Annual Report 2002 - grenke.de · Annual Report 2002 L_GB_02_engl_g_Onl ... “Pawn power” proves itself in an extremely diverse competitive ... ment and chess and that the interaction

A K T I E N G E S E L L S C H A F T

Annual Report 2002

L_GB_02_engl_g_Onl.INNEN_1818 08.04.2003 17:12 Uhr Seite 1

Key Figures of the GRENKELEASING AG Group

GRENKELEASING AG is the parent company of the GRENKELEASING AG Group – hereinafter referred to as GRENKELEASING.

All the figures and statements published in the Annual Report refer to the GRENKELEASING AG Group.

2002 Change 2001 Unit

New business (cost of new lease contracts)* 278,040 18% 235,572 €’000s

Contribution margin 1 of new business 28,497 17% 24,311 €’000s

Number of new contracts 39,595 10% 36,103 Number

Number of new contracts without projects 35,782 16% 30,809 Number

Net interest income from lease receivables (from lease business) 39,196 28% 30,715 €’000s

Settlement of claims 9,886 8% 9,181 €’000s

Profit from insurance business 8,249 27% 6,490 €’000s

Profit from new business 10,152 18% 8,595 €’000s

Profit from disposals 1,229 –6% 1,303 €’000s(income exceeding the calculated residual value)

Trading profit (mainly Mauden/brokerage) 55 –67% 166 €’000s

Other operating income 962 –19% 1,194 €’000s

Costs of new contracts 8,623 17% 7,376 €’000s

Costs of current contracts 2,779 25% 2,221 €’000s

Project costs and basic distribution costs 5,990 37% 4,375 €’000s

Management costs 5,971 21% 4,944 €’000s

Other costs 1,666 31% 1,273 €’000s

Amortization/depreciation 349 13% 310 €’000s

Other interest profit 462 –30% 661 €’000s

EBT 25,041 29% 19,444 €’000s

Net profit (consolidated net profit pursuant to IAS) 15,259 27% 11,976 €’000s

DVFA earnings 15,259 27% 11,976 €’000s

DVFA earnings per share 1.13 27% 0.89 €

Proposed dividend for 2002***** 0.25 €

Embedded value of the contract portfolio 50.5 19% 42.3 € m

Share of IT products in the lease portfolio 88 85 Percentage

Share of corporate customers in the total portfolio 96 95 Percentage

Mean acquisition value** 7.0 6.5 €’000s

Mean term of contract 44 44 Months

Volume of leased assets*** 698 500 € m

Number of current contracts 105,730 84,920 Number

Number of employees**** 281 233 People

* incl. addition of EKOMA plus currency adjustment

**based on new business

***at cost including lease-purchase

****as of December 31, 2002, excluding Board of Directors

*****will be proposed to the shareholders’ meeting on May 13, 2005


The GRENKELEASING AG GroupAnnual Report 2002



Contents

Keeping economic stagnation in check.

The perfect combination of strategy and tactics secures market leadership.

“Pawn power” proves itself in an extremely diverse competitive environment.

State-of-the-art technology, economy and putting the customer first – the keys to our success.

Facts and figures.


Chess and Management 7Letter to the Shareholders from the Board of Directors 8

The GRENKELEASING Business Model 16GRENKELEASING Workflow 17Innovative Leasing Concepts 18An Efficient Business Model 20Milestones in the Group’s History 21Strong Partnerships 21Overview of the Group 22Corporate Structure 23

The Leasing Market – About to Turn Around? 28The Market Potential of GRENKELEASING Products 30Competing to Win 31

Variations on a Theme: Expansion in Germany and Europe 36

Optimizing Costs in Contract Logistics 40

Recalculation of Liquidity 42

WEBLEASE NETBUSINESS AG – Leasing Online 43

The GRENKELEASING Share 44

The Share at a Glance 45

The Reorganization of the German Stock Market 47

Corporate Citizenship 48

GRENKELEASING AG GroupManagement report for fiscal year 2002, income statement for fiscal

year 2002, balance sheet as of December 31, 2002, statement of changes

in equity and cash flow for 2001 and 2002, notes to the financial

statements for fiscal year 2002, audit opinion, Supervisory Board report from page 50


Chess and Management

Letter to the Shareholders from the Board of Directors

6


“Chess is a sea in which a mosquito can bathe and an elephant can drown.”

That is what the Indian proverb claims and, in actual fact, there is no limit to the variety of the

“Game of Kings”. Considerations and decision processes within the GRENKELEASING Group are made

in somewhat clearer dimensions, but are nevertheless highly complex.

We are convinced that there are numerous parallels between manage-

ment and chess and that the interaction of strategic and tactical

measures contribute to our success – as in the world of chess.

One of the world’s best chess player will comment on several the-

oretical and practical parallels between chess and management:

Viswanathan Anand – called “Vishy” by his friends.

Born in India, the home of chess, he has been a member of the world’s chess elite since 1988 when

he became an International Grand Master at the age of 19. The greatest achievement in his career so

far was in 2000 when he won the FIDE World Championship. The “Tiger of Madras” makes his moves

at an unbelievable speed and seemingly without effort. At home, he is as famous as David Beckham

in the UK or André Agassi in the US.

W. Grenke and V. Anand.

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Dear Shareholders,Ladies and Gentlemen,

Fiscal year 2002 was without doubt a weak phase for the economy on both anational and international level. Slow growth, rising public deficits, high unem-ployment, political risks and weak equity markets have accompanied us throughthe entire year. Despite avoiding a recession in Germany, growth of 0.2% wasnowhere near enough to help the country master the tasks at hand.

The upturn signaled in spring 2002 failed to materialize. Even now – at the begin-ning of the new year – this are still no reliable indications of an economic recov-ery. On average, experts are anticipating growth of just under 1%. The decision bythe European Central Bank (ECB) on December 5, 2002 to cut the base rate by0.5% – possibly to be followed further interest rate cuts – is taking time to have

an effect. They will not be able to give a boost to theeconomy in the short term.

However, sobering facts and figures are no reason fordespair and resignation. We should first consider that,in comparison to many other countries, we are complain-ing “at a high level” – for Germany is still undoubtedlyone of the world’s most prosperous countries.

We wish to encourage our shareholders, customers andemployees as well as the general public to tackle futuretasks with courage and optimism – in defiance of allpolitical and economic adversities – and to leave “pessi-mists’ corner”. Popular opinion has it that the Germansextend the tunnel when they see the light at the end ofit; this should not be allowed to become reality.

Checkmate for economic stagnation andbusiness pessimism!

Letter to the Shareholders from the Board of Directors

Wolfgang Grenke


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We believe it is our duty and privilege to make this appeal because in our smallniche market we have managed to generate double-digit growth in profits and newbusiness in every fiscal year since our flotation on the Neuer Markt in Frankfurtin March 2000. We have incidentally been profitable in all fiscal years prior to thatsince being founded in 1978, i.e. at a time in which we were only accountable toourselves, our business partners and banks – and not yet to a large group of invest-ors.

We were again able to successfully continue this tradition in fiscal year 2002: atrack record of positive, stable quarterly results and above-average profit figuresfor 2002 are proof of the stringency with which we pursue and implement our cor-porate objectives – in spite of not quite attaining the annual growth of 20% tar-geted in spring 2002 when overall economic forecasts were somewhat brighter.

Unfortunately, this successful growth has not been rewarded by the capital mar-ket. With investors’ confidence in equity investments as a whole rapidly dwindl-ing, the GRENKELEASING share suffered as a result of the ailing markets, eventhough the company itself gave no cause for concern.

On the contrary, new business, i.e. total cost of newly acquired leased assets, grewin comparison to 2001 from EUR 235m to EUR 278m. This represents an increaseof 18%. The margin for new business (contribution margin 1) rose to EUR 28mcompared to EUR 24m in the prior year.

As in the past, foreign business played again made an overproportionate contri-bution to growth, increasing by 34% and attaining a 25% share of the Group’snew business. New business in Germany also grew strongly by 14%.

The Group’s results of operations also developed extremely favorably. Compared to2001, earnings before tax (EBT) rose by 29% to EUR 25m. At the same time, prof-its after tax were up 27% to EUR 15m. This meant that earnings per share increas-ed by EUR 0.24 on the prior year to EUR 1.13.

These earnings were generated by 281 employees (2001: 233) in a total of 18German branches and at 11 offices abroad. In addition to four branches in France,GRENKELEASING AG has subsidiaries in Switzerland, the Netherlands, Austria,Italy, the Czech Republic, Spain and Denmark. Expansion into Scandinavia and theUnited Kingdom is planned for 2003.


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We gained further cooperation partners for sales, thus enlarging platform for ourproducts and services. At the same time, we established and strengthened new andexisting partnerships with big-name manufacturers of IT hardware and softwareproducts.

Our internet subsidiary WEBLEASE NETBUSINESS AG founded in 1998 offers inno-vative shopping basket solutions and is successfully cooperating with e-com-merce shops and e-lease services.

To make our figures even more transparent for shareholders and to provide furthercriteria for assessing the efficiency of new business we have decided to determinethe embedded value of our contract portfolio and to publish it in our key figures.We are doing this because unlike in trading business, income from lease contractsis not recognized upon conclusion but allocated to income over the term of thecontract, which means the majority of income is realized in the future. In linewith comparable approaches taken in the insurance industry, in the fiscal year wehave therefore calculated the approximate value of future net cash flows from thecurrent contract portfolio and offset it against future projected expenses.

Our signing of the German Corporate Governance Code in autumn 2002 was an-other step we took to inform shareholders and investors candidly and comprehen-sively about GRENKELEASING’s business policy. We thereby declare our full com-pliance with the version passed by the government commission of the FederalMinistry of Justice and undertake to observe and implement the recommendedprinciples of responsible management. We not only consider the application of theCorporate Governance Code to be a legally sensible step, we also see it as anopportunity to actively align GRENKELEASING to the requirements of the capitalmarket. We have therefore immediately implemented two key rules of conduct: acommittee set up by the Supervisory Board reviews the balance sheet and we dis-close directors’ salaries for the fiscal year.

The Corporate Governance Code recommends that the Board of Directors andSupervisory Board negotiate an excess in concluding directors’ and officers’ in-surance. The expenses of the chairmen of committees of the Supervisory Boardshould be remunerated separately. Shareholders should also be able to follow theshareholders’ meeting in future on the internet. In order to implement theserecommendations, the Company’s articles of incorporation will have to be amend-ed. Shareholders will be able to vote on these motions at this year’s shareholders’meeting. Even if in all likelihood 2003 will again be a difficult year, we consider


11

ourselves well equipped. All our activities are focused on the interests of our shareholders, our customers and our employees – and in part of our Company –and it is on their behalf that we are working to contribute our ideas, assertive-ness and experience to create a measurable added value. Our products and ser-vices are well accepted by the market and are the foundation of our long-term suc-cess, continuous growth and, in the foreseeable future, European market leader-ship in small-ticket IT leasing – of this we are convinced.

Best regards,

Wolfgang GrenkeChairman of the Board


Tactics and Strategy

The GRENKELEASING Business Model

GRENKELEASING Workflow

Innovative Leasing Concepts

An Efficient Business Model

Milestones in the Group’s History

Strong Partnerships

Overview of the Group

Corporate Structure

12


The perfect combination of strategy andtactics secures market leadership.

13


14

Dr. Saviely Tartakower vs. José CapablancaNew York 1924

The match between the famous Grand Master andauthor of many influential chess books, Dr. SavielyTartakower (1887-1956), and the third world cham-pion, José Raúl Capablanca (1888-1942), high-lights the difference between combined individualoperations and tactics in the service of strategy.

With 9. xb8, White hopes, after 9... xb8 to cap-ture a piece with 10. a4+. But with 9... d5, thebishop is covered on b4 and simultaneously, making a counterthreat (10... e3+), time is won to

withdraw the piece (10. a4+ d7 or 10. f4 f6). Whereas White exchanges its well-developed bishop for a knight in the basic position,Black has brought its knight into a magnificentcentral position, thereby winning time.

We see another similar situation. With 18. h7+ White captures a pawn (18... xh719. d3+), but when the match is resumed, Black’sknight on d5 again takes a dominating position(see diagram), and White perishes as a result of theweakness of its black squares (f4) and the inferiorposition of its king.

1.e4 e5 2.f4 exf4 3. e2 d5 4.exd5 f6 5.c4 c6 6.d4 b4+ 7. f1 cxd5 8. xf4 dxc4 9. xb8 d510. f2 xb8 11. xc4 0-0 12. f3 f6 13. c3 b5 14. d3 g4+ 15. g1 b7 16. f5 xf317.gxf3 e3 18. xh7+ h8 19. d3 xc3 20.bxc3 d5 21. e4 f4 22. d2 h4 23. f1 f524. c6 f6 25.d5 d8 26. d1 xc6 27.dxc6 xd2 28. xd2 e6 29. d6 c4+ 30. g2 e2+White resigns.

Tactics and Strategy

A B C D E F G H

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A B C D E F G H

Final position after 20... d5


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As with classic battles, a distinction is drawn in chess between strategy and tactics. The more profi-

cient players become, the more they prefer either a tactical/combinational or a positional/strategic

game plan.

The strategist operates in the long term. At the end of the opening, he seeks a vulnerable point in

the opponent’s defenses and tries to exploit it so that a key capture or a decisive gain in ground ulti-

mately leads him to victory.

The tactician is different. From the very outset, his game plan is to single-mindedly march in the

direction of the opponent’s king. He does not shy away from material loss, looks to cleverly thought-

out move combinations and anticipates deep variations in all phases of the match.

Top players are masters of both methods and vary their use of them depending on their opponent or

the position they find themselves in.

Vishy Anand

GRENKELEASING is already the leader in the small-ticket IT leasing market in central Europe. We are

combining our long-term corporate strategy – annual growth in new business and profits coupled

with the goal of European market leadership – with tactical measures such as adapting our products

and services to market requirements or constantly improving our customer relations.

Wolfgang Grenke


16

Small-Ticket IT Leasing

Innovative products and services, rapid, simple andsecure winding-up of lease contracts – increasinglyalso over the internet – and the focus on the finan-cing of office communication equipment had al-ready made the company from Baden-Baden, whichwas founded by Wolfgang Grenke in 1978,Germany’s market leader in small-ticket IT leasingin the 1990s. In this market segment, equipmentsuch as notebooks, personal computers, monitorsand other peripheral devices, smaller networks,software and telecommunication, backup and copier technology normally costing up to EUR25,000 are leased.

Today, IT accounts for approximately 88% ofGRENKELEASING’s new business. In the fiscal year,the average acquisition cost per leased asset wasEUR 7,000 (2001: EUR 6,500). We dealt with a totalof 81,770 leasing requests, resulting in 39,595 leases with an average term of 44 months. Our tar-get groups are professionals, traders, and small tomedium-sized companies in a wide range of indus-tries.

Dealers as Key Cooperation Partners

More than 96% of contracts through specialist deal-ers are concluded with business customers.Contracts with trade and professional lessees areconcluded under cooperation agreements withGerman and foreign IT dealers, manufacturers ofhardware and software and e-commerce shops.

Together with 11 foreign offices, a nationwide net-work of 18 German branches provides the geogra-phical proximity and personal advice and supportfor these key sales partners and multipliers andensures rapid and efficient leasing logistics.

The GRENKELEASING Business Model

The Benefits

For Dealers

Comprehensive sales support

Free implementation of leasing sales modules for drawing upinstant lease proposals on site

Optimized online contract processing

Check of creditworthiness within 20 minutes

Immediate payment upon receipt of complete contract document

Marketing of returned equipment via the internet platform www.asset-broker.de

For the Lessee

Financing of products from a value of EUR 500

Quick check of creditworthiness and contract approval

Lease installments remain the same throughout the term of the contract

Frees up liquidity and credit lines

No effect on balance sheet

Lease installments are immediately tax deductible

Range of leasing equipment meets users’ demands

Financing of all equipment brands offered on the market

For GRENKELEASING and its Shareholders

No residual value and warranty risks (full pay-out leases)

Low default rates thanks to an IT-based scoring model constantly adjusted to market conditions

Cooperation agreements with big-name IT manufacturers

Risk minimized by leasing to a wide range of industries and alarge volume of contracts

Attractive funding from money and capital markets with modernfinancing instruments such as asset-backed commercial papers(ABCP).


The chart shows the flow of information, money andgoods from the decision to lease a piece of equipment

to termination of the lease and possibilities for thefurther use of the equipment.

Result of creditworthinesscheck is OK

04

17

Direct debit via bank or

bank transfer

End customerLessee

Dealer

Check of creditworthiness03

Fax/e-mail/extranet

Fax/e-mail/extranet

Decision to finance usingleasing

01

GRENKELEASINGLessor

Time FrameCommunication

and Payment Flow

Completion of the applica-tion form (printed form,

GRENKE software)

02

Within 20 minutes

Within 24 hours

Agreed term of the

lease contract

Signing contract06

Notification of OK

05

New

dem

and

for

leas

ing

Postal deliveryDispatch of contact, accept-ance confirmation and

invoice

08Check of completeness

09

Postal delivery/bank

transfer

Receipt of payment andposting of amount

as income

11Payment for asset

10

Direct debit via bank Posting as income

Extension of lease contract

Purchase of leased asset

2nd alternativePosting as income

2nd alternative

Equipment returned3rd alternative

Realization via the internet platform

www.asset-broker.de

3rd alternative

07

Payment of leasing installments

1st alternative

Option of exchanging equipment

Acceptance of the asset andwritten confirmation of

acceptance

Issue of asset

1. Phase until conclusion of the lease contract

2. Processing during the term of the contract

3. End of contract

GRENKELEASING Workflow


18

Flexplus Leasing

With this type of leasing only the acquisition costis spread out over the minimum lease term in cal-culating the monthly leasing installments; no inter-est or charges are included in the calculation. Atthe end of the lease term, the customer can choose either to extend the lease by six monthsbefore returning the equipment or make a finalpayment of six monthly installments and return theequipment immediately. GRENKELEASING then sellsthe equipment over its own internet platformwww.asset-broker.de and pays the customer 75% ofthe proceeds from the sale. Ideally, this conceptmeans lease financing costs of 0%.

Exchange Leasing

This contract type allows leased assets to beexchanged within the term of the contract. Thishas the advantage for the customer that he alwayshas state-of-the-art equipment and does not haveto stick with certain products for years. The leaseinstallments do not increase if a specific percent-age of the contract value is not exceeded uponexchange of equipment.

Above and beyond the classic lease, the fast paceof information technology demands leasing equip-ment that is constantly updated to meet customerand market requirements. GRENKELEASING hasalways offered its dealers – and therefore theircustomers – leasing concepts which are not onlyattractive on paper, but which also functionsmoothly in practice, both technically and organiz-ationally.

Framework Leasing

Customers who acquire and finance numerous itemsover a long period of time can conclude a frame-work agreement and sign individual lease contractson an item-by-item basis. The advantages are thatfavorable conditions apply for the entire term ofthe contract and the processing fee and organiz-ational expenses, e.g. creditworthiness check, areonly incurred once. Monthly unit billing createstransparency and simplifies invoicing.

Dealers and End Customers Benefit

From Our Innovative Leasing Concepts

Structure of the Leasing Portfolio

Notebooks 8.4%Medical equipment 4.3%Machines 1.8%Security equipment 3.9%

Fixtures and fittings 2.2%

Telecommunication equipment 8.3%

General office equipment 3.1%Other 0.1%

Copier equipment 24.9%

IT equipment 43.0%

Percentage of IT products in the leasing portfolio: 88%.


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Rental-Leasing

Assets costing EUR 500 or more can be leased onparticularly attractive terms. The requirement issimply that the equipment be returned at the endof the lease. This means that the customer has anideal basis for planning and can stay competitivewith the latest IT technology.

Conclusion

All types of lease offered by GRENKELEASING takeaccount of lessees’ and dealers’ needs for uncom-plicated solutions, flexible availability, state-of-the-art equipment and attractive terms.


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An Efficient Business Model

Being present throughout Germany – and increasinglyalso in other countries in Europe – in conjunc-tion with central contract processing allows GRENKELEASING to offer favorable leasing conditions,support dealers individually and personally and sellsecond-hand equipment over the internet at marketprices. As a result, an optimized supply chain hasbeen created benefiting all involved.

Decentralized

distribution via

Virtual leasing company, e-commerce solutions, support of GRENKELEASING’sinternet activities

www.weblease-europe.com Manufacturers

• 5,500 dealers in Germany

• 700 dealers in otherEuropean countries

• 18 branch offices inGermany

• 11 foreign branch offices

IT dealers

Effective Business Model

Centralized processing

of all lease contracts

in Baden-Baden

• Cost-effective, largely automated ”paperless” contract processing• IT-based scoring system for checking creditworthiness

Sale of used

equipment on the

internet

• Central collection point for all returns in Berlin, central realization via the virtual www.asset-broker.de

Renowned global manu-facturers of IT technology


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1978 1990 1993 1994 1997

Foundation ofGRENKELEASINGas a one-mancompany inBaden-Baden

The first branch/subsidiary wasestablished andthe Group wasformed

Partnerships andcooperations wereentered into

Introduction ofthe computer-aided scoring procedure

Cooperation withHP

Establishment ofGRENKELEASING AG;foreign companiesfounded

20022001200019991998

01/2002Opening of theMönchengladbachbranch

09/2002Opening of thefourth Frenchbranch in Nantes

12/2002Cooperation withCancom

12/2002Foundation of thesubsidiary inDenmark

Four German andfour foreign branches wereopened

Two foreign com-panies wereacquired

Cooperations withDevelop andToshiba

IPO of GRENKELEASING; the Company is listed on the Frankfurt Stock Exchange for the first time

Conclusion of part-nerships and cooper-ations with, amongothers, Maxdata,Vobis and Sharp

Further foreignbranches opened

Foundation ofWeblease LeasingGmbH, Europe’sfirst virtual leasing company

Entry into inter-net-based e-com-merce

Installation ofwww.assetbroker.de,the internet mar-keting service forsecond-hand ITequipment

Milestones in the Group’s History

Strong Partnerships

We have attained market leadership in Germanythanks to our innovative products and services.Strategic cooperation agreements with strong part-ners have enabled us to consolidate our leadingposition and open up new and interesting lines ofbusiness. A number of big-name IT manufacturersnow draw on our expertise and infrastructure toconclude lease contracts with their customersthrough us – and not only in Germany, but also in

other European countries. We offer technically per-fect leasing solutions for the e-commerce platformsof internet retailers by implementing our ownmodules, and thanks to our collaboration with aleading American finance network, we are the firstEuropean leasing company to have been includedin an international finance portal offering internet-based real-time financing.


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Overview of the Group

GRENKELEASING AG

Vienna (Austria)

GRENKE LOCATION S.A.

Schiltigheim (France)

GRENKELEASING AG

Basle (Switzerland)

Branches

Paris, Lyon, Nantes (France)

WEBLEASE NETBUSINESS AG

Baden-Baden (Germany)

GLG Grenke-Leasing GmbH


Grenke Investitionen Verwaltungs KGaA


EKOMA s.r.o.

Prague (Czech Republic)

GRENKE ALQUILER S.A.

Barcelona (Spain)

Grenkefinance N.V.

Maasbree (Netherlands)

GRENKE Locazione S.r.l.

Milan (Italy)

GRENKELEASING ApS

Herlev (Denmark)

GRENKE LIMITED

Dublin (Ireland),Business operations have yet to becommenced

MAUDEN S.p.A.

Milan (Italy), sale of investment(February 6, 2003)

Parent company, Baden-Baden (Germany)

GRENKELEASING AG


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Operative management of specific areas of the Group and:

IT & operations Human resourcesPersonnel developmentTraining

Cash managementTreasury

Refinancing

Corporate Structure

The management of GRENKELEASING AG has beenrestructured in the face of growing tasks. The Boardof Directors was reduced to four members whoseterms of office were extended by a further fiveyears by the Supervisory Board.

The functions and responsibilities of WolfgangGrenke, the Chairman of the Board of Directors,Thomas Konprecht, his deputy, Mark Kindermannand Michael Kostrewa remain unchanged.

Thomas KonprechtVice-Chairman of the Board

43 years oldMarketing, sales, management services

Wolfgang GrenkeChairman of the Board

51 years oldGroup development,investor relations, corporate communication

Michael Kostrewa

34 years olde-business, document management, marketing of leasing returns (asset broker)

Mark Kindermann

41 years oldFinance, accounting, controlling, legal, quality management

Board of Directors

Overall strategic responsibility for the Company

Management Board


“Pawn Power”

The Leasing Market

The Market Potential of GRENKELEASING Products

Competing to Win

24


“Pawn power” proves itself in an extremely diverse competitive environment.

25


26

Alexander McDonnell –Louis Charles Mahe De LabourdonnaisLondon, 1834

The famous musician and chess player François-André Danican Philidor (1726-1795) and the firstperson to compose a comprehensive study of chess-playing wrote that “pawns are the soul of chess”,

i.e. pawn structure determines the positional struc-ture. The game below, one of the earliest recordedin the history of chess, underlines the power ofpawns advancing in closed ranks. The final positionis legendary, with the tripled pawns in the secondto last rank having more power than a queenbecause all three are ready to be promoted; Whiteis mated at once.

1.e4 c5 2. f3 c6 3.d4 cxd4 4. xd4 e5 5. xc6 bxc6 6. c4 f6 7. g5 e7 8. e2 d5 9. xf6 xf610. b3 0-0 11.0-0 a5 12.exd5 cxd5 13. d1 d4 14.c4 b6 15. c2 b7 16. d2 ae8 17. e4 d818.c5 c6 19.f3 e7 20. ac1 f5 21. c4+ h8 22. a4 h6 23. xe8 fxe4 24.c6 exf3 25. c2 e3+ 26. h1 c8 27. d7 f2 28. f1 d3 29. c3 xd7 30.cxd7 e4 31. c8 d8 32. c4 e1 33. c1 d2 34. c5 g8 35. d1 e3 36. c3 xd1 37. xd1 e2 White resigns.

“Pawn Power”

A B C D E F G H

A B C D E F G H

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Final position after 37...e2


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The endless variation of games and the fascination of chess stems from the different values of the

pieces battling for victory or at least a draw: king, queen, rook, knight, bishop and pawn – every

piece has a unique way of moving with all the strengths and weakness this entails and this gives

each piece its distinct personality. The successful player will make best use of these different char-

acters, coordinate their moves, take advantage of their individual strengths and conceal their weak-

nesses or compensate them with the aid of other pieces. And sometimes a pawn is even able to make

a career for itself when, having reached the end of a long and difficult path, it finally becomes a

queen.

Vishy Anand

We as a company also have to face a variety of market mechanisms and an array of competitors. They,

too, have their different strengths, occupy specific market segments – like ourselves – and are try-

ing to win market shares.

Wolfgang Grenke


The financing instrument of leasing did not bearthe full brunt of the economic slump that persistedin 2002 and brought with it a drop in investmentsin all industries. This was particularly true of thedynamic and widespread business involving IT andoffice communication products, especially forreplacement investments in the small-ticket area.It also applied to the share of lease financing inother European countries, which grew faster than

the average. And national and international marketresearch institutes believe that there is a consider-able additional potential for growth given the situ-ation in the USA, where 30% of movables are leased.

That is why we believe that 2003 will see a turn-around in the leasing market!

The Leasing Market – About to Turn Around?

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86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02

* In respective prices.Source: ifo Investitionstest Anlagenvermietung, Federal Statistical Office

Growth dynamic in the leasing industry(in percent)

350

300

250

200

150

100

* Share of moveable assets leased compared to overall economic investment in equipment.Provisional figures for 2002.Source: ifo Investitionstest, Federal Statistical Office

Leasing rate(in percent)

22

20

18

16

14

12

10

8

6

4

2

0

Investment development* 1986=100

Overall economy

Leasing

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02

Leasing overall

Leasing of moveable assets*


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74 76

74 76

25

20

15

10

5

074 76

USA GB D F I E S CH NL A

Source: Leaseeurope and ELAA (Equipment Leasing Association of America)

Moveable asset leasing rate in selected countries

in percent

30

25

20

15

10

5

0

30

26

23

13

10

53 3 3

2


30

GRENKELEASING dealers and their customers profitfrom efficient handling – from initial request tocontract to settlement-, attractive terms and cus-tomer and service-oriented leasing offers.

No company, business or freelancer can managenowadays without a quick and efficient IT infra-structure. The decision to acquire products pricedwithin the range we cover is made faster and in-volves less red tape than for big ticket investments.Even though the days in which only the very latestmodels were good enough are gone, restrictions oninvestments in information technology are not asdrastic as they are in other areas of a troubled eco-nomy.

In fiscal year 2002 GRENKELEASING benefited fromthe unresolved structural crisis in the bankingworld, with banks occasionally being more carefulabout choosing who to lend to, and generally being

The Market Potential of GRENKELEASING Products

more restrictive on lending altogether. The Basel IIcriteria are often cited as the reason for this, butit is more likely that the banks’ unsolved structuraland administrative problems have made many oftheir loans unprofitable and this has led to rejec-tions. In view of this, small-ticket leasing, in par-ticular, was a feasible alternative for financing newacquisitions – on highly competitive terms.

These circumstances helped GRENKELEASING onceagain to double-digit growth in defiance of thegeneral economic trend.


31

GRENKELEASING’s goals have not changed. InGermany we were able to consolidate and extendour market leadership in small-ticket IT leasing in2002. In Europe we have been expanding into newmarkets, doing the groundwork to make us thenumber one in the medium term.

Our success is driven by a number of competitiveedges which we have been developing over theyears; these make it hard for our rivals to catch upon us, let alone overtake us.

Competing to Win

Our Benefits

Our products and services cater to both market and customerrequirements

An efficient and extensive sales network for business leasing customers through office and telecommunications dealers

IT and telecommunications expertise coupled with know-how in the lease financing market

Local support for dealers by our branches and subsidiaries

Our partnerships with big-name manufacturers

We provide leasing modules to traders operating e-commerce platforms

The technology to handle and wind up contracts – except for signature – over the internet

Highly automated, central contract support and settlement

An IT-based scoring model, developed in-house and constantly improved, affords a high level of protection against default risks

A good reputation on money and capital markets allows refi-nancing on more favorable terms


“Space Advantage”

Variations on a Theme: Expansion in Germany and Europe

Optimizing Costs in Contractual Logistics

Recalculation of Liquidity

WEBLEASE NETBUSINESS AG – Leasing Online

The GRENKELEASING Share

The Share at a Glance

The Reorganization of the German Stock Market

Corporate Citizenship

32


State-of-the-art technology, economy and putting the customer first – the keys to our success.

33


1.e4 c6 2. f3 e5 3. b5 a6 4. a4 f6 5.0-0 b5 6. b3 e7 7.d4 d6 8.c3 g4 9.h3 xf3 10. xf3 exd4 11. g3 0-0 12. h6 e8 13. d5 d7 14. g4 xg4 15.hxg4 gxh6 16. xc6 dxc3 17. xc3 b8 18. d5 d8 19.f3 g7 20. f2 e6 21. e3 g7 22. h1 g8 23. ad1 f8 24.g3 g6 25. h2 a5 26.b3 c5 27. e2 b4 28. e3 g7 29. d4 g5 30. dh1 e6+ 31. d3 g6 32. e3 b6 33. d5 c6 34. f5+ f6 35. xe6 xe6 36. xh6 a4 37. xh7 axb338.axb3 a6 39. d4+ e7 40. h8 d5 41.exd5 Black resigns.

A B C D E F G H

A B C D E F G H

8

7

6

5

4

3

2

1

8

7

6

5

4

3

2

1

Svetozar Gligoric - Hector RossettoPortoroz Interzonal, 1958

In this unspectacular but subtle game of positionsthe Yugoslav Grand Master Svetozar Gligoric(*1923), for decades one of the best players out-side the Soviet Union, sacrifices a pawn to weaken

his opponent’s defenses. In spite of his materialdisadvantage it allows him to penetrate his oppo-nent’s position; the latter is unable to free himselffrom this iron grip and suffocates to death.

“Space Advantage”

34

Position after 18… d8


The abstract basis of chess is determined by three factors – time, space and material.

“Time” means making the best possible use of each move. For example, advancing a piece then

retracting it is considered a waste of time because it uses up two moves.

“Space” is the area on the chessboard which is divided up into two sections, a player’s and his oppo-

nent’s. The skillful interaction of pieces can allow either side to gain ground on his opponent or

enlarge his own territory. However, deliberately neglecting either of these two aspects can also lead

to victory. For instance, a complicated maneuver can cost moves and time, but can at the same time

result in a match-winning space gain.

“Material”, the most important factor, refers to the pieces with their individual values and their dif-

ferent ways of moving. This is why material equilibrium is extremely important: almost all strategies

are aimed at achieving a material advantage.

This means a match can only be won by dominance in at least one of the three areas – by outnum-

bering the opponent in terms of pieces, by having an advantage in the development of the pieces or

a space advantage.

Vishy Anand

We have adapted the principles of time, space and material in the world of chess in developing our

stringent product policy and market penetration strategy to enable us to gain ground nationally and

internationally. Our objective is to meet our customers’ needs with the right product in the right

market, while generating a profit for the company. And we know that this can only be accomplished

with a skilled, well-trained and motivated team of employees who live and communicate our com-

pany’s philosophy every single day.

Wolfgang Grenke

35


Nationwide Coverage in Germany

In Germany we have more or less put into practiceour concept of being close to dealers both geogra-phically and personally over the past few years. Themain changes now taking place are “cell divisions”,i.e. a sales region is split into new regions when abranch becomes too big. As of year-end 2002,GRENKELEASING had more than 18 branchesthroughout Germany – the Mönchengladbachbranch made it one more than in the previous year.We are planning to establish two new branches in2003 - in Rostock and in Magdeburg. In the face ofadverse economic conditions, new business inGermany grew by a remarkable 14.7% in the fiscalyear.

Expansion into Europe - Multiplying a Successful Business Model

The GRENKELEASING business model which hasbeen successful in Germany had been exported toeight European countries by the end of the fiscalyear. The Group’s strategy is to grow organicallywherever possible. As a rule, our foreign operationsstart off with cross-border business to test marketacceptance. The second step is the foundation ofindependent national companies that operate alongthe lines of the German business model as far as thelocal legal framework allows. Here GRENKELEASINGbenefits from its close collaborations with manyinternational manufacturers of IT products. We areplanning to enter the UK and Swedish markets in2003. Overall, foreign new business grew fasterthan average, at 34.4%.

36

Variations on a Theme:

Expansion in Germany and Europe

Dublin

Nantes


37

*Due to be opened in 2003

London*

Mönchengladbach

Maasbree

Cologne

DusseldorfDortmund

Hanover

Bremen

HamburgRostock*

Copenhagen

Stockholm*

Berlin

Magdeburg*

DresdenLeipzig

Erfurt

NurembergFrankfurt

Mannheim

Baden-BadenSchiltigheim

Basle

Memmingen

StuttgartMunich

Vienna

MilanLyon

Paris

Barcelona

Prague


France: GRENKE LOCATION S.A. strengthened itsregional presence with a fourth branch in Nantes tofollow those in Schiltigheim, Paris and Lyon. Thedecrease in contracts during the fiscal year was dueto tighter credit rating criteria. This allowed itssomewhat higher-than-average loss rate to bereduced.

Italy: In the course of 2002 the leasing businessthat had been previously run by Mauden S.p.A. wastransferred to GRENKE Locazione S.r.l., therebyseparating it from the brokerage operations. Wesold our shares in Mauden S.p.A. at the beginningof 2003. GRENKE Locazione built up its sales net-work on schedule and currently has some 200 dealers on its books, mostly in northern Italy.

Spain: At the end of 2002 the Barcelona-basedGRENKE ALQUILER S.A. had dealings with morethan 342 retailers, 40% of which come fromCatalonia and 20% from in and around Madrid.

Netherlands: Grenkefinance N.V. was founded inMaasbree in late 2001 to supersede the cross-bor-der business operated until then.

38

1998 1999 2000 2001 2002

Number of leases concluded

-624

3,614

6,7836,082

1998 1999 2000 2001 2002


- - -38

514

1998 1999 2000 2001 2002


- - - 1

265

1998 1999 2000 2001 2002


- - -78

440


Czech Republic: EKOMA s.r.o., based in Prague, hasbeen a member of the GRENKELEASING Group since2001. The contract development figures have littleinformative value because the 2001 data includethe contracts inherited from the time before itsacquisition by GRENKELEASING.

Austria: Credit rating requirements were also step-ped up in Austria in 2002. GRENKELEASING AG,Vienna, reported double-digit growth in its coretarget groups of IT and telecommunications deal-ers in the fiscal year.

Switzerland: After Austria, Switzerland was thesecond European country GRENKELEASING wentinto with an independent AG based in Basle.Contracts for IT equipment leases account for 97%of new business.

39

1998 1999 2000 2001 2002


205

467

750868

745

1998 1999 2000 2001 2002


- 12282

756

1,538

1998 1999 2000 2001 2002


- - -

865

373


In 2002 GRENKELEASING dealt with a total of81,770 lease inquiries which generated 39,595lease contracts. This represents an increase of3,492 contracts or 10% on the prior year. The aver-age value of each contract was EUR 7,000 – EUR500 more than in 2001. A sophisticated logisticssystem is needed to cope effectively with this hugevolume and variety of agreements. The processchain starts with comprehensive marketing activi-ties, continues when the dealer talks to his custo-mer, the customer’s credit rating is checked and thecontract is drawn up, and usually ends when thecontractual lease period expires, i.e. when thereare no grounds for early termination.

This complex “bulk business”, which normally takesmany years from start to finish, has to be stream-lined as far as possible, for the more the costs percontract can be cut, the more these savings contri-bute to the company’s profitability. This is why allareas of contract logistics at GRENKELEASING arenow largely automated and “paperless”. The numberof branches and subsidiaries grew by more than athird in the last two years. These new sales officesare not yet in a position to contribute to econ-omies of scale. As a result, costs per new contractwere slightly higher than in the prior year.However, the costs per current contract remainedsteady.

Optimizing Costs in Contract Logistics

40

1997 1998 1999 2000 2001 2002

Costs per new contract

in €

500

400

300

200

100

0

334

291 286

241 239 240

1997 1998 1999 2000 2001 2002

Costs per current contract

in €

50

40

30

20

10

0

40

35

29

26 26 26


Unlike trading business, income from a new leasecontract is not generated upon conclusion – it isreceived during the term of the contract, i.e. themajority of the profit won’t be recognized untilfuture years.

In line with comparable approaches in the insur-ance industry, we have decided to calculate theapproximate value of future net cash flows from thecurrent contract portfolio (embedded value of thecontract portfolio) and disclose it in our key fig-ures. We have offset future income against expen-ses estimated on the basis of current cost rates.

Although this can only be a rough estimate, it doesmake our figures more transparent for our share-holders. It allows them to judge better whether ornot investments in new business were effective.

As of December 31, 2002, the embedded value ofthe contract portfolio was EUR 51 million. Added toequity of EUR 115 million, this yields a total valueof EUR 166 million.

Embedded Value of the Contract Portfolio

41


Cash Situation

Unfortunately the consolidated cash flow state-ment of the financial statements does not give avery representative picture of the Company’s liquid-ity situation. This is because GRENKELEASING usesavailable liquid funds to advance finance its leas-ing business activities and thus save interest.Viewed in conjunction with the cash flow state-ment, the table below gives an accurate picture ofour financial situation.

Recalculation of Liquidity

42

Recalculation of liquidity Status quo Status quo Status quo

in EUR ’000 Jan. 01, 2001 Dec. 31, 2001 Dec. 31, 2002

Means of payment 50,817 10,508 34,534

Transitory items 19,624 0 22,906

Adjusted cash and cash equivalents 31,193 10,508 11,628

Funds used for advance financing 45,542 47,023 57,214

Loans for advance financing –2,986

Readily available funds 76,735 57,531 65,856

Receivable from the German tax office 8,550 6,033 6,830

Discounts 0 5,246 11,902

New position 85,285 68,810 84,588

Change in “new position” Jan. 1. - Dec. 31, Jan. 1. - Dec. 31,2001 2002

Beginning of year to year-end –16,475 15,778


43

WEBLEASE NETBUSINESS AG – Leasing Online

Dealers and manufacturers cooperating with GRENKELEASINGcan wind up their leasing transactions over the internet,saving time and costs.

Business end customers can conclude leasing contracts over the internet to finance the acquisition of IT products.

WEBLEASE supplies leasing modules to e-commerce suppliers providing convenient access to leasing offers.

The enthusiasm for the internet and its unlimitedopportunities that seized the business world at thebeginning of the 21st century proved to be unjusti-fied, but e-commerce platforms have nonethelessbecome an essential part of everyday business.

When the GRENKELEASING Group founded its inter-net subsidiary in 1998 it was Europe’s first virtualleasing company. Today WEBLEASE has three coreactivities which are enjoying increasing success inGermany and abroad:

WEBLEASE successfully extended its support fordealers and manufacturers with the internet solu-tion GLWEB: currently 46% of the Group’s leasingcontracts are concluded with internet support.

However WEBLEASE NETBUSINESS AG only accountsfor the business it generates directly with endcustomers. Because the loss rate for online leasingcontracts was higher than for contracts concludedvia dealers, additional early warning indicatorswere considered in checking new customers’ creditratings. Whenever there were any doubts, we de-cided against a new deal. This meant that the volumeof WEBLEASE new business declined from EUR 4.3million to EUR 3.7 million. We expect business concluded directly over the internet to grow againin 2003.


44

The stock markets have been heading downwardssince March 2002. This trend has been intensifiedby the Iraq conflict. German shares were hit hard-est by these developments, with their value shrink-ing by 55% (DAX) in the course of the year. TheGRENKELEASING share was unable to defy this over-all downward trend even though the company itselfgave no cause for concern. The Group was successfulwithin the limits set by the market and the economy,i.e. it increased its new business while reducingcosts and risks and thereby increasing profits.

This is our key objective for 2003 too. We will focuson our primary business of small-ticket IT leasingto boost new business and profits. This shouldenhance our price-earnings ratio enough for theprice to follow profits and performance. Our closerelations with analysts and institutional investors

have helped us to maintain and strengthen confi-dence in our Company in 2002, thus promoting theGRENKELEASING share.

Because IPO costs were brought forward, earningsin 2001 were too low for a dividend to be paid. Onthe basis of the profit generated in 2002 the Supervisory Board and Board of Directors of GRENKELEASING AG will propose to the share-holders’ meeting on May 13, 2003 that a dividendof EUR 0.25 per share be paid for fiscal year 2002.

The GRENKELEASING Share

The Share at a Glance 2002 2001 2000

Abbreviation GLJ

Security identification number 586 590

ISIN DE0005865901

Stock exchange segment Neuer MarktAdmitted to Prime Segment on January 1, 2003

Designated sponsors Deutsche Bank; ING-BHF-Bank

Number of shares 13,523,848 units 13,523,848 units 13,523,848 units

Closing price* Frankfurt - floor 10.30 EUR 19.15 EUR 29.60 EUR

Highest variable price 26.00 EUR 36.50 EUR 45.90 EUR

Lowest variable price 8.11 EUR 9.60 EUR 18.30 EUR

Stock market capitalization based on closing price 139.3 EUR m 258.9 EUR m 400.3 EUR m

Earnings per share 1.13 EUR 0.89 EUR 0.68 EUR

P/E ratio 9.1% 21.5% 43.5%(at closing price)

* last trading day


The Share at a Glance

Jan. 02 Feb. 02 Mar. 02 Apr. 02 May 02 Jun. 02 Jul. 02 Aug. 02 Sep. 02 Oct. 02 Nov. 02 Dec. 02

Index comparison

in percent

Source: Datastream

NEMAX 50

GRENKELEASING AG

NM-Industrials & Industrial Services Nemax All Share

45

Diagram showing development of the share price

120

100

80

60

40

20


46

Investor Relations Activities

Some 300 shareholders and representatives travel-ed to Baden-Baden on April 16, 2002 for the share-holders’ meeting for fiscal year 2001.

In the fiscal year intensive financial communica-tion also took place on various levels and with awide range of target groups – analysts, fund man-agers, institutional investors, private investors andthe media. Our aim was to actively seek discussionin view of the ailing market in 2002, provide time-ly and transparent information about our perform-ance and win confidence in the Company and itsfinancial services.

The Group published its latest figures on new busi-ness and profit margins only two to three days afterthe close of each quarter, accompanied by telephoneconferences by the Board of Directors with analysts and finance journalists. In addition, GRENKELEASING attended investor conferences and

organized roadshows to present its business modeland report on the current state of business.Countless personal discussions with analysts andinvestors were also held.

Many people also chose to receive up-to-date infor-mation by e-mail from the GRENKELEASING investorrelations department.

The GRENKELEASING Stock OptionPlan

The conditions for the exercise of stock optionsdefined in 2001 were not met in 2002; this is like-ly to be case for the year to come as well. As inprevious years, employees received performance-linked bonuses. GRENKELEASING will consider launch-ing new plans as soon as the stock market has properly recovered.

The Shareholder Structure

Free float 39.0%

Thomas Konprecht and family 5.2%

Wolfgang Grenke and family 55.8%

Shareholder structure: according to sec. 1.10 of the current “Guidelines on the Stock Indices of the GermanStock Exchange” the percentage of free float is:

The diagram shows that the shareholder structure has not changed.


47

The Reorganization of the German Stock Market

The plans of Deutsche Börse AG to reorganize theentire German stock market are nearing comple-tion.

The aim is to increase the integrity and appeal ofthe capital market for both investors and issuers.Clear rules will make decision criteria for investorseven more transparent in the different market seg-ments. The system is to be modified for issuers sothat companies will be able to satisfy their individ-ual financial requirements.

As of spring 2003 the stock market will be dividedinto two segments:

The General Segment for shares of interest todomestic investors that will only have to meet thestatutory minimum requirements.

Companies in the Prime Segment have to meet highinformation and transparency standards, includingquarterly reports, international accounting stan-

dards (IFRS or US GAAP), publishing a corporatecalendar, holding at least one analyst conferenceper year, and ad hoc releases and regular reportingin English. GRENKELEASING has complied with allthese requirements since it went public.

Our share was admitted to the Prime Segment ofthe German stock exchange on January 1, 2003.This is the first hurdle towards inclusion in one ofthe blue chip indices DAX, MDAX, TECDAX or SDAXrepresenting the 160 biggest companies – in termsof stock market capitalization and trading volume.On February 11, 2003 Deutsche Börse decided toinclude our share in the SDAX index. The indiceswill be modified as of March 24, 2003.


48

People are important to us – as customers, businesspartners, employees, and as members of society. Wetake on responsibility - not just for today andregardless of financial interests - by helping toshape a future that is worth living.

With the scheme

“Grenke youth invest”

we act to help young people, the generation oftomorrow, and focus on the following areas:

Chess – school of thought

Apart from the pleasure the game gives, chess islike no other game in that it helps to develop theability to abstract and teach logical and strategicthinking.

Karpov Chess Centre

This organization is home to many institutions forpromoting chess. They include:

The Chess Academy, which sees itself as a “fitnessstudio for the brain”, offers a wide range of chesstraining to young people and adults, clubs andGerman chess teams, individually or in groups.

The members of the Academy for Chess andScience are dedicated to promoting scientific re-search into chess and demonstrating how chess isrelated to scientific disciplines such as neuroscience,psychology, computer science, mathematics andeven literature.

Computers for Schools and SocialInstitutions

GRENKELEASING donated PCs, monitors and printersto several institutions in the fiscal year. The benefi-ciaries were schools in the Ukraine, a children’s homein Karlowy Vary and a Bosnian initiative.

Schul@ktiv - a school PC for everychild

In this nationwide campaign initiated by a Germantelevision show broadcast by ZDF, WISO, new andused PCs, monitors, printers, etc. are collected,repaired and donated to schools. GRENKELEASINGis a member of this initiative and gives its activesupport.

Corporate Citizenship


49


GRENKELEASING AG GROUP

Group Management Report for Fiscal Year 2002 50

Income Statement for Fiscal Year 2002 58

Balance Sheet as of December 31, 2002 59

Statement of Changes in Equity 60

Cash Flow Statements for 2001 and 2002 62

Notes to the Financial Statements for Fiscal Year 2002 64

Auditor’s Report 89

Supervisory Board Report 90

Contents

50


“Facts and Figures”

51


52 Management Report

1. Course of Business in 2002

1.1. Corporate Structure and GroupAffiliations

The GRENKELEASING AG Group traces its originsback to a sole proprietorship founded in 1978.

In 1979, this sole proprietorship was contributed toa limited partnership, GRENKELEASING KG in Baden-Baden. Over the years, other companies were added,over which Wolfgang Grenke had a controllinginfluence. In 1993, these companies were restruc-tured and merged into a group, and consolidatedfinancial statements were then drawn up for thefirst time.

At the end of 1997, the shareholders founded GREN-KELEASING AG – hereinafter referred to as the ”AG”– and Grenke Investitionen Verwaltungs KGaA –hereinafter referred to as the ”KGaA”. The AG andKGaA represent a division of corporate functions,where the AG is the operating company and theKGaA is the holding company. Their foundation wasgeared toward focusing the activities of the Groupin Germany into these two companies.

Only WEBLEASE NETBUSINESS AG – hereinafterreferred to as WEBLEASE – will continue to operateas an independent operating company in Germany,due to its function as a virtual leasing company.

In the fall of 1997, in collaboration with Hewlett-Packard, the Group invested in a foreign operat-ing company, GRENKELEASING AG, Vienna, for thefirst time. In the same way, the second operatingcompany abroad commenced operations inSwitzerland in the fall of 1999. This was followed byGRENKE LOCATION S.A. in Schiltigheim nearStrasbourg in November 1999.

In August 2000, GRENKELEASING AG took over theinternet service provider and software developerhaberichter.net GmbH by way of a share-swap deal.haberichter.net was merged with Weblease Leasing

GmbH (now WEBLEASE NETBUSINESS AG) in fiscalyear 2001, in order to offer all internet servicesfrom one company.

The AG acquired 100 % of the shares in MAUDENS.p.A., Milan, by way of the purchase agreementdated February 6, 2001. It also acquired 100% ofthe shares in EKOMA s.r.o., Prague, by way of pur-chase agreement dated June 5, 2001. The formationof GRENKE ALQUILER, S.A., Barcelona, was nota-rized on October 30, 2001. The AG holds 100 % ofthe shares.

With the purchase agreement dated December 4,2001, the AG acquired 100% of the shares in ZOO-PLUS.COM AG, Unterföhring, which changed itsname to GRENKE Locazione S.r.l. and relocated toMilan.

In fiscal year 2002, the following subsidiaries werefounded: GRENKELEASING ApS, Herlev/Denmark,Grenkefinance N.V., Maasbree/Netherlands andGRENKE LIMITED, Dublin/Ireland.

1.2. Significant Events During theFiscal Year

In the fiscal year, the GRENKELEASING AG Groupappointed a Management Board for the operativebusiness divisions. This Management Board reportsto the Board of Directors, which will now focus onstrategic issues. The Supervisory Board approved afive-year extension of the mandate of the Board ofDirectors (until September 8, 2007) during its meet-ing in September 2002. In the same meeting, theSupervisory Board agreed by mutual consent withtwo directors that they would resign from the Boardof Directors of GRENKELEASING AG for internal busi-ness reasons as of September 30, 2002. From thispoint onward, these two directors were part of theManagement Board of GRENKELEASING AG. Theemployment contracts were terminated with mutualconsent.

Group Management Report for Fiscal Year 2002


Management Report 53

tor was relatively modest, and fell below the pre-vious year’s growth rate for the first time since1994.

The leasing sector has undergone structural changein recent years.

Leasing companies dependent on financing frombanks have seen a slight improvement in their per-formance in real estate leasing. This is probably dueto restricted access to bank loans. Independentcompanies have improved their performance, es-pecially in leasing movable property. A market shake-out of companies dependent on bank financing isexpected in the future, especially with the imple-mentation of the guidelines of the New BaselCapital Accord (Basel II). In automobile leasing,manufacturer-owned leasing companies benefitedfrom increased market share.

With the exception of the acquisition of GEFA, for-merly a Deutsche Bank subsidiary, by SociétéGénérale, stiff competition has hitherto preventedforeign leasing companies from gaining significantmarket share.

Unlike manufacturer-dependent companies, GRENKELEASING is independent and flexible interms of not being bound to particular products,giving it a competitive advantage. Partnerships anddealer programs are improving point-of-sale access.The high degree of automation provides a decisivecompetitive edge with respect to processing small-ticket leasing contracts. The advantages of bank-dependent leasing companies in terms of refinan-cing conditions were offset by a customized ABCP(asset-backed commercial paper) financing facility,providing indirect access to the capital markets.

The tax field audit for the period from 1996 to 1999started in July 2001 and was concluded in the firsthalf of 2002. The audit findings were sent to us andto our tax advisors in July 2002. Provisions in therequired amount had been taken into considerationin the existing financial statements. No date hasbeen set for a final meeting with the tax authoritiesyet.

1.2.1. Commitment to Corporate Governance –GRENKELEASING AG’s Corporate GovernancePrinciples

The principles of value-oriented and transparentmanagement and controls have acquired significantimportance in the assessment and valuation oflisted companies. The German federal governmenthas addressed this issue and prepared the GermanCorporate Governance Code together with theCromme Commission. Under the Transparency andDisclosure Act (TransPuG), all listed companies havea duty to disclose their compliance with and anydeviation from the requirements of the GermanCorporate Governance Code. The Board of Directors,Supervisory Board and the managers of GRENKELEASING AG identify with these principlesand view the duty of corporate governance as animportant measure to increase the confidence ofcurrent and future customers, shareholders, lenders,employees, business partners and the public inGerman and international capital markets.

The Company’s corporate governance principles anddeclaration of compliance are published in full on the GRENKELEASING AG website (www.grenkeleasing.de) in German and English.

1.3. Economic Conditions andIndustry Performance

In the Federal Republic of Germany, the leasingindustry continued to perform better than the econ-omy as whole in 2002. However, growth in the sec-



1.4. Financing

Leased property for new business is essentially rent-ed from the KGaA by way of a two-tier procedure.The KGaA’s rent receivables are sold to financialinstitutions (banks, HP Financial Service) andthrough ABCP (Asset Backed Commercial Paper)programs via special purpose entities (forfaiting).Contractual agreements are concluded between theKGaA (the seller) and the acquiring institutions,which secure financing for the new business forseveral years even when volume increases. Despitean increasing volume of new business, only 36% ofthe ABCP programs had been utilized as ofDecember 31, 2002, with a revolving function.Proceeds from the IPO in 2000 continued to give ussufficient financial leeway, providing preliminaryfinancing for new business and funds for expandinginto new markets.

Only GRENKELEASING AG in Switzerland uses loansas an additional form of refinancing.

1.5. Staff

Due to the acquisitions and the brisk expansion ofour network of branch offices, the number ofemployees rose from 233 in 2001 to 281 (exclusiveBoard of Directors members) as of December 31,2002. An increase of 27 employees is planned for2003. Staff turnover stood at 5.7% in the fiscalyear. There were no members of managementamong the staff who left.

The Group attaches great importance to training forits employees. Thus, for example, 26 employeessuccessfully completed their training at theVerwaltungsakademie in Freiburg to become“Leasing- und Finanzierungswirte” (certified lea-sing and financing consultants). A further 13employees are currently attending the same course.

1.6. Investments

EUR 5,585k was invested in property, plant andequipment and intangible assets in 2002.

This investment went toward setting up new branchoffices in Germany and legally independent sub-sidiaries abroad, renewing/expanding our IT infra-structure and constructing the new head office,which was officially opened on July 26, 2002.

1.7. Sales and Customer Structure

The Group mainly leases information technology prod-ucts (hereinafter referred to as IT). It has focused onthe cost-effective processing of leasing businessinvolving relatively small transaction values (small-ticket IT leasing) and achieved a leading position inCentral Europe in this market segment.

Due to the low acquisition values involved and theconsequently reduced contribution margin per con-tract, direct selling in the field of small-ticket ITleasing is hardly worth its while. This is why theleasing contracts predominantly come about by wayof manufacturers and dealers (vendor programs).We intend to exploit the clear opportunities forgrowth which this market segment presents overthe years to come.

For this reason, we have expanded our sales pres-ence. The branch office in Mönchengladbach com-menced operations in January 2002. Our Frenchsubsidiary opened a new branch office in Nantes inSeptember. Subsidiaries in the Netherlands andDenmark also started sales operations.

The traditional broad-based lessee structure con-tinues to show no signs of change. No lessee hasaccumulated total liabilities of more than 2% oftotal group equity. The average value of each con-tract was EUR 7,000.00 (prior year: EUR 6,500.00).This sector structure corresponds largely to thestructure of the German economy.



2.1.1. Liquidity

The solvency of the Group companies is to be pre-served at all costs. Group management thus at-taches particular importance to maintaining suffi-cient liquidity. The increase in liquidity within theGroup is largely the result of growth in earnings.The liquid assets of the Group are jointly managedfor the Group companies by way of a cash pool.

The proceeds from issuing shares have been in-vested mainly in the advance financing of the leasingcontracts, and thus contribute to an optimizationof the use of funds.

2.1.2. Refinancing

The financing of the leasing business (new busi-ness) is secured for several years to come by way oflong-term contractual arrangements. Our financingpartners (Hewlett-Packard GmbH, StadtsparkasseBaden-Baden, Commerzbank AG, Deutsche Bank AGand WestLB for ABCP financing) are top-rate com-panies. Negotiations on a new framework agree-ment for the Group are currently underway withHewlett-Packard, a refinancing partner. If, contraryto expectations, no new agreement is concluded,the existing agreement shall expire on October 31,2005 in Germany, and on September 30, 2003 forthe subsidiaries in Austria and Switzerland. Thereceivables purchased up to those dates would berepaid subsequently over the remaining term asscheduled.

In keeping with the provisions of our qualitymanagement system, our financing arrangementsare audited (avoidance of double financing; actualacquisition of the leased property) on a quarterlybasis by independent auditors. Based on a due dili-gence examination, the ratings agencies Moody’sand S&P approved our participation in a top-ratedABCP program (Prime 1/A1+) in 1999.

A quality management system was set up to support customer-orientation. GRENKELEASING offers its entire range of services via the internet (www.grenkeleasing.de and www.weblease-europe.com). It is one of the firstleasing companies in Europe to do this. Growth wassecured through further international expansion –the presence on the French, Italian, Czech,Austrian and Swiss markets was increased andgroup companies commenced business activities inthe Netherlands, Denmark and Spain – and throughthe intensifying vendor leasing at local level.Manufacturer programs with high-profile manufac-turers also played a role.

1.8. Structure of Suppliers

The supplier structure continues to be broad-based.No supplier has a share of new business larger than 4%.

2. Business Situation of the Group

2.1. Financial Position

GRENKELEASING AG shares have been listed on theFrankfurt Stock Exchange since April 2000. TheCompany has issued 13,523,848 shares. The chair-man of the Board of Directors, Wolfgang Grenke,and his family hold 55.8% of the shares and thedeputy chairman, Thomas Konprecht, and his fam-ily have a 5.2% shareholding. The free float of33.53% has risen to 39% through the terminationof the pooling agreement and the related votingrights (pursuant to no. 1.10 of the current “Guide-lines on the Stock Indices of the German StockExchange).

The performance of the GRENKELEASING share in2002 was affected by declining growth rates inEurope and was unable to escape the resulting dropin prices.



2.2. Earnings

Results

The positive trend in earnings from leasing (netinterest income after the settlement of claims arisingfrom the leasing business, insurance business,disposals business and follow-up leases) as well asin trading profit boosted EBT by 29%, from EUR19,444k in 2001 to EUR 25,041k. Basic earningsper share therefore rose by 27% from EUR 0.89 in2001 to EUR 1.13.

Conclusion of New Contracts

Group figures for 2002, compared to previous yearsand including foreign subsidiaries, are as follows:

2.3. Net Worth

The Group’s net worth is characterized by a highproportion of lease receivables (83% of totalassets; prior year: 85%) compared with refinancingliabilities which amount to 65% of the balancesheet total (prior year: 68%).

2.4. Business Situation in theVarious Regions

The Group’s foreign subsidiaries’ efforts in openingup markets have made a greater than proportionalcontribution to growth. The new division of branchoffices in Germany increased our presence in cer-tain regions. The resulting improvement in cus-tomer proximity is expected to lead to an increasein new business.

2.5. Structure of Services andLease Contracts

In keeping with the Group’s basic strategy, we con-centrate on office technology and communicationequipment. Our main focus is on IT systems, acces-sories, and software. This specialization entails therisk of new business being affected if these prod-ucts suffer a sales slump. This risk would, howe-ver, seem to be well worth taking in view of con-tinuing high demand for this technology, the factthat the share of lease financing used in suchinvestments is still relatively low, and that strongdevelopment is forecast for the internet-relatedfield.

1998 1999 2000 2001 2002

Sales 2002 compared to prior years

*Including subsidiaries abroad

Numberof

Contracts40.000

30.000

20.000

10.000

0



3.3. Procedural Risk

Our business procedures are documented in ourquality management manual and are updated on anongoing basis. Our quality management was testedand certified in 2001 by Technical ControlAssociation officers from TÜV Management ServiceGmbH in accordance with the new standard DIN ENISO 9001:2000.

Any original leasing contracts which have not beenscanned in are kept in fireproof cabinets/safes.Thus, even in the event of damage to property(caused by fire, etc.), sufficient precautions havebeen taken.

Contract data is stored and updated in our ITsystem, mainly using in-house programs. In-housedevelopment of programs is part and parcel of ourquality management system. Original contract datais stored both in branch offices as well as in thecentral contract management division in Baden-Baden. Automatic backup programs and automaticpower-interruption facilities safeguard data main-tenance.

IT systems play an important role in the processingand administration of our leasing business. Wehave therefore subjected our IT organization andprocesses to review.

3.4. Contractual Risk

Contractual risk is limited by the fact that almostall the agreements concluded by the Group’s com-panies provide for full cost recovery. As a rule, nomaintenance or warranty risks are entered into.

3. Risk Exposure

The internal audit department set up in 2001 star-ted work in 2002. Its task is to identify significantrisks to our business based on a risk analysis, andto propose countermeasures. The departmentreports directly to the Board of Directors.

The financial control department produces regularevaluations which assist in group management.

The risk management system of GRENKELEASING AGwas further developed and extended. The systemensures that relevant risk areas are systematicallymonitored and addressed at an early stage. Marketrisks are of particular significance. These includethe trend in new business and margins, customercreditworthiness, and (fiscal) legal developments.Complete implementation of the measures requiredfor setting up a systematic and integrated moni-toring system is planned for fiscal year 2003.

3.1. Credit Risk

Since 1994, we have assessed the creditworthinessof our lessees using a scoring system. The qualityof this system has been proved by the level of lossesexperienced since its implementation. A quarterlyreview of losses is carried out by means of auto-mated database queries. The scoring system is furtherdeveloped on an ongoing basis by specialist staff.

3.2. Counterparty Risk

A diversification of dealers addresses this risk.Dealers are assessed on a systematic basis. Thisprocedure is part and parcel of our quality manage-ment system, with an evaluation being conductedon a quarterly basis.



3.5. Sales Risk

3.6. Interest Rate Risk

Over the term of a contract, the lease rates are sub-ject to price risk determined by interest rates.Derivative financial instruments (caps) are onlyused for ABCP financing. In other cases, refinan-cing for the same period is achieved for the sale ofreceivables. The Group’s companies bear the risk forself-financed contracts or contracts with advancefinancing.

3.7. Country Risk

The risks that could arise from the different legalsystems in each country are identified with thehelp of local legal and tax advisors and are takeninto consideration in the lease agreements. Thebusiness model is adjusted accordingly.

3.8. Risk Summary

Sufficient precautions have been taken to offsetcredit risk, the risk of losing supplier and dealercontacts, and similar risks arising from the leasingbusiness. The corresponding write-downs, valuationadjustments, and provisions disclosed in the annualfinancial statements were computed at an appro-priate level using conservative benchmarks.With respect to the future development of the

GRENKELEASING AG Group, there are no particularbusiness-related risks beyond the normal range.

4. Additional Disclosures

4.1. Events of ParticularSignificance After the Close ofFiscal Year 2002

The investment in MAUDEN S.p.A, Milan/Italy, wassold at the beginning of 2003 after MAUDEN S.p.A.had transferred its leasing and rental business tothe group company, GRENKE Locazione S.r.l.,Milan/Italy, in December 2002.

4.2. Overview of Group Companiesand Branch Offices

For further details on companies belonging to theGRENKELEASING AG Group, please refer to the table“Consolidated Companies” in the notes to the con-solidated financial statements.

As of the balance sheet date, the following foreigncompanies were wholly owned by GRENKELEASINGAG: GRENKELEASING AG, Vienna/Austria, GRENKELEASING AG, Basle/Switzerland, GRENKELOCATION S.A., Schiltigheim/France, MAUDENS.p.A, Milan/Italy, EKOMA s.r.o., Prague/CzechRepublic, GRENKE ALQUILER S.A, Barcelona/Spain,GRENKE Locazione S.r.l., Milan/Italy, GRENKELEASING ApS, Herlev/Denmark,Grenkefinance N.V., Maasbree/Netherlands andGRENKE LIMITED, Dublin/Ireland.

The GRENKELEASING AG and the GrenkeInvestitionen Verwaltungs KGaA are registered inBaden-Baden. The AG has branch offices in Berlin,Bremen, Düsseldorf, Dortmund, Dresden, Erfurt,Frankfurt am Main, Hamburg, Hanover, Cologne,Leipzig, Mannheim, Memmingen, Mönchenglad-bach, Munich, Nuremberg and Stuttgart; the KGaAhas a branch office in Berlin.

Ongoing marketing measures serve to mitigate sales risk.These measures include:

Dealer polls

Market surveys

Market research

Integration of partners’ dealer bases

Analysis of new business development

Evaluation of early indicators

Industry-specific information



4.3. Outlook and AnticipatedPerformance

We are very confident about developments in thecurrent fiscal year, and believe we can achieve anincrease of more than 10% in new contracts.Investments made in market positioning and secu-ring the future of the Group, particularly withrespect to opening up the European market furtherand expanding a forward-looking IT infrastructure,will continue to be pursued in line with consistentimplementation of corporate strategy. The con-tinued development of optimized business processeswill strengthen our cost leadership in the small-ticket IT leasing segment. In the European coun-tries in which we already have a subsidiary, we aimfor a market presence as comprehensive as ourgeographical coverage of Germany.

Baden-Baden, February 20, 2003

GRENKELEASING AGThe Board of Directors


60 Income Statement

GRENKELEASING AG Group

Income Statement for Fiscal Year 2002

Note in section 2002 2001

in EUR k

Income from interest on lease receivables 3 58,571 46,446

Expenses from interest on lease liabilities 19,374 15,731

Net interest income from leasing business 39,197 30,715

Settlement of claims 4 9,886 9,180

Net interest income after settlement of claims 29,311 21,535

Income from insurance business 9,934 7,738

Expenses from insurance business 1,685 1,249

Profit from the insurance business 8,249 6,489

Profit from new business 5 10,152 8,595

Income from disposals 4,715 3,590

Expenses from disposals 3,486 2,287

Profit from disposals 6 1,229 1,303

Trading profit 7 2,412 3,152

Other operating income 962 1,194

Personnel expenses 8 12,827 10,682

Operating expenses 3,961 3,119

Administrative expenses 2,457 2,107

Consulting and audit fees 1,796 2,206

Distribution costs (without commission) 3,137 2,573

Amortization/depreciation 9 1,899 1,449

Other operating expenses 1,667 1,273

Other taxes –8 76

EBIT 24,579 18,783

Expenses/income from the fair value measurement of securities –35 –16

Other interest income 1,220 1,160

Other interest expenses 723 483

EBT 25,041 19,444

Income taxes 10 3,938 710

Deferred taxes 10 5,844 6,758

Net profit for the period 15,259 11,976

Earnings per share (basic) Euro 1.13 Euro 0.89

Earnings per share (diluted) Euro 1.13 Euro 0.88

Average shares outstanding (basic) 11 Number 13,523,848 Number 13,523,848

Average shares outstanding (diluted) 11 Number 13,523,848 Number 13,584,069


Balance Sheet 61


Balance Sheet as of December 31, 2002

Assets Note in section Dec. 31, 2002 Dec. 31, 2001

in EUR k

Current assets

Cash and cash equivalents 34,534 10,813

Lease receivables 12 229,961 170,722

Trade receivables 13 7,646 6,438

Inventories 817 2,602

Other current assets 14 13,595 10,165

Total current assets 286,553 200,740

Non-current assets

Lease receivables 12 299,427 234,094

Property, plant and equipment 15 19,020 13,822

Intangible assets 16 3,108 3,424

Deferred tax assets 18 18,077 18,139

Other non-current assets 17 11,902 5,245

Total non-current assets 351,534 274,724

Total assets 638,087 475.464

Liabilities

Current liabilities

Liabilities from the refinancing of lease receivables 170,495 171,504

Trade payables 10,510 14,266

Tax liabilities 19 7,710 1,862

Provisions 20 2,820 2,232

Current portion of non-current bank liabilities 5,033 305

Other current liabilities 3,908 1,228

Deferred rent installments 36,199 1,372

Total current liabilities 236,675 192,769

Non-current liabilities

Liabilities from the refinancing of lease receivables 21 242,007 150,470

Non-current bank liabilities, less the current portion 21 7,532 1,375

Deferred tax liabilities 18 36,549 30,767

Other non-current liabilities 21 288 308

Total non-current liabilities 286,376 182,920

Liabilities and Equity

Equity 22

Capital stock 17,287 17,287

Capital reserve 57,118 57,118

Revenue reserves 53 53

Currency translation –42 –44

Profit carryforward 40,620 25,361

Total 115,036 99,775

Total liabilities and equity 638,087 475,464


62 Statement of Changes in Equity


Statement of Changes in Equity

Subscribed Subscribed

capital capital

in EUR k Ordinary shares Preferred shares

Equity as of January 1, 2001 17,287 0

Net profit for 2001

Currency translation

Equity as of December 31, 2001 17,287 0

Net profit for 2002

Currency translation

Equity as of December 31, 2002 17,287 0


Statement of Changes in Equity 63

Capital Reserve Revenue Reserves Revenue Reserves Currency Profit Total

Legal reserve Statutory reserve Translation Carryforward

57,118 5 48 73 13,385 87,916

11,976 11,976

–117 –117

57,118 5 48 –44 25,361 99,775

15,259 15,259

2 2

57,118 5 48 –42 40,620 115,036


64 Cash Flow Statements


Cash Flow Statements for 2001 and 2002

Jan. 1. - Dec. 31, Jan. 1. - Dec. 31, 2002 2001

in EUR k

Net profit for the period before income taxes 25,041 19,444

Non-cash items contained in net profit for the period and reconciliation to cash flow from operating activities

+ Amortization/depreciation 1,899 1,449

+ Disposals of equipment and intangible assets at net carrying values –39 37

– Investment income –497 –671

–/+ Currency translation differences 2 –117

+/– Increase in other provisions 588 787

– Additions of lease receivable –287,954 –240,601

+ Payments by lessees 201,552 152,628

+ Disposals/reclassifications of lease receivables at residual carrying values 40,981 26,308

+/– Changes from other set-offs 254 517

– Interest income from lease receivables –58,571 –46,446

– Increase in other receivables from lessees –20,404 –11,842

– Currency translation differences –431 –206

Change in lease receivables –124,573 –119,642

+ Additions of liabilities from the refinancing of lease receivables 258,237 217,107

– Payment of annuities to refinancers –178,854 –130,684

– Disposal of liabilities from the refinancing of lease receivables –8,405 –4,352

+ Interest expense from lease liabilities 19,374 15,731

+ Currency translation differences 176 68

Change in liability from refinancing lease receivables 90,528 97,870

Changes in other assets/liabilities

–/+ Increase/decrease in other assets –8,336 –6,441

+/– Increase/decrease in deferred lease payments 34,827 –26,724

+/– Increase/decrease in other liabilities –1,098 3,460

= Cash flow from operating activities 18,342 –30,548

–/+ Taxes paid/received –1,003 1,179

– Interest paid –723 –483

+ Interest received 1,220 1,160

– Purchase of equipment and intangible assets –5,585 –8,506

+ Proceeds from sale of equipment and intangible assets 584 42

– Acquisition of subsidiaries (net of cash acquired) 0 –2,904

= Cash flow from investing activities –5,001 –11,368


Cash Flow Statements 65

Jan. 1. - Dec. 31, Jan. 1. - Dec. 31, 2002 2001

in EUR k

+/– Raising/repayment of bank liabilities 8,205 –249

= Cash flow from financing activities 8,205 –249

Cash and cash equivalents

at beginning of period

Cash 10,813 50,817

– Bank liabilities from overdrafts –305 0

= Cash and cash equivalents at beginning of period 10,508 50,817

Cash and cash equivalents at end of period

Cash 34,534 10,813

– Bank liabilities from overdrafts –2,986 –305

= Cash and cash equivalents at end of period 31,548 10,508

Change in cash and cash equivalents during period 21,040 –40,309

Cash flow from operating activities 18,342 –30,548

Interest 497 677

Taxes –1,003 1,179

+ Cash flow from investing activities –5,001 –11,368

+ Cash flow from financing activities 8,205 –249

= Total cash flow 21,040 –40,309


66 Notes

(HGB) and prepared its consolidated financial statements in accordance with internationallyaccepted accounting principles.

On the basis of this provision, the consolidatedfinancial statements have been prepared with dueregard to the International Financial ReportingStandards (IFRS) published by the InternationalAccounting Standards Board (IASB). The IFRS areinternationally accepted accounting principles pur-suant to Sec. 292a (2) no. 2 a HGB. The consolida-ted financial statements are in compliance withDirective 83/349/EEC (7th Council Directive) acco-rding to the interpretation set out in GermanAccounting Standard 1 (GAS 1), "ExemptingConsolidated Financial Statements in Accordancewith Sec. 292a of the Commercial Code”.

The financial statements of companies included inGRENKELEASING AG’s consolidated financial state-ments have all been drawn up on the basis of uni-form accounting and valuation methods. The finan-cial statements have been prepared as of thebalance sheet date of the consolidated financialstatements and audited by independent auditors,where required by local law.

The consolidated financial statements have beenprepared in euros or in thousands of euros (EUR k).

The structure of the balance sheet as of December31, 2002 follows the classification used for quar-terly reporting according to the maturities ofassets and liabilities. The prior-year disclosureshave therefore been adjusted accordingly.Disclosure of deferred taxes and operating leaseshas been altered. The prior-year figures have alsobeen adjusted here.

1 Commercial Register andPurpose of the Company

GRENKELEASING AG (hereinafter also referred to asthe ”Parent Company”, ”Company” or the ”AG”) is astock corporation with its registered office atNeuer Markt 2, Baden-Baden, Germany. The Com-pany is entered at Baden-Baden Local Court in thecommercial register, department B, under No. 1836.The purpose of the Company is to conduct leasingtransactions for all types of movable assets, tomanage lease contracts for third parties, to brokerproperty insurance for leased assets and to conductall other related transactions.

The leasing business of the GRENKELEASING AGGroup mainly concentrates on small-ticket leasingof IT products, such as PCs, notebooks, servers,monitors and other peripheral devices, software,telecommunication and copier equipment and otherIT products. In this context, small-ticket leasingmeans that the acquisition cost of the financedleased assets is less than EUR 25,000 (excludingVAT). Almost all contracts provide for full cost re-covery. This means that the payments to be made bythe lessee during the basic lease period, includingthe guaranteed residual values, exceed acquisitionand contract cost.

2 Summary of SignificantAccounting Principles

The consolidated financial statements for the fiscalyear ended December 31, 2002 comprises GRENKE-LEASING AG and its subsidiaries in which the AGdirectly or indirectly holds 100% of the shares.GRENKELEASING AG, as a listed parent companywhich makes use of an organized market within themeaning of Sec. 2 (5) of the German SecuritiesTrading Act (WpHG) (the share has been listed inthe ”Prime Standard” since January 1, 2003 andwas allocated to the SDAX index by Deutsche Börseon February 11, 2003), has exercised the optionunder Sec. 292a of the German Commercial Code


Notes to the Financial Statements for Fiscal Year 2002


Notes 67

2.1 Principles of Consolidation

The consolidated financial statements contain allassets and liabilities and all expenses and incomeof GRENKELEASING AG and of the subsidiaries itcontrols after eliminating all material intragrouptransactions.

Subsidiaries are included in the consolidated groupfor as long as the Parent Company is able to exer-cise a controlling influence over them. The purcha-se method is used for acquisitions of subsidiaries.Companies acquired or disposed of during the yearare included in the consolidated financial state-ments from the date of acquisition or to the dateof disposal.

In addition to GRENKELEASING AG, the following subsidiaries are included in the consolidated financial state-ments:

Name Based in Investment Investment

2002 2001

Germany

GLG Grenke-Leasing GmbH Baden-Baden 100% 100%

Grenke Investitionen Verwaltungs KGaA Baden-Baden 100% 100%

(84.4% directly, 15.6% indirectly via GLG Grenke-Leasing GmbH)

WEBLEASE NETBUSINESS AG Baden-Baden 100% 100%

The balance sheet date of all subsidiaries is December 31, 2002.

Foreign countries

EKOMA s.r.o. Prague/Czech Republic 100% 100%

GRENKE ALQUILER S.A. Barcelona/Spain 100% 100%

Grenkefinance N.V. Maasbree/Netherlands 100% —

GRENKELEASING AG Basle/Switzerland 100% 100%

GRENKELEASING AG Vienna/Austria 100% 100%

GRENKELEASING ApS Herlev/Denmark 100% —

GRENKE LIMITED Dublin/Ireland 100% —

GRENKE LOCATION S.A. Schiltigheim/France 100% 100%

GRENKE Locazione S.r.l. Milan/Italy 100% 100%

MAUDEN S.p.A. Milan/Italy 100% 100%


68 Notes

2.2 Foreign Currency Translation

2.2.1 Foreign Currency Transactions

Foreign currency monetary items are reported usingthe closing rate. Non-monetary items carried athistorical cost are translated using the exchangerate on the date of the transaction. Income andexpenses are translated at the average rate.

2.2.2 Foreign Entities

Assets and liabilities of foreign entities are trans-lated into euros at the closing rate. Income andexpenses are translated at the average rate.Currency translation effects are contained in equity.

2.3 Historical Cost Principle

The consolidated financial statements are based onhistorical cost. Unless otherwise stated, assets andliabilities are disclosed at nominal value lessnecessary allowances.

2.4 Leases

2.4.1 Finance Leases

Under a finance lease, substantially all the risksand rewards incident to legal ownership are trans-ferred by the lessor to the lessee. The lease pay-ment receivable is thus treated by the lessor asrepayment of principal and finance income to reim-burse and reward the lessor for its investment andservices.

Under IAS 17.28, assets from a finance lease arerecognized as receivables at an amount equal tothe net investment, i.e. the present value of theresidual receivables of all lease contracts existingat the end of a fiscal year. The net investment

value is calculated on the basis of the net cost ofthe leased assets less a special lease payment madeby the lessee. Initial direct costs incurred in con-nection with contract conclusion are offset againstincome over the entire term of the lease contractby proportionately reducing the unearned financeincome by these initial costs. Finance income isrecognized such that a constant periodic rate ofreturn on the outstanding residual receivable isgenerated.

2.4.2 Operating Leases

Operating lease property is disclosed in the bal-ance sheet based on the type of asset (see Note 15).Lease income from operating leases is recognizedon a straight-line basis over the lease term.

After the original lease contract has expired, thecontract may be extended or a follow-on contractconcluded. This leads to the lease being reasses-sed.

In cases where the criteria for an operating leaseare met, the leased assets are disclosed as an assetfrom the start of the extension period. It is carriedat fair value.

2.5 Liabilities from theRefinancing of Lease Receivables

Liabilities from the refinancing of leased assetsresult from the sale of a portion of the lease receiv-ables to the respective refinancer. They are carriedat the present value of the payments still to bemade to the refinancers; for Asset BackedCommercial Paper (ABCP) programs these liabilitiesare carried at cost less the redeemed share of thesold payments. The originally agreed rate is used asthe discount rate for fixed-interest loans. For therepayment of loans, regular payments are split intoan interest element and a capital element. The


Notes 69

interest elements are disclosed as expenses frominterest-bearing lease liabilities.

2.6 Cash

Cash is comprised of bank deposits and cash onhand.

2.7 Trade and Other Receivables

Receivables and other assets are carried at theirnominal value. Adequate specific bad debt allow-ances are recognized to account for the credit riskfrom trade receivables.

2.8 Inventories

Inventories are valued at the lower of cost and netrealizable value.

2.9 Property, Plant and Equipment

Property, plant and equipment are recognized atcost plus directly attributable costs net of accumu-lated depreciation and accumulated impairmentlosses. Property, plant and equipment are subjectto straight-line depreciation according to theirexpected useful life. When property, plant andequipment are sold or retired, their cost and accu-mulated depreciation are eliminated from theaccounts and any gain or loss resulting from theirdisposal is included in the income statement.

Years

Office buildings 33

Equipment

IT hardware 3

Vehicle fleet 4-5

Leasehold improvements 10

Other (office equipment) 3-20

The depreciation rates are based on the followinguseful lives:

The useful life and depreciation method are reviewed periodically to ensure that the methodand period of depreciation are consistent with theexpected pattern of economic benefits from itemsof property, plant and equipment.

2.10 Intangible Assets

2.10.1 Licenses, Software

Licenses are carried at cost plus acquisition charges. The cost of software is capitalized and treated as an intangible asset if these costs are notan integral part of the related hardware. Licensesand software are subject to systematic straight-lineamortization over their expected useful life, gen-er-ally three years.

2.10.2 Goodwill

Goodwill resulting from acquisitions is defined asthe positive difference between the purchase priceand the fair value of the assets and liabilities atthe time of the acquisition.

Goodwill is amortized straight-line and charged asan expense over a period of 10 years.


70 Notes

2.11 Impairment of Assets

Assets within the meaning of IAS 36.1 are reviewedfor impairment whenever events or changes in cir-cumstances indicate that the carrying amount of anasset may not be recoverable. If the carryingamount is more than the recoverable amount, animpairment loss is recognized. The recoverableamount is the higher of an asset’s net selling priceand value in use. The net selling price is theamount obtainable from the sale of an asset in anarm’s length transaction less the costs of disposal.Value in use is the present value of estimated futurecash flows expected to arise from the continuinguse of an asset and from its disposal at the end ofits useful life. Recoverable amounts are estimatedfor individual assets or, if this is not possible, forthe cash-generating unit to which the assetbelongs.

2.12 Provisions

Provisions are carried at their probable settlementamount if a present obligation (legal or constructive)exists for the Group due to an event occurring priorto the balance sheet date, it is probable that settle-ment of the obligation will lead to an outflow ofresources embodying economic benefits, and if areliable estimate can be made of the amount of theobligation. Provisions are reviewed at each balancesheet date and adjusted to reflect the current bestestimate.

2.13 Deferred Tax Liabilities and Assets

Deferred tax liabilities are calculated using the lia-bility method. Deferred income taxes reflect thenet tax effect of temporary differences between thecarrying amount of an asset or a liability for finan-cial reporting purposes and the amounts used forincome tax purposes.Deferred tax assets for previously non-utilized loss

carryforwards are recognized if it is probable thattaxable profit will be available to utilize these carryforwards.

Deferred tax assets and liabilities are recognizedon the basis of tax rates anticipated for the periodin which the temporary differences will reverse. Forthis purpose, tax rates that have been enacted orsubstantively enacted by the balance sheet dateare used.

The measurement of deferred tax liabilities anddeferred tax assets reflects the tax consequencesthat would follow from the manner in which theenterprise expects, at the balance sheet date, torecover or settle the carrying amount of its assetsand liabilities.

2.14 Government Grants

Government grants relate to investment grantsapplied for pursuant to Sec. 2 of the GermanInvestment Grant Act 1999 (InvZulG). The allow-ance represents a grant for an asset; the carryingamount of the lease receivable is netted againstthis amount. This leads to increased income frominterest on lease receivables spread over the termof the lease.

Since the grant is conditional on retention of thesubsidized asset at the business, repayment obliga-tions lead to an increase in the carrying amountand an adjustment of interest income.

2.15 Income From InsuranceBusiness

Income from insurance business comprises pre-miums for insurance policies which the lessees mustconclude via GRENKELEASING if they do not insurethe leased assets themselves. The insurance pre-miums are collected annually; these amounts aredeferred and released to income pro rata temporis.


Notes 71

2.16 Sale of Leased assets

Sales are recognized upon transfer of benefits andburdens.

2.17 Changes in AccountingEstimates

In fiscal year 2002, the procedure for calculatingrates for specific bad debt allowances using thepercentage-of-receivables approach was system-atized and the categories were modified. Had thevalues calculated in this way been applied as ofDecember 31, 2001, this would have resulted in anearnings increase in the prior year of EUR 4,288k.Using the rates from the method used in the prioryear would have resulted in an increase in the baddebt allowance of EUR 6,872k in 2002.

3 Income From Interest on Lease Receivables

Income from interest on lease receivables amounts toEUR 58,571k. This includes EUR 440k from the recog-nition of investment grants (see also Note 2.14).


72 Notes

Expenses from new business are comprised as follows: 2002 2001

in EUR k

Pos 4

Cost of newly acquired leased assets 278,199 232,751

Commission paid to dealers 3,882 3,562

Total 282,081 236,313

Profit from new business 10,152 8,595

4 Expenses From Settlement of Claims

Specific bad debt allowances are calculated based on historical rates for the collectability of a receivablein conjunction with its categorization (“percentage-of-receivables approach”).

2002 2001

in EUR k

Provision to specific bad debt allowances 12,239 10,711

Income from recognizing losses from lessees 24,197 15,919

Expenses from eliminating receivables from claims 21,844 14,388

Total 9,886 9,180

5 Profit From New Business

Revenues from new business are comprised as follows: 2002 2001

in EUR k

Recognition of new lease receivables 287,954 240,601

Share of revenues from prior leases 1,740 1,847

Revenues from processing fees 1,454 1,386

Revenues from special lease payments 1,085 1,074

Total 292,233 244,908


Notes 73

2002 2001

in EUR k

Revenues from the sale of merchandise 17,092 18,337

Change in merchandise inventories –1,786 1,835

Expenses for merchandise and purchased services 12,894 17,020

Total 2,412 3,152

6 Profit From Disposals

7 Trading Profit

The income and expenses originate primarily from the subsidiary MAUDEN S.p.A, Milan/Italy, which spe-cializes in the buying and selling (brokerage) of IT products. The trading profit relates to the purchase ofgoods and services and the resulting proceeds from reselling them.

8 Personnel Expenses

The average number of staff during the fiscal year totaled 267 (prior year: 210). Part-time staff were countedon a proportionate basis.

Revenues from subsequent leases relate to lease income recognized after the end of the basic lease.Accounting losses from the disposal of lease receivables result from the revenues of terminated contractsless the disposal of the lease receivables at their carrying amount.

2002 2001

in EUR k

Salaries 10,649 8,807

Social security and other pension costs 2,178 1,875

Total 12,827 10,682

2002 2001

in EUR k

Revenues from subsequent leases 4,715 3,590

Depreciation of leased assets in the subsequent lease period 3,174 1,997

Accounting losses from the disposal of the lease receivables 312 290

Total 1,229 1,303


74 Notes

Applicable tax rate 2002 2001

Trade tax 16.49% 16.49%

Corporate income tax (25% on profit after trade tax) 20.88% 20.88%

Solidarity surcharge (5.5% of corporate income tax) 1.15% 1.15%

Average applicable tax rate for the Group 38.52% 38.52%

Tax reductions due to tax-free income –0.19% –1.02%

Tax reductions due to first-time capitalization of loss carryforwards 0.00% –0.56%

Tax increases due to non-deductible expenses 0.79% 0.78%

Changes due to foreign taxes –0.83% 0.54%

Balance of tax reductions and increases 0.13% 0.00%due to changes in tax rates*

Backpayments of tax from prior years 0.65% 0.00%

Average effective tax rate for the Group 39.07% 38.26%

* including the increase in the corporate income tax rate by 1.5 percentage points

Reconciliation of the Average Effective Tax Rate and the Applicable TaxRate

Reconciliation of the expected applicable tax rate to the effective tax rate related to pre-tax profit (100%)is as follows:

9 Depreciation/Amortization of Property, Plant and Equipment andIntangible Assets

2002 2001

in EUR k

Office buildings 171 0

Equipment 1,226 1,015

Goodwill 349 310

Software licenses 153 124

Total 1,899 1,449

2002 2001

in EUR k

Current taxes 3,938 710

Deferred taxes 5,844 6,758

Total 9,782 7,468

10 Income Taxes


Notes 75

11 Earnings Per Share

The calculation of both diluted and basic earnings is based on the respective net profit for the period. Incalculating the average number of shares in 2002, the unchanged number of ordinary shares and the pro-portionate number of shares that may be issued on the basis of warrants were taken into account.There wasno dilutive effect due to the current employee stock option programs (see Note 28), since the fair valuewas below the potential exercise price.

12 Lease Receivables

The reconciliation of gross investment only contains contracts still running on the balance sheet date. Thefollowing adjustments have been made to reconcile net investment to the carrying amount of lease receiv-ables disclosed in the balance sheet:

2002 2001

Units

Average number of ordinary shares outstanding (basic) 13,523,848 13,523,848

Employee stock option program 0 60,221

Average number of ordinary shares outstanding (diluted) 13,523,848 13,584,069

2002 2001

in EUR k

Outstanding minimum lease payments 504,247 399,993

+ Unguaranteed residual values 79,522 62,652

= Gross investment 583,769 462,645

– Unearned (outstanding) finance income 98,644 81,369

= Net investment 485,125 381,276

– Present value of unguaranteed residual values 58,393 45,295

= Present value of minimum lease payments 426,732 335,981

up to 1 year 1 to 5 years longer than

in EUR k 5 years

Gross total investment 224,929 354,328 4,512

Present value of outstanding minimum lease payments 162,730 261,493 2,509


76 Notes

31.12.2002 31.12.2001

in EUR k

Tax credits 8,947 6,033

Prepaid expenses 2,804 1,046

Other items 1,844 3,086

Total 13,595 10,165

13 Trade Receivables

Trade receivables mainly relate to receivables from the sale of IT products by the subsidiary MAUDEN S.p.A.

14 Other Current Assets

Other items include marketable securities amounting to EUR 204k which have been assigned to refinancinginstitutions to secure the liabilities.

2002 2001

in EUR k

Net investment 485,125 381,276

– Investment grant 556 875

= Lease receivables from current contracts 484,569 380,401

+ Other receivables from lessees 92,022 61,994

– Accumulated allowance for doubtful 47,203 37,579outstanding minimum lease payments

Net lease receivables (carrying amount) 529,388 404,816

Present value Present value Other receivables Carrying amount of minimum of residual from lessees

in TEUR lease payments value

Current lease receivables 162.730 22.412 44.819 229.961

Non-current lease receivables 264.002 35.425 0 299.427

Total 426.732 57.837 44.819 529.388

Other receivables from lessees mainly comprise receivables from terminated lease contracts.


Notes 77

15 Property, Plant and Equipment at Cost

Construction in progress contains the accumulated costs for the construction of GRENKELEASING AG’s newhead office in Baden-Baden. The Company moved into the new building on June 1, 2002. The office build-ing has been subject to depreciation as of this date.

Depreciation on leased assets from operating leases is shown in profit from disposals (see Note 6).

Sixed assets Land and Equipment Construction Leased Totalbuildings in progress assets from

operatingleases

in EUR k

Cost 686 5,325 6,758 3,174 15,94301.01.2002

Additions 0 2,384 3,011 4,917 10,312

Disposals 1 1,572 0 3,174 4,747

Reclassifications 9,769 0 –9,769 0 0

Cost 10,454 6,137 0 4,917 21,508as of December 31, 2002

Accumulated depreciation 0 2,121 0 0 2,121as of Jan. 1, 2002

Additions 171 1,226 0 3,174 4,571

Disposals 0 1,030 0 3,174 4,204

Accumulated depreciation 171 2,317 0 0 2,488as of Dec. 31, 2002

Net carrying values 10,283 3,820 0 4,917 19,020as of Dec. 31, 2002

Net carrying values 686 3,204 6,758 3,174 13,822as of Dec. 31, 2001


78 Notes

18 Deferred Tax Assets and Liabilities

EUR 47k, EUR 396k and EUR 1,619k of total recognized tax losses will lapse in 2005, 2006 and 2007,respectively.

Deferred tax assets and liabilities are split Dec. 31, 2002 Dec. 31, 2001

over the following items: in EUR k

Deferred tax assets

Tax loss carryforwards 13,409 14,308

Revaluation of lease liabilities 4,668 3,831

Total 18,077 18,139

Deferred tax liabilities

Revaluation of lease receivables 36,273 30,746

Revaluation of other assets 276 21

Total 36,549 30,767

17 Other Non-Current Assets

See also Note 26

16 Intangible Assets at Cost

Dec. 31, 2002 Dec. 31, 2001

in EUR k

ABCP loans 9,803 4,554

ABCP discount reserve 2,099 691

Total 11,902 5,245

Goodwill SoftwareLicences

in EUR k

Cost 01.01.2002 3,495 496

Additions 0 190

Disposals 0 3

Cost as of December 31, 2002 3,495 683

Accumulated amortization as of Jan. 1, 2002 338 229

Additions 349 153

Accumulated amortization as of Dec. 31, 2002 688 382

Net carrying values as of Dec. 31, 2002 2,807 301

Net carrying values as of Dec. 31, 2001 3,157 267


Notes 79

Type of liability Total amount 1 to 5 years More than Secured amount

in EUR k 5 years

Bank liabilities 7,532 2,153 5,379 8,000

(Prior year) 1,375 1,375 0 0

Liabilities from the refinancing of lease receivables 242,007 241,203 804 253,018(Prior year) 150,470 150,305 165 0

Other liabilities 288 288 0 0

(Prior year) 308 305 3 0

19 Tax Liabilities

21 Non-Current Liabilities

The classification of non-current liabilities by residual maturities is shown in the schedule of liabilities below:

20 Provisions

Provisions for other costs take all recognizable risks from contingent liabilities into account. They containprovisions for lease, consulting and financial statement costs.

Dec. 31, 2002 Dec. 31, 2001

in EUR k

Trade tax 1,561 1,130

Corporate income tax 4,032 732

Foreign VAT 2,117 0

Total 7,710 1,862

Type of liability Jan. 1, 2002 Allocation Utilization Reversal Dec. 31, 2002

in EUR k

Other costs 2,232 2,341 1,739 14 2,820


80 Notes

As a result of the resolution passed by the share-holders’ meeting on April 16, 2002, the conditionalincrease in capital of up to EUR 959k, approved onFebruary 28, 2000, was reduced by EUR 180k. “con-ditional capital I” now only amounts to EUR 779k.The shareholders’ meeting also approved a furtherconditional increase (“conditional capital II”) ofEUR 948k. These changes were entered in the com-mercial register on June 7, 2002.

The capital reserve of EUR 57,118k mainly resultsfrom the IPO of GRENKELEASING AG in April 2000.

In addition to the AG’s revenue reserves, revenuereserves also comprise the revenue reserves andprofits of the consolidated subsidiaries.

23 Segment Reporting

In accordance with the provisions on segmentreporting, information in the financial statementshas been disclosed by regions (“primary seg-ments”) and by divisions (“secondary segments”).Regional segmentation makes a distinction as towhether lessees have their seat in Germany, Franceor in another country. The “other countries” seg-ment comprises Austria, Switzerland, Italy, theCzech Republic, Spain and the Netherlands. Forsegmentation by divisions, a distinction is madeaccording to the type of acquisition, i.e. whichlease contracts were acquired through conventionalchannels, via specialist retailers or via the subsidi-ary WEBLEASE NETBUSINESS AG, i.e. via e-com-merce shops, and which were acquired throughdirect conclusion on the internet. The brokeragebusiness is also presented as a separate secondarysegment.

A loan of originally CHF 11,724k is disclosed underliabilities to banks; this was translated at the clos-ing rate and valued at EUR 8,080k. It has as termfrom December 23, 2002 to December 29, 2017 andcarries interest of 2.95% p.a. The loan is securedby a land charge of EUR 8,000k on the office build-ing in favor of Commerzbank Aktiengesellschaft,Baden-Baden Oos branch, entered in the Oos landregister under No. 6080.

Lease receivables totaling EUR 436,707k have beenassigned to the refinancing institutions to securethe liabilities from the refinancing of lease receiv-ables.

The GRENKELEASING AG Group has two ABCP pro-grams; these have a total volume of EUR 425,000k.The ABCP program organized by Deutsche Bank AGwith Rheingold No. 9 Limited has a volume of EUR175,000k. The ABCP program organized by WestLBwith Compass Variety Funding Limited has a vol-ume of EUR 250,000k. The programs’ average inter-est rate in 2002 was 3.88%. One program runs untilOctober 1, 2004 and may be extended by one year.The other program is for an indefinite period. Atthe end of fiscal year 2002, 36% of the refinancingfacilities of the ABCP programs had been utilized.

22 Equity

For the development of equity, we refer to the sta-tement of changes in equity.

The fully paid-in subscribed capital of GRENKELEASING AG amounts to EUR 17,287k. It isdivided into 13,523,848 non-par bearer shares.There is also conditional capital of EUR 5,963kuntil February 28, 2005. The Board of Directors isauthorized to use this capital, with the approval ofthe Supervisory Board, to increase subscribed capi-tal by issuing new no-par bearer shares in returnfor cash or non-cash contributions. The subscribedcapital was entered in the commercial register onMarch 2, 2000.


Notes 81

Revenues listed in the segment report 2002 2001

are comprised as follows: in EUR k

Recognition of lease receivables 289,694 242,448

Revenue at lease inception 2,539 2,460

Insurance income 9,934 7,738

Income from sale of goods 17,092 18,337

Expenses from the acquisition of lease receivables –278,199 –232,751

Subsequent leases 4,715 3,590

Interest income 58,571 46,446

Total 104,346 88,268

The segment information was calculated as follows:

Segment revenue comprises revenue from capitalizing lease receivables, sales revenues from leased assets, insurance revenue and interest income.

Segment result is calculated net of taxes and goodwill amortiz-ation.

Amortization/depreciation solely relates to property, plant andequipment and intangible assets and does not contain any goodwill amortization from the acquisition of consolidated subsidiaries.

Capital expenditure relates to additions of property, plant andequipment and intangible assets without goodwill resulting from the acquisition of shares.

Operating segment assets and liabilities are comprised of the operating assets and/or borrowings – excluding interest-bear-ing claims and liabilities and without taxes.


82 Segment Reporting/Divisions


Segment Reporting December 31, 2002

Regions (primary reporting format)Segment Germany

Dec. 31, 2002 Dec. 31, 2001

in EUR k

Revenues 70,845 59,409

Segment result 21,678 18,116

Unallocated expenses

Consolidated profit before tax

Tax expense

Profit after tax

Amortization/depreciation 1,141 773

Capital expenditure 4,868 7,449

Segment assets 482,573 367,220

Unallocated items

Total assets

Segment liabilities 385,739 283,974

Unallocated items

Total liabilities


Divisions (secondary reporting format)Segment Weblease / Internet

Dec. 31, 2002 Dec. 31, 2001

in EUR k

Revenues 2,481 1,293

Segment result 226 763

Investments 27 7

Segment assets 8,501 7,346


Segment Reporting/Divisions 83

Segment France Other Countries Total Segments

Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001

11,037 6,646 22,464 22,213 104,346 88,268

2,155 1,041 1,557 597 25,390 19,754

349 310

25,041 19,444

9,782 7,468

15,259 11,976

126 80 282 286 1,549 1,139

264 248 453 809 5,585 8,506

77,263 50,140 57,367 36,809 617,203 454,169

20,884 21,295

638,087 475,464

58,703 43,368 36,468 15,718 480,910 343,060

42,141 32,629

523,051 375,689

Segment Segment Total Segments

Conventional lease business Mauden trading

Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001

85,670 68,679 16,195 18,296 104,346 88,268

25,109 18,825 55 166 25,390 19,754

5,558 7,826 0 673 5,585 8,506

599,784 435,899 8,918 10,924 617,203 454,169


84 Notes

24 Information on the Foundationof Subsidiaries During the FiscalYear 2002

The following wholly-owned subsidiaries were found-ed during fiscal year 2002:

On January 17, 2002, GRENKELEASING AG foundedGrenkefinance N.V. Maasbree/Netherlands. Thecompany’s subscribed capital amounts to EUR 250k.It was entered in the commercial register onJanuary 24, 2002.

GRENKE LIMITED Dublin/Ireland was founded byGRENKELEASING AG on June 11, 2002. The com-pany’s subscribed capital amounts to EUR 2. It wasentered in the commercial register on June 20,2002.

GRENKELEASING ApS Herlev/Denmark was foundedby GRENKELEASING AG on December 13, 2002. Thiscompany’s subscribed capital amounts to EUR 200k.The company was entered in the commercial reg-ister on January 8, 2003.

25 Differing Accounting Policiesin the Consolidated FinancialStatements: IFRS Versus theGerman Commercial Code

Significant differences between German accountingstandards and International Financial ReportingStandards exist in the GRENKELEASING AG Group inthe following areas:

Goodwill (IAS 22)Goodwill is capitalized and amortized over a period of 10 years.In contrast, Sec. 309 (1) HGB permits goodwill to be netted against revenue reserves.

Leasing (IAS 17)For lease contracts relating to finance leases, leased assets arereclassified from property, plant and equipment to receivables (lease receivables). Additionally, the amount resulting from thesale of lease receivables (forfaiting) is disclosed under lease liabilities and not under deferred income.

Financial Instruments (IAS 39)Securities are carried at fair value on the balance sheet date. Under the Commercial Code, valuation may not exceed the ori-ginal acquisition cost, as unrealized gains may not be disclosed.

Deferred Tax Assets (IAS 12)Unlike under the Commercial Code, claims from the future use of tax loss carryforwards were capitalized and recognized in theincome statement.

Capital ReserveIPO expenses were netted against the capital reserve; under the Commercial Code, the expenses would have affected the income of the respective fiscal year.

The shares of GRENKELEASING AG issued for the contribution of haberichter.net GmbH were stated at the closing rate. The excess over the nominal value was transferred to the capital reserve. Under the Commercial Code, the shares are carried at nominal value.


Notes 85

the same period is arranged for the sale of receiv-ables. The Group’s companies bear the risk for self-financed contracts or contracts with advance finan-cing.

Credit Risk

Credit risk for primary financial instruments resultsfrom the risk that lessees do not meet their con-tractual payment obligations and that initially cal-culated residual values will not be realizable at theend of the contract.

The maximum credit risk for lease receivables istheir carrying value.

To ensure that contracts are only concluded withcreditworthy parties, the Company uses statisticalscoring processes for accepting contracts.Appropriate allowances are calculated to accountfor credit risks from current contracts. As a result,no material losses are anticipated from lesseesdefaulting on payment.

Significant clusters of credit risk are countered bydiversifying the contract portfolio geographicallyand by covering various industrial sectors and asmany different creditworthy lessees as possible.

26 Financial Instruments

Financial instruments are contractually agreedrights or obligations which lead to an outflow orinflow of financial assets or to the issue of equityrights. In addition to the (primary) financialinstruments disclosed in the balance sheet, theyalso comprise rights or obligations derived fromother financial instruments.

Under IFRS, receivables from finance leases repre-sent a granting of a loan in substance. The carry-ing amount corresponds to the present value of theoutstanding minimum lease payments plus anunguaranteed residual value, discounted at theinternal rate at the inception of the lease.

The carrying amounts of the primary financialinstruments disclosed in the balance sheet are stated in the notes on the respective items.

Details on Risk Management Policy:

Group management has formulated its risk manage-ment policy in corporate guidelines in the form ofrisk guidelines and a certified quality managementsystem (ISO 9001).

The risk management system of GRENKELEASING AGhas been further developed and extended. It isdesigned to ensure systematic monitoring and earlycontrol of relevant risk factors, including those inthe area of financial instruments. The GRENKELEASINGAG Group is chiefly exposed to interest and creditrisk.

Interest Risk

Over the term of a contract, the lease payments aresubject to price risk determined by interest rates.Derivative financial instruments (caps) are onlyused for ABCP financing. The interest cap rangesfrom 3.9% to 6%. In other cases, refinancing for


86 Notes

Fair Value of Primary Financial Instruments

Fair value is the amount for which financial instru-ments would be exchanged, sold, bought or settledon the balance sheet date between knowledgeable,willing contracting parties in an arm’s lengthtransaction.

Financial assets whose fair value differs from their carrying amount are listed below:

27 Contingent Liabilities and Other Financial Obligations

No contingent liabilities existed as of the balance sheet dated which must be mandatorily stated in thebalance sheet or in the notes.

The Company has other financial obligations related to rent and lease contracts. The resulting financialobligations are presented below:

The fair value of lease receivables is estimated byusing, instead of the internal rate, an interest ratewhich would be available for full refinancing. Acommercial rate of interest on December 31, 2002was used for liabilities from refinancing.

Dec. 31, 2002 Dec. 31, 2001

in EUR k

Rent and lease obligations

Of which due in the following year 1,340 1,456

Of which due in 2 to 5 years 2,858 2,428

Of which due in more than 5 years 3 528

Total 4,201 4,412

Fair value 2002 Carrying amount Fair value 2001 Carrying amount

in EUR k 2002 2002

Lease receivables 582,547 529,388 434,117 404,816

Lease liabilities 424,633 412,502 325,956 321,974


Notes 87

Under three agreements regarding the sale of receiv-ables of Grenke Investitionen Verwaltungs KGaA tosecure all receivables of the holding company(Grenke Investitionen Verwaltungs KGaA) from theoperating company, the operating company (GREN-KELEASING AG) assigns to the holding company thefollowing from lease contracts with end lessees(sublease contract) for leased assets, which are thesubject of a purchase agreement between the op-erating company and the holding company: allreceivables, claims and rights arising from thesesublease contracts, including any claims fromextended leases following expiry of the originallyagreed lease, any claims for compensation pay-ments and for residual values, and payment of apurchase price from the sale of the respective leased asset. Claims from loan and property insur-ance from the respective sublease contract are also assigned, as are possible claims from repur-chase obligations on the part of suppliers of leasedassets or of third parties. The buyer of the receiv-ables acquires the equitable lien on the leasedassets, on which the respective receivable purchaseagreement is based.

28 Employee Stock Option Programs

The first employee stock option program (IPO stockoption program) was launched in connection withthe stock market flotation of the GRENKELEASINGAG share. A further stock option program followedin 2002. These employee stock option programs areintended to allow members of the Board ofDirectors and the other employees of the Companyand of its affiliated companies to directly partici-pate in the future growth in corporate value. Forthis purpose, the shareholders’ meeting created“conditional capital I” of EUR 959k for the firsttime on February 28, 2000; this was entered in thecommercial register on March 2, 2000. As a resultof the resolution passed by the shareholders’ meet-ing on April 16, 2002, the conditional increase incapital approved on February 28, 2000 was reducedby EUR 180k. “conditional capital I” now onlyamounts to EUR 779k. The shareholders’ meetingapproved a further conditional increase (“condi-tional capital II”) of EUR 948k. These changes wereentered in the commercial register on June 7,2002.

The conditional capital serves to secure share sub-scription rights from the stock option program. Amaximum total of 1,492,000 subscription rightswill be issued; each allows one share in GRENKELEASING AG to be acquired.

Subscription rights are as follows:

Members of the Board of Directors of GRENKELEASING AG maximum of 203,880

Other employees of GRENKELEASING AG maximum of 969,490

Other employees of companiesaffiliated to GRENKELEASING AG maximum of 318,630

The subscription rights were issued in initial tranches; further tranches will be issued in subsequent years.Subscription rights will be issued within four years following entry of the conditional capital in the com-mercial register.


88 Notes

IPO Stock Option Program Members of the Employees Employees of Total

Board of affiliated

Units Directors companies

Maximum number of subscription rights 100,000 528,000 122,000 750,000

Issue in 1st SOP (2000) 41,452 210,234 27,960 279,646

Remainder 58,548 317,766 94,040 470,354

Retransfer as a result of employees 0 51,355 7,992 59,347leaving the Company

Issue in 2nd SOP (2001) 41,452 267,520 58,296 367,268

Balance as of December 31, 2002 17,096 101,601 43,736 162,433

IPO Stock Option Program II Members of the Employees Employees of Total

Board of affiliated

Units Directors companies

Maximum number of subscription rights 103,880 441,490 196,630 742,000

Issue in 1st SOP (2002) 33,000 113,384 52,540 198,924

Remainder 70,880 328,106 144,090 543,076

Retransfer as a result of employees 0 11,656 1,892 13,548leaving the Company

Issue in 2nd SOP (2003) 0 0 0 0

Balance as of December 31, 2002 70,880 339,762 145,982 556,624

Following expiry of the two-year vesting period, the exercise price for the first issue is EUR 25.02 per sub-scription right (expiry of the vesting period in 2002) and EUR 42.61 per subscription right for the secondissue (expiry of the vesting period in 2003).

Following expiry of the two-year vesting period, the exercise price for the first issue is EUR 28.50 per sub-scription right (expiry of the vesting period in 2004).

29 Subsequent Events

The investment in MAUDEN S.p.A, Milan/Italy, was sold on January 31, 2003 in a management buyout afterMAUDEN S.p.A. had transferred its leasing and rental business to GRENKE Locazione S.r.l., Milan/Italy, inDecember 2002. The sale is reported in the consolidated financial statements of GRENKELEASING AG for thefirst quarter of 2003. The estimated result from the sale is zero.

The share price must exceed a specified target price for the subscription rights to be exercised, and thesubscription rights may be exercised no earlier than two years after being issued.

The exercise price is dependent on the issue price and may fall if the target price is exceeded.

The following table shows the stock options issued under this program as of December 31, 2002:


Notes 89

The Supervisory Board’s remuneration (includingpayments for supplementary services) totaled EUR98k (prior year: EUR 44k). As of December 31,2002, members of the Supervisory Board held 75shares and 6,204 stock options.

Mr. Witt and Dr. Keller are also members of theSupervisory Board of Grenke InvestitionenVerwaltungs KGaA. None of the other members ofthe Supervisory Board were members of any othersupervisory boards or oversight bodies within themeaning of Sec. 125 (1) third sentence of theGerman Stock Corporation Act (AktG).

Mr. Witt and Dr. Keller are appointed until the share-holders’ meeting convenes, which is then to decideon their exoneration for fiscal year 2002. Theremaining members of the Supervisory Board areappointed until the shareholders’ meeting convenes,which is then to decide on their exoneration forfiscal year 2004.

30 Details Regarding theSupervisory Board and the Boardof Directors as GeneralInformation on the Company

In accordance with the articles of incorporation,the Supervisory Board of GRENKELEASING AG hassix members. The members of the Supervisory Boardin fiscal year 2002 were:

Supervisory Board

Mr. Gerhard E. Witt (Chairman)Accountant and tax advisor, Baden-Baden

Mr. Dr. Markus Keller (Deputy Chairman)Chemistry graduate, Mannheim

Mrs. Dr. Brigitte SträterLawyer, Düsseldorf

Mr. Dieter MünchBank officer, Weinheim

Mr. Dr. Bernd RugeLawyer, Hamburg

Mrs. Renate Hauss (employee of GRENKELEASING AG)Business administration graduate, Bühl Board of Directors

Mr. Wolfgang Grenke, businessman, Baden-Baden, (Chairman) Strategy, Corporate Development, Investor Relations

Mr. Thomas Konprecht, graduate programmer, certified leasingand financial consultant (VWA), Düsseldorf, (Deputy Chairman)Germany + Northern Europe, Sales, Marketing

Mr. Mark Kindermann, business graduate, BühlAdministration, Finance, Accounting, Controlling, Legal

Mr. Michael Kostrewa, businessman, industrial IT specialist, Karlsruhe Information Technology, e-Business

Mr. Peter Merkel, bank officer, Hamburg (until September 30, 2002)

Mr. Ray Werschky, business graduate, certified leasing andfinancial consultant (VWA), Berlin (until September 30, 2002)

Remuneration of the Supervisory Board is as fol-lows:

Ms. Anneliese Grenke received a remuneration ofEUR 2.6k in her function as a member of theSupervisory Board of Grenke Investitionen Verwal-tungs KGaA.

The Board of Directors of GRENKELEASING AG iscomprised as follows:

Messieurs Merkel and Werschky have switched tothe Group’s Management Board which is responsiblefor operative management. The reduced Board ofDirectors concentrates on long-term corporatealignment and on the strategic management of theGroup in Germany and abroad.

Incidental

benefits

0

0

0

0

52

0

52

Fixed

portion

6

9

6

6

6

13

46

Total remun-

eration

6

9

6

6

58

13

98

in EUR k

R. Hauss

Dr. Keller

D. Münch

Dr. Ruge

Dr. Sträter

G. Witt

Total


90 Notes

Remuneration of the Board of Directors is as follows: Total Fixed portion Variable portion

in EUR k remuneration

Wolfgang Grenke 233 190 43

Thomas Konprecht 173 143 30

Michael Kostrewa 109 89 20

Mark Kindermann 118 98 20

Peter Merkel 96 78 18

Ray Werschky 99 80 19

Total 828 678 150

In accordance with the aforementioned Stock Option Program II, the members of the Board of Directors alsoreceived 33,000 options (prior year: 41,452) to subscribe to shares in GRENKELEASING AG. The earliestthese options may be exercised is June 2004.

31 Declaration Pursuant to Sec. 161 AktG

For 2002, the Board of Directors and the SupervisoryBoard of GRENKELEASING AG have made the declar-ation pursuant to Sec. 161 AktG in conjunction withSec. 15 of the Introductory Act of the StockCorporation Act (EGAktG) and made this available toshareholders.

Baden-Baden, February 20, 2003

The Board of Directors


Auditor’s Report 91

We have audited the consolidated financial state-ments, prepared by GRENKELEASING AG, Baden-Baden, comprising the balance sheet, the incomestatement and the statement of changes in share-holders’ equity, cash flow statement, as well as thenotes to the financial statements, for the businessyear from January 1 to December 31, 2002.

The preparation and the content of the consolidatedfinancial statements are the responsibility of theCompany’s board of directors. Our responsibility isto express an opinion on the base of our auditwhether the consolidated financial statements arein accordance with International FinancialReporting Standards (IFRS) based on our audit.

We have conducted our audit of the consolidatedfinancial statements in accordance with Germanauditing regulations and the “Grundsätze ordnungs-mäßiger Abschlussprüfung” (Generally AcceptedStandards for the Audit of Financial Statements)promulgated by the “Institut der Wirtschaftsprüfer”(German Institute of Auditors). Those standardsrequire that we plan and perform the audit suchthat it can be assessed with reasonable assurancewhether the consolidated financial statements arefree of material misstatements. Knowledge of thebusiness activities and the economic and legal envi-ronment of the Group and evaluations of possiblemisstatements are taken into account in the deter-mination of audit procedures. The evidence suppor-ting the amounts and disclosures in the consoli-dated financial statements are examined on a testbasis within the framework of the audit. The auditincludes assessing the accounting principles usedand significant estimates made by the Company'slegal representatives, as well as evaluating the over-all presentation of the consolidated financial state-ments. We believe that our audit provides a reason-ably reliable basis for our opinion.

In our opinion, the consolidated financial state-ments give a true and fair view of the net assets,financial positions, results of operations and cashflows of the Group for the business year in accord-ance with the International Financial ReportingStandards published by the InternationalAccounting Standards Board (IASB).

Our audit, which also extends to the group manage-ment report for the business year from January 1 toDecember 31, 2002 prepared by the board of direc-tors, has not led to any reservations. In our opin-ion, on the whole the group management reporttogether with the other disclosures in the consoli-dated financial statements provides a suitableunderstanding on the Group‘s position and suitablypresents the risk of future development. In addi-tion, we confirm that the consolidated financialstatements and the group management report forthe business year from January 1 to December 31,2002 satisfy the conditions required for theCompany's exemption from its obligation to prepareconsolidated financial statements and the groupmanagement report in accordance with German law.

Frankfurt/Main, February 20, 2003

Ernst & Young Deutsche Allgemeine Treuhand AGWirtschaftsprüfungsgesellschaft

Eckl HöhnWirtschaftsprüferin Wirtschaftsprüfer(German Public Auditor) (German Public Auditor)

Auditor’s Report


92 Supervisory Board Report

Agenda of the shareholders’ meeting in 2002

Change in the structure of the Board of Directors

Extension of the period of office of members of the Board of Directors to further five years

Operative management level – Management Board

Foundation of subsidiaries in Italy, the Netherlands, Ireland and Denmark

Corporate governance code

Formation of an audit committee

Rules of procedure for the Supervisory Board

Throughout the past fiscal year, the Board ofDirectors kept the Supervisory Board regularlyinformed on the position and strategic develop-ment of the Company, on current events and on sig-nificant business transactions and fundamentalissues concerning future corporate management. Ina total of four Supervisory Board meetings – whichtook place on February 14, June 7, September 16,and December 9 – the Supervisory Board discussedthe reports submitted by the Board of Directors indepth and passed the required resolutions. Amongother things, the Supervisory Board received theminutes of the meetings of the Board of Directorsas well as the documents prepared for these meet-ings.

In addition to the current business development,the general economic climate and risk management,the Supervisory Board considered the following:

The Supervisory Board thus fulfilled its obligationto review and monitor the management of theCompany as provided for by act of law and by thearticles of incorporation.

The financial statements prepared by the Board ofDirectors for fiscal year 2002 and the managementreport of the Company were submitted to theSupervisory Board for review. The proposal on theappropriation of profits made by the Board ofDirectors was submitted to the Supervisory Board.The financial statements were audited by the audi-ting firm elected by the shareholders’ meeting onApril 16, 2002, Ernst & Young Deutsche AllgemeineTreuhand Aktiengesellschaft, Wirtschaftsprüfungs-gesellschaft, Frankfurt. The accounting methodsused in preparing the individual financial state-ments of GRENKELEASING AG were in keeping withthe provisions of German commercial law. The auditof the financial statements for the year ending onDecember 31, 2002 was conducted pursuant to Sec.317 of the German Commercial Code (HGB) and incompliance with the generally accepted principlesfor the audit of financial statements adopted bythe Institute of Public Auditors in Germany (IDW).

Supervisory Board Report

Gerhard E. WittChairman of the Supervisory Board


Supervisory Board Report 93

The consolidated financial statements of GRENKE-LEASING AG for the fiscal year from January 1 toDecember 31, 2002 were prepared in accordancewith International Financial Reporting Standards(IFRS) and the exempting conditions of Sec. 292apara. 2 HGB. The audit of the consolidated financialstatements was conducted pursuant to Sec. 317HGB in compliance with the generally acceptedprinciples for the audit of financial statementsadopted by the Institute of Public Auditors inGermany (IDW).

An unqualified audit opinion was rendered on boththe financial statements of GRENKELEASING AG and the consolidated financial statements of the GRENKELEASING Group. The auditor attended themeeting of the audit committee to discuss thefinancial statements and provided explanations.The audit committee satisfied itself of the audi-tor’s independence.

The Supervisory Board reviewed the financial state-ments provided to it by the Board of Directors anddiscussed the results in its meeting on February 21,2003. The auditor attended the meeting and report-ed on the significant audit results.

Having duly conducted its own examination, theSupervisory Board raised no objections to the find-ings from the audit of the financial statementsconducted by the auditor and thus approved andadopted the financial statements of GRENKELEASINGAG and the GRENKELEASING Group.

The Supervisory Board concurs with the Board ofDirectors’ proposal on the appropriation of profits.

All members of the Supervisory Board have volun-tarily undertaken to observe the corporate govern-ance code issued during the fiscal year.

There were no changes in the membership of theSupervisory Board in fiscal year 2002.

The Supervisory Board wishes to thank the Board ofDirectors and the employees of the Company andits subsidiaries, without whose personal commit-ment the Company’s continued success would nothave been possible.

Baden-Baden, February 2003For the Supervisory Board

Gerhard E. WittChairman


Appointments

Corporate Calendar

03/01/2003 Publication New Business and Contribution Margin 1

06/03/2003 Publication of the Annual Report for 2002, Balance Sheet press conference, DVFA analyst conference in Frankfurt at the “DVFA-Multimedia-Zentrum”

02/04/2003 Publication New Business and Contribution Margin 1

13/05/2003 Shareholders' meeting in Baden-Baden

15/05/2003 Publication of Financial Statements of Q1 2003

02/07/2003 Publication of New Business and Contribution Margin 1


02/10/2003 Publication of New Business and Contribution Margin 1


94 Appointments



GRENKELEASING AGNeuer Markt 276532 Baden-Baden

Telephone: +49(0)7221-5 00 72 04Fax: +49(0)7221-5 00 71 12

www.grenkeleasing.comwww.weblease-europe.comwww.asset-broker.com

email: [email protected]

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