We hope to achieve the same sales as last year,
although it will not be easy in the present difficult
economic environment. The fact is, we are increasingly
feeling the impact of the slow-down in the American
economy worldwide. Some of our markets are already
in recession. It is in times like these that our sound
financial policy repeatedly proves its value. Franke is
well financed, and we will make every effort to ensure
that it stays that way. Following the tragic events of
September 11, we are faced with the additional problem
of the war that has just begun in Afghanistan
and its effect on currency trends. One result is that the
Swiss franc has risen sharply against the Euro and the
US dollar. Another is that currencies in our most newly
emerged markets, which include India, the Philippines,
South Africa, Turkey and South America have
experienced an above-average fall in the value of their
currencies, making exports to these countries more
difficult and weakening our financial strength.

We can already say at this stage that we will be
unable to achieve the satisfying operating profit of
last year. We are countering this weakness in growth
firstly by introducing new products and services,
and compensating for it by strategically expanding
market shares and further geographic expansion.
In addition, various potential acquisitions are constantly
under discussion. These, however, are the
subject of very careful scrutiny, and we ensure that
only appropriate prices are paid for investments.
Internally, of course, we are also adopting aggressive
policies to combat the economic slow-down; we have
not only intensified our programs for cost-reduction,
efficiency and optimization, but have also accelerated
them.

Despite all of this, we remain optimistic, because we
also view the difficulties as challenges and opportunities.
This was one of the reasons we decided to invest
more heavily in existing structures, as the recently
completed projects in this area clearly illustrate.
Current investments at our subsidiaries in Austria,
France, Switzerland, Germany, Italy, Scotland, Brazil
and Canada show the worth of this policy and we will
certainly be reporting on one or more of these in
future issues.

With best wishes,

Michael Pieper, President & CEO