TO OUR SHAREHOLDERS

Doug Whitehead,
President and C.E.O.

We surpassed expectations in 2001 as Finning International set new records for revenue, profits and cash flow. The successful acquisition of Hewden Stuart in the United Kingdom, which dramatically increased our equipment rental business, combined with greater productivity in all operations, powered us to new levels of success.

We showed significant financial improvement over 2000 with revenue growth of 32 percent to $3.25 billion and an earnings increase of 41.6 percent to $103.9 million.

We delivered on our commitment to be Caterpillar’s best global business partner, by diversifying our sources of earnings, and by achieving market share growth.

Our focus on fast growing segments of our business resulted in a 22.9 percent jump in power systems revenue, a 13.5 percent improvement in parts and service revenue and a four-fold increase in equipment rental activity.

Both Finning (Canada) and Finning (UK) set new revenue records while Finning Chile improved operating earnings ensuring the company was profitable for the 69th consecutive year.

Economic Impact on Customers

These results were achieved in the face of a global economic decline that impacted many of our customers in the resource industries. Lumber, coal and gold prices were relatively weak throughout 2001, while pulp, newsprint and copper prices declined in the last half of the year.

Despite these challenges, we capitalized on our opportunities, particularly in the United Kingdom where government infrastructure spending generated major demand for heavy equipment and in Alberta where oil sands investment continued at a robust level.

Our pledge to earn our customers’ loyalty by providing the best solutions for their equipment needs, was rewarded through the signing of several major customer service agreements. These contracts for the sales, servicing and maintenance of Caterpillar fleets were finalized or underway at all three country operations. These agreements added to the strategic alliances Finning International already enjoyed with customers across a broad range of industries.

Our commitment to customers could not have been achieved without the winning partnership between Finning and Caterpillar Inc., manufacturer of the world’s best heavy equipment.

Cat Expands Lines

Caterpillar’s commitment to expanded production of innovative mobile and power systems equipment enabled Finning to take advantage of market potential in such areas as the building construction industry, rental services, engines and related products. Our investment in Hewden Stuart was strengthened by the availability of Caterpillar compact machines that increased rental opportunities.

Our strategy to increase our market share of the fast growing power systems business resulted in the formation of a separate international power systems group. Jack Carthy was appointed President, Power Systems, based in Vancouver. Jack is responsible for Power Systems operations in Canada, the U.K. and Chile, interfacing with Caterpillar and driving the growth of this business. Jack was replaced as Managing Director of Finning (UK) by Steve Mallett, formerly Vice-President of Customer Support Services for Canadian operations. With these appointments, we continued to build a talented group of internationally trained managers and executives.

Asset Reduction

Our ongoing focus on asset management and core business activity resulted in the disposition of surplus properties in Canada and the U.K. and the sale of our materials handling division in Western Canada. In the short run, the sale proceeds were used to reduce debt and fund our share repurchase program. In the long term, we have ensured financial flexibility as we pursue opportunities to grow our core business both domestically and internationally.

Late in the year, the company gifted 18.6 acres of its Great Northern Way property in Vancouver to four British Columbia post-secondary institutions. The BC Institute of Technology, Emily Carr Institute of Art and Design, University of BC and Simon Fraser University share equally in the land valued at $33.8 million.

We believe in the need to reinvest in the community that has supported our growth over many decades. This gift assists these world-class institutions to educate many talented people and provide us with skilled employees in the future.

As the year closed, Finning completed its move from the Great Northern Way property to its international offices in downtown Vancouver. The balance of its Finning (Canada) employees relocated to our expanded Surrey facilities, now the largest branch in BC.

Improved Productivity

All employees contributed to our record financial results and improved safety performance. In fact, lost time accidents dropped by one third over the previous year. We are especially grateful to the Hewden Stuart employees who have embraced the Finning culture and performance expectations. Once again, our dedicated employees have shown their commitment to making Finning and our customers successful.

Although the economic outlook for 2002 is far from bright, we do expect to maintain the same level of profitability reached in 2001. The Finning management team will be moving ahead as we accelerate investment in the ever-growing power systems, rental and customer support businesses. We will shift resources from slower growth geographic locations to high growth areas. We will pursue acquisitions that will propel the company forward.