SIOEN INDUSTRIES I FINANCIAL OVERVIEW

86

87

COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS

I. CONSOLIDATED BALANCE SHEET

II.1 CONSOLIDATED INCOME STATEMENT BY FUNCTION

II.2 CONSOLIDATED INCOME STATEMENT BY NATURE

III. CASH FLOW STATEMENT

IV. EQUITY STATEMENT

V. DISCLOSURES

V.1 KEY ACCOUNTING RULES

V.2 SEGMENT INFORMATION

V.3 EXCHANGE RATE

V.4 DETAILED INCOME STATEMENT

V.5 DETAILED BALANCE SHEET

VI. OTHER

VII. IFRS

VIII. STATUTORY AUDITOR’S REPORT

IX. STATUTORY ANNUAL ACCOUNTS OF SIOEN INDUSTRIES

X. PROPOSAL TO THE ANNUAL MEETING

FINANCIAL CALENDAR

ADDRESSES

89

92

94

95

96

97

98

106

109

110

113

132

135

143

144

147

149

150

FINANCIAL OVERVIEW

SIOEN INDUSTRIES CONSOLIDATED

88

SIOEN INDUSTRIES I COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS

In the Industrial Applications, segment, the effi ciency improve-

ment in the industrial processes made the EBIT rise by 4% to 10%

of turnover (EUR 1.3 million less personnel expenses, compared to

last year for the same turnover). Several signifi cant write-offs on

receivables, set up in 2004, could be reversed here.

The services and other goods and personnel expenses rose

slightly, due partly to the increase in energy prices. The cost

structure remains fi rmly under control.

The other operating revenue rose from EUR 1.9 million to 4.0

million, coming mainly from the gain (EUR 1.1 million) on the

sale of buildings in Antwerp (Sioen NV) and Southern France (SIP),

indemnities received in the amount of EUR 0.2 million, rental

income in Nordifa (EUR 0.3 million) and Roland (EUR 0.4 million),

government grants on R&D in Ireland and Belgium (EUR 0.2 mil-

lion) and another EUR 1.4 million for miscellaneous revenue items

under EUR 50k.

The other operating expenses rose from EUR 4.9 million to EUR

5.7 million and consist mainly of local taxes. The company made a

provision of EUR 0.8 million relating to a dispute over real estate

tax.

The depreciation method for inventories is consistently applied,

as is the case for trade receivables. The real losses on customers in

2005 amounted to only EUR 0.3 million, which represents 0.1% of

turnover.

NET PROFIT

The fi nancial result amounts to EUR -5.5 million, as compared to

EUR -7.7 million in 2004. The average net fi nancial debt position

rose at the end of the year by 7.7% to EUR 126.8 million (in 2004

EUR 117.7 million). The fi nancial charges fell under the impact of

the low interest rate and the realised exchange rate gains (EUR 0.5

million) under the current hedging contracts. Thanks to the better

fi nancial results, Sioen realised a profi t of EUR 19.9 million before

taxes, as compared to EUR 19.6 million last year.

TURNOVER

In 2005 the Sioen Industries Group realised a turnover of EUR

316.2 million, as compared to EUR 309.8 million last year, i.e. an

increase of 2%.

Thus the Coating Division remained at a status quo (+0.06%). By

contrast, the Apparel Division grew by 14,5%, with the turnover of

EUR 68.3 million in 2004 rising to EUR 78.1 million in 2005. The

“Industrial Applications” Division was confronted with a decline in

its activities by 5.2%. The turnover fell from EUR 70.9 million in

2004 to EUR 67.4 million in 2005. In this segment we are waiting

for the defi nitive attribution of a number of calls for tender won by

the Group. Probably these will contribute to the turnover of 2006.

GROSS MARGIN – EBITDA - EBIT

Last year, the operational cash fl ow (EBITDA) of the Coating

Division was strongly infl uenced by the historically high oil prices

and the uncertainty about economic development in certain

countries. This means that the whole sector continues to struggle

with a constant increase in the prices of the primary raw materials

(polyester granulates, PVC powders, plasticisers, technical fi llers,

pigments, etc.). On the whole, polymers, raw materials derived

from petroleum, constitute the bulk of the purchased raw materials.

The effects of this additional cost were mitigated as much as

possible, fi rst by implementing price increases and secondly by

making continuous efforts in the area of effi ciency increases and

cost savings. As a result, the impact of the high raw material prices

on the EBITDA was limited: the EBITDA fell to 15% of turnover

compared to 17% in 2004.

In the Apparel Division, under the impact of changes in the sales

mix and the supplementary “low end” products, the operational

cash fl ow (EBITDA) in the past year amounted to 7% compared to

8% in the previous year. The EBIT follows the same pattern as the

operating cash fl ow. The charges for depreciation and impairments

on customers and non-revolving inventories rose (7% in 2004 and

4% in 2005).

The operating cash fl ow of this division amounts to 13% of the

turnover, compared with 9% the previous year. This is primarily

attributable to a signifi cant improvement in the effi ciency of indu-

strial processes in these branches.

89

SIOEN INDUSTRIES I COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS

RISK FACTORS

Sioen Industries NV is a company listed on Euronext that does not

itself engage in any industrial activity. Sioen Industries holds

participating interests in companies active in the following sectors:

The application of coatings to technical textiles.

The design, development and production of protective clothing.

The processing of heavy technical fabrics into fi nished products.

With regard to its income, Sioen Industries is dependent on the

economic success of these divisions. In turn, these divisions are

dependent on general economic trends, and more specifi cally:

❱ The volatility of oil prices and the (more or less related)

volatility of the prices of the primary raw materials. (PVC,

Polyester, plasticisers, etc.)

❱ With regard to the processing of heavy technical fabrics, the

evolution of the company has kept pace with the development

of the truck sector.

❱ The protective clothing division follows the current trend in

industrial activity in Western Europe, where less emphasis is

being put on volume than on the technical specifi cations of the

clothing.

❱ And last but not least we may also note that there is a certain

dependence on the weather.

The consolidated actual tax rate amounted to 32% in 2005

compared to 33.19% in 2004. The reversal and the non-recognition

of tax assets on the one hand and the reversal of earlier

established tax liabilities on the other keep the actual tax rate at

the same level.

Given that in 2005 there are almost no more minority

shareholders in the subsidiaries, the net result (group‘s share)

rose to EUR 13.6 million in 2005, as compared to EUR 12.3 million

in 2004.

INVESTMENTS

The total acquisition of property, plant and equipment in 2005

amounted to EUR 16.6 million (including capital grants). The assets

under construction concerns the new coating line in Saint Frères

Enduction, the warehouse under construction in EMB and the

needle felt production line in Nordifa which was not yet in use in

2005. In 2005 a capital grant was received from the Walloon

Region for EUR 0.8 Million. This was deducted from the acquisitions.

BALANCE SHEET

The working capital rose by EUR 17 million, an increase of 4% on

turnover, and is now situated at 34% compared to 29.4% in 2004.

The inventory rose by EUR 8 million, of which EUR 6.3 million is in

the Apparel Division due to a large order that is being delivered at

the beginning of 2006. The customers increased by EUR 5.6 million,

of which EUR 3.5 million is in the Apparel Division due likewise to

partial delivery of a major order at the end of 2005.

We note that the level of the working capital at the end of 2004

was distorted by a one-time effect (liability towards minority

shareholder in the amount of EUR 5.8 million).

90

91

SIOEN INDUSTRIES I I. CONSOLIDATED BALANCE SHEET IN THOUSANDS EURO

ASSETS 2004 2005

Non-current Assets Note

Intangible assets V.5.1 2.796 2.267

Goodwill V.5.2 16.548 16.548

Property, plant & equipment V.5.4 141.442 142.278

Long-term trade receivables V.5.5 - 59

Other long-term assets V.5.5 684 524

Deferred tax assets V.5.15 9.261 7.010

TOTAL NON-CURRENT ASSETS 170.731 168.686

Current Assets

Inventories V.5.6 70.466 78.463

Trade receivables V.5.7 63.818 69.416

Other receivables V.5.8 8.477 11.118

Other investments & deposits V.5.8 1.963 260

Cash and cash equivalents V.5.8 12.923 8.312

Deferred charges and accrued income V.5.8 2.282 1.428

TOTAL CURRENT ASSETS 159.930 168.997

TOTAL ASSETS 330.661 337.683

The consolidated income state 2005 has been approved

by the Board of Directors for publication on 28 March 2006.

92

LIABILITIES 2004 2005

Equity Note

Share Capital 46.000 46.000

Retained earnings 72.439 81.318

Hedging and translation reserves V.5.14 (137) 2.046

Minority interests - 19

TOTAL EQUITY IV. 118.302 129.383

Non-current liabilities

Interest-bearing loans – payable after one year V.5.11 54.336 53.831

Provisions V.5.10 966 1.023

Pension obligations V.5.9 1.198 1.256

Deferred tax liabilities V.5.15 21.581 16.821

Finance leasing – payable after one year V.5.12 14.153 13.049

Other amounts - payable after one year V.5.11 33 33

TOTAL NON-CURRENT LIABILITIES 92.267 86.012

Current liabilities

Trade and other payables V.5.13 31.084 36.510

Interest-bearing loans - up to one year V.5.11 64.045 68.355

Provisions - up to one year V.5.10 1.521 379

Pension obligations - up to one year V.5.9 64 65

Tax liabilities V.5.13 7.216 5.589

Finance leasing - up to one year V.5.12 39 77

Other amounts - payable up to one year V.5.13 16.123 11.313

TOTAL CURRENT LIABILITIES 120.092 122.288

TOTAL LIABILITIES 330.661 337.683

SIOEN INDUSTRIES I I. CONSOLIDATED BALANCE SHEET IN THOUSANDS EURO

93

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

See note V.4 2004 % of 2005 % of

Turnover Turnover

Net sales 309.802 100,0% 316.237 100,0%

Cost of sales -242.270 -78,2% -253.214 -80,1%

Gross profi t 67.532 21,8% 63.022 19,9%

Sales and marketing expenses -16.246 -5,2% -15.896 -5,0%

Research and development expenses -2.723 -0,9% -4.217 -1,3%

General and administrative expenses -21.114 -6,8% -19.887 -6,3%

Other operating income/expenses 666 0,2% 2.940 0,9%

Non-recurrent result(1) -1.129 -0,4% -505 -0,2%

Operating result 26.987 8,7% 25.457 8,1%

Financial result -7.341 -2,4% -5.470 -1,7%

Result before taxes 19.646 6,3% 19.987 6,3%

Taxes -6.520 -2,1% -6.399 -2,0%

Result after taxes 13.126 4,2% 13.588 4,3%

Minority interests -874 -0,3% -6 0,0%

Share of the group 12.252 4,0% 13.582 4,3%

EBITDA 44.794 14,5% 43.647 13,8%

EBIT 26.987 8,7% 25.457 8,1%

Cash fl ow 31.093 10,0% 29.535 9,3%

NOPAT 20.467 6,6% 19.058 6,0%

(1) This concerns one-time restructuring costs.

94

2004 % of 2005 % of

Turnover Turnover

Net sales 309.802 316.237

Change in inventories (9.871) -3% 4.647 1%

Other operating income 1.969 1% 4.026 1%

OPERATING REVENUE 301.900 324.910

Cost of sales 141.803 46% 162.182 51%

Gross margin 51,04% 50,18%

Services and miscellaneous goods 47.511 15,3% 49.368 15,6%

Remuneration, social security and pensions 61.719 19,9% 63.450 20,1%

Depreciation 17.838 5,8% 17.899 5,7%

Amounts written off on inventories and trade receivables 1.051 0,3% 862 0,3%

Provisions for liabilities and charges (1.081) -0,3% (572) -0,2%

Other operating costs 4.945 1,6% 5.758 1,8%

Non-recurrent result 1.129 -0,4% 505 -0,2%

OPERATING RESULT 26.987 8,7% 25.457 8,1%

FINANCIAL RESULT (7.341) -2,4% (5.470) -1,7%

RESULT BEFORE TAXES 19.646 6,3% 19.987 6,3%

TAXES (6.520) -2,1% (6.399) -2,0%

RESULT AFTER TAXES 13.126 4,2% 13.588 4,3%

MINORITY INTERESTS (874) -0,3% (6) -0,0%

SHARE OF THE GROUP 12.252 4,0% 13.582 4,3%

EBIT 26.987 25.457

EBIT% 8,7% 8,1%

EBITDA 44.794 43.647

EBITDA% 14,5% 13,8%

Cash fl ow 31.093 29.535

Cash fl ow% 10,0% 9,3%

Capital employed 251.713 268.686

NOPAT 20.467 19.058

ROCE 8,13% 7,09%

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

95

SIOEN INDUSTRIES I III. CASH FLOW STATEMENT

2004 2005

Profi t from recurrent operating activities 28.115 25.962

Non-recurrent result (1.129) (505)

Depreciation 17.838 17.899

Impairments -

Amounts written-off on inventories and receivables 1.051 862

Changes in provisions (98) (1.026)

Changes in working capital 18.883 (16.664)

Other changes 205 (472)

Changes in deferred tax (1.316) (2.508)

Cash fl ow from operating activities 63.549 23.549

Tax (6.520) (6.399)

Net cash fl ow from operating activities 57.029 17.150

Interest received 308 343

New participations (5.828)

Investments in intangible and tangible fi xed assets (11.678) (19.571)

Desinvestments in intangible and tangible fi xed assets 961 534

Increase in investment grants 1.660 830

Net cash fl ow from investing activities (14.577) (17.865)

Net cash fl ow before fi nancing activities 42.452 (715)

Interest paid (6.925) (6.280)

Dividend distributed (4.278) (4.706)

Increase in long term interest-bearing loans 15.000 20.000

Decrease in long term interest-bearing loans (22.085) (24.293)

Increase/(Decrease) in short term interest-bearing loans (22.518) 8.097

Increase/(Decrease) in fi nance leasing 2.658 (1.066)

Other (560) (18)

Exchange rate result (163) 484

Cash fl ow from fi nancing activities (38.871) (7.781)

Effect of exchange rate fl uctuations (137) 2.182

Changes in cash and cash equivalents 3.444 (6.314)

Net cash position at start of period 11.443 14.887

Net cash position at end of period 14.887 8.572

96

2005

At the end of last fi nancial year 46.000 72.439 -137 0

Profi t of the year 13.582 6

Dividends -4.707

Hedging for increases/decreases in value

not included in profi t and loss statement -636

Deferred taxes 216

Currency differences 2.603 17

Others 4 -4

At the end of current fi nancial year 46.000 81.318 2.466 -420 19

2004

At the end of last fi nancial year 46.000 67.073 0 2.497

Profi t 12.252 874

Dividends -4.454

Hedging for increases

Deferred taxes

Currency differences -137 -4

Others(1) -2.432 -3.367

At the end of current fi nancial year 46.000 72.439 -137 0

(1 ) At the end of 2004 Sioen Industries NV purchased the remaining 25% of Coatex, Saint-Frères Confection and Bacam. The goodwill was

deducted from the consolidated reserves (see notes V.5.16).

SIOEN INDUSTRIES I IV. EQUITY STATEMENT

Cap

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Rese

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Conv

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on d

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Hed

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Min

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97

IFRS 2 - Share-based payment. Sioen Industries has opted to apply

the transitional measures prescribed by IFRS 2. As of 1 January

2004, no new equity instruments have been issued.

General principles

The consolidated annual accounts give a general overview of the

Group’s activities and the results obtained. They give an accurate

picture of the entity’s fi nancial position, fi nancial performance and

cash fl ow, and are drawn up on a going concern basis.

The annual accounts are stated in thousands of euros, as the euro

is the currency of the primary economic environment in which the

Group is active. The annual accounts of foreign holdings are

converted in accordance with the principles described in the

section ‘Foreign currencies’.

The consolidated accounts are presented on the basis of the

historical cost method, unless otherwise stipulated in the

accounting principles set out below.

Foreign currencies

On the basis of the Group’s relevant economic environment and its

transactions, the euro has been chosen as the reporting currency.

Foreign subsidiaries’ fi nancial statements are converted as follows:

Transactions in foreign currencies are converted at the exchange

rate which applied on the date of the transaction. On each balance

sheet date, cash assets and liabilities expressed in foreign currency

are converted at the closing rate. Non-cash assets and liabilities

which are shown at their fair value in a foreign currency are

converted at the exchange rate which applied when their fair value

was determined.

Gains and losses arising from such conversions are recorded in the

profi t and loss account. However, if they are deferred, they are

recorded as equity. Assets and liabilities from the Group’s foreign

activities are converted at the closing rate.

Income and expenses are converted at the average exchange rate

over the period, unless exchange rates have fl uctuated greatly. The

resultant exchange rate differences are recorded in equity, under

the heading “Conversion differences”.

SUMMARY OF KEY ACCOUNTING RULES

The consolidated annual accounts of Sioen Industries NV (the

‘Company’) include the annual accounts of the Company, its subsi-

diaries and those entities which are consolidated by the proportio-

nal method (together referred to as the ‘Group’ from now on).

The consolidated fi nancial statements are drawn up in conformity

with the International Financial Reporting Standards (IFRS), as

accepted within the European Union.

On the fi rst application of the IFRSs, in 2005, the consolidated

annual accounts will be drawn up in accordance with IFRS 1 –

First-time adoption of International Financial Reporting Standards.

IFRS 1 I First-time adoption of

International Financial Reporting Standards

In accordance with IFRS 1- First-time adoption of IFRSs, the

opening balance sheet has been drawn up by retroactively applying

those IFRSs which were in force on the reporting date. However,

IFRS 1 sets out a number of exceptions which can be applied.

Sioen Industries has applied the following exceptions:

Business combinations which predate the transition date do not

have to be restated retroactively. IFRS 3 – Business combinations

was not retroactively applied to business combinations which took

place before 1 January 2003. Certain tangible fi xed assets were

valued at market value. This market value is used as the presumed

cost price. This exception was used for a limited number of items in

tangible fi xed assets, mainly land.

Cumulative actuarial gains and losses were recognised in equity

on the transition date. After the transition date, Sioen Industries

will continue to apply the current ‘corridor’ as stipulated in IAS 19

- Employee benefi ts.

Previously recognised conversion differences, deriving from the

conversion into euros of foreign-currency fi nancial statements of

foreign entities, were reset to 0.

SIOEN INDUSTRIES I V.1 KEY ACCOUNTING RULES

98

SIOEN INDUSTRIES I V.1 KEY ACCOUNTING RULES

All intercompany transactions, intercompany balances and

unrealised profi ts on intercompany transactions are eliminated

unless they relate to a permanent write-down.

Minority interests are valued on the basis of their share in the fair

value of the recorded assets, liabilities and contingent liabilities.

Balance sheet

Intangible assets

Intangible assets are valued at cost price. Intangible assets are

recognised if it is likely that the Group will receive the associated

future economic benefi ts and if the asset’s cost price can be

reliably determined. After their initial recognition in the accounts,

all intangible assets are valued at cost price, less any accumulated

depreciation or impairments. Intangible assets are depreciated on

a straight-line basis over the best estimate of their economic life.

The remaining economic life and the depreciation method used

are reassessed at the close of every fi nancial year. Any change in

the economic life of an intangible asset is treated as a revaluation.

Internally generated intangible assets are only recognised if all the

following conditions are satisfi ed:

❱ an identifi able asset has been generated

❱ it is likely that the generated asset will yield future economic

benefi ts; and

❱ the asset’s cost price can be reliably determined.

Subsequent expenditure on capitalised intangible assets is only

included in the balance sheet if it increases the likely future

economic benefi ts associated with the asset concerned. All other

expenditure is recorded in the profi t and loss account at the time

it is incurred.

Licences, patents and similar rights

Expenditure on purchased licences, patents, trademarks and similar

rights is capitalised and depreciated on a straight-line basis over

the contractual term, where applicable, or over the estimate eco-

nomic life, which is deemed to be no more than fi ve years.

If a foreign activity is disposed of, the cumulative amount of the

exchange rate differences that was recognised in equity is recorded

in the profi t and loss account.

Goodwill and adjustments to the fair value arising on the acquisi-

tion of a foreign entity are treated as assets and liabilities of the

foreign entity and converted at the closing rate.

Consolidation principles

Subsidiaries

Subsidiaries are companies over which the Company exercises a

decisive infl uence (‘control’). Control is the power to steer an

entity’s fi nancial and operational policy in order to derive benefi t

from its activities. The consolidation of subsidiaries starts on the

date on which the Group acquires control over them and stops

when it loses that control. The companies in question are

accounted for by the full consolidation method.

Subsidiaries’ annual accounts are drawn up for the same fi nancial

year as those of the parent company and on the basis of uniform

fi nancial reporting principles for comparable transactions and other

events in similar circumstances.

Combinations of companies

If the Group takes over an entity or business activity, the

identifi able assets, liabilities and contingent liabilities of the party

which has been taken over are adopted at their fair value.

Subsidiaries’ fi nancial statements are included in the scope of

consolidation from the date of acquisition until control ceases.

The difference between the cost price and the acquiring party’s

stake in the net fair value of the identifi able assets, liabilities and

contingent liabilities is recorded as goodwill. If this difference is

negative, the surplus, after reassessment of the fair values, is

accounted for directly in the profi t and loss account.

If the group increases its interest in an investment in which it did

not yet have control, the surplus or defi cit compared with the net

asset, after adjustment to the fair value that was acquired, is

processed as if it were a new acquisition according to the

methodology explained in the above section. If the group increases

its interest in an investment in which it already had control, the

greater or lesser price that was paid vis-à-vis the share in the net

assets that was acquired, is included directly in the company’s own

equity.

99

Goodwill

Goodwill represents the additional premium paid on the

acquisition of an interest over the fair value of the Group’s interest

in the acquired assets and liabilities at the time of acquisition.

Goodwill is recorded as an asset and subjected to a impairment

test at least once a year. Any impairment loss is immediately

recorded in the profi t and loss account and is not subsequently

written back.

Negative goodwill represents the amount by which the fair value

of the Group’s interest in the acquired assets and liabilities at the

time of acquisition exceeds the price paid.

On the disposal of a subsidiary, associated undertaking or entity

over which joint control is exercised, the related goodwill is

included in the calculation of the gain or loss on disposal.

Tangible fi xed assets

Tangible fi xed assets are valued at cost price less accumulated

depreciation and impairments. A tangible fi xed asset is

recognised if it is likely that the Group will receive the associated

future economic benefi ts and if the asset’s cost price can be reliably

determined.

The cost price includes all direct costs and all directly attributable

costs incurred in order to bring the asset to the location and

condition necessary for it to function in the intended way. Interest

during construction is not capitalised.

Subsequent expenditure associated with a tangible fi xed asset is

usually recorded in the profi t and loss account as it is incurred.

Such expenditure is only capitalised if it can be clearly shown to

result in an increase in the expected future economic benefi ts

from the use of the tangible fi xed asset compared with the original

estimate. Repair and maintenance costs which do not increase the

likely future economic benefi ts are recorded as costs as they are

incurred.

The different categories of tangible fi xed assets are depreciated by

the straight-line method over their estimated economic life.

Depreciation commences once the assets are ready for their

intended use.

Computer software

Expenditure relating to the development or maintenance of

computer software is normally offset against the result of the

period in which it is incurred. Only external expenditure which is

directly related to the purchase and implementation of purchased

software is recorded as an intangible asset and depreciated on a

straight-line basis over three years. Purchased ERP software and

the associated implementation costs are depreciated on a

straight-line basis over seven years.

Research and development

Research expenditure with a view to the acquisition of new

scientifi c or technological insights or knowledge is included as

a cost in the profi t and loss account as it arises. Development

expenditure in which research results are used in a plan or design

for the production of new or substantially improved products and

processes prior to commercial production or implementation is

only recognised in the balance sheet if all the following conditions

are satisfi ed:

❱ the product or process is precisely defi ned and the expenditure is

individually identifi able and reliably measurable;

❱ the product’s technical feasibility has been suffi ciently

demonstrated;

❱ the product or process will be commercialised or used within

the company;

❱ the assets will generated future economic benefi ts (e.g. a

potential market exists for the product or its internal usefulness

has been suffi ciently proven);

❱ the appropriate technical, fi nancial and other resources are

available to fi nalise the project.

If the above criteria are not satisfi ed, the development costs are

taken to the profi t and loss account as they arise. Capitalised

development costs are depreciated on a straight-line basis over

the expected duration of the generated benefi ts from the start of

commercial production or the implementation of the product or

process.

SIOEN INDUSTRIES I V.1 KEY ACCOUNTING RULES

100

The estimated economic life of the main tangible fi xed assets lies

within the following ranges:

Buildings: 20 years

Machines: 5 to 15 years

Equipment: 10 years

Furniture: 5 years

Hardware: 5 years

Vehicles: 5 years

If an asset’s book value is lower than the estimated realisable

value, it is immediately written down to the realisable value.

The gain or loss on the sale or disposal of an asset is determined

as the difference between the net income on disposal and the

asset’s book value. This difference is recorded in the profi t and loss

account.

Lease agreements

Financial leasing

Lease agreements which assign to the Group all the main risks

and benefi ts associated with ownership are regarded as fi nancial

leasing. The assets acquired under fi nancial leasing arrangements

are stated in the balance sheet at their fair value at the start of

the lease agreement, or, if this is lower, at the present value of

the minimum lease payments, less accumulated depreciation and

impairments.

The discount rate used in the calculation of the present value of

the minimum lease payments is the interest rate implicit in the

lease agreement, where this can be determined, or otherwise the

company’s marginal borrowing rate. Initial direct costs are included

in the capitalised amount. Lease payments are broken down into

interest charges and repayments of the principal. The interest

charges are spread over the duration of the lease agreement such

that a constant periodic interest rate is obtained on the

outstanding balance for each period. A fi nancial lease agreement

results in the recording of both a depreciation amount and an

interest charge in each period. The depreciation rules for assets

acquired under fi nancial leasing arrangements are consistent with

those for assets over which full ownership is acquired.

Operational leasing

Lease agreements in which all the main risks and benefi ts

associated with ownership reside with the lessor are regarded as

operational leasing. In operational leasing, the lease payments are

SIOEN INDUSTRIES I V.1 KEY ACCOUNTING RULES

101

recorded as costs and spread on a straight-line basis over the lease

period. The total value of discounts or benefi ts granted by the lessor

is offset against the leasing costs and spread on a straight-line basis

over the lease period.

Property investments

A property investment, i.e. one which is maintained in order to

generate rental income, an appreciation of value or both, is shown

at fair value on the balance sheet date. Gains or losses arising from

a change in the fair value of a property investment are recorded in

the results for the period in which they arise.

Financial investments

Investments are recorded in/ removed from the accounts on the

transaction date, i.e. the date on which an entity undertakes to

buy or sell the asset in question. Financial investments are valued

at the fair value of the price paid, plus the transaction costs.

Investments held for trading or available for sale are recorded at

their fair value. If investments are maintained for trading purposes,

the gains and losses arising from changes in the fair value are taken

to the profi t and loss account for the period in question. In the

case of investments which are available for sale, gains and losses

arising from changes in the fair value are immediately recognised

in equity until the fi nancial asset is sold or subject to impairment.

In this case, the cumulative gain or loss which had previously been

recognised in equity is included in the profi t and loss account for

the period. Holdings which are not classifi ed as available for sale,

which are not listed on an active market and whose fair value

cannot reliably be determined using alternative valuation rules are

valued at cost price. Financial investments which are held until

they mature are valued at their amortised cost price, using the ef-

fective interest method. This does not apply to short-term deposits,

as these are valued at their cost price.

Investment grants

Investment grants relating to the purchase of tangible fi xed assets

are offset against the purchase price or manufacturing cost of the

assets in question. The expected amount is recorded in the balance

sheet at the time of initial approval, and, if necessary, corrected

subsequently at the time of defi nitive allocation of the grant.

The grant is recorded in the profi t and loss account in proportion

with the depreciation of the tangible fi xed assets for which it was

obtained.

Deferred taxes are taxes which are expected to be paid or

recovered on the basis of differences between the book value of

assets or liabilities in the annual accounts and their taxable value

used for the calculation of the taxable profi t. They are account for

using the balance sheet liability method. Deferred tax liabilities

are usually recognised for all taxable temporary differences and

deferred tax receivables are recognised to the extent that it is likely

that a taxable profi t will be available against which the recoverable

temporary difference can be offset. Such assets and liabilities are

not recorded if the temporary differences arise from goodwill or

from the initial recognition (other than in connection with a

business combination) of other assets and liabilities in a transaction

which has no effect on the taxable profi t or the profi t before tax.

Deferred tax liabilities are recognised for taxable temporary

differences which relate to investments in subsidiaries, associated

undertakings and enterprises accounted for by the equity method,

unless the Group can determine the time when the temporary

difference will be resolved or if it is likely that the temporary

difference will not be resolved in the near future.

The book value of deferred tax receivable is assessed at every

balance sheet date and reduced if it is no longer likely that

suffi cient taxable profi t will be available to make it possible to use

all or some of the benefi t of the deferred tax receivable.

Deferred taxes are valued on the basis of the tax rates which are

expected to apply in the period in which the tax recovery is

realised or the liability is settled. Deferred taxes are recorded as

income or expenses in the profi t and loss account for the period,

unless the taxation arises from a transaction or event that has

been directly included in equity. In this case, the deferred tax is

also accounted for in equity.

Pensions and related liabilities

In accordance with laws and practices of each country, associated

entities have either defi ned benefi t schemes or defi ned

contribution schemes.

Defi ned contribution schemes

Contributions to defi ned contribution schemes are recorded as an

expense as they fall due.

Inventories

Inventories are valued at the lower of cost price or realisable value.

The cost price includes all direct and indirect costs incurred to

bring the goods to the stage of completion they have reached

on the balance sheet date. The cost price is calculated using the

weighted average cost price method.

The realisable value is the estimated sale price minus the

estimated fi nishing costs and costs associated with marketing, sale

and distribution.

Receivables

Short-term receivables are stated at nominal value, less suitable

provisions for any debts regarded as doubtful. Long-term

receivables are valued at amortised cost price.

Cash and cash equivalents

Cash and short-term investments which are maintained until the

end of the period are stated at their cost price. Cash equivalents

are short-term, extremely liquid investments which can be

converted immediately into cash of a known amount, and which

do not carry any material risk of change of value.

Financial liabilities and equity instruments

Financial liabilities and equity instruments are classifi ed on the

basis of the economic reality of the contractual agreement. An

equity instrument is a contract which includes the residual right to

a share in the Group’s assets, after the deduction of all liabilities.

Equity instruments issued by the Company are recorded to the

amount of the received consideration, less the direct costs of issue.

Income tax

Tax expenses consist of tax due for the reporting period and

deferred taxes. The tax due for the reporting period is based on

the taxable profi t for the period. Taxable profi t differs from the net

profi t in the profi t and loss account, because it excludes certain

items of income or expenditure which are taxable or deductible in

subsequent years, or which will never be taxable or deductible.

The current tax liability is calculated on the basis of the tax rates

for which the legislative process has been (substantially)

completed by the balance sheet date.

SIOEN INDUSTRIES I V.1 KEY ACCOUNTING RULES

102

and loss account and spread on a straight-line basis over the

average term until the benefi t rights have been acquired.

If benefi t rights can be regarded as acquired as a result of a new

scheme or changes to an existing scheme, prior service costs are

immediately recorded in the profi t and loss account.

If the liability to be recorded on the balance sheet is negative, the

asset entry that is included may not exceed the total unrecorded

cumulative actuarial net losses and prior service costs and the

present value of future repayments from the scheme or reductions

in future contributions to the scheme (the ‘asset ceiling’ principle).

In this case, however, the actuarial gains and losses are

immediately taken to the profi t and loss account if deferring them

would result in the recording of a gain purely as a consequence of

an actuarial loss in the current fi nancial year, or of a loss purely

and simply as a consequence of an actuarial gain in the current

fi nancial year. Prior service costs are in this case likewise

immediately included if spreading them out on a straight-line basis

would result in the recording of a gain purely as a consequence of

an increase in prior service costs during the current fi nancial year.

Other long-term personnel remuneration

Other long-term personnel remuneration such as long-service

bonuses is accounted for using the ‘projected unit credit’ method.

However, the accounting treatment differs from that of defi ned

benefi t schemes, in that actuarial gains and losses and prior service

costs are recorded immediately.

Provisions

Provisions are established in the balance sheet if the Group has a

legally enforceable or de facto liability on the balance sheet date

as a result of an event in the past, for which it is likely that an

outlay will be required of resources which contain economic

benefi ts, and if this outlay can be reliably estimated. The amount

recorded as a provision is the best estimate on the balance sheet

date of the outlay required to satisfy the existing liability, if

necessary discounted if the time value of money is relevant.

Provisions for reorganisation costs are recorded if the Group has a

detailed formal plan for the reorganisation that has already been

communicated to the parties concerned before the balance sheet

date.

Defi ned benefi t schemes

In defi ned benefi t schemes, the amount on the balance sheet (the

‘net liability’) corresponds to the present value of the gross liability,

adjusted for unrecorded actuarial gains and losses, after deduction

of the fair value of the scheme investments and unrecorded prior

service costs. The ‘present value of the gross liability of a defi ned

benefi t scheme’ is the present value, before deduction of the

scheme investments, of expected future payments required to

settle the liability which results from the employee’s service record

in the current and previous periods.

The discounted value of the liability arising from defi ned pension

rights and the assigned pension costs associated with the year of

service and prior service pension costs are calculated by accredited

actuaries using the projected unit credit method.

The discount rate corresponds to the rate of return on the balance

sheet date on corporate bonds with a high degree of credit-

worthiness and a remaining term comparable with the term of the

Group’s liabilities. The discount rate is adjusted annually to refl ect

the market return from high-value corporate bonds whose term is

consistent with the estimated term of the gross liabilities arising

from payments after retirement.

‘Actuarial gains and losses’ include adjustments on the basis of

experience (the consequences of differences between previous

actuarial assumptions and what has actually happened) and the

consequences of changes to actuarial assumptions. In principle,

actuarial gains and losses are not recognised at the moment they

arise, but, to the extent that the cumulative amount falls outside

a certain ‘corridor’, they are spread on a straight-line basis over the

expected average remaining working life of the employees who are

members of the scheme. This corridor is determined individually

for each defi ned benefi t scheme and has lower and upper limits of

110% and 90% respectively of the higher of the present value of

the gross liabilities and the fair value of the scheme investments.

‘Prior service costs’ refer to the increase in the present value of the

gross liability for services provided by employees in previous periods

and which result in the current period from the introduction of or

changes to payments after retirement or other long-term personnel

remuneration. Prior service costs are taken gradually to the profi t

SIOEN INDUSTRIES I V.1 KEY ACCOUNTING RULES

103

Fair value hedging

A derivative instrument is recorded as a fair value hedge if the

instrument hedges against the risk that the fair value of the

recorded assets and liabilities may change. Derivatives accounted

for as fair value hedges and hedged assets and liabilities are

recorded at their fair value. The corresponding changes in the fair

value are recorded in the profi t and loss account. Changes in the

fair value of derivative fi nancial instruments which do not qualify

as hedging transactions are recorded in the profi t and loss account

when they arise. Hedge accounting is discontinued when the

hedging instrument expires, is sold, terminated or exercised or

when the hedging no longer satisfi es the criteria for hedge

accounting. In this case the cumulative gain or loss on the hedging

instrument which is accounted for directly in equity continues to

be recorded separately in equity until the expected future

transaction takes place. If an expected future transaction is not

expected to take place any more, the cumulative gain or loss

shown in the equity is transferred to the profi t and loss account for

the period.

Income

Income is recorded if it is likely that the company will receive the

economic benefi ts associated with the transaction and the amount

of the income can be measured reliably. Turnover is recorded after

the deduction of turnover tax and discounts.

Income from the sale of goods is recorded when the delivery and

the complete transfer of risks and benefi ts have taken place.

Interest income is recorded on a time basis that refl ects the actual

return on the asset. Royalties are included on an accrual basis in

accordance with the conditions of the agreement.

Dividends are recorded when the shareholder’s right to receive

them has arisen.

Interest-bearing fi nancing

Interest-bearing fi nancing is recorded at the value of the income

received less transaction costs incurred. It is then valued at

amortised cost price using the effective interest rate method. Any

difference between the income (after deduction of transaction

costs) and the redemption value (including premiums payable on

redemption) is recorded in the profi t and loss account over the

period of the fi nancing.

Trading accounts payable and other payables

Non-interest-bearing trade liabilities are valued at their cost price,

which represents the fair value of the amount payable.

Derivative fi nancial instruments

The Group uses various derivatives to hedge against currency risks

arising from its operating activities, fi nancing and investment

activities. The net risk of all Group subsidiaries is managed centrally

in line with the objectives and rules established by the Group

management. It is the Group’s policy to avoid engaging in

speculative transactions or transactions with a leverage effect

and not to engage in trading in fi nancial instruments under any

circumstances.

Derivative fi nancial instruments are treated as follows:

Cash fl ow hedging

Changes in the fair value of derivative fi nancial instruments which

are ascertained to provide effective hedging for future cash fl ows

are recorded directly in equity, while the non-effective element of

the gain or loss on the hedging instrument is recorded in the profi t

and loss account. If the cash fl ow hedging of a fi xed commitment

or a highly likely future transaction results in the recognition of an

asset or liability, then the associated profi ts and losses on the

derivative instrument which were formerly recorded in equity are

now included in the initial valuation of the asset or liability at the

time of recognition. For hedges which do not result in the

recognition of an asset or liability, amounts which were deferred

in equity are recorded in the profi t and loss account for the period

during which the hedged item affects the gain or loss.

SIOEN INDUSTRIES I V.1 KEY ACCOUNTING RULES

104

Post-balance sheet events

Post-balance sheet events which provide additional information

about the company’s situation on the balance sheet date

(‘adjusting events’) are included in the annual accounts. Other

post-balance sheet events are only mentioned in the notes if they

may have a signifi cant impact.

The most important assessment criteria in the application of

the Valuation rules

In the application of the valuation rules, in certain cases an ac-

counting assessment must be made. This assessment is done by

making the most accurate assessment possible of uncertain future

evolutions. The management determines its assessment on the

basis of different realistically assessed parameters, such as future

market expectations, sector growth rates, industry studies, econo-

mic realities, budgets and multi-year plans, expected profi tability

studies, etc. The most important elements within the group that

are subject to this are: impairments, provisions and deferred tax

items.

Application of new IFRS standards

Sioen Industries Group did not yet change over to the early

application of the following new standards and interpretations

which were issued on the date of approval of these fi nancial

statements, but which were not yet applicable on the date of

closing of the fi nancial statements.

IFRS 6 Exploration for and evaluation of mineral resourcesIFRS 7 Financial instruments: disclosuresIFRIC 4 Determining whether an arrangement contains a lease IFRIC 5 Rights to interests arising from decommissioning, restoration and environmental funds IFRIC 6 Liabilities arising from participating in a specifi c market - waste electrical and electronic equipment.IFRIC 7 Applying the restatement approach under IAS 29 fi nancial reporting in hyperinfl ationary economies IFRIC 8 Scope of IFRS 2

The future application of the above-mentioned standards and

interpretations will have no material impact on the fi nancial

statements, with the exception of the impact of the notes on

fi nancial instruments of the following fi nancial year.

Miscellaneous

Impairment of tangible and intangible assets

Like goodwill, which is subjected to an impairment test every year,

intangible assets and tangible fi xed assets also undergo such a test

when there is an indication that their book value may be lower

than their realisable value. If an asset does not generate a cash

infl ux which is independent of other assets, the Group estimates

the realisable value of the cash fl ow generating unit to which the

asset belongs.

The realisable value is the highest value of the fair value minus

sales costs and the value to the business.

The method of the going concern value uses cash fl ow forecasts

based on the fi nancial budget that is approved by the manage-

ment. Cash fl ows after this period are extrapolated by making use

of the most justifi ed percentage growth over the long term for the

sector in which the cash fl ow-generating unit is active. The ma-

nagement bases its assumptions (prices, volumes, return) on past

performances and on its expectations with regard to the develop-

ment of the market. The weighted average growth percentages are

in conformity with the forecasts included in the sector reports. The

discount rate used is the estimated weighted average equity cost

of the group before taxes, and takes account of the current market

evaluations of the time value of money and the risks for which the

future cash fl ows are adapted.

If the realisable value of an asset (or cash fl ow generating unit)

is estimated to be lower than its book value, the asset’s (or cash

fl ow generating unit’s) book value is reduced to its realisable value.

An impairment loss is immediately recorded in the profi t and loss

account.

If an impairment loss is subsequently written back, the asset’s (or

cash fl ow generating unit’s) book value is increased to the revised

estimate of its realisable value, but only to the extent that the

increased book value is no higher than the book value that would

have been recorded if no impairment loss had been recorded for

the asset (or cash fl ow generating unit) in previous years. However,

impairment losses on goodwill are never written back.

SIOEN INDUSTRIES I V.1 KEY ACCOUNTING RULES

105

SIOEN INDUSTRIES I V.2.1 PRIMARY SEGMENT INFORMATION

Segments 2005 Coating Apparel Industrial Eliminations Consolidated

applications

Net sales 193.431 78.138 70.066 316.237

External sales 170.740 78.127 67.370 316.237

Intersegment sales 22.691 11 2.696 -25.398 0

Segment profi t from operational activities 15.356 3.456 6.743 25.554

Unallocated profi t from operational activities -97

Profi t from operational activities 25.457

Net fi nancial charges -5.470

Profi t before taxation 19.987

Taxes -6.399

Profi t after taxation 13.588

Group share in profi t or loss 13.582

Segment assets 229.224 69.189 55.206 -20.604 333.015

Unallocated assets 4.667

Total consolidated assets 337.683

Segment liabilities 229.224 69.189 55.206 -20.604 333.015

Unallocated liabilities 4.667

Total consolidated liabilities 337.683

Other information Coating Apparel Industrial Head Eliminations Consolidated

applications offi ce

Depreciation 13.599 1.753 1.786 740 22 17.899

Write-downs of inventories 135 516 278 - - 930

Write-downs of receivables -145 105 -28 - - (67)

Additions to/(reversals) of provisions -522 -30 -20 - - (572)

EBITDA 28.423 5.800 8.760 517 147 43.647

Impairments - - - - - -

Reorganisation costs 419 83 - 3 - 505

Investments in intangible fi xed assets 49 43 20 631 (7) 736

Investments in tangible fi xed assets 11.395 1.081 3.390 765 - 16.632

106

SIOEN INDUSTRIES I V.2.1 PRIMARY SEGMENT INFORMATION

Segments 2004 Coating Apparel Industrial Eliminations Consolidated

applications

Net turnover 189.835 68.226 74.277 - 309.802

External turnover 170.645 68.259 70.898 - 309.802

Intersegment turnover 19.190 -34 3.378 -22.534 0

Segment profi t from operational activities 19.853 4.638 2.626 - 27.117

Unallocated profi t from operational activities -130

Profi t from operational activities 26.987

Net fi nancial charges -7.341

Profi t before taxation 19.646

Taxes -6.520

Profi t after taxation 13.126

Group share in profi t or loss 12.252

Segment assets 231.737 59.831 53.263 -19.583 325.247

Unallocated assets 5.414

Total consolidated assets 330.661

Segment liabilities 231.737 59.831 53.263 -19.583 325.247

Unallocated liabilities 5.414

Total consolidated liabilities 330.661

Other information Coating Apparel Industrial Head Eliminations Consolidated

applications offi ce

Depreciation 13.295 1.222 2.294 1.026 - 17.838

Write-downs -141 -202 1.393 0 - 1.051

Additions to/(reversals) of provisions -908 -416 128 114 - -1.081

EBITDA 32.100 5.243 6.442 1.009 - 44.794

Impairments - - - - - -

Reorganisation costs - 113 1.015 - - 1.129

Investments in intangible fi xed assets 10 233 - 558 - 800

Investments in tangible fi xed assets 3.730 1.105 902 474 - 6.211

107

2005

COUNTRY Consolidated Coating Apparel Industrial applications

France 64.331 20,20% 32.197 18,84% 25.138 32,03% 6.996 10,13%

Germany 56.308 17,68% 23.358 13,67% 4.846 6,17% 28.104 40,69%

Belgium 39.087 12,27% 22.083 12,92% 9.242 11,78% 7.762 11,24%

UK 27.560 8,65% 10.150 5,94% 9.557 12,18% 7.852 11,37%

Netherlands 26.732 8,39% 11.444 6,70% 9.191 11,71% 6.097 8,83%

Eastern Europe 25.707 8,07% 22.276 13,03% 312 0,40% 3.119 4,52%

Italy 13.011 4,09% 11.724 6,86% 327 0,42% 960 1,39%

Scandinavia 10.186 3,20% 7.804 4,57% 1.407 1,79% 976 1,41%

Spain 8.357 2,62% 7.299 4,27% 514 0,65% 545 0,79%

USA 7.133 2,24% 1.209 0,71% 1.929 2,46% 3.995 5,78%

Switzerland 4.743 1,49% 3.280 1,92% 1.398 1,78% 65 0,09%

Austria 4.090 1,28% 2.217 1,30% 1.444 1,84% 430 0,62%

Ireland 3.811 1,20% 894 0,52% 2.893 3,69% 24 0,04%

Other 27.417 8,61% 14.995 8,77% 10.285 13,10% 2.138 3,10%

Total gross sales 318.473 100,00% 170.929 100,00% 78.482 100,00% 69.062 100,00%

cash discounts - 2.236

NET SALES 316.237

SIOEN INDUSTRIES I V.5.2 SECONDARY SEGMENT INFORMATION

2004

COUNTRY Consolidated Coating Apparel Industrial applications

Benelux 62.106 19,91% 31.731 18,42% 15.948 23,34% 14.427 20,22%

France 65.294 20,93% 35.130 20,39% 21.565 31,57% 8.600 12,05%

Germany 60.182 19,29% 21.109 12,25% 5.351 7,83% 33.721 47,25%

UK 27.773 8,90% 10.485 6,09% 11.060 16,19% 6.227 8,73%

Spain 9.142 2,93% 8.436 4,90% 452 0,66% 255 0,36%

Scandinavia 8.851 2,84% 7.022 4,08% 1.182 1,73% 647 0,91%

Switzerland 4.848 1,55% 2.840 1,65% 1.911 2,80% 97 0,14%

Eastern Europe 22.912 7,34% 20.708 12,02% 359 0,53% 1.844 2,58%

Austria 4.273 1,37% 2.526 1,47% 1.441 2,11% 306 0,43%

Ireland 3.622 1,16% 837 0,49% 2.749 4,02% 37 0,05%

USA 6.787 2,18% 1.017 0,59% 3.115 4,56% 2.655 3,72%

Italy 14.631 4,69% 13.247 7,69% 454 0,66% 930 1,30%

Other 21.514 6,90% 17.168 9,97% 2.730 4,00% 1.616 2,26%

Total gross sales 311.935 100,00% 172.257 100,00% 68.315 100,00% 71.363 100,00%

cash discounts - 2.132

NET SALES 309.803

108

SIOEN INDUSTRIES I V.5.3 EXCHANGE RATE

Exchange rate

Currency Rate 2004 2005

EUR average 1,0000 1,0000

end 1,0000 1,0000

USD average 1,2460 1,2400

end 1,3621 1,1797

GBP average 0,6796 0,6836

end 0,7051 0,6853

RMB average 10,3102 10,1523

end 11,2883 9,5202

PLN average 4,5163 4,0217

end 4,0845 3,8600

TDN average 1,5479 1,6114

end 1,6349 1,6112

UAH average 6,6326 6,3199

end 7,2202 5,9588

109

NET SALES

2004 2005

€ ‘000 € ‘000

Sale of goods 311.336 317.567

Subcontracting 2.012 2.156

Commissions and discounts -3.546 -3.486

Net sales 309.802 316.237

COST OF SALES

Purchases 139.297 160.425

Transport expenses 713 1.410

Changes in the level of inventories 8.237 -8.180

Subcontracting 4.215 5.206

Personnel expenses 41.163 42.199

Depreciation 15.211 14.697

Services and other goods 33.149 36.529

Write-offs on inventories 286 930

Cost of sales 242.271 253.214

SALES AND MARKETING EXPENSES

Personnel expenses 8.058 8.257

Depreciation 237 117

Services and other goods 7.186 7.590

Write-offs on trade receivables 765 -67

Sales and marketing expenses 16.246 15.896

RESEARCH AND DEVELOPMENT EXPENSES

Personnel expenses 2.019 2.876

Depreciation 87 532

Services and other goods 617 810

Research and development expenses 2.723 4.217

GENERAL AND ADMINISTRATIVE EXPENSES

Personnel expenses 10.488 10.127

Depreciation 2.304 2.554

Services and other goods 8.322 7.206

General and administrative expenses 21.114 19.887

OTHER OPERATING INCOME AND EXPENSES

Gain/loss on disposal of tangible fi xed assets -4 917

Provisions for liabilities and charges 1.081 572

Impairment 0 0

SIOEN INDUSTRIES I V.4 DETAILED INCOME STATEMENT

110

SIOEN INDUSTRIES I V.4 DETAILED INCOME STATEMENT

111

2004 2005

€ ‘000 € ‘000

Compensation received 159 155

Local taxes -1.109 -670

Other 540 1.966

Other operating income and costs 666 2.940

Restructuring costs -1.129 -505

Non-recurrent result -1.129 -505

Operating profi t 26.987 25.457

Interest paid -6.925 -6.280

Received interest 227 251

Realised exchange rate result -1.772 228

Unrealised exchange rate result 1.569 194

Other -440 136

Other fi nancial result -643 558

Tax -6.361 -8.642

Deferred tax -159 2.242

Tax -6.520 -6.399

Consolidated profi t for the year 13.126 13.588

Profi t for the group 12.252 13.582

Reconciliation between taxes and result before taxes

Profi t before taxes 19.646 19.987

Tax on profi t of fi scal entities against theoretical local tax rate 6.657 6.456

Theoretical tax rate(1) 33,88% 32,30%

Tax impact of

non-deductible expenses 346 197

specifi c tax regimes -757 -720

deferred tax assets not recognised 1.415

usage of non-recognised deferred tax assets 1.771

Regularisation of current tax on previous years -1.086 -842

Tax on distributed retained earnings 1.233 -432

Taxes on distributed reserves 166 260

Sale Sirec(2) -1.576

Other -39 -130

(1) Is the weighted average tax rate of the subsidiary(2) In 2005 Sioen Industries sold Sirec to a reinsurance company.

This resulted in the realisation of a deferred tax liability.

DIVIDENDS

Dividend for the period ending 31 December 2004 of EUR 0.22 per share.

Proposed dividend for the period ending 31 December 2005 of EUR 0.24 per share.

The proposed dividend awaits the shareholders’ approval at the annual general meeting and

is not shown as a liability in these annual accounts.

ORDINARY PROFIT PER SHARE

The calculation of the ordinary and diluted profi t per share is based on the following data:

2004 2005

€ ‘000 € ‘000

Net profi t or loss for the period 12.252 13.582

Net profi t or loss from continuing activities 12.252 13.582

Weighted average number of outstanding shares

Ordinary shares 21.391.070 21.391.070

Weighted average number of shares for ordinary profi t per share 21.391.070 21.391.070

IN EUR

Ordinary profi t per share 0,57 0,63

Ordinary profi t per share from continuing activities 0,57 0,63

DILUTED PROFIT PER SHARE

Calculation of diluted profi t per share:

Diluted elements

Net profi t or loss from continuing activities 12.252 13.582

Profi t or loss attributable to ordinary shareholders 12.252 13.582

Weighted average number of outstanding ordinary shares 21.391.070 21.391.070

Weighted average number of shares for diluted profi t per share 21.391.070 21.391.070

IN EUR

Diluted profi t per share 0,57 0,63

Diluted profi t per share from continuing activities 0,57 0,63

Profi t-increasing elements not included in the calculation

Impact on weighted average number of outstanding ordinary shares

Shares option plan -14.324 -15.942

SIOEN INDUSTRIES I V.4 DETAILED INCOME STATEMENT

112

SIOEN INDUSTRIES I V.5.1 INTANGIBLE FIXED ASSETS

Intangible fi xed assets are subject to the application of IAS 36,

Impairments, when there is an indication that their book value may

be lower than their realisable value. If an asset does not generate a

cash infl ux which is independent of other assets, the Group

estimates the realisable value of the cash fl ow generating unit to

which the asset belongs. No impairments were recorded.

The acquisition of a customer portfolio in 2004 relates to the price

paid for Plastylon. This customer portfolio is being depreciated over

four years.

Depreciation of intangible fi xed assets other than goodwill is

shown in the profi t and loss account by function. Depreciation of

goodwill is included in administration costs and is thus located on

the line labelled general and administrative costs.

Purchases of software in 2005 consist predominantly of the initial

expenditure on the ERP project (SAP). This is not yet being

depreciated. Once it is in use, purchased ERP software and

associated implementation costs will be depreciated over seven

years on a straight-line basis.

113

2005

Research and development costs: purchases - 8 - - - - - - - - 8

Concessions, patents, licences: purchases 1.629 17 - - - 7 - - - - 1.653

Software: purchases 7.693 711 - - (22) 18 - - - - 8.399

Goodwill: purchases 2.568 - - - - - - - - - 2.568

TOTAL 11.889 736 - - (22) 24 - - - - 12.628

Research and development costs: impairment - - - - - - - - - - -

Concessions, patents, licences: impairment - - - - - - - - - - -

Software: impairment - - - - - - - - - - -

Goodwill: impairment 6 - - - - - - - (6) - -

TOTAL 6 - - - - - - - (6) - -

Research and development costs: depreciation (0) - - - - - - - - - -

Concessions, patents, licences: depreciation 1.465 - - - - 3 - 44 - - 1.512

Software: depreciation 6.902 - - - (18) 10 - 440 - - 7.334

Goodwill: depreciation 720 - - - - - - 794 - - 1.514

TOTAL 9.088 - - - (18) 13 - 1.278 - - 10.361

Research and development costs - 8 - - - - - - - - 8

Concessions, patents, licences 164 17 - - - 4 - (44) - - 141

Software 790 711 - - (4) 7 - (440) - - 1.064

Goodwill 1.842 - - - - - - (794) 6 - 1.054

Intangible fi xed assets 2.796 736 - - (4) 11 - (1.278) 6 - 2.267

SIOEN INDUSTRIES I V.5.1 INTANGIBLE FIXED ASSETS

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2004

Research and development costs: purchases - - - - - - - - - -

Concessions, patents, licences: purchases 1.425 202 (1) - - 4 - - - 1.629

Software: purchases 7.092 598 (4) - 12 (7) - - - - 7.693

Goodwill: purchases 693 - - - 1.875 - - 2.568

TOTAL 9.210 800 (6) - 12 (4) 1.875 - - - 11.889

Research and development costs: impairment - - - - - - - - - - -

Concessions, patents, licences: impairment - - - - - - - - - - -

Software: impairment - - - - - - - - - - -

Goodwill: impairment - - - - - - - 6 - 6

TOTAL - - - - - - - 6 - 6

Research and development costs: depreciation - - - - - - - - - -

Concessions, patents, licences: depreciation 1.425 - (1) - - 4 - 38 - 1.463

Software: depreciation 6.219 - (4) - 5 (3) - 685 - 6.903

Goodwill: depreciation 196 - - - - - 524 - 720

TOTAL 7.839 - (6) - 5 1 - 1.247 - - 9.088

Research and development costs - - - - - - - - - - -

Concessions, patents, licences - 202 - - - - - (38) - - 164

Software 873 598 - - 7 (4) - (685) - - 790

Goodwill 497 - - - - - 1.875 (524) (6) - 1.842

Intangible fi xed assets 1.371 800 - - 7 (4) 1.875 (1.247) (6) - 2.796

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115

Consolidation goodwill

2005

Goodwill 16.548 - - - - - 16.548

2004

Goodwill 16.520 - - - - 28 16.548

SIOEN INDUSTRIES I V.5.2 GOODWILL

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The realisable value of a cash fl ow-generating unit is determined

on the basis of the going concern value. For calculating the going

concern value, cash fl ow forecasts are used that are based on

fi nancial budgets and projections over a three-year period. These

projections contain extrapolations making use of the most justifi ed

growth percentage that cannot be higher than the average growth

percentage over the long term for the sector in which the cash

fl ow-generating unit is active, that is, between 2% and 3%.

The management bases its assumptions on past performances and

on its expectations over the coming years. The discount rate used

is calculated per segment and varies between 6% and 10%.

In May 2004, Plastylon was acquired. The fi gures were included in

the Group’s fi nancial statement from 1 May 2004. The purchased

assets were included in the consolidated annual accounts using the

purchase accounting method. The resultant goodwill is no longer

depreciated, in line with IFRS 3.

The book value of goodwill acquired in a business combination

must be allocated on a reasonable and consistent basis to each

cash fl ow-generating unit or the smallest group of

cash fl ow-generating units, in conformity with IAS 36.

116

Changes with respect to 2004:

Siotec BVBA has been absorbed by Sioen NV

Sioen Gmbh has merged with Roland Planen Gmbh

SIP Protection SAS has been absorbed by Sioen France SAS.

Sirec has been sold in 2005

% holding 2005 2004 Sioen n.v. Belgium Ardooie 99,47% 99,47% apparelSiotec b.v.b.a. Belgium Ardooie 0% 99,47% apparelSirec s.a. Luxembourg Luxembourg 0% 100,00% groupVeranneman Technical Textiles n.v. Belgium Ardooie 100,00% 100,00% coatingEuropean Masterbatch n.v. Belgium Bornem 100,00% 100,00% coatingCoatex n.v. Belgium Poperinge 100,00% 100,00% industrial applicationsSioen France s.a.s. France Narbonne 99,47% 99,47% apparelConfection Tunisienne de Sécurité s.a. Tunisia Tunis 99,47% 99,47% apparelDonegal Protective Clothing Ltd. Ireland Derrybeg 99,47% 99,47% apparelSioen Coating Distribution n.v. Belgium Ardooie 100,00% 100,00% coatingSioen GmbH Germany Werlte 96,00% coatingSiofab s.a. Portugal Santo Torso 100,00% 100,00% coatingP.T. Sungintex Indonesia Jakarta 100,00% 100,00% apparelSaint Frères s.a.s. France Flixecourt 99,97% 99,97% coatingSioen Fabrics s.a. Belgium Moeskroen 100,00% 100,00% coatingSaint Frères Confection s.a.s. France Flixecourt 100,00% 100,00% industrial applicationsP.T. Sioen Indonesia Indonesia Jakarta 100,00% 100,00% apparelSioen Tunisie s.a. Tunisia Tunis 99,83% 99,83% apparelSioen Fibres s.a. Belgium Moeskroen 100,00% 100,00% coating/apparelTIS n.v. Belgium Kersken 100,00% 100,00% coatingSioen UK Ltd. United Kingdom Chorley 100,00% 100,00% apparelMullion Manufacturing Ltd. United Kingdom Scunthorpe 100,00% 100,00% apparelSioen Shanghai China Shanghai 100,00% 100,00% coatingSioen Zaghouan s.a. Tunisia Zaghouan 99,50% 99,50% apparelSIP Protection s.a.s. France Foix 100,00% apparelSioen Nordifa s.a. Belgium Luik 100,00% 100,00% industrial applicationsInducolor s.a. Belgium Meslin-L’Evêque 100,00% 100,00% coatingBacam s.a.s. France Flixecourt 100,00% 100,00% industrial applicationsSioen Coating n.v. Belgium Ardooie 99,47% 99,47% coatingPennel Automotive s.a.s. France Roubaix 100,00% 100,00% coatingRoland International b.v. Netherlands Tegelen 100,00% 100,00% industrial applicationsRoland Planen GmbH Germany Werlte 100,00% 100,00% industrial applicationsRoltrans Group America Inc. United States Arlington 100,00% 100,00% industrial applicationsRoltrans Group Polska Spzoo Poland Konin 100,00% 100,00% industrial applicationsRoland Tilts UK Ltd. United Kingdom Bradford 100,00% 100,00% industrial applicationsMonal s.a. Luxembourg Luxembourg 100,00% 100,00% industrial applicationsJV Roland-Ukraine Ukraine Rivne 60,00% 60,00% industrial applicationsSioen USA Inc. United States Aberdeen 100,00% 100,00% apparelSioen Industries n.v. Belgium Ardooie 100,00% 100,00% group

SIOEN INDUSTRIES I V.5.3 SUBSIDIARIES

117

The fi xed assets under construction consist of the new coating line

at Saint Frères Enduction, the warehouse under construction at

EMB and the needle felt production line at Nordifa, which was not

yet in use in 2005.

In 2005 an investment grant of EUR 0.8 m was received from the

Walloon Region. This has been deducted from the acquisitions.

The fi xed assets under leasing relate to the buildings at Ardooie

and the Saint Frères Enduction building.

Liabilities for the purchase of tangible fi xed assets were contracted

for an amount of EUR 5.6 m, of which:

EUR 2 m for the warehouse at EMB

EUR 2 m for the needle felt production line at Nordifa

EUR 0.8 m for the new showroom and lab at

Ardooie Sioen Coating NV

and EUR 0.8 m building Saint Frères Enduction

2005

Land: purchases 16.814 - - (138) (126) 168 - - - - 16.718

Buildings: purchases 46.414 3.559 - (401) (206) 946 - - - - 50.312

Building infrastructure: purchases 16.168 622 - (1) (235) 24 - - - - 16.580

Plant, machines and equipment: purchases 139.746 10.770 - (972) 1.005 914 - - 151.462

Furniture: purchases 3.437 92 (8) (7) 6 128 - - - 3.649

Vehicles: purchases 3.727 279 - (660) (35) 95 - - 3.407

Hardware: purchases 5.043 412 - (252) (25) 158 - - - - 5.335

Leased land and buildings: purchases 19.272 516 - - 466 (9) - - - 20.245

Leased furniture: purchases 204 58 - - (9) 23 - - - - 277

Assets under construction: purchases 151 324 - - (378) 5 - - - - 102

TOTAL 250.976 16.632 (8) (2.431) 463 2.453 - - - 268.087

Buildings: depreciation 18.426 - - (206) (4) 284 - 1.862 - - 20.363

Building infrastructure: depreciation 8.776 - - (1) (3) 12 - 1.274 - - 10.057

Plant, machines and equipment: depreciation 69.388 - - (885) 52 745 11.387 - - 80.686

Furniture: depreciation 2.955 - (8) (7) 101 263 - - 3.304

Vehicles: depreciation 2.891 - - (566) (17) 68 357 - - 2.733

Hardware: depreciation 3.422 - - (232) (27) 100 - 665 - - 3.928

Leased land and buildings: depreciation 3.655 - - - 24 (3) - 998 - - 4.674

Leased furniture: depreciation 22 - - - (1) 4 - 39 - - 64

Assets under construction: depreciation 0 - - - - - - - - - -

TOTAL 109.535 - (8) (1.897) 25 1.310 - 16.844 - - 125.808

Land 16.814 - - (138) (126) 168 - - - - 16.718

Buildings(1) 35.380 4.182 - (195) (435) 675 - (3.135) - - 36.472

Plant, machines and equipment 70.358 10.770 - (87) 953 169 - (11.387) - - 70.776

Furniture and vehicles 2.940 783 - (114) (10) 112 - (1.285) - - 2.426

Fixed assets under leasing and other 15.798 574 - - 434 14 - (1.037) - - 15.784

Assets under construction and prepayments 151 324 - - (378) 5 - - - - 102

TOTAL 141.442 16.632 (0) (534) 439 1.143 - (16.844) - - 142.278

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

Tangible fi xed assets

The total acquisition of tangible fi xed assets in 2005 was

EUR 16.6 m (including investment grants).

The main investments in 2005 were:

❱ EUR 3.6 m in a new coating line at Saint Frères Enduction

in France

❱ EUR 1.8 m in the further expansion of the production hall

at Saint Frères Enduction

❱ EUR 2.1 m in a needle felt production line at Nordifa

❱ EUR 3 m on looms at Veranneman and TIS

❱ EUR 2 m on a new warehouse at EMB in Bornem

SIOEN INDUSTRIES I V.5.4 TANGIBLE FIXED ASSETS

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2004

Land: purchases 16.420 15 - (8) 267 120 - - - 16.814

Buildings: purchases 46.222 609 - (366) (190) 138 - - - 46.414

Building infrastructure: purchases 11.065 622 - (17) 4.447 - - - - - 16.168

Plant, machines and equipment: purchases 141.019 3.377 (98) (379) (3.968) (304) - - - 139.746

Furniture: purchases 3.967 291 (120) (212) (215) 15 - - - - 3.437

Vehicles: purchases 3.074 345 - (188) 574 (88) - - - - 3.727

Hardware: purchases 4.328 716 (45) (4) 97 (49) - - - - 5.043

Leased land and buildings: purchases 19.272 - - - - - - - - 19.272

Leased furniture: purchases 84 189 - - (81) 13 - - - - 204

Assets under construction: purchases 6 47 - (7) - 105 - - - - 151

TOTAL 245.456 6.211 (263) (1.479) 932 (50) - - - - 250.978

Buildings: depreciation 16.168 - - (41) 154 64 - 2.082 - 18.426

Building infrastructure: depreciation 5.813 - - (3) 2.793 9 - 164 - 8.776

Plant, machines and equipment: depreciation 60.396 - (97) (26) (2.290) (116) - 11.529 - (8) 69.388

Furniture: depreciation 3.176 - (114) (25) (302) 16 - 205 - 2.955

Vehicles: depreciation 2.282 - - (127) 427 (11) 319 - 2.891

Hardware: depreciation 2.695 - (45) (4) 91 (33) - 717 - 3.422

Leased land and buildings: depreciation 2.753 - - - (82) 5 - 1.001 - 3.655

Leased furniture: depreciation 20 - - - - - - 2 - - 22

Assets under construction: depreciation - - - - - - - - - - -

TOTAL 93.284 - (256) (225) (791) (66) - 16.016 - (8) 108.739

Land 16.420 15 - (8) - 120 - - - - 16.547

Buildings 35.306 1.231 - (338) 1.658 64 - (2.246) - - 35.728

Plant, machines and equipment 80.623 3.377 (1) (353) (1.767) (188) - (11.529) - 8 70.269

Furniture and vehicles 3.215 1.352 (6) (248) (51) (93) - (1.241) - - 2.948

Fixed assets under leasing and other 16.602 189 - - - 8 - (1.001) - - 15.798

Assets under construction and prepayments 6 47 - (7) - 105 - - - - 151

TOTAL 152.172 6.211 (7) (954) (160) 16 - (16.016) - 8 141.442

There are no mortgages secured on the tangible fi xed assets.

Tangible fi xed assets are subject to the application of IAS 36,

Impairments, when there is an indication that their book value may

be lower than their realisable value. If an asset does not generate a

cash infl ux which is independent of other assets, the Group

estimates the realisable value of the cash fl ow generating unit to

which the asset belongs. No impairments were recorded.

SIOEN INDUSTRIES I V.5.4 TANGIBLE FIXED ASSETS

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LONG-TERM TRADE RECEIVABLES

2005

Trade receivables LT - 59 - - - - - 59

Trade receivables LT: revaluation - - - - - - - -

Trade receivables LT: impairment - - - - - - - -

LONG-TERM TRADE RECEIVABLES - 59 - - - - - 59

2004

Trade receivables LT - - - - - - - -

Trade receivables LT: revaluation - - - - - - - -

Trade receivables LT: impairment - - - - - - - -

LONG-TERM TRADE RECEIVABLES - - - - - - - -

The term of these trade receivables is between two and three

years. These long-term receivables have been valued at their net

current value.

SIOEN INDUSTRIES I V.5.5 LONG-TERM TRADE RECEIVABLES

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OTHER LONG-TERM ASSETS

2005

Subsidiaries: receivables - - - - - - - -

Other shares: purchases - - - - - - - -

Guarantees and deposits: purchases 684 - (161) - - - - 524

Other LT receivables: purchases - - - - - - - -

OTHER LONG-TERM ASSETS 684 - (161) - - - - 524

2004

Subsidiaries: receivables - - - - - - - -

Other shares: purchases - - - - - - - -

Guarantees and deposits: purchases 1.105 - (420) - - - - 684

Other LT receivables: purchases - - - - - - - -

OTHER LONG-TERM ASSETS 1.105 - (420) - - - - 684

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

120

SIOEN INDUSTRIES I V.5.6 INVENTORIES

Gross inventories (excluding write-offs) rose EUR 9 m compared

with 2004. Write-downs on inventories increased EUR 0.9 m.

These write-offs are recorded on the basis of an ageing and

rotation analysis.

2005

Value at end of year Raw materials 32.241 Write-off raw materials (2.137)Raw materials 30.105 Consumer goods 298 Write-off consumer goods - Consumables 298 Orders in progress 7.277 Write-off orders in progress - Orders in progress 7.277 Finished products 40.065 Write-off fi nished products (3.240)Goods in transit 3.960 Write-off goods in transit - - Finished products 40.784 Inventories 78.463 Write-off included in result 930

2004

Value at end of year Raw materials 28.166 Write-off raw materials (1.443)Raw materials 26.723 Consumer goods 370 Write-off consumer goods - Consumables 370 Orders in progress 4.614 Write-off orders in progress - Orders in progress 4.614 Finished products 39.902 Write-off fi nished products (2.886)Goods in transit 1.743 Write-off goods in transit - - Finished products 38.759 Inventories 70.466 Write-off included in result 286

121

Trade receivables include amounts to be received from the sale of goods for EUR 75.2 Million. A provision is established for the estimated uncollectable amounts for EUR 5.8 Million. Compared to last year, the trade receivables rose primarily through major orders in the Apparel Division at the end of 2005.

As of 1/4/2005 the Group decided to cover itself for the credit risk by concluding a stop loss credit insurance.

2005

Value at end of year Trade receivables 75.198 Trade receivables: doubtful debts (5.782)Trade receivables 69.416

kEUR outstanding balance turnover

Customer 1 4.441 5,91% 10.976 4%

Customer 2 2.896 3,85% 7.331 2%

Customer 3 1.708 2,27% 7.084 2%

Customer 4 1.635 2,17% 4.567 1%

Customer 5 1.371 1,82% 4.378 1%

Other 63.146 83,97% 281.900 89%

Total 75.198 100% 316.237 100%

SIOEN INDUSTRIES I V.5.7 TRADE RECEIVABLES

2004

Value at end of year Trade receivables 69.779Trade receivables: doubtful debts (5.962)Trade receivables 63.818

kEUR outstanding balance turnover

Customer 1 4.593 6,58% 12.513 4%

Customer 2 1.634 2,34% 4.258 1%

Customer 3 1.346 1,93% 2.815 1%

Customer 4 1.233 1,77% 4.610 1%

Customer 5 1.016 1,46% 3.464 1%

Other 59.957 95,92% 282.142 91%

Total 69.779 100% 309.802 100%

122

SIOEN INDUSTRIES I V.5.8 OTHER CURRENT ASSETS

OTHER CURRENT ASSETS

2005 2004 Prepayments 34 488VAT to be reclaimed 8.194 6.127Tax prepayment 1.641 1.065Capital grants receivable 109 74Insurance premiums receivable 99 163Other 1.040 560Other Current Assets 11.118 8.477

Other current assets consist primarily of VAT to be reclaimed and pre-paid taxes.

The entry “Other” concerns mainly the amounts receivable relating to the sales of the buildings in Antwerp and in Foix.

INVESTMENTS Other investments and deposits 260 1.963Investments 260 1.963

The book value of this forward account refl ects its market value.

CASH AND CASH EQUIVALENTS

Cash 7.438 12.676At hand 874 248Cash and cash equivalents 8.312 12.923

DEFERRED CHARGES & ACCRUED INCOME

Deferred charges 1.343 2.274 Other 85 8 Deferred charges & accrued income 1.428 2.282

These consist primarily of pre-paid rent, insurance policies and interest charges.

123

DEFINED BENEFIT PLANS 2005 2004

Amounts recorded in balance sheet 1. Defi cit for funded plans - - Defi ned benefi t obligations - - Fair value of plan assets - - 2. Defi ned benefi t obligations - unfunded plans 1.422 1.347Financing status 3. Unrecognised past service gain - - 4. Unrecognised actuarial (losses) gains (101) (85)Net liability at balance sheet date 1.321 1.262Amounts recognised in income 1. Current service cost 119 246 2. Interest cost 60 83 3. Expected return on plan assets - - 4. Amortisation of past service cost (gain) (41) 21 5. Amortisation of actuarial net losses (gains) (30) (1) 6. Losses (gains) on curtailments (3) (7)Net periodic pension cost 105 342Movements in the net liability in the current period were as follows Net liability at opening 1.261 951Net periodic pension cost 105 342Uses for contributions paid (75) -Increase through business combinations - -Currency translation changes 30 (32)Net liability at closing 1.321 1.261The key actuarial assumptions used at the balance sheet date are 1. Discount rate 4,01% 4,48% 2. Expected return on plan assets 3. Future pension increases 60 60 4. Expected rate of salary increases 2% / 3% 2% / 3%

SIOEN INDUSTRIES I V.5.9 PENSION LIABILITIES

Defi ned benefi t schemes

In defi ned benefi t schemes, the amount on the balance sheet (the

‘net liability’) corresponds to the present value of the gross liability,

adjusted for unrecorded actuarial gains and losses, after deduction

of the fair value of the scheme investments and unrecorded prior

service costs.

The discounted value of the liability associated with defi ned

pension rights and the assigned pension costs associated with the

year of service and prior service pension costs are calculated by

accredited actuaries using the projected unit credit method.

Defi ned benefi t schemes mainly relate to pension liabilities in

France, where such schemes are required by law.

PROVISIONS FOR PERSONNEL REMUNERATION

In accordance with law and practice in each country, associated

entities have either defi ned benefi t schemes or defi ned

contribution schemes.

Defi ned contribution schemes

Contributions to defi ned contribution schemes are recorded as an

expense when they are due.

124

SIOEN INDUSTRIES I V.5.10 PROVISIONS

2005

Tax provisions - - - - - - - - - - -

Provisions for environmental contamination 219 - - (219) - - - - - - -

Provisions other 2.268 538 (647) (851) - - - 94 1.402 1.023 379

VII. Provisions 2.487 538 (647) (1.070) - - - 94 1.402 1.023 379

2004

Tax provisions 1.075 - (1.075) - - - - - - - -

Provisions for environmental contamination 195 - - - - - - 24 219 - 219

Provisions other 821 2.478 (1.187) - - - - 156 2.268 966 1.302

VII. Provisions 2.091 2.478 (2.262) - - - - 180 2.487 966 1.521

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The provisions for other risks and charges consist mainly of a

provision relating to the soil cleanup of the grounds in Temse

belonging to TIS NV. This risk fi nds its origin in the period before

the takeover. This provision is set up for more than one year and is

discounted using the weighted average capital cost of the Group.

In 2004 there was a provision for the soil cleanup of the Ardooie

grounds, which this year appeared to be unnecessary and was

therefore reversed. In 2004 Sioen Industries signed a ruling

agreement with the Ministery of Finance concerning the fi scal

treatment of the Luxembourg insurance captive company.

125

2005

Subordinated loans -

Bank loans 53.519 20.984 36.477 9.791 4.750 1.429 1.071

Financial leasing liabilities 13.049 1.142 1.344 1.377 1.494 1.105 7.729

Other 344 - - - - - 344

Total long-term interest-bearing loans 66.912 22.126 37.821 11.168 6.244 2.534 9.144

Loans 67.290

Financial leasing liabilities 1.142

Total short-term interest-bearing loans 68.432

2004

Subordinated loans -

Bank loans 54.298 24.293 20.576 16.477 9.791 4.750 2.704

Financial leasing liabilities 14.153 - 1.341 1.344 1.377 1.241 8.850

Other 71 - - - - - 71

Total long-term interest-bearing loans 68.522 24.293 21.917 17.821 11.168 5.991 11.625

Loans 64.043

Financial leasing liabilities 39

Total short-term interest-bearing loans 64.082

SIOEN INDUSTRIES I V.5.11 INTEREST- BEARING LOANS

Valu

e at

end

of y

ear

With

in th

e ye

ar

2 ye

ars

3 ye

ars

4 ye

ars

5 ye

ars

Afte

r 5 y

ears

this bond issue, an IRS (Interest Rate Swap) was concluded on

20/12/2005. This IRS is described in the note on ‘Financial instru-

ments’, and designated as ‘cash fl ow hedging’.

Short-term accounts payable

Short-term straight loans amount to EUR 44.6 m. They consist of

EUR 36.4 m of euro loans with a weighted average interest rate of

3.24% and a dollar loan of USD 9.7 m.

There was also a tax prepayment fi nancing which expires on

10/4/2006.

No securities were issued for these fi nancial debts. Most (approx.

85%) of the Group’s fi nancial liabilities are centrally contracted

and managed.

Financial accounts payable

This note provides information about the group’s interest-bearing

loans.

Long-term accounts payable,

including fi nancial long-term leasing debts.

The weighted average interest rate of long-term debts is 4.55%.

All loans have a fi xed interest rate, apart from one EUR 20 m vari-

able-rate roll-over loan. This ‘bullet’ loan, taken up on 20/12/2005

with expiry date 30/06/2007, was repaid early on 14 March 2006

without additional cost.

On 14 March 2006, a EUR 100 m bond listed on Eurolist by

Euronext Brussels was successfully issued, with a ten-year term

and fi xed coupon interest of 4.75%. To cover the interest rate on

126

SIOEN INDUSTRIES I V.5.12 FINANCIAL LEASING DEBTS

2005

Long-term fi nancial leasing liabilities 13.049 - 1.344 1.377 1.494 1.105 7.729

Long-term fi nancial leasing liabilities due within the year 1.142 1.142 - - - - -

Financial leasing liabilities 14.191 1.142 1.344 1.377 1.494 1.105 7.729

Valu

e at

end

of y

ear

With

in th

e ye

ar2

year

s

3 ye

ars

4 ye

ars

5 ye

ars

Afte

r 5 y

ears

Leasing payments due within the year 1.657 1.142

1 - 2 years 2.188 1.543

2 - 3 years 2.228 1.643

3 - 4 years 3.480 2.526

after 5 years 8.423 7.336

Total leasing payments 17.975 14.191

Future fi nancial charges 3.784

Discounted value of leasing liabilities 14.191 14.191

Less payments due within the year 1.142

Payments due after one year 13.049

Minimumleasing payments

Discounted value of minimum leasing payments

2004

Long-term fi nancial leasing liabilities 14.192 39 1.341 1.344 1.377 1.241 8.850

Financial leasing liabilities 14.192 39 1.341 1.344 1.377 1.241 8.850

Leasing payments due within the year 39 39

1 - 2 years 2.096 1.392

2 - 3 years 1.986 1.342

3 - 4 years 3.855 2.758

after 5 years 10.163 8.661

Total leasing payments 18.138 14.192

Future fi nancial charges 3.946 0

Discounted value of leasing liabilities 14.192 0

Less payments due within the year 39

Payments due after one year 14.153

Valu

e at

end

of y

ear

With

in th

e ye

ar2

year

s

3 ye

ars

4 ye

ars

5 ye

ars

Afte

r 5 y

ears

Minimumleasing payments

Discounted value of minimum leasing payments

127

TRADE ACCOUNTS PAYABLE AND OTHER DEBTS 2005 2004

Trade accounts payable 37.425 32.947Credit notes receivable (1.213) (2.097)Prepayments received 298 234Total 36.510 31.084

Trade and other payables include outstanding amounts for tradepurchases and current charges. The increase as compared to 2004is attributable to the increased turnover and investments (primarily assets under construction).

OTHER DEBTS UP TO ONE YEAR Tax debts 5.589 7.216Other 62 6.069Social security debts 8.338 7.708Dividends payable 1.950 1.320Accrued charges and deferred income 963 1.027Total 16.902 23.340

The tax liabilities concern primarily corporate taxes and VAT to bepaid. The increase as compared to 2004 is attributable to the post ‘other’. In 2004 this concerned the liability in connection with the acquisition of the minority interest in the companies Coatex, Saint-Frères Confection and Bacam.

SIOEN INDUSTRIES I V.5.13 OTHER ACCOUNTS PAYABLE

128

SIOEN INDUSTRIES I V.5.14 FINANCIAL INSTRUMENTS

FINANCIAL DERIVATIVES 2005 2004 Notional Fair Notional Fair value value value valueForward purchase contracts Forward purchase contracts within 1 year - - 1.667 (57)

Forward sale contractsForward sale contracts within 1 year Rights 2.933 41 2.176 62 Duties 4.399 (8) 3.046 -

IRS Forward 100.000 (636)

Exchange rate risk

It is the Group’s policy to hedge against exchange risks arising from

fi nancial and operating activities centrally.

The risks are limited by compensating for transactions in the same

currency, or by fi xing exchange rates via forward contracts or

options.

Overview of exchange rate contracts on 31/12/2005

Rights from exchange rate contracts < 6 months: EUR 2.9 m

Liabilities from exchange rate contracts < 6 months: EUR 4.4 m

The fl uctuation in the market value of these exchange rate

contracts has been included in the profi t and loss account and

amounted to a EUR 32k positive balance.

Credit risk

In view of the relative concentration of credit risk (see note V.5.10

Trade receivables), Sioen has acquired hedging by taking out

stop-loss insurance. In addition, credit control strategies and

procedures have been devised in order to monitor individual

customers’ credit risk.

The Group manages a portfolio of derivatives to hedge against risks

relating to exchange rate and interest rate positions arising as a

result of operating and fi nancial activities. It is the Group’s policy

to avoid engaging in speculative transactions or transactions with

a leverage effect and not to hold derivatives for trading purposes.

Interest risk

The Group’s interest risk is relatively limited, as the interest rate

on virtually all loans is fi xed. It is the group’s strategy to arrange a

fi xed interest rate for the long-term portion of debts, and to keep

short-term debts fl oating. Thanks to an optimal portfolio of

long-term and short-term debt fi nancing, potential negative

interest-rate fl uctuations are minimised.

In connection with the group’s refi nancing, it was decided in

December 2005 to enlist the support of the capital market via

the issue of a EUR 100 m bond over ten years with fi xed coupon

interest. Because such an operation can easily take three months,

and interest rates at the end of December 2005 were very

attractive, Sioen concluded a ten-year IRS starting in April 2006,

the presumed starting date of the bond. As this IRS can be regarded

as effective cash fl ow hedging as per IAS39, the EUR 636k negative

market value fl uctuation on 31/12/2005 of this IRS has been

deducted from equity.

On 02/02/2006, the market value was up EUR 1,346k, and it was

realised following the hedge strategy at the moment of issuing of

the bond. This received premium satisfi es the conditions for cash

fl ow hedging defi ned in IAS39, and will be spread out over the

term of the bond.

129

2005 2004 2005 2004 deferred deferred tax asset tax liability

Intangible fi xed assets 47 334 Tangible fi xed assets 2.404 1.905 16.917 16.572 Inventories 1.765 1.557 Receivables 312 342 Other assets 2.004 Pension liabilities 411 313 Other provisions 329 Other liabilities 44 215 Conversion differences 1.270 Hedging reserves 216 Undistributed reserves 1.904 5.781 Tax losses carried forward 15.779 16.966 Total 21.307 21.632 20.091 24.357 Write-down on deferred tax receivable (11.027) (9.595) Balance (3.270) (2.776) (3.270) (2.776) Total 7.010 9.261 16.821 21.581 The value of carried-forward tax losses arranged by expiry date

One year Two years Three years 2.037 Four years 1.116 2.037 Five years and later No expiry date 45.481 48.267 Unrecognised carried forward tax losses 32.287 27.392

Unrecognised deferred tax on undistributed reserves 306 259

SIOEN INDUSTRIES I V.5.15 DEFERRED TAX

Current tax receivables which do not appear to be collectable in

the near future are not recognised. In this assessment the

management takes account of budgets and multi-year planning.

130

SIOEN INDUSTRIES I V.5.16 ACQUISITIONS AND DISPOSALS OF INTERESTS

EFFECTS OF ACQUISITIONS AND SALES OF INVESTMENTS

2004

Acquisition of minority interest 25% Coatex - Saint Frères apparel - Bacam

Fair value Carrying value

Non-current assets 1.701 1.701

Current assets 3.049 3.049

Long-term payables 524 524

Short-term payables 1.580 1.580

Fair value of acquired assets and liabilities 2.646

Acquisition price in dash 5.800

Goodwill(1) 3.154

Acquisition Plastylon SAS

Intangible non-current assets(2) 1.875 2.400

Current assets 19 19

Long-term payables

Short-term payables 8 8

Fair value of acquired assets and liabilities 1.886

Acquisition price in cash 1.912

Goodwill 26

2005

Sale Sirec SA

Current assets 44

Equity 8.629

Deferred tax liabilities 3.167

Short-term payables 37

Sale price in cash 10.205

Income3) 1.576

(1) Given that there is no change in audit, this goodwill was directly deducted from the equity.(2) The customer portfolio of Plastylon was booked at fair value.(3) Given that the yield of this sale arises from the reversal of a deferred tax liability, this is included in deferred tax revenue.

131

SIOEN INDUSTRIES I VI. OTHER

VI.1 OPERATIONAL LEASING LIABILITIES 2005 2004 Amounts recorded as costs 1.030 260 Payments due within 1 year 953 583 Within 1 and 5 years 956 635 After 5 years 129 Minimum future payments 2.038 1.218

Issue of bond loan

On 14 March 2006 a 10-year bond loan listed on Eurolist by

Eurolist Brussels was successfully issued in an amount of EUR 100

million and at a fi xed coupon rate of 4.75%. An IRS (Interest Rate

Swap) was concluded on 20/12/2005 to cover the interest rate of

this bond issue. Under the note ‘Financial Instruments’ this IRS is

described as ‘Cash Flow Hedging’.

VI.2 EVENTS AFTER BALANCE SHEET CLOSING DATE

Repayment of a long-term revolving credit

A EUR 20 million revolving credit with a variable interest rate,

drawn down on 20/12/2005 and maturing on 30/06/2007, was

prepaid on 14 March 2006 without penalty charges.

VI.3 OFF-BALANCE SHEET ITEMS 2005 2004 Guarantees given - - Commitments to purchase tangible and intangible fi xed assets 8.516 444

VI.4 TRANSACTIONS WITH RELATED PARTIES Transaction type 2005 Recticel Group sale 2.079Recticel Group purchase 344INCH sale 1.722SVB purchase 170

Other transactions with related parties other than directors are not

included, given the negligible amount (under EUR 70,000).

With regard to directors’ remuneration, the read is referred to

section V.6.B.

132

SIOEN INDUSTRIES I VI. OTHER

VI.5 PERSONNEL

Country 2005 2004 Belgium 902 872China 16 14Germany 18 31France 292 290Ireland 42 37Indonesia 2016 1921Netherlands 7 14Poland 490 531Portugal 25 23Tunesia 788 725UK 34 33USA 15 9Total 4645 4500

Workers 3785 862Salaried employees 860 3638Total 4645 4500

VI.6 AUDITING AND NON-AUDITING SERVICES PROVIDED IN THE CURRENT YEAR Deloitte other Audit services 274 71Remaining legal services Tax services 37 12 Remaining services 85 46

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

133

SIOEN INDUSTRIES I VI. OTHER

❱ Mrs. Michèle Sioen received in 2005 as CEO, besides her

remuneration as a member of the board of directors a fi xed

remuneration of 300.000 Eur. She didn’t receive any variable

remuneration or any other kind of remuneration.

❱ The fees paid to the other executive directors in their capacity

as member of the executive management amounted to an overall

sum, in 2005, of EUR 2.126.123,64. This contains contributions to

pension insurance.

❱ All sums mentioned above are gross sums and contain the entire

cost to the Company.

In 2005 there were no shares, share options or other rights for the

acquisition of shares granted to the CEO and the other members

of the executive management. There are no specifi c recruitment

agreements or agreements for a golden handshake with the

members of the executive management.

VI.8 Remuneration of the directors and

the Executive Management

In 2005 the following fees were paid to the members of the board

of directors and the executive management:

❱ Non-executive and independent directors, as well as the mem-

bers of the executive management in their capacity as director:

Mr Jean-Jacques Sioen EUR 20,000

Ms Michèle Sioen EUR 20,000

Ms Jacqueline Sioen-Zoete EUR 20,000

Ms. Danielle Sioen EUR 20,000

Ms Pascale Sioen EUR 20,000

Mr Pol Bamelis EUR 27,500

Mr Wilfried Vandepoel EUR 26,000

Mr. Louis-Henri Verbeke EUR 26,000

Mr Luc Sterckx EUR 27,500

Mr Luc Vansteenkiste EUR 21,500

134

SIOEN INDUSTRIES I IFRS

IFRS 1 – First-time adoption of International

Financial Reporting Standards

In line with IFRS 1- First-time adoption of IFRSs, the opening

balance sheet has been drawn up by the retroactive application

of those IFRS standards which were in force on the reporting date.

However, IFRS 1 sets out a number of exceptions which can be

applied. Sioen Industries has applied the following exceptions:

❱ Business combinations which took place before the transition

date do not need to be revised retroactively. IFRS 3 – Business

combinations was not retroactively applied to business

combinations which took place before 1 January 2003.

❱ Certain tangible fi xed assets were valued at market value. This

market value is used as the presumed cost price. This exception

was applied for a limited number of items in tangible fi xed assets,

mainly land.

❱ Cumulative actuarial gains and losses were recognised in capital

and reserves on the transition date. After the transition date Sioen

Industries will continue to apply the current “corridor” as

stipulated in IAS 19 - Employee benefi ts.

❱ Previously recognised conversion differences, deriving from the

conversion into euros of the fi nancial statements in other

currencies of foreign entities, were reset to 0.

❱ IFRS 2 - Share-based payment. Sioen Industries has opted to

apply the transitional measures laid down by IFRS 2. As of 31

December 2004 no new capital and reserves instruments were

assigned after 7 November 2002.

Impact of the transition on the consolidated opening

balance sheet on 1 January 2004.

The net assets including minority interests according to Belgian

principles were EUR 125.8 million. In the revised opening balance

sheet according to IFRS, the net assets are EUR 115.6 million.

All adjustments are the consequence of changes in fi nancial

reporting principles, and hence not the consequence of any errors

in the application of the former GAAP (Belgian GAAP) made in

previous annual accounts.

The EUR 10.2 million decrease is accounted for in the reconciliation

table and the notes below.

Impact of the transition from Belgian fi nancial reporting

standards to IFRS

The European directive issued on 19 July 2002 (directive

1606/2002), requires all European listed companies to draw up

their consolidated fi nancial reporting in accordance with IFRS,

the International Financial Reporting Standards, approved by the

European Commission. Sioen Industries has opted to show one

year of comparative information in the fi rst consolidated fi nancial

statements drawn up in accordance with IFRS. Consequently, the

transition date to the IFRSs has been set as 1 January 2004. To

make it possible to display this comparable information, the

opening balance sheet according to Belgian standards on 1 January

2004 has had to be revised in order to calculate the IFRS opening

balance sheet on 1 January 2004. The effects of this revision are

included in the net assets on the IFRS opening balance sheet.

All fi gures are in millions of euros, unless indicated otherwise.

The IFRS opening balance sheet is based on all standards and

interpretations approved by the European Commission on 31

December 2004, apart from IFRS 2 – Share-based payment, which

was approved on 4 February 2005.

Basis for preparation of the IFRS opening balance sheet

For the transition to the IFRSs, Sioen Industries has opted for an

early application of IAS 32 - Financial instruments: disclosure and

presentation and IAS 39 - Financial instruments: recognition and

measurement

135

SIOEN INDUSTRIES I IFRS

approved by the management. Cashfl ows after the budgeted

period are extrapolated using the most appropriate growth rate,

which may not exceed the average long term growth rate for the

sector in which the cash generating unit is active.

The management bases its assumptions (regarding prices, volumes

and return) on past performance and on its expectations with

regard to the market’s development. The weighted average growth

rate is listed in the sector reports in accordance with the forecasts.

The discount rate used is the estimated weighted average cost

of capital for the group before tax, and takes account of current

market assessments of the time value of money and the risks for

which the future cashfl ows are adapted.

In accordance with IFRS 1, all goodwill recorded and recognised ac-

cording to Belgian standards has been subjected to an impairment

test for the transition to IFRS, resulting in a negative impact of EUR

0.5 million (before tax impact).

(1) Intangible fi xed assets

Patents and licences recognised according to Belgian standards are

no longer recognised if they are generated internally, in line with

the recognition criteria in IAS 38 – Intangible fi xed assets.

(2) Goodwill

All goodwill is assigned to cash generating units in a reasonable

and consistent manner. Goodwill will no longer be depreciated, in

accordance with IFRS 3 – Business combinations. However, good-

will will be impairment tested annually, in accordance with IAS 36

– Impairment of assets.

The realisable value of a cash generating unit is usually determined

with reference to the value to the business. For certain clearly

identifi ed assets, the price in a binding sale agreement in a

transaction between (independent) parties on an impartial and

objective basis may be used to determine the realisable value.

For the calculation of the value to the business, cashfl ow forecasts

are used which are based on the fi nancial budget that has been

Reconciliation of the net assets on the transition date published according to Belgian principles

with the net assets according to IFRS

Consolidated capital and reserves including minority interests according to BGAAP on 01/01/2004 125,8

Intangible assets -0,3 (1)

Goodwill -0,5 (2)

Goodwill Roltrans Group -19,9 (3)

Tangible fi xed assets 23,5 (4)

Investment grants -8,8 (5)

Long term receivables -1,0 (6)

Inventories -1,9 (7)

Provisions -0,7 (8)

Deferred tax receivable 7,4 (9)

Deferred tax liabilities -12,3 (10)

Dividends 4,3 (11)

Other adjustments - (12)

Consolidated capital and reserves including minority interests according to IFRS on 01/01/2004 115.6

136

SIOEN INDUSTRIES I IFRS

reserves, have been reclassifi ed and offset against the tangible

fi xed assets for which they were obtained, in accordance with IAS

20 - Accounting for government grants and disclosure of

government assistance.

The components approach is also applicable to tangible fi xed

assets for which government grants have been obtained. This

has led to a negative impact on the net assets of EUR 3,8 million

(before tax impact).

(6) Long term receivables

A long term receivable in the amount of EUR 1.8 million has been

treated as a fi nancial lease with the transition to IFRS. Taking ac-

count of the estimated residual value of the underlying fi xed asset,

this should be written down by EUR 1 million (before tax impact).

(7) Inventories

In application of IAS 2 – Inventories, the book value of inventories

according to Belgian standards should be reduced by EUR 1.9

million (before tax impact).

(8) Provisions

The group has certain pension liabilities, mainly in France where

there is a legal requirement in this area. These liabilities qualify as

defi ned benefi t schemes under IAS 19 and led to the recognition of

EUR 0.7 million (before tax impact) in the opening balance sheet.

(9) Deferred tax receivable

In accordance with IAS 12 – Income taxes, deferred taxes are

calculated on temporary differences between the asset’s fi scal

book value and its book value in the fi nancial statements. The

application of this standard has resulted in the additional

recording of deferred tax assets in the amount of EUR 7.4 million.

Deferred tax assets will be recorded to the extent that it is likely

that taxable profi t will be available against which the recoverable

temporary difference can be offset.

(10) Deferred tax liabilities

Deferred tax liabilities are recorded in the amount of EUR 12.3 mil-

lion, mainly on impacts identifi ed in connection with the

transition from Belgian standards to IFRS.

(3) Goodwill in Roltrans Group

According to Belgian principles and the decision of the Board of

Directors on 28 May 2004, Sioen Industries had no control over

the Roltrans Group. The goodwill consequently continued to be

recorded and depreciated in the annual accounts according to

Belgian principles.

In comparison with Belgian principles, IFRS sets stricter standards

regarding the scope of consolidation. According to SIC 12 –

Consolidation, Special Purpose Entities, the Roltrans Group

satisfi es the defi nition of a special purpose entity. In consequence,

according to IAS 27- Consolidated and Separate Financial

Statements, the Roltrans Group must be retroactively included in

the scope of consolidation of Sioen Industries, from 1999 onwards.

Because the net assets of the Roltrans Group were zero at that

point, the recorded goodwill is no longer recognised in the IFRS

opening balance sheet.

(4) Tangible fi xed assets

In accordance with IFRS 1- First-time adoption of IFRSs, it has been

decided to value certain tangible fi xed assets at market value on

the transition date, and to take this value as the presumed cost

price.

Land in Belgium, France and Poland was valued with reference to

valuation reports by qualifi ed property experts. The use of this

option, in accordance with IFRS 1, has led to an impact on the net

assets of EUR 8 million (before tax impact).

IAS 16 – Property, plant and equipment stipulates that if a signifi -

cant tangible asset consists of several components with different

useful lives, these components should be depreciated separately

(the ‘component approach’). Based on a detailed screening of the

group’s tangible fi xed assets, the signifi cant components were

identifi ed and have been depreciated over the estimated useful life.

The application of this principle results in a positive impact on the

net assets of EUR 15.5 million (before tax impact).

(5) Investment grants

Investment grants in the amount of EUR 5 million, which are

recorded in the Belgian annual accounts under capital and

137

SIOEN INDUSTRIES I VII. IFRS

(12) Other adjustments

On the grounds of immateriality, Roland Ukraine and Sioen USA

were not consolidated according to Belgian principles. It has been

decided to include these entities in the scope of consolidation in

the IFRS opening balance sheet. This results in a negative impact

on the net assets of EUR 8,000.

(11) Dividends

In contrast with Belgian principles, according to IAS 10 – Events

after the balance sheet date dividends should only be recognised

as short term liabilities when the General Meeting of Shareholders

approves them. Consequently the EUR 4.3 million dividend has

been recorded back in the net assets.

Reconciliation of the net assets as at 31/12/2004 and the net result for the period 2004 with notes

Reconciliation of the net assets (including minority interests) published according to Belgian principles as at 31/12/2004

with the net assets (including minority interests) according to IFRS as at 31/12/04

Consolidated capital and reserves including minority interests according to BGAAP on 31/12/2004 129,2

Intangible assets - 0,5 *

Goodwill -17,4 *

Tangible fi xed assets 24,8 *

Investment grants -8,5 *

Long term receivables -1,0 *

Inventories -1,8 *

Provisions -1,2 *

Deferred tax receivable 7,4 *

Deferred tax liabilities -14,3 *

Dividends 4.7 (2)

Goodwill on acquired minority interests -3,1 (1)

Consolidated capital and reserves including minority interests according to IFRS on 31/12/2004 118,3

* this impact on the net assets consists of

❱ impact on capital and reserves in the opening balance sheet

as detailed under the heading ‘Reconciliation of the net assets

on the transition date published according to Belgian principles

with the net assets according to IFRS’

❱ impact on the profi t and loss account for the period 2004

as detailed under the heading ‘Reconciliation of the net result

(including minority interests) published according to Belgian

principles for the period 2004 with the net result according to

IFRS’

(1) Goodwill on acquired minority interests

The goodwill recognised according to Belgian principles on the

acquisition of the minority interest of Coatex, Saint Freres

Confection and Bacam has been directly offset against the

consolidated capital and reserves.

(2) Dividends

In contrast with Belgian principles, according to IAS 10 – Events

after the balance sheet date dividends should only be recognised

as short term liabilities when the General Meeting of Shareholders

approves them. Consequently the EUR 4.7 million dividend has

been reincluded in the net assets as at 31/12/2004.

138

SIOEN INDUSTRIES I VII. IFRS

(4) Investment grants

The components approach is also applicable to tangible fi xed

assets for which government grants have been obtained. This has

led to a positive impact on the result of EUR 0.3 million (before tax

impact).

(5) Inventories

The application of IAS 2 – Inventories, results in a positive impact

on the result of EUR 0.1 million (before tax impact).

(6) Deferred tax liabilities

In accordance with IAS 12 – Income taxes, deferred taxes are

calculated on temporary differences between the asset’s fi scal

book value and its book value in the fi nancial statements. The

application of this standard has resulted in a negative impact on

the result of EUR 1.9 million.

Deferred tax assets have been recorded to the extent that it is

likely that taxable profi t will be available against which the

recoverable temporary difference can be offset.

(7) Bonuses

In contrast with Belgian principles, bonuses payable are not

regarded as a component of profi t distribution, but as an expense

for the year. This has resulted in a negative impact on the result of

EUR 1.3 million.

(8) Provisions

The updating of provisions for other liabilities and charges has had

a negative effect on the result of EUR 0.5 million.

(1) Intangible fi xed assets

Patents and licences recognised according to Belgian standards

have no longer been recognised in the opening balance sheet if

they are generated internally, in line with the recognition criteria in

IAS 38 – Intangible fi xed assets. In 2004 the depreciation recorded

according to BGAAP is thus not included according to IFRS.

(2) Goodwill

In accordance with IFRS 3 – Business combinations, goodwill is no

longer depreciated. This results in a positive impact on the result

of EUR 3.0 million. Goodwill will be impairment tested annually, in

accordance with IAS 36 – Impairment of assets.

(3) Tangible fi xed assets

In accordance with IFRS 1- First-time adoption of IFRSs, it has been

decided to value certain tangible fi xed assets at market value on

the transition date, and to take this value as the presumed cost

price.

IAS 16 – Property, plant and equipment stipulates that if a signifi -

cant tangible asset consists of several components with different

useful lives, these components should be depreciated separately

(the “component approach”). Based on a detailed screening of the

group’s tangible fi xed assets, the signifi cant components were

identifi ed and have been depreciated over the estimated useful

life. As a consequence of an extension of the depreciation period

of certain components, there is a positive impact on the result of

EUR 1.3 million.

Reconciliation of the net result (including minority interests) published according to Belgian principles

for the period 2004 with the net result according to IFRS

Net result including minority interests according to BGAAP on 31/12/2004 12,4

Intangible assets -0,2 (1)

Goodwill 3,0 (2)

Tangible fi xed assets 1,3 (3)

Investment grants 0,3 (4)

Inventories 0,1 (5)

Provisions -0,5 (8)

Deferred tax liabilities -1,9 (6)

Bonuses -1,3 (7)

Net result including minority interests according to IFRS on 31/12/2004 13,2

139

SIOEN INDUSTRIES I VII. IFRS

Comparison of the net result (including minority interests) published according to Belgian

principles for the period 2004 with the net result according to IFRS

Profi t and loss account for year ending 31/12/04 BGAAP Effect of transition IFRS

Operating income 303,403.00 -1,503.00 301,900.00

Operating costs 273,606.00 1,307.00 274,913.00

Operating profi t 29,797.00 -2,810.00 26,987.00

Net fi nancial costs 10,801.00 -3,460.00 7,341.00

Extraordinary costs 2,193.00 -2,193.00

Profi t before tax 16,803.00 2,843.00 19,646.00

Tax 4,423.00 2,097.00 6,520.00

Profi t after tax 12,380.00 746.00 13,126.00

Comparison of the balance sheet published according to Belgian principles for the period 2004 with the balance sheet according to IFRS

Assets as at 31/12/04 BGAAP Effect of transition IFRS

Fixed assets 167,054.00 3,677.00 170,731.00

Intangible fi xed assets 3,108.00 -312.00 2,796.00

Goodwill 32,061.00 -15,513.00 16,548.00

Tangible fi xed assets 131,176.00 10,266.00 141,442.00

Investment grants

Financial fi xed assets 709.00 -25.00 684.00

Deferred tax receivable 9,261.00 9,261.00

Current assets 164,731.00 -4,802.00 159,929.00

Accounts receivable due in more than one year 0.00

Inventories 72,277.00 -1,811.00 70,466.00

Accounts receivable due in less than one year 75,363.00 -3,068.00 72,295.00

Investments 1,963.00 1,963.00

Cash and cash equivalents 12,823.00 100.00 12,923.00

Deferred expenses and accrued income 2,305.00 -23.00 2,282.00

ASSETS 331,785.00 -1,124.00 330,661.00

140

SIOEN INDUSTRIES I VII. IFRS

Liabilities as at 31/12/04 BGAAP Effect of transition IFRS

Net assets 129,180.00 -10,878.00 118,302.00

Net assets 123,913.00 -5,611.00 118,302.00

Investment grants 5,267.00 -5,267.00

Provisions and deferred taxes 7,656.00 17,674.00 25,330.00

Provisions 2,386.00 1,363.00 3,749.00

Deferred taxes 5,270.00 16,311.00 21,581.00

Accounts payable 194,949.00 -7,920.00 187,029.00

Accounts payable due in more than one year 68,571.00 -49.00 68,522.00

Accounts payable due in less than one year 125,495.00 -7,850.00 117,645.00

Accrued expenses and deferred income 883.00 -21.00 862.00

LIABILITIES 331,785.00 -1,064.00 330,661.00

Impact of the change from Belgian GAAP to IFRS for the fi rst and second half of 2004.

Reconciliation of the net result (including minority interests) published under Belgian GAAP

for the fi rst and second half of 2004 and of the net result under IFRS for the same periods.

1 H 2004 2 H 2004

Net result at 31/12/2004 including minority interests,

in accordance with Belgian GAAP 8,2 4,2

Intangible fi xed assets -0,2 *

Goodwill 1,5 1,5 *

Tangible fi xed assets 0,7 0,6 *

Investment grants 0,3 *

Stocks -0,8 0,9 *

Provisions -0,5 *

Deferred tax liabilities -1,1 -0,8 *

Directors’ fees -0,6 -0,7 *

Other changes 0,1 -0,1 *

Net result, including minority interests under IFRS at 31/12/2004 8 5,2

* impact on the profi t and loss account, as explained in the memo

“Impact of the transition from Belgian fi nancial information

standards to IFRS” under the heading “Reconciliation of the net

result for 2004 (including minority interests) according to Belgian

principles at the net result according to IFRS”.

141

SIOEN INDUSTRIES I VII. IFRS

* The impact on shareholders’ equity consists of

❱ the impact on the shareholders’ equity in the opening

balance sheet, as explained in the memo “Impact of the transi-

tion from Belgian fi nancial reporting standards to IFRS ” under

the heading “Reconciliation of the net assets at transition date

according to Belgian principles and the net assets according to

IFRS”.

❱ the impact on the profi t and loss account for the fi rst half of

2004, as explained in the memo “Impact of the transition from

Belgian fi nancial information standards to IFRS” under the

heading “Reconciliation of the net result for 2004 (including

minority interests) according to Belgian principles and the net

result according to IFRS”.

Comparison of the shareholders’ equity (including minority interests) published in accordance with Belgian standards at 31/12/2003

and shareholders’ equity (including minority interests) in accordance with IFRS standards at 30/06/2004

Shareholders’ liability at 30/06/2004, including minority interests, in accordance with Belgian GAAP 134

Intangible fi xed assets -0,3 *

Goodwill -19,0 *

Tangible fi xed assets 24,2 *

Investment grants -8,4 *

Amounts payable after one year -1,0 *

Stocks -2,7 *

Provisions -0,7 *

Deferred tax assets 7,4 *

Deferred tax liabilities -13,4 *

Consolidated shareholders’ equity, minority interests under IFRS at 30/06/2004 120,1

142

SIOEN INDUSTRIES I VIII. STATUTORY AUDITOR’S REPORT

information required for our audit. We have examined, on a test basis, the evidence supporting the amounts in the consolidated fi nancial statements. We have assessed the basis of the accounting methods used, the consolidation policies and signifi cant estimates made by management as well as evaluating the presentation of the consolidated fi nancial statements taken as a whole. We believe that our audit, together with the reports of other auditors on which we have relied, provides a reasonable basis for our opinion. In our opinion, and based, to the extent necessary upon the reports of other auditors, the consolidated fi nancial statements give a true and fair view of the group’s fi nancial position as of 31 December 2005, and of its results and its cash fl ows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the EU and with the legal and regulatory requirements applicable in Belgium.

Additional attestationsWe supplement our report with the following attestations which do not modify our audit opinion on the consolidated fi nancial statements:

❱ The directors’report on the consolidated fi nancial statements includes the information required by law and is

in agreement with the consolidated fi nancial statements. However, we are unable to express an opinion on the

description of the principle risks and uncertainties confronting the group, or on the status, future evolution, or signifi cant infl uence of certain factors on its future development. We can, nevertheless, confi rm that the information given is not in obvious contradiction with any information obtained in the context of our appointment.

❱ Relating to note VII “Impact of the transition from Belgian fi nancial reporting standards to IFRSs”, we refer to the statutory auditor’s reports issued respectively on 28 May 2004 and 23 March 2005 on the consolidation fi nancial statements of the group in accordance with Belgian fi nancial reporting standards as of 31 December 2003 and 2004.

29 March 2006The Statutory Auditor

DELOITTE Reviseurs d’EntreprisesSC s.f.d. SCRL represented by Guy Wygaerts and Geert Verstraeten

To the Shareholders

As required by law and the company’s articles of association, we are pleased to report to you on the audit assignment which you have entrusted to us.

We have audited the accompanying consolidated fi nancial state-ments of Sioen Industries NV (“the company”) and its subsidiaries ( jointly “the group”), prepared in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. Those consolidated fi nancial statements comprise the consolidated balance sheet as at 31 December 2005, the consoli-dated income statement, the consolidated statement of changes in equity and the consolidated cash fl ow statement for the year then ended, as well as the summary of signifi cant accounting policies and other explanatory notes. The consolidated balance sheet shows total assets of EUR 337.683 (000) and a consolidated profi t (group share) for the year then ended of EUR 13.582 (000). We have also performed those specifi c additional audit procedures required by the Companies Code.

The Board of Directors of the company is responsible for the preparation of the consolidated fi nancial statements and the directors’report on the consolidated fi nancial statements, for the assessment of the information that should be included in the directors’report on the consolidated fi nancial statements, and for the company’s compliance with the requirements of the Companies Code and the articles of association.

Our audit of the consolidated fi nancial statements was conductedin accordance with legal requirements and auditing standards applicable in Belgium, as issued by the “Institut des Reviseurs d’Entreprises/Instituut der Bedrijfsrevisoren”.

The fi nancial statements of several signifi cant entities included in the scope of consolidation which represent 21,2% of total assets and 28,3% of total sales have been audited by other auditors. Our opinion on the accompanying consolidated fi nancial statements, insofar as it relates to the amounts contributed by those entities, is based solely upon the reports of those other auditors.

Unqualifi ed audit opinionon the consolidated fi nancial statementsThe forementioned auditing standards require that we plan and perform our audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free of material misstatement.In accordance with these standards, we considered the group’s administrative and accounting organization as well as its internal control processes. We have obtained the explanations and

143

SIOEN INDUSTRIES I IX. STATUTORY ANNUAL ACCOUNTS OF I SIOEN INDUSTRIES NV

Without qualifying the unqualifi ed opinion expressed above, we

draw the attention to the annual report. Sioen Industries NV has

per December 31, 2005, a total outstanding receivable of 17,5 mio

EUR on the Roltrans group, a 100% subsidiary of Sioen Industries

NV. In addition, Sioen Coating Distribution NV, a 100% subsidiary

of Sioen Industries NV, has outstanding receivables on the Roltrans

group for an amount of 15,5 mio EUR. The realisation of these

amounts is dependent of the further successful development of

the realised recovery plan. The accompanying fi nancial statements

do not included any less values or provisions relating to the above.

The statutory annual accounts of the parent company Sioen

Industries n.v. are shown below in condensed form. In June 2006,

the annual report and annual accounts of Sioen Industries n.v. and

the auditor’s report will be fi led with the National Bank of Belgium

in accordance with Articles 98-102 of the Companies Act.

These reports are available on request at the following address:

Sioen Industries n.v. – Fabriekstraat 23 – 8850 Ardooie.

The statutory auditor has issued an unqualifi ed opinion with

explanatory paragraph on the statutory fi nancial statements of

Sioen Industries NV. The explanatory paragraph is as follows:

Condensed balance sheet of Sioen Industries n.v. after appropriation of profi t

(in thousands EUR) 2005 2004 2003 2002December 31 (000) EUR (000) EUR (000) EUR (000) EUR

Fixed assets 65.910 81.976 81.990 56.531

II. Intangible fi xed assets 3.656 3.477 3.472 3.989III. Tangible fi xed assets 1.136 681 555 504IV. Financial fi xed assets 61.118 77.818 77.963 52.038 Current assets 139.941 139.630 136.381 132.578

VII. Amounts receivable within one year 138.611 139.207 136.205 125.800IX. Cash at hand and in bank 1.045 286 46 6.544X. Deferred charges and accrued income 285 137 130 234

Total assets 205.851 221.606 218.371 189.109

Capital and reserves 78.034 80.052 79.660 69.265

I. Capital 46.000 46.000 46.000 46.000IV. Legal reserves 3.339 3.174 2.910 2.167V. Profi t brought forward 28.695 30.878 30.750 21.098 Creditors 127.817 141.554 138.711 119.844

VIII. Amounts payable after one year 51.613 60.284 61.828 68.831IX. Amounts payable within one year 76.100 81.107 76.784 50.787X. Accrued charges and deferred income 104 163 99 226

Total liabilities 205.851 221.606 218.371 189.109

144

SIOEN INDUSTRIES I IX. STATUTORY ANNUAL ACCOUNTS OF I SIOEN INDUSTRIES NV

Condensed income statement of Sioen Industries n.v. (in thousands EUR) 2005 2004 2003 2002Years ended December 31 (000) EUR (000) EUR (000) EUR (000) EUR

I. Operating income 5.954 5.599 5.229 5.528

A.Sales 5.889 5.317 5.010 5.383D.Other operating income 65 282 219 145

II. Operating charges (6.113) (5.886) (5.075) (4.934)

B.Services and other goods 2.110 2.325 1.762 1.545C.Renumeration 3.236 2.579 2.256 1.986D.Depreciation and amounts written off 754 901 1.023 1.392G.Other operating charges 13 81 34 11

III. Operating profi t/loss (159) (287) 154 594

IV. Financial income 16.923 15.758 21.201 19.433

V. Financial charges (6.416) (6.531) (6.012) (5.058)

Financial result 10.507 9.227 15.189 14.375

VI. Profi t on ordinary activities 10.348 8.940 15.343 14.969

VII. Extraordinary result (6.739) (3.596) - -

IX. Profi t before tax 3.609 5.344 15.343 14.969

X. Income taxes (293) (71) (495) (766)

XI. Profi t for the fi nancial year 3.316 5.273 14.848 14.203

145

SIOEN INDUSTRIES I IX. STATUTORY ANNUAL ACCOUNTS OF I SIOEN INDUSTRIES NV

The extraordinary income relates to the capital gain on the

disposal of the participating interest in Sirec.

Accounting principles

The accounting principles and translation rules applied to the sta-

tutory annual accounts of Sioen Industries are the same as those

used for the consolidated annual accounts.

Statement of capital

In accordance with Articles 1 to 4 of the Act of March 2, 1989

concerning the disclosure of important holdings in listed companies

and regulating take-over bids, the applicable quotas were set at,

one the one hand, 5 percent or a multiple thereof and on the other

hand at 3 percent or a multiple thereof. (Article 8 of the Articles

of Association). In accordance with Article 4 of the Act of March 2,

1989, the following notifi cations of shareholdings in the company

were received:

Activity of Sioen Industries

The function of Sioen Industries is essentially to outline the

strategy of the three divisions. It also appoints the management

of the Group companies and supports the Group companies in the

areas of personnel management, fi nancial and treasury manage-

ment, budgeting and controlling, MIS and IT, and legal affairs.

Comments

The turnover of the holding company rose by 10.8% to EUR 5.9

million. Other operating income fell to EUR 0.065 million, as

compared to EUR 0.28 million in 2004. In 2005 the operating loss

amounted to EUR 0.159 million, compared with an operating loss

in 2004 of 0.287 million EUR. Income rose to EUR 10.5 million, as

compared to EUR 9.2 million in 2004, as a result of higher dividend

payments from the various subsidiaries.

These extraordinary results include a permanent impairment of

EUR 8.3 million recorded against the participating interest in TIS

and EUR 5 million against the interest in Pennel, and a long-term

impairment of EUR 2.6 million on the claim against Sungintex.

Situation at 1 May 2006

Notifying party Date of notifi cation Number of shares Percentage of total

number of shares

Sihold n.v.,(1)

Fabriekstraat 23, 8850 Ardooie 18 October 1996 13.365.010 62,5%

Notifi cation of change of percentage shareholding

Sihold n.v. 12 October 2005 12.715.010 59,4%

Shell pension fund 12 October 2005 726.320 3,4%

Sihold n.v. 30 January 2006 12.906.212 60,33%

Total number of shares 21.391.070 100,0%

(1) Sihold n.v. is controlled by Sicorp n.v., which is controlled in turn by the Dutch foundation Stichting Administratiekantor Midapa. This foundation is controlled by the Sioen family.

146

SIOEN INDUSTRIES I X. PROPOSALS TO THE ANNUAL MEETING

Proposals to the Annual Meeting of

Sioen Industries n.v. of May 26, 2006

The board of directors of Sioen Industries proposes to the annual

meeting to approve the annual accounts at December 31, 2005

and to consent to the appropriation of profi t.

The profi t for the fi nancial year ended is 3.315.435,84 EUR,

compared to a profi t of 5.273.005,05 EUR for the fi nancial year

2004. The profi t brought forward from the previous fi nancial year

is 30.878.787,74 EUR. The profi t available for appropriation is

consequently 34.194.223,58 EUR.

The board of directors proposes to appropriate the profi t available for appropriation of 34.194.223,58 EUR as follows:

(in EUR)

Gross dividends for the 21.391.070 shares 5.133.856,80

Directors’ fees 200.000,00

Transfer to the legal reserves 165.771,79

Profi t to be carried forward 28.694.594,99

The proposed net dividend per share is calculated as follows:

(in EUR)

Net dividend per share 0,1800

Withholding tax 25/75 0,0600

Gross dividend per share 0,2400

Pay-out ratio (1) 37,80%

The proposed dividend is 9% higher than that of 2004.

The pay-out ratio amounts to 37,80%.

If this proposal is accepted, the net dividend of 0,18 EUR per share

will be made payable as from June 9, 2006 onwards at the counters

of Dexia Bank, ING Bank, Fortis Bank and KBC Bank on presentation

of coupon n°8.

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

147