Royal Ten Cate...The TenCate sectors are subdivided into market groups. Each market group is a...

Our materials are at the cutting edge of

textile technology, chemical technology

and material technology.

Our systems and materials generate

added-value solutions.

Our customers make a difference with our

materials and systems. This generates

growth and continuity.

Our clear vision, mission and strategy give direction to

the company. The strategy is focused on value chain

management. The TenCate business model underpins

the day-to-day structuring, implementation and operationa-

lisation of the business. Our challenge lies in striking the

ultimate balance between the four cornerstones.

TenCate supplied composite material as part of its

sponsorship of the solar-powered Twente One (21) car

produced by the University of Twente.

Every two years, a team of students takes part in the World

Solar Challenge in Australia. This solar race will be held for

the 10th time in October 2009. The Twente solar car will

once again have the starting number 21, Twente One.

We want to be known for the difference we make

AN

NU

AL R

EPO

RT 2008

RO

YAL TEN

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TE

Royal Ten Cate

MATERIALS THAT MAKE A DIFFERENCEColophon

investor relations & corporate development

F.R. Spaan, director

[email protected]

Stationsstraat 11

7607 GX Almelo, The Netherlands

P.O. Box 58

7600 GD Almelo, The Netherlands

Telephone +31 (0)546 544 338

Fax +31 (0)546 824 655

www.tencate.com

Text

Royal Ten Cate

Translation

VVH business translations, Utrecht (NL)

Concept and realisation

C&F Report Amsterdam B.V.

Photography

Picture Report, Amsterdam

Haverkort fotografie, Enschede

Royal Ten Cate

Number of copies printed

3,000

Commercial overview and profileOperating companies, associated companies and other interests

ANNUAL REPORT 2008

Royal Ten Cate

Sustainability. The most natural thing in the world.

© copyright Royal Ten Cate

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Geographic breakdown of sales in 2008

in per cent

◾ By destination

◾ By origin

Royal Ten Cate (TenCate) is a multinational

company which combines textile technology

with chemical processes in the development

and production of functional materials. Various

market applications have been created around

this technological basis.

TenCate occupies leading positions worldwide

in its core markets. Within its strategic core

activities, TenCate presents itself as a developer

and producer of materials with distinctive

characteristics. The company structures product

and process development and stimulates

technological innovation in order to maintain

leading market positions. TenCate develops

customer-specific solutions jointly with partners

and end-users. The system approach plays a key

role.

TenCate materials are mainly used for:

◾ safety and protection;

◾ space and aerospace;

◾ infrastructure and the environment;

◾ sport and recreation.

TenCate employs around 4,500 people worldwide

and strives to operate in an ethically and socially

responsible way. On this basis it encourages

its employees to be enterprising, flexible and

creative, thereby demonstrating its aim of

achieving progress and sustainability for all

stakeholders.

ADVANCED TEXTILES & COMPOSITES

Ten Cate Advanced Textiles bv Nijverdal, NetherlandsGroup activities of the TenCate Advanced Textiles group in the Netherlands

Ten Cate Protect bv Nijverdal, Netherlands

Ten Cate Protective Fabrics USA inc Union City, Georgia, USAFabrics for protective clothing and professional wear

Ten Cate Technical Fabrics bv Nijverdal, Netherlands Fabrics for outdoor applications

Ten Cate Advanced Spinning bv Nijverdal, NetherlandsSpecialist yarns and fabrics for protective clothing and outdoor applications

Ten Cate – Union Protective Fabrics Asia ltd Bangkok, Thailand

(50.65%) (from 16 August 2008) Fabrics for protective clothing

Ten Cate Permess Interlinings Hong Kong ltd Hong Kong, China

Ten Cate Permess (Wuxi) Advanced Textiles co ltd Xishan, ChinaProduction and sale of interlinings

Ten Cate Advanced Composites bv Nijverdal, NetherlandsAdvanced composites for the aircraft industry and antiballistic applications

Ten Cate Advanced Armour S.A.S. Vienne, France

Ten Cate Advanced Armour Danmark A/S Vissenbjerg, DenmarkAdvanced ceramics and composites for antiballistic applications

Ten Cate Advanced Composites USA inc Morgan Hill, California, USA

Phoenixx TPC inc Taunton, Massachusetts, USAAdvanced composites for aerospace and industrial applications

Composix Co. (from 30 January 2008) Newark, Ohio, USAAdvanced composites for vehicle armour

YLA inc (from 12 March 2008) Benicia, California, USA

CCS Composites inc (from 12 March 2008) Benicia, California, USAAdvanced composites for aerospace and industrial applications

GEOSYNTHETICS & GRASS

Ten Cate Geosynthetics North America inc Atlanta, Georgia, USA

Ten Cate Geosynthetics Austria GmbH Linz, Austria

Ten Cate Geosynthetics France S.A.S. Bezons, France

Ten Cate Geosynthetics Netherlands bv Almelo, Netherlands

Ten Cate Geosynthetics Asia sdn bhd Kuala Lumpur, Malaysia

TenCate Industrial Zhuhai co ltd Zhuhai, China

Geofabrics Australasia pty ltd (50%) Cheltenham, AustraliaGeosynthetics and industrial fabrics

Ten Cate Geosynthetics sdn bhd (Malaysia) Kuala Lumpur, Malaysia

Ten Cate Geosynthetics (Thailand) ltd Bangkok, Thailand

Ten Cate Geosynthetics pte ltd Singapore

Ten Cate Geosynthetics Italia srl Lazzata, Italy

Ten Cate Geosynthetics (UK) ltd Telford, United Kingdom

Ten Cate Geosynthetics sl Madrid, Spain

Ten Cate Geosynthetics Schweiz AG Zürich, Switzerland

Ten Cate Deutschland GmbH Dietzenbach, Germany

Ten Cate Geosynthetics Polska Spzoo Krakow, Poland

Ten Cate Geosynthetics CZ sro Prague, Czech Republic

Ten Cate Geosynthetics Rumania Bucharest, RomaniaSales offi ces

Ten Cate Thiolon bv Nijverdal, Netherlands

Ten Cate Thiolon North America inc Dayton, Tennessee, USA

Ten Cate Thiolon Middle East (49%) 1) Dubai, UAESynthetic turf components and systems

Ten Cate Thiobac bv Nijverdal, NetherlandsBacking for synthetic turf systems

Edel Grass bv (50%) (from 14 May 2008) Genemuiden, NetherlandsMarketing and installation of synthetic turf systems

TECHNOLOGIES

Xennia Technology ltd (75%) Letchworth, United Kingdom

(from 14 March 2008) Specialist inkjet technology for industrial applications

TECHNICAL COMPONENTS

Ten Cate Enbi International bv Beek, NetherlandsTenCate Enbi group holding company

Ten Cate Enbi GmbH Opladen, Germany

Ten Cate Enbi Kft Rétság, Hungary

Ten Cate Enbi inc Shelbyville, Indiana, USA

Ten Cate Enbi pte ltd Singapore

Ten Cate Enbi Zhuhai co ltd Zhuhai, ChinaTechnical rollers and components for printers, copiers, fax machines, postal

sorting machines, automated teller machines, insulation and heating systems

OTHERS

Ten Cate Assurantiën bv Almelo, NetherlandsInsurance

Ten Cate Nederland bv Almelo, Netherlands

Royal Ten Cate USA inc Atlanta, Georgia, USA

Ten Cate UK ltd London, United Kingdom

Ten Cate France S.A.S. Paris, France

Ten Cate Deutschland GmbH Opladen, Germany

Ten Cate Danmark A/S Copenhagen, Denmark

Royal Ten Cate Pacifi c ltd Hong Kong, China

Royal Ten Cate China Holding ltd Hong Kong, ChinaCountry holding companies

Ten Cate Finance AG Schaffhausen, SwitzerlandFinancing company

NON-CONSOLIDATED COMPANIES

GreenFields bv (20%) Kampen, NetherlandsMarketing organisation for synthetic turf systems

Landscape Solutions bv (20%) Goirle, NetherlandsSynthetic turf for landscaping

Performance Fabrics and Fibers LLC (16%) Andrews,

(from 16 January 2008) South Carolina, USANon-wovens for industrial applications

The operating companies listed here are consolidated in the financial statements, with the exception

of the companies shown as non-consolidated. Some interests of minor relevance to the overall

picture have been omitted from the list, in accordance with article 379, paragraph 3, Book 2

of the Netherlands Civil Code. The companies are wholly owned unless stated otherwise.

Royal Ten Cate Annual Report 2008Royal Ten Cate Annual Report 2008

as at 1 January 2009 as at 31 December 2008

COMMERCIAL OVERVIEW PROFILEOPERATING COMPANIES, ASSOCIATED COMPANIES AND OTHER INTERESTS

GEOSYNTHETICS & GRASS SECTOR

PROTECTIVE FABRICS

Protective and safety fabrics for industry,

services, firefighting and defence.

◾ TenCate Protective Fabrics Americas

◾ TenCate Protective Fabrics EMEA

◾ TenCate Protective Fabrics Asia

OUTDOOR FABRICS

Protective fabrics for outdoor applications.

◾ TenCate Outdoor Fabrics Europe

SPACE & AEROSPACE COMPOSITES

Advanced composites for aerospace and

industrial applications.

◾ TenCate Advanced Composites Americas

◾ TenCate Advanced Composites Europe

ARMOUR COMPOSITES

Advanced composite and ceramic materials for

the protection of police, army, air force, navy and

civilian service personnel, vehicles and vessels.

◾ TenCate Advanced Armour Americas

◾ TenCate Advanced Armour EMEA

INKJET TECHNOLOGY

◾ Xennia Technology Ltd, United Kingdom

Specialist inkjet technology for industrial

applications.

* Consolidated with the figures of the Advanced Textiles & Composites Sector


Technical rollers and components, particularly

for printers, copiers, fax machines, postal sorting

machines and ATMs.

◾ TenCate Enbi North America

◾ TenCate Enbi Europe

◾ TenCate Enbi Asia

HOLDING & SERVICES

◾ Koninklijke Ten Cate nv, Netherlands

GEOSYNTHETICS

Synthetic fabrics, non-wovens and grids

for infrastructure and civil engineering.

◾ TenCate Geosynthetics Americas

◾ TenCate Geosynthetics EMEA

◾ TenCate Geosynthetics Asia

◾ Geofabrics Australasia Pty Ltd,

Australia (joint venture)

INDUSTRIAL FABRICS

Synthetic fabrics, non-wovens and grids for

agriculture and horticulture, the environmental

sector, the construction industry, water

management and recreation.

◾ TenCate Industrial Fabrics North America

◾ TenCate Industrial Fabrics EMEA

◾ TenCate Industrial Fabrics Asia

GRASS

Synthetic turf components and systems for

top-flight sports, recreation and landscape

projects.

◾ TenCate Grass Americas

◾ TenCate Grass EMEA

◾ TenCate Grass Asia

◾ Edel Grass, The Netherlands (joint venture)

◾ GreenFields, The Netherlands (participation)

The TenCate sectors are subdivided into market groups. Each market group is a cluster of operating companies which co-operate intensively

in research & development, production, marketing and sales.

An overview of the legal entities which make up the company can be found on the inside back cover.

ADVANCED TEXTILES & COMPOSITES SECTOR

TenCate has production sites and sales offices in the following countries (◾): TECHNICAL COMPONENTS/

HOLDING & SERVICES SECTOR

TECHNOLOGIES SECTOR*

1) Due to legislation in Dubai, 51% is held by a local partner. Royal Ten Cate has 100% economic ownership.

Commercial overview Inside cover

Profile Inside cover

Financial highlights 3

Key developments in 2008 4

Evaluation of action plans 6

Actions for 2009 8

Vision, mission, strategy and objectives 9

Foreword by the Chairman of the Executive Board 11

The TenCate share 13

Sustainability 16

Report of the Supervisory Board 18

Corporate governance 22

The Boards 24

Report of the Executive Board 28

General 28

Financial performance 29

Risk management 33

SWOT analysis 34

Information technology 41

Human resources management 42

Socially responsible enterprise 44

Post balance sheet events 47

Outlook 47

Statement from the Executive Board 48

Sector reports 50

Advanced Textiles & Composites 52

Geosynthetics & Grass 60

Technologies 65

Technical Components / Holding & Services 68

Financial statements 2008 73

Other information 136

Ten-year summary 140

Operating companies, associated companies and other interests Inside cover

Colophon Outside cover

Annual Report 2008Royal Ten Cate

Royal Ten Cate Annual Report 20082

2004 2005 2006 2007 2008

540

480

420

360

300

240

180

120

60

0

2004 2005 2006 2007 2008

72

63

54

45

36

27

18

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0

– 9

2004 2005 2006 2007 2008

108

96

84

72

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48

36

24

12

0

2004 2005 2006 2007 2008

2.7

2.4

2.1

1.8

1.5

1.2

0.9

0.6

0.3

0.0

REVENUES PER SECTOR

in millions of euros

◾ Protective Fabrics & Advanced Composites

◾ Geosynthetics & Grass

◾ Technical Components/Holding & Services

EBITA PER SECTOR


◾ Protective Fabrics & Advanced Composites



PER SHARE DATA

in euros

◾ Net income*

◾ Dividend

* Net income before amortisation and excluding

income from the divestment of operations and

exceptional items.

EBITA AND NET INCOME


◾ Operating result before amortisation

(EBITA)

◾ Net income*

Royal Ten Cate Annual Report 2008 3

PROFIT AND LOSS ACCOUNT 2008 2007

Revenues 1,032.6 886.0

Operating income before depreciation and amortisation (EBITDA) 126.1 102.1

Operating result before amortisation (EBITA) 95.4 73.0

Operating income before amortisation as % of revenues (EBITA margin) 9.2% 8.2%

Operating result (EBIT) 83.8 69.4

Net income 51.1 46.4

Net income before amortisation and excluding result of divestment of

operations and exceptional items (cash earnings) 62.7 46.6

CONSOLIDATED BALANCE SHEET AND RETURN

Net capital employed (year-end) 746.6 585.0

Return on net average capital employed 13.4% 13.1%

Net interest bearing debt (year-end) 331.1 230.4

CONSOLIDATED CASH FLOW

Cash flow from operating activities 48.7 27.8

Investments less divestments of fixed assets – 35.2 – 51.8

Free cash flow 13.5 – 24.0

Balance of acquisition / disposal of operating companies and participating interests – 88.1 – 175.1

OUTSTANDING SHARES (X 1,000)

Number of outstanding shares at year-end 23,967 23,556

Weighted average number of outstanding shares (before dilution) 23,426 22,797

Weighted average number of outstanding shares (after dilution) 23,495 22,967

PER-SHARE DATA


Net income before amortisation and excluding result from divested operations

and exceptional items (cash earnings) 2.68 2.04

Diluted net income 2.17 2.02

Diluted cash earnings 2.67 2.03

Dividend per share 0.85 0.80

Equity 15.31 13.16

EMPLOYEES

Number of staff years at year-end 4,437 4,020

– of which in the Netherlands 931 975

Financial highlightsin millions of euros, unless stated otherwise


◾ TenCate exceeded the €1 billion revenue

level in 2008, a milestone which was

forecast earlier in the year. During the

reporting year, TenCate was relatively

unaffected by the imminent economic cri-

sis. Revenue growth amounted to 17%,

including 5% on an organic basis.

◾ EBITA increased by 31% to €95.4 million.

Acquisitions contributed 36% to the

growth. An important positive contribu-

tion was made by the fast-growing reve-

nues in the defence market. The

Geosynthetics & Grass sector also

showed a good performance, under diffi-

cult external conditions.

◾ The EBITA margin increased by one per-

centage point to 9.2%. The growth in

margins took place in both the Advanced

Textiles & Composites sector and the

Geosynthetics & Grass sector.

◾ The cash earnings (net income before

amortisation and excluding the result on

the divestment of operations and excep-

tional items) increased from €46.6 million

to €62.7 million (+35%).

◾ Very major developments again took place

in the field of fire-resistant materials for

the US army (including TenCate

Defender™ M). TenCate Defender™ M is

the standard for the protective fabric

used in US Army uniforms for combat

units. TenCate has developed a product

portfolio in the field of fire-resistant prod-

ucts with a wide range of potential appli-

cations for the army, air force and navy.

◾ With the acquisition of Xennia Technology

Ltd., TenCate took an important step in

the field of inkjet applications for indus-

trial markets. Its focus is on achieving a

breakthrough in finishing technology for

the improvement of production processes

(painting, coating, finishing) and the crea-

tion of new functionalities for textile sub-

strates, as well as a spin-off to other

industrial applications. The first products

based on this technology are being intro-

duced into the market for protective fab-

rics.

◾ Together with Union Textile Public

Company (Thailand), TenCate established

a company for safety fabrics for the Asian

market. This is an important step in the

market development of the Asian region.

◾ In mid-2008 it was decided to implement

an accelerated adaptation in the produc-

tion of protective and outdoor fabrics

(Protective Fabrics and Outdoor Fabrics)

at Nijverdal (Netherlands), in order to pro-

vide greater focus. This adaptation is

aimed at concentrating two plants at one

site.

◾ The aircraft industry was sluggish in the

fourth quarter. The reduction of inventory

positions in the supply chain resulted in

lower quarterly revenues in this market

segment towards the end of the financial

year, particularly in Europe. The trend in

the market nevertheless remains positive

for aviation composites. There is an

underlying increase in the use of light-

weight materials in order to replace alu-

minium.

Key developments in 2008


◾ In the market for aerospace composites

and armour composites, the companies

YLA / CCS Composites and Composix

were acquired in the United States. As

result, the position in the US market was

considerably strengthened. Composix in

particular made a strong contribution

through its involvement in large-scale US

vehicle programmes (Stryker Light Armour

Vehicles and MRAP vehicles).

◾ The Grass market group took a further

step in its strategy of end user marketing

in May 2008. Together with Oranjewoud,

the company Edel Grass was acquired.

The acquisition is mainly of importance

for co-operation within the chain, in order

to guarantee the quality of technical

aspects of synthetic turf systems.

◾ The earlier acquisition of Phoenixx TPC

enabled TenCate to bring the UD (unidi-

rectional) technology in house. This tech-

nology is complementary to the existing

production processes for space and avia-

tion composites (TenCate Cetex®). During

the reporting year, qualification process-

es were set initiated for future applica-

tions in the aviation sector, and produc-

tion capacity was expanded. In addition,

a co-operation agreement was signed

with Airborne Composite Tubulars for

applications in tubular systems for oil and

gas extraction.


Evaluation of action plans

Evaluation of action plans for 2008 which

were announced in the 2007 annual report.

◾ Consolidation and integration of strategic

acquisitions

The companies acquired in 2007 and 2008

have been fully integrated within the

worldwide TenCate organisation. TenCate

strives to achieve market leadership and

chain management within a worldwide

value chain (value chain management).

The full or partial acquisitions of partici-

pating interests in synthetic turf compa-

nies form part of the business model

(end-user marketing section), which is

derived from the TenCate strategy. The

aim is increasingly to achieve a system

approach based on optimum performance

during the economic life of synthetic turf

sport pitches. These marketing organisa-

tions retain their own identity and brand

structure.

Xennia, as a technology investment, is

not an integrated TenCate company,

as the technology is also used outside the

strategic market area. Xennia does never-

theless use specific expertise which is

available within TenCate. Intensive

technological harmonisation takes place

in various sub-areas.

◾ Further implementation of the policy in

the Grass group of raising quality of syn-

thetic turf systems and increasing deliv-

ery reliability through process control and

redefinition of the product portfolio

Within the Grass group, further progress

was made in implementing the strategy

of end-user marketing and entering into

joint ventures with commercial custom-

ers. Good progress was also made with

product and system development.

Strategic partners develop and implement

synthetic turf systems jointly with

TenCate. The mutual relationship between

the various functional components results

in a sustainable, high-quality end-product.

A good example of this approach is the

new football pitch (FIFA Two Star

Recommended) at Heracles Almelo, which

is performing well in the top-flight com-

petition in the Netherlands. In the course

of 2008, the product portfolio and logis-

tics were streamlined. That led to less

idle time for machines and greater effi-

ciency with larger production runs.

◾ Further development of digital textile

finishing

A 75% interest in Xennia was acquired at

the beginning of 2008. This can be viewed

as a technology investment. The joint

developments by TenCate and Xennia can

bring about a major change in TenCate’s

production methods. The first successes

were achieved in 2008 with the wear-

resistant coating or printing of ceramic

tiles. The coating of textile substrates is

a derivative of this. In the course of 2009,

this will be started on a laboratory scale

and trials will be carried out in the mar-

ket. This technology creates considerable

cost benefits for TenCate and will lead to

a substantial saving of environmental

costs and energy consumption.

◾ Controlling growth of working capital

The importance of a strict liquidity policy

was already appreciated in 2007. In view

of the developments in the second half of

2008 and in particular in the fourth quar-

ter, this is now even more significant than

in the previous year. A number of busi-

ness units fell short of the internal tar-

gets were not met, partly because cus-

tomers were reluctant to take up

inventories before the year-end.


◾ Combination of purchase flows

Global sourcing was carried out success-

fully in a number of areas. As a global

player in niche markets, in which it usual-

ly operates as a market leader, TenCate

seeks to avoid regional price differences.

The company therefore aims where

possible to operate a global account for

suppliers, partly based on sale volumes

and a usually broad sale of products.

TenCate increasingly sees purchasing as

a tactical and strategic operation which

is co-ordinated worldwide.

◾ Organisational development and manage-

ment competences

Specific competences of the existing and

potential management are developed,

partly through the TenCate Active pro-

gramme. At the end of 2008, preparations

were begun for the company-wide TenCate

Talent programme, which will focus world-

wide on the development of young talent

within TenCate. Finally, the development

of the new senior structure of TenCate

effectively anticipates the required com-

petences of the senior management, such

as the Global Group Directors. Where

applicable, the content of the manage-

ment profiles was amended.

◾ Establishment of the global active direc-

tory

The IT organisation for corporate applica-

tions has been strengthened. Good

progress was also made with the global

roll-out of TenCate’s worldwide network

(global active directory). The ERP imple-

mentation at TenCate Protective Fabrics

North America was completed. A new

ERP package was implemented at the

new TenCate Geosynthetics plant in

Zhuhai (China), which matches that used

by the other Asian companies within

TenCate Geosynthetics.


◾ The global economy is experiencing diffi-

cult times in 2009. There can be no expec-

tation in the near term of a recovery in

the financial markets or of a return to

optimum operation in the financial sys-

tem. TenCate’s financial policy is focused

primarily on optimising cash flow in order

to reduce bank debt.

The entire company will also place great

emphasis on cost control.

The current market can give rise to attrac-

tive growth opportunities. TenCate aims

to continue the buy & build policy. The

structural financial objectives have been

formulated in such a way that they are

well within the covenants set by the

banks.

◾ Following the successful introduction of

TenCate Defender™ M in the US armed

forces, the product portfolio in the field of

fire-resistant protection will be further

expanded, and new geographic markets

will also be developed. The first armed

forces orders are expected from outside

the United States in 2009.

◾ TenCate will assess the enabling technol-

ogies on the basis of which new product-

market-technology combinations can arise

in the future. To this end, TenCate is part

of European development programmes, in

which it will play an active role.

◾ New possibilities can arise by establish-

ing a link between materials and sensors.

Examples of this development within

Geosynthetics are TenCate Geodetect®

and TenCate Hydrodetect®. TenCate will

develop markets in this area in close co-

operation with a technology partner who

has been involved in the development of

these products. The first pilot projects,

including the IJkdijk project in the

Netherlands (intelligent dyke construc-

tion) are very promising.

◾ The development of the fourth generation

of synthetic turf is now in a decisive

phase. The aim is to implement the first

pilot project in 2009. The fourth genera-

tion of synthetic turf combines various

essential functions in the upper layer

leading to savings in installation costs.

The replacement of the pitch will also be

easier and therefore cheaper.

◾ TenCate will continue entering into stra-

tegic alliances with marketing organisa-

tions in the worldwide synthetic turf mar-

ket, in order to achieve optimum

worldwide coverage, with each of the

commercial partners having access to the

most distinctive product portfolio possi-

ble. It will thus be able to occupy a lead-

ing position in the market.

◾ Further expansion of the market position

in Asia. The Asia region – with major

countries such as China and India – is a

growth market for TenCate’s functional

materials. Following the start-up of pro-

duction of both protective fabrics

(Thailand) and geosynthetic materials

(China), other areas will also be consid-

ered, in order to determine which growth

will be pursued in order to become an

important player in local markets.

◾ For inkjet technology, in addition to tech-

nical textiles, new industrial applications

will be developed in order to achieve con-

tinuing market development and value

creation at Xennia.

◾ In the field of information technology, glo-

bal active directory will be further rolled

out.

Actions for 2009


VISION

TenCate develops and produces functional

materials which are distinctive in terms of

their characteristics. These materials make a

positive contribution to progress, particularly

in social areas such as safety and protection,

environmental benefits and savings of energy

costs. Efficiency, logistical and cost advan-

tages can also be achieved which deliver sub-

stantial savings for users. Technological inno-

vations are important links in this chain. In

developing and producing new functional

materials, TenCate can draw on technological

developments which also take place outside

its core areas.

Textile technology, chemical technology and

material technology can develop into materi-

als science. This gives rise to new functional

materials to replace the existing materials.

Materials, solutions and systems will be avail-

able for use in existing and new product-mar-

ket-technology combinations. On the basis of

their distinctive characteristics, they will

make a positive contribution to the develop-

ment and performance in the industries and

markets in which TenCate operates.

The extent to which demand for such materi-

als is created – for example by new legisla-

tion and regulations and higher specifications

– determines to a large degree the future

growth of TenCate.

MISSION

TenCate strives for leadership in growing

markets for functional materials. To that end

the company exploits its broad technological

base, the individual skills of the employees

and a strong – global – position in the value

chain. By developing (system) solutions,

TenCate achieves progress in the market sec-

tors in which the company operates. The

added value for customers and end-users

results in more highly rated products and

profitable growth for the company. That also

creates value for shareholders.

TenCate strives for an internal culture based

on professionalism, openness, efficiency,

enthusiasm and respect. The core values of

the company are based on entrepreneurship,

innovative capability and a focus on results.

STRATEGY

TenCate has pursued a growth strategy (buy

& build) in recent years in order to secure

strong positions worldwide in the company’s

core markets. The strategy is implemented on

the basis of TenCate’s value chain manage-

ment model. This model is used in structuring,

implementing and operationalising the busi-

ness. It is based on the ultimate balance

between the four cornerstones:

◾ cost leadership in combination with

◾ product differentiation, focusing on spe-

cific applications and customer require-

ments;

◾ end-user marketing and an industrial

brand policy;

◾ technological innovation.

TenCate has achieved the necessary critical

mass and strategic coherence by means of a

series of acquisitions which are complemen-

tary to the existing business. This has also

strengthened the technological position and

achieved a healthy cost structure.

The emphasis has also been placed increasing

returns by concentrating on core competen-

cies and focusing on functional materials with

distinctive characteristics. With the aim of a

Vision, mission, strategy and objectives

TenCate Business Model

Our clear vision, mission and strategy set the course for the corporation. The strategy focuses on value chain management.

In day-to-day practice, the TenCate business model is used as the basis for structuring, implementing and operationalising the

business. Our challenge resides in finding the ultimate balance between the four cornerstones.

© Business Model Royal TenCate.


balanced portfolio of product-market-technol-

ogy combinations, the focus is increasingly on

sufficient new activities. The aim is to use

product development and innovation to gener-

ate at least 15% of revenues from activities

which were developed no more than three

years earlier. This aim is being achieved in the

current revenue breakdown.

QUALITATIVE STRATEGIC

OBJECTIVES

◾ Creation of shareholder value through

profitable growth based on our knowl-

edge, skill and internal synergy. In this

way we can fulfil our social responsibili-

ties;

◾ Achievement of critical mass in product-

market-technology combinations by secur-

ing leading positions in worldwide market

niches;

◾ Achievement of a healthy financial posi-

tion with sufficient strength for acquisi-

tions;

◾ Management of a balanced portfolio of

activities, in which product-market-tech-

nology combinations differ in terms of

growth opportunities and risk profile;

◾ Stimulation of an open, creative and

enterprising culture for progress, change

and renewal;

◾ Management of a commercial organisa-

tion which thinks in terms of (system)

solutions within the overall value chain.

FINANCIAL OBJECTIVES

◾ The net capital employed must generate a

sufficient return. The operating income

before amortisation as a percentage of

average net capital employed (plus accu-

mulated amortisation) must be at least

15%.

◾ The financial position must be sufficiently

solid. The ratio of net interest-bearing

debt to operating income before deprecia-

tion and amortisation (EBITDA) must be

structurally lower than 2.5;

◾ The long-term growth of cash earnings

per share must be at least 10%;

◾ An appropriate profit margin must be

achieved. The EBITA margin should rise to

at least 10%.


DEVELOPMENTS

2008 was a remarkable year in many respects.

On the one hand there was a continuation of

our successful buy & build policy. On the other

hand, there was the impending financial and

then economic crisis, which particularly

affected the end of the year. Another striking

fact was the strong price fluctuation in the

commodity markets, particularly the market

for polyethylene (PE) and polypropylene (PP).

This made it difficult to determine the pricing

policy. As a global player, TenCate conse-

quently had to absorb constant price rises in

the first half of the year. In the fourth quarter

of 2008, commodity prices fell substantially,

but TenCate was barely able to take advan-

tage of this decline.

Although the second half of the year showed

significantly lower growth in our earnings, net

profit growth for the whole year reached an

entirely acceptable level of +35% (cash earn-

ings). The growth was therefore in line with

our earlier profit forecast. Overall, 2008 was

a positive year, but it was buoyed strongly by

acquisitions and excellent performances by

our US companies, where revenues are prima-

rily related to US defence contracts. The

organic growth of consolidated net company

revenues for 2008 amounted to 5%. Although

the economic climate is currently uncertain,

we have achieved a strong strategic position-

ing in the past year. As a result, further organ-

ic growth can be achieved.

TenCate’s growth potential is also seen by

investors. TenCate attracted keen interest

among investors, as is evidenced by the per-

formance of the share on NYSE Euronext.

Although the stock market climate deteriorat-

ed sharply over the year, the TenCate share

fared relatively well.

BUY & BUILD

Over the past decade, TenCate has secured

leading positions worldwide in its niche mar-

kets. The acquisitions during the past finan-

cial year have proved to be an excellent sup-

plement to our product-market-technology

combinations. Each of these new business

units has contributed to the growth and

helped achieve critical mass. That is favoura-

ble for our position in the market and our pur-

chasing power in the commodities markets. In

the near future this purchasing power will

contribute to the desired further growth in the

EBITA margin.

We have consolidated our positions by means

of acquisitions (Xennia, Composix, YLA/CCS

Composites and TenCate – Union Protective

Fabrics), a joint venture (Edel Grass) and a co-

operation agreements (Airborne Composite

Tubulars). These activities must prove their

worth in the years ahead, but they already

directly enhance our strategy. Although we

will continue to focus on growth, attention

will be devoted to the consolidation of our

positions and financial solidity in 2009.

BUSINESS MODEL

The four cornerstones of our unique business

model – technological innovations, end-user

marketing, product differentiation and cost

leadership – offer us opportunities and poten-

tial to address the entire global value chain.

Even when profits are rising strongly, as in

previous years, we continue to pay close

attention to costs. The current economic situ-

ation requires us to do so even more critically.

The cost leadership cornerstone will be imple-

mented more intensively in the near term.

That was already announced in 2008, particu-

larly with regard to the Dutch production

sites. Among other measures, the number of

temporary employees was reduced in the final

quarter of 2008.

Foreword by the Chairman

of the Executive Board

TenCate – Union Protective Fabrics Asia

TenCate – Union Protective Fabrics Asia in Thailand was officially opened on 26 September 2008. The company manufactures

fabrics for work apparel and, in time, will add safety fabrics for the Asian market to its product range. The Asian market for safety

fabrics is developing quickly. Many of TenCate’s customers have production facilities there. Delivery via the new company will

result in cost savings and logistical benefits. A global market leader, TenCate wants to be actively involved in new developments

in this market and expand its production basis at the local level. The new company will allow TenCate to serve the growing Asian

market for functional materials optimally whilst adding value.


Adjustments were also made to the manage-

ment of the company in 2008 (see page 43).

The aim of this was to increase with the

speed of reaction in the market by means of

intercontinental commercial management and

internal co-operation within the groups. This

also strengthens TenCate’s positioning as a

company with clear corporate strategy.

Co-operation between the market groups is

essential in order to operate strongly as a

world player in the market and to create new

value by making use of our knowledge and

skills.

STABILISING MEASURES

When the first signals came at the end of

2007, TenCate took measures to enable it to

cope as effectively as possible with the

impending crisis. Investment proposals were

already put on ice at the end of that year. The

investment budget for 2008 was set on the

basis of defensive assumptions. That resulted

in a downward adjustment of investment

expenditure for 2008. Steps were also taken

at the beginning of 2008 to increase and

renew the syndicated bank facility on attrac-

tive terms. Production was deferred at a

number of locations in the fourth quarter with

a view to controlling working capital.

SUSTAINABILITY

TenCate’s business activities take place

against a backdrop of social and ecological

themes, such as security and protection of

people and the environment. We naturally aim

to make economical use of raw materials and

energy. That aim is integrated in our internal

best practices. TenCate conducts an active

environmental policy, but nowadays that is

the most natural thing in the world.

Precisely because we anticipate the global

themes and trends referred to above, TenCate

appears to be less sensitive to the issues of

the day. When we also lead the way with pio-

neering (process) technologies which deliver

considerable cost and environmental benefits,

the concept of sustainability adds genuine

value.

Xennia, acquired in 2008, is a leading special-

ist in the area of inkjet technology. This tech-

nology already has shown successes in other

industrial processes.

CONFIDENCE

We have always fulfilled our profit forecasts

in past years. That generates confidence. The

growth of the company over the past year

was made possible in part by the confidence

which customers place in us and, not least,

the efforts of how employees, for which I

would like to express my gratitude.

More than ever, we realise that the entire glo-

bal economy is based on confidence.

Confidence is therefore a keyword for our

activities in 2009. However, confidence

relates not to the past, but to the future.

TenCate has the potential to deliver a good

performance, even in difficult times.

L. de Vries

Chairman of the Executive Board

Innovative tubular systems

TenCate Advanced Composites and Airborne Composite Tubulars have entered into a strategic partnership for the development

and manufacture of tubular systems based on thermoplastic composites. These innovative tubular systems are implemented in the

oil and gas extraction industry and in oil and gas transport. Composite tubulars offer considerable advantages. In addition to sig-

nificant weight savings and a higher relative strength, enabling drilling at greater depths, for instance, they also have a longer

lifespan. Moreover other functionalities, such as sensors, can be built into such composite pipe systems relatively easily. As such,

they allow access to areas that were previously difficult or impossible to reach.


The TenCate share

LISTING

The Royal Ten Cate share is listed on NYSE

Euronext Amsterdam and in 2008 formed part

of the AMX index (2008 weighting: 2.33%;

indicative 2009 weighting: 2.55%).

A number of Dutch and international banks

and securities houses are actively engaged in

trading in the TenCate share, and TenCate is

followed by an increasing number of sell-side

analysts.

As at 31 December 2008, there were

23,966,901 outstanding ordinary shares, each

of a par value of € 2.50. The closing price of

the share at the end of December 2008 was

€ 16.05.

INVESTOR RELATIONS POLICY

TenCate has a broad international institution-

al shareholder base. Regular, direct contact is

maintained with the investors market.

The company once again took major strategic

steps in 2008. Against this background, and

as a result of the turbulence in the financial

markets, frequent contact was maintained

with our financial stakeholders.

This policy contributed to the relatively good

performance of the TenCate share. We suc-

ceeded in attracting a reliable core of stable

institutional investors with a long-term focus.

The geographic spread was largely

unchanged. Investors are concentrated in the

United Kingdom and the United States.

Interest is aroused by the strong commercial

developments in the United States, mainly

with regard to defence contracts.

TenCate’s concentration on global themes

such as water management, the environment,

protection and energy saving also creates

interest among sustainable (SRI) investment

funds.

JAN FEB MA APR MAY JUN JUL AUG SEP OCT NOV DEC

140

130

120

110

100

90

80

70

60

50

40

Source: NYSE Euronext

ISIN code: NL 0000375731

Reuters code: NTCN.AS

Bloomberg code: KTC.NA

◾ KTC

◾ AEX

◾ AScX


COMMUNICATION POLICY

TenCate strives for a transparent communica-

tion policy. Nevertheless, the quality of the

quarterly reporting will be raised, to reflect

the seasonal character of certain activities

and the project-based character of defence

contracts in particular. In the current form,

the detailed quarterly financial reports pro-

vide have only limited comparative and pre-

dictive value for stakeholders. Starting in

2009, TenCate will therefore send out trading

updates setting out the main points of the

company’s current performance. The full- and

half-year figures meet the requirements of the

new European transparency directive.

In TenCate’s positioning, it is important to

draw attention to the identity of the company

as a whole. It is more than the sum of the

parts. Our strength lies in the common striv-

ing for market leadership in both the techno-

logical and commercial spheres. In addition, a

strong position can be secured in global value

chains. Our model for value chain manage-

ment is based on a business model that has

proved its worth in past years.

DIVIDEND POLICY

TenCate operates in sustainable growth mar-

kets. As stated in previous annual report,

TenCate expects to realise growth in its stra-

tegic key markets in the years to come.

In order to finance such growth, TenCate aims

to achieve internal funding to the greatest

possible extent whilst retaining a sound finan-

cial basis.

In view of the development of the world econ-

omy, the company pursued a cautious invest-

ment policy and implemented a number of

cost cutting measures early on in 2008. In

2009, TenCate pursues a financial policy that

focuses primarily on debt reduction.

A consistent dividend policy is pursued, which

is based on a 40% payout ratio. Shareholders

are offered a choice of cash or shares charged

to the share premium reserve.

In view of the growth trend of TenCate shares,

over 50% of the shareholders have consist-

ently opted for a stock dividend in recent

years. Over the past few years, the buy &

build strategy resulted in a significant growth

of profit per share.

In view of the above, it is proposed to set the

dividend in respect of 2008 at € 0.85 per

€ 2.50 par value share. Half of the dividend

will be payable in the form of a stock divi-

dend; the remaining half in cash or stock

dividend according to the shareholder’s

preference. TenCate aims to stimulate the

choice for a stock dividend by applying a light

premium to the value of the stock dividend

compared to the cash dividend.

As at 31 December 2008 2007

Number of issued

ordinary shares 23,966,901 23,556,158

Par value € 2.50 € 2.50

Highest price € 27.19 € 34.05

Lowest price € 11.60 € 19.92

Closing price € 16.05 € 21.27

Cash earnings per

share € 2.68 € 2.04

Dividend per share € 0.85 € 0.80

DISCLOSURE OF MAJOR HOLDINGS

IN LISTED COMPANIES ACT

The register maintained by the Netherlands

Authority for the Financial Markets (AFM) in

connection with the disclosure of major hold-

ings in listed companies contains details of

the following investors (percentages based

on AFM returns or recent returns by the

respective shareholders):

Date of

disclosure Disclosing shareholder Interest

28.10.08 Allianz Global 4.99%

23.10.08 Kempen Capital

Management 9.90%

08.10.08 Allianz Global Investors 5.04%

22.02.08 Schroders plc 9.70%

Source: Netherlands Authority for the Financial Markets, situation as at 16 February 2009

A new slope with geosynthetics

Avalanches, falling rock and land slides can damage or obstruct mountain roads. Retaining walls reinforced with TenCate geosyn-

thetics offer a solution to repair the damage caused by, and prevent the consequences of, such natural phenomena. The foundation

of the road near Rodlau (Austria), for instance, was being damaged by water drainage. Soil reinforcement was required and the

curve in the road needed to be adapted. Option 1 was building a € 1 million bridge. However, option 2 was selected: constructing a

30 metre slope reinforced with TenCate Polyfelt®, which would cost 50% less than the first solution. After building the reinforced

structure, the road was relocated and paved. The slope now looks like a naturally vegetated slope.


47%

21%

6%

8%

13%

5%

52%

23%

5%

12%

8%

In addition to the above institutional inves-

tors, WAM Acquisitions and Aviva plc (Delta

Lloyd) have in the past disclosed interests of

over 5% under the Disclosure of Major

Holdings in Listed Companies Act.

OPTION PLAN, SHAREHOLDINGS

OF PERSONNEL AND EXECUTIVE

BOARD

Details of the option plan for managers and

members of the Executive Board can be found

on page 131 of this report. The shares repur-

chased by the company relate to the hedging

of granted options which have become fully

vested. Details of shares and options of the

company held by members of the Executive

Board and Supervisory Board can be found on

page 126 of this report.

Geographic spread of shareholdings

in percentage

◾ The Netherlands

◾ Belgium/Luxembourg

◾ United Kingdom

◾ USA/Canada

◾ Others

◾ Germany

2007

2008

Changes in the number of outstanding shares

Number of outstanding shares at end of 2007 23,556,158

Issue of shares –

Increase in share capital as a result of stock dividend 410,743

Number of outstanding shares at end of 2008 23,966,901

Important dates in 2009

Publication of 2008 full-year figures 4 March

Annual General Meeting of Shareholders 9 April

Ex-dividend date 15 April

Record datum for dividend eligibility 17 April

Option period for cash or stock dividend 17 April to 4 May inclusive

Publication of trading update 29 April

Payment of dividend/delivery of shares (stock) 8 May

Publication of half-year figures 2009 26 August

Publication of trading update 28 October


Sustainability

THE MOST NATURAL THING IN

THE WORLD

Sustainability is an inherent quality of

TenCate. It is embodied in numerous qualita-

tive aspects of products, systems, production

process and our social innovation. Every day

of every year. Sustainability as a basis and a

reflection of our striving for continuity.

Within our operational management, sustain-

ability is the most natural thing in the world.

We believe it is very important that our prod-

ucts should make an essential contribution to

a better world where safety and protection

are also the most natural thing in the world.

Such functionalities are so essential that this

is considered to be self-evident. There is a

natural demand for these functional charac-

teristics. TenCate therefore has the important

task of setting or following functional trends.

In the production process, TenCate focuses

attention on responsible handling of raw

materials, reject reduction, waste reduction

and recycling. Almost all production sites

have been established or certified in accord-

ance with ISO 9001 and/or ISO 14001 stand-

ards. Environmental legislation and environ-

mental protection form the foundations. They

are the basis for dealings with suppliers, as

well as customers. TenCate is a great advo-

cate of industry-wide preferably international

regulations. That creates clarity, keeps rela-

tionships pure and guarantees fair competi-

tion. It underlines TenCate’s wish to control

the production process as part of the chain

and make improvements where necessary and

possible.

QUALITATIVE ASPECTS

TenCate operates in the field of materials sci-

ence. Material characteristics are based on

the choices of raw materials used and the

market’s requirements with regard to use,

sustainability and environmental characteris-

tics, among other aspects. Safety, protection,

risk control, reduction of environmental

impact and energy saving are the current

themes that are of importance throughout the

world and constantly demand innovative solu-

tions. TenCate aims to play a decisive role in

providing the answers. These can involve full

or partial social, economic, technological and

ecological solutions. They will preferably be

qualitative total solutions which fit in with

the system approach targeted by TenCate.

This focus on responsible solutions forms the

basis for our growth, because this growth is

based on worldwide themes. It also limits the

cyclical nature of TenCate’s revenues to a cer-

tain extent.

CHAIN MANAGEMENT

Continuity is the common theme in the man-

agement of the chains in which TenCate oper-

ates. TenCate has the necessary technical

knowledge and international networks that

are of importance in value chain management.

Our approach to value chain management is

distinctive in the industrial world. It is based

on four policy cornerstones: cost control in

combination with product differentiation,

end-user marketing and technological innova-

tion.

The exercising of influence and authority as a

market leader is necessary in order to monitor

and accelerate progress within the various

chains. After all, each chain is ultimately

linked directly to the end users. Changing

demand requires a changing supply and tech-

nological renewal. And hence changing pro-

duction, new processes, new choices of raw

materials and adjustments to purchasing from

suppliers.

Such an outlook demands special form of

problem-solving capability. TenCate has

proved over many years that it can adapt

effectively to changed circumstances by being

innovative. That requires an unorthodox

entrepreneurial approach. After all, the bal-

anced combination of the four cornerstones of

our business model is a constant challenge.


In some cases the result is a coincidental –

and subsequently explainable – concurrence

of circumstances. Often it is not. One of the

biggest challenges is to effectively deploy the

knowledge and skills that are available within

the organisation for process and organisa-

tional renewal and technological innovation.

That is part of our culture.

FUNCTIONAL MATERIALS

Innovative technologies contribute to the

emergence of new functional materials. In

some cases this can take place rapidly.

Product design and material use will often

have an unforeseen influence. For example,

who would have thought 20 years ago that

modern aircraft would comprise more than

50% composites, often originating in textile-

related materials. In this example, composites

now make an important contribution to the

reduction of both the fuel consumption and

noise.

Operation in niche markets for functional

materials underlines the need to indicate

trends and developments clearly in technolo-

gy roadmaps. These articulate and represent

the developments in functional materials and

related technologies. A good example is the

Technology Road Map for Personal Protective

Equipment drawn up jointly with the EFSM

(Engineering Fibrous Smart Materials) founda-

tion in December 2008.

TenCate contributes to these ‘roads to the

future’ in many ways. The network approach

is also central in the many contacts with the

outside world. Relationships with internation-

al research establishments, partners, univer-

sities and government bodies create solid

opportunities for innovation. This approach

guarantees that new directions can be taken

in good time. TenCate has demonstrated that

it has a successful model in which it continu-

ously renews itself by developing technolo-

gies and new processes with which new

paths can be taken. An example is the DigiTex

project, with which inkjet technology is being

developed for industrial applications in the

textile production process.

SYSTEM APPROACH

Functional materials are a decisive component

of an overall system or concept. Each system

consists largely of the functionalities of the

materials, some of which constitute a system

in themselves. Standards form the framework

conditions within which the overall system

operates.

TenCate endeavours to apply its system

approach as a common theme in all markets.

Co-operation – from supplier to decision

maker – is necessary at all times for the end-

user. When each component has been harmo-

nised as fully as possible with the other parts

or components in the system, the most effi-

cient and effective solution has been found.

IDENTITY AND CULTURE

TenCate is a company in which different cul-

tures come together. In addition to the core

values in the field of environmental protection

and innovation, the corporate culture is based

on integrity and reliability, quality of products,

professionalism of employees and respect for

society.

All employees within TenCate have access to

‘10Cate’, which represents the identity of the

company. These ten values are universal

within our company. The customer is at the

centre, and every team is the driving force

behind the corporate culture.


Report of the Supervisory Board

ANNUAL REPORT

We hereby present the 2008 annual report

as prepared by the Executive Board, incorpo-

rating the financial statements. The financial

statements have been audited by KPMG

Accountants NV and were discussed with the

Executive Board on 3 March 2009, in the pres-

ence of the auditor. We are therefore of the

opinion that the annual report fulfils the

transparency requirements and forms a good

basis on which the Supervisory Board can

account for its supervision.

We propose that you accordingly adopt the

financial statements, approve the dividend

proposal and grant discharge to the Executive

Board in respect of its policy and to the

Supervisory Board in respect of its supervi-

sion.

SUPERVISION

The Supervisory Board held plenary meetings

with the Executive Board on six occasions in

2008, on the basis of a fixed schedule. It also

met independently on several occasions.

In addition, the Board held four supplementa-

ry meetings, on a range of subjects including

proposed acquisitions and their financing.

All members attended the majority of the

meetings.

During the joint meetings, the Supervisory

Board dealt with subjects such as the budget,

current acquisition projects and the corporate

strategy. The financial results were discussed

in each quarter. In the discussion of the 2007

annual figures and 2008 half-year figures, the

independent auditor reported on his findings.

The Supervisory Board met independently of

the Executive Board to discuss the composi-

tion and performance of the Supervisory

Board and the remuneration and performance

of the Executive Board.

One or two representatives of the Board took

part in four consultative meetings of the

Central Works Council, at which they

appraised themselves of the company’s

affairs.

INDEPENDENCE

All members of the Supervisory Board are

independent within the meaning of the best-

practice provisions of the Corporate

Governance Code.

No TenCate shares or options are held by the

members of the Supervisory Board.

COMPOSITION

In the general meeting of shareholders held

on 3 April 2008, Mr J.C.M. Hovers was

appointed as a supervisory director and then

elected by the board members as chairman.

Messrs F.A. van Vught and E. ten Cate were

simultaneously reappointed.

At the same meeting, Messrs A.W. Veenman

and C.W. Versteeg retired from the board. We

are grateful to both of them for their commit-

ment and contribution to the company.

Mr Veenman served as chairman of the

Supervisory Board for 12 years. TenCate

achieved strong growth under his chairman-

ship. His extensive technical and managerial

knowledge and experience were of great

value to the company. The way in which he

managed the Supervisory Board and the con-

sultations with the Executive Board was stim-

ulating and inspiring, and contributed to

effective decision-making.

Mr Versteeg served as a member of the

Supervisory Board for eight years. His contri-

bution was characterised by his involvement

with the human aspect of the company, rela-

tions with employees and consideration of

broad social developments.


SUPERVISORY BOARD COMMITTEES

The Supervisory Board has two committees:

the Financial Committee chaired by

Mr Ten Cate and the combined Remuneration,

Selection and Appointments Committee

chaired by Mr Van Vught. Their task is to ana-

lyse subjects within their specific areas of

knowledge and make preparations for deci-

sions to be taken in the meeting of the

Supervisory Board.

FINANCIAL COMMITTEE

The entire Financial Committee met on three

occasions in 2008. The meetings were held to

prepare for the discussion of the 2007 annual

figures and the 2008 half-year figures and a

number of specific subjects.

Matters considered in greater depth included

the internal management and reporting

systems, the tax position, the policy with

regard to audit services, aspects of financial

risk management and the external auditor’s

management letter and the corresponding

follow-up.

REMUNERATION REPORT

No changes were made to the remuneration

policy as set out in detail in the 2005 report-

ing year. The rise of the position of CEO of

Royal Ten Cate to the median of Hay level 30

was continued. In view of the continued wide

difference between the current salary level

and the median of Hay level 30, it was decid-

ed in 2008 also to implement an interim rise

towards level 30. The annual salary of Mr L.

de Vries was therefore increased by 10%.

The position of Mr J. Wegstapel as CFO and a

member of the Executive Board was set at

Hay level 26. The fixed basic salary was also

raised by 10% in 2008.

The remuneration of the Executive Board is

shown in note 56.2 on page 125 of this

report.

VARIABLE REMUNERATION

In 2008 Mr L. de Vries received the maximum

results-linked remuneration in respect of

2007, amounting to 50% of the annual salary,

having comfortably met the specified per-

formance criteria.

Mr J. Wegstapel received results-linked

remuneration of 30% of annual salary in 2008,

i.e. 75% of the maximum obtainable. This was

paid pro rata due to his having joined the com-

pany in March 2007.

Almelo, 3 March 2009

Supervisory Board

J.C.M. Hovers, Chairman

P.P.A.I. Deiters, Vice-Chairman

F.A. van Vught

E. ten Cate

20 ADVANCED ARMOUR

SAFETY. THE MOST NATURAL THING IN THE WORLD.

Personal protection. In an increasingly dynamic society, it is about

the safety of people. Whether military or police, they make themselves

vulnerable by protecting civilians.

Mireille van der Doorn has been a police

officer since graduating from the police

academy in Harlingen in 1992.

At the beginning of her career, she regular-

ly ‘walked the beat’ in uniform. She wore

a bulletproof vest countless times. Mireille,

married and the mother of a daughter,

is now a detective with the Large-scale

Investigation Unit of the Regional Police

Department of Twente. She has specialised

in interrogation methods. Today, she wears

a protective vest primarily during some

on-site investigations.

We would like to thank VTS Politie Nederland. We would also like to thank Suit Supply Hengelo.

The threat level determines the choice of stab and bulletproof material,

such as TenCate Aresshield for safety vests, which is also used for

antiballistic shields. Composite is a – relatively – light-weight material

that offers maximum multi-threat protection depending on its layer

structure and composition.


CORPORATE GOVERNANCE

STRUCTURE

The Supervisory Board and the Executive

Board endorse the main principles of corpo-

rate governance. The few exceptions which

apply within TenCate mostly relate to the

nature and size of the organisation. They do

not affect the basic principles of good corpo-

rate management and integrity. No changes

occurred in 2008 with regard to the excep-

tions to the best practice provisions stated on

TenCate’s corporate website.

With regard to the declaration made by the

Executive Board in the annual report with

regard to the internal risk and control sys-

tems, reference is made to page 33 of this

report.

The corporate governance structure is based

on the voluntary application of the two-tier

board structure. The main elements of this

are:

◾ The financial statements are adopted by

the general meeting of shareholders.

◾ Supervisory directors are appointed by

the general meeting of shareholders on

the basis of nominations by the

Supervisory Board. The profile of the

members of the Supervisory Board is first

discussed at the general meeting of

shareholders at the time of adoption and

on each subsequent modification.

◾ The general meeting of shareholders and

the works council can recommend per-

sons to the Supervisory Board for nomina-

tion as supervisory directors.

◾ In the case of one-third of the members of

the Supervisory Board, the Supervisory

Board will in principle place in nomination

the name of a person recommended by

the works council (works council’s rein-

forced right of recommendation).

◾ In the event of an outright majority of the

votes, the general meeting of sharehold-

ers representing at least one-third of the

issued share capital may reject the nomi-

nation by the Supervisory Board.

◾ The members of the Executive Board are

appointed by the general meeting of

shareholders on the basis of a binding

nomination by the Supervisory Board.

Corporate governance within TenCate is

based on the following principles:

◾ Value creation for shareholders

This means making optimum use of the

available resources. In the context of

internal financial control, financial ratios

and metrics are monitored closely. These

reflect the performance in terms of cash

flow generating assets, efficiency, mar-

gins and the return on capital employed.

Consideration is also given to longer-term

continuity. TenCate takes account of effi-

cient use of natural resources and its

social responsibilities.

◾ Quality of the management and appropri-

ate remuneration

The remuneration policy must make it

possible to attract high-quality manage-

ment which is appropriate for the special-

ised and multinational character of

TenCate. The performance pay structure

must be transparent and focused on key

performance indicators. The Supervisory

Board’s Remuneration Committee is

responsible for developing the remunera-

tion policy and assessing the performance

criteria for members of the Executive

Board.

Corporate governance

Personal Protective Equipment

Early in December 2008 TenCate co-organised the PPE Conference, which is devoted to Personal Protective Equipment. The con-

ference revolved around personal protection (fire brigade, police, emergency services) and focused on protection against high risks.

Personal Protective Equipment is one of the key factors in guaranteeing safety at work by protecting workers from a broad range of

hazards. Innovation is vital in order to improve the wearing comfort and properties of PPE products.


◾ Code of conduct for management and

employees

The company has a code of integrity, a

whistleblowers scheme and rules to pre-

vent abuse of inside information.

◾ Disclosure

Disclosed information must fulfil criteria

of accuracy, completeness and prompt-

ness and comply with transparency guide-

lines and IFRS standards, in order to pro-

vide stakeholders with the most

transparent and accurate information

possible on the performance and outlook.

The main risks must be stated and evalu-

ated.

The information on TenCate’s corporate

strategy is communicated clearly. TenCate

carried out full financial quarterly report-

ing up until the 2008 financial year. From

2009, only a market-compliant trading

update will be provided for the first and

third quarters, in accordance with the

legislation which came into force in

December 2008.

TenCate maintains an open communica-

tion policy, providing regular information

on important commercial developments.

◾ Financial control and risk monitoring

The Supervisory Board forms a financial

committee from among its members to

supervise the financial performance,

acquisitions, divestments and general risk

policy.

◾ Avoidance of conflicts of interest

TenCate is alert to conflicts of interest.

These are addressed and where neces-

sary avoided.

◾ Social responsibility and sustainable

enterprise

TenCate strives to maintain good rela-

tions with other parties in its vicinity and

with stakeholders. The company endeav-

ours to limit environmental impact as far

as possible. This principle is also included

in the code of conduct for employees.

Substantial environmental investments

are made for this purpose.

Operating companies have long imple-

mented major elements of socially respon-

sible enterprise. In order to ensure that

the sustainability policy is widely dissem-

inated, it is increasingly publicised inter-

nally. TenCate products also have major

sustainable elements having regard to

their functional characteristics.


EXECUTIVE BOARD

L. de Vries (57), Chairman J. Wegstapel (53)

The Boardsas at 1 January 2009


SUPERVISORY BOARD

J.C.M. Hovers (65) Chairman 1) 2)

Commenced in office: 2008

End of current term: 2012

Former Chairman of the Executive Board of

Océ nv and Stork nv

Supervisory director of Randstad Holding

Chairman of the Supervisory Board of Schuitema

Chairman of the Supervisory Board of Inter Access

Chairman of the Supervisory Board of Gemeentelijk

Vervoersbedrijf Amsterdam

P.P.A.I. Deiters (65) Vice-Chairman 1)



Former director of Berghaus International Fashion

Supervisory director of G-III Apparel Group Ltd

Supervisory director of Bandolera B.V.

Supervisory director of Tootal B.V.

Consultant to the European Bank for Reconstruction

and Development EBRD

Supervisory director of HVEG Investments B.V.

F.A. van Vught (58) 2*)



Member of the Group of Policy Advisors,

Chairman of the European Committee

Member of the Executive Board of

the European University Association

Member of the University Grants Committee

of Hong Kong

Supervisory director of Rova N.V.

Chairman of the Board of Nether (Netherlands

House for Education and Research, Brussels)

Chairman of the Board of ESMU (European Centre

for Strategic Management of Universities, Brussels)

E. ten Cate (63) 1*)



Director of Bank ten Cate & Cie N.V.

Chairman of the Supervisory Board of Nyloplast N.V.

Supervisory director of Nesbic Investment Fund

Supervisory director of Pas Reform B.V.

Supervisory director of Medisch Spectrum Twente

From left to right: E. ten Cate, F.A. van Vught, J.C.M. Hovers and P.P.A.I. Deiters

1) Member of the Financial Committee.

2) Member of the combined Remuneration,

Selection and Appointments Committee.

*) Chairman.

26 AEROSPACE COMPOSITES

ENERGY SAVING. THE MOST NATURAL THING IN THE WORLD.

As in the aviation industry, the automotive industry could benefit a lot

if more composites were implemented. After all, composites are lighter

than aluminium, stronger than steel and recyclable. This Twente One,

the solar car of Solar Team Twente, is featherlight thanks to TenCate

composites. The sustainable vehicles attained speeds of up to

126 kilometres per hour.

Solar Team Twente, a student team of

Twente University in the Netherlands,

competed in the World Solar Challenge in

Australia with its Twente One (21) solar car

in October 2007. The team completed the

journey, which is more than 3000 km long,

finished in sixth place and was the techno-

logy and innovation winner thanks to the

composite pivoting wing equipped with

solar cells.

In October 2009, the sun’s sustainable

energy will be the focal point in Australia

once again. A new team, a new Twente

One – red this time, the proud colour of

the Dutch region of Twente

Thermoplast and thermoset materials, such as TenCate Thermo-Lite

and TenCate Cetex, make a contribution to more sustainable transport.

The car racing industry is already using these innovative materials

extensively.


GENERAL

TenCate was one of the best-performing list-

ed companies in 2008, amid a deteriorating

stock market climate. At the same time, the

fall in the share price during the year was no

reflection on the good performance of

TenCate. The global economy deteriorated

sharply in the second half of the year.

Although this had an effect on TenCate’s

share price, the company continued to per-

form very well, delivering a satisfactory result

of 35% growth in cash earnings.

The intended strategic developments pro-

ceeded according to plan. The Advanced

Textiles & Composites sector provides a

strong foundation for profit growth. The syn-

thetic turf activities are also well positioned.

As stated previously, the process of improv-

ing the results of the Geosynthetics & Grass

sector will proceed gradually. Despite the

continuing recession in the United States, the

TenCate Geosynthetics group showed good

results.

Numerous alliances were entered into with

parties in the value chain were established. A

growing awareness of quality and our

advanced system approach fulfil a guiding

role.

TenCate is reasonably able to withstand the

prevailing economic downturn around the

world. Nevertheless, a degree of uncertainty

has arisen in various value chains with regard

to the availability of parts of public sector

budgets. In addition, there is some reticence

with regard to financing on the part of specif-

ic customers. This put some pressure on reve-

nues and results in the second half of the

year. On the other hand, within the limited

public sector budgets priorities are being set

which may have a positive effect on TenCate’s

activities, such as investments in infrastruc-

ture in order to stimulate the economy.

The rise in revenues during the year was

strongly influenced by defence contracts. The

lion’s share of our acquisitions in 2008 related

to this market. TenCate was thus able to

anticipate the growing demand for protection

of personnel and materiel. The great success

of TenCate Defender™ M was due to that. A

large part of the revenues of TenCate

Protective Fabrics relate to defence. In view

of the military modernisation programmes

already announced, this market offers impor-

tant prospects.

Despite less favourable external conditions,

the Geosynthetics & Grass sector continued

its rising trend. A positive aspect was the

increase in the EBITA margin. It should be

borne in mind that TenCate had to absorb part

of the sharp increase in raw material costs in

the first half of 2008. The positive effect of

the sharp decline in raw material costs in the

fourth quarter of 2008 will be evident mainly

in 2009. There is a strong seasonal pattern in

this sector, particularly in synthetic turf,

where market demand peaks during the sum-

mer months.

TenCate succeeded in increasing its medium-

term finance in good time on attractive terms.

The commitment runs for a residual term of

three years.

Attention was focused specifically on the

trends in the profit of TenCate’s Dutch compa-

nies, particularly with regard to the trend in

costs. This remains an important subject in

2009. The leading global market positions and

the favourable underlying market trends pro-

vide a strong foundation.

Report of the Executive Board

TenCate Defender™ M sets the standard

TenCate Defender™ M fabrics have been selected as the standard material for flame-resistant combat uniforms for the American

army and marine corps. New TenCate Defender™ M products are being developed continuously. The American army submits them

to comprehensive wearing tests. TenCate Gen2™ fabric is another successful product for military applications. As the biggest

American manufacturer of protective fabrics, TenCate is able to respond quickly to the requirements of different army units, each

with its own specific functional and qualitative properties. The company recently received an award for its performance from US

military authorities.


COMMERCIAL DEVELOPMENTS

Because there were signs at the beginning of

the year of possible growing uncertainty in

the market and a slowdown in growth in the

global economy, the investment level was

temporarily reduced. The emphasis was also

placed on generating returns from the recent

acquisitions and investments in production

capacity and new technologies. TenCate’s

markets are dominated by growth resulting

from global trends and themes such as water

management, energy saving and protection.

As a continuation of our sale activities in

Asia, important steps have been taken with

regard to production activities. This emerging

market will in the near future constitute an

important pillar of growth for TenCate.

On 17 July last year, the new synthetic turf

system for Heracles Almelo was presented in

the Polman Stadium jointly with TenCate’s

synthetic turf partners. It is the latest devel-

opment in synthetic turf systems for football.

Recent research has shown that footballers

highly rate the new pitch, which meets the

highest standards of FIFA and UEFA. This new

synthetic turf system has also attracted great

interest in the United States. It can also be

used effectively for sports other than football.

BUY & BUILD

TenCate achieved further success and

progress with the implementation of its buy &

build strategy during the reporting year. The

lion’s share was achieved in the first half of

2008. Our product-market-technology posi-

tions were further strengthened.

The strategic themes of buy & build and fix-it

/ exit will be of secondary importance in

2009. We will focus on liquidity and concen-

trate on further margin improvement, particu-

larly within the Geosynthetics & Grass sector,

and on reducing working capital.

FIX-IT / EXIT

As a result of the general economic situation

and the turmoil in the financial markets, it

was not possible to pursue our fix-it / exit

policy. A divestment of TenCate Enbi was not

opportune. TenCate will continue to work

towards the effective positioning of TenCate

Enbi as a reliable supplier in the international

printer and copier market.

FINANCIAL PERFORMANCE

NET INCOME

Net income amounted to € 51.1 million in

2008. That is a rise of 10% compared to 2007

(€ 46.4 million). The 2007 net income included

a book profit of € 0.3 million on the divest-

ment of operating companies, as well as

exceptional income after tax of € 3.1 million in

connection with a large real-estate trans-

action.

Net income before amortisation and excluding

the result on the divestment of operations and

exceptional items (cash earnings) rose by 35%

from € 46.6 million in 2007 to € 62.7 million in

2008.

As a result of the acquisitions during the

reporting year, the amortisation of intangible

fixed increased from € 3.6 million in 2007 to

€ 11.6 million in 2008.

COMPOSITION OF THE COMPANY

In line with the company’s strategy, the fol-

lowing companies were acquired in 2008:

◾ On 30 January 2008: Composix Co. of

Newark, Ohio (United States), a company

operating in the field of vehicle armour.


Analysis of 2008 results by sector 2008 2007 Diff. Organic

of which

currency

Acquisition/

divestment


Net sales

Advanced Textiles & Composites 481.0 350.3 37% 8% – 4% 33%

Geosynthetics & Grass 497.8 468.3 6% 5% – 4% 5%

Technical Components / Holding & Services 53.8 67.4 – 20% – 16% – 2% – 2%

1,032.6 886.0 17% 5% – 4% 16%

Operating result before amortisation (EBITA)

Advanced Textiles & Composites 61.5 40.2 53% 0% – 4% 57%

Geosynthetics & Grass 37.8 30.4 24% 20% – 7% 11%

Technical Components / Holding & Services – 3.9 2.4

95.4 73.0 31% 0% – 5% 36%* Including an exceptional item of €4.1 million.

Amortisation – 11.6 – 3.6

Operating result (EBIT) 83.8 69.4 21%

Net financial expenses – 13.7 – 11.3 21%

Pre-tax result 70.1 58.1 21%

Profit tax – 19.1 – 11.9 61%

Result from ordinary operations after tax 51.0 46.2 10%

Result from divested activities – 0.3

Third party minority interest 0.1 – 0.1

Net result 51.1 46.4 10%

*

EBITA margins 2008 2007

Advanced Textiles & Composites 12.8% 11.5%

Geosynthetics & Grass 7.6% 6.5%

Consolidated 9.2% 8.2%

Road through the salt lake

Two projects were realised in Algeria using TenCate geosynthetics. One of these is the construction of a 13 kilometre access road

through Chott el Hodna, a salt lake between Mcif and Ain Khadra. The salt lake has an inadequate substrate. In winter, the lake is

one meter deep; in summer, the soil is covered entirely with a layer of salt due to evaporation. Thanks to the expertise of TenCate

Geosynthetics and the collaboration with the company creating the specifications, the builders decided against digging – which

would have required a huge investment in terms of time and money. TenCate supplied TenCate 300,000 m² TenCate Bidim® and

252,000 m² TenCate Miragrid® for the foundation of the road.


◾ On 12 March 2008: YLA inc and the 100%

subsidiary CCS Composites inc of Benicia,

California (United States), operating in

the manufacture of composite materials

for aerospace and industrial applications.

◾ On 14 March 2008: Xennia Technology ltd

(75% interest) of Cambridge (United

Kingdom), operating in the development

of industrial applications of inkjet tech-

nology.

◾ On 14 May 2008: Edel Grass bv (50%

interest) of Genemuiden (Netherlands), a

marketing organisation and installer of

synthetic turf sports pitches. This compa-

ny is proportionally consolidated.

◾ On 16 August 2008: TenCate – Union

Protective Fabrics Asia ltd (50.65% inter-

est) of Bangkok (Thailand), a producer of

fabrics for protective clothing.

REVENUES

Net revenues rose by 17% in 2008, including

5% on an organic basis. The currency effect

on revenues amounted to –4% and was

caused principally by a decline in the average

rate of the US dollar and related currencies.

The bulk of the revenue growth was account-

ed for by the Advanced Textiles & Composites

sector. Revenue growth in this sector amount-

ed to 37%, including 33% as a result of acqui-

sitions (Composix, YLA/CCS, Xennia and

TenCate – Union Protective Fabrics Asia ltd).

The Geosynthetics & Grass sector recorded

revenue growth of 6%. This growth was

mainly due to the Grass activities. The organic

sales growth in the sector amounted to 5%,

with a currency effect of –4%.

The 5% acquisition effect concerns the pro-

portional consolidation (50%) of Edel Grass

and the full-year consolidation of TenCate

Thiolon Middle East compared to nine months

in 2007.

The revenues of TenCate Enbi declined by

20%. It was not possible to win new projects

in time to offset the termination of a number

of major customer contracts.

OPERATING INCOME BEFORE AMORTISATION

(EBITA)

Operating income before amortisation (EBITA)

rose by 31% in 2008 from € 73.0 million to

€ 95.4 million. Excluding the exceptional item

of € 4.1 million in 2007, there was a rise of

38%. 36% of the EBITA growth was due to

acquisitions, including a particularly large

contribution from Composix.

The Advanced Textiles & Composites sector

recorded EBITA growth of 53%, including 57%

as a result of acquisitions. The 0% organic

EBITA growth was due to an increase in the

American activities and a decrease in profits

from activities in Europe.

The Geosynthetics & Grass sector generated

EBITA growth of 24%. This growth arose in

both the Geosynthetics and the Grass activi-

ties. On an organic basis, the EBITA growth

amounted to 20%.

The results of the Geosynthetics group came

under pressure from start-up costs for the

new plant at Zhuhai (China) and the contrac-

tion of the US market. These effects were

offset, however, by cost measures in compa-

nies in the United States and further earnings

growth in the activities in South-East Asia.

The Grass businesses began using new pro-

duction lines during in Dayton (United States)

and Dubai during the year. As a result, the

company now has sufficient production capac-

ity to meet the growing market demand in the

short term.


The reduction in the EBITA of the Technical

Components / Holding & Services sector is

closely related to the aforementioned excep-

tional item of € 4.1 million in 2007, the decline

in the revenues and results of TenCate Enbi

and the recognition of a reorganisation provi-

sion at TenCate Enbi in 2008.

The EBITA margin rose to 9.2% (2007: 8.2%).

RAW MATERIAL COSTS

Raw material costs as a percentage of reve-

nues rose from 52% to 54%. This rise was

mainly due to the changed composition of rev-

enues. The Geosynthetics & Grass sector in

particular had to contend with wide fluctua-

tions in prices of the main raw materials (pol-

yethylene, polypropylene). These prices are

strongly correlated with the price of crude oil.

From January to August 2008, prices rose

strongly. They then fell back steeply in the

final part of the year.

PERSONNEL COSTS

Personnel costs in 2008 amounted to 18% of

revenues, a decrease of two percentage

points compared to 2007 (20%). This decrease

was a result of the changed composition of

the company and efficiency improvements in

a number of businesses.

TAXES

The tax rate rose from 20.5% to 27.3%. Key

factors were the change in the geographic

origin of profits. Partly as a result of acquisi-

tions, a larger proportion of profit was gener-

ated in the United States, where the tax rate

is relatively high.

In addition, the tax charge was favourably

impacted by non-recurring tax income relating

to previous years.

WORKING CAPITAL

Working capital increased by € 52 million in

2008 from € 210 million to € 262 million.

Working capital at end

of 2007 € 210.3 million

(84 days)

Effect of exchange rate

differences € 5.8 million

Effect of acquisitions

(divestments) € 12.9 million

Organic change € 33.0 million

Total at end of 2008 € 262.0 million

(90 days)

INVESTMENTS

In 2008, € 48.0 million was invested (2007:

€ 62.9 million), compared to depreciation and

amortisation of € 42.3 million.

Major expenditure related to:

◾ the construction of a geosynthetics plant

at Zhuhai (China);

◾ the expansion of the number of produc-

tion lines in the synthetic turf plants at

Dayton (US) and Dubai;

◾ expansion investments for the Aerospace

& Armour Composites activities in the

Netherlands and the United States.

C1000 personnel in orange and black

Employees of C1000, the Dutch supermarket chain, are currently being fitted for an all-new uniform. Two qualities of TenCate

Tecawork™ represent the basis for the new clothing range. The new uniform is a part of the transition towards the new, fourth

generation of stores. Many of the approximately 30,000 employees already wear the new clothing range, which was developed in

close collaboration with C1000 owner Schuitema. It is ‘an exclusive design’ that complies with all of the quality standards and

uses the new corporate colours, orange and black. The clothing range will be used for a period of seven to ten years.


CASH FLOWS AND FINANCING

The acquisitions in the first months of 2008

led to an increased financing requirement.

This was met by increasing the existing syndi-

cated bank facility from € 250 million to € 400

million.

Net interest-bearing debt increased from

€ 230.4 million at the end of 2007 to € 331.1

million at the end of 2008. In spite of this, the

covenants entered into with the banks were

complied with.

The ratio of net interest-bearing debt to

EBITDA (bank definition) amounted to 2.61 at

the end of 2008.

Group equity at the end of 2008 stood at

€ 372 million, with a solvency ratio of 41.8%

(2007: 43.0%).

SWOT ANALYSIS

Previous annual reports have included a

detailed SWOT analysis has been included.

The following pages contain a summary of the

main changes in the positions and the specific

developments that have taken place with

regard to this analysis.

RISK MANAGEMENT

There are risks associated with the business

strategy. External economic factors, unpre-

dictability of market developments, calamities

and human factors can impede the achieve-

ment of business objectives. TenCate strives

to control the achievement of strategic and

operational objectives as effectively as possi-

ble. To that end, TenCate has access to appro-

priate risk management and control measures.

As a result of these:

◾ the main risks are identified in time and

remain limited to an acceptable level;

◾ there is a reasonable degree of certainty

that the financial reporting contains no

material misstatements;

◾ the applicable regulations and legislation

are complied with.

The market areas in which TenCate operates

– protective fabrics, aerospace, antiballistics,

geotextiles, synthetic turf and technical com-

ponents – entail specific strategic and com-

mercial risks. In most cases, TenCate pursues

these activities on four continents, each with

its own dynamics. TenCate is therefore not

part of a monoculture. Consequently, none of

the risks detailed below will have a dominant

influence.

A number of specific significant risks applying

to TenCate have been identified. The summa-

ry of the main specific risk areas below is not

exhaustive. It is possible that risks which

have not currently been identified or which

are not seen as material will subsequently

have a significant negative effect on

TenCate’s ability to achieve its business

objectives. The risk management and control

measures are aimed at timely identification of

these risks.

MARKET RISKS

Market

The market risks differ depending on the mar-

ket segment. In some segments, such as base

fabrics for professional wear, there is inten-

sive competition and high price elasticity.

In addition, production of less distinctive

products is gradually shifting to Asia.

In other market segments, such as safety fab-

rics, antiballistics, geotextiles and artificial

grass, TenCate has a technological lead, in

many cases with associated market leader-

ship.

To be continued on page 37 ▶ ▶


SWOT analysis

TENCATE’S STRENGTHS

TenCate owes its strong position in the stra-

tegic markets on a global scale primarily to

the know-how which it has developed in the

specialist markets and the broad technologi-

cal basis, both through organic growth and in-

house research & development and through

acquisitions.

In past years, TenCate has succeeded in

securing positions in respective value chains

that have given the company leading positions

in terms of market share. TenCate has striven

continuously for critical mass in order to

achieve a balanced position principally

between the suppliers (input side) and the

often large parties in end-markets (output

side), among which TenCate occupies a dis-

tinctive position.

Size is not the only important factor. Specialist

markets mainly demand solutions for complex

requirements (specifications) from the market

in the field of functional materials. TenCate is

increasingly solution-focused and is shifting

the market approach from a product-based

philosophy to a system approach.

POINTS FOR IMPROVEMENT

Partly as a result of product life cycles, there

is a continuing risk that a product will become

a commodity, replacement products will

appear and margins will decline. TenCate pro-

tects itself against this by continuously plac-

ing cost control high on its agenda. In addi-

tion, product differentiation is one of the

cornerstones of its policy. This means that the

company works continuously to develop prod-

ucts and expand the portfolio.

The positioning of the corporate brand and its

values, in which the quality and performance

of TenCate products form an important part,

is a means of increasing the recognition and

familiarity of TenCate products within the

context of end-user marketing. This is a con-

tinuous process, in which acquired companies

are also included.

It was previously stated that TenCate is still

underrepresented in the Asian market.

Although the demand for high-grade function-

al materials on the whole has not yet

increased to the level of the United States

and Europe, strong growth is nevertheless

being recorded. In 2008, TenCate increased

its position in Asia in the field of geosynthet-

ics and protected fabrics. This development

will be continued in the years ahead.

OPPORTUNITIES

TenCate plays an important role in Europe

with regard to research and development in

smart textiles. Digital processing based on

inkjet technology (Xennia) also offers consid-

erable opportunities. Due to the large number

of developments in the field of standards,

specifications, etc. and technological devel-

opments, it was decided to manage both cor-

porate technology and corporate development

on a central level.

The increasing concern for sustainability,

safety and protection is positive for the mar-

kets in which TenCate operates. An example

of this is the geosynthetics used in infrastruc-

ture projects. These enable substantial sav-

ings in environmental costs and reductions in

harmful environmental impacts, such as dis-

ruption to the environment, as well as lower

transport costs for construction materials.

THREATS

The purchasing side and scarcity of certain

raw materials (e.g. synthetic fibres) remains a

point of attention. The dependence has nev-

ertheless decreased as a result of acquisi-

tions and the growth of TenCate over the past

few years. Moreover, as a result of the gener-


al economic situation, there is no longer any

scarcity of raw materials. Such a situation is

not expected to recur in the near term, partly

having regard to capacity expansions which

have taken place in the past.

On the purchase side, the very sharp rises in

prices of PE and PP had a substantial impact

on margins. There are few effective ways to

hedge against these wide movements effec-

tively in the market, but where possible

TenCate revises its contractual relationships

with customers and suppliers in order to build

in greater flexibility.

CHALLENGES FOR TENCATE

The situation with regard to the challenges

referred to previously is stated below.

◾ Knowledge protection / patent position

The central position of corporate technol-

ogy underlines the importance of knowl-

edge protection and the patent position.

For each market group, a Technology Road

Map is drawn up which serves as a basis

for product and market development.

◾ System approach

A continuing focus is our system

approach, which plays a role in all of the

areas in which TenCate operates. A func-

tionality usually operates not in isolation

but as part of a system. TenCate products

form an inseparable part of it. This devel-

opment requires more intensive co-opera-

tion with third parties (joint venture, out-

sourcing of operations, etc.) and in some

situations other technologies may be

required to operate as an integrated sys-

tem. It is possible that new networks of

companies will arise in future which mar-

ket certain systems.

◾ Conceptual (system) approach in the field

of synthetic turf sports applications

The synthetic turf market is potentially a

worldwide growth market, in which a

growth rate of 15% is achievable.

However, synthetic turf is not a generic

product but must be adapted to the spe-

cific use, the local situation and climate

conditions.

The joint ventures which TenCate has

entered into in the synthetic turf market

form a basis for a more conceptual

approach to the synthetic turf market.

This process takes several years, because

the market also has to develop the dis-

tinctive capability. A good performance of

a sports pitch over a number of years is

not a basic requirement that can be

achieved with an arbitrary selection of

components. In addition to good quality in

the end-product, increasing co-operation

is required in installation and mainte-

nance in order to achieve optimum play-

ing conditions over many years. The co-

operation with partners in the market

must support this development.

◾ Growth potential in Asia and emerging

markets

Following the start-up of the new produc-

tion facility for geosynthetics in Zhuhai

(China) and the joint venture for protec-

tive fabrics in Thailand, TenCate’s pres-

ence in Asia will be further enhanced. The

relative share of revenues from Asia is

expected to increase considerably in the

years ahead.

◾ Reduction of dependence on oil products

TenCate has begun development work in

biopolymers with third parties. This

project is taking place within the frame-

work of the Regional Innovation Platform

in Twente in the Netherlands.


◾ Links to other industrial sectors

Two developments can be cited with

regard to new applications for TenCate

materials,. With the acquisition of

Phoenixx (composites), TenCate has

gained access to UD technology, which

can be used to produce composite pipe-

lines for oil and gas extraction. TenCate

has entered into a joint venture in this

field with the Dutch company Airborne

Composite Tubulars. In addition, Xennia is

working with other companies in order to

market the developed technologies in

industrial sectors other than the textile

sector. A commercial breakthrough was

achieved in the field of coating (printing)

of ceramic interior tiles.

The combination of TenCate’s strengths/

opportunities and possible threats/risks cre-

ates possibilities for action.

◾ Exploitation of scale benefits and world-

wide presence in the purchasing market.

The ending of scarcity strengthens the

position in this market.

◾ Wider use of available knowledge and

patent positions, with a greater degree of

international cooperation in R&D.

◾ Co-operation with third parties and open

innovation lead to shorter time to market

and faster market acceptance.

◾ The system approach and greater interac-

tion within the value chain in the synthet-

ic turf market raise quality and lead to

greater appreciation of performance-

related characteristics among end-users.

The system approach and new technologi-

cal developments lead to higher added

value in the synthetic turf system.

◾ The system approach is an effective

means of shortening a product lifecycle

as a result of commoditisation.

◾ The broadening of the geographic cover-

age (Asia) reduces the general market

risk. An example of this is the sluggish

market for geosynthetics materials in the

US and a strong, growing market in Asia.

Seasonal patterns are also smoothed out.


This provides no guarantee for the future.

Products which reach the end of their life

cycle must be succeeded in good time by new,

improved and distinctive versions.

Protection and patenting of intellectual prop-

erty strengthens the unique positions of the

products.

End-user marketing provides pull effects, as a

result of which the value chain is controlled

more effectively and distinctive ability is

rewarded by the market.

There are also markets which feature long-

term development programmes, such as the

aerospace market. Growth in revenues is

protected by qualification processes. A pre-

condition is that TenCate continues to adhere

to the quality guidelines specified by the cus-

tomers.

Macroeconomic developments

Macroeconomic developments have an influ-

ence on the level of demand for TenCate’s

products. That also applies to the current eco-

nomic crisis. The revenues of some market

groups and product-market-technology combi-

nations is directly impacted by the level of

economic activities among industrial compa-

nies and end-users. An important factor is

government expenditure in the major coun-

tries. The demand for protective fabrics and

antiballistics is controlled by public sector

bodies, in particular defence forces and fire

brigades.

Demand for geotextiles and synthetic turf

products is driven by public sector invest-

ments in infrastructure and sports facilities.

Factors which determine government policy in

the above markets include security policy and

economic growth. Strong commercial net-

works and the associated information provi-

sion make it possible to anticipate govern-

ment plans promptly and efficiently.

As a result of flexibility in cost structures, it

is possible to compensate for the conse-

quences of a certain degree of reduction in

demand. This flexibility is achieved among

other things by flexible deployment of labour

and partial outsourcing in some market

groups.

Raw materials

A limited number of raw materials determine

a large part of the materials consumed by the

TenCate companies. This concerns in particu-

lar cotton, aramid fibres and various grada-

tions of polyethylene and polypropylene.

Prices in the commodity market may fluctuate

widely. The price of plastics is determined

partly by the oil price, but in particular by

shortages or surpluses in the market.

Price rises can be passed on to customers

with a time lag of one to six months. The

same applies to price reductions. In some

cases an automatic price adjustment clause is

included in customer contracts.

In the case of super-strength or fire-resistant

armour fibres, regular shortages occur or

a strong dependence develops on a single

supplier. In such situations suitable agree-

ments have been entered into with the sup-

plier. TenCate operating companies will

increasingly take part jointly in negotiations

with major suppliers, in order to achieve opti-

mum conditions in terms of price, quality and

delivery reliability.

▶ ▶ Continued from page 33

‘Synthetic turf owns the future’

FIFA, the world football organisation, is a strong advocate of synthetic turf. Football on synthetic turf owns the future. It makes the

game faster, more attractive and safer. ‘Synthetic turf fields have many benefits: the field is always perfectly green; the game is

sped up and the passes are more accurate thanks to the field’s regularity. Technically talented and physically strong players have

equal changes. Synthetic turf fields can be used more often and offer a greater number of options for use. The field is not damaged

by bad weather and the maintenance, which is vital to maintain synthetic turf fields in top condition, is less costly than for natural

grass fields.’


FINANCIAL RISKS

Currency

Approximately 36% of TenCate’s revenues are

denominated in euros. The main currency risk

incurred by Ten Cate is in respect of the US

dollar (47% of sales) and a number of more or

less dollar-related currencies such as the

Hong Kong, Singapore and Australian dollar,

the Chinese renminbi and the dirham (Dubai).

With regard to currencies, we draw a distinc-

tion between competition, transaction and

translation risk. The competition risk concerns

the changing competitive position vis-à-vis

competitors in areas with a different curren-

cy. This risk is hedged over the subsequent six

months by means of options. Thereafter a

permanent answer must be found to the new

situation. Transactions in foreign currencies

are immediately hedged by means of futures

or options. These are mainly transactions by

European operating companies denominated

in US dollars and British pounds.

Since foreign operating companies, particu-

larly those using US dollars and related cur-

rencies, make an important profit contribution

to the company’s results, these, these trans-

lation risks are hedged. If possible, they are

offset by means of opposite positions with

regard to competitive risk.

Interest

The company’s financing is fairly centralised.

The risk of interest rate rises is in principle

hedged 90% for the following year and 75%

and 50% for the subsequent years, taking into

account the expected interest rate trends.

The preference is to use caps for this purpose.

The impact of the change in value of financial

instruments on the company’s results is miti-

gated as far as possible by the use of hedge

accounting.

Pension provisions

TenCate has placed the pension provision for

Dutch employees with Stichting Pensioenfonds

Koninklijke TenCate. This average salary

scheme is designated as ‘defined benefit’ in

accordance with IFRS reporting rules. A sharp

fall in prices on international securities

exchanges could lead to a decrease in the

value of the pension fund’s investments. The

result of this and of interest rate develop-

ments may be that the provision for pension

liabilities on the Royal Ten Cate balance sheet

increases under the new IFRS guidelines. The

pension fund has taken measures itself within

its investment policy, partly as a result of the

Financial Assessment Framework (including

interest rate risk management), involving a

reduction in the risk profile.

The company has concluded an implementa-

tion contract with Stichting Pensioenfonds

Koninklijke TenCate, under which the financial

contribution remains limited to an average

contribution. This moves within an agreed

range depending on the financial situation of

the fund.

In the other countries there are defined con-

tribution schemes in the vast majority of

cases.

ORGANISATIONAL AND LEGAL RISKS

TenCate is involved in various legal proceed-

ings resulting from normal business opera-

tions. In the proceedings between United

Fabrics and TenCate, which began in 2000

and have been reported on previously, The

Supreme Court issued a judgment on 7 April.

Part of the claim, based on a commercial alli-

ance, was dismissed. With regard to the

remainder of the claim, relating to a manage-

ment alliance, the other party has been

instructed to demonstrate the damage suf-


fered. A bank guarantee issued by us expired

in 2008, increasing the likelihood of a favour-

able outcome.

Environment

TenCate’s environmental policy is based on

limiting any impact on the environment as far

as possible. Regular checks are carried out

both by the holding company and by the man-

agements of operating companies and meas-

ures are taken to avoid environmental risks.

Textile finishing in particular may involve the

use of chemicals which must be covered by

guarantees. The waste water from textile fin-

ishing in the Netherlands and the United

States is treated in the company’s own water

treatment plants.

TenCate considers that the environmental

risks have been limited as fully as possible.

Environmental coordinators have been

appointed at local level who are familiar with

the specific situation and implement local leg-

islation and regulations accordingly.

Product development

Product development is the lifeline for the

years ahead. It must be managed with care. If

products are brought to market too early, this

can result in teething troubles, recalls and

damage. On the other hand, if the time-to-

market is too long, TenCate will lose a large

part of its competitive advantage. The prod-

uct development process has been structured

in accordance with strict procedures and cri-

teria.

Production and product liability

TenCate has various small- to medium-scale

production processes, for example involving

fewer than 100 employees. Where there is a

relatively low degree of production automa-

tion there is a higher risk of human error.

Incidents in production can never be ruled

out.

These may lead to a loss of quality in the end-

products, claims from customers or even a

temporary halt in the production process.

However, TenCate carries out preventive

inspections of its products and almost all

plants are ISO-certified. Control of production

processes and quality management are impor-

tant priorities in order to avoid product claims.

In that context, terms and conditions of sale

have been standardised as far as possible.

Management and personnel

TenCate’s organisation strategy is based on a

decentralised model. The group directors and

operating company managements determine

the company policy to a large extent inde-

pendently and take entrepreneurial decisions.

Not having the right man or woman in the

right place can result in an operating company

rapidly losing its lead or even falling behind

its competitors. For this reason the selection

criteria for new management personnel have

been tightened up, with an assessment form-

ing part of the key management recruitment

procedure.

Another risk is dependence on key officers,

often with an R&D or market background. It is

necessary to ensure that this expertise is

retained and shared across the organisation.

This is achieved by guaranteeing knowledge.

TenCate Industrial Zhuhai

The official opening of TenCate Industrial Zhuhai occurred on 13 June 2008. It is the biggest TenCate manufacturing plant in the

Pacific and the most important investment of TenCate in Asia to date. It will be able to respond to the great demand for geosyn-

thetics in China, the rest of Asia and Australasia. Part of its production will be exported to the Middle East and the US. The plant

operates weaving machines for polypropylene and polyester based geotextiles. It also contains four extrusion lines. Most of the

textiles produced will be delivered to TenCate Geosynthetics. The remainder is intended for TenCate Industrial Fabrics (trampoline

fabric in particular).


CONTINUITY OF INFORMATION PROVISION

Each operating company has its own systems

for control and transaction processing in the

main operating processes. Systems for com-

munication and generic workplace automation

are implemented to a large extent centrally.

Disruptions to these systems can impede

operating processes. The risks are limited as

far as possible by means of information secu-

rity and fallback procedures. The operation of

these facilities is tested periodically.

Risk management and control system

The overall risk management and control

measures are based on a number of key ele-

ments.

MANAGEMENT ENVIRONMENT

The company strives for a culture of open-

ness, integrity, professionalism, enthusiasm,

efficiency and respect. Core values are entre-

preneurship, innovation and a focus on

results.

Every employee is made aware of these cul-

tural elements and the obligation to comply

with all applicable legislation and regula-

tions.

The Integrity Code and the Confidential

Adviser Scheme set out the general rules of

conduct with which employees must comply.

ORGANISATION

TenCate’s organisational structure is based

on providing support for a co-operation struc-

ture in which each person’s responsibilities

are clearly defined and performances are

measurable.

This is reflected in a group structure in which

groups and operating companies bear respon-

sibility for results. The group managements

determine the group strategy, promote con-

sistency and synergy and are responsible for

exploiting the market positions in the value

chain.

Central management support departments in

the company with functional responsibilities

contribute to the co-ordination.

The above objectives are facilitated by a

number of Group procedures, including the

TenCate Accounting Manual.

Managements of operating companies are

controlled on the basis of a formalised plan-

ning and control cycle.

INFORMATION PROVISION,

COMMUNICATION AND PROCESS

MONITORING

Systems for internal information provision

and communication are primarily aimed at giv-

ing employees and managers appropriate

information for their own areas of responsibil-

ity. A whistleblowers scheme and a com-

plaints scheme enable employees to inform

the company management about undesirable

situations.

It is important to maintain direct contact

between the Executive Board, group manage-

ments and operating company directors.

Direct discussion takes place regularly,

depending on the matter at hand. More for-

mally, extensive monthly reporting takes

place and the performance, results, outlook

and certain facets of risk management are

discussed once each quarter. Risk manage-

ment also forms part of the consultation with

the Financial Committee of the Supervisory

Board.

MANAGEMENT ACTIVITIES

Risk management is a responsibility of the

management at all levels. All managers and

controllers sign a twice-yearly letter of repre-


sentation on the financial reporting/internal

control.

All financial regulations are included in the

TenCate Accounting Manual. The manage-

ments and controllers of the operating com-

panies declare in respect of all their reports

that the results have been compiled in accord-

ance with this manual.

Each year the external auditors assess the

structure and operation of the administrative

organisation and internal control, to the

extent relevant to the auditing of the financial

statements. They report on this to the man-

agement, the Executive Board and the

Supervisory Board.

Where risks are insurable, such as for fire and

loss of profits and third-party and product lia-

bility, they are laid off to insurers. The bal-

ance between insurance cover, premium lev-

els and own risk is reassessed each year.

Regular inspections and follow-up increase

the continuity of the business processes,

reduce production outages and lead to lower

risk costs. Damage prevention and preventive

investments improve the risk profile.

EVALUATION OF RISK MANAGEMENT AND

CONTROL SYSTEMS

The Executive Board is of the opinion that:

◾ the risk management and control systems

provide a reasonable degree of certainty

that the financial reporting is free of

material misstatements;

◾ the risk management and control systems

have operated correctly in the reporting

year;

◾ there are no indications that the risk man-

agement and control systems will not

operate correctly during the current year.

However well designed our internal risk man-

agement and control systems are, they can

never provide absolute certainty that objec-

tives in the field of strategy, operation,

reporting and compliance with laws and rules

will always be achieved. In taking decisions

we are aware that:

◾ human errors of judgement may arise;

◾ cost/benefit assessments are always

made when accepting risks and taking

control measures;

◾ human failings and even simple errors or

mistakes can have major consequences;

◾ conspiracies by officials can lead to cir-

cumvention of internal control measures;

◾ the management of parts of the company

can permanently or temporarily negate

agreements made with the Executive

Board.

This statement should not be interpreted as

being a statement in accordance with the

requirements of section 404 of the Sarbanes

Oxley Act in the United States, which does

not apply to Royal Ten Cate.

INFORMATION TECHNOLOGY

DEVELOPMENTS IN 2008

A policy was formulated in 2008 for the

organisation and further standardisation of

generic ICT services, including e-mail and

services for the ICT infrastructure. The IT

organisation for corporate applications was

strengthened.

A number of operating companies have

migrated from the traditional analogue teleph-

ony systems to the use of computer network-

based (VoIP) technology combined with the

integration of e-mail, fax and chat functional-

ity (unified messaging).

TenCate Active 2 online

TenCate is a learning organisation, which is why the company invests continuously in the knowledge and skills of its employees.

The first version of the TenCate Active programme was concluded towards the end of 2007. In mid-2008, a number of employees

of TenCate companies in the US and Europe – potential leaders – enrolled in the second edition of the TenCate Active programme.

Once again, the programme focuses on increasing the employees’ understanding of the TenCate strategy, the translation to tactics

and operations, refining their competencies (innovative ability, entrepreneurship and leadership), and the execution of innovation

projects.


Good progress was made in 2008 with the

global roll-out of the TenCate’s worldwide

network (global active directory). Active

directory enables managers to manage the

policy (rights, domains and settings) in the

network of an entire company.

The ERP implementation within TenCate

Protective Fabrics USA was completed at the

end of 2008. In the new TenCate

Geosynthetics plant in Zhuhai (China), an ERP

package was implemented which is aligned

with that of the other Asian companies of

TenCate Geosynthetics.

PLANS FOR 2009

Global active directory will also be imple-

mented in the US companies in 2009, thereby

completing the roll-out.

A single shared service centre will be estab-

lished in each region (United States, Europe,

Asia) in the years ahead. A shared service

centre is unit within the organisation which

has responsibility for results, operates on the

basis of a contract (service level agreement)

and provides specialised services within the

organisation. The shared service centre for

Europe began operating on 1 January 2009.

Organisationally, it is within the purview of

the corporate information manager.

Preparations are being made for the creation

of a shared service centre in the United States

in 2009.

The standardisation of ERP systems in each

group will be continued.

HUMAN RESOURCES MANAGEMENT

HUMAN RESOURCES POLICY

On the central level, the HRM efforts are

focused primarily on guaranteeing continuity

of the company. The early identification of

talent for management positions and other

key roles and the continuous strengthening of

the organisation are of key importance in this

regard.

In concrete terms, that means:

◾ early identification and development of

talent;

◾ leadership development;

◾ strengthening of conduct based on the

core values in our corporate culture: inno-

vative capability, enterprise, a focus on

results, trust and co-operation.

These principles form an important part of our

TenCate People Program. In particular,

TenCate endeavours to engender a sense of

commitment among employees at all levels of

the company. We are constantly looking for

employees with passion who are always pre-

pared to ‘go the extra mile’.

During the reporting year, TenCate increased

its worldwide presence by acquiring Composix

and YLA / CCS Composites (USA), Xennia (UK)

and TenCate – Union Protective Fabrics. The

international character of TenCate was there-

by further strengthened, leading to improved

control of international value chains.

Economic, social and ethical factors are the

criteria applied in the creation of jobs in geo-

graphic areas that are new to TenCate.

Number of employees Year end

2008

Year end

2007

(in staff years)

Netherlands 931 975

Rest of Europe 612 582

United States 1,573 1,527

Asia/Australia 936 641

Middle East 385 295

Total 4,437 4,020


ORGANISATIONAL DEVELOPMENT

Our role as market leader requires strong

leadership and a clear organisational struc-

ture, so that further growth can be guaran-

teed. During the reporting year, work began

on laying the basis of a new organisational

structure, based on global leadership in each

group. This will strengthen and guarantee

international co-operation within the groups.

In addition, the lines between the Executive

Board and the group managements will be

shortened, leading to improved distribution of

duties and responsibilities. This structure is

based on a global presence of all five groups.

Important principles are a decentralised

organisation and lowest possible devolution

of responsibilities within the organisation.

Entrepreneurship is key at all levels in the

groups. Efficient, central management by the

holding company strengthens the aforemen-

tioned core values of the corporate culture.

An appropriate degree of autonomy in the

various operating companies and the active

pursuit of internal and external co-operation

are consistent with the company’s culture.

The renewed overarching global structure of

the organisation is intended to deliver greater

co-operation and greater strength and provide

a solid foundation for further growth in 2009.

TALENT AND MANAGEMENT DEVELOPMENT

For an enterprising and growing organisation

such as TenCate, the prompt identification

and development of in-house talent remains

an important key to success. Talent is about

more than having sufficient competences.

Passion is also a very important motive.

Management development

TenCate recognises the importance of invest-

ing in the knowledge and skills of the current

and potential management. The core values

of entrepreneurship, leadership, innovative

capability, a focus on results and co-operation

are systematically strengthened in a

four-layer management development (MD)

programme. The purpose of this international

TenCate programme is to ensure appropriate

succession, the development of current and

potential management and the attraction of

the right talent.

The MD programme was established interna-

tionally during the reporting year. 30 employ-

ees took part in two TenCate Active pro-

grammes. One programme took place in the

US and was provided by Twente School of

Management (TSM) in co-operation with

Emory Business School in Atlanta. The other

programme took place in Europe. This was

also provided by TSM, in co-operation with

teachers from leading European business

schools.

These programmes are aimed at promoting

innovative capability, entrepreneurship and

situational leadership. The participants are

given guidance to provide them with a better

understanding of the strategy formation proc-

ess and its tactical and operational implemen-

tation and enable them to adjust this process

as necessary. The participants carry out a

strategic assignment in teams. In addition to

the acquired knowledge, skill, expertise and

attitude, an important added value of this pro-

gramme is the mutual cooperation between

the managers in the various strategic product

groups and disciplines.

TenCate People Programme

The early identification and development of talent, the development of leadership, and the

reinforcement of behaviour based on the key values of our corporate culture are important

components of the TenCate People Programme. The TenCate Talent Programme started up in

the last quarter of 2008. All TenCate employees up to 35 years of age with at least a

Bachelor’s level education are invited to participate in events. These talents can improve their

visibility within the organisation at these events. Continuous scouting, assessment (of poten-

tial), evaluation and development of talent represent the key values of the programme.


In the final quarter of the reporting year, work

commenced on the TenCate Talent pro-

gramme. All TenCate employees up to the age

of 35 with education at least to bachelor

degree level are invited to take part in events.

These events, which take place over the year,

raise the visibility of these talents within the

organisation. Continuous scouting, assess-

ment (of potential), evaluation and develop-

ment of talent form the core of this pro-

gramme. The local management and the HRM

discipline play an important role in these pro-

grammes, meeting local requirements as fully

as possible.

The TenCate Talent programme and the

TenCate Active programme will be further

expanded In 2009. For the Talent target group,

a number of events will be organised over the

year, in which they can participate on a volun-

tary basis. The aim of this is to offer this

group an opportunity to become more visible

within the organisation.

EMPLOYMENT CONDITIONS

TenCate aims to offer its employees a com-

prehensive and competitive package of

employment conditions. To this end, regular

surveys are conducted, in co-operation with

Hay Group and local employer organisations.

The globally developed remuneration policy

for the international senior and upper man-

agement, based on the Hay system, was com-

pleted during the reporting year.

SAFETY

Our employees on all continents are profes-

sional people who have a sense of enterprise

focused on results and solutions and are pre-

pared to take on challenges. A safe, high-

quality working environment is of great impor-

tance in this regard and has the utmost

priority. TenCate’s policy is aimed at imple-

menting or structuring all operations and

processes in such a way that all forms of per-

sonal injury and damage to health can be

avoided.

This aim forms the basis of the health and

safety policy implemented in all our compa-

nies. This results among other things in a rela-

tively low level of sickness absence.

SOCIALLY RESPONSIBLE

ENTERPRISE

SUSTAINABILITY

The basis of TenCate’s sustainability policy is

an optimum balance between our quality poli-

cy and our environment policy. TenCate aims

to impact the environment as little as possi-

ble. Quality assurance forms the basis of this.

Periodic inspections are carried out by both

the holding company and the managements of

the operating companies and measures are

taken to avoid quality deficiencies and envi-

ronmental risks. In addition, the standing poli-

cy is to ensure, by means of quality systems

and independent certification, that compli-

ance with all applicable (international) legis-

lation and regulations – particularly on envi-

ronmental aspects – is guaranteed.

TenCate further developed its central policy

principles for sustainability during the report-

ing year. The necessary improvements were

made in order to fulfil and implement the pre-

viously defined key objectives. These related

to areas such as environmental protection as

part of integrated quality assurance, safety

and protection on the shopfloor, professional-

ism and integrity of employees and social

commitment.


MEASUREMENT PROVIDES THE ANSWERS

The general principles with regard to socially

responsible enterprise have been further

defined and developed within the company. A

fuller assessment of our sustainability policy

was carried out during the reporting year. All

plants worldwide were visited by the corpo-

rate risk manager and an extensive series of

sustainability-related qualitative and quanti-

tative information was obtained. The ISO

14001 methodology was used as a general

framework. Examples include the volumes of

waste, waste by type, waste water, energy

consumption and various emissions. Due to

the confidentiality of such data, figures and

details are not being disclosed. It was never-

theless established that comparability needs

to be improved. That can be explained by the

fact that each country applies its own meas-

urement and recording methods due to histor-

ical reasons and local legislation.

At product level, almost all product-market

combinations were surveyed in terms of their

effect on social aspects, ecological conditions

and economic performance. These data have

similarly not been disclosed to third parties,

for competition reasons. An increasing

amount of information on certain aspects of

sustainability is nevertheless being provided

in publications by operating companies – such

as pamphlets, datasheets and websites. The

results of the aforementioned internal surveys

are being further studied and assessed.

QUALITY ASPECTS

Quality assurance is a guiding principle within

our company. It begins with the process of

product development. This is structured in

accordance with strict procedures and crite-

ria. Some customers apply additional quality

standards which must be complied with. That

is the case, for example, of materials for

applications in aerospace, antiballistics and

protective fabrics.

Further work was carried out in 2008 on the

standardisation and tightening up of stand-

ards in plants and sales organisations. The

standardised terms and conditions of sale

were rolled out to European customers during

the year. They are stated in full on the web-

site.

ENVIRONMENTAL ASPECTS

TenCate considers that the environmental

risks have been limited as fully as possible.

Environmental co-ordinators have been

appointed at local level in practically every

part of the world who know the specific situ-

ation and implement local legislation and reg-

ulations. The high standards applied in Europe

serve increasingly as guiding principles for

plants at other locations around the world.

Apart from five recently acquired units, all 26

plants have a quality system that is currently

certified in accordance with ISO 9001 stand-

ards. Three of the five excluded plants do

nevertheless have an internal quality system.

With regard to environmental aspects, a

growing number of plants have also been cer-

tified in accordance with ISO 14001 standards

since 2000. In most cases the internal envi-

ronmental policy served as the basis for this

successful additional step.

On the basis of environmental control sys-

tems, the aim is to limit the use of raw mate-

rials, water and energy consumption and

emissions. Action is taken jointly suppliers of

raw materials and customers in an effort to

further reduce the environmental effects.

Examples are the replacement of chemical

additives by environmentally friendlier mate-

rials, improvements in the production process,

reduction of energy and water consumption


and control of energy and waste flows. For

example, TenCate Advanced Textiles in the

Netherlands uses only chemicals and dies

that are listed in the textile environmental

database. TenCate purchases most chemicals

and synthetic fibres from major multinationals

who already have a policy aimed at sustaina-

bility.

The TenCate operating companies devote a

great deal of attention to the control of waste

flows. In addition to coherent waste separa-

tion, various production sites maintain a mass

balance sheet. This serves as preparation for

the limitation of waste flows in the entire

production process. Specific materials such

as glass and bulbs, board and paper, iron and

steel, as well as wood, are separated as far

as possible. Any hazardous waste is collected

separately and removed by recognised

processing companies.

A number of Dutch operating companies suc-

cessfully reduced their water and energy con-

sumption at industry level during the past

year. These arrangements had previously

been set out in a covenant. The aim is to

achieve an energy saving of 10% within a

period of 10 years. A plan for energy savings

is drawn up and implemented every three

years. The saving of energy across the entire

chain is a central objective.

The TenCate Advanced Textiles site in the

Netherlands has had its own water treatment

plant since June 2007. Considerable savings

were made in 2008 in treatment charges. In

2009, investments are planned in the

Netherlands to enable the biogas obtained

from these treatments to be burned – after

cleaning – as an additional fuel in the steam

boiler of TenCate Advanced Textiles, for all

the existing plants. The conversion of cooling

water from TenCate Grass into process water

for TenCate Advanced Textiles in the

Netherlands is also bearing fruit. This results

in lower energy costs and discharge levies

and hence less time consumption.

CHAIN-FOCUSED ENVIRONMENTAL

PROTECTION

TenCate exercises its growing influence in the

value chain on suppliers and customers in

order to achieve objectives in terms of more

sustainable enterprise within the value chain,

although the various markets still differ in this

regard, sometimes substantially. Our increas-

ingly chain-focused approach makes it possi-

ble to achieve objectives which also have an

influence outside the company itself. Within

the organisation, TenCate continues to sup-

port sustainable operation with best practices

in its internal media. Operating companies are

encouraged to devise projects of their own,

both internally and externally.

SAFETY AND PROTECTION

TenCate gives the utmost priority to a safe

working environment worldwide. Although

any incident is one too many, the very low

percentage of industrial accidents underlines

this ambition. Safety is about protective

equipment and awareness. Safe machines

must be used safely. Training and information

are targeted means of keeping employees

mindful of possible risks. The operational

management is required to remind colleagues

on the shopfloor of the operational arrange-

ments for personal protection. Quality, Health

& Safety and Environment officers have been

appointed within the operating companies.

They monitor the performance in these areas

in the operating companies.

Waste water purification

The new waste water purification system at TenCate Protect is the first anaerobic purification system installed in a textile plant in

the Netherlands. The environmental costs are reduced by about 40%, including depreciation, operating costs and power consump-

tion. Anaerobic purification does not require any oxygen, since the contamination is removed by bacteria. This results in methane

(CH4), the main component of natural gas. The company aims to reuse the generated biogas to the boiler house as a power source

in the near future.


INTEGRITY

One of TenCate’s core values is reliability. The

integrity code involves everyone who is

employed in TenCate or one of its operating

companies. The code is part of each individual

contract of employment. A central compliance

officer and a confidential adviser have been

appointed to support the code. Additions

were made to various points of the integrity

code in 2008.

COMMITTED AND ACTIVE

On the basis of its local responsibility,

TenCate endeavours to make a positive con-

tribution to its environment worldwide.

TenCate sponsors a wide range of activities in

sport, culture and other social projects. The

largest project relates to its role as the main

sponsor of the Heracles Almelo professional

football club, which serves both a local and a

commercial interest. This is the first profes-

sional football club to play official competi-

tion matches on synthetic turf. This is an

important reference for TenCate Grass. The

summer of 2008 saw the installation of the

very latest synthetic turf system was

installed, which now also includes sensors –

a world first.

POST BALANCE SHEET EVENTS

In the first quarter of 2009 it was announced

that imminent agreement was expected on

the acquisition of a minority interest in

TigerTurf, a leading company in the interna-

tional synthetic turf market operating princi-

pally in Australia and New Zealand. The com-

pany markets concepts for various sports and

landscape applications. Annual revenues are

approximately € 50 million.

OUTLOOK

TenCate operates in sustainable growth mar-

kets. The company’s growth is based on

worldwide trends in the field of water man-

agement and the environment, the growing

demand for lightweight materials in transport

and haulage (lower fuel costs) and increasing

focus on safety and protection. The current

economic and financial situation may tempo-

rary inhibiting effect on market develop-

ments.

In the Advanced Textiles & Composites sec-

tor, protective materials for defence markets

account for a large proportion of revenues.

Government policies in the field of personal

protection and armour (vehicles) are not

expected to differ greatly from past policies.

Various future projects have already been

announced.

The outlook in the European market for work

clothing for industrial end-users is sluggish.

By contrast, the outlook for high-grade safety

fabrics, particularly in the professional wear

market, remains positive.


The space and aerospace markets are driven

by long-term developments, although the cur-

rent tightness in the financing market may

give rise to a temporary slowdown.

The US market for geosynthetics remains

sluggish, whereas outside the United States

the geosynthetics markets remain positive.

Governments’ plans to stimulate the economy

by means of infrastructure projects will have

a positive effect on the geosynthetics market

worldwide.

Synthetic turf is continuing to gain ground

worldwide. The sports market is often associ-

ated with government budgets.

The recently announced plan to acquire an

interest in TigerTurf will further strengthen

TenCate’s market position. This is another

step in the strategy of end-user marketing in

the synthetic turf market.

Growth opportunities are arising in this mar-

ket as a result of the company’s good global

strategic positioning. TenCate will continue to

investigate the potential for exploiting these

growth opportunities, having regard to the

profit growth achieved in this area in the

past.

TenCate is maintaining its restrained invest-

ment policy and striving for continuing cost

control as already implemented at an early

stage in 2008.

Unlike last year, no profit forecast is being

issued for the current financial year in view of

the current market situation.

STATEMENT FROM THE EXECUTIVE

BOARD

We, the Executive Board of Royal Ten Cate,

have established the Annual Report and

Financial Statements for 2008.

We hereby certify that, to the extent known

to us:

◾ the Financial Statements are a true repre-

sentation of the capital and financial

position of the company and its consoli-

dated businesses;

◾ the Annual Report is a true representa-

tion of the state of affairs on the balance

sheet date and in the course of the finan-

cial year of the corporation and its affili-

ated companies, and that the actual risks

are incorporated in the Annual Report.


Executive Board

L. de Vries, Chairman

J. Wegstapel

Cruyff Court London

On 23 October 2008, Dennis Bergkamp opened a Cruyff Court named in his honour. Johan Cruijff himself, the initiator of the syn-

thetic turf football fields for young people, attended the occasion. Like most courts, the Cruyff Court Dennis Bergkamp was built in

a residential district: Elthorne Park (Islington). Dennis Bergkamp played for Arsenal for eleven years. The partnership between

TenCate and the Johan Cruyff Foundation was renewed for another three years at the end of October.

50 PROTECTIVE FABRICS

TenCate offers protective fabrics for a great variety of applications. The

risk level always determines the choice. These are all high-tech fabrics,

such as textiles for fire fighters. They are also all inherently flame-

resistant.

PROTECTION. THE MOST NATURAL THING IN THE WORLD.

In everyday life, Geert Gottemaker is an

employee of TenCate in Nijverdal, the

Netherlands. He has been handling impor-

tant parts of the production process for

protective fabrics at TenCate Protective

Fabrics for over 24 years.

Together with four other TenCate colle-

agues, Geert is also a member of the

voluntary fire brigade of the Dutch munici-

pality of Hellendoorn, of which Nijverdal

forms part. As a result, he and his fire figh-

ting colleagues test the practical side of

the protective fabrics their employer

manufactures again and again. Geert has

been a volunteer with the fire brigade for

14 years now.

TenCate Tecashield provides maximum protection and comfort thanks

to a multi-layer structure. It allows fire fighters to approach the source

of a fire more closely without endangering their lives more than

absolutely necessary. The clothing underneath the fire fighter’s suit

is also part of the total protective system.


ACTIVITIES

The Advanced Textiles & Composites sector

consists of the following market groups:

◾ TenCate Protective Fabrics and

TenCate Outdoor Fabrics

High-grade protective and safety fabrics for

the defence and professional wear market,

and for the high-grade segment of the outdoor

market.

◾ TenCate Space & Aerospace

Composites and TenCate Armour

Composites

Composites for the aerospace industry and

special industrial applications and for person-

al protection and vehicle armour, including

composite materials with bullet-, fragment-,

knife- and needle-proof characteristics.

REVENUES AND RESULTS

The revenues of the Advanced Textiles &

Composites sector increased by 37% to € 481

million. The acquisition of the US company

Composix (antiballistics) made a substantial

contribution to the growth of this sector.

Organic revenue growth amounted to 8%.

Operating income before amortisation

amounted to € 61.5 million. The EBITA margin

rose further to 12.8%. This excellent result

was due primarily to the very good perform-

ance in defence-related markets (safety fab-

rics for military applications and antiballistic

materials).

Organic EBITA growth amounted to 0%. The

good growth in the United States was thus

negated by the European activities in the field

of protective fabrics.

INVESTMENTS

Investments in tangible and intangible fixed

assets amounted to € 11.7 million during the

reporting year. They were made primarily in

the composites market segment, in anticipa-

tion of future growth. This concerns among

other things the supplies of TenCate Cetex®

to Airbus for the Airbus A380 programme.

Preparations are also being made for develop-

Advanced Textiles & Composites

KEY FIGURES

Advanced Textiles & Composites 2008 2007 2006 2005 2004

in millions of euros unless stated otherwise

Revenues 481.0 350.3 279.7 285.6 229.9

Operating result before amortisation

(EBITA) 61.5 40.2 21.3 16.8 11.2

EBITA margin (%) 12.8 11.5 7.6 5.9 4.9

Operating result (EBIT) 52.9 38.7 20.9 16.5 11.1

Investments 11.7 17.0 11.7 13.2 4.0

Depreciation and amortisation 17.6 10.8 6.1 6.2 5.6

Net assets 286.4 197.6 124.9 124.2 113.6

Staff years at year-end 1,651 1,238 1,203 1,171 1,204

EBITA as percentage of net average capital

employed 22.9 22.6 17.1 13.5 10.5

Protection against electric arcs

Industrial businesses are increasingly aware of risks their operations present to employees. The most common injury is caused by

electric arcs resulting from short-circuits and incorrect switching operations. As a result, demand for protective clothing is grow-

ing. Legislation in this field is also evolving. Multi-layer systems must be deployed for protection against strong electric arcs to

achieve a higher insulation value. TenCate Protective Fabrics already markets a range of fabric combinations and is working on the

development of a multi-layer system that provides Class 2 protection according to the electric arc standard. The objective is to

minimise the weight of this system in order to retain the comfort-related properties of the clothing.


ments in the Airbus A350 XWB programme.

Investments were also made in production

capacity based on UD (unidirectional) tape

technology, which will be used for new devel-

opments in aerospace and oil and gas extrac-

tion (including drill pipes). The latter activity

represents an expansion of TenCate’s scope

of application for composites. This technology

was acquired as a result of the acquisition of

the US composites company Phoenixx.

PROTECTIVE FABRICS AND

OUTDOOR FABRICS

MARKET POSITION AND STRATEGY

TenCate is the market leader in America and

Europe in the field of protective fabrics. The

products offer protection against risks in the

workplace, for example from chemicals, fire

and static electricity. The market is tightly

regulated, as governments have enacted

employment legislation specifying safety

standards in certain risk areas. TenCate’s cus-

tomers are ready-to-wear clothing producers

and industrial clothing laundries offering a

total range of professional wear and work

clothing for end-users. TenCate focuses tradi-

tionally on industrial markets, firefighting and

emergency services as well as the healthcare

sector.

In the last two years there has been very

strong growth in military markets, for which

TenCate has developed concept products.

After TenCate Defender™ M was selected as

the US standard for uniforms with fire-resist-

ant protection in 2008, this product has

become one of the main pillars of the strong

growth that has taken place in this field.

TenCate’s strategy is focused on the use of

end-user marketing to make target groups

aware of protection concepts in order to exert

an influence on specifications. TenCate’s

positioning is supported by a brand policy

based mainly on quality and functionality in

the field of high-grade protection. TenCate

has also the ability to supply customised prod-

ucts, which have proved successful with the

US armed forces.

TenCate has a broad technological basis and

excellent access to the worldwide commodi-

ties market. This is due to its long-term focus

on this niche market and its scale as a global

player.

TenCate further strengthened its market posi-

tion in 2008 by becoming the first western

company to enter into a co-operation agree-

ment with a producer in Asia (Thailand) for

the growing local market.

GENERAL PERFORMANCE

In Europe, the market for protective and out-

door fabrics was under pressure. TenCate’s

focus in this market has traditionally been

mainly on the industrial segment of work

clothing and professional wear. The company

withdrew from the market for contract finish-

ing (pretreatment and finishing of fabrics for

third parties) during the year. As a result, the

organisation was slimmed down and a further

step was taken in the concentration of the

two production plants (Nijverdal, Netherlands).

The aim of this is to focus more on high-grade

materials. This operation involved the loss of

47 posts in mid-2008.

In the United States, TenCate succeeded in

maintaining growth in the field of protective

fabrics. Approximately half of the revenues

generated in the US in this market segment

related to defence applications, mostly

TenCate Defender ™ M. This product, which

has only been on the market since May 2007,


has been developed for a wide field of appli-

cation. Wearing comfort and good value for

money are the key aspects. The expansion of

the rayon fibre capacity at the Austrian com-

pany Lenzing AG, which supplies one of the

components for TenCate Defender™ M, ena-

bled TenCate to offer considerably higher vol-

umes in the market in the second half of

2008.

In addition to the US armed forces, there is

growing interest among armed forces in

Europe, because of the increasing concern for

security and the general level of protection is

being raised. The first orders from outside the

US are expected in 2009. Further product dif-

ferentiation in the Defender line led to an

expansion of the product range and additional

demand.

A substantial order for TenCate Gen2™, worth

€ 35 million, was received in December 2008.

This is a product for military applications

based on aramid fibres and delivering a very

high level of protection.

The firefighting market in the US is the sec-

ond most important market. After a good

start, growth weakened somewhat in the sec-

ond half of the year. Full-year revenues were

higher, but budget cuts became evident in the

course of the year. TenCate in an excellent

position to offer cheaper solutions if the mar-

ket requires them for budgetary reasons.

In the US, TenCate achieved success in the

industrial market for firefighting protection

with the TenCate Tecasafe® product (TenCate

Tecasafe™ Plus) adapted for this market.

TenCate also generated growing revenues In

this industrial market.

In Asia, TenCate achieved success with

TenCate Tecasafe among major companies in

the oil industry. Asia and South America are

attractive growth markets.

TECHNOLOGICAL DEVELOPMENTS

Details of the technological developments in

this sector can be found on page 65, which

contains a description of the Technologies

sector. This includes Xennia Technology ltd. A

majority interest (75%) was acquired in this

British company in March 2008.

The technology platforms developed jointly by

Xennia and TenCate were used commercially

in 2008 in the ceramics industry through the

Spanish company Creta Print, an OEM (origi-

nal equipment manufacturer) partner which

produces and sells machines in this sector.

Continued development is taking place for

applications on textile substrates. Initial con-

tacts have been made with industrial part-

ners. Work is being carried out on the devel-

opment of the first industrial width test

machine which can be used to produce test

runs.

OUTLOOK

The signs coming from the market at the end

of 2008 pointed to a sharp slowdown. This

was mainly evident in the European market

for professional wear and work clothing.

Business investments fell back and projects

were deferred.

The measures taken to control costs helped

offset the less favourable market conditions.

By contrast, expectations for the defence

market remain positive. There is a good pos-

sibility that – following the example of

America – the standard for fire-resistant pro-

tection for military applications will be raised

in Europe.



AND ARMOUR COMPOSITES


TenCate is one of the leading companies in

space and aerospace composites. These are

composite materials which replace traditional

materials (aluminium) and make an important

contribution to aspects such as weight saving

and reduced production costs. The material is

used for interior and structural parts.

In the US, TenCate became the number one in

composite materials for space applications

following the acquisition of YLA/CCS

Composites. TenCate is active in the aircraft

industry in the field of civil aviation and small

private aircraft, as well as in military aviation.

The main civil aviation customers are Airbus

and Boeing and their direct suppliers. TenCate

has initially focused on these two manufac-

turers and the market will be further devel-

oped from that basis. The start-up of produc-

tion for aerospace has required substantial

investments in the past few years. The

TenCate Cetex® material now occupies a

strong position. Among other products, the

leading edge of the wing (J-nose) and the

engine intakes are manufactured from this

material.

TenCate is involved as a technology partner in

the development of materials and their use in

the development and design of new aircraft.

In acquiring the US company Phoenixx,

TenCate took an important step in the devel-

opment of UD technology for the aerospace

sector. This has strengthened its position as a

development partner and supplier to the

entire aircraft sector has been strengthened.

In view of the strong revenue growth in

armour composites, the relative importance

of the aviation sector is still limited.

Nevertheless, the building rates point to

strong future revenue growth, which began in

2008 with the launch of the Airbus A380.

TenCate is the global market leader in con-

cepts for ballistic protection for personnel and

materiel. Following the acquisition of Compo-

six in the United States, TenCate also has a

strong position in this field in America, which

is evidenced partly in the considerable orders

placed with TenCate in 2008. Customers are

mainly large industrial conglomerates in the

defence industry, manufacturers of trucks,

aircraft, helicopters etc. and the related sup-

pliers. The specifications are determined by

government bodies (defence ministries).

TenCate operates as a single group with

regard to the exchange of knowledge and

solutions, provided that is permitted by the

defence authorities.

TenCate occupies an important position as a

(fibre-)independent producer of composites.

The company processes a range of fibres

including aramid, glass and carbon on behalf

of third parties. TenCate has a wide range of

products, but has focused on aerospace and

armour because these are highly specialised

and high-grade markets with comparable

structures and dynamics. Weight saving is a

characteristic of both markets, but a range of

requirements and specifications form the

basis for the ultimate solution which has to

be embedded in the material.

Composites for aviation and aerospace

TenCate finalised the acquisition of YLA and CCS Composites in March 2008. YLA is a manufacturer of advanced thermoset com-

posites, which focuses on supplying manufacturers in the field of satellites and communication, aviation, defence and power gen-

eration. CCS Composites is a manufacturer of composite components. These are used in commercial and military aviation, satel-

lites, oil and gas extraction, and industrial applications. The Advanced Extremely High Frequency (AEHF) satellite communication

system is one example.


GENERAL PERFORMANCE AND

OUTLOOK


Europe was dominated by the scaling up of

production for Airbus in 2008 for the launch

of the A380. There was volume growth, but

this was not reflected in earnings.

The scaling up involved costs incurred for the

addition of new capacity and qualification of

new products.

As a result of the financial crisis, the entire

industrial sector began to reduce inventories

at the end of the year, leading to delays in

deliveries. The longer-term market trend for

lightweight composite materials remains pos-

itive.

Strong growth was recorded in this market

segment In America, partly due to the

strengthened position following the acquisi-

tion of YLA/CCS Composites. A great deal of

energy was devoted to the integration of the

various companies during the year.

This market also saw weakening growth

towards the end of the year, mainly due to a

sharp decline in the market small private jets.

Increased revenues in areas such as space

and communication (radomes) continued to

provide strong support for growth.

OUTLOOK FOR SPACE & AEROSPACE

COMPOSITES

As a result of the financial market crisis

referred to earlier, there is prevailing uncer-

tainty in this market. Although underlying

demand remains unchanged, uncertainty is

being fuelled by potential financing problems

for airlines wishing to purchase new aircraft.

However, neither Airbus nor Boeing have

announced any downward adjustments in pro-

duction volumes. Demand for small jets is

expected to decline in 2009.

Expectations remain positive for the military

aviation and space markets.

ARMOUR COMPOSITES

The largest proportion of revenues in compos-

ites are related to armour. Although develop-

ments in the Eastern European market were

positive, the developments in the American

market in 2008 were particularly encouraging.

Substantial orders were received for vehicle

armour at the beginning of 2008. TenCate

generated substantial revenues from the

MRAP (Mine Resistant Ambush Protection)

and Stryker programmes in America. There

are similar market requirements In Europe, but

they are on a much smaller scale and are more

fragmented.

A positive factor is the co-operation with

other TenCate businesses in the field of pro-

tective fabrics (TenCate Defender™ M).

Market synergies can be achieved here. Joint

presentations at trade fairs and joint market-

ing strengthen TenCate’s proposition for the

defence market with regard to general protec-

tion of personnel and materiel. The system

approach is also applied in this area. A con-

ceptual approach to theme of protection is

more effective than a more product-oriented

individual approach.

An important aspect is the project-based

character of the businesses, which means

among other things that they must be flexible

in their cost structure. The worldwide market

presence, the breadth of the product portfolio

and the conceptual approach are important

strengths in the organisation.

TenCate composites at home in space

After travelling for over nine months, the Phoenixx Mars Lander made a successful landing on Mars on 26 May 2008. Among other

things, the space probe consists of TenCate Thermo-Lite, advanced thermoset composites produced by TenCate Advanced

Composites USA. This company has a leading position in the American space industry. The two science decks and sides of these

decks are also made from TenCate materials, as are the heat shield, the casing of the probe, and the landing radar antenna of the

telecommunication panel.


OUTLOOK FOR ARMOUR COMPOSITES

A number of extremely large number of

projects took place in 2008, and it is not cer-

tain that the performance can be matched.

The annual revenues in this market depend

greatly on the number and size of projects. No

major programmes are planned in the short

term. Larger-scale projects are expected for

the MATV (MTAP All Terrain Vehicle) pro-

gramme at the end of 2009. The size and tim-

ing of the potential revenues are uncertain.

There are various possibilities In Europe there

and the market is expected to continue to

yield a good level of revenues. These expec-

tations are based on the fact that government

budgets for security are not being cut as a

result of the economic situation. This is partly

reflected in the defence programmes already

announced for armour and modernisation pro-

grammes.

58 GRASS

SAVING WATER. THE MOST NATURAL THING IN THE WORLD.

Synthetic turf has a number of sustainable benefits. Synthetic turf

fields can be used far more intensively in top sports and mixed sports,

reducing the amount of space needed. Trainings and matches can be

held in all weather conditions.

Kees van der Meiden has been the

enthusiastic and motivated director of the

TwentseWelle Museum in Enschede since

2008. He travels by public transport on

a regular basis.

The museum is a modern open depot

museum, one of the biggest showcases in

Europe. Interactive presentations are used

to tell ‘The Big Story’ of the Twente region.

It describes how man found this region just

after the last ice age and decided to live

there. The museum focuses on nature,

hunting, agriculture, the development of

land to city and region, the (textile) indus-

try, innovation and technique. It also exhi-

bits TenCate materials.

In terms of maintenance, its water saving properties and reduced

pesticide use are the most notable properties. This also applies to

synthetic turf for landscaping, which is used for instance between the

bus lanes for the public transport facilities in the Roombeek district in

Enschede, a city in Twente.


ACTIVITIES

The Geosynthetics & Grass sector consists of

the following market groups:

◾ TenCate Geosynthetics and TenCate

Industrial Fabrics

Fabrics, grids and nonwovens for use in civil

engineering, the construction industry and the

environmental market, as well as industrial

fabrics for various applications, such as fish

farms, agribusiness, sports and recreation.

◾ TenCate Grass

Synthetic turf components, including synthet-

ic turf fibres and backing, for a wide range of

applications, such as football, hockey and

other sports pitches, as well as landscaping.


The revenues of the Geosynthetics & Grass

sector rose 6% to € 497.8 million. On an organ-

ic basis, the rise was 5%. The revenues grew

amid less favourable market conditions in the

geosynthetics market in the United States,

which is an important geographic market.

Operating income before amortisation of

intangible fixed assets (EBITA) rose by 24% to

€ 37.8 million. The EBITA margin increased to

7.6% despite unfavourable trends in commod-

ity prices. At the beginning of 2008 TenCate

announced its intention that this margin

should rise to at least 10% within two years.

Organic EBITA growth amounted to 20%.

INVESTMENTS

The investments in this sector amounted to

€ 29.0 million. A major investment concerned

the production expansion for geosynthetics in

the Asian market. The new plant at Zhuhai

(China) was opened in June 2008. The synthet-

ic turf production capacity at Dayton (United

States) and in Dubai was also expanded.

GEOSYNTHETICS AND INDUSTRIAL

FABRICS


TenCate is the largest producer worldwide in

the field of (high-strength) fabrics and nonwo-

vens for infrastructure, the construction

industry and environmental applications

(Geosynthetics) as well as industrial fabrics

for sectors including the agriculture, horticul-

ture and recreation sectors (Industrial

Fabrics). This group generates by far the larg-

Geosynthetics & Grass

KEY FIGURES

Geosynthetics & Grass 2008 2007 2006 2005 2004


Revenues 497.8 468.3 397.5 273.9 231.9


(EBITA) 37.8 30.4 25.6 23.8 21.8

EBITA margin (%) 7.6 6.5 6.4 8.7 9.4

Operating result (EBIT) 34.8 28.3 25.5 23.8 21.8

Investments 29.0 44.9 28.9 10.5 5.3


Net assets 427.4 354.8 215.8 206.4 98.2

Staff years at year-end 2,129 2,053 1,633 1,544 1,176

EBITA as percentage of net average

capital employed 8.8 8.9 12,9 22,6 21,9

TenCate Mirafi® builds dykes

The Calcasieu River is one of the lifelines between the harbour of Lake Charles in Louisiana and the Gulf of Mexico, one of the

world’s most vulnerable environments. The river is dredged systematically to preserve its depth. It is lined with a dyke created

from different qualities of TenCate Mirafi®, materials produced by TenCate Geosynthetics North America. The materials provide

stability, adequate water permeability and can act as a storage facility. The dyke is sustainable and represents modest annual

maintenance costs. The harbour of Lake Charles in Louisiana will remain accessible for all water-based transport for decades to

come.


est proportion of sales in the first of these

market segments.

A distinction should be drawn between

wovens and nonwovens (fleeces). Woven

products are generally stronger and can with-

stand greater forces. The non-woven market

can be characterised as a volume market. The

important factor for TenCate is that the com-

pany is strongly represented in both market

segments and provides extensive technical

advice on the use of geosynthetics for civil

engineers, construction managers and con-

tractors. Here too, the aim is to achieve a sys-

tem approach focused on solutions.

Geosynthetics form part of the overall struc-

ture and deliver functional added value.

The market is devoting increasing attention to

the positive environmental aspects of geosyn-

thetics. The alternatives are mostly concrete,

stone and steel, which often have to be trans-

ported over long distances. By contrast, geo-

synthetics use materials that are available

locally (sand, sludge). In the case of land rec-

lamation (hydraulic filling with sand), there is

usually considerably less need for dredging. In

many cases that has a positive effect on the

environment.

These environmental arguments and reduced

environmental impacts are increasingly being

incorporated in the promotion, design and

specifications.

GENERAL PERFORMANCE IN 2008

Persistent sluggishness in the American mar-

ket in 2008 resulted in a decrease in volumes

in the United States, one of the most impor-

tant markets for geosynthetics. The other

geographic markets (Europe and Asia) contin-

ued to grow. In Asia in particular, where major

infrastructure projects took place in the civil

engineering sector, sales grew strongly.

Geographic markets such as Africa and South

America also showed growth.

TenCate’s market share in the United States

increased. Cost measures were taken at an

early stage in 2007 and 2008, which had a

positive impact on profitability.

The most salient development, which was of

importance for the entire Geosynthetics &

Grass sector, was the very sharp rise in raw

material costs in-mid 2008. Price rises put

margins under pressure for a considerable

time. TenCate can pass on rises in raw mate-

rial costs after a certain period, but sudden

movements of the scale seen in 2008 had a

clearly negative impact. The final months of

the year saw very steep fall in commodity

prices. This is traditionally the period in which

activities in the market (construction, con-

tracting) are at a low level.

A business simplification process is being

implemented throughout the TenCate

Geosynthetics Group, with priorities being

reset and attention being focused on the over-

all product portfolio. In addition, internal co-

operation is being encouraged by means of

single management, redefinition of commer-

cial responsibilities, exchanges of product

knowledge and identification of worldwide

growth opportunities.

TenCate Geosynthetics is contributing to a

range of attractive projects worldwide. An

example is the repair work following the dam-

age caused by Hurricane Katrina in New

Orleans. In 2008, the work still involved main-

ly small-scale repairs, but at the end of 2008

the group participated in a major restoration

project. Further related projects are expected

in 2009.

In Asia in particular, where the ground is less

stable, geosynthetics are used frequently in


the construction of roads and railway lines.

These are often large-scale projects.


TenCate sees a large market for the combina-

tion of geosynthetics and sensors. Smart geo-

synthetics can be used for security, monitor-

ing of engineering structures, artificial grass

(the new pitch at the Heracles Almelo football

club is equipped with sensors which measure

the load on the pitch) and the environment

(measurement of pollution from leaks in stor-

age basins and tanks etc.).

Trial projects have been successfully conduct-

ed in recent years. TenCate is working with a

technology partner in the field of high-quality

optical fibres. In this context, TenCate is

launching new products, fitted with sensor

technology, in the market for land-based and

hydraulic applications. Together with its part-

ners, TenCate took part in the Dutch IJkdijk

project (see www.ijkdijk.nl) in order to con-

duct trials in the intelligent dyke construction

system of the future.

OUTLOOK

All signs are pointing to a further weakening

of the global economy, which does not offer

good prospects for the construction sector

and the infrastructure projects market. In

addition to the American market, the other

geographic markets are expected to be affect-

ed to a certain extent. By contrast, there are

signs that governments will promote projects

to stimulate economic growth. TenCate does

not expect this to lead to additional sales in

the first half of 2009, but such government

policies will have a positive impact in the

longer term. TenCate is also encouraged by

indications that government stimulus policies

should also have other positive environmental

effects, including in other areas of materials

engineering.

Past and future cost measures and the results

of the business simplification process will

have a further positive impact on profitability.

A decrease in sales therefore does not neces-

sarily have to lead to a decrease in operating

margins.

GRASS


The TenCate Grass group has a leading posi-

tion worldwide in the market for synthetic turf

fibres and backing for synthetic turf. TenCate

is therefore almost at the beginning of the

supply chain. By entering into alliances with

marketing organisations which carry out

projects, TenCate contributes to increased

quality awareness, among both end-users and

companies in the value chain. In the case of

synthetic turf sports pitches, there is a certi-

fication process which lays down the specifi-

cations of sports pitches and thus determines

the performance (technical sporting charac-

teristics). In order to guarantee these charac-

teristics as effectively as possible during the

economic life of the pitch, close co-operation

is required in the business chain (production

of components, processing, installation and

maintenance). TenCate calls this co-operation

process end-user marketing. As part of the

process, alliances have been entered into and

equity interests acquired in various synthetic

turf businesses, such as Edel Grass and

GreenFields. The intended acquisition of an

interest in TigerTurf was announced in

February 2009.

Improvement in the performance of synthetic

turf sports pitches, particularly for football, is

one of the key challenges in this market. The

market penetration of synthetic turf in sport

has risen sharply in the last few years, but is

still fairly low worldwide. A greater degree of

co-operation, the use of only environmentally

friendly components, the reduction of pro-

Cost-effective, environmentally friendly and simple

Schnecksville, Pennsylvania, is growing steadily. One of the consequences of that growth is its increasing car traffic, necessitating

reconstruction and widening of the through road. However, the town wanted to protect the surrounding nature reserve, rich in

water, as much as possible from the work. The construction had to take up as little space as possible. The best solution – because

it was the most cost-effective, environmentally friendly and simply one – was a stabilised earth retaining wall with TenCate geo-

synthetics and geogrids. These materials are perfectly suited for layered soil stabilisation in such steep road structures.


curement and replacement costs as well as a

greater degree of certainty with regard to

performance will have a positive impact on

acceptance. Synthetic turf potentially offers

unprecedented benefits over the year com-

pared to natural grass as a sports playing sur-

face.

The market position as a producer of synthetic

turf fibres is partly based on economies of

scale. TenCate is the only supplier in the mar-

ket with such a wide product portfolio (prod-

uct differentiation) in the field of sports and

landscaping. With production facilities in the

Netherlands, Dubai and the US, TenCate has

organised its production more cost-effectively

and the logistical lines to customers in the

sector are short.

The technology component has also been

strongly developed within the grass group.

TenCate has a large number of valuable pat-

ents. Formulations are developed in-house

which give fibres high wear resistance and

make them flexible and resilient.

Technologies available within TenCate as a

whole are drawn upon to devise new methods

for the production of synthetic turf carpet.

TenCate has demonstrated its technological

leadership in new developments for many

years. The company also strives to develop a

safe product which makes a positive contribu-

tion to the prevention of sports injuries (syn-

thetic turf for a safe and sustainable sporting

experience).

PERFORMANCE IN 2008

The Grass group generated revenue growth of

16%, resulting in a larger share of the total

revenues of the Geosynthetics & Grass sec-

tor. The increase in revenues was partly

caused by the price effect. In volume terms,

growth fell short of the high expectations,

particularly due to the sluggishness market

conditions in the second half of 2008. The

sluggishness was partly due to the initial

sharp rise in raw material costs in the high

season, after which they fell back sharply.

The increased scarcity of financial resources

in the final four months of 2008 prevented

some operators from building inventories

before the year-end for the forthcoming sea-

son. This extreme situation led to lower reve-

nue growth than could be expected on the

basis of general market forecasts. This situa-

tion also put downward pressure on prices.

Production was partly shut down at the end

of 2008 in order to control working capital.

New products were developed in 2008 offer-

ing superior quality characteristics. The

TenCate Monoslide® Pro fibre is an example

of a resilient and durable fibre which has been

developed primarily for football. For a number

of strategic partners, specific products with

high functional characteristics are developed

for applications in hockey, tennis and football.

The XP fibre has been developed particularly

for intensively used facilities such as Cruyff

Courts®, a concept developed jointly with

TenCate and provided by the Cruyff

Foundation. This fibre is manufactured on

unique machines in accordance with a specif-

ic formulation. The TenCate Tapeslide® XP

fibre is thus a unique and particularly wear-

resistant yet soft product, which is particular-

ly sliding-friendly. Substantial revenue growth

was achieved with this product, demonstrat-

ing that the characteristics of fibres lead to

considerable sale volumes worldwide. That is

an important success factor in the develop-

ment of unique fibres of high functional quali-

ty marketed through TenCate-dedicated par-

ties.

For this reason the decision was also taken

during the year to rationalise the range of vol-

ume products. This concerned products with


too limited distinctive capability and products

at the end of their life cycle. The market for

such products is price sensitive. These prod-

ucts provide little support for a conceptual

system approach and increased quality

awareness in end-markets.

Since 2008, the organisation has been man-

aged as an integrated group on the basis of a

regional market strategy and global account

management, with the optimum production

method (location) being chosen with the high-

est level of efficiency. The synthetic turf

activities of Mattex in Dubai have been fully

integrated. An integrated customer approach

also applies among the TenCate businesses in

the United States and the Netherlands.

The sports market is currently the most impor-

tant market for synthetic turf, but the land-

scaping market has the potential to surpass

the sports market. Water conservation is one

of the main reasons for using synthetic turf in

gardens and public green spaces.

Within the sports market, the football market

is seeing the highest growth. A sports-related

market is the market for multisport applica-

tions, particularly in schools. This market is

focused on America and Asia. Each market

requires products with specific functional

characteristics.

TenCate generated its lowest growth in Asia

as a result of high import duties. These make

it more difficult for TenCate to compete in the

middle segment of the market. The lower mar-

ket segment is of such a low quality level that

TenCate does not cater to it.


TenCate originated as a producer of compo-

nents. The combination of components to a

large extent determines the technical sport-

ing characteristics. The substructure (layers

under the top layer) nevertheless provide cer-

tain characteristics, such as shock absorption

and ball bouncing behaviour. TenCate’s tech-

nological developments are aimed partly at

integrating as many functionalities as possi-

ble in the top layer, thereby reducing the costs

of installation or renovation.

OUTLOOK

The demand side of the synthetic turf market

for sport applications remains structurally

sound. Synthetic turf offers large cost and

other advantages compared to natural grass,

particularly for intensively used sports pitch-

es. Water conservation is also increasingly a

motive for the choice of synthetic turf.

In Europe, however, this market is strongly

influenced by government budgets. Sports

complexes are often owned by local authori-

ties. The availability of these budgets for

sports can sometimes be delayed and priori-

ties may be temporarily changed. The current

tightness in the financial markets has a nega-

tive impact on the synthetic turf sector. It

consists largely of private marketing and

installation companies which have relatively

limited financial buffers and have grown

strongly in the past in tandem with the growth

in the market (15-20% annually) also grown

strongly. It is uncertain how these companies

will fare in the market in future in the face of

a constrained credit policy.

The situation in the housing market and the

decline in consumer confidence are expected

to have a negative impact on the landscaping

market. However, this market is smaller than

the sports market.

Sensory synthetic turf system in Polman Stadium

Heracles Almelo will be playing its home matches at the Polman Stadium on a new synthetic turf system this season. The Two

Dimension Pro system was co-developed by TenCate. The synthetic turf hides an innovation: dozens of sensors are embedded in

the shock pad. Among other things, these register the impact on and condition of the turf. Heracles’ technical staff receives infor-

mation and advice on maintenance on the basis of these data.

TenCate sees the stadium as a showroom in which it can display the latest developments in synthetic turf. The players of Heracles

Almelo are very happy with the new synthetic turf system.


Technologies

INKJET TECHNOLOGY

◾ Xennia Technology ltd, UK


applications

A majority holding (75%) was acquired in the

British company Xennia in March 2008. This

company is one of the few specialists in the

world in the field of inkjet technology for

industrial applications. Intensive co-operation

has already taken place with this company in

the European DigiTex-project. Within this

project, TenCate develops exclusive applica-

tions for innovative digital finishing process

(Digifin). Production methods and processes

are developed jointly with partners for this

technological innovation.

Xennia originally focused mainly on research

and development assignments for third parties

on a contract basis. Xennia’s speciality is com-

bining the technology (hardware) with operat-

ing systems (software) based on its own chem-

ical formulations for inks, coatings etc. Xennia

has a range of ink formulations for applications

in areas such as printed electronics (circuits,

infrared reflection, coatings with self-cleaning

effect on special inks for applications in the

printing sector (such as label printers).

The use of inkjet technology in industrial proc-

esses is still in its infancy, but the growth

potential is enormous. The advantages of

inkjet technology are:

◾ Rapid reaction time to changing market

demand (reduction of inventories);

◾ Mass customisation;

◾ Cost benefits (production costs, environ-

mental costs, labour costs);

◾ Product innovations through new possi-

bilities offered by the technology;

◾ Accuracy and controllability

Due to the complexity of the technology and

the relatively high price of inks, there has as

yet been no exponential growth, but consider-

able technological progress has already been

made in the past few years. As the potential

areas of application grow, the increased vol-

umes will also lead to a decrease in the price

of the special inks and coatings.

Xennia plays an important role in this process

as a developer and problem solver. The com-

pany will continue to fulfil this role after the

acquisition of a 75% interest by TenCate. In

2008 the company received a number of new

requests for co-operation in development

projects. Co-operation with TenCate for devel-

opments in the technical textiles takes place

on an exclusive basis.

Xennia also has a number of hardware com-

ponents which have been developed in-house.

The sale of these components is also begin-

ning to make a substantial contribution to the

company’s revenues and results. Joint ven-

tures have been entered into with various

producers of print heads, including the British

company Xaar.

Within the foreseeable future, Xennia’s reve-

nues will consist mainly of the sale of compo-

nents and royalties on links/coatings and

other royalty income.

Xennia achieved growth in 2008 and made a

positive contribution to the company result.

Xennia leading in inkjet technology

TenCate owns a controlling interest in Xennia Technology, a leading company in digital inkjet technology. TenCate believes in the

opportunities of using inkjet technology for protective and outdoor fabrics and will be introducing products with new or improved

properties (smart textiles) in the near future. Moreover, this development represents a significant cost saving (in the field of envi-

ronmental considerations and energy, for instance) for TenCate. Digital inkjet technology is one of the answers to the trend

towards sustainable business and mass customisation – the cost-effective production of big customer-specific orders in small

series. It also represents opportunities in relation to the production of synthetic turf and composite materials.

66 INDUSTRIAL FABRICS

The number of fish farms is growing worldwide. Modern locations can

be found in Scottish estuaries and Norwegian fjords.

Sustainable aquaculture is important for many reasons. Predator fish try

to eat the cultured fish. TenCate Aquagrid prevents this. The material is

much stronger than conventional nylon netting, reducing replacement

and maintenance costs. The smooth coating reduces fouling.

AQUACULTURE. THE MOST NATURAL THING IN THE WORLD.

Micro-organisms attach much less easily to this material than to nylon.

The coating also prevents the fish from unravelling the netting. Cleaning

is easier because organisms are easily removed with a brush or high-

pressure water spray. Anti-foulant is no longer necessary, which is

good news for cultured fish and their living environment.

At TenCate Industrial Fabrics in Almelo,

Maarten Bos, Gerrit Hofmans and

Jan-Willem Heezen constitute the sales

team for, among other things, TenCate

Aquagrid. They focus on the European

market.

Aquaculture is the world’s fastest growing

agrarian industry. In Norway, the sales

team works on bringing its innovative

products to the attention of aquafarmers.

The large-scale aquaculture of cod is the

main business in the Norwegian fjords.

On other continents, too, the grid product

is marketed by sales teams from America,

Australia and Asia.


ACTIVITIES

◾ TenCate Enbi

Technical rollers and components particularly

for printers, copiers, fax machines, postal

sorting machines and automated teller

machines.

TenCate Enbi develops and produces techni-

cal rollers and components based on rubber

and foam technology for paper transport and

image transfer in printers, copiers and fax

machines, as well as for postal sorting

machines and automated teller machines. The

group is one of the world’s major players in

this field. TenCate Enbi has sites at Beek (the

Netherlands), Opladen (Germany), Rétság

(Hungary), Shelbyville (Indiana, US), Rochester

(New York, US), Singapore and Zhuhai (China).

In the financial reports, the data for TenCate

Enbi are combined with those of the holding

company and the related TenCate services.


The revenues of the Technical Components /

Holding & Services sector declined by 20%.

The EBITA of the Technical Components /

Holding & Services sector declined by € 6.3

million to - € 3.9 million. This decrease is

associated with the 2007 exceptional item of

€ 4.1 million referred to previously, the

decrease in the revenues and results of

TenCate Enbi and the recognition of a reor-

ganisation provision at TenCate Enbi in 2008.


TenCate Enbi occupies an important position

as a leading supplier to major printer and cop-

ier producers in Europe, America and now

also Asia. The products consist mainly of com-

ponents for image transfer (technical rollers)

and paper transport. The products have to

meet strict qualification requirements with

regard to technical characteristics.

TenCate Enbi is one of few suppliers to oper-

ate on three continents: Europe, North

America and Asia. Its competitors mainly

operate locally. As an industrial supplier, it is

important as a partner in the logistics chain

to provide added value and serve as a sound-

ing board in technological development proc-

Technical Components /

Holding & ServicesKEY FIGURES

Technical Components /

Holding & Services 2008 2007 2006 2005 2004


Revenues 53.8 67.4 93.3 127.0 179.2


(EBITA) – 3.9 2.4* 4.2 – 1.5 1.7

Operating result (EBIT) – 3.9 2.4 3.7 – 1.8 1.7

Investments 7.3 1.0 2.4 2.5 2.7


Staff years at year-end 657 729 696 863 1.254* Including exceptional items.


esses. Naturally, this all has to be done on the

basis of competitive terms and conditions.

In addition to the office market, TenCate Enbi

serves niche markets, such as postal sorting

machines, automated teller machines, photo

printers and (foam-based) insulation prod-

ucts.

A strong development capacity and the possi-

bility of wider knowledge deployment are key

conditions for success in this market, which

has increasingly short product life cycles.

PERFORMANCE IN 2008

The markets for printers and copiers came

under increasing pressure in 2008. The major

producers announced measures and reported

steep falls in earnings. TenCate Enbi was not

immune to this trend. In addition, customers

deferred new developments, as a result of

which revenues fell short of the expected

level.

One of the major customers insourced part of

its production, causing a loss of revenues for

TenCate Enbi. A long-term co-operation

arrangement was nevertheless entered into

with regard to future volumes, providing secu-

rity and compensation.

A positive development is the diversification

within Europe, which became necessary due

to the loss of a large part of the traditional

revenues in the European printer and copier

market. TenCate Enbi won a multi-year con-

tract in the field of boiler insulation for heat-

ing systems.

The newly acquired projects in Asia have still

not generated expected revenue levels, as a

result of the general economic situation.

Further cost measures were taken in view of

the market situation. The sites in Hungary and

Germany were integrated, generating greater

commercial strength. Additional cost meas-

ures have also been taken recently at the

head office of TenCate Enbi, including the

transfer of the R&D department to Singapore.

The strategic focus for TenCate Enbi is

not currently on the fix-it/exit-process.

Divestment is not a realistic proposition at

present. The emphasis is primarily on improv-

ing the return and strengthening the market

position with a profitable product portfolio.

OUTLOOK

The outlook in the traditional markets, even in

Asia, is uncertain. Costs will be brought into

line with the market outlook in 2009. TenCate

will continue to strive for a strong positioning

for TenCate Enbi as a reliable high-quality

supplier. Continuity is a key principle in order

to provide maximum certainty for customers.

In this difficult economic situation, it is par-

ticularly important to be part of an interna-

tionally well-positioned company.

70 GEOSYNTHETICS

SUSTAINABILITY. THE MOST NATURAL THING IN THE WORLD.

Water plays a central part in the history of geotextile. After the great

inundation of the southwest Netherlands in 1953, protective resources

were vital. Initially, these were sandbags made from synthetic fabrics

that were used to seal holes in breached dykes. This was the world’s first

implementation of synthetic fibres in hydraulic engineering. From 1957

geotextiles were used in several applications in the Delta Works, which

In 2008, the Dutch water polo players

Marieke van den Ham and Rianne Guiche-

laar won a gold medal with their 11 team

mates at the Beijing Olympics. Both started

their water polo careers in swimming pools

in Twente.

Rianne Guichelaar (1983) has been playing

water polo since she was eight years old.

She debuted in the Dutch water polo team

in May 2001. Rianne is left-handed and is a

member of swimming and water polo club

Het Ravijn from Nijverdal, Twente.

Marieke van den Ham (1983) has been

playing water polo since she was 14 years

old. She, too, is left-handed and started out

with a club in Wierden, Twente. In 2007,

she became the national champion with

her water polo club Polar Bears from Ede

protect the southwest Netherlands from a new storm surge with coastal

defences. In 2053, this will be 100 years ago.

Today, TenCate’s geosynthetics are the basis for a range of earth and

water works, such as Palm Island in Dubai, Hong Kong Airport, and the

coastal defences on the Eastern Seaboard.


Financial statements 2008Royal Ten Cate

Consolidated profit and loss account 75

Consolidated balance sheet 76

Consolidated cash flow statement 78

Consolidated statement of changes

in Group equity 80

Notes to the consolidated financial statements 81

1 General information on Royal Ten Cate 81

2 General principles for financial reporting 81

3 Principles for the preparation

of the financial statements 81

4 Consolidation principles 82

5 Foreign currencies 83

6 Derivatives 83

7 Hedge accounting 84

8 Segment reporting 84

9 Revenues 84

10 Government subsidies 84

11 Raw materials and manufacturing supplies 85

12 Lease payments 85

13 Financial income and expenses 85

14 Profit tax 85

15 Earnings per share 86

16 New standards and interpretations

not yet applied 86

17 Principles for the preparation

of the cash flow statement 87

18 Intangible fixed assets 88

19 Tangible fixed assets 89

20 Inventories 90

21 Trade and other receivables 90

22 Cash and cash equivalents 90

23 Impairment 90

24 Share capital 91


25 Pension liabilities 91

26 Share-based payments 92

27 Provisions 93

28 Long-term debts 93

29 Trade creditors 94

30 Determination of the fair value

of business combinations 94

Notes to the consolidated profit and loss accaount 95

31 Segment information 95

32 Acquisitions and divestment

of operating companies 97

33 Personnel costs 99

34 Other operating costs 99

35 Financial income and expenses 100

36 Profit tax 100

37 Result from divested activities 101

Notes to the consolidated balance sheet 102

38 Intangible fixed assets 102

39 Tangible fixed assets 104

40 Financial fixed assets 105

41 Deferred profit tax assets and liabilities 106

42 Inventories 107

43 Trade debtors 107

44 Other receivables 107

45 Cash and cash equivalents 108

46 Total shareholders’ equity 108

47 Earnings per share 111

48 Long-term debts 112

49 Pension liabilities 114

50 Provisions 117

Other information 118

51 Financial instruments 118

52 Liabilities not shown in the balance sheet 124

53 Investment liabilities 124

54 Contingent liabilities 124

55 Post balance sheet events 125

56 Related parties 125

57 Estimates and judgments formed

by the management 127

Company financial statements 128

58 Company profit and loss account 128

59 Company balance sheet 128

Notes to the company financial statements 129

60 Financial fixed assets 129

61 Equity 129

62 Called and paid-up capital 130

63 Ordinary shares 130

64 Share premium reserve 130

65 Statutory reserve 131

66 Other reserves 131

67 Option plan 131

68 Provisions 134

69 Long-term liabilities 134

70 Short-term liabilities 134

71 Auditor’s fees 135

72 Liabilities not shown in the balance sheet 135


in millions of euros note 2008 2007

Revenues 31 1,032.6 886.0

Changes in inventories of finished products and work in progress – 18.0 – 11.7

Raw materials and manufacturing supplies 562.0 463.6

Work contracted out and other external expenses 60.7 54.9

Personnel costs 33 190.3 178.3

Depreciation and impairment 39 30.7 29.1

Amortisation 38 11.6 3.6

Other operating costs 34 111.5 98.8

Total operating expenses 948.8 816.6

OPERATING RESULT 83.8 69.4

Financial income 35 4.2 0.5

Financial expenses 35 – 17.9 – 11.8

NET FINANCIAL EXPENSES – 13.7 – 11.3

PRE-TAX INCOME 70.1 58.1

Profit tax 36 – 19.1 – 11.9

Result from ordinary operations after tax but before

divestment of activities 51.0 46.2

Result from divested activities after tax 37 – 0.3

RESULT AFTER TAX 51.0 46.5

ATTRIBUTABLE TO:

Shareholders of parent company (net income) 51.1 46.4

Minority interests – 0.1 0.1

Weighted average number of shares (x 1,000) 47 23,426 22,797

Weighted average number of shares after dilution (x 1,000) 47 23,495 22,967

Net income per share (in euros) 47 2.18 2.04

Diluted net income per share (in euros) 47 2.17 2.02

The notes in sections 1 to 72 form an integral part of these consolidated financial statements.

Consolidated profit and loss account


in millions of euros note 31 December 2008 31 December 2007

FIXED ASSETS

Goodwill 38 165.1 115.1

Other intangible fixed assets 38 47.0 21.7

Tangible fixed assets 39 247.4 218.1

Financial fixed assets 40 10.9 6.2

Deferred profit tax assets 41 14.2 13.6

Total fixed assets 484.6 374.7

CURRENT ASSETS

Inventories 42 211.5 176.2

Receivables

Trade debtors 43 168.9 145.8

Profit tax receivables 2.5 3.8

Other receivables 44 16.3 16.6

Cash and cash equivalents 45 5.4 4.8

Total current assets 404.6 347.2

TOTAL ASSETS 889.2 721.9

Consolidated balance sheet


in millions of euros note 31 December 2008 31 December 2007

GROUP EQUITY

Share capital 59.9 58.9

Share premium reserve 49.7 50.7

Statutory reserve – 5.9 – 19.5

Other reserves 212.1 173.6

Undistributed Result 51.1 46.4

Total shareholders’ equity 366.9 310.1

Minority interests 5.1 0.3

Group equity 372.0 310.4

LONG-TERM LIABILITIES

Long-term debts 48 316.2 222.3

Pension liabilities 49 24.3 28.5

Provisions 50 9.6 11.4

Deferred profit tax liabilities 41 5.2 0.9

Total long-term liabilities 355.3 263.1

SHORT-TERM LIABILITIES

Cash loans, overdrafts 45 19.4 12.5

Repayment of long-term debt 48 0.9 0.4

Trade creditors and other payables 132.6 128.9

Provisions 50 4.4 3.4

Profit tax liabilities 4.6 3.2

Total short-term liabilities 161.9 148.4

Total liabilities 517.2 411.5

TOTAL GROUP EQUITY AND LIABILITIES 889.2 721.9




CASH FLOW FROM OPERATING ACTIVITIES

Result after tax 51.0 46.5

Adjustments for:

Depreciation and impairment 39 30.7 29.1

Amortisation 38 11.6 3.6

Net interest income and expense 17.4 11.3

Profit tax 36 19.1 11.9

Result from divested activities 37 – – 0.3

Result from sale of tangible fixed assets 34 – 6.7 – 9.7

Costs of option scheme 1.7 1.1

Change in provisions and pension liabilities – 2.2 – 5.3

CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGE IN

WORKING CAPITAL 122.6 88.2

CHANGES IN WORKING CAPITAL

Inventories – 14.6 – 19.8

Receivables – 0.7 – 31.6

Short-term liabilities – 20.5 16.2

– 35.8 – 35.2

CASH FLOW FROM OPERATING ACTIVITIES 86.8 53.0

Interest paid – 18.7 – 11.1

Profit tax paid – 19.4 – 14.1

CASH FLOW FROM OPERATING ACTIVITIES 48.7 27.8

Consolidated cash flow statement



CASH FLOW FROM INVESTING ACTIVITIES

Income from sale of tangible fixed assets 34 12.8 11.1

Interest received – 0.3

Divested activities less cash – 7.8

Receipt of long-term receivables – 0.2

Acquisition of operating companies less cash acquired 32 – 88.1 – 182.9

Investments in intangible fixed assets 38 – 1.2 – 1.4

Investments in tangible fixed assets 39 – 46.8 – 61.5

Increase in long-term receivables – – 0.5

CASH FLOW FROM INVESTING ACTIVITIES – 123.3 – 226.9

CASH FLOW FROM OPERATING AND INVESTING ACTIVITIES – 74.6 – 199.1

CASH FLOW FROM FINANCING ACTIVITIES

Issue of shares – 50.6

Issue of repurchased shares 0.4 1.0

Repurchase of own shares – – 4.2

Drawdown of long-term debt 74.4 215.3

Repayment of long-term debt – – 56.2

Dividend payment to shareholders – 8.6 – 4.7

CASH FLOW FROM FINANCING ACTIVITIES 66.2 201.8

CHANGE IN CASH – 8.4 2.7

Cash on 1 January 45 – 7.7 – 22.4

Currency differences in cash 2.1 12.0

CASH AS AT 31 DECEMBER 45 – 14.0 – 7.7




Share

capital

Share

premium

Retained

earnings of

associated

companies

Translation

differences

Retained

earnings

Undistributed

profit

Undistributed

result

Total

share-

holders’

equity

Minority

interest

Group

equity

BALANCE AS AT

1 JANUARY 2007 52.7 6.3 – – 2.0 105.2 0.5 76.0 238.7 0.2 238.9

Foreign currency translation

differences – 18.8 – 18.8 – 18.8

Result for 2007 46.4 46.4 0.1 46.5

TOTAL RESULT FOR 2007 – – – – 18.8 – – 46.4 27.6 0.1 27.7

Appropriation of 2006 profit 1.3 58.5 – 59.8 – –

Dividend paid – 4.7 – 4.7 – 4.7

Stock dividend 0.9 – 0.9 11.5 – 11.5 – –

Issue of shares 5.3 45.3 50.6 50.6

Share-based payments 1.1 1.1 1.1

Issue of repurchased shares 1.0 1.0 1.0

Repurchase of own shares – 4.2 – 4.2 – 4.2

TOTAL OTHER CHANGES 6.2 44.4 1.3 – 67.9 – – 76.0 43.8 – 43.8

BALANCE AS AT

31 DECEMBER 2007 58.9 50.7 1.3 – 20.8 173.1 0.5 46.4 310.1 0.3 310.4

BALANCE AS AT

1 JANUARY 2008 58.9 50.7 1.3 – 20.8 173.1 0.5 46.4 310.1 0.3 310.4

Foreign exchange translation

differences 12.2 12.2 – 0.4 11.8

Result for 2008 51.1 51.1 – 0.1 51.0

TOTAL RESULT FOR 2008 – – – 12.2 – – 51.1 63.3 – 0.5 62.8

Appropriation of 2007 profit 1.4 26.5 – 0.4 – 27.5 – – –

Dividend paid – 8.6 – 8.6 – – 8.6

Stock dividend 1.0 – 1.0 10.3 – 10.3 – – –

Share-based payments 1.7 1.7 1.7

Changes as a result of

consolidation 5.3 5.3

Issue of repurchased shares 0.4 0.4 0.4

TOTAL OTHER CHANGES 1.0 – 1.0 1.4 – 38.9 – 0.4 – 46.4 – 6.5 5.3 – 1.2

BALANCE AS AT

31 DECEMBER 2008 59.9 49.7 2.7 – 8.6 212.0 0.1 51.1 366.9 5.1 372.0


Consolidated statement of changes in group equity


ACCOUNTING STANDARDS

1 GENERAL INFORMATION ON ROYAL TEN CATE

Koninklijke Ten Cate nv (Royal Ten Cate) (the company) is established in Almelo, the Netherlands.

The consolidated financial statements of the company comprise the financial statements of the company and its

operating companies (referred to collectively as the ‘Group’) and the Group’s interests in other (non-consoli-

dated) participating interests and proportionally consolidated joint ventures. The financial statements have been

prepared by the Executive Board.

The 2008 annual report and accounts were discussed on 3 March 2009 at the meeting of the Supervisory Board.

They were released by the Executive Board for publication on 4 March 2009. They will be presented to the

general meeting of shareholders for adoption on 9 April 2009.

The parent company financial statements form part of the 2008 financial statements of Royal Ten Cate. Royal

Ten Cate has made use of the exemption pursuant to article 2:402 of Book 2 of the Netherlands Civil Code with

regard to the parent company financial statements.

The original financial statements were prepared in the Dutch language. This document is a version translated

into English. In the event of any differences between the English and the Dutch text, the latter shall prevail.

2 GENERAL PRINCIPLES FOR FINANCIAL REPORTING

The consolidated financial statements have been prepared in accordance with International Financial Reporting

Standards, as adopted within the EU (hereinafter EU-IFRS) and with Part 9 of Book 2 of the Netherlands Civil

Code.

3 PRINCIPLES FOR THE PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements are presented in millions of euros, unless stated otherwise. The financial statements

have been prepared on the basis of historical cost, except for the following assets and liabilities, which are

valued at fair value: derivatives, financial instruments held for trading purposes.

In preparing the financial statements, the Executive Board has used estimates and assumptions which affect

the amounts stated in the consolidated financial statements (see note 57). Changes in estimates and assump-

tions may affect amounts reported in future years. The actual results may differ from such estimates.

The accounting principles set out below have been applied consistently by the Group’s operating companies and

joint ventures for the periods presented in these consolidated financial statements.

Notes to the consolidated financial statements


>

4 CONSOLIDATION PRINCIPLES

4.1 Operating companies

Operating companies are undertakings in which the company directly and/or indirectly has a controlling interest.

The company has a direct or indirect controlling interest if it can determine the financial and operational policy

of a company in such a way that it can derive a benefit from the activities of that company. The financial

statements of operating companies are included in the consolidated financial statements from the first to

the last date on which control is exercised. Minority interests in the Group result and the shareholders equity

of the Group are stated separately.

4.2 Associated companies, joint ventures and other participating interests

Associated companies are undertakings in which the Group can exercise significant influence on the financial

and operational policy, but in which it has no controlling interest and which are not therefore included in the

consolidation. Joint ventures are companies over which the Group has joint control and in which such control

has been set forth in an agreement and in which strategic decisions on the financial and operational policy

are taken on the basis of unanimity.

Joint ventures are proportionally consolidated. Associated companies are accounted for using the equity

method.

If the Group’s share in losses exceeds the book value of the associated company, the book value is stated at

zero and further losses are no longer stated, unless the Group has entered into a legally enforceable or actual

liability on behalf of the associated company.

Other participating interests over which no significant influence is exercised are valued at fair value and

the dividend is stated in the profit and loss account when it is made payable.

If no fair value is available and other methods do not result in a reasonable estimate, the investment is valued

at cost less impairment.

4.3 Elimination of transactions on consolidation

Intragroup balances and transactions between the operating companies in the Group and unrealised profits and

losses on such transactions are eliminated in the preparation of the consolidated financial statements. Unreal-

ised profits on Group transactions with proportionally consolidated joint ventures are eliminated in proportion to

the Group’s interest in the joint venture. Unrealised losses are eliminated in the same way as unrealised profits,

but only to the extent that there is no indication of impairment.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


5 FOREIGN CURRENCIES

5.1 Transactions in foreign currencies

Receivables and liabilities denominated in foreign currencies are converted into euros at the rate prevailing on

the balance sheet date. Transactions in foreign currencies are converted into euros at the exchange rate apply-

ing on the transaction date. Foreign exchange translation differences are stated in the profit and loss account.

Non-monetary assets and liabilities which are denominated in foreign currencies and valued on the basis of

historical cost are converted into euros at the exchange rate on the transaction date.

5.2 Foreign operating companies and joint ventures

The profit and loss accounts of foreign operating companies are converted into euros at the exchange rate on

the transaction date. Assets and liabilities including goodwill and fair value adjustments in respect of acquisi-

tions are converted at the rate on the balance sheet date. The resulting translation differences are carried in

equity. If a foreign activity is fully or partly divested, the respective amount is transferred from equity to the

profit and loss account. The rates of the main currencies against the euro are as follows

Closing rate Average rate

2008 2007 2008 2007

US dollar 1.39 1.46 1.47 1.37

Hungarian forint (100) 2.67 2.54 2.52 2.52

Danish krone 7.44 7.45 7.46 7.45

UAE dirham 5.12 5.36 5.41 5.03

Singapore dollar 2.00 2.12 2.08 2.06

Malaysian ringgit 4.92 4.88 4.90 4.72

British pound 0.96 0.74 0.79 0.69

Thai bhat (100) 0.50 0.45 0.49 0.45

Chinese yuan renminbi 9.50 10.75 10.27 10.43

Australian dollar 2.03 1.68 1.74 1.64

6 DERIVATIVES

Royal Ten Cate uses derivatives in order to hedge exchange rate and interest rate risks resulting from operating,

financing and investing activities. Examples are interest rate caps and swaps as well as currency options and

forward contracts. In accordance with its treasury policy, the Group does not use derivatives for trading purpos-

es. Nor does it issue such derivatives. Any derivatives which do not meet the requirements for hedge accounting

are stated as trading instruments. Derivatives are valued at fair value. The inclusion of the resulting income or

expense depends on the nature of the item being hedged. The fair value of derivatives is the estimated amount

which the Group would receive or would have to pay in order to terminate the derivative on the balance sheet

date, taking into account the current exchange rates, the current interest rate and the current creditworthiness

of the counterparty/counterparties to the derivative.


>

7 HEDGE ACCOUNTING

Where specific conditions are met (IAS 39 88), hedge accounting can be applied. Under these specific condi-

tions, there must be a demonstrable one-on-one relationship between the risk and the hedge instrument.

In such a situation, the profit or loss is stated directly in equity (in the reserve for hedging results) during

the term of the risk and the hedge instrument. When the risk and/or the hedge instrument terminates, the result

is stated in the profit and loss account or in the cost price of the first-time inclusion of the non-financial asset

or liability. If no hedge accounting is applied, profits or losses on the hedge instrument are always stated in the

profit and loss account. Hedge accounting was applied for the first time in the 2008 financial statements

in respect of a number of contracts.

8 SEGMENT REPORTING

A segment is a clearly distinguishable part of the Group which is engaged in the supply of products or services

(business segment), or the supply of products or services in a particular economic environment (geographic

segment) which has a different risk and return profile than other segments. The Group’s primary segmentation

is based on business segments.

9 REVENUES

Revenues comprise the revenues from goods and services supplied to third parties, less discounts and any taxes

due.

Revenues from sales of goods are recognised in the profit and loss account when the main risks and benefits

of ownership have been transferred to the purchaser.

Revenues from services supplied are recognised in the profit and loss account in proportion to the extent of per-

formance of the work applying on the balance sheet date. No revenues are recognised if the extent of the reve-

nues cannot be reliably determined and if significant uncertainties remain with regard to the collection of the

remuneration due, the associated costs or the possible return of goods, and also if there is a protracted man-

agement involvement with such goods.

10 GOVERNMENT SUBSIDIES

Subsidies granted as compensation for expenses incurred by the Group are systematically stated as income in

the profit and loss account in the same period as that in which the subsidisable expenses are incurred and as

soon as there is a reasonable certainty that they will be received and that the Group will fulfil the attached con-

ditions. Subsidies granted to compensate the Group for the cost of an asset are systematically stated as cost of

sales in the profit and loss account during the useful life of the asset.



11 RAW MATERIALS AND MANUFACTURING SUPPLIES

The consumption of raw materials and manufacturing supplies is calculated on the basis of historical cost.

12 LEASE PAYMENTS

12.1 Operational leasing

Lease payments in respect of operational leasing are stated in the profit and loss account on a straight-line

basis over the lease term.

12.2 Financial leasing

Lease payments are stated partly as financing charges and partly as a repayment of the outstanding liability.

The financing costs are allocated to each period of the total lease term in such a way that this results in a con-

stant periodic interest rate on the residual balance of the liability.

13 F INANCIAL INCOME AND EXPENSES

The financial income and expenses include the interest charges on cash, interest charges on financial lease

payments, foreign exchange translation differences and results of derivatives for which no hedge accounting is

used. Interest income and expenses are included in the profit and loss account on the basis of the effective

interest method.

14 PROFIT TAX

The tax on profit for the financial year includes the taxation that is payable, available for set-off and deferred in

respect of the reporting period. The tax is stated in the profit and loss account, except where it relates to items

which are included directly in equity, in which case the tax is stated in equity. Tax that is payable and available

for set-off in respect of the reporting period is the tax which is expected to be payable on the taxable result,

calculated on the basis of tax rates which have been set on the balance sheet date, or on which a firm decision

has been taken by the balance sheet date, and corrections to tax payable in respect of previous years.

A receivable/provision is recognised for deferred tax differences using the balance sheet liability method for

timing differences between the book value of assets and liabilities for the financial reporting and the fiscal

book value of the items concerned. No provision is formed in respect of two timing differences: non-tax-deducti-

ble goodwill and the difference between the economic and fiscal value of operating companies, associated

companies and a joint venture. The amount of the provision for deferred profit tax liabilities is based on the

method by which the book value of the assets and liabilities is expected to be realised or settled, using tax

rates which, on the balance sheet date, have been specified by law or in respect of which an effective legal

decision has been taken.The amount of deferred profit tax assets is reduced to the extent that it is no longer

likely that the associated tax benefit will be realised. Additional taxes on the profit in respect of dividend pay-

ments are stated at the same time as the liability to pay the respective dividend.


>

Deferred profit tax assets and liabilities are offset if there is a legally enforceable right to offset the profit tax

assets and liabilities and such assets and liabilities relate to profit tax imposed by the same tax authority on the

same taxable entity, or on different taxable entities which intend to offset the profit tax assets and liabilities or

whose profit tax assets and liabilities are realised simultaneously.

A deferred profit tax asset is only recognised to the extent that it is likely that future taxable profits will be

available which can be applied for the realisation of the timing difference. Deferred profit tax assets are

reviewed on each reporting date and reduced if it is no longer likely that the associated tax benefit will be real-

ised.

15 EARNINGS PER SHARE

The Group presents ordinary and diluted earnings per share for the ordinary share capital. The net income per

ordinary share is calculated on the basis of the profit attributable to shareholders or the loss divided by the

weighted average number of ordinary shares in issue during the reporting period. In the calculation of the dilut-

ed earnings, the weighted average number of ordinary shares in issue during the reporting period is corrected to

take account of the potential dilutive effect on the ordinary shares arising from the share options granted to

employees.

16 NEW STANDARDS AND INTERPRETATIONS NOT YET APPLIED

A number of new standards, amendments to standards and interpretations were not in force in 2008 and have

therefore not been applied to these consolidated financial statements:

◾ IFRS 8 – Operating Segments: introduces the segment reporting management approach. This becomes com-

pulsory with effect from 2009 and is consistent with the breakdown which the management applies for

internal purposes. The impact of IFRS 8 on TenCate is currently being analysed.

◾ Revision of IAS 23 – Borrowing Costs: the existing possibility of charging borrowing costs relating to the

construction or purchase of an asset directly to the result is no longer permitted under the amended stand-

ard. Instead, borrowing costs must be capitalised. This already happens in the case of significant invest-

ments.

◾ IFRIC 14 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

makes clear that pension assets are available if, on the balance sheet date, there is an unconditional right

to dispose of the surplus now or in the future in the form of repayments and/or future contribution reduc-

tions. Application of IFRIC 14 is compulsory in the case of the Group’s consolidated financial statements for

2009. IFRIC 14 is not expected to have any impact on TenCate.

◾ IFRS 3 – Business Combinations will be applied prospectively to the consolidated financial statements from

2010 and therefore has no impact on prior periods.



The revised IFRS 3 Business Combinations (2008) includes the following amendments, which will probably

be relevant to the Group’s activities:

◽ The definition of business has been extended; it can therefore be expected that a larger number of

acquisitions will be treated as business combinations;

◽ Conditional remuneration is valued at fair value; changes after first-time inclusion are stated in the

profit and loss account;

◽ Except in the case of share and debt issue costs, transaction costs are charged to the result in the peri-

od in which they are incurred;

◽ Any interest already held in the acquired party is valued at fair value; the profit or loss is stated in the

profit and loss account;

◽ The acquirer can elect, on a transaction-by-transaction basis, to value a minority interest either at fair

value or at the minority interest’s share of the identifiable assets and liabilities of the acquiree.

◾ The amended IAS 27 Consolidated and Separate Financial Statements (2008) states that changes in the

group’s ownership interest in a subsidiary, where control is retained, must be stated as a share transaction.

If the group ceases to have control of a subsidiary, any residual interest in the former subsidiary must be

measured at fair value, with the resulting profit or loss being stated in the profit and loss account. Applica-

tion of the amendments to IAS 27 will be compulsory in respect of the Group’s consolidated financial state-

ments for 2010.

◾ The following new or amended standards are not expected to have any material impact on TenCate:

◽ Revised IAS 1 – Presentation of Financial Statements

◽ IFRS 2 – Share-based Payment – provisions for unconditional promise and cancellation

◽ IFRIC 13 – Customer Loyalty Programmes

◽ IAS 39 – Financial Instruments: Recognition and Measurement – qualifying hedged positions

◽ IFRIC 15 – Agreements for the Construction of Real Estate

◽ IFRIC 16 – Hedges of a Net Investment in a Foreign Operation

◽ IFRIC 17 – Distributions of Non-cash Assets to Owners

◽ IFRIC 18 – Transfers of Assets from Customers.

17 PRINCIPLES FOR THE PREPARATION OF THE CASH FLOW STATEMENT

Cash flows from operating activities are presented on the basis of the indirect method. Cash flows in foreign

currencies are converted at the exchange rate on the date of the cash flow or on a cash basis. Changes which

have not resulted in cash flows, such as exchange rate differences, acquisitions, financial lease liabilities,

changes in fair value, recognised share-related transactions and similar transactions are eliminated in this

statement. Dividends paid to shareholders are included in the cash flow from financing activities. Dividends

received are stated in the cash flow from investing activities, and interest paid is stated in the cash flow from

operating activities. Overdrafts which are immediately repayable and form part of the cash management of the

Group are included in the balance of cash and bank current accounts as part of the consolidated cash flow

statement.


>

18 INTANGIBLE FIXED ASSETS

18.1 Goodwill

All acquisitions are accounted for using the purchase accounting method. Goodwill results from the acquisition

of operating companies, associated companies and joint ventures and is the difference between the cost of the

acquisition and the net fair value of the acquired identifiable assets, liabilities and contingent liabilities.

Up until 2000, goodwill was charged to equity. In the years 2001 to 2003 it was stated at cost less amortisation.

Since 1 January 2004, goodwill has no longer been amortised but has been valued at cost less accumulated

impairments (impairments). Goodwill is allocated to cash generating units.

18.2 Other intangible fixed assets

The other intangible fixed assets consist of:

Research and development

Costs of research activities carried out with a view to acquiring new scientific or technical knowledge and

insights are stated as an expense in the profit and loss account when they are incurred.

Costs of development activities, in which research results are used for a plan or design for the production of

new or substantially improved products and processes, are capitalised if the product or process is technically

and commercially feasible and the Group has sufficient resources to complete the development. The capitalised

costs include material costs, direct labour costs and an appropriate portion of directly attributable overheads.

Other development costs are stated as an expense in the profit and loss account when they are incurred. The

capitalised development costs are valued at cost less accumulated amortisation and impairments (see note 23).

Other intangible fixed assets

Other intangible fixed assets acquired by the Group relate to customer relationships, trademark rights, patents

and similar rights. These intangible assets are valued at cost less accumulated amortisation and impairments

(see note 23). Costs of internally generated goodwill and trademarks are stated as an expense in the profit and

loss account when they are incurred.



18.3 Expenses after first-time inclusion

Expenses after the first-time inclusion of capitalised intangible fixed assets are capitalised only if they lead to

an increase in the future economic benefits embodied in the particular asset to which they relate. All other

expenses are charged to the profit and loss account when they are incurred.

18.4 Amortisation

Amortisation costs are charged to the profit and loss account by the straight-line method on the basis of the

estimated useful life of intangible fixed assets. Goodwill is tested each year on the balance sheet date to assess

whether any impairment has arisen. The amortisation of other intangible fixed assets begins as soon as the

assets are available for use.

The amortisation method, economic life and residual value are assessed periodically.

The estimated economic life is as follows:

◾ Development costs 5 years

◾ Other intangible fixed assets 3 – 14 years

19 TANGIBLE FIXED ASSETS

19.1 Owned assets

Tangible fixed assets are valued at cost less accumulated depreciation (see note 19.4) and impairments (see

note 23).

The cost price of self-manufactured assets comprises material costs, direct labour costs and an appropriate

portion of directly attributable overheads. The financing costs relating to the construction or purchase of

a significant asset are also included in the determination of the cost price.

Where tangible fixed assets consist of components with differing useful lives, these are stated as separate

items under tangible fixed assets.

19.2 Leased assets

Lease agreements in which the Group actually assumes all the risks and benefits of ownership are classified

as financial leases. Tangible fixed assets which are required by means of financial leases are valued at

the lower of fair value and the discounted value of the minimum lease payments at the inception of the lease,

less accumulated depreciation (see note 19.4) and impairments (see note 23). Lease payments are stated as

described in note 12.

19.3 Expenses after first-time inclusion

Expenses incurred for the replacement of a component of a tangible fixed asset are capitalised provided the

future economic benefits resulting from the asset accrue to the Group and the costs of such replacement

expenses can be reliably determined. All other expenses are charged to the profit and loss account when they

are incurred.


>

19.4 Depreciation

Depreciation is charged to the profit and loss account on the basis of the straight-line method over the estimat-

ed economic life of each component of a tangible fixed asset. Land is not depreciated. The estimated economic

life is as follows::

◾ buildings 33 years

◾ fixtures and installations in buildings 10 years

◾ plant and equipment 7 – 10 years

◾ inventory 5 years

◾ computers and office equipment 3 – 5 years

The depreciation method, economic life and residual value are assessed periodically.

20 INVENTORIES

Inventories are stated at the lower of cost or net realisable value. The net realisable value is the estimated sale

price in ordinary operations, less the estimated costs of completion and the sale costs. The cost of inventories is

based on the FIFO (first in, first out) principle and includes the costs incurred on the acquisition of the invento-

ries, their production or conversion and bringing them to the existing location and condition. In the case of

inventories of finished products and work in progress, the cost price includes an appropriate portion of the indi-

rect costs based on the normal production capacity.

21 TRADE AND OTHER RECEIVABLES

Trade and other receivables with a term of less than one year are stated at amortised cost less impairments.

22 CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash balances and immediately claimable credit balances. Current account

credit balances at banks which are immediately claimable and form an integral part of the Group’s cash man-

agement are included as part of the cash and cash equivalents for the purposes of the cash flow statement.

23 IMPAIRMENT

The book value of the Group’s assets, except that of inventories (see note 20) and deferred profit tax assets (see

note 14) is examined at each balance sheet date in order to determine whether there are indications of impair-

ment. If there are such indications, an estimate is made of the realisable value of the asset. In the case of good-

will and intangible fixed assets which are not yet available for use, the realisable value is estimated at each

balance sheet date.

An impairment is recognised when the book value of an asset or the cash generating unit thereof is higher than

the realisable value. It is first charged to any allocated goodwill and then deducted from the book value of the

other assets.



23.1 Calculation of the realisable value

The realisable value is the higher of the recoverable amount, less sale costs, and the value in use. In determin-

ing the value in use, the discounted value of the estimated future cash flows is calculated using a discount rate

after tax which reflects both the current market valuations of the time value of money and the specific risks

relating to the asset. In the case of an asset which generates no cash receipts which are to a large degree inde-

pendent of other assets, the realisable value is determined for the cash generating unit to which the asset

belongs.

23.2 Reversal of impairments

An impairment relating to goodwill cannot be reversed. In the case of other assets, an assessment is made on

the balance sheet date as to whether an impairment must be reversed if there is a change in the estimates on

which the realisable value was based.

An impairment is only reversed to the extent that the book value of the asset is no higher than the book value

which would have been determined after the deduction of depreciation, if no impairment had been recognised.

24 SHARE CAPITAL

24.1 Share capital

The share capital is classified as equity.

24.2 Repurchase of own shares

On the repurchase of share capital which is stated in the balance sheet as equity, the amount of the paid con-

sideration, including directly attributable costs, is stated as a change in equity. Repurchased shares are classi-

fied under ‘Other reserves’ and presented as a deduction from total assets.

24.3 Dividend

Dividend is stated as a liability in the period in which it is declared.

25 PENSION LIABILITIES

25.1 Defined contribution schemes

Liabilities relating to contributions to defined contribution pension schemes are charged to the profit and loss

account in the period to which they relate.


> NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

25.2 Defined benefit schemes

The Group’s net liability in respect of defined benefit pension schemes is calculated separately for each scheme

by estimating the amount of the future payments which employees have earned in the present and previous

reporting periods in exchange for their services. This payment is discounted in order to determine the present

day value, with the fair value of the fund investments being deducted. The discount rate is the yield on the bal-

ance sheet date of bonds which have an AA credit rating and a period to maturity which approximates the term

of the Group’s liabilities and are denominated in the currency in which the benefits are paid. The calculation

is performed by an authorised actuary on the basis of the projected unit credit method. If the payments under

a pension scheme are increased, the proportion of the higher payment which relates to employees’ past service

is stated as an expense in the profit and loss account on a straight-line basis over the average period up to the

granting of the rights. If the rights are granted immediately, the expense is stated immediately in the profit and

loss account.

With regard to the actuarial profits and losses that arise in the calculation of the Group’s liability under

a pension scheme, in so far as any accumulated actuarial profits or losses not yet recognised amount to more

than 10% of the discounted value of the gross liabilities in respect of defined benefit pension rights or of the

fair value of the fund investments if this is greater (in other words: remains within the corridor), that element is

recognised in the profit and loss account over the expected average remaining service period of the employees

participating in the scheme. For the remainder, the actuarial profit or loss is not recognised.

When the calculation results in a receivable for the Group, the recognised asset item is limited to the net total

of any actuarial losses and back-service costs and the discounted value of the lower of future repayments

by the fund and future pension contributions.

26 SHARE-BASED PAYMENTS

The option scheme enables the Group’s management to acquire shares in the legal entity.

The fair value of the granted options is stated under personnel costs, with a corresponding entry in equity.

The fair value is determined on the grant date and is allocated over the period up to the time at which the man-

agement acquires an unconditional right to the options. The fair value of the granted options is determined on

the basis of the binomial model, taking account of the conditions under which the options have been granted.

Valuation factors include the share price on the valuation date, the exercise price of the instrument, the expect-

ed volatility, the weighted average expected term of the instruments (based on past experience and the conduct

of the instrument holders), the expected dividends and the risk-free interest rate (based on government bonds).


27 PROVISIONS

A provision is recognised in the balance sheet if there is a legally enforceable or actual obligation as a result of

a past event and it is likely that an outflow of resources will be required to settle such liability and such outflow

can be reliably estimated. If the effect of this is material, the provisions are determined by discounting the

expected future cash flows using a discount rate before tax which reflects the current market valuations of the

time value of money and, if necessary, the specific risks of the liability.

27.1 Claims and guarantees

The provision for claims relates to damages claims and any litigation costs. The provision for guarantees relates

to goods and services supplied and is based on historical guarantee data.

27.2 Reorganisation

Reorganisation provisions are included if the Group has formalised a detailed plan for the reorganisation and

has begun or publicly announced the reorganisation. The reorganisation provision does not include costs

incurred in relation to future activities.

27.3 Other personnel liabilities

Long service leave and other allowances such as anniversaries form part of the provisions under other person-

nel liabilities. These provisions are accumulated over the respective period as in the case of defined benefit

pension schemes, albeit that actuarial profits or losses are included in the profit and loss account in the period

in which they arise.

27.4 Environment

In accordance with the Group’s published environmental policy and the applicable legal obligations, a provision

for the clearance of environmental pollution is formed when the pollution occurs.

28 LONG-TERM DEBTS

When included for the first time, interest-bearing loans received are stated at fair value less directly attributa-

ble transaction costs. After the first-time inclusion, interest-bearing loans are valued at amortised cost, with the

difference between the cost and the redemption price being stated in the profit and loss account on the basis of

the effective interest method over the term of the loans.


>

29 TRADE CREDITORS

Trade creditors and other payables are stated at amortised cost.

30 DETERMINATION OF THE FAIR VALUE OF BUSINESS COMBINATIONS

The following principles have been applied in determining the fair value of assets and liabilities in the case

of acquisitions:

Tangible fixed assets

The fair value of tangible fixed assets included as a result of a business combination is based on market value.

The market value of real estate is the estimated value at which an item of immovable property can be traded

on the valuation date between a well-informed purchaser and a well-informed seller in a transaction on an

objective, business basis, in which both parties have acted carefully and without coercion. The market value of

other tangible fixed assets and inventories is based on the listed market prices of comparable assets and items.

Intangible assets

The fair value of patents and trademarks acquired as part of a business combination is determined on the basis

of the discounted estimated royalties which have been avoided as a result of ownership of the patent or trade-

mark. The fair value of customer relationships acquired in a business combination is determined using

the excess earnings method over several periods, with the respective assets being valued after deduction of

a real return on all other assets which jointly constitute the associated cash flows.

Inventories

The fair value of inventories acquired as part of a business combination is determined on the basis of the

estimated sale price in normal business operation, less the estimated costs of completion and the sale costs,

plus a reasonable profit margin reflecting the completion and sale effort.



31 SEGMENT INFORMATION

Segment information is provided for the business and geographical segments of the Group. The primary

segmentation basis, business segments, reflects the Group’s internal reporting structure.

The prices for transactions between the segments are determined on an objective, business basis.

The results, assets and liabilities of a segment comprise items which can be attributed directly or reasonably

to the segment. Net financial expenses and profit tax are not allocated to the segments. The same applies

to the related balance sheet items.

Investments in fixed assets in the segment relate to the total costs incurred during the reporting period for the

acquisition of the assets of the segment which are expected to remain in use for longer than a reporting period.

Business segments

The Group distinguishes the following business segments:

◾ Advanced Textiles & Composites

Manufacture and sale of protective and safety fabrics for professional wear, outdoor fabrics, composites

for personal and vehicle protection and composites for technological applications in aerospace


Manufacture and sale of fabrics and non-wovens for civil engineering, environmental projects, recreational

and industrial applications and manufacture and sale of synthetic turf fibres


Manufacture and sale of rubber and foam rollers for the office equipment industry and related products, as

well as country holding companies and service companies

Geographic segments

The segments operate on four continents, namely Europe, North America, Australia and Asia. In the presenta-

tion of information based on geographic segments, the revenues of the segment are based on the geographic

location of origin. The assets of the segment are based on the geographic location of the asset.

Notes to the consolidated profit and loss account


> NOTES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT

31.1 Segment information

31.2 Analysis by business segmentAdvanced Textiles

& Composites

Geosynthetics

& Grass

Technical Components/

Holding & Services/

eliminations Consolidated

in millions of euros 2008 2007 2008 2007 2008 2007 2008 2007

Revenues 481.0 350.3 497.8 468.3 53.8 67.4 1,032.6 886.0

Intercompany sales 1.6 1.3 – – – 1.6 – 1.3 – –

Total revenues 482.6 351.6 497.8 468.3 52.2 66.1 1,032.6 886.0

Operating result 52.9 38.7 34.8 28.3 – 3.9 2.4 83.8 69.4

Net financial expenses – 13.7 – 11.3


Profit tax – 19.1 – 11.9

Minority interests 0.1 – 0.1


Assets of segments 343.7 243.4 487.9 426.2 29.3 28.8 860.9 698.4

Investments in other participating interests – – – – 6.2 1.3 6.2 1.3

Unallocated assets – – – – – – 22.1 22.2

Total assets 343.7 243.4 487.9 426.2 35.5 30.1 889.2 721.9

Liabilities of segment* 58.3 56.8 63.6 71.7 48.8 43.7 170.7 172.2

Unallocated liabilities – – – – – – 346.5 239.3

Total liabilities 58.3 56.8 63.6 71.7 48.8 43.7 517.2 411.5

Investments 11.7 17.0 29.0 44.9 7.3 1.0 48.0 62.9

Depreciation and impairment 9.0 9.3 20.0 17.9 1.7 1.9 30.7 29.1

Amortisation 8.6 1.5 3.0 2.1 – – 11.6 3.6* Excluding intercompany loans.

31.3 Analysis by geographic location

(origin) Revenues Assets

Investments in

tangible & intangible

fixed assets

2008 2007 2008 2007 2008 2007

Netherlands 222.5 234.4 135.4 157.8 8.5 24.8

Rest of Europe 176.1 162.4 185.1 153.1 7.3 2.6

North America 488.0 373.6 295.5 206.6 11.0 14.0

Asia / Australia / Middle East 146.0 115.6 273.2 204.4 21.2 21.5

TOTAL 1,032.6 886.0 889.2 721.9 48.0 62.9


32 ACQUISITIONS AND DIVESTMENT OF OPERATING COMPANIES

32.1 Acquisitions

On 30 January 2008 the Group acquired 100% of the shares of Composix Co of Newark, Ohio, United States for

a cash payment to the original shareholder of $ 68 million.

The acquisition was consolidated in the Group’s figures from 30 January. The Group’s revenues would have been

€ 8.0 million higher if the acquisition had taken place on 1 January 2008. The net income would not have been

materially different. The goodwill paid amounts to € 19.8 million.

On 12 March 2008 the Group acquired 100% of the shares of YLA inc and CCS Composites inc, both of Benicia,

California, United States for a combined cash payment of $ 32 million.

The acquisition was consolidated in the Group’s figures from 12 March. The Group’s revenues would have been

€ 4.8 million higher if the acquisition had taken place on 1 January 2008. The net income would not have been

materially different. The goodwill paid amounts to € 13.1 million.

On 14 March 2008 the Group acquired 75% of the shares of Xennia Technology ltd of Cambridge, United

Kingdom for a cash payment of £ 8 million.

The acquisition was consolidated in the Group’s figures from 14 March. The revenues and net income would not

have been materially different if the acquisition had taken place on 1 January 2008. The goodwill paid amounts

to € 7.3 million.

On 14 May 2008 the Group acquired 50% of the shares of Edel Grass bv, Genemuiden, the Netherlands for

a cash payment to the original shareholder of € 5.5 million.

Edel Grass bv was proportionally consolidated in the Group’s figures from 14 May. The Group’s revenues would

have been € 2.6 million higher if the acquisition had taken place on 1 January 2008. The net income would not

have been materially different. The goodwill paid amounts to € 2.9 million.

On 16 August 2008 the Group acquired 50.65% of the shares of the newly formed company TenCate-Union

Protective Fabrics Asia Ltd of Bangkok, Thailand by contributions of cash and assets. This newly formed compa-

ny is fully consolidated in the Group’s figures, on the basis of a minority interest of 49.35%. This acquisition led

to a cash outflow of € 0.1 million. The goodwill paid amounts to € 0.1 million.

In the case of Composix, Xennia and Edel Grass, an earn-out payment may be payable in the future in addition

to the amounts stated above.

The expected earn-out has been taken into account in the determination of the purchase price.


>

The total goodwill acquired in 2008 amounts to € 44.8 million and comprises mainly employee potential and

synergy benefits.

The total contribution from the 2008 acquisitions to the Group’s 2008 revenues amounts to € 124.6 million.

The effect of the acquisitions on the result after tax amounts to € 10.4 million.

32.2 Effects of the acquisition of operating companies

The effect of the above acquisitions on assets and liabilities was as follows:

Recognised values Fair value adjustments Book values

Composix Co Others Group Composix Co Others Group Composix Co Others Group

Tangible fixed assets 6.0 5.9 11.9 – 0.4 0.4 6.0 5.5 11.5

Intangible fixed assets 17.8 17.0 34.8 17.8 16.7 34.5 – 0.3 0.3

Deferred profit tax assets – 0.5 0.5 – – – – 0.5 0.5

Inventories 14.7 4.6 19.3 0.7 – 0.7 14.0 4.6 18.6

Trade creditors and other payables 7.7 8.7 16.4 – – – 7.7 8.7 16.4

Cash and cash equivalents 0.8 1.4 2.2 – – – 0.8 1.4 2.2

Minority interests – – 5.3 – 5.3 – – 1.2 – 1.2 – – 4.1 – 4.1

Deferred profit tax liabilities – – 5.7 – 5.7 – – 5.7 – 5.7 – – –

Other provisions – – 0.3 – 0.3 – – – – – 0.3 – 0.3

Interest-bearing loans – – 0.1 – 0.1 – – – – – 0.1 – 0.1

Banks, current accounts – – 1.8 – 1.8 – – – – – 1.8 – 1.8

Trade creditors and other payables – 15.2 – 7.8 – 23.0 – – 0.1 – 0.1 – 15.2 – 7.7 – 22.9

NET IDENTIFIABLE ASSETS

AND LIABILITIES 31.8 17.1 48.9 18.5 10.1 28.6 13.3 7.0 20.3

Goodwill on acquisition 19.8 25.0 44.8

Purchase price paid in cash 51.6 42.1 93.7

Amount still payable – 4.0 – 1.2 – 5.2

Acquired cash less short-term bank debts – 0.8 0.4 – 0.4

Cash outflow 46.8 41.3 88.1

NOTES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT


32.3 Divested operations

The effect of the 2007 divestments of Business Key and SCI La Domitienne on the 2007 profit and loss account

was as follows:

2008 2007

Revenues – 1.4

Costs of raw materials and manufacturing supplies and work contracted out – – 1.0

Other costs – – 0.3

Operating result – 0.1

33 PERSONNEL COSTS 2008 2007

Wages and salaries 138.4 127.9

Social charges 32.0 31.6

Costs of option scheme 1.7 1.1

Pension costs 3.8 4.4

Temporary personnel 14.4 13.3

Personnel costs 190.3 178.3

The pension costs comprise € 1.9 million (2007: € 1.2 million) in respect of defined benefit pension schemes

and € 1.9 million (2007: € 3.2 million) in respect of defined contribution schemes (see note 49.3).

34 OTHER OPERATING COSTS

34.1 Government subsidies

The Group’s profit and loss account includes € 2.1 million of government subsidies in 2008 (2007: € 2.5 million).

34.2 Research and development

The costs associated with research and development amounted to € 7.9 million in 2008 (2007: € 8.2 million),

of which € 4.2 million (2007: € 3.2 million) has been stated in personnel costs and € 3.7 million (2007: € 5.0 mil-

lion) in other operating costs.


> NOTES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT

34.3 Book profit on sale of tangible fixed assets

In 2008 the Group sold land and buildings on which a total book profit of € 6.5 million was recorded

(2007: € 9.5 million).

2008 2007

Land and buildings 6.5 9.5

Others 0.2 0.2

Result from sale 6.7 9.7

Book value of sold assets 6.1 1.4

Proceeds of sale 12.8 11.1

34.4 Operating lease expenses

In 2008 the Group included € 5.5 million of expenses relating to operating lease agreements in other operating

costs.

35 F INANCIAL INCOME AND EXPENSES 2008 2007

Interest income 0.5 0.5

Interest expenses – 17.9 – 11.4

Exchange rate differences and fair value adjustments in respect

of financial instruments 3.7 – 0.4

– 13.7 – 11.3

36 PROFIT TAX 2008 2007

Profit taxes payable

Current financial year – 21.0 – 15.2

Release of provision in respect of previous years – 2.1

– 21.0 – 13.1

Deferred profit tax

Use of tax losses 1.9 1.2

Total tax charge in profit and loss account – 19.1 – 11.9


Reconciliation with applicable tax rate 2008 2007

% euro % euro

Pre-tax income 70.1 58.1

Tax on profit at local profit tax rate 29.7% 20.8 30.1% 17.5

Non-tax deductible costs 0.9% 0.6 1.5% 0.9

Tax-exempt income 1.6% 1.1 0.2% 0.1

Use of loss set-off – 4.0% – 2.8 – 5.6% – 3.3

Change of rate – 2.7% – 1.9 – 2.0% – 1.2

Others 1.8% 1.3 – 3.7% – 2.1

Tax charge in profit and loss account 27.3% 19.1 20.5% 11.9

The decrease in the weighted average tax rate from 30.1% to 29.7% is due to changes in the various countries’

shares in the total pre-tax income and to the fact that the applicable tax rate changed in a number of countries.

37 RESULT FROM DIVESTED ACTIVITIES 2008 2007

Business Key – 0.2

SCI La Domitienne – 0.1



Notes to the consolidated balance sheet


38 INTANGIBLE FIXED ASSETS Goodwill Development

Other

intangible

fixed assets Total

Cost

Balance as at 1 january 2007 12.6 0.2 4.1 16.9

Change as a result of consolidation 114.8 – 22.6 137.4

Investments – 0.3 1.1 1.4

Change as a result of deconsolidation – 1.0 – – – 1.0

Divestments – – – 0.1 – 0.1

Exchange rate differences – 9.1 – – 1.9 – 11.0

Balance as at 31 December 2007 117.3 0.5 25.8 143.6

Change as a result of consolidation 44.8 – 34.8 79.6

Investments – 0.8 0.4 1.2

Exchange rate differences 5.2 – 1.5 6.7


Amortisation

Balance as at 1 january 2007 3.3 – 1.2 4.5

Amortisation – 0.1 3.5 3.6

Changes as a result of deconsolidation – 0.9 – – – 0.9

Exchange rate differences – 0.2 – – 0.2 – 0.4


Amortisation – 0.2 11.4 11.6

Exchange rate differences – – 0.6 0.6


Book value

Balance as at 1 january 2007 9.3 0.2 2.9 12.4




38.1 Amortisation/Impairments

The Group recognised no impairment losses in 2008 (2007: € 0).

38.2 Testing of the impairment for cash generating units which include goodwill

The following units contain goodwill items:

2008 2007

TenCate Grass 82.7 78.8

TenCate Advanced Armour EU 32.3 32.3

TenCate Advanced Composites US 19.7 3.4

Composix 21.0 –

Others 9.4 0.6

165.1 115.1

The Group tested the existing goodwill for impairment in 2008. The value in use has been determined on

the basis of future cash flows over the forthcoming three years, based on historical empirical data, market

expectations and strategic plans. No growth rate is applied for the period beyond three years. The discount rate

used is 9.3% (2007: 9.5%).

The net realisable value is the fair (market) value less sale costs.

On the basis of this test, no goodwill impairment has been recognised. The changes in 2008 related largely to

the acquired participating interests amounting to € 44.8 million (see note 32.2) and exchange rate differences.

38.3 Amortisation

The amortisation of € 11.6 million (2007: € 3.6 million) has been stated in the ‘Amortisation’ item in the profit

and loss account.


>

39 TANGIBLE FIXED ASSETS

Land and

operating

buildings

Plant and

equipment

Other

operating

assets

Operating

assets under

construction Total

Acquisition value

Balance as at 1 January 2007 113.0 292.2 36.2 11.7 453.1

Changes as a result of consolidations 7.6 24.6 0.5 0.8 33.5

Investments 12.4 34.7 3.3 11.1 61.5

Changes as a result of deconsolidations – 1.4 – – 0.4 – – 1.8

Divestments – 3.6 – 3.0 – 0.9 – – 7.5

Exchange rate differences – 3.7 – 12.5 – 0.9 – 0.8 – 17.9

Balance as at 31 December 2007 124.3 336.0 37.8 22.8 520.9

Changes as a result of consolidations 1.3 7.2 1.1 2.3 11.9

Investments 7.7 52.6 4.4 – 17.9 46.8

Divestments – 6.2 – 8.0 – 0.7 – – 14.9

Exchange rate differences 2.5 6.9 0.5 1.4 11.3


Depreciation and impairment

Balance as at 1 January 2007 51.3 206.3 29.7 – 287.3

Changes as a result of consolidations – 0.6 – – 0.6

Depreciation 4.2 20.5 2.1 – 26.8

Impairment – 2.3 – – 2.3

Changes as a result of deconsolidations – 0.4 – – 0.3 – – 0.7

Divestments – 2.5 – 2.7 – 0.9 – – 6.1

Exchange rate differences – 1.2 – 5.7 – 0.5 – – 7.4

Balance as at 31 December 2007 51.4 221.3 30.1 – 302.8

Depreciation 4.6 23.5 2.6 – 30.7

Divestments – 4.1 – 4.2 – 0.5 – – 8.8

Exchange rate differences 0.7 2.8 0.4 – 3.9

Balance as at 31 December 2008 52.6 243.4 32.6 – 328.6

Book value

Balance as at 1 January 2007 61.7 85.9 6.5 11.7 165.8



NOTES TO THE CONSOLIDATED BALANCE SHEET


39.1 Impairment and reversal of impairment

The Group recognised no impairment of tangible fixed assets in 2008 (2007: € 2.3 million).

The impairment recognised in 2007 was stated in the consolidated profit and loss account under depreciation

and impairment. No impairment losses were reversed during the year.

39.2 Leased plant and equipment

The Group leases buildings, plant and equipment under a number of financial leases.

The net book value of these assets as at 31 December 2008 was € 5.5 million (31 December 2007: € 1.2 million).

The increase was due to the conversion of an operating lease into a financial lease. The leased buildings, plant

and equipment serve as collateral for the financial lease liabilities (see note 48).

39.3 Collateral

No land and buildings were encumbered as collateral for bank loans as at 31 December 2008. The same was

true as at 31 December 2007.

39.4 Depreciation charge

The depreciation charge of € 30.7 million (2007: € 26.8 million) has been stated in depreciation and impairment

in the profit and loss account.

40 F INANCIAL FIXED ASSETS

The financial fixed assets can be analysed as follows:

2008 2007

Other participating interests 6.2 1.3

Other long-term receivables 4.7 4.9

Balance as at 31 December 10.9 6.2

40.1 Other participating interests

The main other participating interests included below concern GreenFields bv (Kampen, 20%), Landscape

Solutions bv (Goirle, 20%) and Performance Fabrics and Fibers LLC (Andrews, South Carolina, 16%).

2008 2007

Balance as at 1 January 1.3 1.3

Investments 4.6 –

Exchange rate differences 0.3 –



>

The investments include the acquisition of 16% of the shares of Performance Fabrics and Fibers LLC (€ 4.6 mil-

lion). The consideration took the form of a contribution of assets.

No loans were granted to other participating interests.

40.2 Other long-term receivables and investments

The main long-term receivables and investments concern invested pension monies at a number of US operating

companies (€ 2.6 million) and an advance payment in connection with long-term lease rights in China and Malay-

sia (€ 1.9 million).

41 DEFERRED PROFIT TAX ASSETS AND LIABILITIES

The deferred profit tax assets and liabilities recognised in the balance sheet are attributable to the following

items:

Assets Liabilities Net

2008 2007 2008 2007 2008 2007

Tangible fixed assets – – – 4.4 – 3.4 – 4.4 – 3.4

Intangible assets – 0.7 – 6.6 – 2.2 – 6.6 – 1.5

Financial fixed assets – 0.5 – 0.4 – 0.2 – 0.4 0.3

Inventories 3.4 2.0 – – 3.4 2.0

Other receivables 0.4 0.3 – – 0.4 0.3

Pension provisions 4.6 6.0 – – 4.6 6.0

Other provisions 6.1 4.9 – – 6.1 4.9

Tax value of loss carry-forwards 5.1 2.9 – – 5.1 2.9

Others 0.8 1.2 – – 0.8 1.2

Deferred profit tax asset/liability 20.4 18.5 – 11.4 – 5.8 9.0 12.7

Balance of assets and liabilities – 6.2 – 4.9 6.2 4.9 – –

Net deferred profit tax asset/liability 14.2 13.6 – 5.2 – 0.9 9.0 12.7

Deferred profit tax assets not stated in the balance sheet

As at 31 December 2008 there were € 21.8 million (2007: € 16.0 million) of unused losses available for set-off.

No deferred profit tax asset has been recognised in respect of this amount because it is currently unlikely that

future taxable profit will be available to the Group for the losses to be set off. The profit tax assets not included

as at 31 December 2008 amounted to € 4.4 million (2007: € 3.1 million).



The expiry periods of the unused losses available for set-off are shown in the table below:

2008

Within 2 – 5 years 5.0

After five years 0.7

Indefinite period 16.1

Unused losses available for set-off 21.8

42 INVENTORIES 2008 2007

Raw materials and manufacturing supplies 57.4 49.1

Semi-manufactures 42.6 39.0

Finished products 111.5 88.1

Inventories 211.5 176.2

43 TRADE DEBTORS 2008 2007

Due from third parties 154.2 145.8

Due from other participating interests 13.4 –

Due from joint ventures 1.3 –

Trade debtors 168.9 145.8

Trade debtors are stated at nominal value after deduction of provisions deemed necessary. Transfers to provi-

sions for doubtful debts are included in the profit and loss account under direct sale costs (work contracted out

and other external costs).

44 OTHER RECEIVABLES 2008 2007

Receivable in respect of other taxes 3.3 2.3

Derivatives at fair value 1.8 3.4

Other receivables and prepayments 11.2 10.9

Other receivables 16.3 16.6

The other taxes receivable relate mainly to reclaimable VAT.


>

45 CASH AND CASH EQUIVALENTS 2008 2007

Bank balances 5.3 4.7

Cash balances 0.1 0.1

Cash and cash equivalents 5.4 4.8

Cash loans, overdrafts – 19.4 – 12.5

Cash in the cash flow statement – 14.0 – 7.7

All amounts were freely available at the end of 2008 and 2007.

46 TOTAL SHAREHOLDERS’ EQUITY

A statement of changes in equity can be found on page 80.

46.1 Ordinary shares 2008 2007

Number x 1,000

Outstanding as at 1 January 23,556 21,063

Issue of shares – 2,106

Issued stock dividend 411 387

Outstanding as at 31 December 23,967 23,556

The authorised share capital amounts to € 200 million divided into 80 million ordinary shares of a par value

of € 2.50. The issued capital as at 31 December 2008 amounts to 23,966,901 ordinary shares of a par value of

€ 2.50 (as at 31 December 2007: 23,556,158 ordinary shares of a par value of € 2.50).

The holders of ordinary shares are entitled to dividend as approved periodically by the General Meeting

of Shareholders. They are also entitled to cast one vote per share at meetings of the company.

Issue of shares and limitation of pre-emptive right

The general meeting of shareholders has granted the Executive Board the power to issue shares and to exclude

or restrict the pre-emptive right for the period ending on 30 September 2009. The power to issue shares con-

cerns 10% of the issued share capital plus a further issue up to a maximum of 10% of the issued share capital

in the event that the issue takes place in the context of a merger or acquisition. The same applies to the power

of the Executive Board, with the approval of the Supervisory Board, to restrict or exclude the pre-emptive right.



46.2 Repurchased ordinary shares 2008 2007

Number x 1,000

Outstanding as at 1 January 556 509

Repurchasing of shares – 175

Exercise of options – 25 – 125

Issued in connection with share plan – 4 – 3

Outstanding as at 31 December 527 556

The aim of the repurchase of ordinary shares is to avoid the dilution of earnings per share by the granting of

options and the issue of shares as part of the share savings plan. No shares in the company were repurchased

in 2008. The shares repurchased in 2007 have been purchased at an average price of € 23.99.

Repurchase of own shares

The general meeting of shareholders has granted the Executive Board the power to acquire fully paid-up shares

in the company (or certificates thereof) for the period ending on 30 September 2009. The maximum number

of shares which may thus be acquired is 10% of the issued capital at the time of acquisition of the shares

(or certificates thereof).

46.3 Share premium

The share premium reserve is to be considered as paid-up capital.

46.4 Retained earnings of associated companies

The reserve has been formed in respect of operating companies and joint ventures in which the free disposal

of retained earnings is subject to restrictions.

46.5 Translation differences

The reserve for translation differences comprises all exchange rate differences which arise due to the trans-

lation of the financial statements of foreign activities outside the eurozone. These exchange rate differences

(translation risk) are carried in equity. The accumulation of the respective amount began on 1 January 2004 and

is not available for distribution to shareholders.

46.6 Reserve for hedging results

The reserve for hedging results is not available for distribution to shareholders. A negative reserve reduces

the amount which is freely distributable from the reserves.

The balance of the reserve for hedging results as at 31 December 2008 was negligible.


>

46.7 Undistributed Result

Subsequent to the balance sheet date the following dividend has been proposed, which has not yet been includ-

ed in the balance sheet. It is proposed to set the dividend in respect of 2008 at € 0.85 per share (2007: € 0.80

per share), payable half as a stock dividend and half at shareholders’ discretion in cash or in the form of a stock

dividend, with the value of such stock dividend slightly exceeding the cash dividend.

2008 2007

€ 0.85 per ordinary share (2007: € 0.80) 20.4 18.8

46.8 Objective with regard to equity

The objective with regard to equity, as in 2007, is to guarantee the continuity of the company by means

of attractive returns for shareholders and by guaranteeing benefits for other stakeholders. The capital structure

is adjusted if necessary in line with economic developments and the risks relating to assets.

With regard to financing, the longer-term objective is a ratio of net debt to EBITDA of a maximum of 2.5.

The calculation as at 31 December is as follows:

31 December

2008

31 December

2007

Long-term interest-bearing liabilities 316.2 222.3

Short-term portion of long-term liabilities 0.9 0.4

Cash loans and overdrafts 19.4 12.5

Total debt 336.5 235.2

Less: cash and cash equivalents 5.4 4.8

Net debt 331.1 230.4

EBITDA* 127.0 105.7

Net debt / EBITDA 2.61 2.18

* In accordance with the covenant relating to the loan facility, the EBITDA for acquired and divested businesses is annualised. The effect

of this extrapolation is a € 0.9 million increase in EBITDA. (2007: € 3.6 million).



47 EARNINGS PER SHARE

47.1 Ordinary earnings per share

The calculation of the ordinary earnings per share as at 31 December 2008 is based on the net profit of

€ 51.1 million (2007: € 46.4 million) attributable to holders of ordinary shares and a weighted average number

of outstanding ordinary shares during the 2008 financial year of 23,426,397 (2007: 22,797,063), calculated

as follows:

2008 2007

Net profit for the financial year attributable to holders of ordinary shares 51.1 46.4

Weighted average number of ordinary shares 2008 2007

Number x 1,000

Outstanding ordinary shares on 1 January 23,556 21,063

Issue of shares – 1,847

Effect of ordinary shares held (including repurchased shares) – 556 – 535

Effect of shares issued in connection with stock dividend 411 387

Effect of shares issued as a result of exercised option rights 13 33

Effect of shares issued as a result of share savings plan 2 2

Weighted average number of ordinary shares as at 31 December 23,426 22,797


>

47.2 Diluted earnings per share

The calculation of the diluted earnings per share as at 31 December 2008 is based on the net profit of

€ 51.1 million (2007: € 46.4 million) attributable to holders of ordinary shares and the weighted average number

of outstanding ordinary shares during the 2008 financial year of 23,494,868 (2007: 22,966,852), calculated

as follows:

2008 2007

Net profit for the financial year attributable to holders of ordinary shares 51.1 46.4

Weighted average number of ordinary shares 2008 2007

Number x 1,000

Weighted average number of ordinary shares as at 31 December 23,426 22,797

Effect of outstanding option rights 69 170

Weighted average number of ordinary shares (after dilution)

as at 31 December 23,495 22,967

48 LONG-TERM DEBTS 2008 2007

Syndicated loan 304.2 214.1

Financial lease liabilities 5.3 1.2

Other loans 7.6 7.4

317.1 222.7

Less: repayment of loans in forthcoming year – 0.9 – 0.4

Long-term debts 316.2 222.3



2008

Total

2009

< 1 year

2010

1 – 2 years

2011/2013

2 – 5 years

2014

and after

> 5 years

2007

Total

Syndicated loan

EUR – variable interest 122.1 122.1 214.1

USD – variable interest 150.8 150.8 –

DKK – variable interest 31.3 31.3 –

Financial lease liabilities

EUR – fixed interest 8.00% 0.9 0.2 0.2 0.5 1.1

EUR – variable interest 4.3 0.6 0.7 3.0 –

DKK – fixed interest 6.96% – 0.1

THB – fixed interest 3.65% 0.1 0.1 –

Other loans

AUD – variable interest 2.6 2.6 2.6

USD – variable interest 2.9 2.9 2.7

EUR – fixed interest 0.5 – 3.0% 0.1 0.1 0.2

EUR – fixed interest 1.00% 2.0 2.0 1.9

Long–term debts 317.1 0.9 3.5 309.8 2.9 222.7

The syndicated loan of € 400 million (2007 € 250 million), which is available for drawing in various currencies,

was concluded with a syndicate of 12 banks on 16 February 2007 and was amended on 27 February 2008.

€ 306 million of this facility was drawn as at 31 December 2008 (2007: € 215 million). The original term of the

loan is five years (up to 16 February 2012). Repayment is due in full on the maturity date. The loan is valued

at amortised cost in accordance with the effective interest method.

The interest rate payable is linked to the net debt/EBITDA ratio, which is calculated quarterly in respect of the

preceding 12 months. The interest margin above Euribor or Libor will be between 0.40% and 1.00%. At the end

of 2008, the margin was 0.725% (2007: 0.50%).

The aforementioned syndicated loan is subject to a number of covenants, the principal of which are:

◾ total net debt/EBITDA + result from associated companies less than 3, with the once-only possibility of an

increase to 3.5 for two successive quarters following an acquisition;

◾ EBITDA/net interest greater than 4;

◾ joint guarantee of operating companies with total assets of at least 60% of the TenCate total.

TenCate fulfilled these conditions as at the balance sheet date.


>

In the event of a change of control of the company, the syndicated loan of € 400 million is immediately repaya-

ble if a two-thirds majority of the lenders so require.

The € 4.3 million Financial lease liability with variable interest concerns the conversion of an operating lease

into a financial lease.

The AUD loan with a variable interest rate was granted by Westpac Banking Corporation.

The USD loan with variable interest concerns a $ 4 million loan from the Development Authority of Pike County

Industrial Revenue Bonds. Repayment is due in full in 2018.

The euro loans with a fixed interest rate between 0.5% and 3% were granted by Forschungsförderungsfond,

Vienna, and Öberbank AG, Linz.

Of the total of long-term loans, 99% (2007: 98%) had variable interest in 2008. The risk associated with this

variability has been hedged by means of a number of instruments (caps, swaps). Details of the interest rate risk

borne by the Group can be found in note 51.3.

49 PENSION LIABILITIES 2008 2007

Defined benefit schemes

Discounted value of covered liabilities 275.1 298.6

Market value of fund investments 272.4 304.7

Discounted value of net liabilities 2.7 – 6.1

Unstated actuarial profits and losses 15.1 26.8

Total defined benefit schemes 17.8 20.7

Other liabilities in respect of pensions 6.5 7.8

Pension liabilities 24.3 28.5

49.1 Changes in the valuation of liabilities as at the balance sheet date 2008 2007

Balance of liabilities as at 1 January 298.6 316.1

Service costs 3.3 3.7

Members’ contributions 3.1 3.1

Interest costs 16.3 14.6

Benefits paid – 15.6 – 12.9

Actuarial differences – 30.6 – 26.0




49.2 Investments 2008 2007


Expected return 17.7 17.1

Employer’s contribution 4.8 4.8

Members’ contributions 3.1 3.1

Actuarial losses – 42.3 – 10.3

Benefits paid – 15.6 – 12.8


Analysis of investments as at 31 December 2008 2007

Bonds 161.4 158.6

Shares 69.0 102.1

Hedge funds 11.1 16.7

Real estate 26.0 24.0

Cash 4.9 3.3

Pension fund investments 272.4 304.7

49.3 Charge stated in profit and loss account 2008 2007

Service costs – 3.3 – 3.7

Interest on the liabilities – 16.3 – 14.6

Expected return on fund investments 17.7 17.1

Pension income/charges – 1.9 – 1.2

The pension charges have been stated in the 2008 profit and loss account in an amount of € 1.9 million

(2007: € 1.2 million) under personnel costs. The actual return on fund investments amounts to € – 24.6 million

(2007: € 6.8 million).

Netherlands

The defined pension scheme concerns the pension rights of the Dutch employees which have been placed with

Stichting Pensioenfonds Koninklijke Ten Cate.

The main features of the scheme are:

◾ pension accumulation based on average salary;

◾ accumulation rate of 2.1%;

◾ conditional indexation; the average indexation expectation has been set at 70%.

Agreements have been entered into with the pension fund in respect of the contribution payable. The contribu-

tion percentage varies within an agreed range, depending on the cover ratio of the pension fund. The current

agreements cover the period up to 31 December 2009.


> NOTES TO THE CONSOLIDATED BALANCE SHEET

Other liabilities

The other liabilities in respect of pensions relate to defined contribution schemes and a number of specific old-

age provisions. The principal defined contribution scheme is a 401K (savings) scheme in the United States.

49.4 Liability in respect of defined benefit schemes

The main actuarial assumptions as at the balance sheet date (in weighted averages):

2008 2007

Discount rate as at 31 December 5.7% 5.5%

Expected return on fund investments as at 31 December 6.1% 5.9%

Future wage increases 2.5% 2.7%

Future pension increases 1.4% 2.0%

Assumptions with regard to future mortality figures are based on published statistical data and mortality tables.

The mortality tables used are the GBM and GBV survival tables for 2000 – 2005 with an age reduction of three

years for men and zero years for women. The age difference between men and women is set at three years.

A loading of 3.5% has been applied for future improvement in life expectancy on the liability and 6.0% on the

service cost. The total expected long-term return on the investments is 6.1% (2007: 5.9%). This percentage is

based on the sum of the returns in separate investment categories. A 0.1% change in the discount rate does not

lead to a change in the annual charges (2007: € 0.1 million). A 0.1% change in the discount rate will, however,

cause the liability to rise or fall by € 3.5 million (2007 € 4.1 million).

Historical information 2008 2007 2006 2005 2004

Discounted value of covered liabilities 275.1 298.6 316.1 326.5 302.4

Market value of fund investments 272.4 304.7 302.8 289.1 265.9

Discounted value of net liabilities 2.7 – 6.1 13.3 37.4 36.5

Experience adjustments arising

on liabilities of the scheme* 0.8 2.7 – 1.6 – –

Experience adjustments arising

on fund investments – 42.3 – 10.3 5.7 15.7 5.8

* No figures are available for 2005 and 2004.

The Group expects to contribute € 7.0 million of employer’s contributions to defined benefit pension schemes

in 2009 (2008: € 4.8 million). The pension expense in respect of 2009 is estimated at € 1.8 million (2008:

€ 1.9 million).


50 PROVISIONSGuarantee/

claims

Reorganisation

provision

Other

personnel

liabilities Environment Others Total

Balance as at 1 January 2008 6.0 – 4.6 2.0 2.2 14.8

Change as a result of

consolidation – – – – 0.3 0.3

Formed as charge against result 1.6 2.5 0.3 – 0.1 4.5

Released to result – 2.4 – 0.2 – 0.2 – 0.2 – 3.0

Expenditure in current year – 1.5 – 0.5 – 0.2 – – 0.4 – 2.6

Reclassification 1.1 – 1.1 –

Balance as at

31 December 2008 3.7 1.8 5.8 1.8 0.9 14.0

Of which short-term

as at 31.12.07 2.6 – – – 0.8 3.4

as at 31.12.08 2.1 1.8 0.1 – 0.4 4.4

The amount released to the result has been included in the profit and loss account as follows:

2008 2007

Personnel costs 0.2 0.7

Other operating costs 2.8 2.1

Total 3.0 2.8

The guarantee provision relates to goods and services supplied and the provision for claims relates to damage

claims and possible legal costs.

Two reorganisations were announced in 2008. The transfer of Ten Cate Enbi’s R&D activities to Singapore and

the discontinuation of contract finishing for third parties at TenCate Protective & Outdoor Fabrics are expected

to be completed in 2009.

The provision for other personnel liabilities has been formed in respect of long-term leave and other allowances,

such as anniversaries.

The environmental provision has been formed for expected costs of decontamination of industrial sites, on the

basis of functional decontamination (maintenance of business use).


51 F INANCIAL INSTRUMENTS

As part of the normal business operations, the Group incurs liquidity, credit, interest and currency risks. The risk

of fluctuations in exchange rates and interest rates is hedged using derivatives.

51.1 L IQUIDITY RISK

The liquidity risk is the risk of TenCate being unable to meet its liabilities when they fall due. TenCate’s policy

on control of the liquidity risk is to guarantee to the best of its ability that sufficient liquidities are available to

meet its liabilities on time, in both normal and exceptional situations.

The term of the financial liabilities as at 31 December 2008 is as follows:

Book value

Contractual

cash flow

2009

< 1 year

2010

1-2 years

2011/2013

2-5 years

2014 f.f.

> 5 years

Financial liabilities

(excluding derivatives)

Long-term debts 317.1 – 349.6 – 10.6 – 13.2 – 322.8 – 3.1

Cash loans, overdrafts 19.4 – 19.4 – 19.4 – – –

Trade and other creditors,

excluding derivatives 130.6 – 130.6 – 130.6 – – –

Derivatives

Interest rate swaps 0.6 – 2.0 – 0.1 – 0.5 – 1.0 – 0.4

Forward foreign exchange

contracts 1.4 – 1.4 – 1.4 – – –

Total financial liabilities

(including derivatives) 469.1 – 503.0 – 162.1 – 13.7 – 323.8 – 3.5

Other information


The term of the financial liabilities as at 31 December 2007 is as follows:

Book value

Contractual

cash flow

2008

< 1 year

2009

1-2 years

2010/2012

2-5 years

2013 f.f.

> 5 years

Financial liabilities (excluding

derivatives)

Long-term debts 222.7 – 268.1 – 11.3 – 11.3 – 240.8 – 4.7

Cash loans, overdrafts 12.5 – 12.5 – 12.5 – – –

Trade and other creditors,

excluding derivatives 128.5 – 128.5 – 128.5 – – –

Derivatives

Interest rate swaps – 0.1 0.3 0.3 – – –

Caps – 0.8 1.0 0.6 0.4 – –

Forward foreign exchange

contracts 0.1 – 0.1 – 0.1 – – –

Total financial liabilities

(including derivatives) 362.9 – 407.9 – 151.5 – 10.9 – 240.8 – 4.7

51.2 Credit risk

Credit risk is the risk of a financial loss for the Group if a customer or counterparty to a financial instrument fails

to discharge its contractual obligations. Credit risks result in particular from trade debtors and investments

in securities.

The management has drawn up a credit policy and the credit risk is constantly monitored.

In the case of all supplies above a certain amount, the customer is subjected to a credit assessment and, where

possible, the debtor position is insured. All European operating companies, as well as a number of American

and Asian companies, have credit insurance.

On the balance sheet date there were no major concentrations of credit risk. The residual credit risk is the

balance sheet value of each financial asset, after deduction of derivates.


>

The book value of the financial assets reflects the maximum exposure to credit risk. The maximum exposure can

be defined as follows:

31 December

2008

31 December

2007

Trade debtors and other (long-term) receivables 188.1 163.9

Cash and cash equivalents 5.4 4.8

Forward foreign exchange contracts and options 1.6 2.3

Interest rate swaps – 0.3

Interest rate caps 0.2 0.8

Total 195.3 172.1

The age of the trade debtors and the provision for bad debts can be analysed as follows:

2008 2007

Gross Provision Gross Provision

0 – 60 days overdue 152.5 0.6 143.7 0.5

60 – 120 days overdue 11.0 0.5 2.1 0.4

120 – 360 days overdue 6.8 1.1 1.3 0.9

Over 360 days overdue 2.8 2.0 2.2 1.7

Balance as at 31 December 173.1 4.2 149.3 3.5

The movements in the provision for trade debtors are as follows:

2008 2007


Change as a result of consolidations/deconsolidations 0.1 – 0.1

Formed as charge against result 1.8 2.0

Released to result – 1.0 – 1.0

Written off during the year – 0.3 – 0.3

Exchange rate differences 0.1 – 0.2


OTHER INFORMATION


51.3 Interest rate risk

The policy with regard to interest rate risks is stated in the risk section on page 38 of this report. The conditions

applying to the interest-bearing debt are set out in note 48.

The aim of the interest rate policy is to limit the finance charges as far as possible. Interest rate instruments

can be used in order to adjust the fixed or variable interest character of finance to the required profile. The

Group has entered into interest rate swaps and caps in order to fulfil this purpose within the policy of the

Group.

The following interest rate instruments were outstanding at the end of 2008:

◾ interest rate swap to 02-01-2018: $ 4 million received variable, payment 4.47% fixed

◾ interest rate cap 30-12-2005 to 31-12-2009: € 25 million 3.5%




◾ interest rate cap 30-06-2008 to 31-12-2009: $ 70 million 4.5%



◾ interest rate swap 31-12-2009 to 31-12-2012: $ 70 million, received variable, payment 2.215%

fixed

The Group classifies the interest rate swaps and the interest rate caps as cash flow hedging and values them

at fair value. The net fair value of the interest rate swaps as at 31 December 2008 of € – 0.6 million (2007:

€ 0.1 million) has been included under trade creditors and other payables. The net fair value of the caps of

€ 0.2 million (2007: € 0.8 million) has been included under other receivables.

51.4 Currency risk

The Group incurs currency risks on sales and purchases denominated in currencies other than the local currency

of the respective Group company. The currencies which give rise to this risk are primarily the US dollar, the Brit-

ish pound and the euro.

Transaction risk

The Group hedges all trade receivables and debts denominated in foreign currencies. To that end it uses foreign

exchange forward contracts and options. The forward contracts have a term of less than one year after the bal-

ance sheet date. If necessary they are extended.

Competition risks

The Group also hedges the estimated currency risk of the expected purchases and sales in the subsequent six

months. Currency options are used for this purpose.


>

With regard to monetary assets and liabilities held in currencies other than the euro, the Group ensures that the

net risk remains at an acceptable level, by purchasing or selling foreign currencies as necessary in the spot mar-

ket in order to eliminate short-term imbalances.

The principal of the USD, and AUD loans of the Group has not been hedged, because these loans have been

drawn by operating companies which have corresponding assets in the same currency.

Additional note on currency risk

The Group’s exposure to currency risks on the balance sheet date is as follows:

31 December 2008 31 December 2007

USD GBP EUR USD GBP EUR

Transaction risk 5.2 2.5 23.8 – 2.5 5.1 – 9.8

Competition risk 2.2 1.4 – 0.9 4.0 2.2 15.2

Risk before hedging 7.4 3.9 22.9 1.5 7.3 5.4

Forward contracts – 6.5 – 2.2 – 22.5 – 0.6 – 6.7 7.3

Option contracts 0.3 – 0.8 – 4.4 0.5 – 0.9 6.1

Risk after hedging 1.2 0.9 – 4.0 1.4 – 0.3 18.8

The foreign currencies have been converted into euros at the closing rate.

The transaction risk in USD and EUR relates respectively to debts and receivables in USD and EUR of operating

companies outside the dollar and euro zones. The transaction risk in EUR mainly concerns trade receivables of

TenCate Thiolon Middle East. The competition risk in USD relates mainly to expected revenues of TenCate Geo-

synthetics Asia. The transaction risk in GBP relates mainly to GBP receivables of TenCate Advanced Armour

France.

The competition risk concerns the balance of expected revenues and costs in the stated currencies of operating

companies located outside the respective regions.

51.5 Future transactions

The Group classifies options to hedge future transactions as cash flow hedging and values them at fair value.

The net fair value of options to hedge future transactions as at 31 December 2008 amounted to € 0.8 million

(2007: € 2.1 million). This amount has been included in other receivables.

OTHER INFORMATION


51.6 Assets and liabilities included in the balance sheet

Changes in the fair value of foreign exchange forward contracts and options which are used to hedge, in an

economic sense, monetary assets and liabilities denominated in foreign currencies are stated in the profit and

loss account. Both changes in the fair value of forward contracts and options and the exchange rate differences

relating to monetary balance sheet items are included as exchange rate differences under net financial expens-

es (see note 35).

51.7 Sensitivity analyses

In managing interest rate and currency risks, the Group’s aim is to limit the effect of short-term fluctuations on

the Group result. In the longer term, however, sustained changes in exchange rates and interest rates will have

an effect on the consolidated result.

The effect of a general rise of one percentage point in the interest rate on the pre-tax income in 2008 is

estimated at € – 2.1 million (2007: € – 0.4 million). This calculation takes account of the concluded interest rate

swaps or caps.

A general rise of one percentage point in the value of the euro against other currencies would have reduced

the result after tax by an expected € 0.4 million (2007: € 0). Existing options have been taken into account in this

calculation.

A general rise of one percentage point in the value of the euro against other currencies would have reduced

the equity by approximately € 3.1 million (2007: € 2.1 million).

51.8 Estimate of fair value

Details are given below of the main methods and assumptions used in estimating the fair value of financial

instruments.

Foreign exchange forward contracts and interest rate caps are valued on the basis of calculations or prices

obtained from financial institutions. In the case of interest rate swaps, bank statements are used.

The fair value of long-term debts is calculated on the basis of the discounted value of expected future cash

flows from repayments and interest payments.

The fair value of financial lease liabilities is estimated on the basis of the present value of future cash flows,

discounted at the interest rate for similar lease agreements.

In the case of trade debtors, other receivables, trade creditors and other short-term debts which fall due within

one year, the nominal value is deemed to reflect the fair value.


> OTHER INFORMATION

52 L IABILITIES NOT SHOWN IN THE BALANCE SHEET

Operational lease as lessee

Payments due under non-cancellable operational lease agreements are as follows:

2008 2007

Less than 1 year 5.4 4.7

Between two and five years 14.5 10.7

More than five years 8.6 15.6

28.5 31.0

The Group leases buildings, plant, vehicles and office equipment under operational leases. The leased buildings

have a term of 10 to 15 years. Lease payments are indexed annually. None of the lease agreements include

conditional lease payments. In principle the Group does not act as a lessor. The term of the other lease agree-

ments is a maximum of five years.

53 INVESTMENT LIABILITIES

In 2008 the Group entered into contractual liabilities for the purchase of tangible fixed assets. The amount of

the liabilities as at 31 December 2008, after deduction of advance payments already made during the financial

year, is € 7.1 million (2007: € 24.9 million).

54 CONTINGENT LIABILITIES

The Group has received claims for damages arising from the conduct of business. With the exception of those

stated below, the claims are not deemed to be substantial and provisions have been recognised to the extent

necessary.

A claim for damages has been made against Royal Ten Cate by United Fabrics nv, a company registered in the

Netherlands Antilles (majority shareholder in Textielgroep Twenthe nv). The claim is based on an outsourcing

and management agreement from 1998 and originally amounted to € 56 million. On 24 May 2002 the district

court of Almelo dismissed the claim in its entirety. In a judgment on 10 February 2004 the court of appeal of

Arnhem dismissed the claim in respect of the outsourcing agreement and referred the claim in respect of the

management agreement back to the plaintiff, requiring the latter to substantiate its loss before the court.

On 10 May 2004 both Royal Ten Cate and the receiver of United Fabrics lodged appeals in cassation against

the appeal court’s judgment. The Supreme Court issued a ruling on 7 April 2006 upholding the appeal court’s

judgment. The claim in respect of the outsourcing agreement has thus permanently lapsed. There remains

the possibility of a damages assessment procedure with regard to the management agreement, which Royal

Ten Cate views with confidence. As at the end of 2008, United fabrics had not commenced any damages

assessment procedure.


55 POST BALANCE SHEET EVENTS

A commentary on events subsequent to the balance sheet date can be found on page 138.

56 RELATED PARTIES

56.1 Identity of related parties

Related parties concern relationships between the Group and its operating companies, other associated compa-

nies, joint ventures, the TenCate pension fund and the executive and supervisory directors.

56.2 Directors’ remuneration

The remuneration of the members of the Executive Board was as follows:

L. de Vries J. Wegstapel P.H. van der Vorm

in thousands of euros 2008 2007 2008 2007 2008 2007

Periodic remuneration 507 461 358 259 – 57

Results-related pay 254 231 85 – – –

Pension costs 281 413 68 40 – –

1,042 1,105 511 299 – 571 As at 29 March 2007.

2 Up to and including 29 March 2007.

In addition to the above pension costs, costs of € 110,000 were incurred in 2007 for repairs in respect of the

Early Retirement (Pre-pension and Life Course Savings) Act. As at 31 December 2008 Mr De Vries held 129,084

shares in the company (31 December 2007: 124,928 shares). Mr Wegstapel holds no shares in the company.

Messrs De Vries and Wegstapel are participating in the Group’s share option plan. See also note 67.

1 2


> OTHER INFORMATION

The remuneration of the members of the Supervisory Board was as follows:

2008 2007

in euros

A.W. Veenman – Chairman1,2 (to 3 April 2008) 13,324 38,154

J.C.M. Hovers – Chairman1,2 (from 3 April 2008) 39,972 –

P.P.A.I. Deiters – Vice-Chairman1 30,492 29,343

F.A. van Vught2,* 25,008 23,532

E. ten Cate1,* 25,008 23,532

C.W. Versteeg (to 31 March 2008) 5,253 20,535

139,057 135,0961 Member of the Financial Committee.

2 Member of the combined Remuneration, Selection and Appointments Committee.

* Chairman.

The members of the Supervisory Board held no shares or option rights of Royal Ten Cate at the end of 2008.

56.3 Transactions with other associated companies and joint ventures

During the 2008 financial year, other (non-consolidated) associated companies and joint ventures purchased

goods from the Group amounting to € 25.7 million. As at 31 December 2008, the outstanding trade receivables

due to the Group from other associated companies amounted to € 13.4 million and from joint ventures

€ 1.3 million. The Group has no trade accounts payable to other associated companies and joint ventures.

Transactions with other associated companies and joint ventures take place on an objective, business basis.

56.4 Operating companies

A list of (significant) subsidiaries and companies can be found inside the back cover of this report.


57 ESTIMATES AND JUDGMENTS FORMED BY THE MANAGEMENT

The Executive Board has conducted discussions with the Financial Committee on the critical principles for the

financial reporting and estimates, as well as the application of such principles and estimates.

With regard to the pensions, the main actuarial assumptions are stated in note 49. With regard to guarantees

and claims, provisions have been formed whenever there is an actual liability or it is likely that an outflow

of funds will be necessary. The result of this is stated in note 50.

With regard to impairments in the case of loss-making companies, an examination has been carried out to

determine whether the realisable value of any cash generating unit was lower than the book value. This was

not the case in 2008.


Company financial statements

58 COMPANY PROFIT AND LOSS ACCOUNT note 2008 2007

In millions of euros

Result from associated companies after tax 60 65.6 46.6

Other results after tax – 14.5 – 0.2

NET INCOME 51.1 46.4

59 COMPANY BALANCE SHEET note 2008 2007

In millions of euros

FINANCIAL FIXED ASSETS 60

Interests in operating companies 641.3 336.1

Other participating interests – 1.3

Loans to operating companies 75.4 210.3

Deferred profit tax assets 2.3 3.7

719.0 551.4

CURRENT ASSETS

Due from operating companies 0.8 2.1

Profit tax receivable 1.5 –

Other receivables 1.7 3.2

Cash and cash equivalents 0.8 –

4.8 5.3

TOTAL ASSETS 723.8 556.7

EQUITY

Share capital 62 59.9 58.9

Share premium reserve 64 49.7 50.7

Statutory reserve 65 – 5.9 – 19.5

Other reserves 66 212.1 173.6

Undistributed Result 51.1 46.4

366.9 310.1

PROVISIONS 68 1.6 3.3

LONG-TERM LIABILITIES 69 305.6 223.3

SHORT-TERM LIABILITIES 70 49.7 20.0

TOTAL EQUITY AND LIABILITIES 723.8 556.7


Notes to the company financial statements

General

Accounting principles

In determining the accounting principles for its parent company financial statements, Royal Ten Cate uses the

option available under article 2.362 paragraph 8 of the Netherlands Civil Code. This means that the accounting

principles for the parent company financial statements of Royal Ten Cate are the same as those applying to the

consolidated financial statements. Associated companies over which significant influence is exercised are val-

ued in accordance with the equity method. The consolidated financial statements have been prepared in accord-

ance with the standards set by the International Accounting Standards Board and adopted by the European

Union. A description of these standards can be found in the accounting policies applicable to the consolidated

financial statements.

The share in the results of associated companies includes the share of Royal Ten Cate in the results of these

companies. Results from transactions involving a transfer of assets and liabilities between Royal Ten Cate and

its associated companies and between individual associated companies are not included to the extent that they

can be considered to be unrealised.

60 F INANCIAL FIXED ASSETS

Interest in

operating

companies

Other

participating

interests

Loans to

operating

companies

Deferred

profit tax

assets Total

Balance as at 1 January 336.1 1.3 210.3 3.7 551.4

Capital contributions 54.2 54.2

Internal restructurings 204.5 – 1.3 203.2

Translation differences 12.2 6.3 18.5

Loans granted 164.5 164.5

Repayment of loans – 305.7 – 305.7

Result from associated companies 65.6 65.6

Dividend of associated companies – 31.3 – 31.3

Withdrawn from result – 1.4 – 1.4

Balance as at 31 December 641.3 – 75.4 2.3 719.0

Royal Ten Cate is at the head of the Group and has capital interests in the operating companies stated on

the cover.

A number of legal/financial restructurings took place in 2008. A large proportion of the internal financing

activities of Royal TenCate were placed with a newly formed financing company registered in Switzerland.

61 EQUITY

The equity in the parent company financial statements corresponds to the equity in the consolidated financial

statements. A statement of changes in equity can be found on page 80.


> NOTES TO THE COMPANY FINANCIAL STATEMENTS

62 CALLED AND PAID-UP CAPITAL 2008 2007

Authorised share capital 200.0 200.0

Of which not issued 140.1 141.1

59.9 58.9

63 ORDINARY SHARES 2008 2007

The authorised share capital consists of:

80,000,000 ordinary shares of € 2.50 200.0 200.0

Issued share capital

Balance as at 1 January 2008 2007

Ordinary shares 23,556,158 and 21,063,292 58.9 52.7

Issued shares 0 and 2,106,329 – 5.3

Issued stock dividend 410,743 and 386,537 1.0 0.9


64 SHARE PREMIUM RESERVE 2008 2007


Premium on issued shares – 45.3

Issued stock dividend – 1.0 – 0.9


The share premium reserve is available for distribution to shareholders.


65 STATUTORY RESERVE 2008 2007

65.1 Retained earnings of associated companies

Balance as at 1 January 1.3 –

Added from appropriation of profit in respect of 2008 and 2007 1.4 1.3


This reserve has been created for associated companies and joint ventures where free disposal of retained

earnings is subject to restriction.

65.2 Translation differences 2008 2007

Balance as at 1 January – 20.8 – 2.0

Change 12.2 – 18.8

Balance as at 31 December – 8.6 – 20.8

Balance of statutory reserve as at 31 December – 5.9 – 19.5

66 OTHER RESERVES 2008 2007


Added from 2007 and 2006 result 36.4 70.0

Repurchase of own shares for share savings plan/option plan – – 4.2

Share and option schemes 1.7 1.1

Issue of repurchased shares for share savings plan/option plan 0.4 1.0


67 OPTION PLAN

Royal Ten Cate operates a stock option plan for the management, established by the Supervisory Board.

The maximum possible account has been taken of the recommendations of VNO-NCW and the Dutch Investors’

Association (VEB). Those eligible for options are members of the Executive Board, the corporate and group

directors and a number of managers. The implementation of the share option plan is supervised by the compli-

ance officer.

The options are granted on a conditional basis. If after three years a specified performance level has been

attained, the options confer the right to acquire a € 2.50 ordinary share at the option exercise price.

The performance condition is that the earnings per share over the previous three years must have increased

at least by a percentage equal to inflation plus 3% per year. The term of the options was extended in 2008;

the exercise period of the vested options is now between the third and the eighth year after the conditional

granting of the option rights (previously between the third and sixth years). The exercise price is equivalent

to the average price of the Royal Ten Cate share on NYSE Euronext Amsterdam nv on the five stock exchange


>

trading days following publication of the annual figures. Each granted option right lapses on termination

of employment.

In principle options amounting to approximately 1.5% of the total number of shares outstanding will be granted

in any one year. The exercise of options is subject to the restrictions laid down in the Securities Transactions

Supervision Act.

67.1 Granting of options in 2009

On 3 March 2009 the intention was to grant 275,750 conditional options at the average market price during the

five stock exchange trading days following publication of the annual results on 4 March 2009. The distribution is

as follows:

03-03-2009 05-03-2008

Members of the Executive Board 100,000 92,000

Management and management support staff 175,750 175,000

275,750 267,000

67.2 Statement of movements in options of the Executive Board in 2008

Issued on Term until

Number of

options Exercise price

Exercised/

lapsed to

2007

Exercised

in 2008

Lapsed

in 2008

Outstanding

31-12-2008

Exercisable

31-12-2008

27-02-2002 27-02-2008 40,000 6.42 40,000 – – – –

25-02-2003 25-02-2011 40,000 6.18 40,000 – – – –

25-02-2004 25-02-2012 40,000 10.29 – – – 40,000 40,000

22-02-2005 22-02-2013 50,000 15.17 – – – 50,000 50,000

01-03-2006 01-03-2014 60,000 23.63 – – – 60,000 –

28-02-2007 28-02-2015 60,000 25.77 – – – 60,000 –

05-03-2008 05-03-2016 92,000 22.50 – – – 92,000 –

382,000 80,000 – – 302,000 90,000

03-03-2009 03-03-2017 100,000

The option series from 2002 to 2007 inclusive concern only Mr De Vries. The grant in 2008 concerns Mr De Vries

(60,000 options) and Mr Wegstapel (32,000).

NOTES TO THE COMPANY FINANCIAL STATEMENTS


67.3 Statement of movements in options of management and management support staff in 2008


Number of


Exercised/

lapsed to

2007

Exercised

in 2008

Lapsed

in 2008

Outstanding

31-12-2008

Exercisable

31-12-2008

27-02-2002 27-02-2008 40,000 6.42 39,200 800 – – –

25-02-2003 25-02-2011 48,200 6.18 42,400 2,200 – 3,600 3,600

25-02-2004 25-02-2012 55,600 10.29 41,998 800 – 12,802 12,802

22-02-2005 22-02-2013 102,400 15.17 10,400 21,000 – 71,000 71,000

01-03-2006 01-03-2014 141,200 23.63 13,000 – 12,600 115,600 –

28-02-2007 28-02-2015 145,000 25.77 4,000 – 5,000 136,000 –

05-03-2008 05-03-2016 175,000 22.50 – – 6,500 168,500 –

707,400 150,998 24,800 24,100 507,502 87,402

03-03-2009 03-03-2017 175,750

67.4 Complete statement of movements in options in 2008


Number of


Exercised/

lapsed to

2007

Exercised

in 2008

Lapsed

in 2008

Outstanding

31-12-2008

Exercisable

31-12-2008

27-02-2002 27-02-2008 80,000 6.42 79,200 800 – – –

25-02-2003 25-02-2011 88,200 6.18 82,400 2,200 – 3,600 3,600

25-02-2004 25-02-2012 95,600 10.29 41,998 800 – 52,802 52,802

22-02-2005 22-02-2013 152,400 15.17 10,400 21,000 – 121,000 121,000

01-03-2006 01-03-2014 201,200 23.63 13,000 – 12,600 175,600 –

28-02-2007 28-02-2015 205,000 25.77 4,000 – 5,000 196,000 –

05-03-2008 05-03-2016 267,000 22.50 – – 6,500 260,500 –

1,089,400 230,998 24,800 24,100 809,502 177,402

03-03-2009 03-03-2017 275,750

The Group received € 345,534 for the 24,800 options which were exercised during the year. The weighted average

exercise price was € 13.93 and the weighted average share price at sale was € 21.87.

67.5 Share savings plan

All employees in the Netherlands have been given the possibility of participating in the share savings plan.

The maximum amount per participant in 2008 was € 1,226 (2007: € 1,226). 3,827 shares were saved through this

plan in 2008 (2007: 3,274), as a result of which employees have saved a total of 52,055 shares since 2002

(2007: 48,228). The Group has received € 91,806 (2007: € 95,744) for 3,827 (2007: 3,274) saved shares (average

of € 23.99; 2007: € 29.24).


>

67.6 Repurchased shares

In principle the company will repurchase shares in order to prevent any dilution of earnings

per share caused by the granting of options.

2008 2007

number of shares

Number as at 1 January 555,874 508,946

Repurchase of shares – 175,000

Issued in respect of options – 24,800 – 124,798

Issued in respect of share savings plan – 3,827 – 3,274

Number as at 31 December 527,247 555,874

68 PROVISIONS 2008 2007

Guarantees and claims 1.6 3.0

Others – 0.3

Balance of provisions as at 31 December 1.6 3.3

The term of the provisions exceeds one year.

69 LONG-TERM LIABILITIES 2008 2007

Syndicated loan 303.3 214.1

Loans from operating companies 2.3 9.2


The conditions of the syndicated loan can be found in note 48 in the notes to the consolidated balance sheet.

70 SHORT-TERM LIABILITIES 2008 2007

Cash loans, overdrafts 46.9 17.4

Owed to consolidated operating companies 0.4 –

Repayment of long-term debt 0.9 –

Trade creditors and other payables 1.5 2.6


NOTES TO THE COMPANY FINANCIAL STATEMENTS


71 AUDITOR’S FEES

The following fees of KPMG Accountants N.V. and the other entities affiliated to the KPMG network have been

charged to the Group, in accordance with article 382a Part 9 of Book 2 of the Netherlands Civil Code.

Fees 2008 2007

in thousands of euros

Examination of the financial statements 801 686

Other audit assignments 280 249

Other non-audit services 515 655

Total 2008 1,596 1,590

72 L IABILITIES NOT SHOWN IN THE BALANCE SHEET

The company has issued a declaration of liability in accordance with article 403 of Book 2 of the Netherlands

Civil Code on behalf of its Dutch operating companies.

The company forms a tax group together with the majority of the Dutch operating companies for corporation

and sales tax. Each of these operating companies is severally liable for the tax payable by all the companies

included in the tax group.


Executive Board

L. de Vries, Chairman

J. Wegstapel

Supervisory Board

J.C.M. Hovers, Chairman

P.P.A.I. Deiters, Vice-Chairman

F.A. van Vught

E. ten Cate


To the General Meeting of Shareholders of Royal Ten Cate

AUDITOR’S REPORT

Report on the financial statements

We have audited the 2008 financial statements of Royal Ten Cate of Almelo as set out on pages 73 to 135 of

this report. The financial statements consist of the consolidated financial statements and the company financial

statements. The consolidated financial statements comprise the consolidated balance sheet as at 31 December

2008, the profit and loss account, statement of changes in equity and cash flow statement for the year then

ended, and a summary of significant accounting policies and other explanatory notes. The company financial

statements comprise the company balance sheet as at 31 December 2008, the company profit and loss account

for the year then ended and the notes.

Management’s responsibility

Management is responsible for the preparation and fair presentation of the financial statements in accordance

with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of

the Netherlands Civil Code, and for the preparation of the management board report in accordance with Part 9

of Book 2 of the Netherlands Civil Code. This responsibility includes: designing, implementing and maintaining

internal control relevant to the preparation and fair presentation of the financial statements that are free from

material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;

and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our

audit in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance whether the financial statements are free from material mis-

statement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of

the risks of material misstatement of the financial statements, whether due to fraud or error. In making those

risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation

of the financial statements in order to design audit procedures that are appropriate in the circumstances, but

not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also

includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting esti-

mates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

audit opinion.

Other information


Opinion with respect to the consolidated financial statements

In our opinion, the consolidated financial statements give a true and fair view of the financial position of Royal

Ten Cate as at 31 December 2008, and of its result and its cash flow for the year then ended in accordance with

International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of

the Netherlands Civil Code.

Opinion with respect to the company financial statements

In our opinion, the company financial statements give a true and fair view of the financial position of Royal Ten

Cate as at 31 December 2008, and of its result for the year then ended in accordance with Part 9 of Book 2 of

the Netherlands Civil Code.

Report on other legal and regulatory requirements

Pursuant to the legal requirement under 2:393 sub 5 part f of the Netherlands Civil Code, we report, to the

extent of our competence, that the management board report is consistent with the financial statements as

required by 2:391 sub 4 of the Netherlands Civil Code.

Enschede, 3 March 2009

KPMG ACCOUNTANTS N.V.

A.J.M. Oude Weernink RA


> OTHER INFORMATION

POST BALANCE SHEET EVENTS

Acquisition of minority interest in TigerTurf

In the first quarter of 2009 it was announced that imminent agreement was expected on the acquisition of a

minority interest in TigerTurf, a leading company in the international synthetic turf market operating principally

in Australia and New Zealand. The company markets concepts for various sport and landscape applications.

Annual revenues are approximately € 50 million.

PROVISIONS OF THE ARTICLES OF ASSOCIATION RELATING TO APPROPRIATION OF PROFIT

(Article 27)

General

The authorised capital is divided into ordinary shares.

Summary of the provisions of the articles of association

1. Profit distributions may only take place to the extent that the equity of the company exceeds the paid and

called-up part of the issued capital plus the reserves which must be held by law.

2. With the approval of the Supervisory Board, the Executive Board is authorised to determine the part of the

profit that will be reserved.

3. The sum remaining from the profit after the reservation in accordance with paragraph 2 is at the disposal of

the general meeting of shareholders.

4. Shares held by the company in its own capital are not taken into account in calculating the appropriation of

profit.

5. The dividend payable shall be made payable no later than 30 days after adoption of the financial statements

by the general meeting of shareholders. It shall be made payable only to the authorised persons in whose

name the shares are held. Such payments shall discharge the company.

6. A shareholder’s claim for payment shall be time-barred after a period of five years has elapsed.


PROPOSED APPROPRIATION OF PROFIT

in millions of euros 2008 2007


Added to other reserves in accordance with article 27, paragraph 4 of the articles of association – 29.5 – 26.5

21.6 19.9

Net addition to the reserve for retained earnings of associated companies – 1.4 – 1.4

20.2 18.5

Undistributed dividend balance from previous year 0.2 0.5

20.4 19.0

Payment of € 0.85 and € 0.80 dividend to holders of ordinary shares in accordance with article 27

paragraph 3 of the articles of association – 20.4 – 18.8

Undistributed dividend balance at year end, which is transferred to the relevant account 0.0 0.2


Ten-year summary

In millions of euros, unless stated otherwise

Figures based on IFRS Figures based on Dutch GAAP

2008 2007 2006 2005 2004 2003 2002 2001 2000 1999

CONSOLIDATED PROFIT

AND LOSS ACCOUNT

Revenues 1,032.6 886.0 770.5 686.5 641.0 569.6 602.1 620.0 620.2 665.5

Changes in inventories of finished products and

work in progress – 18.0 – 11.7 – 4.8 0.5 – 12.6 – 2.6 – 2.4 6.0 – 3.2 9.6

Raw materials and manufacturing supplies 562.0 463.6 402.2 353.8 332.1 280.7 289.9 297.2 294.4 279.8

Work contracted out and other external expenses 60.7 54.9 34.7 29.3 29.5 28.8 36.4 37.9 36.3 48.6

Personnel costs 190.3 178.3 171.2 161.6 159.7 142.9 151.3 159.1 160.2 165.5

Other operating costs 111.5 98.8 94.0 83.5 78.5 71.5 79.0 78.9 74.7 91.0

Depreciation and impairment 30.7 29.1 22.1 18.6 18.9 18.5 22.9 25.0 25.2 30.1

EBITA 95.4 73.0 51.1 39.2 34.9 29.8 25.0 15.9 32.6 40.9

Amortisation 11.6 3.6 1.0 0.7 0.3 1.1 1.1 1.0 – –

OPERATING RESULT (EBIT) 83.8 69.4 50.1 38.5 34.6 28.7 23.9 14.9 32.6 40.9

Net financial expenses – 13.7 – 11.3 – 8.0 – 4.6 – 6.8 – 7.0 – 12.0 – 12.9 – 10.6 – 10.2

PRE-TAX INCOME 70.1 58.1 42.1 33.9 27.8 21.7 11.9 2.0 22.0 30.7

Profit tax – 19.1 – 11.9 – 11.4 – 11.5 – 9.2 – 5.3 1.7 0.7 – 3.3 – 9.0

RESULT AFTER TAX BUT BEFORE RESULT

FROM PARTICIPATING INTERESTS AND

RESULT FROM DIVESTED ACTIVITIES 51.0 46.2 30.7 22.4 18.6 16.4 13.6 2.7 18.7 21.7

Share in net income of associated companies

and result from divested activities – 0.3 45.4 8.1 5.1 3.9 5.4 3.5 5.5 – 0.1

RESULT AFTER TAX BEFORE

EXTRAORDINARY ITEMS 51.0 46.5 76.1 30.5 23.7 20.3 19.0 6.2 24.2 21.6

Extraordinary items after tax – – – – – – 12.3 – 12.0 – –

RESULT AFTER TAX 51.0 46.5 76.1 30.5 23.7 20.3 31.3 – 5.8 24.2 21.6

Minority interests 0.1 – 0.1 – 0.1 – – 0.1 – – 0.2 0.1 – –

NET INCOME 51.1 46.4 76.0 30.5 23.6 20.3 31.1 – 5.7 24.2 21.6

Dividend 20.4 18.8 16.2 12.5 10.2 8.5 7.7 2.4 9.8 8.6

EBITA in % of revenues 9.2% 8.2% 6.6% 5.7% 5.4% 5.2% 4.2% 2.6% 5.3% 6.1%

Cash earnings 62.7 46.6

Return on average net capital employed 13.4% 13.1% 14.4% 15.3% 13.5% 11.7% 9.7% 5.9% 13.6% 13.5%


In millions of euros, unless stated otherwise

Figures based on IFRS Figures based on Dutch GAAP

2008 2007 2006 2005 2004 2003 2002 2001 2000 1999

CONSOLIDATED BALANCE SHEET

Intangible fixed assets 212.1 136.8 12.4 13.8 12.1 10.6 12.8 14.7 – –

Tangible fixed assets 247.4 218.1 165.8 161.4 118.8 118.1 130.5 154.3 151.5 143.6

Financial fixed assets 25.1 19.8 18.3 35.2 19.9 11.4 9.2 5.6 7.5 3.4

Total fixed assets 484.6 374.7 196.5 210.4 150.8 140.1 152.5 174.6 159.0 147.0

Inventories 211.5 176.2 157.7 157.5 138.6 110.0 117.4 124.6 134.6 112.0

Receivables 187.7 166.2 128.2 125.0 98.8 91.7 89.8 109.7 107.0 96.2

Securities and cash 5.4 4.8 6.7 4.6 2.7 5.8 2.9 0.1 0.4 0.4

Total current assets 404.6 347.2 292.6 287.1 240.1 207.5 210.1 234.4 242.0 208.6

TOTAL ASSETS 889.2 721.9 489.1 497.5 390.9 347.6 362.6 409.0 401.0 355.6

Equity* 366.9 310.1 238.7 181.8 146.5 162.0 152.9 129.5 140.6 130.5

Minority interests 5.1 0.3 0.2 – 0.1 0.1 0.2 0.1 0.4 0.1

Group equity 372.0 310.4 238.9 181.8 146.6 162.1 153.1 129.6 141.0 130.6

Provisions 43.5 40.8 43.8 56.1 52.1 15.6 15.1 14.4 11.2 11.3

Long-term debts 316.2 222.3 63.5 130.2 74.1 82.9 107.0 77.7 83.1 92.6

Banks and short term loans 20.3 12.9 30.4 27.1 24.6 13.9 8.9 99.7 67.4 25.1

Other short-term debts 137.2 135.5 112.5 102.3 93.5 73.1 78.5 87.6 98.3 96.0

TOTAL LIABILITIES 889.2 721.9 489.1 497.5 390.9 347.6 362.6 409.0 401.0 355.6* With effect from 2003 equity before appropriation of profit.

Group capital/total capital 42% 43% 49% 37% 38% 47% 42% 32% 35% 37%

Acquisitions /(de)consolidations 88.1 175.1 – 63.0 40.8 29.2 0.3 1.4 23.6 14.8 34.6

Investments in tangible and intangible fixed

assets 48.0 62.9 43.0 26.2 12.0 16.9 17.0 28.5 29.5 33.7

Depreciation and amortisation 42.3 32.7 23.1 19.3 19.2 19.6 24.0 26.0 25.2 30.1

Number of staff years at year-end 4,437 4,020 3,532 3,578 3,634 3,245 3,278 3,625 3,585 3,970

Number of shares outstanding at year-end

(x 1,000) 23,967 23,556 21,063 20,784 20,472 20,096 19,192 18,872 18,872 18,092

Net earnings per € 2.50 share 2.18 2.04 3.66 1.48 1.17 1.03 1.63 – 0.31 1.30 1.20

Cash earnings per share 2.68 2.04

Dividend per share in euro 0.85 0.80 0.70 0.60 0.50 0.43 0.40 0.13 0.52 0.48

Closing price in euro 16.05 21.27 23.21 21.50 13.55 9.02 6.25 6.50 8.23 9.38

0

5

10

15

20

25

30

35

40

45

50

NETH

ERLA

ND

S

BELG

IUM

GER

MA

NY

UK

FRA

NC

E

AU

STR

IA

ITALY

SP

AIN

OTH

ER EU

OTH

ER EU

RO

PE

MID

DLE EA

ST

US

A + C

AN

AD

A

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OU

TH A

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ICA

AS

IA

RES

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E WO

RLD

Geographic breakdown of sales in 2008

in per cent

◾ By destination

◾ By origin

Royal Ten Cate (TenCate) is a multinational

company which combines textile technology

with chemical processes in the development

and production of functional materials. Various

market applications have been created around

this technological basis.

TenCate occupies leading positions worldwide

in its core markets. Within its strategic core

activities, TenCate presents itself as a developer

and producer of materials with distinctive

characteristics. The company structures product

and process development and stimulates

technological innovation in order to maintain

leading market positions. TenCate develops

customer-specific solutions jointly with partners

and end-users. The system approach plays a key

role.

TenCate materials are mainly used for:

◾ safety and protection;

◾ space and aerospace;

◾ infrastructure and the environment;

◾ sport and recreation.

TenCate employs around 4,500 people worldwide

and strives to operate in an ethically and socially

responsible way. On this basis it encourages

its employees to be enterprising, flexible and

creative, thereby demonstrating its aim of

achieving progress and sustainability for all

stakeholders.

ADVANCED TEXTILES & COMPOSITES

Ten Cate Advanced Textiles bv Nijverdal, NetherlandsGroup activities of the TenCate Advanced Textiles group in the Netherlands

Ten Cate Protect bv Nijverdal, Netherlands

Ten Cate Protective Fabrics USA inc Union City, Georgia, USAFabrics for protective clothing and professional wear

Ten Cate Technical Fabrics bv Nijverdal, Netherlands Fabrics for outdoor applications

Ten Cate Advanced Spinning bv Nijverdal, NetherlandsSpecialist yarns and fabrics for protective clothing and outdoor applications

Ten Cate – Union Protective Fabrics Asia ltd Bangkok, Thailand

(50.65%) (from 16 August 2008) Fabrics for protective clothing

Ten Cate Permess Interlinings Hong Kong ltd Hong Kong, China

Ten Cate Permess (Wuxi) Advanced Textiles co ltd Xishan, ChinaProduction and sale of interlinings

Ten Cate Advanced Composites bv Nijverdal, NetherlandsAdvanced composites for the aircraft industry and antiballistic applications

Ten Cate Advanced Armour S.A.S. Vienne, France

Ten Cate Advanced Armour Danmark A/S Vissenbjerg, DenmarkAdvanced ceramics and composites for antiballistic applications

Ten Cate Advanced Composites USA inc Morgan Hill, California, USA

Phoenixx TPC inc Taunton, Massachusetts, USAAdvanced composites for aerospace and industrial applications

Composix Co. (from 30 January 2008) Newark, Ohio, USAAdvanced composites for vehicle armour

YLA inc (from 12 March 2008) Benicia, California, USA

CCS Composites inc (from 12 March 2008) Benicia, California, USAAdvanced composites for aerospace and industrial applications

GEOSYNTHETICS & GRASS

Ten Cate Geosynthetics North America inc Atlanta, Georgia, USA

Ten Cate Geosynthetics Austria GmbH Linz, Austria

Ten Cate Geosynthetics France S.A.S. Bezons, France

Ten Cate Geosynthetics Netherlands bv Almelo, Netherlands

Ten Cate Geosynthetics Asia sdn bhd Kuala Lumpur, Malaysia

TenCate Industrial Zhuhai co ltd Zhuhai, China

Geofabrics Australasia pty ltd (50%) Cheltenham, AustraliaGeosynthetics and industrial fabrics

Ten Cate Geosynthetics sdn bhd (Malaysia) Kuala Lumpur, Malaysia

Ten Cate Geosynthetics (Thailand) ltd Bangkok, Thailand

Ten Cate Geosynthetics pte ltd Singapore

Ten Cate Geosynthetics Italia srl Lazzata, Italy

Ten Cate Geosynthetics (UK) ltd Telford, United Kingdom

Ten Cate Geosynthetics sl Madrid, Spain

Ten Cate Geosynthetics Schweiz AG Zürich, Switzerland

Ten Cate Deutschland GmbH Dietzenbach, Germany

Ten Cate Geosynthetics Polska Spzoo Krakow, Poland

Ten Cate Geosynthetics CZ sro Prague, Czech Republic

Ten Cate Geosynthetics Rumania Bucharest, RomaniaSales offi ces

Ten Cate Thiolon bv Nijverdal, Netherlands

Ten Cate Thiolon North America inc Dayton, Tennessee, USA

Ten Cate Thiolon Middle East (49%) 1) Dubai, UAESynthetic turf components and systems

Ten Cate Thiobac bv Nijverdal, NetherlandsBacking for synthetic turf systems

Edel Grass bv (50%) (from 14 May 2008) Genemuiden, NetherlandsMarketing and installation of synthetic turf systems

TECHNOLOGIES

Xennia Technology ltd (75%) Letchworth, United Kingdom

(from 14 March 2008) Specialist inkjet technology for industrial applications


Ten Cate Enbi International bv Beek, NetherlandsTenCate Enbi group holding company

Ten Cate Enbi GmbH Opladen, Germany

Ten Cate Enbi Kft Rétság, Hungary

Ten Cate Enbi inc Shelbyville, Indiana, USA

Ten Cate Enbi pte ltd Singapore

Ten Cate Enbi Zhuhai co ltd Zhuhai, ChinaTechnical rollers and components for printers, copiers, fax machines, postal

sorting machines, automated teller machines, insulation and heating systems

OTHERS

Ten Cate Assurantiën bv Almelo, NetherlandsInsurance

Ten Cate Nederland bv Almelo, Netherlands

Royal Ten Cate USA inc Atlanta, Georgia, USA

Ten Cate UK ltd London, United Kingdom

Ten Cate France S.A.S. Paris, France

Ten Cate Deutschland GmbH Opladen, Germany

Ten Cate Danmark A/S Copenhagen, Denmark

Royal Ten Cate Pacifi c ltd Hong Kong, China

Royal Ten Cate China Holding ltd Hong Kong, ChinaCountry holding companies

Ten Cate Finance AG Schaffhausen, SwitzerlandFinancing company

NON-CONSOLIDATED COMPANIES

GreenFields bv (20%) Kampen, NetherlandsMarketing organisation for synthetic turf systems

Landscape Solutions bv (20%) Goirle, NetherlandsSynthetic turf for landscaping

Performance Fabrics and Fibers LLC (16%) Andrews,

(from 16 January 2008) South Carolina, USANon-wovens for industrial applications

The operating companies listed here are consolidated in the financial statements, with the exception

of the companies shown as non-consolidated. Some interests of minor relevance to the overall

picture have been omitted from the list, in accordance with article 379, paragraph 3, Book 2

of the Netherlands Civil Code. The companies are wholly owned unless stated otherwise.

Royal Ten Cate Annual Report 2008Royal Ten Cate Annual Report 2008

as at 1 January 2009 as at 31 December 2008

COMMERCIAL OVERVIEW PROFILEOPERATING COMPANIES, ASSOCIATED COMPANIES AND OTHER INTERESTS

GEOSYNTHETICS & GRASS SECTOR

PROTECTIVE FABRICS

Protective and safety fabrics for industry,

services, firefighting and defence.

◾ TenCate Protective Fabrics Americas

◾ TenCate Protective Fabrics EMEA

◾ TenCate Protective Fabrics Asia

OUTDOOR FABRICS

Protective fabrics for outdoor applications.

◾ TenCate Outdoor Fabrics Europe


Advanced composites for aerospace and

industrial applications.

◾ TenCate Advanced Composites Americas

◾ TenCate Advanced Composites Europe

ARMOUR COMPOSITES

Advanced composite and ceramic materials for

the protection of police, army, air force, navy and

civilian service personnel, vehicles and vessels.

◾ TenCate Advanced Armour Americas

◾ TenCate Advanced Armour EMEA

INKJET TECHNOLOGY

◾ Xennia Technology Ltd, United Kingdom


applications.

* Consolidated with the figures of the Advanced Textiles & Composites Sector


Technical rollers and components, particularly

for printers, copiers, fax machines, postal sorting

machines and ATMs.

◾ TenCate Enbi North America

◾ TenCate Enbi Europe

◾ TenCate Enbi Asia

HOLDING & SERVICES

◾ Koninklijke Ten Cate nv, Netherlands

GEOSYNTHETICS

Synthetic fabrics, non-wovens and grids

for infrastructure and civil engineering.

◾ TenCate Geosynthetics Americas

◾ TenCate Geosynthetics EMEA

◾ TenCate Geosynthetics Asia

◾ Geofabrics Australasia Pty Ltd,

Australia (joint venture)

INDUSTRIAL FABRICS

Synthetic fabrics, non-wovens and grids for

agriculture and horticulture, the environmental

sector, the construction industry, water

management and recreation.

◾ TenCate Industrial Fabrics North America

◾ TenCate Industrial Fabrics EMEA

◾ TenCate Industrial Fabrics Asia

GRASS

Synthetic turf components and systems for

top-flight sports, recreation and landscape

projects.

◾ TenCate Grass Americas

◾ TenCate Grass EMEA

◾ TenCate Grass Asia

◾ Edel Grass, The Netherlands (joint venture)

◾ GreenFields, The Netherlands (participation)

The TenCate sectors are subdivided into market groups. Each market group is a cluster of operating companies which co-operate intensively

in research & development, production, marketing and sales.

An overview of the legal entities which make up the company can be found on the inside back cover.

ADVANCED TEXTILES & COMPOSITES SECTOR

TenCate has production sites and sales offices in the following countries (◾): TECHNICAL COMPONENTS/

HOLDING & SERVICES SECTOR

TECHNOLOGIES SECTOR*

1) Due to legislation in Dubai, 51% is held by a local partner. Royal Ten Cate has 100% economic ownership.

Our materials are at the cutting edge of

textile technology, chemical technology

and material technology.

Our systems and materials generate

added-value solutions.

Our customers make a difference with our

materials and systems. This generates

growth and continuity.

Our clear vision, mission and strategy give direction to

the company. The strategy is focused on value chain

management. The TenCate business model underpins

the day-to-day structuring, implementation and operationa-

lisation of the business. Our challenge lies in striking the

ultimate balance between the four cornerstones.

TenCate supplied composite material as part of its

sponsorship of the solar-powered Twente One (21) car

produced by the University of Twente.

Every two years, a team of students takes part in the World

Solar Challenge in Australia. This solar race will be held for

the 10th time in October 2009. The Twente solar car will

once again have the starting number 21, Twente One.

We want to be known for the difference we make

AN

NU

AL R

EPO

RT 2008

RO

YAL TEN

CA

TE

Royal Ten Cate

MATERIALS THAT MAKE A DIFFERENCEColophon

investor relations & corporate development

F.R. Spaan, director

[email protected]

Stationsstraat 11

7607 GX Almelo, The Netherlands

P.O. Box 58

7600 GD Almelo, The Netherlands

Telephone +31 (0)546 544 338

Fax +31 (0)546 824 655

www.tencate.com

Text

Royal Ten Cate

Translation

VVH business translations, Utrecht (NL)

Concept and realisation

C&F Report Amsterdam B.V.

Photography

Picture Report, Amsterdam

Haverkort fotografie, Enschede

Royal Ten Cate

Number of copies printed

3,000

Commercial overview and profileOperating companies, associated companies and other interests

ANNUAL REPORT 2008

Royal Ten Cate

Sustainability. The most natural thing in the world.

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