe AG

Hans-Lothar Hagen Dr. Alexander Kirsch Chairman of the Board Member Managing Board for Finance

39 Consolidated balance sheet

CENTROTEC Hochleistungskunststoffe AG Consolidated balance sheet December 31, 1999

AKTIVA 1999 1998 DM DM

A. FIXED ASSETS Financial assets Shareholdings in affiliated companies 27.675.670,67 11.645.522,46

B. CURRENT ASSETS I. Receivables and other assets 1. Receivables from affiliated companies 17.392.434,04 11.617.167,43 of which with a maturity of more than one year: DM 0.00 (previous year: DM 0.00) 2. Other assets 34.602,77 164.642,08 17.427.036,81 11.781.809,51

II. Bank balances 278.266,45 9.506.069,54 17.705.303,26 21.287.879,05

45.380.973,93 32.933.401,51

40 EQUITY AND LIABILITIES 1999 1998 DM DM

A. EQUITY

I. Subscribed capital 7.040.988,00 6.000.000,00 II. Capital reserve 20.259.012,00 21.300.000,00 III. Revenue reserves 1.058.299,17 43.047,90 IV. Net profit/net loss 1.015.251,27 -108.046,16 29.373.550,44 27.235.001,74

B. PROVISIONS Other provisions 225.700,00 555.300,00

C. LIABILITIES 1. Due to banks 13.901.480,04 4.998.834,38 2. Due to company members 1.687.955,80 0,00 3. Other liabilities 192.287,65 144.265,39 - thereof taxes: DM 183,360.06 (previous year: DM 21,590.49) - thereof relating to social security and similar obligations: DM 8,927.59 (previous year: DM 3,252.72) 15.781.723,49 5.143.099,77

45.380.973,93 32.933.401,51

41 Statement of income for the 1999 fiscal year

CENTROTEC Hochleistungskunststoffe AG, Marsberg Statement of income December 31, 1999

1999 1998 DM DM

1. Other operating income 2.891.955,85 109.338,15 2. Personnel expenses a) Wages and salaries 508.304,25 79.395,38 b) Social security costs 67.426,82 14.026,16 3. Depreciation on tangible assets 257,76 0,00 4. Other operating expenses 2.201.758,37 3.844.991,28 5. Income from shareholdings 1.355.269,56 2.884.277,76 - of which from affiliated companies DM 1,355,269.56 (previous year: DM 2,844,277.76) 6. Other interest and similar income 1.032.663,57 8.849,45 - of which from affiliated companies DM 714,526.39 (previous year: DM 0.00) 7. Interest and similar expenses 363.593,08 297.095,19 8. Result from ordinary operations 2.138.548,70 -1.233.042,65

9. Other taxes 0,00 2.759,31

10. Net income/net loss for the year 2.138.548,70 -1.235.801,96

11. Retained profits/accumulated losses brought forward -108.046,16 1.127.755,80 12. Allocation to revenue reserves -1.015.251,27 0,00 13. Net profit/net loss 1.015.251,27 -108.046,16

42 Notes to the annual financial statements for the 1999 fiscal year CENTROTEC Hochleistungskunsstoffe AG, Marsberg

A. GENERAL INFORMATION The company is a large company as defined by § 267 Para. 3 of HGB (German Commercial Code), on the strength of its stock exchange listing.The format of the balance sheet and the statement of income is based on the provisions of §§ 264 ff. HGB applicable to corporations. It applies the type of expenditure (total cost) format defined in § 275 Para. 2 of HGB to the statement of income.

B. ACCOUNTING AND VALUATION PRINCIPLES

1. Tangible assets Tangible assets are carried at their cost of acquisition, less regular depreciation.

2. Financial assets Financial assets are valued at their cost of acquisition or at the lower applicable value.

3. Receivables Receivables are carried at their principal amount or at the lower applicable value.

4. Provisions Other provisions are set up for contingent liabilities. They are carried at the amount dictated by sound business judgement.

5. Liabilities Liabilities are carried at their redemption amount.

43 C. SPECIAL INFORMATION AND NOTES 1. Balance sheet 1.1 Assets 1.1.1 Fixed assets The classification and movements of fixed assets are shown in the following Assets Movement Schedule:

ACQUISITION COST 1.1.1999 Additions Disposals 31. 12. 1999 DM DM DM DM TANGIBLE ASSETS Other equipment, operating and office 1.251,20 257,76 257,76 1.251,20

FINANCIAL ASSETS Shares in affiliated companies 11.645.522,46 31.094.860,20 15.064.711,99 27.675.670,67 11.645.522,46 31.095.117,96 15.064.969,75 27.676.921,87

44 ACCUMULATED DEPRECIATION NET BOOK VALUES 1.1.1999 Additions Disposals 31. 12. 1999 31. 12. 1999 31. 12. 1998 DM DM DM DM DM DM

1.251,20 257,76 257,76 1.251,20 0,00 0,00

0,00 0,00 0,00 0,00 27.675.670,67 11.645.522,46 1.251,20 257,76 257,76 1.251,20 27.675.670,67 11.645.522,46

1.1.2 Current assets through the issue of new bearer shares in the form of Receivables and other assets: individual share certificates on one or more occasions, The receivables and other assets do not contain any in return for contributions in cash or in kind, by August items with more than one year to maturity. 31, 2003.The new shares are to be accepted by banks, with the undertaking to offer them for subscription to Receivables from affiliated companies totalling the shareholders.The Managing Board is, however, aut- DM 17,392 thousand include trade receivables totalling horised to exclude residual amounts from the sharehol- DM 2,429 thousand. ders’ subscription right.The Managing Board is moreover authorised, with the approval of the Supervisory 1.2 Equity and liabilities Board, to exclude the subscription right of the sha- 1.2.1 Equity reholders in order to issue new shares against contri- The subscribed capital at December 31, 1999 totalled bution in kind.The Managing Board is moreover autho- EUR 3,600,000.-, divided into 1,200,000 bearer individu- rised to exclude the subscription right of the sharehol- al share certificates. Approved capital was in addition ders in order to issue up to 300,000 new shares at a pri- created.The Managing Board is, with the approval of ce which does not significantly undercut the stock mar- the Supervisory Board, authorised to raise the capital ket price for the company’s shares at the time the issue stock by up to EUR 1,533,875.64 (approved capital) price is determined by the Managing Board.

45 The capital stock has moreover been raised by an unis- As of February 15, 2000, the shares were split at a ratio sued amount of EUR 270,000.The increase of authori- of 1 to 3 pursuant to the resolution of the Sharehol- sed but unissued capital only becomes definitive inso- ders’ Meeting of May 11, 1999. Since the split, the sub- far as the bearers of the option certificates issued by scribed capital has consequently been divided into the company pursuant to the authorisation of the Ordi- 3,600,000 individual share certificates, and the authori- nary Shareholders’ Meeting of September 9, 1998 exer- sed but unissued capital into 270,000 individual share cise their subscription right to ordinary bearer shares in certificates; after splitting, the number of options alrea- the company (option right).The new shares qualify for dy issued on the authorised but unissued capital is profits from the start of the financial year in which they 96,390. are issued through the exercising of option rights.The authorised but unissued capital was divided into up to The individual financial statements are prepared in DM. 90,000 individual share certificates on December 31, The euro exchange rate is EUR 1 = DM 1.95583. 1999. The capital stock of Centrotec Hochleistungskunststof- With effect from July 1, 1999, 32,130 options (before fe AG, Marsberg, totals DM 7,041 thousand, and the ca- share split) were issued for employees, management pital reserve DM 20,259 thousand.The company has al- and board members, at the exercise price of EUR 44.30. located an amount of DM 1,015 thousand from the net The options may be exercised from July 1, 2001 to July income for the year to the revenue reserves, which now 1, 2006.The exercising of the options is tied to certain total DM 1,058 thousand. As a result of its distributable conditions and targets.They may only be exercised if profit for the year of DM 1,015 thousand, the com- the daily quotation at the Frankfurt Stock Exchange has pany’s equity at December 31, 1999 totals DM 29,373 risen by at least 30 % since the granting of the option. thousand. The exercising of the option is moreover tied to the at- tainment of individual targets by employees, manage- 1.2.2 Other provisions ment and board members. It is therefore uncertain The other provisions primarily include amounts for co- what proportion of the options issued will be exercised vering legal and consultancy costs, claims for outstan- in practice. ding vacation entitlements, costs of the Shareholders’ Meeting, industrial accident insurance contributions, Pursuant to the resolution of the Shareholders’ Meeting warranty obligations and credit notes to be issued. of May 11, 1999 the subscribed capital was denomina- ted in euro, individual share certificates were introduced and the capital stock was raised by means of a capital increase of EUR 532,248.71 from company funds, from EUR 3,067,751.29 or DM 6,000,000.- to EUR 3,600,000.-; to this end, the capital reserves of this amount shown in the balance sheet at December 31, 1998 were converted into capital stock.

46 1.2.3 Liabilities The remaining maturities are shown in the following table: (Prior-year figures in brackets)

thereof with a remaining maturity of At Dec. 31, 1999 less than between one more than one year and five years five years DM '000 DM '000 DM '000 DM '000 Due to banks 13.901 9.110 429 4.362 (4.999) (107) (429) (4.463) Trade payables 1.688 1.688 0 0 (0) (0) (0) (0) Other liabilities 192 192 0 0 (144) (144) (0) (0) 15.781 10.990 429 4.362 (5.143) (251) (429) (4.463)

The collateral provided for liabilities to banks consists As part of the takeover of the Ubbink Group, it was ag- principally of global assignments of receivables, stora- reed that Centrotec Hochleistungskunststoffe AG or a ge assignments of inventories, assignments of technical subsidiary would do all in its power to help sales repre- equipment and machinery as security, and a mortgage sentatives be released from rental guarantees.The ren- on the site of the Centroplast GmbH & Co. plant in tal agreements in question are an agreement in Eng- Marsberg, amounting to DM 5,000 thousand. land for annual rent of currently GBP 148,000 (DM 468 thousand), due to run until 2008, and a rental agree- At the closing date, DM 13,901 thousand of the liabili- ment in England for an annual rent of currently GBP ties were covered by collateral. 80,000 (DM 253 thousand), due to run until 2012. Cen- trotec Hochleistungskunststoffe AG moreover releases D. OTHER PARTICULARS its designated sponsors, M.M.Warburg & CO KG aA, Hamburg and Gontard & Metallbank AG, Frankfurt a.M. 1. Contingent liabilities from liability in connection with their sponsoring ac- The company is liable for the liabilities of Centroplast tivities, subject to this liability not resulting from gross Kunststofferzeugnisse GmbH & Co., Marsberg, on ac- negligence or fault on the part of the designated spon- count of its shareholder status. sor.

47 2. Other financial obligations 4. Average number of employees Leasing contracts result in financial obligations for the Over the period from January 1 to December 31, 1999, minimum leasing period of DM 288 thousand, inclu- the company had an average of one employee, plus ding DM 145 thousand for 2000. Financial obligations two board members. In the previous year, there was an totalling DM 29 thousand exist as a result of current average of one employee (board member). agreements. No material financial obligations were entered into by the group companies vis-à-vis and on 5. Management and supervisory bodies behalf of Ubbink Holding b.v. other than the employm- The Managing Board members in the financial year we- ent of equity. re Dipl.-Ing. Hans-Lothar Hagen, engineer, Altenbeken (Chairman) and Dr. Alexander Kirsch, businessman, Mül- 3. Own shares heim an der Ruhr. Herr Hagen is entitled to act as sole Pursuant to the resolution of the Shareholders’ Meeting representative of the company and is exempt from the of May 11, 1999 the company is authorised to acquire restrictions of § 181 of German Civil Code. Dr. Kirsch is own shares up to an amount not exceeding ten per- entitled to act as sole representative of the company. cent of the capital stock.The price paid for these shares may not be more than 15 % above or below the aver- The members of the Supervisory Board were Guido A. age of the daily quotations at the Frankfurt Stock Krass, entrepreneur (Chairman),Wadhurst, England, Dr. Exchange over the last ten trading days preceding the Bernhard Heiss, lawyer, Munich, and Dipl.-Kfm. Hans acquisition of the shares.The Managing Board is autho- Thomas, consultant businessman, Hofheim. In addition rised to sell these shares publicly or call them in with- to belonging to the corporate bodies of Centrotec out the need for a further resolution by a shareholders’ Hochleistungskunststoffe AG, the following members meeting. of the Managing and Supervisory Boards also sit on other supervisory boards of stock corporations: Dr. A. In the financial year under review, between June 10, Kirsch: Pari Capital AG, Munich. G.A. Krass: COS Commu- 1999 and June 17, 1999, a total of 5,140 own shares we- nity Online Service AG, Munich, Cloppenburg Automo- re acquired on the stock market at a price of DM 86.64 bil AG, Düsseldorf, pre-IPO AG, Hamburg, Pari Capital to DM 88.01.The purpose of acquiring these shares AG, Munich. Dr. B. Heiss: ArtMerchandising & Media AG, was to reduce the liquidity of the market in that parti- Munich, OPUS-1 Vermögensverwaltungs AG, Munich. cular trading phase. Later in the financial year, these No personnel changes to the company's Managing and own shares were sold again via the stock market at pri- Supervisory Boards occurred in the financial year. ces of between DM 107.62 and DM 109.96.This was do- ne in preparation for the impending takeover of Ub- 6. Total remuneration of corporate bodies bink, for which liquid funds were created to pay the Remuneration of the Supervisory Board totalled DM purchase price.The maximum level of own shares held 13.5 thousand in the financial year.The remuneration during the financial year was equivalent to 0.43 per- of the two board members and the one managing di- cent of the capital stock, i.e. these shares represented rector was not disclosed by analogous application of DM 30,158 of the capital stock. No own shares were the protective clause of § 286 IV of HGB, as the remun- held at the end of the financial year. eration paid to each individual member of the Mana-

48 ging Board can easily be deduced from this information.

7. Shareholdings The company owned holdings in the following companies at the balance sheet date:

Holding Name/registered office % Centroplast Kunststofferzeugnisse GmbH & Co., Marsberg 100 Centrotherm Abgastechnik GmbH, Marsberg 100 Centroplast Verwaltungs-GmbH, Marsberg 100 Ubbink Holding B.V., Doesburg, Niederlande 100 Ubbink International B.V., Amstelveen, Niederlande 100 Rega Ubbink Ltd., Sandy, England 100

The equity of these subsidiaries and their result for the past financial year are not indicated here, on the basis of § 286 Para. 3 No. 2 HGB.

Marsberg, February 24, 2000

CENTROTEC Hochleistungskunststoffe AG

Hans-Lothar Hagen Dr. Alexander Kirsch Chairman of the Board Member Managing Board for Finance

49 Independent auditor’s report