Consolidated Financial Statements - L. Possehl & Co. mbH

In accordance with Article 312 Para. 6 HGB and based on the consolidated
fi nancial statements prepared by Hako Holding GmbH & Co. KG,
which include a total of 31 companies, Hako is to be included in the
consolidated fi nancial statements of L. Possehl according to the equity
method.
Receivables and payables, as well as sales, expenses and gains in
income among consolidated companies are set off against one another.
Unless immaterial, intercompany profi t eliminations were performed
for intra-subgroup transactions. Internal sales from supply of own products
are reclassifi ed as own work capitalized or changes in inventory
unless they are not negligible.
Due to their immaterial effect on the net assets, fi nancial position and
earnings of the Group, there are no intercompany profi ts to be eliminated
from supply and service relationships with associated companies.
The bad loan losses on Group-internal receivables performed in the
individual fi nancial statements as well as the write-off on shares of consolidated
companies are eliminated.
Required deferred tax payments are recognized for earnings-relevant
consolidation processes.
IV. CURRENCY TRANSLATION
The carrying values of the foreign subsidiaries are translated throughout
at the mean current rate as of the balance sheet date. The differences
resulting from exchange rate changes compared to the end of
the previous fi scal year are offset against the reserves retained from
and not recognized in net income. The currency used by the parent
company is the Euro.
Expenses and income including the consolidated net profi t are translated
at the monthly average exchange rates. Currency differences from
the application of different rates for translating the balance sheet and
the income statement are treated as neutral in their effect on earnings
in accordance with DRS 14.
The following exchange rates are used for translating the most important
foreign currencies within the Group:
Reporting date rate in € Average rate in €
Country Currency 2005 2004 2005 2004
USA USD 0.84767 0.73416 0.80470 0.80520
China RMB 0.10500 0.08990 0.09950 0.09850
Hong Kong HKD 0.10932 0.09445 0.10343 0.10338
Malaysia MYR 0.22430 0.19296 0.21342 0.21211
Singapore SGD 0.50948 0.44920 0.47819 0.47619
In the analysis of fi xed assets and provisions and in the development of
bad loan provisions, the differences resulting from the currency translation
of the beginning levels as of the balance sheet date of December
31, 2005 compared with the previous year’s exchange rate are offset
with retained earnings not impacting earnings.
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