annual report 2003 - KU Leuven..._ annual report 2003 Deceuninck NV Registered office: Brugsesteenweg 374, 8800 Roeselare (Belgium) Operational HQ: Bruggesteenweg 164, 8830 Hooglede-Gits

_ annual report 2003

Deceuninck NV

Registered office:

Brugsesteenweg 374,

8800 Roeselare (Belgium)

Operational HQ:

Bruggesteenweg 164,

8830 Hooglede-Gits (Belgium)

tel. +32 51 23 92 11, Fax: +32 51 22 79 93

E-mail: [email protected]

VAT Registration No. BE 405.548.486,

RPR Kortrijk

www.deceuninck.com

deceuninck NV

Registered office:

Brugsesteenweg 374,

B-8800 Roeselare

Operational HQ:

Bruggesteenweg 164,

B- 8830 Hooglede-Gits

I - I

> Annual Report: Financial Year 2003Submitted to the Annual General Meeting of Shareholders on 11th May 2004

_annual report 2003 company profile

> Company Profile

Over the years, the Deceuninck Group has succeeded to establish itself in its sector as one of the

industry’s top companies worldwide. In a number of European countries it is the market leader.

Deceuninck’s turnover and profits have been growing fast in recent years, as a result of an active

and effective expansion and acquisition policy.

The Deceuninck Group currently owns some 23 subsidiaries (production and/or sales) throughout

Europe, North America and Asia.

The headquarters of the Group and the coordination center are located in Belgium.

In 2003 the Deceuninck Group achieved a turnover of 470.5 million euros, up 30% by comparison

with the year before (organic growth +8.7% in volume), with a workforce of 2,738.

Brasschaat, Belgium Zwevegem, Belgium Québec, Canada

> Part I Introduction to Deceuninck Group

2 - 3> ContentsAnnex Key figures: consolidated / per share

PART I Introduction to the Deceuninck Group

2 Company Profile

4 Statement to the Shareholders

6 The International Deceuninck Network

8 Structure of the Deceuninck Group

10 Board of Directors and Management

12 Corporate Governance

PART II Report of the Board of Directors

19 Group Strategy and Objectives

21 Main achievements in 2003

24 Post Balance Sheet Events

25 Evolution of key performance figures

30 Annual Report Deceuninck NV

35 Activities of the Business Units

39 Activities of Subsidiaries of the Group

53 Strategic Resources

57 Human Resources

60 Prevention, Health and Safety

61 Environmental Issues

62 Risk Management

PART III Information for the Shareholders

63 Characteristics of the Deceuninck share

65 Shareholders Policy and dividends

PART IV Financial Report

69 Report of the Board of Directors, Consolidated Financial Statement

73 Consolidated Financial Statements and Notes

112 Auditor’s Report

PART V Useful Information

114 Addresses

117 Lexicon

_ annual report 2003 statement to the shareholders

2003: a very difficult start but a perfect second half in nearly all markets.

The difficult start was linked to low consumer confidence, a result of great insecurity in the world. Everybody remembers the war in Iraq, the SARS-virus and the weak stock markets.

Nevertheless, low interest rates created the opportunity to stimulate the construction and renova-tion markets. From June onwards the tide was turning, turnover grew steadily, finishing the year with an organic volume growth of 8.7% which was the highest increase in the last 5 years. This was exclusively the result of the largest acquisition Deceuninck ever achieved: Thyssen Polymer, on 11th April 2003. The German Thyssen Polymer, a subsidiary of the Thyssen Krupp Technologies AG, with a turnover of more than 190 million euros per annum, opened new perspectives in Germany, Central and Eastern Europe and strengthened our position in the USA, France, Poland and other markets.

Our integration strategy took further shape following the acquisition of Detajoint which specialises in TPE-seals. This acquisition will allow the Group to produce one of the most important and also relatively expensive components of a window, its own rubber seals.

The company also excelled in terms of innovation: the melamine windowsill was a success and we developed and installed a new acoustic barrier.

In the windows division, the Zendow® concept was launched in France and the Czech Republic. This European system will, as of 2005, allow a major reduction of complexity and therefore increase productivity and margins. In the USA, final preparations took place for the start up of wood com-posites production.To serve this fast growing market better, Deceuninck entered into a strategic alliance with Alcoa Home Exteriors, one of the most renowned names in the distribution of building profiles.

> Statement to the shareholders

4 - 5

No less than 50.2 million euros has been invested, amongst others, in the extension of the com-pound plant in Belgium, new warehouse facilities in the United Kingdom and France, extrusion production lines, Zendow® machinery, finishing (Decoroc®) and computer systems (company security).

We will have to prove our position as a major world player: quality, innovation, market share and cost reduction will be key factors in our success. Synergies with Thyssen Polymer are at the top of our list of priorities.

Our employees at Deceuninck and Thyssen Polymer are ready to work with great commitment on turning the business plan into reality. This should result in a turnover of more than 700 million euros by 2007. On behalf of the Board of Directors and the management, we wish them all a fan-tastic future.

Clement De Meersman Arnold DeceuninckCEO Chairman

Deceuninck Ltd

Compound Machinery Extrusion Sales Stocks Training

Vinyl Building Products LLC

Status Systems PVCu Ltd

Dayton Technologies LLC


Deceuninck NV

Deceuninck NV - Compound division

Detajoint NV

Deceuninck Kunststof BV

Thyssen Polymer Polska Sp Zoo

Deceuninck Polska Sp Zoo

Deceuninck Spol sro

Thyssen Polymer GmbH

Deceuninck SA

Deceuninck NV –Branch Italy

Deceuninck NV - Branch Spain

Deceuninck NV- Branch Portugal

Rep office Deceuninck Moscow

Rep office Deceuninck Lithuania

Rep office Deceuninck Ukraine

Rep office Deceuninck Thyssen Polymer Kiev Ukraine

Deceuninck Romania srl

Rep office Deceuninck Bulgaria

Ege Profil AS

Thyssen Polymer (Thai) Co Ltd

_ annual report 2003 international deceuninck network

> The International Deceuninck Network (*)

* As of 31 March 2004

Deceuninck Ltd

Compound Machinery Extrusion Sales Stocks Training


Status Systems PVCu Ltd

Dayton Technologies LLC


Deceuninck NV

Deceuninck NV - Compound division

Detajoint NV

Deceuninck Kunststof BV

Thyssen Polymer Polska Sp Zoo

Deceuninck Polska Sp Zoo

Deceuninck Spol sro


Deceuninck SA

Deceuninck NV –Branch Italy

Deceuninck NV - Branch Spain

Deceuninck NV- Branch Portugal

Rep office Deceuninck Moscow

Rep office Deceuninck Lithuania

Rep office Deceuninck Ukraine

Rep office Deceuninck Thyssen Polymer Kiev Ukraine

Deceuninck Romania srl

Rep office Deceuninck Bulgaria

Ege Profil AS

Thyssen Polymer (Thai) Co Ltd

6 - 7

Spain UK BelgiumThe Netherlands Ireland Romania Czech Republic Italy

Poland Thailand Germany Turkey France USA Rep. OfficesPortugal

Status Systems Ltd

Eurisk RE Ltd

Deceuninck SA

Huis Clos SA

Ege Profil AS

Ege Pen ASDayton

Technologies LLC

VBP Inc

99,99%

100%

100%

100%

100%

100%

80% 100%

100%

100%

100%

100%

100%

100%

25%

75%

51%

48,95%

48,97%

100%

100%

100%

4,95%

100%

100%

100%

100%

10%

100%

100%

100%

100%

99,99%

100%

100%

10%

99,99%

100%

75 %

100%

98%

100%

Deceuninck GmbH & Co KG


Rewindo GmbH

Godiva Windows Ltd

Deceuninck Ltd

DeceuninckHoldings UK Ltd

DeceuninckRomania srl

DeceuninckSpol sro

Deceuninck NVSucursal em Portugal

DeceuninckIreland Ltd

DeceuninckNV branch Italy

Range ValleyExtrusion Ltd

Range ValleyEngineering Ltd Deceuninck

Kunststof BV

Deceuninck NVSucursal en Espana

Deceuninck Beheer BV

SistemasSumun SL

Deceuninck PolskaSp Zoo

Thyssen PolymerPolska Sp Zoo

Thyssen Polymer(Thai) Co Ltd

Asia Profile HoldingCo Ltd

Deceuninck HoldingGermany GmbH

DeceuninckVerwaltungs GmbH

Deceuninck Rep.Office Moscow

Deceuninck Rep.Office Lithuania

Deceuninck Rep.Office Bulgaria

Deceuninck Rep.Office Ukraine

Rep. OfficeThyssen Polymer Kiew

Ukraine

Deceuninck NorthAmerica Inc

Vinyl BuildingProducts LLC

Deceuninck Recycling NV

FIN-TONIC NV

0,01%

0,01%

0,01%

Plastics Deceuninck NV

Uniplast NV

Detajoint NV

DeceuninckCoordination Center NV

Deceuninck NV

_ annual report 2003 structure

> Structure of the Deceuninck Group

8 - 9

Status Systems (PVCu) Ltd: 24th January 2003Range Valley Ltd sold 100% of its shares in Status Systems (PVCu) Ltd to Deceuninck Ltd.

Thyssen Polymer: 11 April 2003On 11th April 2003 an agreement was signed for the purchase of shares in Thyssen Polymer GmbH shares and in Vinyl Building Products Inc.

The acquisition was structured as follows:Deceuninck Holding Germany GmbH and Deceuninck Verwaltungs GmbH were incorporated by Deceuninck Beheer BV; these two German companies then set up Deceuninck GmbH & Co KG, which bought the Thyssen Polymer GmbH shares.Thyssen Polymer GmbH holds 75% of Thyssen Polymer Polska Sp Zoo, 48.97% of Thyssen Polymer (Thai) Co Ltd 48.95 % of Asia Profile Holding Co Ltd and 10% of Rewindo GmbH. The remaining 25% of Thyssen Polymer Polska Sp Zoo was bought by Deceuninck Beheer BV. In the United States, VBP Inc was set up by Deceuninck North America Inc, which owns 100% of the Vinyl Building Products Inc shares.

Deceuninck Beheer BV: 14 April 2003-Transfer of 12,000 shares in Deceuninck Compound NV to FIN-TONIC NV-Transfer of 107,999 shares in Deceuninck Compound NV to Deceuninck NV.

Detajoint NV: 22 May 2003Purchase of 75% shares (2,820 shares) of Detajoint NV, Zone Industrielle Barrière de Fer, Avenue de Bois Jacquet 2, 7711 Dottignies.

Deceuninck Coordination Center NV: 26 June 2003Capital increase of 48,257,357.76 euros, increasing the firm’s share capital from 87,008,534.89 euros to 135,265,892.65 euros by the issue of 4,650 shares .Capital increase of 5,027,712.56 euros bringing the capital to 140,293,605.21 euros through incor-poration of the issue premium.

Merger of Deceuninck NV – Deceuninck Compound NV: 11 July 2003In this merger all the assets and liabilities of Deceuninck Compound NV as of 31/12/02 were taken over by Deceuninck NV.

Deceuninck NV Italian branch: 28 November 2003On 28th November 2003 a branch of Deceuninck NV was established in Italy.

> Bogen, Germany

_ annual report 2003 board of directors and management

> Board of Directors and Management (*)

Arnold Deceuninck Chairmanpermanent representative of R.A.M. Comm. VA

Roger Deceuninck Director and Honorary Chairman

Willy Deceuninck Vice Chairman permanent representativeof T.R.D. Comm. VA

Clement De Meersman Managing DirectorCEO

Dirk Demeulemeester Secretary

Herwig Bamelis Director permanent representative of HBM Consult BVBA

Lionel De MulderDirector

Michaël Mohr Director

Gerhard Rooze Director

(*) As of 31 March 2004

10 - 11

Executive Committee

Clement De Meersman, PresidentManaging Director, CEO

Dirk DemeulemeesterGroup Finance, Controlling and Corporate Development Manager, CFO

Geert DemeurisseGroup Operations Manager

Hans HerpoelGroup Manager Business Units (1)Group Manager and Managing Director BU of Thyssen Polymer (2)

Paul ScheibleGeneral Manager Thyssen Polymer GmbH (3)

Management Committee

Ann BataillieGeneral Counsel

Wim ClappaertGeneral Manager Operations, Hooglede

Wilfried HuygheGeneral Manager Research & Development, and Quality Assurance (1)

Marc MichelsGeneral Manager Human Resources

Michel StrypsteinGeneral Manager Special Projects

Alain SwyngedauwGeneral Manager Export

Frans Van VaerenberghGeneral Manager Compound

Lieven VandendriesscheGeneral Manager Business Analysis, Development and ICT

Bernard VanderperGeneral Manager Benelux

Hugo VerniestGeneral Manager Tooling Technologies

Regional Management

Ralph WeissCEO of Vinyl Building Products LLC and of Deceuninck North America Inc (United States) (4)

Darwin BrownCEO of Deceuninck North America Inc (United States) (5)

Ergun CicezkciGeneral Manager, Ege Profil AS (Turkey)

Antonio EscobarGeneral Manager Deceuninck NV Sucursal em Portugal & Sucursal en Espana (Spain and Portugal)

Alain SwyngedauwGeneral Manager ad interim Deceuninck Spol sro (Czech Republic)

Elena MaricaGeneral Manager Deceuninck Romania srl (Romania)

Chris ForemanGeneral Manager Status Systems Ltd (Oldham – UK)

Ron Painter General Manager Deceuninck Ltd (Calne – UK)

Paul Van WambekeGeneral Manager Deceuninck SA (France)

Przemyslaw ZdziebkowskiGeneral Manager Deceuninck Polska Sp Zoo (Poland)

Renate JasekGeneral Manager Thyssen Polymer Polska Sp Zoo (Poland)

Martin RosochaGeneral Manager CIS countries

Volker GuthGeneral Manager Deceuninck Russia (Russia)

Internal Auditor

Charles Leclercq (6), Steven Powell (7)Internal Audit Manager

Auditors

Ernst & Young, company auditors BCVrepresented by Mr. Marc Van Hoecke and Mr. Ludo Swolfs

> Board of Directors and Management (*)

(1) Until 1 July 2003(2) From 1 July 2003(3) From 1 August 2003

(4) From 1 February 2004(5) Until 1 February 2004

(6) Until 31 December 2003(7) From 1 January 2004

> Corporate Governance

As Deceuninck shares are widely held, the Board of Directors intends to ensure the greatest possi-ble transparency in complying with the rules for Corporate Governance.

Deceuninck’s policy is based on strict rules concerning integrity and Corporate Governance, the fair representation of stakeholders’ interests, independence, transparency and responsibility. The pre-sence of independent non-executive directors on the Board is evidence of this vision of Corporate Governance: it is their duty, while remaining completely independent of both management and shareholders, to help assess the company’s strategy, performance and resources.The Deceuninck Board is composed of eight directors in all, four of whom are independent.

The basic principle of the Group’s philosophy is that the company and its governing bodies should be independent in decision-making. This takes into account the Group’s economic situation, spe-cific character, size and structure.

The Board of Directors has discussed recent developments regarding Corporate Governance especially the Belgian law of 2nd August 2002. In October 2003 the company modified its Bylaws in accordance with that law and statutory rules were adopted for the work of the Audit and Remunerations Committee.

Deceuninck participates actively in meetings and seminars on Corporate Governance and pays heed to the recommendations of the Belgian Banking, Finance and Insurance Commission.

The Board of Directors, the Executive Committee and the Management Committee, together with the General Meeting, constitute the Group’s key management bodies.

_ annual report 2003 corporate governance

12 - 13

The Board of Directors

1. Composition (as of 31 March 2004)

Directors representing controlling interests

Chairman (1) Arnold DeceuninckPermanent representative of R.A.M. Comm. VA (3)

Director of Companies

Director and Honorary Chairman (2)

Roger Deceuninck Director of Companies

Vice Chairman (1) Willy DeceuninckPermanent representative of T.R.D. Comm. VA (3)


Executive Director

Managing Director Clement De Meersman Director of Roularta Media Group NV and of Elia NV

Independent Directors

Director Herwig Bamelis Permanent representative of HBM Consult BVBA (4)


Director Lionel De Mulder Director of Companies

Director Michael Mohr Tax Consultant

Director Gerhard Rooze Director of Bank Degroof NV

The Board of Directors is made up of eight directors, one executive and seven non-executive. All were elected by the AGM for a maximum of six years and are eligible for re-election.The company Bylaws set no age limit for directors.

On 1 July 2003 Arnold Deceuninck succeeded Roger Deceuninck as Chairman of the Board and Willy Deceuninck was appointed Vice Chairman.

All mandates will come to an end at the annual meeting of 2007.

> Izegem, Belgium

(1 ) From 1 July 2003 (4) From 8 November 2003

(2) Chairman until 30 June 2003

(3) From 1 January 2004


Roger Deceuninck has served as Chairman since 1974. The Board, the management and all the staff express their sincere thanks for his professional and personal efforts on the company’s behalf over the years. Roger Deceuninck remains on the Board of Directors and was nominated as Honorary Chairman.

From 1 January 2004 the Chairmanship is to be held by Arnold Deceuninck as permanent repre-sentative of R.A.M. Comm. VA and the Vice Chairmanship by Willy Deceuninck as permanent representative of T.R.D. Comm. VA.

A proposal for the permanent appointment of R.A.M. Comm. VA, T.R.D. Comm. VA and HBM Consult BVBA nominations will be put to the AGM on 11th May 2004.

Day-to-day management is in the hands of Clement De Meersman who also chairs the Executive Committee and the Management Committee.

2. The Board: organization and functioning

The Board of Directors met nine times in 2003. Eight of these meetings were held at the registe-red office of Deceuninck NV at Roeselare (Belgium). The June meeting was hosted by the Polish subsidiary in Poznan. The Board also visited subsidiaries and branches in Germany and the Czech Republic, attending events organized for customers. These meetings give the Board an opportunity to have direct contact with the customers and thus to form an impression of the market.All decisions were taken by the unanimous vote of those directors present. No use was made of the facility for taking a decision by means of written consents.

The schedule of Board meetings is established at the start of the year on the Chairman’s motion. To be able to prepare for each meeting, Board members are provided with the necessary documents for each agenda item. Minutes of every meeting are taken by the Secretary to the Board who assu-res the regulatory financial reporting in his capacity as CFO.

Each Board meeting is provided with the consolidated sales figures, key performance indicators, details of investments and other relevant information in order that it can make an assessment of the way the company and its subsidiaries are developing.

Besides its legal and statutory powers, the Board of Directors also: - draws up strategic aims for the Group- draws up the Management Plan- approves the annual budget- oversees the quality of information given to shareholders and to the public

Esmery-Hallon, France

14 - 15

- takes all proper steps to maintain the company’s internal control system- takes decisions concerning acquisitions, major changes in organization and the sale of land or

buildings

The Board of Directors appoints the Managing Director, the members of the Executive Committee and the Management Committee, the regional managers, the members of the Audit Committee and the Remunerations Committee. These decisions are taken by a majority vote, except where the company’s Bylaws provides otherwise.The Remunerations Committee determines the fees and/or other emoluments or benefits provi-ded to Board members. For the financial year 2003, the total of all directors’ fees amounted to 0,8 million euros.

DAY-TO-DAY MANAGEMENT

The Managing Director is responsible for the day-to-day management of the company. He reports directly to the Board of Directors.

An Executive Committee and a Management Committee assist him in his task.The Executive and Management Committees meet every two weeks. The Management Committee minutes are taken by the Group’s General Counsel.

The Executive Committee, chaired by the Managing Director, prepares draft strategies for the Board of Directors, follows these up once adopted, oversees the operational results and analyses the Group’s performance. The CFO takes the Executive Committee’s minutes.

The Steering Committee meets, together with the Executive Committee and the Management Committee, eight times a year. The heads of the various Business Units and of the logistics, invest-ments, product development, corporate control and e-business departments attend these mee-tings, at which the agenda items are discussed on a wider basis within the organization.

In addition, a Strategy Committee also meets twice a year. This committee is made up of all mana-gers from the various foreign subsidiaries and branches, together with the members of the Executive and the Management Committees. These meetings discuss subjects of a strategic nature.


No “executive committee” in the sense of Article 524bis of the Companies Code has been set up within the Board of Directors

COMMITTEES ESTABLISHED BY THE BOARD OF DIRECTORS

AUDIT COMMITTEE

The establishment and composition of the Audit Committee are governed by the company’s Bylaws. The Audit Committee consists of three non-executive directors, two of whom are indepen-dent directors.

Members: Gerhard Rooze, Chairman Willy Deceuninck, Director Michaël Mohr, Director Internal Audit Manager: Charles Leclerq (until 31 December 2003) Steven Powell (from 1 January 2004)

The Audit Committee’s duties include, as a minimum, the following:- examining the accounts and supervising the budget- supervising audit activities, including permanent monitoring of action on the External Auditors’

report- evaluating the reliability of the financial figures- supervising the Internal Control organized by the company management.

The Audit Committee met three times in 2003 in the presence of the Internal Audit Manager.

The Audit committee has the duty of supervising the internal and external financial and opera-tional controls and the implementation of the external and internal Auditors’ recommendations. It provides advice on the appointment of the external Auditors and the setting of the Directors’ remuneration. The Internal Audit Manager drafts the Audit Committee’s minutes for submission to the Board of Directors.

The Audit Committee also has powers to order investigations into any of the matters falling within its remit. It has at its disposal the necessary tools, has access to all company information and can call on internal or external specialists for advice.

Hollebeke, Belgium

16 - 17

REMUNERATIONS COMMITTEE

A Remunerations Committee has been set up as a sub-committee of the Board.The Remunerations Committee is composed of at least three members. It has the task of making recommendations to the Board concerning the fees and other emoluments payable to the compa-ny’s directors and executives.In the case of this Committee itself, its appointment, standing orders for discussion/decision and reporting procedures are laid down in a company regulation, established by the Board of Directors after discussion with the Remunerations Committee.

The Remunerations Committee is at present composed of three members: Mr. Arnold Deceuninck, Mr. Clement De Meersman and Mr. Herwig Bamelis. It met once in 2003. The committee reports on its decisions and recommendations to the Board of Directors.

POLICY ON ALLOCATION OF PROFITS

At least 5% of each financial year’s profit is set aside to build a statutory reserve. This obligatory retention ceases once that reserve reaches one tenth of the company’s share capital but resumes if the statutory reserve is drawn on.The allocation of the remaining profit is decided by the AGM on the proposal of the Board of Directors.

STOCK OPTION PLAN

The Board of Directors has on a number of occasions provided an opportunity for managers, key-people and Board members other than those representing controlling interests, to acquire options on existing Deceuninck shares. The Board aims in this way to motivate the staff and directors by enabling them to acquire shares under relatively advantageous terms: this will no doubt enhance their commitment with the company’s interests.

Around 288,250 options have already been made available to the staff. Each option entitles the holder to buy one Deceuninck share at a fixed price, equal to the market value at the time when the option is allocated.

At its meeting on 19 December 2003 the Board of Directors decided to launch a new stock option plan with the issue of 64,000 stock options on existing Deceuninck shares. In accordance with Article 523, paragraph 1 of the Companies Code, note was made at a meeting of the Board of Directors of a possible conflict of interest in relation to assets owned by members of the Board. The extract from the relevant minutes of the Board of Directors meeting is reproduced in the Report of the Board of Directors (ref. Part II).


Overview of Stock Option Plans

Basic Information 1999 Plan 2000 Plan 2001 Plan 2002 Plan 2003 Plan Total

Date of Board resolution 27/11/1999 22/12/2000 30/10/2001 20/12/2002 19/12/2003

Issue price 23.42 17.00 13.90 18.65 25.22

Options issued 48,500 55,250 56,500 64,000 64,000 288,250

Refused 1,400 2,000 700 9,750 16,500 30,350

Accepted 47,100 53,250 55,800 54,250 47,500 257,900

Exercise Periods

Available Balance 47,100 53,250 55,800 54,250 47,850 257,900

2003-2009 -47,100 -47,100

2004-2010 -53,250 -53,250

2005-2011 -55,800 -55,800

2006-2012 -54,250 -54,250

2007-2013 -47,850 -47,500

Schilde, Belgium

18 - 19

> Strategy and Objectives • World leader in the field• Turnover of 470 million euros (incl. 6 months Thyssen Polymer GmbH)• 4,500 customers worldwide• Present in 32 countries• 23 subsidiaries (production and/or sales)• 305,000 km of extruded profiles (incl. Thyssen Polymer GmbH)• 2,738 employees• 205,000 tonnes of produced compound• management of 3,800 tools

Strategy and Objectives of the Group

2003 saw the continued implementation of the strategic plan 2000-2004. In addition, foundations were laid for the new strategic plan 2003-2007, which was announced in June 2003.The main keystones of the strategic plan 2000-2004, which were based on an increasingly systema-tic consolidation of the sector, were: • balancing organic growth with growth through acquisitions • the importance of territorial expansion and • a far reaching integration of activities. The Coordination Center continued to work towards a position of financial and fiscal optimiza-tion.

In 2003, Deceuninck has continued in the same direction. The take-over of Thyssen Polymer was a big but carefully considered step towards growth through acquisitions. Thyssen Polymer offers a clear territorial complement to Deceuninck activities in those areas in which Deceuninck was less well represented in the past, without however, becoming too dependent on any one territory. In Western Europe, these areas were in particular Germany, Austria and Switzerland and in Eastern Europe most countries of the former Soviet Union. In France, the expansion towards the east of the country was an important move in customer repositioning, as Deceuninck had been traditionally less well represented there than in the west.

In existing markets, Deceuninck also succeeded in increasing its market share in nearly all countries resulting in organic growth greater than market growth or > 8.7%.

The acquisition of 75% of the shares of Detajoint allowed Deceuninck to continue its strategy of increased integration. Gradually, seals purchased externally will be replaced by those produced by Detajoint.

Schilde, Belgium

> Part II Report of the Board of Directors

_ annual report 2003 strategy and objectives

The acquisition of Thyssen Polymer offers further opportunities for integration. Thyssen Polymer has at its disposal an injection moulding division. Until recently Deceuninck contracted out the production of injection moulded products. It will be examined in 2004 whether it would make eco-nomic sense to produce in the various injection moulded products.

The business plan for 2003-2007 is ambitious, aimed at achieving, without any substantial acqui-sitions, a turnover of 700 million euros by 2007. Deceuninck plans to do this on the basis of three guiding principles: consolidation, integration and product development.It is obvious that the continued integration of the Thyssen Polymer Group in Europe and the United States is central to this. Operational processes will be harmonised and common platforms deve-loped and implemented with the objective of maximising economies of scale and synergies. This will, in turn, help Deceuninck control expenditure through an increased purchasing power. These efforts should result in a 12 million euros cost saving by 2007.Compounds. In 2003, a fourth compound tower was brought into use. This will allow Deceuninck Compound to increase the production of compounds by 35% over the next 5 years without making any new substantial investments.Tool shop. Plans to bring together a number of tool shops divisions are being developed.Extrusion. Further investments in additional extrusion lines or in the renewal of existing ones will happen within existing extrusion units. In addition, consideration is being given to setting up new extrusion-units in new territories, i.e. Russia and the west of the United States.Finishing. As a result of the strong increase in demand for coloured profiles, further investment in additional production lines for foiling will be required. As a result of the success of the coated Decoroc® profiles an investment in an automated coating production line was made.

An important aspect of the strategy to 2007 will be product innovation, in particular relating to the development in Non-Fenestration. In the first instance Deceuninck is considering the commerciali-zation in the United States of wood composite profiles for decking, a fast growing market segment. It is also the intention to introduce in Europe, as fast as possible, a range of wood composite pro-ducts for the construction industry.

Furthermore, the company wants to develop the recycling of post-consumer rigid PVC products through cyclefoam technology, both with existing as well as with new products. The first results of this technique, such as the acoustic barrier, were already realized in 2003.

Consideration is also being given to the extension of the capacity of hard foam products and to the implementation of new printing technology.

On the other hand, the acquisition of Detajoint offers Deceuninck the possibility of further analy-sing the economic feasibility of extending the supply of TPE-seals to the automotive industry and possibly of implementing .

> Holstein, Germany

20 - 21

Deceuninck Recycling SA: 6 January 2003

As of 28 February 2003, operations at Deceuninck Recycling SA were closed down. Machinery and customer lists have been sold. A restructuring plan has been put in place for the 8 employees. The PVC recycling activity, which was carried out mainly in the Hooglede-Gits plant, has been maintai-ned.

Czech Republic: 24 February 2003

Deceuninck Spol moved to new premises, including a warehouse and training centre facilities, in Popuvky (near Brno), Czech Republic. An investment of 3.5 million euros is involved.

Germany: 11 April 2003

Deceuninck took over Thyssen Polymer GmbH, the extrusion business unit of ThyssenKrupp Technologies. Thyssen Polymer is a world player in the production of PVC-profiles for doors, win-dows and cladding. The majority of its turnover is outside Germany, mainly in France, the USA, Poland and other countries in Central and Eastern Europe. The company is number five in Europe and the USA. It has an extrusion plant in Bogen (Germany) as well as two extrusion divisions in the USA (Oakland in New Jersey and Little Rock in Arkansas) which operate under Vinyl Building Products Inc. Thyssen Polymer has a total extrusion capacity of approximately 86,000 tonnes per annum and is also active in injection moulding, tool production, lamination and compounding. Sales were 186 million euros in 2002. The company employs 650 people in Germany and about 250 in other countries.

Purchase of own shares: 13 May 2003

The Extraordinary General Meeting of Deceuninck NV on 13 May 2003, in accordance with article 620 of the Companies Code, extended the empowerment for the company to purchase its own shares by 18 months.

> Main Achievements in 2003

Zendow®: 16 May 2003

During its annual meeting with customers in France, Deceuninck intro-duced ‘Zendow®’. Zendow® is an innovative window concept in which various window traditions from different countries have been integrated in one basic concept. In doing this, Deceuninck is drawing on the platform thinking of the automotive industry which seeks to reduce complexities

without detracting from deep-rooted, different national, functional traditions of the use of a window. Zendow® was first introduced in France and the Czech Republic, followed in 2004 by Deceuninck markets in Spain, Poland, UK and Belgium.

Detajoint: 22 May 2003

Deceuninck purchased a 75% share in Detajoint, a company specialising in the extrusion of TPE-seals. ThermoPlastic Elastomers (TPE) are a flexible synthetic material based on high-quality poly-mers. The company was established in 1995, achieved a turnover of 2.5 million euros in 2002, opera-tes seven extrusion lines and employs 15 people. The Deceuninck Group uses more than 30 million meters of seals annually. This purchase strengthens the integration strategy of the Deceuninck Group which is aimed at optimum control over the know-how needed for production processes. The current management and all staff of Detajoint will stay with the company to maintain continuity.

Board of Directors – new Chairman: 1 July 2003

Arnold Deceuninck succeeded Roger Deceuninck as Chairman of the Board of Directors. Roger Deceuninck had been Chairman since 1974; he will continue to be a member of the Board and has been appointed Honorary Chairman. Willy Deceuninck was appointed as Vice-Chairman.

Merger of Deceuninck NV with Deceuninck Compound NV: 11 July 2003

On the decision of the Extraordinary General Meetings of Deceuninck NV and Deceuninck Compound NV, the latter was merged with Deceuninck NV. Deceuninck NV assumed all the assets and liabilities of Deceuninck Compound NV, including all rights and responsibilities.

_ annual report 2003 main achievements in 2003

22 - 23

Deceuninck Compound: 4th tower brought on-line: 1 September 2003

Early September saw the 4th tower brought on-line, allowing Deceuninck Compound to increase its capacity from 100,000 to 135,000 tonnes per annum. This has resulted in making the Deceuninck Compound operation one of the largest of its kind worldwide.

Deceuninck Ltd: start of groundworks for new logistics centre

Groundworks for a new logistics centre in Calne commenced on 14 July 2003. This is the first phase of a project seeking to bring the existing three warehouse facilities for finished products at Calne under one roof. A warehouse of 10,000 m2 will be built on a purchased area totalling 70,000 m2. The first phase was completed on 10 November 2003. The second phase, the construction, will commence in early 2004 with a projected completion date of June 2004.

Wood extrusion: 2 October 2003

Dayton Technologies LLC joined Alcoa Home Exteriors, a major American manufacturer of building products, in a strategic alliance for the distribution of composite decking and railing, produced by Dayton from PE and wood flour.

Amendment of Bylaws: 22 October 2003

The Extraordinary General Meeting of Deceuninck NV decided to amend its Bylaws in order to bring them into line with the Law on Corporate Governance of 2 August 2002. The General Meeting also extended the authority of the Board of Directors, for a period of five years, to increase capital within agreed limits. The authorization for the Company to purchase its own shares in case of some serious circumstances threatening the Company, has also been renewed for a period of 3 years.

Private Placement: 7 November 2003

Deceuninck signed an agreement to issue a private placement of debt arranged by ABN AMRO. The issue consists of USD 40 million and 20 million euros and was placed with 4 investors, insurance companies and pension funds.

_ annual report 2003 post balance sheet events

> Post Balance Sheet Events

Deceuninck North America closed its Wilmington plant (Delaware, USA) and decided to conso-lidate its extrusion activities in Ohio, New Jersey and Arkansas. 35 employees have been offered alternative employment in the plants in Ohio and New Jersey.

In early 2004, Deceuninck Russia moved into its new premises. The local staff and management team have been expanded. The production of wood extrusion products for decking and railing officially commenced on 15 March 2004 in the presence of the governor of Ohio, Mr Bob Taft, and representatives of Deceuninck North America and Alcoa Home Exteriors.

Acoustic Barrier: 12 December 2003

The first acoustic barrier made from recycled PVC was installed in Belgium. The total wall area is 4,500 m2, manufactured from over 150 tonnes of recycled, rigid PVC, which has been processed using the Cyclefoam technique developed by Deceuninck. It allows two environmental issues to be tackled. On the one hand, it offers a solution for the recycling and the processing of post-consu-mer rigid PVC from the construction industry and, on the other hand, it offers a solution for noise pollution.

> Ghent, Belgium

24 - 25

> Evolution of key performance figures

Consolidated turnover

The consolidated turnover increased by 30% from 362.2 million euros to 470.5 million euros. Without Thyssen Polymer, this represents an organic growth in volume of 8.7%.

The depreciation of certain currencies such as the US Dollar, the British Pound and the Polish Zloty had a negative impact of 27.1 million euros on turnover. The organic growth of turnover was due to growing market share in nearly all regions, supported, in particular, by a strong renovation market.

The largest growth took place in Eastern Europe and Turkey. In Turkey, we registered a growth in volume terms of more than 30%, despite a slow start as a consequence of the war in Iraq.

Geographical distribution of the consolidated turnover in %

USA23%

Central and Eastern Europe

18%

Asia/Turkey7%

UK15%

South, West and Northern Europe

37%

_ annual report 2003 evolution of key performance figures

EBIT – EBITDA

EBITDA rose by 17.5% to 90.9 million euros, compared with 77.3 million euros in 2002.

This 13.6 million euros rise is primarily due to the acquisition of Thyssen Polymer. The positive contribution of the growth in volume was, however, balanced by an increase in raw material prices in the USA, the costs associated with the launch of the innovative window concept Zendow®, the integration costs of Thyssen Polymer, and adjustments for lower exchange rates.

The EBIT or the operating results rose by 25.8% from 42.9 million euros to 54 million euros. In per-centage terms, the increase in EBIT was higher than that of EBITDA because of release of previously accrued provisions.

Net Income

Net income decreased from 29.6 million euros in 2002 to 28.6 million euros in 2003. This decrease was mainly the result of higher finance costs and a higher taxation rate than in 2002.

The financial performance was approximately 5 million euros less favourable than last year. This is a result of interest of 0.8 million euros on the new loan to acquire Thyssen Polymer, higher cash discounts at Thyssen of 1.7 million euros, and 2 million euros out of exceptionally favourable exchange rates registered in 2002.

The consolidated tax rate amounted to 32.7% in comparison to 20% in 2002 when one-off tax adjustments worth 4.5 million euros were recorded.

Private placement

Deceuninck signed an agreement to issue a private placement of debt arranged by ABN AMRO. The issue consists of USD 40 million and 20 million euros and was placed with 4 investors, insurance companies and pension funds.

These funds will be used to finance the bridging loan following the take over of Thyssen Polymer and to optimize its general debt profile.

NOVASIL

26 - 27

NORDICA

PACIFIC

Investments

Investments amounted to 50.2 million euros in 2003 in comparison to 36.3 million euros in 2002. This amount has been used mainly for:

- The continued extension of the production capacity in raw materials within our division Compound, aimed at increasing capacity to 135,000 tonnes

- The production of new calibers and dies for the new window concept, Zendow®

- The start of work on a logistics centre in the United Kingdom- The extension of production infrastructure in Turkey though an increase in the number of extru-

sion lines- Investments in Wood extrusion in Deceuninck North America- The installation of silos in the Polish subsidiary - The automation of coating in Gits.

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50

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20032002200120001999

33,1

18

50,2

36,3

18(IFRS)

33,2

Balance Sheet Items

Total assets increased by 44.3% from 337.8 million euros in 2002 to 487.6 million euros in 2003 as a result of the acquisition of Thyssen Polymer.

Tangible assets amount to 216.8 million euros compared to 140.2 million euros in the last financial year. Intangible assets stand at 6.3 million euros.

Stocks amount to 66.3% of total assets, representing an increase of 64.1%.

Despite negative exchange rate movements, equity rose from 190.8 million euros to 202 million euros thanks to the good results. This now represents 41.4% of total assets.

Debts rose by 100.5 million euros to 152.2 million euros. This increase is the result of financing the acquisition described above.

The balance sheet structure thus remains very healthy with equity at 41.4% of total assets.

Managing market risk

The principal categories of market risk the Group faces are changes in raw material prices and foreign currency exchange rates and interest rates.

The different subsidiaries of the Group seek to minimize adverse effects on their financial results by using commercial agreements, in which sales prices are linked to the evolution of the commodity price. Due to its international character, the Deceuninck Group is exposed to different foreign currency risks arising from countries which do not belong to the Eurozone (Turkish Lira, British Pound, etc.). The finance department of the Group manages all risks and limits them by pooling transactions in the Deceuninck Coordination Center NV in the same currency.

Currently, interest rate risk is limited for the Group as almost all loans are at a fixed interest rate. The Group strives to achieve an optimal portfolio of long and short term liabilities in order to minimize the risk of potential interest rate fluctuation. In the framework of the financing of the acquisition of Thyssen Polymer, Deceuninck opted unreservedly to spread the risk, the currency, the term and the instalment schedule of the loan.

_ annual report 2003 evolution of key performance figures

28 - 29

Little Totham, UK

On the one hand and in part, a traditional bank loan was chosen, with a fixed interest rate. This is withdrawn partly on a revolving basis which benefits the flexibility of the withdrawals. On the other hand and new to the Group, the investors market was called on with success, resulting in two bullet loans in USD and in euro.

As the issuing of a private placement tends to take around three months and as interest rates were rather volatile in the middle of 2003, it was decided, as a precaution and in the belief that interest rates were at a very attractive level at that time, to agree to a loan.

This product allowed Deceuninck to save 45,344 euros and 202,311 USD respectively, during the first six months of the loan. This structure allows Deceuninck to get unlimited advantage from the current, favourable interest rates. On the other hand, the Group is subject to rising, capped interest rates. Such a product (swap) can have a negative impact on the market value of the product which has an impact on the results of the Group. This impact was entered as losses of 162,095 euros and 675,484 USD respectively for the financial year 2003. In comparison, the indicative market value on 12 March 2004 signified gains of 56,000 euros and 5,000 USD respectively.

There is no significant concentration of insolvency amongst our client base. A number of procedu-res have been introduced to control risks related to insolvency.

Deceuninck entered into contracts with various credit insurance companies to cover trading liabi-lities.

Liquidity risk is related to the evolution of the company’s working capital. The Group monitors changes in working capital through specific actions such as increasing the rotation of inventories and intensive follow-up on outstanding invoices.

> Annual Report

Report of the Board of Directors to the Annual General Meeting of the Deceuninck NV Company of 11 May 2004.

Commentary on the statutory annual accounts (shortened version*). A statement of approval has been submitted by the Auditor without reservations alongside this annual report.

Results

The net result of the financial year 2003 breaks down as follows:

In thousands of euros Financial year 2003 Operating income 204,588Operating charges -188,573Operating profit 16,015Financial income 7,691Financial charges -13,717Profit on ordinary activities before taxes 9,989Extraordinary income 551Extraordinary charges -20,440Loss for the year -9,900Transfer from deferred taxes 249Transfer to deferred taxes -115Income tax -3,769Loss for the year -13,535Transfer from untaxed reserves 468Transfer to untaxed reserves -224Loss for the year to be appropriated -13,291

Variations compared to the last financial year are mainly attributable to the merger of Deceuninck Compound NV with Deceuninck NV. The merger took place through the assignment of all the assets and liabilities of Deceuninck Compound as of 31 December 2002, as a result of its dissolu-tion without liquidation.Significant variations, which cannot be attributed to the merger, are explained in detail.

After deducting what is related to the merger of Compound, turnover has risen from 115.1 million euros to 126.3 million euros. This can be attributed to the strong increase in turnover of the Czech and Polish subsidiaries through continued advances in the Central European market, as well as through a further capture of French market share.

_ annual report 2003 annual report

(*) The annual report will be submitted within 30 days following approval by the general meeting. A full copy can be obtained from the

company headquarters.

30 - 31Kortrijk, Belgium

The net result after taxes stands at a loss of 13.3 million euros, compared to a loss of 2.03 million euros in 2002. This result is due to a one-off write-off of Compound’s shares in Deceuninck NV at the time of the merger (extraordinary charges), the negative value of the shares in Deceuninck Iberica SA as a result of the dissolution of this company (extraordinary charges), the increase in fees and the interest charges following the acquisition of Thyssen Polymer, as well as the continued production of new tools in the framework of the launch of the new window concept Zendow® (depreciation costs).

Investments

Alongside the acquisition of the assets following the merger with Deceuninck Compound NV, Deceuninck NV invested 24.5 million euros.

These investments were valued at purchase cost or production cost (fixed assets produced in-house). They relate in particular to the installation of a new compounding tower in the raw materials division, the completion of the modernization of the tools division, the production of new tools in the framework of the new window system, Zendow®, the purchase of containers and the automa-tion of the coating department.

Justification of the use of appraisal values

The merger of Deceuninck Compound with Deceuninck NV has contributed significantly to the loss in the financial year. Considering the unique character of the merger, the appraisal values of Deceuninck have been applied assuming continuity.

Appropriation of the result

The year 2003 ended with a non-consolidated net loss to be appropriated of 13,3 million euros. The profit brought forward from 2002 amounts to 38.7 million euros.

The profit available for appropriation stands at 25.4 million euros.The Board of Directors proposes to appropriate the profit as follows:

Addition to legal reserves 0.030 million eurosAddition to other reserves 4.376 million eurosDividends payable 5.006 million eurosProfit to be carried forward 15.998 million eurosTOTAL 25.410 million euros

In accordance with the law, the accounts submitted for approval were drawn up according to the appropriation shown above. A gross dividend of 0.2360 per share will be paid out, or 0.1770 per share after taxes. The dividend shall be payable from 25 May 2004 on presentation of coupon no. 4.


Holdings

The holding of Deceuninck NV in the Turkish company Ege Profil AS rose further from 97.16% to 97.46%.

The holding of Deceuninck NV in Deceuninck Coordination center NV has increased from 62% to 100% as a result of the merger with Deceuninck Compound NV.

Deceuninck NV acquired a 75% stake in Detajoint NV, a company specializing in the extrusion of thermoplastic elastomer seals.

Following the dissolution of Deceuninck Iberica SA, the stake in Deceuninck NV was written off.

Discharge

In accordance with the Bylaws, the Annual General Meeting is requested to grant final discharge to the Directors and statutory Auditor in respect of their assignment during the past year.

Capital

Capital assets grew by 0.299 million euros following the merger with Deceuninck Compound NV.

Purchase of company shares

The total number of company shares purchased and held in portfolio at the end of the year remai-ned unchanged. At the end of the year they numbered 337,380 shares. Following the rise in capital they are now valued at 133,057.61 euros. This is 1.57% of the issued capital.

The gross book value of the shares held in portfolio at the end of the year is 6,989,820.94 euros, for which an earmarked reserve fund ‘purchase of company shares’ is maintained. On the basis of the market price on 31 December 2003, a capital loss on shares of 154,429.82 euros was recorded.

Capital assets grew by 0.299 million euros following the merger with Deceuninck Compound NV, for which 171,602 new shares were issued and allocated to the shareholders of the merged com-pany (and not the buying company).On 1 December, Deceuninck NV purchased company shares on the stock market. On the decision of the Extraordinary General Meeting of 31 December 2003, these 171,602 shares were annulled and the accrued earmarked reserve written off.

Sylt, Germany

32 - 33

Stock options

At its meeting of 19 December 2003, the Board of Directors decided to launch a new stock option plan involving the issue of 64,000 stock options on existing Deceuninck shares.

Research & Development

Research and development activities were mainly aimed at the development of a new window system.

Sales offices of the company

Deceuninck NV has a sales office in Spain (Deceuninck NV – Branch Spain) and in Portugal (Deceuninck NV – Branch Portugal). Both are engaged in commercial activities only.On 28 November 2003, Deceuninck NV set up a branch in Italy (Pontedera).

Post balance sheet events

No events which could significantly affect the development of the company, took place post balance sheet.

Other circumstances

There are no circumstances which can considerably influence the development of the company.

Statutory Appointments

The appointment as Director of R.A.M. Comm. VA, T.R.D. Comm. VA and HBM Consult BVBA will be proposed to the Annual General Meeting of 11 May 2004.

Resolution of the Board of Directors under provisions of Article 523 of the Companies Code

Article 523(1) of the Companies Code. Extract from the minutes of the Board of Directors meeting, 19th December 2003.

a. Conflicts of interest

Prior to discussion of this point, four Members (Clement De Meersman, Gerhard Rooze, Herwig Bamelis and Michael Mohr) indicated that in the case of decisions to be taken by the Board for setting up the stock option plan for senior managers, executives, and directors under the Law of


STARLINE PRIMAVERA

26th March 1999 on the Belgian Action Plan 1998 for employment, they faced a potential conflict of interest in relation to assets owned by them, given that they were to be among the beneficiaries of such a plan.

The Board of Directors noted this conflict of interest, together with the fact that the directors con-cerned had also reported it to the company’s external Auditor.

In accordance with the provisions of Article 523 of the Companies Code and in view of the fact that the company makes a call on the market, the directors concerned were asked to leave the meeting while these agenda items were discussed. The directors concerned consequently took no part in that discussion nor in the corresponding vote.

b. Discussion

Issue of a stock option plan on existing shares: four directors took no part in the discussion or the vote.

Copy of the stock option plan is attached to these minutes.The Board of Directors resolved in favour of the Incentive Plan, to take the form of stock options.

In order to meet the formal requirements of Article 523 of the Companies Code, it was stipulated that the operation would consist of an issue of options to purchase existing shares. These stock options are restricted to senior managers, executives and directors.

The rationale on which this decision is based is the motivation of such senior managers, executives and directors, who, being able, in this way, to acquire shares in the company on relatively advanta-geous terms, will identify the company’s interests more strongly with their own.

The impact on the company’s balance sheet of the issuing of a total of 64,000 (maximum) purchase options to four directors is insignificant, given, on the one hand, the total amount involved in this operation and, on the other, the fact that the price at which the options may be exercized is based on the market value of the shares at the time of granting the option.

c. Terms of the stock option plan

A maximum of 64,000 stock options on existing Deceuninck shares are to be issued in total.

Roeselare, 1 April 2004The Board of Directors

34 - 35

> Activities of the Business Units

Window & Door Systems and Home Protection

The slowdown in economic growth, which started in Western Europe in the middle of 2001, conti-nued undiminished throughout the past financial year. This was also noticeable in the construction sector. In the second half however, a small resurgence became evident in Europe. This may create the basis for a turnaround of the economic climate in the next few years. In the USA stagnation was noticeable in particular in the renovation market. The new housing sector, however, experienced a far more positive development.

The total European window market grew in volume last year by 4.5%. Western Europe remained more or less static, indicating that the growth took place, in particular, in Central and Eastern Europe. Deceuninck succeeded again in growing faster within its different territories than the growth of the PVC window market generally. Consequently, market share increased, both in the traditional markets of Western Europe and the USA, as well as in the new growth markets, i.e. Eastern and Southern Europe.

Moreover, as a result of the acquisition of Thyssen Polymer, Deceuninck succeeded in gaining a solid position in one of Europe’s largest PVC-window markets, Germany. The anticipated, valuable synergies resulting from this acquisition have already started to take shape. This important step in the Deceuninck history will strengthen further its position in Central and Eastern Europe.

The launch of the innovative window concept Zendow® signified a milestone for the Deceuninck window systems in Europe. In doing this, Deceuninck is drawing on the platform thinking of the automotive industry which seeks to reduce complexity without detracting from deep-rooted, diffe-rent national, functional traditions in the use of a window.

Despite fierce competition, in particular from German manufacturers, the erosion of price levels was contained. Margins were maintained through firm cost controls. Thanks to the local manufac-turing divisions the exchange rate effects (particularly USD, British Pound and Polish Zloty) were neutralized.

Furthermore, the partnership approach to customer relations remains key in the fiercely com-petitive environment Deceuninck is active in. This is illustrated by the e-business application SynergeBuild® which has already demonstrated its value to customers. Already more than 40% of turnover is ordered on-line.

VERMONT

_ annual report 2003 business units

Building Profiles

The turnover in the Building Profiles division experienced a markedly weaker start than in 2002. This was a result of, in particular, seasonal factors. The second half of the year compensated totally for this slow start, resulting in an increase in turnover of 2%. In a number of countries, growth was spectacular. The growth can be partly attributed to the launch of the product ‘NOVASIL®’. NOVASIL® is an internal window board with a melamine top layer. Deceuninck succeeded in intro-ducing this new product in only a few months, as a result of which sales, both in terms of volume and turnover, increased considerably in comparison to its predecessor DECOBOARD.

The very aggressive approach of local East-European extrusion companies brought about an increase in competitive pressure in the East European growth markets, resulting in an increase in downward pressure on prices. Price erosion was limited, among other things through the timely adaptation of the product mix.Renovation, adaptation and innovation should in future offer the necessary guarantees for maintai-ning our market share and protecting the margins of the Non-Fenestration business unit.

Wood extrusion is the most recent development for the Deceuninck building profiles in both Europe and North America. This technology, originally developed in the Special Projects division will partly ensure the future of the Building Profile Division. A first objective of wood extrusion is a cost reduc-tion for products which are susceptible to slipping into the commodity markets. A second objective is to introduce new products with improved characteristics to the market. 2004 will see the com-mercialization of the first major wood extrusion product.

Special Projects

This business unit encompasses all new projects and diversification activities of the Deceuninck Group. The activities of Uniplast NV and Deceuninck Recycling NV were also brought under its remit. Towards the end of 2002, the decision was taken to close down the activities of both (cf. Annual Report of 2002) in view of the poor results in a difficult niche market with limited growth prospects. The closure of both plants took place early in 2003 and a restructuring plan was put in place for all employees. The machinery and clientele of Deceuninck Recycling were taken over by the Limburg-based company Govaerts. Regarding Uniplast, the Vitflex part was sold to Preflexibel based in Denderleeuw; the Mondoflex part to the Dutch Grain Plastics. The current activities of this business unit are focused on the following three areas:

-Extrusion of TPE-seals-Foam and Cyclefoam®

-Wood extrusion

36 - 37

Extrusion of TPE seals

Traditionally, manufacturers of windows insert EPDM-seals in the profile during the production process, ensuring that windows are water- and windproof. Deceuninck, however, developed a tech-nique allowing for the insertion of these seals in the profile whilst being extruded. The strong and growing demand for profiles with inserted seals resulted in an increase in volume of purchased seals. It was, therefore, decided to produce these seals in house, as part of the extrusion production process. To satisfy the stringent requirements on colour, elasticity and possibilities for welding and recycling, ThermoPlastic Elastomers (TPE) was chosen as the raw material. Following the launch of an own extrusion range, Deceuninck acquired, in May 2003, a 75% interest in the company Detajoint, which is based in Dottignies-Mouscron. Detajoint currently operates 8 tri-extrusion production lines and employs 17 people. Given the continued strong increase in demand, consideration is currently being given to extend its short-term capacity further. Besides Deceuninck, Detajoint also supplies other customers who are mostly situated in the building application industries. In the long term, we hope to explore applications in other industries, e.g. the automotive industry.

Foam and Cyclefoam®

The extrusion of profiles using the foam technique has been carried out for a long time within the Group Deceuninck by its UK based plant in Calne. Given the increasing demand for these products on the continent and the increasingly rigorous quality requirements that are demanded, it was decided to introduce this technique also at the Gits plant (Belgium). In addition, the foam technique was further optimized through a combination of improvements, coupled with innovative developments. Currently many rigid foam products are being produced in Belgium.

The foam technique is also being used to develop a more effective way for the re-use of PVC recy-clate originating from rigid PVC post-consumer waste.For a long time, Deceuninck has been regrinding its own extrusion waste as well as the offcuts of window manufacturers to re-use the recyclate in original or secondary products. This is called pre-consumer waste. No solution had yet been found for dealing with the waste coming from dis-mantled windows, old shutters, building profiles, or waste pipes made of PVC. This type of waste is typically highly contaminated because of the other materials used in its production (such as glass, metal, other synthetic materials, rubber, etc). Despite sophisticated separation techniques it had not been possible to achieve a pure raw material. It was necessary to search for a dedica-ted extrusion process and specific products. As such the Cyclefoam®- process was selected and a number of new products were developed. This project received the support from the Institute for the encouragement of Innovation through Science and Technology in Flanders (IWT). The

_ annual report 2003 business units

most remarkable innovation has been the development of an acoustic barrier for application near motorways, railways, around machinery, etc. In March 2003, the first commercial contacts were agreed in domestic and external markets. These first steps into the market resulted quickly in two firm orders: one for a project of 2,000 m2 in Asten in the Netherlands and the other for a barrier of 4,500 m2 to be built alongside the E17 in Ghent. The size of the two projects corresponds to 195 tonnes of recycled PVC or to old PVC windows from nearly 950 houses. This allowed Deceuninck to address, at the same time, two environmental concerns: the recycling of PVC waste as well as noise pollution.

Wood Extrusion

Wood extrusion is a technology that has been known in the USA for some 10 years and has been applied in the production of decking. This technique is based on the mixing of polyolefines and wood waste of a certain consistency which is then extruded into a profile through the use of a die. The result is a totally new material whose properties sit between wood and plastics, depending on the mixing measure that is applied. The process allows the combination of the appearance and certain mechanical characteristics of wood with the durability and the ease of maintenance of plas-tics. Following thorough market research and a carefully constructed business plan, the business unit Special Projects initiated a pilot line to develop the technology. In cooperation with a number of external partners, united in a consortium, intensive work is being carried out to improve this technique further using PVC as the synthetic material. PVC offers, in comparison to polyfelines, important advantages for products with applications in the construction industry. For this project too a submission was made to the Institute for the encouragement of Innovation through Science and Technology in Flanders (IWT). The division Building Profiles is scheduling the first commercialization of products on the basis of wood extrusion in 2004.

38 - 39

> Activities of the Subsidiaries of the Group

Western EuropeBenelux

As in most European countries, activities in the building sector got off to a slow start as a result of less favourable weather and the lack of consumer confidence because of the war in Iraq. Growth only started to pick up in April and growth in turnover was achieved for every month thereafter.

In Belgium, activity in private, residential new housing reached rock bottom and the renovation market was the driving force behind rising sales of Deceuninck windows & doors.

Growth of Deceuninck in this segment was 5% and was realized, in particular, as a result, on the one hand, of the extended product range and, on the other by the continued emphasis on quality.

With regard to products, the Autentica®- series in 5 Decoroc® colours was introduced. This series allows each consumer to renovate his existing windows with a version of this series (Romantic, Renaissance, Artistic or Barok, etc). The addition of pearl-white profiles across the range was com-pleted, leading to a whole range of new applications in 2003.

In partnership with its manufacturers, Deceuninck seeks to increase considerably the share of windows and doors installed with a KIWA quality certificate. Deceuninck Benelux joined forces with KIWA five years ago to have the fabrication and installation of windows and doors inspected at the window fabricator’s site, thus maximizing the service to the consumer.The kitemark was extended in 2004 with a certificate for independent installers of Deceuninck windows and doors.

A further range of initiatives was undertaken to present Deceuninck products to all professional installers of building profiles so as to ensure their correct processing and installation. Examples are: some twenty information evenings, the third edition of Pocket Guide for the Professional Installer and also a new publication of ‘Profiles’ (the news magazine of Deceuninck Benelux) which is sent to 13,000 professional contacts in the construction industry.

Within the building profile range, further attention was given to the colourful range of cladding and roofline systems. Partly as a result of the recommendations of architects, these products have become more and more common in contemporary projects.In the interior products range, emphasis has been placed, in particular, on the ecological and archi-tectural qualities of the wall- and ceiling-systems.

_ annual report 2003 subsidiaries

As such there is the BeeBo® range, launched successfully at the ‘Interieur 2002’ exhibition in Kortrijk in 2002 and consisting of three different decorative designs on profiles out of 100% recy-clate. This range is ideal for substantial areas of high end of the market wall cladding in offices, showrooms, shops, kitchens, bathrooms, etc.

The aforementioned products delivered prove in 2003 that PVC is a high-quality, ecological and architecturally useful material which has a bright future.

Deceuninck succeeded to increase considerably its market share. The most important reasons for this growth are: a maximum number of KOMO – quality certificates on products, an expanded pre-sence on the project market and the additional sales strategy in the consumer market.

In 2003 the ‘StarKozijn®’ concept was introduced, a cooperative framework between existing KOMO-certificated Deceuninck fabricators. In 2004 the high quality and reliable StarKozijn® for-mula was further extended with sales outlets across the Netherlands.

Within the framework of the growing market share of Deceuninck in the sector, the decision was made to adapt the Benelux-organization to the needs of the market on the one hand, and further automation on the other. The back office in the Netherlands was shut down and all adminis-trative functions integrated into the Benelux organization.

This allowed for a clearer focus on the market, a focus which is supported by the back office with its specialists in different fields. The result is a genuine partnership between building partners and Deceuninck Benelux. Deceuninck NV Compound Division

Deceuninck Compound NV merged with Deceuninck NV on 11 July 2003 and is currently operatio-nal as a division of Deceuninck NV, under the name of ‘Division Compound’.

The new production installation started up in early September. As a result, the output capacity of the Compound Division has increased to 135,000 tonnes per annum, making it one of the largest divisions of its kind worldwide. The supply of raw materials to Deceuninck branches increased by 12%.

The further exploitation of the production capacity will increase the number of employees to approximately 70.

Passendale, Belgium

40 - 41

The developments and application of environmentally friendly raw materials continues. The nume-rous regulatory and certification agencies in many European countries is slowing this process down.

As a result of the acquisition of Thyssen Polymer, the Deceuninck Group can organize the purchase of raw materials globally, with greater volumes leading to better contractual conditions. This also allows the Division Compound to optimize the complexities related to the number of formulas and basic raw materials used and, as such, reduce its logistical costs.

In 2004 emphasis will remain on the introduction of environmentally friendly raw materials and on control of costs. Continued integration and investment plans in relation to compound installations are being prepared so as to be able to sustain the further development of the Deceuninck Group in the coming years.

ICT and e-business

During the first half of 2003, emphasis was mainly on the extension of software applications. On a number of pilot sites, software for quality control and maintenance management were implemen-ted.The platform approach within ICT was extended to CAD/CAM applications. These have been har-monized within the Deceuninck Group and linked to a ‘product lifecycle management’ system. This in turn has been linked to SynergeBuild®, the e-business platform of Deceuninck which makes all, up-to-the-minute product related technical information accessible on-line. The purpose is to facili-tate the introduction of the new Zendow®-series.

SynergeBuild® was also extended further in other areas. By the end of 2003, 42% of the worldwide turnover (before consolidation with Thyssen Polymer) was realized through the Internet. In addition there is the continued extension of our package of on-line services.

Passendale, Belgium

0%

10%

20%

30%

40%

50%SynergeBuild®: monthly cum%/ total turnover 2003 (excl TP)

FebJan

% T

urno

ver

38% Objectives

Mar Apr May Jun Jui Aug Sept Oct Nov Dec


The changeover of Thyssen Polymer to the ICT platform of Deceuninck commenced in July. ICT has a catalyzing role for the integration of Thyssen Polymer and for the exchange of best practice. The German and Polish plants have been converted in their entirety to the IT-systems of Deceuninck since 1 January 2004. The schedule for 2004 includes, among other things, the integration of Vinyl Building Products, the American representative of Thyssen Polymer.

Italy

Deceuninck started to explore market prospects in Italy in 2003, where it is hoped to capture a place in the market through the introduction of the Zendow®-concept.

Spain and Portugal

In contrast to earlier prognoses, building activity was on the increase in Spain. The improvement of the Portuguese economy boosted consumer confidence.

The consolidated turnover (including Portugal) grew in 2003 in comparison to 2002, continuing the growth trend of recent years.

The Sumum® project was continued. Sumum® is a company set up by Deceuninck and nine Deceuninck window fabricators which is aimed at generating sales to the general public through a distribution network. The Sumum® brand is on the way to becoming the most important brand for PVC windows in Spain and Portugal.

In the framework of continued improvements across a range of fields, further training has been organized for both employees and customers. This will lead to a closer, professional partnership with fabricators, which will guarantee long term growth. The Spanish subsidiary also attracted two new clients, which will be reflected in the turnover for 2004.

42 - 43

United Kingdom

Deceuninck Ltd (Calne –UK)

2003 was characterized for Deceuninck Calne by consolidation and reorientation.

The predicted decline of the market and increase in competition was confirmed in 2003. Nevertheless, and despite the difficult conditions throughout the year, there was an increase in turnover.

Through an important alteration in the customer mix, the Building Profiles division succeeded in increasing its margins considerably.

Total production rose by more than 7%. In September 2003, the completion of phase 1 of the new warehousing facility in Calne began.

The site purchased covers 70,000 m2. It will bring the three existing dispersed warehouse facilities under one roof.

The restructuring of the management team was completed in March 2003 with the appointment of Ron Painter as General Manager. The first task of the General Manager was to assist the Quality Control Manager in updating the recognition of the quality control system for ISO 9001 – 2000. They succeeded in this task at the first attempt. Wiltshire County Council selected the company as ‘Employer of the Year’.

Considerable improvements were made across the board, among other things through the promo-tion and the strategic use of SynergeBuild®.

The specific objectives and strategies for the 3000 project were defined towards the end of the year. This project will be crucial for achieving success in 2004.

Medway, UK


Status Systems Ltd (Oldham)

In 2003, Status Systems succeeded in attracting 31 new customers, results of which were already noticeable in the increase in turnover.

2003 was marked by effective management with an emphasis on cost control and investment in more efficient extrusion lines. Also during the last year, Chris Foreman was appointed the new Managing Director.

From a logistics point of view, works on the warehouse facility have started. Early in 2004, the trans-port division will be subcontracted. This will optimize the effectiveness of the fleet and simplify the expansion of the company’s client list.

Germany

The total turnover of Thyssen Polymer GmbH (Bogen) rose in 2003 in comparison to 2002. The main reason behind this excellent result is the greater emphasis that has been put on export markets, in particular those in Eastern Europe. Thyssen Polymer Polska, the Polish sales outlet, continues its excellent results with an increase in sales in Poland and in Ukraine. This considerable growth was also noticeable in other East European countries such as the Czech Republic, Slovakia, Lithuania and the former Yugoslavia.

In Western Europe sales stagnated, with the exception of France, where Thyssen Polymer succeeded in reinforcing its already strong position through an increase in sales of 14%.

In contrast to a decrease in the PVC windows market of over 7%, Thyssen Polymer succeeded also in growing sales in Germany by 2.2%. After a slow start, demand increased considerably towards the end of the Spring. This can be explained partly by a change in legislation which will result in a reduction of government subsidies for construction companies from 2004 onwards.

During the second half of 2003, emphasis was put on the integration of Thyssen Polymer in the Deceuninck Group. A range of synergy projects have been launched, some of which have already been completed successfully. An example is the combination of purchasing power, a new strategy for warehousing and the implementation of Deceuninck’s Deplis-software system.

44 - 45

France

For Deceuninck SA 2003 was a year full of important events:

After a long period of preparation, the new window concept, Zendow®, was officially launched during the Fifth Convention in Paris on 16 May 2003. The Zendow® range, which breaks with the past in every possi-ble way, was welcomed enthusiastically by all participants. This allowed the plant to further strengthen its position as market leader in France. Towards the end of the year, 70% of the turnover in windows and doors was accounted for by Zendow®.

To facilitate production and warehousing, made complex because of the commercialization of two ranges, an investment of approximately 2 million euros was made in the construction of buildings totalling 5,000 m2.

In November, the French subsidiary exhibited at Batimat, resulting in 800 valuable contacts. These contacts constitute a very good basis for the promotion of Zendow®, but equally for the launch of Grandparc, the new concept for shutters and doors. This new concept, developed jointly with the distributors, also attracted a lot of attention. The launch of the new Tecnocor-sliding door is currently being prepared.

The end consumer sales network ‘Les Menuisiers Pevecistes Deceuninck’ also developed very well. This network, with 56 members officially opened its training centre, Samarkand, offering its members the opportunity for training in accordance with the values of Group Deceuninck. Deceuninck SA exhibited for the first time at Foire de Paris.

At the end of this very busy year, Deceuninck SA achieved an increase in its turnover, this in a stagnating economy and in a construction market that shrank by 1.1%.

The macroeconomic forecast for 2004 is a better one. The extension of the reduced VAT tariff of more than 5% for the next 2 years will provide both the general construction market but, in particu-lar, the renovation market with a dynamic impetus.

Roe

sela

re, B

elgi

um


Central and Eastern EuropePoland

Deceuninck Polska Sp zoo (Swarzedz – PL)

The Polish subsidiary Deceuninck Polska Sp zoo in Swarzedz, near Poznan, experienced a strong increase in volume in both the window, door and building profiles.

Turnover in the windows market grew. Investments have been made to increase the capacity for the production of window profiles and in two new silo’s in order to optimise the supply of raw materials.

However the turnover of the building profile market decreased. The further erosion of retail prices, in order to maintain sales volumes as a result of competition with local products of a lesser quality (in particular window sills), was inevitable.

The subsidiary holds the ISO9001 quality mark. More than 50% of the clients are now using SynergeBuild® (e-business).

Deceuninck Polska assisted in the integration of the Thyssen Polymer plant in Wroclaw (sales and stock organization) in, inter alia, the implementation of the Deceuninck information and logistics system, Deplis. Moreover, the future holds out many promising possibilities for synergies.

Poland will join the European Union in 2004. Thanks to improvements in the international economic climate and to investments with European regional support, forecasts for the building sector are positive.

Thyssen Polymer Sp zoo (Wroclaw, PL)

Thyssen Polymer Polska continued its winning strategy, which was reflected in a big increase in turnover. In contrast to the overall unfavourable economic conditions in Poland, a steady growth has been achieved during the last few years. The completion of the new warehouse in 2003 will constitute the basis for further growth.

46 - 47

Romania

Deceuninck Romania Srl (Bucharest – RO)

Despite a slow start as a result of the severe Winter, Deceuninck Romania managed to increase its turnover.

Competition, in particular from Germany, remained fierce. Nevertheless, Deceuninck Romania succeeded in growing its market share as a result of the high quality of commercial, technical and logistic support to the manufacturers, combined with a competitive made-to-measure product line which responds to the requirements of the different market regions.An example is the new Everest series, which was launched successfully at the end of 2002.

Thanks to the extensive and reliable range of quality products, a ‘made-to-measure’ strategy for each market segment and the professional approach of a dedicated local team, Deceuninck Romania always manages to be present at the right time and in the right place to meet all challenges within its sector.

< Pecky, Czech Republic


Czech Republic, Slovakia, Croatia and Hungary

Deceuninck Spol sro (Popuvky-CZ)

Deceuninck Spol sro is responsible for the distribution of Deceuninck products across four coun-tries in Central Europe: the Czech Republic, Slovakia, Croatia and Hungary.

In January 2003, Deceuninck Spol moved to its new headquarters in the immediate vicinity of the motorway between Brno and Prague. The site totals 16,600 m2 with warehouse facilities and office space totalling 4,900 m2.

The new Zendow®-window system was presented to customers in February 2003. The innovating concept was greeted enthusiastically and, already, the Zendow®-window system has become the most sold system in all four countries.

More than 50% of all customers were placing their orders using SynergeBuild® by the middle of 2003. The innovative technology greatly speeded up the exchange of information between Deceuninck and its customers and is proving very popular.

At the end of 2003, the team of Deceuninck Spol sro met the new colleagues of Thyssen Polymer. Cooperation, strategy and synergy between both companies bring an opportunity and a challenge to improve the results of 2003 in 2004.

An explicitly client-focused team, the introduction of new products, sufficient warehousing facilities and a functional organization are the basis of the growth figures and the success of 2003.

48 - 49

Baltic States, Bulgaria, Russia and Ukraine

The export division concentrated its efforts in 2003 on the growth markets of Russia, Ukraine, the Baltic States and Bulgaria. The result was an increase in the turnover of ‘Fenestration’ products, which was considerably higher than general market growth in the region. The turnover of building profiles with a lower added value decreased further, in particular, as a result of the increasing supply of locally produced goods, combined with the unfavourable euro-dollar ratio. The decrease in turnover of these profiles was more than compensated in terms of profitability through sales of products with higher added value. Simultaneously, the general turnover level of 2002 was main-tained.

At the end of 2003, the decision was taken to reinforce the Russian organization, in the first ins-tance by considerably increasing local staff size and the management team. In doing so, the current and expected short term growth in the construction industry in Russia, both for the new and reno-vation markets, and the stabilising investment climate, have been taken into account. With this in mind, new office premises were acquired.In the strategy that was developed to increase the market share in the CIS-region, considerable use has been made of the product-related opportunities for synergies offered by the subsidiaries in Germany and Turkey.

The cooperation with the Turkish subsidiary was further enhanced by making use of their comple-mentary product range and this with special attention to markets in North Africa and the Middle East.

Frydek Mistek, Czech Republic


Near East Turkey

Ege Profil AS (Izmir, TR)

2003 was an excellent year for Turkey and for Ege Profil.

Despite the instability on many fronts as a result of the war in Iraq and the fight against terrorism, the Turkish economy achieved excellent results and demonstrated remarkable strength. The politi-cal situation is now as stable as it has been for a long time and this contributed, without any doubt, to the creation of a favourable climate for economic recovery. The growth of the Gross Domestic Product amounted to 5% by the end of the year. Inflation in the wholesale trade fell from 31% in 2002 to 13.9%, considerably lower than the IMF inflation estimates of 20%. The Turkish lira proved remarkably strong, with a loss of only 4% against a strongly increasing euro and registered a profit of 15% against a weakening dollar.

Nevertheless, the war in Iraq was the reason behind the zero growth figures of the first quarter. The market picked up quickly with some phenomenal growth figures during the subsequent quar-ters resulting in a total increase in volume for the year of 28%. As a result of the strong Euro, the increase in turnover was 24% in euro terms. The enormous efforts to get business going again, the decrease in inflation, falling interest rates and the weak dollar – trade in Turkey is still dominated by the dollar – made increases to retail prices difficult.

The excellent sales results can be attributed to:

• The strong position in the renovation market, a network of 750 branded sales outlets spread across the entire country and an intensive radio and television advertising campaign to increase awareness of the products’ brand name even more.

• Strategic successes against competitors and newly founded window manufacturers led to a growth in clientele of 25%.

• New export markets have been developed in the Middle East and North Africa, with even greater opportunities opening up for 2004.

The investments for 2004 are all aimed at increasing production capacity and efficiency in order to achieve ambitions for growth. Ege Profil is convinced that it will maintain its market share with excellent growth figures as a result.

> Munich, Germany

50 - 51

North AmericaDayton Technologies LLC (Monroe – Ohio USA)

Thanks to favourable economic circumstances in the USA in 2003 – especially noticeable in the new housing market – combined with operational improvements within the company, this year’s results stood out. The turnover of Dayton Technologies LLC (Monroe, Ohio) rose in volume terms.

The programme of reorganization of production resulted, after one full year, to an increase in extru-sion productivity of 16% for 2003. The operational improvements resulted, moreover, in less waste and lower production costs. The first synergy projects on account of the cooperation with Vinyl Building Products were reflected in a considerable reduction in prices for raw materials.

Capital expenditure increased from 4 million dollars in 2002 to 7.3 million dollars in 2003. This includes the primary phase of the wood extrusion project. Despite the increased level in capital expenditure, the cash flow remained good, with a decrease of outstanding debts and stocks.

Deceuninck announced in October 2003 a strategic alliance between its subsidiary Dayton Technologies and Alcoa Home Exteriors, a major US distributor of building products. The alliance was forged in order to optimize the production and distribution of finished wood extrusion pro-ducts, such as decking, railing and siding. The first product, a combination of HDPE (High Density Polyethylene) and wood flour is aimed at the decking and railing market. The product will be manu-factured at the plant in Monroe, Ohio.

The acquisition of Thyssen Polymer in 2003 included also the American subsidiary Vinyl Building Products, Inc. This reinforced considerably the position of Deceuninck in North America.

The alliance between Vinyl Building Products and Dayton Technologies offers great advantages relating to scale, territorial reach and operational synergies.

> Munich, Germany


Vinyl Building Products LLC (Oakland – New Jersey & Little Rock – Arkansas USA)

Sales of Vinyl Building Products increased in 2003 by more than 15%, in particular as a result of the strong growth of major customers. Volume increased by 17%. The factory in Little Rock remains very competitive in the southern part of the North American market from where it serves all major markets. The potential for growth in the new housing industry remains vast in the South, where aluminium still dominates the market but continues to lose market share to PVC.

Prices of PVC remain high in North America and, as such, influences income. The consolidation of Vinyl Building Products and Dayton Technologies into Deceuninck North America from July 2003 has resulted in a range of synergy projects that have positively influenced the year’s results; the current consolidation process should deliver even more opportunities for further cost savings in 2004.

The North American profile market is dominated by four manufacturers with Deceuninck North America at the top. Opportunities exist for major, partly vertically integrated window fabricators, which could lead to a considerable increase in volume. A consultant is currently analysing the feasi-bility for a plant on the American West Coast, which could supply existing clients of Vinyl Building Products and Dayton Technologies in the West and would considerably increase the joint market share.There are also new and promising possibilities for new building products. The clear presence of Deceuninck on the American markets and the generally large-scale distribution network should strengthen the prospects for growth. Demand is present, without a doubt.

The consolidation will also drive product innovation in the window and door ranges for 2004 and 2005. A number of projects have already been developed.

The outlook for 2004 for North America is exceptionally favourable. The general economic climate is expected to be good throughout the year. It can be expected that the extension of the range of decking products from wood composite and the new élan in the window market, both the result of cooperation in 2003, will bring with them considerable increases in turnover and net income for Deceuninck North America.

Demaplast

> Strategic Resources (Belgium)

Dies and Calibers

Owing to last year’s investments in terms of personnel and resources, Demaplast succeeded as a tool manufacturer in becoming a benchmark for the development, manufacturing and maintenance of extrusion tools, both within the Deceuninck Group and worldwide.

At Demaplast, the entire development and manufacturing of tools happens by way of a ‘CIM-stra-tegy’ (computer integrated manufacturing), based on a 3D-Cax-method and linked to the most modern integrated simulations and the machine park: a unique approach in the world of extru-sions.

’24-7 production’ or the usage of invested resources around the clock, is only one of the achieved results which is otherwise considered utopian in the manufacturing mechanical industry. But at Demaplast, it has become a self-evident working method.

A ‘real-time’ periodic assessment throughout the development and manufacturing of all tools offers customers maximum transparency and service.

New methods and technologies offer new challenges every day which are optimized in cooperation with the end-user to ensure service for the end-client.

‘Twice as fast as the market, 30% cheaper but with higher quality, and with increasing skill in the extrusion technology’ remain Demaplast’s key objectives.

Laboratory and research

The Group’s expenditure on research and development amounted to 6 million euros in 2003.

Deceuninck, conscious of the importance of good quality control and of research into innovation and improvement of the product range, has been investing in resources for the laboratory and in research for a number of years.

52 - 53

Demaplast

_ annual report 2003 strategic resources

Central Laboratory

In 2003, investments have been made mainly in the optimization and the automation of the sam-ple preparation for an array of tests. To this end, a CNC-controlled milling machine was acquired allowing the automatic milling of samples for traction and impact tests. In addition, an Automatic Notcher was acquired with which notches can be made automatically and more accurately in the impact test samples.

The automation of the measuring process, together with the processing of measurement results through a database, has been further optimized.

Special attention was also given to new regulations in the framework of CE-marking, of fire testing according to EU classifications and for new materials such as wood extrusion.

Finally, new calibrating software has been installed that should result in calibrating being more efficient and allow all measurements to be brought together in a database. This will allow for a better overview of the data from different measuring equipment.

Research

Products made from Cyclefoam® have been further optimized. 2003 also saw the start of wood extrusion which can generate numerous new applications. Additional memorable achievements include the reduced use of solvents during the foiling process, the optimization of melamine win-dow boards, and the automation of the Decoroc® coating process.

Logistics

Within the Group Deceuninck, logistics has been considered for quite a while as encompassing a range of activities. The key objectives are: accurate and ‘just-in-time’deliveries, rapid stock rota-tion, a reduction in logistics costs and the optimal usage of the available production capacity. The main challenge in 2003 was the launch of the ‘Zendow®’ range within the parameters of logistics objectives and the optimization of logistics processes at Thyssen Polymer.

Roeselare, Belgium

54 - 55

Operations Gits

The fundamental, operational strategy remains unchanged. The objective is to generate a strong cash flow which allows for continuous growth, optimization and innovation. A reduction in costs, without affecting the high quality standards for products and processes, remains a priority.With the growing complexity of products, the increase in production capacity and the improvement of flexibility is crucial for all divisions. Pushing forward the ‘5S-programme’ and the SMED methodology guarantee Deceuninck greater flexibility. The experience, involvement and loyalty of all employees are the main building blocks in the realisation of the strategic objectives. Therefore attention for staff welfare is central.

Extrusion

For the 7th consecutive year, employees of the extrusion division for window and door profiles achieved a significant reduction in absenteeism and an increase in labour efficiency. The set of tools for the new Zendow®-window system was introduced and optimized in the production divi-sion during 2003.

Improvements to organization and higher extrusion speed resulted in a breakthrough in the extru-sion division for building profiles (Non-Fenestration). The extrusion division for Cyclefoam® is completely operational and its dual mission is product and process innovation.

Extensive research in process stability and standardization should guarantee continued improve-ments in results.

_ annual report 2003 strategic resources

Finishing

The increasing importance of finished products in the product range led to the implementation of the strategic ‘Foiling’ project in 2002. The objective of saving 2 million euros was achieved at the end of 2003 as a result of improvements in foiling technology, labour efficiency and Supply Chain Management.

The installation of an automatic coating system should accommodate the explosive increase in demand for Decoroc® products. The investment increases coating capacity threefold.

A preliminary study into investment in a new printing system has been concluded. The objective is to improve quality, to increase flexibility, to reduce costs and to eliminate the emission of sol-vents.

The management of stocks

In spite of growing product diversification, employees of the logistics division increased stock rotation for the fourth consecutive year. The accuracy of the stocks as well as the quality of service also improved.

Technological Synergies

2004 will be known for the far reaching interaction between Deceuninck and Thyssen Polymer in a number of technological fields such as compounding, extrusion, tooling and finishing.

< Repiste, Czech Republic

Opava, Czech Republic >

56 - 57

> Human ResourcesTeam building excellence

Deceuninck has decided to develop a uniform approach to project management, allowing for the most effective use of resources.

To achieve this, Deceuninck is working together with ‘Project Factory’, considered the experts in the field of project management consultancy in Belgium.

Deceuninck seeks to develop this uniform project management approach, which is applied consis-tently and by the entire management, with a particular emphasis on:- teambuilding- communication- portfolio management

This structure will allow Deceuninck to deliver its strategic and innovation projects which are crucial for the future of the company.

Development of skills

For the first time staff appraisals based on skills took place in 2003. This method was developed jointly with the company Gitp and with the involvement of all employees through workshops and information sessions.

This activity was evaluated in the middle of 2003. The results of this evaluation provided the basis for adaptations and for the training sessions commencing early 2004.

Training

Training and education constitute by far the most important aspects of ‘Deceuninck Career Guidance’. Continued investment in knowledge improvement, skills and behaviour of the employees is crucial for the competitiveness of the company.

As part of this, emphasis is also put on creativity and on the organization as a training centre. Deceuninck laid the foundations for the establishment of company teaching groups for foremen and young managers. A lot of effort is currently put into a ‘knowledge pool’ project which concerns the mapping and sharing of knowledge, with particular attention to semi and unskilled workers.

Projects concerning pc-skills and informatics are also currently in progress for all employees, including shop-floor workers.

Acquisition of Thyssen Polymer

The acquisition of Thyssen Polymer was announced simultaneously to all employees in all subsi-diaries of Deceuninck and Thyssen Polymer. On 1 July, the acquisition became a reality and since then both companies have been operating as one major business ‘Group Deceuninck’, with 2,738 employees worldwide.This expansion has, without any doubt, also had a major impact on personnel management.

As early as the Strategy Meeting in June the new corporate HR approach was announced: ‘Deceuninck Career Guidance – Local versus Corporate’.

The existing values of Deceuninck Career Guidance provide the cornerstone and serve as a basis for further developments of important HR activities.

_ annual report 2003 human resources

58 - 59

Various ActivitiesCollective employment agreement

Deceuninck also plays a key role in industrial relations. A new collective agreement for all employees and workers within the plastic converting sector in the province of West-Flanders was agreed in 2003. In addition to the traditional employment terms, this agreement also denominates time credits, end of career systems, early retirement, etc. In all respects the aim is to achieve a good work-life balance.

Technical Education

Deceuninck capitalizes on technological developments and progress. Deceuninck can take pride in having one of the most specialized tool shops in Europe. To man its machinery, a qualified work-force is required.Deceuninck works closely with the ‘Flemish Plastics Centre’ (VKC), based in Kortrijk, to develop training in Flanders on plastics, both in secondary and in higher education.

Social Activities

Deceuninck has a very effective festivities committee. A selection of activities in 2003 include: an excursion by motorbike, ‘Santa Claus’-party, Cheese and Wine evening, Night of the Proms, Mini football tournament, etc.

Staff party to conclude a very busy but successful year 2003 was concluded on 19 December with a stunning staff party, in which more than 400 employees and their partners participated. At this occasion, many employees’ personal achievements were honoured.

> Prevention, safety and health

It is a good tradition to pay ample attention to the safety and health of all employees within all Deceuninck plants, divisions and shop floors. During 2003 a wide range of programmes aimed at the welfare of staff were launched and concluded. Work continued on the intensive training of fork-lift truck operators, a targeted sensitivity campaign for all levels of hierarchy took place and 90 employees received training in the use of fire extinguishers. The training for the first aid team was also repeated.

We also sought new formulas to drastically reduce, or even eliminate, the use of damaging sol-vents. This will positively affect both the health of the employees as well as the environment.

The order and tidiness of the production halls was greatly improved by the introduction of the 5S-principles.

Finally, the excellent cooperation between our Committee for Prevention and Protection at Work, the labour representatives in the different negotiation bodies, the external departments of Prevemed, the insurer ‘Accidents at Work’ and the relevant governmental departments is very important.

Without doubt, all of this contributed to this magnificent result: all divisions of Deceuninck NV at Gits have remained for more than 500 days without accidents requiring leave.

Safety knows no boundaries. In this context, very constructive exchanges have taking place between a number of Deceuninck plants on dangerous situations, preventative actions and exchanges of information. This allowed Poland, the USA, the Czech Republic, Spain and Romania also to remain without accidents.

_ annual report 2003 prevention, safety and health

60 - 61

> Environmental Issues

As was the case for the prevention of accidents, the awareness of environmental issues received a lot of attention in 2003. Deceuninck received, for the fourth consecutive year, the certificate of the West-Flemish Environment Charter, which the company had signed up to. The main achievements were the drastic reduction of packaging, continuous work on energy-saving measures, the impro-vements in natural lighting, heat-insulation - as a result of the replacement of all lighting in Hall 1 - and foiling.In addition, mention should definitely be made of how the recycling of post-consumer waste recei-ved a very positive impetus with the launch of the ‘acoustic barrier’ project.

Finally, we note the opening of the internal company container park which offers the company the possibility to deal with waste in an environmentally friendly and commercially responsible way. In addition it also encourages employees to sort waste outside the company.

Our prevention and environmental efforts are much admired externally which led to numerous invitations for the employees within the Internal Department for Prevention and the Environment to address various information sessions and conferences as guest speakers.

Novy Jicin, Czech Republic

_ annual report 2003 risk management

> Risk Management

Safety for employees and the protection of property and of the environment has always been a central concern at Deceuninck. Adding an extra dimension, a risk management programme has been developed in which best practice at work is identified and framework for its realization esta-blished. In all this the necessary attention is given to risk factors, e.g. bottlenecks, new processes, ‘single suppliers’, etc. Through the tracing and analysis of risks, the usage of specific techniques or decisions on certain measures, risk is brought to an acceptable level and insured against in ‘made-to-measure’ policies.

Typical for 2003 was the start of a closer, international cooperation between different departments and external parties. A number of different inspections from insurance companies were organized and the results of these discussed with the different divisions. This resulted amongst others things in specific adaptations relating to fire safety when the new tower at the Compound Division in Diksmuide was brought on-line. A number of specialists were consulted who advised Deceuninck in the development of a range of prevention and protection measures in diverse fields and in different countries.The new plants, following the acquisition of Thyssen, have been integrated in the insurance pro-gramme. In addition, the overall insurance portfolio was optimized worldwide.

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> Part III Information for the Shareholders

Characteristics of the Deceuninck share

Number of shares

The share capital (8,499,000 euros) is divided into 21,550,000 shares.

The number of shares increased on 11 July 2003 as a result of the creation of 171,602 new shares. These were issued following the increase in capital which took place as payment for the acquisition of 10% of the shares of Deceuninck Compound NV on the occasion of the merger by acquisition through which all assets and liabilities of Deceuninck Compound NV were assumed by Deceuninck NV. As a result these shares were assigned to the subsidiary FIN-TONIC NV.These shares were entered on the primary market of Euronext Brussels on 11 November 2003.

In December Deceuninck NV decided to purchase these shares on the stock market and, following the resolution of the Extra-ordinary General Meeting of 31 December 2003, that decided to annul these shares.

As a result the number of shares that existed on 31 December 2003 amounted to 21,550,000.

The share of company shares held by the Deceuninck company amounts to 337,380.

Registered shares and bearer shares

There are 21,549,926 bearer shares and 74 registered shares. To convert registered shares into bearer shares, or vice-versa, please contact the Legal Department of Deceuninck NV, Bruggesteenweg 164, 8830 Hooglede-Gits.

62

64 64

Shareholding structure

On the basis of the most recent shareholder reports and in accordance with the law of 31 March 1989, the shareholding structure is found to be as follows:

5,478,000 shares25.42%

3,360,000 shares15.59% 2,164,306 shares

10.04%

10,547,494 shares48.95%

Dasco 15.59% 3,360,000 shares

Plastec International 25.42% 5,478,200 shares

First Eagle SoGen Funds 10.04% 2,164,306 shares

Others (Institutional investors, personnel, stock exchange, etc.)

48.95% 10,547,494 shares

The company has no knowledge of any agreements among the family shareholders.

_ annual report 2003 information for the shareholders

64 - 6564

Shareholders policy and dividends

The Deceuninck Group continues its stable shareholder policy, based on moderate long term growth. Each year, the Annual General Meeting is presented with an appropriation of the results, based on a ‘stable’ or ‘growing’ dividend.

If the appropriation of the results as presented in the report is approved by the Annual General Meeting of 11 May 2004, a gross dividend of 0.2360 euros per share will be paid for the financial year 2003, or a net dividend of 0.1770 euros, on presentation of coupon no. 4 after taxes of 25%, representing an increase of 2.6% in comparison to 2002.

Dividends become payable from 25 May 2004 onwards.

Stock market information

Following three consecutive years of falling prices, the stock market experienced a recovery in 2003. The stock markets under-went a recovery in the spring, and were well on the rise again by the end of 2003.

The Bel20 increased by 16.4% in 2003.

Deceuninck scrupulously observes the Belgian regulations governing financial information that must be supplied to Euronext and the Banking, Finance and Insurance Commission.

Share price – Share price index

Deceuninck shares are listed under the DECB code and are traded on the continuous segment of Euronext in Brussels. They are part of the Euronext segment NextPrime.

On 20 April 2004, the weight of the share in this index was 0.96%. The Deceuninck share thus ranked 33rd in the clas-sification according to percentage.

Deceuninck stock vs Brussels All Shares Price Index

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Deceuninck stock vs Bel20 Price Index

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Deceuninck stock vs DJ STOXX Price Index

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Trend of the Deceuninck share

The price of the Deceuninck share rose from 19.16 euros on 31 December 2002 to 25.88 euros on 31 December 2003. The aver-age price was 20.38 euros. The lowest price (15.02 euros) was recorded on 12 March 2003 and the highest price (27.19 euros) on 17 December 2003.

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Deceuninck share price in 2003 and until March 2004 (in euros)

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Market capitalization (in millions of euros)

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350,2

403,2 412,9

557,7

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Deceuninck share price at 31/12 since 1994 (in euros)

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Pay-out ratio (in millions of euros)

2000 2001 2002 2003

4,6 4,7 4,8 4,9 5,0

28,61,351,40

1,121,09

0,94

29,6

24,2

23,5

17,8

20,3

23%

Gross dividends

25% 20% 17% 17,5%

Net profit (IFRS)

Gross dividend (IFRS)

Net profit per share

Net profit

Net profit per share (IFRS))


66 - 6766

Information per share

Consolidated figures per share (21,550,000 shares) (in euros)*

2003 (1) 2002 (1)

Equity 9.38 8.85

Net profit 1.33 1.37

Current net profit 1.49 1.52

Gross dividend 0.24 0.23

Net dividend 0.18 0.17

EBIT 2.50 1.99

EBITA 2.67 2.14

EBITDA 4.22 3.59

Quotations on Euronext (in euros)

2003 2002

Lowest price 15.02 15.1

Highest price 27.19 23.6

Price at 31 December 25.88 19.16

Price/Earning (PER) at 31/12 (in%) (2) 19.5 14.4

Net dividend yield at 31/12 (in%) (3) 0.68 0.9

Return on Deceuninck shares (in %) 35.1 2.4

Pay-out ratio (in %) (4) 17.5 17

Market capitalization at end of financial year (5) 557.714 412.898

(1) according to IFRS-standards (4) gross dividend consolidated net profit(2) share price at 31 December

net profit per sharel (5) in thousands of euro

(3) net dividend share price at 31 December

* figures are rounded off

68 68

Institutional investors and financial analysts

Deceuninck has further improved its communication policy towards shareholders, institutional investors and financial ana-lysts.

Several ‘road shows’ were staged in 2003 at the key financial locations in Europe (London, Paris, Amsterdam, Frankfurt, etc.) and have contributed to a broader presentation of the Deceuninck Group to institutional investors. In addition, Deceuninck participated in the NextPrime/NextEconomy events organized by Euronext in Paris in both April and December.In addition, many analysts and institutional investors are welcomed and briefed at our headquarters in Belgium.

Investor Relations

Investors, shareholders or any other person who wishes to receive a copy of the annual report or other financial information can contact our Corporate Communications department by telephone, fax, e-mail or ordinary post:

Contact person: Ludo DebeverTelephone: +32 51 239 248Fax: +32 51 239 214E-mail: [email protected]: www.deceuninck.comAddress: Deceuninck NV Corporate Communications Bruggesteenweg 164 B-8830 Hooglede-Gits


68 - 6968

> Part IV Financial Report Annual Report of the Board of Directors of 1 April 2004 with regard to the consolidated financial statements.

ANNUAL REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS OF DECEUNINCK NV WITH REGARD TO THE CONSOLIDATED FINANCIAL STATEMENTS

Introduction

This management report should be read in conjunction with the audited annual financial statements of the Deceuninck Group, hereafter referred to asthe ‘Group’, and the related notes. The Board of Directors has approved these audited, consolidated financial statements on 1 April 2004.

Principal changes within the Group during the financial year 2003.

Acquisition of the extrusion business unit of Thyssen Krupp Technologies

On 11 April 2003, the Group signed an agreement for the acquisition of Thyssen Polymer, the business unit of Thyssen Krupp Technologies. The acquisition has been recognized in the financial statements of the Group from 1 July 2003 onwards, being the date that the Group obtained control over the assets and the production of the company.

Acquisition of a 75% shareholding in Detajoint NV

On 22 May 2003, the Group purchased 75% of the shares in Detajoint, a company specializing in the extrusion of thermoplastic elastomers seals. The financial results of this subsidiary were consolidated from 1st June 2003 onward.

Merger of Deceuninck NV with Deceuninck Compound NV

On 11 July 2003, Deceuninck Compound merged with Deceuninck NV. This has been backdated in the financial statements to 1 January 2003.

70 70

Deceuninck consolidated: key financial indicators

In millions of euros 1999 2000 2001 (IFRS) 2002 (IFRS) 2003 (IFRS)

Fixed assets 146.5 176.8 192.4 188.0 276.0

Current assets 141.5 153.7 156.2 149.8 211.6

Equity 138.3 154.9 182.5 190.8 202

Minority interest 0.3 3.1 0.2 0.3 1.1

Provisions 11.1 7.1 3.4 5.5 16.9

Deferred tax liability 2.1 3.6 11.1 14.4 23.9

Long term liabilities 51.2 69.1 59.3 47.7 134.7

Short term liabilities 85.0 92.7 92.1 79.2 109.0

Total assets 288.0 330.5 348.6 337.8 487.6

Working capital 66.7 96.4 86.5 84.6 137.2

Capital expenditure 33.1 33.2 18.0 36.3 50.2

Net debt -51.2 -93.6 -70.5 -51.7 -152.2

Net turnover 281.0 339.6 352.6 362.2 470.5

EBITDA (1) 59.8 65.3 74.0 77.3 90.9

EBITDA-margin 21.3 19.2 21.0 21.3 19.3

EBITA (2) 38.7 41.7 45.2 46.0 57.5

EBITA-margin 13.8% 12.3% 12.8% 12.7% 12.2%

EBIT (3) 35.9 37.5 42.1 42.9 54.0

EBIT-margin 12.8% 11.0% 11.9% 11.8% 11.5%

EBT (4) 32.2 28.9 35.0 37.0 43.1

EBT-margin 11.5% 8.5% 9.9% 10.2% 9.2%

Net profit 20.3 17.8 24.2 29.6 28.6

Net profit margin 7.2% 5.2% 6.9% 8.2% 6.1%

Profit per share 0.94 0.83 1.14 1.40 1.35

Equity/ Total assets 48.0% 46.9% 52.4% 56.5% 41.4%

Net profit/ Equity 14.7% 11.5% 13.3% 15.5% 14.2%

Gearing (5) 37.0% 60.4% 38.6% 27.1% 75.3%

Effective tax rate 37.0% 38.4% 30.9% 20.0% 32.7%

1 EBITDA Earnings before interest, taxes, depreciation and amortization = company cash flow

2 EBITA Earnings before interest, taxes and amortization

3 EBIT Earnings before interest and taxes = operational earnings or company earnings

4 EBT Earnings before taxes

5 Gearing Net financial debt in relation to equity

_ annual report 2003 financial report

70 - 7170

Financial performance and liquidity position of the Group

Consolidated turnover

The consolidated turnover rose from 362.2 million euros in 2002 to 470.5 million euros in 2003, an increase of 108.3 million euros or 30%. This increase can be attributed entirely to the acquisition of Thyssen Polymer. Without Thyssen Polymer and in terms of volume (kg), turnover increased by 8.7% in comparison to 2002.

The continued weakening of currencies outside the eurozone had a negative effect of 27.1 million euros on the consolidated turnover. The contributions of non-comparable operations in the consolidated turnover amounted to 5.3 million euros, or 1.5%, in 2003.

EBIT-EBITDA

The EBITDA rose by 13.6 million euros, or 17.5% from 77.3 million euros in 2002 to 90.9 million euros in 2003. As a percentage of consolidated sales, EBITDA amounts to 19.3% in comparison to 21.4% in 2002. The increase of 13.6 million euros in compari-son to 2002 can be ascribed primarily to the acquisition of Thyssen Polymer. The positive contribution of the growth in volume was, however, balanced by an increase in raw materials prices in the USA, the costs associated with the launch of the innovative window concept Zendow®, the integration costs of Thyssen Polymer and adjustments for lower exchange rates.In addition, the EBITDA experienced a negative influence of 1.6 million euros as a result of the application of ‘purchase ac-counting’. According to this method, stocks obtained through acquisition are valued at their market price, which is higher than their purchase cost. Consequently, there is no profit margin acknowledged for the sale of stocks obtained through acquisition – except for a reasonable margin attributable to sales endeavours.

The EBIT increased from 42.9 million euros in 2002 to 54 million euros in 2003, corresponding to a growth of 11.1 million euros or 25.8%. The increase in EBIT in comparison to EBITDA was strengthened by a release of previously accrued provisions.

Net profits

Net profits decreased from 29.6 million euros in 2002 to 28.6 million euros in 2003. The decrease is a result of higher finance costs and a higher taxation rate than in 2002.

The financial performance was approximately 5 million euros less favourable than last year. This is a result of interest payments of 0.8 million euros on the new loan to acquire Thyssen Polymer, higher cash discounts at Thyssen of 1.7 million euros and 2 million euros worth of less favourable exchange rates adjustments than in 2002. The consolidated tax rate amounted to 32.7% in comparison to 20% in 2002, when one-off tax adjustments worth 4.5 million euros were recorded, mainly through the offset-ting of losses and reduced tax rates.

Balance sheet total and equity

The balance sheet total increased from 337.8 million euros in 2002 to 487.6 million euros in 2003 as a result of the acquisition of Thyssen Polymer. The consolidated equity amounts to 202 million euros, representing an increase of 11.2 million euros in comparison to 2002. Equity was increased with the consolidated result of the financial year and amounts to 41.4% of the total assets.

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Capital expenditure

Capital expenditure comprises of the purchase of specific assets to be employed within the production process or in an admin-istrative or supporting role.

The Group financed its operational expenditure and its capital expenditure through its own resources.

The net capital expenditure for the purchase of capital goods amounted to 50.2 million euros in 2003 and 36.3 million euros in 2002. The increase can be attributed to following factors:

• The continued extension of the production capacity in raw materials in Diksmuide aimed at increasing capacity from 80,000 tonnes to 135, 000 tonnes

• The production of new calibers and dies for the new window concept Zendow®

• The start of work on a logistics centre in the United Kingdom• The extension of production infrastructure in Turkey through an increase in the number of extrusion lines• Investments in wood extrusion in Deceuninck North America• The installation of silos in the Polish subsidiary• The automation of coating in Gits.

Managing market risk

The principal categories of market risk the Group faces are changes in commodity and foreign exchange prices and interest rates.

The Group seeks to minimize adverse effects on the financial results by using commercial agreements in which sales prices are linked to the evolution of the commodity price.

Due to its international character, the Group is exposed to different foreign exchange risks, caused by divergent exchange rate posi-tions, primarily with respect to Turkish Lira, USD, GBP, PLZ and CZK.

The finance department of the Group monitors these exposures and limits the risks by compensating transactions within the same currency and above all by setting rates through fixed term contracts.

Currently, interest rate risk is limited for the Group as almost all loans are at a fixed interest rate. The Group strives to achieve an optimal portfolio of long and short-term liabilities in order to minimize the risk of potential interest rate fluctuation.

In the framework of the financing of the acquisition of Thyssen Polymer, we opted unreservedly to spread the risk, the currency, the term and the instalment schedule of the loan. On the one hand, and in part, a traditional bank loan was chosen, with a fixed interest rate. This is withdrawn partly on a revolving basis, which benefits the flexibility of the withdrawals. On the other hand, and new to the Group, the investors market was called on with success, resulting in two bullet loans in USD and in euro.

As the issue of a private placement tends to take around three months and as interest rates were rather volatile at the middle of 2003, we decided, as a precaution and in the belief that interest rates were at a very attractive level at that time, to agree to a loan.

This product allowed Deceuninck to save 45,344 euros and 202,311 USD respectively during the first six months of the loan. This structure allows Deceuninck to get unlimited advantage from the current, favourable interest rates.On the other hand, the Group is subject to rising, capped interest rates. Such a product (swap) can have a negative impact on the market value of the product, which has an impact on the results of the Group. This impact was entered as losses of 162,095 euros and 675,484 USD respectively for the financial year 2003. In comparison: the indicative market value on 12 March 2004 signified gains of 56,000 euros and 5,000 USD respectively.

72 - 7372

The Group has no significant concentration of credit risk and has developed strategies to monitor the credit risk of customers. The Group also insures a large part of its outstanding client portfolio by using credit insurance companies.

Liquidity risk is related to the evolution of the company’s working capital. The Group monitors changes in working capital through specific actions such as increasing the turnaround of inventories and intensive follow-up on outstanding invoices.

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

Consolidated Income Statements Deceuninck(For the year ended 31 December 2003)

In thousands of euros Notes 2003 2002

Net turnover 470,487 362,160

Cost of sales 5 -296,237 -219,893

Gross profit 174,250 142,267

Marketing, selling and distribution costs -79,327 -61,057

Research and development expenses -6,018 -5,702

Administrative and general expenses -36,818 -28,233

Other operating income / expenses 5 5,422 -1,259

Operating profit before goodwill 57,509 46,016

Amortization of goodwill 9 -3,554 -3,128

Operating profit 53,955 42,888

Finance costs 5 -10,880 -5,842

Profit before tax and minority interests 43,075 37,046

Income tax 6 -14,074 -7,422

Net profit from ordinary activities 29,001 29,624

Minority interests -354 -43

Net profit 28,647 29,581

Basic earnings per share (euros) 7 1.35 1.40

Diluted earnings per share (euros) 7 1.35 1.39

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Consolidated balance sheet Deceuninck (as at 31 December 2003)

In thousands of euros Notes 2003 2002

Intangible fixed assets 8 6,299 7,496

Goodwill 9 45,421 32,136

Tangible fixed assets 10 216,797 140,236

Financial assets available for sale 11 2,003 1,219

Long term receivables 12 2,081 3,348

Deferred tax assets 6 3,452 3,525

Non current assets (1) 276,053 187,960

Inventories 13 66,348 40,423

Trade receivables 14 112,485 79,184

Other receivables 7,290 1,784

Cash and cash equivalents 15 22,483 27,051

Deferred charges and accrued income 2,986 1,405

Current assets (2) 211,592 149,847

TOTAL ASSETS (1) + (2) 487,645 337,807

Issued capital 8,499 8,200

Consolidated reserves 213,919 190,450

Financial instrument revaluation reserve -1,554 -3,033

Treasury shares -6,605 -6,605

Foreign currency adjustments -12,210 1,742

Equity 16 202,049 190,754

Minority interest 1,139 294

Liabilities for post employment benefits 17 9,415 1,750

Non-current provisions 18 7,526 3,724

Deferred tax liabilities 6 23,857 14,402

Interest bearing loans and borrowings 19 134,664 47,684

Non current liabilities 175,462 67,560

Interest bearing loans and borrowings 19 39,988 31,063

Trade creditors 41,608 34,958

Taxes 6 4,735 0

Liabilities for personnel commitments 12,073 6,322

Other liabilities 20 4,956 4,261

Accrued charges and deferred income 5,635 2,595

Current liabilities 108,995 79,199

TOTAL EQUITY AND LIABILITIES 487,645 337,807

74 - 7574

Consolidated Cash Flow Statement Deceuninck (for the year ended 31 December 2003) In thousands of euros 2003 2002OPERATING ACTIVITIESNet profit 28,647 29,581Depreciation 31,244 24,706Amortization 3,554 3,128Reversal of impairment losses -114Impairment losses 2,432Write-offs on current assets 139 2,448Unrealized foreign exchange losses/(gains) 130 -576Interest income -944 -1,128Investment income -50 -40Hyperinflation accounting adjustment -407Interest expense 6,705 5,964Gain on sale of tangible assets -442Loss on sale of tangible assets 807 -65Income taxes 14,074 7,422Minority interest 354 43Cash flow from operational activities before changes in working capital and provisions 86,243 71,369Decrease /(increase) in trade and other receivables 2,455 -862Decrease /(increase) in inventories 897 2,800Decrease /(increase) in other current assets -697 436(Decrease) / increase in trade and other payables -4,441 -2,295Decrease /(increase) in other non current assets 3,638 -403(Decrease) /increase in other current liabilities -1,505 -1,240Decrease /(increase) in other permanent equity 6,888 1,620Cash flow generated from operational activities 93,478 71,425Interest paid -5,032 -5,791Interest received 492 1,241Income taxes paid -7,348 -8,179Cash flow from operating activities 81,590 58,696INVESTING ACTIVITIESCash proceeds from sale of tangible assets 522 1,871Capital expenditures: tangible assets -49,455 -34,471Capital expenditures: intangible assets -725 -1,838Acquisition of available-for-sale financial assets -37 -513Acquisition of subsidiaries, excl. cash and cash equivalents -39,707Cash flow from investing activities -89,402 -34,951FINANCING ACTIVITIESNew long term borrowings 120,250 12,948Repayment of long term borrowings -110,707 -21,572Proceeds in cash of new short term finance deals 6,718 6,507Repayment of short term finance deals -6,507 -17,903Dividends paid -4,879 -4,773Cash flow from financing activities 4,875 -24,793Net variation in cash and cash equivalents -2,937 -1,048Cash and cash equivalents as of 1 January 27,051 28,099Impact of foreign exchange differences on cash and cash equivalents -1,631Cash and cash equivalents as of 31 December 22,483 27,051

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Notes

1. Principal accounting policies

Summary of principal valuation rules - Deceuninck NV Standards applied in the drawing up of the financial statement.

The consolidated financial statements incorporate the following principal accounting policies which conform with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). These include the appli-cable standards and interpretations approved by the IASB and the International Accounting Standards and the Standing Inter-pretations Committee interpretations as approved by the IASC. These policies are consistent in all material respects with those applied in the previous year. The consolidated financial statements were prepared on this basis for the first time on 31 December 2002. Deceuninck received to this effect a derogation from the Belgian Banking, Financing and Insurance Commission.

The Board of Directors approved the consolidated financial statements on 1 April 2004. The consolidated financial statements can still be adapted at the Annual General Meeting of Deceuninck NV on 11 May 2004.

BASIS OF PRESENTATION

The consolidated financial statements are presented in thousands of euros. They have been prepared in accordance with the historical cost convention as modified by the re-statement of derivatives and available-for-sale financial assets to fair value.

The consolidated financial statements relate to the financial accounts as at 31 December 20003.

It is presented before the payment of dividends by the parent company as proposed to the Annual General Meeting of Share-holders.

76 - 7776

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements of Deceuninck NV and its subsidiaries.

Subsidiaries are those companies in which the Group, directly or indirectly, has an interest of more than one half of voting rights, or over which the Group, directly or indirectly, can exert control in one way or another.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.Acquisitions of subsidiaries are accounted for using the purchase method of accounting.

The financial statements of subsidiaries are drawn up for the same reporting period as for the parent company, applying con-sistent measurement standards.

All intra Group transactions and balances are eliminated on consolidation.

The adjustments are made in order for the financial statements to accommodate any anamolous accounting methods that may have been used.

Associated companies are those companies in which the Group has significant influence, yet over which it cannot exert con-trol.

This is generally evidenced by ownership of 20% to 50% of the voting rights. Associated companies are accounted for using the equity accounting method from the date that significant influence commences onwards to the date that influence ceases. When the Group’s share of losses exceeds the book value of the associate, the book value is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate.

Between 31/12/2002 and 31/12/2003, the Group did not have investments in associates. A listing of the Group’s principal subsidiaries is set out in note 27.

USE OF ESTIMATES

To draw up the financial statements in accordance with the IFRS, the management has to make estimates and assumptions which have repercussions on the amounts in the financial statements.

The estimates made on the date of reporting reflect the existing conditions on those dates (e.g. market prices, interest rates and foreign exchange rates). Whilst the management makes these estimates to the best of its abilities with due regard to knowledge of current affairs and of actions the Group could undertake, the real results can deviate from the estimates.

FOREIGN CURRENCY

Foreign currency transactions

The reporting currency of the Group is the euro. Foreign currency transactions are recognized at the exchange rates recorded on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are converted to euros at foreign exchange rates on the balance sheet date. Gains and losses resulting from the settlement of foreign currency transactions and from the conversion of monetary assets and liabilities denominated in foreign currencies are recognized in the income state-ment. Non monetary assets and liabilities are converted using the exchange rate on the day when the assets and liabilities were required.

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Foreign subsidiaries

Assets and liabilities of foreign subsidiaries are converted to euros at foreign exchange rates on the balance sheet date. The income statements of foreign subsidiaries, excluding foreign subsidiaries in hyperinflationary economies, are converted at the weighted average exchange rate for the year, adjusted for the rate on the day of the transaction.The components of equity are converted at historical rates. Exchange rate differences arising from the conversion of equity into euros at year-end exchange rates are recognized as ‘foreign currency conversion’ under the item ‘equity’.

Foreign operations

The Group’s foreign operations are not considered an integral part of the Company’s operations and accordingly have a certain degree of autonomy.

In hyperinflationary economies, a general price index is applied to re-measure non-monetary assets, liabilities, related income accounts and equity accounts. These re-measured accounts are used for conversion into euros at the closing exchange rate on the balance sheet date.

Exchange rates

The following exchange rates have been used in compiling the financial statements:

1 euro Closing rate Closing rate Average rate Average rateequals 31/12/03 31/12/02 31/12/03 31/12/02USD 1.2629 1.0487 1.1413 0.9516GBP 0.7048 0.6505 0.6929 0.6299PLN 4.7015 4.0209 4.4464 3.8760CZK 32.3625 31.5457 31.8471 30.7692

INTANGIBLE ASSETS OTHER THAN GOODWILL

Patents and licenses

Expenditure relating to patents is capitalized at original cost minus accumulated amortization and impairment losses. The costs are amortized on a straight-line basis, either over the contractual period if any, or 15 years for the patents recognized in North America and 5 years for other patents, whichever is the shortest. Licenses relating to software are capitalized and amortized on a straight-line basis over a period no longer than the contractual period if any, or three years, whichever is the shortest.

Research and Development

Research costs, undertaken with the prospect of gaining new scientific or technological knowledge, are recognized in the income statement.

Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, are capitalized if, and only if, all the recognition criteria as defined in the stan-dard on Intangibles, IAS 38, are met.

The expenditure recognized includes the cost of materials, direct labour and an appropriate proportion of overheads. Recog-nized development expenditure is stated at cost less accumulated amortization and impairment losses.These development costs are amortized on a straight-line basis over their expected life span, not exceeding five years.

78 - 7978

Other intangible assets

Other intangible assets acquired by the Group, are measured at cost less accumulated amortization and impairment losses. Such costs are currently amortized on a straight-line basis over their expected 5-year life span. Expenditure on internally genera-ted goodwill and brands is expensed in the income statements when incurred.

Subsequent expenditure

Subsequent expenditure on intangible assets after purchase or the completion thereof is recognized only when it will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance. All other expenditure is recognized as an expense when incurred.

GOODWILL

Goodwill represents the excess of the purchase price over the attributable fair value of the identifiable net assets of the subsidi-ary or the associated company at the date of acquisition. Goodwill is capitalized and amortized, using the straight-line method, over the period that benefits are expected to be realized, ranging from five to fifteen years.

Goodwill is expressed in the currency of the company involved and is converted into euros on the closing rate on the balance sheet date.

TANGIBLE ASSETS

All tangible assets are stated at historical cost minus accumulated depreciation and accumulated impairment losses. The histori-cal cost includes the initial purchase price and any other direct acquisition costs (e.g. non refundable taxes, transport). The cost of self-constructed assets (e.g. dies) includes the cost of materials, direct labour and an appropriate proportion of the production overheads.

Subsequent expenditure is recognized only when it increases the future economic benefits in excess of its originally assessed stan-dard of performance. Repairs and maintenance costs are expensed in the income statement when incurred.

Depreciation is calculated from the date the asset is brought into use, on a straight-line basis over the expected, useful life of the asset. The expected useful lives of tangible assets are as follows:

Buildings 40 yearsFurnishings 10 yearsMachinery and equipment 8 yearsScrews and barrels 4 yearsMoulds and extrusion dies 5 yearsInstallations 10 yearsOffice equipment 5 yearsComputer equipment 3 yearsContainers and small equipment 5 yearsFurniture 10 yearsVehicles 5 years

Land is not depreciated as it is deemed to have an infinite life.

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LEASES

Financial leasing contracts, which effectively transfer to the Group substantially all the risks and benefits incidental to the owner-ship of the leased item, are recognized at the fair value of the minimum lease payments at the inception of the lease term and classified as leased tangible asset. Lease payments are apportioned between the finance charges and the repayment of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

Leases of assets where the lessor retains substantially all the risks and benefits of ownership are classified as operating leases. Operating lease payments are recognized as an expense in the consolidated income statement on a straight-line basis over the lease term.

FINANCIAL INSTRUMENTS

Fair value of financial instruments.

The fair value of financial financial instruments is estimated in compliance with the following methods and principles:

• For investments in non-quoted companies for which fair value cannot be reliably established, fair value is determined by the purchase price, and adjusted for potential impairment losses (a)

• For investments in quoted companies, fair value equals the share price on an official stock market at the close of business on the balance sheet date

• For other long term financial assets (other than derivatives), the amortized cost is deemed to approximate to the estimated fair value (b)

• For trade receivables, trade creditors, other current assets and liabilities, the balance sheet values are an approximation of the fair value, taking into account their short term nature (c)

• For cash and cash equivalents, the balance sheet values are an approximation of the fair value, taking into account their short term nature(d)

• For long term interest-bearing debts subject to variable interest rates, the amortized cost is deemed to approximate fair value (e)

• For long term interest-bearing debts subject to fixed interest rates, fair value is based on the cash value of the future cash flows (e)

• For derivatives, the fair value is estimated using various valuing techniques, in particular the discounting of future cash flows (f)

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Criteria for initial recognition and derecognition of financial assets and liabilities

The financial instruments are initially recognized when the Group subscribes to the contractual stipulations of the instruments. The buying and selling of financial assets are recognized on the date of the transaction. Financial assets (or part of them) are no longer recognized when the Group cashes in on the remunerative claims as stipulated in the contract, when the claims lapse or the Group renounces them or in a situation where the Group loses control over the contractual rights relating to the financial asset. Financial liabilities (or part of them) are no longer recognized when the obligation stipulated in the contract is withdrawn, cancelled, or lapses.

Criteria for offsetting financial assets and liabilities

A financial asset and a financial liability are offset and the net amount is recognized in the balance if a legally enforceable right exists to offset the recognized amounts and the intention exists to settle the liability and realize the asset simultaneously, or to settle on a net basis.

(a) Available-for-sale financial assetsAll financial assets are originally recognized at purchase cost, increased by the acquisition costs of the investment.

The Group mainly owns ‘available-for-sale’ financial assets. The unrealized gains and losses arising from changes in the fair value of the available-for-sale financial assets are recognized directly in equity, until the financial asset is sold, redeemed or oth-erwise disposed of, or until the financial asset is deemed to be impaired, at which time the cumulative gain or loss previously recognized in equity is recognized in the income statement for the period.

The unrealized gains and losses, arising from changes in the fair value of tradeable financial assets, are recognized directly in the income statement.

(b) Other long-term financial assets which are intended to be held to maturity, such as bonds, are measured at amortized cost using the effective interest rate method. Amortized costs are calculated by taking into account any discount or premium on acquisition. For financial assets valued at amortized cost, any gain or loss is recognized in the financial statements when the financial asset is de recognized (for example, through redemption) or impaired.

(c) Trade receivables are recognized at their carrying value, less an allowance for impairment. An estimate is made of the im-pairment to be recognized when collection of the full carrying amount is no longer probable. The impairment loss is recognized in the period when it has been identified as such.

(d) Cash and cash equivalents are carried at cost. Cash and cash equivalents consists mainly of cash on hand, cash at the bank, demand deposits and highly liquid investments (with an original maturity of three months or less) which can be converted into cash and are therefore susceptible to minimal change in value.

For the purpose of the cash flow statement, cash and cash equivalents consist of cash on hand and deposits in banks (current and non-current accounts) and are presented net of outstanding bank overdrafts.

(e) Interest-bearing loans and borrowings are initially recognized at cost, less transaction costs. Subsequent to initial recogni-tion, interest-bearing debts, except for those hedged by a ‘fair-value’-cap (which complies with the specific conditions of hedge accounting), are stated at amortized cost. Any difference between amortized cost and redemption value is recognized on the basis of the effective interest rate over the period of the debt, or at the time that the debt is no longer upheld.

Interest-bearing debts that are hedged by a fair value financial instrument that qualifies for hedge accounting, are recognized at fair value with fluctuations in fair value being recorded in the income statement.

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(f) The Group uses derivative financial instruments (mainly interest rate swaps) to reduce exposure to adverse fluctuations in interest rates. Company policy prohibits the use of such instruments for speculation purposes.

The derivative financial instruments are classified as ‘fair value’ hedges if these instruments hedge the exposure to changes in fair value of the recognized assets and liabilities, or as ‘cash flow’ hedge if such instruments hedge the exposure to variability in cash flows related to a specific risk associated with a recognized asset or liability, or a highly probable forecast transaction, which could affect profit or loss.

For fair value hedges, which comply with the specific conditions of hedge accounting, gains or losses resulting from the re-mea-surement of the hedging instrument at fair value, are recognized directly in the income statement. The gains or losses on the hedged item, are recognized in the value of the hedged item.

If the adjustment relates to the value of an interest bearing debt the adjustment is amortized via the profit or the loss in order for it to be amortized in its entirety at maturity.

For cash flow hedges covering fixed liabilities of the Group, which qualify for hedge accounting, the portion of the gain or loss on the hedging instrument which is identified as an effective hedge, is recognized directly in equity while the non-effective portion is recognized in the income statement.

Financial instruments which do not qualify for hedge accounting, are measured at fair value, with gains or losses resulting from the change in fair value of the instrument being recognized directly in the income statement.

INVENTORIES

Inventories are valued at cost or net realizable value, whichever is the lower. The net realizable value is defined as the estimated selling price in the ordinary course of business, minus the estimated costs of completion and selling costs.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:• Raw materials – purchase costs on a first-in, first-out basis• Finished goods and work in progress – costs of direct materials and labour and a proportion of manufacturing overheads

based on normal operating capacity• Goods purchased for resale – purchase cost on a first-in, first-out basis

TREASURY SHARES

When company shares are purchased, the amount of the consideration paid, including directly attributable costs, is deducted from Group equity.

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IMPAIRMENT

The carrying value of assets is reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognized whenever the carrying value of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the income statement. For intangible assets not yet available for use, as well as for goodwill amortized over a period longer than 20 years, the recoverable amount is estimated at each balance sheet date.

The recoverable amount of the Group’s financial assets held-to-maturity and of receivables is calculated as the present value of expected future cash flows, discounted at the original effective interest rate inherent in the asset.

The recoverable amount of other assets is either the fair value less costs to sell or value in use, whichever is the higher. In as-sessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. For an asset that does not gen-erate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss in respect of the Group’s financial assets held-to-maturity or receivables is reversed if a subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized.

An impairment loss in respect of goodwill is not reversed unless the loss was caused by a specific external event of an excep-tional nature, which is not expected to recur, and the increase in recoverable amount related clearly to the reversal of the impact of that specific event.In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.The increase in the carrying amount of the asset, as a result of the reversal of an impairment loss should not exceed the carry-ing amount, net of depreciation or amortization, that would have been achieved if no impairment loss had been recognized in previous years.

PROVISIONS

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of past events, it is prob-able that an outflow of resources embodying economic benefits will be required to settle the liability, and a reliable estimate can be made of the amount of the obligation.

Where the Group expects some or all expenses related to settling the provision to be reimbursed by a third party, the reimburse-ment is recognized as a separate asset, but only when the reimbursement is virtually certain.

A warranty provision is recognized at the balance sheet date for all products under warranty and is based on past experience of the level of repairs and returns.

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EMPLOYEE BENEFITS

The Group primarily has guaranteed contribution agreements, as well as a guaranteed pension contribution agreement at the German subsidiary. Funds of these pension schemes consist of employers’ and employees’ contributions. Current contribution costs, in respect of such ‘guaranteed contribution’ agreements, are expensed in the income statement when incurred.

In respect of the ‘guaranteed pension contribution’ agreement, the cost of providing benefits under the plan is determined using the ‘projected unit credit’ actuarial valuation method. This method considers each employment period separately as a unit that entitles to an additional unit of pension benefits.

Accordingly, pensions are recognized as an expense in the income statement in a way that spreads the cost over the outstand-ing period of service of the participants, in compliance with the advice of actuaries who produce a comprehensive calculation of the pension schemes at least once a year. The amounts recognized as a cost in the income statement comprise the increase in the cash value of the guaranteed pension entitlements, the cost of interest, the expected income of the pension funds, the actuarial gains or losses and the carried value of cost over served term of employment.

The pension obligations recognized in the balance sheet are calculated as being the actual values of the estimated future out-flows of cash, calculated on the basis of the interest rate of high value company bonds of a duration which approaches the term of the pension obligation, adjusted for as yet unrecognized actuarial gains and losses and reduced by the as yet unrecognized costs over served term of employment and with the fair value of the assets of the fund.Actuarial gains and losses comprise the effect of the differences between former actuarial parameters and current parameters and the changes in actuarial parameters. All actuarial gains and losses which exceed 10% of the fair value of the assets in the fund or of the current value of the future obligations, if this is higher, are recognized in the financial statements over the average outstanding length of service of the participants. If this is not the case, the actuarial gains or losses are not recognized.When the calculations result in a benefit for the company, the recognized assets are limited to the net total of all unrecognized actuarial gains and losses of served terms of employment and the cash value of either the repayment of the plan or reductions of future contributions to the plan.

The Group also provides in an early retirement scheme which is accessible to all employees. The related provision is computed by calculating the actual values of the future contributions promised to the employees involved.

Various stock option schemes allow employees, senior management and members of the board of Directors to acquire shares in the Holding company. The purchase price of the option equals the market price of the underlying shares on the date of reg-istration. No compensation cost or obligation is recognized. When the options are exercised, equity is increased by the amount of the profits.

Bonuses for the senior management are calculated on the basis of envisaged financial key indicators. The expected amount of the bonus is recognized as an expense in the income statement, based on an estimate made on balance sheet date.

REVENUE

Revenue is recognized to the extent that it is probable that the economic benefits related to the transaction will flow to the Group and the revenue can be reliably measured.

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SALE OF GOODS

Turnover is recognized as realized when the risks and rewards of the sale have transferred to the buyer and there is no longer uncertainty about: receiving the agreed remuneration, the transaction cost and the possible return of the goods.

INTEREST INCOME

Interest income comprises interest received from approved loans. Revenue is recognized as the interest accrues (taking into account the effective-yield on the asset).

DIVIDENDS

Dividends are recognized in the income statement when the right to receive payment is established.

GOVERNMENT GRANTS

Grants from the government are recognized at their fair value when it is virtually certain that the grant will be received and that the Group will comply with all conditions related to it. When the grant relates to an expense item, it is recognized as income over the periods necessary to match them on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is presented as deferred income and is released to the income statement over the expected useful life of the relevant asset.

FINANCING COSTS

Interest expense comprises interest payable on borrowings. Financing costs are recognized as an expense in the income state-ment in the period in which they are incurred.

INCOME TAX

Income taxes on the profit or loss for the year comprise current and deferred tax. Income tax is recognized in the financial state-ments except to the extent that it relates to items recognized directly to equity, in which case it is charged against equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates in force at the balance sheet date and any adjustments to tax payable in respect of previous years.

Deferred income taxes are recognized using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Tax rates currently in force are used to determine deferred income tax.

According to this method, the Group is required to calculate deferred taxes as the difference between the fair values of the net assets acquired and their tax base as a result of a new business acquisition.

Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the assets can be utilized. Deferred tax assets are reduced when it is no longer probable that the related tax benefit will be real-ized.

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The financial gains or losses comprise the realized and unrealized foreign exchange variations on interest carrying debts, as well as gains or losses recognized resulting from a revaluation of the fair value of derivate financial instruments considered as fair value hedging instruments, or derivate financial instruments which do not comply with the specific conditions of hedge ac-counting.

DISCONTINUING OPERATIONS

A discontinuing operation is a component of the Group that, in part or as a whole, is abandoned or terminated in accordance with a set plan and which represents a separate major activity/line of business or geographical area of operation.

RECENTLY PUBLISHED IFRS ACCOUNTING STANDARDS

The International Accounting Standards Board (IASB) published in December 2003 ‘Improvements to International Accounting Standards’, which have to be applied to periods commencing on or after 1 January 2005 and for which earlier application is being encouraged. This IASB publication revises 13 existing IAS standards. The Group has chosen not to apply these on 31 December 2003 and will investigate the impact of applying these revised standards during 2004.

The IASB published in December 2003 the revised editions of ‘IAS 32’, Financial Instruments: Disclosure and Presentation, and ‘IAS 39’, Financial Instruments: Recognition and Measurement. These revised standards are applicable from or after 1 January 2005, but earlier application is encouraged. The revised standards oblige, for comparative purposes, retrospective application of selected revisions. The Group has chosen not to apply these on 31 December 2003 and will investigate the impact of applying these revised standards during 2004.

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2. Segment Information

A business segment is a distinguishable component of the Group that generates individual goods or services within a particular economic environment, and that is subject to risks and returns that are different from other business segments. The chosen primary segment-reporting format is geographical as it is used for the internally reported financial information. The secondary format is according to ‘business units’.

The Group has three reportable segments on a primary basis, which are based on the location of the assets, and comprise the following countries:1. Western Europe: Belgium, the Netherlands, France, Spain, Germany and the UK2. USA3. Eastern Europe & Asia: Poland, Russia, the Czech Republic, Romania, Turkey and Thailand.

The reportable segments on the ‘secondary’ basis are as follows:1. Windows and Doors and Home Protection2. Building Profiles and Special Projects

Inter-segment pricing is determined according to the ‘arm’s length’ principle. Segment information comprises of financial state-ments, assets and liabilities which can be attributed directly or on a reasonable basis to a segment. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one financial year.

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In thousands of euros Western Europe USA Eastern Europe & Asia Consolidated

2003 2002 2003 2002 2003 2002 2003 2002

Sales 419,156 346,199 104,368 91,009 96,778 65,844 620,302 503,052

Inter-company Sales -147,300 -138,110 -16 -2,499 -2,782 -149,815 -140,892

Net turnover 271,856 208,089 104,352 91,009 94,279 63,062 470,487 362,160

Proportion of consolidated turnover

57.8% 57.5% 22.2% 25.1% 20% 17.4% 100% 100%

Segment result 64,734 53,862 19,052 17,772 7,122 5,703 90,908 77,337

Return on net turnover 23.8% 25.9% 18.3% 19.5% 7.6% 9.0% 19.3% 21.4%

Operating results before good-will

46,108 38,055 7,315 6,210 4,086 1,751 57,509 46,016

Return on net turnover 17% 18.3% 7% 6.8% 4.3% 2.8% 12.2% 12.7%

Operating results 44,782 36,868 6,069 5,161 3,104 860 53,955 42,889

Return on net turnover 16.5% 17.7% 5.8% 5.7% 3.3% 1.4% 11.5% 11.8%

Financial result -10,879 -5,843

Income taxes -14,074 -7,422

Minority interests -354 -43

NET PROFIT 28,647 29,581

Segment assets 293,463 336,420 119,596 91,173 74,586 65,461 487,645 493,054

Inter-segment eliminations -155,247

Total assets 487,645 337,807

Segment liabilities 64,513 90,224 4,798 6,087 5,583 23,871 74,894 120,182

Inter-segment eliminations -70,591

Total operating liabilities 74,894 49,591

Capital expenditures 35,157 25,103 9,180 3,891 5,843 7,315 50,180 36,309

Depreciation 17,311 11,965 10,650 9,849 3,283 2,892 31,244 24,706

Amortization of goodwill 1,325 1,186 1,247 1,049 982 893 3,554 3,128

Impairment 2,215 217 2,432

Other non-cash expenses -899 3,843 1,086 1,713 -464 1,059 -277 6,615

Secondary segment information Windows and Doors & Home Protection

Building Profiles and Special Projects

Consolidated

2003 2002 2003 2002 2003 2002

Net turnover 408,481 292,263 62,006 69,897 470,487 362,160

Proportion of consolidated turnover 86.8% 80.7% 13.2% 19.3% 100% 100%

Segment assets 424,251 270,246 63,394 67,561 487,645 337,807

Capital expenditures 43,657 29,047 6,523 7,262 50,180 36,309

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3. Acquisiton of subsidiaries

The following major acquisitions took place:

- With effect from 1 July, 100% of the extrusion division of Thyssen Krupp Technologies was acquired for 48 million euros. Goodwill amounted to 19.1 million euros

- On 22 May, 75% of Detajoint was acquired for 2.3 million euros, thereby resulting in goodwill of 821,000 euros.

The acquired subsidiaries were recognized in consolidated financial statements using the take over method.

Goodwill resulting from the acquisition is amortized over 15 years. In light of the inherent complexity of determining the fair values of the acquired activities, it should be noted that the take on fair values of assets and liabilities are only temporary as of 31 December 2003. Adjustments are possible during the course of 2004.

With regard to the acquisition of Thyssen Polymer, a postponement of payment of 12 million euros were obtained, of wich half (incl. interest) will be redeemed midway through 2004 and the remaining 6 million euros (incl. interest) midway through 2005.

The fair value of the acquired assets and liabilities of the acquired subsidiaries on the date of the acquisition is presented as follows:

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In thousands of euros

Intangible fixed assets 214

Tangible fixed assets 74,150

Long term receivables 669

Deferred tax assets 935

FIXED ASSETS 75,968

Inventories 26,112

Trade receivables 32,505

Other receivables 9,606

Other receivables, deferred charges & accrued income 488

CURRENT ASSETS 68,711

Provisions -10,729

Deferred tax liability -8,321

Interest-bearing loans and borrowings -7,320

NON-CURRENT LIABILITIES -26,370

Short term borrowings -66,831

Trade creditors -11,275

Liabilities for personnel commitments -7,236

Taxes and other liabilities -1,184

CURRENT LIABILITIES -86,526

FAIR VALUE OF ACQUIRED ASSETS AND LIABILITIES 31,783

GOODWILL 19,924

Take-over price in cash terms 38,312

Activated acquisition costs 3,084

Acquired cash and cash equivalents -1,689

Net cash outflow 39,707

Deferred payment acquisition 12,000

90 - 9190

4. Discontinuing operation

The discontinuing operation relates to the abandonment of Deceuninck Recycling SA and Uniplast SA. A detailed plan of dis-continuance had been agreed by the Board of Directors on 18 December for Deceuninck Recycling SA, and on 5 December 2002 for Uniplast SA. This decision was internally announced before the end of 2002. The results for both subsidiaries recognized in the consolidated financial results (primary segment Western Europe) are as follows:

In thousands of euros Uniplast SA Deceuninck Recycling SA

2003 2002 2003 2002

Net turnover 470 2,567 231 789

COST OF SALES -650 -2,480 -362 -876

Gross profit -180 87 -131 -87

Marketing, sales and distribution costs 106 -426 -2 -261

Administration costs -15 -188 -80 -113

Other operating income / (expenditure) -1686 225 118 557

Operating results -1,775 -302 -95 96

Financial result s -20 -69 -7 -14

PROFIT BEFORE TAXES -1,795 -371 -102 82

Income tax -7

Net profit -1,795 -371 -109 82

The liquidation of Deceuninck Recycling will be concluded during 2004. It is not yet clear when it will be possible to liquidate Uniplast.

The building and adjacent land of the subsidiary, Uniplast SA, are no longer in use and lie in grant. During 2003, an additional impairment of 1.7 million euros was recognized in order to reduce the carrying value to its realizable value. The realizable value is based on the yield of the related assets in the framework of the right for sale on these buildings and land held by the IEG (In-tercommunal d’Etude et de Gestion). The book value is 1.3 million euros, as of 31 December 2003.

Other liabilities consist mainly of subsidies (372,000 euros) which is due back to the Walloon government.

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The net assets to be disposed of are presented as follows:


2003 2002 2003 2002

Tangible fixed assets 1,282 3,393 0

Trade and other receivables 257 255 13 335

Inventories 416 177

Other assets 0 11

Cash and cash equivalents 39 187 7 51

Total assets 1,578 4,251 20 574

Loans 552 2

Loan creditors 11 380 12 170

Other creditors 375 501 113

Total liabilities 386 1,433 12 285

Net assets 1,192 2,818 8 289

The cash flows as per 31 December 2003 are as follows:


2003 2002 2003 2002

Operational activity 403 515 -109 83

Investing 1 176 67 70

Financing -552 -551 -2 -103

Net cash inflow (outflow) -148 140 -44 50

5. Operating profit

This is stated after taking account of the following items

OTHER OPERATING INCOME

In thousands of euros 2003 2002

Governments grants released 416 848

Exchange rates gains 919 1,742

Gain on disposal tangible fixed assets 442 533

Indemnities 8,032 4,343

Reversal of unused provisions 624 469

Other 1,165 249

Total 11,598 8,184

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The increase in other operating income in comparison to 2002, is mainly due to indemnities received from the supplier EVC (6.0 million euros) in compensation for the supply of raw materials of low quality (see also note 18).

OTHER OPERATING EXPENSES


Exchange rate losses 2,496 4,877

Additional provisions 3,887

Reversal provisions -10

Impairment losses 2,432

Realized loss on tangible fixed assets 807 468

Other 451 211

Total 6,176 9,443

The decrease in other operating expenses in comparison to 2002 is mainly due to a decrease of the operating exchange rate losses partly compensated by the impairment losses on fixed assets.

FINANCIAL INCOME


Interest income 944 763

Exchange rate gains 11,129 6,238

Other 569 717

Total 12,642 7,718

FINANCIAL EXPENSES


Interest expense 6,705 5,947

Cash discounts granted 3,824 2,128

Exchange rate losses 11,233 4,370

Other 1,760 1,116

Total 23,522 13,561

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PAYROLL AND RELATED BENEFITS


Wages and salaries 71,615 56,970

Social security contributions 22,398 17,834

Contributions to defined contribution plans 2,626 2,096

Other payroll charges 8,860 2,395

Total 105,499 79,295

2003 2002

Number of employees at balance sheet date 2,738 1,776

COST OF SALES


Inventory change - own production -9,630 -5,826

Material cost 198,674 144,970

Wages and salaries 59,443 44,099

Depreciation of tangible fixed assets 23,237 18,345

Other production costs 24,513 18,305

Total 296,237 219,893

COSTS BY NATURE


Inventory change - own production -9,630 -5,826

Material cost 198,674 144,970

Payroll charges 105,499 79,295

Depreciation 31,244 24,706

Other charges 92,613 71,740

Total 418,400 314,885

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6. Income taxes

Major components of income tax for the financial year 2003 are:


Current income tax

Current income tax charges 12,397 6,843

Adjustments in respect of previous years 584 215

Deferred income tax

Deferred tax relating to the originating and reversing of temporary differences 1,299 1,122

Deferred tax asset recognition/utilization on losses of previous year -206 -758

Income tax expense reported in the consolidated financial statements 14,074 7,422

Profit before taxes 43,075 37,046

At Deceuninck NV statutory income tax rate (33.99%) 14,641 14,881

Effect of different tax rates in other countries -1,212 -3,206

Expenses not deductible for tax purposes 393 351

Utilization / recognition of previously unrecognized losses -3 -1,560

Unrecognized deferred tax losses 1,007 -186

Change in tax rate: impact on the deferred taxes (Turkey, Germany and Poland) -771 -1,792

IAS 29 “Inflationary accounting” adjustments Turkey 10 -1,281

Tax incentives (Turkey) -575

Under/over provided in prior years 584 215

Income tax expense reported in the consolidated financial statements 14,074 7,422

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The following table provides an overview of the tax effects of the temporary differences for compensation per judicial entity:

In thousands of euros 2002 Change through

acquisition

Change Financial

Statements

Currency adjustments

2003

Deferred tax assets

Operating tax loss carryforwards 942 423 1,365

Deferred tax on provisions 1,435 940 2,375

Deferred tax on current assets 815 3,008 3,823

Deferred tax on inventories and other assets 1,500 -164 1,794 3,130

Deferred tax assets 2,442 2,086 6,165 10,693

Deferred tax liabilities

Deferred tax on tangible fixed assets 11,636 9,888 5,587 28,160

Deferred tax on profits 879 -125 754

Deferred tax on provisions 206 -7 199

Deferred tax on other liabilities 598 -416 1,803 1,985

Deferred tax liabilities 13,319 9,472 7,258 1,049 31,098

Net deferred tax assets (liabilities) 10,877 7,386 1,093 1,049 20,405

Reconciliation of the deferred tax balances as shown in the consolidated balance sheet:


Deferred tax assets 3,452 3,525

Deferred tax liabilities 23,857 14,402

Net deferred tax liability 20,405 10,877

The Group recognized in 2003 a deferred tax asset on operating tax losses of subsidiaries which incurred losses in preceding years. Those subsidiaries are profitable in 2003 and budgets indicate that these companies will generate sufficient taxable profit in the near future to utilize the recognized deferred tax assets (3.5 million euros).

The Group did not recognize any deferred tax assets on recoverable losses, of 3 million euros, as of 31 December 2003, and 5 million euros as of 31 December 2002, that were partly attributable to discontinuing activities as well as loss-making entities.

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7. Earnings per share

Basic earnings per share are calculated by dividing the net profit for the year, attributable to ordinary shareholders, by the weighted average number of ordinary shares not taken up during the year, excluding ordinary shares purchased by the Company and held as Treasury shares (the average number of shares is presented in thousands).


Net profit attributable to shareholders 28,647 29,581

Weighted average number of ordinary shares 21,213 21,220

Basic earnings per share (euros) 1.35 1.40

Diluted earnings per share are calculated by dividing the net profit attributable to ordinary shareholders and adjusted for the effects on the result of potential ordinary shares, by the weighted average number of ordinary shares not taken up during the year, increased by the weighted average number of ordinary shares which would have been issued upon conversion into ordinary shares of all potential shares which would result in dilution. As the Group holds company shares for the exercise of the options granted, no additional ordinary shares will be created by the exercise of the options, however Company shares will be attributed (average number of shares is presented in thousands).


Net profit attributable to shareholders 28,647 29,581

Weighted average number of ordinary shares 21,213 21,220

Effect of dilution 34 24

Weighted average number of shares after effect of dilution 21,247 21,244

Diluted earnings per share (euros) 1.35 1.39

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8. Intangible assets, other than goodwill

In thousands of euros Patents, licenses and similar rights

Development costs TOTAL

ACQUISITION VALUE

Balance as at 31 December 2002 12,326 1,073 13,399

Adjustment effect IAS 29 18 18

Balance at the end of the previous period after adjustments

12,344 1,073 13,417

Additions 398 327 725

Disposals -275 -275

Additions through acquisition of subsidiaries 181 33 214

Exchange rate adjustments -1,460 -1,460


DEPRECIATION AND IMPAIRMENT LOSSES

Balance as at 31 December 2002 -5,903 -5,903

Adjustment effect IAS 29 -3 -3

Balance at the end of the previous period after adjustments

-5,906 -5,906

Additions -1,178 -187 -1,365

Disposals 275 275

Exchange rate adjustments 674 674

Balance as at 31 December 2003 -6,135 -187 -6,322

INTANGIBLE ASSETS

At cost 11,188 1,433 12,621

Accumulated depreciation -6,135 -187 -6,322

Net book value 5,053 1,246 6,299

Amortizations on intangible assets other than goodwill are included in cost of sales of the sold goods.

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9. Goodwill

In thousands of euros 2003

ACQUISITION VALUE

Balance as at 31 December 2002 51,235

Additions 37

Additions through acquisition of subsidiaries 19,924

Exchange rate adjustments -5,674

Balance as at 31 December 2003 65,522


Balance as at 31 December 2002 -19,099

Additions -3,554

Exchange rate adjustments 2,552

Balance as at 31 December 2003 -20,101

GOODWILL

At cost 65,522

Accumulated depreciation -20,101

Net book value 45,421

The application of the standard on “Business Combinations” implies that assets and liabilities should be measured at fair value upon acquisition of a company. All differences between the value of the net assets of the acquired company and the fair value, stated at acquisition, have to be attributed to goodwill. Following the acquisition of Thyssen Polymer GmbH and Detajoint NV, goodwill rose by 19.9 million euros. Goodwill is amortized over a period of 15 years.

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10. Tangible assets

In thousands of euros Land and buildings

Machinery and

equipment

Furniture and

Installation

Assets under

leasing

Other tangible

assets

Assets under con-

struction

TOTAL

ACQUISITION VALUE

Balance as at 31 December 2002 70,304 207,587 10,968 1,503 1,804 13,080 305,246

Inflationary Adjustment 248 2,033 58 2,339

Balance as at 31 December 2002 after adjustment

70,552 209,620 11,026 1,503 1,804 13,080 307,585

Additions 2,487 30,031 2,568 621 13,748 49,455

Disposals -22 -5,662 -510 -1,757 -666 -8,617

Additions through acquisition of subsidiaries

33,200 35,981 1,179 90 1,796 1,904 74,150

Other transfers 3,371 10,626 33 -881 -13,149

Exchange rate adjustments -6,400 -18,503 -481 -171 -1,506 -27,061

Balance as at 31 December 2003 103,188 262,093 13,815 2,214 791 13,411 395,512


Balance as at 31 December 2002 -13,064 -142,727 -7,622 -204 -1,392 -165,009

Inflationary Adjustment 390 -1,410 -27 -1,047

Balance as at 31 December 2002 after adjustment

-12,674 -144,137 -7,649 -204 -1,392 -166,056

Additions -2,576 -25,591 -1,552 -77 -82 -29,878

Disposals 21 5,564 501 123 1,337 7,546

Impairment losses -1,868 -564 -2,432

Other transfers 438 -438

Exchange rate adjustments 1,082 10,597 419 7 12,105

Balance as at 31 December 2003 -16,015 -153,693 -8,281 -158 -568 -178,715

TANGIBLE ASSETS

At cost 103,188 262,093 13,815 2,214 791 13,411 395,512

Accumulated depreciation and im-pairment losses

-16,015 -153,693 -8,281 -158 -568 -178,715

Net book value 87,173 108,400 5,534 2,056 223 13,411 216,797

The Group has no restrictions on title with the exception of the new building in the Czech Republic for which a mortgage of 3.7 million euros has been taken out.

The Group has no significant commitments for the purchase of tangible assets.

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The amount of expenditure for tangible assets can be detailed as follows:


Land and buildings 5,383

Machinery & equipment 7,966

Fixtures and movables 62

Total 13,411

The assets held under leasing consist of a building in Spain, machinery and equipment in Spain, at Detajoint NV and in the USA.

Impairment losses have been noted against the book value of the old buildings at the Czech subsidiary and at Uniplast SA (ter-minated activity). As a result, the Group has recognized additional impairment losses of 0.2 million euros and 1.7 million euros respectively. Both assets lie in grant. The book values amount to 1.3 million euros and 145 thousand euros respectively.

Furthermore, impairment losses were recognized in Deceuninck NV of 0.5 million euros on machinery (mainly calibers) which will generate insufficient cash in future because they are infrequently used and have been replaced by specially made machinery in support of the launch of the new window concept Zendow®. The book value of these machines has been reduced to zero.

As such, the total amount of impairment losses amounts to 2.4 million euros as at 31 December 2003. In 2002, no impairment losses were recorded.

11. Available-for-sale financial assets


Shares - listed 1,913 866

Shares - unlisted 90 353

Total 2,003 1,219

The increase in the available-for-sale financial assets is mainly attributable to an increase in the stock exchange rate of Huis Clos SA, resulting in a withdrawal of unrealized losses compared to the previous financial year. The fair value of the financial assets is based on the quoted market price at balance sheet date (38.65 euros at the end of 2003 compared to 17.5 euros at the end of 2002). At the end of 2002 and 2003, the Group acquired 49,500 shares or 4.95% of Huis Close SA at 48 euros per share.

12. Long term receivables


Trade receivables 1,093 1,488

Other receivables 988 1,860

Total 2,081 3,348

The term of these trade receivables is between 2 to 3 years. The average interest rate applied amounted to 3% for year 1 and 5% for all following years.

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13. Inventories


Raw materials (at cost) 15,319 12,332

Work-in-progress (at cost) 1,374 622

Finished goods at cost 31,898 16,859

Finished goods at net realizable value 29,352 16,693

Trade goods 19,485 10,776

Intangible goods held for sale 203

Advance payments on stocks 615

Total inventories at average weighted cost or net realizable value, whichever is the lower

66,348 40,423

14. Trade receivables

The gross trade receivables and the bad debt reserve for 2003 and 2002 are as follows:


Trade receivables (gross) 116,989 83,035

Recognized impairment loss (bad debt reserve) 4,504 3,851

Trade receivables 112,485 79,184

15. Cash and cash equivalents


Cash at bank and on hand 18,543 23,200

Cash equivalents 3,940 3,851

Total 22,483 27,051

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16. Equity

In thousands of euros Issued capital

Consolidated reserves

Financial instru-ment revalua-

tion reserve

Treasury shares

Exchange rate adjustments

Total

Balance as at 31 December 2002 8,200 190,450 -3,033 -6,605 1,742 190,754

Profit on available for sale financial assets

1,047 1,047

Changes in fair value of the cash flow derivatives

432 432

Exchange rate adjustments -13,952 -13,952

Increase in capital 299 299

Company shares (purchase) -299 -299

Company shares (annulment) -299 299

Net profit of the financial year 28,647 28,647

Dividends to shareholders -4,879 -4,879

Balance as at 31 December 2003 8,499 213,919 -1,554 -6,605 -12,210 202,049

Equity comprises 21,550,000 ordinary shares without par value. The holders of ordinary shares are entitled to receive dividends when declared and are entitled to one vote per share at shareholders’ meetings of the Group.

After the balance sheet date, the Board of Directors proposes a net dividend of 0.177 euro per share or a gross amount of 0.236 euro per share. The total gross amount of payable dividends amounts to 5,600,178 euros. The 2003 dividend has not been recorded in the financial statements of 2003.

The Group purchased Company shares for its employee benefit schemes. As at 31 December 2003, the Group has 337,380 Com-pany shares.

Following the merger of Deceuninck NV and Deceuninck Compound NV a new capital increase took place of 0.299 million euros, at which 171,602 new shares were issued and allocated to the shareholders of the acquired company excluding those with shares in the acquiring company. On 1 December 2003, Deceuninck NV purchased 171,602 company shares on the stock market. It was decided at the General Meeting of 31 December 2003 that these 171,602 shares be annulled.

‘Exchange rate adjustments’ comprises all exchange rate differences arising from the conversion of the financial statements of foreign operations that are not integral to the operations of the Group.

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17. Provisions for post employment benefits

In thousands of euros Thyssen Polymer Belgian subsidiaries

Total

Balance as at 31 December 2002 1,750 1,750

Increase through acquisition of subsidiaries 7,319 7,319

Additional provisions 244 238 482

Withdrawal provisions -136 -136


GUARANTEED CONTRIBUTION AGREEMENTS (fixed contribution pension schemes)

For the guaranteed contribution, the Group pays contributions to a certain insurance company. The Group has no further li-abilities with this company except for the contributions. The pension contributions are recognized in the financial statements during the year in which they are paid out.

GUARANTEED PENSION AGREEMENT (pension agreements with unspecified objectives)

Belgian subsidiaries

For Belgian companies, the provisions for employee benefits relates to the provision for early retirement, This scheme is open to all people on early retirement in so far as this complies with the current collective agreement.

In accordance with the standard on emplyee benefits, this scheme should be accounted for as defined benefit plan. Consequent-ly, the present value of the early retirement benefit obligation was calculated by the actuariese. The liabilities for post-employ-ment benefits was increased by 0.2 million euros during the financial year 2003.

The actuarial value was calculated using the following assumptions:

Discount rate 5.25 %

Rate of compensation increase 2.5 %

Inflation 2 %

Thyssen Polymer (Germany)

For Thyssen Polymer GmbH, provisions for employee benefits relates to the provision for pensions. This scheme is accessible to all employees.

The actuarial value was calculated using the following assumptions:

Discount rate 5.5 %

Rate of compensation increase 3 %

Inflation 2 %

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The following table provides an overview of the net periodic pension costs recognized in the consolidated financial statements and the amounts recognized in the consolidated balance sheet for the guaranteed pension agreements.

Components of net periodic benefit cost Thyssen Polymer Belgian subsidiaries Total


Increase in actuarial value 55 137 192

Interest cost 189 84 273

Net periodic cost 244 221 465

Changes in projected benefit liabilities Thyssen Polymer Belgian subsidiaries Total


Net liability on 1 January 1,530 1,530

Takeover scheme Thyssen Polymer 7,319 7,319

Increase in actuarial value 55 137 192

Interest cost 189 84 273

Paid (received) -136 8 128

Net liability as at 31 December 7,427 1,759 9,186

18. Provisions, contingent assets and liabilities

In thousands of euros Warranty Disputes Other Total

Provisions as at 31 December 2002 4,615 397 102 5,114

Increase in provisions following acquisition subsidia-ries

501 3,615 4,116

Additional provisions 2,384 9 159 2,552

Withdrawal of unused provisions -220 -397 -24 -641

Provisions used during the year -2,262 -2,262

Net exchange adjustments -335 -5 -340

Provisions as at 31 December 2003 4,683 9 3,847 8,539

Non current 3,751 1 3,774 7,526

Current 932 8 73 1,013

Provisions are built up for warranty claims on products sold during the last ten years, based on past experience of the level of repairs and returns.The major part of the provisions is however intended to cover the claims made in the UK, due to discoloration problems. In the meantime, the Group received from the supplier damages of 5.5 million GBP (7.9 million euros), of which 4.25 million GBP (6.0 million euros) was recognized in the 2003 financial statements. 1.25 million GBP (1.9 million euros) had already been rec-ognized in the financial statements for 2002.

The Group expects the largest part of the provisions for warranty to be utilized within the next 3 to 5 years.

Other provisions relate mainly to provisions for employee remuneration at Thyssen Polymer GmbH. Considering the nature of these provisions, it is impossible to state a precise utilization period.

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19. Interest bearing liabilities

This note provides information about the contractual terms of the Group’s interest bearing debts. For more information about the Group’s exposure to interest rate and exchange rate risks we refer to note 24.

LONG TERM LIABILITIES


Subordinated loans 748

Unsecured bank loans 126,260 46,045

Finance lease liabilities 2,271 891

Deferred payment acquisition Thyssen Polymer 6,000

Other 133

Total 134,664 47,684

SHORT TERM LIABILITIES


Subordinated loans 748

Unsecured bank loans 23,203 24,423

Short term loans 9,413 6,507

Finance lease liabilities 624 133

Deferred payment acquisition Thyssen Polymer 6,000

Total 39,988 31,063

FINANCE LEASE LIABILITIES

2003 2002

In thousands of euros Payments Interest Capital Payments Interest Capital

Less than one year 750 126 624 169 36 133

Between one and five years 2,297 198 2,099 695 104 591

More than five years 295 123 172 365 65 300

Total 3,342 447 2,895 1,229 205 1,024

The finance lease liabilities consist of a building leased in Spain as well as machinery and equipment in the USA and at Detajoint NV (for which purchase options exist).

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TERMS AND DEBT REPAYMENT SCHEDULE

In thousands of euros < 1 year 1-2 year 2-5 year > 5 year Total

Subordinated loans 748 748

Unsecured bank loans 23,203 16,020 58,563 51,677 149,463

Finance lease liability 624 642 1,457 172 2,895

Short term loans 9,413 9,413

Loan Thyssen Krupp 6,000 6,000 12,000

Other 133 133

Total 39,988 22,795 60,020 51,849 174,652

The following table provides an overview of the effective interest rate at balance sheet date and the maturity of unsecured bank loans:

Bank loans Interest rate Expiry date > 2004 Expired 2004

In thousands of euros In thousands of euros

Euroloan euribor+1.25% 2004 145 186

Euroloan fixed interest rate 3.85% 2004 0 343



Euroloan fixed interest rate 3.79% 2004 0 1,500

Euroloan fixed interest rate 5.22% 2004 0 1,583

GBP loan fixed interest rate 5.25% 2004 0 780

USD loan fixed interest rate 6.43% 2004 0 609

USD loan fixed interest rate 7.34% 2005 396 791

USD loan fixed interest rate 7.61% 2005 1,662 3,325

USD loan variable interest rate* libor + 0.15% 2005 633 633

Euroloan variable interest rate * 3.55 2006 20,000 0

USD loan fixed interest rate 5.34% 2006 2,058 1,029

Euroloan fixed interest rate 3.97% 2006 1,200 0

Euroloan fixed interest rate 3.79% 2006 1,200 0


Euroloan fixed interest rate 4.46% 2007 9,000 3,000

USD loan fixed interest 6.38% 2007 5,939 1,979

Euroloan variable interest rate * 3.54% 2008 12,000 3,000

Euroloan variable interest rate * 3.54% 2008 12,000 3,000

USD loan fixed interest 6.19% 2009 3,959 791

CZK loan fixed interest rate 4.40% 2010 3,708 0


Private placement euro 5.15% 2011 20,000 0

Private placement USD 5.43% 2011 31,672 0

Total 126,260 23,203

*Fixed via SWAP

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For derived financial instruments, which provide for a fixed interest rate, refer to note 24.

The short-term loans refer to1. Spot credit Ege Profil AS at 26,5% (TRL) and euribor +0.90% (euro)2. Spot credit in Thyssen Polska at wibor +0,75% and euribor +0.75%

The subordinated loan at 748,000 euros is free of interest charges and expires during 2004.

The unused credit limits amounted to 56.1 million euros as at 31 December 2003.

OPERATING LEASE COMMITMENTS

The Group has entered into leases on its vehicles and office equipment


Within one year 2,168 1,855

After one year but not more than five years 2,221 2,289

Total 4,389 4,144

20. Other liabilities


Provisions – short term portion 1,013 1,384

Interest rate swap – fair value 1,436 1,424

Repayment of government grants 372 372

Guarantees received from clients 767 760

Other 1,368 321

Total 4,956 4,261

“Interest rate swaps” are used to fix or limit the interest payable on existing liabilities with variable interest rates (see also note 24). The repayment of government grants relates to the discontinuing operations of Uniplast SA, which no longer meets the grant conditions. We refer to note 18 for the increase in the short term portion of provisions.

21. Stock option plans

The Group offers executives, the management team and the directors who do not represent the majority of the shareholders, the opportunity to acquire stock options on existing Deceuninck shares. This benefit incentivises staff and directors by enabling them to acquire shares in the company at relatively favourable prices, thereby increasing their commitment to the company.

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The existing stock option plans allow for the issuing of 288,250 options.

As at 31 December 2003 a total of 257,900 options have been granted, entitling the beneficiary to acquire a Deceuninck share at a fixed exercise price equivalent to the market price at the time of awarding the option.

No options have been exercized during 2003.

A statement of stock options granted is set out below:

Basic Information Plan 1999 Plan 2000 Plan 2001 Plan 2002 Plan 2003 Total

Date of Board resolution 27/11/1999 22/12/2000 30/10/2001 20/12/2002 19/12/2003

Issue price 23.42 17.00 13.90 18.65 25.22

Options issued 48,500 55,250 56,500 64,000 64,000 288,250

Refused 1,400 2,000 700 9,750 16,500 30,350

Accepted 47,100 53,250 55,800 54,250 47,500 257,900

Exercise periods

Available balance 47,100 53,250 55,800 54,250 47,500 257,900

2003-2009 -47,100 -47,100

2004-2010 -53,250 -53,250

2005-2011 -55,800 -55,800

2006-2012 -54,250 -54,250

2007-2013 -47,500

22. Related parties

During 2003, purchases amounting to 1.8 million euros (1.5 million euros in 2002) at normal market prices have been made from companies, whereby directors are controlling shareholders. These companies are active in the production of dies, the maintenance of machinery and equipment, and services.

Members of the Board of Directors, together with senior management received a remuneration amounting to 1.7 million euros in 2003.

To date, 90,000 options have been granted to members of the Board of Directors and the senior management.

23. Hyperinflation

The Group has two subsidiaries, Ege Profil AS and Ege Pen AS (Turkey), that operate in a hyper inflationary economy.The financial statements and the comparative figures of these companies have been re measured with reference to changes in the general purchasing power of the reporting currency.

The index used in the wholesale price index At 31 December 2001: 4,951.7 At 31 December 2002: 6,478.8 At 31 December 2003: 7,382.1Income as a result of purchasing power adjustments for 2003 equated to 407,000 euros and 499,000 euros for 2002.

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24. Financial risk management

The principal categories of market risk the group faces are changes in commodity and foreign exchange prices and interest rates.

The Group seeks to minimize adverse effects on the financial results by using commercial agreements in which sales prices are linked to the changes inthe commodity price.

Due to its international character, the Group is exposed to different foreign exchange risks, caused by divergent exchange rate positions, primarily with respect to Turkish Lira, USD, GBP, PLZ and CZK.

The finance department of the Group monitors these exposures and limits the risks by compensating transactions within the same currency.

Currently, interest rate risk is limited for the Group as almost all loans are at a fixed interest rate. The Group strives to achieve an optimal portfolio of long and short-term liabilities in order to minimise the risk of potential interest rate fluctuation.

The Group has no significant concentration of credit risk and has developed strategies to monitor the credit risk of customers. The Group also insures a large part of its outstanding client portfolio by using credit insurance companies.

Liquidity risk is related to the movements in the Group’s working capital. The Group monitors changes in working capital through specific actions such as increasing the turnaround of inventories and intensive follow-up on outstanding invoices.

At 31 December 2003 the Group has used four derivatives for cash flow hedging purposes. In addition, we entered into two inter-est swaps to limit the exposure of the private placement in euro and USD respectively.

The Group has 25 million USD (Loan I) and 9 million USD (Loan II) loans with Key Bank NA. To eliminate its exposure to in-terest rate fluctuations on Loan I, the Group entered into an interest rate swap with the same bank to fix the rate of interest at 6.38% through to 1 September 2007.

To eliminate its exposure to interest rate fluctuations on Loan II, the Group entered into an interest rate swap with the same bank to fix the rate of interest at 7.01% through to 1 June 2005. In December 2003, the Group entered into a reverse swap agree-ment to convert this loan to a variable rate based on LIBOR with quarterly adjustment intervals until the maturity of the loan.

In the framework of the financing of Thyssen Polymer, the Group has taken out bank loans of 15 million euros (loan III), 15 mil-lion euros (loan IV) and 20 million euros (loan V).

Loans III and IV have an equal term and repayment schedule for which an interest swap rate was entered into of 30 million eu-ros. The interest rate was fixed at 3.035%.

The loan of 20 million euros (Loan V) has a different term and repayment schedule, for which an interest rate swap was also entered into of 20 million euros. The interest rate was fixed at 3.175%.

A the end of 2003, the re measurement of the fair values of the two aforementioned derivatives of the Group resulted in a gain of 0.4 million euros being recognized in equity. In 2002, an equity loss of 0.4 million euros was recognized as a result of these re measurements.

In addition to the four cash flow hedges (interest rate swaps), the Group entered into two interest rate hedges with ABN Amro.

110 - 111110

These interest rate hedges allow the Group to benefit from decreasing interest rates.When an increase in the interest rate occurs, a maximum interest rate kicks in.

The two interest rate hedges do not meet the hedge accounting criteria. As such, all changes in the fair value of these instru-ments were recognized directly in the statements of the Group as a finance cost. The total impact of the change in fair value during 2003 amounts to 0.7 million euros.

25. Additional services of the Auditors

The Auditor carried out additional services in the framework of a special assignment (acquisition Thyssen Polymer) amounting to 0.5 million euros.

26. Post balance sheet events

Deceuninck North America closed its plant in Wilmington (Delaware, VS) and decided to consolidate its extrusion activities in the Ohio, New Jersey and Arkansas plants.The 35 employees have been offered alternative employment opportunities in Ohio and New Jersey.

27. Important Subsidiaries

All subsidiaries are fully owned (for names and addresses, see Part V), except for Ege Profil AS (97.46%), Godiva Windows Ltd (80%), Detajoint NV (75%) and Thyssen Polymer (Thai) Co Ltd (74%).

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STATUTORY AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2003 TO THE SHAREHOLDERS’ MEETING OF DECEUNINCK N.V.

In accordance with the legal and statutory regulations, we are pleased to report to you on the performance of the audit mandate which has been entrusted to us.

We have audited the consolidated financial statements as of and for the year ended December 31, 2003 which have been pre-pared in accordance with the International Financial Reporting Standards and under the responsibility of the Board of Directors and which show a consolidated balance sheet total of Ð 487,645,000 and a consolidated profit for the year of Ð 29,001,000. We have also examined the consolidated director’s report.

In respect of certain foreign subsidiary of your company, for which we are not the auditors, we have relied upon the work of other auditors.

Unqualified audit opinion on the consolidated financial statements

Our examination has been conducted in accordance with the auditing standards of the “Institut des Reviseurs d’Entreprises/Instituut der Bedrijfsrevisoren”. Those standards require that we plan and perform the audit to obtain reasonable assurance that the consolidated financial statements are free of material misstatement taking into account the International Financial Reporting Standards as adopted by the International Accounting Standards Board.

In accordance with those standards, we considered the group’s administrative and accounting organisation as well as its in-ternal control procedures. We have obtained explanations and information required for our audit. We have examined, on a test basis, the evidence supporting the amounts and disclosures included in the consolidated financial statements. We have assessed the validity of the accounting policies, the basis for consolidation and significant accounting estimates made by the company, as well as the overall presentation of the consolidated financial statements. We believe that those procedures provide a reasonable basis for our opinion.In our opinion, based on our audit and the reports of the other auditors, the consolidated financial statements give a true and fair view of the group’s assets, liabilities and financial position as of December 31, 2003, and of the results of its operations for the year then ended in accordance with the International Financial Reporting Standards. The information provided in the notes to the consolidated financial statements is adequate.

112 - 113112

Additional certifications and information

We supplement our report with the following certifications and information, which do not modify our audit opinion on the con-solidated financial statements:

• the consolidated directors’ report includes the information required by law and is consistent with the consolidated finan-cial statements;

• the Company has obtained on 3 December 2002 the approval from the Banking, Finance and Insurance Commission to prepare the consolidated financial statements in accordance with the International Financial Reporting Standards.

Brussels, April 19, 2004

Ernst & Young Réviseurs d’Entreprises S.C.C. (B 160)Statutory auditorrepresented by

Marc Van Hoecke Ludo SwolfsPartner Partner

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> Part V Useful Information

Addresses

Headquarters and Subsidiaries

Europe

Belgium

Deceuninck NVRegistered office:Brugsesteenweg 3748800 RoeselareTel: +32 51 239 206 – Fax: +32 51 245 454

Deceuninck NVPlace of business:Bruggesteenweg 1648830 Hooglede – GitsTel: +32 51 239 211 – Fax: +32 51 227 993http://www.deceuninck.come-mail:[email protected]

Detajoint NVZone Industrielle Barrière de FerAvenue du Bois Jacquet 27711 DottigniesTel : + 32 56 48 44 61 – Fax : + 32 56 40 37 68http://www.detajoint.bee-mail : [email protected]

FIN-TONIC NVBruggesteenweg 1648830 Hooglede-Gits

Deceuninck Coordination Center NVBruggesteenweg 1648830 Hooglede-Gits

Deceuninck Recycling SA (Company in liquidation)3, Rue André Renard5210 Andenne-Seille

Uniplast SA117, Rue du Château d’Eau7730 Estaimpuis

Plastics Deceuninck NVBrugsesteenweg 3748800 Roeselare Italy

Deceuninck NV-Branch ItalyVia Savonarola 2356025 PontederaTel: +39 340 7026880 – Fax: +39 0587 212465e-mail:[email protected]

Spain

Deceuninck NV-Sucursal en EspañaAv. De la Industria 25 – Pol. Ind. De Coslada28820 Coslada-MadridTel: +34 91 485 01 25 – Fax: +34 91 485 01 35e-mail:[email protected]

Portugal

Deceuninck NV- Sucursal em PortugalAv. Do Forte, 3-ED. Suécia 12795 504 CarnaxideTel: +351 21 416 08 13 – Fax: +351 21 416 08 14e-mail: [email protected]

Germany

Thyssen Polymer GmbHBayerwaldstraße 1894322 BogenTel: +49 94 22 8 21-0 – Fax: +49 94 22 8 21-349www.deceuninck-thyssenpolymer.com/index2.htme-mail: [email protected]

Deceuninck Verwaltungs GmbHBayerwaldstraße 1894322 BogenTel: +49 94 22 8 21-0 – Fax: +49 94 22 8 21-349

Deceuninck GmbH & Co KGBayerwaldstraße 1894322 BogenTel: +49 94 22 8 21-0 – Fax: +49 94 22 8 21-349

Deceuninck Holding Germany GmbHBayerwaldstraße 1894322 BogenTel: +49 94 22 8 21-0 – Fax: +49 94 22 8 21-349

_ annual report 2003 addresses

114 - 115114

France

Deceuninck SAZone industrielle – Impasse des bleuets80700 ROYETel: +33 3 22 876 666 – Fax: +33 3 22 876 667e-mail: [email protected]

The Netherlands

Deceuninck Kunststof BVJeugdland 1A4851AT UlvenhoutTel: +31 30 635 1200 – Fax: +351 21 416 08 14e-mail:[email protected]

Deceuninck Beheer BVJeugdland 1ANL-4851 AT Ulvenhout

United Kingdom

Deceuninck LtdPorte Marsh Industrial EstateCalne – Wiltshire SN11 9PXTel: +44 1249 816 969 – Fax: +44 1249 815 234e-mail: [email protected]

Status Systems PVCu LtdDelph New RoadDelph, Oldham OL3 5BYTel: +44 1457 875731 – Fax: +44 1457 875 651www.status-systems.co.uke-mail: [email protected]

Range Valley Extrusion LtdDelph New RoadDelph, Oldham OL3 5BY

Range Valley Engineering LtdDelph New RoadDelph, Oldham OL3 5BY

Deceuninck Holdings (UK) Ltd2 Temple Back EastTemple QuayBristolBS1 6EG

Godiva Windows LtdUnit 1, 403 Broad LaneTile Hill, Coventry, West Midlands, CV5 7AX

Ireland

Eurisk RE LtdLower Mount Street 12/14Dublin 2

Deceuninck Ireland LtdUnit 7, Ballymount Business ParkDublin 12

Bulgaria

Rep. Office Deceuninck NV BulgariaPavillon 5 - Floor II - Office 21037 Tzar Boris III Obedinitel - Blvd. Fair city4003 PlovdivTel/Fax: + 359 32 964 386e-mail: [email protected]

Lithuania

Rep. Office Deceuninck NV LithuaniaV. Kuzmos 6-13000 KaunasTel: + 370 37 33 88 44 - Fax: + 370 37 33 88 45e-mail: [email protected]

Russia

Rep. Office Deceuninck NV Moscow4 Maguistralnaya str., 11/1, .oor 3123007 MoscowTel: + 7 095 785 84 67 - Fax: + 7 095 259 96 80e-mail: [email protected]

Ukraine

Rep. Office Deceuninck NV UkraineForum Business City13 Pimonenko st. Office 6A/2804050 KievTel: + 38 044 461 79 92 - Fax: + 38 044 461 79 94e-mail: [email protected]

Rep. Office Thyssen Polymer Kiev UkraineSaganskovo Str. 5201033 Kiev / UkraineTel: + 38 044 536 11 48

116 116

Poland

Deceuninck Polska Sp ZooUl. Poznanska 3462-020 Swarzedz JasinTel: + 48 61 81 87000 - Fax: + 48 61 8187001e-mail: [email protected]

Thyssen Polymer Polska Sp ZooUl. Wladyslawa Grabskiego 255-011 SiechniceTel: +48 71 39 02 400 - Fax: +48 71 39 02 440

Czech Republic

Deceuninck Spol sroVintrovna 2366 4 41 PopüvkyTel: + 420 547 427 777 - Fax: + 420 547 427 788

Romania

Deceuninck Romania srlTraian Str. n°2, Bloc F1, Scara 4, etaj 8, ap. 24, Sector 3BucharestTel: + 40 1 327 49 52 - Fax: + 40 1 323 52 90e-mail: [email protected]

NORTH AMERICA

United States of America

Dayton Technologies LLC351 North Garver RoadMonroe, Ohio 45050Tel: + 1 513 539 5437 - Fax: + 1 513 539 5404http://www.daytech.come-mail: [email protected]

Vinyl Building Products LLC8801 Frazier PikeLittle Rock72206 ArkansasTel: +1 501 490 1400 – Fax: +1 501 490 1400

Vinyl Building Products LLC1 Raritan RoadOakland070436 New JerseyTel: + 1 +1 501 490 1400 – Fax: +1 501 490 1400

Deceuninck North America LLC900 East 30 th StreetWilmington, DE 19809

NEAR EAST

Turkey

Ege Profil Ticaret Ve Sanayi AS10003 Sokak n°5 – AOSB35620 Gigili - IzmirTel: + 90 232 376 71 60 - Fax: + 90 232 376 71 63e-mail: [email protected]

Ege Pen Ticaret Ve Sanayi AS10003 Sokak n°5 – AOSB35620 Gigili - IzmirTel: + 90 232 376 71 60 - Fax: + 90 232 376 71 63

ASIA

Thailand

Thyssen Polymer (Thai) Co LtdNo. 2/3 Bangna Tower A, 12th Floor, Room 1203Moo 14 Bangna Trad Highway km 6.5 RoadBangkaew Sub-districtBangplee District,Samutprakarn Province

Asia Profile Holding Co LtdNo. 2/3 Bangna Tower A, 12th Floor, Room 1203Moo 14 Bangna Trad Highway km 6.5 RoadBangkaew Sub-districtBangplee District,Samutprakarn Province

_ annual report 2003 addresses

116 - 117116

Lexicon

1 EBITDA

Earnings before interest, taxes, depreciation and amortization = company cash flow

2 EBITA

Earnings before intrest, taxes and amortization

3 EBIT Earnings before interest and taxes = operational earnings or company earnings

4 EBT

Earnings before taxes

5 Net profit before goodwill Current net profit

6 EPS (non-diluted) Earnings per share = ordinary profit per share

7 EPS (diluted) Earnings per share = diluted profit per share

8 Net financial debt Cash + cash equivalents – financial debts

9 Working capital Clients + stocks – suppliers

10 Liquidity Current assets / current liabilities

11 Solvency Total equity / Total assets

12 R.O.C.E. = EBIT/Capital Employ-ed

Operating results in relation to capital employed

13 Capital Employed (CE) Sum of goodwill, intangible, tangible and financial fixed assets and working capital

14 Netto Cashflow Net profit of the Group + amortizations

15 Yield of dividend Gross dividend in relation to the share price on 31/12

16 Subsidiaries Companies in which Deceuninck has a >50% stake

17 Associated companies Companies in which Deceuninck has a 20% to 50% stake and valued according to the equity transaction method

18 K/W ratio Share value/ consolidated profit per share of the financial year of the Group

19 Gearing Net financial debt in relation to equity

20 Turnover rate Market turnover (Euronext Brussels) in relation to market capitalization

21 Payout Gross dividend as a percentage of the consolidated profit of the financial year for the Group

118 118

Notes


118 - 119118

Notes

120

Notes


AnnexKey figures: consolidated / per share

0

5

10

15

20

25

30

1994

Share price at 31/12 since 1994 (in euros)19

95

1996

1997

1998

1999

200

0

200

1

200

2

200

3

(1) according to IFRS-standards

(2) share price at 31 December net profit per share (3) net dividend share price at 31 December

(4) gross dividend consolidated net profit

(5) in thousands of euros

> Deceuninck share price since 1994 (in euros)

Stock information

> Consolidated figures per share (21,550,000 shares) (in euros)*

2003 (1) 2002 (1)

euros euros

Equity 9.38 8.85

Net profit 1.33 1.37

Current net profit 1.49 1.52

Gross dividend 0.24 0.23

Net dividend 0.18 0.17

EBIT 2.50 1.99

EBITA 2.67 2.14

EBITDA 4.22 3.59

> Quotations on Euronext Brussels (in euros)

2003 2002

euros euros

Lowest price 15.02 15.10

Highest price 27.19 23.60

Price at 31 December 25.88 19.16

Price/Earning (PER) at 31/12 (in%) (2) 19.5 14.4

Net dividend yield at 31/12 (in%) (3) 0.68 0.9

Return Deceuninck share (in %) 35.1 2.4

Payout ratio (in %) (4) 17.5 17.0

Market capitalization at end of financial year (5) 557,714 412,898

* figures are rounded off

> Deceuninck Group (consolidated)* (1) 2003 2002

euros euros

Turnover 470.5 362.2Current net profit (2) 32.2 32.7Consolidated results before taxes 43.1 37.0Consolidated results after taxes 28.6 29.6EBIT 54.0 42.9EBIT (margin in %) 11.5 11.8EBITA 57.5 46.0EBITA (margin in %) 12.2 12.7EBITDA 90.9 77.3EBITDA (margin in %) 19.3 21.3

Equity 202.0 190.8Net debt 152.2 51.7Working capital 137.2 84.6Total assets 487.6 337.8Capital Expenditure 50.2 36.3

RatiosProfitability ratio (3) 14.2% 15.5%Liquidity ratio (4) 1.9% 1.9%Payout ratio (5) 17.5% 17.0%R.O.C.E. (6) 13.1% 15.7%

Staff (units) 2,738 1,776

* in millions of euros

Key figures

> Consolidated turnover (in millions of euros)

(1) according to IFRS-standards

(2) current net profit = net profit + amortization on goodwill (3) net profit equity

(4) current assets current liabilities + accrued charges and deferred income

(5) gross dividends consolidated net profit

(6) Return on Capital Employed: operating results capital employed

> Consolidated result after taxes (in millions of euros)

20032002200120001999

20.418.8

23.2

24.2(IFRS)

29.6(IFRS)

28.6(IFRS)

0

5

10

15

20

25

30

mio 0

10

20

30

40

50

60

20032002200120001999

33.1

18

50.2

36.3

18(IFRS)

33.2

> Capital expenditure (in millions of euros)

0

10

20

30

40

50

60

200320022001200019990

2

4

6

8

10

12

14

1654.0

11.542.911.8

35.9 37.5

12.8

10.912.1

42.4 42.1

11.9EBITEBIT (IFRS)EBIT/sales (%)

EBIT/sales (%) (IFRS)

0

5

10

15

20

25

20032002200120001999

77.3

59.5

90.9

EBITDA21.3 21.4

19.319.2

65.374.1 74.0

21.1 21.0

0

10

20

30

40

50

60

70

80

90

100

EBITDA (IFRS)EBITDA/sales (%)

EBITDA/sales (%) (IFRS)

> EBITDA (in millions of euros)

> EBIT (in millions of euros)

1000

1250

1500

1750

2000

2250

2500

2750

3000

20032002200120001999

2,738

1,7761,6941,686

1,611

> Staff (units)

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

200320022001200019990

5

10

15

57.512.212.712.813.2

12.3

13.8

38.741.8

46.445.2 46.0

EBITAEBITA (IFRS)EBITA/sales (%)

EBITA/sales (%) (IFRS)

> EBITA (in millions of euros)

USA23%

Central and Eastern Europe

18%

Asia/Turkey7%

UK15%

South, West and Northern Europe37%

Equity

Balance sheet total

Equity (IFRS)

Balance sheet total (IFRS)

0

100

200

300

400

500487.6

202.0

337.8

190.8

348.6339.8

182.5

173.6

330.6

154.9

288.0

138.3

1999 2000 2001 2002 2003

> Equity (in millions of euros)

> Geographical distribution of the consolidated turnover (in %)

Deceuninck NV

Registered office:

Brugsesteenweg 374,

B-8800 Roeselare

Operational HQ:

Bruggesteenweg 164,

B- 8830 Hooglede-Gits

Documents

annual report 2003 - KU Leuven..._ annual report 2003 Deceuninck NV Registered office: Brugsesteenweg 374, 8800 Roeselare (Belgium) Operational HQ: Bruggesteenweg 164, 8830 Hooglede-Gits