Annual Report 2005

Annual Report 2005

Contents
Financial Overview 4
Evaluation of financial Overview 5
Consolidated Companies 5
Board of Directors 7
Foreword from the Spokesman for the Executive Board of Directors 8
Business Units 12
Market Strategy 14
Restructuring Program 15
Business Unit “Graphics” 18
Business Unit “Documents” 21
Business Unit “Special Products” 24
Information Technology 25
Quality Management 26
Investor Relations 27
Corporate Governance Code 28
Directors and Officers 29
Report of the Supervisory Board 30
Consolidated report: course of business and Group’s state of affairs 32
Turnover development 32
Profit and loss statement 34
Balance sheet structure 37
Cash flow 38
Investments 39
Personnel 40
Forecast
Information on business transactions of particular significance
41
which have occurred since the end of the financial year 43
Research and Development 44
Risks of future development 45
Financing/Liquidity 45
Company outlook 46
Consolidated balance sheet 48
Consolidated profit and loss account 49
Notes relating to the consolidated annual accounts 50
Declaration on Corporate Governance Code 76
Balance sheet of Neschen AG 78
Income statement of Neschen AG 80
Addresses 81
Imprint 82
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Financial Overview
HGB IFRS IFRS
Balance Sheet €k 2003 2004 2005
Subscribed capital 5,950 8,750 8,750
Shareholders’ equity 14,575 8,426 1,218
Investments in fixed assets 8,079 3,676 1,386
Balance sheet total 112,912 101,590 92,470
Profit/Loss €k 2003 2004 2005
Consolidated turnover 140,941 140,308 136,174
Turnover in Germany 22,835 24,706 25,213
International turnover 118,106 115,602 110,961
Profit/loss from operating activity - 2,500 - 8,373 - 3,391
Pre-tax profit for the year - 2,852 - 13,881 - 8,739
Profit for the year after tax - 3,664 - 15,126 - 9,350
Net income according to shares in minority interest - 3,840 - 15,169 - 9,558
EBIT 1,864 - 9,296 - 3,950
EBIT (excluding restructuring costs) 1,864 - 1,938 3,983
EBITDA 8,726 - 2,094 2,404
EBITDA (excluding restructuring costs) 8,726 2,197 8,251
Cash flow 2,908 - 6,626 - 1,956
Profit/loss per share in Euros* - 0.62 - 1.73 - 1.09
Dividend per share in Euros 0.00 0.00 0.00
Staff 2003 2004 2005
Total staff as of 31.12. 715 664 573
Personnel expenses in Euros 29,836 29,421 27,021
Turnover per employee in Euros* 188.2 208.5 218.2
Average absenteeism 3.2% 2.4% 2.1%
* in relation to the annual average of 624 employees
Fixed assets (in €k)
Neschen Group 2005 Book value Depreciation Investments
Intangible assets 15,074 1,102 171
Land and buildings
Fixtures, fittings and equipment, technical equipment,
17,111 1,139 54
plant and machinery in process of construction, machinery 16,787 4,113 685
Financial assets 3,499 0 476
Total as of 31.12.2005 52,471 6,354 1,386
Total investments in tangible fixed assets over the last five years came to 56.4 million Euros.

Financial overview in detail - Breakdown according to company office
HGB IFRS IFRS HGB IFRS IFRS
2003 2004 2005 2003 2004 2005
Turnover Change in %
Europe 103,701 103,406 98,983 - 9.3% - 0.3% - 4.3%
USA/Asia 37,240 36,902 37,191 - 18.6% - 0.9% 0.8%
Group 140,941 140,308 136,174 - 12.0% - 0.4% - 2.9%
Cost of Materials In % of turnover
Europe 50,276 55,079 52,098 48.5% 53.3% 52.6%
USA/Asia 23,648 24,583 25,889 63.5% 66.6% 69.6%
Group 73,924 79,662 77,987 52.5% 56.8% 57.3%
Personnel expenses In % of turnover
Europe 24,556 24,394 22,140 23.7% 23.6% 22.4%
USA/Asia 5,280 5,037 4,881 14.2% 13.6% 13.1%
Group 29,836 29,431 27,021 21.2% 21.0% 19.8%
Profit/Loss In % of turnover
Europe - 824 - 9474 - 5999 - 0.8% - 9.2% - 6.1%
USA/Asia - 2,840 - 5,652 - 3,351 - 7.6% - 15.3% - 9.0%
Group - 3,664 - 15,126 - 9,350 - 2.6% - 10.8% - 6.9%
EBIT In % of turnover
Europe 3,260 - 5,327 - 2,439 3.1% - 5.2% - 2.5%
USA/Asia - 1,396 - 3,969 - 1,512 - 3.7% - 10.8% - 4.1%
Group 1,864 - 9,296 - 3,950 1.3% - 6.6% - 2.9%
EBITDA In % of turnover
Europe 9064 725 3246 8.7% 0.7% 3.3%
USA/Asia - 338 - 2,819 - 843 - 0.9% - 7.6% - 2.3%
Group 8,726 - 2,094 2,404 6.2% - 1.5% 1.8%
Per capita turnover Change in %
Europe 161 180 189 - 7.5% 11.8% 5.4%
USA/Asia 362 380 368 - 5.0% 5.2% - 3.2%
Group 188 208 218 - 8,7% 10.8% 4.7%
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Neschen AG · Consolidated Companies
� Distribution
� Production plants
� Holding companies
� Patent holders
100%
Seal Graphics
Americas Corp.
Elkridge
USA
100%
Seal Graphics
Technol. Corp.
Elkridge
USA
100%
Seal USA
Corporation
Delaware
USA
100%
Neschen
USA LLC
Wichita
USA
85%
Neschen
Accutech LLC
Elkridge
USA
50%
Neschen
Corporation
Elkridge
USA
50%
100%
Filmolux Sarl
Paris
France
100%
Neschen Italia srl
Bagnolo
Italy
Neschen Austria
GmbH
Vienna
Austria
Neschen Benelux
B.V.
Breda
The Netherlands
Neschen AG
Bückeburg
Germany
100%
Seal UK Ltd.
Basildon
England
100%
Seal Graphics
Europe B.V.
Raalte
The Netherlands
100% 100%
Seal Graphics
Pacific Ltd.
Hong Kong
China
100% 100%
Neschen UK Ltd.
Stone
England
100%
100%
Neschen Kft.
Budapest
Hungary
Neschen
International B.V.
Raalte
The Netherlands
51%
HSW Signall s.r.o.
Prague
Czech Republic
51%
Neschen Products
España S. A.
Barcelona
Spain
51%
Neschen
China Ltd.
Hong Kong
China

Neschen AG · Management Board
Stefan Zinn (left), Diplom-Kaufmann (MBA), born 17 April 1965
Member of the Board of Directors since 1998, Spokesman for the Executive Board of
Directors since 1 October 2004. Executive officer for the Sales and Marketing division, until
30 June 2005 also for the Finance and Controlling divisions.
Martin E. Davies (centre), Diplom-Ingenieur (Degree in Mechanical Engineering),
born 4 June 1961
Member of the Board of Directors since 1 January 2004.
Executive officer for the Research & Development, Quality, Purchasing, Production and
Logistics divisions.
Dr. Wolfram Meiritz, born 26 September 1955
Member of the Board of Directors from 1 July 2005 to 31 December 2005.
Executive officer for the Finance, Controlling, Personnel and IT divisions.
Dr. Ulf Hülbert (right), born 1 March 1947
Member of the Board of Directors since 1 January 2006.
Executive officer for the Finance, Controlling, Personnel and IT divisions.
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Foreword by the Spokesman for the Executive Board of Directors
Dear Sir or Madam,
The company has been concentrating on its announced restructuring program in the 2005
financial year. After the low levels of sales achieved in recent years, at the beginning of 2005
we were faced with a decision: we could either focus on recovering a significant and sustained
increase in demand or undertake a massive program of restructuring within the Group.
After the savings in costs already realised in 2003 and 2004, there were no further significant
cost reductions to be made within the existing structures.
Consequently, at the beginning of the year the Executive Board of Directors and the
Supervisory Board decided to carry out a comprehensive restructuring program rather than to
focus on growth. The objective was to significantly reduce the number of staff, to reduce the
number of sites and to optimise all business processes within a year. With the improved cost
structure and increased competitiveness, it would then be possible to re-establish growth and
profitability from 2006.
We can now announce that the restructuring program has been carried out successfully. In
Europe, the principal measures were completed by October of the financial year. Because of
the ownership structures of the joint venture, structural adjustments in the USA could not be
made until the first quarter of 2006.
In 2005, sales amounted to 136.2 million Euros (previous year 140.3 million Euros). Excluding
the foam board company in England which was sold in 2004 and the foam board company
in the USA which was shut down in 2005, sales were down 1.7% on the previous year. The
drop is primarily due to technical delivery problems in some areas of trading.

Foreword by the Spokesman for the Executive Board of Directors
Another reason for the drop in sales was the planned adjustments made to product ranges
at NESCHEN AG and SEAL Americas.
All in all, we saw a stabilisation of the markets in 2005.
The NESCHEN Group made a loss after tax (in accordance with IFRS) of - 9.4 million Euros in
the 2005 financial year (previous year - 15.1 million Euros). The one-time expenditures as part
of the restructuring program included in this amount to 7.9 million Euros (previous year also
7.9 million Euros). These are mainly connected with the relocation of machinery production
to the USA and the subsequent closure of the site at Raalte in the Netherlands, the staff cutbacks
at the main production plant in Bückeburg, Germany and the optimisation of business
processes.
There has been a significant improvement in the result before one-time effects compared
with the previous year which has risen by approximately 5.8 million Euros to - 1.4 million
Euros. This means that it has not yet been possible to achieve the target of a balanced result
before one-time effects. However, the cost structure of the whole group was reduced by a
total of approximately 7 million Euros. This was accompanied by an unavoidable 14% reduction
in the number of staff to 573 as of 31.12.2005 (previous year: 664).
In initiating these measures, the company aims to achieve a positive operating result without
affecting the level of turnover or the current gross profit margin.
EBIT was - 2.9% (previous year - 6.6%) and EBITDA + 1.8% (previous year - 1.5%) with
regard to the total performance. Excluding the one-time expenditures, the EBIT was + 2.9%
(previous year - 1.4%) and EBITDA + 6.1% (previous year + 1.6%).
It should be pointed out that the company was able to increase the gross profit margin again
during the second half of 2005 while carrying out its restructuring program in parallel. This
margin had sunk from 46.5% (2003, German Commercial Code) to 43.2% (2004, IFRS) in
2004 on account of increases in the prices of all the raw materials used by the company. It
managed to put a stop to this trend by optimising purchasing, pooling raw materials, consolidating
product ranges and increasing product prices. As a result of the measures implemented,
the gross profit margin was significantly increased during the fourth quarter. The
price increases could not be passed onto the market until some time later.
Consequently, we have been successful in pushing through price increases in an intensely
competitive market in 2005. As far as we are concerned, this shows that despite unsatisfactory
results over the past few years, NESCHEN occupies a strong position within the market.
2005 also saw special write-offs being made in order to adjust to current developments within
the market and the reduced product mix structure. These special write-offs related to
fixed assets, inventories and claims but were well below the write-offs made in 2004.
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Foreword by the Spokesman for the Executive Board of Directors
In order to improve liquid assets from internal
financing, inventories were successfully optimised
throughout all the companies as a result
of commitment shown by all involved.
After several years of high investment, the
company succeeded in keeping investment at
a low level as planned. In 2005, investments
amounted to 1.4 million Euros (previous year
3.7 million Euros) thus well below write-offs at
6.4 million Euros. Because of our advanced
technology and large production capacities,
we will be able to keep new investments at
this level over the next few years without
adversely affecting our market position or
competitiveness.
The balance sheet total dropped to 92.5 million Euros (previous year 101.6 million Euros) with
the reduction in inventories (by 3.6 million Euros to 16.7 million Euros) and the reduction in
tangible fixed assets (by 4.4 million Euros to 33.9 million Euros).
In the past financial year, losses in the USA have been reduced from 5.5 million Euros (2004)
to 3.3 million Euros while turnover has increased by 3.5% to 37.7 million Euros. The financial
development in the USA has indeed still been unsatisfactory. However in 2005 and during
the first quarter of 2006, a series of measures were implemented which has set the path for
further financial improvement in the future. These measures included relocating the machine
manufacturing facility from the Netherlands to the USA, closing the plant in Wichita, merging
the sales companies and making changes to the product range.
One of the advantages of carrying out production in the USA is that business is now significantly
less susceptible to exchange rate developments and as a result of implementing various
measures, the gross profit margin has increased to 32.9% of the turnover (previous year
30.9%). We expect to see the effect of all the measures carried out in the USA on results from
the third quarter of 2006.
In accordance with the German Commercial Code, NESCHEN AG has made losses of 12.6
million Euros (the deficit from the previous year was 9.6 million Euros). These include a capital
injection of 8.5 million Euros for the NESCHEN Corporation in the USA which was used to
balance out the losses sustained there and was immediately included under expenditure. The
operating losses made by NESCHEN AG (in accordance with the German Commercial Code)
for the past financial year amount to 1.6 million Euros (previous year - 3.0 million Euros).

Foreword by the Spokesman for the Executive Board of Directors
The individual financial statement for 2005
drawn up for NESCHEN AG in accordance
with the German Commercial Code shows
shareholders’ equity capital at 10.2 million
Euros (previous year 22.7 million Euros).
The annual deficit for 2005 of 12.6 million
Euros was offset against the capital reserves.
The Group annual accounts which were
drawn up in accordance with IFRS for the first
time show shareholders’ equity capital at 1.2
million Euros as of 31.12.2005 (previous year
8.4 million Euros). This reflects the depreciation
as a result of the restructuring program
and special write-offs.
The Supervisory Board and the Executive
Board of Directors are committed to rebuilding
the Group’s shareholders’ equity capital base
which has been reduced as a result of losses as well as to arranging an injection of capital.
In our opinion, the extensive measures which have been carried out in Europe and the USA
as part of the operative restructuring program have been a success. We have come through
a difficult year which is now behind us. NESCHEN has made significant sustained improvements
throughout its organisational structure and cost structure and now we will be focussing
on expanding the business and improving its capital structure.
We wish to thank our employees and acknowledge their hard work and the support they
have given us during this year of change. The implementation of change is a continuous process
which makes high demands on everyone involved. Our employees have risen to this challenge
and met all the demands made upon them in a professional manner which has given
us a firm basis for the future. Your commitment and trust in the company are and always will
be vital to the success of the NESCHEN Group.
The company would also like to thank its shareholders, customers, suppliers and other business
partners for their loyalty and support during this difficult phase. The company looks forward
to continuing these partnerships and trusted relationships.
Stefan Zinn
Spokesman for the Executive Board of Directors
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Business Units
NESCHEN AG has led the market for decades in
the business units “Documents” and
“Graphics”. The focus on core competences
and specific sales markets in niche areas is a key
component of the corporate strategy of today
and in the future.
The production process for the manufacture of
self-adhesive products in both business units is accomplished by utilising identical coating
technologies and similar product structures.
Marketing is carried out within the framework of direct distribution via the NESCHEN subsidiaries
in Europe by utilising the same distribution structure but also utilises independent distribution
channels such as specialist traders and OEM partners.
NESCHEN offers a complete product range of self-adhesive products and accessory products
for both business units. All of the common adhesive systems - aqueous dispersions, solvent
and hot melt adhesives - are in use. The coating machinery has been set up for new applications
and processes such as coating with special varnishes.
All of these features clearly set the company apart from its competitors.
Business unit “Graphics”
The business unit “Graphics” markets a wide range of products for the printing, protection
and finishing of large-format pictures, photographs and digital prints under the two brand
names “NESCHEN” and “SEAL”. The product range includes:
• Printable materials for professional inkjet printers up to five metres wide
• Self-adhesive applicable and protective films
• Special protective varnishes for large pictures as well as coating machines
• Self-adhesive films for labelling and decoration
• Portable presentation systems for large pictures
• Processing machines for protective and application films

Business Units
These products are used in areas such as motor vehicle and urban advertising, façade advertising,
at sports and cultural events, in trade fair construction and at the point of sale. As part
of the “one-stop shopping” strategy, the core line of self-adhesive products, inkjet media and
processing machines is supplemented with related merchandise, to provide a full spectrum,
covering all customers’ needs. The emphasis is on compatible product systems which increase
product security for the customer.
Business unit “Documents”
The business unit “Documents” sells the classic product line for the care and repair of books
as well as the services offered by the Archive Centre. The core range consists of:
• Self-adhesive protective and reinforcement films
• Self-adhesive repair and signature tapes
• The services of the Archive Centre with the “Bückeburg Conservation Procedure for
Modern Archival Material”
• Portable conservation machines for the conservation (deacidification and reinforcement)
of archival material
As part of the “one-stop shopping” strategy, the product range in this business unit is also
supplemented by an extensive line of accessory and processing products. These products are
used by professionals in libraries and archives.
Both NESCHEN AG business units enjoy outstanding unique selling points in their markets and
hold a leading market position in many countries.
Thanks to its unique product line, the innovative system solutions and the concentration on
the above-mentioned business units, NESCHEN as a whole is not directly comparable with its
competitors. This is possible only on the basis of individual product groups within the two
business units.
Business unit “Special Products”
This business unit covers the development and manufacture of customer-specific products,
e.g. for industrial applications, surface finishing or for medical applications.
This business unit is based on the existing know-how which has been accumulated over decades
as well as the ultra-modern production facilities of the NESCHEN Group. These include
the use of water-based dispersion adhesives as well as solvent and hot melt adhesives.
Another important area within the development division covers surface finishing.
Plans have been made for the continuous expansion of this business unit which is an essential
component within the company’s long-term strategy. It has been managed as an independent
business unit since 2005.
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Market Strategy
NESCHEN AG has had a consistent corporate
sales strategy for many years, thereby displaying
its continuity even under difficult, changing
market conditions.
This strategic goal includes the development of niche markets within the business units
“Graphics”, “Documents” and “Special Products”.
The business units “Graphics” and “Documents” are characterised by their comprehensive
product range from our own production and merchandise, the focus on the core competences
in production and marketing as well as the company’s international market presence.
Within our strategic framework, our actions are governed by the following principles:
• All products are manufactured to the highest standards of quality and undergo
continuous inspection
• Rapid product availability is guaranteed via our own companies or agents
• Coordinated product systems are marketed for specific customer applications
• The ongoing development and marketing of new products is implemented
The core business unit “Documents” has been supplemented by products for the end consumer
market whereby the product structure and production procedures have utilised the
synergy of existing product families for professional users. Marketing is carried out by wellknown
brand companies which have access to the appropriate distribution channels.
Special medical products and various industrial applications are also manufactured and marketed
within the business unit “Special Products”. Coating is also carried out. Turnover for
these products currently amounts to about 4% of the total turnover. This sector will be continuously
expanded over the next few years focusing on the countries in which we have production
plants, i.e. Germany, England and the USA.

Restructuring Program
In March 2005, the Executive Board of Directors
and the Supervisory Board decided on a restructuring
program. The decision was preceded
by a comprehensive analysis of the market situation
as well as the business processes and cost
structures at all of the sites. The company engaged
the support of external consultants. The
objective of the program was the quick and sustained
reduction of material and personnel
expenses as well as the extensive consolidation
of business activities. All the measures were
concluded within twelve months. The measures
have cut annual costs throughout the group by
approximately 7 million Euros. The one-time
expenditure for the restructuring has affected
results in 2005 and came to approximately 7.9
million Euros (4.5 million Euros for personnel
expenses and 2.1 million Euros for depreciation
as well as other costs amounting to 1.3 million
Euros).
In 2003 and 2004, the technical and organisational basis was created for adapting processes,
structures and sites in the NESCHEN Group to market developments. The sustained further
massive reduction of personnel expenses and material costs was only possible within the framework
of a comprehensive restructuring program which included the merging of sites. The
measures which began in March 2005 have primarily affected NESCHEN AG and SEAL companies.
The measures included:
NESCHEN AG site, Bückeburg
In 2005, the number of staff at the headquarters in Bückeburg was reduced by 49 (approximately
15%) to 268 (31.12.2005).
The staff cutbacks were made across virtually all of the company divisions and business units.
This was made possible by a number of individual measures:
• Reduction of the product portfolio
• Centralisation of raw materials
• Merging of departments in the Management and Sales divisions
• Changing of business processes
• Closure of the Archive Centre in Kornwestheim and relocation of activities to
the Archive sites in Berlin and Brauweiler
As a result, business processes, productivity and efficiency have been significantly improved.
After staff cutbacks were implemented successfully, logistics and customer service activities at
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Restructuring Program
the site of SEAL Graphics Europe B.V. in Raalte, the Netherlands were relocated to the
Bückeburg site. The additional volume of business was absorbed within a very short period of
time without having to take on any more staff to cope with the increase.
SEAL Europe site, Raalte/The Netherlands
Laminating machines for the European market were manufactured at this site. Distribution
and logistics for Europe and Asia were also coordinated for the SEAL companies from this site.
The machine manufacturing activities carried out in Raalte directly reflected the activities carried
out at the assembly plant in Sun Prairie, USA. As a result of market developments, neither
of the plants was working at full capacity. It was therefore decided to shut down production
in Raalte and consolidate all activities at the Sun Prairie site. Besides the existing painting
facilities, another advantage offered by the US site was the possibility of balancing out product
flows in Euros and US dollars. The export of machines for the European market also creates
a natural currency hedge. This merger will consolidate the concept of the uniform platform
strategy between Europe and the USA. By closing down one site, functions such as planning,
work preparation, purchasing and development will be centralised at a single site. We
also expect the integration and merging of purchasing volumes to result in increased efficiency
in assembly and reduced material costs during the second half of 2006.
Customer service, warehousing and dispatch were relocated to the Bückeburg site. As a
result, the order desk and delivery have been handled from Bückeburg since September 2005.
The successful integration of ”SEAL” activities only took a few weeks to complete. SEAL customers
reacted favourably to the move which has now been fully completed. Local customer
service activities will still be carried out by SEAL field representatives. The 2-brand strategy has
not been affected by the relocation and remains an important part of the long-term corporate
strategy.
It is guaranteed that SEAL will retain its identity, its own image on the market and independent
marketing. In order to do this, a small site for sales management, marketing and product
management to include a showroom and training centre will be set up directly adjacent
to the former site of SEAL Graphics Europe. The advantages which this will bring for customers
include faster delivery, direct contact with the production site and headquarters.
The relocation of all activities from Raalte resulted in 56 jobs being lost. The property belongs
to the company and will be sold off. The new structure is expected to take SEAL operations
into Europe into the profit zone from 2006.
US sites:
US operations have profited from machine manufacturing being relocated from the
Netherlands to the Sun Prairie site. The production volume is set to double as a result of this
measure. In addition to this, the utilisation of existing development, purchasing, work preparation
and management resources will be improved considerably. In order to cope with the
increased production volume, nine new employees have been taken on, mainly in the
Production and Quality Assurance departments.

Restructuring Program
During the past financial year, the American holding company NESCHEN Corp. took over the
15% share of the minority shareholder in NESCHEN USA LLC in Wichita to become a 100%
shareholder. In addition, 24.7% of the shares of a co-partner in NESCHEN-Accutech Corp. of
Elkridge were purchased. In February 2006, the remaining 15.1% of the shares of another copartner
in NESCHEN Corp. were purchased. So NESCHEN Corp. has been the sole partner in
all the American sales companies since February 2006. This created the legal basis for the merger
of these companies on 1 March 2006. Since then, the company has been trading under
the name “NESCHEN Americas Corp.” and includes machine manufacturing as well as sales
of the whole product range. All sales activities in the USA are therefore managed by following
a uniform strategy. The 2-brand strategy will be retained and will also remain an important
part of the long-term strategy in the USA.
March 2006 saw the closure of the Wichita site and the relocation of its activities to the
American headquarters in Elkridge. This includes all business processes, i.e. purchasing, production,
logistics, sales and management. Approximately 20 employees were affected by this
measure. The transfer was completed within a month. We are consequently expecting cost
reductions in the amount of approximately 0.8 million Euros per annum from 2007. The onetime
expenditures resulting from this measure will be compensated for by the positive effects
created in 2006.
All sites:
Further cost reductions were achieved and business processes optimised at all sites. For example,
the Logistics department of the sales company NESCHEN Benelux B.V. was relocated to
the headquarters in Bückeburg. The sales company remained an independent business unit
and local customer services were retained which meant that logistics costs were reduced. All
in all, numerous projects were defined and realised in order to improve results and increase
liquidity. As a result, the turnover per employee has risen by 16% to 218,000 Euros in the last
three years.
The measures implemented marked the completion of the restructuring of the NESCHEN
Group. The full effect of the measures carried out in Europe will not be apparent until 2006
and the effects of the closure of the Wichita site not until 2007. All in all, the expenditure connected
with the restructuring program including special write-offs to be made on tangible
fixed assets and current assets, costs connected with departing personnel (2005 only) and
consultancy services provided in 2004 and 2005 amounts to 15.8 million Euros.
We have seen sustained improvement in our competitiveness as a result of the measures carried
out which have also created a sound basis for the positive development of results in the
future.
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Business Unit “Graphics”
The business unit “Graphics” accounts for
approximately 90% of the Group’s turnover
just as it did last year. However during the past
few years, this unit has been reorganised considerably
through the sale and shutdown of
operating activities. The end of this process
was marked by the closure of the foam board
company in the USA in September 2005. The volume of sales relating to this amounted to
approximately 4.5 million Euros per annum. Because of the extremely low return on capital,
this company will be run as an investment company in the future. Compared to 2002, a total
volume of 16 million Euros per annum was sold, closed down or removed from the consolidated
group.
Activities in the business area “Special Products” have been shown as an independent area
of operations for the first time in 2005. Up to and during 2004, these activities were included
within the business unit “Graphics”. Independent segment reporting has been dispensed
with since they still only account for a small proportion of the turnover.
During the past financial year, the consolidated turnover amounted to 120.7 million Euros
(previous year 124.9 million Euros) which equates to a drop of 3.4%. Excluding the changes
to the foam board operations in the USA and UK described, this amounts to a drop of 2.0%.
Up to the summer of 2005, turnover has developed according to plan. The strong seasonal
increase expected in the autumn did not happen. However, turnover did develop in line with
our expectations during the last two months of the year.
The reasons for the deviations in the autumn included technical problems with the procurement
of goods as well as the changes to foam board operations in the USA.
All in all, the graphics markets in our most important sales regions have continued to stabilise
throughout 2005. This is also indicated by the development of sales during the first quarter
of 2006.

Business Unit “Graphics”
The gross profit margin for this business area is
40.6% which is just below the previous year
(41.2%). However, we did stop the strong
negative trend shown by the margin from the
2nd half of 2004 which was caused by overproportional
increases in the prices of raw
materials. During the past financial year, we
have recorded a continuous increase in the
margin.
This positive development was achieved by
increasing sale prices as well as implementing
numerous individual measures and is crucial to
future positive results.
The Group losses after tax made within the
business unit amount to 9.8 million Euros (previous
year - 15.6 million Euros). The one-time
expenditures to be appropriated to the business
unit come to 7.8 million Euros (7.9 million Euros). The Group result for the business unit was
significantly better before the one-time expenditures. EBIT before one-time expenditures
amounts to + 2.5% (previous year - 2.8%).
The main measures from the Group’s restructuring program were implemented within the
business unit “Graphics”. Examples include the staff cutbacks made at Bückeburg, the relocation
of machine manufacturing from the Netherlands to the USA, the relocation of SEAL
customer service and logistics to Bückeburg as well as the relocation of activities from the
Wichita site in the USA during the first quarter of 2006. In addition, the internal service
departments within the individual segments were centralised in Bückeburg in order to increase
efficiency and improve customer service.
Because of the development of turnover and the delayed improvement in the margin, we
have not yet achieved our objective of more or less balancing out the operating result in
2005. As a result of the cost reductions, the improved gross profit margin and the increase
in demand, we are expecting an improvement in sales and the financial results for this business
unit in the future. The course for achieving our expectations was set in 2004 and 2005.
The first sales of inkjet media for L-XL printers were made in the USA in 2005. These initial
results have given us high hopes for the future as far as gaining a foothold in this growing
market sector in the USA is concerned.
We have achieved satisfactory growth of approximately 9% in machine manufacturing. Our
customers’ increased investment activity reflects the definite revival which is taking place within
the graphics market and the advertising industry.
19

20
Business Unit “Graphics”
The company will maintain the strategic orientation
of its two strong brands, NESCHEN and
SEAL. As in the past, both trade names will
continue to offer a comprehensive range of
coordinated system solutions for relevant customer
applications in the market sectors covered.
The company will continue to expand, especially
in the export markets of Eastern Europe
and Asia. As in the past, the product portfolio
exhibits excellent growth potential in all product
sectors.
Development of turnover for “Graphics”
in €k (from 2004 in accordance with IFRS)
Excluding the operations shut down (amounting to
approximately 16 million Euros per annum) and the
effects of exchange rates, turnover has been virtually
constant since 2002.
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
145,432
2002
126,971
124,944
120,707
2003 2004 2005
Development of EBIT and EBITDA for “Graphics”
in €k (from 2004 in accordance with IFRS)
8,000
6,000
4,000
2,000
-2,000
0
-4,000
-6,000
-8,000
-10,000
4,225
8,514
2002
425
6,400
-10,877
-4,335
-4,716
■ EBIT
■ EBITDA
736
2003 2004 2005

Business Unit “Documents”
The consolidated turnover of the business unit “Documents” in the past financial year was
15.5 million Euros which was slightly higher than the previous year (15.4 million Euros). The
gross profit margin fell from 60.1% in 2004 to 56.4%. The main reasons for this were the
changes made to product mixes and the delay in passing on increases in the prices of raw
materials. EBIT went down from 1.6 million Euros (10.3%) in the previous year to 0.8 million
Euros (5.0%). This was directly influenced to some extent by the one-time expenditures in connection
with the restructuring program carried out in this business unit. The Group result in
this business unit was 0.2 million Euros (previous year 0.4 million Euros).
Despite continuous government budget cuts and an intensely competitive market environment,
the level of sales remained the same for protective films and repair tapes for libraries.
Since 2004, we have increased our co-operation with a Danish partner and sold products for
the end consumer markets in Europe and the USA. These products, which are sold as private
label products in large department store groups, are mainly blanks of various surface protection
films and cold lamination pouches for photos, print-outs, business cards, etc. This sector
is supported by our co-operation with the GBC Office Group, with its world-wide sales activities,
under its own brand name, for our self-adhesive, correctible protective films. The products
are made of environmentally friendly polypropylene for the school, home and office markets
and are marketed under the GBC name in catalogues and large supermarkets. The product
range for these end consumer applications has shown a good level of growth over the past
financial year.
21

22
Business Unit “Documents”
The technical foundations for winning new customers
and sales markets were laid in 2005 with
the introduction of special adhesive coating
technologies for these business areas.
Consequently, sales in these areas are expected
to continue to increase significantly in the future.
We have also been able to expand our position
as the leading service provider in Germany in the field of mass deacidification of modern
papers by utilising the “Bückeburg Conservation Procedure (BCP)” for modern archival material.
The “Archive Centre West” which was opened in Brauweiler, Cologne in summer 2004
has been operating at full capacity and as a result it has reached its target in respect of turnover
achieved.
Our small site in Kornwestheim was closed following the successful start-up of the “Archive
Centre West”. Activities were relocated to the sites at Brauweiler and Berlin which meant that
the level of turnover was subsequently sustained.
In France, initial orders have also been received for the C 900 small conservation unit installed
at our subsidiary. Sales of the C 900 have lead to further expansion of exports as planned. We
are also expecting an exceptionally high level of growth and very high profits for the single
sheet deacidification procedure.
Development of a conservation procedure for bound archival materials and books continued
in 2005. The intention was to offer a worldwide solution to libraries as well as to the archives
market which is now established. We are planning to conclude this development shortly and
to start marketing within the current financial year.
We are expecting a definite improvement in sales and financial results in this business unit over
the next few years and a return to the EBIT margins of previous years.
Demand for our classic protective films and repair tapes for books has been increasing in
Southern and Eastern Europe.

Development of turnover for “Documents”
in €k (from 2004 in accordance with IFRS)
16,500
15,000
13,500
12,000
10,500
9,000
7,500
6,000
4,500
3,000
1.500
0
14,674
2002
13,970
15,364
15,467
2003 2004 2005
1,400
1,200
1,000
800
600
400
0
Business Unit “Documents”
The transfer of standard products for applications
in the consumer and office market has
been successful and will be expanded further.
NESCHEN has excellent prospects for growth in
this field.
The Archive Centre sector is operating at a profit
following a significant increase in demand.
More and more public funds have been made
available. If we are also successful in finding a
technical solution for bound books which is economically
viable for the customer, we will become
the only system provider in the world which
will open up outstanding opportunities for us.
Development of EBIT and EBITDA for “Documents”
in €k (from 2004 in accordance with IFRS)
2,400
2,200
2,000
1,800
1,600
1,296
2002
1,924
1,438
2,326
1,581
2,241
■ EBIT
■ EBITDA
766
1,668
2003 2004 2005
23

24
Business Unit “Special Products”
Activities in the business area “Special
Products” have been shown as an independent
area of operations for the first time.
These activities relate to the development and
manufacture of self-adhesive products and
special surface coatings for industrial and
medical applications. This area also covers the
production of customer-specific coatings
where the customer provides some of the raw
materials. NESCHEN has been operating in
these fields for many years now even though
they were previously not part of the corporate
strategy and were included within the business
unit “Graphics”.
The field of application for self-adhesive products and surface coatings is growing all the time
and covers numerous branches of industry. NESCHEN has the know-how as well as the production
facilities and capacities required to become a recognised supplier in this area. This
know-how is based on experience gained over decades on adhesives, films, release papers
and siliconisation as well as the whole process of coating and production. NESCHEN is one
of only a few companies in the world able to offer solvent adhesives, hot melt adhesives and
water-based dispersion adhesives under one roof. Sales activities are focused on the countries
in which we have production and development facilities, i.e. Germany, the UK and the USA.
The products currently in production include products for medical applications, for the electrical
industry and for security documents. In 2005, turnover amounted to 5.5 million Euros
(previous year 5.3 million Euros).
In the past financial year, management of these sales activities has been standardised and
coordinated from a central location. Numerous sales activities have been initiated in order to
win new business. As expected, these have not yet been reflected in the turnover. Long development
times and the time-consuming process of adjusting products to fit in with customers’
operations mean that the lead time could be six to eighteen months. Projects are currently
being carried out at all sites and these are expected to result in improved sales and financial
results for 2006. Here too, the business area is predominantly focused on advanced technical
applications for niche markets. We see our strength compared with other leading manufacturers
worldwide as being the flexibility of our development and production facilities which
enable us to manage smaller volumes quickly and efficiently as well as the intensive personal
customer service which we provide. Since sales are still relatively low, individual segment
reporting has been dispensed with for this business area. Sales and costs have been included
in the segment “Graphics”.

Information technology
The hardware at the central computer centre in Bückeburg was replaced at the beginning of
2005. In the process, the existing IBM AS/400 system was replaced by the latest generation
of hardware. The storage system of the existing SAN (Storage Area Network) was replaced by
the latest IBM DS6800 at the same time. This not only improved the performance of the systems
but also brought down leasing payments considerably and reduced operating costs.
Following the replacement of the hardware, the SAP R/3 systems were migrated from the
classic IBM Codepage to ASCII/Unicode. This means that it will also be possible for future versions
of the strategic management software platform SAP R/3 to be used with this hardware.
In addition, it has also paved the way for the SAP R/3 upgrade which is planned to take place
during the first half of 2006.
During the second half of the year, the e-mail systems at the Basildon and Raalte sites were
integrated into the central Lotus Notes system in Bückeburg. This represented another technical
step towards centralising the management of the IT systems in Bückeburg which are so
important to the corporate strategy.
The following specific projects have been realised in connection with business management
within the SAP R/3 environment in 2005:
• Stage 2 of the warehouse management system was realised as planned. The main warehousing
processes are now supported by the use of mobile hand-held terminals with
scanners.
• The plant management system has been modified in line with the requirements stipulated
in IFRS.
• Some of the SAP R/3 processes for NESCHEN Italia were redesigned. The procurement
process was modified and sliding average prices have now been set for materials. The
pricing system has also been adjusted and cost accounting has been activated in SAP R/3.
• Sales controlling in SAP R/3 has been expanded.
• Improvements to production controlling have been made by adding a facility for reporting
actual production data in SAP R/3.
• SEAL Graphics Europe has been integrated within NESCHEN AG processes as a sales
organisation including logistics operations.
All in all, the use of external consultants and the costs associated with this have been reduced
considerably as a result of the expansion and further development of in-house competences
within IT.
The introduction of further IT guidelines completed an important organisational step towards
ensuring data protection and protecting data and systems.
25

26
Quality Management
During the past financial year, NESCHEN AG
has been successful in recertifying its quality
management system to DIN EN ISO 9001:2000.
The world’s largest, internationally acknowledged
certification company SGS (Société Générale de Surveillance) from Hamburg gave the
company a positive evaluation after a “Multi-Site Recertification Audit” produced successful
results.
The procedure designed for group certificates was successfully completed by the audited sites
in Elkridge USA, Bückeburg and the Archive Centre in Berlin.
The Basildon site has added environmental protection to its existing QM system. Certification
to the relevant standard DIN EN ISO 14001 is planned for 2006.
The US companies NESCHEN Accutech, the NESCHEN Corporation, NESCHEN GBC LLC and
SEAL Graphics Americas have been “official participants” in the certification since 2005 and
have also successfully completed their own certification procedures.
In addition to this, the type approval of the German Federal Office for Motor Traffic (KBA)
was reconfirmed for a special range of products requiring compliance with international (ECE
regulations), European (EU directives) and German traffic laws. Consequently, NESCHEN AG
will be authorised to market two products with a “General Construction Type Permit” (AGB)
allowing these products to continue to be used for large vehicle windows, e.g. for buses operated
by transport companies.
The objective for 2006 is to constantly improve the QM system within all areas of the company.
This will include further implementation of the Continuous Improvement Process (CIP)
successfully initiated at the Bückeburg site and expansion through the introduction of an
employee suggestion system.

Investor Relations
During the past business year, NESCHEN stock
suffered a loss of approximately 30%. With a
current price of 1.50 Euros (price as of
26.04.06) and an all-time high of 14.70 Euros,
we now find ourselves quoted on the list of
“turnaround candidates”.
We have already set a course for achieving this
turnaround:
The relocation of machine manufacturing from
the Netherlands to the USA has enabled us to
reduce fixed costs considerably and has expanded
the natural currency hedge. With the significant
volatility of the dollar which was still valued at $ 1.36 per Euro at the start of 2005 and
has since stabilised at $ 1.20-$ 1.24 per Euro, this has enabled us to significantly reduce the
risk of incalculable currency influences on financial results.
We have been able to compensate for almost all the effects of the market increases in the
price of raw materials through the introduction of price increases within the market as well
as by taking measures to improve production conditions. The rise in the gross profit rate since
the beginning of the current financial year is the result of the measures that we have taken.
Nevertheless, the price changes affecting
raw materials and the energy sector
which are difficult to predict present
a considerable challenge when it
comes to planning our market strategy
for the future.
The measures implemented as part of
the restructuring program have created
a basis for realising improved
financial results in the short term. The
results of the restructuring program will contribute towards the sustained improvement of all
financial results.
We are confident that this will enable us to achieve results on a par with those achieved by
NESCHEN AG in previous years. Good operating results should help to turn around the price
of NESCHEN stock.
27

28
Corporate Governance Code
With the introduction of the Corporate Governance Code on 26 February 2002, the rules for
corporate management and supervision applicable in Germany became transparent for national
and international investors. One aim was to guarantee co-operative interaction between
the Supervisory Board and the Executive Board of Directors, open corporate communication
and solid balance sheet policies as minimum requirements.
For these reasons, Neschen AG follows the recommendations of the government commission
on the German Corporate Governance Code as last revised on 2 June 2005, making only the
following exceptions:
• The Annual General Meeting will not be published using modern communications media
owing to high expenditure (Code sub-paragraph 2.3.4.).
• D & O insurance without retention has been concluded for the members of the Board of
Managers and the Supervisory Board (Code sub-paragraph 3.8.).
• The total remuneration for the Executive Board of Directors for 2005 has been disclosed.
We cannot envisage any advantages for our shareholders in an individualised presentation
of the figures (Code sub-paragraph 4.2.4.).
• In view of the size of the Supervisory Board, the formation of committees was dispensed
with (Code sub-paragraph 5.3.).
• The total remuneration for the Supervisory Board for 2005 has been disclosed. The
variable share was omitted as no dividend was distributed. There is no stock option
program for the members of the Supervisory Board. We cannot envisage any advantages
for our shareholders in an individualised presentation of the figures
(Code sub-paragraph 5.4.7.).
• The periods of 90 and 45 days recommended for publishing the consolidated financial
statements and the interim reports respectively will not be observed on account of the
required consolidation of the Group data (Code sub-paragraph 7.1.2.).
In accordance with the declaration of conformity, the following information is given regarding
holdings which are subject to disclosure:
The Supervisory Board member Rolf W. Zinn holds 46.0% of the shares issued together with
his wife. Until 22.10.2005, the Supervisory Board member Dr. Henning Sulitze was the managing
director of Vermögensverwaltung Erben Dr. Karl Goldschmidt GmbH, Essen, holding
29.9% of the shares issued. As of 31.12.2005, the chairman of the Supervisory Board Dr.
Hans-Günter Scholz does not hold any shares in NESCHEN AG. On 31.12.2005, the members
of the Executive Board of Directors hold less than 1% of the shares issued by the company.
The following additional information has been disclosed voluntarily:
• The Executive Board of Directors and the Supervisory Board have not received any loans
from the company.
• There are no retirement pension commitments to the Executive Board of Directors or the
Supervisory Board.

Executive Board of Directors of NESCHEN AG
� Stefan Zinn,
Diplom-Kaufmann (MBA), (Spokesman for the Executive Board of Directors)
� Martin Davies,
Diplom-Ingenieur (degree in mechanical engineering)
� Dr. Ulf Hülbert,
Diplom-Kaufmann (MBA), (since 01.01.2006)
� Dr. Wolfram Meiritz
Diplom-Ökonom (degree in economics), (from 01.07.2005 to 31.12.2005)
Directors and Officers
Supervisory Board of NESCHEN AG
� Dr. Hans-Günter Scholz,
Diplom-Chemiker (degree in chemistry) and corporate consultant, (Chairman)
� Dr. Henning Sulitze,
Diplom-Physiker (degree in physics)
� Rolf-Werner Zinn,
Diplom-Kaufmann (MBA)
Scientific Advisory Board of NESCHEN AG
� Dr. Bernd Kappelhoff (Chairman)
Senior Legal Secretary, State Archives Lower Saxony
� Dr. Anna Haberditzel
Senior Conservator, Director of the State Archives Baden-Württemberg
� Dr. Marcus Stumpf
Head of Stock Conservation, State Archives North Rhine-Westphalia
� Dr. Rainer Hofmann
Archives Director, Federal Archives Koblenz
� Rainer E. Klemke
Head of Division, Senate Administration for Science, Research and Culture
� Dr. Norbert Kühn
Head of the Rhineland Archives and Museum Department
Rhineland Agricultural Association
29

30
Report of the Supervisory Board
The Supervisory Board held a total of six meetings
and additional telephone conferences in
which the Executive Board of Directors participated
during the past financial year. The
Executive Board of Directors submitted comprehensive,
meaningful documents at all meetings
containing detailed reports on
• the intended business policy and basic
matters relating to corporate planning,
especially financial, investment and
personnel planning
• the profitability of the company, especially
the return on equity and on business
transactions which could be of major
significance for the profitability or liquidity
of the company
• the course of business, in particular turnover, liquidity and the situation of the company
The economic situation and the opportunities for development of NESCHEN AG and the
NESCHEN Group were each discussed in detail on the basis of the Executive Board of
Directors reports. In addition to the ongoing reports on the situation and development of the
company, the Supervisory Board discussed corporate planning in detail with the Executive
Board of Directors. The Supervisory Board also specifically discussed the restructuring program
and measures derived from it at further meetings and during telephone conferences
which the Executive Board of Directors did not take part in. Decisions required regarding staff
were discussed in detail and arranged quickly.
The core topic at all the meetings was the development of all the group companies, the current
market situation and the securing of the company’s liquidity.
During the past financial year, specific issues which were discussed included the relocation of
machine manufacturing from SEAL Graphics Europe B.V. in Raalte, the Netherlands to the
USA as well as the strategic orientation of the American companies and their amalgamation
to form a single company, NESCHEN Americas Corporation.
Intensive discussions were also held with the business consultants assisting with the restructuring
process in order to talk about the planned preliminary measures and their implementation.
To keep itself informed, the Supervisory Board attended all the meetings of the steering
committee held in order to enable the Executive Board of Directors and the business consultants
commissioned to check on and discuss the progress of the restructuring process.

Report of the Supervisory Board
Discussions were also held on the subject of the Group’s equity capital and the intended optimisation.
The Executive Board of Directors kept the Supervisory Board informed regarding
each of these points by providing comprehensive documentation and reporting on the state
of negotiations with creditors on a regular basis.
In accordance with the German Commercial Code, the company’s Executive Board of
Directors submitted to the Supervisory Board the annual accounts of NESCHEN AG as of 31
December 2005, with a balance sheet total of 56,730,855.18 Euros and an annual deficit of
12,553,468.58 Euros, the management report and the consolidated annual accounts as of
31 December 2005 in accordance with IFRS standards with the consolidated management
report.
ADK GmbH, chartered accountants of Tersteegenstraße 28, 40474 Düsseldorf, appointed as
auditor by resolution of the Annual General Meeting of 23 June 2005, has submitted its
reports of 06.04.2006 regarding the audit of the annual accounts and the management
report as well as the consolidated annual accounts and the consolidated management report,
each of them certified with an unqualified opinion, to the Supervisory Board.
The Supervisory Board has reviewed the submitted documents; the auditor took part in the
Supervisory Board's discussions of these documents and reported on the major results of its
audit.
The Supervisory Board agrees with the result of the auditor’s audit. According to the results
of its own audit, there are no objections to the annual accounts or the executive management
report.
The Supervisory Board approves the company’s annual accounts. The annual accounts have
thus been adopted.
Dr. Meiritz who had been a member of the Executive Board of Directors since 1 July 2005
resigned from the Executive Board of Directors on 31 December 2005. Dr. Ulf Hülbert was
appointed to take over from him as Financial Director on 1 January 2006.
The Supervisory Board thanks the Executive Board of Directors and all employees for their
great commitment and efforts, especially in this situation which has been so difficult for the
company, and wishes all those involved great success with the further development of the
company.
Bückeburg, im April 2006
Dr. Hans-Günter Scholz
Chairman of the Supervisory Board
31

32
Course of business and Group’s state of affairs:
Turnover development
During the past financial year, the consolidated
turnover fell by 2.9% from 140.3 million Euros
to 136.2 million Euros. Excluding the foam
board company in the USA and the UK which
was shut down in 2004 and 2005, this corresponds
to a drop of 1.7% which is primarily due
to delivery problems in some areas of trading.
Another reason for the drop were the planned
adjustments made to product ranges at
NESCHEN AG. All in all, we saw an increased
stabilisation of the markets in 2005.
During the last few years, the consolidated
companies have changed considerably owing
to the drop in investments at NESCHEN Vinywin
and NESCHEN Polska. The shutdown of the
direct foam board company in the USA (2005)
and the sale of the foam board company in the
UK (2004) have lead to a reduction in the volume
of sales. The US production company is a
joint venture in which NESCHEN holds a 50%
interest which is not fully consolidated but
shown at equity.
Turnover distribution by region
in €k (from 2004 in accordance with IFRS)
■ USA / Asia ■ EU-countries ■ Germany
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
49.7 % 34.1 %
16.2 %
2003
49.4 % 33.0 %
17.6 %
2004
48.2 % 33.3 %
18.5 %
2005
Turnover development
in €k (from 2004 in accordance with IFRS)
Excluding the companies shut down as described above (amounting to
approximately 16 million Euros per annum) and the effects of exchange
rates, turnover has been virtually constant since 2002.
170,000
150,000
130,000
110,000
90,000
70,000
50,000
0
54,667
1998
70,024
83,948
112,411
1999 2000 2001
160,106
2002
140,941
140,308
136,174
2003 2004 2005

Turnover development
Business unit “Graphics”
The drop in the Group turnover shown comes from the business unit “Graphics” which
accounts for a share of 88.6% of the Group turnover. In this business unit, the turnover fell
by 3.4% to 120.7 million Euros (previous year 124.9 million Euros). Large fluctuations in the
graphics market were recorded within the various countries and also within the product
groups. Customer development has also been extremely varied. However all in all, we have
seen a revival in demand.
In the past financial year, the product portfolio within the business unit “Graphics” was comprehensively
reorganised. The volume of turnover at Foamboard USA amounts to approximately
4.5 million Euros per annum and because of low margins, it was converted into an
investment company during the third quarter. The company was affected by technical delivery
problems in some areas of trading. For the reasons given above, a drop in turnover was
recorded for the business unit “Graphics”. In accordance with expectations, orders received
for machine manufacturing increased and turnover went up by approximately 9% compared
with the previous year.
Business unit “Documents”
A slight increase in turnover of 0.7% to a consolidated turnover of 15.5 million Euros (previous
year 15.4 million Euros) was achieved for the business unit “Documents”.
Turnover development by business unit:
Business unit 2003 2004 2005 Deviation Deviation
in m€ in m€ in m€ in m€ in%
Graphics 127.0 124.9 120.7 -4.2 -3.4
Documents 13.9 15.4 15.5 +0.1 +0.7
Total 140.9 140.3 136.2 -4.1 -2.9
Turnover development in Germany:
In Germany, turnover increased by 2% to 25.2 million Euros (previous year 24.7 million
Euros). All business units contributed towards this positive development.
Turnover development abroad:
The international share of the consolidated turnover came to 82% which was slightly lower
than the previous year. Of the 111.0 million Euros of international sales (previous year 115.6
million Euros), 65.6 million Euros (59%) came from Europe, 39.2 million Euros (35%) from
North America and 6.2 million Euros (5.6%) from other countries.
Turnover development by region:
Region 2003 2004 2005 Deviation Deviation
in m€ in m€ in m€ in m€ in%
Europe 92.9 93.9 90.8 -3.1 -3.4
USA / Canada 41.8 40.0 39.2 -0.8 -2.0
Asia / ROW 6.2 6.4 6.2 -0.2 -3.2
Total 140.9 140.3 136.2 -4.1 -2.9
33

34
Profit and Loss Statement
During the past financial year, the loss before
taxes amounted to 8.7 million Euros (previous year 13.9 million Euros) while the loss after
taxes was 9.4 million Euros (previous year 15.1 million Euros).
The group made a loss after tax in the amount of 1.4 million Euros (previous year 7.3 million
Euros) before one-time expenditures. As a result, it has not yet been possible to achieve our
objective - a balanced operating result - in spite of the significant improvement made. The reason
for this lies in the delayed realisation of the increase in the gross profit margin as well as
our failure to reach our trade sales target in the autumn.
One-time expenditures amounted to 7.9 million Euros (previous year also 7.9 million Euros)
which was therefore in line with expectations.
The main items of expenditure include redundancy payments for a total of 93 employees at
2.0 million Euros, wages and salaries for departing employees at 2.5 million Euros, extraordinary
value adjustments to fixed assets and liquid assets at 2.1 million Euros and other expenditure
at 1.3 million Euros.
The one-time expenditures have been caused by the restructuring program and mainly comprise
the staff cutbacks in Bückeburg, the relocation of activities from SEAL Graphics Europe
to the sites at Bückeburg and Sun Prairie, USA as well as organisational changes.
The downward trend in the gross profit margin from 46.5% in 2003 to 43.2% in 2004 caused
the year before by price increases for all the main raw materials was stopped. The turnaround
achieved during the second half of 2005 was not enough to get back up to the level
of 2004.

Profit and Loss Statement
Personnel expenses were reduced by 2.4 million Euros to 27.0 million Euros as a result of the
extensive restructuring measures described.
EBIT achieved in 2005 amounted to - 4.0 million Euros (previous year - 9.3 million Euros) and
the EBIT margin - 2.9% (previous year - 6.6%). The net EBIT amounted to + 4.0 million Euros,
this corresponds to an EBIT margin of + 2.9% in relation to the total performance.
NESCHEN sales companies in Europe have achieved a positive result.
The result for SEAL Graphics Europe was affected by the considerable one-time expenditures
incurred in connection with the relocation and therefore closed at a loss of 3.6 million Euros
(previous year 3.6 million Euros). Since September 2005, the business has been handled by
NESCHEN AG and machines have been manufactured in the USA. Since then, positive results
have been achieved for SEAL within NESCHEN AG. In the USA, the increase in the volume of
machine manufacturing has contributed towards the positive result which has also been
achieved at the Sun Prairie site which is now being run as a production site.
The laminating plant at SEAL UK Ltd. has closed with a loss of 1.4 million Euros (previous year
2.1 million Euros). We expect results to continue to improve significantly in 2006 due to the
improved utilization of capacity. Both the growth in the business unit “Graphics” and projects
within the business unit “Special Products” will contribute towards this.
All the business carried out in the USA has enabled us to reduce losses compared with the
previous year from 5.5 million Euros to 3.3 million Euros. This reduction was primarily due to
the considerable increase in turnover of 3.5% as well as the improvement of the gross profit
margin. Preparations carried out at the Sun Prairie site in readiness for the increase in volume
of production caused by the relocation of operations from Europe resulted in one-time expenditures
amounting to 0.3 million Euros.
The positive effects of the increase volume of machine manufacturing on the operating result
have only been felt during the past few months. However they were mainly offset against the
one-time expenditures incurred as well as the usual start-up costs.
We are expecting to achieve a virtually balanced operating result in the USA in the current
financial year. The reason for this is the high gross profit margin which has been achieved
since September, the utilization of machine manufacturing facilities which has improved considerably,
the positive effects of the closure of the Wichita site in March 2006 and the continuing
positive development in turnover.
In accordance with the German Commercial Code, NESCHEN AG has made a loss of 12.6 million
Euros (previous year 9.6 million Euros). This includes one-time expenditure as a result of
staff cutbacks as well as the other expenditure incurred in connection with the restructuring
program amounting to 2.5 million Euros.
35

36
Profit and loss statement
The result for NESCHEN AG also includes depreciation of the book value of the investments
made by NESCHEN International B.V. in Raalte amounting to 8.5 million Euros. This was required
on account of NESCHEN International B.V. having converted liabilities in respect of US
companies of 8.5 million Euros into shares and then written them off.
The incursions into the capital of the Dutch company as a result of the depreciation were
compensated for by an 8.5 million Euro injection of capital provided by NESCHEN AG. All in
all, as a result of these transactions the capital of the US companies was increased by 8.5 million
Euros and balanced against losses incurred.
Excluding the special influences specified, NESCHEN AG made a loss in the amount of 1.6
million Euros (previous year - 3.0 million Euros).
We are expecting NESCHEN AG to achieve a positive result in the current financial year once
the full effect of the restructuring program and the improved gross profit margin has been
felt.
Development of cash flow
in €k (from 2004 in accordance with IFRS)
,.000
4,500
3,000
1,500
0
-1,500
-3,000
-4,500
-6,000
-7,500
5,551
2002
2,908
2003 2004 2005
-6,626
-1,956
Development of EBIT/EBITDA
in €k (from 2004 in accordance with IFRS)
10,000
8,000
6,000
4,000
2,000
0
-2,000
-4,000
-6,000
-8,000
5,521
10,438
1,864
8,726
-9,296
-1,938
■ EBIT
■ EBITDA
■ excluding restructuring
costs in each case
-2,094
2,197
2002 2003 2004
2005
-3,950
3,983
2,404
8,251

Assets
Balance sheet structure
The balance sheet total dropped by 9.1 million Euros (9.0%) to 92.5 million Euros. This was
due to the reduction in tangible fixed assets (by 4.4 million Euros to 33.9 million Euros) as
well as the cutbacks in inventories (by 3.6 million Euros to 16.7 million Euros). In the case of
fixed assets, the reason for the reduction is that there was no longer a need for high levels
of investment activity. The cutbacks in inventories were made as a result of intensive measures
carried out in order to strengthen internal cash flow. These also included the reduction of
trade receivables by 0.5 million Euros as a result of the improved management of accounts
receivable.
Shareholders’ equity capital was reduced to 1.2 million Euros as a result of the expenses from
the restructuring program carried out in 2004 and 2005.
HGB IFRS IFRS
2003 2004 2005
€k €k €k
Business expansion
expenses 818 0 0
Fixed assets 61,579 56,456 52,471
Inventories 22,831 20,327 16,734
Receivables and other assets 24,688 22,130 21,463
Liquid assets
Deferred income
704 1,689 687
(incl. deferred taxes) 2,292 988 1,115
Balance sheet total 112,912 101,590 92,470
Shareholders’ equity and liabilities
Shareholders’ equity
Provisions and
14,575 8,426 1,218
accrued liabilities 3,279 4,743 5,191
Financial liabilities 76,220 69,910 70,100
Trade liabilities 16,094 13,809 9,959
Other liabilities 2,658 4,702 6.002
Deferred expenses 86 0 0
Balance sheet total 112,912 101,590 92,470
37

38
Cash Flow
Cash flow as of 31/12 2004 2005
€k €k
Net income/net loss - 15,126 - 9,350
+ Write-offs/write-ups on fixed assets 7,202 6,354
+ Increase/decrease in provisions 180 - 28
+ Increase/decrease in deferred tax debt 0 - 127
+ Increase/decrease in deferred taxation liabilities 328 81
+ Profit/loss from disposals of fixed assets 112 134
+ Exchange rate-controlled changes in the values of fixed assets 678 980
Cash Flow -6,626 -1,956
+ Increase/decrease in inventories 1,264 3,593
+ Increase/decrease in trade receivables 1,035 459
+ Increase/decrease in other assets 2,066 208
+ Increase/decrease in short-term reserves 1,064 395
+ Increase/decrease in trade liabilities - 2,291 - 3,850
+ Increase/decrease in other liabilities 300 1300
Change in net assets 3,456 2,105
= Inflow/outflow of funds from current operations - 3,170 149
+ Earnings from losses in assets 2,452 193
- Payments for investments in fixed assets - 4,126 - 1,386
= Inflow/outflow of funds from investment activities - 1,674 - 1,193
+ Increase in capital 12,180 0
- Payments to minority shareholders - 43 - 148
+ Payments received/made from financial loans received - 6,308 190
= Inflow/outflow of funds from financing activities 5,820 42
= Total changes in cash affecting payments 985 - 1,002
+ Cash at beginning of period 704 1,689
= Cash at end of period 1,689 687

Investments
The total investments of the past business year amount to 1.4 million Euros (previous year
3.7 million Euros) and are therefore substantially below the level of depreciation of 6.4 million
Euros (previous year 7.2 million Euros).
In 2005, a capital increase was completed by both partners in the production joint venture in
the USA in order to improve structures. The NESCHEN share of the increase amounted to
approximately 0.1 million Euros. In order to enable the joint venture to operate independently,
both partners also each contributed a long-term loan of 0.3 million Euros which has
provided a firm financial basis for the joint venture.
A total of approximately 0.7 million Euros was invested in technical equipment, machinery
and plant and machinery in process of construction. Between 2001 and 2005, NESCHEN
invested more than 51.0 million Euros in fixed capital assets including intangible assets. As a
result, investments during this period in relation to turnover are well above the average for
the industry.
There are currently no plans for additional coating sites or other large single-item investments.
All of the sites now have state-of-the-art technology and are directed towards potential
growth. As a result of the optimisations in England and the new production site in the
USA, NESCHEN has created adequate capacities for future growth as well as for the expansion
of the business unit “Special Products”.
Assuming a normal course of business, the investments in the coming years will be significantly
below the annual levels of depreciation. This will ensure that NESCHEN maintains its
high level of technology.
Development of investments
in fixed capital assets
in €k (from 2004 in accordance with IFRS)
30,000
25,500
20,000
15,000
10,000
5,000
0
19,380
2002
8,079
3,676
1,386
2003 2004 2005
Development of depreciation
in €k (from 2004 in accordance with IFRS)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
4,917
2002
6,862
7,202
6,354
2003 2004 2005
39

40
Personnel development
As of 31.12.2005, the number of employees had been reduced by 91 to 573 (previous year
664) as part of the restructuring program. The main staff cutbacks were made in the
Netherlands as a result of the closure of the Raalte site (loss of 56 employees) and at the main
production site in Bückeburg (loss of 49 employees). Naturally, additional employees were
taken on in the Production department at the machine manufacturing site in Sun Prairie, USA
in order to cope with the increased volume of production. Almost all the departments in
Bückeburg were affected by staff cutbacks.
In each case, the staff cutbacks were made as part of a program for balancing interests and
a redundancy scheme agreed with staff representatives. This ensured the application of
know-how and flexibility, especially with regard to the production, research and development
and sales departments. Despite the cutbacks, the company managed to keep the rate of fluctuation
low while product quality remained constant. There were a few individual cases of
employees in senior positions leaving the company. These losses were compensated for by
means of internal reorganisation. We do not consider that the performance of the company
has been affected by this.
The per capita turnover (based on the average number of employees, i.e. 624) went up to
218,000 Euros in 2005 (previous year 208,000 Euros) as a result of the major staff cutbacks
made. This was only made possible by implementing a number of individual measures in
order to optimise business processes which resulted in an increase in efficiency. Thus in the
past two years, sales have gone down by only 3% while the number of employees has been
reduced by approximately 20%.
The development of absenteeism has also been satisfactory. In the past financial year, the
level was 2.1% (previous year 2.4%) which is significantly lower than the average for the chemical
industry of 4.9%.
in €k
Turnover per employee
--Employees (average) ■ €k per capita
220
210
200
190
180
170
160
2000 2001 2002
2003 2004 2005
900
750
600
450
300
150
0
Employees (average)
Personnel development
Country
No. of staff
2004
No. of staff
2005
Ø-Age in years
Ø-length of employment
in years
Germany 307 268 42 11
France 63 66 42 11
The Netherlands 89 27 38 7
Austria 8 8 38 7
England 47 47 45 10
Italiy 8 7 31 3
USA 92 100 42 5
Hungary 3 3 33 4
Spain 4 3 52 8
Czech Republic 38 39 34 6
China 5 5 38 6
Total 664 573 41.1 9.0

Forecast
The majority of economic experts are expecting positive developments in the world economy
in the next few years. China and the USA remain the main driving forces though increasing
tendencies towards growth are also predicted for Germany.
According to the Institute for World Economics (IfWE), the potential global gross domestic
product (GDP) is estimated at + 5.4%. The Organisation for Economic Co-operation and
Development (OECD) also predicts that the upturn will only gain in strength. But here too,
energy prices and the US dollar exchange rate are quoted as risk factors.
In the USA, industrial growth is predicted at 3.4%. Consumer demand is expected to fall due
to rising interest rates on household loans.
Accelerated growth is generally expected in Europe. Recovery of consumer demand as well
as more lively investment activity in the processing industry have been identified as the driving
forces behind the upturn. Economic researchers are predicting a 2.2% increase in the
gross domestic product for the 25 members within the European Union. There are increasing
signs of a sustained revival within the German economy too. Forecasts have been repeatedly
adjusted upwards and are currently well above the figure for the previous year. The Institute
for World Economics has predicted growth of 1.5%; the latest prediction by the Ifo Institute
is 1.7%. The widely observed Ifo business climate index for the German industrial economy
rose again in March. Companies surveyed believed that their current business situation as well
as their prospects for the next six months had improved for the fourth time in succession.
Again, they were particularly pleased with their current business situation compared with the
previous month. The upturn in the economy has also continued to stabilise.
Moderate growth is predicted for the graphics industry and the advertising market worldwide
for 2006.
In the next few years, we are expecting our company to grow not only in Asia and Eastern
Europe with significant increases in the gross national product but also in Western Europe
and the USA. The reasons for this growth include positive economic development along with
an expansion of the advertising budgets of large companies, most of which are now achieving
high levels of profit again. The expected increase in mergers and acquisitions in virtually
all branches of industry worldwide will also contribute towards increasing the use of our
products.
We are expecting the volume of sales (based on the adjusted product portfolio) to increase
during the current financial year compared with last year. We also expect our shares in the
Asian and American markets to go down slightly. Up-to-date forecasts by independent institutes
for our market segments and product ranges are not available.
41

42
Forecast
We plan to achieve sales amounting to 135 million Euros in 2006. This is based on moderate
growth in all business units compared with last year. We are expecting to realise several
projects which were started as joint ventures with customers last year within the new business
unit “Special Products”.
With these sales, we are expecting to make a profit after tax. This is based on us retaining
the improved gross profit margins achieved during the second half of 2005 compared with
the previous year and on the moderate development of possible increases in the prices of raw
materials. We have also assumed that the positive development of the economy will continue.
Because of the restructuring measures carried out in 2004 and 2005, we expect a per capita
performance of 240,000 Euros during the current financial year as well as significant improvement
in all the definitive key data.
Investments in 2006 amount to less than 2.0 million Euros. These are concentrated on the
areas of replacement, IT and an exhaust air decontamination system for the UK production
site.
As far as replacement is concerned, we are going to optimise the purchasing of parts in the
USA in order to enable us to gain benefit from the consolidation of production volumes carried
out in 2005. We will obtain supplies for adhesive coatings increasingly from international
sources in order to reduce the costs of raw materials. Apart from this, we will continue to
work with our suppliers in order to optimise products and procurement processes.
We will collaborate with selected suppliers on an increasing number of projects to reduce
inventory commitments and increase the liquidity of the company.
We expect to further reduce inventory commitments in the current financial year and thus
increase our cash flow.
IT processes have been optimised during the past financial year. This will continue, focusing
on worldwide standardised sales reporting on a daily basis using standardised analysis tools.
We will keep to our strategic objectives and priorities in the field of research and development
which will mean taking account of the requirements relating to the business unit
“Special Products”. Activities will be determined by market and customer requirements, coordinated
in line with each other and controlled from a central location.
After our successful program of restructuring and the major staff cutbacks made over the
past few years, we are planning to make further staff cutbacks in 2006 but only in connection
with the relocation of activities from the Wichita site in the USA which was carried out.
As far as our staff are concerned, we have already started to invest more heavily in their professional
development. We will continue to do so by concentrating on specific priorities.
Variable payment shares will be developed further and standardised.

Forecast
The level of debt is due to be continuously reduced over the next few years. This will mainly
involve the further reduction of capital tied up in liquid assets and fixed assets. Because of
the high level of investment activity during the years leading up to 2003, this level can be
kept low from now on without adversely affecting the long-term position of the company.
Besides the positive result expected in respect of business operations, we are also expecting
a significant improvement in cash flow as a result of the activities described.
Regardless of the above, the Supervisory Board and the Executive Board of Directors will
establish measures which can be implemented in order to increase shareholders’ equity capitalization.
The options available are currently being investigated and evaluated. The shareholders
will be informed of developments in due course.
If the basic economic conditions should turn out to be as expected, then NESCHEN can assume
that its business will see quite positive development over the next few years. Based on the
restructuring, staff cutbacks and reduction in material costs which have been achieved, we
predict a return to profit in 2006. With moderate growth in sales, we are expecting a further
improvement in the annual result in 2007.
The measures and standards introduced in previous years will be consistently applied in the
future too. We will make sure that our growth is profitable and sustained. Our activities will
be oriented towards our clients’ requirements.
Information on business transactions of particular significance which have occurred
since the end of the financial year
Since as early as the end of February 2006, the banks which have been financing the
NESCHEN Group as part of a security pool for years and have actively supported the restructuring
program once again decided to extend the existing lines of credit until 30.09.2006 and
confirmed that after that they would be favourably disposed towards further extensions, we
can assume that further financing of the company has been secured.
In order to continue to expand the company’s shareholders’ equity capital which has been
reduced, an external financial service provider was commissioned to help the company to
carry out preparations for this increase in the shareholders’ equity capital. We assume that
we may achieve an improved equity capital quota as a result of this financing process.
At present, we are not aware of any other circumstances which could adversely affect the
planned development of the NESCHEN Group or directly jeopardise the company’s continued
existence.
43

44
Research and Development
Approximately 2% of the Group’s turnover was invested in research and development during
the past financial year. The structure and staffing levels in the consumables development division
were not affected by the restructuring program. NESCHEN has laboratories at its sites in
Bückeburg (Germany), Basildon (UK) and Elkridge (USA).
In connection with machine manufacturing, the activities of the development department in
Raalte, the Netherlands were relocated to USA when the plant was closed down. We are also
expecting this consolidation to result in increased efficiency in terms of development and to
spur on the standardised platform strategy for markets in the USA and Europe.
The completion of the restructuring program and organisational improvements to development
activities at the individual sites as well as central coordination of the projects have considerably
reduced times for responding to customer requests.
NESCHEN AG is constantly working on the realisation of customer-specific requirements in all
areas of its business. This is borne out by the numerous projects which have been carried out
such as the expansion of adhesive technology or the development of an anti-bacterial protective
film for books, for example. In 2005, all solvent adhesives had to be technically adjusted
on account of a new order commissioned in Basildon. This specific adjustment was carried
out quickly and successfully without compromising the characteristics of the product. In
spite of the very high level of expenditure in connection with machine manufacturing as a
result of the merging of the two plants, further improvements have been made to the technology
used for the liquid laminating machines.
Large centralized projects were started in 2005 and they are planned to be completed in
2006. These also include products, for example, relating to surface coatings, which will be
delivered within the business unit “Special Products” to markets which NESCHEN has not
catered for before.
Our development activities in the business unit “Documents” are focused on a conservation
procedure for bound archival materials and books. An initial prototype has already been
undergoing tests in the lab and the procedure will now be developed further until it is ready
to be launched onto the market.
The investigation of alternative raw materials for the purpose of optimizing products and also
continuously improving profitability represents an important contribution from the area of
R&D.
The core business of the research department involves intensive work with innovations connected
with adhesives, inkjet coatings and surface finishes.

Risks of future development
The restructuring program which was decided on during the last financial year and has since
been carried out for the most part will result in cost reductions of approximately 7 million
Euros per annum from 2006. The measures implemented in the first quarter of 2006 in the
USA (closure of the Wichita site and the consolidation of the sales companies) will lead to
further cost reductions of approximately 0.8 million Euros per annum from 2007.
Because of the high one-time expenditures associated with the restructuring program totalling
7.9 million Euros in 2005, liquidity was sometimes extremely tight during the first half of
the past financial year. This has improved over time. The planned reduction of the liquid assets
was achieved to a large extent which meant that most of the one-time expenditures could be
covered by internal funds. In addition, the company was able to reduce liabilities from supplies
and services by 3.9 million Euros compared with the previous year.
The restructuring program that was carried out has strengthened the company and reduced
the risk of becoming dependent on growing markets. However, the shareholders’ equity capital
base has been noticeably reduced due to the high expenditure connected with this.
The exchange rate risk arising from the development of the US dollar against the Euro has
been reduced considerably as a result of the production of self-adhesive products and the
production of laminating machines in the USA. A natural currency hedge has been created
by supplies to and from the USA. However, the possibility of exchange rate risks cannot be
totally ruled out for the future.
We are currently not aware of any specific risks associated with the production or sale of products.
We have seen a revival in demand in important business areas.
Financing/liquidity
There are currently no serious risks in connection with price changes, a drop in demand and
liquidity or risks from fluctuations in payment flows in relation to the use of financial instruments
to which the Group is exposed and which are of particular importance when assessing
the Group’s situation. We have some interest rate protection to cover the risk of changes in
interest rates.
45

46
Outlook
The past year - 2005 - has been dominated by the restructuring measures announced for the
whole NESCHEN Group. These were concentrated on the European sites in Raalte in the
Netherlands as well as Bückeburg in Germany. The restructuring of the North American sites
was carried out during the first quarter of 2006.
During the last three years, we have had to reduce our workforce by 20%, close a number
of companies which were not representative of our core business, reduce our product portfolio
by approximately 15%, make changes to numerous business processes, sell or consolidate
six Group companies as well as close two sites.
All in all, as of the end of 2005 consolidated turnover has dropped 9.8 million Euros compared
to 2003.
As a result, in the last few years turnover per employee has gone up 16% to 218,000 Euros.
On completion of the measures, we are expecting per capita turnover of approximately
240,000 Euros in 2006.
Most of the restructuring measures have been carried out as of the end of the first quarter
of 2006.
The gross profit margin has improved considerably during the second half of 2005 compared
with last year as a result of the implementation of numerous individual measures. The company
is now focussing on returning to a profitable financial status. We are currently seeing
an increase in demand in the main product areas and in important countries. The increase in
demand for our laminating machines can also be seen as an indicator of the revival which the
graphics market is experiencing.
The restructuring program has asked a lot of everyone involved in terms of effort and energy.
Implementation was only made possible thanks to the high level of commitment and
absolute desire for change on the part of management and the employees connected with
the program.
In view of market developments since the end of 2001, the accompanying staff cutbacks
were essential. However, the reduction of the workforce in particular but also the closure of
sites required considerable financial expenditure. The company was able to maintain its liquidity
due to the assistance provided by financial institutions as well as the successful release of
funds via inventories and other assets.
However as a result of the restructuring program, shareholders’ equity capital has been virtually
zeroed out at just 1.2 million Euros as of 31.12.2005 in the consolidated balance sheet
which has still been drawn up as a going concern in accordance with current plans.

Outlook
The Supervisory Board and the Executive Board of Directors therefore decided to call in an
external financial service provider to investigate all the possibilities for increasing the shareholders’
equity capital. The feasibility of various alternatives is currently being looked into.
Apart from that, we have assumed that our external financiers will continue to support the
company and will now be involved in the process of organic growth and the achievement of
improved results.
Even after the restructuring program, NESCHEN is still in an extremely favourable position
with regard to strategic orientation, product range, distribution channels and its positioning
within the “Graphics” and “Documents” markets.
The company will continue to follow its basic strategic plan for organic growth within the
niche segments we serve and for expanding our worldwide market position by using advanced
technology and providing high-quality products. The development of the business unit
“Special Products” remains an important part of the strategy. Although this was already an
active area of business for NESCHEN in the past, it has become more significant within the
whole corporate policy. We have acquired new customers and by expanding the sales organisation
and implementing technical developments throughout the company, we see ourselves
as being in an excellent position for continuing to develop the business area “Special
Products”.
If the slight revival of sales markets should continue during the course of 2006 and thus enable
the company to expand, we can only assume that we will even be able to show a small
profit by the end of 2006.
47

48
Consolidated balance sheet
Consolidated balance sheet as of 31.12.2005
in €k 31.12.2005 31.12.2004
ASSETS
Intangible assets 15,074 15,335
Plant, property and equipment 33,898 38,304
Financial assets 3,499 2,817
Deferred taxes 1,115 988
Long-term assets 53,586 57,444
Inventories 16,734 20,327
Trade receivables 16,854 17,313
Other liabilities and other assets 4,609 4,817
Liquid assets 687 1,689
Short-term assets 38,884 44,146
Balance sheet total 92,470 101,590
in €k 31.12.2005 31.12.2004
SHAREHOLDERS’ EQUITY AND LIABILITIES
Capital subscribed 8,750 8,750
Capital surplus 0 6,428
Earnings reserves 0 0
Other reserves 0 0
Balance sheet loss - 8,049 - 7,331
Net income according to shares in minority interests 701 7,847
Minority interests 517 579
Shareholders’ equity capital 1,218 8,426
Provisions for pensions and similar obligations 202 230
Provisions for deferred taxes 502 421
Liabilities due to banks 44,310 42,076
Other long-term liabilities 1,221 1,500
Long-term liabilities 46,235 44,227
Provisions for taxes 2,431 2,282
Other provisions 2,056 1,810
Liabilities due to banks 25,790 27,834
Trade liabilities 9,959 13,809
Other short-term liabilities 4,781 3,202
Current liabilities 45,017 48,937
Balance sheet total 92,470 101,590

Consolidated profit and loss account for the period from 01 January to 31 December 2005.
Consolidated profit and loss account
in €k 2005 2004
Sales 136,174 140,308
Changes in inventories - 798 55
Other operating income 2,498 2,023
Cost of materials - 77,987 - 79,662
Personnel expenses - 27,021 - 29,431
Depreciation - 6,354 - 7,202
Other operating expenses - 29,903 - 34,464
Profit/loss from business operations - 3,391 - 8,373
Ergebnis aus equity-Earnings from equity interests - 168 - 581
Other investment earnings 0 3
Financial result - 4,788 - 4,585
Investment earnings and financial result - 4,956 - 5,163
Profit/loss before tax - 8,347 - 13,536
Taxes - 1,003 - 1,590
Annual deficit - 9,350 - 15,126
Shares in minority interests 208 43
Result after minority interests - 9,558 - 15,169
Losses carried forward from the previous year - 7,331 - 3,666
Transfers from capital reserves 8,840 5,544
Transfers from earnings reserves 0 5,960
Balance sheet loss - 8,049 - 7,331
49

50
Notes relating to the consolidated annual accounts
A. General information on the company
The parent company is Neschen AG of Bückeburg/Germany which is entered in the Stadthagen Companies Register in section B under number 2057.
The share capital as of the balance sheet closing date is 8,750,000.00 Euros and is divided into 8,750,000 no-par-value shares.
NESCHEN AG shares are quoted on the official stock market (Frankfurt, Hanover), on the open market (Berlin, Düsseldorf, Hamburg, Stuttgart) and in the electronic
stock exchange trading system (Xetra).
The Neschen Group has led the market for decades in the business units “Documents” and “Graphics”. The focus on core competences and specific sales markets
in niche areas is a key component of the corporate strategy of today and in the future. The production process for the manufacture of self-adhesive products
in both business units is accomplished by utilising compatible coating technologies and similar product structures on the same machines.
Marketing of the products from both business units is carried out within the framework of direct distribution via the Neschen subsidiaries in Europe but also utilises
independent distribution channels such as specialist traders and OEM partners.
Neschen offers a complete product range of self-adhesive products and accessory products for both business units. All of the common adhesive systems - adhesives
based on aqueous dispersions, solvent and hot melt adhesives - are in use. The coating machinery has been set up for new applications and processes such
as coating with special varnishes, for example. All of these features clearly set the company apart from its competitors.
B. General information on the financial statement
I. Basic information
The consolidated financial statement for Neschen AG for 2005 was drawn up in accordance with the International Financial Reporting Standards (IFRS) of the
International Accounting Standards Board (IASB) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) for the first
time. Reporting for the 2005 financial year has been carried out in accordance with statutory standards and interpretations to be applied.
The consolidated financial statement is in line with the European Union directive on group accounting standards (directive 83/349/EEC). In order to achieve equal
standards with a consolidated financial statement drawn up in accordance with the German Commercial Code (HGB), all the necessary details and explanatory
notes required in accordance with the HGB which go beyond the stipulations of the IASB have been provided.
For the sake of improving clarity and meaningfulness, individual items have been consolidated in the profit and loss account and the balance sheet. These items
are shown separately and explained in the Notes. The profit and loss account has been drawn up in accordance with the total cost procedure.
Unless specific reference is made to deviations, all amounts are specified in millions of Euros (?k).
The consolidated financial statement is based on the historic acquisition cost principle and has been drawn up in accordance with the consolidation, accounting
and valuation methods described below.
The financial year of Neschen AG and the subsidiaries included in the consolidated financial statement corresponds to the calendar year.
II. Information on the application of IFRS for the first time
The change-over in accounting procedures has been carried out in accordance with the rules stipulated in IFRS 1 “Applying International Financial Reporting
Standards for the first time”. The figures for the previous year were determined in accordance with the same principles.
The accounting, valuation and consolidation methods previously used to draw up consolidated financial statements for Neschen AG in accordance with German
commercial law were changed in some cases as a result of IFRS being applied for the first time.
International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) have been used retrospectively for the first time in accordance
with IFRS 1. Consequently, the adjustments which need to be made to the accounting and valuation methods to enable IAS/IFRS to be used for the first time are
to be made retrospectively as if IAS/IFRS had always been used for accounting purposes.
The information required in order to carry out the change-over from the German Commercial Code to IFRS is contained in the reconciliation statement. The adjustment
to the accounting and valuation methods in line with IFRS rules as of 1 January 2004 was carried out in accordance with IFRS 1 with no effect on the result
to the credit or debit of the retained income.
The effects which the change-over from the previous accounting procedure in accordance with the German Commercial Code to accounting in accordance with
IFRS had on the asset, financial and income position are shown in the reconciliation statement.

Notes relating to the consolidated annual accounts
Reconciliation of the balance sheet as of 01.01.2004 (IFRS opening balance sheet)
German Commercial Code Reconciliation IFRS
01.01.2004 01.01.2004 01.01.2004
ASSETS in €k in €k in €k
Start-up expenses 818 - 818 0
Intangible assets 14,140 1,385 15,525
Plant, property and equipment 43,716 2,590 46,306
Financial assets 3,723 - 1,095 2,628
Inventories 22,831 - 1,240 21,591
Receivables and other assets 24,688 1,078 25,766
Liquid assets 704 0 704
Prepaid expenses 1,748 - 1,748 0
Deferred taxes 544 - 73 471
112,912 79 112,991
LIABILITIES
Shareholders’ equity capital 14,574 - 1,474 13,100
Provisions 3,139 - 61 3,078
Provisions for deferred taxes 140 - 47 93
Liabilities due to banks 76,220 0 76,220
Other liabilities 18,753 1,747 20,500
Deferred credits to income 86 - 86 0
112,912 79 112,991
Reconciliation of the balance sheet as of 31.12.2004
German Commercial Code Reconciliation IFRS
01.01.2004 01.01.2004 01.01.2004
ASSETS in €k in €k in €k
Start-up expenses 529 - 529 0
Intangible assets 12,687 2,648 15,335
Plant, property and equipment 35,538 2,766 38,304
Financial assets 3,493 - 676 2,817
Inventories 21,645 - 1,318 20,327
Receivables and other assets 21,403 727 22,130
Liquid assets 1,689 0 1,689
Prepaid expenses 1,483 - 1,483 0
Deferred taxes 1,053 - 65 988
99,520 2,070 101,590
LIABILITIES
Shareholders’ equity capital 8,971 - 545 8,426
Provisions 4,242 80 4,322
Provisions for deferred taxes 287 134 421
Liabilities due to banks 69,846 64 69,910
Other liabilities 16,069 2,442 18,511
Deferred credits to income 105 - 105 0
99,520 2,070 101,590
Reconciliation of shareholders’ equity capital as of 01.01.2004 in €k
Shareholders’ equity capital in accordance with the German Commercial Code
as of 01.01.2004 including minority shares 14,574
Correction to start-up expenses - 818
Changes to useful life and depreciation methods for fixed assets,
revaluation of machinery 6,426
Currency effects (mainly due to revaluation of fixed assets) - 3,547
Adjustment of inventory valuation - 1,240
Valuation of receivables - 182
Leasing commitments - 392
Derivatives: market evaluation of interest rate swaps - 1,250
Deferred taxes and other adjustments - 471
13,100
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Notes relating to the consolidated accounts
Reconciliation of the profit and loss account for the 2004 financial year
German Commercial Code Reconciliation IFRS
01.01.2004 01.01.2004 01.01.2004
ASSETS in €k in €k in €k
Sales 140,308 0 140,308
Increase in stocks of finished and semi-finished goods 44 11 55
Other operating income 1,983 40 2,023
Cost of materials - 78,262 - 1,400 - 79,662
Personnel expenses - 29,421 - 10 - 29,431
Depreciation - 6,445 - 757 - 7,202
Other operating expenses - 33,609 - 855 - 34,464
Income from investments - 577 - 1 - 578
Financial result - 4,585 0 - 4,585
Extraordinary profit/loss - 3,553 3,553 0
Taxes on income and earnings - 929 - 315 - 1,244
Other taxes - 354 8 - 346
Annual deficit before minority interests - 15,400 274 - 15,126
III. Accounting and valuation rules which deviate significantly in respect of German commercial law
Start-up and business expansion expenses are not shown as assets.
Goodwill or company values as well as other intangible fixed assets with an indefinite useful life will be checked at least once a year to substantiate their value
(impairment-only approach). There will be no scheduled depreciation.
The straight-line method of depreciation will be used for tangible assets in accordance with estimated useful life and not in accordance with progressive rates
under tax law. Current values above the continued acquisition costs have been used for certain machines.
Leasing contracts which meet the restrictive prerequisites for financial leasing in accordance with IFRS will be entered in the balance sheet as an asset value and
leasing obligation.
Derivatives will be valued at market value even if this is higher than the acquisition costs. The negative market development in respect of interest rate swaps will
be shown as a liability at fair value. Market changes affecting derivatives and their effect on the result will be shown in the profit and loss account.
Only the production-related overheads in respect of normal utilisation capacity will be shown for finished and semi-finished products. Reductions in value as a
result of changes to range and marketability will be carried out in accordance with the Group’s standardised devaluation criteria (IFRS consolidated accounting
guidelines).
Individual and global value adjustments to claims will be made in accordance with the standards specified in the IFRS consolidated accounting guidelines.
Provisions will only be created if there are existing obligations in respect of third parties and if there is at least a 50% likelihood that the obligation will have to
be settled.
Provisions will not be created for failure to carry out maintenance or other expenses.
Pension provisions have been calculated in accordance with the present value of entitlement procedure.
Monetary items in foreign currency are valued at the rate prevailing on the closing date and the resulting exchange rate differences are taken into account in the
result for the period. By way of exception, exchange rate differences from long-term monetary items within the Group are entered under shareholders’ equity capital
without affecting the result.
If conditions were met (different valuation methods in the operating and tax statements, expected future adjustment of tax loss carry-forwards, consolidation
methods at Group level), differences have been shown with deferred taxes. Deferred taxes on loss carry-forwards have only been created at the rate of existing
deferred tax liabilities.

C. Information on the consolidated group and methods of consolidation
I. Consolidated group
Notes relating to the consolidated annual accounts
All the main companies in which Neschen AG directly or indirectly has a controlling influence (control concept) are included in the consolidated financial statement.
Within the context of IAS 27 “Group and separate individual financial statements in accordance with IFRS”, a company is described as having a controlling influence
if it is able to determine the financial and business policy of a company in order to derive benefit from its activity. It will be included in the consolidated financial
statement once it is able to control the company in accordance with the “control concept”. Once it is no longer able to do this, it will no longer be included.
Besides Neschen AG, 19 foreign companies which are fully consolidated are included in the consolidated financial statement. The joint venture GBC Graphic Films
LLC is included in the consolidated financial statement in accordance with IAS 31 “Shares in joint ventures” through application of the equity method. In the case
of participating interests which are valued at equity, the changes in shareholder’s equity capital corresponding to the capital interest are added or taken away
from the acquisition costs on an annual basis. All other participating interests where the Neschen Group could not exercise a definitive influence on the financial
or business policy or which were individually and in their entirety of secondary importance in respect of the assets and earnings situation on account of their low
level or lack of business activity are shown at their current value in accordance with IAS 39. If it is not possible to determine a permissible current value, allowance
will be made for these by taking account of continued acquisition costs.
Four companies were not consolidated in 2005.
The following subsidiaries (full consolidation) are included in the consolidated annual accounts::
Company Registered in Subscribed Participating interest
capital EUR %
Neschen AG Bückeburg, Germany 8,750,000 Parent company
Neschen International B.V. Raalte, the Netherlands 3,400,000 100.00
Filmolux S.A.R.L. Paris, France 920,000 100.00
Neschen Austria Ges.m.b.H. Vienna, Austria 102,000 100.00
Neschen Benelux B.V. Breda, the Netherlands 250,000 100.00
Neschen China Ltd. Hong Kong, China 10,896 * 51.00
Neschen UK Ltd. Stone, Great Britain 174,672 * 100.00
Neschen ITALIA s.r.L. Bagnolo, Italy 209,471 100.00
Neschen Products España S.A. Barcelona, Spain 90,152 51.00
HSW Signall s.r.o. Prague, Czech Republic 34,495 * 51.00
Neschen Kft. Budapest, Hungary 115,455 * 100.00
Neschen Corporation Elkridge, USA 5,013,180 * 100.00
Neschen USA LLC Wichita, USA 1,090,004 * 100.00
Neschen Accutech Corporation Elkridge, USA 636,728 * 84.90
Seal Graphics Europe B.V. Raalte, the Netherlands 1,250,000 100.00
Seal UK Ltd. Basildon, Great Britain 2,474,527 * 100.00
Seal Graphics Americas Corp. Elkridge, USA 849,865 * 100.00
Seal Graphics Technologies Corp. Sun Prairie, USA 772,604 * 100.00
Seal USA Corp. Delaware, USA 540,822 * 100.00
Seal Graphics Pacific Ltd. Hong Kong, China 1,090 * 100.00
* converted into Euros as per closing date exchange rate on 31.12.2005
II. Consolidation methods
The financial statements of the German and foreign Group companies included in the consolidation have been drawn up in accordance with IAS 27 “Group and
separate individual financial statements in accordance with IFRS” using uniform accounting and evaluation methods.
Capital consolidation has been carried out by offsetting the acquisition costs of the participating interests against the current values of the assets and liabilities
acquired. Any remaining credit differences in amounts has been accepted as income after the current values of the assets and debts acquired have been audited.
If less than 100% of the shares have been acquired, the acquisition costs relating to a participating interest have been offset against the proportional current
values of the assets and debts acquired. Minority interests have been shown under shareholders’ equity capital at their remaining current value.
Differences in amounts included in the values of participating interests in joint ventures have been determined in accordance with the same principles.
Minority shares have been shown as a proportion of the current value of the assets and debts acquired to be provided according to the share.
Interim earnings relating to fixed assets or inventories, sales, expenditure and income as well as receivables and liabilities between the companies included have
been eliminated. Proportional interim earnings in relation to joint ventures have also been eliminated.
Deferred taxes in accordance with IAS 12 “Tax on profits” have been limited to consolidation processes which affect the result.
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54
Notes relating to the consolidated annual accounts
D. Information on currency conversion
I. Basic information
The annual accounts including the hidden reserves covered within the acquisition method and the costs of the consolidated companies as well as the assets
arising from the consolidation of capital have been converted into Euros in accordance with IAS 21 “Effects of changes to exchange rates” based on the concept
of functional currency. Functional currency is the main currency in which a foreign company has its assets and which it uses to make payments. Since the
functional currency for all the Group companies is the national currency in each case, the assets and liabilities have been converted using the average rates on
the closing date while expenditure and income have been converted using the annual average rates. The difference compared with the closing date exchange
rates is shown separately in the shareholders’ equity capital in the column “Changes to shareholders’ equity capital not affecting the result” and does not
affect the annual result. Foreign currency receivables and liabilities have been valued at the closing date exchange rate and the resulting exchange rate differences
are taken into account in the result for the period. By way of exception, exchange rate differences from long-term monetary items within the Group are
entered under shareholders’ equity capital without affecting the result.
Conversion of the main currencies used within the Group was carried out based on the following exchange rates:
The exchange rates varied as shown below:
Closing date exchange rates Average exchange rates
2005 2004 2005 2004
EUR EUR EUR EUR
1 US dollar (USD) 0.845023 0.73314 0.803148 0.803994
1 pound sterling (GBP) 1.455604 1.41255 1.462309 1.473405
1 Hungarian forint (HUF) 0.003958 0.00408 0.004027 0.003995
1 Hong Kong dollar (HKD) 0.108959 0.09430 0.104060 0.103032
1 Czech koruna (CZK) 0.034495 0.03286 0.033607 0.031368
II. Information on high inflation
The annual accounts of subsidiary companies in countries where there is high inflation are converted in accordance with IAS 29 “Accounting in countries with
high inflation”. Assets and liabilities as well as items from the profit and loss account are converted at the closing date exchange rate. This does not currently
affect any Group companies.
E. Information on the balance sheet
I. Main accounting and valuation methods
Assets available for sale
Long-term assets available for sale have been entered at the lower of book value and current value minus any outstanding sales costs.
Long-term assets and impersonal entities are classified as being “available for sale” if their book value would be obtained if they were sold rather than if they
were to continue to be used. This condition is not considered to have been met until sale is highly likely and the asset is ready to be sold immediately. The management
must have decided on the sale and plans must be in place for the sale to take place within the next year after the asset has been qualified as being “available
for sale”.
Intangible assets
Goodwill and company values from the consolidation of capital will be shown as assets in accordance with IFRS 3 “Corporate mergers” and audited once a year
on a regular basis - and also at more frequent intervals if evidence shows that it is necessary - to check for depreciation. If necessary, depreciation will be applied
and their value will be reduced to a lower recoverable amount. If the reasons for unscheduled depreciation in previous years should cease to apply, the value
will not be adjusted upwards.
As a result of the application of IFRS 3, instead of scheduled depreciation a check on depreciation will be carried out (impairment check). This will involve comparing
the book value with the recoverable amount. The recoverable amount is determined in the form of the useful life as the current value of expected future
cash flows. Expected future cash flows are based on a qualified planning process which takes account of empirical values within the company as well as supporting
economic data from outside the company.
The interest rate for capitalisation was derived as the average weighted capital rate using the capital asset pricing model from data relating to the capital market.
The substantiation of company values was carried out at the level of the so-called “cash-generating unit” (CGU). The CGU is defined as the smallest identifiable
group of assets which generate fund flows which are, to the greatest possible extent, independent from fund flows relating to other assets or other groups of
assets.
Other intangible assets acquired against payment are shown based on their acquisition costs. Intangible assets created by the company are shown as assets based
on their manufacturing costs if the criterion for showing items as assets has been met in accordance with IAS 38 “Intangible assets”. Manufacturing costs inclu-

Notes relating to the consolidated annual accounts
de all costs which can be directly or indirectly attributed to the manufacturing process. Financing costs and research costs are not shown as assets. Licences are
written off by the end of the term of the licence. Five years has been taken as the useful life of software.
Unscheduled depreciation is also applied to intangible assets specified on the closing date if the recoverable amount is below the continued acquisition and manufacturing
costs. If the reasons for unscheduled depreciation in previous years should cease to apply, the value will be adjusted upwards.
Intangible assets with an indefinite useful life will not be subject to the scheduled straight-line method of depreciation but will be checked regularly once a year
to substantiate their value -and also at more frequent intervals if evidence shows that it is necessary. If necessary, depreciation will be applied and their value will
be reduced to a lower recoverable amount. If the reasons for unscheduled depreciation in previous years should cease to apply, the value will be adjusted upwards.
Tangible fixed assets
Tangible fixed assets which have been used by the company for more than one year are valued at their acquisition or manufacturing costs less scheduled depreciation.
The manufacturing costs of systems produced in-house include a reasonable share of the attributable overheads in addition to individual costs. Financing
costs are not shown as assets within the acquisition or manufacturing costs. Investment grants received and independent investment grants are taken into account
by deducting the amount of the grant from the acquisition or manufacturing costs of the asset in question.
Depreciation of assets is only carried out using the straight-line method. Scheduled depreciation within the Group is based on the following useful lives:
Buildings 50 years
Fixtures and fittings 12-30 years
Plant and equipment 6-12 years
Machines 6-15 years
Assets of negligible value are regularly written off in full in the year of acquisition.
If evidence shows that it is necessary to reduce the value of assets and the recoverable amount is below the continued acquisition or manufacturing costs, then
the assets will be subject to unscheduled depreciation. If the reasons for unscheduled depreciation should cease to apply, values will be adjusted upwards accordingly.
Leasing
The equitable ownership of leased objects is to be attributed to the lessee in accordance with IAS 117 “Leases” if the lessee is to retain all the main risks and
rewards associated with the object (financial leasing). All other leases are classified as operating leases. If the equitable ownership is to be attributed to the
Neschen Group, then the leased object will be shown as an asset at fair value or the current value of the lease payments if lower when the lease is concluded.
Scheduled depreciation will take place over the useful life of the object or over the term of the lease if it is shorter, in accordance with comparable objects acquired
as tangible fixed assets. Payment obligations arising from future lease payments will be shown as liabilities.
Financial assets
Financial assets include those which are kept by the Neschen Group for longer than one period for the purpose of capital gain, increasing the value of capital
employed or building up business relations.
If they do not relate to associated companies within the context of IAS 28 “Shares in associated companies”, financial assets are capitalised in accordance with
IAS 39 “Financial instruments: recognition and measurement”. Financial assets are valued at (continued) acquisition cost or at fair value and entered on the trading
day depending on how they are classified in accordance with IAS 39.
Financial assets which are to be classified as being “available for sale” will be valued at acquisition cost when they are first entered in the accounts. If the fair
values of these financial assets can be reliably determined during subsequent periods, then these will be used; if there are no active markets and the costs involved
in determining fair values cannot be justified, then the (continued) acquisition costs will be shown. Borrowings will be classified as “advances and debts managed
by the company” and consequently carried at continued acquisition cost. Financial assets which are designated as a secured transaction within a fair value
hedge will be carried at fair value.
Fluctuations in value resulting from financial assets from the “available for sale” category will be shown in the shareholders’ equity capital without affecting the
result - if necessary taking account of deferred taxes. The amounts entered without affecting the result will not be included in the result for the period until the
time of deduction or in the case of the sustained depreciation of the assets.
Evidence of depreciation will be taken into account by applying appropriate unscheduled depreciation to the lower recoverable amount.
Inventories
Inventories are recognised at their acquisition cost, manufacturing cost or their net realisable value, according to whichever is the lower. Manufacturing costs include
production and material overheads, depreciation and pro rata production-related general administrative costs as well as directly attributable costs. Fixed overheads
are taken into account based on the normal utilisation capacity of production systems. Costs of production capacities not utilised (idle costs) are shown in
the profit and loss account within the costs of performance realised. The value of inventories will be adjusted if acquisition or manufacturing costs go above the
expected net realisable value or are dependent on range stocked.
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Notes relating to the consolidated annual accounts
Trade receivables and other assets
Trade receivables are classified as “advances and debts managed by the company” in accordance with IAS 39 “Financial instruments: recognition and measurement”
and shown at acquisition cost. If doubts should arise regarding recovery, customer debts will be shown at their lower realisable value. Besides the necessary
individual value adjustments, recognisable risks from the general credit risk will be taken into account by carrying out general value adjustments.
All other receivables and assets are shown at acquisition cost.
Evidence of depreciation will be taken into account by applying appropriate unscheduled depreciation to the lower recoverable amount.
In principle, non-interest-bearing receivables with a residual term of more than one year will be discounted and shown at their current value.
Securities
Securities are classified as “held for trading purposes” or as “available for sale” in accordance with IAS 39 “Financial instruments: recognition and measurement”
and valued at fair value.
Liquid assets
Cash and cash equivalents include cash assets, cheques and bank funds which are immediately available with an original term of up to three months and shown
at nominal value.
Income taxes
Income taxes represent the total actual income taxes and deferred income taxes.
Deferred taxes are calculated in accordance with IAS 12 “Income taxes”. Tax relief and tax charges which are likely to arise in the future will be shown for temporary
differences between the book values shown in the Group financial statement and the tax valuations for assets and liabilities. Tax savings expected from
the utilisation of loss carry-forwards which are considered to be realisable in the future will be shown as assets.
Deferred tax assets for deductible temporary differences and tax loss carry-forwards which exceed the deferred tax liabilities from taxable temporary differences
will only be recognised to the extent that it is sufficiently probable that sufficient taxable income will be obtained in order to realise the corresponding benefit.
Deferred taxes will be valued at the rates expected to be valid for the period in which an asset is realised or a liability is discharged. Deferred taxes will be shown
as tax proceeds or tax expenditure in the profit and loss account unless they relate to items entered directly under shareholders’ equity capital without affecting
income. If that is the case, the deferred taxes will also be entered under shareholders’ equity capital without affecting income.
Transitory items
Transitory depreciation is shown in connection with deferred charges to expenses and deferred credits to income.
Provisions
The actuarial valuation of pension provisions for company pension schemes is carried out in accordance with the projected unit credit method prescribed in IAS
19 “Employee benefits”. This procedure based on the present value of entitlement takes account of both the known pension and entitlements accrued on the closing
date as well as increases in wages and pensions to be expected in the future. Differences arising at the end of the year (so-called actuarial profits or losses)
between scheduled pension obligations determined and the actual value of entitlement will only be shown if they lie outside a margin of 10% of the scope of the
obligation. If that is the case, they will be distributed over the average remaining period of service of employees with an entitlement from the following year and
entered as income or expenditure. The pro rata interest relating to the addition to reserve included under pension costs will be shown as an interest expense within
the financial result.
Other provisions for pensions and similar obligations will be created based on actuarial reports in accordance with IAS 19.
Other provisions will be created in the case of legal or de facto obligations to third parties which are based on past business transactions or events and which
will probably (more than 50% likely to occur) lead to asset outflows which can be reliably determined.
They will be shown at their expected realisable value taking account of all the resulting recognisable risks and not offset against rights of recovery. The realisable
value with the highest probability of occurrence will be used in each case.
Provisions for warranty costs will be entered when the product in question is sold. The amount entered as the provision represents the best possible estimate of
the expenditure required to meet the current obligation.
Provisions for restructuring will be entered once the Group has drawn up a formal plan for the restructuring program and it has been distributed to the units to
be affected by the program.

Notes relating to the consolidated annual accounts
Liabilities
Financial obligations from financing leases are shown as liabilities at the current value of the future lease payments.
Liabilities due to banks are shown at the amount payable received minus directly attributable expenditure. Financing costs including those connected with the
repayment or discharge of premiums payable are shown on an accruals basis and will increase the book value of the instrument unless they were paid when it
was created.
Liabilities from supplies and services as well as other liabilities are shown at their repayment value apart from derivative financial instruments which are shown
at fair value in accordance with IAS 39 “Financial instruments: recognition and measurement”.
Contingencies
Contingencies are possible or existing liabilities based on past events where an outflow of resources is, however, regarded as improbable. In accordance with IAS
37 “Provisions, contingent liabilities and contingent assets”, such liabilities are not to be entered in the balance sheet but specified in the Notes to the balance
sheet.
Recognition of derivative financial instruments/Hedge accounting
All derivative financial instruments are to be recognised at fair value in accordance with IAS 39 “Financial instruments: recognition and measurement”.
The valuation of derivative financial instruments is based on inter-bank conditions or rates of exchange, using the buying and selling rates on the closing date. If
exchange rates are not used, the fair value will be calculated using recognised financial models. The fair value shown corresponds to the amount for which an
asset could be exchanged or a liability settled between knowledgeable, willing business partners in an arm’s length transaction in each case.
Profits and losses resulting from derivative financial instruments which have been defined as qualified hedging tools within a fair value hedge or for which it was
not possible to create a qualified hedge in accordance with IAS 39 “Financial instruments: recognition and measurement” and therefore hedge accounting cannot
be carried out will be shown as affecting the result in the profit and loss account. The results from derivative financial instruments for which a cash flow hedge
is created and which are proven to be effective will be shown in the shareholders’ equity capital without affecting the result until the time when the secured
underlying transaction is realised. The effects of any changes to the result caused by the ineffectiveness of these financial instruments will be shown immediately
in the profit and loss account.
Share-based payment systems
The Group is not currently operating any share price-oriented payment systems via shareholders’ equity capital instruments or share price-oriented cash payment
systems.
The making of assumptions and use of estimates
When the Group’s financial statement was drawn up, assumptions were made and estimates used which affected the presentation and levels of assets, liabilities,
income, expenditure and contingencies shown. These assumptions and estimates mainly related to the standardised determination of useful commercial lives within
the Group, the valuation of provisions and the feasibility of future tax relief. In individual cases, the actual values may differ from the assumptions made and
estimates used. Changes will be taken into account and shown as affecting the result when further information on these becomes available.
Realisation of profit
Income will be valued at the current value of the consideration received or debt to be reconciled and represents amounts for goods supplied and services provided
as part of normal business activity minus discounts, turnover tax and other taxes arising in connection with sales.
Proceeds from the sale of goods will be entered on delivery after the transfer of ownership.
Income from interest will be determined for periods taking into account the outstanding amount of the loan and the effective interest rate to be applied. The effective
interest rate is the interest rate to be used in order to ensure that the current value of the payments expected to be made in the future over the expected useful
life of the financial asset is equal to the net book value.
Dividend income from financial investments will be entered when the shareholder becomes entitled to payment.
Research and development costs
It is not permitted to show research costs as assets. Development costs are to be shown as assets if cumulatively all the appropriation criteria from IAS 38
“Intangible assets” are met, the research phase can be clearly distinguished from the development phase and costs incurred can be attributed to the individual
project phases without any overlapping.
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Notes relating to the consolidated annual accounts
II. Assets
Long-term assets
Development of tangible assets
Intangible assets Tangible assets Financial assets Total
in €k
Acquisition or manufacturing costs
Situation as of 01.01.2005 19,485 56,452 2,817 78,754
Currency conversion 723 637 310 1,670
Accruals 171 739 476 1,386
Deductions - 47 - 1,400 - 104 - 1,551
Transfers 21 - 21 0 0
Situation as of 31.12.2005
Depreciation
20,353 56,407 3499 80,259
Situation as of 01.01.2005 4,150 18,148 0 22,298
Currency conversion 74 286 0 360
Accruals 1,102 5,252 0 6,354
Deductions - 47 - 1,177 0 - 1,224
Value adjustments upwards 0 0 0 0
Transfers 0 0 0 0
Situation as of 31.12.2005 5279 22,509 0 27,788
Book value 31.12.2005 15,074 33,898 3499 52,471
Book value 31.12.2004 15,335 38,304 2817 56,456
Only the straight-line method of depreciation is used for tangible assets which are subject to wear based on useful life within the Group; unscheduled depreciation
will be applied if necessary.
Development of intangible assets
Goodwill or Goodwill Development Licences / Total
company values (from from consolidation costs industrial
in €k idividual balance sheets) of capital property rights
Acquisition or manufacturing costs
Situation as of 01.01.2005 8,113 2,842 4,511 4,018 19,484
Currency conversion 195 104 0 424 723
Accruals 0 0 12 159 171
Deductions 0 0 0 - 47 - 47
Transfers 0 0 0 21 21
Situation as of 31.12.2005 8,308 2,946 4,523 4,575 20,352
Depreciation
Situation as of 01.01.2005 224 0 2,624 1,301 4,149
Currency conversion 13 0 0 61 74
Accruals 56 0 842 204 1,102
Deductions 0 0 0 - 47 - 47
Value adjustments upwards 0 0 0 0 0
Transfers 0 0 0 0 0
Situation as of 31.12.2005 293 0 3,466 1,519 5,278
Book value 31.12.2005 8,015 2,946 1,057 3,056 15,074
Book value 31.12.2004 7,889 2,842 1,887 2,717 15,335
Distribution of intangible assets
in €k 31.12.2005 31.12.2004
Goodwill or company values 10,961 10,731
Licences and industrial property rights 3,056 2,717
Development costs 1,057 1,887
Total 15,074 15,335

Notes relating to the consolidated annual accounts
Goodwill or company values from individual accounts
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg 5,926 5,926
Seal UK Ltd., Basildon/Great Britain 884 916
Neschen Corporation, Elkridge/USA 243 211
Seal Graphics Americas Corporation, Elkridge/USA 962 836
Total 15,074 15,335
Goodwill or company values from individual accounts
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg 5,926 5,926
Seal UK Ltd., Basildon/Great Britain 884 916
Neschen Corporation, Elkridge/USA 243 211
Seal Graphics Americas Corporation, Elkridge/USA 962 836
Total 8,015 7,889
Of the goodwill or company values as of 31.12.2005 amounting to 10,961,000 Euros (previous year 10,731,000 Euros), 2,946,000 Euros (previous year
2,842,000 Euros) relate to differences arising from the consolidation of capital and 8,015,000 Euros (previous year 7,889,000 Euros) relate to goodwill or company
values from individual accounts. As a result of the application of IFRS 3 “Corporate mergers”, no scheduled depreciation was applied in the financial year.
The value of goodwill or company values is checked for depreciation once a year on a regular basis - and also at more frequent intervals if evidence shows that
it is necessary - by carrying out an impairment check.
The unscheduled depreciation (56,000 Euros) relates to the balanced company value for Seal UK Ltd., Basildon/Great Britain.
Licences/industrial property rights
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg 282 210
Neschen International B.V., Raalte/The Netherlands 76 76
Neschen Benelux B.V., Breda/The Netherlands 3 5
Filmolux S.A.R.L., Paris/France 6 9
Neschen ITALIA s.r.L., Bagnolo/Italy 1 0
Neschen Corporation, Elkridge/USA (consolidated) 2,686 2,416
Neschen Products España S.A., Barcelona/Spain 2 1
Total 3,056 2,717
The accruals mainly relate to the introduction of SAP R/3 EC-CS (software for consolidation purposes), SAP software licences and numerous Microsoft Office licences.
Development costs
in €k 31.12.2005 31.12.2004
Seal Graphics Europe B.V., Raalte/The Netherlands 1,057 1,887
The development costs relate to a project for developing technology to enable printers to be connected to laminators. The depreciation amounting to 842,000 Euros
mainly relates to the Jetcoater project.
59

60
Notes relating to the consolidated annual accounts
Development of fixed assets
Land and Technical Fixtures, Advance Total
in €k buildings equipment, plant fittings and payments
and machinery equipment
Acquisition or manufacturing costs
Situation as of 01.01.2005 21,398 25,759 8304 991 56,452
Currency conversion 100 243 294 0 637
Accruals 53 367 311 8 739
Deductions - 9 - 1,267 - 124 0 - 1,400
Transfers 58 143 46 - 268 - 21
Situation as of 31.12.2005 21,600 25,245 8831 731 56,407
Depreciation
Situation as of 01.01.2005 3,322 9,588 5,238 0 18,148
Currency conversion 15 114 157 0 286
Accruals 1,139 2,776 1,160 177 5,252
Deductions 0 - 1,106 - 71 0 - 1,177
Value adjustments upwards 0 0 0 0 0
Transfers 13 - 13 0 0 0
Situation as of 31.12.2005 4,489 11,359 6484 177 22,509
Book value 31.12.2005 17,111 13,886 2347 554 33,898
Book value 31.12.2004 18,076 16,171 3066 991 38,304
Distribution of fixed assets
Land and buildings
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg 13,880 14,418
Neschen Austria Ges.m.b.H., Vienna/Austria 2 3
Seal Graphics Europe B.V., Raalte/The Netherlands 1,300 1,808
Seal UK Ltd., Basildon/Great Britain 214 232
Filmolux S.A.R.L., Paris/France 150 166
Neschen UK Ltd., Stone/Great Britain 348 345
Neschen ITALIA s.r.L., Bagnolo/Italy 675 612
Neschen Corporation, Elkridge/USA (consolidated) 510 459
HSW Signall s.r.o., Prague/Czech Republic 32 33
Total 17,111 18,076
Technical equipment, plant and machinery
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg 12,450 14,317
Seal Graphics Europe B.V., Raalte/The Netherlands 92 360
Seal UK Ltd., Basildon/Great Britain 380 395
Seal Graphics Pacific Ltd., Hong Kong/China 13 13
Filmolux S.A.R.L., Paris/France 161 166
Neschen UK Ltd., Stone/Great Britain 12 5
Neschen ITALIA s.r.L., Bagnolo/Italy 0 45
Neschen Kft., Budapest/Hungary 1 1
Neschen Corporation, Elkridge/USA (consolidated) 764 837
Neschen Products España S.A., Barcelona/Spain 0 1
HSW Signall s.r.o., Prague/Czech Republic 13 31
Total 13,886 16,171
The accruals (367,000 Euros) mainly relate to modifications and extensions to production machines as well as the acquisition of various demonstration machines.
The deductions (book value 161,000 Euros) are the result of the sale of a conservation system and a pagination system.

Notes relating to the consolidated annual accounts
Fixtures, fittings and equipment
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg 982 1,096
Neschen Technologies GmbH, Bückeburg 0 1
Neschen Austria Ges.m.b.H., Vienna/Austria 8 11
Neschen International B.V., Raalte/The Netherlands 118 24
Neschen Benelux B.V., Breda/The Netherlands 41 54
Seal Graphics Europe B.V., Raalte/The Netherlands 108 491
Seal UK Ltd., Basildon/Great Britain 170 291
Seal Graphics Pacific Ltd., Hong Kong/China 1 1
Filmolux S.A.R.L., Paris/France 38 47
Neschen UK Ltd., Stone/Great Britain 11 15
Neschen ITALIA s.r.L., Bagnolo/Italy 28 37
Neschen Kft., Budapest/Hungary 6 2
Neschen Corporation, Elkridge/USA (consolidated) 797 946
Neschen Products España S.A., Barcelona/Spain 36 45
Neschen China Ltd., Hong Kong/China 3 5
Total 2,347 3,066
Im Geschäftsjahr 2005 wurden u.a. Computer, Drucker, eine Prüfmaschine, das SAP-LE-RF Datenfunksystem sowie eine Klimaanlage angeschafft.
Advance payments
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg 546 988
HSW Signall s.r.o., Prague/Czech Republic 8 3
Total 554 991
Unscheduled depreciation
The unscheduled depreciation (1,785,000 Euros) relates to land and buildings as well as fixtures, fittings and equipment of Seal Graphics Europe B.V., Raalte/The
Netherlands.
Development of financial assets
Participating Investment Investment Other loans Total
in €k
Acquisition or manufacturing costs
interests loans securities
Situation as of 01.01.2005 923 1204 12 678 2,817
Currency conversion 127 183 0 0 310
Accruals 167 263 0 46 476
Deductions 0 0 0 - 104 - 104
Transfers 0 0 0 0 0
Situation as of 31.12.2005
Depreciation
1,217 1,650 12 620 3,499
Situation as of 01.01.2005 0 0 0 0 0
Currency conversion 0 0 0 0 0
Accruals 0 0 0 0 0
Deductions 0 0 0 0 0
Value adjustments upwards 0 0 0 0 0
Transfers 0 0 0 0 0
Situation as of 31.12.2005 0 0 0 0 0
Book value 31.12.2005 1,217 1,650 12 620 3,499
Book value 31.12.2004 923 1,204 12 678 2,817
Participating interests
in €k 31.12.2005 31.12.2004
Neschen Service GmbH, Bückeburg 50 25
Neschen Portugal S.A., Mem Martins/Portugal 16 16
Filmolux Co. Ltd., Tokyo/Japan 43 43
Total 109 84
61

62
Notes relating to the consolidated annual accounts
Joint venture (equity method)
in €k 31.12.2005 31.12.2004
Neschen GBC Graphic Films LLC, Elkridge/USA 1,108 839
Total 1,217 923
Investment loans
in €k 31.12.2005 31.12.2004
Neschen GBC Graphic Films LLC, Elkridge/USA 1,650 1,204
Securities
in €k 31.12.2005 31.12.2004
Neschen Austria Ges.m.b.H., Vienna/Austria 10 10
Filmolux S.A.R.L., Paris/France 1 1
Neschen ITALIA s.r.L., Bagnolo/Italy 1 1
Total 12 12
Sonstige Ausleihungen
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg 1 1
Neschen International B.V., Raalte/The Netherlands 536 610
Neschen Benelux B.V., Breda/The Netherlands 75 59
Neschen Products España S.A., Barcelona/Spain 8 8
Total 620 678
Deferred taxes
in €k 31.12.2005 31.12.2004
Active deferred taxes 1,115 9,888
The deferred taxes relate to different valuations in the operating and tax statements, the expected future adjustment of tax loss carry-forwards and from consolidation
methods at Group level. In the financial year, deferred taxes on tax loss carry-forwards were only shown as assets at the rate of the deferred tax liabilities
relating to the Group company in question created in the financial year. Besides these, no deferred taxes on tax loss carry-forwards were created on the assets
side.
Short-term assets
Distribution of assets
in €k 31.12.2005 31.12.2004
Raw materials and supplies 4,903 6,425
Semi-finished products 3,388 4,350
Finished products and commodities 8,386 9,494
Advance payments 57 58
Total 16,734 20,327
Raw materials and supplies
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 1,865 2,324
Seal Graphics Europe B.V., Raalte/The Netherlands 27 917
Seal UK Ltd., Basildon/Great Britain 19 86
Filmolux S.A.R.L., Paris/France 41 29
Neschen Corporation, Elkridge/USA (consolidated) 2,951 3,069
Total 4,903 6,425

Notes relating to the consolidated annual accounts
Semi-finished products
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 2,192 3,009
Seal Graphics Europe B.V., Raalte/The Netherlands 4 292
Neschen Corporation, Elkridge/USA (consolidated) 1,192 1,049
Total 3,388 4,350
Finished products and commodities
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 4,524 4,520
Neschen Austria Ges.m.b.H., Vienna/Austria 108 151
Neschen Benelux B.V., Breda/The Netherlands 0 301
Seal Graphics Europe B.V., Raalte/The Netherlands 4 1513
Seal UK Ltd., Basildon/Great Britain 0 34
Seal Graphics Pacific Ltd., Hong Kong/China 45 52
Filmolux S.A.R.L., Paris/France 130 15
Neschen UK Ltd., Stone/Great Britain 521 576
Neschen ITALIA s.r.L., Bagnolo/Italy 318 366
Neschen Kft., Budapest/Hungary 38 52
Neschen Corporation, Elkridge/USA (consolidated) 1,657 879
Neschen Products España S.A., Barcelona/Spain 46 58
HSW Signall s.r.o., Prague/Czech Republic 908 925
Neschen China Ltd., Hong Kong/China 87 52
Total 8,386 9,494
Advance payments
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 50 55
Neschen Products España S.A., Barcelona/Spain 1 1
HSW Signall s.r.o., Prague/Czech Republic 6 2
Total 57 58
Trade receivables
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg 4,116 3,006
Neschen Austria Ges.m.b.H., Vienna/Austria 399 550
Neschen International B.V., Raalte/The Netherlands 9 4
Neschen Benelux B.V., Breda/The Netherlands 416 334
Seal Graphics Europe B.V., Raalte/The Netherlands 212 1,485
Seal UK Ltd., Basildon/Great Britain 214 176
Seal Graphics Pacific Ltd., Hong Kong/China 71 53
Filmolux S.A.R.L., Paris/France 2,552 2,648
Neschen UK Ltd., Stone/Great Britain 379 304
Neschen ITALIA s.r.L., Bagnolo/Italy 2,193 1,946
Neschen Kft., Budapest/Hungary 42 104
Neschen Corporation, Elkridge/USA (consolidated) 4,558 4,761
Neschen Products España S.A., Barcelona/Spain 517 769
HSW Signall s.r.o., Prague/Czech Republic 1,041 1,075
Neschen China Ltd., Hong Kong/China 135 98
Total 16,854 17,313
The trade receivables have a residual term of up to one year.
Individual risks have been taken into account by means of appropriate value adjustments.
63

64
Notes relating to the consolidated annual accounts
Distribution of other short-term receivables
in €k 31.12.2005 31.12.2004
Receivables from subsidiaries 778 789
Other assets 2,452 2,276
Deferred charges 1,379 1,752
Total 4,609 4,817
The other short-term receivables are shown at nominal value or current value to be reconciled. Any risks have been taken into account by means of value adjustments.
Receivables from subsidiaries
in €k 31.12.2005 31.12.2004
Neschen Service GmbH, Bückeburg 0 2
Neschen Portugal S.A., Mem Martins/Portugal 63 77
Filmolux Co. Ltd., Tokyo/Japan 206 149
Neschen GBC Graphic Films LLC, Elkridge/USA 509 561
Total 778 789
Other assets
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg 600 980
Neschen Technologies GmbH, Bückeburg 0 10
Neschen Austria Ges.m.b.H., Vienna/Austria 7 2
Neschen International B.V., Raalte/The Netherlands 547 524
Neschen Benelux B.V., Breda/The Netherlands 33 27
Seal UK Ltd., Basildon/Great Britain 36 17
Filmolux S.A.R.L., Paris/France 291 186
Neschen UK Ltd., Stone/Great Britain 7 6
Neschen ITALIA s.r.L., Bagnolo/Italy 75 55
Neschen Kft., Budapest/Hungary 6 11
Neschen Corporation, Elkridge/USA (consolidated) 205 87
Neschen Products España S.A., Barcelona/Spain 124 31
HSW Signall s.r.o., Prague/Czech Republic 521 340
Total 2,452 2,276
Other assets mainly include accounts receivable resulting from taxes, accounts receivable due from employees, insurance refunds and licence fees.
Deferred charges
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 38 0
Neschen International B.V., Raalte/The Netherlands 289 445
Neschen Benelux B.V., Breda/The Netherlands 9 8
Seal Graphics Europe B.V., Raalte/The Netherlands 84 433
Seal UK Ltd., Basildon/Great Britain 276 270
Seal Graphics Pacific Ltd., Hong Kong/China 13 11
Filmolux S.A.R.L., Paris/France 134 4
Neschen UK Ltd., Stone/Great Britain 14 13
Neschen ITALIA s.r.L., Bagnolo/Italy 4 10
Neschen Kft., Budapest/Hungary 0 1
Neschen Corporation, Elkridge/USA (consolidated) 448 509
HSW Signall s.r.o., Prague/Czech Republic 70 47
Neschen China Ltd., Hong Kong/China 0 1
Total 1,379 1,752
Deferred charges include payment of rent, leasing payments and interest in advance as well as other deferrals and have a residual term of up to one year.

Notes relating to the consolidated annual accounts
Cash and cash equivalents
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 174 82
Neschen Technologies GmbH, Bückeburg/Germany 0 7
Neschen Austria Ges.m.b.H., Vienna/Austria 1 1
Neschen International B.V., Raalte/The Netherlands 10 542
Neschen Benelux B.V., Breda/The Netherlands 1 20
Seal Graphics Europe B.V., Raalte/The Netherlands 0 20
Seal UK Ltd., Basildon/Great Britain 1 0
Seal Graphics Pacific Ltd., Hong Kong/China 10 6
Filmolux S.A.R.L., Paris/France 22 18
Neschen UK Ltd., Stone/Great Britain 1 1
Neschen ITALIA s.r.L., Bagnolo/Italy 1 1
Neschen Kft., Budapest/Hungary 28 31
Neschen Corporation, Elkridge/USA (consolidated) 230 673
Neschen Products España S.A., Barcelona/Spain 109 237
HSW Signall s.r.o., Prague/Czech Republic 48 24
Neschen China Ltd., Hong Kong/China 51 26
Total 687 1,689
III. Liabilities
Shareholders’ equity capital
in €k 31.12.2005 31.12.2004
Subscribed capital 8,750 8,750
Capital reserves 0 6,428
Balance sheet loss - 8,049 - 7,331
Foreign shares 517 579
Total 1,218 8,426
Authorised capital
The Executive Board of Directors is authorised to increase the company’s share capital by up to a total of 4,375,000.00 Euros by means of cash investments or
contributions in kind once or several times by 24 June 2009 with the consent of the Supervisory Board by issuing new no-par-value ordinary bearer shares. In
principle, shareholders are to be granted a subscription right too.
Foreign shares
in €k 31.12.2005 31.12.2004
Neschen Accutech Corporation, Elkridge/USA - 90 - 39
HSW Signall s.r.o., Prague/Czech Republic 748 666
Neschen China Ltd., Hong Kong/China - 251 - 284
Neschen Products España S.A., Barcelona/Spain 110 113
Other 0 123
Total 517 579
Distribution of provisions
in €k 31.12.2005 31.12.2004
Provisions for pensions and similar obligations 202 230
Provisions for taxes 2,933 2,703
Other provisions 2,056 1,810
Total 5,191 4,743
Provisions for pensions and similar obligations
in €k 31.12.2005 31.12.2004
Filmolux S.A.R.L., Paris/France 172 164
Neschen ITALIA s.r.L., Bagnolo/Italy 30 66
Total 202 230
65

66
Notes relating to the consolidated annual accounts
Provisions for taxes
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 1,371 1,315
Neschen Austria Ges.m.b.H., Vienna/Austria 0 27
Neschen International B.V., Raalte/The Netherlands 626 757
Neschen Benelux B.V., Breda/The Netherlands 37 0
Seal UK Ltd., Basildon/Great Britain 16 0
Filmolux S.A.R.L., Paris/France 299 275
Neschen UK Ltd., Stone/Great Britain 0 45
Neschen ITALIA s.r.L., Bagnolo/Italy 56 0
Neschen Corporation, Elkridge/USA (consolidated) 101 0
Neschen Products España S.A., Barcelona/Spain 95 130
HSW Signall s.r.o., Prague/Czech Republic 332 154
Total 2,933 2,703
Provisions for taxes from income 2,297 2,262
Provisions for other taxes 134 20
Provisions for deferred taxes 502 421
Total 2,933 2,703
The provisions for deferred taxes relate to various valuations in the Group balance sheet in relation to the taxable profit calculated for the companies included.
Other provisions
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 955 547
Neschen Technologies GmbH, Bückeburg/Germany 0 4
Neschen Austria Ges.m.b.H., Vienna/Austria 100 87
Neschen International B.V., Raalte/The Netherlands 150 281
Seal Graphics Europe B.V., Raalte/The Netherlands 10 10
Filmolux S.A.R.L., Paris/France 298 273
Neschen UK Ltd., Stone/Great Britain 52 27
Neschen Corporation, Elkridge/USA (consolidated) 458 558
HSW Signall s.r.o., Prague/Czech Republic 31 21
Neschen China Ltd., Hong Kong/China 2 2
Total 2,056 1,810
Other provisions
in €k 31.12.2005 31.12.2004
Leave 234 231
Supervisory board remuneration 19 19
Auditing costs 187 148
Part time option for older employees 36 0
Bonuses 117 0
Commission 41 158
Compensation 159 0
Outstanding invoices 99 397
Legal costs 150 100
Warranties 300 407
Social insurance for occupational accidents 151 163
Other 563 187
Total 2,056 1,810
The other provisions have a residual term of up to one year.
The valuation of the other provisions was based on the best possible estimate of the expenditure required to meet current obligations as of the closing date.

Notes relating to the consolidated annual accounts
Distribution of liabilities
in €k 31.12.2005 31.12.2004
Liabilities due to banks 70,100 69,910
Payments received 110 123
Liabilities from supplies and services 9,959 13,809
Liabilities to subsidiaries 8 168
Other liabilities 5,682 4,267
Deferred credits to income 202 144
Total 86,061 88,421
Liabilities due to banks
in €k 31.12.2005 31.12.2004
Neschen Austria Ges.m.b.H., Vienna/Austria 207 150
Neschen International B.V., Raalte/The Netherlands 65,851 65,390
Seal Graphics Europe B.V., Raalte/The Netherlands 13 0
Seal UK Ltd., Basildon/Great Britain 0 1
Filmolux S.A.R.L., Paris/France 2,438 3,098
Neschen ITALIA s.r.L., Bagnolo/Italy 1,416 1,114
Neschen Corporation, Elkridge/USA (consolidated) 175 157
Total 70,100 69,910
Residual term < 1 year 25,790 27,834
Residual term 1-5 years 44,310 42,076
Total 70,100 69,910
Securities
The following securities were granted under a bank pooling agreement:
(Pooling manager: Commerzbank AG)
• Land charge amounting to 40,000,000.00 Euros for joint liability relating to the following properties:
a) plot at Hans-Neschen-Strasse 1, 31675 Bückeburg (buildings and undeveloped land, lot Müsingen, field 5, land parcel 8/8). Entered in the Land
Register of the local court of Bückeburg (district of Müsingen, sheet 205).
b) plot at Windmühlenstrasse 6, 31675 Bückeburg (buildings and undeveloped land, lot Bückeburg, field 24, land parcel 52/562). Entered in the Land
Register of the local court of Bückeburg (district Bückeburg, sheet 2672).
• Assignment of the machines at the Bückeburg site and at the Archive Centres as security insofar as these are not accessories or essential parts of an
operational object in Bückeburg. With the exception of the siliconising machine – currently assigned as security to the Deutsche Bank AG.
• Assignment of the warehouse at Hans-Neschen-Strasse 1 and Windmühlenstrasse 6 in Bückeburg as security.
• Pledging of trademark rights, patents and licences
• Assignment of rights of disbursement towards EUROFACTOR AG, Munich including claims relating to trade credit insurance policies concluded and
assigned to the factor
• Global assignments for those outstanding debts not acquired by EUROFACTOR AG, Munich
• Pledging of business shares in the following European companies: HSW Signall s.r.o., Prague/Czech Republic, Filmolux S.A.R.L., Paris/France,
Neschen Italia s.r.l., Bagnolo/Italy, Neschen Products España S.A., Barcelona/Spain, Neschen Benelux B.V., Breda/The Netherlands, Seal Graphics Europe B.V.,
Raalte/The Netherlands, Seal UK Ltd., Basildon/Great Britain, Neschen UK Ltd., Stone/Great Britain. Pledging of European subsidiaries has not yet been
legally implemented in full.
• Liability of the controlling company from the sub-group in the USA (Neschen Corporation) through the provision of guarantees
• Guarantees of Seal Graphics Americas Corp. and Neschen Accutech Corp., both in Elkridge/USA.
Payments received
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 82 98
Neschen Benelux B.V., Breda/The Netherlands 2 2
HSW Signall s.r.o., Prague/Czech Republic 6 23
Neschen China Ltd., Hong Kong/China 20 0
Total 110 123
67

68
Notes relating to the consolidated annual accounts
Liabilities from supplies and services
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 5,923 7,873
Neschen Technologies GmbH, Bückeburg/Germany 0 8
Neschen Austria Ges.m.b.H., Vienna/Austria 48 31
Neschen International B.V., Raalte/The Netherlands 27 58
Neschen Benelux B.V., Breda/The Netherlands 77 307
Seal Graphics Europe B.V., Raalte/The Netherlands 48 1,430
Seal UK Ltd., Basildon/Great Britain 112 197
Seal Graphics Pacific Ltd., Hong Kong/China 18 0
Filmolux S.A.R.L., Paris/France 929 766
Neschen UK Ltd., Stone/Great Britain 100 142
Neschen ITALIA s.r.L., Bagnolo/Italy 682 805
Neschen Kft., Budapest/Hungary 1 0
Neschen Corporation, Elkridge/USA (consolidated) 1,432 1,523
Neschen Products España S.A., Barcelona/Spain 69 76
HSW Signall s.r.o., Prague/Czech Republic 476 592
Neschen China Ltd., Hong Kong/China 17 1
Total 9,959 13,809
Liabilities to subsidiaries
in €k 31.12.2005 31.12.2004
Neschen GBC Graphic Films LLC, Elkridge/USA 8 53
Other 0 115
Total 8 168
Liabilities to subsidiaries have a residual term of up to one year.
Other liabilities
in €k 31.12.2005 31.12.2004
Other liabilities from taxes 522 802
Other liabilities in connection with social security contributions 576 545
Other liabilities to personnel 46 122
Other 4,538 2,798
Total 5,682 4,267
Other liabilities shown include liabilities amounting to 4,461,000 Euros with a residual term of up to one year.
Other liabilities from taxes
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 188 177
Neschen Austria Ges.m.b.H., Vienna/Austria 30 130
Neschen Benelux B.V., Breda/The Netherlands 78 0
Filmolux S.A.R.L., Paris/France 147 181
Neschen UK Ltd., Stone/Great Britain 0 119
Neschen ITALIA s.r.L., Bagnolo/Italy 24 66
Neschen Corporation, Elkridge/USA (consolidated) 6 5
HSW Signall s.r.o., Prague/Czech Republic 49 124
Total 522 802

Notes relating to the consolidated annual accounts
Other liabilities in connection with social security contributions
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 300 159
Neschen Technologies GmbH, Bückeburg/Germany 0 1
Neschen Austria Ges.m.b.H., Vienna/Austria 8 7
Neschen International B.V., Raalte/The Netherlands 11 0
Neschen Benelux B.V., Breda/The Netherlands 0 5
Filmolux S.A.R.L., Paris/France 220 310
Neschen UK Ltd., Stone/Great Britain 0 14
Neschen ITALIA s.r.L., Bagnolo/Italy 10 11
Neschen Products España S.A., Barcelona/Spain 2 2
HSW Signall s.r.o., Prague/Czech Republic 25 36
Total 576 545
Other liabilities to personnel
in €k 31.12.2005 31.12.2004
Neschen Austria Ges.m.b.H., Vienna/Austria 5 5
Neschen International B.V., Raalte/The Netherlands 3 0
Neschen Benelux B.V., Breda/The Netherlands 9 117
Neschen China Ltd., Hong Kong/China 29 0
Total 46 122
Other liabilities
in €k 31.12.2005 31.12.2004
Neschen AG, Bückeburg/Germany 1,341 393
Neschen Austria Ges.m.b.H., Vienna/Austria 38 40
Neschen International B.V., Raalte/The Netherlands 2,391 1,660
Neschen Benelux B.V., Breda/The Netherlands 35 40
Seal Graphics Europe B.V., Raalte/The Netherlands 276 548
Seal UK Ltd., Basildon/Great Britain 52 50
Neschen UK Ltd., Stone/Great Britain 145 5
Neschen ITALIA s.r.L., Bagnolo/Italy 62 1
Neschen Kft., Budapest/Hungary 15 8
Neschen Corporation, Elkridge/USA (consolidated) 181 20
HSW Signall s.r.o., Prague/Czech Republic 2 4
Neschen China Ltd., Hong Kong/China 0 29
Total 4,538 2,798
Here, other liabilities shown mainly include financial derivatives valued at fair value (1,221,000 Euros), company loans (1,265,000 Euros) and specific
interest (995,000 Euros).
Financial derivatives
The derivative financial instruments for reducing risk and shown as liabilities include the following interest rate swaps:
Interest rate Nominal value Term Book value
in €k in €k
Interest rate swap 5% fixed 10,000 Up to 2007 340
Interest rate swap 6% fixed 6000 Up to 2010 881
The fair values of the derivative financial instruments have been determined using the cash value method.
Deferred credits to income
in €k 31.12.2005 31.12.2004
Seal UK Ltd., Basildon/Great Britain 113 52
Neschen ITALIA s.r.L., Bagnolo/Italy 71 48
Neschen Kft., Budapest/Hungary 3 3
HSW Signall s.r.o., Prague/Czech Republic 15 41
Total 202 14
The deferred credits to income have a residual term of up to one year.
69

70
Notes relating to the consolidated annual accounts
Liabilities statement
in €k Up to 1 year 1-5 years Over 5 years Total
Liabilities due to banks 25,790 44,310 0 70,100
Payments received 110 0 0 110
Liabilities from supplies and services 9,959 0 0 9,959
Liabilities to subsidiaries 8 0 0 8
Other liabilities 4,461 1,221 0 5,682
Transitory items 202 0 0 202
40,530 45,531 0 85,061
The liabilities to banks with a residual term of 1-5 years also include pro rata amounts from deferred interest and repayment amounts.
F. Information on the profit and loss account
General
Sales have gone down 4.1 million Euros compared with last year to 136.2 million Euros. The drop in sales is mainly due to the closure of the foam board business
(Great Britain, USA). In the year under report, one-time expenditures amount to 7.9 million Euros and relate to restructuring measures mainly in connection
with the closure of the Raalte site and staff cutbacks at the Bückeburg site. The distribution of the one-time expenditures is as follows:
One-time expenditures
in €k 2005 2005
Annual deficit - 9,350
Neschen AG, Bückeburg/Germany
Continued wage payments 763
Redundancy payments/compensation, other personnel expenses 631
Consultancy costs 700
Depreciation on Kröner laminator 225
Book deacidification project (chemicals) 178
2,497
Seal Graphics Europe B.V., Raalte/The Netherlands
Continued wage payments 1,712
Redundancy payments/compensation 1,350
Unscheduled depreciation 1,590
Devaluation of inventories 93
Relocation costs 78
4,823
Compensation for other Group companies 154
Other one-time expenditures 458
One-time expenditures 7,932
Annual deficit before one-time expenditures - 1,418
Sales
in €k 2005 2004
Neschen AG, Bückeburg/Germany 45,575 42,015
Neschen Austria Ges.m.b.H., Vienna/Austria 3,131 3,218
Neschen Benelux B.V., Breda/The Netherlands 5,055 5,906
Seal Graphics Europe B.V., Raalte/The Netherlands 11,120 16,344
Seal UK Ltd., Basildon/Great Britain 984 1,896
Seal Graphics Pacific Ltd., Hong Kong/China 439 445
Filmolux S.A.R.L., Paris/France 14,938 15,007
Neschen UK Ltd., Stone/Great Britain 4,456 4,412
Neschen ITALIA s.r.L., Bagnolo/Italy 3,982 4,119
Neschen Kft., Budapest/Hungary 431 418
Neschen Corporation, Elkridge/USA (consolidated) 37,335 36,938
Neschen Products España S.A., Barcelona/Spain 2,618 3,758
HSW Signall s.r.o., Prague/Czech Republic 7,817 7,013
Neschen China Ltd., Hong Kong/China 351 293
Subtotal 138,232 141,782
Sales deductions - 2,058 - 1,474
Total 136,174 140,308
90,599,000 Euros of the sales (previous year 99,767,000 Euros) relate to Group companies abroad. The development of sales by business area and region is
shown in the section on segment reporting.

Notes relating to the consolidated annual accounts
Changes in inventories
in €k 2005 2004
Changes in inventories 798 - 55
Other operating income
in €k 2005 2004
Exchange profits 600 1,083
Income from deductions 21 60
Income from booked receivables paid 178 1
Income from sidelines 454 88
Income from the disposal of provisions 307 20
Insurance refunds 25 14
Other 913 757
Total 2,498 2,023
Material costs
in €k 2005 2004
Costs of raw materials and supplies and goods acquired 76,961 78,309
Services purchased 1,026 1,353
Total 77,987 79,662
Personnel expenses
in €k 2005 2004
Wages 6,156 8,299
Salaries 15,967 15,863
Social security contributions 4,898 5,269
of which for pensions (62) (127)
Total 27,021 29,431
Number of employees
Annual average number of employees within the Group: 2005 2004
Clerical staff 394 417
Industrial staff 230 256
Total 624 673
Depreciation
in €k 2005 2004
Scheduled depreciation 4,513 4,310
Unscheduled depreciation 1,785 2,597
Depreciation on goodwill or company values 56 295
Total 6,354 7,202
Other operating expenditure
in €k 2005 2004
Rent, leases 4,142 4,707
Advertising costs 2,246 2,454
Travel expenses 1,588 1,483
Maintenance 989 1,194
Insurance 2,431 2,155
Legal and consultancy costs 2,478 2,981
Cleaning and security 88 824
Freight costs 5,121 5,331
Exchange rate losses 79 1,621
Losses on deductions 133 250
Value adjustments 477 394
Office supplies 865 1,009
Training costs 217 151
Commission 2,039 1,810
Other 7,010 8,100
Total 29,903 34,464
71

72
Notes relating to the consolidated annual accounts
Other operating expenditure includes extraordinary expenditure amounting to 4.1 million Euros. 1.5 million Euros of the extraordinary expenditure relates to the
closure of the Raalte site, 2.0 million Euros relates to expenditure from the redundancy payment scheme and consultancy costs for Neschen AG and 0.5 million
Euros relates to restructuring costs at the USA site.
Financial result
in €k 2005 2004
Income from interest 118 212
Interest expenditure - 4,906 - 4,797
Total - 4,788 - 4,585
Result from participating interests
in €k 2005 2004
Joint venture
Neschen GBC Graphic Films LLC, Elkridge/USA - 168 - 581
Other participating interests
Neschen Portugal S.A., Mem Martins/Portugal 0 3
Total -168 -578
Taxes
in €k 2005 2004
Income taxes 752 1,256
Other taxes 392 346
Deferred taxes - 141 - 12
Total 1,003 1,590
Allocation of deferred taxes
31.12.2005 31.12.2004
in €k To assets To liabilities To assets To liabilities
Intangible assets 85 459 18 321
Tangible assets 0 1,745 0 1,988
Financial assets 0 69 0 21
Inventories 262 3 307 0
Receivables and other assets 48 52 152 128
Provisions 10 118 12 121
Liabilities 141 42 357 87
Loss carry-forwards 1,866 0 1,620 0
Total from individual accounts 2,412 2,488 2,466 2,666
Deferred taxes from consolidation 990 301 1,054 287
Balancing - 2,287 - 2,287 - 2,532 - 2,532
Balance sheet items 1,115 502 988 421
G. Information on the Group cash flow statement
The cash flow statement shows how cash flow has developed within the Group during the course of the year under report via funds inflows and outflows in accordance
with IAS 7 “Cash flow statements”. It distinguishes between changes in funds from current business activity, investment activity and financial activity.
The funds from the cash flow statement include all the liquid assets shown in the balance sheet, i.e. cash assets, cheques and bank funds as long as they can be
made available within three months. These funds will not be subject to any restraint on disposal.
The cash flows from investment activity and financial activity are defined by payment while the cash flow from operating activity is derived indirectly based on the
net income for the year after income tax.
Indirect derivation takes account of changes in balance sheet items in connection with current business activity excluding effects from currency conversion and changes
in the consolidation group. Therefore these cannot be reconciled with the corresponding changes based on the published Group balance sheet.

Notes relating to the consolidated annual accounts
In the year under report, 149,000 Euros (previous year - 3,170,000 Euros) was generated from current business activities.
The cash flow from investment activities amounts to a funds outflow of - 1,193,000 Euros (previous year - 1,647,000 Euros) in the year under report.
The funds inflow from financial activity in the year under report amounts to 42,000 Euros (previous year 5,829,000 Euros).
H. Other notes
I. Segment reporting
The activities of the Neschen Group are divided into the segments “Graphics” and “Documents”.
Both segments generally use existing resources equally in production and administration. Areas which can be directly allocated to the segments include sales,
material costs, specific assets, finished products and commodities as well as some personnel expenses. The other items will be divided between sales or production
accordingly or in accordance with items already assigned.
We have taken great care to define the items correctly. Expenditure and income have been allocated according to economic criteria which sometimes differ
from the Group’s profit and loss account.
Investments by segment and the number of employees in each segment have been derived from the values determined.
Annual average number of employees:
Number
Segments:
Graphics 552
Documents 72
624
Investments:
in €k
Segments:
Graphics 865
Documents 522
1,387
1. Profit and loss account
Graphics Documents Total
in €k in €k in €k
Sales 120,707 15,467 136,174
Changes in inventories and own
performance shown as assets - 752 - 46 - 798
Total operating revenue 119,955 15,421 135,376
Material costs - 71,271 - 6,716 - 77,987
Gross return 48,684 8,705 57,389
Personnel expenses - 23,062 - 3,959 - 27,021
Other income 2,337 161 2,498
Other expenditure - 27,055 - 3,240 - 30,295
Depreciation - 5,452 - 902 - 6,354
Financial result - 4,480 - 308 - 4,788
Investment result - 168 0 - 168
Taxes - 401 - 210 - 611
Segment result - 9,597 247 - 9,350
Outside shareholders’ interests - 194 - 14 - 208
Group result - 9,791 233 - 9,558
EBIT - 4,716 766 - 3,950
EBITDA 736 1,668 2,404
73

74
Notes relating to the consolidated annual accounts
2. Balance sheet
Graphics Documents Total
in €k in €k in €k
Intangible assets 14,664 410 15,074
Tangible assets 27,619 6,279 33,898
Financial assets 3,459 40 3,499
Inventories 14,452 2,282 16,734
Receivables 15,803 1,829 17,632
Cash on hand, cash in bank 620 67 687
Other assets 4,358 588 4,946
Assets 80,975 11,495 92,470
Shareholders’ equity capital - 2,747 3,965 1,218
Provisions 4,541 650 5,191
Liabilities due to banks 64,987 5,113 70,100
Liabilities from supplies and services 8,776 1,301 10,077
Other liabilities 5,418 466 5,884
Liabilities 80,975 11,495 92,470
II. Information on earnings per share
The earnings per share is calculated by dividing the Group result to which the shareholders are entitled by the number of shares issued.
Details in Euros 2005 2004
Annual earnings for the Group - 9,559,298.83 - 15,169,502.12
Number of bearer shares 8,750,000.00 8,750,000.00
Earnings per share - 1.09 - 1.73
The creation of authorised capital within the context of §§ 202ff. of the Companies Act is potentially diluting if the resolution regarding the creation of authorised
capital includes the authority to exclude the subscription right in accordance with § 203 clause 2 of the Companies Act along with § 186 of the Companies
Act. The resolution regarding the creation of authorised capital does not exclude the subscription right.
There is no diluting effect which can be caused by so-called potential shares in the year under report.
III. Contingencies and liabilities
Other financial obligations
in €k Up to 1 year 1-5 years Over 5 years Total
Leasing obligations 1,060 1,070 0 2,130
Lease and tenancy obligations 1,623 3,789 1,129 6,541
Total 2,683 4,859 1,129 8,671
Leasingverhältnisse
Leasingraten der Folgeperioden
in €k Up to 1 year 1-5 years Over 5 years Total
Financial leasing obligations
Neschen ITALIA s.r.L., Bagnolo/Italy
Lease payments 80 127 0 207
Deduction of interest accrued - 5 - 24 0 - 29
Current value 75 103 0 178

Notes relating to the consolidated annual accounts
Operating lease obligations
in €k Up to 1 year 1-5 years Over 5 years Total
Neschen AG, Bückeburg/Germany 630 547 0 1,177
Neschen Austria Ges.m.b.H., Vienna/Austria 16 9 0 25
Neschen International B.V., Raalte/The Netherlands 45 51 0 96
Neschen Benelux B.V., Breda/The Netherlands 68 104 0 172
Filmolux S.A.R.L., Paris/France 97 98 0 195
Neschen UK Ltd., Stone/Great Britain 28 32 0 60
Neschen ITALIA s.r.L., Bagnolo/Italy 13 1 0 14
Neschen Kft., Budapest/Hungary 1 0 0 1
Neschen Corporation, Elkridge/USA (consolidated) 7 7 0 14
Seal Graphics Americas Corp., Elkridge/USA 8 19 0 27
Neschen USA LLC, Wichita/USA 7 18 0 25
HSW Signall s.r.o., Prague/Czech Republic 60 57 0 117
980 943 0 1,923
Lease and tenancy obligations
in €k Up to 1 year 1-5 years Over 5 years Total
Neschen Austria Ges.m.b.H., Vienna/Austria 11 0 0 11
Neschen International B.V., Raalte/The Netherlands 46 84 0 130
Neschen Benelux B.V., Breda/The Netherlands 68 11 0 79
Seal Graphics Pacific Ltd., Hong Kong/China 33 0 0 33
Filmolux S.A.R.L., Paris/France 367 1,882 1,129 3,378
Neschen UK Ltd., Stone/Great Britain 2 0 0 2
Neschen Kft., Budapest/Hungary 15 0 0 15
Neschen Corporation, Elkridge/USA (consolidated) 660 1,483 0 2,143
Neschen USA LLC, Wichita/USA 159 53 0 212
Seal Graphics Americas Corp., Elkridge/USA 173 276 0 449
Neschen Products España S.A., Barcelona/Spain 21 0 0 21
HSW Signall s.r.o., Prague/Czech Republic 67 0 0 67
Neschen China Ltd., Hong Kong/China 1 0 0 1
Total 1,623 3,789 1,129 6,541
Contingencies
No provision was made in the consolidated financial statement for the risk of legal proceedings associated with the summary termination of an agency agreement
as the lawyer for the Group company in question considered that there was little likelihood of this happening.
IV. Boards and remuneration
Members of the Executive Board of Directors include the following:
• Stefan Zinn, Dipl.-Kaufmann (MBA), Bückeburg
- Spokesman for the Executive Board of Directors -
• Martin E. Davies, Dipl.-Ingenieur (degree in mechanical engineering), Bückeburg
• Dr. rer. Pol. Wolfram Meiritz, Diplom Ökonom (degree in economics), Bückeburg (from 01.07.2005-31.12.2005)
• Dr. rer. pol. Ulf Hülbert, Diplom-Kaufmann (MBA), Bückeburg (since 01.01.2006)
Members of the Supervisory Board include the following:
• Dr. Hans-Günter Scholz,
Diplom-Chemiker (degree in chemistry) and corporate consultant, Hirschberg (Chairman)
• Dr. Henning Sulitze,
Diplom-Physiker (degree in physics), Gärtringen-Rohrau
• Rolf-Werner Zinn, Dipl.-Kaufmann (MBA),
Bückeburg (since 22.02.2005)
Besides the company under report, Dr. Sulitze was a member of the following Supervisory Boards and Advisory Committees in 2005:
- Thormählen Schweißtechnik AG, Bad Oldesloe
- Goldschmidt-Thermit GmbH, Leipzig (Chairman of the Supervisory Board)
The other members of the Supervisory Board were neither members of any other Supervisory Boards nor did they hold any comparable positions (in accordance
with § 125, section 1 sentence 3 of the German Companies Act) in 2005.
75

76
Notes relating to the consolidated annual accounts
The remuneration of the Executive Board of Directors and the Supervisory Board were distributed as follows:
Executive Board of Directors Supervisory Board
in €k in €k
Basic salary 455 26
Performance-related bonus 0 0
Bonus with long-term incentive 0 0
455 26
Variable remuneration to the Supervisory Board which depends on the amount of dividends does not apply as no dividend distribution is intended for the 2005
financial year.
No loans or advances were granted to members of the Executive Board of Directors or the Supervisory Board in the financial year.
Members of the Scientific Advisory Board include the following:
• Dr. Bernd Kappelhoff (Chairman)
President of the State Archives Lower Saxony
• Dr. Marcus Stumpf
Head of Stock Conservation, State Archives North Rhine-Westphalia
• Dr. Anna Haberditzel
Senior Conservator, Director of the State Archives Baden-Württemberg
• Dr. Rainer Hofmann
Archives Director, Federal Archives Koblenz
• Rainer E. Klemke
Head of the Working group for State Museums/Contemporary History/Memorials, Senate Administration for Science, Research and Culture, Berlin
• Dr. Norbert Kühn
Head of the Rhineland Archives and Museum Department, Rhineland Agricultural Association
V. Declaration on Corporate Governance Code
Pursuant to § 161 of the German Companies Act, the Board of Managers and the Supervisory Board have passed a joint declaration of conformity regarding
the recommendations of the German Corporate Governance Code. The declaration of conformity can be viewed by shareholders at any time on the Neschen
AG website.
Neschen AG complies with the directory provisions of the Code, with the exception of the following:
Code sub-paragraph 2.3.4 Due to over-proportionately high costs, the Annual General Meeting will not be published in modern communication media.
Code sub-paragraph 3.8 D & O insurance without retention (Directors & Officers liability insurance) has been concluded for members of the Board of
Managers.
Code sub-paragraph 4.2.4 We have published the total remuneration for the Board of Managers for 2005. We cannot envisage any advantages for our
shareholders in an individualised presentation of the figures.
Code sub-paragraph 5.3 In view of the size of the Supervisory Board, we did not form any committees.
Code sub-paragraph 5.4.5 We have published the total remuneration for the Supervisory Board for 2005. The variable share was omitted as no dividend was
distributed. There is no stock option program for the members of the Supervisory Board. We cannot envisage any advantages for
our shareholders in an individualised presentation of the figures.
Code sub-paragraph 7.1.2 The periods of 90 and 45 days recommended for publishing the consolidated financial statements and the interim reports r
espectively will not be observed on account of the required consolidation of key data.
In accordance with the declaration of conformity, the following information is given regarding holdings which are subject to disclosure:
As of 31.12.2005, the Supervisory Board member Rolf W. Zinn holds 46.0% of the shares issued together with his wife. Until 22.10.2005, the Supervisory
Board member Dr. Henning Sulitze was the managing director of Vermögensverwaltung Erben Dr. Karl Goldschmidt GmbH, Essen, holding 29.9% of the shares
issued. As of 31.12.2005, the chairman of the Supervisory Board Dr. Hans-Günter Scholz does not hold any shares in Neschen AG. On 31.12.2005, the members
of the Executive Board of Directors hold less than 1% of the shares issued by the company.
Bückeburg, 4 April 2006
Neschen AG
Stefan Zinn Martin E. Davies Dr. Ulf Hülbert
Spokesman for the Executive Board of Directors Executive Board of Directors
Executive Board of Directors

Auditors’ report
Notes relating to the consolidated annual accounts
We have examined the consolidated financial statements – consisting of the balance sheet, profit and loss statement, statement of changes to shareholders’ equity,
cash flow statement and notes - and consolidated annual report of Neschen AG, Bückeburg for the business year from 1 January to 31 December 2005. The
company’s legal representatives are responsible for preparing the consolidated financial statements and the annual report in accordance with the IFRS as they
are to be applied in the EU and the supplementary provisions of German commercial law in accordance with § 315a para. 1 of the German Commercial Code
and the supplementary provisions of the memorandum and articles of association. Our responsibility is to express our opinion based on our audit of the financial
statements and the annual report. We were also commissioned to assess whether the consolidated financial statements also correspond to the IFRS as a whole.
We duly conducted our audit of the consolidated financial statements pursuant to § 317 of the German Commercial Code, thereby observing the German auditing
regulations and generally accepted standards laid down by the Institut der Wirtschaftsprüfer (IDW, Institute of Auditors). The audit is to be planned and performed
so as to obtain reasonable assurance that the presentation of the state of affairs relating to assets, financial and earnings in the consolidated statement
is drawn up pursuant to the applicable accounting regulations and the group report is free from material misstatements and irregularities accordingly. Knowledge
of the business activities of the company, the economic and legal environment of the Group and evaluations regarding possible misstatements were taken into
account in the determination of our audit procedures. During the audit, the effectiveness of accounting-related in-company control systems as well as evidence
supporting the amounts and disclosures presented in the consolidated financial statements and the annual report were examined on a test basis within the framework
of the audit. Our audit included an assessment of the annual accounts of the companies in the group, the limitations of the scope of consolidation, the
applied accounting and consolidation principles, significant estimates made by the legal representatives as well as an evaluation of the overall presentation of
the consolidated financial statement and the consolidated report. We believe our audit provides a reasonable basis for our opinions.
Our audit gave no cause for objections.
In our opinion which is based on the knowledge gained during our audit, the consolidated financial statements are in accordance with the IFRS as they are to
be applied in the EU and the supplementary provisions of German commercial law in accordance with § 315a para. 1 of the German Commercial Code, the supplementary
provisions of the memorandum and articles of association and the IFRS as a whole and, taking these provisions into account, they provide a true and
fair view of the state of affairs of the company regarding assets, finances and earnings. All in all, the consolidated report is in line with the consolidated financial
statements, provides a true and fair view of the Group’s state of affairs and presents an appropriate picture of the opportunities and risks involved in future
development.
Düsseldorf, 6 April 2006
ADK GmbH Wirtschaftsprüfungsgesellschaft (auditing company)
Dipl.-Kfm. K. Verstegen
auditor
C. Rennert-Bergenthal
auditor
77

78
Neschen AG balance sheet (in accordance with the German Commercial Code)
Neschen AG balance sheet
ASSETS
Financial year Previous year
Euros Euros Euros
A. Start-up and business expansion expenses 0.00 9,009.00
B. Fixed assets
I. Intangible assets
1. Royalties, patents, licences and
similar rights and values as well as
licences to such rights 253,775.00 172,807.00
2. Goodwill or company value 4,889,059.00 5,185,366.00
5,142,834.00 5,358,173.00
II. Tangible assets
1. Land and buildings including buildings
on property abroad 13,160,059.75 13,773,782.75
2. Technical equipment, plant and machinery 9,586,705.00 11,421,925.00
3. Other equipment, fixtures, fittings and equipment 505,334.70 547,402.70
4. Advance payments and plant and machinery
under construction 545,707.48 987,806.96
23,797,806.93 26,730,917.41
III. Financial assets
1. Shares in affiliated companies 8,649,806.30 8,629,806.30
2. Investments 0.00 24,500.00
3. Cooperative shares 150.00 150.00
8,649,956.30 8,654,456.30
C. Current assets
I. Inventories
1. Raw materials and supplies 1,864,649.57 2,324,112.84
2. Work-in-progress 2,351,347.10 3,361,281.05
3. Finished products and goods 4,703,262.57 4,775,004.07
4. Advance payments 50,500.00 55,249.80
8,969,759.24 10,515,647.76
II. Receivables and other assets
1. Trading receivables 3,382,011.06 2,973,287.99
2. Accounts due from affiliated companies 4,200,116.50 4,650,402.27
3. Accounts due from other Group companies 778,170.31 789,535.30
4. Other assets 1,597,916.54 970,786.17
9,958,214.41 9,384,011.73
- of which with a residual term of more than
One year 0.00 Euros (26,167.35 Euros)
III. Cash on hand, cash in Federal bank, cash in
banks and cheques 173,813.49 81,948.08
D. Transitory items 38,470.81 14,269.43
56,730,855.18 60,748,432.71

Neschen AG balance sheet
LIABILITIES
A. Shareholders’ equity
Neschen AG balance sheet (in accordance with the German Commercial Code)
Financial year Previous year
Euros Euros Euros
I. Capital subscribed 8,750,000.00 8,750,000.00
II. Capital reserve 1,406,765.22 13,960,233.80
B. Provisions
1. Tax provisions 1,292,866.00 1,237,262.00
2. Other provisions 955,426.00 547,350.00
2,248,292.00 1,784,612.00
C. Liabilities
1. Advance payments received on orders 81,928.14 98,419.27
- of which with a residual term of up to one year
81,928.14 Euros (98,419.27 Euros)
2. Trade receivables 5,929,071.24 7,900,467.50
- of which with a residual term of up to one year
5,929,071.24 Euros (7,900,467.50 Euros)
3. Liabilities due to affiliated companies 36,419,370.75 27,472,286.80
- of which with a residual term of one year
36,220,539.57 Euros (27,074,619.32 Euros)
4. Liabilities due to Group companies 7,797.60 53,488.00
- of which with a residual term of up to one year
7,797.60 Euros (53,488.00 Euros)
5. Other liabilities 1,887,630.23 728,925.34
44,325,797.96 36,253,586.91
- of which due to shareholders
1,264,987.68 Euros (0.00 Euros)
- of which from taxes
220,686.46 Euros (214,904.79 Euros)
- of which in connection with social security
299,877.94 Euros (322,274.85 Euros)
- of which with a residual term of up to one year
637,630.23 Euros (728,925.34 Euros)
- of which with a residual term of more than five years
200,000.00 Euros (0.00 Euros)
56,730,855.18 60,748,432.71
79

80
Income statement of Neschen AG
Financial year Previous year
Euros Euros Euros
1. Sales 69,372,897.25 70,920,176.20
2. Reduction in stock of finished and semi-finished products 1,159,200.90 - 56,348.52 -
3. Total operating revenue 68,213,696.35 70,863,827.68
4. Other operating income
a) ordinary operating income
aa) other ordinary income 1,145,607.40 1,261,088.50
b) income from disposal of fixed assets and upward
value adjustments on fixed assets 8,260.14 43,048.96
c) income from reduction of overall adjustment for outstanding payments 0.00 20,500.00
d) income from the release of provisions 20,365.97 15,504.92
e) other income from ordinary business activities 449,771.20 192,637.99
1,624,004.71 1,532,780.47
5. Cost of materials
a) cost of raw materials, supplies and services purchased 43,559,968.98 - 46,841,188.71 -
6. Personnel expenses
a) wages and salaries 11,584,563.30 - 11,538,241.23 -
b) social security, pensions and other benefit costs 2,244,811.09 - 2,409,709.95 -
13,829,374.39 - 13,947,951.18 -
- of which for pensions
62,471.30 - Euros (126,975.94 0 - Euros)
7. Depreciation
a) on intangible assets and tangible assets and on
start-up and business expansion costs shown as assets
- 402,912.10 - Euros (0.00 Euros) of which is unscheduled depreciation
in accordance with § 253 (2) sentence 3 of the German Commercial Code 3,642,074.47 - 3,437,167.60 -
8. Other operating expenses
a) ordinary operating expenses
aa) costs for premises 565,814.12 - 596,391.05 -
ab) insurance, contributions and levies 529,432.86 - 396,895.76 -
ac) repairs and maintenance 364,721.00 - 512,101.32 -
ad) motor vehicle expenses 165,057.35 - 162,226.94 -
ae) advertising costs and travel expenses 563,679.54 - 460,553.66 -
af) cost of sales 2,185,927.45 - 2,130,102.26 -
ag) miscellaneous operating costs 5,956,654.92 - 5,357,792.02 -
b) losses from the disposal of fixed assets 19,594.00 - 206,328.00 -
c) losses from the devaluation or disposal of
current assets and transfer to general bad debt allowance 319,607.99 - 295,552.25 -
d) other expenditure on ordinary business activities 105,939.55 - 131,801.10 -
10,776,428.78 - 10,249,744.36 -
9. Income from investments 9.00 12.81
10. Other interest and similar income 40,371.89 370,320.74
- of which from affiliated companies
38,800.00 Euros (368,116.56 Euros)
11. Depreciation on financial assets and securities in current assets 8,480,230.00 - 5,122,271.50 -
- of which unscheduled depreciation in accordance with
§ 253 (2) sentence 3 of the German Commercial Code
8,480,230.00 - Euros (5,122,271.50 - Euros)
12. Interest and similar expenditure 2,093,341.98 - 2,714,948.97 -
- of which due to associated companies
1,821,360.14 - Euros (2,483,624.76 - Euros)
13. Profit/loss from ordinary business activities 12,503,336.65 - 9,546,330.62 -
14. Taxes on income and earnings 0.00 1,038.24
15. Other taxes 50,131.93 - 81,504.59 -
50,131.93 - 80,466.35 -
16. Annual deficit 12,553,468.58 - 9,626,796.97 -
17. Profit brought forward from the previous year 0.00 1,833,847.24 -
18. Transfers from capital reserves 12,553,468.58 5,544,766.20
19. Transfers from profit reserves
a) from statutory reserves
b) from other profit reserves 0.00 511,291.88
0.00 5,404,586.13
0.00 5,915,878.01
20. Balance sheet profit 0.00 0.00

NESCHEN AG
Hans-Neschen-Strasse 1
D-31675 Bückeburg
Tel.: ++49 5722 20 70
Fax: ++49 5722 20 71 97
E-mail: neschen@neschen.de
China
NESCHEN China Ltd.
Unit A, 13/F, Phase 1
Leader Industrial Centre
188-202 Texaco Road, Tsuen Wan,
New Territories
Hong Kong
Tel.: ++852 25 55 09 82
Fax: ++852 25 55 06 71
E-mail: neschencn@hotmail.com
SEAL Graphics Pacific Ltd.
Unit A, 13/F, Phase 1
Leader Industrial Centre
188-202 Texaco Road, Tsuen Wan,
New Territories
Hong Kong
Tel.: ++852 24 07 37 38
Fax: ++852 24 08 09 73
E-mail: seal@hkstar.com
England
SEAL UK Ltd.
Watkins Close
Burnt Mills Industrial Estate
Basildon, Essex SS13 1TL
United Kingdom
Tel.: ++44 1268 722400
Fax: ++44 1268 725864
www.sealbrands.com
NESCHEN UK Ltd.
Emerald Way
Stone Business Park, Stone
Staffordshire ST15 0SR
Tel.: ++44 1785 610110
Fax: ++44 1785 610111
E-mail: neschen@neschen.co.uk
France
Filmolux Sarl
14, Avenue du Professeur A. Lemière
F-75020 Paris
Tel.: ++33 1 49 20 67 89
Fax: ++33 1 48 58 28 29
E-mail: filmolux@wanadoo.fr
Italy
NESCHEN Italia srl
Via Leonardo da Vinci
Zone Industriale Nord
I-26010 Bagnolo Cremasco
Tel.: ++39 0373 237 911
Fax: ++39 0373 237 930
E-mail: info@neschen-italia.it
Japan
Filmolux Co. Ltd.
Akiyama Building
6-10 Nishigoken-Cho
Shinjuku-ku, Tokyo
Tel.: ++81 332 69 04 91
Fax: ++81 332 69 42 09
E-mail: filmolux-japan@filmolux.co.jp
The Netherlands
NESCHEN International B.V.
Heesweg 16A
NL 8102 HJ Raalte
The Netherlands
Tel.: ++31 572 346 015
Fax: ++31 572 346 016
E-mail: general@neschenint.nl
NESCHEN Benelux B.V.
Mijkenbroek 18
NL 4824 AB Breda
PO Box 6870
NL-4802 HW Breda
Tel.: ++31 76 548 60 00
Fax: ++31 76 542 11 01
E-mail: neschen@neschen.nl
Seal Graphics Europe
Heesweg 16A
NL 8102 HJ Raalte
The Netherlands
Tel.: ++31 572 346 000
Fax: ++31 572 346 001
www.sealgraphics.com
info@sealgraphics.nl
Austria
NESCHEN Austria GmbH
Panikengasse 3-5
A-1160 Vienna
Tel.: ++43 1 49 49 96 40
Fax: ++43 1 49 49 96 422
E-mail: office.vienna@neschen.at
Portugal
NESCHEN Portugal S.A.
Estrada de Barrosa, Elospark
Edificios 12 e 13 Algueirao
P-2725 – 193 Mem Martins
Tel.: ++351 219 267 220
Fax: ++351 219 264 986
E-mail: neschen@neschen.pt
Spain
NESCHEN Products España S.A.
L’Església 4-10
E - Barcelona 08024
Tel.: ++34 932 17 15 14
Fax: ++34 932 17 98 77
E-mail: neschen@telefonica.net
Czech Republic
HSW Signall s.r.o.
Modranská 25
CZ-143 00 Prague 4
Tel.: ++420 2 41 02 94 11
Fax: ++420 2 41 02 94 99
E-mail: signall@hsw.cz
Hungary
NESCHEN Kft.
Kerepesi út 27/a
H-1087 Budapest
Tel.: ++36 1 4 77 42 73
Fax: ++36 1 3 33 53 21
E-mail: neschen@pronet.hu
USA
NESCHEN Corporation
7091 Troy Hill Drive
Elkridge, MD 21075
Tel.: ++1 410 3 79 54 00
Fax: ++1 410 5 79 89 60
Neschen AG 2005 – Addresses
NESCHEN-Accutech Corporation
7091 Troy Hill Drive
Elkridge, MD 21075
Tel.: ++1 410 3 79 56 88
Fax: ++1 410 5 79 89 59
E-mail: info@neschen-accutech.com
NESCHEN Americas Corporation
7091 Troy Hill Drive
Elkridge, MD 21075
Tel.: ++1 410 3 79 54 00
Fax: ++1 410 5 79 89 60
www.neschenamericas.com
SEAL Graphics Technologies Corporation
615 Progress Way
Sun Prairie, WI 53590
Tel.: ++1 608 8 34 81 00
Fax: ++1 608 8 34 00 23
www.sealgraphics.com
81

82
Imprint
Imprint
The Annual Report 2005 appears in
German and English.
If you require additional information, please
contact us at the following adress:
Publisher:
Neschen AG
Hans-Neschen-Str. 1
D-31675 Bückeburg
Tel. (++ 49) (0) 57 22 - 2 07-0
Fax (++ 49) (0) 57 22 - 2 07-197
e-mail: neschen@neschen.de
internet: www.neschen.com
Conception, design:
Ilka Wohl, Dipl. Grafik-Designerin, Neschen AG
Photos:
Frank Baumhammel, 61231 Bad Nauheim
Lithography:
Lightwerk, 32479 Hille
Printer:
Vogler-Druck, 33790 Halle

Neschen AG • Hans-Neschen-Str. 1 • D-31675 Bückeburg
Tel. ++ 49 (0) 57 22-20 70 • Fax ++ 49 (0) 57 22-20 71 97
www.neschen.com