FINANCIAL SUMMARY TANDBERG's 2004 operating revenues were 305.0 MUSD (223.3 MUSD).* The revenue growth was driven by the Company's continued efforts to expand the market for visual communications. Operating fundamentals continued to improve, and TANDBERG delivered a gross margin of 67.4% (67.2%) and an operating profit of 74.5 MUSD (46.0 MUSD), reflecting consistent execution and a strong business model. Profit before tax ended the year at 77.0 MUSD (58.7 MUSD). With a tax expense of 21.5 MUSD (14.8 MUSD), the Group's net income was 55.6 MUSD (43.8 MUSD), generating earnings per share of 0.42 USD (0.33 USD). Cash flow from operations totaled 55.9 MUSD (57.8 MUSD). The repurchase of TANDBERG shares, acquisitions and the 2003 dividend, totaling 73.4 MUSD, primarily offset by cash flow generated from operations and share issues to employees, gave a net decrease in liquid assets of 11.3 MUSD from the previous year-end. As of 31 December 2004, the Company had a cash balance of 242.9 MUSD (254.2 MUSD). The equity ratio at year-end 2004 was 75.8% (83.0%). The Company has no outstanding overdraft or interest-bearing loans.

THE VISUAL COMMUNICATIONS MARKET On the backdrop of a gradually improving, yet challenging market in 2003, market conditions were generally good in 2004 and improved cautiously quarter by quarter. Compared to the same periods of 2003, in terms of revenues from videoconferencing end-point systems, the industry experienced a strong 29% increase in the first quarter, on the back of a weak first quarter in 2003, a 25% increase in the second quarter, 20% increase in the third quarter and finally an estimated 24% increase in the fourth quarter. Measured in revenue for the full year, the market showed an impressive 24% (- 4%) estimated growth. The same trend was also reflected in terms of units sold, but with a slightly higher year-over-year growth, estimated at 29% (14%). The decline in the Average Sales Price (ASP) is primarily due to changes in product mix.

The worldwide market for visual communications solutions is dominated by few vendors. TANDBERG is the second largest supplier of videoconferencing equipment, both when measured in terms of revenue or unit shipments. Hence, TANDBERG's performance has a significant impact on the performance of the whole industry. TANDBERG experienced solid profitability combined with four quarters of sequential quarter-over-quarter growth. TANDBERG's growth exceeded that of its competition and the industry overall; and the Company ended an excellent year above plan, with accelerating revenue momentum, strong cash flow from operations, an industry leading product portfolio and increased market share.

By the fourth quarter of 2004, TANDBERG's estimated global market share was 39% (37%) in terms of revenue and 25% (22%) in terms of units sold. The Company's reinforced product portfolio and new technology, well-executed marketing initiatives, further geographic expansion, strategic positioning and alliances, as well as high quality channel distribution partnerships and programs are driving profitable growth and strengthening the TANDBERG brand.

TANDBERG's total revenue from Network Infrastructure Products (the MPS, MCU, Gateways and Gatekeeper) increased continuously throughout the year, ultimately accounting for 12% (10%) of total revenue in the fourth quarter. The Company's technological leadership allowed the Company to enjoy an estimated 17% (15%) market share in the fourth quarter of 2004, two years after introducing its first Network Infrastructure Product.

In 2004, continued increasing interest and adoption of visual communications, along with strong government, enterprise and vertical sales in most regions gave the global market a real uplift from 2003. The year also marked an inflection point with regards to the proliferation of IP networks, which sharply reduce total cost of ownership for users of videoconferencing. Driven by IP based communication needs, 2005 will likely prove to be an exciting year for the videoconferencing industry.

TANDBERG AMERICAS
TANDBERG’s revenues in the Americas represented 55% (58%) of the Company’s total revenues and amounted to 168.3 MUSD (129.1 MUSD), up 30% year-over-year.

Strong revenue growth in high-end solutions (51% year-over-year), network infrastructure (94% year-over-year), and vertical solutions (45% year-over-year), more than offset ASP pressures from new personal and office systems. For the first time in three years, non U.S. Federal revenues grew faster than the U.S. Federal segment due to success in Canada, Latin America, the U.S. education vertical and the U.S. Fortune 500 segment. Federal sales still grew a healthy 25% year-over-year. TANDBERG America’s Grants Initiative accelerated sales to education and local government entities by matching their requirements to available Federal grant programs. The launch of MXP and TANDBERG’s MPS multi-site bridge was very well received in all segments, but in particular the Fortune 100 segment where several key wins fueled a strong second half.

Americas operations continue to execute according to plan. Several successful major events yielded strong results in 2004, such as the launch of the TANDBERG Now seminars, A Day of Visual Communications and Partner Summits, widely attended by Americas’ partner representatives, industry analysts and other key participants. The Company remains committed to its linearity programs with partners, and anticipates gaining further traction from the global accounts and vertical market teams in 2005.

New Partner and Service programs launched in Americas during the second half of 2004 have improved service attach rates and renewal rates to levels that will significantly improve services revenue performance in 2005.

TANDBERG EMEA
Revenues in Europe accounted for 34% (32%) of the Company’s total revenues and amounted to 102.2 MUSD (70.8 MUSD), up 44% year-over-year.

TANDBERG’s geographical coverage in EMEA was further developed during 2004, expanding into new markets, with the Emerging Markets Region showing very positive development. With the leading market share, TANDBERG further increased its penetration of Fortune 500 companies in EMEA with several key wins. Furthermore, TANDBERG EMEA continued investing in developing and expanding its Vertical Markets with key strategic wins both within the Bank/Finance and Defense sectors. EMEA experienced increased momentum for the new product groups.

During 2004, TANDBERG in Europe focused on strengthening and fine-tuning the organization and business procedures for long-term growth. Distribution was significantly strengthened and improved by developing Channel Partners through training, education and improved Partner programs. As expected, the effects of these organizational improvements were duly reflected in both customer and partner satisfaction.

Sales of network products and service programs gained significant momentum in 2004. A series of service initiatives produced strong results with invoiced service revenues exceeding the corporate target for total revenues from value-added services in the fourth quarter.

TANDBERG ASIA PACIFIC (APAC)
Revenues in Asia Pacific represented 11% (10%) of the Company’s total revenues and amounted to 34.5 MUSD (23.3 MUSD), up 48% year-over-year.

The year 2004 represented a year of rapid growth for TANDBERG in Asia Pacific. TANDBERG’s investments in the region over the last couple of years are taking effect, with impressive revenue growth, margin development and linearity in 2004. Notable key wins in 2004 include successes in the Financial Sector in China, Japan, Taiwan and Australia; the Manufacturing Sector in Australia and Japan; the Government Sector in China, Japan and Thailand; and the Education Sector in Australia.

Headcount increased by more than 50% with several key appointments, especially in China, Australia/New Zealand and at the Theatre management level. Expanding according to plan and part of TANDBERG’s commitment to aggressively grow its business in this Theatre, Mr. Benny Lee joined TANDBERG as President for the APAC Theatre, effective January 2005.

The APAC Marketing Department had its first full year of operation, and is forcefully executing marketing programs throughout the region. TANDBERG Asia Pacific has vastly improved the Company’s brand awareness and image in the region during 2004.

The year 2004 also brought the initial introduction of the TANDBERG partner program throughout the APAC Theatre. The addition of new partners and the rebalancing of the partner portfolio in the Theatre increased TANDBERG’s ability to provide adequate coverage within the regions. Service capabilities were established in China and service and support programs were considerably strengthened throughout the Theatre leading to increased customer satisfaction and improved renewal and attach rates.

As the economy in Asia Pacific gathers momentum, TANDBERG Asia Pacific is poised for further strong growth and to take advantage of the huge market potential that unfolds in 2005.

STRATEGIC ALLIANCES AND M&A ACTIVITY To strengthen TANDBERG’s leadership position in IP video communication and accelerate the adoption of video over IP, the Company acquired the UK based Ridgeway Systems & Software Ltd. in May 2004. TANDBERG will begin offering IP-video solutions integrated with Ridgeway’s firewall traversal technology, named TANDBERG Expressway™, in the first quarter of 2005. Terms of the acquisition included 16 MUSD to purchase the company and a patent portfolio. In November 2004, TANDBERG acquired patents related to video management and scheduling software from Forgent Networks Inc. for 3.75 MUSD. This purchase further strengthened TANDBERG’s portfolio of patents.

TANDBERG announced a strategic alliance with GlowPoint Inc. in April 2004, focused on delivering and expanding the use of IP video communications. As part of the agreement, GlowPoint acquired certain assets and the customer base of the TANDBERG Inc. owned Network Systems LLC.

In February 2004, TANDBERG’s leadership in IP gained significant momentum through the expansion of its strategic relationship with Cisco Systems, Inc. Videoconferencing functionality was included in Cisco’s CallManager 4.0, Cisco launched a desktop videoconferencing solution, and TANDBERG made available end-points on Cisco’s proprietary SCCP protocol that will be sold by Cisco resellers. This alliance is an example of TANDBERG’s commitment to provide interoperable and standards-based solutions through strategic partnerships. This joint effort to expand the marketplace for visual communications was further strengthened throughout the year and early 2005 when it was announced that TANDBERG will provide Cisco with technology that will be co-branded and sold by Cisco.

?TANDBERG also strengthened its strategic alliance with Microsoft Corp., another company driving the widespread acceptance of visual communications, partnering on next generation technology. TANDBERG is prepared to deploy SIP, a call set-up protocol for video telephony. The TANDBERG SIP products will interoperate with Microsoft Live Communications Server and will ship in the first quarter of 2005.

TANDBERG is focused on expanding the market for visual communications with Cisco and Microsoft. By expanding TANDBERG’s MXP platform to support CallManager and SIP, anyone–from individuals to large groups–independent of protocols, will be able to experience the convenience of video telephony.

PRODUCT DEVELOPMENT In 2004, TANDBERG further reinforced its technology leadership. New groundbreaking products from TANDBERG entered the market throughout the year across its portfolio of visual communications solutions consisting of end-point systems, network products, management software and value-added services. The new product launches in 2004 were the most wide-ranging in the Company’s history and included several industry firsts. The most significant were related to the expansion of the Network Products line, the introduction of an innovative new technology platform called MXP and the launch of a new personal products line. The new products and solutions all strategically complement TANDBERG’s portfolio serving enterprises, service providers and verticals, resulting in a complete end-to-end solution.

The Company spent 19.2 MUSD (13.3 MUSD) on applied and basic research and product development in 2004.

OPERATIONS TANDBERG outsources functions such as procurement, production, transportation, and warehouse services. As of year-end, four production partners in Norway, one in Denmark, and two in the United States were contracted. Gross margins remained at the 67% level as a result of an extended and improved portfolio of products and services, continuous process improvements and cost reductions.

The Company delivered a total of 27,532 (19,229) end-point systems in 2004, up 43.2% from 2003, and shipped a record 8,330 (5,699) units in the fourth quarter. The TANDBERG 770, 880, 990, 1500, 2000, 2500 and 3000, the Company’s mid-range systems, represented 54% (49%) of total systems sold. High-end systems, including the TANDBERG 6000, 7000, 8000, Maestro and specialized systems for the healthcare, education, judicial, legal and public safety markets, represented 19% (24%) of all systems sold, while the low-end range, the TANDBERG 150, 550 and 1000, accounted for 27% (27%).

ORGANIZATION TANDBERG headquarters are in Oslo, Norway and New York, United States. The Company has offices and representation in Norway, United States, Canada, U.K., Sweden, France, Spain, Germany, Italy, Singapore, China, Japan, Hong Kong, Australia and India. TANDBERG provides sales, support, and value-added services in more than 90 countries worldwide.

In conjunction with TANDBERG’s highly selective hiring process, TANDBERG ended the year with 589 (539) employees, an increase of 9%, reflecting the Company’s profitable growth momentum. Approximately 56% (60%) work in sales and marketing, 29% (30%) in research and product development and 15% (10%) in logistics, operations, accounting/finance and administration.

The Company’s administrative functions were strengthened in 2004 to keep up with the growth and increasing complexity of the rest of the organization. By improving the internal service levels through a continuous focus on professionalism and by developing the Company’s infrastructure, the administrative functions have been moved into a proactive mode, playing a key part in reaching the Company’s overall goals and positioning the Company for future growth.

?TANDBERG’s sales organization was strengthened with local expertise as the Company expands geographically, and with significant specialist know-how to serve the growing vertical markets. R&D has broadened its expertise within new technologies by internal development and training, hiring of skilled employees and through acquisitions.

The Company was able to attract high caliber candidates for all functions in all geographies. Middle management was strengthened and some senior executives were appointed in Europe, Asia, and the Americas, fortifying the management team and positioning the Company for continued profitable strong growth.

Increasingly, training is a steady focus at all levels and in every function of the Company. As the organization grows and becomes ever more geographically dispersed, there is a continuous focus on developing the organization and managers at all levels. TANDBERG University trained 77 new employees in product knowledge, the organization and TANDBERG’s culture and core values. Twice a year, every employee is involved in nominating colleagues to the One TANDBERG Summit, a global meeting with top management to discuss the TANDBERG organization, culture and how to move the Company forward without sacrificing our values and unique corporate culture.

At the Annual General Meeting, 15 April 2004, Ralph Høibakk announced his decision not to stand for reelection to the Board of Directors for personal reasons. The Board of Directors would like to express its gratitude to Mr. Høibakk for his extensive period as a prominent member. Jørgen-Ole Haslestad was elected to the Board of Directors.

CORPORATE GOVERNANCE A separate section of this annual report outlines the Company’s guidelines for Corporate Governance in accordance with the provisional code of practice published in December 2003. TANDBERG will apply the new Norwegian Code of Practice for Corporate Governance as required for all listed companies on the Oslo Stock Exchange with effect from 2005.

WORKING ENVIRONMENT TANDBERG has a strong corporate culture built around core values that include speed and precision, enthusiasm and integrity, exceeding expectations, fun and profit, and TANDBERG First. The strength of TANDBERG’s corporate culture is what sets the Company apart from its competition.

TANDBERG encourages diversity and believes it is an asset to the Company. People with diverse backgrounds and perspectives are critical to innovation, and innovation is critical to TANDBERG’s success.

TANDBERG is a socially responsible company committed to equal opportunity in the workplace. Equal opportunity in the workplace is a TANDBERG policy, approved and promoted by the board of directors and management. TANDBERG management believes that all employees should have equal access to opportunities whatever their gender, race, religion, national origin, age, or disabilities. This applies to all aspects of employment.

TANDBERG offers a working environment that is congenial, safe, productive and well balanced. Of the Company’s 589 employees, approximately 25% are women. TANDBERG is committed to making the Company an attractive workplace for women at all levels and in all functions and is especially encouraging and actively working on increasing the number of women within R&D and Sales. The Company is also actively seeking to identify highly qualified candidates for positions at the middle- and top management levels. Women occupy senior positions at numerous locations across the Company, and two out of the eight global leaders are women, as are two board members.

Absence due to illness in 2004 was less than 2%. No accidents or incidents involving personal injury or material damage occurred.

MISCELLANEOUS In accordance with Norwegian accounting law, it is confirmed that the annual financial statements have been prepared on a going-concern basis. The Company does not pollute the external environment.

The Company is exposed to credit risk and foreign exchange risk in its ordinary business activities, risks that are closely monitored and limited to acceptable levels. It is the Company’s policy not to use financial instruments in order to reduce the Company’s foreign exchange risks. All new customers are checked for credit rating and all customers are checked against credit limits before contracts are closed.

TRANSITION TO IAS/IFRS Listed companies in the European Union (EU) must adopt and apply International Financial Reporting Standards (IFRS) to their consolidated financial statements beginning in 2005. Through the EEA agreement, this also applies to listed Norwegian companies.

Preparing for this transition, TANDBERG has drawn up plans for implementation, made surveys of differences between current accounting principles and those that apply under IFRS, prepared the preliminary 1 January 2004 IFRS opening balance sheet and started the process of implementing necessary changes in systems and routines.

In addition to the effects on the measurement of profit and loss and shareholders’ equity, the conversion to IFRS will amongst others largely influence the documentation requirements of individual accounting items and the accounting principles. Additional information requirements to the financial statements and the annual report are also added under IFRS.

TANDBERG will follow the Committee of European Securities Regulators’ (CESR) recommendation on providing additional information during the transition to IAS/IFRS.

U.S.–DOLLAR REPORTING TANDBERG successfully began reporting its financial statements in U.S. Dollars commencing with first quarter reporting on 15 April 2004. Previously, the Company reported its financial statements in Norwegian Kroners. This move was made for strategic reasons. TANDBERG believes that the USD gives the Company financial reports that most accurately measure its performance in world markets.

SHARE BUYBACK PROGRAM In view of the Company’s strong cash flow and cash position, the Board of Directors called an Extraordinary General Meeting on 10 November 2004 and obtained authorization for a share buyback program which opens for buyback of up to 10% of TANDBERG’s shares (13,428,460 shares) in the market, and which is valid until 10 May 2006. The intention is to use the shares in connection with incentive schemes for employees, acquisitions or to cancel the shares through a capital reduction. All transactions under this program will be disclosed to the Oslo Stock Exchange, and on www.tandberg.net. As of 31 December 2004, TANDBERG had acquired a total of 3,955,470 of its own shares at an average price of NOK 70.81.

SHAREHOLDERS As of 1 January 2004, there were 131,685,143 shares outstanding. On 19 February 2004, 14 May 2004, 12 August 2004 and 11 November 2004 share issues of 63.6 MNOK, 5.3 MNOK, 4.0 MNOK and 1.1 MNOK were made to employees, through the issue of 2,267,719, 188,489, 143,251 and 40,204 new shares, respectively, in accordance with the Company’s share option program. At year-end 2004 there were 134,324,806 shares outstanding. The Company had 4,258 shareholders at year-end. Thirty-seven percent of the shares were owned by Norwegian shareholders, 27% by U.S.-based shareholders, 22% by U.K.-based shareholders and 13% by other European-based shareholders.

FUTURE OUTLOOK TANDBERG’s growth, results and technology development throughout 2004 further strengthened the Company’s market position and it is today one of two dominating contenders in the industry. The Company has also gained momentum organizationally and financially throughout the year. Hence, the inherent uncertainty of looking into the future is done with the comfort that the base has never been better. Looking at the market, 2004 proved to be a point of inflection where proliferating IP networks and growing demand for faster and more efficient communication resulted in solid growth.

On the basis of a solid organization and operating model and a stronger competitive edge in a market that exhibits good growth prospects, the Board of Directors is optimistic and it expects that the Company will meet its long-term objectives.

ALLOCATION OF THE YEAR’S PROFIT The net profit of the parent company, TANDBERG asa, was NOK 205,090,000. The Board recommends the following allocation of net profit for 2004, hereunder a dividend of NOK 0.55 per share (NOK 0.40), equivalent to a payout ratio of 36% (23%) of net profit for 2004:

The holding company’s total equity as of 31 December 2004 was NOK 1,826,006,000, of which distributable equity amounted to NOK 1,045,870,000 before allocation to dividend for 2004.

Lysaker, Norway, 10 February 2005.
Board of Directors of TANDBERG asa