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ANNUAL REPORT 2010

© 2011 Aalberts N.V. All rights reserved.

Headlines 2010

n Revenue +20% to EUR 1,683 million

n Organic revenue growth +12%(at constant exchange rates)

n Added-value margin from 58.9% to 59.7%

n Operating profit (EBITA) +82% toEUR 179.9 million

n Net profit before amortisation +116%to EUR 117.3 million

n Earnings per ordinary share before amortisation +116% to EUR 1.10

n Decrease in net debt; sharp dropleverage ratio to 2.3

n Industrial Services very profitable

n Flow Control retains margins andstrengthens market positions

n Acquisition Conbraco Industriesin the United States


ANNUAL REPORT 2010

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T 2010

Headlines 2010

n Revenue +20% to EUR 1,683 million

n Organic revenue growth +12%(at constant exchange rates)

n Added-value margin from 58.9% to 59.7%

n Operating profit (EBITA) +82% toEUR 179.9 million

n Net profit before amortisation +116%to EUR 117.3 million

n Earnings per ordinary share before amortisation +116% to EUR 1.10

n Decrease in net debt; sharp dropleverage ratio to 2.3

n Industrial Services very profitable

n Flow Control retains margins andstrengthens market positions

n Acquisition Conbraco Industriesin the United States

www.aalberts.com

© 2011 Aalberts N.V. All rights reserved. © 2011 Aalberts N.V. All rights reserved.

Locations

• Industrial Services

• Flow Control


Annual report2010


Aalberts Industries at a glance6 Key figures7 Profile and markets8 Strategy9 Objectives

11 The Aalberts Industries N.V. share14 Personal Details

Report of the Management Board18 Introduction by the President & CEO20 Financial results22 Industrial Services very profitable25 Flow Control retains margins and

strengthens market positions29 Developments in personnel and

organisation 30 Corporate sustainability34 Outlook35 Management Board declaration

Report of the Supervisory Board38 Financial statements 2010 and

dividend proposal38 Composition of the Supervisory Board38 The work of the Supervisory Board39 Corporate governance40 Remuneration policy41 Note of thanks

General information44 Health, safety and the environment44 Personnel and organisation45 Managerial aspects and risk profile47 Corporate governance48 Decision making

Financial statements 201050 Consolidated balance sheet51 Consolidated income statement52 Consolidated statement of

comprehensive income and changesin equity

53 Consolidated cash flow statement54 Notes to the consolidated financial

statements80 Company balance sheet and

income statement81 Notes to the company financial

statements85 Independent auditor’s report

86 List of group companies

Aalberts Industries N.V.

Contents


Aalberts Industriesat a glance


6


Annual report 2010 Key figures

2010 2009 2008 2007 2006

Result (in EUR million)Revenue 1,682.8 1,404.9 1,750.8 1,702.5 1,440.3Added-value* 1,004.2 827.6 1,014.8 978.8 874.7Operating profit (EBITDA) 248.2 168.8 251.6 254.2 222.1Operating profit (EBITA) 179.9 98.9 181.5 193.3 168.1Net profit before amortisation 117.3 54.2 105.0 128.0 107.5Depreciation 68.3 69.9 70.1 60.9 54.0Cash flow** (net profit+depreciation) 185.6 124.1 175.1 188.9 161.4Cash flow from operations 235.4 240.5 264.5 230.1 186.0

Balance sheet (in EUR million)Intangible fixed assets 609.2 584.8 594.7 410.2 340.1Property, plant and equipment 530.4 493.6 516.3 444.9 378.0Capital expenditure 63.2 45.1 110.5 108.8 77.3Net working capital 304.0 243.6 315.8 292.0 265.8Total equity 745.7 626.5 587.0 538.2 387.6Net debt 593.7 630.6 765.2 524.9 532.9Total assets 1,777.5 1,577.9 1,703.4 1,434.5 1,278.9

Number of staff at year-endIndustrial Services 4,026 3,706 4,253 4,356 4,086Flow Control 7,494 6,276 6,608 6,544 5,264Other 16 17 19 18 20Total 11,536 9,999 10,880 10,918 9,370

RatiosAdded-value* as a % of revenue 59.7 58.9 58.0 57.5 60.7EBITDA as a % of revenue 14.8 12.0 14.4 14.9 15.4EBITA as a % of revenue 10.7 7.0 10.4 11.4 11.7Interest cover ratio (twelve months-rolling) 10.4 5.8 6.0 7.3 8.8Net profit** as a % of revenue 7.0 3.9 6.0 7.5 7.5Total equity as a % of balance sheet total 42.0 39.7 34.5 37.5 30.3Net debt / total equity 0.8 1.0 1.3 1.0 1.4Leverage ratio (twelve months-rolling) 2.3 3.4 2.9 2.0 2.3

Shares issued (million)Ordinary shares (average) 106.7 106.1 103.3 101.7 98.2Ordinary shares (at year-end) 106.7 106.1 103.3 102.0 98.2Cumulative preference shares – – 0.45 1.00 1.55

Figures per ordinary share (in EUR)Cash flow** 1.74 1.17 1.69 1.86 1.64Net profit** 1.10 0.51 1.02 1.26 1.09Dividend** 0.28 0.13 0.28 0.32 0.28Share price at year-end 15.77 10.09 5.06 13.60 16.38

* Added value = revenue minus raw materials and work subcontracted ** Before amortisation


Profile and markets

ProfileAalberts Industries, founded in 1975 and quoted on the stock exchange since 1987, is aninternationally active specialist in industrial products and systems with high-quality technicalknowledge. The company develops solutions for diverse customer needs, divided into thegroup activities Industrial Services and Flow Control.Industrial Services supplies specialised products, processes and systems to specific marketsegments including the semiconductor and automotive industry, the metal & electronicsindustry and precision engineering, the medical sector, the aerospace industry, defenceand the (sustainable) energy sector.Flow Control concentrates on the development, production and assembly of productsand systems for the distribution and regulation of liquids and gases. This group activity isfocused on inter alia the housing market, commercial buildings, private and public new-builds and renovation, utility networks, district heating and cooling, fire protection,irrigation systems, the beer and soft drinks industry, laboratory systems and industrialmarkets.

Added-valueAalberts Industries belongs to the global market leaders and is continually looking for newopportunities which will lead to sustainable and profitable growth, both organically and viaacquisitions. Industrial Services and Flow Control have their own market development andstrategic approach characteristics. However, in both group activities customers are concen-trating increasingly on suppliers who have proven themselves as a reliable and innovativepartner. Aalberts Industries plays on this development as a financially solid, flexible andtechnically high-quality specialist. Innovation of products, processes and systems and collaboration with customers receive constant attention. There is also a clearly recognisabletrend for individual products and components to integrated systems on the one hand andcomplete product packages on the other hand. To achieve this Aalberts Industries isworking intensively with customers who are also reaping the benefits of strengthenedinternal collaboration. Sharing knowledge, expertise and sales and distribution channelsof the group companies lead to higher added-value for the customer and for AalbertsIndustries to increased efficiency and new options for further growth as well as higheradded-value.

Employees and organisationApproximately 11,500 employees work at Aalberts Industries in more than 140 groupcompanies in over 30 countries. The company has a flat organisational structure. The groupcompanies are largely responsible for day-to-day operations in which strategy is determinedtogether with the holding company. This approach leads to an enterprising culture whereinnovation of products and active market approach are continuously worked on. Mutualknowledge sharing, exchange of technology, using each other’s sales and distribution

7


Aalberts Industries at a glance

Aalberts Industries belongs to the global market leaders

and is continually looking for new opportunities

which will lead to sustainable and profitable growth,

both organically and via acquisitions.


8


Annual report 2010

channels and joint product development (best practice) contribute towards product renewaland expansion of the product portfolio.

A detailed overview of Aalberts Industries’ activities can be found on www.aalberts.com.

Strategy

GeneralAalberts Industries’ strategy is aimed at achieving sustainable and profitable growth, bothorganically and through acquisitions. The strategy is formulated primarily by the holdingcompany, supported by the group companies. The strategy is discussed and evaluated structurally and at various levels within the organisation.

Industrial ServicesIndustrial Services works on strengthening its market positions by increasing the applicationpossibilities of innovative and high-value technologies. This group activity is mainly focused onspecialised products, systems and processes for various markets. The products, systems andprocesses offered include various types of heat and surface treatment of parts used in theautomotive industry, systems for the semiconductor industry and advanced medicalequipment and precision stamping parts for the metal & electronics industry. AalbertsIndustries is a precision engineering expert in the production and heat and surface treatmentof metal and plastic parts. It supplies the aerospace industry with (treatment of) parts forfuselage, wings, jet engines and landing gears. This also applies to the (gas) turbine industryand the energy sector where fitted systems must be vacuum-welded in an extremely accuratemanner.

KEY FIGURES AALBERTS INDUSTRIES(in EUR million) 2010 2009 Difference

Revenue 1,682.8 1,404.9 20%Operating profit (EBITDA) 248.2 168.8 47%EBITDA as a % of revenue 14.8 12.0Operating profit (EBITA) 179.9 98.9 82%EBITA as a % of revenue 10.7 7.0Capital expenditure 63.2 45.1 40%Depreciation 68.3 69.9 (2%)Average number of employees (x1) 11,042 10,241 8%Number of employees at year-end (x1) 11,536 9,999 15%

FIRE SPRINKLERSSprinkler systems are used to fight fires in commercial and

public buildings, warehouses, car parks, hotels, ships andmany other places. VSH Fittings (NLD) supplies complete

systems consisting of copper, plastic and steel combinations.The most important markets are in Western and

Eastern Europe, the United States and the Middle East.


Aalberts Industries is developing increasingly as a strategic partner; generally, severalproducts, systems and material treatment processes are supplied at the same time, targetedat the specific customer need and based on a mix of technologies. Direct involvement inthe development of customers’ new products and processes at as early a stage as possibleenables Industrial Services to deliver maximum added-value. Production mainly takes placein Western Europe with additional locations in North America, Eastern Europe and Asia.

Flow ControlFlow Control provides a complete package of products and systems for the distribution andregulation of fluids and gases. The product and system offer contains a comprehensivepackage of metal and plastic piping systems, a range of valves for gas and water, systems toimprove water circulation, sprinkler systems and equipment for pressure and temperatureregulation of water flows. There is an important trend towards more comfort and regulationand energy-efficient systems for the distribution of heat and cool air.

The focus lies on cross-selling group products meaning that local sales and distributionnetworks in the various countries and market segments sell each other’s products. Localorganisations are used as a sales platform for products which are produced in competencecentres, supported by strong product brands (multi-branding). Products are specified by theprescribing bodies, such as product developers, architects and installers. Flow Control continually strives to fill the gaps in its product portfolio in the different market segmentsand countries, in particular in Western and Eastern Europe and North America.

InnovationResearch, development and (technological) innovation form a crucial cornerstone and resultin entirely new products and improvements to existing products and technologies. AnnuallyAalberts Industries spends around 3% of revenue on research and development.The company introduces new products, processes and technologies each year, always basedon specific wishes of the customers who also profit from the increasing technological andknowledge exchange between Industrial Services and Flow Control. Innovation and increasedinternal collaboration contribute not only to revenue and result but also to strengtheningdistinctive market positions.

Objectives

Aalberts Industries strives for stable growth that exceeds the market average. The companyhas been working on the objectives explained here below for several decades.

Stable profit growth per shareThe primary objective is a stable growth of average earnings per share over several years.

Often several products, systems and processes are

supplied at the same time, targeted at the specific

customer need, based on a mix of technologies.

9




Stable revenue growthStable revenue growth is essential for the long-term retention of market positions and theachievement of profit growth. This revenue growth is achieved through both organic growthand by acquisitions. In 2010, the organic revenue growth was 12% (at constant exchangerates) compared to 2009.

Balanced distribution of the resultAalberts Industries realises a balanced distribution of the result across geographical markets,market segments and customers to limit the dependence on a specific market or customerand distribute risk, which benefits the continuity of the company.

Leading market positionsAalberts Industries strives for a leading position in specific market segments. In manyEuropean countries and in North America, the company is market leader or well placed. Themarket need for solid technological high-quality partners which has become clearly stronger,particularly since 2009, continued in 2010. This meant that Aalberts Industries couldstrengthen its positions in a number of important market segments.

Solid balance sheet ratiosIn order to implement the chosen strategy successfully the available financing possibilities areconstantly being optimised. The financial objectives are:n total equity consisting of at least 30% of the balance sheet total;n an interest cover ratio (EBITDA / net interest cost) of at least 4;n the gearing (net debt / total equity) may not exceed 1.5.

10


Annual report 2010

Revenue

(in EUR million)

2006

1,800

1,682.81,600

1,400

1,200

1,000

800

600

400

200

02007 2008 2009 2010

Operating profit

(in EUR million)

EBITDA

EBITA

2006

300

250

200

150

100

50

02007 2008 2009 2010

248.2

179.9

Net profit before amortisation

(in EUR million)

2006

140

117.3

120

100

80

60

40

20

02007 2008 2009 2010

ON THE ROADMetalis, with branches in Western and Eastern Europe and in

China, produces various parts, which are used in theautomotive industry such as connectors for electrical

windows and roofs. Mifa Aluminium (NLD) supplies metalparts including surface treatment for shock absorbers for

motorbike manufacturers, including KTM.


Despite the takeover in 2010 of the American company Conbraco the healthy balance sheetratios were maintained and the three financial objectives were amply achieved. At the end of2010 total equity was 42.0% of the balance sheet total; the interest cover ratio amounted to10.4 and the gearing 0.8.

The Aalberts Industries N.V. share

ListingSince 1987 Aalberts Industries has been quoted on the Amsterdam stock exchange where itis included in the AMX index of NYSE Euronext Securities Market. In addition, in 2006Euronext.liffe introduced options in Aalberts Industries shares. At year-end 106,683,292ordinary shares with a nominal value of EUR 0.25 were in circulation and the market capitali-sation amounted to EUR 1,683 million (at the end of 2009: EUR 1,070 million).

Dividend policyAalberts Industries will continue its dividend policy which has not changed and wants todesignate approximately 75% of the net profit before amortisation achieved in 2010 forfurther growth and to strengthen the financial position; approximately 25% will bedistributed to shareholders by way of an option dividend. The dividend can be paid out incash or in shares.

Shareholders’ interestsMore than 70% of the ordinary shares are freely tradable. Based on the Disclosure of MajorHoldings and Capital Interests in Securities-Issuing Institutions Decree and in accordance withthe Financial Supervision Act that prescribes that shareholders holding more than 5% of the

Aalberts Industries’ key objective is stable growth.

Solid balance sheet ratios were maintained in 2010

despite the takeover of Conbraco.

11



Cash flow from operations

(in EUR million)

2006

300

250

200

150

100

50

02007 2008 2009 2010

235.4

Capital expenditure

(in EUR million)

2006

120

63.2

100

80

60

40

20

02007 2008 2009 2010

Number of employees

(at year-end)

2006

12,000

10,000

8,000

6,000

4,000

2,000

02007 2008 2009 2010

11,536


outstanding ordinary shares must be disclosed, the following holders of ordinary shares aredisclosed:

Name % of the total capital interest Date of report

Stichting Administratiekantoor Dutch (Aalberts Family) 13.27% 03.11.2010

Ameriprise Financial Inc 5.04% 27.10.2010

FMR LLC 5.13% 02.06.2010

OppenheimerFunds, Inc. 5.09% 10.05.2010

Conditional awarding of shares to the Management Board andgroup company managersRemuneration for long-term performance of the management is in the form of a conditionalawarding of shares. The remuneration depends on the strategic plan and the creation ofvalue over a period of three years after which the degree to which the targets have beenachieved is evaluated and the number of shares to be awarded is determined.

Prevention of misuse of insider informationIn 2009, revised rules regarding the notification and regulation of transactions in sharesbecame effective for Supervisory Board members, Management Board members, groupcompany managers and other designated persons such as holding company employees.A record of all insiders is kept by the compliance officer. Aalberts Industries has a so-calledWhistleblower Scheme; the full text is on Investor Relations on the company’s website.

12


Annual report 2010

STOCK EXCHANGE INFORMATION2010 2009 2008 2007 2006

Highest share price (in EUR) 15.98 10.35 14.68 21.95 16.70Lowest share price (in EUR) 9.35 3.30 4.77 12.30 11.05Closing share price at year-end (in EUR) 15.77 10.09 5.06 13.60 16.38Price/earnings ratio at year-end 14.3 19.8 5.0 10.8 14.9Average stock exchange revenue per day

(in EUR thousand) 4,905 4,432 7,035 8,324 4,908Number of outstanding shares at year-end (in million) 106.7 106.1 103.3 102.0 98.2Average number of outstanding shares (in million) 106.7 106.1 103.3 101.7 98.2Market capitalisation at year-end (in EUR million) 1,683 1,070 523 1,387 1,609

REGULATING FLOWSBackflow valves are an example of the (stainless) steel and

bronze products which Conbraco (USA) produces and whichform part of Aalberts Industries’ product portfolio. The valves,with a maximum diameter of around 25 cm, prevent water or

other fluids from flowing back. The systems are used by thechemical industry, oil, gas and energy companies and pulp and

paper factories. Backflow valves with smaller dimensions arealso used in irrigation installations and fire protection systems.


Financial calendar 2011–2012provisional24 March 2011 Registration date for the General Meeting20 April 2011 Trading update (before start of trading)21 April 2011 General Meeting

in the Okura hotel in Amsterdam, starting 2 p.m.27 April 2011 Quotation ex dividend29 April 2011 Record date02 to 17 May 2011 Dividend option period (stock or cash dividend)18 May 2011 Stock dividend conversation ratio notification*

(after close of trading)20 May 2011 Paying out dividend and issuing new ordinary shares17 August 2011 Publication of half-year figures 2011 (before start of trading)27 October 2011 Trading update (before start of trading)23 February 2012 Publication of annual figures 2011 (before start of trading)26 April 2012 General Meeting

Our policy is to pay out approximately 25% of the

net profit before amortisation as dividend. This means

an increase of 115% compared to 2009.

13



AEX

Aalberts Industries

Share price course ordinary share Aalberts Industries N.V.

(in EUR)

2006

25

20

15

10

5

02007 2008 2009 2010

Earnings per ordinary share

before amortisation

(in EUR)

2006

1.50

1.10

1.25

1.00

0.75

0.50

0.25

02007 2008 2009 2010

Dividend per ordinary share

before amortisation

(in EUR)

2006

0.35

0.30

0.25

0.20

0.15

0.10

0.05

02007 2008 2009 2010

0.28

* The stock dividend

conversion ratio is deter-

mined on the basis of the

volume-weighted average

price of all Aalberts

Industries N.V. traded

shares as of 12, 13, 16,

17 and 18 May 2011, in

such a way that the value

of the dividend in

ordinary shares is virtually

the same as that of the

cash dividend.


Personal Details

Supervisory BoardA.B. (Dries) van Luyk (1945)Dutch nationality.Former Managing Director Passage Division KLM Royal Dutch Airlines.First appointed 1996. Current term ends 2011.Other relevant functions: Chairman Supervisory Board Jetair W.W. AG, ChairmanAdvisory Board Key Technology, Inc., Member Advisory Board Deerns Group and Member ofthe Supervisory Board Orfeo kliniek.

M.C.J. (Martin) van Pernis (1945)Dutch nationality.Former President Siemens Groep in the Netherlands, former Chairman of the ManagementBoard of Siemens Nederland N.V.First appointed 2010. Current term ends 2014.Other relevant functions: Chairman of the Supervisory Board of Dutch Space B.V., Member ofthe Supervisory Board of Batenburg Beheer N.V., Feyenoord Rotterdam N.V., ASMInternational N.V., Chairman of the Supervisory Board of GGZ-Delfland and VlietlandZiekenhuis, President of the Dutch Royal Institute of Engineers KIVI NIRIA and Chairman ofthe board “Vernieuwing Bouw”.

H. (Henk) Scheffers (1948), ChairmanDutch nationality.Former Management Board Member SHV Holdings N.V.First appointed 2007. Current term ends 2011.Other relevant functions: Vice-chairman Supervisory Board Flint Holding N.V.,Member Supervisory Board Royal FrieslandCampina N.V., Koninklijke BAM Groep N.V.,Wolters Kluwer N.V., Made in Scotland and Member Investment Committee NPM Capital N.V.and Board Member of the foundation Stichting Administratiekantoor Aandelen KAS BANK.

W. (Walter) van de Vijver (1955)Dutch nationality.CEO of Reliance Industries E&P International.First appointed 2007. Current term ends 2011.No other relevant functions.

14


Annual report 2010

VIBRATION FREE PRODUCTIONWafers are discs of advanced material used in producing

integrated switches. For optimal processing, insulation andvibration systems are needed which ensure that the platform

can move in semiconductor production machines withoutvibration. IDE (DEU/USA) produces these systems. Mogema

(NLD) produces and tests the advanced vacuum chamberswhere parts are assembled for the semiconductor industry.


The company has an enterprising culture where

innovation of products and active market approach

are continuously worked on.

Management BoardJ. (Jan) Aalberts (1939), President & Chief Executive OfficerDutch nationality. Founder Aalberts Industries in 1975. First appointed 1987. No otherrelevant functions.

J. (John) Eijgendaal (1964), Chief Financial OfficerDutch nationality. Employed by the Aalberts Industries Group since 1989: current positionheld since 1999. No other relevant functions.

W.A. (Wim) Pelsma (1963), Chief Operating OfficerDutch nationality. Employed by the Aalberts Industries Group since 1999: current positionheld since 2008. No other relevant functions.

Operational ManagementIndustrial ServicesO. (Oliver) Jäger (1967) Material TechnologyP. (Pierre) Petitjean (1966) MetalisH.A. (Erik) Zantinge (1965) Industrial Products

Flow ControlM.A.B. (Michiel) Boehmer (1969) Flow Control Northern EuropeD. (Dale) Dieckbernd (1951) Elkhart ProductsE. (Eddy) Hendrickx (1962) Henco IndustriesD.W. (David) Lease (1955) TapriteG.H. (Georg) Lechtenböhmer (1959) Flow Control GermanyJ.C. (Jack) McDonald (1961) LASCO FittingsG.L. (Glenn) Mosack (1964) Conbraco IndustriesM.J. (Mike) Saunders (1956) Flow Control United Kingdom & Middle East

15




Report of theManagement Board


Introduction by the President & CEO

Dear Reader,

A good yearAalberts Industries recovered well and developed further in 2010. As already indicated, basedon our continued strategy and business operations we expected to emerge strengthenedfrom the difficult market situation of 2009. This expectation was confirmed. Revenue and netprofit greatly increased. The added-value margin improved from 58.9% to 59.7% of therevenue. The net cash flow was positive. Stringent cost management and active control ofworking capital contributed largely to further strengthening the company’s financial position.We won ground in various markets, also as the result of the introduction of innovativeproducts, closer collaboration with customers and combining sales and distribution power.The takeover of Conbraco Industries was an important step towards strengthening the NorthAmerican market position. The acquisition led to strengthening of the product offer andprovides numerous new market opportunities and technological possibilities to increaseefficiency.

Market positions strengthenedNot all markets that are important to us recovered to the same extent and at the same speed.Despite this both group activities, Industrial Services and Flow Control, showed clear volumegrowth and improvement in added-value margin and results. The EBITA margin at IndustrialServices strongly recovered compared to 2009 and was 12.5% (2009: 1.8% negative).Flow Control achieved an EBITA margin of 10.0% (2009: 10.1%). The favourable course ofaffairs at Industrial Services was mainly thanks to the positive developments in particular onthe semiconductor, automotive and precision engineering markets, combined with increasedinnovation and commercial power efforts. At Flow Control in particular the recovery on anumber of markets, the intensive collaboration between the group companies, the accel-erated combination of sales and distribution power and improvement in price levels in anumber of product segments contributed towards the improved course of affairs, despitethe reticent character in 2010 of most markets which this group activity focuses on.

Prospect of further growthBy combining powers in product development, production, sales and distribution, AalbertsIndustries is expanding the product portfolio, decreasing costs and serving customers fasterwith the best possible solutions. We are looking for close connection to trends which arestanding out more prominently all the time: the consolidation on the customer side in anumber of important markets, the growing need in particular at large customers for strongpartnerships and integral systems and complete product solutions and support from theirinternational expansion policy. In 2010, we increased and invested in particular in commercialmanagement in various European countries and the United States in order to stimulate thegrowth in systems and complete solutions. We support customers whose activities are

18


Annual report 2010


increasing locally such as in China and India. As we already announced on the takeover ofConbraco we are giving additional attention to further growth in the United States. We alsocontinue to work continuously on expanding activities in Western and Eastern Europe.After the substantial capital expenditure of an average of EUR 100 million per year in theperiod 2006–2008 and EUR 45 million in 2009, EUR 63.2 million was invested in 2010.

Fixed, sustainable courseAalberts Industries has a strong year behind it. We remain committed to our strategy andobjectives, continue to keenly observe costs, put extra energy into the further expansion ofour commercial activities and endeavour to serve our customers with high-quality, innovativeproducts and excellent service. In 2010, we also took initiatives to improve reporting in thefield of the sustainability performances of our group.

ConfidenceJust as in the troublesome 2009, a year in which on balance 900 employees left thecompany, our employees were not deterred in 2010. In addition, on behalf of the othermembers of the Management Board we would like to thank everyone for their efforts andthe huge amount of work that was carried out. We are convinced that in 2011 we willagain live up to the confidence that customers and partners have in us.

Langbroek, 22 February 2011

Jan Aalberts

“We are convinced that in 2011 we will again live up to

the confidence that customers and partners have in us.”

19


Report of the

Management Board


20


Annual report 2010

GEOGRAPHICAL SPREAD OF REVENUE (in EUR million) 2010 % 2009 %

Germany 286.1 17 241.4 17Benelux 251.2 15 226.4 16United States 248.7 15 149.9 11France 193.1 11 172.0 12United Kingdom 186.7 11 174.9 12Eastern Europe 176.3 11 152.1 11Scandinavia 85.7 5 73.1 5Spain & Portugal 51.2 3 51.3 4Other European countries 88.8 5 82.2 6Other countries outside of Europe 115.0 7 81.6 6Total 1,682.8 100 1,404.9 100

Financial results

RevenueThe revenue for 2010 was EUR 1,683 million (2009: EUR 1,405 million), an increase of 20%.The organic revenue growth was 12% (at constant exchange rates).

Added-valueThe added-value (revenue minus raw materials and work subcontracted) amounted toEUR 1,004.2 million in 2010 and rose to 59.7% of revenue (2009: EUR 827.6 million,58.9% of the revenue).

Operating profitThe operating profit before depreciation and amortisation (EBITDA) rose by 47% toEUR 248.2 million (2009: EUR 168.8 million). The EBITDA margin was 14.8% of the revenue(2009: 12.0%), at Flow Control 13.3% (2009: 13.8%) and at Industrial Services 18.7%(2009: 6.8%). Depreciation and amortisation in 2010 amounted to 81.2 million (2009:EUR 82.7 million).The operating profit after depreciation and before amortisation (EBITA) in 2010 increased by82% to EUR 179.9 million (2009: EUR 98.9 million). Industrial Services achieved an EBITAmargin of 12.5% (2009: 1.8% negative) and Flow Control achieved an EBITA margin of10.0% (2009: 10.1%).

Net finance costIn 2010 the net finance cost was EUR 27.5 million (2009: EUR 34.6 million) of which netinterest cost was EUR 26.7 million (2009: EUR 32.3 million). This decrease was thanks to theaverage lower interest percentages and lower surcharges of the banks due to the stronglyimproved leverage ratio.

GROWTH IN RENOVATION AND BUILDINGMeibes (DEU) produces and assembles complete hot water tapsystems, including heat exchangers and valves. Biofloor® is the

brand name for floor heating systems used for varioussurfaces. The complete system consists of floorboards,

distributors, plastic piping systems and valves. Design andproduction take place at Comap (FRA). The systems are mainly

sold in the Benelux, France and Germany; for 2011 furtherexpansion on the Eastern European markets is on the agenda.


The three financial objectives with regard to

total equity, interest cover ratio and gearing

were amply achieved in 2010.

Tax on profitsIn 2010 the total tax on profits was EUR 33.1 million (2009: EUR 9.5 million); the effectivetax rate was 23.7% (2009: 18.4%), which is mainly explained by better results in countrieswhere a higher tax percentage applies.

Net profitThe net profit before amortisation for 2010 amounted to EUR 117.3 million (2009: EUR 54.2million), an increase of 116%. Earnings before amortisation per issued ordinary share in2010 were EUR 1.10 (2009: EUR 0.51), an increase of 116%.

Profit appropriationThe number of issued ordinary shares at the end of 2010 was 106.7 million (at the end of2009: 106.1 million). The increase was the result of the stock dividend over 2009. It will beproposed to the General Meeting that the dividend over 2010 be fixed at EUR 0.28 in cashper ordinary share or according to the shareholders’ preference in ordinary shares. This isconsistent with Aalberts Industries’ policy of paying out around 25% of the achieved netprofit before amortisation as dividend. This means an increase of 115% in 2010 comparedto 2009. The stock dividend will be fixed on 18 May 2011 based on the volume-weightedaverage share price of all ordinary shares in Aalberts Industries N.V. as of 12, 13, 16, 17 and18 May 2011 in such a way that the value of the dividend in ordinary shares is virtually equivalent to the cash dividend.

Capital expenditure and cash flowIn 2010 capital expenditure amounted to EUR 63.2 million (2009: EUR 45.1 million) of whichEUR 21.6 million related to Industrial Services and EUR 41.6 million to Flow Control.At the end of 2010, the net working capital was EUR 304.0 million (at the end of 2009:EUR 243.6 million). The cash flow (net profit plus depreciation and amortisation) amountedto EUR 185.6 million in 2010 (2009: EUR 124.1 million). The cash flow from operations for2010 was EUR 235.4 million (2009: EUR 240.5 million). This clearly indicates the strong cashflow generating ability of Aalberts Industries.

Balance sheet ratiosAt the end of 2010, total equity amounted to EUR 745.7 million (2009: EUR 626.5 million),42.0% of the balance sheet total (2009: 39.7%). The net debt at the end of the year wasEUR 593.7 million (2009: EUR 630.6 million). Solid balance sheet ratios were maintainedwhich is also evidenced by the development of the three ratios important for the company:the leverage ratio improved from 3.4 to 2.3; the interest cover ratio went from 5.8 to 10.4and the gearing was 0.8 compared to 1.0 in 2009.

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Report of the

Management Board


Industrial Services very profitable

Revenue and resultsIn 2010 Industrial Services’ revenue increased by 29% to EUR 464.8 million (2009:EUR 361.0 million), of which 27.9% organic. The operating profit before depreciation andamortisation (EBITDA) was EUR 86.8 million (2009: EUR 24.4 million), 18.7% of the revenuecompared with 6.8% in 2009. The EBITA was EUR 58.1 million (2009: EUR 6.4 millionnegative).

The added-value margin of this group activity was 79.5%. As a whole, Industrial Servicesdemonstrated excellent volume growth and improvements in efficiency, quality and service.Various new customers were welcomed also thanks to the more intensive attention paid tothe market and entrepreneurship. Management was reinforced in a number of countries.The number of employees increased to 4,026 (2009: 3,706).

Strong recovery in various marketsThe considerable volume growth at existing and new customers in 2010 led to a rapidrecovery of profitability. In particular, the improvements on the semiconductor, automotiveand precision machine building markets meant a strong increase in demand.

The semiconductor industry developed well in 2010. There was a strong demand forengineering, production and assembly of systems for this industry and frames for newmachines. Both the number of systems supplied as well as the quantity of heat treatmentprojects grew strongly. Systems were also delivered for a new generation of machines whichcan make larger and more efficient wafers. In this field, Industrial Services is a distinctivetechnology partner.

22


Annual report 2010

KEY FIGURES INDUSTRIAL SERVICES(in EUR million) 2010 2009 Difference

Revenue 464.8 361.0 29%Operating profit (EBITDA) 86.8 24.4 256%EBITDA as a % of revenue 18.7 6.8Operating profit (EBITA) 58.1 (6.4)EBITA as a % of revenue 12.5 (1.8)Capital expenditure 21.6 10.0 116%Depreciation 28.7 30.8 (7%)Average number of employees (x1) 3,911 3,847 2%Number of employees at year-end (x1) 4,026 3,706 9%

AMBITIONS IN THE MEDICAL AREANowak (FRA) en Eurocast (NLD) design and produce

composed knee prostheses. Pressure regulation valves for therequired gas or oxygen bottles are also supplied by Aalberts

Industries. Machinefabriek Technology Twente (NLD)designed the dermatological equipment used for skin

transplants in hospitals and burn wound centres. Medicalapplications and equipment are an important growth area

for Aalberts Industries.


Industrial Services showed a rapid recovery of

profitability, mainly thanks to considerable volume

growth at new as well as existing customers.

The demand from the automotive industry showed a strong recovery in practically allcountries, in particular the high-quality car segment in Germany. Various new products andprocesses were introduced and the collaboration between companies within the group wasreinforced by more intensive key account management. Examples of this include thehandling of exhaust systems for lorries so that they become resistant against sulphuric acidformation and the surface treatment of turbo parts. Alignment and heat treatment of therear axis of passenger cars was also carried out in large volumes.

The precision engineering market showed healthy recovery during the year, in particular forindustrial products. This occurred to a lesser extent in the field of heat and surfacetreatment. This was mainly caused by the considerably long lead times of new projects atcustomers. New precision stamping parts were developed in various European countries.

Various successful initiatives were undertaken in the medical segment to expand marketpositions. New products were also introduced which can lead both to new customers as wellas to more revenue at existing customers. Initiatives were taken to increase the revenue inmetal prostheses at companies in France and the Netherlands. These prostheses aredeveloped, moulded, processed and assembled. An innovative product was also developedto remove layers of skin for skin transplants.

The activity level within the aerospace construction industry at the end of 2010 was lessthan the levels for 2008 and 2009. The number of profitable projects was limited and theproduction of construction parts was less than in 2009. As the year progressed the numberof orders that aircraft builders received increased slowly. The order portfolio is expected toimprove in the coming years.

23


Report of the

Management Board

Revenue

(in EUR million)

2006

600

464.8

500

400

300

200

100

02007 2008 2009 2010

Operating profit

(in EUR million)

EBITDA

EBITA

2006

100

80

60

40

20

02007 2008 2009 2010

86.8

58.1

Capital expenditure

(in EUR million)

2006

50

21.6

40

30

20

10

02007 2008 2009 2010

Number of employees

(at year-end)

2006

5,000

4,000

3,000

2,000

1,000

02007 2008 2009 2010

4,026


The development of the turbine industry in the United States was favourable. Heattreatment of parts in the North American branches took place on a large scale in 2010, inparticular due to an increase of activities for the overhaul of gas turbines. Parts for a recentlyintroduced aircraft jet engine were also treated. Industrial Services will provide various partsfor this new type of engine in the next few years and the growth potential is considerable.The market remained stable in the defence area. This also applied for the energy sector eventhough the number of new products on this market increased, in particular in the field ofsustainable provision of energy.

Customers are increasingly globally activeIndustrial Services customers are increasingly globally active and investments are more andmore being made from that perspective. Upcoming markets such as China, India and Brazilshow strong growth in investments from our customers.

In China Industrial Services was particularly successful with flat springs for the metal &electronics industry. These are highly accurate precision stamping parts that use technologyfrom Western Europe for globally active customers in China.Sales organisations in France and Germany were reinforced and various new products andprocesses were introduced with a view to future growth.

Overmoulding showed strong growth in Eastern Europe. This technology is used to extrusioncoat precision stamping parts with plastic into a complete finished product. Many newcustomers were acquired in this growing activity which is mainly targeted at the automotiveand metal & electronics market. The commercial processing of the local markets was furtherincreased in the production locations in Slovakia and Poland. In Poland, the volume for thesurface treatment of piston parts also grew strongly; close cooperation with customersplayed a prominent role.

In the second half of the year, the activities in the area of heat treatment increased in theUnited Kingdom and Spain. The intensive market approach, increased service in combinationwith an increased volume and new management in these countries led to better results.

More intensive collaborationThe collaboration between the companies of Industrial Services was further strengthened.Further steps were taken in the field of customer exchange, key account management andoffering precision stamping parts together with treatment processes. This approach will beintensified in 2011.

In addition, the development and delivery of integrated systems will be taken to a higherlevel in order to offer customers more total solutions. The activities in vibration systems inparticular form a focal point for further high-quality, profitable growth.

24


Annual report 2010

DISTRICT HEATINGAalberts Industries provides valves for district heating

projects in Western, Northern and Eastern Europe and China.The steel valves, sold under the brand name Ballomax®, are

used in piping systems, distribution stations and energygeneration. Insulated valves are also supplied for regulating

and distributing gas, both in Europe and in North America.


Companies within Industrial Services are increasingly

using each other’s knowledge and experience in the

upcoming markets.

The Industrial Services customers are organising their strategy from a more globalperspective. With this in mind various companies within Industrial Services are increasinglyusing each other’s knowledge and experience in the upcoming markets. Cross selling andtechnical cooperation with Flow Control is also taking shape. Many products, for examplepress and compression fittings, are given a heat treatment by Industrial Services. New developments have started to improve special coatings fittings and valves. The cooperationbetween Industrial Services and Flow Control is also making a mark in the field of rollforming.

FutureThe strategic policy lines which were pursued in 2010 will remain applicable in the future.Offering a mix of technologies with the highest possible added-value for Industrial Servicesand customers will be further intensified. Joint key account management will be increasinglyimplemented, as will an intensive cooperation in the group and acceleration of the intro-duction of new products.

Flow Control retains margins and strengthensmarket positions

Revenue and resultsIn 2010 Flow Control achieved a revenue of EUR 1,218.0 million (2009: EUR 1,043.9million), an increase of 17%, of which 7.5% was organic. The operating profit before depre-ciation and amortisation (EBITDA) amounted to EUR 161.4 million (2009: EUR 144.4 million)and therefore 13.3% of the revenue (2009: 13.8%). The EBITA amounted to EUR 121.8million (2009: EUR 105.3 million), an increase of 16%.

The added-value margin of this group activity was 52.1%. Closer cooperation in purchasing,sales and distribution led to substantial efficiency improvements. The collaboration withinFlow Control was also given more substance and led to many product introductions inEurope, the Middle East and the United States. The number of employees increased to7,494 at year-end (2009: 6,276). This was mainly thanks to the takeover of the Americancompany Conbraco.

Markets: mixed imageThe introduction of new products and strengthening of both collaboration between groupcompanies and market orientation resulted in growth of the market share in a number ofmarket segments. Nonetheless the developments on various markets, seen both from themarket area as well as geographically showed a mixed image.

With regard to the developments per market area, the residential new-build marketremained at a low level whereas the renovation and maintenance market showed a stable

25


Report of the

Management Board


picture. The decrease in the commercial building market could be compensated by theincreased quantity of products per project. Developments were clearly positive in the field ofutility networks and district heating. This was also visible in the activities in the field of floorheating for buildings. The product offer for water regulation systems was expanded and toan increasing extent combined with energy-efficiency systems. Thanks to this, customersprofit from lower energy consumption and more comfort. New activities for fire protectionhad an excellent start, mainly focused on Europe and the United States.In shipbuilding new contracts for the supply of sprinkler systems were entered into. Inaddition, the warm spring in the United States meant that the number of projects in theirrigation industry grew. The development of activities for the beer and soft drinks industrylikewise showed a positive picture, also because of improved collaboration between groupcompanies in Europe and the United States. New products were launched and the customerbase was increased. The worldwide laboratory market also developed well, partly becauseof a stimulating government policy and the demand for integrated systems.

Northern and Eastern EuropeIn the Netherlands, despite the small number of new-build projects, sales were somewhatcompensated by the introduction of new products and an increase in sales in floor heating,plastic and metal piping systems, sanitary systems and balancing valves. The utilities marketalso showed favourable development, in particular from the second quarter onwards; newgas and plastic piping systems were put onto the market. The product package wasexpanded for the utility market in Belgium that is developing favourably. Floor heating activities also increased there and many new projects were realised. Meanwhile Henco isusing various sales and distribution channels within Aalberts Industries.

26


Annual report 2010

KEY FIGURES FLOW CONTROL (in EUR million) 2010 2009 Difference

Revenue 1,218.0 1,043.9 17%Operating profit (EBITDA) 161.4 144.4 12%EBITDA as a % of revenue 13.3 13.8Operating profit (EBITA) 121.8 105.3 16%EBITA as a % of revenue 10.0 10.1Capital expenditure 41.6 35.1 19%Depreciation 39.6 39.1 1%Average number of employees (x1) 7,115 6,376 12%Number of employees at year-end (x1) 7,494 6,276 19%

EMERGENCY AND EYE BATHSIf employees in factories or laboratories for example are

unfortunate enough to be exposed to chemical substances,

they can use an emergency shower or eye bath. These

systems are produced by BROEN (DNK) and sold worldwide.


At Flow Control substantial efficiency improvements

and many product introductions took place in Europe,

the Middle East and the United States.

After a hesitant start in Scandinavia market circumstances improved halfway through theyear. In Sweden and Norway positions on the utility markets were strengthened and the firstorders for the new fibre-reinforced composite piping systems were recorded. In Norway newmetal push fittings were also introduced. Moreover in several Scandinavian countriesadditional products such as automatic balancing valves and plastic piping systems were putonto the market. Various measures were taken in the region to strengthen the joint salesand distribution power with more emphasis on project specifications. Management was alsostrengthened in various places.

The severe winter in Eastern Europe as well as the limited liquidity had a restraining effectduring the first months of the year on various activities. However, a positive trend was seenin Russia, Poland and the Czech Republic from mid 2010 which continued furtherthroughout the year. In Russia the district heating market developed very favourably where alocal production facility became fully operational in the first quarter. This also meant that thealready strong market positions were built on. The markets for hot water tap systems alsodeveloped well. In the Eastern European region a lot of energy was put into combining salesand distribution power and intensifying cross selling.

Germany, Austria and SwitzerlandHealthy growth was recorded in Germany despite a reticent market, in particular due to theincreased revenue from many sister company products. Commercial organisation wasincreased in various places and combined more. The organisations in the countries inquestion are focusing further on supplying a total package of products combined with clearsegment choices, product specifications and training end-users. Key account management incollaboration with the group based on the broad product portfolio offers many opportu-

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Report of the

Management Board

Revenue

(in EUR million)

2006

1,400

1,218.01,200

1,000

800

600

400

200

02007 2008 2009 2010

Operating profit

(in EUR million)

EBITDA

EBITA

2006

200

160

120

80

40

02007 2008 2009 2010

161.4

121.8

Capital expenditure

(in EUR million)

2006

60

41.6

50

40

30

20

10

02007 2008 2009 2010

Number of employees

(at year-end)

2006

8,000

6,000

4,000

2,000

02007 2008 2009 2010

7,494


nities for substantial growth in this region. Increasing efficiency in production and logisticsin many places in Germany was worked hard on, as well as strengthening the commercialefforts. A reinforced sales organisation was set up with new management in Austria wheresales and distribution of group products will be further combined. In Switzerland mainly thewater segment grew and sales of hot water tap systems and metal piping systemsincreased.

United Kingdom and Middle EastIn the United Kingdom the housing and commercial market remained at a low level; therenovation and maintenance market maintained a stable level. Market shares werestrengthened and various new products were put onto the market. These included hotwater systems, supplementary sanitary tap systems, plastic piping systems, heatingregulation equipment and valves for the commercial market. Halfway through 2010 a newextrusion line for brass rods was put into operation. These are delivered to other companieswithin the group. In the second half of the year further expansion of the activities in plasticpiping systems and the introduction of Conbraco’s products package was worked hard on.A new distribution centre will be ready in the first quarter of 2011.

The markets in the Middle East showed strong growth. The market positions were furtherexpanded, inter alia with additional sanitary tap systems and many group products.Preparations were also made to bring sales efforts and organisation for 2011 to a higherlevel.

Southern EuropeIn France, the sales organisation was reinforced in various areas. The sales of groupproducts were further shaped by improved product specification and performance ofprojects. Efficiency further increased due to cost reductions and higher production. Variousproduct development processes were put into effect which should lead to extra revenue inthe coming years. In close collaboration with other group companies in 2011 furtherefficiency improvements will be carried out for various product groups. In view of the manyinitiatives to stimulate sales and the increased number of cross selling projects healthyrevenue growth is expected in France.

In Spain and Portugal market conditions remained bad. The new-build housing market andutility market were bad compared to the somewhat better renovation and maintenancemarkets. New sanitary products that were introduced sold well and were also successfullyexported to North Africa and the Middle East.

Market circumstances were difficult in Italy and Greece. Costs were reduced and efficiencywas improved in both countries. The Italian production facility showed a healthy growth byexpansion of the product package.

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Annual report 2010

INTELLIGENT ENERGY SAVINGAalberts Industries develops, produces and supplies customer-specific energy-efficiency systems, consisting of hot water tap,

measuring and regulation systems and balancing valves tooptimise energy consumption. Comap (FRA) and Pegler

Yorkshire (GBR) supply the programmable thermostatsystems. These react automatically to temperature changesand ‘communicate’ radiographically with other thermostats.

This intelligent temperature control ensures energy savingsup to 30%.


More intensive collaboration between group

companies, concentration of production and

progressive automation will lead to higher results

at Flow Control.

United StatesDespite price pressure in the United States margins were maintained in a number ofsegments. The industrial market grew strongly as did the irrigation market although growthwas delayed in the second half of the year. A positive impulse was felt on the acquisition ofConbraco. The portfolio was further expanded with a number of strong branded productsand additional market segments could be penetrated. A start was also made on combiningthe sales organisations of various activities in the United States and the offer of completeproduct packages for specific market segments. In addition the exchange of productiontechnology between Conbraco and other companies at Flow Control commenced. Theactivities in consumer products were combined within one commercial organisation, whichnow serves the market with a complete product portfolio.

FutureBecause of the increasingly closer cooperation between the group companies the numberof product introductions in 2011 will continue to rise. Moreover, in order to further improvethe efficiency the production of specific product groups is more concentrated. In combi-nation with progressive automation of production these initiatives will lead to higher results,so that the course of 2010 can be continued.

Developments in personnel and organisation

Organisation closer to the marketBoth the general and commercial management was increased with a view to furtherimprovement of market orientation. Within the European activities of Flow Control the

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Report of the

Management Board

GEOGRAPHICAL SPREAD OF EMPLOYEES 2010 % 2009 %

United States 2,137 18 1,022 10Germany 2,110 18 1,951 20Benelux 1,610 14 1,533 15France 1,609 14 1,629 16Eastern Europe 1,563 14 1,417 14United Kingdom 1,145 10 1,149 12Scandinavia 421 4 390 4Spain & Portugal 240 2 242 2Other 701 6 666 7Total 11,536 100 9,999 100


general management in the Benelux and Scandinavian region was strengthened and inGermany the commercial power was further reinforced. In addition, in the United Kingdom,France and the Middle East commercial management was increased and became morefocused. Moreover in various countries new management was recruited to accelerate thegrowth in specific market segments, such as sprinkler piping systems and energy-efficiencysystems. In the United States after the takeover of Conbraco intensive commercial collabo-ration commenced between the companies. The objective is to form market and customerfocused organisations which will supply total packages of products and systems for specificmarket segments.At Industrial Services the management of the surface treatment activities is enhanced bygiving more attention to key account management.

More staffThe average number of employees grew from 10,241 to 11,042. At the end of 2010 thenumber of employees was 11,536 (at the end of 2009: 9,999). This increase was mainlydue to the takeover of more than 1,000 employees from Conbraco in the United States.

Corporate sustainability

Departure pointsAalberts Industries is firmly grounded in society. The company depends on society and isstrongly aware of its own role and responsibilities which extend further than merelyfinancial and economic business operations. Aalberts Industries recognises the impactwhich the company has on employees, the environment and society. After all, the companyworks on a daily basis with suppliers, customers and other partners as participants in socialand economic life. Obviously Aalberts Industries’ activities impact the environment. Thecompany uses raw materials and semifinished products, consumes energy and generateswaste. Aalberts Industries is also a people organisation. The development of employees andthe continual attention for a safe and healthy work environment are key. AalbertsIndustries therefore endorses the OESO en ILO guidelines with regard to corporate sustain-ability.

StakeholdersAalberts Industries has defined the most important stakeholders for the company’s success.Internally these are the employees, externally the shareholders, customers, suppliers,authorities and society. The company and the group companies dialogue with the stake-holders in order to examine social policy. The table here below shows an overview of theobjectives.

As well as the stakeholders below, in 2010 Aalberts Industries also approached the DutchAssociation of Investors for Sustainable Development (VBDO) to ask for its view of Aalberts

30


Annual report 2010

PROGRESS IN MATERIAL TECHNOLOGYDuralloy (DEU/CHE) focuses on heat and surface treatment of

amongst others ball bearings, which are used for many applications, for example in large machines. The company

developed a coating, which coats the surface with a chromelayer 1.5–20 micrometres thick and ensures extreme hardness

and resistance against chemical substances. AHC is alsospecialised in surface treatment, inter alia anodising

inspection systems.


Aalberts Industries is strongly aware of its own

responsibilities which extend further than merely

financial and economic business operations.

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Report of the

Management Board

Stakeholders Expectations Aalberts Industries’ objectives

Employees Safe, healthy and inspiringwork environment

Consciously dealing with the welfare of the employees by creating ahealthy, safe and pleasant environment where everyone’s potentialcan be realised.

Shareholders Sustainable profit growth Aalberts Industries strives towards sustainable profit growth with goodmargins, inter alia by optimising collaboration between the groupcompanies.

Customers High-quality and durableproducts. Realisation of projectsand installations using AalbertsIndustries innovations

Aalberts Industries strives towards supplying ever-increasing added-valueto its customers. This is realised by combining specialised groupcompanies, technologies and high-quality service provision in the formof innovative systems, production processes and products.

Suppliers Reliable partnerLong-term relationship

Aalberts Industries endeavours towards entering into a long-termrelationship in order to source products as locally as possible.

Authorities Compliance with law and legis-lation

Observance of the applicable statutory provisions and regulations.Where possible doing more than is asked.

Society Involved with the localcommunity

Active dialogue with the local community.

Industries’ corporate sustainability activities. It indicated that Aalberts Industries should worktowards a systematic approach and should stay close to core processes. Moreover at thebeginning of 2011 in its points for attention letter, the VBDO informed Aalberts Industriesof its focal points for 2011: remuneration, biodiversity and social policy. Also based on thedialogue with the VBDO a decision was taken to further tighten up the policy framework asset out here below, explain the social policy better (see under “health and safety”, humanresources policy and “Aalberts Industries in society”) and to include more quantitative data.

Remuneration based on results in the field of corporate sustainability is not yet on theagenda also because of the fact that Aalberts Industries wants to start collecting quanti-tative control information in 2011 as a first reference date. Biodiversity is a supply chainmatter for Aalberts Industries as the company mainly works with semifinished products.The sections on Supply Chain Responsibility and use and reuse of materials here belowdescribe the current situation.


The current social policyAalberts Industries’ current social policy is decentralised. Responsibilities in the field ofenergy, waste, purchasing, personnel, health and safety lie with the group companies.Because of the group’s decentralised character and the complementary skills it can veryeasily adapt to local circumstances. The holding company provides the framework foraction and fulfils a coaching role. The final responsibility with regard to the social policy lieswith the Management Board. In view of the significance afforded to corporate sustain-ability by Aalberts Industries, the ambition has been expressed to further tighten up thepolicy with regard to corporate sustainability in the coming years.

ResultsEnergy and emissionsEnergy plays an important role in the manufacture of Aalberts Industries products. Thecompany sees it as its responsibility to realise energy-saving where possible. This will resultin a decrease in CO2 emissions and a reduction in energy costs. Studies in 2010 at fourgroup companies showed that countless measures have already been taken to reduceenergy consumption. These included redesigning the production process, so that efficiencyincreased, and recalibrating and adjusting equipment. Video conference equipment hasalso been invested in at the holding company and a number of group companies meaningthat the number of flights is limited.

Use and reuse of materialsThe supply of raw materials and semifinished products is essential to Aalberts Industries’production process. The products are subject to high requirements because this also deter-mines the quality of the finished product. Recycling and reusing raw materials is animportant topic in Aalberts Industries policy. Materials and raw materials are sourcedinsofar as possible locally. Where possible production locations use a closed loop system sothat remaining waste is used again in the production process. Reuse and recycling weregiven full attention again in 2010.

WasteAalberts Industries has the objective of producing a minimum amount of waste. Wherepossible waste is reused.

Supply chain responsibilityCorporate sustainability is taken into account in tenders. On the one hand that meanspurchasing locally insofar as possible and making efforts to offer products which contributeto durable installation and long-term use. Installation ease, safety and the lifespan of theproducts are key here.

32


Annual report 2010

PARTNER FOR THE AVIATION INDUSTRYAccurate Brazing (USA) is specialised in high-quality vacuumwelding, assembling and heat treatment of end caps for gas

turbines. In addition, various products are vacuum weldedand fitted into aircraft jet engines. SGI (FRA) is specialised

in treating fuselage parts of aircrafts, which includes trackingdown the smallest irregularities using innovative blue edge

technology.


Aalberts Industries has expressed the ambition to

further tighten up the policy and practice with regard

to corporate sustainability in the coming years.

Aalberts Industries as a supplierAalberts Industries strives towards supplying ever-increasing added-value to its customers.This is realised by investing in technologies and high-quality service provision in the form ofinnovative systems, (production) processes and products. The result is high-quality products,characterised by installation ease, use efficiency and a long lifespan. Aalberts Industries’products contribute towards matters such as a “heat/cold storage”, solar collectors,irrigation systems and water facilities. In addition Aalberts Industries wishes to increase thelifespan of many metals by applying a heat and/or surface treatment for example.

CertificationMany of the group companies have had their management system certified according tothe ISO 9001 standard for quality management. In addition the safety management systemshave been designed according to the standards of OHSAS 18001. Finally, there are groupcompanies that have had their environmental management systems certified according tothe ISO 14001 standard and have obtained certificates specifically for the automotiveindustry and the aerospace industry.

Health and safetyThe company is committed to continually improving performance in the field of health andsafety for all employees and persons involved and an integral part of Aalberts Industries’policy is the will to excel in all aspects of health and safety. This means that AalbertsIndustries’ policy is focused on performing all work in such a way that not only statutoryrequirements are met but also so that:n any form of personal injury and damage to personal health is prevented;n negative effects on the environment and damage to property of third parties or Aalberts

Industries are avoided; andn company processes are performed in a controlled manner and continually improved.

No Aalberts Industries’ employees died in 2010 as a result of an industrial accident.Aalberts Industries makes a link between absolute numbers of industrial accidents withleave and worked hours using the lost time injury frequency ratio– the ratio of the numberof industrial accidents per million hours worked. Aalberts Industries uses a group widedefinition to compare the mutual performances of company divisions. It remains a challengefor group companies that perform less well compared to other company divisions toimprove. In line with previous years the percentage absence due to illness is low at 2.9% and lies wellbelow the national and sector averages of the countries where Aalberts Industries is active.

Human resources policyRecruiting and keeping talent is very important. In 2010 Aalberts Industries was able toreduce staff turnover by offering development plans and challenging career prospects andgiving employees operational responsibility. In addition to a talented employee base,

33


Report of the

Management Board


diversity is also paramount. By offering equal opportunities, irrespective of sex, faith or creed,Aalberts Industries hopes to progress further in this area.

Aalberts Industries in societyIncreasing local involvement of group companies is most important in Aalberts Industries’donation policy. Donations by group companies often concern a local project. An ‘openhouse’ is held regularly and other local projects are developed. For example, in a groupcompany local project in the United Kingdom disadvantaged youth from the area are beinggiven the opportunity to learn a trade at Aalberts Industries, giving them the chance of abetter future. Further, Aalberts Industries supports local vocational training. In doing so thecompany hopes to be able to contribute towards the quality of technical education.

Legion of opportunitiesAalberts Industries sees a legion of opportunities in the field of sustainability. The companycan enter new sustainable markets with sustainable innovations and keep current customersby energy saving and saving costs by recycling. The high level of attention for health andsafety makes it an attractive employer. In 2010 Aalberts Industries decided to further workout the policy framework for corporate sustainability. The objective of this policy frameworkis to establish whether the current initiatives and efforts in the field of corporate sustain-ability contribute towards operational objectives and also to establish what new initiativeswould have to be developed. The group companies are also helped by more effectivelysubstantiating the policy framework by way of activities which are focused on corporatesustainability. For questions about the policy with regard to corporate sustainability pleasecontact [email protected].

Outlook

A wider recovery in various markets, an active market approach and the increased orderposition will lead to further improvement of the earnings per share in 2011– barringunforeseen circumstances.

Solid balance sheet ratios remain maintained due to the continuing large amount ofattention given to profitability and the control of working capital and costs.

34


Annual report 2010

ACCELERATED INDUSTRIAL MAINTENANCEMetalis produces precision stamping parts from zirconium

that are mechanically resistant against nuclear radiation.The grid shown is approximately 4 metres long. The valveshown, which can be opened from above, is produced by

Conbraco (USA). The major advantage is that machines canbe maintained without the valve having to be removed.


A wider recovery in various markets, an active market

approach and the increased order position will lead

to further improvement of the earnings per share

in 2011– barring unforeseen circumstances.

Management Board declaration

The Management Board declares that, to the best of its knowledge:1. the financial statements as included in this report provide a true and fair view of the

assets, liabilities, financial position and profit for the financial year of Aalberts IndustriesN.V. and the group companies included in the consolidated statements;

2. the annual report as included in this report provides a true and fair view of the situationon the balance sheet date and the business development during the financial year ofAalberts Industries N.V. and the affiliated group companies included in the financial statements.

The annual report provides information regarding the material risks to which AalbertsIndustries is exposed.

Langbroek, 22 February 2011Jan Aalberts, President & CEOJohn Eijgendaal, CFOWim Pelsma, COO

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Report of the

Management Board


Report of theSupervisory Board


Financial statements 2010 and dividend proposal

The financial statements for the financial year ending 31 December 2010 were prepared bythe Management Board and signed by the Management Board and Supervisory Board. TheIndependent Auditor’s Report from PricewaterhouseCoopers Accountants N.V. is included onpage 85 of the financial statements. The Management Board will present the 2010 financialstatements to the General Meeting for adoption. The Supervisory Board advises the GeneralMeeting to adopt these financial statements, including the proposed dividend of EUR 0.28per ordinary share.

Composition of the Supervisory Board

In 2010 Mr M.C.J. (Martin) van Pernis acceded to the Supervisory Board of AalbertsIndustries. Mr Van Pernis, nominated during the General Meeting on 22 April 2010, wasPresident of the Siemens Group in the Netherlands and chairman of the Management Boardof Siemens Nederland N.V. for seven years. Prior to that he was active for Siemens in otherpositions in the Netherlands and internationally. Mr van Pernis has held various SupervisoryBoard memberships and a number of societal positions.In 2011 Mr A.B. (Dries) van Luyk will resign from his membership of the Supervisory Board. Inthat year Mr Van Luyk will have been affiliated with Aalberts Industries as a member of theSupervisory Board for fifteen years. The company is most grateful to him for the manner inwhich he has fulfilled his office.In 2011 Stichting Prioriteit “Aalberts Industries N.V.” will propose to the General Meetingthat Mr R. (René) van der Bruggen, President & CEO of Imtech N.V. be appointed as amember of the Supervisory Board of Aalberts Industries. Mr Van der Bruggen (1947) hasample board experience, in particular at larger organisations and has fulfilled several super-visory positions at Dutch companies.At the end of the General Meeting in 2011 H. (Henk) Scheffers and W. (Walter) van de Vijverwill resign according to retirement schedule; both are reelectable and the Stichting Prioriteit

“Aalberts Industries N.V.” intends to put Messrs Scheffers and Van de Vijver forward forreappointment.

The work of the Supervisory Board

In 2010 the Supervisory Board met six times. One of the meetings took place at groupcompany Pegler Yorkshire in Doncaster, United Kingdom. A meeting was also held in theabsence of the Management Board during which the performance of the ManagementBoard and the Supervisory Board was discussed.The course of affairs and developments with regard to result and markets were discussedwith the Management Board. This also included the half-yearly and annual figures and the

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Annual report 2010


dividend policy. With regard to the business strategy, acquisition policy and the takeover ofConbraco were paid special attention. The business risks, organisational structure and devel-opments in staff policy were also discussed in detail.The Supervisory Board established that Aalberts Industries showed a strong ascending line in2010 after a difficult 2009. Excellent progress was made with regard to cost and work capitalmanagement, revenue, results and added-value.The Supervisory Board approved the operational strategy and the objectives for 2011.

Corporate governance

The Board ascertained that the corporate governance structure functioned well throughoutthe entire range of regulations and procedures as applicable within Aalberts Industries. TheManagement Board and Supervisory Board discussed the updating of the Dutch CorporateGovernance Code (Tabaksblat Code) presented by the Corporate Governance CodeMonitoring Committee (Frijns Committee and Streppel Committee) and the potential effectof the revisions on Aalberts Industries.

IndependenceIn the Supervisory Board’s opinion the composition of the Board is such that the memberscan operate critically and independently of each other and the Management Board as stipu-lated in the Corporate Governance Code and Article 4 of the Rules. This means that the legaland statutory duties of the Supervisory Board are being fulfilled, including providing theManagement Board with solicited and unsolicited advice and support.

Remuneration and Audit CommitteesIn accordance with Article 8 of the Rules the Supervisory Board has not set up separatecommittees but fulfils the tasks of these committees as a whole. In this context, in 2010 theBoard during the meeting focussed on performance appraisal, financial reporting and theprevailing remuneration policy. Furthermore, the Board drew up the remuneration policyexplained here below for the Management Board and the General Meeting approved theproposal on 22 April 2010.

Performance appraisalDuring a closed meeting the Supervisory Board evaluated its own performance and that ofthe members. At this meeting the performance of the Management Board as a whole andeach individual member was also evaluated.

External auditorAs is customary for Aalberts Industries, the Supervisory Board discussed the half-yearly andannual figures with the external auditor. On both occasions the discussions included the workthat had been carried out, the internal risk management and control systems, the figures to

The takeover of Conbraco Industries was

an important step towards strengthening

the North American market position.

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Report of the

Supervisory Board


be published, the manner in which the Board executed its supervisory role and the role of theexternal auditor. It has been decided to propose to the General Meeting on 21 April 2011 toreappoint PricewaterhouseCoopers Accountants N.V. for the financial year 2011.

Remuneration policy

IntroductionIn accordance with the Articles of Association the Supervisory Board establishes the remuner-ation of the Management Board members. The remuneration of the individual ManagementBoard members (including remuneration based on shares) must be in accordance with thepolicy approved by the General Meeting.

Within the framework of the best practice principles contained in the Monitoring CommitteeCorporate Governance Code, the Supervisory Board has brought the remuneration policyfurther in line with Aalberts Industries’ strategy, risks and financial objectives. This aims at agood balance between the fixed and variable remuneration and the short and long-termremuneration.

AimThe objective of the remuneration policy is to recruit, motivate and retain qualified andexperienced directors with industry experience. The remuneration structure for theManagement Board is aimed at an optimal balance between the company’s short-termresults and long-term goals. The total remuneration of the Management Board memberscomprises the following components:n a fixed basic salary;n a short-term variable income in cash for short-term (one year) performance;n a long-term variable income in shares for long-term (three years) performance;n a pension plan.

Basic salaryOnce a year the Supervisory Board will determine whether and to what extent the basicsalary will be adjusted taking developments in the market as well as the Aalberts Industriesresults into account.

Short-term variable incomeThe variable income is an important component of the remuneration package. ManagementBoard members can be awarded an annual bonus for the achievement of targets set inadvance (including earnings per share, net working capital and organic revenue growth). Thetargets are set by the Supervisory Board at the beginning of each financial year. The variableincome package is, to an important extent, performance-based and can, if the targets areachieved, add a maximum of 75% to the basic salary.

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Annual report 2010

SWING HEAD FOR IRRIGATIONLASCO Fittings (USA) produces swing heads for irrigating golf

fields and sports fields and municipal and holiday parks. Thecompany also supplies a complete package of plastic fittingsand valves for various markets including irrigation, industry,

commercial buildings, swimming pools & spas and to alimited extent housing.


The Supervisory Board establishes that Aalberts

Industries has been able to withstand the difficult

circumstances of 2009 and to close 2010 profitably.

Long-term variable incomeThe long-term variable income of Management Board members is in the form of a condi-tional awarding of shares. These performance targets are focused on the strategic plan andthe creation of added-value over a period of three years after which the Supervisory Boardassesses the extent to which the performance targets have been achieved and decides howmany shares will be awarded unconditionally. Shares awarded conditionally must be held forat least five years or until termination of employment if this is sooner, unless the ComplianceOfficer can be shown that shares are sold to pay tax obligations related to the awarding ofthese shares.

Pension planThe Management Board participates in a pension plan (career average or defined contri-bution pension scheme) with a retirement age of 65. Management Board members areresponsible for payment of a third of the contribution.

AmendmentEach year, the Supervisory Board will review the Management Board remuneration policy andassess its market conformity. Amendments will be put before the General Meeting.

Note of thanks

The Supervisory Board establishes that Aalberts Industries has been able to withstand thedifficult circumstances of 2009 and to close 2010 more profitably and with increased marketpositions. The Board thanks all employees of Aalberts Industries for the resilience shown andthe huge amount of work that was done.

Langbroek, 22 February 2011Dries van LuykMartin van PernisHenk Scheffers, ChairmanWalter van de Vijver

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Report of the

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General information


Health, safety and the environment

Aalberts Industries examines its production processes and methods each year and adjuststhese as necessary to amended circumstances or statutory requirements. The company setsitself the objective of restricting noise nuisance, soil, water and air pollution and the gener-ation of residual material and hazardous substances. The following departure points andobjectives have been formulated for employees and management:n Current statutory provisions and regulations should be complied with and where possible

exceeded if this contributes towards the achievement of the environmental and safetyobjectives.

n Continuous raising of awareness and clear, practical guidelines ensure that health, safetyand the environment are paid constant attention and dealt with in the right way.

n An approach that is continuously focused on the prevention or limiting of soil, water andair pollution, noise nuisance, the production of residual materials and restricting orcompletely eliminating the use of hazardous substances.

n Reduction of material and raw material use by developing new products and processes,stimulating reuse and implementing modern production and assembly techniques.

n Stimulating energy and water-saving measures, inter alia by reusing released energy and/orused cooling water.

Safety and quality of working conditions are a priority at Aalberts Industries. The groupcompanies all employ their own health policy and practically all have their own environ-mental and safety policy. This policy is judged each year for its merits and specific results arediscussed with the Management Board. Day-to-day implementation of the policy is based ona number of group principles:n employee training and education;n clear communication and guidelines including safeguarding;n regular audits and immediate follow-up of any actions ensuing therefrom;n regular listing and evaluation of the risks;n structural exchange of knowledge and experience between the group companies.

Personnel and organisation

Aalberts Industries strives to rank amongst the preferred employers in the various marketsand geographical areas. The company is very ambitious and has a decentralised organisationstructure; the company is therefore mainly focused on recruiting, keeping and developingtalented and enterprising people. Maintaining and increasing management potential is putinto practice by personal development plans, challenging career prospects and far-reachingoperational responsibility. Aalberts Industries has been following this approach for years sothat local management teams are very motivated to increase the result of their own companyand that of the group.

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Annual report 2010


The following principles apply for the human resources policy:n stimulating an entrepreneurial culture;n a focus on the environment, safety and social developments;n training and education of employees and management;n creation of challenging career prospects;n a market-conforming salary structure and employment conditions.

These principles form the basis of the human resources policy within each group company.Given the diversity of employees, cultures and nationalities, the local management is furthersubstantiated within these frameworks. The group management and management of thesubsidiaries regularly discuss business development and the human resources policy and anyappointments at management team level.

Increasing the underlying collaboration and synergy remains a strategic focal point, whileretaining the decentralised structure and responsibilities mainly at the level of the variousgroup companies. The company stimulates cross selling possibilities and knowledge sharingin areas such as sales, efficiency improvement, safety and environment. Group companiesare also encouraged to purchase semifinished products or processes from each other (crossproduction) rather than from third parties because this positively contributes directly toimprovement of the group’s capacity utilisation and margin. Increasing the underlying collaboration is given permanent attention in order to strengthen both the individualcompanies and the group as a whole.

Managerial aspects and risk profile

OperationalAalberts Industries is susceptible to a number of operating risks. These are mainly the techno-logical condition and continuity of the production resources and environmental control andsafety. Aalberts Industries invests annually in the most up-to-date production technologiesand development of new products and processes. Operational management follows thestatutory developments in the field of environment and industrial innovations closely andwhere possible takes proactive steps.The markets which Aalberts Industries is active on are diverse and distinctive. That alsoapplies to the countries and geographical regions where the company has a presence. Pricedevelopments, economic trends and the development of raw material and energy prices areessential for Aalberts Industries in organising risk policy.

Aalberts Industries attempts to manage the volatility on financial results by processing priceincreases in the end prices in a short time period. The price policy is further discussed herebelow in the paragraph Financial.

Aalberts Industries is strongly focused on recruiting,

keeping and developing talented, enterprising people.

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General information


With regard to the purchasing policy purchase volumes are consolidated and dynamicpurchase contracts with suppliers are entered into in terms of prices, volumes and periods.Reducing material use and managing energy costs are also important points. AalbertsIndustries plays on developments on sales markets by worldwide distribution of the activitiesover a large number of customers, products and markets as well as possible. Further increaseof the diversification of Aalberts Industries is an important strategic objective. This is given alot of attention in both the investment policy as well as any operational business operations.

FinancialAalberts Industries has a solid balance sheet and implements an active policy of optimisingthe balance sheet ratios. This limits the financial risks and financial solidity is maintained inthe long term. The stock exchange quotation makes it possible for acquisitions to make awell-considered choice in determining the best financing mix. Aalberts Industries is suscep-tible to financial risks which are worked out in detail on pages 59 to 61 of the financial statements. The most significant are currency, credit and interest rate risks. By coordinatingthe currency streams at holding company level and consolidating purchase and sales streamsin certain currencies regionally, the group neutralises sensitivity to exchange rate fluctuationsinsofar as possible. In general Aalberts Industries is most sensitive for exchange rate fluctua-tions in the British pound, the US dollar, the Polish zloty and the Russian rouble. As far ascredit risks are concerned the group follows a restrictive policy in which the creditworthinessof customers is repeatedly checked and most of the accounts receivable portfolio is creditinsured. The interest rate risk is relatively limited and the group has various options foractively managing interest rate fluctuations actively. The research and development expen-diture, necessary to increase the portfolio qualitatively and quantitatively, is directly chargedto the income statement.

LegalOn 20 September 2006 Aalberts Industries and two of its group companies were finedEUR 100.8 million for an alleged infringement of competition regulations. After a thoroughlegal analysis of the arguments and in view of the opinion, based on the facts, that AalbertsIndustries had not infringed any competition regulations, the Management Board, in consul-tation with its legal advisors, filed an appeal with the Court of First Instance in Luxembourg.The hearing took place on 2 February 2010 and the judgment is expected on 24 March 2011.The Management Board continues to believe that no competition regulations were infringedand therefore no provision has been formed for this matter. In January 2007 AalbertsIndustries provided the European Commission with a bank guarantee which was extendedfor two years in January 2010.

Risk managementThe internal risk management system is intended to identify the most important risks and totake effective measures. Rapid, practical applicability within the decentralised structure ofAalberts Industries therefore forms the most important criterion. The financial reporting is

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Annual report 2010

COOL QUALITYFor barrel manufacturers and beer brewers DSI

Getränkearmaturen (DEU) produces complete tap systemsconsisting of heads, insulated tubes and pipes. The tap head

is fitted with a bayonet catch and eyepiece and can becooled automatically. This also applies for the pipes, which

are often in warm rooms. This system ensures optimumhygiene and that product quality is maintained longer.


Aalberts Industries has a solid balance sheet

and implements an active policy of optimising

the balance sheet ratios.

formulated within a strict framework of budgeting and reporting. The individual groupcompanies report regularly to the Management Board including on associated risks.This report is discussed in detail with the Management Board, which assesses the accuraciesand completeness of this report including compliance with the prescribed risk managementpolicy.Accurate risk management and control systems do not offer absolute certainty that mistakes,fraud, losses or illegal transactions can be prevented. The Management Board is of theopinion that the risk management and control systems offer a reasonable level of certaintythat the financial reporting does not contain any material misstatement. The ManagementBoard has no indications that the systems did not function properly in 2010. Likewise theManagement Board has no reason to assume that the risk management and control systemswill not continue to function adequately during the current financial year, as worded onpage 35 in the Management Board’s declaration.

Corporate governance

In the opinion of the Supervisory Board and Management Board Aalberts Industries pursuesa consistent corporate governance policy, based on the Dutch Corporate Governance Code.Aalberts Industries endorses the principles of the Corporate Governance Code and appliesvirtually all the best practice provisions of this Code. On a limited scale these have beenadjusted to specific circumstances of Aalberts Industries. These adjustments are explainedunder Investor Relations on the company’s website. This also includes all exceptional regula-tions and rules drawn up with regard to the applicable corporate governance structure.The main amendments to the Corporate Governance Code relate to the following topics:1. Management Board: The company wants to offer such employment conditions that the

right person is recruited for the right position. The term of the appointment is unlimited.Management Board members must obtain the approval of the Supervisory Board beforeaccepting supervisory positions at other companies. Irrespective of the ordinary shares inAalberts Industries N.V., private investments do not have to disclosed. On dismissal theexisting employment conditions and regulations are taken into account; this also appliesto new appointments.

2. Members of the Supervisory Board: Not prohibited from holding shares in AalbertsIndustries. A former director may be a member of the Supervisory Board and can also beChairman of that Board. With regard to expertise the Supervisory Board must becomposed such that together the members of the Board can fulfil their responsibilities.The maximum duration of membership is three terms of four years but in the interests ofthe company deviation from this is possible. Aalberts Industries does not specify themaximum number of Supervisory Board memberships that may be held by a member ofits Supervisory Board but strives to apply a qualitative check. Before accepting anappointment or reappointment as a member of the Supervisory Board of another company,a member of Aalberts Industries’ Supervisory Board must consult the Supervisory Board

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General information


and the President of the Management Board in order to establish whether the acceptanceof this appointment or reappointment is compatible with membership of AalbertsIndustries’ Supervisory Board.

3. Company secretary: The nature and size of the group is such that the creation of theposition of company secretary is deemed unnecessary.

4. Provision of information: New information will be disseminated simultaneously and equally.Individuals are provided with information based on the above principle. The externalauditor will not be invited to attend the General Meeting unless this is legally required orthe Supervisory Board decides otherwise; the company will enable questions regarding theaudit to be submitted to the external auditor in writing prior to this meeting.

The Management Board believes that with the explanatory notes as published on the websiteit has complied in full with the principle of ‘apply or explain’. All the regulations pursuant tothe Code that are applicable to Aalberts Industries in respect of reporting and transparency ofinformation have been incorporated in this annual report and on Aalberts Industries’ website.During 2010 there were no changes to the corporate governance structure at AalbertsIndustries.

Decision making

The tasks and powers of the General Meeting, the Supervisory Board, the ManagementBoard and the Stichting Prioriteit “Aalberts Industries N.V.” have been defined in such a waythat a well-balanced allocation has been achieved in respect of the participation andinfluence of the company bodies. In doing so Aalberts Industries has ensured insofar as thisis possible that when essential decisions are made the interests of all the company’s stake-holders are taken into account and that the decision-making process can, at all times,be conducted in a prudent manner.

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Annual report 2010

PRECISION PARTS FOR THE

METAL & ELECTRONICS INDUSTRYMetalis extrusion coats (overmoulds) precision stamping parts

for use in switch and distribution boxes for example whichare processed in various types of connectors. Designing,

assembling and overmoulding takes place at subsidiaries inFrance and Slovakia. The parts are sold in Western and

Eastern Europe and in China.


50 1 Consolidated balance sheet51 2 Consolidated income statement52 3 Consolidated statement of comprehensive income 52 4 Consolidated statement of changes in equity53 5 Consolidated cash flow statement54 6 Notes to the consolidated financial statements54 7 Summary of significant accounting policies59 8 Financial risk management62 9 Segment reporting64 10 Intangible assets66 11 Property, plant and equipment67 12 Inventories67 13 Trade receivables68 14 Other current assets68 15 Financial instruments69 16 Equity70 17 Borrowings72 18 Deferred income tax73 19 Provisions75 20 Other current liabilities75 21 Personnel expenses76 22 Other operating expenses76 23 Net finance cost77 24 Income tax expenses77 25 Earnings and dividends per ordinary share77 26 Contingencies78 27 Operational lease and rent commitments78 28 Business combinations79 29 Related parties80 30 Company balance sheet80 31 Company income statement81 32 Notes to the company financial statements84 33 Special controlling rights under the articles of association85 34 Independent auditor’s report

Financial statements 2010


1 Consolidated balance sheetbefore profit appropriation

(in EUR x 1,000) notes 31–12–2010 31–12–2009

AssetsGoodwill 10 464,979 446,380Other intangible assets 10 144,184 138,432Property, plant and equipment 11 530,380 493,586Deferred income tax assets 18 20,674 19,743

Non-current assets 1,160,217 1,098,141

Inventories 12 386,668 298,434Trade receivables 13 199,870 153,737Other current assets 14 30,650 27,495Cash and cash equivalents 100 100

Current assets 617,288 479,766

Total assets 1,777,505 1,577,907

Equity and liabilitiesShareholders’ equity 4 732,553 615,657Minority interests 4 13,162 10,860

Total equity 745,715 626,517

Non-current borrowings 17 414,564 468,387Employee benefit plans 19 26,667 27,946Deferred income tax liabilities 18 51,109 38,182Other provisions and long-term liabilities 19 21,069 5,697

Non-current liabilities 513,409 540,212

Current borrowings 17 49,834 54,038Current portion of non-current borrowings 17 129,418 108,242Trade and other payables 223,011 160,450Current income tax liabilities 8,298 458Other current liabilities 20 107,820 87,990

Current liabilities 518,381 411,178

Total equity and liabilities 1,777,505 1,577,907

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Annual report 2010

Consolidated balance sheet


51



2 Consolidated income statement

(in EUR x 1,000) notes 2010 2009

Revenue 9 1,682,781 1,404,933

Raw materials and work subcontracted (678,615) (577,310)Personnel expenses 21 (473,877) (412,065)Depreciation of property, plant and equipment 11 (68,326) (69,925)Amortisation of intangible assets 10 (12,856) (12,738)Other operating expenses 22 (282,054) (246,745)

Total operating expenses (1,515,728) (1,318,783)

Operating profit 167,053 86,150

Interest income 23 7,943 5,543Interest expenses 23 (34,595) (37,803)Foreign currency exchange results 23 (2,452) (2,835)Derivative financial instruments 23 1,593 451

Net finance cost (27,511) (34,644)

Profit before tax 139,542 51,506

Tax expenses 24 (33,095) (9,501)

Net profit after tax 106,447 42,005

Attributable to:Ordinary shareholders 104,436 41,471Minority interest 2,011 534

Earnings per ordinary share (before amortisation)Basic 25 1.10 0.51Diluted 25 1.10 0.51

Consolidated income statement


3 Consolidated statement of comprehensive income

(in EUR x 1,000) 2010 2009

Profit financial year 106,447 42,005

Exchange rate differences 18,909 5,932

Fair value changes derivative financial instruments 219 3,442

Taxes on direct equity movements (482) (1,082)

Total comprehensive income 125,093 50,297

Attributable to:Ordinary shareholders 122,692 49,394

Minority interest 2,401 903

4 Consolidated statement of changes in equity

Issued Share Other Currency Retained Share- Minority Totalcapital premium reserves translation earnings holders’ interests equity

account and equityhedging

(in EUR x 1,000) reserve

As at 1 January 2009 25,838 202,623 301,123 (45,327) 92,753 577,010 9,943 586,953Dividends 2008 677 (677) – – (10,747) (10,747) (87) (10,834)Addition to other reserves – – 82,006 – (82,006) – – –Contributions and

acquisitions – – – – – – 101 101Total comprehensive income – – – 7,923 41,471 49,394 903 50,297

As at 31 December 2009 26,515 201,946 383,129 (37,404) 41,471 615,657 10,860 626,517Dividends 2009 156 (156) – – (6,746) (6,746) (99) (6,845)Addition to other reserves – – 34,725 – (34,725) – – –Share based payments – – 950 – – 950 – 950Total comprehensive income – – – 18,256 104,436 122,692 2,401 125,093

As at 31 December 2010 26,671 201,790 418,804 (19,148) 104,436 732,553 13,162 745,715

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Annual report 2010

Consolidated statement of comprehensive incomeand changes in equity


5 Consolidated cash flow statement

(in EUR x 1,000) 2010 2009

Cash flows from operating activitiesOperating profit 167,053 86,150Adjustments for:Depreciation of property, plant and equipment 68,326 69,925Amortisation of intangible assets 12,856 12,738Result on sale of equipment 1,239 322Changes in provisions and other movements (1,253) (3,155)

Changes in inventories (41,567) 66,567Changes in trade and other receivables (23,921) 27,359Changes in trade and other payables 52,717 (19,414)

Changes in working capital (12,771) 74,512

Cash flow from operations 235,450 240,492Finance income received 8,881 4,668Finance expenses paid (36,674) (42,871)Income taxes paid (22,291) (6,067)

Net cash from operating activities 185,366 196,222

Cash flows from investing activitiesAcquisition of subsidiaries (72,279) (1,865)Purchase of property, plant and equipment (58,705) (50,292)Purchase of intangible assets (2,119) (1,838)Proceeds from sale of equipment 2,835 3,543

Net cash from investing activities (130,268) (50,452)

Cash flows from financing activitiesProceeds from non-current borrowings 72,365 189Repayment of non-current borrowings (118,781) (83,084)Dividends paid (6,746) (10,747)Minority interest and other cash flows (99) 64

Net cash from financing activities (53,261) (93,578)

Net increase in cash and current borrowings 1,837 52,192

Cash and current borrowings at beginning of period (53,938) (107,726)Net increase in cash and current borrowings 1,837 52,192Currency differences on cash and current borrowings 2,367 1,596

Cash and current borrowings at end of period (49,734) (53,938)

Cash 100 100Current borrowings (49,834) (54,038)

Cash and current borrowings at end of period (49,734) (53,938)

53



Consolidated cash flow statement


6 Notes to the consolidatedfinancial statements

Aalberts Industries, founded in 1975 and quotedon the stock exchange since 1987, is an inter -nationally active specialist in industrial productsand systems with high-quality technicalknowledge. The company develops solutions fordiverse customer needs, divided into the groupactivities Industrial Services and Flow Control.Industrial Services supplies specialised products,processes and systems to specific marketsegments including the semiconductor andautomotive industry, the metal & electronicsindustry and precision engineering, the medicalsector, the aerospace industry, defence and the(sustainable) energy sector.Flow Control concentrates on the development,production and assembly of products and systemsfor the distribution and regulation of liquids andgases. This group activity is focused on inter aliathe housing market, commercial buildings, privateand public new-builds and renovation, utilitynetworks, district heating and cooling, fireprotection, irrigation systems, the beer and softdrinks industry, laboratory systems and industrialmarkets.Aalberts Industries N.V. is a publicly tradedcompany incorporated in Utrecht and domiciledin Langbroek, the Netherlands. The consolidatedIFRS financial statements of the company for theyear ended 31 December 2010 comprise thecompany and its subsidiaries. The financial state-ments have been adopted by the SupervisoryBoard on 22 February 2011 and will be submittedfor approval to the General Meeting on 21 April2011. The financial statements have beenprepared by the Management Board and will bereleased for publication on 23 February 2011.

7 Summary of significantaccounting policies

7.1 Basis for preparationThe European regulation number 1606 came intoforce on 1 January 2005 and consequently theGroup has adopted the International FinancialReporting Standards (IFRS) issued by theInternational Accounting Standards Board (IASB)and endorsed by the European Union for thepreparation of consolidated statements. Thefinancial statements are presented in EUR x 1,000,unless mentioned otherwise. The financial state-ments are prepared on the historical costs basisexcept derivative financial instruments which arestated at their fair value. Employee benefits arebased on the projected unit credit method. Theareas where assumptions and estimates are signif-icant to the consolidated financial statements aredisclosed in note 8.3. Standards and interpreta-tions to existing standards adopted for the firsttime in 2010 and being relevant are the following:

n IFRS 3R (Business combinations)n IAS 27R (Consolidated and separate financial

statements)

The adoption of these standards has impacted theannual accounts as the Conbraco acquisition wastreated according to these adjusted standards.We refer to paragraph 28.

Furthermore adjustments from the annual ‘IFRSImprovements project’ in relation to the followingstandards are adopted:n IFRS 2, ‘Share based payment’.n IFRS 5, ‘Non-current assets held for sale and

discontinued operations’.n IFRS 8, ‘Operating segments’.n IAS 1, ‘Presentation of financial statements’.n IAS 7, ‘Statement of cash flows’.n IAS 17, ‘Leases’.n IAS 18, ‘Revenue’.n IAS 36, ‘Impairment of assets’.n IAS 38, ‘Intangible assets’.n IAS 39, ‘Financial instruments: Recognition

and measurement’.n IFRIC 9, ‘Reassessment of embedded

derivatives’.n IFRIC 16, ‘Hedges of a net investment in

foreign operation’.

7.2 Basis for consolidation7.2.1 SubsidiariesSubsidiaries are those entities controlled by thecompany. Control exists when the company hasthe power to govern directly or indirectly thefinancial and operational policies of an entity toobtain benefits from its activities. The financialstatements of subsidiaries are included in theconsolidated financial statements from the datethat control commences until the control ceases.

7.2.2 Investments in associated companiesAssociates are those entities in which the Groupholds, directly or indirectly, significant influence,but no control, over the financial and operatingpolicies. Associates are valued using the equitymethod. The consolidated financial statementsinclude the Group’s share of the total recognisedgains and losses of associates based on the equitymethod accounting, from the date that significantinfluence commences until the date that signif-icant influence ceases. When the Group’s share oflosses exceeds the net book amount of theassociate, the net book amount is reduced to zeroand recognition of further losses is discontinuedexcept to the extent that the Group has incurredobligations in respect of the associate. If theassociate subsequently reports profits, the Groupresumes recognising its share of those profits onlyafter its share of the profits equals the share oflosses not recognised.

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Annual report 2010

Notes to the consolidated financial statements


55




7.2.3 Business combinationsBusiness combinations are accounted for byapplying the acquisition method. This means thatat the time of acquisition the identifiable assetsand liabilities of the acquiree are included at theirfair value, taking into account any contingentliabilities, indemnification assets, reacquired rightsand the settlement of existing clients with thenewly acquired group company. The purchaseconsideration is set at the payment transferredand consists of the fair value of all assets trans-ferred, obligations entered into and shares issuedin order to obtain control of the acquired entity(including an estimate of the conditional purchaseconsideration). All identifiable intangible assets ofthe acquired company are recorded at fair value.Intangible assets are separately identified andvalued. An asset is identifiable when it eitherarises from contractual or other legal rights or if itis separable. An asset is separable if it can be soldon its own or with other assets. The transferredpayment is allocated across the fair value of allassets and liabilities with any residual allocated togoodwill. Excess of the acquirer’s interest in thenet fair value of the acquiree’s identifiable assetsover the fair value of the payment is recognisedimmediately in the statement of comprehensiveincome.Transaction costs incurred by the acquirer inrelation to the business combination are notincluded in the cost price of the business combi-nation but once incurred are recognised as acharge in the income statement unless theyrefer to the issue of debt instruments or equity instruments.

How any minority interests are accounted for isdetermined per transaction. The minority interestsare valued either at the fair value on the acqui-sition date or at a proportionate part of theacquiree’s identifiable assets and liabilities. If anacquisition is effected by consecutive purchases(step acquisition) the identifiable assets and liabil-ities of the acquiree are included at their fair valueonce control is acquired. Any profit or losspursuant to the difference between the fair valueof the interest held previously in the acquiree andthe carrying amount is included in the statementof comprehensive income.

Newly acquired group companies are included inthe consolidation once a controlling interest hasbeen acquired.

7.2.4 Intercompany and related party transactionsThe Management and Supervisory Board and thepension funds in the United Kingdom have beenidentified as related parties. Transactions with theManagement Board and the Supervisory Boardonly consist of remuneration. Transactionsbetween group companies including unrealisedgains on these transactions are eliminated.

Unrealised losses are also eliminated unless thetransaction provides evidence of an impairment ofthe asset transferred. Transactions with minorityinterests are treated as third party transactions.

7.3 Segment reportingOperational segment reporting is performedconsistently to the internal reporting as providedto the Management Board. The ManagementBoard is responsible for the allocation of theavailable resources, the assessment of the opera-tional results and strategic decisions.

7.4 Foreign currency transactions andtranslation7.4.1 Functional and presentation currencyItems included in the financial statements of eachof the Group’s entities are measured using thecurrency of the primary economic environment inwhich the entity operates (functional currency).The consolidated financial statements arepresented in euros, which is the presentationcurrency of the Group and the functionalcurrency of the parent company.

7.4.2 Transactions and balancesForeign currency transactions are translated intothe functional currency using the exchange rateprevailing at the dates of the transactions (spotrate). Foreign currency exchange gains and lossesresulting from the settlement of financial trans -actions and from the translation at year-endexchange rates of borrowings and cash denomi-nated in foreign currencies are recognised in theincome statement as finance cost. Non-monetaryassets and liabilities that are measured in terms ofhistorical cost in a foreign currency are translatedusing the exchange rate at the date of trans-action. Non-monetary assets and liabilities denom-inated in foreign currencies that are stated at fairvalue are translated to euros at foreign currencyexchange rates effective at the date the valueswere determined. A summary of the maincurrency exchange rates applied in the year underreview and the preceding year reads as follows:

Currency 1 British 1 US exchange rates pound dollar

(GBP) = EUR (USD) = EUR

2010 Year-end 1.168 0.7552010 Average 1.166 0.7552009 Year-end 1.111 0.6982009 Average 1.123 0.720

7.4.3 Group companiesThe results and financial position of all the groupcompanies that have a functional currencydifferent from the presentation currency are trans-lated into the presentation currency as follows:n Assets and liabilities for each balance sheet

presented are translated at the closing rate atthe date of that balance sheet;


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Annual report 2010

n Income and expenses for each incomestatement are translated at average exchangerates. All resulting exchange differences arerecognised as a separate component of equity.This also is applicable to currency, exchangedifferences on intercompany loans which aretreated as investments in foreign activities.

7.5 Intangible assets7.5.1 GoodwillGoodwill represents the excess of the costs of anacquisition over the fair value of the Group’sshare of the net identifiable assets of the acquiredsubsidiary at the date of acquisition. Goodwill isallocated to cash generating units, being theparts of the business segments benefiting fromthe business combination in which the goodwillarose. Goodwill is not amortised but is testedannually for impairment.

7.5.2 SoftwareAcquired software is capitalised and stated at costless accumulated amortisation and impairmentlosses. Software is amortised over the useful life,normally 3 years.

7.5.3 Research and developmentExpenditure on research and development activ-ities, undertaken with the prospect of gainingnew technical knowledge and new commerciallyfeasible products is recognised in the incomestatement. When future benefits from the development activities can reliably be measured,development costs are capitalised. Otherwise theywill be expensed through the income statement.

7.5.4 Other intangible assetsOther intangible assets include brand names andcustomer base. Intangible assets that are acquiredthrough acquired companies are initially valued atfair value. This fair value is subsequently treatedas deemed cost. These identifiable intangibles arethen systematically amortised over the expecteduseful life between 10 and 20 years.

7.5.5 Subsequent expenditureSubsequent expenditure on capitalised intangibleassets is capitalised only when it increases thefuture economic benefits embodied in the specificasset to which it relates. All other expenditure isexpensed as incurred.

7.5.6 AmortisationThe straight-line amortisation method is used,based on the estimated useful life of the intan-gible asset. The amortisation period and theamortisation method have been reviewed at leastat each financial year-end. If the expected usefullife of the intangible asset was significantlydifferent from previous estimates, the amorti-sation period has been changed accordingly.Goodwill is not subject to amortisation.

7.6 Property, plant and equipment7.6.1 ValuationProperty, plant and equipment are stated at costless accumulated depreciation based on theestimated useful life of the assets concerned andimpairment losses. The cost of self-constructedassets includes the cost of materials, direct labourand an appropriate proportion of directly attrib-utable overheads.

7.6.2 Subsequent expenditureThe Group recognises in the net book amount ofan item of property, plant and equipment thecost of replacing part of such an item when thatcost is incurred if it is probable that the futureeconomic benefits embodied with the item willflow to the Group and the cost of the item can bemeasured reliably. The carrying amount of thereplaced part is derecognised. All other costs suchas repair and maintenance costs are recognised inthe income statement as an expense as incurred.The difference between opening and closingbalance of assets under construction normallyconsists of additions and reclassifications to othercategories of property, plant and equipment.

7.6.3 DepreciationFor depreciation, the straight-line method is used.The useful life and residual value are reviewedperiodically through the life of an asset to ensurethat it reflects current circumstances. Depreciationis not applied to property, plant and equipmentunder construction. The useful life of thefollowing categories are used for depreciationpurposes:

Category Useful life Useful life(minimum) (maximum)

Land Infinite InfiniteBuildings and installations 5 years 40 years

Machinery 5 years 15 yearsOther factory equipment 3 years 10 yearsOffice equipment 3 years 5 yearsComputer hardware 3 years 5 yearsCompany cars 3 years 5 yearsCommercial vehicles 3 years 6 years

7.7 Impairment of non-financial assetsCircumstances may arise where the net bookamount of an asset may not be economicallyrecoverable from future business activity.Although future production may be technicallypossible and for commercial reasons necessary,this may be insufficient to recover the currentcarrying value in the future. Under these circum-stances, it is required that a write-down of thenet book amount to the recoverable amount (thehigher of its fair value less cost to sell and itsvalue in use) is charged as an immediateimpairment expense in the income statement.Goodwill and intangible assets with indefinite



57




lives are tested for impairment annually, whereasother assets should be tested when circumstancesindicate that the carrying amount may not berecoverable. For the purpose of assessingimpairment, assets are grouped at the lowestlevels for which there are separately identifiablecash flows (cash generating units). An impairmentloss will be reversed if there is a change in theestimates used to determine the recoverableamount of the assets since the last impairmentloss was recognised. The net book amount of theasset will be increased to its recoverable amount.Goodwill is never subject to reversion ofimpairment losses recognised.

7.8 InventoriesInventories are measured at the lower of cost andnet realisable value. Net realisable value is theestimated selling price in the ordinary course ofbusiness less the estimated costs of completionand the estimated costs necessary to make thesale. Cost includes all costs of purchase, costs ofconversion and other costs incurred in bringingthe inventories to their present location andcondition. The cost of inventories, other thanthose for which specific identification of costs areappropriate, is assigned by using weightedaverage cost formula. Borrowing costs areexcluded.

7.9 Trade receivablesTrade receivables are recognised at fair value,taking into account unrecoverable receivables.Indications for unrecoverable receivables arebased on the past due aging (in general whenreceivables are past due between 60 to 90 days aprovision is accounted for) and credit insuranceconditions, if applicable.

7.10 Cash and cash equivalentsCash and cash equivalents comprise cash balancesand deposits. Bank overdrafts that are repayableon demand form an integral part of the Group’scash management and are included as acomponent of cash and current borrowings forthe purpose of the cash flow statement.

7.11 Share capitalShare capital is classified as equity.

7.12 Share-based payments (PerformanceShare Plan)Selected employees of the Group are given theopportunity to participate in a long-term equity-settled incentive plan. The fair value of the rightsto shares is included as a charge during thevesting period and the total equity is amendedaccordingly. The total amount taken into accountis determined based on the fair value of theshares as determined on the grant date withouttaking into account the non-market relatedperformance criteria and continued employmentconditions (“vesting conditions”). These vesting

conditions are included in the expected numberof shares that will be vested and this estimate willbe revised on the date of vesting based on theactual number of shares that are granted. Theshares in question are new ordinary shares to beissued by Aalberts Industries N.V.

7.13 Derivatives and borrowingsDerivatives are stated at fair value. The change infair value is included in net finance cost if nohedge accounting is applied. Fair value changesfor derivative cash flow hedges which areaccounted for under hedge accounting are addedor charged through the total comprehensiveincome into equity, taking taxation into account.Upon expiration the result from derivatives isbrought to the income statement in associationwith the hedged items. Borrowings are recog-nised initially at fair value, net of transaction costsincurred. Borrowings are subsequently stated atamortised cost; any difference between theproceeds (net of transaction costs) and theredemption value is recognised in the incomestatement over the period of the borrowingsusing the effective interest method. Borrowingsare classified as current liabilities unless the Grouphas an unconditional right to defer settlement ofthe liability for at least 12 months after thebalance sheet date.

7.14 Finance leasesThe Group leases certain property, plant andequipment. Leases of property, plant andequipment where the Group has the majority ofall the risks and rewards of ownership areclassified as finance leases. Finance leases arecapitalised at the lease’s commencement at thelower of the fair value of the leased property andthe present value of the minimum leasepayments. Lease payments are allocated betweenthe liability and finance charges so as to achieve aconstant rate on the finance balance outstanding.The corresponding rental obligations, net offinance charges, are included in non-currentborrowings. The interest element of the financecost is charged to the income statement over thelease period so as to produce a constant periodicrate of interest on the remaining balance of theliability for each period. The property, plant andequipment acquired under finance leases is depre-ciated over the shorter of the useful life of theasset and the lease term.

7.15 Deferred income taxDeferred income tax is provided in full, using theliability method, on temporary differences arisingbetween the tax bases of assets and liabilities andtheir net book amounts in the consolidatedfinancial statements. However, if the deferredincome tax arises from initial recognition of anasset or liability in a transaction other than abusiness combination that at the time of thetransaction affect neither accounting nor taxable


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Annual report 2010

profit or loss, it is not accounted for. Deferredincome tax is determined using tax rates and lawsthat have been enacted or substantially enactedby the balance sheet date and are expected toapply when the related deferred income tax assetis realised or the deferred income tax liability issettled. The deferred tax asset is recognised forthe carry-forward of unused tax losses andunused tax credits to the extent that it is probablethat future taxable profit will be available againstwhich the unused tax losses and unused taxcredits can be utilised.

7.16 Employee benefit plansThe Group has a number of pension plans inaccordance with local conditions and practices.Group companies operate various pensionschemes. The schemes are generally fundedthrough payments to insurance companies ortrustee-administered funds, determined byperiodic actuarial calculations. The Group hasboth defined benefit and defined contributionplans. A defined contribution plan is a pensionplan under which the Group pays fixed contribu-tions into a separate entity. The Group has nolegal or constructive obligations to pay furthercontributions if the fund does not hold sufficientassets to pay all employees the benefits relatingto employee service in the current and priorperiods. In the UK, Germany, France, Italy andNorway, the plans are partly defined benefitplans. Typically, defined benefit plans define anamount of pension benefit that an employee willreceive on retirement, usually dependent on oneor more factors such as age, years of service andcompensation. The defined benefit obligationsare measured at present value, taking intoaccount actuarial assumptions; plan assets arevalued at fair value. The net periodic pensioncosts (consisting of service costs, interest costsand expected return on assets) are recognised aspersonnel expenses. The liability recognised in thebalance sheet in respect of defined benefitpension plans is the present value of the definedbenefit obligation at the balance sheet date lessthe fair value of plan assets, together with adjust-ments for unrecognised actuarial gains or lossesand past service costs. The defined benefitobligation is calculated annually by independentactuaries using the projected unit credit method.The present value of the defined benefitobligation is determined by discounting theestimated future cash outflows using interestrates of high quality corporate bonds that aredenominated in the currency in which thebenefits will be paid and that have terms tomaturity approximating to the terms of therelated pension liability.Actuarial gains and losses arising from experienceadjustments and changes in actuarial assumptionsin excess of the greater of 10% of the value ofplan assets or 10% of the defined benefitobligation are charged or credited to income over

the employees’ expected average remainingworking lives. Past-service costs are recognisedimmediately in income, unless the changes to thepension plan are conditional on the employeesremaining in service for a specified period of time(the vesting period). In this case, the past-servicecosts are amortised on a straight-line basis overthe vesting period.The contributions are recognised as personnelexpenses when they are due. Prepaid contribu-tions are recognised as an asset to the extent thata cash refund or a reduction in the futurepayments is available.

7.17 ProvisionsA provision is recognised in the balance sheetwhen the Group has a legal or constructiveobligation as result of a past event, and it isprobable that an outflow of economic benefitswill be required to settle the obligation. Provisionsare determined by discounting the expectedfuture cash flows at a pre-tax rate that reflectscurrent market assessments of the time value ofmoney and, where appropriate, the risks specificto the liability. Provisions have been made inconnection with liabilities related to normalbusiness operations. These comprise mainlyrestructuring costs and environmental restoration.The provisions are mainly non-current.

7.18 Revenue recognitionRevenue comprises the fair value of the consider-ation received or receivable for the sale of goodsand services in the ordinary course of business.Revenue includes the proceeds of goods andservices supplied, excluding VAT and net of pricediscounts and bonuses. The proceeds of goodssupplied are recognised as soon as all majorownership rights and risks in respect of the goodshave been transferred to the buyer. Sales ofservices are recognised in the accounting periodin which the services are rendered on the basis ofthe actual service provided as a proportion of thetotal services to be provided. Royalty income isrecognised on an accrual basis in accordance withthe substance of the relevant agreements.

7.19 Other incomeOther income is income not related to the keybusiness activities of the Group or relates toincidental and/or non-recurring items, like incomefrom the sale of nonmonetary assets and or liabil-ities, commissions from third parties, governmentgrants and insurance amounts received. Grantsfrom the government are recognised at fair valuewhere there is a reasonable assurance that thegrant will be received and the Group will complywith all related conditions. Government grantsrelating to costs are deferred and recognised inthe income statement over the period necessaryto match the costs they are intended tocompensate. Government grants relating to thepurchase of property, plant and equipment are



59




deducted from the carrying amount of thatproperty, plant and equipment. Insuranceamounts received relate to business interruptioninsurance and for material damage insurance theexcess amounts received above the net bookvalue of the lost assets.

7.20 Net finance costInterest expense and income on current and non-current borrowings, foreign currency exchangeresults and fair value changes on derivativefinancial instruments are recognised in theincome statement in net finance cost if no hedgeaccounting is applied. Results from derivativeinterest instruments for which hedge accountingis applied are brought from equity to net financecost upon expiration and in relation with thehedged item.

7.21 TaxationIncome tax expenses are based on the pre-taxprofit at the ruling tax rate, taking into accountany tax-exempt results, tax losses carried forwardand fully or partly deductible costs.

7.22 Share in result of associated companiesThis item represents the share in the net profit ofassociated companies not included in the consoli-dation, and the profit realised on the disposal ofassociated companies.

7.23 Notes to the consolidated cash flowstatementThe cash flow statement is drawn up using theindirect method. The cash paid for the acquiredgroup companies, less the available cash, isrecorded under cash flow from investing activities.The changes in assets and liabilities as a result ofacquisitions are eliminated from the cash flowsarising from these assets and liabilities. Thesechanges have been incorporated in the cash flowfrom investment activities under ‘Acquisition ofsubsidiaries’. The net cash flow consists of the netchange of cash and current borrowings incomparison with the previous year under review.

7.24 Operational leasesLeases in which a significant portion of the risksand rewards of ownership are retained by thelessor are classified as operational leases.Payments made under operating leases arecharged to the income statement on a straight-line basis over the period of the lease.

7.25 Dividend distributionDividend distribution to the ordinary shareholdersis recognised as a liability in the financial state-ments in the period in which the dividends areapproved by the company’s shareholders.

8 Financial risk management

8.1 Financial risk factorsThe Group’s activities are exposed to a variety offinancial risks: market risk, credit risk, liquidity risk,cash flow and interest rate risk and capital risk.The Group uses derivative financial instruments tohedge certain risk exposures. Risk management iscarried out by a central treasury department‘Group Treasury’ under policies approved by theManagement Board. Group Treasury identifies,evaluates and hedges financial risks in closecooperation with the Group’s operating units.The Board provides principles for overall riskmanagement, as well as policies covering specificareas, such as foreign currency exchange risk,interest rate risk, credit risk, and the use of deriv-ative financial instruments and non-derivativefinancial instruments. These principles may differper group company or business unit being a resultof different local market circumstances.

8.1.1 Market riskThe Group operates internationally and isexposed to foreign currency exchange risk arisingfrom various currency exposures, primarily withrespect to the US dollar and the British pound.Foreign currency exchange risk arises from futurecommercial transactions, recognised assets andliabilities and net investments in foreign opera-tions. Foreign currency exchange risk arises whenfuture commercial transactions or recognisedassets or liabilities are denominated in a currencythat is not the entity’s functional currency. GroupTreasury is responsible for managing the netposition in each foreign currency. In general,remaining substantial currency risks are coveredby using currency instruments. The Group hasseveral foreign subsidiaries of which the netequity is subject to currency risk. Where possible,this currency risk is hedged by financing thesubsidiaries concerned with loans denominated inthe relevant currencies, subject of course to thelegal and fiscal opportunities and limitations.The US dollar and British pound are the majorforeign currencies for the Group. At 31 December2010, if the euro had weakened against the USdollar by 10%, with all other variables heldconstant, the net profit of the Group would havebeen impacted by negative EUR 0.6 million (2009:EUR 2.1 million). The net equity at year-endwould have been impacted by positive EUR 6.8million (2009: positive EUR 4.7 million). At 31December 2010, if the euro had weakenedagainst the British pound by 10%, with all othervariables held constant, the net profit of theGroup would have been impacted by positiveEUR 0.9 million (2009: positive EUR 2.5 million).The net equity at year-end would have beenimpacted by positive EUR 10.4 million (2009:positive EUR 10.6 million).The Group is exposed to commodities price riskbecause of its dependence on certain raw


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materials, especially copper. Generally, commodityprice variances are absorbed by the sales pricedevelopments. Additionally the Group makes useof its strong position in the market forcommodities to realise the purchase and deliveryof raw materials at the best possible conditions.Where considered necessary, exposures with highrisk may be covered through commodity futurecontracts, besides currency and interest hedgingderivatives to cover market risks relating to foreigncurrency exchange rates and interest rates.

8.1.2 Credit riskThe Group has no significant concentrations ofcredit risk due to the diversification of activitiesand markets. It has policies in place to ensure thatwholesale sales of products are made tocustomers with an appropriate credit history,as also required by credit insurance. The vastmajority of companies in the Group make useof credit insurance, unless approved by highermanagement. Derivative counterparties and cashtransactions are limited to high-credit-qualityfinancial institutions. The maximum credit riskon financial assets amounts to EUR 237,115(2009: EUR 186,663), being the total carryingvalue of these assets before provisions forimpairment of receivables.

8.1.3 Liquidity riskPrudent liquidity risk management impliesmaintaining sufficient cash and marketablesecurities, the availability of funding throughan adequate amount of credit facilities and theability to close out market positions. Due tothe dynamic nature of the underlying businesses,Group Treasury aims to maintain flexibility infunding by keeping credit lines available at anumber of well-known financial institutions.On the basis of cash flow forecasting models,the Group is testing on a periodic basis, whetherthe available credit facilities will cover theexpected credit need. Based on these analyses, theGroup believes that the current expected creditneed is sufficiently covered. On a going concernbasis, except for major acquisitions, the Grouptherefore expects to be able to cover cash flowfrom investing and financing activities out of thecash flow from operating activities.

8.1.4 Cash flow and interest rate riskAs the Group has no significant interest-bearingassets, the Group’s income and operating cashflows are substantially independent of changesin market interest rates. The Group’s interest raterisk arises mainly from current and non-currentborrowings. Borrowings issued at fixed ratesexpose the Group to interest rate risk. Grouppolicy is to maintain the majority of its borrowingsin floating rate instruments. Where consideredapplicable the Group manages its interest rate riskby using floating-to-fixed interest rate swaps. Suchinterest rate swaps have the economic effect of

converting borrowings from floating rates to fixedrates. At 31 December 2010, if the interest levelsfor euro would have been 100 basis points higher,with all other variables constant, the net profit ofthe Group would have been impacted by negativeEUR 5.9 million (2009: negative EUR 5.6 million),mainly as a result of higher interest expenses onfloating rate borrowings. The net equity at year-end would have been impacted with the sameamount. The change in the market value atbalance sheet date of the derivative financialinstruments, as a result of the interest adjustment,is excluded from this sensitivity analysis.

8.1.5 Capital riskIn order to manage going concern for share-holders and other stakeholders the Group periodi-cally monitors the capital structure in consistencywith the industry and financial institutions throughthe following principal financial ratios: leverageratio (net debt / EBITDA on 12 months rollingbasis), 2010: 2.3 (2009: 3.4), interest cover ratio(EBITDA / net interest expense on 12 monthsrolling basis), 2010: 10.4 (2009: 5.8) and gearing(net debt / total equity), 2010: 0.8 (2009: 1.0).

8.2 Accounting for hedging activitiesThe Group uses financial instruments like interestrate swaps, currency contracts and commodityfutures to hedge cash flow risks from non-currentborrowings, foreign currency exchange andcommodity prices. In accordance with its treasurypolicy, the Group neither holds nor issues derivatefinancial instruments for trading purposes.However, derivatives that do not qualify for hedgeaccounting are accounted for as trading instru-ments. Changes in the fair value of these financialinstruments are recognised immediately in theincome statement. However, where the derivativesqualify for hedge accounting, recognition of anyresulting gain or loss depends on the nature of theitem being hedged. The valuation of the fair valueis done by the financial institutions where theinstruments are held, and derived from the relatedofficial rates and listings.If a derivative financial instrument is designated asa hedge against the variability in the cash flows ofa recognised asset, liability or highly probableforecasted transaction, the effective part of thehedge is recognised through the total result intoequity. If a hedge of a forecasted transactionsubsequently results in the recognition of afinancial asset or liability, the associated gain orloss that was recognised directly in equity isbrought to the income statement. Where hedgeaccounting is applied, the Group has documentedthe relationship between hedging instruments andhedged items, as well as its risk managementobjectives for undertaking these hedge trans -actions.As from 2008 the Group has defined cash flowhedge relations for certain financial instrumentsthat cover interest risk as well as for some deriv-



61




ative financial instruments that are used to hedgethe foreign currency exchange risk of forecastedtransactions.

8.3 Critical accounting estimates andassumptionsThe preparation of financial statements in accor-dance with IFRS requires management to makejudgments, estimates and assumptions that affectthe application of policies and reported amountsof assets and liabilities, revenues and expenses.The estimates and assumptions are based onexperience and factors that are believed to bereasonable under circumstances. Estimates andassumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognisedin the period in which the estimate is revised if therevision affects only that period or in the period ofthe revision and future periods if the revisionaffects both current and future periods. Theaccounting policies have been consistently appliedby group entities to all periods presented in theseconsolidated financial statements.

8.3.1 Estimated impairments of goodwillThe Group tests annually whether goodwill hassuffered any impairment in accordance with theaccounting policy stated in note 7.7. The recov-erable amounts of cash-generating units havebeen determined based on value-in-use calcula-tions. The impairment model used is thediscounted cash flow method using a weightedaverage cost of capital (WACC), the determinationof useful lives and residual values require the useof estimates.

8.3.2 Estimated useful lives and residualvaluesFor depreciation and amortisation, the straight-linemethod is used. The useful life and residual value

of property, plant and equipment and intangibleassets are reviewed periodically during the life ofthe asset to ensure that it reflects current circum-stances.

8.3.3 Pension plansSince the Group is dealing with long-term obliga-tions and uncertainties, assumptions arenecessary for estimating the amount the Groupneeds to invest to provide those benefits.Actuaries calculate the defined benefit obligationpartly based on information from managementsuch as future salary increase, the rate of returnon plan investments, mortality rates, and therates at which plan participants are expected toleave the system because of retirement, disabilityand termination.

8.3.4 TaxesThe Group is subject to taxes in numerous juris-dictions. Judgement is required in determiningthe worldwide provision for taxes. There aremany transactions and calculations for which theultimate tax determination is uncertain during theordinary course of business. The Group recog-nises liabilities for anticipated tax issues based onestimates of whether additional taxes will be due.Where the final tax outcome of these matters isdifferent from the amounts that were initiallyrecorded, such differences will impact thecompany tax and deferred tax provisions in theperiod in which such determination is made.

8.3.5 Other critical accounting estimatesand assumptionsAccounting estimates and assumptions in relationto specific risks are commented in the respectivedisclosure notes.


9 Segment reporting

9.1 Primary reporting format–business segmentsAs at 31 December 2010, the Group is organised on a worldwide basis into two main business segments,Industrial Services and Flow Control. Within these segments the activities are clustered in geographicalareas and / or products. The clusters (operational segments) are aggregated in the segment reporting(reporting segments) as the majority of the characteristics of these clusters are equal within the twobusiness segments. Unallocated mainly consist of supporting activities at holding level and (deferred)income tax assets. The eliminated intersegment revenue is not substantial.

2010 Industrial Flow Unallocated TotalServices Control

Revenue 464,809 1,217,972 – 1,682,781EBITDA 86,781 161,454 – 248,235EBITDA as % of revenue 18.7 13.3 – 14.8EBITA 58,072 121,837 – 179,909EBITA as % of revenue 12.5 10.0 – 10.7Capital expenditure 21,612 41,542 – 63,154Depreciation 28,709 39,617 – 68,326Amortisation 2,780 9,924 152 12,856Average number of employees (x1 FTE) 3,911 7,115 16 11,042Number of employees at year-end (x1 FTE) 4,026 7,494 16 11,536Assets 487,584 1,268,724 21,197 1,777,505Liabilities 105,175 249,815 23,639 378,629

2009 Industrial Flow Unallocated TotalServices Control

Revenue 360,995 1,043,938 – 1,404,933EBITDA 24,382 144,364 68 168,814EBITDA as % of revenue 6.8 13.8 – 12.0EBITA (6,368) 105,257 – 98,889EBITA as % of revenue (1.8) 10.1 – 7.0Capital expenditure 9,969 35,101 – 45,070Depreciation 30,750 39,107 68 69,925Amortisation 3,267 9,320 151 12,738Average number of employees (x1 FTE) 3,847 6,376 18 10,241Number of employees at year-end (x1 FTE) 3,706 6,276 17 9,999Assets 464,768 1,088,793 24,346 1,577,907Liabilities 73,660 195,524 12,963 282,147

Intersegment transfer or transactions are entered into under transfer pricing terms and conditions that arecomparable with terms and conditions with unrelated third parties. Segment assets consist primarily ofintangible assets, property, plant and equipment, inventories, trade debtors and other current assets.Segment liabilities do not include borrowings, finance leases and other liabilities that are incurred forfinancing rather than operating purposes. In addition, segment liabilities do not include deferred tax liabil-ities and current income tax liabilities.

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9.2 Secondary reporting format–geographical segments

Revenue is allocated based on the geographical location of the customers:

Revenue 2010 % 2009 %

Germany 286,053 17.0 241,450 17.2Benelux 251,179 14.9 226,361 16.1United States 248,653 14.8 149,915 10.7France 193,073 11.5 172,041 12.2United Kingdom 186,734 11.1 174,867 12.4Eastern Europe 176,284 10.5 152,110 10.8Scandinavia 85,686 5.1 73,050 5.2Spain & Portugal 51,196 3.0 51,294 3.7Other 203,923 12.1 163,845 11.7

Total 1,682,781 100.0 1,404,933 100.0

Assets are allocated based on the country in which the assets are located:

Total assets 2010 % 2009 %

Germany 320,420 18.0 322,501 20.4Benelux 393,468 22.1 388,273 24.6United States 311,600 17.5 173,581 11.0France 233,367 13.1 266,448 16.9United Kingdom 182,515 10.3 145,652 9.2Eastern Europe 136,724 7.7 118,161 7.5Scandinavia 67,946 3.8 59,826 3.8Spain & Portugal 68,201 3.8 71,607 4.5Other 42,590 2.4 12,115 0.8Unallocated 20,674 1.2 19,743 1.3

Total 1,777,505 100.0 1,577,907 100.0

Capital expenditure is allocated based on the country in which the assets are located:

Capital expenditure 2010 % 2009 %

Germany 7,880 12.5 5,702 12.7Benelux 18,950 30.0 14,736 32.7United States 6,972 11.0 3,300 7.3France 7,283 11.5 5,351 11.9United Kingdom 10,149 16.1 3,689 8.2Eastern Europe 6,383 10.1 8,030 17.8Scandinavia 2,591 4.1 2,663 5.9Spain & Portugal 812 1.3 960 2.1Other 2,134 3.4 639 1.4

Total 63,154 100.0 45,070 100.0

9.3 Analyses of revenue by category

Revenue 2010 % 2009 %

Sales of goods 1,467,943 87.2 1,242,948 88.5Services 214,838 12.8 161,985 11.5

Total 1,682,781 100.0 1,404,933 100.0


10 Intangible assets

Goodwill Software Other Otherintangible

assets

As at 1 January 2009Cost 445,557 24,267 170,869 195,136Accumulated amortisation – (19,904) (26,091) (45,995)

Net book amount 445,557 4,363 144,778 149,141

Year ended 31 December 2009Opening net book amount 445,557 4,363 144,778 149,141Additions – 1,526 349 1,875Disposals – (37) – (37)Acquisition of subsidiaries 40 – 150 150Amortisation – (2,270) (10,468) (12,738)Currency translation 783 16 25 41

Closing net book amount 446,380 3,598 134,834 138,432

As at 31 December 2009Cost 446,380 24,534 171,364 195,898Accumulated amortisation – (20,936) (36,530) (57,466)

Net book amount 446,380 3,598 134,834 138,432

Year ended 31 December 2010Opening net book amount 446,380 3,598 134,834 138,432Additions – 1,812 296 2,108Acquisition of subsidiaries 14,567 – 13,870 13,870Amortisation – (1,759) (11,097) (12,856)Currency translation 4,032 98 2,532 2,630

Closing net book amount 464,979 3,749 140,435 144,184

As at 31 December 2010Cost 464,979 26,465 190,096 216,561Accumulated amortisation – (22,716) (49,661) (72,377)

Net book amount 464,979 3,749 140,435 144,184

Other intangible assets mainly consist of intangible assets which arose from acquisitions. Approximatelytwo third of the book amount relates to customer relations. The remainder relates to brand names.

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Goodwill is not amortised and has an infinite useful life at the time of recognition. A segment levelsummary of the goodwill allocation is shown below:

Goodwill allocation 2010 Industrial Services Flow Control Total Group

Germany 83,350 33,390 116,740Benelux 3,932 117,894 121,826United States 16,687 49,487 66,174France 21,235 22,334 43,569United Kingdom 3,076 60,402 63,478Eastern Europe – 23,068 23,068Scandinavia 6,327 1,078 7,405Spain & Portugal 6,349 16,370 22,719

Total 140,956 324,023 464,979

Goodwill allocation 2009 Industrial Services Flow Control Total Group

Germany 83,350 33,390 116,740Benelux 3,932 117,894 121,826United States 15,458 33,213 48,671France 21,235 26,283 47,518United Kingdom 2,928 55,756 58,684Eastern Europe – 22,942 22,942Scandinavia 6,209 1,071 7,280Spain & Portugal 6,349 16,370 22,719

Total 139,461 306,919 446,380

Goodwill is tested annually for impairment per cash generating unit. Relevant parts of the businesssegments have been identified as cash generating units. The recoverable amount of a cash generatingunit is determined based on fair value calculations. These calculations are pre-tax cash flow projectionsbased on financial budgets approved by management covering a five year period. Cash flows beyond thefive year period are extrapolated taking into account a long-term average growth rate.

Impairment assumptions Industrial Services Flow Control

Valuation basis Value in use Value in useValuation method Discounted Discounted

cash flow cash flowKey assumptions:Average growth rate 4% (2009: 4%) 4% (2009: 4%)Long-term average growth rate (after 5 years) 2% (2009: 2%) 2% (2009: 2%)Discount rate 9% (2009: 9%) 9% (2009: 9%)Projected period 5 years 5 yearsApproved period 5 years 5 years

Management determined budgeted growth rate based on past performance and its expectations ofmarket development. The discount rates used are pre-tax and reflect specific risks relating to the relevantsegments. After conducting impairment tests on all cash generating units within the Group, noimpairment was necessary since the discounted future cash flows from the cash generating unitsexceeded the value of the goodwill and other relevant net assets.

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11 Property, plant and equipment

Land and Plant and Other Under Total

buildings equipment construction

As at 1 January 2009

Cost 333,798 874,778 55,838 35,146 1,299,560

Accumulated depreciation (127,696) (608,909) (46,690) – (783,295)

Net book amount 206,102 265,869 9,148 35,146 516,265

Year ended 31 December 2009

Opening net book amount 206,102 265,869 9,148 35,146 516,265

Additions 3,308 19,224 2,163 20,375 45,070

Assets taken into operation 1,629 18,237 384 (20,250) –

Disposals (2,032) (1,145) (408) (280) (3,865)

Acquisition of subsidiaries 3,290 100 – – 3,390

Depreciation (12,034) (54,438) (3,453) – (69,925)

Currency translation 680 1,589 141 241 2,651

Closing net book amount 200,943 249,436 7,975 35,232 493,586

As at 31 December 2009

Cost 338,324 903,358 58,009 35,232 1,334,923

Accumulated depreciation (137,381) (653,922) (50,034) – (841,337)

Net book amount 200,943 249,436 7,975 35,232 493,586

Year ended 31 December 2010

Opening net book amount 200,943 249,436 7,975 35,232 493,586

Additions 4,547 25,970 2,503 30,134 63,154

Assets taken into operation 12,956 14,218 816 (27,990) –

Disposals (2,154) (1,308) (213) (306) (3,981)

Acquisition of subsidiaries 15,639 22,708 433 849 39,629

Depreciation (12,517) (52,427) (3,382) – (68,326)

Currency translation 2,203 2,886 171 1,058 6,318

Closing net book amount 221,617 261,483 8,303 38,977 530,380

As at 31 December 2010

Cost 384,580 1,057,543 74,363 38,977 1,555,463

Accumulated depreciation (162,963) (796,060) (66,060) – (1,025,083)

Net book amount 221,617 261,483 8,303 38,977 530,380

At year-end, group companies had investment commitments outstanding in respect of property, plantand equipment to the amount of EUR 47,354 (2009: EUR 43,809) of which EUR 38,977 (2009:EUR 35,232) has been capitalised on the balance sheet as advance payment. The real estate as well assome machines of some subsidiaries are encumbered by a mortgage.

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Annual report 2010



12 Inventories2010 2009

Raw materials 83,280 65,608Work in progress 84,368 47,654Finished goods 209,446 175,803Other inventories 9,574 9,369

Total 386,668 298,434

The costs of inventories recognised as an expense and impairment losses on inventories are included in‘raw materials and work subcontracted’. No inventories are pledged as security for liabilities. The provisionfor write-down of inventories, due to obsolescence and slow moving amounts to EUR 33,169 (2009:EUR 27,803).

13 Trade receivables

2010 2009

Trade receivables 206,364 159,068Provision for impairment of receivables (6,494) (5,331)

Trade receivables 199,870 153,737

There is no concentration of credit risk with respect to trade receivables, as the Group has a largecustomer base which is internationally dispersed and makes use of credit insurance for a majority of itsreceivables. Impairment losses on trade receivables are included in the ‘other operating expenses’ andamount to EUR 1,975 (2009: EUR 1,015). The carrying amount approximates the fair value.

The past due aging analysis of the trade receivables is as follows:2010 2009

Not past due 153,124 118,750Past due less than 30 days 35,432 25,762Past due between 30 days and 60 days 8,742 8,333Past due between 60 days and 90 days 4,878 1,053Past due more than 90 days 4,188 5,170


The majority of the carrying amounts of the trade receivables are denominated in the functional currencyof the reported entities.

2010 2009

Euro 118,661 101,435US dollar 34,130 18,754British pound 28,359 23,133Other currencies 25,214 15,746


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Annual report 2010


14 Other current assets

2010 2009

Prepaid and accrued income 10,327 15,786

Derivative financial instruments 935 497

Other receivables 19,388 11,212

Total 30,650 27,495

The carrying amount approximates the fair value.

15 Financial instruments

Assets Assets Liabilities Liabilities2010 2009 2010 2009

Interest rate swap contracts – – 2,942 4,224

Foreign currency exchange contracts 209 322 – 92

Metal hedging contracts 726 175 – –

Total 935 497 2,942 4,316

The principal amounts of the outstanding interest rate swap contracts at 31 December 2010 were

EUR 87,025 (2009: EUR 123,432) and for foreign currency exchange contracts EUR 7,498 (2009:

EUR 14,847) and for metal hedging contracts EUR 6,406 (2009: EUR 2,418). The majority of the

outstanding foreign currency exchange and metal hedging contracts has a short term nature. Interest rate

swaps maturity is directly related to the bank borrowings concerned (note 17.1).The fair value of financial

instruments equals the market value at 31 December 2010. This valuation has been carried out by the

financial institutions where the instruments are held and derived from the related official rates and listings.


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16 Equity

16.1 Share capitalThe total number of ordinary shares outstandingat year-end was 106.7 million shares (2009: 106.1million shares) with a par value of EUR 0.25 pershare. In addition, there are 100 priority sharesissued with a par value of EUR 1.00 per share.

16.2 Share-based payments (PerformanceShare Plan)In June 2008, Aalberts Industries introduced anew long-term equity-settled incentive plan(Performance Share Plan) for a limited number ofemployees. Conditional ordinary shares areawarded that become unconditional three yearsafter the start of the performance period as longas the related conditions with regard toemployment and performance have been met.The performance conditions attached to thegranting of Performance Shares are based on thecompany’s financial performance over a three-year performance period. The financialperformance over the three calendar years ismeasured based on the average growth of theearnings per share before amortisation (EPS).The conditions of the plan stipulate thatultimately a maximum of 125% of the numberof conditionally granted shares at the start ofthe performance period can be paid out.140,000 conditional shares were granted andaccepted in June/July 2008. The results of 2008(drop in the EPS by 20%) and 2009 (drop in theEPS by 50%) made it seem as if the conditions of

the plan for an average increase of the earningsper share over the period 2008–2010 would notbe realised. Consequently, the plan had no impacton the financial statements for 2008 and 2009.Because of the strong rise in the earnings pershare in 2010 (+116%), the average increase inthe earnings per share over the three-year periodamounts to almost 16%.At the end of 2010, there are still 105,000 condi-tional shares in circulation because a number ofemployees have left. Based on the averageincrease of the earnings per share over the period2008–2010 it is expected that 84,000 shares willbe issued in May 2011 if the participants are stillemployed by the group at that time.The fair value of the Performance Shares is basedon the share price on the grant date, minus thediscounted value (risk-free rate of 4.40%-4.67%)of the expected dividends in the period that theshares were granted conditionally, in view of thefact that the participants are not entitled todividends during the vesting period. The expecteddividends are based on the company’s dividendpolicy. The average fair value of these conditionalshares is EUR 11.26 per share. At the end of 2010,the total fair value of the 84,000 conditionalshares was EUR 950 and was charged to thepersonnel expenses in 2010 and credited to totalequity.Two Management Board members of AalbertsIndustries N.V. participate in the PerformanceShare Plan. The details are mentioned in theremuneration of the board on page 83.


17 Borrowings

During 2009 Aalberts Industries has agreed with the banks upon adjustment and widening of thecovenants in which the leverage ratio and interest cover ratio are adjusted. The interest rate is madedependant of the achieved leverage ratio.

Definitions:– Leverage ratio: Net debt / EBITDA on 12 months rolling basis– Interest cover ratio: EBITDA / net interest expense on 12 months rolling basis

Covenants Leverage ratio Interest cover ratio

As at 31 December 2009 < 4.5 > 3.0As at 30 June 2010 < 4.0 > 3.0As at 31 December 2010 < 3.5 > 3.0As at 30 June of each year thereafter < 3.5 > 3.0As at 31 December of each year thereafter < 3.0 > 3.0

At year-end the requirements in the covenants are met as stated below.

Realised covenant ratios 2010 2009

Leverage ratio 2.3 3.4Interest cover ratio 10.4 5.8

Bank Finance Totalborrowings leases

As at 1 January 2010 549,224 27,405 576,629New borrowings 71,469 896 72,365Acquired borrowings 13,731 – 13,731Repayments (116,044) (2,633) (118,677)Translation differences (4) (62) (66)

As at 31 December 2010 518,376 25,606 543,982Current portion of non-current borrowings (127,385) (2,033) (129,418)

Non-current borrowings as at 31 December 2010 390,991 23,573 414,564

The current portion of non-current borrowings amounts to EUR 129,418 (2009: EUR 108,242) and ispresented within the current liabilities. The carrying amount approximates the fair value; the effectiveinterest rate approximates the average interest rate. The interest rate for bank borrowings was between1.6% and 5.3%.

17.1 Bank borrowingsThe maturity of bank borrowings is as follows:

Maturity bank borrowings 2010 2009

Within 1 year 127,385 106,172Between 1–5 years 372,740 401,756Over 5 years 18,251 41,296

Total 518,376 549,224

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Annual report 2010



The Group’s bank borrowings are denominated in the following currencies:

Bank borrowings 2010 2009

Euro 393,215 475,836US dollar 117,569 61,325British pound 438 2,084Other currencies 7,154 9,980

Total 518,376 549,224

17.2 Finance leases

Maturity finance leases 2010 2009

Minimum lease payments:Within 1 year 3,444 3,471Between 1–5 years 13,750 14,088Over 5 years 23,958 25,432

41,152 42,991Future finance charges:Within 1 year 1,411 1,401Between 1–5 years 5,387 5,351Over 5 years 8,748 8,834

15,546 15,586Present value of finance lease:Within 1 year 2,033 2,070Between 1–5 years 8,363 8,737Over 5 years 15,210 16,598

Present value of finance lease in the balance sheet 25,606 27,405

17.3 Current borrowingsCurrent borrowings are short-term credit facilities given by a number of credit institutions. The total ofthese facilities at year-end 2010 amounted to EUR 432 million (2009: EUR 379 million), of which EUR 50million was used (2009: EUR 54 million). The carrying amount approximates the fair value.

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18 Deferred income tax

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offsetcurrent tax assets against current tax liabilities and when the deferred income taxes relate to the samefiscal authority. The Group has carry-forward tax losses amounting to some EUR 20 million (2009:EUR 22 million). The related deferred income tax assets have not been recorded, since future usage ismainly depending on profit-earning capacity. Deferred income tax assets mainly relate to pensions andcapitalised losses. Deferred income tax liabilities mainly relate to temporary differences on other intan-gible assets which arose from acquisitions and temporary depreciation differences on property, plantand equipment.

Tax Intangible Plant and Provisions Working Off- Netlosses assets equipment capital setting asset /

and other liability

Asset 13,261 100 1,726 8,773 6,491 (4,850) 25,501Liability – 25,467 10,760 810 5,428 (4,850) 37,615

As at 1 January 2009 (13,261) 25,367 9,034 (7,963) (1,063) – 12,114

Acquisitions – – 997 (459) (87) – 451Income statement 2,289 (1,673) 2,563 1,388 265 – 4,832Direct to equity – – – – 1,082 – 1,082Currency translation 1 216 260 (195) (322) – (40)

Movements 2009 2,290 (1,457) 3,820 734 938 – 6,325

Asset 10,971 119 1,308 8,122 3,712 (4,489) 19,743Liability – 24,029 14,162 893 3,587 (4,489) 38,182

As at 31 December 2009 (10,971) 23,910 12,854 (7,229) (125) – 18,439

Acquisitions (589) 9,586 – – (793) – 8,204Income statement 2,618 (950) 3,031 515 (1,992) – 3,222Direct to equity – – – – 482 – 482Currency translation 759 (677) 107 (77) (24) – 88

Movements 2010 2,788 7,959 3,138 438 (2,327) – 11,996

Asset 8,183 117 769 7,502 6,868 (2,765) 20,674Liability – 31,986 16,761 711 4,416 (2,765) 51,109

As at 31 December 2010 (8,183) 31,869 15,992 (6,791) (2,452) – 30,435

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Annual report 2010



19 Provisions

19.1 Retirement benefit obligationsGermany France United Other Total

Kingdom

Present value of (partly) funded obligations 1,914 4,174 107,258 2,954 116,300

Fair value of plan assets (1,456) (190) (72,687) (1,952) (76,285)

458 3,984 34,571 1,002 40,015Present value of unfunded obligations 8,797 2,441 – 1,477 12,715Unrecognised actuarial gains and losses (297) 303 (24,916) (601) (25,511)Unrecognised past service cost – (552) – – (552)

Liability in the balance sheetas at 31 December 2010 8,958 6,176 9,655 1,878 26,667

Amounts recognised in Germany France United Other Totalincome statement Kingdom

Current service cost 80 329 1,068 335 1,812Interest cost 550 282 5,482 130 6,444Expected return on plan assets (56) (8) (4,959) (80) (5,103)Recognised actuarial gains and losses 20 16 1,251 26 1,313Past service cost – (39) – 5 (34)Curtailments and settlements – (222) (2,536) (217) (2,975)

Total, included in personnel expenses 594 358 306 199 1,457

The actuarial assumptions used for the calculations of the retirement benefit obligations are:

Actuarial assumptions 2010 Germany France UnitedKingdom

Discount rate 5.15% 4.50% 5.40%Expected return on plan assets 4.00% 4.00% 7.66%Rate of inflation 1.75% 2.00% 3.45%Future salary increases 1.75% 2.00% 3.95%

Actuarial assumptions 2009 Germany France UnitedKingdom

Discount rate 5.50% 5.00% 5.80%Expected return on plan assets 4.00% 4.00% 8.11%Rate of inflation 1.75% 2.00% 3.40%Future salary increases 1.75% 2.00% 3.90%

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Movement of liability Present value Fair value Net Present Unrecog- Unrecog- Totalrecognised on the balance sheet (partly) plan assets liability value nised actua- nised past

funded unfunded rial gains serviceobligations obligations and losses cost

As at 1 January 2009 68,501 (54,053) 14,448 10,596 2,358 306 27,708Acquisitions – – – 835 – – 835Current service cost 1,554 – 1,554 386 – – 1,940Interest cost 4,705 – 4,705 595 – – 5,300Contributions by employer – (2,092) (2,092) – – – (2,092)Contributions by participants 413 (413) – – – – –Expected return on plan assets – (4,599) (4,599) – – – (4,599)Actuarial gains and losses 23,392 (4,464) 18,928 1,311 (20,496) – (257)Benefits paid (3,994) 3,994 – (1,394) – – (1,394)Past service cost (76) – (76) (24) – (33) (133)Curtailments and settlements (86) 2 (84) (205) – – (289)Currency translation 4,705 (4,336) 369 198 332 28 927

As at 31 December 2009 99,114 (65,961) 33,153 12,298 (17,806) 301 27,946Acquisitions – – – – – – –Current service cost 1,463 – 1,463 349 – – 1,812Interest cost 5,851 – 5,851 593 – – 6,444Contributions by employer – (2,159) (2,159) – – – (2,159)Contributions by participants 417 (417) – – – – –Expected return on plan assets – (5,103) (5,103) – – – (5,103)Actuarial gains and losses 11,267 (3,983) 7,284 790 (6,761) – 1,313Benefits paid (4,632) 4,632 – (1,116) – – (1,116)Past service cost 703 – 703 116 – (853) (34)Curtailments and settlements (2,667) – (2,667) (308) – – (2,975)Currency translation 4,784 (3,294) 1,490 (7) (944) – 539

As at 31 December 2010 116,300 (76,285) 40,015 12,715 (25,511) (552) 26,667

The actual return on plan assets was EUR 9,086 positive (2009: EUR 9,063 positive). The expected return on plan assets forbonds is based upon long bond yields at balance sheet date, for equities, long bond yields are added with an appropriate riskpremium based upon the market conditions at balance sheet date.

The plan assets consist of following categories:

Plan asset categories 2010 2009

Equities 64% 62%Bonds 28% 30%Other net assets 8% 8%

Total 100% 100%

The Dutch subsidiaries participate in multi-employer pension plans, under IFRS these plans qualify as defined benefit plans.Since these funds do not supply any allocation information they are mentioned under defined contribution plans.

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Annual report 2010



19.2 Other provisions and long-term liabilities2010 2009

As at 1 January 5,697 5,907Additions 2,412 1,225Acquisitions 17,054 1,378Used during year (762) (2,228)Currency translation (1,321) 41Unused amounts reversed (2,011) (626)

As at 31 December 21,069 5,697

The other provisions have been made in connection with liabilities related to normal business operationsand provisions for restructuring and environmental restoration. Also included is the unpaid part of thepurchase consideration for acquisitions (EUR 15.1 million).

20 Other current liabilities

2010 2009

Social security charges and taxes 19,123 16,692Value added tax 7,183 5,956Accrued expenses 35,234 25,286Amounts due to personnel 38,313 30,836Derivative financial instruments 2,942 4,316Other 5,025 4,904

Total 107,820 87,990

The carrying amount approximates the fair value.

21 Personnel expenses

2010 2009

Wages and salaries (377,151) (325,994)Social security charges (69,892) (59,102)Pension expenses:Defined benefit plans (1,457) (1,962)Defined contribution plans (11,513) (11,454)Other expenses related to employees (13,864) (13,553)

Total (473,877) (412,065)

In the year under review, the average number of full-time employees amounted to 11,042 (2009:10,241). The remuneration of the Management and Supervisory Board is disclosed as part of thecompany financial statements.

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22 Other operating expenses

2010 2009

Production expenses (162,289) (131,274)Selling expenses (50,577) (40,894)Housing expenses (27,451) (26,770)General expenses (65,453) (53,972)Warranty costs (1,790) (1,829)Other operating income 25,506 7,994

Total (282,054) (246,745)

Production expenses comprise mainly energy costs, repair and maintenance costs and freight andpackaging costs.

Other operating income is income not related to the key business activities of the Group or relates toincidental and/or non-recurring items, like government grants for an amount of EUR 1,348 (2009:EUR 1,428) and insurance amounts received for an amount of EUR 17,599 (2009: EUR 2,201). The actualexpenses, where a larger part of these insurance amounts received relate to, are classified under therespective cost categories.

23 Net finance cost

2010 2009

Interest income on short term bank deposits 7,943 5,543

Interest expenses:Bank borrowings (33,872) (36,798)Finance leases (723) (1,005)

Total interest expense (34,595) (37,803)

Net interest expense (26,652) (32,260)

Foreign currency exchange results (2,452) (2,835)

Fair value results on financial instruments:Interest rate swaps 1,042 (436)Foreign currency exchange contracts – (310)Metal price hedge contracts 551 1,197

Total fair value results on derivative

financial instruments 1,593 451

Net finance cost (27,511) (34,644)

During 2009 a waiver fee is paid to the banks for an amount of EUR 2.8 million of which EUR 0.6 millionin 2009 is reported as finance cost. The remaining amount has been expensed in 2010.

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Annual report 2010



24 Income tax expenses

2010 2009

Current tax:Current year 28,298 7,180Prior years 1,575 (2,511)

29,873 4,669

Deferred tax 3,222 4,832

Tax charge 33,095 9,501

2010 2009

Profit before tax 139,542 51,506Tax calculated at domestic rates applicable to profits 40,049 13,701Expenses not deductible for tax purposes 1,511 1,701Tax relief facilities (5,384) (3,937)Use of unrecognised tax losses (3,081) (1,964)

Tax charge 33,095 9,501

Effective tax rate 23.7% 18.4%

The weighted average applicable domestic tax rate increased due to changes in the country mix. For 2010the weighted average applicable domestic tax rate amounted to 28.7% (2009: 26.6%).

25 Earnings and dividends per ordinary share

2010 2009

Net profit before amortisation 117,292 54,209Weighted average number of ordinary shares in issue (x1) 106,683,292 106,060,577Basic earnings per ordinary share before amortisation 1.10 0.51

Net profit before amortisation 117,292 54,209Weighted average number of ordinary shares in issue (x1) 106,683,292 106,060,577Diluted earnings per ordinary share before amortisation 1.10 0.51

The dividends paid in 2010 were EUR 0.13 per share (2009: EUR 0.28 per share). A dividend in respect ofthe year ended 31 December 2010 of EUR 0.28 per share will be proposed at the General Meeting to beheld on 21 April 2011. These financial statements do not reflect this dividend payable. Earnings per shareafter amortisation in 2010 amounted to EUR 0.98 (2009: EUR 0.39).

26 Contingencies

The Group has contingent liabilities in respect of bank and other guarantees arising in the ordinary courseof business. It is not anticipated that any material liabilities will rise from the contingent liabilities. TheGroup has given guarantees in the ordinary course of business amounting to EUR 9,837 (2009:EUR 10,284) to third parties.

On 20 September 2006 Aalberts Industries and two of its group companies were fined EUR 100.8 millionfor an alleged infringement of competition regulations. After a thorough legal analysis of the argumentsand in view of the opinion, based on the facts, that Aalberts Industries had not infringed any competitionregulations, the Management Board, in consultation with its legal advisors, filed an appeal with the Courtof First Instance in Luxembourg. The hearing took place on 2 February 2010 and the judgment isexpected on 24 March 2011. The Management Board continues to believe that no competition regula-

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Annual report 2010


tions were infringed and therefore no provision has been formed for this matter. In January 2007 AalbertsIndustries provided the European Commission with a bank guarantee which was extended for two years inJanuary 2010.The Company has started discussions with the minority shareholder of Integrated Dynamics EngineeringGmbH to acquire the remaining 20% of the shares.

27 Operational lease and rent commitments

It has been agreed with banks that no security will be provided to third parties without the banks’permission. The real estate as well as some machines of some subsidiaries are encumbered by a mortgage.

Operational lease and rent commitments 2010 2009

Due in less than 1 year 15,491 16,479Due between 1 and 5 years 35,999 38,503Due from 5 years or more 30,307 27,431

Total commitments 81,797 82,413

28 Business combinations

On 15 July 2010 Aalberts Industries N.V. has acquired 100% of the shares of Conbraco Industries, Inc.Conbraco in the United States is a leading manufacturer of a complete package of bronze, brass, steel andstainless steel valves and a range of backflow preventers is sold mainly in the commercial, industrial andconsumer market (retail) under the strong brand name “APOLLO®“ Valves. Conbraco, “APOLLO®“ Valves,is a key player in the North American market for ball valves, safety, relief and check valves, strainers and anew patented range of stainless steel and casted backflow preventers for the commercial and fireprotection markets. Additionally the company has a strong position in the industrial market with US madesteel and stainless steel valves. Towards the consumer products market Conbraco offers different productlines and a complete service through a separate business unit. With more than 1,000 employees Conbracogenerates an annual revenue of approximately USD 200 million.Conbraco operates three manufacturing facilities in South Carolina: two in Pageland and one in Conway.The head office is based in Matthews, North Carolina. The management team of Conbraco will remainwith the company and is motivated to realise the market opportunities together with the AalbertsIndustries Flow Control companies within the United States and Europe. Based on three strong brands, the

“APOLLO®“ Valves together with EPC® (Elkhart Products) metallic fitting range and the LASCO® Fittings’plastic fittings and other products, Aalberts Industries Flow Control can realise a more complete offeringto the residential, commercial, consumer market, fire protection and industrial market in North America.The specification, sales and distribution channels of these three organisations will be working togetherto realise a strengthened and focused sales approach per market segment.The “APOLLO®“ Valves range consists of many products which can also be sold through the existing salesand distribution network in Europe, where Aalberts Industries is present with own sales organisations inalmost every country. Especially the product program of safety, relief and check valves and backflowpreventers for commercial buildings is an extension of the portfolio in Europe. Additionally Conbraco’sproduct portfolio for the industrial sector opens new markets in Europe. There are many opportunitiesfor cross-selling which can be jointly developed which will strengthen the market position in Europe.The dedicated management and sales approach and experience of Conbraco’s business unit ConsumerMarkets gives a lot of potential in the future by introducing European product lines and concepts throughthe existing channels in the United States. Conbraco uses production technologies–especially the castingof bronze, steel and stainless steel products in all kind of different dimensions–which Aalberts Industriesdoes not operate in Europe and gives new possibilities of product development for present and newmarkets. On the other hand the European experience of automated machining and assembly can be usedto optimise the manufacturing of Conbraco. Also joining the procurement of especially raw materials canincrease Aalberts Industries’ profitability.Conbraco’s results have made a direct contribution to earnings per share in the second half of 2010.The acquisition is financed from credit facilities.


Fair values of assets and liabilities arising from business combinations

Intangible assets 13,870Property, plant and equipment 39,629Inventories 43,245Receivables and other current assets 23,518Payables and other current liabilities (21,922)Cash and current borrowings (16,522)Other provisions (668)Net deferred tax assets (liability) (8,204)Non-current borrowings (13,731)

Net assets acquired 59,215

Purchase consideration settled in cash 55,919Contingent purchase consideration 18,025

Total purchase consideration 73,944

Goodwill 14,729

Purchase consideration settled in cash (55,919)Cash and current borrowings (16,522)Prior years adjustments 162

Cash out flow on business combinations (72,279)

With the development of results in 2010, the most important condition to reach the maximumcontingent purchase consideration is already met. The non-current part of the consideration is classifiedunder other provisions and long-term liabilities and is payable in 2013. The goodwill connected with theacquired business mainly consists of anticipated synergies and know how and is not tax deductable.The increase of the 2010 revenue due to the consolidation of the Conbraco acquisition amounted toEUR 82 million. Total 2010 revenue reached an amount of EUR 165 million (pro forma). The contributionto the 2010 operating profit of Aalberts Industries amounted to EUR 7 million where a total operatingprofit for the year was reached of EUR 11 million (pro forma). The acquisition related transaction costs(EUR 490) are expensed through the income statement. The nominal value of the acquired receivablesamounts to EUR 24,104 (fair value EUR 23,518).

29 Related parties

The Management and Supervisory Board and the pension funds in the United Kingdom have beenidentified as related parties. No material transactions have been executed other than intercompany transactions and remuneration under normal business conditions.

79





30 Company balance sheetbefore profit appropriation

(in EUR x 1,000) notes 31–12–2010 31–12–2009

AssetsIntangible assetsOther intangible assets 32 17 135

Tangible fixed assetsOther tangible fixed assets 32 26 33

Financial fixed assetsInvestments in subsidiaries 32 826,945 714,369Loans to group companies 236,070 236,070

Fixed assets 1,063,058 950,607

DebtorsOther debtors, prepayments and accrued income 9,827 5,182

Current assets 9,827 5,182

Total assets 1,072,885 955,789

Equity and liabilitiesIssued capital 26,671 26,515Share premium account 201,790 201,946Other reserves 418,804 383,129Currency translation and hedging reserve (19,148) (37,404)Retained earnings 104,436 41,471

Shareholders’ equity 32 732,553 615,657

ProvisionsDeferred taxation 32 4,958 3,100

Non-current liabilitiesNon-current borrowings 32 140,000 180,000

Current borrowings 152,144 131,367Current portion of non-current borrowings 40,000 20,000Trade creditors 257 241Taxation and social security charges 1 49Other payables, accruals and deferred income 2,972 5,375

Current liabilities 195,374 157,032

Total equity and liabilities 1,072,885 955,789

31 Company income statement

(in EUR x 1,000) 2010 2009

Profit from subsidiaries after tax 104,232 41,373Other income and expenses after tax 204 98

Net profit 104,436 41,471

80


Annual report 2010

Company balance sheet and income statement


32 Notes to the company financial statements

32.1 Accounting principlesThe company financial statements of Aalberts Industries N.V. are prepared in accordance with GenerallyAccepted Accounting Principles in the Netherlands and compliant with the requirements included in Part9 of Book 2 of the Netherlands Civil Code. As from 2005, Aalberts Industries N.V. prepares its consoli-dated financial statements according to International Financial Reporting Standards (IFRS) as adopted bythe European Union.Use has been made of the possibility to apply the accounting policies used for the consolidated financialstatements to the financial statements of the company. The company income statement has been drawnup using the exemption of article 402 of Part 9, Book 2 of the Netherlands Civil Code.The subsidiaries are stated at net asset value, based upon policies applied in the consolidated financialstatements.

The average number of employees amounts to 11 full time equivalents (2009: 11), at year-end 12(2009: 11).

32.2 Fixed assetsOther tangible Software

fixed assets

As at 1 January 2010Cost 538 410Accumulated depreciation (505) (275)

Net book amount 33 135

Movements 2010Additions 16Depreciation (23) (118)

26 17As at 31 December 2010Cost 554 410Accumulated depreciation (528) (393)

Net book amount 26 17

32.3 Financial fixed assetsInvestments in subsidiaries

As at 1 January 2010 714,369Share in 2010 profit 104,232Increase in capital and acquisitions 5,000Dividends paid (14,912)Currency translation and fair value changes after tax 18,256

As at 31 December 2010 826,945

81



Notes to the company financial statements


32.4 Shareholders’ equityIssued Share Other Currency Retained Totalcapital premium reserves translation earnings

account andhedging

(in EUR x 1,000) reserve

As at 1 January 2009 25,838 202,623 301,123 (45,327) 92,753 577,010Dividends 2008 677 (677) – – (10,747) (10,747)Addition to other reserves – – 82,006 – (82,006) –Profit financial year – – – – 41,471 41,471Exchange rate differences – – – 5,563 – 5,563Fair value changes derivate financial instruments – – – 3,442 – 3,442Taxes on direct equity movements – – – (1,082) – (1,082)

As at 31 December 2009 26,515 201,946 383,129 (37,404) 41,471 615,657Dividends 2009 156 (156) – – (6,746) (6,746)Addition to other reserves – – 34,725 – (34,725) –Profit financial year – – – – 104,436 104,436Exchange rate differences – – – 18,519 – 18,519Share based payments – – 950 – – 950Fair value changes derivative financial instruments – – – 219 – 219Taxes on direct equity movements – – – (482) – (482)

As at 31 December 2010 26,671 201,790 418,804 (19,148) 104,436 732,553

The authorised share capital amounts to EUR 61 million divided into:

n 122,000,000 ordinary shares of EUR 0.25 par value each

n 30,499,900 preference shares of EUR 1.00 par value each

n 100 priority shares of EUR 1.00 par value each

As at 31 December 2010, 106,683,292 (2009: 106,060,577) ordinary shares and 100 priority shares

were issued. The issued share capital increased in the course of the year under review by 622,715

ordinary shares as a result of payment of stock dividend for the year 2009.

The currency translation and hedging reserve are not to be used for profit distribution.

32.5 Profit appropriationIn accordance with the resolution of the General Meeting held on 22 April 2010, the profit for 2009 has

been appropriated in conformity with the proposed appropriation of profit stated in the 2009 Financial

Statements.

The net profit for 2010 attributable to the ordinary shareholders amounting to EUR 104,436 shall be

available in accordance with Article 30, paragraph 3 of the articles of association.

The Management Board proposes to declare a dividend of EUR 0.28 in cash per ordinary share of

EUR 0.25 par value, or, at the discretion of the shareholders, in ordinary shares. Any residual profit shall

be added to reserves.

32.6 Non-current borrowingsFor the purpose of financing acquisitions, in 2008 the company took up a 7 year loan issued by a Dutch

credit institution against a floating interest rate based upon Euribor plus an agreed margin.

82


Annual report 2010



32.7 Audit feesThe following amounts are paid as audit fees and included in other operating expenses.

2010 PricewaterhouseCoopers Other TotalAccountants N.V. PricewaterhouseCoopers PricewaterhouseCoopers

Accountants network Accountants network

Audit of annual accounts 279 1,196 1,475Other audit services – – –Tax advisory services – – –Other non-audit services – – –

Total 279 1,196 1,475

2009 PricewaterhouseCoopers Other TotalAccountants N.V. PricewaterhouseCoopers PricewaterhouseCoopers

Accountants network Accountants network

Audit of annual accounts 266 1,284 1,550Other audit services – – –Tax advisory services – – –Other non-audit services – – –

Total 266 1,284 1,550

The fees listed above relate to the services applied to the Company and its consolidated group entities byaccounting firms and external auditors as referred to in Section 1(1) of the Dutch Accounting FirmsOversight Act (Wta), as well as by Dutch and foreign-based accounting firms, including their tax servicesand advisory groups.

32.8 Remuneration of the Management and Supervisory BoardMr. J. Aalberts (President & CEO) received a salary of EUR 518 (2009: EUR 505) and a bonus amounting toEUR 389 (2009: EUR 150). At year-end he held a total of 14,199,724 ordinary shares (2009: 14,092,968)in Aalberts Industries N.V.Mr. J. Eijgendaal (CFO) received a salary of EUR 454 (2009: EUR 441), a bonus amounting to EUR 340(2009: EUR 130) and a pension contribution of EUR 76 (2009: EUR 68). At year-end he held a total of75,862 ordinary shares in Aalberts Industries N.V. (2009: 75,000) and 40,000 conditional performanceshare awards (2009: 40,000). It is expected that 32,000 performance shares will vest in May 2011 ofwhich the fair value at year end amounted to EUR 360.Mr. W.A. Pelsma (COO) received a salary of EUR 454 (2009: EUR 363), a bonus amounting to EUR 340(2009: EUR 130) and a pension contribution of EUR 60 (2009: EUR 48). At year-end he held a total of40,460 ordinary shares in Aalberts Industries N.V. (2009: 30,538) and 15,000 conditional performanceshare awards (2009: 15,000). It is expected that 12,000 performance shares will vest in May 2011 ofwhich the fair value at year end amounted to EUR 135.

The following fixed individual remunerations were paid to members of the Supervisory Board:

(in EUR x 1,000) 2010 2009

C.J. Brakel – 50A.B. van Luyk 40 40M.C.J. van Pernis 30 –H. Scheffers 50 40W. van de Vijver 40 40

Total 160 170

No loans, advances, guarantees or options have been granted to the members of the Supervisory Board.At year-end, the Supervisory Board members did not hold any shares in Aalberts Industries N.V.

83





32.9 LiabilityThe company has guaranteed the liabilities of most of its Dutch group companies in accordance with theprovisions of article 403, paragraph 1, Book 2, Part 9 of the Netherlands Civil Code. As a consequence,these companies are exempt from publication requirements. The company forms a tax unity with almostall of its Dutch subsidiaries. The company therefore is liable for the tax obligations of the tax unity as awhole.

Langbroek, 22 February 2011

The Management Board The Supervisory BoardJan Aalberts, President & CEO Dries van LuykJohn Eijgendaal, CFO Martin van PernisWim Pelsma, COO Henk Scheffers, Chairman

Walter van de Vijver

33 Special controlling rights under the articles of association

One hundred issued and paid-up priority shares are held by Stichting Prioriteit ‘Aalberts Industries N.V.’,whose executive committee consists of Management Board and Supervisory Board members of thecompany and an independent third party. Every executive committee member who is also a member ofthe Management Board of Aalberts Industries N.V. has the right to cast as many votes as there areexecutive committee members present or represented at the meeting who are also members of theSupervisory Board of Aalberts Industries N.V. Every executive committee member who is also a member ofthe Supervisory Board has the right to cast as many votes as there are executive committee memberspresent or represented at the meeting who are also members of the Management Board of AalbertsIndustries N.V. The independent member of the executive committee has the right to cast a single vote.The following principal powers are vested in the holders of priority shares:n authorisation of every decision to issue shares;n authorisation of every decision to limit or exclude the preferential rights of shareholders in the event of

an issue of ordinary shares;n authorisation of every decision to buy paid-up shares in shareholders’ equity or certification thereof

without payment or subject to conditions;n authorisation of every decision to dispose of shares held by the company;n authorisation of every decision to reduce the issued capital through the cancellation of shares or

through a decrease in the par value of shares by amending the articles of association;n authorisation of the transfer of preference shares;n determination of the number of members of the Management Board;n to make a binding nomination to the General Meeting concerning the appointment of management

and supervisory board members;n to approve the sale of a substantial part of the operations of the company;n to approve acquisitions that would signify an increase of more than 15% in the company’s revenue, or

that would involve more than 10% of the company’s balance sheet total;n to approve the borrowing of funds that would involve an amount of EUR 100 million or more;n to recommend to the General Meeting a change in the Articles of Association, a legal merger, a split-up

or the dissolution of the company.

The full text of the Articles of Association of Aalberts Industries N.V. may be found on its website:www.aalberts.com.

84


Annual report 2010



85



Independent auditor’s report

34 Independent auditor’s report

To: the General Meeting of AalbertsIndustries N.V.

Report on the financial statementsWe have audited the accompanying financial state-ments 2010 of Aalberts Industries N.V., Langbroek.The financial statements include the consolidatedfinancial statements and the company financialstatements. The consolidated financial statementscomprise the consolidated balance sheet as at 31December 2010, the consolidated incomestatement, the statements of comprehensiveincome, changes in equity and cash flows for theyear then ended and the notes, comprising asummary of significant accounting policies andother explanatory information. The companyfinancial statements comprise the companybalance sheet as at 31 December 2010, thecompany income statement for the year thenended and the notes, comprising a summary ofaccounting policies and other explanatory infor-mation.

Management Board’s responsibilityThe management board is responsible for thepreparation and fair presentation of these financialstatements in accordance with InternationalFinancial Reporting Standards as adopted by theEuropean Union and with Part 9 of Book 2 of theDutch Civil Code, and for the preparation of theReport of the Management Board in accordancewith Part 9 of Book 2 of the Dutch Civil Code.Furthermore, the management board is respon-sible for such internal control as it determines isnecessary to enable the preparation of thefinancial statements that are free from materialmisstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on thesefinancial statements based on our audit. Weconducted our audit in accordance with Dutchlaw, including the Dutch Standards on Auditing.This requires that we comply with ethical require-ments and plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free from material misstatement.An audit involves performing procedures to obtainaudit evidence about the amounts and disclosuresin the financial statements. The proceduresselected depend on the auditor’s judgment,including the assessment of the risks of materialmisstatement of the financial statements, whetherdue to fraud or error. In making those risk assess-

ments, the auditor considers internal controlrelevant to the company’s preparation and fairpresentation of the financial statements in orderto design audit procedures that are appropriate inthe circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of thecompany’s internal control. An audit also includesevaluating the appropriateness of accountingpolicies used and the reasonableness ofaccounting estimates made by the managementboard, as well as evaluating the overall presen-tation of the financial statements.We believe that the audit evidence we haveobtained is sufficient and appropriate to provide abasis for our audit opinion.

Opinion with respect to the consolidatedfinancial statementsIn our opinion, the consolidated financial state-ments give a true and fair view of the financialposition of Aalberts Industries N.V. as at 31December 2010, and of its result and its cashflows for the year then ended in accordance withInternational Financial Reporting Standards asadopted by the European Union and with Part 9of Book 2 of the Dutch Civil Code.

Opinion with respect to the companyfinancial statementsIn our opinion, the company financial statementsgive a true and fair view of the financial positionof Aalberts Industries N.V. as at 31 December2010, and of its result for the year then ended inaccordance with Part 9 of Book 2 of the DutchCivil Code.

Report on other legal and regulatory require-mentsPursuant to the legal requirement under Section2: 393 sub 5 at e and f of the Dutch Civil Code,we have no deficiencies to report as a result ofour examination whether the Report of theManagement Board, to the extent we can assess,has been prepared in accordance with Part 9 ofBook 2 of this Code, and whether the infor-mation as required under Section 2: 392 sub 1 atb-h has been annexed. Further we report that theReport of the Management Board, to the extentwe can assess, is consistent with the financialstatements as required by Section 2: 391 sub 4 ofthe Dutch Civil Code.

Utrecht, 22 February 2011

PricewaterhouseCoopers Accountants N.V.drs. P.J. van Mierlo RA


Industrial Services

Industrial Productsaiis-group.com

Adex B.V.Venlo (NLD)adex-dies.com

Eurocast B.V.Apeldoorn (NLD)eurocast.nl

FijnmechanischeIndustrie Venray B.V.Cuijk (NLD)fivbv.nl

Germefa B.V.Alkmaar (NLD)germefa.nl

HartmanFijnmechanischeIndustrie B.V.Groenlo (NLD)hfibv.nl

Integrated DynamicsEngineering GmbH(80%)Raunheim (DEU)ideworld.com

Integrated DynamicsEngineering, Inc.Randolph MA (USA)ideworld.com

Integrated DynamicsEngineering Ltd.Tokyo (JPN)ideworld.com

Kluin Wijhe B.V.Wijhe (NLD)kluinwijhe.com

Machinefabriek VanKnegsel B.V.Vessem (NLD)vanknegsel.nl

Leco Products B.V.Ede (NLD)lecoproducts.nl

Mifa Aluminium B.V.Venlo (NLD)mifa.nl

Mogema B.V.‘t Harde (NLD)mogema.nl

Overeem B.V.Ede (NLD)overeembv.nl

MachinefabriekTechnology Twente B.V.Hengelo (NLD)technologytwente.nl

Metalismetalis.fr

Cotterlaz Jean S.A.S.Marnaz (FRA)metalis.fr

Cotterlaz ConnectorsShenzhen Ltd.Shenzhen (CHN)metalis.fr

Cotterlaz ConnectorsSlovakia spol.s.r.o.Presov (SVK)metalis.fr

Metalis S.A.S.Chaudefontaine (FRA)metalis.fr

Metalis HPS S.A.S.Montbrison (FRA)metalis.fr

Metalis Polska Sp. z.o.o.Dzierzoniów (POL)metalis.fr

Nowak S.A.S.Pancé (FRA)nowak.fr

Material Technologygroupmt.com

Acorn SurfaceTechnology LimitedNottingham (GBR)acornst.com

Accurate BrazingCorporationGoffstown NH (USA)accuratebrazing.com

AHC Benelux B.V.Eindhoven (NLD)ahcbenelux.com

AHC Italia S.R.L. (90%)Opera MI (ITA)ahc-surface.com

AHC OberflächentechnikGes. m.b.H.St. Pantaleon (AUT)ahc-surface.com

AHC OberflächentechnikGmbHKerpen (DEU)ahc-surface.com

AHC OberflächentechnikGmbHBurg (DEU)ahc-surface.com

AHC Polska Sp. z.o.o.Gorzyce (POL)ahc-surface.com

AHC Special CoatingsGmbHKerpen (DEU)ahc-surface.com

AHC Surface TechnologyS.A.S.Faulquemont (FRA)ahc-surface.com

Duralloy AGHärkingen (CHE)ahc-surface.com

Duralloy Süd GmbHVillingen-Schwenningen(DEU)ahc-surface.com

Hærderiet A/SSkanderborg (DNK)haerderiet.dk

Härterei Hauck GmbHRemscheid (DEU)haerterei-hauck.de

Härterei Hauck SüdGmbHGaildorf (DEU)haerterei-hauck.de

Heat & SurfaceTreatment B.V.Eindhoven (NLD)h-st.nl

Ionic Technologies Inc.(94%)Greenville SC (USA)ionic-tech.com

Mamesta B.V.Lomm (NLD)mamesta.nl

Métatherm S.A.S.Vermondans (FRA)metatherm.fr

Métatherm 74 S.A.S.Thyez (FRA)metatherm.fr

RIAG Oberflächen -technik AGWängi TG (CHE)ahc-surface.com

SGI Société deGalvanoplastieIndustrielle S.A.S.Plaisir (FRA)galvanoplastie.fr

StålserviceVärmebehandlingNordic ABVärnamo (SWE)stalservice.se

T. Térmicos Metasa, S.A.(92,75%)Zaragoza (ESP)trateriber.es

86


Annual report 2010

List of groupcompaniesThe following most important group companies are included in the consolidated financial statements ofAalberts Industries N.V. It concerns wholly owned subsidiaries, unless indicated otherwise.


T. Térmicos Sarasketa,S.L.U.Elgoibar (Guipuzcoa) (ESP)trateriber.es

T. Térmicos Sohetrasa,S.A. (88,82%)Amorebieta (ESP)trateriber.es

T. Térmicos Tey, S.L.Atxondo (Vizcaya) (ESP)industriastey.net

T. Térmicos Traterh,S.A.U.Pinto (Madrid) (ESP)trateriber.es

TTI Group LimitedLuton (GBR)ttigroup.co.uk

Flow Control

Flow Control GermanyConti SanitärarmaturenGmbHWettenberg (DEU)conti-armaturen.com

DSI GetränkearmaturenGmbHHamm-Rhynern (DEU)dispensegroup.com

Meibes System-TechnikGmbHGerichshain (DEU)meibes.de

Meibes s.r.o.Prague (CZE)meibes.cz

Meibes Metall-TechnikSp. z.o.o. (60%)Gorzów (POL)meibes.pl

PUZ Meibes Sp. z.o.o.(80%)Leszno (POL)meibes.pl

Meibes RUS OOO (85%)Moscow (RUS)meibes.ru

Meibes SK s.r.o.Rimavská Sobota (SVK)meibes.sk

Melcher & FrenzenArmaturen GmbHVelbert (DEU)melcher-frenzen.de

Rossweiner Armaturenund Messgeräte GmbH &Co. OHGRoßwein (DEU)rossweiner.de

Seppelfricke ArmaturenGmbHGelsenkirchen (DEU)seppelfricke.com

Seppelfricke-SimplexArmaturen AustriaGes.m.b.HBregenz (AUT)seppelfricke.com

Simplex Armaturen &Systeme GmbHArgenbühl/Allgäu (DEU)simplex-armaturen.de

VTI Automotive GmbHHamm-Rhynern (DEU)vti.de

VTI Ventil Technik GmbHMenden (DEU)vti.de

Flow ControlNorthern EuropeBROEN A/SAssens (DNK)broen.com

BROEN ArmaturenGmbHGernsheim (DEU)broen.de

BROEN Finland OYEspoo (FIN)broen.com

BROEN Valves Ltd.Tipton, West Midlands(GBR)broen.co.uk

BROEN Valves (Beijing)Co., Ltd.Beijing (CHN)broen.com

BROEN S.A.Dzierzoniów (POL)broen.pl

BROEN SingaporePte LtdSingapore (SGP)broen.com

BROEN, Inc.Birmingham AL (USA)broen.us

BROEN Ltd.Moscow (RUS)broen.ru

BROEN Raufoss ABGothenburg (SWE)broen.se

BROEN SEI SRL (75%)Bucharest (ROU)broen.com

BROEN-Zawgaz Sp. z.o.o.Suchy Las k. Poznania(POL)zawgaz.com

Clorius Controls A/SBallerup (DNK)cloriuscontrols.com

Holmgrens Metall ABGnosjö (SWE)holmgrensmetall.se

HSF SamenwerkendeFabrieken B.V.Duiven (NLD)hsfbv.nl

Hydro-Plast Sp. z.o.o.(85%)Warsaw (POL)hydroplast.com.pl

Isiflo S.A.S.Molsheim (FRA)isiflo.fr

KAN Sp. z.o.o. (51%)Kleosin (POL)kan.com.pl

OOO KAN-term Bel(51%)Minsk (BLR)kan.com.pl

KAN-therm GmbH (51%)Troisdorf (DEU)kantherm.de

OOO KAN-R (51%)Moscow (RUS)kan.com.pl

TOB KAN (45%)Kiev (UKR)kan.com.pl

Raufoss Water & Gas ASRaufoss (NOR)isiflo.com

Raufoss Metall GmbHHemer (DEU)isiflo.com

VSH Fittings B.V.Hilversum (NLD)vsh-fittings.com

VSH Flow Control N.V.Wijnegem (BEL)vsh-flowcontrol.eu

Flow ControlUnited Kingdom &Middle EastPegler LimitedDoncaster (GBR)pegleryorkshire.co.uk

Pegler Yorkshire GroupLimitedLeeds (GBR)pegleryorkshire.co.uk

87


List of group companies


Aalberts Industries N.V.Sandenburgerlaan 43947 CS LangbroekThe Netherlands

P.O. Box 113940 AA DoornThe Netherlands

T +31 (0) 343 56 50 80F +31 (0) 343 56 50 [email protected]

Colophon

Concept and realisationKroese brands & behaviour

TextsDon Croonenberg

Graphic designPuntspatie [bno]

PrintLenoirschuring

PhotographyVincent Boon et al.

88


Annual report 2010Comap RUS OOOMoscow (RUS)comap.ru

Grupo HidroaplicacionesY Gas, S.L.Madrid (ESP)hidroaplicaciones.com

Nova Comet, S.r.l.Torbole Casaglia (BS) (ITA)clesse-industries.com

Standard Hidráulica S.A.Barcelona (ESP)standardhidraulica.com

Henco IndustriesHenco Floor N.V.Herentals (BEL)hencofloor.nl

Henco Industries N.V.Herentals (BEL)henco.be

Clesse (UK) LimitedWolverhampton (GBR)clesse.co.uk

Comap S.A.Lyon (FRA)comap.fr

Comap N.V.Dworp (BEL)comap.be

Comap Adria d.o.o.Komenda (SVN)comap-group.com

Comap do Brasil LtdaSorocaba, est. de SaoPaulo (BRA)comap.com.br

Comap Handelsgesell -schaft m.b.H.Vienna (AUT)comap-group.com

Comap Hellas S.A.Athens (GRC)comap.gr

Comap Hungaria Kft.Budaörs (HUN)comap.hu

Comap Industria SPARoncadelle (ITA)comapitalia.com

Comap Industries S.A.S.Abbeville (FRA)comap.fr

Comap Italia S.r.l.Torbole Casaglia (ITA)comapitalia.com

Comap Nordic ABVellinge (SWE)comap-group.com

Comap Polska Sp. z.o.o.Warsaw (POL)comap.pl

Comap Praha s.r.o.Jesenice u Prahy (CZE)comappraha.cz

Pegler (Jiangmen)Plumbing and HeatingEquipment Co. Ltd.Jiangmen City, Guangdong(CHN)pegleryorkshire.co.uk

Westco UK Ltd.Leigh Lancashire (GBR)comap.co.uk

Yorkshire Fittings GyártóKft.Budapest (HUN)yorkshirefittings.hu

Flow ControlUnited StatesConbraco Industries, Inc.Matthews, NC (USA)apollovalves.com

Elkhart ProductsCorporationElkhart IN (USA)elkhartproducts.com

Elkhart Products LimitedBurlington ON (CAN)elkhartproducts.com

LASCO Fittings, Inc.Brownsville TN (USA)lascofittings.com

Taprite-FasscoManufacturing, Inc.San Antonio TX (USA)taprite.com

Flow ControlSouthern EuropeAqua-Touch (Pty) Ltd.Randburg (ZAF)comap-aquatouch.co.za

Clesse Industries S.A.S.Cournon d’Auvergne (FRA)clesse-industries.fr

Clesse Industries(Shanghai) Co. Ltd.Shanghai (CHN)ccifc.org


http://www.kroese-bb.com

http://www.kroese-bb.com

http://www.thebitterend.nl

http://www.thebitterend.nl

http://www.puntspatie.nl/

http://www.puntspatie.nl/

http://www.lenoirschuring.com/

http://www.lenoirschuring.com/

http://www.vincentboon.nl/

http://www.vincentboon.nl/

List of group companies

Locations • Industrial Services

• Flow Control


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