Vorwerk Annual Report20 0 4

R E P O R T O N T H E 1 2 1 S T F I N A N C I A L Y E A R

amongst us takes us straight to the heart of the matter.Although often embellished with pathos and attributed tothose we put on a pedestal, it is something we all need –eve

ryday. True to tradition, the Vorwerk Annual Reportdevo

tesitsel

f to a big issue – this year, one that

isdisco

mfiting only to the faint-hearted: courage.

“Courage!” This word of encouragement for the more timid

C O N T E N T S

A Review of Vorwerk 4

Status Report 2004 6

Direct Sales, Vorwerk Kobold Systems 12

Direct Sales, Vorwerk Thermomix 16

Direct Sales, Ironing System Vorwerk Feelina 18

Direct Sales, Jafra Cosmetics 18

Direct Sales, Lux Asia Pacific 22

Vorwerk Engineering 22

Vorwerk Carpets 25

Brand Image Campaign 26

HECTAS Facility Management 26

Finances and Financial Assets 28

Human Resources 30

Vorwerk Family Fund 33

akf group 33

Consolidated Financial Statements 2004 35

Essential Companies of the Vorwerk Group 46

Sources / Imprint 48

G r o u p E x e c u t i v e M a n a g e m e n t

Dr. Jörg Mittelsten Scheid (Managing Partner)

Achim Schwanitz (Managing Partner)

Wolfgang Bahlmann (Executive Vice President)

Eberhard Pothmann (Executive Vice President)

Markus von Blomberg

(Managing Partner since 1. 1. 2005)

H e a d O f f i c e o f t h e V o r w e r k G r o u p ( H o l d i n g C o m p a n y )

Vorwerk & Co. KG

Mühlenweg 17 - 37

42270 Wuppertal, Germany

Telephone +49 202 564-0, Telefax -1301

www.vorwerk.de / www.vorwerk.com

The Advisory Board serves to advise the Managing

Partners. Its members are the following:

Günter Busch, Mülheim/Ruhr (President)

Prof. Dr. Pius Baschera, Schaan/Liechtenstein

Prof. Dr.-Ing. Hubertus Christ, Friedrichshafen

Dr. Axel Epe, Düsseldorf

Verena Klüser, Munich

Jens Mittelsten Scheid, Munich

Karen Schmidt-Paas, Neuss

Vorwerk Group: Business Volume 2004

akf group** 23% (1 480 million)

Carpets 3% (1 68 million)Lux Asia Pacific 4% (1 77 million)

Kobold Systems incl. Fitted Kitchens36% (1 755 million)

Thermomix 12% (1 253 million)HECTAS Facility Management 9%

(1 196 million)

Other (1 14 million)

Jafra Cosmetics* 11% (1 229 million)

Feelina Ironing System (1 2 million)

*Pro rata as of June 2004 ** Relating to a 15-month financial period

4

Key Figures for the Vorwerk Group (not including the akf group)in million 1 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Balance-sheet Total 732 791 856 904 964 1,028 1,062 1,150 1,204 1,756Partners’ Equity 379 438 466 507 519 548 547 568 607 686Partners’ Equity in % 52 56 54 56 54 53 52 49 50 39Financial Assets 23 26 29 26 68 144 146 147 144 144Other Fixed Assets 90 86 83 83 86 78 73 81 69 465Current Assets 617 675 742 793 808 804 841 922 985 1,136Liquid Resources 351 422 471 529 553 542 525 609 666 688Capital Investments* 35 38 36 31 34 25 27 37 20 33Depreciation 30 27 33 29 28 29 26 27 25 35Personnel Costs 364 350 359 351 349 351 370 405 401 434Number of Employees 15,073 15,109 14,827 14,550 14,117 13,984 16,913 16,602 16,888 19,894Vorwerk Sales Advisers 18,831 19,697 20,803 22,661 24,209 23,951 28,409 29,609 30,137 466,443Sales Group (incl, sales tax) 1,220 1,180 1,247 1,301 1,268 1,243 1,218 1,231 1,287 1,594

New Business, akf group*** 129 161 182 218 249 289 303 339 348 480Total Business Volume 1,349 1,341 1,429 1,519 1,517 1,532 1,521 1,570 1,635 2,074

* Without financial investments ** 434,697 thereof Jafra consultants *** included in the consolidated financial statements in accordance with the equity method of accounting, in 2004 with a 15-month financial period

The Vorwerk Group comprised the following business segments in the year 2004:

Direct Sales, Vorwerk Kobold Systems, including Fitted Kitchens Direct Sales,

Vorwerk Thermomix Direct Sales, Ironing System Vorwerk Feelina Direct Sales,

Jafra Cosmetics Direct Sales, Lux Asia Pacific in Asia HECTAS Facility Management

akf Financial Services Vorwerk Carpets for the retail trade and contract business

****

Argentina, Australia, Austria, Bahrain, Belarus, Belgium, Brazil,Brunei, Canada, China, Croatia, Curaçao, Cyprus, Denmark, Estonia,Finland, France, Germany, Great Britain, Greece, Guatemala, HongKong, Hungary, Indonesia, Ireland, Israel, Italy, Japan, Latvia,Lebanon, Lithuania, Malaysia, Mexico, Morocco, New Zealand, Norway, Peru, Poland, Portugal, Romania, Russia, Serbia andMontenegro, Singapore, Slovenia, South Africa, South Korea, Spain,Sweden, Switzerland, Taiwan, Thailand, The Czech Republic, TheDominican Republic, The Netherlands, The Philippines, The SlovakianRepublic, The United States of America, Turkey, Ukraine, Vietnam

A R E V I E W O F V O R W E R K

5

The Vorwerk family enterprise upheld its successful tradition of previous years and for

the financial year 2004 again reported an increase not only in business volume, but also in operating

profit. Compared with the previous year, business volume rose by 27 per cent to 2,074 million

euros. The reasons for this can be found both in the appreciable growth of nearly all of the existing

business segments, especially of the Vorwerk direct-sales companies, and in the acquisition of

Jafra Cosmetics, which is included in the consolidated financial statements from the month of

June onwards. Even without the special effect of the additional short financial year of three

months (October to December 2004) carried in the consolidated financial statements for the akf

group, which is included under the equity method of accounting, there is a reported increase

in business volume of 21 per cent. We are also very pleased with the development of our

operating result.

Vorwerk once again expanded its international horizons in 2004. A

growing proportion of business volume, 50 per cent, is now generated outside Germany without

this having a detrimental effect on our activities in Germany. On the contrary, the high volume

of sales both in the rest of Europe and overseas secures German and European jobs in develop-

ment, production and sales. Products and services from the house of Vorwerk are now obtainable

in over 60 countries. An annual average of 51,640 people worked for Vorwerk worldwide in 2004,

31,746 of whom were earning their main income or a side income as self-employed sales advi-

sers and representatives. In addition to these, 434,697 consultants worked for Jafra Cosmetics.

As can be seen, Vorwerk and the direct-sales companies create jobs.

The direct customer approach again proved to be Vorwerk’s recipe for success. The core

business was further expanded in 2004 and Jafra Cosmetics, which operates chiefly on the

American continent, joined the segment. Direct Sales is the main pillar of the Vorwerk group and

embraces the household cleaning system Vorwerk Kobold Systems, the multifunctional kitchen

appliance Thermomix, the Vorwerk Feelina Ironing System, Vorwerk fitted kitchens, the products

of Lux Asia Pacific and now also those of Jafra Cosmetics. We achieved significant growth in our

larger markets of Italy, Spain and China and also with Jafra in Mexico. Vorwerk activities in

Germany also made healthy progress. At the same time, we succeeded in reversing negative

trends in certain smaller countries. The company is broadly positioned so that we can now turn

our attention to growth and to exploring markets in new countries.

S T A T U S R E P O R T

6

Steps taken to alter an undesired state call for initiativeand courage when it comes to self-portrayal. Any collec-tive pounding of hearts arising in the subsequent course ofthe undertaking is perfectly within the realms of the desired.

He seeks her:

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”Have the courage to use your common sense.” Immanuel Kant

The launch of a follow-up product, in response to demands from those in charge of sales,

is always something the sales team awaits with great anticipation – after all, customers and sales

advisers alike first need to acquaint themselves with the new appliance. Thanks to a high level

of innovation and close proximity of development and production to customers and sales units,

not forgetting a highly motivated sales team, the new Thermomix 31 turned out to be a

resounding success in all countries. Sales expectations were surpassed to such an extent that the

new Thermomix actually suffered the occasional delivery bottleneck.

The group’s decision to purchase Jafra Cosmetics has now

put Vorwerk on the American map, too. Vorwerk is now represented in the fast-growing, direct-

sales segment of cosmetics, facial and body-care products. The new division more than fulfilled

expectations in its first year.

Group services – HECTAS Facility Management and the financial services of akf – also

made headway. Thanks to the success of a restructuring process, it is especially gratifying to see

the Carpets division, Teppichwerke, back in the black despite a continuing weak market.

The re-organisation of Vorwerk’s information technology set-up, which went hand in

hand with the sale to T-Systems in 2003 of its subsidiary ZEDA, is proceeding according to plan.

Worldwide support from a single supplier is now guaranteed. The first countries have already

been equipped with VISSION, the new IT platform, which has been a joint development of

Vorwerk and our new partner, T-Systems. In this respect, therefore, the right conditions are being

created for the Vorwerk direct-sales companies to operate successfully in the future within an

increasingly international group.

The general trend in Vorwerk business shows that the decision taken in 2002 to establish

autonomous divisions, independent of one another, has proved its worth. Entrepreneurial

freedom is something that can be delegated well, particularly in a family-run business. This

explains why such a strong tendency towards taking responsibility has developed in the divisions.

In accordance with the character of a family enterprise, the relationship between the executive

floor and management is marked by mutual respect and trust. Particular attention is paid to

developing human resources, especially to the grooming of trainee managers. When considering

the merits of potential acquisitions, Vorwerk pursues long-term objectives and is favourably

disposed towards corporate cultures different from its own. The company’s prime focus here is

not short-term success, but a long-term increase in the value of the company.

S T A T U S R E P O R T

9

The consolidated Vorwerk balance-sheet total rose in 2004 by 46 per cent to 1,755.6 million

euros, of which 39 per cent are accounted for by liquid assets. Despite the acquisition of Jafra

Cosmetics, the proportion of partners’ equity continues at a high level, at 39 per cent. Partners’

equity entirely covers the fixed assets as well as some 7 per cent of the current assets. Taking into

account provisions for pensions, Vorwerk has long-term capital totalling 800 million euros at its

disposal.

Vorwerk is proud of being a family company. The “family” is constituted not only by the

owners, but is also the focus of our entrepreneurial approach and dealings. The great majority of

our products and services are sold to families in the home. We go into people’s homes, which

gives us direct contact with them and the opportunity to learn about their needs and wishes as

well as their problems. Family closeness also applies to the internal structure of our direct-sales

companies. The teams in which our field staff work provide them with incentive and motivation

as well as the sense of security engendered by a family unit. Indeed, we encounter the “family”

and family values at all levels of the company.

That is why Vorwerk has also successfully continued its brand-image campaign with

television advertising in Germany (“I manage a very successful, small family business”) and, in

collaboration with the German family magazine and television guide Hörzu, organised a

competition to find the “Family Manager of the Year”. These activities add weight to the Vorwerk

core message: “Our best for your family.”

The decision was taken in 2004 to welcome a younger man, Markus von Blomberg,

as the third in the circle of Vorwerk managing partners as of January 2005. His appointment

represents the first step towards a generation change at the helm of the Vorwerk group.

The very good results of last year were sadly overshadowed by the tragic consequences

of the natural disaster which swept across Asia on 26 December. The flood wave set in motion

by the seaquake hit Banda Aceh in Sumatra, a sales area of our Lux Indonesia subsidiary, with

full force. All of our sales staff there were badly affected, some even lost their entire belongings.

Eight people, almost one in seven of our team in this area, did not survive the tsunami. Nearly

all members of the team lost members of their kin. The management and staff of Vorwerk reacted

to the disaster by providing the survivors with fast and unbureaucratic aid. Our thoughts go out

to those people. Happily, our teams in Phuket (Thailand) and other regions of Asia were spared

the direct effects of the tsunami.

The cat to the little mouse said ,“In a moment you’ll be dead !”

The mouse retor ted unabashed , “One more word and you’ll be scratched !”

S T A T U S R E P O R T

R i s k R e p o r t

Within the context both of its business segments – the main focus being on Direct Sales

– and its regions of diversified structure, the Vorwerk group is exposed to various types of risk.

Handling such business risks is a key aspect of entrepreneurial management at the Vorwerk

group. The principles of risk prevention are defined and adopted by the Executive Board of

Vorwerk & Co. KG. We have put efficient systems of planning, reporting and control into place

for the early identification, evaluation and proper management of existing business risks. The

Vorwerk group system of risk management takes the form of standard guidelines applied

throughout the group, a monthly reporting system and also the continuous review especially of

production processes with the aim of further optimising the existing risk structure.

As an international player, the Vorwerk group is exposed to changes in exchange rates

in the course of its business activities. In addition to a high level of self-financing, Vorwerk has,

for interest and currency reasons, in recent years secured refinancing through bank loans in

different currencies. In purchasing Jafra, the group for the first time took out an outside loan. This

outside funding exposes Vorwerk to the risk of changing interest and exchange rates.

We are exposed to other financial risks within the context of the portfolio management

of our investments on the international money and capital markets. The Finance Committee

regularly scrutinises the group’s net currency position and alters it where necessary within the

scope of our risk strategy. In isolated cases, Vorwerk uses derivative financial tools to limit

financial risk. Only negotiable instruments offering adequate market liquidity are implemented.

The use of derivative financial instruments is subject to internal Vorwerk guidelines and control

mechanisms.

Vorwerk is exposed to future development risks in that Direct Sales is dependent upon

statutory frameworks which are the object of political debate. At present, no risks exist that could

harm the long-term existence of the Vorwerk group. In recent years, the high proportion of

partners’ equity, the improvement in the group’s strategic positions and net operating result have

created a more comprehensive volume of risk cover.

T h a n k s a n d O u t l o o k

Vorwerk is where it is today thanks to the people who work for the company. Direct Sales

and Services rely particularly on having motivated and qualified people in their employ. The

success of Vorwerk would be inconceivable without the dedication of its staff and the endeavours

of its independent sales advisers. The Executive Board would like to express its gratitude to them

all for their dedicated efforts.

In the next few years, Vorwerk plans to continue pursuing its strategy of growth,

expanding its business activities to new countries and stepping up management development. In

addition to these goals, Vorwerk will be focusing its attention on integrating Jafra into the group

over the coming year. In all of its endeavours, Vorwerk will place the emphasis on its

characteristic role as a family enterprise.

Turnover according to business segment (incl. sales tax) in million 12001 2002 2003 2004

Direct Sales 948.0 965.0 1,025.3 1,316.5Division Kobold Systems incl. Fitted Kitchens 707.1 666.8 723.5 754.7Division Thermomix 195.6 196.6 212.1 252.6Division Feelina – 1.6 2.1 2.4Division Jafra Cosmetics * – – – 229.5Division Lux Asia Pacific** 45.3 100.0 87.6 77.3

HECTAS Facility Management 153.0 169.5 176.0 196.2Vorwerk Carpets 80.5 72.9 69.9 67.8ZEDA*** 14.1 11.2 7.5 0Others 22.5 12.4 8.6 14.0Group turnover 1,218.1 1,231.0 1,287.3 1,594.5akf group**** 303.0 338.5 348.2 480.0Total business volume 1,521.1 1,569.5 1,635.4 2,074.5

*pro rata as of June 2004 **Member of the Vorwerk group since mid-2001, included pro rata in 2001 ***Member of the Vorwerkgroup until 30. 9. 2003 ****akf group included in the consolidated financial statements in accordance with the equity method ofaccounting (in 2004 with a 15-month financial period)

1 1

D i r e c t S a l e s , V o r w e r k K o b o l d S y s t e m s

The domain of the Kobold Systems Division is direct sales of the Vorwerk household

cleaning system. Kobold Systems includes the Vorwerk Kobold upright vacuum cleaner, the

electric brush, the cleaning appliance for hard floors, the Pulilux, the Polsterboy upholstery brush

and the Frischer-Kit for the deep cleaning of carpets along with an array of other accessories.

Kobold Systems is suitable for allergy sufferers as well as being economical on energy thanks to

its multistep filter system and highly impermeable casing. The combination of components

ensures excellent cleaning results coupled with great durability. Vorwerk produces not only the

Kobold, but also a cylinder vacuum cleaner of similar quality, the Vorwerk Tiger, which is sold

in Germany and Austria. Sales of Kobold Systems are in the hands of sales advisers who, as their

main occupation, work as self-employment sales advisers visiting households on a door-to-door

basis or at the recommendation of other customers.

The Kobold Systems Division reported turnover

up by 4 per cent to 755 million euros in 2004, thus sustaining the previous year’s positive growth

trend. The number of sales advisers increased by an even more significant 5 per cent, under-

scoring the growth prospects of the Kobold Systems Division.

The country with the highest turnover for Kobold Systems – and also for the entire

Vorwerk direct-sales segment – was Italy, which showed growth of 8 per cent to 330 million euros.

Indeed, 2004 was the first year in which Italy sold more than one million appliance units. Vorwerk

Folletto is the undisputed market leader in Italy, commanding a 20-per-cent share in the vacuum-

cleaner market, a position it owes to the increased productivity of its sales advisers and also a

boosting of staff numbers. Year after year, the company’s special brand of customer proximity,

based on an extensive sales structure and tight service network, pays off in Italy.

Kobold Systems also generated significant growth in Germany both in the number of sales

advisers employed and of appliances sold. However, turnover increased there by a less marked

1 per cent to 315 million euros as a result of a change in the product mix. The changes in sales

and group structures implemented over the past three years with a view to creating an

organisation in closer touch with its customers and sales staff proved successful and in turn led

to a rise in the number of sales advisers. The Tiger vacuum cleaner, which is sold only in

Germany and Austria, provided the sales team with extra motivation and customers with added

incentive to buy.

S T A T U S R E P O R T K O B O L D S Y S T E M S

1 2

Dr Schreiber is fond of showing off to foreign business associates the chunk of paving stonehe hurled at a police water canon back in 1968 that could easily have incurred notinconsiderable damaged. “And I still stand by my decision.”

Business has also developed favourably in China, where turnover rose by 5 per cent to

16 million euros, which is equivalent in local currency to an increase of 14 per cent. The Vorwerk

Kobold with its German guarantee of quality has an attractive image with the rising middle class

in China’s conurbations and is ideally suited to the typical flats in new buildings which, though

small, are modern and well equipped.

Growth was sustained in Austria, too. Our company there generated turnover of 24 million

euros (4 per cent more than the previous year). Focused trainee development and an increase in

the number of sales advisers were the basis for the company’s excellent result.

Turnover was up by 5 per cent in Spain, where specific measures, in particular human

resources development, are set to make even greater growth possible in the future. In the Czech

Republic, radical measures involving a price adjustment coupled with a change in the sales system

proved successful in bringing about a reversal in the negative trend and resulted in growth of

17 per cent. There was also gratifying growth in the export business done with distributors

operating in countries where Vorwerk has no sales companies of its own. Now that the relatively

small sales operation in Portugal has been placed in the hands of a distributor, France is the only

country showing unsatisfactory business development. Investigations are currently under way in

an attempt to identify how to make a success of direct sales of the Kobold there, too.

In 2004, initial market analyses were conducted with

a view to expanding our business activities to Russia. Vorwerk sees in Russia an interesting market

for the entire group. The step into Russia would form part of the Vorwerk strategy of establishing

direct-sales companies in large countries where the high potential for growth and large number

of recruitable sales advisers would give a general boost to the Vorwerk group’s course of growth.

The Vorwerk Fitted Kitchens direct-sales unit, which exists only in Germany and is

attached to the German direct-sales unit of Kobold Systems Division also looks back on a

gratifying year. Despite the negative market trend, Fitted Kitchens succeeded in raising turnover

to 35 million euros and improving its operating result.

S T A T U S R E P O R T K O B O L D S Y S T E M S

1 4

1 6

S T A T U S R E P O R T T H E R M O M I X

D i r e c t S a l e s , V o r w e r k T h e r m o m i x

The direct-sales unit of the Thermomix Division sells the multifunctional kitchen

appliance Vorwerk Thermomix, which trades under the name of Vorwerk Bimby in Italy. As a

combination of conventional kitchen appliance and cooking device, the Thermomix is second

to none in the home-cooking of quick and healthy meals. The complexity of the Thermomix calls

for full and clear explanation, which is why it is a typical direct-sales product, ie one that comes

into its own at demonstrations, where customers get to see the appliance in action and quickly

recognise the unique possibilities they would overlook if buying from a shop or by mail order.

In certain countries, Italy and Spain, for example, the Thermomix has become an absolute must

in the kitchen and cooking with the Thermomix enjoys cult status. All the greater, therefore, was

the challenge of launching the new Thermomix 31 so that it would be recognised not only as the

successor to but also as superior even to the previous best-selling model. The TM 31 with its new

motor, optimised cutting technology, innovative heating system, precise electronic controls and

attractive design more than fitted the bill. The Thermomix, or Bimby, is sold at parties or on

customer recommendation, mainly by female self-employed representatives pursuing this as a

side income opportunity.

The Thermomix Division achieved a record in 2004 with

turnover up 19 per cent to 253 million euros. For the first time ever, more than 300,000 units

were sold and all expectations surpassed. The new Thermomix was universally received with

overwhelming enthusiasm by customers and representatives alike and this led to an unavoidable

delivery bottleneck towards the end of the year even though the production plant in Cloyes, France,

was running to full capacity. The number of representatives working for the division rose by some

8 per cent to 15,000 in 2004.

Italy and Spain were once again the division’s engines of growth. Our Italian sales

company, Contempora, generated 23 per cent more turnover with the Bimby than in the previous

year, its sales totalling 102 million euros. A highly motivated sales team made the most of the

new appliance’s positive impetus and organised an exemplary launch for the TM 31 that went

without a hitch. They also set themselves the ambitious goal of breaking their long unbroken sales

record – and succeeded, clocking up an impressive total of 119,000 appliances sold.

As in the previous year, Thermomix Spain contributed the best single result of any

country to the group operating result with clear growth of 16 per cent to 87 million euros. Here,

too, the threshold of 100,000 appliances sold was crossed. Lean structures and high staff and

representative motivation once again made an excellent result possible.

In both of these southern European countries, Thermomix (or Bimby) owners generally

make daily use of the appliance because with it they can have simple, tasty, everyday meals

prepared in next to no time. Frequent use makes the appliance an indispensable, tried and trusted

household help. Once accustomed to the Thermomix, people no longer want to do without it

and happily spread the word.

The success of a well-considered restructuring of the sales organisation combined with a

high-quality product was particularly evident in France. Over many years, the resounding sales

success of former years failed to materialise. Now, for the first time in quite a while, growth soared

by 28 per cent and this positive trend shows every sign of continuing.

Similar progress was made in other smaller and medium-sized Thermo-

mix sales organisations. Turnover rose by 10 per cent to 27 million euros in Germany. The

restructuring of sales regions is advancing well. Growth figures are also showing an upward trend

in Portugal and Poland.

The Thermomix Division ventured a new beginning in Austria, where the previous sales

structure had proved incapable of growth. Vorwerk now sees its chances of success in Austria as

greatly improved. The initial test for the suitability of the Thermomix for the Asian market began

with the establishment of a sales operation in Taiwan. The beginnings have been promising. The

appliance appears to be passing the test for Taiwan – possibly even for the People’s Republic of

China. Food and the preparation of food are a top priority everywhere in Asia, which means that

the essential prerequisites for the success of the Thermomix in Asia already exist.

The Thermomix is an ideal candidate for direct sales and suits the needs of our customers

worldwide. The party system presents excellent career opportunities for women. New markets

are being approached and here, too, the vast Eastern European market is particularly interesting.

These are the best prerequisites for continued growth.

1 7

D i r e c t S a l e s , V o r w e r k F e e l i n a

The Vorwerk Feelina ironing system is currently sold exclusively in Germany. The

Feelina, an integrated unit designed to deal with what is often felt to be the most tiresome of

household chores, makes ironing possible in half the time. It boasts a number of unique features,

including an iron with an antiscale system. The product is in great demand and receives top marks

from buyers. Although there were sufficient sales advisers, so-called “Feelina Fairies”, during the

launch phase, the new sales system that was initially piloted proved unsuitable for providing

adequate support and achieving the desired results. It was therefore necessary to restructure the

sales system and this was done with great success in 2004.

The Feelina party system was readjusted for Germany. During the course of the reporting

year, an increase in the number of Feelina Fairies and new turnover growth became evident.

Initial studio and sales tests have been conducted with a view to establishing a sales organisation

in Spain. The operation will start up in 2005. Production of the Vorwerk Feelina was moved to

the Vorwerk plant in Arcore, Italy.

With its modified sales system, the Feelina Division is now planning to establish the best

possible and most desirable sales structure for a young direct-sales organisation and to achieve

significant growth rates.

D i r e c t S a l e s , J a f r a C o s m e t i c s

While other forms of distribution are battling against falling turnover, direct sales is

steadily going from strength to strength all over the world. This is especially true of the facial and

body-care cosmetics segment. Jafra Cosmetics is among the most successful companies in its field

focusing on the Mexican and US markets. Vorwerk’s acquisition of Jafra Cosmetics is therefore

also a geographical extension of the Vorwerk group.

Jafra’s very different style of corporate culture poses an exciting challenge to a classic,

direct-sales company of European character specialising in high-quality household appliances,

such as Vorwerk. The Jafra product line spans the full range from colour cosmetics to fragrances

and facial and body care. The product range is entirely developed, produced and updated

regularly and often by Jafra. Since Jafra specialises in consumables, sustaining long-term

customer relationships is especially important. The number of cosmetics consultants is high,

S T A T U S R E P O R T F E E L I N A / J A F R A C O S M E T I C S

1 8

By the torero’s courage, there’s something amiss here! Six mistakes in the secondpicture rob the scene of all its splendour. Find out where disgrace lies in the arena!

many of them basically forming buying communities with relations and friends. All, however,

have the opportunity to turn selling cosmetics with Jafra into a source of personal income and to

develop their own business. In patriarchal societies, such as that of Mexico and other threshold

and developing countries, working as a Jafra consultant offers women an opportunity for self-

fulfilment. Hence the company motto: Jafra – The Best Company for Women.

Jafra Cosmetics generated turnover in 2004 of 390 million euros,

229 million euros of which, for the months of June to December, is included in the consolidated

financial statements of the Vorwerk group. Compared with the previous year, Jafra boosted

turnover – calculated in the various national currencies – by 12 per cent, exceeding its own ex-

pectations. The driving force behind this positive development was Mexico, Jafra’s largest market

by far, where turnover totalled the equivalent of 268 million euros for the entire year of 2004 (a

year-on-year increase of 21 per cent in local currency). The number of cosmetics consultants also

rose in Mexico by 21 per cent.

There is still room for business to improve in the USA (85 million euros turnover) and in

Europe (33 million euros turnover in Germany, Austria, Italy, Switzerland and the Netherlands).

Thanks to internal management changes, the foundations have now been laid for further growth

although this did not materialise as anticipated in 2004. The full relocation of production from

the USA to Mexico was successfully completed.

To Vorwerk, the strategic investment in Jafra’s so-called “small ticket” sales operation

represents a further opportunity to open up new, emerging markets in Asia, South America and

Eastern Europe. This business model, which offers women an opportunity for personal develop-

ment and income by engaging in a sideline occupation as a self-employed consultant in the direct

sales of high-quality products, is reproducible anywhere. This is the direction in which Jafra

Cosmetics plans to proceed.

S T A T U S R E P O R T J A F R A C O S M E T I C S

2 0

„Der Apfel ist gefallen.” „Der Knabe lebt.”

Tells Meisterschuss weckt bis heute den Stolz der Schweizer. Kaum einer denkt dabei aber an Walter, seinen Sohn. Der hat den Apfel auf dem Kopf und ruft:

„Vater, schieß zu, ich fürcht' mich nicht.”

D i r e c t S a l e s , L u x A s i a P a c i f i c

Lux Asia Pacific has its headquarters in Singapore and operates in various Asian

countries, where it sells its own household appliances as well as those of outside manufacturers.

Turnover in euros fell by 11 million euros to 77 million euros compared with the previous year,

the stronger euro against the US dollar and local currencies playing a significant role in this.

Indonesia and Japan remained the countries generating the highest turnover. The launch of

operations in Vietnam got off to a good start.

Growth rates in the existing sales systems of Lux Asia Pacific are nonetheless

disappointing. We are currently investigating whether elements which have proved valuable to

the Vorwerk sales organisations could also be usefully adopted by Lux Asia Pacific. One step

towards improving market penetration could be to focus sales activities on a small number of

products. The water filter produced by Lux Asia Pacific, for example, is one device that is set to

meet with growing worldwide demand in the future.

V o r w e r k E n g i n e e r i n g

The Vorwerk group develops and produces the Vorwerk products itself. Wuppertal,

Germany, is the centre of development and main focus of production for the Vorwerk household

appliances. Vorwerk electrical appliances are also produced in Cloyes, France, in Arcore, Italy

and in Shanghai, the People’s Republic of China, while Vorwerk fitted kitchens are made in

Velbert, Germany. As in the previous year, Vorwerk Engineering succeeded in raising the bar to

a record level of quality. This was achieved alongside the launch of three new products: the

Vorwerk Tiger cylinder vacuum cleaner, the new Polsterboy and the new Thermomix. The

market success of the Thermomix 31 by far exceeded our already optimistic expectations and

led to the full capacity utilisation of the production plants in Germany and France as well as to

temporary delivery bottlenecks which were overcome with the aid of additional investments.

The new Thermomix is a shining example of the technological advances of products

carrying the Vorwerk brand name. For the first time, an electronically regulated motor has been

integrated into a household appliance – a development which is likely to have a signalling effect

on the industry. It is a Vorwerk-manufactured product. Altogether, 22 patents have been

registered for the Thermomix.

S T A T U S R E P O R T L U X A S I A P A C I F I C / E N G I N E E R I N G

2 2

“He who ventures not into danger, will surely perish in it.” Herbert Achternbusch

“If evil has audacity, then good must have courage.” (from France)

“I’d like to have wanted, but I didn’t dare to be allowed.” Karl Valentin

“I know no fear, unless, of course, I get scared.” Karl Valentin

Courage is founded on the will to have it.” Ellen Key

“The moment you start thinking about all the things that could happen, your finger strays to the brake.” Erik Zabel

Boldness has genius, magic and power in it.” Johann Wolfgang von Goethe

“It is not because things are difficult that we do not dare; it is because we do not dare that they are difficult.”Seneca

AMANAPLANACANALPANAMA

A sentence that can be read backwards and forwards and still makes sense even if you’re not a “Mirror” reader is what philologists call a palindrome.

A man, a plan, a canal – Panama!

The other direct-sales companies of the Vorwerk group also manufacture their own

products. The water filters destined for direct sales by Lux Asia Pacific are produced at the

company’s own factory in the Philippines and Jafra’s cosmetics, facial and body-care products

are made in Mexico.

V o r w e r k C a r p e t s

The Vorwerk Carpets Division, which has both its production facilities and sales unit in

Hamelin, Germany, was again faced with a difficult market environment in 2004, yet successfully

held its own. Although turnover was down by some 3 per cent to 68 million euros, the volume

of sales still equalled that of the previous year. The market declined much more significantly,

resulting in an increase in the market share falling to Vorwerk Carpets. The prime focus of the

division’s business policy was the implementation of a programme for the restructuring of the

entire company aimed at successfully maintaining its position in a tough market environment.

This process of change, which affects all areas of Carpets, got off to an encouraging start. Thanks

to these measures, which also included minimal staff cutbacks, Vorwerk Carpets is now back in

the profit zone.

On the product side too, 2004 was marked by the introduction of new develop-

ments that opened up fresh market opportunities for the future. In collaboration with Infineon,

Vorwerk Carpets introduced the prototype of an “intelligent” carpeting product. Microchips

integrated into the carpet react to changes such as pressure and temperature. They are inter-

connected and configured to perform tasks relevant to safety and comfort, such as raising the

alarm in the event of burglary or fire, monitoring patients and controlling light, temperature and

ventilation. This development has aroused great interest among the trade public and is being

seriously pursued. Vorwerk also leads the field once again in the design and development of new

collections. Market surveys attest Vorwerk Carpets’ market leadership in terms of recognition,

innovation and brand strength as well as giving excellent marks for speed of delivery and service.

Vorwerk Carpets plans to further expand its market standing and boost profits with new

products, excellent service and lean cost structures.

S T A T U S R E P O R T C A R P E T S

2 5

V o r w e r k B r a n d I m a g e C a m p a i g n

With a view to enhancing awareness and empathy for the brand, Vorwerk also continued

the television campaign “I manage a very successful, small family business” in Germany in 2004.

The commercial, which won the golden “Effie” award in New York, has attracted great attention

and sets itself apart from other adverts. Independent studies pinpoint the reason for this as being

the authentic presentation of the world in which women live, where the emphasis is placed not

on the “super woman”, but on the modern housewife and mother.

In 2004, we decided to show the advert on Italian television as of 2005.

In a joint effort with the family magazine and television guide Hörzu, Vorwerk launched

the Family Manager of the Year competition in Germany. The aim was to gain greater recognition

for the jobs of bringing up children and taking care of housework and to achieve greater public

respect for these tasks. From one hundred detailed nominations, five women were picked out as the

winners for their outstanding achievements in their efforts for their family – some with, some

without a paid job as well. In the presence of the German Federal Minister for Family Affairs and

many public figures in Germany, the Family Managers received their awards at a gala in Berlin.

Both activities underscore Vorwerk’s identification with the concept of family.

H E C T A S F a c i l i t y M a n a g e m e n t

HECTAS provides facility-management services in Germany, the Netherlands, Austria,

Belgium, Poland, the Czech Republic and Hungary. The company was able to raise its turnover

by 11 per cent to 196 million euros by means of internal growth, especially in its international

companies, as well as an acquisition in Germany. However the operating result remained

approximately equal to that of the previous year due to tough competition.

The market for facility-management services is still strained as a result of the gloomy

economic climate prevailing in Europe. In Germany, HECTAS’ major market, volumes were

slightly down. This makes it all the more difficult to charge customers acceptable prices without

being drawn into a ruinous price war. HECTAS held its own well in view of the market situation.

The strategic approach of offering big customers comprehensive, individual and

nationwide facility-management services has proved to be the right one. Once confidence has

been gained in performance worth its price, HECTAS will be able to build on its reputation

internationally.

S T A T U S R E P O R T B R A N D I M A G E / H E C T A S

2 6

For the future, HECTAS plans to pursue its policy of growth on existing markets and also

to gain a firmer foothold within the European Union. At the same time, HECTAS is positioning

itself as a “European services brand” and will also, to a greater extent, be providing various

services as packages or in co-operation with partners. Co-operative agreements have already been

entered into with companies in France and Great Britain.

Reference to HECTAS’ being a member of the Vorwerk group is of benefit in the

company’s dealings with customers and partners.

2 7

F i n a n c e s a n d F i n a n c i a l A s s e t s

While a positive basic trend was still in evidence on the securities markets in spring 2004

– sparked by rising corporate profits and favourable economic prospects – the terrorist attacks

in Madrid and continuing geopolitical unsettlement caused a severe downturn. Optimistic tones

began to take the upper hand towards the end of the year.

The interest markets were marked by the interest turnabout of the American Federal

Reserve. The Federal Reserve Board raised the prime rate, but the European Central Bank did

not go along with the Americans’ interest turnabout so that interest on long-term investments in

Europe came down.

This movement was helped along by the rapid development of the euro. The European

single currency went from strength to strength despite ever-weakening economic data and the

growing deficit problems of some euro states to reach a new all-time high by the end of the year.

Once again, the Vorwerk investment philosophy with its long-term orientation and focus on the

group’s liquidity requirements proved invaluable in this environment.

Not only the market movements outlined above but also the acquisition of Jafra

Cosmetics placed great demands on the Vorwerk group’s legal, tax and treasury team. In order

to finance the acquisition, short-term foreign-currency loans were used alongside the company’s

own funds. Longer-term liabilities are up slightly at 321 million euros, thus influencing the

proportion of partner’s equity, which has now decreased to 39 per cent. As in previous years,

currency risks have been greatly minimised by a higher proportion of foreign-currency loans.

The reported liquid funds of the Vorwerk group rose to 688 million euros by the end of the

year, whereas the contribution made by our financial assets to the net result was slightly below that

of the previous year – chiefly due to lower interest levels. We were once again able to increase the

reserves arising from favourable differences between book and market value significantly in 2004.

The Vorwerk share in the American Tupperware Corporation was 10.8 per cent in the

reporting year.

S T A T U S R E P O R T F I N A N C E S

2 8

Those of bittersweet disposition will love it with a glass of port.

Who will venture a taste?

H u m a n R e s o u r c e s

The member companies of the Vorwerk group offer employees and self-employed staff

a number of different career opportunities and types of job. Customer proximity, the binding

element in all areas of the group, makes it possible to preserve and create jobs as well as to

reinforce training efforts even in economically difficult times. At Vorwerk, too, however, it has

been observed that, despite rising sales, growth in employment can be achieved not in production

but in the service and consulting jobs involving direct customer contact, especially in the direct-

sales segment.

In 2004, the number of people working for Vorwerk rose by 9 per cent to 51,640, of whom

23,201 are employees and 28,439 independent sales advisers and representatives. Sixty per cent

of them work outside Germany. In addition to these, there are the 434,697 cosmetic consultants

working for Jafra Cosmetics, our newly acquired company.

A central focus of the Vorwerk human resources

policy in 2004 was the grooming of suitable management trainees in all segments. Direct sales

in particular calls for specific leadership qualities which are hard to find in other industries. In

order that sufficient new managers are trained to ensure full implementation of the group’s growth

strategy, special activities are run both at group level and also within the divisions with a view to

identifying and developing management potential.

The Thermomix Division and Lux Asia Pacific place particular emphasis on preparing

university and college graduates for the specific needs of direct sales. The other direct-sales

divisions tend to favour the course of training managers from within their own organisation.

These endeavours are supported by interdivisional management programmes.

S T A T U S R E P O R T H U M A N R E S O U R C E S

3 0

Brilliant prospects notwithstanding, lack ofentrepreneurial courage has up to now preventedthe realisation of the product ideas pictured here.

World First: Hopsi – the cordless skipping rope!No tangling, no tripping.Hopsi is also obtainablewithout handles!

Staff (annual average) 2001 2002 2003 2004Direct Sales

Division Kobold Systems 3,725 3,927 3,909 3,990Division Thermomix 1,182 835 887 901Division Ironing System 5 11 17 22Division Lux Asia Pacific** 3,734 3,639 4,105 4,156Division Jafra Cosmetics*** – – – 1,376

HECTAS Facilty Management 9,943 10,278 10,395 12,054Vorwerk Carpets 546 497 461 395ZEDA**** 214 214 153 0Others 109 115 112 117Total* 19,458 19,516 20,039 23,011Self-employed Sales Advisers (annual average)

Division Kobold Systems 10,243 9,484 9,873 10,369Division Thermomix 12,694 13,981 13,941 15,004Division Ironing System – 158 276 318Division Lux Asia Pacific** 2,927 3,072 2,896 2,748

Self-employed sales advisers ”household appliances“ 25,864 26,695 26,986 28,439Self-employed sales advisers Jafra Cosmetics – – – 434,697akf group***** 159 185 193 190Total Vorwerk workforce 45,481 46,396 47,218 486,337of which sales advisers 28,409 29,609 30,137 466,443

* Including employed sales advisers ** Member of the Vorwerk group since mid-2001 *** Member of the Vorwerk group since June 2004**** Member of the Vorwerk group until 30.9.2003 ***** akf group included in the consolidated financial statements in accordance withthe equity method of accounting (in 2004, with a 15-month financial period)

In 2004, efforts were directed at taking the already well-developed management culture

at Vorwerk a step further and establishing a uniform understanding of management. Broad

discussion on the subject culminated in management guidelines which are to be communicated

and realised in the coming weeks and months. The management guidelines are based on the

Vorwerk Principles and on the corporate culture of the Vorwerk family enterprise as it is

experienced on a day-to-day basis by the people who work there.

S T A T U S R E P O R T H U M A N R E S O U R C E S

3 2

V o r w e r k F a m i l y F u n d

Under the name of “Family Fund”, Vorwerk set up a relief fund that is fed by donations

from staff, customers and the Executive Board. Vorwerk works hand in hand with SOS Children’s

Villages to put the money collected straight into projects – without any detours. The first activity

supported by the Vorwerk Family Fund was the building of three family houses at the SOS

Children’s Village in Hyderabad, India, which were inaugurated in January 2004. During the

course of the year, the Vorwerk Family Fund also provided for the families living in these houses.

There are plans for an SOS Children’s Village to be built in the near future in the part of

Indonesia badly affected by the tsunami. Vorwerk has pledged to help fund it. Vorwerkers all over

the world along with the Executive Board are also providing aid for Lux Asia Pacific colleagues

who are victims of the flood wave.

a k f g r o u p

The akf group, which is included in the consolidated financial statements under the equity

method of accounting, covers leasing and credit transactions with motor vehicles, production

machinery, medical and laboratory technology, office machines and other equipment as well as

leasing and service packages chiefly of vehicles for executives. In order to adjust akf accounting

to the Vorwerk financial year, the period from October to December 2004 was inserted as a short

financial year. Both this short financial year and the financial year from 1 October 2003 to 30

September 2004 are included in the consolidated financial statements. During this period, the

akf group generated new business amounting to 480 million euros, representing an increase of

12 per cent compared with the previous 12 months. There was also a rise in the net operating

result. Unlike its competitors, the akf group benefited from strong business links with industry

and thus expanded its market share.

The reason for this positive development in the face of an ailing economy with attendant

cautious demand was flourishing business with the leasing of plant and machinery. Business with

car dealers recovered appreciably as the year drew to a close. The net operating result also

profited from good returns on the sale of used vehicles.

The akf group continues to pursue a strategy of expansion and will benefit from the slight

recovery in demand for automobiles.

A new partner was found in Bankhaus Lampe, which has taken over the shares totalling

9.9 per cent previously held by Bankhaus Delbrück.

3 3

Courage

ALL my weary days I pass’dSick at heart and poor in purse.Poverty’s the greatest curse,Riches are the highest good!And to end my woes at last,Treasure-seeking forth I sped.„Thou shalt have my soul instead!“Thus I wrote, and with my blood.

Ring round ring I forthwith drew,Wondrous flames collected there,Herbs and bones in order fair,Till the charm had work’d aright.Then, to learned precepts true,Dug to find some treasure old,In the place my art foretoldBlack and stormy was the night.

Coming o’er the distant plain,With the glimmer of a star,Soon I saw a light afar,As the hour of midnight knell’d.Preparation was in vain.Sudden all was lighted upWith the lustre of a cupThat a beauteous boy upheld.

„Pure life’s courage drink!“ cried he:„This advice to prize then learn,-Never to this place returnTrusting in thy spells absurd;Dig no longer fruitlessly.Guests by night, and toil by day!Weeks laborious, feast-days gay!Be thy future magic-word.

The Treasure-Diggers Johann Wolfgang von Goethe

Sweetly seem’d his eyes to laughNeath his flow’ry chaplet’s load;With the drink that brightly glow’d,He the circle enter’d in.And he kindly bade me quaff,Then methought. „This child can ne’er,With his gift so bright and fair,To the arch-fiend be akin.“

C O N S O L I D A T E D A C C O U N T S 2 0 0 4

Consolidated Balance Sheet 36

Consolidated Profit and Loss Account 38

Movements in Fixed Assets 40

Explanatory Notes 42

Auditors’ Report 45

3 5

C O N S O L I D A T E D B A L A N C E S H E E T

As at 31 December 2004 with Jafra without JafraAssets 2004 2004 2003

3000 3000 3000A. Fixed Assets

I. Intangible Assets

1. Concessions, patents, trademarks and similar rightsas well as licences thereto 30,131 1,919 922

2. Goodwill 328,524 0 03. Payments on account 301 301 245

358,956 2,220 1,167

II. Tangible Assets

1. Land, land rights and buildings, including buildings on third-party land 48,163 22,375 20,904

2. Technical plant and machinery 30,472 22,035 24,8183. Other fixtures, fittings and office equipment 24,283 18,853 17,7324. Payments on account and assets under construction 2,919 1,864 4,204

105,837 65,127 67,658

III. Financial Assets

1. Participations in associated companies 36,247 36,247 35,3762. Long-term investments 106,517 106,503 106,3933. Other loans 1,606 1,606 2,182

144,370 144,356 143,951

Fixed Assets 609,163 211,703 212,776

B. Current Assets

I. Inventories

1. Raw materials and consumables 22,431 14,217 12,3682. Work in progress, services in progress 5,056 5,007 4,7123. Finished products and merchandise 63,327 41,146 40,6124. Payments on account 13 13 10

90,827 60,383 57,702

II. Receivables and other Assets

1. Trade accounts receivable; 283,475 252,627 224,041of which with a remaining term of more than 1 year: (170) (61) (8,832)

2. Accounts receivable from associated companies 1,085 1,085 1,3163. Other assets; 79,538 67,750 42,347

of which with a remaining term of more than 1 year: (4,028) (2,992) (4,634)364,098 321,462 267,704

III. Marketable Securities 466,270 466,270 461,934

IV. Cheques, Cash in Hand, Federal Bank Balances

and Balances with other Banks 215,184 255,145 197,847

Current Assets 1,136,379 1,103,260 985,187

C. Prepaid Expenses and Deferred Charges 10,088 8,575 5,684

1,755,630 1,323,538 1,203,647

3 6

with Jafra without Jafra

Equity and Liabilities 2004 2004 2003

3000 3000 3000A. Partners’ Equity

1. Capital shares, reserves, consolidated profits 683,851 660,898 605,1232. Minority interests

in capital and reserves 885 885 1,496in profits 1,527 1,527 446

2,412 2,412 1,942

686,263 663,310 607,065

B. Provisions and Accruals

1. Provisions for pensions and similar obligations 114,084 113,179 113,0832. Provisions for taxes 28,075 22,455 22,7183. Other provisions and accruals 150,435 122,651 113,843

292,594 258,285 249,644

C. Liabilities

1. Amounts arising from loans; 149,082 – –of which due within 1 year: (0) – –of which due after more than 5 years: (149,082) – –

2. Amounts payable to banks; 344,086 161,188 138,461of which due within 1 year: (182,307) (14,664) (24,863)of which due after more than 5 years: (20,000) (20,000) (0)

3. Advance payments received; 7,571 7,571 3,341of which due within 1 year: (1,409) (1,409) (1,534)of which due after more than 5 years: (0) (0) (0)

4. Trade accounts payable; 51,813 39,046 33,470of which due within 1 year: (50,963) (38,192) (33,470)of which due after more than 5 years: (0) (0) (0)

5. Notes payable; 92 92 172of which due within 1 year: (92) (92) (172)

6. Amounts payable to associated companies; 674 674 954of which due within 1 year: (2) (2) (282)of which due after more than 5 years: (0) (0) (0)

7. Other liabilities; 203,695 173,691 155,525of which due within 1 year: (200,945) (172,086) (154,691)of which due after more than 5 years: (2,196) (1,009) (0)of which taxes: (35,481) (17,176) (15,789)of which within the scope of social security: (13,458) (13,199) (12,934)

757,013 382,262 331,923

D. Deferred Income 19,760 19,681 15,015

E. Contingent Liabilities arising from:

1. Bills of exchange 221 17 392. Secondary liability for pension obligations

transferred to the relief fund 2,413 2,413 2,7713. Liability for sureties 696 696 416

1,755,630 1,323,538 1,203,647

3 7

C O N S O L I D A T E D P R O F I T A N D L O S S A C C O U N T

For the Period 1 January to 31 December 2004 with Jafra without Jafra2004 2004 20033000 3000 3000

1. Gross sales 1,594,472 1,364,124 1,287,328less sales tax 226,655 192,925 181,103

1,367,817 1,171,199 1,106,2252. Change in finished goods and work in progress 16,870 -2,441 -4,9773. Own work capitalised 713 713 766

1,385,400 1,169,471 1,102,014

4. Other operating income; 69,487 55,892 72,0445. Raw materials and consumables:

a) Expenditure on materials and purchased merchandise 201,407 143,280 165,353

b) Expenditure on purchased services 45,735 44,756 18,603247,142 188,036 183,956

1,207,745 1,037,327 990,102

6. Personnel costs:a) Wages and salaries 349,168 321,272 320,478b) Social security contributions

and pensions; 84,917 82,146 80,040of which for retirement pensions: (19,626) (19,557) (17,574)

434,085 403,418 400,5187. Depreciation on tangible and

intangible assets 35,009 23,741 24,9778. Income from participations in associated companies 18,904 18,904 10,2949. Income from other securities and

long-term loans 4,627 4,627 4,98710. Interest and similar income 53,627 53,299 46,14711. Write-down of financial assets and

marketable securities 296 248 5,89412. Interest and similar charges 22,744 8,466 8,53713. Collective heading: 792,769 678,284 611,604

Other items not shown separately(taxes and net profit for the year, other operating costs);

3 8

Professor Dr. Marcel Fodor

David’s formula ...

M O V E M E N T S I N F I X E D A S S E T S

From 1 January to 31 December 2004

Gross values

As at As at1.1.2004 Additions*) Additions Disposals Book transfers 31.12.2004

3000 3000 3000 3000 3000 3000I. Intangible Assets

1. Concessions, patents,trademarks and similar rightsas well aslicenses thereto 14,359 42,047 2,809 5,958 — 53,257

2. Goodwill — 335,039 — — — 335,0393. Payments on accounts 282 — 71 16 — 337

14,641 377,086 2,880 5,974 — 388,633

II. Tangible Assets

1. Land, land rights andbuildings, includingbuildings onthird-party land 73,246 28,166 3,301 126 192 104,779

2. Technical plant and machinery 148,771 11,045 11,553 5,636 1,695 167,428

3. Other fixtures, fittingsand office equipment 103,782 16,668 13,654 27,133 2,267 109,238

4. Payments on account andassets under construction 4,204 935 2,086 152 -4,154 2,919

330,003 56,814 30,594 33,047 0 384,364

III. Financial Assets

1. Participations inassociated companies 35,594 — 871 — — 36,465

2. Long-terminvestments 116,441 16 199 86 — 116,570

3. Other loans 4,008 — 5 1,413 — 2,600156,043 16 1,075 1,499 — 155,635

500,687 433,916 34,549 40,520 0 928,632

*) Additions due to change in the consolidated group **)Depreciation figures for the financial year do not correspond to the figures

The phantom of fear will do exactly as you please

just gather all 4 0

Accumulated depreciation/Write-offs Net values

As at As at As at As at1.1.2004 Additions*) Additions**) Disposals 31.12.2004 31.12.2004 31.12.2003

3000 3000 3000 3000 3000 3000 3000

13,437 11,890 3,239 5,440 23,126 30,131 922— — 6,515 — 6,515 328,524 —37 — 12 13 36 301 245

13,474 11,890 9,766 5,453 29,677 358,956 1,167

52,342 1,999 2,341 66 56,616 48,163 20,904

123,953 5,246 12,200 4,443 136,956 30,472 24,818

86,050 11,829 10,573 23,497 84,955 24,283 17,732

— — — — — 2,919 4,204262,345 19,074 25,114 28,006 278,527 105,837 67,658

218 — — — 218 36,247 35,376

10,048 3 2 — 10,053 106,517 106,3931,826 — 262 1,094 994 1,606 2,182

12,092 3 264 1,094 11,265 144,370 143,951

287,911 30,967 35,144 34,553 319,469 609,163 212,776

carried in the profit and loss account due to differences in the exchange rate for foreign currencies.

your courage and bring him to his knees.

E X P L A N AT O R Y N O T E S

4 2

I. Introductory RemarksFor the financial year 2004, as in thepreceding years, Vorwerk & Co. KG ispublicly disclosing its worldwide con-solidated financial statements, takinginto account the rules and regulationscontained in the German Publicity andDisclosure Law and the German Com-mercial Code governing consolidatedfinancial statements and group annualreports.A list of all holdings in affiliated andassociated companies giving the director indirect holding quotas (§ 313 Par 2No. 1 and 2 of the German Handelsge-setzbuch)(HGB=German CommercialCode) has been lodged in the commer-cial register (Handelsregister) in Wup-pertal, Germany (§ 313 Par 4 HGB).

II. Consolidated GroupThe parent company is Vorwerk & Co.KG. The companies under its controlare active in the following business seg-ments: production and direct sales ofhigh-quality household appliances andcosmetic, facial and body-care products,facility-management services and carpets.The principal companies in Germanyand abroad included in the consolidatedfinancial statements are listed on pages46 and 47. In the reporting year, 31 af-filiated companies of the Jafra group,which was wholly acquired in 2004 andoperates in North and Central Americaas well as Europe, were for the first timeincluded in the consolidated financialstatements. An additional column wasinserted into the balance sheet and prof-it and loss account in order to ensurecomparability with the consolidated financial statements of the previousyear pursuant to § 294 Par 2 HGB. The akf companies and the proLog

companies in Germany have been in-cluded as associated companies in ac-cordance with the equity method of ac-counting as stipulated in §§ 311 and 312HGB. Three additional associatedcompanies of inferior significance havenot been recorded by this method pur-suant to § 311 Par 2 HGB.

III. Accounting and Valuation MethodsThe Balance Sheet and the Profit andLoss Account are laid out in accordancewith the format stipulated in §§ 290 ff,266 and 275 HGB for corporate entities.For disclosure purposes, recourse wasmade to the facilities provided for un-der the German Publicity and Disclo-sure Law (capital, reserves and profitshown as partners’ equity). In view ofthe fact that the contributions of thepartners which have subordinate rank-ing are equivalent to partners’ equity,these have also been included underthis heading. In addition, with respectto § 13, Par 3, Clause 2 of the Publicityand Disclosure Law, information as per§ 5, Par 5 of the same Publicity and Disclosure Law is also given in the explanatory notes to the consolidatedfinancial statements.Vorwerk has chosen to go further thanthe statutory minimum requirementsand to disclose the consolidated profitand loss account as a constituent part ofthese explanatory notes laid out in theform stipulated in § 275, Par 2 HGB (asshown on page 38). In so doing, taxesand profit for the year have been includ-ed with other operating costs under thecollective heading “Other items notshown separately”.Vorwerk & Co. KG’s accounting andvaluation principles also pertain to

the consolidated financial statements.The financial statements of non-Germansubsidiaries drawn up in accordancewith national rules and regulations atvariance with German legal require-ments have been adjusted in line withwhat is known as the Handelsbilanz II(Type II Commercial Balance Sheet).The valuation methods applied can beregarded as uniform valuation in thespirit of § 308, Par 1 HGB and remainedunchanged from those applied in theprevious year.Intangible assets were valued at theircost on purchase less scheduled straight-line depreciation. In the case of fixedassets subject to wear and tear, the normal rates of depreciation (straight-lineor reducing-balance) were deductedfrom the purchase or manufacturingcost. As a rule, the straight-line methodof depreciation was used where this re-sulted in higher amounts of depreciation.Tax incentives for the depreciation ofminor-value assets were claimed.Financial assets were valued at cost orlower attributable value. The develop-ments in fixed assets can be obtainedfrom the table of movements in fixedassets shown on pages 40 and 41. Inventory was valued at cost, being theaverage purchase or manufacturingcost, or lower market value. Apart from direct costs, the manufacturing costs include overheads only to the extentrequired by law.Receivables and other assets are shownat nominal value less provisions for baddebts. Marketable securities are assessedat the historical cost or the value at thedate of the balance sheet, if lower. Therequired reinstatement of original valueswas effected in accordance with § 280,Par 1 HGB.

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Reasonable provisions for all identifia-ble risks and liabilities have been made.The provisions for pensions shown,which relate primarily to Germany, werevalued on the basis of the going-concernvalue for tax purposes in accordancewith § 6a of the Income Tax Law, where-by the 1998 guideline tables were applied.Liabilities are shown at the amountpayable. Deferred income relates pri-marily to instalment sales contracts.

IV. Foreign Currency ConversionFor the companies based outside theeuro zone which are included in theconsolidation, the balance-sheet itemsshown in the individual financial state-ments were converted into euros fromthe currency of the country in questionat the mean rate of exchange on the date of the balance sheet.Income and expenditure shown in the-se profit and loss accounts have beenconverted at the average rate ofexchange for the year 2004. The resul-tant differences after conversion wereallocated net with profit effect to otheroperating costs. The effects of currency conversion re-sulting from changes in exchange ratefrom year-end to year-end have beendeducted from revenue reserves, with-out affecting the results, to the sum of12.6 million within the scope of equitydevelopments.

V. Consolidation PrinciplesThe companies included in the consoli-dated financial statements in accordan-ce with the principles of full consolida-tion all have as their financial year theperiod from 1 January to 31 December. The akf companies consolidated in ac-cordance with the equity method of ac-

counting also have their financial yearending on 31 December in accordancewith § 312 Par 6 HGB.Consolidation of the balance sheets andprofit and loss accounts of the compa-nies included therein was made in ac-cordance with the following principles:

1. Capital ConsolidationCapital has been consolidated in ac-cordance with the book value method.In so doing, the book values of the hol-dings have been set against the amountof equity capital of the correspondingsubsidiary companies including re-serves and the result brought forward atthe date of initial consolidation or at thedate of acquisition. The resultant debitdifferences were netted with revenuereserves in previous years. Credit differ-ences resulting in previous years werecombined into revenue reserves becausethey were of reserve character.The debit differences (1346 million)resulting from the first-time consolida-tion of the Jafra group were carried onthe assets side as goodwill in accordan-ce with § 301 Par 3 Clause 1 HGB fol-lowing the release of hidden reserves inassets and liabilities. Depreciation willtake place over 30 years as scheduled.The participating interests of outsideshareholders in the equity capital sub-ject to consolidation and in the resultsof the subsidiary companies includedin the consolidation have been shownin the compensating item for minorityinterests.The associated companies of akf andproLog, included under the equity me-thod of accounting, have been consoli-dated in accordance with the sameprinciples. The valuation principles ofthe associated companies were adopted

without change. Since December 2001,Vorwerk has held all shares (formerlysome 90%) in the akf group companies.Since Vorwerk exercises no uniform di-rection over the akf companies, thecompanies continue to be consolidatedunder the equity method of accounting.Due to the change in the financial yearof the akf group to coincide with the ca-lendar year, the group has been includ-ed in the present consolidated financialstatements with a 15-month reportingperiod (October 2003 to December2004). akf leasing Beteiligungs GmbHprepared consolidated financial state-ments for the companies of the akf leas-ing division both up to 30 September2004 and for the short financial yearspanning 1 October to 31 December2004. In accordance with § 312 Par 6HGB, these were taken as the basis forthe consolidation. Vorwerk’s share ofthe results for the year under review ofthe companies consolidated under theequity method of accounting is includ-ed in the Profit and Loss Account as in-come from participations in associatedcompanies.

2. Consolidation of DebtAmounts due as receivables or paya-bles in respect of companies within theconsolidated group have been offsetagainst each other for consolidationpurposes (§ 303 HGB).

3. Consolidation of EarningsConsolidation of the income and ex-penditure contained in the items shownin the Consolidated Profit and Loss Ac-count comply with § 305 HGB. Inter-company sales and the expenditureentailed thereby as well as other nor-mal mutual intercompany income and

E X P L A N A T O R Y N O T E S

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expenditure from the consolidatedcompanies’ profit and loss accounts have been set against each other.Deferred taxation debit balances amount-ing to 114.9 million resulting from theindividual financial statements, in ac-cordance with the option provided forin § 274, Par 2 HGB, along with deferredtaxation debit balances amounting to11.3 million, in accordance with § 306Clause 1 HGB, which were calculatedfor consolidating entries affecting netincome arising from the elimination ofunrealised results of intercompanytransactions within the group, consolida-tion of debt and also the consolidationof income and expenditure, were setagainst 116.2 million of deferred taxationcredit balances resulting from the indi-vidual financial statements in accordancewith § 306 Clause 3 HGB. As in the pre-vious year, when calculating taxes forconsolidating entries affecting net in-come in accordance with § 306 HGB,the company has proceeded on the basisof an average rate of tax of 30 per cent.

VI. Other statutory disclosures inaccordance with § 314 HGB andExplanatory Notes to VariousItems in the Balance Sheet and theProfit and Loss Account

1 Other Financial CommitmentsThe expenses arising from rental and leasing contracts contained in the Profit and Loss Account amounted to128.0 million in 2004 (125.4 millionin 2003). These expenses are spreadover the entire group worldwide and

relate to contracts with various terms ofduration. Order obligations for invest-ments in tangible fixed assets amount-ed to 14.0 million (13.1 million at31.12.2003).

2. Profit and Loss AccountGroup Sales (including sales tax)Breakdown by 2003 2004Region 1 million 1 millionGermany 528.4 548.8Europe 650.4 736.2North America - 49.3Central America - 162.1Rest of world 108.5 98.1Total 1,287.3 1,594.5Group sales broken down by divisionare shown in the annual report.

3. Market Value of Financial InstrumentsThe market value of a financial instru-ment is the price at which a party wouldacquire the rights and/or obligationsarising from this financial instrumentfrom another party. The book and marketvalues of the financial instruments of theVorwerk group are shown as follows:

Derivative Financial Instruments in 1 thousanda) Currency options b) Exchange futures c) Interest rate swaps d) Interestrate optionsNominal value Book value Marketvalue

31.12.04a) 72,711 1,996 1,996b) 21,304 - 21,300 c) 50,485 - -644d) 5,000 - -

The nominal value of the derivative fi-nancial instruments is obtained itemby item using the closing rate method.Appropriate provisions were made forimpending losses. The market valuesof exchange futures are determinedaccording to the closing rate methodtaking forward discounts and pre-miums into account. Currency optionsare valued on the basis of option price models. The market value of interestrate hedging instruments (interest rateswaps) is determined on the basis ofdiscounted, anticipated cash flows,whereby the current market interestrates for the remaining term of the fi-nancial instruments is applied. Interestrate options are valued on the basis ofoption price models.

4. Other InformationAverage workforce

2003 2004Employees* 20,039 23,011Sales SystemAdvisers 26,986 463,136

Kobold Systems 9,873 10,369Thermomix 13,941 15,004Ironing System 276 318Jafra Cosmetics - 434,697Lux Asia Pacific 2,896 2,748

*Including sales advisers in permanentemployment

The executive managers of the parentcompany Vorwerk & Co. KG are themanaging partners Dr. Jörg MittelstenScheid of Wuppertal, Achim Schwanitzof Ratingen and Markus von Blombergof Wuppertal (as of 1 January 2005).

A U D I T O R S ’ R E P O R T

4 5

The foregoing consolidated balancesheet with its explanatory notes as in-tended for publication in accordancewith § 15 Par. 2 of the German Publicityand Disclosure Law (PublG), togetherwith the group management reportcomply with the legal requirements.We have expressed the following opinionon the complete consolidated financialstatements and the group managementreport: “We have audited the consoli-dated financial statements and thegroup management report of Vorwerk& Co. for the business year from 1 Ja-nuary 2004 to 31 December 2004. Thepreparation of the consolidated financialstatements and the group managementreport in accordance with Germancommercial and accounting practiceare the responsibility of the company’smanagement. Our responsibility is toexpress an opinion on the consolidatedfinancial statements and the group man-agement report based on our audit.We have conducted our audit of theconsolidated financial statements in ac-

amined primarily on a test basis withinthe audit framework. The audit includesassessing the annual financial statementsof the companies included in consoli-dation, the determination of the com-panies to be included in consolidation,the accounting and consolidation prin-ciples used and significant estimatesmade by the company’s managementas well as evaluating the overall presen-tation of the consolidated financial state-ments and the group management report.We believe that our audit provides areasonable basis for our opinion.Our audit has not led to any reserva-tions.In our opinion, the consolidated finan-cial statements give a true and fair viewof the net assets, financial position andresults of operations of the group in ac-cordance with German principles ofproper accounting. On the whole thegroup management report provides asuitable understanding of the group’sposition and suitably presents the risksof future development.”

Essen, 15 April 2004

cordance with § 317 of the GermanHGB (German Commercial Code) andthe generally accepted standards forthe audit of financial statements pro-mulgated by the Institut der Wirt-schaftsprüfer in Deutschland (IDW).Those standards require that we planand perform the audit such that mis-statements materially affecting the pre-sentation of the net assets, financial po-sition and results of operations in theconsolidated financial statements in ac-cordance with German principles ofproper accounting and in the groupmanagement report are detected withreasonable assurance. Knowledge ofthe business activities and the econo-mic and legal environment of the com-pany and evaluations of possible mis-statements are taken into account in thedetermination of audit procedures. Theeffectiveness of the accounting-relatedinternal control-system and the evidencesupporting the disclosures in the con-solidated financial statements and the group management report are ex-

PwC Deutsche Revision

Aktiengesellschaft

Wirtschaftsprüfungsgesellschaft

P. Albrecht Th. Hofmann

Wirtschaftsprüfer Wirtschaftsprüfer

4 6

Vorwerk & Co. KGMühlenweg 17-3742270 WuppertalGermany

Vorwerk & Co. Interholding GmbHMühlenweg 17-3742270 WuppertalGermany

Vorwerk & Co. Beteiligungsgesellschaft mbHMühlenweg 17-3742270 WuppertalGermany

Vorwerk International Mittelsten Scheid & Co.Verenastr. 398832 WollerauSwitzerland

Direct Sales

Vorwerk Deutschland Stiftung & Co. KGMühlenweg 17-3742270 WuppertalGermany

Vorwerk Folletto s.r.l.Via Ludovico Di Breme, 3320156 MilanoItaly

Vorwerk Household Appliances Co. Ltd.Unit C, Building 3, Floor 9Comalong Industrial Park889 Yi Shan RoadShanghai 200233China

Vorwerk Austria GmbH & Co. KGSchäfferhofstr. 156971 Hard/BregenzAustria

Vorwerk CS K.S.Pod Pekarkou 1147 00 Praha 4The Czech Republic

Vorwerk Asia Mittelsten Scheid & Co.Tokyo BranchYamate K Bldg. 7F1-8-8 Nakameguro Meguro-kuTokyo 153-0061Japan

Vorwerk Contempora S.r.l.Via Grazzini 1520157 MilanoItaly

Vorwerk España M.S.L., S.C.Avda. Llano Castellano, 13 2˚lzq.28034 MadridSpain

Vorwerk & Co. Thermomix GmbHMühlenweg 17-3742270 WuppertalGermany

Vorwerk France s. c. s.30, Avenue de l‘Amiral Lemonnier78160 Marly-le-RoiFrance

Vorwerk Polska Sp.z.o.o.ul. Strzegomska 46b53-611 WroclawPoland

Vorwerk Portugal,Electrodomésticos LdaRua da Quinta do Paizinho,Edificio Bepor, Bloco 2, 2°Esq.2790-237 Carnaxide/LisboaPortugal

Vorwerk Asia Mittelsten Scheid & Co.Taiwan Branch5f, N. 85, Sec 1Chung-Hsiao East Rd.Taipei City 100Taiwan R.O.C.

Vorwerk Bügelsystem GmbH & Co. KGMühlenweg 17-3742270 WuppertalGermany

Vorwerk Deutschland Stiftung & Co. KGVorwerk EinbauküchenMühlenweg 17-3742270 WuppertalGermany

Vorwerk ElektrowerkeGmbH & Co. KGMühlenweg 17-3742270 WuppertalGermany

Vorwerk Semco s.a.s. Route de Montigny28220 CloyesFrance

Vorwerk Folletto Manufacturing s.r.l.Via Garibaldi, 2720043 Arcore-MilanoItaly

Vorwerk Household Appliances Co. Ltd.655 Xinqu Road201700 Qinpu Industrial ZoneShanghai China

Jafra S.A.382-386 Route de LongwyLuxemburg-MerlLuxemburg

Jafra Cosmetics International, Inc.2451 Townsgate RoadWestlake Village, CA 91361USA

Jafra Cosmetics International, S.A. de C.V.Blvd. Adolfo Lopez Mateos #515, Colonia Tlacopac, 01040México, D.F.

E S S E N T I A L C O M P A N I E S O F V O R W E R K G R O U P

Jafra Cosmetics GmbH & Co. KGHanauer Straße 85 80993 MünchenGermany

Jafra Cosmetics S.p.APiazza San Vittore, 221100 VareseItaly

Jafra Cosmetics A.G.Riedstraße 3/5, 6330 ChamSwitzerland

Jafra Cosmetics Handelsgesellschaft mbHMariahilferstraße 1231060 WienAustria

Jafra Cosmetics International B.V.Regus Business CentreJ.P. Coenstraat 7.2595 WP The HagueThe Netherlands

Jafra Cosmetics Dominicana, S.A.Cabral No. 15Ensanche JulietaSanto Domingo, The Dominican Republic

Cosmeticos y Fragancias S.A. de C.V.Mexican ManufacturingVictoria #25Frace. Industrial Alce BlancoNaucalpanEdo. De Mexico 53370

Lux Asia Pacific Pte. Ltd.The Lux Building18 Arumugam Road409962 Singapore

Lux (Japan) Ltd.Nisso-11 Bldg., 2-3-4 Shin-YokohamaKohoku-Ku222-0033 YokohamaJapan

PT Luxindo Raya Jl Agung Timur 9 Blok 0-1/29-30Sunter Agung PodomoroJakarta 14350Indonesia

Lux Royal (Thailand) Ltd523-535 Lux Building Sukhumvit 71, Phra Khanong-NuaWattana, Bangkok 10110,Thailand

Lux (Far East) Ltd.2F, No. 2, Ruiguang Road, Neihu District, Taipei City 114, Taiwan, R.O.C.

Lux Korea Ltd5 floor Gubo Building, 84-5, Yang-Jae Dong, Seo-cho Gu, SeoulSouth Korea

Lux Vietnam Co., Ltd117B Nguyen Dinh ChinhWard 15, Dist. Phu NhuanHo Chi Minh CityVietnam

Lux (Singapore) Pte LtdThe Lux Building18 Arumugam Road409962 Singapore

Lux Manufacturing Corp.2nd Floor Molave Building2231 Pasong Tamo St.Makati City 1231The Philippines

Industrial Services

akf bank GmbH & Co. KGFriedrichstr. 5142105 WuppertalGermany

akf leasing GmbH & Co. KGFriedrichstr. 5142105 WuppertalGermany

akf servicelease GmbH & Co. KGJohannisberg 742103 WuppertalGermany

Hectas GebäudediensteStiftung & Co. KGAm Diek 5242277 WuppertalGermany

Hectas GebäudereinigungStiftung & Co. KGAm Diek 5242277 WuppertalGermany

Hectas Sicherheitsdienste GmbHAm Diek 5242277 WuppertalGermany

Hectas Bedrijfsdiensten C. V.Nieuwgraaf 966921 RK DuivenThe Netherlands

Hectas GebäudediensteGes.m.b.H. & Co. KGSonnwendgasse 189020 KlagenfurtAustria

activia PersonaldienstleistungenGes.m.b.H.Sonnwendgasse 189020 KlagenfurtAustria

Carpets

Vorwerk & Co. TeppichwerkeGmbH & Co. KGKuhlmannstr. 1131785 HamelnGermany

S o u r c e s :

André Poloczek, page 1, 2, 19, 31, 39;

Robert Gernhardt, page 10, 23, 40, 41;

Hans Traxler, page 13, 27; Staatliche

Kunstsammlung Dresden, Jürgen Karpinski,

page 21; Regina Göllner, page 29, 34;

Animals Unlimited, page 48

I m p r i n t :

Publication: Vorwerk & Co. KG,

Mühlenweg 17 - 37, 42270 Wuppertal

+49 202 564 - 1221

www.vorwerk.de

annual.report@vorwerk.de

Editorial staff: Jürgen Hardt (person

responsible) and Xenia Sarigiannidis,

Corporate Communications

of the Vorwerk group

Design: Hermann Michels

and Regina Göllner, Wuppertal

Text: Vorwerk & Co. KG,

Stefan Hoinka, Bochum

Translation: Lynda Matschke

Production:

Druckhaus Ley + Wiegandt, Wuppertal

© Vorwerk & Co. KG, 2005

Our Annual Report is published in German

and English with a total circulation of

14,300 copies. We print our Annual Report

on book paper, 150 g/m2.

„It’s not the size of the dog in the fight,it’s the size of the fight in the dog.“ Mark Twain