SAURER AND SOCIETY Oerlikon Barmag

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					CONSOLIDATED FINANCIAL HIGHLIGHTS.


KEY DATA
(CHF 1000)                                                    2000        1999    Change in %
Sales                                                     2 223 813   1 387 856          60.2
Operating profit (loss) before amortization of goodwill    133 608     (44 015)
% of sales                                                    6.0%       (3.2)%
Amortization of goodwill                                    11 423      12 687
Operating profit (loss)                                    122 185     (56 702)
Group profit (loss)                                         72 799     (70 240)
% of sales                                                    3.3%       (5.1)%
Depreciation and amortization                              113 388      93 462           21.3
% of sales                                                    5.1%        6.7%
Cash flow (net cash from operating activities)             170 837     (14 545)
% of sales                                                    7.7%       (1.0)%
Employees (year-end)                                        11 219       7 774           44.3
Capital expenditures                                       114 832     101 207           13.5
Total assets                                              2 045 026   1 577 934          29.6
Shareholders’ equitiy                                      722 493     652 110           10.8
% equity financing                                           35.3%       41.3%
Stock market capitalization (year end)                    1 157 250   1 186 567          (2.5)


SHARE SUMMARY (in CHF)
Shareholders’ equity                                        507.85      455.47           11.5
Net income (loss)                                            50.03      (50.07)
Cash flow (net cash from operating activities)              120.08      (10.16)
Capital repayment (proposal for 2000)                            8            –




                                                                                            1
INDEX.




THE FISCAL YEAR 2000.   SOCIAL TRENDS: THE                  TEXTILE INDUSTRY:
                        NETWORKED SOCIETY.                  TECHNOLOGY TRENDS.




        IMAGES OF THE            THE ROLE OF APPAREL:                NEW MATERIAL:
        FUTURE.                  BETWEEN SMART FABRIC AND            BOOM FOR
                                 WASHABLE COMPUTING.                 INNOVATIVE TEXTILES.



    5   15               16       20                         22       26




2
ECONOMIC TRENDS:        AUTOMOBILE 2.01:                 THE ANNUAL REPORT 2000.
THE GLOBAL              THE OFFICE ON WHEELS.            FINANCIAL REPORT.
ECONOMIC SYSTEMS.




         E-COMMERCE:          SURFACE TECHNOLOGY:                  APPENDIX.
         BROADBAND            LIMITLESS POSSIBILITIES.
         CONSUMPTION.



 28       30             34    36                         39        74




                                                                                   3
THE FISCAL YEAR 2000.


The year 2000 developed positively in all areas of the Group. The continuous recovery of the most important markets, the high
interest in our new products and the increasing benefits from efficiency projects led to a marked improvement of the most impor-
tant key data.
   Compared to the prior year, order intake increased by 67% to CHF 2,374 million (of which 33% due to acquisitions) and
sales increased by 60% to CHF 2,224 million (of which 33% due to acquisitions). The strong rise in sales, the substantially more
favorable cost structure and the higher percentage share of sales in new products resulted in a marked increase in profitability.
The result before interest and taxes (EBIT) amounted to a profit of CHF 122 million, following a loss in the prior year of CHF 57
million. EBIT is stated after deduction of the amortization of goodwill in the amount of CHF 11 million. The EBITDA (Earnings
before interest, tax, depreciation and amortisation) increased from CHF 37 million to CHF 236 million. Following a loss of CHF
70 million in the prior year, the Group’s net income improved to a positive CHF 73 million.
   Capital expenditures amounting to CHF 115 million were primarily attributable to the Transmission Systems business unit
(42%), whilst 46% of the total capital expenditures were attributable to the Textile units and 12% to Surface Technology. The
net cash flow from operating activities amounted to CHF 171 million, whilst the funding requirement for the acquisition of
Barmag amounted to CHF 409 million; net debt thus rose to CHF 280 million and the equity ratio amounted to 35% (prior year
41%).


Continuous increase in all business units. Following the substantial decline due to market conditions in the prior year, Saurer
Textile Systems, which is active in the natural fiber sector, achieved an impressive increase in sales. The even greater increase in
order intake, caused by the economic upturn in the worldwide textile machinery business for staple fibers, led to an increased
level of orders on hand at the end of the year. This ensures a high degree of utilization for the bulk of the capacities until the
second half of the year 2001.
   Within the context of the strategic completion of the range of products for spinning machinery, the acquisitions of the
Barmag and Neumag companies, which are leaders for the spinning of synthetic fibers, were completed during the previous fiscal
year. These two companies were included in the Group’s financial accounts from May 1, 2000, and September 1, 2000, respecti-
vely. Combined they contributed CHF 469 million and CHF 406 million to order intake and sales, respectively, during the corre-
sponding periods. The operating result of these two newly acquired companies during this period was at break-even. Encouraging
progress has been made in the integration of these companies into the SaurerGroup. Teams covering the companies systemati-
cally analyzed the areas of purchasing and logistics, production, marketing and sales, research and development, EDP and human
res-ources to formulate synergies, and thus, identify a future course of action. Sustainable cost savings with an annual effect of
over CHF 15 million will result from the synergy projects implemented to date.
   In spite of continued low volumes in its traditional markets for agricultural vehicles and construction equipment, Transmission
Systems achieved a 23% increase in sales from new projects in the automobile sector. Particularly the new projects in the four-
wheel drive and luxury sport automobile sectors will maintain increasing internal growth. As a result of high capacity utilization,
the good level of earnings and cash flow margins prevailing before the decline in the agricultural sector have again been achieved.
   In Surface Technology the large investments in capacity renewal and extension registered their first successes. Increase in sales
amounted to 17%, of which approximately 8% were attributable to the effect of foreign currencies. However, further improve-
ment in operating results has fallen far short of medium-term objectives.
   Growth in sales, without taking acquisitions into consideration, was realized in the Textile division even though the number
of employees was reduced by 305, versus the prior year. Not included in those are 394 limited employment contracts associated
with short-term output. Through the acquisitions of Barmag and Neumag 3,123 new employees joined the Group, resulting in a
total number of 11,219 employees in the SaurerGroup as at 31.12.2000 (7,774 in prior year).
   On June 26, 2000, the SaurerGroup issued a 2 1⁄ 4% convertible loan in the amount of CHF 230 million, repayable on June 26,
2005. The conversion right can be exercised at any time at a conversion price of CHF 1,260 per registered share of Saurer AG.




                                                                                                                                   5
Strategic direction of the SaurerGroup. Saurer intends to be an attractive partner for its customers, suppliers, employees and
shareholders. This entails maintaining strong market positions in individual business segments, leading in technology utilization
and by providing exceptional service. This will result in a continuous internal growth of sales and earnings. Market leadership in
all areas will be strengthened or attained through specific acquisitions.
      In Textile Machinery, Saurer’s focus is on machinery and equipment for the production of yarn. By applying this focus also in
cooperation with third parties Saurer should continue its evolution towards becoming an integral supplier for yarn production
equipment. As the use of yarns grows worldwide at a long-term average of approximately 3–4% per annum, corresponding
roughly to the expected increase in productivity of a new generation of machinery, significant market growth for spinning
machinery is not necessarily anticipated. Growth will be attained through additional improvements in market position, comple-
mentary services and increasing consolidation in the industry.




            TEXTILE MILL CONSUMPTION.                                                        TEXTILE VALUE CHAIN.
                                                                in 1000 tons
    40000
                                                                                                         Synthetic staple fiber – Neumag

    35000                                                                                                                                                        Filament – Barmag
                                                                                                               Spinning preparation
                                                    Manmade total
    30000
                                                                                               Air-jet
                                                                                                          Open-end/ring-spinning/winding – Saurer                Texturing – Barmag
                                                                                              spinning
    25000
                                                                                                                                                                                      Non-
                                                                                                                                                                                      woven
    20000                                                                                                                                    Twisting – Saurer

                                                  Cotton
    15000                                                                                                                      Weaving/knitting

                          Manmade staple
    10000                                                                                                                             Finishing
                                                    Manmade filament
    5000                                                                                                                         Embroidery
                                                                               Source: PCI




                                  Wool
        0                                                                                                                       Manufacturing
            1970   1975   1980     1985    1990       1995     2000    2005




      Saurer traditionally has held strong positions in staple fiber processing machinery for cotton, yarn blends and wool. As a result
of the Barmag and Neumag acquisition during the course of the fiscal year 2000, the strategic gap in the faster growing mar-
kets for synthetic yarns could be closed. As such, Saurer has essentially concluded the “rounding-out” of its product portfolio in
the spinning machinery sector.
      The primary focus during the next few years in the textile sector will be placed on the further increasing operating perfor-
mance in areas of 1. Serving customers, 2. Innovation, 3. Logistics, as well as further improvement of resistance to the strong
fluctuations in the textile machinery market.
      Over the next few years, Saurer’s expansion emphasis will be focussed on Transmission Systems. This should be expanded for-
cibly as a counterpole to the extremely cyclical textile machinery business. In this respect, Saurer intends to capitalize on growth
opportunities in the agricultural vehicles and sports automobiles segments. New possibilities in this segments are constantly
being opened as a result of the continuing trend of vehicle manufacturers to outsource activities not part of their core business,
as well as component suppliers’ increased specialization. Additional opportunities for robust technologies are being offered in
developing countries such as India and China. Hence, during the past year the Group opened a factory in New Delhi (India).
      Surface Technology is currently in a consolidation phase. Substantial previous investments in infrastructure, capacity and prod-
uct development will be used for further improvements in volume and margins. Partnerships are foreseen in order to expand the
worldwide activities and to achieve a more efficient use of the infrastructures.




6
BARMAG BUSINESS UNIT.


Barmag reached the turning point. With an order intake of over CHF 469 million, the Barmag Group registered a noticeable
increase of over 46% compared to a very weak previous year. The major emphasis was on the markets of China and Turkey,
where different large projects involving spinning and texturing equipment were concluded. After very weak sales in the first three
months of the year, the market revived considerably in the second half of the year, but still continued to remain at a historically
low level. Excess capacities in connection with the Asian customers and the instability on the oil markets, the suppliers of raw
material for synthetic yarns, led to continued reticence in respect of new investment projects. We expect only a slow recovery of
the business.
   The new Barmag 12-fold ACW winding unit (Automatic Craft Winder), introduced at the beginning of the year, and the
Baby ASW (Automatic Spin Winder) developed by Barmag-Spinning Twist were received positively in the marketplace. Whilst
the winding unit perfects the winding development of the yarn and enables an automatic package doffing thanks to fully inte-
grated electronics, older equipment can be renewed and productivity can thus be increased due to the small construction size
of the ASW. As a result of the acquisition of Neumag, Neumünstersche Maschinen- und Anlagenbau GmbH, Barmag was also
able to complete its product program in the chemical fiber sector with synthetic staple fiber equipment, to complete its car-
pet yarn sector and to strengthen further the position of the SaurerGroup as an integral provider in the spinning equipment
sector. In order to utilize existing synergies, the joint activities in the carpet yarn segment will be concentrated as from 2002
at Neumag, whilst the filament segment of Neumag will be integrated with Barmag.
   In addition to the objective of product renewal, high priority was placed on developing additional flexibility and resistance
within Barmag to react to economic fluctuations. An important step in achieving this objective was the independence and out-
sourcing of areas generally not part of Barmag’s core competence, such as heat treatment, metal sheet production and weld-
ing. Approximately 130 employees from the central production function were transferred to competent partners at the same
site so that the cyclical fluctuations of individual customers could be offset better. Similar measures will be taken during the
first half of 2001 concerning approximately 120 additional employees. As such, Barmag has thus succeeded in further reduc-
ing vertical integration which historically had grown, in a manner socially acceptable, and thereby succeded in reducing con-
tinuously the sales-break-even level.


Neumag completes the synthetic sector. Neumag, which specializes in the area of synthetic staple fibers and carpet yarns,
reported a slight increase in orders and earnings this fiscal year versus the previous year. Whilst half of the sales were pre-
viously attributable to each staple fiber and carpet yarn equipment, the order intake for the whole of 2000 shows the share
for staple fibers in excess of 65%. High raw material costs resulting from the development of the oil price are dampening the
readiness to invest, particularly in the classical carpet markets of Turkey, Belgium and the USA.
   In the carpet yarn segment the capability to deliver and install turnkey equipment quickly at the customer locations was
refined further through consistent modular construction. A novelty was also introduced with regard to the equipment for
polyester staple fibers. The finest fibers up to under 3 dpf (denier per filament) can be manufactured from the waste of PET
bottles in very high quality by the equipment.


SAURER TEXTILE SYSTEMS BUSINESS UNIT.


Recovery in rotor spinning business. The rotor machinery business of Schlafhorst suffered particularly as a result of the
textile crisis of 1998/99. For the Autocoro business unit this meant a difficult start with low rates of capacity utilization.
During the first few months of the year business from Turkey revived quicker than expected, but declined again towards the
end of the year because of problems in the banking and financing sector. Towards the middle of the year important demand




                                                                                                                                  7
Heinrich Fischer, CEO and Delegated Member of the Board of Directors




developed from Asia and South America. The traditionally largest rotor market, the USA, also recovered in spite of continued
low prices for open-end yarns, and increasing textile imports from the middle of the year forward. As a result of this market
recovery, the rotor segment was able to increase order intake by almost 60% while sales increased by 30%, both versus last
year. The encouraging level of orders on hand assures a high utilization of the reduced capacities, until well past the middle
of the current year.
    The new ACO 312 rotor spinning machine with advanced automation, new controls and an improved technical air con-
cept was introduced in selected markets. It was positively received by customers. Apart from having the largest number of
spindles of all rotor spinning machines, the ACO 312 also sets new standards in quality, flexibility and economy. As a result,
its first successes were visible after only a short time in the form of order intake and sales. The integration of the new spin-
box developed by Schlafhorst into all machinery configurations could be concluded successfully this year. Today it is a per-
manent component of all Autocoro spinning machines with new qualities such as contact and maintenance-free magnet bear-
ings, 3-D diamond coating and an energy-saving fiber-guiding element. Together with the Belcoro™ certification, the stan-
dard for high-quality yarns, it also ensured an increasing market share in the re-equipment of older equipment during the past
year.
    The organizational changes already implemented in 1999 resulted in the achievement of the objectives for 2000. For the
first time, the rotor-spinning sector successfully proved the functioning of its lighter structure. As a result of increased sales
volumes and correlating longer delivery times temporary employees were engaged for a short time in the production and
assembly area during the start-up phase in the late summer. This led to a small decline in the operating results.




8
Ring-spinning on a stable footing. The ring-spinning sector also profited in 2000 from a general recovery in its primary
export markets. Zinser registered higher demand from Central and South America, the Near and Middle East, as well as from
the Far East towards the end of the year. Customer interest was directed at all products, from the manual to the fully auto-
matic roving frame, and from the 350-ring-spinning machine to the equipment in the worsted sector.
   To better serve customers worldwide, Zinser restructured its service sector during last year. The physical relocation of the
after sales service into a service center with independent responsibility for profits, and the resulting organizational integra-
tion of the spare parts service as well as the customer service and consulting into one unit assure short contact channels and
lead to fast reaction times and support the exchange of information.
   Apart from the further development of new products until the ITMA Asia in the fall of 2001, efforts are being concen-
trated on further outsourcing of the vertically integrated production to suppliers as well as transferring parts production and
assembly. As such, a decision was taken late in the year to transfer the production of switch cabinets for all ring-spinning
machinery to the new Barmag subsidiary in the Czech Republic, and to concentrate the core competence of spindles and
lower rollers, in Oberviechtach. With the introduction of measures designed to further reduce structural costs and the break-
even point, Zinser is on a stable footing and can absorb the effect of economic fluctuations more easily in the future.


High capacity utilization for winding machinery. The winding machinery market showed its most positive side for Saurer
in the past year. The investments, postponed as a result of the Asian crisis in the traditional markets, were ordered. In
addition, demand for high-quality ring-spinning yarns increased worldwide over proportionately. Another contributing factor
is the fact that an increasing number of manufacturers in the developing countries are being forced to replace their winding
machinery, which has become obsolete and is no longer adequate to meet the quality requirements of their customers world-
wide. Favorable market situation and the strength of the completely renewed winding machinery program led to an increase
by almost 50% in both orders and deliveries compared to the prior year. The intensive discussion regarding automation to impro-
ve quality in production satisfied the increased requirements for high quality. The discussion led to high interest in the modu-
lar concept of the Autoconer 338, where not only well-known standard yarns can be quickly adapted, but also new market
requirements, such as Lycra processing. Apart from further development of the Autoconer, advanced data systems such as the
“Conerpilot” ensure a continued strengthening of Schlafhorst Winding Systems technological leadership.
   Thanks to leaner structures, improved production planning systems and the high motivation of the employees, Schlafhorst
Winding Systems succeeded within a period of just a few months, to more than double its output last year. This high degree
of flexibility should also be extended further in the coming years through the consistent focussing on the core activities.


Stable twisting business. In comparison with the spinning business twisting developed positively already during the second
half of 1999. The high demand continued in the technical sector until the end of the year 2000, whilst the carpet yarn equip-
ment business declined substantially in the fourth quarter, above all in the USA. A significant recovery was registered in par-
ticular in the Asian and Latin American markets, whilst Europe and NAFTA in aggregate remained at the positive level of the
prior years.
   From the production of tire cord and finest fancy plied yarn at Saurer-Allma as well as the innovative processes in the fila-
ment wrapping sector for elastic weaving and knitting articles at Hamel to the two-for-one twisting machinery of Volkmann,
the new products proved to attract great customer interest, which resulted in a further strengthening of the strong market
position.
   Also, a further reduction in structural costs was undertaken in the twisting segment. Therefore, the planned outsourcing
of the mechanical production to third parties at Saurer-Allma could be concluded successfully already at the middle of last
year.




                                                                                                                               9
Creativity in the embroidery sector. The market for large shuttle embroidery machinery made a noticeable recovery during
2000. Due to improved demand from China, India, Turkey and Latin America, Saurer Embroidery Systems registered an in-
crease of sales in excess of 80% compared to previous year.
     The new sales organization and the continuing expansion of the service organization, as well as the rising margins from
the middle of the year forward, contributed substantially to the improved but not yet satisfactory result of this year. New devel-
opments to be presented for the first time at the ITMA Asia in October are anticipated to provide additional support to this
uptrend.
     Melco, in Denver (USA), which is active in the segment of single- and multiple-head embroidery machinery, underwent an
extensive restructuring in the past year. This program concerned the total product range, the sales organization and the distri-
bution networks, logistics and production and as a result thereof, the whole cost structure. With substantially reduced costs,
Melco can look back on a slow but continuous increase in demand. The fully modular machine concept, as well as the new
Internet-supported e-business solutions for contacting and supporting widely dispersed customers, will give additional assis-
tance to the new positioning of Melco as from mid-2001.


TRANSMISSION SYSTEMS BUSINESS UNIT.


Strong growth with new products in the automobile sector. In the year under report Graziano Trasmissioni achieved
growth of 23% in both order intake and sales. This was particularly encouraging as the worldwide agricultural vehicle and
construction machinery market, traditionally the major business of Graziano, was weak. The increase in growth resulted
almost entirely from the new programs acquired during the last three years from the automobile sector. These projects were
brought up to full volume production since the middle of last year, and will ensure further growth in the current fiscal year,
independent of economic conditions in the automobile sector. With these new programs in place, the percentage of
Graziano’s sales generated from the automobile segment increased from 11% (1997) to 33%.
     Following the worldwide decline in sales of agricultural machinery during the past two years, the first signs of a slow recov-
ery occurred at the end of 2000. The merger of the largest customers of Graziano, New Holland and Case, led particularly
during the first half of the year to a reticent attitude. Customer priorities were integration projects, restructuring of the prod-
uct range or the transfer, closing or sale of production sites. New possibilities are expected to become presented to Graziano
during the coming months and years as a result of the completion of this customer’s restructuring. The trend of outsourcing
specialties with small or medium unit volumes, as well as the reduction in vertically integrated production at total systems
manufacturers, is continually opening up new opportunities in this area. Growth possibilities are emerging for Graziano’s




Heinz Bachmann, CEO Saurer Textile Systems                        Klaus K. Moll, CEO Barmag Group




10
robust technology in the aspiring developing countries such as India or China. Slowly increasing demand for synchronization
units in tractors of Indian manufactures helped the Indian subsidiary, Graziano Trasmissioni India Ltd., to reach the break-even
point just one year after starting operations. Increasingly also customers from Asia and Europe will be delivered products from
India due to the high production quality and the high level of customer satisfaction. Graziano is projecting substantial growth
in this sector.
    Graziano will also benefit during the next few years in the area of specialties for niche market through new products such
as axles for city buses or golf carts. Business was stable during the past year with automatic gears and axles for fork-lift truks,
which are delivered to customers like Linde and Jungheinrich.
    The most important segment for the further expansion of Graziano are gears and transmission components for automo-
biles. In this respect, Graziano will focus on specialties such as spur gears for four-wheel drive vehicles, synchronization units
for high torque, as well as complex gearing subassemblies and complete gearboxes for luxury sports automobiles. Despite the
temporary decline in the economy being experienced by automobile manufacturers in the USA and more recently in Europe,
Graziano is benefiting from an increasing number of long-term projects. Following the USA, the trend towards four-wheel
drive cross-country vehicles is beginning to penetrate Europe. This is resulting in the establishment of partnerships with those
firms which possess specific know-how in critical components areas experiencing increased demand. Cooperation with custo-
mers such as Audi, VW, Renault, BMW, GM, as well as Steyr Power Train and Getrag, has been developed further during the
past year and offers a solid basis for additional new projects. Graziano was also able to prove its capabilities in engineering
and production technology in the growing segment of high torque gears for luxury sports automobiles and has obtained
orders from Ferrari, Maserati and Lamborghini.


SURFACE TECHNOLOGY BUSINESS UNIT.


In the year 2000 Surface Technology reported growth of 17% in order intake and sales, of which 8% were attributable to the
change in the Swiss franc/US dollar exchange rate. This was accompanied similarly by an improvement in operating results,
which nevertheless fell short of target.
    Surface Technology is currently in a consolidation phase following the major investments of previous years in the moder-
nization of its machinery and equipment, the expansion of capacity in most of its operations, standard IT systems and pro-
cesses as well as in the development of the new site in Thailand to serve the Asian market. These investments constitute a
solid basis to benefit from the growth opportunities in the market with relatively few additional capital expenditures. Whilst
the business of plastification systems recovered at the beginning of the year with new orders from Europe and Asia, and




Marcello Lamberto, CEO Graziano Trasmissioni                      Ulrich Bellgardt, CEO Surface Technology Group




                                                                                                                                 11
Prof. Dr. Manfred Timmermann, President of the Board of Directors




Japanese machinery manufacturers even speak of a record year, the American injection molding and extrusion machinery mar-
ket stagnated and declined slightly by year-end. Xaloy GmbH was established in Remscheid in order to expand the range of
products from a supplier of parts to a supplier of complete plastification modules. It was formed from operations of the
Barmag extruder assembly facility and will in future serve as an assembly site for plastification units in Europe. The expansion
of the facility in Thailand continued to proceed systematically. Efforts were primarily focused on the qualification of the facil-
ity by sophisticated Japanese customers. This was successful in the case of the three most important OEM (original equipment
manufacturers) customers. The efforts for a continuous improvement of product quality and supplier loyalty were favorably
recognized by various customers. For example, Xaloy was selected by Husky, a leading worldwide manufacturer of injection
molding equipment, as the supplier of the year in the USA and Europe.
     The thin-film-coating business also experienced a recovery during the past year. Whilst the demand for the traditional coat-
ing of tools hardly moved in England and in the USA, the diamond-like ADLC (amorphous diamond-like carbon) coatings, as
well as new applications in the decorative sector, reported strong growth. The “In-House Coating Center” opened success-
fully at the drill manufacturer, Dormer. In order to simplify the operating processes and to reduce structural costs, worldwide
activities in the plastification systems sector were combined in the year under report under the brand name of XALOY™ and
placed under one management. The thin-film-coating activities were similarly combined worldwide under the brand name of
IONBOND™.




12
Many thanks to the employees. The fiscal year 2000 demanded a high degree of commitment and flexibility from our
employees and above all from the management of Saurer. In this respect high requirements were set by the abrupt fluctua-
tions in demand and the resulting strong expansion of sales, as well as the many additional projects due to the integration of
Barmag and Neumag into the SaurerGroup, and also by the structural adjustment in Surface Technology.
   The Supervisory Board and the Group Management wish to express their thanks to all employees and members of the
management for their commitment to excellence. They have approached our unique opportunities with creativity, hard work
and teamwork, and led Saurer back to the road of success.


Yours sincerely,




Prof. Dr. M. Timmermann,                   H. Fischer,
President of the Board of Directors        Delegated Member of the Board of Directors




                                                                                                                            13
IMAGES OF THE FUTURE.


The most important groups interested in the Annual Report of the SaurerGroup, namely our shareholders, customers and
employees, are asking us more and more in what direction we are going or could go, rather than about what has happened
in the past; what has occurred is of increasingly less interest.
     Together with the Gottlieb Duttweiler Institute, an organization, which is engaged professionally with research of the fu-
ture, we have tried with this Annual Report to indicate possible future developments. The following eight images of the futu-
re include topics which are of importance for the SaurerGroup. Our task was to describe from an external point of view the
changes in the business environment, for which we must prepare ourselves or even equip ourselves. Various external and
internal experts* participated in the considerations and questions necessary for this, and we should like to express to them
our profound thanks in this regard.
     We are very conscious of the fact that the discussions regarding the longer-term future are always very much in the bal-
ance and that the difference between what is very interesting and what is ridiculous and between comprehension and
miscomprehension can be very slight. We are also similarly aware that the period for a part of these developments will be sub-
stantially longer than ten years. In other cases it will, however, proceed faster, and some items are exaggerated in order to
make the trend clearly visible. Above all, we wish to achieve with these considerations that the problem areas highlighted will
be included systematically in our daily decisions and thus support the permanent process of change. The future is finally also
what we make of it.




*List of the interview partners: Ulrich Bellgardt, CEO, Xaloy Group; Holger Blumberg, Manager of Information Technology, Barmag AG; Christian Bode, Apprentice, mechanics and electro-
nics, Barmag AG; Benjamin Bresser, Apprentice, mechanics and electronics, Barmag AG; Frank Ferlemann, Apprentice, information technology, Barmag AG; Ralph Knecht, Marketing
Manager, Schlafhorst Winding Systems GmbH; Josef Kopetschke, Purchasing engineers, Porsche AG; Oliver Lapidus, Designer and CEO, Lapidus Haute Couture; Astrid Metzger, Personnel
Manager, Saurer Sticksysteme AG; Winfried Popp, Member of the Board of Management, Barmag AG; Jan Markus Röttgering, Sales Manager, Schlafhorst AG & Co.; Gianni Sarti, Executive
Vice President, Graziano Trasmissioni; Leopold Schöller, CEO, Schöller-Textil GmbH & Co. KG; Christina Waters, Apprentice, industrial management, Barmag AG; Shen Wei, Managing Director,
Saurer Twisting Systems (Suzhou) Co. Ltd.; Burkhard Wulfhorst, Director, Institute for Textile Technology at the Technical University of Rhineland-Westphalia, Aachen; International research
institutes: Copenhagen Institute of the Future, Harvard Business School, London School of Economics, MIT, Sloan Management School, etc.




                                                                                                                                                                                          15
SOCIAL TRENDS: THE NETWORKED SOCIETY.


Which trends will characterize society in 2010? If the end of the twentieth century was characterized by the strong increase
in personal lifestyle possibilities, the paradigm change from the atom to the bit at the beginning of the 21st century has had
a decisive influence in many parts of our world on the profound change in social values and structures. The highly developed
industrial societies demand more knowledge. Networking and global communication have become important in order to exist
in an environment, in which the natural confrontation with a partially autonomously acting technology determines increasing-
ly our social life. This new world is growing quickly together. In this respect, central institutions of the industrial society such
as profession, workplace, home, market and living together have also changed.
     Traditional frameworks of reference have lost their force in many places. In their place new models of behavior have aris-
en. In the intensively networked companies the trends towards increasing flexibility and individualization are influencing so-
cial life. In this respect the classic structures for distinct careers and organized forms of life are now considered increasingly
to be outdated. Above all with regard to working relationships in the service sector demand for flexible working partners is
rising, for independent and mobile employees with know-how and many talents, who are willing to learn and who are always
open to new ideas and are engaged in the companies on a project-by-project basis. Everything, which they require for work-
ing, their personal data and the connection to the broadband, are carried with them on a permanent basis. This social devel-
opment also influences increasingly the organization of labor.
     People in the networked society have accustomed themselves quickly to the fact that they are relieved of routine tasks in
their daily work thanks to the new media. Without the support of the networks, the growing volume of data could not be
handled. Together with the more flexible forms of work the feeling of permanence, which constituted the core element of
confidence, has been relegated to the background. The flexible work partners find it easy to change backwards and forwards
between the various values and forms of life. This part of society is constantly changing.
     The generation @, the first generation which has grown up with the digital media, networks and the constant change, has
had an easy access to the networked society. It finds a well-known and playful joy of life in digital equipment and virtual con-
tacts. Many of these people understand their market value as a share price, which they wish to increase at each workstation.
Although individuality and self-realization are their driving motives, this generation has also developed a team model, the
impulses of which have also changed the social and economic values and thus also the working world: in 2010 differences in
the working world which are based not on competence but on hierarchy will be less and less accepted. In the future there
will thus be an increasing number of companies, which will function on the basis of the model of self-organizing systems. On
the way thereto the generation conflicts will first of all become more relevant, triggered by the conflict between the rigid
thought patterns of the industrial age and the self-consciousness of the generation @.
     Besides this new generation @ the group of older people are playing an important social role, in particular in the tradi-
tional industrial countries. This population group has become continuously larger as a result of the generally increased life
expectancy. Even in old age, these still sprightly people are not withdrawing from social life. This group is formulating its
claims and requirements self-consciously to the networked society. It can also afford to do so: with its large purchasing power
this segment of society has become the most important consumer group, which has to be taken into consideration by many
new offers on the market.




16
SAURER AND SOCIETY.
Questions to Astrid Metzger, Personnel Director of Saurer Sticksysteme, Arbon


What do the employees expect from their workstation at Saurer? The employees naturally want first of all to assure
their existence. Most of them, however, also look in their work for challenges to prove their competence and to develop them
further. They want to be recognized for their high performance and also gain satisfaction and self-evaluation from this. As a
result of the weakening of traditional contacts in society, many people will seek increasingly social contact, security, recogni-
tion and also security at their workplace.
   These developments require a new quality of corporate culture and attitude from management. In order to satisfy these
changes, particularly structures, processes and ways of behavior must be reassessed and reoriented anew. In the future there
will thus be less inflexible hierarchies and classic career ladders. The work content must offer sufficient room for the devel-
opment and self-responsibility for the increasingly better trained employees.


What does this mean for the management of Saurer? For us management this means that our task will be moving in-
creasingly in the direction of coaching, coordination and the optimal use of resources and above all in the orientation towards
the customers in all operational activities. Competent people with a wide overview and the capability to implement complex
projects with sophisticated teams will be in demand.
   With the increasing significance of the very volatile production factor of “knowledge,” personnel development is becom-
ing even more important. The most important projects, which are being pursued by the Saurer Human Resources team, are
also aimed in this direction. For example, the employees’ discussion was refined in all business units specifically as a deve-
lopment instrument for the recording and support of the competencies of the employees. For the further development of our
management the 360° feedback method, i.e. a report from the chief from employees and colleagues, was adjusted to our
requirements and in-troduced. These instruments are concerned much less with pure professional development but rather give
impulses with regard to management understanding and behavior.


What does the workplace of the future look like? The strengthened self-organization and self-responsibility has natural-
ly also effects on the workplace. The employees must have the possibility of cooperating in a less structured environment in
flexible teams of specialists. We must succeed in staying on the ball in the area of modern communications in order to have
ready also efficient aids for the organization and management of the widely networked teams.
   The orientation is thus based less on structures but increasingly on processes. Networks are gaining in importance at all
levels. Virtual teams such as the group-wide synergy teams in the areas of purchasing, IT, etc. or the Monte Rosa research
team are today standard at Saurer. They are being constantly brought into life and being terminated as soon as the objective
has been achieved. As a network they surpass the classical organization structure and can thus act more flexibly and more
specifically and use the knowledge optimally.




                                                                                                                               17
18
“IN THE NETWORKED SOCIETY, IN WHICH KNOWLEDGE MEANS
MORE THAN LAND OR FIXED ASSETS, THE VALUE OF COMPANIES
IS SHIFTING INCREASINGLY TOWARDS THE WORKFORCE. THE IN-
DIVIDUAL IS BECOMING THE INVESTMENT OBJECT OF THE 21ST
CENTURY.” Stan Davis/Christopher Meyer, GDI IMPULS 3/99




                                                      19
THE ROLE OF APPAREL: BETWEEN SMART FABRIC AND
WASHABLE COMPUTING.
In ten years the most important functions of apparel will still be the protection against the influences of the environment and
to enable the wearer to look well. Thanks to the economic upturn the basic requirement for textiles for daily use could be
covered in many places in the developing world. In the other regions of the world the entrepreneurs of life of the new millen-
nium are placing increasing importance on the fact that their style of apparel expresses perfectly their personality whilst their
body communication should present the value of their “personal share price.” Particularly in the developing economies of Asia
and Latin America large pent-up demand exists for these functions of apparel. In the highly developed countries apparel can
in addition take over several additional tasks: thus for many people it is becoming an intelligent second skin and an impor-
tant interface to the broadband. The fashion and lifestyle industry has quickly understood the trend towards omnipresent
computer mobility at the beginning of the new millennium and created with the connection between information technolo-
gy and textiles first of all a trendy expression for the lifestyle of the generation @, which is in love with technology. Very soon,
however, new customer segments could also be developed in the mass markets with innovative and comfortable applications.
     In 2010 computers and communications systems are miniaturized to the size of a button and keyboards and sensors can
be weaved into the most varied textile applications, from the self-adjusting car seat, which draws attention to position errors,
to the interactive information sofa, from the intelligent tie to the networked gymnastic shoe. Conductive fibers connect the
various modules of the apparel, which is connected with the broadband through the personnel software assistant. Without
it, the mobile knowledge workers could no longer cope with their growing volumes of data. The virtual assistant knows in
which situation they are currently in and assures them with the currently required information and services, whether this is a
free parking space or working documents, personalized leisure offers or the ideal meeting place for business people from
several continents. The competitive pressure in the networked society requires that an increasing number of people are cur-
rently informed at all times, that they can separate essential from unnecessary information and do not waste their valuable
attention with routine work. The intelligent textile solutions and the expanded functions of apparel are ideal for this. They
permit a comfortable life with the highest degree of mobility.
     The sector of sport and outdoor apparel, which has been booming for several years, is one of the strongest driving forces
for innovative apparel solutions in the highly developed countries. In the year 2010 functional fibers and materials have be-
come real high-tech products for the sophisticated and spoiled consumers. This user demands from his apparel not only per-
fect perspiration, temperature, fragrance and humidity control, but also that his well-being is continuously monitored through
the apparel and, if necessary, it should also organize independent help. Well-being, security and a high degree of freedom for
individual outdoor activities are the standards in this respect. Increasing importance is also being given to the protective effect
against ultraviolet and electromagnetic radiation. In this area of social discussions and fears the textile industry can create a
new market with creative solutions. The apparel of the future also integrates a series of medical applications: sensors moni-
tor the most important body functions and special textiles care for sick people with medication in a tailor-made fashion. In
particular in the case of older people the step towards the initially rejected “computer compatibility” has been much simpli-
fied. Functional apparel and application specialties therefore also generate new demand in saturated and highly competitive
markets.
     This trend is true not only for the former industrial states but also for the less highly developed countries. In this case tex-
tiles with a functional added value are also meeting constantly increasing demand. In particular fragrant textiles are popular
as well as materials which no longer require any washing powder, but which clean themselves on contact with water. The eco-
logical components play an increasingly important role in these countries and have helped recycled fibers and cellulose fibers
to a breakthrough. On the other hand, materials, which change color with temperature, have survived only in niche markets.
Similarly the fashion of throwaway apparel, which landed in the trash after being worn once, could not survive on the mass
market. Although this fashion corresponded to the convenience trend and the fibers used broke down completely in an eco-
logically correct manner, many people could not ever really accept this throwaway function of apparel.




20
SAURER AND THE ROLE OF APPAREL.
Questions to Winfried Popp, Member of the Board of Management, Barmag AG, Remscheid


How does Saurer view new developments and trends in the apparel sector? The new apparel will be determined
worldwide by the fast changing fashion. Not only in the case of materials but also with yarns new creations and developments
will be constant. They will enter into fashion under the name of “fancy yarns.” Since a large part of the fibers produced by
our machinery finally end up in textiles, we are extremely interested in these trends and attempt to finalize them through the
quality and flexibility of our machinery and of the end product “yarn.”


How is cooperation with your customers? Worldwide we are cooperating very closely with our customers. Whilst increa-
singly more specialties are being manufactured in the USA and Europe and also modern technical yarns are undergoing fur-
ther applications, the mass-market business is being transacted in Asia. In the meantime, China is the worldwide largest pro-
ducer of chemical fibers. With the modular construction of our machinery we can thus meet various requirements. Customers
can make tests in our laboratories with their specific materials and requirements, before they specify their machinery or under-
take process optimization, even before the machinery has been installed in their factories. The period during which the invest-
ment is paid back, i.e. time to money, is thus substantially reduced for our customers.


Where do you personally expect the greatest changes? Apart from the chemical fiber threads known today, new modern
materials will be introduced on the market, whereby the shares for technical applications as well as for leisure and sport
apparel will further increase. Nevertheless I am convinced that in the next 10 years the largest number of people, and this not
only in the Asian countries, will wear above all cotton and classical synthetic fibers.




                                                                                                                              21
TEXTILE INDUSTRY: TECHNOLOGY TRENDS.


Whereas during the twentieth century the increase of production speed and the degree of automation was considered for a
long time as the central technological challenge of the textile branch, “innovation” and “service” counted very soon after the
turn of the millennium as the most important success criterion. Compatible technologies, intensely segmented markets and
higher expense for revolutionary developments made a change of ideas necessary, so that now even the basic research starts
completely in the market. Added value concepts are being demanded, which permit highly flexible solutions, create a unique
product value and enable a better use of the raw material. In 2010 what counts is product performance instead of produc-
tion performance. In this respect the adjustment to new processes within the textile chain is also required, such as, for exam-
ple, the fully automatic 3-D stitching in the automobile industry or the laser stitching of waterproof textiles.
     The competitive market requires innovative products with a high added value, which are tailor-made with regard to the
cost structure of the relevant countries. In the production process "soft” factors have gained in this respect increasingly in
importance in contrast to a pure increase in speed: a high degree of flexibility, processing without problems, low maintenance
cost, excellent service and a high raw material tolerance are now decisive, since the customers require technical solutions,
which permit them to react flexibly and just-in-time to the demands of their markets. These include machinery, which can be
converted quickly and at low cost, requires little maintenance and can also produce small batch sizes economically. Functional
specialties and new product qualities certainly create new markets, but they are always also evaluated from the standpoint of
economy. New technologies and equipment must therefore improve the overall efficiency or enable a specific increase in value
of the product. Since primarily product advantages determine profitability, the whole technological process has accelerated.
In this respect the time until the investments pay for themselves is becoming increasingly important for the investment, i.e.
time to money. The manufacturers decide quickly and address creatively the characteristics demanded by the market.
     A new concept of quality has in this respect become an important differentiation characteristic. It no longer refers to indi-
vidual aspects but includes the whole process, from the processing of the raw material and all the prior and subsequent pro-
cess stages up to material handling, cost structure and flexibility. The end customer finally determines this quality just as the
processes are driven more strongly from the end product and the uniqueness of which should be guaranteed. Leading tech-
nology providers thus support their customers with process competence, help with process reductions and offer them optimal
total services. Service and convenience have become central factors in this respect. They permit the manufacturers to meet
the segmented requirements of their customers quickly and flexibly. For in the global real time economy the speed of adap-
tation is decisive: Special effects must be able to be integrated simply, the product content must be quickly readapted and
various qualities and raw materials must be able to be processed at the same time. And naturally the access to digital media
is also part of the basic equipment of this technology. In 2010 it has become self-explanatory in many sectors that the net-
worked customers have the last word. Processes for real time customization and virtual product simulations through the
broadband are thus the standard.
     An important technological market in the old industrial countries is the recycling and the spinning of secondary fibers.
Since there has been no shift in production particularly in the sector of house and home textiles, new service providers with
creative solutions were able to establish themselves in this market early in the 21st century. Increasingly stricter legal re-
quirements strengthened this trend.




22
SAURER AND TECHNOLOGY.
Questions to Ralph Knecht, Marketing Manager, Schlafhorst Winding Systems GmbH, Mönchengladbach


Textile machinery is becoming increasingly faster and lasts longer; is there any point for technological innovation?
Yes, exactly for that reason. Traditional arguments such as, for example, the speed of the machinery has long lost their value
as the differentiation characteristic. Our customers can only qualify themselves towards their own customers through flexi-
bility and quality and in their capability to follow new fashion trends more quickly. Excellent technological knowledge has
become a competitive advantage exactly in this respect. For example, we are undertaking with the University of Aachen com-
prehensive process analyses in inter-disciplinary teams with regard to the most varied process technologies. We are thus con-
centrating no longer only on one process stage but are optimizing the whole process and can thus increase the product qual-
ity or also variability.


Can you give an example of this? Today we can, for example, follow on-line the quality parameters of the manufactured
products and thus simulate the effects of quality changes on the total process of textiles and thus categorize the relevance of
the quality parameters. This use of product simulations is being constantly refined further in our technology teams. With this
textile know-how winding technology will achieve a new quality standard.


Customer service is becoming increasingly important; what is Saurer’s position here? We have made progress, but not
to the extent to which we intend. Although it is theoretically possible to identify errors within the shortest time by means of
remote diagnosis and to draw the customer’s attention to the wear and tear of a part, the networking is not yet secure
throughout the whole value-added chain from the customer to service and back again. The objective is nevertheless to esta-
blish this connection as quickly as possible.




                                                                                                                             23
“IN THE FUTURE, FLEXIBILITY, MAINTENANCE QUALITY AND RAW
MATERIAL TOLERANCE OF THE MACHINERY WILL BE DECISIVE. I
HOPE FOR A TECHNOLOGY WHICH WILL PRODUCE A HIGH-QUALI-
TY YARN EVEN FROM MEDIUM-QUALITY RAW MATERIAL.”
Leopold Schöller, CEO of Schöller-Textil GmbH & Co. KG
NEW MATERIAL: BOOM FOR INNOVATIVE TEXTILES.


In the competitive market at the beginning of the millennium mainly the technical textiles with their functional advantages
assured strong market growth. Textile fibers were able to penetrate many new material areas. The highest rates of growth
were in this respect registered by applications in the areas of composite synthetic materials, textile reinforced concrete and
medicine.
     In the aircraft and space industry as well as in automobile production composite synthetic materials with innovative tex-
tile structures have been used widely. As a result of cooperation with partners in product, processing and machinery deve-
lopment, technological progress has become possible, which appeared improbable a short time before. In 2010 an aircraft hull
thus consists already up to sixty percent out of composite synthetic materials. The creative connection of old process know-
ledge, new technologies and high-tech threads has opened interesting markets for composite synthetic materials with a high
degree of stability and low weight. In concrete construction textile fibers can now replace steel in many areas: low-cost, alka-
li-resistant, highly stable, flexible and drawn fibers are laid exactly in the calculated lines of force; they do not rust and simi-
larly make thin and stable construction elements possible. This development has given strong impulses both to the textile as
well as to the construction industries. One of the prerequisites for this was the development of production processes, which
can produce more complex structures from existing textiles than, for example through stitching.
     Many new working materials also arise through the combination and variation of existing fibers and textiles. Particularly
in the former industrialized countries there were thus large market segments for modifications, refinements, new surfaces and
the integration of chemical materials. In addition, new fibers and yarns open up a broad scope of interesting applications.
Thus yarns with copper cores are integrated not only into intelligent apparel but also into textile wall coverings. They permit
a cost-effective and efficient solution protection against electro-smog, which is becoming increasingly important, and also
guarantee security against being overheard in sensitive spaces.
     Following a slow start to the turn of the millennium the environmentally friendly cellulose fibers experienced a boom.
There were two reasons for this. On the one hand ecological criteria became increasingly important for the end consumer and
at the same time the commencing worldwide shortage of water and the increased use of chemicals made cotton production
more expensive. The natural fibers from the raw material, wood, suited the increased requirements in the networked society
and show the trend for new developments: they are friendly for the skin and the environment, are biologically disposable,
have a high stability profile and give the manufacturers a broad scope for innovative handling and optical variants. The fibers
from algae, fruit and vegetables, which were highlighted by the media, have on the other hand survived only in small niches.




26
“IN THE FUTURE THE CAPABILITY IS DECISIVE TO BE ABLE TO RE-
ACT QUICKLY TO THE MARKET. THE PREREQUISITES FOR THIS
ARE CREATIVITY, GOOD TECHNOLOGY AND A GOOD MANAGE-
MENT. IN ALL STAGES OF MANUFACTURING CLOSER COOPERA-
TION IS REQUIRED.” Burkhard Wulfhorst, Director of the Institute for Textile Technology, Aachen


                                                                                             27
ECONOMIC TRENDS: THE GLOBAL ECONOMIC SYSTEM.


The global economic system during the first decade of the 21st century was driven by the factors of globalization, network-
ing, concentration and decentralization as well as by real-time solutions. In the highly developed markets the scene is deter-
mined by small, agile units, which interreact together within changing alliances and networks. Many companies followed the
trend towards decentrally structured, flexible and in part virtual organizations, in the headquarters of which a small manage-
ment team determined the strategic course. Subcompanies and independent teams within the organization manage the oper-
ating business under their own responsibility. In parallel, strong oligopolies, which have survived out of the large wave of
mergers at the turn of the century, are also participating in the global market. The role of politics as a regulatory factor in the
economy has declined further in this system.
     The requirement of the real time economy for accelerated delivery has made the shortening of the logistics chain neces-
sary in many sectors. Around the economically dominating core regions of North America, Western Europe and parts of Asia,
belts of delivery regions have thus been established, which are profiting from a new calculation of the logistics and the value-
added chain as well as from a further increase of the degree of automation. With regard to labor costs large differences still
exist in the highly developed countries. In particular the wage gap between the knowledge workers, who are paid in accor-
dance with the model of the star system, which characterized already at the turn of the millennium the sport, entertainment
and the financial worlds, and the service employees became even wider in the 21st century. This led to a rise in the rate of
criminality, effected the crisis of the middle classes in the United States and brought into being new social protest movements.
     Apart from the dominating US market the most important development in the world economy during the first decade of
the 21st century took place in South East Asia and resulted in the economic center of gravity of the world shifting further in
the direction of the Pacific Basin. The main reason for this was above all the different growth curves of domestic product and
the size of the populations. Above all China contributed essentially to this boom with strongly growing markets and enor-
mous pent-up demand: thus the Chinese consumer goods industry and thus also the textile industry has therefore grown up
to the year 2010 by up to twenty percent per annum, thus corresponding to a doubling every 4 to 5 years.
     The economic development in Asia led, as already before in Latin America, to the formation of a middle class, which is
comparable to those in the OECD countries. For example, twenty percent of the population in China and India together repre-
sent 450 million people. Even this narrowly classified middle class is even larger than the middle classes were together in
Europe and the United States at the turn of the millennium. Even under the assumption of weak growth forecasts until the
year 2020 this class is continuing to grow quickly in absolute numbers and is leading to the creation of large new consumer
segments.
     Although the distribution of income in the Asian countries is still very uneven, it can be assumed that in this region there
will be further strong growth towards a consumerorientated life-style and thus to an increasing use of textiles per inhabitant.




28
SAURER AND ECONOMY.
Questions to Jan Markus Röttgering, Sales Manager, Schlafhorst AG & Co., Mönchengladbach


What does globalization and worldwide networking mean for Saurer? With the concept of the Saurer hotels, i.e. a
common infrastructure in the most important markets for all business units, we have developed a tool in order to be compe-
tent worldwide and to be close to the customer. Thanks to our size and the corresponding economy of scale, smaller business
units can also be served efficiently and at low cost from these “hotels”. Saurer can therefore provide first class service on site
worldwide, which individual business units on their own could not organize.




Questions to Shen Wei, Managing Director Saurer Twisting Systems (Suzhou) Co. Ltd., Suzhou


What attracts you in your activity for the Saurer Group? For my employees and myself it is a great and exciting chal-
lenge to develop the market in China for Saurer. Since two years we are producing in Suzhou for the Chinese and other Asian
markets and have successfully developed our own infrastructure in Peking and Shanghai for developing the market within the
framework of the Saurer hotel concept. Our customers rely on quick support; today we have everything on site, from service
and maintenance and repair shop up to the fast provision of spare parts or training for new products and applications. In this
respect we are able to prove daily the targeted service leadership of the SaurerGroup.


Why is Saurer developing China? Today China is already the largest manufacturer of textiles worldwide. With a partially
very outdated machinery sector and many local providers, China is also the largest textile machinery market. The increasing
opening of the market and the concentration on exports of the Chinese textile industry offer great possibilities to technolog-
ically leading providers. Our challenge is to implement the Saurer strategy here in this vital market.




                                                                                                                                29
E-COMMERCE: BROADBAND CONSUMPTION.


Consumption habits change slowly but surely. In 2010 electronic trading is so widely extended that no one any longer empha-
sizes the “e,” as was the case at the beginning of the millennium: transactions via the Internet connection to the data net-
work are part of the normal business day; from engineering and purchasing as well as remote maintenance up to the spare
parts area, where the logistics software of the customers can look into the inventory levels or can view the actual position of
an ordered part automatically on the control system. The data highway has also become an airway, since the broadband, apart
from its high performance networks of fiber optics, also relies on satellite technology. Formerly peripheral regions of the
world, the development of which would have been too expensive by fixed network, have thereby created their access to the
global economy and are now increasing competition. Nevertheless, in 2010 the growth of the broadband economy in North
America, Europe and the Asian Pacific Basin is still leaving the other regions far behind.
     The sale of components for industrial equipment via the Internet has increased spectacularly. Already in 2005 it ac-
counted for twenty percent of total sales and no sector was left untouched by this fast and efficient sales channel. The beha-
vior models, which people have learned in the worldwide department store of the Internet, were transferred in the broadband
to the business-to-business platforms. “Consumer control” was the slogan soon after the turn of the millennium, i.e. the shift
in the information leadership from the trader to the customer, whose relationship thus changed radically. For not only the
expectations increased with the additional knowledge, but the customers also took active influence on the structuring and
the conditions of the offer as well as of the products and services which they required. If the customers in the Internet have
reacted to the oversupply with mouse-zapping and the search for options, which are meaningful for their individual lifestyles,
they expect tailor-made solutions on the vertical business platforms, which, when necessary, can combine also the components
of several manufacturers. Continuously improving, autonomous and software-supported agents provide these propositions as
well as navigation in the transparent offer.
     With their integration into the broadband the convenience and operating friendliness of textile machinery has also incre-
ased substantially. Product contents are developed and integrated independent of site, disturbances are discovered and in part
repaired by remote diagnosis, and new product qualities are compared with the simulation undertaken in advance. Function
controls as well as regular software updates by the producer take place in many cases automatically. In 2010 it is the rule that
the Internet is no longer used mainly by people but also by intelligent objects, which communicate and negotiate transactions
with other objects.




30
SAURER AND E-COMMERCE.
Questions to Holger Blumberg, Manager of Informatics, Barmag AG, Remscheid


What importance has networking for Saurer? Our objective is to become the “service world champion” in the textile
machinery business. In this respect e-commerce offers excellent tools. From the training of our local service engineers and
customers through constant information and availability of products up to the on-line networking throughout the whole
value- added chain. Even the exchange of information with and via other companies, which was only slightly pursued hither-
to, is now becoming an important part of our sales strategy.


Will Saurer penetrate the sector of the new economy with e-commerce? The effective sale of textile machinery will cer-
tainly not occur primarily via the Internet in the foreseeable future. Nevertheless, the influence may not be underestimated.
The sales business will change, but the contact to our customers will not be replaced but complemented by the new media.
With these, every degree of detail required for information will be available at any time and at any place. Virtual structures
can thus be developed quickly, in which all parties in the daily business can cooperate without any time delay.


How is Saurer preparing for this development? At Saurer we differentiate three areas of application where e-commerce
will have influence in the future. First of all sales will be increasingly supported by e-commerce applications and in particular
the processing of spare parts and consulting will be simplified via the SECOS Internet solution. Furthermore, we see a great
potential in purchasing to cooperate closely with our suppliers and to coordinate better within the SaurerGroup. Clear savings
can be realized in the future in particular through the pooling of purchasing volumes and the settlement via market places.
As a third area we see the numerous possibilities of process optimizations through networking such as in the case of common
know-how data banks and information systems. With this we assure for our customers faster development and production
times as well as an improved satisfaction of their specific requirements.




                                                                                                                               31
32
“THE INTERACTION OF MACHINES WITH MACHINES WILL BE THE
BASIS FOR THE INCREASE OF HUMAN PRODUCTIVITY.”
Michael L. Dertouzos, Manager of the Informatics Institute at MIT




                                                                    33
AUTOMOBILE 2.01: THE OFFICE ON WHEELS.


The traffic on the roads and in the air has continued to grow strongly up to 2010. In the developing countries cost-efficient
standard solutions have clearly reduced the break-even point for the private automobile for large segments of the population,
whilst in the former industrial countries, where the private households spend almost as much for the automobile as for food
and rent, mainly the strongly increased truck traffic has contributed to a marked growth in traffic. Just-in-time production and
online shopping have shifted inventories to an increasing extent on to the roads. The results were chronic traffic jams, loss of
time and frustrated automobile drivers. The traffic on the roads has become more intense, but life in the traffic jam has be-
come more agreeable. Thanks to traffic telematics, electronic control systems, intelligent highways and autopilots, for which
driving licenses are no longer required, the social role of the automobile has slowly changed. Emotional factors such as life-
style and cultural values no longer only count; for the networked society the automobile 2.01, the automobile in 2010, has
become an office and living room on wheels. Computer, broadband access, television, playstation VII, refrigerator and even
toilet are part of the premium standard just as the increasingly popular traffic jam gadgets in recent times in the form of inter-
active entertainment.
     The automobile 2.01 is no longer a machine but a computer and communications system, which makes driving an inter-
active computer application. The user starts the driving program or transfers to the autopilot because he is working or wants
to relax. Driving is undertaken by voice and joystick. Apart from several navigation and safety programs as well as office aids,
which are offered in accordance with graded convenience standards, one can also chose between several driving types, noise
and fragrance backgrounds, from the old-timer to the sports automobile. New materials have been quickly applied, such as
composite synthetics with innovative textile structures or pressure sensitive intelligent textiles for seat covers. The most impor-
tant driving forces for new developments were increase in comfort, individualization and the reduction of environmental pol-
lution. The transmission systems registered further progress in technology. Apart from the electronically controlled low fuel-
consumption diesel engines, alternative power sources have established themselves in 2010, such as combustion cells, hydro-
gen and biogas. Electro-automobiles with hydrogen or hybrid power sources support low pollution driving and are becoming
a proven and popular system in the large cities threatened by smog. Photovoltaic cells on the roof provide additional energy
on board. This development rendered necessary a redesign of the whole transmission chain. The progress in electronics cre-
ated the basis for modern automatic transmissions. They permitted cost effective and above all fuel-saving solutions and offer
the users of the automobile 2.01 at the same time increased driving comfort. Specialized suppliers provide the market with
individualized equipment, ranging from more safety to individual computer systems and more fun.
     In the tractor sector the development up to 2010 was also driven strongly by the various customer requirements. At the
beginning of the 21st century a substantial pent-up demand was shown in the developing countries for tractors equipped
with traditional transmissions, whilst in Europe and North America above all highly specialized agricultural vehicles, offering
the highest productivity and user comfort, provided for growth. GPS (global positioning system) is a standard in this respect.
It permits precise driving through the large fields when sowing seed or automatic ploughing or harvesting. In general, in this
respect there will be a trend towards the ecological tractors due to the increased consciousness of the consumers and the
stricter environmental regulations. In both sectors innovative providers are occupying the market place with cost efficient solu-
tions and new product developments.




34
SAURER AND AUTOMOBILE 2.01.
Questions to Gianni Sarti, CEO of Graziano Trasmissioni, Turin


Where does Graziano see the greatest challenges during the next few years? We see as our greatest challenge during
the next few years the extension of our know-how to the development of integrated systems and modules in the transmis-
sion systems sector together with our existing partners. We shall also benefit from the increasingly higher requirements for
the safety of the transmission components. In addition, the growing number of types of automobiles and the increasingly
higher requirements for comfort will result in large automobile manufacturers tending to transfer their in-house capacities to
third parties and to rely on qualified suppliers such as Graziano.


What makes you so sure that Graziano is predestined for this? Our strong growth in the past few years has taken place
above all in the automobile sector, where we were able to differentiate ourselves clearly from the competition through our
image and size. Thanks to our specific know-how in a focussed area large automobile manufacturers see us as the ideal part-
ner for small and medium series; we undertake tasks, which would entail too much expense for large manufacturers, but as
a niche supplier we do not enter into a competitive situation with their own large research departments, which are occupied
with the total system.




                                                                                                                            35
SURFACE TECHNOLOGY: LIMITLESS POSSIBILITIES.


The development in surface technology during the first decade of the 21st century was characterized both by evolutionary as
well as revolutionary steps. The thin film coating processes were adopted simultaneously by engineers, architects, designers
and medical experts as a key technology. Many important material qualities are thus surface qualities, which can be combined
with the basic material in a cost-efficient and resource-saving manner by means of thin film coatings. Qualities not realizable
before have thus become possible also for the mass market. These applications succeeded in emerging from the laboratory
into practice and are able to implement their functional advantages at competitive prices. The qualities most in demand
include the reflection and absorption of electro-magnetic rays, favorable friction coefficients under the most varied pressure,
temperature, humidity and material conditions as well as resistance to corrosion and to wear and tear.
     The breakthrough succeeded when the production and distribution costs could be reduced substantially and important
application requirements were consistently foreseen. Razor blades with long-lasting and skin-friendly diamond coatings and
frictionless machine parts pointed the way already at the turn of the millennium. Leading Formula I teams already used at an
early stage thin film processes to increase engine performance and to achieve a reduction of the weight. In 2010 hard-
coated surfaces were used in many moving parts in the automobile industry. They enabled low consumption diesel engines
and the use of environmentally friendly fuels with substantially reduced sulfur content. Functional and decorative coatings
have increased the value of the plastic materials, in electronic end products, miniaturized components as well as for house-
hold applications. Scratch-free coatings are thus very popular; they look like metal but neither corrode nor show contact
marks. Door handles, which limit static charge, are also of interest or cooking spoons and the handrails of fire staircases,
which block the transfer of heat. With regard to industrial applications the efficiency and life span of machine parts were
increased through the cost-efficient application of coatings; in particular cutting tools could be constantly improved. With
regard to medical equipment and implants thin film coatings are experiencing a substantial boom thanks to their high
resistance to wear and tear and their biological compatibility. The coating systems permit the residue-free through-flow of
body liquids and reagents.
     Physical applications such as self-cleaning surfaces and foils have resulted from the progress in micro-structuring technol-
ogy. They are popular above all in outdoor applications such as roof tiles, façade colors, solar modules, garden furniture and
traffic signs. The nano technology also makes an important contribution to the success of surface technology with extraordi-
nary new chemical and physical qualities of the coated materials. Thus tools require no cooling agents. Colors become ultra-
hard, glass panes are resistant to heat and panels are adhesive on one side and reject pollution on the other. Industrial tools
as well as everyday objects thus become more comfortable to use, as well as safer and more efficient. However, this research
also brought to the marketastounding trend solutions for unreal problems, which disappeared again. In 2010, however, sur-
face technology has achieved the change from the high-tech sector to the mass market in many areas of application.
Nevertheless it was shown that the market growth depended on the whole more on cost efficiency than on constantly newer
but, however, minimal quality differences. The most important limit for new solutions in surface technology are set neither by
fantasy nor by the technical implementation, but by the cost factor. This represents the greatest challenge.




36
INTERVIEWPARTNERS.




The Interviewpartners of the SaurerGroup from left to rigth: Gianni Sarti, Executive Vice President Graziano Trasmissoni; Winfried Popp, Member of the Board of Management,
Barmag AG; Ralph Knecht, Marketing Manager, Schlafhorst Winding Systems GmbH; Astrid Metzger, Personnel Manager, Saurer Sticksysteme AG; Shen Wei, Managing Director,
Saurer Twisting Systems (Suzhou) Co. Ltd.; Holger Blumberg, Manager of Information Technology, Barmag AG; Jan Markus Röttgering, Sales Manager, Schlafhorst AG & Co.

                                                                                                                                                                        37
38
THE ANNUAL REPORT 2000.
FINANCIAL REPORT.

Consolidated financial statements


Consolidated financial highlights                      40


Report on the financial statements                     41


Consolidated income statement                          46


Consolidated balance sheet                             47


Consolidated statement of cash flow                    48


Consolidated statement of shareholders’ equity         49


Principles for the consolidated financial statements   50


Notes to the consolidated financial statements         52


Report of the Group auditors                           61


Supplementary information                              62


Share statistics                                       63


Multiple year comparison                               64


Financial report of Saurer Ltd.                        67




                                                       39
CONSOLIDATED FINANCIAL HIGHLIGHTS



Key data
                                                                       Change
(CHF 000)                                         2000        1999       in %
Sales                                         2 223 813   1 387 856      60.2
Operating profit (loss) before amortization    133 608     ( 44 015)
 % of sales                                      6.0%         (3.2)%
Amortization of goodwill                        11 423       12 687
Operating profit (loss)                        122 185     ( 56 702)
Group profit (loss)                             72 799     ( 70 240)
 % of sales                                      3.3%         (5.1)%
Depreciation and amortization                  113 388      93 462       21.3
 % of sales                                      5.1%        6.7%
Cash flow                                      170 837     ( 14 545)
 (Net cash from operating activities)
 % of sales                                       7.7%       (1.0)%
Employees                                       11 219        7 774      44.3
 (year end)

Capital expenditures                           114 832     101 207       13.5
Total assets                                  2 045 026   1 577 934      29.6
Shareholders' equity                           722 493     652 110       10.8
% equity financing                              35.3%       41.3%
Stock market capitalization                   1 157 250   1 186 567      (2.5)
 (year end)




Share summary (CHF)
Shareholders’ equity                            507.85       455.47      11.5
Net income (loss)                                50.03       (50.07)
Cash flow                                       120.08       (10.16)
 (Net cash from operating activities)

Capital repayment (proposal for 2000)                8            –
* 1996 angepasst (siehe Seite 7)




40
                                                                                                 MANAGEMENT’S DISCUSSION OF RESULTS



Overview of the year 2000                                                    May 1 and Neumag GmbH & Co. KG as at September 1, 2000. The
The economic situation of the Saurer Group improved substantially            integration of these companies constituted a difficult operation for all
during the course of the year. Following a loss of some CHF 70 million       participants during the year under report in order to realize the intend-
in the prior year a group profit of over CHF 73 million was achieved         ed synergies. Several teams were involved in the realization of the most
during the year under report. The main contributors to this encour-          different synergy potentials, for example in the areas of technology,
aging development were the recovery of the Asian textile machinery           market image and organization, human resources, informa-
markets, the effect of the restructuring measures already introduced as      tion technology and software, product development and supply chain
well as the generally positive economic environment. The Group has           management.
grown and thus strengthened its strategic position with regard to the            Today, all the business units of the Group are well positioned stra-
completion of its product range by the acquisition of Barmag AG as at        tegically with leading market positions and technological leadership.




Order intake
                                                                                                                                             Change
(CHF 000)                                                                                                2000                1999              in %
Total                                                                                               2 373 558          1 419 026                 67.3
Textile segment                                                                                     1 810 675            950 771                 90.4
Components segment                                                                                    562 883            468 255                 20.2


Order intake developed positively during the whole year and amounted              In the Components segment the new transmission technology proj-
at the end of the year to CHF 150 million in excess of the sales realized.   ects in the automobile industry sector were well received, which is
The recovery resulted mainly from the Asian region, in particular from       reflected in an increase of 23% in order intake. This success could be
India and China as well as Turkey. However, the European markets             achieved from internal growth in spite of weak markets in the traditio-
and the NAFTA countries also contributed to the improved course              nal sales areas of construction machinery and agricultural vehicles.
of business. The much increased order intake in the textile sector is             Surface technology increased orders by 17%. Sales have more than
partially due to acquisitions. Adjusted for acquisitions the increase        doubled in the Asian region. The investments undertaken during the
amounted to 41%.                                                             past few years in the extension of the production facilities thus showed
                                                                             their first successes.




Development of sales
Total                                                                                               2 223 813          1 387 856                 60.2
Textile segment                                                                                     1 659 721            918 615                 80.7
Components segment                                                                                    564 092            469 241                 20.2


In all business units substantial sales increases were achieved. In total    which did not exist during the past few years. Adjusted for acquisitions,
there was an extremely broad geographic support for the growth,              the increase in sales amounted to 27%.




                                                                                                                                                   41
MANAGEMENT’S DISCUSSION OF RESULTS



Orders on hand
                                                                                                                                            Change
(CHF 000)                                                                                        31.12.2000         31.12.1999                in %
Total                                                                                                793 315            268 233               195.8
Textile segment                                                                                      767 897            241 606               217.8
Components segment                                                                                    25 418             26 627                (4.5)



The strong increase in orders led to longer delivery times and thus to          In the Components segment, the order backlog is a less significant
an increase in order backlog.                                               indicator since the throughput time of orders generally amounts to less
    The order backlog of the Barmag/Neumag Group amounting to               than one month. General agreements concluded for larger orders are
CHF 385 million is included in the Textile segment. Accordingly, for        not included in order backlog but only recognised when individual
Saurer Textile Systems there was an increase of 59% from CHF 242 mil-       orders are processed.
lion to CHF 383 million.




Geographic sales development
                                                                                                                                            Change
(CHF 000)                                                                                               2000               1999               in %
Europe                                                                                               757 313            599 555                26.3
North and South America                                                                              703 536            517 738                35.9
Middle East and Far East                                                                             762 964            270 563               182.0
Total                                                                                              2 223 813          1 387 856                60.2



The sales were distributed almost equally throughout all continents. In     Turkey developed strongly. Adjusted for acquisitions, sales increased in
comparison with the prior year, a substantial improvement occurred in       Europe and in the American markets by 9%, whilst the increase in the
the Middle East and Far East. Sales in countries such as India, China and   Asian markets amounted to 106%.




Improvement of margins
(CHF 000)                                                                            2000                  %               1999                  %
Sales                                                                          2 223 813               100.0          1 387 856              100.0
Gros profit                                                                      551 715                24.8            290 747                20.9
Operation profit (-loss)                                                         122 185                 5.5           ( 56 702)             ( 4.1)


The gross profit margin of goods sold increased by almost 4%. Con-              The operating profit improved by CHF 179 million in comparison
tributing to this increase were higher prices, an improved exploitation     with the prior year. Amounting to 5.5% of sales, it did not, however,
of the production capacities, additional savings through outsourcing of     achieve the objectives. Further measures for an improvement of the
parts and components as well as internal cost reductions.                   cost structures are underway.




Development of operating result (before amortization of goodwill)
(CHF 000)                                                                         Jan–Apr          May–Aug              Sep–Dec                Total
2000                                                                               29 505             25 587             78 516            133 608
1999                                                                             ( 32 827)          ( 25 187)            13 999           ( 44 015)



The improvement in profitability is shown clearly in the development of     the results was achieved. This was attained on the one hand through
the four month results during the last two years. Following substantial     higher sales volumes and on the other hand as a result of further cost
losses at the beginning of the year 1999 a constant improvement of          reductions.




42
                                                                                                  MANAGEMENT’S DISCUSSION OF RESULTS



Results Textile segment
(CHF 000)                                                                              2000                  %                1999                  %
Sales                                                                            1 659 721                100.0           918 615               100.0
Cost of goods sold and operating expenses                                        1 479 347                 89.1           920 690               100.2
 before amortization of goodwill
Research and development                                                             96 800                 5.8             70 483                 7.7
Operating profit before amortization of goodwill                                     83 574                 5.0           (72 558)               ( 7.9)
Amortization of goodwill                                                              8 722                 0.5            10 100                  1.1
Operating result                                                                     74 852                 4.5           ( 82 658)              ( 9.0)
Depreciation and amortization                                                        65 614                 4.0             54 029                 5.9
Operating cash flow                                                                 140 466                 8.5           ( 28 629)              ( 3.1)
Order intake                                                                     1 810 675                                950 771
Order backlog                                                                      767 897                                241 606
Capital expenditures                                                                 52 615                                40 321
Net assets                                                                          740 532                               366 974
Employees (year end)                                                                  8 346                                 5 134




Sales development by division
Saurer Textile Systems                                                           1 199 630                                918 615
Barmag Group                                                                       460 091                                      –
Total                                                                            1 659 721                                918 615



With regard to the strategic completion of the product range, the two              Amortization of goodwill did not increase in comparison with the
companies Barmag AG and Neumag GmbH & Co. KG were acquired                    prior year in spite of the Barmag acquisition, since the prior period
during the course of the year. Barmag was consolidated as from May 1          included a special one-time charge.
and Neumag GmbH & Co. KG as from September 1, 2000.                               With an operating cash flow of CHF 140 million, an improvement
    Whilst the Barmag/Neumag Group still made no contribution to              of CHF 169 million could be achieved in comparison with the prior year.
operating result in the year under report, the situation improved sub-        This reflects the objective of ensuring in future the necessary cash flow
stantially at Saurer Textile Systems. The sales growth at Saurer Textile      from the Textile segment for the expansion of the corporate activities
Systems amounted to 31% and the return on sales before amortization           in the other sectors.
of goodwill almost to 7%. Price quality improved substantially as a
result of the satisfactory utilization of capacity during the course of the   Outlook
year. Furthermore, additional progress could be achieved in the reduc-        Thanks to the high order backlog the production capacities of several
tion of fixed costs. The strong increase in volume required major efforts     product groups are fully utilized up until the summer of 2001. This is
of the supply chain management, in order to ensure the necessary              true primarily for the spinning and embroidery machinery sectors. The
supply of parts and components within the simultaneously continuing           order backlog of the Barmag Group is still remaining at a lower level,
outsourcing process.                                                          whereby a slight improvement appears possible. Together with the
    The research and development efforts were maintained at the same          current plans for making the costs more flexible and thus to reduce
level. The assurance of permanent, innovative progress remains a key          them further, additional improvement in the result of the Textile
component of future success.                                                  segment is also expected.




                                                                                                                                                    43
MANAGEMENT’S DISCUSSION OF RESULTS



Results of the Components segment
(CHF 000)                                                                          2000                   %               1999                   %
Sales                                                                           564 092               100.0            469 241               100.0
Cost of goods sold and operating expenses                                       501 809                89.0            426 454                 90.9
 before amortization of goodwill
Research and development                                                         12 249                  2.2            12 885                  2.7
Operating profit before amortization of goodwill                                 50 034                  8.9            29 902                  6.4
Amortization of goodwill                                                          2 701                  0.5             2 535                  0.5
Operating profit                                                                 47 333                  8.4            27 367                  5.9
Depreciation and amortization                                                    47 774                  8.5            39 351                  8.3
Operating cash flow                                                              95 107                16.9             66 718                 14.2
Order intake                                                                    562 883                                468 255
Order backlog                                                                    25 418                                 26 627
Capital expenditures                                                             62 217                                 60 886
Net assets                                                                      333 794                                319 564
Employees (year end)                                                              2 857                                  2 626




Sales development by division
Transmission Systems                                                            333 345                                271 157
Surface Technology                                                              223 179                                190 711
Other areas                                                                       7 568                                  7 373
Total                                                                           564 092                                469 241


The results of the Components segment continued to develop                ed in Thailand in the prior year for the manufacture of bimetallic barrels
positively. A growth in sales of 20% was accompanied by a 73%             was able to establish itself successfully in the Asian markets.
improvement in the operating result. The gross margins could be               The operating cash flow of CHF 95 million increased by 43% in
improved thanks to reduced cost of goods sold. The major part of the      comparison with the prior year, whilst capital expenditures remained at
capital expenditures were attributable to the transmissions technology    the level of 1999. As a result the positive cash flow after capital expen-
sector in connection with new projects for the automobile industry.       ditures in this sector amounted to CHF 33 million.
    Transmissions Technology benefited above all from the newly
launched projects in the prior years for the automobile industry. The     Outlook
sales of these new projects could more than compensate for the weak       In spite of the signs of stagnation or even declining developments in
markets for agricultural vehicles and construction machinery. The new     several vehicle markets, the opportunities for further growth are
factory in India developed according to plan, manufacturing com-          considered positive for the Transmissions Technology sector. An in-
ponents for the local market and also supplying to the plants in Italy.   crease in sales as well as in profit is also expected in 2001.
The increase in sales of the Transmissions Technology sector amounted         The objectives of the Surface Technology sector include further
to 23 % whilst the operating profit rose overproportionally.              growth in 2001 in spite of the possible decline in the manufacturing of
    Surface Technology was able to increase its sales by 17%. The         industrial products in North America. Furthermore an additional in-
operating profit improved at a substantially higher rate than sales but   crease in profitability is expected thanks to the capital expenditures and
nevertheless did not meet the objectives. The production facility open-   restructuring undertaken in the past years.




44
                                                                                                MANAGEMENT’S DISCUSSION OF RESULTS



Financial and Group results
(CHF 000)                                                                                               2000                                   1999
Financial income (expense)                                                                          ( 27 243)                                5 156
Tax expense                                                                                           22 143                                18 694
Group profit (loss)                                                                                    72 799                             ( 70 240)


In the financial result the increase of net debt is reflected as a result       The tax expenses are approximately at the same level as the prior
of the acquisition of the Barmag/Neumag Group as well as the much           year. Substantial tax loss carry forwards are available particularly in
lower income from securities in comparison with the prior year. In          Germany, whilst in most of the other countries the usual charges were
accordance with IAS 32 interest expense amounting to CHF 4.8 million        applied.
was charged to the income statement for the 21/4% convertible bond
whilst from this only an amount of CHF 2.6 million will be paid.




Balance sheet data
(CHF 000)                                                                                        31.12.2000                             31.12.1999
Net cash (debt)                                                                                    ( 280 318)                            ( 115 575)
Total net working capital                                                                            268 462                               279 740
(without liquidity and short-term debt)
 Group companies without Barmag Group                                                                255 176                               279 740
 Barmag Group                                                                                         13 286
Interest bearing debt
  Convertible loan                                                                                   204 583
  Other borrowings                                                                                   217 909                               373 753
Shareholders’ equity                                                                                 722 493                               652 110



Net debt increased by CHF 165 million mainly as a result of the acqui-      During the course of the year under report, a 21/4% convertible bond
sition of the Barmag / Neumag Group. The relevant acquisition prices        in the amount of CHF 230 million was issued. It served in particular the
amounted to CHF 425 million, so a positive cash flow of CHF 260 mil-        financing of the acquisition of the Barmag / Neumag Group.
lion was achieved in the year under report. This includes the liquidity
purchased with the acquisitions in the amount of CHF 169 million,
resulting in a cash flow of approximately CHF 91 million from operating
and other activities.




Cash flow
(CHF 1000)                                                                                              2000                                   1999
Change in liquidity from operating activities                                                         170 837                              ( 14 545)
Acquisition of participations                                                                      ( 246 423)                                ( 1 582)
Capital expenditures                                                                               ( 114 832)                            ( 101 207)


The substantially improved course of business led to a considerable         tion. The proposed distribution takes into consideration that the Com-
improvement in cash flow from operating activities. Following a liquid-     pany suffered a massive loss in the prior year, which could only be off-
ity deficit of CHF 15 million in the prior year, a positive funds flow of   set during the year under report.
CHF 171 million resulted in the year under report.
                                                                            Share split
Distribution                                                                The Board of Directors is proposing to the General Meeting of
The Board of Directors proposes to the General Meeting of Share-            Shareholders a share split of 1:10. Following the capital repayment, the
holders a distribution of CHF 8 per share in the form of a capital reduc-   nominal value of the share will thereafter be reduced to CHF 12.50.




                                                                                                                                                  45
CONSOLIDATED INCOME STATEMENT




(CHF 000)                                                                     Note*                  2000                      %                  1999          %
Sales                                                                              1          2 223 813                    100.0            1 387 856        100.0
Cost of goods sold                                                                            1 672 098                     75.2            1 097 108         79.1
Gross profit                                                                                     551 715                    24.8              290 748         20.9
Selling and distribution                                                                        183 521                       8.2             139 903         10.1
Research and development                                                                        109 049                       4.9              83 368          6.0
Administration and other expenses                                                  2            136 960                       6.2             124 179          8.9
Total operating expenses                                                                         429 530                    19.3              347 450         25.0
Operating profit (loss)                                                                          122 185                    5.5              ( 56 702)      ( 4.1)
Financial income                                                                   3            ( 27 243)                 ( 1.2)                 5 156        0.4
Profit (loss) before taxes                                                                        94 942                      4.3            ( 51 546)      ( 3.7)
Taxes                                                                              4              22 143                      1.0              18 694         1.3
Group profit (loss)                                                                               72 799                    3.3              ( 70 240)      ( 5.0)
Minority interests                                                               16              ( 1 631)                 ( 0.1)               ( 1 450)     ( 0.1)
Net income (loss)                                                                                 71 168                      3.2            ( 71 690)      ( 5.1)

* For details see the notes to the consolidated financial statements, pages 52–60. These form an integral part of the consolidated financial statements.




Share statistics
(CHF)                                                                                                                      2000                              1999
Earnings (loss) per share                                                                                                  50.03                           ( 50.07)
Diluted earnings (loss) per share                                                                                          49.70                           ( 50.07)

See note 6, page 54.




46
                                                                                                                                CONSOLIDATED BALANCE SHEET



Assets
(CHF 000)                                                                     Note*          31.12.2000                        %          31.12.1999          %
Cash                                                                                             110 997                                      232 371
Marketable securities                                                                             21 953                                       21 201
Liquid assets                                                                      7             132   950                    6.5             253   572     16.1
Accounts receivable, trade                                                         8             427   772                                    313   379
Inventories                                                                        9             352   810                                    289   198
Prepayments and accruals                                                                           8   682                                      9   311
Other receivables                                                                                 66   044                                     43   259
Current assets                                                                                   988 258                    48.3              908 719       57.6
Financial assets                                                                 10               38   141                                     31   639
Deferred taxes                                                                     4              47   289                                      8   117
Property, plant and equipment                                                    11              676   764                                    572   741
Intangible assets                                                                12              294   574                                     56   718
Non-current assets                                                                            1 056 768                     51.7              669 215       42.4
Total assets                                                                                  2 045 026                    100.0            1 577 934      100.0




Liabilities
Short-term debt                                                                                 133    913                                    154   369
Accounts payable, trade                                                                         246    182                                    131   213
Accruals and deferred income                                                                    152    803                                    125   218
Short-term provisions                                                            13             105    807                                     71   939
Other liabilities                                                                                82    054                                     47   037
Current liabilities                                                                              720 759                    35.2              529 776       33.6
Financial debt                                                                   14              288   579                                    219   384
Long-term provisions                                                             13               27   202                                     32   898
Deferred taxes                                                                     4              26   729                                     18   541
Pension liabilities                                                              18              241   979                                    122   056
Medium and long-term liabilities                                                                 584 489                    28.6              392 879       24.9
Total liabilities                                                                             1 305 248                     63.8              922 655       58.5
Minority interests                                                               16               17 285                      0.8                3 169       0.2
Share capital                                                                    15              188 873                                      189 427
Group reserves                                                                                   462 452                                      534 373
Net income (loss) for the period                                                                  71 168                                     ( 71 690)
Shareholders' equity                                                                             722 493                    35.4              652 110       41.3
Tota liabilities and shareholders' equity                                                     2 045 026                    100.0            1 577 934      100.0

* For details see the notes to the consolidated financial statements, pages 52–60. These form an integral part of the consolidated financial statements.




                                                                                                                                                             47
CONSOLIDATED STATEMENT OF CASH FLOW




(CHF 000)                                                                                                                   Note*                 2000          1999
Cash flow from operating activities
Group profit (loss)                                                                                                                            72 799       ( 70 240)
Depreciation and amortization                                                                                                                 113 388          93 462
Other non-cash items and changes in net working capital                                                                (15 350)               (37 767)
Cash flow – net cash from (to) operating activities                                                                                           170 837        (14 545)
Cash flow from investing activities
Acquisition of participations                                                                                                  17            (243 719)        ( 1 445)
Repayment of loans granted, net                                                                                                                 (1 660)       ( 1 150)
Capital expenditures                                                                                                                         (114 832)     ( 101 207)
Aditions to intangible assets                                                                                                                  (4 394)        ( 1 455)
Sale (purchase) of marketable securities                                                                                                       (1 017)         97 671
Proceeds from the sale of property, plant and equipment                                                                                         12 647           8 516
Net cash from (to) investing activities                                                                                                      (352 975)           930
Cash flow from financing activities
Increase (decrease) in interest bearing debt                                                                                                 (148 904)       105 981
21/4% convertible bond 2000–2005, net of costs                                                                                 14              224 579              0
Dividends paid to minority shareholders                                                                                                          ( 486)       ( 1 076)
Change in own shares                                                                                                                            (7 567)       ( 8 501)
Capital repayment                                                                                                                                    0      ( 26 231)
Net cash from (to) financing activities                                                                                                         67 622        70 173
Difference in currency translation                                                                                                              (6 858)        1 268
Net increase (decrease) in cash                                                                                                              (121 374)        57 826
Cash as at January 1                                                                                                                           232 371       174 545
Cash as at December 31                                                                                                                        110 997        232 371
Interest income                                                                                                                                10 242         17 426
Interest payments                                                                                                                             (26 151)      ( 17 173)
Tax payments                                                                                                                                  (15 904)         2 570

* For details see the notes to the consolidated financial statements, pages 52–60. These form an integral part of the consolidated financial statements.




48
                                               CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY




                                                            Foreign currency    Retained earnings
                                      Share       Capital         translation     and net income
(CHF 000)                            capital     reserves             reserve       for the period       Total
Balance as at 1.1.1999              215 540      263 637            ( 4 553)             274 189      748 813
Capital repayment                  ( 26 231)                                                         ( 26 231)
Net loss                                                                                ( 71 690)    ( 71 690)
Foreign currency translation                                          9 719                              9 719
Change in own shares                    118      ( 8 619)                                              ( 8 501)
Balance as at 31.12.1999           189 427       255 018              5 166              202 499      652 110
Net income                                                                                71 168        71 168
21/4% convertible bond 2000–2005                  22 150                                                22 150
Foreign currency translation                                       ( 15 368)                         ( 15 368)
Change in own shares                 ( 554)      ( 7 013)                                              ( 7 567)
Balance as at 31.12.2000           188 873       270 155           ( 10 202)             273 667     722 493




                                                                                                            49
ACCOUNTING PRINCIPLES



Organization and business activity                                            the shares of third-party minority shareholders are shown separately in
Saurer Ltd. is a corporation organized under the laws of Switzerland          the balance sheet and income statement.
with legal domicile in Arbon. The main activities of the Textile segment           Capital consolidation The capital consolidation is based on the
are the development, manufacture and sale of textile systems and of           Anglo-Saxon purchase method. The assets and liabilities of newly
the Components segment the development, manufacture and sale of               acquired subsidiaries are included at their fair values in the consolidat-
transmission systems as well as the surface technology product lines.         ed financial statements as from the date of acquisition. In the case of
    The Group operates worldwide.                                             companies acquired during the current business year, the income
                                                                              earned prior to the acquisition is not included in the consolidated finan-
Organizational changes within the scope of consolidation                      cial statements.
During the current year Barmag AG and Neumag GmbH & Co. KG                          Intercompany profits Profits resulting from intercompany sales
were included in the consolidation as from 1.5.2000 and 1.9.2000              are eliminated insofar as the products and services concerned were not
respectively. BB Industrie Holding AG and Saurer AG merged in                 delivered to third parties on the balance sheet date.
December. Schlafhorst Automation Systems Inc. (USA) and Vectron
GmbH (D) were divested during the period under report.                        Valuation and accounting principles
                                                                              Foreign currency translation           Business transactions in foreign
Principles for the consolidated financial statements                          currencies are translated into the respective local currency at the
General principles and accounting standards The consolidated                  exchange rate ruling on the day of transaction and accounts receivable
financial statements are based on the financial statements of the indi-       and liabilities at the year-end balance sheet rate. The resulting profits
vidual Group companies which have been drawn up in accordance with            and losses are included in the income statement. At year-end the
standardized accounting principles. The accounts are based on the             balance sheets and income statements of foreign subsidiaries are
historical cost convention. The consolidated financial statements as          translated into Swiss Francs at the year-end exchange rate, whilst the
well as the individual financial statements of all companies are pre-         income statements are translated into Swiss Francs at annual average
sented in accordance with "International Accounting Standards" (IAS).         rates. Any difference arising thereon is not included in the income
Change in accounting principles During the year under report, the             statement, but is shown in the statement of shareholders' equity. In
following new IAS regulations came into force: IAS 36 concerning              the event of divestment of a subsidiary, the relative cumulative ex-
impairment of assets, IAS 37 concerning provisions, contingent                change rate differences from the sale are included in the income state-
liabilities and contingent assets and IAS 38 concerning intangible            ment.
assets. The implementation of these standards resulted in slight adjust-          Financial risk management Forward contracts are used to hedge
ments to the information presented. Customer prepayments are now              against currency risks. Realized and unrealized profits as well as losses
deducted from the inventories and the interest on provisions for pen-         on foreign currency forward contracts are included in the correspond-
sions will now be reported in interest expense. The prior year data has       ing profits and losses of the underlying business transactions.
been adjusted accordingly for the last two items.                                 Foreign currency risks which arise from the translation of income
                                                                              statement and balance sheet items of foreign consolidated companies
Principles of consolidation                                                   are not hedged.
Scope of consolidation The consolidated financial statements of                   Interest The Group's liquidity is invested on a short-term basis.
Saurer Ltd. include all subsidiaries in which Saurer Ltd. directly or indi-   Interest exposures are not hedged.
rectly controls more than 50% of the votes and the share capital.                 Credit risks Liquid funds are placed short-term with first-class
Companies acquired during the year under report are included in the           banks. The credit risk pertaining to accounts receivable is limited by the
consolidation as from the date of acquisition. Companies, which for           wide spread of customers, both geographically and by business activity.
strategic considerations are divested or discontinued, are removed from
the scope of consolidation and are included in the consolidated finan-        Composition and valuation of balance sheet items
cial statements in accordance with the equity method.                         Cash includes cash in hand, balances in postal and bank accounts, as
     Participations of between 20% and 50% (associated companies),            well as short-term money market funds.
in which the Group exercises a decisive influence, are included in the            Marketable securities are shown at year-end stock market or
consolidated financial statements in accordance with the equity               market value. Changes in value are included in the income statement.
method.                                                                           Accounts receivable, trade and other receivables are included
     Group receivables, payables and transactions have been eliminated.       at face value, less specific provisions where appropriate.
     Levels of consolidation          Specific consolidations have been           Inventories Raw materials are valued at the lower of cost or
undertaken for the Textile and Components segments, in order to show          market, using the weighted average cost method.
separate results for these business sectors.                                      Finished goods and work in process are valued at production cost
     Full consolidation In the case of consolidated Group companies           reduced to net realizable value should this be lower than cost. For items
with minority interests, 100 % of all balance sheet and income state-         of reduced salability and excess stocks the necessary provisions have
ment items are included in the Group financial statements. The total of       been set up. Customer prepayments are deducted from this item.




50
                                                                                                                      ACCOUNTING PRINCIPLES



    Financial assets are included at cost less provisions for perma-        future years of service as well as net interest on the assets or obliga-
nent impairment of value.                                                   tions. Contributions to defined contribution pension schemes are
    Property, plant and equipment is carried at purchase or pro-            charged to the income statement as incurred.
duction cost less appropriate depreciation. For impairments special              For funded plans, plan assets are held separately from those of the
depreciation is charged. Depreciation is provided for on a linear basis     Group in independently administered funds. The Group's liability to pay
over the following periods:                                                 future retirement benefits is determined using the "projected unit
                                                                            credit method" in accordance with IAS 19 (revised), and is fully provid-
                                                                   Years    ed in the Group's balance sheet. All actuarial profits and losses insofar
Furniture, fittings and equipment                                  5–12     as they exceed 10% of the higher amount of the present value of the
EDP, office equipment                                               3–7     defined benefit obligation or the fair value of the plan assets shall be
Vehicles, tools                                                     4–6     amortized over the average remaining period of employment.
Machinery                                                          6–10           The additional costs incurred within the context of the retirement
Buildings:      – exterior constructions                          30–60     agreements shall be provided for at the time of the agreement.
                – interior constructions                          12–25          Employee stock options shall be issued at market prices and there-
                                                                            fore no charge shall be made to the income statement at that time. On
     Repair and maintenance costs are expensed directly to the income       the exercise of the option, the difference between the exercise and
statement. Costs which give rise to an increase in value are capitalized    market prices shall be charged to the capital reserves.
and depreciated over the remaining useful life of the assets. Similarly,         Convertible bond The convertible bond includes a liability and
significant financing costs incurred in respect of the construction of      an equity component. At the time of issue the equity component is
property, plant and equipment are capitalized and depreciated over the      booked directly to shareholders' equity. The difference between the lia-
life of the corresponding assets.                                           bility and the nominal value will be treated as interest expense over the
     Leased equipment Property, plant and equipment financed                duration of the loan.
through long-term financial leasing contracts, and for which the                 Other assets and liabilities are reported at their nominal or
Company bears the major risks (financial leasing), is capitalized and       market value.
depreciated like other fixed assets. The cash value of the corresponding         Share capital The share capital reported corresponds to the share
lease obligations is included as a liability under long-term liabilities.   capital of Saurer Ltd. after elimination of own shares.
      Rental costs for short-term operational leases are charged directly
to the income statement. Operating leases are not included in the           Composition of items in the income statement
balance sheet; the corresponding obligations are fully reported in the      Sales Revenues from products sold or services rendered are stated
notes.                                                                      without turnover or value added tax, net of allowances and are recog-
     Goodwill includes the excess of the acquisition price of partici-      nized on shipment.
pations over the relative equity value and is amortized to the income            Research and development Research and development costs
statement over a maximum period of 20 years using the straight-line         are charged to the income statement insofar as the conditions for
method. Amortization periods in excess of 5 years are only used in the      capitalization in accordance with IAS 38 are not fulfilled. Only the costs
case of strategic acquisitions where a sustainable expansion of market      for the development of new products and the further development of
share can be expected. In the case of the purchase of a foreign             existing products are included.
company goodwill is converted and fixed in Swiss Francs at the time of           Taxes Liabilities for taxes on income are calculated and provided
acquisition. The amortization of goodwill is included in the administra-    for irrespective of their maturity on the basis of the tax rates prevailing
tion and other expenses.                                                    at the balance sheet date for the relative Group companies. Deferred
     Patents, licenses and trademarks are capitalized at cost and           taxes on differences between Group and tax valuations as well as
are written off over a maximum period of 10 years.                          eliminations with an effect on the income statement are accounted for
     Provisions are set up for present legal and constructive obliga-       in accordance with the liability method. Deferred tax credits and liabili-
tions as a result of past events. The amount of the provisions is based     ties are offset insofar as this is legally permissible.
on the expected outflow of reserves which will be required to settle the         Tax effects from tax loss carry forwards are taken into account if it
obligation.                                                                 can be reasonably expected that they will be realized. Provisions for
     Retirement benefits Saurer Group companies operate various             non-recoverable withholding taxes are set up in respect of retained
plans for providing employees with retirement benefits, which conform       earnings at Group companies, as soon as a distribution of profits is
to local circumstances and practice in the countries concerned.             planned.
     These include defined benefit and defined contribution plans,
under which benefits are provided through separate funds, insurance
plans or unfunded arrangements. For defined benefit plans, the
amount charged to the income statement consists of current service
cost which includes the normal cost of financing benefits in respect of




                                                                                                                                                    51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



1    Segment information
     Saurer reports its financial results in two segments, consisting of the Textile segment which is active in the development and manufacturing
     of spinning and texturing systems, and the Components segment, which includes the development and manufacturing of transmission
     systems for vehicles as well as metallic surface coatings. The operating result is reported for each segment. The difference between the
     operating result and the net income is shown in the consolidated income statement. There are no significant sales transactions between the
     segments.



                                                                                  Textile     Components            Corporate
     2000                                                                       Segment          Segment            and other               Total
     Sales                                                                    1 659 721            564 092                            2 223 813
     Research and development                                                    96 800             12 249                              109 049
     Other operating costs                                                    1 488 069            504 510                            1 992 579
     Segment result                                                              74 852             47 333                              122 185
     Capital expenditure                                                         52 615             62 217                              114 832
     Depreciation and amortization                                               65 614             47 774                              113 388
     Segment assets                                                           1 449 302            554 532              3 343         2 007 177
     Unallocated assets                                                                                                                  37 849
     Consolidated total assets                                                                                                        2 045 026
     Segment liabilities                                                        708 770            220 738             11 241           940 749
     Unallocated liabilities                                                                                                            364 499
     Consolidated total liabilities                                                                                                   1 305 248

     1999
     Sales                                                                      918 615            469 241                            1 387 856
     Research and development                                                    70 483             12 885                               83 368
     Other operating costs                                                      930 790            428 989              1 411         1 361 190
     Segment result                                                            ( 82 658)            27 367            ( 1 411)         ( 56 702)
     Capital expenditure                                                         40 321             60 886                              101 207
     Depreciation and amortization                                               54 029             39 351                 82            93 462
     Segment assets                                                             813 014            511 614              1 704         1 326 332
     Unallocated assets                                                                                                                 251 602
     Consolidated total assets                                                                                                        1 577 934
     Segment liabilities                                                        446 040            192 050              7 748           645 838
     Unallocated liabilities                                                                                                            276 817
     Consolidated total liabilities                                                                                                     922 655

                                                                                 South              Africa,          Far East,
     2000                                       Europe           NAFTA          America         Middle East              Asia               Total
     Sales                                     757 313         592 531          111 005            299 258           463 706          2 223 813
     Total assets                            1 434 861         477 620             7 241                             125 304          2 045 026
     Capital expenditures                       92 425           9 240               113                              13 054            114 832

     1999                                                                                                                                   Total
     Sales                                     599 555         464 137           53 601             97 788           172 775          1 387 856
     Total assets                            1 038 473         489 579                                                 49 882         1 577 934
     Capital expenditures                       70 277          12 634                                                 18 296           101 207



2 Administration and other expenses                                                                   2000                                 1999
     Administration expenses                                                                       136 891                              127 316
     Goodwill amortization                                                                          11 423                               12 687
     Other expenses                                                                                 26 166                                    0
     Other income                                                                                 ( 37 520)                            ( 15 824)
     Administration and other expenses                                                             136 960                              124 179




52
                                                                                              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



3 Net financial income                                                                                                      2000                                          1999
   Income from marketable securities
     Realized capital gains                                                                                                1 626                                         5 118
     Unrealized capital gains                                                                                              ( 787)                                        3 847
   Total income from marketable securities                                                                                   839                                         8 965
   Interest expense from 21/4% convertible bond 2000–2005                                                                ( 4 767)                                            0
   Interest expense from pension plans                                                                                  (12 294)                                        (5 137)
   Other interest expense                                                                                               (24 509)                                      (17 160)
   Interest income                                                                                                        13 972                                        18 520
   Income from participations                                                                                              1 292                                           759
   Expenses from foreign exchange differences (net)                                                                      ( 5 074)                                      ( 3 911)
   Other financial income                                                                                                  3 298                                         3 120
   Total                                                                                                                (27 243)                                         5 156


4 Steuern
   Taxes on income                                                                                                       21 899                                         14 676
   Deferred taxes                                                                                                         ( 322)                                         1 743
   Total taxes on income                                                                                                 21 577                                         16 419
   Capital and other taxes                                                                                                  566                                          2 275
   Total                                                                                                                 22 143                                         18 694
   Using the maximum tax rate of 23.6 % at the Group's headquarter location (Saurer AG, Arbon, Switzerland) applied to the profit (loss) before tax of CHF 94.9 million (1999:
   CHF (51.5) million), an expected tax charge (relief) of CHF 22.4 million (1999: CHF (12.2) million) results. The effective tax charge differs from the expected tax charge for
   the following reasons:


   Profit (loss) before taxes                                                                                            94 942                                      ( 51 546)
   Maximum tax rate                                                                                                       23.6%                                         23.6%
   Expected tax charge (relief)                                                                                          22 406                                      ( 12 165)
   Variance due to differing local tax rates                                                                            ( 8 537)                                     ( 20 739)
                                                                                                                         13 869                                      ( 32 904)
   Effect of expenses not accepted for tax (including amortization of goodwill)                                            4 210                                          3 120
   Prior year taxes                                                                                                          567                                            283
   Change the valuation of deferred taxes                                                                               ( 8 512)                                        48 058
   Effect of changes in tax rate                                                                                          8 582                                               0
   Other influences                                                                                                       2 861                                        ( 2 138)
   Effective tax charge                                                                                                  21 577                                         16 419
   Effective tax rate                                                                                                    22.7%
   Deferred tax assets and liabilities arise due to differences between the Group and tax valuations in the following balance sheet items:

                                                                                                          31.12.00                                       31.12.99
                                                                                               Deferred                Deferred               Deferred               Deferred
                                                                                                 assets                liabilities              assets               liabilities
   Assets
   Accounts receivable, trade / tax credits                                                       1   968                23   331                2   271               11    640
   Inventories                                                                                   58   735                 6   237               51   944                3    398
   Financial assets                                                                               7   919                 4   156                6   923                6    891
   Property, plant and equipment                                                                  1   624                69   185                2   099               64    408
   Intangible assets                                                                              2   795                      44                1   074                      14
   Liabilities
   Accounts payable, trade                                                                           122                    205                  1 118                   1   047
   Other liabilities                                                                               7 135                 43 868                  2 436                  49   216
   Provisions including pension liabilities                                                       27 592                  5 813                 17 429                   4   005
   Medium and long term liabilities                                                                7 145                  9 749                    288                   4   394
   Deferred tax assets deriving from tax loss carry forwards                                     160 425                      0                 169 524                     0
   Valuation allowances                                                                         ( 92 312)                     0              ( 120 517)                     0
   Offset of deferred tax assets and liabilities                                              ( 135 859)             ( 135 859)              ( 126 472)            ( 126 472)
   Total                                                                                          47 289                 26 729                   8 117                 18 541
   On the balance sheet date the Company had tax loss carry forwards totalling CHF 433 million (1999: CHF 349 million) with a tax value of CHF 160 million (1999: CHF 169
   million). Of these CHF 12 million expire by the year 2003 and a further CHF 33 million by the year 2007. The remaining CHF 388 million may be utilized after 2007.




                                                                                                                                                                              53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



5 Supplementary notes to the income statement                                                           2000                                  1999
     Wages and salaries                                                                              570 720                               429 495
     Social expenses and other personnel expense                                                     143 982                               114 747
     Personnel expenses                                                                              714 702                               544 242
     Cost of materials                                                                               886 986                               505 453
     Depreciation and amortization                                                                   113 388                                93 462




6 Earnings per share
     Net income (loss) attributable to shareholders                                                   71 168                              ( 71 690)
     Average number of ordinary shares                                                             1 422 647                             1 431 722
     Adjustment for share options                                                                      9 399                                     0
     Average number of shares outstanding                                                          1 432 046                             1 431 722
     for the calculation of diluted earnings
     Earnings (loss) per share (CHF)                                                                   50.03                                (50.07)
     Diluted earnings (loss) per share (CHF)                                                           49.70                                (50.07)




7 Liquid assets
     This item contains cash and marketable securities with a maturity of less than three months. The market securities are primarily equity invest-
     ments in listed companies and are stated at market value.




8 Accounts receivable, trade                                                                        31.12.00                              31.12.99
     Total                                                                                           427 772                               313 379
     of which bills of exchange                                                                       15 714                                30 187




9 Inventories
     Raw materials                                                                                   177 077                               126 660
     Work in process                                                                                 193 776                                62 055
     Finished goods                                                                                  137 419                               132 763
     Total                                                                                           508 272                               321 478
     Customer prepayments                                                                          ( 155 462)                             ( 32 280)
     Total                                                                                           352 810                               289 198




10 Financial assets
     Participations                                                                                    8   440                               6   425
     Loans                                                                                             9   224                               4   606
     Capitalized pension surplus (note 19)                                                            14   000                              14   000
     Other financial assets                                                                            6   477                               6   608
     Total                                                                                            38 141                                31 639




54
                                                                        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



11 Property, plant and equipment                         31.12.00                                        31.12.99
                                        Machinery and     Land and                      Machinery and     Land and
   Original cost                           equipment      buildings         Total          equipment      buildings         Total

   Balance as at January 1               1 104 091       560 190      1 664 281          1 036 404       552 646      1 589 050
   Additions                                96 088        18 744        114 832             96 182         5 025        101 207
   Disposals                              ( 74 438)      ( 5 598)      ( 80 036)          ( 44 531)      ( 3 945)      ( 48 476)
   Change in scope of consolidation          37 280       65 605        102 885                                                0
   Reclassifications                                                           0            ( 2 805)        2 805             0
   Foreign currency translation            ( 34 525)     ( 15 612)     ( 50 137)             18 841         3 659        22 500
   Balance as at December 31             1 128 496       623 329      1 751 825          1 104 091       560 190      1 664 281
   Accumulated depreciation
   Balance as at January 1                  807 385      284 155      1 091 540             770 304      273 837      1 044 141
   Depreciation                               88 977      11 483        100 460              69 477        9 827         79 304
   Disposals                               ( 69 771)     ( 2 016)      ( 71 787)           ( 40 470)      ( 206)       ( 40 676)
   Change in scope of consolidation          ( 8 833)    ( 4 949)      ( 13 782)                                              0
   Foreign currency translation            ( 26 324)     ( 5 046)      ( 31 370)              8 074           697         8 771
   Balance as at December 31               791 434       283 627      1 075 061            807 385       284 155      1 091 540
   Property, plant and equipment, net
   Balance as at December 31               337 062       339 702       676 764             296 706       276 035       572 741
   Value of leased assets                                                 3 179                                           6 286
   Insured values
   Machinery and equipment                                            1 743 538                                       1 382 749
   Buildings                                                          1 011 386                                         815 209




12 Intangible assets
   Original cost                          Patents etc.    Goodwill          Total         Patents etc.    Goodwill          Total

   Balance as at January 1                   10 158       93 589       103 747                 9 497      93 988       103 485
   Additions                                   4 394     247 473       251 867                 1 455           97         1 552
   Disposals                                ( 1 918)       ( 863)      ( 2 781)             ( 1 447)       ( 496)      ( 1 943)
   Change in scope of consolidation         ( 1 480)                   ( 1 480)                                               0
   Foreign currency translation                 ( 26)                      ( 26)                 653                        653
   Balance as at December 31                 11 128      340 199       351 327               10 158       93 589       103 747
   Accumulated amortization
   Balance as at January 1                     7 710      39 319         47 029               7 233       27 128         34 361
   Amortization                                1 505      11 423         12 928               1 471       12 687         14 158
   Disposals                                ( 1 309)       ( 382)       ( 1 691)            ( 1 440)       ( 496)       ( 1 936)
   Change in scope of consolidation         ( 1 474)                    ( 1 474)                                               0
   Foreign currency translation                 ( 39)                       ( 39)                446                         446
   Balance as at December 31                  6 393       50 360         56 753               7 710       39 319         47 029
   Intangible assets, net
   Balance as at December 31                  4 735      289 839       294 574                2 448       54 270         56 718




                                                                                                                             55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



13 Provisions
                                                                                                  Warranty                Restruc-
                                                                                                     costs                  turing                  Other                    Total
     Short-term provisions                                                                          32 500                 36 847                  2 592                  71 939
     Long-term provisions                                                                                                   9 895                 23 003                  32 898
     Balance as at January 1                                                                        32 500                 46 742                 25 595                104 837
     Charge to income                                                                               11 268                                        25 032                  36 300
     Usage                                                                                       ( 16 905)               ( 16 615)              ( 34 645)              ( 68 165)
     Release                                                                                       ( 3 169)                ( 9 529)                 ( 207)             ( 12 905)
     Foreign currency translation                                                                  ( 1 527)                   ( 989)                ( 836)               ( 3 352)
     Change in the scope of consolidation                                                           23 693                  12 467                 40 134                 76 294
     Balance as at December 31                                                                      45 860                 32 076                 55 073                133 009
     Short-term provisions                                                                          41 468                 23 473                 40 866                105 807
     Long-term provisions                                                                            4 392                  8 603                 14 207                 27 202

     Only large one-time projects are reported under restructuring. No new restructuring provisions had to be set up in the year under report.




14 Financial liabilities                                                                                                                        31.12.00               31.12.99
     Secured loans                                                                                                                                25 600                 50 832
     Unsecured loans                                                                                                                              58 396                168 552
     21/4% convertible bond 2000–2005                                                                                                            204 583                      0

     Total                                                                                                                                       288 579                219 384
                                                                                Bank                                         Other
     Maturities                                                                loans            Mortgages                    loans                    Total
     1 to 2 years                                                            37 450                  4 399                 13 450                 55 299                 81 703
     2 to 5 years                                                            11 427                 12 418                208 090                231 935                135 217
     After 5 years                                                              666                                           679                  1 345                  2 464
     Total                                                                   49 543                 16 817                222 219                288 579                219 384
     Financial liabilities (short and long-term) by currency
     Euro                                                                                                                                        106 639                156   310
     USD                                                                                                                                          72 632                 83   032
     GBP                                                                                                                                             193                  2   139
     CHF                                                                                                                                         233 602                114   286
     Other currencies                                                                                                                              9 426                 17   986
     Total                                                                                                                                       422 492                373 753

     Conditions of the 21/4% convertible bond 2000–2005 in the amount of CHF 230 million:
     Each bond with a nominal value of CHF 5 000 can be converted from June 26, 2000 up to maturity on June 26, 2005 or at an earlier repayment date, free of charge into
     3.968254 registered shares of Saurer Ltd. with a nominal value of CHF 133 each. The conversion price is CHF 1 260 per registered share. For fulfilment of the conversion
     right 182 540 registered shares of Saurer Ltd. with a nominal value of CHF 133 each have been reserved from conditional capital (resolution of the General Meeting of
     Shareholders of May 17, 2000). In accordance with IAS 32 the conversion right is valued separately and reported in shareholders' equity.


     The convertible bond is reported as follows in the balance sheet:
     Nominal value                                                                                                                               230 000
     Conversion right (equity component) after deduction of deferred taxes                                                                      ( 22 150)
     Deferred taxes                                                                                                                                ( 568)
     Original valuation of the liability as at June 26, 2000                                                                                     207 282
     Costs and dues                                                                                                                              ( 4 879)
     Interest expense (note 3)                                                                                                                      4 767
     Interest to be paid (accrued)                                                                                                               ( 2 587)
     Valuation of the liability as at December 31, 2000                                                                                          204 583

     There is no significant difference between the valuation of the liability in the balance sheet and the corresponding market value. The calculation of interest expense for the
     convertible bond is based on the effective market yield and the relative coupon of an equivalent loan without conversion right.




56
                                                                                   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



15 Consolidated share capital                                                                            31.12.00                  31.12.99
   Share capital of Saurer Ltd.                                                                           205 219                   205 219
   Elimination of own shares                                                                             ( 16 346)                 ( 15 792)
   Total                                                                                                 188 873                   189 427

   Details concerning the shareholders are shown on page 62. The shares outstanding are entitled to one vote each.

   Authorized capital, conditional capital
   See notes 3 and 4, page 70, notes to the financial statements of Saurer Ltd.




16 Minority interests
   Balance as at January 1                                                                                   3169                      4484
   Minority share of group profit                                                                           1 631                     1 450
   Dividends paid                                                                                           ( 486)                  ( 1 076)
   Purchase (sale) of minority participations                                                              12 950                   ( 1 684)
   Foreign currency translation                                                                                 21                      ( 5)
   Balance as at December 31                                                                               17 285                     3 169




17 Acquisition/divestment of participations
   Consolidated participations
   Current assets                                                                                         379 196                         0
   Fixed assets                                                                                           162 073                         0
   Liabilities and deferred income                                                                      (372 680)                         0
   Net assets                                                                                            168 589                          0
   Divestment proceeds (acquisition price)                                                              (413 719)                         0
   Of which paid in the year under report                                                               (413 065)                         0
   Less liquid assets                                                                                     167 158                         0
   Acquisition of consolidated participations                                                           (245 907)                         0
   Acquisition of minority participations                                                                  ( 516)                   (1 582)
   Acquisition of participations                                                                        (246 423)                   (1 582)
   Divestment of minority participations                                                                    2 704                      137
   Total cash flow                                                                                      (243 719)                   (1 445)

   In 2000 Barmag AG and Neumag GmbH & Co. KG were acquired. Schlafhorst Automation Systems Inc. and Vectron GmbH were divested.




                                                                                                                                         57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



18 Retirement benefits                                                 31.12.00      31.12.99
     Pension schemes                                                   192 765         97 417
     Other post-retirement benefits                                     49 214         24 639
     Total                                                             241 979       122 056

     Development of the balance sheet obligations
     Present value of funded obligations                                455 045       284 670
     Present value of unfunded obligations                              137 219        78 150
     Fair value of plan assets                                        ( 459 666)    ( 336 869)
     Under (over) funding net                                          132 598         25 951
     Unrealized actuarial losses (profits)                             ( 7 203)         5 556
     Pension surplus not capitalized                                    53 370         51 910
     Thereof included in long-term provisions                           192 765        97 417
     Thereof included in financial assets                              ( 14 000)     ( 14 000)

     The amounts recognized in the income statement are as follows:
     Current service cost                                                 11 094          8 830
     Interest cost                                                        28 385        13 965
     Expected net return on plan assets                                ( 20 236)     ( 12 856)
     Amortization of funded status                                            767             0
     Employee contributions                                              ( 2 122)      ( 2 060)
     Increase in pension surplus not capitalized                            1 460         1 821
     Total charged to income                                             19 348         9 700
     Service expenses for defined contribution plans                      2 163         2 119

     Movement in the liability recognized in the balance sheet
     Balance as at January 1                                             97 417        78 290
     Effect of adopting IAS 19 (revised)                                               16 392
     As restated                                                         97 417        94 682
     Change in the scope of consolidation                                97 461              0
     Exchange differences                                               ( 7 170)            56
     Total expense as above                                              19 348          9 700
     Employer's contributions                                           ( 6 412)      ( 3 265)
     Pensions paid from unfunded plans                                  ( 7 879)      ( 3 756)
     Balance as at December 31                                         192 765         97 417

     Assumptions used in actuarial calculations (weighted average)
     Discount rate                                                        4.9%          4.2%
     Expected return on plan assets                                       5.1%          4.0%
     Future salary increases                                              2.5%          2.4%
     Future pension increases                                             1.8%          1.5%

     Change in the provision for other post-retirement benefits
     Balance as at January 1                                             24 639        23 655
     Exchange differences                                               ( 1 808)        ( 105)
     Change in the scope of consolidation                                19 978              0
     Service cost                                                         9 584          3 841
     Benefits paid                                                      ( 3 179)      ( 2 752)
     Balance as at December 31                                           49 214        24 639




19 Remuneration of the Board of Directors                                  2000          1999
     The remuneration paid to the Board of Directors amounted to            256           256




58
                                                                                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



20 Transactions with related parties

   There exists a program for employee stock options. The shares required to cover this program were purchased on the market. The condition-
   al capital, which is also available for this program (note 4, page 70), has not been used to date. The options granted as at December 31, 2000
   have exercise prices between CHF 340 and CHF 1 065. The exercise prices correspond to the market prices at the time of issue. The options
   are blocked for between 2 and 5 years and are valid for 5 to 6 years.


                                                            Employees                       Board of Directors                                    Total
   Options   outstanding as at 31.12.1998                       38 010                                   9 200                                 47 210
   Options   granted                                             9 030                                   3 750                                 12 780
   Options   exercised                                         ( 4 967)                                                                       ( 4 967)
   Options   expired                                             ( 325)                                                                         ( 325)
   Options   outstanding as at 31.12 1999                       41 748                                  12 950                                 54 698
   Options   granted                                              5 800                                   2 850                                 8 650
   Options   exercised                                         ( 2 615)                                ( 1 100)                               ( 3 715)
   Options   expired                                           ( 2 760)                                                                       ( 2 760)
   Options outstanding as at 31.12.2000                         42 173                                 14 700                                  56 873



21 Contingent liabilities                                                                            31.12.00                                31.12.99
   Discounted notes                                                                                       874                                   1 360
   Guarantees in favor of third parties                                                                28 704                                  36 718
   Others                                                                                                   0                                     236
   Total                                                                                               29 578                                  38 314



22 Financial instruments
   Open forward foreign exchange contracts
   Contract value                                                                                     177 267                                 155 626
   Negative market value                                                                              ( 7 113)                               ( 10 248)
   Positive market value                                                                                 4 841                                    100

   Foreign forward currency transactions are used to hedge currency risks in accordance with Group guidelines.
   The contract value shows the volume (gross nominal value) of the hedging transactions open at the balance sheet date. The negative market
   value is the potential cost required to close the outstanding contracts at the balance sheet date. The positive market value represents the un-
   realized profit on hedging transactions on the balance sheet date and thus the maximum risk in the event that the other party to the contract
   should not fulfil its obligations. Hedging is undertaken exclusively through first class financial institutions. Otherwise, there are no significant
   variances between the valuation of the balance sheet items and fair market values. Included in the figures above are anticipatory hedge trans-
   actions intended to protect future cash flows. In connection with the anticipatory hedge transactions the company has bought and sold a
   number of foreign currency options whose economic values are reflected in the figures above.



23 Other financial obligations
   As at 31.12.2000 obligations for future capital expenditures amounted to CHF 18 172 (prior year CHF 11 343).

                                                                                                              Due within:
   Future obligations from:                                                                          1–2 years        2–5 years          after 5 years
   Finance lease                                                                                           16                  11                   0
   Operating lease                                                                                     17 424              23 023                   0
   Rental contracts                                                                                     7 813              23 457               5 821
   Total financial obligations                                                                         25 253              46 491               5 821




                                                                                                                                                    59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



24 Pledged assets                                                                                   31.12.00                              31.12.99
     Assets are pledged as follows:
     Fixed assets                                                                                    88 539                               142 661
     Inventories                                                                                          0                                 1 951
     Other items of current assets                                                                      967                                   692
     Total                                                                                           89 506                               145 304

     Loans and other liabilities secured by pledged assets                                           25 600                                58 129




25 Events subsequent to the balance sheet date
     There are no events to report which could have a significant influence on the business results following the balance sheet date.




26 Changes in the scope of consolidation
     See page 50, organizational changes within the scope of consolidation.




27 Currency rates applied                                                                    2000                                  1999
                                                                                  Income             Balance           Income              Balance
     Currency                                                                  statement               sheet        statement                sheet
     100     DEM                                                                  79.762             78.228            81.807              81.807
       1     EURO                                                                  1.560              1.530             1.600               1.600
       1     USD                                                                   1.690              1.630             1.500               1.590
     100     ATS                                                                  11.337             11.119            11.628              11.628
     100     ITL                                                                   0.081              0.079             0.083               0.083
       1     GBP                                                                   2.560              2.470             2.430               2.580




60
                                                                                                     REPORT OF THE GROUP AUDITORS




Report of the group auditors
to the general meeting of the shareholders of Saurer Ltd., Arbon



As auditors of the group, we have audited the consolidated financial statements (income statement, balance sheet, statement of cash
flows, statement of changes in equity and notes, on pages 46 to 60) of Saurer Ltd. for the year ended December 31, 2000.

These consolidated financial statements are the responsibility of the board of directors. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional
qualification and independence.

Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession and with the International Standards
on Auditing issued by the International Federation of Accountants (IFAC), which require that an audit be planned and performed to obtain
reasonable assurance about whether the consolidated financial statements are free from material misstatement. We have examined on a
test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accoun-
ting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and the
cash flows in accordance with the International Accounting Standards (IAS) and comply with Swiss law.

We recommend that the consolidated financial statements submitted to you be approved.



PricewaterhouseCoopers AG




Urs Honegger                  Manuela Hutter




St. Gallen, March 27, 2001




                                                                                                                                               61
SUPPLEMENTARY INFORMATION – ORGANIZATION, SHAREHOLDERS, PARTICIPATIONS



Board of Directors Dr. R. Staub submitted his resignation on the date          Participations in Barmag AG In November 1999 Saurer concluded
of the last General Meeting of Shareholders on May 17, 2000. R. Staub          an acquisition agreement with AGIV AG, Frankfurt (D) concerning the
gave his full commitment to the Company and for several years was an           acquisition of a majority shareholding of 74.7% in Barmag AG,
experienced member of the Audit Committee. The Board of Directors              Remscheid (D). Following the closing Barmag AG has been consolidated
expresses its sincere thanks to him for his services.                          since May 1, 2000.

Shareholders There are no restrictions either for Swiss or for non-            Purchase offer Barmag AG On September 19, 2000 the 100%
Swiss investors with regard to registration in the share register. Similarly   subsidiary Tesys GmbH (D) submitted to the third party shareholders
there are no limits regarding the number of shares eligible for voting         of Barmag AG a voluntary purchase offer at an acquisition price of
rights to be registered, whereby, however, in accordance with the arti-           20.50 per share. As at 31.12.2000 the shareholding situation was as
cles of incorporation, there is an obligation to report participations         follows: Tesys GmbH 93.5%, Schlafhorst AG 5.1%, third parties 1.4%.
which exceed or fall below 5, 10, 25, 331/3, 50 and 662/3 percent
respectively. In the event that a participation of 331/3% is attained,         Acquisition of Neumag GmbH & Co. KG            In September 2000
there is the further obligation to submit a public tender offer.               Barmag AG acquired Neumag GmbH & Co. KG, Neumünster (D) from
                                                                               Babcock Borsig AG. The company has been consolidated since Septem-
As at the end of 2000 the following shareholders were registered :             ber 1, 2000.

                                          Number of            Number of       Acquisition of PLB (Poland) The acquisition of the gear production
Shareholders                                 shares          shareholders      sector of the Polish agricultural machinery manufacturer Ursus, which
                                                                               was announced in September 2000, was not concluded since the
Individuals                                       9%                 87%       situation following due diligence did not correspond to what had been
Corporate entities                               46%                 13%       expected.
Own shares                                        8%                    –
Shares in the process of transfer                37%                    –      Sale of Schlafhorst Automation Systems Inc. and Vectron GmbH
                                                                               In September 2000 Schlafhorst Automation Systems Inc., New Holland,
     According to information available to the Company, UBS Asset              MI (USA) which was active in the manufacture of automated transport
Management AG, Zurich (CH), holds a share of 7% in the share capi-             systems was sold to Engim (Belgium).
tal as well as in the votes. The Company does not know further share-
holders with a share of more than 5%.                                          Internal legal restructuring In December BB Industrie Holding AG
                                                                               (Schaffhausen) merged with Saurer Ltd. (Arbon), and Bernex Inc. (USA)
Change of corporate names During the course of the year, the                   merged with Schlafhorst Inc. (USA).
global market image of the surface technology unit was simplified.
Within the framework of the new structure, the companies of the
product group including bimetallic barrels, feed screws and nozzles,
which were hitherto known under several names, were combined
under the new name of Xaloy; the companies active in thin film coating
technology were renamed as IonBond. These changes concerned in
detail the following companies :

Previous name                                                  New name

Berna AG (Olten, CH)                                           Xaloy AG
Bernex-Müller AG (Rorbas, CH)                           Xaloy Rorbas AG
Bernex-Bimetall AG (Olten, CH)                              IonBond AG
Multi-Arc. Inc. (Rockaway, NJ, USA)                         IonBond Inc.




62
                                                                                                                        SHARE STATISTICS



Saurer registered share (CHF)                                     2000             1999             1998             1997            1996
Symbol SWX: SAUN, Security No. 226 881                      nom. CHF 133     nom. CHF 133     nom. CHF 150     nom. CHF 175    nom. CHF 190



Nominal share capital
Number of shares                                             1 543 000        1 543 000        1 543 000        1 543 000       1 543 000
Nominal share capital                                      205 219 000      205 219 000      231 450 000      270 025 000     293 170 000



Conditional capital*
Number of shares (for convertible bond)                        300   000
Nominal value                                               39 900   000
Number of shares (for stock option plans)                      125   000        125 000          125 000          125 000         125 000
Nominal value                                               16 625   000     16 625 000       18 750 000       21 875 000      23 750 000



Authorized capital* (for capital market transactions)
Number of shares                                               300 000          125 000          125 000          125 000                –
Nominal value                                               39 900 000       16 625 000       18 750 000       21 875 000                –



Shares issued (year end)
Number of shares                                             1 543 000        1 543 000        1 543 000        1 543 000       1 543 000



Shares with rights to dividends (year end)
Number of shares                                             1 420 089        1 424 267        1 436 931        1 456 437       1 482 980



Own shares (year end)
Number of shares                                               122 911          118 733          106 069           86 563          60 020



Distributions (in respect of the financial year shown)
Capital repayment per share                                           8                –               17               25              15
(2000: proposal to the General Meeting of Shareholders)



Total distributions                                                    –     26 231 000       38 575 000       23 145 000                –
(shown for year of payment)



Stock market capitalization
Year end                                                  1 157 250 000    1 186 567 000    1 265 260 000    1 635 580 000    894 940 000



Key data per share
Group result                                                     50.03           (50.07)            58.70           87.57            34.63
Cash flow                                                       120.08           (10.16)            92.99          119.58            83.67
 (Net cash from operating activities)
Shareholders' equity                                            507.85           455.47           519.19           508.45          492.43



Stock market prices
High                                                              1 140              893            1 720            1 198             588
Low                                                                 700              622              600              572             440
Year end                                                            750              769              820            1 060             580

* The total of new shares issued must not exceed 500 000. See also Notes 3, 4 and 5, page 70.



                                                                                                                                        63
MULTIPLE YEAR COMPARISON



Income statement (CHF 000)                                  2000                1999        1998        1997        1996


Sales
Saurer Textile Systems                                 1 199 630              918 615   1 226 131   1 403 902   1 291 181
Barmag Group                                             460 091
Total Textile segment                                  1 659 721              918 615   1 226 131   1 403 902   1 291 181
Transmission Systems                                     333 345              271 157    296 081     304 414     246 630
Surface Technology                                       223 179              190 711    191 918     152 607     117 948
Other sectors                                              7 568                7 373     13 669      14 536      15 344
Total Components segment                                 564 092              469 241    501 668     471 557     379 922
Total sales                                            2 223 813         1 387 856      1 727 799   1 875 459   1 671 103
Gross profit                                             551 715              290 748    429 333     456 965     367 068
Operating expense                                        429 530              347 450    348 277     331 326     305 606
Operating result                                         122 185          ( 56 702)       81 056     125 639      61 462
of which Textile segment                                  74 852          ( 82 658)       34 927      79 888      43 462
         Components segment                               47 333            27 367        45 761      45 654      16 300
Net financial income (expense)                          ( 27 243)               5 156     20 976      25 148      ( 1 632)
Income (loss) before taxes                                94 942          ( 51 546)      102 032     150 787      59 830
Taxes                                                     22 143             18 694       15 193      18 056      10 183
Minority interests                                       ( 1 631)           ( 1 450)     ( 1 538)    ( 1 507)      1 117
Net result                                                71 168          ( 71 690)       85 301     131 224      50 764




Operating cash flow (operating profit before depreciation and amortization)
Textile segment                                          140 466          ( 28 629)       83 255     127 224      93 225
Components segment                                        95 107             66 718       81 336      76 395      42 354




Depreciation and amortization
Total                                                    113 388               93 462     83 959      78 166      75 922
as % of sales                                              5.1%                 6.7%       4.9%        4.2%        4.5%
of which Textile segment                                  65 614               54 029     48 328      47 336      49 763
         Components segment                               47 774               39 351     35 575      30 741      26 054




Order intake, order backlog
Order intake                                           2 373 558         1 419 026      1 509 381   1 957 332   1 478 218
Order backlog                                            793 315           268 233        237 063     455 481     373 608




64
MULTIPLE YEAR COMPARISON



Cash fow (CHF 000)                                 2000         1999         1998         1997         1996
Net cash from operating activities              170 837      ( 14 545)    135 126      179 195      122 635
% of sales                                        7.7%          (1.0)%      7.8%         9.6%         7.3%

Capital expenditures                            114 832      101 207      139 105       78 676       68 588
of which Textile segment                         52 615       40 321       61 404       46 120       34 940
         Components segment                      62 217       60 886       77 614       32 556       33 528



Balance sheet (CHF 000)                         31.12.00     31.12.99     31.12.98     31.12.97     31.12.96
Assets
Liquid funds                                    132   950    253   572    289   570    308   725    362   503
Accounts receivable, trade                      427   772    313   379    294   058    330   912    294   152
Inventories                                     352   810    289   198    288   914    292   827    283   516
Prepayments and accruals, other receivables      74   726     52   570     50   633     46   242     54   265
Current assets                                  988 258      908 719      923 175      978 706      994 436
Financial assets, deferred taxes                 85 430       39 756       20 345       17 781       27 999
Property, plant and equipment                   676 764      572 741      544 909      494 934      494 335
Intangible assets                               294 574       56 718       69 124       73 939       54 842
Non-current assets                             1 056 768     669 215      634 378      586 654      577 176
Total assets                                   2 045 026    1 577 934    1 557 553    1 565 360    1 571 612

Liabilities
Short-term debt                                 133   913    154   369    181   290     73   419    148   793
Accounts payable                                246   182    131   213    117   438    154   407    127   002
Provisions, accruals and deferred income        258   610    197   157    196   603    226   683    209   686
Other liabilities                                82   054     47   037     78   554     83   303     80   047
Current liabilities                             720 759      529 776      573 885      537 812      565 528
Financial debt                                  288 579      219 384       76 680      129 184      141 949
Provisions, deferred taxes                      295 910      173 495      148 079      131 812      140 277
Long-term liabilities                           584 489      392 879      224 759      260 996      282 226
Total liabilities                              1 305 248     922 655      798 644      798 808      847 754
Minority interests                                17 285       3 169        4 484        4 601        2 087
Shareholders’ equity                             722 493     652 110      754 425      761 951      721 771
Total liabilities and shareholders’ equity     2 045 026    1 577 934    1 557 553    1 565 360    1 571 612
Equity financing ratio                            35.3%        41.3%        48.4%        48.7%        45.9%



Employees
Number of employees (year end)                   11 219         7 774       8 319        8 711        8 329
of which Textile segment                          8 346         5 134       5 691        6 026        6 130
         Components segment                       2 857         2 626       2 615        2 672        2 154
of which Europe                                   9 230         6 077       6 665        7 066        6 947
         of which Switzerland                       546           534         560          584          600
         NAFTA                                    1 070         1 078       1 200        1 189          820
         Asia                                       920           619         454          456          562

Personnel expenses (CHF 000)                       2000         1999         1998         1997         1996
Wages and salaries                              570 720      429 495      447 696      440 484      413 850
Social security and other personnel expenses    143 982      114 747      118 164      117 004      108 894
Total                                           714 702      544 242      565 860      557 488      522 744




                                                                                                           65
SAURER LTD. – FINANCIAL REPORT.


Saurer Ltd. – Financial statements


Income statement                                   68


Balance sheet                                      69


Notes to the financial statements                  70


Proposals to the General Meeting of Shareholders   72


Report of the statutory auditors                   73


Directors, officers, auditors                      74


Principal companies and participations             76


Addresses                                          78




                                                   67
SAURER LTD. – INCOME STATEMENT



Revenues (CHF)                                                  Note        2000           1999
Revenues from operations
Revenues from securities and participations                             1 570 040      4 367 152
Interest income                                                        10 904 675      4 550 553
Income from sale of participations                                        119 856              0
Other income                                                            1 740 122      1 833 099
Merger profit                                                    1*    59 689 548              0
Total revenues                                                         74 024 241     10 750 804

Expenses
Operating expense
Administration expense                                                    524   877      415   707
Depreciation/write-downs                                                  571   518       69   326
Interest expense                                                        5 333   855    1 845   020
Taxes                                                                     157   295      500   077
Other expenses                                                            722   527    1 959   737
Write-down of participations                                           19 638   019              0
Total expenses                                                         26 948 091      4 789 867
Net income                                                             47 076 150      5 960 937

* For details see notes to the financial statements, page 70.




68
                                                                                      SAURER LTD. – BALANCE SHEET



Assets (CHF)                                                    Note     31.12.2000                     31.12.1999
Liquid assets                                                            11 995 333                      4 801 623
Marketable securities                                                     1 009 277                      1 577 035
Current accounts receivable
  Third parties                                                             785 177                        404 680
  Group companies                                                        20 721 497                      7 579 435
Accrued income                                                            7 156 331                      1 647 522
Current assets                                                           41 667 615                     16 010 295
Loans
 Group companies                                                        384 993 140                    154 373 871
Participations
 Third parties                                                                4 142                      2 379 459
 Group companies                                                        654 363 091                    715 260 021
Non-current assets                                                     1 039 360 373                   872 013 351
Total assets                                                           1 081 027 988                   888 023 646




Liabilities
Short-term liabilities
 Third parties                                                           12   048   236                     32     356
 Group companies                                                          5   825   191                  5 332     174
Short-term provisions                                                     1   129   216                    405     000
Accruals and deferred income                                              3   190   835                    499     237
Current liabilities                                                      22 193 478                      6 268 767
Loans
 21/4% convertible bond 2000–2005                                       230 000 000                              0
 Third parties                                                                    0                    100 000 000
 Group companies                                                        171 550 584                    171 547 103
Provisions                                                               74 724 030                     74 724 030
Total liabilities                                                       498 468 092                    352 539 900
Share capital                                                           205   219   000                205   219   000
General legal reserves                                                   61   904   473                 61   904   473
Reserve for own shares                                                  126   440   000                122   875   000
Unappropriated retained earnings                                        188   996   423                145   485   273
Shareholders' equity                                             2*     582 559 896                    535 483 746
Total liabilities and shareholders' equity                             1 081 027 988                   888 023 646

* For details see notes to the financial statements, page 70.




                                                                                                                    69
SAURER LTD. – NOTES TO THE FINANCIAL STATEMENTS



Explanation to the accounts
SaurerGroup shareholders participate legally in Saurer Ltd., which controls the companies listed on pages 76/77. The consolidated financial state-
ments are of primary importance economically. The statutory financial statements of Saurer Ltd. are in this context to be viewed as a supplement.




Notes (amounts in CHF)
1    Merger profit
     A book profit resulted from the merger in December 2000 between BB Industrie Holding AG (Schaffhausen) and Saurer AG (Arbon).



2    Development of equity
                                                                                 General         Reserve for      Unappropriated
                                                         Share capital           reserves        own shares     retained earnings                Total
     Balance as at 31.12.98                              231 450 00          61 904 473        114 650 000           147 749 336        555 753 809
     Repayment of nominal value                         (26 231 000)                                                                    (26 231 000)
     Net income for the year 1999                                                                                      5 960 937          5 960 937
     Reserve for own shares                                                                       8 225 000           (8 225 000)                 0
     Balance as at 31.12.99                             205 219 000          61 904 473        122 875 000           145 485 273        535 483 746
     Net income for the year 2000                                                                                     47 076 150         47 076 150
     Reserve for own shares                                                                       3 565 000           (3 565 000)                 0
     Balance as at 31.12.2000                           205 219 000          61 904 473        126 440 000           188 996 423        582 559 896



3    Authorized capital
     The Board of Directors is authorized to increase up to May 17, 2002 the share capital through the issue of a maximum of 300 000 fully
     liberated registered shares with a nominal value of CHF 133 each up to the maximum amount of CHF 39 900 000. Increases through firm
     underwriting or in partial amounts are approved. The issue price, the period of the entitlement to dividends and the type of liberation or the
     contribution or underwriting in kind shall be determined by the Board of Directors. The Board of Directors is authorized to exclude the sub-
     scription right of the shareholders and to allocate them to third parties in the event of the use of shares for the purpose of the acquisition of
     companies, parts of companies or participations, for mergers and exchange of participations as well as in the case of a share placement for
     the financing of such transactions. Subscription rights not exercised shall be sold by the Board of Directors at market conditions.



4    Conditional capital
     The share capital of the Company shall be increased by the maximum amount of CHF 56 525 000 through the issue of 425 000 fully liberat-
     ed registered shares with a nominal value of CHF 133 each, of which
     a) up to an amount of CHF 39 900 000 representing 300 000 registered shares with a nominal value of CHF 133 each will be allocated to
     the shareholders through the exercise of option and conversion rights, which will be granted in connection with loans or other bonds of the
     Company or of Group companies or through the exercise of option rights;
     b) up to an amount of CHF 16 625 000 representing 125 000 registered shares with a nominal value of CHF 133 each, which are granted to
     the employees of the Company or of Group companies as a result of the exercise of stock option rights.
     The subscription right of the shareholders is excluded.



5    Joint determination for approved and conditional capital
     The number of the new shares to be issued on the basis of Articles 6 and 7 of the Articles of Incorporation may not exceed a total of 500 000.



6    Contingent liabilities                                                                          31.12.00                               31.12.99
     Guarantees                                                                                  446 339 000                            396 076 000

     The guarantees were given almost exclusively in favor of SaurerGroup subsidiary companies.




70
                                                               SAURER LTD. – NOTES TO THE FINANCIAL STATEMENTS



7   Purchase and sale of own shares
                                                                             Number of               Movements at
                                                                       registered shares         transaction values
    Balance as at 31.12.1998                                                   106 069
    Purchase                                                                    22 226                 16 491 446
    Sale                                                                       ( 4 595)                 3 763 087
    Sale from employee options programs (at exercise prices)                   ( 4 967)                 2 232 725
    Balance as at 31.12.1999                                                   118 733
    Purchase                                                                     28 297                28 937 577
    Sale                                                                      ( 21 339)                20 917 010
    Sale from employee options programs (at exercise prices)                    ( 2 780)                1 184 597
    Balance as at 31.12.2000                                                   122 911



8   Significant shareholders
    Please refer to the information given on page 62.



9   Participations
    Please refer to the information given on pages 76/77.



10 Other notes
    No other reportable items are applicable.




                                                                                                                71
SAURER LTD. – PROPOSAL TO THE GENERAL MEETING OF SHAREHOLDERS



Appropriation of profit (amounts in CHF)
Profit brought forward                                                                                                         145 485 273
Net income for the financial year 2000                                                                                          47 076 150
Appropriation to reserve for own shares                                                                                         (3 565 000)
Unappropriated retained earnings                                                                                               188 996 423

The Board of Directors proposes to the General Meeting of Shareholders that the unappropriated retained earnings be carried forward for new
account.




Capital repayment
The Board of Directors proposes to the General Meeting of Shareholders of May 16, 2001 a reduction in the share capital from CHF 205 219 000
to CHF 192 875 000 through the repayment of CHF 8 per share. The capital repayment is not subject to the deduction of any capital investment
taxes.
The capital repayment shall be effected without cost on August 6, 2001 by the Company at the depository banks. Share certificates being held
in custody privately should be sent to the Company including information of the account to which the remittance should be made. The Company
will undertake the payment directly together with the exchange of the new certificates.




Share split
The Board of Directors proposes to the General Meeting of Shareholders on May 16, 2001 a share split of 1:10. After the repayment of capital
the new nominal value of the share will amount to CHF 12.50. The split will be made on August 6, 2001 at the same time as the capital repay-
ment.




72
                                                                                SAURER LTD. – REPORT OF THE STATUTORY AUDITORS




Report of the statutory auditors
to the general meeting of the shareholders of Saurer Ltd., Arbon

As statutory auditors, we have audited the accounting records and the financial statements (income statement, balance sheet and notes,
on pages 68 to 72) of Saurer Ltd. for the year ended December 31, 2000.

These financial statements are the responsibility of the board of directors. Our responsibility is to express an opinion on these financial sta-
tements, based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.

Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession, which require that an audit be
planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. We
have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the
accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.

In our opinion, the accounting records and financial statements and the proposed appropriation of available earnings comply with Swiss
law and the company's articles of incorporation.

We recommend that the financial statements submitted to you be approved.

PricewaterhouseCoopers AG




Urs Honegger                   Manuela Hutter




St. Gallen, March 27, 2001




                                                                                                                                                   73
OFFICERS – BOARD OF DIRECTORS


BOARD OF DIRECTORS                                                 Expiration of mandate

Prof. Dr. Manfred Timmermann    Chairman                                          2001

Prof. Dr. Giorgio Behr          Deputy Chairman                                   2001

Heinrich Fischer                Delegated Member                                  2001

Dr. Mohamad W. Khouja           Member                                            2001

Dr. Klaus Oesch                 Member                                            2001

Ulrich Schmidt                  Member                                            2001




Audit Committee                 Dr. Mohamad W. Khouja (Chairman)

                                Prof. Dr. Manfred Timmermann

                                Dr. Klaus Oesch




74
                                                                       OFFICERS – MANAGEMENT               (AS AT 1.3.2001)




MANAGEMENT

Group Management                                   Group Directors

Heinrich Fischer         Chief Executive Officer   Klaus K. Moll           CEO Barmag Group

Ernst Kessler            Chief Financial Officer   Heinz Bachmann          CEO Saurer Textile Systems

Joseph Steiger           Corporate Development     Marcello Lamberto       CEO Graziano Trasmissioni

                                                   Ulrich Bellgardt        CEO Surface Technology

BARMAG GROUP

Klaus K. Moll                                                              Chairman of the Board of Management

Martin Stillger                                                            Member of the Board of Management

Winfried Popp                                                              Member of the Board of Management

Dr. Carsten Voigtländer, Dr. Joachim Brenk                                 Neumag GmbH & Co. KG

SAURER TEXTILE SYSTEMS

Heinz Bachmann                                                             Chief Executive Officer

Martin Börger                                                              Controller

Spinning Systems

John Cundill, Martin Börger, Stefan Kroß                                   W. Schlafhorst AG & Co.

John Cundill                                                               Schlafhorst Autocoro GmbH

Stefan Kroß                                                                Schlafhorst Winding Systems GmbH

Rolf Klingebiel                                                            Parsys Produktionstechnik GmbH

Hagen B. Heitmann                                                          Schlafhorst Parts Service GmbH

Heinz W. Kamp                                                              Zinser Textilmaschinen GmbH

Petr Horak, Leo Franke                                                                   ´
                                                                           Elitex Cerven y Kostelec a.s.

Twisting Systems

Dr. Dirk Burger                                                            Director Twisting Systems

Rolf-Dieter Weber                                                          Saurer-Allma GmbH

Gerhard Kempf                                                              Hamel AG

Dr. Dirk Burger                                                            Volkmann GmbH

Embroidery Systems

Jürg Gygax                                                                 Saurer Embroidery Systems Inc.

Jürg Gygax                                                                 Saurer & Horeschy GmbH

Dr. Jürg Henz                                                              Melco Industries Inc.

GRAZIANO TRASMISSIONI GROUP

Dr. Marcello Lamberto                                                      Chief Executive Officer

Dr. Gianni Sarti                                                           Executive Vice President

SURFACE TECHNOLOGY

Ulrich Bellgardt                                                           Chief Executive Officer

Peter D. Flood                                                             IonBond

Walter Cox                                                                 Xaloy




AUDITORS

PricewaterhouseCoopers AG

INVESTOR RELATIONS

Dr. Carole Ackermann                                                       Saurer Gruppe Management AG




                                                                                                                        75
PRINCIPAL COMPANIES AND PARTICIPATIONS


                                                                                      Share    % share-   Consol-
Group                                       Location                 Currency        capital    holding    idation   Function

Saurer AG                                   Arbon, CH                    CHF    205 219 000                     K

Aktiengesellschaft Adolph Saurer            Arbon, CH                    CHF       100 000         100          K
S.B. Holding Inc.                           Panama, Rep. of Panama                       *)        100          K
Saurer Group Investments Ltd.               George Town, Grand Cayman    CHF     77 118 600        100          K
Saurer Gruppe Management AG                 Arbon, CH                    CHF       100 000         100          K
Saurer Holding Inc.                         Denver, CO, USA              USD      2 000 000        100          K
Tesys GmbH                                  Mönchengladbach, D          DEM         50 000         100          K




TEXTILE SEGMENT

Barmag Group

Barmag AG                                   Remscheid, D                DEM      66 703 000         99          K
American Barmag Corporation                 Charlotte, NC, USA           USD      1 000 000        100          K
Barmag do Brasil Ltda.                      Sao Leopoldo, Brasil         BRL     18 585 000         99          K
Barmag Far East Ltd.                        Hongkong, China             HKD        100 000         100          K
Barmag India (Private) Ltd.                 Mumbai, India                INR     50 000 000        100          K
Barmag-Spinnzwirn GmbH                      Chemnitz, D                 DEM       4 000 000        100          K
Shanghai Barmag Machinery Co. Ltd.          Shanghai, China             CNY      37 440 000         51          K
Wuxi Barmag Hongyuan Machinery Co. Ltd.     Wuxi, China                 CNY      58 059 000         53          K
Neumag GmbH & Co. KG                        Neumünster, D               DEM       9 779 000        100          K



Spinning Systems

              ´
Elitex Cerven y Kostelec a.s.                      ´
                                            Cerven y Kostelec, CZ        CZK    127 074 000         96          K
Schlafhorst Aktiengesellschaft              Mönchengladbach, D          DEM        500 000          49          Q
Schlafhorst Autocoro GmbH                   Mönchengladbach, D          DEM         50 000         100          K
Schlafhorst Winding Systems GmbH            Mönchengladbach, D          DEM         50 000         100          K
Schlafhorst Parts Service GmbH              Mönchengladbach, D          DEM         50 000         100          K
Parsys GmbH                                 Mönchengladbach, D          DEM         50 000         100          K
Schlafhorst Asia Ltd.                       Hong Kong, HK               HKD        275 000         100          K
Schlafhorst Electronics GmbH                Mönchengladbach, D          DEM       2 000 000         58          K
Schlafhorst Inc.                            Charlotte, NC, USA           USD      3 000 000        100          K
W. Reiners Verwaltungs GmbH                 Mönchengladbach, D          DEM      75 000 000        100          K
W. Schlafhorst AG & Co.                     Mönchengladbach, D          DEM      80 000 000        100          K
Texparts GmbH                               Fellbach, D                 DEM         50 000         100          K
Zinser Textilmaschinen GmbH                 Ebersbach, D                DEM      34 000 000        100          K


Twisting Systems


Hamel AG                                    Arbon, CH                    CHF      2 000 000        100          K
Saurer Textile Systems Charlotte Inc.       Charlotte, NC, USA           USD       247 458         100          K
Saurer Textile Systems Far East Ltd.        Hong Kong, HK               HKD        250 000         100          K
Saurer-Allma GmbH                           Kempten, D                  DEM      19 000 000        100          K
Saurer Twisting Systems (Suzhou) Co. Ltd.   Jiangsu, China              CNY      14 906 000        100          K
Volkmann GmbH & Co.                         Krefeld, D                  DEM      10 000 000        100          K



Embroidery Systems


Melco Industries Inc.                       Denver, CO, USA              USD      2 407 000        100          K
Saurer & Horeschy GmbH                      Lustenau, A                  ATS      3 000 000        100          K
Saurer (Japan) Co. Ltd.                     Osaka, J                     JPY     30 000 000         83          K
Saurer Sticksysteme AG                      Arbon, CH                    CHF     13 160 000        100          K




76
                                                                                             PRINCIPAL COMPANIES AND PARTICIPATIONS


                                                                                          Share      % share-       Consol-
Components segment                         Location                   Currency           capital      holding        idation   Function

Transmission Systems

Graziano Trasmissioni India Ltd.           New Dehli, IN                  INR      157 550 090            100             K
Graziano Trasmissioni North America Inc.   Duluth, GA, USA                USD                 1           100             K
Graziano Trasmissioni S.p.A.               Cascine Vica Rivoli, I          ITL   21 000 000 000           100             K
Graziano Trasmissioni UK Ltd.              Cambridge, GB                  GBP           40 000            100             K
Graziano Voith Transmissions S.p.A.        Cascine Vica Rivoli, I          ITL    2 400 000 000           100             K
I.T.T. S.r.l.                              Cervere, I                      ITL    5 000 000 000           100             K
OTR Trasmissioni S.p.A.                    Bari, I                         ITL    5 000 000 000           100             K
SAC Saurer Automotive Components B.V.      Rotterdam, NL                  NLG       25 000 000            100             K



Surface Technology

Xaloy AG                                   Olten, CH                      CHF         3 000 000           100             K
IonBond AG                                 Olten, CH                      CHF          850 000            100             K
Xaloy Rorbas AG                            Rorbas, CH                     CHF          500 000            100             K
Flametech Corporation                      Newburyport, MA, USA           USD            5 000            100             K
IonBond Inc.                               Madison Heights, MI, USA       USD                 1           100             K
IonBond (UK) Ltd.                          Consett, GB                    GBP         1 150 000           100             K
Xaloy Inc.                                 Pulaski, VA, USA               USD            1 000            100             K
Xaloy Asia (Thailand) Ltd.                 Chonburi, THA                  THB      100 000 000            100             K



*) Shares without par value


Consolidation:                                                                                           Financial companies
C = Fully consolidated                                                                                              Services
P = Proportional consolidation                                                                     Research and development
                                                                                                                 Production
                                                                                                         Marketing and sales




                                                                                                                                          77
ADDRESSES


Company                               Address                              Telephone/fax            Internet/e-Mail              Management

SAURER

Saurer AG                             Schlossgasse 2                       T +41 71 447 52 82       www.saurer.com
                                      CH-9320 Arbon                        F +41 71 447 52 88       info@sgm.saurer.com

Saurer Gruppe Management AG           Schlossgasse 2                       T +41 71 447 52 82       www.saurer.com
                                      CH-9320 Arbon                        F +41 71 447 52 88       info@sgm.saurer.com

Saurer Group Investments Ltd.         Campbell Corporate Services Ltd      T   +1 809 949   2648
                                      The Bank of Nova Scotia Building     F   +1 809 949   2648
                                      P.O. Box 268, George Town            T   +377 97 70   36 82
                                      Grand Cayman, Cayman Island          F   +377 97 70   36 81
                                      British West Indies


BARMAG GROUP

Barmag AG                             Leverkuser Strasse 65                T +49 2191 67 0          www.barmag.com               Klaus K. Moll
                                      D-42897 Remscheid                    F +49 2191 67 1204       info@barmag.de               Winfried Popp
                                                                                                                                 Martin Stillger

American Barmag Corporation           1101, Westinghouse Bvd.              T +1 704 588 0072        www.barmag.com               Mike Collins
                                      USA-Charlotte, NC 28273              F +1 704 588 2047        general@americanbarmag.com   Hermann Rupprecht
                                                                                                                                 Herbert Voigt
                                                                                                                                 Bernd Ebert

Barmag do Brasil Ltda.                Av. São Borja No. 2266               T +55 51 588 1500        www.barmag.com               Heinz-Bodo Günther
                                      BR-93032-000 São Leopoldo            F +55 51 588 1363        barmag@barmag.com.br         Klaus Riemann
                                      Rio Grando do Sul (RS), Brasil

Barmag Elektro CZ, spol. s.r.o.       Obornik 31                           T +420 648 412 838       www.barmag.com               Josef Tempir
                                      CZ-78901 Zabreh                      F +420 648 412 838       barmag@raz-dva.cz

Barmag Far East Ltd.                  Units 3806B–3807                     T +852 2827 4314         www.barmag.com               Michael Hennig
                                      38th Floor, Wu Chung House           F +852 2827 5250         barmaghk@netvigator.com
                                      No. 213 Queen’s Road East
                                      PRC-Wanchai, Hong Kong, PR China

Barmag GmbH                           Sumpfstrasse 3                       T +41 41 748 80 12       www.barmag.com               Klaus Karrasch
Engineering & Manufacturing           CH-6300 Zug                          F +41 41 748 80 19       barmag@bluewin.ch

Barmag India (Pvt.) Ltd.              306–309 Dalamal Tower                T +91 22 2850 813        www.barmag.com               Khurshed M. Thanawalla
                                      Nariman Point                        F +91 22 2044 322        bilind@bom2.vsnl.net.in
                                      400 021 Mumbai, India

Barmag Spinning Company               U veze 8                             T +420 48 24 278 41                                   Herbert Rönchen
Liberec s.r.o.                        CZ-46107 Liberec                     F +420 48 24 278 45

Barmag Spinnzwirn GmbH                Zwickauer Strasse 247                T +49 371 2388 0         www.barmag.com               Jochen Krüpe
                                      D-09116 Chemnitz                     F +49 371 2388 349       info@barmag-chemnitz.de

Neumag GmbH & Co. KG                  Christianstrasse 168–170             T +49 4321 305 0         www.neumag.de                Dr. Carsten Voigtländer
                                      D-24536 Neumünster                   F +49 4321 305 212                                    Dr. Joachim Brenk

Shanghai Barmag Machinery Co., Ltd.   687 Chang Zhong Road                 T +86 21 6531 4648       www.barmag.com               Martin Schmeisser
                                      PRC-200 434 Shanghai, PR China       F +86 21 6531 4649       sbmco@public1.sta.net.cn     Zhou Yang

Wuxi Barmag Hongyuan                  28 Sunjiang Road                     T +86 510 580 5288       www.barmag.com               Joachim Diezl
Machinery Co., Ltd.                   PRC-214062 Wuxi, Jiangsu Province,   F +86 510 586 1734       wbmhy@public1.wx.js.cn       Liu Chong Hui
                                      PR China


SAURER TEXTILE SYSTEMS

Saurer Textile Systems                Textilstrasse 2                      T +41 71 447 53 15       www.sts.saurer.com           Heinz Bachmann
                                      CH-9320 Arbon                        F +41 71 447 53 12       info@sts.saurer.com

Spinning Systems

W. Schlafhorst AG & Co.               Blumenberger Strasse 143–145         T +49 2161 28 0          www.schlafhorst.de           Martin Börger
                                      D-41061 Mönchengladbach              F +49 2161 28 2645       info@schlafhorst.de          John Cundill
                                      Postfach 100435                                                                            Stefan Kroß
                                      D-41004 Mönchengladbach

Schlafhorst                           Blumenberger Strasse 143–145         T +49 2161 28 0          www.schlafhorst.de           John Cundill
Autocoro GmbH                         D-41061 Mönchengladbach              F +49 2161 28 2803       info@schlafhorst.de




78
                                                                                                                                         ADDRESSES


Company                           Address                             Telephone/fax         Internet/e-Mail                   Management

Schlafhorst                       Carlstrasse 60                      T +49 2161 28 0       www.schlafhorst.de                Stefan Kroß
Winding Systems GmbH              D-52531 Übach-Palenberg             F +49 2161 28 5302    info@schlafhorst.de

Parsys Produktionstechnik GmbH    Blumenberger Strasse 143 –145       T +49 2161 28 0       www.schlafhorst.de                Rolf Klingebiel
                                  D-41061 Mönchengladbach             F +49 2161 28 3028    info@schlafhorst.de

Schlafhorst                       Blumenberger Strasse 143–145        T +49 2161 28 0       www.schlafhorst.de                Hagen B. Heitmann
Parts Service GmbH                D-41061 Mönchengladbach             F +49 2161 28 3388    info@schlafhorst.de

Schlafhorst                       Waldnieler Strasse 73               T +49 2161 28 0       www.schlafhorst.de                Knut Richter
Electronics GmbH                  D-41068 Mönchengladbach             F +49 2161 28 3575    info@schlafhorst-electronics.de   Manfred Tillmann

Saurer Czech a.s.                                 ´
                                  CZ-54941 Cerven y Kostelec          T +420 441 46 95 00   www.elitex-saurer.cz              Petr Horak
                                                                      F +420 441 46 95 02   sales@elitex-saurer.cz            Leo Franke

Schlafhorst                       Units 3806B–3807                    T +852 2866 35 01     wscasia@compuserve.com            Harald Fraessle
Asia Ltd.                         38th Floor, Wu Chung House          F +852 2861 27 15
                                  No. 213 Queen’s Road East
                                  PRC-Wanchai, Hong Kong, PR China

Schlafhorst                       Iyoti Studio’s Compound 1st Floor   T +91 22 386 03 50    smclbom@bom3.vsnl.net.in          Soumitri Mohan Sen
Marketing Company Ltd.            K.B.A. Irani Bridge                 F +91 22 387 84 39
                                  Mumbai 400 007, India

Schlafhorst Inc.                  8801 South Boulevard                T +1 704 554 08 00    www.schlafhorst.com               Dan Loftis
                                  P.O. Box 240828                     F +1 704 554 73 50    info@schlafhorst.com
                                  USA-Charlotte, NC 28224

Schlafhorst                       Office Room 1405 New Town Center    T +86 21 6464 7707    ssro@public4.sta.net.cn           Henri Wiggers
Shanghai Repr.                    83 Lou Shan Guan Road               F +86 21 6236 8029
                                  PRC-200336 Shanghai, PR China

Schlafhorst                       Sor Juana Inés de la Cruz           T +52 5 565 6200      lmayoral@prodigy.net.mx           Luis F. Mayoral
de México S.A. de C.V. Av.        No.14–7° piso                       F +52 5 565 6305
                                  Col. San Lorenzo C.P.
                                  MEX-54000 Tlalnapantla,
                                  Estado de México

Schlafhorst                       Calle 14 #30–144                    T +57 4 268 6969      schlafhorst@sdcol.com             Manuel Herrero
de Colombia Ltda.                 COL-Barrio El Poblado/Medellin      F +57 4 318 1855                                        Dominguez
                                  Colombia

Schlafhorst                       Rua Domingos Afonso                 T +55 11 6101 2010    schlafhorst@schlafhorst.com.br    Günter Bammer
do Brasil Ltda.                   460-térreo, Vila Santa Clara        F +55 11 6916 6680
                                  BR-03161-090 São Paulo-SP, Brasil

Zinser Textilmaschinen GmbH       Hans-Zinser-Strasse 1–3             T +49 7163 14 0       www.zinser-texma.com              Heinz Wilhelm Kamp
                                  D-73061 Ebersbach                   F +49 7163 14 250     info@zinser-texma.com
                                  Postfach 1480
                                  D-73058 Ebersbach

S + G Industrieschreinerei GmbH   Bahnstrasse 9                       T +49 2161 28 2827    info@industrieschreinerei.de      Jakob Gielessen
                                  D-41069 Mönchengladbach             F +49 2161 35 4555


Twisting Systems

Saurer-Allma GmbH                 Leonhardstrasse 19                  T +49 831 688 0       www.allma.saurer.com              Rolf-Dieter Weber
                                  D-87437 Kempten                     F +49 831 688 320     info@allma.saurer.com
                                  Postfach 2580
                                  D-87415 Kempten

Hamel AG                          Textilstrasse 2                     T +41 71 447 53 40    www.hamel.saurer.com              Gerhard Kempf
                                  CH-9320 Arbon                       F +41 71 447 53 51    info@hamel.saurer.com

Volkmann GmbH                     Weeserweg 60                        T +49 2151 717 01     www.volkmann.saurer.com           Dr. Dirk Burger
                                  D-47804 Krefeld                     F +49 2151 717 478    info@volkmann.saurer.com
                                  Postfach 102365
                                  D-47723 Krefeld

Saurer Textile Systems            4200 Performance Road               T +1 704 394 8111     info@stsc.saurer.com              Helmut Leksa
Charlotte Inc.                    USA-Charlotte, NC 28266             F +1 704 393 1502

Saurer Textile Systems            Units 3806B–3807                    T +852 286 603 08     info@stsfe.saurer.com             Wolfgang Schoeffl
Far East Ltd.                     38th Floor, Wu Chung House          F +852 286 605 09
                                  No. 213 Queen’s Road East
                                  PRC-Wanchai, Hong Kong, PR China

Saurer Twisting Systems           No. 165 Jinjihu Road                T +86 512 763 0086    info@suzhou.saurer.com            Shen Wei
(Suzhou) Co. Ltd.                 Suzhou Industrial Park              F +86 512 763 0586
                                  PRC-215021 Jiangsu, PR China




                                                                                                                                                   79
ADDRESSES



Company                               Address                                  Telephone/fax         Internet/e-Mail               Management

Embroidery Systems

Saurer Embroidery Systems Inc.        Textilstrasse 2                          T +41 71 447 51 11    www.embroidery.saurer.com     Jürg Gygax
                                      CH-9320 Arbon                            F +41 71 447 54 11    info@embroidery.saurer.com

Melco Industries Inc.                 1575 West, 124th Avenue                  T +1 303 457 1234     www.melco.com                 Dr. Jürg Henz
                                      USA-Denver, CO 80234                     F +1 303 252 0508     info@melco.com

Saurer & Horeschy GmbH                Staldenweg 5a                            T +43 5577 84 666     info@horeschy.saurer.com      Jürg Gygax
                                      A-6890 Lustenau                          F +43 5577 84 66 63

Saurer (Japan) Co. Ltd.               11–32, 3-Chome, Imamiya,                 T +81 727 306 655     saurerjp@green.an.egg.or.jp   Akihiro Doike
                                      Minoo-Shi                                F +81 727 306 650
                                      562-0033 JAP-Osaka-Fu, Japan


TRANSMISSION SYSTEMS

Graziano Trasmissioni S.p.A.          Via Cumiana 14                           T +39 011 957 01      graziano@interbusiness.it     Dr. Marcello Lamberto
                                      I-10090 Cascine Vica Rivoli (TO)         F +39 011 959 4803

Graziano Trasmissioni UK Ltd.         9, Harley Industrial Park, Paxton Hill   T +44 1480 403 453    grazuk@btinternet.com         Mike Finnigan
                                      St. Neots-Huntingdon                     F +44 1480 403 454
                                      GB-Cambs PE19 6AT

Graziano Trasmissioni                 2222 Northmont Parkway, Suite 300        T +1 770 476 0496     grazianogears@mindspring.com Dave McPherson
North America Inc.                    USA-Duluth, GA 30096                     F +1 770 623 3290

Graziano Voith Transmissions S.p.A.   Via Cumiana 14                           T +39 011 950 5011    graziano@interbusiness.it     Dr. Gianni Sarti
                                      I-10090 Cascine Vica Rivoli (TO)         F +39 011 957 4674

Graziano Trasmissioni India Ltd.      Plot no. 14, Udyog Kendra                T +91 118 456 3141    graziano@del6.vsnl.net.in     Dr. Marcello Lamberto
                                      Greater Noida, Gautam Budh Nagar         F +91 118 456 3146
                                      Uttar Pradesh 201 304, India

I.T.T. S.r.l.                         Frazione Grinzano                        T +39 0172 474 504    itt@mtrade.com                Dr. Marcello Lamberto
                                      I-12040 Cervere/Cuneo                    F +39 0172 474 601


SURFACE TECHNOLOGY

Xaloy AG                              Industriestrasse 211                     T +41 62 287 87 87    www.xaloy.com                 Ulrich Bellgardt
                                      CH-4600 Olten                            F +41 62 287 87 88    info@ch.xaloy.com

IonBond AG                            Industriestrasse 211                     T +41 62 287 86 86    www.ionbond.com               Ulrich Bellgardt
                                      CH-4600 Olten                            F +41 62 287 87 92    dsz@ionbond.com

Xaloy AG Rorbas                       Irchelstrasse 25                         T +41 1 866 81 81     www.xaloy.com                 Ivo Schmid
                                      CH-8427 Rorbas                           F +41 1 866 81 89     info@ch.xaloy.com

IonBond Inc.                          200 Roundhill Drive                      T +1 973 586 47 00    www.ionbond.com               Peter D. Flood
                                      USA-Rockaway, NJ 07866                   F +1 973 586 47 29    info@us.ionbond.com

IonBond Ltd.                          Unit 36, No. 1 Industrial Estate         T +44 1 207 500 823   www.ionbond.com               John Alan Stevenson
                                      Medomsley Road                           F +44 1 207 590 254   info@gb.ionbond.com
                                      GB-Consett, Durham DH8 6TS

Xaloy Inc.                            102 Xaloy Way                            T +1 540 980 7560     www.xaloy.com                 Walter Cox
                                      USA-Pulaski, VA 24301                    F +1 540 980 5670     info@us.xaloy.com

Xaloy Inc./Flametech Corp.            104 Parker Street                        T +1 978 462 31 63    www.xaloy.com                 Walter Cox
                                      USA-Newburyport, MA 01950                F +1 978 465 63 60    info@us.xaloy.com

Xaloy Asia (Thailand) Ltd.            700/446 Moo Amata Nakorn                 T +66 38 717 084      www.xaloy.com                 Tom Farley
                                      Industrial Estate 4                      F +66 38 458 177      info@th.xaloy.com
                                      Donhuaroh
                                      TH-Muang Chonburi 2000




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