EXHIBIT 10.1
PROSPECTUS
[BESI LOGO]
BE SEMICONDUCTOR INDUSTRIES N.V.
(a public company with limited liability incorporated in the Netherlands
with its statutory seat in Amsterdam)
(EURO)46,000,000
5.5% CONVERTIBLE NOTES DUE 2012
ISSUE PRICE: 100%
The (euro)46,000,000 5.5% convertible notes due 2012 (the "Notes") of BE
Semiconductor Industries N.V. ("Besi" or "the Company" or "the Issuer") will, at
any time on or after the Closing Date (as defined herein) (i) be convertible
into ordinary shares ("Ordinary Shares") of the Issuer at a conversion price
(the "Conversion Price") of (euro)5.125 per Ordinary Share, subject to
adjustment in certain circumstances as described herein, to the extent of the
Conversion Amount (as defined herein), and (ii) be redeemable in cash to the
extent of the Cash Settled Amount (as defined herein), at the Redemption Price
(as defined herein), provided that the sum of the Conversion Amount and the Cash
Settled Amount in respect of each Note shall at all times equal (euro)50,000.
The Issuer may at any time by notice to the holders of the Notes increase the
Conversion Amount by an amount specified in such notice and reduce the Cash
Settled Amount by an equal amount, provided that the sum of the Conversion
Amount and the Cash Settled Amount in respect of each Note shall always equal
(euro)50,000. For a description of the rights attaching to the Ordinary Shares,
see "Share Capital, Corporate Structure and Corporate Governance".
Interest on the Notes is payable semi-annually in arrear on 28 January and 28
July in each year, commencing on 28 July 2005. Principal and interest payments
will be made subject to withholding for, and deduction of taxes required by law.
Unless previously redeemed, converted or purchased and cancelled, the Notes will
be redeemed at 100% of their principal amount on 28 January 2012, but may be
redeemed, in whole but not in part, at the option of the Issuer at their
principal amount together with accrued and unpaid interest at any time after 28
January 2009, provided that within a period of thirty (30) consecutive Trading
Days (as defined herein) ending fifteen (15) calendar days prior to the date on
which the relevant notice of redemption is given to Noteholders, the official
closing price of an Ordinary Share on Euronext Amsterdam for twenty (20) Trading
Days, whether or not consecutive, shall have been at least 130% of the
Conversion Price (as defined herein) deemed to be in effect on each of such
Trading Days.
Application has been made to list the Notes on the Official Segment of the stock
market of Euronext Amsterdam N.V. ("Euronext Amsterdam"). The existing issued
Ordinary Shares are listed on Euronext Amsterdam and on the Nasdaq National
Market ("Nasdaq"). The Issuer will apply for the Ordinary Shares issued upon
conversion of any Notes to be admitted to listing on Euronext Amsterdam. The
closing price of the Ordinary Shares on Euronext Amsterdam on 21 January 2005
was (euro)4.04 per Ordinary Share.
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.
Neither the Notes, nor the Ordinary Shares to be issued upon conversion of the
Notes, have been or will be registered under the United States Securities Act of
1933, as amended (the "Securities Act") or with any securities regulatory
authority of any state within the United States. The Notes are being offered in
offshore transactions outside the United States in reliance on Regulation S
("Regulation S") under the Securities Act and, unless the Notes are registered
under the Securities Act or an exemption from the registration requirements of
the Securities Act is available, may not be offered, sold or delivered within
the United States or to or for the account or benefit of U.S. persons (as
defined herein).
The Notes will be issued in registered form. The Notes will be registered in the
name of Nederlands Instituut voor Giraal Effectenverkeer ("Euroclear
Netherlands") or in the name of a participant in Euroclear Netherlands, and
shall be subject to the provisions of the Netherlands Giro Securities
Transactions Act (Wet Giraal Effectenverkeer) and the rules and procedures of
Euroclear Netherlands. Clearance of the Notes on Euronext Amsterdam shall be
effected through Clearnet S.A. (the securities clearing corporation of Euronext
Amsterdam). The Notes have been accepted for delivery through Euroclear
Netherlands, Euroclear Bank S.A./N.V., as operator of the Euroclear System
("Euroclear") and Clearstream Banking, societe anonyme ("Clearstream").
Investors may only hold interests in the Notes through Euroclear or through
Euroclear Netherlands Participants (as defined herein) (including Euroclear and
Clearstream).
This Prospectus is a "prospectus" for the purposes of the rules and regulations
of Euronext Amsterdam.
Sole Lead Manager and Bookrunner
MORGAN STANLEY
25 JANUARY 2005
THIS PAGE IS INTENTIONALLY LEFT BLANK
TABLE OF CONTENTS
IMPORTANT INFORMATION 2
DEFINITIONS 4
SUMMARY 7
PRINCIPAL TERMS AND CONDITIONS OF THE NOTES 10
BESI SUMMARY OPERATING AND FINANCIAL INFORMATION 14
INVESTMENT CONSIDERATIONS 16
TERMS AND CONDITIONS OF THE NOTES 22
USE OF PROCEEDS 42
CAPITALIZATION 43
ORDINARY SHARE PRICE HISTORY 44
DIVIDENDS AND DIVIDEND POLICY 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF BESI'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS 48
ACQUISITION OF DATACON 59
BUSINESS 62
MANAGEMENT AND EMPLOYEES 70
PRINCIPAL SHAREHOLDERS 81
SHARE CAPITAL, CORPORATE STRUCTURE AND CORPORATE GOVERNANCE 82
TAXATION 89
SUBSCRIPTION AND SALE 94
ADDITIONAL INFORMATION 96
SUMMARY OF CERTAIN DIFFERENCES BETWEEN IFRS AND U.S. GAAP 98
INDEX OF FINANCIAL INFORMATION DATACON F-1
1
IMPORTANT INFORMATION
GENERAL
Potential investors in the Notes are expressly advised that an investment in the
Notes may involve financial risk and they should therefore carefully review the
entire contents of this Prospectus.
The Issuer, having made all reasonable enquiries, confirms that, to the best of
its knowledge and belief as at the date hereof, the information contained in
this Prospectus is true and accurate and that there are no other facts the
omission of which would, in the context of the issue of the Notes, make any
statement in this Prospectus misleading in any material respect. The Issuer
accepts responsibility for the accuracy and completeness of this Prospectus.
Potential investors should not assume that the information contained in this
Prospectus is accurate as of any date after the date on the front of the
Prospectus.
The Prospectus does not constitute an offer of, or an invitation by or on behalf
of the Issuer or Morgan Stanley to subscribe for, any of the Notes. The
distribution of this Prospectus and the offering or sale of the Notes in certain
jurisdictions may be restricted by law. Persons into whose possession this
Prospectus may come are required by the Issuer and Morgan Stanley to inform
themselves about and to observe such restrictions. This Prospectus may not be
used for or in connection with any offer to, or solicitation by, anyone in any
jurisdiction or in any circumstances in which such offer or solicitation is not
authorized or is unlawful. For a description of certain further restrictions on
offers and sales of Notes and distribution of this Prospectus, see "Subscription
and Sale".
In connection with the offer of the Notes, Morgan Stanley (or any person acting
for it) may effect transactions with a view to supporting the market price of
the Notes at a level higher than that which might otherwise prevail for a
limited period. However, there is no obligation on Morgan Stanley (or any agent
of it) to engage in such stabilizing activity. Such stabilizing activity, if
commenced, may be discontinued at any time, and must be discontinued 30 days
after the initial announcement of the Offering on 12 January 2005. Stabilization
transactions conducted on Euronext Amsterdam must be conducted by a member of
Euronext Amsterdam and must be conducted in accordance with all applicable laws
and regulations, including those of Euronext Amsterdam and Article 32 of the
Further Regulation on the Behavioral Supervision of the Securities Trade 2002
(Nadere Regeling Gedragstoezicht 2002).
In making an investment decision, potential investors must rely on their own
examination of the Issuer and the terms of the offering, including the merits
and risks involved. Potential investors should not construe anything in this
Prospectus as legal, business or tax advice. Each potential investor should
consult its own advisers, as necessary, before making any investment decision
and in order to determine whether or not such potential investor is legally
permitted to purchase the Notes under applicable laws and regulations.
Morgan Stanley (as Lead Manager and Bookrunner) is acting exclusively for the
Issuer and for no one else in relation to the issue and listing of the Notes and
will not be responsible to anyone other than the Issuer for giving advice in
relation to the Notes. Morgan Stanley, its associates or group companies may
have a holding in, or may from time to time provide advice or other investment
services in relation to, or engage in transactions involving securities in, the
Issuer.
No dealer, salesman or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by or on behalf of the Issuer or Morgan Stanley. Neither
the delivery of this Prospectus nor any sale of Notes shall, under any
circumstances, create any implication that there has been no change in the
information contained herein or in the affairs of the Issuer since the date
hereof.
FINANCIAL AND STATISTICAL INFORMATION
Certain financial and statistical information in this Prospectus has been
subject to rounding adjustments. Accordingly, the sum of certain data may not
conform to the total.
FORWARD-LOOKING STATEMENTS
Certain information in this Prospectus contains forward-looking statements that
involve substantial risks and uncertainties. The Issuer and its representatives
may also make forward-looking statements in materials delivered to holders of
its securities, in press releases or in oral statements to security analysts,
investors and others. Forward-looking statements provide current expectations of
future events based on certain assumptions and include any statement that does
not directly relate to any
2
historical or current fact. Words such as "anticipates", "believes", "expects",
"estimates", "intends", "plans", "projects", "could" and "may" or similar
expressions may identify such forward-looking statements. The risk factors
stated in "Investment Considerations" beginning on page 16, as well as any
cautionary language in this Prospectus, identify certain important factors that
could cause actual results to differ materially from those in the
forward-looking statements and from historical trends. Such forward-looking
statements may relate to various matters, including, without limitation, the
financing position, business, revenue, expenses, profitability, strategy,
acquisitions, disposals, services, products and operating and capital
requirements of the Issuer and expected trends in the industry in which it
operates.
PRESENTATION OF FINANCIAL INFORMATION
This Prospectus should be read in conjunction with the audited consolidated
financial statements of the Issuer for each of the three years ended 31 December
2001, 2002 and 2003 and the interim financial statements of the Issuer for the
nine month periods ended 30 September 2003 and 2004 (which have not been audited
by the Issuer's auditors), that in each case have been prepared in accordance
with U.S. GAAP (as defined herein).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates by reference the following documents that are not
presented in or delivered with this Prospectus but have been filed with or
submitted to the Commission (as defined herein):
- - the financial statements and notes included in Besi's Annual Report on
Form 20-F for the fiscal year ended 31 December 2002;
- - Besi's Annual Report on Form 20-F for the fiscal year ended 31 December
2003; and
- - Besi's Report of Foreign Private Issuer on Form 6-K filed 15 November
2004;
copies of which are available through the Commission's electronic data gathering
and retrieval system which is located at the Commission's website at
www.sec.gov, and may be obtained, free of charge, by writing to the Company.
This Prospectus is qualified in its entirety by the more detailed information
contained in these reports. Capitalized terms used and not otherwise defined
herein are used herein as defined in Form 20-F for the financial year ended 31
December 2003, except as the context may otherwise require.
In addition, all documents or reports filed by Besi pursuant to Sections 13(a),
13(c) or 13(d) of the Exchange Act and, to the extent delivered with or as a
supplement to this Prospectus, certain Reports on Form 6-K submitted to the
Commission by Besi after the date of this Prospectus and prior to the completion
of the offering contemplated hereby, shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing or
submitting of such documents or reports, to the extent not superseded by
documents or reports subsequently filed or submitted.
Any statement contained herein or in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or therein or in any other
subsequently filed document which also is incorporated by reference herein
modifies or replaces such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
INFORMATION ON DATACON
On 4 January 2005, the Company completed its acquisition of Datacon (as defined
herein). In this Prospectus, Datacon is described independently and not as part
of the Company or the Group (as defined hereafter). Similarly, financial
information in relation to the Company included in the Prospectus does not
include financial information in respect of Datacon. For a description of
Datacon, see "Acquisition of Datacon" and "Index of Financial Information
Datacon".
3
DEFINITIONS
AFM The Netherlands Authority for the Financial
Markets (Autoriteit Financiele Markten)
AGENCY AGREEMENT The agreement to be dated on or before the Closing
Date and to be entered into between the Issuer and
the Paying Agent and Conversion Agent relating to
the Notes
ARTICLES OF ASSOCIATION The articles of association of the Issuer, last
amended on 25 May 2004
BESI, THE ISSUER OR THE BE Semiconductor Industries N.V.
COMPANY
BOARD OF MANAGEMENT The board of management of the Issuer (Raad van
Bestuur)
CASH SETTLED AMOUNT (euro)5,002.5, or such lesser amount pursuant to
any notice given by the Issuer as provided in
"Terms and Conditions of the Notes - Condition
6(5)"
CLEARSTREAM Clearstream Banking, societe anonyme
CLOSING DATE 28 January 2005
COMMISSION U.S. Securities and Exchange Commission
CONVERSION AMOUNT (euro)44,997.5 (representing 8,780 Ordinary Shares
at the initial Conversion Price), or such greater
amount pursuant to any notice given by the Issuer
as provided in "Terms and Conditions of the Notes
- Condition 6(5)"
CONVERSION PRICE (euro)5.125 per Ordinary Share, subject to
adjustment from time to time in accordance with
the Terms and Conditions of the Notes as described
in "Terms and Conditions of the Notes - Condition
6(13)"
CORPORATE GOVERNANCE CODE The Dutch corporate governance code published on 9
December 2003 by the Corporate Governance
Committee chaired by Mr. M. Tabaksblat
DATACON Datacon Technology AG
EURIBOR Euro Interbank Offered Rate as at 11:00 CET on the
date in question
EURO, EURO OR (euro) The European currency introduced at the start of
the third stage of European economic and monetary
union pursuant to the Treaty establishing the
European Community, as amended
EUROCLEAR Euroclear Bank S.A./N.V., as operator of the
Euroclear system
EUROCLEAR NETHERLANDS Nederlands Centraal Instituut voor Giraal
Effectenverkeer B.V., the Dutch depositary and
settlement institute
EUROCLEAR NETHERLANDS a participant in Euroclear Netherlands
PARTICIPANTS (aangesloten instelling as defined in The
Netherlands Giro Securities Transaction Act (Wet
giraal effectenverkeer)), including Euroclear and
Clearstream
EURONEXT AMSTERDAM The Official Segment of the stock market of
Euronext Amsterdam
4
N.V., or as the context may require, Euronext
Amsterdam N.V.
EXCHANGE ACT U.S. Securities Exchange Act of 1934, as amended
FICO Fico B.V., a wholly owned subsidiary of Besi, or
any of its subsidiaries, as the case may be
FOUNDATION Stichting Continuiteit BE Semiconductor Industries
GENERAL MEETING OF Shall comprise the actual general meeting of
SHAREHOLDERS shareholders of the Issuer or the corporate body
of the general shareholders' meeting, as the
context may require
GROUP The Issuer and its subsidiaries and affiliated
companies, taken as a whole, but excluding Datacon
and its subsidiaries
IFRS International Financial Reporting Standards
LARGE COMPANY RULES The provisions of Dutch law applicable to "large
companies", included in sections 2:153 et seq. of
the Dutch Civil Code (structuurregeling)
LEAD MANAGER AND BOOKRUNNER Morgan Stanley
MECO Meco International B.V., a wholly owned subsidiary
of Besi, or any of its subsidiaries, as the case
may be
MORGAN STANLEY Morgan Stanley & Co. International Limited
NASDAQ The Nasdaq National Market
NOTES The(euro)46,000,000 5.5% convertible notes due
2012 to be issued by the Issuer on the Closing
Date
ORDINARY SHAREHOLDERS Holders of Ordinary Shares, from time to time
ORDINARY SHARES Ordinary Shares in the share capital of the
Issuer, each with a nominal value of(euro)0.91
PAYING AGENT AND CONVERSION ING Bank N.V., appointed under the terms of the
AGENT Agency Agreement
PREFERENCE SHAREHOLDERS Holders of Preference Shares, from time to time,
when issued
PREFERENCE SHARES The unissued preference shares in the share
capital of the Issuer, with a nominal value
of(euro)0.91 each
REDEMPTION PRICE Is defined in "Terms and Conditions of the Notes -
Condition 6(16)"
REGISTRAR ING Bank N.V., appointed under the terms of the
Agency Agreement
REGULATION S Regulation S under the Securities Act
SECURITIES ACT U.S. Securities Act 1933, as amended
SHAREHOLDERS Ordinary Shareholders and/or Preference
Shareholders, as the case may be
SHARES Ordinary Shares and/ or Preference Shares, as the
case may be
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STOCK OPTION PLAN The stock option plans run by the Issuer, as
described in "Management and Employees - Stock
Option Plans"
SUBSCRIPTION AGREEMENT The subscription agreement dated 11 January 2005
and entered into between Morgan Stanley and the
Issuer
SUPERVISORY BOARD The supervisory board of the Issuer (Raad van
Commissarissen)
TRADING DAY A day on which Euronext Amsterdam is open for
business, but does not include a day on which no
official closing price for Ordinary Shares on
Euronext Amsterdam is reported
UNITED STATES The United States of America, its territories and
possessions, any State of the United States and
the District of Columbia
U.S. GAAP General accepted accounting principles in the
United States
U.S. PERSON A person within the meaning of Regulation S under
the Securities Act
VLSI VLSI Research Inc., an independent research firm
covering the semiconductor industry
6
SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Terms and Conditions of the Notes", "Investment
Considerations" and the financial statements, appearing elsewhere in this
Prospectus or being referred to. This summary is not complete and does not
contain all the information that a prospective investor should consider before
making an investment decision with respect to the Notes.
THE COMPANY
Besi is a leading manufacturer of semiconductor packaging, plating and die
handling equipment for both leadframe and array connect applications (source:
VLSI 2003). The Company designs and manufactures technologically advanced,
high-performance equipment and integrated systems for the semiconductor
industry's assembly process operations. The Company's equipment is used
principally to produce semiconductor packages, which provide the electronic
interface and physical connection between the chip and other electronic
components and protect the chip from the external environment. The Company's
innovative systems offer customers high productivity and improved yields of
defect-free devices at a low total cost of ownership. The Company operates
primarily through its wholly owned divisions. The Company conducts the molding
systems and trim and form integration systems business through Fico. The Company
conducts the plating systems and singulation systems business through Meco. The
Besi die handling division, which was created by combining the Company's former
RD Automation and Laurier subsidiaries, operates the Company's flip chip die
attach systems and die sorting systems businesses.
The Company's customers are leading U.S., European and Asian semiconductor
manufacturers and packaging subcontractors and include Agere, Amkor, ASE, AVX,
Infineon, Micron, Motorola, NSEB, ON Semiconductor, Philips, Skyworks and
STMicroelectronics. The Company's equipment performs critical functions in its
customers' semiconductor assembly operations and in many cases represents a
significant percentage of their installed base of packaging and plating
equipment. The Company's business has benefited from close, long-term
relationships with the Company's customers, many of whom have been purchasing
the Company's equipment and services for over 30 years. The Company believes
that these customer relationships have contributed to its attaining a leading
position in each of the Company's principal product lines.
The Ordinary Shares are listed on Euronext Amsterdam (symbol: BESI) and on
Nasdaq (symbol: BESI).
RECENT EVENTS
ACQUISITION OF DATACON
On 4 January 2005, the Company - partly through a subsidiary - completed the
acquisition of 100% of the ordinary shares of Datacon for a total consideration
of (euro)72.6 million, of which (euro)65 million was paid in cash and the
remainder by the issue of 1,933,842 Ordinary Shares.
Datacon, a private company founded in 1986 and located in Radfeld, Austria, is a
leading global manufacturer of flip chip bonding, multi chip die bonding and
other related assembly equipment for the semiconductor and telecommunications
industries (source: VLSI, 2003), with (euro)58.3 million reported revenue for
the fiscal year ended 31 March 2004 and (euro)39.1 million for the six months
ended 30 September 2004. The financial data in relation to Datacon included in
this Prospectus has been prepared in accordance with IFRS. Reference is made to
"Besi Summary Operating and Financial Information" and "Summary of Certain
Differences between IFRS and U.S. GAAP".
Datacon's products provide a wide range of die bonding capabilities for the
advanced packaging market, ranging from high precision single die attach to
sophisticated multi chip, die and flip chip bonding applications. In addition,
Datacon offers customers tailored solutions ranging from single machines to
entire production lines with equipment integrated from third parties.
Datacon's largest customers are principally European and North American
semiconductor manufacturers such as Epcos, Infineon, Bosch, STMicroelectronics,
Skyworks and Fairchild as well as Asian assembly subcontractors such as Amkor,
ASE and Chippac STATS.
Datacon has production facilities in Radfeld, Austria, Gyor, Hungary and Berlin,
Germany and currently employs approximately 440 people. Datacon has an estimated
installed base of approximately 1,500 machines at customer locations worldwide.
See "Acquisition of Datacon".
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RESTRUCTURING
On 14 December 2004, Besi announced a restructuring of its operations focused
principally on a workforce reduction of 81 employees at its Dutch packaging and
tooling manufacturing operations in Duiven and Brunssum, the Netherlands,
representing approximately 10% of total fixed headcount worldwide, as part of a
plan to address the current downturn in the semiconductor industry. In addition,
Besi announced that it will phase out approximately 50 temporary workers at the
Duiven facility. A component of the restructuring will be the closing of Besi's
tooling facility in Brunssum, the Netherlands in the first half of 2005. The
workforce reductions are expected to occur during the first quarter of 2005.
Besi will take a restructuring charge in the fourth quarter ending 31 December
2004 to cover the estimated costs of this workforce reduction which the Company
does not expect to exceed (euro)5.6 million. Furthermore, in the fourth quarter
of 2004, Besi expects to incur a charge of up to (euro)1.7 million relating to
the write down of certain inventories and work in progress, which would have the
effect of reducing gross margins for the fourth quarter of 2004 by up to 5.5%.
THE OFFERING
SECURITIES OFFERED (euro)46,000,000 principal amount of 5.5% convertible
notes due 2012
LISTING Application has been made to list the Notes on Euronext
Amsterdam. The issued Ordinary Shares are listed on
Euronext Amsterdam, as well as on Nasdaq. The Issuer
will apply for the Ordinary Shares issued upon
conversion of any Notes to be admitted to listing on
Euronext Amsterdam and to be listed, quoted or dealt in
on any other stock exchange or securities market on
which the Ordinary Shares may then be listed or quoted
or dealt in. See "Terms and Conditions of the Notes -
Condition 9".
FIRST DAY OF OFFICIAL Expected to be 28 January 2005
LISTING ON EURONEXT
AMSTERDAM
REGISTRAR, PAYING AGENT ING Bank N.V.
AND CONVERSION AGENT
DELIVERY Investors may only hold interests in the Notes through
Euroclear Netherlands or through Euroclear Netherlands
Participants (including Euroclear and Clearstream). The
Notes have been accepted for delivery through Euroclear
Netherlands, Euroclear and Clearstream.
Neither the Notes nor any of the Ordinary Shares
issuable upon conversion of the Notes has been
registered under the United States Securities Act of
1933, as amended (the "Securities Act"), or any state
securities laws and, accordingly, may not be offered or
sold within the United States or to, or for the account
or benefit of, U.S. persons (within the meaning of
Regulation S under the Securities Act) except pursuant
to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act.
LOCK-UP ARRANGEMENTS Subject to certain exceptions, the Issuer has agreed
that, without the prior written consent of Morgan
Stanley, it will not, subject to certain exceptions,
during the period commencing on 11 January 2005 and
ending 180 days after the Closing Date, directly or
indirectly issue, offer, pledge, sell, contract to issue
or sell, issue or sell any option or contract to
purchase, purchase any option or contract to issue or
sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or
indirectly, any Ordinary Shares or any securities
convertible into or exercisable or exchangeable for
Ordinary Shares; or enter into
8
any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly,
any of the economic consequences of ownership of
Ordinary Shares whether any such swap or transaction is
to be settled by delivery of Ordinary Shares or such
other securities, in cash or otherwise. See
"Subscription and Sale".
USE OF PROCEEDS The aggregate net proceeds from the sale of the Notes,
after deduction of the underwriting commission and
estimated expenses, are estimated to be approximately
(euro)43.5 million. These net proceeds will be used for
general corporate purposes, including working capital
and capital expenditures. In addition, Besi may choose
to repay all or a portion of the credit facilities
assumed upon completion of the acquisition of Datacon.
At 31 December 2004, net debt of Datacon aggregated
(euro)23.3 million. Pending such use, Besi intends to
invest all or a portion of the net proceeds in
short-term, interest-bearing instruments.
9
PRINCIPAL TERMS AND CONDITIONS OF THE NOTES
The following (subject to completion and amendment) are the principal terms and
conditions of the Notes. These should be read in conjunction with, and are
qualified in their entirety by, the Terms and Conditions of the Notes. See
"Terms and Conditions of the Notes".
ISSUER BE Semiconductor Industries N.V.
NOTES (euro)46,000,000 5.5% Convertible Notes due 2012. The
Notes are initially convertible partly into cash and
partly into fully-paid Ordinary Shares, subject to the
terms and conditions of the Notes. See "Terms and
Conditions of the Notes - Condition 6(5)".
CLOSING DATE The Notes will be issued on 28 January 2005.
ISSUE PRICE 100%.
FINAL MATURITY DATE Unless previously redeemed, converted or purchased and
cancelled, the Notes will be redeemed at 100% of their
principal amount on 28 January 2012.
FORM AND DENOMINATION The Notes are in registered form. The Notes will be
registered in the name of Euroclear Netherlands or in
the name of a Euroclear Netherlands Participant, and
shall be subject to the provisions of the Netherlands
Giro Securities Transactions Act (Wet Giraal
Effectenverkeer) and the rules and procedures of
Euroclear Netherlands. Rights in respect of the Notes
registered in the name of Euroclear Netherlands or
registered in the name of a Euroclear Netherlands
Participant take the form of co-ownership rights
(aandelen) in the collective depot (girodepot, as
referred to in the Wet giraal effectenverkeer) of Notes.
The Notes have a denomination of (euro)50,000 each.
RANKING The Notes rank equal in right of payment with all other
existing and future unsubordinated and unsecured
indebtedness of the Issuer and will be senior in right
of payment to all subordinated indebtedness of the
Issuer.
In addition, the Notes will be effectively subordinated
to all of the Company's future secured indebtedness, to
the extent of the value of the collateral securing such
indebtedness, and are and will be effectively
subordinated to all of the existing and future
indebtedness and other liabilities of the Company's
subsidiaries.
See "Terms and Conditions of the Notes -- Condition 3".
NEGATIVE PLEDGE The Notes have the benefit of a negative pledge. See
"Terms and Conditions of the Notes - Condition 4".
CROSS DEFAULT The Notes have the benefit of a cross default. See
"Terms and Conditions of the Notes - Condition 10".
INTEREST RATE 5.5% per annum, payable semi-annually in arrear on 28
January and 28 July commencing on 28 July 2005.
Any Note that is converted will cease to bear interest
at the end of the day immediately preceding the last due
date for interest which precedes the date of such
conversion. See
10
"Terms and Conditions of the Notes - Condition 5".
INITIAL CONVERSION (euro)5.125 per Ordinary Share.
PRICE
The Conversion Price is subject to adjustment in the
circumstances set out in the terms and conditions of the
Notes. See "Terms and Conditions of the Notes -
Condition 6".
CONVERSION Each Note shall entitle the holder (such right a
"Conversion Right"): (i) to convert such Note to the
extent of the Conversion Amount (as at the relevant
Conversion Date) into Ordinary Shares, and (ii) to
redeem such Note to the extent of the Cash Settled
Amount (as at the relevant Conversion Date) of such Note
at the Redemption Price (as defined in Condition 6
(16)).
Conversion Amount means, in respect of each Note for
which the Conversion Right is exercised, (euro)44,997.5
(representing 8,780 Ordinary Shares at the initial
Conversion Price), or such greater amount pursuant to
any notice given by the Issuer as provided in "Terms and
Conditions of the Notes - Condition 6(5)", provided that
the aggregate amount of the Conversion Amount and the
Cash Settled Amount in respect of each Note shall at all
times equal (euro)50,000.
Cash Settled Amount means, in respect of each Note for
which the Conversion Right is exercised, (euro)5,002.5,
or such lesser amount pursuant to any notice given by
the Issuer as provided in "Terms and Conditions of the
Notes - Condition 6(5)", provided that the aggregate of
the Cash Settled Amount and the Conversion Amount in
respect of each Note shall at all times equal
(euro)50,000.
The Issuer may at any time by notice to the holders of
the Notes increase the Conversion Amount by an amount
specified in such notice and reduce the Cash Settled
Amount by an equal amount, provided that the sum of the
Conversion Amount and the Cash Settled Amount in respect
of each Note shall always equal (euro)50,000. The Issuer
will procure that a resolution will be proposed to the
General Meeting of Shareholders to seek authority to
grant the right to subscribe for Ordinary Shares in
respect of a sufficient amount of Ordinary Shares for
the Issuer to be able to satisfy Conversion Rights in
full, at the first annual General Meeting of
Shareholders after the issue date of the Notes and at
each successive General Meeting of Shareholders
thereafter until such a resolution is passed.
The Conversion Right in respect of a Note may be
exercised, at the option of the holder on or after the
Closing Date up to, and including, the close of business
ten Trading Days prior to the Final Maturity Date or, if
the Notes have been called for redemption prior to the
Final Maturity Date, then up to and including the close
of business ten Trading Days prior to the date for
redemption.
The Initial Conversion Price is (euro)5.125 per Ordinary
Share. The Conversion Price is subject to adjustment in
the manner provided for in "Terms and Conditions of the
Notes - Condition 6(13)".
Upon conversion of the Notes, Ordinary Shares will be
11
delivered to Noteholders by way of book entry delivery
through Euroclear Netherlands, or a Euroclear
Netherlands Participant. Certificates in respect of
Ordinary Shares will not be issued directly to
Noteholders, and accordingly a converting Noteholder
will, upon exercise of Conversion Rights, be required to
specify an account with Euroclear Netherlands, or a
Euroclear Netherlands Participant to be credited with
Ordinary Shares issuable upon conversion.
If all of the Notes were to be converted (assuming no
adjustment to the Conversion Price and no rounding for
fractions), a maximum of 8,975,609 Ordinary Shares would
be required to be issued, representing approximately 21%
of the Issuer's outstanding share capital upon
conversion, as at the date of this Prospectus.
RANKING OF ORDINARY Ordinary Shares issued on conversion of the Notes will
SHARES be fully paid and will rank pari passu in all respects
with the fully paid Ordinary Shares in issue on the
Conversion Date. See "Terms and Conditions of the Notes
- Condition 6".
FINAL REDEMPTION Unless previously redeemed, converted or purchased and
cancelled, the Notes will be redeemed at their principal
amount on 28 January 2012.
OPTIONAL REDEMPTION BY The Issuer may at any time on or after 28 January 2009
THE ISSUER redeem the Notes, in whole but not in part, at their
principal amount together with accrued and unpaid
interest to the date of redemption, provided that,
within a period of thirty (30) consecutive Trading Days
ending within fifteen (15) calendar days prior to the
date on which the relevant notice of redemption is given
to Noteholders, the official closing price of an
Ordinary Share on Euronext Amsterdam for twenty (20)
Trading Days, whether or not consecutive, shall have
been at least 130% of the Conversion Price deemed to be
in effect on each of such Trading Days.
The Issuer may at any time on or prior to 28 January
2012 redeem, in whole but not in part, the Notes at
their principal amount together with accrued and unpaid
interest to the date of redemption, if the aggregate
principal amount of the Notes outstanding at such time
is less than 15% of the aggregate principal amount of
the Notes originally issued.
OPTIONAL REDEMPTION BY In the event of a change of control of the Issuer, each
THE NOTEHOLDERS holder of the Notes will have the right to require the
Issuer to redeem all of such holder's Notes at 100% of
their principal amount, together with accrued and unpaid
interest. See "Terms and Conditions of the Notes --
Condition 6(4)".
ABSENCE OF A PUBLIC The Notes are new securities, and there is currently no
MARKET IN THE NOTES established trading market for them. Accordingly, there
can be no assurance as to the development or liquidity
of any market for any of the Notes. Besi does not intend
to apply for a listing of the Notes on any securities
exchange or to arrange for their quotation on any
quotation system, other than the application to list the
Notes on Euronext Amsterdam.
TAXATION Currently, the Netherlands does not impose any
withholding of, or deduction for, taxes in respect of
payments on the Notes prior to their conversion. In the
event any withholding of or deduction for, or on account
of, any present or future taxes,
12
duties, assessments or governmental charges of whatever
nature is required by law, the Company will not be
required to pay any additional amounts with respect to
any such withholding or deduction to the holders of the
Notes. See "Terms and Conditions of the Notes -
Condition 8".
GOVERNING LAW The Notes will be governed exclusively by Dutch law. See
"Terms and Conditions of the Notes - Condition 13".
REGISTRAR, PAYING AGENT ING Bank N.V.
AND CONVERSION AGENT
SALES RESTRICTIONS There are restrictions on the offer and sale of the
Notes, inter alia, in the Netherlands, the United
States, the United Kingdom, Japan and Belgium. See
"Subscription and Sale".
SECURITY NUMBERS FOR ISIN: NL0000116648
THE NOTES
Common code: 020851112
Fondscode: NL02085112
13
BESI SUMMARY OPERATING AND FINANCIAL INFORMATION
Besi makes available annual reports in English containing consolidated financial
statements of the Company prepared on the basis of U.S. GAAP, as well as
statutory financial statements of Besi prepared in accordance with Dutch law, in
each case relating to the preceding two fiscal years and accompanied by an
opinion thereon by its independent public accountants. Besi also makes available
unaudited interim financial information after the end of each quarter. Besi is
exempt from the proxy rules of the Commission under the Exchange Act and is not
required to solicit proxies or prepare proxy statements for shareholders'
meetings.
This Prospectus should be read in conjunction with the audited consolidated
financial statements of the Issuer for each of the three years ended 31 December
2001, 2002 and 2003, and the interim consolidated financial information of the
Issuer for the nine month periods ended 30 September 2003 and 2004 (which have
not been audited by the Issuer's auditors), that in each case have been prepared
in accordance with U.S. GAAP.
The following summary consolidated financial data should be read in conjunction
with the financial statements of the Issuer and the Notes. See "Important
Information - Incorporation of certain documents by reference".
The financial information for Besi included in this Prospectus does not include
financial information for Datacon. Financial information for Datacon - which
reports under IFRS and not under U.S. GAAP - is included elsewhere in this
Prospectus. See "Acquisition of Datacon" for a summary of consolidated financial
data related to Datacon, and see "Index of Financial Information Datacon" for
full financial statements of Datacon including footnotes related thereto.
14
BE SEMICONDUCTOR INDUSTRIES N.V.
SUMMARY CONSOLIDATED FINANCIAL DATA
NINE MONTHS ENDED 30
YEAR ENDED 31 DECEMBER SEPTEMBER
------------------------------------ -------------------------
2003 2004
(Euro amounts in thousands except share and 2001 2002 2003 unaudited) (unaudited)
per share data) ---------- ---------- ---------- ---------- -----------
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales 150,030 83,228 85,500 62,072 95,458
Cost of sales 96,253 55,849 63,345 43,502 64,508
---------- ---------- ---------- ---------- ----------
Gross profit 53,777 27,379 22,155 18,570 30,950
Selling, general and administrative expenses 30,563 26,235 25,436 19,021 20,611
Research and development expenses 15,446 12,470 13,564 9,745 9,327
Restructuring charges 8,306 786 - - -
Impairment of intangibles - 3,302 287 - -
Amortization of intangible assets 3,848 2,591 2,522 1,896 1,852
---------- ---------- ---------- ---------- ----------
Total operating expenses 58,163 45,384 41,809 30,662 31,790
Operating loss (4,386) (18,005) (19,654) (12,092) (840)
Interest income, net 4,240 3,395 2,815 2,132 1,512
---------- ---------- ---------- ---------- ----------
Income (loss) before taxes and equity in loss
of affiliated companies and minority interest (146) (14,610) (16,839) (9,960) 672
Income taxes (benefit) 518 2,404 (3,292) (1,683) 421
---------- ---------- ---------- ----------- -----------
Income (loss) before equity in earnings (loss)
of affiliated companies and minority interest (664) (17,014) (13,547) (8,277) 251
Equity in loss of affiliated companies and
loss on sale of affiliated companies (16,314) - - - -
Minority interest - 3 50 29 29
---------- ---------- ---------- ---------- -----------
`
Net income (loss) (16,978) (17,011) (13,497) (8,248) 280
========== ========== ========== ========== ===========
Earnings (loss) per share
Basic (0.53) (0.54) (0.44) (0.27) 0.01
Diluted (0.53) (0.54) (0.44) (0.27) 0.01
Weighted average number of shares used to
compute earnings (loss) per share
Basic 31,794,675 31,462,482 30,813,681 30,820,091 30,794,660
Diluted 31,794,675 31,462,482 30,813,681 30,820,091 30,874,353
========== ========== ========== ========== ===========
CONSOLIDATED BALANCE SHEET DATA
Cash and cash equivalents 141,506 119,866 108,897 109,219 102,426
Working capital 177,121 157,612 138,437 143,971 146,698
Total assets 271,886 244,998 221,417 225,943 235,843
Long-term debt and capital leases, including
current portion 10,688 9,040 8,879 9,061 14,637
Total shareholders' equity 228,302 200,488 183,506 189,779 183,869
CONSOLIDATED STATEMENTS OF CASH FLOW DATA
Capital expenditures 3,393 4,903 11,889 10,037 2,640
Depreciation of property, plant and equipment 4,495 4,135 3,947 2,797 3,282
Net cash provided by (used in) operating 14,942 (4,224) 5,296 1,874 (11,680)
activities
Net cash provided by (used in) investing 14,729 (8,719) (11,796) (9,773) (2,573)
activities
Net cash provided by (used in) financing (11,392) (6,792) (2,817) (1,623) 7,795
activities ========== ========== ========== ========== ===========
15
INVESTMENT CONSIDERATIONS
Prospective investors in the Notes should carefully consider the following
considerations in addition to the other information presented in this
Prospectus. The investment considerations set forth below are not intended to be
exhaustive and there may be other factors that should be taken into account in
relation to an investment in the Notes. The following important considerations,
among others, could cause the Company's actual results to differ materially from
those contained in forward-looking statements made in this report or presented
elsewhere by management from time to time.
THE COMPANY'S NET SALES AND RESULTS OF OPERATIONS DEPEND IN SIGNIFICANT PART ON
ANTICIPATED DEMAND FOR SEMICONDUCTORS, WHICH IS HIGHLY CYCLICAL, AND THE
SEMICONDUCTOR MARKET HAS RECENTLY EXPERIENCED A SIGNIFICANT AND SUSTAINED
DOWNTURN
Capital expenditures of the Company's customers for semiconductor manufacturing
equipment depend on the current and anticipated market demand for semiconductors
and products using semiconductors. The semiconductor industry is highly cyclical
and has suffered significant economic downturns at various times. These
downturns have involved periods of production overcapacity, oversupply, reduced
prices and lower net sales, and have regularly been associated with dramatically
reduced levels in capital expenditures for semiconductor facilities and
equipment. Due to the lead times associated with the production of semiconductor
equipment, a rise or fall in the level of sales of semiconductor equipment
typically lags any downturn or recovery in the semiconductor market by
approximately nine to twelve months. For example, according to trade association
data, worldwide sales of all semiconductor products grew by more than 40% in
1995, while worldwide semiconductor sales in 2002 decreased by more than 30% as
compared to 2000. This cyclicality has had and is expected to continue to have a
direct effect on the Company's net sales, results of operations and backlog.
Downturns in the industry can be severe and protracted and could again adversely
affect the Company's net sales, results of operations and backlog.
THE COMPANY'S QUARTERLY NET SALES AND OPERATING RESULTS FLUCTUATE SIGNIFICANTLY
The Company's quarterly net sales and operating results have varied in the past
and may continue to fluctuate in the future. The Company believes that
period-to-period comparisons of the Company's operating results are not
necessarily indicative of future operating results. Factors that have caused the
Company's operating results to fluctuate in the past and which are likely to
affect the Company in the future include the following:
- - the volatility of the semiconductor industry;
- - the length of sales cycles and lead-times associated with the Company's
product offerings;
- - the timing, size and nature of the Company's transactions;
- - the market acceptance of new products or product enhancements by the
Company or the Company's competitors;
- - the timing of new personnel hires and the rate at which new personnel
become productive;
- - the changes in pricing policies by the Company's competitors;
- - the changes in the Company's operating expenses;
- - the Company's ability to adjust production capacity on a timely basis to
meet customer demand; and
- - the fluctuations in foreign currency exchange rates.
Because of these factors, investors should not rely on quarter-to-quarter
comparisons of the Company's results of operations as an indication of future
performance. In future periods, the Company's results of operations could differ
from estimates of public market analysts and investors. Such discrepancy could
cause the market price of the Company's securities to fall.
THE COMPANY'S BACKLOG AT ANY PARTICULAR DATE MAY NOT BE INDICATIVE OF THE
COMPANY'S FUTURE OPERATING RESULTS
The Company's backlog amounted to (euro)45.1 million at 30 September 2004. In
market downturns, semiconductor manufacturers historically have cancelled or
deferred additional equipment purchases. For example, backlog decreased
significantly in the third quarter of 2004 due to production and capital
expenditure cutbacks initiated by the Company's customers during this period.
The orders in the Company's backlog are subject to cancellation by the customer
at any time upon payment of a
16
negotiated charge. Because of the possibility of changes in delivery schedules,
cancellations of orders and potential delays in product shipments, the Company's
backlog at any particular date may not be representative of actual sales for any
succeeding period.
The Company's current and future dependence on a small number of customers
increases the revenue impact of each customer's delay or deferral activity. The
Company's expense level in future periods will be based, in large part, on the
Company's expectations regarding future revenue sources and, as a result, the
Company's operating results for any given period in which material orders fail
to occur, are delayed or deferred could vary significantly.
BECAUSE OF THE LENGTHY AND UNPREDICTABLE SALES CYCLE ASSOCIATED WITH THE
COMPANY'S TRANSACTIONS, THE COMPANY MAY NOT SUCCEED IN CLOSING TRANSACTIONS ON A
TIMELY BASIS, IF AT ALL, WHICH WOULD ADVERSELY AFFECT THE COMPANY'S NET SALES
AND OPERATING RESULTS
Transactions for the Company's products often involve large expenditures as the
average selling price for a substantial portion of the equipment the Company
offers exceeds (euro)300,000. The sales cycles for these transactions are often
lengthy and unpredictable. Factors affecting the sales cycle include:
- - customers' capital spending plans and budgetary constraints;
- - the timing of customers' budget cycles; and
- - customers' internal approval processes.
These lengthy sales cycles may cause the Company's net sales and results of
operations to vary from period to period and it may be difficult to predict the
timing and amount of any variations.
The Company may not succeed in closing such large transactions on a timely basis
or at all, which could cause significant variability in the Company's net sales
and results of operations for any particular period.
THE ACQUISITION OF DATACON MAY ADVERSELY AFFECT THE COMPANY'S RESULTS OF
OPERATIONS. IN ADDITION, HISTORICAL FINANCIAL INFORMATION PROVIDED IN THIS
PROSPECTUS IN RELATION TO THE COMPANY AND DATACON MAY NOT BE INDICATIVE OF
FUTURE RESULTS OF OPERATIONS OF THE ENLARGED GROUP
The Company completed its acquisition of Datacon on 4 January 2005. The
acquisition of Datacon is material to the Company based on Datacon's reported
net sales of (euro)58.3 million for the fiscal year ended 31 March 2004 and
(euro)39.1 million for the six months ended 30 September 2004, as opposed to
(euro)85.5 million for the year ended 31 December 2003 and (euro)95.5 million
for the nine months ended 30 September 2004 for the Company. The success of this
acquisition will depend, in part, on the Company's ability to retain key
personnel, and integrate the business of Datacon with the business of the
Company. In addition, the integration efforts relating to the acquisition of
Datacon may divert management attention from its day-to-day activities, disrupt
the Company's ongoing operations, increase the Company's expenses and adversely
impact the Company's results of operations, which could adversely affect the
market price of the Ordinary Shares.
Datacon reports under IFRS and not under U.S. GAAP. In order to consolidate the
financial figures of Datacon with those of the Company, Datacon must prepare its
financial statements according to U.S. GAAP subsequent to the acquisition. The
effects of this change in reporting standards for Datacon's future results of
operations can not yet be established. The Company's results of operations in
future periods may therefore substantially differ from the results of operations
in historical periods and the results of operations for the Company and Datacon
presented in this Prospectus may therefore not be indicative of the results of
operations for future years, which could adversely affect the market price of
the Ordinary Shares. For a summary of certain differences between IFRS and U.S.
Gaap, see "Summary of Certain Differences between IFRS and U.S. GAAP".
A LIMITED NUMBER OF CUSTOMERS HAVE ACCOUNTED FOR A SIGNIFICANT PERCENTAGE OF THE
COMPANY'S NET SALES, AND THE COMPANY'S FUTURE NET SALES COULD DECLINE IF THE
COMPANY CANNOT KEEP OR REPLACE THESE CUSTOMER RELATIONSHIPS
Historically, a limited number of the Company's customers have accounted for a
significant percentage of the Company's net sales. In 2003, the Company's three
largest customers accounted for approximately 46% of the Company's net sales,
with the largest customer accounting for approximately 31% of the Company's net
sales. In the first nine months of 2004, the Company's three largest customers
accounted for approximately 36% of the Company's net sales, with the largest
customer accounting for approximately 19% of the Company's net sales. The
Company anticipates that the Company's results of operations in any given period
will continue to depend to a significant extent upon revenues from a small
number of customers. In addition, the Company anticipates that the identity of
such customers will continue to vary over time, so that the achievement of the
17
Company's long-term goals will require the maintenance of relationships with the
Company's existing clients and obtaining additional customers on an ongoing
basis. The Company's failure to enter into and realize revenue from a sufficient
number of contracts during a particular period could have a significant adverse
effect on the Company's net sales.
THE COMPANY MAY FAIL TO COMPETE EFFECTIVELY IN THE COMPANY'S MARKET
The Company faces substantial competition from established companies, based
primarily in Japan, various other Pacific Rim countries and the United States,
many of which have greater financial, engineering, manufacturing and marketing
resources than the Company itself. The Company believes that once a
semiconductor manufacturer has decided to buy semiconductor assembly equipment
from a particular vendor, the manufacturer often continues to use that vendor's
equipment in the future. Accordingly, it is often difficult to achieve
significant sales to a particular customer once another vendor's products have
been installed. Furthermore, some companies have historically developed,
manufactured and installed back-end assembly equipment internally, and it may be
difficult for the Company to sell its products to these companies.
Most of the Company's principal competitors on a worldwide basis are Japanese,
which historically have dominated the Japanese market because Japanese
semiconductor manufacturers typically purchase equipment from domestic
suppliers. To date, the Company's sales to Japanese customers have been limited.
The Company believes that the limited growth of the Japanese semiconductor
industry in recent years has caused the Company's Japanese competitors to
intensify their efforts to export their products to other areas of the world,
particularly Asia. As a result, competition in these markets has become
increasingly intense.
The Company believes that a decrease in the value of the Japanese yen or the
U.S. dollar and dollar-linked currencies in relation to the euro could lead to
intensified price-based competition in the Company's markets resulting in lower
prices and margins and could have a negative impact on the Company's business
and results of operations.
The Company believes that its ability to compete successfully in its markets
depends on a number of factors both within and outside the Company's control,
including:
- - price, product quality and system performance;
- - ease of use and reliability of the Company's products;
- - manufacturing lead times, including the lead times of the Company's
subcontractors;
- - cost of ownership;
- - success in developing or otherwise introducing new products; and
- - market and economic conditions.
THE COMPANY MUST INTRODUCE NEW PRODUCTS IN A TIMELY FASHION AND IS DEPENDENT
UPON THE MARKET ACCEPTANCE OF THESE PRODUCTS
The Company's industry is subject to rapid technological change and new product
introductions and enhancements. The success of the Company's business strategy
and results of operations are largely based upon accurate anticipation of
customer and market requirements. The Company's ability to implement the
Company's overall strategy and remain competitive will depend in part upon the
Company's ability to develop new and enhanced products and to introduce them at
competitive price levels. The Company must also accurately forecast commercial
and technical trends in the semiconductor industry so that its products provide
the functions required by its customers and are configured to be used in its
customers' facilities. The Company may not be able to respond effectively to
technological changes or to specific product announcements by competitors. As a
result, the introduction of new products embodying new technologies or the
emergence of new industry standards could render the Company's existing products
uncompetitive from a pricing standpoint, obsolete or unmarketable.
Although the Company expects to continue to introduce new products in each of
its product lines, the Company cannot assure you that it will be successful in
developing new products in a timely manner or that any new products will achieve
market acceptance.
THE COMPANY IS LARGELY DEPENDENT UPON ITS INTERNATIONAL OPERATIONS
The Company has manufacturing and/or sales and service facilities and personnel
in, amongst others, the Netherlands, Malaysia, Korea, Hong Kong, Singapore,
Japan, China, Philippines and the United States and the Company's products are
marketed, sold and serviced worldwide. The Company's
18
operations are subject to risks inherent in international business activities,
including, in particular:
- - general economic conditions in each country;
- - the overlap of different tax structures and management of an organization
spread over various countries;
- - currency fluctuations, which could result in increased operating expenses
and reduced revenues;
- - greater difficulty in accounts receivable collection and longer collection
periods;
- - unexpected changes in regulatory requirements, compliance with a variety
of foreign laws and regulations; and
- - import and export licensing requirements, trade restrictions and changes
in tariff and freight rates.
In addition, each region in the global semiconductor equipment market exhibits
unique characteristics that can cause capital equipment investment patterns to
vary significantly from period to period.
THE COMPANY IS DEPENDENT ON NET SALES FROM CUSTOMERS IN VARIOUS PACIFIC RIM
COUNTRIES WHO HAVE EXPERIENCED ECONOMIC DIFFICULTIES IN THE PAST
The Company's net sales are dependent upon customers in various Pacific Rim
countries. Many Pacific Rim countries have experienced banking and currency
difficulties that have led to economic recessions at times in the recent past.
Specifically, the decline in value of the Korean and Southeast Asian currencies,
together with difficulties in obtaining credit, has resulted in a decline in the
purchasing power of the Company's Korean and Southeast Asian customers and has
resulted in the cancellation or delay of orders for the Company's products from
Korean and Southeast Asian customers. In addition, if Japan's economy were to
weaken again, investments by Japanese customers may be negatively affected with
potential negative implications for the economies of other Pacific Rim
countries.
THE COMPANY'S RESULTS OF OPERATIONS HAVE IN THE PAST AND COULD IN THE FUTURE BE
AFFECTED BY CURRENCY EXCHANGE RATE FLUCTUATIONS
For the year ended 31 December 2003, the percentage of the Company's
consolidated net sales that is denominated in euro was approximately 72% whereas
net sales represented by U.S. dollars or dollar-linked currencies was
approximately 28%. Approximately 81% of the Company's costs and expenses were
denominated in euro for such period. For the nine months ended 30 September 2004
the percentage of the Company's consolidated net sales that was denominated in
euro was approximately 52% whereas net sales represented by U.S. dollars or
dollar-linked currencies was approximately 48%. Approximately 83% of the
Company's costs and expenses were denominated in euro for such period. As a
result, the Company's results of operations could be affected by fluctuations in
the value of the euro against the dollar. In recent periods, the value of the
U.S. dollar has declined significantly in comparison with the euro. The Company
seeks to manage its exposure to such fluctuations by hedging firmly committed
sales contracts denominated in U.S. dollars. While management will continue to
monitor the Company's exposure to currency fluctuations and, as appropriate, use
financial hedging instruments to minimize the effect of these fluctuations, the
Company cannot assure you that exchange rate fluctuations will not have an
adverse effect on its results of operations or financial condition.
IF THE COMPANY FAILS TO CONTINUE TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, THE
COMPANY'S BUSINESS MAY BE HARMED
The Company's future operating results depend in significant part upon the
continued contribution of its senior executive officers and key employees,
including a number of specialists with advanced university qualifications in
engineering, electronics and computing. In addition, the Company's business and
future operating results depend in part upon its ability to attract and retain
other qualified management, technical, sales and support personnel for the its
operations. The Company believes that its ability to increase the manufacturing
capacity of its subsidiaries has from time to time been constrained by the
limited number of such skilled personnel. Competition for such personnel is
intense, and the Company may not be able to continue to attract and retain such
personnel. The loss of any key executive or employee or the inability to attract
and retain skilled executives and employees as needed could adversely affect the
Company's business, financial condition and results of operations.
THE COMPANY MAY NOT BE ABLE TO PROTECT ITS INTELLECTUAL PROPERTY RIGHTS, WHICH
COULD MAKE THE COMPANY LESS COMPETITIVE AND CAUSE THE COMPANY TO LOSE MARKET
SHARE
Although the Company seeks to protect its intellectual property rights through
patents, trademarks,
19
copyrights, trade secrets and other measures, the Company cannot assure you that
it will be able to protect its technology adequately, that the Company's
competitors will not be able to develop similar technology independently, that
any of its pending patent applications will be issued, or that intellectual
property laws will protect the Company's intellectual property rights. In
addition, the Company operates internationally, and intellectual property
protection varies among the jurisdictions in which it conducts business.
Litigation may be necessary in order to enforce the Company's patents,
copyrights or other intellectual property rights, to protect its trade secrets,
to determine the validity and scope of the proprietary rights of others or to
defend against claims of infringement. Litigation could result in substantial
costs and diversion of resources and could have a material adverse effect on the
Company's business and operating results. Third parties may seek to challenge,
invalidate or circumvent any patent issued to the Company, and the rights
granted under any patent issued to the Company may not provide competitive
advantages or third parties may assert that the Company's products infringe
patent, copyright or trade secrets of such parties. Furthermore, third parties
may independently develop similar products or duplicate the Company's products.
THE COMPANY IS SUBJECT TO ENVIRONMENTAL RULES AND REGULATIONS IN A VARIETY OF
JURISDICTIONS
The Company is subject to a variety of governmental regulations relating to the
use, storage, discharge and disposal of chemical by-products of, and water used
in, the Company's manufacturing processes. Environmental claims or the failure
to comply with any present or future regulations could result in the assessment
of damages or imposition of fines against the Company, suspension of production
or a cessation of operations. New regulations could require the Company to
acquire costly equipment or to incur other significant expenses. Any failure by
the Company to control the use or adequately restrict the discharge of hazardous
substances could subject the Company to future liabilities.
REPORTING IN ACCORDANCE WITH IFRS MAY DIFFER FROM REPORTING IN ACCORDANCE WITH
U.S. GAAP
Beginning in 2005, the European Commission will require companies that are
quoted on a European stock market, such as Euronext Amsterdam, to publish their
financial statements in accordance with IFRS. While the Company intends to
continue publishing financial statements prepared in accordance with U.S. GAAP,
the Company will also publish the Company's consolidated financial statements in
accordance with IFRS from 1 January 2005 onwards. The Company's financial
condition and results of operations reported in accordance with IFRS may differ
from the Company's financial condition and results of operations reported in
accordance with U.S. GAAP, which could adversely affect the market price of the
Ordinary Shares.
THE COMPANY MAY ACQUIRE OR MAKE INVESTMENTS IN COMPANIES OR TECHNOLOGIES ANY OF
WHICH COULD DISRUPT THE COMPANY'S ONGOING BUSINESS, DISTRACT ITS MANAGEMENT AND
EMPLOYEES, INCREASE THE COMPANY'S EXPENSES AND ADVERSELY AFFECT THE COMPANY'S
RESULTS OF OPERATIONS
As part of the Company's future growth strategy, the Company may from
time-to-time acquire or make investments in companies and technologies. The
Company could face difficulties in integrating personnel and operations from the
acquired businesses and in retaining and motivating key personnel from these
businesses. In addition, these acquisitions may disrupt the Company's ongoing
operations, divert management from its day-to-day activities, increase its
expenses and adversely affect its results of operations. Any future acquisitions
could involve other risks, including the assumption of additional liabilities,
dilutive issuances of equity securities and incurrence of debt. In addition,
these types of transactions often result in charges to earnings for items, such
as amortization of intangible assets or in-process research and development
expenses.
THE COMPANY IS SUBJECT TO PROVISIONS OF DUTCH LAW, WHICH MAY RESTRICT THE
ABILITY OF THE COMPANY'S SHAREHOLDERS TO MAKE SOME DECISIONS
The Company is subject to provisions of Dutch law applicable to large companies
(structuurregeling) that, together with some provisions of the Articles of
Association, have the effect of concentrating control over significant corporate
decisions and transactions in the hands of the Supervisory Board. Under such
regime, the Supervisory Board has the power to appoint and dismiss the members
of the Board of Management. The members of the Supervisory Board are appointed
by the General Meeting of Shareholders, but the Supervisory Board may provide
binding nominations for the majority of the members so to be appointed.
Consequently, this regime may have the effect of delaying or preventing a
takeover attempt, including a takeover attempt that might result in a premium
over the market price for the Ordinary Shares. See "Share Capital, Corporate
Structure and Corporate Governance".
20
ANTI-TAKEOVER PROVISIONS COULD DELAY OR PREVENT A CHANGE OF CONTROL, INCLUDING A
TAKEOVER ATTEMPT THAT MIGHT RESULT IN A PREMIUM OVER THE MARKET PRICE FOR THE
ORDINARY SHARES
The Articles of Association provide for the possible issuance of Preference
Shares. Such shares may be issued pursuant to a resolution of the General
Meeting of Shareholders. The General Meeting of Shareholders granted, and the
Supervisory Board approved, the Board of Management's right to issue Preference
Shares. In April 2000 the Company established the Foundation, whose board
consists of five members, four of whom are independent of Besi. The Company has
granted the Foundation a call option pursuant to which the Foundation may
purchase up to 55,000,000 of the Preference Shares. If the Foundation were to
exercise the call option, it may result in delaying or preventing a takeover
attempt, including a takeover attempt that might result in a premium over the
market price for the Ordinary Shares.
ABSENCE OF DEVELOPED MARKET FOR THE NOTES
The Notes are new securities for which there is presently no established market
and none may develop. Although Morgan Stanley has informed the Company that it
currently intends to make a market in the Notes, Morgan Stanley is not obligated
to do so. The liquidity of any market for the Notes will depend upon the number
of holders of the Notes, the interest of security dealers in making a market in
the Notes and other factors. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Notes.
RANKING AND STRUCTURAL SUBORDINATION OF THE NOTES TO CREDITORS OF THE ISSUER'S
SUBSIDIARIES
The Notes constitute unsubordinated and unsecured indebtedness of the Issuer and
will rank equal in right of payment without any preference or priority among
themselves with all other existing and future unsubordinated and unsecured
indebtedness of the Issuer, and the Notes will rank senior in right of payment
to all future subordinated indebtedness of the Issuer. Generally, claims of
creditors of the Issuer's subsidiaries, including trade creditors, secured
creditors and creditors holding indebtedness and guarantees issued by the
Issuer's subsidiaries, will have priority in a distribution or a winding up of
the assets of such subsidiaries over the claims of the Issuer's creditors.
PRICE VOLATILITY OF THE ORDINARY SHARES
The current market price of the Ordinary Shares may not be indicative of prices
that will prevail in the trading market in the future. In particular, since the
Company's initial public offering in December 1995, the market price of its
Ordinary Shares has experienced significant appreciation and, more recently,
significant depreciation, as have price levels for equity securities generally
and price levels for equity securities of companies associated with the
semiconductor industry and other high-technology fields. In addition, since the
Company's initial public offering, the market price of the Ordinary Shares has
experienced significant fluctuation, including fluctuation that is unrelated to
its performance. The Company expects that this fluctuation will continue in the
future.
21
TERMS AND CONDITIONS OF THE NOTES
The following (subject to completion and amendment, and other than the words in
italics) is the text of the Terms and Conditions of the Notes.
The 5.5% convertible notes due 2012 (the "Notes", which expression shall, unless
the context otherwise requires, include any further securities issued in
accordance with Condition 15 and consolidated and forming a single series with
the Notes) will be issued by BE Semiconductor Industries N.V. (the "Issuer") in
the denomination of (euro)50,000 without coupons. The Notes will mature on 28
January 2012 (the "Final Maturity Date") and be payable at a price of 100% of
the principal amount thereof. The Notes will bear interest at 5.5% per annum
from 28 January 2005, payable semi - annually in arrear on 28 January and 28
July, commencing on 28 July 2005.
At any time on or after 28 January 2005 up to and including the close of
business ten Euronext Amsterdam Business Days prior to the Final Maturity Date,
unless previously redeemed, converted or purchased and cancelled, the Notes will
be, subject as provided in Condition 6, convertible into ordinary shares of the
Issuer, nominal value (euro)0.91 per share (the "Ordinary Shares"). Ordinary
Shares delivered upon any such conversion are referred to herein as "Conversion
Shares". A "Euronext Amsterdam Business Day" means any day on which the Official
Segment of the stock market of Euronext Amsterdam N.V. ("Euronext Amsterdam") is
open for business.
The Notes will be redeemable at the option of the Issuer at any time on or after
28 January 2009, in whole but not in part, upon not more than 30 Euronext
Amsterdam Business Days' nor less than 15 Euronext Amsterdam Business Days'
prior notice, at 100% of their principal amount, together with accrued and
unpaid interest, in the circumstances specified in Condition 6.
The Issuer will enter into a paying agency, conversion agency and registrar
agreement (the "Agency Agreement") to be dated on or about 28 January 2005 with
ING Bank N.V. Copies of the Agency Agreement are available for inspection by
holders of the Notes at the specified office of ING Bank N.V. (being at the
issue date of the Notes at Van Heenvlietlaan 220, 1083 CN Amsterdam. The holders
of the Notes are bound by, and are deemed to have notice of, all of the
provisions of the Agency Agreement.
1. DENOMINATION AND FORM
(1) The Notes will be issued in registered form in the denomination of
(euro)50,000 without interest coupons attached. The Notes are not issuable
in bearer form.
(2) The Notes will be registered in the name of Nederlands Centraal Instituut
voor Giraal Effectenverkeer B.V. ("Euroclear Netherlands") or in the name
of a participant in Euroclear Netherlands (aangesloten instelling as
defined in The Netherlands Giro Securities Transaction Act (Wet giraal
effectenverkeer), including Euroclear Bank S.A./N.V., as operator of the
Euroclear System ("Euroclear") and Clearstream Banking, societe anonyme
("Clearstream"); each: a "Euroclear Netherlands Participant"), and shall
be subject to the provisions of the Netherlands Giro Securities
Transactions Act (Wet Giraal Effectenverkeer) and the rules and procedures
of Euroclear Netherlands. Rights in respect of the Notes registered in the
name of Euroclear Netherlands or registered in the name of a Euroclear
Netherlands Participant take the form of co-ownership rights (aandelen) in
the collective depot (girodepot, as referred to in the Wet giraal
effectenverkeer) of Notes (the "Giro Depot"). In these Terms and
Conditions, "Noteholder" and in relation to a Note: "holder" means a
holder of a co-ownership right in respect of the Notes. Ownership of
interests in the Notes may be held only through Euroclear Netherlands or
through Euroclear Netherlands Participants. The principal amount of the
Notes will be evidenced by the register (the "Register") maintained for
that purpose by a registrar (the "Registrar"), which initially will be ING
Bank N.V.
Neither the Notes nor any of the ordinary shares issuable upon conversion of the
Notes have been registered under the United States Securities Act of 1933, as
amended (the "Securities Act"), or any state securities laws and, accordingly,
may not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons (within the meaning of Regulation S under the
Securities Act) except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act.
22
(3) Upon issuance of the Notes, Euroclear Netherlands will credit, on its
book-entry registration and transfer system, the principal amount of the
Notes to the accounts of Euroclear Netherlands Participants. Entitlement
to beneficial interests in the Notes will be limited to Euroclear
Participants and Euroclear Netherlands Participants or persons that may
hold interests through Euroclear Netherlands Participants. Ownership of
interests in the Notes will be shown on, and the transfer of those
ownership interests will be effected only through, records maintained by
Euroclear Netherlands and Euroclear Netherlands Participants.
(4) Clearance of the Notes on Euronext Amsterdam will be effected through
Clearnet S.A. (the securities clearing corporation of Euronext Amsterdam).
The Notes have been accepted for settlement through Euroclear Netherlands,
Euroclear, as operator of the Euroclear System and Clearstream.
Holders of beneficial interests in the Notes will not be entitled to have the
Notes registered in their names, will not receive or be entitled to receive
physical delivery of Notes in definitive form and will not be considered the
owners or holders of any Notes. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair the ability to transfer or pledge
beneficial interests in the Notes.
2. TRANSFER OF NOTES
(1) The Notes will be registered in the name of Euroclear Netherlands or in
the name of a Euroclear Netherlands Participant, and shall be subject to
the provisions of the Netherlands Giro Securities Transactions Act (Wet
Giraal Effectenverkeer) and the rules and procedures of Euroclear
Netherlands. Rights in respect of the Notes registered in the name of
Euroclear Netherlands or registered in the name of a Euroclear Netherlands
Participant take the form of co-ownership rights (aandelen) in the
collective depot (girodepot, as referred to in the Wet giraal
effectenverkeer) of Notes.
(2) Subject to the Netherlands Giro Securities Transactions Act and the Agency
Agreement and clauses (3) and (4) below, a Note may be transferred in
whole in the authorised denomination by way of a transfer of co-ownership
rights in the Giro Depot. Any such transfer shall be effected by and among
Euroclear Netherlands Participants in accordance with the Netherlands Giro
Securities Transactions Act and the procedures established by Euroclear
Netherlands, as applicable.
(3) Transfers of Notes may not be effected during the period commencing on a
Record Date (as defined in Condition 7(4)) and ending on a related Payment
Date (as defined in Condition 7(5)) (both dates inclusive).
(5) Subject to the Agency Agremeent, a conversion of Notes into Ordinary
Shares will be recorded in the Register and a corresponding reduction of
the aggregate amount of the Notes shall be made by the Registrar.
3. RANKING
The indebtedness evidenced by the Notes will be unsubordinated and unsecured
indebtedness of the Issuer and will rank equal in right of payment without any
preference or priority among themselves, with all other existing and future
unsubordinated and unsecured indebtedness of the Issuer, and the Notes will be
senior in right of payment to all existing and future subordinated indebtedness
of the Issuer.
4. NEGATIVE PLEDGE
(1) So long as any Note remains outstanding, neither the Issuer nor any of its
Subsidiaries will create or assume any mortgage, charge, pledge, lien or
other encumbrance upon the whole or any part of its present or future
undertakings, assets or revenues to secure any Relevant Indebtedness of
any person or give any guarantee or indemnity in respect of any Relevant
Indebtedness of any other person without at the same time (i) securing the
Notes or causing them to be secured equally and rateably therewith, (ii)
providing such other security as shall be approved by a resolution of a
meeting of the Noteholders, or (iii) providing a guarantee or
23
indemnity on substantially identical terms in respect of the Notes,
subject in each case to compliance with applicable law.
In this Condition, "Relevant Indebtedness" means:
(a) any existing or future loan, debt, guarantee or other obligation for
borrowed money which is in the form of or represented by any bond, note,
debenture, debenture stock, loan stock, certificate or other similar
instrument but only if such bond, note, debenture stock, loan stock,
certificate or other similar instrument is, or is capable of being listed,
quoted or traded on any stock exchange or in any securities market
(including, without limitation, any over-the-counter market); and
(b) any guarantee or indemnity in respect of any indebtedness referred to
in Condition 4(1)(a) above.
(2) For the purposes of these Conditions, "Subsidiary" shall have the meaning
given by Section 2:24a of the Dutch Civil Code.
5. INTEREST
(1) The Notes shall bear interest from 28 January 2005 at the rate of 5.5% per
annum, payable semi-annually in arrear on 28 January and 28 July in each
year (each a "Due Date for Interest"), commencing on 28 July 2005, as
provided in Condition 7.
(2) Each Note will cease to bear interest at the end of the day preceding the
Due Date (as defined in Condition 7) for principal unless, upon due
presentation, payment of principal is improperly withheld or refused, in
which case such Note will continue to bear interest at the same rate until
the end of the day on which all amounts due in respect of such Note up to
that day are received at the office of the paying agent named in or
appointed pursuant to Condition 11 (the "Paying Agent"). In the event the
right to convert any Note has been exercised pursuant to Condition 6(5),
such Note shall cease to bear interest at the end of the day immediately
preceding the last Due Date for interest which precedes such conversion.
(3) If interest is required to be calculated for a period which is equal to or
shorter than an Interest Period (as defined below), the day-count fraction
used will be the number of days in the relevant period, from and including
the date from which interest begins to accrue to but excluding the date on
which it falls due, divided by the number of days in the Interest Period
in which the relevant period falls (including the first such day but
excluding the last). The period beginning on the issue date of the Notes
and ending on the first Due Date for interest and each successive period
beginning on a Due Date for interest and ending on the next succeeding Due
Date for interest is called an "Interest Period".
6. REDEMPTION, CONVERSION AND PURCHASE
(1) Unless previously redeemed, converted or purchased and cancelled as
specified below, the Issuer will redeem each Note at 100% of its principal
amount on 28 January 2012 as provided in Condition 7. The Notes may not be
redeemed at the option of the Issuer other than in accordance with
Condition 6(2). Subject to Condition 6(4), the Notes may not be redeemed
at the option of the Noteholders.
(2) (a) The Notes are not entitled to any sinking fund.
(b) At any time on or after 28 January 2009, the Notes will be
redeemable at the option of the Issuer on not more than 30 Euronext
Amsterdam Business Days' nor less than 15 Euronext Amsterdam
Business Days' prior notice (which notice shall be irrevocable), in
whole but not in part, at 100% of their principal amount together
with accrued and unpaid interest to, but excluding, the date fixed
for redemption, provided that, within a period of 30 consecutive
Trading Days ending 15 calendar days prior to the date on which the
relevant notice of redemption is given to the Noteholders as
provided above, the official closing price of an Ordinary Share on
Euronext Amsterdam (as defined in Condition 6(16)) for 20 Trading
Days, whether or not consecutive, shall
24
have been at least 130% of the Conversion Price deemed to be in
effect on each of such Trading Days.
(c) At any time on or prior to 28 January 2012 the Notes will be
redeemable at the option of the Issuer on not more than 30 Euronext
Amsterdam Business Days' nor less than 15 Euronext Amsterdam
Business Days' prior notice (which notice shall be irrevocable), in
whole but not part, if the aggregate principal amount of the Notes
outstanding at such time is less than 15% of the aggregate principal
amount of Notes originally issued. In such case, the Notes will be
redeemed at 100% of their principal amount together with accrued and
unpaid interest to, but excluding the date fixed for redemption.
(d) With respect to any redemption pursuant to this Condition 6(2), the
Issuer will give notice to the Noteholders in accordance with
Condition 12 specifying the redemption date not more than 30
Euronext Amsterdam Business Days' nor less than 15 Euronext
Amsterdam Business Days' prior to that date.
(e) For purposes of Condition 6(2)(b), if on any Trading Day in such 30
day Trading Period, the closing price of the Ordinary Shares shall
have been quoted cum-dividend (or cum any other entitlement) then
the official closing price on each Trading Day on which the Ordinary
Shares have been quoted cum dividend shall be deemed to be the
amount thereof reduced by an amount equal to the Fair Market Value
of any such Dividend or entitlement per Ordinary Share as at the
date of first public announcement of such Dividend or entitlement.
(f) For purposes of Condition 6(2)(c), the aggregate principal amount of
the Notes originally issued shall be the aggregate of the principal
amount of the Notes and the principal amount of any further
securities issued in accordance with Condition 15 and consolidated
and forming a single series with the Notes, but shall not take
account of any Conversion Rights (as described below in Condition
6(5)) exercised or purchases and corresponding cancellations.
(g) All Notes which are redeemed by the Issuer will be forthwith
cancelled pursuant to Condition 6(15) and, accordingly, may not be
reissued or resold.
(h) If any notice requiring the redemption of the Notes is given
pursuant to this Condition 6(2) on or after the fifteenth Euronext
Amsterdam Business Day prior to a Dividend determination date which
has occurred since the last Due Date for interest (or, in the case
of the first Interest Period, since the issue date of the Notes),
whether such notice is given before, on or after such Dividend
determination date, in respect of any dividend or distribution
payable in respect of Ordinary Shares where such notice specifies a
date for redemption falling on or prior to the date which is 14
calendar days after the Due Date for interest next following such
Dividend determination date, interest shall accrue on Notes in
respect of which the Conversion Date falls after such Dividend
determination date and on or prior to the Due Date for interest next
following such Dividend determination date in respect of such
dividend or distribution, from and including the preceding Due Date
for interest (or, if such Conversion Date falls before the first Due
Date for interest, from the issue date of the Notes) to but
excluding such Conversion Date. Any such interest shall be paid by
the Issuer no later than 14 calendar days after the relevant
Conversion Date by euro-denominated cheque drawn on, or by transfer
to, a euro account maintained with a bank in a city in which banks
have access to the TARGET System in accordance with instructions
given by the relevant Noteholder.
(3) (a) In the event of any merger (juridische fusie) of the Issuer with
or into any other company, the Issuer will: (a)(x) if the Issuer is
the continuing entity, ensure that each Note remains convertible
into the number of Ordinary Shares into which such Note could have
been converted prior to such merger taking effect (subject to
adjustment as set out in Condition 6(13)), or (y) if the Issuer is
not the continuing entity, ensure that each Note will be convertible
into the number of shares (or other securities, including depositary
receipts issued for the same) of the continuing entity equal to the
Total Consideration that would have been issued, transferred or paid
by the Issuer to
25
the holder of the number of Ordinary Shares into which such Note
could have been converted upon exercise of such Noteholder's
conversion rights, immediately prior to the merger taking effect
(subject to adjustment as set out in Condition 6(13)) (the
"Consideration Securities"); and (b) appoint an independent
Registeraccountant (registered accountant), to approve the Issuer's
calculation of the number of Consideration Securities, such approval
being evidenced by a written declaration issued by such
Registeraccountant.
(b) In the event of any restructuring of the Issuer's share capital,
other than an event which causes an adjustment to the Conversion
Price pursuant to Conditions 6(13)(a)(A) to (K) or which falls
within clause (a) of this Condition 6(3), the Issuer will: (a)
ensure that each Note will be convertible into the number of shares
(or other securities, including depositary receipts issued for the
same) issued or transferred by the Issuer to the holder of the
number of Ordinary Shares into which such Note could have been
converted upon exercise of such Noteholder's conversion rights,
immediately prior to the restructuring taking effect (subject to
adjustment as set out in Condition 6(13)) (the "New Securities")
plus, if the Ordinary Shares remain in issue, the Ordinary Shares
into which such Note could have been converted upon exercise of such
Noteholder's conversion rights, immediately prior to the
restructuring taking effect (subject to adjustment as set out in
Condition 6(13)); and (b) appoint an independent Registeraccountant
(registered accountant), to approve the Issuer's calculation of the
number of New Securities, such approval being evidenced by a written
declaration issued by such Registeraccountant.
(c) Upon the occurrence of any of the events referred to in this
Condition 6(3), the Issuer will, or will procure that its successor,
if applicable, will enter into a supplement to the Agency Agreement
setting forth and containing such provisions relating to the Notes
as to give the most equitable treatment to Noteholders in accordance
with the provisions of this Condition 6. If such a supplement to the
Agency Agreement is not executed within a reasonable period, the
Issuer may request the president of the Koninklijk Nederlands
Instituut van Registeraccountants to appoint an independent
Registeraccountant to adopt the amendment to the Terms and
Conditions of the Notes. Such adoption will be binding upon the
Issuer, its successor where applicable, and all Noteholders. The
fees of the Registeraccountant appointed pursuant to this Condition
6(3) will be charged to the Issuer. Any supplement to the Agency
Agreement as referred to above will be binding upon all the parties
in this regard. Such supplement to the Agency Agreement will provide
for adjustments which will be as nearly equivalent as may be
practicable to the adjustments provided for in the provisions of
this Condition 6 and shall make such amendments as shall be
necessary to the definition of Ordinary Shares. The above provisions
of this Condition 6(3) will apply in the same way to any subsequent
merger or restructuring.
(d) In the event that the provisions of Conditions 6(3)(a) or 6(3)(b)
apply and such number of the Consideration Securities or the New
Securities, as the case may be, as would enable the Conversion
Rights and all other rights of subscription and exchange for and
conversion into Ordinary Shares to be satisfied in full are not
listed or to be listed on a Recognised Stock Exchange within 10
Euronext Amsterdam Business Days of such merger or restructuring
taking effect, then such merger or restructuring, as the case may
be, shall be deemed to be a "Change of Control" for purposes of
Condition 6(4).
(4) In the event of a Change of Control of the Issuer, each Noteholder will
have the right to require the Issuer to redeem all (but not less than all)
of such Noteholder's Notes at 100% of their principal amount together with
accrued and unpaid interest to, but excluding, the redemption date. The
Issuer shall give each Noteholder notice of such Change of Control in
accordance with the provisions of Condition 12 hereof not later than 14
calendar days after the date on which such Change of Control occurs, which
notice shall contain a statement informing Noteholders of their
entitlement to exercise their right to require redemption of the Notes. To
exercise such option, the Noteholder must deposit with the Registrar (with
a copy to Euroclear Netherlands) a duly completed redemption notice in the
form obtainable from the Registrar, not less than 7 calendar days prior to
the date fixed for redemption. No redemption notice so deposited may be
withdrawn. The date fixed for redemption of Notes pursuant to this
26
Condition 6(4) shall be not more than 60 calendar days nor less than 30
calendar days after the date on which such Change of Control occurs.
(5) Each Noteholder has the right (the "Conversion Right") (i) to convert its
Notes to the extent of the Conversion Amount (as defined in Condition
6(16)) (as at the relevant Conversion Date) into Conversion Shares, in a
form representing good delivery for the purposes of settlement on Euronext
Amsterdam, at any time during the Conversion Period referred to below, and
(ii) to redeem such Note to the extent of the Cash Settled Amount (as
defined in Condition 6(16)) (as at the relevant Conversion Date) of such
Note at the Redemption Price (as defined in Condition 6(6)), subject to
compliance with the provisions of this Condition 6. Upon conversion, the
right of the converting Noteholder to payment of the Note to be converted
shall cease. Subject to, and upon compliance with these Terms and
Conditions, the Conversion Right in respect of a Note may be exercised, at
the option of the holder on or after 28 January 2005 up to and including
the close of business ten Euronext Amsterdam Business Days prior to the
Final Maturity Date or, if the Notes have been called for redemption
pursuant to Clause 6(2) prior to the Final Maturity Date, then up to and
including the close of business ten Euronext Amsterdam Business Days prior
to the date fixed for redemption with respect thereto in accordance with
Clause 6(2), unless the Issuer defaults in making the payment due upon
redemption, in which case the Conversion Right shall extend up to the
close of business on the date on which the full amount of such payment
becomes available and notice of such availability has been duly given to
Noteholders in accordance with Condition 12 or, if earlier, the Final
Maturity Date. The period during which Conversion Rights may be exercised
by a Noteholder is referred to as the "Conversion Period".
Any Redemption Price shall be paid by the Issuer by no later than the
fifth Euronext Amsterdam Business Day following the end of the Redemption
Price Calculation Period by euro-denominated cheque drawn on, or by
transfer to, a euro account maintained with a bank in a city in which
banks have access to the TARGET System in accordance with instructions
given by the relevant Noteholder.
The Issuer may at any time and from time to time by notice to the
Noteholders in accordance with Condition 12, on and with effect from the
date specified in such notice, not being earlier than five Euronext
Amsterdam Business Days after the date on which such notice is given,
increase the Conversion Amount by an amount specified in such notice and
reduce the Cash Settled Amount by an equal amount, provided that the sum
of the Conversion Amount and the Cash Settled Amount in respect of each
Note shall always equal (euro)50,000.
(6) The number of Conversion Shares to be delivered on exercise of a
Conversion Right will be determined by dividing the Conversion Amount of
such Note by the conversion price (the "Conversion Price") in effect on
the relevant Conversion Date. The result of such division shall be rounded
to the third decimal place, with 0.0005 being rounded upwards. If more
than (euro)50,000 in principal amount is converted at any one time by the
same Noteholder, the number of Conversion Shares to be delivered upon such
conversion will be calculated on the basis of the aggregate Conversion
Amount of such Notes being so converted. A Conversion Right may only be
exercised in respect of the authorised denomination of Notes. The initial
Conversion Price is (euro)5.125 per Ordinary Share. The Conversion Price
is subject to adjustment in the manner provided for in Condition 6(13).
(7) Fractions of Conversion Shares will not be issued or transferred and no
cash payment or adjustment will be made in lieu thereof.
Notes surrendered for conversion during the period from the close of
business on any Record Date (as defined in Condition 7(4)) next preceding
any Payment Date for interest to the opening of business on such Payment
Date for interest (except Notes called for redemption within such period)
must be accompanied by payment of an amount equal to the interest thereon
which the registered holder is entitled to receive as well as any other
amounts payable to the Issuer in respect of amounts under Condition 6(13).
No interest on Notes submitted for conversion will be payable by the
Issuer on any Payment Date for interest subsequent to the Conversion Date,
except in the situation described in the immediately preceding sentence.
No other payment or adjustment for premium, interest or dividends is to be
made upon conversion.
27
(8) A Conversion Right may not be exercised by a Noteholder following the
giving of a Termination Notice pursuant to Condition 10 with respect to
its Notes.
(9) To exercise the Conversion Right, the Noteholder must, through the
Euroclear Netherlands Participant, who is shown in the records of
Euroclear Netherlands, as the holder of a book-entry interest in such Note
at that time (i) deliver at its own expense during normal business hours
to the office of the conversion agent named in Condition 11 (the
"Conversion Agent") a notice of conversion (the "Conversion Notice") duly
completed and in duplicate form obtainable from the office of the
Conversion Agent, and (ii) transfer a corresponding principal amount of
Notes to the account of the Conversion Agent with Euroclear Netherlands,
and all amounts to be paid by the Noteholder pursuant to Condition 6(11)
and Condition 6(7), if applicable, provided that the foregoing procedures
shall at all times be subject to the rules and procedures governing the
operations of Euroclear Netherlands. A Conversion Notice once received
shall be irrevocable and become effective on the day on which the
conditions of the first section of this Condition 6(9) have been
fulfilled.
(10) The "Conversion Date" will be deemed to be the day immediately following
the date on which the Conversion Notice shall have become effective in
accordance with Condition 6(9) or, if such day is not a Euronext Amsterdam
Business Day, the next Euronext Amsterdam Business Day.
(11) A Noteholder exercising its Conversion Right must pay any taxes and other
duties arising on conversion of its Notes which he is required to pay by
law.
(12) Upon the exercise by the Noteholder of any Conversion Right, the Issuer
shall, as soon as practicable, and in any event not later than three
Euronext Amsterdam Business Days, after the Conversion Date, effect
delivery of the Conversion Shares through the Issuer's issuing agent
(currently ING Bank N.V.) to Euroclear Netherlands.
Any Additional Shares to be issued pursuant to Condition 6(13)(a) will be
issued, as soon as practicable, and in any event not later than three
Euronext Amsterdam Business Days, after the date the relevant Retroactive
Adjustment (as defined in Condition 6(16)) takes effect or the date of the
issue of Ordinary Shares if the adjustment results from the issue of
Ordinary Shares (each such date, the "Reference Date").
The Conversion Shares issued on conversion will, in each case, be fully
paid and free from any liens, charges, encumbrances, pre-emptive rights or
other third party rights and will rank pari passu in all respects with the
fully paid Ordinary Shares in issue on the Conversion Date (or, in the
case of Additional Shares, on the relevant Reference Date) and will be
entitled to dividends and other distributions and to pre-emptive rights in
respect of issues of Ordinary Shares in accordance with Dutch law.
Holders of beneficial interests in the Notes represented will be required to
take delivery of any Ordinary Shares in the form of a beneficial interest held
through a Euroclear Netherlands Participant.
(13) Adjustment of Conversion Price
(a) The Conversion Price will be adjusted in the manner provided in Condition
6(13)(b) below in the following circumstances, without duplication:
(A) there occurs any alteration to the nominal value of the
Ordinary Shares as a result of consolidation or subdivision of
the Ordinary Shares;
(B) the Issuer makes or causes to be made an issue of any Ordinary
Shares credited as fully paid to the holders of Ordinary
Shares by way of capitalisation of profits or reserves
including any share premium account (except any such
capitalisation made in connection with, and for the purpose of
facilitating, a consolidation or subdivision of Ordinary
Shares, which would be subject to adjustment under clause (A)
above);
(C) the Issuer pays or makes a Dividend (as defined herein) (other
than in the form of Ordinary Shares and falling within clause
(B) above);
28
(D) the Issuer issues or sells Ordinary Shares, or causes Ordinary
Shares to be issued or sold, for a sale price that is less
than 95% of the Current Market Price per Ordinary Share on the
date of pricing of such Ordinary Shares;
(E) the Issuer grants or causes to be granted a free distribution
or dividend of securities that are convertible, exchangeable
or otherwise exercisable into Ordinary Shares to existing
holders of Ordinary Shares;
(F) the Issuer grants or causes to be granted a right, option,
warrant or other security to existing holders of Ordinary
Shares giving them the right to purchase or subscribe for
additional Ordinary Shares or securities that are convertible,
exchangeable or otherwise exercisable into Ordinary Shares;
(G) the Issuer or any Subsidiary or (at the direction or request
of, or pursuant to any arrangements with, the Issuer or any
Subsidiary) any other company, person or entity (otherwise
than any issue or sale falling within (D), (E) or (F) above)
issues or sells, or causes to be issued or sold, securities
that are convertible, exchangeable or otherwise exercisable
into Ordinary Shares and the sale price per equity-linked
security together with any other consideration received by the
Issuer, in respect of such equity-linked security, is less
than 95% of the Current Market Price per Ordinary Share on the
date of the pricing of such newly issued equity-linked
securities;
(H) the Issuer or any Subsidiary or (at the direction or request
of, or pursuant to any arrangements with, the Issuer or any
Subsidiary) any other company, person or entity (otherwise
than any issue or sale falling within (D), (E) or (F) above)
makes or causes to be made a free distribution or dividend of,
or grants a right, option, warrant or other security giving
the right to purchase at less than Fair Market Value (as
defined herein) any other property (not covered by another
paragraph of this Condition 6(13)(a)) to existing holders of
Ordinary Shares;
(I) if, whether by way of statutory demerger (splitsing) or
spin-off (afsplitsing) within the meaning of Section 334a of
Book 2 of the Dutch Civil Code or otherwise, the Issuer
distributes, or causes to be distributed (including in
connection with any merger with or consolidation into another
corporation), in a manner not falling under clause (B) above,
to existing holders of Ordinary Shares (a "Spin-off Event")
equity securities of an issuer other than the Issuer (the
"Spin-off Securities"), or subdivides (a "Reclassification")
the Ordinary Shares into two or more separately quoted classes
of equity securities (such new class(es) of equity securities,
the "Reclassified Securities"), then, subject to applicable
law, one of the following adjustments will be made, as
selected by the Board of Management of the Issuer acting in
good faith and in consultation with an investment bank of
international repute active in the European convertible bond
market selected by the Issuer, from among the options
applicable to such event, effective as of the ex-dividend date
of any Spin-off Event or as of the effective date of any
Reclassification:
(i) if the Spin-off Securities or Reclassified Securities
are publicly traded on a Recognised Stock Exchange, the
Ordinary Shares shall thereafter comprise the securities
comprising the Conversion Shares immediately prior to
such adjustment together with the Spin-off Securities or
the Reclassified Securities, in either case
corresponding to the Ordinary Shares the Noteholder
would have been entitled to receive had he converted the
Notes into Ordinary Shares immediately prior to the
record date of such Spin-off Event or the effective date
of such Reclassification;
(ii) the Conversion Price will be adjusted in accordance with
the formula provided in Condition 6(13)(b)(B) below;
(iii) within five Euronext Amsterdam Business Days after the
ex-dividend date of the Spin-off Event or the effective
date of the Reclassification, the Issuer will deliver
the Spin-off Securities or the Reclassified Securities,
as the case may be, to each Noteholder in either case in
the same amount as the Noteholder would have been
entitled to receive had he converted the Notes into
Ordinary Shares immediately
29
prior to the record date of such Spin-off Event or the
effective date of such Reclassification; or
(iv) within five Euronext Amsterdam Business Days after the
ex-dividend date of the Spin-off Event or the effective
date of the Reclassification, the Issuer will deliver to
each Noteholder an amount in euro equal to the number of
such Spin-off Securities or Reclassified Securities as
such Noteholder would have been entitled to receive had
he converted the Notes into Ordinary Shares immediately
prior to the record date of such Spin-off Event or the
effective date of such Reclassification multiplied by
the Fair Market Value of the Spin-off Securities or
Reclassified Securities on a per share basis, as the
case may be (as determined by means of the procedure
specified in the definition of Fair Market Value below);
or
(J) if there is a modification of the rights of conversion,
exchange or exercise attaching to any of the securities as
mentioned in Condition 6(13)(a)(G) irrespective of the sale
price per equity-linked security together with any other
consideration received by the Issuer in respect of such
equity-linked security at the time of issue or sale of such
security (other than in accordance with the terms (including
terms as to adjustment) applicable to such securities), so
that following such modification the sale price per
equity-linked security together with any other consideration
received by the Issuer in respect of such equity-linked
security is less than 95% of the Current Market Price per
Ordinary Share on the date of such modification;
(K) in the event of a purchase or redemption of Ordinary Shares by
or on behalf of the Issuer where the Volume Weighted Average
Price (before expenses) on any one day in respect of such
purchase or redemption exceeds by more than 5% the Current
Market Price per Ordinary Share on that date or, where an
announcement has been made of the intention to purchase
Ordinary Shares at some future date at a specified price, on
the date of such announcement;
(L) if the Issuer determines in good faith that an adjustment
should be made to the Conversion Price as a result of one or
more events or circumstances not referred to in Conditions
6(13)(a)(A) to (K) (even if the circumstances are specifically
excluded from the operation of any or all of Conditions
6(13)(a)(A) to (K)), the Board of Management of the Issuer,
acting in good faith and in consultation with an investment
bank of international repute active in the European
convertible bond market, shall determine what adjustment (if
any) to the Conversion Price is fair and reasonable to take
account of such events or circumstances and the date on which
such adjustment should take effect. Upon such determination,
such adjustment (if any) shall be made and shall take effect
in accordance with such determination;
provided that, where the circumstances giving rise to any adjustment pursuant to
this Condition 6(13)(a) have already resulted or will result in an adjustment to
the Conversion Price or where the circumstances giving rise to any adjustment
arise by virtue of any other circumstances which have already given or will give
rise to an adjustment to the Conversion Price, such modification shall be made
to the operation of the adjustment provisions as may be determined by the Board
of Management of the Issuer, acting in good faith and in consultation with an
investment bank of international repute active in the European convertible bond
market, to be in their opinion appropriate to give the intended result.
On any adjustment, the resultant Conversion Price, if not an integral multiple
of (euro)0.01, shall be rounded down to the nearest (euro)0.01. No adjustment
shall be made to the Conversion Price where such adjustment (rounded down if
applicable) would be less than 1% of the Conversion Price then in effect. Any
adjustment not required to be made, and any amount by which the Conversion Price
has been rounded down, shall be carried forward and taken into account in any
subsequent adjustment, but such subsequent adjustment shall be made on the basis
that the adjustment not required to be made had been made at the relevant time.
Notice of any adjustments shall be given to Noteholders as soon as practicable
after the determination thereof.
No adjustment will be made to the Conversion Price where Ordinary Shares or
other securities (including rights, warrants or options) are issued, offered,
exercised, allotted, appropriated, modified or
30
granted to employees (including members of the Board of Management or the
Supervisory Board) of the Issuer or any Subsidiary pursuant to any employee
share or stock option scheme (including any scheme for the issue of convertible
bonds to employees) or where Ordinary Shares are purchased for purposes of
satisfying grants under any such scheme, provided that, for so long as any of
the Notes remains outstanding, such schemes in the aggregate do not allow
Ordinary Shares or securities (including, rights, warrants or options)
convertible, exchangeable or otherwise exercisable into Ordinary Shares to be
issued, offered, exercised, allotted, appropriated, modified or granted such
that as a result thereof the number of outstanding Ordinary Shares on the date
of the original issue of the Notes, all other things remaining equal, is, will
be or could be increased by more than 2% per calendar year.
The Conversion Price may not be reduced so that, on conversion of the Notes,
Ordinary Shares would fall to be issued at a discount to their nominal value.
Where more than one event which gives or may give rise to an adjustment to the
Conversion Price occurs within such a short period of time that, in the opinion
of the Board of Management of the Issuer, acting in good faith, a modification
to the operation of the adjustment provisions is required in order to give the
intended result, such modification shall be made to the operation of the
adjustment provisions as may be in their good faith opinion appropriate to give
such intended result.
Subject as provided below, if the Conversion Date in relation to any Note shall
be after the record date for any such issue, distribution, grant or offer (as
the case may be) as is mentioned in Condition 6(13)(a)(B) to (I) which is made
to the shareholders of the Company or any of them, but before the relevant
adjustment becomes effective (such adjustment, a "Retroactive Adjustment"), the
Issuer shall (conditional upon the relevant adjustment becoming effective)
procure that there shall be issued to the converting Noteholder, or in
accordance with the instructions contained in the Conversion Notice, such
additional number of Conversion Shares (if any) (the "Additional Shares") as,
together with the Conversion Shares issued or to be issued on conversion of the
Conversion Amount of the relevant Note, is equal to the number of Conversion
Shares which would have been required to be issued on conversion of the
Conversion Amount of the Note (together with any fraction of a Conversion Share
not so issued) if the relevant adjustment (more particularly referred to in the
said provisions of Condition 6(13)), had in fact been made and become effective
immediately after the relevant record date.
If there is a Retroactive Adjustment to the Conversion Price following the
exercise of Conversion Rights by a Noteholder and the Cash Settled Amount was
greater than or equal to (euro)0.01 on the relevant Conversion Date, the Issuer
shall pay to the relevant Noteholder an additional amount (the "Additional Cash
Amount") equal to the Market Price of such number of Conversion Shares equal to
that by which the number of Reference Ordinary Shares would have been increased
if the relevant adjustment to the Conversion Price had been made and become
effective immediately after the relevant record date, including for this
purpose, any fraction of a Conversion Share.
The Issuer will pay the Additional Cash Amount by no later than the fifth
Euronext Amsterdam Business Day following the Reference Date by euro-denominated
cheque drawn on, or by transfer to, a euro account maintained with a bank in a
city in which banks have access to the TARGET System in accordance with
instructions given by the relevant Noteholder.
(b) If, pursuant to Condition 6(13)(a) above, the Conversion Price is to be
adjusted:
(A) the adjusted Conversion Price in the event(s) described in
Conditions 6(13)(a)(A) and (B) shall be determined as follows:
(X/Y) x CP
where:
X= the number of Ordinary Shares outstanding immediately prior
to the occurrence of such event.
Y= the number of Ordinary Shares outstanding immediately after
the occurrence of such event.
CP= the Conversion Price immediately prior to the occurrence of
such event.
31
(B) The adjusted Conversion Price in the event(s) described in
Conditions 6(13)(a)(C), (E), (F), (H) and (I) shall be determined as
follows:
((P-d)/P) x CP
where:
P= the Current Market Price per Ordinary Share on the day on
which any distribution in respect of which this adjustment is
being made is announced, or, if applicable, on the last day of
the period identified in clause (ii)(x) of the definition of
Fair Market Value below.
d= the Fair Market Value of the Dividend, rights, options or
other securities attributable to one Ordinary Share.
CP= the Conversion Price immediately prior to the occurrence of
such event.
(C) The adjusted Conversion Price in the event(s) described in
Conditions 6(13)(a)(D), (G) and (J) shall be determined as follows:
((X-(Z x c/P)) / (X + Z) x CP
where:
X= the number of Ordinary Shares outstanding immediately prior
to the occurrence of such event.
P= the Current Market Price per Ordinary Share on the day of
the pricing of the securities to be sold or announcement of
the modification.
Z= the number of (i) Ordinary Shares to be sold or (ii)
Ordinary Shares into which such other securities to be sold or
issued are convertible, exchangeable or otherwise exercisable.
c= the sale price per share of (i) the Ordinary Shares to be
sold or (ii) the securities to be sold, issued or modified
that are convertible, exchangeable or otherwise exercisable
into the Ordinary Shares.
CP= the conversion price applicable immediately prior to the
occurrence of such event.
(D) The adjusted Conversion Price in the event(s) described in Condition
6(13)(a)(K) shall be determined as follows:
(((N1 x P) - A) / (N2 x P)) x CP
where:
N1= the number of Ordinary Shares outstanding on the day of such
purchase (the "Purchase Date"), without deducting Ordinary
Shares so purchased or redeemed (the "Purchased Shares").
N2= the number of Ordinary Shares outstanding on the Purchase
Date, after deducting any Purchased Shares.
P= the Current Market Price per Ordinary Share on the Purchase
Date.
A= the aggregate consideration payable to holders of Ordinary
Shares which are the subject of such purchase or redemption.
CP= the Conversion Price immediately prior to the occurrence of
such event.
(14) The Issuer and any of its Subsidiaries may at any time purchase Notes at
any price in the open market or otherwise, provided that such purchases
are in compliance with all applicable laws and regulations.
32
(15) All Notes which are paid will forthwith be cancelled. All Notes so
cancelled and any Notes purchased pursuant to Condition 6(14) and
cancelled pursuant to this Condition 6(15) may not be reissued or resold.
(16) As used in this Condition 6:
"Cash Consideration" means the value in euro of cash and cash equivalents,
including any short-term debt or other instruments effectively equivalent
to cash, to be paid by any person in connection with a Change of Control;
"Cash Settled Amount" means, in respect of each Note for which the
Conversion Right is exercised, (euro)5,002.5, or such lesser amount
pursuant to any notice given by the Issuer as provided in Condition 6(5),
provided that the aggregate of the Cash Settled Amount and the Conversion
Amount in respect of each Note shall at all times equal (euro)50,000;
A "Change of Control" will be deemed to have occurred when: (i) Control of
the Issuer is acquired or deemed to be held by any Person or any Persons
acting in agreement as to the exercise of voting rights which at the date
of the issue of the Notes does not have (and would not be deemed to have)
such Control or an offer to acquire the Ordinary Shares has become or been
deemed unconditional; or (ii) the legal or beneficial ownership of all, or
substantially all of the assets owned by the Issuer, either directly or
indirectly through its Subsidiaries, are acquired by one or more Persons,
provided, however, a Change of Control will not be deemed to have occurred
solely as a result of the issuance or transfer, with the co-operation of
the Issuer's Supervisory Board, Board of Management or the Issuer's
general meeting of shareholders, as applicable, and, in each case, if
required, of any preferred shares in the Issuer's capital to an
independent foundation (stichting) in accordance with the rules of
Euronext Amsterdam;
"Control" means (i) the right or power (as majority shareholder or
otherwise) to appoint and/or remove all or the majority of the members of
the Supervisory Board and/or the Board of Management of the Issuer or
other of the Issuer's governing bodies whether obtained directly or
indirectly and whether obtained by ownership of share capital, the
possession of voting rights, contract or otherwise, or (ii) ownership or
control carrying the right to vote at meetings of the shareholders of more
than 50% of the Issuer's issued share capital;
"Conversion Amount" means, in respect of each Note for which the
Conversion Right is exercised, (euro)44,997.5 (representing 8,780 Ordinary
Shares at the initial Conversion Price), or such greater amount pursuant
to any notice given by the Issuer as provided in Condition 6(5), provided
that the aggregate of the Conversion Amount and the Cash Settled Amount in
respect of each Note shall at all times equal (euro)50,000;
"Current Market Price" means, in respect of an Ordinary Share at a
particular date, the arithmetical mean of the official closing prices as
reported in the Euronext Amsterdam Daily Official List for the Ordinary
Shares for the five consecutive Trading Days preceding and ending on the
Trading Day immediately preceding such date, provided that if at any time
during such five day period the Ordinary Shares shall have been quoted
ex-dividend (or ex any other entitlement) and during some other part of
that period the Ordinary Shares shall have been quoted cum-dividend (or
cum any other entitlement) then: (i) if the Ordinary Shares to be issued
do not rank for the Dividend or entitlement in question, the quotation on
the dates on which the Ordinary Shares shall have been quoted cum-dividend
or entitlement shall, for the purpose of this definition, be deemed to be
the amount thereof reduced by the Fair Market Value of that Dividend or
entitlement per Ordinary Share as at the date of the first public
announcement of such Dividend or entitlement; or (ii) if the Ordinary
Shares to be issued do rank for the Dividend or entitlement in question,
the quotations on the dates on which the Ordinary Shares shall have been
quoted ex-dividend or entitlement shall, for the purpose of this
definition, be deemed to be the amount thereof increased by such similar
amount; and, in each case, provided further that if the Ordinary Shares on
each of such five Trading Days have been quoted cum-dividend (or cum any
other entitlement) in respect of a Dividend or other entitlement which has
been declared or announced but the Ordinary Shares to be issued do not
rank for that Dividend, the quotations on each of such dates shall for the
purposes of this definition be deemed to be equal to the Fair Market Value
of that Dividend or entitlement
33
per Ordinary Share as at the date of the first public announcement of such
Dividend or entitlement;
"Dividend" means any dividend or distribution, whether of cash, assets or
other property, and whenever paid or made and however described (and for
these purposes a distribution of assets includes without limitation an
issue of Ordinary Shares or other securities credited as fully or partly
paid by way of capitalisation of profits or reserves), provided that (i)
where a Dividend is announced which is to be, or may at the election of a
holder or holders of Ordinary Shares be, satisfied by the issue or
delivery of Ordinary Shares or other property or assets, or where a
capitalisation of profits or reserves is announced which is to be, or may
at the election of a holder or holders of Ordinary Shares be, satisfied by
the payment of a cash Dividend, then for the purposes of this definition
the Dividend in question shall be treated as a Dividend of (x) such cash
Dividend or (y) the Fair Market Value on the date of announcement of such
Dividend or capitalisation (as the case may be) or if later, the date on
which the number of Ordinary Shares (or amount of property or assets, as
the case may be) which may be issued or delivered is determined, of such
Ordinary Shares or other property or assets if such Fair Market Value is
greater than the Fair Market Value of such cash Dividend; and (ii) a
purchase or redemption of Ordinary Shares on behalf of the Issuer shall
not constitute a Dividend;
"Dividend determination date" means the date by reference to which an
entitlement to dividends, distributions or any other entitlement is
determined;
"Fair Market Value" means (i) with respect to a cash Dividend or other
cash amount, the amount of such cash; and (ii) with respect to any
property on any date, the fair market value of that property, as
determined by the Board of Management of the Issuer, acting in good faith
and in consultation with an investment bank of international repute active
in the European convertible bond market, provided however that in any such
case: (x) where options, warrants, rights or securities are publicly
traded in a market which is determined by an investment bank of
international repute active in the European convertible bond market
selected by the Issuer to have adequate liquidity, the fair market value
of such options, warrants or other rights shall equal the arithmetic mean
of the daily closing prices of such options, warrants, rights or
securities during the period of eight trading days on the relevant market
commencing on such date (or, if later, the first trading day such options,
warrants, rights or securities are publicly traded) or such shorter period
as such options, warrants, rights or securities are publicly traded; (y)
any cash Dividend declared or paid in a currency other than euro shall be
converted into euro at the rate of exchange used to determine the amount
payable to shareholders of the Issuer who were paid or are to be paid the
cash Dividend in euro; and (z) any other amount or value in a currency
other than euro shall be converted into euro at the Screen Rate on that
date;
"Market Price" means the Volume Weighted Trading Average of an Ordinary
Share on the Reference Date (or, if that is not a Trading Day, on the next
following Trading Day);
"Person" includes any individual, company, corporation, firm, partnership,
joint venture, undertaking, association, organisation, trust, state or
agency of a state (in each case whether or not being a separate legal
entity), but does not include the Issuer's wholly-owned direct or indirect
Subsidiaries;
"Recognised Stock Exchange" means a stock exchange that is a member of the
World Federation of Exchanges and is situated in a Member Country of the
Organisation for Economic Co-operation and Development;
"Redemption Price" means an amount calculated in accordance with the
following formula:
RP=(N)(Sigma)(n=1)1/N xSxP(n)
where:
RP = the Redemption Price;
34
S = the number of Reference Ordinary Shares;
P(n) = the Volume Weighted Trading Average of an Ordinary Share on the
nth dealing day of the Redemption Price Calculation Period; and
N = 10, being the number of Trading Days in the Redemption Price
Calculation Period.
"Redemption Price Calculation Period" means the period of 10 consecutive
Trading Days commencing on the relevant Conversion Date (or the next
dealing day if such date is not a Trading Day);
"Reference Ordinary Shares" means the number of Ordinary Shares (including
any fraction of an Ordinary Share) determined by dividing the Cash Settled
Amount by the Conversion Price on the relevant Conversion Date;
"Screen Rate" means, on any day, and, in respect of the translation or
conversion of one currency into another currency, the rate of exchange
between such currencies appearing on Reuters page ECB 37 on that day, or,
if that page is not available or that rate of exchange does not appear on
that page on that day, the rate of exchange between such currencies
appearing on such other screen or information service, or determined in
such other manner, as the Issuer shall determine in consultation with an
investment bank of international repute active in the European convertible
bond market;
"TARGET System" means the Trans-European Automated Real-Time Gross
Settlement Express Transfer (TARGET) System or any successor thereto;
"Total Consideration" means the value in euro of the shares, securities,
other instruments and Cash Consideration issued or paid by the Issuer (or
continuing entity in any merger, restructuring or other corporate
reorganisation or by the Person or Persons which made an acquisition of
the legal or beneficial ownership of all or substantially all of the
assets owned by the Issuer, either directly or indirectly (through its
Subsidiaries)), to a holder of Ordinary Shares pursuant to such merger,
acquisition, restructuring or other corporate reorganisation;
"Trading Day" means a day on which Euronext Amsterdam is open for
business, but does not include a day on which no official closing price
for Ordinary Shares on Euronext Amsterdam is reported; and
"Volume Weighted Trading Average" means, in respect of an Ordinary Share
on any Trading Day, the order book volume-weighted average price of an
Ordinary Share appearing on or derived from Bloomberg or such other source
as shall be determined to be appropriate by an investment bank of
international repute active in the European convertible bond market
selected by the Issuer on such Trading Day, provided that (i) on any such
Trading Day where such price is not available or cannot otherwise be
determined as provided above, the Volume Weighted Average Price of an
Ordinary Share or in respect of such Trading Day shall be the Volume
Weighted Average Price, determined as provided above, on the immediately
preceding Trading Day on which the same can be so determined; and (ii) if
any Dividend or other entitlement in respect of Ordinary Shares is
announced on or prior to the relevant Conversion Date in circumstances
where the Dividend determination date shall be on or after the relevant
Conversion Date and if on such Trading Day the price determined as
provided above is based on a price ex-dividend or ex any other
entitlement, then such price shall be increased by an amount equal to the
Fair Market Value of any such Dividend or other entitlement per Ordinary
Share as at the date of announcement of such Dividend or entitlement.
7. PAYMENTS
(1) The Issuer irrevocably undertakes to pay in euro, when due, principal,
interest and other amounts which may be payable in accordance with
Condition 6. The amounts due in respect of the Notes shall be paid to the
Noteholders with due observance of any tax, foreign exchange or other laws
and regulations of the country of the relevant Paying Agent without it
being permissible to require the execution of an affidavit or compliance
with any other
35
formality whatsoever, unless such affidavit or formality is prescribed by
the laws of the country of the relevant Paying Agent.
(2) Payments of principal of, and interest on, the Notes shall be made in euro
on the relevant Payment Date (as defined in Condition 7(5)) to Euroclear
Netherlands. Euroclear Netherlands will be discharged of its obligation to
pay by paying the relevant funds to the Euroclear Netherlands Participants
which, according to Euroclear Netherlands' records, hold a share in the
Giro Depot with respect to the Notes, in proportion with the share in the
Collective Depot held by each of such Euroclear Netherlands Participants.
The amount of payments to Euroclear Netherlands shall correspond to the
aggregate principal amount of Notes, as established by the Registrar at
the close of business on the relevant Record Date (as defined in Condition
7(4)). Payments in respect of any definitive Notes shall be made pursuant
to such procedures as may be established by the Paying Agent for such
purpose upon the issuance of any such Notes to reflect then prevailing
market practice. Payment of principal shall be made upon delivery of the
Notes, to a Paying Agent. Except as specifically provided for therein, the
payment of other amounts payable pursuant to Conditions 6 and 8 will be
made in accordance with the provisions of this Condition 7(2).
(3) Payments made by the Issuer in accordance with Condition 7(1) to Euroclear
Netherlands shall discharge the liability of the Issuer under the Notes to
the extent of the sums so paid.
(4) The record date for purposes of payments of principal and interest and
other amounts payable pursuant to Conditions 6 and 8 (the "Record Date")
shall be, in respect of each such payment, the earlier of the following
dates: (i) the date determined in accordance with the rules of Euroclear
Netherlands from time to time for the entitlement of their participants to
payments in respect of debt obligations denominated in euros and (ii) the
tenth Euronext Amsterdam Business Day preceding the relevant due date.
(5) For the purposes of these Terms and Conditions "Payment Date" means the
day on which the payment is actually to be made, where applicable, as
adjusted in accordance with Condition 7(6), and "Due Date" means the date
for making such payments as provided herein, without taking account of any
such adjustment.
(6) If any Due Date for payment of principal or interest in euros in respect
of any Note is not a Euronext Amsterdam Business Day, such payment will
not be made until the next day which is a Euronext Amsterdam Business Day,
and no further interest shall be paid.
8. TAXATION
In the event any withholding of or deduction for, or on account of, any present
or future taxes, duties, assessments or governmental charges of whatever nature
is required by law, no additional amounts with respect to any such withholding
or deduction will be payable to the Noteholders.
9. UNDERTAKINGS
(1) The Issuer will (i) procure that a resolution to disapply pre-emption
rights of shareholders of the Issuer and to grant the right to acquire
Ordinary Shares in respect of a sufficient amount of Ordinary Shares for
the Issuer to be able to satisfy Conversion Rights in full by the delivery
of Ordinary Shares is put to the shareholders of the Issuer at the first
annual general meeting of shareholders of the Issuer held after the issue
date of the Notes and at each successive general meeting of shareholders
of the Issuer therafter until such a resolution is passed, and (ii) give
notice to the Noteholders as soon as practicable following the passing of
such a resolution to increase the Conversion Amount and reduce the Cash
Settlement Amount to the extent permissible by such resolution and
applicable laws.
(2) Whilst any Conversion Right remains exercisable, the Issuer will, save
with the approval of a resolution of the Noteholders passed in accordance
with the terms of the Agency Agreement:
(a) issue and allot, or transfer, and deliver Conversion Shares on
exercise of Conversion Rights in accordance with these Terms and
Conditions and at all times keep available for issue or transfer,
free from pre-emptive or other similar rights, out of its authorised
but unissued share capital and/or in its or any of its Subsidiaries'
treasury such
36
number of Ordinary Shares as would enable it to issue and/or
transfer in full such number of Conversion Shares as are required to
be delivered by it upon the exercise of Conversion Rights (to the
extent of the Conversion Amount) and all other rights of
subscription and exchange for and conversion into Ordinary Shares;
(b) not issue or pay up any securities, in either case by way of
capitalisation of profits or reserves, unless the same gives rise
(or would, but for the provisions of Condition 6(13)(a) relating to
the carry forward of adjustments, give rise) to an adjustment to the
Conversion Price;
(c) not in any way modify the rights attaching to the Ordinary Shares
with respect to voting, dividends or liquidation;
(d) not make any issue, grant or distribution or take any other action
if the effect thereof would be that, on conversion of the Notes,
Conversion Shares would (or but for the provisions of Condition
6(13)(b) would) have to be issued in circumstances not permitted by
applicable law;
(e) if any offer is made to all (or nearly as practicable all)
shareholders of the Issuer (or all or as nearly as may be
practicable all) such shareholders other than the offeror and/or any
associates of the offeror) to acquire all or a majority of the
issued ordinary share capital of the Issuer or, if any person makes
a proposal with regard to such acquisition, give notice of such
offer or proposal to Noteholders at the same time as any notice
thereof is given to the shareholders of the Issuer (or as soon as
practicable thereafter) and, where such an offer or proposal has
been recommended by the Issuer's Board of Management or Supervisory
Board, or where such an offer or proposal has become or been
declared unconditional in all respects, use its reasonable
endeavours to procure that a like offer or proposal is extended to
the holders of any Conversion Shares issued or transferred during
the period of the offer or proposal arising out of the exercise of
Conversion Rights and/or to the holders of the Notes and ensure that
details concerning such offer or proposal may be obtained from the
specified offices of the Paying Agent; and
(f) apply for the Conversion Shares to be admitted to listing on
Euronext Amsterdam and to be listed, quoted or dealt in on any other
stock exchange or securities market on which the Ordinary Shares may
then be listed, quoted or dealt in.
10. EVENTS OF DEFAULT
If any of the following events (each an "Event of Default") occurs:
(a) Non-payment: the Issuer fails to pay any amount of principal of, or
interest on, the Notes when payment thereof becomes due and the
default continues for a period of 15 days; or
(b) Breach of other obligations: the Issuer defaults in the performance
or observance of any of its other obligations under or in connection
with the Notes or the Agency Agreement and such default remains
unremedied for 30 days after written notice thereof, addressed to
the Issuer by any Noteholder, has been delivered to the Issuer or to
the specified office of a Paying Agent; or
(c) Winding-up, bankruptcy, etc.: if (i) bankruptcy (failissement) or
insolvency proceedings are commenced in a court of competent
jurisdiction against the Issuer or any Material Subsidiary (as
defined below), which shall not have been dismissed or stayed within
60 days after the commencement thereof, or the Issuer or any
Material Subsidiary institutes such proceedings or applies for
suspension of payments (surseance van betaling) or suspends payments
or offers a general arrangement (akkoord) for the benefit of all its
creditors; or (ii) an order or judgment is made or an effective
resolution is passed for the liquidation or dissolution (ontbinding)
of the Issuer or any Material Subsidiary, except for the purpose of
and followed by a reorganisation either (x) on terms approved by a
resolution of the Noteholders passed in accordance with these Terms
and Conditions and the Agency Agreement, or (y) in the case of a
Material Subsidiary, whereby or pursuant to which the undertaking
and/or material assets of
37
the Material Subsidiary, or, as the case may be, the proceeds of its
liquidation are transferred to or otherwise vested in the Issuer or
another Subsidiary or (iii) the Issuer or any Material Subsidiary
ceases or threatens to cease to carry on all or substantially all of
its business (otherwise than where Condition 6(3) or Condition 6(4)
applies or in the case of a Material Subsidiary, pursuant to a
solvent amalgamation, reorganisation or restructuring); or
(d) Merger: the Issuer enters into a merger, consolidation or other form
of combination with another legal entity (unless the continuing
entity or the entity formed as a result of a merger (juridische
fusie) continues by operation of law to be liable for the
obligations of the Issuer under the Notes, in which case Condition
6(3) and, if applicable, Condition 6(4) shall apply); or
(e) Cross-acceleration: (i) any present or future indebtedness of the
Issuer or any of its Material Subsidiaries for or in respect of
moneys borrowed or raised becomes due and payable prior to its
stated maturity by reason of any default, event of default or the
like (howsoever described), or (ii) any such indebtedness is not
paid when due or, as the case may be, within any applicable grace
period or any extension thereof as agreed by the relevant parties,
or (iii) the Issuer or any of its Material Subsidiaries fails to pay
when due any amount payable by it under any present or future
guarantee for, or indemnity in respect of, any moneys borrowed or
raised, provided that the aggregate amount of the relevant
indebtedness, guarantees and indemnities in respect of which any one
or more of the events mentioned above in this clause (e) has or have
occurred equals or exceeds (euro)7,500,000 or its equivalent in
other currencies (on the basis of the middle spot rate for the
relevant currency against the euro as quoted by any leading bank on
the day on which this clause operates); or
(f) Security enforced: any mortgage, charge, pledge, lien or other
encumbrance, present or future, created or assumed by the Issuer or
any of its Material Subsidiaries over all or a substantial part of
the assets of the Issuer or the relevant Material Subsidiary, as the
case may be, for an amount at the relevant time in excess of
(euro)7,500,000 becomes enforceable and any step is taken to enforce
it (including the taking of possession or the appointment of a
receiver, administrative receiver, manager or similar person) unless
such enforcement is discharged within 30 calendar days; or
(g) Failure to take action with respect to the Notes: any action,
condition or thing (including the obtaining or effecting of any
necessary consent, approval, authorisation, exemption, filing,
licence, order, recording or registration) at any time required to
be taken, fulfilled or done in order (i) to enable the Issuer
lawfully to enter into, exercise its rights and perform and comply
with its obligations under the Notes and the Agency Agreement, (ii)
to ensure that those obligations are legally binding and
enforceable, and (iii) to make the Notes and the Agency Agreement
admissible in evidence in the courts of the Netherlands, is not
taken, fulfilled or done; or
(h) Unlawful performance: it is or will become unlawful for the Issuer
to perform or comply with any one or more of its obligations under
any of the Notes or the Agency Agreement; or
(i) Analogous Events: any event occurs which under the laws of any
relevant jurisdiction has an analogous effect to any of the events
referred to in either of the foregoing clause (c),
any Note may, by written notice (a "Termination Notice") addressed by the holder
thereof to the Issuer and delivered to the Issuer or to the specified office of
the Paying Agent, be declared immediately due and payable, whereupon it shall
become immediately due and payable at its principal amount together with accrued
interest without further action or formality (unless it is proven that the event
that has led to the Note being declared immediately due and payable has been
cured at the time the notice of such declaration is received by the Issuer or a
Paying Agent). Notice of any such declaration shall promptly be given to the
Noteholders.
For purposes of this Condition 10, "Material Subsidiary" means, at any
particular time:
38
(i) any Subsidiary of the Issuer: (a) whose revenues are 3% or more of
the consolidated revenues of the Issuer and its Subsidiaries taken
as a whole (the "Group"), or (b) whose gross assets (consolidated if
such Subsidiary has Subsidiaries) are 3% or more of the consolidated
gross assets of the Group, all as shown in the most recent audited
consolidated accounts of the Group and audited accounts of any such
Subsidiary; and
(ii) any Subsidiary of the Issuer which becomes a Subsidiary of the
Issuer or acquires assets subsequent to the date of the then most
recent audited consolidated accounts of the Group, and (a) whose
revenues would be 3% or more of the consolidated revenues of the
Group, or (b) whose gross assets (consolidated if such Subsidiary
has Subsidiaries) would be 3% or more of the consolidated gross
assets of the Group,
if the latest audited consolidated accounts of the Group and audited accounts of
such Subsidiary were prepared on its becoming a member of the Group or as at the
date of acquisition of such assets, as the case may be, provided that (x) any
Subsidiary, which immediately prior to the transfer thereof, was a Material
Subsidiary, that transfers all or part of its business, undertaking or assets
such that immediately after such transfer it is no longer a Material Subsidiary
shall immediately cease to be a Material Subsidiary and (y) a Subsidiary which
becomes a Material Subsidiary pursuant to (ii)(a) or (b) above shall cease to be
a Material Subsidiary after the date of publication of the first audited
consolidated accounts of the Group prepared after such Subsidiary becomes a
Material Subsidiary unless it remains to be treated as a Material Subsidiary
pursuant to (i) above.
For the purposes of this definition of "Material Subsidiary", if there shall at
any time not be any relevant published audited consolidated accounts of the
Group and/or audited accounts of any Subsidiary, references thereto herein shall
be deemed to refer to a pro forma consolidation prepared by the Issuer or such
Subsidiary, as the case may be, and agreed by the auditors from time to time of
the relevant published accounts of the Group.
A report of the auditors of the Issuer, from time to time, that in their opinion
a Subsidiary is or is not, or was or was not, at any particular time a Material
Subsidiary shall be conclusive and binding on the Issuer and the Noteholders (in
the absence of manifest error) and, for the purposes of (ii) above, in
determining whether a Subsidiary is a Material Subsidiary, the latest audited
consolidated accounts of the Group and/or the latest audited accounts of the
relevant Subsidiary shall be adjusted as such auditors think fair and
appropriate to take account of Subsidiaries or assets acquired or disposed of
subsequent to the date of such accounts.
11. PAYING AGENT, CONVERSION AGENT AND REGISTRAR
(1) The Registrar, Paying Agent and Conversion Agent (the "Agents") and their
respective specified office is as follows:
ING Bank N.V.
Van Heenvlietlaan 220
1083 CN Amsterdam
The Netherlands
(2) In acting as Agents in connection with the Notes, the Agents act solely as
agents of the Issuer and do not assume any obligations towards or
relationship of agency or trust for or with any of the Noteholders.
(3) The Issuer reserves the right at any time to vary or terminate the
appointment of any of the Agents, and to appoint successor or additional
paying agents, successor or additional conversion agents or successor or
additional Registrars, provided that so long as the Notes are listed on
Euronext Amsterdam, the Issuer shall maintain a Paying Agent (i) in
Amsterdam if the rules and regulations of Euronext Amsterdam so require
and (ii) in a European Union member state (if any) that will not be
obliged to deduct tax pursuant to European Council Directive 2003/48/EC or
any other European Union Directive on the taxation of savings implementing
the conclusions of the ECOFIN Council meeting of 3 June 2003 or any law
implementing or complying with, or introduced in order to conform to such
Directive. Notice of any change in the Paying Agent, the Conversion Agent
or the Registrar, or in the specified
39
office of the Paying Agent, the Conversion Agent or the Registrar shall
promptly be given to the Noteholders in accordance with Condition 12.
12. NOTICES
Notices to the Noteholders will be valid if published in a leading newspaper
having general circulation in the Netherlands, in the Euronext Amsterdam Daily
Official List (officiele prijscourant) (so long as the Notes are listed on
Euronext Amsterdam and the rules of Euronext Amsterdam so require) and in an
English language newspaper of general circulation in Europe. Any such notice
shall be deemed to have been given on the date of such publication (or, if
published more than once or on different dates, on the first date on which
publication is made), provided that notices to Noteholders may be given by
delivery of the relevant notice to Euroclear Netherlands for communication by
them to their respective participants in substitution for publication as
required by this Condition, provided always that, so long as the Notes are
listed on Euronext Amsterdam, the requirements of Euronext Amsterdam have been
complied with and, where such requirements specify publication in a leading
newspaper having general circulation in the Netherlands and in the Euronext
Amsterdam Daily Official List, such requirement has been complied with.
13. GOVERNING LAW AND JURISDICTION
(1) The form and contents of the Notes, as well as all the rights and duties
arising therefrom, are governed exclusively by Dutch law. The place of
performance is the Netherlands.
(2) The Issuer irrevocably submits to the non-exclusive jurisdiction of the
competent court in Amsterdam, the Netherlands to settle any disputes which
may arise out of, or in connection with the Notes and these Terms and
Conditions. Accordingly, any suits, actions or proceedings arising out of,
or in connection with the Notes and these Terms and Conditions may be
brought in such court.
(3) Any person holding a beneficial interest in a Note represented may in any
proceedings against the Issuer or to which such Noteholder and the Issuer
are parties protect and enforce in its own name its rights arising under
its Notes only on the basis of a statement issued by its Custodian (a)
stating the full name and address of such person, (b) specifying an
aggregate principal amount of Notes credited on the date of such statement
to such person's securities account maintained with such Custodian and (c)
confirming that the Custodian has given a written notice to Euroclear
Netherlands, as appropriate, and the Registrar containing the information
pursuant to (a) and (b). For purposes of the foregoing, "Custodian" means
any bank or other financial institution of recognised standing authorised
to engage in the securities custody business with which the owner of a
beneficial interest in a Note maintains a securities account in respect of
any Notes and includes the Euroclear Netherlands Participants.
14. AMENDMENT
(1) The Terms and Conditions of the Notes may be modified or amended by the
Issuer, without the consent of the Noteholders, for the purpose of (a)
adding to the covenants of the Issuer for the benefit of the Noteholders;
(b) surrendering any right or power conferred upon the Issuer; (c)
securing the Notes; (d) evidencing the assumption by another legal entity
of all of the obligations of the Issuer with respect to the Notes as the
result of a merger permitted by Condition 10(d); or (e) curing any
ambiguity, inconsistency, defect or omission in the Notes or between the
Terms and Conditions, to all of which each Noteholder shall, by acceptance
hereof, consent.
(2) The Terms and Conditions of the Notes may also be modified or amended by
the Issuer, and past defaults thereunder or under the Agency Agreement by
the Issuer may be waived, with the written consent of the Noteholders of
not less than 662/3% in aggregate principal amount of the Notes
outstanding. Any such written consent of holders may be arranged by the
Issuer or such holders. Notwithstanding the foregoing, no such
modification, amendment or waiver, without the consent of the holders of
not less than 75% in aggregate principal amount of the Notes outstanding,
may: (a) waive a default in the payment of the principal of or interest on
any Note, or change the stated maturity of the principal of or the time
for payment of any instalment of interest on any Note, or change the
currency of payment of the principal of, or interest on, any Note or
reduce the principal amount of, or the rate of interest on, any Note, or
40
impair the right to institute suit for the enforcement of any such payment
on or with respect to any Note; (b) reduce the above-stated percentage in
principal amount of the outstanding Notes required for any modification of
or amendment to the Terms and Conditions of the Notes, or of any waiver of
any past default; or (c) modify any of the provisions of this clause
except to provide that certain other provisions of the Terms and
Conditions cannot be modified, amended or waived without the consent of
the holders of not less than 75% in aggregate principal amount of the
Notes outstanding.
(3) The Agency Agreement contains provisions for convening meetings of
Noteholders (including at the Issuer's request) for the purpose of
considering any matter affecting their interests. Such meeting may be
convened by Noteholders holding not less than 25% in aggregate principal
amount of the Notes for the time being outstanding (as defined in the
Agency Agreement). The quorum at any such meeting for passing a resolution
will be one or more persons representing 66 2/3% of the principal amount
of the Notes for the time being outstanding, or at any adjourned meeting
one or more persons being or representing Noteholders whatever the
principal amount of Notes so held or represented, provided that at any
meeting the business of which includes the matters set out in Conditions
14(2)(a), (b) and (c) above, the necessary quorum for any such meeting
will be one or more persons holding or representing not less than 75% in
aggregate principal amount of the Notes for the time being outstanding, or
at any adjourned such meeting one or more persons being or representing
Noteholders whatever the principal amount of Notes so held or represented.
At any meeting of Noteholders, a resolution may be passed if adopted by at
least 66 2/3% of the votes validly cast at such meeting, and with respect
to a resolution relating to the matters in Conditions 14(2)(a), (b) and
(c) above, if adopted by at least 75% of the votes validly cast at such
meeting. A resolution duly passed in accordance with the provisions of the
Agency Agreement at any meeting of Noteholders or in writing will be
binding on all Noteholders whether or not they are present at the meeting
and whether or not they vote in favour. The Issuer and the Paying Agent
and Conversion Agent may enter into an agreement or agreements
supplemental to the Agency Agreement for the purpose of making any
amendment or modification to the Notes or the Agency Agreement or
modifying in any manner the rights of any Noteholder with the requisite
consent of the Noteholders as described in this Condition 14.
15. FURTHER ISSUES
The Issuer may from time to time, without the consent of the Noteholders, create
and issue further notes, bonds or debentures either having the same terms and
conditions as the Notes (or in all respects except for the first payment of
interest on them) and so that such further issue shall be consolidated and form
a single series with the outstanding notes, bonds or debentures or any series
(including the Notes) or upon such other terms as to interest, subordination (if
any), conversion, premium, redemption and otherwise as the Issuer may determine
at the time of their issue. Any further notes, bonds or debentures forming a
single series with the outstanding notes, bonds or debentures of any series
(including the Notes) constituted under the Agency Agreement shall be
constituted by a supplement to the Agency Agreement.
16. MISCELLANEOUS
(1) No service charge shall be made for any registration of transfer or
exchange of the Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith, which shall be for the account of the Noteholder.
(2) The Issuer undertakes to comply with the provisions set forth in Article
2.1.20 of Schedule B of the Listing and Issuing Rules (Fondsenreglement)
of Euronext Amsterdam as in force on the date of this document.
(3) Claims for payment of principal, interest or any other amounts in respect
of the Notes which are not exercised within five years from the relevant
Due Date will lapse and revert to the Issuer.
The Notes have been accepted for clearance through Euroclear Netherlands under
International Securities Identification Number ("ISIN") NL0000116648, Common
Code 020851112 and Fondscode: NL02085112.
41
USE OF PROCEEDS
The aggregate net proceeds from the sale of the Notes offered hereby, after
deduction of underwriting commission and estimated expenses, are estimated to be
approximately (euro)43.5 million. These net proceeds will be used for general
corporate purposes, including working capital and capital expenditures. In
addition, Besi may choose to repay all or a portion of the credit facilities
that have been assumed upon completion of the acquisition of Datacon. At 31
December 2004, net debt of Datacon aggregated (euro)23.3 million. Pending such
use, Besi intends to invest all or a portion of the net proceeds in short-term,
interest-bearing instruments.
42
CAPITALIZATION
Set forth below is the historical consolidated capitalization of the Company as
of 30 September 2004 and as adjusted on a pro forma basis to give effect to the
offering of the Notes and the application of the expected net proceeds. The
Company may utilize a portion of the net proceeds from the offering to help
finance the acquisition of Datacon. See "Use of Proceeds".
30 SEPTEMBER 2004
(in euro million) ACTUAL AS ADJUSTED
Cash and cash equivalents (1) 102.4 145.9
===== =====
5.5% Convertible Notes due 2012 - 46.0
Bank term loans 1.8 1.8
Capital lease obligations 12.0 12.0
----- -----
Total long-term debt and capital leases 13.8 59.8
Total shareholders' equity 183.9 183.9
----- -----
Total capitalization 197.7 243.7
===== =====
Notes:
(1) Net of underwriting commission and estimated expenses, in aggregate
presently estimated at (euro)2.5 million.
43
ORDINARY SHARE PRICE HISTORY
The Ordinary Shares are listed on Euronext Amsterdam and on Nasdaq. The
following tables set out the high and low closing prices of the Ordinary Shares
for the periods indicated on Euronext Amsterdam, as reported by Bloomberg, and
on Nasdaq, as furnished by Nasdaq:
EURONEXT AMSTERDAM NASDAQ
----------------------- --------------------
(PRICE) HIGH LOW HIGH LOW
------- ------ ------ ----- ----
(euro) (euro) ($) ($)
1999 14.70 5.10 15.00 5.88
2000 28.45 8.70 27.75 7.28
2001 12.50 5.00 11.63 4.40
2002 10.40 3.70 9.70 3.35
2003 6.92 3.15 8.49 3.16
2004 7.19 3.65 8.99 4.62
2005 (THROUGH JANUARY) 4.21 4.01 5.65 5.20
EURONEXT AMSTERDAM NASDAQ
----------------------- --------------------
2004 (INTRADAY PRICES) HIGH LOW HIGH LOW
- ----------- ----------------- ------ ------ ----- ----
(euro) (euro) ($) ($)
13 December 4.17 4.13 5.51 5.46
14 December 4.07 3.90 5.50 5.25
15 December 4.05 3.96 - -
16 December 4.08 4.00 5.59 5.40
17 December 4.08 3.95 - -
20 December 4.02 3.95 5.37 5.31
21 December 4.05 3.96 5.49 5.21
22 December 4.09 4.00 5.40 5.35
23 December 4.09 4.00 5.54 5.36
24 December 4.07 4.00 - -
27 December 4.07 3.97 5.51 5.22
28 December 4.04 4.00 5.50 5.27
29 December 4.03 3.98 5.65 5.38
30 December 4.04 3.98 5.58 5.58
31 December 4.05 4.00 5.67 5.32
2005
3 January 4.15 4.02 5.71 5.49
4 January 4.27 4.03 5.72 5.64
5 January 4.18 4.09 5.46 5.44
6 January 4.17 4.08 5.40 5.20
7 January 4.10 3.99 5.44 5.26
44
10 January 4.14 4.05 5.45 5.374
11 January 4.13 4.08 5.381 5.376
12 January 4.13 4.04 5.40 5.35
13 January 4.10 4.03 5.47 5.47
14 January 4.10 4.07 5.39 5.39
17 January 4.10 4.08 - -
18 January 4.10 4.03 5.35 5.29
19 January 4.08 4.02 5.27 5.20
20 January 4.06 3.95 5.36 5.12
21 January 4.05 3.99 - -
[LINE GRAPH]
45
[LINE GRAPH]
46
DIVIDENDS AND DIVIDEND POLICY
HISTORICAL DIVIDENDS
The Company has never paid a dividend in respect of its Ordinary Shares.
DIVIDEND POLICY
The Company intends to retain any future earnings to finance its operations and
to help finance future acquisitions. Therefore, the Company does not expect to
pay any dividends in the foreseeable future.
According to Besi's Corporate Governance Code, the policy of Besi on additions
to reserves and on dividends (the level and purpose of the addition to reserves,
the amount of the dividend and the type of dividend) and resolutions to pay a
dividend shall be dealt with as a separate agenda item at the General Meeting of
Shareholders.
See "Investment Considerations" and "Share Capital, Corporate Structure and
Corporate Governance".
PREFERENCE SHARES
Each year, the Board of Management subject to approval of the Supervisory Board,
shall determine which part of the profit - the positive balance of the profit
and loss account - shall be reserved. From the profit remaining after
reservation, a dividend shall be distributed on the preference shares equal to
the average EURIBOR rate plus two calculated over the amounts paid on such
shares, the average being taken over the number of days this rate applied over
the financial year concerned. Currently there are no Preference Shares
outstanding. See "Share Capital, Corporate Structure and Corporate Governance".
47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF BESI'S
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company designs, develops, manufactures, markets and services products for
the semiconductor industry's back-end assembly operations.
The Company's net sales and results of operations depend in significant part on
the level of capital expenditures by semiconductor manufacturers, which in turn
depends on the current and anticipated market demand for semiconductors and for
products utilizing semiconductors. Demand for semiconductor devices and
expenditures for the equipment required to assemble semiconductors is cyclical,
depending in large part on levels of demand worldwide for computing and
peripheral equipment, telecommunications devices and automotive and industrial
components as well as the production capacity of global semiconductor
manufacturers. Historically, as demand for these devices has increased,
semiconductor manufacturers have sought to increase their capacity by increasing
the number of wafer fabrication facilities and equipment production lines, and
installing equipment that incorporates new technology to increase the number of
devices and the amount of computing power per device. As demand has increased,
semiconductor prices have also typically risen. Conversely, if the additional
capacity outstrips the demand for semiconductor devices, manufacturers
historically have cancelled or deferred additional equipment purchases until
demand again begins to outstrip aggregate capacity. Under such circumstances,
semiconductor prices typically fall.
Due to the lead times associated with the production of the Company's
semiconductor manufacturing equipment, the Company's sales orders historically
have lagged any downturn or recovery in the semiconductor market by
approximately nine to twelve months. The Company's results of operations
historically have fluctuated significantly both on an annual and quarterly basis
depending on overall levels of semiconductor demand globally and the specific
production requirements of the Company's principal customers. During 2001, the
Company saw a significant deterioration in industry conditions. Although the
Company experienced increased order levels in 2002, the slowdown in the
semiconductor and semiconductor equipment industry continued throughout 2002 and
2003. In the first half of 2004, industry conditions improved and the Company
saw a significant increase in bookings as compared to the first half of 2003.
However, in the third quarter of 2004, the Company saw a deterioration in
industry conditions, resulting in a significant decrease in bookings in the
third quarter of 2004 as compared to the first half of 2004.
The Company's sales are generated primarily by shipments to the Asian
manufacturing operations of leading U.S. and European semiconductor
manufacturers and, to a lesser extent, Korean and other Asian manufacturers and
subcontractors. Most of the Company's principal competitors on a worldwide basis
are Japanese, which historically have dominated the Japanese market, because
Japanese semiconductor manufacturers typically purchase equipment from domestic
suppliers. To date, the Company's sales to Japanese customers have been limited.
The Company's sales to specific customers tend to vary significantly from year
to year depending on customers' capital expenditure budgets, new product
introductions, production capacity and packaging requirements. In addition, the
Company derives a substantial portion of the Company's net sales from products
that have an average selling price in excess of (euro)300,000 and that have
significant lead times between the initial order and delivery of the product.
The timing and recognition of net sales from customer orders can cause
significant fluctuations in operating results from quarter to quarter.
RECENT EVENTS
ACQUISITION OF DATACON
On 4 January 2005, the Company - partly through a subsidiary - completed the
acquisition of 100% of the ordinary shares of Datacon for a total consideration
of (euro)72.6 million, of which (euro)65 million was paid in cash and the
remainder in 1,933,842 newly issued Ordinary Shares.
Datacon, a private company founded in 1986 and located in Radfeld, Austria, is a
leading global manufacturer of flip chip bonding, multi chip die bonding and
other related assembly equipment for the semiconductor and telecommunications
industries (source: VLSI, 2003), with (euro)58.3 million reported revenue for
the fiscal year ended 31 March 2004 and (euro)39.1 million for the six months
ended 30 September 2004.
Datacon's products provide a wide range of die bonding capabilities for the
advanced packaging market, ranging from high precision single die attach to
sophisticated multi chip, die and flip chip
48
bonding applications. In addition, Datacon offers customers tailored solutions
ranging from single machines to entire production lines with equipment
integrated from third parties.
Datacon's largest customers are principally European and U.S. semiconductor
manufacturers such as Epcos, Infineon, Bosch, ST Micro electronics, Skyworks and
Fairchild as well as Asian assembly subcontractors such as Amkor, ASE and
Chippac STATS.
Datacon has production facilities in Radfeld, Austria, Gyor, Hungary and Berlin,
Germany and currently employs approximately 450 people. Datacon has an estimated
installed base of approximately 1,500 machines at customer locations worldwide.
See "Acquisition of Datacon".
RESTRUCTURING
On 14 December 2004, Besi announced a restructuring of its operations focused
principally on a workforce reduction of 81 employees at its Dutch packaging and
tooling manufacturing operations in Duiven and Brunssum, the Netherlands, or
approximately 10% of total fixed headcount worldwide, as part of a plan to
address the current downturn in the semiconductor industry. In addition, Besi
announced that it will phase out approximately 50 temporary workers at the
Duiven facility. A component of the restructuring will be the closing of Besi's
tooling facility in Brunssum, the Netherlands in the first half of 2005. The
workforce reductions are expected to occur during the first quarter of 2005.
Besi intends to take a restructuring charge in the fourth quarter ending 31
December 2004 to cover the estimated costs of this workforce reduction which the
Company does not expect to exceed (euro)5.6 million. Furthermore, in the fourth
quarter of 2004, Besi expects to incur a charge of up to (euro)1.7 million
relating to the write down of certain inventories and work in progress, which
would have the effect of reducing gross margins for the fourth quarter of 2004
by up to 5.5 percentage points.
Ongoing economic uncertainties and industry over-capacity resulted in customers
delaying scheduled deliveries, capacity investment and the funding of strategic
programs in the last half of 2004. On 14 December 2004 Besi announced that it
forecasted that net sales for the fourth quarter of 2004 will decline by
approximately 20% as compared to the third quarter level. Besi has taken steps
to realign its operations in response to reduced demand. The restructuring also
is consistent with Besi's plans to reduce exposure in high cost geographies and
to rely more on low cost manufacturing regions.
EVALUATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and results of
operations is based upon its condensed consolidated financial statements, which
are included elsewhere in this Prospectus and which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Areas where significant judgments are made include, but are not limited to,
revenue recognition, inventories, long-lived assets and goodwill and intangible
assets. Actual results could differ materially from these estimates.
For a more detailed explanation of the judgments made on these areas and a
discussion of the Company's accounting policies, please refer to "Evaluation of
Critical Accounting Policies" included in Item 5 of the Company's Annual Report
on Form 20-F for the year ended 31 December 2003. Since 31 December 2003, there
have been no significant changes to the Company's critical accounting policies.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following table discloses the Company's contractual obligations and
commercial commitments as of 30 September 2004.
PAYMENTS DUE BY PERIOD
--------------------------------------------------------------------------------
(EURO IN THOUSANDS) LESS THAN 1 YEAR 1-3 YEARS 4-5 YEARS AFTER 5 YEARS TOTAL
- ------------------- ---------------- --------- --------- ------------- ------
Long term debt obligations 159 1,805 - - 1,964
Capital lease obligations
including imputed interest 716 11,931 8 18 12,673
Operating lease obligations 964 1,608 1,410 3,762 7,744
Unconditional purchase obligations 8,530 - - - 8,530
------ ------ ----- ----- ------
TOTAL CONTRACTUAL OBLIGATIONS AND
COMMERCIAL COMMITMENTS 10,369 15,344 1,418 3,780 30,911
====== ====== ===== ===== ======
49
Unconditional purchase obligations relate to buildings, equipment and specific
external technical staff.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements.
50
NINE MONTHS ENDED 30 SEPTEMBER 2003 COMPARED TO NINE MONTHS ENDED 30 SEPTEMBER
2004
NINE MONTHS ENDED 30 SEPTEMBER
(Euro amounts in thousands, except -----------------------------------------------------------------------
share and per share data) 2003 (UNAUDITED) % 2004 (UNAUDITED) %
- ------------------------------------------------ ----------------- ------ ---------------- -----
Net sales 62,072 100.0 95,458 100.0
Cost of sales 43,502 70.1 64,508 67.6
---------- ----- ---------- -----
Gross profit 18,570 29.9 30,950 32.4
Selling, general and administrative expenses 19,021 30.6 20,611 21.6
Research and development expenses 9,745 15.7 9,327 9.8
Amortization of intangible assets 1,896 3.1 1,852 1.9
---------- ----- ---------- -----
Total operating expenses 30,662 49.4 31,790 33.3
Operating loss (12,092) (19.5) (840) (0.9)
Interest income, net 2,132 3.5 1,512 1.6
---------- ----- ---------- -----
Income (loss) before taxes and minority interest (9,960) (16.0) 672 0.7
Income tax expense (benefit) (1,683) (2.7) 421 0.4
---------- ----- ---------- -----
Income (loss) before minority interest (8,277) (13.3) 251 0.3
Minority interest 29 0.0 29 0.0
---------- ----- ---------- -----
NET INCOME (LOSS) (8,248) (13.3) 280 0.3
========== ===== ========== =====
Income (loss) per share
- - Basic (0.27) 0.01
- - Diluted (0.27) 0.01
Number of shares used in calculating
income (loss) per share:
- - Basic 30,820,091 30,794,660
- - Diluted 30,820,091 30,874,353
========== ===== ========== =====
NET SALES
The Company's net sales consist of sales of molding systems, trim and form
integration systems, singulation systems, plating systems and die handling
systems.
The Company's net sales increased from (euro)62.1 million in the first nine
months of 2003 to (euro)95.5 million in the same period of 2004, an increase of
53.8%. The increase in net sales in the first nine months of 2004 as compared to
the first nine months of 2003 was due to increased order levels in the first
half of 2004, resulting in increased shipments in the first nine months of 2004
for all product lines.
The Company's net sales per product line for the first nine months ended 30
September 2003 and 2004 were as follows:
NINE MONTHS ENDED 30 SEPTEMBER
(Euro in million) 2003 (UNAUDITED) 2004 (UNAUDITED) % CHANGE
- --------------------------------- ---------------- ---------------- --------
Molding systems 26.4 42.9 62.5%
Trim and form integration systems 15.1 16.0 6.0%
Singulation systems 4.6 8.8 91.3%
Plating systems 14.5 22.2 53.1%
Die handling systems 1.5 5.6 273.3%
---- ---- -----
TOTAL NET SALES 62.1 95.5 53.8%
==== ==== =====
51
BACKLOG
Backlog decreased by 27.5% to (euro)45.1 million at 30 September 2004 from
(euro)62.2 million at 30 June 2004 and increased by 13.3% from (euro)39.8 at 31
December 2003. New orders for the third quarter of 2004 amounted to (euro)23.2
million as compared to (euro)16.5 million in the third quarter of 2003 and
(euro)47.5 million in the second quarter of 2004. The book-to-bill ratio was
0.57 for the third quarter of 2004 as compared to a book-to-bill ratio of 0.94
for the third quarter of 2003 and 1.44 for the second quarter of 2004. As a
result of the significant reduction in new orders in the third quarter of 2004,
the Company expects that net sales in the fourth quarter of 2004 will experience
a decrease from those experienced in the third quarter of 2004.
The Company includes in backlog only those orders for which it has received a
completed purchase order. Such orders are subject to cancellation by the
customer with payment of a negotiated charge. Because of the possibility of
customer changes in delivery schedules, cancellation of orders and potential
delays in product shipments, backlog as of any particular date may not be
representative of actual sales for any succeeding period.
GROSS PROFIT
Cost of sales includes materials, purchased components and subassemblies from
subcontractors, direct labor and manufacturing overhead. It also includes costs
relating to the pre-production and customization of new equipment once a product
has advanced beyond the prototype stage. Changes in the Company's cost of sales
typically lag changes in net sales due to the Company's manufacturing lead
times.
Gross profit increased by 66.7% from (euro)18.6 million in the first nine months
of 2003 to (euro)31.0 million in the first nine months of 2004. As a percentage
of net sales, gross profit increased from 29.9% in the nine months ended 30
September 2003 to 32.4% in the same period of 2004, due to the increase in net
sales and the benefits achieved from increased economies of scale in the first
nine months of 2004 and an increase in gross margins realized from the sale of
all product lines except for molding systems.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses consist of expenses related to
sales of products and services, administrative and other corporate level
expenses not related to the production of products and all expenses associated
with ongoing customer support.
The Company's selling, general and administrative expenses for the nine months
ended 30 September 2003 totaled (euro)19.0 million and represented 30.6% of net
sales, compared to (euro)20.6 million or 21.6% of net sales in the nine month
period ended 30 September 2004. The decrease in selling, general and
administrative expenses as percentage of net sales resulted primarily from the
increase in net sales levels and the results of the Company's restructuring
efforts.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development spending relating to packaging and die handling
equipment varies from year to year depending on the Company's new product
development cycle. As research and development expenses do not include
pre-production and customization costs, the Company's research and development
expenses decrease as products move from prototype development to production and
final customer acceptance.
Research and development expenses relating to plating equipment include costs
related solely to new product development efforts and exclude new product
pre-production and customization expenses and design and engineering expenses
incurred in sustaining and enhancing existing product lines.
The Company's research and development expenses decreased from (euro)9.7 million
in the nine months ended 30 September 2003 to (euro)9.3 million in the same
period of 2004. As a percentage of net sales, research and development expenses
were 15.7% and 9.8% during the nine months ended 30 September 2003 and 2004,
respectively.
OPERATING LOSS
The Company's operating loss decreased from a loss of (euro)12.1 million in the
first nine months of 2003 to a loss of (euro)0.8 million in the first nine
months of 2004. Operating loss in the first three quarters of 2004 decreased as
compared to the first three quarters of 2003 due to increased sales and gross
margins.
52
INTEREST INCOME, NET
The Company's interest income, net decreased from (euro)2.1 million in the first
nine months of 2003 to (euro)1.5 million in the first nine months of 2004, due
to lower interest rates and lower cash and cash equivalent balances.
INCOME TAX EXPENSE (BENEFIT)
The Company's income tax benefit amounted to (euro)1.7 million in the first nine
months of 2003 compared to an income tax expense of (euro)0.4 million in the
first nine months of 2004. The effective tax rate was 16.9% in the first nine
months of 2003 and 62.7% in the first nine months of 2004. The increase of the
effective tax rate was due to losses in certain foreign subsidiaries in which
the Company was not able to recognize a tax benefit, as management believes that
the recent losses of these subsidiaries should be given substantially more
weight than forecasts of future profitability in the evaluation. Furthermore,
the increase was due to certain non deductible losses recorded in the third
quarter of 2004.
NET INCOME (LOSS)
The Company's net loss for the first nine months of 2003 amounted to (euro)8.2
million compared to income of (euro)0.3 million in the first nine months of
2004. The increase of the Company's net result in the first nine months of 2004
compared to the first nine months of 2003 was principally due to the increase in
net sales and gross margins.
LIQUIDITY AND CAPITAL RESOURCES
The Company had (euro)108.9 million and (euro)102.4 million in cash and cash
equivalents at 31 December 2003 and 30 September 2004, respectively.
The Company finances its Meco subsidiary and, to an extent, its Fico subsidiary,
on a stand-alone basis. Meco utilizes funds generated from its results of
operations and available bank lines of credit to finance its working capital and
capital expenditure requirements. Meco and Fico maintain lines of credit with
various local commercial banks. The credit lines of Meco and Fico are unsecured,
except for pledges on the accounts of Fico and Meco with the banks that provide
the facilities. The principal restrictive covenant in each line is related to
solvency ratios, which generally are based on a ratio of each subsidiary's
equity to its assets. Currently, the Company's Besi Die Handling Systems
subsidiary and, to an extent, Fico are financed through intercompany loans. Fico
Tooling Leshan Company Ltd. in China, 87% of which is owned by the Company, is
partly financed by long-term loans issued by a local bank.
The working capital requirements of the Company's subsidiaries are affected by
the receipt of periodic payments on orders from their customers. Although Fico
and Besi Die Handling generally receive partial payments for automated molding
systems, automated trim and form integration systems and die handling systems
prior to final installation, initial payments generally do not cover a
significant portion of the costs incurred in the manufacturing of such systems.
Meco generally receives a higher initial payment upon receipt of orders than
Fico and Besi Die Handling.
Net cash (used in) provided by operating activities was (euro)1.9 million and
((euro)11.7) million in the first nine months of 2003 and 2004, respectively.
The primary uses of cash in operations in the first nine months of 2004 were
working capital requirements of (euro)16.4 million as a result of the
substantial increase in bookings activity during the first half of 2004.
At 30 September 2004, the Company's cash and cash equivalents totaled
(euro)102.4 million and the Company's total debt and capital lease obligations
totaled (euro)14.6 million. At 30 September 2004, shareholders' equity stood at
(euro)183.9 million.
On 6 February 2004, Fico sold land and buildings in Duiven, the Netherlands in a
sale and lease-back transaction for (euro)14.5 million in cash. At the date of
the transaction, the net book value of the real estate sold was approximately
equal to the selling price of the real estate. The Company granted the buyer a
(euro)1.5 million loan which is payable over a maximum period of 24 months. The
loan can be repaid at any time during the term of the loan. The loan is secured
by a second mortgage on the land and buildings which were the subject of the
sale and lease back transaction. The loan bears interest at the rate of 4.5% per
annum. The transaction will be accounted for as a financing until the buyer pays
off the loan. Once the loan is repaid, the remaining lease is expected to be
accounted for as an operating lease.
At 30 September 2004, Meco and Fico had available lines of credit amounting to
in aggregate (euro)13.5 million, under which no borrowings were outstanding, but
with the amount available to be drawn under the lines reduced by (euro)1.0
million in outstanding bank guarantees. At 30 September 2004, (euro)0.9
53
million of the lines of credit was reserved for foreign exchange contracts.
Interest is charged at the bank's base lending rates plus an increment of 1.5%.
The credit facility agreements include covenants requiring the Company to
maintain certain financial ratios. The Company was in compliance with, or had
received waivers for, all loan covenants at 30 September 2004.
The Company believes that its cash position, internally generated funds and
available lines of credit will be adequate to meet its levels of capital
spending, research and development and working capital requirements for at least
the next twelve months.
CAPITAL EXPENDITURE
The Company's capital expenditures decreased from (euro)10.0 million in the
first nine months of 2003 to (euro)2.6 million in the first nine months of 2004.
The decrease in capital expenditures is mainly due to the completion of the
Company's facilities in Duiven, the Netherlands and in China, which were mainly
constructed in 2003. The Company expects total capital spending in 2004 to
amount to approximately (euro)5.0 million. A majority of the capital
expenditures of (euro)5.0 million will be used to further expand the Company's
production capacity in China and Malaysia.
The Company's capital expenditures were (euro)3.4 million in 2001, (euro)4.9
million in 2002 and (euro)11.9 million in 2003.
The expenditures in 2003 were incurred primarily for the construction of an
80,000 square foot facility in Duiven, the Netherlands for molding systems and
tooling manufacturing and the establishment of the Company's first manufacturing
facility in China for the production of tools.
54
YEAR ENDED 31 DECEMBER 2002 COMPARED TO YEAR ENDED 31 DECEMBER 2003
YEAR ENDED 31 DECEMBER
----------------------------------------------
(Euro amounts in thousands, except share and per share data) 2002 % 2003 %
- ------------------------------------------------------------ ---------- ----- ----------- -----
Net sales. 83,228 100.0 85,500 100.0
Cost of sales. 55,849 67.1 63,345 74.1
------ ----- ------ -----
Gross profit. 27,379 32.9 22,155 25.9
Selling, general and administrative expenses. 26,235 31.5 25,436 29.8
Research and development expenses 12,470 15.0 13,564 15.9
Restructuring charges. 786 0.9 - -
Impairment of intangibles 3,302 4.0 287 0.3
Amortization of intangible assets. 2,591 3.1 2,522 2.9
------ ----- ------ -----
Total operating expenses 45,384 54.5 41,809 48.9
Operating loss (18,005) (21.6) (19,654) (23.0)
Interest income, net 3,395 4.1 2,815 3.3
------ ----- ------ -----
Loss before taxes and equity in loss of affiliated
companies and minority interest (14,610) (17.5) (16,839) (19.7)
Income taxes (benefit) 2,404 2.9 (3,292) (3.9)
------ ----- ------ -----
Loss before equity in loss of affiliated companies
and minority interest. (17,014) (20.4) (13,547) (15.8)
Equity in loss of affiliated companies and loss on
sale of affiliated companies - - - -
Minority interest 3 - 50 -
------ ----- ------ -----
NET LOSS (17,011) (20.4) (13,497) (15.8)
======= ===== ======= =====
Loss per share:
Basic (0.54) (0.44)
Diluted (0.54) (0.44)
The weighted average number of shares used to compute
net loss per share:
Basic 31,462,482 30,813,681
Diluted 31,462,482 30,813,681
NET SALES
The Company's net sales increased from (euro)83.2 million in 2002 to (euro)85.5
million in 2003, an increase of 2.8%. The increase in net sales in 2003 as
compared to 2002 was due to increased order levels in the second half of 2002,
resulting in increased shipments in 2003, especially for trim and form
integration systems and singulation systems, offset by lower sales for die
handling systems.
55
The Company's net sales per product line for the periods indicated were as
follows:
2002 2003 % CHANGE
(Euro in millions) ---- ---- --------
Molding systems 35.2 36.6 4.0
Trim and form integration systems 15.8 22.1 39.9
Singulation systems 2.9 4.6 58.6
Plating systems 21.7 20.1 (7.4)
Die handling systems 7.6 2.1 (72.4)
---- ---- --------
TOTAL NET SALES 83.2 85.5 2.8
==== ==== ========
BACKLOG
The Company's backlog at 31 December 2003 decreased by 6.4% to (euro)39.8
million from (euro)42.5 million at 31 December 2002. This decrease was primarily
due to a relatively high backlog for trim and form integration systems at 1
January 2003 that decreased as a result of increased shipments of these systems
in 2003. The decrease in trim and form integration systems' backlog was partly
offset by an increased backlog for singulation systems and die handling systems.
New orders in 2003 were (euro)82.9 million, a decrease of 7.0%, as compared to
(euro)89.1 million in 2002, which included (euro)1.8 million of die handling
systems' backlog that was acquired as part of the Company's purchase of Laurier.
The book-to-bill ratio for 2003 was 0.97 compared to 1.07 for 2002.
GROSS PROFIT
Gross profit decreased by 19.0% from (euro)27.4 million in 2002 to (euro)22.2
million in 2003. As a percentage of net sales, gross profit decreased from 32.9%
in 2002 to 25.9% in 2003. The gross profit in 2003 was adversely affected by
slightly lower margins, mainly caused by the devaluation of the U.S. dollar
against the euro. Furthermore, charges of (euro)2.9 million were recorded in the
fourth quarter of 2003 for higher engineering and modification costs and
inventory write-downs associated with the completion of a multi-unit order with
a specific customer.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company's selling, general and administrative expenses in 2002 totaled
(euro)26.2 million and represented 31.5% of net sales compared to (euro)25.4
million or 29.7% of net sales in 2003. The decrease in selling, general and
administrative expenses resulted primarily from the Company's ongoing efforts to
reduce the operating expenses.
RESEARCH AND DEVELOPMENT EXPENSES
The Company's research and development expenses increased from (euro)12.5
million in 2002 to (euro)13.6 million in 2003. As a percentage of net sales,
research and development expenses were 15.0% and 15.9% in 2002 and 2003,
respectively. The increase in research and development spending in 2003 reflects
the Company's continued investment in research and development, mainly for the
development of new trim and form systems, the Company's new AMS-i molding
system, as well as spending for singulation systems.
RESTRUCTURING CHARGES
On 15 June 2001, the Company adopted an initial restructuring plan that included
a reduction of the Company's global workforce (including temporary workers) of
approximately 13%. These actions were necessitated by the semiconductor industry
downturn that resulted in a significant reduction in new orders. The Company
undertook this restructuring (i) to better align the Company's cost structure
with anticipated revenues and (ii) to improve manufacturing efficiency and
productivity. The Company recorded pre-tax restructuring charges of (euro)3.6
million in connection with the reduction of the Company's workforce in the
second quarter of 2001. As a result of continued adverse market conditions in
the semiconductor equipment industry, the Company took additional restructuring
measures in each of the third and fourth quarters of 2001, which resulted in a
cumulative workforce reduction of approximately 26%. In connection with those
additional restructuring measures, the Company incurred additional restructuring
charges for employee severance and benefits of (euro)1.7 million and (euro)3.0
million in the third and fourth quarter of 2001, respectively.
In the third quarter of 2002, the Company relocated the Company's flip chip die
attach operations from New Jersey to New Hampshire in the United States and
consolidated these activities with the Company's die sorting business to form a
single die handling systems business unit. In the fourth quarter of 2002, the
Company restructured the combined business by reducing its workforce by
approximately 28%. The Company recorded a restructuring charge relating to these
actions of (euro)0.8 million in 2002.
56
Changes in the restructuring reserve were as follows:
2001 2002 2003
(euro) (euro) (euro)
------ ------ ------
Balance at 1 January - 5,487 1,281
Additions 8,306 1,991 -
Releases - (1,201) -
Impairments on assets - (107) -
Cash payments (2,819) (4,889) (760)
------ ------ ------
BALANCE AT 31 DECEMBER 5,487 1,281 521
====== ====== ======
The 2001 provision for the reduction in workforce included severance and other
benefits for approximately 180 employees in the Netherlands and Asia. The
additions to the restructuring reserve in 2002 related to higher than expected
severance cost, later than expected final employment terminations and severance
payments for the reduction in workforce in the United States and relocation
cost. The releases in 2002 mainly relate to social security expenses and amounts
paid to disabled personnel which the Company was not obliged to pay. Total
remaining cash outlays for restructuring activities are expected to be (euro)0.5
million, which relate mainly to pension premiums to be paid for laid off
employees over a period of two to five years.
OPERATING LOSS
Operating loss increased from (euro)18.0 million in 2002 to (euro)19.7 million
in 2003. Operating loss for 2002 included non-cash goodwill impairment of
(euro)3.3 million and restructuring charges of (euro)0.8 million. Operating loss
for 2003 included non-cash patent impairment of (euro)0.3 million and charges of
(euro)2.9 million related to higher engineering and modification costs and
inventory write-downs associated with the completion of a multi-unit order with
a specific customer. Furthermore, operating loss in 2003 increased as compared
to 2002 due to slightly lower order margins as well as increased spending on
research and development.
The Company incurred annual patent and other identifiable assets amortization
charges of (euro)2.5 million in 2003, which related to the acquisitions of the
Company's Fico, Meco, RDA and Laurier subsidiaries in October 1993, May 1995,
September 2000 and January 2002, respectively.
As of 1 January 2002, the Company adopted SFAS No. 142 and SFAS No. 144,
"Accounting for the impairment or disposal of long-lived assets". SFAS No. 142
eliminates the amortization of goodwill and indefinite-lived intangible assets,
addresses the amortization of intangible assets with finite lives and addresses
impairment testing and recognition for goodwill and intangible assets with
indefinite lives. SFAS No. 144 establishes a single model for the impairment of
long-lived assets and broadens the presentation of discontinued operations to
include disposal of an individual business. As a result of the adoption of SFAS
No. 142, goodwill amortization ceased.
The Company reviewed its business and determined that there are four reporting
units to be reviewed for impairment in accordance with the standard - the
reporting units were: packaging equipment, plating and singulation equipment,
flip chip die attach equipment and die sorting equipment. Upon adoption of SFAS
No. 142 in the first quarter of 2002, the Company completed the required
transitional impairment testing of goodwill, and based upon those analyses, did
not identify any impairment charges as a result of adoption of this standard
effective 1 January 2002.
The Company has determined that its annual test for impairment of goodwill will
take place at the end of the fourth quarter of each year, which coincides with
the completion of the Company's annual forecasting process. In the third quarter
of 2002, the Company consolidated its die attach equipment business unit and die
sort equipment business into a single die handling equipment business unit. Due
to the severity and the length of the current industry downturn and uncertainty
of the timing of improvement in industry conditions, the Company revised its
earnings forecasts for each of the Company's business units that were tested for
impairment. As a result, in the fourth quarter of fiscal year 2002, the Company
recognized a goodwill impairment loss of (euro)3.3 million in the die handling
equipment reporting unit. The fair value of each reporting unit was estimated
using the expected present value of future cash flows.
In the fourth quarter of 2003, the Company tested its intangibles for
impairment. As a result of this impairment test, an impairment of patents of die
handling equipment equal to an amount of (euro)0.3 million was recorded. No
impairment on other intangibles was required. The Company does not have any
identifiable assets with indefinite lives.
57
INTEREST INCOME, NET
The Company's interest income, net, decreased from (euro)3.4 million in 2002 to
(euro)2.8 million in 2003, mainly due to lower market interest rates and
slightly lower cash balances.
INCOME TAXES
The Company's income tax expense was (euro)2.4 million in 2002 as compared to an
income tax benefit of (euro)3.3 million in 2003. The income tax rate as shown in
the results of operations was 19.6% in 2003. The tax rate for 2002 was not
meaningful as the Company recorded a valuation allowance of (euro)6.0 million in
the fourth quarter of 2002. The tax rate for 2003 is significantly lower than
the domestic tax rate of the Company, due to losses in certain foreign
subsidiaries in which the Company was not able to recognize a tax benefit, as
management believes that the recent losses of these subsidiaries should be given
substantially more the weight than forecasts of future profitability. In 2003,
the Company did not recognize an available tax benefit of (euro)2.8 million.
In the fourth quarter of fiscal year 2002, as part of the income tax provision
for the period, the Company recorded a charge of (euro)6.0 million through the
establishment of a valuation allowance against the Company's deferred tax asset
consisting primarily of U.S. net operating loss carry forwards and temporary
differences. The Company determined that the valuation allowance was required
based on the Company's recent losses, which were given substantially more the
weight than forecasts of future profitability calculating tax valuation
allowances. Until the Company utilizes these U.S. operating loss carry forwards,
the Company's income tax provision will reflect mainly domestic taxation.
NET LOSS
The Company's net loss amounted to (euro)17.0 million in 2002 and (euro)13.5
million in 2003. Net loss for 2002 was negatively impacted by (i) goodwill
impairment of (euro)3.3 million, (ii) a non-cash valuation allowance of
(euro)6.0 million against the Company's net deferred tax assets and (iii) after
tax restructuring charges of (euro)0.6 million related to the Company's die
handling operations.
Net loss for 2003 was negatively impacted by slightly lower margins due to the
devaluation of the U.S. dollar against the euro, as the well as by charges of
(euro)2.9 million related to higher engineering and modification costs and
inventory write-downs associated with the completion of a multi-unit order with
a specific customer and a (euro)0.3 million charge for the impairment of
intangibles.
58
ACQUISITION OF DATACON
GENERAL
On 4 January 2005, the Company completed the acquisition of Datacon Technology
AG ("Datacon"), In the transaction, Datacon shareholders received a total
consideration of (euro)72.6 million, of which (euro)65 million was paid in cash
from the Company's existing cash resources of (euro)102.4 million at 30
September 2004 and the balance was represented by the issue of 1,933,842 new
Ordinary Shares (representing approximately 5.7% of the Company's outstanding
share capital (including 1,000,015 Ordinary Shares held by the Company in
treasury) on completion of the acquisition). In connection with the acquisition
of Datacon, the Company incurred an amount of approximately (euro)3.2 million in
acquisition fees and expenses.
Under the terms of the acquisition, two foundations representing the former
Datacon shareholders have agreed to a lock-up arrangement pursuant to which the
new Ordinary Shares issued to them in the transaction must be held for a period
of two years from the date of the acquisition, subject to certain permitted
exceptions.
The Company expects to complete the determination of the allocation of the
purchase price paid in connection with the acquisition of Datacon in the first
quarter of 2005 and currently anticipates taking a non-cash charge in the first
quarter of 2005 relating to in-process research and development. Excluding such
charge, the Company anticipates that the transaction will be accretive to its
earnings per share in 2005 assuming no synergies related to the combination of
the two firms.
The Company intends to operate Datacon as an independent subsidiary within its
group. The Company intends to retain the Datacon brand name and to offer its
flip chip and die bonding equipment as part of its global product portfolio of
assembly equipment.
Under the terms of the transaction, H. Rutterschmidt and G. Zeindl, members of
Datacon's management board, will be appointed by the Company's Supervisory Board
as members of the Board of Management. This appointment is expected to take
place after the notification of the General Meeting of Shareholders at the next
annual General Meeting of Shareholders.
In a separate transaction, an Austrian subsidiary of the Company acquired the
land where the factory building of Datacon is located in Radfeld, Austria, for
(euro)2 million from a partnership of which H. Rutterschmidt and G. Zeindl are
two of the partners.
STRATEGIC RATIONALE
The Company's business strategy is to become the world's leading supplier of
advanced back-end assembly equipment by means of leveraging its technology
leadership, pursuing back-end system integration, focusing on long-term customer
relationships, expanding its sales and service operations and selectively
pursuing acquisitions.
The purchase of Datacon provides the Company with a complementary product line
acquisition that fits well with the Company's goal of becoming the world's
leading assembly equipment company and its strategy of offering customers a
broad portfolio of cost-effective, end-to-end integrated solutions. The Company
believes that the acquisition will increase the breadth of its product portfolio
through the addition to its product and service offering of the leading global
supplier of flip chip bonding equipment and a significant competitor in the
multi-chip die bonding equipment market.
The acquisition significantly increases the Company's scale and presence in the
assembly equipment market. Based on 2003 data from VLSI, an independent research
firm covering the semiconductor industry, the Company believes that as a result
of the Datacon acquisition, it will become the third largest assembly equipment
company in the world as measured by revenues. The Company believes that this
increase in scale and market presence will enhance its position in the eyes of
its customers, competitors and employees.
In addition, the Company believes that the acquisition will allow it to further
expand its market penetration of many key global accounts such as Infineon,
STMicroelectronics and Amkor and provide the potential to expand its
relationships with customers such as Epcos, Skyworks, Bosch, Fairchild and ASE.
The Company believes that its manufacturing capacity and technology base will
also benefit from the transaction. The Company's global manufacturing resources
will be expanded through the incorporation into its organization of additional,
efficient production capacity in Hungary, Austria and Asia. The Company's
technology base will be strengthened through the combination of the resources of
its die handling subsidiary in the United States with those of Datacon.
59
The Company also expects to benefit from the depth of Datacon's management
resources. The Company believes that Datacon has an excellent senior and middle
management organization with a demonstrated track record of business and
financial success. Datacon's executive management team has agreed to stay on
with Datacon subsequent to the transaction and will be integrated with the
Company's management team. The Company believes that Datacon's historical
financial results reflect the leadership position of its products and
management's successful business model. Further, it believes that Datacon has
the ability to further grow through the anticipated development of the flip chip
market and the opportunity to make incremental market share gains in each of its
two principal product lines.
BUSINESS
Datacon was founded in 1986 in Radfeld, Austria and is today a leading global
manufacturer of flip chip bonding, multi-chip die bonding and other related
assembly equipment for the semiconductor and telecommunications industries. In
the year ended 31 March 2004, sales of flip chip and die bonding equipment
represented approximately 47% and 53%, respectively, of Datacon's net sales.
According to data for 2003 from VLSI, Datacon is the world's largest
manufacturer of flip chip bonding equipment for the semiconductor industry with
a market share of 26%. The use of flip chip bonding technology is critical for
the needs of chip manufacturers to further shrink device sizes while increasing
functionality for applications such as wireless telephony, personal digital
assistants, consumer electronics and Internet infrastructure.
Datacon's products provide a wide range of die bonding capabilities for the
advanced packaging market, ranging from high precision single die attach to
sophisticated multi-chip, die and flip chip bonding applications. In addition,
Datacon offers a customized products service for its customers, ranging from
single machines to entire production lines with equipment integrated from other
manufacturers, and also offers standardized and market specific products and
training as standard to all customers. The principal end markets for its
products are the automotive, telecommunications, consumer electronics, computer,
health care, industrial and military and space industries.
Datacon's largest customers are principally semiconductor manufacturers in
Europe and North America. Key customers include Epcos, Infineon, Bosch,
STMicroelectronics, Skyworks and Fairchild. It also has major customers in the
Asian assembly subcontractor industry, such as Amkor, ASE and Chippac STATS.
Currently, Datacon has production facilities in Radfeld, Austria, Gyor, Hungary
and Berlin, Germany, employs approximately 450 people, including 110 in research
and development, and has an estimated installed base of approximately 1,500
machines at customer locations worldwide.
Business operations are managed from the corporate headquarters in Radfeld,
Austria, which also performs final assembly and testing of modules and frames
and houses die bonder research and development. Datacon's Hungarian subsidiary
is principally responsible for the production of mechanical parts and assembly
of application modules in the production of flip chip and die bonding equipment.
Datacon's German subsidiary, Eurotec, located in Berlin, Germany produces
special purpose machinery for both internal and external use. Datacon's sales
and service activites outside Europe are handled by subsidiaries in North
America (Datacon North America, Inc), which includes the USA, Canada and Mexico,
and the Asia Pacific region (Datacon Asia Pacific Pte. Ltd.).
DATACON SUMMARY OPERATING AND FINANCIAL DATA
Datacon makes available annual reports in German containing consolidated
financial statements prepared on the basis of IFRS, in each case relating to the
preceding two fiscal years and accompanied by an opinion thereon by its former
independent public accountants, Ernst and Young Austria.
The Issuer has, for convenience, included in this Prospectus the consolidated
financial statements of Datacon translated in English which have been audited
for each of the three years ended 31 March 2002, 2003 and 2004, and the
unaudited financial statements of Datacon for the six months ended 30 September
2004, in each case prepared in accordance with IFRS.
The following summary operating and financial information should be read in
conjunction with the financial statements of Datacon and the notes thereto
appearing elsewhere in this Prospectus. See "Index of Financial Information
Datacon" on page F-1.
This summary of operating and financial data contains figures according to IFRS.
Besi's principal accounting standard is U.S. GAAP. Datacon's results of
operations under U.S. GAAP may vary
60
significantly from its results of operations calculated according to IFRS. For a
summary of certain differences between IFRS and U.S. GAAP please see "Summary of
Certain Differences between IFRS and U.S. GAAP."
DATACON TECHNOLOGY AG
SUMMARY CONSOLIDATED FINANCIAL DATA ACCORDING TO IFRS
SIX MONTHS
ENDED 30
YEAR ENDED 31 MARCH SEPTEMBER
--------------------------------------------
2002 2003 2004 2004
(Euro amounts in thousands) (UNAUDITED)
STATEMENTS OF OPERATIONS
Net sales 61,664 41,559 58,262 39,146
Cost of sales 36,253 22,277 33,872 21,238
------ ------ ------ ------
Gross profit 25,411 19,282 24,390 17,908
Other operating income (3,115) (4,962) (1,119) (654)
Selling expenses 9,478 11,222 10,146 5,016
Administrative expenses 5,454 6,394 4,078 2,795
Research and development expenses 6,672 7,045 4,302 2,698
Other operating expenses 1,946 960 860 480
Amortization of goodwill 849 1,260 1,260 -
------ ------ ------ ------
Total operating expenses 21,284 21,919 19,527 10,335
Operating income (loss) 4,127 (2,637) 4,863 7,573
Financial result 130 (847) (2,125) (249)
------ ------ ------ ------
Income (loss) before taxes 4,257 (3,484) 2,738 7,324
Income taxes (benefit) 1,938 (530) 585 1,955
------ ------ ------ ------
Income (loss) after taxes 2,319 (2,954) 2,153 5,369
Minority interest (1,113) 16 - -
------ ------ ------ ------
Net income (loss) 1,206 (2,938) 2,153 5,369
====== ====== ====== ======
CONSOLIDATED BALANCE SHEET DATA
Cash and cash equivalents 7,501 2,449 2,256 2,198
Working capital 1,002 4,193 4,981 15,049
Total assets 84,641 79,331 75,744 88,784
Liabilities to banks (non-current and current) 13,041 33,275 28,160 30,422
Total shareholders' equity 32,550 29,568 31,795 37,181
CONSOLIDATED STATEMENTS OF CASH FLOW DATA
Capital expenditures 2,920 2,445 864 731
Depreciation of property, plant and equipment 2,204 2,057 1,658 873
Net cash flow from operating activities 14,732 (14,471) 6,949 (1,601)
Net cash flow from investing activities (10,904) (10,815) (1,403) (720)
Net cash flow from financing activities (12,552) 20,234 (5,739) 2,263
====== ====== ====== ======
61
BUSINESS
INTRODUCTION
Besi is a leading manufacturer of semiconductor packaging, plating and die
handling equipment for both leadframe and array connect applications (source:
VLSI, 2003). The Company designs and manufactures technologically advanced,
high-performance equipment and integrated systems for the semiconductor
industry's assembly process operations. The Company's equipment is used
principally to produce semiconductor packages, which provide the electronic
interface and physical connection between the chip and other electronic
components and protect the chip from the external environment. The Company's
innovative systems offer customers high productivity and improved yields of
defect-free devices at a low total cost of ownership. The Company operates
primarily through its wholly owned divisions. The Company conducts the molding
systems and trim and form integration systems business through Fico. The Company
conducts the plating systems and singulation systems business through Meco. The
Besi die handling division, which was created by combining the Company's former
RD Automation and Laurier subsidiaries, operates the Company's flip chip die
attach systems and die sorting systems businesses.
The Company's customers are leading U.S., European and Asian semiconductor
manufacturers and packaging subcontractors and include Agere, Amkor, ASE, AVX,
Infineon, Micron, Motorola, NSEB, ON Semiconductor, Philips, Skyworks and
STMicroelectronics. The Company's equipment performs critical functions in the
Company's customers' semiconductor assembly operations and in many cases
represents a significant percentage of their installed base of packaging and
plating equipment. The Company's business has benefited from close, long-term
relationships with the Company's customers, many of whom have been purchasing
the Company's equipment and services for over 30 years. The Company believes
that these customer relationships have contributed to the Company's attaining
leading positions in each of the Company's principal product lines.
The Ordinary Shares are listed on Euronext Amsterdam (symbol: BESI) and on
Nasdaq (symbol: BESI).
On 4 January 2005, the Company completed the purchase of Datacon. Details of
Datacon's business, together with the key terms of and rationale for the
acquisition, are set out in "Acquisition of Datacon".
INDUSTRY AND COMPETITORS
INDUSTRY BACKGROUND
Semiconductors are the basic building blocks used to create an increasing
variety of electronic products and systems. Most consumers picture
semiconductors as small black boxes. The small black boxes are actually the
packaging that surrounds the silicon chip and both protects the chip from the
external environment and provides the interface between the chip and other
electronic components.
Historically, semiconductors have been mass-produced as standard parts. Their
electronic functionality was determined by configuring many standard parts on a
printed circuit board that was custom designed for each application. Continuous
improvements in semiconductor process and design technologies have led to
smaller, more complex and more reliable devices at a lower cost per function.
Over time, system users and designers have continued to demand more
functionality, higher levels of performance, greater reliability and shorter
design cycle times, all at a lower cost. The semiconductor industry has
responded by combining the functions of multiple chips onto one chip. In
addition, by increasing the number of chips per wafer and wafer diameter,
manufacturers have reduced costs and increased device yields.
The simple approach of reducing chip sizes and increasing functionality in order
to meet customer production requirements has pushed the limits of conventional
semiconductor packages. Semiconductor manufacturers have been required to
develop new packaging technologies in response to increased demand for:
- - Complexity. Manufacturers now combine so many functions on each chip that
it becomes difficult to accommodate the large number of necessary
electrical interconnections. The Company believes that his problem will
only increase as designers continue to develop solutions with an increased
number of functions per chip.
- - Miniaturization. New applications and ever smaller electrical equipment
such as wireless devices, including cellular telephones and personal
digital assistants, demand increased density and functionality per chip,
which can only be achieved through smaller chip designs and packages.
62
- - Customization. At the same time as individual chips become more powerful
and the total number of chips in end products is reduced, customers
require specific customized packages for their individual needs.
Manufacturers therefore demand packaging equipment with the flexibility to
handle an increased number of specific applications.
The rapid development of advanced semiconductor applications requires
semiconductor manufacturers to continually improve their core technology and
manufacturing capabilities to remain competitive. Due to increased requirements
for complexity, miniaturization and customization, semiconductor manufacturers
demand highly sophisticated, cost-effective equipment from semiconductor
assembly packaging and plating equipment suppliers.
SEMICONDUCTOR MANUFACTURING AND ASSEMBLY
The semiconductor manufacturing process involves two distinct phases, wafer
processing, commonly referred to as the front-end, and assembly/test operations,
including die attach wire bonding, packaging, plating and testing functions,
which are commonly referred to as the back-end. Wafer processing involves
thousands of complex steps applied to a silicon wafer to form millions of
circuits on the wafer comprising a large number of chips. As the cost of
equipment and consequently production cost for the front-end is very high, it is
critical for manufacturers to protect their investment during the back-end
process by minimizing losses from defective processing, increasing throughput
and shortening manufacturing lead times for semiconductor products.
The semiconductor assembly process first involves the separation from the wafer
of individual chips or "die" and the attachment of each die to a plated metal
leadframe or a multi-layer substrate. The connection of the chip is then made
either by bonding extremely fine gold or aluminum wire to the leadframe (this is
referred to as "wire bonding") or to a multi-layer substrate or by creating
direct connections to the multi-layer substrate via a so-called flip chip (this
is referred to as "die attach" or "die bonding"). Next, the chips are molded by
encapsulation in an epoxy plastic. In leadframe applications, the leads are then
de-flashed and tin-plated, the chips are separated into individual devices, and
the leads are trimmed and formed. In array connect applications, connections
between the substrate and the chip are attached by ball placement and reflow
processes and the devices are cut, or singulated, into individual units.
Functional testing is carried out in various testing operations. Advanced
integration capabilities, however, already permit the integration of test
functions with leadframe trim and form operations.
SEMICONDUCTOR PACKAGING DEVELOPMENTS
Semiconductor manufacturers face continuing challenges to meet the demands of
their end-user customers in response to new market developments. For example, in
recent years, the use of semiconductors in applications such as wireless
telephony, personal digital assistants and consumer electronics has proliferated
rapidly. In addition to rapidly increasing volumes, the use of semiconductors in
devices such as cellular telephones imposes continuing demands upon
semiconductor manufacturers to reduce the size of the device and increase its
functionality, while still responding to intense time-to-market pressures.
To meet the challenges faced by semiconductor manufacturers, the semiconductor
assembly industry has developed new chip packaging technologies. To address the
requirement for increasingly dense circuits, array connect packaging has been
developed, of which chip scale ball grid array packaging has emerged as the
leading solution. Rather than relying on lead frames to mount and connect
semiconductors, a multi-layer substrate material is used. Underneath the
substrate, balls of solder are placed in an array pattern to establish direct
contact with the circuit board allowing much greater densities than can be
attained using leadframe technology. Chip scale ball grid array packaging is
ideal for producing small, complex wireless devices.
A more recent innovation is flip chip technology. As chips have decreased in
size, the pitch or distance between the gold wires that connect the chip to the
substrate or leadframe has continued to shrink. Flip chip technology eliminates
the need for wire bonding by placing the contact points of the chip in direct
contact with the packaging substrate. This technology requires stringent control
of the placement of the chip on the substrate.
The Company believes that both these new technologies are attractive solutions
for a number of the challenges faced by semiconductor manufacturers, and
anticipate that they will continue to be adopted and will become a more
significant part of the overall market in the future. This adoption will in turn
require the introduction of new assembly processes, including new molding
processes to encapsulate array connect chips and singulation systems in place of
trim and form systems to cut and form array connect chips for installation on
printed circuit boards.
63
CUSTOMER REQUIREMENTS
The dynamic nature of the semiconductor market causes manufacturers to seek a
one-stop, integrated solution for their production requirements, both to
maximize their return on investment in fabrication facilities and to eliminate
potential bottlenecks in the semiconductor assembly process. As a result,
manufacturers require assembly solutions that:
- - are continuously improved to support new technologies for both leadframe
and array connect packages;
- - include equipment capable of handling the wide range and proliferating
number of chip packages; and
- - offer increased yields of defect-free devices while reducing manufacturing
lead times.
To develop these solutions, manufacturers and suppliers must collaborate closely
to identify product and process specifications and develop new technologies.
COMPETITORS
The Company is one of the world's leading independent suppliers of semiconductor
assembly equipment. The market for assembly systems is highly competitive. In
each of the markets the Company serves, it faces competition from established
and potential competitors, some of which may have greater financial,
engineering, manufacturing and marketing resources than the Company has.
The Company believes it competes favorably with respect to the following
factors:
- - product performance;
- - ease of use of the Company's products;
- - product reliability;
- - product pricing in relation to "value of ownership";
- - breadth of product portfolio;
- - historical customer relationships; and
- - customer service and support.
A significant amount of the world's semiconductor manufacturing activity is
concentrated in Japan, a market which has traditionally been supplied by
Japanese semiconductor equipment manufacturers and historically has been
difficult for non-Japanese suppliers to penetrate. Since 1995, the Company has
supplied plating systems to the connector industry in Japan, and in recent years
have begun to ship plating systems to Japanese semiconductor manufacturers.
While the Company believes that this development will provide an opportunity to
expand and broaden the Company's presence in the Japanese market, given the
historical difficulties of entering that market, and the existence of a number
of major Japanese competitors, the Company may not be successful in doing so.
Moreover, Japanese semiconductor equipment manufacturers aggressively compete in
areas outside Japan, particularly in the Asia Pacific region. The Company
believes that Japanese suppliers will be the Company's most significant
competitors for the foreseeable future due to their strength in the supply of
equipment for high-volume, low-cost production and their high levels of excess
capacity relative to other suppliers, including Besi.
The semiconductor assembly industry is characterized by rapidly changing
technology and a high rate of technological obsolescence. Development of new
technologies that have price/performance characteristics superior to the
Company's technologies could adversely affect the Company's results of
operations. In order to remain competitive, the Company believes that it will be
necessary to expend substantial effort on continuing product improvement and new
product development. The Company cannot assure you that it will be able to
develop and market new products successfully or that the products introduced by
others will not render the Company's products or technologies non-competitive or
obsolete.
STRATEGY
The Company's objective is to become the world's leading supplier of advanced
back-end assembly equipment incorporating both leadframe and array connect
process technologies. The principal elements of the Company's strategy to
achieve this goal are set forth below.
64
LEVERAGE THE COMPANY'S TECHNOLOGY LEADERSHIP TO EXPLOIT NEW PACKAGING
TECHNOLOGIES
The Company's customers' success depends on the Company's timely development of
manufacturing processes and equipment to address changing requirements for new
semiconductor packaging. In the array connect market, the Company has introduced
advanced molding systems and singulation systems designed to address its
customers' requirements for miniaturization and higher chip density at lower
overall cost. The Company has been involved in the development and production of
chip scale ball grid array technology since the early 1990s and is one of the
leading suppliers of equipment used in chip scale ball grid array molding.
ACTIVELY PURSUE SYSTEM INTEGRATION
The Company believes that customer demands for higher throughput, quality and
flexibility in the assembly process offer significant opportunities for those
equipment manufacturers able to automate and integrate that process. The Company
intends to expand the range of automated systems for various leadframe and array
connect assembly processes and ultimately to offer a complete, integrated
solution for its customers. The Company's current generation of systems has
introduced the integration of molding with wire bonding and post cure, as the
well as the integration of marking, vision inspection and testing with trim and
form and singulation processes. The Company intends to continue this process by
introducing other products to support an automated and integrated assembly
process, including advanced test handling systems and tracking systems, as part
of the Company's goal of offering customers a one-stop, integrated solution for
the entire assembly process.
FOCUS ON STRATEGIC, LONG-TERM CUSTOMER RELATIONSHIPS
The Company's close relationships with its customers, many of which exceed
thirty years, provide the Company with valuable knowledge about the
semiconductor packaging and plating requirements as the well as opportunities to
develop back-end systems in conjunction with its customers. The Company believes
that these relationships, combined with the Company's position as a leading
supplier of integrated assembly systems, provide an opportunity to broaden the
range of products sold to these customers and to enhance the Company's
reputation as a supplier of a broad and flexible range of assembly systems.
EXPAND GLOBAL SALES AND SERVICE OPERATIONS
The Company maintains regional sales and service operations in Europe, the Asia
Pacific region and the United States and has customers in each region. As part
of the Company's strategy, the Company intends to expand the Company's customer
base in critical global markets, particularly in China and Japan. Given the
globalization of the semiconductor industry, the Company believes that a
significant presence in sales and after-market service in each geographic region
is critical to sustain close relationships with customers and generate new
product sales.
SELECTIVELY PURSUE ACQUISITIONS
The Company believes that in order to implement the Company's goals of providing
customers with highly automated, integrated solutions with optimal packaging
flexibility, it is critically important to identify and incorporate new
technologies and processes on a timely basis. Towards that end, the Company
intends to actively identify and evaluate acquisition candidates that could
assist the Company in attaining the Company's overall goals of achieving
integrated, automated assembly, maintaining product leadership, addressing
evolving new packaging technologies and expanding the Company's geographic
scope. In September 2001, the Company acquired its RDA subsidiary in order to
expand its array connect product portfolio, in January 2003, the Company
acquired its Laurier subsidiary allowing the Company to incorporate intelligent
die sorting capabilities as part of its integration strategy and on 4 January
2005 the Company acquired Datacon in order to extend its presence in the flip
chip and die bonding equipment markets and to increase its scale and presence in
the assembly equipment market. See "Acquisition of Datacon". The Company expects
to implement its acquisition strategy by leveraging its reputation in the
industry, extensive product range and significant cash resources. In addition,
the Company will also, where appropriate, evaluate implementing the Company's
goals through joint ventures, alliances and other strategic relationships.
PRODUCTS AND SERVICES
The Company develops and produces semiconductor die handling, packaging and
plating equipment for both leadframe and array connect applications.
The Company's die handling equipment consists of:
- - die sorting systems which are used to inspect, select and sort dies, flip
chips, wafer level scale packages and opto-electronic devices for further
processing in assembly operations; and
65
- - high precision single and multi-chip and flip chip die attach systems
which place the contact points of the chip in direct contact with the
packaged substrate.
The Company's packaging equipment consists of:
- - molding systems that encapsulate bonded semiconductor devices in epoxy
resin;
- - trim and form integration systems used to cut and then form metallic leads
of encapsulated semiconductor devices;
- - singulation systems used to cut package array connect substrates; and
- - integration lines that connect and integrate the packaging process from
molding until final testing.
The Company's plating equipment consists of a comprehensive line of fully
automated tin-lead plating systems.
In the future, the Company plans to offer customers a fully automated and
integrated array connect assembly solution that will integrate test handling and
flip chip bonding capabilities with the Company's existing line of packaging and
plating equipment.
CUSTOMERS
The Company's customers consist primarily of leading U.S., European and Asian
semiconductor manufacturers and subcontractors. The Company's close
relationships with its customers provide the Company with valuable knowledge
about evolving semiconductor devices and packages as the well as the opportunity
to develop back-end systems in conjunction with its customers.
The Company's principal customers, include:
DIE HANDLING EQUIPMENT PACKAGING EQUIPMENT PLATING EQUIPMENT
Agere Amkor Agere
CMD ASE Korea ASE
Cree Atlantic Amkor
Data I/O AVX Chipmos
Infineon Delphi Automotive Systems Compel
Micron EDL EEMS
Nortel EEMS FCI
Night Vision Labs Infineon Hitachi
NSEB Micron Infineon
Philips Micronas Lingsen
Raytheon Motorola NSEB
Samsung NSEB OSE Semiconductor
Osram Philips
Philips Renesas
ON Semiconductor Samsung
Samsung Skyworks
Skyworks SPIL
STMircoelectronics Texas Instruments
For the year ended 31 December 2003, Infineon Technologies accounted for more
than 10% of the Company's net sales. For the nine months ended 30 September
2004, Infineon Technologies and STMicroelectronics each accounted for more than
10% of the Company's net sales. Historically, a significant percentage of the
Company's net sales in each year have been attributable to a limited number of
customers; however, the largest customers for the Company's systems tend to vary
from year to year depending upon specific capital investment schedules,
technological developments and business prospects.
In general, the Company has maintained close, long-term relationships with its
customers. The use of the Company's systems has become an integral part of some
of the Company's customers' decision-making process for future equipment
selection, while the quality of services rendered by the plating division has
provided customers with flexibility in making evaluations regarding capacity
needs in future business planning. The Company believes that its focus on large,
technically sophisticated
66
semiconductor manufacturers and its emphasis on close relationships with a
number of such semiconductor manufacturers worldwide is an important competitive
advantage.
SALES, FIELD SUPPORT AND SERVICES
The Company's worldwide sales and support organization is critical to the
Company's strategy of maintaining close relationships with leading semiconductor
manufacturers. Sales functions are performed both on a regional and product line
basis, and salesmen have direct responsibility for new product sales and daily
customer account management. The regional offices are supplemented in some
Middle Eastern and Asian countries by distributors or agents. Sales activities
in each region are supported by product line marketing groups in the
Netherlands.
The Company's service and support activities include warranty services,
technical support, training, provision of spare parts, molds and tooling
capability. The Company maintains 21 service offices. The Company's
manufacturing facilities in the Netherlands, Malaysia and the United States also
play an important role in marketing and sales. Each facility is responsible for
the production and technical support of the equipment that it manufactures as
the well as for customer service in conjunction with field service personnel.
The following table sets forth the number of the Company's employees, by
geographical region, engaged in sales and marketing and after sales and customer
support as of 30 September 2004:
AFTER SALES
AND
SALES AND CUSTOMER
MARKETING SUPPORT
--------- -----------
Europe 47 18
Asia Pacific 13 37
United States 7 7
-- --
TOTAL 67 62
The Company typically experiences a lengthy sales cycle for its products due to
the significant amount of capital investment involved and careful coordination
required to satisfy customers' design specifications. Equipment production takes
between four and nine months after agreement upon specifications, with generally
at least an additional month for testing and acceptance.
GEOGRAPHIC MARKETS
The Company believes that it is the leading supplier of trim and form, molding
and plating systems to non-Japanese semiconductor manufacturers for their
operations in Europe, the United States and the Asia Pacific region, including
Korea. The following table sets forth the Company's net sales by geographic
regions for each of the last three years and the percentage of the Company's
total net sales represented by each region.
NINE MONTHS ENDED 30
YEAR ENDED 31 DECEMBER SEPTEMBER 2004
2001 2002 2003 (UNAUDITED)
---- ---- ---- ----------------------
(in millions)
Asia Pacific (euro)68.9 46% (euro)44.8 54% (euro)55.3 65% (euro)66.1 69%
Europe and Rest (euro)47.8 32% (euro)28.3 34% (euro)26.7 31% (euro)21.8 23%
of World
North America (euro)33.3 22% (euro)10.1 12% (euro)3.5 4% (euro)7.6 8%
----------- --- ---------- --- ---------- --- ---------- ---
TOTAL (EURO)150.0 100% (EURO)83.2 100% (EURO)85.5 100% (EURO)95.5 100%
----------- --- ---------- --- ---------- --- ---------- ---
Net sales in 2003 in the United States declined significantly as compared to
2002 and 2001, primarily due to the completion of an investment program of a
major U.S. semiconductor manufacturer in 2002.
67
BACKLOG
Backlog decreased by 27.5% to (euro)45.1 million at 30 September 2004 from
(euro)62.2 million at 30 June 2004 and increased by 13.3% from (euro)39.8 at 31
December 2003. The decrease in backlog as compared to 30 June 2004 was primarily
due to a decrease in backlog for all product lines. The Company includes in
backlog only those orders for which the Company has received a completed
purchase order. Such orders are subject to cancellation by the customer with
payment of a negotiated charge. Because of possible changes in customer delivery
schedules, cancellation of orders and potential delays in product shipments, the
Company's backlog as of any particular date may not be representative of actual
sales for any succeeding period.
MANUFACTURING AND SUPPLIERS
Besi plating division, singulation division and Besi die handling division
subcontract virtually all components and subsystems incorporated into its
products. Its manufacturing operations consist exclusively of final assembly and
test. The Company's molding division continues to manufacture molds and tools,
which it considers critical to its performance. It subcontracts all other
manufactured parts, components and subsystems. However, an increasing amount of
the manufacturing requirements of the Company's molding division and trim and
form division is being subcontracted to third-party vendors. In all cases, the
Company maintains overall responsibility for the design, assembly, test,
production and incorporation of proprietary features in their equipment.
Although the Company has not experienced any significant difficulty in its
relationships with subcontractors, the Company's ability to expand its capacity
and rate of growth will rely on its ability to obtain increased production from
its existing subcontractors or identify additional qualified subcontractors.
On occasion, the Company has experienced delays or unexpected costs in
connection with the introduction of new products. These problems can result in
unanticipated delays in product introduction, delays in product shipment,
declines in orders and increased costs of goods sold and warranty costs, and can
adversely impact the Company's relationship with its customers.
The Company believes that emphasis upon quality equipment and service is
essential to its competitive position, and therefore maintain, at each facility
a dedicated quality management organization. The Company trains all of its
employees in basic quality skills and conduct customer quality audits of
procedures and personnel. All of the Company's trim and form and molding systems
operations have qualified for compliance with ISO 9000 standards.
RESEARCH AND DEVELOPMENT
The semiconductor equipment industry is subject to rapid technological change
and new product developments and enhancements. The Company has periodically
introduced new generations of molding, trim and form and plating systems, and
believes that continued and timely development and introduction of new and
enhanced products is essential for the Company to maintain its competitive
position.
Towards that end, the Company is currently actively engaged in developing
enhancements to its established systems, introducing the Company's singulation
systems for the array connect market and developing automated ball placement
systems for that market as the well as other hardware and software to support
full automation and integration of the back-end process.
The Company's research and development spending is customer-driven and focuses
on identifying and responding quickly to evolving customer and market
requirements. Overall research and development activities for molding systems
and trim and form systems are undertaken at the Company's Duiven facilities, and
automated plating, singulation and ball placement systems at the Company's
Drunen facility. All of these facilities are located in the Netherlands. The
Company's research and development activities for its die handling systems are
conducted in Londonderry, New Hampshire, USA. In addition, each of the Company's
production facilities has an engineering group whose main responsibility is
application engineering, including customization of specific customer
requirements and investigation of new manufacturing processes and materials.
The Company historically has devoted a significant portion of its financial
resources to research and development programs and expects to continue to do so
in the future. For the three years ended 31 December 2001, 2002 and 2003,
aggregate research and development expense was (euro)5.4 million, (euro)12.5
million and (euro)13.6 million, respectively and (euro)9.3 million for the nine
months ended 30 September 2004. The increase in research and development
spending in 2003 as compared to 2002 reflects the Company's continued investment
in research and development, mainly for the development of new
68
trim and form systems, the Company's new AMS-i molding system, as well as
spending for singulation systems.
At 30 September 2004, the Company employed a total of 56 engineers engaged in
research and development projects for molding and trim and form systems. The
Company also employed approximately 31 engineers engaged in research and
development of plating systems and singulation systems, and approximately 17
engineers at Besi Die Handling engaged in research and development for die
handling systems.
PROPERTY, PLANT AND EQUIPMENT
The Company's molding systems and molds are manufactured in facilities
aggregating approximately 96,000 square feet located in Duiven and Brunssum, the
Netherlands. Fico leases, under a capital lease, an approximately 95,000 square
foot manufacturing facility for trim and form systems in Duiven, the
Netherlands. The premises in Brunssum are owned by Fico. The Company owns an
approximately 24,000 square foot facility for tooling manufacturing in Shah
Alam, Malaysia. In Leshan, China, the Company owns a facility of approximately
30,000 square feet which the Company uses as a facility for tooling and
manufacturing. The Company's automated plating and singulation systems are
manufactured at facilities leased aggregating approximately 95,000 square feet
in Drunen, the Netherlands. The Company also leases approximately 22,264 square
feet of facilities for the Company's die sorting systems in Londonderry, New
Hampshire, U.S.
On 28 June 2002, the Company sold the land and buildings of its Meco subsidiary
in Drunen, the Netherlands in a sale and lease back transaction for (euro)6.5
million in cash. At the date of this transaction, the cost of the land and
buildings totaled (euro)6.9 million and the net book value of the real estate
sold amounted to (euro)5.4 million. The Company's gain on this transaction of
(euro)1.1 million is being amortized and netted against rental expenses over the
twelve and a half year term of the lease. Gross rental expenses total (euro)0.6
million per annum.
On 6 February 2004, Fico sold the land and buildings it owned in Duiven, the
Netherlands in a conditional sale and lease back transaction for (euro)14.5
million in cash. At the date of the transaction, the net book value of the real
estate sold was approximately equal to the selling price of the real estate.
Gross rental expenses will amount to (euro)1.3 million per annum. The Company
granted the buyer a (euro)1.5 million loan which is payable over a maximum
period of 24 months. The loan can be repaid at any time during the term of the
loan. The loan is secured by a second mortgage on the land and buildings which
were the subject of the transaction. The loan bears interest at a rate of 4.5%
per annum.
On 14 December 2004, the Company announced that it will close its tooling
facility in Brunssum, the Netherlands in the first half of 2005.
The Company's rental obligations for its facilities and machinery in 2001, 2002
and 2003 were (euro)1.6 million, (euro)9.1 million, and (euro)7.7 million,
respectively.
The following table summarizes information with respect to the principal
facilities that the Company leased or owned as of 30 September 2004.
PLANT LOCATION PRINCIPAL ACTIVITIES AREA (SQ. FT)
Duiven, the Netherlands Manufacturing 175,000
Drunen, the Netherlands Manufacturing; Executive Offices 95,000
Leshan, China Manufacturing 30,000
Shah Alam, Malaysia Manufacturing 24,000
Londonderry, New Hampshire, United States Manufacturing 22,264
Brunssum, the Netherlands Manufacturing 16,000
Herwen, the Netherlands Idle Idle
69
MANAGEMENT AND EMPLOYEES
DIRECTORS AND SENIOR MANAGEMENT
MANAGEMENT STRUCTURE
Besi has a two-tier board structure consisting of a Board of Management (Raad
van Bestuur) and a Supervisory Board (Raad van Commissarissen) which is
entrusted with supervising and guiding the Board of Management in its management
of the Company. The Board of Management is currently comprised of two members
and the Supervisory Board is currently comprised of four members. The Board of
Management, the Chairman of the Board of Management, and two members of the
Board of Management acting jointly, are authorized to represent Besi. See "Share
Capital, Corporate Structure and Corporate Governance". In addition to the two
members of the Board of Management, the management team of the Company is
currently also comprised of seven key members of management which do not form
part of the Board of Management itself.
The Supervisory Board supervises the policy of the Board of Management, as well
as the general course of Besi's corporate affairs and business, and provides
advice to the Board of Management. The Board of Management must keep the
Supervisory Board informed, consult with the Supervisory Board on important
matters and submit certain important decisions to the Supervisory Board for its
prior approval. In performing its duties, the Supervisory Board is required to
act in the interests of Besi's business as a whole. The members of the
Supervisory Board are not authorized to represent the Company. See "Share
Capital, Corporate Structure and Corporate Governance". All of the members of
the Supervisory Board are independent as defined under the new rules of Nasdaq,
including the independence requirements contemplated by Rule 10A-3 under the
Exchange Act.
SUPERVISORY BOARD
The members of the Supervisory Board as of the date of this Prospectus are as
follows:
NAME AGE TITLE TERM ENDS
- ---- --- ----- ---------
W. D. Maris 65 Chairman of the Supervisory Board 2006
E. B. Polak 60 Member of the Supervisory Board 2005
D. Sinninghe Damste 65 Member of the Supervisory Board 2005
T. de Waard 58 Member of the Supervisory Board 2007
Mr. Maris - Chairman of the Supervisory Board
Mr. Maris became a member of the Supervisory Board in May 2001 and has served as
Chairman since June 2001. From 1990 to January 2000, Mr. Maris served as
President and CEO of ASM Lithography N.V., the Netherlands, a semiconductor
equipment manufacturer. From 1979 to 1990 Mr. Maris was active in the IC
division of Philips Electronics N.V. Mr. Maris also serves as a member of the
Supervisory Board of Vanderlande Transport Mechanismen B.V. Furthermore, Mr.
Maris serves as a member of the board of directors of Photronics Inc., FSI
International Inc., and the European Asset Trust.
Mr. Polak - Member of the Supervisory Board
Mr. Polak became a member of the Supervisory Board in November 2001. From 1984
until 2001, Mr. Polak has served in various capacities with ASM Lithography
N.V., the Netherlands. From 1969 to 1984, Mr. Polak served in various capacities
with Philips.
Mr. Sinninghe Damste - Member of the Supervisory Board
Mr. Sinninghe Damste became a member of the Supervisory Board in November 2001.
From 1988 to his retirement in 2001, Mr. Sinninghe Damste served as a member of
the Board of Management of Hollandsche Beton Groep N.V., a multi-sector
construction company. From 1968 to 1988, Mr. Sinninghe Damste served in various
capacities with Royal Dutch/Shell Group of Companies. Mr. Sinninghe Damste also
serves as Chairman of the Supervisory Board of Holland Institute of Traffic
Technology N.V. and as a member of the Supervisory Boards of Vedior N.V. and NKI
\ AvL.
Mr. De Waard - Member of the Supervisory Board
Mr. De Waard became a member of the Supervisory Board in November 2001. Since
2001, Mr. De Waard has been a partner of Clifford Chance Limited Liability
Partnership, a law firm. Previously, Mr.
70
De Waard was a partner of the law firm Stibbe. Mr. De Waard also serves as a
member of the Supervisory Board of STMicroelectronics N.V.
The business address of each of the members of the Supervisory Board is the
registered office of the Company.
BOARD OF MANAGEMENT AND OTHER KEY MEMBERS OF MANAGEMENT
The members of the Board of Management and the other key members of management
as of the date of this Prospectus are as follows:
BOARD OF MANAGEMENT
NAME AGE TITLE
- ---- --- -----
R. W. Blickman 50 President and Chief Executive Officer, Chairman of
the Board of Management
J. A. Wunderl 53 Member of the Board of Management, Managing
Director of Besi Die Handling, appointed as member
of the Board of Management as of 25 March 2004
OTHER KEY MEMBERS OF MANAGEMENT
NAME AGE TITLE
- ---- --- -----
H. Menschaar 58 Director of Corporate Technology
C. te Hennepe 46 Director of Finance
W. Enzing 45 Managing Director of Fico Trim and Form Integration
R. J. Foppen 57 Worldwide Sales and Marketing Manager of Besi
Plating
P. A. Govaert 49 Managing Director of Fico Molding and Fico Tooling
F. J.M. Jonckheere 45 Managing Director of Besi Plating
G. A. in `t Veld 48 Managing Director of Besi Singulation
Mr. Blickman - President, Chief Executive Officer and Chairman of the Board of
Management
Mr. Blickman is President and Chief Executive Officer and Chairman of the Board
of Management, positions he has held since November 1995. He also is Managing
Director of the Fico subsidiary, a position he has held since February 1991, and
Managing Director of the Meco subsidiary, a position he has held since November
1995. Mr. Blickman was also a Managing Director and a Management Board member of
the PBE joint venture. Previously, Mr. Blickman held the position of Worldwide
Sales Manager of Fico from September 1989 to February 1991. Prior to joining
Fico, he served as the European Marketing and Sales Manager for Advanced
Semiconductor Materials International N.V. (ASMI). Furthermore, Mr. Blickman
serves as a member of the supervisory board of ZBG Holdings N.V. and of
Ennismore Fund Management Limited.
Mr. Wunderl - Executive Member and Managing Director of Besi Die Handling Inc.
Mr. Wunderl has served as Managing Director of Besi Die Handling Inc. since 5
January 2004 and was appointed a member of the Board of Management on 25 March
2004. From 2002 to 2004 Mr Wunderl worked at Esec Switzerland and between 1990
and 2002 he held various positions at ASMI.
Mr. Menschaar - Director of Corporate Technology
Mr. Menschaar is Director of Corporate Technology, a position he has held since
January 1999. Mr. Menschaar served as Strategic Business Development manager for
Fico and Meco. Prior to joining Besi, Mr. Menschaar served variously as Managing
Director for AFAM B.V., as Managing Director for Advanced Production Automation
and as Chief Development for Patent Machinebouw B.V.
Mr. te Hennepe - Director of Finance
Mr. te Hennepe has served as Director of Finance since 1 March 2002. From March
1999 until February 2002 Mr. te Hennepe served as Finance Manager of Possehl
Besi Electronics N.V. Prior to joining Possehl Besi Electronics N.V., Mr. te
Hennepe served as Finance Manager/Controller for Yokogawa, GTI, HCS, ABB and
ASMI in the Netherlands.
Mr. Enzing - Managing Director of Fico Trim and Form Integration
Mr. Enzing has served as Managing Director of Fico Trim and Form Integration
Systems since
71
September 2001. Prior to joining Fico, Mr. Enzing served as Sector Director at
Atos Orgin from 1997 and as Account Manager from 1995. Prior to that, Mr. Enzing
was an Associate Consultant in McKinsey & Company, and held various positions at
ASMI.
Mr. Foppen - Worldwide Sales and Marketing Manager of Besi Plating
Mr. Foppen is Worldwide Sales and Marketing Manager of Besi Plating and also
serves as the Director of Sales and Marketing, a position he has held since
1985. From 1973 to 1985, Mr. Foppen served as the Sales Manager for the United
Kingdom and Benelux Countries for Cetema B.V.
Mr. Govaert - Managing Director of Fico Molding and Fico Tooling
Mr. Govaert is Managing Director of Fico Molding, a position he has held since 1
November 2004, and Managing Director of Fico Tooling, a position he has held
since 1 May 1999. Prior to joining the Fico subsidiary, Mr. Govaert served at
Berkhof Heerenveen B.V. as General Manager from 1997 to 1998 and at WBM
Staalservice Centrum B.V. from 1987 to 1997 as General Manager.
Mr. Jonckheere - Managing Director of Besi Plating
Mr. Jonckheere is Managing Director of Besi's plating activities a position he
has held since 1 October 2003. Formerly, Mr. Jonckheere served as Director of
Operations of Meco Plating Systems and Chemicals from January 1996. From 1986
until joining Besi, Mr. Jonckheere served in various positions at Holec Machines
and Apparaten B.V.
Mr. in 't Veld - Managing Director of Besi Singulation
Mr. in 't Veld has served as Managing Director of Besi Singulation since 1,
November 2003. Prior to joining Besi, Mr. in 't Veld served as Managing Director
of Multin Technology Group from 2000 to 2003. From 1982 to 2000, Mr. in 't Veld
held various positions at Delft Instruments.
The business address of each of the members of the Board of Management and of
the other key members of management is the registered office of the Company.
FUTURE MEMBERS OF THE BOARD OF MANAGEMENT
It is intended that Messrs. H. Rutterschmidt and G. Zeindl, members of the
Datacon management board, will be appointed by the Supervisory Board as members
of the Board of Management after the notification of the General Meeting of
Shareholders at the next annual General Meeting of Shareholders. See
"Acquisition of Datacon". In connection with the acquisition of Datacon, H.
Rutterschmidt received 444,784 Ordinary Shares from two of the selling
shareholders, which shares are subject to a two year lock up arrangement
(subject to certain exceptions), which expires on 4 January 2007. H.
Rutterschmidt and G. Zeindl are two of the partners in a partnership that sold
real property to a subsidiary of the Company. See "Acquisition of Datacon".
COMMITTEES OF THE SUPERVISORY BOARD
AUDIT COMMITTEE
In view of the limited number of members of the Supervisory Board, the
Supervisory Board acts as the Audit Committee. The Audit Committee's
responsibilities include:
- - appointing, approving the compensation of, and assessing the independence
of the Company's independent auditor;
- - overseeing the work of the independent auditor, including through the
receipt and consideration of certain reports from the independent auditor;
- - reviewing and discussing with management and the independent auditors the
annual and quarterly financial statements and related disclosures;
- - monitoring the Company's internal control over financial reporting,
disclosure controls and procedures and compliance with the Company's code
of business conduct and ethics;
- - overseeing the internal audit function;
- - discussing the risk management policies;
- - establishing policies regarding hiring employees from the independent
auditor and procedures for the receipt and retention of accounting related
complaints and concerns; and
72
- - meeting independently with the independent auditors and management.
The Audit Committee meets at least 5 times per year.
REMUNERATION COMMITTEE
Besi has a Remuneration Committee which has responsibility for:
- - annually reviewing and approving the corporate goals and objectives
relevant to the compensation of senior management;
- - overseeing and administering the equity incentive plans;
- - overseeing and making recommendations to the Supervisory Board with
respect to director compensation; and
- - determining the compensation of the chief executive officer and reviewing
and approving, or make recommendations to the Supervisory Board, with
respect to the compensation of the other executive officers.
The Remuneration Committee consists of Mr. T. de Waard, chairman of the
Remuneration Committee, Mr. W.D. Maris, Mr. Polak and Mr. Sinninghe Damste. The
Remuneration Committee meets at least 1 time per year.
SELECTION, APPOINTMENT AND GOVERNANCE COMMITTEE
The Selection, Appointment and Governance Committee consists of its chairman Mr.
Polak, Mr. W.D. Maris, Mr. De Waard and Mr. Sinninghe Damste. The Selection,
Appointment and Governance Committee prepares, within its duties, the
decision-making of the Supervisory Board on:
- - drawing up selection criteria and appointment procedures for Supervisory
Board members and Board of Management members;
- - periodically assessing the size and composition of the Supervisory Board
and the Board of Management, and making a proposal for a composition
profile of the Supervisory Board;
- - periodically assessing the functioning of individual Supervisory Board
members and Board of Management members, and reporting on this to the
Supervisory Board;
- - making proposals for appointments and re-appointments; and
- - supervising the policy of the Board of Management on the selection
criteria and appointment procedures for senior management.
COMPENSATION OF DIRECTORS AND OFFICERS
The aggregate cash compensation paid or accrued by the Company for its
management including members of the Board of Management was (euro)1.9 million in
2004. Amounts accrued to provide pension, retirement or similar benefits to
these individuals, as a group, were (euro)0.2 million in 2004.
REMUNERATION OF THE BOARD OF MANAGEMENT
The aggregate cash compensation paid to its members of the Board of Management
was (euro)715,089 in 2004 (including pension but excluding one-time payments of
(euro)739,392).The remuneration of the members of the Board of Management is
determined by the Supervisory Board, all with due observance of the management
board remuneration policy to be adopted by the General Meeting of Shareholders.
The Supervisory Board is required to present any scheme providing for the
remuneration of the members of the Management Board in the form of shares or
options, to the General Meeting of Shareholders for adoption.
73
The total remuneration and related costs of the individual members of the Board
of Management for the year ended 31 December 2002, 2003 and 2004 was as follows:
YEAR ENDED 31 DECEMBER
-------------------------
(In euros, except as specified otherwise) 2002 2003 2004
------- ------- -------
R.W. Blickman
Salaries and related costs (5) 311,497 312,637 317,847
Bonus (4) - 35,458 (4)
Pension 54,326 54,326 55,231
Other (6) - - 344,392
J. A. Wunderl (1) (in U.S.$)
Salaries and related costs (5) - - 190,797
Bonus (4) - - (4)
Pension - - -
M.A.H. Wartenbergh (2)
Salaries and related costs (5) - 124,219 169,050
Bonus (4) - 13,755 -
Pension - 14,329 19,499
Severance payment - - 395,000
J.W. Rischke (3)
Salaries and related costs (5) 145,948 - -
Bonus (4) - - -
Pension 32,367 - -
Other (6) - - 40,884
Notes:
(1) Member of the Board of Management as from 25 March 2004, remuneration
relates to the period as from 25 March 2004 onwards.
(2) Member of the Board of Management as from 27 March 2003; remuneration
relates to the period as from 27 March 2003 until his exit as of 1 January
2005.
(3) Member of the Board of Management until 23 October 2002; remuneration
relates to the period until 23 October 2002.
(4) Bonus is included in the year to which it relates. Bonus for the year 2004
is not yet known.
(5) Includes salaries, holiday allowance, medical insurance and premiums
social securities.
(6) This amount was paid as part of an over-all settlement reached with
certain holders of options issued under the Company's Incentive Plan 1995
(as defined under "Stock Option Plans", below), following a court
interlocutory judgment in a legal proceeding filed by a former employee
that indicated that the Company should compensate for dilution that arose
as a result of the Company's secondary share offering in 2000.
A portion of the compensation of the Board of Management is performance related.
74
REMUNERATION OF THE SUPERVISORY BOARD
The aggregate remuneration paid to current members of the Supervisory Board was
(euro)87,488 in 2004. The remuneration of the Supervisory Board is determined by
the General Meeting of Shareholders.
The total remuneration of the individual members of the Supervisory Board
members for the years ended 31 December 2002, 2003 and 2004 was as follows:
YEAR ENDED 31 DECEMBER
(IN EUROS) 2002 2003 2004
- ---------- ------ ------ ------
W. D. Maris 15,882 15,882 23,038
E. B. Polak 15,882 15,882 19,206
D. Sinninghe Damste 15,882 15,882 26,038
T. de Waard 15,882 15,882 19,206
In 2002, 2003 and 2004, part of the cash compensation, not exceeding 50%, to the
Supervisory Board members has been replaced by the acceptance of granting of
options by three Supervisory Board members. The fair value of the option awards
to the Supervisory Board members was estimated using the Black-Scholes
option-pricing model. Total remuneration after said grant of options did not
change compared to the remuneration approved by the General Meeting of
Shareholders.
STOCK OPTION PLANS
DESCRIPTION OF STOCK OPTION PLANS
In 1995, the Company established the BE Semiconductor Industries Incentive Plan
1995 (the "Incentive Plan 1995"). The Company granted 1,101,236 options to
purchase Ordinary Shares ("1995 Plan Shares") under the Incentive Plan 1995.
During the years 1995 to 2001, the Company made awards under the Incentive Plan
1995 to executive officers and senior employees of the Company. Options granted
between 1999 and 2001 vest after three years. The Incentive Plan 1995 expired in
2001. Stock options granted under the Incentive Plan 1995 have exercise prices
which were equal to the market price of the Ordinary Shares on the date of
grant.
In 2001, the Company established the BE Semiconductor Industries Incentive plan
2001 - 2005 (the "Incentive Plan 2001"). The total number of Ordinary Shares
("2001 Plan Shares") that the Company may issue under the Incentive Plan 2001,
may not exceed 1.5% of the total number of Ordinary Shares outstanding in the
applicable fiscal year, subject to adjustments for share splits, share
dividends, recapitalizations and similar events. 2001 Plan Shares may consist,
in whole or in part, of unauthorized and unissued Ordinary Shares or treasury
shares. The Company anticipates that it will, on an annual basis, make awards
under the Incentive Plan 2001 to executive officers and senior employees of the
Company. Options granted in 2002, 2003 and 2004 vest after three years. Stock
options granted under the Incentive Plan 2001 will have exercise prices equal to
the market price of the Ordinary Shares on the date of grant.
Under separate stock option plans, in the years 2000 through 2004, the Company
granted options to all of its employees. Under these plans, the employees have a
right to receive payment of an amount that corresponds with the profit achieved
with the (virtual) sale of newly issued Ordinary Shares by the Company after
exercise of the options. The options vest after three years and have exercise
prices equal to the market price of the Ordinary Shares on the date of grant.
These options receive variable accounting treatment. All other options granted
by the Company receive fixed accounting treatment.
The Company accounts for stock-based compensation using the intrinsic value
method. Accordingly, no compensation has been recorded for the stock options
granted from 2001 through 2004, which received fixed accounting treatment. As of
31 December 2004 there were outstanding options to purchase an aggregate of
1,005,181 Ordinary Shares which receive fixed accounting treatment at a weighted
average exercise price of (euro)9.79 per share. For the stock options granted
from 2001 through 2004 that receive variable accounting treatment, the Company
will recognise a compensation release of (euro)12 net of tax, based on the
market value of the Ordinary Shares for the year ended 31 December 2004. As of
31 December 2004, 229,079 options that receive variable accounting treatment
were outstanding at a weighted average exercise price of (euro)7.06 per share.
The Company accounts for stock based employee compensation plans under the
recognition and measurement principles of Accounting Principles Board Opinion
("APB") No. 25 "Accounting for Stock Issued to Employees", and related
interpretations in accounting for its plans. SFAS No. 123
75
"Accounting for Stock-Based Compensation" allows companies to elect to either
account for stock options using fair value based method, or continue to account
for stock option plans under APB No. 25, and disclose pro forma disclosure of
net income and earnings per share as if SFAS No. 123 were applied. Under APB No.
25, no stock-based employee compensation cost is reflected in net income (loss)
for the fixed stock options, as all options granted under the Company's stock
option plans had an exercise price equal to the market value of the underlying
Ordinary Shares on the date of grant. The Company has elected to continue to
account for its stock options under the provisions of APB No. 25 and disclose
the pro forma effect of SFAS No. 123.
FINANCING OF STOCK OPTION PLANS
Option plans that were issued in 1999 and 2000 were constructed with a virtual
financing arrangement whereby Besi financed the fiscal value of the options
granted to employees subject to the Dutch tax-regime. The loans issued under
this arrangement are repayable to Besi on the exercised date of the respective
option, provided that the option was actually exercised. If the options expire
unexercised, the respective loans are forgiven. Besi accrues a liability for the
respective fiscal implication of this arrangement.
SUMMARY OF OUTSTANDING STOCK OPTIONS
Following is a summary of changes in Besi options:
2002 2003 2004
------------------- -------------------- ------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
NUMBER OF PRICE NUMBER OF PRICE NUMBER OF PRICE
OPTIONS EURO OPTIONS EURO OPTIONS EURO
--------- -------- --------- -------- --------- --------
FIXED OPTION PLANS
Outstanding, beginning of year 821,896 12.10 929,095 11.56 975,768 10.25
Options granted 223,337 9.32 162,905 3.46 131,363 6.02
Options expired (51,692) 11.28 (53,598) 10.05 - -
Options forfeited (64,446) 10.90 (62,634) 12.14 (101,950) 9.34
------- ----- -------- ----- --------- -----
Outstanding, end of year 929,095 11.56 975,768 10.25 1,005,181 9.79
======= ===== ======== ===== ========= =====
EXERCISABLE, END OF YEAR 190,798 11.74 431,366 13.48 597,426 12.12
======= ===== ======== ===== ========= =====
VARIABLE OPTION PLANS
Outstanding, beginning of year 67,983 9.55 122,710 9.23 164,105 7.54
Options granted 67,627 8.94 48,466 3.22 69,535 5.95
Options forfeited (12,900) 9.44 (7,071) 7.26 (4,561) 7.19
------- ----- -------- ----- --------- -----
Outstanding, end of year 122,710 9.23 164,105 7.54 229,079 7.06
======= ===== ======== ===== ========= =====
EXERCISABLE, END OF YEAR - - - - 55,059 9.55
======= ===== ======== ===== ========= =====
76
Stock options outstanding and exercisable at 31 December 2004:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------- ----------------------------------
WEIGHTED
AVERAGE WEIGHTED
REMAINING AVERAGE
CONTRACTUAL EXERCISE PRICE WEIGHTED AVERAGE
RANGE OF EXERCISE NUMBER OF LIFE IN NUMBER OF EXERCISE PRICE IN
PRICE OPTIONS (YEARS) EURO OPTIONS EURO
- ----------------- --------- ----------- -------------- --------- -----------------
FIXED OPTION PLANS
(euro)3.22 - (euro)4.35 162,639 4.58 3.46 34,200 4.35
(euro)5.20 - (euro)7.70 153,513 4.05 6.06 5,000 7.70
(euro)8.94 - (euro)10.31 482,563 2.53 9.48 317,560 9.66
(euro)14.65 - (euro)17.90 240,666 1.44 16.55 240,666 16.55
======= ==== ===== ======= =====
VARIABLE OPTION PLANS
(euro)3.22 44,860 4.25 3.22 - -
(euro)5.95 69,330 5.25 5.95 - -
(euro)8.94 - (euro)10.31 114,889 2.81 9.23 55,059 9.55
------- ---- ----- ------- -----
77
ORDINARY SHARES AND OPTIONS HELD BY MEMBERS OF THE BOARD OF MANAGEMENT
The aggregate number of Ordinary Shares and the aggregate number of options on
Ordinary Shares owned by the current members of the Board of Management as the
date of this Prospectus is as follows:
NUMBER OF
SHARES
---------
R.W. Blickman 270,485
NUMBER OF
EXERCISE PRICE OPTIONS
YEAR OF GRANT IN EUROS OUTSTANDING
------------- -------------- -----------
R.W. Blickman 1999 4.35 8,500
2000 17.90 20,000
2000 9.80 142,000
2001 9.55 40,000
2002 8.94 36,000
2003 3.22 35,042
2004 5.95 15,000
J. A. Wunderl 2003 5.20 8,000
2004 5.95 5,500
---------
TOTAL 310,042
Loans outstanding relating to the stock options to the members of the Management
Board amounted to (euro)286,795 as of 31 December 2004. The principal amount and
other loan conditions have not changed since the inception of the loan
agreements in 1999 and 2000.
OPTIONS AND ORDINARY SHARES HELD BY MEMBERS OF THE SUPERVISORY BOARD
The aggregate number of Ordinary Shares and the aggregate number of options on
Ordinary Shares owned by the current members of the Supervisory Board as the
date of this Prospectus is as follows:
NUMBER OF
OPTIONS
YEAR OF GRANT EXERCISE PRICE OUTSTANDING
------------- -------------- -----------
E. B. Polak 2002 8.94 1,322
2003 3.22 3,667
2004 5.95 1,937
D. Sinninghe Damste 2002 8.94 1,322
2003 3.22 3,667
2004 5.95 2,629
T. de Waard 2002 8.94 1,322
2003 3.22 3,667
2004 5.95 1,937
--------
TOTAL 21,470
78
OPTIONS AND ORDINARY SHARES HELD BY FORMER MEMBERS OF THE BOARD OF MANAGEMENT
Details of options held by former members of the Board of Management in the
Ordinary Shares of the Company as the date of this Prospectus are as follows:
NUMBER OF
OPTIONS
YEAR OF GRANT EXERCISE PRICE OUTSTANDING
------------- -------------- -----------
J.W. Rischke 1999 4.35 8,500
2000 17.90 16,000
2001 9.55 32,000
2002 8.94 23,000
2003 3.22 13,221
--------
TOTAL 92,721
Loans outstanding relating to the stock options to the former executive members
of the Management Board amounted to (euro)78,286 as of 31 December 2004. The
principal amount and other loan conditions did not change since the inception of
the loan agreement in 1999.
EMPLOYEES
NUMBERS OF EMPLOYEES
The following table indicates the composition of the workforce (full time
employees ("fte")) by geography during the financial years ended 31 December:
2002 2003 2004
---- ---- ----
The Netherlands 460 464 477
Asia/Pacific 117 233 254
United States 65 49 67
---- ---- ----
TOTAL 642 746 798
The following table indicates the composition of the workforce (full time
employees) by role during the financial years ended 31 December:
2002 2003 2004
---- ---- ----
Manufacturing 371 459 484
Sales & Marketing & Customers Sevice 120 114 129
Research & Development 78 90 103
General & Administrative 73 83 82
---- ---- ----
TOTAL 642 746 798
As of 31 December 2004, the Company had approximately 798 employees (fte), of
whom 339 were employed at Fico in the Netherlands, 130 at Meco in the
Netherlands, 61 at Besi Die Handling in the United States, 101 at Fico Tooling
Leshan, China, 122 at Fico Asia, Malaysia, 37 at Fico and Meco sales and service
offices outside the Netherlands and 8 at Besi headquarters in the Netherlands.
In addition, the Company employed 51 temporary workers (fte), principally in
product development and engineering activities in the Netherlands.
RESTRUCTURING
On 14 December 2004, Besi announced a restructuring of its operations focused
principally on a workforce reduction at its Dutch packaging and tooling
manufacturing operations in Duiven and Brunssum of 81 employees, or
approximately 10% of total fixed headcount worldwide, as part of a plan to
address the current downturn in the semiconductor industry. In addition, Besi
will phase out the use of approximately 50 temporary workers at the Duiven
facility. The personnel terminations are expected to occur in the first quarter
of 2005.
A component of the restructuring will be the closing of Besi's tooling facility
in Brunsum, the Netherlands in the first half of 2005. Besi intends to take a
restructuring charge in the fourth quarter
79
ending 31 December 2004 to cover the estimated costs of this workforce reduction
which the Company does not expect to exceed (euro)5.6 million.
COLLECTIVE BARGAINING ARRANGEMENTS AND WORKS COUNCIL
Approximately 98% of the employees in the Netherlands are covered by nationwide
collective bargaining agreements (CAO Metaalnijverheid). The Company does not
have any employee unions in any of the other jurisdictions in which it operates.
Pursuant to the requirements of Dutch law, several of the Company's subsidiaries
have an employee works council. A central works council has been established at
the level of Fico for the operations of Fico Molding, Fico Tooling and Fico Trim
& Form. In addition, Besi Plating and Besi Singulation have a joint works
council. Each works council has the right to be informed by and/or to advise
management on specific matters in accordance with the Netherlands Works Council
Act. In addition, the Works Council Act provides that various decisions with
respect to employment conditions of general application require the works
council's consent. If withheld, such consent may be replaced with a judgment
from the cantonal court (kantonrechter). These works councils may make
non-binding recommendations for the nominations made by the Supervisory Board to
the General Meeting of Shareholders for the appointment of new Supervisory Board
members. In addition, the central works council of Fico and the works council of
Besi Plating and Besi Singulation jointly have the statutory right to make
binding recommendations for up to one third of the members of the Supervisory
Board. See also "Share Capital, Corporate Structure and Corporate Governance -
Supervisory Board".
80
PRINCIPAL SHAREHOLDERS
BENEFICIAL HOLDINGS OF SHAREHOLDERS BASED ON PUBLIC FILINGS MADE UNDER THE
EXCHANGE ACT
The following table shows the beneficial ownership of the Company's share
capital as of 31 December 2004 as filed with the Commission by the principal
shareholders (each person or entity who owns beneficially 5% or more of the
Company's Shares).
NAME OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED
- ------------------------ -------------------------
FMR Corp. (2) 3,096,700
Schneider Capital Management Corporation (3) 2,005,495
Notes:
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. Shares subject to options currently exercisable or exercisable
within 60 days of 31 December 2004 are deemed outstanding for computing the
percentage beneficially owned by the person holding such options but are not
deemed outstanding for computing the percentage beneficially owned by any
other person.
(2) Consists of shares for which Fidelity Management & Research Company, a
wholly owned subsidiary of FMR Corp., has investment and or voting power in
its capacity as an investment adviser. The shares are held by Fidelity Low
Priced Stock Fund. This information is based solely on a Schedule 13g filed
with the Commission on 10 June 2004.
(3) This information is based solely on a Schedule 13g filed with the Commission
on 12 February 2004.
1996 ACT ON THE DISCLOSURE OF HOLDING IN LISTED COMPANIES
On 15 July 1996, Berliner Elektro Holding Aktiengesellschaft notified the AFM of
its capital interest of 58,67% in the Company's share capital pursuant to the
1996 Act on the Disclosure of Holding in Listed Companies (Wet Melding
Zeggenschap in ter beurze genoteerde vennootschappen 1996), which filing still
appears in the public register maintained by the AFM for these purposes. At the
General Meeting of Shareholders held on 25 March 2004, Berliner Elektro
Aktiengesellschaft (presently named: Ad Capital AG), deposited an aggregate
number of 1,654,080 Ordinary Shares, which leads the Company to believe that the
information presented in the public register with the AFM does not reflect the
actual holdings of Ad Capital AG.
THE FOUNDATION
In accordance with the 1996 Act on the Disclosure of Holding in Listed Companies
(Wet Melding Zeggenschap in ter beurze genoteerde vennootschappen 1996), it was
announced that the Foundation has an option to acquire up to 55,000,000
Preference Shares. No such option has been exercised to date. The objectives of
the Foundation are to safeguard the interests of the Company and its enterprise,
group companies and all persons connected with the Group. To achieve its
objective, the Foundation may acquire Preference Shares and may exercise the
rights attached to those Preference Shares. See "Share Capital, Corporate
Structure and Corporate Governance".
81
SHARE CAPITAL, CORPORATE STRUCTURE AND CORPORATE
GOVERNANCE
This section contains a summary of material information relating to the Issuer's
share capital, including summaries of certain material provisions of the
Articles of Association and applicable Dutch law in effect on the date hereof,
as well as relevant proposed legislation and regulation. This summary does not
purport to be complete and is qualified in its entirety by reference to the full
Articles of Association. The full text of the Articles of Association is
available in Dutch and English at the principal office of the Issuer and at its
website www.besi.com.
GENERAL
The Company was incorporated on 9 May 1995 as a Dutch public company with
limited liability (naamloze vennootschap) and is governed by Dutch law. The
Company has its corporate seat in Amsterdam, the Netherlands, with its head
office in Drunen, the Netherlands, and is registered under number 09092395 with
the Trade Register at the Chamber of Commerce and Industry of Oost-Brabant, the
Netherlands. The Ordinary Shares are listed on Euronext Amsterdam (symbol: BESI)
and on Nasdaq (symbol: BESI). The Company is subject to the Large Company Rules
(structuurregeling). A number of provisions of the Articles of Association are
subject to recent amendments to the Large Company Rules and the Company will
propose to amend its Articles of Association accordingly.
ARTICLES OF ASSOCIATION
The material provisions of the Articles of Association are summarized below.
Such summaries do not purport to be complete statements of these provisions and
are qualified in their entirety by reference to such exhibit. The Articles of
Association were last amended by a notarial deed executed on 25 May 2004 before
Mr P.H.N. Quist, as legal substitute for Mr H.B.H. Kraak, civil law notary
(notaris), practicing in Amsterdam. The Articles of Association are available
free of charge at Besi's website (www.besi.com).
CORPORATE PURPOSES
Pursuant to Article 4 of the Articles of Association, the objects of the Company
are:
- - to participate in, to finance, to collaborate with, to conduct the
management of companies and other enterprises and provide advice and other
services;
- - to acquire, use and/or assign industrial and intellectual property rights
and real property;
- - to invest funds;
- - to provide security for the debts of legal persons or of other companies
with which the company is affiliated in a group;
- - to undertake all that which is connected to the foregoing or in furtherance
thereof,
all in the widest sense of the words.
SHARE CAPITAL
As at the date of this Prospectus, the authorized share capital amounts to
(euro)100,100,000, divided into 55,000,000 Ordinary Shares with a nominal value
of (euro)0.91 each, and 55,000,000 Preference Shares with a nominal value of
(euro)0.91 each. The Ordinary Shares may be in bearer or registered form.
As at the date of this Prospectus, a total of 33,728,517 Ordinary Shares were
outstanding (including 1,000,015 Ordinary Shares held by the Company in
treasury) and there were no Preference Shares outstanding.
ISSUES OF ORDINARY SHARES AND PREEMPTIVE RIGHTS
Ordinary Shares may be issued pursuant to a resolution of the General Meeting of
Shareholders or the General Meeting of Shareholders may grant the authority to
issue shares in the share capital of the Company to the Board of Management for
a maximum period of five years. After such designation, the Board of Management
may resolve upon the issue of Ordinary Shares after the approval of the
Supervisory Board.
Currently, the General Meeting of Shareholders has delegated its authority to
issue Ordinary Shares up to a maximum of 20% of the Ordinary Shares included in
the authorized capital, to the Board of Management subject to the prior approval
of the Supervisory Board, until 14 May 2006.
82
Shareholders have a pro rata preemptive right of subscription to any Ordinary
Share issued for cash, which right may be limited or excluded. Shareholders have
no pro rata preemptive subscription right with respect to any Ordinary Shares
issued for a contribution other than cash, with respect to any issuance of
Preference Shares or in the case of Ordinary Shares issued to the employees. On
the basis of a designation by the General Meeting of Shareholders, the Board of
Management has the power, subject to approval of the Supervisory Board, to limit
or exclude Shareholder preemptive rights through 14 May 2006. The designation
may be renewed for a maximum period of five year. In the absence of such
designation, the General Meeting of Shareholders has the power to limit or
exclude such preemptive rights.
The foregoing provisions apply mutatis mutandis to the issuance of rights to
subscribe for Ordinary Shares.
PREFERENCE SHARES
The provisions for the issuance of Preference Shares are similar to the
provisions for the issuance of Ordinary Shares described above. However, if an
issuance of Preference Shares would result in an outstanding amount of
Preference Shares exceeding 100% of the outstanding Ordinary Shares and the
issuance is effected pursuant to a resolution of a corporate body other than the
General Meeting of Shareholders, such as the Board of Management, the issuance
will require prior approval of the General Meeting of Shareholders.
If the issuance of Preference Shares is effected pursuant to a resolution of a
corporate body other than the General Meeting of Shareholders, but the amount of
Preference Shares to be issued would not exceed 100% of the number of
outstanding Ordinary Shares, then prior approval of the General Meeting of
Shareholders is not required, but the reasons for the issuance must be explained
at an extraordinary General Meeting of Shareholders to be held within four weeks
after such issue. Subsequently, within two years after the first issuance of
Preference Shares, a General Meeting of Shareholders will be held to resolve to
repurchase or cancel the Preference Shares. If no such resolution is adopted,
another General Meeting of Shareholders with the same agenda must be convened
and held within two years after the previous meeting and this meeting will be
repeated until no Preference Shares are outstanding. This procedure does not
apply to Preference Shares that have been issued pursuant to a resolution by, or
with the prior approval of, the General Meeting of Shareholders.
In connection with the issuance of Preference Shares it may be stipulated that
an amount not exceeding 75% of the nominal amount ordinarily payable upon
issuance of shares, may be paid only if the Company requests payment. A decision
of the Board of Management for further payment requires prior approval of the
Supervisory Board.
THE FOUNDATION
The Foundation was established in April 2000. The board of the Foundation
consists of five members, four of whom are independent of Besi and one of whom
is a member of the Supervisory Board. The purpose of the Foundation is to
safeguard the Company's interests, the enterprise connected therewith and all
the parties having an interest therein and to exclude as much as possible
influences which could threaten, among other things, the Company's continuity,
independence and identity.
Under the terms of an agreement entered into in April 2002 between the Company
and the Foundation, the Foundation has been granted a call option, pursuant to
which it may purchase a number of Preference Shares up to a maximum of the total
number of outstanding Ordinary Shares. Until the call option is exercised by the
Foundation, it can be revoked by the Company, with immediate effect. Under the
terms of a separate agreement entered into in April 2002, the Company may force
the Foundation to exercise its call option right if it has been announced (or
may be expected) that an unfriendly take-over bid will be made with respect to
the Shares, or if (in the opinion of the Board of Management), a single
Shareholder (or group of Shareholders) holds a substantial number of the
Ordinary Shares. The aim of the Preference Shares is to provide a protective
measure against unfriendly take-over bids.
REPURCHASE AND CANCELLATION OF SHARES
The Company may repurchase any class of shares in its own capital subject to
certain provisions of Dutch law and the Articles of Association, if (a)
shareholders' equity less the payment required to make the acquisition does not
fall below the sum of the paid-up and called part of the issued share capital
and any reserves required by Dutch law or the Articles of Association and (b)
the Company and its subsidiaries would thereafter not hold Shares with an
aggregate nominal value exceeding one-tenth of the Company's issued share
capital. Shares held by the Company or any of its subsidiaries will
83
have no voting rights and the Company does not receive dividends on Shares it
holds in its own capital. Any such purchases are subject to the approval of the
Supervisory Board and may only take place if the General Meeting of Shareholders
has granted to the Board of Management the authority to effect such repurchases,
which authorization may apply for a maximum period of 18 months. The Board of
Management was authorized to repurchase up to 10% of the issued share capital
through 27 September 2006.
Upon a proposal of the Board of Management and approval of the Supervisory
Board, the General Meeting of Shareholders shall have the power to decide to
cancel shares acquired by the Company or to reduce the nominal value of the
Ordinary Shares. Any such proposal is subject to the relevant provisions of
Dutch law and the Articles of Association of the Company with respect to
reduction of share capital.
DIVIDENDS
Dividends may be paid out of annual profits shown in the annual accounts, which
- - under the Large Company Rules presently in effect and described below - must
be adopted by the General Meeting of Shareholders. At its discretion, subject to
statutory provisions, the Board of Management may, with the prior approval of
the Supervisory Board, distribute one or more interim dividends on the Ordinary
Shares before the annual accounts have been adopted by the General Meeting of
Shareholders. The Board of Management, with the prior approval of the
Supervisory Board, may decide that all or part of the profits should be retained
and not be made available for distribution to the shareholders. Those profits
that are not retained shall be distributed to holders of Ordinary Shares
pursuant to a shareholders' resolution, subject to preferred returns payable
with respect to outstanding Preference Shares, if any, provided that the
distribution does not reduce shareholders' equity below the issued share capital
increased by the amount of reserves required by Dutch law. Existing reserves
that are available for distribution under Dutch law may be distributed upon a
shareholders' resolution, proposed by the Board of Management, which proposal is
subject to the prior approval by the Supervisory Board. With respect to cash
payments, the rights to dividends and distributions shall lapse if such
dividends or distributions are not claimed within five years following the day
after the date on which they were made available.
VOTING RIGHTS
Every Share (whether Ordinary Share, or Preference Share) will carry the right
to cast one vote. Resolutions by the General Meeting of Shareholders require the
approval of an absolute majority of votes validly cast, unless otherwise
required by Dutch law or the Articles of Association.
SUPERVISORY BOARD
Under Dutch law and the Articles of Association of the Company, the management
of the Company is entrusted to the Board of Management under the supervision of
the Supervisory Board. Pursuant to the laws of the Netherlands, members of the
Supervisory Board cannot at the same time be a member of the Board of Management
of the same company. The primary responsibility of the Supervisory Board is to
supervise the policies pursued by the Board of Management and the general course
of affairs of the Company and its business. In fulfilling their duties, the
members of the Supervisory Board are required to act in the best interests of
the Company and its business.
Pursuant to the Articles of Association, the Supervisory Board consists of three
or more members, to be determined by the Supervisory Board itself. Although the
Articles of Association presently provide otherwise, in connection with a recent
change of the Large Company Rules described in more detail below, the
Supervisory Board members are appointed by the General Meeting of Shareholders
upon a nomination prepared by the Supervisory Board. Non-binding recommendations
for appointment to the Supervisory Board may be made by the General Meeting of
Shareholders and the works councils of Besi's subsidiaries. In addition, the
central works council of Fico and the works council of Besi Plating and Besi
Singulation jointly have the right to make binding recommendations for up to one
third of the members of the Supervisory Board. The Supervisory Board must adopt
such recommendation, except in certain limited circumstances.
The Articles of Association provide that a member of the Supervisory Board shall
resign no later than on the day the first General Meeting of Shareholders is
held after the fourth anniversary of his or her appointment. For details on the
period of service for the individual members of the Supervisory Board, see
"Management and Employees".
84
BOARD OF MANAGEMENT
The Supervisory Board appoints members of the Board of Management. The
Supervisory Board must notify the shareholders of intended appointments to the
Board of Management.
The management of the Company is entrusted to the Board of Management under the
supervision of the supervisory Board. The Articles of Association provide that
the Board of Management may lay down further rules and regulations with respect
to its procedures and internal organization. These rules require the prior
approval of the Supervisory Board. In addition, the Articles of Association
provide that certain resolutions of the Board of Management require prior
approval of the Supervisory Board, such as resolutions relating to the issuance
of debt instruments.
The Board of Management consists of such number of members as may be determined
and as appointed by the Supervisory Board. The Supervisory Board has the power
to suspend or dismiss members of the Board of Management, provided that the
Supervisory Board will be required to consult the General Meeting on the
intended dismissal.
The compensation and other terms and conditions of employment of the members of
the Board of Management are determined by the Supervisory Board. Since 1 October
2004, the amended Large Company Rules prescribe that public companies with
limited liability, such as the Company, should have in place a policy relating
to the remuneration of the members of the Board of Management. This policy is to
be determined by the General Meeting of Shareholders. In addition, the new
legislation determines that the Supervisory Board shall present any scheme
providing for the remuneration of the members of the Management Board in the
form of shares or options, to the General Meeting of Shareholders for adoption.
INDEMNIFICATION OF MEMBERS OF THE BOARD OF MANAGEMENT AND THE SUPERVISORY BOARD
AND OTHER OFFICERS OF THE COMPANY
Subject to certain restrictions, the Company indemnifies any person who on
account of being (former) member of the Supervisory Board, (former) member of
the Board of Management or an (former) official entitled to represent the
Company, or who on request of the Company acts or acted as member of the
Supervisory Board, member of the Board of Management or officer of another
company or business, whether or not having legal personality, is or was involved
as party or threatens to become a party in a threatened, pending or completed
action or proceedings (other than an action by or in the right of the Company)
for all costs incurred by such person in connection with proceedings or actions.
In addition, subject to certain restrictions, the Company indemnifies any person
who was a party or is threatened to be made a party to any threatened, pending
or completed action or proceedings by or in the right of the Company to procure
a judgment in its favour, by reason of the fact that he is or was a member of
the Supervisory Board, (former) member of the Board of Management, official or
agent of the Company, or is or was serving on request of the Company as Member
of the Supervisory Board, member of the Board of Management or officer of
another company or business, whether or not having legal personality, for all
costs incurred by him in connection with the defense or settlement of such
action or proceeding.
The indemnification set out above is additional to other rights which the
indemnified person could be entitled to.
To cover any liability, the Company is authorized to conclude and maintain
insurances on behalf of all indemnified persons.
GENERAL MEETINGS OF SHAREHOLDERS
General Meetings of Shareholders are held at least once a year, not later than
six months after the end of the fiscal year. Notices convening a General Meeting
of Shareholders will be mailed to holders of registered Shares at least 15 days
before the General Meeting of Shareholders and will be published in national
newspapers in the Netherlands and abroad in countries where the bearer shares
are admitted for official quotation. In order to attend, to address and to vote
at the General Meeting of Shareholders, the holders of the registered shares
must notify the Company in writing of their intention to attend the meeting and
holders of the bearer shares must deposit their bearer shares with a depositary,
as specified in the published notice. The Company currently does not solicit
from or nominate proxies for the shareholders and are exempt from the proxy
rules of the United States Exchange Act. However, shareholders and other persons
entitled to attend the General Meetings of Shareholders may be represented by
proxies with written authority. The Articles of Association allow the Board of
Management to provide for a record date should they decide to provide for proxy
85
solicitation.
Other General Meetings of Shareholders may be held as often as deemed necessary
by the Supervisory Board or the Board of Management and must be held if one or
more Shareholders or other persons entitled to attend the General Meeting of
Shareholders jointly representing at least 10% of the issued share capital make
a written request to the Supervisory Board or the Board of Management that a
meeting be held and specifying in detail the business to be dealt with at such
meeting.
Resolutions are adopted at General Meetings of Shareholders by a majority of the
votes cast, except where a different proportion of votes is required by the
Articles of Association or Dutch law. Each Ordinary Share and, if outstanding,
Preference Share, shall carry one vote.
AMENDMENT OF ARTICLES OF ASSOCIATION AND WINDING UP
A resolution of the General Meeting of Shareholders to amend the Articles of
Association or to dissolve the Company may only be taken at the proposal of the
Board of Management, which proposal shall require the approval of the
Supervisory Board. A resolution to dissolve the Company must be approved by at
least a three-fourths majority of the votes cast.
ADOPTION OF ANNUAL ACCOUNTS
The annual accounts (i.e. the balance sheet, the profit and loss account and the
explanatory notes to these accounts), together with a certificate of the
auditors, will be submitted to the General Meeting of Shareholders for adoption.
Following adoption of the annual accounts by the General Meeting of
Shareholders, a resolution shall be submitted to the General Meeting of
Shareholders to discharge the Board of Management and the Supervisory Board from
liability for the performance of their respective duties for the past financial
year.
LIQUIDATION RIGHTS
In the event of a dissolution and liquidation, the assets remaining after
payment of all debts and liquidation expenses are to be distributed first to the
Preference Shareholders to the extent of the amount paid on the Preference
Shares and the remaining balance shall be distributed to holders of the Ordinary
Shares in proportion to their nominal possession of said shares.
OBLIGATIONS OF SHAREHOLDERS TO DISCLOSE MAJOR HOLDINGS
Holdings of Shares or rights to acquire Shares may be subject to notification
obligations under the 1996 Act on the Disclosure of Holdings in Listed Companies
(Wet melding zeggenschap in ter beurze genoteerde vennootschappen or the
"Disclosure Act") and the Dutch Act on the Supervision of the Securities Trade
1995 (Wet toezicht effectenverkeer 1995 or the "Dutch Securities Act"). The
following description summarizes these obligations. Holders of Shares or rights
to acquire Shares are advised to consult with their own legal advisors to
determine whether the notification obligations apply to them.
Under the Disclosure Act, any person who, directly or indirectly, acquires or
disposes of an interest or a potential interest in the Company's capital or
voting rights must immediately give written notice to the Company and the
Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiele
Markten, the "AFM") if, as a result of such acquisition or disposal, the
percentage of the Company's capital or voting rights held by such person falls
within another percentage range, compared to the percentage range applicable to
the rights held by such person previously. The percentage ranges referred to in
the Disclosure Act are 0-5%, 5-10%, 10-25%, 25-50%, 50-66 2/3% and over 66 2/3%.
For the purpose of the notification obligation, the following interests must be
taken into accounts: (a) shares directly held (or acquired or disposed of) by
any person, (b) shares held (or acquired or disposed of) by such person's
subsidiaries or by a third party for such person's accounts or by a third party
with whom such person has concluded an oral or written voting agreement and (c)
shares which such person, or any subsidiary or third party referred to above,
may acquire pursuant to any option or other right which such person has (or
acquires or disposes of), including through the exercise of warrants. Special
rules apply to the attribution of the shares which are part of the property of a
partnership or other community of property. A holder of a pledge or right of
usufruct in respect of shares can also be subject to a notification obligation
if such person has, or can acquire, the right to vote on shares.
Under Section 2a of the Disclosure Act, each member of the Board of Management
and Supervisory Board must without delay notify both the AFM and the Company of
any changes in his interest or potential interest in the Company's capital or
voting rights.
The AFM will publish all disclosures by means of an advertisement in a newspaper
distributed
86
throughout the Netherlands as well as on its public website (www.afm.nl).
In addition, pursuant to the Dutch Securities Act and a decree based thereon, a
holder that directly or indirectly has a capital interest of more than 25% in
the Company must, by means of a standard form within ten (10) days after the end
of the month in which the transaction took place, notify the AFM of any and all
transactions (including, without limitation, an acquisition or disposal of
Ordinary Shares) that it carried out or caused to be carried out in securities
issued by the Company, including warrants. If that shareholder is a legal entity
and not an individual, the obligation is extended to its managing directors and
members of its board of supervisory directors. The notification obligations also
rest on 25% shareholders, their managing directors and members of their board of
supervisory directors (if a legal entity), their spouses and persons with whom
they share a household (if an individual). The AFM keeps a public register of
all notifications made pursuant to the Disclosure Act and the Dutch Securities
Act and publishes any notification received by it.
Non-compliance with the notification obligations under the Disclosure Act or the
Dutch Securities Act can lead to imprisonment or criminal fines, or
administrative fines or other administrative sanctions. In addition,
non-compliance with the notification obligations under the Disclosure Act may
lead to civil sanctions, including, without limitation, suspension of the voting
rights attaching to the Company's shares held by the offender for a period of
not more than three (3) years, suspension of a resolution of the General Meeting
of Shareholders, nullification of a resolution adopted by the General Meeting of
Shareholders (insofar as it can be assumed that such resolution would not have
been adopted if the offender had not voted) and a prohibition for the offender
to acquire the Ordinary Shares for a period of not more than five (5) years.
AMENDMENT OF THE LARGE COMPANY RULES
GENERAL
On 1 October 2004 the Act on the Amendment of the Large Company Rules (the
"Act") came into effect. The Act provides broader powers to shareholders of
companies established under Dutch law and, in particular, companies subject to
the Large Company Rules (structuurregeling), such as the Company. The most
important elements of the Act, to the extent relevant to the Company, are
described below.
THE GENERAL MEETING OF SHAREHOLDERS
In public companies with limited liability (N.V.s), a requirement is introduced
for approval by the general meeting of shareholders of board of management
decisions concerning an important change in the identity or character of the
company, including those to:
- - transfer all, or the major part, of a company's business to a third party;
- - enter into, or terminate long-lasting cooperation between the company, or
a subsidiary, and a third party, if such entering into, or termination,
has a fundamental impact on the company; and
- - acquire, or divest an interest in another enterprise, with a value of at
least one third of the amount of the total assets reflected in the
company's (consolidated) annual accounts, by the company or a subsidiary
of the company.
Lack of approval by the general meeting of shareholders does not affect the
authority of the board of management to represent the company vis-a-vis third
parties and therefore has no external effect. The policy of the board of
management is of course subject to review by the court.
AGENDA FOR THE GENERAL MEETING OF SHAREHOLDERS
Shareholders and holders of depositary receipts for shares issued with the
co-operation of the company ("Depositary Receipt Holders") representing at least
1% of the issued capital of a public company with limited liability (N.V.) have
the right to request the inclusion of (additional) items on the agenda of the
general meeting of shareholders. In case of listed companies, shareholders or
Depositary Receipt Holders representing an aggregate stock exchange value of at
least fifty million euro also have the right to make such a request. This amount
may be increased or decreased by a governmental decree. The board of management
may refuse to put an item on the agenda only if this would prejudice vital
interests of the company. Also, such request must be made sixty (60) days prior
to a general meeting of shareholders. Under Dutch law, general meetings of
shareholders may be called by giving at least fifteen (15) days notice. If a
proposal is received after the sixty (60) day deadline, but more than fifteen
(15) days prior to the general meeting of shareholders, the company may, but is
not under an obligation to, decide to put the item on the agenda for the general
meeting of shareholders. If the proposal is received late and the items are not
put on the agenda, they must be
87
addressed at the subsequent general meeting of shareholders.
BOARD OF MANAGEMENT AND REMUNERATION
Before the Act came into effect on 1 October 2004, the Dutch Civil Code provided
that the remuneration of the members of the board of management was determined
by the general meeting of shareholders, to the extent not stipulated otherwise
by the articles of association. The Act introduced a change to this provision
for all public companies with limited liability. The new provision prescribes
that public companies with limited liability (N.V.s) should have a policy
regarding the remuneration of the members of the board of management. The
general meeting of shareholders shall determine this policy. The articles of
association can also prescribe that a body other than the general meeting of
shareholders establish the remuneration of individual members of the board of
management, all with due observance of the policy adopted by the general meeting
of shareholders. If a different body is authorised on the basis of the articles
of association with regard to establishing the remuneration of individual
members of the board of management, that body shall present any arrangement
providing for the remuneration of members of the board of management in the form
of shares or options, to the general meeting of shareholders for approval.
RELATIONSHIP BETWEEN THE BOARD OF MANAGEMENT AND THE BOARD OF SUPERVISORY
DIRECTORS
Before the Act entered into force on 1 October 2004, the Dutch Civil Code
provided that the board of management provide the supervisory board in a timely
manner with such information as the latter would require to fulfil its tasks.
The Act added to this requirement that the board of management must inform the
board of supervisory directors at least once every year in writing of the broad
outlines of the company's strategic policy, the general and financial risks
connected to the operation of the company's business, as well as of the
company's management and control system.
APPOINTMENT AND RE-APPOINTMENT OF MEMBERS OF THE BOARD OF SUPERVISORY DIRECTORS
The Act provides that proposals to appoint, or re-appoint members of the
supervisory board must - also in case of companies that are not subject to the
Large Company Rules - be reasoned. In case of re-appointment, consideration
should be given to the manner in which the relevant member has fulfilled his/her
tasks as a member of the board of supervisory directors in the past.
REMUNERATION OF THE BOARD OF SUPERVISORY DIRECTORS
The Act provides that the general meeting of shareholders is to establish the
remuneration of the board of supervisory directors.
CORPORATE GOVERNANCE CODE
The Corporate Governance Code applies to companies with a registered office in
the Netherlands and a listing on a government-recognised stock exchange. The
Company, which has its registered office in Amsterdam and is listed on Euronext
Amsterdam, falls within the scope of the Corporate Governance Code. At the last
annual meeting the shareholders approved the Besi Corporate Governance Code.
This code is based on both the Corporate Governance Code and the Sarbanes Oxley
requirements. The Besi Corporate Governance Code can be found at Besi's website
(www.besi.com).
88
TAXATION
SUMMARY OF DUTCH TAX CONSIDERATIONS
The following is a summary of Dutch tax consequences of the acquisition, holding
and disposal (including conversion) of the notes and ordinary shares into which
the notes may be converted. This summary does not purport to describe all
possible tax considerations or consequences that may be relevant to a holder or
prospective holder of notes or of ordinary shares into which the notes may be
converted. In view of its general nature, it should be treated with
corresponding caution. Holders should consult with their tax advisers with
regard to the tax consequences of investing in the notes.
Except as otherwise indicated, this summary only addresses Dutch tax
legislation, as in effect and in force at the date hereof, as interpreted in
published case law.
WITHHOLDING TAX
INTEREST AND ANY OTHER PAYMENTS UNDER THE NOTES
Under current Dutch law, payment of interest, principal and premium, if any,
will not be subject to Dutch withholding tax. Accordingly, all payments made by
the Company under the notes may be made free of withholding or deduction of, for
or on account of any taxes of whatever nature imposed, levied, withheld or
assessed by the Netherlands or any political subdivision or taxing authority
thereof or therein.
DIVIDENDS
Dividends distributed by the Company generally are subject to a withholding tax
imposed by the Netherlands at a rate of 25%. The expression "dividends
distributed" includes, among other things:
- distributions in cash or in kind, deemed and constructive distributions
and repayments of paid-in capital not recognized for Dutch dividend
withholding tax purposes;
- liquidation proceeds, proceeds of redemption of ordinary shares or
consideration for the repurchase of ordinary shares by the Company, or one
of our subsidiaries, to the extent such consideration exceeds the average
paid-in capital recognized for Dutch dividend withholding tax purposes;
- the par value of ordinary shares issued to a holder of ordinary shares or
an increase in the par value of ordinary shares, as the case may be, to
the extent that it does not appear that a contribution, recognized for
Dutch dividend withholding tax purposes, has been made or will be made;
- partial repayment of paid-in capital, recognized for Dutch dividend
withholding tax purposes, if and to the extent that there are net profits
(zuivere winst), unless the general meeting of our shareholders has
resolved in advance to make such repayment and provided that the par value
of the ordinary shares concerned has been reduced by an equal amount by
way of an amendment to the articles of association; and
- payment of interest with respect to a "hybrid loan". A loan with a
maturity date (i.e. the original maturity date or revised maturity date
upon a novation of the loan, if any) on or before the tenth anniversary of
the loan cannot be classified as a "hybrid loan".
If a holder of ordinary shares resides in a country other than the Netherlands
and if a double taxation convention is in effect between the Netherlands and
such other country, such holder of ordinary shares may, depending on the terms
of that double taxation convention, be eligible for a full or partial exemption
from, reduction or refund of, Dutch dividend withholding tax. The Netherlands
has concluded such a convention with the United States, among other countries.
Under the Convention between the United States of America and the Kingdom of the
Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income (the "U.S. Tax Treaty") currently in
effect, dividends the Company pays to a holder of our ordinary shares who is
not, or is not deemed to be, a resident of the Netherlands for Dutch tax
purposes but who is a resident of the United States as defined in the U.S. Tax
Treaty are generally eligible for a reduction of the 25% Dutch withholding tax
to 15% or, in the case of certain U.S. corporate shareholders owning at least
10% of voting power in the Company, to 5%, provided that such shareholder does
not have an enterprise or an interest in an enterprise that is, in whole or in
part, carried on through a permanent establishment or permanent representative
in the Netherlands to which the ordinary shares and the dividends are
attributable. As per 1 February 2005 a full exemption
89
of Dutch withholding tax is applicable for certain U.S. corporate shareholders
owning at least 80% of voting power in the Company for a period of at least
twelve months prior to the distribution. The U.S. Tax Treaty provides for
complete exemption from tax on dividends received by exempt pension trusts and
exempt organizations, as defined therein. The Netherlands and the United States
have entered into a mutual agreement to clarify the entitlement of exempt
pension funds to the benefits under the U.S. Tax Treaty. Based on this agreement
U.S. pension funds investing in the Company, through entities that are
considered to be transparent from a Dutch point of view, but are treated as
taxable from a U.S. point of view, are entitled to a reduction of dividend
withholding tax to nil. Except in the case of exempt organizations, the reduced
dividend withholding rate (or exemption from withholding) can be applied at the
source upon payment of the dividends, provided that the proper forms have been
filed prior to the payment. Exempt organizations remain subject to the statutory
withholding rate of 25% and are required to file an application for a refund of
such withholding.
A holder who is not, or is not deemed to be, a resident of the Netherlands may
not claim the benefits of the U.S. Tax Treaty unless:
- the holder is a resident of the United States as defined therein, and
- the holder's entitlement to such benefits is not limited by the provisions
of Article 26 ("limitation on benefits") of the U.S. Tax Treaty. The
Protocol to the U.S. Tax Treaty, mentioned above, will also amend Article
26 of this treaty.
Individuals and corporate entities who are resident or deemed to be resident in
the Netherlands for Dutch tax purposes ("Dutch resident individuals" and "Dutch
resident entities") can generally credit the withholding tax against their
income tax or corporate income tax liability.
Under current Dutch law, the Company may be permitted under limited
circumstances to deduct and retain from the withholding a portion of the amount
that otherwise would be required to be remitted to the tax authorities in the
Netherlands. That portion generally may not exceed 3% of the total dividend
distributed by the Company. If the Company retains a portion of the amount
withheld from the dividends paid to Dutch resident individuals or Dutch resident
entities, the portion (which is not remitted to the tax authorities) might not
be creditable against your domestic income tax or corporate income tax
liability. The Company will endeavor to provide you with information concerning
the extent to which the Company has applied the reduction described above to
dividends paid to you and advise you to check the consequences thereof with your
local tax advisor.
A refund, reduction, exemption or credit of Dutch dividend withholding tax on
the basis of Dutch tax law or on the basis of a tax treaty between the
Netherlands and another state, will be granted only if the dividends are paid to
the beneficial owner of the dividends. A receiver of a dividend is not
considered to be the beneficial owner of a dividend in an event of "dividend
stripping" in which he has paid a consideration related to the receipt of such
dividend. In general terms, "dividend stripping" can be described as the
situation in which a foreign or domestic person (usually, but not necessarily,
the original shareholder) has transferred his shares or his entitlement to the
dividend distributions to a party that has a more favorable right to a refund or
reduction of Dutch dividend withholding tax than the foreign or domestic person.
In these situations, the foreign or domestic person (usually the original
shareholder), by transferring his shares or his entitlement to the dividend
distributions, avoids Dutch dividend withholding tax while retaining his
"beneficial" interest in the shares and the dividend distributions. This regime
may also apply to the transfer of shares or the entitlement to dividend
distributions as described above, if the avoidance of dividend withholding tax
is not the main purpose of the transfer.
DUTCH TAXES ON INCOME AND CAPITAL GAINS
DUTCH RESIDENT INDIVIDUALS
As a general rule, Dutch resident individuals will be taxed annually on a deemed
income of 4% of their net investment assets at an income tax rate of 30%. The
net investment assets for the year are the average of the investment assets less
the attributable liabilities at the beginning and at the end of the relevant
year. The value of the notes or shares or cash received in case of a conversion
or redemption of the note is included in the calculation of the net investment
assets. A tax-free allowance for the first (euro)19,552 ((euro)39,104 for
partners (statutorily defined term); this amount may be increased with
(euro)2,607 per minor child) of the net investment assets may be available
(mentioned amounts are applicable for 2005). Actual benefits derived from the
notes or shares, including any capital gains (including conversion or a
redemption), are not as such subject to Dutch income tax.
However, if the notes or shares are attributable to an enterprise from which a
Dutch resident individual derives a share of the profit, whether as an
entrepreneur or as a person who has a co-entitlement to
90
the net worth of such enterprise without being a shareholder, any benefit
derived or deemed to be derived from the notes or shares, including any capital
gain realized on the disposal or deemed disposal thereof (including a conversion
or a redemption of the notes and including a deemed disposal that also occurs
upon a merger (juridische fusie) if the Company is not the continuing entity, a
demerger (splitsing) or a spin-off (afsplitsing), are generally subject to
income tax at a progressive rate with a maximum of 52%. An increase of the
Conversion Amount, under the conditions mentioned in Article 6(5) of the Terms
and conditions of the Notes, may be treated as a conversion of the notes.
Subject to the same progressive rate are benefits derived from the notes or
shares in case a Dutch resident individual carries out activities that exceed
regular portfolio asset management or derives other benefits from the notes or
shares that are taxable as benefits from activities (resultaat uit overige
werkzaamheden).
Furthermore, if a Dutch resident individual has an actual or deemed substantial
interest in the Company, any benefit derived or deemed to be derived from the
shares, including any capital gains realized on the disposal or deemed disposal
(that also occurs upon a merger (juridische fusie) if the Company is not the
continuing entity, a demerger (splitsing) or a spin-off (afsplitsing)) thereof,
are subject to income tax at a rate of 25%. Finally if a Dutch resident
individual has an actual or deemed substantial interest in the Company, any
benefit derived or deemed to be derived from the notes, including any capital
gains realized on the disposal thereof (including conversion or a redemption of
the notes and including a deemed disposal that also occurs upon a merger
(juridische fusie) if the Company is not the continuing entity, a demerger
(splitsing) or a spin-off (afsplitsing), may be subject to income tax at a
progressive rate with a maximum of 52%. An increase of the Conversion Amount,
under the conditions mentioned in Article 6(5) of the Terms and conditions of
the Notes, may be treated as a conversion of the notes. Please see below for
further clarification of the term substantial interest.
DUTCH CORPORATE ENTITIES
Any benefit derived or deemed to be derived from the notes or the shares held by
entities residing in the Netherlands for Dutch tax purposes ("Dutch resident
entities"), including any capital gains realized on the disposal or deemed
disposal (including a conversion or a redemption of the notes and including a
deemed disposal that also occurs upon a merger (juridische fusie) if the Company
is not the continuing entity, a demerger (splitsing) or a spin-off (afsplitsing)
thereof, is generally subject to corporate income tax at a rate of 34.5% (2005:
31.5%), unless the participation exemption is applicable. An increase of the
Conversion Amount, under the conditions mentioned in Article 6(5) of the Terms
and conditions of the Notes, may be treated as a conversion of the note. Under
the participation exemption Dutch resident companies are exempt from corporate
income tax with respect to dividends and capital gains (and losses), including
currency exchange results, derived from or realized on the disposal of a
qualifying shareholding. Generally, the participation exemption applies if a
Dutch resident entity holds an interest of at least 5% in the issued and paid up
share capital of a company.
A Dutch qualifying pension fund is not subject to corporate income tax and a
qualifying Dutch resident investment fund (fiscale beleggingsinstelling) is
subject to corporate income tax at a special rate of 0%.
NON-RESIDENT HOLDERS
A holder of notes or shares into which the notes may be converted will not be
subject to Dutch taxes on income or capital gains in respect of any payment
under the notes or the shares or in respect of any gain realized on the disposal
or deemed disposal of the notes or the shares (including the conversion of the
notes into shares or the redemption of the notes and including a deemed disposal
that also occurs upon a merger (juridische fusie) if the Company is not the
continuing entity, a demerger (splitsing) or a spin-off (afsplitsing), provided
that:
- such holder is neither resident nor deemed to be resident in the
Netherlands nor has made an election for the application of the
rules of the Dutch 2001 Income Tax Act as they apply to residents of
the Netherlands; and
- such holder does not have, and is not deemed to have, an
enterprise or an interest in an enterprise which is, in whole or in
part, carried on through a permanent establishment, a deemed
permanent establishment, or a permanent representative in the
Netherlands and to which enterprise or part of an enterprise the
notes or the shares are attributable nor does such holder carry out
any other activities in the Netherlands that exceed regular asset
management; and
- such holder does not have a profit share in, or any other
entitlement to, the assets or income
91
of an enterprise, other than by way of securities, which enterprise
is effectively managed in the Netherlands and to which enterprise
the shares are attributable; and
- such holder does not carry out and has not carried out employment
activities with which the holding of the shares is connected
directly or indirectly; and
- such holder, individuals relating to such holder and some of their
relations by blood or marriage in the direct line (including foster
children) do not have a substantial interest or deemed substantial
interest in an entity residing in or deemed to reside in the
Netherlands, or, if such holder has a substantial interest or a
deemed substantial interest, it forms part of the assets of an
enterprise.
To the extent that a non-resident holder is subject to Dutch taxes on income or
capital gains in respect of the notes, an increase of the Conversion Amount,
under the conditions mentioned in Article 6(5) of the Terms and conditions of
the Notes, may be treated as a conversion of the notes.
Generally, a non-resident holder of shares will have a substantial interest if
he, his partner, certain other relatives (including foster children) or certain
persons sharing his household, alone or together, directly or indirectly:
- hold shares representing 5% or more of the Company's total issued
and outstanding capital (or the issued and outstanding capital of
any class of shares);
- hold or have rights to acquire shares (including the right to
convert notes or stock options into shares), whether or not already
issued, that at any time (and from time to time) represent 5% or
more of the Company's total issued and outstanding capital (or the
issued and outstanding capital of any class of shares); or
- hold or own certain profit participating rights that relate to 5% or
more of the Company's annual profit and/or to 5% or more of the
liquidation proceeds.
The same criteria apply to a non-resident entity, save for the extension to
partners, certain other relatives, and certain persons sharing the holder's
household.
A deemed substantial interest arises if a substantial interest (or part thereof)
has been disposed of, or is deemed to have been disposed of, on a nonrecognition
basis.
GIFT, ESTATE AND INHERITANCE TAX
DUTCH RESIDENTS
Gift, estate and inheritance taxes will arise in the Netherlands with respect to
an acquisition of the notes or shares or cash received in case of a conversion
or redemption of the notes by way of a gift by, or on the death of, a holder of
the notes or shares who is resident or deemed to be resident in the Netherlands
at the time of the gift or his death.
NON-RESIDENTS
No Dutch gift, estate or inheritance taxes will arise on the transfer of notes
or shares by way of gift by, or on the death of, a holder of notes or shares who
is neither resident nor deemed to be resident in the Netherlands, unless:
- such holder at the time of the gift has or at the time of his death
had an enterprise or an interest in an enterprise that is or was, in
whole or in part, carried on through a permanent establishment or a
permanent representative in the Netherlands and to which enterprise
or part of an enterprise the notes or shares are or were
attributable; or
- such holder is entitled to a share in the profits of an enterprise
that is effectively managed in the Netherlands other than by way of
securities or through an employment contract, the ordinary shares
being attributable to that enterprises; or
- in the case of a gift of a note or a share by an individual who at
the date of the gift was neither resident nor deemed to be resident
in the Netherlands, such individual dies within 180 days after the
date of the gift, while being resident or deemed to be resident in
the Netherlands.
For purposes of Dutch gift, estate and inheritance taxes, a Dutch national is
deemed to be a resident of the Netherlands if he resided in that country at any
time during a period of ten years preceding the date of the gift or death, as
the case may be. In addition, for purposes of Dutch gift tax, a person not
possessing Dutch nationality is also deemed to be a Dutch resident, irrespective
of his nationality, if he was a Dutch resident at any time during a period of
twelve months preceding the time at which the gift was made. The Netherlands has
concluded a treaty with the United States based on which double
92
taxation on inheritances may be avoided if the inheritance is subject to Dutch
and/or U.S. inheritance tax and the deceased was a resident of either the
Netherlands or the United States.
TURNOVER TAX
No Dutch turnover tax will arise in respect of any payment in consideration for
the issue of the notes, the conversion of the notes into ordinary shares or with
respect to any payment by the Company of principal, interest, dividend or
premium (if any) on the notes or on the shares.
OTHER TAXES AND DUTIES
No Dutch registration tax, customs duty, transfer tax, stamp duty or any other
similar documentary tax or duty other than court fees, will be payable by a
holder of notes or shares in respect of or in connection with the signing and/or
enforcement by legal proceedings (including the enforcement of any foreign
judgment in the courts of the Netherlands) of the issue documents or the
performance by the Company of its obligations thereunder or under the notes or
shares.
EU SAVINGS DIRECTIVE
The European Union has formally adopted the Savings Directive. Under the Savings
Directive Member States will be required to provide to the tax authorities of
another Member State details of payments of interest or other similar income
paid by an economic operator to an individual resident in that other Member
State, subject to the right of certain Member States to opt instead for a
withholding system for a transitional period in relation to such payments.
Luxembourg, Austria and Belgium have opted for the withholding system. The EU
has signed or is in the process of signing agreements with Switzerland, Andorra,
San Marino, Monaco, Liechtenstein and the dependent and associated territories
of the United Kingdom and the Netherlands, that provides for equivalent
measures. It is expected that the directive will enter into force as from 1 July
2005, provided that the non-EU countries mentioned above have concluded the
aforementioned agreement with the EU.
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SUBSCRIPTION AND SALE
Pursuant to a subscription agreement dated 11 January 2005 (the "Subscription
Agreement"), Morgan Stanley has agreed with the Issuer, subject to the
satisfaction of certain conditions, to subscribe, or procure subscribers for, at
100% of their principal amount, (euro)46,000,000 in aggregate principal amount
of Notes and the Issuer has agreed to issue the Notes on such basis. The
aggregate principal amount of the Notes includes (euro)6,000,000 in principal
amount of Notes that were the subject of an option granted to Morgan Stanley for
such purposes as Morgan Stanley might in its absolute discretion determine
(including, without limitation, for the purposes of covering over-allotments, if
any, or short positions arising from stabilization transactions). Morgan Stanley
exercised this option on 13 January 2005.
The Issuer has agreed to pay a commission to Morgan Stanley for its services.
The Issuer has agreed to indemnify Morgan Stanley in respect of certain matters
pursuant to the Subscription Agreement. The Subscription Agreement entitles
Morgan Stanley to terminate it in certain circumstances prior to payment being
made to the Issuer.
Besi has also agreed with Morgan Stanley that, subject to certain exceptions and
without Morgan Stanley's prior written consent, it will not and it will ensure
that none of its subsidiaries or affiliates will, during the period beginning on
11 January 2005 and ending 180 days after the Closing Date,
(i) save for (a) the issue of Ordinary Shares pursuant to the exercise
of existing employee share options, or (b) the grant in the ordinary
course of share options to employees and management, directly or
indirectly, issue, offer, pledge, sell, contract to issue or sell,
issue or sell any option or contract to purchase, purchase any
option or contract to issue or sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any Ordinary Shares or any securities convertible into
or exercisable or exchangeable for Ordinary Shares; or
(ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, any of the
economic consequences of ownership of Ordinary Shares,
whether any such swap or transaction described in (i) or (ii) above is to be
settled by delivery of Ordinary Shares or such other securities, in cash or
otherwise.
In connection with the issue of the Notes, Morgan Stanley (or any person acting
for it) may over-allot or effect transactions with a view to supporting the
market price of the Notes at a level higher than that which might otherwise
prevail for a limited period. However, there is no obligation on Morgan Stanley
(or any agent of it) to engage in such stabilizing activity. Such stabilizing
activity, if commenced, may be discontinued at any time, and must be
discontinued 30 days after the initial announcement of the Offering on 12
January 2005. Stabilization transactions conducted on Euronext Amsterdam must be
conducted by a member of Euronext Amsterdam and must be conducted in accordance
with all applicable laws and regulations, including those of Euronext Amsterdam
and Article 32 of the Further Regulation on the Behavourial Supervision of the
Securities Trade 2002 (Nadere Regeling Gedragstoezicht 2002).
THE NETHERLANDS
The Notes (including rights representing an interest in a Note in global form)
are not and will not be offered anywhere in the world other than to persons who
trade or invest in securities in the conduct of their profession or trade (which
includes banks, securities intermediaries (including dealers and brokers),
insurance companies, pension funds, other institutional investors and commercial
enterprises which as an ancillary activity regularly trade or invest in
securities).
UNITED STATES
The Notes and the Ordinary Shares to be issued upon conversion of the Notes have
not been and will not be registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in certain transactions exempt from the registration
requirements of the Securities Act. Accordingly, the Notes are being offered and
sold only outside the United States to investors that are not U.S. persons in
reliance on Regulation S under the Securities Act.
Morgan Stanley has agreed that, except as permitted by the Subscription
Agreement, it has not
94
offered or sold, and will not offer, sell or deliver any Notes within the United
States, except in accordance with Rule 903 of Regulation S. Morgan Stanley has
also agreed that neither its affiliates nor any persons acting on its or their
behalf have engaged or will engage in any directed selling efforts with respect
to the Notes.
Terms used in the preceding two paragraphs have the meanings ascribed to them by
Regulation S under the Securities Act.
In addition, until 40 days after the commencement of the offering, an offer or
sale of the Notes or the Ordinary Shares to be issued upon conversion of the
Notes within the United States by any dealer (whether or not participating in
the offering) may violate the registration requirements of the Securities Act.
UNITED KINGDOM
Morgan Stanley has represented warranted and agreed in the Subscription
Agreement: (1) it has not offered or sold, and prior to the expiry of a period
of six months from the Closing Date of the sale of the Notes, will not offer or
sell any Notes to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (2) it has only communicated or caused to
be communicated and will only communicate or cause to be communicated any
invitation or inducement to engage in investment activity (within the meaning of
section 21 of The Financial Services and Markets Act 2000 (the "FSMA") received
by it in connection with the issue or sale of any Notes in circumstances to
which section 21(1) of the FSMA does not apply to Besi, and (3) it has complied
with and will comply with all applicable provisions of the FSMA with respect to
anything done by it in relation to the Notes in, from, or otherwise involving
the United Kingdom.
JAPAN
The Notes have not been and will not be registered under the Securities and
Exchange Law of Japan, as amended. Morgan Stanley has represented, warranted and
agreed in the Subscription Agreement that the Notes which it purchases will be
purchased by it as principal and that it has not offered or sold, and will not
offer or sell in connection with the offering, any Notes, directly or
indirectly, in Japan or to, or for the benefit of, any resident of Japan
(including Japanese corporations), or to others for reoffering or resale,
directly or indirectly, in Japan or to, or for the benefit of, any resident of
Japan (including Japanese corporations), except as permitted under applicable
laws of Japan.
BELGIUM
The Notes will not be offered publicly, directly or indirectly, in Belgium. The
offering has not been notified to and this Prospectus has not been approved by
the Belgian Banking and Finance Commission. The Notes may only be sold in
Belgium to professional investors as defined in article 3 of the Royal Decree of
7 July 1999 on the public nature of financial transactions acting for their
account, and this Prospectus may not be delivered or passed on to any other
investors.
95
ADDITIONAL INFORMATION
CORPORATE APPROVALS
The issue of the Notes being offered hereby and the Ordinary Shares to be issued
upon conversion thereof were authorized, and the preemptive rights of the
existing Shareholders were excluded, by resolutions of the Board of Management
on 24 January 2005, by resolutions of the Supervisory Board on 24 January 2005
and pursuant to the designation of the Board of Management on 25 March 2004 by
the General Meeting of Shareholders of Besi as the corporate body authorized to
grant rights to subscribe for shares up to 20% of the authorized share capital
at that time, and to exclude all pre-emptive rights in respect thereof, pursuant
to the Articles 11 and 12.6 of the Articles of Association.
ORGANIZATIONAL STRUCTURE AND GROUP COMPANIES
The Company is the ultimate parent of the Group, which as of 31 December 2004
included each of the subsidiaries set forth below. Unless otherwise indicated,
each subsidiary is wholly owned, directly or indirectly, and is included in the
Company's consolidated financial statements. Each of the subsidiaries operates
in its country of incorporation.
LOCATION AND
NAME COUNTRY OF INCORPORATION PERCENTAGE OF OWNERSHIP
---- ------------------------ -----------------------
BE Semiconductor Industries USA, Inc. Londonderry, New Hampshire, USA 100%
Fico B.V. Duiven, the Netherlands 100%
Fico Molding Systems B.V. Duiven, the Netherlands 100%
Fico Trim & Form Integration Systems B.V. Duiven, the Netherlands 100%
Fico Tooling B.V. Duiven, the Netherlands 100%
Fico Tooling Leshan Company Ltd. Leshan, China 87%(2)
Fico Asia SDN. BHD. Shah Alam, Malaysia 100%(3)
Fico America Inc. Chandler, Arizona, USA 100%(1)
ASM Fico (F.E.) SDN. BHD. Shah Alam, Malaysia 99.9%(4)
Besi Korea Ltd. Seoul, Korea 100%
Fico Hong Kong Ltd. Hong Kong, China 100%
Fico Sales & Service Pte. Ltd. Singapore 100%
Meco International B.V. Drunen, the Netherlands 100%
Besi Plating B.V. Drunen, the Netherlands 100%
Besi Japan Co. Ltd. Tokyo, Japan 100%
Besi Singulation B.V. Drunen, the Netherlands 100%
Besi Taiwan Ltd. Taipei, Taiwan 100%
PASR Neunte Beteiligungsverwaltung GmbH Vienna, Austria 100%
PASR Zehnte Beteiligungsverwaltung GmbH Vienna, Austria 100%
Meco Equipment Engineers Inc. Rock Hill, South Carolina, USA 100%(1)
Meco Equipment Engineers (Far East) Pte Ltd. Singapore 100%
Besi Die Handling Inc. Londonderry, New Hampshire, USA 100%
- ----------------
Notes:
(1) Merged effective 1 January 2005 and name changed in Besi USA Inc.
(2) Upon a resolution of Fico Tooling Leshan's Management Board, Leshan Radio
Company Ltd., the other 13%-shareholder in Fico Tooling Leshan Company
Ltd. (LRC), shall make agreed upon capital contributions after which LRC
shall hold 30% of and Besi 70% of Fico Tooling Leshan Company's equity.
(3) In order to comply with local corporate law, a minority shareholding (less
than 0.1%) is held by the respective management of these respective
companies.
(4) In order to comply with local corporate law, a minority shareholding is
held by the management of these respective companies.
96
INDEPENDENT AUDITORS
The consolidated financial statements of the Company as of 31 December 2002 and
2003 and for each of the years in the three-year period ended 31 December 2003,
incorporated by reference in this Prospectus from Form 20-F for the year ended
31 December 2003 have been audited by KPMG Accountants, independent auditors, as
stated in their report thereon, which is incorporated herein by reference. KPMG
Accountants have served as the Company's independent auditors for each of the
last three years and have rendered unqualified audit reports with respect to the
Company's annual accounts for each of such years.
The summary consolidated interim financial statements of the Company as of and
for the nine months ended 30 September 2003 and 2004, included and incorporated
by reference in this Prospectus to the Company's Report on Form 6 -K filed on 15
November 2004, have not been audited.
The address of the Company's auditors, KPMG Accountants, is Pettelaarpark 34,
5216 PD `s Hertogenbosch, the Netherlands.
LEGAL PROCEEDINGS
The Company is not currently, nor has the Company in the last 12 months been,
involved in any litigation or arbitration proceedings that have or, in the last
12 months, have had, a significant effect on the Company's financial position or
results of operations. The Company is not aware of any threatened or potential
legal proceedings that could have a significant effect on the Company's
financial position or results of operations.
DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the Company's most recent annual report and audited statutory accounts
and a copy of the current Articles of Association are available free of charge
upon request during normal business hours at the offices of Besi and at Besi's
website (www.besi.com).
GOVERNING LAW
The Offering and any dispute arising from it is subject to Dutch law.
97
SUMMARY OF CERTAIN DIFFERENCES BETWEEN IFRS AND U.S.
GAAP
The consolidated financial statements of the Company and its subsidiaries have
been prepared in accordance with U.S. GAAP, which differ in certain significant
respects from IFRS. The Company has not prepared financial statements in
accordance with IFRS and, accordingly cannot offer any assurances that the
differences described below would, in fact, be the accounting principles
creating the greatest differences between financial statements of the Company
prepared under U.S. GAAP and under IFRS.
The following summary may not include all differences that exist between U.S.
GAAP and IFRS.
The following paragraphs summarize certain significant differences between U.S.
GAAP and IFRS as of 30 September 2004 and not differences that may have existed
throughout the period covered in the financial statements. This description is
not intended to provide a comprehensive listing of all such differences
specifically related to the Company or the industries in which it operates. U.S.
GAAP is generally more restrictive and comprehensive than IFRS regarding
recognition and measurement of transactions, account classification and
disclosure requirements. No attempt has been made to identify all disclosure,
presentation or classification differences that would affect the manner in which
transactions and events are presented in the financial statements or the notes
thereto.
Furthermore, certain U.S. standards, in particular Statement on Financial
Accounting Standards (SFAS) No 132 (revised), "Employers' Disclosures about
Pensions and Other Postretirement Benefits -- an amendment of FASB Statements
No.87.88 and 106"; SFAS 150, "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity" and certain IFRS standards
issued or that that were revised, in particular IFRS 2, Share-based Payment,
IFRS 3, Business Combinations and the International Accounting Standards (lAS)
No 1, "Presentation of Financial Statements"; lAS 2, "Inventories"; IAS 8.
"Accounting Policies, Changes in Accounting Estimates and Errors"; lAS 10
"Events after the Balance Sheet Dale"; lAS 16 "Property, Plant and Equipment";
IAS 17 "Leases"; lAS 21 "The Effects of Changes in Foreign Exchange Rates"; lAS
24 "Related Party Disclosures"; lAS 27 "Consolidated and Separate Financial
Statements"; lAS 28 "Investments in Associates"; lAS 31 "Interests in Joint
Ventures"; lAS 33 "Earnings per Share'; lAS 32 "Financial Instruments:
Disclosure and Presentation"; lAS 39 "Financial Instruments: Recognition and
Measurement" and lAS 40 "Investment Property" that have been issued but which
are not mandatory for the period ended 30 September 2004 could result in further
significant differences between U.S. GAAP and IFRS.
BUSINESS COMBINATIONS
U.S. GAAP requires the use of the purchase method of accounting for all business
combinations.
Under IFRS, business combinations are always accounted for as acquisitions. IFRS
requires the purchase method of accounting to be used to portray the financial
effect of an acquisition.
COST OF ACQUISITION
Under U.S. GAAP, shares issued as consideration are measured at their market
price over a reasonable period of time (interpreted to be a few days) before and
after the parties reach an agreement on the purchase price and the proposed
transaction is announced. The date for measuring the value of marketable
securities should not be influenced by the need to obtain shareholder or
regulatory approval.
Under IFRS, shares issued as consideration are recorded at their fair value as
at the date of the exchange.
INTANGIBLE ASSETS
Under U.S.GAAP, an intangible asset must be recognized separately from goodwill
if it represents contractual or legal rights or is capable of being separated or
divided and sold, transferred, licensed, rented or exchanged. U.S. GAAP requires
the fair value exercise to include acquired in-process R&D. However, the
acquired in-process R&D must be expensed immediately unless it has an
alternative future use.
Under IFRS, similar intangible assets may be recognized under both IFRS and U.S.
GAAP. Acquired in-process research and development (R&D) is recognized as a
separate intangible asset if it meets the definition of an intangible asset and
its fair value can be measured reliably. Non-identifiable intangible assets are
subsumed within goodwill.
98
CONTINGENT LIABILITIES
Under U.S. GAAP, if fair value can be determined during the allocation period,
the contingent liabilities are included in the allocation of purchase price. If
the fair value cannot be determined, the contingent liability should be included
if it is probable and reasonably estimable.
Under IFRS, the acquiree's contingent liabilities should be recognized
separately at the acquisition date as part of allocating the cost, provided
their fair values can be measured reliably.
DEFERRED TAX RECOGNIZED IN PURCHASE ACCOUNTING
Under U.S. GAAP, the recognition of a deferred tax asset of either the acquirer
or the acquiree not previously recognized that becomes recognizable because of a
business combination results in an adjustment to goodwill.
Under IFRS, the recognition of a deferred tax asset of the acquirer not
previously recognized that becomes recognizable because of a business
combination is reported in income as a tax benefit.
DERIVATIVE INSTRUMENTS AND HEDGE ACCOUNTING
U.S. GAAP and IFRS require that all derivative instruments be recorded in the
balance sheet as either an asset or liability measured at fair value and that
changes in fair value be recognized currently in earnings, unless specific hedge
accounting criteria are met.
However, there are certain differences between U.S. GAAP and IFRS and depending
on the type of instruments a Company has, the accounting may be different. The
following are differences between U.S. GAAP and IFRS:
a) definition of a derivative: only U.S. GAAP requires that the
contract can readily be settled by a net cash payment, or with an
asset that is readily convertible to cash;
b) short-cut method: U.S. GAAP accepts that certain narrowly defined
types of hedging relationship, where the critical terms of the
hedging instrument and the entire hedged item are the same, will be
completely effective; i.e. there will be no ineffectiveness to
recognize in income statement. This assumption is commonly known as
"short-cut method" and there is no equivalent in IFRS:
c) hedges of firm commitments: under U.S. GAAP it is reported as fair
value hedges, while under IFRS, hedges of firm commitments are
considered to be cash flow hedges.
d) hedging of net investment in a foreign entity: Under U.S. GAAP, the
gain or loss on translation of the hedging instrument is only taken
to equity to the extent that it is an effective hedge of the net
investment. U.S. GAAP requires the operating unit that is exposed to
the foreign currency exposure to have the same functional currency
as the entity within the Group that holds the hedging instrument.
There is no equivalent requirement under IFRS. When the hedging
instrument is not a derivative, IFRS requires that the total gain or
loss on translation of that hedging instrument (i.e. debt) to be
taken directly to equity and there is no need to report any
ineffectiveness in the income statement.
e) reclassification of amounts reported in equity in cash flow hedges:
Under U.S. GAAP, the amounts recognized in accumulated other
comprehensive income shall be reclassified into earnings in the same
period or periods during which the hedged forecasted transaction
affects earnings (for example, when a forecasted sale actually
occurs). If the hedged transaction results in the acquisition or an
asset or the incurrence of a liability, the gains and losses in
accumulated other comprehensive income shall be reclassified into
earnings in the same period or periods during which the asset
acquired or liability incurred affects earnings (such as in the
periods that depreciation expense, interest expense. or cost of
sales is recognized). IFRS requires that if the hedged firm
commitment or forecasted transaction results in the recognition of
an asset or a liability, then at the time the asset or liability is
recognized the associated gains or losses that were recognized
directly in equity should be removed from equity and should enter
into the initial measurement of the acquisition cost or other
carrying amount of the asset or liability. The gain or loss on the
hedging instrument that was included in the acquisition cost or
other carrying amount of the asset or liability is subsequently
included in earnings when the asset or liability affects earnings
(such as in the periods that depreciation expense. interest income
or expense, or cost of sales is recognized).
f) use of partial-term hedges: IFRS permits the use of partial-term
hedges while it is prohibited under U.S. GAAP.
99
FOREIGN CURRENCY TRANSLATION
Under U.S. GAAP, the Company must use the current exchange rate.
Under IFRS, translation of fair value adjustments and goodwill relating to a
prior business combination of a foreign entity may be translated using either
the current or historical exchange rate.
CASH AND CASH EQUIVALENT
Under U.S. GAAP cash and cash equivalents do not include bank overdrafts;
accordingly, changes in the balances of overdrafts are classified as financing
cash flows, rather than being included within cash and cash equivalents.
Under IFRS, cash includes overdrafts repayable on demand but not short-term bank
borrowings, which are considered to be financing flows.
PROPERTY, PLANT AND EQUIPMENT
Under U.S. GAAP, the Company must use the historical acquisition cost.
Revaluations are not allowed. Interest cost (comprised only by interest)
incurred during the construction period (i.e. period of time necessary to bring
a constructed fixed asset to the condition and location necessary for its
intended use) is capitalized. The capitalized interest is recorded as part of
the asset to which it relates and is amortized over the asset's estimated useful
life.
Under IFRS, the Company may use the historical acquisition cost or revalued
amounts. Frequent valuations of entire classes of assets are necessary when
revalued amounts are used. Interest cost incurred during the construction period
may be capitalized or expensed as incurred. The Company may capitalize interest,
certain ancillary costs and foreign exchange differences that are regarded as an
adjustment of interest.
Under U.S. GAAP, changes in depreciation method shall be reported as a change in
accounting policy with the cumulative effect reported in current earnings.
Under IFRS, such changes for existing assets are reported as a change in
estimate (current and prospectively).
LEASES
Under U.S. GAAP, if any one of the following four criteria applies to a lease
agreement, then the lease must be classified as capital by the lessee:
1) The lease transfers ownership of the leased assets to the lessee at
the end of the lease term.
2) The lease contains a bargain purchase option.
3) The lease term is greater than or equal to 75% of the economic
useful tife of the leased asset.
4) The present value of the minimum lease payments is greater than or
equal to 90% of the lair value of the leased asset.
Under IFRS, a lease is classified as a finance lease if the risks and rewards
incident to ownership lie with the lessee. There are only narrative thresholds
for useful life (described as major part) and present value test (described as
substantially all of). Classifying a lease depends upon the substance of
transaction rather than the form of the contract. Under IFRS there is an
indication of a finance lease if assets are specialized.
U.S. GAAP and IFRS generally require that any gain or loss on a sale-leaseback
transaction be deferred and amortized over future periods if the resulting lease
is a capital or finance lease. However, U.S. GAAP requires that the deferred
amount be amortized in proportion to the amortization of the leased asset, while
IFRS requires that the deferred amount be amortized over the lease term.
U.S. GAAP generally requires profit or loss deferral on a sale-leaseback
transaction that is classified as an operating lease. The exceptions to that
general rule are the same as those for a sale-leaseback transaction classified
as a capital lease.
U.S. GAAP has stringent rules on accounting for sale and leaseback transactions
of real estate.
IFRS requires immediate profit or loss recognition for a sale-leaseback
transaction classified as an operating lease if the sale transaction is
established at fair value because, in those situations, the sale transaction is
deemed to be a normal sale transaction that would typically result in profit or
loss being recognized immediately. If the sale price is less than the property's
fair value, IFRS requires immediate profit or loss recognition unless the loss
is compensated by future rentals at a below-market
100
price, in which case the loss is deferred and amortized in relation to the
rental payments over the period that the asset is expected to be used. If the
sale price is above fair value, IFRS requires that the excess over fair value be
deferred and amortized over the period for which the asset is expected to be
used.
IMPAIRMENT OF LONG LIVED ASSETS
Under U.S. GAAP, when events or changes in circumstances indicate possible
impairment, the sum of expected undiscounted future cash flows, related to the
fixed asset (or group of assets) being measured, is compared to the carrying
amount of the respective assets. Estimates of future cash flows! used to test
the recoverability of a long lived asset group should include only the future
cash flows that are directly associated with and are expected to arise as a
direct result of the use and eventual disposition of that asset group. If the
carrying amount of the asset exceeds this value, an impairment loss exists and a
write-down is necessary. The impairment charge is measured as the excess of
carrying value over fair value. Fair value may be measured using quoted market
prices in active markets, if available or using discounted cash flows.
Impairment losses cannot he written back.
Under IFRS, when events or changes in circumstances indicate possible
impairment, the sum of expected future discounted cash flows is compared to the
carrying amount of the respective assets. If the carrying amount of the asset
exceeds the sum of the discounted cash flows, an impairment loss exists and a
write-down is necessary. The impairment loss is based on the recoverable amount
(the higher of the asset's value-in-use and net selling price).
Under U.S. GAAP, reversals of impairment losses for assets to be held and used
are prohibited, as the impairment loss results in a new cost basis for the
asset. Subsequent revisions to the carrying amount of an asset to be disposed of
must be reported as adjustments to the asset's carrying amount, but limited by
the carrying amount at the date on which the decision to dispose of the asset is
made.
Under IFRS, reversal of impairment losses is required when there has been a
change in economic conditions or in the expected use of the asset.
CONVERTIBLE DEBT
Under U.S. GAAP, the conventional convertible debt is treated as a unit and
recorded as a liability (no recognition is given to the equity component).
Under IFRS, "split accounting" is used, whereby the proceeds of issuing debt are
allocated between the two components: the equity conversion rights (recognized
in equity); and the liability, recognized at fair value calculated by
discounting at a market rate for a non-convertible debt (recognized in
liabilities).
REVENUE RECOGNITION
U.S. GAAP has specific guidance on revenue recognition particularly relating to
industry specific issues. In addition, public companies must follow a more
detailed guidance provided by the SEC. The Staff Accounting Bulletin 101 and 104
("SAB 101" and "SAB 104")) addresses revenue recognition and under this
guidance, revenue is generally recognized when the following four criteria are
all met:
i. persuasive evidence of an arrangement exists;
ii. delivery has occurred or services have been rendered;
iii. the sales price to the buyer is fixed or determinable, and
iv. collectibility is reasonably assured.
In addition, EITF 00-21 "Revenue Arrangements with Multiple Deliverables" is
effective for revenue arrangements entered into in fiscal periods beginning
after 15 June 2003. A multiple deliverables arrangement generally involves the
delivery or performance of multiple products and/or services at different points
in time or over different periods of time. The principles that should be applied
are as follows:
a) In revenue arrangements with multiple deliverables, the delivered elements
should be considered separate units of accounting if
i. the delivered items have value to the customer on a standalone
basis,
ii. there is objective and reliable evidence of the fair value of the
undelivered items and
iii. if the arrangement includes a general right of return relative to
the undelivered item, delivery or performance of the undelivered
items is considered probable and substantially
101
in control of the vendor.
b) Arrangement consideration should be allocated among the separate units of
accounting as follows. If there is objective and reliable evidence of fair
value for all units of accounting, the arrangement consideration should be
allocated to the separate units of accounting based on their relative fair
value. Where there is objective and reliable evidence of the lair value of
undelivered items in an arrangement but no such evidence for the delivered
items, the residual method should instead be used under which the amount
of arrangement consideration allocated to the delivered items equals the
total arrangement consideration less the fair value of the undelivered
elements. However, the amount allocable to a delivered item is limited to
the amount that is not contingent upon delivery of additional items or
meeting other specified performance conditions.
c) Applicable revenue recognition criteria should be considered separately
for separate units of accounting.
Under IFRS, revenue is recognized as the fair value of the consideration
receivable in an exchange of items dissimilar in nature and value. Revenue is
recognized when:
a) the seller has transferred to the buyer the significant risks and
rewards of ownership;
b) the seller retains neither continuing managerial involvement to the
degree usually associated with ownership nor effective control over
the goods sold;
c) the amount of revenue can be measured reliably;
d) it is probable that the economic benefits associated with the
transaction will flow to the seller and
e) the costs incurred or to be incurred in respect of the transaction
can be measured reliably.
RESEARCH AND DEVELOPMENT
Under U.S. GAAP, research and development costs are expensed as incurred.
Under IFRS, research costs should be expensed as incurred. An intangible asset
arising from development (or from the development phase of an internal project)
must be recognized as an intangible if, and only if, an enterprise can
demonstrate all of the following:
- the technical feasibility of completing the intangible asset so that
it will be available for use or sale;
- its intention to complete the intangible asset and use or sell it;
- its ability to use or sell the intangible asset;
- how the intangible asset will generate probable future economic
benefits. Among other things, the enterprise should demonstrate the
existence of a market for the output of the intangible asset or the
intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset;
- the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset; and
- its ability to reliably measure the expenditure attributable to the
intangible asset during its development.
PENSIONS
MULTI-EMPLOYER PLANS
Under U.S. GAAP, defined contribution accounting must be used.
Under IFRS, defined benefit accounting must be used, unless sufficient
information cannot be obtained.
STOCK OPTIONS
Under U.S. GAAP, companies may elect to follow the accounting prescribed by
either Accounting Principles Board Opinion 25. "Accounting for Stock Issued co
Employees," (APE 25) or SFAS No 123. "Accounting for Stock-Based Compensation"
(SFAS 123).
Under U.S. GAAP, compensation is recorded for the cost of providing the options
to the employee
102
over the relevant service period. The costs can be determined based on either
the intrinsic value method (APB 25) or the fair value method (SFAS 123). Under
the intrinsic value method, the compensation cost is the difference between the
market price of the stock at the measurement date and the price to be
contributed by the employee (exercise price). Under the intrinsic method, the
measurement date is the first date on which the employee knows the number of
shares that such employee is entitled to receive and the exercise price. The
measurement date is often the grant date; however, it may be later than the
grant date in plans with variable terms that depend on events which occur after
the grant date These terms may be variable by design, may become variable due to
their modification after the date of grant, or may be considered variable due to
their relation to other stock option features. In such eases, compensation is
measured at the end of each reporting period until the measurement date or in
some cases, until the stock option's exercise, forfeiture, or expiry.
Under the fair value method, the cost associated with options is based on the
fair value at the date of grant. Cost is estimated using an option-pricing
model. If an entity chooses to follow the intrinsic value method, it must make
pro-forma disclosures of net income and earnings per share as if the fair value
method had been applied.
IFRS requires disclosure of stock based compensation plans, but does not provide
guidance on the recognition and measurement of compensation expense. IFRS does
not require disclosure of the fair value of the stock options granted, contrary
to U.S. GAAP.
EARNINGS PER SHARE - DILUTED
Under U.S. GAAP and IFRS, the treasury share method is used to determine the
effect of share options. The assumed proceeds from the issue of the dilutive
potential ordinary shares are considered to have been used to repurchase shares
at fair value. The difference between the number of shares issued and the number
of shares that would have been issued at fair value is treated as an issue of
ordinary shares for no consideration and is factored into the denominator used
to calculate the diluted EPS. However, U.S. GAAP guidance for applying the
treasury stock (share) method in year to date computations states that the
number of incremental shares to be included in the denominator is determined by
computing a year-to-date weighted average of the number of incremental shares
included in each quarterly diluted EPS computation.
PROVISIONS AND CONTINGENCIES
Under U.S. GAAP, a provision can only be discounted if the amount and the timing
of payments are fixed or reliably determinable (considering the nature of
provisions, this means that it can be difficult to account for a provision on a
discounted basis). The FASB Interpretation FIN 14, "Reasonable Estimation of the
Amount of a Loss" requires that if any outcome within the range is more likely,
then that outcome should be accrued. If no amount within the range is a better
estimate than any other, then the minimum amount should be accrued.
Under IFRS, provisions for contingencies are recorded by the best estimate to
settle the obligation, which generally involves the expected value method
(discounting is required) if it is more likely than not that an outflow of
resources embodying economic benefits will be required to settle the
obligations. Where there is a range of possible outcomes IFRS requires a
provision for the expected value of the obligation to be made, weighting all
possible outcomes by their associated probabilities.
103
INDEX OF FINANCIAL INFORMATION DATACON
AUDITOR'S REPORTS
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 MARCH 2004, 2003 AND
2002 (AUDITED) AND FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004 (UNAUDITED) IN
ACCORDANCE WITH IFRS
CONSOLIDATED BALANCE SHEETS AS OF 30 SEPTEMBER 2004 AND 31 MARCH 2004, 2003 AND
2002
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
AND FOR THE YEARS ENDED 31 MARCH 2004, 2003 AND 2002
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
AND FOR THE YEARS ENDED 31 MARCH 2004, 2003 AND 2002
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX MONTHS
ENDED 30 SEPTEMBER 2004 AND FOR THE YEARS ENDED 31 MARCH 2004, 2003 AND 2002
FIXED ASSETS MOVEMENT SCHEDULES FOR THE YEARS ENDED 31 MARCH 2004 AND 2003
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 MARCH 2004
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 MARCH 2003
F-1
The following is a translation of the original German language audit reports of
Ernst & Young Wirtschaftsprufungsgesellschaft mbH as issued on the original
German language consolidated financial statements prepared in accordance with
International Accounting Standards / International Financial Reporting Standards
of Datacon Technolgy AG for the years ended 31 March 2002, 2003 and 2004
respectively. Such original German language consolidated financial statements
together with the group management report (which is not printed in this
prospectus) are available at the head office of Datacon Technolgy AG. The
respective audits were performed under the regulations of the Austrian
Commercial Code which limit the auditors' liability with respect to the audit of
the financial statements for the year ending 31 March 2002 to (euro)36,336.42
and with respect to the audits of the financial statements for the years ending
31 March 2003 and 2004 respectively to (euro)1,000,000 each (such amount being
increased to (euro)5,000,000 in case of gross negligence).
A translation of the original German language consolidated financial statements
prepared in accordance with International Accounting Standards / International
Financial Reporting Standards of Datacon Technolgy AG for the years ended 31
March 2003 and 2004 (including corresponding figures for the years ended 31
March 2002 and 2003, respectively) is included in this prospectus, whereby the
notes with respect to "Significant differences between IAS and the Austrian
accounting requirements" have not been included in the translation.
The address of Datacon's auditors, Ernst & Young,
Wirtschaftsprufungsgeschellschaft m.b.H., is Wagramer Straae 19, IZD-Tower,
A-1220 Wien, Austria.
F-2
TRANSLATION OF THE AUDITORS' REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH INTERNATIONAL ACCOUNTING STANDARDS FOR THE YEAR
ENDED 31 MARCH 2002
To the Managing Board and the Supervisory Board of Datacon Technology AG
We have audited the accompanying consolidated financial statements of Datacon
Technology AG as of 31 March 2002. These financial statements are the
responsibility of the management of Datacon Technology AG. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with International Standards on Auditing
(ISA) as issued by the International Federation of Accountants (IFAC). Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of 31
March 2002, and the results of its operations and its cash flows for the fiscal
year from 1 April 2001 to 31 March 2002 in accordance with International
Accounting Standards as issued by the International Accounting Standards
Committee and adopted by the International Accounting Standards Board.
Without qualifying our opinion, we draw attention to the Goodwill amounting to
TEUR 24,357.8 as disclosed in the consolidated balance sheet as of 31 March
2002. Such goodwill is exclusively attributable to the subsidiary EuroTec
Technologische Entwicklungs- und VertriebsgmbH. As discussed in Note (8) to the
consolidated financial statements, the Managing Board of Datacon Technolgy AG
assumes that, based on the mid-term and long-term earnings expectations for the
business operation of EuroTec Technologische Entwicklungs- und VertriebsgmbH,
the net book value of the goodwill as disclosed in the consolidated balance
sheet as of 31 March 2002 is not impaired. This evaluation of the Managing Board
on the appropriateness of the goodwill amount as disclosed in the consolidated
balance sheet as of 31 March 2002 is based on the assumption of a mid-term to
long-term recovery of the semi-conductor markets.
Furthermore we point out the fact that the adjustment of the presentation of the
corresponding income statement figures for the fiscal year ended 31 March 2001
from the total cost method (nature of expense method) to the cost of sales
method was not audited.
According to the provisions of the Austrian Commercial Code, the group
management report and the adherence to the legal requirements for the exemption
from the obligation to compile consolidated financial statements in accordance
with Austrian law have to be examined.
We certify that the group management report corresponds with the consolidated
financial statements and that the legal requirements for the exemption from the
obligation to compile consolidated financial statements in accordance with
Austrian law have been met.
Vienna 24 June 2002
Ernst & Young
Wirtschaftsprufungs- und Steuerberatungsgesellschaft mbH
Mag. Isabella Schwartz-Gallee mp Mag. Helmut Maukner mp
Wirtschaftspruferin Wirtschaftsprufer
F-3
TRANSLATION OF THE AUDITORS' REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH INTERNATIONAL ACCOUNTING STANDARDS FOR THE YEAR
ENDED 31 MARCH 2003
To the Managing Board and the Supervisory Board of Datacon Technology AG
We have audited the accompanying consolidated financial statements of Datacon
Technology AG as of 31 March 2003. These financial statements are the
responsibility of the management of Datacon Technology AG. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with International Standards on Auditing
(ISA) as issued by the International Federation of Accountants (IFAC). Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of 31
March 2003, and the results of its operations and its cash flows for the fiscal
year from 1 April 2002 to 31 March 2003 in accordance with International
Accounting Standards as issued by the International Accounting Standards
Committee and adopted by the International Accounting Standards Board.
Without qualifying our opinion, we draw attention to the discussion of the
Managing Board in the Notes to the goodwill relating to EuroTec Technologische
Entwicklungs- und VertriebsgmbH. In the balance sheet as of 31 March 2003 the
goodwill relating to EuroTec Technologische Entwicklungs- und VertriebsgmbH is
disclosed with an amount of TEUR 23,097.5. Such amount equals the result of an
appraisal performed by the company, whereby a mid-term to long-term recovery of
the semi-conductor markets was assumed. Due to the immanent uncertainties of
forward looking statements on future events and circumstances, it is possible
that the actual future course of business of EuroTec Technologische
Entwicklungs- und VertriebsgmbH deviate from the planned results of operations,
and as a result the recoverability of the goodwill amount as disclosed cannot be
guaranteed.
According to the provisions of the Austrian Commercial Code, the group
management report and the adherence to the legal requirements for the exemption
from the obligation to compile consolidated financial statements in accordance
with Austrian law have to be examined.
We certify that the group management report corresponds with the consolidated
financial statements and that the legal requirements for the exemption from the
obligation to compile consolidated financial statements in accordance with
Austrian law have been met.
Vienna, 9 July 2003
Ernst & Young
Wirtschaftsprufungsgesellschaft mbH
Mag. Helmut Maukner mp ppa. Mag. Sabine Eberhard mp
Wirtschaftsprufer Wirtschaftspruferin
F-4
TRANSLATION OF THE AUDITORS' REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH INTERNATIONAL ACCOUNTING STANDARDS FOR THE YEAR
ENDED 31 MARCH 2004
To the Managing Board and the Supervisory Board of Datacon Technology AG
We have audited the accompanying consolidated financial statements of Datacon
Technology AG as of 31 March 2004. These financial statements are the
responsibility of the management of Datacon Technology AG. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with International Standards on Auditing
(ISA) as issued by the International Federation of Accountants (IFAC). Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of 31
March 2004, and the results of its operations and its cash flows for the fiscal
year from 1 April 2003 to 31 March 2004 in accordance with International
Accounting Standards as issued by the International Accounting Standards
Committee and adopted by the International Accounting Standards Board.
Without qualifying our opinion, we draw attention to the discussion of the
Managing Board in the Notes to the goodwill relating to EuroTec Technologische
Entwicklungs- und VertriebsgmbH. In the balance sheet as of 31 March 2004 the
goodwill relating to EuroTec Technologische Entwicklungs- und VertriebsgmbH is
disclosed with an amount of TEUR 21,837.1. The recoverability of such amount was
proven by the Managing Board by updating as at the balance sheet date an
appraisal performed by the company in the fiscal year 2003/04, whereby a
mid-term to long-term recovery of the semi-conductor markets was assumed. Due to
the immanent uncertainties of forward looking statements on future events and
circumstances, it is possible that the actual future course of business of
EuroTec Technologische Entwicklungs- und VertriebsgmbH deviate from the planned
results of operations, and as a result the recoverability of the goodwill amount
as disclosed cannot be guaranteed.
According to the provisions of the Austrian Commercial Code, the group
management report and the adherence to the legal requirements for the exemption
from the obligation to compile consolidated financial statements in accordance
with Austrian law have to be examined.
We certify that the group management report corresponds with the consolidated
financial statements and that the legal requirements for the exemption from the
obligation to compile consolidated financial statements in accordance with
Austrian law have been met.
Vienna, 15 July 2004
Ernst & Young
Wirtschaftsprufungsgesellschaft mbH
Mag. Helmut Maukner mp ppa. Mag. Sabine Hofstotter mp
Wirtschaftsprufer Wirtschaftspruferin
F-5
DATACON - GROUP
CONSOLIDATED BALANCE SHEET
in TEUR
as of as of
30 September as of 31 March as of
2004 31 March 2004 2003 31 March 2002
(unaudited) (audited) Notes (audited) Notes (audited)
------------ ------------- ----- --------- ----- -------------
ASSETS
Non current assets
Goodwill 21,837.1 21,837.1 (6) 23,097.5 (6) 24,357.8
Intangible assets 1,641.0 1,237.7 (7) 472.3 (7) 637.4
Property, plant and equipment 10,461.3 10,938.4 (8) 11,855.8 (8) 11,394.2
Financial assets 1,208.1 1,208.1 (9) 1,142.2 (9) 2,656.5
Other receivables (non-current)
and other assets 3,360.6 2,699.6 (10) 2,560.3 (10) 1,164.5
------------ ------------- --------- -------------
38,508.1 37,920.9 39,128.1 40,210.4
Deferred tax assets 12.2 951.1 (11) 1,226.7 (11) 567.9
Current assets
Inventories 18,631.7 15,934.6 (12) 22,603.8 (12) 21,576.5
Trade accounts receivable 28,116.9 16,513.6 (13) 10,147.9 (13) 10,246.4
Other receivables (current) and
other assets 1,317.9 2,167.8 3,775.3 4,496.4
Securities held for trading 0.0 0.0 0.0 43.1
Cash and cash equivalents 2,197.6 2,256.1 (23) 2,448.9 (23) 7,500.7
------------ ------------- --------- -------------
50,264.1 36,872.1 38,975.9 43,863.1
------------ ------------- --------- -------------
TOTAL ASSETS 88,784.4 75,744.1 79,330.7 84,641.4
============ ============= ========= =============
F-6
in TEUR
as of as of
30 September as of 31 March as of
2004 31 March 2004 2003 31 March 2002
(unaudited) (audited) Notes (audited) Notes (audited)
------------ ------------- ----- --------- ----- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock 1,000.0 1,000.0 1,000.0 1,000.0
Differences from currency
translation 8.8 -7.9 -82.0 -38.4
Accumulated earnings 36,171.7 30,802.8 28,650.3 31,588.6
------------ ------------- --------- -------------
37,180.5 31,794.9 (14) 29,568.3 (14) 32,550.2
Minority interest 0.0 0.0 (15) 731.3 (15) 747.6
Government grants received 179.6 185.9 198.4 210.8
Non-current liabilities
Provisions for pensions and
severance payments 4,534.3 4,154.1 (16) 4,222.2 (16) 4,984.1
Liabilities to banks (non-current) 10,283.6 6,573.0 (17) 8,783.0 (17) 1,200.0
Trade accounts payable
(non-current) 0.0 0.0 0.0 906.4
Other non current liabilities 795.0 1,019.6 (18) 1,043.0 (18) 1,125.3
------------ ------------- --------- -------------
15,612.9 11,746.7 14,048.2 8,215.8
Deferred tax liabilities 595.9 125.8 (19) 1.8 (19) 56.4
Current liabilites
Liabilities to banks (current) 20,138.8 21,586.5 (20) 24,492.1 (20) 11,841.4
Advance Payments received 970.7 625.6 260.6 1,396.3
Trade accounts payable 7,230.7 3,133.9 1,914.8 4,712.5
Other current payables 3,550.7 4,708.6 (21) 6,329.5 (21) 19,878.3
Provisions for taxes 231.4 283.7 924.9 4,217.6
Other current provisions 3,093.2 1,552.5 (22) 860.8 (22) 814.5
------------ ------------- --------- -------------
35,215.5 31,890.8 34,782.7 42,860.6
------------ ------------- --------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 88,784.4 75,744.1 79,330.7 84,641.4
============ ============= ========= =============
F-7
DATACON - GROUP
CONSOLIDATED STATEMENT OF INCOME
for the for the
period period for the for the
from from period period
1 April 2004 to 1 April 2003 from from
30 September to 1 April 2002 to 1 April 2001 to
2004 31 March 2004 31 March 2003 31 March 2002
in TEUR (unaudited) (audited) Notes (audited) Notes (audited)
- ----------------------------------- --------------- ------------- ----- --------------- ----- ---------------
SALES 39,145.7 58,261.9 (1) 41,558.5 (1) 61,663.7
Cost of sales - 21,238.4 - 33,872.1 - 22,276.9 - 36,252.3
Other operating income 654.3 1,119.5 (2) 4,962.6 (2) 3,115.0
Selling expenses - 5,015.6 - 10,146.4 - 11,221.4 - 9,477.6
Admininstrative expenses - 2,795.0 - 4,078.4 - 6,394.4 - 5,454.3
Research and development expenses - 2,697.4 - 4,301.7 - 7,044.8 - 6,671.5
Other operating expenses -480.0 - 859.6 - 959.9 - 1,946.4
--------------- ------------- --------------- ---------------
OPERATING PROFIT/LOSS BEFORE
AMORTIZATION OF GOODWILL 7,573.6 6,123.2 -1,376.3 4,976.6
Amortization of goodwill 0.0 - 1,260.4 (3) - 1,260.4 (3) - 849.3
--------------- ------------- --------------- ---------------
OPERATING PROFIT/LOSS AFTER
AMORTIZATION OF GOODWILL 7,573.6 4,862.8 -2,636.7 4,127.3
Financial result - 249.3 - 2,124.8 (4) - 847.1 (4) 130.1
--------------- ------------- --------------- ---------------
INCOME/LOSS BEFORE TAXES 7,324.3 2,738.0 -3,483.8 4,257.4
Taxes on income/loss - 1,955.4 - 585.5 (5) 529.3 (5) - 1,937.9
--------------- ------------- --------------- ---------------
NET INCOME/LOSS AFTER TAXES 5,368.9 2,152.5 -2,954.5 2,319.5
Minority interest 0.0 0.0 16.3 - 1,113.0
--------------- ------------- --------------- ---------------
INCOME/LOSS AFTER MINORITY INTEREST 5,368.9 2,152.5 -2,938.2 1,206.5
Earnings/loss per share (EUR) 536.9 215.3 - 293.8 120.7
F-8
DATACON - GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the
period for the for the
from period period
1 April 2004 from from for the period
to 1 April 2003 1 April 2002 from
30 September to to 1 April 2001 to
in TEUR 2004 31 March 2004 Notes 31 March 2003 Notes 31 March 2002
- ----------------------------------------- ------------ ------------- ----- ------------- ----- ---------------
Income/loss before taxes 7,324.3 2,738.0 - 3,483.8 4,257.4
Depreciation and
amortization/appreciation of
+/- goodwill,
intangible assets and property,
plant and equipment 872.7 2,918.3 3,316.9 3,053.3
+ Depreciation of financial assets 0.0 1.6 135.9 0.0
+/- Profit/Loss on disposal of fixed
assets - 110.0 - 84.2 0.0 - 0.2
- Amortization of government grants - 6.3 - 12.5 - 12.5 - 12.6
- Interest income - 8.5 - 54.0 - 383.1 - 445.6
+ Interest expenses 402.9 966.0 1,002.9 483.1
+/- Decrease/Increase in inventories - 2,697.1 6,669.2 - 1,027.2 56.8
Decrease/Increase in trade
+/- accounts receivable
and other assets - 11,414.4 - 4,897.5 1,201.5 32,536.5
Increase/Decrease in trade
+/- accounts payable
and other liabilities 3,127.4 - 60.2 - 10,143.9 - 10,326.5
+/- Increase/Decrease in provisions
(except provisions for income
taxes) 1,512.9 623.6 - 715.6 383.9
Effects from foreign currency
+/- translation 7.3 29.1 34.3 - 34.5
------------ ------------- ------------- ---------------
Net cash flow from current business
activities - 988.8 8,837.4 - 10,074.6 29,951.6
- Interest paid - 421.5 - 1,061.6 - 919.9 - 483.1
- Taxes on income paid - 190.7 - 827.1 - 3,476.0 - 14,736.1
------------ ------------- ------------- ---------------
NET CASH FLOW FROM OPERATING ACTIVITIES - 1,601.0 6,948.7 - 14,470.5 14,732.4
F-9
for the
period for the for the
from period period for the
1 April 2004 from from period
to 1 April 2003 1 April 2002 from
30 September to to 1 April 2001 to
in TEUR 2004 31 March 2004 Notes 31 March 2003 Notes 31 March 2002
- ----------------------------------------- ------------ ------------- ----- ------------- ----- ---------------
Disbursements for the acquisition
- of
subsidiaries (in prior years) - 49.4 - 12.8 (25) - 8,425.0 (25) - 7,670.0
- Disbursement for intangible assets - 660.2 - 999.7 - 167.7 - 396.0
Disbursements for the purchase of
- property,
plant and equipment - 731.1 - 864.4 (24) - 2,444.7 (24) - 2,920.0
Disbursements for the purchase of
- financial assets
and other financial investments 0.0 - 239.0 - 482.9 - 404.7
Proceeds from sales of property,
+ plant and equipment 711.8 419.1 181.1 40.9
Proceeds from sales of financial
+ assets and
other financial investments 0.0 239.8 43.1 0.0
+ Interest received 8.5 54.0 481.1 445.6
------------ ------------- ------------- ---------------
NET CASH FLOW FROM INVESTING ACTIVITIES - 720.4 - 1,403.0 - 10,815.0 - 10,904.2
+ Proceeds from issuance of equity 0.0 0.0 0.0 3.7
- Dividends paid 0.0 0.0 0.0 - 10,000.0
Share of profit paid to minority
- shareholders 0.0 - 718.5 0.0 - 3,606.0
Proceeds from issuance of bonds
+ and borrowings 2,262.9 0.0 20,233.7 1,200.0
- Repayment of borrowings 0.0 - 5,020.0 0.0 - 149.9
------------ ------------- ------------- ---------------
NET CASH FLOW FROM FINANCING ACTIVITIES 2,262.9 - 5,738.5 20,233.7 -12,552.2
Net change in cash and cash
equivalents - 58.5 - 192.8 - 5,051.8 - 8,724.0
Cash and cash equivalents at the
+ beginning of the year 2,256.1 2,448.9 7,500.7 16,224.7
CASH AND CASH EQUIVALENTS AT THE END OF
THE YEAR 2,197.6 2,256.1 (23) 2,448.9 (23) 7,500.7
F-10
DATACON - GROUP
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
TOTAL
Common Currency Accumulated Shareholders'
in TEUR stock translations earnings Equity
- ------------------------- ---------- ------------ ----------- ---------------
as of 31 March 2001 36.3 - 0.3 41,342.0 41,378.0
------- ------ ---------- ----------
Nominal capital increase 960.0 - 960.0 -
Ordinary capital increase 3.7 3.7
Consolidated earnings 1,206.5 1,206.5
Dividend paid - 10,000.0 - 10,000.0
Currency translation - 38.0 -38.0
------- ------ ---------- ----------
as of 31 March 2002 1,000.0 - 38.3 31,588.5 32,550.2
------- ------ ---------- ----------
Consolidated earnings 0.0 0.0 - 2,938.2 - 2,938.2
Currency translation 0.0 - 43.7 0.0 - 43.7
------- ------ ---------- ----------
as of 31 March 2003 1,000.0 -82.0 28,650.3 29,568.3
------- ------ ---------- ----------
Consolidated earnings 0.0 0.0 2,152.5 2,152.5
Currency translation 0.0 74.1 0.0 74.1
------- ------ ---------- ----------
AS OF 31 MARCH 2004 1,000.0 -7.9 30,802.8 31,794.9
------- ------ ---------- ----------
Consolidated earnings 0.0 0.0 5,376.9 5,368.9
Currency translation 0.0 16.7 0.0 16.7
------- ------ ---------- ----------
AS OF 30 SEPTEMBER 2004 1,000.0 8.8 36,179.7 37,180.5
------- ------ ---------- ----------
F-11
DATACON GROUP
FIXED ASSET MOVEMENT SCHEDULE FROM 1 APRIL 2002 TO 31 MARCH 2003
DEVELOPMENT AT ACQUISITION AND PRODUCTION COSTS
------------------------------------------------------
At Adjustment
beginning for At
of currency end of
in TEUR the period translations Additions Disposals the period
- ---------------------------- ---------- ------------ --------- --------- ----------
I. GOODWILL 25,207.2 - - - 25,207.2
--------- ------- -------- ------ --------
II. INTANGIBLE ASSETS
Concessions,
rights, licences 1,432.9 - 0.3 167.7 8.7 1,591.6
III. PROPERTY, PLANT AND
EQUIPMENT
1. Buildings on
non-owned
land 10,121.3 - 80.3 2.5 10,199.1
2. Machinery
and equipment 80.6 - 12.0 438.6 - 507.2
3. Machinery
for lease
purposes - - 736.0 - 736.0
4. Other
equipment,
furniture and
fixtures 4,771.0 - 93.4 1,172.1 721.7 5,128.0
5.Prepayments &
assets under
construction 58.1 - 0.2 17.7 58.1 17.5
--------- ------- -------- ------ --------
TOTAL 15,031.0 - 105.6 2,444.7 782.3 16,587.8
--------- ------- -------- ------ --------
IV. FINANCIAL ASSETS
1. Marketable
securities 1,398.0 - 262.6 268.4 1,392.2
2.
Reimbursement
rights 1,372.6 - 488.1 - 1,860.7
--------- -------- -------- ------ --------
TOTAL 2,770.6 - 750.7 268.4 3,252.9
--------- -------- -------- ------ --------
DEVELOPMENT OF AMORTIZATION/DEPRECIATION NET BOOK VALUE
-------------------------------------------------------- ---------------------
Adjustment
At for At At the At the
beginning of currency end of end of end of
in TEUR the period translations Additions Disposals the period the period prior year
- ----------------------------- ------------ ------------ --------- --------- ---------- ---------- -----------
I. GOODWILL 849.3 - 1,260.4 - 2,109.7 23,097.5 24,357.9
------- ------ ------- ------ ------- -------- --------
II. INTANGIBLE ASSETS
Concessions,
rights, licences 795.3 - 331.9 7.9 1,119.3 472.3 637.4
III. PROPERTY, PLANT AND
EQUIPMENT
1. Buildings on
non-owned
land 1,066.8 - 400.2 0.2 1,466.8 8,732.3 9,054.5
2. Machinery
and equipment 36.8 - 1.8 64.8 - 99.8 407.4 43.8
3. Machinery
for lease
purposes - - 99.0 - 99.0 637.0 -
4. Other
equipment,
furniture and
fixtures 2,533.2 - 25.6 1,160.6 601.8 3,066.4 2,061.6 2,237.8
5.
Prepayments &
assets under
construction - - - - - 17.5 58.1
------- ------ ------- ------ ------- -------- --------
TOTAL 3,636.8 - 27.4 1,724.6 602.0 4,732.0 11,855.8 11,394.2
------- ------ ------- ------ ------- -------- --------
IV. FINANCIAL ASSETS
1. Marketable
securities 114.1 - 135.9 - 250.0 1,142.2 1,283.9
2.
Reimbursement
rights - - - - - 1,860.7 1,372.6
------- ------ ------- ------ ------- -------- --------
TOTAL 114.1 - 135.9 - 250.0 3,002.9 2,656.5
------- ------ ------- ------ ------- -------- --------
F-12
DATACON - GROUP
FIXED ASSET MOVEMENT SCHEDULE FROM 1 APRIL 2003 TO 31 MARCH 2004
DEVELOPMENT AT ACQUISITION AND PRODUCTION COSTS
------------------------------------------------------
At the
beginning At the
of Currency end of
in TEUR the period translations Additions Disposals the period
- ------------------------- ---------- ------------ --------- --------- ----------
I. GOODWILL 25,207.2 0.0 0.0 0.0 25,207.2
-------- ------ ----- ----- --------
II. INTANGIBLE ASSETS
1. Concessions,
Rights,
Licenses 1,591.6 -0.2 18.5 4.9 1,605.0
2. Capitalized
project-related
development
costs 981.2 981.2
-------- ------ ----- ----- --------
TOTAL 1,591.6 -0.2 999.7 4.9 2,586.2
-------- ------ ----- ----- --------
III. PROPERTY, PLANT AND
EQUIPMENT
1. Buildings on
non-owned land 10,199.1 0.4 96.2 0.0 10,295.7
2. Machinery
and equipment 507.2 26.7 535.3 110.2 959.0
3. Machinery
for lease
puposes 736.0 0.0 0.0 446.5 289.5
4. Other
equipment,
furniture
and fixtures 5,128.0 -179.2 229.2 27.9 5,150.1
5.
Prepayments
& assets
under
construction 17.5 -0.5 3.7 12.9 7.8
-------- ------ ----- ----- --------
TOTAL 16,587.8 -152.6 864.4 597.5 16,702.1
-------- ------ ----- ----- --------
IV. FINANCIAL ASSETS
Marketable
securities 1,392.2 -6.0 239.0 244.5 1,380.7
-------- ------ ----- ----- --------
TOTAL 1,392.2 -6.0 239.0 244.5 1,386.7
-------- ------ ----- ----- --------
DEVELOPMENT OF AMORTIZATION/DEPRECIATION NET BOOK VALUE
----------------------------------------------------- ---------------------
At the
beginning At the At the At the
of Currency end of end of end of the
in TEUR the period translations Additions Disposals the period the period prior year
- ------------------------- ---------- ------------ --------- --------- ---------- ---------- ----------
I. GOODWILL 2,109.7 0.0 1,260.4 0.0 3,370.1 21,837.1 23,097.5
------- ------ ------- ----- ------- -------- --------
II. INTANGIBLE ASSETS
1.
Concessions,
Rights,
Licenses 1,119.3 0.1 231.6 2.5 1,348.5 256.5 472.3
2.
Capitalized
project-related
development
costs 0.0 0.0 981.2 0.0
------- ------ ------- ----- ------- -------- --------
TOTAL 1,119.3 0.1 231.6 2.5 1,348.5 1,237.7 472.3
------- ------ ------- ----- ------- -------- --------
III. PROPERTY, PLANT AND
EQUIPMENT
1. Buildings on
non-owned land 1,466.8 0.0 427.5 0.0 1,894.3 8,401.4 8,732.3
2. Machinery
and equipment 99.8 4.5 130.5 22.0 212.8 746.2 407.4
3. Machinery
for lease
puposes 99.0 0.0 0.0 99.0 0.0 289.5 637.0
4. Other
equipment,
furniture
and fixtures 3,066.4 -202.4 868.3 75.7 3,656.6 1,493.5 2,061.6
5.
Prepayments
& assets
under
construction 0.0 0.0 0.0 0.0 0.0 7.8 17.5
------- ------ ------- ----- ------- -------- --------
TOTAL 4,732.0 -197.9 1,426.3 196.7 5,763.7 10,938.4 11,855.8
------- ------ ------- ----- ------- -------- --------
IV. FINANCIAL ASSETS
Marketable
securities 250.0 -6.0 1.6 73.0 172.6 1,208.1 1,142.2
------- ------ ------- ----- ------- -------- --------
TOTAL 250.0 -6.0 1.6 73.0 172.6 1,208.1 1,142.2
------- ------ ------- ----- ------- -------- --------
F-13
DATACON - GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 MARCH 2004 PREPARED IN
ACCORDANCE WITH IFRS
The DATACON - Group is an internationally operating group of companies in the
business of manufacturing high-precision machinery. Parent company is the
Datacon Technology AG with its seat in Radfeld/Tirol. The company is registered
in Austria in the Firmenbuch (company register) with the Landesgericht
(provincial court) Innsbruck under FN 51781z as Aktiengesellschaft (Joint stock
corporation).
The operations of the subsidiaries consist in the selling of high-quality
machines (Die Bonder) as well as the manufacturing of special equipment.
I. ACCOUNTING POLICIES
1. BASIS OF PREPARATION
The consolidated financial statements of DATACON - Group for the fiscal year
2003/04 (from 1 April 2003 to 31 March 2004) have been prepared in accordance
with International Financial Reporting Standards (IFRS) published by the
International Accounting Standards Committee (IASC) and adopted by the
International Accounting Standards Board (IASB).
In the preparation of the consolidated financial statements all IFRS and
interpretations of the Standing Interpretation Committee (SIC) as adopted by the
International Financial Reporting Interpretations Committee (IFRIC) which are
mandatory to be applied for the fiscal year 2003/04 were considered.
This consolidated financial statements were prepared in accordance with the
"Konzernabschlussgesetz" (KonzAG) (Section 245a HGB) published in March 1999.
According to this law a parent company, which draws up consolidated financial
statements and a management report in accordance with internationally accepted
accounting principles, needs not to prepare financial statements on basis of the
national regulations of the Austrian Commercial Code. The financial statements
were drawn up in accordance with the 7th EU-Directive and have therefore be
considered as equivalent with consolidated financial statements according to the
regulations of the Austrian Commercial Code.
The entire reporting of the group for the fiscal year 2003/04 is presented in
thousand Euros (TEUR).
F-14
2. CONSOLIDATED GROUP
The determination of the consolidated group follows the principles of IAS 27
(Consolidated Financial Statements and Accounting for Investments in
Subsidiaries). Besides the parent company, the following companies are included
in the consolidated financial statements:
direct
Corporate name Corporate seat Country share %
- --------------------------------------------- -------------- ---------- -------
Datacon Semiconductor Equipment GmbH, (DC SE) Radfeld Austria 100
Datacon Asia Ltd., (DC Asia) Hong Kong People's
Republic 100
of China
Datacon Asia Pacific Pte. Ltd., (DC AP) Singapore Singapore 100
Datacon Korea Ltd., (DC KO) Seoul Korea 100
Datacon Hungary Termelo Kft., (DC HU) Gyor Hungary 100
Datacon North America Inc., (DC NA) Wilmington/ USA 100
Delaware
EuroTec Technologische Entwicklungs- und
Vertriebsgesellschaft m.b.H. (EuroTec) Berlin Germany 100
The shares in Datacon Asia Ltd. and Datacon Hungary Termelo Kft. were reported
with 100% because the minority shareholder abandons his profit share and his
interest in net assets is immaterial.
CHANGES IN THE GROUP OF CONSOLIDATED COMPANIES
The number of fully consolidated companies did not change in the fiscal year.
By 1 April 2003, the outstanding interest of 25% in EuroTec Technologische
Entwicklungs- und Vertriebsgesellschaft m.b.H. was acquired at the nominal
value, consequently, Datacon Technology AG holds 100% of this company at
year-end.
The balance sheet date of the consolidated financial statements is equivalent to
the balance sheet date of the ultimate parent company, as in accordance with IAS
27
3. SIGNIFICANT DIFFERENCES BETWEEN IFRS AND THE AUSTRIAN STATUTORY ACCOUNTING
REQUIREMENTS
Intentionally eliminated for purposes of the Euronext listing prospectus
4. ACCOUNTING AND VALUATION PRINCIPLES
The consolidated financial statements of Datacon - Group and subsidiaries are
presented in thousand Euros (TEUR). The balance sheet date of all consolidated
companies is 31 March.
The financial statements of all included companies are drawn up on the basis of
uniform group accounting and valuation principles.
There were no changes of accounting and valuation principles in the reporting
period.
INTANGIBLE ASSETS are valued at acquisition costs and are amortized by applying
the straight-line method over their useful life of two to five years. The
amortization is allocated in the income statement to cost of sales (1%), selling
expenses (2%), administrative expenses (89%) and research and development
expenses (8%) reflecting the actual usage.
F-15
GOODWILL resulting from acquisitions (if the fair value of identifiable assets
and liabilities is below the purchase price of the acquired unit) is generally
capitalized and subsequently amortized. Generally the amortization is performed
on a straight line basis over a period of 20 years.
DEVELOPMENT COSTS for inventories are normally expensed when they occur. They
are only capitalized if it is reasonable probable that the development activity
will result in future cash inflows, covering the development costs. Furthermore
there are several criteria as stated in IAS 38 to be fulfilled cumulatively for
such projects.
PROPERTY, PLANT AND EQUIPMENT - In accordance with IAS 16 property, plant and
equipment is valued at acquisition or production costs. Depreciation is
generally calculated straight-line over the estimated useful life.
Interest expense related to property, plant and equipment requiring a longer
period to be acquired or produced is not capitalized.
Straight-line depreciation for property, plant and equipment is based on the
following useful life:
Buildings 8 to 28 years
Machinery and equipment,
machinery for lease purposes 4 to 10 years
Other equipment, furniture and fixtures 3 to 10 years
Substantial decreases in value which exceed the extent of the scheduled
depreciation are considered in line with IAS 36 "Impairment of assets" by
accounting for an asset impairment, if any. In the reporting period there were
no such asset impairments.
Subsequent expenses are capitalized if it is probable that they contribute
future economic benefit, in excess to the performance of the existing asset.
Leased assets, which are acquired under a finance lease agreement and transfer
the risks and opportunities incidental to ownership of the leased item to the
lessee are capitalized in accordance with IAS 17 at the fair value of the leased
property or, if lower, at the present value of the minimum lease payments.
Depreciation is performed over the useful life. Payment obligations resulting
from future lease payments are recognized as liability.
Assets obtained under all other lease and rent contracts are classified as
operating lease and are assigned to the lessor or renter. Lease and rent
payments are expensed.
Small value items with acquisition cost below EUR 400 are fully expensed in the
acquisition period.
According to IAS 23 interest costs are recognised as expenses in the period in
which they are incurred.
FINANCIAL INSTRUMENTS - A purchase or sale of financial instruments is
recognised at the settlement date in accordance with IAS 39. Financial assets
comprise investment funds certificates which are used to cover personnel related
provisions. These certificates are classified as available-for-sale and are
measured in accordance with IAS 39 at their fair value without deduction of
transaction costs. The fair value matches the market price at the balance sheet
date.
Financial assets are derecognised when the control of the contractual rights of
the asset is transferred to a third party. Financial liabilities are
derecognised when the obligation specified in the contract is discharged,
cancelled, or expired.
Financial assets disclosed under current assets are measured in accordance with
IAS 39 at the fair market price at the balance sheet date. Changes in value are
reported in the profit and loss account.
INVENTORIES - Raw materials and other supplies are valued at the lower of
acquisition costs and net realisable value. Cost of inventory is calculated by
using the weighted average cost method.
Work in progress and finished goods are valued at the lower of cost of
production and net realisable value. The production costs include all costs
directly related to the item and indirect cost which are
F-16
allocated through an overall costing rate. Cost of inventory is assigned by
using the identified cost of the individual item. Risks resulting from the
storage period or reduced usability are taken into account through an
appropriate allowance. Engineering contracts are valued at cost for reasons of
prudence and the lack of reliable profit estimations.
The POC method according to IAS 11 is only applied to a few client specific
construction-contracts as for most contracts the criteria for POC-valuation are
not fulfilled. Contracts valued at percentage-of completion are disclosed as
trade accounts receivable. The percentage of completion and the percentage of
the contract profit realised at the balance sheet date are determined by the
cost to cost method.
RECEIVABLES - In accordance with IAS 39 receivables are initially measured at
the fair value of the consideration given. Other assets are measured at
acquisition cost. Identifiable risks result in appropriate valuation
adjustments.
The entity classifies cash at bank and in hand, bank deposits and investments
with a maturity at the acquisition date of 90 days at maximum as cash and cash
equivalents. These items are measured at their fair value (mark to market) at
the balance sheet date. There were no restraints on disposal of such items at
the balance sheet date.
GOVERNMENT GRANTS are related to investments in buildings on land not owned by
the Datacon Group and to the accounting software of the Datacon Semiconductor
Equipment GmbH. As set out in IAS 20 government grants are set up as deferred
income and recognised as income over the useful life of the corresponding asset.
PROVISIONS FOR EMPLOYEE BENEFITS are calculated by using the Projected Unit
Credit Method as set out in IAS 19, whereby the corridor method is not applied.
The interest rate was assumed at 5.5%. For the severance payment obligations a
salary increase rate of 3.5% was assumed. For contractually granted pensions to
the members of the Board of Directors the contractual 1.5% increase was taken
into account, for pension agreements with other employees no increases are
foreseen in the contract. Actuarial gains respectively losses are recognized
immediately in the income statement.
PROVISIONS - Other provisions were recognised in accordance with IAS 37 when the
enterprise has a present obligation as a result of a past event. In the case of
an uncertainty whether or not an obligation is currently existing, a provision
was only recognised when it was more likely than not (>50%) at the balance sheet
date that an obligation exists. Long term provisions were discounted when the
interest component was material.
LIABILITIES - Liabilities are initially measured at the fair value of the
consideration received. At the balance sheet date financial liabilities were
measured at amortized cost. Liabilities resulting from finance lease agreements
were measured at the present value of the minimum lease payments as set out in
IAS 17 (Leases).
REVENUE RECOGNITION - Revenue is recognised when the risks are transferred (at
the time the significant risks and rewards of ownership have passed)
respectively when services are rendered. Interest income is recognised on a time
proportion basis, taking into account the effective yield of the asset,
royalties and rental revenue are also recognised on a time proportion basis.
For a few client specific contracts revenues are recognized in accordance with
IAS 11 thus providing for the partial recognition of contract gains.
Sale and lease back transactions of the period include only one machine. The
gain of the sale transaction is recognised over the term of the lease contract.
Financial obligations related to sale and lease back transactions amount to TEUR
289 (prior year TEUR 637)
INCOME TAXES - The provision for current taxes include all tax obligations
existing at the balance sheet date. In addition a deferred tax liability was
recognised by using the balance sheet liability method as set out in IAS 12. All
temporary differences between the tax basis of assets and liabilities and their
carrying amount in the IFRS accounts as well as differences resulting from the
consolidation processes are included in the deferred tax liability applying the
enacted tax rate.
F-17
Furthermore a deferred tax asset is recognised for all tax loss carry forwards,
to the extent it is probable that they can be utilised.
The tax rate for the calculation of deferred taxes of local enterprises is 25%.
Foreign group companies apply the respective local tax rates.
EARNINGS PER SHARE - Earnings per share were calculated by dividing the group
profit for the period by the number shares issued. Datacon Technology was
transformed from a private to a public limited company only during the period
2001/02.
There are 10,000 shares with a nominal value of 100 EUR each share. With
reference to the pre-tax income of TEUR 2,738 (prior year TEUR - 3,484) positive
earnings per share result at the amount of 237.8 EUR/share (prior year - 348.4
EUR/share). Based on the profit for the period (after taxes and minority
interests) of TEUR 2,152 earnings per share amount to 215.2 EUR/share (prior
year - 293.8 EUR/share)
FOREIGN CURRENCY TRANSLATION - Financial statements of fully consolidated
foreign subsidiaries are converted according to IAS 21 following the concept of
the functional currency. For all companies the functional currency is the
respective local currency, as the subsidiaries operate independently from a
financial, economical and organizational point of view.
The balance sheet items are converted with the average foreign exchange rate as
of the balance sheet date, with exception of shareholder's equity which is
converted at historical rate. The income statement is converted with the annual
average rate.
Differences resulting from the currency translation of balance sheet items of
one year and the translation of prior years' balances as well as differences
between the balance sheet and the income statement do not affect net income as
they are taken directly to equity.
Differences arising from the roll-forward of the shareholder's equity in
comparison with the first time consolidation are set off against reserves
without affecting net income.
Differences due to the translation of monetary foreign currency positions in the
individual financial statements resulting from exchange rate fluctuations
between the recording of the transaction and the balance sheet date are taken to
the income statement.
The exchange rates of significant foreign currencies have changed as follows:
Average rate on balance sheet date Annual average rate
---------------------------------- -------------------
Currency 31 March 2004 31 March 2003 2003/04 2002/03
- -------- ------------- ------------- -------- --------
1 USD 1.2235 1.0907 1.1748 0.9767
1 HUF 247.80 246.35 257.2208 244.5233
1 CHF 1.5598 - - -
1 HKD 9.5180 8.4935 9.1421 7.6158
1 SGD 2.0450 1.9195 2.0296 1.7312
1 KRW 1400.00 1366.26 1388.69 1196.17
Goodwill arising on the acquisition of a foreign entity is recorded at the
exchange rate at the date of the initial consolidation.
HEDGING TRANSACTIONS / DERIVATIVE FINANCIAL INSTRUMENTS - In order to hedge the
market risk for existing assets and liabilities as well as for deferred income
and accrued expenses Datacon is using future contracts and swap transactions.
The hedging transactions and the derivative financial instruments are measured
in accordance with IAS 39 at fair market value.
F-18
CONSOLIDATION PRINCIPLES - Capital consolidation is performed according to the
benchmark-approach by offsetting the acquisition cost of the investment with the
fair value of identifiable assets and liabilities assumed at the date of
acquisition / date of foundation.
When offsetting intra-group receivables and payables for the consolidated
financial statements, receivables from trade, loans and other receivables are
matched with the corresponding payables and provisions of the consolidated group
companies.
Revenues, expenses, gains and losses resulting from intra-group transactions
have been set-off in course of the consolidation process.
Profits and losses from fixed asset transfers within the group are, if material
eliminated affecting net income. Also material intra-group profits in
group-inventories are eliminated.
Positive or negative differences resulting from initial consolidation are
disclosed as goodwill or badwill and are amortized / dissolved regularly over
the useful economic life. In addition the net book value of goodwill is reviewed
for impairment every year at the balance sheet date. Reductions of future
benefit are recorded as impairment.
NON-CURRENT AND CURRENT ASSETS AND LIABILITIES - Assets and liabilities with a
remaining life up to one year are considered as current, whereas those with a
maturity exceeding one year are classified as long-term. The determination of
the maturity is effected at the respective balance sheet date.
ESTIMATES AND ASSUMPTIONS - The preparation of consolidated financial statements
requires estimates and assumptions affecting the reported amounts of assets,
provisions, liabilities and other contingencies as of the balance sheet date as
well as the disclosure of earnings and expenses during the period under review.
Actual future amounts can differ from those estimates.
F-19
II. NOTES TO THE CONSOLIDATED INCOME STATEMENT
OPERATING RESULT
(1) Sales
Sales can be broken down as follows:
in TEUR 2003/04 2002/03
- ----------------- ------- -------
Contract revenues 5,340 631
Other revenues 52,922 40,928
------- -------
Total 58,262 41,559
======= =======
Contract revenues recognized result from contracts valued according to IAS 11.
Sales can be split up into the following market areas:
in TEUR 2003/04 2002/03
- ----------------- ------- -------
Europe 31,402 22,607
Asia 14,422 13,420
United States 12,438 5,532
------- -------
Total 58,262 41,559
======= =======
(2) Other operating income
in TEUR 2003/04 2002/03
- --------------------------- ------- -------
Income from the reversal of
provisions 14 1,749
Subsidies and grants 402 294
Income from the reversal of
allowances 0 1,883
Other 704 1,036
------- -------
TOTAL 1,120 4,962
======= =======
(3) Amortization of goodwill
The item ,,amortization of goodwill" (TEUR 1,260, prior year TEUR 1,260) does
not include any impairment expenses.
F-20
(4) Financial result
Interest Income
in TEUR 2003/04 2002/03
- --------------------------------------------------- ------- -------
Interest income and similar income 41 383
Interest expenses and similar expenses - 966 - 1,003
------- -------
TOTAL - 925 - 620
======= =======
Other financial income
in TEUR 2003/04 2002/03
- --------------------------------------------------- ------- -------
Exchange gains 1,223 821
Exchange losses - 2,671 - 1,470
Income from investments in securities 414 1,791
Expenses related to financial assets and securities - 166 - 1,369
------- -------
TOTAL - 1,200 - 227
======= =======
The income from investments in securities includes TEUR 224 (prior year TEUR
1,735) earnings from options.
Last year expenses for options amounting to TEUR 1,228 were disclosed under the
item ,,Expenses related to financial assets and securities". Due to unstable
market development fewer hedge-contracts have been concluded in the current
reporting period and therefore the related expenses were reduced to TEUR 162.
(5) Taxes on income
Taxes on income are composed as follows:
in TEUR 2003/04 2002/03
- --------------------------------- ------- -------
Tax expenses for the current year - 254 27
Deferred tax expenses / benefit - 332 - 557
------- -------
TOTAL - 586 - 530
======= =======
A reconciliation of the tax burden using the Austrian corporate tax rate of 34%
to the effective tax rate is as follows:
in TEUR 2003/04 2002/03
- ------------------------------------------------- ------- -------
Income before tax 2,737 - 3,484
Taxes on income calculated at the tax rate of 34% - 931 - 1,184
Impact of the reduction of the tax rate to 25%
for deferred tax - 214 0
Capitalization of loss carried forwards 537 0
Foreign tax charges 160 556
Non-temporary differences
Amortization of goodwill 428 428
Tax exemptions - 266 - 118
Other permanent differences - 300 847
------- -------
Actual tax expenses / benefit - 586 529
Effective tax rate 21.4% 15.2%
======= =======
F-21
OTHER EXPLANATORY NOTES TO THE INCOME STATEMENT
The income statement of the DATACON - Group is drawn up using the function of
expense (cost of sales) method. When using the nature of expense method the
following personnel expenses and cost of materials would be reported.
Personnel expenses
in TEUR 2003/04 2002/03
- --------------------------------------------------- ------- -------
Wages 229 308
Salaries 13,155 15,665
Expenses for severance payments 434 330
Contributions to employee benefit funds
according to Austrian employee benefit regulations 1 0
Expenses for pensions -203 32
Expenses of social security and
payroll related taxes and contributions 3,236 3,908
Other expenses for employee benefits 338 474
------- -------
17,190 20,717
======= =======
Cost of material and purchased services
in TEUR 2003/04 2002/03
- -------------------------- ------- -------
Cost of material 29,433 18,139
Cost of purchased services 1,052 737
------- -------
30,485 18,876
======= =======
Amortization and depreciation of intangible assets and property, plant and
equipment
Amortization of intangible fixed assets amounts to TEUR 232 (prior year TEUR
332) and is allocated as follows:
2003/04 2002/03
------- -------
Cost of sales 2 3
Distribution expenses 5 7
Administration expenses 206 295
R&D 19 27
------- -------
232 332
Depreciation of property, plant and equipment amounts to TEUR 1,426 (prior year
TEUR 1,626) and is allocated to the corresponding functions disclosed in the
income statement by using internal cost rates.
F-22
III. NOTES TO THE CONSOLIDATED BALANCE SHEET
ASSETS
NON-CURRENT ASSETS
(6) Goodwill
Goodwill is amortized over an expected the useful life time of 20 years. Total
amortization expense is disclosed as a separate item in the income statement.
The recoverability of the goodwill amount for EuroTec Technologische
Entwicklungs- und Vertriebsgesellschaft m.b.H. has been verified in the prior
year on the basis of an internal business appraisal which was updated at the
current year end. The valuation was made using the earnings method. Thus the
company value corresponds to the present value of future net income, which is
defined as the surplus of earnings and expenses. The future results were
discounted to the date of valuation, which is 31 March 2004, using a
risk-adapted capitalization-rate. As it is common practice for business
appraisals, a two-phase model was applied, whereby phase I corresponds with the
planning horizon of the company (from the year 2005 up to the year 2007), phase
II is defined as a stable phase represented as a perpetual annuity. The present
values of the net income in the two phases amount to TEUR 4,000 for phase I and
TEUR 22,200 for phase II (income before tax EUR 3.93 mio) applying a discount
rate of 8.5% for phase I and 9.0% for phase II. The net book value of the
goodwill is lower than the value as of 31 March 2004 when calculated as
described. Therefore no additional impairment according to IAS 36 is necessary.
IFRS 3, which was published on 31 March 2004 does not longer allow amortization
of goodwill. This regulation has to be applied for business years starting after
31 March 2004 for the first time, thus goodwill amortization was considered in
the underlying consolidated financial statements for the last time.
(7) Intangible assets
The development of intangible assets is presented in detail on fixed-assets
movement schedule which is an integrated part of the financial statements. The
adjustment for currency translation relating to foreign group companies which
results from the translation of assets with different exchange rates at the
beginning of the year and at year-end, is also disclosed separately therein. For
the current fiscal year an acquisition amounting to TEUR 18 as well as a
capitalization of internal development cost for the development of the "FC
Quantum" machinery was recorded at Datacon Semiconductor Equipment GmbH. Those
capitalized development costs are amortized over the useful life time of 5
years, starting with the next business year (2004/05).
(8) Property, plant and equipment
The development of Property, plant and equipment is presented in detail on the
fixed-assets movement schedule as part of the consolidated financial statements.
The adjustment for currency translation relating to foreign group companies
which results from the translation of assets with different exchange rates at
the beginning of the year and at year-end, is also disclosed separately therein.
Included in property, plant and equipment are leased assets, which are
economically assigned to Datacon-Group because of the terms of the
lease-agreements. A machine acquired through a sale and lease back agreement is
capitalized, the net book value as at the balance sheet date amounts to TEUR 289
(prior year TEUR 637). The machine is depreciated over the term of the lease
agreement to the agreed residual value.
(9) Financial assets
The item ,,financial assets" consists of various investment funds certificates
(TEUR 1,208, prior year TEUR 1,142). The stated certificates are available for
sale according to IAS 39 and are reported at fair value which corresponds with
the market value of the shares on the balance sheet date. A part of
F-23
the investment funds certificates (TEUR 436) is pledged to "Bank fur Tirol und
Vorarlberg AG" for ERP-Projects.
(10) Other receivables (non-current) and other assets
Non-current receivables amounting to TEUR 353 (prior year TEUR 400) concern
receivables with a maturity from 1 to 5 years from "Schweitzer + Zeindl
Vermogensverwaltungs OEG" (a related party). These receivables are categorized
according to IAS 39 as originated by the company.
Furthermore the item includes coverage amounts of insurances for pension
obligations amounting to TEUR 2,347 (prior year TEUR 1,861).
(11) Deferred tax assets
The deferred taxes assets derive from the following:
in TEUR 2003/04 2002/03
- ----------------------------------------- ------- -------
Loss carry forwards 1,146 829
Intra-group eliminations 201 291
Differences between IFRS and tax balances
POC -601 -134
capitalized R&D costs -245 0
personnel related accruals 364 328
others 86 -87
------- -------
Total 951 1,227
======= =======
CURRENT ASSETS
(12) Inventories
Inventories are classified in detail as follows:
in TEUR 2003/04 2002/03
- -------------------------- ------- -------
Raw materials and supplies 8,029 10,364
Work in progress 3,725 5,784
Finished goods 4,067 6,173
On-account payments made 114 283
------- -------
TOTAL 15,935 22,604
======= =======
Provisions amounting to TEUR 577 (prior year TEUR 455) were deducted from
inventories. Thereof TEUR 234 (prior year TEUR 215) concern raw materials and
supplies, TEUR 169 (prior year TEUR 0) work in progress and TEUR 174 (prior year
TEUR 240) finished goods.
(13) Trade accounts receivable
in TEUR 2003/04 2002/03
- -------------------------------- ------- -------
Receivables from goods delivered
and services performed 11,955 9,518
Contract receivables 4,559 630
------- -------
Total 16,514 10,148
======= =======
F-24
Trade accounts receivable include allowances for bad debt amounting to TEUR 152
(prior year TEUR 127).
Construction Contracts
in TEUR 2003/04 2002/03
- --------------------------------- ------- -------
Contract receivables 4,559 630
Cost of production -2,156 -23
------- -------
Recognized profits resulting from
contruction contracts 2,403 394
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
(14) Shareholder's Equity
The composition of and changes in shareholder's equity is disclosed in a
separate statement (Consolidated Statement of Changes in Shareholders' Equity).
Common Stock
The common stock consists of 10,000 bearer shares with a nominal value of EUR
100 each.
(15) Minority interest
Minority interest has changed as follows:
in TEUR 2003/04 2002/03
- ---------------------------------------------- ------- -------
Minority interest as of April 1 731 747
Dividend distribution to minority shareholders - 718 0
Minority interest in result of the year 0 - 16
Increase of group share due to acquisition of
------- -------
minority interest - 13 0
------- -------
Minority interest as of March 31 0 731
======= =======
The remaining minority interest in EuroTec Technologische Entwicklungs- und
Vertriebsgesellschaft m.b.H. has been acquired in the current fiscal year.
NON-CURRENT LIABILITIES
(16) Provisions for pensions and severance payments
Provisions for pensions
Direct pension obligations exist at the Austrian group companies as well as with
EuroTec Technologische Entwicklungs- und Vertriebsgesellschaft m.b.H for the
members of the Management Board and additional persons based on individual
contracts. Such contracts constitute an unfunded defined benefit plan.
The parameters used for the calculation in accordance with the Projected Unit
Credit Method were as follows:
F-25
AVO 1999 von Pagler & Pagler
Biometrical actuarial assumptions "Angestellten-Generationen"
- --------------------------------- ----------------------------
Assumed rate of interest 5.5% p.a.
Rate of compensation increase 3.5% p.a.
Rate of pension increase 1.5% p.a.
According to the contractual agreements, compensation and pensions increases are
only applicable to the members of the Management Board.
Provisions for severance payments
Austrian employment regulations provide obligatory termination indemnities to
laid-off or retired employees. The amount payable is dependent on the duration
of the employment and the monthly remuneration at the end of the employment.
The parameters used for the calculation in accordance with the Projected Unit
Credit Method were as follows:
AVO 1999 von Pagler & Pagler
Biometrical actuarial assumptions "Angestellten-Generationen"
- --------------------------------- ----------------------------
Assumed rate of interest 5.5 p.a.
Rate of compensation increase 3.5 p.a.
Retirement age 62 years*
* The increase of the retirement age for early retirement for entitled
females as of 2019 has been considered.
F-26
The movement of the provision for pensions and severance payments for the
reporting period is as follows:
in TEUR 2003/04 2002/03
- ----------------------------------------------- ------- -------
Present value of severance and pension payments
as of April 1 4,222 3,932
Service costs 498 709
Interest costs 210 217
Less severance and pension payments made - 776 - 636
------- -------
Recorded provision as of March 31 4,154 4,222
======= =======
Interest and service costs are reported as a part of pensions cost of the
relevant cost center.
(17) Liabilities to banks (non-current)
Long term financial liabilities consist of bank loans amounting to TEUR 6,600
(prior year JPY-loan TEUR 6,749) and are measured at their fair value. Exchange
gains which amounted to TEUR 122 (prior year TEUR 189) were reported in the
income statement. Accumulated gains at the balance sheet date amount to TEUR 873
(prior year TEUR 751). The interest charge is 2.375% (prior year 1.0 %).
Further, there is a ERP-investment-loan, KZE-Nr: 6902.0153/01 dated 12 April
2002, which was obtained in course of the ERP-internationalisation program
amounting to TEUR 934 (loan facility). The loan will be reduced by TEUR 334 in
the forthcoming business year as actual investments are below expectations. The
loan which is to support the investments of Datacon Hungary Termelo Kft matures
in 2008', interest rate is fixed at 1.5% up to 31 December 2003 and at 2.45%
thereafter.
For the expansion of the "Die-Bonder" production, the set-up of a competence
center, the extension of the R&D department and the implementation of new
technologies ("Flip Chip") another ERP-investment-loan (KZE-Nr.1002.0122/01)
was granted on 16 July 2001 amounting to TEUR 1,200 (loan facility). The term of
the loan is up to 2009, interest rates are fixed at 1.5% till 31 December 2004
and at 2.95% for the subsequent periods. In the fiscal year 2004/05 TEUR 100
(prior year TEUR 100) of the principle amount are due for repayment.
due due
within after
in TEUR total amount 1 - 5 years 5 years
- ---------------------------------------- ------------ ----------- -------
ERP-investment-loan KZE-Nr. 1002.0122/01 900 800 100
prior year 1,100 800 300
ERP-investment loan KZE-Nr. 6902.0153/01 817 817 0
prior year 934 817 117
Euro-loans 4,856 3,885 971
prior year 0 0 0
Yen-loans 0 0 0
prior year 6,749 2,463 4,286
----- ----- -----
Total 6,573 5,502 1,071
prior year 8,783 4,080 4,703
(18) Other non-current liabilities
Other non-current liabilities refer to liabilities against the Support-fund for
trade and industry (Forderungsfonds der gewerblichen Wirtschaft).
The interest rate for subsidised loans amounts between 2% and 3%.
(19) Deferred tax liabilities
F-27
The deferred taxes liabilities are accounted for tax-deductable general
provisions at EuroTec Technologische Entwicklungs- und Vertriebsgesellschaft
m.b.H. and Datacon Asia Ltd., which are not to be recognized in the consolidated
financial statements.
CURRENT LIABILITIES
( 20 ) Liabilities to banks (current)
Current liabilities to banks bear an interest rate of 3.75% and 4.0%.
( 21 ) Other current payables
Other current payables include payables amounting to TEUR 289 (prior year TEUR
637) resulting from a sale and leaseback agreement with a remaining term of 5
months which were accordingly not discounted.
( 22 ) Other current provisions
The movement of other current provisions was as follows:
in TEUR 31/3/2003 used reversed provided 31/3/2004
- -------------------------- --------- ---- -------- -------- ---------
Guarantees 43 0 14 84 113
Consultancy fees 141 141 0 134 134
Extra-remuneration 502 502 0 474 474
Forward exchange contracts 0 0 0 361 361
Others 175 175 0 470 470
--- --- -- ----- -----
Total 861 818 14 1,523 1,552
=== === == ===== =====
IV. NOTES TO THE CONSOLIDATED CASH-FLOW STATEMENT
The cash-flow statement of DATACON-Group provides information on the changes in
cash and cash equivalents of DATACON-Group during the fiscal year due to cash
inflows and outflows.
The cash-flow statement differs between cash-flows resulting from operating
activities, investing activities and financing activities.
Cash-flow resulting from operating activities is derived using the indirect
method. Under this method the income before tax is adjusted for the effects of
non-cash expenses and income. Such amount plus the changes in net-working
capital (excluding cash and cash equivalents) reveal the cash-flow from
operating activities. The cash-flows from investing activities and from
financing activities are calculated according to IAS 7 using the direct
approach.
Cash outflows from interest payments are reported under cash-outflows resulting
from operating activities whereas cash inflows from interest payments received
are reported under investing activities. Normally all interest expenses and
income (with exception of interest components concerning provisions for pensions
and severance payments) are effected in cash.
( 23 ) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand as well as deposits
with banks only.
( 24 ) Disbursements for the acquisition of property, plant and equipment
In the reporting period property, plant and equipment amounting to TEUR 864
(prior year TEUR 2,445) were acquired, thereof TEUR 864 (prior year TEUR 1,709)
where paid in cash.
F-28
V. FINANCIAL RISK MANAGEMENT (GROUP TREASURY)
Financial Instruments
Financial instruments are transactions based on contractual agreements that give
rise to the right to receive cash and cash equivalents. According to IAS 32 and
IAS 39 financial instruments comprise primary financial instruments such as
trade accounts receivable and payable and also other financial assets or
liabilities. The definition also comprises derivative financial instruments,
which are financial instruments whose value changes in respond to a specified
interest rate or price, that requires no or only little initial net investment
and that are settled at a future date. Derivate financial instruments are
primarily used for transactions to hedge the risk exposures resulting from
changes of foreign currency exchange rates and interest rates.
Derivative financial instruments
The DATACON group sells machinery to a certain extent in Asia and America. Such
transactions are almost completely performed in USD. The production units,
however, are located in Austria, Germany and Hungary. This means that production
cost are incurred nearly exclusively in Euro or HUF.
In order to hedge the immanent USD/EUR currency risk of DATACON Group, Datacon
Semiconductor Equipment GmbH has concluded several hedging transactions. Those
transactions comprise forward transactions, options as well as a macro-hedge.
The latter was performed by swithching a JPY - loan to a USD - loan. While the
business operations are harmed by the dollar weakness, the dollar-loan has
provided an appropriate compensation.
When entering into an option contract the DATACON group focuses on a cost
neutral position policy. Call options bought are opposed by put options sold
with knock in levels. Knock in levels are thereby agreed in such a way that
forward transactions are concluded at the same level when the knock-in level is
achieved.
USD 19 mio have been hedged with the instruments selected. This accounts for
approximately 50% of expected sales in USD in the financial period 2004/05
Primary financial instruments
Primary financial instruments existing in the group, which are exposed to a
credit risk are: receivables, cash at bank and in hand, financial assets and
other marketable securities.
Interest rate risk
For financial assets the risk of changes in market interest rates exits with
fixed interest rate securities. Since the securities could be sold easily the
risk of interest rate changes is considered to be not material.
On the liability side the interest rate risk relates to bank-liabilities. Due to
the current market interest rates and the expectations about the future
development of market interest rates no hedge transactions have been entered
into as at the balance sheet date.
The carrying amount of the bank liabilities as of 31 March 2004 mainly
corresponds with the fair value based on present interest rates.
Currency risk
Approximately 40% of total sales are billed in USD. Therefore sales may
fluctuate due to changes in foreign currency exchange rates.
According to our selected approach with respect to option contracts
approximately 50% of expected USD sales are hedged. However, only 1/3 of our
hedge requirement is covered. This is due to the inhomogenous market
expectations of the further development of the USD/Euro exchange rate.
F-29
Fair value
The carrying amount of cash at bank and in hands, bank deposits, receivables and
other assets and trade accounts payable as well as other current liabilities and
provisions are considered as appropriate estimations of their fair value due to
their short term nature.
Acquisition cost and the fair market value of the marketable securities included
in current and non-current assets as at 31 March 2004 are set out below:
Gains/
in TEUR Acquisition cost Fair value Losses
- ---------------- ---------------- ---------- ------
Financial assets 1,381 1,208 -173
Prior year 1,392 1,142 -250
VI. OTHER DISCLOSURES
Number of personnel
The DATACON Group - employed:
On average
in the reporting period
2003/04 2002/03
Employees: 384 437
Thereof blue collar workers: 42 8
Thereof white collar workers: 342 429
Apprentices 11 10
The calculation was based on full-time employments.
Related party transactions:
Buildings on land not owned by the DATACON Group are located on land which is
owned by the Schweitzer + Zeindl Vermogensverwaltungs OEG, which is a related
party.
Related rental expenses for the Group amount to TEUR 152 (prior year TEUR 140).
The corresponding amounts of the open items are as follows:
Business year 2003/04 Business year 2002/03
TEUR receivables liabilities receivables liabilities
- -------------------------- ----------- ----------- ----------- -----------
loan - Schweitzer + Zeindl 353 0 400 0
Vermogensverwaltungs OEG
Furthermore interest income related to the loan of TEUR 353 (prior year 400)
granted to Schweitzer + Zeindl Vermogensverwaltungs OEG amounted to TEUR 10
(prior year TEUR 12).
All transactions with related parties were effected at arm's length principle.
Other financial obligations:
The following obligations related to long term rental contracts and operating
lease contracts exist in connection with land and cars:
in TEUR 31 March 2004 31 March 2003
- ------------------------------------------- ------------- -------------
Minimum amount of rental and lease payments
due within:
F-30
up to 1 year 572 1,048
more than 1 year but less than 5 years 2,439 2,853
more than 5 years 4,926 2,502
Rental expenses for the business year 2003/04 amounted to TEUR 508 (prior year
TEUR 708).
Disclosures concerning the Boards and Group management:
Compensation for the members of the Managing Board and Managing Directors
amounted to TEUR 1,168 (prior year TEUR 1,301). Remuneration for the Supervisory
Board amounted to TEUR 32 (prior year TEUR 26).
Expenses for severance payments:
in TEUR 2003/04 2002/03
- -------------------------------------------- ------- -------
for members of the Managing Board,
managing directors and managerial employees 49 118
for other employees 385 212
--- ---
Total 434 330
=== ===
F-31
Expenses for pensions
in TEUR 2003/04 2002/03
- ------- ------- -------
for members of the Managing Board,
managing directors and managerial employees - 216 - 250
for other employees 13 282
------- ------
Total - 203 32
======= ======
The members of the Managing Board during the business year 2003/04 were:
Mr. Ing. Karl Schweitzer
Mr. Ing. Gerhard Zeindl
Mr. Helmut Rutterschmidt
The members of the Supervisory Board during the business year 2003/04 were:
Mr. Herbert Schrettl (chairman)
Mr. GenDir. DI Dr. Heinrich Scherfler (vice-chairman)
Mr. Dr. Stefan Geiler
Mr. Manfred Uberreiter
Events subsequent to the balance sheet date:
No significant events occurred subsequent to the balance sheet date that are to
be reported according to IAS 10.
It is not intended to declare a dividend out of the profit for the financial
year 2003/04 of Datacon Technology AG.
Radfeld, 15 July 2004
The Managing Board:
Ing. Karl Schweitzer m.p. Ing. Gerhard Zeindl m.p. Helmut Rutterschmidt m.p.
F-32
DATACON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 MARCH 2003 PREPARED IN
ACCORDANCE WITH IAS
The DATACON - Group is an internationally operating group of companies in the
business of manufacturing high-precision machinery. Parent company is the
Datacon Technology AG with its seat in Radfeld/Tirol. The company is registered
in Austria in the Firmenbuch (company register) with the Landesgericht
(provincial court) Innsbruck under FN 51781z as Aktiengesellschaft (Joint stock
corporation).
The operations of the subsidiaries consist in the selling of high-quality
machines (Die Bonder) as well as the manufacturing of special equipment.
I. ACCOUNTING POLICIES
1. BASIS OF PREPARATION
The consolidated financial statements of Datacon - Group for the fiscal year
2002/03 (from 1 April 2002 to 31 March 2003) have been prepared in accordance
with International Accounting Standards (IAS) published by the International
Accounting Standards Committee (IASC) and adopted by the International
Accounting Standards Board (IASB).
In the preparation of the consolidated financial statements all IAS and
interpretations of the Standing Interpretation Committee (SIC) as adopted by the
International Financial Reporting Interpretations Committee (IFRIC) which are
mandatory to be applied for the fiscal year 2003/04 were considered.
This consolidated financial statements were prepared in accordance with the
"Konzernabschlussgesetz" (KonzAG) (Section 245a HGB) published in March 1999.
According to this law a parent company, which draws up consolidated financial
statements and a management report in accordance with internationally accepted
accounting principles, needs not to prepare financial statements on basis of the
national regulations of the Austrian Commercial Code. The financial statements
were drawn up in accordance with the 7th EU-Directive and have therefore be
considered as equivalent with consolidated financial statements according to the
regulations of the Austrian Commercial Code.
The entire reporting of the group for the fiscal year 2002/03 is presented in
thousand Euros (TEUR).
F-33
2. CONSOLIDATED GROUP
The determination of the consolidated group follows the principles of IAS 27
(Consolidated Financial Statements and Accounting for Investments in
Subsidiaries). Besides the parent company, the following companies are included
in the consolidated financial statements:
direct
Corporate name Corporate seat Country share %
- -------------- -------------- ------- -------
Datacon Semiconductor Equipment GmbH, (DC SE) Radfeld Austria 100
Datacon Asia Ltd., (DC Asia) Hong Kong People's Republic 100
of China
Datacon Asia Pacific Pte. Ltd., (DC AP) Singapore Singapore 100
Datacon Korea Ltd., (DC KO) Seoul Korea 100
Datacon Hungary Termelo Kft., (DC HU) Gyor Hungary 100
Datacon North America Inc., (DC NA) Wilmington/Delaware USA 100
EuroTec Technologische Entwicklungs-und
Vertriebsgesellschaft m.b.H. (EuroTec) Berlin Germany 75
The shares in Datacon Asia Ltd. and Datacon Hungary Termelo Kft. were reported
with 100% because the minority shareholder abandons his profit share and his
interest in net assets is immaterial.
CHANGES IN THE GROUP OF CONSOLIDATED COMPANIES
The number of fully consolidated companies has increased by two due to
acquisitions during the fiscal year.
Datacon Asia Pacific Pte. Ltd. founded during the current fiscal year and the
operational business of Datacon Asia Ltd. (Singapore branch) was merged into
this unit. The company was established with a capital stock of 100,000 SGD.
Datacon Korea Ltd. was also founded in the current business year. This company
was provided with a share capital of 50,000,000 KRW.
The balance sheet date of the consolidated financial statements is equivalent to
the balance sheet date of the ultimate parent company, as in accordance with IAS
27
3. SIGNIFICANT DIFFERENCES BETWEEN IAS AND THE AUSTRIAN ACCOUNTING REQUIREMENTS
Intentionally eliminated for purposes of the Euronext listing prospectus
4. ACCOUNTING AND VALUATION PRINCIPLES
The consolidated financial statements of Datacon - group and subsidiaries are
presented in thousand Euros (TEUR). The balance sheet date of all consolidated
companies is 31 March.
The financial statements of all included companies are drawn up on the basis of
uniform group accounting and valuation principles.
There were no changes of accounting and valuation principles in the reporting
period.
INTANGIBLE ASSETS are valued at acquisition costs and are amortized by applying
the straight-line method over their useful life of two to five years.
GOODWILL resulting from acquisitions (if the fair value of identifiable assets
and liabilities is below the purchase price of the acquired unit) is generally
capitalized and subsequently amortized. Generally the amortization is performed
on a straight line basis over a period of 20 years.
F-34
PROPERTY, PLANT AND EQUIPMENT - In accordance with IAS 16 property, plant and
equipment is valued at acquisition or production costs. Depreciation is
generally calculated straight-line over the estimated useful life.
Interest expense related to property, plant and equipment requiring a longer
period to be acquired or produced is not capitalized.
Straight-line depreciation for property, plant and equipment is based on the
following useful life:
Buildings 8 to 28 years
Machinery and equipment 4 to 10 years
Other equipment, furniture and fixtures 3 to 10 years
Substantial decreases in value which exceed the extent of the scheduled
depreciation are considered in line with IAS 36 "Impairment of assets" by
accounting for an asset impairment, if any. In the reporting period there were
no such asset impairments.
Subsequent expenses are capitalized if it is probable that they contribute
future economic benefit, in excess to the performance of the existing asset.
Leased assets, which are acquired under a finance lease agreement and transfer
the risks and opportunities incidental to ownership of the leased item to the
lessee are capitalized in accordance with IAS 17 at the fair value of the leased
property or, if lower, at the present value of the minimum lease payments.
Depreciation is performed over the useful life. Payment obligations resulting
from future lease payments are recognized as liability.
Assets obtained under all other lease and rent contracts are classified as
operating lease and are assigned to the lessor or renter. Lease and rent
payments are expensed.
Small value items with acquisition cost below EUR 400 are fully expensed in the
acquisition period.
According to IAS 23 interest costs are recognised as expenses in the period in
which they are incurred.
According to IAS 38 (Intangible Assets) research costs must not be capitalized
and are expensed in the period incurred.
Development costs are normally also expensed when incurred. To capitalize such
expenses it has to be reasonably probable that the development activities are
generating future cash inflows, which not only cover the normal costs, but also
cover the corresponding development costs. Furthermore there are several
criteria as stated in IAS 38 to be fulfilled cumulatively for such development
projects. Such criteria where neither met this year nor last year, thus no
development costs were capitalized.
FINANCIAL INSTRUMENTS - Financial instruments are recognised at the settlement
date in accordance with IAS 39. Financial assets comprise investment funds
certificates which are used to cover personnel related provisions. These
certificates are classified as available-for-sale and are measured in accordance
with IAS 39 at their fair value without deduction of transaction costs. The fair
value matches the market price at the balance sheet date.
Financial assets disclosed under current assets are measured in accordance with
IAS 39 at the fair market price at the balance sheet date. Changes in value are
reported in the profit and loss account.
INVENTORIES - Raw materials and other supplies are valued at the lower of
acquisition costs and net realisable value. Cost of inventory is calculated by
using the weighted average cost method.
Work in progress and finished goods are valued at the lower of cost of
production and net realisable value. The production costs include all costs
directly related to the item and indirect cost which are allocated through an
overall costing rate. Cost of inventory is assigned by using the identified cost
of the individual item. Risks resulting from the storage period or reduced
usability are taken into account through an appropriate allowance.
F-35
The POC method according to IAS 11 is only applied to a few client specific
construction-contracts. Contracts valued at percentage-of completion are
disclosed as trade accounts receivable. The percentage of completion and the
percentage of the contract profit realised at the balance sheet date are
determined by the cost to cost method.
RECEIVABLES - In accordance with IAS 39 receivables are initially measured at
the fair value of the consideration given. Other assets are measured at
acquisition cost. Identifiable risks result in appropriate valuation
adjustments.
The entity classifies cash at bank and in hand, bank deposits and investments
with a maturity at the acquisition date of 90 days at maximum as cash and cash
equivalents. These items are measured at their fair value (mark to market) at
the balance sheet date. There were no restraints on disposal of such items at
the balance sheet date.
GOVERNMENT GRANTS are related to investments in buildings on land not owned by
the Datacon Group and to the accounting software of the Datacon Semiconductor
Equipment GmbH. As set out in IAS 20 Government grants are set up as deferred
income and recognised as income over the useful life of the corresponding asset.
PROVISIONS FOR EMPLOYEE BENEFITS are calculated by using the Projected Unit
Credit Method as set out in IAS 19, whereby the corridor method is not applied.
The interest rate was assumed at 5.5%. For the severance payment obligations a
salary increase rate of 3.5% was assumed. For contractually granted pensions to
the members of the Board of Directors the contractual 1.5% increase was taken
into account, for pension agreements with other employees no increases are
foreseen in the contract.
PROVISIONS - Other provisions were recognised in accordance with IAS 37 when the
enterprise has a present obligation as a result of a past event. In the case of
an uncertainty whether or not an obligation is currently existing, a provision
was only recognised when it was more likely than not (>50%) at the balance sheet
date that an obligation exists. Long term provisions were discounted when the
interest component was material.
LIABILITIES - Liabilities are initially measured at the fair value of the
consideration received. At the balance sheet date financial liabilities were
measured at amortized cost. Liabilities resulting from finance lease agreements
were measured at the present value of the minimum lease payments as set out in
IAS 17 (Leases).
REVENUE RECOGNITION - Revenue is recognised when the risks are transferred (at
the time the significant risks and rewards of ownership have passed)
respectively when services are rendered. Interest income is recognised on a time
proportion basis, taking into account the effective yield of the asset,
royalties and rental revenue are also recognised on a time proportion basis.
For a few client specific contracts revenues are recognized in accordance with
IAS 11 thus providing for the partial recognition of contract gains.
During the business year a sale and lease back contract has been exercised for
two machines. The revenue from these sales is allocated over the term of the
leasing contract. Financial obligations resulting from these transactions amount
to TEUR 637 (prior year TEUR 0).
INCOME TAXES - The provision for current taxes include all tax obligations
existing at the balance sheet date. In addition a deferred tax liability was
recognised by using the balance sheet liability method as set out in IAS 12. All
temporary differences between the tax basis of assets and liabilities and their
carrying amount in the IAS accounts as well as differences resulting from the
consolidation processes are included in the deferred tax liability applying the
enacted tax rate.
Furthermore a deferred tax asset is recognised for all tax loss carry forwards,
to the extent it is probable that they can be utilised.
The tax rate for the calculation of deferred taxes of local enterprises is 34%.
Foreign group companies apply the respective local tax rates.
EARNINGS PER SHARE - Earnings per share were calculated by dividing the group
profit for the period by the number of shares issued. Datacon Technology was
transformed from a private to a public limited company only during the period
2001/02.
F-36
There are 10,000 shares with a nominal value of 100 EUR each share. With
reference to the pre-tax income of TEUR - 3,483.8 negative earnings per share
result at the amount of - 348.4 EUR/share (prior year 426 EUR/share). Based on
the profit for the period (after taxes and minority interests) of TEUR - 2,952
earnings per share amount to - 293.8 EUR/share (prior year 121 EUR/share)
FOREIGN CURRENCY TRANSLATION - Financial statements of fully consolidated
foreign subsidiaries are converted according to IAS 21 following the concept of
the functional currency. For all companies the functional currency is the
respective local currency, as the subsidiaries operate independently from a
financial, economical and organizational point of view.
The balance sheet items are converted with the average foreign exchange rate as
of the balance sheet date, with exception of shareholder's equity which is
converted at historical rate. The income statement is converted with the annual
average rate.
Differences resulting from the currency translation of balance sheet items of
one year and the translation of prior years' balances as well as differences
between the balance sheet and the income statement do not affect net income as
they are taken directly to equity.
Differences arising from the roll-forward of the shareholder's equity in
comparison with the first time consolidation are set off against reserves
without affecting net income.
Differences due to the translation of monetary foreign currency positions in the
individual financial statements resulting from exchange rate fluctuations
between the recording of the transaction and the balance sheet date are taken to
the income statement.
The exchange rates of significant foreign currencies have changed as follows:
Average rate on balance sheet date Annual average rate
Currency 31 March 2003 31 March 2002 31 March 2003 31 March 2002
1 USD 1.0907 0.8729 0.9767 0.8845
1 HUF 246.35 243.635 244.5233 251.3502
100 JPY 129.37 115.9 not relevant 110.4146
1 HKD 8.4935 6.7995 7.6158 6.8758
1 SGD 1.9195 not relevant 1.7312 not relevant
1 KRW 1366.26 not relevant 1196.17 not relevant
Goodwill arising on the acquisition of a foreign entity is recorded at the
exchange rate at the date of the initial consolidation.
HEDGING TRANSACTIONS / DERIVATIVE FINANCIAL INSTRUMENTS - In order to hedge the
market risk for existing assets and liabilities as well as for deferred income
and accrued expenses Datacon is using future contracts and swap transactions.
The hedging transactions and the derivative financial instruments are measured
in accordance with IAS 39 at fair market value. However, as of 31 March 2003
such financial instruments do not exist.
CONSOLIDATION PRINCIPLES - Capital consolidation is performed according to the
benchmark-approach by offsetting the acquisition cost of the investment with the
fair value of identifiable assets and liabilities assumed at the date of
acquisition / date of foundation.
When offsetting intra-group receivables and payables for the consolidated
financial statements, receivables from trade, loans and other receivables are
matched with the corresponding payables and provisions of the consolidated group
companies.
F-37
Revenues, expenses, gains and losses resulting from intra-group transactions
have been set-off in course of the consolidation process.
Profits and losses from fixed asset transfers within the group are, if material
eliminated affecting net income. Also material intra-group profits in
group-inventories are eliminated.
Positive or negative differences resulting from initial consolidation are
disclosed as goodwill or badwill and are amortized / dissolved regularly over
the useful economic life. In addition the net book value of goodwill is reviewed
for impairment every year at the balance sheet date. Reductions of future
benefit are recorded as impairment.
ESTIMATES AND ASSUMPTIONS - The preparation of consolidated financial statements
requires estimates and assumptions affecting the reported amounts of assets,
provisions, liabilities and other contingencies as of the balance sheet date as
well as the disclosure of earnings and expenses during the period under review.
Actual future amounts can differ from those estimates.
NON-CURRENT AND CURRENT ASSETS AND LIABILITIES - Assets and liabilities with a
remaining life up to one year are considered as current, whereas those with a
maturity exceeding one year are classified as long-term. The determination of
the maturity is effected at the respective balance sheet date.
II. NOTES TO THE CONSOLIDATED INCOME STATEMENT
OPERATING RESULT
(1) Sales
in TEUR 2002/03 2001/02
- ----------------- ------- -------
Contract revenues 631 555
Other revenues 40,928 61,109
------ ------
TOTAL 41,559 61,664
====== ======
Contract revenues recognized result from contracts valued according to IAS 11.
(2) Other operating income
in TEUR 2002/03 2001/02
- -------------------------------------- ------- -------
Income from the reversal of provisions 1,749 386
Subsidies and grants 294 459
Income from the reversal of allowances 1,883 -
Other 1,036 2,270
----- -----
TOTAL 4,962 3,115
===== =====
The income resulting from the reversal of provisions results from the adjustment
of the basis of calculation for provisions for pensions which was exercised in
the business year 2002/03 because of changes in the underlying contracts.
The income from the reversal of allowances resulted in connection with the
termination of a strategic trade partnership.
F-38
(3) Amortization of goodwill
The item "amortization of goodwill" (TEUR 1,260, prior year TEUR 849) does not
include any impairment expenses.
(4) Financial result
Interest income
in TEUR 2002/03 2001/02
- -------------------------------------- ------- -------
Interest income and similar income 2,118 446
Interest expenses and similar expenses - 1,003 - 1,415
------- -------
TOTAL 1,115 - 969
======= =======
Other financial income
in TEUR 2002/03 2001/02
- --------------------------------------------------- ------- -------
Exchange gains 821 1,227
Exchange losses - 1,470 - 188
Income from investments in securities 56 60
Expenses related of financial assets and securities - 1,369 -
------- -------
TOTAL - 1,962 1,099
======= =======
(5) Taxes on income
Taxes on income are composed as follows:
in TEUR 2002/03 2001/02
- --------------------------------- ------- -------
Tax expenses for the current year 27 3,788
Deferred tax expenses / benefit - 557 - 1,850
----- -------
TOTAL - 530 1,938
===== =======
F-39
A reconciliation of the tax burden using the Austrian corporate tax rate of 34%
to the effective tax rate is as follows:
in TEUR 2002/03 2001/02
- -------------------------------------------------- ------- -------
Income before tax - 3,484 4,257
Taxes on income calculated at the tax rate of 34 % - 1,184 1,447
Foreign tax charges 556 - 328
Non-temporary differences
Amortization of goodwill 428 289
Tax exemptions - 118 - 136
Adjustment for prior year taxes - - 168
Other permanent differences 847 834
------- -----
Actual tax expenses / benefit 529 1,938
======= =====
Effective tax rate 15.2% 45.5%
======= =====
OTHER EXPLANATORY NOTES TO THE INCOME STATEMENT
The income statement of the DATACON - Group is drawn up using the function of
expense (cost of sales) method. When using the nature of expense method the
following personnel expenses and cost of materials would be reported.
Personnel expenses
in TEUR 2002/03 2001/02
- -------------------------------------------- ------- -------
Wages 308 1.232
Salaries 15,665 11,742
Expenses for social security and
payroll related taxes and contributions 3,908 3,430
Expenses for pensions and severance payments 362 1,520
Other expenses for employee benefits 474 403
------- ------
Total 20,717 18,327
======= ======
Cost of material and purchase services
in TEUR 2002/03 2001/02
- -------------------------- -------- -------
Cost of material 18,139 19,653
Cost of purchased services 737 887
------ ------
Total 18,876 20,540
====== ======
Amortization and depreciation of intangible assets and property, plant and
equipment
Amortization of intangible fixed assets amounts to TEUR 332 (prior year TEUR
726), depreciation of property, plant and equipment amounts to TEUR 1,626 (prior
year TEUR 1,416) and is allocated to the corresponding functions disclosed in
the income statement by using internal cost rates.
F-40
III. NOTES TO THE CONSOLIDATED BALANCE SHEET
ASSETS
NON-CURRENT ASSETS
( 6 ) Goodwill
Goodwill is amortized over an expected the useful life time of 20 years. Total
amortization expense is disclosed as a separate item in the income statement.
The recoverability of the goodwill amount for EuroTec Technologische
Entwicklungs- und Vertriebsgesellschaft m.b.H. has been verified in the prior
year on the basis of an internal business appraisal which was updated at the
current year end. The valuation was made using the earnings method. Thus the
company value corresponds to the present value of future net income, which is
defined as the surplus of earnings and expenses. The future results were
discounted to the date of valuation, which is 31 March 2003, using a
risk-adapted capitalization-rate. As it is common practice for business
appraisals, a two-phase model was applied, whereby phase I corresponds with the
planning horizon of the company (from the year 2003 up to the year 2005), phase
II is defined as a stable phase represented as a perpetual annuity. The present
values of the net income in the two phases amount to EUR 4.1 mio for phase I and
EUR 21.8 mio for phase II (income before tax EUR 3.85 mio) apllying a discount
rate of 8.5% for phase I and 9.0% for phase II. The net book value of the
goodwill is lower than the value as of 31 March 2003 when calculated as
described. Therefore no additional impairment according to IAS 36 is necessary.
( 7 ) Intangible assets
The development of intangible assets is presented in detail on fixed-assets
movement schedule which is an integrated part of the financial statements. The
adjustment for currency translation relating to foreign group companies which
results from the translation of assets with different exchange rates at the
beginning of the year and at year-end, is also disclosed separately therein.
( 8 ) Property, plant and equipment
The development of Property, plant and equipment is presented in detail on the
fixed-assets movement schedule as part of the consolidated financial statements.
The adjustment for currency translation relating to foreign group companies
which results from the translation of assets with different exchange rates at
the beginning of the year and at year-end, is also disclosed separately therein.
Included in property, plant and equipment are leased assets, which are
economically assigned to Datacon-Group because of the terms of the
lease-agreements. Two machines acquired through a sale and lease back agreement
are capitalized, the net book value as at the balance sheet date amounts to TEUR
637. The machines are depreciated over the term of the lease agreement to the
agreed residual values.
( 9 ) Financial assets
The item "financial assets" consists of various investment funds certificates
(TEUR 1,142, prior year TEUR 1,284) and the coverage amounts of insurances for
pension obligations amounting to TEUR 1,861 (prior year TEUR 1,373). The stated
certificates are available for sale according to IAS 39 and are reported at fair
value which corresponds with the market value of the shares on the balance sheet
date. The reduction of the fair value amounts to TEUR 136 in fiscal year 2002/03
(prior year TEUR 114). The accumulated reduction of the fair value amounts to
TEUR 250 in 2002/03 (prior year TEUR 114).
( 10 ) Other receivables (non-current) and other assets
Non-current receivables amounting concern receivables with a maturity from 1 to
5 years from "Schweitzer + Zeindl Vermogensverwaltungs OEG" (a related party).
These receivables are categorized according to IAS 39 as originated by the
company.
F-41
( 11 ) Deferred tax assets
The deferred tax assets refer to assets with a tax base higher than the amounts
reported in the consolidated financial statements or liabilities with a tax base
lower than the amount reported in the consolidated financial statements.
Significant amounts included concern the tax loss carry-forwards (TEUR 829),
provisions for pensions and severance payments (TEUR 328; prior year TEUR 523),
leasing contracts (TEUR 60), valuation of liabilities (TEUR -143) as well as
valuation adjustments because of the percentage of completion method (TEUR
- -134). The amounts disclosed in the prior year financial statements concerned
the provisions for pensions and severance payments of Datacon Technology AG with
an amount of TEUR 523.
CURRENT ASSETS
( 12 ) Inventories
Inventories are classified in detail as follows:
in TEUR 2002/03 2001/02
- -------------------------- ------- -------
Raw materials and supplies 10,364 9,665
Work in progress 5,784 5,159
Finished goods 6,173 6,198
On-account payments made 283 554
------- -------
TOTAL 22,604 21,576
======= =======
Provisions amounting to TEUR 455 (p/y TEUR 441) were deducted from inventories.
Thereof TEUR 215 concern raw materials and supplies and TEUR 240 finished goods.
( 13 ) Trade accounts receivable
Trade accounts receivable include allowances for bad debt amounting to TEUR 127
(prior year TEUR 1,623). Furthermore this item contract receivables amounting to
TEUR 630 (prior year TEUR 875) for which profits were partially realised in
accordance with IAS 11. The unrealized profit from these orders amounts to TEUR
394 (prior year TEUR 555).
F-42
LIABILITIES AND SHAREOLDER'S EQUITY
( 14 ) Shareholder's Equity
The composition of and changes in shareholder's equity is disclosed in a
separate statement (Consolidated Statement of Changes in Shareholders' Equity).
Common Stock
The common stock consists of 10,000 bearer shares with a nominal value of EUR
100 each.
( 15 ) Minority interest
Minority interest has changed as follows:
in TEUR 2002/03 2001/02
- --------------------------------------------------------------- ------- -------
Minority interest as of 1 April 747 5,291
Adjustment for prior periods - - 1,417
Dividend distribution to minority shareholders - - 3,606
Minority interest in result of the year - 16 1,113
Increase of group share due to acquisition of minority interest - - 634
------- -------
Minority interest as of 31 March 731 747
======= =======
Last year's prior period adjustment resulted from a recalculation of goodwill
and the minority share in EuroTec based upon the estimation adjustment of the
consideration due to former shareholders.
NON-CURRENT LIABILITIES
( 16 ) Provisions for pensions and severance payments
Provisions for pensions
Direct pension obligations exist at the Austrian group companies as well as with
EuroTec Technologische Entwicklungs- und Vertriebsgesellschaft m.b.H for the
members of the Management Board and additional persons based on individual
contracts.
The parameters used for the calculation in accordance with the Projected Unit
Credit Method were as follows:
AVO 1999 von Pagler & Pagler
Biometrical actuarial assumptions "Angestellten-Generationen"
- --------------------------------- ----------------------------
Assumed rate of interest 5.5% pa
Rate of compensation increase 3.5% pa
Rate of pension increase 1.5% pa
According to the contractual agreements, compensation and pensions increases are
only applicable to the members of the Management Board.
Provisions for severance payments
Austrian employment regulations provide obligatory termination indemnities to
laid-off or retired employees. The amount payable is dependent on the duration
of the employment and the monthly remuneration at the end of the employment.
F-43
The parameters used for the calculation in accordance with the Projected Unit
Credit Method were as follows:
AVO 1999 von Pagler & Pagler
Biometrical actuarial assumptions "Angestellten-Generationen"
- --------------------------------- ----------------------------
Assumed rate of interest 5.5% p.a.
Rate of compensation increase 3.5% p.a.
Retirement age 62 years*
- ----------
* The increase of the retirement age for early retirement for entitled
females as of 2019 has been considered.
The movement of the provision for pensions and severance payments for the
reporting period is as follows:
in TEUR 2002/03 2001/02
- ------------------------------------------------------------- ------- -------
Present value of severance and pension payments as of April 1 3,932 3,952
Service costs 709 1,520
Interest costs 217 217
Less severance and pension payments made - 636 - 705
------- -------
Recorded provision as of 31 March 4,222 4,984
======= =======
Interest and service costs are reported as a part of pensions cost of the
relevant cost center.
( 17 ) Liabilities to banks (non-current)
Long term financial liabilities consist of bank loans denominated in Yea and
amounting to TEUR 6,749 (prior year TEUR 0) and are measured at their fair
value. Exchange gains which amounted to TEUR 189 (prior year TEUR 562) were
reported in the income statement. Accumulated gains at the balance sheet date
amount to TEUR 751 (prior year TEUR 562). The interest charge is 1.0% (prior
year 0.875%).
Further, there is a ERP-investment-loan, KZE-Nr: 6902.0153/01 dated 12 April
2002, which was obtained in course of the ERP-internationalisation program
amounting to TEUR 934 (loan facility). The loan which is to support the
investments of Datacon Hungary Termelo Kft matures in 2008', interest rate
is fixed at 1.5% up to 31 December 2003 and at 2.45% thereafter.
For the expansion of the "Die-Bonder" production, the set-up of a competence
center, the extension of the R&D department and the implementation of new
technologies ("Flip Chip") another ERP - investment-loan (KZE-Nr.1002.0122/01)
was granted on 16 July 2001 amounting to TEUR 1.200 (loan facility). The term of
the loan is up to 2009, interest rates are fixed at 1.5% till 31 December 2004
and at 2.95% for the subsequent periods. In the fiscal year 2003/04 TEUR 100
(prior year TEUR 0) of the principle amount are due for repayment.
F-44
due due
within after
in TEUR total amount 1 - 5 year 5 years
- ---------------------------------------- ------------ ---------- -------
ERP-investment-loan KZE-Nr. 1002.0122/01 1,100 800 300
prior year 1,200 800 400
ERP-investment loan KZE-Nr. 6902.0153/01 934 817 117
prior year - - -
Yen-loans 6,749 3,214 3,535
prior year - - -
------------ ---------- -------
Total 8,783 4,831 3,952
prior year 1,200 800 400
( 18 ) Other non-current liabilities
Other non-current liabilities refer to liabilities against the Support-fund of
the country of Tyrol (Forderungsfonds des Landes Tirol).
The interest rate for subsidised loans amounts between 2% and 3%.
( 19 ) Deferred tax liabilities
The deferred taxes liabilities are accounted for tax-deductable general
provisions at EuroTec Technologische Entwicklungs- und Vertriebsgesellschaft
m.b.H. and Datacon Asia Ltd., which are not to be recognized in the consolidated
financial statements.
CURRENT LIABILITIES
( 20 ) Liabilities to banks (current)
Current liabilites to banks bear an interest rate of 3.75% and 4.0%.
( 21 ) Other current payables
Other current payables include payables amounting to TEUR 637 resulting from a
sale and leaseback agreement with a remaining term of 17 respectively 9 months
which were not discounted because of the short-term nature.
( 22 ) Other current provisions
The movement of other current provisions was as follows:
in TEUR 31 March 2002 used reverse provided 31 March 2003
- ------------------ ------------- ---- ------- -------- -------------
Guarantees 137 - 94 - 43
Extra-remuneration 471 471 502 502
Others 206 206 - 316 316
------------- ---- ------- -------- -------------
Total 814 677 94 818 861
============= ==== ======= ======== =============
F-45
IV. NOTES TO THE CONSOLIDATED CASH-FLOW STATEMENT
The cash-flow statement of DATACON-Group provides information on the changes in
cash and cash equivalents of DATACON-Group during the fiscal year due to cash
inflows and outflows.
The cash-flow statement differs between cash-flows resulting from operating
activities, investing activities and financing activities.
Cash-flow resulting from operating activities is derived using the indirect
method. Under this method the income before tax is adjusted for the effects of
non-cash expenses and income. Such amount plus the changes in net-working
capital (excluding cash and cash equivalents) reveal the cash-flow from
operating activities. The cash-flows from investing activities and from
financing activities are calculated according to IAS 7 using the direct
approach.
Cash outflows from interest payments are reported under cash-outflows resulting
from operating activities whereas cash inflows from interest payments received
are reported under investing activities. Normally all interest expenses and
income (with exception of interest components concerning provisions for pensions
and severance payments) are effected in cash.
( 23 ) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand as well as deposits
with banks only.
( 24 ) Disbursements for the acquisition of property, plant and equipment
In the reporting period property, plant and equipment amounting to TEUR 2,445
(prior year TEUR 2,920) were acquired, thereof TEUR 1,709 (prior year TEUR
2,920) where paid in cash.
( 25 ) Disbursements for the acquisition of subsidiaries in prior years
The disbursements of TEUR 8,425 (prior year 7,670) refer to remaining payments
for the acquisition of the shares in EuroTec.
V. FINANCIAL RISK MANAGEMENT (GROUP TREASURY)
Financial Instruments
Financial instruments are transactions based on contractual agreements that give
rise to the right to receive cash and cash equivalents. According to IAS 32 and
IAS 39 financial instruments comprise primary financial instruments such as
trade accounts receivable and payable and also other financial assets or
liabilities. The definition also comprises derivative financial instruments,
which are financial instruments whose value changes in respond to a specified
interest rate or price, that requires no or only little initial net investment
and that are settled at a future date. Derivate financial instruments are
primarily used for transactions to hedge the risk exposures resulting from
changes of foreign currency exchange rates and interest rates.
Primary financial instruments
Primary financial instruments existing in the group, which are exposed to a
credit risk are: receivables, cash at bank and in hand, financial assets and
other marketable securities.
Derivative financial instruments
The Datacon Group receives for its sales in the United States and in Asia U.S.$
as invoicing currency. However there is only a small amount of costs in U.S.$.
For this reason, there is a steady cash surplus in U.S.$, which is to be hedged
with adequate financial instruments. Hedging with derivatives is only
reasonable, if there is a clear opinion in the market about future developments
of the currency (in this case U.S.$). However, the situation and development at
the beginning of 2003 was more than inhomogeneous. The strong rise of the Euro
was hardly fundamentally justified and the development in the immediate future
was completely unstable. Consequently, there were no
F-46
hedging instruments uses as at the balance sheet date. Should the market trend
become clearer, we will for sure use again derivative financial instruments in
order to hedge our currency risk.
Interest rate risk
For financial assets the risk of changes in market interest rates exits with
fixed interest rate securities. Since the securities could be sold easily the
risk of interest rate changes is considered to be not material.
On the liability side the interest rate risk relates to bank-liabilities. Due to
the current market interest rates and the expectations about the future
development of market interest rates no hedge transactions have been entered
into as at the balance sheet date.
The carrying amount of the bank liabilities as of 31 March 2003 mainly
corresponds with the fair value based on present interest rates.
Currency risk
There where no forward exchange contracts at the balance sheet date.
Approximately 20% of total sales are billed in USD. Therefore sales may
fluctuate due to changes in foreign currency exchange rates.
Fair value
The carrying amount of cash at bank and in hands, bank deposits, receivables and
other assets and trade accounts payable as well as other current liabilities and
provisions are considered as appropriate estimations of their fair value due to
their short term nature.
Acquisition cost and the fair market value of the marketable securities included
in current and non-current assets as at 31 March 2003 are set out below:
31 MARCH 2003 Acquisition Unrealized
in TEUR cost Fair value Gains/losses
- ---------------------------- ----------- ---------- ------------
Non-current financial assets
Investment fund certificates 1,392 1,142 - 250
CURRENT FINANCIAL ASSETS
Investment fund certificates
and securities 0 0 0
----------- ---------- ------------
TOTAL 1,392 1,142 - 250
=========== ========== ============
MARCH 31, 2002 Acquisition Unrealized
in TEUR cost Fair value gains/losses
- ---------------------------- ----------- ---------- ------------
Non-current financial assets
Investment fund certificates 1,398 1,284 - 114
CURRENT FINANCIAL ASSETS
Investment fund certificates
and securities 43 43 0
----------- ---------- ------------
TOTAL 1,441 1,327 - 114
=========== ========== ============
The current financial assets in the prior year financial statement were solely
deriving from EuroTec. The market value reflected the figures of the balance
sheet date 31 December 2000.
F-47
VI. OTHER DISCLOSURES
Number of personnel
On average
of the reporting period
The DATACON Group - employed: 2002/03 2001/02
Employees 437 380
Thereof blue collar workers: 8 34
Thereof white collar workers: 429 346
Apprentices 10 13
The calculation was based on full-time employments.
Related party transactions:
Buildings on land not owned by the DATACON Group are located on land which is
owned by the Schweitzer + Zeindl Vermogensverwaltungs OEG, which is a related
party.
Related rental expenses for the Group accounted for TEUR 140 (prior year TEUR
215).
The corresponding amounts of the open items are as follows:
Business year 2002/03 Business year 2001/02
in TEUR Receivables Liabilities Receivables Liablilities
- ----------------------- ----------- ----------- ----------- ------------
Schweitzer & Zeindl OEG 400 0 1,169 1,000
Furthermore interest income related to the loan granted to Schweitzer + Zeindl
OEG amounted to TEUR 12 (prior year TEUR 40).
All transactions with related parties were effected at arm's length principle.
Other financial obligations:
The following obligations related to long term rental contracts and operating
lease contracts exist in connection with land and cars:
in TEUR 31 March 2003 31 March 2002
- ------------------------------------------- ------------- -------------
Minimum amount of rental and lease payments
due within
up to 1 year 1,048 751
more than 1 year but less than 5 years 2,853 2,566
more than 5 years 2,502 0
Rental expenses for the business year 2002/03 amounted to TEUR 708 (prior year
TEUR 504).
Disclosures concerning the Boards and Group management:
Compensation for the members of the Managing Board and Managing Directors
amounted to TEUR 1,301 (prior year TEUR 1,396). Remuneration for the Supervisory
Board amounted to TEUR 26 (prior year TEUR 0).
F-48
Expenses for severance payments:
in TEUR 2002/03 2001/02
- -------------------------------------------- ------- -------
for members of the Managing Board,
managing directors and managerial employees 118 - 164
for other employees 212 - 37
------- -------
TOTAL 330 - 201
======= =======
Expenses for pensions
in TEUR 2002/03 2001/02
- -------------------------------------------- ------- -------
for members of the Managing Board,
managing directors and managerial employees - 250 93
for other employees 282 1,628
------- -------
TOTAL 32 1,721
======= =======
The members of the Managing Board during the business year 2003/04 were:
Mr. Ing. Karl Schweitzer
Mr. Ing. Gerhard Zeindl
Mr. Helmut Rutterschmidt
The members of the Supervisory Board during the business year 2003/04 were:
Mr. Herbert Schrettl (chairman)
Mr. GenDir. DI Dr. Heinrich Scherfler (vice-chairman)
Mr. Dr. Stefan Geiler
Mr. Manfred Uberreiter
Events subsequent to the balance sheet date:
In the business year 2003/2004 the remaining 25% minority interest of EuroTec
Technologische Entwicklungs- und Vertriebsges.mbH was acquired at nominal value
with retroactive effect as of April 1, 2003.
Radfeld, 8 July 2003
The Managing Board:
Ing. Karl Schweitzer m.p. Ing. Gerhard Zeindl m.p. Helmut Rutterschmidt m.p.
F-49
THIS PAGE IS INTENTIONALLY LEFT BLANK
F-50
THE ISSUER
BE SEMICONDUCTOR INDUSTRIES N.V.
Marconilaan 4
5151 DR Drunen
the Netherlands
LEGAL ADVISERS
To the Issuer as to Dutch law To the Issuer as to English law To the Issuer as to U.S. law
other than taxation
STIBBE N.V. HERBERT SMITH WILMER CUTLER PICKERING HALE
Stibbetoren Exchange House AND DORR LLP
Strawinskylaan 2001 Primrose Street 60 State Street
1077 ZZ Amsterdam London EC2A 2HS Boston, Massachusetts 02109
the Netherlands United Kingdom United States
To the Issuer as to Dutch taxation matters
BAKER & MCKENZIE AMSTERDAM N.V.
Leidseplein 29
1017 PS Amsterdam
the Netherlands
To the Lead Manager and Bookrunner To the Lead Manager and Bookrunner
as to Dutch law as to English and U.S. law
FRESHFIELD BRUCKHAUS DERINGER FRESHFIELD BRUCKHAUS DERINGER
Apollolaan 151 65 Fleet Street
1077 AR Amsterdam London EC 4Y 1 HS
the Netherlands United Kingdom
AUDITORS OF THE COMPANY
KPMG ACCOUNTANTS
Pettelaarpark 34
5216 PD `s-Hertogenbosch
the Netherlands
REGISTRAR, CONVERSION AGENT AND PAYING AGENT
ING BANK N.V.
Van Heenvlietlaan 220
1083 CN Amsterdam
the Netherlands
SOLE LEAD MANAGER AND BOOKRUNNER
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
25 Cabot Square
Canary Wharf
London E14 4QA
United Kingdom