Annual Report Kverneland skal bli verdens ledende og mest profitable leverandør av kvalitetsutstyr og tjenester til den framsynte bonden

Transcription

1 Annual Report 1999 Kverneland skal bli verdens ledende og mest profitable leverandør av kvalitetsutstyr og tjenester til den framsynte bonden

2 Kverneland shall become the global market leader and the most profitable supplier of quality equipment and services to the professional farming community Table of Contents Who and what is Kverneland Page 3 Report from the President & CEO Page 4 Development in the world market International depression in agriculture Page 6-7 Modern farming demands new technology Page 8-9 Group Strategy Restructuring and innovation basis for growth Page Multi brands multi distribution channels Page A winning culture a necessity for success Page Product areas Page The Board of Directors Annual report Page Financial Statements Page Auditors report Page 44 Historic figures Page 45 Definition of key figures Page 47 Shareholders Policy and Investor Relations Page 49

3 2 Kverneland is the world s largest specialised producer and distributor of agricultural implements. KVERNELAND ANNUAL REPORT Kverneland ASA is a Norwegian Company listed on the stock exchange in Oslo. The shares are held by investors from several countries. At present no shareholder owns more than 10 % of the share capital. Kverneland offers a unique product range to both farmers and dealers with complete product lines within arable, seeding, grass, spreaders and sprayers. The history of the Group dates back to 1879 when the company was established as a plough producer. Kverneland was family owned and family managed until the company was listed on the stock exchange in The Kverneland Group has expanded strongly during the 90 s through acquisition of a number of well know manufactures of agricultural implements: Underhaug in 1986 Norwegian Maletti in 1992/95/97 Italian Taarup in 1993 Danish Kidd in 1993 British Accord in 1994/96 German Silo-Wolff in 1997 German Greenland in 1998 Dutch RAU in 1999 German/French Product range The strategy of Kverneland is to offer a complete product line of the tools that the farmer uses on the farm whether the final product is potatoes, meat, milk, grapes, grain or other agricultural products. The strategy is reflected in the product range which includes: Grass and fertiliser spreaders Mowers, conditioners, tedders, rakes, harvesters, square and round balers and bale wrappers and a complete range of spreaders. The product group represents 47.6 % of the Group s turnover. Soil preparation and seeding All types of ploughs and harrows, stubble cultivators, pneumatic seed drills and planters. The product group represents 40 % of the Group s turnover. Sprayers A complete line of three-point linkage mounted, trailed or self-propelled sprayers. The product group represents 6 % of the Group s turnover. Potato machinery and other Potato machinery includes bedformers, clod separators, planters, toppers and harvesters. Other comprises of agricultural buildings and a few minor product groups. In total these products represents 7 % of the Group s turnover. Spare parts and equipment The turnover of spare parts comes from all product areas mentioned above and represents approximately 20 % of total Group turnover. Key figures (NOK million) Operating revenue 3,808 3,119 1,981 Operating profit Profit before tax Return on capital employed (%) Return on equity (%) Equity ratio (%) Earnings Per Share (NOK) No. of employees at 31 December 3,508 3,273 2,147 For definitions of key figures, see page 40. Geographical distribution of sales WESTERN EUROPE 84 % EASTERN EUROPE 5 % NORTH AND SOUTH-AMERICA 6 % REMAINING MARKETS 5 %

4 Report from President & CEO 1999 a year characterised by a turbulent market and internal restructuring. Kverneland has clearly stated that the company will take a leading role in the inevitable restructuring of the agricultural machinery business During most of the 90 s there has been high prices for agricultural products, increasing income for the farmers and a good investment climate in most of the western world. In the last couple of years, however, we have seen a gradual change and a reduction in our customers income. In many ways it is a paradox that, despite a large unfulfilled demand for food in the world, in 1999 we experienced another year with global pressure on prices for a number of important agricultural products. The consequence of this is reduced Restructuring the business Kverneland has clearly stated that the company will take a leading role in the inevitable restructuring of the agricultural machinery business. Reduced income, fewer units and increased internationalisation are important forces behind this necessary change. Our ambition demands that we continuously develop the Group to deal with increasingly tougher competition. In order to be able to reach our goals concerning more rational and cost effective operations we need to realise the synergies from our acquisitions. This means carrying out demanding adjustments and restructuring of Group operations. We will (Vicon). The purpose of the changes is to increase our service level, improve product quality and, not least, accelerate the pace within our product development. Further restructuring will be carried out in the year 2000 so that the Kverneland Group will income for our customers, which again has resulted in a more moderate demand for a number of our machines especially the products where the main market is within grain production i.e. sprayers and arable products. further develop our distribution strategy and focus on our well-known brands and will continue to develop our long-term relationships with our dealers. An important tool for this will be changes in our sales organisation. Over time this will improve our service level towards the farmers and dealers. Substantial changes in our internal organisation have been carried out in 1999 especially in our sales companies in France, Germany and Spain where we merged the Kverneland and Vicon organisations. In addition substantial restructuring has been carried out in the factories Kerteminde (Taarup), Weilheim (RAU) and Orleans become a more market oriented and effective organisation. New establishments During 1999 the Group has been established in the Czech Republic and Slovakia through a co-operation with our importer AMT. The establishment of a sales organisation in South Africa was decided and the company will be operational early in year New possible acquisitions, within Kverneland core strategy have been looked into. These acquisitions are planned to be realised in the years to come.

5 4 One of the foundations in our strategy is to use considerable resources on product development. This policy enabled us to launch a number of new products, even in a demanding year like 1999 KVERNELAND ANNUAL REPORT New products One of the foundations in our strategy is to use considerable resources on product development. This policy enabled us to launch a number of new products, even in a demanding year like The new products provide us with a good position in the fight for market shares within all product areas. In 1999 the Group used approximately NOK 121 million on product development. SAP implementation The Kverneland Group is an integrated Group with control over its value chain. In order to be able to better control the value added, it was decided in 1996 to implement SAP R/3. Since this decision was taken the Group has become more complex. The implementation of SAP has proved to be more demanding than first assumed both with respect to costs and the workload for our employees. In the first half of 2000 the Group will carry out a thorough analysis of the use of SAP in the Group before we make decisions on further implementation. However, there is no doubt in our minds that once we can start using the integrated IT-system in the whole Group, the communication will become easier and more rationalised. This will lead to both lower costs and better customer service. Financial results As stated in the annual report from the Board of Directors, the financial results for 1999 are far from satisfactory. The long-term target of 10 % operating margin seems to be more unobtainable than obtainable. However, 1999 has been characterised by the combination of a reduced total market and substantial adjustments and restructuring in Kverneland. This has given the Group lower earnings than planned. It is, however, necessary to continue the process of restructuring in order to reduce the level of fixed costs over time and thereby make the Group more robust toward cyclical fluctuations in our customers income. The restructuring is a costand time-consuming process, involving relocations and changes in manning. The development in profits and the moderate short-term expectations which have been stated by the Board of Directors and the CEO, have caused a negative share price development for Kverneland during the year. The strategy remains The fundamental industrial conditions which are the basis for our strategy are developing as expected, even though the short-term reduction in prices of agricultural products has been larger and more long-term than expected. However, there is no reason to change our strategy for further growth. We will try to find acquisition candidates, of which some will be both well operated and profitable and others will need substantial restructuring. A consequence of the acquisition strategy is that the Group will be in a continual process of restructuring. Kverneland acquires companies in order to take a leading role in the restructuring of the agricultural machinery business. By doing this we will be able to further expand the breadth and depth of our product range and also focus aggressively on product development. This will in turn give our dealers access to strong Kverneland Inc. Canada Kverneland South Africa (operational beginning of 2000) brands, the best service, top quality products and a continual flow of new products. The substantial restructuring will increase Kverneland s competitiveness in the years to come. However, we expect that also the profits for year 2000 will be characterised by a difficult market situation and continued restructuring.. Atle Eide PRESIDENT & CEO Sales companies Factories

6 The farmer as well as the manufacturer of agricultural machinery is dependent on increased prices for agricultural products in order to finance growth and new investments in the shortterm. Due to the demand for more effective and environmentally friendly mechanisation, Kverneland will experience global growth in the demand for agricultural machinery.

7 6 Development in the world market The international agriculture is in depression KVERNELAND ANNUAL REPORT This depression is a direct consequence of low prices for agricultural products. However, we see large variations in the market, for example in the production of grapes, where profitability was good and in potato where prices were very good in the EU in Still 1999 as a whole was a difficult year for the farmers worldwide with record low prices for a number of agricultural products, which again caused reduced demand for machines and equipment. Within the EU, which is Kverneland s main market, the farmers have in addition experienced uncertainties related to the new agricultural policy and the discussions in WTO. This has without doubt affected the investments. An intense political struggle made the effect of the reform of Agenda 2000 somewhat less dramatic than first assumed. However, the farmers income is under pressure. For example will the intervention prices on grain be reduced in the years to come in the EU. The farmer as well as the manufacturer of agricultural equipment is dependent on increased prices on agricultural products in order to grow and finance new investments in the short-term. Another issue, which influences the investments in machinery, concerns the expectation that farmers will use substantial capital resources to buy land. The land will become available, as a number of smaller farmers will discontinue operations. It has never before been more difficult to predict future price developments The statements from the experts vary, and even though there seems to be a consensus that prices are currently at rock bottom, there is uncertainty regarding how much the prices will increase and on how fast the price increase will come. In Kverneland we expect that the demand for agricultural machinery and implements will be further reduced in The extent of the reduction is not certain, but in our prognosis we assume a reduction of minimum 5 10 %. As a consequence of differences in the price developments between the different products we expect large variations within the various machine markets. Development in a longer perspective The demand for, for example grain, is expected to increase considerably over the next decades. At the same time there will be a fight for the agricultural land in the industrialised world. A number of groups and operations need cultivated land for other purposes and therefore the need for more efficient use of the remaining agricultural land will be higher. However, this will have to happen in a way that is in line with demands of society. The demand for more effective and environmentally friendly mechanisation, which therefore is expected, will give Kverneland a global growth in the demand for agricultural equipment. This development, together with the change to larger units, provides Kverneland with exiting possibilities to develop and distribute a whole new range of products and solutions. Growth potential in new markets will be even more important Eastern Europe and the former Soviet Union (FSU) Some of the most productive agricultural areas are located in this region and there is a large demand for increased mechanisation in order to get the necessary growth in food production. The lack of investments for a number of years has meant that there is now substantial demand for replacement of the existing machines. The pace of the growth in investments is related to the overall social and economic development in the area. South-America The agricultural area here faces the same challenges as in Eastern Europe. Productive land together with the need for increased food production both for national consumption and export provides a large future market for agricultural machinery. Both South-America and Eastern Europe are interesting markets with growth potential for the technology and the products Kverneland produces. Africa and Southeast Asia The combination of a productive agricultural area and well-known technology provides good growth possibilities in the world s food production close to the areas where most of the consumption will take place. Therefore we see good growth potential for Kverneland in parts of Africa and large parts of Southeast Asia. This is an area with a large population and agricultural area (over 2 million people in China and India), and Kverneland has the technology that is required to carry out the necessary mechanisation. Our home market Within the EU we see a structural change in agriculture. The trend towards larger units continues, likewise the contractors are taking over an increasing part of the work for the farmer. The development is a natural consequence of reduced subsidies and larger dependence on the prices on the world market. This gives exciting prospects because the demand changes towards larger and more advanced machinery and new products, new technology and service and quality improvements.

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9 Development in the world market Modern agriculture demands new technology Agriculture is a traditional business. A long-term view and a dependence on sustainable development characterise the agricultural way of thinking. The use of IT will also lead to far more interaction between machines this gives a company like Kverneland, which provides a wide range of machinery, very good possibilities. 8 KVERNELAND ANNUAL REPORT Food production and management of the arable land are demanding tasks. There is little room for experiments in the industry since the consequences for the harvests and environment are too critical. However, at the same time all parts of the value chain have to deal with a new and far more competitive reality and challenge. Therefore the farmers have always been looking for new technology and will continue to do so in the years to come. Productivity must improve Since the world s population is growing the harvest per acreage must be increased at the same time as the area available for agriculture is under pressure especially in the western world. The demands from society are becoming more critical with respect to the environment and sustainable development. To be more specific this means more cultivation with minimal negative effect on the environment. At the same time there is pressure on product prices and the subsidies are being reduced. The whole situation challenges Kverneland with respect to innovation and product development areas which in many ways are the basis for the Group s success. The focus in the future will primarily be on product development directed at the challenges faced by the farmers. In the future there is a need to operate in a better way This applies to both the farmer and Kverneland. It is of great importance for the farmer to reduce the number of passes in the field. This will save time and protect the cultivated land. This gives Kverneland as a Group the opportunity to develop and distribute a number of combination implements which carry out several operations simultaneously. At the same time this gives us the possibility to connect employees from different product developments environments so that we better can utilise the total expertise in the Group. Kverneland is in a unique position because we, to a larger extent than any other, have a complete product range and thereby a special breadth in our product expertise. Precision Farming This concept reflects the farmers need to optimise the use of input factors in production. By mapping the land and customising the use of seeds, fertiliser and chemicals the farmer will be able to achieve the optimal harvest. This is an area where we have the opportunity to develop completely new machinery and mechanisation and where we have used substantial resources. The high-tech farmer Whilst farming today is to a large extent characterised by traditional technology, we will see a change in the future to high-tech production units. The use of IT will also lead to far more interaction between machines, which gives a company like Kverneland, which provides a wide range of machinery, very good possibilities. The modern agriculture has new requirements with respect to service and logistics, be it in the form of fine-tuning the use of machinery, simpler maintenance or quicker delivery of spare parts. The Internet technology will be central in this area. This is especially interesting because a number of analyses show that the farmer is a long way ahead with regards using the Internet as a tool. It is of great importance for the farmer to reduce the number of passes in the field. This will save time and protect the cultivated land. This provides Kverneland as a Group with the opportunity to develop and distribute a number of combination implements, which carry out several operations simultaneously. Patrick Verheecke Managing Director Kverneland France

10 Group Strategy Restructuring and innovation basis for growth Until the early 90 s Kverneland was a typical European producer of agricultural machinery. The product range was limited and with a large part of turnover through importers and with focuse on a few geographical markets. The acquisitions during the last 7-8 years have quadrupled the Group s turnover and because of this Kverneland now provides a wide product range. The acquisitions during the last 7-8 years have quadrupled the Group s turnover and because of this Kverneland now provides a wide product range within grass, fertiliser spreaders, soil preparation, sprayers, potato equipment and more. The farmer is the basis for our growth strategy The farmer is central for us whether he produces grain, potato, root crops, grapes, milk or meat. Kverneland aims to build up a complete product range and related services. Since distribution is one of the keys to success, Kverneland co-operates with an extensive network of competent dealers. Both the farmer and the dealer appreciate a product range which over time can offer a homogenous quality- and service-level. The Kverneland product range is attractive in the market because it gives the farmer the best operating profits and makes it profitable for the dealers to sell the products. Advantages from improved distribution As a consequence of the acquisitions carried out over the last years, Kverneland has established new sales organisations in a number of countries. The organisations are owned by Kverneland and are operated as an integrated part of the Group. In time this will create a cost effective distribution system and also facilitate a close and open co-operation between the production and development environments internally and externally. It ensures quick and effective feedback from and to the market and therefore enables Kverneland to carry out a market oriented and highspeed product development. Size is important for Kverneland Size enables us to use further resources on the development of both products and service levels. The wide product range makes it possible to exchange experience over a wide spectre. In the years to come this will lead to completely new concepts for machinery because innovation occurs when people form different nations and professions exchange ideas and work together. Our presence in more than 20 countries also enables us to have close contact with a lot of users. Our partnership with importers in a number of countries also gives us additional breadth in distribution and access to information. The Kverneland product range is attractive in the market because it gives the farmer the best operating profits and makes it profitable for the dealers to sell the products.

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13 12 Group Strategy Multi brands multi distribution channels KVERNELAND ANNUAL REPORT Well-known brands such as Kverneland, Kverneland Taarup, RAU, Vicon, Kverneland Underhaug and Kverneland Accord are part of the Kverneland Group today. For farmers all over the world these are brands associated with quality, first-class solutions and, not least, high second hand value. Multi brands versus one brand A strategy to continue and further develop a number of strong brands is the basis for growth of the Kverneland Group (multi brand strategy). This means that over time there will be competing brands within most product groups. This strategy has been chosen due to the great values and goodwill connected to the Kverneland brands and also because such a strategy allows us to offer exclusive distributions agreements in several distribution channels in each market. These values are linked to brand recognition, utility value, second hand value and the possibility for the dealer to develop a sustainable business. Furthermore these brands have been marketed and distributed for decades and this has led to valuable relations between farmers, employees and the leading brand names. The different brand names will also have their own identity with respect to special quality standards, characteristics and service levels. Kverneland will therefore have at least two brand names within most product groups in the future These will be products which, in most markets, will be different with respect to technical solution and design. The brand names will also have their own identity regarding special quality standards, characteristics and service level. This will make it easier for the farmer to select the products with the right characteristics and for the dealers to better market the products they sell. With a multi brand strategy the dealers are guaranteed a reliable distribution and this means that the Kverneland dealer can invest in the brands he sells. A third, equally important reason for choosing the multi brand strategy is the considerable potential for synergies within logistics, distribution and procurement which it offers. In addition the strategy gives advantages within product development and, not least, in production. The strategy chosen by Kverneland has also been chosen by the large tractor manufacturers and has been used in the global car business for a long time. With a multi brand strategy the dealers are guaranteed a reliable distribution, which again means that the Kverneland dealer can invest in the brands he sells. Karl-Heinz Lammert, Managing Director Kverneland Deutschland

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15 Group Strategy A winning culture a necessity for success Kverneland is one of the sponsors for the Norwegian ladies downhill ski team. There are many parallels between top-level athletics and our ambitious Group. 14 KVERNELAND ANNUAL REPORT Kverneland has set a clear course to reach its targets. Therefore considerable resources have been used in order to communicate the strategy to all levels in the Group to ensure that we all pull together in the same direction. Information is a central element in organisational development. What is understood is supported and what is supported gets done. This is the simple logic behind how we implement our strategy in an increasingly more complex organisational structure of the Group. Different tools The tools in the process are different. First of all internal communication is prioritised and structured. All employees receive a personal copy of the strategy plan and additional internal information is frequently distributed through the magazine Kverneland Family and the newsletter Kverneland This Week. Strategy plan The Balanced Score Card (BSC) is used to communicate the strategy and is a systematic and logical way of setting targets and measurements which allow us to determine whether our goals are being reached and when we need to take corrective action. The logic behind the BSC is that our employees are the most central resource in the company. The BSC is used in the whole Group as a strategic tool and focuses on all our strategic goals, whether they are financial, customer, process or development oriented. Employee development Our goal is to develop our employees at all levels in the organisation so that they can utilise their own potential. In order to achieve this, extensive training and education is offered throughout the organisation. Kverneland has a trainee program which has been developed to attract new talents. In addition a number of employees are encouraged to work for the Group in other countries on secondments. At present a number of our employees work outside their own country and the Group Management Team also include members from outside Norway. A systematic and extensive management training program is also carried out in the Group. The program is run in co-operation The Norwegian School of Business and Economics and gives several hundred managers a unique opportunity for development. In addition the program contributes to building a common culture for the Group. Management processes Employees in management positions are to a large extent involved in deciding and developing the strategy through cross company meetings. In addition managers also frequently receive information on strategic and commercial decisions so that they can develop the right strategic responses in their local operations. Our management philosophy is to deliver the results that have been promised. Therefore all managers in the Kverneland Group shall be proactive and have a commercial focus. The Balanced Score Card is the most important tool for the managers with respect to reporting and follow up. All Managers have performance contracts where the achievement of their targets is closely linked to compensation. Organisation The Kverneland Group is organised around strategic business units (SBU). Operational companies are organised in this way if they are overlapping in products or core expertise. This organisational structure makes it easier to transfer and co-ordinate ideas, expertise and technology within the Group. In addition it enables the production and administration to be rationalised. The strategic business units will play a more important role in the future with regards souring, procurement, distribution, customer service and product planning. Sponsor for the Norwegian National Female Team in Downhill Kverneland is one of the sponsors for the Norwegian ladies downhill skiing team. There are many parallels to be found between top level athletics and ambitious companies like our Group, and the national team is important for us since it represents a winning culture a culture which we aim to develop in our organisation. In such a culture critical success factors are put on the agenda and the necessary skills and knowledge are developed to enable goals to be achieved. The downhill skiers clearly represent this type of culture. They participate in a sport where the requirements for discipline, courage, skills and the willingness to push the boundaries are part of their everyday life. As a national team they are dependent on helping and supporting each other and functioning well as an integrated group.

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17 16 Group Strategy Product Areas KVERNELAND ANNUAL REPORT The Kverneland Group is built up around the product areas arable, sprayers, grass and other. These are strategic focus areas where the Group has a strong position. In addition there are some product area which Kverneland finds very exciting and where the farmers invest large amounts. Kverneland will enter these areas when the time is right. Arable The turnover in 1999 was NOK 1,511 million. Operating profit was NOK 66 million.the product area consists of the following brand names: RAU (power harrows, harrows, seed drills and stubble cultivators). Accord (seed drills and planters). Kverneland (plough, power harrows, harrows and stubble cultivators). Accord is the market leader for pneumatic seeders in Europe in the same way that Kverneland is the market leader for ploughs. Concerning harrows, both Kverneland and RAU hold a strong position in a number of countries. The products within the product area arable are distributed in all western countries and in Eastern Europe. Sprayers The turnover in 1999 was NOK 216 million and the operating loss was NOK 12 million. The sprayers are distributed under the brand names Vicon and RAU. RAU is the market leader in Germany while both brands in total have a strong position in Benelux and France. We also see increasing sales in Denmark, Norway, Italy, Great Britain and a number of East-European countries. Grass The turnover in 1999 was NOK 1,783 million. Operating profit was NOK 83 million. The product area consists of the following brand names: Vicon (complete range of seeders, rakes, harrows, harvesters, round balers and from year 2000 also balers). Taarup (movers, rakes, tedders, harvesters and round balers) Both brands are strong all over Europe and have a significant position in the rest of the world. In addition fertiliser spreaders is included in this product area. The spreaders are sold globally under the brand name Vicon. Other The turnover in 1999 was NOK 298 million. The potato machines are distributed under the brand name Underhaug, which has a strong position in the Nordic countries, Great Britain, Holland and a number of East-European countries. Spare parts A synergy potential which has risen from the acquisitions during the last years can be found in the distribution and sale of spare parts. Kverneland is building a central organisation which will handle spare parts for all our brands and for all markets. The figures show that this is a strategically important area for the Group. At present the sales of spare parts represents 20 % of the Group s total sales, which constitutes approximately NOK 800 million.

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19 18 The Board of Directors Annual Report 1999 KVERNELAND ANNUAL REPORT Kverneland Board of Directors From the left: Kai Ole Togstad (employee representative), Sven Erga (deputy board member), Steinar Olsen (Chairman), Ole Julian Eilertsen, Georg Eldor Fjermestad, Anders Eckhoff (Deputy Chairman), Per Otto Dyb, Stein Mossige (employee representative), Henrik Ager-Hanssen, Magne Wiggo Høyland (observer), Olaf Eie and Atle Eide (President & CEO). TYPE AND LOCATION OF OPERATIONS The Kverneland Group is involved in development, production, distribution, marketing, sale and service of agricultural machinery and equipment. The Group has factories in Norway, Denmark, Great Britain, Germany, France, The Netherlands and Italy, which are owned 100 % by the Group. In order to take care of the sale and distribution of the Group s product range the Group has established sales companies in all the largest single markets in West- and Northern Europe, Canada, Poland, The Czech Republic and Slovakia. STATEMENT OF ANNUAL ACCOUNTS Profit development The reported net profit for the Kverneland Group in 1999 is less than satisfactory. Reduced earning in the second half of 1999 made it necessary for the Group to send out a profit warning. The profit warning has resulted in a negative effect on the share price development of the Kverneland share. Due to difficult market conditions the Group s revenue, excluding new acquisitions, is reduced by NOK 257 million, which represents 7 % of turnover in The Group has not been able to adjust the cost sufficiently to compensate for the market reduction. The restructuring within the Group, a consequence from the last acquisitions, has taken more time than planned and the cost related to this has been higher than expected. Realisation of synergies has also taken more time than expected. Problems related to the implementation of an extensive IT project (SAP R/3) has had a negative effect on the operations in The Board of Directors finds it necessary to make additional amortisation and expense of NOK 60 million in total for This amount is included in the operating expenses. In addition NOK 65 million has been expensed this year relating to restructuring of the operating companies. The profit and loss account is also affected by operating losses in two of the Group s production companies, Kverneland Weilheim and Kverneland Kerteminde (Taarup) with a total of NOK 42 million. As a consequence of a reduction in the total market and therefore reduced volumes, the operating profit in Kverneland Klepp and Kverneland Soest (Accord) is NOK 62 million lower than in In order to improve the Group s ability to predict changes, faster reactions and stronger project control, the Group s organisation has been strengthened. Year 2000 will be characterised by further reduction in the market and a need for further restructuring. Sales and market development The Group s net operating revenue for 1999 were NOK 3,808 million compared to NOK 3,119 million for This represents an increase in turnover of 22 %. The increase in turnover compared to 1998 is mainly due to the fact that in 1998 the Greenland Group was only consolidated as of 1 May. The increase in turnover is also due to the acquisition and consolidation of RAU as of 1 January The market for agricultural machinery has demonstrated its cyclical nature with a negative trend in This has particularly been the case within soil preparation and sprayers. The reduction in turnover of arable products (Soest,

20 The Board of Directors Annual Report 1999 Modena and Klepp) has been 13.5 % compared to The indication from some markets is that the Group s market share shows a slight increase during When considering the turnover for the Greenland Group in the 1st Four- Month Period of 1998, the turnover within product area grass for 1999 is approximately at the same level as in The turnover within product area grass now represents 46 % compared to 41 % in The turnover within product area arable is at the same time reduced from 48 % to 39 % of total sales. The recent acquisitions have therefore given the Group a more balanced and stronger product range, which have made Kverneland a more attractive partner both with respect to the farmer and distribution network. The geographical distribution of sales in 1999 is the same as the Group presented for % within Western Europe, 6 % within North America, 5 % within Central and Eastern Europe and 5 % in remaining markets. Comparable figures The new accounting act, effective from , has suspended the prohibition of booking net deferred tax assets in the balance sheet. As per the Group had a net deferred tax asset of NOK 16 million. This deferred tax asset has been booked in the revised opening balance as per The tax expense for 1997 shows a reduction of NOK 16 million compared to the official accounts and the tax expense for 1998 shows a corresponding increase. Further, the goodwill related to the acquisition of Greenland is increased by NOK 9 million as a consequence of new information about deferred tax at the time of consolidation. Due to the above changes the comparable figures including key figures for 1998, has been changed compared to the annual report for ,000 1,800 1,600 1,400 1,200 1, Operating Revenue 1998 and ,499 1,511 Arable 24 (NOK MILLION) 216 Sprayers Margins and profits The operating margin for the Group was 2.3 % compared to 9.4 % in The operating margin for 1999 includes an expense of NOK 60 million related to amortisation and expense of SAP cost, which had been capitalised by the end of the 2nd Four-Month Period. Adjusted for the cost of NOK 60 million the operating margin was 3.9 % in The adjusted operating margin is comparable to an operating margin of 7.6 % for 1998, which is exclusive of the gain from the sale of operations in Kverneland Kvernex AS of NOK 60 million. The reduction in operating margin is mainly due to the difficult market conditions, especially within soil preparation and sprayers. In addition high costs related to the restructuring of operational companies in some of the Group s main markets have affected the operating margin. Substantial restructuring has been carried out in our sales companies in France, Germany, UK and Spain and in our factories in Kerteminde (Denmark) and Soest (Germany). Operating profit for product area grass has increased from NOK 61 million in 1998 to NOK 83 million in However, the operating margin is reduced from 4.8 % to 4.7 % in The operating profit for product area arable is reduced from NOK 163 million in 1998 to NOK 65 million in The operating margin is reduced correspondingly from 10.9 % to 4.3 % in The Group s profit before tax was NOK 43 million compared to NOK 235 million in The tax expense was NOK 20 million and represents 45.6 % of profit before tax, compared to NOK 74 million and 31 % in The high tax rate is a result of higher tax rates abroad compared to Norway in addition to the fact that only parts of tax loss carry forward are booked as deferred tax assets in the balance sheet. The profit and loss account shows a profit after tax and minority interests of NOK 21 million compared to 1,269 1,783 Grass Other

21 20 KVERNELAND ANNUAL REPORT NOK 161 million in Earnings per share are NOK 2.14 compared to NOK in Return on capital employed is NOK 5 % down from 17 % in Return on equity is 2 % down from 17 % in The operating profit and return on capital for 1999 are not satisfactory. However, it is a result of identified conditions such as the falling market and the implemented restructuring which is founded in the Group strategy. A number of actions that have been carried out will have a positive effect for year The process of restructuring and adjustment will continue, and is expected to cause non-recurring costs also in Acquisitions Effective from 1 January 1999 the Group acquired RAU, the German/ French producer of agricultural machinery. The production in RAU includes sprayers and soil preparation equipment. The result from the operations in the German RAU companies has not been satisfactory in In August the Group acquired 50 % of the shares in A.M.T. spol.s.r.o., that for a number of years have been the Group s importer in the Czech Republic and Slovakia. The company was consolidated as of 1 August Financial strategy, exposure and exposure management The Group s equity ratio is 33 % down from 36 % at the end of The reduction in the equity ratio is due to the acquisition of RAU. Net interest bearing debt as per was NOK 1,141 million compared to NOK 936 million at the end of Financial management and liquidity At the end of 1999 the Group s balance sheet was NOK 3,062 million compared to NOK 3,038 million at the end of At the time of acquisition the total balance sheet of RAU was NOK 400 million. Hence there has been a reduction in the Group s balance sheet of NOK 323 million in The reduction is mainly due to reduction in current assets. In addition the Group has sold some property and a subsidiary of RAU in Germany during Due to these transactions the balance sheet is reduced by NOK 22 million. The Group s liquid assets are reduced by NOK 29 million and were NOK 89 million at the end of The cash flow from operations was NOK 161 million compared to NOK 187 million in Cash flow before financing was NOK 59 million compared to minus NOK 369 million in The cash flow in 1998 includes effect of acquisitions of NOK 264 million compared to NOK 49 million in The accounts are based on continued operations. GROUP PROSPECTS Strategy The Group has through a number of acquisitions during the 90 s taken a leading position as a producer and distributor of agricultural implements in Europe. The target of owning the importers in all the main markets is accomplished. Over 70 % of sales are now through owned sales organisations. The Group has an extensive product range and the long-term objective is to be able to offer the dealers on a global basis a complete product range with the implements required by the farmers. The Group strategy is multiple brands coupled with multiple distribution. This means that the dealers will be offered differentiated products under well-known brands with the possibility for local exclusivity. This strategy makes Kverneland an attractive partner for the best dealers and opens the possibility for long-term growth. Further growth will come from acquisitions and gradual expansion in new geographical markets. Product development, procurement, production and outsourcing are central issues in the processes to achieve synergies. The Group expects a reorganisation of spare parts logistics to result in an increased service level, a more cost effective operation and better utilisation of capital. Increased focus on marketing and distribution of original wear- and spare parts together with stronger customer focus are expected to have a positive effect on turnover. A co-ordination within this area will also make it easier to integrate acquired companies in the future. With operational effect from year 2001 this area will be a separate business unit. The use of E-business and Internet will be established as a separate focus area. The Group aims to have a leading role within this area in the agricultural sector. The Group expects that electronic shopping and communication via Internet will be an important instrument in all contact with the professional farmer. The increased focus in this area will be a combination of the Group s own resources and co-operation with other partners. The Group s dealers will also be important partners in this.

22 The Board of Directors Annual Report 1999 The market The farmers within the EU have experienced reduced income during the last three years. The positive development in the farmer s income that took place until 1996 caused increased investments by the farmers. The market also remained at a high level in 1997/1998 even though the development in the farmer s income started to fall. However, in 1999 the reduction within soil preparation and sprayers came as a consequence of record low grain prices on the world market. The reduction within the EU is probably related to the changes agreed within the European Common Agricultural Policy (CAP). The cyclical nature of the agricultural machinery business will also characterise the global market in the years to come. In a world still characterised by a growing population, there will be an increased demand for production of food. A prerequisite for achieving the necessary growth in production of food is mechanisation. Globally this can in a longer perspective cause growth within the total market for agricultural equipment. However, in Europe the European Common Agricultural Policy will cause a continuing reduction in the number of farmers and a change to larger units. This restructuring will lead to a long-term moderate reduction in the total market in Europe. The consequence will be a change in the demand for larger and more advanced machinery. The pressure in the market due to the restructuring will reduce the number of producers of agricultural machinery and give Kverneland an opportunity to further strengthen it s position. It also needs to be emphasised that year 2000 is the first year with tightened subsidies to agriculture as a consequence of the changes in the Common Agricultural Policy, and there is uncertainty about how the farmer s investment will be affected by this. An increase in the prices on the world market is necessary in order to get new growth in investments. However, it is not likely that the growth will be so strong that it will affect the market estimates described here. With respect to the planned growth in the new markets in the East- and Central Europe, we have to state that the difficult economic conditions have postponed the expected growth. Despite of these market conditions, the Group has been able to avoid a major reduction in turnover in these markets. This underlines the value of the competence and contacts established, and gives the Group a good position when the market turns again. Kverneland in year 2000 The Group expects that the market for all product groups will show a reduction in year 2000 and The estimates are characterised by uncertainty. Soil preparation and sprayers are expected to fall in the area of 10 %, while product area grass is expected to fall less. The reduction in the total market is related to falling income for the farmer s due to the low prices on the world market on relevant raw materials especially grain. With new products, the Group s continuously growing product range, improved service and a more focused market orientation after years with large restructuring, Kverneland expects growth in market shares. Taken into account the strained market situations, this will only to some extent compensate for the reduction in the total market. As part of the restructuring carried out within the sales organisation, Kverneland has kept and further developed the dealer network. Indications of improved market share for important products in some markets, strengthens Kvernelands position in a period with pressure in the market. The Group s high quality profiled products are expected to gain market share when the farmers now more than ever have to focus on

23 22 KVERNELAND ANNUAL REPORT reducing operating- and maintenance costs. The Group s order back-log in the beginning of year 2000 is not satisfactory and is 16 % lower than at the same time last year. The reduction is mainly within soil preparation and sprayers. Synergies and restructuring In 1999 the Group has carried out substantial restructuring within distribution, procurement and information technology. The sales companies of Kverneland and Greenland have been merged in all the main markets. In addition there have been large restructuring in Kverneland Kerteminde, Kverneland Weilheim, Kverneland Klepp and Kverneland Soest. The restructuring of Kverneland Gottmadingen, which started in 1998, is progressing according to plans. Wages and other personnel expense represents 51 % of the Group s indirect cost in The reduction in number of employees takes time and in some cases involves large costs. The actions carried out in 1999 have reduced the number of employees with over 320 persons or approximately 10 % of the permanent staff. This will have a positive effect on the costs as from year The actions taken to establish procurement agreements on a Group level have had a positive effect and this will continue in year The actions taken to reduce the Group s balance sheet has also given results. However, the Group will continue to focus on this area. The target is a further reduction of the balance sheet of 10 %. The restructuring will be continued and the Group plans further adjustments in the organisation in order to reduce the fixed cost base. The Board of Directors sees opportunities for improved efficiency within procurement, production, product development, distribution and logistics and an effective use of IT investments carried out. Further the Group will gradually be able to increase turnover through more intensive distribution of the total product range. Administrative integration The implementation of SAP has proved to be more demanding than previously assumed. The overrun in cost is partly due to the project being substantially changed since the implementation was decided in An extensive use of external consultants has been necessary in order to keep the pace to make solutions that was critical to the year There still remains a lot of work before SAP will give the Group reduced operating costs. Further implementation of SAP in the Group companies will be considered based on operations and costs during the year. Organisation The organisation has been strengthened in key areas throughout Continued investments in management training and further focus on organisation will take place in The activities related to E-business and Internet, spare parts and further acquisitions will be central. Targets for growth The previous targets for growth and profitability still apply. A falling market will affect earnings in the short-term, but will give exiting opportunities for acquisitions. The Group emphasises that even though the profit for 1999 is not satisfactory, the underlying operations are solid in most Group companies. The process of restructuring in a falling market has taken more time and cost more than planned, but puts the Group in a strong position both strategic and market wise. WORKING ENVIRONMENT There is a good co-operation between the employee representatives and Group Management. European Works Council was established in 1997 and has since had annual meetings with representatives from most countries where Kverneland is located. European Works Council is the most important co-operative body between the employees and the management. The European Works Council focuses on achieving a good co-operation and high degree of involvement and information at all levels in the Group. The working environment in the Kverneland Group is considered to be good and a number of actions to improve the working environment in operating companies and on Group level has been started. A common internal information system, focus on co-operation between employees and management, visit by all employees (200) at our factory in Nieuw-Vennep (Holland) to the head quarters in Norway are examples on actions on Group level. On Group level the absence due to sickness was 5.6 % in 1999, varying from 0 % to 10.2 % dependent on the company. There have not been any working accidents with fatal issue in

24 The Board of Directors Annual Report Absence due to working accidents is insignificant. ENVIRONMENT Manufacturing of agricultural implements result in noise and special waste. The noise level is according to local regulations. Special wastes mainly comprise oil-, plastic- and paint products. All special wastes are handled properly by certified companies in the countries where the Group has production. The most important raw material used in the production is steel of different quality and different degree of processing. Electricity, oil and gas are used as the source of energy in production. Personal safety and protective equipment relevant to the work performed are used as appropriate and required. Since most transportation of machines from the factory to the customers are done by cars this involves air pollution. The pollution from using Kverneland products is limited to the air pollution caused by the tractors, with the exception of spreaders and sprayers. The fertiliser and chemicals used in the spreaders and sprayers can cause damage on the environment. However, the Kverneland products fulfil all requirements set by local authorities and the Group s research and development activities aim to be ahead or minimum in line with new environmental requirements. OTHER At the end of 1999 Kverneland ASA had 3,708 shareholders. No single shareholder holds more than 20 % of the share capital. 8.3 million Kverneland shares have been traded in The Kverneland share price at the end of 1999 was NOK per share down from NOK at the end of last year. At the end of 1999 foreigners held 17 % of the shares down from 22 % in the beginning of The risk-amount for 1998 (as per ) was NOK 5.92 per share. The corresponding risk-amount for 1999 (as per ) is calculated to be NOK 5.56 per share. ALLOCATION OF PROFITS Retained earnings in Kverneland ASA are NOK 371 million at the end of The Board of Directors proposes a dividend payment of NOK 1.00 per share for the financial year This represents a pay out ratio of 47 %. Normally the pay out ratio for Kverneland is in the area of % of net profit after tax. The higher pay out ratio in 1999 reflects the Board of Directors wishes to soften the effect of the large variations in profits. The Board of Directors proposes the following allocations: (NOK million) Loss for the year 9.9 Group contributions received 62.6 Dividend distribution 9.7 Total transferred to retained earnings 43.0 Kvernaland, 31 December 1999/Oslo, 3 February Steinar Olsen Anders Eckhoff Henrik Ager-Hanssen Per Otto Dyb CHAIRMAN DEPUTY CHAIRMAN Olaf Eie Ole Julian Eilertsen Stein Mossige Georg Eldor Fjermestad Kai Ole Togstad Atle Eide PRESIDENT & CEO

25 24 KVERNELAND ANNUAL REPORT

26 Consolidated Profit and Loss Account (NOK million) Note Sales revenue 3, , ,048.8 Freight and royalty Operating revenue 1, 3 3, , ,981.2 Materials consumed 1, , Wages and other personnel expenses 4 1, Depreciation and amortisation Other operating expenses Operating expenses 3, , ,868.8 Operating profit Financial income Financial expenses Profit before tax Taxes 8, Profit before minority interests Minority interests Profit after minority interests Earnings Per Share (NOK) Fully Diluted Earnings Per Share (NOK) Consolidated Balance Sheet (NOK million) Note ASSETS Intangible assets Deferred tax asset 8, Tangible assets Investments and other Long-term financial assets Fixed assets , Stocks 12 1, , Trade debtors Other debtors Cash and deposits Current assets 2, , ,111.9 Total assets 3, , ,627.1 Note EQUITY AND LIABILITY Paid in capital Retained earnings Minority interests Equity 13 1, , Pension liabilities Deferred tax Provisions Long-term interest bearing debt 16, 17 1, Short-term interest bearing debt Other current liabilities Current liabilities Total equity and liabilities 3, , ,627.1

27 26 Consolidated Cash Flow Statement (NOK million) Profit before tax Depreciation and amortisation Taxes Equity Dividends Operating cash flow KVERNELAND ANNUAL REPORT Increase/decrease in stocks Increase/decrease in debtors Increase/decrease in current liabilities Changes in working capital employed Cash flow from operations Investments in fixed assets Acquisitions Increase/decrease in financial assets Sale of tangible fixed assets Cash flow before financing Increase/decrease in debt due beyond one year Increase/decrease in debt due within one year Issue of ordinary shares Effects of foreign exchange movements Net change in liquidity Liquid assets Kvernaland, 31 December 1999/Oslo, 3 February Steinar Olsen Anders Eckhoff Henrik Ager-Hanssen Per Otto Dyb CHAIRMAN DEPUTY CHAIRMAN Olaf Eie Ole Julian Eilertsen Stein Mossige Georg Eldor Fjermestad Kai Ole Togstad Atle Eide PRESIDENT & CEO

28 Accounting Principles The consolidated accounts of Kverneland ASA and its subsidiaries (Kverneland) have been prepared in accordance with Norwegian generally accepted accounting principles. These principles are similar to the international accounting standards (IAS). CONSOLIDATION PRINCIPLES Consolidated companies The consolidated financial statements for Kverneland include the financial statements of Kverneland ASA and its subsidiaries in which Kverneland ASA owns, directly or indirectly, more than 50 % of the shares or has controlling power. New subsidiaries are included from their respective dates of acquisition during the year. The results of subsidiaries disposed of during the year are included to the date of disposal. Elimination of shares in subsidiaries The purchase price of an acquired subsidiary is assigned to the subsidiaries identifiable assets and liabilities. When the fair value of the consideration exceeds the fair value of the subsidiaries separable net assets, the difference is treated as purchased goodwill and is capitalised and amortised over its estimated economic life. The value attributed to tangible fixed assets are depreciated at a rate reflecting the economic life of the assets. Currency translation relating to foreign subsidiaries Profit and loss items are translated into Norwegian kroner at average exchange rates. Assets and liabilities are translated at the exchange rates ruling on 31 December. Translation differences are recorded as part of shareholders equity. Elimination of transactions within the Group Unrealised profit in stocks which arise from internal transactions are eliminated from the consolidated stocks value. Changes in internal profit are eliminated from the operating profit/loss for the year. All other internal transactions, as well as debtors and liabilities between group companies, are eliminated in the consolidated accounts. Associated companies Companies where Kverneland owns between 20 % and 50 % and has a strategic interest will be accounted for in accordance with the equity method. VALUATION PRINCIPLES Cash and Deposits Cash and deposits include cash, deposits and financial instruments purchased for an original maturity of three months or less. Debtors Trade debtors and other debtors are valued net of estimated bad debts. Stocks Stocks of raw materials are valued at the lower of acquisition cost and replacement cost, following the first in first out principle. Work in progress and finished goods are included at the lower of cost and net realisable value after making due allowance for any obsolete or slow moving items. Cost comprises direct materials, direct labour and, an appropriate amount of works overhead expenses related to the state of manufacture of the goods concerned. Investment Investments classified as fixed assets are stated at cost, less provision for diminution in value. This also applies to investments in subsidiaries in the financial statement of Kverneland ASA. Tangible assets Tangible fixed assets are stated at cost plus write-ups less depreciation. Depreciation is provided on a straight line basis to write off the cost of fixed assets over their estimated useful lives. Monetary assets and liabilities in foreign currencies Monetary assets and liabilities denominated in foreign currencies are valued at the exchange rates ruling on 31 December. Financial instruments The company uses various financial instruments in order to reduce currency risk. The accounting treatment for financial instruments follow the intention of the contract. At the time of commitment, the financial instrument will be defined as either a balance sheet contract or a cash flow contract. A balance sheet contract is entered into to secure the account balances and order back-logs and will be accounted for in connection with these. A cash flow contract is entered into to secure future currency in- and outflows and will be accounted for in connection with these.

29 28 KVERNELAND ANNUAL REPORT Research and development Research and development costs, including market development, is charged against profits in the year in which it is incurred. Pension costs Kverneland ASA and its Norwegian subsidiaries have pension schemes which will give the employees future pension benefits. Except for some pension schemes in subsidiaries in Germany, the UK and in France, the pension schemes relating to the foreign subsidiaries are considered to be defined contribution plans. The calculation of net pension assets and net pension liabilities are based on economic and actuarial assumptions as outlined in Note 15. For the Norwegian pension schemes, the effect of changes in estimates, changes in schemes and deviation between real and estimated yield, are amortised over the remaining duration or expected life only when the accumulated effect represents more than 10 % of the pension assets or the pension liabilities whichever is the larger amount. Extraordinary items To be considered extraordinary, an item must be unusual in nature, material and not expected to occur often or regularly. Restructuring costs are recorded as ordinary items. Profits/losses on disposals of fixed assets are also recorded as ordinary items. Tax Taxes in the profit and loss account comprise the tax expense related to the fiscal result of the year. The tax expense consist of taxes payable and the net change in deferred taxes. Taxes are distributed on ordinary profit and extraordinary items. Tax related to equity transactions are posted against the equity.

30 Notes Consolidated All amounts in NOK million unless otherwise specifically stated. NOTE 1 PRODUCT AREAS AND MARKETS Net sales and operating profits derive from the following areas: Net sales 1. Tert 2. Tert 3. Tert Tert 2. Tert 3.Tert 1998 Arable , ,499 Grass , ,269 Sprayers Other Total 1,534 1,226 1,048 3, ,271 1,050 3,119 Operating profit 1. Tert 2. Tert 3. Tert Tert 2. Tert 3.Tert 1998 Arable Grass Sprayers Other Total All Kverneland product areas are within the same business area. Geographical distribution of net sales: Net sales 1. Tert 2. Tert 3. Tert Tert 2. Tert 3.Tert 1998 Nordic Western Europe ex Nordic 1, , ,000 Remaining markets Total 1,534 1,226 1,048 3, ,271 1,050 3,119 NOTE 2 ACQUISITIONS 1999 The German/French producer of agricultural machinery, RAU Agrotechnic, were acquired and consolidated into the Group accounts as from 1 January. The total asset of RAU was NOK 400 million at the time of acquisition. Since RAU was the minority share holder in Ferrag Ltd, the Group now owns 100 % of the Ferrag shares as of 1 January. The purchase price for RAU was DEM 9.3 million. On 1 August the Group bought 50 % of the shares in our former importer, A.M.T. spol. s.r.o, in the Czech Republic The Greenland Group was acquired 100 % and consolidated into the Group accounts as from 1 May. The total assets of the Greenland Group was NOK 1,020 million at the time of acquisition. The Group s ownership in Ferrag was increased to 75 % and consolidated into the Group accounts from 1 January Kverneland Maletti S.p.A (former Agricole Maletti S.p.A): The Group s ownership was increased to 100 % as from 1 January As of 31 December 1997 our newly established company Kverneland Silo-Wolff GmbH bought all the shares in Silo-Wolff KG. The total asset of the company was NOK 248 million. Kverneland Poland sp.zo.o was established in the autumn of 1997 to take over the role as importer/distributor in Poland as of 1 January Kverneland owns 94 % of the company and the local management owns the remaining 6 %. The sales support office, Kverneland USA Inc. was established in the autumn of NOTE 3 OTHER REVENUE Sales revenue for 1998 includes other revenue of NOK 64 million related to the sale of Kverneland Kvernex. Kverneland Kvernex was sold to the newly established company Komatsu KVX LLC in July The new company is owned 60% by Komatsu America and 40 % by Kverneland ASA. NOTE 4 WAGES AND REMUNERATION Wages 1, Average number of employees 3,671 2,952 2,047

31 30 Notes Consolidated NOTE 5 OPERATING EXPENSES Operating expenses include loss on receivables as follows: Actual loss of the year Change in bad debt allowance Settlement for claims previously written off Loss on receivables in the Profit and Loss Account KVERNELAND ANNUAL REPORT Operating expenses include research and development costs as follows: Research and development The Group carries out research and development related to new products and improvement of existing products. The Group expects that the total income from the ongoing research and development will correspond to the cost accrued. NOTE 6 FINANCIAL ITEMS Financial Income Interest income Cash discounts 4.5 Currency exchange gain Other Total financial income Financial expenses Interest expenses Currency exchange loss 3.1 Other Total financial expenses NOTE 7 CURRENCY CONTRACTS The Group s cash flow is mainly in other currencies than NOK, with Euro being the dominant currency. The Group uses forward exchange contracts to secure future in- and outflows in foreign currency to change the currency mix of the Group s balance sheet and order back-log. In addition the Group uses currency swaps in order to adjust the liquidity in each currency. Outstanding currency contracts as per : Currency Bought/sold Net amount Average remaining days American dollars (USD) Sold 11,8 175 British pounds (GBP) Sold Canadian dollars (CAD) Sold Danish kroner (DKK) Sold Euro (EUR) Bought Norwegian kroner (NOK) Bought Swedish kroner (SEK) Bought NOTE 8 REVISED OPENING BALANCE The new accounting act effective from has suspended the prohibition against the booking of net deferred tax assets in the balance sheet. As per the Group had a net deferred tax asset of NOK 16.1 million. This deferred tax asset is booked in the revised opening balance as per The taxes paid for 1997 shows a reduction of NOK 16.1 million compared to the official accounts and the taxes paid for 1998 shows an equivalent increase.

32 Notes Consolidated NOTE 9 FIXED ASSETS Goodwill/ Machinery Plant Total Intangible & under Site and Tangible Assets equipment Buildings construction Property Assets Acquisition cost , ,657.2 Write-up per Additions Additions Group produced tangible assets Disposals Acquisition cost , ,811.5 Accumulated depreciation ,000.5 Depreciation Net book value Total Economic life 5 10 year 3-6 year year Rent operational leasing Capitalised amount related to financial leasing The opening balance of the intangible assets consist only of goodwill. The Group depreciate goodwill over 10 years. Goodwill is mainly related to the distribution channels obtained through the various acquisitions. The expected economic life of these are minimum 10 years. In the pro forma opening balance presented in note 11 to the 1998 financial statement of the Group, the difference between the adjusted equity of RAU and the acquisition cost was estimated at NOK 25 million and reported as negative goodwill. This has now been allocated to the appropriate balance sheet items. The goodwill related to the acquisition of Greenland has been increased by NOK 8.8 million as per the time of acquisition due to new information about deferred tax at the time of consolidation. The additions in 1999 is due to the purchase of the production rights of a new bale wrapper. These rights will be amortised on a straight-line basis over five years. NOTE 10 INVESTMENTS AND OTHER LONG-TERM FINANCIAL ASSETS Company name Ownership % Purchase price Book value (1.000) Tritec AS Komatsu KVX LLC Other investments owned by Kverneland ASA Investments owned by Kverneland ASA Other investments owned by subsidiaries Total In addition to these investments, the Group has long-term receivables of NOK 7.1 million. NOTE 11 INVESTMENTS IN SUBSIDIARIES Company name Time of acquisition Business address Ownership % Owned by Kverneland ASA Kverneland Klepp AS Kvernaland, Norway Kverneland Nærbø AS Nærbø, Norway Kverneland Norge AS Kvernaland, Norway Kverneland Sverige AB Nyköping, Sweden Kverneland Poland sp.z.o.o Torun, Poland Kverneland Inc Drummondville, Canada Kverneland USA Inc Rosemont, USA Kverneland Eiendom AS Kvernaland, Norway Globus AS Brummunddal, Norway Kverneland IT AS Kvernaland, Norway A.M.T. spol. s.r.o Kraluv Dvur, Czech Republic Kverneland Holding (DE) GmbH Soest, Germany 1.00 Kverneland Europe b.v Nieuw Vennep, The Netherlands

33 32 Notes Consolidated NOTE 11 (CONTINUES) Company name Time of acquisition Business address Ownership % KVERNELAND ANNUAL REPORT Owned by subsidiares Kverneland Holding (DE) GmbH Soest, Germany Kverneland Grass nv Nieuw-Vennep, The Netherlands Kverneland Holding (DK) AS Kerteminde, Denmark Kverneland Holding France SAS Saint Jean de Braye, France Kverneland Holding (UK) Ltd Haydock, United Kingdom Vicon Agricultural Holdings Ltd Market Drayton, United Kingdom Kverneland Modena Sp.A Modena, Italy Kverneland Iberica SA Barcelona, Spain Machinenfabrik RAU GmbH Weilheim, Germany RAU Agrotechnic SRL Modena, Italy Landtechnich Hohenmölsen GmbH Hohenmölsen, Germany RAU Agrotechnic Spotka Zoo Poznan, Poland Kverneland (DK) AS Kerteminde, Denmark Kverneland Kerteminde AS Kerteminde, Denmark Kverneland Ireland Ltd Kilkenny, Ireland Kverneland Devizes Ltd Devizes, United Kingdom Kverneland (UK) Ltd Haydock, United Kingdom Ferrag Ltd Haydock, United Kingdom Vicon Ltd Market Drayton, United Kingdom Greenland Seed Drills Ltd Market Drayton, United Kingdom Kverneland Deutschland GmbH Lauenförde, Germany Kverneland Soest GmbH Soest, Germany Kverneland Accord GmbH&CO KG Soest, Germany Kverneland Accord Verwaltungs GmbH Soest, Germany Kverneland Vermögensverwaltungs GmbH Soest, Germany Accord Fähse GmbH Soest, Germany Greenland Vertriebs GmbH Lauenförde, Germany Vicon Belgium nv Ternat, Belgium Kverneland Gottmadingen Verw. GmbH Gottmadingen, Germany Kverneland Gottmadingen GmbH & CO KG Gottmadingen, Germany Kverneland Geldrop bv Geldrop, The Netherlands Vicon Friesland bv Nieuw-Vennep, The Netherlands Machinenfabriek & Meetalgieterij Bosch bv Geldrop, The Netherlands Machinenfabriek Nijverdal b.v Geldrop, The Netherlands Kverneland International bv Nieuw-Vennep, The Netherlands Kverneland Nieuw Vennep bv Nieuw-Vennep, The Netherlands Vissers bv Nieuw-Vennep, The Netherlands Kverneland Benelux bv Dronten, The Netherlands Multinorm bv Nieuw-Vennep, The Netherlands A.M.T. Slovakia s.r.o Nove Zamky, Slovakia Kverneland France, SA Saint Jean de Braye, France Kverneland Orleans, SA Saint Jean de Braye, France RAU Agrotechnic SA Les Landes Genusson, France Sider, SA Bourgoin Jallieu, France Sicam SA Les Landes Genusson, France Jean de Bru S.A Carcasonne, France RAU SARL Connantre, France Kverneland Finance Lauenförde, Germany With the exception of Kverneland Poland the voting share equals the ownership. For Kverneland Poland the voting share is 70 %. NOTE 12 STOCKS Consolidated stocks comprise Raw materials Work in progress Finished goods Total stocks 1, ,

34 Notes Consolidated NOTE 13 EQUITY Paid in capital Retained earnings Effect of step by step acquisitions 10.6 Translation differences Profit of the year (less dividend payable) Total retained earnings Minority interests Change in minority interests Minority interests share of profit of the year Total minority interests Total equity 1, , In May 1998 a private placement was carried out towards a foreign investor, related to the acquisition of Greenland. Offering comprised 751,661 shares with an offering price per share of NOK The translation differences in 1999 reflects a 10 % strengthening of the Norwegian kroner. NOTE 14 MINORITY INTERESTS Company Minority interests Equity ratio Profit share Kverneland Ireland 49% 1.7 Kverneland Poland 6% RAU companies Various RAU Czech Republic 50% Total NOTE 15 PENSION AND PENSION OBLIGATIONS Kverneland ASA, the Norwegian subsidiaries and some foreign subsidiaries, have pension schemes that entitle its members to defined future benefits. These benefits are primarily dependent upon the number of years of employment, the salary level at the time of retirement and the size of pension payments from the government. The Norwegian pension obligations are insured and managed by life insurance companies. In addition the Group has some uninsured pension obligations which includes obligations to former owners of subsidiaries and pension obligations for top management. The uninsured pension obligations also includes estimated futures obligations related to AFP (early retirement scheme) and uninsured pension schemes outside Norway. Pension obligations related to top management are partly insured through life insurance companies. Some of the subsidiaries outside Norway have pension schemes that are defined as contribution plans. These pension schemes are either managed by a life insurance company or by the Group company. These plans may be specific for the company or be multiple-employer plans. Pension liabilities related to pension schemes managed by Group companies are included as uninsured pension plans. Norwegian insured pension schemes Pension cost 1999 Net present value of current year pension earnings 4.9 Interest expenses on pension obligations 6.9 Return on pension fund -9.7 Profit from changes in estimates 0.8 Net pension cost 2.9 Reconciliation of financial status 1999 Pension obligations to date 88.0 Calculated net effect of future salary increase 20.8 Calculated pension obligations Pension funds (at market value) Effect of changes in estimates not charged to profit and loss 9.4 Net pension asset 37.8 The Norwegian insured pension schemes cover 1,001 people. The net pension assets are included in the Group s Balance Sheet in its entirety since the total obligation is higher than the market value of the funds.

35 34 Notes Consolidated Non-Norwegian financed plans Reconciliation of financial status 1999 Calculated pension obligations Pension funds (at market value) Net pension asset 10.5 KVERNELAND ANNUAL REPORT The non Norwegian insured pension schemes cover 237 people. The total net pension asset of the non Norwegian plans are included in the Balance Sheet. For these plans, there is a net income of NOK 10.5 million in Operational pension schemes Reconciliation of financial status 1999 Pension obligations to date 98.4 Calculated net effect of future salary increase 17.6 Calculated pension obligations Effect of changes in estimates not charged to profit and loss -8.2 Net pension obligations Operational pension schemes cover 2,139 people. The pension cost for these schemes in 1999 is NOK 3 million. Economic assumptions (%) 1999 Discount rate 7.0 Expected future increase in salary 3.3 Expected future increase of pensions 1.5 Expected increase in the basis for calculation of government contributions 2.5 Expected return on pension funds 8.0 Expected percentage of qualifying employees to use the pension scheme AFP 45.0 The actuarial calculations assumes commonly used insurance assumptions for demographic factors and turnover rates. Comparable figures have not been included due to information not being available. NOTE 16 LONG-TERM INTEREST BEARING DEBT The Group had the following long-term facilities at the end of 1999: NOK 700 million 7 years Multicurrency Revolving Credit Facility established in April 1997 NOK 500 million 4 years Multicurrency Revolving Credit Facility established in December 1998 Drawings 1999 Drawings 1998 Drawings 1997 Average Average Average Currency Amount NOK int.rate Amount NOK int.rate Amount NOK int.rate NOK % % DEM % NLG % DKK % EUR % Total 1, In addition the Group has mortgages on buildings totalling NOK 77.5 million. The remainder of the account balance is mainly related to financial leases. Drawings on the above mentioned credit facility are due at the end of each interest period (1, 3 or 6 months), and are replaced by new drawings according to the Group s need and within the 7 and 4 year facilities. The interest rate on both facilities are LIBOR plus a margin. The Multicurrency Revolving Credit Facility Agreement includes a clause about solidity. This clause is fulfilled.

36 Notes Consolidated NOTE 17 MORTGAGES Long-term mortgage debt Overdraft facility used Total mortgaged debt Debtors Stocks Machinery and equipment Buildings Site and property Total value mortgaged assets NOTE 18 TAXES Nominal tax rates in the various countries have been applied in the calculation of deferred taxes. However, in calculation of deferred tax pertaining to purchase price allocations on acquisitions, the discounted tax rates as reflected in the purchase price have been used. Tax expense Current year tax payable Net change in deferred tax Tax expense Foreign part of total tax expense Reconciliation of actual tax expense to calculated tax based on the tax rate of the parent company Profit before tax Calculated tax, using the tax rate of the parent company (28%) Current year tax losses not recognised as deferred tax assets Effect of differences in tax rates as compared to parent company Tax effect on permanent differences Utilisation of tax losses carry forward Other Tax expense Payable tax comprises: Current year taxes payable on taxable income Other Taxes payable Deferred tax/deferred tax asset Tax depreciation Pensions Effect of changes in tax rates Other temporary differences Other Sum deferred tax Provisions not tax deductible Write down of assets Tax losses carry forward Pensions Other Tax assets not recorded Sum deferred tax liabilities Deferred tax/deferred tax asset net

37 36 Notes Consolidated Tax losses carry forward by year of expiry Amount Subsequent expiry date 21.3 No expiry date 1, ,206.5 KVERNELAND ANNUAL REPORT Deferred tax assets of NOK 52.4 million related to losses carry forward is accounted for. This asset is expected to be utilised through future earnings. NOK 25.9 million out of total change in deferred tax has been recorded to the profit and loss statement. The remainder has been recorded against equity. NOTE 19 OTHER CURRENT LIABILITIES Trade creditors Accrued VAT, tax, social welfare contribution etc Wages Provisions for guarantee obligations Taxes payable Dividend payable Operational provisions Other current liabilities Total NOTE 20 GUARANTEE OBLIGATIONS At the end of 1999 the Group had guarantee obligations of NOK million compared to NOK million in In addition the Group has overdraft facilities for the companies in the Netherlands with a limit of NLG 5 million. As per 31 December 1999 the Group used NLG 5 million.

38 Kverneland ASA Profit and Loss Account (NOK million) Note Sales revenue Wages and other personnel expenses Depreciation and amortisation Other operating expenses Operating expenses Operating profit (loss) Financial income Financial expenses Profit before tax Taxes Profit after tax Group contribution received Allocated to dividend Kverneland ASA Balance Sheet (NOK million) Note ASSETS Deferred tax asset Tangible assets Shares in subsidiaries Long-term debtors, Group companies 1, , Investments and other long-term financial assets Fixed assets 1, , Debtors, Group companies Other debtors Cash and deposits Current assets Total assets 2, , EQUITY AND LIABILITY Paid in capital Retained earnings Equity 6, Pension liabilities Deferred tax Provisions Long-term interest bearing debt 9, 11 1, Short-term interest bearing debt Other current liabilities Current liabilities Total equity and liabilities 2, ,

39 38 Kverneland ASA Cash Flow Statement (NOK million) Profit before tax Depreciation and amortisation Taxes Group contribution Equity dividend Operating cash flow KVERNELAND ANNUAL REPORT Increase/decrease in debtors Increase/decrease in current liabilities Changes in working capital employed Cash flow from operations Investments in fixed assets Increase/decrease in financial assets Sale of fixed assets Cash flow before financing , Increase/decrease debt due beyond one year Increase/decrease debt due within one year Increase in equity Net change in liquidity Liquid assets

40 Accounting Principles and Notes to the accounts Kverneland ASA The accounts for Kverneland ASA have been prepared in accordance with Norwegian generally accepted accounting principles. These are described in the notes to the consolidated accounts. All amounts in NOK million unless otherwise specified NOTE 1 SALES REVENUE Sales revenue include income from rent of property to the Norwegian operations in the Group and management fee from Group companies. NOTE 2 WAGES AND REMUNERATION Wages Wages Payroll tax Pension cost Other cost Total wages Payment to management (NOK 1,000) President & CEO Board of Directors Wages/remuneration 2,314 1,185 Pension cost 169 Other remuneration 189 If the company terminates the employment of the Chief Executive Officer, he is entitled to a compensation corresponding to 12 months of salary beyond the termination period of 6 months. Any income earned by the Chief Executive Officer in another position in this 12 months period will be deducted from the above mentioned compensation. The profit and loss account for Kverneland ASA includes auditor fees of NOK 0.5 million in In addition the accounts include consultant fees of NOK 0.7 million paid to the auditors. NOTE 3 FINANCIAL ITEMS Financial Income Interest income Currency exchange gain Dividend Other 0.2 Total financial income Financial expenses Interest expenses Currency exchange loss 19.9 Other Total financial expenses NOTE 4 FIXED ASSETS Machinery Buildings Site Total and and fixed equipment property assets Acquisition cost Write-up per Additions Disposals Acquisition cost Accumulated depreciation Depreciation Net book value Economic life 3 10 years years Kverneland ASA have no financial leasing agreements. Rent related to operational leasing is NOK 0.4 million in Depreciation for 1999 includes write-down of formerly capitalised expenses related to SAP. The SAP system has been sold to Kverneland IT AS in 1999.

41 40 Notes to the accounts Kverneland ASA NOTE 5 SHARES IN SUBSIDIARIES AND OTHER COMPANIES Kverneland ASA s ownership in subsidiaries and other companies are specified in note 10 and 11 of the Group accounts. KVERNELAND ANNUAL REPORT NOTE 6 EQUITY Paid in capital Share capital Share capital Issue of ordinary shares 7.5 Share capital Share premium reserve Share premium reserve Issue of ordinary shares Share premium reserve Paid in capital Retained earnings: Retained earnings Group contribution received Implementation of pension accounting 1.1 Profit less equity dividend payable Retained earnings Total equity In May 1998 a private placement was carried out towards a foreign investor, related to the acquisition of Greenland. Offering of 751,661 shares with an offering price per share of NOK NOTE 7 SHAREHOLDER INFORMATION The share capital is NOK 97.2 million 9,715,301 shares of NOK The following shares are owned by members of the Board of Directors and Group Management: Board of Directors Anders Eckhoff 5,000 Stein Martin Mossige (employee representative) 350 Group Management Atle Eide 10,000 Ellinor Grude 150 Eirik Larsen 3

42 Notes to the accounts Kverneland ASA NOTE 7 SHAREHOLDER INFORMATION (CONTINUES) The 20 largest shareholders in Kverneland ASA at 31 December 1999 Company No. of shares % of all shares Chase Manhattan Client account 918, Orkla ASA 913, Storebrand Livsforsikring 681, Kommunal Landspensjonskasse 473, Vital forsikring ASA 361, Gjensidige Nor 256, K-Holding AS 250, Norsk Hydros Pensjonskasse 224, Avanse Forvaltning 176, Folketrygdfondet 173, K-Vekst Aksjefondet 166, Odin Norge 165, Hartog & Co. A/S 160, Union Bank of California Client account 130, Bosten Safe Dep. & Trust Client account 128, Avanse Forvaltning 117, Vår Livsforsikring 114, Bankers Trust Company 114, Storebrand AMS 109, Tine Pensjonskasse 99, Total 5.734, NOTE 8 PENSION COST Kverneland ASA have pension schemes that entitle its members to defined future benefits. The pension schemes cover 19 people. The benefits are primarily dependent upon the number of years of employment, the salary level at the time of retirement and the size of the pension payments from the government. The pension schemes are insured and managed by a life insurance company. Effective from the pension obligations related to the insured pension plans are included in the company accounts. The implementation is booked against equity. The total effect of the implementation is NOK 1,1 million. In addition Kverneland ASA has uninsured pension obligations. These includes top management and estimated future obligations related to the early retirement scheme AFP. Insured plans Uninsured plans Pension cost Net present value of current year pension earnings Interest costs from pension obligations Return on pension fund -0.4 Profit/loss from changes in estimates 0.2 Net pension cost Insured plans Uninsured plans Uninsured plans Reconciliation of financial status Pension obligations to date Calculated net effect of future salary increase Calculated pension obligations Pension funds (market value) 6.1 Effect of changes in estimates not charged to profit and loss Net pension asset (+)/ obligations (-) The net pension asset on the insured pension plans are included in the company s balance sheet since the total obligations is higher than the market value of the funds.

43 42 Notes to the accounts Kverneland ASA Economic assumptions Discount rate (%) Expected future increase in salary (%) Expected future increase in pension (%) Expected increase in the basis for calculation of government contributions (%) Expected return on plan assets (%) KVERNELAND ANNUAL REPORT The actuarial calculations assumes commonly used insurance assumptions for demographic factors and turnover rates. NOTE 9 LONG-TERM INTEREST BEARING DEBT Long-term debt Multicurrency Revolving Credit Facility 1, Mortgage debt Total long-term debt 1, NOTE 10 TAXES Tax expense Current year tax payable Net change in deferred tax Tax expense Reconciliation of actual tax expense to calculated tax Profit before tax Calculated tax (28 %) Tax effect on permanent differences Tax expense Payable tax comprises: Current year taxes payable on taxable income Payable tax related to Group contribution Taxes payable Deferred tax/deferred tax asset Tax depreciation 8.5 Other temporary differences Sum deferred tax Provisions not tax deductible 1.0 Pensions Sum deferred tax liability Deferred tax/deferred tax asset net NOTE 11 MORTGAGES Mortgage debt Buildings Site and property Net book value of mortgaged assets NOTE 12 GUARANTEE OBLIGATIONS At the end of 1999 Kverneland ASA had guarantee obligations on behalf of their subsidiaries of NOK million compared to NOK 63.4 million in Kverneland ASA has a cash pool system with an overdraft facility where all subsidiaries in Norway, Sweden, Denmark, UK and Germany are participating, and where Kverneland ASA is responsible for the total overdraft of the Group. The limit of this overdraft facility is NOK 100 million but it was not used as at

44 Auditors Report for 1999 To the Annual Shareholders Meeting of Kverneland ASA We have audited the annual financial statements of Kverneland ASA as of 31 December 1999, showing a loss of NOK 9,9 million for the parent company and a profit NOK 20,8 million for the group. We have also audited the information in the Board of Directors report concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss. The financial statements comprise the balance sheet, the statements of income and cash flows, the accompanying notes and the group accounts. These financial statements are the responsibility of the Company s Board of Directors and Managing Director. Our responsibility is to express an opinion on these financial statements and on the other information according to the requirements of the Norwegian Act on Auditing and Auditors. We conducted our audit in accordance with the Norwegian Act on Auditing and Auditors and Norwegian good auditing practice. Good auditing practice require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. To the extent required by law and good auditing practice an audit also comprises a review of the management of the Company s financial affairs and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements are prepared in accordance with the law and regulations and present the financial position of the Company and the Group as of December 31, 1999, and the results of its operations and its cash flows for the year then ended, in accordance with Norwegian good accounting practice the company s management has fulfilled its duty to produce a proper and clearly set out registration and documentation of accounting information in accordance with the law and good accounting practice the information in the Board of Directors report concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss are consistent with the financial statements and comply with the law and regulations. Oslo, 3 February 2000 PricewaterhouseCoopers DA Per Hanstad STATE AUTHORISED PUBLIC ACCOUNTANT (NORWAY) Note: This translation from Norwegian has been prepared for information purposes only

45 44 Historic figures KVERNELAND ANNUAL REPORT (NOK million) Revenue and Income Net sales 3,808 3,119 1,981 1,952 1,618 1,445 1, ,087 Operating profit Profit (loss) before minority and tax Taxes Net income (loss) Capital Debtors Stocks 1,144 1, Interest bearing liabilities 1,230 1, Capital employed 2,311 2,237 1,247 1, Equity 1,022 1, Total assets 3,062 3,038 1,627 1,479 1, Investments in fixed assets Profitability Operating margin (%) Return on capital employed (%) Return on equity (%) Equity ratio (%) Liquidity Cash flow from operations Shares Number of shares at 31 Dec. (1.000) 9,715 9,715 8,964 8,964 8,964 7,467 7,420 5,565 5,565 5,565 Market capitalisation at 31 Dec. (NOK million) 1,622 1,822 1,076 1,578 1, Equity per share at 31 Dec. (NOK) Share price at 31 Dec. (NOK) Share price High (NOK) Shareprice Low (NOK) Payout ratio (%) Earnings Per Share (NOK) Cash Flow Per share (NOK) Employees Number of employees at 31 Dec. 3,508 3,273 2,147 2,032 1,621 1,469 1, ,021 1,228

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47 46 Definitions of key figures KVERNELAND ANNUAL REPORT Interest bearing debt Short-term and long-term interest bearing debt. 2. Capital employed Total assets less short-term non interest bearing debt. 3. Equity Untaxed equity is 100% included before From 1991 untaxed equity is transferred partly to equity, partly to deferred tax. From 1993 the effect of the new accounting standard for pension is included in equity. 4. Operating margin Operating profit as % of net sales. 5. Return on capital employed Operating profit plus financial income as % of average capital employed. 7. Equity ratio Equity as % of total assets. 8. Share price at 31 Dec. Share price adjusted for share issues. 9. Share price high/low Applicable year's highest and lowest share price adjusted for share issues. 10. Payout ratio Dividend as % of net income after tax. 11. Earnings Per Share Net income after tax divided by average number of shares. 12. Cash Flow Per Share Cash flow from operations divided by average number of shares. 6. Return on equity Net income after tax as % of average equity. (NOK) Share price development (LAST 2 YEARS) KVERNELAND (KVE) ALL SHARE INDEX, OSLO STOCK EXCHANGE

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49 48 Shareholders' Policy and Investor Relations KVERNELAND ANNUAL REPORT Financial targets The Board has established the longterm yield target on capital employed for the Group to be risk free interest with the addition of 8 % covering risk. Capital structure To ensure freedom of action and based on risk assessment, Kverneland has deter mined to maintain a solvency ratio for the Group of at least 40 % of total assets. This should help the company ensure it has access to the necessary loan capital on reasonable terms. Shareholders earnings Kverneland s aim is that shareholders should, in the long-term, have a yield that is competitive in relation to other investments having the same degree of risk. The yield should reflect the value added of the company and should be expressed in the form of dividend and an increase in the value of the company s shares. The sum of the dividend and the increase in share price should give the shareholders an annual yield that at least corresponds to risk-free placements plus addition for risk. Share issues It is the company s policy, by possible new share issues, to ensure that a dilution of the shareholders value does not happen. Share issues will primarily be effected with preference for existing shareholders. Private share issues may be effected if they are considered favourable for existing shareholders, for instance when related to acquisitions of or mergers with other companies. Voting rights One share gives the right to one vote at the General Assembly. Investors relations/financial information Kverneland is committed to disclose relevant information promptly in order to enable shareholders, investors and the financial market in general to undertake correct company evaluation and pricing. In connection with its presentation of interim results, Kverneland regularly holds presentations for investors and analysts at home and abroad. The objective is to increase the understanding and enhance knowledge about Kverneland, so that at any given time the share price will reflect the company s status and future prospects. In addition, the company will give the stock market ongoing information about events of importance to the Group. The Kverneland Group publishes written reports in Norwegian and English for the 1st and 2nd four-month periods as well as an annual report. As from year 2000 the Kverneland Group will start reporting on a quarterly basis. In 2000, Kverneland will publish the quarterly results on 28 April, 4 August and 27 October. The General Assembly will take place on 27 April. The Kverneland share The Kverneland share is listed on the Oslo Stock Exchange (ticker symbol KVE). A total of 8.4 million Kverneland shares were traded, where 5.4 million were traded on the Oslo Stock Exchange with a trading value of NOK 984 million. This represents 56 % of the average outstanding number of Kverneland shares during The total number of outstanding shares at 31 December 1999 is 9.7 million. The Kverneland share traded at NOK at the end of 1998 and the share price at the end of 1999 is NOK This represents a decrease in 1999 of 10.9 %. During the same period, the OSE index on the Oslo Stock Exchange increased by 45.5 %, while the industrial index increased by 48.9 %. The high and low for 1998 were NOK and NOK respectively. The Board of Directors in Kverneland proposes that for 1999 the dividend per share is set to NOK 1.00, a reduction from NOK 4.00 in This represents a distribution ratio of 47 %, an increase from 22 % in The General Assembly will be held on 27 April 2000, and the share will be quoted ex dividend on the following day. The dividend will be paid out in the middle of May to those registered as shareholders with the Norwegian Registry of Securities, the Verdipapirsentralen (VPS), as at 27 April Shareholder profile There were 3,708 shareholder in Kverneland as per 31 December 1999 of which 121 were non-norwegians. The number of shares held by non-norwegians has reduced by 4.1 percentage points during 1999 and stands at 17.4% at year-end. OWNERSHIP STRUCTURE AT No. of No. of No. of Holding No. of shares shareholders shareholders as a % shares as a % , , ,001 1, , ,001 10, , , ,286, Total 3, ,715,

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51 Kverneland shall become the global market leader and the most profitable supplier of quality equipment and services to the professional farming community DESIGN: MELVÆR & LIEN RRA7 PHOTO: PETTER HEGRE PRINT: BRYNE OFFSET

52 Kverneland ASA, 4355 Kvernaland, Norway. Telephone Telefax