An Emerging Force in System Building for OEMs worldwide

Annual report 2007

Headquarters Transportstraat 1 3980 Tessenderlo Belgium Tel. : +32 13 67 07 80

Fax. : +32 13 67 21 34

e-mail : info@EPIQ.com web : www.EPIQ.com

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This document can only be used for translation purposes. Only the Dutch version is the official version. TABLE OF CONTENTS 2

GENERAL INFORMATION ...........................................................................................4

RISK FACTORS...............................................................................................................5

1. LETTER TO THE SHAREHOLDER ......................................................................9

2. FINANCIAL DATA ...........................................................................................10

2.1 Selected summary financial data.....................................................................10

2.2 Management’s discussion and analysis of financial condition and results of

operations ....................................................................................................................11

2.2.1 Overview.................................................................................................11

2.2.2 Results of operations ...............................................................................12

2.2.3 Liquidity, working capital and capital resources ....................................15

2.3 Detailed consolidated financial statements .....................................................15

2.3.1 Independent auditor’s report ...................................................................15

2.3.2 Detailed consolidated financial statements ....................................................17

2.4 Notes to the consolidated financial statements .....................................................21

2.4.1 General ...........................................................................................................21

2.4.2 Summary of Significant Accounting Policies ................................................21

2.4.3 Changes in Group’s organisation ...................................................................34

2.4.4 Notes to the consolidated financial statements ..............................................34

2.4.4.1 Cash and cash equivalents...................................................................34

2.4.4.2 Trade accounts receivable ...................................................................34

2.4.4.3 Inventories...........................................................................................34

2.4.4.4 Other current assets .............................................................................35

2.4.4.5 Other investments & Investment in associates ...................................35

2.4.4.6 Property, plant and equipment ............................................................36

2.4.4.7 Goodwill and badwill..........................................................................37

2.4.4.8 Intangible assets ..................................................................................37

2.4.4.9 Other current liabilities .......................................................................38

2.4.4.10 Bank loans and overdrafts...............................................................38

2.4.4.11 Long-term debts ..............................................................................38

2.4.4.12 Shareholders’ equity and rights attached to shares .........................39

2.4.4.13 Subordinated loan............................................................................40

2.4.4.14 Provisions........................................................................................41

2.4.4.15 Pension provisions ..........................................................................42

2.4.4.16 Cost of sales ....................................................................................43

2.4.4.17 General and administrative expenses ..............................................44

2.4.4.18 Other operating income / (expense) ................................................44

2.4.4.19 Selling expenses ..............................................................................44

2.4.4.20 Research and development expenses ..............................................44

2.4.4.21 Personnel expenses and average number of employees..................45

2.4.4.22 Depreciation and amortization expenses.........................................45

2.4.4.23 Financial income / expense - net .....................................................45

2.4.4.24 Income taxes....................................................................................46

2.4.4.25 Deferred taxes .................................................................................46

2.4.4.26 Earnings per share ...........................................................................47

2.4.4.27 Segment information.......................................................................47

2.4.4.28 Minority interest..............................................................................49

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2.4.4.29 Financial instruments ......................................................................50

2.4.4.30 Leasing ............................................................................................52

2.4.4.31 Operational leasing..........................................................................53

2.4.4.32 Related party ...................................................................................54

2.4.4.33 List of subsidiaries consolidated .....................................................57

2.4.4.34 Contingent liabilities .......................................................................58

2.4.4.35 Subsequent events ...........................................................................58

2.4.4.36 Going concern and bank covenants.................................................58

2.5. Short version of the statutory annual stand-alone accounts of EPIQ nv.........58

2.5.1 Balance sheet...........................................................................................59

2.5.2 Income statement ....................................................................................60

3. CORPORATE GOVERNANCE ........................................................................61

3.1 Board of Directors...........................................................................................61

3.2 Committees of the Board of Directors ............................................................62

3.3 Management....................................................................................................62

3.4 Dividend policy...............................................................................................63

3.5 Auditor ............................................................................................................63

3.6 Financial calendar ...........................................................................................64

3.7 Stock related information................................................................................65

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GENERAL INFORMATION

Board of Directors: R. Duchatelet Schlötzer Innovation, represented by E. Schlotzer Moova NV, represented by W. Vanden Poel F. Chombar G. Bernard J. Claes Registered offices Transportstraat 1 B-3980 Tessenderlo Group Sollicitors: Buntinx Berckmans Advocaten Jan van Rijswijcklaan 162 B-2020 Antwerp Represented by: Mr. P. Buntinx CLAESSENS & MINNEKEER Advocaten Bessemerstraat 16 / 1 B-3620 LANAKEN Represented by: Mr. J. Minnekeer

Group Auditors: BDO Atrio Bedrijfsrevisoren Burg. CVBA The Corporate Village Da Vincilaan 9 – Box E.6 Elsinore Building B-1935 Zaventem Represented by: Mr. Koen De Brabander and Mr. Gert Claes

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RISK FACTORS

Investors should carefully consider the following factors in addition to the other

information presented in this Annual Report, prior to investing in Shares of the

Company.

The Contract Electronic Manufacturing Market

The contract electronic manufacturing (‘CEM’) sector is highly dependent on the outsourcing of manufacturing activities of original equipment manufacturers (‘OEMs’) which in turn is dependent on demand for the electronic products manufactured by its customers. When demand for the products manufactured by customers falls, the CEM sector is particularly vulnerable as the customer will seek to cut back outsourced manufacturing. The CEM market in Europe is vulnerable to delocalization towards Asia and China in particular. Its success will depend on the willingness and ability of electronic manufacturers to continue to outsource their manufacturing activities to European companies in the future. Changing Technology

The market for the manufacturing services of the Company and its subsidiaries (together the ‘Group’) is characterized by rapidly changing technology and continuing process development. The Group is continually evaluating the advantages and feasibility of new manufacturing processes. The Company believes that the Group’s future success will depend upon its availability to develop and market manufacturing services that meet changing customer needs, maintain technological leadership and successfully anticipate or respond to technological changes in manufacturing processes on a cost-effective and timely basis. There can be no assurance that the Group’s process development efforts will be successful. Competition

The CEM sector is highly competitive and is expected to become increasingly competitive in the future. Increased competition could result in price reductions, reduced revenues and profit margins, inability to expand and potential loss of market share, any of which could have a material adverse effect on the Group. The Company believes that the principal factors affecting competition in the Group’s markets are: quality, price and the ability to meet specific customer needs. The Group’s principal competitors include Sanmina Inc., Flextronics, Jabil Circuit, Inc. and Videoton. Each of these companies and many of the Group’s other competitors have greater financial, technical, marketing, sales and customer support resources and greater name recognition than the Group. The Company believes that the ability of the Group to compete successfully in the future will depend, in part, upon its continued ability to use the synergies of the organisation and to expand its excellent relationships with its customers. There can be no assurance, however, that the Group will be able to achieve these objectives in order to compete successfully in the future. There can be no assurance that the Group will have the resources required to respond to changes, that the Group will be able to compete successfully with current or future competitors, or that

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competitive pressures faced by the Group will not have a material adverse effect on the Group. History of Losses and Fluctuation of Operating Results

The Company and its subsidiaries have a history of trading losses with a turnaround in 2004, 2005 and with 3 years of positive result. There can be no assurance that the Company will not fall back into losses in the future. In addition, the operating results of the Group fluctuate according to the season (the Group generally experiences increased orders in the second half of the year) and according to the loss or gain of major customers. Risks Associated with Currency Fluctuations

The Company conducts business in several currencies, which exposes it to fluctuations in the currency exchange rates between the reporting currency of the Company and the operating (functional) currencies of its subsidiaries and other currencies in which the Company conducts business. In particular, the Company is exposed to currencies such as the Mexican Peso, the United States Dollar and the Czech Krona. Management of Geographically Disparate Locations

The Group’s main research and development operations are located in Botevgrad, Bulgaria and the Group has operating facilities in France, Germany, Bulgaria, Mexico and the Czech Republic. In all of these countries, administrative personnel are employed. The Group is centralizing its business and administrative operations, such as purchasing operations, in order to benefit from synergies. However, there can be no assurance that the efforts will be successful. In addition, operating in diverse geographic locations imposes a number of risks and burdens on the Group, including the need to manage employees and contractors from diverse cultural backgrounds who speak different languages. Although the Company will use its best efforts to mitigate the difficulties associated with operating in diverse geographic locations, there can be no assurance that it will not encounter unforeseen difficulties or logistical barriers in operating in diverse locations. Ability to Manage Growth

The Company has recently been awarded with contracts from customers. The Company also continually evaluates growth and acquisition opportunities and may pursue additional opportunities over time. Future acquisitions by the Company may result in the use of significant amounts of cash, potentially dilutive issues of securities, incurrence of debt and amortization of expenses related to goodwill and other intangible assets, each of which could materially and adversely affect the Company’s business, results of operations or financial condition. There can be no assurance that the Company will successfully manage the growth related to new contracts and / or related to other business it may acquire in the future. As the Company manages its existing operations and expands geographically, it may experience certain inefficiencies as it integrates new operations and manages geographically dispersed operations. In addition, the Company’s results of operations could be adversely affected if its new facilities do not achieve growth sufficient to offset increased expenditures associated with geographic expansion. Should the Company increase its expenditures in anticipation of a future level of

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sales that does not materialise, its results of operations could be materially adversely affected. Financial controls and Management Information Systems

The Group’s ability to support any growth of its business will be dependent upon, among other things, the further implementation and development of financial controls and management information systems, including the hiring and training of new personnel. The Group continues to develop rigorous financial controls and management information systems. However, no assurance can be given that the Group will be able to successfully continue to develop the financial controls and management information systems necessary to support and control any rapid development of its business. International Operations

The Company intends to expand in other relatively low-cost markets as well as growth countries, including in China and Mexico, where certain of the Group’s principal customers have a presence, Manufacturing operations in these markets are accompanied by a number of added risks, including imposition of governmental controls, currency fluctuations, unexpected changes in trade regulations, including tariffs and import and export quotas, political and economic instability, general difficulties in administering a business in emerging markets, labour issues and potentially adverse tax consequences. Due to the increasing extent of the Group’s international operations, these issues can have a material adverse impact on the Group’s business, financial condition or results of operations. Variability of Customer Requirements

A part of the Group’s business is conducted for customers which have the desire to balance their inventories, changes in their manufacturing strategies and variations in end user demand for their products. This makes it difficult to schedule production and optimise use of the Group’s manufacturing capacity. There can be no assurance that anticipated orders from the Company’s customers will materialise. In addition, it is possible that delivery schedules may have to be deferred as a result of changes in the customer’s business needs. Any inability by the Group to reduce operating expenses and inventory quickly enough to compensate for any shortfall in net sales may magnify the adverse impact of such shortfall on the Group’s results of operations and financial condition. Dependence on Major Customers

Whilst the Group is not dependent on any one customer, the loss of one or more of its significant customers could have a material adverse effect on its business and prospects. The percentage of the Group’s sales to its major customers may fluctuate from period to period. Significant reductions in sales to any of these customers would have a material adverse effect on the Group’s results of operations. The Group has established few firm long-term relationships with its customers, but customer contracts can be cancelled and volume levels can be changed or delayed. The timely replacement of cancelled, delayed or reduced contracts with new business cannot be assured. These risks are increased because of majority of the Group’s sales are to customers in the automotive industry, which is subject to rapid

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technological change and product obsolescence. The factors affecting the automotive industry in general, or any of the Group’s major customers in particular, could have a material adverse effect on the Group’s results of operations. Control by existing Shareholders

The Company’s principal Shareholder, Elex nv, owns approximately 79 per cent of the Company’s outstanding Shares. As a result, Elex nv has the ability to control, or substantially influence, respectively, most matters requiring action at a meeting of shareholders, including the election and removal of Directors and approval of significant corporate transactions. Such control or influence by Elex nv could delay, defer or prevent a change in control of the Company, impede a merger, consolidation, takeover or other business combination involving the Company, or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company.

Dependence on Key Personnel

The Company’s success depends to a significant degree on the continued contributions of the Company’s top management including Gilles Bernard, Yves Duchatelet and other key management, development, marketing and sales personnel. The loss of any of such personnel could have a material adverse effect on the Company. In addition, the Company believes that its future success will depend on its availability to attract, integrate and retain highly skilled technical, managerial, marketing and sales personnel. The Company believes that the management team is able to manage the Group’s activities and the reporting requirements. Risks of Infringements of Intellectual Property Rights

Although the Company does not believe that the Group’s circuit designs or manufacturing processes infringe on the proprietary rights of third parties, there can be no assurance that third parties will not assert infringement claims against the Group in the future with respect to current or future designs or processes. Any such assertion may require the Group to enter into an expensive royalty arrangement or result in costly litigation.

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1. LETTER TO THE SHAREHOLDER

The annual revenue of EPIQ in 2007 increased from EUR 152,4 million in 2006 to

EUR 200,2 million, an increase of 31% over 2006.

Profit from operations (EBIT) increased from EUR 6,5 million in 2006 to 9,2 million

in 2007. The net result improved from EUR 2,7 million to EUR 4,6 million.

In 2007 EPIQ again executed a substantial growth in sales mainly within existing

capacity of buildings and machinery. In addition, the overhead costs have been

maintained. Therefore the gains in gross margin have been secured and were

translated into increased profits from operations.

Gilles Bernard, CEO/COO, says: “The continuous growth in sales has been

confirmed in 2007 and shows that EPIQ is recognized as a reliable and long term

partner on its core markets. A promising point for the future is that the majority of

the new projects awarded in 2007 have been realised with the help of our design

and development team. These projects will contribute to additional sales in the

coming years and will help EPIQ to improve its net margin or at least stabilize it in a

competitive automotive market.

With the opening of EPIQ China in Zhuhai in 2007, EPIQ extended its manufacturing

capabilities in Asia and is now capable to deliver a worldwide platform of

automotive products in Europe, North America and Asia."

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2. FINANCIAL DATA

2.1 Selected summary financial data

2.1.1 Introduction

EPIQ NV CONSOLIDATED INCOME STATEMENT 2007 2006 2005

ALL AMOUNTS ARE IN EURO

Sales 193.464.504 146.169.975 121.224.805

Other revenues 6.690.422 6.246.158 655.433

Cost of sales (see note 2.4.4.16) -182.844.095 -137.466.222 -111.251.401

Gross margin 17.310.831 14.949.911 10.628.837

Research and development expenses (see note 2.4.4.20) -2.161.955 -1.760.398 -2.069.034

Selling expenses (see note 2.4.4.19) -718.134 -754.745 -817.268

General and administrative expenses (see note 2.4.4.17) -6.104.391 -6.607.710 -6.019.035

Other operating income / (expense) (see note 2.4.4.18) 891.043 691.767 1.149.953

Profit/loss from operations 9.217.394 6.518.825 2.873.453

Financial income (see note 2.4.4.23) 108.696 57.052 1.840.316

Financial charges (see note 2.4.4.23) -3.768.645 -2.725.910 -2.812.525

Profit/loss before taxes 5.557.445 3.849.967 1.901.244

Income taxes (see note 2.4.4.24) -985.945 -1.117.851 -894.080

Minority Result (see note 2.4.4.28) -3.518 0 689.980

Net profit/loss 4.567.981 2.732.116 1.697.144

Profit/loss per share (see note 2.4.4.26) 0,19 0,11 0,07

YEARS ENDED 31ST DECEMBER

The selected financial data presented above have been extracted and derived from

the IFRS consolidated financial statements of EPIQ nv for the 3 years ending

December 31st, 2007, 2006 and 2005. These consolidated figures have been

audited by Ernst & Young for 2005 and by BDO Atrio Bedrijfsrevisoren Burg. CVBA

for 2006 and 2007.

The consolidated financial data are presented in EUR.

2.1.2 Exchange rates

Since January 1st, 1999, EPIQ keeps its books and prepares its statutory and

consolidated financial statements in EUR.

Assets and liabilities of group companies expressed in currencies other than the

EUR are translated at exchange rates in effect at the end of the reporting period,

and revenues and expenses are translated at the average exchange rate during the

period. Equity components have been translated at historical exchange rates. Gains

or losses resulting from this translation are reflected in the component ‘currency

translation adjustment’ in the balance sheet at December 31st, 2007.

The year-end exchange rates (used to translate assets and liabilities in the financial

statements) are as follows:

DATE CZK/EUR BGL/EUR MXP/EUR CNY/EUR GBP/EUR

COUNTRY: CZECH REP. BULGARIA MEXICO CHINA UK

December 31st, 2007 26.628 1.956 16.089 10.773 0.733

December 31st, 2006 27.485 1.956 14.285 0.672

December 31st, 2005 29.005 1.956 12.536 0.685

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The average rates (used to translate revenues and expenses in the financial

statements) are as follows:

DATE CZK/EUR BGL/EUR MXP/EUR CNY/EUR GBP/EUR

COUNTRY: CZECH REP. BULGARIA MEXICO CHINA UK

December 31st, 2007 27.755 1.956 14.989 10.435 0.685

December 31st, 2006 28.338 1.956 13.700 0.682

December 31st, 2005 29.785 1.956 13.566 0.684

2.2 Management’s discussion and analysis of financial condition and

results of operations

The following management’s discussion and analysis of financial condition and

results of operations should be read in conjunction with the company’s financial

statements for the years ending December 31st, 2007, 2006 and 2005.

2.2.1 Overview

EPIQ designs, produces and sells electronic and electro-mechanical systems and

sub-systems. These are drive- and/or control elements especially for supply in the

following markets: automotive equipment, household appliances, industrial market

and other applications with plastic parts and/or electronic components.

EPIQ provides a wide range of integrated services from product development up to

mass production. Production comprises the design of printed circuits and/or spray

casting of plastics up to and including the supply of assembled and tested systems

and sub-systems. In addition the Group provides all the required engineering,

research & development and logistic management.

EPIQ was incorporated in February 1989 and started business developing electronic

modules for the toy industry and small appliances market. Initially, EPIQ worked

with subcontractors from Taiwan, Thailand and Hong Kong to provide its

manufacturing services but in early 1993 the company started providing these

services from its newly established subsidiary, EPIQ Electronic Assembly EOOD in

Sofia, Bulgaria. In the period since early 1993, EPIQ also developed activities in

connection with testing of integrated circuits (‘IC’s’) and production of automation

equipment for IC manufacturers.

In December 1997, a decision was taken by EPIQ’s shareholders to focus EPIQ’s

business on the design, production and assembly of printed circuit boards and

electronic modules.

The EPIQ group went through a phase of acquisitions and went public in 1998 at

EASDAQ, which later changed its name into NASDAQ EUROPE.

In October 2003, EPIQ moved from NASDAQ EUROPE to EURONEXT.

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In October 2004, EPIQ sold the real estate property in Diepenbeek to Fremach

Plastics NV, being part of the demerger transaction in December 2002.

In November 2004, after a successful restructuring since the acquisition, EPIQ

divested EPIQ Sensor-Nite nv, Sensor-Nite Industrial EOOD and EPIQ USA Ltd.

EPIQ has been elected by the new shareholders as their main supplier. The

consolidated income statement of 2004 includes EPIQ Sensor-Nite nv, Sensor-Nite

Industrial EOOD and EPIQ USA Ltd, the consolidated balance sheet per December

31st 2004 excludes EPIQ Sensor-Nite nv, Sensor-Nite Industrial EOOD and EPIQ

USA Ltd.

In December 2004, EPIQ Personal Communication nv, bought the shares of the

Joint Venture Partner Yamashita in Yamaver S.A. de C.V. and Nipbelmex S.A. de

C.V. MIF (Multinational Industrial Fund) acquired 35% of the shares in EKER de

Saltillo S.A. de C.V.

In December 2004, EKER GmbH filed for liquidation. The company operated as a

real estate investment company only.

In December 2005, EPIQ nv reached an agreement with ELEX nv in the sale of the

operational activities of Structuplas-Riesselberg nv. The consolidated income

statement of 2005 includes Structuplas-Riesselberg nv, the consolidated balance

sheet per December 31st 2005 excludes Structuplas-Riesselberg nv.

In March 2007, Zuhai EPIQ Trading Co., LTD was established as a trading company

between Chinese subcontractors and EPIQ customers.

2.2.2 Results of operations

EPIQ NV RESULTS FROM OPERATIONS (% OF OPERATING INCOME) 2007 2006 2005

YEARS ENDED 31ST DECEMBER

Sales and other revenues 100.0% 100.0% 100.0%

Cost of sales -91.4% -90.2% -91.3%

Gross margin 8.6% 9.8% 8.7%

Amortisation of goodwill 0.0% 0.0% 0.0%

Impairment of goodwill 0.0% 0.0% 0.0%

Research and development expenses -1.1% -1.2% -1.7%

Selling expenses -0.4% -0.5% -0.7%

General and administrative expenses -3.0% -4.3% -4.9%

Other operating expenses 0.4% 0.5% 0.9%

Restructuring costs 0.0% 0.0% 0.0%

Profit/loss from operations 4.6% 4.3% 2.4%

Income from associates 0.0% 0.0% 0.0%

Financial income 0.1% 0.0% 1.5%

Financial charges -1.9% -1.8% -2.3%

Profit/loss before taxes 2.8% 2.5% 1.6%

Income taxes -0.5% -0.7% -0.7%

Net profit/loss 2.3% 1.8% 1.4%

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Revenues

For 2007, 2006 and 2005, sales and other revenues are spread over the group

companies as follows:

EPIQ NV REVENUES PER SITE 2007 2006 2005

ALL AMOUNTS ARE IN EURO

Epiq NV

Epiq sàrl 31,980,473 24,213,162 29,054,930

Epiq EA 132,053,711 97,717,352 61,038,056

Epiq GmbH 7,372,509 8,848,657 10,869,802

Epiq CZ 5,193,186 5,509,995 4,068,216

Epiq MX 16,864,625 9,880,809 3,193,434

Structuplas-Riesselberg 12,485,018

Epiq PC

Yamaver 515,348

Nipbelmex

Zuhai Trading

Microenergia

Total 193,464,504 146,169,975 121,224,804

YEARS ENDED 31ST DECEMBER

Cost of sales

Cost of sales consists of materials (raw materials and semi-finished parts),

subcontracting, labour, depreciation and other production expenses.

The relative importance of each component of cost of sales depends on whether the

Group operates as a payroll subcontractor (i.e. providing essentially labour only) or

as a full subcontractor. Cost of sales amounted to 91,4% in 2007 compared to

90,2% in 2006. For a large customer EPIQ has become a full subcontractor in 2007

which increased the material part in the total value.

Gross Margin

Gross margin increased from EUR 14.949.911 in 2006 to EUR 17.310.831 in 2007.

This can be attributed mainly to the increased sales.

Research and development expenses

Research and development expenses amounted to EUR 2.161.955 in 2007,

representing 1,1% of the total revenue, compared to EUR 1.760.398 in 2006. This

increase is due to increased travel and purchase of tools.

It is the strategy of EPIQ to invest in advanced research and development

activities. EPIQ has development centres located in France, Germany and Bulgaria.

The research and development activities are concentrating on advance

development and re-engineering of existing products for the automotive, household

and industrial market.

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Selling expenses

Selling expenses consist of salaries and salary related expenses and bad debts. In

total they amount to EUR 718.134 in 2007. This is a reduction of 4.9% compared to

2006.

General and administrative expenses

General and administrative expenses consist mainly of salaries and salary-related

expenses, office equipment and related expenses, travel and entertainment

expenses. In total they amount to EUR 6.104.391 in 2007 against EUR 6.607.710 in

2006, a decrease of 7,6%, mainly due to the favourable settlement of an old

quality claim towards a supplier.

Restructuring costs

No restructuring costs are reported for the accounting year 2007.

Other operating income and expenses

Other operating income and expenses for the year 2007 mainly relate to

adjustment of provisions for legal disputes.

For more details we refer to the note 2.4.4.18.

Financial result

In 2007 EPIQ’s net financial result amounted to EUR 3.659.949 which is EUR

991.091 higher than 2006 due to rising interest rates and higher working capital

needs in line with the growth of the sales. Additionally, costs related to the early

repayment of the IFC-loan have been booked.

Net profit

EPIQ generated a profit before taxes for 2007 of EUR 5.557.445. This represents

2,8% of turnover. The rise in profit is mainly related to the increased sales with

stable gross margin whereas overhead costs have been maintained.

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2.2.3 Liquidity, working capital and capital resources

The liquidity ratio of EPIQ remained stable at 1,7 in 2007. The increased

requirements in working capital have been secured by the cash flow from

operations.

The solvency ratio decreased towards 26,3% compared to 28,3% in 2006 and

29,4% in 2005 due to an increase in the balance sheet related to the growth in

activity.

The capital expenditure of over EUR 8 million is financed through own funds, long-

term loans and leasing. The most important investment was the new plant Epiq 3 in

Botevgrad.

2.3 Detailed consolidated financial statements

2.3.1 Independent auditor’s report

STATUTORY AUDITOR'S REPORT TO THE GENERAL SHAREHOLDERS’

MEETING OF THE COMPANY EPIQ NV ON THE CONSOLIDATED

FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2007

In accordance with the applicable legal requirements, we are pleased to report on the

performance of the audit mandate which you have entrusted to us. Our report includes

our opinion on the fair view of the consolidated financial statements and the required

additional disclosures.

Unqualified audit opinion on the consolidated financial statements

We have audited the consolidated financial statements for the accounting year ended

December 31, 2007, prepared in accordance with International Financial Reporting

Standards as accepted in the European Union, which show a balance sheet total of

EUR 102.914.229 and a profit of EUR 4.567.981.

The consolidated financial statements for the accounting year ended December 31, 2007

include some foreign subsidiaries which have been audited by other auditors.

The preparation of the consolidated financial statements is the responsibility of the

board of directors. This includes, among other things, the implementation and

maintenance of internal control procedures related to the preparation and the fair

presentation of the financial statements free from material misstatement resulting from

fraud or error; the selection and application of adequate accounting principles and

reasonable accounting estimates.

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It is our responsibility to express an opinion on the consolidated financial statements

based on our audit.

We conducted our audit in accordance with Belgian legal requirements and auditing

standards, as issued by the Institut des Réviseurs d’Entreprises/Instituut der

Bedrijfsrevisoren. These standards require that we plan and perform our work so as to

obtain sufficient evidence to give reasonable assurance that the consolidated financial

statements are free from material misstatements as a result of fraud or error.

In accordance with those standards, we considered the company’s administrative and

accounting organization as well as its internal control procedures. Company officials

have clearly responded to our requests for explanations and information. An audit

includes examining, on a test basis, evidence supporting the amounts included in the

consolidated financial statements. We have assessed the accounting principles used and

significant accounting estimates made by management, as well as evaluated the overall

consolidated financial statement presentation. We believe that our audit provides a

reasonable basis for our opinion.

In our opinion, the financial statements give a true and fair view of the company’s

consolidated financial situation, consolidated financial results and the consolidated cash

flow statement, in accordance with International Financial Reporting Standards as

accepted in the European Union.

Additional disclosure

The preparation and the contents of the consolidated annual report are the responsibility

of the board of directors.

It is our responsibility to include in our report the following additional disclosure which

does not modify our audit opinion on the consolidated financial statements:

� The consolidated directors’ report includes the information required by law and is

consistent with the financial statements. We are, however, unable to comment on the

description of the principal risks and uncertainties which the company is facing, and

on its situation, its foreseeable evolution or the significant influence of certain facts

on its future development. We can nevertheless confirm that the matters disclosed

do not present any obvious inconsistencies with the information obtained during our

audit.

BDO Atrio Réviseurs d'Entreprises Soc. Civ. SCRL

Statutory Auditor

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2.3.2 Detailed consolidated financial statements

The enclosed consolidated financial statements and the related notes are in

compliance with the International Financial Reporting Standards as adopted for use

in the European Union.

DETAILED CONSOLIDATED BALANCE SHEET 2007 2006 2005

ALL AMOUNTS ARE IN EURO 31 DECEMBER 31 DECEMBER 31 DECEMBER

Current Assets:

Cash and cash equivalents (see note 2.4.4.1) 4.958.282 4.082.200 2.672.543

Accounts receivable from trade activities (see note 2.4.4.2) 24.392.288 17.312.217 12.924.849

Accounts receivable from related parties (see note 2.4.4.32) 9.237.207 7.586.646 8.510.567

Other current assets (see note 2.4.4.4) 1.967.614 2.079.570 2.808.664

Income tax receivable 1.997.096 2.038.168 1.216.464

Inventories (see note 2.4.4.3) 35.458.964 25.946.900 19.182.840

Total current assets 78.011.451 59.045.702 47.315.927

Non-current assets:

Other investments (see note 2.4.4.5) 0 15.000 15.000

Property, plant and equipment (see note 2.4.4.6) 24.384.024 20.003.230 21.090.621

Intangible assets (see note 2.4.4.8) 518.754 401.491 403.021

Goodwill (see note 2.4.4.7)

Total non-current assets 24.902.778 20.419.722 21.508.642

Total assets 102.914.229 79.465.424 68.824.569

Current liabilities:

Bank loans and overdrafts (see note 2.4.4.10) 11.815.247 5.052.311 7.158.565

Current portion of long-term debts (see note 2.4.4.11) 3.344.508 2.752.267 1.199.397

Accounts payable due to trade activities 22.719.983 18.858.808 12.667.377

Accounts payable due to related partie (see note 2.4.4.32) 1.061.029 2.191.687 1.728.462

Income tax liabilities 2.724.762 1.871.441 259.756

Provisions short-term (see note 2.4.4.14) 50.000 624.255 964.711

Other current liabilities (see note 2.4.4.9) 3.605.376 2.515.566 3.633.724

Total current liabilities 45.320.905 33.866.335 27.611.992

Non-current liabilities:

Long-term debt less current portion (see note 2.4.4.11) 9.754.933 14.314.814 10.435.391

Provisions long term (see note 2.4.4.14) 930.000 930.000 1.180.000

Pension provisions (see note 2.4.4.15) 1.291.077 1.146.151 1.224.487

Deferred tax liabilities (see note 2.4.4.25) 330.420 316.414 624.549

Subordinated loans (see note 2.4.4.13) 18.218.615 6.418.614 7.495.059

Total non-current liabilities 30.525.045 23.125.993 20.959.486

Shareholders' equity:

Share capital 37.054.000 37.054.000 37.054.000

Share premium 31.744.720 31.744.720 31.744.720

Reserves 1.876 1.876 1.876

Retained earnings -45.959.115 -48.691.374 -50.388.516

Result of the year 4.567.981 2.732.116 1.697.142

Cumulative translation adjustment -360.945 -368.242 143.867

Total shareholders' equity (see note 2.4.4.12) 27.048.517 22.473.096 20.253.089

Minority Interest 19.762 0 1

Total liabilities and shareholders' equity 102.914.229 79.465.424 68.824.569

18

Consolidated statement of changes in equity:

EPIQ NV NUMBER SHARE SHARE RESERVES RETAINED CUMULATIVE TOTAL

OF CAPITAL PREMIUM EARNINGS TRANSLATION EQUITY

DATE SHARES ADJUSTMENT

31st December 2002 23,786,590 37,054,000 31,744,720 1,876 -45,021,801 275,022 24,053,817

Net profit of the period -8,791,819 16 -8,791,803

Curr. translation adjust. -546,252 -546,252

31st December 2003 23,786,590 37,054,000 31,744,720 1,876 -53,813,620 -271,214 14,715,762

Net profit of the period 967,868 967,868

Curr. translation adjust. -26,019 -26,003

Restatement MIF acquisition 1,369,772 1,369,772

31st December 2004 23,786,590 37,054,000 31,744,720 1,876 -51,475,980 -297,233 17,027,383

Net profit of the period 1,697,145 1,697,145

Curr. translation adjust. 441,100 441,100

MIF capital payment 1,087,477 1,087,477

31st December 2005 23,786,590 37,054,000 31,744,720 1,876 -48,691,358 143,867 20,253,105

Net profit of the period 2,732,116 2,732,116

Curr. translation adjust. -512,110 -512,110

31st December 2006 23,786,590 37,054,000 31,744,720 1,876 -45,959,242 -368,243 22,473,111

Net profit of the period 4,568,108 4,568,108

Curr. translation adjust. 7,298 7,298

31st December 2007 23,786,590 37,054,000 31,744,720 1,876 -41,391,134 -360,945 27,048,517

Movement in minority interest:

The minority interest is related to the participation of third parties in the capital of

Microenergia EOOD for 30%. In 2007 Microenergia has been included in the

consolidated statements for the first time.

EPIQ NV SHARE RETAINED RESULT NET CAPITAL EARNINGS ALLOCATION MINORITY

DATE ALLOCATED INTEREST

Capital payment 1,474,180 1,474,180 Retained earnings allocation -1,369,772 -1,369,772

31st December 2004 1,474,180 -1,369,772 0 104,408

Capital payment 1,673,049 1,673,049 Retained earnings allocation -1,087,477 -1,087,477

Result allocation -689,980 -689,980

31st December 2005 3,147,229 -2,457,249 -689,980 0

Result allocation 0 0

31st December 2006 3,147,229 -2,457,249 -689,980 0

Microenergia 767 15,477 16,244 Result allocation 3,518 3,518

31st December 2007 3,147,996 -2,441,772 -686,462 19,762

19

Consolidated income statement:

EPIQ NV CONSOLIDATED INCOME STATEMENT 2007 2006 2005

ALL AMOUNTS ARE IN EURO

Sales 193,464,504 146,169,975 121,224,805

Other revenues 6,690,422 6,246,158 655,433

Cost of sales (see note 2.4.4.16) -182,844,095 -137,466,222 -111,251,401

Gross margin 17,310,831 14,949,911 10,628,837

Research and development expenses (see note 2.4.4.20) -2,161,955 -1,760,398 -2,069,034

Selling expenses (see note 2.4.4.19) -718,134 -754,745 -817,268

General and administrative expenses (see note 2.4.4.17) -6,104,391 -6,607,710 -6,019,035

Other operating income / (expense) (see note 2.4.4.18) 891,043 691,767 1,149,953

Profit/loss from operations 9,217,394 6,518,825 2,873,453

Financial income (see note 2.4.4.23) 108,696 57,052 1,840,316

Financial charges (see note 2.4.4.23) -3,768,645 -2,725,910 -2,812,525

Profit/loss before taxes 5,557,445 3,849,967 1,901,244

Income taxes (see note 2.4.4.24) -985,945 -1,117,851 -894,080

Minority Result (see note 2.4.4.28) -3,518 0 689,980

Net profit/loss 4,567,981 2,732,116 1,697,144

Earnings per share (see note 2.4.4.26) 0.19 0.11 0.07

YEARS ENDED 31ST DECEMBER

20

Consolidated cash flow statement:

CONSOLIDATED STATEMENT OF CASH FLOW 2007 2006 2005

ALL AMOUNTS ARE IN EURO YEARS ENDED 31ST DECEMBER

CASH FLOW USED IN OPERATING ACTIVITIES

Net result 4.567.981 2.732.116 1.697.144

Adjustment for:

Depreciation fixed assets 4.107.854 4.190.077 5.039.448

Reserve for uncollectable receivables -802.651 -240.287 -947.806

Deferred taxes 14.006 0 56.457

Provisions -429.329 590.456 -1.901.536

Financial result 3.659.949 2.668.858 972.209

Income taxes 41.072 0 894.080

Income taxes paid 853.321 0 0

Operating profit before working capital changes 12.012.203 9.941.220 5.809.996

Changes in operating assets and liabilities

Accounts receivable -6.277.420 -4.147.081 -1.849.517

Accounts receivable towards related parties -1.650.561 923.921 -5.812.996

Other current assets 111.956 -628.707

Inventories -9.512.064 -6.764.060 -3.866.002

Accounts payable 3.861.175 6.191.431 3.168.719

Trade positions towards related parties -1.130.658 463.224 -4.796.858

Accrued expenses 142.698

Other current liabilities 1.089.810 -1.118.158 594.515

Net cash used in operating activities -1.495.559 5.490.497 -7.238.153

CASH FLOW USED IN INVESTING ACTIVITIES

Deconsolidation of Structuplas 0 0 1.906.704

Financial fixed assets and investments in associates 15.000 0 -15.000

Additions to fixed assets (tangible and intangible) -8.605.911 -3.149.462 -10.033.790

Interest received 108.696 140.108 123.819

Loss/profit on current investments

Net cash used in investing activities -8.482.214 -3.009.355 -8.018.267

CASH FLOW USED IN FINANCING ACTIVITIES

Capital increase and share premium

Proceeds/(repayments) from bank loans and overdrafts short term 6.762.936 -2.106.254 3.354.708

Proceeds/(repayments) from bank loans and overdrafts long term -4.559.881 3.879.423 9.154.873

Proceeds/(repayments) from current portion of long-term debt 592.241 1.552.870 117.248

Proceeds/(repayments) from subordinated loan 11.800.001 -1.076.444 267.059

Investment from minority shareholder 19.762 0 -104.409

Interest paid -2.836.974 -2.528.587 -1.773.336

Translation exchange gain/(loss) -931.671 -280.379 677.308

Net cash provided by/used in financing activities 10.846.414 -559.371 11.693.450

Movement in cumulative translation adjustment 7.297 -512.106 441.098

Movement in retained earnings 144 0 1.087.461

Increase/(decrease) in cash and cash equivalents 876.082 1.409.665 -2.034.410

Cash at the beginning of the period 4.082.200 2.672.543 4.706.948

Exchange difference o/opening cash position 0 0 6

Cash at the end of the period 4.958.282 4.082.200 2.672.543

Movement 876.082 1.409.657 -2.034.411

21

2.4 Notes to the consolidated financial statements

2.4.1 General

EPIQ is a limited liability company incorporated under Belgian law, with production

facilities in France (EPIQ s.a.r.l.), Bulgaria (EPIQ Electronic Assembly EOOD),

Germany (EPIQ GmbH), the Czech Republic (EPIQ CZ Spol s.r.o. prior: Eker Spol

s.r.o.), Mexico (EPIQ Mexico) and China (Zhuhai Epiq Trading Co Ltd).

EPIQ is a European system builder that assembles and tests systems and sub-

systems for major original equipment manufacturers in, essentially, three fields:

● automotive & sensors

● household appliances

● industrial appliances

The EPIQ group employed on average 3.317 people in 2007, 3.006 people in 2006

and 2.248 people in 2005. The registered offices address of the Group is

Transportstraat 1, 3980 Tessenderlo, Belgium. The financial statements were

authorised for issue by the Board of Directors subsequent to the meeting held on

February 25, 2008 in Botevgrad.

2.4.2 Summary of Significant Accounting Policies

The principal accounting policies adopted in preparing the financial statements of

EPIQ nv are as follows:

Basis of preparation

The accompanying financial statements are prepared in accordance with the

International Financial Reporting Standards as published by the International

Accounting Standards Board. They have been prepared under the historical cost

convention.

Measurement currency

Based on the economic substance of the underlying events and circumstances

relevant to EPIQ, the measurement currency has been determined to be the EUR.

To consolidate EPIQ nv (measured in EUR) and each of its subsidiaries (each

measured in its own measurement currency) financial statements of foreign

22

consolidated subsidiaries are translated at year-end exchange rates with respect to

the balance sheet, and at the average exchange rate for the year with respect to

the income statements. All resulting translation differences are included in a

currency translation reserve in equity.

Principles of Consolidation

The consolidated financial statements of the EPIQ group include EPIQ nv and the

companies that it controls. This control is normally evidenced when EPIQ nv owns,

either directly or indirectly, more than 50% of the voting rights of a company’s

share capital and is able to govern the financial and operating policies of an

enterprise so as to benefit from its activities.

The purchase method of accounting is used for acquired businesses. Companies

acquired or disposed of during the year are included in the consolidated financial

statements from the date of acquisition or to the date of disposal.

Investments in associated companies (generally investments of 20% to 50% in a

company’s equity) where significant influence is exercised by EPIQ nv, are

accounted for using the equity method. An assessment of investments in associates

is performed when there is an indication that the assets have been impaired or the

impairment losses recognized in prior years no longer exist.

When EPIQ’s share of losses exceeds the carrying amount of the investment, the

investment is reported at nil value and recognition of losses is discontinued except

to the extent of EPIQ’s commitment.

Interests in joint ventures are recognized by including the accounts using the

proportionate consolidation basis, i.e. by including in the accounts under the

appropriate financial statement headings of the Company’s proportion of the joint

venture revenues, costs, assets and liabilities. An assessment of interests in joint

ventures and other ventures is made when there are indications that the assets

have been impaired or the impairment losses recognized in prior years no longer

exist. The adjusted shareholder structure in Mexico, which came into place in

December 2004, was applied as of January 1st, 2005. Until 2004, EPIQ has applied

the proportional method for consolidation purposes. As of 2005, the purchase

method was applied.

Intercompany balances and transactions, including intercompany profits and

unrealised profits and losses are eliminated. Unrealised gains arising from

transactions with associates are eliminated to the extent of the Group’s interest in

the associate, against the investment in the associate. Unrealised losses are

23

eliminated similarly but only to the extent that there is no evidence of impairment

of the assets transferred.

Consolidated financial statements are prepared using uniform accounting policies

for transactions and other events in similar circumstances.

For balance sheet purposes, the companies which entered into liquidation in 2004

are treated at year-end as third parties. The companies divested in 2004 are

treated as related parties.

Cash and Cash Equivalents

Cash includes cash on hand and cash with banks. Cash equivalents are short-term,

highly liquid investments that are readily convertible to known amounts of cash

with original maturities of three months or less and that are subject to an

insignificant risk of change in value.

Investments

Available-for-sale investments are classified as current assets if management

intends to realise them within 12 months of the balance sheet date. All purchases

and sales of investments are recognized on the trade date.

Investments are initially measured at fair value plus transaction costs that are

directly attributable to the acquisition.

Available-for-sale investments are subsequently carried at fair value without any

deduction for transaction costs by reference to their quoted market price at the

balance sheet date.

Gains or losses on measurement to fair value of available-for-sale investments are

recognized directly in equity, through the statement of changes in equity, except

for impairment losses and foreign exchange gains and losses, and interests

calculated using the effective interest method (i.e. monetary assets).

The financial assets have been measured as if they were classified as financial

assets at fair value through profit or loss.

Receivables

Receivables are stated at the fair value of the consideration given and are carried at

amortized cost, after provision for impairment.

24

Inventories

Inventories, including work-in-process, are valued at the lower of cost and net

realisable value. Net realisable value is the selling price in the ordinary course of

business, less the costs of completion, marketing and distribution. Cost is

determined primarily on the basis of FIFO method. For processed inventories, cost

includes the applicable allocation of fixed and variable overhead costs based on

normal operating capacity. Unrealisable inventory has been fully written off.

Investment Property

Investment properties are stated at cost less accumulated depreciation and

accumulated impairment loss. When assets are sold or retired, their cost,

accumulated depreciation and impairment are eliminated from the accounts and

any gain or loss resulting from their disposal is included in the income statement.

Depreciation is computed on a straight-line basis over the following estimated

useful lives:

● buildings: 2 - 5%

● furniture: 10 – 20%

The initial cost of Investment Property comprises its purchase price and directly

attributable costs of bringing the asset to its working condition and location for its

intended use. The accumulated depreciation and related impairment are accounted

in its respective periods.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and

accumulated impairment loss. When assets are sold or retired, their cost and

accumulated depreciation are eliminated from the accounts and any gain or loss

resulting from their disposal is included in the income statement.

The initial cost of property, plant and equipment comprises its purchase price,

including import duties and non-refundable purchase taxes and any directly

attributable costs of bringing the asset to its working condition and location for its

intended use. Expenditures incurred after the fixed assets have been put into

operation, such as repairs and maintenance and overhaul costs, are normally

charged to income in the period in which the costs are incurred. In situations where

it can be clearly demonstrated that the expenditures have resulted in an increase in

the future economic benefits expected to be obtained from the use of an item of

25

property, plant and equipment beyond its originally assessed standard of

performance, the expenditures are capitalised as an additional cost of property,

plant and equipment.

Depreciation is computed on a straight-line basis over the estimated useful lives,

resulting in following depreciation percentages:

● buildings: 2 - 5 – 7 – 10%

● plant, machinery and equipment: 10 – 20 – 25 – 33%

● furniture and vehicles: 10 – 20 – 25 – 33 – 50%

● computer equipment: 25 – 33%

The useful life and depreciation method are reviewed each year to ensure that the

method and period of depreciation are consistent with the expected pattern of

economic benefits from items of property, plant and equipment.

Construction-in-progress represents plant and properties under construction and is

stated at cost. This includes cost of construction, plant and equipment and other

direct costs. Construction-in-progress is not depreciated until such time as the

relevant assets are completed and put into operational use.

Impairment

At each balance sheet date, all assets are reviewed to look for any indication that

an asset may be impaired, based on internal and external indicators of impairment.

An impairment loss is recognized when the carrying amount of the asset is in

excess of the greater of its net selling price and its value in use.

The recoverable amounts of the following types of intangible assets should be

measured annually whether or not there is any indication that it may be impaired.

In some cases, the most recent detailed calculation of recoverable amount made in

a preceding period may be used in the impairment test for that asset in the current

period.

● an intangible asset with an indefinite useful life

● an intangible asset not yet available for use

● goodwill acquired in a business combination

For the reversal of impairment losses we use the same approach as for the

identification of impaired assets: assess at each balance sheet date whether there

is an indication that an impairment loss may have decreased. If so, calculate

recoverable amount. The increased carrying amount due to reversal should not be

26

more than what the depreciated historical cost would have been if the impairment

had not been recognized. Reversal of an impairment loss is recognized as income in

the income statement. Reversal of an impairment loss for goodwill is prohibited.

Financial Fixed Assets

A financial asset or financial liability is recognized by an entity on its balance sheet

when it becomes a party to the contractual provisions of the instrument.

If the company holds a non-current asset where a sale is highly probable and the

asset is available for immediate sale in its present condition, the asset is classified

as ‘held-for-sale’ and valued at the lower of its carrying amount and fair value less

costs to sell.

Finance lease

The Company recognizes finance leases as assets and liabilities in the balance

sheets at amounts equal at the inception of the lease to the fair value of the leased

property or, if lower, at the present value of the minimum lease payments. In

calculating the present value of the minimum lease payments the discount factor

used is the interest rate implicit in the lease, when it is practicable to determine.

Otherwise, the Company’s incremental borrowing rate is used. Initial direct costs

incurred are included as part of the asset. Lease payments are apportioned

between the finance charge and the reduction of the outstanding liability. The

finance charge is allocated to periods during the lease term so as to produce a

constant periodic rate of interest on the remaining balance of the liability for each

period.

A finance lease gives rise to depreciation expense for the asset as well as a finance

expense for each accounting period. The depreciation policy for leased assets is

consistent with that for depreciable assets that are owned. If there is no reasonable

certainty that the Group will obtain ownership by the end of the lease term, the

asset is fully depreciated over the shorter of the lease term and its useful life.

Operating lease

Leases of assets under which substantially all the risks and rewards of ownership

are effectively retained by the lessor, are classified as operating leases. Lease

payments under an operating lease are recognized as an expense on a straight-line

basis over the lease term.

27

Intangible Assets

Intangible assets are measured initially at cost. Intangible assets are recognized if

it is probable that the future economic benefits that are attributable to the asset

will flow to the enterprise, and the cost of the asset can be measured reliably. After

initial recognition, intangible assets are measured at cost less accumulated

amortization and any accumulated impairment losses. Intangible assets are

amortized on a straight-line basis over the best estimate of their useful lives. The

amortization period and the amortization method are reviewed annually at each

financial year-end.

Amounts paid for patents, trademarks, licences are capitalised and then amortized

on a straight-line basis over the expected periods of benefit. The expected useful

lives of patents, trademarks and licences are 3 years.

The cost of acquisition of new software is capitalised and treated as an intangible

asset if these costs are not an integral part of the related hardware. Software is

amortized on a straight-line basis over 3 years.

Costs incurred in order to restore or maintain the future economic benefits that an

enterprise can expect from the originally assessed standard of performance of

existing software systems are recognized as an expense when the restoration or

maintenance work is carried out.

Goodwill

Goodwill is recognized by the acquirer as an asset from the acquisition date and is

initially measured as the excess of the cost of the business combination over the

acquirer's share of the net fair values of the acquirer’s identifiable assets, liabilities

and contingent liabilities.

IFRS 3 prohibits the amortization of goodwill as from the beginning of the first

annual period beginning on or after 31 March 2004. Instead, goodwill will be tested

for impairment at least annually in accordance with IAS 36 Impairment of Assets.

If the interest in the net fair value of the acquired identifiable net assets exceeds

the cost of the business combination, that excess (sometimes referred to as

negative goodwill) is recognized immediately in the income statement as a gain.

Before concluding that ‘negative goodwill’ has arisen, a reassessment is done: the

identification and measurement of the acquirer’s identifiable assets, liabilities, and

contingent liabilities and the measurement of the cost of the combination.

28

Research and development costs

Expenditure for research is recognized as an expense when incurred. Expenditure

on development is charged against income in the period incurred except for project

development costs which comply strictly with all of the following criteria.

● the product or process is clearly defined and costs are separately identified

and measured reliably;

● the technical feasibility of the product is demonstrated;

● the product will be sold or used in-house;

● the assets will generate future economic benefits (e.g. a potential market

exists for the product or its usefulness in case of internal use is

demonstrated); and

● adequate technical, financial and other resources required for completion

of the project are available.

Capitalization of costs starts when the above criteria are first met. Expenditure

recognized as an expense in previous accounting periods is not reinstated.

Capitalised development costs are amortized on a straight-line basis over their

expected useful lives. The period of amortization does not normally exceed five

years.

The recoverable amount of development costs is estimated whenever there is an

indication that the asset has been impaired or that the impairment losses

recognized in previous years no longer exist.

Long-term debts

The borrowings are valued at amortized cost using the effective interest rate

method.

Provisions

A provision is recognized when, and only when an enterprise has a present

obligation (legal or constructive) as a result of a past event and if it is probable (i.e.

more likely than not) that an outflow of resources embodying economic benefits will

be required to settle the obligation, and a reliable estimate can be made of the

amount of the obligation. Provisions are reviewed at each balance sheet date and

adjusted to reflect the current best estimate. Where the effect of the time value of

29

money is material, the amount of a provision is the present value of the

expenditures expected to be required to settle the obligation. When discounting is

used, the increase in provision reflecting the passage of time is recognized as

interest expense.

Gains from the expected disposal of assets are not taken into account in measuring

the provision. Property, plant and equipment that is retired from active use is

carried at the lower of the carrying amount or estimated net selling price less costs

of disposal.

When some or all of the expenditures required to settle a provision are expected to

be reimbursed by another party, the reimbursement is not recognized until it is

virtually certain that reimbursement will be received.

Use of estimates in the preparation of financial statements

The preparation of financial statements in conformity with IFRS requires

management to make estimates and assumptions that affect the reported amounts

of assets and liabilities and disclosure of contingent assets and liabilities at the date

of the financial statements, and the reported amounts of revenues and expenses

during the reported period. Actual results could differ from those estimates.

Revenue Recognition

EPIQ recognizes revenue from sales of products upon shipment or delivery,

depending on when title and risk of loss are transferred under the specific

contractual terms of each sale, which may vary from customer to customer.

Revenues from research projects are recognized upon meeting all contractual

conditions.

Interest is recognized on a time proportion basis that reflects the effective yield on

the asset. Dividends are recognized when the shareholder’s right to receive

payment is established.

Foreign Currency

Foreign currency transactions

Each entity within the Group translates its foreign currency transactions and

balances into its measurement currency by applying to the foreign currency amount

the exchange rate between the measurement currency and the foreign currency at

30

the date of transaction. Exchange rate differences arising on the settlement of

monetary items or on reporting monetary items at rates different from those at

which they were initially recorded during the period or reported in previous financial

statements are recognized in the income statement in the period in which they

arise.

Foreign currency translation

Since the introduction of the EUR on January 1st, 1999, and in accordance with

Belgian law, EPIQ keeps its books and prepares its consolidated financial

statements in EUR’s. The measurement currency of EPIQ nv and of its subsidiaries,

EPIQ s.a.r.l., EPIQ GmbH (prior: Frankonia GmbH), EPIQ Personal Communication

nv and EPIQ Personal Communication Holding nv is the EUR. The measurement

currency for EPIQ Electronic Assembly EOOD is the Bulgarian Leva (BGN), for EPIQ

CZ spol s.r.o. (prior: Eker spol s.r.o.) the Czech Koruna (CZK), for EPIQ MX S.A. de

C.V. (prior: Eker de Saltillo S.A. de C.V.), Yamaver S.A. de C.V. and Nipbelmex S.A.

de C.V. the Mexican Peso (MXN) and for Zhuhai Epiq Trading Co Ltd the Chinese

Yuan (CNY)

Assets and liabilities of EPIQ Electronic Assembly EOOD, EPIQ CZ Spol s.r.o., EPIQ

MX S.A. de C.V., Yamaver S.A. de C.V., Nipbelmex S.A. de C.V. and Zhuhai Epiq

Trading Co Ltd are translated at exchange rates in effect at the end of the reporting

period, and revenues and expenses are translated at the average exchange rate

during the period. Equity components have been translated at historical exchange

rates. Gains or losses resulting from this translation are reflected in the component

‘currency translation adjustment’ in the balance sheet.

Employee Benefits

Defined benefit plans

Certain group companies provide defined benefit plans for their employees. The

funds are valued every year by professionally qualified independent actuaries. The

obligation and costs of pension benefits are determined using a projected unit

credit method. The Projected Unit Credit Method considers each period of service as

giving rise to an additional unit of benefit entitlement and measures each unit

separately to build up the final obligation. Upon introduction of a new plan or

improvement of an existing plan, past service costs are recognized on a straight-

line basis over the average period until the amended benefits become vested. To

the extent that the benefits are already vested immediately, past service cost is

31

immediately expensed. Gains or losses on the curtailment or settlement of pension

benefits are recognized when the curtailment or settlement occurs. Actuarial gains

or losses, outside the corridor, are amortized based on the expected average

remaining working lives of the employees. The pension obligation is measured at

the present value of estimated future cash flows using a discount rate that is similar

to the interest rate on government bonds where the currency and terms of the

government bonds are consistent with the currency and estimated terms of the

defined benefit obligation.

Where the obligation of the company results in an asset (e.g. where a defined

benefit plan has been over-funded), EPIQ nv recognizes an asset only to the extent

that this does not exceed the net total of unrecognized actuarial losses and past

service cost not recognized and the present value of any economic benefits

available in the form of refunds from the plan or reductions in future contributions

to the plan.

Defined Contribution Plans

In addition to the defined benefit plans described above, certain companies sponsor

defined contribution plans based on local practices and regulations. The plans cover

full-time employees and provide for contributions ranging from 1% to 3% of salary.

The Group’s contributions relating to defined contribution plans are charged to

income in the year to which they relate.

Income taxes

The income tax charge is based on profit for the year and considers deferred

taxation. Deferred taxes are calculated using the balance sheet liability method.

Deferred income taxes reflect the net tax effects of temporary differences between

the carrying amounts of assets and liabilities for financial reporting purposes and

the amounts used for income tax purposes. Deferred tax assets and liabilities are

measured using the tax rates expected to apply to taxable income in the years in

which those temporary differences are expected to be recovered or settled, based

on tax rates enacted or substantially enacted at the balance sheet date.

The measurement of deferred tax liabilities and deferred tax assets reflects the tax

consequences that would follow from the manner in which the enterprise expects,

at the balance sheet date, to recover or settle the carrying amount of its assets and

liabilities.

32

Deferred tax assets and liabilities are recognized regardless of when the timing

difference is likely to reverse. Deferred tax assets and liabilities are not discounted

and are classified as non-current assets (liabilities) in the balance sheet.

A deferred tax liability is recognized for all taxable temporary differences, unless

the deferred tax liability arises from goodwill for which amortization is not

deductible for tax purposes.

As an exception, no deferred tax liability is recognized on taxable temporary

differences associated with investments in subsidiaries, associates and joint

ventures when the timing of the reversal of the temporary difference is controlled

by the Group and it is probable that the temporary difference will not reverse in the

foreseeable future.

Deferred tax assets are recognized when it is probable that sufficient taxable profits

will be available against which the deferred tax assets can be utilised. At each

balance sheet date, EPIQ re-assesses unrecognized deferred tax assets and the

carrying amount of deferred tax assets. EPIQ recognizes a previously unrecognized

deferred tax asset to the extent that it has become probable that future taxable

profit will allow the deferred tax asset to be recovered. The company conversely

reduces the carrying amount of a deferred tax asset to the extent that it is no

longer probable that sufficient taxable profit will be available to allow the benefit of

part or that entire deferred tax asset to be utilised.

Impairment of assets

Property, plant and equipment and intangible assets are reviewed for impairment

whenever events or changes in circumstances indicate that the carrying amount of

an asset may not be recoverable. Whenever the carrying amount of an asset

exceeds its recoverable amount, an impairment loss is recognized in income for

items of property, plant and equipment and intangibles carried at cost.

The recoverable amount is the higher of an asset’s net selling price and value in

use. The net selling price is the amount obtainable from the sale of an asset in an

arm’s length transaction less the costs of disposal, while value in use is the present

value of estimated future cash flows expected to arise from the continuing use of

an asset and from its disposal at the end of its useful life. Recoverable amounts are

estimated for individual assets or, if this is not possible, for the cash-generating

unit to which the asset belongs.

33

Minority Interest

Minority Interest is that part of the net results of operations and of net assets of a

subsidiary attributable to interests which are not owned, directly or indirectly

through subsidiaries, by the parent. From 2004 onwards the participation in Mexico

by MIF (‘Multinational Industrial Fund’) is identified as minority interest.

From 2007 onwards the participation of 30% in Microenergia EOOD by third parties

is identified as minority interest.

Dilutive effects on minority participation are recognized directly through equity.

Results of the year are allocated to the minority based on the share participation.

Losses are allocated to the minority until the minority interest reaches the balance

of zero. Losses in excess are allocated to the Group result.

Segments

Business segments: for management purposes EPIQ is organised on a worldwide

basis into three major operating businesses. The divisions are the basis upon which

EPIQ reports its primary segment information. Financial information on business

segments is presented in note 2.4.4.27.

Earnings per share

The earnings per share data for all periods mentioned are calculated by dividing the

net income for the period by the weighted average number of shares outstanding

during the period. (See also 2.4.4.26)

Contingencies

Contingent liabilities are disclosed in the financial statements, unless the possibility

of an outflow of resources embodying economic benefits is remote.

A contingent asset is not recognized in the financial statements, but disclosed when

an inflow of economic benefits is probable.

Subsequent events

Post-year-end events that provide additional information about the company’s

position at the balance sheet date (adjusting events) are reflected in the financial

34

statements. Post-year-end events that are non-adjusting events are disclosed in

the notes when material.

2.4.3 Changes in Group’s organisation

In 2007 there have been no significant changes in the group’s organisation.

2.4.4 Notes to the consolidated financial statements

All amounts are in EUR

2.4.4.1 Cash and cash equivalents

CASH AND CASH EQUIVALENTS

2007 2006 2005

31ST DECEMBER

Cash at bank and in hand 3.262.023 3.163.373 1.747.558

Short term deposits 1.696.259 918.827 924.985

Total 4.958.282 4.082.200 2.672.543

EPIQ nv has deposited EUR 900.000 in a frozen account with KBC Bank who has

given a bank warranty to OVAM for this amount (see also note 2.4.4.14 and

2.4.4.32).

2.4.4.2 Trade accounts receivable

TRADE ACCOUNTS RECEIVABLE

2007 2006 2005

31ST DECEMBER

Trade accounts receivable 24.646.536 18.369.116 14.222.035

Allowance for doubtfull accounts -254.248 -1.056.899 -1.297.186

Total 24.392.288 17.312.217 12.924.849

The allowance for doubtful accounts has been decreased thanks to the payment of

an old claim on quality towards a supplier which has been settled.

2.4.4.3 Inventories

INVENTORIES

2007 2006 2005

31ST DECEMBER

Raw materials and supplies at cost 24.666.800 19.013.570 14.183.523

Work in progress at cost 6.977.893 4.780.275 3.358.896

Finished goods at cost 5.314.931 3.706.011 3.373.757

Material Toolshop 524.865 140.052 129.683

Obsolescence reserve -2.025.525 -1.693.008 -1.863.019

Total 35.458.964 25.946.900 19.182.840

35

Inventories have grown in line with the business but also because of full

subcontracting for a large customer where now also the material is included in the

price.

2.4.4.4 Other current assets

OTHER CURRENT ASSETS

2007 2006 2005

31ST DECEMBER

Other receivables 1.418.275 1.483.959 2.284.079

Prepayment and accruals 549.339 595.611 524.585

Total 1.967.614 2.079.570 2.808.664

Other receivables mainly consist of tax accruals (VAT, etc.), current accounts,

receivables from insurance policies and non-income related tax accruals. An

amount of approx. EUR 200.000 included in other receivables relates to the pension

liability in EPIQ GmbH, and is restricted for this purpose.

2.4.4.5 Other investments & Investment in associates

Other investments

OTHER INVESTMENTS

COUNTRY OF PRINCIPAL OWNERSHIP GROUP'S SHARE

BUSINESS ACTIVITIES INTEREST OF INCOME

Global Purchasing Solution Limited Shanghai P.R.China purchasing 15% 0

In September 2005, EPIQ participated for 15% in the share capital in a limited

company Global Purchasing Solutions (G.P.S.L.), a Shanghai based purchasing

services company.

In 2007 the cooperation with G.P.S.L. has been stopped and the investment has

been impaired.

Investment in associates

INVESTMENTS IN ASSOCIATES

COUNTRY OF PRINCIPAL OWNERSHIP GROUP'S SHARE

BUSINESS ACTIVITIES INTEREST OF INCOME

Fremach EPIQ System Builders Belgium renting 40% 0

In 2007 the participation in Fremach EPIQ System Builders has been sold at book

value.

36

2.4.4.6 Property, plant and equipment

PROPERTY, PLANT AND EQUIPMENT

LAND FURNITURE MACHINERY CARS ASSETS

AND LEASEH. AND AND AND UNDER

31ST DECEMBER BUILDINGS IMPROVEM. FIXTURE EQUIPMENT VANS LEASING CONSTR. TOTAL

Cost:

1st January 2007 7.920.123 1.034.025 1.686.064 24.695.252 594.839 4.930.133 3.448.188 44.308.623

Additions of the year 0 38.963 136.903 2.615.721 186.984 1.057.815 4.167.551 8.203.937

Reclassifications 2.582.527 0 0 0 0 0 -2.582.527 0

31st December 2007 10.502.650 1.072.988 1.822.967 27.310.973 781.823 5.987.948 5.033.212 52.512.560

Accumulated depreciation

and impairment:

1st January 2007 2.313.786 496.120 1.320.495 14.746.951 286.193 2.931.550 2.210.299 24.305.393

Depreciation of the period 259.843 133.940 153.373 2.790.681 119.197 417.847 90.075 3.964.956

Reclassifications 346.559 0 0 0 0 0 -488.372 -141.813

31st December 2007 2.920.188 630.060 1.473.868 17.537.632 405.390 3.349.397 1.812.002 28.128.536

Net book value 7.582.462 442.928 349.099 9.773.341 376.433 2.638.551 3.221.210 24.384.024

In the framework of purchase accounting, buildings are stated at fair value based

on their market value, if this is substantially different from the book value.

An impairment has been recognized in previous years which resulted in a partial

write-off of the following assets:

● Building in EPIQ CZ spol s.r.o. (approx. EUR 1,6 million)

● Building in EPIQ MX S.A. de C.V. (approx. EUR 0,8 million)

EPIQ CZ spol s.r.o. has built in 2001 two buildings, of which building I has been

completed and is in use as production facility. Building II has been finished in 2007

and is currently in use as warehousing facility. An impairment has been recognized

for the difference between the book value and the value for the building as

warehouse.

EPIQ MX S.A. de C.V. was initially located in Saltillo, Mexico. All operations were

moved to Guadalajara, Mexico, where Yamaver S.A. de C.V. and Nipbelmex S.A. de

C.V. are located. Due to the incomplete stage of the building in Saltillo the book

value has been impaired to zero in 2002. In 2007 the building in Saltillo has been

sold for an amount of 1.100.000 USD, the gain on the transaction has been

recorded in 2007 under other operating income, see note 2.4.4.18 .

The building of Nipbelmex S.A. de C.V. in Mexico which has been sold to EPIQ

Mexico S.A. de C.V. has been recorded at a consolidated book value at December

31st 2007 of EUR 905.805 (MXP 14.573.229). Hence the original restatement of

EUR 1.250.000 made in 2001 has been preserved.

Apart from these adjustments, there were no material differences between the fair

value of the assets and liabilities and their book value as at the relevant acquisition

date.

37

2.4.4.7 Goodwill and badwill

GOODWILL

EPIQ SARL

AND EKER FMC

31ST DECEMBER SM2E GROUP Epiq GmbH (BADWILL) EPIQ PC TOTAL

Cost:

1st January 2007 1.457.129 1.540.073 1.141.850 -71.979 -697.156 3.369.917

Additions of the year 0

31st December 2007 1.457.129 1.540.073 1.141.850 -71.979 -697.156 3.369.917

Impairment:

1st January 2007 1.457.129 1.540.073 1.141.850 -71.979 -697.156 3.369.917

Impairment of the period

31st December 2007 1.457.129 1.540.073 1.141.850 -71.979 -697.156 3.369.917

Net book value 0 0 0 0 0 0

Goodwill is determined as the difference between the acquisition cost and the net

equity of these companies after fair value adjustments as of the acquisition date.

2.4.4.8 Intangible assets

INTANGIBLE FIXED ASSETS

Other Intangible

31ST DECEMBER SOFTWARE Assets TOTAL

Cost:

1st January 2007 1.251.953 799.217 2.051.170

Additions acquired from 3rd parties 250.987 0 250.987

Retirements and other -11.074 37.117 26.043

31st

December 2007 1.491.866 836.334 2.328.200

Accumulated depreciation:

1st January 2007 850.462 799.217 1.649.679

Depreciation of the period 138.763 4.135 142.898

Retirements and other -2.320 19.190 16.870

31st

December 2007 986.905 822.542 1.809.447

Net book value 504.961 13.793 518.754

Capitalised software costs are related to the implementation of ERP and production

software in the French, Bulgarian and Mexican subsidiaries.

38

2.4.4.9 Other current liabilities

OTHER CURRENT LIABILITIES

31ST DECEMBER 2007 2006 2005

Other amounts payable 385.862 738.203 133.764

Accrued charges 1.598.966 609.256 761.506

Vacation accruals 989.544 614.725 560.567

Other social accruals 631.004 553.382 371.212

Tax accruals 0 0 1.806.675

Total 3.605.376 2.515.566 3.633.724

Tax accruals include non-income tax related receivables such as VAT, wage tax and

local taxes.

2.4.4.10 Bank loans and overdrafts

BANK LOANS & OVERDRAFTS

31ST DECEMBER 2007 2006 2005

Overdrafts 11.815.247 3.252.311 7.158.565

Straight loans 1.800.000

Total 11.815.247 5.052.311 7.158.565

2.4.4.11 Long-term debts

Long-term debts consist of the following:

LONG-TERM DEBTS

31ST DECEMBER 2007 2006 2005

Long-term debts: with financial institutions 6.701.457 11.400.000 7.517.109

leasing 3.053.476 2.914.814 4.117.679

Current portion: with financial institutions 1.805.608 1.600.000

leasing 1.538.900 1.152.267 1.199.397

Total 13.099.441 17.067.081 10.435.391

In December 2005, EPIQ nv finalised a loan agreement with the International

Finance Corporation (IFC) for an amount of EUR 20 million. At year-end 2007 the

outstanding amount is EUR 5 million at EPIQ nv. This is the part of the loan that is

convertible against shares of EPIQ nv. All other balances of the IFC loan have been

repaid in 2007 prior to the maturity dates.

The leasing mainly relates to the financing of the building and machines in EPIQ

s.a.r.l. and the machines in EPIQ Electronic Assembly EOOD and EPIQ CZ spol s.r.o.

39

DETAIL OF LONG-TERM DEBTS (INCLUDING CURRENT PORTION)

INSTITUTION INTEREST RATE INITIAL AMOUNT OUTSTANDING

AMOUNT

Epiq sàrl

Société Générale (leasing) 4,88% 175.188 34.213

ING (leasing) 5,59% 1.645.000 1.019.922

ING (leasing) 5,50% 695.526 616.668

Société Générale (leasing) 4,59% 143.000 36.572

Société Générale (leasing) 3,58% 412.248 216.456

Crédit Agricole (leasing) 3,96% 268.856 151.516

Crédit Agricole (leasing) 4,60% 405.327 377.484

Anvar Septi + 170.000 170.000

Epiq EA

Bulbank (loan Epiq 3) 1 m. Euribor+2% 3.889.259 3.507.067

Unicredit (leasing) 6 m. Euribor+8.5% 43.458 15.217

Interlease (leasing) 3 m. Euribor+3.75% 1.755.069 1.430.431

Hebros Leasing 3 m. Euribor+3.75% 109.141 24.283

DSK Leasing 4 m. Euribor+3.75% 89.519 89.161

Other Leasings 317.830

Microenergia

Leasing 5.518 5.518

Epiq CZ

CAC Leasing 4,80% 102.971 12.161

Automat GEM OPAL XII SF 5,46% 105.033 74.945

Epiq NV IFC Loan C 5 mio EUR EURIBOR + 2% 5.000.000 5.000.000

Of which: Financial leasing 4.592.377 €

Financial debt 8.507.067 €

13.099.444

The repayment schedule of the long-term debts is as follows (excluding financial

leasing obligations):

The repayment schedule of long-term debts (excluding financial lease obligations)

2007 2006 2005

31ST DECEMBER

2004

2005

2006

2007 1,600,000 1,600,000

2008 1,805,608 2,850,000 1,600,000

2009 1,805,608 2,850,000 1,600,000

2010 1,805,608 2,850,000 1,600,000

2011 1,805,608 2,850,000 1,600,000

2012 555,608

Thereafter 729,025

Total 8,507,065 13,000,000 8,000,000

The nominal interest rate amounts to 6,35%.

2.4.4.12 Shareholders’ equity and rights attached to shares

As of 31 December 2007, the common stock consisted of 23.786.590 issued and

outstanding ordinary shares without face value.

40

Each holder of shares is entitled to one vote per share, without prejudice to specific

restrictions on the shareholders’ voting rights in the company’s Articles of

Association and Belgian Company Law, including restrictions for non-voting shares

and the suspension or cancellation of voting rights for shares which have not been

fully paid up at the request of the Board of Directors.

Under Belgian Company Law, the shareholders decide on the distribution of profits

at the annual shareholders’ meeting, based on the latest audited statutory accounts

of the Company. Dividends may be paid either in cash or in kind. However,

shareholders may not declare a dividend if the Company has not first reserved at

least 5% of its profits for the financial year until such reserve has reached an

amount equal to 10% of its share capital (the ‘legal reserve’) or if, following any

such dividend, the level of the net assets adjusted for the unamortized balance of

the incorporation costs and capitalized research and development costs of the

Company falls below the amount of the company’s paid-in capital and of its Non-

Distributable reserves. The Board of Directors may pay an interim dividend,

provided certain conditions set forth in Belgian Company Law are met.

In the event of a liquidation of the Company, the proceeds from the sale of assets

remaining after payment of all debts, liquidation expenses and taxes are to be

distributed proportionally to the shareholders, subject to liquidation preference

rights of shares having preferred dissolution rights. The Company currently has no

plans to issue any shares having such preferred dissolution rights.

2.4.4.13 Subordinated loan

EPIQ nv has entered into a subordinated loan agreement with ELEX nv for an

amount EUR 9.000.000. The original loan of EUR 7.000.000 given by International

Finance Corporation (IFC) to ELEX nv was completed by ELEX nv with EUR

2.000.000 and sub-loaned to EPIQ nv. EPIQ nv has used the loan to finance the

expansion of its subsidiary EPIQ Electronic Assembly EOOD in Bulgaria. In 2007

Elex nv has arranged a club deal with banks whereby EUR 10.000.000 was loaned

to EPIQ nv . Both loans between ELEX nv and EPIQ nv have been consolidated into

one. The interest percentage towards EPIQ nv amounts to euribor plus 1,4 %. At

the end of December 2007, the remaining balance of the IFC-loan is EUR 5.000.000

which therefore limits the subordinated part of the ELEX nv loan to that amount.

For the repayment of the IFC-loan itself we refer to note 2.4.4.11 Long-term debts.

41

2.4.4.14 Provisions

PROVISIONS

LEGAL DISPUTES OTHER OTHER

31ST

DECEMBER (SHORT TERM) (SHORT TERM) (LONG TERM) TOTAL

Balance at December 31st

, 2003 780.390 0 530.385 1.310.775

Provisions made during the year 732.903 1.500.000 930.000 3.163.503

Provisions reversed during the year 0 0 -280.385 -280.985

Release related to deconsolidation -250.000 0 0 -250.000

Balance at December 31st , 2004 1.263.293 1.500.000 1.180.000 3.943.293

Provisions made during the year 50.000 52.180 0 102.180

Provisions reversed during the year -50.762 0 0 -50.762

Provisions used during the year -350.000 0 0 -350.000

Release related to deconsolidation 0 -1.500.000 0 -1.500.000

Balance at December 31st , 2005 912.531 52.180 1.180.000 2.144.711

Provisions made during the year 0

Provisions reversed during the year -238.276 -52.180 -250.000 -540.456

Provisions used during the year -50.000 -50.000

Balance at December 31st , 2006 624.255 0 930.000 1.554.255

Provisions made during the year 0

Provisions reversed during the year -574.255 -574.255

Provisions used during the year 0

Balance at December 31st , 2007 50.000 0 930.000 980.000

The provisions consist of the following:

Warranty

No provisions for warranties are made. Some warranties are covered by insurance

policies, the remainder are considered at this point as not material.

Legal disputes

The company has closed some legal cases in 2007, the major one was related to

the building in Saltillo in Mexico. Therefore, provisions for an amount of EUR

574.255 were released.

The provision recorded for the remaining cases only relates to the legal fees. Given

the fact that the timing of the outcome of these legal disputes is sometimes difficult

to predict, this provision has been classified as short-term. The movements of the

provisions during the year are incorporated in the general and administrative

expenses (see note 2.4.4.17). In these legal cases no liability is accepted by EPIQ

nv.

Other long-term

In 2004 EPIQ nv sold the real estate property in Diepenbeek to Fremach Plastics

nv. A provision was already in place regarding the environmental pollution on the

site. The company is following the environmental rules in this matter. The initial

42

obligation to clean up the pollution is with EPIQ nv, however in the sale agreement

Fremach Plastics nv has taken on the obligation to pay for the total clean up costs,

which are currently estimated (still to be approved by OVAM) at EUR 930.000. This

amount is also provided for in the books per year-end. EPIQ nv has committed

itself to Fremach Plastics nv that if the costs would exceed EUR 1.0 million, 50% of

the costs will be paid by EPIQ nv, up to a maximum of EUR 250.000. Parties are in

discussion with the Belgian authorities (OVAM) to transfer all obligations in this

matter to Fremach Plastics nv. However, until today EPIQ nv is the first responsible

to pay. Total provision per December 31st, 2007 amounts to EUR 930.000 which is

unchanged compared to the end of 2006 because the latest information on pollution

shows that there is no deterioration and therefore the original estimated clean up

cost of EUR 930.000 will most probably not be exceeded. The engagement of

Fremach Plastics nv to pay for the pollution cost is recorded as a receivable.

EPIQ nv has deposited EUR 902.333 in a frozen account with KBC Bank who has

given a bank warranty to OVAM for this amount (see note 2.4.4.1).

2.4.4.15 Pension provisions

The pension provisions consist of a detailed benefit plan provision and a pre-

pension provision, and can be detailed as follows:

PENSION PROVISIONS

31ST DECEMBER

Balance at 31st December 2005 1.224.487

Provisions made during the year 7.358

Provisions reversed during the year -85.694

Balance at 31st December 2006 1.146.151

Provisions made during the year 194.926

Provisions reversed during the year -50.000

Balance at 31st December 2007 1.291.077

Defined contribution plan

EPIQ GmbH has recorded a liability of EUR 850.439 regarding early retirement. This

amount relates to the estimated total pension payments according the local practice

and in line with IFRS valuation principles. The (fixed) monthly payments to the

beneficiaries and the annual update of the above mentioned bridge pension

provision are incorporated in the general and administrative expenses (note

2.4.4.17). The company also recorded under other current assets the net present

value of the deposits made of EUR 228.086 and under cash and cash equivalents an

amount of EUR 76.126, which are both restricted to pay the liability (note 2.4.4.4).

43

Defined benefit plan

DEFINED BENEFIT PLAN

Pension expense is compromised as follows:

2007 2006 2005

Current service cost -13,624 -82,307

Interest expense on obligations 17,977 18,418 20,116

Net actuarial losses (gains) recognised 23,169 -14,598 42,943

Losses (gains) on curtailments and settlements

Total pension expense 41,146 -9,804 -19,248

The movements in the liability recognised in the balance sheet were as follows:

2007 2006 2005

Net liability at the beginning of the year 399,492 409,295 695,235

Net expense recognised in 41,146 -9,804 -19,248

Effect of business (de)combination 0 -266,692

Net liability at the end of the year 440,638 399,492 409,295

Principal actuarial assumptions used to determine pension obligations as of 31st December were:

2007 2006 2005

Discount rate 4.5% 4.5% 4.5%

Wage and salary increase above inflation 2% - 3% 2% - 3% 2% - 3%

Retirement benefit increases between 2% and 3% between 2% and 3% between 2% and 3%

Average employee turnover between 0% and 6% between 0% and 6% between 0% and 6%

EPIQ s.a.r.l. provides defined benefit pension plans for all employees. Provisions for

pension are established for benefits payable in the form of retirement, disability and

surviving dependent pensions. Benefits are dependent on years of services and the

respective employee’s compensation.

The obligation resulting from defined benefit pension plans is determined using the

projected unit credit method. Unrecognized gains and losses resulting from changes

in actuarial assumptions, outside the corridor, are recognized as income (expense)

over the expected remaining service life of the active employees.

2.4.4.16 Cost of sales

COST OF SALES

31ST DECEMBER 2007 2006 2005

Purchases 148.832.401 108.688.070 81.827.864

Transportation costs 1.707.287 2.044.357 2.050.040

Salaries 22.020.953 17.084.197 18.448.596

Depreciation and amortisation 3.692.386 3.855.040 4.533.663

Other (in)direct production costs 6.591.068 5.794.558 4.391.238

Total 182.844.095 137.466.222 111.251.401

The increase in cost of sales is in line with the growth of the business. Purchases

increased more rapidly due to the inclusion of the full material cost in the sales

price of a large customer.

44

2.4.4.17 General and administrative expenses

GENERAL AND ADMINISTRATIVE EXPENSES

31ST DECEMBER 2007 2006 2005

Salaries 2.388.856 2.232.060 2.752.807

Depreciation 415.468 335.037 368.765

Other 3.300.067 4.040.613 2.897.463

Total 6.104.391 6.607.710 6.019.035

2.4.4.18 Other operating income / (expense)

Under other operational income and expenses the company recorded the reversal of

some legal and other provisions. In 2007 a number of legal cases have been closed.

OTHER OPERATING INCOME / (EXPENSE)

DESCRIPTION AMOUNT TOTAL

Less value participation GPSL -15.000

Reversal less value Microenergia 3.059

Badwill Microenergia 34.843

Reversal impairment Begassa building 730.086

Profit on sale fixed assets 10.977

Release Provision Begassa 43.365

Impairment on Fixed Assets related to Genie & Environment business -492

Other 79.739

Movement in bad debt provision 4.466

TOTAL 891.043

On the other hand an impairment of EUR 15.000 was booked on GPSL because the

decision has been taken to perform central purchasing in-house so that this

company becomes almost inactive.

2.4.4.19 Selling expenses

SELLING EXPENSES

31ST DECEMBER 2007 2006 2005

Salaries 488.735 426.869 343.079

Other 229.399 327.876 474.189

Total 718.134 754.745 817.268

2.4.4.20 Research and development expenses

RESEARCH AND DEVELOPMENT EXPENSES

31ST DECEMBER 2007 2006 2005

Salaries 903.878 789.547 872.395

Depreciation 0 0 137.020

Other 1.258.077 970.851 1.059.619

Total 2.161.955 1.760.398 2.069.034

45

2.4.4.21 Personnel expenses and average number of employees

PERSONNEL EXPENSES AND AVERAGE NUMBER OF EMPLOYEES

31ST DECEMBER 2007 2006 2005

COS salaries 22.020.953 17.084.197 18.448.596

G&A salaries 2.388.856 2.232.060 2.752.807

Selling salaries 488.735 426.869 343.079

R&D salaries 903.878 789.547 872.395

Total 25.802.422 20.532.673 22.416.877

Number of employees 3.317 2.741 2.112

The increase in employees from 2005 to 2006, and from 2006 to 2007, mainly

relates to the continuously higher output in EPIQ Electronic Assembly EOOD and

EPIQ MX S.A. de C.V.

2.4.4.22 Depreciation and amortization expenses

DEPRECIATION AND AMORTISATION EXPENSES

31ST DECEMBER 2007 2006 2005

COS depreciation 3.692.386 3.855.040 4.533.663

G&A depreciation 415.468 335.037 368.765

R&D depreciation 0 0 137.020

Goodwill depreciation

Total 4.107.854 4.190.077 5.039.448

2.4.4.23 Financial income / expense - net

FINANCIAL EXPENSES - NET

31ST DECEMBER 2007 2006 2005

Interest income 108.696 140.108 97.954

Exchange difference 0 -83.056 1.716.497

Fair value adjustments on shares

Other 0 0 25.865

Total financial income 108.696 57.052 1.840.316

Interest expense 2.512.372 1.995.247 1.538.693

Bank charges 324.602 533.340 234.643

Exchange difference 931.671 197.323 1.039.189

Fair value adjustments on shares

Other

Total financial expense 3.768.645 2.725.910 2.812.525

The exchange rate difference in 2007 was negative EUR 931.671 on a net basis

compared to positive EUR 114.267 in 2006.

The main reason is the drop of the Mexican Peso, which is more or less linked to

the United States Dollar, against the Euro which resulted in a lower value of the

Mexican Peso nominated loans of EPIQ nv towards EPIQ MX S.A. de C.V.

46

2.4.4.24 Income taxes

INCOME TAXES

31ST DECEMBER 2007 2006 2005

Current tax expense 1.029.643 1.215.495 -953.467

Deferred tax (income)/expense -43.698 -97.644 59.387

Total income tax 985.945 1.117.851 -894.080

2007 2006 2005

Current year 1.029.643 1.239.895 -731.055

Over / (under) provided in prior years -24.400 -222.412

Total current tax expense 1.029.643 1.215.495 -953.467

2007 2006 2005

Organisation and reversal of temporary differences -43.698 -97.644 59.387

Changes in tax rates, impositions of new taxes

Write-down of deferred tax liabilities

Total deferred tax (income)/expense -43.698 -97.644 59.387

The reconciliation of the total income tax to the theoretical amount that would arise

using the tax rate of the home country of EPIQ is as follows:

31ST DECEMBER 2007 2006 2005

Accounting profit before tax 5,557,445 3,849,967 2,035,040

Tax at the applicable tax rate 985,945 1,117,851 -691,710

Amortisation of goodwill 0

Valuation allowance on temporary differences 0 0 -933,977

Other 0 0 731,607

Consolidated tax charge 985,945 1,117,851 -894,080

2.4.4.25 Deferred taxes

DEFERRED TAXES

31 DECEMBER MOVEMENT 31 DECEMBER

2006 2007

Deferred tax asset

Tax loss carry forward 10.360.506 3.886.494 14.247.000

Temporary differences 1.036.694 211.306 1.248.000

Valuation allowance -11.307.606 -4.040.097 -15.347.703

Total 89.594 57.703 147.297

Deferred tax liability

Temporary differences -316.414 182.414 -134.000

Valuation allowance 0 -196.420 -196.420

Total -316.414 -14.006 -330.420

47

Components of deferred taxes are as follows:

Deferred tax liability mainly relates to temporary differences with respect to fixed

assets valuation and provisions. Net deferred tax asset positions have not been

recognized.

EPIQ group has fiscal losses of EUR 34.568.268 for 2007, EUR 33.636.273 for 2006

and EUR 32.612.418 for 2005, for which no deferred tax asset has been

recognized. These fiscal losses have the following expiring dates:

2007 2006 2005

2007

2008

2009 1.236.171 287.243

2010 2.126.028 420.876

2011 461.996

Thereafter 11.531.258 14.991.943 15.214.601

No expiring date 19.212.815 17.936.211 17.397.817

Total 34.568.268 33.636.273 32.612.418

The increased unrecognized fiscal losses in 2007 mostly relate to the local non-

operational fiscal losses in EPIQ NV.

2.4.4.26 Earnings per share

EARNINGS PER SHARE

31ST DECEMBER 2007 2006 2005

Net result of the group 4.567.981 2.732.116 1.697.144

Weighted average

number of shares 23.786.590 23.786.590 23.786.590

Earnings per share 0,19 0,11 0,07

Basic earnings per share are calculated by dividing the net profit for the period

attributable to ordinary shareholders (net profit for the period less dividends on

preference shares) by the weighted average number of ordinary shares outstanding

during the period.

2.4.4.27 Segment information

A. Business segments

EPIQ has separated its activities in following business segments:

● automotive & sensors

48

● household appliances

● industrial

B. Geographical segments

The EPIQ group’s activities are conducted predominately in France, Germany,

Mexico, Benelux, Czech Republic and Bulgaria.

Intersegment transactions: segment revenue, segment expenses and segment

performance include transfers between business segments and between

geographical segments. Such transfers are accounted for at competitive market

prices charged to unaffiliated customers for similar services. Those transfers are

eliminated in consolidation.

Business segment data

For the year 2007:

BUSINESS SEGMENT DATA

YEAR TO DECEMBER 2007 AUTOMOTIVE HOUSEHOLD INDUSTRIAL OTHER TOTAL

APPLIANCES

External revenues 150.398.275 32.216.511 9.323.149 1.526.569 193.464.504

Operating profit 7.165.553 1.534.919 444.191 72.732 9.217.394

Financial result net -2.845.225 -609.470 -176.375 -28.880 -3.659.949

Income taxes 766.469 164.184 47.513 7.780 985.945

Net profit 3.551.124 760.679 220.133 36.045 4.567.981

Segment assets 80.004.973 17.137.704 4.959.487 812.065 102.914.228

Segment liabilities 58.962.233 12.630.181 3.655.053 598.477 75.845.944

Capital expenditure 10.270.161 2.199.950 636.645 104.244 13.211.000

Depreciation 3.193.424 684.057 197.959 32.414 4.107.854

For the year 2006:

YEAR TO DECEMBER 2006 AUTOMOTIVE HOUSEHOLD INDUSTRIAL OTHER TOTAL

APPLIANCES

External revenues 113,945,771 23,649,102 6,450,733 2,124,369 146,169,975

Operating profit 5,081,704 1,054,692 287,687 94,742 6,518,825

Financial result net -2,080,489 -431,799 -117,781 -38,788 -2,668,858

Income taxes 871,413 180,859 49,333 16,246 1,117,851

Net profit 2,129,802 442,034 120,573 39,707 2,732,116

Segment assets 40,317,183 7,240,556 1,201,590 30,706,095 79,465,424

Segment liabilities 29,265,330 6,084,966 1,169,786 20,472,239 56,992,321

Capital expenditure 1,874,188 822,719 393,184 59,371 3,149,462

Depreciation 2,907,005 608,008 270,141 404,923 4,190,077

49

The relative importance of the different business segments as a percentage (%) of

external revenues is shown as follows:

2007 2006 2005

Automotive 77,7% 78,0% 71,3%

Household appliances 16,7% 16,2% 22,8%

Industrial 4,8% 4,4% 2,0%

Other 0,8% 1,5% 3,9%

Geographical segment data

Geographical segment data for the year 2007 are as follows:

GEOGRAPHICAL SEGMENT DATA

BENELUX FRANCE GERMANY BULGARIA CZECH REP CHINA USA MEXICO ITALY OTHER TOTAL

YEAR TO DECEMBER 2007

External revenues

1. By destination 1.994.985 43.610.547 22.105.866 80.889.096 1.334.629 0 1.425.853 23.808.484 3.931.102 14.363.942 193.464.504

2. By geographical origin 0 31.980.473 7.372.509 132.053.711 5.193.186 16.864.625 193.464.504

Automotive 0 12.412.080 0 41.730.270 1.025.701 14.342.516 69.510.567

Household appliciances 0 16.380.690 7.372.509 4.460.152 1.615.229 2.387.931 32.216.511

Sensors 0 0 0 80.887.708 0 0 80.887.708

Industrial 0 2.268.252 0 4.379.611 2.552.256 123.030 9.323.149

Other 0 919.451 0 595.970 0 11.148 1.526.569

Segment assets 29.365.015 19.319.854 2.242.630 50.614.619 -461.730 76.038 1.757.802 102.914.228

Segment liabilities 23.905.713 13.861.737 2.168.320 31.642.008 1.083.363 28.825 3.155.978 75.845.944

Capital expenditure -2.417 766.473 8.206 7.579.746 70.401 2.695 4.785.896 13.211.000

Depreciation 78.932 764.479 44.218 2.247.611 336.565 0 636.049 4.107.854

Geographical segment data for the year 2006 are as follows:

BENELUX FRANCE GERMANY BULGARIA CZECH REP UK USA MEXICO ITALY OTHER TOTAL

YEAR TO DECEMBER 2006

External revenues

1. By destination 1,575,285 26,711,014 27,060,105 53,538,452 1,670,064 0 4,420,531 18,667,015 965,810 11,561,699 146,169,975

2. By geographical origin 0 24,213,162 8,848,657 97,717,352 5,509,995 9,880,809 146,169,975

Automotive 0 16,217,321 0 33,993,349 536,682 8,323,532 59,070,884

Household appliciances 0 5,847,590 8,848,657 5,414,748 2,215,980 1,322,127 23,649,102

Sensors 0 0 0 54,874,887 0 0 54,874,887

Industrial 0 441,358 0 3,016,892 2,757,333 235,150 6,450,733

Other 0 1,706,893 0 417,476 0 0 2,124,369

Segment assets 25,619,997 14,100,942 2,106,530 34,721,258 -216,045 3,132,742 79,465,424

Segment liabilities 19,056,751 9,022,760 2,023,990 22,328,151 469,359 4,091,310 56,992,321

Capital expenditure 26,461 441,326 5,437 1,040,234 279,108 1,356,896 3,149,462

Depreciation 75,525 952,113 69,571 2,133,526 356,906 602,436 4,190,077

2.4.4.28 Minority interest

The Multinational Industrial Fund (‘MIF’) acquired 35% of the shares in EPIQ MX

S.A. de C.V. in 2004 through a share capital increase, in which also EPIQ nv

participated.

50

MINORITY INTEREST

MINORITY GROUP'S SHARE

INTEREST OF INCOME

Epiq MX SA de CV 35,0% -543.072 -190.075 -352.997

Mexico

Mikro-Energia 30,0% 11.728 3.518 7.623

Reallocation minority result due to negative minority 190.075 -190.075

3.518 -535.449

MINORITY RESULTTOTAL RESULT

Because the minority interest has fallen to zero, the minority result of EPIQ Mexico

de C.V. has been recharged to the Group’s share of income in 2007.

In 2005 a shareholders agreement was closed between EPIQ nv and ‘MIF’ whereby

the decision making with regard to EPIQ MX S.A. de C.V. was agreed. In practice

this boils down to a veto-voting power of ‘MIF’ into the Board of directors of EPIQ

MX S.A. de C.V.

In 2007 there was no use of this veto-voting power by ‘MIF’ with regard to any of

the proposed decisions by the board members representing EPIQ nv in the board of

EPIQ MX S.A. de C.V.

In 2007 EPIQ also included the results of Microenergia EOOD which is owned for

30% by third parties.

2.4.4.29 Financial instruments

Financial risk management

EPIQ operates internationally, which could expose it to market risks associated with

changing interest and foreign exchange rates.

EPIQ does not use derivatives to manage these risks, mainly because all revenues

and nearly all costs are quoted in the two main currencies of the Group, the EUR

and the Dollar.

Risk management policies have been defined on group level, and are carried out by

the local companies of the Group.

(1) Credit Risks

The Group has no significant concentration of credit risk with any single

counterparty or group of counterparties having similar characteristics.

51

The Group has a policy on business unit level to ensure that sales are only made to

new and existing customers with an appropriate credit history.

The Group does not guarantee obligations of other parties, except for their pro-

rata-obligations towards their joint venture partner.

(2) Interest rate risk

It is the Group’s policy to finance up to a minimum of 50% of its fixed assets by

long-term financing. This long-term financing is done based on a fixed interest rate

basis.

Consequently, long-term bank financing of fixed assets is done at fixed interest

rates, which eliminates substantial interest rate risks.

All interest rates are in line with market interest rates.

At the end of 2007, Epiq nv closed a fixed against floating interest rate swap for an

amount of EUR 7.000.000 as a cover of the interest rate risk on floating debt.

The cover has been taken for a maturity of 5 years at a rate of 4,325%.

The schedule of long-term-debt repayments is disclosed in note 2.4.4.11 and

2.4.4.13. Finance lease debts (all at fixed interest rate) are shown in note 2.4.4.30.

The Group has no significant interest-bearing held-to-maturity financial assets.

(3) Liquidity risk

Liquidity risk arises from the possibility that customers may not be able to settle

obligations to the Company within the normal terms of trade. To manage this risk

the Company periodically assesses the financial viability of customers.

(4) Foreign exchange risk

The main currencies used within the Group are the Dollar and EUR.

It is the Group’s policy not to manage exchange risks with ‘other’ currencies in use.

These currencies are mainly the local currencies of the sites that are located in the

EUR or Dollar regions. This is relevant for Bulgaria and Czech Republic (these

currencies are situated in the EUR-region) and Mexico (of which the currency is

situated in the Dollar-region).

52

It is the Group’s policy to principally manage the EUR/Dollar exchange risk through

its commercial contracts and through the offsetting of payments and receipts.

Commercial contracts with a yearly or more frequent price negotiation include the

relevant exchange rate evolution in their price negotiations. Contracts with price

definition on a long-term basis always include the exchange risk in the formula of

price-determination.

Fair value of financial instruments

The fair value of securities included in available-for-sale investments is estimated

by reference to their quoted market price at balance sheet date. The principal

financial instruments of EPIQ are carried at fair value. Cash and cash equivalents,

trade receivables, other current assets, other non current assets, trade and other

payables and bank overdrafts are carried at nominal value, which represents the

fair value.

The following methods and assumptions are used to estimate the fair value of each

class of financial instruments.

The carrying amount of cash and cash equivalents and bank overdrafts

approximates their fair value due to the relatively short-term maturity of these

financial instruments.

Similarly, the historical cost carrying amounts of receivables and payables that are

all subject to normal credit terms approximates their fair values.

The fair value of the long-term borrowings is based on the current rates available

for debt with the same maturity profile and approximates their carrying amounts.

Management believes that there was minimum-exposure to interest rate risk of

financial assets and liabilities as per 31 December 2007, because their deviation

from their respective fair values was not significant.

2.4.4.30 Leasing

The split between financial debt and leasing debt is separated as follows:

FINANCIAL LEASING

TOTAL DEBT FINANCIAL LEASING

OUTSTANDING DEBT DEBT

Bank loans and overdrafts 11.815.247 11.815.247

Current portion of long-term debt 3.344.508 1.805.608 1.538.900

Long term debt 9.754.933 6.701.457 3.053.476

53

Property leased by EPIQ and its subsidiaries includes buildings, plants, machinery

and equipment. The most significant obligations assumed under the lease terms,

other than rental payments, are the maintenance of the facilities, insurance and

property taxes. Lease terms generally range from 5 to 10 years with options to

renew at varying terms.

The following is an analysis of assets under financial leases:

2007 2006 2005

Buildings 1.645.000 1.645.000 1.645.000

Machinery and equipment 4.342.948 3.285.133 3.424.910

Total 5.987.948 4.930.133 5.069.910

Accumulated depreciation -3.349.397 -2.931.550 -2.413.553

Net book value 2.638.551 1.998.583 2.656.357

The future minimum lease payments for the above leases are as follows:

Next 1 year 1,538,900

1 year though to 5 years 2,290,107

After 5 years 763,369

Total minimum lease obligations 4,592,376 0 0

2.4.4.31 Operational leasing

EPIQ and its subsidiaries have various operational lease agreements for machinery,

equipment and other facilities. Most leases contain renewal options.

OPERATIONAL LEASING

COST FOR RENTAL 2007 2006 2005

Rent 2.832.396 1.713.798 914.106

Commitment expense

less: received payments under non-cancellable subleases

Total 2.832.396 1.713.798 914.106

The increase in 2007 against previous years mainly relates to the leased machines

in EPIQ Electronic Assembly EOOD from Sensor-Nite Industrial EOOD for the

manufacturing of the sensors, which has grown further in 2007 compared to 2006.

FUTURE MINIMUM LEASE PAYMENTS UNDER NEXT 1 YEAR 1 - 5 YEARS

NON-CANCELLABLE OPERATING LEASES

Land, Leasehold right and buildings

Production, machinery and equipment 505,785 2,326,611

Furniture, fixtures and office equipment

Total 505,785 2,326,611

54

2.4.4.32 Related party

1. Shareholders and identification of major related parties

The shareholders of EPIQ nv are as follows:

Per December 31st, 2007, ELEX nv owns 79% of the outstanding shares of EPIQ nv.

The shares of ELEX nv are held directly and/or indirectly by Mr. R. Duchatelet which

is also director of MELEXIS nv. and of of EPIQ nv.

XTRION nv is a holding company which owns 50,05% of the outstanding shares of

MELEXIS nv. The remaining balance of the outstanding shares is publicly owned.

The shares of XTRION nv are held directly and/or indirectly by Mr. R. Duchatelet

and Mr. R. De Winter.

XTRION nv also owns 58,9% of X-FAB Silicon Foundries nv, which owns 97,15% of

X-FAB semiconductor foundries AG who owns 100% of X-FAB Texas Inc. and 100%

of X-FAB UK Ltd and 100% of X-FAB Dresden, all producers of wafers, which are

the main raw materials for integrated circuits.

Since September 1st 2006 X-FAB Silicon Foundries nv also owns 100% of XFAB

Sarawak in Malaysia, also a producer of wafers. Business transactions between X-

FAB and EPIQ are limited.

EPIQ nv purchases ASIC’s (Application Specific Integrated Circuits) from MELEXIS

nv for household appliances and for use in the automotive sector. These operations

resulted in a liability of EPIQ nv to MELEXIS nv for EUR 430.156 per December 31st,

2007 and a receivable from MELEXIS nv for EUR 95.049.

X-PEQT AG developes, produces and sells test systems for the semiconductor

industry. X-PEQT nv owns 100.0 % of the shares of X-PEQT AG. EPIQ purchases

toolshop and test equipment from X-PEQT.

Per December 31st, 2007 EPIQ has no receivable on X-PEQT and no payable to

X-PEQT.

The relations between EPIQ nv and XTRION nv are limited to the invoicing of IT

equipment and support. On December 31st, 2007 EPIQ nv has no receivable on

XTRION nv and no payable to XTRION nv.

The relations between EPIQ nv and ELEX nv consist of the invoicing of mutually

used assets, mainly relating to the building in Tessenderlo, owned by MELEXIS nv.

Additionally ELEX nv has arranged a clubdeal financing facility with three major

banks to provide financing to its subsidiaries.

55

Therefore, EPIQ nv has a payable to ELEX nv for EUR 18.558.912 per December

31st, 2007.

On the other hand, ELEX nv has guaranteed the loan of EPIQ nv with the IFC, see

note 2.4.4.11.

Since November 2004, ELEX nv owns 100% of the Sensor-Nite group. EPIQ has a

payable to the Sensor-Nite group for EUR 290.576 per December 31st, 2007 and a

receivable from the Sensor-Nite group for EUR 9.142.158.

As required by Belgian law (articles 523 and 524 of the Company law), the Board of

Directors investigates all transactions which could result in potential conflict of

interest. For all transactions which have not taken place in the ‘normal course of

business’, an independent expert is appointed to review these transactions as to

their fair nature and report to independent directors.

For 2007, the Board of Directors has not identified any transaction in this matter.

2. Outstanding balances at year-end

RELATED PARTY OUTSTANDING BALANCES

31ST DECEMBER 2007 2006 2005 2004 2003

Accounts receivable:

Elex 90.901 4.506.720

X-Peqt 15.756 83.619 10.016 27.116

X-FAB

Melexis 95.049 55.694 150.750 57.873 115.200

Structuplas 0 13.273

SensorNite 9.142.158 7.424.295 8.262.925 2.350.806

Yamashita 278.876 246.671

Total 9.237.207 7.586.646 8.510.567 2.697.571 4.895.707

Accounts payable:

Elex 18.558.912 213.350 134.396 3.303.854 3.279.866

X-Peqt 17.046 21.120 6.922 83.324

Melexis 430.156 1.704.950 1.202.971 2.254.523 3.400.727

Xtrion 15.593

Structuplas

SensorNite 290.576 256.341 369.975 393.157

Yamashita 566.864 299.782

Total 19.279.644 2.207.280 1.728.462 6.525.320 7.063.699

56

3. Transactions during the year

In the course of the year, the following transactions have taken place:

TRANSACTIONS DURING THE YEAR

31ST DECEMBER 2007 2006 2005

Sales to affiliated companies:

Elex 32.026

Xpeqt 28.317 35.101 94.183

X-FAB

Melexis 655.260 575.627 793.230

SensorNite 81.770.122 54.796.221 26.246.006

Structuplas 82.531

Total 82.453.699 55.489.480 27.165.445

Purchases from affiliated companies:

Elex 923.004 765.464 629.074

Xpeqt 30.595 16.228 96.756

Melexis 8.787.233 9.257.191 9.719.839

Xtrion 19.046

SensorNite 2.652.713 1.996.209 1.689.086

Total 12.393.545 12.054.138 12.134.755

The sales to the MELEXIS and X-PEQT companies mainly relate to respectively

services and R&D. The sales to Sensor-Nite are finished products under a five year

rolling forward manufacturing agreement. By the end of 2007 EPIQ EA EOOD has

finished the building of a factory in Botevgrad to be used for the manufacturing of

finished products for Sensor-Nite. The manufacturing agreement between Epiq EA

OOD and Sensor-Nite has been extended from a five year fixed period into a five

year rolling forward period.

The gross amount of purchases from MELEXIS nv are Integrated Circuitboards,

whereas the purchases from Sensor-Nite relates to rent for the machines which are

the property of Sensor-Nite .

The Board of Directors and the Audit Committee have reviewed and analysed all

major transactions and concluded that these transactions are within the normal

course of business and that there is sufficient reason to conclude that the

remuneration is based on arm’s length principles.

4. Remuneration of Board of Directors and non-audit fees

Directors’ total remuneration was approximately EUR 24.000 in 2007.

In 2007 audit related fees invoiced to the EPIQ group by BDO network amounted to

EUR 125.000, whereas non-audit related fees amounted to EUR 2.350.

57

2.4.4.33 List of subsidiaries consolidated

LIST OF SUBSIDIARIES CONSOLIDATED

ENTITY PLACE OF PRINCIPLE OWNERSHIP INCORPORATED IN INCORPORATED IN

INCORPORATION COUNTRY VAT numbre ACTIVITIES INTEREST CONSOLIDATED CONSOLIDATED

INCOME STATEMENT BALANCE SHEET

Epiq sàrl Dieppe France Production/Sale/R&D 100,0% x x

Epiq EA EOOD Botevgrad Bulgaria Production/Sale/R&D 100,0% x x

Epiq GmbH Adelsdorf Germany Production/Sale 100,0% x x

Epiq CZ Tremosna Czech Republic Production/Sale/R&D 100,0% x x

Epiq MX SA de CV Saltillo Mexico Production/Sale 65,0% x x

Epiq PC NV Izegem Belgium Sale 100,0% x x

Epiq PC Holdings NV Tessenderlo Belgium Holding 100,0% x x

Yamaver SA de CV Saltillo Mexico Production 100,0% x x

Nipbelmex SA de CV Saltillo Mexico Production 100,0% x x

Zuhai Trading Tessenderlo China Purchase 100,0% x x

Microenergia LTD Botevgrad Bulgaria Production/Sale 70,0% x x

France Czech Republic

Mexico plant Mexico production

Bulgaria

58

2.4.4.34 Contingent liabilities

There are no contingent liabilities to disclose.

2.4.4.35 Subsequent events

There are no subsequent events to disclose.

2.4.4.36 Going concern and bank covenants

Based on the results of 2007 and the business plan of 2008, there is no going

concern issue to report.

The company realized a consolidated profit before taxes after minorities of EUR 5,6

million, the solvency ratio of the company was stable at 26,3% in 2007 compared

to 28,3% in 2006.

Bank covenants:

All covenants regarding the IFC-loan have been met.

2.5. Short version of the statutory annual stand-alone accounts of EPIQ

nv

This represents an excerpt of the statutory financial statements of EPIQ nv, which

will be published on March 27th, 2008. The statutory auditors of EPIQ nv, Ernst &

Young for 2005 and BDO Atrio Bedrijfsrevisoren Burg. CVBA, represented by Gert

Claes and Koen De Brabander for 2006 and 2007 have issued an unqualified audit

opinion on the statutory financial statements of EPIQ nv.

59

2.5.1 Balance sheet

DETAILED BALANCE SHEET 2007 2006 2005

ALL AMOUNTS ARE IN EURO 31 DECEMBER 31 DECEMBER 31 DECEMBER

Current Assets:

Cash and cash equivalents 1,964,500 3,649,497 1,222,733

Current investments

Accounts receivable from trade activities 80,028 49,779

Accounts receivable from related parties 91,972 77,342

Other current assets 8,145,294 6,518,055 6,240,263

Income tax receivable

Inventories

Total current assets 10,189,822 10,259,524 7,590,117

Non-current assets:

Financial fixed assets 26,215,850 25,093,185 27,316,100

Investments in associates 1

Deferred tax assets

Other non-current assets

Investment property

Property, plant and equipment 20,049 25,187 2,357

Intangible assets 3,906 7,950 37,756

Goodwill

Total non-current assets 26,239,805 25,126,322 27,356,214

Total assets 36,429,627 35,385,846 34,946,331

Current liabilities:

Bank loans and overdrafts 0 1,800,000 0

Current portion of long-term debts 1,250,000 1,200,000

Accounts payable due to trade activities 275,853 55,788 107,380

Accounts payable due to related partie 687,652 198,655 194,530

Income tax liabilities 18,164 10,729 -296

Provisions short-term 50,000 300,000

Other current liabilities 327,925 1,045,549 228,594

Total current liabilities 2,559,594 4,360,721 830,208

Non-current liabilities:

Long-term debt less current portion 8,200,000 9,800,000 8,000,000

Provisions long term 980,000 930,000 1,180,000

Pension provisions

Deferred tax liabilities

Subordinated loans 18,218,614 6,418,614 7,495,059

Total non-current liabilities 27,398,614 17,148,614 16,675,059

Shareholders' equity:

Share capital 37,054,000 37,054,000 37,054,000

Share premium 17,660,229 17,660,229 17,660,229

Reserves 260,523 260,523 260,523

Retained earnings -41,098,241 -37,533,688 -35,370,036

Result of the year -7,405,093 -3,564,553 -2,163,652

Cumulative translation adjustment

Total shareholders' equity 6,471,419 13,876,511 17,441,064

Total liabilities and shareholders' equity 36,429,627 35,385,846 34,946,331

17.76% 39.21% 49.91%

60

2.5.2 Income statement

EPIQ NV INCOME STATEMENT 2007 2006 2005

ALL AMOUNTS ARE IN EURO

Sales 2,818,630 2,022,484 1,078,208

Other revenues 168,954 112,744 59,857

Cost of sales 0 -211 -9,177

Gross margin 2,987,584 2,135,017 1,128,888

Depreciation and amortisation -11,003 -33,436 -29,543

Selling expenses -13,159 -23,433 -10,588

General and administrative expenses -1,550,953 -1,268,056 -394,850

Other operating income / (expense) -6,516,287 -3,743,340 -1,081,910

, , ,

Profit/loss from operations -5,103,818 -2,933,248 -388,003

Financial income / (expense) 713,679 899,277 529,725

Exceptional income / (expense) -2,939,912 -1,446,716 -2,297,523

Profit/loss before taxes -7,330,051 -3,480,687 -2,155,801

Income taxes -75,042 -83,866 -7,851

Net profit/loss -7,405,093 -3,564,553 -2,163,652

61

3. CORPORATE GOVERNANCE

Next to the General Shareholder’s Assembly, the main policy-making bodies of the

Group are the Board of Directors and the Board of Management.

3.1 Board of Directors

Composition of the Board of Directors

Name Age Position

Roland Duchatelet 61 Director (non-executive)

Moova NV, represented

by Willy Vanden Poel

61 Director (non-executive)

Eugen Schlötzer

Innovation, represented

by Eugen Schlötzer

65 Director (non-executive)

Jenny Claes 61 Director (non-executive)

Françoise Chombar 45 Director (non-executive)

Gilles Bernard 50 Director, Chief Executive Officer (CEO ) / Chief

Operating Officer (COO)

Moova NV, Eugen Schlötzer Innovation and Jenny Claes are independent directors.

According to the declaration of the members of the Board of Directors, none of

them has been convicted of fraud during the past five years.

Mr. Roland Duchatelet is 61 years old. He holds a degree as Electronics Engineer,

Applied Economics and an MBA from the University of Leuven. He is a director in

several companies and he takes part in the Belgian Senate.

Ms. Françoise Chombar holds a master’s degree as Interpreter in Dutch, English

and Spanish from the University of Gent. Ms. Chombar is also director/CEO of

Melexis nv and director of X-FAB nv.

Mr. Gilles Bernard has worked as Development Engineer from 1983 until 1988.

From 1988 until 1993 he was Technical Manager with Thomson. From 1993 to 1995

he was Quality Control Manager with SM2E SA and in September 1995 he has been

appointed as Plant Manager of EPIQ s.a.r.l. Since 1998 he has been Chief Executive

Officer.

62

Moova NV is duly represented by Mr. Willy Vanden Poel and is a non-executive

independent Director of EPIQ group.

Eugen Schlötzer Innovation is duly represented by Mr. Eugen Schlötzer and is a

non-executive independent Director of EPIQ group.

Mrs. Jenny Claes has a long career in three (3) different companies and was

mainly active in the field of Logistics. This included responsibilities for commercial

planning, production planning, warehousing, transport, international sales

administration, ICT and quality management. She participated in the start up of the

European Distribution Centre of SKF in Tongeren and holds now the position of

General Manager of SKF EDC. Mrs. Jenny Claes holds a Masters degree in

International Trade.

Directors remuneration

The overall amount paid to the Directors amounts to approx. EUR 24.000.

3.2 Committees of the Board of Directors

Audit Committee

The audit committee consists of three non-executive members, Moova NV,

Chairman, Jenny Claes, independent director and Eugen Schlötzer Innovation,

independent director.

The internal and external auditor is regularly invited to the meetings of the Audit

Committee.

The Audit Committee meets twice a year.

Remuneration Committee

The Remuneration Committee consists of three non-executive members, Roland

Duchatelet, Chairman, Eugen Schlötzer Innovation, independent director and Willy

Vanden Poel, independent director.

3.3 Management

The Board of Management consists of Gilles Bernard, Chief Executive Officer and

Chief Operating Officer and Yves Duchatelet, Chief Financial Officer.

63

Management’s remuneration

The overall gross payment paid to management in 2007 amounted to approx. EUR

240.000.

According to the declaration of the members of the Management, none of them has

been convicted of fraud during the past five years.

3.4 Dividend policy

Taking into account the current and future cash flow situation no (interim-)

dividend will be paid the shareholders.

Gross (interim-) dividend paid out per share in

2005: 0 EUR dividend payment

2006: 0 EUR dividend payment

2007: 0 EUR dividend payment

3.5 Auditor

At the General Shareholder’s Assembly on 30 March 2006, BDO Atrio

Bedrijfsrevisoren Burg. CVBA , represented by Gert Claes and Koen De Brabander,

was appointed for a period of 3 years.

64

3.6 Financial calendar

2008

February 26th: Publication annual results 2007

March 27th: Annual General Shareholder’s Assembly

May 23rd: Publication quarter results Q1/2008

August 28th: Publication half-year results

November 21st: Publication quarter results Q3/2008

2009

February 27th: Publication annual results 2008

65

3.7 Stock related information

During 2007, 1.646.780 shares have been traded. The highest rate was EUR 3,23

per share, the lowest rate was EUR 2,25 per share.

EPIQ - Share evolution 2007

2

2,5

3

3,5

Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07

Roland Duchâtelet Gilles Bernard

Director Director

Françoise Chombar Eugen Schlotzer Innovation

Director Represented by Eugen Schlotzer

Director

Jenny Claes Moova nv

Director Represented by Willy Vanden Poel

Director