Annual report 2005 Financial by Sioen Industries

SIOEN INDUSTRIES I

FINANCIAL OVERVIEW

SIOEN INDUSTRIES CONSOLIDATED

89 92 94 95 96 97

98 106 109 110 113 132 135 143 144 147

COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS I. CONSOLIDATED BALANCE SHEET II.1 CONSOLIDATED INCOME STATEMENT BY FUNCTION II.2 CONSOLIDATED INCOME STATEMENT BY NATURE III. CASH FLOW STATEMENT IV. EQUITY STATEMENT V. DISCLOSURES V.1 KEY ACCOUNTING RULES V.2 SEGMENT INFORMATION V.3 EXCHANGE RATE V.4 DETAILED INCOME STATEMENT V.5 DETAILED BALANCE SHEET VI. OTHER VII. IFRS VIII. STATUTORY AUDITOR’S REPORT IX. STATUTORY ANNUAL ACCOUNTS OF SIOEN INDUSTRIES X. PROPOSAL TO THE ANNUAL MEETING

149 150

FINANCIAL CALENDAR ADDRESSES

SIOEN INDUSTRIES I

COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS

TURNOVER In 2005 the Sioen Industries Group realised a turnover of EUR 316.2 million, as compared to EUR 309.8 million last year, i.e. an increase of 2%. Thus the Coating Division remained at a status quo (+0.06%). By contrast, the Apparel Division grew by 14,5%, with the turnover of EUR 68.3 million in 2004 rising to EUR 78.1 million in 2005. The “Industrial Applications” Division was confronted with a decline in its activities by 5.2%. The turnover fell from EUR 70.9 million in 2004 to EUR 67.4 million in 2005. In this segment we are waiting for the deﬁnitive attribution of a number of calls for tender won by the Group. Probably these will contribute to the turnover of 2006.

GROSS MARGIN – EBITDA - EBIT Last year, the operational cash flow (EBITDA) of the Coating Division was strongly influenced by the historically high oil prices and the uncertainty about economic development in certain countries. This means that the whole sector continues to struggle with a constant increase in the prices of the primary raw materials (polyester granulates, PVC powders, plasticisers, technical fillers, pigments, etc.). On the whole, polymers, raw materials derived from petroleum, constitute the bulk of the purchased raw materials. The effects of this additional cost were mitigated as much as possible, first by implementing price increases and secondly by making continuous efforts in the area of efficiency increases and cost savings. As a result, the impact of the high raw material prices on the EBITDA was limited: the EBITDA fell to 15% of turnover compared to 17% in 2004. In the Apparel Division, under the impact of changes in the sales mix and the supplementary “low end” products, the operational cash flow (EBITDA) in the past year amounted to 7% compared to 8% in the previous year. The EBIT follows the same pattern as the operating cash flow. The charges for depreciation and impairments on customers and non-revolving inventories rose (7% in 2004 and 4% in 2005). The operating cash flow of this division amounts to 13% of the turnover, compared with 9% the previous year. This is primarily attributable to a significant improvement in the efficiency of industrial processes in these branches.

In the Industrial Applications, segment, the efficiency improvement in the industrial processes made the EBIT rise by 4% to 10% of turnover (EUR 1.3 million less personnel expenses, compared to last year for the same turnover). Several significant write-offs on receivables, set up in 2004, could be reversed here. The services and other goods and personnel expenses rose slightly, due partly to the increase in energy prices. The cost structure remains firmly under control. The other operating revenue rose from EUR 1.9 million to 4.0 million, coming mainly from the gain (EUR 1.1 million) on the sale of buildings in Antwerp (Sioen NV) and Southern France (SIP), indemnities received in the amount of EUR 0.2 million, rental income in Nordifa (EUR 0.3 million) and Roland (EUR 0.4 million), government grants on R&D in Ireland and Belgium (EUR 0.2 million) and another EUR 1.4 million for miscellaneous revenue items under EUR 50k. The other operating expenses rose from EUR 4.9 million to EUR 5.7 million and consist mainly of local taxes. The company made a provision of EUR 0.8 million relating to a dispute over real estate tax. The depreciation method for inventories is consistently applied, as is the case for trade receivables. The real losses on customers in 2005 amounted to only EUR 0.3 million, which represents 0.1% of turnover.

NET PROFIT The financial result amounts to EUR -5.5 million, as compared to EUR -7.7 million in 2004. The average net financial debt position rose at the end of the year by 7.7% to EUR 126.8 million (in 2004 EUR 117.7 million). The financial charges fell under the impact of the low interest rate and the realised exchange rate gains (EUR 0.5 million) under the current hedging contracts. Thanks to the better financial results, Sioen realised a profit of EUR 19.9 million before taxes, as compared to EUR 19.6 million last year.

SIOEN INDUSTRIES I

COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS

The consolidated actual tax rate amounted to 32% in 2005 compared to 33.19% in 2004. The reversal and the non-recognition of tax assets on the one hand and the reversal of earlier established tax liabilities on the other keep the actual tax rate at the same level. Given that in 2005 there are almost no more minority shareholders in the subsidiaries, the net result (group‘s share) rose to EUR 13.6 million in 2005, as compared to EUR 12.3 million in 2004.

INVESTMENTS The total acquisition of property, plant and equipment in 2005 amounted to EUR 16.6 million (including capital grants). The assets under construction concerns the new coating line in Saint Frères Enduction, the warehouse under construction in EMB and the needle felt production line in Nordifa which was not yet in use in 2005. In 2005 a capital grant was received from the Walloon Region for EUR 0.8 Million. This was deducted from the acquisitions.

BALANCE SHEET The working capital rose by EUR 17 million, an increase of 4% on turnover, and is now situated at 34% compared to 29.4% in 2004. The inventory rose by EUR 8 million, of which EUR 6.3 million is in the Apparel Division due to a large order that is being delivered at the beginning of 2006. The customers increased by EUR 5.6 million, of which EUR 3.5 million is in the Apparel Division due likewise to partial delivery of a major order at the end of 2005. We note that the level of the working capital at the end of 2004 was distorted by a one-time effect (liability towards minority shareholder in the amount of EUR 5.8 million).

RISK FACTORS Sioen Industries NV is a company listed on Euronext that does not itself engage in any industrial activity. Sioen Industries holds participating interests in companies active in the following sectors: The application of coatings to technical textiles. The design, development and production of protective clothing. The processing of heavy technical fabrics into finished products. With regard to its income, Sioen Industries is dependent on the economic success of these divisions. In turn, these divisions are dependent on general economic trends, and more specifically: ❱ The volatility of oil prices and the (more or less related) volatility of the prices of the primary raw materials. (PVC, Polyester, plasticisers, etc.) ❱ With regard to the processing of heavy technical fabrics, the evolution of the company has kept pace with the development of the truck sector. ❱ The protective clothing division follows the current trend in industrial activity in Western Europe, where less emphasis is being put on volume than on the technical specifications of the clothing. ❱ And last but not least we may also note that there is a certain dependence on the weather.

SIOEN INDUSTRIES I

I. CONSOLIDATED BALANCE SHEET IN THOUSANDS EURO

ASSETS

2004

2005

2.796 16.548 141.442 684 9.261

2.267 16.548 142.278 59 524 7.010

170.731

168.686

70.466 63.818 8.477 1.963 12.923 2.282

78.463 69.416 11.118 260 8.312 1.428

TOTAL CURRENT ASSETS

159.930

168.997

TOTAL ASSETS

330.661

337.683

Non-current Assets Intangible assets Goodwill Property, plant & equipment Long-term trade receivables Other long-term assets Deferred tax assets

Note V.5.1 V.5.2 V.5.4 V.5.5 V.5.5 V.5.15

TOTAL NON-CURRENT ASSETS

Current Assets Inventories Trade receivables Other receivables Other investments & deposits Cash and cash equivalents Deferred charges and accrued income

The consolidated income state 2005 has been approved by the Board of Directors for publication on 28 March 2006.

V.5.6 V.5.7 V.5.8 V.5.8 V.5.8 V.5.8

SIOEN INDUSTRIES I

I. CONSOLIDATED BALANCE SHEET IN THOUSANDS EURO

LIABILITIES

2004

2005

46.000 72.439 (137) -

46.000 81.318 2.046 19

IV.

118.302

129.383

V.5.11 V.5.10 V.5.9 V.5.15 V.5.12 V.5.11

54.336 966 1.198 21.581 14.153 33

53.831 1.023 1.256 16.821 13.049 33

92.267

86.012

31.084 64.045 1.521 64 7.216 39 16.123

36.510 68.355 379 65 5.589 77 11.313

TOTAL CURRENT LIABILITIES

120.092

122.288

TOTAL LIABILITIES

330.661

337.683

Equity Share Capital Retained earnings Hedging and translation reserves Minority interests TOTAL EQUITY

Note

V.5.14

Non-current liabilities Interest-bearing loans – payable after one year Provisions Pension obligations Deferred tax liabilities Finance leasing – payable after one year Other amounts - payable after one year TOTAL NON-CURRENT LIABILITIES

Current liabilities Trade and other payables Interest-bearing loans - up to one year Provisions - up to one year Pension obligations - up to one year Tax liabilities Finance leasing - up to one year Other amounts - payable up to one year

V.5.13 V.5.11 V.5.10 V.5.9 V.5.13 V.5.12 V.5.13

SIOEN INDUSTRIES I

II.1 CONSOLIDATED INCOME STATEMENT BY FUNCTION I IN THOUSANDS OF EUROS

See note V.4

2004

% of Turnover

2005

% of Turnover

309.802

100,0%

316.237

100,0%

Cost of sales

-242.270

-78,2%

-253.214

-80,1%

Gross proﬁt

67.532

21,8%

63.022

19,9%

Sales and marketing expenses Research and development expenses General and administrative expenses

-16.246 -2.723 -21.114

-5,2% -0,9% -6,8%

-15.896 -4.217 -19.887

-5,0% -1,3% -6,3%

666 -1.129

0,2% -0,4%

2.940 -505

0,9% -0,2%

26.987

8,7%

25.457

8,1%

-7.341

-2,4%

-5.470

-1,7%

19.646

6,3%

19.987

6,3%

-6.520

-2,1%

-6.399

-2,0%

13.126

4,2%

13.588

4,3%

-874

-0,3%

-6

0,0%

Share of the group

12.252

4,0%

13.582

4,3%

EBITDA EBIT Cash ﬂow NOPAT

44.794 26.987 31.093 20.467

14,5% 8,7% 10,0% 6,6%

43.647 25.457 29.535 19.058

13,8% 8,1% 9,3% 6,0%

Net sales

Other operating income/expenses Non-recurrent result(1) Operating result Financial result Result before taxes Taxes Result after taxes Minority interests

(1)

This concerns one-time restructuring costs.

SIOEN INDUSTRIES I

II.2 CONSOLIDATED INCOME STATEMENT BY NATURE I IN THOUSANDS OF EUROS

2004 Net sales Change in inventories Other operating income OPERATING REVENUE Cost of sales

309.802 (9.871) 1.969 301.900 141.803

Gross margin

51,04%

% of Turnover -3% 1% 46%

2005 316.237 4.647 4.026 324.910 162.182

% of Turnover 1% 1% 51%

50,18%

Services and miscellaneous goods Remuneration, social security and pensions Depreciation Amounts written off on inventories and trade receivables Provisions for liabilities and charges Other operating costs Non-recurrent result

47.511 61.719 17.838 1.051 (1.081) 4.945 1.129

15,3% 19,9% 5,8% 0,3% -0,3% 1,6% -0,4%

49.368 63.450 17.899 862 (572) 5.758 505

15,6% 20,1% 5,7% 0,3% -0,2% 1,8% -0,2%

OPERATING RESULT

26.987

8,7%

25.457

8,1%

FINANCIAL RESULT

(7.341)

-2,4%

(5.470)

-1,7%

RESULT BEFORE TAXES

19.646

6,3%

19.987

6,3%

TAXES

(6.520)

-2,1%

(6.399)

-2,0%

RESULT AFTER TAXES

13.126

4,2%

13.588

4,3%

MINORITY INTERESTS

(874)

-0,3%

(6)

-0,0%

SHARE OF THE GROUP

12.252

4,0%

13.582

4,3%

EBIT EBIT%

26.987 8,7%

25.457 8,1%

EBITDA EBITDA%

44.794 14,5%

43.647 13,8%

Cash ﬂow Cash ﬂow%

31.093 10,0%

29.535 9,3%

251.713 20.467 8,13%

268.686 19.058 7,09%

Capital employed NOPAT ROCE

SIOEN INDUSTRIES I

III. CASH FLOW STATEMENT

2004

2005

28.115 (1.129) 17.838

Proﬁt from recurrent operating activities Non-recurrent result Depreciation Impairments Amounts written-off on inventories and receivables Changes in provisions Changes in working capital Other changes Changes in deferred tax Cash ﬂow from operating activities Tax

1.051 (98) 18.883 205 (1.316) 63.549 (6.520)

25.962 (505) 17.899 862 (1.026) (16.664) (472) (2.508) 23.549 (6.399)

Net cash ﬂow from operating activities

57.029

17.150

Interest received New participations Investments in intangible and tangible ﬁxed assets Desinvestments in intangible and tangible ﬁxed assets Increase in investment grants

308 (5.828) (11.678) 961 1.660

343 (19.571) 534 830

Net cash ﬂow from investing activities

(14.577)

(17.865)

42.452

(715)

Interest paid Dividend distributed Increase in long term interest-bearing loans Decrease in long term interest-bearing loans Increase/(Decrease) in short term interest-bearing loans Increase/(Decrease) in ﬁnance leasing Other Exchange rate result

(6.925) (4.278) 15.000 (22.085) (22.518) 2.658 (560) (163)

(6.280) (4.706) 20.000 (24.293) 8.097 (1.066) (18) 484

Cash ﬂow from ﬁnancing activities

(38.871)

(7.781)

Effect of exchange rate ﬂuctuations Changes in cash and cash equivalents Net cash position at start of period Net cash position at end of period

(137) 3.444 11.443 14.887

2.182 (6.314) 14.887 8.572

Net cash ﬂow before ﬁnancing activities

IV. EQUITY STATEMENT

sts

ere

rve

rit y

Int

res e

dg ing

ion Co nv ers

rve Re se

pit

dif fer e

SIOEN INDUSTRIES I

2005 At the end of last financial year Profit of the year Dividends Hedging for increases/decreases in value not included in profit and loss statement Deferred taxes Currency differences Others At the end of current financial year

46.000

72.439

-137

13.582 -4.707

-636 216 2.603 46.000

4 81.318

2.466

46.000

67.073

17 -4 19

-420

2004 At the end of last financial year Profit Dividends Hedging for increases Deferred taxes Currency differences Others(1) At the end of current financial year

2.497

12.252 -4.454

874

-137 46.000

-2.432 72.439

-4 -3.367 0

-137

(1 )

At the end of 2004 Sioen Industries NV purchased the remaining 25% of Coatex, Saint-Frères Confection and Bacam. The goodwill was deducted from the consolidated reserves (see notes V.5.16).

SIOEN INDUSTRIES I

V.1 KEY ACCOUNTING RULES

SUMMARY OF KEY ACCOUNTING RULES The consolidated annual accounts of Sioen Industries NV (the ‘Company’) include the annual accounts of the Company, its subsidiaries and those entities which are consolidated by the proportional method (together referred to as the ‘Group’ from now on). The consolidated ﬁnancial statements are drawn up in conformity with the International Financial Reporting Standards (IFRS), as accepted within the European Union. On the ﬁrst application of the IFRSs, in 2005, the consolidated annual accounts will be drawn up in accordance with IFRS 1 – First-time adoption of International Financial Reporting Standards.

IFRS 1 I First-time adoption of International Financial Reporting Standards In accordance with IFRS 1- First-time adoption of IFRSs, the opening balance sheet has been drawn up by retroactively applying those IFRSs which were in force on the reporting date. However, IFRS 1 sets out a number of exceptions which can be applied. Sioen Industries has applied the following exceptions: Business combinations which predate the transition date do not have to be restated retroactively. IFRS 3 – Business combinations was not retroactively applied to business combinations which took place before 1 January 2003. Certain tangible fixed assets were valued at market value. This market value is used as the presumed cost price. This exception was used for a limited number of items in tangible fixed assets, mainly land. Cumulative actuarial gains and losses were recognised in equity on the transition date. After the transition date, Sioen Industries will continue to apply the current ‘corridor’ as stipulated in IAS 19 - Employee benefits. Previously recognised conversion differences, deriving from the conversion into euros of foreign-currency financial statements of foreign entities, were reset to 0.

IFRS 2 - Share-based payment. Sioen Industries has opted to apply the transitional measures prescribed by IFRS 2. As of 1 January 2004, no new equity instruments have been issued.

General principles The consolidated annual accounts give a general overview of the Group’s activities and the results obtained. They give an accurate picture of the entity’s financial position, financial performance and cash flow, and are drawn up on a going concern basis. The annual accounts are stated in thousands of euros, as the euro is the currency of the primary economic environment in which the Group is active. The annual accounts of foreign holdings are converted in accordance with the principles described in the section ‘Foreign currencies’. The consolidated accounts are presented on the basis of the historical cost method, unless otherwise stipulated in the accounting principles set out below. Foreign currencies On the basis of the Group’s relevant economic environment and its transactions, the euro has been chosen as the reporting currency. Foreign subsidiaries’ financial statements are converted as follows: Transactions in foreign currencies are converted at the exchange rate which applied on the date of the transaction. On each balance sheet date, cash assets and liabilities expressed in foreign currency are converted at the closing rate. Non-cash assets and liabilities which are shown at their fair value in a foreign currency are converted at the exchange rate which applied when their fair value was determined. Gains and losses arising from such conversions are recorded in the profit and loss account. However, if they are deferred, they are recorded as equity. Assets and liabilities from the Group’s foreign activities are converted at the closing rate. Income and expenses are converted at the average exchange rate over the period, unless exchange rates have fluctuated greatly. The resultant exchange rate differences are recorded in equity, under the heading “Conversion differences”.

SIOEN INDUSTRIES I

V.1 KEY ACCOUNTING RULES

If a foreign activity is disposed of, the cumulative amount of the exchange rate differences that was recognised in equity is recorded in the proﬁt and loss account. Goodwill and adjustments to the fair value arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and converted at the closing rate.

All intercompany transactions, intercompany balances and unrealised proﬁts on intercompany transactions are eliminated unless they relate to a permanent write-down.

Consolidation principles

Balance sheet

Subsidiaries Subsidiaries are companies over which the Company exercises a decisive influence (‘control’). Control is the power to steer an entity’s financial and operational policy in order to derive benefit from its activities. The consolidation of subsidiaries starts on the date on which the Group acquires control over them and stops when it loses that control. The companies in question are accounted for by the full consolidation method.

Intangible assets Intangible assets are valued at cost price. Intangible assets are recognised if it is likely that the Group will receive the associated future economic benefits and if the asset’s cost price can be reliably determined. After their initial recognition in the accounts, all intangible assets are valued at cost price, less any accumulated depreciation or impairments. Intangible assets are depreciated on a straight-line basis over the best estimate of their economic life. The remaining economic life and the depreciation method used are reassessed at the close of every financial year. Any change in the economic life of an intangible asset is treated as a revaluation. Internally generated intangible assets are only recognised if all the following conditions are satisfied:

Subsidiaries’ annual accounts are drawn up for the same financial year as those of the parent company and on the basis of uniform financial reporting principles for comparable transactions and other events in similar circumstances. Combinations of companies If the Group takes over an entity or business activity, the identifiable assets, liabilities and contingent liabilities of the party which has been taken over are adopted at their fair value. Subsidiaries’ financial statements are included in the scope of consolidation from the date of acquisition until control ceases. The difference between the cost price and the acquiring party’s stake in the net fair value of the identifiable assets, liabilities and contingent liabilities is recorded as goodwill. If this difference is negative, the surplus, after reassessment of the fair values, is accounted for directly in the profit and loss account. If the group increases its interest in an investment in which it did not yet have control, the surplus or deficit compared with the net asset, after adjustment to the fair value that was acquired, is processed as if it were a new acquisition according to the methodology explained in the above section. If the group increases its interest in an investment in which it already had control, the greater or lesser price that was paid vis-à-vis the share in the net assets that was acquired, is included directly in the company’s own equity.

Minority interests are valued on the basis of their share in the fair value of the recorded assets, liabilities and contingent liabilities.

❱ an identifiable asset has been generated ❱ it is likely that the generated asset will yield future economic benefits; and ❱ the asset’s cost price can be reliably determined. Subsequent expenditure on capitalised intangible assets is only included in the balance sheet if it increases the likely future economic benefits associated with the asset concerned. All other expenditure is recorded in the profit and loss account at the time it is incurred. Licences, patents and similar rights Expenditure on purchased licences, patents, trademarks and similar rights is capitalised and depreciated on a straight-line basis over the contractual term, where applicable, or over the estimate economic life, which is deemed to be no more than five years.

SIOEN INDUSTRIES I

V.1 KEY ACCOUNTING RULES

Computer software Expenditure relating to the development or maintenance of computer software is normally offset against the result of the period in which it is incurred. Only external expenditure which is directly related to the purchase and implementation of purchased software is recorded as an intangible asset and depreciated on a straight-line basis over three years. Purchased ERP software and the associated implementation costs are depreciated on a straight-line basis over seven years. Research and development Research expenditure with a view to the acquisition of new scientific or technological insights or knowledge is included as a cost in the profit and loss account as it arises. Development expenditure in which research results are used in a plan or design for the production of new or substantially improved products and processes prior to commercial production or implementation is only recognised in the balance sheet if all the following conditions are satisfied: ❱ the product or process is precisely defined and the expenditure is individually identifiable and reliably measurable; ❱ the product’s technical feasibility has been sufficiently demonstrated; ❱ the product or process will be commercialised or used within the company; ❱ the assets will generated future economic benefits (e.g. a potential market exists for the product or its internal usefulness has been sufficiently proven); ❱ the appropriate technical, financial and other resources are available to finalise the project. If the above criteria are not satisfied, the development costs are taken to the profit and loss account as they arise. Capitalised development costs are depreciated on a straight-line basis over the expected duration of the generated benefits from the start of commercial production or the implementation of the product or process.

Goodwill Goodwill represents the additional premium paid on the acquisition of an interest over the fair value of the Group’s interest in the acquired assets and liabilities at the time of acquisition. Goodwill is recorded as an asset and subjected to a impairment test at least once a year. Any impairment loss is immediately recorded in the profit and loss account and is not subsequently written back. Negative goodwill represents the amount by which the fair value of the Group’s interest in the acquired assets and liabilities at the time of acquisition exceeds the price paid. On the disposal of a subsidiary, associated undertaking or entity over which joint control is exercised, the related goodwill is included in the calculation of the gain or loss on disposal. Tangible fixed assets Tangible fixed assets are valued at cost price less accumulated depreciation and impairments. A tangible fixed asset is recognised if it is likely that the Group will receive the associated future economic benefits and if the asset’s cost price can be reliably determined. The cost price includes all direct costs and all directly attributable costs incurred in order to bring the asset to the location and condition necessary for it to function in the intended way. Interest during construction is not capitalised. Subsequent expenditure associated with a tangible fixed asset is usually recorded in the profit and loss account as it is incurred. Such expenditure is only capitalised if it can be clearly shown to result in an increase in the expected future economic benefits from the use of the tangible fixed asset compared with the original estimate. Repair and maintenance costs which do not increase the likely future economic benefits are recorded as costs as they are incurred. The different categories of tangible fixed assets are depreciated by the straight-line method over their estimated economic life. Depreciation commences once the assets are ready for their intended use.

100

SIOEN INDUSTRIES I

V.1 KEY ACCOUNTING RULES

The estimated economic life of the main tangible ﬁxed assets lies within the following ranges: Buildings: Machines: Equipment: Furniture: Hardware: Vehicles:

20 years 5 to 15 years 10 years 5 years 5 years 5 years

If an asset’s book value is lower than the estimated realisable value, it is immediately written down to the realisable value. The gain or loss on the sale or disposal of an asset is determined as the difference between the net income on disposal and the asset’s book value. This difference is recorded in the profit and loss account. Lease agreements Financial leasing Lease agreements which assign to the Group all the main risks and benefits associated with ownership are regarded as financial leasing. The assets acquired under financial leasing arrangements are stated in the balance sheet at their fair value at the start of the lease agreement, or, if this is lower, at the present value of the minimum lease payments, less accumulated depreciation and impairments. The discount rate used in the calculation of the present value of the minimum lease payments is the interest rate implicit in the lease agreement, where this can be determined, or otherwise the company’s marginal borrowing rate. Initial direct costs are included in the capitalised amount. Lease payments are broken down into interest charges and repayments of the principal. The interest charges are spread over the duration of the lease agreement such that a constant periodic interest rate is obtained on the outstanding balance for each period. A financial lease agreement results in the recording of both a depreciation amount and an interest charge in each period. The depreciation rules for assets acquired under financial leasing arrangements are consistent with those for assets over which full ownership is acquired. Operational leasing Lease agreements in which all the main risks and benefits associated with ownership reside with the lessor are regarded as operational leasing. In operational leasing, the lease payments are

recorded as costs and spread on a straight-line basis over the lease period. The total value of discounts or benefits granted by the lessor is offset against the leasing costs and spread on a straight-line basis over the lease period. Property investments A property investment, i.e. one which is maintained in order to generate rental income, an appreciation of value or both, is shown at fair value on the balance sheet date. Gains or losses arising from a change in the fair value of a property investment are recorded in the results for the period in which they arise. Financial investments Investments are recorded in/ removed from the accounts on the transaction date, i.e. the date on which an entity undertakes to buy or sell the asset in question. Financial investments are valued at the fair value of the price paid, plus the transaction costs. Investments held for trading or available for sale are recorded at their fair value. If investments are maintained for trading purposes, the gains and losses arising from changes in the fair value are taken to the profit and loss account for the period in question. In the case of investments which are available for sale, gains and losses arising from changes in the fair value are immediately recognised in equity until the financial asset is sold or subject to impairment. In this case, the cumulative gain or loss which had previously been recognised in equity is included in the profit and loss account for the period. Holdings which are not classified as available for sale, which are not listed on an active market and whose fair value cannot reliably be determined using alternative valuation rules are valued at cost price. Financial investments which are held until they mature are valued at their amortised cost price, using the effective interest method. This does not apply to short-term deposits, as these are valued at their cost price. Investment grants Investment grants relating to the purchase of tangible fixed assets are offset against the purchase price or manufacturing cost of the assets in question. The expected amount is recorded in the balance sheet at the time of initial approval, and, if necessary, corrected subsequently at the time of definitive allocation of the grant. The grant is recorded in the profit and loss account in proportion with the depreciation of the tangible fixed assets for which it was obtained.

101

SIOEN INDUSTRIES I

V.1 KEY ACCOUNTING RULES

Inventories Inventories are valued at the lower of cost price or realisable value. The cost price includes all direct and indirect costs incurred to bring the goods to the stage of completion they have reached on the balance sheet date. The cost price is calculated using the weighted average cost price method. The realisable value is the estimated sale price minus the estimated finishing costs and costs associated with marketing, sale and distribution. Receivables Short-term receivables are stated at nominal value, less suitable provisions for any debts regarded as doubtful. Long-term receivables are valued at amortised cost price. Cash and cash equivalents Cash and short-term investments which are maintained until the end of the period are stated at their cost price. Cash equivalents are short-term, extremely liquid investments which can be converted immediately into cash of a known amount, and which do not carry any material risk of change of value. Financial liabilities and equity instruments Financial liabilities and equity instruments are classified on the basis of the economic reality of the contractual agreement. An equity instrument is a contract which includes the residual right to a share in the Group’s assets, after the deduction of all liabilities. Equity instruments issued by the Company are recorded to the amount of the received consideration, less the direct costs of issue. Income tax Tax expenses consist of tax due for the reporting period and deferred taxes. The tax due for the reporting period is based on the taxable profit for the period. Taxable profit differs from the net profit in the profit and loss account, because it excludes certain items of income or expenditure which are taxable or deductible in subsequent years, or which will never be taxable or deductible. The current tax liability is calculated on the basis of the tax rates for which the legislative process has been (substantially) completed by the balance sheet date.

102

Deferred taxes are taxes which are expected to be paid or recovered on the basis of differences between the book value of assets or liabilities in the annual accounts and their taxable value used for the calculation of the taxable profit. They are account for using the balance sheet liability method. Deferred tax liabilities are usually recognised for all taxable temporary differences and deferred tax receivables are recognised to the extent that it is likely that a taxable profit will be available against which the recoverable temporary difference can be offset. Such assets and liabilities are not recorded if the temporary differences arise from goodwill or from the initial recognition (other than in connection with a business combination) of other assets and liabilities in a transaction which has no effect on the taxable profit or the profit before tax. Deferred tax liabilities are recognised for taxable temporary differences which relate to investments in subsidiaries, associated undertakings and enterprises accounted for by the equity method, unless the Group can determine the time when the temporary difference will be resolved or if it is likely that the temporary difference will not be resolved in the near future. The book value of deferred tax receivable is assessed at every balance sheet date and reduced if it is no longer likely that sufficient taxable profit will be available to make it possible to use all or some of the benefit of the deferred tax receivable. Deferred taxes are valued on the basis of the tax rates which are expected to apply in the period in which the tax recovery is realised or the liability is settled. Deferred taxes are recorded as income or expenses in the profit and loss account for the period, unless the taxation arises from a transaction or event that has been directly included in equity. In this case, the deferred tax is also accounted for in equity. Pensions and related liabilities In accordance with laws and practices of each country, associated entities have either defined benefit schemes or defined contribution schemes. Defined contribution schemes Contributions to defined contribution schemes are recorded as an expense as they fall due.

SIOEN INDUSTRIES I

V.1 KEY ACCOUNTING RULES

Defined benefit schemes In defined benefit schemes, the amount on the balance sheet (the ‘net liability’) corresponds to the present value of the gross liability, adjusted for unrecorded actuarial gains and losses, after deduction of the fair value of the scheme investments and unrecorded prior service costs. The ‘present value of the gross liability of a defined benefit scheme’ is the present value, before deduction of the scheme investments, of expected future payments required to settle the liability which results from the employee’s service record in the current and previous periods. The discounted value of the liability arising from defined pension rights and the assigned pension costs associated with the year of service and prior service pension costs are calculated by accredited actuaries using the projected unit credit method. The discount rate corresponds to the rate of return on the balance sheet date on corporate bonds with a high degree of creditworthiness and a remaining term comparable with the term of the Group’s liabilities. The discount rate is adjusted annually to reflect the market return from high-value corporate bonds whose term is consistent with the estimated term of the gross liabilities arising from payments after retirement. ‘Actuarial gains and losses’ include adjustments on the basis of experience (the consequences of differences between previous actuarial assumptions and what has actually happened) and the consequences of changes to actuarial assumptions. In principle, actuarial gains and losses are not recognised at the moment they arise, but, to the extent that the cumulative amount falls outside a certain ‘corridor’, they are spread on a straight-line basis over the expected average remaining working life of the employees who are members of the scheme. This corridor is determined individually for each defined benefit scheme and has lower and upper limits of 110% and 90% respectively of the higher of the present value of the gross liabilities and the fair value of the scheme investments. ‘Prior service costs’ refer to the increase in the present value of the gross liability for services provided by employees in previous periods and which result in the current period from the introduction of or changes to payments after retirement or other long-term personnel remuneration. Prior service costs are taken gradually to the profit

and loss account and spread on a straight-line basis over the average term until the benefit rights have been acquired. If benefit rights can be regarded as acquired as a result of a new scheme or changes to an existing scheme, prior service costs are immediately recorded in the profit and loss account. If the liability to be recorded on the balance sheet is negative, the asset entry that is included may not exceed the total unrecorded cumulative actuarial net losses and prior service costs and the present value of future repayments from the scheme or reductions in future contributions to the scheme (the ‘asset ceiling’ principle). In this case, however, the actuarial gains and losses are immediately taken to the profit and loss account if deferring them would result in the recording of a gain purely as a consequence of an actuarial loss in the current financial year, or of a loss purely and simply as a consequence of an actuarial gain in the current financial year. Prior service costs are in this case likewise immediately included if spreading them out on a straight-line basis would result in the recording of a gain purely as a consequence of an increase in prior service costs during the current financial year. Other long-term personnel remuneration Other long-term personnel remuneration such as long-service bonuses is accounted for using the ‘projected unit credit’ method. However, the accounting treatment differs from that of defined benefit schemes, in that actuarial gains and losses and prior service costs are recorded immediately. Provisions Provisions are established in the balance sheet if the Group has a legally enforceable or de facto liability on the balance sheet date as a result of an event in the past, for which it is likely that an outlay will be required of resources which contain economic benefits, and if this outlay can be reliably estimated. The amount recorded as a provision is the best estimate on the balance sheet date of the outlay required to satisfy the existing liability, if necessary discounted if the time value of money is relevant. Provisions for reorganisation costs are recorded if the Group has a detailed formal plan for the reorganisation that has already been communicated to the parties concerned before the balance sheet date.

103

SIOEN INDUSTRIES I

V.1 KEY ACCOUNTING RULES

Interest-bearing financing Interest-bearing financing is recorded at the value of the income received less transaction costs incurred. It is then valued at amortised cost price using the effective interest rate method. Any difference between the income (after deduction of transaction costs) and the redemption value (including premiums payable on redemption) is recorded in the profit and loss account over the period of the financing. Trading accounts payable and other payables Non-interest-bearing trade liabilities are valued at their cost price, which represents the fair value of the amount payable. Derivative financial instruments The Group uses various derivatives to hedge against currency risks arising from its operating activities, financing and investment activities. The net risk of all Group subsidiaries is managed centrally in line with the objectives and rules established by the Group management. It is the Group’s policy to avoid engaging in speculative transactions or transactions with a leverage effect and not to engage in trading in financial instruments under any circumstances. Derivative financial instruments are treated as follows: Cash flow hedging Changes in the fair value of derivative financial instruments which are ascertained to provide effective hedging for future cash flows are recorded directly in equity, while the non-effective element of the gain or loss on the hedging instrument is recorded in the profit and loss account. If the cash flow hedging of a fixed commitment or a highly likely future transaction results in the recognition of an asset or liability, then the associated profits and losses on the derivative instrument which were formerly recorded in equity are now included in the initial valuation of the asset or liability at the time of recognition. For hedges which do not result in the recognition of an asset or liability, amounts which were deferred in equity are recorded in the profit and loss account for the period during which the hedged item affects the gain or loss.

104

Fair value hedging A derivative instrument is recorded as a fair value hedge if the instrument hedges against the risk that the fair value of the recorded assets and liabilities may change. Derivatives accounted for as fair value hedges and hedged assets and liabilities are recorded at their fair value. The corresponding changes in the fair value are recorded in the profit and loss account. Changes in the fair value of derivative financial instruments which do not qualify as hedging transactions are recorded in the profit and loss account when they arise. Hedge accounting is discontinued when the hedging instrument expires, is sold, terminated or exercised or when the hedging no longer satisfies the criteria for hedge accounting. In this case the cumulative gain or loss on the hedging instrument which is accounted for directly in equity continues to be recorded separately in equity until the expected future transaction takes place. If an expected future transaction is not expected to take place any more, the cumulative gain or loss shown in the equity is transferred to the profit and loss account for the period.

Income Income is recorded if it is likely that the company will receive the economic benefits associated with the transaction and the amount of the income can be measured reliably. Turnover is recorded after the deduction of turnover tax and discounts. Income from the sale of goods is recorded when the delivery and the complete transfer of risks and benefits have taken place. Interest income is recorded on a time basis that reflects the actual return on the asset. Royalties are included on an accrual basis in accordance with the conditions of the agreement. Dividends are recorded when the shareholder’s right to receive them has arisen.

SIOEN INDUSTRIES I

V.1 KEY ACCOUNTING RULES

Miscellaneous Impairment of tangible and intangible assets Like goodwill, which is subjected to an impairment test every year, intangible assets and tangible fixed assets also undergo such a test when there is an indication that their book value may be lower than their realisable value. If an asset does not generate a cash influx which is independent of other assets, the Group estimates the realisable value of the cash flow generating unit to which the asset belongs. The realisable value is the highest value of the fair value minus sales costs and the value to the business. The method of the going concern value uses cash flow forecasts based on the financial budget that is approved by the management. Cash flows after this period are extrapolated by making use of the most justified percentage growth over the long term for the sector in which the cash flow-generating unit is active. The management bases its assumptions (prices, volumes, return) on past performances and on its expectations with regard to the development of the market. The weighted average growth percentages are in conformity with the forecasts included in the sector reports. The discount rate used is the estimated weighted average equity cost of the group before taxes, and takes account of the current market evaluations of the time value of money and the risks for which the future cash flows are adapted. If the realisable value of an asset (or cash flow generating unit) is estimated to be lower than its book value, the asset’s (or cash flow generating unit’s) book value is reduced to its realisable value. An impairment loss is immediately recorded in the profit and loss account. If an impairment loss is subsequently written back, the asset’s (or cash flow generating unit’s) book value is increased to the revised estimate of its realisable value, but only to the extent that the increased book value is no higher than the book value that would have been recorded if no impairment loss had been recorded for the asset (or cash flow generating unit) in previous years. However, impairment losses on goodwill are never written back.

Post-balance sheet events Post-balance sheet events which provide additional information about the company’s situation on the balance sheet date (‘adjusting events’) are included in the annual accounts. Other post-balance sheet events are only mentioned in the notes if they may have a significant impact. The most important assessment criteria in the application of the Valuation rules In the application of the valuation rules, in certain cases an accounting assessment must be made. This assessment is done by making the most accurate assessment possible of uncertain future evolutions. The management determines its assessment on the basis of different realistically assessed parameters, such as future market expectations, sector growth rates, industry studies, economic realities, budgets and multi-year plans, expected profitability studies, etc. The most important elements within the group that are subject to this are: impairments, provisions and deferred tax items. Application of new IFRS standards Sioen Industries Group did not yet change over to the early application of the following new standards and interpretations which were issued on the date of approval of these financial statements, but which were not yet applicable on the date of closing of the financial statements. IFRS 6 IFRS 7 IFRIC 4 IFRIC 5

Exploration for and evaluation of mineral resources Financial instruments: disclosures Determining whether an arrangement contains a lease Rights to interests arising from decommissioning, restoration and environmental funds IFRIC 6 Liabilities arising from participating in a specific market waste electrical and electronic equipment. IFRIC 7 Applying the restatement approach under IAS 29 financial reporting in hyperinflationary economies IFRIC 8 Scope of IFRS 2

The future application of the above-mentioned standards and interpretations will have no material impact on the financial statements, with the exception of the impact of the notes on financial instruments of the following financial year.

105

SIOEN INDUSTRIES I

V.2.1 PRIMARY SEGMENT INFORMATION

Segments 2005

Coating

Apparel

Industrial applications

Net sales External sales Intersegment sales Segment profit from operational activities Unallocated profit from operational activities Profit from operational activities Net financial charges Profit before taxation Taxes Profit after taxation Group share in profit or loss Segment assets Unallocated assets Total consolidated assets Segment liabilities Unallocated liabilities Total consolidated liabilities

193.431 170.740 22.691 15.356

78.138 78.127 11 3.456

70.066 67.370 2.696 6.743

229.224

69.189

55.206

-20.604

229.224

69.189

55.206

-20.604

Head ofﬁce

Eliminations

Consolidated

740 517 3 631 765

22 147 (7) -

17.899 930 (67) (572) 43.647 505 736 16.632

Other information

Depreciation Write-downs of inventories Write-downs of receivables Additions to/(reversals) of provisions EBITDA Impairments Reorganisation costs Investments in intangible ﬁxed assets Investments in tangible ﬁxed assets

106

Coating

13.599 135 -145 -522 28.423 419 49 11.395

Apparel Industrial applications 1.753 516 105 -30 5.800 83 43 1.081

1.786 278 -28 -20 8.760 20 3.390

Eliminations

-25.398

Consolidated

316.237 316.237 0 25.554 -97 25.457 -5.470 19.987 -6.399 13.588 13.582 333.015 4.667 337.683 333.015 4.667 337.683

SIOEN INDUSTRIES I

V.2.1 PRIMARY SEGMENT INFORMATION

Segments 2004

Coating

Apparel

Industrial applications

Eliminations

Consolidated

Net turnover External turnover Intersegment turnover Segment profit from operational activities Unallocated profit from operational activities Profit from operational activities Net financial charges Profit before taxation Taxes Profit after taxation Group share in profit or loss Segment assets Unallocated assets Total consolidated assets Segment liabilities Unallocated liabilities Total consolidated liabilities

189.835 170.645 19.190 19.853

68.226 68.259 -34 4.638

74.277 70.898 3.378 2.626

-22.534 -

231.737

59.831

53.263

-19.583

231.737

59.831

53.263

-19.583

309.802 309.802 0 27.117 -130 26.987 -7.341 19.646 -6.520 13.126 12.252 325.247 5.414 330.661 325.247 5.414 330.661

Coating

Apparel

Industrial applications

Head ofﬁce

Eliminations

Consolidated

13.295 -141 -908 32.100 10 3.730

1.222 -202 -416 5.243 113 233 1.105

2.294 1.393 128 6.442 1.015 902

1.026 0 114 1.009 558 474

17.838 1.051 -1.081 44.794 1.129 800 6.211

Other information

Depreciation Write-downs Additions to/(reversals) of provisions EBITDA Impairments Reorganisation costs Investments in intangible ﬁxed assets Investments in tangible ﬁxed assets

107

SIOEN INDUSTRIES I

2005 COUNTRY France Germany Belgium UK Netherlands Eastern Europe Italy Scandinavia Spain USA Switzerland Austria Ireland Other Total gross sales cash discounts NET SALES 2004 COUNTRY Benelux France Germany UK Spain Scandinavia Switzerland Eastern Europe Austria Ireland USA Italy Other Total gross sales cash discounts NET SALES

108

Consolidated 64.331 56.308 39.087 27.560 26.732 25.707 13.011 10.186 8.357 7.133 4.743 4.090 3.811 27.417 318.473 - 2.236 316.237

20,20% 17,68% 12,27% 8,65% 8,39% 8,07% 4,09% 3,20% 2,62% 2,24% 1,49% 1,28% 1,20% 8,61% 100,00%

Coating 32.197 23.358 22.083 10.150 11.444 22.276 11.724 7.804 7.299 1.209 3.280 2.217 894 14.995 170.929

Consolidated 62.106 65.294 60.182 27.773 9.142 8.851 4.848 22.912 4.273 3.622 6.787 14.631 21.514 311.935 - 2.132 309.803

19,91% 20,93% 19,29% 8,90% 2,93% 2,84% 1,55% 7,34% 1,37% 1,16% 2,18% 4,69% 6,90% 100,00%

V.5.2 SECONDARY SEGMENT INFORMATION

18,84% 13,67% 12,92% 5,94% 6,70% 13,03% 6,86% 4,57% 4,27% 0,71% 1,92% 1,30% 0,52% 8,77% 100,00%

Apparel 25.138 4.846 9.242 9.557 9.191 312 327 1.407 514 1.929 1.398 1.444 2.893 10.285 78.482

Coating 31.731 35.130 21.109 10.485 8.436 7.022 2.840 20.708 2.526 837 1.017 13.247 17.168 172.257

18,42% 20,39% 12,25% 6,09% 4,90% 4,08% 1,65% 12,02% 1,47% 0,49% 0,59% 7,69% 9,97% 100,00%

32,03% 6,17% 11,78% 12,18% 11,71% 0,40% 0,42% 1,79% 0,65% 2,46% 1,78% 1,84% 3,69% 13,10% 100,00%

Apparel 15.948 21.565 5.351 11.060 452 1.182 1.911 359 1.441 2.749 3.115 454 2.730 68.315

23,34% 31,57% 7,83% 16,19% 0,66% 1,73% 2,80% 0,53% 2,11% 4,02% 4,56% 0,66% 4,00% 100,00%

Industrial applications 6.996 28.104 7.762 7.852 6.097 3.119 960 976 545 3.995 65 430 24 2.138 69.062

10,13% 40,69% 11,24% 11,37% 8,83% 4,52% 1,39% 1,41% 0,79% 5,78% 0,09% 0,62% 0,04% 3,10% 100,00%

Industrial applications 14.427 8.600 33.721 6.227 255 647 97 1.844 306 37 2.655 930 1.616 71.363

20,22% 12,05% 47,25% 8,73% 0,36% 0,91% 0,14% 2,58% 0,43% 0,05% 3,72% 1,30% 2,26% 100,00%

SIOEN INDUSTRIES I

V.5.3 EXCHANGE RATE

Exchange rate

Currency

Rate

EUR

average end average end average end average end average end average end average end

USD GBP RMB PLN TDN UAH

2004

2005

1,0000 1,0000 1,2460 1,3621 0,6796 0,7051 10,3102 11,2883 4,5163 4,0845 1,5479 1,6349 6,6326 7,2202

1,0000 1,0000 1,2400 1,1797 0,6836 0,6853 10,1523 9,5202 4,0217 3,8600 1,6114 1,6112 6,3199 5,9588

109

SIOEN INDUSTRIES I

V.4 DETAILED INCOME STATEMENT

NET SALES 2004 € ‘000

2005 € ‘000

Sale of goods Subcontracting Commissions and discounts Net sales

311.336 2.012 -3.546 309.802

317.567 2.156 -3.486 316.237

COST OF SALES Purchases Transport expenses Changes in the level of inventories Subcontracting Personnel expenses Depreciation Services and other goods Write-offs on inventories Cost of sales

139.297 713 8.237 4.215 41.163 15.211 33.149 286 242.271

160.425 1.410 -8.180 5.206 42.199 14.697 36.529 930 253.214

8.058 237 7.186 765 16.246

8.257 117 7.590 -67 15.896

RESEARCH AND DEVELOPMENT EXPENSES Personnel expenses Depreciation Services and other goods Research and development expenses

2.019 87 617 2.723

2.876 532 810 4.217

GENERAL AND ADMINISTRATIVE EXPENSES Personnel expenses Depreciation Services and other goods General and administrative expenses

10.488 2.304 8.322 21.114

10.127 2.554 7.206 19.887

-4 1.081 0

917 572 0

SALES AND MARKETING EXPENSES Personnel expenses Depreciation Services and other goods Write-offs on trade receivables Sales and marketing expenses

OTHER OPERATING INCOME AND EXPENSES Gain/loss on disposal of tangible ﬁxed assets Provisions for liabilities and charges Impairment

110

SIOEN INDUSTRIES I

V.4 DETAILED INCOME STATEMENT

2004 € ‘000

2005 € ‘000

Compensation received Local taxes Other Other operating income and costs

159 -1.109 540 666

155 -670 1.966 2.940

Restructuring costs Non-recurrent result

-1.129 -1.129

-505 -505

Operating proﬁt

26.987

25.457

Interest paid Received interest

-6.925 227

-6.280 251

Realised exchange rate result Unrealised exchange rate result Other Other ﬁnancial result

-1.772 1.569 -440 -643

228 194 136 558

-6.361 -159 -6.520 13.126 12.252

-8.642 2.242 -6.399 13.588 13.582

19.646 6.657 33,88%

19.987 6.456 32,30%

346 -757

197 -720 1.415 1.771 -842 -432 260 -1.576 -130

Tax Deferred tax Tax Consolidated profit for the year Profit for the group Reconciliation between taxes and result before taxes Profit before taxes Tax on profit of fiscal entities against theoretical local tax rate Theoretical tax rate(1) Tax impact of non-deductible expenses specific tax regimes deferred tax assets not recognised usage of non-recognised deferred tax assets Regularisation of current tax on previous years Tax on distributed retained earnings Taxes on distributed reserves Sale Sirec(2) Other (1) (2)

-1.086 1.233 166 -39

Is the weighted average tax rate of the subsidiary In 2005 Sioen Industries sold Sirec to a reinsurance company. This resulted in the realisation of a deferred tax liability.

111

SIOEN INDUSTRIES I

V.4 DETAILED INCOME STATEMENT

DIVIDENDS Dividend for the period ending 31 December 2004 of EUR 0.22 per share. Proposed dividend for the period ending 31 December 2005 of EUR 0.24 per share. The proposed dividend awaits the shareholders’ approval at the annual general meeting and is not shown as a liability in these annual accounts. ORDINARY PROFIT PER SHARE The calculation of the ordinary and diluted proﬁt per share is based on the following data: 2004 € ‘000

2005 € ‘000

Net proﬁt or loss for the period

12.252

13.582

Net proﬁt or loss from continuing activities

12.252

13.582

21.391.070 21.391.070

IN EUR Ordinary proﬁt per share

0,57

0,63

Ordinary proﬁt per share from continuing activities

0,57

0,63

12.252 12.252 21.391.070 21.391.070

13.582 13.582 21.391.070 21.391.070

IN EUR Diluted proﬁt per share

0,57

0,63

Diluted proﬁt per share from continuing activities

0,57

0,63

-14.324

-15.942

Weighted average number of outstanding shares Ordinary shares Weighted average number of shares for ordinary proﬁt per share

DILUTED PROFIT PER SHARE Calculation of diluted profit per share: Diluted elements Net profit or loss from continuing activities Profit or loss attributable to ordinary shareholders Weighted average number of outstanding ordinary shares Weighted average number of shares for diluted profit per share

Proﬁt-increasing elements not included in the calculation Impact on weighted average number of outstanding ordinary shares Shares option plan

112

SIOEN INDUSTRIES I

V.5.1 INTANGIBLE FIXED ASSETS

The acquisition of a customer portfolio in 2004 relates to the price paid for Plastylon. This customer portfolio is being depreciated over four years. Depreciation of intangible ﬁxed assets other than goodwill is shown in the proﬁt and loss account by function. Depreciation of goodwill is included in administration costs and is thus located on the line labelled general and administrative costs.

Intangible fixed assets are subject to the application of IAS 36, Impairments, when there is an indication that their book value may be lower than their realisable value. If an asset does not generate a cash influx which is independent of other assets, the Group estimates the realisable value of the cash flow generating unit to which the asset belongs. No impairments were recorded.

Purchases of software in 2005 consist predominantly of the initial expenditure on the ERP project (SAP). This is not yet being depreciated. Once it is in use, purchased ERP software and associated implementation costs will be depreciated over seven years on a straight-line basis.

113

- 1.653

Software: purchases

7.693

711

(22)

- 8.399

Goodwill: purchases

2.568

- 2.568

11.889

736

(22)

- 12.628

TOTAL

sal Sal es

At th

Research and development costs: purchases

Tra nsf ers Exc han ge rat Co ed nso iffe lida ren ces tio ns cop e De pre cia tio n Im pai rm ent s Ot her cha nge s At the end of cur ren ty ear

1.629

2005

Concessions, patents, licences: purchases

Dis

V.5.1 INTANGIBLE FIXED ASSETS nd of pre ced Pur ing cha yea ses r

SIOEN INDUSTRIES I

Research and development costs: impairment

Concessions, patents, licences: impairment

Software: impairment

Goodwill: impairment

(6)

TOTAL Research and development costs: depreciation

(0)

Concessions, patents, licences: depreciation

1.465

- 1.512

Software: depreciation

6.902

(18)

440

- 7.334

Goodwill: depreciation

720

794

- 1.514

9.088

(18)

1.278

- 10.361

164

(44)

141

Software

790

711

(4)

(440)

- 1.064

Goodwill

1.842

(794)

- 1.054

Intangible ďŹ xed assets

2.796

736

(4)

- (1.278)

- 2.267

TOTAL Research and development costs Concessions, patents, licences

114

V.5.1 INTANGIBLE FIXED ASSETS

Research and development costs: purchases

Tra nsf ers Exc han ge rat ed iffe Co ren nso ces lida tio ns cop De e pre cia tio n Im pai rm ent s Ot her cha nge s At the end of cur ren ty ear

s Sal es

sal po

Dis

2004

Pur c

At th

nd of pre ced has ing es yea

SIOEN INDUSTRIES I

Concessions, patents, licences: purchases

1.425

202

(1)

1.629

Software: purchases

7.092

598

(4)

(7)

- 7.693

Goodwill: purchases

693

(6)

TOTAL

9.210

800

(4)

1.875

2.568

1.875

- 11.889

Research and development costs: impairment

Concessions, patents, licences: impairment

Software: impairment

Goodwill: impairment TOTAL Research and development costs: depreciation

Concessions, patents, licences: depreciation

1.425

(1)

1.463

Software: depreciation

6.219

(4)

(3)

685

6.903

Goodwill: depreciation

196

524

720

7.839

(6)

1.247

- 9.088

TOTAL

Research and development costs

Concessions, patents, licences

202

(38)

164

Software

873

598

(4)

(685)

790

Goodwill

497

1.875

(524)

(6)

- 1.842

1.371

800

(4)

1.875 (1.247)

(6)

- 2.796

Intangible ďŹ xed assets

115

V.5.2 GOODWILL

r yea

rre

nd of cu

Exc

At th

cop ns tio

s ol ida

Inc l

Co n

han

nce iffe re ge rat ed

ity qu in e ed

cre ase

rea s Inc

Consolidation goodwill

At th

nd of pre ced ing

yea

SIOEN INDUSTRIES I

16.548

16.520

16.548

2005 Goodwill

2004 Goodwill

In May 2004, Plastylon was acquired. The figures were included in the Group’s financial statement from 1 May 2004. The purchased assets were included in the consolidated annual accounts using the purchase accounting method. The resultant goodwill is no longer depreciated, in line with IFRS 3. The book value of goodwill acquired in a business combination must be allocated on a reasonable and consistent basis to each cash flow-generating unit or the smallest group of cash flow-generating units, in conformity with IAS 36.

116

The realisable value of a cash flow-generating unit is determined on the basis of the going concern value. For calculating the going concern value, cash flow forecasts are used that are based on financial budgets and projections over a three-year period. These projections contain extrapolations making use of the most justified growth percentage that cannot be higher than the average growth percentage over the long term for the sector in which the cash flow-generating unit is active, that is, between 2% and 3%. The management bases its assumptions on past performances and on its expectations over the coming years. The discount rate used is calculated per segment and varies between 6% and 10%.

SIOEN INDUSTRIES I

V.5.3 SUBSIDIARIES

% holding 2005 Sioen n.v. Siotec b.v.b.a. Sirec s.a. Veranneman Technical Textiles n.v. European Masterbatch n.v. Coatex n.v. Sioen France s.a.s. Confection Tunisienne de Sécurité s.a. Donegal Protective Clothing Ltd. Sioen Coating Distribution n.v. Sioen GmbH Siofab s.a. P.T. Sungintex Saint Frères s.a.s. Sioen Fabrics s.a. Saint Frères Confection s.a.s. P.T. Sioen Indonesia Sioen Tunisie s.a. Sioen Fibres s.a. TIS n.v. Sioen UK Ltd. Mullion Manufacturing Ltd. Sioen Shanghai Sioen Zaghouan s.a. SIP Protection s.a.s. Sioen Nordifa s.a. Inducolor s.a. Bacam s.a.s. Sioen Coating n.v. Pennel Automotive s.a.s. Roland International b.v. Roland Planen GmbH Roltrans Group America Inc. Roltrans Group Polska Spzoo Roland Tilts UK Ltd. Monal s.a. JV Roland-Ukraine Sioen USA Inc. Sioen Industries n.v.

Belgium Belgium Luxembourg Belgium Belgium Belgium France Tunisia Ireland Belgium Germany Portugal Indonesia France Belgium France Indonesia Tunisia Belgium Belgium United Kingdom United Kingdom China Tunisia France Belgium Belgium France Belgium France Netherlands Germany United States Poland United Kingdom Luxembourg Ukraine United States Belgium

Ardooie Ardooie Luxembourg Ardooie Bornem Poperinge Narbonne Tunis Derrybeg Ardooie Werlte Santo Torso Jakarta Flixecourt Moeskroen Flixecourt Jakarta Tunis Moeskroen Kersken Chorley Scunthorpe Shanghai Zaghouan Foix Luik Meslin-L’Evêque Flixecourt Ardooie Roubaix Tegelen Werlte Arlington Konin Bradford Luxembourg Rivne Aberdeen Ardooie

99,47% 0% 0% 100,00% 100,00% 100,00% 99,47% 99,47% 99,47% 100,00% 100,00% 100,00% 99,97% 100,00% 100,00% 100,00% 99,83% 100,00% 100,00% 100,00% 100,00% 100,00% 99,50% 100,00% 100,00% 100,00% 99,47% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 60,00% 100,00% 100,00%

2004 99,47% 99,47% 100,00% 100,00% 100,00% 100,00% 99,47% 99,47% 99,47% 100,00% 96,00% 100,00% 100,00% 99,97% 100,00% 100,00% 100,00% 99,83% 100,00% 100,00% 100,00% 100,00% 100,00% 99,50% 100,00% 100,00% 100,00% 100,00% 99,47% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 60,00% 100,00% 100,00%

apparel apparel group coating coating industrial applications apparel apparel apparel coating coating coating apparel coating coating industrial applications apparel apparel coating/apparel coating apparel apparel coating apparel apparel industrial applications coating industrial applications coating coating industrial applications industrial applications industrial applications industrial applications industrial applications industrial applications industrial applications apparel group

Changes with respect to 2004: Siotec BVBA has been absorbed by Sioen NV Sioen Gmbh has merged with Roland Planen Gmbh SIP Protection SAS has been absorbed by Sioen France SAS. Sirec has been sold in 2005

117

r ye a nt rre nd of cu ee At th

ge rat ed iffe ida ren tio ces ns cop e De pre cia tio n Im pai rm e Ot her nt cha nge s sol

han

Co n

Exc

ee At th

2005

Tra nsf ers

V.5.4 TANGIBLE FIXED ASSETS nd of pre ced Pur ing cha yea ses r Dis po sal s Sal es

SIOEN INDUSTRIES I

Land: purchases

16.814

(138)

(126)

168

16.718

Buildings: purchases

46.414

3.559

(401)

(206)

946

50.312

16.168

622

(1)

(235)

139.746

10.770

(972)

1.005

914

Building infrastructure: purchases Plant, machines and equipment: purchases Furniture: purchases

3.437

(8)

(7)

128

Vehicles: purchases

3.727

279

(660)

(35)

Hardware: purchases

5.043

412

(252)

(25)

158

19.272

516

466

(9)

Leased land and buildings: purchases

16.580 151.462

3.649 3.407

5.335 20.245

Leased furniture: purchases

204

(9)

277

Assets under construction: purchases

151

324

(378)

102

250.976

16.632

(8) (2.431)

463

2.453

- 268.087

18.426

(206)

(4)

284

1.862

20.363

8.776

(1)

(3)

1.274

10.057

TOTAL Buildings: depreciation Building infrastructure: depreciation Plant, machines and equipment: depreciation

69.388

(885)

Furniture: depreciation

2.955

(8)

(7)

745

11.387

80.686

101

263

Vehicles: depreciation

2.891

(566)

3.304

(17)

357

Hardware: depreciation

3.422

2.733

(232)

(27)

100

665

Leased land and buildings: depreciation

3.655

3.928

(3)

998

4.674

(1)

109.535

(8) (1.897)

1.310

16.844

- 125.808

Leased furniture: depreciation Assets under construction: depreciation TOTAL Land

16.814

(138)

(126)

168

16.718

Buildings(1)

35.380

4.182

(195)

(435)

675

(3.135)

36.472

Plant, machines and equipment

70.358

10.770

(87)

953

169

- (11.387)

70.776

2.940

783

(114)

(10)

112

(1.285)

2.426

15.798

574

434

(1.037)

15.784

102

- (16.844)

- 142.278

Furniture and vehicles Fixed assets under leasing and other Assets under construction and prepayments TOTAL (1)

151

324

(378)

141.442

16.632

(0)

(534)

439

1.143

The building in Tegelen is not used in production and therefore is not depreciated. The net book value amounts to 4 million EURO.

Tangible ﬁxed assets The total acquisition of tangible ﬁxed assets in 2005 was EUR 16.6 m (including investment grants). The main investments in 2005 were:

The ﬁxed assets under construction consist of the new coating line at Saint Frères Enduction, the warehouse under construction at EMB and the needle felt production line at Nordifa, which was not yet in use in 2005.

❱ EUR 3.6 m in a new coating line at Saint Frères Enduction in France ❱ EUR 1.8 m in the further expansion of the production hall at Saint Frères Enduction ❱ EUR 2.1 m in a needle felt production line at Nordifa ❱ EUR 3 m on looms at Veranneman and TIS ❱ EUR 2 m on a new warehouse at EMB in Bornem

In 2005 an investment grant of EUR 0.8 m was received from the Walloon Region. This has been deducted from the acquisitions. The ﬁxed assets under leasing relate to the buildings at Ardooie and the Saint Frères Enduction building. Liabilities for the purchase of tangible ﬁxed assets were contracted for an amount of EUR 5.6 m, of which: EUR 2 m for the warehouse at EMB EUR 2 m for the needle felt production line at Nordifa EUR 0.8 m for the new showroom and lab at Ardooie Sioen Coating NV and EUR 0.8 m building Saint Frères Enduction

118

(8)

267

120

46.222

609

(366)

(190)

138

Building infrastructure: purchases

11.065

622

(17)

4.447

141.019

3.377

(98)

Sal es

sal po

At th

Plant, machines and equipment: purchases

Tra nsf ers Exc han ge rat Co ed ns o iffe lida ren t io ces ns cop De e pre cia tio n Im pai rm ent Ot her cha nge s At the end of cur ren ty ear

16.420

Buildings: purchases

2004

Land: purchases

Dis

V.5.4 TANGIBLE FIXED ASSETS nd of pre ced Pur ing cha yea ses r

SIOEN INDUSTRIES I

16.814 46.414 -

16.168

(379) (3.968) (304)

Furniture: purchases

3.967

291 (120)

(212)

(215)

3.437

Vehicles: purchases

3.074

345

(188)

574

(88)

3.727

(49)

5.043

19.272

Hardware: purchases Leased land and buildings: purchases Leased furniture: purchases Assets under construction: purchases TOTAL

4.328

716

(45)

(4)

19.272

189

(81)

204

(7)

105

151

6.211 (263) (1.479)

245.456

Buildings: depreciation Building infrastructure: depreciation Plant, machines and equipment: depreciation

932

(50)

- 250.978

16.168

(41)

154

2.082

18.426

5.813

(3)

2.793

164

60.396

(97)

(26) (2.290) (116)

11.529

Furniture: depreciation

3.176

- (114)

(25)

(302)

Vehicles: depreciation

2.282

(127)

427

(11)

Hardware: depreciation

2.695

(45)

(4)

(33)

Leased land and buildings: depreciation

2.753

(82)

- (256)

(225)

Leased furniture: depreciation Assets under construction: depreciation TOTAL

139.746

93.284

8.776

- (8)

69.388

205

2.955

319

2.891

717

3.422

1.001

(791)

(66)

16.016

3.655

- (8) 108.739

Land

16.420

(8)

120

16.547

Buildings

35.306

1.231

(338)

1.658

- (2.246)

35.728

Plant, machines and equipment

80.623

3.377

(1)

(353) (1.767) (188)

- (11.529)

70.269

3.215

1.352

(6)

(248)

(51)

(93)

- (1.241)

2.948

16.602

189

- (1.001)

15.798 151

Furniture and vehicles Fixed assets under leasing and other Assets under construction and prepayments TOTAL

(7)

105

152.172

6.211

(7)

(954)

(160)

- (16.016)

8 141.442

There are no mortgages secured on the tangible fixed assets. Tangible fixed assets are subject to the application of IAS 36, Impairments, when there is an indication that their book value may be lower than their realisable value. If an asset does not generate a cash influx which is independent of other assets, the Group estimates the realisable value of the cash flow generating unit to which the asset belongs. No impairments were recorded.

119

Exc

Ot her

59 59

2004 Trade receivables LT Trade receivables LT: revaluation Trade receivables LT: impairment LONG-TERM TRADE RECEIVABLES

rre nd of cu

At th

pai

rm ent

nge cha

han ge rat e

Tra nsf ers

cre

ase

d if fer e

nce

yea

2005 Trade receivables LT Trade receivables LT: revaluation Trade receivables LT: impairment LONG-TERM TRADE RECEIVABLES

LONG-TERM TRADE RECEIVABLES

nd of pre ced ing Inc rea yea se r

V.5.5 LONG-TERM TRADE RECEIVABLES

At th

SIOEN INDUSTRIES I

The term of these trade receivables is between two and three years. These long-term receivables have been valued at their net current value. OTHER LONG-TERM ASSETS 2005 Subsidiaries: receivables Other shares: purchases Guarantees and deposits: purchases Other LT receivables: purchases OTHER LONG-TERM ASSETS

684 684

- (161) - (161)

524 524

2004 Subsidiaries: receivables Other shares: purchases Guarantees and deposits: purchases Other LT receivables: purchases OTHER LONG-TERM ASSETS

1.105 1.105

- (420) - (420)

684 684

These other long-term assets mainly consist of a VAT deposit.

120

SIOEN INDUSTRIES I

V.5.6 INVENTORIES

2005 Value at end of year Raw materials Write-off raw materials Raw materials Consumer goods Write-off consumer goods Consumables Orders in progress Write-off orders in progress Orders in progress Finished products Write-off ďŹ nished products Goods in transit Write-off goods in transit Finished products Inventories

32.241 (2.137) 30.105 298 298 7.277 7.277 40.065 (3.240) 3.960 40.784 78.463

Write-off included in result

930

2004 Value at end of year Raw materials Write-off raw materials Raw materials Consumer goods Write-off consumer goods Consumables Orders in progress Write-off orders in progress Orders in progress Finished products Write-off ďŹ nished products Goods in transit Write-off goods in transit Finished products Inventories

28.166 (1.443) 26.723 370 370 4.614 4.614 39.902 (2.886) 1.743 38.759 70.466

Write-off included in result

286

Gross inventories (excluding write-offs) rose EUR 9 m compared with 2004. Write-downs on inventories increased EUR 0.9 m. These write-offs are recorded on the basis of an ageing and rotation analysis.

121

SIOEN INDUSTRIES I

V.5.7 TRADE RECEIVABLES

2005 Value at end of year Trade receivables Trade receivables: doubtful debts Trade receivables kEUR Customer Customer Customer Customer Customer Other Total

1 2 3 4 5

outstanding 4.441 2.896 1.708 1.635 1.371 63.146 75.198

75.198 (5.782) 69.416

5,91% 3,85% 2,27% 2,17% 1,82% 83,97% 100%

balance turnover 10.976 7.331 7.084 4.567 4.378 281.900 316.237

4% 2% 2% 1% 1% 89% 100%

2004 Value at end of year Trade receivables Trade receivables: doubtful debts Trade receivables kEUR Customer Customer Customer Customer Customer Other Total

1 2 3 4 5

outstanding 4.593 1.634 1.346 1.233 1.016 59.957 69.779

69.779 (5.962) 63.818

6,58% 2,34% 1,93% 1,77% 1,46% 95,92% 100%

balance turnover 12.513 4.258 2.815 4.610 3.464 282.142 309.802

Trade receivables include amounts to be received from the sale of goods for EUR 75.2 Million. A provision is established for the estimated uncollectable amounts for EUR 5.8 Million. Compared to last year, the trade receivables rose primarily through major orders in the Apparel Division at the end of 2005. As of 1/4/2005 the Group decided to cover itself for the credit risk by concluding a stop loss credit insurance.

122

4% 1% 1% 1% 1% 91% 100%

SIOEN INDUSTRIES I

V.5.8 OTHER CURRENT ASSETS

OTHER CURRENT ASSETS

Prepayments VAT to be reclaimed Tax prepayment Capital grants receivable Insurance premiums receivable Other Other Current Assets

2005

2004

34 8.194 1.641 109 99 1.040 11.118

488 6.127 1.065 74 163 560 8.477

Other current assets consist primarily of VAT to be reclaimed and pre-paid taxes. The entry “Other” concerns mainly the amounts receivable relating to the sales of the buildings in Antwerp and in Foix. INVESTMENTS Other investments and deposits Investments

260 260

1.963 1.963

7.438 874 8.312

12.676 248 12.923

1.343 85 1.428

2.274 8 2.282

The book value of this forward account reﬂects its market value. CASH AND CASH EQUIVALENTS Cash At hand Cash and cash equivalents DEFERRED CHARGES & ACCRUED INCOME Deferred charges Other Deferred charges & accrued income These consist primarily of pre-paid rent, insurance policies and interest charges.

123

SIOEN INDUSTRIES I

V.5.9 PENSION LIABILITIES

DEFINED BENEFIT PLANS

Amounts recorded in balance sheet 1. Deficit for funded plans Defined benefit obligations Fair value of plan assets 2. Defined benefit obligations - unfunded plans Financing status 3. Unrecognised past service gain 4. Unrecognised actuarial (losses) gains Net liability at balance sheet date Amounts recognised in income 1. Current service cost 2. Interest cost 3. Expected return on plan assets 4. Amortisation of past service cost (gain) 5. Amortisation of actuarial net losses (gains) 6. Losses (gains) on curtailments Net periodic pension cost Movements in the net liability in the current period were as follows Net liability at opening Net periodic pension cost Uses for contributions paid Increase through business combinations Currency translation changes Net liability at closing The key actuarial assumptions used at the balance sheet date are 1. Discount rate 2. Expected return on plan assets 3. Future pension increases 4. Expected rate of salary increases

PROVISIONS FOR PERSONNEL REMUNERATION In accordance with law and practice in each country, associated entities have either defined benefit schemes or defined contribution schemes. Defined contribution schemes Contributions to defined contribution schemes are recorded as an expense when they are due.

2005

2004

1.422

1.347

(101) 1.321

(85) 1.262

119 60 (41) (30) (3) 105

246 83 21 (1) (7) 342

1.261 105 (75) 30 1.321

951 342 (32) 1.261

4,01%

4,48%

60 2% / 3%

124

Provisions for environmental contamination

yea

ear

Mo re tha n

At th

rm ent pai Im

rre nd of cu

s nge cha

Ot her

ear

nce dif fer e ge rat e han Exc

Tra nsf ers

als Rev ers

ati on ilis Ut

nd of pre ced Inc ing rea yea se r

ee Tax provisions

At th

2005

V.5.10 PROVISIONS

SIOEN INDUSTRIES I

219

(219)

Provisions other

2.268

538

(647)

(851)

1.402

1.023

379

VII. Provisions

2.487

538

(647) (1.070)

1.402

1.023

379

2004 Tax provisions Provisions for environmental contamination Provisions other VII. Provisions

1.075

- (1.075)

219

821

2.478 (1.187)

156

2.268

966

1.302

2.091

2.478 (2.262)

180

2.487

966

1.521

195

The provisions for other risks and charges consist mainly of a provision relating to the soil cleanup of the grounds in Temse belonging to TIS NV. This risk ďŹ nds its origin in the period before the takeover. This provision is set up for more than one year and is discounted using the weighted average capital cost of the Group. In 2004 there was a provision for the soil cleanup of the Ardooie grounds, which this year appeared to be unnecessary and was therefore reversed. In 2004 Sioen Industries signed a ruling agreement with the Ministery of Finance concerning the ďŹ scal treatment of the Luxembourg insurance captive company.

125

V.5.11 INTERESTBEARING LOANS

Subordinated loans Bank loans Financial leasing liabilities Other Total long-term interest-bearing loans

53.519 13.049 344 66.912

Loans Financial leasing liabilities Total short-term interest-bearing loans

67.290 1.142 68.432

5y Aft er

ear s 5y

ear s 4y

ear s 3y

2y ear s

he Wi thi

te Va lue a

2005

ear s

yea

nd of yea r

SIOEN INDUSTRIES I

20.984 1.142 22.126

36.477 1.344 37.821

9.791 1.377 11.168

4.750 1.494 6.244

1.429 1.105 2.534

1.071 7.729 344 9.144

24.293 24.293

20.576 1.341 21.917

16.477 1.344 17.821

9.791 1.377 11.168

4.750 1.241 5.991

2.704 8.850 71 11.625

2004 Subordinated loans Bank loans Financial leasing liabilities Other Total long-term interest-bearing loans

54.298 14.153 71 68.522

Loans Financial leasing liabilities Total short-term interest-bearing loans

64.043 39 64.082

Financial accounts payable This note provides information about the group’s interest-bearing loans.

this bond issue, an IRS (Interest Rate Swap) was concluded on 20/12/2005. This IRS is described in the note on ‘Financial instruments’, and designated as ‘cash ﬂow hedging’.

Long-term accounts payable, including ﬁnancial long-term leasing debts. The weighted average interest rate of long-term debts is 4.55%. All loans have a ﬁxed interest rate, apart from one EUR 20 m variable-rate roll-over loan. This ‘bullet’ loan, taken up on 20/12/2005 with expiry date 30/06/2007, was repaid early on 14 March 2006 without additional cost.

Short-term accounts payable Short-term straight loans amount to EUR 44.6 m. They consist of EUR 36.4 m of euro loans with a weighted average interest rate of 3.24% and a dollar loan of USD 9.7 m.

On 14 March 2006, a EUR 100 m bond listed on Eurolist by Euronext Brussels was successfully issued, with a ten-year term and ﬁxed coupon interest of 4.75%. To cover the interest rate on

No securities were issued for these ﬁnancial debts. Most (approx. 85%) of the Group’s ﬁnancial liabilities are centrally contracted and managed.

126

There was also a tax prepayment ﬁnancing which expires on 10/4/2006.

Long-term ﬁnancial leasing liabilities Long-term ﬁnancial leasing liabilities due within the year Financial leasing liabilities

13.049 - 1.344 1.142 1.142 14.191 1.142 1.344

Aft er

ear s

1.377 1.494 1.377 1.494

ear s 5y

ear s 4y

ear s 3y

2005

V.5.12 FINANCIAL LEASING DEBTS

Va lue at end of yea r Wi thi nt he yea r 2y ear s

SIOEN INDUSTRIES I

1.105 7.729 1.105 7.729

Minimum leasing payments

Discounted value of minimum leasing payments

1.657 2.188 2.228 3.480 8.423 17.975 3.784 14.191

1.142 1.543 1.643 2.526 7.336 14.191 14.191 1.142 13.049

Long-term ﬁnancial leasing liabilities Financial leasing liabilities

Leasing payments due within the year 1 - 2 years 2 - 3 years 3 - 4 years after 5 years Total leasing payments Future ﬁnancial charges Discounted value of leasing liabilities Less payments due within the year Payments due after one year

14.192 14.192

ear s

yea

39 1.341 39 1.341

1.344 1.377 1.344 1.377

5y Aft er

ear s 5y

ear s 4y

ear s 3y

ear s

he in t Wi th

2004

Va lue a

of y

ear

1.241 8.850 1.241 8.850

Minimum leasing payments

Discounted value of minimum leasing payments

39 2.096 1.986 3.855 10.163 18.138 3.946 14.192

39 1.392 1.342 2.758 8.661 14.192 0 0 39 14.153

127

SIOEN INDUSTRIES I

V.5.13 OTHER ACCOUNTS PAYABLE

TRADE ACCOUNTS PAYABLE AND OTHER DEBTS

Trade accounts payable Credit notes receivable Prepayments received Total

2005

2004

37.425 (1.213) 298 36.510

32.947 (2.097) 234 31.084

5.589 62 8.338 1.950 963 16.902

7.216 6.069 7.708 1.320 1.027 23.340

Trade and other payables include outstanding amounts for trade purchases and current charges. The increase as compared to 2004 is attributable to the increased turnover and investments (primarily assets under construction). OTHER DEBTS UP TO ONE YEAR Tax debts Other Social security debts Dividends payable Accrued charges and deferred income Total The tax liabilities concern primarily corporate taxes and VAT to be paid. The increase as compared to 2004 is attributable to the post ‘other’. In 2004 this concerned the liability in connection with the acquisition of the minority interest in the companies Coatex, Saint-Frères Confection and Bacam.

128

SIOEN INDUSTRIES I

V.5.14 FINANCIAL INSTRUMENTS

FINANCIAL DERIVATIVES

Forward purchase contracts Forward purchase contracts within 1 year Forward sale contracts Forward sale contracts within 1 year Rights Duties IRS Forward

Notional value

2005 Fair value

Notional value

2004 Fair value

1.667

(57)

2.933 4.399

41 (8)

2.176 3.046

62 -

100.000

(636)

The Group manages a portfolio of derivatives to hedge against risks relating to exchange rate and interest rate positions arising as a result of operating and financial activities. It is the Group’s policy to avoid engaging in speculative transactions or transactions with a leverage effect and not to hold derivatives for trading purposes. Interest risk The Group’s interest risk is relatively limited, as the interest rate on virtually all loans is fixed. It is the group’s strategy to arrange a fixed interest rate for the long-term portion of debts, and to keep short-term debts floating. Thanks to an optimal portfolio of long-term and short-term debt financing, potential negative interest-rate fluctuations are minimised. In connection with the group’s refinancing, it was decided in December 2005 to enlist the support of the capital market via the issue of a EUR 100 m bond over ten years with fixed coupon interest. Because such an operation can easily take three months, and interest rates at the end of December 2005 were very attractive, Sioen concluded a ten-year IRS starting in April 2006, the presumed starting date of the bond. As this IRS can be regarded as effective cash flow hedging as per IAS39, the EUR 636k negative market value fluctuation on 31/12/2005 of this IRS has been deducted from equity.

Exchange rate risk It is the Group’s policy to hedge against exchange risks arising from financial and operating activities centrally. The risks are limited by compensating for transactions in the same currency, or by fixing exchange rates via forward contracts or options. Overview of exchange rate contracts on 31/12/2005 Rights from exchange rate contracts < 6 months: EUR 2.9 m Liabilities from exchange rate contracts < 6 months: EUR 4.4 m The fluctuation in the market value of these exchange rate contracts has been included in the profit and loss account and amounted to a EUR 32k positive balance. Credit risk In view of the relative concentration of credit risk (see note V.5.10 Trade receivables), Sioen has acquired hedging by taking out stop-loss insurance. In addition, credit control strategies and procedures have been devised in order to monitor individual customers’ credit risk.

On 02/02/2006, the market value was up EUR 1,346k, and it was realised following the hedge strategy at the moment of issuing of the bond. This received premium satisfies the conditions for cash flow hedging defined in IAS39, and will be spread out over the term of the bond.

129

SIOEN INDUSTRIES I

V.5.15 DEFERRED TAX

Intangible ďŹ xed assets Tangible ďŹ xed assets Inventories Receivables Other assets Pension liabilities Other provisions Other liabilities Conversion differences Hedging reserves Undistributed reserves Tax losses carried forward Total Write-down on deferred tax receivable Balance Total

2005 deferred tax asset

2004

47 2.404 1.765 312

334 1.905 1.557 342

411 329 44

313

Unrecognised carried forward tax losses Unrecognised deferred tax on undistributed reserves

Current tax receivables which do not appear to be collectable in the near future are not recognised. In this assessment the management takes account of budgets and multi-year planning.

130

2004

16.917

16.572

2.004

215 1.270

216 1.904

5.781

15.779 21.307

16.966 21.632

20.091

24.357

(11.027) (3.270)

(9.595) (2.776)

(3.270)

(2.776)

7.010

9.261

16.821

21.581

2.037 1.116

2.037

45.481

48.267

32.287

27.392

306

259

The value of carried-forward tax losses arranged by expiry date One year Two years Three years Four years Five years and later No expiry date

2005 deferred tax liability

SIOEN INDUSTRIES I

V.5.16 ACQUISITIONS AND DISPOSALS OF INTERESTS

EFFECTS OF ACQUISITIONS AND SALES OF INVESTMENTS 2004 Acquisition of minority interest 25% Coatex - Saint FrĂ¨res apparel - Bacam Fair value Non-current assets Current assets Long-term payables Short-term payables Fair value of acquired assets and liabilities Acquisition price in dash Goodwill(1) Acquisition Plastylon SAS Intangible non-current assets(2) Current assets Long-term payables Short-term payables Fair value of acquired assets and liabilities Acquisition price in cash Goodwill

Carrying value

1.701 3.049 524 1.580 2.646 5.800 3.154

1.701 3.049 524 1.580

1.875 19

2.400 19

8 1.886 1.912 26

2005 Sale Sirec SA Current assets Equity Deferred tax liabilities Short-term payables Sale price in cash Income3) (1) (2) (3)

44 8.629 3.167 37 10.205 1.576

Given that there is no change in audit, this goodwill was directly deducted from the equity. The customer portfolio of Plastylon was booked at fair value. Given that the yield of this sale arises from the reversal of a deferred tax liability, this is included in deferred tax revenue.

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VI. OTHER

VI.1 OPERATIONAL LEASING LIABILITIES 2005

2004

Amounts recorded as costs

1.030

260

Payments due within 1 year Within 1 and 5 years After 5 years Minimum future payments

953 956 129 2.038

583 635 1.218

VI.2 EVENTS AFTER BALANCE SHEET CLOSING DATE Repayment of a long-term revolving credit A EUR 20 million revolving credit with a variable interest rate, drawn down on 20/12/2005 and maturing on 30/06/2007, was prepaid on 14 March 2006 without penalty charges.

Issue of bond loan On 14 March 2006 a 10-year bond loan listed on Eurolist by Eurolist Brussels was successfully issued in an amount of EUR 100 million and at a ﬁxed coupon rate of 4.75%. An IRS (Interest Rate Swap) was concluded on 20/12/2005 to cover the interest rate of this bond issue. Under the note ‘Financial Instruments’ this IRS is described as ‘Cash Flow Hedging’.

VI.3 OFF-BALANCE SHEET ITEMS

Guarantees given Commitments to purchase tangible and intangible ﬁxed assets

2005

2004

8.516

444

Transaction type

2005

sale purchase sale purchase

2.079 344 1.722 170

VI.4 TRANSACTIONS WITH RELATED PARTIES

Recticel Group Recticel Group INCH SVB Other transactions with related parties other than directors are not included, given the negligible amount (under EUR 70,000). With regard to directors’ remuneration, the read is referred to section V.6.B.

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VI. OTHER

VI.5 PERSONNEL Country

2005

2004

Belgium China Germany France Ireland Indonesia Netherlands Poland Portugal Tunesia UK USA Total

902 16 18 292 42 2016 7 490 25 788 34 15 4645

872 14 31 290 37 1921 14 531 23 725 33 9 4500

Workers Salaried employees Total

3785 860 4645

862 3638 4500

VI.6 AUDITING AND NON-AUDITING SERVICES PROVIDED IN THE CURRENT YEAR Deloitte

other

Audit services Remaining legal services Tax services Remaining services

274

37 85

12 46

VI.7 CONTINGENT ASSETS AND LIABILITIES A number of commercial disputes are pending, albeit with a limited value in dispute. A mixed soil pollution was identiďŹ ed at the Ardooie site. A descriptive soil study is under way to determine the scope.

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VI. OTHER

VI.8 Remuneration of the directors and the Executive Management In 2005 the following fees were paid to the members of the board of directors and the executive management: ❱ Non-executive and independent directors, as well as the members of the executive management in their capacity as director: Mr Jean-Jacques Sioen Ms Michèle Sioen Ms Jacqueline Sioen-Zoete Ms. Danielle Sioen Ms Pascale Sioen Mr Pol Bamelis Mr Wilfried Vandepoel Mr. Louis-Henri Verbeke Mr Luc Sterckx Mr Luc Vansteenkiste

134

EUR 20,000 EUR 20,000 EUR 20,000 EUR 20,000 EUR 20,000 EUR 27,500 EUR 26,000 EUR 26,000 EUR 27,500 EUR 21,500

❱ Mrs. Michèle Sioen received in 2005 as CEO, besides her remuneration as a member of the board of directors a ﬁxed remuneration of 300.000 Eur. She didn’t receive any variable remuneration or any other kind of remuneration. ❱ The fees paid to the other executive directors in their capacity as member of the executive management amounted to an overall sum, in 2005, of EUR 2.126.123,64. This contains contributions to pension insurance. ❱ All sums mentioned above are gross sums and contain the entire cost to the Company. In 2005 there were no shares, share options or other rights for the acquisition of shares granted to the CEO and the other members of the executive management. There are no speciﬁc recruitment agreements or agreements for a golden handshake with the members of the executive management.

SIOEN INDUSTRIES I

IFRS

Impact of the transition from Belgian ﬁnancial reporting standards to IFRS

IFRS 1 – First-time adoption of International Financial Reporting Standards

The European directive issued on 19 July 2002 (directive 1606/2002), requires all European listed companies to draw up their consolidated financial reporting in accordance with IFRS, the International Financial Reporting Standards, approved by the European Commission. Sioen Industries has opted to show one year of comparative information in the first consolidated financial statements drawn up in accordance with IFRS. Consequently, the transition date to the IFRSs has been set as 1 January 2004. To make it possible to display this comparable information, the opening balance sheet according to Belgian standards on 1 January 2004 has had to be revised in order to calculate the IFRS opening balance sheet on 1 January 2004. The effects of this revision are included in the net assets on the IFRS opening balance sheet.

In line with IFRS 1- First-time adoption of IFRSs, the opening balance sheet has been drawn up by the retroactive application of those IFRS standards which were in force on the reporting date. However, IFRS 1 sets out a number of exceptions which can be applied. Sioen Industries has applied the following exceptions: ❱ Business combinations which took place before the transition date do not need to be revised retroactively. IFRS 3 – Business combinations was not retroactively applied to business combinations which took place before 1 January 2003. ❱ Certain tangible fixed assets were valued at market value. This market value is used as the presumed cost price. This exception was applied for a limited number of items in tangible fixed assets, mainly land. ❱ Cumulative actuarial gains and losses were recognised in capital and reserves on the transition date. After the transition date Sioen Industries will continue to apply the current “corridor” as stipulated in IAS 19 - Employee benefits. ❱ Previously recognised conversion differences, deriving from the conversion into euros of the financial statements in other currencies of foreign entities, were reset to 0. ❱ IFRS 2 - Share-based payment. Sioen Industries has opted to apply the transitional measures laid down by IFRS 2. As of 31 December 2004 no new capital and reserves instruments were assigned after 7 November 2002.

All ﬁgures are in millions of euros, unless indicated otherwise. The IFRS opening balance sheet is based on all standards and interpretations approved by the European Commission on 31 December 2004, apart from IFRS 2 – Share-based payment, which was approved on 4 February 2005.

Basis for preparation of the IFRS opening balance sheet For the transition to the IFRSs, Sioen Industries has opted for an early application of IAS 32 - Financial instruments: disclosure and presentation and IAS 39 - Financial instruments: recognition and measurement

Impact of the transition on the consolidated opening balance sheet on 1 January 2004. The net assets including minority interests according to Belgian principles were EUR 125.8 million. In the revised opening balance sheet according to IFRS, the net assets are EUR 115.6 million. All adjustments are the consequence of changes in ﬁnancial reporting principles, and hence not the consequence of any errors in the application of the former GAAP (Belgian GAAP) made in previous annual accounts. The EUR 10.2 million decrease is accounted for in the reconciliation table and the notes below.

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IFRS

Reconciliation of the net assets on the transition date published according to Belgian principles with the net assets according to IFRS Consolidated capital and reserves including minority interests according to BGAAP on 01/01/2004 Intangible assets Goodwill Goodwill Roltrans Group Tangible ﬁxed assets Investment grants Long term receivables Inventories Provisions Deferred tax receivable Deferred tax liabilities Dividends Other adjustments Consolidated capital and reserves including minority interests according to IFRS on 01/01/2004

(1) Intangible fixed assets Patents and licences recognised according to Belgian standards are no longer recognised if they are generated internally, in line with the recognition criteria in IAS 38 – Intangible fixed assets. (2) Goodwill All goodwill is assigned to cash generating units in a reasonable and consistent manner. Goodwill will no longer be depreciated, in accordance with IFRS 3 – Business combinations. However, goodwill will be impairment tested annually, in accordance with IAS 36 – Impairment of assets. The realisable value of a cash generating unit is usually determined with reference to the value to the business. For certain clearly identified assets, the price in a binding sale agreement in a transaction between (independent) parties on an impartial and objective basis may be used to determine the realisable value. For the calculation of the value to the business, cashflow forecasts are used which are based on the financial budget that has been

136

125,8 -0,3 -0,5 -19,9 23,5 -8,8 -1,0 -1,9 -0,7 7,4 -12,3 4,3 115.6

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

approved by the management. Cashﬂows after the budgeted period are extrapolated using the most appropriate growth rate, which may not exceed the average long term growth rate for the sector in which the cash generating unit is active. The management bases its assumptions (regarding prices, volumes and return) on past performance and on its expectations with regard to the market’s development. The weighted average growth rate is listed in the sector reports in accordance with the forecasts. The discount rate used is the estimated weighted average cost of capital for the group before tax, and takes account of current market assessments of the time value of money and the risks for which the future cashﬂows are adapted. In accordance with IFRS 1, all goodwill recorded and recognised according to Belgian standards has been subjected to an impairment test for the transition to IFRS, resulting in a negative impact of EUR 0.5 million (before tax impact).

SIOEN INDUSTRIES I

IFRS

(3) Goodwill in Roltrans Group According to Belgian principles and the decision of the Board of Directors on 28 May 2004, Sioen Industries had no control over the Roltrans Group. The goodwill consequently continued to be recorded and depreciated in the annual accounts according to Belgian principles. In comparison with Belgian principles, IFRS sets stricter standards regarding the scope of consolidation. According to SIC 12 – Consolidation, Special Purpose Entities, the Roltrans Group satisfies the definition of a special purpose entity. In consequence, according to IAS 27- Consolidated and Separate Financial Statements, the Roltrans Group must be retroactively included in the scope of consolidation of Sioen Industries, from 1999 onwards. Because the net assets of the Roltrans Group were zero at that point, the recorded goodwill is no longer recognised in the IFRS opening balance sheet. (4) Tangible fixed assets In accordance with IFRS 1- First-time adoption of IFRSs, it has been decided to value certain tangible fixed assets at market value on the transition date, and to take this value as the presumed cost price. Land in Belgium, France and Poland was valued with reference to valuation reports by qualified property experts. The use of this option, in accordance with IFRS 1, has led to an impact on the net assets of EUR 8 million (before tax impact). IAS 16 – Property, plant and equipment stipulates that if a significant tangible asset consists of several components with different useful lives, these components should be depreciated separately (the ‘component approach’). Based on a detailed screening of the group’s tangible fixed assets, the significant components were identified and have been depreciated over the estimated useful life. The application of this principle results in a positive impact on the net assets of EUR 15.5 million (before tax impact). (5) Investment grants Investment grants in the amount of EUR 5 million, which are recorded in the Belgian annual accounts under capital and

reserves, have been reclassified and offset against the tangible fixed assets for which they were obtained, in accordance with IAS 20 - Accounting for government grants and disclosure of government assistance. The components approach is also applicable to tangible fixed assets for which government grants have been obtained. This has led to a negative impact on the net assets of EUR 3,8 million (before tax impact). (6) Long term receivables A long term receivable in the amount of EUR 1.8 million has been treated as a financial lease with the transition to IFRS. Taking account of the estimated residual value of the underlying fixed asset, this should be written down by EUR 1 million (before tax impact). (7) Inventories In application of IAS 2 – Inventories, the book value of inventories according to Belgian standards should be reduced by EUR 1.9 million (before tax impact). (8) Provisions The group has certain pension liabilities, mainly in France where there is a legal requirement in this area. These liabilities qualify as defined benefit schemes under IAS 19 and led to the recognition of EUR 0.7 million (before tax impact) in the opening balance sheet. (9) Deferred tax receivable In accordance with IAS 12 – Income taxes, deferred taxes are calculated on temporary differences between the asset’s fiscal book value and its book value in the financial statements. The application of this standard has resulted in the additional recording of deferred tax assets in the amount of EUR 7.4 million. Deferred tax assets will be recorded to the extent that it is likely that taxable profit will be available against which the recoverable temporary difference can be offset. (10) Deferred tax liabilities Deferred tax liabilities are recorded in the amount of EUR 12.3 million, mainly on impacts identified in connection with the transition from Belgian standards to IFRS.

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VII. IFRS

(11) Dividends In contrast with Belgian principles, according to IAS 10 – Events after the balance sheet date dividends should only be recognised as short term liabilities when the General Meeting of Shareholders approves them. Consequently the EUR 4.3 million dividend has been recorded back in the net assets.

(12) Other adjustments On the grounds of immateriality, Roland Ukraine and Sioen USA were not consolidated according to Belgian principles. It has been decided to include these entities in the scope of consolidation in the IFRS opening balance sheet. This results in a negative impact on the net assets of EUR 8,000.

Reconciliation of the net assets as at 31/12/2004 and the net result for the period 2004 with notes Reconciliation of the net assets (including minority interests) published according to Belgian principles as at 31/12/2004 with the net assets (including minority interests) according to IFRS as at 31/12/04 Consolidated capital and reserves including minority interests according to BGAAP on 31/12/2004 Intangible assets Goodwill Tangible ﬁxed assets Investment grants Long term receivables Inventories Provisions Deferred tax receivable Deferred tax liabilities Dividends Goodwill on acquired minority interests Consolidated capital and reserves including minority interests according to IFRS on 31/12/2004 * this impact on the net assets consists of ❱ impact on capital and reserves in the opening balance sheet as detailed under the heading ‘Reconciliation of the net assets on the transition date published according to Belgian principles with the net assets according to IFRS’ ❱ impact on the proﬁt and loss account for the period 2004 as detailed under the heading ‘Reconciliation of the net result (including minority interests) published according to Belgian principles for the period 2004 with the net result according to IFRS’

138

129,2 - 0,5 * -17,4 * 24,8 * -8,5 * -1,0 * -1,8 * -1,2 * 7,4 * -14,3 * 4.7 (2) -3,1 (1) 118,3

(1) Goodwill on acquired minority interests The goodwill recognised according to Belgian principles on the acquisition of the minority interest of Coatex, Saint Freres Confection and Bacam has been directly offset against the consolidated capital and reserves. (2) Dividends In contrast with Belgian principles, according to IAS 10 – Events after the balance sheet date dividends should only be recognised as short term liabilities when the General Meeting of Shareholders approves them. Consequently the EUR 4.7 million dividend has been reincluded in the net assets as at 31/12/2004.

SIOEN INDUSTRIES I

VII. IFRS

Reconciliation of the net result (including minority interests) published according to Belgian principles for the period 2004 with the net result according to IFRS Net result including minority interests according to BGAAP on 31/12/2004 Intangible assets Goodwill Tangible ﬁxed assets Investment grants Inventories Provisions Deferred tax liabilities Bonuses Net result including minority interests according to IFRS on 31/12/2004

(1) Intangible fixed assets Patents and licences recognised according to Belgian standards have no longer been recognised in the opening balance sheet if they are generated internally, in line with the recognition criteria in IAS 38 – Intangible fixed assets. In 2004 the depreciation recorded according to BGAAP is thus not included according to IFRS. (2) Goodwill In accordance with IFRS 3 – Business combinations, goodwill is no longer depreciated. This results in a positive impact on the result of EUR 3.0 million. Goodwill will be impairment tested annually, in accordance with IAS 36 – Impairment of assets. (3) Tangible fixed assets In accordance with IFRS 1- First-time adoption of IFRSs, it has been decided to value certain tangible fixed assets at market value on the transition date, and to take this value as the presumed cost price. IAS 16 – Property, plant and equipment stipulates that if a significant tangible asset consists of several components with different useful lives, these components should be depreciated separately (the “component approach”). Based on a detailed screening of the group’s tangible fixed assets, the significant components were identified and have been depreciated over the estimated useful life. As a consequence of an extension of the depreciation period of certain components, there is a positive impact on the result of EUR 1.3 million.

12,4 -0,2 3,0 1,3 0,3 0,1 -0,5 -1,9 -1,3 13,2

(1) (2) (3) (4) (5) (8) (6) (7)

(4) Investment grants The components approach is also applicable to tangible fixed assets for which government grants have been obtained. This has led to a positive impact on the result of EUR 0.3 million (before tax impact). (5) Inventories The application of IAS 2 – Inventories, results in a positive impact on the result of EUR 0.1 million (before tax impact). (6) Deferred tax liabilities In accordance with IAS 12 – Income taxes, deferred taxes are calculated on temporary differences between the asset’s fiscal book value and its book value in the financial statements. The application of this standard has resulted in a negative impact on the result of EUR 1.9 million. Deferred tax assets have been recorded to the extent that it is likely that taxable profit will be available against which the recoverable temporary difference can be offset. (7) Bonuses In contrast with Belgian principles, bonuses payable are not regarded as a component of profit distribution, but as an expense for the year. This has resulted in a negative impact on the result of EUR 1.3 million. (8) Provisions The updating of provisions for other liabilities and charges has had a negative effect on the result of EUR 0.5 million.

139

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VII. IFRS

Comparison of the net result (including minority interests) published according to Belgian principles for the period 2004 with the net result according to IFRS Profit and loss account for year ending 31/12/04 Operating income Operating costs Operating profit Net financial costs Extraordinary costs Profit before tax Tax Profit after tax

BGAAP

Effect of transition

IFRS

303,403.00 273,606.00 29,797.00 10,801.00 2,193.00 16,803.00 4,423.00 12,380.00

-1,503.00 1,307.00 -2,810.00 -3,460.00 -2,193.00 2,843.00 2,097.00 746.00

301,900.00 274,913.00 26,987.00 7,341.00 19,646.00 6,520.00 13,126.00

Comparison of the balance sheet published according to Belgian principles for the period 2004 with the balance sheet according to IFRS Assets as at 31/12/04 Fixed assets Intangible fixed assets Goodwill Tangible fixed assets Investment grants Financial fixed assets Deferred tax receivable Current assets Accounts receivable due in more than one year Inventories Accounts receivable due in less than one year Investments Cash and cash equivalents Deferred expenses and accrued income ASSETS

140

BGAAP

Effect of transition

IFRS

167,054.00 3,108.00 32,061.00 131,176.00

3,677.00 -312.00 -15,513.00 10,266.00

170,731.00 2,796.00 16,548.00 141,442.00

709.00

-25.00 9,261.00 -4,802.00

684.00 9,261.00 159,929.00

-1,811.00 -3,068.00

70,466.00 72,295.00 1,963.00 12,923.00 2,282.00 330,661.00

164,731.00 0.00 72,277.00 75,363.00 1,963.00 12,823.00 2,305.00 331,785.00

100.00 -23.00 -1,124.00

SIOEN INDUSTRIES I

VII. IFRS

Liabilities as at 31/12/04 Net assets Net assets Investment grants Provisions and deferred taxes Provisions Deferred taxes Accounts payable Accounts payable due in more than one year Accounts payable due in less than one year Accrued expenses and deferred income LIABILITIES

BGAAP

Effect of transition

IFRS

129,180.00 123,913.00 5,267.00 7,656.00 2,386.00 5,270.00 194,949.00 68,571.00 125,495.00 883.00 331,785.00

-10,878.00 -5,611.00 -5,267.00 17,674.00 1,363.00 16,311.00 -7,920.00 -49.00 -7,850.00 -21.00 -1,064.00

118,302.00 118,302.00 25,330.00 3,749.00 21,581.00 187,029.00 68,522.00 117,645.00 862.00 330,661.00

Impact of the change from Belgian GAAP to IFRS for the ﬁrst and second half of 2004. Reconciliation of the net result (including minority interests) published under Belgian GAAP for the ﬁrst and second half of 2004 and of the net result under IFRS for the same periods.

Net result at 31/12/2004 including minority interests, in accordance with Belgian GAAP Intangible ﬁxed assets Goodwill Tangible ﬁxed assets Investment grants Stocks Provisions Deferred tax liabilities Directors’ fees Other changes Net result, including minority interests under IFRS at 31/12/2004

1 H 2004

2 H 2004

8,2

4,2 -0,2 1,5 0,6 0,3 0,9 -0,5 -0,8 -0,7 -0,1 5,2

1,5 0,7 -0,8 -1,1 -0,6 0,1 8

* impact on the proﬁt and loss account, as explained in the memo “Impact of the transition from Belgian ﬁnancial information standards to IFRS” under the heading “Reconciliation of the net result for 2004 (including minority interests) according to Belgian principles at the net result according to IFRS”.

141

* * * * * * * * *

SIOEN INDUSTRIES I

VII. IFRS

Comparison of the shareholders’ equity (including minority interests) published in accordance with Belgian standards at 31/12/2003 and shareholders’ equity (including minority interests) in accordance with IFRS standards at 30/06/2004 Shareholders’ liability at 30/06/2004, including minority interests, in accordance with Belgian GAAP Intangible ﬁxed assets Goodwill Tangible ﬁxed assets Investment grants Amounts payable after one year Stocks Provisions Deferred tax assets Deferred tax liabilities Consolidated shareholders’ equity, minority interests under IFRS at 30/06/2004

* The impact on shareholders’ equity consists of ❱ the impact on the shareholders’ equity in the opening balance sheet, as explained in the memo “Impact of the transition from Belgian financial reporting standards to IFRS ” under the heading “Reconciliation of the net assets at transition date according to Belgian principles and the net assets according to IFRS”. ❱ the impact on the profit and loss account for the first half of 2004, as explained in the memo “Impact of the transition from Belgian financial information standards to IFRS” under the heading “Reconciliation of the net result for 2004 (including minority interests) according to Belgian principles and the net result according to IFRS”.

142

134 -0,3 -19,0 24,2 -8,4 -1,0 -2,7 -0,7 7,4 -13,4 120,1

* * * * * * * * *

SIOEN INDUSTRIES I

VIII. STATUTORY AUDITOR’S REPORT

To the Shareholders As required by law and the company’s articles of association, we are pleased to report to you on the audit assignment which you have entrusted to us. We have audited the accompanying consolidated financial statements of Sioen Industries NV (“the company”) and its subsidiaries (jointly “the group”), prepared in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. Those consolidated financial statements comprise the consolidated balance sheet as at 31 December 2005, the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. The consolidated balance sheet shows total assets of EUR 337.683 (000) and a consolidated profit (group share) for the year then ended of EUR 13.582 (000). We have also performed those specific additional audit procedures required by the Companies Code. The Board of Directors of the company is responsible for the preparation of the consolidated financial statements and the directors’report on the consolidated financial statements, for the assessment of the information that should be included in the directors’report on the consolidated financial statements, and for the company’s compliance with the requirements of the Companies Code and the articles of association. Our audit of the consolidated financial statements was conducted in accordance with legal requirements and auditing standards applicable in Belgium, as issued by the “Institut des Reviseurs d’Entreprises/Instituut der Bedrijfsrevisoren”. The financial statements of several significant entities included in the scope of consolidation which represent 21,2% of total assets and 28,3% of total sales have been audited by other auditors. Our opinion on the accompanying consolidated financial statements, insofar as it relates to the amounts contributed by those entities, is based solely upon the reports of those other auditors. Unqualified audit opinion on the consolidated financial statements The forementioned auditing standards require that we plan and perform our audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. In accordance with these standards, we considered the group’s administrative and accounting organization as well as its internal control processes. We have obtained the explanations and

information required for our audit. We have examined, on a test basis, the evidence supporting the amounts in the consolidated financial statements. We have assessed the basis of the accounting methods used, the consolidation policies and significant estimates made by management as well as evaluating the presentation of the consolidated financial statements taken as a whole. We believe that our audit, together with the reports of other auditors on which we have relied, provides a reasonable basis for our opinion. In our opinion, and based, to the extent necessary upon the reports of other auditors, the consolidated financial statements give a true and fair view of the group’s financial position as of 31 December 2005, and of its results and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the EU and with the legal and regulatory requirements applicable in Belgium. Additional attestations We supplement our report with the following attestations which do not modify our audit opinion on the consolidated financial statements: ❱ The directors’report on the consolidated financial statements includes the information required by law and is in agreement with the consolidated financial statements. However, we are unable to express an opinion on the description of the principle risks and uncertainties confronting the group, or on the status, future evolution, or significant influence of certain factors on its future development. We can, nevertheless, confirm that the information given is not in obvious contradiction with any information obtained in the context of our appointment. ❱ Relating to note VII “Impact of the transition from Belgian financial reporting standards to IFRSs”, we refer to the statutory auditor’s reports issued respectively on 28 May 2004 and 23 March 2005 on the consolidation financial statements of the group in accordance with Belgian financial reporting standards as of 31 December 2003 and 2004. 29 March 2006 The Statutory Auditor DELOITTE Reviseurs d’Entreprises SC s.f.d. SCRL represented by Guy Wygaerts and Geert Verstraeten

143

SIOEN INDUSTRIES I

IX. STATUTORY ANNUAL ACCOUNTS OF I SIOEN INDUSTRIES NV

Condensed balance sheet of Sioen Industries n.v. after appropriation of proﬁt (in thousands EUR) December 31

2005 (000) EUR

2004 (000) EUR

2003 (000) EUR

2002 (000) EUR

Fixed assets

65.910

81.976

81.990

56.531

II. Intangible fixed assets III. Tangible fixed assets IV. Financial fixed assets

3.656 1.136 61.118

3.477 681 77.818

3.472 555 77.963

3.989 504 52.038

Current assets

139.941

139.630

136.381

132.578

VII. Amounts receivable within one year IX. Cash at hand and in bank X. Deferred charges and accrued income

138.611 1.045 285

139.207 286 137

136.205 46 130

125.800 6.544 234

Total assets

205.851

221.606

218.371

189.109

Capital and reserves

78.034

80.052

79.660

69.265

I. Capital IV. Legal reserves V. Proﬁt brought forward

46.000 3.339 28.695

46.000 3.174 30.878

46.000 2.910 30.750

46.000 2.167 21.098

127.817

141.554

138.711

119.844

51.613 76.100 104

60.284 81.107 163

61.828 76.784 99

68.831 50.787 226

205.851

221.606

218.371

189.109

Creditors VIII. Amounts payable after one year IX. Amounts payable within one year X. Accrued charges and deferred income Total liabilities

The statutory annual accounts of the parent company Sioen Industries n.v. are shown below in condensed form. In June 2006, the annual report and annual accounts of Sioen Industries n.v. and the auditor’s report will be filed with the National Bank of Belgium in accordance with Articles 98-102 of the Companies Act. These reports are available on request at the following address: Sioen Industries n.v. – Fabriekstraat 23 – 8850 Ardooie. The statutory auditor has issued an unqualified opinion with explanatory paragraph on the statutory financial statements of Sioen Industries NV. The explanatory paragraph is as follows:

144

Without qualifying the unqualiﬁed opinion expressed above, we draw the attention to the annual report. Sioen Industries NV has per December 31, 2005, a total outstanding receivable of 17,5 mio EUR on the Roltrans group, a 100% subsidiary of Sioen Industries NV. In addition, Sioen Coating Distribution NV, a 100% subsidiary of Sioen Industries NV, has outstanding receivables on the Roltrans group for an amount of 15,5 mio EUR. The realisation of these amounts is dependent of the further successful development of the realised recovery plan. The accompanying ﬁnancial statements do not included any less values or provisions relating to the above.

SIOEN INDUSTRIES I

IX. STATUTORY ANNUAL ACCOUNTS OF I SIOEN INDUSTRIES NV

Condensed income statement of Sioen Industries n.v. (in thousands EUR) Years ended December 31

2005 (000) EUR

2004 (000) EUR

2003 (000) EUR

2002 (000) EUR

I. Operating income

5.954

5.599

5.229

5.528

A.Sales D.Other operating income

5.889 65

5.317 282

5.010 219

5.383 145

(6.113)

(5.886)

(5.075)

(4.934)

B.Services and other goods C.Renumeration D.Depreciation and amounts written off G.Other operating charges

2.110 3.236 754 13

2.325 2.579 901 81

1.762 2.256 1.023 34

1.545 1.986 1.392 11

III. Operating proﬁt/loss

(159)

(287)

154

594

IV. Financial income

16.923

15.758

21.201

19.433

V. Financial charges

(6.416)

(6.531)

(6.012)

(5.058)

Financial result

10.507

9.227

15.189

14.375

VI. Proﬁt on ordinary activities

10.348

8.940

15.343

14.969

VII. Extraordinary result

(6.739)

(3.596)

IX. Proﬁt before tax

3.609

5.344

15.343

14.969

X. Income taxes

(293)

(71)

(495)

(766)

XI. Proﬁt for the ﬁnancial year

3.316

5.273

14.848

14.203

II. Operating charges

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SIOEN INDUSTRIES I

IX. STATUTORY ANNUAL ACCOUNTS OF I SIOEN INDUSTRIES NV

The extraordinary income relates to the capital gain on the disposal of the participating interest in Sirec.

Activity of Sioen Industries The function of Sioen Industries is essentially to outline the strategy of the three divisions. It also appoints the management of the Group companies and supports the Group companies in the areas of personnel management, ﬁnancial and treasury management, budgeting and controlling, MIS and IT, and legal affairs.

Accounting principles The accounting principles and translation rules applied to the statutory annual accounts of Sioen Industries are the same as those used for the consolidated annual accounts.

Comments The turnover of the holding company rose by 10.8% to EUR 5.9 million. Other operating income fell to EUR 0.065 million, as compared to EUR 0.28 million in 2004. In 2005 the operating loss amounted to EUR 0.159 million, compared with an operating loss in 2004 of 0.287 million EUR. Income rose to EUR 10.5 million, as compared to EUR 9.2 million in 2004, as a result of higher dividend payments from the various subsidiaries. These extraordinary results include a permanent impairment of EUR 8.3 million recorded against the participating interest in TIS and EUR 5 million against the interest in Pennel, and a long-term impairment of EUR 2.6 million on the claim against Sungintex.

Situation at 1 May 2006 Notifying party

In accordance with Articles 1 to 4 of the Act of March 2, 1989 concerning the disclosure of important holdings in listed companies and regulating take-over bids, the applicable quotas were set at, one the one hand, 5 percent or a multiple thereof and on the other hand at 3 percent or a multiple thereof. (Article 8 of the Articles of Association). In accordance with Article 4 of the Act of March 2, 1989, the following notiﬁcations of shareholdings in the company were received:

Date of notiﬁcation

Number of shares

Percentage of total number of shares

18 October 1996

13.365.010

62,5%

12 October 2005 12 October 2005 30 January 2006

12.715.010 726.320 12.906.212 21.391.070

59,4% 3,4% 60,33% 100,0%

Sihold n.v.,(1) Fabriekstraat 23, 8850 Ardooie Notiﬁcation of change of percentage shareholding Sihold n.v. Shell pension fund Sihold n.v. Total number of shares (1) Sihold n.v. is controlled by Sicorp n.v., which is controlled in turn by the Dutch foundation Stichting Administratiekantor Midapa. This foundation is controlled by the Sioen family.

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Statement of capital

SIOEN INDUSTRIES I

X. PROPOSALS TO THE ANNUAL MEETING

Proposals to the Annual Meeting of Sioen Industries n.v. of May 26, 2006

The board of directors of Sioen Industries proposes to the annual meeting to approve the annual accounts at December 31, 2005 and to consent to the appropriation of profit. The profit for the financial year ended is 3.315.435,84 EUR, compared to a profit of 5.273.005,05 EUR for the financial year 2004. The profit brought forward from the previous financial year is 30.878.787,74 EUR. The profit available for appropriation is consequently 34.194.223,58 EUR.

The board of directors proposes to appropriate the proﬁt available for appropriation of 34.194.223,58 EUR as follows: (in EUR) Gross dividends for the 21.391.070 shares 5.133.856,80 Directors’ fees 200.000,00 Transfer to the legal reserves 165.771,79 Proﬁt to be carried forward 28.694.594,99 The proposed net dividend per share is calculated as follows: (in EUR) Net dividend per share Withholding tax 25/75 Gross dividend per share Pay-out ratio (1)

0,1800 0,0600 0,2400 37,80%

The proposed dividend is 9% higher than that of 2004. The pay-out ratio amounts to 37,80%. If this proposal is accepted, the net dividend of 0,18 EUR per share will be made payable as from June 9, 2006 onwards at the counters of Dexia Bank, ING Bank, Fortis Bank and KBC Bank on presentation of coupon n°8.

(1) Gross dividend in relation to the share of the Group in the consolidated result

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