PDF, 2.3 MB - Pfleiderer AG

Annual Report 2003
Discovering Pfleiderer

Discovering Pfleiderer
Pfleiderer's products and services are creating the basis for a better quality of
life, for environmentally friendly mobility and efficient infrastructures in the
energy and communications sectors. Whether engineered wood, concrete sleepers
or poles – as a system supplier and engineering partner we offer our customers
innovative technology and comprehensive know-how. While you are likely to come
into contact with our products daily, you'll probably only discover Pfleiderer at
second glance.
Shelving for the City of
Pforzheim Library
KEY FIGURES FOR GROUP AND SUMMARY OF BUSINESS SEGMENTS

Group Figures
Jan. 1 – Jan. 1 –
Dec. 31, 2003 Dec. 31, 2002
Sales million euros 1,020.9 1,028.4
Foreign share % 48.8 48.4
EBITDA million euros 85.4 109.5
EBIT million euros 27.6 48.9
EBT before extraordinary items million euros 29.4 37.6
EBT continued operations million euros 11.3 33.6
Result discontinued operations million euros –45.0 –52.4
EBT million euros –33.7 –18.8
Result after minority interests million euros –45.8 –39.7
Operative Cash flow million euros 62.0 83.3
Cash flow after investing activities million euros 59.3 102.7
Equity ratio % 17.9 22.7
ROCE % 5.7 8.7
ROS % 1.1 3.3
Capital expenditure million euros 37.0 44.7
Sales per employee million euros 0.182 0.180
Employees cuttoff date 5,614 5,715
Thereof in foreign countries cuttoff date 1,964 1,931
Key Figures per Share
Jan. 1 – Jan. 1 –
Dec. 31, 2003 Dec. 31, 2002
Earnings per share Euros –1.07 –0.93
Cash flow per share Euros 1.35 1.84
Dividend Euros – –
Average number of shares in circulation 42,678,146 42,673,784
Segments Jan. 1 – Dec. 31, 2003
Engineered Infrastructure
Wood Technology
Sales million euros 715.9 304.4
Foreign share % 53.4 37.8
EBITDA million euros 57.7 31.3
EBIT million euros 29.1 8.1
Capital expenditure million euros 23.3 9.6
Employees cuttoff date 3,450 1,967

Business Segments at a Glance
Engineered Wood
Products:
Raw particleboard,
tongue and
groove board
Surface Finished
Products
Products:
Melamin faced chipboards,
high-pressure
laminates, postforming
elements
Production Sites (excluding USA)
Europe
Raw
Particleboard
Infrastructure Technology
Products:
Track sleepers,
sleeper systems
Products:
Poles and towers
made of spun
concrete, steel,
reinforced plastic
Sectors: furniture industry, specialist trade Sectors: rail traffic, energy, communication
(as of March 2004)
Engineered Wood
Germany
Arnsberg
Gütersloh
Neumarkt
Leutkirch
Rheda-Wiedenbrück
Poland
Grajewo
Wieruszow
track
systems
Infrastructure Technology
Germany
Brandenburg-Kirchmöser
Coswig
Dinkelsbühl
Gernsbach
Langen
Leipzig
Neumarkt
Regensburg
Poles &
Towers
Asia
Spain
Constanti
Hungary
Lábatlan
Rumania
Buzău
Taiwan
Yang Mei Town

Focused on its two Business Segments Engineered Wood and Infra-
structure Technology, Pfleiderer AG is a leading systems supplier of
engineered wood, surface-finished panels, rail sleeper technology and
a vast range of poles. We are the preferred partner for the furniture
industry and specialist trade throughout Europe. Pfleiderer is active
worldwide in the creation and expansion of state-of-the-art rail track
networks. We are also leaders in many markets as a supplier of infrastructure
for the energy and communication sectors.
Fulfilling the demands of the market and the needs of our customers
is our challenge and mission. Our strengths lie in our technology
leadership, innovative abilities and the quality of our products. To this
we add our highly customer-oriented approach and the dedication of
our employees.
Accepting responsibility for society and environment is part of our
corporate philosophy. As a stock-market listed company, our goal
is to achieve a long-term sustained increase in corporate value, to
build on employee satisfaction and to contribute positively to the
world we live in.
1
ANNUAL REPORT 2003

5
CONTENTS
2
“Lowering costs to beat the
competition. Being innovative for
success.” Hans H. Overdiek
Pfleiderer Engineered Wood
is profiting from dynamic growth on
the eastern European markets.
24
5 Introduction by Board of Management
8 Report by Supervisory Board
11 Corporate Governance

21 Management Report
21 Market Report
24 Company Report
35 Segment Report
51 Research and Development
53 Capital Expenditure
55 Environmental Report
57 Organization
58 Personnel Report
63 Risk Report
68 Marketing and Communication
70 The Pfleiderer Share
73 Post-Closure Report/Outlook
3
CONTENTS
41
With its “Solid Track System”, Pfleiderer
track systems is increasingly involved
in international high-speed rail projects.
Working closely with its customers,
Pfleiderer Poles & Towers is developing
technically sophisticated poles and towers
tailored to individual requirements. 51
MANAGEMENT REPORT
SEGMENT REPORT
FINANCIAL STATEMENTS
79 Financial Statements
80 Pfleiderer Group
134 Pfleiderer AG (holding company)
(Extract from the Annual Report)
In Brief
138 Supervisory Board and Board of
Management of Pfleiderer AG
140 Glossary
142 Multi-Year Report
Cover
Financial Calendar, Imprint
Contacts

Dr. Jürgen Koch
Member of the Board of Management,
Finance, Infrastructure Technology
Michael Ernst
Member of the Board of Management,
Personnel, Legal
Hans H. Overdiek
Spokesman of the Board of Management
(since 8/18/2003),
Engineered Wood

Following its strategic realignment in 2002, Pfleiderer AG further streamlined its corporate portfolio
in fiscal 2003, involving the disposal of unprofitable units and the improvement of cost
structures. Overall, the Company has performed satisfactory, despite the difficulties that continue
to beset the German market:
Our sales target of over 1 billion euros was reached, with EBT (earnings before taxes) of
11.3 million euros, meeting the forecast level for operative earnings.
In the spring of 2003, a rigorous package of cost-cutting measures to safeguard earnings was
introduced, leading to savings in assets and personnel expenses of around 50 million euros.
As announced, business units were disposed of which no longer belonged to the Group’s core
activities.
After eliminating charges incurred from discontinued operations, the overall result for fiscal 2003
is clearly negative. However, this must be seen in the light of the heavy costs linked to the disposals.
What is decisive is the fact that we have now removed accumulated risk from the past,
and taken further precautionary measures in the balance sheet where market expectations
deem that prudent.
In addition to this, we have successfully plotted a course that will ultimately strengthen our position
in our markets and open up additional potential for earnings:
With its new brand and sales concept, Pfleiderer Engineered Wood has created a firm foundation
for increasing value added. This will be achieved through more specific sales targeting,
improved customer loyalty and greater service quality.
Pfleiderer track systems has attained major successes in prestigious international projects with
its Solid Track technology, and is now setting its sights on the Asian market, with its enormous
potential for growth.
Our engineered wood activities in Poland have made a significant and positive contribution to
earnings. Thanks to the continued dynamic growth in demand in eastern Europe, sales in this
area of the Company have risen by more than 20 percent. In the light of this, our decision to
expand production capacities in these plants and to start work on the construction of a new
plant in Russia must come as no surprise.
One of our most important successes during the past fiscal year has been the reduction of net
indebtedness in the Pfleiderer Group, which we have cut back even further than scheduled. In
the summer of 2002, net indebtedness stood at well over 500 million euros. By the end of 2003,
this figure had been reduced to around 260 million euros. The funds needed to reduce debt have
been won from tough asset management and current Cash Flows, underlining the solid financial
footing on which the Company stands.
5
INTRODUCTION BY BOARD OF MANAGEMENT

Further reduction of corporate debt and the generation of cash remain at the heart of our work:
Disposing of our US steel and concrete poles activities at the beginning of 2004 has resulted
in considerable income and balance sheet profits. This income will be used to improve our
capital base, further reduce debt and to selectively strengthen core activities. The capital ratio
is set to increase considerably to over 20 percent during the further course of the year.
The planned increase in capital funding for our Polish subsidiary Pfleiderer Grajewo S.A. during
the current fiscal year will provide it with fresh capital, giving it the financial means to expand
the Business Segment Engineered Wood in eastern Europe.
Recent changes in the ownership structure of the Company make the Pfleiderer share more
attractive to the capital market. This comes at the right time in Germany, providing conditions
which broaden our equity base, enabling us to grow further.
Looking at operations in general, while consolidation among the competition continuous, we
also see opportunities which will help us strengthen our position in the difficult German market.
This is the major challenge facing Pfleiderer Engineered Wood. Following years of declining demand
in the furniture industry, coupled with surplus production capacity on the supply side, tough
competition and price pressures are now the defining features of this market. In the light of this,
our strategic goal is to play an active part in the forthcoming process of consolidation within the
industry. At the same time, we shall continue to develop our products and services to the benefit
of our customers. We still want our own MDF production facilities, be it in Germany or a neighboring
European country.
We are putting every effort into fully exploiting the growth potential arising from dynamic developments
in the market for engineered wood in eastern Europe and Russia. Over the last few years,
Pfleiderer Engineered Wood has succeeded in becoming a market leader in Poland. It has also
established a good name for itself in the Russian market, thanks to extensive exporting activities.
It is on this basis that we have decided to set up a new plant in Novgorod in Russia.
6
“Increasing value added, exploiting opportunities for
earnings-led growth, actively modeling our presence
on the capital markets – these are the three elements
taking us forward to a bright future for Pfleiderer AG.”

In the Business Segment Infrastructure Technology, we have already announced that we will be
reacting to downward demand in the wind converter sector. This will involve the disposal of our
steel tower production facilities in the Leipzig plant. Regarding the Pfleiderer Poles & Towers Business
Center overall, we see a long-term market strategy of expanding throughout Europe as the
best route to success. The leading position we currently enjoy in various niche markets for poles
and towers made of spun concrete, steel and plastic in Germany can best be expanded by forming
strategic alliances with international partners. In view of the general stagnation currently affecting
the industry, improving efficiency by bundling forces and the use of intelligent processes is
essential.
Pfleiderer track systems expects to maintain its leading position in Germany at a high level, at
the same time making greater use of domestic production capacity for exports. With this in mind,
a new turnout sleeper production plant was opened in Brandenburg-Kirchmöser in October 2003.
Regarding international activities, the Company will grow organically in measured stages as new
projects are acquired in Europe, Asia and the USA.
Over the last two years, Pfleiderer AG has been concentrating on its Business Segments Engineered
Wood and Infrastructure Technology. In this process, we have strengthened the Company’s
cash and financial basis, creating new scope for further commercial growth. This process has
cost us much energy, and has been accompanied by far-reaching changes in the Group’s established
structures. However, the upward trend in Pfleiderer’s share price confirms that this has
been the right course of action, and that our efforts will be rewarded in future.
The growing interest in our Company and our share shown by the capital market was decisive for
the majority shareholder, Pfleiderer Unternehmensverwaltung, in relinquishing a major part of its
former majority holding in Pfleiderer AG. It has now placed these shares with a wide number of
international institutional investors. This step is consistent with the path first embarked upon by
the Company in 1997 when it was floated, reflecting the owners’ and management’s desire at
the time to orientate towards the capital market. We assume that a significantly increased free
float of the Pfleiderer share will have a positive influence on its future price.
Increasing value added by consolidating operative activities in Germany, exploiting opportunities
for earnings-led growth abroad and actively modeling our presence on the capital markets as an
attractive and solid share for both private and institutional investors – these are three elements
of the challenge we have taken up with determination, confidence and energy.
It is in this spirit that we would like to thank all our employees warmly for their dedication and
hard work during these difficult times. We would also like to thank the employee representatives
for their fair and constructive cooperation and all our customers and associates for the confidence
they have placed in us. But finally, we thank you, the shareholders, for your trust and
loyalty. Come with us as we move towards a bright future for Pfleiderer AG.
Neumarkt, March 23, 2004
Hans H. Overdiek
Spokesman of the Board of Management
7
INTRODUCTION BY BOARD OF MANAGEMENT

Ernst-Herbert Pfleiderer
Chairman of the Supervisory Board
of Pfleiderer AG
During the reporting period, and in accordance with the legal and statutory obligations, the Supervisory
Board of Pfleiderer Aktiengesellschaft supervised and advised the Company’s management.
The Supervisory Board was always kept fully informed on all major developments and the general
course of business. Where approval by the Supervisory Board for decisions and measures taken
by the Board of Management was required – in particular for actions relating to financial and personnel
planning and capital expenditure – the members of the Supervisory Board carefully
examined all the issues at stake and adopted appropriate resolutions based on the written and
oral information provided.
The Supervisory Board held four ordinary meetings in March, June, September and December 2003
respectively, during which the Board of Management reported in detail about the general state of
business and on current developments. The Labor Committee of the Supervisory Board met three
times during the year under review – in March, September and December 2003. The newly formed
8

Audit Committee set up in accordance with Corporate Governance convened under the chairmanship
of Dr. Manfred Scholz for the first time in March 2003. The Committee discussed the present
Financial Statements on March 17, 2004. Apart from these meetings, a regular exchange of
information took place between the Chairman of the Supervisory Board and the Chairman, and
then the Spokesman, of the Board of Management. The Conciliation Committee, set up in accordance
with Sec. 27 (3) Mitbestimmungsgesetz did not meet in the year under review.
Based on the German Corporate Governance Code promulgated by the Federal Government at
the beginning of 2002, the Supervisory Board and the Board of Management of Pfleiderer AG
has drafted and developed Principles of Corporate Governance for the Company which extend
beyond the general statutory guidelines, adding principles of good national and international
corporate conduct relating to the particular markets in which we are involved.
In accordance with Sec. 161 Aktiengesetz the Board of Management and the Supervisory Board
of Pfleiderer AG issued a declaration which states the extent to which they have complied with
the Recommendations of the Government Commission on the German Corporate Governance Code
and the extent to which they will comply in future. Where exceptions and deviations to the Recommendations
occur, full reasons are given (see the following section “Corporate Governance”).
On August 18, 2003 the Chairman of the Board of Management of Pfleiderer AG, Prof. Dr. Ralf
H. Bufe, left the Company at his own wish. At the same date, and with immediate effect, the
Supervisory Board nominated Mr Hans H. Overdiek as Spokesman of the Board of Management.
Mr Overdiek continues to lead the Business Segment Engineered Wood. In addition to his responsibilities
as Chief Financial Officer, Dr. Jürgen Koch has taken over from Dr. Bufe in leading
the Business Segment Infrastructure Technology. In addition to his responsibilities on the Board
of Management for Personnel, Personnel Development and Legal Matters, Mr. Michael Ernst also
leads Risk Management. The Supervisory Board and the Board of Management believe that the
Board of Management, presently comprising three members, appropriately meets the current size
of the Company, its organizational structures and future activities of Pfleiderer AG.
In accordance with a resolution passed by the Shareholders’ Meeting on June 17, 2003, and in
my capacity as Chairman of the Supervisory Board, I engaged Ernst & Young Deutsche Allgemeine
Treuhand Wirtschaftsprüfungsgesellschaft, Stuttgart, public auditor to audit the Financial
Statements and management report of Pfleiderer AG and the consolidated Financial Statements
and consolidated management report. During their audit, the auditors focused among others on
the valuation of continued and discontinued operations, the impairment of goodwill and investments,
as well as the recoverability of inventories, stock options and latent taxes.
The annual Financial Statements of Pfleiderer AG and the consolidated Financial Statements for
year-ending December 31, 2003, as well as the consolidated management report, combined with
management report of Pfleiderer AG, have been audited by Ernst & Young Deutsche Allgemeine
Treuhand AG Wirtschaftsprüfungsgesellschaft, Stuttgart, and have all received an unqualified audit
opinion. The Supervisory Board also examined the annual Financial Statements and consolidated
Financial Statements, as well as the combined management report and consolidated management
report, as drawn up by the Board of Management. The audit report by the public auditor was
available to all members of the Supervisory Board in good time. The public auditor participated
in the meetings of Audit Committee and informed it of the main results of the audit.
9
REPORT OF THE SUPERVISORY BOARD

No objections were raised by the Supervisory Board following its review of the annual Financial
Statements of Pfleiderer AG, the consolidated Financial Statements and the combined consolidate
management report and management report. The Supervisory Board concurs with the results
of the audit by the public auditor, and duly approves the consolidated Financial Statements and
annual Financial Statements for fiscal 2003. Accordingly, the annual Financial Statements have
been approved pursuant to Sec. 172 Aktiengesetz.
Ernst & Young Deutsche Allgemeine Treuhand AG Wirtschaftsprüfungsgesellschaft, Stuttgart, also
audited the Dependence Report prepared by the Board of Management relating to the Company’s
dealings with its affiliated companies, as required under Sec. 312 Aktiengesetz. The public auditor
issued the following opinion:
“Within the terms of our audit and assessment we confirm that
1. The information provided in the Report is correct,
2. The Company did not make excessive payments as part of the transactions mentioned in the
Report.”
The Supervisory Board has also reviewed the Dependence Report drawn up by the Board of
Management. The Supervisory Board raised no objections to the concluding statement made by
the Board of Management and the results of the audit by the public auditor.
In view of the exceptional burden placed on results in fiscal 2003 and the strategic objectives
of the Company in fiscal 2004, the Supervisory Board follows the proposal made by the Board of
Management that no dividend will be paid for fiscal 2003.
On behalf of all members of the Supervisory Board, I would like to thank the Board of Management,
the employees’ representatives and all our employees for their application and personal
commitment over the last twelve months. I would also like to wish those employees of companies
since disposed of our best wishes and much personal and professional success in their new
corporate homes.
Neumarkt, March 23, 2003
Ernst-Herbert Pfleiderer
Chairman of the Supervisory Board
10

CORPORATE GOVERNANCE
1. Introduction
In January 2003, the Board of Management and the Supervisory Board of
Pfleiderer Aktiengesellschaft drafted and adopted the following Principles
of Corporate Governance, with the objective of ensuring good and responsible
corporate management and supervision of the Company.
Principles of Corporate Governance
Pfleiderer Aktiengesellschaft
Pfleiderer Aktiengesellschaft commits itself to the following Principles of Corporate Governance.
These Principles are designed to ensure that management and supervision of the Company
are transparent, responsible and uphold the objective of increasing of the Company’s value. The
Supervisory Board and the Board of Management, as well as all directors and employees of the
Pfleiderer Group, are committed to this objective, which was formally resolved by the Supervisory
Board in its Meeting on November 21, 2002. The Board of Management accepts full responsibility
for the observance of these Principles of Corporate Governance.
Pfleiderer’s Principles of Corporate Governance are designed to increase trust among national
and international investors, customers, employees and general public alike regarding the way the
Company is managed and supervised.
Pfleiderer’s Principles of Corporate Governance reflect conditions laid down by law, as well as
defining what constitutes good national and international corporate conduct and how to act appropriately
in the specific markets in which the Company is active.
Pfleiderer’s Principles of Corporate Governance are not immutably fixed, but are part of an
ongoing process. As such, they will be reviewed and revised as law changes, and in keeping with
other national and international developments. Pfleiderer’s Principles of Corporate Governance
will be published on its corporate website and in its annual report.
11
CORPORATE GOVERNANCE

2. Shareholders and
the General Meeting
3. Board of
Management
Pfleiderer AG has issued registered shares. Each share carries one vote. No “golden shares”
exist.
The General Meeting shall resolve on the appropriation of net income and on the ratification
of the actions of the Board of Management and the Supervisory Board. It shall elect the public
auditors and exercises all legal rights.
The Board of Management shall only exercise its authorization to issue new shares without preemptive
rights where the issue does not to exceed 10 percent of subscribed capital. The Company
shall publish all information and reports, including the Agenda of the General Meeting, via electronic
media on the corporate website. The Company offers voting and proxy voting by Internet
to facilitate the personal exercise of shareholders’ voting rights. The Company will arrange a
corporate representative to exercise shareholders’ voting rights in accordance with instructions
received.
In the performance of its statutory duties, the Board of Management is bound to act in the Company’s
best interests and in accordance with the Principles of Good Management. The central
objective of corporate management is the sustained increase in corporate value. The key statistic
used to determine this is EVA (Economic Value Added).
The Board of Management coordinates corporate strategy with the Supervisory Board and is responsible
for its implementation and must select appropriate effective and efficient instruments
to this end. In doing so, it shall implement suitable systems for planning, supervision and risk
management. The Board of Management is committed to acting lawfully and to ensure that all
statutory regulations are upheld throughout the Pfleiderer Group.
The Board of Management shall inform the Supervisory Board regularly about all major issues
affecting the Company relating to planning, business developments or risk. Deviations from any
previous plans or targets must be reported and justified. The Board of Management must also
looks after the social responsibilities of the Pfleiderer Group.
In accordance with Sec. 77, German Stock Corporation Act, all members of the Board of
Management are jointly and severally charged with the running the Company. Terms of Reference
regulate the allocation of areas of responsibility for each member of the Board of Management,
and how the members of the Board of Management cooperate. Standing Orders provide that decisions
to be taken on matters of fundamental importance lie to the full Board of Management.
Depending on the magnitude of the decision or the financial transaction involved, approval must
also be given by the Supervisory Board.
The members of the Board of Management must give their full working capacity to the Pfleiderer
Group. They are bound to uphold the Company’s best interests and may not pursue any personal
interests which would conflict with those of the Company. The members of the Board of Management
may not accept payments or other personal advantages from third parties during the
discharge of their duties which would be contrary to the best interests of the Company or its
customers.
12

4. Supervisory Board
The Board of Management accepts specific insider trading rules and commits management as a
whole to comply with these rules.
Compensation of members of the Board of Management is regulated by Sec. 87, German Stock
Corporation Act. Compensation comprises a fixed salary factor plus variable components. The
variable components depend on the financial situation of the Company, the performance and
outlook of the Group, as well as other performance-oriented elements. Stock options serve as
variable compensation components, adding a long-term incentive effect. They are issued according
to a scheme adopted by the General Meeting and Supervisory Board. Compensation and
stock holdings must be reported in the annual report. Stock option rights must be exercised
within 3 years of issuance at latest. Insider trading rules are met by setting periods during
which the exercising of option rights is suspended.
The Board of Management of Pfleiderer AG has adopted rules that also apply to senior management
eligible to receive stock options. It must also ensure that compensation for senior management
throughout the Group adheres to these rules.
The members of the Supervisory Board of Pfleiderer AG shall have the requisite expert knowledge,
specific abilities and experience to enable them to fulfil their advisory and supervisory duties
such that corporate targets are achieved. These qualifications shall be taken into account when
accepting nominations for the Supervisory Board. The members of the Supervisory Board must
have sufficient personal time in which to perform their duties.
The Supervisory Board issues Standing Orders. The Chairman of the Supervisory Board shall
maintain regular contact with the Chairman of the Board of Management and with the Board of
Management as a whole, and shall be informed as soon as possible about any major events.
The Chairman of the Supervisory Board shall then inform the members of the Supervisory Board.
In order to improve efficiency, the Supervisory Board has set up a Labor Committee and an Audit
Committee. The Labor Committee may take decisions on behalf of the Supervisory Board in
accordance with statutory rules and Standing Orders. The Chairman of the Supervisory Board is
not Chairman of the Audit Committee.
The members of the Supervisory Board shall treat all information relating to their duties as confidential.
Each member of the Supervisory Board is bound to uphold the Company’s best interests.
The Supervisory Board shall be informed of any conflicts of interests which could result from a
consultancy or directorship function with clients, suppliers, competitors, suppliers of capital or
other business associates. Advisory and other service agreements between a member of the
Supervisory Board and the Pfleiderer Group require prior approval by the Supervisory Board.
Remuneration of the Supervisory Board and stock holdings of its members are reported in the
Company’s annual report. Representatives of the shareholders and employees are enjoined to
work together on the Supervisory Board in a spirit of consensus.
13
CORPORATE GOVERNANCE

5. Communication and
Information
Preparations relating to nomination of the public auditor, what particular areas of emphasises
should be taken into account during the audit, as well as matters relating to auditor fees, are
dealt with by the Audit Committee. The Audit Committee is also responsible for preparing the
audit of the Consolidated Financial Statements including the Management Report.
When communicating with shareholders and the general public, the Board of Management shall
provide transparent information, ensuring that communications are punctual, open, comprehensible
and treat issues fairly. It shall publish all new facts which may arise within the Company’s
areas of activity not known to the public, in particular where these are likely to have a substantial
impact on the share price due to their effect on the assets, financial situation or general course
of the Company’s business. All major financial dates shall be published in advance on the corporate
website.
Information about the Company shall be published electronically, in particular via the Internet.
All publications are available in English.
The Company shall notify on the purchase or sale of Company shares transacted by officers of
the Company, or members of their families. These notifications are made on the corporate website
in accordance with the rules of “Directors’ Dealings”.
Neumarkt, January 15, 2003
Pfleiderer AG
14

Declaration of Compliance 2003
Under Sec. 161 German Stock Corporation Law, the Board of Management and the Supervisory
Board of a joint stock company traded on the stock market must issue an annual Declaration of
Compliance. In this Declaration they must disclose to what extent they have and shall comply
with the Recommendations of the Government Commission on the German Corporate Governance
Code. In December 2003, the Board of Management and the Supervisory Board published this
Declaration on the Company’s website, stating that they are complying with the Recommendations
of the Government Commission on the German Corporate Governance Code, with the following
exceptions:
Article 4.2.3: The Stock Option Scheme of the Pfleiderer AG adopted at the General Meeting in
2001 does not provide for capping. No later adjustments to the current scheme are envisaged.
Compensation received by the members of the Board of Management of Pfleiderer AG comprises
a fixed component and variable components. As a long-term incentive component, in 2001 the
General Meeting adopted a Stock Option Scheme for the Board of Management and senior executives
of Pfleiderer AG. The Stock Option Scheme is not capped. Any subsequent change to the
Stock Option Scheme requires a resolution by the General Meeting. Capping will be included when
the Stock Option Scheme is under renewal. No changes are envisaged to the current Scheme.
Articles 4.2.4 and 5.4.5: Total compensation received by members of the Board of Management
and the Supervisory Board are not reported individually. Only the total amounts received
by the Boards in question are reported.
Compensation received by members of the Board of Management of Pfleiderer AG comprises
a fixed component and variable components. In addition to the variable bonus, members of the
Board of Management may also be awarded stock options as part of a long-term incentive plan.
Total compensation received by members of the Board of Management is not reported individually,
only the total amount received by the Board as a whole. In our opinion, only the total amount
received by the Board of Management is relevant to shareholders when assessing the Company’s
performance. In order to protect the private sphere, the Board of Management and the Supervisory
Board have decided not to report individual amounts of compensation or remuneration.
The amount of remuneration received by individual members of the Supervisory Board can be
inferred from the Articles of Association (Article 15).
Article 5.4.1: The Articles of Association set no age limit on membership of the Supervisory
Board.
At present, the Articles of Association of Pfleiderer AG set no age limit on membership of the
Supervisory Board. This aspect will be taken into consideration when making future nominations
to the Supervisory Board.
Article 5.4.5: Members of the Supervisory Board currently only receive a fixed remuneration,
as well as reimbursement of out-of-pocket expenses.
Remuneration of the members of the Supervisory Board has been defined in the Articles of Association
of Pfleiderer AG (Article 15) and is published on its website. Introducing a variable component
to remuneration is not regarded as meaningful. Apart from reimbursement of out-of-pocket
expenses, including VAT when incurred in the course of duty, members of the Supervisory Board
15
CORPORATE GOVERNANCE

eceive payment each of 10,500 euros. This amount is payable after the end of the fiscal year. In
the case of the Chairman this figure is doubled, while Deputy Chairmen and Chairmen of the Committees
receive 1.5 times this amount and members of the Committees 1.25 times this amount.
Total remuneration paid to the members of the Supervisory Board for fiscal 2003 amounted to
152,000 euros.
Article 5.6: The Supervisory Board has decided to forego an efficiency audit for 2003.
The Supervisory Board has not performed an efficiency audit for fiscal 2003. An audit will be
carried out for fiscal 2004.
Performance-Linked Compensation of Board of Management
Compensation received by the members of the Board of Management of Pfleiderer AG comprises
a fixed component and variable components. In addition to the variable bonus, members of the
Board of Management may participate in the Company’s Stock Option Scheme as a further a longterm
incentive component. The criteria applied when deciding to award options depend on the
duties and performance of the individual Board member, as well as the Company’s economic state,
its success and future perspectives. These factors are calculated using Nopat and the Economic
Value Added of the Group, as well as taking into account the relevant Business Segment and personal
targets.
In fiscal 2003, the Board of Management received compensation amounting to 3.8 million euros.
This figure includes compensation received during the fiscal year by departing members of the
Board of Management. This figure includes a variable component of 0.7 million euros. After adjustment
for elapsed options to former Board members, members of the Board of Management received
no stock options (prior year: 603.000) which can be purchased at own cost.
Element
Fixed salary component
Variable components:
Nopat Group
Nopat Engineered Wood
EVA® Group
Delta EVA® to previous year EVA® Group
EVA® Engineered Wood
Delta EVA® to previous year EVA®
Engineered Wood
Hans H. Overdiek Michael Ernst Dr. Jürgen Koch
Personal targets
(EVA® is a registered trademark of Stern Stewart & Co.)
16

For some time now, issuing stock options has been regarded internationally as an important aspect
of compensation policy by stock-market listed companies. Stock options enable companies
to offer their senior executives attractive compensation terms compared to competitors. The
long term incentive plan (Stock Option Scheme) provides the Company with an additional instrument
to increase the value of the Company.
On July 10, 2001 the Pfleiderer General Meeting approved a Stock Option Scheme which covers
a maximum 4,268,500 non-par value shares (corresponding to 10 percent of capital stock) which
may be issued as part of the Pfleiderer Stock Option Scheme. Stock options may be issued up to
June 30, 2006 as part of the Stock Option Scheme in accordance with those conditions adopted
by the General Meeting in 2001. In order to qualify for the Scheme, participants must make a
personal investment in Pfleiderer shares. Stock option rights can only be exercised after a threeyear
suspension period from date of issue. The number of stock options issued is calculated on
the total value of the participant’s personal investment in Pfleiderer shares divided by the base
value and multiplied by a factor of 12, or 18 in the case of members of the Board of Management.
The base value is calculated from the average price of the Pfleiderer share traded during
the months September through November. Stock options can be exercised when an exercise
threshold of between 110 to 125 percent of the base value has been reached.
As the exercise threshold was not reached for any of the options issued as of 31st December
2003, they are not carried in the Consolidated Financial Statements for 2003 of the Pfleiderer
Group. No stock options were issued in 2003. An exact listing of the stock options awarded is
shown in the Notes to the Consolidated Financial Statements of the Pfleiderer Group (page 111).
17
CORPORATE GOVERNANCE

Directing Opportunity

Raw Particleboard
Carrier materials and
surface finishings for leading
kitchen suppliers and
furniture manufacturers
Industrial production, efficient cost structures, optimal logistics and innovative
concepts for material procurement and management – that is how Pfleiderer
Engineered Wood is securing performance and earnings in the tough German
market. At the same time, it is expanding its production capacity in Poland and
building a new plant in Russia in order to participate in the dynamic growth
markets of eastern Europe. Directing opportunity.

MANAGEMENT REPORT
Market Report
Engineered Wood Market Affected by Low Demand for Furniture
Expansion of International Rail Traffic a Growth Market for Track Systems
General Economic Developments
According to the Federal Statistics Agency, GDP in Germany was down by an average real 0.1 percent
in 2003 compared to the previous year’s figures – and this despite of the considerable fall
in GDP already recorded in 2002. Both worldwide and in Germany, economic growth was heavily
affected by the war in Iraq during the first half of the year. The immediate results were postponement
of exporting activity and capital expenditure, accompanied by modest consumer spending.
Once the war terminated, consumers and companies proved slow in regaining confidence. This,
together with the strong upward swing of the euro, had a noticeable effect on export figures
which remained negative in the first half of the year.
However, starting in the USA and Asia, the global economy began to pick up in the second half of
the year. As a result, the German economy also experienced a slight export-led recovery. Nevertheless,
domestic demand remained weak at +0.1 percent, and private consumption declined by
a further 0.2 percent. Private household savings rose again in the second half of the year. A difficult
labour market situation and cautious consumer spending, as well as increased taxation,
were all reflected in the way the economy developed.
It is true that the downturn in investments in the construction sector was less pronounced in
2003, yet 2002 had been marked by extraordinary factors such as the worst flooding in Germany
for a century, and the removal of the government subsides on new housing.
21
MANAGEMENT REPORT MARKET REPORT

Wood Processing Industry
According to the Timber Committee of the United Nations Economic Commission for Europe
UNECE, the European market for timber and wood products continues to record high sales levels.
Particularly eastern Europe and Russia are profiting from high growth rates in GDP, good availability
of wood as a raw material, low wage levels and political support resulting from foreign investment.
Western European markets, on the other hand, are currently suffering from a weak
construction sector and poor demand for furniture.
The European consumption of wood-based products reached a new record of 54.1 billion cubic
meters in 2002, mainly due to positive developments in Central and eastern Europe. Here,
consumption rose by a massive 17.4 percent, while consumption in western Europe fell by
2.3 percent. The UNECE Timber Committee has predicted a decline in consumption of around
1.9 percent for 2003 in the European market as a whole. This contrasts strongly with the Russian
Federation, where the market for wood-based products is expected to grow by around 13.2 percent
in 2003. All in all, utilization of capacities in the wood-based products industry is already
high, so that the industry is having to deal with short-term production overcapacities and low
price levels.
In Germany, operating conditions remained difficult in 2003, leading to further concentration
in the industry. In nearly all sectors of the wood and wood processing industry companies or
individual production sites are up for sale. Even the closure of older production sites in the wood
processing sector has failed to stabilize the market.
Pfleiderer Engineered Wood’s major sales sector, the furniture industry, also faced further declines
in sales in 2003. Sales were heavily down overall during the first ten months at to 16.424 billion
euros, a fall of –2.5 percent compared to the same period of the previous year. The office and
shop segments were particularly badly hit. In the period from January to October 2003, sales in
this segment of the market were down by 12.8 percent at 1.807 billion euros. Manufacturers of
kitchens were also affected, with sales down by 3.8 percent. Liquidity difficulties led increasingly
to insolvencies, and thus to termination of production. All in all, there have been major changes
on the customer side, especially among the office and kitchen furniture industries.
22

Infrastructure Technology
As far as developments in the Business Segment Infrastructure Technology are concerned,
spending patterns by industry and government alike continue to play a decisive role. Rail traffic,
energy, urban planning and telecommunication are all areas in which the business centers
Pfleiderer track systems and Pfleiderer Poles & Towers sell their products.
The expansion of regional rail traffic, the increase in passenger rail travel and the move of heavy
goods away from the roads onto the rail networks, are all growth drivers in the rail sectors, both
in Germany and worldwide. The Deutsche Bahn AG, Germany’s rail operator, has defined its core
corporate strategy as
Reduction of the backlog in spending and optimization of existing networks
Prevention of capacity bottlenecks within the rail infrastructure
Of the 9.9 billion euros spent by Deutsche Bahn AG in 2002, around 67 percent was directed at
the track network itself. As a result, Pfleiderer track systems has not only profited from the construction
of new links, but also from necessary modernization and maintenance work.
While the rail-related economy profited from extraordinary events such as the flooding in Saxony
in August 2002, routine projects were carried out in 2003. The announcement by Deutsche Bahn
that it would be postponing planned capital spending due to government budget cuts has not
had any noticeable effects on business to date.
Privatization of the power generation market in the USA has driven the setting up and expansion
of regional power grids run by smaller utility companies. This explains why Pfleiderer AG’s US
subsidiary Newmark International Inc., has been experiencing increased demand for spun concrete
masts over the last few years. In 2003, however, a decline in this high level of demand
set in.
23
MANAGEMENT REPORT MARKET REPORT

Company Report
Cost-Savings Package of 50 Million Euros Achieved
Corporate Debt Reduced by Additional 15 Percent to 260.7 Million Euros
Successful Disposal of Discontinued Operations Results in Charges of around
45.0 Million Euros
New Strategic Direction
Following the successful implementation of its new strategic direction in fiscal 2002, Pfleiderer AG
concentrated on its two business segments Engineered Wood and Infrastructure Technology in
2003. The products and services provided by Engineered Wood and Infrastructure Technology –
the latter comprising the Business Centers Track Systems and Poles & Towers – have made
Pfleiderer a leading systems supplier in Europe for engineered wood and surface finishing, rail
track sleeper technology and a wide range of pole designs.
Management is maintaining a course of strict cost budgeting in view of the difficult situation
experienced over the last two years in the sectors in which the Pfleiderer Group operates. And
while some experts forecast economic recovery, the German wood processing market is unlikely
to experience much of this improvement in 2004. Accordingly, the Company’s main focus of activity
must remain the optimization of cost structures.
In eastern Europe the story is somewhat different. As this market continues to develop upwards,
the Company is pursuing a sustained growth strategy in this segment. This contrasts with the
German market, where the main objective has been to combat the fall in prices and demand
over the past months. One answer has been the new brand and sales concept, introduced in
August 2003 which tailors products and services more specifically to different customer groups.
This has been accompanied by a systematic optimization of production networks. The objective
is to maintain the Company’s strong position in the market and, at the same time, increase value
added in what are tough operating conditions in Germany.
This contrasts with the Business Segment Infrastructure Technology, where the strategy is to
expand market and technology leadership, as well as win further regional markets and niches
where profitable. Pfleiderer track systems regularly presents its portfolio at international trade
fairs and exhibitions in Europe and Asia. One of its particular strengths is the patented innovative
technology “RHEDA 2000®”, which has been setting new standards in rail-track networks for
several years now.
Presentation of “Discontinued Operations”
In the consolidated income statement, operating results for the business units Tischlerplatte
(Tipla), Eltec and Wind Energy, as well as profits and losses from the sale of these activities, are
shown under “losses from discontinued operations”.
24

In accordance with their respective disposal dates, the operating results of the Business Unit
Eltec are stated up to January 1, 2003, the Business Unit Tipla and the offshore activities of the
Business Unit Wind to November 30, 2003 and the onshore activities of the Business Unit Wind
to December 31, 2003.
The assets and liabilities of discontinued operations were already summarized accordingly under
“Assets of discontinued operations” and “Liabilities of discontinued operations” in the balance
sheet as of December 31, 2002. Accordingly, the income statement and balance sheet show comparative
figures for the previous year for continued operations.
Earnings
25
MANAGEMENT REPORT COMPANY REPORT
2003 2002
% of % of
million euros sales million euros sales
Sales 1,020.9 100.0 1,028.4 100.0
Foreign share in percent 48.8 48.4
Cost of sales 759.8 74.4 755.2 73.4
Gross margin 261.1 25.6 273.2 26.6
EBITDA 85.4 8.4 109.5 10.6
Amortization/depreciation of noncurrent
assets and financial assets –57.8 –60.6
EBIT 27.6 2.7 48.9 4.8
Net interest –16.3 –1.6 –15.3 –1.5
EBT before special effects 29.4 2.9 37.6 3.7
Special effects –18.1 –4.0
EBT continued operations 11.3 1.1 33.6 3.3
Taxes on income –9.3 –0.9 –13.2 –1.3
Earnings of continued operations
before minority interests 2.0 0.2 20.4 2.0
Loss from discontinued operations –45.0 –4.4 –52.4 –5.1
Taxes on discontinued operations 1.8 0.2 –3.0 –0.3
Earnings before minority interests –41.2 –4.0 –35.0 –3.4
Minority interests –4.6 –0.4 –4.7 –0.5
Earnings after minority interests –45.8 –4.5 –39.7 –3.9

In fiscal 2003, the Pfleiderer Group recorded sales of 1,020.9 million euros (2002: 1,028.4 million
euros). The foreign share in Group sales came to 48.8 percent, up by a further 0.4 percentage
points on the previous year, despite the strong euro. The strong euro reduced sales reported
by the Group’s US and Polish affiliates by around 43.0 million euros. Continued low price levels
in Germany in the engineered wood segment could only be partly compensated for by higher
exports and growth recorded at the Company’s Polish affiliates. In the Business Segment Infrastructure
Technology, the market for wind towers declined in fiscal 2003. Low demand and falling
prices have resulted in weaker sales and lower results in fiscal 2003 in what is otherwise a
stable segment.
Earnings before interest, tax, depreciation and amortization (EBITDA) declined by 24.1 million
euros to 85.4 million euros (2002: 109.5 million euros). Earnings before interest and taxes (EBIT)
came to 27.6 million euros, this figure having been particularly affected by special effects totaling
18.1 million euros. Before special effects, EBIT came to 45.7 million euros. In relative terms,
the 13.6 percent drop in EBIT was not as high as in the previous year affected by higher writedowns.
Taken overall, these results reflect lower margins in the German engineered wood sector
and the wind converter market, as well as the strength of the euro against the US dollar and the
Polish zloty. Earnings before special effects, taxes and minority interests were around 21.8 percent
down on the previous year, and came to 29.4 million euros.
The consolidated income statement also shows special effects of 18.1 million euros for fiscal
2003. Write-downs and accruals were recorded to account for the contracting market for wind
towers. Additionally, accruals have been set up to cover further personnel measures in the
Engineered Wood segment in Germany and other restructuring measures. However, one positive
effect here is profits from the sale of shares of a Polish affiliate.
After special effects, earnings before taxes (EBT) came to 11.3 million euros. In the previous year,
EBT came to 33.6 million euros, and was 66.3 percent higher. Discontinued operations include
losses, depreciation and accruals from the announced sales of the Business Units Tischlerplatte
(Tipla), Eltec and the onshore and offshore activities of the Business Unit Wind. The disposal of
these activities was completed in fiscal 2003.
The ratio of cost of materials to sales, adjusted for changes in inventories, increased from 48.8
to 49.6 percent. This also reflects the fall in prices in the engineered wood and wind tower segments,
as well as a change in the product mix in the Business Center Track Systems.
26

Personnel expenses contracted from 23.4 to 22.9 percent. This was achieved despite substantial
accruals for restructuring which had to be recorded as a result of the cost-savings package
which targeted personnel costs. Nevertheless, this package more than compensated the collective
agreement increase in wages and salaries of 3 percent on the previous year.
The ratio of depreciation to sales has fallen from 5.9 to 5.6 percent. The reasons for the lower
figure include high write-downs made in the previous year and the effects of a weaker US dollar
and Polish zloty.
Interest rose by 0.1 percent to 1.6 percent of sales due to changes in the maturity of certain
financial liabilities.
Cost-Savings Package Safeguards Earnings
Continued weakness in the German economy was combated by the introduction of a radical
cost-savings package. The package was introduced in the first quarter of 2003 to safeguard the
Company’s future development. The measures included savings in assets and personnel expenses
amounting to 50 million euros in fiscal 2003. Management decided to implement longterm
measures in order to improve the cost position of Engineered Wood Germany in the years
to come. This was achieved by
Improvements in production quality and productivity
Optimized use of materials and maintenance cycles
Better procurement conditions
Reduction of freight costs through IT-controlled logistics
Reduction of administrative costs
Reduction of personnel expenses.
This has included the reduction of around 350 jobs, of which 300 have since fallen away in Engineered
Wood Germany. An addition to the collective agreement with IG Metall would have reduced
personnel expenses through more flexible working time arrangements. However, despite
several months of negotiations, talks with the unions failed to bring about positive results, and
have since been declared null and void by IG Metall. Despite this, targeted savings of around
50 million euros were achieved by the end of 2003.
27
MANAGEMENT REPORT COMPANY REPORT

Net Assets and Financial Position/Balance Sheet Structure
28
Dec. 31, 2003 Dec. 31, 2002
% of balance % of balance
million euros sheet total million euros sheet total
Cash and cash equivalents 68.7 8.8 58.3 6.6
Inventories 133.7 17.2 114.4 12.9
Other current assets 108.8 14.0 157.2 17.7
Assets of discontinued operations 14.7 1.9 35.0 3.9
Current assets 325.9 41.8 364.9 41.1
Property, plant and equipment 331.0 42.5 381.6 43.0
Intangible assets 96.0 12.3 102.4 11.5
Other non-current assets 26.3 3.4 38.5 4.3
Non-current assets 453.3 58.2 522.5 58.9
Assets 779.2 100.0 887.4 100.0
Dec. 31, 2003 Dec. 31, 2002
% of balance % of balance
million euros sheet total million euros sheet total
Liabilities and other
short-term liabilities 174.4 22.4 179.9 20.3
Financial liabilities
Liabilities of discontinued
56.3 7.2 42.9 4.8
operations 31.8 4.1 23.3 2.6
Short-term liabilities 262.5 33.7 246.1 27.7
Long-term financial liabilities 273.2 35.1 322.6 36.4
Accruals for pensions 62.4 8.0 61.3 6.9
Other long-term liabilities 41.9 5.4 56.2 6.3
Minority interests 44.3 5.7 45.4 5.1
Long-term liabilities 421.8 54.1 485.5 54.7
Shareholders’ equity 94.9 12.2 155.8 17.6
Liabilities 779.2 100.00 887.4 100.0

Net indebtedness carried in the consolidated balance sheet fell by around 46 million euros in fiscal
2003 and stood at 260.7 million euros as of December 31, 2003. Above all, lower working
capital and an operative Cash Flow of 62.0 million euros provided the basis for this improvement.
Shareholders’ equity including minority interests came to 139.2 million euros as of Dec. 31, 2003.
The reduction of 62.0 million euros is due to the net loss for the year recorded by the Pfleiderer
Group, together with the unfavorable exchange rates of the US dollar and Polish zloty. The equity
ratio including minority interests stood at 17.9 percent as of December 31, 2003.
At 5.7 percent, return on capital employed (ROCE) is lower than the previous year’s figure (8.7 percent)
due to the poorer earnings situation. The Business Segment Engineered Wood had to accept
a decline to 8.1 percent due to weaker earnings. Due to the provisions made, ROCE came
to 7.1 percent in the Business Segment Infrastructure Technology.
Formel 2003 2002
Net indebtedness Financial liabilities – cash and cash equivalents million euros 260.7 307.2
Equity ratio Equity (including minority interests)/balance sheet total in % 17.9 22.7
Gearing Net indebtedness/equity (excluding minority interests) in % 274 197
Net working capital Inventories and trade receivables – trade payables million euros 31.0 40.3
Capital employed Working capital + non-current assets million euros 484.3 562.7
Return on capital employed EBIT/capital employed in % 5.7 8.7
Financing
Refinancing of the Pfleiderer Group is directed at securing the Company’s long-term future.
Long-term liabilities from loans have maturity periods up to 2009 and carry an average interest
charge of about 6 percent.
The rating given by Fitch Ratings Ltd. was revised and downgraded in November 2003 from BB+
for senior unsecured debt to BB. The main reason for the downgrade was the continued difficult
market for wood-based panels in Germany.
This downgrade does not impair the Company’s financial position, as we have sufficient credit
lines and cash on hand, and no significant borrowing is expected in the near future.
International business is largely conducted using own production plants located in our major
markets. Exports from Germany are mainly invoiced in euro. The export ratio in other currencies
is slight, and risks arising from this business are adequately hedged.
Derivative Financial Instruments
Derivative financial instruments in the Pfleiderer Group are only used to hedge against currency
and interest rate risks from transactions which are part of the Company’s ordinary operations.
Hedging activities are mostly conducted centrally by Pfleiderer AG and Pfleiderer Finance B.V. on
behalf of the group companies. Further information is provided in the notes to the consolidated
Financial Statements.
29
MANAGEMENT REPORT COMPANY REPORT

Net Assets and Earnings of Pfleiderer AG
As holding company, Pfleiderer AG is responsible for the strategy and management of the Group.
This means that the earnings position of Pfleiderer AG is closely connected to the success of the
Pfleiderer Group.
The fiscal year for Pfleiderer AG was marked by the new strategy adopted by the Pfleiderer Group,
and thus by the effects of divesting indirect and direct holdings. Due to the disposal of the Business
Centers Doors & Windows and Insulation Technology, less energy needed to be purchased
from Pfleiderer Energietechnik GmbH. This energy is invoiced to affiliated companies without a
mark-up. Other operating expenses were thus significantly reduced, but other operating income
was lower, too.
The investment result was affected by losses of affiliated companies, in particular from the disposal
of the business units Eltec, Tipla and Wind. Additionally, the investment in Pfleiderer Dämmstofftechnik
International GmbH & Co. KG had to be written down due to later adjustments in the
purchase price following disposal of the operative business. This contrasted with profits made by
the Business Segment Engineered Wood from the sale of shares in Pfleiderer Grajewo S.A.
The net loss totaling of 29.5 million euros led to a preliminary accumulated loss of the same
magnitude.
The reduction in equity at Pfleiderer AG is mainly due to negative effects in the investment result.
Liabilities to banks increased slightly, but this has been compensated for by a decrease in interest-bearing
liabilities to affiliated companies. At the same time, due to a change in affiliated
companies’ capital needs, short-term bank balances increased, as did interest-bearing receivables
from affiliated companies.
Interest-bearing liabilities to affiliated companies relate in particular to the Dutch financing company
Pfleiderer Finance B.V., Deventer/Netherlands. The Dutch financing company refinances
itself via the capital markets.
30

Dividend
Sale of the Business Units Tischlerplatte (Tipla), Eltec and the onshore and offshore activities
of the Business Unit Wind, as well as developments in Engineered Wood Germany during fiscal
2003 led to an overall negative result for Pfleiderer AG. For this reason, no dividends will be paid.
Dependent Company Report
In its dependent company report on relationships with affiliated companies, Pfleiderer AG made
the following statement for fiscal 2003:
“We herewith declare that our Company received adequate compensation for every transaction
with affiliated companies listed in the report in light of the circumstances at the time of the
transactions. No actions were taken in the interest or at the request of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG or companies affiliated to Pfleiderer Unternehmensverwaltung
GmbH & Co. KG.”
31
MANAGEMENT REPORT COMPANY REPORT

Designing Quality

High-End Surface Finishings
Wide variety of decors
for stylish furnishings
Pfleiderer Engineered Wood’s new brand and sales concept is strengthening
its international position. Working closely with the furniture industry and
specialist trade, we are enhancing ties and creating common competitive
advantages. Our key account management and customer-oriented products,
as well as our Thermopal and wodego brands stand for quality, design, supply
service, maximum competence and reliability. Products for designing quality.

Segment Report
Engineered Wood
Difficult Market Has Negative Effect on Domestic Business
Foreign Sales and Exports Increase to 53.4 Percent
Cost-Savings Package of over 50 Million Euros Successfully Implemented
The Business Segment Engineered Wood produces raw and melamine faced chipboard, and
has seven plants based in Germany and Poland. Engineered Wood, which employs 3,450 people,
recorded sales of 715.9 million euros in 2003 (prior year: 725.2 million euros). This downturn of
1.3 percent reflects the continued weakness in the German market, a situation which has lasted
for two years now. Additionally, timber merchants Heller Holz GmbH, consolidated for the first
time, and Jura Spedition GmbH & Co. KG both affected sales figures compared to the previous year.
Apart from acting as a freight forwarder for Pfleiderer Engineered Wood, the latter company also
sells its services to URSA GmbH, a former Pfleiderer subsidiary. Adjustments were made in the previous
year to take account of the effects of consolidating Jura Spedition GmbH & Co. KG. In order
to streamline its product portfolio in the Business Center Engineered Wood, the companies Eltec
Elemente-Technik für Möbel und Innenausbau GmbH, Moralt Tischlerplatten GmbH & Co. KG and
Moralt Tischlerplatten-Verwaltungs GmbH were disposed of in fiscal 2003.
As market leader, with a share of around 25 percent of German production capacity for raw and
direct coated particleboard, the difficult market situation on Pfleiderer’s home market is making
itself particularly felt. Competitive pressure, falling prices and the weakness of the furniture industry
characterize the German market for engineered wood. This explains the strategy adopted
in 2003 to increase foreign share and exports, thereby reducing dependency on the German
market. This has been achieved, with exports and the foreign share of the Business Segment
Engineered Wood increasing to 53.4 percent. Leaving aside currency effects on sales figures,
foreign share actually increased to 56.9 percent. Apart from increased exports from Germany,
this result is largely due to expansion of Pfleiderer’s Polish affiliates. Here, Pfleiderer Engineered
Wood has succeeded in increasing sales by 22 percent in terms of the local currency. Expanding
Sales Summary by Region
34.4%
35
22.5%
43.1%
MANAGEMENT REPORT SEGMENT REPORT
in % 2003 2002
Germany 43.1 48.2
Rest of EU 22.5 21.6
Rest of World 34.4 30.2

market economies and the increase in the quality of life in eastern European countries has led to
strong demand for interior furnishings, and thus for Pfleiderer products. In view of this, Pfleiderer
intends to set up its own production plant in Novgorod in the Russian Federation and to extend
its market share in the eastern European states. Initial sales from this production site are expected
at the end of 2005.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the Business Segment
Engineered Wood came to 57.7 million euros in fiscal 2003. That is 26.9 percent down on the
previous year. Earnings before interest and taxes (EBIT) came to 29.1 million euros. The figure for
the previous year was 27.5 percent higher.
In fiscal 2003, the Business Segment Engineered Wood had a return on capital employed (ROCE)
of 8.1 percent (2002: 9.9 percent). This reflects weaker earnings before interest and taxes
(EBIT). The inventories in this business segment were increased as scheduled, as part of the new
brand and sales concept.
Key Figures for Business Segment Engineered Wood
Sales
2003
2002
EBIT
2003
2002
Products
In the field of processed wood, Pfleiderer Engineered Wood produces wood-based panels, in particular
raw particleboard, as well as a range of surface-finished products such as melamine
faced chipboard, high-pressure laminates and post-forming elements. The main selling product
is direct-coated particleboard, which accounts for 43 percent of sales in the Business Segment
Engineered Wood, followed by raw particleboard (including tongue and groove boards), accounting
for 19 percent.
Sales Summary by Product Group
9%
14 %
36
15 %
715.9 million euros
725.2 million euros
29.1 million euros
40.1 million euros
19 %
43%
million euros 2003 2002
Sales 715.9 725.2
EBITDA 57.7 79.0
EBIT 29.1 40.1
in % 2003
Raw Particleboard incl. Tongue & Groove 19
Melamine Faced Board 43
Post-forming 14
HPL 9
Other 15

Following the introduction of its new brand portfolio in August 2003 Pfleiderer now offers the
brands “wodego”, “Thermopal” and “Pfleiderer”. With this new brand and sales strategy Pfleiderer
has tailored its production more specifically to target groups, with a wide range of over 266 decorative
designs available on raw particleboard, MDF or OSB board in various sizes and thicknesses.
The product portfolio comprises 17 different surface treatments, including melamine surfaces
and ABS edgings. The range is rounded off by special products for architects, interior design studios,
shop fitters and furniture manufacturers such as magnetic decorative boards, highly flameretardant
and non-inflammable boards for fire protection or conductive materials which prevent
electrostatic charges, of particular interest to laboratories. Any article can now be delivered
within 48 hours, thanks to a new production and color service network – this service is offered
for around 2,500 articles and operates via specially set up centralized warehouses. With this
service, “wodego” is setting new standards for fast delivery to customers.
The introduction of the new brand concept is part of a strategy to increase customer loyalty in a
strongly fought over market. An essential part of this strategy is the more flexible use of production
capacity as a result of new sales processing and organization concepts, as well as improved
logistics and manufacturing. At the same time, the concept reduces freight forwarding costs and
turnaround times. This means that customers’ requirements are met in full, and faster. The
main modules of the new brand concept are a tightly intermeshed, production and logistics network
across locations, together with new logistics centers. The central warehouses in the north
and south of Germany provide customers with full access to the whole range of products, linked
to rapid deliveries. In the past, several deliveries were necessary from different production sites.
The SAP R/3 software was also successfully introduced in August 2003 in sales and distribution
offices in order to further optimize customer delivery relations and to control the complex
processes between the business centers involved. Teething problems have since been resolved
and it is now planned to extend this software to other areas of the Company.
The most important customer group for the Business Center Engineered Wood is the wood
trade which accounts for around 27 percent of total sales. The second most important buyer of
Pfleiderer Engineered Wood’s products is the German furniture industry, accounting for around
16 percent. The kitchen industry is particularly strongly represented. And with sales falling by
around 3.8 percent in the first ten months of 2003 compared to 2002, this segment of the
market has been badly hit by reticent consumer spending in Germany last year. This industry is
also suffering from the continued process of concentration which has since led to insolvencies
and buyouts throughout Europe.
Share of sales
56.9%
37
15.9 %
27.2%
MANAGEMENT REPORT SEGMENT REPORT
in % 2003 2002
Domestic 43.1 48.2
Industry 15.9 18.2
Trade 27.2 30.0
Exports + Poland 56.9 51.8

Production
Pfleiderer has production sites in Germany (Neumarkt, Gütersloh, Arnsberg, Rheda and Leutkirch),
as well as Grajewo and Prospan in Poland, and produces around 3.1 million cubic meters of raw
particleboard. Average capacity utilization at its raw particleboard production sites is running at
between 93 to 99 percent, which is normal for the industry. While production capacity take-up
in Germany has been slightly cut back, high demand in Poland has actually led to an increase in
production. Short-term production bottlenecks have been met by supplying from German production.
In order to serve the increased demand in eastern Europe over the long term, capacity
at the Polish site of Prospan has been increased by the introduction of an additional press in
August 2003.
Mechanical failure in fiscal 2003 led to unexpected short-term stoppages and resulted in loss of
production in Gütersloh and Neumarkt. However, this did not have any significant effect on
sales, as plant holidays in the raw particleboard production were brought forward and deliveries
made from inventories or from third party suppliers.
Each site has a suggestions scheme which examines ways of further rationalizing production.
For example, in 2003 the particleboard plant in Gütersloh moved over to automatic warehousing
of raw particleboard. This, and other minor measures, has resulted in savings at other plants,
particularly in personnel expenses.
Sales
Continued weakness in the engineered wood market in Germany over the last two years has had
a negative effect on prices. At the same time, pressure to increase production has led to overproduction
and downward price movements. This trend continued in fiscal 2003 in Germany.
Especially during the first and second quarters, prices dropped even lower in Germany. In some
areas, prices reached all-time lows by the summer. However, prices for raw particleboard did
improve slightly during the last weeks of 2003, reaching an average of 90–95 euros for standard
16–19 mm board. In other markets, prices have remained stable.
Price sensitivity for raw particleboard also extended to direct coated white particleboard. Prices
fell by around 10 percent for this product in the year-on-year comparison 2002–2003. The fall in
prices for both product groups was significant last year, and a two-year summary for 2001–2003
shows that prices declined by around 17 percent for raw particleboard and for white melamine
faced chipboard.
38

Quality Management
Quality management policy at Pfleiderer Engineered Wood is based on DIN EN ISO 9001 and
directed at best meeting the needs of customers and Company alike. The main objective of quality
management is to continually improve product quality and to fulfill customer requirements.
Our aim is to achieve maximum customer satisfaction through our products and services.
Quantifiable quality targets are set by senior management at each plant. These include fixing
upper limits for claims, maintaining delivery dates and regularly evaluating and analyzing customer
feedback as a yardstick of customer satisfaction. Apart from that, the effectiveness of
the quality management system in fulfilling requirements and implementing improvements is
checked through internal and external audits. Quality management is also responsible for the
continuous assessment of suppliers, ensuring quality in terms of product origin.
Attached to all plants is a quality and environmental supervisor, responsible for the monitoring
and performance of quality management. This responsibility also extends to internal training
sessions for employees on issues of quality and environmental management, as well as developing
procedures to ensure that quality and environmental problems are pro-actively avoided.
The operations and plants of the Business Center Engineered Wood are certified according to
DIN ISO 9001. Quality assurance has been implemented in all sites, involving laboratory testing
to monitor product conformity.
Procurement
The procurement strategy applied by the Business Segment Engineered Wood ensures that the
Company is supplied with the necessary raw materials at specified times and qualities, and that
they conform in terms of environmental and safety standards, quantity and price.
Long-term supplies are ensured through the careful selection and evaluation of suppliers. Essential
with regard to all quality-relevant suppliers is their ability to fulfill the quality and environmental
protection requirements laid down by the Business Segment Engineered Wood. Where
necessary, product quality and conformity of the materials procured is checked on reception.
A strategy based on multiple suppliers for major materials and the main sites ensures independence
and certainty of supply. Major chemical pre-products are supplied just in time, avoiding
unnecessary storage and the tying up of cash. Master agreements have been concluded with
suppliers of chemical products, setting out prices and quantities to be supplied. This ensures
that planning remains largely constant in terms of the quantities procured and purchase prices.
39
MANAGEMENT REPORT SEGMENT REPORT

The Business Segment Engineered Wood was re-organized last year. This included setting up
materials group management with different core procurement groups. This change has already
shown the first signs of success in processing the market. Active supply chain management,
especially for suppliers of decorative and technical paper, has led to improved delivery terms and
prices. Due to the weak order books of paper suppliers and printers, prices have remained constant
in this material group. Positive developments in the raw materials markets are also reflected
in purchase prices of chemical pre-products, such as urea-based glues, phenols, resins and
paraffin. Only the utilities supplying electrical power implemented large price hikes in 2003. Considerably
higher costs also had to be faced following the rise in the price of crude oil.
Interwood GmbH
The supply of wood to co-generation plants and for particleboard production in Germany and
Poland has been bundled into the affiliate Interwood GmbH. The daily requirement for timber,
sawmill by-products and used wood equates to around 1,300 to 1,500 truckloads.
Acquisition of the timber merchants Heller Holz GmbH, an established company with a history
going back some 50 years, has provided the basis for a procurement and marketing network
spread across Germany supplying industrial and sawmill-quality wood. An annual 2 to 3 million
metric tons of used wood is pre-processed, either for further use as a raw material, or for thermal
combustion in the five existing processing plants and three sites planned or under construction.
After pre-processing, this wood is passed on to the particleboard industry, as well as being
fired in the Company’s own and third party biomass power plants.
Where the quality of used wood makes it unsuitable as a raw material for particleboard production,
it is used in the co-generation plants attached to the particleboard plants at Neumarkt,
Rheda and Gütersloh. These plants are fitted with the latest flue-gas purification filters, enabling
regenerative energy to be produced in an environmentally friendly manner and with a neutral
impact on CO 2 levels. The application of used wood as a biomass in this manner is ecologically
more meaningful than disposing of it in landfills, which ultimately has a negative effect on the
environment.
With an annual trading volume of around 10 million metric tons, Interwood GmbH optimizes
material flows for Pfleiderer and reduces raw material costs for the main buyers and its other
associates.
40

Segment Report
Infrastructure Technology
Downturn in Sales Due to Weak Demand for Wind Towers
Accruals of around 14 Million Euros Depress Earnings
The Business Segment Infrastructure Technology includes the Business Centers Pfleiderer Poles &
Towers and Pfleiderer track systems, as well as the developing Business Unit Pfleiderer water
systems. Infrastructure Technology employs 1,967 people in 21 locations in Europe and the USA,
and recorded sales totaling 304.4 million euros, 9.3 percent down on the previous year’s figure.
The decline is particularly due to forecast slacker business in the telecommunications masts segment
and lower demand for wind towers in the Business Center Poles & Towers. In addition to
that, Poles & Towers business in North America was unable to maintain the same high levels as
in the previous year. Earnings before interest, taxes, depreciation and amortization (EBITDA) for
the Business Segment Infrastructure Technology came to 31.3 million euros. This figure is 14.3 million
euros or 31.4 percent lower than that of the previous year. Due to special effects amounting
to 14.5 million euros at the Business Center Poles & Towers, earnings before interest and taxes for
Pfleiderer Infrastructure Technology came to 8.1 million euros. Before special effects, EBIT came
to 22.6 million euros and was 39.7 percent lower than the previous year’s figure.
Sales Summary by Business Center
174.7
million euros
As of December 31, 2003, return on capital employed (ROCE) was 7.1 percent (2002: 25.9 percent).
While capital employed was reduced by 24.0 million euros, weaker earnings before interest
and taxes made themselves felt here.
Key Figures for Business Segment Infrastructure Technology
Sales
2003
2002
EBIT
2003
2002
41
129.7
million euros
304.4 million euros
335.5 million euros
8.1 million euros
35.9 million euros
MANAGEMENT REPORT SEGMENT REPORT
million euros 2003 2002
Track Systems 129.7 107.7
Poles & Towers 174.7 171.7
million euros 2003 2002
Sales 304.4 335.5
EBITDA (before special effects) 32.8 47.1
EBITDA 31.3 45.6
EBIT (before special effects) 22.6 37.5
EBIT 8.1 35.9

Poles & Towers
Market Leader in Spun Concrete Technology
Satisfactory Business Except for Wind Towers
Pfleiderer Poles & Towers manufacturers a wide range of poles and towers made of spun concrete,
steel and glass-fiber reinforced plastic. With 1,148 employees in Germany and the USA,
Pfleiderer is Europe’s leading manufacturer of poles and towers, and worldwide number two for
these infrastructure products. Despite a weaker market for wind towers and a slightly contracting
market in the USA, sales in fiscal 2003 remained stable at 174.7 million euros.
Sales Poles & Towers
2003
2002
Products
In addition to its standardized range of products for lighting and traffic control systems, Pfleiderer
Poles & Towers can at short notice provide products custom-tailored with regard to both functional
characteristics and optical appearance. Products are being newly developed in order to
satisfy the increased aesthetics requirements of urban planners. Pfleiderer Poles & Towers is
technologically leading with its spun concrete – a technology which involves highly rigid concrete
being rotated at up to 600 revolutions per minute in a circular mould. Using this technology, masts
and poles up to 100 meters in length can be produced. Poles and towers produced by Pfleiderer
are used for advertising or lighting on motorways, at airports and sports grounds, as lighting and
traffic direction poles for urban traffic control, or as highly aesthetic rounded columns used in the
architecture of hotels and industrial plants. And if the product ranges manufactured by Pfleiderer
Poles & Towers are highly diverse, so too are its customers. These include well-known utilities companies,
providers of infrastructure, mineral oil companies, telecommunications providers, as well
as local authorities.
For telecommunications providers, Pfleiderer Poles & Towers offers full supporting services, including
the planning, realization and rollout of communications infrastructure. Mobile phone
networks by well-know providers in Germany, Europe and the USA are built and extended using
Pfleiderer poles and its engineering services. More than 7,000 antenna supports using poles
made of spun concrete, steel or plastic and ranging in height from 10 to 130 meters and up to
4 meters in diameter have been erected in open spaces or on rooftops. The physical infrastructure,
together with electronics and software involved, plays a major role. For example, Pfleiderer
is currently supplying the means of communication for Germany’s longest autobahn tunnel, the
Rennsteig Tunnel – 7.6 kilometer long. Or take the Schalke Football Club Stadium, where around
25 kilometers of optical and high-frequency cable has been laid.
42
174.7 million euros
171.7 million euros

In the USA,Pfleiderer Poles & Towers is market leader with its spun concrete technology. Pfleiderer’s
subsidiary Newmark International, Inc., produces masts and towers made of glass-fiber reinforced
plastic, steel and spun concrete at eight sites. These products are particularly directed at energy
suppliers, communications providers and other industries. In the context of privatization of the
US power generation market, regional utilities are expanding the power grid in the USA in an effort
to increase power capacities as well as to cut prices. Newmark International, Inc., is profiting
from new and expanding power grids as spun concrete masts are increasingly being used instead
of the traditional wooden poles. Following the introduction of the hybrid mast – a combination
of ready-to-assemble sections made of concrete and steel rising to up to 50 meters – an innovative
new “muscle pole” was introduced in the USA in 2003. This construction, comprising a steel
mast filled with concrete, can be used in very narrow spaces, for example between the highway
and sidewalk.
Developments
Apart from the steel pole plant in Leipzig, production capacity was completely booked out. While
there was strong demand in 2002 for wind towers, the weak market for wind converters in 2003
had a marked effect on sales figures. As a result, production in the Leipzig plant had to be reduced
by one third. In view of the uncertain future of this site, accruals and write-downs have
been made. In the USA, sales of poles were at a lower level than the previous year. Production
over-capacity among competitors in the steel poles market means that prices in the USA are lower
than the previous year. Stocks have been matched to standardized product ranges of the individual
business centers and supply commitments to customers adjusted for shorter delivery times.
In fiscal 2003, Pfleiderer Poles & Towers produced a total of 13,000 metric tons of concrete
poles, 142,000 steel poles, 5,750 glass-fiber poles and 16,200 metric tons steel towers in
Germany. In the USA, Newmark International, Inc. produced 143,000 metric tons of concrete
poles, 8,800 metric tons of steel masts and 30,700 glass-fiber poles.
43
MANAGEMENT REPORT SEGMENT REPORT

Track Systems
New Turnout Plant Opened
Successful Start in Asian Market
The Business Center Track Systems covers all rail-related activities of the Pfleiderer Group. With
819 employees responsible for sales, engineering and production in Germany, Hungary, Rumania
and Spain, Pfleiderer track systems holds a leading position in rail-track systems and in the
production of concrete sleepers. Thanks to a positive upturn in domestic business in fiscal 2003,
sales rose by 20 percent to 129.7 million euros, exceeding targets.
Sales Track Systems
2003
2002
Products
Pfleiderer develops innovative rail-track systems for both urban, as well as regional and intercity
rail traffic. The challenges posed by tunnels, bridges or special requirements for the track
base are exceedingly high and must be taken carefully into account during planning. In municipal
areas aesthetic considerations must also be considered when designing the system.
Pfleiderer track systems’ core product is its concrete sleeper type B70, which can be used either
in new constructions or when renovating track. This sleeper can be produced and supplied in
large numbers within a very short period of time. Pfleiderer’s solid track technology “RHEDA 2000®”
on the other hand, allows trains to travel at speeds in excess of 300 km/h, is practically maintenance-free,
and is the preferred system for all new stretches of inter-city track. As systems supplier,
Pfleiderer track systems is responsible for the planning, detailed engineering, logistics,
quality assurance and just-in-time supply of the sleeper system to the construction site.
This new technology is already operational in the German high-speed ICE rail link between
Frankfurt and Cologne, where Pfleiderer track systems supplied around 180,000 special sleeper
systems. The system can also be found in the Hanover–Berlin and Erfurt–Halle/Leipzig rail
links. Further project orders which underline the leading position of this sleeper technology were
awarded in 2003:
“RHEDA 2000®” will be used the Dutch HSL-Zuid high-speed link from Amsterdam to the Belgian
border. As system partner of the major Dutch construction company BAM, Pfleiderer is involved
in the planning and construction of the link. This will also involve the supply of around 280,000
sleeper systems based on “RHEDA 2000®” technology.
The new Nuremberg–Munich link stretching 38 kilometers will also be fitted with 120,000
“RHEDA 2000®” sleepers.
“RHEDA 2000®” is also being used in two tunnels as part of the renovation work being carried
out on the West Coast main line in the UK.
44
129.7 million euros
107.7 million euros

In order to participate in markets usually reserved for national infrastructure suppliers, Pfleiderer
track systems exports standardized sleeper plant models. In Taiwan, for example, Pfleiderer is
represented in the consortium responsible for planning and realizing the new link between
Taipeh and Kaohsiung. This has involved finding a new partner capable of producing around
115,000 “RHEDA 2000®” sleeper systems to specification and under the guidance of Pfleiderer
experts.
In Eastern Asia, other important growth markets such as Korea, India, Malaysia and China await
us. The latter is a fast developing market with high potential. In order to gain access to these
markets, Pfleiderer track systems has set up the “German High-Speed Initiative” in cooperation
with BWG, a supplier of turn-out systems, and the Siemens rail technology division. This initiative
offers competence centers for local and national railways providing know-how and consultancy
services. A letter of intent for the first competence center in Guangzhou, China, was signed with
the Guangdong Railway Group Corporation Ltd in December 2003. The mission of this competence
center is to advise and support local engineers in developing the 127 kilometers long new
stretch from Guangzhou to Zhuhai.
Developments
Thanks to long-term project planning by infrastructure providers in the rail traffic segment, business
at Pfleiderer track systems remains stable and largely independent of economic fluctuations.
Order books at the end of 2003 carried around 4 months’ orders for Germany and abroad and
can be described as satisfactory.
Sleeper sales in Germany increased considerably, with prices remaining stable. Around 1.3 million
track sleepers and some 300,000 turnout sleepers were produced at the German plants in Coswig,
Langen, Neumarkt, Gernsbach and Kirchmöser. Production ran at between 80 and 100 percent.
As production for turnout sleepers has been fully utilized, a new plant was opened in Kirchmöser
in Brandenburg in October 2003. Involving an investment of around 4 million euros, the new
plant has two twin-bed lines capable of manufacturing 100,000 meters of turnout sleepers per
year, mainly as special turnouts and for export.
Water Systems
Developing Business with Wide Market Acceptance
Pfleiderer water systems, part of Pfleiderer Infrastructure Technology, was formed in 2000 as
a developing business. The objective is to exploit 25 years of experience gained with extruded
plastic. To date, cable protection tubes and sections have been produced. Once experimental,
this area has since developed into a sophisticated product system which can exploit the precious
resource drinking water without impacting on the environment. Today, Pfleiderer water systems
offers innovative solutions in the field of water supply, storage, filtration and wastewater management
in residential, industrial and agricultural environments. Applications range from well construction
for agricultural purposes to waste water purification. Efficient water management helps
to save water and reduce costs. Pfleiderer water systems’ product newair © controls aeration in
industrial and municipal water purification plants, thereby reducing the operating costs of these
plants. Over 60 municipal and industrial users in Germany and abroad fitted their plants with
45
MANAGEMENT REPORT SEGMENT REPORT

the newair © aerator in 2003. The filter product newflow © from Pfleiderer water systems is specifically
designed for the exploitation of water in sandy regions where water is scarce. Water storage
for plants is provided by newpor © . This granulate has a highly porous consistency offering the
maximum possible surface area on which water can be stored, at the same time minimizing evaporation.
Wind Energy
Pfleiderer Wind Energy developed and sold wind converters. Pfleiderer has been active in the
wind energy business since 1985 and is a leading supplier of wind converter towers made of
concrete or steel, with vast know-how in this field. Based on know-how from Windtec Anlagenerrichtungs-
und Consulting GmbH and the innovative Multibrid Technology‚ Pfleiderer now
develops its own onshore converters, having evolved from a provider of towers to an innovative
supplier of complete, turnkey units.
Pfleiderer’s first licensing agreement for wind converters has proved a major step forward in
the development of Pfleiderer Wind Energy. Together with the Ebara Corp., Tokyo – the market
leader in the Japanese wind converter industry – a joint venture was set up in March 2003 to
sell PWE 600 and PWE 1,500 wind converters (PWE = Pfleiderer Wind Energy) in Japan and neighbouring
Asian countries. Ebara’s wind division has the biggest wind park operator in Japan, Eco-
Power Corp, as its main customer. To date, wind converters had been imported to Japan, re-fitted
to suit local conditions and then sold on to domestic wind park operators. Now these units are
being built in Japan according to Pfleiderer Wind Energy plans. A further important milestone for
Pfleiderer Wind Energy is the contract to erect a wind park using PWE 650–75 models near to
Altenheerse in the German state of North-Rhine Westphalia.
For the first time, Pfleiderer Wind Energy was able to demonstrate its competence as a full service
provider with the turnkey construction, installation and rollout of this wind park in 2003. Besides
its involvement in wind converters for onshore applications, Pfleiderer Wind Energy is currently
building 5 MW offshore converters based on the world-leading Multibrid Technology®.
In November 2003 offshore operations were transferred to PROKON Nord Energiesysteme GmbH,
Leer, as part of the new strategic direction the Pfleiderer Group. This strategy reflects the decision
taken by the Company to focus on its core competences of Engineered Wood and Infrastructure
Technology. PROKON Nord Energiesysteme GmbH will continue to develop the patented offshore
technology MULTIBRID® to market maturity, as well as continuing work on the 5 MW wind
converter prototype currently being assembled in Bremerhaven.
In a joint venture with Fuhrländer AG, Pfleiderer set up Fuhrländer-Pfleiderer GmbH & Co. KG to
continue its onshore activities. The joint venture, in which Fuhrländer AG is the majority shareholder,
has taken over all customers, patents, licenses and proprietary rights which were part of
Pfleiderer Wind Energy GmbH’s onshore activities.
46

Quality Management
Quality management means constantly developing and improving working methods and procedures
in order to satisfy the high demands that customers place on our products. All employees
are involved in this process of optimizing procedures, products and services. One aspect of this
is Pfleiderer’s “Continual Improvement Scheme” where employees can analyze working methods,
make suggestions for improvements and ensure their rapid implementation. In order to guarantee
that the products are of a sustained high quality, the quality management system for central
plants which are part of Pfleiderer Infrastructure Technology has been certified according to
DIN EN ISO 9001.
Production control at each plant involves checking the quality of goods in, as well as intermediate
and final checking of materials and products out. This is supported by third party monitoring
performed by accredited organizations as part of the quality management system. Certificates
or declarations of conformity demonstrate to the customer that products supplied in Germany
by Pfleiderer Infrastructure Technology comply with the relevant engineering standards. The concrete
sleeper plants of the Business Center Track Systems in Neumarkt, Langen, Coswig and
Gernsbach have been awarded Q1 supplier status by Deutsche Bahn. The new sleeper plant in
Kirchmöser is currently undergoing product certification by Deutsche Bahn.
Procurement
The procurement strategy of the Business Segment Infrastructure Technology takes advantage
of economies of scale through the centralized purchasing of raw materials and services used in
production. Medium and long-term agreements have been entered into with major suppliers for
most of the standard materials used. This not only ensures a high level of supply certainty, while
reducing any unnecessary stocks, but also frees up cash. In the case of standard products,
Pfleiderer can supply customers on demand from just a few days’ stock of raw materials. At the
same time, materials storage logistics have been designed to cope with special orders, such as
steel poles or turnout sleepers, on a flexible production basis. This enables us to complete special
orders within two to eight weeks. Sufficient numbers of qualified suppliers are on hand for all
the main groups of materials to prevent supply bottlenecks. The same applies to the supply of
raw materials, consumables and supplies. An Internet module linked to internal software has
been installed to ensure that standard consumables and supplies can be called off more economically.
This simplifies procedures, enabling production sites to place their orders directly with
suppliers.
Three factors from the quality management system described ensure the quality assurance of
materials used in production:
Material compliance testing for basic materials, safety-relevant parts and services
Supplier compliance testing for authorized materials and
Goods in checking as part of each plant’s own production monitoring system.
Prices for raw materials, consumables and supplies used in production moved in various directions
in 2003. While competition helped to push down the price of cement, and thus material
costs in general, steel producers have been continually implementing price increases.
47
MANAGEMENT REPORT SEGMENT REPORT

Trusting Technology

Track Systems
Patented sleeper technology
means travel comfort
on high-speed rail links
Pfleiderer track systems’ patented sleeper and track systems are setting new
technical standards in urban and inter-city rail travel. As a systems supplier and
engineering partner, we provide a wide range of concrete sleepers and know-
how for related applications. Our patented Solid Track System is the worldwide
basis for new directions in high-speed rail travel. The products we manufacture
are renowned for their strength and endurance, high load performance and
comfort. Trust technology and see for yourself – no spills, not even at 300 km/h!

Research and Development
Functional Extension of the Engineered Wood Range of Products Already in
the Market
Continued Development of Systems Concepts for Solid Track System
“RHEDA 2000®” for High-Speed Rail Links
The Pfleiderer Group’s research and development activities aim to improve products already in
the market and to optimize production and costs structures in manufacturing. In 2003, a staff
of 89 people, comprising quality managers, laboratory technicians, product designers and applications
technicians, worked on improving the range of products on offer and finding new production
methods for the Business Segments Engineered Wood and Infrastructure Technology. Total
R&D expenses in fiscal 2003 came to 2.4 million euros (2002: 1.2 million euros).
Research and Development Expenses
2003
2002
Engineered Wood
In the Business Segment Engineered Wood, development activities centered largely on further
developing products already in the market. Working closely with customers and suppliers, new
surface finishings were created to extend existing product ranges for kitchen and office furniture.
The latest development is a ferromagnetic board which can be used in seminar or training
rooms, and to which sketches, plans, notes or similar information can be attached. This major
development successfully increases the range of applications of products from Pfleiderer Engineered
Wood aimed at the office furniture segment.
Infrastructure Technology
Development activities in the Business Center Track Systems are particularly significant in view
of the international importance placed on rail infrastructure. At present, products from this business
center are protected by 43 German priority applications, 14 design registrations and 21
international registrations, as well as five new applications for patents and designs. In the Business
Center Track Systems employees working in research and development are involved with
new systems concepts for different solid track systems. Particularly with regard to system designs,
special applications and new manufacturing processes represent a wide area of research and
development. The central RHEDA 2000® and GETRAC systems have been recalculated to optimize
the system construction. Products are continuously being refined and adapted to suit regional
51
1.2 million euros
2.4 million euros
MANAGEMENT REPORT RESEARCH AND DEVELOPMENT

needs and allow for international use of Pfleiderer technology. Specially for the American market,
Pfleiderer developed a concrete sleeper which can withstand a load of 36 metric tons per axle.
Pfleiderer track systems has also played a leading role among German systems suppliers in offering
a complete RAMS analysis (reliability, availability, maintainability and safety) for the high-speed
RHEDA 2000® system.
In Pfleiderer Poles & Towers product development is carried out directly with customers. In the
USA, the “muscle pole © ” – a steel pole filled with concrete – has been developed for use in the
limited space available between sidewalk and highway. In Europe, particularly in Germany, mobile
phone network providers are finding it increasingly difficult to gain the acceptance of the general
public when integrating base transmission units in urban areas. In order to stealth such poles in
urban areas, together with one customer, Pfleiderer Poles & Towers has developed a base transmission
unit integrated into a lamp pole. Antennas for UMTS, GSM or directional relay transmissions
can be hidden in such poles. The body of the pole is made of glass-fiber reinforced plastic
which allows RF waves to pass through it making it suitable for microwave transmission purposes.
What looks just like a tree, or in southern climates, a palm tree, is another method that can also
be used to stealth antennas.
52

Capital Expenditure
Expansion of Eastern European Engineered Wood Activities through
New Production Lines in Poland; Introduction of SAP
New Turnout Sleeper Plant opened in Brandenburg
The investing activities of the Pfleiderer Group follow the internal return on investment guidelines
and the Cash Flow generated. Apart from the operational need to maintain assets and current
projects, all new investments are examined closely in terms of their economic viability, using
precise benefit and cost analyses. Total capital expenditure by the Pfleiderer Group came to
37.0 million euros in fiscal 2003 (2002: 44.7 million euros).
Capital Expenditure
2003
2002
Engineered Wood
In the Business Segment Engineered Wood, capital expenditure was directed mainly at the
expansion of production capacity through an additional lamination press at the Polish site of
Wieruszow and a purification plant for wood chips in Gütersloh. This latter measure enables
Pfleiderer to use more recycling material, which is having a positive effect on material costs and
availability. Replacement spending and minor rationalization measures were also carried out.
Parallel to the introduction of the new brand and logistics concept, SAP/R3 was introduced in
distribution and sales units at all sites in Germany.
By setting up a new production facility in Novgorod, Russian Federation, Pfleiderer intends
to exploit existing market potential in the eastern European states. Construction is expected to
start in 2004, with production coming on stream at the end of 2005.
53
37.0 million euros
44.7 million euros
MANAGEMENT REPORT C APITAL EXPENDITURE

Infrastructure Technology
The biggest investment project in the Business Segment Infrastructure Technology in 2003 involved
the construction and start-up of a new turnout sleeper production line in Kirchmöser in
Brandenburg capable of producing around 100,000 meters of turnout sleepers yearly. The investment
volume for this project came to around 4 million euros. Construction of the new line
was necessary due to full utilization of production capacity of existing turnout sleeper plants
and greater general demand from international projects, as well as demand for special turnout
sleepers. In Rumania and Taiwan, Pfleiderer track systems expanded existing capacities and
set up new production facilities for turnout sleepers. This demonstrates the considerable trust
placed in Pfleiderer technology, as enjoyed by Pfleiderer track systems internationally, be it the
expansion of existing systems or the construction of new track.
In Pfleiderer’s discontinued operations further capital expenditure in 2003 flowed into the development
and construction of the prototype 5 MW offshore wind converter. Construction work has
started near Bremerhaven on the prototype, which will then undergo a one-year test phase.
54

Environmental Protection
Engineered Wood an Environmentally-Friendly Product
Regular Monitoring at All Production Sites by Environment Officer
Corporate policy in the Pfleiderer Group places a high priority on environmental protection. This
is reflected by a new environmental policy adopted by the Board of Management in 2003 which
commits the Group to even stricter standards than those laid down in statutory requirements and
regulations.
The Group regularly monitors, tests and assesses its production for any negative effects on the
environment which might impact on waster water, noise, waste, emissions and energy. This ensures
that environmental pollution is prevented, and where necessary, procedures are halted to
ensure this. Pfleiderer also places great importance on the development of new products and
manufacturing methods which have a minimal or no impact on the environment. One central aspect
of the Pfleiderer Group’s corporate philosophy is to ensure that employees are adequately
trained, and the public, local authorities and customers are regularly informed, about Pfleiderer’s
products and services and how they relate to the environment.
Pfleiderer’s central service unit for environmental protection coordinates, consults and monitors
the activities of the environmental officers at the Company’s sites and reports directly to the
Board of Management. Regular meetings are held with environmental officers to ensure that
information is exchanged between sites and to produce synergies.
A total of six employees are directly involved in environmental protection within the Pfleiderer
Group.
Low-Impact Production
Engineered wood products are a carbon dioxide sink, and thus environmentally friendly. Particleboard
production involves the use of otherwise unusable softwood and production residues from
other areas of industry. Thanks to the Company’s new co-generation plants, the use of fossil
fuels – which is strictly regulated – has been virtually completely replaced by biomass. Pfleiderer
has also committed itself to a high degree of transparency to the public with regard to emissions.
Dioxin levels are constantly measured and openly presented in the Internet as evidence to show
that emissions of heavy metal and dioxin emissions are at least 80 percent below the German
statutory levels.
55
MANAGEMENT REPORT ENVIRONMENTAL PROTECTION

Environmental Protection Activities
Part of Pfleiderer’s environmental policy involves regular and open contact with the general public.
Regular meetings are held at production sites to exchange information with neighbours, politicians
and other interested parties, leading to better understanding on both sides. Where specific
projects and plans are involved, Pfleiderer organizes open days in order to inform the public in
advance.
Apart from these communication activities, active environmental protection is applied at all the
Company’s sites, for example with residual pollution and any environmental risks these might
pose. Residual pollution is likely to exist at plants where wood impregnation was carried out in
earlier years on railway sleepers, before they were made of concrete. Ground water is regularly
analyzed by Pfleiderer in order to test for soil pollution. Based on these tests, ground water has
been purified for many years at the Neumarkt site, a process that continued in 2003. Dismantling
of the disused particleboard site in Peiting started last year is now nearly completed. Problems
arising from incorrect methods used by the salvage company have since been corrected.
56

Organization
The new corporate strategy applied by the Pfleiderer Group in 2002, together with continued
corrective measures in 2003, has resulted in fundamental changes to the organizational structure
of the Group. The basic structure of holding company and two business segments has been
maintained in 2003, while the operative structure has been more closely geared towards regional
markets and products. The Business Unit Water Systems has become a legally independent unit,
but remains part of the Business Segment Infrastructure Technology for accounting purposes.
Centralized service activities for internal and external customers, such as the provision of information
technology, personnel development or specialist legal services have been bundled in
Pfleiderer Service GmbH.
The new corporate strategy has also led to changes in terms of the legal composition of the
Group. Disposal of the business units Eltec, Tipla and Wind has involved the sale of individual
companies or assets. The production sites, logistics and commercial control of the Business
Segment Engineered Wood have been bundled into Pfleiderer Holzwerkstoffe GmbH & Co. KG.
Similarly, Pfleiderer Poles & Towers has been converted into an independent partnership under
German law (GmbH & Co KG). Pfleiderer track systems continues to be part of Pfleiderer Infrastrukturtechnik
GmbH & Co. KG. A precise summary of the companies consolidated in the Group
is shown in the section under “Consolidated companies”.
Business Segment
Engineered Wood
Business Center
Germany
Business Center
Eastern Europe
57
Pfleiderer AG
Business Segment
Infrastructure Technology
Business Center
Track Systems
Business Center
Poles & Towers
Business Unit
Water Systems
MANAGEMENT REPORT ORGANIZATION
Pfleiderer
Service GmbH

Personnel Report
Cut-Backs in Personnel Implemented as Planned
Pfleiderer Business Campus and CHANCES
As of December 31, 2003, the Pfleiderer group employed 5,614 people including its officers
(2002: 5,715). Of this figure, 1,778 were salaried employees (including its officers), while 3,846
were wage earners. The savings package to safeguard earnings has reduced personnel numbers,
particularly in the Business Segment Engineered Wood and in administration.
At the nine sites that offer trainee programs, Pfleiderer is currently providing training 24 people
in commercial and technical occupations. As of December 31, 2003 Pfleiderer employed 222
trainees throughout the Group. The training quota in Germany is around 6 percent.
At present, 71 employees are in pre-retirement part-time work. 104 employees celebrated their
25 th anniversary with the Company and 14 employees their 40 th anniversary.
Personnel Development in Difficult Times
The Pfleiderer Business Campus bundles all the Pfleiderer Group’s personnel development activities
and schemes. Individual projects run by the Pfleiderer Business Campus continued in 2003,
as planned. The Campus offers a broad spectrum of basic and advanced training activities, ranging
from Internal Junior Consulting, a leadership potential recognition scheme, to PRIMA – Project
for Intelligent Management. Nevertheless, it has been necessary to adjust these activities to
meet the changed corporate requirements arising from the difficult market situation.
As far as Pfleiderer AG is concerned, personnel development also means supporting employees
faced with redundancy following restructuring. The Pfleiderer Business Campus is tackling this
challenge with its CHANCES project which helps employees to re-orientate when faced with job
loss. CHANCES provides affected employees with practical help when looking for a new job on
the labor market. A central team coordinates and advises the participants and ensures that the
measures are tailored to individual needs and the relevant occupational target group.
58
2003 2002
As of Dec. 31 Domestic Foreign Total Domestic Foreign Total
Continued operations:
AG/Corporate Units 28 0 28 38 0 38
Service Units 117 2 119 148 0 148
BS Engineered Wood 2,474 976 3,450 2,563 978 3,541
BS Infrastructure Technology 1,002 965 1,967 1,012 934 1,946
Subtotal core operations 3,621 1,943 5,564 3,761 1,912 5,673
Discontinued operations:
Wind Energy 29 21 50 23 19 42
Total 3,650 1,964 5,614 3,784 1,931 5,715

Following talks held between senior management, employee representatives and those affected,
joint projects have been set up in which the following measures were formulated:
Targeted short and medium-term occupational re-positioning through professional training,
consulting and support
Pragmatic support during the job-finding process
Setting up of an external network to improve exploitation of the job market in the region
Joint approach to dealing with personal situations through the exchange of strategies and
experience in the job-seeking process
Reduction of loss of motivation by documenting social responsibility to those employees
remaining with the Company
The regional job centers have fully equipped offices in which employees can carry out Internet
research, compile job application documents, set up job exchanges, obtain information from the
press about the job market or receive advice or support on current job applications. A consultant
is available one day in the week to provide personal coaching.
A survey carried out following completion of a CHANCES project at one location shows that the
acceptance of the measures is high, as is that of the coaches and consultants. Tailored consulting
and support, which focuses closely on individual needs, has met with a very high level of
acceptance.
Pfleiderer also introduced a Coaching Book for senior managers, offering them support during
such far-reaching processes of change. Within a certain framework senior managers can obtain
feedback at their own initiative from the neutral perspective of experienced coaches and consultants.
Individual support instruments cover such areas as self-management, leadership, change
management or conflict mediation, and can be discussed and examined in detail with an independent
partner. The coaching scheme helps managers to deal with specific problems as they
arise, such as acute conflicts, personal development or preparation for new tasks. The coach,
scope, timing and topic can be freely selected in the Coaching Book. A discrete fee system ensures
that where taken up, this remains a confidential matter between coach and manager.
59
MANAGEMENT REPORT PERSONNEL REPORT

Creating Landmarks

Poles & Towers
Floodlight poles at Terminal 2,
Franz Josef Strauß Airport,
Munich
Pfleiderer Poles & Towers develops and manufactures poles made of concrete,
steel or plastic. Our products have a vast range of applications and are used
throughout Europe. Poles and towers for street lighting, overhead power supplies,
industrial and highway applications, sports and leisure centers, telecommuni-
cations – we have even developed specialized components for airport aprons
and surrounding areas. Pfleiderer Poles & Towers has won customer loyalty and
trust through the wide range of innovative products it offers, its flexibility and
individual solutions. Creating landmarks for the future.

Risk Report
Improved Risk Situation in the Pfleiderer Group
No Risks Which Might Jeopardize the Company’s Existence
The Pfleiderer Group’s risk situation had already improved considerably through the disposal of
the business centers Insulation Technology and Doors & Windows. The Company has since disposed
of its blockboard, wind converter and other operations which were not part of its core
activities. Income from these disposals has given the Company new operational scope. By concentrating
on its two Business Segments, Engineered Wood and Infrastructure Technology, as
well as the further expansion of foreign operations, Pfleiderer has made a concerted effort to
shield the Group as much as possible from risk.
General Risk Situation and Individual Risk Scenarios
Overall Economic and Industry-Specific Risk
The Group expects to draw a large proportion of its earnings from domestic business during the
planning period, and is therefore affected by the continued weakness of the German economy.
In the Engineered Wood segment, this is particularly noticeable due to lower consumer spending
on furniture and furnishings. In the Business Segment Infrastructure Technology, the Business
Centers Track Systems and Poles & Towers are also feeling the pinch due to tighter spending
budgets of local authorities. These factors have been sufficiently taken into account in corporate
planning and do not represent a specific risk. Nor does Pfleiderer see any particular economic
risks affecting foreign markets that might have a significant effect on earnings.
Apart from that, the Group has prepared for a diminishing volume of business by increasing the
outsourcing of functions and by reducing personnel.
The Business Center Track Systems is participating in projects run by Deutsche Bahn in Germany.
Outside Germany, it is involved in the expansion of high-speed rail links being set up in Europe
and Asia. The industry fears that prices and conditions could come under greater pressure when
the current master agreement with Deutsche Bahn expires at the end of 2004. However, with
the rationalization measures performed and having set up production plants close to demand,
the Company expects earnings to remain at the same levels as in the past. Expansion of the
volume of business and improved earnings depend on the Company working together with other
renowned companies on foreign projects. Such joint projects provide an opportunity for higher
earnings, but at the same time do place high demands on technical planning, order processing
and logistics. Pfleiderer has prepared itself for this by taking the necessary steps in terms of
organization and personnel. Due to their many years of experience and flexibility as small and
medium-sized organizations, the current suppliers are confident that they can face any challenges
posed by big construction companies trying to enter the rail track business, as was expected
several years back.
63
MANAGEMENT REPORT RISK REPORT

The Poles & Towers business has been waning over the last few years due to a downturn in demand
from energy suppliers, municipalities (for street lighting) and mobile phone providers.
Pfleiderer has taken this downturn in volume into account in its planning and sees no further
risks beyond this for the areas mentioned. As Pfleiderer produces towers for wind converters,
any downturn in the wind converter market will also have an effect on the Business Center Poles
& Towers.
Despite careful planning, deviations from budgeted sales and earnings in the German engineered
wood segment cannot be entirely excluded in 2004. This is especially due to the poor demand
situation in the furniture industry, where even the biggest, well-known manufacturers are under
threat. This, together with large excesses in production capacity, is also putting pressure on
prices in the German particleboard industry. However, management is expecting that the new
production, marketing and logistics concept, apart from reducing costs, will also result in better
earnings in the medium term.
No risks are expected from exchange rate fluctuation which could have a serious effect on the
Company’s activities. Pfleiderer is also not facing increased risk from its two engineered wood
plants in Poland. Interest rates are not expected to rise steeply in Germany or abroad which
would have a detrimental effect on ordering by the Company’s customers.
The Company is not aware of any changes in the law, new ordinances or tax regulations that
have come into effect and could have a significant effect on the Company or its development, or
the industries or markets it serves, nor that any such changes are planned. Management knows
of no fundamental technological changes in the use or manufacture of products manufactured by
the Group. Production plants in Germany and abroad do not face a risk from natural catastrophes
or from political changes, nor is any specific danger of turmoil, terrorism or targeted sabotage
anticipated.
Operating Risks
Sales Risks
No new suppliers are expected to enter the market that could have a significant effect on the
competitive situation in those markets that Pfleiderer AG serves. With regard to customers, management
sees no signs of concentration, nor any risks that might result from such a process.
While the insolvency of individual customers cannot be excluded in markets which are relevant
for Pfleiderer, this does not pose a threat to the Company’s existence. Management believes
that there is no danger of a loss of major customers in the steel poles and towers segment which
could have serious consequences for this segment. The remaining partial dependency of Polish
manufacturing plants on furniture manufacturers with strong exports to Germany will be further
reduced in future by expanding exports to eastern European countries.
In accordance with Group guidelines, risk of bad debts due to insolvencies has been largely
covered by credit insurance less any deductibles .
64

Development, Production and Procurement Risks
There are no risks in product development and production technology, as Pfleiderer is operating
state-of-the art in areas where it already holds technology leadership, such as its sleeper systems.
No infringements of third party proprietary rights are anticipated with concomitant risks.
The Company’s products are mainly manufactured on continuously running plants or in multishift
operations. This means that the Company is highly dependent on the availability of plant,
and that raw material must be provided for the production process on time. Breakdowns and
stoppages are avoided through proper maintenance management, and where acceptable,
through the use of reserve equipment. Wood processing contains an inherent risk of fire and
explosion that cannot be entirely ruled out. In order to avoid such incidents, the Company has
taken all possible technical and organizational measures and set up contingency and emergency
plans. It also operates its own works fire-fighting services in selected plants. Pfleiderer is able
to counteract the risk of customer loss due to longer stoppages by arranging supplies from other
plants, if necessary.
Due to the wide range of raw materials used (wood, sand, gravel, cement, steel), together with
the multi-sourcing procurement policy, the Company is not dependent on individual suppliers.
The supply of materials in good time, and the long-term supply of wood, is ensured through a
suitable procurement organization and long-term supply contracts. Continuous monitoring of
such agreements ensures that related risks are eliminated. No risks of price increases in raw
materials are currently foreseen which would have an impact on the Company’s risk situation.
Through the use of co-generation plants, Pfleiderer is reducing dependency on future increases
in the cost of energy.
Personnel Risks
Pfleiderer enjoys a well-balanced age structure among production team leaders and management,
together with an attractive pay system and other schemes which bind qualified employees.
This means that the Company is not facing any particular risk of losing essential personnel.
Young managers are generally available from internal resources as they pass through a process
of systematic screening.
Financing Risks
The Company has access to sufficient available long and short-term credit lines. Income from
the disposal of the business centers Doors & Windows and Insulation Technology in fiscal 2002
has had a positive effect on net indebtedness, which was further reduced by around 15 percent
in fiscal 2003. In order to alleviate any risk associated with procuring credit and capital – which
has become more difficult to obtain in the last two years due to disappointing results – the
Board of Management has implemented far-reaching cost savings and personnel measures which
have already begun to take effect. At the same time, the volume of capital expenditure has been
limited. Applications for spending and spending growth have been placed under strict controls.
From today’s point of view, the available credit volume provides sufficient financial resources
and Cash Flow to ensure that the Group can continue to grow as planned.
65
MANAGEMENT REPORT RISK REPORT

This applies equally to the interest rate risks in the planning period for existing loans and the
related fixed conditions.
Centralization of financing activities within the treasury department of the holding company ensures
that they are carried out professionally and that financial planning and monitoring of the
Group’s finances is ensured. Debtor management, which remains the responsibility of the individual
operating segments, is also overseen by the treasury department — ensuring that limits
imposed by credit insurance are maintained. This is gaining in importance in view of the increasing
number of insolvencies. Derivative financial instruments are only used centrally, and then
only for pure hedging purposes.
Legal Risks
No litigation or legal proceedings are pending or announced which could have a significant effect
on results or the operations of the Group, or its operating segments. The holding company
has its own legal department which ensures that matters are dealt with formally and correctly
throughout the Group, in particular when drafting contracts or taking legal action.
IT and Other Risks
Major risks relating to IT and data processing have already been reduced in early years and eliminated
by outsourcing hardware, especially mainframes and data networks and the operating of
the system, to a specialist provider of a large German group. Our IT security concept is constantly
monitored and updated, particularly with respect to illegal access to corporate data from inside
and outside the Company. Similarly, security for external data transfer and defenses against
virus attacks are constantly improved. While the need to connect up decentralized servers has
slowed the implementation of logistics and sales under SAP R/3 down in the Business Center
Engineered Wood in fiscal 2003, this does not represent any significant risk to operations.
Bearing in mind incidents in previous years, the Company agreed to a large insurance deductible
in 2002 in order to limit increased premiums demanded by insurers. The Company is counteracting
the risk resulting from this by specific measures to prevent any future incidents occurring.
The Group and the business segments have eliminated or limited environmental risks by nominating
environmental officers and by setting out relevant corporate guidelines. According to experts,
there is no substantial probability of a real incident occurring from historical contamination.
66

Overall Risk
As in previous years, no individual risks are identifiable within the Pfleiderer Group which could
endanger the Company’s existence through scale of damage or probability of occurrence.
Similarly, no risks are perceived which have a high correlation to other risks which could endanger
the existence of the Group. Nor have any risks been determined that could threaten the
Company’s existence within a foreseeable period after 2004. The number of risks reported in the
group risk report increased from 45 in the previous year to 54, whereby a large part of the risks
were already contained in the risk report of the previous year. One third of these risks no longer
exist, and eight risks have occurred within anticipated levels. Great efforts are being made to
implement measures to prevent incidents and to limit any damage occurring.
In November 2003, the international rating agency Fitch Ratings lowered Pfleiderer AG’s rating
for senior unsecured debt from BB+ to BB. The outlook remains “negative”, as the rating agency
expects the difficult market in Germany to persist, especially for engineered wood. According
to Fitch, this poses a risk with regard to completing the repositioning and development of the
Group.
Risk Management and Early-Warning System
Pfleiderer’s early warning system for the detection of risk complies with the German Law on
Control and Transparency in Business (KonTraG). The system lays down a clear organization and
defined procedures, predetermined corporate strategy and planning, operational planning and
control systems, ongoing monitoring through internal audits and legal department, as well as
quality management and environmental officers to cover all operational areas. Centralized Group
financing and institutionalized cooperation with one of the biggest insurance brokers ensure that
such risks to the Group are avoided to the greatest extent possible. Continuous reporting and
monthly monitoring ensures that the Group’s Board of Management is provided with comprehensive
information without delay, also with regard to any risks developing.
The Company’s risk management system is based on a detailed risk strategy covering:
Risk determination and assessment
Determination of responses to current risks and identification of new risks
Additional ways to act on risk
Monitoring risk developments and action taken.
The risk management unit responsible for the Group has been instructed to continue developing
the risk management system, changing it where necessary. The unit has been instructed to coordinate
and monitor work in this area, to produce corporate reports and to make sure that this
information is passed on immediately to the Board of Management, as well as to support the
business centers in day-to-day risk management.
67
MANAGEMENT REPORT RISK REPORT

The operating segments of the Company are responsible for recognizing and dealing appropriately
with risks. All risks are assessed, including the extent of potential damage and likelihood of
occurrence. In this process, objective quantification of potential risk is given preference over
verbal description. Risk inventories for the Company’s business centers are collated in workshops
attended by senior management and employees from the business units.
The results of these studies are compiled in a detailed risk report which is presented to the full
Board of Management, where it is discussed. The Report is then presented to the Supervisory
Board and the Company’s auditors. The risk report and risk inventories from the business centers
are regularly updated during the course of the year and any changes or measures taken
documented and explained.
Marketing and Communication
New Brand Concept for Pfleiderer Engineered Wood Introduced in August 2003
International Marketing of Technological Competence by Pfleiderer Infrastructure
Technology
Costs
5.2
million euros
Communication with the public is an important part of operative business and corporate strategy
of the Pfleiderer Group. Pfleiderer’s products are not directed at the consumer at first glance,
like other consumer goods such as food. Pfleiderer is first discovered when looking at the details
– for example, when buying the latest trend kitchen, or traveling at 250 km/h in a train from
Frankfurt to Cologne, or when on the highway looking for a filling station. That means that communication
and marketing must present the characteristics and quality of our different products
and make them clear to the customer. Accordingly, around 86 percent of total spending on marketing
and communication amounting to 7.3 million euros (2002: 8.5 million euros) targets customers
of Engineered Wood and Infrastructure Technology. In its centralized function, corporate
communication also addresses employees, the press and covers investor relations.
68
1.2
million euros
0.8
million euros
million euros 2003 2002
Corporate Communication 1.2 1.5
Infra 0.8 0.9
Wood 5.2 5.4

Engineered Wood
In the Business Segment Engineered Wood, marketing and communications activities in fiscal
2003 focused mainly on the introduction of a new brand and sales concept in Germany. Directing
products and services specifically at different customer groups, and optimizing production
control and logistics will strengthen the competitive position of Pfleiderer Engineered Wood as a
partner for the furniture industry and specialist outlets. The focal point of the new brand and
sales concept has been the introduction of the new “wodego” brand, based on a broad range of
carrier materials, surface-finished décor boards, surfacings and HPL elements. A flexible logistics
and service concept has been set up in close cooperation with some 200 selected dealers
and industrial customers from small and medium-sized businesses. Combined with the wide
range of products on offer and short delivery times, this brand is expected to take on a leading
position in Germany. “wodego” stands for the supply of 2,500 different articles, all available
within 48 hours from the logistics centers of Gütersloh and Neumarkt. The other mainstay is the
highly regarded “Thermopal” brand, with its exclusive specialty ranges of surfaces and finishes.
This, together with standard products, is aimed at quality-conscious manufacturers, architects
and the furniture industry via a central network of dealers.
Introduction of the new brand and sales concept was prepared through target-group advertising
directed at employees, dealers and customers. This process involved the full marketing mix of
press and media coverage, trade fairs, image adverts, brochures and trade samples, as well as
direct mailings and communication.
Infrastructure Technology
Marketing and communications activities in the Business Segment Infrastructure Technology in
fiscal 2003 concentrated largely on the presentation of products and services at trade fairs and
exhibitions. Around half of the marketing expenditure in the Business Segment Infrastructure
Technology was made on presentations at 10 trade fairs and exhibitions in Germany and abroad,
communicating Pfleiderer Poles & Towers, Pfleiderer track systems and Pfleiderer water systems.
The objective is to strengthen awareness among specialist buyers and increase market
share for Pfleiderer technology. Strong positive feedback received at trade fairs illustrates how
by the Business Center Track Systems. Being able to present references of successful projects in
Europe has proved a convincing argument for trade visitors, demonstrating how Pfleiderer Solid
Track RHEDA 2000® is used in real situations. Initial success from this intensified international
sales activity has already been seen in the high-speed project in Taiwan. Following these first
steps in the Asian market, presentations at the international trade markets in Korea and China
have led to new contacts and market share has already increased.
Unique in Europe is the new pole & tower park opened by the Business Center Poles & Towers.
For the first time, customers can view the whole range of materials used in pole and tower construction.
The 1st Pfleiderer Poles & Towers symposium marked the opening of the exhibition
grounds at the Pfleiderer headquarters in Neumarkt, complete with lighting poles, overhead conductors
and poles used for electricity supply, advertising, architectural design and telecommunication.
The exhibition is constantly being extended with new poles types and is permanently
available to sales units for customer events.
69
MANAGEMENT REPORT MARKETING AND COMMUNICATION

Share data
ISIN
DE0006764749
Stock exchange
abbreviation
PFD 4
Traded at
Frankfurt, Hamburg,
Munich, Stuttgart,
Berlin/Bremen,
Düsseldorf, Xetra
Cal. par value
2.56 euros
Market segment
Corporate Communication
While the operative segments of Engineered Wood and Infrastructure Technology address the customer,
the target groups for corporation communication are employees, the financial and business
media and the financial markets. Communicating corporate strategy is a focal point. Central
communications media include the annual report and the customer and employee magazine
“Imagine”. The objective is to make shareholders, customers, suppliers, employees, neighbours
and others more aware of what Pfleiderer stands for. The strength of a conglomerate with its
different business segments lies in the variety of its activities and the fact that different strengths
and weaknesses are balanced out. The communications budget breaks down as follows: 73 percent
investor relations, 14 percent press, public relations and employee communications, 13 percent
other activities.
The Pfleiderer Share
Increased Demand for Pfleiderer Shares Leads to Higher Trading
Pleasing Recovery of Share Price
Indexed Chart Pfleiderer Share + SDAX; Pfleiderer Share in Absolute Figures 02-03
(January – December 2003)
euros Index
6
5
4
3
2
1
Prime Standard J F M A M J J A S O N D
70
Pfleiderer share in euros
SDAX index
3500
3000
2500
2000
1500
1000

Share Price Movement
For Pfleiderer investors, fiscal 2003 was a year of considerable ups and downs. At the start of
the year, sellers put the share under pressure at relatively low trading levels. Following a fall in
the share price in the previous year, the share bottomed out at 1.65 euro in the first quarter of
2003. Market capitalization of Pfleiderer AG fell to under 100 million euros.
However, in the second quarter, the Pfleiderer share picked up, moving with the general upward
turn of the capital markets. Seen overall, the under-valuation of the small caps index SDAX compared
to the heavy-weights on the capital market was recognized as an opportunity which started
to pull in investors. Increased demand by newly won investors caused the Pfleiderer share to
strengthen as trading increased. At 3.54 euros, an increase of over 200 percent compared to the
year low was reached.
The third quarter was marked by weak summer months, with low trading levels leaving the price
to move sideways.
In the fourth quarter, however, the Pfleiderer share strengthened again following demand by international
investors, with the price moving up to an all-year high of 5.38 euros in December
2003. Market capitalization of Pfleiderer AG rose to 227.5 million euros, with the share outperforming
the SDAX. At the start of the new year, following profit-taking by some investors, the
share eased back to 4.60 euros at the end of January 2004.
Trading in the Pfleiderer Share
Around 8.6 million Pfleiderer shares with a total value of 25.6 million euros changed hands via
the XETRA electronic trading system and the trading floor of the Frankfurt Stock Exchange in
fiscal 2003. Trading per trading day came to an average 34,575 shares, with the average volume
rising from 9,758 shares in January to 44,353 in November 2003.
Earnings per Share/Dividend
Earnings per share are calculated from the Group’s net income/loss for the year divided by the
weighted average of issued shares. In fiscal 2003 earnings per share came to –1.07 euro compared
to –0.93 euro in 2002. Here the business centers disposed of (Wind, Eltec and Tipla)
played a role, with their operative results and book value write-downs. Accordingly, this result
has only limited meaning in terms of operative business. For this reason, earnings per share
has also been calculated just for the continued operations Engineered Wood and Infrastructure
Technology. Here EPS fell to – 0.06 euro in 2003, following 0.37 euro in 2002, this being particularly
due to accruals of 18.1 million euros.
Due to the net loss for the year 2003, no dividend will be paid.
Shareholders
As of January 28, 2004 the number of shareholders registered in the Pfleiderer shareholders register
stood at 14,882. Around 92.2 percent of shares are held by German investors, and around
3.8 percent by investors in the other countries of the European Union.
71
MANAGEMENT REPORT THE PFLEIDERER SHARE

Key Figures
The majority shareholder is Pfleiderer Unternehmensverwaltung GmbH & Co. KG which holds
around 66 percent. In the course of fiscal 2003, this company reduced its shareholding from
70 to 66 percent, increasing free float to 34 percent. No changes in shareholdings requiring
notification pursuant to Sec. 41(2) “Wertpapierhandelsgesetz” (German Securities Trading Act)
occurred during fiscal 2003.
Pursuant to Sec. 15a “Wertpapierhandelsgesetz”, members of the Board of Management and the
Supervisory Board and their dependents are obliged to notify the company and the German
Federal Financial Services Supervisory Office without delay of securities trading with their own
company (“Directors’ Dealings”) if they exceed the de minimis limit. The notification is published
on the website of Pfleiderer AG at www.pfleiderer.com. On November 27, 2003, Hans Theodor
Pfleiderer and Christiane Pfleiderer announced that they have each sold 76,096 and 43,600
shares respectively in Pfleiderer AG at a price of 3.80 euros.
Corporate Governance
Pursuant to Sec. 161 “Aktiengesetz” (German Stock Corporation Act) the Board of Management
and the Supervisory Board have issued a declaration of compliance for fiscal 2003 in accordance
with the recommendations of the Government Commission on the German Corporate Governance
Code. This declaration is published on the Company’s website. Pfleiderer AG reports in
more detail on corporate governance under the section “Corporate Governance at Pfleiderer”
in this annual report.
Investor Relations Activities
Individual and open communication with institutional and private investors is a cornerstone of
Pfleiderer’s communications policy. Alongside its regular events for analysts and telephone conferences,
the Company also holds presentations at investor conferences and individual talks
with investors and analysts in order to explain its corporate strategy. Pfleiderer has used various
international roadshows as a means of reinforcing its links with institutional investors as opinion
formers. This has resulted in the Company gaining a series of new investors.
The most important media for financial communication at Pfleiderer are the annual report, the
quarterly reports, press releases and ad hoc statements, the Annual General Meeting (AGM) and
the Internet. The most important event in the financial calendar is the AGM. The AGM was held
on June 17 in 2003 and attended by around 1,200 shareholders representing 79.58 percent of
capital stock.
72
2003 2002
Capital stock euros 109,274,000 109,274,000
Number of shares 42,685,000 42,685,000
Market capitalization as of Dec. 31 euros 227,510,000 117,380,000
Price as of Dec. 31 (Xetra) euros 5.33 2.75
High/Low 5.33/1.65 9.00/2.55
Dividend euro 0.00 0.00
EPS euro –1.07 –0.93
Av. daily trading 34,575 11,271

Post-Closure Report/Outlook
Moderate Outlook for German Business for Pfleiderer Engineered Wood
Growth in Earnings through Expansion Abroad
General Economic Conditions
Forecasts from German economic institutes on national and international economies are guardedly
optimistic. The main risk factor for a recovery of the German economy is seen by the Hamburg-based
Welt-Wirtschafts-Archiv (HWWA) in a further strengthening of the euro against the
dollar. Should the budgetary deficit reach 4 percent of GDP, this would again exceed the upper
limits defined in the Maastricht Treaty. Overall, HWWA considers it unlikely that the German
economy will develop dynamically in 2004.
This contrasts with the better business climate index in January, supporting ifo Institut’s prognosis
that the process of economic recovery will continue in Germany. This process is mainly borne
by the manufacturing sector, and to a lesser part by the construction industry. As far as retail
and wholesale are concerned, the climate has cooled down again according to the latest economic
survey carried out by the ifo-Institut in January 2004. Overall, ifo-Institut expects real
GDP growth to reach an average of around 1.8 percent in 2004.
The Timber Committee of the United Nations Economic Commission for Europe does not expect
any major changes in the timber and wood sector during 2004. However, a slight recovery in
engineered wood consumption in Europe is expected in 2004, following the decline in 2003.
Consumption figures in the Russian Federation are expected to increase considerably.
The European Panel Federation (EPF) expects production of particleboard to increase slightly in
2004, following a renewed slump in 2003. The situation in the European engineered wood markets
improved in the second half of 2003, but on aggregate production declined nevertheless in
2003.
Procurement
Bundling procurement activities for all the plants in Pfleiderer Engineered Wood means that positive
effects can be expected in 2004 again with regard to prices. Where not secured through
medium or long-term contracts, conditions are largely dependent on the state of the economy
and sector developments. As things stand today, it is likely that the 2003 increases in the cost
of energy will continue in 2004.
The UNECE Timber Committee expects that European producers of materials used in the production
of engineered wood will put up raw material prices. However, supplies to the Pfleiderer
plants have been secured by the Pfleiderer affiliate Interwood GmbH which is bundling material
flows for Pfleiderer’s particleboard production and its co-generation plants.
73
MANAGEMENT REPORT POST-CLOSURE REPORT/OUTLOOK

Corporate Structure and Organization
The Pfleiderer Group was restructured in January 2004, thereby reducing administrative costs.
At the same time, the management activities of the Board of Management are now more closely
geared to operative tasks. Production sites, logistics and commercial controls for the Business
Segment Engineered Wood have been brought together under the umbrella of Pfleiderer Holzwerkstoffe
GmbH & Co. KG. Similarly, Pfleiderer Pole & Towers has also been integrated into a
company of its own (GmbH & Co. KG). Pfleiderer track systems continues to operate as part of
Pfleiderer Infrastrukturtechnik GmbH & Co. KG.
In February 2004, an agreement was signed with Valmont Industries, Inc., USA, concerning the
sale of the Pfleiderer subsidiary Newmark International, Inc., USA. The agreement is still subject
to approval by the US anti-trust authorities.
Changes in Personnel and Social Activities
The personnel structure of the Pfleiderer Group is under continuous assessment to ensure maximum
efficiency in the use of labor and operational structures. The personnel development
scheme, part of the Pfleiderer Business Campus, will be continued in 2004 in accordance with
long-term personnel development targets. However, spending has been cut in this area as part
of the general cost-savings package.
Investment, Research and Development
Future spending on research and development will be planned carefully in the Pfleiderer Group,
taking into full consideration the general financial situation. Only those projects will be considered
which have a strong potential for earnings and growth, and which fit in with the Company’s
strategy of reducing dependence on the German economy through international expansion. In
this context, spending in the Engineered Wood segment – apart from maintenance measures in
Germany necessary to sustain production – will be directed at expanding eastern European
business. In order to participate in growing markets there, extensions are being made to production
capacity in the Polish plants. Construction of the particleboard plant in Novgorod, Russian
Federation, will continue as planned. Production is due to start there in 2005.
In the Business Segment Infrastructure Technology, investments will focus on expanding the
international activities of the Business Center Track Systems. Two new sleeper plants and the
extension of existing production facilities in Kirchmöser, Germany, and in Lábatlan, Hungary,
are planned for 2004.
74

Future Earnings
Growth of the Pfleiderer Group is particularly dependent on how business develops in its individual
segments. In the Business Segment Engineered Wood, this depends on overall economic developments
in Germany, in particular on consumer demand for furniture. Accounting for around
46 percent of sales, the German market is the main factor determining earnings in this business
center. The German furniture industry, the most important customer group for Pfleiderer Engineered
Wood, expects sales to grow in 2004 following heavy losses made in 2003. However,
there have been no real signs of demand picking up to date. Not only is the Pfleiderer management
being extremely cautious in contrast to the present mood of optimism, it is even planning
for a scenario of a stagnating market in Germany. Bearing this in mind, the first priority must be
to strengthen exports and drive business on in the eastern European markets. However, management
expects sales and earnings in the Business Segment Engineered Wood to continue to grow
as far as its operations outside Germany are concerned.
Regarding the Business Segment Infrastructure Technology, impetus for growth is expected from
the international operations of the Business Center Track Systems. Apart from the wind converter
operations, the German market for poles and towers and maintenance and repair business
for the German rail track system are expected to remain stable. On the other hand, management
expects positive effects from projects already realized in Europe and Asia which involve
the RHEDA 2000® Solid Track System, with follow-up orders expected.
Overall, the Pfleiderer management expects sales and earnings to remain stable in 2004, provided
conditions affecting the market and the political framework do not change with regard to the
Group’s operations.
Future Dividends
In principle, the payment of dividends by the Pfleiderer Group depends on the earnings generated
and a free Cash Flow for the fiscal year in question. The decision on a dividend for fiscal
2004 will be taken spring of 2005.
75
MANAGEMENT REPORT POST-CLOSURE REPORT/OUTLOOK

Inspiring Creativity

Poles & Towers
Round columns of spun concrete
for the Neue Pinakothek, Museum
of Modern Art in Munich
Pfleiderer Poles & Towers’ know-how in the field of spun concrete provides new
opportunities when planning modern architecture or city and urban landscapes.
Aesthetic design, high functionality and tough surface quality, coupled with
extraordinary static strength – convincing arguments for our vast range of spun
concrete poles and columns. Poles from Pfleiderer are increasingly used in
advertising or telecommunications antennas. In contemporary architecture, our
products are more than just supporting structures – they are inspiring creativity.

Financial Statements
80
Pfleiderer Group
Consolidated Balance Sheet
82 Consolidated Statement of Income
83 Consolidated Statement of Cash Flows
84 Consolidated Statement in Shareholders’ Equity
86 Segment Reporting
88 Notes to the Consolidated Financial Statements for Fiscal Year 2003
128 Analysis of Group Assets
130 Audit Opinion
132 Consolidated Companies
Pfleiderer AG
Extract from the Annual Report
134 Balance Sheet
135 Statement of Income
136 Analysis of Fixed Assets
In Brief
138 Supervisory Board and Board of Management of Pfleiderer AG
140 Glossary
142 Multi-Year Summary
79
FINANCIAL STATEMENTS

FINANCIAL STATEMENTS
Pfleiderer Consolidated Balance Sheet for Fiscal Year Ending December 31, 2003
Assets
‘000 euros Notes Dec. 31, 2003 Dec. 31, 2002
Cash and cash equivalents (1) 68,735 58,242
Securities classified as current assets 0 13
Receivables and other assets (2) 98,195 146,312
Inventories, net (4) 133,716 114,397
Deferred tax assets (20) 8,168 8,702
Prepaid expenses 2,443 2,231
Assets of discontinued operations (16) 14,731 35,045
Current assets 325,988 364,942
Property, plant and equipment, net (5) 331,054 381,546
Intangible assets, net (6) 95,950 102,435
Financial assets (7) 2,231 2,072
Deferred tax assets (20) 18,473 33,638
Other assets (8) 5,560 2,802
Non-current assets 453,268 522,493
Total assets 779,256 887,435
80

Liabilities and Stockholders’ Equity
‘000 euros Notes Dec. 31, 2003 Dec. 31, 2002
Short-term liabilities (9) 138,064 143,328
Financial liabilities (10) 56,289 42,885
Other short-term accruals (11) 31,841 31,534
Deferred tax liabilities (20) 2,458 3,063
Deferred income 2,061 1,953
Liabilities of discontinued operations (16) 31,816 23,314
Short-term liabilities 262,529 246,077
Long-term financial liabilities (12) (13) 273,176 322,603
Accruals for pensions (21) 62,414 61,263
Deferred tax liabilities (20) 22,464 39,314
Other long-term liabilities 0 252
Other long-term accruals (14) 14,555 9,772
Deferred income (15) 4,888 6,888
Minority interests 44,337 45,478
Long-term liabilities 421,834 485,570
Contributions and subscribed capital 109,274 109,274
Additional paid-in capital 10,927 10,927
Revenue reserves 158,862 158,862
Treasury stock 0 -8
Retained earnings/accumulated loss –163,195 –117,433
Other comprehensive income –20,975 –5,834
Stockholders’ equity (17) 94,893 155,788
Total liabilities and stockholders’ equity 779,256 887,435
The accompanying notes are an integral part of these consolidated Financial Statements.
81
FINANCIAL STATEMENTS PFLEIDERER GROUP

Pfleiderer Consolidated Statement of Income for Fiscal Year 2003
‘000 euros Notes Dec. 31, 2003 Dec. 31, 2002
Sales revenues 1,020,900 1,028,432
Cost of sales –759,751 –755,197
Gross margin 261,149 273,235
Selling expenses –124,993 –117,199
Administrative expenses –98,103 –104,163
Research and development costs –2,418 –1,159
Other operating income and expenses (1) 9,028 3,515
Special effects (3) –18,102 –4,049
Operating result 26,561 50,180
Net interest (2) –16,307 –15,391
Investment income 1,089 589
Other financial income/loss 5 –1,749
Financial result
Earnings of continued operations before taxes
–15,213 –16,551
on income and minority interests 11,348 33,629
Taxes on income –9,305 –13,200
Earnings of continued operations before
minority interests 2,043 20,429
Loss from discontinued operations –44,964 –52,452
Taxes on income from discontinued operations 1,777 –3,000
Earnings before minority interests –41,144 –35,023
Minority interests –4,618 –4,641
Earnings after minority interests –45,762 –39,664
Earnings per share (basic and diluted) –1.07 –0.93
Earnings of continued operations per share –0.06 0.37
Earnings of discontinued operations per share –1.01 –1.30
Average number of shares outstanding 42,678,146 42,673,784
The accompanying notes are an integral part of these consolidated Financial Statements.
82

Pfleiderer Consolidated Statement of Cash Flows for Fiscal Year 2003
Jan. 1 – Jan. 1 –
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Cash Flow from operating activities
Earnings of continued operations before minority interest 2,043 20,429
Changes:
Depreciation and amortization of non-current assets 58,787 60,566
Change in accruals for pensions 1,121 2,282
Operative Cash Flow 61,951 83,277
Change in current assets 33,128 75,325
Change in non-current assets 12,474 9,133
Change in short-term liabilities excluding financial debt –9,388 –13,146
Change in long-term liabilities excluding financial debt
Change in adjustment item for minority interests
–14,319 –15,062
(before current earnings and distribution) –4,368 –5,978
Cash Flow from operating activities 79,478 133,549
Cash Flow from investing activities
Cash paid for investments in intangible assets –2,366 –5,694
Cash paid for investments in property, plant and equipment –34,014 –38,258
Cash paid for investments in financial assets –619 –792
Cash received for disposal of intangible assets 1,040 261
Cash received for disposal of property, plant and equipment 15,611 7,177
Cash received for disposal of financial assets 215 6,480
Cash Flow from investing activities –20,133 –30,826
Cash Flow from operating activities after investing activities 59,345 102,723
Cash Flow from financing activities
Change in financial liabilities –36,023 –163,254
Distribution to minority interests –1,390 0
Dividend distribution 0 –8,537
Cash paid for the purchase of treasury stock 8 –8
Cash Flow from financing activities –37,405 –171,791
Change in cash and cash equivalents
Change in cash and cash equivalents due to exchange
21,940 –69,076
rate fluctuations
Change in cash and cash equivalents due to discontinued
3,096 95
operations –14,371 70,265
Change in cash and cash equivalents due to purchase accounting –185 1,207
Cash and cash equivalents as of January 1 58,255 55,764
Cash and cash equivalents as of December 31 68,735 58,255
The accompanying notes are an integral part of these consolidated Financial Statements.
83
FINANCIAL STATEMENTS PFLEIDERER GROUP

Pfleiderer Consolidated Statement of Changes in Shareholders’ Equity
Fiscal year 2003
Capital Additional
‘000 euros stock paid-in capital
As of January 1, 2003
Dividends of Pfleiderer AG
Treasury stock
Change in adjustment item from currency translation
Change in adjustment item from valuation of
financial derivatives
109,274 10,927
Change in adjustment item from valuation of pensions
Earnings after minority interests
As of December 31, 2003 109,274 10,927
Fiscal year 2002
Capital Additional
‘000 euros stock paid-in capital
As of January 1, 2002
Dividends of Pfleiderer AG
Treasury stock
Change in adjustment item from currency translation
Reclassification of foreign currency items of
deconsolidated companies
Change in adjustment item from valuation of
financial derivatives
109,274 137,919
Change in adjustment item from valuation of pensions
Reclassification from adjustment item from valuation of
financial derivatives of deconsolidated companies
Earnings after minority interests
Reserves used –126,992
As of December 31, 2002 109,274 10,927
The accompanying notes are an integral part of these consolidated Financial Statements.
84

Comprehensive income (loss)
85
Other comprehensive income (loss)
Retained Valuation of
Revenue Treasury earnings of Currency financial Valuation of
reserves stock the Group translation derivatives pensions Total
158,862 –8 –117,433 4,057 –8,403 –1,488 155,788
0
8 8
–15,783 –15,783
FINANCIAL STATEMENTS PFLEIDERER GROUP
672 672
–30 –30
–45,762 –45,762
158,862 0 –163,195 –11,726 –7,731 –1,518 94,893
Comprehensive income (loss)
Other comprehensive income (loss)
Retained Valuation of
Revenue Treasury earnings of Currency financial Valuation of
reserves stock the Group translation derivatives pensions Total
158,862 0 –187,004 13,740 –2,303 –2,035 228,453
–8,537 –8,537
–8 –8
–18,543 –18,543
–8,860 8,860
–6,460 –6,460
547 547
–360 360 0
–39,664 –39,664
126,992 0
158,862 –8 –117,433 4,057 –8,403 –1,488 155,788

Segment Reporting for Fiscal Year 2003
86
Engineered Wood
‘000 euros Dec. 31, 2003 Dec. 31, 2002
External sales 698,009 700,214
Intercompany sales 17,913 24,966
Sales revenues 715,922 725,180
thereof domestic 333,247 342,083
thereof foreign 382,675 383,097
Foreign share (%) 53.4 52.8
Cost of sales –538,282 –541,672
% of sales revenues –75.2 –74.7
Gross margin 177,640 183,508
% 24.8 25.3
Cost of selling –101,915 –95,355
% of sales revenues –14.2 –13.1
General and administrative expenses –51,753 –55,846
% of sales revenues –7.2 –7.7
Research and development costs –1,324 –1,057
% of sales revenues –0.2 –0.1
Other comprehensive income and expenses 6,117 10,568
Other comprehensive income 13,944 21,453
Other comprehensive expenses –7,825 –10,885
Amortization of goodwill 0 0
Special effects –42 –631
Operating result 28,723 41,187
EBIT 29,076 40,129
% of sales revenues 4.1 5.5
EBITDA 57,721 78,961
% of sales revenues 8.1 10.9
Capital expenditure 23,254 19,026
Average employees without trainees 3,492 3,571
Segment assets in million euros 361.1 403.7
ROCE (%) 8.1 9.9

Infrastructure Technology Consolidation/other Pfleiderer Group
Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2003 Dec. 31, 2002
297,441 334,664
6,966 865
304,407 335,529 571 –32,278 1,020,900 1,028,432
189,131 202,153 522,991 530,508
115,276 133,376 497,909 497,924
37.8 39.7 48.8 48.4
–223,864 –238,985 –759,751 –755,197
–73.5 –71.2 –74.4 –73.4
80,543 96,544 2,967 –6,818 261,149 273,235
26.5 28.8 519.8 21.1 25.6 26.6
–28,304 –27,259 –124,993 –117,199
–9.3 –8.1 –12.2 –11.4
–29,726 –33,193 –98,103 –104,163
–9.8 –9.9 –9.6 –10.1
–1,099 –121 –2,418 –1,159
–0.4 0.0 –0.2 –0.1
1,206 2,300 9,028 3,515
3,489 4,108 19,547 20,450
–2,282 –1,808 –10,519 –16,935
0 0 0 0
–14,517 –1,549 –18,102 –4,049
8,103 36,722 –10,265 –27,729 26,561 50,180
8,116 35,918 –9,560 –27,152 27,632 48,894
2.7 10.7 –1,675.2 84.1 2.7 4.8
31,264 45,576 –3,601 –15,077 85,385 109,460
10.3 13.6 –630.9 46.7 8.4 10.6
9,581 18,027 4,164 7,692 36,999 44,745
1,972 1,931 159 189 5,623 5,691
114.6 138.6 8.6 20.4 484.3 562.7
7.1 25.9 5.7 8.7
87
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Notes to the Consolidated Financial
Statements for Fiscal Year 2003
I. Business Units and Description of the Business
Following the sale of its Eltec and Tipla business units and the onshore and offshore operations
of its Wind business unit in the year under review, which are no longer part of the defined target
market of the Pfleiderer Group, Pfleiderer AG (hereinafter “Pfleiderer” or “the Company”) is concentrating
on its core competences Engineered Wood and Infrastructure Technology with their
main business units Rail Traffic and Concrete Masts and Towers.
The assets and liabilities remaining after the sale of discontinued operations are disclosed separately
in the balance sheet and income statement.
As in the prior year, operations sold and deconsolidated in the year under review are also disclosed
under discontinued operations in the comparable figures of the prior fiscal year.
The consolidated Financial Statements of Pfleiderer AG are included in the consolidated Financial
Statements of Pfleiderer Unternehmensverwaltung GmbH, Nuremberg. The consolidated Financial
Statements of Pfleiderer Unternehmensverwaltung GmbH, Nuremberg, as of December 31, 2003
are prepared in accordance with the Generally Accepted Accounting Principles of the United
States (US GAAP). Pursuant to Sec. 292a HGB [“Handelsgesetzbuch”: German Commercial Code],
Pfleiderer Unternehmensverwaltung GmbH, Nuremberg, is exempted from the obligation to prepare
consolidated Financial Statements in accordance with the German Commercial Code. The
consolidated Financial Statements have been filed with the commercial register of the Nuremberg
district court.
II. Exemption Pursuant to Section 264b HGB
The companies that have applied the exemption rule are marked accordingly in the list of consolidated
companies.
III. Summary of Significant Accounting and Valuation Principles
Basis of presentation
The consolidated Financial Statements of Pfleiderer AG have been prepared in accordance with
US GAAP. Pursuant to Sec. 292a HGB, Pfleiderer AG is therefore exempted from the obligation to
prepare consolidated Financial Statements in accordance with the German Commercial Code. All
amounts in the consolidated Financial Statements are stated in euro.
From 2005 onwards, the Company will prepare Financial Statements in accordance with IFRS
(International Financial Reporting Standards). The reason for this decision is the EU Directive
promulgated in 2002 concerning application of the international accounting standards, according
88

to which preparation of consolidated Financial Statements in accordance with IFRS is mandatory
for all listed companies in the EU for fiscal years beginning on January 1, 2005. The prior year
figures will be converted accordingly in 2004.
Consolidated companies
The consolidated Financial Statements contain the Financial Statements of Pfleiderer AG and its
majority-owned subsidiaries in which it has a controlling interest. All significant subsidiaries in
which the Company has a direct or indirect controlling interest have been consolidated. In addition
to Pfleiderer AG, 24 (prior year: 26) German and 20 (prior year: 20) foreign subsidiaries are
fully consolidated in the Financial Statements. In the year under review, seven (prior year: three)
subsidiaries were consolidated for the first time, while four (prior year: 16) subsidiaries left the
consolidated group.
As they are not material for the net assets, financial position and results of operations of the
Group, eleven (prior year: eight) subsidiaries have not been consolidated.
Number of fully consolidated companies:
Number of fully consolidated companies that are reported as continued operations:
Subsidiaries included in the consolidated Financial Statements for the first time:
Formations
Pfleiderer Poles & Towers GmbH & Co. KG (December 31, 2003)
Acquisitions
Heller Holz GmbH
Heller Forstservice GmbH
FH Frischholz GmbH
Other
Duropal GmbH
Pfleiderer Holzwerkstoffe Vertriebs-GmbH
Wodego GmbH
All three distribution companies listed under “Other” were already founded in the prior year, but
not included in the prior year consolidated Financial Statements due to immateriality.
89
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP
2003 2002
Domestic 24 26
Foreign 20 20
Total 44 46
2003 2002
Domestic 21 18
Foreign 19 19
Total 40 37

Effects from additions to the consolidated group on the major balance sheet items
reported as continued operations:
‘000 euros
Assets
Fixed assets 113
Inventories 1,293
Trade receivables 2,298
Equity and liabilities
Accruals 76
Other liabilities 1,316
The additions to the consolidated group raised the revenues of continued operations by 8,009
thousand euros.
Principles of consolidation
Equity investments are consolidated using the purchase method of accounting. This method offsets
the acquisition cost of the equity investment against the share in equity attributable to the
parent company on the date of acquisition. The difference is allocated to the assets and liabilities
of the subsidiary in line with the investment held in the company up to the amount of their
proportionate fair values (proportionate purchase method). Any remaining debit difference is
capitalized as goodwill and subjected to an impairment test in accordance with the provisions of
SFAS No 142.
Shares in affiliated companies that are not fully consolidated are valued at acquisition cost. Due
to immateriality, no shares in associated companies were accounted for using the equity method.
Intercompany receivables and liabilities, sales, expenses and income as well as intercompany
results between the consolidated companies are eliminated in consolidation.
Minority interests are determined on the basis of the equity as of the balance sheet date and
reported in the balance sheet together with allocable profits or losses as adjustment item for
minority interests.
Significant acquisitions and disposals/discontinued operations
The company Heller Holz GmbH, Korbach/Germany, and its two wholly-owned subsidiaries Heller
Forstservice GmbH and FH Frischholz GmbH (also registered in Korbach) were acquired in the
fiscal year 2003. It was consolidated for the first time as of June 1, 2003. Therefore, the consolidated
income statement only takes account of the results of these companies from their date
of first-time consolidation.
90

The onshore and offshore operations of the Wind business unit were sold in fiscal 2003. The
effects from the sale and deconsolidation of the operations on the consolidated balance sheet
and consolidated income statement are explained below in Section IV. 16 “Discontinued operations”.
The Onshore operations were contributed to a new company together with Fuhrländer AG.
Fuhrländer AG holds a majority in interest in the company trading under the name of Fuhrländer-
Pfleiderer GmbH & Co. KG and is responsible for company management. After expiry of a threeyear
period, Pfleiderer AG has the option to offer its shares to Fuhrländer AG. In addition, Eltec
Elemente-Technik für Möbel- und Innenausbau GmbH, Arnsberg, was sold as of January 1, 2003
while the two companies registered in Bad Tölz, Moralt Tischlerplatten GmbH & Co. KG and
Moralt Tischlerplatten Verwaltungs-GmbH, were sold as of November 30, 2003.
The balance sheet items of two companies in the Wind business unit as well as two other companies
of the former insulation technology operations are not reported as discontinued operations
in the balance sheet.
Use of estimates
The preparation of the consolidated Financial Statements requires the Board of Management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and
of income and expenses in the consolidated Financial Statements and the disclosure of contingent
assets and liabilities. Actual results may differ from these estimates.
Foreign currency translation
The Financial Statements of the subsidiaries of Pfleiderer AG were prepared in their functional
currency, i.e., their local currency. With the exception of equity which is translated at the exchange
rate valid on the respective date of a transaction, all balance sheet accounts are translated to
the reporting currency (EUR) at the rate valid at the end of the year under review. Income and
expense accounts are translated at the weighted average rates of the fiscal year. Any differences
resulting from foreign currency translation are recorded in a separate item under equity
(“Other comprehensive income/adjustment item from currency translation”) until the group
company is sold or liquidated.
The main foreign currencies for the Group are as follows:
Mean rate as of balance sheet date (EUR 1 = ) Dec. 31, 2003 Dec. 31, 2002
Czech Republic (CZK) 32.5500 31.5200
Hungary (HUF) 262.1150 236.0650
Poland (PLN) 4.7255 4.0329
Rumania (ROL) 40,146.3000 34,084.2000
Russia (RUB) 36.8800 33.4800
Switzerland (CHF) 1.5590 1.4527
Slovenia (SIT) 233.8310 228.4860
Ukraine (UAH) 6.5137 5.4063
United Kingdom (GBP) 0.7070 0.6505
USA (USD) 1.2610 1.0477
91
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Revenue recognition
Sales revenues are mainly generated from the supply of products and services. In accordance
with US GAAP, sales revenues are recorded net of sales deductions such as bonuses, discounts
or rebates at the date when they are realized or realizable and earned. This is generally the case
where clear proof of an agreement exists, the delivery or service has been effected, the price
has been fixed or can be clearly ascertained and actual payment is reasonably secured.
Revenues from long-term production are considered realized when total revenue, total costs
and percentage of completion can be determined sufficiently reliably (percentage-of-completion
method, as mainly defined in SOP 81-1 and ARB 45). Under the percentage-of-completion method,
the Group reported revenues totaling 154 thousand euros in 2003 (prior year: 1,342 thousand
euros).
Cash and cash equivalents
Cash and cash equivalents are cash on hand and bank balances, including current deposits with
banks with initial maturities of three months or less.
Concentration of credit risks
The Group sells a broad range of products and services to a wide circle of industrial and commercial
customers in Germany and abroad. Outside Germany, the Pfleiderer Group is mainly represented
in Europe, Asia, Australia, North America and South Africa. The concentration of credit
risks from trade receivables is limited by the large number of customers alone. Some of the
receivables are also secured by credit insurance.
In the year under review, approx. 5 percent (prior year: 6 percent) of total sales revenues were
generated with one customer. The Company does not see any credit risk arising in connection
with this major customer.
The Company invests cash reserves via bank accounts and in other secure investments that can
be liquidated at short notice. The Company monitors its credit risk by obtaining regular ratings
on the creditworthiness of its counterparties. Apart from that, such investments only take the
form of deposits or short-term investments.
Receivables
Receivables are stated at net realizable value, i.e. their nominal value less specific and general
bad debt allowances and less reductions (bonuses, discounts, sales deductions). Specific bad
debt allowances are recorded if receivables are considered to be partly or wholly unrecoverable
and the amount of non-recovery can be determined with sufficient accuracy. A general allowance
is estimated on the basis of past bad debts to cover the general bad debt risk. Sufficient valuation
allowances and accruals are formed to cover bonuses and discounts. From fiscal 2003 onwards,
the risk will generally be taken into account by bad debt allowances.
92

Sales of receivables by the Group are treated in accordance with SFAS No 140 (“Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”). Pursuant to SFAS
No 140, a company must recognize the financial and servicing assets it controls and the liabilities
it has incurred and derecognize financial assets when control as defined by SFAS No 140
has been surrendered.
The Group treats receivables transferred under its asset-backed securities scheme as sold. However,
a transfer is only reported as a sale when receivables are beyond the reach of the company
and its creditors. This also applies in the event of insolvency or other administration of the creditor’s
property. Additionally, the right to pledge or exchange transferred receivables must be
surrendered and the possibility or obligation to repurchase transferred receivables excluded.
Inventories
Inventories are valued at the lower of cost or market on the basis of individual values or the
weighted averages method. Where justified, the first-in, first-out (FIFO) method is used. The
market value is generally determined using replacement costs. The ceiling for the market value is
the estimated sales price in the scope of ordinary activities less the expected costs of completion
and sale (net realizable value). The floor for the market value is the net realizable value less
a customary profit margin.
Production costs include direct material and labor costs as well as adequate portions of production-related
overheads.
All identifiable inventory risks from reduced salability or obsolescence are accounted for by
appropriate deductions. Allowances are made for slow-moving articles.
Use of financial instruments
The Group transacts business in numerous international currencies subject to exchange rate
fluctuations. Pfleiderer reduces its risk in different markets by hedging with derivative financial
instruments.
93
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Market value of financial instruments
The market value of a financial instrument is the price at which a third party would be prepared
to accept the rights and/or obligations arising from it. The Company has its financial instruments
valued by the other contracting party, as a rule banks.
The carrying amounts of liabilities from finance leases are based on market prices for similar
financing and largely correspond to the fair value. The same applies to financial assets.
Intangible assets
Purchased intangible assets are capitalized at acquisition cost and amortized over their useful
lives on a straight-line basis.
Expenses incurred in connection with the purchase and own development of software used by
the Company, including expenses incurred for achieving operability of such software, are capitalized
and amortized over the useful life of the software.
Goodwill
Pursuant to the provisions of SFAS No 142, goodwill is capitalized and tested for impairment at
regular intervals, at least once a year. SFAS No 142 requires that goodwill and other intangible
assets with an indefinite useful life are no longer amortized as scheduled, but reviewed for
impairment whenever there are indications that it may be impaired, at least once a year. The
impairment rules of SFAS No 142 are applicable for any goodwill and other intangible assets
acquired after June 30, 2001 through acquisition of a company. Any other goodwill acquired prior
to June 30, 2001 is amortized as scheduled from fiscal 2002 in accordance with SFAS No 142.
Property, plant and equipment
Property, plant and equipment are valued at historical acquisition or production cost less accumulated
depreciation. Depreciation is recorded over the useful life of the assets using the straightline
method. Production cost for property, plant and equipment constructed by the Company
includes direct material and labor costs as well as adequate portions of allocable overheads and
– where the manufacturing process extends over a longer period of time – interest on borrowing
from third parties during the construction period. General administrative costs are only capitalized
where they are directly related to manufacture. Maintenance and repairs are recognized as
expenses.
Assets with a limited useful life are depreciated using the straight-line method. For reasons of
immateriality, low-value assets not exceeding 410 euros in value are fully expensed in the year
of acquisition in agreement with the German accounting practice. Where assets are sold or
scrapped they are retired from the balance sheet with any profit or loss posted to income.
94

Scheduled depreciation is based the following useful lives:
Leasehold improvements and leased property, plant and equipment are depreciated over their
useful life or over the rental or lease period, whichever is shorter.
Government subsidies and grants
Upon receipt, government subsidies and grants are deducted from the acquisition and production
cost of the subsidized investment, provided the conditions relating to the investment are
fulfilled.
Impairment of long-lived assets and intangibles with a limited useful life
Long-lived assets and intangibles are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may no longer be recoverable. Where
facts and circumstances indicate that an asset has been impaired, the carrying amount of the
asset is compared with its estimated future undiscounted net Cash Flow. If necessary, the assets
are written down to the lower fair value. Fair value is based on the discounted net Cash Flow
generated by the asset over its useful life.
Leases
Leases are classified either as capital leases or as operating leases. Transactions which satisfy
the criteria of SFAS No 13 are treated in the Group as capital leases. In this case, the leased asset
and the corresponding liability have to be recorded by the Group (lessee).
SFAS No 13 sets out the following criteria:
The lease transfers ownership of the property to the lessee at the end of the lease term.
The lease contains a bargain purchase option to acquire the leased property considerably below
its market value.
The lease term of the leased property is equal to 75 percent or more of the estimated useful
life of the leased property.
The present value at the beginning of the lease term of the future minimum lease payments
equals or exceeds 90 percent of the fair value of the leased property.
All other lease agreements in which the Group acts as lessee are treated as operating leases,
and the lease payments are consequently expensed as incurred.
95
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP
years
Buildings 20–25
Technical equipment and machines 8–16
Other equipment, furniture and fixtures 3–11

Stock-based compensation
On account of SFAS No 123 (“Accounting for Stock Based Compensation”), the Company has decided
to value issued stock options according to the intrinsic value based method in compliance
with Accounting Principles Board Opinion No 25 (“Accounting for Stock Issued to Employees”)
and pertinent interpretations. In accordance with APB No 25, the difference between the market
price of the Company’s share at the date of issue of the option and the exercise price of the
subscription right is disclosed under personnel expenses. With regard to pro-forma disclosures
in accordance with SFAS No 123 (“Accounting for Stock-Based Compensation”), we refer to
Section IV No 18. The option provided by the SFAS No 148 (“Accounting for Stock-Based Compensation
– Transition and Disclosure”), published in December 2002, on transition to the fair
value method was not used. The table below shows personnel expenses and the effect that application
of the fair values prescribed by SFAS No 123 would have had on earnings (after taxes)
and earnings per share.
Accruals for pensions and similar obligations
Accruals for pensions and similar obligations are calculated using the projected unit credit
method. A minimum obligation is recognized, i.e., the amount in excess of the accruals for pensions
taken into account as affecting income in the past. If no intangible asset is recognized,
or if there are additional obligations exceeding the value of the intangible asset, the amount is
offset against equity. Unrecognized actuarial gains and losses are amortized in accordance
with the specific pension plan, however, no longer than the remaining period of service of the
employee or the life expectancy or his/her dependants.
Other accruals
Other accruals, including accruals for environmental protection measures resulting from legal
claims, local authority regulations or any other basis, are formed at the date when it is probable
that they have been incurred and their amount can be reasonably estimated, i.e., where a legal
obligation exists.
96
Dec. 31, 2003 Dec. 31, 2002
Net loss after taxes and minority interests
less: personnel expenses for stock-based compensation
‘000 euros –45,762 –39,664
(pursuant to the fair value method) ‘000 euros –893 –356
Pro forma loss ‘000 euros – 46,655 –40,020
Earnings per share euro –1.07 –0.93
Adjusted basic pro-forma earnings per share euro –1.09 –0.94

The Company sets up accruals in connection with environmental protection measures where a
claim seems likely and can be estimated. Changes to these estimates are recorded in the accounting
period in which the change occur. While the Company cannot estimate the effect of
future laws, the Group assumes that a final ruling on these matters will not have a significant
effect on the consolidated Financial Statements.
Future expenses for environmental protection measures are not discounted to their present value.
The Company carries receivables for estimated claims against insurance companies or third parties
where it appears likely that such receivables will be received.
Advertising expenses
Expenses for advertising and sales promotion are recorded at the date of inception. In the year
under review, expenses for advertising and sales promotion came to 6,079 thousand euros, compared
to 6,229 thousand euros in the prior year. Owing to the launch of a new brand and selling
concept in engineered wood, expenses remained at prior year level.
Research and development costs
Research and development costs are expensed as incurred.
Deferred taxes
Deferred tax assets and liabilities are recognized for all temporary differences between the carrying
amounts in the tax balance sheet and those in the consolidated balance sheet, as well as
for tax loss carryforwards (“temporary concept”). The tax rates to be used are those that, under
current legislation, will apply in future when the temporary differences are expected to be reversed.
The effects of changes in tax law on deferred taxes are taken into account with effect on
income in the period in which they enter into force. Deferred tax assets are only reported when
it is probable that the related tax advantages will be realized.
When estimating the recoverability of deferred tax assets, the Company considers whether the
probability that they will be realized is greater than 50 percent.
Comprehensive income
SFAS No 130 “Reporting Comprehensive Income” obliges the complying companies to disclose
comprehensive income and its components (net income after minority interests and other comprehensive
income) in separate items.
Other comprehensive income includes sales, expenses, profits and losses that are not included
in the Group’s net income for the year. Both other comprehensive income and comprehensive
income are shown in the statement of changes in shareholders’ equity.
97
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Basic and diluted earnings per share
Earnings per share (EPS) were calculated in accordance with SFAS No 128 (“Earnings per Share”).
Pursuant to SFAS No 128, EPS must be shown for all companies that have issued shares. Basic
EPS is the net profit divided by the weighted average of outstanding shares. Common-stock
equivalents used for purposes of stock option compensation can have a dilutive effect. Where
a dilutive effect occurs, diluted earnings per share must also be shown.
Changes in accounting policies
As of January 1, 2003, Pfleiderer applies SFAS No 143 (“Accounting for Asset Retirement Obligations”).
This new statement regulates the accounting and reporting of obligations from the discontinuation
or disposal of property, plant and equipment and the associated retirement costs.
The new standard applies to legal obligations associated with the discontinuation or disposal
of property, plant and equipment that result from the acquisition, construction, development
and/or the customary use of the asset. SFAS No 143 requires the liabilities to be recognized
at fair value in the period in which the related payment obligations are incurred if a reasonable
estimate of fair value can be made. The carrying amount of the related property, plant and
equipment is increased accordingly. The write-up is written off over the remaining useful life of
the property, plant and equipment. The liability is adjusted to its present value at the end of
each reporting period, with effect on income. Any positive or negative difference in its carrying
amount arising when the liability is extinguished is recorded with effect on income. Neither
first-time nor subsequent application of SFAS No 143 had an effect on the Company in 2003.
In July 2002 the FASB published SFAS No 146 (“Accounting for Costs Associated with Exit or
Disposal Activities”) which rescinds Emerging Issues Task Force (EITF) Issue 94-3 (“Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity –
including Certain Costs Incurred in a Restructuring”). The Company has applied the standard
since January 1, 2003. SFAS No 146 requires that expenses resulting from the discontinuation or
disposal of operations must not be recorded with effect on income until there is a legal obligation
to the third party concerned, i.e., not on the date management decides on a plan for discontinuation
or disposal. These expenses include certain severance payments to employees, costs
for terminating contracts prematurely and expenses related to the merger or closure of operations
or relocation of employees. SFAS No 146 also requires that the liability be measured at fair value
and adjusted according to changes to the estimated future Cash Flows. The provisions of the new
standard are applicable for future discontinuations or disposals of operations initiated after
December 31, 2002. Earlier application is possible. There have been no effects from first-time
application of SFAS No 146.
98

In December 2002, the FASB issued SFAS No 148 (“Accounting for Stock-Based Compensation –
Transition and Disclosure”). SFAS No 148 modifies SFAS No 123 (“Accounting for Stock-Based
Compensation”) and offers alternatives to changing to the fair value method pursuant to SFAS
No 123. Moreover, SFAS No 148 has revised the notes required by SFAS No 123 and APB Opinion
No 28 (“Interim Financial Reporting”). Following revision, the summary of the significant accounting
and valuation policies must include effects of the policies chosen (pursuant to APB 25
or SFAS No 123) with respect to employee subscription rights on the result and earnings per
share both in the annual and quarterly reports. SFAS No 148 does not require that the companies
apply the fair value method pursuant to SFAS No 123. However, the notes required pursuant to
SFAS No 148 are necessary for all companies irrespective of whether the company uses APB 25
or SFAS No 123. The application of SFAS No 148 is mandatory for fiscal years ending after
December 15, 2002. The Company continues to use APB 25. The notes required by SFAS No 148
were included in the accompanying consolidated Financial Statements.
In November 2002, the FASB published FIN 45 (“Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others”). The interpretation
has significantly changed current practice in the accounting for and disclosure of guarantees
and warranties. Guarantees and warranties that display the characteristics described in the interpretation
and do not fall under the exemptions must be accounted for at fair value. To date
a liability only had to be recorded if a loss seems probable and can be estimated (SFAS No 5
“Accounting for Contingencies”). Moreover, the interpretation requires significant disclosures for
practically all guarantees and warranties, even if the probability of a claim is considered low. The
accounting rules of FIN 45 are applicable for guarantees and warranties issued or modified after
December 31, 2002 irrespective of the fiscal year of the issuer of the guarantee or warranty. The
disclosures in the notes are mandatory for fiscal years ending after December 15, 2002. Pfleiderer
has made the appropriate disclosure in the notes (see Section VII.). Application of the accounting
rules relating to warranties in accordance with FIN 45 did not lead to any further effects for
the Group.
In January 2003, the FASB published FIN 46 (“Consolidation of Variable Interest Entities”) and
revised it again in December 2003. FIN 46 regulates the application of Accounting Research
Bulletin ARB 51 for the consolidation of variable interest entities (VIEs), in which a controlling
financial interest is held that is not based on a majority of voting rights. FIN 46 provides for consolidation
of a VIE by primary beneficiaries and for disclosure of significant investments held in
VIEs by other beneficiaries. The Company holds a controlling financial interest in a company that
qualifies as a VIE. We refer to Section VII 2 for further details.
99
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

1. Cash and cash
equivalents
2. Receivables and
other assets
3. Trade receivables
IV. Notes to the Consolidated Balance Sheet
As of December 31, 2003 cash and cash equivalents were reported at 68,735 thousand euros
(prior year: 58,242 thousand euros). Cash and cash equivalents contain cash on hand and bank
balances, including current deposits with banks with initial maturities of three months or less.
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Trade receivables 78,231 94,828
Tax refunds 8,005 25,594
Receivables from affiliated companies 2,077 245
Other 9,882 25,645
Total 98,195 146,312
The drop in tax receivables is attributable to the tax assessment notices received in 2003 and
the related payment of the balance to Pfleiderer AG.
The rise in receivables from affiliated companies is due in particular to the issue of short-term
funds to newly founded subsidiaries in the Group.
Trade receivables break down as follows:
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Trade receivables 95,056 108,760
Less specific bad debt allowance 7,416 13,226
Less general bad debt allowance 790 706
Less sales allowances, bonuses and discounts 8,619 0
Receivable, net 78,231 94,828
All receivables are due within one year.
The general credit risk is provided for by appropriate general bad debt allowances based on past
experience. Sufficient valuation allowances and accruals are formed to cover bonuses and discounts.
From fiscal 2003 onwards, the risk will generally be taken into account by allowances.
The prior year allowances were not adjusted for comparability, as this would not have led to
significant changes in the balance sheet ratios. The prior year value is 11,481 thousand euros.
100

4. Inventories
5. Property, plant
and equipment
As of December 31, 2003, the Company sold receivables amounting to 45,342 thousand euros
(prior year: 43,889 thousand euros). The Company had a retained interest from these sales, including
the provision of settlement services. The Group only sells receivables covered by credit
insurance. Expenses of 1,475 thousand euros (prior year: 2,449 thousand euros) were incurred
in connection with the sale of receivables. Most of these expenses relate to interest payments
reported under financial result in the consolidated income statement.
Inventories break down as follows:
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Raw materials, consumables and supplies 51,665 50,050
Work in process 20,203 15,695
Finished goods and merchandise 61,191 48,052
Payments on account 657 600
Total 133,716 114,397
The main reason for the increase in inventories is the introduction of the new selling concept.
To meet the commitment to supply any product to any place in Germany within 48 hours, the
warehouses had to be stocked accordingly.
For changes in property, plant and equipment, we refer to the analysis of the fixed assets of the
Group included herein.
Property, plant and equipment breaks down as follows:
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Land, land rights and buildings including buildings
on third-party land 151,885 178,821
Technical equipment and machines 151,008 172,972
Other equipment, furniture and fixtures 13,479 13,075
Assets under construction 14,682 16,678
Total 331,054 381,546
Depreciation of property, plant and equipment amounted to 51,785 thousand euros in fiscal 2003
(prior year: 48,769 thousand euros). In the reporting year 1,150 thousand euros thereof is an
impairment loss for buildings of the Coswig concrete masts plant that are no longer used and
10,677 thousand euros is an impairment loss at the Leipzig location. The figures for the Leipzig
location were determined in an impairment test. The impairment losses thus relate exclusively to
the Infrastructure Technology business segment.
101
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

6. Intangible assets
In fiscal 2003, the Group did not capitalize any interest charges on qualifying property, plant and
equipment (prior year: 161 thousand euros).
In 2003, government grants totaling 348 thousand euros for a site of the Infrastructure Technology
business segment in Leipzig had to be repaid. The reason was that jobs were cut which
had been subsidized.
Property, plant and equipment of 2,463 thousand euros (prior year: 3,088 thousand euros) less
accumulated depreciation of 848 thousand euros (prior year: 954 thousand euros) was capitalized
under capital leases. The remaining carrying amount thus comes to 1,615 thousand euros (prior
year: 2,134 thousand euros).
Individual assets have only been assigned as collateral in the USA. The collateral assignment
worth 1,132 thousand euros was accepted in an acquisition in past fiscal years and is to be continued.
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Licenses, software and patents 9,900 8,965
Goodwill 85,539 89,412
Payments on account 511 4,058
Total 95,950 102,435
Amortization of intangible assets amounted to 6,985 thousand euros in fiscal 2003 (prior year:
9,978 thousand euros). Additions to intangible assets totaled 2,366 thousand (prior year: 5,694
thousand euros).
The Company has subjected goodwill carried in the consolidated Financial Statements to an
impairment test. The impairment test for the Leipzig location resulted in an impairment loss of
2,340 thousand euros.
Estimated future write-downs on intangible assets still subject to scheduled amortization is as
follows:
‘000 euros
2004 3,300
2005 2,343
2006 1,713
2007 1,430
2008 1,114
thereafter 0
102

7. Financial assets
8. Other non-current
assets
9. Short-term liabilities
The composition and development of financial assets is shown in the analysis of the fixed assets
of the Group.
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Shares in affiliated companies 1,603 1,606
Equity investments 56 60
Loans to companies in which investments are held 169 0
Other loans 403 406
Total 2,231 2,072
In the year under review, other non-current assets came to 5,560 thousand euros (prior year:
2,802 thousand euros). This figure includes a loan of 4,846 thousand euros extended to a (former)
affiliated company that was sold in the fiscal year 2003.
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Payments on account 8,857 3,102
Trade payables 85,646 75,229
Liabilities to affiliated companies 5,509 5,151
Other 38,052 59,846
Total 138,064 143,328
Other short-term liabilities break down as follows:
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Financial derivatives 12,116 13,146
Customer bonus payments 0 8,650
Other taxes 1,824 6,897
Corporate income tax 2,542 6,121
Wages and salaries 5,549 6,097
Withheld social security contributions 5,221 5,461
Withheld wage tax and church tax 4,006 4,308
Payments received on receivables sold 1,420 1,436
Value added tax 634 1,064
Other personnel liabilities 24 918
Interest cut-off 30 27
Other 4,686 5,721
Total 38,052 59,846
Since this fiscal year, bonus obligations are generally taken into account as valuation adjustments
of receivables. The prior year allowances were not adjusted for comparability, as this would not
have led to significant changes in the balance sheet ratios.
103
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

10. Financial liabilities
11. Other long-term
accruals
12. Capital leases
Short-term loan liabilities of the Company break down as follows:
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Other short-term liabilities and short-term portions
of long-term loans 55,763 42,321
Capital leases 526 564
Total 56,289 42,885
The average interest rate is 6 percent p.a.
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Accruals for personnel commitments 21,817 17,180
Accruals for production 925 3,913
Accruals for sales and marketing 0 3,130
Other accruals 9,099 7,311
Total 31,841 31,534
The change in accruals for sales and marketing is due to the general consideration of reductions
and discounts as adjustments of receivables from fiscal year 2003 onwards. The prior year
allowances were not adjusted for comparability, as this would not have led to significant changes
in the balance sheet ratios. The corresponding value of the accruals for sales and marketing in
2003 is 3,487 thousand euros.
In 1998 and 1999, the Company entered into lease agreements for wood-processing machinery
for its Polish sites and for technical plant at its sites in the USA. These lease agreements are
treated as capital leases. In addition, a vehicle lease agreement is in place at a site in Germany
and has also been classified as a capital lease owing to its structure. The future minimum lease
payments from lease obligations as of December 31, 2003 are:
‘000 euros
2004 652
2005 454
2006 16
Total minimum lease payments 1,122
less imputed interest 131
Present value of the minimum lease payment 991
Less short-term portion 526
Long-term portion of the capital lease obligation 465
104

13. Long-term liabilities
14. Other long-term
accruals
The Company is primarily funded by non-current loans. The loans generally bear interest based
on the variable EURIBOR and LIBOR rates. The average interest rate for these loans in fiscal 2003
was below 6 percent. Most of the variable interest payments are hedged using interest swaps.
As of the balance sheet date, the Group reported fixed-interest loans totaling 38,235 thousand
euros (prior year: 20,452 thousand euros) with an average interest rate of 5.1 percent (prior
year: 5.9 percent). As of December 31, 2003, the loans were valued at 39,863 thousand euros
(prior year: 22,395 thousand euros).
As of December 31, 2003, repayments of long-term liabilities for the next five fiscal years and
thereafter are as follows:
‘000 euros
2004 31,521
2005 32,903
2006 35,403
2007 42,805
2008 111,975
thereafter 49,625
Total 304,232
Accruals for restructuring have been formed to cover probable, quantifiable liabilities in the
accounts. These mainly relate to severance payments to 167 persons in the Infrastructure Technology
business segment and 37 persons in central departments.
105
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP
Dec. 31, 2003
Short-term Long-term
Long-term portion of portion of more
‘000 euros amounts up to 1 year than 1 year Dec. 31, 2002
Long-term financial
liabilities excluding
capital leases 304,232 31,521 272,711 330,329
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Restructuring 4,538 2,339
Environmental risks 311 311
Long-service bonuses 4,444 4,959
“Altersteilzeit” – German phased retirement scheme 5,236 2,138
Other 26 25
Total 14,555 9,772

15. Deferred income
16. Discontinued
operations
Accruals for environmental risks relate to obligations to recultivate land and remedy environmental
damage.
One of the reasons for the rise in accruals for claims from the German phased retirement scheme
(“Altersteilzeit”) is the rise in the number of fixed obligations. The German government has announced
plans to raise the age for early retirement to 63 years and employees have therefore
used the opportunity to have their claims confirmed by their employer in the past year. Another
reason is the anticipated change in the future level of hiring activities which would lead to a decrease
in refunded amounts.
Deferred income includes income from the sale of receivables from a lease agreement due over
the coming years (non-recourse financing). The deferred income is released (with effect on income)
in installments at the due dates of the corresponding lease payments. The outstanding
residual amount from non-recourse financing is 4,888 thousand euros as of December 31, 2003.
It is subject to interest at the customary market rate. The agreement expires on May 1, 2007.
In the fiscal year 2003, the Company sold the Eltec and Tipla business units as well as the onshore
and offshore operations of the Wind business unit.
The Eltec business unit was sold effective January 1, 2003 by way of management buy-out of Eltec
Elemente-Technik für Möbel- und Innenausbau GmbH to employees of the company. The Tipla
business unit was transferred in December 2003 by sale of Moralt Tischlerplatten GmbH & Co. KG
and Moralt Tischlerplatten Verwaltungs-GmbH as well as of one plot of company land to Certina
Holding AG, Munich. Multibrid Entwicklungsgesellschaft mbH, and with it the offshore operations
of the Wind business unit, were sold to Prokon Nord Energiesysteme GmbH, Leer, in December
2003. The onshore operations of the Wind business unit were sold to Fuhrländer Pfleiderer
GmbH & Co. KG, Neumarkt, effective December 31, 2003.
106

The assets and liabilities remaining in the Group are reported in the consolidated balance sheet
under discontinued operations.
With the agreed aggregate selling price of 1,180 thousand euros, the disposal of discontinued
operations resulted in a loss of 23,133 thousand euros. Any income from subsequent purchase
price adjustments has not been taken into account in this figure.
The following table shows the details of the sale:
‘000 euros
Agreed aggregate selling price 1,180
Disposal of assets and liabilities of operations sold –14,211
Incidental and follow-up costs of the disposal –10,237
Without the cancellation of amortization and depreciation required by US GAAP and its positive
effect on the operative result, the loss from the disposal of discontinued operations would have
come to –22,908 thousand euros.
The operative business of the discontinued operations developed as follows:
In 2003 further operative special effects and related expenses were incurred by the discontinued
operations amounting to 5,141 thousand euros after tax.
107
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP
– 23,268
plus income from deferred taxes 135
Loss on the disposal of discontinued operations –23,133
‘000 euros 2003 2002
Sales revenues 40,985 356,149
Other expenses –57,031 –367,911
Effect from cancellation of amortization/depreciation 360 11,750
EBIT –15,686 –12
Net interest 157 –15,083
EBT –15,529 –15,095
Taxes 751 – 612
Taxes from cancellation of amortization/depreciation –135 –3,536
Earnings after taxes –14,913 –19,243

17. Shareholders’ equity
The table below shows the balance sheet items summarized under assets and liabilities of discontinued
operations:
‘000 euros 2003 2002
Cash and cash equivalents and securities classified
as current assets 0 173
Receivables and other assets 5,849 15,411
Inventories 5,362 14,651
Other current assets 724 151
Current assets 11,935 30,386
Property, plant and equipment 2,504 4,638
Intangible assets 10 11
Financial assets 144 10
Deferred tax assets 138 0
Other assets 0 0
Non-current assets 2,796 4,659
Assets of discontinued operations 14,731 35,045
Liabilities 13,640 16,862
Financial liabilities 207 0
Accruals 14,259 1,060
Other current liabilities 44 0
Short-term liabilities 28,150 17,922
Long-term financial liabilities 1,206 1,821
Accruals for pensions 1,679 2,213
Deferred tax liabilities 420 305
Other liabilities 0 139
Other long-term accruals 361 914
Adjustment item for minority interests 0 0
Long-term liabilities 3,666 5,392
Liabilities of discontinued operations 31,816 23,314
The balance sheet items for December 31, 2003 essentially relate to the Wind business unit.
The development of shareholders’ equity is presented in the statement of changes in shareholders’
equity preceding these notes to the consolidated Financial Statements.
Capital stock
As of the balance sheet date, capital stock remained unchanged at 109,273,600 euros divided
into 42,685,000 ordinary shares. All shares have been issued and are outstanding.
108

18. Stock appreciation
rights and stock
option plan
Authorized capital
On July 10, 2001, the shareholders’ meeting authorized the Board of Management, subject to
approval by the Supervisory Board, to increase capital stock once or several times by a total of
up to 51,200 thousand euros by issuing new shares against cash contributions.
Contingent capital
The Company is also entitled to issue contingent capital of 20,480 thousand euros until June 30,
2006.
As part of the Pfleiderer AG stock option plan, the Board of Management is also authorized to
issue further contingent capital of 10,927 thousand euros.
Additional paid-in capital
Additional paid-in capital of the Group was adjusted to the capital reserve of Pfleiderer AG of
10,927 thousand euros.
Changes in other comprehensive income
The following table shows the development of the carrying amounts recorded for financial derivatives
and for pensions in other comprehensive income:
Comprehensive income
Following the disposal of the Wind business unit, of Eltec Elemente-Technik für Möbel- und Innenausbau
GmbH and of the two Moralt companies, no equity items had to be reclassified in fiscal
2003 from the adjustment item from currency translation or the adjustment item from valuation
of financial derivatives to the loss carryforward (prior year: 9,220 thousand euros).
The Company decides each year whether to issue a stock option plan, who shall be eligible and
how many stock options each employee may receive. Granting stock options is subject to the
condition that the employees also pay in a personal contribution. The options have a term of six
years. The stock options may not be exercised for a period of three years after being granted.
The number of stock options for each employee is based on the amount of the personal contribution
divided by the reference price and multiplied by a factor of 12. The reference price is
calculated from the Company’s average share price in the months September through November.
Stock options can be exercised when the subscription price lies between 110 and 125 percent
of the reference price.
109
2003 2002
Before Tax After Before Tax After
‘000 euros tax effect tax tax effect tax
Financial derivatives 816 –145 671 –9,130 3,030 –6,100
Minimum benefit obligation 16 –46 –30 754 –207 547
832 –191 641 –8,376 2,823 –5,553
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Stock appreciation rights 2000
On November 14, 2000, the Company decided to set up a stock appreciation rights plan, subsequently
approved by the shareholders’ meeting of December 5, 2000, which authorizes the Board
of Management to grant employees up to 1,270,608 stock appreciation rights until June 30, 2006.
The reference price is 9.73 euros. The exercise price lies between 10.70 euros and 12.16 euros,
with a weighted average exercise price of 11.43 euros.
Stock option plan 2001
Under the terms of the stock option program (SOP) 2001 proposed on July 10, 2001 and subsequently
approved by the Supervisory Board on October 25, 2001, the Board of Management is
authorized to grant eligible employees up to 4,268,500 non-transferable options to acquire Company
shares. Of the 116 employees potentially eligible, 65 senior executives took part in SOP
2001 with 1,257,456 options. The reference price is 7.45 euros. The exercise price lies between
8.20 euros and 9.31 euros, with a weighted average exercise price of 8.76 euros.
Stock option plan 2002 (continuation of SOP 2001)
Following on from the stock option program proposed in 2001 and adopted on July 10, 2001, the
stock option plan 2002 was confirmed on September 10, 2002 by the Board of Management, and
on September 20, 2002 by the Working Committee of the Supervisory Board. Under the terms
of SOP 2002, the Board of Management is authorized until June 30, 2006 to grant the remaining
non-transferable stock options to eligible employees. A total of 40 management board members/
110
2003 2002
Stock Stock
in thousands options options
Outstanding as of the beginning of the year 919 1,123
Issued 0 0
Exercised 0 0
Forfeited 919 204
Outstanding as of year-end 0 919
Exercisable as of year-end 0 0
2003 2002
Stock Stock
in thousands options options
Outstanding as of the beginning of the year 1,080 1,257
Issued 0 0
Exercised 0 0
Forfeited 352 177
Outstanding as of year-end 728 1.080
Exercisable as of year-end 0 0

19. Derivative financial
instruments
senior executives took part in SOP 2002 with 983,544 options. The reference price is 4.67 euros.
The exercise price lies between 5.14 euros and 5.84 euros, with a weighted average exercise price
of 5.49 euros.
The Company records stock options in accordance with SFAS No 123 (“Accounting for Stock-
Based Compensation”) using the intrinsic value method from APB Opinion No 25 (“Accounting for
Stock Issued to Employees”). All options were issued at an exercise price in excess of the market
price at the date of issue. Therefore, the Company recorded no personnel expenses in connection
with these subscription rights.
SFAS No 123 requires adjusted pro-forma information on the Group’s net income for the year to
be reported as if the Company had accounted for employee subscription rights using the fair value
method. The fair value of the subscription rights granted for the fiscal years 2002 and 2003 was
estimated as of the date on which they were granted using the Black Scholes method based on
the following assumed weighted averages: risk-free interest rate of 4.7 percent for 2001 and of
4.4 percent for 2002, volatility of 42 percent for 2002 and of 54.8 percent for 2003, expected
dividend yield as of valuation date of 2 percent for 2002 and 2003, weighted average life expectancy
of the subscription right of six years.
All existing stock option plans were given prior approval by the shareholders’ meeting.
Derivative financial instruments are used to hedge interest and currency items with the aim of
minimizing risks resulting from fluctuations in exchange rates and market interest rates. The corporate
guidelines state that such risks must generally be hedged. Only marketable interest rate
derivatives and forward exchange contracts managed by banks of first-class standing are used.
Derivative financial transactions are limited to hedging operative business and related financing.
The Company does not conduct derivative financial transactions for speculation purposes.
Interest rate risks are hedged by interest swaps and caps. These instruments are used to hedge
variable liabilities denominated in EUR or USD.
111
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP
2003 2002
Stock Stock
in thousands options options
Outstanding as of the beginning of the year 984 984
Issued 0 0
Exercised 0 0
Forfeited 204 0
Outstanding as of year-end 780 984
Exercisable as of year-end 0 0

The following interest rate derivatives had been entered into as of the balance sheet date:
Forward exchange contracts are concluded to hedge fluctuation of the exchange rate of the US
dollar, Swiss franc, pound sterling and Polish zloty against the euro. Hedging relates to transactions
shown on the balance sheet, as well as future transactions considered highly likely to occur.
The following forward exchange contracts were recognized as of the balance sheet date:
The nominal volume represents the reference values of interest swaps and the purchase and
selling amounts of the derivative transactions, valued on the balance sheet date at the prevailing
forward rates.
Valuation of interest rate derivatives is performed by the contracting bank by discounting expected
Cash Flows which result from the difference to the development of market interest rates (markto-market
valuation). Valuation of forward exchange contracts corresponds to the expenses or
income which would otherwise be realized if the transaction was completed as of the balance
sheet date.
Summary of derivative transactions recognized as of the balance sheet date:
Derivative financial instruments are recognized in the balance sheet at fair value under other
receivables, other assets or other liabilities.
112
Dec. 31, 2003 Dec. 31, 2002
Nominal Nominal
‘000 euros volume volume
Interest swaps 237,630 257,919
Interest caps 6,741 8,150
Total 244,371 266,069
Dec. 31, 2003 Dec. 31, 2002
Nominal Nominal
‘000 euros volume volume
Exchange rate hedges of current/recognized transactions 11,710 5,725
Exchange rate hedges of expected Cash Flows 3,442 7,114
Total 15,152 12,839
Dec. 31, 2003 Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2002
Nominal Nominal
‘000 euros volume Fair value volume Fair value
Interest rate derivatives 244,371 –13,601 266,069 –14,876
Forward exchange contracts 15,152 293 12,839 –65
Total 259,523 –13,308 278,908 –14,941

In compliance with SFAS No 133 (“Accounting for Derivative Instruments and Hedging Activities”),
derivative financial transactions are accounted as follows:
Where forward exchange contracts are used to hedge the fair value, changes in value of the
derivative, as well as in the underlying transaction, are recognized with effect on income. In the
case of Cash Flow hedges for exchange rate risks on future payments, changes in fair value are
recognized without affecting income up to completion date.
Where interest swaps or caps are used as Cash Flow hedges, changes in fair value are treated as
changes in equity and reported under comprehensive income. For interest rate derivatives which,
in accordance with SFAS No 133, are not sufficiently effective as Cash Flow hedges, changes in
fair value are recorded as interest expenses or income in the income statement.
Financial derivatives were valued as follows as of the balance sheet date in accordance with
SFAS No 133:
The volume of derivatives recorded with an effect on income is a result of the repayment of
funds due to disposal of operations.
The remaining term of the interest rate derivatives essentially corresponds to the term of the
underlying financial transaction, and ranges between one and seven years. The average term is
five years. The remaining term of forward exchange contracts ranges between one and twelve
months.
The Group’s exposure from derivative instruments is limited to the risk that the counterparty is
unable to fulfill its obligations. The maximum credit risk for the Group cannot exceed the positive
fair value of the derivatives. The maximum risk from forward exchange contracts is the exchange
rate fluctuation in the hedged amounts.
113
Dec. 31, 2003 Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2002
Nominal Nominal
‘000 euros volume Fair value volume Fair value
Without effect on income 228,420 –12,096 219,178 –12,912
With effect on income 31,104 –1,212 59,730 –2,029
Total 259,523 –13,308 278,908 –14,941
Market value, Market value, Dec. 31, 2003
due within due in more
‘000 euros 1 year than 1 year Total
Interest rate derivatives 16,967 224,904 241,871
Forward exchange contracts 15,152 – 15,152
Total 32,119 224,904 257,023
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

20. Deferred taxes
In accordance with SFAS No 109 (“Accounting for Income Taxes”), deferred tax assets and liabilities
are recognized if future tax effects are expected to result from temporary differences
between carrying amounts in the commercial and those in the tax balance sheet or from loss
carryforwards.
The Group’s taxes on income break down as follows:
‘000 euros 2003 2002
Current taxes
Germany –742 3,561
Foreign 8,802 12,134
Deferred taxes
Germany –1,981 –3,024
Foreign 3,226 529
Total 9,305 13,200
Long-term deferred taxes were recognized on the basis of an overall tax rate of 37.5 percent
(prior year: 37.5 percent). This rate is determined assuming a corporate income tax rate (including
solidarity surcharge) of 26.4 percent (prior year: 26.4 percent) and an average trade tax
rate on the German companies of 11.1 percent (prior year: 11.1 percent). Short-term deferred
taxes expected to be reversed in the next fiscal year are calculated based on overall tax rate
of 37.5 percent (prior year: 38.8 percent). This rate is determined assuming a corporate income
tax rate (including solidarity surcharge) of 26.4 percent (prior year: 28.0 percent) and an average
trade tax rate of 11.1 percent (prior year: 10.8 percent). As a result of the tax rate changes,
deferred tax expenses came to 101 thousand euros in fiscal 2003 (prior year: 630 thousand
euros).
The calculations for foreign companies are based on their local corporate income tax rates.
114

The following table shows the reconciliation from expected to disclosed tax expenses. In order
to calculate the expected tax burden, earnings before taxes are multiplied by the overall tax
rate applicable for the fiscal year under review.
‘000 euros 2003 2002
Net income of the Group before taxes 11,348 33,629
Estimated tax expense at a tax rate of 38.8% (2002: 37.5%)
Increase/decrease in tax expense due to:
4,403 12,611
Differences in foreign tax rates –3,078 –2,086
Change in tax rate 101 –630
Non-deductible operating expenses 387 265
Non-deductible amortization on investments 0 1,969
Tax-free income 128 –984
Prior year taxes –2,866 –351
Non-deductible foreign source tax 1,113 0
Increase in valuation allowance for deferred taxes
Special effects from cut-off of continued and
30,676 10,375
discontinued operations –21,545 –6,533
Special effects from deferred tax in Poland 0 –1,578
Other –14 142
Current tax expense 9,305 13,200
As of December 31, 2003 the Group has loss carryforwards for German corporate income tax of
276,393 thousand euros (prior year: 188,062 thousand euros), for German trade tax of 204,257
thousand euros (prior year: 80,813 thousand euros) and for foreign taxes of 6,261 thousand euros
(prior year: 2,937 thousand euros). Under German tax law applicable at the balance sheet date,
domestic losses can be carried forward without limit in time or amount. Of the foreign loss carryforwards,
1,357 thousand euros may be used until 2008.
Valuation allowances of 82,476 thousand euros (prior year: 43,420 thousand euros) were recorded
on deferred tax assets, mainly for tax loss carryforwards where realization within a foreseeable
period of time is uncertain owing to the legal and financial situation or other information available
to the Company. Current estimates on the recoverability of deferred tax assets may change in
the years to come, depending on the Company’s results of operations, and necessitate higher or
lower valuation allowances. The changes in German tax law affecting utilization of loss carryforwards
(minimum taxation) were taken into account in the assessment of the deferred tax assets’
recoverability.
115
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Deferred tax assets and liabilities from valuation differences of balance sheet items break down
as follows:
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Intangible assets 10,362 10,512
Property, plant and equipment 9,275 8,883
Financial assets 4,335 1,557
Inventories 907 1,210
Receivables 2,073 1,782
Other assets 16 123
Accruals for pensions 3,122 4,371
Other accruals 3,893 3,040
Liabilities 4,649 5,095
116
38,632 36,573
Tax loss carryforwards 94,937 63,595
133,569 100,168
Valuation allowances –82,476 –43,420
Deferred tax assets 51,093 56,748
Intangible assets 8,406 12,032
Property, plant and equipment 37,842 40,918
Financial assets 0 379
Inventories 291 797
Other assets 1,305 101
Accruals for pensions 27 762
Other accruals 811 1,381
Liabilities 324 55
Other liabilities 368 360
Deferred tax liabilities 49,374 56,785
Net deferred tax assets
(prior year: deferred tax liabilities) –1,719 37

21. Pensions and similar
obligations
Summarized deferred tax assets and liabilities are disclosed as follows:
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Deferred tax assets
short-term 8,168 8,702
long-term 18,473 33,638
Deferred tax liabilities
short-term 2,458 3,063
long-term 22,464 39,314
Net deferred tax assets
(prior year: deferred tax liabilities) –1,719 37
The total amount of deferred taxes stemming from matters recorded directly to equity in the
fiscal year under review is 5,084 thousand euros (prior year: 5,513 thousand euros). No deferred
taxes were formed to cover currency translation differences recorded directly to equity, arising
from the consolidation of international subsidiaries.
Deferred taxes assets of 4,163 thousand euros were capitalized for changes from financial derivatives
recorded directly to equity (prior year: 4,525 thousand euros).
Deferred tax liabilities from recognizing the adjustment item from pension valuation amounted to
921 thousand euros in the year under review (prior year: 988 thousand euros).
Pfleiderer grants eligible employees defined benefit obligations. Additionally, historical obligations
exist from various pension schemes covering retirement, invalidity and dependants. Employer
pension schemes were closed for new entrants by May 31, 1986. In some international companies,
similar obligations for one-off claims are also reported under accruals for pensions.
Accruals for pensions for the fiscal years ending December 31, 2002 and December 31, 2003
break down as follows:
‘000 euros 2003 2002
Accruals for pensions 62,016 60,876
Other benefit obligations 398 387
Accruals for pensions and similar obligations 62,414 61,263
In the year under review, accumulated benefit obligations came to 61,594 thousand euros (prior
year: 59,646 thousand euros).
117
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Payments from defined benefit plans depend on the length of service, age and salary of the
employee. Costs and obligations resulting from defined benefit plans are calculated on the basis
of actuarial appraisals using the projected unit credit method. This method sets the service
period of the employee in relation to the date of valuation, and includes estimated future changes
in salary. The appraisals were prepared as of the valuation date December 31, 2003 with the
following assumptions:
in % 2003 2002
Discount rate 5.5 5.5
Salary increase 3.0 3.0
The discount factor applied corresponds approximately to the interest rate achievable on the
date on which the benefit obligation is calculated from high-yield fixed interest securities with
the same maturity period. The annual salary increase is taken into account in calculating the
benefit obligations.
Expenses for pensions for the fiscal years ending December 31, 2002 and December 31, 2003
break down as follows:
‘000 euros 2003 2002
Service cost 959 1,119
Interest expenses 3,271 3,407
Amortization of actuarial gains (losses) 30 14
Prior service cost 341 0
Total 4,601 4,540
The following table shows changes in benefit obligations recognized in the consolidated Financial
Statements for the fiscal years ending December 31, 2003 and December 31, 2002:
‘000 euros 2003 2002
Benefit obligation at beginning of year 63,345 62,205
Service cost 959 1,119
Interest cost 3,271 3,407
Benefits paid (3,430) (3,307)
Actuarial (gain)/loss (294) (1,107)
Retroactive plan amendments 127 358
Disposals and transfers 0 670
Benefit obligations as of year-end 63,978 63,345
Unrecognized actuarial gain (loss) (4,393) (4,718)
Unrecognized past service cost (127) (341)
Amount recognized 59,458 58,286
118

1. Other operating
income/other operating
expenses
2. Net interest
3. Special effects
The following amounts are shown in the consolidated balance sheet as of December 31, 2003
and December 31, 2002:
‘000 euros 2003 2002
Intangible assets 98 114
Accruals for pensions 62,016 60,876
Accumulated other comprehensive income 2,460 2,476
Net pension costs 59,458 58,286
V. Notes to the Income statement
Jan. 1 – Jan. 1 –
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Other operating income 19,547 20,450
Other operating expenses 10,519 16,935
Total 9,028 3,515
Due to the disclosure of special effects in the year under review, 1,549 thousand euros of the
corresponding “other expenses” from the prior year were reclassified to special effects to improve
comparability. The amount related to accruals for restructuring in the Infrastructure Technology
business segment.
Other operating income/other operating expenses includes income from insurance claims of
4,282 thousand euros (prior year: 6,177 thousand euros). They are essentially accounted for by
compensation to the Engineered Wood business segment (1,680 thousand euros) and insurance
payments for bad debts (2,528 thousand euros). The item also comprises income from the reversal
of accruals (6,484 thousand euros). The expenses are a result of exchange rate fluctuation
(3,281 thousand euros) and expenses from allocation to accruals (3,414 thousand euros).
Jan. 1 – Jan. 1 –
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Other interest and similar income 5,926 2,868
Interest and similar expenses 22,233 18,259
Total –16,307 –15,391
The special effects item presents non-recurring matters from 2002 and 2003 separately. Broken
down by function, they are as follows:
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Production cost –15,236 –150
Selling expenses –2,469 –177
General administrative expenses –4,387 –2,173
Other operating income/expenses 3,990 –1,549
Total –18,102 –4,049
119
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

1. Contingent liabilities
The special effects in 2003 comprise non-recurring impairments of groups of assets. Of the
total of 18,102 thousand euros, 10,677 thousand euros relate to impairment losses recorded on
property, plant and equipment at the Leipzig location. The figures for the Leipzig location were
determined in an impairment test. Impairment charges of 2,340 thousand euros were also recorded
on goodwill there. Further effects in 2003 concern the accrual for personnel restructuring and
other operating income and mainly stem from the disposal of shares to a Polish subsidiary. The
comparative figures for 2002 concern restructuring effects only.
VI. Notes to the Consolidated Statement of Cash Flows
Cash and cash equivalents examined in the Cash Flow statement corresponds to the balance
sheet item “Cash and cash equivalents including securities classified as current assets”.
In the year under review, interest payments came to 21,422 thousand euros (prior year: 29,637
thousand euros). Payments made for taxes on income amounted to 15,561 thousand euros (prior
year: 16,608 thousand euros).
VII. Other Notes
Contingent liabilities are shown below at nominal value:
million euros Dec. 31, 2003 Dec. 31, 2002
Guarantees and letters of comfort 10.7 13.1
Warranty commitments 29.1 4.5
Contingencies from notes 1.4 1.9
In the context of various disposals of companies, the Group has issued guarantees to the buyers
in the customary scope. The Company is currently not expecting material claims to be made on
the basis of the guarantees.
There are long-term supply obligations in the Engineered Wood business segment to a power
plant operator at fixed prices. Potential risks for the results stemming from these fixed prices are
considered improbable.
Bank guarantees of 40.5 million euros have also been issued in favor of customers, suppliers
and other contractual partners of the Group and the corresponding guarantee facilities are available.
These are mainly guarantees and warranties in connection with contingent liabilities from
the discontinued operations.
No accruals were set up for the above contingent liabilities, as the probability that the risk will
occur is considered to be low.
120

2. Other financial
obligations
The Group provides warranties for certain products (particularly masts). The amount of the
potential warranty claims is based on the number of products sold and the records kept of past
warranty claims for these products.
In the year under review, the accruals for warranty obligations developed as follows:
‘000 euros
As of January 1, 2003 3,638
Warranties issued during the reporting period 138
Claims during reporting period 3,119
As of December 31, 2003 657
The Group has concluded lease agreements for property, plant and equipment that do not qualify
as capital leases, but operating leases under US GAAP. Additionally, the Group has entered into
contracts for the maintenance of property, plant and equipment and for various services. Expenses
from rental and lease agreements reported in the income statement total 20,995 thousand euros
(prior year: 30,398 thousand euros).
The following tables shows future (non-discounted) minimum lease payments from non-cancelable
contracts that have an initial or remaining term of more than one year as of December 31, 2003:
‘000 euros
2004 21,996
2005 19,811
2006 18,325
2007 7,721
2008 7,499
After 2008 29,550
Total 104,902
The Group carried out sale-and-lease-back transactions in fiscal 2003 in which two plants were
sold and then leased back under an operating lease agreement. The total volume of these transactions
was 1,018 thousand euros.
Together with an affiliated company, the Group holds a controlling financial interest in a company
that qualifies as a VIE. As the Group is not the primary beneficiary of the VIE, the company was
not included in the consolidated Financial Statements. It was formed on August 24, 1999. Its business
objective is to purchase, sell, let and lease property, plant and equipment and to perform
any related transactions. As of December 31, 2003 the VIEs total assets amount to 83,494 thousand
euros. The maximum potential loss of the Group in the VIE is approx. 5,300 thousand euros.
The investment in the VIE is not expected to generate a loss.
121
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

3. Pending litigation
and claims
4. Transactions with
related parties
Between 2000 and 2003, Pfleiderer AG and its subsidiaries sold several large plants worth a
total of 76,909 thousand euros to the VIE and then leased them back. The lease agreements
qualify as operating leases under US GAAP. The majority of the lease agreements run until 2006.
The lease expenses for the years from 2004 to the end of the contractual terms are disclosed
under other financial obligations.
Residual value guarantees were issued for these lease obligations. No claims are expected on
the basis of the guarantees.
As of December 31, 2003, the Group has purchase commitments of 43,930 thousand euros
(prior year: 57,952 thousand euros).
The Company is occasionally involved in litigation in the ordinary course of business. The Company
is not aware of any events which could have a significant negative effect on its results of
operations, liquidity or financial position.
Pfleiderer Unternehmensverwaltung GmbH & Co. KG has a substantial investment in Pfleiderer AG
(subsidiary) and is thus a related party to the Group. The Group had business relations with this
company and its subsidiary Pfleiderer Leasing GmbH & Co. KG, Delitzsch, in the current and the
prior fiscal year. The extent of business relations in 2003 is summarized as follows
‘000 euros 2003 2002
Interest income 134 1,365
Interest expense 19 991
Income from cost allocations 714 218
Expenses from cost allocations 3 27
Lease expenses 1,255 1,182
Dividend distribution 0 6,012
Expenses for power purchased from Pfleiderer Energietechnik Verwaltungs-GmbH, Neumarkt,
came to 12,515 thousand euros in fiscal 2003 (prior year: 19,132 thousand euros).
122

5. Notes on directors’
dealings
Pursuant to Sec. 15a WpHG (“Wertpapierhandelsgesetz”: German Securities Trading Act) members
of the Board of Management and the Supervisory Board and their dependents are obliged to
notify the company and the German Federal Financial Services Supervisory Office without delay
of securities trading with their own company (“Directors” Dealings’) if they exceed the de minimis
limit. The notification is published on the website of Pfleiderer AG at www.pfleiderer.com.
On November 27, 2003, Hans Theodor Pfleiderer and Christiane Pfleiderer announced that they
have each sold 76,096 and 43,600 shares respectively in Pfleiderer AG at a price of 3.80 euros.
VIII. Segment Reporting
For segment reporting purposes as defined by SFAS No 131 is concerned (see consolidated
segment reporting preceding the notes to the consolidated Financial Statements), the Group’s
operations are divided into two segments, Engineered Wood and Infrastructure Technology.
The Wind business unit, which was sold in the current fiscal year and reported under discontinued
operations in the prior year, is no longer reported.
Geographical information
Sales revenue by region
Sales revenues break down by region as follows:
Jan. 1 – Jan. 1 –
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Germany 522,991 530,508
Other EU countries 212,784 219,601
Rest of Europe 207,964 187,493
Other countries 77,161 90,830
Total 1,020,900 1,028,432
Segment assets by region
Segment assets break down by region as follows:
Jan. 1 – Jan. 1 –
‘000 euros Dec. 31, 2003 Dec. 31, 2002
Germany 323,701 361,576
Other EU countries 329 1,535
Rest of Europe 134,623 159,965
Other countries 25,633 39,624
Total 484,286 562,700
123
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

1. Board of Management
2. Supervisory Board
IX. Earnings per Ordinary Share
The following table shows earnings per share:
Stock options granted to members of the Board of Management and employees did not have a
dilutive effect. For this reason, there was no difference between basic and diluted earnings per
share.
X. Management and Supervisory Board Remuneration/
Shares held by Board Members
Remuneration paid to members of the Board of Management in fiscal 2003 totaled 3,834 thousand
euros (prior year: 3,597 thousand euros) including the remuneration of a board member who left
in the course of the fiscal year. Remuneration paid for the year under review includes a variable
component of 717 thousand euros (prior year: 585 thousand euros).
Pension obligations to former members of the Board of Management and their dependants
amounted to 3,916 thousand euros (prior year: 2,966 thousand euros). Total payments to former
members of the Board of Management amounted to 145 thousand euros in fiscal 2003 (prior
year: 127 thousand euros).
Pfleiderer AG did not grant the members of the Board of Management stock options from its stock
option plan (prior year: 603,000). This calculation is net of options granted to former members
of the Board of Management. Based on the amount of personal contributions made to the stock
option plan 2002, the Company does not plan to grant members of the Board of Management
further options (prior year: 466,092). Members of the Board of Management hold 36,380 shares
(prior year: 54,060).
Total remuneration paid to the members of the Supervisory Board in fiscal 2003 amounted to
152 thousand euros (prior year: 151 thousand euros).
Members of the Supervisory Board hold a total of 1,045 shares (prior year: 77,224).
124
Jan. 1 – Jan. 1 –
Dec. 31, 2003 Dec. 31, 2002
Net loss for the year after minority interests ‘000 euros –45,762 –39,664
Average number of outstanding shares No. 42,678,146 42,673,784
Earnings per share euro –1.07 –0.93
Earnings of continuing operations per share euro –0.06 0.37
Earnings of discontinuing operations per share euro –1.01 –1.30

1. Leases
2. Valuation of
inventories
XI. Subsequent Events
Damage was caused by a fire at the Rheda-Wiedenbrück plant on January 12, 2004. As a consequence,
production came to a brief standstill which was compensated for by additional supplies
from other plants. The total loss is estimated at 2.2 million euros.
By notification dated February 24, 2004, the Company announced the sale of Newmark International
Inc., its U.S. American concrete and steel mast business, to Valmont Industries, Inc. The
corresponding agreement is still subject to approval of the American trust authorities, but has
been signed by both parties as of the time these notes were prepared.
XII. Deviations in Accounting, Valuation and Disclosure Duties
under Sec. 292a HGB
Applying the exemption rules provided by Sec. 292a HGB, the consolidated Financial Statements
of Pfleiderer AG have been prepared in compliance with the Generally Accepted Accounted
Principles of the United States (US GAAP) in force on the balance sheet date.
The main differences in accounting, valuation and consolidation methods under US GAAP compared
to the German HGB rules are as follows:
HGB does not stipulate explicitly how lease transactions should be treated. When deciding how
to account for such transactions, German companies generally apply the decrees on leases issued
by their local tax authorities. Applying tax criteria to lease agreements generally has the effect
that the leased asset is recognized in the balance sheet of the lessor.
US GAAP provides extensive rules (in particular SFAS No 13) on accounting for lease transactions.
The central principle revolves around which of the parties bears substantially all risks and
rewards from use of the leased asset, and can thus be regarded as its economic owner. This is
the difference between capital lease and operating lease. As economic owner, the lessee must
capitalize the leased asset, whereas this duty lies with the lessor when the transaction is regarded
as an operating lease.
Under HGB, inventories are valued as of the balance sheet date in accordance with the strict
lower-of-cost-or-market principle. Fair value of raw materials, consumables and supplies is determined
based on replacement prices on the procurement market, and fair value of work in
process and finished goods retrospectively from net selling prices obtained on the sales market.
125
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

3. Derivative financial
instruments
4. Cost of raising capital
5. Stock options
Under US GAAP, APB 43 also requires that inventories be valued using the strict lower-of-cost-ormarket
principle. However, in contrast to HGB, for all types of inventories (with the exception of
raw materials, consumables and supplies) both the procurement and the sales market have to be
taken into consideration in the valuation. Where cost of replacement is lower than acquisition
or production cost, inventories must be valued at the average of replacement cost, realizable net
selling price or realizable net selling price less normal profit margin. The realizable net selling
price less normal profit margin is the floor, even if cost of replacement is lower. Raw materials,
consumables and supplies are valued at the lower of replacement and acquisition cost, without
taking into account the sales market.
HGB contains no binding procedures for accounting and valuing derivative financial instruments.
Valuation consequently takes account of the historical cost, realization and imparity principles.
US GAAP, on the other hand, requires that all original and derivative financial instruments be
measured at fair value. Under certain restrictive conditions, US GAAP requires that hedging be
recognized on the balance sheet, which means that fluctuations in financial instruments used for
hedging purposes are not directly shown as income or expenses, but must be temporarily accrued
under equity. The criteria for recognition on the balance sheet include the type of hedged
transaction and of financial instrument involved. Where the conditions for recognition are not
fulfilled, fluctuations are posted to income or expenses in the period in which they occur.
Under German law, costs of raising capital must be recorded as an expense and may not be offset
against the addition to funds obtained from capital increases. Under US GAAP, the costs of
raising capital, e.g., issuing costs in the course of an initial public offering, net of the related tax
effects, are subtracted from the gross proceeds of the funds raised, thus reducing additional
paid-in capital.
There is no prevailing opinion in Germany on the accounting treatment of stock options granted
to employees. Under US GAAP, stock options are mainly dealt with in APB 25 and SFAS No 123.
Under APB 25, stock options are valued on the basis of their intrinsic value, whereas in SFAS
No 123 they are recognized at fair value. The Company has decided to apply APB 25 for its stock
options, the intrinsic value being the difference between the exercise price and the higher market
share price at balance sheet date.
126

6. Currency translation
7. Goodwill
8. Discontinued
operations
Under HGB, foreign currency receivables and liabilities not hedged are valued at the exchange
rate on the date of transaction or the balance sheet date, whichever is less favorable. Under
US GAAP, SFAS No 52 requires that all foreign currency receivables and liabilities are translated
at the exchange rate prevailing on the balance sheet date, with the result that unrealized exchange
gains can affect income.
Under German commercial law, goodwill acquired for a consideration must be capitalized and
amortized over its average useful life. Where it results from purchase accounting, goodwill must
be offset in full against equity in the period in which it arises. Goodwill must be written down,
for example, when the Company’s future results of operations are not expected to be positive.
Under German commercial law, recognition of impairment losses is considered justified in view
of the prudence principle.
Under US GAAP, goodwill is also capitalized, but scheduled amortization is no longer permitted.
Instead, SFAS No 142 states that goodwill must be reviewed for impairment at least once a year,
and its value adjusted where necessary.
Sec. 246 (2) HGB states that expenses and income or assets and liabilities may not be offset
against each other. This means that discontinued operations must not be shown separately in
the Financial Statements.
Under the US GAAP rules laid down in SFAS No 144, however, the items in the income statement
and the balance sheet must be adjusted for effects of discontinued operations. The adjusted figures
must be summarized in a separate item as results from discontinued operations in the income
statement and assets and liabilities from discontinued operations on the balance sheet.
XIII. Analysis of Fixed Assets of the Group
The development of the Group’s non-current assets is shown in the analysis of fixed assets
enclosed as exhibit to these notes.
Neumarkt, March 4, 2003
Michael Ernst Dr. Jürgen Koch Hans H. Overdiek
127
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Analysis of Group Assets
Acquisition and production costs
Change
in con-
Currency solidated Reclassi-
‘000 euros Jan. 1, 2003 translation group Additions Disposals fications Dec. 31, 2003
I. Intangible assets
1. Franchises, trademarks,
patents and licenses
and similar rights and
licenses to such rights 33,113 –433 – 2,224 –987 3,350 37,267
2. Goodwill 110,560 –588 – 85 –993 12 109,076
3. Payments on account 4,058 – – 57 – –3,604 511
147,731 –1,021 – 2,366 –1,980 –242 146,854
II. Property, plant and equipment
1. Land, land rights and
buildings including
buildings on third-party
land
2. Technical equipment
283,897 –8,769 – 1,320 –13,243 1,497 264,702
and machines
3. Other equipment,
647,367 –32,586 – 11,647 –40,167 15,218 601,479
furniture and fixtures
4. Payments on account
and construction in
64,786 –1,750 59 4,261 –5,648 1,000 62,708
progress 17,422 –559 – 16,786 –860 –17,473 15,316
1,013,472 –43,664 59 34,014 –59,918 242 944,205
III. Financial assets
1. Shares in affiliated
companies 3,260 –225 – 222 – – 3,257
2. Equity investments
3. Loans to companies
in which investments
60 –1 – 19 –5 – 73
are held – – – 169 – – 169
4. Other loans 1,049 –2 – 209 –210 – 1,046
4,369 –228 – 619 –215 – 4,545
1,165,572 –44,913 59 36,999 –62,113 – 1,095,604
128

Accumulated amortization/depreciation Net carrying amount
Change
in con-
Currency solidated
Jan. 1, 2003 translation group Additions Disposals Dec. 31, 2003 Dec. 31, 2003 Dec. 31, 2002
–24,148 296 – –4,454 939 –27,367 9,900 8,965
–21,148 141 – –2,531 1 –23,537 85,539 89,412
– – – – – – 511 4,058
– 45,296 437 – –6,985 940 –50,904 95,950 102,435
–105,076 3,502 – –18,602 7,359 –112,817 151,885 178,821
–474,395 21,226 – –29,138 31,836 –450,471 151,008 172,972
–51,711 1,431 –16 –4,045 5,112 –49,229 13,479 13,075
–744 110 – – – –634 14,682 16,678
–631,926 26,269 –16 –51,785 44,307 –613,151 331,054 381,546
–1,654 – – – – –1,654 1,603 1,606
– – – –17 – –17 56 60
– – – – – – 169 –
–643 – – – – –643 403 406
– 2,297 – – –17 – –2,314 2,231 2,072
– 679,519 26,706 –16 –58,787 45,247 –666,369 429,235 486,053
129
FINANCIAL STATEMENTS PFLEIDERER GROUP

Audit Opinion
We have audited the consolidated Financial Statements, comprising the balance sheet, the income
statement and the statements of changes in shareholders’ equity and Cash Flows as well as the
notes to the Financial Statements, prepared by Pfleiderer AG, Neumarkt, for the fiscal year from
January 1 to December 31, 2002. The preparation and the content of the consolidated Financial
Statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion whether the consolidated Financial Statements are in accordance with the US Generally
Accepeted Accounting Standards (US-GAAP), based on our audit.
We have conducted our audit of the consolidated Financial Statements in accordance with the
German audit regulations and the generally accepted German standards for the audit of Financial
Statements promulgated by the IDW [“Institut der Wirtschaftsprüfer in Deutschland”: Institute
of Public Auditors in Germany]. Those standards require that we plan and perform the audit such
that it can be assessed with reasonable assurance whether the consolidated Financial Statements
are free of material misstatement. Knowledge of the business activities and the economic and legal
environment of the Group and evaluations of possible misstatements are taken into account in
the determination of audit procedures. The effectiveness of the internal control system and the
evidence supporting the amounts and disclosures in the consolidated Financial Statements are
examined on a test basis within the framework of the audit. The audit includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated Financial Statements. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the consolidated Financial Statements give a true and fair view of the net assets,
financial position, results of operations and Cash Flows of the Group for the fiscal year in accordance
with US-GAAP.
130

Our audit, which also extends to the combined management report prepared by the Board of
Management for the fiscal year from January 1 to December 31, 2002, has not led to any reservations.
In opinion, on the whole the group management report together with the other disclosures
in the consolidated Financial Statements provides a suitable understanding of the Group’s
position and suitably presents the risks of future development. In addition, we confirm that the
consolidated Financial Statements and the group management report for the fiscal year from
January 1, 2002 to December 31, 2002 satisfy the conditions required for the Company’s exemption
from its obligation to prepare consolidated Financial Statements and the group management
report in accordance with German law.
Stuttgart, March 9, 2004
Ernst & Young
Deutsche Allgemeine Treuhand AG
Wirtschaftsprüfungsgesellschaft
A. Müller P. Hegenbarth
Wirtschaftsprüfer Wirtschaftsprüfer
[German Public Auditor] [German Public Auditor]
131
FINANCIAL STATEMENTS PFLEIDERER GROUP

Consolidated Companies as of December 31, 2003
Pfleiderer AG Neumarkt
Business Segment Engineered Wood
Pfleiderer Holzwerkstoffe GmbH & Co. KG Neumarkt *) 100.00%
Pfleiderer Holzwerkstoffe Verwaltungs-GmbH Neumarkt 100.00%
Duropal GmbH Neumarkt 100.00%
FH Frischholz GmbH Korbach 100.00%
Fideris Spanplatten AG St. Gallen (CH) 100.00%
FOLS Sp. z o.o. Warsaw (PL) 100.00%
Heller Forstservice GmbH Korbach 100.00%
Heller Holz GmbH Korbach 100.00%
Interwood GmbH Neumarkt 100.00%
Jura Belgium BVBA Hoogstraaten (B) 100.00%
JURA-Spedition GmbH & Co. KG Neumarkt *) 100.00%
JURA-Spedition Verwaltungs-GmbH Neumarkt 100.00%
Pfleiderer B.V.
Pfleiderer Grajewo S.A.
Deventer (NL) 100.00%
(formerly Zaklady Plyt Wiorowych S.A. w. Grajewie) Grajewo (PL) 80.49%
Pfleiderer Holzwerkstoffe GmbH Peiting 100.00%
Pfleiderer Holzwerkstoffe Vertriebs-GmbH Neumarkt 100.00%
Pfleiderer Industrie Ltd.
Pfleiderer Prospan S.A.
Chalfont St Peter (GB) 100.00%
(formerly Zaklady Plyt Wiorowych Prospan S.A.) Wieruszow (PL) 48.08%
Thermopal GmbH (formerly Thermopal Verwaltungs GmbH) Leutkirch 100.00%
wodego AG (formerly Pfleiderer Industrie Schweiz AG) St. Gallen (CH) 100.00%
Wodego GmbH Neumarkt 100.00%
wodego S.A.S. (formerly Duropal S.A.S.) Reims (F) 100.00%
Companies not consolidated:
Jura Polska Sp. z o.o. Dabrowa Gornicza (PL) 100.00%
Laminat Sp. z o.o. Grajewo (PL) 80.49%
Pfleiderer OOO Velikii Novgorod (RUS) 80.49%
Business Segment Infrastructure Technology
Pfleiderer Infrastrukturtechnik GmbH & Co. KG Neumarkt *) 100.00%
Pfleiderer Infrastrukturtechnik Verwaltungs-GmbH Neumarkt 100.00%
Newmark International Inc. Birmingham (USA) 100.00%
PESA Telecom SAU Constanti (E) 100.00%
Pfleiderer Consulting GmbH Neumarkt 100.00%
Pfleiderer Energietechnik Verwaltungs-GmbH Dinkelsbühl 100.00%
Pfleiderer España SAU Constanti (E) 100.00%
Pfleiderer Infrastructure S.A.R.L. Villeneuve (F) 100.00%
Pfleiderer Lábatlani Vasbetonipari Rt. Lábatlan (H) 86.00%
Pfleiderer Leasing USA Inc. Wilmington (USA) 100.00%
132

Pfleiderer Poles & Towers GmbH & Co. KG Neumarkt *) 100.00%
Pfleiderer Technika Infrastrukturalna Polska Sp. z o.o Warsaw (PL) 100.00%
Pfleiderer Wind Energy GmbH Neumarkt 100.00%
S.C. Travertec srl Brasov (RUM) 100.00%
Travipos SA Constanti (E) 51.00%
Windtec Anlagenerrichtungs- und Consulting GmbH Völkermarkt (A) 100.00%
Companies not consolidated:
German Track Systems Projektgesellschaft mbH GTS Neumarkt 100.00%
Pfleiderer Poles & Towers Verwaltungs-GmbH
(formerly Pfleiderer Fenster Verwaltungs-GmbH) Neumarkt 100.00%
Pfleiderer track systems B.V. Deventer (NL) 100.00%
Pfleiderer water systems GmbH
(formerly Wayss & Freytag Ges. f. Untern. bet. mbH) Neumarkt 100.00%
Swiss Track Systems AG Zolfingen (CH) 48.70%
Other
Pfleiderer Dämmstofftechnik International GmbH & Co. KG Neumarkt *) 100.00%
Pfleiderer Dämmstofftechnik Verwaltungs-GmbH Neumarkt 100.00%
Pfleiderer Finance B.V. Deventer (NL) 100.00%
Pfleiderer Leasing GmbH & Co. Neumarkt *) 100.00%
Pfleiderer Leasing Verwaltungs-GmbH Neumarkt 100.00%
Pfleiderer Service GmbH Neumarkt 100.00%
Companies not consolidated:
Pfleiderer Energietechnik Verwaltungs-GmbH Neumarkt 100.00%
*) Companies opting out under Section 264b HGB
133
FINANCIAL STATEMENTS PFLEIDERER GROUP

The following is a summary of the Financial Statements of Pfleiderer AG as drawn up and audited
pursuant to the German Commercial Code (HGB). This summary does not comply with Sec. 328 (2)
HGB. A copy of the full Financial Statement can be ordered from Pfleiderer AG, Investor Relations,
Ingolstädter Strasse 51, 92318 Neumarkt.
Pfleiderer AG Balance Sheet as of December 31, 2003
Assets
‘000 euros Notes Dec. 31, 2003 Dec. 31, 2002
Fixed assets
Property, plant and equipment 62 79
Financial assets 273,925 298,518
(1) 273,987 298,597
Current assets
Receivables and other assets 59,697 76,758
Treasury stock 0 8
Cheques, cash and bank balances 59,376 51,967
(2) 119,073 128,733
Total assets 393,060 427,330
Stockholders’ Equity and Liabilities
‘000 euros Notes Dec. 31, 2003 Dec. 31, 2002
Stockholders’ equity
Capital stock 109,274 109,274
Capital reserve 10,927 10,927
Revenue reserve 50,621 50,621
Retained earnings –29,520 0
(3) 141,302 170,822
Accruals
Accruals for pensions 6,365 6,201
Other accruals 9,002 14,289
(4) 15,367 20,490
Liabilities
Financial liabilities 22,971 20,839
Other liabilities 213,420 215,179
(5) 236,391 236,018
Total stockholders’ equity and liabilities 393,060 427,330
134

Pfleiderer AG Statement of Income 2003
Jan. 1 – Jan. 1 –
‘000 euros Notes Dec. 31, 2003 Dec. 31, 2002
Income from investments in affiliated companies 24,584 8,872
Income from profit transfer agreements 0 0
Depreciation of financial assets –4,263 0
Expenses from the absorption of losses from affiliated companies –26,745 –15,025
(9) – 6,424 –6,153
Income from other securities and long-term loans 103 206
Other interest and similar income 6,179 11,367
Interest and similar expenses –13,989 –12,625
(10) –7,707 –1,052
Holding performance –14,131 –7,205
Other operating income (11) 16,660 25,413
Personnel expenses (12) –6,898 –8,495
Amortization and depreciation –18 –19
Other operating expenses (13) –23,793 –33,140
Result from ordinary business activity –28,180 –23,446
Extraordinary expenses (14) 0 –178,317
Taxes on income (15) –1,340 4,000
Net income –29,520 –197,763
Addition to retained earnings 0 6,679
Withdrawal from capital reserve 0 190,576
Withdrawal from revenue reserve 0 508
Retained earnings –29,520 0
135
FINANCIAL STATEMENTS PFLEIDERER AG

Analysis of Fixed Assets of Pfleiderer AG 2003
136
Acquisition or production costs
Reclassifi-
‘000 euros Jan. 1, 2003 Additions Disposals cations Dec. 31, 2003
I. Property, plant and equipment
Other equipment, furniture and fixtures 102 2 2 0 102
102 2 2 0 102
II. Financial assets
1. Investments in affiliated companies 349,181 19 46 6 349,160
2. Loans to affiliated companies 20,286 0 20,286 0 0
3. Investments 51 0 17 –6 28
4. Other loans 0 0 0 0
369,518 19 20,349 0 349,188
369,620 21 20,351 0 349,290

Accumulated depreciation Net book value
Reclassifi-
Jan. 1, 2003 Additions Disposals cations Dec. 31, 2003 Dec. 31, 2003 Dec. 31, 2002
23 18 1 0 40 62 79
23 18 1 0 40 62 79
71,000 4,263 0 75,263 273,897 278,181
0 0 0 0 0 20,286
0 0 0 0 28 51
0 0 0 0 0 0
71,000 4,263 0 0 75,263 273,925 298,518
71,023 4,281 1 0 75,303 273,987 298,597
137
FINANCIAL STATEMENTS PFLEIDERER AG

Supervisory Board and Board of Management of Pfleiderer AG
Additional board memberships held
by members of the Supervisory
Board of Pfleiderer AG
Ernst-Herbert Pfleiderer
Chairman of the Supervisory Board
of Pfleiderer AG
Member of the following comparable
German advisory board:
Advisory board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt (Chairman)
Wolfgang Rhode*
1st Deputy Chairman of the Supervisory
Board
Executive member of the managing
board of IG Metall
Dr. Manfred Scholz
2nd Deputy Chairman of the Supervisory
Board
Managing director Augsburg Airways
GmbH & Co. KG, Augsburg
Member of the supervisory boards in
the following companies:
Citicorp (Member of the German
Advisory Board from January 2003)
ASSTEL Lebensversicherung AG,
Cologne (Chairman)
Württembergische Hypothekenbank
AG, Stuttgart
Drei Mohren AG, Augsburg
Gothaer Lebensversicherung AG,
Göttingen (Chairman)
Gothaer Versicherungsbank VvaG,
Cologne
Gothaer Finanzholding AG, Cologne
Westfalenbank AG, Bochum
(Chairman)
138
Member of the following comparable
German advisory board:
Advisory board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt (Deputy-Chairman)
N. Erich Gerlach
Business Consultant, Business
Integration Service, Friedrichsdorf
Member of the following comparable
German advisory board:
Advisory board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt
Reinhard Hahn*
Trade Union Secretary, managing
board of IG Metall, Frankfurt am
Main
Frank Kratzsch*
Works Council Chairman of Pfleiderer
Holzwerkstoffe GmbH & Co. KG,
Plant Arnsberg
Hans Theodor Pfleiderer
Member of the executive board of
P&V Holding Aktiengesellschaft,
Vienna
Member of the following comparable
German advisory board:
Advisory board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt
Hanno C. Fiedler
Chairman of the managing board
of Ball Packaging Europe GmbH,
Ratingen
Executive Vice President of Ball Corporation,
Bromfield, Colorado, USA
Member of the executive board of
Impress Metal Packaging Holdings
B.V., Amsterdam
(until February 28, 2003)
Member of the following comparable
German advisory board:
Advisory board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt
Member of the supervisory boards in
the following companies:
Thyssen Krupp Stahl AG, Duisburg
Howaldtswerke-Deutsche Werft AG,
Kiel
Duales System Deutschland AG,
Cologne (until June 15, 2003)
Member of the following comparable
German advisory board:
Ball Corporation, Bromfield,
Colorado, USA
Robert J. Koehler
Chairman of the executive board of
SGL Carbon AG, Wiesbaden
Member of the supervisory boards in
the following companies:
Wacker Chemie GmbH, Munich
Benteler AG, Paderborn (Chairman)

Member of the following comparable
German advisory board:
Advisory board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt
New Russia Fund, ING-Barings,
Great Britain (Member of the supervisory
board)
Rainer Stracke*
Member of the Board of Management
of Pfleiderer Prospan S.A., Wieruszow,
Poland (from June 6, 2003)
Member of the Board of Management
of Pfleiderer Grajewo S.A., Grajewo,
Poland (from June 6, 2003)
Manfred Schmidt*
Works Council Chairman of Pfleiderer
Holzwerkstoffe GmbH & Co. KG,
Plant Neumarkt
Josef Rugge-Fechtelpeter*
Works Council Chairman of Pfleiderer
Holzwerkstoffe GmbH & Co. KG,
Plant Rheda
Chairman of Central Works Council
Engineered Wood
Additional board memberships
held by members of the Board of
Management
Prof. Dr. Ralf H. Bufe
Chairman of the Board of Management
(until August 18, 2003)
Business Segment Infrastructure
Technology (until August 18, 2003)
Member of the managing board
of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG
139
Member of the following comparable
German advisory board:
Windtec Anlagenerrichtungs- und
Consulting GmbH, Völkermarkt,
Austria (until August 18, 2003)
Pfleiderer Finance B.V., Deventer,
Netherlands (until August 18, 2003)
Pfleiderer Industry Ltd., Gerrads
Cross/Buckinghamshire, Great
Britain (until August 18, 2003).
Pfleiderer Prospan S.A., Wieruszow,
Poland (until August 18, 2003).
Pfleiderer Grajewo S.A., Grajewo,
Poland (until August 18, 2003).
Hans H. Overdiek
Member of the Board of Management
Spokesman of the Board of Management
(from August 18, 2003)
Business Segment Engineered Wood
Member of the managing board
of Pfleiderer Holzwerkstoffe
GmbH & Co. KG
Member of the following comparable
German advisory board:
Windtec Anlagenerrichtungs- und
Consulting GmbH, Völkermarkt,
Austria
Pfleiderer B.V., Deventer,
Netherlands
Pfleiderer Industry Ltd., Gerrads
Cross/Buckinghamshire, Great
Britain
Pfleiderer Grajewo S.A., Grajewo,
Poland, Chairman of the supervisory
board (from October 13, 2003,
Member of the supervisory board
until September 15, 2003).
Pfleiderer Prospan S.A., Wieruszow,
Poland, Chairman of the supervisory
board (from October 13, 2003,
Member of the supervisory board
until September 15, 2003)
IN BRIEF SUPERVISORY BOARD AND BOARD OF MANAGEMENT
Michael Ernst
Member of the Board of Management
Personnel, Legal Affairs,
Risk Management,
Information Technology
(from August 18, 2003)
Member of the supervisory boards in
the following companies:
Incon AG, Taunusstein (Deputy-
Chairman of the supervisory board)
Member of the following comparable
German advisory board:
Windtec Anlagenerrichtungs- und
Consulting GmbH, Völkermarkt,
Austria
Pfleiderer Finance B.V., Deventer,
Netherlands
Dr. Jürgen Koch
Member of the Board of Management
Finance
Business Segment Infrastructure
Technology (from August 18, 2003)
Member of the managing board of
Pfleiderer Unternehmensverwaltung
GmbH & Co. KG
Member of the following comparable
German advisory board:
Windtec Anlagenerrichtungs- und
Consulting GmbH, Völkermarkt,
Austria
Pfleiderer Finance B.V., Deventer,
Netherlands
Pfleiderer Grajewo S.A., Grajewo,
Poland
(until August 18, 2003) * Elected by the employees

Glossary
Technical Glossary
Carrier Materials
Wood-based materials which serve as
the base for decorative surface materials
(HPL, direct-coated wood materials,
veneer). The preferred materials are
unrefined particleboard and MDF.
Combined Heat-Power Plan
Also known as a co-generation plant:
a decentralized plant for generating
energy which Pfleiderer uses for supplying
electricity and process heat,
particularly for the production of woodbased
panels (Pfleiderer’s “Central
Energy Unit”).
Concrete Masts
Very strong masts used preferably for
supporting mobile phone antennas, as
well as for lighting, current conductors
and aerial lines as well as high signs.
Pfleiderer manufactures spun concrete
poles using this technology in which
concrete is rotated at speeds of up to
600 rpm in a symmetric radial steel
mound.
Contipress
A twin band press for the continuous
production of particleboard, MDF or
laminated board.
EEG
The German Act on Renewable Energy
(“Erneuerbare-Energie-Gesetz”) with
which the Federal Government aims
to promote the use of alternative energies.
The supply of electricity to the
public grid generated from wind power,
solar energy or biomass is promoted by
the EEG with various levels of subsidy.
140
GRP Mast
Glass fibre-reinforced plastic mast
which combines low weight with high
flexural strength. Preferred use for
lamp-posts, traffic light masts and flag
poles or for special telecommunications
solutions.
GSM
Global System for mobile Communication:
the current worldwide standard in
use for mobile radio technology.
HPL
High pressure laminate: a surface for
wood-based panels made of plastic.
ISO
International Standardization Organization:
voluntary international association
of national standardization committees
with the aim of developing uniform
standards valid worldwide. The Quality
Management division pioneered it in
Germany.
Onshore/Offshore Plants
Wind energy plants for sites on land
(onshore) or at sea (offshore). Pfleiderer
is developing offshore plants using its
Multibrid® technology.
MDF
Medium density fibreboard: consists of
wood fibres impregnated with glue and
subjected to heat under pressure; one
particular use is for three-dimensionally
constructed furniture fronts.
MFC, Melamine faced Chipboard
A direct coating system for surface
finishing of wood-based panels.
Renewable Energy
Use of natural energy sources which
are regenerative, making them available
in unlimited supply, e.g. sun, wind,
geothermal energy.
Solid Track
Rail track construction with load-bearing
layer of asphalt or concrete and
concrete sleepers laid directly in concrete
bedding instead of on ballast.
Giving high track stability and low
maintenance, this system is preferred
for high-speed links. Today’s Rheda
2000® System sleepers are a further
development of a design Pfleiderer first
used in 1972 for platform tracks in the
city of Rheda in eastern Westphalia,
Germany
Surface-Finished Board
Wood-based panels with a decorative
surface. The surface may consist of
various materials, for instance plastic,
manufactured from pressed and laminated
decorative paper.

Turnkey Service
Delivery of a complete system. Example:
Pfleiderer not only builds the
transmission mast, but also acquires
the land, provides and assembles the
mobile phone technology and later on
maintains the station.
UMTS
Universal Mobile Telecommunications
System: a 3rd generation system of
radio data transmission. 2 MBit/s data
rates have been defined as the UMTS
standard. These high data transfer
rates open up new possibilities for
users, such as e-commerce and mobile
multimedia applications.
141
Economic Glossary
Capital Employed
The entire capital employed in the
company, i.e. fixed assets plus current
assets less provisions (excluding
provisions for pensions), and liabilities
(excluding financial liabilities).
Cash Flow
A measure used when analyzing balance
sheets, companies and shares in
order to assess a company’s financial
strength and profitability. The Cash
Flow defines the inflow of liquid funds
to a company from sales and other
sources over a certain period.
Discontinued Operations
According to US-GAAP Business segments
which are forseen to be sold or
separated are separately shown under
“discontinued operations” in the income
statement and balance sheet.
EBIT
Earnings before interest and taxes.
EBITDA
Earnings before interest, taxes, depreciation
and amortization.
EBT
Earnings before taxes.
EPS
Earnings per share: consolidated earnings
divided by the weighted number of
shares.
KonTraG
The law for control and transparency
in the corporate sector, KonTraG was
adopted by the Bundesrat on 27 March
1998 and aims to improve corporate
control.
IN BRIEF GLOSSARY
Long-term incentive Scheme
A motivation scheme geared to the
long term to encourage staff loyalty,
incorporating schemes to allow employees
a share in the success of the
company.
ROCE
Return on capital employed.
Stock Appreciation Rights
The right to participate in the future
appreciation of an equity’s value. At
Pfleiderer AG members of management
at the end of 2000 had the option to
participate in the company’s success
through the acquisition of such rights.
Stock Options
Form of remuneration entailing the
issue of subscription rights to members
of management and employees,
conferring on them the right to acquire
shares in the own company provided
they achieve certain goals under certain
conditions.
WACC
Weighted average cost of capital
payable by the company for borrowed
capital and equity capital on the financial
markets.

Multi-Year Summary
US-GAAP HGB
‘000 euros 2003 2002 2001 RG 2000 1999/2000 1998/1999 1997/1998
Balance sheet key ratios
Assets
Current assets
Cash and short-term securities 68,735 58,255 55,764 34,424 36,939 16,646 21,273
Inventories (till short 2000 net) 133,716 114,397 132,681 171,067 175,842 143,015 136,310
Other current assets 108,806 157,245 210,658 290,050 285,366 229,006 208,558
Assets of discontinued operations 14,731 35,045 345,183
Non-current assets
Property, plant and equipment 331,054 381,546 417,576 594,632 656,819 501,460 453,953
Intangible assets 95,950 102,435 107,515 89,929 52,072 34,016 11,761
Financial assets 2,231 2,072 9,583 5,480 42,860 43,568 32,711
Other non-current assets 24,033 36,440 45,573
Liabilities and stockholders equity
Accruals
Accruals for pensions
Other accruals
62,414 61,263 59,818 55,247 58,154 56,009 51,978
(till short 2000 incl. deferred taxes) 46,396 41,306 41,985 121,907 137,329 82,675 80,727
Financial liabilities 329,465 365,488 522,244 573,082 646,294 431,645 300,230
Other liabilities 169,935 194,798 217,483 211,944 163,441 129,893 93,209
Liabilities of discontinued
operations 31,816 23,314 207,735
Stockholders’ equity and
minority interests 139,230 201,266 275,268 223,402 244,680 267,446 337,444
Special reserves with an
equity portion – – – 0 0 42 979
Balance sheet total 779,256 887,435 1,324,533 1,185,582 1,249,898 967,711 864,567
As share of balance sheet total
Non-current assets (asset intensity) 58.2% 58.9% 43.8% 58.2% 60.1% 59.8% 57.7%
Current assets
Stockholders’ equity incl.
41.8 % 41.1% 56.2% 41.8% 39.9% 40.2% 42.3%
minority interests 17.9% 22.7% 20.8% 18.8% 19.6% 27.6% 39.0%
Financial debt 42.3% 41.2% 39.4% 48.3% 51.7% 44.6% 34.7%
Ratios
Tangible non-current assets
financed by equity
Non-current assets financed
42.1% 52.8% 65.9% 37.6% 37.3% 53.3% 74.3%
by equity
Non-current assets and inventories
30.7% 38.5% 47.4% 32.4% 32.5% 46.2% 67.7%
financed by equity 23.7% 31.6% 38.6% 25.9% 26.4% 37.0% 53.2%
142

Income ratios
Sales 1,020,900 1,028,432 1,041,995 830,350 1,437,800 1,224,060 1,118,041
Foreign share in percent 48.8 48.4 48.1 43.7 40.8 30.2 28.0
EBITDA 85,385 109,460 140,910 106,970 167,628 149,316 145,671
Depreciation –57,753 –60,566 –63,013 –51,715 –95,489 –79,914 –67,714
EBIT 27,632 48,894 77,897 55,255 72,139 69,402 77,957
Interest –16,284 –15,265 –22,673 –24,047 –34,700 –18,016 –17,670
EBT continued operations 11,348 33,629 55,224 38,268 2,989 51,386 60,287
Taxes of income –9,305 –13,200 –9,180 –14,787 –11,573 –16,582 –6,759
Result continued operations
before minority interests 2,043 20,429 46,044 23,481 –8,584 34,804 53,528
Losses of discontinued operations –44,964 –52,452 –14,243
Taxes of discontinued operations –1,777 –3,000 –4,237
Result before minority interests –41,144 –35,023 27,564
Minority interests –4,618 –4,641 –3,345
Result after minority interests –45,762 –39,664 24,219
Earnings key ratios
EBITDA in percent of sales 8.4% 10.6% 13.5% 12.9% 11.7% 12.2% 13.0%
EBIT in percent of sales 2.7% 4.8% 7.5% 6.7% 5.0% 5.7% 7.0%
EBT continued operations
in percent of sales
Result continued operations before
1.1% 3.3% 5.3% 4.6% 0.2% 4.2% 5.4%
minority interests in percent of sale 0.2% 2.0% 4.4% 2.8% –0.6% 2.8% 4.8%
EBT continued operations before
provisions in percent of sale 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Ratios per share
Average number of
distributed shares
Earnings per share
(till short 2000 earnings per share
42,678,146 42,673,784 42,685,000 42,685,000 42,685,000 42,685,000 42,685,000
acc. to DVFA/SG)
Cash Flow per share
(till short 2000 Cash Flow per share
–1.07 –0.93 0.57 0.34 0.37 0.72 1.10
acc. to DVFA/SG) 1.35 1.84 2.53 1.63 2.85 2.73 2.66
143
US-GAAP HGB
‘000 euros 2003 2002 2001 RG 2000 1999/2000 1998/1999 1997/1998
IN BRIEF MULTI-YEAR SUMMARY

Financial position
Ratio EBIT to sales 0.03 0.05 0.07 0.07 0.05 0.06 0.07
Capital employed in million euros 2 484.3 562.7 663.7 806.9 906.6 725.3 633.8
Operative Cash Flow in million euros 3 62.1 83.3 111.2 88.4 91.2 117.9 122.6
Turnover rates
Turnover of inventories 7.6 9.0 7.9 8.3 1 8.2 8.6 8.2
Turnover of receivables 13.0 10.8 7.1 6.8 1 6.6 7.1 7.4
Turnover of capital employed 2.1 1.8 1.6 1.8 1 1.6 1.7 1.8
Profitability after taxes on income
Return in equity (Basis:
Earnings continued operations
before minority interests 1.5% 10.2% 16.7% 18.0% 1 Return on total working capital
(Basis: Earnings continued
–3.5% 13.0% 15.9%
operations before minority interests 4.6% 7.0% 9.3% 10.7% 1 Return on sales (Basis:
Earnings continued operations
3.1% 7.7% 11.6%
before minority interests 0.2% 2.0% 4.4% 2.8% –0.6% 2.8% 4.8%
Profitability before taxes
on income
ROCE 5.7% 8.7% 11.7% 11.7% 1 8.0% 9.6% 12.3%
CFROCE 12.8 % 14.8 % 16.8 % 18.8 % 1 10.1 % 16.3 % 19.3 %
Number of employees
at cutt-off date
(after 2001 without trainees)
Average number of employees
5,535 5,647 5,785 9,708 10,238 8,721 8,132
(after 2001 without trainees) 5,623 5,691 5,780 9,883 10,115 8,658 8,179
1 Annualised
2 Capital employed without capital bounded in discontinued operations.
3 Result continued operations add. depreciation and changes in accruals for pensions
(till short 2000: annual result add. depreciation and changes in accruals for pensions and in special reserves with an equity portion)
144
US-GAAP HGB
‘000 euros 2003 2002 2001 RG 2000 1999/2000 1998/1999 1997/1998

Financial Calendar 2004
March 31, 2004
Balance sheet press conference, Munich
Publication of the annual report 2003
Analysts conference, Frankfurt
May 4, 2004
Three month report 2004
June 15, 2004
Annual shareholder meeting, Munich
August 10, 2004
Six month report 2004
November 2, 2004
Nine month report 2004
Imprint
Publisher
Pfleiderer AG, Neumarkt
Responsible:
Corporate Communication
Concept and Design
3st kommunikation, Mainz
Photography
Stefan Wildhirt, Offenbach
Typesetting
Knecht GmbH, Ockenheim
Print
Societätsdruck, Mörfelden
This annual report is published
in German and English. In case
of discrepancies, the German
version shall prevail.

Contacts
Pfleiderer AG
Ingolstädter Strasse 51
D-92318 Neumarkt
E-Mail: info@pfleiderer.com
Internet: www.pfleiderer.com
Corporate Communication
Tel. +49 (0)9181/28 - 84 91
Fax +49 (0)9181/28 - 606
Investor Relations
Tel. +49 (0)9181/28 - 80 44
Fax +49 (0)9181/28 - 606