~Ivo in brie!

V"OLV"O

VCilVD FINANCIALAND OPERATING STATISTICS

Contents

Financial Reports

Notes

Volvo in brief

Financial Statistics, Consolidated Financial Statistics, AB Volvo Operating Statistics, Consolidated Administration

Page

9

19 25 35

,_ ^{... ,}

These financial reports are published regularly byVolvo:

Preliminary Report on year's operations Definitive Report on year's operations Annual Report

Interim Report, first quarter Financial and Operating Statistics Interim Report, first six months Interim Report, nine months

end of January end of March early May end of May earlyJuly end of August end of November

In the financialstatements and accompanying tab/es in the nates, parentheses are used to inclicate negative figures.

In the narrative text, parentheses enetase figures related to 1984 operations.

The present edition ofVolvo Financial and Operating Statistics contains a nu m ber of changes designed to make this annual presentation more useful and easier to hand le.

1. In response to requests from users of earlie r editions, we have expanded most of the tables to cover eleven years' operations.

2. Pages have been added to provide room for nates and suppis- mental information issued du ring the year.

3. Somepages have been rearranged and we have included the

"business segment" data that has been presenled in o ur Annual Reports for several years in connectionwith the application of U.S.

accounting principles.

We trust that these changes will hel p you to form a dearer pieturs ofVolvo's total operations and welcome your comments and sug- gestions for furthe r improvements of this publication.

First quarter figures for 1986 and major events up to May 31,1986 are included.

May 31,1986

Form 20-F, Ann u al report to be de livered to the U.S. seeurities and Exchange Commission, not laterthan J une 30.

The above reports as weil as other information and printed annual reports of campanies with in the Volvo Groupmay be obtained from:

AB Volvo

Financial Relations Department S-405 08 Göteborg, Sweden

Figures in Swedish kronor (SEK) may be translatedat the approximate 1985 year-end exchange r~tes as follows:

G B P 1 .OO=SEK 1 0.98 USD 1.00=SEK 7.61 DEM 1.00-SEK 3.09 FRF 1.00-SEK 1.01 BEC 1.00=SEK 0.15 CHF 1.00=SEK 3.66 NLG 1.00=SEK 2.74

Du ring the years 1975-1985, inflation in Sweden occured at the following annual rates, based upon the Consumer Price Index published by statistiska Centralbyrån:

1975 9 percent 1981 1976 1 O percent 1982 1977 13 percent 1983 1978 7 percent 1984 1979 1 O percent 1985 1980 14 percent

9 percent 10 percent 9 percent 8 percent 6 percent

~Ivo in brie!

H1stcty and bUSIMSS Page

2

Transport eqUipment

Acquisrbons 3 SUmmary of Group structure. early 1986 4 Sales organtzatiOn 5 Capttal expendtrures and frnanc1rt9

Personne4 6

Research and development

Suppt~ers

Sharehoklefs

· VOLVO IN BAIEF

General

Volvo is a Swedish-based, international industrial group with operations in three principal areas: ~ransport equipment (including cars, trucks, buses, marine, industrial and aircraft engines); energy;

and food.The transport equipment area continues to form the base of the Gro u p's operations. A separate area, finance, was formed early in 1985. Over the past 60 years, Volvo has devel- oped from a company with yearly produc- tion of a few hundred cars inta the targest industrial enterprise, measured by sales, in the Nordie Area (Sweden, Norway, Denmark, Finland and lceland).

History and business

Volvo was incorporated in 1915 as a subsidi- ary of AB SKF; commenced business in 1926, assembling cars and trucks;' and be- came an independent company in 1935.

From the late 1930's there has been steady development of the Company' s automotive business, and Volvo has grown inta a divar- silied group with integrated manufacturing operations.

In order to strengthen its structure and en- hance its potential for growth, Volvo under- look in the 1970's to decentralize manage- ment responsibility and to expand ils marketing organization. During this period and the prior decade, the Company also introduced and implemented new pro- ductian technologies, built plants in key markel areas and developed lurther the quality, reliability and safety of its products.

In addition, Volvo also identified the heavy

vehicle industry as an area of increased strategic importance. Toward the end of the 1970's, Volvo entered in to a nu m ber of cooperation agreements with other campa- nies and, in 1980, formed Volvo Energy Corporation to engage in hydraearbon exploration, development, investment and related activities, which the Company had also identified as an area of strategic im- portance.

The transport equipment area dominated the Group's business up to 1981.1n this year AB Volvo acquired all of the capital stock of Beijerinvest AB, a publicly traded Swedish holding companywith interests in energy, industrial equipment, food, trading and financial businesses.

Volvo disposed of some Beijerinvest inter- ests which had no im mediale connection with the Company's major business Iines and has regrouped others inta dislinet business segments. Volvo has also made a number of strategic acquisitions of, and investments in, campanies that cample- ment the Volvo Group' sindustrial base and others thai relate to its food and ener- gy business. Certain investments in shares of Swedish campanies hel d by Volvo have been disposed of and other major invest- ments acquired.

Volvo's international growth has been substantial. Productian facilities abroad have been established ana expanded through a truck and bus assembly plant in Brazil in the late 1970's, and the acquisition in 1981 of most of the truck manufacturing assets of White Motor Corporation in the United States. Excluding o il trad i ng, Volvo's sales outside Sweden constituted 82 per- cent of total1985 sales. North America, Western Europe and the Nordie Area are the Group's three most im portant markel areas.

In order to enhance and maintain its com- petitive position, Volvo has made a signifi- cant commitment to increasing product development in all its business seetars and at the same time has concentraled on expanding markelshares through aggres- sive· sales efforts. Volvo's strateg y continues to be to invest in product development; to upgrade product quality and safety; to increase productivity; to enhance its com- petitive position in all industries in which the Group competes;

to

increase its stability by broadening operations; and to continue to expand through intemal growth, strategic acquisitions and joint ventures.

In the energy field, the Groupwill continue to emphasize ils investments in associated companies engaged in exploration and productian of oil and gas. In addition, an importantVolvo objective is to achieve consistent prolitabil ity in ils oil frading busi- ness. Volvo's interests in the energy busi- ness are intended to contributs to the sta- bility of the Group in the future.

Additionally, in order to lurther i nerease stability and to give Volvo access to new markels and technologies, Volvo maintains significant shareholdings in certain publicly traded corporations, often outside the Group's own business areas.

The Volvo Group is operaled on the prin- ciples of decentralized responsibility and autonomy. The productand marketing campanies with in the Group are operaled as separate profit centers with their own management and boards of directors, re- sponsible for the development of, and the resources allocated to,their operations.

Transport equlpment -Production in Sweden

AB Volvo still has ils headquarters and ils la r gest plant in Göteborg, Sweden. The first Volvo ear lett the assembly Iine on April14, 1927, and the first truck in 1928. The original productian models were designed to with- stand the rigors of Sweden's rough roads and cold temperatures. This emphasis on durability has been a feature ofVolvo prod- uels ever since.

Following the acquisition in 1931 of Sköfde Gjuteri och Mekaniska Verkstad AB (now part ofVolvo Components Corporation), which manufactures engines for the Volvo vehicles, the Company developed its busi- ness from an assembly to a manufacturing operation. This was the first of a nu m ber of acquisitions of manufacturing companies, formingthe foundation for the development of the Volvo Group. In 1941 AB Volvo ac- quired a majority holding in Svenska Flyg- motor AB (now Volvo Flygmotor AB).

Köpings Mekaniska Verkstads AB (now part of Volvo Components Corporation) was acquired in 1942, AB Bolinder-Munk- tell (nowVolvo BM AB) in 1950 and Olof- ström AB (now part of Volvo Car Corpora- tion) in 1969.

In the 1960's Volvo's Swedish ear assembly, parts handling and Group head office were transferred to a new camplex atTorslanda, Göteborg, which has since been expanded in several steps. The smaller Kalmar as- se m bly plant, designed for completely dif- ferent productian methods and new forms of work organization, which in effect do awaywith assembly Iine techniques, was completed in 1974.

In 1985 it was decided

to

build an assem- bly plant in Uddevalla, where construction is scheduled to start in October 1986.

VOLVO IN BRIE F

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Volvo Trucks are assembled at the Lund by Plant, Göteborg since the late 1920s.At the end of 1981 assembly operations starled in the newly constructed plant in the Tuve area, Göteborg. Truck cabs are manufactured in the Umeå plant.

The first Volvo bus chassis we re produced in 1932 and a separate bus chassis plant in Borås starled productio n in 1978. A body productian plant in Säffle was included in 1982.

Volvo Penta marine and industrialengines has its orig in in Skövde where the engines are produced. They are converted to the i r special use in Göteborg.

Ever since Volvo Flygmotor was founded in 1930, aircraft engines for the Swedish

Arrned Forces have been produced; some of the m under licence agreements with foreign producers such as Pratt&Whitney Aircraft and General Electric Company.

Cooperation agreements with these com- panies, as weil as the Garrett Corporation, emphasizes the productian of civilian air- eratt engines.

Volvo Flygmotor alsodelivers the combus- tion chambersfor the Ariane space racket program.

Through other agreements Volvo Flygmotor has secured a leading position in the mar- kel for ear and boat heaters.

Volvo starled productian of farm Iraetars in 1944, acquired Volvo BM in 1950 and the two productians we re merged. The last farm Iraetor model was out of productian in the summer of 1983.

Volvo BM now is a company specializing in construction eg!![Qment, supplemented by productian of components for farm Iraetars and forest machinery for OyValmet thai starled in 1982.

After a merger with Clark Michigan Co ear ly i n 1985, Volvo BM is no longer con- solidaled in the Volvo Group, but construc- tion equipment is sold through same Volvo sales companies.

The principal productian facilities are locat- ed in Sweden, where Volvo has assembly plants for cars, trucks, buses, marine, in- dustrial and aircraft engines, as weil as fac- torias for productian of such vital compo- nents as engines, gearboxes, axles, brakes and bodies.'

Productian outside Sweden

lncreased emphasis on productian outside Sweden in the form of assembly opera- tions, with the main components being de- livered from the Group's Swedish factorias is a response to the need for close centact with major markets. lt also reflects the nat- ural desire of same countries to have part of the manufacturing or assembly work · carried out locally.

Volvo has established wholly-owned assembly plants in Belgium, Great Britain, the United States, Canada, Brazil and Australia, and partly owned plants in th,@

Netherlands, Iran, Malaysia, Thailand and Peru.

Assembly work is al so carried out in other Jocal facilities in Greece, Portugal, Morocco, Kenya, Mozambique, Venezuela and lndo- nesia.

In cooperation with Peugeot and Renault, Volvo has a factoryat Oouvrin in France for the manufacture of ear engines.

Following a cooperation agreement con- cluded in November, 1972, Volvo acquired a one-third interest in DAF CarBV, the Netherlands, in the beginning of 1973.1n January 1975, Volvo acquired additional shares in the company and the name was c han g ed to Volvo Car B V.

In May 1981 the Outch Government in- creased ils shareholding in Volvo Ca r BVto 70 percent through a special issue of new shares and Volvo Car Corporation's hold- ing was reduced to 30 percent Volvo Car BV thus achieved an independent position but il continues to conduct ils operations in close cooperation with Volvo Car Cor- poration. A further program for product development in the years 1984-1986 was determined early in 1983 by the Outch Goveniment and Volvo Car Corporation.

At the end of 1979, Volvo concluded an agreement on industrial cooperation in the passenger ear field with Regie Nationale des Usines Renault, France. Through this agreement, Renault assumed a minority in- terest in Volvo Car Corporation. Renault's interest was reduced in 1983 from 15 per- cent to nine percent In December 1985, Volvo acquired the remaining shares from Renault.

A truck and bus assembly plant partially owned by Volvo and Brazilian interests was constructed in Brazil. Assembly of bus chassis started at the end of 1979 and truck assembly operations starled in the seeond part of 1980. Since the end of 1985, Volvo do Brasil is a Volvo subsidiary.

The first stage of a planned assembly plant in Chesapeake, Virginia, in the United States was rea dy in 1976. The p remises are used as an inspection and transshipment point for importedVolvo cars and trucks for the eastern part of the United States.

In 1981 Volvo acquired most of the truck manufacturing assets of White Motor Corp.

in the United states and formed a new company, Volvo White Truck Corp., now headquartered in Greensboro, North Carolina. The purehasa included two as- sembly plants (Oublin, Virginia and Ogden, Utah) and the cab factory (Orrville, Ohio), sales branches plus parts distribution cen- ters and inventory. Volvo also purehasad

the modern range of heavy trucks that are adapted to the very specific demands of the U.S. market under the names of White and Autocar.

Acquisltlons In the energy seetar

During 1982 AB Volvo concluded an agrse- ment with the principal owners of Hamilton Brothers Petroleum Corporation in the United States.

Under the same agreement, Volvo Energy acquired approximately 10 percent of the shares in Hamilton Oil Great Britain PLC, a British oil company Iisted on the London Stock Exchange.

Volvo's initial investment in the Hamilton group amounted to about USD 80M, ex- cluding costs of USD 10 M annually for a period of five years for participation in joint ventures.

Volvo's involvement in the Hamilton group was strengthened at the beginning of 1984 through the acquisition, from members of the Hamilton family, of additional shares in Hamilton Brothers Petroleum Corporation in the U.S.

Following the combination of Hamilton Brothers Petroleum Corporation, in the U.S., and Hamilton Oil Great Britain PLC, Volvo's holding in the newly formed Hamil- ton Oil Corporation was 32 percent Foliow- i ng a tender offerto Hamilton shareholders, Volvo-through Volvo North America Cor- poration-acquired a total of 4.7 million shares in Hamilton, thereby increasing its holding in the latter company to just under 50 percent late in 1984.

Hamilton has a substantial productian

o r

Od in the British seetar of the North Sea.

VOLVO IN BRIEF

Productian of gas from the Esmond field was begun in mid-1985. Hamilton owns 36 percent of the Argyii/Duncan field s and 60 percent of the Esmond field. Hamilton Oil Corporation had sales of USD 275M in 1985 and income before taxes ofUSD 49 M.

As of early 1983, Volvo Energy holds a 20- percent interest in Saga Petroleum a.s., Norway.ln the beginnning of 1985, Volvo Energy participated in providing capita! to Saga Petroleum by subscribing, in an amount of NOK 92 M, forshares and con- vertible debentures issued by Saga.

Saga has participations in oil concessions in around .25 blocks in the Norwegian see- to r of the North Sea and is the operator in ten of the m. Saga had sales of NOK 1,120 M and income before allocations and taxes of NOK 191 M in 1985.

In the food seetar

As a part of the merger of Beijerinvest early 1981, Volvo acquired a group of food com- panies. After further acquisitions this seetar now is the seeond largest food group in Sweden.

Summary of Group Structure, earty 1986 Tl'tlnsport Equlpment-CatS. Volvo's ear business includes the design, manufacture, assembly and marketing of high-perfor- mance prestige models, medium-sized family cars and a Iine of smaller models.

Volvo cars are manufactured mainly through Group subsidiaries, at three princi- pal assembly plants, two ofwhich are in Sweden. Ear ly in 1985 Volvo announced its intention to plan for an expansion of its ear operations through a new plant in Sweden.

In addition, the smaller ear Iine is manufac- tured in the Netherlands by Volvo Car BV.

Tl'tlnsport Equipment-1'rucks. Volvo is one of the world's largest producers of heavy (Glass 8) trucks. Through Volvo Truck Corporation, a Group subsidiary, Volvo de- signs. manufactures, assembles, markels and services four basic ranges of trucks:

Tl'tlnspott Equipment-Buses. Through the Group subsidiaryVolvo Bus Corpor- ation, Volvo is on e of the leading European manufacturers of heavy bus chassis. The Company generally designs, manufactures and markets bus chassis, and also manu- factures bus bod ies ma i n ly for the Swedish m arket.

Tl'tlnspott Equipment-Marine and lndustrial Englnes. AB Volvo Penta, aJ so a Group subsidiary, designs, manufactures, markets and services engines, transmis- sions, accessories and-equipment for the marine and industrialengine markets.

Tl'llnsport Equipment-Aerospace, etc.

Through the Group subsidiaryVolvo Flyg- motor AB, Volvo is engaged in the pro- ductian of jetengines and components for military and commercial aircraft and for space projects. Volvo Flygmotor also has a growing nu m ber of civil non-aviatian prod- ucts. including specialized hydraulic ma- chinery, transmission systems and heaters for boats and vehicles.

Energy and Trading. Volvo's energy ac- tivities are conducled through Volvo Energy Corporation and STC Scandinavian Trad i ng Company AB. Volvo Energy has

been active primarily in investing in other campanies engaged in exploration and productian of oil and gas. The seetar in- cludes Volvo's investment in Hamilton O il Corporation, which operates principally in the United States and the British seetar of the North Sea, and in Saga Petroleum a.s.

in Norway.

STC and its subsidiaries tagether engage in a large vol u me of oil frading activities.

Other STC subsidiaries trade certain com- modities other.than oil.

Food. The food activities of Volvo are con- ducled through Provendar Food AB, a Group subsidiary. The Provendar food campanies tagether conslitute the seeond largest food group in Sweden. This group manufactures brand name consumer products, including processad meats and fish. mineral water and canned and frozen convenience foods.

Since April1, 1986, the group has also included among others, Sockerbolaget (The Swedish Sugar Co). Hilleshög AB (plant breeding) and Weibullinternational AB (seed).

Finance. AB Fortas is a wholly-owned subsidiary of AB Volvo. The activities of Fortas combine Volvo's business activities

in the finance area, including investing and trad i ng in money markel instruments and government securities. Fortas also handles currency frading for the Swedish seetar of the Volvo Group. Fortas is the parent com- pany for Volvo Finance SA, Fortos Finans AB and Alfred Berg Fondkommission AB.

Volvo's most important present strategic holdings are as follows:

(1) a 19 percent interest in voting power (16 percent of the equity) in AB Custos, an investment companywith substanfial inter- est in publicly-tradad leading Swedish industrial companies, construction campa- nies and banks which also owns three percent of the voting power (two percent of the equity) of AB Volvo:

(2) a 47 percent interest in lnvestment AB Card o, a company which acquired AB Cardo's share portfolio in March 1986, in- cluding five percent of the voting power (two percent of the equity) of AB Volvo:

(3) a 27 percent interest in voting power (eight percent of the equity) in Pharmacia AB, a Swedish pharmaceuticaJ and bio- technical group;

VO~OINBR·~IE~F---~

(4) a 50 percent interest in VME Group NV, a holding companyformed byVolvo and Clark Equipment Company.VME includes the former construction equipment busi- nesses ofVolvo and Clark;

(5) a 21 percent interest in Protorp F?rvalt- nings AB, an investment companywith substanfial interests in publicly-traded Swedish construction and building mate- rials campanies which also owns four percent of the voting power (two percent of the equity) of AB Volvo;

(6) a 48 percent interest in AB Catena (formerly a wholly-owned subsidiary of Volvo named ABVolvator), a companywith a deal er network that retails Volvo's transport equipment and other products in the Nordie Area. This company acquired Säfveån AB, a publicly-traded investment company early in 1986; and

(7) a 91 percent interest in Sonessons, a company which is primarily en gag ed in the industrial equipment and pharmaceut1cal business. Following a recent tender offer, Volvo is in the process of increasing ils in- terest to 100 percent, pursuant to a com- pulsory redemption. Volvo has an intention toregroup the Sonesson companies, at the same time trying to contribute to streng- thening the strueture of the Swedish phar- maceutical industry.

Other Operations. The Group also con- duels actlvities in other areas, including the manufacturing of equipment for the steel, mining and quarrying industries: ear in- surance: the development, marketing and installation of advanced computer systems for traffic planning and management;

and the development. manufaeturing and marketing of carrier systems that employ self-propelled carts and the distribution of consfruction equipment.

Sales organization

Volvo starled exporting cars already in its seeond year of operation. TodayVolvo pro- duels are sold throughout the world and 82 percent of the Group's sales excluding oil trad i ng were to customers outs1de Sweden in 1985.

The Transport Equipment business seetar of the Volvo Group has a worldwide sales network with its own sales compan1es 1n Sweden, Denmark, Finland, Norway, Great Britain, West Gerrna ny, Switzerland, Bel- g i u m, The Netherlands, France, Ila~ y, Spain, the United States, Canada, Argentma, Brazil, Peru and Australia. AB Catena (for- merly AB Volvator) has interests in a nu m- ber of dealerships in the Nordie countries, enabli ng it to participale directly in the structural ch anges and growth of sales in these im portant market areas.

Around 2,300 dealers, some ofwhom have mor e than on e outlet, se il Volvo cars to the ultimate customer. Approximately 7 percent of the dealerships are located in the Nordie area, 62 percent in Western Europe (ex- cluding the Nordie area). 21 percent 1n

North America, 3 percent in Australia and 7 percent i n other m arkets. Volvo has 750 outlets for truck sales in Western Europe and the United States.

The Group generally does not provide

wholesale financing to enlities outside the

Group or retail financing to individual purchasers. Dealers normally obtain a ny required financing from local banks, wh1ch often also provide retail financing when necessary, except in certain countries, where bank financing is augmenled by financing from Volvo subsidiaries or af- filiates.The Group provides ils own financ- ing for completed products and carries them as inventory until such products have been purchased from Volvo-owned distri- bulors by deal ers.

The bulk of energy sales is a broad, mainly in Western Europe and the United States.

The food campanies havelarge horne- market shares in Sweden, Denmark and Austria. The re is a marked strategy to en- large business abroad and markels out- side Sweden now account for 40 percent of food sales.

In 1985 Group sales by markel area were as follows:

SEKM Percent

Sweden 12,023 14

Nordie area,

excluding Sweden 6,211 7 Europe, excluding

Nordie area 16,789 19

North America 24,102 28

Other markels 6,573 8

Total, excluding

oil trading 65,698 76

Oiltrading 20,498 24

Group total 86,196 100

The Group considers that its marketing organization is weil equipped to hand.le the increasing vol u me of sales expected 1n the future.

Volvo International Development Corpora- tion, a Group subsidiary, evaluates the par-

ticular requirements of developing markets,

including possibilities for local assembly or manufacture of products.lt also markels the Group's producls in these areas.

Capital e;;.pendal.!res and fina!1cing Over the five-year period 1981-1985, the Group invested same SEK 13,300 M in property, plant artd equipment, the bulk or approximately 67 percent of il in Sweden.

Most expenditures has relaled to the grad- ual expansion of produclive capacity, but expenditures in new facilities for techno- logical development, and for the strengthen- ing of the marketing organization, has al so been significant.

Capital expenditures by operating seetar in 1985 were as follows:

SEKM Percent

Cars 1,594 45

Trucks 587 17

Buses 48 1

Marine and

industrialengines 96 3

Aerospace, etc 203 6

Energy and Trad i ng 137 4

Food 105 3

Other operations and earporale capital

expenditures 736 21

Total 3,506 100

Capital expenditures which had been approved but not yet implemented

amounted atyear-end 1985 to SEK5,000 M.

Projects totalin g approximately SEK 2,640 M are scheduled for 1986 and approximately SEK 2,360 M for 1987 or later years.

The distribution of t hese capita! expendi- tures, by operating sector, was as follows:

Cars

Trucks and Buses Aerospace, etc.

Energy and Trad i ng Other operating seetars and earporale investments Total

SEKM 3,000 1,000 200 350

450 5,000

VOLVO IN BRIE F

The distribution of assets at year-end 1985 was as follows:

Sweden

Nordie area, exclud1ng Sweden Europe, excluding Nordie area North Amenca

Other countries Total

SEKM 39,657 2,106 8,61

o

10,507 1,913 62,793 Operating resulls and the Group's policy of consolidatian have made possible a /arge measure of internal/y generaled financing of investments.The Group's untaxed re- serves rose by some SEK 11,300 M bet- ween 1981 and 1985.

Personnel

At year-end 1985, 67,850 persons we re em- ployed in the Volvo Group, an i nerease of approximately 4,400 du ring the year, taking into account thatVolvo BM AB was not part of the Group and that Volvo do Brasil is now consolidated.

Wages, salaries and social costs totaled SEK 11,359 M in 1985.

Of the total nu m ber of employees 50,000 were in Sweden and 17,900 outside Sweden. The distribution by operating see- tar was as follows at y ear end 1985:

C ars Trucks

Buses

Marine and industrial engines Aerospace, etc.

Energy and Trad i ng Food

Other operations and central services Group total, approx.

32,950 17,500 1,750 2,650 3,300 300 5,000

4,400 67,850

Research and development

Volvo maintains an extensive and contin- uing research program, including a sepa- rate research center for transport equip- ment. In each of the three years in the period ended December 31,1985 product development expenditures we re SEK 2,508 M, SEK 3,304 M and SEK 3,817 M, respectively.

In addition to research and development related to automotive products, the Com- pany has devoted substantial ettorts to im proving the working environment of its employees.ln particular, new methods of assembly and new materials handling systems have been developed. The Com- pany believes that it has significant expert- ise in the design and operation of assem- bly plants.

Suppiiers

Through Group subsidiaries, Volvo manu- tact u res certain major automotive compo- nents, including engines, transmissions and rear axles.ln addition, Volvo and Volvo Car BV purchase raw and semi-finished materials, many components (including several major components) and numerous parts for its automot1ve products from approximately 900 suppliers (including other aulamobile manufacturers).

Certain ofVolvo's suppliers produce com- ponents pursuant to cooperation agree- ments. Although the failure of a significant supplier to provide Volvo with components or parts could disrupt vehicle productian to a material extent, the Company Qelieves such an occurrence is unlikely an·d that its supplier arrangements attord it flexibility to respond to occasional shortages.

Volvo purchases many components from independent manufacturers; a /arge pro- portion of its components for transport equipment is purchased outside of Sweden.ln 1985, approximately 25 percent of the value of the Group's total purchases for transport equipment productian pur- poses came from Sweden, four percent from other countries in the Nordie Area, 39 percent from other European countries, 23 percent from the United States and n1ne percent from elsewhere.

For technical and econom i c reason s, Volvo- designed components are often manufac- tured n ear the Volvo plant in w h ich the part is to be used. Some parts designed in ca- operation with certain specialist suppliers are distributed to manufacturers in all countries in which the Group assembles products. Group campanies select their suppliers careful ly and strive to maintain good working relationships with them.

Shareho!ders

Volvo has approximate!y 150,000 sharehold- ers. Some 15 percent of the Volvo s hare capita/ is owned by persons or institutions outside Sweden. The company has no dominat1ng owner interests.

Volvo's shares have been Iisted on the Slackholm Stock Exchange since 1935, on the London Stock Exchange since 1972, on the FrankfurVMain, Dusseldorf and Ham- burg Stock Exchanges since 1974 and on the Oslo Stock Exchange since 1979.

Since the autumn of 1984, Volvo shares are trad ed

on

the Par1s Bourse and, Volvo's non-restricted B shares in the form of Ame- rican Depositary Receipts (ADRs) are traded 1n the over-the-counter markel in the U.S., through the NASDAO electronic quotation system.

Effect1 "December 9, 1985, Volv•J's n•'Jn- restrll :ted 8 'i hel! C'~ hi1Vå bt~ll t" sie: 01 (h€

stock :xcnang!:!:. 111 Brussels a11d /l.rMo~er~

as a lLJr1twr step 111 The prooram to g:. t1 wida, d15lr tY:.JI10::Jn IDI these sharus oot:. cil.!

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I'JOtFS

Financial Statislics, Consolidated

statements ot lncome 1975-·1985 Page 10 Balance Sneets, December 31 1975-1985 11

Caprtal e.\J)Bnd1tures 1975-1985 Researen a:1d developrnent expenses 1980-1985

State:nents of Ch3ngas m Ftnanc~al Pos1t1on 1975-1985 12 Quarterly Bales and m come 1975-1986 13

Sales by operat1ng secto( i975-1985 14 Sales by mC:trket a roa 1975-1985

Exports from Sweden 1975·-1985 lncome before aftocat1ons, taxes and

mmonty 1ntNests, by geographical area 1980·-1985 AeBets by geograph1cal araa 1980-1985

C.."\peratmg 1ncome by ~ector 1979-.1985 15 Assets by sector 1979-1985

Return on cap1tal 1977-1985 16 Kay Fmar1C1al Ra!1os 1975-1985

Cap1tahzat1on Dec 31,1985 17

F • \ICIAL STATISTICS, CONSOLIDATED

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statements of lncome for 1975-1985 (SEK M)

1975 1976 1977 1978

Sales 13,692 15,743 16,168 19,133

Less: Cost of operations 12,563 14,430 14,935 17,625

Operating income before depreciation and amortization 1,129 1,313 1,233 1,508 Less: Provision for depreciation and amortization 488 558 599 658

Operating income 641 755 634 850

Add: Interest received less paid (142) (173) (170) (175)

Other in come (expense) 2 40 2

Fore1gn exchange gain (loss)'' (153) (31)

l neo me after financial i neo me (expense) 501 582 351 646

Extraordinary item s !

Provision for employee bonus

lncome before allocations, laxes and minority interests 501 582 351 646 Less: (AIIocation to) reallocation from:2>

General inventory reserves Extra depreciation lnvestment reservesJI Other allocations41

In come before laxes and minority interests Less:Taxes

Minority interests in (income) losses Net income

1 l Exchange differences on toans for the years 1975 and 1976 are included in Cosi of opera11ons.

2 l All allocat1ons represent untaxed reserves provided by lhe legislalian in Sweden and same other count,es.

3l lncluding in ventory invastment reserve for 1975, and spe- Cial investmenl reserve for 1983, 1984 and 1985.

(375) (343) (49) (122)

(32) (3) 21 74

(42) (91) (103)

8 14 (6) (20)

60 159 317 475

74 112 130 151

22 16 11 (12}

8 63 198 312

41 Work enwonmenr reserve, exlra appropriation to in- surance reserve, non-current asset replacement reserve and exchange reserve and as of 1985 development reserve.

5) lncludes allocations to development reserves of SEK 581 M and exchange reserves of SEK 353M.

1979 1980 1961 1982 1983 l ')9~ 1985

23,472 23,803 48,017 75,624 99,460 87,052 86,196 21,521 22,081 45,039 70,992 93,385 79,022 77,996 1,951 1,722 2,978 4,632 6,075 8,030 8,200 649 676 1,012 1,297 1,573 1,402 1,725 1,302 1,046 1,966 3,335 4,502 6,628 6,475 (72) (56) (427) (564) (417) 249 421

2 3 132 195 86 138 110

12 14 (246) (721) (226) (551) 759 1,244 1,007 1,425 2,245 3,945 6,464 7,765

235 1,363

(40) (166) (180) (163) 1,244 1,007 1,425 2,440 3,779 7,647 7,602

(460) (177) (347) (794) ¹104) 919 (374)

11

o

^{(252) (42)} (32) •41 370

(223) (296) (279) (434) (2,845) (5,386) (2.315) (2) (149) (36) (88) (33) (58) 11.0 ll)'lr'

669 133 721 1,092 798 3,263 4,272

240 83 222 508 752 1,624 1,713

(13) (12) (46) (88) 158 (74) (13)

416 38 453 496 204 1,565 2,546

n-.A\ICIALSTATISTICS, CONSOLIDATED

1975 1976 1977 1978 19791) 1980 1981 1982 1983 1984 1985

Balance Sheets at year-end Assets 1975-1985 (SEK M)

Cash in banks and temporary investments 1,589 1,837 1,868 2,385 3,515 3,592 5,476 7,250 11,625 11,900 14,394

Receivables, etc. 2,918 3,336 3,929 3,888 4,450 4,618 8,546 10,528 10,706 13,265 11,244

lnventories 5,137 6,015 6,643 6,903 7,921 8,783 11,580 14,341 15,415 15,462 16,044

i

Current assets 9,644 11,188 12,440 13,176 15,886 16,993 25,602 32,119 37,746 40,627 41,682

l Restricted deposits

in Bank of Sweden 115 93 115 54 64 38 208 221 264 1,762 2,823

Other assets 4,273 4,424 4,435 4,482 5,042 6,088 10,835 13,935 15,496 15,240 18,288

T otal assets 14,032 15,705 16,990 17,712 20,992 23,119 36,645 46,275 53,506 57,629 62,793

Liabilities and shareholders' equity

Current liabilit1es 6,081 6,898 7,174 7,295 8,897 9,635 17,388 21,484 26,631 26,066 26,856

Long-term liabilities 2,583 2,923 3,661 3,867 4,086 4,600 8,535 10,904 9,706 9,005 9,285

Untaxed reserves 3,563 3,984 4,019 4,194 4,848 5,717 6,458 7,846 10,832 14,973 17,738

Minority interests 80 65 185 199 238 327 451 732 757 229 116

Shareholders' e q u ity 1,725 1,835 1,951 2,157 2,923 2,840 3,813 5,309 5,580 7,356 8,798

Totall1abilities and shareholders' equ1ty 14,032 15,705 16,990 17,712 20,992 23,119 36,645 46,275 53,506 57,629 62,793

Assets pledged 2,151 2,361 2,833 2,758 2,665 2,921 5,149 5,500 5,915 3,516 3,033

Conlingent liabilities 621 531 855 1,304 1,667 1,972 2,060 3,289 3,182 2,620 2,106

Capital expenditures for By market area property, plant and

Sweden 674 407 448 418 729 1,405 1,311 1,332 1,665 1,874 2,830

equipment

1975-1985 (SEKM) Nordie area, excluding Sweden 12 4 19 66 32 22 69 33 64 26 21

Europe, excludtng Nordie area 265 197 153 170 184 203 147 206 275 374 384

North America 54 86 19 11 g _{13 883 747 354 134 189}

Other markels 29 10 17 3 8 14 104 28 39 181 82

Total 1,034 704 656 668 962 1,657 2,514 2,346 2,397 2,589 3,506

By operating seetar

C ars 265 342 654 1,013 688 575 678 1,017 1,594

Trucks and Buses 261 188 174 299 505 388 443 499 635

Construction equipment etc. 74 65 48 57 70 98 137 106

Marine and industrial engines 19 27 23 18 55 17 37 81 96

Aerospace, etc. 25 36 50 242 157 217 80 207 203

lndustrial equipment campanies 119 115 180

Energy and Trad i ng 754 846 560 284 137

Food 47 46 76 97 105

Other operations and earparate cap1tal expenditures 12 10 13 28 119 44 206 298 736

Total 656 668 962 1,657 2,514 2,346 2,397 2,589 3,506

R~search and development

expenses, 1980-1985 (SEK M) 1,593 1,617 2,002 2,508 3,304 3,817

1 J see nate 3, page 12.

fl '14>\NCIAL STATISTICS, CONSOLIDATED

statements of Changes in Financial Position 1975-1985 (SEKM)

Funds provided

lncome betare allocations, laxes and minority interests Depreciation and amortization Minority interest in 1ncome Taxes

Withdrawals from (deposits in) restricted d eposils in Bank of Sweden

Funds provid ed by the year's operations²¹ Decrease in long-term receivables l nerease in long-term liabilities Minority interest in shareholders' equity in subsidiaries

Share issue

Changes in composition of Group etc.

Total lunds provided Application of funds

Capita! expenditures for property, plant and equipment, including company acquisitions Less: Residua! value of assets sold and scrapped Changes in shares and participations

lncrease in long-term receivables Dividend paid

Total lunds applied Change (n working capita/

Specification of changes in working capita!

lnventories Current receivables

Current liabilities (minus indicates an increase) Cash in banks and temporary investments

- - - - -

Total change in working capita!

1 l In January 1975 AB Volvo increased ils holding of shares in Ca r BV to 75 percent The 1975 figures have been shownon the basis ol a 75 percent holding by AB Volvo of shares in CarBVas al31 st December1974.This means thaithe above statement shows runds supplied and application of lunds lo r l h e Group in 1975 excludmg the acquisition af Volvo Car BV.

19751) 1976 1977 1978

501 582 351 646

487 558 599 658

22 16 11 (12)

(74) (112) (130) (151)

12 22 (22) 61

948 1,066 809 1,202

851 340 739 206

(3) (15) 120 13

183 137

(25) 7 :33 (14)

1,954 1,535 1,701 1,407

1,034 740 656 677

(65) (57) (67) (40)

4 10 26 24

21 21

s

25

79 94 106 106

1,073 808 726 792

881 727 975 615

887 878 628 260

663 418 592 (41)

(772) (817) (276) (121)

103 248 31 517

881 727 975 615

2 l In evaluating lunds provid ed by the year's operations and the degree of self-lmancing, it should be noted !hat income belare ailocations,laxes and minority interests has been charged w1lh write-ups on long-term ioan liabilil1es. (See Foreign exchange ga1n (loss) in the Statements alineorne on page 10.)

197931 1980 1981 1982 1983 l BAl

1,246 1,007 1,425 2,440 3,779 7,647

650 676 1,012 1,297 1,573 1,402

(13) (12) (46) (88) 158 (74) (240) (83) (222) (508) (752) (1,624)

(11) 26 (170) (13) (43) (1,498)

- - -

1,632 l f114 1,999 3,128 4,715 g

250 412 3,935 2,369 (1,198)

14 89 124 281 25

212 482 608 304

o

^{97 (209)} 18 (34)

2,117 2,212 6,331 6,404 3,812

962 1,665 4,841 2,467 2,865 (53) (32) {1 ,360) (737) (285)

66 122 1,390 1,624 (262)

21 435 378 674

124 169 169 251 340

1,099 1,945 5,475 3,983 3,332

1,018 267 856 2,421 480

960 863 2,797 2,761 1,074 562 168 3,928 1,982 178 (1,634) (841) (7,753) (4,096) (5,147)

1,130 77 1,884 1,774 4,375

1,018 267 856 2,421 480

31 Effect1ve lrom 1980, new principles are used in transiating the accoun1s ol foreign subsidiaries to Swedish kronor.

Balance she et figures for 1979 above have been transialed in accordance with the new principles. For lurther infor- mation, see page 38 in Volvo Annual Report 1980.

5,853 457 (701) (528) 237

49 5,367

2,613 (3,306)

2,215 399 1,921 3,446

47 2,559 565 275 3,446

1985

7,602 1,725 (13) (1,713) (1,061) 6,540

4 280 (113) (1,039) 5,672

4,230 (719) 1,485

411 5,407

265

582 (2,021)

(790) 2,494

265

r1 JI\ ... CIALSTATISTICS, CONSOLIDATED

Quarterly sales and income 1975-1986

Sales (SEK M) 1st q u arter 2nd quarter 3rd quarter 4th quarter Wholeyear

lncome before allocations, taxes and minority Interests (SEKM)

1st quarter 2nd quarter 3rd quarter 4th quarter Wholeyear

lncome per sharesl (SEK)

1st quarter 2nd quarter 3rd quarter 4th quarter Wholeyear

Approximate net income in accordance with U.S. generally accepted accounting principles (SEK M)

Approximate net income per sh are

in accordance with U.S. generally

accepted accounting principles (SEK)

1 l After allocation of a special grant from the Outch Govern- ment to Volvo Car B.V. in total SEK 193M, with 25% to each q u arter.

2l Alter allocation of a special grant from the Dutch Govern- ment to Volvo Ca r B.V. SEK 199M with 25% to each q u arter.

3l lncluding a special grant t rom the Dutch Government to Volvo Ca r B .V., SEK 104 M with SEK 32M for the three first quarters and SEK 72 M lo r the tourth quarter.

41 lncluding a special grant from the Dutch Government to

Volvo Car BV. SEK 129 M.

1975 1976 1977 1978 1979

3,028 3,461 3,428 4,260 5,320 3,283 3,858 4,123 4,854 6,376 3,474 4,099 3,826 4,367 5,128 3,907 4,325 4,791 5,652 6,648 13,692 15,743 16,168 19,133 23,472

166 162 81 151 235

119 184 123 235 410

63 144 25 112 216

153 92 122 148 383

501 582 3511l 646²l 1,244³l

2.90 2.30 1.10 2.00 3.00 2.10 2.70 1.50 3.00 5.30 0.90 1.90 0.40 1.40 2.30 2.00 1.20 1.50 1.90 4.10 7.30 7.50 4.50 8.30 15.30

5l lncame pershare is calculated as income divided by the weighted averaga number of s hares outstanding during the year (far 1975, numberaf shares at year-end).lncome consists ofincome betare allocations, taxes and minority interests, reduced by minority interests in such amount and

in come laxes assumlng a standard 50 percent tax rate

ad jusled for tax-free dividend income. For 1980 and prior years no adjustment has been made for minority 1nterest in

~n come. since it was lnsigmf1cant.

61 Not including Volvo Ca r BV nor the Beijerinvest group.

7 l lncludes extraordinary income of SEK 744 M, equal to SEK 9.60 per s hare.

1980 1981 1982 1983 1984 1985 1986

5,921 5,7616) 14,946 23,631 21,687 21,809 20,661 5,651 13,089 19,168 26,269 21,930 20,470

5,578 12,320 17,392 21,583 19,091 20,060 6,653 16,847 24,118 27,977 24,344 23,857 23,803 48,017 75,624 99,460 87,052 86,196

385 2806l 516 1,025 2,600 2,167 2,41

o

220 424 1,004 1,392 3,466 2,001

201 286 408 793 921 1,552

201 435 512 569 660 1,882

1,0074) 1,425 2,440 3,779 7,647 7,602

4.10 3.006) 3.90 7.00 15.60 13.1

o

^15.50

2.40 2.70 7.50 8.80 21.90 12.40 2.10 2.30 2.60 4.80 5.60 9.40 2.20 2.90 2.20 3.70 3.40 14.30

10.80 11.60 15.70 24.30 46.50 49.20

419 687 850 1,496 4,100 4,47871

9.00 11.90 12.70 19.80 52.90 57.707l