KRONES AG — Annual Report 2002

May 7, 2003

For the year 2002, reported pleasing figures in the midst of an unamicable economic situation. The achievement of new record results for the third year in a row are the proof of the Group's sustained development:a 12.0% growth in sales reaching 1,305 million euro, a 13.9% rise in profit pushing it to 57.3 million euro, full order books and the continued great demand for beverage bottling plants and packaging machines. With our acknowledged high machine quality, our technological lead and reliable service, we have succeeded in further reinforcing our position as global market leader.

The Company's Executive Bodies

Supervisory Board

Dr. Lorenz M. Raith Chairman

Paul Jogsch* Deputy Chairman Chairman of Central Works Council

Ernst Baumann Member of the Executive Board of bmw ag

Rudolf Ederer Lawyer

Herbert Gerstner* Works Council Member

Dr. Klaus Heimann* Director of the Professional Training Department on the Board of ig Metall

Dipl.-Ing. Dieter Jensen (until 16.3.2002)

Prof. Dr. Ing. Erich Kohnhäuser President of the College of Higher Eduction in Regensburg (since 19.6.2002)

Norman Kronseder Chief Executive of Saatzucht Steinach GmbH

h. h. Alfred Ernst, the Prince of Löwenstein-Wertheim-Freudenberg (until 19.6.2002)

Johannes Maschke Managing Director of Kronseder Beteiligungsgesellschaft mbH (since 26.3.2002)

Walter Meyer* 1. Head of the Branch ig-Metall Administration, Regensburg

Anton Schindlbeck* Head of Sales for Central European Region (since 19.6.2002)

Josef Strobl* Plant Manager (until 19.6.2002)

Günter Walter* Deputy Chairman of Central Works Council

* Elected by staff

Vorstand

Volker Kronseder Chairman

Hans-Jürgen Thaus Deputy Chairman

Rainulf Diepold

Werner Frischholz Deputy Member of the Executive Board (since 1.1.2003)

Christoph Klenk Deputy Member of the Executive Board (since 1.1.2003)

Alois Müller (until 31.12.2002)

Overview of the Group Key Data

	1998	1999	2000	2001	2002
Sales (in mio. €)	921	908	1,015	1,165	1,305
Employees (as of 31.12.)	7,822	7,616	7,989	8,365	8,494
Orders received (in mio. €)	935	974	1,104	1,190	1,309
Net income (in mio. €)	26	25	38	50	57
Fixed assets (in mio. €)	152	163	182	206	250
Investments (in mio. €)	21	37	62	58	88
Depreciation (in mio. €)	58	26	32	35	38
Cash flow (in mio. €)	90	53	70	85	94
Shareholders' equity (in mio. €)	328	340	338	381	409
Balance-sheet total (in mio. €)	586	630	643	726	806

Development of sales (in mio. €) Development of net income (in mio. €)

Key data per share

(mio.)	10.53
		10.53	10.53
(mio.)	3.57	3.57	3.57
(mio.)	6.96	6.96	6.96
€	123.91	110.66	96.35
€	5.44	4.78	3.61
€	8.97	8.09	6.67
€	38.82	36.18	32.14
€	43.50	55.10	28.50
€	39.87	46.50	32.00
€	1.10*	1.00	0.77
€	1.00*	0.90	0.66

*acc. to proposed appropriation of profits

Orders received (in mio. €) Employees (as of 31.12.)

8,365

8,494

and Annual Report 2002

• 5 Our company targets
• 7 To our shareholders
• 10 The year 2002
• 13 Growth requires innovation
• 73 Report by the Supervisory Board

17

About the share Status report of and the

- 25 Company situation and business development 47 Outlook

• and Group end-of-year accounts
• Profit-and-loss account Capital flow statement fixed assets
• 78 Balance sheet
• 80
• 81

• 82 Analysis of

• Balance sheet Profit-and-loss account Capital flow statement Analysis of fixed assets

• 86
• 848788
• 90
• 104
• Notes for and the Segment reporting 109 Supervisory Board and Executive Board
• 110 Auditor's report

Further information

• 112 worldwide
• 114 Glossary
• 118 Group statistics at a glance
• Reports from the product divisions, sales and production departments
• 51 Reports from the product divisions
• 61 At the bridge to the market and the customer
• 67 Production and technology

Our company targets

is engaged in the sector of packaging machine technology. We are the global number one in this market and will apply all our efforts to maintain and extend this position.

We have presented ourself with the task of always providing our customers with high-quality products comprising the latest technology. It is our goal to be the technical leader by international standards in each of our product divisions.

We generate our company's success by actively including all of our employees. In doing so, we systematically master costs and procedures in all areas, thus securing the necessary growth and, in turn, the company profit. In the long term, we are a reliable partner for all of our customers.

To implement this successfully, we require our employees to be prepared to experience continual change and to have the courage to try something new now and again.

»We have shown that, within the framework of clear strategic direction, great things can be achieved even in difficult times if courage and commitment, diligence and goal orientation are displayed.«

Volker Kronseder Executive Chairman

To our shareholders

Even in times of economic difficulty, we can once again deliver figures which are pleasing. As the global market leader for beverage bottling plants and packaging machines, we have been able to achieve a record turnover and profit result for the third year in a row. By continuing our successful company orientation, we can foresee a positive development for the year 2003, even in a negative environment.

Our business figures led an economic magazine to regard us as being »in another world«. Even if the figures of the last years may have given such an impression, orders do not just literally fall into our laps! We regard each customer as a new challenge and each project is accompanied by hard negotiations. We have learned that successes of the past provide no guarantee for the future, but rather that success must be fought for and structured anew year after year.

And this applies more than ever to the year 2003 and subsequent years. The market is becoming more and more difficult, our customers are displaying a more reserved behaviour when it comes to investment and our competitors have established themselves well. We must adapt ourselves to this situation. It is important to access new areas of growth. Viewed geographically, we must intensify our search for opportunities outside of Europe and then seize them. We would like our North American and Asian customers to accept us in the same way as is already the case in the European market. In addition, more and more new areas of growth are opening up to us outside of the beverage industry, in the non-beverage sector.

In view of these challenges and opportunities, we still continue to hold on to our long-term growth and yield targets – especially since our global position and our status as a complete system supplier have clearly improved in the last few years. We have adopted a cost reduction programme which should to keep fit and strong for the demands faced in the future. In view of our extremely positive figures, this may appear at first to make little sense, it is, however, logical and consistent. We must remain slender to move swiftly and flexibly in a market of ever increasing difficulty.

And we will succeed in doing so – with your help. For this success, we would like to thank our customers, business partners and shareholders who loyally accompany on the path it choses to follow. We would like to continue to earn your trust in the future through hard work.

Yours,

Volker Kronseder Executive Chairman

Dear shareholders and business associates,

Global politics and the economic climate had the year 2002 completely under their control. The political and economic repercussions of 11t^h September still prevailed one year later, the threat of war against Iraq aggravated the situation even further and resulted in both bad reports from the business community and share prices plummeting once again on the global stock exchanges. In Germany, the economic recession, crippling economic activity, rising unemployment figures and unsolved welfare system problems were accompanied by poor economic development. The discussion regarding the »packaging regulations« which remained unclear for a long time lead to additional uncertainty and a reluctance to invest on the part of many domestic customers.

We at tried to regard this all-embracing crisis as an opportunity. With energy and optimism, we stood in defiance against this negative omen. For pessimism would prove damaging – both for the soul and for our success. The drinktec-interbrau global exhibition, which took place in the autumn of 2001 in Munich, continued to have a positive impact on our company's business climate in 2002. With our acknowledged high-quality machinery, our technological advantage and our reliable service, we succeeded in reinforcing our position as the global leader in the beverage industry.

In view of this, the Group's balance sheet for the year 2002 has turned out quite well. This is not only due to a renewed 12% growth in sales, pushing them to a new record level of 1.305 billion €, or to another exponential increase in profits of 13.9% which means they now total 57.3 million €. We also made a great deal of progress in our journey towards our most important goals, above all in the consistent further implementation of our impetus programme which sees us concentrating our efforts on improving our processes and increasing our productivity. We have continued resolutely with the reorientation of our subsidiaries, improved once again on the quality of our machines and plants in the premium-quality segment and can refer to innovations from all product divisions.

This success is the result of a team performance from all of the employees in the Group who have once again completed excellent work, shown great dedication and proved their extraordinary expertise. The only touch of melancholy felt in our success story – and this especially from the viewpoint of our shareholders – is the unsatisfactory development of the share. After having soared close to the 70 € mark, the stocks had lost 22% of their value by 31.12.2002 during the stock market's general downward trend – and this without any fundamental change to their data.

April

At the Interpack international packaging exhibition in Düsseldorf, met with much approval as a complete line and system supplier for the pharmaceutical, chemical and cosmetic industries, as well as for the food and non-food sector. The visitors showed great interest in the blowmoulding technology and software solutions.

June

In the Supervisory Board meeting on 19th June 2002, Werner Frischholz and Christoph Klenk are appointed new deputy members of the Executive Board. As of 1st January 2003, Mr. Frischholz takes on the field of »Operations« which comprises the purchasing, production and service divisions. Mr. Klenk is responsible for the field of »Research & Development and Product Divisions« which includes the entire research and development division, the engineering sector and all of the product divisions.

December

To consolidate the originally very scattered site of the headquarters in Neutraubling, we have been acquiring neighbouring land by degrees over the last years and have either converted the buildings situated on it or constructed a new building to create additional space for our Group's various departments and divisions. With the exception of some small gaps, our company can now be viewed as a single unit.

September

The plastics technology division's growing need for space was the deciding factor in the construction of the new plastics centre which got underway in 2002. The building complex situated on a newly acquired stretch of land will be ready for occupation in May 2003 and will hold the entire plastics technology division. In the factories, the Contiform stretch-blow moulding machines will be assembled and tested prior to their installation on the customers' premises.

February

implemented its principle of supplying »everything from a single source« in its dealings with Hipp, the baby food manufacturer. , ' newly founded subsidiary, attended to the complete project management for the new line for mixing and filling fruit and vegetable juices – including planning, coordination of the machine deliveries, automation and commissioning.

October

is awarded the European Environmental Prize 2002 in Budapest for its Merlin® wort boiling system which is gentle on ressources and provides a radical improvement in the product quality, economical and ecological factors during the most energyintensive phase of beer preparation.

July , the brewery equipment supplier and a subsidiary of is awarded two major contracts with a total value of around 47 mio. €. One of the most major contracts in the company history amounting to 30 mio. € entails the construction of a brewery for a Mexican brewery group. A total of around 17 mio. € in contracts is connected with the expansion of a brewery in Thailand.

April

entered into a cooperation with the Austrian Group to occupy the fast-growing starting market for packaging machines belonging to the »low output range«. In collaboration with and (based in Roverbella, Italy), the company can offer attractive lines for the beverage and packaging industries with a good price/performance ratio in the so-called »just-enough« segment.

»In the future, we want to continue to react to market changes quicker and better than our competitors while inspiring our customers with our innovative ideas and convincing them of krones capabilities.«

Hans-Jürgen Thaus Deputy Executive Chairman

Growth requires innovation

We have submitted a record result for the third year in a row. Our turnover has risen by 44% since 1999 and the end-of year surplus after tax has also increased exponentially in this period by 133%. ' successful growth is attributed to our pioneering position as an innovator in the market and also to our new direction within the company itself.

Virtual line planning and process simulation offer an opportunity to reach a fullyautomatic production level which has so far been unheard of. With the help of these superior tools, we support our customers in employing their investment in a considerably better and more economical way, thus increasing their return on investment.

Change management in programme form

After the generation change-over in the company leadership, a new course was set for the future. re-established itself. The turning point was achieved with the new strategic direction. The new corporate design provided a visible image of this change. The many-faceted measures for the restructuring of the Group, established in the impetus programme, quickly led the way to success. Sales exceeded the billion euro mark for the first time ever in the year 2000 for the Group as a whole, for this happened in 2002, and profits showed an exponential increase.

We have now already reached our goal to grow faster than the beverage industry's global market while simultaneously generating an more exponential income. And we are aware that we will only continue to be one of the winners among our continually increasing competition if we can generate a lasting profitable growth of five to ten percent per year.

Innovation in all areas

For us, innovation means a lot more than »just« providing new products and services. has also structured its business procedures within the company using new methods and mobilised potential for rationalisation to allow improved competitiveness. This economic success would not have been possible were it not for the massive changes which took place within the framework of the internal impetus programme started in 1999.

A substantial increase in know-how, technological advancements and globalisation forced us to redefine our goals – knowing well that the decisive factor for ' success is the individual. We reached our targets thanks to new ideas, new technologies, optimised processes and productivity increases, as well as the systematic tightening of the product range and site optimisation combined with the dissolution of redundancies. For future profitable growth needs innovation and this applies both to the customer and to ourselves.

Technology provider for the beverage industry

A company's success can be structured. With our strategic direction, we have set down the corresponding guidelines and targets. Thus, we can systematically orientate ourselves toward markets with high growth rates and toward our customers' continually increasing demands. We have recognised our customers' needs at an early stage and used them to develop products and services to suit the market. They not only comprise innovative machine concepts which are mechanically perfect, but also the intelligent, electronic connection of single machines to form an optimised complete system. The innovative information technologies allow a substantial improvement in the efficiency and performance of complete bottling lines.

implements the harmonious combination of machine technology, systems know-how, process and information technology and uses it to progress to become a systems partner and problem solver for our customers. Our aim is to offer optimised hardware, engineering and intelligent concepts »from a single source«. As an information specialist, project manager and service supplier, takes on the role of a technology provider for the beverage industry.

Intelligent information technologies

The application of improved software and the intelligent use of knowledge both significantly increase the value of the machines and lines in use. This sensible use of components at the customer's plant serves as a means for planning and production, as well as an aid when deciding upon new investments, choosing whether or not to optimise existing production and in strategic company decisions.

Net income in million € after tax krones Group sales in million €

Innovation takes place

everywhere at krones: in our machines and services as well as in the company itself.

Development of sales and net income of the krones group in million €

»Analysts and our shareholders have a great need for current information about the strategic direction taken by our company and its trade development. We want to continually communicate this to all participants in the capital market so that the value potential of our share can be made transparent.«

Hermann Graf Castell Head of Corporate Communications

About the share

The share was unable to escape the general stock market trend. After really taking off in year 2001 and increasing 63% in value, the preference shares traded on the lost 22% of their value during the course of 2002. Yet this was without there being any change to the fundamental data. The shares are just as sound as before.

The 2002 trading year

The downward slide experienced by the share markets still continued undeterred in 2002. Economic concerns, bad company reports and the threat of a conflict in Iraq knocked down the share prices worldwide. After the century's boom which lasted between 1996 and 2000, the acute stock market low still continued relentlessly for the third year. The leading index, the Dow Jones, forfeited 16.7% of its value, the Euro-stoxx 50 index of the most important shares in Europe lost 36.1% of its value and the Japanese Nikkei-Index dropped 18.4% to its lowest level is almost 20 years.

The German share index, the , is in the middle of an especially steep downward trend. In 2002, the shares of the 30 largest German public limited companies sank to their lowest value for 6 years. Even though the index welcomed in the new year at 5160 points and then peaked in March at 5467 points, the reached its lowest point in October at 2519 points, ending the year at a meagre 2892 points. This amounts to a loss of 44% in the year 2002. Thus, when compared to its all-time-high when it reached 8136 points back on 7th March 2002, the had lost almost 65% of its value by the end of 2002 – and this drop in value has continued in the year 2003. The German -50, which has since been dissolved, suffered great losses (–75.6%) once again while the American Nasdaq dropped by 31.5%. When compared to the German share index, the got off lightly. The 70 most important shares on the closed the 2002 trading year with a loss of 31%.

krones year-end share prices

Key data per share

1998	03 03 23.0 27.1
1999	25.0 03 27.0 03
2000	28.5 03 32.0 03
2001	46.5 03 03 55.1
2002	73 03 39.8 43.5

Primary data of the krones share

Ordi sha nary res		Prefe e sh renc ares
dent ifica ber Secu rity i tion num	6335 00 wkn	dent ifica ber Secu rity i tion num	6335 03 wkn
Indiv idua l sha rtific ates * re ce	6,95 5,72 9	Indiv idua l sha rtific ates * re ce	3,57 5,29 5
Abb revia tion	krn	Abb revia tion	3 krn

krones share: Ups and Downs

The share can look back on a turbulent trading year full of highs and lows. The preference shares quoted on the had a good start to the year reaching 55.70 € on 2n^d January – and the upward trend continued. On 25th April, the share reached its highest level for the year reaching 67.49 € during the course of trading. However, its prices then continued to fall. Our interim report containing new record sales and surplus figures had no effect on this. In July, the share fell below the 50 € mark, only to recover and reach 58 € a few weeks later. The preference shares were quoted at this value on 20th November. But, triggered by the sale of liquid assets by institutional investors, the price slumped once again to 41.53 € at the end of December, before climbing to 43.50 € on the year's last day of trading.

Yet, despite its losses, the preference share has still managed to perform considerably better when compared to the development of the as a whole. However, it in no way reflects the unchanged, excellent fundamental data of and the positive trading prospects of the Group.

Despite its losses,

the krones

share was distinctly better at

asserting itself than the mdax

as a whole.

In the difficult

year

which was 2002,

it emerged as

a winner.

		200 2	200 1	200 0
ber of s hare Num s	(mil lion )	10.5 3	10.5 3	10.5 3
of w hich fere pre nce	(mil lion )	3.57	3.57	3.57
of w hich ord inar y	(mil ) lion	6.96	6.96	6.96
Sale r sha s pe re	€	123 .91	110 .66	96.3 5
shar Net inco per me e	€	5.44	4.78	3.61
Cash flow sha per re	€	8.97	8.09	6.67
Equ ity c apit al pe r sha re	€	38.8 2	36.1 8	32.1 4
e (p are) High pric refe e sh est renc	€	67.4 9	55.1 0	36.0 0
e (p are) refe e sh Low est pric renc	€	41.5 3	26.0 0	24.0 0
High e (o rdin shar e) est pric ary	€	59.0 0	46.5 0	35.4 0
e (o e) Low est pric rdin shar ary	€	37.5 0	31.0 1	27.8 5
e (p are) End -of-y pric refe e sh ear renc	€	43.5 0	0 55.1	28.5 0
e (o e) End -of-y rdin shar pric ear ary	€	39.8 7	46.5 0	32.0 0
den d pe fere shar Divi r pre nce e	€	* 1.10	1.00	0.77
Divi den d pe r ord inar y sh are	€	1.00 *	0.90	0.66

* acc.to proposed appropriation of profits

»The krones share was not spared the general fall in prices. There is no change in our estimation that share belonging to the global leader in beverage bottling lines is obviously fundamentally undervalued.« 26.9.2002 issue of Börse Online

* Total number: 10,531,024

krones ordinary shares krones preference shares

krones passes the security test

When, in its issue dated 2nd August 2002, the German Financial Times asked »Which company will succeed in surviving the stock market turmoil without suffering major damage?«, occupied eighth place of all of the companies quoted on the 100. For its »security test«, the newspaper assessed the companies based on four criteria, these being the dynamic ratio between price and profit, the price and booking ratio, volatility and management quality.

Current studies on the share have been carried out, among others, by the research departments of the following banks: Credit Lyonnais Securities (25th October 2002), Trinkaus & Burkhardt (28th October 2002), Equity Research (28th October 2002), Commerzbank (30th October 2002), Warburg (8th November 2002), -Amro (21st February 2003) and Dresdner Kleinwort Wasserstein (12th March 2003) .

Corporate governance for transparent company leadership

At , corporate governance is a constituent part of the company leadership. It is aimed at continually increasing the company value. The management of considers the principles and rules of corporate governance in all of its business activities. In collaboration with the Supervisory Board, the Executive Board develops the Group's strategic direction and takes responsibility for its implementation. Our aim is a systematic and sustained increase in our company's value In doing so, we protect the interests of our shareholders so that their investments in are worthwhile. Through regular reports which provide open and transparent information about the current and future development of the Group, about the strategy adopted by our company as well as any possible risks which may be involved in our present and planned trading activities, we encourage our shareholders' trust and acceptance on the capital market. With our wide range of communication, we are intent on continually providing current information about to our shareholders, potential investors, customers and the public.

As stated in § 161 Aktiengesetz, the Executive and Supervisory Boards declare »that the recommendations on conduct put forward by the ›Governing commission for the German corporate governance code‹ employed by the German federal government for the management and supervision of companies quoted on the German stock markets have been and will be complied with as indicated in the German corporate governance code published on the website.

The share is still held in high esteem by analysts and investors alike. Analysts recommend purchasing the paper. They regard the share as being decidedly undervalued. Poignantly, the stock market newspaper remarked in its 26th September 2002 issue, » is already highly valued by its customers and analysts alike – only on the stock market is it still waiting for success to come its way.« The financial magazine »Börse Online« remarked on the same day, »The share was not spared the general fall in prices. The assessment that the share belonging to the global leader in beverage bottling lines is obviously fundamentally undervalued still remains the same.« And on 14th November 2002, the same magazine complained, »Even though has no problem in mastering the current lull in economic activity and although the signs point to growth, the share price is trailing behind the strategic development.«

»krones is already highly valued by its customers and analysts alike – only on the stock market is it still waiting for success to come its way.« 26.9.2002 issue of Börse Online

Openness and transparency toward our investors and the capital market mark our company leadership whose aim it is to increase the value of the company.

mdax krones preference share

mdax

krones ordinary share

krones share progression

Shareholder structure secures company inventory

issued a total of 10,531,024 individual share certificates: 6,955,729 ordinary and 3,575,295 preference shares. The preference shares are being traded on the and the ordinary shares on the Prime Standard stock exchange. Ordinary shares make up 66.05% of all shares and, of these, 86.25% are in the ownership of the Kronseder family. All of the preference shares are in free float.

We are aware that this constellation is not beneficial for the participation of strategic and institutional investors. However, we will also retain this distribution of shares in the future. Otherwise, due to the low share prices suffered over a long period of time, would have long been a potential candidate for take-over.

Dividends rise for the fifth time in a row

Our investors should profit once again from our good financial position and the dynamic development of results, as well as the rise in the profit of 5.44 € per share. At the Annual General Meeting on 25th June 2003, we will once again – and thus for the fifth time in a row – propose a rise in the dividend issue. This should amount to 1.10 € per preference share (previous year: 1.00 €) and 1.00 € per ordinary share (previous year: 0.90 €).

Investor relations promote open information policy

For us, investor relations is an important instrument to increase the trust shown by the shareholders by providing an open information policy and thus gaining new circles of investors. We also enter into continuous dialogue with investors and financial analysts. The regular research reports drawn up by analysts belonging to German and international investment companies provide documentation of the major interest shown in our company by institutional investors. With appearances at roadshows, analyst meetings and press conferences, together with our regularly published quarterly and yearly reports, we provide a detailed overview of our economic situation and the company strategy of the Group.

All of these measures are in pursuit of our aim to always quickly inform investors, analysts and the economic press of any developments which are taking place at , and in doing so, promote our acceptance on the capital market and – in keeping with our duty to always act in a value and market-oriented manner in the interests of our shareholders – to continue to increase the value of the company.

Detailed information about the Group and its products, as well as current data regarding the share, can be found under www.krones.com, the homepage of and its subsidiaries. You can view the current prices quoted for the preference and ordinary shares, pursue the development of the shares in the analysis chart as well as have a look at the press releases and ad hoc memos. Our company and quarterly reports can be called up and downloaded.

Corporate Communications Hermann Graf Castell Böhmerwaldstraße 5 93068 Neutraubling Telephone: + 49 (0) 94 01/70-32 58 Fax: + 49 (0) 94 01/70-34 96 Internet: www.krones.com E-mail: investor-relations@krones.de

* acc. to proposed appropriation of profits

* acc. to proposed appropriation of profits

Dividends per preference share in €

Dividends per ordinary share in €

Earnings per share

Earnings per share improved by 14 %, reaching 5.44 € (previous year 4.78 €).

Company situation and business development

proved itself to be as strong as a rock in the midst of the strained worldwide economic situation. It was by making use of the opportunities offered to us in new areas of business, among other things, that we succeeded in achieving further growth. A 12.0% increase in sales, an increase in profits which even reached 13.9%, a high number of orders received and a solid financial structure have continued to strengthen our company.

»krones' development shows that we have, on the one hand, established the Group strategically and ›correctly‹ in an operative sense and that we have also learned to master the company risks which we are exposed to in our global business activities.«

Hans-Jürgen Thaus Deputy Executive Chairman

Packaging machines increasingly in demand

The global demand for packaging machines represents around 20 billion € per year. The packaging system demand can be split up into markets as follows: 28% to the North American region (, Canada, Mexico), 26% to the Japan/China region and 23% to Western Europe. 12% of the market volume is apportionable to the states of Eastern Europe, Latin America, Africa and the Middle East, 11% to the countries in the Asian and Pacific Region excluding Japan and China.

The annual rate of increase in the demand for packaging machines is 3%, however this differs greatly depending on the region. While the states of North America and Western Europe can only register a low amount of growth of 2.2 to 2.7%, the greatest thrust of economic growth is expected in the Asian area, headed by China whose demand will show an annual increase of 4.6% until the year 2005 and then an average increase of 8.8% until the year 2010. In the Asian nations, growth rates of 4.5% are expected until the year 2005. Forecasters predict that the sales volume in Germany will, on the other hand, more than likely stagnate at 1.3% until the year 2005.

Beverage packaging machines, krones' core business

Despite making up the core business of , the beverage sector only accounts for 22% when measured against the entire volume of packaging machines. The majority is apportionable to food items with 41%, with 19% of packaging machines being used for processing pharmaceutical items, cosmetics and chemicals.

Beverages are currently the subject of a change in customer habits. Viewed globally, beer sales have only risen by approximately 3%, yet they are showing exponential growth in the emerging markets such as China and the states. The greatest consumers can be found in Europe (34%), North America (26%) and the Middle Eastern States and Africa which together make up 26% of global consumption.

There is no change as regards non-alcoholic beverages which remain extremely popular. Approximately 2.1 billion hectolitres of fruit juice will be drunk each year until the year 2005 (in the year 2000 it was 1.7 billion hectolitres) and of this approximately half (45%) will be drunk in North America, followed by Europe with 22% and South America with 13%. Bottled water registers the greatest growth rates: although the figure lay at 1.02 billion hectolitres in the year 2002, the prognosis expects this to increase to an excess of 1.6 billion hectolitres for the year 2005. The biggest buyers are North America (37%), Europe (35%) and the Asian/Pacific region (19%). Carbonated non-alcoholic beverages are also advancing at an unstoppable rate. Soft drinks also report strong growth rates: Compared to 478 million hectolitres in the year 2000, it has been forecast that 508 million hectolitres of soft drinks will be consumed in the year 2005.

Weakness in global economic activity

The global economic situation clearly lost momentum in 2002, and this particularly at the end of the year. The critical developments in the Iraq conflict had an especially restraining effect. The levelling off of economic activity was visible in global trading which, in the end, was only expanding moderately. The increase in the effective gross domestic product slowed down noticeably in the industrial nations. According to calculations made by the institute for global economics, the gross domestic product increased by 2.8% worldwide. The industrial nations, however, only report a growth of 1.5%. Certainly, the rates of growth shown by the individual countries differ greatly. The United States increased their gross domestic product by 2.4%, the Western European nations improved by an average of 1.0% while Japan (+0.3%) and Germany (+0.2%) achieved hardly any growth at all.

Outside of the industrial nations, economic activity remained comparably robust in the year of the report. The entire economic production showed a strong increase (+4.2%) especially in the Asian nations (not including China and Japan). China stood out from the rest with 8.2% growth. In Central and Eastern Europe (+2.8%) the increase in production scarcely slackened and in Russia it amounted to 4.1%. In contrast, recessive tendencies remained dominant in Latin America (–1.0%).

In the year 2002, the German economy only grew by 0.2% – the slowest it has grown since the recession of 1993. One year previously, the gross domestic product () had been 0.6%. In the year of the report, the public deficit lay at 3.7% of the , meaning it had clearly fallen short of the European deficit limit of 3%. Personal expenditure declined and businesses displayed a strong reluctance to invest. In its capital expenditure on equipment, the Federal Statistical Office registered a deficit of 8.4%. Exports only increased by 2.9%, having been 5.0% in the year 2001. Imports which had increased by 1.0% in 2001, now declined by 1.3%.

Non-alcoholic beverages Hot drinks Alcoholic beverages

»If you take a look at the trading figures of the beverage and packaging machine manufacturer krones, you must think that the company is in another world.« From the 12th December 2002 issue of the financial magazine »Wirtschaftswoche«.

Consumption of industrially bottled beverages per head (in litres)

Total market of the packaging machine industry, per sector

New highs for sales, orders received and profits

The 2002 trading year ended with us having made new record achievements as regards sales, the number of orders received and income. Even though the economic environment is still difficult, the demand for the machines, systems and services offered by the Group is still on the increase.

Sales increase by 12%

The sales of the Group increased in the year of the report by 12.0% reaching 1,305 million €, thus topping the value from the previous year by 140 million € (1,165 million €). 23% of our sales were generated in Germany (previous year: 25%). The ratio of exports to total sales amounted to 77% (previous year: 75%). 33% of sales were placed within the other European countries (previous year: 36%) and those placed by our customers abroad amounted to 44% (previous year: 39%). In addition to our core markets of Germany and Europe, North and Central America, the Middle East and the states were our most important buyers. sales rose to 1,082 million €, which accounted for a 19.9% improvement when compared to the previous year (902 million €).

pet as a guarantee for growth

When viewed as individual sectors, we are now achieving the greatest percentage of our sales volume, namely 51%, with packaging machines and lines used to process soft drinks, waters and fruit juices. 30% is apportionable to machines and lines for the production of beer and alcoholic beverages. The remaining 19% is apportionable to machines and lines for the non-beverage sector.

This distribution of the sales volume achieved by our machines and lines has witnessed a strong change in the last four years. Even though machines and lines for handling beer, wine and spirits still accounted for 52% of sales in 1999, its percentage declined to 42% in the year 2000, 39% in 2001 and now to just 30%. The greatest mainstay of sales with 51% – machines and lines for soft drinks, water and fruit juices – only amounted to 39% in 1999. The non-beverage sector has almost doubled in value since then, from 9% to 19% today.

The sales distribution to the individual packaging types has undergone an even bigger change within the last four years. Machines and lines sold for packaging using containers constituted 68% of the total number of sales in the year of the report. In 1999, it was just 45%. In contrast, bottling using glass containers has almost halved since then, from 40% to 22% – this based on our sales figures. In the can filling sector, the percentage of our sales fell from 15% (1999) to 10% in the year of the report.

The krones Group

The Group essentially comprises (complete solutions for filling, labelling and bottle manufacture) and the following subsidiaries: (pasteurisation systems), GmbH (brewing and filter technology), GmbH ( solutions for production and logistics), (high-tech adhesives for labels and carton packaging) and GmbH (packing and palletising systems).

The business activities of the Group are divided into the segments »machines and lines for beverage production«, »machines and lines for product filling and decoration« and »machines and lines for packing and palletising«. The »beverage production« segment comprises brewery technology (), pasteurisation technology ( ) and the newly founded subsidiary . The »product filling and decoration« segment which comprises conveyor and line technology, plastics technology, filling technology, cleaning technology, labelling and decoration technology and inspection/monitoring technology makes up an extensive proportion of the business segments. The third »packing and palletising« segment comprises the business activities in packing and palletising technology.

The Group report includes all of the significant affiliated companies. In the company report, we firstly list the figures for the entire Group and then state the respective values for krones ag separately.

Group return on sales and equity capital after taxes

Bran ches
/no n-be * Beve rage vera ge
-bev Beve /non rage erag e
Beve rage
-bev Beve /non rage erag e
-bev Beve /non rage erag e
Beve -bev /non rage erag e

Gro truc ture kro nes up s	Prod divi uct sion s
kro nes ag	Labe lling hno logy tec ecti on t echn olog Insp y Fillin chn olog g te y Clea hno logy ning tec Plas tech nolo tics gy
bH Gm kett ner	Pack and pal letis ing ing tech nolo gy
bH Gm stei nec ker	hou nd Brew se a filtr chn olog atio n te y
a/s san der han sen	Prod tech nolo uct trea tme nt gy
bH Gm sysk ron	Info tion hno logy tec rma
mbH es G kic k ron	Labe lling adh esiv es

* (Beer, csd, wine, sparkling wine, spirits), ** (Food, chemical, pharmaceutical, cosmetic)

Return on sales after tax, in % Return on equity capital after tax, in %

We are remaining steadfast on our path to growth. The krones Group sales have increased by 12.0 % compared to the previous year, reaching the new record level of 1,305 mio. €.

Exponential increase in profits

The Group profit has once again shown exponential growth. Profits after tax grew by 13.9% reaching a new high of 57.3 million € (previous year: 50.3 million €). In addition to the growth in sales, efforts made in the previous years to provide an increase in efficiency within the company had the greatest effect on profits.

The profits before interests, taxes and depreciation () rose by 12.5% to 136.1 million € (previous year: 121.0 million €). Profits before tax and interest () showed a 15.0% increase, reaching 99.0 million € (previous year: 86.1 million €). The return on sales grew to 4.4%, compared to 4.3% the previous year. The return on equity capital (), calculated using the ratio between the ebit and the average amount of net capital tied up (balance-sheet profit minus interest-free liabilities and remaining provisions) showed an improvement, reaching 22.8% (previous year: 21.6%).

's year-end surplus improved by 35.3% to reach 63.2 million € (previous year: 46.7 million €), boosting the sales income to 5.8% (previous year: 5,2%). Earnings from normal business activities increased by 30.7% from 76.0 million € to 99.3 million € compared to the 2001 trading year.

Increase in number of orders received

The number of orders received for the Group rose to 1,309 million € in the year of the report, exceeding the record level achieved the previous year by 10% (1,190 million €). With 1,101 million €, 17.4% more orders received were booked for when compared to the year 2001 (937.5 million €).

With 57.3 million €, we obtained the highest Group year-end surplus in our company history.

The main pillars of sales

Split into regions, the Group gained the majority of its total sales in Europe with 56%. Of this, 23% was apportionable to Germany and 33% to the European countries including Russia and the states. The remaining 44% of our sales were generated outside of Europe. The countries which purchased the most were the states of North and Central America, the Middle Eastern nations and also increasingly China.

The greatest mainstay of sales with 1,022 million € (previous year: 927 million €) was once again the »machines and lines for product filling and decoration« sector. This sector contributed 78% (previous year: 79%) to the total number of sales. 135 million € was apportioned to the sector »machines and lines for packing and palletising« (previous year: 114 million €, thus amounting to 10% (previous year: 10%). With our sector »machines and lines for beverage production« we achieved a turnover of 148 million € (previous year: 125 million €). This corresponds to a proportional share of 12% (previous year: 11%) of the sales volume.

Net income and cash flow (Group) in million €

Geographical breakdown of sales

Breakdown of sales by sector

roce and ebit for the Group

Clear increase in flow of funds

The influx of funds from day-to-day trade activities increased in the Group by 29.3% to 78.2 million € (previous year: 60.5 million €). This increase is the result of a higher cash flow (year-end surplus plus depreciation) amounting to 94.4 million € (previous year: 85.1 million €), as well as from provisions which increased by 46.3 million €. Due to the increase in trade volume caused by alterations to inventories, receivables and liabilities, 69.7 million € of this (previous year: 65.4 million €) are tied up.

Fixed-asset investment activity lead to an 87.0 million € increase in cash outflow (previous year: 56.3 million €). Even the cash outflow from financing rose by 2.9 million € to 11.1 million € (previous year: 8.2 million €). At the end of the 2002 business year, the balance of funds amounted to 36.2 million € (previous year: 62.4 million €).

As was the case for the Group as a whole, 's influx of funds from day-today trade activities also increased considerably when compared to the previous year, from 32.4 million € to 72.0 million € – an increase of 122.2%). Due to a similar increase in investment and higher outflow of funds from financing activity, the balance of funds fell by 12.0 million €. By the balance-sheet date, had liquid assets to the value of 13.2 million €).

Cash flow secures future investments

The Group generated a cash flow of 94.4 million €, meaning it exceeded the previous year's value (85.1 million €) by 10.9%. The cash flow rose by 28.1% from the previous year's 69.8 million € to 89.4 million €. This cash flow can be used to finance practically all future investments in machines and buildings, as well as measures for company expansion. The high cash flow is also an excellent basis for reaching another positive interest result.

No bank loans, few liabilities

Our financial scope was also preserved in 2002, without the need for bank loans. Our Group's liquid funds which amount to 36.2 million € are marred by only 0.7 million € of bank liabilities. With a bank balance to the value of 13.2 million €, is free of any liabilities to financial institutions.

Orders on hand secure capacity will be utilised to the full

The order books of the Group are still well filled. By 31st December 2002, the orders on hand amounted to 614 million €. Due to shorter processing times, this means that the volume of orders on hand has only increased slightly by 0.7% when compared to the previous year (610 million €). In figures, our orders on hand correspond to a production capacity of 5.4 months; this scope of orders provides a very good starting basis for the current business year. On 31st December 2002, had orders to the value of 522.1 million € (previous year: 502.9 million €).

Extremely stable financial structure

The balance-sheet total of the Group has increased by 11.0% compared to the previous year, reaching 806 million €. This was promoted, on the one hand, by investments which rose to record levels and increased the fixed assets by 21.4% to 250 million € (previous year: 206 million €). On the other hand, thanks to the higher trade volume, the revolving assets grew by 6.8% to 551 million € (previous year: 517 million €). With regard to the source of the funds, the advantageous relation between equity and debt capital remained. The equity ratio fell slightly to 50.7% (previous year: 52.5%) which is proof of an extremely sound financial structure.

The financing of growth increased the total amount of borrowed funds by 15.1% or 52.1 million € to 397.0 million €). The liabilities rose by 10.5 million € to 126 million € (15.6% of the total balance). Only 0.7 million € of this was owed to banks. However, the provisions of the Group increased by 18.2% to 271.4 million €. The net liquid assets of the Group amounted to 35.5 million €. Due to high investments, it lies below the previous year's value (60.4 million €). Nonetheless, it still gives us sufficient room for manoeuvre.

A 10.9 % rise in cash flow and the 46.3 million € top-up in provisions were the reason for the increased influx of funds from day-to-day trade activities in the krones Group.

	199 8	199 9	200 0	200 1	200 2
Asse ts
Fixe d as sets	152	163	182	206	250
Inve ntor ies	95	99	102	143	165
ivab les, othe Rece ets r ass	229	246	293	315	355
Liqu id as sets	109	122	66	62	36
Liab ilitie s
Sha reho lder s' ity equ	328	340	338	381	409
Prov ision s	175	199	186	230	271
Fina ncia l liab ilitie s	4	2	3	2	1
Oth er li abil ities	79	89	116	113	125
Bala shee l t tota nce-	586	630	643	726	806

krones Group balance sheet structure in million €

»krones is seen as the success story in the world of engineering. Ever since 1997, the only way for the manufacturer of bottling lines is up, whether it has to do with sales figures, profits, cash flow or dividends.« 15th August 2002, Wirtschaftswoche

Strategic investment policy

We also continued with our investment strategy for the expansion of our capacities and modernisation in all areas of the company in the 2002 trading year. In the 2002 trading year, 88.3 million € were invested in the Group in tangible and intangible assets. This corresponds to increase of 53.0% when compared to the previous year (57.7 million €). The investments exceeded the depreciation (37.9 million €) by 133.0%. 74.5 million € were invested in (previous year: 44.8 million €).

A large percentage of these funds was spent on improving our production sites and introducing new products. injected additional funds into the reinforcement of the sales and service divisions which are active in existing markets and into setting up the organisation in new, future-orientated regions.

In 2002, a new subsidiary was created in Raubling to enable the further expansion of . In addition to the development and engineering hall which has a surface area of approx. 1,500m2, a new assembly hall with a surface area of approximately 6,000m2 was created. Ever since July 2002, all carton and film packaging machines have been developed, built and assembled here.

Our production site in Flensburg where we manufacture our bottle washing machines and pasteurisers was expanded to include a multi-storey administration building. The technical offices, sales department, training department, personnel department and works management, as well as conference rooms for training and customer care activities are located on four office levels covering a surface area of more than 1,500m2.

Our investment strategy focussed again on new systems for increasing productivity, continued rationalisation and the modernisation in all areas of our company. The immense investments that have flowed into the entire value chain have enabled us to establish the conditions necessary for a financially successful future, and therefore for the continued growth of our company.

Subsidiaries restructurised

The concept for the restructuring of . in Franklin/Wisconsin () was implemented in the year of the report. The transfer of production to a decentralised spare parts manufacturing plant for the North American region means that the machinery belonging to our subsidiary in the United States is optimally used. This will allow us to react quicker when supplying spare parts to our customers resident in the entire American region.

The further expansion of . saw us focus more strongly on the service area. Regionally organised service engineers are on stand-by for our customers and our product specialists and after-sales service employees are at a central location in Franklin to process our customers' enquiries and orders. Our American engineering department and a central training team complete our range of services available to the American customers around the clock.

Non-beverage sector of increasing importance

We have also managed to gain an increasingly strong foothold outside of our classical market, the beverage industry. We were able to complete further projects successfully in the non-beverage sector – which includes the pharmaceutical, chemical, cosmetic, food and non-food industries. Companies from these segments have found a competent partner in . With our subsidiaries and , we have succeeded in consolidating our customer relations in the non-beverage sector.

In one of our projects, we equipped a Japanese pharmaceutical company which manufactures non-medicinal health products with an empty bottle inspector, a filler with a speed of 72,000 bottles per hour and a labelling machine, all for handling 100ml energy drinks.

Investments in million €

We are already generating 19 % of our sales in the non-beverage sector, more than twice as much as three years ago – and with an ever increasing tendency.

Growth in the non-beverage sector compared to complete sales volume

We invested 88.0 million € for the optimisation of our sites, the introduction of new products and the expansion of our sales division, thus creating the conditions which allow krones to continue to grow.

For a pharmaceutical company in Israel, we installed a labelling machine which applied the instruction booklet directly onto different-sized medicine containers. And a labelling machine which applies wrap-around labels onto tiny cylinder ampoules is operating at yet another pharmaceutical group.

We were also challenged by a diverse range of tasks in the food sector. The machines and robots from were used for the packing and palletising work – for palletising sacks of rice in Australia and individual 1 kg bags of sugar in a company in Austria already operating a fully-automatic packing line for packs of sugar cubes, or for palletising yoghurt cups in a production site in Madrid. In the food sector, our company was also a popular problem solver with its automation software and logistic concepts, whether it be for a baby food manufacturer or for the implementation of a fully-automatic high rack warehouse for a dairy.

The palletising machinery from can also be employed in the non-food sector, for example, if a large global brand manufacturer wants to palletise packs of detergent or if small wooden blocks used for the manufacture of wooden pallets themselves have to be palletised.

Cooperation with kosme group

The starting market for so-called »just enough« machines and lines in the beverage industry provides a diverse range of opportunities for new trading activities – also for . However, our machines and lines belonging to the premium segment cannot be considered here. To allow us to offer inexpensive solutions to the lower segment which we have not yet served so far, we entered into a cooperation with the Group in Austria and Italy in April 2002. This cooperation with means we can round off our service offer which can now also deal with smaller customers requiring low output machinery.

manufactures linear stretch blow-moulding machines which provide a perfect extension to our Contiform programme. Austria also trades simultaneously with the Italian labellers, packers and palletisers which share their name. This cooperation will, however, make none of the machines or lines built by in Germany superfluous. We are still keeping our own range in its entirety. However, with , we will be in a better position as regards price to extend our lines or to reach customers who would otherwise not even turn to us with their enquiry. Thanks to these synergies, we will be equally attractive for small and large customers alike worldwide.

Leading position thanks to innovation

has been successfully developing innovative products and building up basic competencies for years now. The ability to respond to customer requirements quickly and flexibly has always helped both and the user to progress.

We are now exemplary in our technological leadership with synergies across all business sectors. By joining together these basic competencies, we succeed in permanently developing new products for the different business sectors and market requirements. We will only continue to advance development in the future with visionary innovation targets and our customers' help.

The development of new products and processes and the consistent further development and improvement of our product range work towards safeguarding our leading position in the market, extending our technological lead and securing an increase in sales and an exponential growth in profits for . All the divisions which make up our Group once again came up with numerous innovations in the year 2002 in the pursuit of this endeavour.

The major role played by innovation in the achievement of economic success was demonstrated once again by GmbH, one of the leading brewery suppliers worldwide and resident in the Bavarian town of Freising. Our subsidiary also managed to set new standards in brewery technology in the year 2002 with its Pegasus lautering system.

Total sales of 1,305 mio. € in 2002

Total sales of 1,165 mio. € in 2001

10% (114 mio.)

11% (124 mio.)

79% (927 mio.)

Sales distribution in million €

The plastics division provided a few highlights not only technologically, but also in engineering. With the Contiform 30 and Contiform 40 – standing for their 30 and 40 stations respectively – we have developed two real peak capacity machines. The Contiform 40 is the only stretch blow-moulding machine on the market which can manufacture 60,000 bottles per hour with one blowing wheel.

In our aseptic centre, a team of 25 engineers from the fields of engineering, process technology, food technology, brewing, beverage and dairy technology work on the development, planning and validation of aseptic filling systems. To guarantee the optimum distribution of sensitive beverages with demands on freshness, we further developed our -Asept cold aseptic filling method using a continuous improvement procedure.

In what is now the third generation of such systems, the new isolator principle keeps the system interior surface as small as possible. The clean room at the filling unit has been reduced to the absolute minimum. Only the bottle path runs through the inside of the isolator. The isolator takes the form of a thick chamber which is completely separated from the ambient air, as well as from the motors and electrical and pneumatic components. For our customers, this brings with it primarily economical advantages – due to lower disinfectant consumption and the greatest possible safety when keeping the aseptic conditions within the line.

The -Asept system has now proven itself in practice in renowned beverage manufacturing companies. The process offers beverage bottlers enormous opportunities to secure market advantages with their innovative beverages and packaging.

Thanks to our Wrapapac continuous-motion wrap-around packer in its high output design of 60 pulses per minute, we have stopped the gap in our high-speed range of secondary packaging machines. The most flexible variant, the Wrapapac with its integrated film-wrapping module and shrinking tunnel is now combined as a wraparound and tray shrink packer, just as much for cans as for round or square glass and bottles, a diverse spectrum of applications appreciated by the bottling industry worldwide.

With , is in a unique position in the industry. We are in a position to optimise the entire value chain from warehousing to the dispatch of the equipment (logistics) to the customer and create connections to inventory control. 's solutions are suitable for a wide range of systems and independent of the line manufacturer. For us, this results in new customer potential which will especially improve our position in the non-beverage sector once more.

Recognising and mastering risks

Both the Group and are subject to numerous business risks as part of their global operations. By detecting and assessing these risks as thoroughly and as early as possible, we can contribute to the long-term safeguarding of our company's success. The essential risks to our company's success are as follows:

Credit risks

is subject to different credit risks, especially in the shape of default and country risks. To finance the purchase of our equipment, we offer the customer various methods of financing. While doing so, we most of all make use of the protective instruments which are standard practice in foreign trading in order to minimize the remaining risks.

Sales market and price risks

Our customers expect innovative solutions which are of the highest quality and correspond to their requirements. The competitive situation, which was strengthened in the past business year due to mergers, leads to price risks in the sales market. Innovative solutions which are designed to correspond to the customer's requirements hide additional price risks, due to the fact that we would have to carry any additional costs which arise out of fixed-price contracts.

Currency risks

In the case of fluctuations in currency exchange rates, is not subject to any significant risks with regard to the expected inflow and outflow of funds as our acquisition and trading in foreign currencies is only of minor importance. We additionally use forward-rate cover for trade dealings with foreign currencies. However, the developments on the currency exchange markets still influence ' trade development, as countries located outside of the European Currency Exchange Union possess a considerable proportion of sales.

Personnel risks

Highly-qualified employees are a considerable success factor in the development, manufacture and installation of our machines and plants which are geared to suit the respective customer requirements. Thus, our future success also greatly depends on employing flexible, qualified personnel and committing them to .

Summarised assessment

Compared to the previous year, there was no great change to risks in the past year of trading. Risks which could endanger our inventory did not exist in the trading year 2002 and are also not evident for the foreseeable future.

Risks and opportunities in the individual areas of business are recorded, analysed and evaluated using a planning, information and monitoring process. We develop appropriate courses of action to limit the identified risks.

Innovations in all divisions: technological highlights, continual improvement processes and special customer-orientated developments for krones' economic success and leading position on the market.

Purchasing with cost savings and improved quality

We were once again able to achieve positive purchasing results in the acquisition sector. We achieved this by expanding upon our partnership dealings with our suppliers and with simultaneous cost reductions. The reduced production material prices and their delivery to our production sites when due both contributed positively to the company results. The improvement in the purchasing of goods stems from the coordination of acquisition between our sites, the increased standardisation in individual machine manufacture and the optimised coordination in our dealings with our suppliers.

We have further optimised our order processing by introducing an internet-supported connection between our suppliers and our computer systems. The system to which all of our main suppliers are linked allows them to glimpse into our production planning schedule. In doing so, we improve communication, increase procurement safety and avoid supply shortages. We have also increasingly included our suppliers in new product developments. This sped up our processes, contributed to an improved machine quality and effectively supported ' great innovative power.

Environmental protection through responsible action

Great importance is placed on environmental protection at all of ' production sites. We regard it as our duty to our environment and fellow human beings to bring ecological and economic aspects together in harmony and to treat our natural resources with care. Through responsible action, we guarantee maximum security for our employees and the environment.

We are engaged in active environmental protection – both in our machines and in the manufacture and assembly of our lines. The bottling systems and packaging machines manufactured by us have been optimised so that they can be operated with a comparably low energy consumption and cleaning requirement. In addition, we also take care to use recyclable materials in the manufacture of our machines and to reduce the consumption of materials which can be harmful to the environment.

Employees as the company's success factors

The number of our employees in the Group has increased in the past year of trading by 129 to 8,494 people, 1.5% more than the previous year (8,365). At our five company locations in Germany – Neutraubling, Nittenau, Rosenheim, Freising and Flensburg – 7,322 people were employed on 31st December 2002, 331 people or 4.7% more than in the previous year (6,991). 5,743 of them are employed at (previous year: 5,547). GmbH had the highest growth in personnel once again having registered an increased volume of orders for packers and palletisers. By the end of 2002, 1,059 people were employed in Rosenheim and its subsidiary plant in Raubling, an increase of 78 people or 7.9% compared to 2001 (981).

In our total of 33 foreign subsidiaries, the number of employees fell slightly by 14.7% to 1,172 people (previous year: 1,374). Due to the new orientation of our company in the United States, the number of people employed there fell by 25.9% to 449 people (previous year: 606). At in Denmark, the number of persons employed showed a 18.9% decrease, amounting to 73 employees (previous year: 90).

In the year of the report, the Group trained 418 young people (previous year: 391), of which 330 were trained in the field of commerce, 57 in industrial trades and 31 in field of technology. Out of those trainees completing their courses in the year 2002, 104 entered into permanent contracts. In the year 2002, 140 young people started on the road to their professional life with .

Reward system honours good work

The employees in ' individual segments are themselves responsible for calculated costs and quality from the taking in of the order, through production and on to delivery. Their adherence to cost and quality is honoured by a reward system. In addition, we also have clear aims for sales and profits against which each employee is measured.

Our dealings with suppliers on a partnership basis, the cost reductions in the supplied components and networking activities with our partners lead to cost savings and positive results in purchasing.

1,172 8,494 (+129) 1,347 8,365 (+376) 1,404 7,989 (+373) 7,616 (-206) 7,822 (+203)

Geographical distribution of employees

Education and training as a worthwhile investment

Knowledge makes the difference. In the economic world, information has become a valuable commodity. The imparting of knowledge and qualification of employees are treated with the same importance as investments in machines. Since the knowledge and ability shown by our employees both have a major influence on the economic future of our company, our sights are set on their permanent and qualitative education and training.

In order to meet with future requirements for well-educated employees, we are investing in the education of young people. An average training course lasting threeyears may cost around 70,000 € per trainee including the provided infrastructure,making up a total of approximately 10 million € per year. This great committment to education has so far always been worthwhile.

In addition to the classic apprenticable trades in the industrial, technical and commercial sectors, also offers future-orientated apprentice job outlines. In our training facilities, the young people are educated in industrial professions, for example, qualified tool mechanic, industrial, systems and engineering mechanic for different specialised areas and energy and system electronic engineer. A qualification as a mechanical/electronic engineer has been newly added. Technical artists, industrial and European sales administrators, business administrators (from the academy for administration and economics) and specialist computer scientists. Since September 2002 we have also been providing training for an international business administrator qualification specialised in controlling and an economic engineer qualification (from the professional academy).

Personnel marketing for junior staff

Thanks to our diverse product spectrum and the strong export orientation of our company, we offer a broad spectrum of employment for employees who come to us with the widest range of qualifications from the most different areas. Especially in demand are university graduate recruits from electrical/electronic engineering, mechanical engineering, business management, industrial engineering, computer science and plastics technology and also physics, mathematics, languages and the humanities. We are also applying diverse efforts to rouse the enthusiasm of the good but rare upand-coming engineers for . We are working towards this target by collaborating closely with the Regensburg college of higher education and by participating in personnel exhibitions.

The krones academy as a training centre

We rely on our employees and management possessing specific qualifications with high quality education and training which moves in line with the fast development in the technical and technological sectors. With its trainers and their practice-based and educational experience, the Academy makes up a reliable institution in this complex environment – using comprehensive training, effective advice and expert communication.

In the economic world, information is a valuable commodity. That is why we treat the education and qualification of employees with the same importance as investment in research and development or in machines – as an investment which will lead to a greater return. Thus, the education and training provided by the Academy also had a marked effect in the year 2002: on our employees' qualifications, their motivation and not least on their awareness of opportunities for improvement – and thus on the optimisation of the manufacturing and production processes.

»If we are to continue to be successful against the immensely difficult global competition in the future and are to remain in the lead, then we need the best employees available.« Hans-Jürgen Thaus, Deputy Chairman of the Executive Board

Breakdown of employees per qualification (krones ag)

With a regular team of more than 40 qualified trainers active in seven training centres worldwide, the krones Academy provides a high standard of education and training.

After the end of the trading year

Alois Müller steps down from the Executive Board

Having reached retirement age, Alois Müller stepped down from the Executive Board on 31.12.2002. Mr. Müller, who entered the company in 1968, had belonged to the Executive Board since 1989, having been firstly a deputy member for the production and service division and then a full member since 1992. He will continue to support our company on an advisory basis.

Werner Frischholz and Christoph Klenk new to the Executive Board

With Christoph Klenk and Werner Frischholz, has appointed two employees from its own ranks as deputy members of its Executive Board, with effect on 1st January 2003. Christoph Klenk (39) takes on the field of »Research&Development and Product Divisions« which comprises the entire research and development division, the engineering sector and all of the product divisions. His main focus will be placed on the planning and implementation of innovations. Werner Frischholz (51) takes on the field of »Operations« which comprises the purchasing, production and service departments, making him successor to the retired Executive Board member, Alois Müller. Werner Frischholz will continue to consistently develop the processoriented direction of the Operations division and also continue to expand the downstream area.

Majority holding in kosme group

We have strengthened the co-operation entered into in April 2002 with the group still further with an amalgamation of capital. On 1st January 2003, took on a majority stake in the Austrian-Italian company. procured 75% of the company shares belonging to private limited company in Sollenau/Austria which, in turn, has a 55% share in ... in Roverbella. The newly formed group which achieved an unconsolidated turnover of around 70 million € with 300 employees in 2002 will supply bottling and packaging machines for the low output range while serves the medium and high output segment.

Planned fusion of kettner GmbH with krones ag

In times of intense competition, strengths must be gathered together and a uniform Group appearance must be communicated. As there is no longer a relevant reason for the preservation of an independent GmbH, the Supervisory and Executive Boards will propose a fusion of GmbH with at the Annual General Meeting.

»By continuing our successful company orientation, we can foresee a positive development for 2003 despite the negative economic environment.«

Volker Kronseder Executive Chairman

Outlook

Global economic weaknesses, the Iraq conflict, stagnating markets and aggressive competition – will have to exert itself even more in 2003 than in the previous year if it is to affirm its exposed position. We have taken the respective precautionary measures with our »slender« planning and are entirely convinced that we will be able to conclude the current trading year with an increase in turnover and profits.

Growth through new acquisitions

Growth through new technologies

Growth in downstream business

Complete economic situation

The global economy is currently looking to the future with a rather reserved optimism. An improvement in the general economic situation is still not in sight. The global economic situation is also not going to stop just because of the beverage industry. Companies act with caution, invest hesitantly and build up safety reserves. This will also have an effect on tradings in new machines from for the beverage bottling and packaging industry. Simultaneously, our competitive environment has also changed. Our main competitors Sidel (France), (Germany) and (Switzerland) have re-established themselves.

In such a situation, will find it more difficult to continue with its course of growth than in previous years. However, a high number of orders on hand and a consistent number of orders received make us optimistic in continuing to reach our goals. The areas of growth which is considering can be found in the continuing boom in technology. Currently around 120 billion bottles are being manufactured worldwide and the consumption of for use in bottle-making shows an annual double figure increase. The demand for aseptic filling systems is growing at an exponential rate. In addition, new trends in the quickly growing soft drinks sector are placing high demands on the flexibility of the machines.

Additional substantial potential for sales and revenue can be found in so-called »downstream business« – this comprises spare parts, after-sales and engineering services and software – and also in the new solution-providing areas of information technology. Our expansion in the non-beverage sector also promises growth in the long term. is opening up a wide range of strategic areas of growth. We must primarily mention our growth in new markets – here we are focussing mainly on the pharmaceutical, chemical and food sectors – and the further penetration of the different regional markets, above all the United States and Asia, as well as our growth in

A high number of orders on hand, a consistent number of orders received and new trade sectors promise krones further growth and allow us to expect a positive development for 2003.

• Utilising regular markets to the full
• Opening up new markets
• Systems trading/engineering
• New technologies
• Quality leadership
• Acquisitions

the new areas of technology such as pasteurising technology, aseptic filling and technology. We will achieve growth in our customers' horizontal value chain using logical solutions, information and systems technology. Thanks to our participation in the group, which offers stretch blow-moulding machines, bottling lines and packaging machines for the lower market segment, we will also be able to grow in the vertical value chain. In addition, will achieve further growth in the downstream sector with its spare parts and after-sales services. And yet another further potential for growth can be found in new business areas and in other possible cooperations or acquisitions.

Using personnel fluctuation for production capacity

The basic economic conditions, the great suppression of prices weighing heavily on us because of price wars with our competitors and the resulting discounts are forcing us to take measures to secure our employment and production capacity. Thus, due to the natural fluctuation taking place in 2003, we will not be filling any positions which become available, where possible. With these measures, we are taking precautionary measures to make sure that retains its market position and its competitive status this year and in subsequent years.

Increase in sales and profits planned

Despite doubtful global conditions and economic uncertainties, our company aim for 2003 is to improve our turnover and obtain another increase in profits. The steady number of orders received and the continued high number of orders on hand provide us with the security we need for our plans for growth which will manoeuvre within a corridor of growth fixed by us. With this, we will also succeed in reinforcing ' profitability and extending our leading position in the global market for packaging machines in 2003.

Internal corridor of growth – annual growth target: 5 to 10 % per year

»To remain in the lead in new technologies, krones annually invests between six and seven percent of its turnover in research and development. In doing so, we achieve the technological lead which the customers expectand value.«

Christoph Klenk Deputy Member of the Executive Board

Reports from the product divisions

All of the divisions which make up the Group played a part in the overall success of our company. Their high product quality, their reliability, their adherence to deadlines, their service, and especially their phenomenal efforts in research and development, meant that we were able to continue to extend our global market leadership in the year 2002.

steinecker

As one of the leading brewery equipment suppliers worldwide, our subsidiary, , demonstrates how important innovation is in economic success. In the year 2002, the engineers from the Bavarian town of Freising succeeded in setting new standards in brewing technology with their Pegasus lautering system. In the Pegasus, the mash storage is more even, the sampling of the extract quicker and the yield higher than from a conventional lauter tun. Two Pegasus systems were already put into operation in 2002 and, in the current trading year, two more are being installed in Panama and Peru. The has placed an order for Pegasus number five.

Thanks to the Merlin wort boiling system which is gentle on resources and with which succeeded in significantly improving product quality while simultaneously greatly lowering energy costs during the phase of beer preparation which requires the most energy, the company was awarded the European Environmental Prize 2002 in Budapest. Merlin consumes less primary energy during boiling, less cleaning agent, water and raw materials. When combined with an energy storage system including recuperation system, the Merlin provides an energy saving of just under 75% when compared to conventional boiling. This, in turn, has a sustained positive effect on the environmental balance during beer production.

At the end of the 2002 trading year, was its most successful yet. Two major contracts contributed primarily to this success. The Mexican brewery group Cerveceria Cuauhtemoc-Moctezuma .. awarded one of the most major contracts in its company history – the total sales volume amounted to around 30 million€. The international Asia Pacific Brewery Ltd., a network of 14 breweries located in eight Asian countries, contracted for the expansion of their brewery in the Thai capital, Bangkok. The Thai Asia Pacific Bangkok Brewery is investing more than 17 million € in the construction of this new brewery.

syskron

Our decision to unite the information technology sectors of the individual departments belonging to the Group to form one company as turned out to have been exactly the right one. The newly-founded GmbH which was formed in July 2001 out of this amalgamation can, after 18 months, strike an impressive balance, a further indication that this constellation of grouped expertise meets with our customers' expectations. Renowned companies already adorn the customer list of the young service providers. In the meantime, 140 employees based in Neutraubling, Freising, Rosenheim and Flensburg are working together on projects. The variety shown in customers reflects the variety of areas in which Syskron solutions can be implemented.

2002 was also steinecker's year – with a significant increase in sales and the awarding of the European environmental prize for their Merlin wort boiling system which is gentle on resources.

Advancement through innovation

' company success is built upon the leading technology of our machines and lines. The harmonious combination of machine technology, systems know-how, process and information technology has helped us obtain this innovational lead. To defend this leading position, we yearly invest between six and seven percent of our sales proceeds specifically in research and development

Beverage production segment

sander hansen

, the Danish engineering company for special machinery and technological leader in pasteurisation systems has been a member of the Group since 2000. In the year of the report, our subsidiary situated in Copenhagen once again used advanced innovations to strengthen its outstanding position in the global market of pasteurisation technology.

With the knowledge-based pasteurisation controller, the control2, presented the most recent version of the most widespread control system for tunnel pasteurisers. The system follows the position of the bottles, the spraying temperature and time, guaranteeing that the required pick-up value is obtained within the permissible tolerance limits and that the maximum temperature for the product is never exceeded.

The Checkers tunnel pasteuriser monitoring system is a further innovation which records, saves and displays all essential data. The pasteuriser's real-time processing data are called up every second and displayed to the user as system messages, trend curves and mimic diagrams.

New developments in pasteurising technology underlineour outstanding position in this technology.

Number of krones ag patents granted

into or other plastic containers. The aseptic filling of beverages into bottles should be developed to become the filling technology of the future. Studies have shown that the number of containers which are aseptically filled in Europe could show a 37% annual increase by the year 2007. Although this aseptic technology for filling containers is still relatively new, for it already constitutes a complete domain.

The -Asept system has already proven itself in practice and the results seen at renowned beverage bottling plants are proof of this. The process offers them enormous opportunities to secure market advantages with their packaging and innovative beverages. In ' own aseptic centre, 25 engineers work on the development, planning and validation of aseptic filling systems. The expertise gained from the fields of engineering, process technology, food technology, brewing, beverage and dairy technology is fused together. Using a continuous improvement procedure, we are further developing our -Asept cold aseptic filling method so that we can provide a better guarantee that sensitive beverages with demands on freshness are receiving the optimum treatment.

A sterile, hygienic environment and product safety also determine the further developments in the field of filling technology. The closure rinser newly developed by us allows closures to be cleaned and disinfected before being fed into the closer. Moreover, our aseptic screw capper concept has allowed us to produce a prototype which differs fundamentally from any solution known so far. By transferring the drive components and all machine modules downwards, the sterile conditions prevailing during the closing procedure can be significantly improved.

Conveyor and systems technology

Engineering solutions were also a fixed constituent of ' system trading in the year 2002. The central task is to combine all machines located within a plant with the correct conveying technology so that the required efficiency rate can be guaranteed. In conveying technology, flexible solutions for container and pack conveying systems were increasingly sought after by our customers in the past business year. Following its reorganisation, our conveyor technology division focussed its complete concentration on the conveyor technology used within beverage filling lines. With our SynCo container conveying system for glass bottles and filled containers, we are not only optimising bulk conveyance but also other important elements such as rejection units, components for changing the container direction and distribution units.

Thanks to the increasing percentage of non-returnable bottles which are appearing on the beverage market, our AirCo air conveyor became a product which boomed in the year 2002. Numerous innovations supported this development. Here we would like to give a special mention to the fundamental components of our systems for changing the container direction such as handling or stop systems or the X-gate which we regard as being the most innovative distribution unit on the global market which is

The great trend towards pet worked once again to the advantage of krones plastics technology which produced further technological and engineering highlights.

Product filling and decorating segment

Plastics technology

In the beverage industry, is still booming. In 1997, began developing the Contiform Compact stretch blow-moulding machine for the manufacture of containers. Ever since then, the second generation of our Contiform series was successfully placed in the market. In the meantime, we have already taken the technological lead in plastics technology in many sectors. We are now the market leader in stretch blowmoulding technology in Germany.

We succeeded in making further breakthroughs in stretch blow-moulding technology with our Contiform S for non-returnable bottles and Contiform H for hot-filled bottles, which is derived from the Contiform S. The Contiform S can reach a speed of up to 1,600 bottles per hour per blowing unit. With the Contiform H, we provided the basis for heat-set technology. Now bottles suitable for technologically-demanding hot-aseptic filling can be manufactured. The bottles for hot filling must be able to withstand temperatures of up to 95°C. To do so, the bottles require special thermal stabilising and we have made this possible with our heat-set process. The first two Contiform H machines are already successfully in operation. One of the machines serves the North American market, the second the Chinese market.

The plastics division also provided a few engineering highlights – for example, with the Contiform 30 and Contiform 40, the figures standing for their 30 and 40 stations respectively. Here we are dealing with two real peak capacity machines, with the Contiform 40 stretch blow-moulding machine containing one blowing wheel and able to manufacture 60,000 bottles per hour. This is the world record. The first models are to be commissioned in the spring of 2003 in the and Australia.

Filling technology

The demand for aseptic filling systems is growing at a tremendous rate. The consumers want products which are fresh, micro-biologically sound and can be stored for longer, and this without hot filling and the use of preservatives. This applies mostly to sensitive, non-carbonated soft drinks, fruit juices and mineral waters, but also to beverages which are sensitive to light or which contain protein and which are filled

simultaneously the most gentle on the product. We have also developed intelligent products for the MultiCo pack conveying system. This most universal member of our family of conveying systems can convey all types of packaging – be it plastic crates, shrink packs or cartons. Connecting the new Multidivider to a palletising unit allows the packs to be distributed in a very effective and secure manner.

Labelling and decoration technology

With a new labelling concept we are able to accommodate the bottling industry's demands for greater flexibility during the labelling of bottles. Made up of individual assembly groups, our new modular labelling machines allow us to combine cold-glue, hotmelt and self-adhesive labelling. The application units for self-adhesive labelling and the cold-glue or hotmelt units can be easily changed over.

This new technology has the ability to considerably shorten conversion times and simplify the change-over of the handling parts. Service and maintenance costs are also reduced. The users can also run the cold-glue and self-adhesive labelling stations simultaneously, for example, or change over to another type of labelling whenever they want.

With models in different sizes, the Solomodul, Topmodul and Multimodul, we can meet the industry's demands for flexibility in all output ranges. Our modular design concept for labelling machines has already been honoured. The British Packaging and Process Machinery Manufacturers Association, the , presented us with an »Award of Excellence«.

Thanks to our decades of experience in the development of labelling machines and our great innovation, the implementation of non-standard applications makes up one our strengths. Thus, we were able to provide a solution for a pharmaceutical manufacturer in which we were able to apply a wrap-around label onto ampoules with a height of 110 mm and a diameter of just 17 mm. Our newly developed labelling machine succeeds in labelling 30,000 of the tiny containers per hour precisely and reliably.

Cleaning technology

We have succeeded in achieving a pioneering change in concept for the Spiragrip – a bottle washing machine with extreme operational reliability and cost efficiency, developed initially for cleaning returnable bottles. The Spiragrip's concept and process technology rises far above the machines usually found on the market. In fact, it has already been awarded an environmental prize. After having already installed 30 machines of this type in returnable lines, we have now also modified this model series to allow the treatment of glass bottles. The result is a bottle washing technology which is revolutionary, and this can be stated without the risk of exaggeration. Our target to create a cleaning method which is gentle on the containers while keeping power, water and chemical consumption to a minimum has now also been reached for glass bottles with the Spiragrip.

A completely new concept: modular labelling machines – created using the modular system by joining together individual assembly groups – thus allowing more flexibility during labelling and more possibilities for combining in all output ranges.

A further reduction in cleaning agent and an improved cleaning result from our Lavatec bottle washing machines are the subject of our continued advancements in the field of cleaning technology. With our preventative, automatic cleaning and disinfection of the head space of the machine, we had previously already found an effective means of combating reinfection of the bottles after the caustic tank.

Inspection and monitoring technology

Achieving a high efficiency rate without compromising on high quality and high machine speeds requires not only suitable production plants, but also effective monitoring units.

The new empty bottle inspector, the Linatronic 713 M2, which we designed especially for use in small to middle-sized breweries and beverage manufacturing plants, is now appearing in a more slender and improved form. This new Linatronic model no longer has its own drive. Instead, the conveyor chain at the discharge uses a drive to pull the machine conveyor belt which then conveys the containers freely through the machine. This allows the entire electrical components of the inspector to be omitted and the machine acts like a conveyor controlled by the subsequent conveying system. This saves on space on the one hand and, on the other, reduces the amount of installation and maintenance work needed.

Two additional innovations extend the functional scope of our empty bottle inspectors. We have developed and introduced a special scuffing detection unit for the sidewall inspection of returnable bottles. Bottles with heavy scuffing can be safely detected and removed from the bottle pool, thus keeping their quality at a high standard using an economical method. Inspecting the screw thread of twist-off crowns, which are becoming more and more popular, presented us with a challenge. This new development has also already proven itself on the market.

Packing and palletising segment

New packing and palletising solutions

Business is continuing to rocket at in Rosenheim and in its new affiliated company in Raubling which opened in 2002. High investments, an increase in personnel and, above all, a 34.4% rise in sales marked the last trading year. In addition to its long-standing clientele from the international beverage industry, the manufacturer of machines and lines for the packing and palletising technology division also increasingly served companies from the pharmaceutical, food and non-food industries. The special solutions were often connected to new developments and optimisations made to the packers and palletisers in use.

kic krones developed the purely synthetic adhesive for the improved labelling of special beverage bottles and a thermally stabile adhesive for carton packaging.

Simultaneously, new trends could be detected. In the top output segment, a great demand for machines with universal abilities was met, whereas for the low output range, compact machines were preferred. We have extended our well-proven series of Variopac tray shrink packing machines to include the Variopac Compact model operating at 18 to 30 pulses per minute. This machine is aimed especially for small to middle-sized companies whose products demand non-returnable, convienience packaging or alternatively as a second packaging line. Thanks to its shorter construction, this machine is also good for planning into areas with only a limited space.

We have closed the gap in the top range of secondary packaging machines with our Wrapapac continually-operating wrap-around packer in its high-capacity design which operates at 60 pulses per minute. Since we know how highly the bottling industry values a wide range of applications, with our Wrapapac we have developed a variant with a maximum of flexibility. With its integrated film-wrapping module and shrinking tunnel, and combined as a wrap-around and tray shrink packer, it is suitable just as much for cans as it is for round and square glass and bottles.

kic krones

manufactures high-tech labelling adhesives for bottle labels and for the adhesion of cartons and secondary packaging. In addition to our continual improvement of standard natural adhesives, we also develop new adhesives for special applications. To correspond to the special conditions which prevail during the labelling of wine, sparkling wine and spirits bottles, we developed a purely synthetic adhesive in 2002 whose consistency has been completely adapted for use in slower operating machines.

We also developed special hotmelts which set quickly and develop a high adhesive response for the adhesion of cartons, secondary packaging, trays and slotted-type boxes. The new Colfix Mega hotmelt is marked by its especially high thermal stability. This means that it remains clear, even over a long processing period. The adhesive no kettner's packing longer becomes encrusted in the hotmelt unit and on the glue application nozzles.

In 2002, and palletising solutions were also in demand in all industries. This presented our subsidiary with a growth in sales in excess of 18 %.

»Systems are becoming more and more important for line operators. They have long been more than just the combination of several components and lines and the higher rate of capacity utilisation which it generated. Today, krones' systems solutions cover a complete service which ranges from planning and technical line specifications to financing and the handing over of a line which is ready for operation.«

Rainulf Diepold Board Member

On the bridge to the market and the customer

Thanks to its direct contact with the customer and the market, our sales department has a comprehensive view of everything – the competitive environment, the new markets and the changing demands placed by our customers. Several measures and concepts which the sales department introduced in 2002 helped us work toward our target of increasing customer satisfaction and further boosting the sales volume of our machines and lines.

Competition with new challenges

' competitive environment changed in 2002. Our three important competitors – (Germany), (Switzerland) and the French company Sidel, which was taken over by Tetra Pak – have re-established themselves. In the previous years, we had been able to assert ourselves best in a hectic and difficult environment and even claim market shares from our competition.

In addition to the great competitors, even stronger competition is emerging from Italy, above all in the beverage and packaging sectors, as its export industry for packaging machines is already almost as strong as the German industry. The Italian industry also profits from its longer working hours and lower labour costs meaning that it can offer its machines at completely different prices on the global market. In this changed competitive environment which is also marked by restrained investment behaviour on the part of our customers worldwide, we are now faced with new challenges. Despite this, we are optimistic that we will be able to gain further shares of the market.

Sales emphasis on emerging markets

We are putting special effort into our global sales activities in the emerging markets. In doing so, we have our sights firmly on countries such as Russia and the states of the former Soviet Union, the Asian countries and here especially China. In the year 2002, we already supplied around 28% of our new machines to these regions. We estimate that this percentage will still see a considerable increase in the coming years. The strong rise in the consumption of water, soft drinks and fruit juices will cause a step up in requirements which means that the demand for beverage bottling lines and packaging machines from will undergo a significant increase.

The great back-up in demand, together with the boom which has already started in these regions, allow us to expect high rates of growth. We, at , view these countries as being »countries of opportunity«. We already seized this opportunity offered to us years ago with success by increasing our presence in Eastern Europe and Asia and working there with a extra commitment. Our strategies and sales measures are targeted at better penetrating these »markets of the future«.

Key-account management for major customers

Customers with an international production structure and companies with whom we collaborate to achieve new technological developments benefit from preferential support at . The size of their company, their mostly international business activities and, not least, their significance as a major customer are what make them especially important to us. To be a competent partner to such companies, we must firstly have a very precise knowledge of their production, their needs and their respective situation in the industry.

We can only achieve this if we have intensive and permanent dealings with the company in question, remain in continual contact with it to allow us to learn in time about their demands on machines, technologies and service and offer them the correct solutions. At the same time, these customers seek a quick and direct path to , which means they need one contact person at who is there exclusively for them. This is why we have provided them with their own key-account managers – specialised sales employees whose task it is to provide active support and conduct negotiations.

To further intensify their support, we also started setting up a protected key-account portal in the internet in 2002 to provide our major customers with grouped information at first hand which is tailored to suit their specific information requirements.

Downstream concept for closer customer contact

In a global after-sales concept, all subsidiaries and representative offices are integrated, rearranged and coordinated from a central position. The customers can then – at first for single machines and then later for lines – have access to fullydeveloped maintenance quotations. In addition, globally-applicable software contains a record of all service employees together with each person's qualifications which is intended to considerably improve availability and allow flexible assignment planning.

With our new project management structure in the sales sector – in all sales projects, a project leader is appointed as the sole contact person and is responsible for all customer requirements – we want to guarantee that the different systems run smoothly. This allows us to react quickly and flexibly to any possible problems or to any changes in customer adjustments, thus resulting in an increase in customer satisfaction.

At krones, special customers can enjoy a special service. Our key-account managers are competent contact persons.

Customer ordering system simplified

With our electronic ordering system, eGate, a competitive and practical procedure for spare parts acquisition has established itself. Following the approximately three year phase of development, market introduction and optimisation, our customers now have a standardised and modular solution for spare parts procurement at their disposal. Spare parts enquiries can be transmitted to directly via the internet.

The customer is provided with a quotation containing an indication of the price and parts availability in seconds. An electronic spare parts catalogue helps our customers to simply and surely select the spare parts, collect them in a shopping basket and start their on-line order. The enquiry and order can be traced back using a tracking system and the order status called up at any time. For customers with their own system, eGate sets up connections to the customer's materials management tool and electronic procurement system. For us, eGate plays a central role in our task to guarantee round-the-clock support to our customers.

Customer qualification in the krones Academy

We rely on employees and management possessing specific qualifications, both in our own Group and in our customers' companies, gained through high-quality education and training which orientates itself in the direction of fast development. The Academy makes up a reliable institution in this complex environment with comprehensive training, effective advice and expert communication. Founded twenty years ago for training machine and line operators, maintenance personnel and managers, the Academy has developed into a centre of communication for the packaging industry.

The Academy, which has been in its modern new training building in Neutraubling for a year now, clocked up more than 6,000 seminar participants in 2002. A team of 40 trainers, all equipped with rich experience acquired through practice, guarantee the high standard of training. In addition to education and training, the experts from the Academy are also in demand for their competent advice regarding the practice of filling and packaging technology. In the field of consultation, they can help the company when it comes to the optimisation of the rate of efficiency and the analysis of the weak areas in the line.

Communication for a uniform company appearance

For , communication counts as one of the most important instruments used for the company's comprehensive market appearance. We use all media to communicate with the most different target groups – the interested public, our shareholders, our customers, our employees, potential customers and professional circles. And the

Training, advice and communication – in 2002, the krones Academy trained more than 6,000 customer employees in, among other things, machine technology and the new technologies.

diversity of our addressees is also reflected in our goal-oriented and strategically positioned measures – branch and product brochures, classic press relations, advertising, the magazine, the internal employee newspaper, exhibitions, the internet and, not least, this company annual report. All of these activities are embraced by the joined brackets represented by our corporate design, the image for which we were honoured by the German designer club () in 2002.

Excellent communication for a uniform appearance of the entire group – through all media and on to our target groups: shareholders, customers, employees, professional circles and the interested public.

The magazine, our company's customer magazine, carries the company's message around the world four times per year. Due to the fact that we generate almost 80% of our sales outside of Germany, it is imperative that we can speak our customers' language. Thus, the magazine already appears in German, English and Spanish. Since November 2002, it is now also appearing in Russian for the fastest growing market in Eastern Europe and, starting with the first edition in 2003, it will also be available to the Chinese people in our profession in their native language. With its diverse information regarding current trends in the beverage industry, reports about new developments at and practice reports, the magazine, which was incidentally placed among the 30 best customer magazines in Europe by the media magazine »Horizont«, is an effective medium, for customer service. It also supports the work of the sales department serving as a basis for sales discussions.

Exhibitions provide us with a welcome opportunity to present the Group and its affiliates in all of their complexity, to present new products and to intensify our customer contact. At the same time, we use exhibitions as a barometer of our customer acceptance and as a mirror of our competition.

For years, the internet has been an important instrument for our communication with our customers, shareholders and other parties interested in our company. The new internet appearance by the Group gathers all of the Groups activities under a common roof. Since 2002, not only , but also the affiliated companies , , , and can be reached via the website www.krones.com. Thus, the group is now joined together at a central position and under a uniform structure.

The user can comfortably select the individual companies on our home page, get information on the complete product range of the individual divisions and subsidiaries, pick out company representatives or find out about new developments in the entire Group. In addition, visitors to our home pages always have the opportunity to change over between different languages. www.krones.com is the address in the worldwide web for the international brewing, beverage and food industry.

Excellent communication for a uniform appearance of the entire krones Group – via all media to our target groups – shareholders, customers, employees, the professional circles and the interested public.

»The first step towards process orientation in the manufacturing sector has been implemented. In doing so, an important focus has been set for the future.«

Alois Müller Member of the Executive Board (until 31.12.2002)

Now we want

to expand it all to include the assembly and other

rest of manufacturing, areas.« Werner Frischholz

Deputy Member of the Executive Board

(since 1.1.2003)

Production and technology

Our consistently applied process and site optimisation and the continued introduction of the manufacturing segmentation in all areas of production are decisive factors for the growth in sales within the Group. At times of greater utilisation of capacities, we can manufacture more efficiently, significantly lower the lead time and in doing so, continue to improve on our competitive position.

Process optimisation results in increase in productivity

The simplification of the manufacturing processes and the resulting reduction in production costs and lead times are the overriding aim which we strive towards in our segmentation of the manufacturing sector which started a few years ago. Ever since the successful introduction of manufacturing segmentation, we have significantly increased our productivity and improved on our competitive position. The phased change over to process-oriented manufacture also continued in the year 2002.

The new manufacturing segmentation replaced performance-oriented manufacture in more and more of our machine production areas. This was marked by the arrangement of similar types of machines at a single location. The result of this was that, to be processed, a manufacturing order had to pass through several departments in whole factory with sometimes even more than one factory being involved. Instead, in segmented manufacture, defined parts are manufactured on an »island«, meaning the segment, with a much higher degree of efficiency. For the employees, one positive aspect of this is the introduction of team work in which order control and the assignment of personnel to the order can be carried out independently by the employees themselves.

This segmentation resulted in significant increases in productivity. The reasons for the improvements lie in a coherent and systematic concept which allows our employees to optimise their potential through adapted structures and processes. The implementation of process-orientated manufacturing structures and the simultaneous introduction of teamwork provides our employees with a great deal of leeway for decisions and improvements. Key data on the capacity and development of the segments are used by our employees and management for orientation. The segment employees' premium bonus is calculated on the basis of this key data. Annual target agreements support our employees in the persistent improvement of the key data.

One of the targets which we strived towards with our manufacturing segmentation has already been reached within a few years – the significant reduction in our processing times. Whereas, in 1997, we needed 12 to 15 months from the signing of the contract to the machine delivery, this has been considerably reduced today to an average of only six months. The ability this has given us to react quickly and flexibly to customer demands has provided with an invaluable competitive advantage.

In our factories, the departments which had so far been structured on a functional basis have now been fused under one area of responsibility and independent teams have been formed which are aimed at the further optimisation of the assembly processes. The orientation towards modular component assembly has enabled us to gain a high degree of transparency during assembly planning and has given us the flexibility needed to react to customer demands while maintaining a constant level of high quality. Our clear focus on the abilities of the assembly team reduces our processing times and increases our production volume.

Restructuring means that krones has substantially less coordination work, lower manufacturing costs and considerable savings as regards lead times. Through this, we are also fulfilling the urgent requests of our customers who, after deciding to invest, place high importance on short delivery times, quick commissioning and availability.

We are increasingly standardising our production with a view to increasing our efficiency and minimising costs and has its own department to deal with this subject. Approximately one third of the machines built by us can be considered for standardisation. On the other hand, the majority of the manufactured plants has been specially designed to suit the demands placed by our customers; however, here we are increasingly implementing modular construction systems so that we can also react quickly by standardising the assembly groups. Standardisation itself is most successful in those areas where different components can be used in the manufacturing segments of different divisions and different factories within the Group. We are already reaching such a high degree of standardisation in the electrical sector. In the mechanical sector, it is mostly the labelling, filling and inspection technology divisions who are gaining from the use of standardised components.

Concentration of abilities at one location

2002 was a year of relocation for numerous divisions and departments. Under the framework of our site optimisation process in the headquarters in Neutraubling, the aim was to better combine the departments of the individual divisions, to use the space available in a more effective manner and to produce shorter paths. Thus, the labelling and filling technology divisions, for example, moved to new office areas so that they could then make way for the largest division, the systems technology division. The sales division is now concentrated since 2002 in the »round building« of the administration complex.

The implementation of the new site concept also required the relocation of individual production areas in order to achieve a more efficient flow of materials. And even the assembly department was effected by the restructuring measures. Here, the relocation operations worked towards the goal of creating the additional space needed by the assembly department.

Quicker spare parts supply

With the restructuring of our American subsidiary, ., what was up to now the machinery production sector will be concentrated on the manufacture of spare parts from now on. This will allow us to provide a quicker reaction in the supply of spare parts to our customers in the North, Central and South American area. In addition, regionally-organised service technicians are on stand-by for our customers. In our subsidiary in Franklin/Wisconsin, product specialists and service employees process our customers' enquiries and orders. The engineering department and a team of trainers, who carry out customer training sessions either on site or in the Franklin factory, complete our range of services which guarantee our strong presence on the American market.

The optimisation of its processes resulted in a considerable increase in productivity for krones. Thanks to the significant reduction in lead times, the average period between order placement and machine delivery fell to just six months.

Environmental protection as a provision for the future

Great importance is placed on environmental protection at all of ' production sites. We regard it as our duty to our environment and fellow human beings to bring ecological and economic aspects together in harmony and to treat our natural resources with care. Through responsible action, we guarantee maximum security for our employees and the environment.

We are engaged in active environmental protection – both in our machines and in the manufacture and assembly of our lines. The bottling systems and packaging machines manufactured by us have been optimised so that they can be operated with a comparably low energy consumption and cleaning requirement. In addition, we also take care to use recyclable materials in the manufacture of our machines and to reduce the consumption of materials which can be harmful to the environment.

We also observe environmental protection requirements to a special degree during production. Although safe to the environment, all of our production processes are subject to the strictest of environmental obligations and fulfil the most recent standards. Our surface treatment centre with its highly-modern galvanising and coating plants are is exemplary in this respect as it produces practically no hazardous waste.

In our coating centre, air flows incessantly from the ceiling into the coating cabin and pushes any residual coating floating around the cabin downwards. This causes the residual coating to dry and turn into powder within seconds. The powder then falls through a grid and is collected. In the computer-controlled galvanising plant where, in addition to traditional galvanisation, the electro-chemical polishing and anodisation treatment methods are also applied – as well as in the coating plant – the waste water undergoes careful treatment. Our laboratory monitors this process. Caustic and acid solutions are separated and harmful substances such as heavy metals and fluorides are filtered out until the water quality is far below the prescribed values. The waste water which is subsequently fed into the drainage system has almost the same quality as drinking water.

In the plastics centre, we collect the containers produced in test runs on our stretch blow-moulding machines in shafts especially embedded in the flooring. There, the plastic bottles are processed to granulate material which is then used for the manufacture of new preforms for the stretch blow-moulding machines – thus completing the circle.

For krones, active environmental protection means developing machines which require little energy and natural resources, having »clean« production and manufacturing processes and ensuring absolute safety for our employees.

»From a ›higher‹ position, I would like to mention the good and very constructive work achieved within the entire krones group. The Executive Board, employee representatives and employees all pull together. And this is most definitely one of the reasons why this company is in such an excellentposition.«

Dr. Lorenz Raith Supervisory Board Chairman

Report by the Supervisory Board

According to the obligations it has by law and the articles of association, the Supervisory Board has monitored the management of the Executive Board and supported them with advice in all decisions regarding corporate policy. The 2002 end-of-year accounts drawn up by the Executive Board and checked by the Bayerische Treuhandgesellschaft were approved by the Supervisory Board.

In the constitutional meeting of the Supervisory Board on 19th June 2003, Dr. Lorenz Raith was unanimously re-elected Chairman of the Supervisory Board. Mr. Paul Jogsch, Chairman of the General Works Council was re-elected Deputy Chairman of the Supervisory Board.

In its meeting on 19th June 2002, the Supervisory Board appointed Christoph Klenk and Werner Frischholz new deputy members of the Executive Board, with effect from 1st January 2003. Christoph Klenk takes on the field of »Research & Development and Product Divisions«. Werner Frischholz takes on the field of »Operations« which includes the purchasing, production and service areas.

In its meeting on 27th November 2002, the Supervisory Board bid farewell to Alois Müller who, having reached retirement age, stepped down from the Executive Board on 31st December 2002 as planned. The Supervisory Board would like to express its special thanks to Mr. Müller.

The members of the Supervisory Board would like to thank the Executive Board, the management of the Group, the works councils and all of the employees for their responsible and committed work throughout the 2002 trading year. It is this which forms the basis of our company's success.

Neutraubling, May 2003

The Supervisory Board

Dr.Lorenz M.Raith

Chairman

Ladies and Gentlemen,

During the year of the report, the Supervisory Board undertook the obligations which it has according to law and according to the articles of association, monitoring the management of the Executive Board and supporting them with advice. In total, four Supervisory Board meetings and two Economic and Personnel Committee meetings were held.

The Chairman of the Supervisory Board also maintained regular contact with the Chairman and Deputy Chairman of the Executive Board, who informed him about all the major business happenings, strategic matters and critical subjects, and consulted him on all major decisions. The main issues raised during the consultations were company policy and the Group's strategic orientation with regard to the changed competitive situation.

The end-of-year accounts of , the Group end-of-year accounts and the status report complied together with the Group status report were audited by the account auditor elected by the Annual General Meeting, the Bayerische Treuhandgesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft (commercial auditiors and tax consultants), Regensburg, and awarded an unconditional audit certificate. The auditor took part in the Supervisory Board's balance-sheet meeting and provided a report on it. The Supervisory Board was in agreement with the result of the audit.

In its meeting on 5th May 2002, the end-of-year accounts drawn up by the Executive Board were approved by the Supervisory Board, thus finalising them. The Supervisory Board endorses the Executive Board's proposal for the disposal of the accumulated profit which involves issuing a dividend of 1.00 € per ordinary share and 1.10 € per preference share of the capital stock eligible for dividend, amounting to 26.9 million€.

In the year of the report, there were a few changes to the members of the Supervisory Board. Dieter Jensen, .. Prince Alfred Ernst of Löwenstein-Wertheim-Freudenberg and Josef Strobl stepped down from the panel. would like to express its great appreciation to these Supervisory Board members.

Newly elected to the Supervisory Board were Johannes Maschke, Chief Executive of Kronseder Beteiligungsgesellschaft m.b.H., Professor Dr.-Ing. Erich Kohnhäuser, President of the Regensburg college of higher education, and Anton Schindlbeck, Head of Sales for the Central European Region of .

The focus of the counsel in of the krones ag Supervisory Board was placed on business policies and the strategic orientation of the Group due to the changed competitive situation.

and Group end-of-year accounts

Group balance-sheet

		31.12 .200 2		31.12 .200 1
Asse ts	ndix Appe	TH€	TH€	TH€	TH€
Fixe d as A. A. sets
ngib le as I. Inta sets	1
Indu stria l pro pert y rig hts a nd a nd s imil ar ri ghts and valu 1. es,
ell a s lic s th eret as w ence o		11,2 66		11,9 72
Adv d pa nts 2. ance yme		194		13
			11,4 60		11,9 85
ible II. Tang ts asse	2
Land and bui ldin gs in clud ing 1.
buil ding thir d-pa rty l and s on		148 ,633		128 ,970
Tech nica l pla nd m achi nts a 2. nery		32,4 76		28,1 16
Oth lant fact and offi quip t 3. er p ory ce e men ,		31,2 45		27,3 95
Adv nd c ts a onst ruct ion in p 4. ance pay men rogr ess		6,92 5		7,04 4
			219 ,279		191 ,525
Fina ncia l ass ets III.	3
Sha res i bsid iarie 1. n su s		1,31 3		910
ther Inve stm ents in o ies 2. com pan		112		96
affil d co Loan s to iate nies 3. mpa		0		315
Long -ter curi ties 4. m se		414		541
Oth er lo ng-t loa ceiv able 5. erm ns re		17,0 60		166
			18,8 99		2,02 8
			249 ,638		205 ,538
B. Curr ent ts asse
I. Inve ntor ies	4
Inve ntor ies 1.		253 ,642		257 ,498
de o Paym ents nt 2. ma n ac cou		09 12,2		4,34 7
ived orde Paym ents 3. rece rs on		-10 0,69 8		-11 9,25 6
			165 ,153		142 ,589
ivab le an d ot her II. Acco unts ts rece asse
le (t ) Acco unts ivab rade deb tors 1. rece	5	313 ,360		285 ,867
from affi liate d co nies Due 2. mpa		5,07 5		4,34 6
Oth sset 3. er a s		30,9 71		21,6 23
			349 ,406		311 ,836
III. Secu ritie s	6
Oth curi ties er se			890		1,03 9
Liqu id fu nds IV.	7		35,3 15		61,3 97
			550 ,764		516 ,861
aid e and rued C. Prep inco xpe nses acc me			5,50 6		3,59 1
Bala shee l t tota nce-			805 ,908		725 ,990

			31.12 .200 2		31.12 .200 1
Liab ilitie s	ndix Appe	TH€	TH€	TH€	TH€
ital k A. Cap stoc
Sub scrib ed c al I. apit	8
Ord inar y sh 1. ares		82 17,7		82 17,7
Pref hare 2. eren ce s s		9,14 0		9,14 0
			26,9 22		26,9 22
ital II. Cap rese rve			103 ,703		103 ,703
III. Reve nue rese rve
l res Lega 1. erve		51		51
Oth 2. er re ven ue r eser ves	9	209 ,466		181 ,164
inclu ding offs e ba lanc e fro itial solid et activ m in atio n TH € 22 2 con
			209 ,517		181 ,215
ted ined IV. Una pria reta ning ear s	10		68,6 55		68,6 89
ppro
Sha n th ird-p hip V. res i arty ow ners	11		1		531
			408 ,798		381 ,060
cial item s wi th re B. Spe t serv e co mpo nen			0		1
C. Prov ision d ac ls s an crua	12
ision s for sion d sim ilar obli gati Prov 1. pen s an ons		39,0 31		37,9 13
ision s for Prov tax 2. es		41,9 71		23,0 26
Oth rovi sion 3. er p s		190 ,419		168 ,792
			271 ,421		229 ,731
s'eq D. Sha reho lder uity and liab ilitie s	13
to b ank Due 1. s		737		2,01 4
able Acco unts 2. pay		68,0 39		67,2 25
ffilia ted Due to a ies 3. com pan		1,06 8		955
Oth er li abil ities 4.		55,7 87		44,9 46
			125 ,631		,140 115
Defe rred inco E. me			58		58
Bala shee l t tota nce-			805 ,908		725 ,990

Group profit-and-loss account

Group statement of sources and application of funds

		200 2		200 1
	Appe ndix	TH€	TH€	TH€	TH€
Sale s rev enu es	16	4,86 1,30 9		1,16 5,40 6
Cha rodu nd o k in in p ct inve ntor ies a nge wn wor prog ress		-1,4 67		37,2 76
of se lf-co Cap itali sed cost nstr ucte d as sets		2,81 2		1,99 0
Oth ting inco er o pera me	17	52,3 49	1,35 8,56 3	20,9 42	1,22 5,61 4
of m ials Cost ater	18
a) of ra Cost ater ials, bles and chas ed m ater ials w m cons uma pur		-46 8,07 6		-41 7,48 4
b) Cost of p urch ased ices serv		-68 ,755	-53 6,83 1	,735 -51	-46 9,21 9
el ex Pers onn pen ses	19
a) nd s alar Wag ies es a		-37 3,20 2		-35 1,67 3
b) lfare Soci al se curi ty co ntrib utio sion and ts ns, pen we cos		-78 ,730	-45 1,93 2	-77 ,392	-42 9,06 5
recia tion of i gibl e fix ed a Dep ntan sset s
and gibl tan sets e as	20	-37 ,144		-34 ,836
Oth ting er o pera exp ense s	21	-23 1,68 8		-20 4,14 1
inco Inve stm ent me	22	270		310
me f oth nd lo loa Inco er in vest ts a ng-t rom men erm ns	22	94		83
Oth er in tere st and sim ilar inco me	22	6,54 9		6,54 8
of f cial Amo rtisa tion inan ts asse	22	-80 5		0
and ilar Inte rest sim exp ense s	22	-4,6 53	-26 7,37 7	-2,4 58	-23 4,49 4
lts f ord inar y bu sine ctiv ities Resu rom ss a			102 ,423		92,8 36
Taxe inco s on me	23		-43 ,131		-40 ,269
Oth er ta xes	23		-1,9 79		-2,2 33
inco Net me			57,3 13		50,3 34
Prof ied f ard from it viou carr orw pre s ye ar			41,4 90		41,3 36
Allo cati on t ve t o ot her o re ven ue r eser reve nue rese rves			-30 ,148		-22 ,903
Prof due from it -Gro ourc non up s es	24		0		-78
ted ined Una pria reta ning ppro ear s			68,6 55		68,6 89

	200 2	200 1
	TH€	TH€
	57,3 13	50,3 34
	37,9 49	34,8 36
	46,2 60	43,4 28
	6,47 4	-1,8 05
	-10 8	-91 0
	-84 ,204	-62 ,642
	14,5 27	-2,7 36
	78,2 11	60,5 05
	1,64 3	1,37 7
ngib le as in ta sets	-65 ,893	-55 ,655
in in tang ible ts asse	-4,9 25	-2,0 10
cial ts	-17 ,055	-28
nan asse
	-72 4	0
	-86 ,954	-56 ,316
	-9,8 95	-7,3 65
of lo and fina ncia l cre dits ans	-1,1 54	-80 7
	-11 ,049	-8,1 72
	-19 ,792	-3,9 83
olid d ev alua atio tion cons n an	-6,4 39	126
	62,4 36	66,2 93
	36,2 05	62,4 36

Peri odic fit pro
of f ixed Dep recia tion /app recia tion ets ass
d ac ls Incr in p rovi sion ease s an crua
Oth acti l me on-t er n rans ona asur es
Prof from the sale of f ixed it ets ass
Cha s in inve ntor ies, unts ivab le an d ot her ts nge acco rece asse
not attr ibut able to i tme nt or fi cing act ivity nves nan
Cha able and oth er li abil s in unts ities nge acco pay ibut able or fi not attr to i tme nt cing act ivity nves nan
Cash flow from rent trad tivit ies cur e ac
from sale s of fixe d as Rece ipts sets
out for i tme nt in ta le as sets Mon
paid ngib eys nves
paid for i ible Mon out tme nt in in tang ts eys nves asse
paid for i in fi cial Mon out tme nt ts nves nan asse
eys
paid for t he a isitio n of solid ated ies a nd o ther bus ines its Mon out eys cqu con com pan s un
Cash flow from inve stm ent
paid hare hol ders /min ority sha reho lder Mon out to s eys s
paid for t he r Mon out t eys epay men
flow from fina Cash ncia l act iviti es
Cha in liq uid f und nge s
id fu Cha s to liqu nds due to e xcha rate olid atio d ev alua tion nge nge s, cons n an
Liqu id fu nds on J st anu ary 1
id fu nds ber Liqu on D 31st ecem

Analysis of Group fixed assets

	hase Purc /ma	nufa ing ctur	cost s					recia tion Dep							boo k va Net	lue
	01.0 1.20 02	Add ition s	Subs nt eque	osal Disp s	Book	Curr ency	31.12 .200 2	01.0 1.20 02	Add ition s	Subs nt eque	osal Disp s	Book	Curr ency	ulat Cum ive	31.12 .200 2	31.12 .200 1
			activ atio n		sfers tran	diffe renc es				activ atio n		sfers tran	diffe renc es	depr ecia t.
	TH€	TH€	TH€	TH€	TH€	TH€	TH€	TH€	TH€	TH€	TH€	TH€	TH€	TH€	TH€	TH€
fixe ngi ble d as I. Inta set s
Indu l pro hts a nd a nd s imil ghts stria pert y rig ar ri 1.
and valu ell a s lic s th eret es, as w ence o	39,6 76	4,74 4	1,80 0	493	17	-43 0	45,3 14	27,7 04	5,59 6	1,38 0	423	2	-21 1	34,0 48	11,2 66	11,9 72
dwi ll Goo 2.	49,1 86	0	0	0	0	0	49,1 86	49,1 86	0	0	0	0	0	49,1 86	0	0
de o Paym ents nt 3. ma n ac cou	13	181	0	0	0	0	194	0	0	0	0	0	0	0	194	13
	88,8 75	4,92 5	1,80 0	493	17	-43 0	94,6 94	76,8 90	5,59 6	1,38 0	423	2	-21 1	83,2 34	60 11,4	11,9 85
gib le f ixed II. Tan ets ass
Land and bui ldin 1. gs
inclu ding bui ldin n th ird-p arty lan d gs o	205 ,363	22,6 56	409	1,95 8	6,19 6	-7,6 20	225 ,046	76,3 93	5,31 8	38	813	0	23 -4,5	76,4 13	148 ,633	128 ,970
Tech l pla nd m achi nica nts a 2. nery	142 ,745	13,6 13	25	6,10 7	0	-3,1 45	147 ,131	114 ,629	8,67 2	14	5,95 1	0	-2,7 09	114 ,655	32,4 76	28,1 16
Oth lant fact and offi quip t 3. er p ory ce e men ,	129 ,933	22,7 97	273	7,37 8	43	-3,8 07	141 ,861	102 ,538	17,5 56	177	6,56 3	-2	-3,0 90	110 ,616	31,2 45	27,3 95
Adv nd c ion in p ts a onst ruct 4. ance pay men rogr ess	7,04 4	6,82 7	0	210	-6,7 19	-15	6,92 7	0	2	0	0	0	0	2	6,92 5	7,04 4
	485 ,085	65,8 93	707	15,6 53	-48 0	-14 ,587	520 ,965	293 ,560	31,5 48	229	13,3 27	-2	-10 ,322	301 ,686	219 ,279	191 ,525
l as III. Fina ncia set s
Sha bsid res i iarie 1. n su s	923	431	0	28	0	0	1,32 6	13	0	0	0	0	0	13	1,31 3	910
ther Inve stm ents in o ies 2. com pan	96	40	0	0	463	0	599	0	487	0	0	0	0	487	112	96
icipa ting ies Loan s to part 3. com pan	315	0	0	0	0	0	315	0	315	0	0	0	0	315	0	315
Long -ter curi ties 4. m se	547	111	0	180	0	-62	416	6	3	0	7	0	0	2	414	541
Oth er lo ng-t loa ceiv able 5. erm ns re	166	16,9 04	0	8	0	-2	17,0 60	0	0	0	0	0	0	0	17,0 60	166
	2,04 7	17,4 86	0	216	463	-64	19,7 16	19	805	0	7	0	0	817	18,8 99	2,02 8
	576 ,007	88,3 04	2,50 7	16,3 62	0	-15 ,081	635 ,375	370 ,469	37,9 49	1,60 9	13,7 57	0	-10 ,533	385 ,737	249 ,638	205 ,538

balance sheet

			31.12 .200 2		31.12 .200 1
Asse ts	Appe ndix	TH€	TH€	TH€	TH€
A. Asse ts
ngib le as I. Inta sets	1
Indu stria l pro y rig hts a nd s imil ar ri ghts and valu ell a s lic pert es, as w ense	s
ell a s lic s th eret as w ence o			5,02 2		4,17 6
II. Tang ible ts asse	2
Land and bui ldin gs in clud ing 1.
buil ding thir d-pa rty l and s on		76,6 60		60,7 57
Tech l pla nd m achi nica nts a 2. nery		29,1 57		23,3 95
Oth lant fact and offi quip t 3. er p ory ce e men ,		21,9 69		16,7 41
Adv nd c ts a onst ruct ion in p 4. ance pay men rogr ess		6,43 1		3,03 4
			134 ,217		103 ,927
Fina ncia l ass III. ets	3
Sha bsid res i iarie 1. n su s		97,6 34		96,9 10
ther Inve stm ents in o ies 2. com pan		112		96
affil d co Loan s to iate nies 3. mpa		0		315
-ter curi ties Long 4. m se		135		39
Oth er lo loa ceiv able ng-t 5. erm ns re		16,9 89		89
			114 ,870		97,4 49
			254 ,109		205 ,552
B. Curr ent ts asse I. Inve ntor ies	4
teria ls an d su ppli Raw 1. ma es		47,0 10		46,1 66
k in Wor 2. prog ress		82,0 61		67,5 30
hed ds a nd g ood s for le Finis 3. goo resa		53,4 69		57,1 19
de o Paym ents nt 4. ma n ac cou		3,19 9		3,41 2
Paym ents ived orde 5. rece on rs		-66 ,532		-75 ,348
			119 ,207		98,8 79
ivab le an d ot her II. Acco unts ts rece asse	5
ivab le (t rade deb ) Acco unts tors 1. rece		167 ,912		183 ,705
from affi liate d co Due nies 2. mpa		85,6 99		71,6 89
Oth sset 3. er a s		22,0 65		12,6 26
			275 ,676		268 ,020
Sho ities III. rt-te rm s ecur	6
Oth arke tabl curi ties er m e se			0		10
id fu IV. Liqu nds	7		13,2 23		25,2 13
			408 ,106		392 ,122
aid e and rued inco C. Prep xpe nses acc me			646		215
Bala shee l t tota nce-			662 ,861		597 ,889

			31.12 .200 2		31.12 .200 1
Liab ilitie s	ndix Appe	TH€	TH€	TH€	TH€
ital k A. Cap stoc
I. Sub scrib ed c apit al	8
Ord inar y sh 1. ares		82 17,7		82 17,7
s (w s) Pref hare itho ight ut voti 2. eren ng r ce s		9,14 0		9,14 0
			26,9 22		26,9 22
ital II. Cap rese rve			103 ,703		103 ,703
III. Reve nue rese rve
Lega l res 1. erve		51		51
Oth 2. er re ven ue r eser ves	9	199 ,966		,966 154
			200 ,017		155 ,017
ted ined IV. Una pria reta ning ppro ear s	10
Prof ied f ard it 1. carr orw		825		928
-end plus afte r tra nsfe r of Year 2. sur reve nue rese rves		33,1 99		24,7 33
			34,0 24		25,6 61
			364 ,666		311 ,303
d ac ls B. Prov ision s an crua	12
Prov ision s for sion d sim ilar obli gati 1. pen s an ons		35,1 47		33,7 15
ision s for Prov tax 2. es		35,3 96		18,9 36
Oth rovi sion 3. er p s		127 ,941		113 ,601
			198 ,484		166 ,252
Liab ilitie C. s	13
to b ank Due 1. s		0		0
able Acco unts 2. pay		44,3 68		47,7 48
ffilia ted Due to a ies 3. com pan		26,6 05		54,6 54
Oth er li abil ities 4.		28,7 38		17,9 32
			99,7 11		120 ,334
Bala shee l t tota nce-			662 ,861		597 ,889

profit-and-loss account

statement of sources and application of funds

	200 2	200 1
	TH€	TH€
odic fit Peri pro	63,1 99	46,7 33
recia tion iatio n of fixe d as Dep /Ap sets prec	26,5 17	23,1 13
d ac ls Incr in p rovi sion ease s an crua	30,5 03	46,0 55
Oth on-t acti l me	51	-12 6
er n rans ona asur es	-5,6
Prof it/lo ss fr the sale of f ixed ets om ass	-11 0	-19 1
ivab le an d ot her Incr in i tori unts ts
ease nven es, acco rece asse or fi not attr ibut able to i tme nt cing act ivity nves nan	-31 ,250	-94 ,484
Cha s in able and oth er li abil ities unts nge acco pay
ibut able or fi not attr to i tme nt cing act ivity nves nan	-11 ,098	11,2 68
Cash flow from trad rent tivit ies cur e ac	72,1 10	32,3 68
from sale s of fixe d as Rece ipts sets	245	406
paid for i ngib le as Mon out tme nt in ta sets eys nves	-52 ,719	-42 ,459
paid for i in in ible Mon out tme nt ts nves asse	-4,0 57	-1,3 68
tang eys
paid for i in fi cial Mon out tme nt ts eys nves nan asse	-17 ,744	-1,0 06
flow from Cash inve stm ent	-74 ,275	-44 ,427
paid hare hol ders Mon out to s eys	-9,8 35	-7,3 65
for t of lo fina Mon paid out he r t and ncia l cre dits eys epay men ans	0	-70
Cash flow from fina ncia l act iviti es	-9,8 35	-7,4 35
uid f Cha in liq und nge s	-12 ,000	-19 ,494
Cha liqu id fu nds due xcha d ev alua tion s to to e rate nge nge s an	0	126
st
id fu nds Liqu on J anu ary 1	25,2 23	44,5 91
Liqu id fu nds ber on D 31st ecem	13,2 23	25,2 23

		200	2	200 1
	Appe ndix	TH€	TH€	TH€	TH€
Sale s rev enu es	16	1,08 1,76 0		902 ,132
Cha rodu nd w ork in p ct inve ntor ies a in p rogr nge ess		6,71 5		37,7 65
itali sed of se lf-co d as Cap cost nstr ucte sets		2,81 2		1,99 0
Oth ting inco er o pera me	17	33,1 77	1,12 4,46 4	15,1 44	957 ,031
of m ials Cost ater	18
of ra bles and chas ed m ials Cost ater ater		-49 7		-39 8
a) ials, w m cons uma pur b) of p Cost urch ased ices serv		0,31 -69 ,602	-55 9,91 9	7,60 -57 ,003	-45 4,61 1
el ex Pers onn pen ses	19
a) nd s alar Wag ies es a		-24 3,88 4		-22 7,26 4
b) al se ntrib and lfare Soci curi ty co utio sion ts ns, pen we cos		-49 ,411	-29 3,29 5	-48 ,466	-27 5,73 0
recia tion of i ntan gibl e fix ed a sset d ta ngib le as sets Dep s an	20	-26 ,199		-23 ,113
Oth ting er o pera exp ense s	21	-15 6,98 6		-13 9,15 9
Inve stm ent inco me	22	12,7 03		12,0 78
me f oth er in nd lo loa Inco vest ts a ng-t rom men erm ns	22	82		51
Oth and ilar er in tere st sim inco	22	4		7
me		3,81		4,42
rtisa tion of f inan cial ts Amo asse	22	-31 8		0
and ilar id Inte rest sim exp ense s pa	22	-5,0 26	-17 1,93 0	-4,9 71	-15 0,68 7
lts f ord y bu Resu inar sine ctiv ities rom ss a			99,3 20		76,0 03
inco Taxe s on me	23		-35 ,922		-28 ,313
Oth er ta xes	23		-19 9		-95 7
Net inco me			63,1 99		46,7 33
Prof it ied f ard from viou carr orw pre ar s ye			825		928
Allo her cati on t ve t o ot o re ven ue r eser reve nue rese rves			-30 ,000		-22 ,000
Bala shee prof it t nce-			34,0 24		25,6 61

Analysis of fixed assets

	hase Purc /ma	nufa ing ctur	cost s				recia tion Dep
	01.0 1.20 02	Add ition s	luat ion Reva	Disp osal s	Book	31.12 .200 2	01.0 1.20 02	Add ition s	luat ion Reva	Disp osal s	31.12 .200 2
					sfers tran
	T€	T€	T€	T€	T€	T€	T€	T€	T€	T€	T€
ble Inta ngi ets I. ass
Indu l pro hts a nd s imil ghts and stria pert y rig ar ri ell a s lic s th eret	41	7	0	0	0	98	65	1	0	0	76
as w ence o	23,3	4,05	1,80			29,1	19,1	3,63	1,38		24,1
gib le a ts II. Tan sse
Land and bui ldin 1. gs
inclu ding bui ldin n th ird-p arty lan d gs o	108 ,997	15,8 57	409	7	2,77 1	128 ,027	48,2 40	3,08 9	38	0	51,3 67
Tech nica l pla nd m achi nts a 2. nery	115 ,487	13,2 10	25	5,03 5	0	123 ,687	92,0 92	7,41 6	14	4,99 2	94,5 30
Oth lant fact and offi quip t 3. er p ory ce e men	88,3 23	17,2 39	273	2,50 3	34	103 ,366	71,5 82	12,0 63	177	2,42 5	81,3 97
,
Adv ts a nd c onst ruct ion in p 4. ance pay men rogr ess	3,03 4	6,41 3	0	211	-2,8 05	6,43 1	0	0	0	0	0
	315 ,841	52,7 19	707	7,75 6	0	361 ,511	211 ,914	22,5 68	229	7,41 7	227 ,294
l as
III. Fina ncia set s
Sha res i bsid iarie 1. n su s	165 ,080	724	0	0	0	165 ,804	68,1 70	0	0	0	68,1 70
ther Inve stm ents in o ies 2. com pan	96	16	0	0	0	112	0	0	0	0	0
Loan s to affil iate d co nies 3. mpa	315	0	0	0	0	315	0	315	0	0	315
Long -ter curi ties 4. m se	39	99	0	0	0	138	0	3	0	0	3
Oth er lo loa able ng-t ceiv erm ns re	89	16,9 05	0	5	0	16,9 89	0	0	0	0	0
5.
	,619 165	17,7 44	0	5	0	183 ,358	68,1 70	318	0	0	68,4 88
	504 ,801	74,5 20	2,50 7	7,76 1	0	574 ,067	299 ,249	26,5 17	1,60 9	7,41 7	319 ,958

boo k va lue Net
31.12 .200 2	31.12 .200 1
T€	T€
5,02 2	4,17 6
76,6 60	60,7 57
29,1 57	23,3 95
21,9 69	16,7 41
6,43 1	3,03 4
134 ,217	103 ,927
97,6 34	96,9 10
112	96
0	315
135	39
16,9 89	89
,870 114	97,4 49
254 ,109	205 ,552

Consolidation principles

The end-of-year accounts of companies included within the Group end-of-year accounts are always prepared in accordance with uniform balance-sheet and valuation principles They have all been prepared by the appointed day for the Group year-end results.

Capital consolidation is performed according to the book value method. In the Group balance-sheet, the fixed assets and debts of subsidiaries are stated instead of the book value of shareholdings. The purchase costs of shareholdings are offset against the proportional equity capital at the time of purchase or when first consolidated. If the purchase costs are higher than the proportional equity capital, the difference is wholly or partly allocated to the assets of the subsidiary. Residual asset differences are offset against the Group profit reserves or capitalised as goodwill. Differences classed as liabilities that arise from capital consolidation are allocated to Group reserves according to their balance-sheet category.

Third-party shareholdings in the equity of consolidated companies are reported as shareholdings in third-party possession.

Other consolidations concern the totalling of receivables and liabilities, and reportable guarantee agreements with or benefiting the companies included. Internal Group sales and other revenue items are offset against the relevant internal Group expenditure items.

The intermediate results from goods and services inside the group are not eliminated, as they are of minor importance to the portrayal of the Group's assets, finances and results.

With the exception of normal goods and services transactions, included Group companies did not purchase any items from other consolidated Group companies. Consequently, an additional interim profit elimination is not required.

Shares in subsidiaries not included in the consolidation are reported in the Group end-of-year accounts at the shareholding book value.

Currency conversion

Receivables and liabilities in foreign currencies are valued at the rate applicable when originally entered in the accounts or, where forward exchange cover was secured, at the cover rate. Where exchange rates produce losses not yet realised by the balancesheet date, these are accounted for as appropriate. Unrealised exchange-rate profits are not reported.

Notes for and the group

General information

The explanatory notes below relate to the year-end results of both the public limited company , Neutraubling ( ), and consolidated financial statement of , Neutraubling ( Group). Except where expressly stated, the comments apply to both sets of results.

Statutory principles

The year-end results and Group results of have been prepared in accordance with the rules laid down in Volume Three of the and AktG laws. They incorporate the year-end results of six domestic and thirteen foreign subsidiaries (full consolidation). The Group year-end results apply the entity principle prescribed in §297, Section 3, Para. 1 of the . The profit-and-loss account was prepared in accordance with the »total cost« accounting principle.

Companies embraced by consolidation

The Group year-end accounts dated 31st December 2002 of include, in addition to , all major domestic and foreign subsidiaries for which is in the possession of more than 50% franchise.

The consolidation group comprises six domestic and 13 foreign subsidiaries. Since last year, the following companies have been omitted from the consolidated group. The Maschinenfabrik Ges.m.b.H, Vienna/Austria ended its operative business activities in 2002 and left the consolidated group as of 31st December 2002. The company Brau-Control Steuerungstechnik GmbH, Freising, which was included in the consolidated group last year, merged with Anton Steinecker Maschinenfabrik GmbH on 1st January 2002, meaning it has also left the consolidated group.

In the trading year, acquired a additional 2% of shares in Anton Steinecker Maschinenfabrik GmbH, Freising. Initial consolidation was effected at the time of acquisition. A resulting active difference was openly offset against the profit reserves.

Because of their minor significance for the portrayal of the Group's assets, finances and results, the seventeen direct and two indirect subsidiaries are not embraced by the consolidated accounts. A list of shareholdings has been deposited with the Registrar of Companies.

Budgeted depreciation of fixed asset items is calculated on the basis of the following service-life periods, applied uniformly within each category:

Bui ldin gs	25– 50 yea rs
chi Ma ner y	5–1 0 yea rs
fitti ls a nd Fix i tur too ent es, ngs equ pm ,	5–1 3 yea rs
oftw /oth ght Com i put er s are er r s	3–4 yea rs

Non-real-estate fixed assets acquired during the first year-half are depreciated at the full rate, whilst those acquired during the second year-half are depreciated at half the annual rate. Low value asset items are depreciated in full in the year of acquisition as described in § 6, Section 2 of the EStG. They are recorded as a disposal the following year.

Shares in affiliated undertakings and holdings are entered at purchase cost less the appropriate depreciation. Securities and loans are reported at their face value or at current market value if lower; no reinstatements to original values were necessary. Inventories are valued at purchase or production cost or, if lower, at current value.

Manufacturing costs of finished and unfinished goods and work in progress include production materials and wages as well as mandatory fiscally capitalised material and overhead costs. Prices are reduced to the lower reportable value in accordance with the minimum value principle. These reductions take account of all stock risks arising from limited marketability or from duration of storage, that were identifiable at the date of the year-end account.

Accounts receivable and other assets are valued at purchase cost. Identifiable risks are accounted for by individual adjustments, whilst the general credit and financing risk is allowed for by a lump-sum adjustment. Receivables from previous years and those long overdue for settlement are generally discounted according to the anticipated date of settlement. Foreign currency receivables from exports are always recorded at the rate applicable on the date of posting or, if lower, at the rate applicable on the balancesheet date. Items secured by forward rate cover are entered at the secured rate. Current asset investments are entered either at purchase cost or, if lower, at the stockexchange price.

Where permissible, the unbudgeted and fiscal depreciation performed in previous years is continued with respect to all fixed asset and current asset items. Tax depreciation has no major influence on the Group result. The prepayments and accrued income item was compiled to the extent permitted under commercial law.

For items in the Group balance sheet, including the profit for the year, currency conversion of the year-end accounts of the foreign Group subsidiaries is performed at the rate applicable on the balance-sheet date. Group profit-and-loss account entries are converted at the average rates for the year.

Exchange-rate differences from the previous year arising from capital consolidation are always offset against the other profit reserves such that it does not affect the results. Conversion differences in the Group profit-and-loss account are accounted for under other operating expenditure, particularly the difference between the year-end result at average rates, and the year-end-result reported in the profit-and-loss account at accounting date rates, the latter of which agrees with the balance-sheet statement.

Foreign exchange differences arising from debt consolidation are included under either other operating revenues or other operating expenditure, such that they affect the result.

Accounting and valuation methods

Accounting and valuation are performed in accordance with the rules applicable to incorporated firms. Variant methods as specified in § 284, section 2 number 3,331, section 1 number 3 of the HGB have not been employed.

Assets

Purchases of intangible asset items are recorded at fiscally mandatory capitalised purchase cost and are written off in equal instalments according to their expected useful life of between 3 and 20 years.

Tangible assets are valued at purchase or production cost less budgeted depreciation. The production costs of self-manufactured plants include both directly calculable costs and a portion of general overheads.

Tangible fixed assets are written down at the highest fiscally permissible rates. In the 2002 trading year, the new AfA tables and the maximum digressive depreciation rate of 20% were implemented for accruals. Buildings and non real-estate fixed asset items belonging to are, where permissible, depreciated digressively, whilst all other fixed asset items are depreciated in equal instalments. The method of depreciation applied to non-real-estate fixed assets is changed from digressive to straight-line if this yields a higher rate of depreciation.

The appreciation from the 2001 audit for the 1998 to 2000 assessment periods are listed in the analysis of fixed assets.

4Inventories

The value of inventories rose by 6.6% compared to the previous year.At Group level inventories including advance payments rose by 1.5%.37.9% of these were prefinanced using customer down-payments.

Approximately

5 Accounts receivable and other assets

Of the total accounts receivable, and 78% from foreign customers.

22% are due from domestic customers

The accounts receivable from affiliated companies are the result ofthe Group.

services within

6 Short-term securities

This heading reports financial assets invested in fixed-rate securities.

7 Liquid funds

8 Subscribed capital

's capital amounts to € 26,922,135.36.

This is divided into:

6,955,729 registered ordinary shares 3,575,295 registered preference shares.

kro nes gro up	31.12. 2002	of wh ich resid ual te rm > 1 ye ar	31.12. 2001	of wh ich resid ual te rm > 1 ye ar
	TH€	TH€	TH€	TH€
le (t ) unts ivab rade deb tors Acco rece	313 ,360	8,21 3	285 ,867	12,8 13
from affi liate d co Due nies mpa	5,07 5	—	4,34 6	439
Oth sset er a s	30,9 71	3,04 9	21,6 23	3,16 4
	349 ,406	11,2 62	311 ,836	16,4 16

	kro	nes ag	kro nes gro up
	31.12. 2002 31.12. 2001		31.12. 2002	31.12. 2001
	TH€	TH€	TH€	TH€
Cash han d on	12	11	75	103
Cash in b ank unts acco	13,2 11	25.2 02	35,2 40	61,2 94
	13,2 23	25.2 13	35,3 15	61,3 97

Liabilities

Pension provisions reflect cash pension values and partial values of pension entitlements. Other reserves are formed for those accounts payable which constitute a burden on assets and whose amount or date of incidence is the subject of uncertainty. They are formed for all identifiable risks and insecure commitments according to reasonable commercial judgement. Valuation is made by reference to the probable amount.

Liabilities are recorded at either the nominal amount or, if higher, at the repayment amount. Foreign currency commitments not secured by forward rate cover arising from goods and services provided are entered under liabilities at the selling rate when the invoice was received, or at the selling rate on the balance-sheet date, if higher. Figures for liabilities arising from acceptances, warranties and guarantee contracts represent the value-dated amount at the balance-sheet date.

Commentary on the balance sheet

Assets

Fixed assets

Fixed asset items listed in the balance sheets are shown on pages 82/83 and 88/89. The book/balance-sheet figures shown are determined by reference to purchase or production costs in application of the principle of recording all planned receipts and expenditures in the budget.

1 Intangible assets

The amount for additions within both the Group and essentially relates to computer software licences.

2 Tangible assets

The additions under land and buildings derive from land purchases and new constructions at (15,857 €) and the extension of the Raubling factory of GmbH, Rosenheim (3,401 €). Group investments in other tangible assets to the value of 46,635 € were mainly related to the capacity-boosting and modernisation of our production sites. In the Neutraubling factory, investments were made in the expansion of production capacity for the plastics technology division and in major machine developments. By ending the consolidation of Maschinenfabrik Ges.m.b.H, acquisition or construction costs to the value of 1,127 €, as well as depreciation to the value of 365 € were deducted

3 Financial assets

A credit to the value of 10,500 € was extended to GmbH, Sollenau/Austria, with one to the value of 6,400 € being granted to associates. The end of the consolidation with Maschinenfabrik Ges.m.b.H, Vienna/Austria resulted in a deduction in acquisition costs to the value of 104 € and depreciation amounting to 6 €. 431 € were added through shares in affiliated companies.

kro nes ag	31.12. 2002	of wh ich resid ual te rm > 1 ye ar	31.12. 2001	of wh ich resid ual te rm > 1 ye ar
	TH€	TH€	TH€	TH€
le (t ) ivab rade deb Acco unts tors rece	167 ,912	5,49 9	183 ,705	7,26 3
from affi liate d co Due nies mpa	85,6 99	—	71,6 89	—
Oth sset er a s	22,0 65	2,76 3	12,6 26	2,28 2
	275 ,676	8,26 2	268 ,020	9,54 5

The Annual General Meeting on 19th June 2002 and the special meeting of preference shareholders on the same day passed a resolution establishing a stock of approved capital. The Executive Board, with the approval of the Supervisory Board, is permitted to use this approved capital to increase the share capital by issuing new registered ordinary shares or registered preference shares without voting rights, once or more than once, in exchange for cash deposits of up to € 10,000,000.00. This it may do before 31st May 2007. Shareholders must be granted subscription rights to these shares.

The Annual General Meeting on 19th June 2002 passed a resolution empowering the company to by and sell their own company shares by 19th December 2003. The inventory of stock acquired for this purpose, together with the other company shares which the company has already acquired and still owns, must not exceed 10% of 's approved capital. The lowest countervalue to which a company-owned share can be purchased is to be fixed at the mean value of the unitary rate for this share on the Frankfurt stock exchange over the last five days of trading prior to the Executive Boards decision to purchase, minus 10%. The highest countervalue is fixed at this mean value plus 10%.

At the Annual General Meeting on 19th June 2002, a resolution was passed which, with the approval of the Supervisory Board, empowers the Executive Board to call in own shares in without this requiring an additional Annual General Meeting resolution. This can be exercised for the shares as a whole or in part.

9 Other revenue reserves

10 Unappropriated retained earnings

11 Shares in third-party ownership

The balancing entry in the Group balance-sheet for shares in third-party ownership represents third-party equity holdings and profit shares in Anton Steinecker Maschinenfabrik GmbH.

12 Provisions and accruals

Pension regulations stipulate that employees that had joined the by the 1999 trading year have a right to retirement, disability and widow's pensions. The entry for pension provisions is based upon expert actuarial opinion. Amounts are determined by applying an interest rate of predominately 5.5% on the basis of the 1998 table of guidelines. There is an under-accrual of 1 €. Indirect pensions payable which are not covered by the Welfare Fund e.V amount to 1,392 €.

Tax reserves make provision for anticipated tax payments to be paid by and the subsidiaries. Potential taxes amounting to 582 € are contained in the Group.

Other provisions cover all identifiable risks and other uncertain commitments.

In , these mainly comprise provisions for semi-retirement (11,300 €), installation services yet to be provided (35,390 €) and guarantees (36,600 €).

In the group, provisions are included for personnel expenses (6,958 €), administration expenses (1,948 €) and for threatened losses (825 €).

13 Liabilities

All liabilities listed have a residual term of less than one year. No securities are pledged.

Out of the listed liabilities of the Group which are due to banks, 266 € are due in 1 to 5 years and the remainder due within one year. The liabilities due to banks amounting to 737 € are secured by mortgages.

The liabilities due to affiliated companies are the result of services rendered within the Group.

	kro nes ag		kro nes gro up
	2002	2001	2002	2001
	TH€	TH€	TH€	TH€
(Gro up) net inco me
afte r all ion t ocat o re ue r eser ven ves
(and fit shar es) es to -Gro pro non up s ourc	33,1 99	24,7 33	27,1 65	27,3 53
Prof ied f ard it carr orw	825	928	41,4 90	41,3 36
pria ted reta ined ning Una ppro ear s	34,0 24	25,6 61	68,6 55	68,6 89

kro nes ag	200 2	200 1
	TH€	TH€
l at Leve 1st Janu ary	154 ,996	123 ,432
Allo d fro by t he E rd cate et inco tive Boa m n me xecu	30,0 00	22,0 00
Allo cate d fro m b alan heet prof it ce-s
by t he A al G ral S hare hold ers' ting Mee nnu ene	15,0 00	11,7 60
Ded g fro mpl ified edu ucti risin m si ity r ctio on a equ n	—	-2,2 26
l at emb Leve 31st Dec er	199 ,966	154 ,966

kro nes gro up	200 2	200 1
	TH€	TH€
l at Leve 1st Janu ary	181 ,164	149 ,252
Prof l for ffec it-ne utra eign han ts exc ge e	-16 ,514	973
Allo d fro m G inco cate net roup me	30,1 48	22,0 00
Allo d fro ear' s ba lanc e-sh prof cate revio eet it m p us y	15,0 00	11,1 65
Ded on/d iffer from ital olid ucti atio ence cap cons n	-22 2	—
Ded on f fina l con solid ucti atio rom n	-11 0	—
Ded ucti risin g fro m si mpl ified ity r edu ctio on a equ n	—	-2,2 26
l at emb Leve 31st Dec er	209 ,466	181 ,164

Comments on the profit-and-loss account

16 Sales revenues

17 Other operating income

The other operating revenue of mostly comprise revenue gained from the renunciation of sponsorship (9,533 €), contributions to affiliated companies (1,220 €) and currency gains (3,015 €), as well as income from the use of other provisions (6,910 €).

The other operating revenue of the Group contains currency differences from the consolidation of debts (9,969 €).

Other liabilities of the include liabilities from taxes in the amount of 3,122 € (previous year 2,713 €) as well as liabilities within social security in the amount of 6,389 € (previous year 6,020 €). Other liabilities of the Group include liabilities from taxes in the amount of 15,220 € (previous year 12,471 €) as well as liabilities within social security in the amount of 10,262 € (previous year 9,836 €).

14 Contingencies

Acceptance liabilities are the product of the issue and transfer of commodity bills. Guarantees and warranty agreements consist both of cover for instalment payments and balance of price payments, and of guarantees arising from credit insurance contracts.

15 Other financial liabilities

Leasing liabilities result principally from a leasing agreement with a pre-emptive right on a site and factory building in Neutraubling.

Liabilities from maintenance contracts relate to computer hardware and software and to office communications equipment.

kro nes ag
kdow n by Brea ion reg
Ger man y
Rest of E urop e
Oth gion er re s

200 2	200 1
% 27	% 30
30 %	34 %
43 %	36 %

kro nes kon zern
kdow n by Brea ion reg
Ger man y
of E Rest urop e
Oth gion er re s

200 2	200 1
23 %	25 %
33 %	36 %
% 44	% 39

	kro nes ag		kro nes gro up
	31.12. 2002	31.12. 2001	31.12. 2002	31.12. 2001
	TH€	TH€	TH€	TH€
ce li abil ities Acce ptan	18 16,3	9,04 7	18 16,3	9,82 5
Liab ilitie rant s on gua ees
and ty a ts wa rran gree men	11,3 30	10,1 51	18,1 05	28,4 46
	27,6 48	19,1 98	34,4 23	38,2 71

	kro nes ag		kro nes gro up
	31.12. 2002	31.12. 2001	31.12. 2002	31.12. 2001
	TH€	TH€	TH€	TH€
urch obli Rep gati ase on
from ficia l sec arti urity sion tran sact ions pen	13,9 95	—	13,9 95	—
Rent al an d lea sing trac ts con	25,8 13	25,0 25	32,9 72	32,7 98
Mai nten trac ts ance con	4,23 3	2,93 8	4,23 3	3,93 9
from ord Com mitm ents ers	—	—	275	—
	44,0 41	27,9 63	51,4 75	36,7 37

	kro nes ag		kro nes gro up
	31.12. 2002	31.12. 2001	31.12. 2002	31.12. 2001
elat ed r Term -unr even ue	TH€	TH€	TH€	TH€
from the disp osal of f ixed Reve ets nue ass	186	258	377	1,12 1
from the liqu idat f res Reve ion o nue erve s	5,95 5	2,90 7	15,8 36	5,72 3
from the aba tem ent of o ff an d Reve nue ne-o
lum m ad just ivab les ts to men rece p su	884	1,91 3	884	1,98 0
from the of Reve recia tion nue app
fixe d as set item s	898	—	898	—
Oth er te nrel ated rm-u reve nue	1,19 3	—	1,89 1	—
Oth ting er o pera reve nue	24,0 61	10,0 66	32,4 63	12,1 18
	33,1 77	15,1 44	52,3 49	20,9 42

22 Financial results

23 Taxes

The heading »revenue and profit taxes« includes the trading year's tax burdens for the relevant periods. A corporate tax credit on profits paid out in the 2003 trading year, amounting to 1,815 € for and 2,099 € for the Group, has been deducted. The taxes on earnings at includes term-unrelated tax expenditures to the value of 2,400 € and term-unrelated tax revenues to the value of 1,602 €. The taxes on earnings for the Group includes term-unrelated tax expenditures to the value of 2,492 € and term-unrelated tax revenues to the value of 1,602 €.

Other taxes reported include property tax and vehicle tax.

24 Profit due to third-party shareholders

This heading embraces the proportion of profits due to third-party shareholders in the subsidiary Anton Steinecker Maschinenfabrik GmbH.

18 Cost of materials

The cost of materials within the Group amounted to 41.1% of total value of production (previous year: 38.9%)

19 Personnel expenses

At during 2002, the average number of staff in training was 316 (previous year: 293).

20 Depreciation

Depreciation on intangible, tangible and financial fixed assets may be found in the table »Analysis of Fixed Assets« (pages 82/83 and 88/89). At , unforeseen depreciation to the value of 315 € was effected on loans to affiliated companies.

21 Other operating expenses

Other operating expenses include term-unrelated expenses from losses related to the deduction of fixed assets to the value of 72 € (previous year: 67 €) for , as well as 269 € (previous year: 211 €) for the Group.

	kro nes ag		kro nes gro up
	2002	2001	2002	2001
	TH€	TH€	TH€	TH€
Wag nd s alar ies es a	243 ,884	227 ,264	373 ,202	351 ,673
Soci al se curi ntrib utio nd e ty co ns a xpe nses
for p and lfare ensi ons we	49,4 11	48,4 66	78,7 30	77,3 92
of w hich for sion pen s	(3,8 68)	(6,0 33)	(4,1 40)	(6,7 10)
	293 ,295	275 ,730	451 ,932	429 ,065

ber of st aff d urin g th Ave rage ar num e ye	kro nes ag		kro nes gro up
	2002	2001	2002	2001
Sala ried staf f	2,77 9	2,57 7	4,18 1	3,94 2
rnin g st aff Wag e-ea	2,89 4	2,85 6	4,25 3	4,23 5
l Tota	5,67 3	5,43 3	8,43 4	8,17 7

	kro	nes ag	kro nes gro up
	2002	2001	2002	2001
	TH€	TH€	TH€	TH€
Prof it from sha reho ldin gs
from affi liate d co Inve stm ent nies reve nue mpa	12,7 03	12,0 78	270	310
Inte rest reve nue
me f oth er in Inco vest ts rom men
and lon rm l g-te oan s	82	51	94	83
Oth er in tere st and sim ilar inco reve nue me
from affi liate d co nies mpa	1,42 7	1,47 6	—	—
from oth nies er co mpa	2,38 7	2,95 1	6,54 9	6,54 8
and ilar id Inte rest sim exp ense s pa
to a ffilia ted ies com pan	-2,3 02	-3,5 07	—	—
ther to o ies com pan	-2,7 24	-1,4 64	-4,6 53	-2,4 58
	11,5 73	11,5 85	2,26 0	4,48 3
rtisa tion of f inan cial ts Amo asse	-31 8	—	-80 5	—
l res ult Fina ncia	11,2 55	11,5 85	1,45 5	4,48 3

Additional comments

25 Statement of sources and application of funds

The capital flow statement shows how the funds of the Group changed in the course of the reporting year through the inflow and outflow of funds. In it, the flow of funds is broken down into trading, investment and financial activities. The level of funds comprises the liquid funds and the securities from current assets.

In the cash flow from investment activities, investments in fixed assets to the value of 88,304 € have been listed for the Group. The cash flow from financing activity includes paid dividends and the redemption of financial liabilities.

Especially due to increased investments in fixed assets and exchange rate related changes, the level of Group funds has fallen by 26,231 € when compared to the previous year. The cash flow from day-to-day business activities contains 2,274 € in interest payments (previous year: 1,464 €) and 4,653 € in Group interest payments (previous year: 2,458 €), as well as taxes on earnings amounting to 19,463 € paid by (previous year: 11,589 €) with 23,694 € (previous year: 21,286 €) being paid by the Group. Dividend distributions to the value of ⁶⁰€ were paid to minority shareholder Anton Steinecker Maschinenfabrik GmbH, Freising.

26 Segment reporting

The »machines and lines for beverage production« division combines Anton Steinecker Maschinenfabrik GmbH, Freising, GmbH, Neutraubling and International ⁄, Glostrup, Denmark. The »machines and lines for packing and palletising« division comprises GmbH, Rosenheim. All of the other companies of the Group are allocated to the »machines and complete lines for product bottling and finishing« division.

The sales are allocated to different regions, according to where the customer is located. »Depreciation« relates to fixed assets. Group internal sales are carried out at market prices.

»Total assets« covers fixed assets, current assets, prepayments and accrued income. The investments relate to the additions to fixed assets. The assets and investments are listed according region depending on the location of the asset or investment object. Debts comprise the short-term provisions and liabilities, as well as financial debts.

»Return on sales« illustrates the ratio of profit after tax to sales.

27 Remuneration of the Supervisory Board and Executive BoardThe total remuneration paid to the Supervisory Board amounted to 132 €,to the Executive Boards 2,544 € of which 1,113 € dependent on profit. Remuneration paid to former Board members amounted to 536 €.

and were variable remunerations

28 Shareholdings

A list of shareholdings is deposited with the Registrar of Civil Court ( 2344).

Companies in Regensburg

29 Corporate governance code

Shareholders can access the Executive and Supervisory Boards' declaration regarding the corporate governance code, as stated in § 161 AktG, on the website.

rting Seg t repo men	hine d pl for Mac ants s an the prod f be ucti on o vera ges		hine d pl for Mac ants s an prod bott ling and fini shin uct g		Mac pack	hine d pl for ants s an and pal letis ing ing		solid atio Con n		Gro kro nes up
	200 2	200 1	200 2	200 1		200 2	200 1	200 2	200 1	200 2	200 1
	in TH €	in TH €	in TH €	in TH €		in TH €	in TH €			in TH €	in TH €
Sale s	148 ,123	124 ,615	1,02 2,11 0	926 ,740		134 ,636	114 ,051			1,30 4,86 9	1,16 5,40 6
of w hich Ger man y	9,92 8	41,0 24	258 ,665	211 ,415		37,4 30	36,3 36			306 ,023	288 ,775
of w hich rest of E urop e	59,6 18	64,2 84	334 ,446	316 ,352		31,6 82	37,7 75			425 ,746	418 ,411
of w hich oth gion er re s	78,5 77	19,3 07	428 ,999	398 ,973		65,5 24	39,9 40			573 ,100	458 ,220
Dep recia tion	2,29 1	2,16 6	31,0 43	29,2 05		3,81 0	3,46 5			37,1 44	34,8 36
ived Inte rest rece	1,69 4	1,12 4	6,37 5	7,31 4		2	21	-1,5 22	-1,9 11	6,54 9	6,54 8
paid Inte rest	822	577	4,66 6	3,05 0		687	742	-1,5 22	-1,9 11	4,65 3	2,45 8
arni Tax on e ngs	839	4,26 7	38,9 96	32,9 05		3,29 6	3,09 7			43,1 31	40,2 69
Prof for t he y it ear	2,01 7	4,40 1	53,3 41	44,1 75		5,89 5	3,90 1	-4,9 40	-2,1 43	57,3 13	50,3 34
ts Asse	103 ,204	,822 114	695 ,827	,712 647		69 56,4	53,1 06	-49 ,592	-89 ,650	805 ,908	725 ,990
of w hich Ger man y	81,7 71	85,9 37	513 ,578	491 ,750		56,4 69	53,1 06	-48 ,470	-88 ,258	603 ,348	542 ,535
of w hich of E rest urop e	21,4 33	28,8 85	57,9 02	49,0 72		0	0	-69	-52	79,2 66	77,9 05
of w hich oth gion er re s	0	0	124 ,347	106 ,890		0	0	-1,0 53	-1,3 40	123 ,294	105 ,550
Deb ts	71,4 07	93,5 23	300 ,447	266 ,795		35,7 59	36,2 90	-49 ,592	-89 ,650	358 ,021	306 ,958
Inve stm ents	5,16 1	1,81 3	77,2 37	46,8 71		5,90 6	9,00 9			88,3 04	57,6 93
of w hich Ger man y	4,49 2	1,18 2	74,3 68	43,8 44		5,90 6	9,00 9			84,7 66	54,0 35
of w hich of E rest urop e	669	631	1,02 0	1,16 6		0	0			1,68 9	1,79 7
of w hich oth gion er re s	0	0	1,84 9	1,86 1		0	0			1,84 9	1,86 1
loye t Dec emb Emp n 31s es o er	593	553	6,84 2	6,83 1		1,05 9	981			8,49 4	8,36 5
les Retu rn o n sa	1.4 %	3.5 %	5.3 %	4.8 %		4.4 %	3.4 %			4.4 %	4.3 %

After the allocation of € 30,000,000.00 to other profit reserves, unappropriated retained earnings to the value of € 34,024,579.25 remain.

We recommend to the Annual General Meeting to be held on 25th June 2003 that it should elect to dispose of the sum as follows:

den ds Divi	€
€ 1,00 for 6 .955 .729 ordi sha nary res	6,95 5,72 9.00
for 3 pref hare € 1,10 .575 .295 eren ce s s	3,93 2,82 4.50
Allo her prof cati on t o ot it rese rves	22,5 00,0 00.0 0
ied f ard he n Carr to t nt orw ew a ccou	636 ,025 .75

Neutraubling, March 2003

The Executive Board:

Proposal for the disposal of the balance-sheet profit

Volker Kronseder (Chairman)

Rainulf Diepold

Hans-Jürgen Thaus (Deputy Chairman)

Christoph Klenk (Deputy Executive Board Member)

Werner Frischholz(Deputy Executive Board Member)

Following compliance with the implementation requirements of the 1976 Co-Determination Law in 1987, the Supervisory Board was extended from six to twelve Members. Articles of Association stipulates that six members are appointed from among the shareholders in accordance with Shares Law (§§96, section 1, 101 AktG). Six members are also appointed among company employees in accordance with §1, section. 1, §7, section 1, sentence 1, no.1 of the Co-Determination Law.

Supervisory Board and Executive Board

Dr. Lorenz M. Raith Chairman * . .

Paul Jogsch** Deputy Chairman Chairman of Central Works

Council

Ernst Baumann Member of the Executive Board of

Rudolf Ederer Lawyer

Herbert Gerstner** Works Council Member

Dr. Klaus Heimann** Director of Training Department on the Board of Metall *

the Professional

Dieter Jensen

Dipl.-Ing. (until 16.3.2002) Prof. Dr. Ing. Erich Kohnhäuser President of the College of Higher Eduction in Regensburg (since 19.6.2002)

Norman Kronseder Chief Executive of Saatzucht Steinach GmbH *

.. Prince Alfred Ernstof Löwenstein-Wertheim-Freudenberg(until 19.6.2002)

Johannes Maschke Chief Executive of affiliated company Kronseder mbH (since 26.3.2002)

Walter Meyer**

1st Head of the Branch

Metall Administration Centre

Regensburg

* Anton Schindlbeck**

Head of

Sales for Central

European Region

(since 19.6.2002)

Josef Strobl **

Plant Manager

(until 19.6.2002) Günter Walter **

Deputy Chairman of Central Works Council

Volker Kronseder Chairman

* .,

Hans-Jürgen Thaus Deputy Chairman * .,

Rainulf Diepold

Werner Frischholz Deputy Board Member (since 1.1.2003)

Christoph Klenk Deputy Board Member (since 1.1.2003)

Alois Müller (until 31.12.2002) * Variant methods as specified in § 125, section 1, sentence 3 AktG ** Elected by staff

Furthermore, each of the

Group companies is the responsibility of two members of the Executive Board, according to share ownership.

Supervisory Board

Executive Board

We have inspected the year-end accounts and accounting records of , the Group year-end accounts prepared by , and its report on the company's and Group's situation for the trading year from 1st January to 31st December 2002. According to German commercial law, the preparation of these documents is the responsibility of the company's Executive Board. Our task is to issue, on the basis of the results of our inspection, an assessment of the year-end accounts and accounting records, the Group year-end accounts prepared by , and its report on the company's and the Group's situation.

We conducted our audit of the year-end and Group year-end accounts according to the rules for correctly auditing year-end accounts laid down by the Institute of German Auditors (), as stipulated by §317 . These rules state that the audit must be planned and executed so as to safely identify any errors and infringements which significantly impair the accuracy of the picture of the company's assets, finances and profits presented – in compliance with the principles of proper accounting practice – by the company and Group year-end accounts, and by the report on the situation of the company and the Group. When we define the audit procedure, we take into consideration the information we have about the company's business activities, its commercial and legal environment, and any expected sources of error. The audit incorporates an assessment of the effectiveness of internal accounting verification systems and inspects proofs for the entries in accounting records, the company and Group year-end accounts and the report on the situation of the company and the Group. This assessment is performed mainly by means of random sampling. The audit also assesses the accounting and consolidation principles used and the principle opinions of the legal representatives, as well as providing an appreciation of the overall picture presented in the company and Group year-end accounts and the report on the situation of the company and the Group. We consider our audit to provide a sufficiently sound foundation for our assessment.

Auditor's report

Our audit did not reveal any grounds for objection.

In our opinion, the company and Group year-end accounts present a true and realistic picture of the assets, finances and profits of the company and Group in compliance with the principles of proper accounting practice. The report on the situation of the company and the Group provides an accurate overall representation of this situation, and appropriately depicts the risks affecting future progress.

Regensburg, 28t^h March 2003

Bayerische Treuhandgesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft

Graf von Lerchenfeld Medick Auditor Auditor

Our comments are required prior to publishing or circulating the end-of-year accounts and/or the status report and/or the Group's conversion interpretation in a form that deviates from the confirmed version (including the translationinto different languages), provided our confirmation annotation is quoted or our examination is indicated; we especially point out § 328 (German Commercial Code).

worldwide

Europe

Belgium .. .. Parc Scientifique Einstein Rue du Bosquet, n°17 B-1348 Louvain-La-Neuve – Sud Phone: (0032)-[0]10-480 700 Fax: (0032)-[0]10-480 722 Mail:j.dewijn@krones.be

Bulgaria Representative Office Drujba 2 bul. Momina tscheschma Nr. 10 BG-1582 Sofia Phone: (00359)-[0]2-793784 Fax: (00359)-[0]2-9712657 Mail: repr_krones@einet.bg

Denmark

ApS Søndre Ringvej 55 DK-2605 Brøndby Phone: (0045)-48-36 90 00 Fax: (0045)-48-36 90 01 Mail:krones@krones.dk

/ Søndre Ringvej 55 DK-2605 Brøndby Phone: (0045)-43466100 Fax: (0045)-43466101 Mail: kim.dalum@sanderhansen.com

France 12, rue Lavoisier F-94437 Chennevières-sur-Marne Cedex Phone: (0033)-[0]1-45 76 72 32 Fax: (0033)-[0]1-45 76 30 46 Mail: hetzlen.muriel@krones.fr

United Kingdom

Ltd. Westregen House Great Bank Road Wingates Industrial Park Westhoughton GB-Bolton BL5 3XB Phone: (0044)-[0]1942-84 5000Fax: (0044)-[0]1942-84 5091 Mail: sales@krones.co.uk

Germany

Böhmerwaldstraße 5 D-93068 Neutraubling Phone: (0049)-[0]9401-70-0 Fax: (0049)-[0]9401-70-3239 Mail: info@krones.de

Nittenau subsidiary Heideweg 36 D-93149 Nittenau Phone: (0049)-[0]9436-3070 Fax: (0049)-[0]9436-307395 Mail:hildebrand.heinz@krones.de

Flensburg factory Schäferweg 9 D-24921 Flensburg Phone: (0049)-[0]461-5044-0 Fax: (0049)-[0]461-5044-1410 Mail: schimpf.mariette@ fl.krones.de

GmbH Äußere Münchener Straße 104 D-83026 Rosenheim Phone: (0049)-[0]8031-404-0 Fax: (0049)-[0]8031-404-297 Mail: contact@kettner-gmbh.de

GmbH Raiffeisenstraße 30 D-85356 Freising Phone: (0049)-[0]8161-953-0 Fax: (0049)-[0]8161-953-150 Mail:info@steinecker.com

GmbH Böhmerwaldstraße 5 D-93068 Neutraubling Phone: (0049)-[0]9401-70-4880 Fax: (0049)-[0]9401-70-4870 Mail:info@syskron.com

2

Italy ... Via L. Bacchini delle Palme,I-37016 Garda (VR) Phone: (0039)-045-620 82 22Fax: (0039)-045-620 82 99 Mail: l.bettamin@krones.it

Netherlands Nederland B.V. Koninginneweg 1F NL-2771 DN Boskoop Phone: (0031)-[0]172-21 15 14 Fax: (0031)-[0]172-21 15 26 Mail: sales@krones.nl

Austria

Maschinenfabrik Ges.m.b.H. Einsiedelei-Gasse 10 A-1130 Vienna Phone: (0043)-[0]1-8 77 05 07 Fax: (0043)-[0]1-8 77 05 77 Mail: andrasova.renate@krones.de

Poland

Spólka z o.o. ul. Wal Miedzeszynski 844 PL-03-942 Warsaw Phone: (0048)-[0]22-616 03 82 Fax: (0048)-[0]22-616 03 31 Mail: biuro@biuro.krones.pl

Portugal

Portugal Equipamentos Industriais, Lda.Rua Guerra Junqueiro, n°6 E–FQueluz de Baixo P-2745 Barcarena Phone: (00351)-[0]21-434 25 00Fax: (00351)-[0]21-434 25 09 Mail: kronesportugal @mail.telepac.pt

Romania

Romania Prod. ... Central Business Park Corp B, etajul 1 Calea Serban Voda nr.133, sector 4 70517 Bucuresti – Romania Phone: (0040)-[0]1-335 0173 Fax: (0040)-[0]1-335 17 38 Mail: kronesro@pcnet.ro

Russia o.o.o. Krasnopresnenskaja nab., 12 Hotel Meshdunarodnaja-II Office 1620 R-123610 Moscow Phone: (007)-095-967 0509 Fax: (007)-095-967 0507 Mail:krones@wtt.ru

Switzerland Kapellenweg 5 CH-5632 Buttwil Phone: (0041)-[0]56-6 75 50 40 Fax: (0041)-[0]56-6 64 47 60 Mail: ch-krones@swissonline.ch

Spain Iberica, .. Provenza 30 E-08029 Barcelona Phone: (0034)-93-410 81 85 Fax: (0034)-93-410 70 98 Mail: info@krones.es

Czech Republic ...

Nádrazní 86 CZ-150 54 Praha 5 Phone: (00420)-[0]2-57 31 56 63 Fax: (00420)-[0]2-57 31 56 62 Mail: krones@krones.cz

Turkey

Representative Office Ali Riza Gurcan Cad. Metropol Center A Blok No. 32 Kat 13/51 TR-34010 Merter/Istanbul Phone: (0090)-212-481 74 74 Fax: (0090)-212-481 74 76 Mail: krones@superonline.com

Ukraine Representative OfficeSchelkovitschaja Str., 7-A

Office 60 UA-01021 Kiev Phone: (00380)-44-25 37 646 Fax: (00380)-44-25 37 958 Mail: krones@carrier.kiev.ua

Overseas

Argentina Surlatina, .. Riobamba 588, Piso 1° (1025)-Buenos Aires Phone: (0054)-11-4373-2884 Fax: (0054)-11-4372-9612 Mail: hcirigliano@krones.com.ar

Brazil

.. Av. Presidente Juscelino, 1140 (Piraporinha) 09950-370 Diadema, São Paulo Phone: (0055)-[0]11-4075-9500 Fax: (0055)-[0]11-4075-9800 Mail: vendas@krones.com.br

.. China

(Beijing) Machinery Co., Ltd. Room 1803, Jingtai Tower 24 Jian Guo Men Wai Street Chao Yang District Beijing, 100022 Phone: (0086)-[0]10-65156597/98Fax: (0086)-[0]10-6515 6599 Mail: kroneskb@eastnet.com.cn

(Shanghai) Representative Office

No. 03/13F, New Town Center 83 Loushanguan Road Shanghai, 200336 Phone: (0086)-[0]21-62368380 Fax: (0086)-[0]21-62368141 Mail:kronessh@sh163.net

Asia Ltd. (Hongkong) Unit 1311 New East Ocean Centre9 Science Museum Road Tsimshatsui East Kowloon Hongkong/ Phone: (00852)-27 21 26 18 Fax: (00852)-27 23 25 98 Mail: annie@krones.com.hk

Indien

India Private Limited Unit No. 204, Money Centre Koramangala, Hosur Road Bangalore 560 095 Phone: (0091)-80-571 5766 Fax: (0091)-80-571 57 68 Mail: harish@kronesindia.com

Japan Japan Co., Ltd. Gotanda First Bldg. 8–1, Nishi-Gotanda 2-Chome Shinagawa-ku Tokyo 141 Phone: (0081)-[0]3-34 91 21 41Fax: (0081)-[0]3-34 91 92 13 Mail:k-nobukawa@krones.co.jp

Canada

Machinery Co. Ltd. 28 Regan Road Brampton, Ont. L7A 1A7 Phone: (001)-905-8 40 50 00 Fax: (001)-905-8 40 29 00 Mail:lindah@krones.ca

Kasachstan

Representative Office Aljfarabi 65 480090 Almaty Phone: (007)-3272-582568 Fax: (007)-3272-582569 Mail: krones@nursat.kz

Columbia

Andina Ltda. Av. Calle 81 No. 62–70 Bodega No. 30 Apartado Aéreo 330029 Santafé de Bogotá, D.C. Phone: (0057)-1-310 87 68Fax: (0057)-1-310 87 98 Mail: krones-andina @krones.com.co

Mexiko

. .. de .. Av. Horacio No. 828 Col. Polanco 11550 Mexiko, D.F. Deleg. Miguel Hidalgo Phone: (0052)-55 19971700 Fax: (0052)-55 19971709 Mail: ejurgensen@krones.com.mx

South Africa

Southern Africa () Ltd. ... Industrial Park Unit 35, Elsecar Road Kya Sand, Randburg Private Bag X42, Bryanston 2021 Phone: (0027)-[0]11-708 1733 Fax: (0027)-[0]11-708 2357 Mail:stephan@Krones.co.za

South Korea Korea Ltd. 5Fl. & 6Fl. Cheong Hee Bldg. 422–4, Togok-Dong Kangnam-Ku Seoul, 135–270 Phone: (0082)-[0]2-3461 2910 Fax: (0082)-[0]2-3461 2916 Mail: yrhong@kroneskorea.co.kr

Thailand

(Thailand) Company Ltd. 947/161 Bangna Complex Moo 12 Bangna Trad Km 3 Bangna Trad Road Bangkok, 10260 Phone: (0066)-2-361 90 92/93 Fax: (0066)-2-361 90 91 Mail: kuebrich@Kronesthailand.com kaewjai@Kronesthailand.com

. 9600 South 58th Street .. Box 32 100 Franklin, Wis. 53132-6300 Phone: (001)-414-4 09 40 00 Fax: (001)-414-4 09 4140 Mail: tlehmann@kronesusa.com

Venezuela

Maquinarias de Venezuela, .. Centro Empresarial Torre Humboldt Piso 3, Oficinas 08–09 Urb. Parque Humboldt Prados del Este P.O. Box 81.140 Caracas 1080 Phone: (0058)-212-9 75 08 15 Fax: (0058)-212-9 75 08 15 Mail:krones@cantv.net

Commercial glossary

Fixe d as sets	t ite ms f rvin g bu sine tivit ies o t ba sis. Asse or se n a p erm anen ss ac	ket c apit alisa tion Mar	ket p rice of d on the k ex chan It is calc Mar uote stoc mpa ny q a co ge. u lated g th e sh mul tipli ed b y th al nu mbe r of shar usin rice e tot are p es.
Cash flow	lus d on f ngib le an d ta ngib le as Net inco ciati inta sets me p epre rom	 	The Mid pris es th larg anie s in Ger e 50 est c -cap  com omp man
Cor te G pora over nan ce	The onsi ble c lead ersh ip an d m onit orin etho d wh ich i resp omp any g m s aim ed a t lon alue tion g-te rm v crea		y base d on rket d ca pita lisat ion. Thu it in clud es th tur ma nov er an s, e   valu hich aine d in the 100 30. not cont es w are 
	The sha dex. The is ba sed he e valu ated Ger re in ent on t man asse ssm f ks a g th e hig hest lity pric ative Ger 30 r sent stoc es o epre mon qua man shar es.	 	The l Ass of aler ated Nat iona ocia tion Secu ritie s De s Au Qu ions tom otat elec adin d by the dyn is an ic tr You ami tron stem rate g sy ope  . ng, c ies e stab lishe d in the wth ind ies a aded the ustr re tr com pan gro on  
dex Dow -Jon es In	Shar e ind f the ost i eric tock han alue 30 m t Am rtan ex o mpo an s exc ge v s.	50	The rket Ind he 5 0 lar sha lues the New Ma ins t
 	bef depr and Earn ings inte ecia tion orti satio rest, taxe ore s, am n.	 	onta gest ex c re va on new ket (has bee eded by t he  ). mar now n su pers 
	ings bef inte and Earn rest taxe ore s.	liqu id as Net sets	Liqu id fu nds and ritie s of the inus ban k lia bilit ies. ent ts m secu curr asse
	ings bef Earn taxe ore s.	Nikk ei	sha re in dex. The crit erio n is the degr f ket Japa nese ee o mar talis capi atio n.
	Profi t fro al bu sine tivit m n orm ss ac y.
Shar ehol ders ' equi ty	ds m ade avai labl the by t he p ieto rs th h Fun e to com pany ropr roug ribu tion and /or i aine d pr ofits cont tme nt o r ret nves	aid e Prep xpen ses and ued inco accr me	he t of the hose lts h ffect Paym in t ents rt w erm repo resu ave an e in a peri od a fter the bala shee t da te. nce-
Retu n in vest t rn o men	The o be and sha reho lder s' rati t inc equi twee ty. n ne ome	 	The rati o be n th and the capi tal t ied u twee net e   aver age p (bal -she tal m free liab ilitie d ot her s.) inus inte ision et to rest- prov ance s an
50  - 	The ind g th ies f the risin st im e 50 port ant ex c omp mo com pan rom s (th -call ed b lue c hips ). Eval uati on i s ba sed arke state t  e so on m capi talis atio k ex chan adin d br anch mbe rshi stoc ge tr n, me		o of profi t be fore to th al ca l Rati pita tax e tot e av erag (retu n in t). vest rn o men
Flo Free at	g an p. of the w idely ead shar l. Part pita spr e ca	Sub sidia ries	All c anie s wh ich a lled eith er d irect ly or ind irect ly by ntro omp re co a due sha d/or iform lead ersh maj ority ip. nt c to a pare omp any re an a un
Deb ital t cap	m fo r the able and def d ex Join visio t ter unts pro ns, acco pay erre pen ses liste d un der the liab ilitie s.	Cur rent ts asse	med ng b sho Asse t ite re ai ervi usin ctivi ties at s rt te ms a ess a on a rm basi s.
l cap ital y ield Tota	The rati o of profi t be fore and inte for d ebt c apit al to the tax rest ave rage l cap ital. tota	Affi liate d co nies mpa	Refe subs idia ries r to
ital flow Cap stat nt eme	elop t of liqu id as flow of fund der ider n of Dev sets/ atio men s un cons the f fund d th eir e mpl ithin the trad ing y ent w sour ce o s an oym ear.	ding Xetr a tra syst em	Elec ock ket t radi ic st tron yste mar ng s m
Kon TraG	for itori anie d ac hiev ing Law tran mon ng c omp s an com pany spar ency
Late nt ta xes	e-lim ited diff ces b he c alcu lated d th ults Tim etwe en t taxe eren s an e res liste d on the trad e ba lanc d tax ith t he a f listin g th im o stat nts w e an eme e ditu re in rela tion he r esul t wh ich c lies with tax e to t xpen omp com mer cial law.

Technical glossary

Con tain stem er co nvey or sy	em f h as bot tles, and whi ch Syst eyin ntai jars or c onv g co ners suc or c ans the indi vidu al m achi of a bo ttlin d pa ckag line ing ects conn nes g an
Pack tem con veyo r sys	em f eyin cks such plas tic c film Syst arto rate or c onv g pa as c ns, s or d pa cks. wra ppe
mel t glu Hot ing	Lab ellin th a dhe s wh ich a ssed g wi sive 0°C at 1 30 t o 17 re p roce , idin t ad hesi on b he la bel a nd c iner etwe en t onta prov g pe rma nen
-fille d bo ttles Hot	ial  bott les w hich be fi lled f Spec o 95 °C. at te ratu up t  can mpe res o
mel Hot t	mel t ad hesi ve ( refe hotm elt la belli ng) Hot r to
Cold -glu e lab ellin g	Lab ellin th w -solu ble a dhe s wh ich a ssed g wi sive 35° C at 2 0 to ater re p roce
ty b ottle insp ectio achi Emp n m ne	hine whi ch in bott les f or d nd c min atio Mac ts em pty onta spec ama ge a n.
doc Line ion ntat syste ume m	ed to anal and alise the dat a of the hine An  is us visu s in  sav e, yse mac a bo ttlin d pa ckag line ing g an
Air eyin stem conv g sy	This bott les i nsid rodu ctio n lin e wi th syst mpt em c onv eys e y   e a p the assis e of sed air. The y sli de a long ide r ail w ith t heir tanc com pres a gu neck ring
plan Past euri sing t	Plan whi ch b or fo od i de s ble f t in uita tem or st ever age s are ma orag e usin g a h eatin g pr oces s.
Rins er	In th e rin ty b ottle rins ed o r blo with r air out wat ser, emp s are wn er o prio fillin g in orde dust ticle d fo reig n bo dies r to r to rem par s an ove
Shri nkin l g tu nne	In sh rink d pa ckag the film is sh runk o th f ing, ont -wra ppe e gro up o aine rs in the shr inki el us ing heat cont ng t trea tme nt. unn
tch b low uldi achi Stre -mo ng m ne	bott les a factu red from pref s in the ch b low stret  re m anu  orm ldin achi mou g m ne.
Tray	-edg ed c hich the acke d. Low n in tain arto to w con ers a re p
Tray shr ink pack er	This chin e pla iner s int cks t hem in a pla stic film onta o a t ma ces c ray o r pa whi ch is the n sh runk usin g he at tr eatm ent.
nel p Tun uris aste er	hine for hich the ed th h Mac euri sing in w tain past con ers a re co nvey roug l. a tu nne
d pa cker Wra p-ar oun	In th is m achi on b lank fold ed a nd s eale d »a d th cart ne, s are roun e gro up of aine cont rs«.

Group statistics at a glance

	1998	1999	200 0	200 1	200 2
Sale s
Sale in mi s rev enu es o.	921 €	908	1.01 5	1.16 5	1,30 5
dom esti in mi c o.	185 €	182	244	289	306
abro ad in mi o.	736 €	726	771	876	999
Perc enta rts in % ge e xpo	80.0	80.0	76.0	75.0	77.0
Prof its
Prof it from ord inar y bu sine ctiv ities in mi ss a o.	53 €	66	68	93	102
inco Net me in mi o.	26 €	25	38	50	57
shar Net inco per in € me e	2.30	2.16	3.61	4.78	5.44
nd c al st Asse ts a apit ruct ure
Fixe d as sets in mi o.	152 €	163	182	206	250
Curr ent ts asse in mi o.	434 €	467	461	520	556
of w hich liqu id as sets in mi o.	107 €	120	66	62	36
Sha reho lder s' ity in mi equ o.	328 €	340	338	381	409
Prov ision in mi s o.	176 €	199	186	230	271
Liab ilitie in mi s o.	82 €	91	119	115	126
Bala shee t tota l in mi nce- o.	586 €	630	643	726	806
Cash flow /inv estm ents
Cash flow in mi o.	90 €	53	70	85	94
Inve stm ents in mi o.	21 €	37	62	58	88
recia tion Dep in mi o.	58 €	26	32	35	38
(liq fina ncia l pos ition uid f und Net s
s) less fina l liab ilitie ncia in mi o.	106 €	121	63	60	35
indi key prof itab ility figu Key ces/ res
ity r atio Equ in %	55.9	53.9	52.6	52.4	50.7
les a fter Retu tax rn o n sa in %	2.9	2.7	3.8	4.3	4.4
afte Retu n inv estm ent r tax rn o in %	8.1	7.2	11.3	13.2	14.0
roc in % e	11.2	13.1	16.0	21.6	22.8
/ma rgin in % ebit	4.4	5.3	6.0	7.4	7.6
es (o 12.) loye Emp n 31.	7,82 2	7,61 6	7,98 9	8,36 5	8,49 4
dom esti c	6,33 4	6,27 8	6,58 5	6,99 1	7,32 2
abro ad	1.48 8	1.33 8	1.40 4	1.37 4	1.17 2
Divi den d di strib utio n
Divi den d pe r ord inar y sh are in €	0.41	0.51	0.66	0.90	* 1.00
den d pe fere shar Divi r pre in € nce e	0.51	0.61	0.77	1.00	* 1.10

*acc. to proposed appropriation of profits

Impressum

Published by:	krones ag Böhmerwaldstraße 5 93068 Neutraubling
Design:	Büro Benseler
Text:	Peter Hellmund
	krones ag
Photography:	www.kiefer-fotografie.de
	krones ag
Printer:	Mediahaus Biering GmbH
Litho:	kaltnermedia GmbH
Print-run:	4,500 copies in German
	1,500 copies in English

Financial diary

7. May 2003	Balance Sheet Press Conference
	dvfa Conference
May 2003	1st Quarter Report
25. June 2003	Annual General Meeting of Shareholders
August 2003	Interim Report
November 2003	3rd Quarter Report

Contact

krones ag Investor Relations Hermann Graf Castell Böhmerwaldstraße 5 93068 Neutraubling Germany

Phone 0 94 01-70 32 58 Fax 0 94 01-70 34 96 E-Mail investor-relations@krones.de Internet www.krones.com

The Annual Report is also available in German. A copy will be posted on request. You will also find it on our website under the heading Investor Relations.

krones ag

Investor Relations Hermann Graf Castell Böhmerwaldstraße 5 93068 Neutraubling Germany

Phone 0 94 01-70 32 58 Fax 0 94 01-70 34 96 E-Mail investor-relations@krones.de Internet www.krones.com