Agfa jaarv. 2002 GB p1-36 - KU Leuven Bibliotheken

Agfa annual report 2001 | 2

Contents 3 Key Figures 2001

4 Company Profile

6 Letter to the shareholders

8 Company Strategy

9 Management Report

32 Corporate Governance

37 Financial Statements

38 Independent Auditor's Report

39 Consolidated Statements of Income

40 Consolidated Balance Sheets

41 Consolidated Statements of Shareholder's Equity

42 Consolidated Statements of Cash Flow

43 Notes to the Consolidated Financial Statements

91 Summary version of Statutory Accounts

95 Shareholder information

Key figures 2001euro million

2001 2000 1999

Net sales 4,911 5,260 4,731

change (6.6)% 11.2% 8.5%

Sales per Business Segment

Graphic Systems 1,890 2,065 1,945

share of Group sales 39% 39% 41%

Technical Imaging 1,823 1,708 1,352


Consumer Imaging 1,198 1,487 1,434


Sales 'New Digital Solutions' 1,372 1,146 712


Research & Development expenses 231 224 241


Operating result before restructuring expenses1 260 527 364

Return on sales 5.3% 10.0% 7.7%

Restructuring expenses1 524 126 273

Net income of consolidated companies (251) 175 11

Share of results of associated companies2 (37) (6) 3

Net result (288) 169 14

Shareholders' equity 1,267 1,570 1,439

Financial debt 1,066 1,375 1,241

Working capital3 1,672 1,869 1,460

Total assets 4,527 5,070 4,854

Gross operating cash flow 226 526 300

Net operating cash flow 738 436 377

Outstanding shares 140 million 140 million 140 million

Earnings per share Euro -2.06 Euro 1.21 Euro 0.10

Gross dividend per share Euro 0.23 Euro 0.45 Euro 0.33

Employees4 21,038 21,946 22,635

1 including non-recurring results

2 including minority interest

3 current assets minus current liabilities

4 full time equivalent permanent employees; December 31, 2001

| Agfa annual report 20013

4Agfa annual report 2001 |

The Agfa-Gevaert Group develops, produces and distributes a wide

range of analogue and digital imaging systems and products, primarily

for the graphics industry, healthcare, non-destructive testing, photo-

graphy and industrial imaging.

The corporate headquarters and the parent company are located in

Mortsel, Belgium. The largest production and research centres are

based in Belgium, Germany and the United States.

The operational activities are divided into 3 business segments which

are further split into 5 business groups.

Agfa at a glance

Share of Group Sales 2001by business segment

Graphic Systems: 39 % (2000: 39 %)

Technical Imaging: 37 % (2000: 33 %)

Consumer Imaging: 24 % (2000: 28 %)

Company Profile

5 | Agfa annual report 2001

Graphic SystemsIn terms of sales, Graphic Systems is Agfa’s largest business segment supplying awide range of electronic and photographic prepress systems and consumables for thegraphics industry. Agfa is the worldwide number one in prepress solutions and aleading global player in the newspaper market, and the packaging industry as wellas the commercial printing market.

Technical imagingTechnical Imaging comprises three business groups: HealthCare, Non-DestructiveTesting and Industrial Imaging.

HealthCare

HealthCare supplies conventional X-ray equipment as well as a state-of-the-art rangeof diagnosis and communication systems, including systems for computed radiographyand digital networks for hospitals where Agfa is the global market leader. Agfa operates in medical imaging with equipment, consumables and services for varioushospital departments and supplies comprehensive information systems tailored tothe needs of the hospital.

Non-Destructive Testing (NDT)

Non-Destructive Testing (NDT) guarantees safety, performance and quality and helpsto reduce operational cost. Agfa is the global leader in both analogue and digitalX-ray and ultrasonic inspection systems which check the structure and tolerance ofmaterials without damaging or deforming them. They are used mainly in the aerospace, automotive, railway, energy and petrochemical industries.

Industrial Imaging

Industrial Imaging operates in a number of areas. It supplies solutions for the capture,management, secure microfilm storage and distribution of business documents forthe document systems market, digital and conventional optical sound-recording filmand colour copy film for the cinema market and high-security identification docu-ments and semi-finished products for electroluminescent lighting and displays.

Consumer ImagingConsumer Imaging supplies photographic products for the consumer market as wellas consumables and equipment for finishing labs. Agfa plays a central role in thetaking, processing and finishing of photographs. Among other things, Agfa is theglobal leader in high-speed printers for industrial finishing centres (WSF- WholesaleFinishing) and private label film.

Business segments

Dear shareholders and friends of the company

2001 was a turbulent and difficult year for our Group, one in which we had to dealwith both external and internal problems.

The sudden, marked slowdown in economic growth at the beginning of the year isthe major reason for the deterioration of our results. In particular, the fall in thegraphics industry and the sharp decline in Consumer Imaging sales (our activitieswhich are most sensitive to the business cycle) affected our results substantially.

The uncertainty about the possible sale of Consumer Imaging weighed on our customers and staff, and contributed to the drop in turnover. After Agfa’s decisionnot to accept the offer but to make this activity more cost effective, sales inConsumer Imaging stabilised.

Finally, the delay in bringing our new digital minilabs to the market, the decision todiscontinue the loss-making sales of digital cameras and scanners and some qualityissues also affected sales and reduced margins.

By mid 2001, sales were 5.5% below those of 2000 and the operating result deteriorated by around 40%. This made it particularly clear that our cost structurewas too heavy.


the shareholdersLetter to

(from left to right)

André LeysenChairman of the Board of Directors

Ludo VerhoevenChairman of the Board of Management

and CEO


Bellus apparatus bellis corrumperet gulosus agricolae, etiam

lascivius chirographi agnascor plane adfabilis saburre. Saetosus

agricolae adquireret concubine, et umbraculi infeliciter

deciperet Augustus.

After the change in management in June, it was therefore decided to launch theHorizon plan. In a nutshell, this plan aims to reduce costs and to transform Agfainto a much less complex, far more transparent and flexible organisation. Withinthis framework, we have been obliged to decide to reduce our staff levels by approximately 4,000. We did not take this decision lightly but we are convinced thatthese measures are necessary to safeguard the future of Agfa and its many remainingmembers of staff.

The one-off restructuring cost for the implementation of Horizon has been estimated at 550 million Euros. We were able to charge the major part of these – 440 million Euros – to 2001, which explains the net loss our Group incurred thisyear.

In spite of the net loss of – 288 million Euros registered for 2001, the Board ofDirectors will propose to the Shareholders’ General meeting of April, 30th, 2002 topay a gross dividend per share of 0.23 Euros, thus expressing its confidence in thecapacity of the Group to rapidly improve its results.

The Shareholders’ General Meeting will also be asked to approve a proposal for animportant change in the composition of the Board of Directors. Mr André Leysen,Chairman, and Mr Hermann Josef Strenger, Vice Chairman, consider themselvesbound to resign for age reasons. Mr Werner Wenning has taken on important newprofessional responsibilities which prevent him from continuing his duties as adirector of our company. We are confident that Messrs Jo Cornu, Klaus Kühn andUdo Oels will show the same dedication as their predecessors. Also, the Board ofDirectors immediately following the Shareholders' General Meeting will discuss theappointment of Mr Pol Bamelis as new Chairman of the Board of Directors.

We are also convinced that with the Horizon plan, the necessary measures havebeen taken to rapidly restore profitability. Its positive effects will already becomevisible in 2002. They will be substantial in 2003 and provide their full beneficialimpact as from 2004. We firmly believe that Agfa has the expertise, the required talentand the resolution to successfully tackle the many challenges it is facing and to createvalue for its customers, staff and shareholders.

André Leysen, Ludo Verhoeven,Chairman of the Board of Directors Chairman of the Board of Management

and CEO

Agfa is a global leader in imaging and targets a wide variety of business sectorsincluding the graphics market, the healthcare market, the consumer market and theindustrial market for testing materials. A common technology is at the source of this diversity, i.e. the production of light-sensitive film which, following exposure anddevelopment, provides high-quality pictures for various applications.

The rapid emergence of digital imaging means that the thread binding Agfa activities is gradually becoming thinner. Digitisation is also leading to over-capacityand price-erosion in analogue imaging.

Against this background, Agfa’s general strategy is to maximise efficiency in analogueproduction, to participate actively in the consolidation in the industry and finally, toinvest heavily in digital imaging.

This basic strategy has been further emphasised in the Horizon plan launched in2001. In addition to the above stated objectives, it seeks to reduce administrativecosts drastically, to make the business groups more responsible and accountableand to monitor their performance via a smaller, but stronger headquarters.

The Horizon plan extends to the end of 2003. Its objective is to diminish the cost structure by 550 million Euros per year from 2004. It also aims to reduce workingcapital by 500 million Euros in order to free up resources to finance future growth.

Strategy for profitable growth



reportManagementBoard of Management

(March 31, 2002; from left to right)

Ludo Verhoeven, Chairman of the Board of Management and Chief ExecutiveOfficer, responsible for the Business Group Graphic Systems and for CorporateCommunication and Internal Audit.

André Bergen, Chief Financial and Administration Officer, responsible for theregion Europe, Corporate Finance, Corporate Legal, Human Resources and IT.

Albert Follens, responsible for the Business Groups Non-Destructive Testing andIndustrial Imaging, Production Photochemicals, Research and Development,Corporate Environment, Procurement and Logistics.

John Glass, responsible for the Business Group HealthCare and for the NAFTAregion.

Jesper O. Möller, responsible for the Business Group Consumer Imaging and forthe regions Asia Pacific and Latin America, and Direct Export.


In 2001, the results of the Agfa-Gevaert Group were affected by the sluggish globaleconomy and by the accelerating shift from analogue to digital imaging. With itsHorizon plan, the company has already initiated far-reaching structural measuresintended to bring a sustained improvement in profits and to release funds for financingfuture growth. Some 440 million Euros of the estimated total restructuring expensesof 550 million Euros for this plan were booked to 2001. Therefore, despite a positiveEBIT (operating result before restructuring costs and non-recurring results) of 260million Euros, the Group posted a considerable net loss in the year under review.

Sales

After a very successful 2000, even in the last quarter, Agfa was confronted with asharp reversal from the very beginning of 2001. The economic slowdown particularlyaffected turnover in Graphic Systems and in Consumer Imaging, the business groupsmost sensitive to the economic cycle. The uncertainties in the market related to thepossible sale of the Consumer Imaging Business Group and internal issues withrespect to the timely availability of some products also influenced sales.

Technical Imaging succeeded in growing turnover by 6.7%, but this was not sufficientto compensate for the declines in Graphic Systems (–8.5%) and Consumer Imaging(–19.4%). For the group as a whole, turnover reached 4,911 million Euros, 6.6%less than the previous year. Excluding the sales of digital cameras and scanners,which Agfa has announced it is to discontinue, the decrease was 5%.The share of Technical Imaging in total turnover continued to increase to 37%against 33% in 2000. Graphic Systems and Consumer Imaging respectively represented39% (previous year 39%) and 24% (previous year 28%).

Income statement

Sales 2001 by Business Segmenteuro million

Group Sales 2001euro million

2000 20015,260 4,911

-6.6 %

-8.5 %6.7 %

-19.4 %

Graphic

Systems

Technical

Imaging

Consumer

Imaging

2000 2001 2000 2001 2000 20012,065 1,890 1,708 1,823 1,487 1,198


Digital Imaging

In Technical Imaging and Graphic Systems, Agfa's ‘new digital solutions’ continuedto register strong growth. They comprise computer-to-plate, digital radiography andnetworks for healthcare applications, and ultrasonic systems for non-destructivetesting. In Consumer Imaging, the decision to discontinue the sales of digital camerasand scanners, the late availability of the digital minilab and the market's reluctanceto invest in laboratory equipment, resulted in a decrease in turnover for digital solutions. For Agfa as a whole, the share of digital imaging solutions reached 28% of totalturnover, against 22% in 2000 and 5% in 1996, illustrating the rapid transition todigital imaging, which further accelerated during the economic slowdown.

Development in the regions

Sales in Technical Imaging increased throughout the world. However, this growthdid not compensate for the declines in all regions in the other two segments,Graphic Systems and Consumer Imaging.

The regional shares of Group turnover remained virtually the same as in the previousyear. In Europe (50% of sales) sales declined by 4%, and in the NAFTA region (28%of sales), by 9%. The Asia/Oceania and Africa region (17% of sales) suffered adecline of 9%. Latin America (5% of sales) also posted a decrease of 9%.

Sales ‘New Digital Solutions’euro million

Share of Group sales

Europe: 50 % (2000: 49 %)

NAFTA: 28 % (2000: 29 %)

Latin America: 5 % (2000: 5 %)

Asia/Oceania/Africa: 17 % (2000: 17 %)

1996 1998 2000 2001170

5 %

12 %

22 %

28 %

557 1,146 1,372

Share of Group sales 2001 by region


Result

The operating result before restructuring costs and non-recurring results fell from527 million Euros to 260 million Euros. In order to improve profitability rapidly and significantly, Agfa had already announced its Horizon plan by mid year. The restructuring charges linked to it are estimated at 550 million Euros, of which 440million Euros have been charged to 2001. Financial and other non-operatingexpenses amounted to 120 million Euros (previous year: 130 million).

The net result was also negatively affected by Xeikon, in which Agfa holds a 25%stake. When Xeikon asked for protection from its creditors, its value in Agfa’s bookswas written off in its entirety. The Group therefore recorded a net result of minus288 million Euros (previous year: plus 169 million Euros).

“Horizon”

Agfa presented its plan for increasing profitability and growth under a project entitled “Horizon”, and began immediately with its implementation. The plan is setto run from 2001 to 2003, and aims firstly to increase the profitability of the companyon a lasting basis, and secondly to release the funds needed for future growth – fordeveloping new systems, tapping new markets, making acquisitions etc.

Operating result before restructuring*euro million

2000 2001527 260

Restructuring expenses euro million

2000 2001

* Including non-recurring results

Operating result after restructuring*euro million

2000 401

-264

2001 126 84

524

440

Expenses linked to

Horizon plan 2001


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sus agricolae, etiam lascivius chirographi

agnascor plane adfabilis saburre.

Saetosus agricolae adquireret concubine,

et umbraculi infeliciter deciperet

Augustus.

The plan covers more than 100 individual projects and should lead to cost savings ofsome 550 million Euros a year from 2004. The first positive effects are expected tobe felt in 2002, followed by substantial savings in 2003 with full beneficial effect asfrom 2004.

The measures covered by Horizon include reducing overheads by around 135 millionEuros and raising efficiency in production to save some 240 million Euros by cuttingdown on the number of production sites and improving processes. Additional potentialfor achieving a sustained improvement in earnings is expected in purchasing(approx. 80 million Euros), research and development (approx. 20 million Euros)and sales (approx. 75 million Euros). This involves strengthening direct marketingactivities and significantly enhancing efficiency in the backoffice. Major projects inall these fields have already been launched and are in the course of implementation.

The Horizon plan will involve restructuring expenses of some 550 million Euros, ofwhich write-offs for about 160 million Euros and the cutting of around 4,000 jobsworldwide. At many sites, including Mortsel, Leverkusen and Leeds agreementshave already been reached with the employee representatives on ways of reducingworkforce levels.

Horizon also includes a number of other steps to increase cash flows. The mostimportant project in this connection involves reducing accounts receivable andinventories by 500 million Euros by end 2003.

Research & Development

Agfa invested through its R&D centres all over the world 231 million Euros – around5% of Group sales – in research, development and applications technology.Technical Imaging accounted for around 39% of this, Graphic Systems for 33% andConsumer Imaging for 28%.

Whereas five years ago more than 60% of research expenses went into the development of consumables, the corresponding figure in 2001 was just 36%. Incomparison, the proportion of development costs for equipment has risen to 40%and for software to 24%. This underlines the company’s strategic alignment to digital imaging systems. The major focus in the HealthCare segment is on imagemanagement software and information systems, digital IMPAX networks, digital dryhardcopy systems and computed radiography. In Graphic Systems, the computer-to-plate systems, workflow software and digital proofing systems take centre stage,and in Consumer Imaging, the emphasis is on digital laboratory equipment.

Restructuring expenses linked to Horizon planeuro million

76 89 66

R&D expenses 2001 by Business Segmenteuro million

Production: 240 (44%)

Overhead: 135 (24%)

Purchasing: 80 (14%)

Sales: 75 (14%)

R&D: 20 (4%)

Graphic

Systems

Technical

Imaging

Consumer

Imaging


Total assets at the end of 2001 amounted to 4,527 million Euros, compared to 5,070 million Euros the previous year.

Noncurrent assets

Noncurrent assets were influenced by the write-offs related to the plant consolidationwhich is part of the Horizon plan. Furthermore, the write-off of the stake in Xeikonand the acquisitions made during 2001 affected the figures.

Acquisitions

In 2001, Agfa spent a total of 82 million Euros on acquisitions. The companiesinvolved have outstanding expertise in digital technologies and will make an important contribution to further expansion in the high-growth markets of thefuture. Graphic Systems has acquired the US company, Autologic, as well as amajority holding in the Belgian firm, Image Building. HealthCare purchased aminority stake in MediVision, acquired Talk Technology and, in the first days of2002, also Mitra. In Non-Destructive Testing, the US company Pantak and theGerman-based firm Seifert, the two leading suppliers of X-ray systems in their particular region, were acquired.

Current assets

Current assets reached 3,006 million Euros, a decrease of 405 million due to thecontinuous efforts to decrease working capital.

Balance sheet

Working capitalInventorieseuro millionDays of inventories

2000 20011,293

149

123

1,055

Working capitalTrade receivableseuro millionDays of trade receivables

2000 20011,316

91

84

1,125

Net financial debteuro million

2000 20011,147 842

Balance sheet 2001euro million

Noncurrent assets 1,233

Inventories 1,055

Trade Receivables 1,125

Other current assets 581

Cash and cash equivalents 224

Deferred charges and taxes 309

Total assets 4,527





deciperet Augustus.

For the past two years, Agfa has stressed the importance of reducing the level ofworking capital in order to generate cash flow, necessary to finance future growth.The economic slowdown made this more difficult to achieve and by mid 2001, thesum of inventories and trade receivables increased. Consequently, several measureswere taken, including stopping production to bring inventories down. This provedvery successful and the year-end inventories decreased to 1,055 million Euros or 238 million Euros less than the previous year. Trade receivables also showed adecrease of 191 million to reach 1,125 million at the end of the year.

The total of inventories and trade receivables decreased 429 million Euros duringthe year, largely exceeding the targets. It is the objective to further diminish workingcapital during the coming years.

Shareholders Equity

Shareholders equity reached 1,267 million Euros at the end of 2001 (2000:1,570).

Financial debt

Financial debt decreased by 309 million Euros to reach 1,066 million Euros at yearend. Taking into account a cash level of 224 million Euros, net financial debt amountedto 842 million Euros compared to 1,147 at the end of 2000.

The gross operational cash flow decreased in 2001 to 226 million in line with thetrend of the operating result. Thanks to the significant reduction of working capitalduring the second half of the year, the net operational cash flow could improve to738 million Euros.

At the end of 2001 Agfa employed staff totalling 21,038 full time equivalents ascompared to 21,943 at the end of 2000.By the end of 2003, the Horizon plan will lead to a decrease of staff levels by approximately 4,000 full time equivalents compared to numbers in June 2001. Agfahas already reached agreements with its social partners in several countries withrespect to the conditions of these departures.

Forecasting how the global economy will perform in 2002 is fraught with uncertainties.Nevertheless, there are indications that there may be an improvement – at least inthe second half of 2002. This trend, together with the fact that the positive effects ofthe Horizon scheme will increase gradually as time goes by, leads Agfa to expect itsfirst half results to remain weak while those of the second half should improve significantly. Although the year will still be affected by the remaining restructuringcosts of 110 million linked to the Horizon plan, the net result of 2002 should be positive again.

Human Resources

Cash Flow statement

Outlook 2002

Net operating cash floweuro million

2000 2001436 738

Agfa is the global number 1 in the prepress market. To consolidate this position further,Agfa aims to expand in market segments with large growth potential such asnewspapers and packaging printing or, at regional level, the Asian market.In addition, Agfa needs to achieve cost leadership in the production of graphic filmand printing plates and aims to grow in the long term by investing in specialised“Enterprise Software” for the graphics industry. In all of these areas progress wasmade in 2001.

Thus, in 2001 Agfa acquired Autologic, an American producer of computer systemsfor prepress automation, principally in the newspaper segment. Autologic’s outputsystems and production workflow software comprise an interesting expansion ofand supplement to Agfa’s range. On the other hand, Autologic’s customers in thenewspaper sector form an important target group for Agfa’s graphic film, analogueand digital plates and proofing systems.Furthermore, Autologic’s strong market position in North America largely complementsAgfa’s prominent market share in the rest of the world.


Graphic Systems represents 39% of the total Group sales. This includes

equipment, software and consumables for both computer-to-film and

computer-to-plate workflows, as well as digital colour proofing systems

and workflow management software.

Graphic Systems achieved sales of 1,890 million Euros in 2001, a

decline of 8.5% compared to 2000. Graphic Systems’ operating result

before restructuring costs and non-recurring results fell to 79 million

Euros. The weak economic situation, mainly in the United States,

resulted in substantially lower production levels of commercial print

and formed the basis for this fall.

Graphic Systems


Graphic Systemseuro million

2001 2000 change

Sales 1,890 2,065 (8.5)%

Operating result before restructuring* 79 163 (51.5)%

Operating result after restructuring* (56) 99 (156.6)%

Return on sales (2.9)% 4.8%

* including non-recurring results

At regional level, China is a strong growth market. Agfa has consequently set up arange of investment programmes in China, including the installation of a new production line in the existing Wuxi plant. This will be operational by mid 2003 andwill produce analogue and digital printing plates for the Asian market.

To achieve greater cost efficiency, Agfa sold its plate processor production unit inThetford, UK, in 2001 to Glunz & Jensen, a Danish market leader in film and plateprocessors. Furthermore, it was decided to streamline the European printing plateproduction, which had become fragmented due to the numerous acquisitions of previous years. The production capacity for digital has been increased after heavyinvestment in Wiesbaden, Germany, and Agfa is now able to serve the demand of itscustomers, which is increasing by over 50% per year.

The prepress process and the business process of printers are constantly growingcloser to each other. Agfa is currently the reference workflow management expertfor graphic applications thanks to products such as Apogee and IntelliNet. With thisknowledge of graphic processes, Agfa is best placed to develop the software solutionsrequired for process integration.

In 2001, Agfa acquired a majority stake in Image Building, a Belgian company thatfocuses on design and prepress. Image Building is the co-developer of Agfa Delano,a web-based communication system for project management in the graphics industry.

Agfa in the graphics market in 2001The prepress market is made up of equipment and software on the one hand, andconsumables on the other. In total, it accounts for global annual sales of at least 8 billion Euros. Agfa is the global leader in this segment: 40% of all commercial printing is produced with the help of Agfa products.

In 2001, Agfa was able to maintain its market share in the market segments forgraphic film and associated imagesetters, which are contracting as the transitionfrom computer-to-film to computer-to-plate is accelerating.

Thanks to the extra investment made in 2000 in enhancing production capacity, thecompany was able to meet the large demand for digital plates. With its digital platesand platesetters, Agfa was thus able to expand its market share in the rapidly growingcomputer-to-plate segment.


1 | Agfa plays a major part in every step of the pre-press process in newspaper production. From

editing to printing the data is in good hands. To optimally guide the production process, Agfa has

developed specific workflow management systems such as Agfa Apogee and Agfa IntelliNet. With

the Computer-to-Plate printing process, the prepared page is sent directly from the computer to the

Polaris platesetter, wherever the machine is located.

2 | Thanks to the Agfa Polaris platesetter, newspapers can meet even tighter deadlines. Following

exposure and development, the digital printing plate is ready to be sent to the printing press. Agfa's

clients particularly appreciate the quality, reliability and the speed of the Polaris.

3 | The printing plate brought into the rotary press is a N 91 highly sensitive photopolymer plate.

Because of its durability and high image quality, this plate is ideal for printing newspapers. The

printer checks the quality of the first copy of the newspaper.

1 | 2 |

3 |


In the computer-to-plate segment, Agfa offers thermal, visible-light and photopolymersystems. Agfa has a strong lead over the competition, primarily in the area of visible-light systems (based on the violet laser diode technology), where it was the first tolaunch this new technology and has already sold 300 Galileo Violet systems.One of the most prestigious contracts which Agfa won in this area in 2001 was anorder in the UK for 30 Polaris Violet systems from Associated Newspapers which isseeking to establish a fully digital workflow model in its printing works on this basis.

The continuing success, particularly in Europe, of the Polaris production line fornewspaper print, the strong sales of Xcalibur thermal platesetters for very large formatsand the commercial breakthrough of Agfa’s digital proofing system Sherpa, which isnow generally accepted by the market as valid “contract proofing”, contributed tokeeping 2001 sales of equipment in Graphic Systems at the same level as in 2000.This is a remarkable performance, in view of the market’s reluctance to invest due tothe weak economic environment.

4 | Agfa sets the trend in packaging printing. The draft of a

package design is sent directly from the computer to Agfa’s

Sherpa digital proofing system. This easy to use system

produces high quality proofs at an unrivalled speed.

5 | Once the proof is approved, the actual printing process can

begin. Using an Xcalibur thermal platesetter the information is

transferred to an Agfa thermal printing plate.

6 | An offset press prints packaging using heat sensitive printing

plates. Thanks to their robustness, these plates are ideal for long

run work.

4 | 5 | 6 |

The healthcare market offers substantial potential for growth. Agfa wishes to use its strong position in this market as a starting point for further expansion in twodirections. On the one hand, it will use its know-how in radiology to grow into othermedical imaging domains such as cardiology, pathology, ophthalmology, oncology,etc. This will largely be achieved through organic growth. On the other hand, Agfais focusing on the hospital information systems market, a high growth sector worthapproximately 9 billion Euros. Strategic take-overs will be necessary in this area inthe future.

This twin growth strategy was emphasised in 2001 by changing the name MedicalImaging to HealthCare and by creating two separate business units: Imaging andInformatics.

In the Imaging area, Agfa took a minority interest in MediVision, a developer andmanufacturer of digital imaging systems for ophthalmology applications. Agfa andMediVision will jointly develop and market an integrated digital ophthalmologyPACS system.

Agfa wishes to become a leading supplier of hospital IT solutions through the newInformatics division. With this in view, Agfa took over Talk Technology, NorthAmerica’s leading supplier of voice-enabled clinical workflow and reporting solutionsfor healthcare, in 2001.


HealthCare was able to report a 4.5% rise in sales in 2001. This increase

was mainly due to the stronger demand for hardcopy products as well

as digital networks and systems for hospitals.

The business group’s EBIT was negatively influenced in 2001 by greater

investment in Research and Development and higher production and

sales costs. The increase in the sales costs can mainly be ascribed to

the development of a sales network for digital systems and networks.

HealthCareTechnical Imaging

Technical Imaging is made up of HealthCare (previously

Medical Imaging), Non-Destructive Testing and Industrial

Imaging and represented in 2001 37% of group sales (33% in

the previous year). Technical Imaging’s results are largely

determined by HealthCare, which is by far the largest busi-

ness group in this segment. Compared to 2000 (1,708 million

Euros) sales in Technical Imaging rose by 6.7 percent to 1,823

million Euros, whereas EBIT was down by 25.5 percent and

now stands at 193 million Euros.





deciperet Augustus.

Technical Imagingeuro million

2001 2000 change

Sales 1,823 1,708 6.7%

Operating result before restructuring* 193 259 (25.5)%




In the first days of 2002, Agfa also finalized the purchasing of Mitra. Mitra is one ofthe most important global suppliers of imaging and information management systems for healthcare and has co-operated with Agfa for many years. As such, Mitrahas played a major role in the development and success of Agfa’s digital IMPAX networks over the past 10 years. Mitra will provide the necessary software knowledgeand technological innovation, which will form the core of Agfa’s HealthCareInformatics. The goal is to further simplify all the steps in the medical process and to harmonise them with each other so that patient care is optimised.

Agfa in the healthcare market in 2001Agfa offers the customer a combination of classic film-based systems, on the onehand, and digitally-controlled systems, on the other. As a result, images and patientdata can be combined and compiling a totally electronic patient file will ultimatelybecome feasible.


With more than 600 installed digital networks worldwide, Agfa maintained its leadership position in the PACS (Picture Archiving and Communications Systems)area in North America and Europe in 2001 and doubled its market share in South-east Asia. In North America, several large contracts were won by Agfa’s IMPAX(including the US Ministry of Defence). IMPAX also experienced sharp growth inEurope, primarily in Benelux, Scandinavia, the United Kingdom, Italy, France andGermany. For instance, new IMPAX-systems were installed in the Lambton HospitalsGroup (Ontario, Canada), the Blackpool Victoria Hospital (UK), the Queen ElizabethHospital in Woolwich (UK), the Offenbach Hospital (Germany), all hospitals in Dalarna (Sweden), the County Council healthcare system in Uppsala(Sweden) and the St. Joseph Hospital (Veldhoven, Holland).

After the acquisition in 2000 of Quadrat, a European market leader in RadiologyInformation Systems (RIS), the integrated Agfa RIS/PACS system was successfullyinstalled in several large hospitals in 2001.A good example of this approach is provided by the Esch-sur-Alzette municipal hospital in Luxembourg. By integrating Quadrat’s RIS into Agfa’s IMPAX system, the entire staff now have immediate access to digitised diagnostic images and theassociated protocol information. This permanent access to data speeds up workingprocedures, consequently enhancing patient care and also reducing working costs.

During 2001, Agfa concluded or renewed several contracts with American “grouppurchasing” organisations including Shared Services Healthcare, Consorta, OrionMedical Management and Algotec. Each of these represents some hundreds or thousands of potential customers. The associated radiologists, medical centres orhospitals can buy Agfa’s complete product range subject to better conditions throughtheir membership. With the help of agreements like these, Agfa can offer its entireproduct range more efficiently to a much larger target group.

1 | A radiologist examines an X-ray image. As a leading

supplier of innovative films, screens and processing

equipment, Agfa has been instrumental in helping to

minimise radiation exposure levels whilst maximising

image quality.

2 | Hospitals make the move from conventional to digital

imaging with the Agfa Diagnostic Centre. The system's

patented image processing software Musica provides the

highest image quality available in Computed Radiology

today.

3 | A radiologist dictates her findings. A TalkStation from

Talk Technology, an Agfa company since 2001, converts her

words into a written report. Along with functions for

enhanced report tracking, retrieval and distribution, this

affords doctors a considerable saving in time.

4 | Doctors consult an electronic patient record. Thanks to

the integration of different technologies, all relevant med-

ical data - digital images as well as reports on various

examinations along with other patient information - can be

gathered in one file. Agfa’s IMPAX networks make it

possible to send these records to hospitals all over the

world and to retrieve the information with one simple click

of the mouse. This new technology enhances patient care

and saves considerable expense.

1 |





deciperet Augustus.

The use of the Internet for image and information distribution in healthcare issteadily increasing. In 2001, Agfa announced its latest application in the domain:“WEB1000 for Cardiology”. This is an improved version of the powerful WEB1000corporate server which enables doctors and clinicians to view information and medical images remotely via a LAN, WAN or a worldwide network. As a result,images and other patient information from different disciplines and hospital departments arrive more rapidly, more securely and more easily at the desktop inthe treating doctor’s surgery.

Ever greater use is also being made of the Internet in the provision of services. Thus,Agfa was the first global company in the healthcare sector to receive “Code ofConnection” approval for its global 24/7 support strategy from the UK’s NationalHealth Service Information Authority.This enables Agfa to log in directly onto the National Health Service’s secure network,which in turn means that Agfa service staff now enjoy direct access to 70 PictureArchiving and Communications Systems (PACS) and computed radiology systems(CR) plus their associated printers via a single secure logon point. This gives Agfathe opportunity to use the National Health Service network to provide services,upgrades and support among other things.

2 | 3 |

4 |

Non-Destructive Testing (NDT) guarantees safety, performance and quality andhelps to reduce operational costs. Agfa is the global leader in both analogue and digitalX-ray and ultrasonic inspection systems which check the structure and tolerance ofmaterials without damaging or deforming them. They are used mainly in the aerospace, automotive, railway, energy and petrochemical industries. It is Agfa’sambition to offer all the important NDT technologies and thus to be a global solutionsprovider and market leader.

In 2001, Agfa expanded its range of solutions for the NDT market further via strategicacquisitions. Agfa has long been the global market leader in analogue X-ray film systems for non-destructive materials testing. The take-overs of RADView (in 1999)and Krautkramer (in 2000) ensured Agfa a leading position in the NDT market withdigital radiography (direct radiography) and ultrasonic systems. In 2001, theGerman company Seifert and the American company Pantak, the market leaders inindustrial X-ray equipment for NDT applications in Europe and the United Statesrespectively, were acquired. As a result, Agfa can now expand its X-ray range withportable and stationary X-ray equipment and industrial inspection systems.

The worldwide sales, marketing and service activities in the NDT area were streamlined in 2001 so that the customer is now served by one Agfa sales channelregardless of the technology which he wishes to use.


Non-Destructive Testing’s sales grew by 44.1% in 2001. This is partially

explained by the take-over of Krautkramer, as well as by strong organic

growth in both film and ultrasonic activities.

Non-Destructive TestingTechnical Imaging





deciperet Augustus.

Agfa in the non-destructive testing market in 2001Agfa’s NDT activities in 2001 were not affected by the economic slowdown.Substantially higher sales were achieved in the energy sector in particular. Thus,Agfa technology was used to test new turbines intended to cope with the energyshortage in California. Similarly, a noticeably greater amount was invested in testingpipelines and aircraft parts both in the production phase and during maintenance.With a market share of approximately 60% of analogue film systems and approximately 30% of ultrasonic systems, Agfa confirmed its position as globalleader in the NDT market.

Experts expect digitisation to break into the global NDT market in 2002. To takeadvantage of this trend, Agfa has made important efforts to make its technologyeven more user-friendly and to enhance quality further.

In the near future, Agfa will bring a new computed radiography system with reusablephosphor plates, which clears the way for new applications.

Agfa will also bring a new film scanner onto the market which will enable the customer to digitise his film archive quite easily.

In addition, a quicker, more user-friendly direct radiography system has beendeveloped. With this technology, the energy from X-rays can be transformed directlyinto digital signals without intermediate steps. The quality of these images comesclose to that of X-ray film, something which was unthinkable in the recent past.

1 | An engineer puts the landing gear of a passenger

aircraft to the test. Minute cracks and other flaws are

discovered during these regular safety checks so that

necessary repairs can be carried out in time. Approximately

80% of all passenger aircraft worldwide are safety-tested

using Agfa materials, such as Krautkramer's ultrasonic

systems and Agfa Structurix X-ray film.

2 | In the automotive industry ultrasonic systems from

Krautkramer are used to check the bodywork of cars for

flaws and weak spots.

3 | An engineer tests the welding quality of a new pipeline

using Agfa’s Structurix X-ray film.

1 | 3 |

2 |

Some of these markets – e.g. the microfilm market – are contracting due to the transition to digital imaging. Consequently, sales and EBIT of Industrial Imagingwere unable to match those of the previous year.

In Industrial Imaging, Agfa is seeking on the one hand to produce the analogueproduct range including colour cinema film, sound negative films and microfilm forthe lowest possible cost. On the other hand, Industrial Imaging also aims to useAgfa’s know-how to tap new markets in cooperation with industrial partners.Examples of these include digital document systems for the scanning, data extraction, storage and intelligent retrieval of documents and data, systems for theproduction of high security identification documents and semi-finished products forelectroluminescent lighting and displays.

Micrographics and Document SystemsMicrographics and Document Systems supplies an integrated range of hardware andsoftware products to effectively capture, store, manage and distribute documentsand data.

Microfilm is losing ground to digital storage media, primarily for the short-termstorage of data. This development had a negative influence on Agfa’s sales of microfilm and micrographic equipment, which was not adequately compensated forby the substantial growth in the sale of digital document management solutions.

Some promising products were brought to the market in 2001, including the ADMISS35C colour scanner which combines speed and quality perfectly, and the e-Codissoftware package. e-Codis simplifies the retrieval of corporate documents and information via the web thanks to its extraordinarily flexible search facilities.


Industrial Imaging operates in a number of areas. It supplies solutions

for the capture, management, secure microfilm storage and distribution

of business documents for the document systems market, digital and

conventional optical sound-recording film and colour copy film for the

cinema market and high-security identification documents and semi-

finished products for electroluminescent lighting and displays.

Industrial Imaging Technical Imaging





deciperet Augustus.

CinefilmIn cinefilm, which is still a growing market, Agfa is an important supplier of digitaland conventional optical sound recording film and colour film used to producecopies for projection in cinemas.

Agfa is the absolute European market leader in the digital sound reproduction technology sector, the standard in the industrialised world.

Specialty Foils & ComponentsSpecialty Foils & Components markets Agfa’s PET film (polyethylene terephthalate),triacetate film and special chemical products. In addition, the borders of the imagingmarket are crossed with new developments. Thus, Agfa supplies Orgacon, conductive foils and pastes based on organic polymers which are used in the electro-luminescent lighting market. These are utilised as background lighting for mobilephone screens and keyboards and as lighting for car dashboards and aircraft instrument panels. Orgacon’s flexibility, transparency and scratch resistance are distinct product advantages.

In 2001, Agfa set up the joint venture IDENTIS in co-operation with the French company Allitech-ID. IDENTIS is involved in the production, marketing and sales ofequipment for the manufacture of high security cards, such as identity cards anddriving licences. The consumables which are needed to produce these cards are alsomarketed by IDENTIS.

1 | Agfa’s experts in chemistry and physics are deploying

their knowledge to develop new products, like Orgacon.

Orgacon based illumination foils are highly scratch resist-

ant and flexible, and can, for example, be used to light car

and airplane instrument panels.

2 | The new joint-venture, Identis develops and manufac-

tures systems for the production and personalisation of

high security identification documents, such as driver’s

licences and passports. The compact devices produce ID

documents at a rate of up to 1,800 documents per hour. A

number of security marks can be added, such as micro let-

ters, ultraviolet prints, holograms, chips and barcodes.

2 |

1 |


Consumer Imaging posted sales in 2001 of 1,198 million Euros, a

decrease of 19.4%. Several factors explain this decline: sales were

affected by the weak economic conditions, by the late availability of

the digital minilabs and by the discussions concerning the possible

sale of the business group to a venture capitalist which created

uncertainties amongst customers and staff. After the decision was

taken not to sell the business, turnover stabilised or improved slightly.

Finally, the announcement that Agfa was going to discontinue the

loss-making sales of digital cameras and scanners, accelerated the drop

in turnover. Compared to the previous year, the EBIT was down to minus

12 million Euros; if digital cameras and scanners are excluded, EBIT

reached a positive 24 million Euros (2000: 121).

Consumer Imaging





deciperet Augustus.

In the consumer imaging market, Agfa will focus its activities on the film, finishingand lab equipment business, both in the area of minilab and wholesale finishing,and will use its leading position in the field of lab equipment for bundling with filmand finishing products.

Some 3,000 pictures are taken throughout the world every second, producing anannual total of around 100 billion photos printed on photographic paper. Theimages captured with digital cameras or scanners must be added to this figure. Thislast category accounts for less than 3% in photofinishing labs to date. This figure isincreasing but Agfa considers that film will remain a strong basis for the consumerimaging market for the foreseeable future, not in the least because of its excellentprice/performance ratio and its attractive margins. Today Lab equipment must,however, be able to produce perfect photos not only from a film, but also from adata carrier.

Consumer Imagingeuro million

2001 2000 change

Sales 1,198 1,487 (19.4)%

Operating result before restructuring* (12) 105 (111.4)%





Agfa in the consumer imaging market of 2001In Laboratory Equipment, demand shifted strongly from analogue systems to all-digital and hybrid systems. Both of these systems can process traditional films aswell as digital images, but the difference is that all-digital systems also contain adigital exposure unit, leading to appreciable improvements in print quality. Despite the weakness in the economic situation and the later than planned availabilityof Agfa's d-lab.3 minilab, total minilab sales remained virtually unchanged in 2001.The hybrid systems of the MSC.d generation and the all-digital Agfa d-lab.3 minilablaunched in spring 2001 met with great success. The range of all-digital minilabswas extended at the end of the year by the addition of the Agfa d-lab.2. Its printcapacity is smaller, but it has greater flexibility and is currently the only digital minilabon the world market to produce prints in poster format (30 x 45 cm/12 x 18 cm).Agfa anticipates that its digital minilabs, which feature its unique d-Total FilmScanning technology for instant image enhancement at the printing stage, will continue to be very well accepted by the market.

After exceptionally high sales in 2000, demand for the Agfa MSP DIMAX high-speedprinter fell considerably. Wholesale labs are waiting for an all-digital solution thatwill offer considerable advantages with regard not only to print quality but also tolab workflow organization. Agfa intends to introduce such a digital wholesale laboratory at the end of 2003.

1 |

2 |





deciperet Augustus.

Laboratory equipment mainly produces prints on photo paper. Agfa's traditionalcolour negative photo paper business remained virtually stable in terms of volume,but came under considerable price pressure. Sales of special paper for digital exposures in the minilab and professional lab segments increased significantly.

The Internet Print Services, through which digital images are prepared and dispatched for printing on photo paper, also recorded strong growth. More andmore customers see this service as an important, future-oriented module forexpanding business. The number of prints produced through the "Agfanet"-servicetripled compared with the previous year.

Agfa’s “Vista” film range received the “European Colour Film 2001-2002” awardfrom the European trade press association EISA following a vote by 16 leadingEuropean imaging magazines. Nevertheless, against the background of decliningprices, Agfa's film business fell back significantly. Near the end of 2001 Agfa gainedan important new customer with Wal-Mart, the biggest retailing chain in the world.At the same time, Agfa acquired a license from Polaroid to use its name for conventional films in the NAFTA region. Wal-Mart began selling these films highlysuccessfully in NAFTA in the same year, and, in January 2002, Agfa also reached anagreement with Polaroid on the use of the Polaroid name in Europe.

1 | A photographer puts an Agfa ‘Vista’ film in his camera.

Thanks to the ‘Eye Vision Technology’ even photos taken

under fluorescent lighting, turn out the way the human eye

sees them. The ‘Vista’ range includes an extremely

sensitive film with a rating of ISO 800.

2 | Agfa’s d-lab.2 in action. This fully digital minilab

features Agfa’s unique d-TFS technology (digital Total Film

Scanning). d-TFS analyses not only the negative film as a

whole, but also every image separately. Colour characteristics

and density are analysed automatically, allowing all

necessary corrections at the printing stage. d-lab.2 is the

only digital minilab in the world to produce prints in poster

format.

3 | 4 | The MSP DIMAX, used in wholesale finishing labs, can

print up to 20,000 pictures per hour whilst automatically

correcting shortcomings in the images. The printer

combines the advantages of digital imaging with the speed

of analogue printing.4 |3 |

Corporategovernance



Board of DirectorsDuring 2001, the number of Board members was reduced from 15, including 5executive directors, to 11, of whom 2 are executive directors.Messrs E. Hommelsheim and F. Hujer resigned as directors of the Group on 1 January 2001. After Mr K. Seeger offered his resignation as a member of theBoard of Directors and as Chief Executive Officer, the Board of Directors of 18 June2001 named Mr L. Verhoeven as Chief Executive Officer and appointed Mr P. Bamelisas a director. The Annual General Meeting of 30 April 2002 will be asked to approvethis appointment.

On 24 September 2001, the Board of Directors appointed Messrs Albert Follens andJohn Glass as members of the Board of Management and Mr André Bergen as ViceChairman of the Board of Management from 1 October.

Mr W. Van der Kooij resigned as a member of the Board of Directors and of theBoard of Management as of 1 January 2002. The Board of Directors consequentlydecided to appoint Mr Jesper Möller to the Board of Management from 1 January2002.

Composition of the Board of Directors on 1 January 2002Main activity or profession

Dr hc André Leysen, Chairman Chairman of Gevaert N.V., MortselHermann Josef Strenger, Vice Chairman Chairman of the Supervisory Board of

Bayer AG, LeverkusenPol Bamelis Company directorAndré Bergen Executive Director, Vice Chairman of the

Board of Management, Chief Financial & Administration Officer

Ferdinand Chaffart Member of the Board of Directors of Gevaert N.V., Mortsel

Klaus-Peter Müller Chairman of the Board of Management of Commerzbank AG, Frankfurt am Main

Prof Dr ir André Oosterlinck Rector, Catholic University of LeuvenWerner Wenning Member of the Board of Management of

Bayer AG, LeverkusenDr hc Karel Van Miert President, Nyenrode University, the

NetherlandsDr Ludo Verhoeven Executive Director, Chairman of the Board

of Management, Chief Executive OfficerDietrich von Kyaw Former Ambassador of the Federal

Republic of Germany to the European Union

CORPORATE GOVERNANCE





deciperet Augustus.

Two members of the Board of Directors, Messrs Strenger and Wenning, wereappointed on the recommendation of Bayer AG, while the other main shareholder,Gevaert N.V., is represented by Messrs Leysen and Chaffart. Finally, Messrs Bamelis,Müller, Oosterlinck, Van Miert and von Kyaw are considered to be independent ofthe main shareholders and the management.

The Shareholders’ General Meeting of 30 April 2002 will be asked to approve animportant change in the composition of the Board of Directors. Although there is noformal age limit, Mr Leysen, Chairman, and Mr Strenger, Vice Chairman, havedecided to resign for age reasons. The Group thanks both gentlemen for the outstanding way they have rendered service to our staff, customers and shareholdersduring past years. Furthermore, Mr Wenning has taken on important new professionalresponsibilities which prevent him from continuing his duties as a director of theGroup. The Group thanks him for his dedication and wishes him great success in hisnew task.The Board of Directors proposes the Shareholders’ General Meeting to grant a mandateas director to Messrs Jo Cornu, member of the Board of Directors of Alcatel S.A.,Klaus Kühn, member of the Board of Management of Bayer AG as of May 2002, andUdo Oels, member of the Board of Management of Bayer. Furthermore, during theBoard of Directors' meeting immediately following the Shareholders' General Meeting,it will be proposed to appoint Mr Pol Bamelis as the new Chairman.

Statutory provisionsThe articles of association stipulate that the Board of Directors is to be made up of atleast six members, shareholders or not, appointed for a renewable maximum periodof 6 years.

Although there is no formal procedure for the appointment of non-executive members,the Board of Directors proposes candidates who meet the criteria which it sets withregard to corporate or scientific integrity and experience. There is no age limit formembership of the Board of Directors.

The Board of Directors meets whenever the company’s interests require it, as well aswhen two directors seek a meeting. Six meetings were held during 2001.

The main concerns of the Board of Directors are matters of extraordinary economicand strategic importance, the development of new activities or the discontinuationof existing activities, the establishment and closure of subsidiaries and the specification of the company’s general, strategic and social policy. The Group’sbudgets and financing are periodically defined and evaluated by the Board.



The majority of the directors has to be present or represented to enable the Board toconsult and make valid resolutions. If this condition is not met, a valid decision canbe reached in a new meeting with the same agenda, if at least two directors arepresent or represented.

The decisions of the Board of Directors are reached by absolute majority. In theevent of a tied vote, the proposal is rejected.

The articles of association also provide for the possibility of written decision-makingby the Board of Directors within the boundaries of legal requirements in this area.

Although there is no formal procedure for the provision of internal information todirectors or for engaging experts by directors, they do exercise their right to information on an ad hoc basis.

Directors’ remunerationThe overall remuneration for the directors is determined as follows:

(i) a fixed sum of Euro 375,000 per year and

(ii) a variable sum per year in proportion to the dividend per share. For everyEuro 0.05 dividend per share which exceeds Euro 0.15 per share, the directors shallreceive a remuneration of Euro 2,000 per director.

The global amount of directors’ fees paid in 2001 to the executive directors amountsto Euro 123,333, that for non-executive directors amounts to Euro 373,500.

Committees established by the Board of DirectorsRemuneration Committee: Messrs Strenger and Leysen are the members of theRemuneration Committee, which makes proposals to the Board of Directors concerning the appropriate remuneration of members of the Board of Management. Audit Committee: The Audit Committee is made up of two non-executive directors,Messrs Chaffart and Wenning.

Strategy Committee: in 2001 a Strategy Committee was also set up, comprisingMessrs Leysen, Strenger and Bamelis.

Board of ManagementThe Board of Management is responsible for implementing corporate policy and thestrategy defined by the Board of Directors. The Board of Management consequentlyreceived the widest range of competencies as regards day-to-day management, aswell as a number of other specific powers.The Board of Management regularly submits reports to the Board of Directors concerning its specific activities, the development of the subsidiaries and acquisitions.






deciperet Augustus.

On 1 January 2002, the Board of Management was made up as follows:

L. Verhoeven*, Chairman, CEOA. Bergen*, Vice Chairman, CFAOA. FollensJ. GlassJ. Möller* Executive director

In principle, the Board of Management meets once per fortnight.

The overall gross remuneration paid to those who were members of the Board ofManagement during 2001, amounted to Euro 5,841,629 in 2001.

Furthermore, at year end the number of issued warrants attributed to the members ofthe Board of Management is equal to 84,500 and the number of options equal to156,650. The exercise price of these warrants is Euro 22 and the exercise periodruns from 1 January 2003 to 10 November 2005. The exercise price of the firsttranche of 63,750 options is Euro 22 and the exercise period runs from 1 January2004. The exercise price of the second tranche of 92,900 options is Euro 20 and theexercise period runs from 6 July 2004.

Policy with respect to allocation of profitsThe Board of Directors’ proposals to the Annual General Meeting concerning theallocation and distribution of the result take various factors into consideration,including the company’s financial situation, the corporate results, the current andexpected requirements for liquid assets and expansion plans.

Relations with the main shareholdersIn compliance with the notification on the basis of the law on the publication of significant holdings in listed companies, Bayer announced that it indirectly possesses30% of the issued shares in the company while Gevaert indirectly holds 25%.

AuditorAgfa-Gevaert N.V.’s auditor is Klynveld, Peat Marwick, Goerdeler, represented byMessrs Karel Van Oostveldt and Erik Helsen. The auditor was re-appointed for a 3-year period at the annual general meeting of shareholders held on 24 April 2001.



Agfa-Gevaert GroupFinancial

Statements

INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and the Shareholders of Agfa-Gevaert N.V.

We have audited the accompanying consolidated balance sheets of Agfa-Gevaert N.V.and its subsidiaries (the ‘Group’) as of December 31, 2001 and 2000, and the related consolidated income statements, statements of recognized gains and lossesand cash flows statements for the years then ended. These consolidated financialstatements are the responsibility of the Company’s directors. Our responsibility is toexpress an opinion on these financial statements based on our audits.

Unqualified audit opinion on the consolidated financial statementsWe conducted our audits in accordance with International Standards on Auditing asissued by the International Federation of Accountants. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basis forour opinion.In our opinion, the consolidated financial statements give a true and fair view of thefinancial position of the Group as of December 31, 2001 and 2000, and of theresults of its operations and its cash flows for the years then ended in accordancewith International Accounting Standards as adopted by the InternationalAccounting Standards Board.

Additional informationThe following additional information is provided in order to complete the auditreport but does not alter our audit opinion on the consolidated financial statements:• the consolidated Board of Directors’ report contains the information required by

law and is in accordance with the consolidated financial statements;• as indicated in note 1(a), the consolidated financial statements have been

prepared in accordance with International Accounting Standards as adopted bythe International Accounting Standards Board, in accordance with the decision ofJuly 6, 1999 of the “Commissie voor het Bank- en Financiewezen/CommissionBancaire et Financière”.

Antwerp, March 25, 2002

Klynveld Peat Marwick Goerdeler, Reviseurs d’Entreprisesrepresented by

K. M. Van Oostveldt E. Helsen

AGFA-GEVAERT GROUP CONSOLIDATED STATEMENTS OF INCOME


Euro million Note 2001 2000

Net sales 3 4,911 5,260Cost of goods sold (3,119) (3,171)

Gross Profit 1,792 2,089

Selling expenses (970) (1,000)Research and development expenses (231) (224)General administration expenses (310) (279)Other operating income 5 294 233Other operating expenses 6 (839) (418)

Operating result (264) 401

Interest income (expense) – net 7 (63) (81)Other non-operating income (expense) – net 8 (57) (49)

Non-operating result (120) (130)

Income before income taxes (384) 271

Income taxes 9 133 (96)

Net income of consolidated companies (251) 175

Minority interest 1 1Share of results of associated companies (38) (7)

Net result of the accounting period (288) 169

Basic Earnings per share (Euro) 26 -2.1 1.2Diluted Earnings per share (Euro) 26 -2.1 1.2

euro million Note Dec. 31, Dec. 31,2001 2000

Assets

Non-current assets 1,233 1,487

Intangible assets 11 403 379Property, plant and equipment 12 780 994Investments 13 49 114Derivative financial instruments 22 1 -

Current assets 3,006 3,411

Inventories 14 1,055 1,293Trade receivables 1,125 1,316Other receivables and other assets 15 580 509Cash and cash equivalents 16 224 228Deferred charges 21 65Derivative financial instruments 22 1 -

Deferred taxes 9 288 172

Total assets 4,527 5,070

Equity and liabilities

Shareholders’ equity 17 1,267 1,570

Capital stock of Agfa-Gevaert N.V. 140 140Share premium of Agfa-Gevaert N.V. 107 107Retained earnings 1,281 1,124Reserves (5) -Net income (288) 169Translation differences 32 30

Minority interest 1 7

Non-current liabilities 1,894 1,825

Liabilities for post-employment benefits 18 879 778Liabilities for personnel commitments 46 59Financial obligations more than one year 19 898 970Provisions more than one year 21 57 18Derivative financial instruments 22 14 -

Current liabilities 1,334 1,542

Financial obligations less than one year 19 168 405Trade payables 352 281Miscellaneous liabilities 20 290 287Liabilities for personnel commitments 103 117Provisions less than one year 21 380 396Deferred income 31 56Derivative financial instruments 22 10 -

Deferred taxes 9 31 126

Total equity and liabilities 4,527 5,070

AGFA-GEVAERT GROUP CONSOLIDATED BALANCE SHEETS


Euro million .

December 31, 2000 140 107 1,124 - - 169 30 1,570 7 1,577

Changes in shareholders’ equity

resulting from capital

contributions and dividend

payments

Dividend payments - - (63) - - - - (63) - (63)

Other changes in shareholders’

equity not recognized in income

Change in accounting policy (IAS 12 2000 revised) - - 53 - - - - 53 - 53Impact of adopting IAS 39 - - (2) - - - - (2) - (2)Own shares acquired - - - (2) - - - (2) - (2)Revaluation of available-for-sale financial assets - - - - (3) - - (3) - (3)Translation differences - - - - - - 2 2 - 2Other - - - - - - - - (5) (5)Changes in shareholders’ equity

recognized in income

Allocation to retained earnings - - 169 - - (169) - - - -

Income after taxes for the period January 1 till December 31, 2001 - - - - - (288) - (288) (1) (289)

December 31, 2001 140 107 1,281 (2) (3) (288) 32 1,267 1 1,268


AGFA-GEVAERT GROUP CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Capital

Stock of

Agfa-

Gevaert

N.V.

Share

premium of

Agfa-

Gevaert

N.V.

Retained

Earnings

Reserve for

own shares

Revaluation

reserve

Net Income Translation

differences

Minority

interest

Agfa-

Gevaert

Group

share-

holders’

equity

Total

Euro million Note 2001 2000

Cash and cash equivalents at beginning of year 220 130

Operating result (264) 401Current tax expense (17) (116)Depreciation, amortization and impairment losses 434 286Changes in fair value of derivative financial instruments 9 -Movement in long-term provisions 91 (38)Gains (losses) on retirement of non-current assets 12 (27) (7)

Gross cash provided by operating activities 226 526

Decrease /(Increase) in inventories 282 (53)Decrease /(Increase) in trade accounts receivable 223 120Increase / (Decrease) in trade accounts payable 52 (7)Movement in short-term provisions (61) (45)Movement in other working capital 16 (105)

Net cash provided from operating activities 738 436

Cash outflows for additions to intangible assets 11 (26) (21)Cash outflows for additions to property, plant and equipment 12 (160) (194)Cash inflows from disposals of intangible assets 11 1 10Cash inflows from disposals of property, plant andequipment 12 50 84Cash outflows for equity and debt instruments (36) (101)Cash outflows for acquisitions 4 (65) (116)Cash inflows from disposals 4 - 19Interests and dividends received 45 64

Net cash used in investing activities (191) (255)

Capital contributions - 2Dividend payments to stockholders 17 (63) (46)Net issuances of debt (336) 96Interest paid (106) (139)Other financial outflows (40) (10)

Net cash provided by/(used in) financing activities (545) (97)

Change in cash and cash equivalents due to business activities 2 84Change in cash and cash equivalents due to change in consolidation scope - 4Change in cash and cash equivalents due to exchange rate movements 1 2

Cash and cash equivalents at end of year 16 223 220


AGFA-GEVAERT GROUP CONSOLIDATED STATEMENTS OF CASH FLOW

(a) Statement of complianceAgfa-Gevaert N.V. (“the Company”) is a company domiciled in Belgium. The consolidated financial statements of the Company comprise the Company and itssubsidiaries (together referred to as the “Group”) and the Group’s interests in associated entities. The consolidated financial statements were authorized for issueby the Board of Directors on March 25, 2002. The consolidated financial statementshave been prepared in accordance with the International Accounting Standards(IAS) adopted by the International Accounting Standards Board (IASB) and interpretations issued by the Standing Interpretations Committee of the IASB as ineffect at the closing date. They comply, in all material aspects, with the EuropeanUnion’s Directives on consolidation of financial statements. The application by the Company of the IAS has been approved by the Banking andFinance Commission on July 6, 1999.

(b) Basis of preparationThe consolidated financial statements are presented in Euro, rounded to the nearestmillion.

The consolidated financial statements are prepared on the historical cost basisexcept that the following assets and liabilities are stated at their fair value: derivativefinancial instruments and investments classified as available-for-sale. Recognizedassets and liabilities that are hedged are stated at fair value in respect of the riskthat is hedged.

The accounting policies have been consistently applied by Group enterprises and,except for the changes in accounting policy (note 9 and note 22), are consistentwith those used in the previous year.

(c) Consolidation principlesSubsidiariesSubsidiaries are those enterprises controlled by the Company. Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. Thefinancial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that controleffectively ceases.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Significant accounting policies

AssociatesAssociates are those enterprises in which the Group has significant influence, butnot control, over the financial and operating policies. The consolidated financialstatements include the Group's share of the total recognized gains and losses ofassociates on an equity accounting basis, from the date that significant influenceeffectively commences until the date that significant influence effectively ceases.When the Group’s share of losses exceeds the carrying amount of the associate, thecarrying amount is reduced to nil and recognition of further losses is discontinuedexcept to the extent that the Group has incurred obligations in respect of the associate.

Transactions eliminated on consolidationAll intra-group balances and transactions, and any unrealized gains arising on intra-group transactions, are eliminated in preparing the consolidated financialstatements. Unrealized gains arising from transactions with associates are eliminatedto the extent of the Group’s interest in the enterprise. Unrealized gains arising fromtransactions with associates are eliminated against the investment in the associate.Unrealized losses are eliminated in the same way as unrealized gains except thatthey are only eliminated to the extent that there is no evidence of impairment.

(d) Foreign currencyForeign currency transactionsIn the individual Group companies, transactions in foreign currencies are translatedat the exchange rate at the date of the transaction. Foreign currency monetaryassets and liabilities are translated at the exchange rate ruling at the balance sheetdate. Resulting foreign exchange differences arising on translation are recognizedin the income statement for the year. Non-monetary assets and liabilities denominatedin foreign currency, which are stated at historical cost, are translated at the foreignexchange rate ruling at the date of the transaction.

Financial statements of foreign operations The Group’s foreign operations are not considered an integral part of the Company’soperations. Accordingly, the assets and liabilities of foreign operations, includinggoodwill and fair value adjustments arising on consolidation, are translated at theforeign exchange rate ruling at the balance sheet date, while revenue and expensesof foreign operations, are translated at the average foreign exchange rate for theyear. Resulting foreign exchange differences are recognized directly in equity. The financial statements of foreign operations in hyperinflationary economies aretranslated into the local company’s measurement currency (mostly the USD) as if itwas the operation’s functional currency. As a result, non-monetary assets, liabilitiesand related income statement accounts are remeasured using historical rates inorder to produce the same result in terms of the reporting currency that would haveoccurred if the underlying transaction was initially recorded in this currency.



1. Significant accounting policiescontinued

(e) Derivative financial instruments The Group uses derivative financial instruments primarily to manage its exposure tointerest rate and foreign currency risks arising from operational, financing andinvestment activities. In accordance with its treasury policy, the Group does notcurrently hold or issue derivatives for trading purposes. However, derivatives thatdo not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognized initially at cost. Subsequent to initialrecognition, derivative financial instruments are stated at fair value. Recognition ofany resultant gain or loss depends on the nature of the item being hedged (accountingpolicy f). Derivative financial instruments that are either hedging instruments thatare not designated or do not qualify as hedges are carried at fair value with changesin value included in the income statement.

The fair values of derivative interest contracts are estimated by discounting expectedfuture cash flows using current market interest rates and yield curve over theremaining term of the instrument. The fair value of forward exchange contracts istheir quoted market price at the balance sheet date, being the present value of thequoted forward price.

(f) HedgingCash flow hedgesWhere a derivative financial instrument is designated as a hedge of the variability incash flows of a recognized asset or liability, a firm commitment or a highly probableforecasted transaction, the effective part of any gain or loss on the derivative financialinstrument is recognized directly in equity. When the firm commitment or forecastedtransaction results in the recognition of an asset or liability, the cumulative gain orloss is removed from equity and included in the initial measurement of the acquisitioncost or other carrying amount of the asset or liability. Otherwise the cumulativegain or loss is removed from equity and recognized in the income statement at thesame time as the hedged transaction. The ineffective part of any gain or loss is recognized in the income statement immediately. Any gain or loss arising fromchanges in the time value of the derivative financial instrument is excluded from themeasurement of hedge effectiveness and is recognized in the income statementimmediately.

When a hedging instrument or hedge relationship is terminated but the hedgedtransaction still is expected to occur, the cumulative gain or loss at that pointremains in equity and is recognized in accordance with the above policy when thetransaction occurs. If the hedged transaction is no longer probable, the cumulativeunrealized gain or loss recognized in equity is recognized in the income statementimmediately.




Fair value hedgesFor fair value hedges, in which derivative financial instruments hedge the fair valueof assets and liabilities, changes in the fair value of derivative financial instrumentsare recognized in the income statement, together with changes in the fair value ofthe related hedged item.

Hedge of a net investment in foreign operationWhere a foreign currency liability hedges a net investment in a foreign operation,foreign exchange differences arising on translation of the liability to Euro are recognized directly in equity.

(g) Segment reportingSegment reporting is based on two segment reporting formats. The primary reportingformat represents three businesses – Consumer Imaging, Graphic Systems andTechnical Imaging – reflecting the Group’s management structure. The secondaryreporting format represents the Group’s four geographical markets.

Segment results include revenue and expenses directly attributable to a segmentand the relevant portion of revenue and expenses that can be allocated on a reasonablebasis to a segment.

Segment assets and liabilities comprise those operating assets and liabilities that aredirectly attributable to the segment or can be allocated to the segment on a reasonablebasis. Segment assets and liabilities do not include income tax items.

(h) Discontinuing operationsA discontinuing operation is a clearly distinguishable component of the Group’sbusiness (a) that is disposed of or terminated pursuant to a single plan; (b) that represents a separate major line of business or geographical area of operations; and(c) that can be distinguished operationally and for financial reporting purposes.

(i) Intangible assetsGoodwillGoodwill arising on an acquisition represents the excess of the cost of the acquisitionover the fair value of the net identifiable assets acquired. Goodwill is stated at costless accumulated amortization and impairment losses (accounting policy l). Inrespect of associates, the carrying amount of goodwill is included in the carryingamount of the investment in the associate.







Research and developmentExpenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in the incomestatement as an expense as incurred.

Expenditure on development activities, whereby research findings are applied to aplan or design for the production of new or substantially improved products andprocesses should be capitalized if, and only if, all of the recognition criteria of IAS38.45 are met. The intangible asset recognition criteria of IAS 38.45 are not met.

Other intangible assetsOther intangible assets that are acquired by the Group are stated at cost less accumulated amortization and impairment losses (accounting policy l).

AmortizationAmortization is charged to the income statement on a straight-line basis over theestimated useful lives of intangible assets. Goodwill is amortized from the date ofinitial recognition; other intangible assets are amortized from the date the asset isavailable for use. The estimated useful lives are as follows:

goodwill 5 to 20 yearsmulti hospital group contracts 4 yearscomputer software max. 4 years

(j) Property, plant and equipmentOwned assetsItems of property, plant and equipment are stated at purchase price or productioncost less accumulated depreciation and impairment losses (accounting policy l).

The production cost of self-constructed assets includes the direct cost of materials,direct manufacturing expenses, appropriate allocations of material and manufacturingoverheads, and an appropriate share of the depreciation and write-downs of assetsused in construction. It includes the share of expenses for company pension plansand discretionary employee benefits that are attributable to construction. Borrowingcosts are not capitalized.

Expenses for the repair of property, plant and equipment are usually chargedagainst income when incurred. They are, however, capitalized when they increasethe future economic benefits embodied in the item of property, plant and equipment.

Property, plant and equipment is depreciated on a straight-line basis over the esti-mated useful life of the item, except where the declining-balance basis is moreappropriate in light of the actual utilization pattern. Land is not depreciated.




The estimated useful lives of the respective asset categories are as follows:

Buildings 20 to 50 yearsOutdoor infrastructure 10 to 20 yearsPlant installations 6 to 20 yearsMachinery and equipment 6 to 12 yearsLaboratory and research facilities 3 to 5 yearsVehicles 4 to 8 yearsComputer equipment 3 to 5 yearsFurniture and fixtures 4 to 10 years

Leased assetsLeases in terms of which the Group assumes substantially all the risks and rewardsof ownership are classified as finance leases. Plant and equipment acquired by wayof finance lease is stated at an amount equal to the lower of its fair value and thepresent value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses (accounting policy l).The depreciation period is the estimated useful life of the asset, or the lease term ifshorter.

(k) Investments in equity securitiesInvestments classified as non-current assets comprise participations in companies inwhich the Group has no control.

Where the Group holds, directly or indirectly, more than 20 % of the voting powerand/or exercises significant influence over the financial and operating policies, theinvestments are referred to as associated companies. Investments in associatedcompanies are accounted for using the equity method. If there is an indication thatan investment in an associate may be impaired, the accounting policy with respectto impairment is applied (accounting policy l).

Other investments in equity securities are classified as available-for-sale and arestated at fair value, except for those equity instruments that do not have a quotedmarket price in an active market and whose fair value cannot be reliably measured.Those equity instruments that are excluded from fair valuation are stated at cost.A gain or loss arising from a change in fair value of an investment classified as available-for-sale that is not part of a hedging relationship is recognized directly inequity. When the investment is sold, collected, or otherwise disposed of, or whenthe carrying amount of the investment is impaired, the cumulative gain or loss previously recognized in equity is transferred to the income statement.

The fair value of investments available-for-sale is their quoted bid price at the balancesheet date.

(l) ImpairmentThe carrying amounts of the Group’s assets, other than inventories, deferred taxassets and assets arising from employee benefits, are reviewed at each balance sheetdate to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. The recoverable amount of the Group’s receivables is calculated as the present valueof expected future cash flows, discounted at the original effective interest rate inherentin the asset. Receivables with a short duration are not discounted. The recoverable amount of other assets is the greater of their net selling price andvalue in use. In assessing value in use, the expected future cash flows are discountedto their present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. For anasset that does not generate largely independent cash inflows, the recoverableamount is determined for the cash-generating unit to which the asset belongs. An impairment loss is recognized whenever the carrying amount of an asset or itscash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the income statement.A previously recognized impairment loss is reversed if there has been a change inthe estimates used to determine the recoverable amount, however not to an amounthigher than the carrying amount that would have been determined, net of amortizationor depreciation, if no impairment loss had been recognized in prior years. Animpairment loss in respect of goodwill is not reversed unless the loss was caused bya specific external event of an exceptional nature that is not expected to recur, andthe increase in recoverable amount relates clearly to the reversal of the effect of thatspecific event.

(m) InventoriesRaw materials, supplies and goods purchased for resale are valued at purchase cost.Work in progress and finished goods are valued at the cost of production. The costof production comprises the direct cost of materials, direct manufacturing expenses,appropriate allocations of material and manufacturing overheads, and an appropriateshare of the depreciation and write-downs of assets used for production. It includesthe share of expenses for company pension plans and discretionary employee benefitsthat are attributable to production. Administrative costs are included where theyare attributable to production.

Inventories are valued using the weighted-average cost method.




If the purchase or production cost is higher than the net realizable value, inventoriesare written down to net realizable value. Net realizable value is the estimated sellingprice in the ordinary course of business, less the estimated costs of completion andselling expenses.

(n) Trade and other receivablesTrade and other receivables are stated at their cost less impairment losses (accountingpolicy l).

At the inception of the lease, receivables under finance leases are stated at the presentvalue of the future net lease payments. The receivables are continually reducedduring the lease term by the portion of the lease payments that represents theredemption of the principal.

(o) Cash and cash equivalentsCash and cash equivalents comprise cash balances and call deposits.

(p) Share capital

Repurchase of share capitalWhen share capital recognized as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognized as a change inequity. Repurchased shares are classified as treasury shares and presented as adeduction from total equity.

DividendsDividends are recognized as liabilities in the period in which they are declared.

(q) Interest-bearing borrowingsInterest-bearing borrowings are recognized initially at cost, less attributable transactioncosts. Subsequent to initial recognition, interest-bearing borrowings are stated atamortized cost with any difference between cost and redemption value being recognized in the income statement over the period of the borrowings on an effectiveinterest basis.

(r) Income taxesIncome tax on the profit or loss for the year comprises current and deferred tax.Income tax is recognized in the income statement except to the extent that it relatesto items recognized directly to equity, in which case it is recognized in equity.




Current tax is the expected tax payable on the taxable income for the year, using taxrates enacted or substantially enacted at the balance sheet date, and any adjustmentto tax payable in respect of previous years.

Deferred tax is calculated using the balance sheet liability method, providing fortemporary differences between the carrying amount of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible fortax purposes, the initial recognition of assets or liabilities that affect neitheraccounting nor taxable profit, and differences relating to investments in subsidiariesto the extent that they will probably not reverse in the foreseeable future. Theamount of deferred tax provided is based on the expected manner of realization orsettlement of the carrying amount of assets and liabilities, using tax rates enacted orsubstantially enacted at the balance sheet date.

A deferred tax asset is recognized only to the extent that it is probable that futuretaxable profits will be available against which the unused tax losses and credits canbe utilized. Deferred tax assets are reduced to the extent that it is no longer probablethat the related tax benefit will be realized.

Additional income taxes that arise from the distribution of dividends are recognizedat the same time as the liability to pay the related dividend.

(s) Employee benefitsPost employment benefitsPost employment benefits comprise pensions, post employment life insurance andmedical care.

The majority of the Group’s employees are eligible for retirement benefits underdefined contribution and defined benefit plans provided through separate funds,insurance plans or unfunded arrangements.

(1) Defined contribution plans:Contributions to defined contribution pension plans are recognized as an expense inthe income statement as incurred.

(2) Defined benefit plans:For defined benefit plans, the amount recognized in the balance sheet is determinedas the present value of the defined benefit obligation adjusted for the unrecognizedactuarial gains and losses and less any past service costs not yet recognized and thefair value of any plan assets. Where the calculation results in a net surplus the recognized asset does not exceed the net total of any unrecognized actuarial lossesand past service costs and the present value of any future refunds from the plan orreductions in future contributions to the plan.




The recognition of actuarial gains and losses is determined separately for eachdefined benefit plan. To the extent that the net cumulative unrecognized gain orloss exceeds ten percent of the greater of the present value of the defined benefitobligation and the fair value of plan assets, that excess is recognized in the incomestatement over the expected average remaining working lives of the employees participating in that plan. Otherwise, the actuarial gain or loss is not recognized.

Past service costs are recognized as an expense on a straight-line basis over the averageperiod until the benefits become vested. To the extent that the benefits are alreadyvested following the introduction of, or changes to, a defined benefit plan, past servicecosts are recognized as an expense immediately.The present value of the defined benefit obligations and the related service costs arecalculated by a qualified actuary using the projected unit credit method. The discountrate used is the yield at balance sheet date on high quality corporate bonds thathave maturity dates approximating the terms of the Group’s obligations. The amountcharged to the income statement consists of current service cost, interest cost, theexpected return on any plan assets and actuarial gains and losses.

Pre-retirement pensions are treated as termination benefit.

Other long-term employee benefitsThe Group’s net obligation in respect of long-term employee benefits, other thanpension plans, post employment life insurance and medical care, is the amount offuture benefit that employees have earned in return for their service in current andprior periods. The obligation is calculated using the projected unit credit methodand is discounted to its present value and the fair value of any related assets isdeducted. The discount rate used is the yield at balance sheet date on high qualitycorporate bonds that have maturity dates approximating the terms of the Group’sobligations.

Termination benefitsTermination benefits are recognized as a liability and an expense when a Groupcompany is demonstrably committed to either: (a) terminate the employment of anemployee or group of employees before the normal retirement date; or (b) providetermination benefits as a result of an offer made in order to encourage voluntaryredundancy.Where termination benefits fall due more than twelve months after the balancesheet date, they are discounted using a discount rate which is the yield at balancesheet date on high quality corporate bonds that have maturity dates approximatingthe terms of the Group’s obligations.




(t) ProvisionsProvisions are recognized in the balance sheet when a Group company has a presentobligation (legal or constructive) as a result of a past event; it is probable that anoutflow of resources embodying economic benefits will be required to settle theobligation and a reliable estimate can be made of the amount of the obligation.The amount recognized as a provision is the best estimate of the expenditurerequired to settle the present obligation at the balance sheet date.If the effect is material, provisions are determined by discounting the expectedfuture cash flows at a pre-tax rate that reflects current market assessments of thetime value of money and, where appropriate, the risks specific to the liability.A provision for restructuring is recognized when the Group has approved a detailedand formal restructuring plan, and the restructuring has either commenced or hasbeen announced to those affected by it. Future operating costs are not provided for.In accordance with the Group’s published environmental policy and applicable legalrequirements, a provision for site restoration in respect of contaminated land is recognized when the land is contaminated.A provision for onerous contracts is recognized when the expected benefits to bederived by the Group from a contract are lower than the unavoidable cost of meetingits obligations under the contract.

(u) Trade and other payablesTrade and other payables are stated at their cost.

(v) RevenueFor the sale of goods, revenue is recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer.

Revenue is recognized when there are no significant uncertainties regarding recoveryof the consideration due, the associated costs or the possible return of goods.

Royalties and rentals are included in revenue and recognized when it is probablethat the economic benefits associated with the transaction will flow to the Groupand can be measured reliably. The income is recognized on an accrual basis inaccordance with the substance of the relevant agreement.




(w) ExpensesInterest income (expense)Interest income (expense) comprises interest payable on borrowings and interestreceivable on funds invested. Other non-operating income (expense) comprises foreign exchange gains and losses with respect to non-operating activities and gainsand losses on hedging instruments with respect to non-operating activitiesInterest income is recognized in the income statement as it accrues, taking intoaccount the effective yield on the asset. Dividend income is recognized in theincome statement on the date that the dividend is declared.All interest and other costs incurred in connection with borrowings are expensed asincurred. The interest expense component of finance lease payments is recognizedin the income statement using the effective interest rate method.

Operating lease payments Payments made under operating leases are recognized in the income statement on astraight-line basis over the term of the lease.Lease incentives received are recognized in the income statement as an integral partof the total lease expense.




The 2001 Consolidated Financial Statements of the Group include the Company and80 consolidated subsidiaries controlled by the Company. For the year 2000, theConsolidated Financial Statements include 64 consolidated subsidiaries (note 27).

Excluded from consolidation in 2001 are 22 subsidiaries (2000: 21 subsidiaries)that in aggregate are of minor importance to the net worth financial position andearnings of the Group. The subsidiaries excluded from the consolidation representon an aggregate level less than 1 percent of Group sales.

Listed below are the material acquisitions of the Group for 2001.

On April 12, 2001, Agfa Corporation Inc., the U.S. subsidiary of Agfa-Gevaert N.V.,wholly acquired Talk Technology Inc. for Euro 24 million. Talk Technology is a supplier of voice-enabled clinical workflow and reporting solutions for healthcare.

On August 29, 2001, the Group wholly acquired Rich. Seifert & Co. GmbH andPantak for Euro 8 million. The Seifert and Pantak businesses consist of marketing,sales, development, production and world-wide distribution of X-ray equipment andsystems for the non-destructive testing market.

On November 30, 2001, Agfa Corporation Inc., the U.S. subsidiary of Agfa-GevaertN.V., wholly acquired Autologic Information International Inc. for Euro 50 million.Autologic designs, manufactures, markets and services computer-based electronicprepress systems to the publishing industry.

Segment reporting is based on two segment reporting formats. The primary reportingformat represents three businesses – Consumer Imaging, Graphic Systems andTechnical Imaging – reflecting the Group’s management structure. The secondaryreporting format represents the Group’s four geographical markets.

The three business segments comprise the following activities :

• The Consumer Imaging business group develops, produces and supplies colornegative, slide and black-and-white films, single-use “films with lens” cameras.Other products embrace photographic paper, photochemicals, laboratory equipment,digital cameras and scanners. Mid 2001, the Group announced to discontinue thesales of digital cameras and scanners as from year end.

• The Graphic Systems business group's products range from scanners to laserimagesetters and printing plates.

• The products of the Technical Imaging business group for medical diagnosticsinclude x-ray films, the Agfa “Impax” network for handling the dispatching andarchiving of diagnostic images and data. Other fields of activity are nondestructivematerial testing, micrography and motion-picture film for big-screen and televisionproductions.



2. Companies consolidated

3. Segment reporting

Key data for business segments and geographical regions have been calculated asfollows:

• Return on sales is the ratio of operating result to external sales

• Gross operating cash flow is the excess of cash receipts over cash disbursementsbefore any application of funds

• Segment capital expenditure is the total cost incurred during the period toacquire segment assets that are expected to be used for more than one period.

• Segment result is segment revenue minus segment expenses excluding administrative expenses.

• EBIT: Operating result before non-recurring income/expense and restructuringexpenses



3. Segment reportingcontinued



Key data by business segment and region

Business Segments Consumer Imaging (CI)

(Euro million) 2001 2000

Net Sales (external) 1,198 1,487Change (19.4)% 3.7%Operating Result (100) 71Return on sales (8.3)% 4.8%EBIT (12) 105Segment result (28) 141Segment assets 857 1,049Segment liabilities 608 633Gross cash flow (47) 110Capital Expenditures 41 39Amortization and depreciation 55 67Impairment losses recognized on Brevard facility (USA) - -Impairment losses recognized on other fixed assets 1 4Other Non Cash expenses (Net of reversal of provisions) 0 (6)R&D expenses 66 75Number of employees at year end (Full Heads) 4,286 5,188

Regions Europe NAFTA

(Euro million) 2001 2000 2001 2000

Net Sales (external) by market 2,472 2,577 1,396 1,541Net Sales (external) by point of origin 2,781 2,877 1,382 1,539Change (3.3)% 5.2% (10.2)% 17.3%Segment assets 2,113 2,404 940 1,225Segment liabilities 1,466 1,352 550 459Operating Result (10) 372 (265) (16)Return on sales (0.4)% 12.9% (19.2)% (1.0)%Capital Expenditures 154 160 24 37Amortization and depreciation 154 152 102 107Impairment losses recognized on Brevard facility - - 153 -Impairment losses recognized on other fixed assets 6 - 1 7R&D Expenses 192 186 39 38Number of employeesat year end (Full Heads) 14,971 15,685 4,296 4,244Number of employees at year end (full time equivalents)




Graphic Systems (GS) Technical Imaging (TI) Agfa–Gevaert Group

2001 2000 2001 2000 2001 2000

1,890 2,065 1,823 1,708 4,911 5,260(8.5)% 6.2% 6.7% 26.3% (6.6)% 11.2%

(56) 99 (108) 231 (264) 401(2.9)% 4.8% (5.9)% 13.5% (5.4)% 7.6%

79 163 193 259 260 52775 225 (1) 314 46 680

1,255 1,471 1,357 1,598 3,469 4,118682 649 780 590 2,070 1,872

36 158 237 258 226 52682 87 67 89 190 21598 108 121 104 274 279

- - 153 - 153 -6 3 - - 7 7

38 (8) 89 (14) 127 (28)76 82 89 67 231 224

8,336 8,971 8,806 8,012 21,428 22,171

Latin America Asia/Africa/Australia Agfa-Gevaert Group

2001 2000 2001 2000 2001 2000

230 253 813 889 4,911 5,260

178 208 570 636 4,911 5,260(14.4)% 22.4% (10.4)% 24.0% (6.6)% 11.2%

136 155 280 334 3,469 4,11811 14 43 47 2,070 1,87212 18 (1) 27 (264) 401

6.7% 8.7% (0.2)% 4.3% (5.4)% 7.6%5 4 7 14 190 2158 8 10 12 274 279

- - - - 153 -

- - - - 7 7- - - - 231 224

583 657 1,578 1,585 21,428 22,171

21,038 21,943


Reconciliation of segment assets and liabilities with balance sheet total and reconciliation of segment result with total result of the Group.

Euro million 2001 2000

Segment result (28) 75 (1) 46 141 225 314 680

General administration expense (310) (310) (279) (279)Interest expenses (63) (63) (81) (81)Other non-operating expenses (57) (57) (49) (49)Income tax expense 133 133 (96) (96)Share of result of associated companies (38) (38) (7) (7)Minority interest 1 1 1 1Net result of the accounting period (288) 169

Segment assets 857 1,255 1,357 3,469 1,049 1,471 1,598 4,118

Investments 49 49 114 114Receivables under finance leases 430 430 368 368Cash and cash equivalents 224 224 228 228Deferred tax assets 288 288 172 172Derivative Financial Instruments 2 2 - -Other unallocated receivables 65 65 70 70Total assets 4,527 5,070

Segment liabilities 608 682 780 2,070 633 649 590 1,872

Financial obligations 1,066 1,066 1,375 1,375Deferred tax liabilities 31 31 126 126Shareholders’ Equity 1,268 1,268 1,577 1,577Derivative Financial Instruments 24 24 - -Other unallocated liabilities 68 68 120 120Total Liabilities 4,527 5,070

Acquisitions 2001 The acquisitions of Autologic, Pantak, Seifert and Talk Technology had the followingeffect on the Group’s assets and liabilities:

Euro millionIntangible assets (other than goodwill) 2Goodwill on acquisition 48Property, plant and equipment 6Inventories 18Trade receivables 19Other receivables 3Cash and cash equivalents 17Personnel liabilities (4)Provisions (2)Trade accounts payable (15)Liabilities to banks (7)Other liabilities (3)Consideration paid 82

Cash acquired (17)Net cash outflow 65

59


Consumer

Imaging

Graphic

Systems

Technical

Imaging

Unallo-

cated

Consoli-

dated

Consumer

Imaging

Graphic

Systems

Unallo-

cated

Technical

Imaging

Consoli-

dated


4. Cash flow statements - effect of acquisitions & disposals

Agfa annual report 2001 |

Acquisitions 2000 The acquisitions of Krautkrämer, Agfa Taiwan and Quadrat had the following effecton the Group’s assets and liabilities:

Euro million

Intangible assets (other than goodwill) 3Goodwill on acquisition 115Property, plant and equipment 26Investments 1Inventories 23Trade receivables 27Other receivables 4Cash and cash equivalents 38Liabilities for post-employment benefits (50)Personnel liabilities (3)Trade accounts payable (14)Other liabilities (14)Total 156

Minority interest (2)Consideration paid 154

Cash acquired (38)Net cash outflow 116

Divestitures 2000On June 30, 2000, the Group disposed of its gelatin production plant Heilbronn forEuro 20 million.On June 30, 2000, the Group disposed of its ‘Digital Printing Systems’ Business Unitto Xeikon N.V. (the “DPS transaction”) in exchange for 1,751,741 newly issuedXeikon shares. As of June 30, 2000 and after the “DPS transaction” the Group held24.73 % of the outstanding Xeikon shares.The disposal of the ‘Digital Printing Systems’ Business Unit (part of the BusinessSegment Graphic Systems) does not qualify as a discontinuing operation.

The disposal of the ‘Digital Printing Systems’ Business Unit and Heilbronn had thefollowing effect on the Group’s assets and liabilities :

Euro million

Intangible assets (3)Property, plant and equipment (23)Inventories (24)Trade receivables -Other receivables -Cash and cash equivalents (1)Liabilities for post-employment benefits -Provisions 1Trade accounts payable -Other liabilities 1Total (49)

Consideration received in cash and in shares Xeikon 48Net cash inflow included in the above consideration 19



4. Cash flow statements - effect of acquisitions & disposals

continued


Exchange gains 161 136Lease income 39 36Gains on the retirement of fixed assets 29 10Reversal of unutilized provisions 22 19Rental income 10 9Royalties 1 1Other income 32 22

TOTAL 294 233


Restructuring expenses 450 80Environmental provision 49 -Exchange losses 160 160Amortization of goodwill 37 32Write-downs of receivables 35 34Provisions 25 23SAP expenses 12 19Changes in fair value of financial instruments 9 -Rent 8 7Property taxes 4 4Loss on retirement of fixed assets 2 3Expenses related to DPS business - 11Other expenses 48 45

TOTAL 839 418

Restructuring plansIn 2001, the Group recorded restructuring charges of Euro 450 million and non-recurring charges of Euro 49 million relating to a worldwide restructuring plan“Horizon” and several smaller programs. These charges included employee termi-nation costs of Euro 257 million, impairment losses on fixed assets of Euro 160 mil-lion, inventory write-offs of Euro 15 million, environmental related costs of Euro 49million and other costs of Euro 18 million.



5. Other operating income

6. Other operating expenses

In June 2001, the Board of Management of the Company announced a worldwiderestructuring plan “Horizon”. Key initiatives for the worldwide restructuring planover the period 2001 through 2003 include a workforce reduction of approximately4,000 employees (full time equivalents), an elimination of excess production capaci-ty and an accelerated transition from analogue to digital technology. The restruc-turing and non-recurring charges recorded for the “Horizon” plan in 2001 wereEuro 440 million. These charges included employee termination costs of Euro 223million, impairment losses on fixed assets of Euro 160 million, inventory write-offsof Euro 7 million, environmental related costs of Euro 49 million and other costs ofEuro 1 million.The other restructuring costs of Euro 59 million were attributable to several smallerprograms.


Income from other securities and loans included in investments 3 5Other interest and similar income 31 56Interest and similar expenses (97) (142)

TOTAL (63) (81)


Interest portion of interest bearing provisions (43) (42)Impairment losses on other investments (5) -Exchange gains 1 (5)Revaluation losses on financial instruments (5) -Result on sale of investments in affiliated companies 2 -Miscellaneous non-operating expenses (7) (2)

TOTAL (57) (49)

The interest portion of interest-bearing provisions primarily comprises the allocationof interest on provisions for personnel commitments, pensions and other post-employment benefits.

Recognized in the income statement


Current tax expense (17) 116Deferred tax income 150 (20)

Total income tax expense in income statement (133) 96



7. Interest income (expense)

8. Other non-operating income (expense)

9. Income taxes

Relationship between tax expense and accounting profit

Summary 2001

Euro million

Accounting profit before tax and before consolidation entries (327) (148) 45.26%Consolidation entries (mainly related to intercompany dividends) (57) 15

Accounting profit before tax (384) (133) 34.64%

Reconciliation of effective tax rate

Euro million

Accounting profit before tax (327) (57) (384)

Theoretical income tax expense (117) 15 (102)

Theoretical tax rate (*) 35.78%

Disallowed items 11 11Tax free income : gains on sale of investments (1) (1)Impact of special tax status: Belgian co-ordination center (22) (22)Impact of special tax status Leeds (permanent establishment) (7) (7)Other tax free income: mainly related to dividend exemption (36) (36)Additional tax assessments and other 8 8Tax credit resulting from investment deduction (18) (18)Other tax credits (8) (8)Tax losses for which no deferred tax asset has been recorded 41 41Deferred tax income on tax losses from previous years (1) (1)Deferred tax expense due to reversal of tax assets on tax losses from previous years 2 2Actual income tax expense (148) 15 (133)

Effective tax rate 34.64%

(*) The theoretical tax rate is the weighted average tax rate of the Company and all subsidiaries included in the consolidation.



9. Income taxescontinued

Tax expense

/ tax

income

Basis for

tax compu-

tation

Tax rate

Consoli-

dation

Adjustments

Before con-

solidation

Adjustments

After

adjustments

Summary 2000

Euro million

Accounting profit before tax as reported by the different Group companies 311Consolidation entries regarding intercompany dividends and gains/ losses on the sale of investments (50)Accounting profit after consolidation entries 261 (72) 27.59%

Consolidation adjustments without influence on tax expense/income (mainly goodwill) (4)Consolidation adjustments 14 (5) 35.71%Consolidation adjustments: additional tax assessments and other (19)

Accounting profit before tax 271 (96) 35.42%

Reconciliation of effective tax rate

Euro million

Accounting profit after consolidation entries 261 10 271

Theoretical income tax expense 111 5 116

Theoretical tax rate 42.53%

Disallowed items 9 9Tax free income (6) (6)Impact of special tax status (co-ordination center) (12) (12)Additional tax assessments and other 6 19 25Tax credit resulting from investment deduction (8) (8)Other tax incentives (1) (1)Tax savings resulting from utilization of tax losses (8) (8)Deferred tax income on tax losses from previous years (19) (19)Actual income tax expense 72 24 96

Effective tax rate 35.42%



9. Income taxescontinuedTax expense

/ tax

income

Basis for

tax compu-

tation

Tax rate

Consoli-

dation

Adjustments

Before con-

solidation

Adjustments

After

adjustments

Deferred tax assets and liabilitiesDeferred tax assets and liabilities are attributable to the following items :

Euro million December 31, 2001 December 31, 2000

Intangible assets 50 13 37 39 23 16Property, plant and equipment 2 96 (94) 3 150 (147)Inventories 64 17 47 84 19 65Receivables 13 16 (3) 12 10 2Other current assets 16 14 2 1 13 (12)Provisions 117 3 114 62 3 59Employee benefit plans 61 39 22 56 21 35Other liabilities 11 15 (4) 6 11 (5)

Deferred tax assets and liabilities related to temporary differences 334 213 121 263 250 13

Tax loss carry-forwards 113 113 82 82

Tax exempted reserves 53 (53)

Excess tax credits 23 23 4 4

Deferred tax assets/liabilities 470 213 257 349 303 46

Set off of tax (182) (182) (177) (177) -

Net tax assets/liabilities 288 31 257 172 126 46

Unrecognized deferred tax assetsDeferred tax assets have not been recognized in respect of ‘tax loss carry-forwards’ for an amount of Euro 47 million because it is notprobable that future taxable profit will be available against which the Group can utilize the benefits therefrom.




NetLiabilitiesAssetsNetLiabilitiesAssets

Movement in temporary differences during 2001

Euro million

Intangible assets 16 21 37Property, plant and equipment (147) 56 (3) (94)Inventories 65 (17) (1) 47Receivables 2 (7) 2 (3)Other current assets (12) 14 2Provisions 59 55 114Employee benefit plans 35 (14) 1 22Other liabilities (5) (4) 4 1 (4)

Deferred tax assets and liabilities related to temporary differences 13 104 4 0 121

Loss carry-forwards 82 27 4 113

Tax exempted reserves* (53) 53 0

Excess tax credits 4 19 23

Deferred tax assets/liabilities 46 150 57 4 257

* The adoption of IAS 12 (2000 revised) has resulted in the Group recognizing income taxesbased on the tax rates applicable to undistributed profits. This change in accounting policy hasbeen accounted for by restating the opening balance of retained earnings at 1 January 2001with Euro 53 million.

Personnel expenses in 2001 amounted to Euro 1,477 million compared to Euro 1,480 million in2000. The breakdown of personnel expenses is as follows :


Wages and Salaries 1,194 1,182Social Expenses 283 298

1,477 1,480

The average number of employees in equivalent heads for 2001 amounted to 21,130 (2000 : 21,759). Classified per corporate function, this average can be presented as follows :

2001 2000

Marketing 7,007 6,572Manufacturing / Engineering 8,250 8,812R & D 1,676 1,694Administration 4,197 4,681

21,130 21,759




10. Personnel expenses

Recognized

in income

Credited to

equity

(Note 17)

December

31,2000

Translation

differences

December

31,2001

Euro million

Gross carrying amount December 31, 2000 164 427 5 596

Exchange differences 7 17 - 24Acquisitions 2 51 - 53Capital expenditures 20 2 4 26Goodwill Agfa Finance - 4 - 4Retirements (6) - - (6)Transfers (1) - (4) (5)

Gross carrying amount December 31, 2001 186 501 5 692

Accumulated amortization & write-downs

December 31, 2000 79 138 - 217

Exchange differences 3 7 - 10Acquisitions - 3 - 3Amortization and write-downs during the year 28 37 - 65Retirements (5) - - (5)Transfers (1) - - (1)

Accumulated amortization & write-downs

December 31, 2001 104 185 - 289

Net carrying amount December 31, 2000 85 289 5 379

Net carrying amount December 31, 2001 82 316 5 403

On April 12, 2001, Agfa Corporation Inc., the U.S. subsidiary of Agfa-Gevaert N.V., whollyacquired Talk Technology Inc. for Euro 24 million. The recognized goodwill, which amountedto Euro 26 million, is being amortized over 10 years.

On August 29, 2001, the Group wholly acquired Rich. Seifert & Co. GmbH and Pantak for Euro8 million. The recognized goodwill, which amounted to Euro 6 million, is being amortized over15 years.

On November 30, 2001, Agfa Corporation Inc., the U.S. subsidiary of Agfa-Gevaert N.V., whollyacquired Autologic Information International Inc. for Euro 50 million. The recognized goodwill,which amounted to Euro 16 million, is being amortized over 10 years.

Exchange differences arise from translating opening and closing values of foreign companies’figures at the respective exchange rates.



11. Intangible assets Acquired

concessions,

industrial

property

rights,

similar rights

assets and

licenses

thereunder

Acquired

goodwill

Advance

payments to

acquire

intangible

assets

Total

Euro million

Gross carrying amount

December 31, 2000 743 2,236 424 50 3,453

Exchange differences 10 27 4 1 42Acquisitions 4 2 13 - 19Capital expenditures 8 65 50 37 160Retirements (30) (105) (60) - (195)Transfers 4 44 10 (53) 5Gross carrying amount

December 31, 2001 739 2,269 441 35 3,484

Accumulated depreciation and

write-downs December 31, 2000 431 1,715 313 - 2,459

Exchange differences 4 17 3 - 24Acquisitions 3 2 8 - 13Depreciation and write-downs duringthe year 24 134 51 - 209

Impairment losses Brevard facility 22 125 6 - 153Impairment losses other assets - 6 - 1 7Retirements (19) (98) (45) - (162)Transfers - - 1 - 1Accumulated depreciation, write-downs

and impairment losses Dec. 31, 2001 465 1,901 337 1 2,704

Net carrying amount Dec. 31, 2000 312 521 111 50 994

Net carrying amount Dec. 31, 2001 274 368 104 34 780

In 2001, the Group recognized an impairment loss of Euro 153 million for its Brevard Facility(cash-generating unit), due to the shutdown by year-end 2002. The shutdown of the BrevardFacility (United States) is part of the consolidation of X-ray film production facilities worldwide.Expected discounted cash flows associated with the Brevard production facility were insufficientto recover its carrying value. The cash-generating unit’s value in use has been calculated using adiscount rate of 8 %.

Exchange differences arise from translating opening and closing values of foreign companies’figures at the respective exchange rates.



12. Property, plant and equipmentLand,

Buildings and

infrastructure

Machinery

and technical

equipment

Furniture,

fixtures and

other

equipment

Construction

in progress

and advance

payments to

vendors and

contractors

Total

The Group leases buildings, infrastructure and production equipment under a numberof finance lease agreements. At the end of the lease term the Group has the optionto purchase the leased asset at a beneficial price. As of December 31, 2001 the netcarrying amount of fixed assets held under finance leases amounted to Euro 18 million(2000 : Euro 22 million). The leased assets secure lease obligations (note 19).Lease payments do not include contingent rent.

The Group, as lessor, included assets subject to operating leases in its balance sheetunder the caption “Other Equipment”. The depreciation of these assets is consistentwith the Group’s normal depreciation policy. At the end of December 2001, theassets subject to operating leases have a total net carrying amount of Euro 19 million(2000: Euro 2 million). The gross carrying amount of these assets amounted to Euro 46 million (2000: Euro 5 million). The future minimum lease income under non-cancellable operating leasesis presented in note 23.

Euro million

Gross carrying amount December 31, 2000 10 - 41 1 26 27 13 118

Exchange differences - - - - - - - -Other additions - - 1 - - 7 1 9Retirements (2) - - - (26) (1) (3) (32)Share in result of associated companies - - (10) - - - - (10)Transfers 2 - 6 - - (8) - -

Gross carrying amount December 31, 2001 10 - 38 1 - 25 11 85

Accumulated write-downs December 31, 2000 - - 1 - - 3 - 4

Exchange differences - - - - - (1) - (1)Amortization goodwill Xeikon - - 1 - - - - 1Impairment losses Xeikon - - 27 - - - 27Impairment losses other - - 1 - - 4 - 5Retirements - - - - - - - -

Accumulated write-downs and impairment losses

December 31, 2001 - - 30 - - 6 - 36

Net carrying amount December 31, 2000 10 - 40 1 26 24 13 114

Net carrying amount December 31, 2001 10 - 8 1 - 19 11 49

Based on an assessment of its recoverable amount, the carrying amount of the equityinvestment in Xeikon N.V. was written down in 2001 by Euro 27 million. Theimpairment loss of Euro 27 million represented the remaining carrying amount ofthe equity investment in Xeikon N.V..



12. Property, plant and equipmentcontinued

13. Investments

Investments

in

susidiaries

Loans to

subsidiaries

Associated

companies

Other

companies

Investments in other

affiliated companies

Loans to

other

affiliated

companies

Other

securities

Other loans Total

euro million 2001 2000

Raw material and supplies 185 206Work in process, finished goods and goods purchased for resale 862 1,079Advance payments 8 8

TOTAL 1,055 1,293

Write-downs on inventories amounted to Euro 24 million during 2001 (2000: Euro 16 million).

The cost of inventories recognized as an expense in the income statement were asfollows :


Cost of raw materials, supplies and goods purchased for resale 2,273 2,297Cost of services purchased 72 93

TOTAL 2,345 2,390


Receivables under finance leases 430 368Claims for tax refunds 73 52Short term loans receivable 6 9Accrued interest on loans receivable 2 12Other 69 68

TOTAL 580 509

Lease agreements in which the other party, as lessee, is to be regarded as the economic owner of the leased assets give rise to accounts receivable in the amountof the discounted future lease payments. These receivables amounted to Euro 430million as of December 31, 2001 and will bear interest income until their maturitydates of Euro 68 million. The receivables under finance leases are as follows:



14. Inventories

15. Other receivables and other assets


Not later than one year 182 34 148 151 31 120Between one and five years 314 34 280 276 29 247Later than five years 2 - 2 1 - 1

TOTAL 498 68 430 428 60 368

The Group leases out its commercial equipment under finance leases via Agfa Finance(i.e. Agfa Finance Brussels N.V. and its subsidiaries) and its entities in North America,i.e. Agfa Corporation (USA) and Agfa Inc. (Canada). At the inception of the lease,the present value of the minimum lease payments generally amounts to 95% of thefair value of the leased assets. This principle applies to all of the leases concludedwith the entities referred to above.The leases concluded with Agfa Finance typically run for a non-cancellable period of four years. The contracts generally foresee an option to purchase the leased equipment after that period at a price equal or less than the fair value at the date theoption becomes exercisable. Sometimes, the fair value of the leased asset is paidback by means of a purchase obligation for consumables at a value higher than itsmarket value, in such a way that this mark-up is sufficient to cover the amount initially invested by the lessor. In these types of contracts the mark-up and/or thelease term can be subject to change.Agfa Finance offers its products via its subsidiaries in Australia, France, Italy andPoland and its branches in Europe (Spain, Switzerland, Benelux, Germany, UK andthe Nordic countries) and Japan.As of December 31, 2001, receivables under finance leases amounted to Euro 250 million.About 60 % of the leases offered by Agfa Corporation have a lease term of 60 monthswith a one dollar purchase option at the end of the term. The remaining portion ofthe finance leases have an average term of 57 months. The options at the end ofthese contracts are to purchase, to renew or to return the leased equipment at avalue which is expected to be the fair value at the date the option becomes exercisable.As of December 31, 2001 receivables under finance leases amounted to Euro 175 million.Agfa Inc. started its lease business in May 2000. The portfolio of Agfa Inc. mainlyrelates to Minilabs (a product of “Consumer Imaging”). The Minilabs are leased outfor a lease term of four years. Most of the contracts foresee a purchase option at avalue equal or less than the fair market value. As of December 31, 2001 the receivablesunder finance leases amounted to Euro 4 million.The remainder of the Group’s lease agreements (Euro 1 million) relates to sale andlease back agreements.

71


15. Other receivables and other assetscontinued

Present valueUnearned

interest

income

Total future

payments

Present valueUnearned

interest

income

Total future

payments

Agfa annual report 2001 |

The reconciliation of Cash and cash equivalents with its corresponding balancesheet items can be presented as folows :


Marketable securities and other instruments 2 10Cash on hand, demand deposits and checks (*) 222 218Total Cash and cash equivalents as reported in the

Balance Sheet 224 228

Accounts receivable under cash management agreements (reported in the balance sheet as other receivables) 3 12Liabilities under cash management agreements (reported in the balance sheet as Miscellaneous liabilities) (7) (20)Revaluation financial assets available-for-sale 3 -Total Cash and cash equivalents as reported in the Cash Flow

Statement 223 220

(*) Included is an amount of Euro 97 million that has been deposited into an escrowaccount in relation to the acquisition of Mitra Inc.. This amount represents a portionof the purchase price of Mitra Inc. (note 28).

The various components of Shareholders’ Equity and the changes therein fromDecember 31, 2000 to December 31, 2001 are presented in the ConsolidatedStatements of Shareholders’ Equity.

Capital stock The issued capital of the Company as of December 31, 2001 amounts to Euro 140million, represented by 140,000,000 fully paid ordinary shares without par value.

Reserve for own sharesThe reserve for the Company’s own shares comprises the cost of the Company’sshares held by the Group. At 31 December 2001 the Group held 150,000 of theCompany’s shares (note 18 B).

Revaluation reserveIn order to manage the price risk on its Long Term Incentive Plan (tranche n° 2) theCompany deposited Euro 10.2 million, pledged in favor of an investment banker.This available-for-sale financial asset was revalued to fair value with cumulativechanges taken into the revaluation reserve (note 18B).

Translation differencesTranslation differences comprise all foreign exchange differences arising from thetranslation of the financial statements of foreign operations that are not integral tothe operations of the Company, as well as from the translation of liabilities thathedge the Company’s net investment in a foreign subsidiary.



16. Cash and cash equivalents

17. Shareholders’ equity

Minority interestThe change in minority interest (December 31, 2001 : Euro 1 million, December 31,2000 : Euro 7 million) is mainly due to the increase of the Company’s equity invest-ment in Agfa Finance N.V. from 48.31% to 100%.

DividendsAt 25 March 2002 a dividend a dividend of Euro 32.2 million (Euro 0.23 per ordinaryshare) has been recommended by the Board of Directors, but has not yet beenapproved by the General Assembly of Shareholders of Agfa-Gevaert N.V. and istherefore not provided for.

Changes in accounting policyThe adoption of IAS 39 has resulted in the Group recognizing all available-for-saleinvestments and all derivative financial instruments as assets or liabilities at fairvalue. This change has been accounted for by adjusting the opening balance ofretained earnings at 1 January 2001 with Euro -2 million (net of taxes).

The adoption of IAS 12 (2000 revised) has resulted in the Group recognizingincome taxes based on the tax rates applicable to undistributed profits. This changein accounting policy has been accounted for by restating the opening balance ofretained earnings at 1 January 2001 with Euro 53 million.

A. Liabilities for post-employment and long-term benefit plansAgfa-Gevaert Group companies maintain retirement benefits in most countries inwhich the Group operates. These plans generally cover all employees and generallyprovide benefits that are related to an employee’s remuneration and years of service.The Group also provides post-retirement medical benefits in the US and long-termbenefit plans in Germany. These benefits are accounted for under IAS 19 (revised1998) and are treated as post-employment and long-term benefit plans.At December 31, 2001, the Group’s total net liability for post-employment and long-term benefit plans amounted to Euro 879 million (Euro 778 million atDecember 31, 2000), comprised as follows:

Euro million

Net liability for material countries 617 606Net liability for termination benefits 128 236Net liability for non-material countries 33 37Total net liability 778 879

The principle for determining the Group’s material countries is based on the level ofIAS 19 pension expense. Material countries represent more than 90% of the Group’stotal IAS 19 pension expense.The increase during 2001 in the net liability for termination benefits is due primarilyto the worldwide restructuring plan “Horizon” (note 6).



17. Shareholders’ equitycontinued

18. Employee benefits

December 31,

2001

December 31,

2000

Defined Contribution PlansIn the case of defined contribution plans, Agfa-Gevaert Group companies pay contributions to publicly or privately administered pension funds or insurance contracts. Once the contributions have been paid, the Group companies have no further payment obligation. The regular contributions constitute an expense for theyear in which they are due. In 2001, the defined contribution plan expense for theGroup’s material countries amounted to Euro 16 million (Euro 14 million in 2000).In Germany, employees of Agfa-Gevaert AG and of Agfa Deutschland Vertriebs-gesellschaft mbH & Cie are members of the Bayer Pensionskasse. The BayerPensionskasse is a multi-employer plan accounted for as if it were a defined contribution plan (IAS 19.30 (a)). The plan is a defined benfit plan under control of the Group’s former parent company Bayer AG. Sufficient information is not available to enable the Group to account for the plan as a defined benfit plan.

Defined Benefit PlansFor the defined benefit plans, the total expense for 2001 for the Group’s materialcountries amounted to Euro 61 million (Euro 59 million for 2000):


Service cost, exclusive of employee contributions 44 4 48 41 4 45Interest cost 93 6 99 98 7 105Expected return on assets (78) 0 (78) (84) 0 (84)Recognized past service cost (1) (1) (2) 13 (6) 7Amortization of unrecognized (Gain)/Losses 0 (6) (6) (2) (4) (6)(Gain)/Losses on settlements or curtailments 0 (2) (2) (3) (3) (6)Net periodic pension cost 58 1 59 63 (2) 61

The change in net liability recognized during the years 2000 and 2001 is set out in the table below.


Net liability at January 1 456 102 558 508 109 617Acquisitions 48 2 50 0 0 0Net periodic pension cost 58 1 59 63 (2) 61Employer contributions (54) (2) (56) (74) (3) (77)Currency effects: charge or (credit) 0 6 6 1 4 5Net liability at December 31 508 109 617 498 108 606



Retirement

Plans

Other post-

employment

and long-term

benefit plans

Total Retirement

Plans

Other post-

employment

and long-term

benefit plans

Total

Retirement

Plans

Other post-

employment

and long-term

benefit plans

Total Retirement

Plans

Other post-

employment

and long-term

benefit plans

Total

18. Employee benefitscontinued

The defined benefit obligation, plan assets and funded status for the Group’s materialcountries are shown below. During the year 2001, the Group established its own pension plan in the UnitedKingdom, the Agfa UK Group Pension Plan, which covers all active and formeremployees of the Group in the United Kingdom. Assets were transferred to the AgfaUK Group Pension Plan from the Bayer Group Pension Plan for all active and formeremployees of the Group that participated in the Bayer Group Pension Plan. At December 31, 2001, the total defined benefit obligation for the Group amountedto Euro 1,864 million (Euro 1,603 million at December 31, 2000). Of this amount,Euro 1,081 million (Euro 904 million at December 31, 2000) related to wholly orpartly funded plans and Euro 783 million (Euro 699 million at December 31, 2000)related to unfunded plans.


Change in Defined Benefit Obligation

Defined benefit obligation at January 1 1,408 89 1,497 1,510 93 1,603Acquisitions 50 2 52 0 0 0Service cost, exclusive of employee contributions 44 4 48 41 4 45Employee contributions 2 0 2 2 0 2Interest cost 93 6 99 98 7 105Benefit payments (82) (2) (84) (86) (3) (89)Past service cost 0 0 0 14 (37) (23)Settlement or curtailment 0 (2) (2) (7) (2) (9)Actuarial (gains)/losses (29) (8) (37) 150 49 199Currency effects: charge or (credit) 24 4 28 27 4 31Defined benefit obligation at Dec. 31 1,510 93 1,603 1,749 115 1,864

Change in Plan Assets

Fair value of assets at January 1 962 0 962 1,053 0 1,053Acquisitions 2 0 2 0 0 0Employer contributions 54 2 56 74 3 77Employee contributions 2 0 2 2 0 2Actual return on assets 90 0 90 (102) 0 (102)Benefit payments (82) (2) (84) (86) (3) (89)Currency effects: (charge) or credit 25 0 25 27 0 27Fair value of assets at December 31 1,053 0 1,053 968 0 968

Funded Status at December 31

Funded status (457) (93) (550) (781) (115) (896)

Unrecognized net (gain) or loss (50) (9) (59) 284 45 329Unrecognized past service cost (1) (7) (8) (1) (38) (39)Net (liability) at December 31 (508) (109) (617) (498) (108) (606)




Retirement

Plans

Other post-

employment

and long-term

benefit plans

Total Retirement

Plans

Other post-

employment

and long-term

benefit plans

Total

Principal actuarial assumptions at balance sheet date (weighted averages)

Discount rate 6.5% 5.9%Expected return on plan assets 7.9% 7.7%Future salary increases 4.0% 4.0%

Discount rate and salary increases have been weighted by the defined benefit obli-gation. Expected return on plan assets has been weighted by fair value of planassets.

B. Equity compensation benefits1. Long Term Incentive Plan (tranche no. 1)On November 10, 1999 the Group established a stock warrant plan (the Long TermIncentive Plan – tranche no.1) for the members of the Executive Committee of theCompany and of the “Vorstand” of Agfa-Gevaert AG and certain key managers. ‘One’warrant gives the holder the right to subscribe to ‘one’ new ordinary share of theCompany. In total 581,100 warrants were issued and allocated to the beneficiariesof the plan. Each beneficiary was entitled to receive 13 warrants for each share inthe Company which he / she has purchased and deposited as the Initial Investment.The warrants were offered free of charge for shares of the Initial Investmentacquired at Euro 22 per share (or higher). For an Initial Investment lower thanEuro 22 per share a price equal to 1/13 of the positive difference between Euro 22per share and the price effectively paid per share had to be paid. In accordance withthe program, the warrants are only exercisable as from January 1, 2003 untilNovember 10, 2005, after which date they become null and void. The exercise priceof the warrants is equal to Euro 22.

The following table summarizes information about the stock warrants outstandingat December 31, 2001:

Warrants issued 581,100Warrants lapsed during 2001 19,500

Warrants outstanding at December 31, 2001 561,600




December 31,

2001

December 31,

2000

2. Long Term Incentive Plan (tranche no. 2)On April 25, 2000 the Group established a stock option plan (the Long TermIncentive Plan – tranche no. 2) for the members of the Executive Committee of theCompany and executives employed at levels VII, VIII and IX of the Company or atequivalent levels within the Group, designated thereto by the Executive Committeeof the Company. “One” option gives the holder the right to buy “one” ordinary shareof the Company. In total 419,050 options were issued and allocated to the beneficiaries of the plan. The options were offered free of charge. In accordancewith the program, the options are only exercisable as from January 1, 2004 untilMay 19, 2006, after which date they become null and void. The exercise price ofthe options is equal to Euro 22. The shares subject to the stock option plan are covered by a binding agreement with an investment banker to deliver these sharesat a fixed price not in excess of the exercise price of the options.

The following table summarizes information about the stock options outstanding atDecember 31, 2001:

Options issued 419,050Options lapsed during 2001 15,000

Options outstanding at December 31, 2001 404,050

3. Long Term Incentive Plan (tranche no. 3)On June 18, 2001 the Group established a stock option plan (the Long TermIncentive Plan – tranche no. 3) for the members of the Executive Committee andexecutives employed at levels A, B and C. “One” option gives the holder the right tobuy “one” ordinary share of the Company. In total 522,940 options were issued andallocated to the beneficiaries of the plan. The options were offered free of charge.In accordance with the program, the options are only exercisable as from July 6,2004 until July 6, 2007, after which date they become null and void. The exerciseprice of the options is equal to Euro 20.The shares subject to the stock option plan are partially covered by an equity swap(285,790 shares) and shares held in treasury (150,000 shares).

The following table summarizes information about the stock options outstanding atDecember 31, 2001:

Options issued 522,940Options lapsed during 2001 19,000

Options outstanding at December 31, 2001 503,940





Non-current liabilities 898 970

Revolving multi-currency credit facility 1 807 892Unsecured bank facilities 2 77 60Finance lease liabilities 3 14 18

Current liabilities 168 405

Commercial paper program 99 181Unsecured bank facility 2 66 220Finance Lease liabilities 3 3 4

1 Revolving multi-currency committed unsecured credit facilities

In the course of 1999, the Company negotiated revolving multi-currency committedcredit facilities for periods of 3, 5 and 7 years for a total notional amount of Euro1,090 million. The terms of these facilities were rescheduled during 2001.

The split up over the relevant periods is the following :

Euro million 2001 2000 2001 2000 2001 2000

220 430 115 199 USD 2.28%-2.60% 6.89%-6.98% 2002*16 51 EUR 3.59% 5.23%-5.28%

- 24 AUD - 6.30%-7.65%- 4 TWD - 5.38%-5.81%- 1 MYR - 3.92%

460 395 157 176 USD 2.39%-3.09% 6.92%-7.00% 2004140 160 EUR 3.60%-3.77% 5.16%-5.31%

33 22 AUD 4.34%-7.65% 6.30%-7.65%- 2 DEM - 4.90%-5.06%

1 - MYR 3.6% -5 - TWD 2.76%-4.10% -

370 265 197 158 USD 2.25%-3.09% 6.89%-6.98% 200655 95 EUR 3.59% 5.06%-5.11%23 - GBP 4.47% -

2 - KRW 5.8%-6.2% -23 - AUD 4.35%-7.65% -

40 - 40 - USD 2.4%-2.8% - 2008TOTAL 1,090 1,090 807 892

* Drawdowns will subsequently be rescheduled over the existing Long-term facilitieswith maturity dates 2004/2006.

In general, drawdowns under these lines are made for periods from 1 month up to 1year. Some of the interest rates are fixed over longer periods by using capped constantmaturity swaps. Interest rates of the Euro denominated Long Term facilities arecapped at a maximum level of 5.43%, whereas the interest rates of part of the USDdenominated loans are capped between 2.77% and 2.98% (note 22). These loanfacilities are unsecured.

78


19. Financial liabilities

Notional amount Outstanding amount Currency Maturity

Date

Interest rate


2 Unsecured Bank facilities


Long-term facilities USD 59 2.44%-3% Revolving 20 6.89%-7.05% 01 / 01*

JPY 12 2.56% 03 / 04 32 2.08%-2.56% 03 / 04Fixed

SEK 6 3.70% Revolving 6 4.90% RevolvingFloating

CHF - - - 1 3.76%-4.02% 01 / 03Floating

EUR - - - 1 5.25% RevolvingFixed

Total long-term facilities 77 60

* Subsequently included in revolving multi-currency credit facilities


Short-term facilities Multi-Currency 66 6.53% 03/02 114 6.62% 06 / 01

Fixed106 5.73% 03 / 01

Floating

Total short-term facilities 66 220

3 Finance Lease Liabilities

Lease agreements in which the Group is a lessee, give rise to financial liabilities in the balancesheet, equal at the inception of the lease to the fair value of the leased property or, if lower, atthe present value of the minimum lease payments. These liabilities amounted to Euro 17 millionas of December 31, 2001 and will bear interest until maturity date of Euro 15 million.

The financial liabilities are payable as follows :


Not later than one year 5 2 3 7 3 4Between one and five years 12 6 6 15 7 8Later than five years 15 7 8 18 8 10

TOTAL 32 15 17 40 18 22



19. Financial liabilitiescontinued

Currency Oustanding

amount

Interest rate Maturity

Date

Oustanding

amount

Interest rate Maturity

Date

Currency Oustanding

amount

Total future

payments

Unexpired

interest

expense

Present value Total future

payments

Unexpired

interest

expense

Present value

Weighted average rate Maturity

Date

Oustanding

amount

Weighted average rate Maturity

Date

Miscellaneous liabilities can be presented as follows :


Payroll liabilities 82 63Tax liabilities 50 43Liabilities for social expenses 36 26Accrued Interest on liabilities 7 17Liabilities from the acceptance of drafts 2 1Other miscellaneous liabilities 113 137

TOTAL 290 287

Tax liabilities include not only Group companies’ own tax liabilities, but also taxeswithheld on behalf of third parties.Liabilities for social expenses include, in particular, social insurance contributionsthat had not been paid over at closing date. Other miscellaneous liabilities comprise numerous individual items such as guarantees,commissions to customers, liabilities under cash management, etc.

A. Current

Euro million

Provisions as at December 31, 2000 29 211 64 92 396

Acquisitions - 1 - 1 2Transfers - - - 33 33Provisions made during the year 7 111 33 133 284Provisions used during the year (26) (119) (37) (80) (262)Provisions reversed during the year (1) (50) (15) (18) (84)Translation differences 1 7 1 2 11

Provisions as at December 31, 2001 10 161 46 163 380

Provisions for trade-related commitments include subsequent payments to customersrelating to goods and services purchased in the accounting period, such as customerbonuses or rebates in kind or in cash, warranty liabilities, agents’ commissions andimpending or anticipated losses on purchase or sales contracts. Other provisions relate mainly to provisions set up for restructuring expenses (note 6). Other provisions moreover include provisions for litigation, claims andnegative outcome of commitments.



20. Miscellaneous liabilities

21. Provisions

Environ-

mental

Trade-related Taxes Other Total

B. Non-current

Euro million

Provisions as at December 31, 2000 - 18 18

Provisions made during the year 49 7 56Provisions used during the year - (3) (3)Provisions reversed during the year - - -Translation differences 1 - 1Transfers - (15) (15)

Provisions as at December 31, 2001 50 7 57

The Group is subject to numerous environmental requirements in various countriesin which it operates, including those governing air and wastewater emissions, themanagement of hazardous materials and spill prevention and cleanup. In order tocomply with applicable standards and regulations, the Group has made significantexpenditures and set up provisions. Provisions for environmental protection relateto future relandscaping, landfill modernization and the remediation of land contaminated by past industrial operations. Provisions for environmental protection moreover include provisions for litigationswith respect to environmental contamination.The non-current provisions are recorded on a discounted basis. The discountedamounts with regard to environmental requirements will be paid out over the periodof remediation of the relevant sites, which is expected to be two years.

Exposure to currency, interest rate and credit risk arises in the normal course of theGroup’s business. Derivative financial instruments are used to reduce the exposureto fluctuations in foreign exchange rates and interest rates. While these are subjectto the risk of market rates changing subsequent to acquisition, such changes aregenerally offset by opposite effects on the items being hedged/covered.

Foreign currency riskRecognized assets and liabilitiesCurrency risk is the risk that the value of a financial instrument will fluctuate due tochanges in foreign exchange rates. The Group incurs foreign currency risk on sales,purchases and borrowings that are denominated in a currency other than the com-pany’s local currency. The currencies giving rise to this risk at December 31, 2001are primarily US Dollar, Pounds Sterling and Hong Kong Dollar.

Such risks may be naturally covered when a receivable in a given currency ismatched by one or more payables having the same amount, and having an equiva-lent term, in the same currency. They may also be managed by the use of derivativefinancial instruments.



21. Provisionscontinued

22. Derivative financial instruments

TotalOtherEnviron-

mental

The Group uses mainly forward exchange contracts to manage its foreign currencyrisk arising from recognized trade receivables, trade payables and borrowingsdenominated in a foreign currency. These forward exchange contracts have maturitiesof less than one year.

Where currency risks are entered into through intra-group loans, these are fully covered either naturally or through derivative financial instruments. The currencyrisk arising from financial commitments is managed via currency swaps and cross-currency interest rate swaps.

Where derivative financial instruments are used to economically hedge the foreignexchange exposure of a recognized monetary asset or liability, no hedge accountingis applied and any gain or loss on the derivative financial instrument is recognizedin the income statement.

As of December 31, 2001 the Group was exposed to the following foreign currencyrisk relating to primary financial instruments forming part of working capital andfinancial debt:

Euro million

Foreign currency risk 758 484 508 286Natural covered positions (356) (356) (199) (199)Outstanding derivative financial instruments (175) (5) (143) (30)Residual foreign currency risk 227 123 166 57

Hedge of net investment in foreign subsidiaryThe Group utilizes USD denominated bank loans and forward exchange contracts inorder to hedge the foreign currency exposure of the Group’s net investment in itssubsidiary in the United States (Agfa Corporation).

Euro million

USD denominated bank loans 483 500Forward exchange contracts 17 0

TOTAL 500 500

As of December 31, 2001 the hedge of the net investment in Agfa Corporation(USA) has been determined to be effective and as a result the effective portion ofthe loss on the hedging instrument, which amounted to 81 million Euro, has beenrecognized directly in equity.



22. Derivative financial instrumentscontinued

Assets Liabilities

December 31, 2001 December 31, 2000

December 31, 2001 December 31, 2000

Assets Liabilities

Interest rate riskInterest rate risk is the risk that the value of a financial instrument will fluctuate dueto changes in market interest rates. The interest rate risk of the Group as ofDecember 31, 2001 was managed via interest rate swaps having a total notionalamount of Euro 501 million. Part of the interest rate risk was covered by cappedconstant maturity swaps amounting to Euro 392 million (notional amount).

Capped constant maturity SwapThe Group engaged in a number of capped CMS agreements for a total amount ofEuro 392 million, whereby the underlying contracts have a remaining duration of 2 and 3 years. The Capped Constant maturity swaps are not designated as hedginginstruments under IAS 39.

The CMS agreements are structured in a way whereby the Group is paying a fixed 2- or 5- years swap rate respectively, reset each 3 months. In return, the Groupreceives the 3 months Euribor plus a number of basispoints. These basispoints arenot distributed, but have been used to buy caps on the underlying CMS’. The USDdenominated agreements are valid over a period of 2 years where the other capsmature in 2004.

Levels of the caps are:

Euro 100 million 5 year swap rate capped to 5.35%Euro 50 million 5 year swap rate capped to 5.37%Euro 40 million 5 year swap rate capped to 5.34% Euro 90 million 5 year swap rate capped to 5.43%Euro 56 million 2 year swap rate capped to 2.77%(USD denominated)Euro 56 million 2 year swap rate capped to 2.98%(USD denominated)

Credit riskCredit risk is the risk that one party to a financial instrument will fail to discharge anobligation and cause the other party to incur a financial loss. The Group does notrequire collateral in respect of financial assets. Management has a credit policy inplace and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount.

Investments are allowed only in liquid securities and only with counterparties thathave a credit rating equal to or better than the Group. Transactions involving derivative financial instruments are only allowed with counterparties that have highcredit ratings.

At balance sheet date there were no significant concentrations of credit risk. Thecarrying amounts of the financial assets, including derivative financial instrumentsin the balance sheet reflect the maximum exposure to credit risk.




Market riskMarket risk is the risk that the value of a financial instrument will fluctuate as aresult of changes in market prices.

In 2001, the Company negotiated an Equity Swap transaction in order to partiallyhedge the potential price exposure relating to the shares subject to its stock optionplan (Long Term Incentive Plan tranche n° 3; note 18B). This transaction was designated as a fair value hedge with changes in the fair value of both the hedgeditem and the hedging instrument recognized in the income statement.

Fair valuesThe adoption of IAS 39 has resulted in the Group recognizing all available-for-saleinvestments and all derivative financial instruments as assets or liabilities at fairvalue. This change has been accounted for by adjusting the opening balance ofretained earnings at 1 January 2001 (note 17).

The fair values are the current market values (quoted market prices or calculatedbased on estimation techniques) of the derivative financial instruments, disregardingany opposite movements in the value of the respective covered transactions.

The fair values of derivative interest contracts are estimated by discounting expectedfuture cash flows using current market interest rates and yield curve over theremaining term of the instrument. The fair value of forward exchange contracts istheir quoted market price at balance sheet date, being the present value of the quot-ed forward price.

The notional amounts indicate the volume of outstanding derivatives at the balancesheet date and therefore do not reflect the Group’s exposure of risks from suchtransactions.

The notional and contractual amounts and respective fair values of derivative financial instruments are as follows :

Euro million

Forward Exchange contracts 583 468 0 9Currency options - 77 - 1Currency swaps 495 896 (8) (8)Interest rate instruments 501 472 (12) 2Other derivative financial instruments 51 - (2) -TOTAL (22) 4

Securitization of trade receivablesSince several years the Group has an agreement with an International Bank where-by trade receivables amounting to Euro 112 million, are sold.




December 31,

2001

December 31,

2000

Notional or

contractual amount

Fair value

December 31,

2001

December 31,

2000

Leases as lesseeThe Group leases mainly buildings and infrastructure under a number of operatinglease agreements. The future lease payments under these non-cancellable operatingleases are due as follows :


Not later than one year 41 37Between one and five years 102 82Later than five years 37 26

TOTAL 180 145

Leases as lessorThe Group leases out some property and furniture, fixtures and other equipmentunder operating leases. Non-cancellable operating lease rentals are as follows :


Not later than one year 4 1Between one and five years 11 3Later than five years - 1

TOTAL 15 5


Issuance and endorsement of bills 26 43Guarantees 22 29Warranties 11 16Other 3 3

TOTAL 62 91

Total purchase commitments in connection with major capital expenditure projectsfor which the respective contracts have already been awarded or orders placedamounted to Euro 8 million as of December 31, 2001 (2000: Euro 13 million).



23. Operating leases

24. Commitments and contingencies

Transactions with Directors and members of the Executive CommitteeThe remuneration of the Executive Committee for 2001 amounted to Euro5,841,629 (2000: Euro 5,486,633). Emoluments to retired members of theExecutive Committee and their dependents amounted to Euro 2,423,284 (2000 :Euro 1,538,735).Pension provisions for members and retired members of the Executive Committee,amounting to Euro 26,344,406, are reflected in the balance sheet of the Group at 31December 2001.The remuneration of the Board of Directors amounted to Euro 496,833 (2000: Euro 346,228).As of December 31, 2001 there were no loans outstanding to members of theExecutive Committee nor to members of the Board of Directors.

Other related party transactionsTransactions with related companies are mainly trade transactions and are priced atarms’ length. The revenue and expenses related to these transactions are immateri-al to the consolidated financial statements as a whole.

Basic earnings per shareThe calculation of basic earnings per share at 31 December 2001 was based on thenet loss attributable to ordinary shareholders of Euro 288 million (2000: net profitof Euro 169 million) and a weighted average number of ordinary shares outstand-ing during the year ended 31 December 2001 of 139,927,261 (2000: 140,000,000).

The weighted average number of ordinary shares is calculated as follows:

Weighted average number of ordinary shares at 1 January 2001 140,000,000Effect of own shares held (72,739)Weighted average number of ordinary shares at 31 December 2001 139,927,261

2001 2000

Basic earnings per share (Euro) -2.06 1.2

Diluted earnings per shareWhen calculating diluted earnings per share the weighted average number of sharesis adjusted for the effects of all dilutive potential ordinary shares. Under the stockwarrant plan for Directors and key managers, 561,600 warrants were outstandingat 31 December 2001 with an exercise price of Euro 22 per share (note 18). The average fair value of one ordinary share during 2001 was Euro 17.28. The war-rants are not dilutive since the average fair value of one ordinary share is less thanthe issue price for one ordinary share under the warrant program.



25. Related party transactions

26. Earnings per share

The ultimate parent of the Group is Agfa-Gevaert N.V., Mortsel / Belgium. Thecompany is the parent company for the following significant subsidiaries :

Investments in subsidiaries and other companies

Agfa–Gevaert Group

December 31, 2001

Consolidated Companies

Name of the company Location Effective Interest %

Agfa (Pty.) Ltd. Isando/Rep. of South Africa 100Agfa ASEAN Sdn. BHD Kuala Lumpur /Malaysia 100Agfa België N.V. Kontich/Belgium 100Agfa Corporation Inc. Ridgefield Park / United States 100Agfa de Mexico S.A. de C.V. Sta. Clara Ecatepec/Mexico 99.80Agfa Deutschland Vertriebsgesellschaft mbH & Cie Leverkusen/Germany 100Agfa Europe N.V. Mortsel/Belgium 100Agfa Europe S.A. Geneva/Switzerland 100Agfa Finance France S.A. Rueil-Malmaison/France 100Agfa Finance Italy Spa Milan / Italy 100Agfa Finance N.V. Brussels/Belgium 100Agfa Finance Pty. Ltd. Nunawading/Australia 100Agfa Hong Kong Ltd. Hong Kong/PR China 100Agfa Hungaria Kft. Budapest/Hungaria 100Agfa Inc. Toronto/Canada 100Agfa Industries Korea Ltd. Kyunggi-do/South Korea 100Agfa Korea Ltd. Seoul/South Korea 100Agfa Limited Dublin/Ireland 100Agfa Monotype Corp. (USA), Inc Wilmington/United States 100Agfa Monotype, Ltd (UK) Redhill/United Kingdom 100Agfa NDT GmbH Köln/Germany 100Agfa NDT Inc. Lewistown/United States 100Agfa NDT Ltd. Conventry/United Kingdom 100Agfa NDT S.A. Limonest/France 100Agfa s.r.o. (Czechia) Prague/Czech Republic 100Agfa Singapore Pte. Ltd. Singapore 100Agfa Sp. z.o.o. Warsaw/Poland 100Agfa Taiwan Co Ltd. Taipei / Taiwan 100Agfa Wuxi Film Production Company Ltd. Wuxi /PR China 99Agfa-Gevaert A/S (Denmark) Glostrup/Denmark 100Agfa-Gevaert AB (Sweden) Kista/Sweden 100Agfa-Gevaert AEBE Athens/Greece 100Agfa-Gevaert AG Leverkusen/Germany 99.99Agfa-Gevaert AG/SA Dübendorf/Switzerland 98.90Agfa-Gevaert Argentina S.A. Buenos Aires/Argentina 100



27. Group companies

Agfa-Gevaert AS (Norway) Hagan/Norway 100Agfa-Gevaert B.V. Rijswijk/Netherlands 100Agfa-Gevaert de Venezuela S.A. Caracas/Venezuela 100Agfa-Gevaert do Brasil Ltda. Sao Paulo/Brazil 100Agfa-Gevaert GmbH Vienna/Austria 100Agfa-Gevaert International N.V. Mortsel/Belgium 100Agfa-Gevaert Investment Fund N.V. Mortsel/Belgium 100Agfa-Gevaert Japan, Ltd. Tokyo/Japan 95Agfa-Gevaert Limited (Australia) Nunawading/Australia 100Agfa-Gevaert Limited (England) Brentford/United Kingdom 100Agfa-Gevaert Ltda. (Chili) Santiago/Chile 100Agfa-Gevaert New Zealand Ltd. Auckland/New Zealand 100Agfa-Gevaert S.A. (France) Rueil-Malmaison/France 100Agfa-Gevaert S.A. (Spain) Barcelona/Spain 99.99Agfa-Gevaert S.p.a. Milan/Italy 100Agfa-Gevaert, Lda. Linda-a-Velha/Portugal 100Australian Directory Services Ltd. North Ryde NSW/Australia 100Autologic Information International Ramat-Gan/Israel 100Autologic Information International (Far East) Ltd. Hong Kong/PR China 100Autologic Information International A.B. Stockholm/Sweden 100Autologic Information International Inc. Thousand Oaks/United Sates 100Autologic Information International Ltd. St. Albans/United Kingdom 100Autologic Information International Pty. Ltd. North Ryde NSW/Australia 100Autologic Information International, Ltd. Thousand Oaks/United States 100Autologic Triple I, Inc. Ontario/Canada 100Cea Aktiebolag Strängnäs/Sweden 100CEA Deutschland GmbH Hamburg /Germany 100Directories Pty, Ltd. North Ryde NSW/Australia 100Fotoindustria S.p.a. Garbagnate/Italy 92Identis S.A. Croissy Beaubourg/France 90International Typeface Corp. Wilmington/United States 100Luithagen N.V. Mortsel/Belgium 100Nukem Nutronics GmbH Alzenau/Germany 100OY Agfa-Gevaert AB Espoo/Finland 100Printing Technologies (NZ) Limited Auckland/New Zealand 100Printing Technologies Ltd Blackburn/Australia 100Quadrat Engineering Company N.V. Sint-Martens-Latem/Belgium 75Quadrat N.V. Deurle/Belgium 75Quadrat S.A. Lille/France 75Rich. Seifert & Co. GmbH Ahrensburg/Germany 100Shanghai Agfa Imaging Products Co., Ltd. Shanghai/PR China 100Talk Technology Inc. Bensalem/United States 100Xitron Europe Ltd. Swindon/United Kingdom 100Xitron Pty. Ltd. North Ryde NSW/Australia 100Xitron, Inc. Ann Arbor/United States 100



27. Group companiescontinued

Subsidiaries not included in the consolidated financial statements

December 31, 2001


Agfa Argentina S.A.C.I. i.L. Buenos Aires/Argentina 100Agfa Deutschland vertriebs-Verwaltungsgesellschaft mbH Leverkusen/Germany 100Agfa Europe Service Center N.V. Mortsel/Belgium 100Agfa India Ltd. Mumbai/India 99.99Agfa Laborgeräte GmbH Gera/Germany 100Agfa OOO Ltd. Moscow/Russian federation 100Agfa Slovakia S.R.O. Nove Mesto Nad Vahom/Slovakia100Agfa-Gevaert Colombia Ltda Santa Fé de Bogota/Colombia 99.99Agfa-Gevaert Iran S.S.K. Teheran/Iran 76Agfa-Gevaert Unterstützungskasse GmbH Leverkusen/Germany 100CAWO Photochemische Fabrik GmbH Strobenhausen/Germany 100Cea America Corporation Ridgefield Park/United States 100Compusat S.r.l. Milan/Italy 100GST Grafic Service Team Verwaltungs GmbH Leverkusen/Germany 100GST Grafic-Service-Team GmbH & Co. Leverkusen/Germany 100Image building B.V.B.A. Antwerp/Belgium 70Impax Solutions Inc. Toronto/Canada 100Information International Foreign Sales Corp. Guam 100Information International Overseas Corp. Thousand Oaks/United States 100Mortselse Immobilienvennootschap N.V. Mortsel/Belgium 100OZASOL S.r.l. Milan/Italy 100Tecsa S.A.S. Montigny Le Bretonneux/France 100

Associated companies

December 31, 2001


Antwerp Digital Mainport C.V. Antwerp/Belgium 12.50FotoWire Development S.A. Geneva/Switserland 19.29Hocking Holding Ltd. St. Albans/United Kingdom 50Hocking NDT Ltd. St. Albans/United Kingdom 50Idoc N.V. Brussels/Belgium 33.33Impax Technology Inc Waterloo/Canada 33.33Mitsui & Co Graphic System Ltd. Tokyo/Japan 20Silicon Vision AG Siegen/Germany 24.66Medivision Medical Imaging Ltd. Yokneam Elit/Israel 8.80Xeikon N.V. Mortsel/Belgium 25.05



27. Group companiescontinued

• On January 3, 2002, the Company acquired 92.9 % of the shares of Mitra Inc. forEuro 193 million. Mitra is a provider of imaging and information managementsystems for the health care enterprise.The acquisition will be accounted for under the purchase method of accountingand accordingly the results of operations of Mitra will be included in the consolidated financial statements of the Group as from January 3, 2002 onwards. The goodwill, which amounted to Euro 175 million, will be amortized over 15years.

• In 2001, the Board of Management of the Company announced a worldwiderestructuring plan “Horizon”. The costs related to this restructuring plan wereestimated at Euro 550 million. The restructuring and non-recurring chargesrecorded for the “Horizon” plan in 2001 were Euro 440 million (note 6). Someparts of the plan, the closing of the Brevard Facility in the United States being themain component, were announced after the balance sheet date.

Krautkrämer GmbH & Co oHG, Hürth, is included in the Consolidated FinancialStatements of Agfa-Gevaert N.V. This Group company is exempted from publicationof Consolidated Statements in accordance with German Rules (§ 264b HGB).



28. Events subsequent to the balance sheet date

The following pages are extracts of the statutory annual accounts of Agfa-Gevaert N.V.prepared under Belgian accounting policies. The management report of the Board ofDirectors to the Annual General Meeting of Shareholders and the annual accounts ofAgfa-Gevaert N.V., as well as the Auditor's Report, will be filed with the NationalBank of Belgium within the statutory periods. These documents are available onrequest from Agfa's Investor Relations Department, and at www. agfa. com.

Only the consolidated annual financial statements as set forth in the precedingpages present a true and fair view of the financial position and performance of theAgfa-Gevaert Group.

The statutory auditor's report is unqualified and certifies that the non-consolidatedfinancial statements of Agfa-Gevaert N.V. for the year ended December 31, 2001give a true and fair view of the financial position and results of the company inaccordance with all legal and regulatory dispositions.


SUMMARY VERSION OF STATUTORY ACCOUNTS AGFA-GEVAERT N.V.


SUMMARY VERSION OF STATUTORY ACCOUNTS OF AGFA-GEVAERT N.V. - INCOME STATEMENTS


I. Operating Income

A. Turnover 1,897 2,010Increase (+); decrease (-) in stocks of finished goods,work and contracts in progress (21) 1

C. Own construction capitalized 106 103D. Other operating income 47 76Total operating income 2,029 2,190

II. Operating charges

A. Raw materials, consumables and goods for resale1. Purchases 1,024 1,1512. Increase (-); decrease (+) in stocks 37 (18)

B. Services and other goods 272 277C. Remuneration, social security costs and pensions 418 391D. Depreciation of and other amounts written off

formation expenses, intangible and tangible fixed assets 168 164

F. Increase (+); decrease (-) in provisions for liabilities and charges 137 (2)

G. Other operating charges 11 12Total operating charges 2,067 1,975

III. Operating result (38) 215

IV. Financial income 200 168

V. Financial charges (204) (208)

VI. Profit on ordinary activities before taxes (42) 175

VII. Extraordinary income 22 23

VIII. Extraordinary charges (37) (3)

IX. Result for the period before taxes (57) 195

X. Income taxes (2) (56)

XI. Result for the period (59) 139

XIII. Result for the period available for appropriation (59) 139

Result Appropriation

A. Profit to be appropriated 123 3211. Result for the period available for appropriation (59) 1392. Profit brought forward 182 182

C. Transfers to other reserves - (76)D. 1. Profit to be carried forward (91) (182)F. Distribution of profit (32) (63)


SUMMARY VERSION OF STATUTORY ACCOUNTS OF AGFA-GEVAERT N.V. - BALANCE SHEET

Euro million Dec. 31, Dec. 31,2001 2000

Assets

II. Intangible assets 142 152III. Tangible assets 77 86IV. Financial assets 3,034 2,427VI. Stocks and contracts in progress 211 269VII. Amounts receivable within one year 334 449VIII. Investments 13 10IX. Cash at bank and in hand 13 8X. Deferred charges and accrued income 2 0

3,826 3,401

Liabilities

I. Capital 140 140II. Share premium account 107 107IV. Reserves 844 844V. Profit carried forward 91 182VI. Investments grants - 1

1,182 1,274

VII. Provisions for liabilities and charges 217 93VIII. Amounts payable after more than one year 491 509IX. Amounts payable within one year 1,914 1,505X. Accrued charges and deferred income 22 20

3,826 3,401

March 25th, 2002

1 Comments on the annual accounts• The annual accounts, which will be presented to the General Meeting of the

Shareholders on April 30, 2002, were verified by the Board of Directors for consistency with the valuation principles and were approved by the Board as such.

• The option plan, attributed to management on June 18, 2001, was approved bythe Board of Directors, subject to the stipulations of article 523 of the CompanyLaw. With respect to this article, we refer to the following extract of the minutes:

“Before the debate on the Plan is started, Mr. Verhoeven, Mr. Bergen and Mr.van der Kooij remind the members of the Board of the fact that, with respect toarticle 523 of the Company Law, they could have a financial interest concerningthe settlement and the approval by the Board of Directors of the modalities andthe terms of the Plan.They declare that this interest is supported by their position as member of theBoard of Management of the company and that their conflicting financial interestresults from the fact that they might be considered for participation in the Plan.They declare that they won’t take part in the consultation, nor in the decisionrelated to this item on the agenda.Likewise, the directors involved declare that they have notified the auditor ofthe company of their possible conflicting interests.”Agfa-Gevaert N.V. purchased 150,000 of its own shares as coverage for theoption plan.

• Klynveld Peat Marwick Goerdeler (KPMG) was paid a fee of Euro 1,068,160 fortheir services in audit, tax and consultancy in the financial year 2001, in additionto their conventional fee as auditor:

• KPMG Tax advisors (in Belgium and abroad) Euro 521,752• KPMG Actuarial Services Euro 1,111• KPMG Auditors Euro 545,297

(additional audit services from foreign KPMG offices – of which one is Leeds –and KPMG-Belgium concerning takeovers and “carves out”)

2 Important post balance sheet date events and information that might influence the development of the companyIn January the takeover of Mitra was concluded. Mitra is a leading provider of imaging and information management systems for healthcare enterprises.The Horizon plan that has been submitted to the Ministry of Employment, has beenapproved.On March 6, 2002, the Court declared Xeikon N.V. bankrupt.


STATUTORY REPORT OF THE BOARD OF DIRECTORS - AGFA-GEVAERT N.V.

Annual Re

Shareholder queriesInvestor Relations DepartmentSeptestraat 272640 Mortsel, BelgiumPhone: +32.3.444 5932Fax: +32.3.444 [email protected]

Number of shares outstanding 140,000,000First day of listing 1 June 1999Market capitalization on Dec.31, 2001 Euro 2,127 million

Listing Brussels and Frankfurt Stock ExchangeReuters ticker AGFAt.BR / AGEG.DEBloomberg ticker AGF BB / AGE GRDatastream B:AGF

Share information (in Euro)2001 2000 1999

EPS after restructuring and non-recurring results -2.06 1.21 0.10Net operational cash flow per share 5,27 3,11 2,69Gross dividend 0.23 0.45 0.33

Shareholder structure as of December 31, 2001Bayer 30%Free float 45%Gevaert Group 25%

Share price: Evolution Agfa share price against BEL-20

Average volume of shares traded in 2001 136,710Year end price 2001 Euro 15.19High since IPO Euro 29.16 (August 10, 2000)Low since IPO Euro 10.90 (November 1, 2001)

Financial calendar 2002-2003Annual General Meeting April 30, 2002Payment of dividend 2001 May 2, 2002First quarter 2002 results May 7, 2002Half year 2002 results August 22, 2002 Third quarter 2002 results November 14, 2002 Full year 2002 results March 2003Annual General Meeting April 2003

Shareholder information

– Agfa– Bel 20

160

150

140

130

120

110

100

90

80

70

60

50

1/10/1999

1/01/2000

1/04/2000

1/07/2000

1/10/2000

1/01/2001

1/04/2001

1/07/2001

1/10/2001

1/01/2002

28/02/2002


eport 2001

Agfa jaarv. 2002 GB p1-36 - KU Leuven Bibliotheken

Documents