annual report 1999/2000largestintegrated travel company,will further complete preussag's...

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Marco PoloChristoph Columbus

Vasco da GamaJohannes Calvin

William ShakespearePeter Paul Rubens

James CookJohann Wolfgang von Goethe

Alexander von HumboldtM. Lewis and W. Clark

Hans Christian AndersenCharles Darwin

Frédéric ChopinDavid LivingstoneAlfred NobelKonrad DudenMark TwainAnna LeonowensHeinrich SchliemannGiuseppe VerdiAlfred Brehm

Elisabeth l., Empress of AustriaRobert Louis Stevenson

Mary KingsleyPaul Gauguin

Albert SchweitzerRoald Amundsen

Henri MatisseTania Blixen

August MackeHoward Carter

Thomas MannElla Maillart

Antoine de Saint-ExupéryErnest Hemingway

Travel is as old as humankind. People in search

of discovery changed the course of history. And

travel, too, can change lives, point to a new direc-

tion. Our fascination for travelling will continue

because we are attracted by what is different from

at home – the climate, the food, the language and

above all, the people.

Travel always leads to encounters. This Annual

Report presents famous encounters spanning five

centuries, highlighting our close links with the

world of travel and travellers. Preussag has risen

rapidly to become market leader in Europe’s

tourism industry. We have acted with resolve –

and the bold vision of just three years ago is now

a reality.

New Horizons.Annual Report 1999/2000

2 To our Shareholders

New Horizons

Dear Shareholders,Over the last two years we have developed tourism as Preussag's core area of business.From the outset this has substantially strengthened the earnings potential of the Group.Indeed, over the past financial year, Preussag's shift to services has paid off, with divisionresults at 747 million euros rising to a new all-time high. The year 2000 was of crucialimportance for the development of the tourism business. Within a short space of time,the acquisition of the Thomson Travel Group and the agreement on the progressiveacquisition of an interest in Nouvelles Frontières have made Preussag the largest inte-grated tourism group in the world.

Preussag is continuing to focus on its new core business, and this will be our

driving force in the new financial year. The integration of TUI and Thomson will

be a priority and enable us to swiftly implement the strong synergies and con-

siderable savings potential that are currently apparent.

TUI and Thomson are well known in their respective markets, have a balanced

brand portfolio and are well integrated at all stages of the tourism value chain.

In other words, this is an excellent basis for economic success in an increasingly

consolidated European market. Furthermore, TUI and Thomson ideally comple-

ment each other in terms of business policy and strategic approach. Both are

market leaders in quality holidays and have built up strong brands that, with

their positive image, achieve high levels of customer retention.

By working together, particularly at holiday destinations, TUI and Thomson will

be in a position to target their products even more closely to offer what holiday-

makers want and to make more efficient use of the facilities this requires, i.e.

aircraft and hotels. This is one important reason why we expect the integration

of TUI and Thomson to further boost Preussag's earnings potential.

In parallel to this integration process, we are continuing to pursue our growth

targets and will consolidate our position as market leader. As a result of our

association with Nouvelles Frontières in France, the products we offer are now

already available to more than 70 per cent of all holidaymakers in Europe. With

the exception of Italy and Spain, we are number one or number two on virtually all

Europe's major tourism markets. We will take advantage of all available oppor-

tunities to enter the Italian market and to expand our position as a tour

operator on the Iberian Peninsula.

To our Shareholders 3

We also want to achieve growth at the individual stages of the tourism value

chain. Over the coming period we will focus on holiday destinations, since

hotels and on-the-spot service and support are factors that contribute most

to the holiday experience. The expansion of our hotel sector, also of consider-

able economic significance, will help us to guarantee the quality of our pro-

ducts in the long term and open up new holiday destinations.

Our focus on tourism as the new core business has far-reaching consequen-

ces for the business portfolio and the management structure of Preussag.

Along with tourism, logistics will remain within Preussag. The flotation of

Hapag-Lloyd – covering our logistics activities – is not being considered at

the moment. Likely tax disadvantages resulting from tax reform are the main

factors militating against flotation. The energy sector, with its core business

in crude oil and natural gas production, will also continue to play its part in

the Group.

In the course of the further development of the tourism business we will

divest our industrial activities. This applies primarily to building engineering

companies Fels, Wolf, Kermi and Minimax. In respect of these companies we

have contacted a number of prominent interested parties who would like to

integrate these businesses into their activities and develop them further. In

addition, in the trading sector the sale of the business of W. & O. Bergmann

has already been completed, and models for divestment are currently in pre-

paration for the remaining companies.

Preussag's clear focus on tourism also requires a change in our management

structure. Following the transfer of the functions of intermediate holding

company TUI Group GmbH to Preussag AG, the tourism activities of TUI and

Thomson are now under the direct management of Preussag. The appoint-

ment of Dr. Ralf Corsten and Charles Gurassa to the Executive Board of

Preussag AG makes this clearly apparent.

In 1997 we began with a vision of transforming Preussag, a group focussing

on commodities, into one of Europe's leading services groups. In a short space

of time we have succeeded. Tourism, our new core business, is a high-growth

sector. We hold a leading position on our markets, and our broad customer

base offers exceptional prospects for growth. On this basis we aim to become

the best and most profitable tourism group in the world.

To our Shareholders

The acquisition of the Thomson Travel Group represents a quantum leap in the

expansion of Preussag's tourism business. As well as making Preussag market

leader in UK – Europe's second-largest tourism market – it also gives the Group

a leading position in the Nordic countries, where its tourism division has not been

previously been represented. Taken together, the TUI Group in Central Europe and

Thomson Travel Group now cover around 70% of the European holiday market.

The progressive acquisition of an interest in Nouvelles Frontières, France's

largest integrated travel company, will further complete Preussag's presence

on the major European markets.

Along with the expansion of tourism, Group structure was streamlined. Since the

beginning of the 1999/2000 financial year, the logistics division has been con-

centrated within Hapag-Lloyd AG. The energy and building engineering sectors

and the trading business form the industry division. As part of its continuing

focus on the tourism business, Preussag will sell off the building engineering

and trading businesses.

˘ Economic climate remained favourableFor most Group companies, the overall economic environment was favourable

and contributed once again to the attainment of record results. Economic recov-

ery continued world-wide. Growth in the North American economy flattened

out somewhat, but on the whole the signs – as in the countries of the European

Union – pointed clearly to expansion. The upward trend in the Asian threshold

countries also continued. Germany saw its strongest economic growth of the

last few years. Exports were the mainstay of economic activity, although in the

course of the year growing domestic demand also contributed to economic

recovery.

Tourism benefited from the sound economic situation. In Germany and UK,

Europe's two largest markets, enthusiasm for travel continued unabated, and

the markets continued to grow. In the logistics division, container shipping

4 Management Report

Economic Situation

2000 – a remarkable yearThe year 2000 was a milestone in Preussag's development. By acquiring the Thomson TravelGroup, Preussag expanded to become the world's largest integrated tourism group. This step and the decision to divest industrial activities led to the rapid completion of the change to a services group. Tourism, the new core business, will in future account for more than three-quarters of turnover. In terms of business, Preussag continued on the success of lastyear with an increase of the results by divisions to 747 million euros.

Management Report 5

participated above-average on the expansion of world trade. Increases in crude

oil and natural gas prices, which in September 2000 reached the highest level

for many years, ensured that the energy sector had a very good year. The

strengthening of the commodities markets did a great deal to improve the trad-

ing business. Contrary to optimistic forecasts, economic activity in the German

construction industry remained weak, but the building engineering companies

nevertheless succeeded in maintaining their position on their respective mar-

kets.

˘ Group turnover up to 21.9 billion EThe expansion of tourism and sound business in the other divisions led to a sub-

stantial increase in Group turnover. At 21.9 billion e it was around one third

higher than last year. Turnover in tourism rose by 47.4% to 10.6 billion e or 48.3%

of Group turnover. Of this turnover increase of 3.4 billion e, 22.8 % was attribut-

able to the commercial success of the TUI Group and 56.9% to the acquisition of

the Thomson Travel Group, for which turnover for the period 1 July to 30 Septem-

ber 2000 was included in the consolidated accounts. The Thomas Cook Group

contributed 20.3% of the increase of turnover, and was included for the last time

with the turnover it generated from 1 October 1999 to 30 June 2000.

The logistics division benefited from improved market conditions and increased

turnover by 19.0% to 3.6 billion e. With 16.4% of the Group turnover it account-

ed for less than last year.

The industry division, comprising the energy, building engineering and trading

sectors, accounted for 34.5% of Group turnover. At 7.5 billion e, division turn-

over exceeded last year's figure by 22.6%. This was largely due to the sizeable

price increases for crude oil and non-ferrous metals on the world market. As a

result, the energy sector generated 0.8 billion e, up 32.6%, while the trading sec-

tor achieved 4.6 billion e, an increase of 23.6%. In building engineering, with

turnover of 2.1 billion e, the 16.9% increase was mainly attributable to external

growth.

Group turnover by divisions1999/2000 1998/99 Change

emill. emill. %

Tourism 10,562.1 7,164.8 + 47.4

Central Europe 7,007.1 6,231.0 + 12.4

Northern Europe 3,555.0 933.8 + 280,7

Logistics 3,589.0 3,014.9 + 19.0

Industry 7,538.3 6,148.8 + 22.6

Energy 842.7 635.4 + 32.6

Building engineering 2,086.9 1,784.9 + 16.9

Trading 4,608.7 3,728.5 + 23.6

Other companies/consolidation 164.3 172.4 - 4.7

Total 21,853.7 16,500.9 + 32.4

Economic Situation

6 Management Report

˘ 77% of turnover in the European region The expansion of the tourism business is also reflected in the regional distribu-

tion of Group turnover. Domestic turnover rose to 4.1 billion e. At 17.7 billion e,

foreign turnover increased by 40.7%, contributing 81.1% of Group turnover com-

pared with 76.3% last year. The largest proportion of foreign business was car-

ried out in European Union countries, where the Group generated 15.8 billion e

or 72.4% of turnover. North and South America contributed 2.9 billion e, or 13.2%.

Turnover in Central and Eastern Europe amounted to 0.9 billion e, representing

4.1% of Group turnover, and in Asia 2.2 billion e or 10.3%, while turnover generat-

ed in Africa was again relatively low.

Group turnover by regions1999/2000 1998/99 Change

emill. emill. %

Germany 4,131.9 3,908.7 + 5.7

EU (excluding Germany) 11,694.5 7,644.2 + 53.0

Rest of Europe 904.9 914.8 - 1.1

America 2,881.7 2,086.5 + 38.1

Other regions 2,240.7 1,946.7 + 15.1

Total 21,853.7 16,500.9 + 32.4

˘ Enhanced earnings potentialBy shifting to services the Preussag Group has further increased its earnings

potential. By achieving 747 million e, the divisions exceeded last year's record

results by 20.4%. This reflects not only the expansion of tourism but also the

remarkable performance of the logistics and energy sectors over the last finan-

cial year. Tourism contributed 423 million e to division results. The 37.7% leap in

results was largely attributable to the first-time inclusion of the Thomson Travel

Group.

The other companies sector, consisting primarily of the Group's central division,

achieved a result of -369 million e during the financial year. A large proportion

consisted of interest payments and financial expenses as well as acquisition

costs which were incurred by Preussag AG mainly as a result of the acquisition

in the tourism division. Furthermore net expenses resulted from the divestment

of plant engineering and shipbuilding.

˘ Earnings per share up to 1.91 EGroup profit rose by 16.5% to 403 million e, despite the fact that amortisation of

goodwill rose to 171 million e. In spite of the good earnings situation taxes declin-

ed to 174 million e, because deferred taxes had to be stated lower due to tax re-

form regulations.

The proportion of Group profit available for distribution to the shareholders of

Preussag AG, after deduction of minority shareholdings, rose by 15.9% to

331 million e. Earnings per share therefore also increased to 1.91 e, compared

with 1.78 e last year.

Economic Situation

Management Report 7

Results by divisions and consolidated profits1999/2000 1998/99 Change

emill. emill. %

Tourism 423.3 307.5 + 37.7

Central Europe 268.1 266.9 + 0.4

Northern Europe 155.2 40.6 + 282,3

Logistics 220.4 139.0 + 58.6

Industry 472.4 259.9 + 81.8

Energy 273.5 129.2 + 111.7

Building engineering 110.7 91.6 + 20.9

Trading 88.2 39.1 + 125.6

Other companies/consolidation - 369.2 - 86.2 - 328.3

Results of the divisions 746.9 620.2 + 20.4

Amortisation of goodwill 170.5 87.0 + 96.0

Profit from ordinary business activities 576.4 533.2 + 8.1

Taxes 173.9 187.8 - 7.4

Group profit for the year 402.5 345.4 + 16.5

˘ Structural changes during the financial yearThe 1999/2000 financial year was marked by the expansion of the tourism divi-

sion and the associated structural changes within Preussag. The acquisition of

the Thomson Travel Group plc was the highlight. Another significant step was

the agreement on the acquisition of an interest in Nouvelles Frontières S.A. Deci-

sions of major importance to the further development of the Group, coming into

effect during 2001 and subsequently, were taken after the end of the financial

year and are set out in the ‘Prospects’ section.

˘ Acquisition of the Thomson Travel GroupFollowing the announcement on 15 May 2000 of a takeover bid for Britain's

largest tourism group, the Thomson Travel Group plc, Goldman Sachs Interna-

tional made a recommended cash offer on 14 June 2000 of 180 pence per share

to Thomson shareholders on Preussag's behalf. On 26 July 2000 the EU Commis-

sion gave approval under competition law of the takeover of Thomson, on condi-

tion that both Preussag and Westdeutsche Landesbank sell off their sharehold-

ings in Thomas Cook Holdings Ltd. Preussag and Westdeutsche Landesbank had

already agreed to this condition during the inquiry procedure. For the interim

period until their sale, the Thomas Cook shares were placed under trusteeship

and the voting rights were transfered.

By 16 August 2000, 75.9% of Thomson shareholders had accepted the cash offer.

At that date, including the 19.9% of shares acquired directly, Preussag held a

95.8% share in Thomson and consequently initiated the procedure for a com-

plete takeover under the British Companies Act 1985. This procedure was com-

pleted on 23 October 2000. A total of around 1.8 billion Pound Sterling was spent

on acquiring all shares in the Thomson Travel Group plc.

Economic Situation

Famous Encounters

Frédéric Chopin(1810–1849)

The Polish composer isconsidered to be one of the mostimportant composers for piano.The young Fryderyk Franciszek

was only four years old when he began to play the piano.

At the age of seven, his firstcomposition was published. From1831 Chopin lived in Paris, wherehe also met the novelist George

Sand. She was a great-great-granddaughter of the Polish

King Augustus the Strong andone of the first independent

women of her time.

˘ Entry onto the French marketBy means of a strategic partnership with Nouvelles Frontières, Preussag's

tourism activities have also gained a foothold on the French market. The

agreement provides for the phased acquisition by Preussag of an interest in

Nouvelles Frontières S.A. Once the EU Commission had consented to this

action, on 14 November 2000, Preussag initially took over 6% of the subscribed

capital of Nouvelles Frontières. In subsequent steps, the acquisition of more

shares and subscription of two capital increases will enable Preussag to en-

large its shareholding to 34.4% by 2002. In addition to this, there is an agree-

ment enabling Preussag to acquire a majority share in Nouvelles Frontières.

˘ Further expansion in tourismBesides the acquisition of Thomson, expansion and organisational streamlining

of the tourism division continued at all levels. Since 1 January 2000 Hapag

Touristik Union has operated under a new name, the TUI Group.

In February 2000 the TUI Group acquired a 75% interest in Gulet Touropa Touris-

tik, the Austrian market leader in the tour operator business. In addition, the TUI

Group took a 25% share in Swiss Inn Hotels in Egypt as a means of expanding its

bed capacity.

˘ More growth, more personnelAcquisitions and changes to Group structure determined the development of

the headcount. Overall, the number of employees rose by 1% to 79,959. There

was major change in the tourism division: the acquisition of the Thomson Travel

Group brought 18,022 new employees into the Group, while 23,146 employees

left following the separation from the Thomas Cook Group. Thus at the end of

the financial year, 57.9% of the workforce was employed in tourism, 11.5% in the

logistics division and 29.0% in industrial activities. With 61.2% the proportion of

employees working abroad declined slightly compared with last year.

Majorca’s beauty inspiredChopin

The famous socialite George Sand, together withher children, accompanied Chopin on a health cureto Majorca. They went because of his frail healthand to escape from the hustle and bustle of Parislife. They travelled to the Balearic islands in thewinter of 1838 and after a stormy crossing put in to land at Palma. Finding accommodation provedvery difficult.

Economic Situation

9

hen Frédéric Chopin sat at the pianoforte, all the world lay at his

feet. One person more than any other, how-ever: George Sand, one of the most enigmaticfigures of Parisian society. When they set offtogether to Majorca, scandal was inevitable.At that time, however, our favourite holidayisland was not the paradise it is now. If onewanted to rent accommodation, it usuallyhad bare walls – no windows or doors.

Because people took these with them whenthey moved out. When they finally found aplace with furnishings, a cell at the Carthu-sian monastery of Valldemosa, a difficult, buthighly productive period began. While GeorgeSand explored the island with her children,Chopin felt depressed by the dark walls andhis poor health. Taking refuge from hisgloomy thoughts, he turned to the piano andcomposed the most glorious piano melodies,his Préludes.

W

10 Management Report

˘ Far-reaching changes in the tourism divisionThe exceptional changes in Preussag's tourism portfolio also had a decisive

influence on the development of turnover and earnings in the tourism division.

Division turnover of 10.6 billion e increased on the 7.2 billion e achieved last year

by 47.4%. The contribution made by tourism to consolidated results also rose

sharply from 308 million e to 423 million e.

Different consolidation periods for the British shareholdings influenced the

year-on-year comparison of both turnover and results. The Thomson Travel

Group was included in Group consolidated financial statements for the first

time on the basis of interim accounts for the quarter of its 2000 financial year

running from 1 July to 30 September 2000. In the preceding financial year the

Thomas Cook Group had been included in the consolidated financial statements

for the first time, covering the period from 1 July 1999 to 30 September 1999, and

for the last financial year they will include the nine-month period from 1 Octo-

ber 1999 to 30 June 2000.

Tourism (in million e) 1997/98 1998/99 1999/2000

Turnover 4,790.8 7,164.8 10,562.1

Results 228.1 307.5 423.3

˘ TUI Group expanded its market positionIn Central Europe the TUI Group continued to expand its market position and

achieved turnover of 7.0 billion e in its second full financial year, an increase of

12.4%. Results of 268 million e topped those of last year, but could not match

the growth in turnover. One important reason for this was the low level of earn-

ings in the winter season, due primarily to unsatisfactory business around the

turn of the year. The summer season, which produced sound booking figures

after a sluggish start, achieved a better result than last year. The growth was

able to substantially make up for the weak results of the winter and lead again

to a good result overall.

In Germany, the most important European holiday market, turnover of TUI tour

operators was up by 9.0% and thus grew more strongly than the tour operator

market, which expanded by around 6.9% in the touristic year 1999/2000

according to surveys by the specialist journal fvw international. Besides sub-

stantial growth in the quality brand 'TUI Schöne Ferien!', business showed a

marked increase in both the low-cost segment – served by the successful brand

'1-2-Fly ' – and in the premium brand 'airtours'. Tour operators also benefited

here from growing demand for second and third holidays. In the other European

source markets, business varied from region to region. While the Dutch tour

operators achieved a moderate increase in turnover, business in Belgium, which

was again considerably stronger than the previous year. In Switzerland, business

increasingly picked up after a difficult last year. Austria developed satisfactorily,

with the acquisition of a majority shareholding in Gulet Touropa Touristik giving

a sizeable boost to the tour operator business.

Economic Situation

Management Report 11

Distribution for the TUI Group in Germany, now concentrated within TUI Leisure

Travel, further increased the proportion of sales of the Group's own products

and again achieved higher mediated turnover in tourism than the previous year.

In a difficult year, Hapag-Lloyd Flug's association with the TUI tour operators

proved to be worthwhile and ensured that aircraft were well-utilised in the

summer season, despite the burden of surplus capacity on the market. Com-

pared with last year, incoming agencies saw business vary between regions, but

nevertheless performed satisfactorily overall. The hotel sector had a good year,

with high occupancy rates for its own bed capacity producing a higher contribu-

tion to consolidated results.

˘ Good summer season in UKIn Northern Europe a turnover of 3.5 billion e and a result of 155 million ewere

consolidated in the financial statements of the Group.

In July, August and September, the three months of the high tourism season, the

Thomson Travel Group generated turnover of 1.9 billion e and concluded with

good results. On the British market, supply and demand for summer holidays

were generally in balance, and so capacity was sold at good levels and price

quality improved compared with last year. The Nordic market was more difficult

this year, but business in the summer season nevertheless proved satisfactory

overall.

For the consolidation period, the Thomas Cook Group contributed turnover of

1.6 billion e. Operating results for this period were nearly balanced, in addition

expenses have been incurred in connection with the removal of Thomas Cook

from consolidation.

˘ Logistics division benefited from growth in world tradeLogistics activities, since the beginning of the financial year concentrated within

Hapag-Lloyd AG, generated turnover of 3.6 billion ewhich was 19,0% more than

last year. Division results were also substantially higher than last year, at

220 million e, with the shipping sector alone more than doubling its contribu-

tion to consolidated results.

Logistics (in million e) 1997/98 1998/99 1999/2000

Turnover 2,929.4 3,014.9 3,589.0

Results 102.2 139.0 220.4

In the shipping sector, Hapag-Lloyd Container Linie performed exceptionally well.

With a transport volume of around 1.6 million standard containers, it achieved

an increase of around 14% and therefore grew more strongly than the market.

Moreover, the economic climate was favourable: brisk demand for transport

services led to the first rise in freight rates for several years, and the strong

US dollar had a positive impact on earnings. Other factors contributing to the

success of the financial year were higher productivity and a further reduction in

shipping system costs per container, which compensated for the adverse effects

of higher fuel prices.

Economic Situation


Underpinned by the successful first year of operation of its new five-star cruise

liner ‘Europa’, Hapag-Lloyd Kreuzfahrten also improved its contribution to con-

solidated results.

The Rickmers-Linie, operating conventional liner shipping services using multi-

purpose freighters, was sold off with effect from 1 January 2000, and so only the

first quarter of its financial year – showing a positive result – is included in the

Group consolidated financial statements.

In the logistics sector, the VTG-Lehnkering Group benefited from stable eco-

nomic activity in its principal customer segment, the chemical industry. Business

was steady particularly in the core business of rail logistics, which made a signi-

ficant contribution to improving the operating results of the VTG-Lehnkering

Group. Due to adjustments in the valuation of shareholdings its contribution

to division results proved to be less than last year.

Pracht freight forwarding also completed a first successful financial year follow-

ing the sale of the parcel business, with the haulage sector as a substantial con-

tributor.

In both the hire and sale of mobile buildings, the Algeco Group continued on the

sound results of previous years. The Group mainly increased business in France

and the Iberian Peninsula. In order to meet high levels of demand, the mobile

buildings park was further expanded, and once again utilisation increased in the

principal markets.

˘ Industrial activities groupedThe energy, building engineering and trading sectors grouped together within

the industry division achieved 7.5 billion e in turnover and thus exceeded that of

last year by 22.6%. The rise was primarily attributable to higher turnover in the

trading sector. Results showed an even larger increase, totalling 472 million e,

of which the largest proportion was generated by the energy sector.

Industry (in million e) 1997/98 1998/99 1999/2000

Turnover 7,469.9 6,148.8 7,538.3

Results 267.3 259.9 472.4

˘ Energy sector benefited from record crude oil prices The rise in crude oil and natural gas prices had a decisive influence on the devel-

opment of results in the energy sector. While the average price of Brent North

Sea oil last year was 14.60 US dollar per barrel, during this financial year it rose

to a temporary peak of just under 38 US dollar per barrel. The average price, at

27.20 US dollar per barrel, was 86% more than last year. Because of these price

rises and also higher production volumes, turnover for the energy sector rose by

32.6% to 843 million e. Results more than doubled to 274 million e.

Economic Situation


Energy(in million e) 1997/98 1998/99 1999/2000

Turnover 755.1 635.4 842.7

Results 106.0 129.2 273.5

By acquiring an interest in a crude oil reservoir in Tunisia and by expanding

existing fields in core regions South America and North Africa, Preussag Energie

GmbH increased crude oil production to 2.71 million tons, up by 9.5% compared

with last year. Domestic production remained virtually stable, which meant that

the proportion of crude oil from foreign deposits rose to 76.4% of total produc-

tion. Natural gas production was also higher than last year, increasing by 8,3%

to 1.34 billion m3

(Vn). Around 95% of total production came from deposits in

Germany.

Higher crude oil prices have not led to any lasting recovery in demand for dril-

ling and workover services. Overall, the Deutag Group succeeded in maintaining

rig utilisation at a stable level, despite regional differences.

˘ Lack of economic stimulus for building engineering Economic activity in the German construction industry remained weak and so

was unable to provide any lasting stimulus to the building engineering busi-

ness. In a number of product areas this led to fiercer competition. Against this

background, the companies in the building engineering sector held their own

well in their respective markets and in addition took advantage of opportunities

for growth. Turnover rose by 16.9% to 2.1 billion e, with a large proportion of the

increase attributable to the first-time inclusion of the Hebel Group. Results for

this sector, at 111 million e, were also higher than last year.

Building engineering(in million e) 1997/98 1998/99 1999/2000

Turnover 1,747.1 1,784.9 2,086.9

Results 112.2 91.6 110.7

˘ Further development of building materials business In the industrial sectors, too, the companies had scope for growth and took advan-

tage of the opportunities arising. With effect from 1 April 2000, a major share in

Hebel AG, Europe's largest manufacturer of porous concrete was acquired. The

integration of Hebel means that besides Fermacell and lime products, the Fels

Group now has a third principal product group, porous concrete products –

with great future potential – and has become one of Europe's leading suppliers

of building materials. The Fels Group's business in its main product, Fermacell

plasterboard, and in other building materials was generally steady. Following

last year's acquisitions, sales of lime products showed a clear increase.

Economic Situation

Famous Encounters

Mark Twain(1835–1910)

His real name was actuallySamuel Langhorne Clemens and

he was the first Americanauthor of world renown from

the region west of theMississippi. Under his

pseudonym, Mark Twain,he became one of the most

prominent figures in the worldof literature. The years he spent

as a steamboat pilot on theMississippi gave him the literarymaterial for his famous tales of

the legendary rascals ‘TomSawyer’ and ‘Huckleberry Finn’.

For the Wolf Group, the heating engineering business was marked by continuing

competition in core markets. Market shares stabilised in Germany and further

increased in France due to good economic conditions on the market there. The

Kermi Group again achieved a satisfactory result in both the radiator and sani-

tary sectors. In the fire protection sector, the Minimax Group increased incoming

orders and turnover, resulting again in high utilisation of manufacturing

capacity.

˘ Upturn in the trading businessThe trading sector showed a clear improvement on last year. Expansion of the

North American economy and strengthening of the international non-ferrous

metals markets during the year were factors that significantly contributed. Turn-

over rose by 23.6% to 4.6 billion e, and results, too, were clearly above last year's

figures at 88 million e.

Trading(in million e) 1997/98 1998/99 1999/2000

Turnover 4,967.7 3,728.5 4,608.7

Results 49.1 39.1 88.2

The AMC Group had a successful financial year overall, although with regional

and sectoral differences. Non-ferrous metals trading improved, and the distribu-

tion, services and metal processing sectors took advantage of good overall mar-

ket conditions and achieved increases on last year.

The steel service companies grouped within Preussag North America benefited

from brisk demand in the US steel processing industries. With sales up by 5.8%

they performed much better than last year.

The W. & O. Bergmann Group increased the volume of business in most of the

non-ferrous metals it traded, and completed the financial year with a positive

result.

Mark Twain’s life with the Old Man

It was Mark Twain who, as a steamboat pilot, pavedthe way for all those who take the trip from St. Louis to New Orleans on the Mississippi today insearch of romance – and perhaps even by paddle-steamer. After he had made his literary break-through he also undertook extended trips toEurope and Palestine. One of his books depicts awalking trip through the Black Forest and theSwiss Alps.

Economic Situation

he Mississippi was his life-blood – even from very early childhood. It was not

without reason that Samuel Clemensadopted a pseudonym from the language of the Mississippi boatmen: ‘Mark Twain’.That was what the men who took the depthsoundings on the steamboats would call out,and it meant quite simply ‘two fathoms ofwater under the keel’. When Twain went toNevada to join the gold and silver prospec-

tors, he came away with no glittering findsto show for it. But he did find his vocation.He began to write reports about camp life asa journalist for a Californian newspaper.Twenty years later Mark Twain repeated hisjourney on the Mississippi. He realised thatboth the river and the man had come a longway in the meantime: he had become worldfamous, while Old Man River had carried onits way.

T

15

The consolidated financial statements of the Group as well as the financial

statements of Preussag AG were marked to a very large extent by changes in

the Group portfolio. Following the withdrawal from consolidation of the Thomas

Cook Group and the first-time inclusion of the Thomson Travel Group, the num-

ber of consolidated companies increased on balance by 52. Taking account of

changes in the other divisions and of Preussag AG, the total number of compa-

nies amounted to 594, an overall increase of 86 on last year.

˘ Accounting principlesThe financial statements of the subsidiaries of the Preussag Group were pre-

pared according to uniform accounting and valuation methods. The valuations

in the consolidated financial statements were based solely on the economic

representation of the assets and financial situation according to IASC rules,

rather than on tax regulations.

In the individual financial statements of Preussag AG and the consolidated

Group companies to 30 September 2000, all risks subject to reporting obliga-

tions were covered by provisions and value adjustments. In respect of

Preussag AG, full use was made of discretionary valuation rights still having a

legal basis by means of special depreciation allowances and tax reserves.

� Assets and capital structure 30 Sept 2000 30 Sept 2000 30 Sept 1999 30 Sept 1999

emill. % emill. %

Fixed assets 12,456.4 67.3 7,768.6 51.0

Current assets 6,053.1 32.7 7,467.2 49.0

Assets 18,509.5 100.0 15,235.8 100.0

Shareholders' equity 3,270.3 17.7 2,718.2 17.8

Long-term liabilities 5,271.2 28.5 3,433.1 22.6

Short-term liabilities 9,968.0 53.8 9,084.5 59.6

Equity and liabilities 18,509.5 100.0 15,235.8 100.0


Financial Review

Balance sheet reflecting changeThe consolidated financial statements for the 1999/2000 financial year were prepared on the basis of accounting standards established by the International Accounting Standards Committee (IASC).These financial statements meet the conditions for exemption from the duty to prepare consoli-dated financial statements under German accounting rules. Accounting and valuation were carried out according to the rules and principles described in the notes. For the first time the financial statements were drawn up in euros, and therefore last year's figures were converted accordingly.


˘ Balance sheet total increased to 18.5 billion EThe balance sheet total for the Group rose by 21.5% to 18.5 billion e, due largely

to the first-time inclusion of the Thomson Travel Group. On the assets side, fixed

assets increased by 60.3% to 12.5 billion e. This substantial increase was primarily

attributable to the addition of goodwill resulting from the acquisition of the

Thomson Travel Group, which was 171.1% higher than last year at 5.0 billion e.

Besides higher investment activity in the divisions, the acquisition also influ-

enced the development of tangible assets including other intangible assets,

which rose by 32.0% to 6.6 billion e. Shareholdings in companies valued at

equity and other investments fell by 8.1% overall to 0.8 billion e.

Current assets, including assets from deferred taxes and prepaid expenses, fell by

18.9% to 6.0 billion e. This was mainly due to the withdrawal from consolidation

of the Thomas Cook Group and its funds from the travellers cheque business. At

1.0 billion e, funds at balance sheet date were down 69.7% compared with last

year. Inventories increased by 29.5% to 1.1 billion e. Receivables and other assets

including assets from deferred taxes and prepaid expenses were also up,

rising by 19.8% to a total of 3.9 billion e.

˘ Equity ratio of 17.7%On the liabilities side, shareholders' equity rose by 20.3% to 3.3 billion e. This was

mainly due to higher revenue reserves, which increased to 0.9 billion e as a

result of transfers from Group net profit for the year and revaluation of deferred

taxes. There was little change in other shareholders' equity positions. The equity

ratio, too, remained virtually unchanged at 17.7% compared with 17.8% last year.

At 3.3 billion e, provisions were 18.2% higher than last year, and liabilities, includ-

ing deferred income, rose by 22.8% to 11.9 billion e. The increase in provisions

was mainly due to the changes in Group structure.

This was also the principal reason behind the increase in liabilities. Financing of

the Thomson acquisition was mainly responsible for financial debts rising to

7.2 billion e. This includes the corporate bond totalling 750 million e, which

Preussag AG issued in October 1999 and which increased liabilities on bond

issues to 1.4 billion e. Trade accounts payable were down to 2.7 billion e as a

result of the withdrawal from consolidation of the Thomas Cook Group and its

travellers cheque business. Other liabilities, including deferred income, rose to

2.0 billion e.

˘ Increase in financing from external funds Once again, the flow of funds was strongly affected by the restructuring of the

Group over the past financial year. Payments made for capital expenditure in

fixed assets and financial investments totalled 4.2 billion e. Taking account of

the inflow of funds from the disposal of fixed assets, a total of 0.5 billion e, the

outflow of funds from investment activities amounted to 3.7 billion e.

Lewis and Clark

US Army Captain MeriwetherLewis (1774-1809) and his

comrade Lieutenant WilliamClark (1770-1838) were entrusted

by American President ThomasJefferson with the task of

finding the route through theRocky Mountains to the Pacific.Their goal: to pave the way fordirect trading relations withAsia and free the New World

from its economic dependencyon Europe. For Jefferson it wasclear: the future of America lay

in the West.

Financial Review

Famous Encounters

Sizeable financing requirements arising from the Thomson acquisition were

only partially met by the inflow of funds from operating activities, which

totalled 1.0 billion e. Finance activities contributed a further 3.2 billion w to the

Group, of which a substantial proportion derived from the use of a credit facility

for interim financing of the Thomson acquisition, and from the corporate bond

issue.

Cash flow statement1999/2000 1998/99 Change

emill. emill. %

Cash flow from business activities 965.9 577.0 + 67.4

Cash flow from investment activities - 3,655.6 1,714.3 - 313.2

Cash flow from finance activities 3,195.2 231.4 + 1,280.8

Cash effective change in funds 505.5 2,522.7 - 80.0

Funds at financial year-end 1,005.8 3,324.3 - 69.7

At financial year-end, funds totalled 1.0 billion e. This fall was primarily account-

ed for by the withdrawal of the Thomas Cook Group from consolidation, repre-

senting 3.0 billion e. A detailed cash flow statement is presented in the consoli-

dated financial statements.

˘ High investment overall Total investment by the Group was largely influenced by the acquisition of the

Thomson Travel Group. Additions to fixed assets totalled 8.0 billion e, which is

108.3% more than last year. Tangible and other intangible assets accounted for

7.7 billion e, including goodwill of 3.7 billion e. Investments were 0.3 billion e.

Additions to fixed assets included 3.2 billion e from the first-time inclusion of

companies in consolidation, mainly in the tourism division. On the other hand,

the withdrawal of companies from consolidation resulted in disposals of

0.7 billion e.

‘Good friend’of Lewis & Clark

The expedition set off on May 4th, 1804. Over the subsequent twoand a half years the Lewis & Clark team covered around 13,000kilometres on their journey across North America: from St. Louisthey followed the Missouri upstream, then journeyed down-wards over the Rocky Mountains towards the Pacific coast (andback again).Tourists today too can take the 'Oregon Trail' totravel across the breadth of America. From coast to coast.

Financial Review

n the autumn of 1804 Lewis & Clark and their expedition reached the Knife River,

where they set up their winter quarters.There they met a French Canadian and hiswife Sacajawea, a Shoshoni Indian womanwho had been kidnapped as a child. Theytook both of them along as interpreters – a fortunate decision. For soon they came toShoshoni country and the young Indianwoman found a group from her tribe.

As she began to translate, she recognised theChief as her long-lost brother. The joyousreunion and the good things she had to sayabout the white men convinced the Indiansand created a climate of trust. The gifts fromthe leaders of the expedition did the rest. Thebiggest item authorised by Congress in theexpedition's budget was for glass beads andsuch like: 669 dollars and 50 cents. Trulymoney well spent.

I

19


Capital expenditure by divisions*)

1999/2000 1998/99 Changeemill. emill. %

Tourism 615.9 352.9 + 74.5

Logistics 492.4 315.5 + 56.1

Industry 189.0 174.7 + 8.2

Energy 58.8 58.1 + 1.2


Trading 40.3 34.3 + 17.5

Other companies/consolidation 49.9 38.3 + 30.3

Total 1,347.2 881.4 + 52.8

*)incl. intangible assets without goodwill from capital consolidation

Most capital investment was used for the expansion and modernisation of plant

and equipment. In tourism, priority was given to expanding the hotel sector and

modernising the fleet of aircraft. The commissioning of four new container ships

accounted for a substantial proportion of funds in the logistics division. In the

energy sector, funds were primarily invested in exploring and developing reser-

ves of crude oil and natural gas.

Depreciation of fixed assets totalled 840 million e, of which 624 million e

related to tangible and other intangible assets, 170 million e to goodwill from

capital consolidation and 46 million e to investments.

Depreciation of tangible assets by divisions*)

1999/2000 1998/99 Changeemill. emill. %

Tourism 241.1 148.4 + 62.5

Logistics 192.0 179.6 + 6.9

Industry 172.9 148.7 + 16.3

Energy 60.9 52.5 + 16.0


Trading 21.2 16.6 + 27.7

Other companies/consolidation 17.9 21.4 - 16.4

Total 623.9 498.1 + 25.3

*)incl. intangible assets without goodwill from capital consolidation

˘ Value added rose to 3.8 billion EThe operating value added of the Group showed a considerable increase. At

3.8 billion e it was 26.8% higher than last year. The expansion of tourism led to

a change in the distribution of value added: at 76.9%, the employees' share

increased. The creditors' share, 7.9%, was also up on last year due to the raising

of external funds to finance growth. The tax share fell to 4.6% of net value

added, and here the law on tax reform affected the determination of deferred

taxes. Shareholders benefited from the successful financial year, receiving 3.5%.

As last year, a 7.1% share was retained by the Group to strengthen its real-asset

value.

Financial Review


Value added statement30 Sept 2000 30 Sept 2000 30 Sept 1999 30 Sept 1999

emill. % emill. %

Source

Group gross income 23,397 100.0 17,864 100.0

Costs - 18,790 80.3 - 14,273 79.9

Gross value added 4,607 19.7 3,591 20.1

Depreciation - 794 3.4 - 585 3.3

Net value added 3,813 16.3 3,006 16.8

Distribution

Employees 2,933 76.9 2,287 76.1

Wages and salaries 2,410 63.2 1,855 61.7

Social security 395 10.4 336 11.2

Pensions and benefits 128 3.3 96 3.2

Public authorities 174 4.6 188 6.2

Creditors 303 7.9 186 6.2

Shareholders 134 3.5 132 4.4

Group 269 7.1 213 7.1

Net value added 3,813 100.0 3,006 100.0

˘ Financial statements of Preussag AG (summary)The financial statements of Preussag AG for the 1999/2000 financial year were

prepared in accordance with the rules of the German Commercial Code and

given an unqualified audit certificate by auditors PwC Deutsche Revision Aktien-

gesellschaft Wirtschaftsprüfungsgesellschaft, Hanover. They are published in

full in the Federal Gazette (Bundesanzeiger) and deposited at the Commercial

Registers of the District Courts of Berlin-Charlottenburg, HRB 321, and Hanover,

HRB 6580. They may also be requested in print from Preussag AG.

Balance sheet of Preussag AG(in million e) 30 Sept 2000 30 Sept 1999

Fixed assets 7,023.8 4,191.6

Tangible assets 73.3 75.8

Investments 6,950.5 4,115.8

Current assets 1,580.3 1,114.2

Receivables 1,534.7 1,105.8

Liquid funds 45.6 8.4

Prepaid expenses 7.3 16.8

Total assets 8,611.4 5,322.6

(in million e) 30 Sept 2000 30 Sept 1999

Shareholders' equity 2,322.7 2,305.4

Special non-taxed items 75.2 87.0

Provisions 664.7 644.4

Liabilities 5,548.8 2,285.8

Bonds 1,453.3 703.4

Other financial liabilities 3,225.7 279.3

Other liabilities 869.8 1,303.1

Total shareholders' equity and liabilities 8,611.4 5,322.6

Famous Encounters

Guiseppe Verdi(1813–1901)

The Italian opera composer wasone of the great creative forces

in 19th century music. Hetransformed traditional Italian

opera with its old-fashionedlibrettos into a complete

musical and theatrical art form.Emotional intensity, gloriousmelodies and dramaturgical

perfection make Verdi's operassome of the most frequently

performed works on the stagesof the world.

Financial Review

Profit and loss statement of Preussag AG(in million e) 1999/2000 1998/99

Other operating income 183.8 315.6

Personnel costs 62.4 56.4

Depreciation 4.5 4.6

Other operating expenses 239.0 271.6

Net income from investments + 565.9 + 310.4

Depreciation on investments - 1.5

Net interest - 93.0 - 47.5

Profit from ordinary business activities 350.8 244.4

Extraordinary result - 141.4 - 3.2

Taxes 75.9 108.5

Net profit for the year 133.5 132.7

˘ Net profit for the year and profit appropriation of Preussag AGFor the 1999/2000 financial year, Preussag AG reports a net profit of 133.5

million e. Taking into account the profit brought forward of 0.5 million e, net

profit available for distribution totals 134.0 million e, available for the payment

of a dividend of 0.77 e per no-par value share. With dividend-bearing capital of

443.4 million e, profit distribution amounts to 133.5 million e, while 0.5 million e

remain to be brought forward on new account.

˘ Annual General Meeting authorised capital measures On 12 April 2000 the Annual General Meeting of Preussag AG agreed to autho-

rise the proposed capital measures. They are as follows: an authorised capital to

increase subscribed capital by up to 165 million e, with possible cancellation of

preemption rights if used for cash contribution or capital contribution in kind; an

authorised capital to increase subscribed capital by up to 44 million e; an autho-

rised capital of 10 million e for the issue of employee shares; a contingent capital

of 50 million e for the issue of convertible bonds; and the purchase of own

shares of up to 10% of subscribed capital for purposes other than securities

trading. Details of these measures may be found in the notes on the financial

statements and in the section on the Preussag share.

Verdi brings new soundsto the world’s ears

The only time Verdi left his homeland was for thepremiere of his opera Aïda, when he travelled tothe Egyptian capital, Cairo. Otherwise, he preferredItaly throughout his life, even though he had beenrefused a place to study music in Milan. His firstopera was premiered at the La Scala in Milan – a place well worth a visit for today's lovers ofculture, especially in Verdi's centenary year, 2001.

Financial Review

he completion of the Suez Canal in 1871 was a great event for Egypt. The Khédive

(Viceroy) wanted to present the country witha new opera house to mark the occasion, anda new opera to go with it. But the famousVerdi declined, saying that he did not write‘occasional pieces’. Finally a friend managedto persuade the Maestro to take on thelibretto of the opera Aïda. But Verdi, as arealist, treated the legend as if it had actuallytaken place. A researcher had to familiarise

him with the culture and history of Egypt.Nothing was known at that time, however,about the music of Ancient Egypt. In order to produce the authentic sound of thepharaohs, Verdi took the unique step ofasking for instruments to be made specially:he commissioned six straight trumpets inancient Egyptian form to make the brasssound of the triumphal march all the moreintense. It was an idea that the Khédive washappy to pay for.

T

23

Handling business risks is an essential part of the entrepreneurial responsibility

of Preussag's management in all operational areas. Risks are identified, assessed

and controlled by means of company-specific and Group-wide reporting and con-

trol systems. The essential elements of risk management are set out in guidelines

applicable to all Group companies.

˘ Premium concept supports risk managementPreussag uses a variety of control systems to assess and control commercial de-

velopment and the risks associated with business transactions. These centre

around the Premium concept (Preussag management information system for

maximisation of Group value), a system aimed at value-oriented management,

which is used for portfolio control. Clearly defined objectives for individual busi-

ness units are checked on a regular basis as a way of measuring economic suc-

cess. Key figures in this respect are results (before tax and amortisation of good-

will) and cash flow (return on total capital by the divisions) as well as Group

value. Furthermore, the system supplies data for investment control and for

standardising the acquisition and divestment decision-making process.

˘ Proven planning and control systems in use The multi-stage, integrated planning and control system provides Preussag man-

agement with another, well-proven risk management tool. On the basis of

monthly statements and reports on the divisions and Group companies, devia-

tions from projected business developments are identified and analysed so that

performance risks are quickly recognised and measures can be taken to deal

with them. The supervisory board is involved in this process by means of regular

quarterly reports as well as reporting at its regular meetings.

˘ Risk-specific control systems set up Besides the avoidance of excessively high risks, the specific risk management tools

which are employed serve primarily to identify, assess and control the risks asso-

ciated with business transactions and resulting from the conduct of business.

The methods and systems used and the frequency of controls vary, depending

on the type of risk. They are continuously checked and adjusted to changing

business environments.


Risk Management

Limiting risks, taking opportunitiesAs a global player, Preussag faces a variety of risks arising directly from the entrepreneurial activity of Group companies. At the same time, there are numerous opportunities available in the businesses and markets where these companies operate. The aim is therefore to make the most of business opportunities, while at the same time weighing up and limiting the inevitable risks involved so that the economic benefits prevail.


˘ Reporting on risks threatening company existenceIn the wake of the implementation of the regulations of the German Act on

Control and Transparency in the Corporate Sector (KonTraG), an additional sys-

tem was already set up during the 1998/99 financial year for the early identifi-

cation of risks. This regular reporting system is designed to identify any poten-

tial risks and other potentially vital risks in the individual Group companies.

By the end of the financial year, these reports had not identified any specific

risks threatening the continued existence of individual companies.

In compliance with the regulations set forth in the KonTraG, the systems for the

early identification of risks have been reviewed by our auditors in the course of

the annual audit of the financial statements.

˘ Regular auditingIn addition to the control systems and tools described above, providing regular

information about risks within the Group, auditing departments have also been

set up within Preussag AG and Group companies. On the basis of given auditing

plans they carry out an additional and ongoing control of transactions and oper-

ational processes, checking them for compliance with regulations, security and

efficiency.

˘ Latent risks in the commercial development of divisionsThe individual divisions and economic regions in which Group companies ope-

rate entail risks that vary depending on how and to what extent they may

threaten economic success. In many sectors, growing globalisation and fiercer

competition mean that there is an increase in market risks particularly.

In tourism, holidaymakers' booking patterns are determined by many different

economical and social factors. Tour operators have to accurately predict the

trends in destinations and kinds of holidays and take them into account when

obtaining airline and hotel capacity. In some destination countries, external fac-

tors such as political events and natural disasters can have a damaging effect

on business.

In the logistics division, business success is affected not only by the balance of

trade flows and the balance between demand and shipping capacity, but also

by the overall level of economic activity in key industries such as the chemical

industry.

Similarly, in the industry division, it is mainly external factors that represent

latent risks to future development. The price of crude oil and the exchange rate

of the US dollar are thus of particular importance to the energy sector. In the

building engineering sector the overall economic climate in the construction

industry is an essential factor in determining business development.

˘ Central financial managementPreussag operates central cash and credit management. The individual financ-

ing categories and the rules to be complied with, for instance in the fields of

project financing or foreign currency management, are defined in guidelines.

Famous Encounters

Anna Leonowens(1834 – 1914)

The young widow of a Britishofficer, she was invited to the

Siamese court in 1862. Mongkut,the King of Siam, wanted AnnaLeonowens to instruct his 67children and various wives in

the English language, mannersand customs. And so she found

herself in a situation wherepomp intermingled with poetry,open-mindedness with archaicdespotism. In the year 2000, her

experiences were once againmade into a film under the title

'Anna and the King'.

Risk Management

In order to limit risks from changes in exchange or interest rates for basic trans-

actions there is a foreign exchange and interest management system in opera-

tion. Here use is also made of derivative financial instruments. Limits have been

fixed for business transactions of this type, and they are regularly checked. More-

over, this type of business is only concluded with banks with a first-rate financial

standing, and in the AMC Group for specific businesses also with other business

partners. The scope of the financial business as per balance sheet date is given

in the consolidated financial statements.

˘ Risk limitation by means of insuranceIn order to cover potential damage and liability risks associated with daily busi-

ness, we are covered by insurance. The scope of the insurances is regularly

checked and adjusted if necessary. Although insurance does not guarantee com-

plete protection, it is nevertheless to be assumed that the impact of damages

on the Group's financial, earnings and liquidity situation will not threaten its

very existence.

Contingent liabilities of the Preussag Group have changed for several items due

to changes in Group and business structure. This also applies to other financial

liabilities. The guarantee liabilities from past activities in the plant engineering

and shipbuilding sector have decreased as expected and will be brought down

further in agreement with banks and principals. To this end, an obligation to

indemnify was given by Babcock Borsig AG to Preussag AG, in the event that

calls were made. Contingent liabilities and other financial liabilities are listed in

the financial statements of the Group and of Preussag AG.

Anna and the beautiesof Eden

After a journey from England that took months,Anna Leonowens arrived in Bangkok harbour in1862 on board the Siamese ship, 'Chow Phya'. Thesame journey can now be covered comfortably byplane in a day. Incidentally, she left the countryagain five years later on the same ship. She nevervisited Siam again.

Risk Management

27

hen the British Ambassador declared that he wanted to see the most

beautiful women in Siam, the court wasplunged into the most delicate state ofdisarray. On the King's orders, Anna was toteach the five most beautiful girls Englishmanners in two days. With the aid of a dress-maker she also had to make Europeanclothing for them. However, there was nomaterial for making underwear. Moreover,although the girls were stunningly beautiful,

their teeth were black from chewing betel. Soa barber also had to be summoned to scrapetheir teeth white. When the great momentarrived, Sir John Hay was wearing a monoclethrough which he was pleasantly surprisedto see unexpectedly European-looking beau-ties. They, however, thought the monocle wasthe evil eye. To protect themselves from itthey flung their skirts over their heads andfled from the temple as naked as creatures inthe Garden of Eden.

W


Research and Development

Innovation – a factor in our successInnovation is a crucial factor in guaranteeing commercial success and a sustainable future.Due to fast-moving trends, particularly in the services sector, we need to identify customer wishes at an early stage and continuously convert ideas into new products. Today through-out the Group innovation goes hand in hand with state-of-the-art information technology,and here Internet-based systems are coming increasingly to the fore.

Trademarks and industrial property rights represent an enormous immaterial

asset that requires protection. They safeguard the competitive position of our

companies' products and are an important instrument in customer retention.

Preussag's shift from industrial activities to services has gone hand in hand with

a further increase in the number of Group trademarks as opposed to technical

protective rights. Overall, Group companies enjoy protection of more than 1,000

trademarks, predominantly in tourism. Protective rights are registered in more

than 100 countries, with most rights protected in European countries.

˘ Tourism – product innovation throughout the value chainCommercial success in tourism depends on a constant stream of innovation,

ensuring that we remain attractive to customers and business partners as well

as standing out distinctly from the competition. Once again a large number of

new product concepts were introduced throughout the tourism value chain –

from travel agencies, tour operators, airlines, incoming agencies to hotels. The

largest proportion of TUI Group expenditure on innovation, 70%, was used for

the development of tourist products, particularly in the hotel sector. 15% was

spent on future-oriented information technologies, expenditure on e-commerce

applications rose to 10%, and 5% went on new developments in distribution.

Allied to new offerings from tour operators, most of the innovations focused on

the hotel sector, since hotel quality is the major factor determining whether holi-

daymakers are satisfied. Important here is the money-back guarantee, which

applies if the services booked as described in the brochure cannot be provided

and no immediate remedy is available.

Co-operation with new partners resulted in a considerable expansion of the

‘train-to-plane’ programme for travel to and from holiday destinations, so that

even more holidaymakers will have travel to the airport included in the price of

their holiday. When returning home, passengers can now check in for their flight

at many hotels, which makes formalities at the airport quicker and easier.

Another innovation is the offer of TUI flight vouchers for people on TUI holidays

whose flights are delayed by four hours or more.


Working in conjunction with aircraft manufacturers, the airline sector success-

fully developed new insulation for Hapag-Lloyd Flug aircraft, which will reduce

fuel consumption as well as improve cabin air-conditioning.

˘ Information technology grows in importance In tourism, too, information technology is a crucial factor in the cost-effective

and efficient supply of tourist products and services of a consistently high quali-

ty. For instance, for the retail sector of the TUI Group, consultancy software was

developed which can serve all tour operators. This is designed to improve control

of products and product lines as well as facilitating the transmission of large vol-

umes of data from the central computers to the distribution units.

In the travel business especially, electronic commerce via the Internet is con-

stantly gaining in importance. In Germany this segment currently generates

the highest turnover within online trading as a whole. In order to take advan-

tage of these favourable circumstances and further strengthen distribution on

the Internet, the TUI Group web-site at www.tui.de is subject to constant im-

provements. For example, it has been made user-friendlier, inquiry functions

have been further individualised, and user services extended. New distribution

channels, such as participation in a television travel channel, are in preparation.

˘ Innovative logistics solutions In the logistics sector, too, innovative processes – primarily in information tech-

nology – have led to further improvements in service quality, enhanced reliabi-

lity and speed, and not least to lower costs. Within Hapag-Lloyd Container Linie

the introduction of a novel route optimisation system called ‘Orion’ is a good

example of innovation in maritime transport. Based on analysis of current mete-

orological data, the system not only saves time and money, but also improves

the safety of ships, cargo and crew. Developments for land transportation have

proved equally significant: Hapag-Lloyd Container Linie controls and monitors

revenue from its complex, world-wide container flows using innovative freight

information systems. The introduction of Internet technologies now under

development promises a further boost in productivity.

For the storage of hazardous goods, VTG-Lehnkering has developed a computer-

based warehousing management system that takes account of volume limits

and bans on storing hazardous goods together, as contained in statutory and

company regulations. VTG-Lehnkering has also introduced innovations in the

transport of sensitive goods. One of these is a special tank wagon for products

sensitive to temperature. Another is the ‘east-west tank wagon’ developed in

conjunction with the chemical industry, which makes it easier to transport

goods over the different gauges of the rail networks in Western and Eastern

European countries.

˘ Optimisation of production technology in the energy sector Exploration costs in the energy sector accounted for the largest proportion of

research and development expenditure. Exploration activities focused primarily

on tapping new crude oil reserves abroad, mainly in core regions South America

and North Africa. Technical developments centred on optimisation processes in

Famous Encounters

James Cook(1728–1779)

He was the last of the greatmaritime explorers. On his threevoyages around the world JamesCook charted the coastlines ofunexplored continents, islandsand waterways. This formed thebasis for a set of navigationalcharts that was used by British

seafarers until well into the19th century. His discoveries and

research were influential infostering a view of the world

that was based on scientificknowledge.


production technology. Areas studied included measures to stimulate the flows

of crude oil or natural gas to the wellheads, and methods to prevent and remove

waste deposits in the boreholes that obstruct the production process.

˘ Product development – focus of building engineering researchResearch and development in building engineering sought primarily to improve

product properties and production processes. The Fels Group focused on its

main product, Fermacell plasterboards, developing new uses e.g. in floors and

cavities and for soundproofing in ceiling construction. As a result of further opti-

misation of production processes in the lime works, new qualities of product are

now available and raw materials more efficiently utilised.

In the heating and air-conditioning technology sector, the Wolf Group continued

to develop its range of products. Priority was given to the renewal of the stan-

dard boiler programme. Here activities focused on further improving the tech-

nical properties of components and assemblies for use in products, and at the

same time reducing production costs.

In fire protection, the Minimax Group concentrated its research and develop-

ment activities on optimising the operation of extinguishing devices. New kinds

of spark, flame and gas detectors and a new generation of extinguishing sys-

tems were developed for the early detection and control of fire.

No people in Down underwas an illusion to Cook

On his first voyage James Cook explored New Zea-land and Australia. On that occasion he locatedthe harbour entrance at Sydney. The return voyagealmost ended in shipwreck on the Great BarrierReef. On his second voyage he discovered most ofthe Pacific islands, much to the enjoyment of ourpresent-day tourists. And on the third he exploredthe north-western coast of America and theBering Straits.


31

he ancient Greeks held the view thatthere must be a huge continent, Terra

Australis, in the southern hemisphere, as aweight to ‘counterbalance’ the great landmass of the northern hemisphere. There wasthought to be a continent south of theequator between the west coast of Americaand India. In 1768 James Cook set sail in the‘Endeavour’ to explore this southern landshrouded in myth. In 1770 he became the first

European to land on the eastern coast ofAustralia. On this three-year voyage ofexploration, Captain Cook proved that therewas no continent the size of Asia in thesouthern hemisphere, only the ‘island’ ofAustralia. Incidentally, the Australians havehim to thank for the fact that they speakEnglish today. The first European visitorswere in fact the Dutch, but they were notinterested in the seemingly deserted isle.

T

Forecasts for world economic development in the 2001 financial year remain

good, despite lower rates of growth in a number of regions. However, persistent-

ly high crude oil prices and exchange rates for the US dollar are factors that

could significantly slow down the growth of the world economy.

The North American economy, one of the principal forces driving the present

recovery, will grow by 3.2%, which is below the rate for 2000. For the European

Union, experts expect the GDP growth curve to show only a slightly weaker

upward trend than last year. Expected growth rates of 2.8% for Germany and

3.0% for Great Britain – Preussag's second largest market for the tourism busi-

ness – almost match last year's figures. The economies of South-East Asia which

are important for the development of the world economy have recovered from

the crisis and should be able to grow strongly again.

Development of GDP2000 2001

European Union 3.4 3.1

Germany 3.0 2.8

United Kingdom 3.1 3.0

North America 5.2 3.2

Asian threshold countries 7.4 6.3

Source: 2000/2001 Annual Report by the German Comittee of Experts for the Evaluation of EconomicDevelopment

˘ Tourism still on growth course Tourism is still one of the few sectors showing stable growth. Current forecasts

by the World Tourism Organization predict that the average growth in turnover

worldwide will be 7% over the next few years. Development in Europe, which

contains eight of the ten largest source markets for holidays abroad, is of partic-

ular significance here. Holidays continue to play a very important part in Euro-

pean consumer behaviour, and sociodemographic developments will also gener-

ate higher demand. This means that spending on holidays will continue to grow

more strongly than GDP.


Ausblick

Tourism – the new core businessConsistent expansion of tourism, the new core business, has brought lasting change to the structure of Preussag. The planned divestment of industrial activities and the trading busi-ness means that the process of becoming a service group is now irreversible. Tourism,generating around 80% of turnover in the future, has become Preussag's central pillar.Before long complete coverage of the European market will be achieved.

Prospects

Famous Encounters


In Europe, Germany is the largest market with a total of around 40 billion e

spent on holidays, followed by Great Britain with around 35 billion e. These two

markets will see the highest growth rates in absolute terms over the next few

years, although in relative terms the forecasts for France and Italy, which still

have development potential in the air-inclusive tours sector, are even higher.

˘ Tourism – market position a basis for growthPreussag, with the TUI Group and the Thomson Travel Group, is by far the world's

largest vertically integrated tourism company. Progressive participation into

Nouvelles Frontières in France means that Preussag companies now have access

to more than 70% of spending on package tours on the European market and

are market leaders in virtually all their countries of operation.

Further growth will be generated by the targeted tapping of new European

source markets, the development of new and existing profitable areas of busi-

ness along the tourism value chain, and expansion into e-commerce sectors.

However, following the acquisitions of 2000, the priority will be on fully exploit-

ing the combined potential of Group companies and on achieving internal

growth. Here the main objectives are to increase capacity utilisation in the air-

line and hotel sectors, make use of economies of scale, e.g. in purchasing and

marketing, establish joint management in holiday destinations and harmonise

information technology standards.

˘ TUI Group continues to grow In the Central Europe sector, covering the distribution and tour operator busi-

ness in Germany, Switzerland, Austria, the Netherlands and Belgium as well as

the e-commerce business and the Hapag-Lloyd airline, the TUI Group again in-

tends to grow more strongly than the market and improve on results. As well as

achieving growth in the tour operator business, the main intention is to expand

the hotel sector.

Growth forecast for tourism marketsTravel expenses 1999 (in billion €) Growth rate 2000-2003 (in %)

Germany 39,9 15%

United Kingdom 34,5 19%

France 14,8 32%

Scandinavia 15,8 15%

Italy 9,2 39%

Benelux 10,3 16%

Sources: World Travel Monitor, Outbound Report 1999 as well as forecasts based on IPK InternationalEuropean Travel Monitor 1992-1999 and WTO Tourism 2020 Vision plus Country Reports

Tania Blixen(1885 – 1962)

Hardly anyone describes thewonders of the Dark Continentas colourfully as Tania Blixen.

Throughout the 17 years that shelived in Africa, the Danish writersent fascinating accounts to her

family. Back in Denmark shewrote 'Out of Africa', which

became an international best-seller and delighted an audience

of millions as a prize-winningfeature film.

Prospects

In Germany, the largest source market in this sector, bookings for medium-haul

holidays – i.e. primarily to destinations around the Mediterranean – are expect-

ed to increase by 3 to 5%. For long-haul travel, such as holidays in the Caribbean

or the Maldives, growth forecasts are even higher at between 7 and 11%. These

forecasts are supported by survey results indicating that Germans are as enthu-

siastic as ever about travelling, and that there is a continuing trend in people

taking a second or third holiday per year. Spain is again named as the most pop-

ular destination, with the Canary and Balearic Islands expected to enjoy greater

popularity than last year. TUI Group tour operators have responded to last year's

large increase in demand for holidays to Turkey and Egypt by expanding their

range of holidays available.

Distribution by self-owned travel agencies has been brought under central man-

agement, a step that makes it possible to optimise the control of distribution

and increase sales of TUI Group products through Group-owned distribution

channels.

Following last year's surplus capacity on the German market for holiday flights,

next year will see a reduction in the number of seats available. There is a contin-

uing trend whereby tour operators are making more use of airlines associated

with their group. This also applies to Hapag-Lloyd Flug, which will start the 2001

summer season with a fleet of 33 aircraft and plans to fly Dutch holidaymakers

from Amsterdam to destinations in Spain for the first time.

The expansion of the hotel sector is designed to make the most of potential for

growth – also in new regions – and to create favourable conditions for expan-

sion at other stages of the tourism value chain. During 2001 the number of ho-

tels belonging to the TUI Group will increase by eleven, and consequently 198

Group-owned hotels will have more than 100,000 beds available. The new

hotels are mainly located in Egypt and the Caribbean, currently in particularly

high demand as holiday destinations.

˘ Thomson Travel GroupThe Northern Europe sector, covering the distribution and tour operator busi-

ness in the United Kingdom, Ireland and the Nordic countries along with charter

airline Britannia, expects a further improvement in business.

Tania Blixen’s dark secret

A one-way ticket to Mombasa. It would be a dreamticket for drop-outs even today. When Tania Blixenarrived in Africa she set about exploring both theimmediate and broader environment in which herplantation was located. On horseback or by car, sheexplored countryside, villages, places of worship.And she developed a profound understanding ofthe people and their special qualities.

Prospects

35

he young Karen Christentze Dinesen,known as Tanne (Tania), was anything

but a placid child. After the death of herfather she put up a dogged fight against thestrong, pious womenfolk of the family. Shefell passionately but hopelessly in love withher half-cousin Hans Blixen-Finecke. Perhapsit was the resemblance that led her tobecome engaged, three years later, to histwin brother Brol. The young couple decided

to go to live in East Africa. On January 14,1914, Tania arrived in Mombasa, where shemarried 'her' Baron the same day. Butfortune smiled neither on the marriage noron the coffee plantation. Baron Brol turnedout to be lacking in both talent and scruplesin equal measure. And Kenya failed to yieldcoffee for her, but it did nurture somethingmuch more valuable: her writing talent.

T


In source market UK, Thomson Travel Group will complete its comprehensive re-

organisation programme involving cost-cutting measures and major investment

in information technology, and benefit from the improvements introduced so

far. On the British market, bookings are expected to be slightly up on last year.

Once again, the beaches of the western Mediterranean and the Canary Islands

will be the most popular destinations. Higher demand is also expected for long-

haul destinations in the Caribbean. Thomson Travel Group is introducing pro-

grammes to meet this demand and continuing with its policy of offering holi-

days based on a quality-oriented approach.

In distribution, with travel agency chain Lunn Poly, Thomson Travel Group aims

to consolidate its leading position and generate further growth in holidays sold

through new distribution channels such as the Internet, TV Travel Shops and Call

Centers.

With 41 aircraft operating from UK, Ireland and the Nordic countries for the 2001

summer season, Britannia will guarantee the efficient provision of airline capacity

to meet the needs of the Thomson Travel Group.

The international distribution and tour operator business includes the Fritids-

resor Group in the Nordic countries and Budget Travel in Ireland. In the Nordic

countries, following rather sluggish business last year, demand is expected to

recover. Forecasts for Ireland assume that the positive trend in bookings will

continue.

˘ Logistics benefits from growth of world tradeInternational Monetary Fund experts anticipate that world trade in 2001 will

grow by around 10% in real terms. As economic prospects remain good for all

major economic regions of the world, it can safely be assumed that there will be

a broad increase in demand for the logistics services that are now concentrated

within Hapag-Lloyd AG.

In world-wide container transport, economic experts predict market volume in

2001 to be around 65 million standard containers, amounting to 9% more than

last year. In 2001 Hapag-Lloyd Container Linie again aims to grow more strongly

than the market. This will primarily be achieved by expanding container trans-

port within Asia and exploiting the market opportunities offered by increased

transport volumes on the Pacific routes.

Prospects are considered to be good for the continuation of stable economic

activity in the chemical industry, an important factor influencing demand for

the VTG-Lehnkering Group's logistics services. This will primarily benefit the rail

logistics sector, inland waterway shipping and the chemical service. All three

sectors expect capacity to be well utilised.

In the mobile buildings hire sector, the Algeco Group aims to strengthen its posi-

tion as Europe's market leader by expanding into markets in Eastern Europe.

Capacity utilisation will remain high. In order to take advantage of market

opportunities in its core markets in France, Spain and Germany, the Group also

plans to increase the size of its mobile buildings park in these countries.

Prospects


˘ Energy sector steps up crude oil production The future development of crude oil prices, currently high, contains a number of

imponderables that largely depend on the behaviour of producer countries. Over

the 2001 financial year as a whole, prices are expected to drop. Preussag Energie

GmbH continues to expand its international crude oil business, with a focus on

its existing activities in Venezuela, Ecuador and Tunisia. In domestic production,

technical measures are being introduced to maintain viability of production

sites. The company plans to increase total production in 2001 to over 3 million

tons, of which almost 80% will come from abroad. On the basis of existing con-

tractual agreements, sales of natural gas will stabilise at a high level.

˘ Lack of economic stimulus for building engineering The German construction industry has yet to experience an upturn, and there is

no clear prospect of economic recovery for 2001. The building engineering com-

panies have performed well so far and expect business to remain steady, despite

the flatness of demand.

Within the Fels Group, the expansion of the business in lime products over the

last few years is proving worthwhile. With a strong regional position, the Group

can now generate growth from its own capacities. Following the integration of

the Hebel Group, porous concrete has become the strongest product group. Fer-

macell, hitherto the main product, will continue to be successful and will acquire

new markets abroad. In the heating technology sector, the Wolf Group expects

the domestic market to stabilise as a result of a boost in the replacement busi-

ness and growing demand for products with condensation technology. Abroad,

it is mainly companies in France and Turkey that will benefit from a strong mar-

ket position. Kermi is planning for continuous growth in both heating and sani-

tary engineering. In fire protection, the Minimax Group anticipates steady busi-

ness in the wake of successful rationalisation measures in a number of sectors.

˘ Moderate growth in the trading business Following the strengthening of the non-ferrous metals markets last year, no

clear trend has yet emerged for 2001. In the USA, developments in the steel sec-

tor are somewhat uncertain because imports already exert growing influence

on market activity. The AMC Group and the US steel service companies have

taken account of this, and so anticipate only moderate growth rates for their

business, following last year's substantial increase.

˘ Adoption of divestment programme The expansion of tourism as the new core business by the acquisition of the

Thomson Travel Group, and the refinancing of this acquisition, has considerably

accelerated the process of change in Preussag. As a consequence, development

of Group structure continued in October 2000 with the decision to make broad-

ranging divestments. At the heart of this plan is the separation, to a very large

extent, of industrial activities and the trading business.

In the industrial sector, the necessary preparations are being made for the indi-

vidual sale of the groups of building engineering companies. The energy sector

will in future focus on its core business, the production of crude oil and natural

Prospects

Famous Encounters

Alexander von Humboldt(1769 – 1859)

The German nobleman, BaronAlexander von Humboldt, was aman of exceptional talent. As anatural historian, geographer,

explorer and diplomat heachieved world fame. The

outcome of his travels to SouthAmerica and Mexico filled 33volumes: 16 on botany, two on

zoology, four on astronomy andten on his experiences of

travelling themselves. His five-volume work, 'Kosmos', is

regarded as the first textbookon geophysics.

gas, and will sell the services business. In the trading sector, the metals trading

business of the W. & O. Bergmann Group was sold as of 1 October 2000. A fur-

ther strand of the divestment programme will involve the sale of remaining resi-

dential properties, which as in the past will be disposed of in a socially responsi-

ble manner.

˘ Developments in the 2000 abbreviated financial year Positive development in the 1999/2000 financial year has continued in the

abbreviated financial year running from 1 October to 31 December 2000.

In the tourism division, bookings for the winter season have so far lived up to

expectations. This applies both to TUI Group tour operators in Germany and to

the Thomson Travel Group business in UK, Ireland and the Nordic countries. Holi-

days for the 2001 summer season are sold in Germany from the beginning of

November onwards. As in previous year, booking were initially restrained at the

start. In UK, where the 2001 summer holiday brochures have been on the market

since spring 2000, bookings were sound. Business in the Nordic countries has

picked up compared with last year.

In the logistics division, business in container shipping continued the exception-

ally good trend of last year. The energy sector benefited from persistently high

crude oil prices. Business was steady in building engineering and the trading

sector.

Group turnover for the abbreviated financial year will amount to around 5 bil-

lion e. An overall positive result can be expected despite the fact that contribu-

tion of the tourism division will be negative as normal in the winter period

because of the seasonal nature of the business. Logistics and industrial activities

are expected to produce continuing sound results and returns from divestments

will add positively to Group results.

Son of Zeus, Humboldt’s secret title?

In 1799 Alexander von Humboldt set out on ajourney through the unexplored countries of the'New World', at that time under Spanish rule. Hetravelled through the countries that today areMexico, Venezuela, Cuba, Columbia, Ecquador andPeru. The first stop on his five-year expedition wasthe Canary Islands. Millions of holidaymakersfollow in his footsteps every year.

Prospects

39

he genius Goethe had the highestregard for the 'superhuman' achieve-

ments and successes of Alexander vonHumboldt: he lived to be almost 90 despitean unhealthy climate and the highly riskyexperiments he carried out on himself, suchas shocks from the electric eel, or a potionmade from curare, the plant-based poison ofthe Amerindians. Together with his friendBonpland, Humboldt covered thousands of

kilometres on foot or by boat through thejungle. They ate monkey meat and ants, andsurvived myriads of insects and seriousillnesses. In Mexico, Humboldt came quiteclose to the gods in physical terms too. Hecarried out a geometric survey of the fourhighest Mexican volcanos, includingPopocatepetl. He also discovered theconnection between Egyptian and Aztechieroglyphics.

T

40 Further Information

The Preussag Share

Established as tourism stockWith the continuing focus on tourism as the new core business, Preussag has now estab-lished itself in the eyes of investors and financial markets as a tourism share. Preussag is the only German stock in this sector, and besides scepticism from market participants about the May 2000 acquisition of the Thomson Travel Group, the weaker performance of the tourism sector on Wall Street and the European stock exchanges this year temporarily had a marked influence on the development of the Preussag share price.

In the first half of the financial year, the German Stock Index (DAX) began to

rocket upwards. Driven by the euphoria surrounding New Economy stocks

on the Frankfurt stock exchange and the American NASDAQ, technology equi-

ties on the DAX rose sharply, bringing the index in March to an all-time high

of 8,065 index points. The Preussag share, in contrast, performed much more

moderately. Following the above-average price increase of around 70% the

previous year, the first few months of the financial year were marked by side-

ways movement with high volatility.

March 2000 saw the beginning of corrective action on the German stock mar-

ket after the rapid rise. This action was influenced by factors such as the weak-

ness of the euro and uncertainty about the development of interest rates. At

that time Preussag acquired the Thomson Travel Group, Britain's market lead-

er, as a way of further expanding tourism as its new core business. Although

market participants welcomed this step from a strategic point of view, a num-

ber of more sceptical reactions – combined with press reports of slow bookings

Preussag share price in relative comparison with the DAX (1999/2000)

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

60 e

55 e

50 e

45 e

40 e

35 e

30 e

8 000

7 000

6 000

5 000

4 000

3 000

2 000

Further Information 41

in the summer tourism season – put pressure on Preussag share prices. Sub-

sequent to clear communication about the planned divestment of industrial

activities and reports of a good summer season, Preussag share prices rose

again against the market trend, closing at 34.70 e at the end of the financial

year.

Development of Preussag share prices (in e) 1995/96 1996/97 1997/98 1998/99 1999/2000

Highest share price 22.60 29.45 39.32 59.25 55.60

Lowest share price 17.38 17.49 23.16 26.08 30.50

Share price at financial year-end 19.58 25.31 29.55 47.30 34.70

Book value 1)10.63

2)10.53

2)13.06 15.85 18.86

1) Equity per share

2) Based on German accounting principles

˘ Preussag share represented in major indices On the basis of its liquidity and total market value amounting to around 6 bil-

lion e at balance sheet date, Preussag has been one of the DAX30 stocks since

1990. On the index it carries a weighting of 0.87%. On European index DJ Euro

Stoxx, the Preussag share is included with a weighting of 0.16%, and on sub-

index DJ Euro Stoxx Consumer Goods and Services with a 3.98% weighting. It

is also listed in the FTSE Index Eurotops 300 and in other industry indices on

the German and European markets.

˘ Brisk trade in Preussag shares Preussag shares are officially quoted on all eight German stock exchanges and

traded in the Xetra electronic trading system. Foreign investors can also trade

Preussag shares off the floor via the London SEAQ system. Once again, inves-

tors showed a high level of interest in Preussag shares. An average of 599,000

shares was traded per day. Trading was therefore around 4% higher than last

year.

˘ Trading in options more than doubledThere was a substantial increase in the number of options on Preussag shares

traded on the European futures exchange (EUREX). At around 368,000 it was

more than double the figure for the previous financial year. As a result, aver-

age trading volume rose to around 31,000 contracts per month. In addition, the

number of covered warrants in circulation – warrants issued by banks and

covered by share portfolios – rose sharply: in November 2000 it was 80, repre-

senting significantly more than last year.

˘ Number of shares up to 173,423,464A total of 17,390 option rights were exercised from the 1996/2001 bond with

warrants attached issued in May 1996. The number of shares increased by

173,900, and subscribed capital rose by 444,568.29 e. From the 1999/2004 con-

vertible bond issue, 83 bonds each with a par value of 1,000 e were converted

into 1,320 no-par value shares, leading to an increase in subscribed capital of

3,374.53 e. It rose by a further 892,153.20 e following the issue of 348,980

employee shares, reaching a total of 443,350,045.76 e at the end of the

1999/2000 financial year, evidenced by 173,423,464 no-par value shares.

The Preussag Share


˘ Employee share issue As in previous years, employee shares on preferential terms were offered to

those eligible in October 2000 from the authorised capital of 10 million e.

26.9% of the workforce being eligible to subscribe took advantage of this

opportunity for long-term capital formation. Consequently the number of

shares rose by 333,185 and the subscribed capital bearing dividends increased

by 851,773.93 e in the abbreviated 2000 financial year.

˘ Development of bond with warrants attached and convertible bond The 1996/2001 bond with warrants attached, total par value 300 million DM

(153.4 million e), matures on 17 May 2001. There are 429,697 as yet unexercis-

ed option rights from this bond, representing almost 48% of total par value.

Given the structure of the bond issue, it is at present reasonable to assume

that the vast majority of investors will exercise their option rights.

During the past financial year, 83 bonds were converted from the 1999/2004

convertible bond, and as a result investors now hold conversion rights for a

total of 8,750,719 shares.

˘ Industrial bond issue In October 2000 Preussag AG issued a bearer bond totalling 750 million e. The

bond issue is divided into 750,000 bonds with a par value of 1,000 e and has

a maturity period of six years. It bears annual interest of 5.875%, paid subse-

quently. Net revenue was mainly used to finance strategic investments

already carried out.

˘ Annual General Meeting authorised capital measures The Annual General Meeting on 12 April 2000 authorised four different capi-

tal measures to create financial scope for further growth and facilitate a flexi-

ble response to capital market developments. The measures are as follows:

(1) Subscribed capital increase with possible cancellation of preemption rights

for capital contribution in kind: a resolution adopted by the Annual General

Meeting created an authorised capital of 165 million e that can be used up to

11 April 2005 to increase subscribed capital by the issue of bearer bonds

against contributions in cash or in kind. The possibility of cancelling preemp-

tion rights will enable the Board to acquire companies or interests in compa-

nies by transferring Preussag shares.

(2) Subscribed capital increase with possible cancellation of preemption rights

under section 186, paragraph 3, line 4 of the German Stock Corporation Law:

the Annual General Meeting created an authorised capital of 44 million e

that can be used up to 11 April 2005 for the issue of bearer bonds against cash

contributions. The cancellation of preemption rights makes it possible to take

advantage of favourable stock market conditions and achieve optimum

strengthening of equity by setting the issue price in line with the market.

The Preussag Share


(3) Convertible bond issue: the Annual General Meeting created a conditional

capital of 50 million e for the issue of bonds with rights of conversion to

Preussag shares. This authorisation expires on 11 April 2005. The total par value

of bonds must not exceed 1 billion e.

(4) Purchase of own shares under section 71, paragraph 1, no. 8 of the German

Stock Corporation Law: the Annual General Meeting authorised the Board to

purchase own shares with a volume of up to 10% of the subscribed capital for

purposes other than securities trading. This authorisation expires on 1 Octo-

ber 2001. As a result it is possible to use own shares as a means of payment

when acquiring other companies or in the event of company mergers.

˘ Shareholder structure consolidated Preussag's shareholder structure was consolidated. Although foreign investors

showed even more interest in Preussag shares as a result of the expansion of

the tourism business, external data and internal analyses indicate that Geman

shareholders hold around two third of the subscribed capital. The majority of

foreign investors come from Great Britain, France, Switzerland and the USA.

GEV – Gesellschaft für Energie- und Versorgungswerte mbH – a subsidiary of

Westdeutsche Landesbank, holds about one third of the subscribed capital

and is thus the largest shareholder in Preussag AG. Institutional investors hold

around 50% of the subscribed capital, while around 15% is in the hands of pri-

vate shareholders.

˘ Investor relations in dialogue with the financial markets Our investor relations activities form an important link between Preussag and

its shareholders, potential investors, analysts and lenders. In competing for

investors we focused on communicating fully and openly about our strategic

objectives and the development of our business. This year our primary aim was

to provide clear information about the continuing realignment of the Group

and to position the Preussag share in the tourism sector. By doing so we suc-

ceeded in boosting the level of interest among foreign investors and increas-

ing the number of analysts who regularly track the performance of the

Preussag share.

We ensured that the capital markets received the information they required

by converting our accounting system to International Accounting Standards

(IAS), reporting on our business development in all four quarters, and provid-

ing information on the current changes and Preussag's strategic alignment.

We made available more detailed information in debate with analysts at three

analyst conferences and in regular discussions. At presentations and road

shows in Germany, Great Britain, Switzerland, France and the USA we justi-

fied our approach before an audience of institutional investors. Private inves-

tors had an opportunity to keep up-to-date with Preussag's transformation

into a services group not only at the Annual General Meeting, but also at a

number of shareholder events organised by credit institutions.

The Preussag Share


For the financial markets it is of the utmost importance that information be

up-to-date and speedily available. All relevant company information is made

available simultaneously to all interest groups by electronic means, and here

the Internet has an important part to play. Up-to-date information such as

press releases or interim reports along with comprehensive information about

Preussag and the Preussag share can be found at www.preussag.de. All reports

are placed on the World-wide Web in both German and English at the same

time.

˘ Value-oriented management The objective of Preussag's entrepreneurial activity as a Group holding is to

manage its portfolio using a value-oriented approach and thus safeguard a

sustained increase in Group value. Sustained value enhancement is essential

in order to guarantee the future of our company, an appropriate return on

capital and the long-term preservation and creation of jobs. It also serves as

a basis to ensure that Preussag can continue to play a full role in society.

The Premium concept (Preussag management information system for maxi-

misation of the value of the Group) was developed as a control tool for value-

oriented management of the Group and its individual companies. Its basic

principles are:

– a clear segmentation of the Group's activities

– the incorporation of all segments in a closed controlling process, and

– a unified evaluation of all investment projects.

The Premium concept, an integrated control tool, is designed for both strate-

gic and operational management control and thus covers the key areas of

value-oriented management. It provides a platform for communication with

investors about strategic decisions and the development of business.

At operational level, the portfolio is controlled by fixing individual return tar-

gets for each sector and allocating financial resources to sectors with high

earnings potential. In addition, the development of corporate value in the dif-

ferent parts of the Group is continuously under observation. For strategic

decisions, value-oriented control tools are used in acquisition and divestment

analyses. An essential feature of portfolio analyses based on key figures is the

development of the Group's value, presented as a return on equity. This is cal-

culated for both the Group as a whole and the individual sectors. Return on

equity is the ratio between the balance-sheet equity employed in individual

sectors and the results of ordinary business activities before amortisation of

goodwill.

Due to the conversion last year of our accounting system to International

Accounting Standards and the consequent increase in equity compared with

German accounting principles, we revised our management ratios and return

targets, setting a return on equity before tax of 25% as a medium-term objec-

tive for the Preussag Group.

The Preussag Share


At 22.8%, the return on equity for the Preussag Group in the 1999/2000 finan-

cial year already comes very close to this target even though the segment

equity rose again compared with last year. Because of the structural changes

in tourism in terms of both earnings and equity, these annual figures are only

comparable to a limited extent. This also applies to the return on equity of the

tourism division itself, which achieved 29.2% following last year's 30.1%. The

logistics division generated a higher return on equity, with 22.6% compared

with 15.4% last year. The industry division achieved 42.5%, due primarily to

sound development in the energy sector; last year's figure was 23.3%.

Key return ratios 1999/2000Turnover Results by Return Equity Total Return

division*) on sales capital on equityemill. emill. % emill. emill. %

Tourism 10,569 423 4.0 1,449 6,649 29.2

Logistics 3,592 220 6.1 976 3,201 22.6

Industry 7,540 473 6.3 1,112 4,342 42.5

Energy 843 274 32.5 231 1,149 118.3

Building engineering 2,088 111 5.3 526 2,143 21.1

Trading 4,609 88 1.9 355 1,050 24.8

Other/consolidation 153 - 369 — - 267 4,317 —

Group 21,854 747 3.4 3,270 18,509 22.8

*) Results before tax and amortisation of goodwill

˘ Earnings per share Earnings per share is an important key figure for investors, enabling them to

make comparisons with other investment opportunities. On the basis of repor-

ting according to International Accounting Standards, the Preussag Group

achieved earnings per share of 1.91 e. This was based on an average number

of shares for the financial year of 173,330,809.

According to current information, the bond with warrants attached and the

convertible bond maturing in May 2001 and June 2004 respectively will result

in subscribed capital increases. Taking into account the resulting share dilu-

tion effect, earnings per share amounts to 1.88 e.

˘ Preussag shares – a worthwhile investment For the 1999/2000 financial year, Preussag AG shows a profit of 133.5 million

e. Taking into account retained profits brought forward of 0.5 million e, net

profit of 134.0 million e is available for distribution to shareholders.

In view of the continuing sound earnings situation, it is possible once again to

propose a dividend of 0.77 e to the Annual General Meeting. With a total of

173,423,464 dividend-bearing shares at the end of the financial year, the result-

ing dividend payouts amount to 133.5 million e; the remaining 0.5 million e

will be carried forward on new account.

The Preussag Share

Famous Encounters

Christopher Columbus(1451 – 1506)

He must be the epitome of the seavoyager and explorer:

Christopher Columbus, son of aGenoese weaver, went to sea at

the tender age of ten. And hehad a vision: to reach India by awesterly route. For eight longyears he pleaded at the Spanish

court for permission (andfinancial support) to undertakethis journey, until finally KingFerdinand and Queen Isabella

provided him with what heneeded.

The payment of dividends is based exclusively on income generated in Ger-

many, and so profit distribution carries a corporation tax credit of 0.33 e per

share for shareholders who are taxpayers in Germany. This means that they

receive a total of 1.10 e per share. The dividend yield thus amounts to 2.4%

based on the share price at the beginning of the financial year.

Development in earnings of the Preussag share(in e) 1995/96 1996/97 1997/98 1998/99 1999/2000

Earning per share 0.89 1)

1.23 1)

1.69 1.78 1.91

Dividend 0.61 0.61 0.61 0.77 0.77

Bonus - - 0.15 - -

Tax credit 0.13 0.26 0.26 0.32 0.33

1)Based on German accounting principles, earnings according to DVFA

For longer-term investors, who for instance invested 500 e in Preussag shares

ten years ago, exercised their subscription rights and reinvested their dividend

income, it was also a worthwhile investment. At balance sheet date they had a

portfolio worth 1,666 e, thus gaining an average annual return of about 13%.

Why Columbus expected India in the Bahamas

In 1492 Christopher Columbus was at last able toput to sea with three caravels from the Spanishport of Palos. The weather was good and after 36days' voyage on a westerly course he reached land.Having covered a distance of 2,400 nautical milesacross the ocean, he thought he had reached hisgoal, Asia. In fact he had reached Watling Island,which is nowadays one of our most popularholiday destinations: the Bahamas.

The Preussag Share

olumbus had an idea: he wanted to go to the East, but westwards, across the

Atlantic. An adventurous notion. And so hetried to capture the imagination of the royalSpanish couple with his visions of the gold ofthe East in order to win them over to hisplans for a voyage. They saw in him thesaviour of the public finances and providedhim with ships and seamen. But somehoweverybody had miscalculated. The formerchartmaker Columbus made a big mistake

in his calculation of the distances. When hefinally reached land after sailing for a goodmonth, it turned out not to be an island offthe coast of India, but one of the Bahamas.His patrons nevertheless named him 'Viceroyand Governor of India'. It remained forposterity to restore order to geography. Andposterity gave him the rank that he reallydeserves, that of the man who discoveredAmerica.

C

47

In the tourism division, the acquisition of the Thomson Travel Group brought

18,022 new employees into the Group. Internal growth of the tourism business

– particularly where tour operators and hotel participations are concerned –

added a further 2,852 employees. Following the split with the Thomas Cook

Group, 23,146 employees left the Group.

There was little change to the headcount in the logistics division and the ener-

gy and trading sectors. In contrast, the number of people working in building

engineering grew by 3,164, which was primarily due to the inclusion of the

Hebel Group for the first time.

˘ Majority of the workforce abroadLargely because of the international nature of the tourism business, foreign

companies of Preussag employed 48,912 people or 61% of the workforce. The

key European regions in this respect were Great Britain with 35%, the Benelux

countries with 10% and Spain and Portugal which together accounted for 17%;

abroad, North America employed 6% of the Group workforce.

Personnel by divisions30 Sept 2000 30 Sept 1999 Change

%

Tourism 46,264 48,536 - 4.7

Logistics 9,202 8,956 + 2.7

Industry 23,221 20,296 + 14.4

Energy 3,052 3,481 - 12.3

Building engineering 16,664 13,500 + 23.4

Trading 3,505 3,315 + 5.7

Other companies 1,272 1,354 - 6.1

Total 79,959 79,142 + 1.0


Personnel

More growth, more personnelAlong with the growth in tourism activities, acquisitions and changes to Group structure continued to influence the development of the headcount during the 1999/2000 financialyear. Overall, the number of employees in the Group rose to 79,959 which is 1% up on the previous year. Just under 58% of the workforce was employed in the tourism business and 12% in companies in the logistics division. Around 29% of Group employees were involved in industrial activities.


Companies in Germany employed 31,047 people or around 39% of all employ-

ees. With the Group's shift away from industrial activities towards services,

30% of the domestic workforce were woman. Approximately 10% of employ-

ees worked part-time. The proportion of foreign employees was around 5%,

of which just under half came from European Union countries.

˘ Increase in personnel costsPersonnel costs increased by 28% to 2,933 million e. Wages and salaries

accounted for 2,410 million e. Social security contributions and payments for

pensions and assistance totalled 523 million e. About 13,000 former employ-

ees or their dependants received pensions from Group companies. In addition,

approximately 23,000 employees had vested pension rights for which 128 mil-

lion e were provided.

˘ Training and personnel developmentAs a result of the substantial realignment of the Group and its growing inter-

nationalisation in the tourism and logistics sectors, high demands were

placed on employees' skill development. At a total of 350 training events laid

on by our education and training company, over 3,300 participants obtained

additional valuable qualifications. This training mainly took the form of

seminar and service programmes which broadened employees' workplace

opportunities, and language courses. There was also promotion of social and

organisational skills for managers. In addition, internal seminars and compa-

ny-specific consultancy provided Group companies with valuable support in

restructuring and integration processes.

By providing vocational training and qualifications for young employees,

Group companies covered their requirements for skilled staff from within

their own ranks, thus also enhancing their competitiveness. The 700 new

training places available in the Group was a further increase on the previous

year. The total of around 1,900 trainees as of 30 September 2000 represents

a training ratio of over 6%. Tourism and logistics contributed to this positive

result, as did traditional training locations in the energy and building engi-

neering sectors. Of the around 500 employees who successfully completed

training in 1999/2000, most started a professional career within the Group.

˘ From company suggestion scheme to ideas management By putting forward good ideas, committed employees make a vital contribu-

tion to improving products and services. The success of our ideas manage-

ment scheme depends on suggestions being promptly put into practice and

rewarded. Around 1,400 suggestions were submitted and about 170,000 e

paid out in reward premiums, which was more than last year.

˘ Further development of health and safetyPreventative industrial medicine, ergonomic workplace design and reducing

stresses and strains at work are essential measures for the protection of em-

ployees' health. New demands at work and in life generally, as well as a shift

in employee expectations and needs will require today's system of health pro-

tection to develop into preventative health promotion with employee involve-

ment.

Famous Encounters

Elizabeth I. of Austria(1837– 1898)

Elizabeth Amalia Eugenia wasthe third child of Duke

Maximilian of Bavaria. At theage of 16, after a relatively

liberal upbringing, she marriedan Emperor: Francis-Joseph of

Austria. She was unable to cometo terms, however, with the

strict Spanish etiquette that wascustomary at the court in

Vienna. All the more so becausethey took her beloved children

and their upbringing out of herhands. And so she became apoetry-writing, travelling

empress, and the icon of an era.

Personnel

This far-reaching approach also leads to changes in the organisation of work.

This requires not only individual workplaces to be optimised, but also greater

emphasis on the development of working systems for the implementation of

increasingly complex production and service chains. Preventative measures

in conjunction with health insurance funds, the evaluation of working condi-

tions in offices and on the shop floor, and the monitoring of contractors' com-

pliance with safety standards again improved health and safety, as shown by

a further fall in the number of accidents.

˘ Membership of company-based health insurance funds continued to grow Contributions of 12.8% – comparing favourably with average contributions to

the statutory health insurance funds – and benefits geared to employees' needs

combined to attract 1,400 new members to the company-based health insur-

ance funds of Preussag BKK and Preussag BKK Public. On 1 July 2000, contribu-

tions in Eastern Germany which had remained unchanged for ten years were

compulsorily brought into line with the general level of contributions in order

to cover costs. Health promotion at work was again effectively enhanced by

various projects to improve the health of the workforce. In order to utilise ex-

penditure on benefits more effectively and in a way more geared to patient

need, health insurance funds and the related doctors' association became in-

volved on a pilot basis in the first practice network set up by general medical

practitioners in Lower Saxony.

˘ AcknowledgementDuring the 1999/2000 financial year, Preussag took a number of crucial steps

towards becoming Europe's leading tourism and services group. Our outstand-

ing business success in this period of fundamental change was also made pos-

sible by the commitment, motivation and willingness to integrate of all our

employees, whether already with us or new to the Group, and we thank them

for this. Equally we would like to thank the elected workforce representatives

at company and Group level for their objective and conscientious coopera-

tion.

Sisi’s penchant for the simple life

It began with a flight into illness. A carefullyhedged diagnosis provided the medical groundsfor the long holidays abroad: Madeira, Corfu,Venice. In the latter years of her life, Elizabeth didsomething that millions of people in need of abreak enjoy doing to this day – she took a leisurelytour around the Mediterranean.

Personnel

lizabeth's whole life soon revolved around travelling. She learned Greek and

then visited the famous excavation sites. Onthe island of Corfu she bought a villa andnamed it the 'Achilleion'. She had her ownstyle of Greek culture in which she blendedclassical antiquity with poetry; she even hada temple built for the poet Heinrich Heine,whom she greatly admired. Although sheloved to express her feelings in writing,Elizabeth kept her poems strictly under lock

and key. She deposited them in Bavaria – faraway from the Viennese court – with thecondition that they should not be publisheduntil 60 years after her death. When thepoems were published in 1984 they revealeda picture of a woman very different fromthat of the sugary-sweet cliché: a womanwho was modern, sceptical, confident. Shewas a convinced opponent of the monarchywho was especially fond of all things liberal.

E

51


Environmental Protection

Man, Nature, TechnologyNowadays, ecology and the economy are no longer in conflict. Particularly in an age of advancingglobalisation, maintaining the link between economic, ecological and social objectives is crucialfor commercial success. To a very large extent, then, the model of sustainable development governs what Preussag companies do. This is amply demonstrated by their degree of involve-ment in international organisations and by the high environmental protection standards alreadyimplemented in the service sector and production plants.

Of the numerous events involving global environmental dialogue in which

Preussag took part, the highlight was the Group's world partnership for the

Expo 2000 world exhibition in Hanover. On the theme of ‘Man – Nature –

Technology’, drawn from the concept of sustainable development in ‘Agenda

21’ of the United Nations, questions were discussed and ideas put forward on

reconciling future economic, ecological and social needs.

The importance that Preussag attaches to these issues was also highlighted

by our participation in the Sustainable Development Forum, an initiative by 18

major German companies. Forum participants undertook to set an example in

working towards this objective, not only in internal dialogue but also in dis-

cussions with political decision-makers and industry federations, and to offer

workable solutions for sustainable development.

˘ Participation in international organisationsMany Preussag companies are involved in the debate on environmental pro-

tection in a variety of national and international organisations. This year, for

instance, Hapag-Lloyd Kreuzfahrten followed in the footsteps of the TUI Group

and the Thomson Travel Group by joining the ‘Tour Operators Initiative for

Sustainable Tourism Development’. The aim of this initiative is to work in

partnership with the United Nations environment organisation, the World

Tourism Organization and UNESCO to gear tourism management towards the

requirements of sustainable development.

At the Environmental Forum of the International Tourism Fair in March 2000

in Berlin the TUI Group continued its initiative for discussion with the general

public. Participating in this dialogue were partners in Germany and from

destinations abroad. With the same aim in mind, the TUI Group is also a mem-

ber of the ‘International Hotels Environment Initiative’, which organises ex-

pert discussions with the world's major hotel groups and, for instance, sup-

ports programmes for environmentally sensitive hotel management.


˘ Natural allies: tourism and environmental protectionAn intact environment is the very basis of sustainable tourism. Environmental

compatibility is therefore an integral part of product quality standards for tour

operators and hotels in the TUI Group. TUI is exemplary in its approach to na-

tural resources in holiday destinations. Using a comprehensive environmental

monitoring system, it monitors, for instance, the environmental compatibility

of hotel management, the condition of the natural surroundings in holiday

areas, and the activities of transport companies.

˘ Environmental awards for TUI hotelsIn the holiday destinations, the objective is to achieve a sustained reduction

in the environmental impact of hotels, as well as to consume less water and

energy. The Iberotel ‘Sarigerme Park’ in Dalaman was the first Turkish hotel to

be certified according to eco audit ISO 14001 for exemplary environmental

management. At the World Trade Market 2000 the Spanish RIU Hotels Group

received the ‘Environmental Company Award‘ for the hotel group implement-

ing the best environmental policy in Europe, while a regular survey of hotel

guests crowned the hotel ‘Tigaiga’ on Tenerife as TUI environmental cham-

pion for the fourth time running. Such awards encourage other hotels to com-

mit themselves to preserving the natural environment in holiday destinations

and thus to safeguarding the long-term future of tourism.

A further example of sustainability in the hotel sector is the ‘Natura Park Resort’

in Punta Cana in the Dominican Republic, designed from start to finish along

ecological lines. It was built of organic materials and designed in such a way

to ensure that it blends perfectly into its natural surroundings.

˘ Numerous environmental projects in holiday destinations In many places the TUI Group's commitment extends beyond the immediate

hotel surroundings. In many holiday destinations the Group has initiated for-

ward-looking projects with an impact on the region as a whole. Its environ-

mental activities therefore also encompass specific projects on nature and

species conservation, improving the quality of water and beaches and refore-

station. On the island of Samos, which was affected by devastating forest

fires in summer 2000, TUI has worked in conjunction with Münster University

to publish a scientific study of the fire damage and has introduced a soil pro-

tection programme to prevent erosion. Holidaymakers can find information

about environmental protection activities in their destination country in all

TUI country brochures.

˘ Technical progress in logistics promotes environmental protection In both container shipping and cruises, Hapag-Lloyd uses modern low-con-

sumption engines and is driving forward further development in this area. A

current research project in cooperation with marine engine manufacturers and

Athens Technical University is investigating the correlation between the pro-

duction of emissions and engine data, seeking to develop measures to improve

the environment. Hapag-Lloyd is also entering new territory with regard to

underwater paint for ships, gradually introducing biocide-free anti-fouling

agents for its entire fleet.


Famous Encounters

Marco Polo(1254 –1324)

Venetian Marco Polo is probablythe most famous globetrotter

ever. He was one of the very fewtravellers of his era to go to theFar East. He journeyed to Chinawith his father and uncle as a17-year-old and lived there forthree years at the court of the

Mongol ruler, Kublai Khan.With the report on his travels

that he wrote while in prison inGenoa in 1298, Marco Polo gave

medieval Europe its firstimportant glimpse of life in Asia.

For VTG-Lehnkering, one of Europe's leading specialists in logistics for hazar-

dous goods, the safety of people and of the environment is a priority when

taking preventive measures. Thus all distribution centres for hazardous goods

have certification according to the ISO 9002 quality standard and the ISO 14001

environmental standard. With its internal safety regulations for storage of haz-

ardous goods, VTG-Lehnkering has set industrial standards that have been

accepted as general guidelines for industry.

˘ Environmentally compatible production processes Environmental protection in the industry division essentially encompasses two

aspects: the production process and the actual product. Care is taken to use

production processes that conserve resources and release as few harmful sub-

stances and as little waste and effluent into the environment as possible.

Measures introduced by the building engineering companies thus again

focused on implementing enhanced recycling systems, particularly for the

supply of water and in waste prevention and disposal.

In the energy sector, too, the handling of waste is an important issue. In Vene-

zuela, Preussag Energie has commissioned a new type of plant for the envi-

ronmentally compatible disposal of waste arising from oil exploration and pro-

duction. The plant in Cuatro Palmas in the Cabimas oilfield extracts the water

from and cleans the drilling mud so that 85% of it can be reused. Furthermore,

the drill cuttings are treated and put into interim storage pending further pro-

cessing in order to minimise environmental pollution.

˘ Ecology and economy The economic benefit of ecological measures is clearly visible in many sectors.

Environmental protection safeguards the basis of economic activity and is

therefore one of the essentials for commercial success. With its international

companies leading the market in many sectors, Preussag assumed its ecologi-

cal responsibilities at an early stage and has geared its entrepreneurial activi-

ties to the model of sustainable development. The same applies to our em-

ployees, who put this model into practice in their everyday work.

Silken mannersfor Marco Polo

Polo's 32,000 kilometre-long journey began in what ismodern-day Israel. It took him overland to Persia, thenonwards up the River Oxus to the Pamir Mountainsand on to the Gobi Desert. When, after two and a halfyears, the travellers reached the court in the Chinesetown of Shang-tu, they had seen landscapes thatEuropeans have rarely ever set foot in, even in ourtouristic times.


he well-travelled Venetians made quite an impression on the Khan. He appoint-

ed the father and uncle as his militaryadvisers. On the young Marco he bestowed aspecial mark of favour: he was allowed toaccompany the Khan as his personal adviseron official journeys throughout the empire.Marco Polo was even made Governor of theChinese town of Yangzhou for three years.He wrote enthusiastically about life inCambaluc, modern-day Beijing: ‘The town

is constructed like a chessboard. And thenumber of its inhabitants is unimaginablylarge. When Kublai Khan gives a feast in hispalace, he sits in state with an empress,presiding over 10,000 guests who sit attables and on rugs. The nobles who have thehonour of waiting on the Grand Khan holdsilk cloths before their mouths. This is so thattheir breath will not come into contact withthe wine and food.’

T

55

56 Divisions

Tourism

Course for growth

TUI GroupThe TUI Group is represented in all market

segments in Germany, with such well-known

brands as TUI Schöne Ferien!, airtours,

1-2-Fly and L’tur. In the TUI ReiseCenters and

the First and Hapag-Lloyd travel agencies

the Group has a strong distribution system.

A large proportion of holidaymakers flies

with the Group's own airline Hapag-Lloyd

Flug.

In the Netherlands and Belgium, too, the

TUI Group, with its strong brands including

Arke, Holland International and JetAir, holds

large market shares.

TUI Suisse has concentrated the holidays

it offers under the Imholz,TUI Schöne Ferien!

and Vögele Reisen brands.

In Austria, TUI expanded its tour opera-

tor business by taking a majority interest in

Gulet Touropa Touristik.

In more than 100 destinations, holiday-

makers are looked after by self-owned agen-

cies. Many people spend their holidays in

hotels owned by the TUI Group: Grecotel,

Grupotel, Iberotel, Dorfhotel and RIU, as

well as Robinson Clubs.

Thomson Travel GroupIn UK, Thomson – with Thomson Holidays –

is the market's leading tour operator in the

quality segment. Most holidaymakers book

through the travel agency chain Lunn Poly

or self-owned call centres and fly with

Britannia, the Group airline.

In Ireland, Budget Travel is the holiday

tour operator taking the largest number of

bookings.

Thomson owns the large tour operator

on the northern European market, the Fri-

tidsresor Group.

TUI and Thomson are strongly represented

at all stages of the tourism value chain. In

numerical terms this means at the end of

the financial year: 3,274 travel agencies, 66

tour operators, 75 aircraft, 18 incoming

agencies and 199 hotels.

TourismTurnover 1997/98 1998/99 1999/2000(in million e)

TUI Group 5,530.1 7,348.3 8,394.8

Thomson Travel Group - - 2,461.4

Thomas Cook Group - 1,131.5 1,912.2

Total turnover 5,530.1 8,479.8 12,768.4

Internal turnover 739.3 1,315.0 2,206.3

Consolidated turnover 4,790.8 7,164.8 10,562.1

With the TUI Group and the Thomson Travel Group, Preussag isnumber one in Europe's tourism business. The integration ofthese two groups enhances synergies and creates a springboardfor further growth. TUI and Thomson supply around 70% of theEuropean holiday market and are number one or number two invirtually all the countries in which they operate.

Divisions 57

During the 1999/2000 financial year, the TUI Group

GmbH managed the operational side of business

in continental Europe within the tourism division.

Its activities were structured into the following

sectors:

– source market Central Europe

– source market Western Europe

– destination management

– hotel companies

– business travel.

Apart from expanding business further, the

TUI Group's principal task was to integrate the

individual stages in the tourism value chain and

ensure that they fit together in the best possible

way.

In August, following Preussag's acquisition of

British market leader Thomson Travel Group, the

TUI Group and its new British partners set up

working parties at all operational and adminis-

trative levels as part of the ‘Titan’ project. Within

a short time they identified and evaluated the

potential for synergy in joint activities in the

future, and developed measures to implement

them.

The 14% increase in overall TUI Group turn-

over to 8.4 billion e reflects the organic growth

of the business; only a small part of the increase

was attributable to acquisitions.

Results again matched those of last year, as

brisk business over the summer more than com-

pensated for the negative results at the beginn-

ing of the year, which were mainly due to the

weakness of the millennium holiday business.

TUI Group

TUI GroupTurnover 1997/98 1998/99 1999/2000(in million e)

Source market Central Europe – 5,207.5 5,966.2

Source market Western Europe – 1,173.9 1,350.5

Destination management – 331.3 337.6

Hotel companies – 383.5 463.0

Business travel – 252.1 277.5

Total turnover 5,530.1 7,348.3 8,394.8

Internal turnover 739.3 1,117.3 1,387.7


˘ Source market Central Europe The source market Central Europe covers all tou-

rism activities in Germany, Switzerland, Austria

and Poland.

Business in this area showed strong growth.

At 5.97 billion e, total turnover was 14.6% up on

last year.

Results were lower than last year. This was

amongst others mainly due to the cost of restruc-

turing distribution and start-up costs for new

media.

˘ GermanyTUI Group continued to extend its leading posi-

tion in the German travel market. With its well-

known tour operator brands – like TUI Schöne

Ferien!, 1-2-Fly, airtours, Wolters Reisen and L’tur –

TUI achieved total turnover of 4.3 billion e, which

represents an increase of 9% compared with last

year. This meant that once again, TUI tour opera

tors grew more strongly than the market, which

is reported to have grown by around 7%.

Quality brand ‘TUI Schöne Ferien!’ was once

again extraordinarily successful. Here the trend

towards second and third holidays also had a posi-

tive impact. Holiday destinations in the eastern

Mediterranean achieved disproportionately high

growth rates, with Turkey and Egypt top of the

league. Spain remained by far the most popular

destination, although it recorded a slight fall fol-

lowing last year's boom, particularly in Majorca.

As far as long-distance travel is concerned, Mexi-

co and the USA were preferred destinations.

Special programmes such as TUI Vital, TUI

Family and city trips also achieved considerable

growth.

Tourism

Hotels

RIU

Robinson

Iberotel

Dorfhotel

Grecotel

Grupotel

Swiss Inn

Nordotel

Anfi del Mar

Incoming agencies

Ultramar Express

Miltours

TUI Hellas

Travel Partner Bulgaria

Tantur

Travco

Airlines

Hapag-Lloyd

Britannia

Tour operators

TUI Schöne Ferien!

1-2-Fly

airtours

Wolters Reisen

L’tur

Thomson Holidays

Skytours

Club Freestyle

Just

Budget Travel

Fritidsresor

Star Tour

Finnmatkat

Travel agencies

TUI ReiseCenter

Hapag-Lloyd

First

Lunn Poly

Budget Travel

The ‘1-2-Fly’ brand offers low-cost holidays for

families and young people. The priorities and

growth areas of the programme are the 1-2-Fly

Fun Clubs and Sun Aktiv Hotels, which are respon-

sible for a 20% expansion in business.

Airtours, the premium brand of the TUI Group

in Germany, had a very successful financial year.

With its variety of world-wide and in some cases

exclusive offers known as ‘Travel in Style’, it suc-

ceeded in increasing turnover by around 9%.

Specialist tour operator Wolters Reisen saw an

increase particularly in holidays to Scandinavia,

short trips and city breaks. This year there was also

especially high demand for holiday homes, mainly

in Germany.

L’tur, European market leader in last-minute

holidays, once again performed extremely well.

Due to strong demand for holidays booked at the

last minute and the excellent range of such prod-

ucts on offer from airlines and tour operators,

turnover rose strongly.

Distribution within the TUI Group was reor-

ganised. The holiday travel activities of First Reise-

büro and Hapag-Lloyd Reisebüro were brought

together within TUI Leisure Travel. The franchise

sector saw the establishment of a large number

of TUI ReiseCenters, thus further expanding the

Group's own distri-bution. Orienting sales to-

wards TUI products also achieved good results.

Distribution turnover slightly exceeded that of

last year.

The substantial increase in airline capacity

available on the German market was not without

an impact on business development in Hapag-

Lloyd Flug. Business flagged in the winter months

because of the low level of bookings for the turn

of the millennium. Although a trend in late holi-

day bookings made flight scheduling difficult, util-

isation of the aircraft fleet in the summer season

was nevertheless excellent. Here, close links with

the TUI tour operators proved worthwhile.

The fleet replacement programme continued

with the replacement of five aircraft with mod-

ern Boeing 737-800s. In total, Hapag-Lloyd Flug

operated seven Airbus A 310s and 25 Boeing 737s.

These aircraft carried around 9% more passen-

gers than last year. Around two-thirds of passen-

gers took off from 14 German airports for holiday

destinations in Spain with Hapag-Lloyd.

˘ SwitzerlandAt the beginning of the financial year, ITV Reisen

AG and Imholz-Vertriebs AG merged to form TUI

Suisse AG. Kuoni made use of the option in the

cooperation agreement and acquired a 49% share

in the parent company.

Within the tour operator business, which was

still marked by extremely fierce competition, the

product range was slimmed down to focus on the

Imholz, TUI Schöne Ferien! and Vögele Reisen

brands. Acquisitions and the expansion of exist-

ing branches served to extend the distribution

network. Cooperation with Kuoni on joint charter

flights and reciprocal product sales was seen to

have a beneficial effect.

˘ AustriaIn the tour operator business, TUI Austria contin-

ued to expand its position on the market for air

tours. Terra Reisen, market leader in land-based

holidays, also had a successful financial year. In

distribution the TUI ReiseCenter Austria and the

Tiroler Landesreisebüro continued on the sound

development of the previous year. The incoming

sector benefited from a variety of large-scale re-

gional events.

By acquiring a 75% interest in Gulet Touropa

Touristik (GTT), the largest Austrian package tour

operator, the TUI Group expanded to become

Austria's market leader. GTT achieved strong

growth in the first nine months of 2000. Business

with Turkey developed with particular success.

The Magic Life Clubs, which offer all-inclusive

holidays, were in great demand across all destina-

tions, with substantial increases in bookings.

˘ Source market Western EuropeThe source market Western Europe covers the

tourism business in the Netherlands and Belgium.

At 1.35 billion e total turnover was up 15% on last

year. Results did not exceed those of last year, as

the markets remained subject to fierce competi-

tion.

˘ The NetherlandsTUI Nederland, with core brands Arke and Hol-

land International and special offerings for all

market segments, is the country's largest tour

operator. After a difficult start – due to the Euro-

pean Cup football championship – business in

58 Divisions

Tourism

Divisions 59

the summer saw a considerable increase and pro-

gressed satisfactorily. Kras Ster Vakanties – taken

over last year and specialising in direct sales –

developed well, already transacting 10% of its

business over the Internet.

˘ BelgiumBelgian tour operator JetAir continued its success

in developing its traditional programme along

with newer brands such as Jetair Auto and Jetair

CityTrip. Bookings rose by just under 13%, which

meant that JetAir's tour operator brands performed

considerably better than the market.

With the travel agency chain VTB-VAB Reizen

and the TUI Travel Centers, the TUI Group owns the

leading distribution organisations on the Belgian

market. By intensifying their own distribution,

these organisations strengthened the market po-

sition of the tour operator business. Their mediat-

ed turnover was higher than last year.

˘ Destination managementIn principal holiday destinations the TUI Group

operates its own agencies. Currently the staff and

travel guides working in the TUI Service provide

support for holidaymakers in 18 countries, taking

care of them on arrival and at the various desti-

nations. Their service supports the tour operators'

core business and contributes significantly to

assuring the quality of the programmes.

At 338 million e, total turnover was 1.9% high-

er on last year. Results were lower than last year,

since the growth achieved by agencies in the east-

ern Mediterranean did not fully offset the drop in

the number of holidaymakers in Spain.

The Ultramar Express Group, operating in

destinations in Spain and the Dominican Repub-

lic, took care of fewer holidaymakers than in the

previous excellent year. The car rental business

with the ‘TUI Cars’ brand was extended. Its high-

quality vehicle fleet and attractive prices generat-

ed growing demand for TUI Cars.

In Portugal, Miltours maintained its leading

position in the destination. The group and incen-

tive travel business, as well as sales of leisure and

business travel, made a growing contribution to

positive development overall.

TUI Hellas continued the positive trend from

last year. It took care of around 7% more holiday-

makers, thus further extending its position as

market leader in the incoming business.

Bookings for holidays to Bulgaria were higher

than last year. This proved beneficial for Travel

Partner Bulgaria, which achieved substantial in-

creases both in the number of holidaymakers it

catered for and in turnover.

The share in the Turkish agency Tantur was

increased to 100%. Tantur took advantage of

Turkey's revival as a holiday destination, welcom-

ing considerably more holidaymakers than last

year.

Agencies associated with the TUI Group in

Cyprus, Egypt, Tunisia and Morocco again per-

formed well. Particularly notable is the develop-

ment of the Egyptian Travco, which benefited

primarily from this year's further substantial in-

crease in the number of people going on holiday

to Egypt.

TUI Service AG is the central organisation

catering for the needs of holidaymakers at their

destinations. During the last financial year,

around 1,400 tour guides provided support for

those on TUI Group holidays in 110 destinations.

˘ Hotel companiesAt the end of the financial year, the TUI Group's

portfolio consisted of 187 hotels with around

92,770 beds. The consolidated hotel companies

generated turnover of 463 million e, 20.7% more

than last year. As a consequence of excellent utili-

sation of the Group's hotel capacity, results also

increased markedly.

˘ RobinsonRobinson, the largest German provider of club holi-

days in the premium segment, operated 25 clubs

in eleven countries. With a capacity of 12,742 beds

it recorded around 10% more overnight stays

than last year. The average occupancy rate for all

Robinson clubs was over 80%.

The winners in the summer season were the

clubs in Turkey, Greece and Egypt. Positive overall

development was largely attributable to the open-

ing of the first German Robinson Club in Meck-

lenburg-Western Pomerania. The Jandia Playa

Club on Fuerteventura and the Schlanitzen Alm

Club in Austria were also highly successful.

Tourism

Hapag-Lloyd FlugNumber of aircraft per type

Airbus A 310-300 3

Airbus A 310-200 4

Boeing B 737-400 6

Boeing B 737-800 19

TUI GroupSelf-owned hotel beds per region

12% 47%

12% 6%

8% 4%

7% 4%

Greece/Cyprus Spain

Carribean Austria

Egypt Turkey

Morocco/Tunisia others

TUI GroupSelf-owned hotel beds per hotel brand

14% 52%

14% 3%

9% 8%

Robinson RIU

Grupotel Dorfhotel

Grecotel Iberotel

˘ DorfhotelDorfhotel operates seven hotels and villages in

Austria, mostly in Carinthia, and one complex in

Hungary. April 2000 saw the addition of the first

village in Germany, Dorfhotel Fleesensee, which

was very well received, with high occupancy rates.

Capacity rose to 2,912 beds and consequently the

number of overnight stays increased strongly.

˘ GrecotelGrecotel is Greece's leading hotel company. All 15

hotels in the Group, with total capacity of 8,277

beds, are in the four or five-star categories. They

are located in the popular holiday areas on the

Chalkidiki Peninsula in northern Greece, on the

West Peleponnese and on the islands of Crete,

Rhodes, Corfu and Mykonos. Occupancy rates

again matched the good level achieved last year.

˘ GrupotelGrupotel – in which the TUI Group has a 50%

share – has 34 hotels on the Balearic Islands with

total capacity of 13,155 beds. The three, four and

five-star hotels are either owned by the company

or operated under management or franchise

agreements. Occupancy was high, although the

number of overnight stays was lower than the

exceptionally good rate achieved last year.

˘ IberotelIberotel operates two hotels in Turkey and 14 in

Egypt, including five Swiss Inn Hotels. The Group

has overall capacity of 7,185 beds, of which 1,302

are in Swiss Inn Hotels. The Turkish hotels bene-

fited from strong demand for holidays in Turkey

and achieved high occupancy rates. In Egypt,

Iberotel has four hotels in Sharm el Sheikh and

five in Hurghada under management. Here, too,

the growing popularity of Egypt as a holiday des-

tination ensured that occupancy rates were high.

˘ RIU The RIU Group, Spain's second largest hotel chain,

operates 86 hotels and apartment complexes with

a total of 47,550 beds. The opening of six hotels on

the Spanish mainland, Lanzarote, Gran Canaria,

and in Tunisia and Mexico increased the number

The majority of hotels, numbering 56, were in

Spain, of which 16 on the Balearic Islands, 34 on

the Canary islands and six in mainland Spain.

A further 16 RIU hotels were located in other

Mediterranean destination countries. Further

afield in the Caribbean RIU operates a total of 14

hotels, mainly in the Dominican Republic. RIU

also has hotels in Mexico, Cuba and Florida.

RIU can look back on a successful financial

year. Group hotels were well occupied, and as a

result the number of overnight stays was up by

around 7%, while turnover showed a dispropor-

tionately large increase.

˘ Business travelSince January 2000, the Hapag-Lloyd Geschäfts-

reise and First Travel Management brands have

operated within the common organisational

structure of TUI Business Travel Deutschland. In

order to take advantage of the international con-

solidation of business customers' travel budgets,

TUI Business Travel will in future cooperate with

two international partners.

Business development for both brands was

gratifying, and the leading market position was

strengthened as a consequence. This is all the

more remarkable since the newly introduced busi-

ness model involving transaction fees for the

issuing of tickets – as a way of countering com-

mission capping by transport companies – was

not adopted by competitors.

The start of the new financial year saw the

establishment of the eMotion sector, which

brings together under one roof all units working

with state-of-the-art technologies, and will set

new standards for e-commerce applications.

Total turnover for the business travel sector

rose by 10.1% to 278 million e, and results also

showed a substantial improvement.

60 Divisions

Tourism

Divisions 61

Thomson Travel GroupFor the Thomson Travel Group, 2000 was a year

that ushered in decisive change for the future.

Internally, new management embarked on the

‘Change Programme’, a project aiming to reor-

ganise operational units, cut costs and invest in

information technology as a way of securing a

profitable future for the Group. Work on individ-

ual projects has progressed well and already

proved worthwhile, producing initial economic

success. Externally, the takeover of the totality of

shares by Preussag AG means that the Thomson

Travel Group is now part of the world's largest

integrated tourism group.

Since the takeover took place in the course of

the financial year, only Thomson Travel Group busi-

ness for July to September 2000 was included in

the Preussag consolidated financial statements.

In these three months during the high tourism

season, Thomson achieved total turnover of

2.46 billion e.

˘ UK tour operatorsWith its Thomson Holidays, Skytours, Club Free-

style, Just and Portland Direct brands, Thomson

Travel Group is the largest tour operator in UK

offering air package tours. Following over-capa-

city on the British market last year, the 2000

summer season saw supply and demand balance

out. As a consequence, much lower discounts

were required for late bookings, and so price

quality improved compared with the previous

summer season.

Thomson Travel Group has an extended mar-

keting network at its disposal. Apart from Lunn

Poly, the biggest travel agency chain of the UK,

three regional travel agency chains as well as call

center and teletext channels belong to it. They all

sell holidays of the Group's own tour operator

brands. A number of measures introduced within

the Change Programme have already started to

enhance the efficiency of own-brand distribution.

˘ International tour operatorsThe international tour operator sector encom-

passes the Nordic countries, where Thomson is

represented by the Fritidsresor Group, and source

market Ireland.

In Ireland, Thomson – represented by Budget

Travel – is market leader in both distribution and

the tour operator business. Demand was extreme-

ly brisk in the peak months of the summer sea-

son. Even more holidays were sold than in the

good previous year. Earnings, too, improved again.

The Fritidsresor Group comprises leading tour

operators in all the Nordic countries and Poland.

Its brands Fritidsresor and Atlas in Sweden, Star

Tour in Denmark and Norway, Hasse, Fritidsresor

and Finnmatkat in Finland and Scan Holiday in

Poland make it the second largest tourism group

in Northern Europe.

On the whole, the Nordic market was more

difficult than last year. Bookings for the summer

season were initially sluggish, with a resulting

increase in the proportion of late-booked holi-

days. Main reasons for this were warm weather,

that diminished the tendency to travel as well as

the weakness of the Scandinavian currencies,

which squeezed holidaymakers' budgets.

˘ Specialist tour operators At the beginning of the year, Thomson started to

reorganise its tour operator activities in special

markets and concentrate them within the Special-

ist Holidays Group. These tour operators include

skiing holidays, city trips and high-quality trips to

the Mediterranean and tours around Australia

and New Zealand in their programme. The reor-

ganisation has progressed well, and build the

basis for an increase of results in future.

˘ Britannia AirwaysOperating 44 aircraft, Britannia flew holidaymak-

ers with Thomson tour operators to holiday desti-

nations in the Mediterranean and abroad. 33 air-

craft were based in UK and eleven in the Group's

other source markets.

With high utilisation of flight capacity in the

2000 summer season, business development car-

ried on the good performance of the previous year.

Also having a positive impact were further im-

proved route planning and tight operational con-

trol of air traffic, factors that once again brought

Britannia the award of the most reliable British

charter airline.

Tourism

TUI Group and Thomson Travel GroupMarket positions in the source markets

No. 1 Austria Ireland

Finland Netherlands

Germany Poland

Great Britain

No. 2 Belgium Denmark

Norway Sweden

No. 3 Switzerland No. 8 Spain

BritanniaNumber of aircraft per type

Boeing B 737 5

Boeing B 767 16

Boeing B 757 22

62 Divisions

Logistics

ShippingThe shipping sector consists of Hapag-Lloyd

Container Linie and Hapag-Lloyd Kreuzfahr-

ten. The Rickmers-Linie was sold off with

effect from 1 January 2000.

Hapag-Lloyd Container Linie is one of

the large companies in international liner

shipping. In addition it is a member of the

Grand Alliance, the world's largest contain-

er shipping association. With the five ships

of 4,900 TEU capacity that came into serv-

ice this year, Hapag-Lloyd Container Linie

now owns 29 container ships. Self-owned

container capacity increased to 300,000

standard containers (TEU). Orders have

been placed for four more ships with stor-

age capacity of 7,200 TEU, putting them

among the largest in the world.

Hapag-Lloyd Kreuzfahrten is the market

leader in Germany. It operates a fleet of five

modern cruise ships, the flagship of which

is the ‘Europa’, a five-star cruise liner com-

missioned in 1999.

LogisticsThe logistics sector encompasses VTG Lehn-

kering, Pracht Spedition + Logistik and the

French company Algeco.

VTG-Lehnkering specialises in the trans-

port and storage of hazardous goods. Its core

business is rail logistics. The majority of its

customers come from the chemical indus-

try and VTG-Lehnkering has established a

strong reputation as a system supplier for

complex logistic solutions for this sector.

Pracht's business consists of internation-

al road haulage, storage and distribution.

Algeco is Europe's largest player in the

mobile buildings hire business as well as in

construction of permanent modular build-

ings. Its principal markets are France, Spain

and Germany.

LogisticsTurnover 1997/98 1998/99 1999/2000(in million e)

Shipping 1,873.8 1,949.2 2,405.4

Logistics 1,367.0 1,383.2 1,566.7

Total turnover 3,240.8 3,332.4 3,972.1

Internal turnover 311.4 317.5 383.1


The logistics division, which since the beginning of the financialyear has been managed within Hapag-Lloyd AG, can look back on a successful year with a new structure. Container shipping inparticular benefited from the growth of world trade and under-went considerable expansion. The other logistics activities con-tinued on the success of previous years.

Strong growth

Divisions 63

Preussag's logistics division, now concentrated

under Hapag-Lloyd AG, increased its total turn-

over by 19.2% to 3.97 billion e. The shipping sec-

tor accounted for more than two-thirds of this

growth. The contribution from this division to

consolidated results rose by 58.6% to 220 million e.

Here, too, shipping generated the largest propor-

tion with results at more than double the level of

last year.

ShippingTurnover 1997/98

1)1998/99 1999/2000

(in million e)

Hapag-Lloyd Container Linie 1,532.5 1,651.7 2,122.1

Hapag-Lloyd Kreuzfahrten 214.1 178.2 238.6

Rickmers-Linie 111.6 101.9 24.6

Hapag-Lloyd AG 15.6 17.4 20.1

Total turnover 1,873.8 1,949.2 2,405.4

1)Abbreviated financial year 1998 plus 4th quarter 1997

˘ Hapag-Lloyd Container LinieHapag-Lloyd Container Linie again grew more

strongly than the market. It handled a transport

volume of 1.57 million standard containers (TEU),

up 14% compared with last year.

Total turnover grew by 28.5% to 2.12 billion e,

while results increased by considerably more. The

main reasons for this – apart from the increase in

transport volume – were higher productivity, im-

proved freight rates, a stable US dollar and a fur-

ther reduction in shipping system costs. As a result

it was possible to absorb the higher costs caused

by a marked increase in fuel prices.

˘ Market developmentsThe strong growth in world trade – predicted to

be around 13% in 2000 – led to a substantial

boost in demand for transport in all continents

served by Hapag-Lloyd. The economic upturn in

Europe and the sustained expansion in North

America had a particularly favourable impact. For

the first time in many years there was a reduction

in surplus shipping capacity, which meant that

on a number of routes higher freight rates could

be applied.

˘ European region At around 540,000 TEU the European region

achieved an increase of around 15% in transport

volume. The North Atlantic routes were especially

well utilised due to the strength of the North

American economy. Shipments from the European

region to Asia also increased.

˘ American regionBusiness in the American region was marked by a

further drop in freight rates for shipments to Asia

and Europe. To some extent this was offset by

large increases in transport volume in both the

Pacific – where additional shipping capacity was

employed – and the North Atlantic. At around

410,000 TEU the volume transported was up by

24% on last year.

˘ Asian/Australian regionThe Asian/Australian region handled around

620,000 TEU, representing a 7% increase in trans-

port volume compared with last year. The region

benefited here above all from higher demand for

transport on routes to America. This led to an im-

provement in freight rates for exports from the

region. As far as shipments within Asia were con-

cerned, business stabilised at a sound level. By

optimising the container circulation system, a

further reduction was made in the unit cost of

shipping empty containers.

Hapag-Lloyd Group

Logistics

Container transports world-wide (in mill. TEU)

65

60

55

50

45

40

1997 1998 1999 2000 2001*

*estimate

Hapag-Lloyd Container LinieTransport volume (in ‘000 TEU)

600

500

400

300

1998/99 1999/2000

America Europe Asia

Hapag-Lloyd Container LinieTransport volume per region (1999/2000)

Asia Europe40% 34%

America26%

˘ Hapag-Lloyd KreuzfahrtenOn all the oceans of the world, cruises continued

to enjoy growing popularity. In Germany alone

the number of passengers booking cruises rose

by around 10%.

On the basis of overall good occupancy rates

for its fleet of five cruise ships, Hapag-Lloyd

Kreuzfahrten had a successful financial year. At

239 million e, total turnover was up by 33.9% and

operating results were improved.

A substantial contribution to these results was

generated by the new ‘Europa’ cruise liner, which

after just one year of operation won an award for

being the world's best cruise ship in its category.

As in previous years, bookings were also high

for the ‘Hanseatic’. In the three-star market the

‘Columbus’ was well established following a suc-

cessful season.

64 Divisions

LogisticsTurnover 1997/98 1998/99 1999/2000(in million e)

VTG-Lehnkering Group 902.4 878.9 968.3

Pracht Spedition + Logistik 185.41)

189.9 166.2

Algeco Group 279.2 314.4 432.2

Total turnover 1,367.0 1,383.2 1,566.7

1)Abbreviated financial year 1998 plus 4th quarter 1997

˘ VTG-Lehnkering GroupThe VTG-Lehnkering Group continued to develop

business steadily, as in previous years. Total turn-

over amounted to 968 million e – an increase of

10.2% on last year, also achieved by external

growth. Operating results were higher, while

overall results were below last year's level due to

adjustments in the value of shareholdings.

˘ Rail logisticsBusiness in the rail logistics sector benefited from

the expansion of activities and operational im-

provements. It thus contributed substantially to

the improvement in Group operating results.

The interest in the Transwaggon Group was

raised to around 54%. Transwaggon, which has

around 8,000 large-volume goods wagons and

flat wagons, is Europe's largest private-sector

supplier in this segment.

In the tank wagon sector, the acquisition of

IVG's fleet also served to consolidate the Group's

market position. Moreover, capacity was expand-

ed by the addition of new vehicles and vehicles

taken over from customers, so that VTG-Lehnkering

had a total of 18,500 tank wagons and special

goods wagons available this financial year.

In the core business of tank wagon rental,

demand was brisk across all market segments,

and thus utilisation of the fleet remained at a

high level.

˘ Inland waterway shippingIn inland waterway shipping, the tanker sector

particularly benefited from stable demand from

the chemical industry. Favourable water levels in

the principal areas of navigation meant that

operations ran smoothly to a very large extent.

Rhein-Fracht, which was taken over last year,

showed marked improvements in the wake of

restructuring.

˘ Rickmers-LinieThe Rickmers-Linie, which focused on conven-

tional liner services, was sold off with effect from

1 January 2000. Turnover generated up to this

date, amounting to 25 million e, was also includ-

ed in the Group financial statements.

Logistics

Divisions 65

˘ Chemical servicesIn the chemical services sector the Dr. Schirm

Group – market leader in Germany for the synthe-

sis, formulation and manufacture of agro-chemi-

cals – achieved good utilisation of its capacities.

By acquiring Ennis Agri-Tech the Dr. Schirm Group

expanded its activities in the US market.

Hago's business in PU foams and aerosols for

the construction industry was adversely affected

by the continuing weakness of economic activity

in this sector and by fierce competition.

˘ ParticipationsIn the participations sector, the tank farms and

warehouses for hazardous goods were satisfacto-

rily utilised overall.

Business in the road haulage and tank con-

tainer forwarding sectors developed unevenly.

Price increases for fuel and contracted haulage

services had a tangible effect on earnings in both

sectors.

As far as maritime services were concerned,

heightened pressure from international competi-

tion placed a particular burden on tug fleets.

˘ Pracht Spedition + LogistikThe sale last year of the parcel service business

reduced total turnover of Pracht by 12.5% to

166 million e over the financial year. Neverthe-

less, operating results improved. A substantial

contributor to this was the haulage sector,

which benefited from its strong regional position

on the market. The storage and distribution sec-

tor also achieved improvements on the basis of

higher order volumes from key accounts.

˘ Algeco GroupIn both the mobile buildings hire business and the

sale of modular buildings the Algeco Group took

advantage of the favourable economic climate on

its principal markets in France, the Iberian Penin-

sula and Germany.

In order to make the most of the commercial

potential arising from an increase in demand, the

mobile buildings park was expanded to over

85,000 units. Following last year's sizeable in-

crease, this represents a further 20% expansion

of capacity.

The Algeco Group achieved a 37.5% increase

in total turnover, taking it to 432 million e, and

profits were considerably higher than last year.

˘ FranceIn the hire business, Algeco S.A. and its French

subsidiaries benefited from the strong economic

position of their principal customer groups and

achieved high utilisation of their – much expand-

ed – capacity. Sales of modular buildings also

showed substantial growth at the close of the

financial year.

˘ Spain and PortugalOn the Iberian Peninsula, Alquimodul in Spain and

Algeco Portugal achieved steady development.

Capacity utilisation remained stable at a high

level.

˘ GermanyMBM Mietsystem and Hada, operating on the

German market, increased utilisation of their en-

hanced capacity and also managed to effect fur-

ther price increases in a number of susectors.

Algeco developed new business in Poland and the

Czech Republic, and opened a new production

plant for mobile buildings in Zlin, Czech Republic.

˘ Pallet logisticsIn the course of the financial year, the hitherto

successful development of business in the pallet

logistics sector was temporarily interrupted. The

main reason for this was uncertainty among cus-

tomers about the outcome of a legal dispute with

a competitor, that was settled in the meantime.

Logistics

Growth of German chemical industry(in %)

6

5

4

3

2

1

0

*estimate

1996 1997 1998 1999 2000*

AlgecoMobile building park (in ‘000 units)

100

80

60

40

20

0

1997/98 1998/99 1999/2000

66 Divisions

Industry

Markets improved Since the beginning of the financial year, the energy, building en-gineering and trading sectors have been grouped together withinthe industry division. Crude oil prices at record levels, the expansion of the North American economy and the strengthening during the year of the non-ferrous metals markets were factors thatplayed a major part in making it an outstanding financial year.

EnergyCore business in the energy sector is explo-

ration and production of crude oil and nat-

ural gas. Preussag Energie GmbH is one of

the major German producers in this sector.

Around 75% of its total crude oil production

is abroad, with key regions in South Ameri-

ca and North Africa. The natural gas business

concentrates largely on domestic reserves.

With its drilling and workover rigs, the

Deutag Group is a drilling contractor with a

presence in all major crude oil and natural

gas regions in the world.

Building EngineeringIn the building materials sector, the Fels

Group is market leader with its Fermacell

plasterboards. It has plants in Germany and

in the Czech Republic and is the second

largest producer of lime products in Europe.

Moreover, in conjunction with the Hebel

Group, Fels is one of the largest suppliers

of porous concrete construction systems.

In the heating and air-conditioning technol-

ogy sector the Wolf Group has a leading

position on the European market, with heat-

ing boilers, gas boilers, burners and solar

collectors its main product groups.

The Kermi Group manufactures flat and

design radiators as well as shower screens

in numerous variations.

The Minimax Group is one of the lead-

ing European suppliers of fire protection

technology for stationary and mobile use.

TradingThe AMC Group, the US steel service com-

panies and the W. & O. Bergmann Group are

acknowledged partners on their national

markets and in the international trading

business. Their activities focus on non-fer-

rous metals and products for the steel pro-

cessing industries.

IndustryTurnover 1997/98 1998/99 1999/2000(in million e)

Energy 904.5 765.4 983.0

Building engineering 1,910.2 1,999.2 2,371.6

Trading 5,081.2 3,818.3 4,799.6

Total turnover 7,895.9 6,582.9 8,154.2



Divisions 67

˘ Preussag Energie GroupThe development of turnover and results for

Preussag Energie Group was largely determined

by the high prices of crude oil and natural gas. At

589 million e, total turnover was almost twice as

large than last year. Operating results also show-

ed a clear improvement.

˘ Market developmentsAmid large fluctuations, prices on the internatio-

nal crude oil markets rose temporarily to levels last

seen around ten years ago. From 24 US dollar per

barrel in October 1999, the price of North Sea oil

Brent rose to top 32 US dollar per barrel at the

beginning of March. Following a collapse in prices

in April to around 20 US dollar per barrel there

was a resumption of the upward trend, driving up

prices to record levels of just under 38 US dollar

per barrel by September. As a result of measures

taken to reverse this trend by the OPEC countries

and the USA, prices then fell once more to just

over 28 US dollar per barrel.

The average price of North Sea oil for the

financial year was 27.20 US dollar per barrel,

around 86% up on last year. The similarly high

exchange rate of the US dollar had an additional

positive effect on income from domestic crude

oil.

Natural gas prices, which follow heating oil

prices with a time-lag, also rose considerably dur-

ing the year and, on average, were above last

year's levels.

˘ Crude oil productionPreussag Energie produced 2.71 million tons of

crude oil, an increase of 9.5% compared with last

year. This was primarily due to the expansion of

the international business with a 50% participa-

tion in the Tunisian offshore oilfield Ashtart and

an increase in production in the fields in Venezuela

and Ecuador. In the Middle East and in the North

Sea the production declined as expected. In

total the production of fields abroad rose by

15.4% to 2.07 million tons. Crude oil production in

Germany stood at 0,64 million tons. Various tech-

nical measures served to stabilise production

over the year.

˘ Natural gas productionAt 1.34 billion m

3(Vn), natural gas production was

8.3% up on the volume of last year. The capacity

of the domestic natural gas plants, accounting for

around 95% of total production, was expanded as

a result of optimised production processes and of

a successful exploratory drilling from last year

starting operation.

˘ ExplorationExploration activities contributed significantly to

identifying reserves: in the Taranaki Basin in New

Zealand two drillings discovered a substantial

natural gas and condensate reservoir. Extensive

development measures in production concessions

in Venezuela und Ecuador have proved the exis-

tence of additional reserves.

˘ Storage servicesThe service business within the storage techno-

logy sector was further expanded. With the com-

pletion of the storage facility in the Hanover area,

Preussag Energie now operates four natural gas

storage facilities for gas supply companies in

Germany.

˘ Kavernen Bau- und Betriebs-GmbHWith an increased turnover, KBB again achieved

a satisfactory result. Domestic engineering and

consultancy services for natural gas storage pro-

jects ensured that engineering capacity was fully

utilised. Activities abroad focused on the con-

struction of a natural gas storage facility in Portu-

gal and salt production projects in Thailand and

the US.

EnergyTurnover 1997/98 1998/99 1999/2000(in million e)

Preussag Energie Group 324.2 308.8 589.0

Deutag Group 580.3 456.6 394.0

Total turnover 904.5 765.4 983.0


Consolidated turnover 755.1 635.4 842.7

Industry

Development of oil price and US dollar

US-$/bbl e/US-$

34 1,25

32 1,20

30 1,15

28 1,10

26 1,05

24 1,00

22 0,95

Financial year 1999/2000

I II III IV

Preussag EnergieCrude oil production (in ‘000 tons)

3,000

2,000

1,000

0

1997/98 1998/99 1999/2000

domestic 722 679 640

abroad 1,480 1,797 2,074

total 2,202 2,476 2,714

1,455 1,239 1,342

Preussag EnergieNatural gas production (in mill. m

3Vn)

1,600

1,400

1,200

1,000

1997/98 1998/99 1999/2000

68 Divisions

˘ Deutag GroupOn the whole the companies of the Deutag

Group succeeded in standing their ground, at

times under difficult market conditions. Although

total turnover fell to 394 million e due to the

weakness of the market, a positive result was

achieved, an improvement compared with last

year.

˘ Drilling contactor businessBy the end of the last financial year, demand for

drilling services had declined as a result of the

drop in crude oil prices. This year, despite the sub-

stantial increase in the price of crude oil, there

was no sustained increase in demand. Business

was made more difficult in some regions by the

appearance of new local competitors.

Considerable regional differences were

apparent in the utilisation of the drilling and

workover rigs of the Deutag Group. In continen-

tal Europe utilisation stagnated at a low level. In

contrast, new contracts were obtained in the Far

East and North Africa. The high utilisation of rigs

located in South America served to stabilise the

situation overall.

˘ Offshore servicesThe offshore business, too, suffered as a result of

weak demand for oilfield services, which meant

that utilisation in this sector failed to live up to

expectations.

˘ Bentec GmbH Drilling & Oilfield SystemsThe reorganisation measures taken last year had

a beneficial effect on business. Utilisation im-

proved in the electrical engineering, repair and

service sectors. The new rigs sector was fully

utilised by the construction of a drilling rig for

a customer in Turkmenistan.

Building engineeringTurnover 1997/98 1998/99 1999/2000(in million e)

Fels Group 398.8 406.0 683.81)

Wolf Group 814.0 887.6 924.5

Kermi Group 231.1 231.6 255.9

Minimax Group 466.3 474.0 507.4

Total turnover 1,910.2 1,999.2 2,371.6


Consolidated turnover 1 ,747.1 1,784.9 2,086.9

1)1999/2000 including Hebel Group

˘ Fels GroupAfter an initial boost, the business climate in the

German construction industry slumped once

again during the last four months of the financial

year. Consequently there was a considerable drop

in demand for building materials.

Nevertheless, the Fels Group succeeded in in-

creasing total turnover to 412 million e. One ma-

jor factor in this was the expansion of the lime

products business. Results were good, at the

same level as last year.

On 1 April 2000 a major participation was

acquired in Hebel AG, one of Europe's leading

manufacturers of porous concrete products; at

the end of the year the participation amounted

to 81.2%.

The Hebel Group was consolidated for a period of

six months with total turnover of 272 million e,

achieving a nearly balanced result.

Despite a persistently weak level of activity in

the construction industry, the Fels Group achiev-

ed steady development in all product areas. In the

market segment for gypsum fibre board Fels main-

tained its leading position with its main product,

Fermacell, although domestic sales did not quite

attain the volume of last year. In contrast, on the

foreign markets, business again picked up, with

strong growth in places.

The lime products sector showed a substan-

tial increase in sales, benefiting from the integra-

tion of the works in Lower Saxony, Bavaria and

Industry

Divisions 69

Brandenburg acquired last year. The development

of sales to the different sectors of industry varied.

Purchasing by the building materials industry was

down because of the economic climate, while

sales to the steel industry and the environmental

protection sector increased markedly.

The development of sales in the porous con-

crete sector was not uniform. Demand for modu-

lar blocks and reinforced large-format compo-

nents was good, but there was a further drop in

demand for small-format stone.

By focusing on higher-quality products and

adding to its product range, the Salith dry mortar

systems sector continued its growth. Here very

high growth levels were achieved in thermal

bonding systems.

˘ Wolf GroupAgainst the background of tightening competi-

tion in its core markets, the Wolf Group devoted

the financial year to a realignment of its produc-

tion and sales organisation.

At 925 million e, total turnover was around 4%

up on last year. Results were satisfactory, although

lower than last year's levels.

On the market for heating technology in Ger-

many, the surge in demand expected for some

time following the new emission protection pro-

visions again failed to materialise. This particular-

ly affected the floor-mounted heater and burner

business. Sales of products with condensation

technology and of solar collectors rose again.

The introduction of new, attractive designs and

enhanced user-friendliness opened up additional

client segments.

In the air-conditioning sector Wolf consoli-

dated its leading position on the German market

and stepped up business abroad.

In Switzerland, construction business for new

buildings remained weak. The service and refur-

bishment business consequently increased in im-

portance and performed satisfactorily. Here the

grouping of the distribution and service organisa-

tion within Elcotherm had a positive impact.

Due to brisk demand in the replacement

business the French market recorded a slight

growth. Chaffoteaux & Maury benefited from this

and won additional market shares, particularly in

wall heaters. In the burner business Cuenod suc-

ceeded in standing its ground in a highly com-

petitive market.

Despite the worsening of economic conditions,

the Turkish Baymak Group continued last year's

good business development, with growth exceed-

ing that of the market.

The export business of the Wolf Group record-

ed a steady increase. Particularly in the Mediter-

ranean countries sales were higher than last year,

with especially strong demand for heaters and

continuous-flow water heaters.

˘ Kermi GroupWith total turnover up by around 10% to 256

million e and increased profits, Kermi continued

the trend visible over the last few years.

Although the heating and sanitary engineer-

ing market remained tense, Kermi achieved an

equally satisfactory performance in all product

areas. The optimisation of production processes

led to substantial productivity gains.

In the heating technology sector, Kermi was

able to maintain its position in the flat radiators

market, which in Germany continued to be sub-

ject to intense price competition. The design radi-

ator business continued to develop well. Domes-

tic sales and exports both exceeded last year's

figures, and this also applies to heating walls and

convectors.

The sanitary technology sector continued to

grow. Following the introduction of new products

and enhanced sales activities on export markets,

more shower screens were sold than last year.

Industry

Building licenses for new buildings(in mill. m

3)

40

30

20

10

0


Western Germany

Eastern Germany

I II III IV

Building licenses in Germany(for enclosed space in mill. m

3)

500

450

400

350

300

250

1995 1996 1997 1998 1999

˘ Minimax GroupThe Minimax Group consolidated its position as

one of the three leading fire protection suppliers

in Europe. Total turnover of 507 million ewas up

around 7% compared with last year, although

results were lower.

The economic climate in the public and com-

mercial building construction sectors improved

slightly. However, this was not yet sufficient to re-

duce the price pressure caused by excess capacity

in the fire protection market.

The Minimax Group recorded incoming orders

and construction performance which exceeded

those of last year, a development underpinned by

favourable economic conditions in its core Euro-

pean markets. The engineering, production and

assembly capacities in stationary fire protection

were fully utilised as a result of the stable order

situation.

In mobile fire protection, business matched

last year's level in a continuing highly competitive

environment.

Companies operating in the European mar-

kets saw non-uniform development. Overall they

succeeded in extending their business, with busi-

ness abroad increasing to 37% as a proportion of

the Group’s turnover.

70 Divisions

TradingTurnover 1997/98 1998/99 1999/2000(in million e)

AMC Group 3,106.1 2,322.8 3,085.6

US Steel Service Companies 981.1 800.2 967.5

W. & O. Bergmann Group 994.0 695.3 746.5

Total turnover 5,081.2 3,818.3 4,799.6



˘ AMC GroupAMC Group business developed well in a largely

favourable economic climate, although improve-

ments on last year varied between regions and

sectors.

Total turnover rose to 3.09 billion e. This 33%

increase derived primarily from the trading busi-

ness, where the substantial rise in non-ferrous

metal prices year on year accounted for most of

the turnover gains. Results for the AMC Group

were much higher than last year.

˘ TradingAmalgamated Metal Trading Ltd. (AMT), ring deal-

ing member of the London Metal Exchange, con-

tinued the trend from the previous year. Under

good trading conditions there was an increase in

income both from commissions and from princi-

pal trading.

International non-ferrous metal trading also

did better than the previous year. In contrast, trad-

ing in fine and industrial chemicals suffered as a

result of the weak euro.

˘ Distribution and merchanting The upturn in the economy of Western Canada led

to a substantial improvement in the steel service

centre business of Wilkinson Steel. In Eastern

Canada, Debro Steel did not yet succeed in trans-

lating its expanded production capacities into

sustained growth.

In special chemicals trading, Debro Chemicals

business was steady, once again matching the

previous year. In the USA, TR Metro focused on its

core markets on the East Coast and so improved

profitability. Cron Chemical, operating in the south-

ern states, was sold off in August 2000, and by

then had achieved a satisfactory contribution to

the results.

In Great Britain, William Rowland had a good

year in special metals trading, despite the fact

that the difficult situation in the metalworking

industry continued. Mountstar Metal benefited

from rising metal prices in the course of the year,

with particularly large increases in scrap metal

trading and wire stripping.

Industry

Divisions 71

˘ ProcessingOrders placed by the Canadian oil and gas indus-

tries only picked up again towards the end of the

financial year, and so Exchanger Industries was

unable to reproduce the results of last year.

National Concrete Accessories took advan-

tage of stable economic activity in Canada's con-

struction industry to sell more industrial building

materials than the previous year.

Similarly, for the Consolidated Alloys Group in

Australia and New Zealand, brisk demand from

the construction industry did much to revive

business. Sales of lead products increased partic-

ularly.

Keeling & Walker, the British tin oxide produ-

cer, benefited from the recovery in demand from

Asia and performed better than in the previous

year.

Thaisarco in Thailand produced more tin than

last year. The price of tin rose during the year and

on average stood at 3% over the previous year. Pro-

ductivity gains combined with the marketing of

metallic residues had a positive effect on income.

˘ US Steel Service Companies The steel service companies consolidated under

Preussag North America, Inc. (PNA) had a success-

ful financial year, albeit with regional differences.

Orders in the steel processing industry were sound,

underpinned by sustained economic growth in

the USA. With brisk demand from virtually all

major client segments, the companies within the

PNA steel service group sold a total of 2.35 million

tons of steel, 5.8% more than last year.

At 968 million e, total turnover rose by

around 21%. With some improvement in margins,

results were also considerably higher than last

year.

Preussag International Steel Corp., which fo-

cuses on storage business and direct sales, sta-

bilised sales on previous year’s level. While the

Mid-Atlantic division saw a substantial increase

in business, in the Mid-West it was more moder-

ate. On the East Coast, the Infra-Metals division

with its steel service center benefited from the

strong demand for sectional steel and heavy gird-

ers in this region.

Delta Steel, Inc. and its Smith Pipe and Steel

Division, with principal markets in the southern

states of Texas, Arizona, Arkansas und Oklahoma,

showed a marked improvement. Alongside sound

demand from the construction sector, business

with the oil and mining industries also picked up

again. There were also significant increases in the

telecommunications mast business.

The Feralloy Group operates several compa-

nies and divisions in the large industrial areas of

the northern states. Its principal clients are the

investment goods industry, the steel construction

sector and the automotive industry. Business

volume was up, but markets were subject to

fierce competition, so that increases in the price

of domestic steel could only to a limited extent

be passed on to the client.

˘ W. & O. Bergmann GroupEconomic development in the metalworking in-

dustries, which are especially important to the

W. & O. Bergmann Group, was not uniform. While

orders and hence demand for non-ferrous metals

in mechanical engineering and the automotive

industry were sound, business with the construc-

tion industry lacked the necessary economic

dynamism.

Nor did the development of metal prices in

core businesses present a uniform picture. Cop-

per prices rose temporarily during the year to

over 2,000 US dollar per ton, and at the end of

the financial year copper cost around 12% more

than the previous year. Over the same period the

price of aluminium rose by around 7%; nickel cost

around 23% more, while the price of zinc saw a

less strong increase of 3%.

For most metals, trading volume of the

W. & O. Bergmann Group was up compared with

last year. Total turnover rose – predominantly due

to prices – by around 7% to 747 million e. Results

were positive, and the restructuring measures

introduced began to take effect.

Industry

LME Quotation (in US-$/t)

Tin

6 200

6 000

5 800

5 600

5 400

5 200

5 000


I II III IV

US Steel Service CompaniesSteel sales (in mill. tons)

2.5

2.0

1.5

1.0

1995/96 96/97 97/98 98/99 99/00

LME Quotation (in US-$/t)

Aluminium Copper

2 000

1 900

1 800

1 700

1 600

1 500

1 400


I II III IV

72 Five Years Summary

Five Years Summary

1995/96 1) 1996/97 1) 1997/98 1998/99 1999/2000

Consolidated companies 226 216 361 508 594

Total turnover emill. 14,483 15,569 20,035 18,637 25,112

Consolidated turnover emill. 12,805 13,630 18,340 16,501 21,854

Foreign turnover % 48.2 54.5 66.3 76.3 81.1

Results by division emill. 239 360 521 620 747

Profit before tax emill. 220 343 479 533 577

Tax emill. 80 140 177 188 174

Net profit for the year emill. 140 203 302 345 403

Earnings per share e 0.89 2) 1.23 2) 1.69 1.78 1.91

Cash flow per share e 3.88 2) 5.25 2) 5.45 3.59 5.57

Cash flow/turnover % 4.6 2) 5.9 2) 4.5 3.5 4.4

Internal financing % 85.3 131.1 51.8 23.1 20.0

Fixed assets emill. 3,599 3,397 5,878 7,769 12,456

Current assets emill. 4,169 4,243 4,402 7,467 6,054

Shareholders’ equity emill. 1,621 1,603 1,996 2,718 3,271

Liabilities emill. 6,147 6,037 8,285 12,518 15,239

long-term emill. 2,546 2,437 3,796 3,433 5,271

short-term emill. 3,601 3,600 4,489 9,085 9,968

Balance sheet total emill. 7,768 7,640 10,280 15,236 18,510

Equity ratio % 20.9 21.0 19.4 17.8 17.7

Capital expenditure emill. 695 612 1,607 2,499 4,820

Goodwill emill. — — 605 1,142 3,263

Tangible assets emill. 569 538 834 863 1,346

Investments emill. 126 74 168 494 211

Depreciation emill. 534 548 564 617 840

on goodwill emill. — — 42 93 174

on tangible assets emill. 521 539 498 492 620

on investments emill. 13 9 24 32 46

Equity/fixed assets ratio % 115.8 118.9 98.5 79.2 68.6

Total employees 30 Sept 66,226 62,601 66,563 79,142 79,959

Domestic 30 Sept 53,603 49,563 43,428 28,718 31,047

Abroad 30 Sept 12,623 13,038 23,135 50,424 48,912

Personnel costs emill. 2,782 2,829 2,941 2,287 2,933

1) financial statements according to German accounting rules2) according to DVFA/SG

� Preussag Group

Financial Year from 1 October 1999 to 30 September 2000

Financial Statements of the Preussag Group� 74 Consolidated Profit and Loss Statement

� 75 Consolidated Balance Sheet

� 76 Development of Fixed Assets

� 78 Segment Reporting

� 80 Development of Equity

� 81 Consolidated Cash Flow Statement

Notes on the Financial Statements� 82 Notes on the Financial Statements

� 95 Notes on the Consolidated Profit and Loss Statement

� 105 Notes on the Consolidated Balance Sheet

� 126 Notes on the Consolidated Cash Flow Statement

� 130 Auditors’ Statement

Boards of Preussag AG� 131 Supervisory Board

� 133 Executive Board

� 134 Report of the Supervisory Board

Major Shareholdings� 136

Financial Statements 1999/2000 73

Financial Statements

74 Financial Statements 1999/2000

Consolidated Profit and Loss Statement

(in mill.e) Notes 1999/2000 1998/99

Turnover (1) 21,853.7 16,500.9

Change in stocks of goods and other own work capitalised (2) + 103.9 + 42.2

Other operating income (3) 1,202.6 1,050.2

23,160.2 17,593.3

Cost of materials (4) 14,930.3 11,099.4

Personnel costs (5) 2,933.2 2,286.9

Depreciation (6) 623.9 498.1

Other operating expenses (7) 3,846.6 3,137.4

22,334.0 17,021.8

Operating result + 826.2 + 571.5

Result from companies valued at equity - 30.8 + 8.9

Other financial result - 48.5 + 39.8

Financial result (8) - 79.3 + 48.7

Result by divisions + 746.9 + 620.2

Amortisation of goodwill (9) 170.5 87.0

Profit on ordinary activities + 576.4 + 533.2

Taxes on income 124.6 150.2

Other taxes 49.3 37.6

Taxes (10) 173.9 187.8

Group profit for the year 402.5 345.4

Results attributable to minority interests (11) 71.4 59.8

Results attributable to shareholdersof Preussag AG 331.1 285.6

Profit carried forward of Preussag AG 0.5 0.4

Transfers to reserves 197.6 152.9

Profit available for distribution of Preussag AG 134.0 133.1

(in e) Notes 1999/2000 1998/99

Earnings per share (12) 1.91 1.78

Diluted earnings per share 1.88 1.72

� Profit and Loss Statement of the Preussag Group (for the period from 1 October 1999 to 30 September 2000)


Assets (in mill.e) Notes 30 Sept 2000 30 Sept 1999

Fixed assets

Goodwill (13) 5,005.2 1,846.0

Other intangible assets (14) 168.6 123.5

Tangible assets (15) 6,438.8 4,881.5

Companies valued at equity (16) 536.5 624.9

Other investments (16) 307.3 292.7

12,456.4 7,768.6

Current assets

Inventories (17) 1,122.8 867.0

Receivables and other current assets

Trade accounts receivable (18) 1,858.2 1,887.7

Other receivables and assets (19) 1,656.6 1,013.1

3,514.8 2,900.8

Funds (20) 1,005.8 3,324.3

5,643.4 7,092.1

Assets from future tax benefits (21) 86.8 121.5

Prepaid expenses (22) 322.9 253.6

18,509.5 15,235.8

Shareholders’ equity and liabilities (in mill.e) Notes 30 Sept 2000 30 Sept 1999

Shareholders’ equity

Subscribed capital (23) 443.4 442.0

(Conditional capital 100.0)

Capital reserves (24) 1,465.4 1,444.3

Revenue reserves (25) 937.1 397.1

Net profit available for distribution (26) 134.0 133.1

Interest in equity of shareholders of Preussag AG 2,979.9 2,416.5

Minority interests in equity (27) 290.4 301.7

3,270.3 2,718.2

Provisions

Provisions for pensions and similar commitments (28) 904.4 814.7

Tax provisions (29) 1,013.3 795.2

Other provisions (29) 1,371.5 1,173.1

3,289.2 2,783.0

Liabilities (30)

Financial liabilities 7,192.8 3,283.1

(of which remaining term of more than one year) (2,995.4) (1,498.4)

Trade accounts payable 2,709.8 4,859.7

Other liabilities 1,820.2 1,419.6

11,722.8 9,562.4

Deferred income (31) 227.2 172.2

18,509.5 15,235.8

� Balance Sheet of the Preussag Group (as per 30 September 2000)

Consolidated Balance Sheet


Development of Fixed Assets

� Development of Fixed AssetsCost of Acquisition or Manufacturing

Balance Currency Changes in Additions Disposals 1) Transfers BalanceAdjustment Consolida-

tion and(in mill.e) 1 Oct 1999 Accounting 30 Sept 2000

Intangible assets

Exploration and drilling licences 13.9 0.0 0.0 0.0 0.0 0.0 13.9

Concessions, patentsand licences 231.8 0.5 206.5 51.3 39.6 11.9 462.4

(of which development costsand self-constructed assets) (19.1) (0.0) (0.0) (18.6) (0.2) (0.0) (37.5)

Goodwill 1,999.2 28.1 477.8 3,263.4 411.4 1.8 5,358.9

(of which goodwill fromcapital consolidation) (1,955.1) (27.8) (468.9) (3,261.3) (406.4) (1.8) (5,308.5)

Payments on account 4.2 0.0 0.1 1.6 0.0 - 4.0 1.9

Total 2,249.1 28.6 684.4 3,316.3 451.0 9.7 5,837.1

Tangible assets

Mineral rights 46.2 0.0 0.0 0.0 0.0 0.0 46.2

Real estate, land rights andbuildings including buildingson third-party properties 2,065.2 46.0 370.4 166.0 203.5 27.3 2,471.4

Pits, mines and boreholes 322.5 0.0 376.3 3.8 5.4 0.7 697.9

Machinery and fixtures 1,642.9 22.7 257.5 93.9 67.5 34.7 1,984.2

Ships and wagons 2,150.8 17.4 0.0 265.3 58.7 47.8 2,422.6

Mobile buildings, containersand container trailers 890.0 0.1 5.6 100.6 33.5 1.6 964.4

Aircraft 1,089.9 89.3 1,014.8 272.3 245.2 13.9 2,235.0

Other plants andoffice equipment 1,292.2 73.6 381.4 239.2 644.1 - 4.9 1,337.4

Work in progress 56.4 2.4 4.5 54.2 0.9 - 46.6 70.0

Payments on account 109.1 0.1 1.9 97.0 5.0 - 82.4 120.7

Total 9,665.2 251.6 2,412.4 1,292.3 1,263.8 - 7.9 12,349.8

Investments

Shares in Group companies 156.4 6.5 24.5 4.0 28.5 - 5.0 157.9

Loans to Group companies 8.9 0.0 0.0 5.9 6.6 - 0.7 7.5

Companies valued at equity 658.6 1.8 35.0 86.7 208.4 6.4 580.1

Other shareholdings 211.0 5.5 9.9 17.9 107.9 - 2.5 133.9

Loans to other companiesin which shareholdings are held 7.4 0.0 0.1 2.2 0.7 0.0 9.0

Securities 2.3 0.3 4.0 5.8 2.5 0.0 9.9

Other investments 62.8 0.8 0.3 13.3 21.2 0.0 56.0

Payments on account 0.0 0.0 0.0 75.6 0.0 0.0 75.6

Total 1,107.4 14.9 73.8 211.4 375.8 - 1.8 1,029.9

Fixed assets of the Preussag Group 13,021.7 295.1 3,170.6 4,820.0 2,090.6 0.0 19,216.8

1) Including disposals relating to changes in structure of consolidated companies a) Intangible assets: 273.4b) Tangible assets: 641.7c) Investments: 101.4


Depreciation Net Book ValuesBalance Currency Changes in Depreciation Disposals 2) Transfers Balance Balance Balance

Adjustment Consolida- for thetion and

1 Oct 1999 Accounting Current Year 30 Sept 2000 30 Sept 2000 30 Sept 1999

13.9 0.0 0.0 0.0 0.0 0.0 13.9 0.0 0.0

112.5 1.3 165.3 31.5 19.2 4.3 295.7 166.7 119.3

(1.7) (0.0) (0.0) (2.6) (0.0) (0.0) (4.3) (33.2) (17.4)

153.2 0.2 47.2 174.5 22.0 0.6 353.7 5,005.2 1,846.0

(140.6) (0.2) (45.5) (170.5) (21.5) (0.6) (335.9) (4,972.6) (1,814.5)

0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.9 4.2

279.6 1.5 212.5 206.0 41.2 4.9 663.3 5,173.8 1,969.5

9.3 0.0 0.0 0.0 0.0 0.0 9.3 36.9 36.9

705.4 13.7 117.7 70.1 53.3 - 1.3 852.3 1,619.1 1,359.8

222.7 0.0 283.0 23.3 5.3 0.0 523.7 174.2 99.8

1,034.6 12.6 151.2 95.7 57.1 0.2 1,237.2 747.0 608.3

1,157.2 9.9 0.0 82.8 41.5 0.0 1,208.4 1,214.2 993.6

479.3 0.0 2.8 62.2 28.7 1.0 516.6 447.8 410.7

382.3 32.4 324.9 69.6 143.4 0.0 665.8 1,569.2 707.6

792.6 48.7 258.4 184.6 382.5 - 4.2 897.6 439.8 499.6

0.3 0.0 0.2 0.1 0.5 0.0 0.1 69.9 56.1

0.0 0.0 0.0 0.0 0.0 0.0 0.0 120.7 109.1

4,783.7 117.3 1,138.2 588.4 712.3 - 4.3 5,911.0 6,438.8 4,881.5

73.6 3.2 23.2 5.3 0.4 - 3.9 101.0 56.9 82.8

4.5 0.0 0.0 0.2 4.5 0.0 0.2 7.3 4.4

33.7 0.0 0.0 32.9 26.3 3.3 43.6 536.5 624.9

68.3 1.5 4.8 7.0 50.3 0.0 31.3 102.6 142.7

0.2 0.0 0.0 0.0 0.0 0.0 0.2 8.8 7.2

0.1 0.0 0.0 0.1 0.0 0.0 0.2 9.7 2.2

9.4 0.0 0.1 0.5 0.4 0.0 9.6 46.4 53.4

0.0 0.0 0.0 0.0 0.0 0.0 0.0 75.6 0.0

189.8 4.7 28.1 46.0 81.9 - 0.6 186.1 843.8 917.6

5,253.1 123.5 1,378.8 840.4 835.4 0.0 6,760.4 12,456.4 7,768.6

2) Including disposals relating to changes in structure of consolidated companies a) Intangible assets: 30.6b) Tangible assets: 293.1c) Investments: 2.3

Tourism Logistics Energy(in mill.e) 1999/2000 1998/99 1999/2000 1998/99 1999/2000 1998/99

Third-party turnover 10,562.1 7,164.8 3,589.0 3,014.9 842.7 635.4

Inter-segment turnover 7.2 3.7 2.6 3.2 0.0 0.1

Segment turnover 10,569.3 7,168.5 3,591.6 3,018.1 842.7 635.5

Segment operating result 305.9 254.5 245.4 156.6 233.2 56.3

of which expenses with no effect on cash (3.8) (31.3) (25.1) (0.9) (0.0) (14.3)

Financial result 117.4 53.0 - 25.0 - 17.6 40.3 72.9

of which results from companies valued at equity (21.6) (19.1) (0.3) (- 1.0) (0.0) (- 12.4)

Result by divisions 423.3 307.5 220.4 139.0 273.5 129.2

Return on sales (%) 4.0 4.3 6.1 4.6 32.5 20.3

Segment assets 4,042.5 3,083.2 2,628.5 2,237.4 977.8 702.9

Interest-bearing assets and funds 1,050.5 3,454.8 330.7 548.8 142.7 176.4

of which book values of companies valued at equity (206.1) (159.7) (5.1) (6.6) (0.0) (0.0)

Assets by divisions 5,093.0 6,538.0 2,959.2 2,786.2 1,120.5 879.3

Segment liabilities 3,643.7 5,474.3 1,021.6 883.2 589.7 523.9

Interest-bearing liabilities 1,222.1 1,345.4 806.4 646.2 221.8 86.6

Liabilities by divisions 4,865.8 6,819.7 1,828.0 1,529.4 811.5 610.5

Tangible and intangible assets

Depreciation 241.1 148.4 192.0 179.6 60.9 52.5

of which non-scheduled (11.7) (2.5) (0.2) (2.9) (0.1) (0.0)

Capital expenditure 615.9 352.9 492.4 315.5 58.8 58.1

Financing ratio (%) 39.1 42.0 39.0 56.9 103.6 90.4

Segment equity 1,449.3 1,020.2 976.3 900.0 231.1 260.0

Segment total capital 6,649.2 8,177.2 3,201.1 2,814.5 1,149.1 912.1

Equity ratio (%) 29.2 30.1 22.6 15.4 118.3 49.7

Total capital ratio (%) 7.5 4.2 8.1 6.8 25.2 15.5

Personnel at year-end 46,264 48,536 9,202 8,956 3,052 3,481

Germany EU (excl. Germany) Rest of Europe(in mill.e) 1999/2000 1998/99 1999/2000 1998/99 1999/2000 1998/99

Consolidated turnover by customers 4,131.9 3,908.7 11,694.5 7,644.2 904.9 914.8

Consolidated turnover bydomicile of companies 10,750.3 9,337.6 8,669.6 5,272.6 631.2 510.1

Segment assets 6,366.4 5,356.2 3,920.9 2,370.3 254.5 235.0

Tangible and intangible assets

Depreciation 389.1 355.7 156.3 102.8 17.4 13.0

Capital expenditure 928.5 662.5 320.5 170.4 22.8 12.1

Segment liabilities 3,561.3 3,232.8 2,775.6 3,259.4 202.9 164.8

Personnel at year-end 31,047 28,718 38,514 36,509 4,633 3,520


Segment Reporting

� Key Figures by Divisions and Sectors

� Key Figures by Regions


Building Engineering Trading Others/Consolidation Group1999/2000 1998/99 1999/2000 1998/99 1999/2000 1998/99 1999/2000 1998/99

2,086.9 1,784.9 4,608.7 3,728.5 164.3 172.4 21,853.7 16,500.9

1.4 0.8 0.0 - 0.1 - 11.2 - 7.7 0.0 0.0

2,088.3 1,785.7 4,608.7 3,728.4 153.1 164.7 21,853.7 16,500.9

127.1 104.8 105.5 52.0 - 190.9 - 52.7 826.2 571.5

(0.3) (0.0) (0.0) (0.3) (84.8) (17.6) (114.0) (64.4)

- 16.4 - 13.2 - 17.3 - 12.9 - 178.3 - 33.5 - 79.3 48.7

(0.0) (0.0) (2.8) (2.1) - (55.5) (1.1) - (30.8) (8.9)

110.7 91.6 88.2 39.1 - 369.2 - 86.2 746.9 620.2

5.3 5.1 1.9 1.1 3.4 3.8

1,748.1 1,402.9 958.0 713.3 1,094.1 682.9 11,449.0 8,822.6

96.1 131.7 83.3 61.7 258.8 99.8 1,962.1 4,473.2

(0.0) (0.6) (9.3) (6.1) (316.0) (451.8) (536.5) (624.8)

1,844.2 1,534.6 1,041.3 775.0 1,352.9 782.7 13,411.1 13,295.8

747.4 604.3 287.1 245.5 609.3 607.6 6,898.8 8,338.8

701.0 423.9 385.4 265.6 3,856.1 519.3 7,192.8 3,287.0

1,448.4 1,028.2 672.5 511.1 4,465.4 1,126.9 14,091.6 11,625.8

90.8 79.6 21.2 16.6 17.9 21.4 623.9 498.1

(6.1) (3.6) (0.0) (0.1) (0.9) (0.1) (19.0) (9.2)

89.9 82.3 40.3 34.3 49.9 38.3 1,347.2 881.4

101.0 96.8 52.6 48.4 35.9 55.9 46.3 56.5

525.6 589.2 355.3 266.8 - 267.3 - 318.0 3 270.3 2,718.2

2,142.8 1,747.6 1,050.4 791.5 4,316.9 792.9 18,509.5 15,235.8

21.1 15.5 24.8 14.7 22.8 22.8

6.7 6.7 10.9 7.5 5.7 5.3

16,664 13,500 3,505 3,315 1,272 1,354 79,959 79,142

America Other Regions Consolidation Group1999/2000 1998/99 1999/2000 1998/99 1999/2000 1998/99 1999/2000 1998/99

2,881.7 2,086.5 2,240.7 1,946.7 21,853.7 16,500.9

1,435.0 1,207.7 367.6 172.9 21,853.7 16,500.9

753.1 724.6 150.0 145.1 4.1 - 8.6 11,449.0 8,822.6

45.4 15.6 16.2 10.3 - 0.5 0.7 623.9 498.1

57.2 30.1 18.2 6.3 1,347.2 881.4

231.5 1,502.8 102.8 201.9 24.7 - 22.9 6,898.8 8,338.8

2,920 4,843 2,845 5,552 79,959 79,142


Development of Equity

Subscribed Capital Revenue of which Profit Equity at- Minority Totalcapital reserves reserves difference available tributable interests Equity

of currency for distri- to share-adjust- bution holders of

(in mill.e) ments Preussag AGBalance 1 Oct 1999 442.0 1,444.3 397.1 (- 52.3) 133.1 2,416.5 301.7 2,718.2

Issued employee shares 0.9 12.1 0.0 (0.0) 0.0 13.0 0.0 13.0

Exercised warrants and 0.5 3.0 0.0 (0.0) 0.0 3.5 0.0 3.5convertible bonds

Payment of dividends 0.0 0.0 0.0 (0.0) - 132.6 - 132.6 - 22.1 - 154.7

Changes due to capitaland dividend payments 1.4 15.1 0.0 (0.0) - 132.6 - 116.1 - 22.1 - 138.2

Application of new IAS regulations for the first time 0.0 - 4.7 289.8 (0.0) 0.0 285.1 - 6.2 278.9

Differences due tochanges in the consolidation 0.0 0.0 8.9 (6.1) 0.0 8.9 - 61.8 - 52.9

Currency adjustments 0.0 0.0 54.4 (54.4) 0.0 54.4 7.4 61.8

Changes withouteffect on results 0.0 - 4.7 353.1 (60.5) 0.0 348.4 - 60.6 287.8

Transfers to reserves 0.0 10.7 186.9 (0.0) - 197.6 0.0 0.0 0.0

Group profit for the year 0.0 0.0 0.0 (0.0) 331.1 331.1 71.4 402.5

Balance 30 Sept 2000 443.4 1,465.4 937.1 (8.2) 134.0 2,979.9 290.4 3,270.3

Subscribed Capital Revenue of which Profit Equity at- Minority Totalcapital reserves reserves difference available tributable interests Equity

of currency for distri- to share-adjust- bution holders of

(in mill.e) ments Preussag AGBalance 1 Oct 1998 390.8 805.6 390.5 (- 55.3) 117.6 1,704.5 291.2 1,995.7

Capital increase 39.0 549.2 0.0 (0.0) 0.0 588.2 0.0 588.2

Issued employee shares 0.7 4.9 0.0 (0.0) 0.0 5.6 0.0 5.6

Exercised warrants 11.5 75.1 0.0 (0.0) 0.0 86.6 0.0 86.6

Exercised convertible bonds 0.0 9.5 0.0 (0.0) 0.0 9.5 0.0 9.5

Payment of dividends 0.0 0.0 0.0 (0.0) - 117.2 - 117.2 - 19.0 - 136.2

Changes due to capitaland dividend payments 51.2 638.7 0.0 (0.0) - 117.2 572.7 - 19.0 553.7

Differences due tochanges in the consolidation 0.0 0.0 - 150.0 (- 0.7) 0.0 - 150.0 - 33.4 - 183.4

Currency adjustments 0.0 0.0 3.7 (3.7) 0.0 3.7 3.1 6.8

Changes withouteffect on results 0.0 0.0 - 146.3 (3.0) 0.0 - 146.3 - 30.3 - 176.6

Transfers to revenue reserves 0.0 0.0 152.9 (0.0) - 152.9 0.0 0.0 0.0

Group profit for the year 0.0 0.0 0.0 (0.0) 285.6 285.6 59.8 345.4

Balance 30 Sept 1999 442.0 1,444.3 397.1 (- 52.3) 133.1 2,416.5 301.7 2,718.2

� Development of Equity 1999/2000

� Development of Equity 1998/99


Consolidated Cash Flow Statement

(in mill.e) Notes 1999/2000 1998/99 ChangeGroup profit for the year 402.5 345.4 57.1

Depreciation (+)/additions (-) to fixed assets 811.1 598.7 212.4

Other non-cash expenditure (+)/earnings (-) 16.4 - 59.1 75.5

Interest expenditure 302.9 185.8 117.1

Profit (-)/loss (+) from disposals of fixed assets - 185.2 - 114.7 - 70.5

Increase (-)/decrease (+) in inventories - 72.2 - 21.5 - 50.7

Increase (-)/decrease (+) in receivable and other current assets - 49.6 274.8 - 324.4

Increase (+)/decrease (-) in provisions 110.1 159.1 - 49.0

Increase (+)/decrease (-) in liabilities(excl. liabilities to banks) - 370.1 - 791.5 421.4

Cash flow from business activities (32) 965.9 577.0 388.9

Payments received from disposalsof tangible and intangible assets 250.9 176.6 74.3

Payments made (-) for/payments received (+) from disposals offinancial assets (excl. disposals of funds due to divestments) 256.3 - 15.4 271.7

Payments made for investmentsin intangible and tangible assets - 1,167.9 - 842.9 - 325.0

Payments received (+) from/payments made (-) for investments infinancial assets (excl. additions of funds due to acquisitions) - 2,994.9 2,396.0 - 5,390.9

Cash flow from investment activities (33) - 3,655.6 1,714.3 - 5,369.9

Payments received from capital increasesand allowances by shareholders 39.1 712.4 - 673.3

Dividend payments of

Preussag AG - 132.6 - 117.2 - 15.4

Subsidiaries to other shareholders - 22.1 - 16.2 - 5.9

Payments received from the issue of loanand the raising of financial liabilities 4,584.7 911.5 3,673.2

Payments made for redemption of bonds and financial liabilities - 1,019.8 - 1,064.0 44.2

Payments made for interests - 254.1 - 195.1 - 59.0

Cash flow from finance activities (34) 3,195.2 231.4 2,963.8

Change in funds with cash effects 505.5 2,522.7 - 2,017.2

(in mill.e) Notes 1999/2000 1998/99

Flow of funds (35)

Funds at the beginning of the period 3,324.3 811.2

Change in funds due to changes in consolidation - 2,952.5 0.0

Change in funds due to exchange rate fluctuationsand other change in value 128.5 - 9.6

Change in funds with cash effects 505.5 2,522.7

Funds at the end of the period 1,005.8 3,324.3

� Cash Flow Statement

� Accounting principles The consolidated financial statements of Preussag AG were prepared in accord-

ance with the binding accounting rules of the International Accounting Stand-

ards Committee (IASC) – the International Accounting Standards (IAS) as well as

the interpretations of the Standing Interpretations Committee (SIC) – applicable

at the balance sheet date, on the basis of the historical cost principle. For the

year under review, the rules contained in IAS 16 (revised 1998) ‘Property, Plant

and Equipment’, IAS 22 (revised 1998) ‘Business Combinations’, IAS 35 ‘Discontin-

uing Operations’, IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’

and IAS 38 ‘Intangible Assets’ were applied for the first time.

In addition to the binding IAS applicable for the financial year, the amendments

adopted in October 2000 to IAS 12 ‘Taxes on Income’ and IAS 10 (revised 1999)

‘Events following the Balance sheet Date’ were already implemented on a volun-

tary basis before they became effective.

All requirements of each of the standards applied were completely fulfilled and

gave rise to the presentation of a true and fair view of the net worth, financial

position and results of the Preussag Group. There was no deviation from these

standards due to overriding principles.

The first-time application of the IASC rules was carried out as per 1 October 1999

with no effect on results to the benefit or at the expense of equity, as if the finan-

cial statements had always been prepared in accordance with the IASC rules. No

revaluation was made of the previous year's values. The first-time application of

the new rules led to the following substantial changes to the consolidated

financial statements:

• The costs of dismantling assets and restoring or recultivating locations are

capitalised as incidental acquisition costs to the extent that these costs are

recognised as a provision.

• In accordance with the rules of IAS 37, long-term provisions for restoration

costs are no longer accrued over the expected useful life, but are valued at the

present value of the anticipated settlement amount.

• Provisions defined as prepaid expenses according to IAS 37 are reclassified as

liabilities. This primarily applies to the provisions for supplier invoices not yet

received. The previous year's figures have been reclassified accordingly.

• The rules of IAS 12 (revised 2000) stipulate that current and deferred taxes and

liabilities are measured at the tax rate applicable to undistributed profits. Thus

deferred taxes for domestic companies were revalued as per 1 October 1999 on

the basis of the rate of corporation tax for retained profits with an average tax

rate of 52% (previously 43%). Corporate tax savings or charges reported last

year and occurring in the event of future distribution of profits retained by

German companies in previous years were offset against equity as per 1 Octo-

ber 1999 with no effect on results.


Notes on the Financial Statements

Notes on the principles and methods underlying the consolidated financial statements

• According to the concept of fictitious profit retention stipulated in IAS 12

(revised 2000), corporation tax credits existing for German companies due to

the specific features of German tax law are only taken into account once com-

panies have taken a resolution on the appropriation of profits. For the differ-

ences from the tax balance sheet that arise from the balance sheet adjust-

ment and revaluation of German subsidiaries acquired after 1 October 1995,

deferred taxes were calculated to apply retroactively to the time of acquisition.

At the same time the goodwill of the companies in question was adjusted

accordingly.

These changes resulted in an increase in equity of 278.9 million e as per 1 Octo-

ber 1999 with no effect on results. The major changes to the individual balance

sheet items are described under the respective items.

The requirements of section 292a of the German Commercial Code (HGB) for an

exemption from the duty to prepare consolidated financial statements in accord-

ance with German accounting standards were met. According to the interpreta-

tion of the German Accounting Standards Committee (DRSC), the consolidated

financial statements were in particular consistent with the European Union

Directive on Consolidated Financial Accounting (Directive 83/349/EEC). In order

to guarantee equivalence with consolidated financial statements prepared

under the rules of commercial law, the commercial law disclosures and explana-

tory information extending beyond the scope of the IASC rules were presented

in their entirety. Hence the Preussag Group has met the conditions for exemp-

tion from the duty to prepare consolidated financial statements based on com-

mercial law.

The financial year of Preussag AG and its main subsidiaries covers the period

from 1 October of any year to 30 September of the subsequent year. Following

the decision at the Annual General Meeting on 12 April 2000 to change the

financial year to coincide with the calendar year, an abbreviated financial year

was established for the period from 1 October to 31 December 2000.

As of 1 October 1999, Group reporting was changed to euros. All comparable

values were converted using the official conversion rate of 1.95583 DM : 1 euro.

The Executive Board of Preussag AG, registered in the commercial registers of

the district courts of Berlin-Charlottenburg and Hanover, is based in Hanover,

Karl-Wiechert-Allee 4.



� Principles and methods of consolidation The consolidated financial statements included all major companies in which

Preussag AG was able directly or indirectly to determine the financial and operat-

ing policies so as to obtain benefits for the Preussag Group companies from the

activity of these companies (subsidiaries). These companies were included in the

consolidated financial statements as from the date on which control was trans-

ferred to the Preussag Group. If the Preussag Group ceases to have this control,

the relevant companies will be taken out of consolidation.

In principle, all consolidated subsidiaries were included as per 30 September

of any year with their annual/consolidated or interim financial statements pre-

pared on the basis of uniform accounting, valuation and consolidation methods

and provided with an audit certificate.

Even when taken together, the subsidiaries not included in the consolidated

financial statements were not significant for the presentation of a true and fair

view of the net worth, financial position and results of the Group. As a matter of

principle, shares in Group companies not included in the consolidation were

valued at cost of acquisition.

In the consolidated financial statements, shareholdings in companies in which

the Group was able to exert significant influence over the financial and opera-

ting decisions within these companies were valued at equity. Apart from this,

subsidiaries not included in the consolidation were also valued at equity in indi-

vidual cases in order to provide a comprehensive and up-to-date presentation of

results. The determination of the dates for inclusion in and removal from the

group of companies valued at equity was analogous to the principles applying

to subsidiaries.

As a matter of principle, equity valuation in each case was based on the last

audited annual or consolidated financial statements; no financial statements

date back more than twelve months.

Join ventures were not included on the basis of proportionate consolidation, but

valued at equity.

Information on the main indirect and direct subsidiaries and shareholdings of

Preussag AG is listed in a separate annex to the notes. A complete list of share-

holdings has been deposited with the commercial registers of the district courts

of Berlin-Charlottenburg (HRB 321) and Hanover (HRB 6580); publication of

details is dispensed with if it might entail a considerable disadvantage for the

Preussag Group.



Group of consolidated companies Following major acquisition and sale transactions, the group of consolidated sub-

sidiaries and shareholdings in associated companies valued at equity saw sub-

stantial changes in the 1999/2000 financial year compared with last year.

In 1999/2000, the consolidated financial statements included a total of 152

domestic and 441 foreign subsidiaries, besides Preussag AG.

114 domestic and 145 foreign subsidiaries were not included in the consolidated

financial statements.

Breakdown and development of the group of consolidated companies1) and the

group of companies valued at equity in the 1999/2000 financial year:

Balance Additions Disposals Balance30 Sept 1999 30 Sept 2000

Cons. subsidiaries 507 268 182 593

of which in Germany 144 23 15 152

of which abroad 363 245 167 441

Companies valued at equity 75 15 19 71

of which in Germany 24 1 8 17

of which abroad 51 14 11 54

1)excl. Preussag AG

Of the additions to consolidation, 209 subsidiaries alone resulted from the acqui-

sition of the Thomson Travel Group plc. On 14 June 2000, investment bank Gold-

man Sachs made a public offer on behalf of Preussag AG for the shares in the

Thomson Travel Group of 180 pence per share. In July 2000 the EU Commission

approved the takeover of Thomson by Preussag AG. The cost of acquisition of the

99.02% share in the Thomson Travel Group totalled 2.9 billion e.

A further 14 additions to the group of consolidated companies were attributable

to the inclusion of the Hebel Group, which mainly manufactures porous concrete.

In a first step, a shareholding of 81.2% was acquired in Hebel AG. An agreement

was made with the sellers not to disclose the acquisition price. Besides the Hebel

Group companies, the building engineering sector gained four further additions

to the group of consolidated companies.

In addition, 31 companies joined the group of consolidated companies in the

tourism sector, seven companies in the logistics sector, two companies in the

trading sector and one Tunisian company in the energy sector.

The inclusion of the profit and loss statement and the cash flow statement of the

Thomson Travel Group was effective from 1 July 2000, and of the Hebel Group

from 1 April 2000.




The consolidation of the Thomson Travel Group produced the following signifi-

cant effects on the balance sheet and on the profit and loss statement of the

Preussag Group, excluding the cost of finance for the acquisition and before

amortisation of goodwill:

prior to after Changeconsolidation of the

(in mill.e) Thomson Travel GroupBalance sheet as per 30 Sept 2000

Tangible assets 5,504.4 6,438.8 + 934.4

Current assets 4,550.4 5,643.4 + 1,093.0

Provisions 3,035.8 3,289.2 + 253.4

Liabilities 9,726.9 11,722.8 + 1,995.9

Profit and loss statement 1999/2000

Turnover 19,921.7 21,853.7 + 1,932.0

Cost of materials 13,619.3 14,930.3 + 1,311.0

Other operating expenses 3,586.1 3,846.6 + 260.5

The differences resulting from the other additions to the basis of consolidation

accounted for almost 3.0% of Group turnover and about 5.2% of the balance

sheet total. Here, 1.1% of the increase in turnover and 2.2% of the balance sheet

total was attributable to the addition of the Hebel Group alone. Where there are

significant material increases in individual assets and liabilities, the differences

are described separately in the notes on the respective items in the balance

sheet or the profit and loss statement.

After the balance sheet date, the remaining 18.8% share was acquired in Hebel

AG, as were the remaining shares in the Thomson Travel Group for a total of

30.7 million e.

Of the significant disposals of consolidated companies, 157 companies were

attributable to the Thomas Cook Group alone. The acquisition of the Thomson

Travel Group by Preussag AG was only approved by the European Commission

on condition that the Group sells its shareholding in the Thomas Cook Group. In

July the Group therefore gave up its power to control the financial and operat-

ing policies of the Thomas Cook Group. In the consolidated financial statements

as per 30 September 2000, the shareholding in the Thomas Cook Group is

carried under current assets because of the intended sale.

The disposal of the Thomas Cook Group from consolidation produced the follow-

ing significant effects on the balance sheet of the Preussag Group, compared

with the situation as per 30 September of the previous year:

prior to after Changeexclusion from consolidation

(in mill.e) of the Thomas Cook GroupBalance sheet as per 30 Sept 1999

Tangible assets 4,881.5 4,604.1 - 277.4

Current assets 7,092.1 3,410.8 - 3,681.3

Provisions 2,783.0 2,563.1 - 219.9

Liabilities 9,562.4 5,753.1 - 3,809.3


The inclusion of the profit and loss statement and the cash flow statement of

the Thomas Cook Group was effective from 1 October 1999 until 30 June 2000

and produced the following significant effects on this year's profit and loss state-

ment for the Group (excluding the cost of finance for the acquisition and before

amortisation of goodwill):

including excluding Changeshareholding in the

(in mill.e) Thomas Cook GroupProfit and loss statement 1999/2000

Turnover 21,853.7 20,230.7 - 1,623.0

Other operating expenses 3,846.6 3,098.0 - 748.6

Financial result - 79.3 - 194.8 - 115.5

In the tourism sector, a further ten companies and in the logistics sector a total

of eight companies were excluded. In the building engineering sector, five com-

panies were no longer consolidated on the basis of their individual financial

statements as a result of mergers. One company was removed from consolida-

tion in the trading sector and one in the energy sector.

Beside 45 associated companies, 26 subsidiaries were valued at equity as per

30 September 2000. Nine subsidiaries and six associated companies were

valued at equity for the first time. The companies of the HDW Group and of the

Babcock Borsig Group were included in the equity valuation on the basis of their

consolidated financial statements. Thirteen companies in the tourism division

were valued at equity for the first time, mainly due to the purchase of additional

shares and the establishment of new companies.

Eight German and eleven foreign companies left the group of associated com-

panies, in particular as a result of the full consolidation of twelve companies

previously included on the basis of the equity method. These companies were

consolidated for the first time, primarily due to the power of control obtained

during the financial year.

Discontinuing operationsOn 5 October 2000 the Supervisory Board of Preussag AG approved a pro-

gramme of divestment for the building engineering sector, the services business

within the energy sector, the trading activities and most of the residential pro-

perty. Completion of the divestment programme is expected by the end of 2002.

The building engineering sector meets the definition of a discontinuing opera-

tion according to IAS 35, because the necessary preparations for the discontinu-

ance of the companies in this sector began immediately after the balance sheet

date. The assets and liabilities of this business sector as per 30 September 2000,

the operating result of the segment for the 1999/2000 financial year and the

corresponding figures for the previous year are all set out in the notes on the

segments on pages 78 to 79. The building engineering companies report a pre-

tax result of 110.7 million e (previous year 91.6 million e). With tax expenditure

of 0.8 million e (previous year 30.8 million e), results after tax amount to

109.9 million e (previous year 60.8 million e).




Foreign currency translation The financial statements of the foreign subsidiaries were translated according

to the functional currency concept. As all companies operate predominantly in-

dependently in financial, economic and organisational terms, the respective

functional currency corresponds to the currency of the country of incorporation

or residence of the company. Assets and liabilities as well as balance sheet notes

were translated at the mean exchange rate applicable at the balance sheet date

(closing rate); the items of the profit and loss statement and hence the profit for

the year shown in the profit and loss statement were translated at the annual

average rate.

In five Turkish and one Venezuelan subsidiary, operating in hyperinflationary

economies, the translation of the income and expense items corresponding to

the changed purchasing power conditions, including the result for the year, was

effected at the respective closing rate. Prior to translation at the closing rate, the

carrying amounts of the non-monetary balance sheet items of these companies

were adjusted to the changes in prices that came about during the financial

year on the basis of appropriate indices for measuring purchasing power. The

purchasing power gains or losses resulting from the indexing were carried as

interest income or expenses with an effect on results.

Goodwill arising from the capital consolidation of foreign subsidiaries was trans-

lated at historical rates, carried at cost and amortised, with scheduled deprecia-

tion taken into account.

The translation of the financial statements of foreign companies valued at equi-

ty followed the same principles for carrying equity as those used for consolidat-

ed companies.

All differences resulting from the translation of the financial statements of

foreign subsidiaries were carried with no effect on results and separately shown

under revenue reserves. These currency differences were recognised as income

or expenses in the year in which foreign subsidiaries left the consolidation.

Exchange rates of currencies with relevance for the translation of financial

statements of subsidiaries:

Closing rate Average rate(in e) 30 Sept 2000 30 Sept 1999 1999/2000 1998/99

1 Pound Sterling 1.67 1.54 1.62 1.48

1 US Dollar 1.14 0.94 1.04 0.91

1 Canadian Dollar 0.76 0.64 0.70 0.61

1 Australian Dollar 0.62 0.61 0.63 0.58

100 Swiss Francs 65.53 62.62 63.35 62.50

100 Norwegian Crowns 12.46 12.12 12.27 11.82

100 Swedish Crowns 11.72 11.47 11.83 11.13

100 Greek Drachmas 0.29 0.30 0.30 0.31

100 Czech Crowns 2.81 2.80 2.78 2.75


Consolidation methods Capital consolidation was effected, depending on the method of acquisition, by

offsetting the acquisition cost of the participation against the interest in net

equity at the date of acquisition, after determining the fair values of the assets

and liabilities of the subsidiary. Debit differences resulting from this method

were capitalised as goodwill and amortised systematically with an effect on re-

sults for all purchases of companies since 1 October 1995; debit differences from

subsidiaries purchased before that date continued to be offset against revenue

reserves. As a matter of principle, credit differences from capital consolidation

were carried as deductions from capitalised debit differences and systematically

released in accordance with the useful life of non-monetary assets of the

companies.

In the wake of the removal from consolidation with an effect on results, the re-

sults generated by the subsidiaries during the period of inclusion in the Group

results were adjusted to the results in the individual financial statements of the

parent company. In the case of a disposal of goodwill acquired before 1 October

1995 in companies leaving the consolidation, the offsetting against revenue re-

serves with no effect on results effected in the past was annulled. Minority in-

terests in the net assets of the subsidiary leaving the consolidation did not

affect the profit from the removal from consolidation, but were disposed of with

no effect on profits.

As a matter of principle, the main associated companies in the Group and a

number of individual non-consolidated subsidiaries were valued at equity as per

the date of acquisition and shown in the balance sheet and in the development

of fixed assets under companies valued at equity. Concerning the treatment of

remaining differences, the principle applied in capital consolidation was also ap-

plied to the companies valued at equity, with goodwill reported in equity valua-

tion. The share of these companies in the results for the year including amorti-

sation of goodwill was shown under the Group's financial results. Differing con-

solidation and valuation methods in the individual or consolidated financial

statements of associated companies underlying the equity valuation were re-

tained unless they were fundamentally incompatible with the IASC's accounting

rules or unless the necessary information for uniform accounting or revaluation

was not known or not available.

Intragroup receivables and liabilities or provisions were offset. If the conditions

for a consolidation of third-party liabilities were met, this consolidation method

was applied.

Internal turnover and other intercompany income as well as the corresponding

expenses were eliminated unless, taking account of intercompany results, they

were to be shown as changes in stocks or own work capitalised. Intercompany

profits from intra-group deliveries or services – unless they were immaterial –

were eliminated with an effect on results, with deferred taxes taken into account.

Intercompany losses were eliminated unless the future benefit flowing from the

assets was exceeded. Intragroup deliveries and services were usually provided in

conformity with market conditions. Intercompany profits from deliveries to and

from companies valued at equity were eliminated on the basis of the same

principles when the corresponding facts were known.




� Accounting and valuation principles The financial statements of the subsidiaries included in the Preussag Group

were prepared in accordance with uniform accounting and valuation principles.

The valuation in the consolidated financial statements was not determined by

tax regulations but solely by the commercial presentation of the net worth and

financial position as set out in the rules of the IASC.

As a matter of principle, turnover and other operating income was reported

upon rendering of the service or delivery of the assets and hence upon transfer

of the risk. For construction contracts and services, the turnover was recognised

in accordance with the percentage of completion method.

As a rule, dividends were reported when the legal claim had arisen. Interest in-

come and expenses were reported for the proportionate period of time.

The cost of funds arising in conjunction with the issue of shares, conversion op-

tions or warrants was offset against the capital reserves provided for the issu-

ance with no effect on results.

Assets were capitalised when all material opportunities and risks related to the

ownership were attributable to the Group. The valuation of assets was effected

at amortised acquisition or manufacturing costs. The cost of finance was not

capitalised.

Receivables and other current assets were reported at their respective nominal

value or at their net present value, if lower. Concerning these items, all identifi-

able individual risks and the general credit risk supported by empirical informa-

tion were accounted for by means of appropriate value discounts. In the indivi-

dual financial statements, hedged foreign currency receivables and liabilities

were valued at the rate of exchange at the forward hedging transaction date.

Unhedged currency items were valued at the closing rate. The currency differen-

ces resulting from the translation of unhedged foreign currency receivables and

liabilities were reported under cost of materials when they had arisen in the

wake of normal operating processes, or under other operating expenses and

income when they were attributable to other facts.

Derivative financial instruments were combined with the associated transac-

tions, both reported in the balance sheet and arising in future, to form valuation

units and did not have an impact on the results for the year to this extent. When

in exceptional cases the agreed payments from the concluded hedging trans-

actions exceeded the income or expenses resulting from the operating activities

at financial year-end, future losses were anticipated as per the balance sheet

date; anticipated profits were not taken into account. Option premiums paid for

the hedging of current operating activities were capitalised and – insofar as they

were not part of a valuation unit – valued at balance sheet date at the cost of

acquisition or fair value, if lower. The premium was charged to expenses as per

the date or period of exercise or use, and by the time of expiry at the latest.

The results from price hedging instruments for airline fuel were shown under

cost of materials upon maturity.


Provisions were formed for third-party contingencies, where these contingencies

would probably lead to a future outflow of resources. They were carried at the

anticipated settlement amount, taking into account all related identifiable risks,

and were not offset against indemnification claims. Long-term provisions, inso-

far as there was a substantial effect, were reported at the net present value.

Pension provisions were valued using the Projected Unit Credit Method in accor-

dance with IAS 19 (revised 1998).

As a rule, liabilities were carried at the value of the consideration received, in-

cluding the costs of borrowing. In the subsequent period, liabilities were valued

using the effective interest method at their cost of acquisition. For the issue of

financial instruments comprising both a liability and an equity element in the

form of conversion options or warrants, the financial resources received for the

respective component were reported in accordance with their character. In this

regard, the loan was reported at the value that would have been achieved by the

issue of this liability without the equity element and on the basis of current

market conditions. Consequently, the amount transferred to capital reserves –

taking into account deferred taxes – corresponded to the fair value of the con-

version options or warrants at the date of issuance.

In accordance with IAS 12 (revised 2000), the accounting and valuation of de-

ferred taxes followed the liability method on the basis of the tax rate applicable

at the date of realisation. The basis of this is fictional profit retention. The fiscal

consequences of profit distribution are only taken into account once a resolu-

tion has been adopted on appropriation of profits. For the expected tax benefits

relating to losses carried forward which are realisable in future, deferred tax

assets were reported.

In order to present a clearer picture of the specific economic features of the

tourism business and thus to provide a more accurate comparison of the net

worth, financial position and results of the Group, the accounting and valuation

methods for business in the tourism sector were adjusted to the customary

international procedures.

Revenue was deemed to be realised for tour operators as of the start of the holi-

day. The effect on results after tax was + 14.8 million e.

In order to guarantee that expenses and revenue amounts were matched proper-

ly, expenses incurred up to the balance sheet date from the production of holi-

day brochures and brochure-related selling aids for future tourist seasons were

carried as prepaid expenses and released proportionately over the duration of

the season when the related revenues is realised. Similarly, expenses arising in

connection with empty-leg flights, which occur at the beginning and end of the

season with regard to seasonal destinations, were accrued at the beginning of

the season with no effect on results and amortised over the season. The changes

to this accounting and valuation method led to an increase in results after tax of

1.6 million e.




If these accounting valuation methods had been applied to the consolidated

financial statements of the previous year, comparable results after tax would

have been 8.2 million e respectively 1.5 million e higher.

Furthermore, the valuation method for inventories was changed from the LIFO

method to the average cost method preferred in IAS 2.21 in order to achieve an

accurate valuation of inventories in line with the market, particularly for com-

panies in the trading sector. This shift from the LIFO method to the average cost

valuation method produced an increase in results after tax of 17.5 million e. In

case the inventories had been measured by applying the average cost method in

the past, the carrying value would have been reported 10.4 million e higher as

per 1 October 1999.

The changes in the accounting and valuation methods were included in the re-

sults in compliance with IAS 8.54. Last year's figures were taken unchanged from

last year's financial statements.

The preparation of the consolidated financial statements was based on a num-

ber of assumptions and estimates which had an effect on the value and presen-

tation of the reported assets, liabilities, income and expenses as well as contin-

gent liabilities. The assumptions and estimates mainly related to the fixing of

uniform economic lives, the valuation of construction contracts, the accounting

and valuation of provisions and the realisability of future tax savings. The actual

values may deviate from the assumptions and estimates made in individual

cases. The effects of changes had been included in income statements by the

time new information was available.

� Notes on the accounting and valuation methods deviating from German lawThe first-time application of accounting and valuation policies on the basis of

new IASC rules was carried out as if these rules had always been applied. The

effect of this adjustment was transferred to shareholders' equity with no effect

on results. Because of this conversion method, the valuation in the balance

sheet as per 1 October 1999 was not identical to that of last year's consolidated

financial statements as per 30 September 1999.

In accordance with IAS 12 (revised 2000), the accounting and valuation of de-

ferred taxes followed the liability method rather than the German Commercial

Code. Tax savings from future losses assessed as realisable were carried in the

balance sheet as deferred tax assets.

In the case of construction contracts and services, revenues and profits were

realised in accordance with the stage of completion. Under commercial law,

profits were realised at the time of completion and acceptance or upon comple-

tion of contract.

Whereas liabilities were carried at the repayable amounts under commercial

law, liabilities were reported in accordance with IASC rules, including the cost of

borrowing, at the value of the consideration received. Deviating from commer-

cial law, the costs arising in conjunction with the issue of shares and subscrip-

tion rights were treated with no effect on profits.


Furthermore, in contrast to German law, self-constructed assets were recog-

nised, long-term unhedged foreign exchange receivables and liabilities existing

outside ordinary business activities were valued at the mean rate at the balance

sheet date, and no provisions were formed for omitted maintenance activities

carried out within three months. Moreover, the provisions with debt characters

were carried as liabilities.

� Notes on the segmentsExplanations on the segments The segmentation of the Group into three divisions with a total of five sectors

reflected the Group's internal control and reporting structure.

In segment reporting, the business activities of the Preussag Group were attri-

buted to the divisions in line with the new Group structure: tourism, logistics

and industry. The sole criterion for the classification of the individual groups of

companies was their economic affiliation to the divisions and sectors, rather

than their participation structure under company law.

In the tourism division, the acquisition of the Thomson Travel Group led to the

creation of the largest integrated tourism group in the world. Its activities com-

prise all value-added stages of the holiday business, distribution via travel agen-

cies, tour operation, transport based on company-owned airlines as well as care

and support at holiday destinations by incoming agencies and company-run

hotels. The segment data for the 1999/2000 financial year cover the Thomson

Travel Group, included for the first time for the period from 1 July to 30 Septem-

ber 2000. The profit and loss statement for the companies of the Thomas Cook

Group was included in the segment result up to 30 June 2000.

The logistics division, covering the VTG-Lehnkering Group and the Algeco Group

under the leadership of Hapag-Lloyd AG, provided transport services for con-

tainer shipping and also special transport and service activities for the chemical

industry and the mineral oil industry. This sector also focused on the manufac-

ture and hire of mobile buildings and pallets.

The industry division comprised the energy, building engineering and trading

sectors. The services offered by the energy sector ranged from the exploration

and production of crude oil and natural gas and the provision of services in the

drilling contractor business to the construction and operation of underground

storage facilities. In the 1999/2000 financial year, the energy sector consisted of

the companies of the Preussag Energie Group, the Deutag Group and the KBB.

The building engineering sector comprised the companies of the Fels Group, the

Wolf Group and the Minimax Group as well as the Kermi Group. The activities of

these companies focused on the production and distribution of products for the

building materials, heating engineering and fire protection markets. The segment

data for 1999/2000 included the companies of the Hebel Group for the first

time, covering the period from 1 April to 30 September 2000. Following the

divestment programme adopted by the Supervisory Board on 5 October 2000,

building engineering was considered to be an operation to be discontinued

according to IAS 35.




The trading sector covered national and international trading in non-ferrous

metals and products for the steel processing industry. In addition, several com-

panies of the Amalgamated Metal Corporation (AMC) Group produced tin as

well as products for the oil, construction and ceramics industries. Besides the

AMC Group, the trading sector comprised the companies of the W. & O. Berg-

mann Group and the US steel service companies.

As Preussag AG, the holding company of the Group, did not carry out any opera-

tive business itself, it was shown as a separate reporting unit under ‘Others/

consolidation’ along with other activities which could not be allocated to indi-

vidual sectors and with consolidations of relationships between the segments.

Notes on the segment dataThe definition of terms for the individual segment data corresponded to the con-

trol basis for value-oriented management in the Preussag Group.

As a rule, inter-segment turnover was generated in line with the arm’s length

principle.

The segment operating result was determined before amortisation of goodwill

and before consideration of the financial result.

Depreciation was only related to segmental fixed assets and did not comprise

any amortisation of goodwill from the acquisition of consolidated subsidiaries.

The result of the companies valued at equity also included the amortisation of

the goodwill of these companies in order to provide an accurate presentation of

the results from investments of the sectors in the framework of the internal

control of the Group.

The segment assets and liabilities comprised the assets or liability required for

the operation, excluding interest-bearing assets and liabilities as well as taxes.

Capital expenditure covered additions of tangible and intangible assets, exclu-

ding the goodwill arising from the acquisition of shares.

Interest-bearing assets and funds as well as interest-bearing liabilities were re-

ported for the generation of the financial result and the funding of the operating

and investment activities.


(1) Turnover As a matter of principle, turnover was recognised when the service had been ren-

dered or the goods or merchandise had been delivered. For construction con-

tracts and services, the turnover was recognised in accordance with IAS 18 or IAS

11 on the basis of the completion stage (Percentage of Completion Method). In

this regard, the completion stage per contract was determined either by the

ratio of accrued costs to expected overall costs (Cost to Cost Method) or by the

physical completion stage of the construction process. For tourism services, turn-

over was realised on the basis of the performance of the service within the

tourism value chain, with tour operator turnover recognised as of the start of

holidays. As a rule, for all other services the beginning and the complete perfor-

mance of the service fell into the same accounting period. In accordance with

the IASC rules, profits from the Percentage of Completion Method were only

realised when the outcome of a construction contract or service could be esti-

mated reliably. In estimating the results of construction contracts and services,

all identifiable risks were taken into consideration.

In the reporting period, total turnover of 14,549.6 million e (previous year:

10,140.1 million e) was achieved with construction contracts and services. Re-

ceivables from services and construction contracts totalled 1,103.1 million e (pre-

vious year 1,268.3 million e). Advance payments received from customers amount-

ed to 1,405.5 million e (previous year 889.5 million e) prior to offsetting against

receivables; after the set-off, total advance payments received for services and

construction contracts were carried as 1,007.5 million e (previous year 664.4 mil-

lion e).

The increase in turnover from services and construction contracts, the resulting

profits and receivables and the advance payments received from customers was

largely attributable to the first-time inclusion of the Thomson Travel Group, to

the growth in turnover of the TUI Group and to the inclusion of the Thomas

Cook Group for a period of nine months.

Group turnover by business activity

(in mill.e) 1999/2000 1998/99

Touristic services 10,562.0 7,024.6

Customised construction contracts,services and production of goods 4,943.6 4,961.9

Trading in merchandise 5,866.1 4,048.5

Leasing and tenancy 469.7 445.2

Income from patent and licensing agreements and other income 12.3 20.7

Total 21,853.7 16,500.9

In the framework of segment reporting, consolidated turnover, broken down

into sectors and regions, is presented on pages 78 to 79.


Notes on the Consolidated Profit and Loss Statement

Notes on the consolidated profit and loss statement


(2) Change in stocks of goods and other own work capitalised (in mill.e) 1999/2000 1998/99

Increase/reduction in stocks of finished goods and work in progress + 24.8 - 15.9

Other own work capitalised 79.1 58.1

Total + 103.9 + 42.2

(3) Other operating income(in mill.e) 1999/2000 1998/99

Book profits from the sale of fixed assets and current assets 249.5 426.8

Income from the release of provisions and deferred liabilities 164.8 180.3

Income from financial and monetary transactions 161.3 72.0

Income from ongoing charging of costs 131.0 58.3

Income from leasing and tenancy contracts,licensing and patent agreements 35.3 26.3

Other income 460.7 286.5

Total 1,202.6 1,050.2

The reduction in book profits from the disposal of fixed or current assets was due

in particular to the income in the previous year from the withdrawal of the

shipbuilding companies.

(4) Cost of materials(in mill.e) 1999/2000 1998/99

Cost of raw materials,consumables and supplies 5,723.0 4,620.3

Cost of purchased merchandise 9,207.3 6,479.1

of which for touristic activities (6,551.0) (4,246.7)

Total 14,930.3 11,099.4

The costs of third party touristic services mainly consisted of hotel and trans-

portation expenses. The increase compared with the previous year resulted

primarily from the first-time inclusion of the companies of the Thomson Travel

Group and turnover increases in the TUI Group.

(5) Personnel costs(in mill.e) 1999/2000 1998/99

Wages and salaries 2,409.7 1,854.8

Social security contributions,pension costs and benefits 523.5 432.1

of which pension costs (128.2) (95.6)

Total 2,933.2 2,286.9

The increase in personnel costs was largely accounted for by the first-time inclu-

sion of the companies of the Thomson Travel Group and the Hebel Group. At the

same time, personnel costs for the Thomas Cook Group were included for nine

months, in contrast to the previous year.

Pension costs mainly covered additions to the pension provisions. Interest costs

included in the additions to the pension provisions were also shown under this

item.


Breakdown of pension costs for defined benefit pension plans

(in mill.e) 1999/2000 1998/99

Current service cost 44.0 21.2

Interest cost 42.9 46.7

Length of service additionally included due to changes in pension plans 2.5 -

Amortisation of the difference between actual pension obligation and pension provision in the balance sheet 1.7 -

Expenses and income from release, reduction or lump-sum compensation of pension claims - - 0.2

Total 91.1 67.7

The increase in current service costs was essentially due to additions to the

group of consolidated companies.

(6) Depreciation (in mill.e) 1999/2000 1998/99

Scheduled depreciation1) of intangible and tangible assets 604.9 489.0

Non-scheduled depreciation1) of intangibleand tangible assets 19.0 9.1

Total 623.9 498.1

1) excl. amortisation of goodwill from the acquisition of subsidiaries.

Scheduled depreciation was based on the uniform economic lives outlined on

pages 105 and 107.

Non-scheduled depreciation was effected when the recoverable amount that

will flow to the Group will be lower than the book value. The recoverable

amount corresponds to an asset's net selling price or its value in use, if higher.

The value in use was determined on the basis of the present value of the future

payment flows attributable to the asset. In the 1999/2000 financial year, non-

scheduled depreciation mainly related to buildings, plant and office equipment.

(7) Other operating expenses(in mill.e) 1999/2000 1998/99

Commissions for touristic services 810.3 685.8

Research and development, environmental protection and advertising expenses 411.0 358.0

Losses from the disposal of fixed assets and current assets 40.9 332.6

Contributions, charges, fees and consultancyexpenses (as well as expenses fromfinancial and monetary transactions) 438.6 313.3

Administrative expenses 442.2 289.0

Leasing, rent and patent expenses 429.8 275.9

Outside services and non-operating material expenses 285.1 246.5

Other expenses from creation of provisions and deferred liabilities 307.6 206.3

Distribution costs 288.8 172.9

Other operating expenses 392.3 257.1

Total 3,846.6 3,137.4




The commissions for touristic services mainly comprised travel agency commis-

sions and commissions passed on from insurances covering travel contract

cancellation costs. The increase in commissions was due in particular to the

first-time inclusion of the Thomson Travel Group and the growth of TUI Group

turnover.

The reduction in losses from disposals of assets is largely attributable to the

losses resulting from the withdrawal from sectors that were reported last year

under this item.

Following the same procedure as last year, utilisation of provisions created and

charged to other operating expenses is shown under the respective cost account.

The reversal of amounts left over from these provisions has been offset against

additions to provisions in the current year.

(8) Financial result(in mill.e) 1999/2000 1998/99

Result from companies valued at equity - 30.8 - 8.9

of which from Group companies (+ 4.3) (- 1.3)

Income from participations 57.5 44.3

of which from Group companies (7.3) (3.8)

Income from profit transfer agreements 1.2 93.8


Expenses relating to loss taken over 1.1 4.0

of which to Group companies (1.0) (0.0)

Net income from investments + 57.6 + 134.1

Depreciation on investments and marketable securities 13.1 36.8

Income from other securities and loans contained in investments 9.5 13.6


Other interest and similar income 200.4 114.7


Interest and similar expenses 302.9 185.8


Net interest - 93.0 - 57.5

Total - 79.3 + 48.7

The results from companies valued at equity also included the amortisation of

goodwill on the companies valued at equity. The drop in results was primarily

attributable to expenses resulting from the transfer of plant engineering to

Babcock Borsig AG during the previous year.

The decrease in income from profit transfer agreements was largely due to the

profit transfers shown last year and recognised for the last time from the sale of

Uranerzbergbau GmbH and Howaldtwerke-Deutsche Werft AG (HDW).

Depreciation on investments and marketable securities included 12.8 million e

(previous year 27.9 million e) of non-scheduled depreciation.


The reduction in net interest was largely due to the financing of the acquisition

of the Thomson Travel Group.

The indexing of the financial statements of foreign subsidiaries based in hyper-

inflationary economies led to the realisation of purchasing power gains total-

ling 5.8 million e (previous year 7.2 million e) from the change in purchasing

power parities of these countries; they were recorded under interest income and

expenses.

(9) Amortisation of goodwillScheduled amortisation of goodwill from the acquisition of consolidated subsi-

diaries was conducted over a period of five to a maximum of 20 years depend-

ing on the strategic importance of the acquisition of the company and a number

of other factors impacting useful economic life. In the case of additions during

the financial year, the amortisation of goodwill was effected for a proportionate

period of time. The amortisation of goodwill from the acquisition of business

operations was included under ‘Depreciation’ (cf. note 6).

During the financial year, non-scheduled amortisation of goodwill of 8.6 million

ewas effected. In the previous year, non-scheduled amortisation had not been

necessary.

The increase in amortisation of goodwill was due largely to the amortisation of

goodwill of newly acquired companies, in particular the Thomson Travel Group,

which was effected during the financial year for a proportionate period of time.

In addition, the increase in goodwill, with no effect on results, which was due to

the first-time application of IAS 12 (revised 2000), led to an increase in annual

amortisation of goodwill of 22.7 million e.

(10) TaxesBreakdown of tax expenses

(in mill.e) 1999/2000 1998/99

Current taxes on income

in Germany 156.4 176.9

abroad 101.3 49.2

Income from deferred taxes 133.1 75.9

Taxes on income 124.6 150.2

Other taxes 49.3 37.6

Total 173.9 187.8

Taxes on income mainly related to profits from ordinary activities after deduction

of other taxes. Amortisation of goodwill only led to a reduction in tax charges to

the extent to which corresponding goodwill was also reported for tax purposes in

the wake of accrual or merger operations or supplementary tax balance sheets

prepared for trading partnerships. The German companies of the Preussag Group

had to pay an average trade tax of approx. 17% of taxable trading profit, which

was deductible in the computation of the corporation tax. The corporation tax

rate for retained profits was 40% and for distributed profits 30%, both as last

year, plus a solidarity surcharge on corporation tax of 5.5%, also as last year. On

14 July 2000, the Bundesrat (Upper House of the German Parliament) approved




the tax reduction law. As of 1 January 2001, this law reduces corporation tax to a

uniform rate of 25% for retained and distributed profits. As a consequence of the

tax reduction law, all deferred tax items realisable after 1 January 2001 are taxed

at an average rate of 39%. The effect of this tax rate change was realised as de-

ferred tax income totalling 113.7 million e, in accordance with the rules of

IAS 12.60.

Moreover, during the financial year, the Group adjusted the accounting and valu-

ation of deferred tax items, with no effect on results to the benefit or at the ex-

pense of equity, to comply with the amendments to IAS 12 adopted by the IASC

in October 2000. Accordingly, all deferred taxes were recalculated across the

board as of 1 October 1999 at an average tax rate of 52% (previous year 43%) for

German companies, based on the corporation tax rate for retained profits. Tax

savings from corporation tax losses carried forward which were deemed to be

realisable in future were also taxed on the basis of the retained profits rate. At

the same time, deferred tax claims and charges existing as per 1 October 1999

on distributable tax-related equity of German companies and representing the

difference over the distribution rate were eliminated. This adjustment, which

had no effect on results, led to an increase in Group equity of 273.1 million e.

In accordance with the rules of IAS 12 (revised 2000), deferred taxes were calcu-

lated for all German subsidiaries acquired after 1 October 1995 on the differen-

ces over the tax balance sheet at the time of the first consolidation, based on

the date of acquisition. The resulting tax items carried forward were reported as

per 1 October 1999 with no effect on results. At the same time, the goodwill of

the companies in question was adjusted accordingly.

There was no adjustment of the values reported the previous year for economic

reasons, since the computation of the exact corresponding values would have

entailed disproportionate costs due to the considerable changes in the group of

consolidated companies in the years of comparison. The application of IAS 12

(revised 2000) to the previous year's financial statements would have increased

the corresponding tax expenses by around 65.0 million e (in the 1997/98 finan-

cial year by around 80.0 million e) with at the same time an increase in equity

as per 30 September 1998 of around 335.0 million ¤ (as per 1 October 1997 of

around 415.0 million e). As of 30 September 1998 an increase in provisions of

around 50.0 million ewould have been shown as deferred tax liabilities.

The computation of foreign taxes on income was based on the laws and regula-

tions applicable in the respective countries. The income tax rates applicable to

foreign companies varied from 12.5% to 75%.

In accordance with IAS 12 (revised 2000), the computation of deferred taxes fol-

lowed the liability method. Accordingly, expected future tax savings and charges

were reported for temporary differences between the book values reported in

the consolidated financial statements and the tax base of assets and liabilities.

Tax savings from the use of losses carried forward that were assessed as realisa-

ble in the future were capitalised. The valuation of a deferred tax asset for future

tax savings took account of the probability of the expected decrease in the tax

burden.


The following deferred tax assets and liabilities reported in the balance sheet

were attributable to differences in the accounting and valuation of the balance

sheet items:

30 Sept 2000 30 Sept 1999(in mill.e) Assets Liabilities Assets LiabilitiesIntangible and tangible assets 263.6 896.9 299.0 388.9

Investments 10.6 4.9 10.1 1.5

Current assets 43.4 59.6 22.3 65.9

Pension provisions 79.7 1.6 75.8 0.6

Other provisions 134.4 52.1 73.0 49.7

Other items 107.0 114.7 63.7 398.5

Total 638.7 1,129.8 543.9 905.1

The differences shown in the commercial balance sheet and the tax balance sheet

in respect of tangible assets were mainly due to different methods of amortisa-

tion and longer useful economic lives. For current assets the differences largely

resulted from different income recognition dates for tax purposes for revenue

and the valuation of inventories. Differences in the commercial and tax balance

sheets with regard to the other provisions were primarily attributable to the crea-

tion of provisions for anticipated losses.

Changes to deferred tax liabilities from intangible and tangible assets and other

items resulted to a large extent from the first-time application of IAS 12 (revised

2000). Thus the deferred tax liabilities from tangible assets increased in particu-

lar due to the retroactive reporting of deferred taxes as per the first-time conso-

lidation of German subsidiaries. The reduction in deferred tax liabilities from

other items is largely attributable to the elimination of tax charges on the future

distribution of profits of German companies retained in previous years. Accord-

ing to IAS 12 (revised 2000), in the event of distribution of this equity, the Group

would have deferred tax charges not shown in the balance sheet totalling

386.2 million e.

Breakdown of losses carried forward

(in mill.e) 30 Sept 2000 30 Sept 1999

German losses carried forward

Corporation tax 233.9 95.5

Trade tax 401.3 181.0

Foreign losses carried forward 537.2 263.7

While domestic losses carried forward were not subject to any restrictions, for-

eign losses carried forward frequently met with specific national timing restric-

tions and restrictions on the use of profits from ordinary activities, which were

taken into account accordingly in the valuation. The large increase in losses

carried forward mainly resulted from changes in the companies included in the

consolidation. Potential tax savings totalling 176.6 million e (previous year

47.6 million e) were not capitalised since the benefit of the underlying losses

carried forward was unlikely to be realised.

The use of losses carried forward for which no asset was reported for the

potentially resulting tax savings in previous years led to a reduction in the tax




burden of 6.1 million e (previous year 2.9 million e) for the 1999/2000 financial

year. As a result of tax loss carrybacks it was possible to reduce the tax burden

for the financial year by 1.3 million e (no reduction in the previous year).

Development of capitalised tax savings from losses carried forward realisable in

the future:

(in mill.e) 1999/2000 1998/99

Capitalised tax savings from losses at the beginning of the financial year 94.5 80.3

Adjustment with no effect on results following the first-time application of IAS 12 (revised 2000) 6.2 -

Changes in the basis of consolidation and exchange adjustment 58.6 11.6

Use of losses carried forward - 27.3 - 7.7

Value adjustment of capitalised tax savings from losses carried forward - 36.1 - 1.2

Effects of changes in tax rate - 16.4 -

Capitalisation of tax savings from losses carried forward 28.8 11.5

Capitalised tax savings from lossesat financial year-end 108.3 94.5

The actual income tax expense of 124.6 million e (previous year 150.2 million e)

was 149.5 million e (previous year 63.0 million e) less than the expected income

tax expense of 274.1 million e (previous year 213.2 million e) that would result if

the domestic tax rate (52% compared to 43% the previous year) were applied to

the Group's annual pre-tax results.

Reconciliation of expected to actual income tax expenses

(in mill.e) 1999/2000 1998/99

Group profit for the year before taxes on income 527.1 495.6

Anticipated expenditure for taxes on income (tax rate 52%, previous year 43%) 274.1 213.2

Difference between actual and anticipated tax rates - 137.0 - 36.8

Tax portion for:

tax-exempt income - 121.8 - 160.8

non-tax-deductible expenses 191.5 143.8

temporary differences and losses for which no deferred taxes were recorded 15.5 4.7

tax expenses and income unrelated to accounting period 42.8 - 31.0

other deviations - 26.8 17.1

Effects of changes in tax rate - 113.7 -

Actual expenditure for taxes on income 124.6 150.2

The difference between actual tax rates and the German tax rate (52% compar-

ed with 43% the previous year) was due to the fact that taxation of the results

from the operation of merchant ships did not depend on the level of profits, and

that lower tax rates were applied to the results of foreign subsidiaries. The in-

crease in this item was amongst others attributable to the substantial rise in

transport volumes handled by merchant shipping. The change in non-tax-de-

ductible expenses resulted particularly from higher amortisation of goodwill.


(11) Results attributable to minority interests (in mill.e) 1999/2000 1998/99

Profit due to minority interests 100.1 64.3

Loss attributable to minority interests - 28.7 - 4.5

Total 71.4 59.8

Annual results attributable to minority interests in the tourism division primari-

ly related to consolidated subsidiaries of the TUI Group and the Thomas Cook

Group. In the logistics division, results attributable to minority interests mainly

related to shareholders in Algeco S.A. and VTG-Lehnkering AG. The increase in re-

sults attributable to minority interests largely resulted from subsidiaries of the

TUI Group.

(12) Earnings per shareIn accordance with IAS 33, undiluted earnings per share were determined as the

ratio between the Group’s net profit for the year due to the shareholders of

Preussag AG and the weighted average number of no-par value shares outstand-

ing during the financial year.

A dilution of earnings per share occurs when the average number of shares is in-

creased by adding the issue of potential shares from the warrants and conver-

sion options issued by Preussag AG. As a rule, warrants and conversion options

have a diluting effect on earnings if they lead to the issue of shares at a price

below the average stock-market share price.

Number of shares for the computation of undiluted and diluted earnings per

share in accordance with IAS 33:

1999/2000 1998/99

Weighted average number of shares 173,330,809 160,670,575

Number of non-exercised option rights with dilution effect 2 ,423,982 4,991,339

Weighted average number of shares with consideration of the dilution effect 175,754,791 165,661,914

The dilution effect of non-exercised warrants was calculated on the basis of a

subscription price per share of 37.50 DM (19.17 e) and an average share price of

43.69 e (previous year 44.97 e) in the financial year. The conversion options did

not additionally increase the dilution effect from warrants.

Earnings per share

1999/2000 1998/99

Group profit for the year due to Preussag shareholders (million e) 331.1 285.6

Undiluted earnings per share (in e) 1.91 1.78

Diluted earnings per share (in e) 1.88 1.72




� Further information on the consolidated profit and loss statementExpenses of 413.4 million e (previous year 517.6 million e) in the Group were at-

tributable to other financial years. On the other hand, the Group had income of

370.5 million e (previous year 508.3 million e) from prior periods including income

tax benefits of 6.4 million e (previous year 25.8 million e). Both expenses and

income were predominantly included in other operating expenses or other oper-

ating income respectively. The expenses from prior periods largely consisted of

expenses resulting from the transfer of plant engineering to Babcock Borsig AG

in the previous year and the sale of the shares in Metaleurop Weiterverarbei-

tung GmbH. Income from prior periods was mainly attributable to income from

the sale of shares in Howaldtswerke-Deutsche Werft AG.

The overall research and development expenses of the Group totalled 12.3 mil-

lion e (previous year 16.0 million e). Where there was no basis for capitalisation,

these expenses were recognised as expenses in the year in which they were

incurred.


(13) GoodwillFor the financial year, the development of capitalised goodwill from the acquisi-

tion of companies is outlined under the development of fixed assets on pages

76 to 77.

Goodwill acquired since 1 October 1995 was capitalised and subjected to sched-

uled depreciation on a straight-line basis over its useful economic life. Debit

differences arising from the capital consolidation of companies acquired before

that date continued to be offset against revenue reserves. The first-time appli-

cation of the rules of IAS 12 (revised 2000) led to an increase in goodwill of 409.1

million e as per 1 October 1999. Additions to goodwill in the 1999/2000 finan-

cial year resulted mainly from the acquisition of the Thomson Travel Group and

the companies of the Hebel Group. First-time consolidations during the financial

year resulted in negative differences totalling 17.2 million e. Following the sche-

duled release of differences totalling 5.2 million e, the remaining credit differ-

ences of 12.0 million e (none in the previous year) were deducted from the capi-

talised goodwill.

(14) Other intangible assetsThe development of the individual items of other intangible assets for the finan-

cial year is outlined under the development of fixed assets on pages 76 and 77.

Other intangible assets that had been purchased were valued at acquisition cost

and subjected to scheduled depreciation on a straight-line basis over their anti-

cipated useful economic life. Development costs and own work were capitalised

when it was probable that the costs would give rise to future economic benefits

for the Group. The manufacturing cost of self-constructed assets was determin-

ed on the basis of direct costs and appropriate indirect costs and depreciation.

The book value of capitalised development costs and self-constructed assets,

mainly for software development, totalled 33.2 million e (previous year 17.4 mil-

lion e) as of 30 September 2000. The costs were amortised in the same way as

purchased assets.

Economic lives of other intangible assets

Economic lifeConcessions, industrial property rights and similar rights up to 20 years

of which software up to 10 years

Capitalised development costs 3 - 5 years

Write-ups were effected when the reasons for non-scheduled depreciation

ceased to exist. In the financial year no write-ups were carried out.

As in the previous year, there were no material restraints on property or disposal.


Notes on the Consolidated Balance Sheet

Notes on the consolidated balance sheet


(15) Tangible assetsThe development of the individual tangible asset items for the financial year is

outlined under the development of fixed assets on pages 76 and 77.

Breakdown of tangible assets at book values


Mineral rights, pits, mines and boreholes 211.1 136.7

Real estate and buildings 1,619.1 1,359.8

Machinery and fixtures 747.0 608.3

Ships and vehicle fleet, mobile buildings and containers 1,662.0 1,404.3

Aircraft 1,569.2 707.6

Other plants and office equipment 439.8 499.6

Work in progress and payment on account 190.6 165.2

Total 6,438.8 4,881.5

The increase for aircraft was in particular due to the first-time consolidation of

the airline Britannia Airways Ltd, a subsidiary of the Thomson Travel Group, with

a total of 44 aircraft.

Tangible assets were valued at acquisition or manufacturing cost, less scheduled

depreciation and in individual cases non-scheduled depreciation. Investment

grants were shown as reductions in the acquisition or manufacturing costs. When

the reasons for non-scheduled depreciation effected in previous years ceased to

exist, the corresponding write-ups were carried out.

The manufacturing costs of own work capitalised were valued on the basis of

direct costs, appropriate indirect costs and depreciation. The cost of finance for

the manufacturing period was not included.

Tangible assets with a limited economic life were depreciated on the basis of

scheduled straight-line depreciation, unless a different depreciation method was

required in individual cases because of the actual development of the economic

life. For aircraft, residual values of up to 20% were taken into account in the de-

termination of depreciation, and for ships and – in well-founded cases – for tech-

nical plants and machinery, scrap values were carried as residual income.

Drillings were valued in accordance with the ‘Successful Effort Method’, the

method generally employed internationally, according to which only economic-

ally successful drillings are capitalised and as a rule depreciated on a straight-line

basis or as a function of production. Economically unsuccessful drillings and ex-

ploratory drillings were immediately recognised as expenses for the period.

Low-cost assets (with acquisition or manufacturing costs of up to 800.00 DM;

around 400.00 e) were written off in full in the year of acquisition and shown

as disposals.


Scheduled depreciation was mainly based on the following economic lives

Tangible assets Economic lifeBuildings up to 50 years

of which hotels 25 years

Machinery and fixtures up to 40 years

of which tank farms up to 25 years

Ships and wagons up to 30 years

of which container ships 23 years

Aircraft and spare parts for aircraft up to 18 years

Plants and office equipment up to 10 years

The costs related to repairs or maintenance of tangible assets were recognised

as expenses. Replacement and renewal costs were recognised as subsequent

manufacturing costs when they led to a considerable extension of economic life

or a substantial improvement or major change in the use of the tangible asset.

Obligations for the dismantling of assets and the recultivation of locations were

capitalised as incidental acquisition costs in accordance with the rules of IAS 16

(revised 1998). The first-time application of this rule led to an increase in tangib-

le assets of 18.0 million ewith no effect on results as per 1 October 1999.

In accordance with IAS 17, leased tangible assets in which consolidated subsidi-

aries carried all the risks and rewards incident to ownership of the asset (finance

leasing) were valued at the cost of acquisition that would have been incurred if

the asset had been purchased. Scheduled depreciation was effected over the eco-

nomic life or the lease term, if shorter, on the basis of the depreciation method

applicable to comparable purchased or manufactured assets. The payment ob-

ligations arising from future lease payments were carried as liabilities, with no

consideration of future interest expenses. In the framework of finance leasing,

tangible assets with a book value of 727.0 million e (previous year 267.4 million

e) were reported at the balance sheet date.

Leased assets were carried at 420.7 million e for aircraft (previous year 2.7 mil-

lion e), 148.0 million e (previous year 112.4 million e) for ships and wagons,

86.9 million e (previous year 88.2 million e) for mobile buildings and containers

and 59.4 million e (previous year 57.2 million e) for buildings. The increase in

leased assets was largely attributable to the first-time inclusion of aircraft

leased by the Thomson Travel Group.

Group companies were not only lessees under finance leasing contracts, but

achieved turnover of 469.7 million e from the leasing and rental of tangible

assets as part of their ordinary business activities. Operational leasing was

predominantly carried out in the logistics division, particularly by the companies

of the VTG-Lehnkering Group and the Algeco Group. In addition, the Group had

residential property that was rented to third parties in order to generate rental

income. Overall, tangible assets with a book value of 871.3 million ewere leased

to third parties, of which the largest proportion, 554.4 million e, was accounted

for by transport vehicles and mobile buildings.



The book value of the tangible assets subject to ownership restraints totalled

75.0 million e (previous year 73.9 million e), of which 67.8 million e (previous

year 66.6 million e) were pledged as collateral.

In 1999/2000, write-ups of 3.2 million e (previous year 0.6 million e) were

effected for tangible assets in the Group.

(16) Companies valued at equity and other investmentsThe development of the individual investment items for the financial year is

outlined on pages 76 to 77.

Breakdown of investments


Companies valued at equity 536.5 624.9

Shares 56.9 82.8

Loans 7.3 4.4

Group companies 64.2 87.2

Shares 102.6 142.7

Loans 8.8 7.2

Shareholdings 111.4 149.9

Securities 9.7 2.2

Other loans 46.4 53.4

Advance payments made 75.6 -

Other investments 307.3 292.7

Total 843.8 917.6

For companies valued at equity, proportionate changes in equity with an effect

on results were shown under additions and disposals, and amortisation of good-

will was carried under depreciation of the year. The reduction in book values for

companies valued at equity was mainly attributable to the sale of shares, in par-

ticular 25% of the shares plus one share in Howaldtswerke-Deutsche Werft AG.

Shares in Group companies and shareholdings as well as other investments

were valued at the cost of acquisition or the lower fair value or market value.

Non-interest or low-interest loans were discounted to their present values, and

other loans were reported at nominal value. The interest rates for loans varied

from 0% to 9.75% p.a. (previous year 2.0% p.a. to 9.75% p.a.).

Write-ups of 26.1 million e (previous year 18.0 million e) were effected for

investments.

The book value of investments subject to ownership restraints totalled

16.1 million e, as in the previous year.



(17) Inventories(in mill.e) 30 Sept 2000 30 Sept 1999

Raw materials and supplies 267.2 164.3

Work in progress 105.8 110.9

Finished goods and merchandise 580.6 445.1

Advance payments made 196.5 173.3

1,150.1 893.6

./. Advance payments received 27.3 26.6

Total 1,122.8 867.0

Raw materials and supplies as well as merchandise were valued at the cost of

acquisition or the lower fair value.

Work in progress and finished goods were valued at the cost of manufacturing

or the lower fair value. Manufacturing costs included the direct cost of materials

and production, special direct production costs and production-related propor-

tions of the indirect cost of material and production; for foreign companies they

also included appropriate indirect cost surcharges. The cost of finance for the

production period, pension costs or voluntary social benefits were not included.

Individual value discounts were effected for all inventories when the income

probably to be realised from the sale or use of the stocks was lower than the

book value of the stocks. The lower fair value was based on the sales revenues

expected to be realisable less the costs to be incurred before the sale. When the

reasons leading to a devaluation of the inventories ceased to exist, a reinstate-

ment of original values was carried out. Of all the inventories, 32.1 million e (pre-

vious year 82.1 million e) were carried at fair value. In the Group, no significant

write-ups of stocks were recognised, just as last year.

Advance payments received were deducted from inventories when they were

attributable to specific construction contracts with a low contract value in

individual cases.

As a rule, similar inventory items were valued using the average valuation

method. In order to guarantee a uniform method of valuation for inventories

which was in line with the market, the method was changed in the 1999/2000

financial year from the LIFO method to the average valuation method. This ad-

justment applied primarily to the trading sector. This change in the valuation

method produced an increase in results after tax of 17.5 million e.

(18) Trade accounts receivable (in mill.e) 30 Sept 2000 30 Sept 1999

from third parties 1,805.4 1,842.1

from Group companies 37.6 27.9

from companies in which shareholdings are held 15.2 17.7

Total 1,858.2 1,887.7

Trade accounts receivable included a total of 15.8 million e (previous year 3.0 mil-

lion e) for receivables with a remaining term of more than one year. Appropriate

value discounts were effected for all identifiable single risks, the general credit

risk supported by empirical values and for special country risks.




(19) Other receivables and assets 30 Sept 2000 30 Sept 2000 30 Sept 1999 30 Sept 1999

Remaining Total Total Remainingterm more term more

(in mill.e) than 1 year than 1 yearOther receivables from Group companies 0.3 11.0 24.1 2.7

from loans (0.3) (5.8) (15.6) (2.7)

other receivables (-) (5.2) (8.5) (-)

Other receivables from companies in which shareholdings are held 1.4 119.7 182.2 3.6

from loans (-) (81.7) (156.4) (-)

other receivables (1.4) (38.0) (25.8) (3.6)

Other receivables 1.7 130.7 206.3 6.3

Income tax refund claims 1.1 2.2 4.0 -

Other taxes 14.0 36.7 25.1 -

Interest deferral 7.6 9.8 45.4 3.6

Receivables from loans to third parties 6.1 14.9 9.0 0.7

Receivables from members of the boards 0.1 0.1 0.9 0.3

Other current assets 357.4 1,462.2 722.4 171.8

Other current assets 386.3 1,525.9 806.8 176.4

Total 388.0 1,656.6 1,013.1 182.7

Just as last year, no material restraints on property or disposal existed for other

receivables and assets reported in the financial statements. The increase in

other current assets was largely attributable to the shareholding in Thomas

Cook shown under this item which was about to be sold.

(20) Funds(in mill.e) 30 Sept 2000 30 Sept 1999

Securities contained in current assets 16.8 1,887.8

Bank deposits 854.2 1,196.5

Cheques, cash-in-hand, balances with Bundesbank (German Central Bank) 134.8 240.0

Liquid funds 989.0 1,436.5

Total 1,005.8 3,324.3

The securities valued at cost or market value, if lower, mainly consisted of fixed-

interest listed securities with interest rates of 4.35% p.a. to 6.25% p.a. (previous

year 5.0% p.a. to 9.0% p.a.). The reduction in securities of around 1.85 billion e

resulted from the exclusion of the Thomas Cook Group from the consolidation.

The fair value of securities totalled 17.1 million e (previous year 1,888.5 million e)

at balance sheet date.

(21) Assets from future tax benefits Assets from future tax benefits comprised deferred tax assets from temporary

differences between the accounting values carried in the consolidated balance

sheet and taxable values as well as the tax savings from losses carried forward

assessed as realisable in the future. Deferred tax claims in a territory with powers

of taxation were offset against deferred tax liabilities in the same territory when-

ever maturities matched. Deferred tax assets (638.7 million e) and expected tax

savings from losses carried forward realisable in the future (108.3 million e) are


outlined in detail under note 10. A total of 660.2 million ewas offset in the finan-

cial year. Assets from future tax benefits totalling 40.8 million e (previous year

57.5 million e) had a remaining term of more than one year.

(22) Prepaid expenses 30 Sept 2000 30 Sept 2000 30 Sept 1999 30 Sept 1999

Remaining Total Total Remainingterm more term more

(in mill.e) than 1 year than 1 yearDiscount 0.1 0.3 0.1 0.1

Other prepaid expenses 1.1 322.6 253.5 3.7

Total 1.2 322.9 253.6 3.8

Other prepaid expenses mainly comprised deferred expenses for regular return

flights taking place after the balance sheet date, rental and maintenance expen-

ses and brochure costs deferred in the financial year for the first time.

Shareholders' equityThe development of the shareholders' equity of the Preussag Group for 1999/2000

and 1998/99 is presented in the equity schedule on page 80.

(23) Subscribed capitalFollowing the resolution adopted by the Annual General Meeting on 31 March

1999, par value shares were converted into no-par value shares, each represent-

ing an identical share in the capital stock. Each previous share with a par value

of 50.00 DM was replaced by ten no-par value shares, and each previous share

with a par value of 100.00 DM was replaced by 20 no-par value shares. Further-

more, the Annual General Meeting also decided to convert the shareholders'

equity and the conditional and authorised capital into euros, at the official ex-

change rate of 1.95583 DM per one euro. Therefore the proportionate share in

the subscribed capital amounted to around 2.56 e.

In comparison to the previous year, the breakdown of the subscribed capital of

Preussag AG, registered in the commercial registers of Berlin-Charlottenburg

and Hanover, was as follows:

Number of shares outstanding Subscribed capital (in e)30 Sept 2000 30 Sept 1999 30 Sept 2000 30 Sept 1999

No-par value shares withan accounting par valueof around 2,56 e 173,423,464 172 ,899,264 443,350,045.76 442,009,949.74

In the 1999/2000 financial year, the number of shares issued rose by 524,200,

consisting of 348,980 shares resulting from the issue of employee shares,

173,900 shares from the exercise of option rights and 1,320 shares from the

exercise of 83 conversion rights.

The Annual General Meeting on 12 April 2000 authorised the company to pur-

chase own shares of up to 10% of the subscribed capital.

The GEV Gesellschaft für Energie- und Versorgungswerte mbH, Dortmund, a sub-

sidiary of Westdeutsche Landesbank Girozentrale, Düsseldorf/Münster, holds

more than 25% of the subscribed capital of Preussag AG.




Conditional capitalFollowing a resolution adopted by the Annual General Meeting on 24 March

1994 on the issue of bonds with warrants attached, conditional capital totalled

45.0 million DM (23.0 million e). Due to the exercise of 17,390 rights from the

bond with warrants attached issued in April 1996 and amounting to 300 million

DM (153.4 million e), the subscribed capital rose by 444,568.29 e compared with

the previous year. The conditional capital was reduced accordingly. A total of

429,697 option rights, representing conditional capital of 11.0 million e, had not

yet been exercised.

In addition, the Annual General Meeting adopted a resolution of 31 March 1999

creating an additional conditional capital of 39 million e for the issue of con-

version options in connection with the issue of convertible bonds. On the basis

of this resolution, Preussag AG issued a convertible bond of 550.0 million e in

June 1999. This convertible bond has been admitted to trading on the stock ex-

change since 17 June 1999. By the balance sheet date, 83 conversion options had

been exercised, leading to a corresponding reduction in conditional capital of

3,374.53 e. On the basis of a conversion ratio of 15.9128 shares per bond, each

with a nominal value of 1,000 e, 1,320 no-par value shares were issued. Cash

settlement of residual amounts totalled 47.00 e. In accordance with section 6

of the terms of the bond issue, the new shares were dividend-bearing for the

entire 1999/2000 financial year. Conversion options for a conditional capital of

39.0 million ewere not yet exercised.

On 12 April 2000 the Annual General Meeting adopted a resolution creating a

conditional capital of 50 million e. The conditional capital is intended for the

issue of conversion options from the issue of convertible bonds totalling up to

1.0 billion e. The convertible bonds have not yet been issued.

Development of the conditional capital

Conditional Availment in Increase as of Conditional capital the current AGM resolution capital

(in ‘000 e) 30 Sept 1999 financial year of 12 April 2000 30 Sept 2000

non-exercised option rights 11,430 (17,390)1) 4452) - 10,985

convertible bond 39,000 (83)1) 32) 50,000 88,997

50,430 (17,473) 448 50,000 99,982

1) Number of option rights and conversion options exercised2) Increase in subscribed capital

Authorised capital The authorised capital created at the Annual General Meeting of 21 March 1996

up to a total of 10.0 million DM (5.1 million e) for the issue of employee shares

was used for the subscription of 348,980 (previous year 273,270) employee shares

in the financial year. The offer to subscribe to employee shares was extended to

both current and former employees of Preussag AG and its Group companies. At

the beginning of the 1999/2000 financial year, on the occasion of Preussag's

75th anniversary, employees were offered shares at a price of 40.90 e in addi-

tion to the ongoing offer of employee shares at a price of 36.30 e. This led to a

total increase in subscribed capital of 892,153.20 e (previous year 698,603.66 e),

and the remaining authorised capital was reduced accordingly to 2,176,953.01 e


(previous year 3,069,106.21 e). The Executive Board's authorisation to increase

the subscribed capital by this amount was terminated at the Annual General

Meeting of 12 April 2000. At the same time, the Annual General Meeting created

a new authorised capital of 10.0 million e for the issue of employee shares. This

capital was not yet used in the financial year for the issue of new no-par value

shares for cash or in-kind contributions.

The authorised capital of up to 165.0 million e created by the Annual General

Meeting of 12 April 2000 was not used during the financial year for the issue of

new no-par value shares for cash or in-kind contributions.

In addition, the Annual General Meeting of 12 April 2000 created another author-

ised capital of up to 44.0 million e. This authorised capital was not used during

the financial year for the issue of new no-par value shares for cash contributions.

(24) Capital reservesThe capital reserves only included share premiums from the issue and conver-

sion of shares together with amounts that were generated by the issue of bonds

for conversion options and option rights to purchase shares in Preussag AG. The

funding costs for the issue of conversion options and option rights and the capi-

tal increase by the issue of new shares for cash contributions were offset against

the transfers to capital reserves resulting from these transactions. In the previous

year, costs for the issue of conversion rights totalling 15.1 million e and 7.4 mil-

lion e for the capital increase were offset against transfers to capital reserves.

In the financial year, the following amounts were transferred to capital reserves:

12.1 million e (previous year 4.9 million e) from the subscription of employee

shares, 2.9 million e (previous year 75.1 million e) from the exercise of subscrip-

tion rights in connection with the bond with warrants attached, and 0.1 million e

from the exercise of conversion options in connection with the convertible bond.

Moreover, capital reserves increased on balance by 6.0 million e as a result of the

release of deferred tax provisions formed in the previous year against capital

reserves with no effect on results and in conjunction with the issue of conversion

options.

(25) Revenue reservesPursuant to commercial-law reporting requirements, revenue reserves consisted

solely of other revenue reserves. They comprised allocations from the results of

the current or previous financial years, differences arising from the currency trans-

lation of the financial statements of foreign subsidiaries with no effect on results,

and set-offs against debit and credit differences from the capital consolidation

and at equity valuation of subsidiaries purchased before 30 September 1995. In

addition, adjustments with no effect on results that were due to the first-time

application of new IAS standards were transferred to the revenue reserves or

offset against them. With the first-time application of the IASC rules in the finan-

cial year, and as per 1 October 1999, totals of 284.2 million e and 10.3 million e

were transferred to the revenue reserves as a result of first-time application of

IAS 12 (revised 2000) and application of IAS 16 (revised 1998) respectively, while

the application of IAS 37 led to the offsetting of a total of 4.7 million e against

revenue reserves.




The memorandum of association of Preussag AG did not contain any provisions

pertaining to the formation of reserves.

Revenue reserves included differences arising from the translation of foreign

currency totalling 8.2 million e (previous year 52.3 million e).

(26) Net profit available for distribution In accordance with German Commercial Code, the results of the financial state-

ments of Preussag AG were the authoritative basis for dividend payments to

Preussag AG’s shareholders. Net profit available for distribution reported in

Preussag‘s consolidated financial statements was identical with the figure car-

ried in the financial statements of Preussag AG. The reconciliation of Group pro-

fit for the year to profit available for distribution of Preussag AG is outlined in

the profit and loss statement of the Preussag Group.

A proposal will be submitted to the Annual General Meeting of Preussag AG to

use Preussag AG‘s profit available for distribution for the payment of a dividend

of 0.77 e per no-par value share, the same amount as the previous year. The

amount of 0.5 million e (previous year 0.5 million e) remaining after the deduc-

tion of the dividend total of 133.5 million ewill be carried forward on new ac-

count. The tax credit associated with the dividend payment rose slightly com-

pared with last year to 0.33 e .

(27) Minority interests in equity Minority interests in equity mainly related to companies of the TUI Group within

the tourism division. Other noteworthy minority interests existed in the logistics

sector for the Algeco Group and the VTG-Lehnkering Group. In building engineer-

ing there were minority interests in the Hebel Group. The first-time application of

new IASC rules reduced minority interests as per 1 October 1999 by 6.2 million e.

(28) Pension provisions and similar commitments A number of pension schemes based on defined contribution plans or defined

benefit plans were operated for the employees. Benefit entitlements depended

on the legal, tax-related and economic situation in each individual country and

were usually based on the employees‘ length of service and pay level. Whereas

defined contribution plans were financed via external funds as a matter of prin-

ciple, systems existed for defined benefit plans that entailed the formation of

provisions or investment (in funds) outside the company.

German employees enjoyed benefits from a statutory defined contribution plan

paying pensions as a function of employees‘ income and the contributions paid

in. A number of additional industry pension organisations existed for companies

of the Preussag Group. Besides the payment of contributions to the state and

private pension insurance institutions, the company was not obliged to pay any

other benefits. Current contribution payments were recognised as an expense

for the respective period. In the 1999/2000 financial year, the pension costs for

all defined contribution plans for the Preussag Group totalled 137.0 million e

(previous year 128.4 million e).


Provisions for pensions and similar commitments


Pension provisions 886.6 811.3

Similar commitments 17.8 3.4

Total 904.4 814.7

The provisions for pension costs were formed on the basis of promised pension,

invalidity and surviving dependents‘ benefits. Provisions were exclusively form-

ed for defined benefit schemes under which the company guarantees employ-

ees a certain level of pension. Provisions for similar commitments covered in

particular early retirement and temporary assistance benefits. The increase in

commitments was due to additions to the group of consolidated companies.

Pension provisions were almost exclusively related to promised benefits for

German companies, whereas in foreign subsidiaries the corresponding benefits

were predominantly fund-based. In the financial year altogether 63.2 million e

were added to the pension provisions with consumption of 43.1 million e and

release of 19.9 million e. Besides, the pension funds increased by 89.5 million e

due to changes in the group of consolidated companies.

Actuarial valuations and assumptions formed the basis of the valuation of the

pension commitments. The commitments under defined benefit plans were cal-

culated in accordance with the internationally customary Projected Unit Credit

Method, taking into account expected future increases in salaries and pensions.

Fundamental actuarial assumptions applied for German subsidiaries

(p.a.) 1999/2000 1998/99

Assumed rate of interest 6.25% 5.5%

Salary increases 2.5 % - 3.0% 2.0 % - 3.0%

Pension increases 1.5 % - 2.0% 1.0 % - 1.5%

Turnover rate 2.0% 2.0%

The actuarial valuations for foreign companies were based on specific assump-

tions for the respective countries. The major fund-based defined benefit pension

commitments abroad were based on expected salary increases from 2.5% p.a. to

5.5% p.a. and expected returns on fund assets from 6.0% p.a. to 6.6% p.a.

Reconciliation of the projected unit credit value to provisions carried in the

balance sheet:


Actual projected unit credit value of all pension benefit entitlements 1,974.0 1,485.3

Fair value of externally managed funds 1,096.8 658.0

Net projected unit credit value 877.2 827.3

Difference caused by changes in actuarial assumptions and past payment obligations + 9.4 - 16.0

Provisions carried in the balance sheet 886.6 811.3

The difference of 9.4 million ewhich had not yet affected results at the balance

sheet date will be recognised ratably as income over the residual service life of

the active workforce and in subsequent years will reduce the transfers to provi-

sions for pension plans.




A breakdown of overall pension costs is presented under note 5 on page 97.

Defined benefit plans that were not funded by provisions were funded by external-

ly managed funds. This type of pension plan funding was predominantly operat-

ed by foreign subsidiaries.

Ratio of fund assets to pension entitlements

Funds with cover shortage Funds with surplus cover(in mill.e) 30 Sept 2000 30 Sept 1999 30 Sept 2000 30 Sept 1999

Fair value of fund assets 823.0 392.7 273.8 265.3

Present value of pension benefit 897.0 414.0 205.1 171.2entitlements

Cover shortage or surplus cover - 74.0 - 21.3 + 68.7 + 94.1

The increase in defined benefit pension plans financed by external pension

funds was primarily due to the first-time inclusion of the Thomson Travel Group

and at the same time the disposal from consolidation of the Thomas Cook Group.

Additional retirement benefits granted by foreign companies were primarily

operated by companies of the AMC Group, the Algeco Group and the Elco Group.

When the present value of a pension entitlement was not covered by fund

assets, a provision for the resulting potential commitment was formed with an

effect on results. In the event of surplus cover, future contributions to fund

assets were adjusted accordingly.

(29) Tax provisions and other provisions Schedule of provisionsDevelopment of provisions in the 1999/2000 financial year

Type of provisions Opening Change in Utilisation Release Addition Closingbalance the basis of balance

(in mill. e) 1 Oct 1999 consolidat. 1) 30 Sept 2000

Tax provisions 795.2 + 284.5 76.7 289.8 300.1 1,013.3

of which provisions for current taxes on income (251.5) (+ 120.0) (57.1) (19.0) (199.1) (494.5)

of which provisions for deferred taxes (388.3) (+ 267.7) (-) (269.5) (83.0) (469.5)

Other provisions 1,173.1 - 4.6 550.3 95.5 848.8 1,371.5

Personnel costs 362.6 - 1.9 245.7 27.8 303.4 390.6

Typical operating risks 265.3 + 101.9 11.9 7.3 29.0 377.0

Other provisions 545.2 - 104.6 292.7 60.4 516.4 603.9

Total 1,968.3 + 279.9 627.0 385.3 1,148.9 2,384.8

1) as well as transfers, exchange adjustment and application of new IAS standards

Tax provisions Tax provisions comprised provisions for current and deferred taxes on income

and for other taxes. Current income tax provisions – provided they existed in the

same fiscal territory and were like provisions in terms of nature and maturity –

were offset against the corresponding tax refund claims. Deferred tax liabilities

are outlined in note 10. The substantial increase in tax provisions resulted in

particular from the first-time application of IAS 12 (revised 2000) and from

changes to the basis of consolidation.


Other provisions As a rule, the interest rate for accounting purposes applied for the valuation of

provisions for anniversary bonuses carried under personnel costs was 5.5% p.a.

Provisions for typical operating risks were formed in particular for recultivation

and waste disposal commitments. The long-term commitments for the reculti-

vation or restoration of locations were carried at the present value of the antici-

pated settlement amount. The calculation of the anticipated settlement amount

was based on cost increases expected in the future. The corresponding provi-

sions were calculated taking into account price increases of 3.5% and a discount

factor of 5.5%. Additions to provisions included an interest portion of 6.0 million e

shown as interest expenses.

The first-time application of IAS 37 as per 1 October 1999 led to an increase in

provisions for typical operating risks with no effect on results of 8.2 million e,

and a rise in deferred tax provisions of 4.2 million e.

Other provisions mainly included provisions for risks from onerous contracts

(114.7 million e; previous year 59.9 million e) and guarantee, warranty and liabi-

lity risks (94.3 million e; previous year 87.5 million e).

In accordance with the rules of IAS 37, commitments that by their nature were

deferred liabilities, particularly deferrals for supplier invoices not yet received

and outside tourist services, were transferred from provisions and reclassified as

trade accounts payable. To guarantee comparability, the previous year's values

were also reclassified in this way. For the 1998/99 financial year a total of

666.1 million e and for the current reporting year a total of 843.8 million ewere

reclassified as trade accounts payable.

Other provisions included an amount of 68.4 million e (previous year 69.3 mil-

lion e) for environmental protection and 114.7 million e (previous year 59.9 mil-

lion e) for anticipated losses relating to onerous contracts.

Maturities of tax provisions and other provisions

30 Sept 2000 30 Sept 2000 30 Sept 1999 30 Sept 1999Remaining Total Total Remainingterm more term more

(in mill.e) than 1 year than 1 yearTax provisions 665.2 1,013.3 795.2 508.5

of which provisions for current taxes on income (213.2) (494.5) (251.5) (168.0)

of which provisions for deferred taxes (439.3) (469.5) (388.3) (250.1)

Other provisions 503.0 1,371.5 1,173.1 531.4

Personnel costs 45.1 390.6 362.6 84.0

Typical operating risks 308.8 377.0 265.3 241.1

Other provisions 149.1 603.9 545.2 206.3

Total 1,168.2 2,384.8 1,968.3 1,039.9




Of the total of all liabilities in the previous year, 214.8 million e had a remaining

term of more than five years.

Bonds included the bond with warrants attached issued by Preussag AG in 1996

with an issue volume of 300 million DM (153.4 million e) and maturing on 17 May

2001 (interest rate 5.75% p.a.). The outstanding warrants entitled holders to pur-

chase 4,296,970 (previous year 4,470,870) no-par value shares in Preussag AG

with an accounting value of 5.00 DM (around 2.56 e) at a subscription price of

37.50 DM (19.17 e) per share. Preussag AG held a conditional capital for the

exercise of the option rights.

In the 1998/99 financial year, Preussag AG issued a convertible bond of 550.0 mil-

lion ematuring on 17 June 2004. The convertible bond with an interest rate of

2.125% p.a. entitled their holders to convert each convertible bond of a par value

of 1,000.00 e into 15.9128 shares. As a rule, the conversion option may be exer-


(30) Liabilities30 Sept 2000 30 Sept 1999

Remaining term of Total Total Remaining more than term of more

(in mill.e) up to 1 year 1 to 5 years 5 years than 1 yearFinancial liabilities 4,197.4 1,899.0 1,096.4 7,192.8 3,283.1 1,498.4

Bonds - 661.4 746.8 1,408.2 651.2 651.2

of which convertible (-) (661.4) (-) (661.4) (651.2) (651.2)

Liabilities to banks 3,737.3 816.0 194.9 4,748.2 1,149.4 422.3

Liabilities on bills drawn 9.4 - - 9.4 9.1 -

Liabilities from finance leasing contracts 89.0 317.2 147.0 553.2 290.9 260.9

Financial liabilities to Group companies 53.2 1.7 0.2 55.1 28.7 11.7

Financial liabilities to companies in which shareholdings are held 306.5 96.9 6.4 409.8 1,153.8 152.3

of which to banks (297.9) (96.5) (6.4) (400.8) (452.9) (151.9)

Other financial liabilities 2.0 5.8 1.1 8.9 - -

Trade accounts payable 2,674.2 6.1 29.5 2,709.8 4,859.7 17.2

to third parties 2,656.5 6.1 29.3 2,691.9 4,834.6 17.0

to Group companies 11.7 - 0.2 11.9 17.9 0.2

to companies in which shareholdings are held 6.0 - - 6.0 7.2 -

Other liabilities 1,706.7 82.1 31.4 1,820.2 1,419.6 105.6

to Group companies 13.6 - - 13.6 55.1 -

to companies in which shareholdings are held 5.0 0.2 - 5.2 23.9 17.3

other liabilities 632.1 38.6 31.4 702.1 567.4 43.8

of which from taxes (134.4) (-) (-) (134.4) (96.8) (-)

(of which from taxes on income) (37.4) (-) (-) (37.4) (1.2) (-)

of which relating to social security (52.1) (0.1) (-) (52.2) (75.5) (0.2)

of which to employees (23.9) (6.3) (0.7) (30.9) (28.7) (6.9)

of which to members of the executive bodies (0.2) (2.0) (0.1) (2.3) (1.5) (-)

of which other liabilities (421.5) (30.2) (30.6) (482.3) (364.9) (36.7)

Liabilities from bills accepted 34.3 - - 34.3 30.1 0.2

Advance payments received 1,021.7 43.3 - 1,065.0 743.1 44.3

Total 8,578.3 1,987.2 1,157.3 11,722.8 9,562.4 1,621.2

cised any time between 1 July 1999 and 28 May 2004. The outside capital

component of the convertible bond was valued at its present value based on an

interest rate in line with market conditions and was increased by the interest

portion of the period as per the balance sheet date in accordance with the Effec-

tive Interest Method, the customary method used internationally.

On 22 October 1999 Preussag AG issued a bearer bond at 5.875% with an issue

volume of 750 million e and divided into 750,000 bonds with a par value of

1.000 e. The bond matures on 22 October 2006.

The liabilities from finance leasing contracts were carried without consideration

of future tax expenses. The total of all future payments from finance leasing con-

tracts was 698.7 million e (previous year 357.5 million e). The increase was main-

ly attributable to aircraft leasing by the Thomson Travel Group.

Reconciliation of future leasing payments to liabilities from finance leasing

contracts:

Total Remaining term ofmore than more than

(in mill.e) up to 1 year 1 to 5 years 5 yearsTotal of future leasing payments 698.7 123.8 395.2 179.7

Interest portion 145.5 34.8 78.0 32.7

Liabilities from finance leasing contracts 553.2 89.0 317.2 147.0

Most medium and long-term liabilities to banks, including banks in which share-

holdings were held, were based on variable interest rates and were broken down

as follows:

Since most of these liabilities were subject to variable interest rates, the fair

value of 1,009.6 million ewas only slightly less than the corresponding present

value. The increase in medium and long-term liabilities was mainly due to the

financing of company acquisitions.

The interest spread of liabilities to banks ranged from 4.90% p.a. to 6.04% p.a.

(previous year 3.17% p.a. to 6.45% p.a.).



30 Sept 2000 30 Sept 1999Original Currency Interest Interest Remaining term of Total Total Remaining loan agree- rate up to more than more than term of moreprincipal1) ment 1 year 1 to 5 years 5 years than 1 year

152,931 EUR variable 5.34-5.49% 12,440 142,121 - 154,561 - -

15,245 EUR fix 5.65% 2,052 8,711 4,536 15,299 - -

1,089,600 DEM variable 5.06-5.53% 5,728 511,291 - 517,019 165,206 159,481

451,201 DEM fix 4.90-6.04% 27,168 106,753 28,773 162,694 187,955 148,305

100,995 GBP variable 5.56-5.66% 41,101 62,192 61,809 165,102 - -

100,000 USD variable 6.02% - - - - 94,697 -

34,000 USD fix 6.45% - - - - 6,375 -

700,000 FRF variable 5.22-5.24% - - - - 99,093 -

Total 88,489 831,068 95,118 1,014,675 553,326 307,786

1)in currency units (‘000)


Liabilities secured by mortgages, assignment as security or similar rights


To banks 343.5 123.2

To non-banks 21.6 21.9

Total 365.1 145.1

The increase compared with the previous year was due to changes to the basis

of consolidation, in particular the first-time inclusion of the Thomson Travel

Group.

(31) Deferred income30 Sept 2000 30 Sept 1999

Remaining term of Total Total Remaining up to more than term of more

(in mill.e) 1 year 1 year than 1 yearInvestment subsidies 1.0 4.2 5.2 10.0 8.1

Other deferred income 127.2 94.8 222.0 162.2 9.3

Total 128.2 99.0 227.2 172.2 17.4

Government grants to promote investments (investment grants) were shown

under deferred income and recognised with an impact on results for a propor-

tionate period of time in line with the economic life of the corresponding assets;

in the 1999/2000 financial year they totalled 5.7 million e (previous year 2.0 mil-

lion e).

� Contingent liabilities (in mill.e) 30 Sept 2000 30 Sept 1999

Liabilities on bills 23.6 26.1

Liabilities under guarantees,bill and cheque guarantees 2,290.3 1,997.0

Liabilities under warranties 19.9 191.1


Contingent liabilities connected with the provision of collateral for third-party liabilities 22.7 1.6

Total 2,356.5 2,215.8

Contingent liabilities were carried at the maximum level of potential availment

at the balance sheet date.

Liabilities under warranties were all contractual liabilities to third parties going

beyond the typical scope of the business and the industry that were not to be

classified as guarantees.

The guarantees and warranties taken over in previous years – in particular by

Preussag AG – on behalf of the companies in the former plant engineering and

shipbuilding sector which mainly served the settlement of ongoing business

transactions and still existed at the balance sheet date, were shown at their

amounts as per that date. In the event of claims raised by creditors, Babcock

Borsig AG has assumed an indemnity obligation to Preussag AG. In the current

financial year, the resulting guarantees were reduced in part. In addition there

remain guarantees for the Thomas Cook Group, predominantly arising from

guarantees for travellers' cheque redemption obligations.


The Preussag Group companies were jointly and severally liable for participations

in civil-law partnerships for which profit and loss transfer agreements with sub-

sidiaries existed, for participations in joint ventures and participations in partner-

ships as general partner.

Contingent liabilities connected with the provision of collateral for third-party

liabilities related to assets used to collateralise third-party liabilities.

� Litigation Neither Preussag AG nor any of its subsidiaries were involved in pending or fore-

seeable court or arbitration proceedings which might have a significant impact

on its economic position or had such an impact in the past two years. Further-

more, the subsidiaries had formed appropriate provisions or expected adequate

insurance benefits to cover any potential financial charges from court or arbitra-

tion proceedings. The financial position was therefore unlikely to be substantial-

ly affected by such charges.

� Other financial commitmentsNominal values of other financial commitments

30 Sept 2000 30 Sept 1999Remaining term of Total Total Remaining

up to more than more than term of more (in mill.e) 1 year 1 to 5 years 5 years than 1 yearOrder commitments in respectof capital expenditure 118.3 241.6 - 359.9 923.2 371.2

Anti-pollution measures 1.0 1.4 - 2.4 4.4 2.9

Commitments from lease,tenancy and leasing contracts 633.0 1,909.4 1,031.3 3,573.7 2,436.5 1,912.4

Other financial commitments 209.7 86.5 0.5 296.7 136.0 76.7

Total 962.0 2,238.9 1,031.8 4,232.7 3,500.1 2,363.2

The decrease in order commitments in respect of capital expenditure of

563.3 million ewas attributable to scheduled investment in the logistics and

tourism divisions during the financial year.

Other financial commitments from lease, tenancy and leasing contracts ex-

clusively related to lease contracts in which the risks and rewards incident to

ownership of the leased assets (‘operating lease’) – in accordance with the IASC

rules – did not lie with the Preussag Group companies. The significant increase

in these commitments in comparison to the previous year mainly resulted from

the first-time inclusion of the Thomson Travel Group. This mainly involved finan-

cial commitments under leasing contracts for aircraft and rental of travel shops.

The remaining other financial commitments mainly included amounts for obli-

gations from orders already placed, commitments in connection with leased

land clean-up and renovation, payment obligations and obligations in connec-

tion with shareholdings.

� Financial instruments Financial instruments are contractual claims or obligations that will lead to an

outflow or inflow of financial assets or to the issue of equity rights. Apart from

the primary financial instruments shown in the balance sheet, they also comprise

derivative claims or obligations derived from other financial instruments.



Primary financial instruments The valuation of the primary financial instruments recognised in the balance

sheet is outlined in the explanatory information on the respective items.

Fair values of primary financial instruments The fair value is the amount for which financial instruments could be exchanged,

sold or purchased, or a liability settled, between knowledgeable and willing par-

ties in an arm’s length transaction at the balance sheet date. The fair values of

the securities shown under investments totalling 9.7 million e (previous year

2.2 million e) and under current assets totalling 16.9 million e (previous year

1,888.5 million e) corresponded in principle to the stock prices. No fundamental

differences existed between book values and fair values for primary financial

instruments.

In terms of financial liabilities, the fair value of the bond with warrants attached

issued in 1995/96, of the convertible bond issued in the 1998/99 financial year,

and of the corporate bond issued during the financial year – based on the re-

spective stock market price at the balance sheet date – totalled 1,401.9 million e

(previous year 692.7 million e); the stock price of the convertible bond also

included a valuation of the conversion option associated with the bond. Based

on an interest rate consistent with market conditions, the fair value of the out-

side capital component of the convertible bond totalled 443.8 million e (pre-

vious year 472.1 million e) as per the balance sheet date.

Currency and interest risk The value of primary financial instruments may change due to changes in

exchange rates (currency risk).

Business transactions conducted by companies of the Preussag Group generat-

ed income and expenses in foreign currencies, which, however, were not always

matched by expenses or income in the same currency with identical amounts

and maturities. To this extent the Preussag Group companies were exposed to

exchange rate risks. These risks mainly related to payments in US dollars, in par-

ticular in the tourism and logistics divisions and industrial activities.

An interest risk, i.e. potential fluctuations in the value of a financial instrument

caused by changes in market interest rates, existed primarily for long-term

fixed-interest receivables and liabilities.

As a matter of principle, the Preussag Group companies countered these risks by

using derivative financial instruments. Both listed and unlisted instruments

were used.

Currency and interest hedging transactions were only concluded with first-rate

banks – or, for business reasons, with other metal traders in the trading sector –

within limits which were established internally and constantly checked. Currency

hedging transactions were always based on an underlying transaction, either

anticipated or shown in the balance sheet. In the tourism division, the hedging

strategy took account of the specific business trend in the industry. Accordingly,



the foreign currency required for expected bookings over the next two tourist

seasons was hedged in the TUI Group and the Thomson Travel Group by corres-

ponding forward currency deals or option contracts.

These deals were concluded on a decentralised basis by the individual Group

companies or sub-groups and Preussag AG. In the framework of currency

hedging, the companies of the Preussag Group transacted nettings for the

foreign exchange revenues and expenditure of the same currency and the same

maturity. Currency hedging transactions were subsequently conducted with

banks for the resulting shortage or excess.

There was a strict separation – as far as can be guaranteed by commercial rules

– between the functional areas of trading, settlement and control.

Derivative financial instruments Nominal volumes and fair values as per 30 September 2000

Nominal volume Total Fair valuesRemaining term of

up to more than(in mill.e) 1 year 1 to 5 years 5 yearsSwaps 17.7 93.7 6.3 117.7 1.0

Forward Rate Agreements 496.9 - - 496.9 - 1.8

Other hedging instruments 9.4 214.1 219.9 443.4 3.7

Interest rate hedging instruments 524.0 307.8 226.2 1,058.0 2.9

Forward buying 3,552.9 400.8 - 3,953.7 86.5

Forward selling 1,187,3 155.5 - 1,342.8 - 39.3

Buying of options 1,593.7 3.8 - 1,597.5 28.3

Selling of options 121.9 0.1 - 122.0 - 3.4

Swaps and other currency hedging instruments 229.2 15.7 - 244.9 - 1.5

Currency hedging instruments*) 6,685.0 575.9 - 7,260.9 70.6

*) Primarily payments in US dollars and in euros – for foreign subsidiaries not using the euro as their functional currency – were hedged by means of derivative currency instruments.

Nominal volumes and fair values as per 30 September 1999

Nominal volume Total Fair valuesRemaining term of

up to more than(in mill.e) 1 year 1 to 5 years 5 yearsSwaps 13.9 145.2 - 159.1 19.1

Forward Rate Agreements - - - - -

Other hedging instruments 9.3 258.3 - 267.6 13.1

Interest rate hedging instruments 23.2 403.5 - 426.7 32.2

Forward transactions2) 1,353.9 109.7 2.0 1,465.6 14.1

Option contracts2) 589.8 1.1 - 590.9 18.6

Interest rate/currency swaps 22.3 21.5 - 43.8 - 0.5

Swaps and othercurrency hedging instruments 34.1 - - 34.1 -

Currency hedging instruments1) 2,000.1 132.3 2.0 2,134.4 32.2

1) Primarily payments in US dollars and to a much smaller extent in Greek drachmas were hedged by means of derivative currency instruments.

2) No information on the breakdown of selling and buying transactions was collected in the previous year.

The nominal amounts corresponded to the total of all purchase or sale amounts

or the contract values of the transactions. The fair values related to the redemp-

tion values at the balance sheet date.




Other interest hedging instruments included zero cost collars and interest limi-

tation contracts. The interest/currency swaps not clearly attributable to any one

hedging category were shown separately under currency hedging instruments.

The interest spread of interest hedging instruments ranged from 2.53% p.a. to

7.80% p.a. (previous year: 2.53% p.a. to 8.57% p.a.).

The increase in the volume of the currency hedging instruments existing as per

30 September 2000 in comparison to the preceding balance sheet date was

primarily attributable to the addition of the Thomson Travel Group.

Credit risk The credit risk in primary financial instruments resulted from the risk of failure

by counterparties to discharge their contractual payment obligations.

The maximum credit risk exposure was mainly reported by means of the total of

the fair values of the primary financial assets, irrespective of existing collateral,

but taking into account any legally enforceable possibilities of offsetting finan-

cial assets and liabilities. A concentration of credit risks may arise from expo-

sures to a single debtor or to groups of debtors having similar characteristics.

Since the Preussag Group operated in many different business areas and regions

in a diversified manner, the structure of the Group meant that significant credit

risk concentrations of receivables from and loans to certain debtors or groups of

debtors were not to be expected. There was as well no significant specific con-

centration of credit risks related to trade accounts receivable for individual

countries.

For the conclusion of derivative financial instruments, the maximum credit risk

was the total of all positive fair values of these instruments, since in the event of

default by the contracting partners, asset losses would be sustained only up to

this amount.

Since derivative financial instruments were concluded with a variety of first-rate

debtors, no significant concentration of credit risks was expected.

� Aircraft fuel and oil price hedging instruments Apart from interest and currency hedging instruments, the airlines of the

Preussag Group also used price hedging instruments for future aircraft fuel re-

quirements in order to hedge external risks impacting operating activities. These

aircraft fuel hedging instruments consisted exclusively of fixed-price and option

deals. In addition, derivative financial instruments were used in the financial

year in the energy sector for the first time to hedge the risks of oil price and ex-

change rate fluctuations for future production volumes.


Nominal volumes and fair prices as per 30 September 2000

Remaining term of Total Fair valuesmore than more than

(in mill.e) up to 1 year 1 to 5 years 5 yearsSwaps 214.5 19.0 - 233.5 57.7

Purchase options/target range options 196.1 45.6 - 241.7 5.1

Others 51.9 - - 51.9 10.9

Nominal volumes and fair prices as per 30 September 1999

Remaining term of Total Fair valuesmore than more than

(in mill.e) up to 1 year 1 to 5 years 5 yearsSwaps 66.3 5.9 - 72.2 11.9

Purchase options/target range options 22.9 - - 22.9 4.4

Others - - - - -

The fair value used for aircraft fuel hedging instruments was calculated on the

basis of the price of comparable contracts at financial year-end.

The increase in airline fuel hedging instruments as per 30 September 2000

compared to the previous financial year-end resulted in particular from the first-

time inclusion of the Thomson Travel Group with the airline Britannia Airways

Ltd., and from the conclusion of oil price hedging transactions in the financial

year for the first time.




� Notes on the consolidated cash flow statementFor the 1999/2000 financial year and for the previous year, the cash flow state-

ment of the Preussag Group showed the flow of funds on the basis of a separate

presentation of cash inflow and outflow from business activities, investments

and finance. The effects of changes to the basis of consolidation were eliminated.

(32) Cash inflow from business activities The cash inflow from operating activities included interest received. In the

1999/2000 financial year, interest totalling 161.1 million ewas received (previous

year 103.9 million e). The increase in interest received was mainly due to the in-

come from the financial services business of the Thomas Cook Group, which was

included in the consolidated cash flow statement for a period of nine months. In

the 1999/2000 financial year, income tax payments led to total cash outflows of


(33) Cash inflow/outflow from investments The cash payments for the acquisition of tangible and intangible assets or the

cash receipts from corresponding sales did not match the additions or disposals

shown under the development of fixed assets, which related to the goodwill ac-

quired from capital consolidation apart from non-cash transactions and dispo-

sals. The outflow of funds for investments included cash payments – offset

against the effect on funds of the additions to consolidation – for the acquisi-

tion of shares in subsidiaries, most of which were included in the consolidated

balance sheet as goodwill and as assets and liabilities.

In the 1999/2000 financial year, cash payments totalling 3.3 billion e (previous

year 1.2 billion e) were made for the acquisition and divestment of subsidiaries.

Total funds acquired from these purchases and sales amounted on balance to

0.8 billion e. In addition, non-cash investments were primarily made in the

logistics and tourism divisions by means of finance leasing contracts.

(34) Cash inflow from finance In addition to the outflow of funds due to the payment of dividends in the finan-

cial year, the flow of funds from finance included in particular the inflows from

the raising of external funds. The increase in inflows of external funds resulted

primarily from the interim financing of the Thomson acquisition, and 750 million e

from the 5.875% bearer bond issued in October 1999.

(35) Development of funds Funds comprised all liquid funds, i.e. cash in hand, cheques, Bundesbank and

other bank deposits and securities under current assets, all of which could be

sold at short notice. The impact of fund movements due to exchange rate fluc-

tuations was shown separately. Also outlined separately were the changes in

funds attributable to changes in the basis of consolidation but which did not re-

sult from the acquisition or sale of companies. In the 1999/2000 financial year

funds were thus reduced by 3.0 billion e, primarily due to the disposal of the

Thomas Cook Group, which was carried under current assets in the consolidated

Notes on the Consolidated Cash Flow Statement

financial statements as per 30 September 2000. Since the Thomas Cook Group

issued travellers' cheques as part of its financial services business, it had

substantial funds at its disposal.

� Average annual headcount (excluding apprentices)1999/2000 1998/99

Industrial workers 14,983 13,639

Employees 61,409 44,034

Total 76,392 57,673

In the year under review, the total number of employees working for the Hapag-

Lloyd Group and the TUI Group companies was 29,165, a significant figure in

terms of the average number of employees. The headcount for the 1999/2000

financial year, with the proportionate annual average, also included 15,358 em-

ployees working for the Thomas Cook Group, which was sold as of 30 June 2000,

and 4,505 people employed by the Thomson Travel Group (as of 30 September

2000, the Thomson Travel Group had 18,022 employees).

� Related parties Apart from the subsidiaries included in the consolidated financial statements,

Preussag AG, in carrying out its ordinary business activities, maintained indirect

or direct relationships with a large number of Group companies that were not

included in the consolidation, and with associated companies. Related parties

controlled by the Preussag Group or over which the Preussag Group was able to

exercise a significant influence are listed in the list of shareholdings, with infor-

mation on the interest held, equity and annual results by sector. The list of share-

holdings was deposited in the commercial registers of the district courts of

Berlin-Charlottenburg and Hanover.

A large number of related, non-consolidated Group companies no longer carried

out operating activities due to the discontinuation of their business operation or

acted as a general partner without capital contribution for consolidated subsi-

diaries in the legal form of a limited partnership.

Apart from pure equity participations, the sole purpose of which was to increase

net worth by means of investments, related parties also included Group partici-

pations that supplied goods or provided services for Preussag Group companies

as part of their business. These transactions mainly included sales services ren-

dered in connection with entry onto foreign markets for the logistics, building

engineering and trading sectors and, to a lesser extent, general centralised ser-

vices for all sectors of the Preussag Group. The volume of assets and goods sold

to related parties, particularly distribution companies, totalled 60.0 million e

(previous year 31.4 million e). In the energy sector, there were participations

with other external companies operating in this sector – as is customary in the

trade – for the purpose of using and securing crude oil pipelines and selling

crude oil and natural gas. Production and supplier services provided by related

parties were only of minor importance.



The logistics division in particular held participations in companies hiring out

tangible assets to consolidated subsidiaries. In view of the commercial owner-

ship held by companies of the Preussag Group, the leased tangible assets and

the corresponding liabilities from these finance leasing conditions were report-

ed in the consolidated balance sheet, as per IASC rules. As of 30 September

2000, the Group had leasing liabilities to related parties totalling 247.3 million e

(previous year 227.7 million e).

In the tourism division there were very few business transactions with associat-

ed companies in which shareholdings were held: as tour operators they made

use of services along the tourism value chain provided by the Preussag Group

such as transportation, accommodation and catering as well as care and sup-

port, and received sales-related services provided by Group travel agencies. Apart

from that, related parties over which Preussag may exert material control pro-

vided service and support services for guests of Group-owned tour operators at

holiday destinations. The volume of all tourist services provided by related

parties amounted to 119.0 million e in the financial year (previous year 104.5 mil-

lion e). Apart from Group-owned hotels, Group companies also used hotel ser-

vices offered by related parties under lease and management contracts. Subsi-

diaries thus provided management and consultancy services for related parties

totalling 18.2 million e (previous year 17.1 million e) and rented hotel buildings

and equipment amounting to 34.0 million e (previous year 26.2 million e). Such

business relationships mainly existed with RIU Hotel S.A., respective by the Riu

family.

Given its direct equity participation, Westdeutsche Landesbank Girozentrale,

Düsseldorf/Münster met the formal requirements for a related party of

Preussag AG in accordance with IAS 24. In holding this participation, Westdeut-

sche Landesbank did not pursue any entrepreneurial objectives, and therefore

did not have any part in the financial or operating policy decisions of Preussag

AG. Relations with Westdeutsche Landesbank consisted entirely of transactions

customarily carried out with commercial banks.

In the 1998/99 financial year the Group had transferred the plant engineering

companies plus 25% of HDW shares to Babcock Borsig AG in the form of in-kind

contribution in exchange for shares. This equity participation met the conditions

for a related party as stipulated in IAS 24. The shares in Babcock Borsig AG were

carried under companies valued at equity. In context with the completion of last

year's transfer of plant engineering, in the 1999/2000 financial year a cash

expenditure on a subsidy arouse. In addition, Babcock Borsig AG was granted an

initially interest-free, conditionally repayable loan.

All business transactions with related parties were executed under conditions

similar to those for trading with third parties, upon assessment based on inter-

national price comparison methods in accordance with IAS 24.

The type and level of claims and liabilities of the Preussag Group resulting from

these transactions are listed in the explanatory information on the correspond-

ing asset and liability items. The income and expenses resulting from the capital

participations and funding were carried under overall financial results and pre-

sented under segment reporting, together with separate results of associated

companies by division. Due to the type and scope of related party transactions,

further disclosures were not required for an understanding of the effects of

these transactions on the earnings situation of the Preussag Group.

Total remuneration of the members of the Executive Board of Preussag AG for

their work for the Group amounted to 6.323 million e (previous year 5.163 mil-

lion e) in the 1999/2000 financial year. For members of the Executive Board,

pension provisions totalled 8.782 million e (previous year 6.919 million e) at the

balance sheet date. Total remuneration of the members of the Supervisory

Board amounted to 1.275 million e (previous year 1.273 million e).

Pension provisions for former members of the Executive Board or their depen-

dants amounted to 37.515 million e (previous year 36.552 million e) at the balan-

ce sheet date. During the past financial year, these persons received a total of


The members of the Supervisory Board and the Executive Board are listed

separately on page 131 to 133.

Hanover, 8 February 2001

The Executive Board

Frenzel

Gurassa Schultze Stodieck


Corsten Feuerhake

130 Auditors’ Statement

overall adequacy of the presentation of informa-

tion in the consolidated financial statements. We

consider that our audit gives us reasonable

grounds for our opinion.

In our opinion, the consolidated financial state-

ments, in conformity with the IAS, present a true

and fair view of the net worth, financial position

and results of the Group and of the cash flows in

the financial year.

Our audit, which was conducted in accordance

with German auditing rules and also covered the

combined management report of the Group and of

Preussag AG as prepared by the Executive Board

for the financial year from 1 October 1999 to 30

September 2000, has not given rise to any objec-

tions. In our opinion the Group management

report provides a true and fair view of the situation

of the Group overall and a proper presentation of

the risks associated with future development.

We also confirm that the consolidated financial

statements and the Group management report for

the financial year from 1 October 1999 to 30 Sep-

tember 2000 meet the conditions for an exemp-

tion of the Group from the duty to prepare consoli-

dated financial statements and a Group manage-

ment report under German law. We have verified,

on the basis of the interpretation of the 7th EU

Directive as per DRS 1 of the German Accounting

Standards Committee, that Group reporting

complies with the Directive and therefore meets

the requirements for exemption from reporting

obligations under commercial law.

We have audited the consolidated financial state-

ments prepared by Preussag Aktiengesellschaft,

Berlin and Hanover, comprised of balance sheet,

profit and loss statement, change in equity state-

ment, cash flow statement and notes, for the fi-

nancial year from 1 October 1999 to 30 September

2000. The Executive Board is responsible for the

preparation and the contents of the consolidated

financial statements. It is our responsibility to

assess, on the basis of our audit, whether the

consolidated financial statements conform with

the International Accounting Standards (IAS).

We conducted our audit of the consolidated

financial statements on the basis of German

auditing rules and the generally accepted auditing

standards issued by the German Auditors‘ Institute

(IDW), complemented by the International Stan-

dards on Auditing (ISA). Accordingly, the audit was

planned and implemented so as to give reasonable

assurance in ascertaining whether the consolidat-

ed financial statements were free from material

misstatements. In determining the audit activities,

information on the business activities and the

economic and legal position of the Group as well

as expectations with regard to potential errors

were taken into account. In the framework of the

audit, the documents used as evidence for the

valuation and information given in the consolidat-

ed financial statements were assessed on a test

basis. The audit included an assessment of the

accounting principles applied and the significant

estimates and judgements made by the legal

representatives, as well as an assessment of the

Hanover, 8 February 2001

PwC Deutsche Revision

Aktiengesellschaft

Wirtschaftsprüfungsgesellschaft

Nienborg Schilling

Wirtschaftsprüfer Wirtschaftsprüfer

˘ Auditors' Statement

Auditors’ Statement

Boards 131

Supervisory Board

Dr. Friedel NeuberChairman of the Executive Board

of Westdeutsche Landesbank

Girozentrale

Düsseldorf

Chairman

Fritz KollorzMember of the Executive Board

of the Mining, Chemical and Energy

Industrial Union

Hanover

Deputy Chairman

(Member of the Presiding Committee

since 18 February 2000)

Uwe KleinClerk

Hamburg

(Member of the Presiding Committee

since 10 November 1999)

Dr. Dietmar KuhntChairman of the Executive Board

of RWE AG

Essen

Dr. Klaus LiesenChairman of the Supervisory Board

of Ruhrgas AG

Essen

Dipl.-SoziologeHorst SchmitthennerMember of the Executive Board

of the Trade Union for the

Metal Industry

Frankfurt/Main

(Deputy Chairman and Member

of the Presiding Committee

until 30 November 1999)

Werner StegmaierSenior Service Engineer

Stuttgart

Rainer BarcikowskiHead of the Branch Office of the

Executive Board of the Trade Union

for the Metal Industry

Düsseldorf

(until 31 October 2000)

Dr. Gerold BezzenbergerSolicitor and Notary Public,

Member of the Executive Board of

Deutsche Schutzvereinigung für

Wertpapierbesitz e.V.

Berlin

Dr. Jürgen DeilmannManaging Director of

Deilmann Montan GmbH

Bad Bentheim

Dr. Heinz DürrEntrepreneur

Berlin

Jan KahmannMember of the Executive Board of

the Trade Union for Public Services,

Transport and Traffic

Stuttgart

(since 3 December 1999)

Dr. Jürgen KrumnowMember of the Board of Advisors

of Deutsche Bank AG

Frankfurt/Main

Heinz LookLocksmith

Suddendorf

Joachim LossackBusiness Administration Graduate

Berlin

Friedhelm MaticHead of the Branch Office of the

Executive Board of the Trade Union

for the Metal Industy

Düsseldorf

(since 1 November 2000)

Dipl.-Kfm. Hans Henning OffenDeputy Chairman of the Executive

Board of Westdeutsche Landesbank

Girozentrale

Düsseldorf

Dr. Günther SaßmannshausenHanover

Gerhard SchneiderClerk

Sehnde

(since 28 October 1999)

Dipl.-Math. Olaf SeifertHead of the Group Controlling Tourism

Department of Preussag AG

Hanover


Johann SitzbergerForeman

Plattling


Dr. Bernd W. VossMember of the Executive Board

of Dresdner Bank AG

Frankfurt/Main

˘ Members of the Supervisory BoardPresiding Committee

132 Boards

Supervisory Board

Dr. Friedel Neuber(Chairman)

a) Babcock Borsig AG1)

Deutsche Bahn AG

Douglas Holding AG

RWE AG1)

ThyssenKrupp AG

TUI Group GmbH

b) AXA S.A.

Bank Austria AG

Fritz Kollorz(Deputy Chairman)

a) DSK Anthrazit Ibbenbüren GmbH2)

RAG Aktiengesellschaft2)

STEAG AG2)

STEAG Walsum Immobilien AG2)

Vereinigte Energiewerke AG2)

Rainer Barcikowski a) EKO Stahl GmbH

Dr. Gerold Bezzenberger a) TESSAG Technische

Systeme & Services AG

Dr. Jürgen Deilmanna) Braunschweigische

Maschinenbauanstalt AG1)

Dr. Heinz Dürra) Bankgesellschaft Berlin AG

Benteler AG

Dürr AG1)

Krone GmbH1)

Stinnes AG

b) Alp Transit Gotthard AG2)

Carl-Zeiss-Stiftung

Landesbank Baden-Württemberg

Jan Kahmanna) Eurogate Geschäftsführungs-

GmbH & C0. KGaA2)

Lufthansa Technik AG

Uwe Kleina) –

*) Information refers to 30 September 2000 or the date of resignation from the Supervisory Board

1) Chairman2) Deputy Chairmana) Membership in Supervisory Boards

required by lawb) Membership in comparable Supervisory

Boards of domestic and foreign companies

Dr. Jürgen Krumnowa) mg technologies ag

Phoenix AG1)

Schering AG

Schmalbach-Lubeca AG

Systracom AG2)

Volkswagen AG

b) Peek & Cloppenburg KG

Lenze Holding GmbH & Co. KG

Dr. Dietmar Kuhnta) AfE Aktiengesellschaft für

Energiewirtschaft

Allianz Versicherungs-AG

Dresdner Bank AG

Hapag-Lloyd AG

Heidelberger Druckmaschinen AG1)

Hochtief AG1)

mg technologies ag

Rheinbraun AG1)

RWE-DEA AG für Mineraloel

und Chemie1)

RWE Energie AG1)

RWE Umwelt AG1)

TESSAG Technische

Systeme & Services AG1)

Dr. Klaus Liesena) Allianz AG1)

Deutsche Bank AG

E.ON AG1)

Ruhrgas AG1)

Volkswagen AG1)

b) Beck GmbH & Co. KG

Heinz Looka) Preussag Energie GmbH

Volksbank Obergrafschaft e.G.

Joachim Lossacka) –

Friedhelm Matica) Europipe Deutschland GmbH

Hoesch-Hohenlimburg GmbH

Klöckner Werke AG

Dipl.-Kfm. Hans Henning Offena) Deutsche Shell AG

Gildemeister AG

Kaufhof Warenhaus AG

RWE Energie AG

ThyssenKrupp Materials &

Services AG

Trienekens AG

WestIntell AG1)

WestLB (Europa) Holding AG2)

b) Banque d’Orsay

Familienstiftung Schwarz

Westdeutsche Landesbank

(Italia) S.p.A.1)

WestKA Westdeutsche

Kapitalanlageges. mbH1)

WestLB International S.A.

Dr. Günther Saßmannshausena) Braunschweigische

Maschinenbauanstalt AG

Heraeus Holding GmbH

Preussag Energie GmbH

VAW Aluminium AG

Volkswagen AG

Dipl.-Soziologe Horst Schmitthennera) Salzgitter AG2)

Gerhard Schneidera) TUI Group GmbH2)

Dipl.-Math. Olaf Seiferta) –

Johann Sitzbergera) Kermi GmbH

Werner Stegmaiera) Minimax GmbH2)

Dr. Bernd W. Vossa) Continental AG

Deutsche Hypothekenbank

Frankfurt-Hamburg AG2)

Deutsche Schiffsbank AG1)

Dresdner Bauspar AG2)

E.ON AG

Karstadt Quelle AG

Oldenburgische Landesbank AG1)

Quelle AG

Varta AG

Volkswagen AG

Wacker Chemie GmbH

˘ Other board memberships of the Supervisory Board

Boards 133

Executive Board

Dr. Michael FrenzelChairman

Dr. Ralf CorstenTourism I

(since 1 January 2001)

Rainer FeuerhakeFinance

Charles GurassaTourism II

(since 1 January 2001)

Dr. Wolfgang SchultzePersonnel and Legal Affairs

Dr. Helmut StodieckHoldings

*) Information refers to 30 September 2000 or the date of resignation from the Supervisory Board

1) Chairman2) Deputy Chairmana) Membership in Supervisory Boards

required by lawb) Membership in comparable Supervisory

Boards of domestic and foreign companies

˘ Other board memberships of the Executive Board *)

Dr. Michael FrenzelChairman

a) AXA-Colonia Konzern AG

Continental AG

Deutsche Bahn AG

Deutsche Hypothekenbank AG

E.ON Energie AG

Hapag-Lloyd AG1)

TUI Group GmbH1)

b) Creditanstalt AG

EXPO 2000 Hannover GmbH

Norddeutsche Landesbank

Kreditanstalt für Wiederaufbau

Preussag North America, Inc.1)

Dr. Ralf Corstena) Ergo Versicherungsgruppe AG

Hapag-Lloyd Fluggesellschaft mbH1)

b) Egyptotel S.A.E.

Grecotel S. A.

Grupotel Dos S. A.

Jet Air N. V.

RIUSA II S. A.1)

Travel Unie International

Nederland N. V.1)

TUI Belgium N. V.1)

TUI Contracting AG1)

TUI Suisse AG1)

Ultramar Express S. A.1)

Rainer Feuerhakea) Babcock Borsig AG

Hapag-Lloyd AG

Howaldtswerke-Deutsche Werft AG

TUI Group GmbH

Wolf GmbH1)

b) Amalgamated Metal

Corporation plc

Preussag North America, Inc.

Westdeutsche Immobilienbank

Charles Gurassaa) –

b) Thomson Travel Group plc

Thomson Travel Group

(Holdings) Ltd.

Whitbread plc

Dr. Wolfgang Schultzea) ECI Elektro-Chemie GmbH

Fels-Werke GmbH

Hebel AG

TUI Group GmbH

b) Preussag BKK1)

Dr. Helmut Stodiecka) Babcock Borsig AG

Preussag Energie GmbH

TUI Group GmbH

b) Amalgamated Metal

Corporation plc1)

W. & O. Bergmann GmbH & Co. KG

Preussag North America, Inc.

˘ Members of the Executive Board

˘ Report of the Supervisory BoardDuring the financial year 1999/2000 (1 October 1999 to 30 September 2000)

and the abbreviated financial year 2000 (1 October to 31 December 2000), the

Supervisory Board supervised and advised the management of the Company.

The Supervisory Board was kept informed regularly about current business

development and the position of the Company by the Executive Board on the

basis of comprehensive written and verbal reports.

In the course of five regular and two extraordinary meetings, the Supervisory

Board was involved in all important Company affairs and discussed them with

the Executive Board. The regular meetings focused on the economic situation of

the Company, the short-term and medium-term planning, the discussion and

approval of the financial statements and the preparation of the resolutions to

be adopted by the Annual General Meeting 2000, in particular concerning the

creation of authorised and conditional capital and the possibility of repurchas-

ing own shares, as well as the preparation of the resolutions to be adopted by

the Annual General Meeting 2001.

The extraordinary meetings focused on the expansion of the tourism division, in

particular the acquisition of the British Thomson Travel Group plc and the relat-

ed sale of the Thomas Cook Group in May 2000, and on the further restructur-

ing of the Group in October 2000, with deliberations focusing on the resolution

concerning the progressive acquisition of the French Nouvelles Frontières S.A.

and the divestment of industrial activities.

Further business transactions which required the consent of the Supervisory

Board according to the law or the Articles of Association or were of particular

importance were discussed in detail prior to passing the corresponding resolu-

tions. The Presiding Committee of the Supervisory Board met to prepare deci-

sions to be taken by the Supervisory Board in meetings.

The financial statements of Preussag AG and the consolidated financial

statements for the financial year ending on 30 September 2000 and for the

financial year ending on 31 December 2000 as well as the joint management

reports relating to both Preussag AG and the Group for the financial year

1999/2000 and for the abbreviated financial year 2000 submitted by the

Executive Board were audited by PwC Deutsche Revision Aktiengesellschaft

Wirtschaftsprüfungsgesellschaft, Hanover, appointed by the Annual General

Meeting on 12 April 2000. The auditors found that the legal requirements had

been complied with and issued their unqualified audit certificate.

The auditors audited and confirmed the conformity of the accounting, valuation

and consolidation in the consolidated financial statements for the financial year

1999/2000 and the abbreviated financial year 2000 with the International

134 Report of the Supervisory Board

Report of the Supervisory Board

Accounting Standards (IAS). Furthermore, the auditors audited the early risk

detection system operated by Preussag AG in accordance with the Act on

Control and Transparency in the Corporate Sector (KonTraG).

The financial statements, management reports and auditors’ reports for the

financial year 1999/2000 and the abbreviated financial year 2000 were present-

ed to all members of the Supervisory Board. Representatives of the auditors

attended the balance sheet meetings of the Presiding Committee and the

Supervisory Board and provided information.

The Supervisory Board approves, after examination, the results of the audit.

It has also examined the financial statements and the consolidated financial

statements as well as the management reports of the Company and the Group.

Following final examination, the Supervisory Board has no objections and

approves the financial statements, which are thereby adopted. After examina-

tion, the Supervisory Board concurs with the Executive Board’s proposal for the

appropriation of the distributable profit of Preussag AG as of 30 September

2000 and 31 December 2000.

At its meeting on 18 February 2000, the Supervisory Board elected Mr. Fritz

Kollorz as deputy chairman of the Supervisory Board.

Mr. Rainer Barcikowski retired from the Supervisory Board with effect from

31 October 2000. The Supervisory Board thanks Mr. Barcikowski for the many

years of constructive cooperation.

By order of the Hanover District Court of 1 November 2000, Mr. Friedhelm Matic

was appointed member of the Supervisory Board.

At its meeting on 5 October 2000, the Supervisory Board resolved to appoint

Dr. Ralf Corsten and Mr. Charles Gurassa as members of Preussag AG’s Executive

Board with effect from 1 January 2001.

Moreover, at its meeting on 7 February 2001, the Supervisory Board appointed

Dr. Peter Engelen as member of the Executive Board with effect from 1 May 2001.

He will succeed to Dr. Wolfgang Schultze who will retire upon reaching the age

of 65 on 30 April 2001.

The Supervisory Board

Hanover, 29 March 2001

Dr. Friedel Neuber

Chairman

Report of the Supervisory Board 135

Report of the Supervisory Board

Wirtschaftliche LageMajor Shareholdings

136 Major Shareholdings

Nominal Result for Shareholding (%)share capital the year1)

in ‘000 in ‘000 total indirectTourism

TUI GROUP GmbH, Hanover DM 300,000 - 79,318 99.6 99.6

TUI Deutschland GmbH, Hanover e 15,000 * 99.6 99.6

Travel Unie International Nederland N.V., Rijswijk NLG 20,000 14,558 90.6 90.6

Hapag-Lloyd Geschäftsreise GmbH, Bremen e 10,180 3,918 99.6 99.6

TUI Leisure Travel GmbH, Hanover e 14,500 * 99.6 99.6

FIRST Reisebüro Management Holding GmbH, Düsseldorf e 10,480 1,305 99.6 99.6

Robinson Club GmbH, Hanover DM 10,050 - 455 99.6 99.6

RIUSA II S.A., Palma de Mallorca ESP 200,000 9,091,892 49.8 49.8

Hapag-Lloyd Fluggesellschaft mbH, Langenhagen DM 85,000 * 99.6 99.6

Thomson Travel Group plc, London3)5) GBP 250,001 37,300 99.0 -

Logistics

Hapag-Lloyd AG, Bremen und Hamburg e 71,581 112,523 99.6 -

Hapag-Lloyd Container Linie GmbH, Hamburg e 25,564 * 99.6 99.6

VTG-Lehnkering AG, Duisburg und Hamburg e 53,430 2,604 79.4 79.4

ALGECO S.A., Paris/Mâcon e 7,300 16,944 66,.7 66.7

Energy

Preussag Energie GmbH, Lingen e 76,694 * 100.0 -

Deutsche Tiefbohr-AG, Bad Bentheim e 32,416 * 100.0 100.0

Building Engineering

FELS-WERKE GmbH, Goslar e 20,452 * 100.0 -

HEBEL AG, Emmering3)5) DM 60,000 - 58,786 81.2 81.2

Wolf GmbH, Mainburg DM 80,000 * 100.0 -

Elcotherm AG, Vilters CHF 1,000 - 1,588 100.0 100.0

Chaffoteaux et Maury S.A., Chatou e 11,944 6,441 100.0 100.0

Kermi GmbH, Plattling e 15,339 * 100.0 -

Minimax GmbH, Bad Oldesloe e 20,810 * 100.0 -

Trading

Amalgamated Metal Corporation PLC, London GBP 16,908 3,178 99.4 99.4

Amalgamated Metal Trading Ltd., London GBP 6,000 1,002 99.4 99.4

Premetalco, Inc., Rexdale CAD 21 13,844 99.4 99.4

W. & O. Bergmann GmbH & Co. KG, Düsseldorf e 30,678 4 100.0 -

Feralloy Corp., Chicago USD 2,000 - 1,970 100.0 100.0

Delta Steel, Inc., Houston USD 2,000 10,325 100.0 100.0

Other Companies

Salzgitter Grundstücks- undBeteiligungsgesellschaft mbH, Salzgitter e 71,427 * 100.0 -

Preussag Immobilien GmbH, Salzgitter e 24,568 10,436 100.0 100.0

Babcock Borsig AG, Oberhausen6)e 268,252 54,8972) 33.3 -

Howaldtswerke-Deutsche Werft AG, Kiel e 71,581 30,700 25.0 -

*) Profit transfer agreement 4) Result is distributed to shareholder1) According to local laws 5) Consolidated financial statements as per 31 Dec 19992) in Euro 6) According to financial statements as per 30 Sept 19993) Divergent financial year

� Major Shareholdings

annual report 1999/2000largestintegrated travel company,will further complete preussag's...

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