annual report 2007

Notifi cationShareholders wishing to attend the

Annual General Meeting must:

be entered in the share register held by •

the Swedish Securities Register Centre

(VPC AB) by Friday 18 April 2008.

notify the company no later than •

Monday 21 April 2008 before 1 p.m.:

OEM International AB, Box 1009,

SE-573 28 TRANÅS

Tel. +46 (0)75 242 40 00

or email [email protected]

Shareholders who have registered their

shares in the name of an authorised agent

must temporarily register the shares in

their own name with the VPC AB by no

later than Friday 18 April 2008 in order to

participate at the Annual General Meeting.

DIVIDEND

The Board of Directors proposes that the

Annual General Meeting issue a dividend

of SEK 3 per share for 2007 and stipulate

Tuesday 29 April 2008 as record date. If

the Annual General Meeting adopts the

proposal, it is expected that dividends will

be distributed on Monday 5 May 2007 to

those entered in the share register on the

date of issue.

BUSINESS

The agenda and business of the Annual

General Meeting will be notifi ed through

advertisements in the daily press and

will also be available on OEM’s website

(www.oem.se). The agenda can also be

obtained from the company when regis-

tering to attend the meeting.

FUTURE REPORTS

Interim report, January-March •

24 April 2008

Half-yearly report, January-June •

24 July 2008

Interim report, January-September •

24 October 2008

Financial statement, 2008 •

February 2009

Annual Report March/April 2009•

VISIT OUR WEBSITE

The latest information about the

company is available on our website

(www.oem.se).

Annual General MeetingThe Annual General Meeting will be held on Thursday 24 April 2008 at 4 p.m. at Stadshotellet, Storgatan 22 in Tranås, Sweden.

07 For easy access to defi nitions while reading the annual report, open the fl ap and lay fl at.

▼

Annual Report 2007

Box 1009, SE-573 28 Tranås • Tel. +46 (0)75 24 24 000 • Fax +46 (0)75 24 24 029 • Email [email protected] • www.oem.se 07

CC

J K

om

mun

ika

tio

n •

Pho

tos

Patri

k Sv

edbe

rg a

nd o

ther

s

OE

M A

NN

UA

L R

EP

OR

T 2

00

7

ANNUAL GENERAL MEETING – FUTURE REPORTS ❚ OEM ANNUAL REPORT 2007 2

For easy access to defi nitions while reading the annual report, open the fl ap and lay fl at.

▼

OEM2008_omslag_Plano_ENG_OK.indd 1 08-04-21 15.51.53









SE-573 28 TRANÅS

Tel. +46 (0)75 242 40 00








DIVIDEND









date of issue.

BUSINESS








FUTURE REPORTS


24 April 2008


24 July 2008


24 October 2008


February 2009


VISIT OUR WEBSITE



(www.oem.se).


07Annual Report 2007

Box 1009, SE-573 28 Tranås • Tel. +46 (0)75 24 24 000 • Fax +46 (0)75 24 24 029 • Email [email protected] • www.oem.se 07 C

CJ

Ko

mm

unik

ati

on

• P

hoto

s Pa

trik

Sved

berg

and

oth

ers

OE

M A

NN

UA

L R

EP

OR

T 2

00

7



▼










SE-573 28 TRANÅS

Tel. +46 (0)75 242 40 00








DIVIDEND









date of issue.

BUSINESS








FUTURE REPORTS


24 April 2008


24 July 2008


24 October 2008


February 2009


VISIT OUR WEBSITE



(www.oem.se).



▼

Annual Report 2007

Box 1009, SE-573 28 Tranås • Tel. +46 (0)75 24 24 000 • Fax +46 (0)75 24 24 029 • Email [email protected] • www.oem.se 07

CC

J K

om

mun

ika

tio

n •

Pho

tos

Patri

k Sv

edbe

rg a

nd o

ther

s

OE

M A

NN

UA

L R

EP

OR

T 2

00

7



▼


OEM ContentsAnnual General Meeting – future reports .... 2This is OEM International ..................... 3-4History ..................................................... 3-42007 in brief ............................................... 5Comments from the CEO ..................... 6-7Vision, business concept and business logic .................................. 8-9Growth strategy ........................................ 10Financial targets....................................... 11Employees ........................................... 12-13Quality, the environment and ethics .. 14-15Board of Directors ............................... 16-17Senior Management ........................... 18-19

GROUP STRUCTURE ..........................20-21

■ OEM Automatic .......................... 22-23■ OEM Electronics ........................ 24-25■ Cyncrona ..................................... 26-27■ Development ............................... 28-29

OEM Electronics – an important partner ................................................. 30-31Positive path for Telfa.......................... 32-33OEM Automatic strengthens its position .......................................... 34-35

FINANCIAL REPORTING

Five-year Group summary ...................... 38Key indicators for the last fi ve years ......... 39Directors’ report .................................. 40-41

FINANCIAL REPORTS – THE GROUP

Income statement .................................... 42Balance sheets ..................................... 43-44Changes in shareholders’ equity .............. 45Cash fl ow statement................................. 46

FINANCIAL REPORTS –

THE PARENT COMPANY


Notes with accounting principles

and comments to the fi nancial

statements ..................................52-80

Proposed allocation of profi ts .................. 81Auditors’ report ......................................... 82

OEM shares ........................................ 84-85Ownership structure ................................ 85Key indicators for OEM shares ................ 86Ownership data ........................................ 87Share capital trend ................................... 87

Addresses ............................................. 88-89Defi nitions ............................................... 90

1974 The agency company OEM Automatic AB is founded by the Franzén and Svenberg families.

1983The company is introduced on the Stock Exchange’s OTC list. Sales amount to SEK 30 million.

1988Sales exceed SEK 100 million for the fi rst time.

1998Three corporate acquisitions completed.

2000Jörgen Sahlin is appointed new MD. Acquisition of the group JMS Systemhydraulik

2003The Group stabilises at sales 30% lower than

2001. Industri AB Refl ex is sold.

2005Acquisition

of Telfa.

2007Acquisition of Crouzet,

MPX Electra and Klitsö.

1993The A. Karlson

Group is acquired.

1997OEM International and Cyncrona

(also listed on the OTC list) merge. Cyncrona becomes a

third subgroup.

1981The fi rst overseas subsidiary is

established in Finland.

1986Industri AB Refl ex

is acquired.

1989The fi rst

subsidiary outside

Scandinavia is set up in

the UK.

1991OEM International is formed and be-comes the Group’s parent company.

The electronics product area breaks away from OEM Automatic to form a separate company, OEM Component.

1996New Group structure. The companies are divided into two sub-groups: OEM Industrial Components and OEM Systemteknik.

2002OEM suffers signifi cant decline in sales due to telecom downturn.

1999Four corporate acquisitions completed.

2004OEM celebrates 30th anniversary Continued restructuring and stream-lining. Profi t climbs 55%.

2006The Group establishes itself in the Czech Republic via the acquisition of EIG. Divestment of JMS System-hydraulik group

OEM’s History

Defi nitions

This is OEM InternationalOEM International is one of Europe’s leading industrial trading companies. The Group is comprised of 26 operating units with activities in 13 countries.

The business concept is to offer the industry components and systems from

leading manufacturers to industrial companies by utilising our excellent product

and application expertise. OEM is a local alternative to the manufacturers’ own

subsidiaries and can provide better marketing and sales conditions.

The Group is organised into four company groups. Three of the groups are

organised according to a concept with a well defi ned range of products that targets

a specifi c market. The fourth group is a collection of other business activities

organised under Development.

OEM AutomaticComponents for

industrial automation.

Read more on pages 22-23

OEM ElectronicsAppliance and circuit

board components and EMC/ microwave components


CyncronaProduction systems and components for

electronics production


DevelopmentBearings and bearing solutions,

motors & transmissions, seals and pumps


10

20

40

30

50

80

70

60

OMX Nordic EUR PI

2003 2004 2005 2006 2007 2008

(SEK)

OEM International B

Share trends

OEM has been listed on the Stockholm Stock Exchange Small Capital since 1983.More information about OEM is available at www.oem.se


OEM ELECTRONICS

OEM Electronics AB Box 1025, Norrabyvägen 6B SE-573 29 TRANÅS SwedenTel: +46 (0)75 242 45 00Fax: +46 (0)75 242 45 [email protected]

OEM Electronics OYP O Box 122, Telekatu 6FI-020101 TURKU FinlandTel: +358-207 499 300Fax: +358-207 499 [email protected] www.oemelectronics.fi

OEM Electronics PLul. Parowcowa 6BPL-02-445 WARSZAWA PolandTel: +48-22-86 32 722Fax: +48-22-86 32 [email protected]

CYNCRONA

Cyncrona ABTomtbergavägen 2SE-145 67 NORSBORG, SwedenTel: +46 (0)75 242 46 50Fax: +46 (0)75 242 46 [email protected]

Cyncrona OyHannuksenpelto 12FI-020101 TURKU FinlandTel: +358-(0)20 7528700 Fax: +358-(0)20 [email protected] www.cyncrona.fi

Cyncrona A/SSindalsvej 21 DK- 8240 RISKOV, DenmarkTel: +45-87-42 66 66Fax: +45-87-42 66 [email protected]

Cyncrona ASPostboks 2144 Bjørnstjerne Bjørnsonsgate 110NO-3003 STRØMSØ NorwayTel: +47-32-21 05 80Fax: +47-32-21 05 [email protected]

Cyncrona Baltic StatesSuur-Jõe 62EE-80042 PÄRNU EstoniaTel: +372 510 05 [email protected] www.cyncrona.com

DEVELOPMENT

Internordic Bearings ABBox 105SE-571 22 NÄSSJÖ SwedenTel: +46 (0)75 242 49 40Fax: +46 (0)75 242 49 [email protected]

IBECAartsdijkweg 111NL-2676 LE MAASDIJKNetherlandsTel: +31-174 52 51 00Fax:+31-174 52 51 [email protected]

Indoma ABBox 319, Fridhemsvägen 25 SE-551 15 JÖNKÖPING, SwedenTel: +46 (0)75 242 43 50Fax: +46 (0)75 242 43 [email protected]

Telfa ABBox 120 SE-402 41 GÖTEBORG SwedenGoods terminal address: Karl Johansgata 158, SE-414 51 GÖTEBORG, SwedenTel: +46 (0)75 242 44 50Fax: +46 (0)75 242 44 [email protected]

ADDRESSES ❚ OEM ANNUAL REPORT 2007 89 DEFINITIONS ❚ OEM ANNUAL REPORT 2007 90

Earning capacity of total capital: Operating

income plus fi nancial income as a percentage

of average total capital.

Earning capacity of capital employed:

Operating income plus fi nancial income as a

percentage of average total capital.

Capital employed refers to total assets minus

non interest-bearing liabilities including deferred

tax liabilities.

Earning capacity of shareholders’ equity:

Net profi t for the year as a percentage of

average shareholders’ equity.

Average interest payable: Financial expenses

as a percentage of interest-bearing liabilities.

Debt/equity ratio: Interest-bearing liabilities

divided by calculated shareholders’ equity.

Calculated shareholders’ equity comprises

shareholders’ equity plus minority interests.

Operating income/Sales: Operating income

before depreciation/amortisation as a

percentage of sales.

Profi t percent: Earnings after fi nancial

income as a percentage of sales.

Profi t margin: Profi t before tax as a


Capital’s turnover rate:

Sales divided by total assets.

Sales per employees: Sales divided by average

number of employees.

Equity/assets ratio: Shareholders’ equity as a

percentage of total capital.

Quick ratio: Current assets minus inventories

as a percentage of current liabilities.

Earnings per share: The Group’s net profi t

after deductions for both paid and deferred tax

divided by the number of shares.

Shareholders’ equity per share:

Shareholders’ equity and minority interests


Price / Earning (P/E) ratio: Quoted price as

per 31 December divided by earnings per share.

Direct return: Dividend per share divided by

the quoted price at year-end.

Sales per share: The Group’s sales divided by

the number of shares on the market at year-end.

Sales increase per share: Increase of the

Group’s sales per share.

Dividend/Profi t payout ratio: Proposed

dividend in relation to the year’s profi t.

Dividend/Shareholders’ equity: Proposed

dividend in relation to the Group’s sharehold-

ers’ equity and the minority interests.

Cash fl ow per share: Cash fl ow for current

operations divided by the number of shares.

Beta values: Measure of historical change

in the share price in relation to the price

fl uctuation of the general index.

Rate of turnover for shares: The number

of shares sold during the year divided by the

number of outstanding shares at year-end.

P/S ratio: Stock market value in relation to the

Group’s sales.

P/E ratio: Quoted price as per 31 December

divided by earnings per share.

Price/Shareholders’ equity: Quoted price

divided by shareholders’ equity per share.

EV/Sales: Enterprise value (stock market value

+ net liability + minority interest) divided by the

Group’s sales.

EBIT multiple: Enterprise value divided by the

Group’s operating income after depreciation/

amortisation.




2007New organisations in three new markets.•

Three corporate acquisitions completed.•

14% sales growth in traditional •

industry sectors.

16% sales decline in the electronics sector.•

9% increase in profi t before tax to SEK •

139 million (127).

OEM Automatic• increased sales by 16% to

SEK 813 million (698) and profi t by 4% to

SEK 94.6 million (91.0).

OEM Elektronic’s• sales reached SEK

276 million (307) and profi t amounted to

SEK 14.1 million (18.8).

Cyncrona’s • sales reached SEK 188 million

(245) and profi t amounted to SEK 3.6

million (14.2).

Development • increased sales by 4% to SEK

221 million (213) and profi t by 18% to SEK

15.4 million (13.0).

OEM Motor, with reported sales of SEK 40.2 million, has been transferred from company group Development to company group OEM Automatic as of 2008.

The Group in fi gures

Summary 2007OEM’s ongoing expansion activities in 2007 resulted in the following:

2007 2006

Net sales* SEK m 1482 1448

Profi t after net fi nancial items* SEK m 139.1 127.5

Profi t divested business unit (SEK m) 2.0 90.8

Profi t for the year (SEK m) 102.8 181.6

Earnings per share:* (SEK) 4.34 3.92

Cash fl ow per share (SEK) 1.91 4.89

Equity per share (SEK) 22.88 27.65

Proposed dividend per share (SEK) 3.00 2.83

Earning capacity of shareholders’ equity (%) 17.6 32.5

Equity/assets ratio (%) 58.9 67.2

Quoted price at year-end (SEK) 42.90 63.00

Market capitalisation at year-end (SEK m) 994 1460

Average no. of employees* (No.) 569 531

*) Remaining business units

2006 in bRief z oeM annual RepoRt 2007 5

OEM2008_del1_5-36_ENG_OK.indd 5 08-04-21 16.16.58

Comments

6 oeM annual RepoRt 2007 z coMMents fRoM the ceo

Comments from the CEO


Comments

coMMents fRoM the ceo z oeM annual RepoRt 2007 7

The Group now consists of 26 operating

units, all of which generated profi ts in

2007. OEM’s market position is stronger

after introducing the new product selec-

tion from both existing and new suppliers.

Acquisitions also contributed to strength-

ening the Group’s market position by

cultivating signifi cant synergy effects.

hiGher profits

OEM Automatic reports yet another

record-breaking year. Reported sales rose

by 16% to SEK 813 million and profi t

by 6% to SEK 94.5 million. Sales and

profi tability improved on all markets due

to strong demand. Costs in the amount

of SEK 6 million for integrating the

acquisition Crouzet AB are charged to

the profi t for 2007.

Development increased sales by 4% to

SEK 221 million and profi t by 25% to

SEK 16.3 million. Business activities

in pumps and electric motors report

the best progress. New pump sup-

pliers and access to Crouzet electric

motors reinforced the product offer.

OEM Electronic’s sales dropped

by 10% to SEK 276 million due to

lost deals in 2006. Streamlining

activities were carried out in the

autumn that cut costs by SEK 6 million/

year, improved the fi nancial results and

generated a profi t of SEK 15 million

(18.8) for the whole year.

Cyncrona reports lower demands which

pulled sales down to SEK 188 million

(245). The autumn’s cost-cutting scheme

cut costs by SEK 8 million/year, slowed

the weakening in fi nancial results and

generated a profi t of SEK 4.3 million (14.2).

In December, all warehouses were centralised

to Sweden which now serves all markets.

acquisitions & new markets

The outstanding 50% of the shares in

Crouzet AB were acquired in February.

Active in the automation component

segment, the company was incorporated

into OEM Automatic AB and OEM

Motor AB. The acquisition means an

additional SEK 30 million in sales

annually and negatively affected profi ts

by SEK 1.5 million in 2007.

Battery supplier MPX Elektra ApS in

Denmark was acquired in September.

The acquisition contributes about SEK

17 million in sales annually and had a

marginal impact on profi ts in 2007.

The company was incorporated in OEM

Automatic in the autumn and constitutes

a new market segment in Denmark.

Simultaneously, the selection of products

improves our competitiveness in terms

of batteries on the Finnish and Swedish

markets.

Klitsö Processtechnic AS in Denmark

sells valves and pneumatic systems and was

acquired in December. The acquisition

contributes about SEK 88 million in sales

annually and had a margin impact on profi ts

in 2007. This acquisition enables us to en-

hance our expansion potential in Denmark.

OEM expanded in new markets in

Slovakia, Latvia and Lithuania in 2007.

This means that we cover the entire Baltic

market and are making inroads south into

Eastern Europe together with our Poland

and Czech-based business units.

prepared for the future

Strong, long-standing relationships with

suppliers and our customers’ genuine

trust cultivates excellent conditions for

ongoing organic growth.

The strong balance sheet coupled with

streamlined processes facilitate acquisitions

and geographic expansion. The organisa-

tion’s dedication enables us to effectively

incorporate acquisitions in the Group.

‘thank you’ to all employees

OEM’s achievements are based on our

ambitious employees who have created

competitive business units through their

dedication and conscientiousness.

Ongoing growth relies on the will to

accept new challenges and see opportuni-

ties in new situations. I want to take this

opportunity to extend a sincere thank-you

to all employees for their excellent efforts

throughout the year.

Jörgen Zahlin

Sales rose by 2% to SEK 1,482 million and profi t by 9% to SEK 139 million in 2007. A sound demand and new acquisitions resulted in a 14% increase in sales for the business units that target traditional industry sectors. Weaker demand from the electronics sector caused a 16% decline in sales for this segment.


8 oeM annual RepoRt 2007 z Vision, business concept and business logic

Visionvision

OEM International is to be a leading player

in industrial trading in northern Europe.

to achieve this vision means:

constantly improving our level of •

knowledge and service to at the very

least conform to customer expectations

making our suppliers market leaders •

effi ciency makes us more profi table •

than our competitors

our employees are able to realise •

their ambitions.

industrial tradinG

Our product range spans from basic

mechanical components such as seals and

couplings to complete production systems

for circuit boards. OEM trades in products

to which the company adds value and

where the company has the potential to

gain a substantial market share.

We constantly expand our range by

adding new products and discontinuing

or replacing unprofi table products.

Each company markets a clearly

defi ned product range which, coupled

with the added value of the organisation,

forms a brand concept.

northern europe

Most of OEM’s business activities are in

Sweden but it views northern Europe as its

market. The company is active in Sweden,

Finland, Norway, Denmark, Poland, the

Czech Republic, Slovakia, the Baltic coun-

tries, the UK and Holland. In addition, the

company has a logistics and quality company

in China. While there is great potential for

growth on these markets, new geographical

markets will be constantly evaluated as the

brand concepts are reinforced.

business concept

OEM International is to be a leading player

in industrial trading in northern Europe.

Our product range is to consist of industrial

components and systems from suppliers

that are each specialists in their fi elds.

The operating units are to adapt to the

conditions that apply in each respective

business area, and effectively satisfy the

interests of customers, suppliers, employees

and shareholders.

business loGic

The OEM Group’s operating units serve

as an alternative to the suppliers’ own local

sales organisations. The Group collaborates

with around 300 different suppliers and has

some 20,000 buying customers. OEM is

responsible for marketing and sales of the

products the company trades.

suppliers customers

an alternative to suppliers’

own sales orGanisations

To our suppliers, OEM is a partner that has:

the fi nancial strength to make •

market investments

knowledge of the market in question •

national presence •

To our customers, collaboration with

OEM means:

access to a broad, extensive range of •

products from specialised manufacturers

quick and high delivery capacity via •

effective warehouses

the option to reduce the number •

of suppliers.

in-depth product and application knowledge •

An effi cient logistics apparatus enables us

to adapt purchasing volumes, stock levels

and transport methods for maximum

competitiveness.

Vision, business concept and business logic


Vision, business concept and business logic z oeM annual RepoRt 2007 9

VisionOEM’s broad, extensive product selection

allows the company to customise its offers

to best suit the needs of our customers.

At the same time, suppliers gain access

to customer groups that they themselves

have difficulty reaching.

Group affiliation strenGthens

competitiveness.

Belonging to a group with a clear focus

improves the conditions for the company

to grow. Group affiliation means:

Economies of scale

A centralised infrastructure and administra-

tion contributes to conditions that allow the

operating units to focus on business and

together with group affiliation, facilitates

expansion in new geographical markets.

Coordination

Logistics, range development and

market communication is coordinated

at brand concept level which intensifies

our competitiveness and makes us more

cost effective.

Spurred by each other’s achievements

The business units are regularly com-

pared to foster cross-company learning

and internal ranking lists spurs

better performance.

Opportunities for employees to grow

within the Group

Developing a company means developing

people. As the company develops, career

opportunities are created for employees

both within their present business units

and within the rest of the Group.


Growth

10 oeM annual RepoRt 2007 z gRoWth stRategY

orGanic Growth

OEM’s target is a 10% organic growth.

This will be achieved by:

Developing our product range•

Expanding our market shares•

Focus on developing customer/

supplier relationships, product offers

and service will improve competitiveness

and increase market shares.

Organic growth is evidence of satisfi ed

customers and that what we offer is attrac-

tive to new customers. Another essential

aspect of organic growth involves start-ups

with new suppliers.

Organic growth over time is necessary

to justify our business units.

GeoGraphical expansion

New opportunities for expansion are

created by launching established brand

concepts on new markets.

Over the past years, OEM has set up

operations in the Baltic countries, the

Czech Republic and Slovakia.

OEM uses its presence in markets where

the company already has other business

operations to expand geographically.

acquisitions

Acquisitions are a central part of the

expansion throughout the entire Group’s

development. OEM has both the resources

and the fi nancial backing to continue

to evaluate and make acquisitions. The

requirement for every acquisition is that

it has the potential to evolve positively

within the OEM Group and that our

integration strategy affords both economy

of scale and aggressive initiatives.

acquisitions can be made at

three different levels:

Supplementary acquisitions

A company or product range is incorpo-

rated into an existing business unit.

Complementary acquisitions

A company that fi ts in and is run as an

individual company within Development.

Strategic acquisitions

A brand-new product area with consider-

able sales that becomes a new concept, or

a company in a new geographical market.

Growth strategyGrowth is central for the OEM Group. Our growth strategy is based on three parts: Organic growth, Geographical expansion and Acquisition.


financial taRgets z oeM annual RepoRt 2007 11

the tarGets for one

business cycle are:

15% annual growth in profi t•

20% return on equity•

Equity/assets ratio not lower than 35%•

The strategy to continue to

achieve these goals entails

establishing a balance between

growth and profi ts. Changes in

external factors, fl uctuations in

the economy and acquisition

opportunities are all factors that

mean that the Group must be

prepared at all times to adjust to

new circumstance and willingly

implement changes that make us

more competitive.

Over the last three years, OEM

has realised the following targets:

Financial targetsOEM’s objective is to achieve a good return on shareholders’ equity with limited fi nancial risks during a period of stable growth.

0

10

20

30

2005 2006 2007

25%

15%

1%0

15

30

45

2005 2006 2007

19,7%

32,5%

17,6%

0

25

50

75

2005 2006 2007

62%67%

59%

Growth of profi t Return on shareholders’ equity

Equity/assets ratio

The growth in profi t is calculated minus divestment of the hydraulic segment and real estate property.


12 oeM annual RepoRt 2007 z eMploYees

EmployeesEmployeesOur employees are OEM’s single greatest

asset. We are convinced that when our

employees grow, so does the company.

Consequently, we feel it is important to

create opportunities for our employees

to develop and realise their ambitions.

We reinforce our competitiveness with

cutting-edge expertise. It is our employees

that produce results and build long-term

value for our customers, suppliers and

shareholders.

competence development

To attract and retain qualifi ed employees,

OEM must offer attractive employment

conditions and good opportunities for per-

sonal growth. Investing in our employees’

competence development is also a natural

aspect of our ongoing quality efforts.

Competence development efforts are

primarily conducted by the respective

business units which organise various

types of in-house training programmes.

Needs and preferences are mapped out

through the personal performance dia-

logues held annually between employees

and immediate supervisors. An individual

competence development plan for each

employee is prepared in conjunction

with this evaluation.

recruits and careers

Our ambition is to internally recruit 75%

of our new managers and specialists.

A propensity to change, curiosity and a

goal-oriented approach are characteristics

that ensure our employees an interesting

future and careers. We consider it a

major achievement when we can wish

an employee success in a new position

within the company.

trainee proGrammes

OEM has been running a two-year trainee

programme since 2006. The purpose

is to secure the supply of employees in

key positions and increase the presence

of Swedish executives in our foreign

companies. The programme lays a sound

foundation for a successful career within

the OEM Group.

corporate culture

OEM currently has 26 operating units

comprised of cultures that are infl uenced

by their employees. All units do however

conform to the Group bywords, namely

dedication, openness, goal orientation,

positive attitudes and modesty. It is natu-

ral for us to share our experiences and

knowledge in order to create a learning

and positive climate. The objective is for

employees to feel a sense of job satisfac-

tion, community and security.

Our ambition is to cultivate a strong

sense of commitment in the company

and pride in working at OEM.

We believe that openness between

employees and managers generates

candour and improves the quality of

personal performance dialogues.

Mutual trust is conducive to making

constructive criticism and praise a part

of the day-to-day communication.

leadership

For OEM, leadership is about being a role

model and sharing knowledge and insight.

Defi ning distinct goals and sub-goals

and drawing up individual goals and

plans together with the employees in

order to achieve these goals. The ability

to coach and develop our employees at

an individual level since each employee

has unique needs.

The will to learn and succeed is to serve

as a lodestar for all employees and be

encouraged by the managers. Managers

and employees are mutually responsible

for contributing to a successful corporate

climate. Reciprocal demands are to lead

EmployeesOEM needs skilled, competent employees in order to live up to its vision of becoming a leading player in the industrial trading sector.


to constructive activities that make us

even better partners for our customers.

work environment and health

A good, suitable working environment is

a prerequisite for employee satisfaction

and good performance. OEM encour-

ages its employees to practice a healthy

lifestyle by participating in various fi tness

activities and work with the contracted

preventive healthcare service.

equal opportunities

OEM is active in an industry that

traditionally has an unequal

distribution between men and

women. Most of the women

in the Group work in

fi nance, administra-

tion and market-

ing. Therefore,

we are working

to attract more

female applicants

to male-dominated

positions.

eMploYees z oeM annual RepoRt 2007 13

Employeesto constructive activities that make us

Employeesto constructive activities that make us

0

50

100

150

200

0

50

100

150

200

<25 26-35 36-45 46-55 56-65 (year)

50

235

177

74

33

0

50

100

150

0

50

100

150

<1 1-3 4-7 8-11 >12 (year)

92

172

10191

113

Age distribution (no. of employees)

Period of employment (no. of employees)

Key indicators employees Average no. of employees 569No. of women 123No. of men 446Sick leave person/yr 7Training costs/employee (SEK) 5762Fitness costs/employee (SEK) 1307

factsfacts


Quality, the environment

14 oeM annual RepoRt 2007 z QualitY, the enViRonMent and ethics

OEM’s all-embracing quality policy is that

products and services must meet or exceed

customer expectations. A central aspect of

our quality efforts is a close collaboration

with our customers and suppliers.

To maintain an improvement process re-

quires constant dialogue with our suppliers

on subjects ranging from product quality

and product development to delivery time

and environmental issues. This is essential

toward upholding set quality targets. At the

same time, we must have an intense dia-

logue to follow-up the customer-perceived

quality and, together with our customers,

identify areas for improvement.

the environment

OEM’s environmental policy dictates

continuous efforts to minimise our exter-

nal environmental impact. Environmen-

tal efforts are governed by legal

requirements as well as what is techni-

cally possible and fi nancially feasible.

The aim is to reduce the impact of our

business on the environment in both the

short and long term.

All companies sell components and

systems from manufacturers all over the

world. This means that the greatest im-

pact on the environment stems from:

goods and personnel transports•

the presence of environmentally-•

damaging substances in products

printing and distribution of •

product catalogues

packaging materials•

offi ce heating, lighting and cooling.•

transports and company cars

OEM pressures forwarding agents to aim

for alternative fuel and environmentally-

classifi ed cars. As per the Group’s own

company car policy, only cars classifi ed

in line with Environmental Class 2005

(MK2005) will be supplied. OEM en-

courages choosing ethanol-driven cars.

our supplier requirements

Our customers often ask questions about

whether the products contain substances

that have an impact on the environment.

We review the environmental efforts of

our suppliers when we visit.

Our certifi ed companies have special

routines for supplier reviews.

Quality, the environment & ethics

Our objective is that customers will associate OEM with good products, high delivery assurance, good technical support and a professional, positive reception.


Quality, the environment

QualitY, the enViRonMent and ethics z oeM annual RepoRt 2007 15

printinG and distribution of

product cataloGues

The Group prints and distributes about

50,000 product catalogues and brochures

each year. When purchasing printing

services, we give top priority to environ-

mentally-certifi ed printers. To the greatest

possible extent, OEM strives to print on

environmentally-friendly paper. We will

gradually expand our online product

information, which will reduce the

number of printed catalogues.

ethics

OEM’s business activities are based

on long-term employee, supplier and

customer relationships. The values

of the management and our

employees contribute

to cultivating these relationships.

Consequently, it is vital that ethical

issues are regularly discussed.

One such ethical issue relates to the

certifi cation of factories that OEM col-

laborates with in China. Among other

things, this entails investigating the oc-

currence of child labour. Our day-to-day

business is characterised by respect for

employees and business partners.

iso14001 environmental

certified companies

The following companies have ISO

14001 environmental certifi cation:

OEM Automatic AB

OEM Electronics AB

Internordic Bearings AB

Indoma AB

Telfa AB

iso9001 quality certified

companies

The following companies have

ISO9001 quality certifi cation:

OEM Automatic AB

OEM Electronics AB

Internordic Bearings AB

Indoma AB

Telfa AB

Quality, the environment & ethics


Board of Directors

The Board of Directors of OEM Interna-tional (publ) is comprised of seven regular members and three deputy members elected by the Annual General Meeting.

1 3

2

4

5

6

Six Board meetings were held in

2007, all of which were recorded in

the minutes. The work of the Board

complies with the rules of procedure

adopted by the Board. Once a year,

the principal auditor attends and

reports on the auditing process.

Decisions and the division of

responsibility between the Board and

the Managing Director are regulated

in the written instructions for the

Managing Director. Proposals regard-

ing remuneration to the Board are

presented to the Annual General

Meeting for decision. The Board re-

ceives no bonuses. The amounts and

other benefits are reported in Note 7.

Auditors are nominated and elected

by the Annual General Meeting for a

four-year tenure. The auditors’ work is

invoiced within negotiated price frames.

nomination and

remuneration committee

The Nomination and Remuneration

Committee is comprised of Chairman

of the Board Jan Svensson as well

as Board members Hans Franzén,

Orvar Pantzar and Agne Svenberg.

The Committee nominates members

to the Board and issues guidelines

for remuneration to the Managing

Director. The Board approves remu-

neration negotiated by the Chairman

of the Board and the Managing

Director. The Committee convened

once in 2007.

Remuneration to other members of

Senior Management is determined by

the Managing Director in consultation

with the Chairman of the Board.

16 oeM annual RepoRt 2007 z boaRd of diRectoRs


JAN SVENSSON (1)Born 1956. Chairman of the Board since 2007. Not employed by OEM. Mechanical Engineer and MBA. Other appointments: MED and CEO of Investment AB Latour. Board member Munters AB, Loomis AB, Oxeon AB and Fagerhult AB. Number of shares: 3,000 OEM Class B

HANS FRANZÉN (2)Born 1940. Chairman of the Board 1992-2006. Board member since1974. CEO until 31 Dec 2001. Engineer. Other appointments: Chairman of the Board, Tranås Rostfria AB, TR Equipment AB, Tranås Resebyrå AB, Aqua Safety Wall Asw AB, Linktech AB, Montico AB and Handelsbanken’s regional board in Tranås.Board member, Allt om Bostad i Skandinavien AB, OPIC Com AB, Ovacon AB, Bomarknadsbolaget i Skandinavien AB and IB Medical AB. Number of shares: 707,376 OEM Class A and 639,090 OEM Class B

GUNNAR ELIASSON (3)Born 1951. Board member since 2000.Business Administrator. Not employed by OEM.Other appointments: Chairman of the Board, Oak Capital Group AB, Norden Finansforum AB and Ideo-metrics AB. Number of shares: 21,000 OEM Class B

LARS-ÅKE RYDH (4)Born 1953. Board member since 2004. M.Sc. Engineering. Not employed by OEM. President and CEO of Nefab AB. Other appointments: Handels-banken Region Eastern Sweden and Nolato AB.Number of shares: 3,000 OEM Class B

ULF BARKMAN (5)Born 1957. Board member since 1997. Business Administrator. Not employed by OEM. Number of shares: 42,000 OEM Class B

AGNE SVENBERG (6)Born 1941. Board member since 1974.Managing Director up until 29 February 2000. EngineerOther appointments: Chairman of the Board, EG:s El o Automation AB, Personality Gym AB and ISP AB. Number of shares: 665,400 OEM Class A and 238,530 OEM Class B

ORVAR PANTZAR (not pictured)Born 1939. Board member since 1997. Founder of Cyncrona AB. Engineer. Not employed by OEM. Other appointments: Board member, Next Gen-eration System AB. Number of shares: 1,627,320 OEM Class A and 2,802,360 OEM Class B

DEPUTY BOARD MEMBERSTOMAS FRANZÉN Born 1962. Deputy member since 1997. MD and CEO of Eniro AB. Graduate engineer. Not employed by OEM. Other appointments: Board member, Eniro AB, BTS AB, Securitas Systems AB, Teligent AB and Inspecta OY. Number of shares: 19,500 OEM Class B

INGER SVENBERGBorn 1937. Board member 1974-1997.Deputy member since 1997. Not employed by OEM.Number of shares: 558,000 OEM Class A and 237,456 OEM Class B

JERKER LÖFGRENBorn 1950. Deputy member since 2003. Head Counsel Carnegie Private Banking. Not employed by OEM. No OEM shares.

AUDITOR:KPMG Bohlins AB. Principal auditor: Niklas Bengtsson Authorised Public Accountant

boaRd of diRectoRs z oeM annual RepoRt 2007 17


18 oeM annual RepoRt 2007 z senioR ManageMent

Senior ManagementOEM International’s ambition is to develop the operating units through growth and profitability that surpasses our competitors. In addition to succinct management-by-objectives, this means also implementing a culture and strategy that produces long-term, stable business units.


senioR ManageMent z oeM annual RepoRt 2007 19

Jörgen Zahlin has been the Managing

Director of OEM International since

2000 and is responsible for the company’s

day-to-day management, which includes

all issues not reserved for the Board.

The Managing Director’s decision-

making rights in terms of investments,

corporate acquisitions/divestments and

fi nancing issues are regulated by the

regulations defi ned by the Board.

The Group’s senior management

consists of the Managing Director,

Finance Director and four Directors in

charge of the Group’s largest business units.

Senior Management works to develop the

Group in line with the vision, business

concept and strategy defi ned by the Board.

Governance

The company groups OEM Automatic,

OEM Electronic and Cyncrona have

separate boards over which the Group’s

Managing Director presides as chairman.

These boards are put together based on

the needs of each company group.

The board of an operating unit consists

normally of the business director,

controller and the Managing Director.

Group-wide resources

There are resources within the Group

that work with specifi c Group-wide

functions. The resources cover fi nancial

control, business systems, tele/data

communication, market communication,

quality&, the environment and logistics.

JÖRGEN ZAHLIN (1)Born 1964. Managing Director of OEM International AB as of 1 March 2000. CEO since 1 Jan 2002.Group employee since 1985. Engineer. Number of shares: 171,500 OEM Class B

JAN CNATTINGIUS (2)Born 1955. Finance Director. Group employee since 1985. Economist. Number of shares: 10,000 OEM Class B

URBAN MALM (3)Born 1962. Managing Director of OEM Electronics AB. Group employee since 1983. Engineer. Number of shares: 900 OEM Class B

FREDRIK TENGSTRAND (4)Born 1966. Business Director Development.Group employee since 1991. Engineer. Number of shares: 1,200 OEM Class B

MIKAEL THÖRNKVIST (5)Born 1968. Managing Director of OEM Automatic AB.Group employee since 1990. Engineer. Number of shares: 3,000 OEM Class B

JENS KJELLSSON (6)Born 1968. Foreign Business Director Group OEM Automatic. Group employee since 1990. Engineer. Number of shares: 7,700 OEM Class B

13

4

5

62


Group structure20 oeM annual RepoRt 2007 z gRoup stRuctuRe

Group structureThe Group is organised into four company groups. Three groups are organised according to their distinct brand concepts and one company group, Development, is a collection of other business activities.




OEM ElectronicsAppliance and circuit board components

and EMC/microwave components.


CyncronaProduction systems and components

for electronics production


Cyncrona 12.5%

OEM Electronics 18.4%

(Share of Group sales in %)

OEM Automatic 54.3%

Development 14.8%


Group structuregRoup stRuctuRe z oeM annual RepoRt 2007 21

Company groups Products No. of countries

OEM Automatic Components for industrial automation. 11

OEM Electronics Electronic and electromechanical components 3

Cyncrona Equipment and material for electronics production 5

Development Other business activities 4

OEM ElectronicsAppliance and circuit board components

and EMC/microwave components.


CyncronaProduction systems and components

for electronics production






22 oeM annual RepoRt 2007 z oeM autoMatic

AutomaticThe Group made three acquisitions in 2007.

Crouzet AB contributed about SEK 30

million to the Swedish business sales, while

MPX ApS and Klitsö Prosesstechnic A/S

contribute sales of SEK 17 million and SEK

88 million respectively to the sales in Den-

mark over the whole year. The acquisitions

also offer expansion opportunities in other

geographical markets in terms of products.

Excluding the acquired units, the

group’s reported sales growth is 10%.

Business organisations have been set

up in Latvia, Lithuania and Slovakia as

part of the group’s geographical expansion

plan. Moreover, the group broadened its

collaboration geographically with several

existing suppliers while concurrently

introducing fi ve new suppliers in 2007.

Goals and strateGies

The goal is a growth rate that exceeds

10% per year. OEM Automatic’s growth

strategy is built around organic growth

comprised of greater market shares,

broader supplier partnerships and ven-

tures in new markets.

The strategy is

Strong local market presence with •

face-to-face sales

Coordinate logistics, market communi-•

cation and range development activities.

Enhance the customer offer by expand-•

ing our product range

Represent key suppliers on all markets •

Geographical expansion in northern •

and eastern Europe

BUSINESS ACTIVITIES OEM Automatic sells industrial automation components in eleven markets. Customers include machine and appliance manufacturing industries, wholesalers and strategic end users. OEM Automatic represents some 80 suppliers that are specialists and leaders within their respective fi elds. Marketing is primarily conducted through face-to-face sales where OEM Automatic provides the customer with product and application knowledge.

ProductsComponents for industrial automation within the busi-ness areas of Electrical Machinery, Electrical Cabinets, Safety, Cables, Motors, Pressure & Flow and Pneumatics.

Geographical marketsOEM Automatic has operations in Sweden, Norway, Denmark, Finland, Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia and the UK.

factsfactsSales climbed by 16% to SEK 813 million (698) Profi t rose 4% to SEK 94.6 million (91.0)

54,3%

Share of Group sales

OEM Automatic2007 was yet another record-breaking year during which all business units made positive progress. The completion of three acquisitions coupled with organic growth generated higher sales and profi t.

Effective 2008, OEM Motor AB is part of the OEM Automatic company group. OEM Motor AB is not included in the above sales and profi t fi gures.

0

200

400

600

800

2005 2006 2007

605

813

698

Sales (SEK m)

0

25

50

75

100

2005 2006 2007

74,7

94,691,0

Profi t (SEK m)

0

100

200

300

2005 2006 2007

248

307

270

No. of employees


oeM autoMatic z oeM annual RepoRt 2007 23

Automaticmarkets and customers

Demand has remained sound on all

markets. On the whole, the market for

automation components in Europe is

relatively stable and expected to grow

about 2-3% per year over a business cycle.

Markets in eastern Europe have a growth

rate that exceeds 5%.

As most of our customers have small to

medium-sized volume production, there

is no drastic transfer of production to

low-cost countries.

competitors

Competitors include manufacturers such

as Schneider Electric, ABB and Omron

as well as trading companies such as

Indutrade and Addtech.

Effective 2008, OEM Motor AB is part of the OEM Automatic company group. OEM Motor AB is not included in the above sales and profi t fi gures.

Jens Kjellsson, Business Director Group OEM Automatic and Mikael Thörnkvist, Managing Director OEM Automatic AB


24 oeM annual RepoRt 2007 z oeM electRonics

ElectronicsLower demands on the Swedish market,

particularly from our EMS*customers

caused an overall decline in sales for the

Swedish business unit, dropping from

SEK 253 million to SEK 217 million.

Adjustments to the business and initia-

tives in the business area Keyboard &

Display, which reported a 35% increase

in sales climbing up to SEK 44 million,

helped the company to recover its profi ts

in the fi nal quarter.

New power supply and communica-

tion solution suppliers were introduced

in 2007 generating sound growth within

these fi elds.

The trend for OEM customers has

been positive with higher sales in such

products as LED lighting and displays.

The business units in Finland and Poland

improved sales by 13% and 73% respectively

and both new suppliers and product seg-

ments were launched on these markets.


Our goals include a growth rate that

exceeds 10% per year and to become the

strongest player on the electronic compo-

nents market in northern Europe.

The strategy is:

Strong local market presence with •

face-to-face sales

An organisation distinguished by •

service-mindedness, excellent

applications knowledge and various

types of logistics solutions.

Enhance our customer offer by •

expanding our product range

Streamlining through coordination •

BUSINESS ACTIVITIES OEM Electronics is comprised of three companies active in the sale of electronic and electromechanical compo-nents. Our customers include appliance and electronics manufacturers as well as strategic electronic manu-facturing services (EMS customers) in northern Europe. The company represents some 60 suppliers that are each specialists in their respective fi elds. Marketing is primarily conducted through face-to-face sales where OEM Electronics provides the customer with product and application knowledge alongside logistics solutions.

ProductsAppliance and circuit board components and EMC/microwave components.

Geographical marketsOEM Electronics has operations in Sweden, Finland and Poland.

*) EMS customers = Electronic Manufacturing Services

factsStreamlining through coordination

factsStreamlining through coordination

factsSales amounted to SEK 276 million (307).Profi t amounted to SEK 14.1 million (18.8).

OEM ElectronicsLower demand in Sweden coupled with changes in the prod-uct offer caused sales to drop in 2007. The business units in Finland and Poland report positive growth.

18,4%

Share of Group sales0

100

200

300

400

305

2005 2006 2007

307276

Sales (SEK m)

0,0

7,5

15,0

22,5

30,0

24,7

2005 2006 2007

18,8

14,1

Profi t (SEK m)

0

25

50

75

100

78

2005 2006 2007

85 85

No. of employees


oeM electRonics z oeM annual RepoRt 2007 25

Electronicsmarkets and customers

Manufacturing assignments for EMS

customers is moving from country to

country to a greater extent, which

creates instability in the Nordic

electronics market.

Growth from the Polish business

units continues to be good.

competitors

Competitors include both the major,

global component distributors Arrow

and Avnet, as well as industrial trading

companies such as Addtech, Lagerkrantz

Group and Elektronikgruppen. Moreover,

manufacturers’ own sales companies rank

among our competitors.

*) EMS customers = Electronic Manufacturing Services

Urban Malm. Business Group Director OEM Electronics.


Cyncrona

26 oeM annual RepoRt 2007 z cYncRona

Sales fi gures in Finland dropped by SEK

68 million after the company’s largest

customer started working on commission

and the number of equipment orders

were fewer than in previous years.

After a period of low demand in Sweden

and Denmark, several deals were settled

in these markets. Demand in Norway and

the Baltic countries is still very good.

The material for PCB manufacturing

product area was divested in 2007. Measures

to adapt the organisation to lower sales were

carried out the second half of the year.

Cyncrona’s largest supplier, Fuji,

launched a new piece of equipment

(the XPF) that has created new business

opportunities. A partnership has been

established with Omron, the leading

inspection equipment supplier in the

world. This partnership resulted in new

business valued at about SEK 5 million.

We took over representation for Fein-

focus, the leading x-ray equipment com-

pany in the Nordic region, which means

about SEK 8 million in additional sales.

As of 2008, the Swedish business unit

manages warehouses and logistics for the

entire Group. Each country organisation

is in charge of sales on their own markets

and product specialists are on stand-by to

support all markets.

Each country organisation has its own

support staff and, depending on work-

load and need for expertise, the support

organisation can work in other countries.


Cyncrona is to be the leading distributor

of equipment, support and material for

BUSINESS ACTIVITIES Cyncrona is comprised of fi ve companies that sell electronics production equipment and material. Cyncrona represents some 20 leading suppliers, each of which are specialists in their fi elds. Support is a signifi cant aspect of our business activities and includes training, installation, start-up and service. Marketing is primarily conducted through face-to-face sales where Cyncrona supplies the customer with product and application knowledge.

ProductsProduction equipment, support and electronics production material.

Geographical marketsCyncrona has operations in Sweden, Finland, Denmark, Norway, Estonia, Latvia and Lithuania.

factsfactsSales amounted to SEK 188 million (245).Profi t amounted to SEK 3.6 million (14.2).

CyncronaSignifi cant decline in sales and over-reliance on a major customer in the Finnish market caused the Cyncrona companies’ profi t to drop in 2007.

12,5%


100

200

300

2005 2006 2007

284

245

188

Sales (SEK m)

0

5

10

15

20

2005 2006 2007

18,5

14,2

3,6

Profi t (SEK m)

0

20

40

60

80

2005 2006 2007

595557

No. of employees


Cyncronaelectronics production in the Nordic and

Baltic countries. Our ambition is to even-

tually achieve a 7% profi t margin over

7% through a streamlined organisation

and strong product offer. Local presence

will create strong customer relations and

Group-wide resources promise a high

level of effi ciency.

markets and customers

Demand on the Finnish market was low

in general in 2007. Other Nordic markets

and the Baltic countries report stable

demand. Our belief is that demand will

be on par with last year throughout 2008

and we plan for higher profi tability with

retained sales levels.

competitors

Cyncrona competes primarily with such

manufacturers as Siemens and Mydatafor

surface-mounting equipment and with

a handful of local distributors, including

Scanditron, HIN and Sincotron for other

parts of the product range.

Pictured left to right: Lassi Peurakoski, Cyncrona Finland, Clas Kagerup, Cyncrona Sweden and Kjell Gunnar Koppangen, Cyncrona Norway cYncRona z oeM annual RepoRt 2007 27


DevelopmenDevelopment is comprised of business

units that are in various stages of growth

and aim to either evolve into a strong

brand concept or be modifi ed to merge

with another business unit. The group

constantly evaluates opportunities for ac-

quisitions within affi liated product areas,

but also within brand new product areas.

telfa

Sales climbed by 6% to SEK 50 million.

The phase out of product area fi lling

machines had a negative impact on sales in

the range of SEK 3 million. Several new

suppliers were added in 2007, including

Milton Roy, world leader in volume

pumps, SAER in the fi eld of water treat-

ment and Flojet, maker of small process

pumps. The new suppliers have had a

marginal impact on the year’s sales fi gures.

indoma


Efforts to increase the company’s business

dealings with engine builders and reduce

the share of aftermarket helped to improve

profi tability. The company is gaining

market shares and reports strong growth

among its OEM customers.

oem motor


Sales of almost SEK 4 million were gained

in conjunction with the Crouzet acquisi-

tion. Other growth stems from growing

market shares.

Collaboration gradually intensifi ed

with company group OEM Automatic’s

units that are active in the motor segment.

BUSINESS ACTIVITIES Development is comprised of business units that are in various stages of growth and aim to either evolve into a strong brand concept or be modifi ed to merge with another business unit. The group constantly evaluates opportunities for acquisitions within affi liated product areas, but also within brand new product areas.

ProductsPumps, seals, roller bearings, slide bearings and plain bearings, as well as motors and transmissions.

Incorporated unitsTelfa, Indoma, OEM Motor, Internordic Bearings and IBEC.

factsfactsSales climbed by 4% to SEK 221 million (213)Profi t rose 18% to SEK 15.4 million (13.0)

DevelopmentCompany group Development boosted both sales and profi t due to a sound demand and streamlining initiatives.

14,8%


50

100

150

200

250

162

2005 2006 2007

213 221

Sales (SEK m)

0

5

10

15

20

8,4

2005 2006 2007

13,0

15,4

Profi t (SEK m)

0

25

50

75

100

83

2005 2006 2007

104 107

No. of employees

28 oeM annual RepoRt 2007 z deVelopMent


DevelopmenAs a result, the company is part of OEM

Automatic company group as of 2008.

internordic

Sales amounted to SEK 85 million,

which is on par with last year.

Gross margin rose in both Sweden

and Finland. Both business units

were reorganised in 2007 and

more resources were allocated to

marketing activities.

ibec

Sales fell from SEK 33 million to SEK

26 million. The decline in sales is due

to lower sales to customers in Central

Europe. This is in line with the com-

pany’s strategy to focus on the Nordic

region. Better gross margin and higher

effi ciency mean stronger profi ts.

IBEC’s function is to supply Internordic

companies will ball bearings via a quality

and logistics center in China.

Fredrik Tengstrand, Business Group Director Development

deVelopMent z oeM annual RepoRt 2007 29


Husqvarna’s robot mower conquers

Europe. Over the past years, sales have

climbed by 50 per cent each year.

”Obviously, this is a very satisfying

trend,” says Patrik Jägenstedt, head of

development for automatic lawnmower

at Husqvarna. People appreciate con-

venience. Success breeds success and

when someone in the neighbourhood

buys an Automower, it spurs the interest

of the neighbours.

“The grass is always perfectly cut and

there’s no cuttings to gather since the

Automower cuts regularly. It also automati-

cally recharges the batteries when needed.

oem onboard from the start

The growth in sales means increasingly

larger orders to OEM Electronics, sup-

plier to Husqvarna since the very first

automatic lawnmowers were designed.

“We initially bought the keyboard

via OEM Electronics,” explains Patrik

Jägenstedt. They represented the Chinese

company ECW, which is a major manu-

facturer. Since the keyboard is always

custom made it was essential that we had

a supplier who could contribute their

expertise and take part in our require-

ments specification. Quality and

delivery accuracy is assured

since OEM Electronics has

its own staff on site in

Chine,” says Patrik Jä-

genstedt, Husqvarna.

expanded

partnership

As of the past two years,

OEM Electronics also

supplies displays

to Husqvarna.

”We receive deliveries from the manufac-

turer Tianma via OEM. This is another

instance where OEM’s presence in China

is critical, should any problems arise.”

The products are shipped from China

and stored at OEM Electronic’s central

warehouse in Tranås, Sweden. From there

they are shipped to northern England

where the mowers have been assembled

the past two years. They were previously

OEM Electronics – important partners for Husqvarna’s robot mower

Husqvarna was the first company to develop a fully automatic lawnmower. Husqvarna Automower™ was released in 1998 and today, increasingly more people use lawnmower robots to care for their lawns all over Europe.

Patrik Jägenstedt, head of development for auto-matic lawnmowers at Husqvarna.

30 oeM annual RepoRt 2007 z oeM electRonics – an iMpoRtant paRtneR


oeM electRonics – an iMpoRtant paRtneR z oeM annual RepoRt 2007 31

assembled in the Swedish cities of

Huskvarna and Ödeshög.

the riGht partner

for the chinese market

The partnership with OEM Electronics

has evolved positively over the years.

When Husqvarna moves on and designs

a hybrid alternative of Automower,

OEM Electronics is a given partner.

“OEM Electronics has the expertise we

need to access the right products from

China,” comments Patrik Jägenstedt.

Insight into the market and the possibi-

lities there is valuable in our design and

development efforts.

husqvarna an important customer

“Husqvarna is a partner with whom we

have developed a very positive partnership

over the years. Our expertise helps

Husqvarna to further develop their

innovative proucts,” says

Fredrik Simonssonhead of

sales at OEM Electronics AB.

OEM Electronics – important partners for Husqvarna’s robot mower

“Quality and delivery accuracy is assured since OEM Electronics has its

own staff on site in Chine,” says Patrik Jägenstedt, Husqvarna.


32 oeM annual RepoRt 2007 z positiVe path foR telfa

“Pumps are the world’s second largest

industrial commodity, second to electric

engines,” explains Managing Director

Mats Björkner. There are about 40 com-

panies in Sweden that are distributors of

pumps and combined, these companies

have about SEK 1.3 billion in sales. If we

include around a dozen pump manu-

facturers, the industry’s total sales figure

lands at between SEK 5 and 6 billion.

Telfa is one of the larger distributors

on this market. A strategic decision was

taken in 2007 to focus the business on

pumps alone.

limited market

“Filling machines were previously

another leg of our business,” says Mats

Björkner. “That market is restricted and

becoming more and more automated.

Major investments in new research and

development are needed to continue

working with filling machines. It also

required substantial internal resources

from the organisation in the form of

assembly, warehousing, trial runs, sales

overheads, after-sales service and marketing.”

in what should we invest?

To generate growth in Telfa while

retaining or improving profits, alterna-

tives were evaluated in terms of the

company’s capacity, growth potential and

margins on the available alternatives.

After the evaluation, Telfa faced the

decision to develop the concept with

filling machines or broaden its product

portfolio within the industrial segment

and focus on pumps.

After considering the margins, growth

potential and risks, the decision was taken

to invest in pumps, primarily against the

industrial segment. The filling machines

were phased out during the summer 2007.

stronG Growth potential

“The pump sector is big and we saw

growth potential by taking market shares

from other companies in the sector,”

says Mats Björkner.

“The existing product range (2006)

offered few options to cultivate growth

within the industrial pumps segment.

We needed to expand our collection.

Among other things, we lacked volume

Focus on pumps a winning path for Telfa

Telfa in Göteborg sells pumps and motor-driven pump units from market- leading manufacturers. The customers are engine builders and end users in the marine, automotive and process industries.

Mats Björkner, Managing Director Telfa


positiVe path foR telfa z oeM annual RepoRt 2007 33

pumps, a competitive supplier for larger

process pumps and a supplier of smaller

pumps for engine builders sold i larger

volumes.

what was the outcome?

Telfa succeeded in signing exclusive

agreements with the following suppliers

in 2007:

Milton Roy (Volume pumps) •

World leader with a 15% market share

Saer (Process pumps) •

One of Europe’s leading players

Flojet (Small OEM pumps) •

World leader in small diaphragm

pumps

Albin Pump (AOD pumps) •

Air-driven diaphragm pumps based on

their own patented design

With these new products, Telfa is a

complete pump supplier in the industrial

segment, well on par with the very best

in standard pumps and in the vanguard

in several areas where our rivals lack

competitive alternatives.

harvest 2008

Sales rose by about SEK 2.5 million in

2007 although the filling machines were

phased out.

“We devoted a great deal of energy to

finding new suppliers and presenting this

to our customer groups in 2007,” says

Mats Björkner.

“Hopefully, we will begin to reap the

fruits of our efforts in 2008 and thereafter.

Telfa is now well equipped to satisfy

the strategically important customers’

needs and has thereby improved the

prerequisites for growth and profitability

long term.

“We are also an attractive partner for our

suppliers. We find ourselves in a positive

upward spiral,” Mats Björkner concludes.


34 oeM annual RepoRt 2007 z oeM autoMatic stRengthens its position

Crouzet’s range of products include time

relays, control relays, micro plc, small

motors, motor controls and

position indicators.

“We realise a number of obvious advan-

tages,” comments Mikael Thörnkvist,

Managing Director of OEM Automatic

AB. We have created a mutual, strong

and efficient distribution chain for the

entire Nordic market which reinforces

our position even more. We can pick

up the pace in terms of marketing and

launches to secure

more market shares for Crouzet’s range.

At the same time, we gain a closer

collaboration with Crouzet’s parent

company Crouzet Automatismes SAS.

lonG history

OEM Automatic has been the market

leader in the Nordic countries for more

than 30 years in the product seg-

ment, starting as representative

for former Syrelec. When

Syrelec was acquired by

Crouzet’s parent compa-

ny, OEM International

decided to buy 50% of

Crouzet AB in 1994.

The organisations

have thereafter partially

worked in parallel with

the same products on

the markets.

“The purchase of Crouzet reinforces our position even more”

OEM International AB acquired the remaining 50 per cent of the shares in Crouzet AB from Crouzet Automatismes SAS in 2007. Crouzet AB is thereby wholly owned and incorporated in OEM Automatic.


oeM autoMatic stRengthens its position z oeM annual RepoRt 2007 35

muscles for the future

“By taking over Crouzet AB, we can

concentrate all our energy and use our

muscles to move forward,” says Mikael

Thörnkvist. “Our offer to our customers

will be more succinct.”

“Discussions about how our companies

can together generate customer benefits

have been underway for some time.

We’ve reached an agreement that benefits

all involved. We will be aggressive in our

marketing throughout the Nordic region,”

Mikael Thörnkvist says in closing.

The acquisition of MPX Electra Aps gives OEM Automatic direct access to a generous selection of industrial batteries, including those from world-lead-ing manufacturer, Yuasa. MPX was incorporated in OEM Automatic Denmark as a new product area.

We gain a strong platform in Denmark with MPX now a part

of OEM Automatic Denmark and can also there boost our

total sales. We also see distinct synergies in our common

customer approach in Denmark.

”We were already representing Yuasa in Sweden and

Finland,” says Mikael Thörnkvist, Managing Director of OEM

Automatic AB. The acquisition means that our customers in

Sweden, Finland and the Baltic countries have access to a

broader product range and more resources in the form of

better market support.

For OEM Automatic, the acquisition means a new aggressive

approach with the ambition of becoming one of the leaders in

industrial batteries the Nordic and Baltic markets. Coordinat-

ing the range, logistics and marketing communication makes

cost-saving initiatives possible.

In total, OEM Automatic has an attractive supplier structure

with a generous product range within cyclical and high

performance batteries. This enables us to approach customers

within the marine, telecom and caravan sectors.

”We have formed special ”battery teams” in Denmark,

Sweden, Finland and the Baltic countries. They have been

assigned the task of expanding our market,” explains

Mikael Thörnkvist. By extension, we also predict excellent

opportunities to expand on more markets, with Norway

and Poland as the most interesting targets.

MPX Electra ApS (MPX) was founded in 1984 by

Frank Birch, one of the people who introduced Yuasa

on the Scandinavian market around the end of the

1970s. The company has steadily added to its collection

ever since and has a broad range of industrial batteries.

“The purchase of Crouzet reinforces our position even more”

Charging to become Nordic and Baltic market leader in batteries

Mikael Thörnkvist, Managing Director of OEM Automatic AB


36 oeM annual RepoRt 2007

Financial reportingFinancial reporting


ial reporFinancial reporting

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007 37

Five year Group summary ........................................38

Key indicators for the last five years ..........................39

Directors’ report ....................................................40-41

FINANCIAL REPORTS — THE GROUP

Income statement ......................................................42

Balance sheets ......................................................43-44

Changes in shareholders’ equity................................45

Cash flow statement ..................................................46

FINANCIAL REPORTS — PARENT COMPANY

Income statement ......................................................47

Balance sheets ......................................................48-49

Changes in shareholders’ equity................................50

Cash flow statement ..................................................51


and financial statements ..................................52-80

Proposed allocation of profits ....................................81

Auditors’ report ..........................................................82

OEM2008_del2_ENG_OK 08-04-22 09.19 Sida 37

38 OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING

FIVE-YEAR GROUP SUMMARY SEK M

FROM THE INCOME STATEMENT 2007 2006 2005 2004 2003

Sweden 890.9 848.6 801.4 900.5 950.3

Overseas 578.6 586.3 557.4 497.6 467.1

Total amount invoiced 1 469.5 1 434.9 1 358.8 1 398.1 1 417.4

Operating income before depreciation and impairment 151.8 140.2 121.7 108.8 92.3

Depreciation and impairment -14.8 -13.5 -12.6 -21.7 -37.0

Income from financial items 2.1 -0.2 2.2 1.1 -2.9

Participation in associated companies - 1.0 1.3 1.1 1.0

Profit before tax 139.1 127.5 112.6 89.3 53.4

Tax -38.3 -36.7 -31.0 -25.7 -21.9

Group profit for the year fromremaining units 100.8 90.8 81.6 63.6 31.5

Profit from divested business unit 2.0 90.8 7.2 - -

Group profit for the year 102.8 181.6 88.8 63.6 31.5

FROM THE BALANCE SHEET

Intangible fixed assets 46.7 20.5 18.2 10.3 15.6

Property, plant and equipment 160.2 139.6 122.5 136.1 125.5

Financial assets and

deferred tax claims 9.0 11.3 14.2 20.5 17.9

Inventories 255.2 214.6 218.2 205.9 230.9

Current receivables 295.1 279.2 241.0 228.6 198.9

Available-for-sale assets 7.1 - - - -

Cash equivalents 127.0 288.5 150.0 111.0 52.7

Total assets 900.3 953.7 764.1 712.4 641.5

Shareholders’ equity 530.1 640.7 477.9 424.9 391.1

Long-term liabilities 41.9 35.9 30.5 41.1 24.8

Current liabilities 328.3 277.1 255.7 246.4 225.6

Total shareholders’ equity and liabilities 900.3 953.7 764.1 712.4 641.5

In the above five-year summary and the key indicators for the past five years, the period between 2007

and 2004 is reported in line with IFRS while 2003 is reported in line with Swedish GAAP.

Adjustments have been made for 2003 for goodwill and component depreciation to ensure consistency with IFRS.

The five-year summary and key indicators for 2007-2005 are adjusted for divested business units in line with IFRS 5.



KEY INDICATORS FOR THE LAST FIVE YEARS

OEM GROUP 2007 2006 2005 2004 2003

Net sales SEK m 1 482 1 448 1 366 1 406 1 428

of which overseas % 39.7 41.2 41.1 35.6 32.9

Group’s profit before tax SEK m 139.1 127.5 112.6 89.3 53.4

from remaining business units

Group profit for the year SEK m 102.8 181.6 88.8 63.6 31.5

Earning capacity of total capital % 15.7 15.2 15.8 13.8 8.1

Earning capacity of capital employed % 22.0 21.2 23.1 20.6 11.9

Earning capacity of shareholders’ equity: % 17.6 32.5 19.7 15.4 7.8

Average interest payable % 4.2 5.8 3.4 4.4 2.2

Debt/equity ratio times 0.16 0.10 0.12 0.12 0.10

Operating income/sales % 10.2 9.7 8.9 7.5 6.5

Profit percent % 9.8 9.0 8.5 6.7 3.9

Profit margin % 9.4 8.8 8.4 6.4 3.7

Capital’s turnover rate times/yr 1.65 1.52 1.79 1.97 2.23

Sales/employee SEK m 2.6 2.7 2.8 2.5 2.2

Equity/assets ratio: % 58.9 67.2 62.5 59.6 61.0

Cash flow from operations SEK m 44.3 113.4 74.1 92.9 131.0

Quick ratio % 131 205 153 138 112

Earnings per share before dilution** SEK 4:43 7:84 3:83 2:74 1:29

Earnings per share after dilution*** SEK 4:43 7:81 3:81 2:72 1:28

Earnings per share before dilution** *** SEK 4:34 3:92 3:52 2:74 1:29

Earnings per share after dilution** *** SEK 4:34 3:90 3:50 2:72 1:28

Average no. of shares*** thousands 23 169 23 169 23 169 23 217 24 417

Average number of shares after dilution *** thousands 23 169 23 268 23 289 23 337 24 498

Shareholders’ equity per share* *** SEK 22:88 27:65 20:62 18:34 16:02

Earnings per share excl. repurchased shares***SEK 4:43 7:84 3:91 2:80 1:38

No. of shares excl. repurchased*** thousands 23 169 23 169 22 707 22 707 22 809

Proposed dividends*** SEK 3:00 2:83 2:33 1:83 1:50

Quoted price as per 31 December*** SEK 42:90 63:00 54:50 39:33 34:00

P/E ratio times 9.7 8.0 14.2 15.9 26.4

P/E ratio** times 9.9 16.1 15.5 15.9 26.4

Direct return % 7.0 4.5 4.3 4.7 4.4

No. of employees No. 569 531 494 571 636

Salaries and remuneration SEK m 189 175 162 184 197

*Shareholders’ equity per share = visible equity per share.

** Remaining business units

*** The key indicators are corrected for the 4:1 share split and automatic redemption of each fourth share carried out Q4 2007.

Prior periods have been adjusted with a factor of 3 since the financial implication of the transaction is a 3:1 split combined

with an extra dividend.



The Board and the Managing Director of OEMInternational AB (publ), corporate identity num-ber 556184-6691, hereby submit the AnnualReport and the consolidated financial statementsfor the 2007 financial year. The Annual Reportand the consolidated financial statements, includ-ing for the auditors’ report cover pages 37-82.

BUSINESS ACTIVITIESOEM International AB is represented via itssubsidiaries in the Nordic countries, as well asin the UK, Poland, the Czech Republic, theNetherlands and Estonia, Latvia, Lithuania andSlovakia. OEM is an industrial trading Groupoperating primarily in northern Europe.

Our product range consists of industrialcomponents and systems from suppliers thatare each specialists in their fields. Our product range spans from basic mechani-cal components such as seals and couplingsto complete production systems for circuitboards, for instance. OEM’s broad, extensiveselection allows the company to customise itsoffers to best suit the needs of our customers.We constantly expand our range by addingnew products and discontinuing or replacingunprofitable products.

Each company markets a clearly definedproduct range which, coupled with the addedvalue of the organisation, forms a brand con-cept. The brand concepts are launched on newgeographic markets as they grow in strength.

In 2007, the Group was organised into four com-pany groups/business segments: OEM Automatic,OEM Electronics, Cyncrona and Development.

NET SALES AND PROFIT The Group’s net sales amounted to SEK 1,482million (1,448) for the remaining business units,marking an increase of 2%. This figure alsoincludes SEK 43 million in acquired net sales.Profit before tax rose 9% to SEK 139.1 million(127.5). The year’s profit after tax for theremaining business units totalled SEK 100.8million (90.8), an increase of 11%. This corre-sponds to SEK 4.34 (3.92) per share.

The Group’s hydraulics unit was divested in 2006with the result of the sale contributing an additionalSEK 2 million (90.8) after tax. This is reported in a sep-arate row in the consolidated income statement.

The year’s profit after tax including divestedbusiness units totalled SEK 102.8 million (181.6).Earnings per share reached SEK 4.43 (7.84).

OEM AUTOMATICSales climbed by 16 % to SEK 813 million(698). The group made three acquisitions in2007, namely Crouzet AB, MPX ApS and Klit-sö Processtechnic AS. The acquisitions’ con-tribution to net sales for 2007 amounts to SEK43 million, meaning that the group’s net salesrose by 10% excepting the acquisitions. On awhole year basis the acquisitions contributenet sales of about SEK 130 million. Profitbefore tax rose 4% to SEK 94.6 million (91.0).Business organisations have been set up inLatvia, Lithuania and Slovakia as part of the

group’s geographical expansion plan. Moreover,the group broadened its collaboration geo-graphically with several existing suppliers whileconcurrently introducing five new suppliers in2007.

OEM ELECTRONICSNet sales dropped to SEK 276 million (307).Lower demand in general in Sweden coupledwith changes in the product offer caused thedecline in sales. The business units in Finlandand Polen report positive growth for 2007. Profitbefore tax dropped to SEK 14.1 million (18.8).

Capacity adjustment measures were imple-mented in the Swedish unit in the autumn.New power supply and communication solu-tion suppliers were introduced in 2007 andvarious activities carried out within the Key-board & Display business area.

CYNCRONANet sales amounted to SEK 188 million (245).Profit before tax dropped to SEK 3.6 million (14.2).Sales figures in Finland dropped by SEK 72 millionafter the company’s largest customer startedworking on commission and the number of equip-ment orders were fewer than in previous years.

After a period of low demand in Sweden andDenmark, several deals were settled in thesemarkets. Demand in Norway and the Balticcountries is still very good. Measures to adaptthe organisation to lower sales were carriedout the second half of the year.

DEVELOPMENTCompany group Development boosted bothsales and profit due to a sound demand andstreamlining initiatives. Net sales climbed by4% from SEK 213 million to SEK 221 million.Profit before tax rose 148% from SEK 13.0 million to SEK 15.4 million.

Development is comprised of business unitsthat are in various stages of growth and aim toeither evolve into a strong brand concept or bemodified to merge with another business unit.The group constantly evaluates opportunitiesfor acquisitions within affiliated product areas,but also within brand new product areas.

PROFITABILITY, FINANCIAL POSITIONAND CASH FLOW Return on capital employed was 22% (21.2)and return on equity was 17.6% (32.5). The Group’s equity/assets ratio at year-endwas 58.9 % (67.2). Shareholders’ equity pershare was SEK 22.88 (27.65). Cash equiva-lents and unutilised credit commitments in theGroup amounted to SEK 315 million (495) atthe turn of the year. Cash flow from currentoperations totalled SEK 44.3 million (113.4).After net investments of SEK 10.6 million(31.9), as well as amortisation, new loans, paiddividends and redemption of shares for a totalof SEK 220.9 million (-4.8), the year’s cash flowwas SEK 166.0 million (140.5).

Investments in the Group during the yearamounted to SEK 16.0 million (15.3) in

machinery and equipment, SEK 16.0 million(25.8) in buildings, and SEK 28.4 million (11.1)in other intangible fixed assets.

GROUP CHANGESOn 2 January 2007, OEM acquired the remain-ing 50% of the shares in Crouzet AB, namechanged to OEM Control AB, for EUR 0.6 mil-lion in cash. The company trades in automationcomponents. The business has been integratedinto OEM Automatic AB and OEM Motor AB.The acquisition means an annual increase insales of about SEK 30 million but had aninsignificant impact on the Group’s profits in2007.

On 1 September 2007, OEM acquired 100% ofthe shares in MPX Elektra ApS in Denmark forDKR 4 million. The company trades in a broadselection of industrial batteries for the Danishmarket. The acquired unit contributes sales ofSEK 7.7 million and profit before tax of SEK 0.4million for the 1 September to 31 December peri-od. Had the acquisition occurred as per 1 Janu-ary, impact on the Group’s sales would havebeen SEK 16.7 million and profit SEK 1 million.

On 10 December 2007 OEM acquired 100%of the shares in Klitsö Processtechnic A/S inDenmark for DKR 28.2 million plus a maximumDKR 6 million in additional purchase price. The company trades in valves and pneumaticsystems for Danish industrial customers primari-ly. Klitsö Processtechnic A/S represents severalimportant suppliers for the OEM Automaticgroup, which generates significant synergyeffects. The acquired unit contributed sales ofSEK 5.5 million and profit before tax of SEK 0.2million. Had the acquisition occurred as per 1January, impact on the Group’s sales wouldhave been SEK 87.8 million and profit SEK 5.6million. More information about the acquisitionsis presented in Note 5. Legal companies wereformed in Latvia, Lithuania and Slovakia in 2007.

Restructuring of the Group is still in progress.The objective is to achieve a simpler, more dis-tinct legal Group structure through fusions andvoluntary liquidations. Dormant companiesHydroprodukter International i Ängelholm ABand OEM Ejendomsselskab A/S were eliminat-ed from the Group in 2007.

EMPLOYEESThe number of employees at year-end was595 (532). The year’s acquisitions contributedan addition 32 (10) employees. The averagenumber of employees in 2007 was 569, com-pared with 531 during the previous financialyear. More detailed information is provided inNote 7 and on pages 12-13, “Employees”.

GUIDELINES FOR REMUNERATION TOSENIOR MANAGEMENTThe policies for remuneration to senior man-agement adopted at the 2007 Annual GeneralMeeting are described in Note 7. The Board’sproposed policies for remuneration to seniormanagement to be presented at the 2008Annual General Meeting is that corporate man-

DIRECTORS’ REPORT



agement apply market salaries and otherremuneration terms. In addition to a base salary, management can also receive variableremuneration which can amount to a maximum50% of the basic pay. Senior executives are tohave defined contribution pension terms thatare adjusted to market conditions and amountto a maximum 25% of the basic pay. All share-related incentive schemes are to be resolved bythe Annual General Meeting. The level of remu-neration coincides basically with previous yearsexcept for the fact that the defined contributionpension terms have been altered from a maxi-mum 20% to a maximum 25% of basic pay.The period of notice will not exceed 24 monthsand involves the obligation to work during theperiod of notice. No employment agreementsmay contain conditions for severance pay.

RISKS AND RISK MANAGEMENTOEM’s results and financial position as well asits strategic position are affected by a numberof internal factors over which OEM has controland a number of external factors where theopportunity to influence the chain of events islimited. The most important risk factors includethe economic situation combined with struc-tural changes, the situation in terms of compe-tition and exchange rate trends. Furthermore,OEM is affected by financial risks such astransaction exposure, translation exposure,financing risk, interest rate risk as well as creditand third-party risks. A description of the finan-cial instruments and how OEM manages thefinancial risks is presented in Note 26.

RESEARCH AND DEVELOPMENTThe Group does not conduct any research anddevelopment of its own. R&D is mainly con-ducted at our suppliers, using informationabout market demands that we provide.

ENVIRONMENTAL IMPACTThe Group had no operations that require reg-istration under the Swedish EnvironmentalCode in 2007. The Group’s greatest impact onthe environment stems from goods and per-sonnel transports, the presence of environmen-tally-damaging substances in products, printingand distribution of product catalogues, packag-ing materials and office heating, lighting andcooling. The OEM Group’s environmental policydictates continuous efforts to minimise ourexternal environmental impact. Environmentalefforts will be governed by legal requirementsas well as what is financially feasible, technicallypossible and ecologically justified. The aim is toreduce the impact of our business on the envi-ronment in both the short and long term.

SHARES AND OWNERSHIP STRUCTURE, ETC

OEM SHARESThe company has 23,169,309 shares dividedamong 4,767,096 Class A shares and 18,402,213Class B shares. One Class A share represents ten

votes and one Class B share represents one vote.The face value per share is SEK 1.67.

REPURCHASE OF OWN SHARESWith the objective of improving the Group’s returnon shareholder’s equity and earnings per share,OEM International AB has an authorisation grant-ed to the Board of Directors by the Annual Gener-al Meeting, to repurchase its own shares. TheAnnual General Meeting’s authorisation for therepurchase of shares extends to 10% of the totalnumber of shares, that is, 2,316,690 shares.

The company did not repurchase any sharesin 2007 and at year-end, the company held nocompany shares.

SHARE SPLIT AND REDEMPTION PROCESSTo facilitate trading of company shares and alterthe company’s capital structure, the AnnualGeneral Meeting decided to carry out a 4:1share split combined with an automaticredemption procedure. This was carried out in2007 and gave the shareholders three newshares and one redemption share. Theredemption share was redeemed at SEK 20 pershare and a total of SEK 154 million was paid tothe shareholders for redeemed shares. The keyindicators are corrected with a factor of 3 sincethe financial implication of the transaction is a3:1 split combined with an extra dividend.

OTHERThe Board of Directors is appointed by theAnnual General Meeting. The Articles of Asso-ciation include pre-emption clause that meansif Class A shares are transferred from oneshareholder to another shareholder in the com-pany, or to someone not previously a share-holder in the company, the shares are to beoffered immediately to the other holders ofClass A shares for redemption through a writ-ten application to the company’s Board. If thecompany decides to issue new shares of ClassA and B through cash issue or set-off, theowners of Class A and B shares have prefer-ential right to subscribe for new shares of thesame type.

Notification of the Annual General Meetingand extraordinary meeting that will address thematter of changes in the Articles of Associationis to be issued no earlier than six and no laterthan four weeks from the date of the Meeting.

At year-end, there were four owners whothrough direct or indirect ownership represent atleast one tenth of the voting rights for all shares inthe company, namely Orvar Pantzar 28.9%, HansFranzén and family 21.5%, Agne Svenberg andfamily 19.2% and Investment AB Latour 11.3%.

Severance pay is not included in the employ-ment conditions and notice of termination for theManaging Director is 24 months and a maximum12 months for the rest of senior management.

THE BOARD OF DIRECTORS AND ITS WORKOEM International’s Board of Directors is com-prised of seven regular board members and

three deputies elected by the Annual GeneralMeeting. The members are presented onpages 16-17. Six Board meetings were held in2007, all of which were recorded in the minutes as well as a Board meeting following election. The work of the Board complies withthe rules of procedure adopted by the Board.Once a year, the principal auditor attends andreports on the auditing process.

Decisions and the division of responsibilitybetween the Board and the Managing Directorare regulated in the written instructions for theManaging Director. The Nomination and Remu-neration Committee is comprised of Chairmanof the Board Jan Svensson as well as Boardmembers Hans Franzén, Orvar Pantzar andAgne Svenberg. The Committee nominatesmembers to the Board and provides guidelinesfor remuneration to the Managing Director. The Committee convened once in 2007.

PARENT COMPANYThe Parent Company is to be an active ownerand develop the subsidiaries. In addition tosuccinct management-by-objectives, thismeans also contributing expertise andresources in the fields of IT, financial control,HR administration, market communication, quality and environmental control as well aswarehouse management.

The Parent Company’s sales amounted toSEK 42.7 million (41.3). Of this, SEK 42.5 mil-lion (39.3) relates to sales to subsidiary compa-nies. Profit before appropriations and taxamount to SEK48.2 million (105.9). Of theyear’s profit, SEK 1 (101.5) million stems fromthe sale of shares in JMS Systemhydraulik ABand Fastighets AB Hydraulen.

In regard to non financial information andfinancial risk management, the Group’s infor-mation also refers to the Parent Companywhere applicable.

PROPOSED DIVIDENDThe Board of Directors proposes that the divid-ed be raised from SEK 2.83 to SEK 3. Thecomplete proposal for profit allocation is pre-sented on page 81.

FUTURE DEVELOPMENTSOEM’s objective is to achieve a good return onshareholders’ equity with limited financial risksduring a period of stable growth. The targetsfor one business cycle are 15% annual growthin profit, 20% return on equity and anequity/assets ratio not lower than 35%.

With its market position, organisation and finan-cial position OEM is well equipped for continuedexpansion. Growth will be realised through organicgrowth, geographical expansion and acquisitions.

The figures for 2006 are in parenthesis.



CONSOLIDATED INCOME STATEMENT SEK m

Note 2007 2006

OPERATING INCOME

Net sales 2 1 482.2 1 447.9

Other operating income 3 13.2 2.5

OPERATING EXPENSES

Trading goods -943.2 -941.5

Other expenses 8 -119.4 -109.2

Personnel expenses 7 -281.0 -259.5

Depreciation/amortisation and impairment of property,

plant and equipment and intangible fixed assets 9 -14.8 -13.5

OPERATING INCOME 2 137.0 126.7

FINANCIAL INCOME AND EXPENSES

Financial income 12 8.3 3.5

Financial expenses 13 -6.2 -3.7

Participation in associated companies 11 0.0 1.0

PROFIT BEFORE TAX 139.1 127.5

Taxes 14 -38.3 -36.7

THE YEAR’S PROFIT FROM REMAINING BUSINESS UNITS 100.8 90.8

Profit from divested business unit, net after tax 6 2.0 90.8

PROFIT FOR THE YEAR 102.8 181.6

ATTRIBUTABLE TO:

Parent company shareholders 102.8 181.6

Minority interest - -

Earnings per share total**

before dilution, SEK 4:43 7:84

after dilution, SEK 4:43 7:81

Earnings per share from remaining business units**



Average no. of shares** 23 169 309 23 169 309

Average number of shares after dilution** 23 169 309 23 269 254

Dividend, SEK** 3:00* 2:83

*Proposal

** Corrected for the 4:1 share split and automatic redemption of each fourth share carried out

Q2 2007. Adjusted with a factor of 3 since the financial implication of

the transaction is a 3:1 split combined with an extra dividend.



CONSOLIDATED BALANCE SHEETS SEK m

ASSETS Note 31.12.2007 31.12.2006

FIXED ASSETS

INTANGIBLE FIXED ASSETS

Goodwill 15 20.9 3.0

Other intangible fixed assets 16 25.8 17.5

46.7 20.5

PROPERTY, PLANT AND EQUIPMENT

Buildings and land 17 122.9 109.8

Equipment, tools and installations 17 37.3 29.8

160.2 139.6

FINANCIAL ASSETS

Participation in associated companies 19 - 5.6

Other financial assets 1.4 1.3

Other long-term receivables 23 1.2 0.5

2.6 7.4

DEFERRED TAX ASSETS 14 6.4 3.9

TOTAL FIXED ASSETS 215.9 171.4

CURRENT ASSETS

INVENTORY, ETC.

Trading goods 255.2 214.6

255.2 214.6

CURRENT RECEIVABLES

Tax claims 4.2 5.4

Accounts receivable 260.7 205.8

Other receivables 15.9 55.0

Prepaid expenses and accrued income 20 14.3 13.0

Available-for-sale assets 4 7.1 -

302.2 279.2

CASH EQUIVALENTS 28 127.0 288.5

TOTAL CURRENT ASSETS 684.4 782.3

TOTAL ASSETS 900.3 953.7



CONSOLIDATED BALANCE SHEETS SEK m

SHAREHOLDERS’ EQUITY AND LIABILITIES Note 31.12.2007 31.12.2006

SHAREHOLDERS’ EQUITY 21

Share capital 38.6 38.6

Other contributed capital 39.4 39.4

Reserves 8.0 1.3

Surplus brought forward 341.3 379.8

Profit for the year 102.8 181.6

TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO HOLDERS OF SHARES IN PARENT COMPANY 530.1 640.7

LIABILITIES

LONG-TERM LIABILITIES

Interest-bearing liabilities

Other long-term liabilities 22 9.8 9.3

Provisions for pensions 23 0.3 0.0

Non interest-bearing liabilities

Deferred tax liabilities 14 31.8 26.6

TOTAL LONG-TERM LIABILITIES 41.9 35.9

CURRENT LIABILITIES

Interest-bearing liabilities

Overdraft 24 71.3 53.1

Other current liabilities 22 3.2 2.9


Advances from customers 0.5 1.3

Accounts payable, trade 142.8 124.6

Liabilities to associated companies - 0.8

Other liabilities 39.0 32.0

Accrued expenses and prepaid income 25 68.1 59.7

Guarantee provisions 3.4 2.7

TOTAL CURRENT LIABILITIES 328.3 277.1

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 900.3 953.7

PLEDGED ASSETS AND Note 31.12.2007 31.12.2006

CONTINGENT LIABILITIES

PLEDGED ASSETS FOR

OWN LIABILITIES AND PROVISIONS 24

Property mortgages 10.0 20.0

Business mortgages 55.1 55.1

TOTAL PLEDGED ASSETS 65.1 75.1


Guarantee commitments 2.6 2.4

TOTAL CONTINGENT LIABILITIES 2.6 2.4



GROUP CHANGES IN SHAREHOLDERS’ EQUITY SEK m

Share Other Reserves Repurchase Brought Totalcapital contributed of shares forward share-

capital capital holders’equity

Opening equity 01.01.2006 38.6 39.4 5.9 -12.2 406.2 477.9

Translation differences -4.6 -4.6

Total changes in assets are recognised directlyin shareholders’ equity, excluding transactions with owners -4.6 -4.6


Total changes in assets, excluding transactions with owners -4.6 181.6 177.0

Paid dividends -53.0 -53.0

Repurchase of shares -74.5 -74.5

Sale of own shares 113.3 113.3

Closing balance 31.12.2006* 38.6 39.4 1.3 26.6 534.8 640.7

Opening equity 01.01.07 38.6 39.4 1.3 26.6 534.8 640.7

Translation differences 6.7 6.7

Total changes in assets are recognised directlyin shareholders’ equity, excluding transactions with owners 6.7 6.7


Total changes in assets, excluding transactions with owners 6.7 102.8 109.5


Redemption of shares -9.7 -144.8 -154.5

Bonus issue 9.7 -9.7 -

Closing balance 31.12.07* 38.6 39.4 8.0 26.6 417.5 530.1

* Shareholders’ equity attributable to Parent Company shareholders.

NUMBER OF SHARES:

Opening amount 01.01.2006 7 723 103

Closing amount 31.12.2006 7 723 103

Opening amount 01.01.07 7 723 103

Share split 23 169 309

Share redemption -7 723 103

Closing amount 31.12.07 23 169 309



CONSOLIDATED CASH FLOW STATEMENT SEK m

2007 2006

CURRENT OPERATIONS

Profit before tax 141.1 127.5

Adjustments for items not included in the cash flow 1.5 12.6

142.6 140.1

Paid taxes -40.1 -42.1

CASH FLOW FROM CURRENT OPERATIONSBEFORE CHANGES IN WORKING CAPITAL 102.5 98.0

Cash flow from changes in working capital

Changes in inventory -20.3 -20.0

Changes in accounts receivable -30.6 -16.1

Change in other operating receivables -2.9 -2.6

Change in accounts payable 3.8 30.2

Change in other operating liabilities -8.2 23.9

CASH FLOW FROM CURRENT OPERATIONS 44.3 113.4

INVESTMENT ACTIVITIES

Divestment of subsidiaries, net liquidity impact 43.9 74.4

Acquisition of subsidiaries, net liquidity impact -26.4 -19.5

Acquisition of intangible fixed assets -1.1 -

Acquisition of property, plant and equipment -32.2 -40.0

Sale of property, plant and equipment 26.4 14.2

Sale of financial assets - 2.8

CASH FLOW FROM INVESTMENT ACTIVITIES 10.6 31.9

FINANCING ACTIVITIES

Loans raised - 9.4

Amortisation loans -0.8 -

Dividends paid -65.6 -53.0

Redemption of shares -154.5 -

Repurchase of shares - -74.5

Sale of own shares - 113.3

CASH FLOW FROM FINANCING ACTIVITIES -220.9 -4.8

CASH FLOW FOR THE YEAR -166.0 140.5

Cash equivalents at start of the year 288.5 149.2

Exchange rate difference cash equivalents 4.5 -1.2

Cash equivalents at end of the year 127.0 288.5

Additional information, refer to Note 28



PARENT COMPANY’S INCOME STATEMENT SEK m

Notes 2007 2006

OPERATING INCOME

Net sales 42.7 41.3

Other operating income 3 - 1.8

OPERATING EXPENSES

Other external expenses 8 -19.8 -19.3

Personnel expenses 7 -22.1 -23.3

Depreciation/amortisation of property,

plant and equipment and intangible fixed assets 9 -1.5 -1.8

OPERATING INCOME -0.7 -1.3

INCOME FROM FINANCIAL ITEMS

Income from participation in Group companies 10 44.1 104.2

Income from participation in associated companies 11 - 1.0

Other interest income and similar profit items 12 4.9 2.3

Interest expenses and similar loss items 13 -0.1 -0.3

INCOME AFTER FINANCIAL ITEMS 48.2 105.9

YEAR-END APPROPRIATIONS

Difference between tax depreciation and depreciation according to plan:

Expenses brought forward for software -0.3 -

Equipment, tools and installations - 0.2

Tax allocation fund, provision -10.0 -14.7

PROFIT BEFORE TAX 37.9 91.4

Taxes 14 1.4 3.7

PROFIT FOR THE YEAR 39.3 95.1



PARENT COMPANY’S BALANCE SHEETS SEK m

ASSETS Note 31.12.2007 31.12.2006

FIXED ASSETS


Expenses brought forward for software 16 1.1 -

1.1 0.0


Buildings and land 17 17.9 18.4

Equipment, tools and installations 17 2.1 2.6

20.0 21.0

FINANCIAL ASSETS

Participation in Group companies 18 235.9 187.9

Participation in associated companies 19 - 1.2

235.9 189.1

TOTAL FIXED ASSETS 257.0 210.1

CURRENT ASSETS

CURRENT RECEIVABLES

Tax claims - 0.3

Accounts receivable - 0.2

Loans to Group companies 251.6 196.6

Other receivables 0.8 45.6

Prepaid expenses and accrued income 20 3.9 2.8

256.3 245.5

CASH AND BANK BALANCES 66.9 220.8

TOTAL CURRENT ASSETS 323.2 466.3

TOTAL ASSETS 580.2 676.4



PLEDGED ASSETS AND Note 31.12.2007 31.12.2006


PLEDGED ASSETS FOR

OWN LIABILITIES AND PROVISIONS 24

Property mortgages 7.5 7.5

TOTAL PLEDGED ASSETS 7.5 7.5


Security undertakings to the benefit of Group companies 239.5 219.7

TOTAL CONTINGENT LIABILITIES 239.5 219.7

PARENT COMPANY’S BALANCE SHEETS SEK m

SHAREHOLDERS’ EQUITY, Note 31.12.2007 31.12.2006

PROVISIONS AND LIABILITIES

SHAREHOLDERS’ EQUITY

RESTRICTED EQUITY 21

Share capital 38.6 38.6

Reserves 32.3 32.3

70.9 70.9

NON-RESTRICTED EQUITY

Surplus brought forward 205.7 263.4


245.0 358.5

TOTAL SHAREHOLDERS’ EQUITY 315.9 429.4

UNTAXED RESERVES

Accumulated excess depreciation:

Expenses brought forward for software 16 0.3 -

Machinery and equipment 13 569 243 17 0.4 0.4

Tax allocation fund, provision for taxation 2004 9.4 9.4



Tax allocation fund, provision for taxation 2008 10.0 -

TOTAL UNTAXED RESERVES 47.8 37.5

PROVISIONS

Deferred tax liability 14 1.8 1.7

TOTAL PROVISIONS 1.8 1.7

CURRENT LIABILITIES


Accounts payable, trade 2.9 2.1

Liabilities to Group companies 191.8 192.0

Tax liabilities 2.0 -

Other liabilities 12.2 6.1

Accrued expenses and prepaid income 25 5.8 7.6

TOTAL CURRENT LIABILITIES 214.7 207.8

TOTAL SHARE HOLDERS’ EQUITY, PROVISIONS AND LIABILITIES 580.2 676.4



PARENT COMPANY CHANGES IN SHAREHOLDERS’ EQUITY SEK m

Restricted equity Non-restricted equity holders’ equity

Shares Reserves Repurchase of Profit brought capital shares forward

Opening equity 01.01.2006 38.6 32.3 -12.2 248.0 306.7

Group contributions received 61.7 61.7

Tax effect on Group contributions received -17.3 -17.3

Group contributions paid -3.6 -3.6

Tax effect on Group contributions paid 1.0 1.0



Total changes in assets, excluding transactionswith owners 136.9 136.9


Repurchase of shares -74.5 -74.5

Sale of own shares 113.3 113.3

Closing equity 31.12.06 38.6 32.3 26.6 331.9 429.4

Opening equity 01.01.07 38.6 32.3 26.6 331.9 429.4

Group contributions received 94.4 94.4

Tax effect on Group contributions received -26.4 -26.4

Group contributions paid -0.9 -0.9

Tax effect on Group contributions paid 0.2 0.2



Total changes in assets, excluding transactions with owners 106.6 106.6


Redemption of shares -9.7 -144.8 -154.5

Bonus issue 9.7 -9.7 -

Closing equity 31.12.07 38.6 32.3 26.6 218.4 315.9

Proposed dividends, SEK 3 per share 69.5

NUMBER OF SHARES:

Opening amount 01.01.2006 7 723 103

Closing amount 31.12.2006 7 723 103

Opening amount 01.01.07 7 723 103

Share split 23 169 309

Share redemption -7 723 103

Closing amount 31.12.07 23 169 309

Total share-



PARENT COMPANY’S CASH FLOW STATEMENT SEK m

2007 2006

CURRENT OPERATIONS

Profit after financial items 48.2 105.9

Adjustments for items not included in the cash flow 1.5 -101.2

49.7 4.7

Paid taxes -22.5 -24.5

CASH FLOW FROM CURRENT OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 27.2 -19.8

Cash flow from changes in working capital

Changes in accounts receivable 0.2 -0.2

Change in other operating receivables -11.3 -30.8

Change in accounts payable 0.8 0.2

Change in other operating liabilities 4.2 27.7

CASH FLOW FROM CURRENT OPERATIONS 21.1 -22.9

INVESTMENT ACTIVITIES

Sale of subsidiary - 120.0

Acquisition of subsidiary -46.8 -29.9

Acquisition of intangible fixed assets -1.1 -

Acquisition of property, plant and equipment -0.5 -0.8

Sale of property, plant and equipment - 0.1

Sale of financial assets - 2.8

CASH FLOW FROM INVESTMENT ACTIVITIES -48.4 92.2

FINANCING ACTIVITIES

Group contribution 93.5 58.1

Dividends paid -65.6 -53.0

Redemption of shares -154.5 -

Repurchase of shares - -74.5

Sale of own shares - 113.3

CASH FLOW FROM FINANCING ACTIVITIES -126.6 43.9

CASH FLOW FOR THE YEAR -153.9 113.2

Cash equivalents at start of the year 220.8 107.6

Cash equivalents at end of the year 66.9 220.8

Additional information, refer to Note 28



COMPLIANCE WITH STANDARDS AND LEGISLATIONThe consolidated financial statements have beenprepared in accordance with the InternationalFinancial Reporting Standards (IFRS) issued bythe International Accounting Standards Board(IASB) and interpretations published by the Inter-national Financial Reporting Interpretations Com-mittee (IFRIC), as approved by the EuropeanCommission for application in all Member States.Furthermore, the Group has applied the SwedishFinancial Accounting Standards Council’s rec-ommendation RR 30:06 (SupplementaryAccounting Regulations for Groups).

The Parent Company applies the sameaccounting principles as the Group, except inthose cases specified below in the section“Accounting Principles of the Parent Company”.The differences between the accounting princi-ples of the Parent Company and the Groupresult from restrictions on how IFRS can beimplemented in the Parent Company on accountof the Swedish Annual Accounts Act and the Acton Safeguarding of Pension Obligations (Trygg-andelagen) and, in some cases, for fiscal reasons.

REQUIREMENTS FOR PREPARINGPARENT COMPANY AND GROUPFINANCIAL REPORTSThe Parent Company’s functional currency is theSwedish krona (SEK), which is also the officialreporting currency for the Parent Company andthe Group. This means that the financial reportsare presented in Swedish krona. All amounts arerounded off to the nearest million unless other-wise stated. Assets and liabilities are reported atthe historical acquisition value, except for certainfinancial assets and derivate instruments that arevalued at their fair value and available-for-saleassets and disposal groups.

Financial instruments, which are valued attheir fair value, consist of financial assets clas-sified as financial assets valued at fair value viathe income statement or as financial assetsthat can be sold. Available-for-sale assets anddisposal groups are reported at the lowest ofthe previously reported value and the fair value after deductions for sales costs.

To prepare the financial statements in accor-dance with IFRS, management must makeassessments, estimates and assumptions thataffect the application of the accounting princi-ples and the reported amounts pertaining toassets, liabilities, income and expenses. Theseestimates and assumptions are based on his-torical experience and a number of other fac-tors that are deemed reasonable and prudentat the time they are made. Consequently, actu-al outcomes may differ from these estimatesand assessments. The estimates and assump-tions are regularly reviewed. Changes in esti-mates are reported in the period in which thechange is made, if the change affects that peri-od only, or in the period in which the change ismade and future periods if the change affectsboth the current and future periods.

Assessments made by the management in theapplication of IFRS that have a significantimpact on the financial statements, and esti-mates and which may give rise to significantadjustments in future financial statements aredescribed in detail in Note 31.

The consolidated accounting principles out-lined below have been applied consistentlythroughout the periods reported in the Group’sfinancial reports unless otherwise stipulatedbelow. Consolidated accounting principles havealso been applied consistently to the account-ing and consolidation of the Parent Company,subsidiaries and associated companies.

STANDARDS, AMENDMENTS AND INTER-PRETATIONS ADOPTED FIRST IN 2007The following new standards, amendmentsand interpretations have been applied whenpreparing the financial reports for 2007:IFRS 7 Financial instruments: Information andrelated amendments in IAS 1 Presentation ofFinancial Statementsdemands extensive infor-mation about the significance that financialinstruments have for the company’s financialposition and earnings, as well as qualitativeand quantitative information about the charac-ter and scope of the risks. IFRS 7 and the affili-ated changes in IAS 1 have lead to more infor-mation in the Group’s financial reports for 2007in terms of the Group’s financial goals andcapital management. The standard has notentailed any changes in the accounting princi-ple, but only changes in terms of disclosure offinancial instruments.

IFRIC 10 Interim Financial Reporting andImpairment does not allow the impairmentlosses recognised during a period for goodwill,investments in equity instruments and financialassets at cost to be reversed on the subse-quent closing day. IFRIC 10 will be applied inthe Group’s financial reports for 2007. Theinterpretation will be applied future-orientedfrom the date when the Group first began toapply the impairment rules in IAS 36 and themeasurement regulations in IAS 39, i.e. interms of goodwill on 1 January 2004 and interms of financial instruments as of 1 January2005. Since no such reversals have beenmade, the interpretation has no impact onOEM’s financial reports.

The Group is not affected by the phenomenacovered in other interpretation statements fromIFRIC that apply as of 2007.

STANDARDS, AMENDMENTS ANDINTERPRETATIONS FOR FUTUREAPPLICATION WHERE THE GROUPDOES NOT APPLY EARLY ADOPTIONThe Group has not applied early adoption ofnew or amended standards and new interpreta-tions that when taken into effect can come tohave an impact on the Group’s financial reports.The following IASB and IFRIC adopted revisionswith future application can com to have animpact on the Group’s financial reports:

Revised IFRS 3 Business combinations andrevised IAS 27 Consolidated and SeparateFinancial Statements entail changes regardingconsolidated accounts and reporting businesscombinations. The revised standards are to beapplied to business combinations beginningthe financial year on 1 July 2009 or after. Early adoption is permitted.

IFRS 8 Operating segments stipulates whatan operative segment is and what informationis to be disclosed about these segments in thefinancial reports. The standard is to applybeginning the financial year on 1 January 2009or after. Early adoption is permitted.Amendments to IAS 1 Presentation of FinancialStatements: A Revised Presentation meansthat the presentation of the financial reports isaltered in a few regards and proposes new,non-mandatory titles for the reports. Theamendment will not affect the determination ofthe amounts reported. The revised IAS 1 is toapply beginning the financial year on 1 January2009 or after. Early adoption is permitted.

Based on the Group’s current situation, thefollowing IASB and IFRIC adopted revisionswith future application are not expected to havean impact on the Group’s financial reports:

Amendments to IFRS 2 Share-based pay-ment: Vesting conditions and cancellations;amendments to IAS 23 Borrowing costs IFRIC11 IFRS 2: Group and Treasury Share Transac-tions; IFRIC 12 Service Concession Arrange-ments; IFRIC 13 Customer Loyalty Pro-grammes and IFRIC 14 IAS 19 – The Limit ona Defined Benefit Asset Minimum FundingRequirements and their Interaction.

CLASSIFICATION, ETC.Fixed assets and long-term liabilities essentiallyconsist only of amounts that can be expected tobe recovered or paid more than twelve monthsafter the balance sheet date. Current assets andcurrent liabilities essentially consist only ofamounts expected to be recovered or paid with-in twelve months from the balance sheet date.

SEGMENT REPORTINGA segment is a part of the Group which isidentifiable for accounting purposes that eithersupplies products or services (business seg-ments), or goods or services in a given eco-nomic environment (geographic segment) thatare exposed to risks and opportunities that dif-fer from other segments. The Group’s primarysegments are business segments. Segmentinformation is presented only for the Group inaccordance with IAS 14.

CONSOLIDATION PRINCIPLES FORSUBSIDIARY COMPANIESSubsidiaries are those businesses over whichOEM International AB has a controlling influ-ence. Control influence means the controllingentity has the direct or indirect right to struc-ture the company’s financial and operatingstrategies to obtain economic advantages.

NOTES WITH ACCOUNTING PRINCIPLES AND COMMENTS TO THE FINANCIAL STATEMENTS

AMOUNTS IN SEK MILL ION UNLESS OTHERWISE INDICATED

NOTE 1. ACCOUNTING PRINCIPLES



When determining whether a controlling influ-ence exists, potential voting equity that can beused or converted without delay should betaken into account.

Subsidiaries are reported in line with the pur-chase method. The method means that theacquisition of a subsidiary is regarded as atransaction through which the Group indirectlyacquires the subsidiary’s assets and assumesits liabilities and contingent liabilities. Theanalysis determines the acquisition value of theshares or business, the fair value of acquiredidentifiable assets on the acquisition date, andassumed liabilities and contingent liabilities.The cost of an acquisition of the subsidiary’sshares and business respectively is measuredas the fair values on the transfer date forassets, incurred or assumed liabilities andequity instruments issued in exchange for theacquired net assets and transaction-relatedcosts that are directly attributable to the acquisi-tion. The excess cost of acquisition over the fairvalue of the of the Group’s share of the identifiableassets, assumed liabilities and contingent liabilitiesis reported as goodwill. A negative difference isrecognised directly in the income statement.

The financial statements of the subsidiariesare included in the consolidated financial state-ments from the effective date of acquisitionuntil the day that control ceases.

CONSOLIDATION PRINCIPLES FORASSOCIATED COMPANIESAssociated companies are companies in whichthe Group exercises substantial, but not con-trolling influence over the operational andfinancial management, generally through aholding of between 20% and 50% of the vot-ing rights. From the date on which the Groupacquires substantial influence, holdings inassociated companies are reported in the con-solidated financial statements according to theequity method. The equity method means thatthe value of the shares in the associated com-panies reported in the consolidated accountscorresponds to the Group’s share in the asso-ciated companies’ equity, the consolidatedgoodwill and other residual values that mightexist in the consolidated fair value adjustments.In the consolidated income statement, theGroup’s share in the associated companies’net earnings after tax and minority interestadjusted for depreciation, write-downs or reso-lution of acquired fair value adjustmentsrespectively is reported under “Participations inassociated companies”. Dividends obtainedfrom the associated company reduce thebooked value of the investment. On acquisi-tion, any differences between the acquisitionvalue of the holding and the owning company’sshare of the net fair value of the associatedcompany’s identifiable assets, liabilities andcontingent liabilities are reported in accordancewith IFRS 3 “Business Combinations”.

When the Group’s share of reported losses inthe associated company exceeds the reportedvalue of the shares in the Group, the value ofthe shares is reduced to zero. Deductions forlosses are also made against unsecured, long-term financial transactions which, in their finan-cial sense, constitute part of the owning com-pany’s net investment in the associatedcompany. Further losses are not reported,

unless the Group has undertaken to coverlosses arising in the associated company. The equity method is adopted until the sub-stantial influence is no longer exercised.

TRANSACTIONS TO BE ELIMINATEDON CONSOLIDATIONAll intra-Group receivables and liabilities, income orexpenses, and unrealised gains or losses arisingfrom intra-Group transactions between Groupcompanies are eliminated in their entirety whenpreparing the consolidated financial statements.

Unrealised gains arising from transactionswith associated companies are eliminated to anextent that corresponds to the Group’s share ofownership in the company. Unrealised lossesare similarly eliminated as unrealised gains, butonly if there is no indication of impairment.

FOREIGN CURRENCY

Transactions in foreign currenciesFunctional currency is the currency that appliesin the primary economic environments in whichthe Group companies operate. Transactions inforeign currencies are translated to the func-tional currency at the exchange rate prevailingon the date of the transaction. Monetaryassets and liabilities denominated in foreigncurrencies are retranslated to the functionalcurrency at the exchange rate prevailing onbalance sheet date. Exchange rate differencesresulting from translations are reported in theincome statement. Exchange rate differencesregarding operating assets and liabilities arereported in the operating income, whilechanges in value attributable to financial assetsand liabilities are reported in net financial items.

Non-monetary assets and liabilities reportedat their historical acquisition values are translat-ed at the exchange rate prevailing on the dateof the transaction. Non-monetary assets andliabilities carried at fair value are translated tothe functional currency at the rate prevailing atthe date when the fair value was determined.Exchange rate fluctuations are then reported inthe same way as other changes in value withregard to assets or liabilities.

Foreign entities’ financial reportsAssets and liabilities in foreign entities, includ-ing goodwill and other corporate fair valueadjustments, are translated to Swedish kronor(SEK) at the exchange rate prevailing on thebalance sheet date. Revenue and expenses inforeign entities are translated to Swedish kro-nor (SEK) at an average rate that represents anapproximation of the rates that applied wheneach transaction took place. Differences thatarise when translating currency in foreign enti-ties are recognised immediately in sharehold-ers’ equity as a translation reserve. The transla-tion reserve includes the translation differenceaccumulated as of 1 January 2004. When aforeign entity is divested, the accumulatedtranslation differences related to the entity arerealised in the consolidated income statement.

INCOME

Sale of goodsIncome includes only the gross inflow of eco-nomic benefits that the company receives or

can receive for its own benefit. Revenue fromthe sale of goods is booked as income whenthe company has transferred to the purchaserto the essential risks and benefits associatedwith ownership of the goods. If there is consid-erable uncertainty in terms of payment,attached costs or risk for returns and if theseller retains involvement with the ongoingadministration which is usually associated withownership, revenue is not taken up as income.Income is booked at the fair value of what hasbeen received or will be received with deduc-tions for discounts. Amounts collected for thebenefit of another are not included in the com-pany’s income but instead constitute receivedcommission.

Sales of services and similar assignmentsIncome from the sale of services is recognised inthe income statement when the service is sup-plied based on the degree of completion on bal-ance sheet date. The degree of completion isdetermined on the basis of costs that have beenincurred in relation to the total calculated costsfor the assignment. Income from the sale ofservices and similar assignments is recognisedas revenue when the following conditions are met:• The income attributable to the assignment

can be calculated in a reliable way.• It is likely that payment corresponding to the

completed assignment will flow to the company. • The costs that have occurred and the costs

that remain to complete the assignment canbe calculated in a reliable manner.

If it is considered probable that the combinedcosts for an assignment will exceed the totalincome, the suspected loss must be immedi-ately reported in full as a cost.

OPERATING EXPENSES AND FINAN-CIAL INCOME AND EXPENSES

Operating leasesPayments for operating leases are recognised inthe income statement on a straight-line basisover the term of the lease. Benefits obtained onsigning an agreement are reported as part of theoverall leasing cost in the income statement.

Financial leasesThe minimum leasing fees are allocated asinterest expenses and amortisation of the out-standing liability. The interest expenses are dis-tributed over the period of the lease, so thateach accounting period is charged with anamount corresponding to a fixed rate of inter-est for the liability reported in the respectiveperiod. Variable payments are entered asexpenses in the periods they occur.

Financial income and expensesFinancial income and expenses include interestrevenue from bank assets, receivables andinterest-bearing securities, interest expensesrelated to loans, dividend incomes, exchangerate differences attributable to financial invest-ments and financing activities, unrealised andrealised gains and losses on financial invest-ments, and derivative instruments used infinancial operations.

Interest revenue from receivables and interestexpenses related to liabilities are calculated



using the effective interest method. The effec-tive interest is the rate that ensures that thecurrent value of all estimated future receiptsand payments during the expected interestduration is the same as the reported value ofthe receivable or the liability. The interest ele-ment of financial lease payments is recognisedin the income statement by using the effectiveinterest method.

Interest revenue and interest expensesrespectively include a periodic amount oftransaction expenses and discounts whereapplicable, premiums and other differencesbetween the original reported value of thereceivable and liability respectively and theamount received on maturity and the estimat-ed future receipts and payments during theterm of the agreement. Dividend income isrecognised when the right to retain paymenthas been established. The Group and the Par-ent Company do not capitalise interest in theacquisition value of assets.

TAXESIncome tax consists of current tax and deferredtax. Income tax is reported in the incomestatement except where the underlying trans-actions is recognised in equity, in which caseany tax effect is recognised in equity. Currenttax is the tax to be paid or received for the cur-rent year with the application of the tax ratesthat have been established or which in practicehave been adopted as of the balance sheetdate. This includes adjustments of current taxattributable to prior periods.

Deferred tax is calculated according to the bal-ance sheet method on the basis of temporary dif-ferences between the carrying amounts and taxvalues of assets and liabilities. Temporary differ-ences are not taken into consideration for differ-ences relating to the initial recognition of goodwill,nor relating to the initial recognition of assets andliabilities that are not a business acquisitionwhich, at the time of the transaction, do not affecteither accounting or taxable income.

Nor are temporary differences attributable toshares in subsidiaries and associated compa-nies that are not expected to be reversed inthe foreseeable future taken into consideration.Measurement of deferred tax is based on howthe carrying amount of assets or liabilities isexpected to be recovered or settled. Deferredtax is calculated with application of the tax rateand regulations in effect or in practice adoptedas of the balance sheet date.

Deferred tax claims relating to deductibletemporary differences and loss carry-forwardsare only recognised to the extent that it is likelythat they can be utilised. The value of thedeferred tax claims is reduced when it is nolonger deemed likely that they can be utilised.

FINANCIAL INSTRUMENTSFinancial instruments recognised in the balancesheet include as assets cash and cash equiva-lents, loan receivables, accounts receivable andfinancial investments. Accounts payable andloan liabilities are reported as liabilities.

A financial asset or financial liability is includ-ed in the balance sheet when the company isparty to the instrument’s conditions of agree-ment. Liabilities are included when the coun-terparty has performed and there is a contrac-

tual liability to pay, even if the invoice has notbeen received. A financial asset (or part there-of) is removed from the balance sheet whenthe contractual rights are realised, expire or thecompany transfers, in all essentials, the risksand benefits associated with ownership. A financial liability (or part thereof) is removedfrom the balance sheet when the contractualliability is fulfilled or otherwise discharged.

Borrowing and investments are reportedwhen the transaction is carried out (settlementdate accounting), while derivative instrumentsare reported when the agreement has beenentered into (trade date accounting).

A financial asset and a financial liability areoffset and reported in the balance sheet as anet amount only when there is a legal right toset off the amount and an intention to adjustthe items with a net amount or, at the sametime, realise the asset and settle the liability. Financial instruments are reported initially at anacquisition value corresponding to the fairvalue of the instrument plus transactionexpenses for all financial instruments, exceptthose instruments categorised as financialassets reported at their fair value in the incomestatement, which are reported at their fair valueexcluding transaction expenses.

The financial instruments are classified in theinitial recognition depending on the purpose forwhich the instruments were acquired whichaffects recognition thereafter. The fair value oflisted financial assets corresponds to the asset’slisted bid price on the balance sheet date. Thefair value of unlisted financial assets is estab-lished by applying valuation techniques such asrecently completed transactions, references tosimilar instruments and discounted cash flow.

Accounts receivable and other current andlong-term receivables classified in the category“loans and receivables” in accordance with IFRS 7.Receivables are non-derivative financial assetswith fixed or determinable payments that arenot quoted on an active market and are report-ed at the accrued acquisition value accordingto the effective interest method. Accountsreceivable and other current receivables thatnormally have a remaining duration of less thantwelve months are reported at nominal value. A receivable is individually assessed withregard to its estimated loss risk and is enteredat the amount it is expected to generate.Impairments are made where necessary andare reported in the income statement.

Financial investmentsFinancial investments are categorised as finan-cial assets measured at fair value in the incomestatement. This category has two subgroups:financial assets held for trading and otherfinancial assets that the Company initiallychose to include in this category.

A financial asset is classified as being heldfor trading if it was acquired for the purpose ofbeing sold in the short term. To the secondsubgroup, the company has chosen to attrib-ute financial assets which, according to themanagement’s risk management and invest-ment strategy, are administered and evaluatedbased on the fair value. These assets includefinancial investments in equity instruments andinterest-bearing securities.

Financial investments are measured continuously at fair value, with changes invalue being reported in the income statementin net financial items.

Derivative instrumentsDerivatives are categorised as financial assetsand liabilities measured at fair value in the incomestatement as instruments available-for-sale.

Derivative instruments include forwardexchange contracts and currency options to coverrisks associated with changes in exchange rates.Derivatives are also contractual terms that areembedded in other agreements. Embeddedderivatives are recognised separately if they arenot closely related to the host contract.

Derivative instruments are measured in theinitial recognition and regularly thereafter at fairvalue with value changes recognised asincome and expenses in the operating incomeor in net financial items, based on the intendeduse of the derivative instrument and how this useis related to an operating item or a financial item.

The Group has not used derivatives for hedgingpurposes during the year 2007 or during thecomparative year.

Cash and cash equivalentsCash and cash equivalents includes cash inhand, deposits held with banks and similar insti-tutions, plus short-term highly liquid investmentswith original maturities of three months or less,which are only exposed to insignificant risk forfluctuations in value. The cash and bank bal-ance is recognised at accrued acquisition value.The definition of cash and cash equivalents inthe cash flow statement corresponds with cashand cash equivalents in the balance sheet.

Interest-bearing liabilities classified in the cate-gory “Other liabilities” in accordance with IFRS 7Loans are recognised continuously at accruedacquisition value, which means that the value isadjusted through discounts where applicable,or premiums when the loan is taken and costswhen borrowing is spread over the expectedterm of the loan. The scheduling is calculatedon the basis of the initial interest rate of theloan. Gains and losses arising when the loan issettled are recognised in the income statement.

Accounts payable and other operating liabilitiesclassified in the category “Other liabilities” inaccordance with IFRS 7Liabilities are recognised at the accrued acqui-sition value determined from the effective inter-est that was calculated at the time of acquisi-tion which normally implies nominal value.


Owned assetsProperty, plant and equipment are recognisedat acquisition value after deductions for accu-mulated depreciation and impairment costs.The acquisition price includes the purchaseprice including expenses directly attributable toputting the asset into place and condition tobe used as intended by the acquisition.

Directly attributable costs, which are includ-ed in the acquisition value, include cost ofdelivery and handling, installation, title deeds,consultancy services and legal services.



Borrowing costs are not included in the acqui-sition value for fixed asset produced by thecompany. The accounting principles for impair-ment are described below.

The carrying amount of property, plant andequipment is removed from the balance sheeton the disposal or retirement of the asset, orwhen no future economic benefits are expect-ed from its use or disposal/retirement. Gains orlosses arising on the disposal or retirement ofan asset is determined as the differencebetween the sales proceeds and the carryingamount of the asset, less direct sales costs.

The gain or loss is recognised in other operating income/cost.

Leased assetsLeases are classified in the consolidated finan-cial statements either as finance or operatingleases. In a finance lease, the financial risksand benefits associated with the ownership areessentially transferred to the lessee, otherwiseit is an operating lease.

Assets leased under a finance lease arerecognised as assets in the Group balancesheet. The obligation to pay future lease fees isrecognised as long-term and current liabilities.The leased assets are depreciated accordingto plan, and the lease payments are recog-nised as interest and amortisation of liabilities.

Subsequent expenditureSubsequent expenditure is added to the acqui-sition value only if it is likely that the future eco-nomic benefits associated with the asset willflow to the enterprise and the acquisition valuecan be calculated in a reliable manner. All othersubsequent expenditure is reported as anexpense in the period it is incurred.

A subsequent expenditure is added to theacquisition value if the expense refers to theexchange of identified components or partsthereof. Even in those cases when a new com-ponent has been constructed, the expense isadded to the acquisition value. Any undepreci-ated values reported for replaced components,or parts of components, are discarded andcharged to expenses when the component isreplaced. Repairs are expensed as incurred.

Depreciation principlesStraight-line depreciation is applied over the esti-mated utilisation period of the assets. Land is notdepreciated. The Group applies componentdepreciation, meaning that the estimated useful lifeof components forms the basis for depreciation.

Estimates of useful life:• buildings, business property, see below• land improvements 20 years• machinery and other technical facilities 5-10 years• equipment, tools and installations 3-10 years

Business property consists of a number ofcomponents with different useful lives. Themain group is buildings and land. Land is notdepreciated as its useful life is considered tobe indefinite. The buildings consist of a numberof components with different useful lives.

The following main groups of componentshave been identified and form the basis fordepreciation of buildings:

• Frame 100 years• Frame extensions, interior walls, etc. 30 years• Installations, heating, electricity, water and

sanitation facilities, ventilation, etc. 20-32 years• External surfaces, walls, roof, etc. 20-50 years

The depreciation methods applied, and theresidual value of the assets and their useful lifeare reviewed at the close of every year.


GoodwillGoodwill is measured at the acquisition valueminus any accumulated impairment. Goodwillis allocated to cash-generating units and test-ed annually for impairment. Goodwill arisingfrom the acquisition of associated companiesis included in the recognised value for partici-pations in associated companies. If the acquisi-tion value is less than the net value of theacquired company’s assets and assumed liabili-ties and contingent liabilities, the difference isrecognised immediately in the income statement.

In respect of goodwill in acquisitions thatwere made before January 1, 2004, the Grouphas not adopted IFRS retroactively on transi-tion to IFRS. Instead, the recognised value inthe future will be the acquisition value for theGroup, after impairment testing.

Other intangible fixed assetsSupplier relations are measured at the acquisi-tion value minus any accumulated impairment.These have arisen through acquisition andhave an indeterminable useful life. Testing isdone each year to determine if the circum-stances still indicate that the useful life is inde-terminable. Impairment testing is done annuallyand performed when indicated.

Other intangible assets include software,trademarks and customer relations. Thesehave a determinable useful life and are recog-nised at acquisition value less accumulatedamortisation and impairment.

Expenses of internally generated goodwilland internally generated trademarks are capi-talised not as assets but recognised asincurred as expense in the income statement.

Subsequent expenditureSubsequent expenditure on capitalised intangibleassets is reported as an asset in the balancesheet only when it increases the future economicbenefits of the specific asset to which it relates. Allother expenditure is expensed when incurred.

AmortisationAmortisation is reported in the income state-ment on a straight-line basis over the estimat-ed utilisation period of the assets, unless suchutilisation periods are undetermined. Goodwillhas an undetermined utilisation period and istested for impairment annually or as soon asindications arise that suggest the asset inquestion has dropped in value. The useful lifeperiods are reviewed annually at least, referalso to Notes 13 and 14.

Estimates of useful life:• IT software 5 years• trademarks 5 years• customer relations 5 years

INVENTORIESInventories are measured at the lowest of theacquisition value and net realisable value. The netrealisable value is the estimated sales price in thecurrent operations after deductions for estimatedcosts for completion and for realising a sale.

The first-in, first-out method (FIFO) is applied inestimating inventories. The acquisition value of in-house manufactured semi-finished and finishedproducts consists of the direct manufacturingcosts and a reasonable share of the indirect man-ufacturing costs. Normal capacity utilisation istaken into account for measurement purposes.

IMPAIRMENTThe recognised values of the Group’s assets aretested on each balance sheet day for any indica-tion of impairment. Below is a description of theimpairment test performed for property, plantand equipment and intangible fixed assets,shares in subsidiaries and associated compa-nies, as well as financial assets. Assets for saleand disposal groups, inventory and deferred taxclaims are exempt. The recognised value of theexempt assets is assessed in accordance withthe respective accounting standards.

Impairment tests for property, plant and equip-ment and intangible assets as well as shares insubsidiaries and associated companiesIf there is any indication of impairment, then theasset’s recoverable value is calculated, accord-ing to IAS 36 (see below). The recoverable valuefor goodwill and other intangible assets withundetermined utilisation period is calculatedannually. If essentially independent cash flowcannot be isolated for individual assets, then theassets are grouped at the lowest levels whereessentially independent cash flows can be iden-tified — a so-called cash-generating unit.

An impairment loss is recognised when thecarrying amount of an asset or cash-generat-ing unit, or pool of units, exceeds its recover-able value. Impairment losses are chargedagainst the income statement. Impairmentlosses attributable to a cash-generating unit, orpool of units, are mainly allocated to goodwillThey are thereafter divided proportionatelyamong other assets in the unit (pool of units).

The recoverable value is the highest of the fairvalue minus sales expenses and utilisation value.Utilisation value is measured by discountingfuture cash flows using a discounting factor thattakes into account the risk-free rate of interestand the risk associated with the specific asset.

Impairment test for financial assetsAll financial assets except those categorised asfinancial assets valued at fair value via theincome statement are tested for impairment.For each report, the company assesses if thereis objective proof that indicates impairment of afinancial asset or group of financial assets. A finan-cial asset has impairment only if objective proofindicates that one or more events have occurredthat have an effect on the financial asset’s futurecash flows, if these can be reliably calculated.

The recoverable value for the assets cate-gorised as loan receivables and accountsreceivable recognised at accrued acquisitionvalue are calculated as current value of thefuture cash flow discounted by the effectiveinterest that applied on initial recognition.



Assets with a short term are not discounted.Impairment losses are charged against theincome statement.

Reversal of amortisationAn impairment is reversed if there is both anindication that the impairment no longer existsand there has been a change in the assump-tions that served as the basis for determiningthe recoverable amount. Impairment goodwillis however never reversed. Impairment isreversed only to the extent the carryingamount of the assets following the reversaldoes not exceed the carrying amount that theasset would have had if the impairment hadnot been recognised, taking into account theamortisation that would have been recognised.

Impairment of loan receivables and accountsreceivables recognised at accrued acquisitionvalue are reversed if a later increase in therecoverable amount can objectively be attrib-uted to an event that occurred after the write-down was made.

SHAREHOLDERS’ EQUITY

Repurchase of sharesPurchase of such instruments is recognised asa deduction from shareholder’s equity. Pay-ment from sales of equity instruments is recog-nised as an increase of shareholder’s equity.Any transaction expenses are recogniseddirectly against shareholders’ equity.

Paid dividendsDividends are recognised as a liability after theAnnual General Meeting has approved the dividend.

EARNINGS PER SHAREEarnings per share are based on the Group’s netearnings for the year attributable to the ParentCompany’s shareholders and the weighted aver-age number of shares outstanding during the year.

EMPLOYEE BENEFITS

Defined-contribution pension plansDefined-contribution pension plans are classi-fied as those plans for which the company’sobligation extends only to the contributions thecompany has committed to pay. In such cases,the size of the employee’s pension is deter-mined by the contribution the company paysto the plan or to an insurance company andthe return on capital yielded by the contribu-tions. Consequently, it is the employee thatcarries the actuarial risk (that compensation islower than expected) and the investment risk(that the invested assets will be insufficient tocover the expected compensation). Obliga-tions concerning the amounts to the defined-contribution plans are recognised as an expensein the income statement at the rate they areearned as the employees perform their work.

Defined-benefit pension plansThe Group’s net obligation regarding defined-benefit pension plans is calculated separatelyfor each plan by estimating the future compen-sation that the employees have earned throughtheir employment in both present and previousperiods; this compensation is discounted tocurrent value. The discount rate is the interest

rate on balance sheet date for a first-class corporate bond with a maturity correspondingto the Group’s pension obligations.

When there is no active market for such corpo-rate bonds, the market interest rate on govern-ment bonds with a similar maturity is usedinstead. Calculations are carried out by a qualifiedactuary using the projected unit credit method.

Moreover, the fair value of any plan assets iscalculated on reporting day. Actuarial gainsand losses can arise when determining theobligation’s current value and fair value of theplan assets. These arise either when the actualoutcome differs from prior assumptions, orwhen an actuarial assumption changes. The corridor rule is applied. The corridor rulemeans that the portion of the accumulatedactuarial gains and losses in excess of 10% ofthe higher of the obligation’s current value andthe fair value of assets under plan is recog-nised over the anticipated average remainingperiod of employment of the employees cov-ered by the plan. Actuarial gains and lossesare otherwise not taken into account.

The liability recognised in the balance sheetin respect of pensions and similar obligations isthe current value of the obligation at the bal-ance sheet date, less the fair value of the planassets, together with adjustments for unrecog-nised actuarial gains or losses and unrecog-nised costs for past service.

When the calculation leads to an asset forthe group, the carrying amount of the asset islimited to the net of unrecognised actuariallosses and unrecognised costs associatedwith service in previous periods and the currentvalue of future repayments from the plan orreduced future payments to the plan. Whenthe compensation in a plan improves, the por-tion of the increased compensation attributableto the employee’s services in previous periodsis expensed through the income statement on astraight-line basis over the average period until thecompensation is fully vested. If the compensationis fully vested, an expense is recognised directly inthe income statement. All the components includ-ed in the period’s cost for a defined benefit planare recognised in the operating income.

Termination benefitsA provision is recognised when employees aregiven notice of termination only if the companyis demonstrably committed to terminate anemployment before the normal date or whenproviding termination benefits as a result of anoffer to encourage voluntary redundancy.

Short-term benefits to employeesShort-term benefits to employees are calculatedwithout discounting and recognised as costswhen the related services are received. A provi-sion is recognised for the expected cost of bonus-es when the Group has a contractual obligation orinformal obligation to make such payments whenthe services received from the employee and theobligation can be reliably calculated.

PROVISIONSA provision is reported in the balance sheetwhen the Group has a legal or informal obliga-tion owing to an event that has occurred and itis likely that an outflow of economic resourceswill be required to settle the obligation and a

reliable estimate of the amount can be made.Where it is important when in time payment ismade, provisions are estimated by discountingthe expected future cash flow at a pre-taxinterest rate that reflects current market esti-mates of the time value of money and, whereappropriate, the risks associated with the liability.

A provision for losses is reported when theunderlying products or services are sold. Theprovision is based on historic data on losses anda total appraisal of feasible outcomes in relationto the probabilities associated with the outcome.

FIXED ASSETS AVAILABLE FOR SALEAND DIVESTED BUSINESS UNITSThe implication of a fixed asset (or a disposalgroup) classified as available-for-sale is that itsrecognised value will be recovered principallythrough a sale and not through use. When ini-tially classified as available-for-sale, fixedassets and disposal groups are recognised atthe lower of their carrying amount before clas-sification as available for sale and fair valuewith deductions for sales expenses.

Certain balance sheet items are exempt fromthe mentioned measurement rules and meas-ured in the same was as before the reclassifi-cation. Exempt balance sheet items includefinancial assets, inventory, plan assets anddeferred tax claims. On each subsequentreporting date, the fixed asset or disposal groupas a whole is measured at the lowest of fairvalue minus sales costs and recognised value atthe time of reclassification plus impairment thatcan be reversed without the recognised valueexceeding fair value minus sales costs.

Losses resulting from a change in value uponinitial classification as available for sale areincluded in the income statement, as are gainsor losses following subsequent revaluation.

A divested business unit is a component of acompany’s operations that represents an inde-pendent operation or significant operationswithin a geographic area or a subsidiaryacquired exclusively with the intent to resale.

Classification as a divested business unit ismade upon divestment or at a previous timewhen the business unit meets the criteria to beclassified as available for sale. A disposalgroup that will be discontinued can also qualifyfor classification as a divested business unitfrom the time it is no longer used.

The figures for the comparative years in theconsolidated income statement and cash flowstatement have been restated and presented asif the business unit sold during the current yearhad been sold already at the start of the com-parative year (refer also to Note 5 and Note 26).

CONTINGENT LIABILITIESA contingent liability is reported when there is apossible obligation that stems from pastevents and the existence of which will be con-firmed only by one or more uncertain futureevents, or when there is an obligation that isnot recognised as a liability or provisionbecause it is not possible that an outflow ofresources will be required.

PARENT COMPANY’S ACCOUNTINGPRINCIPLESThe Parent Company has prepared the AnnualReport according to the Annual Accounts Act



(1995:1554) and the Swedish FinancialAccounting Council’s recommendation RR32:06 “Reporting for Legal Entities”. Also theSwedish Financial Accounting Council’sEmerging Issues Task Force’s statements forlisted companies are applied.

RR 32:06 means that the Parent Company inthe annual report for the legal entity must applyall EU-approved IFRS and statements as far aspossible within the framework of the AnnualAccounts Act and taking into account the con-nections between reporting and taxation.

The recommendation specifies exemptionsand additions relative to IFRS. The sameaccounting principles applied for the consoli-dated financial statements as described abovehave been applied to the Parent Company,except in the instances described below.

Classification and presentationThe Parent Company’s income statement andbalance sheets are prepared in accordancewith the Annual Accounts Act’s scheme. Thedifference to IAS 1 Presentation of FinancialStatements applied when presenting the con-solidated financial statements refers primarilyto reporting financial income and expenses,equity and the occurrence of provisions as aseparate heading in the balance sheets.

Subsidiaries and associated companiesThe parent company reports participation in sub-sidiaries and associated companies according tothe acquisition value method. Only dividendsreceived are reported as income on the conditionthat these stem from profits earned after theacquisition. Dividends that exceed profits earnedare considered a repayment of the investmentand reduce the reported value of the participation.

Income

Completion of service assignmentsIn the Parent Company, income from serviceassignments is reported according to ÅRL 2,chapter 4 §when the service is completed. Untilsuch time, ongoing work on behalf of anotherparty in regard to the service assignment isreported at the lowest of the acquisition valueand net sale value on balance sheet date.

Anticipated dividendsAnticipated dividends from subsidiaries arereported when the parent company has soleright to determine the size of the dividend andthe Parent Company has decided on the sizeof the dividend before the Parent Companyhas published its financial statements.

Property, plant and equipment

Owned assetsProperty, plant and equipment in the ParentCompany are recognised at acquisition valueafter deductions for accumulated depreciationsand impairment when applicable in the sameway applied for the Group but with additionsfor revaluation of assets when applicable.

Leased assetsThe Parent Company recognises all leases in accordance with the regulations for operating leases.

TaxesThe Parent Company recognises untaxedreserves including deferred tax liabilities. In theconsolidated financial statements however,untaxed reserves are divided among deferredtax liability and shareholders’ equity.

Financial guarantee contractsThe Parent Company’s financial guaranteecontracts consist primarily of security under-taking to the benefit of subsidiaries. Financialguarantees mean that the company has acommitment to compensate the owner of adebt instrument for losses incurred because anamed debtor did not make payment on matu-rity in accordance with the contractual terms.In reporting financial guarantee contracts, theParent Company adopts the Swedish FinancialAccounting Council’s respite compared withthe rules in IAS 39. The respite refers to finan-cial guarantee contracts issued on behalf ofsubsidiaries. The Parent Company recognisesfinancial guarantee contracts as provision inthe balance sheet when the company has anobligation for which payment will probably berequired to settle the obligation.

Group contributions and owner contributionsfor legal entities

The company reports Group contributions andowner contributions in accordance with thestatement from the Swedish FinancialAccounting Council’s Emerging Issues TaskForce. Owner contributions are booked directlyagainst shareholders’ equity for the receiverand capitalised in shares and contributor par-ticipations, to the extent that impairment is notrequired. Group contributions are reported inaccordance with their financial substance. Thismeans that Group contributions issued with thepurpose of minimising the Group’s total tax arereported directly against profit brought forwardafter deductions for their current tax effects.



Segment reporting is presented for the Group’sbusiness segments and geographic areas. The Group’s internal reporting system is set upon follow-up on the returns of the Group’sgoods and services, which is why the businesssegments are the primary basis for division.Internal prices between the Group’s differentsegments are fixed using the “arm’s-lengthprinciple”, i.e. between parties who are self-sufficient from each other, well informed andwith an interest in completing the transaction.

In the segments’ profit, assets and liabilitiesinclude directly attributable items and itemsthat can be distributed to the segment in a rea-

sonable and reliable manner Non-distributeditems consist of interest and dividend income,gains from the sale of financial investments,interest expenses, losses from the sale offinancial investments, the Group’s share oflosses in associated companies, tax expensesand general administration expenses.

Assets and liabilities not distributed to thesegments are deferred tax claims and deferredtax liabilities. The segments’ investments inproperty, plant and equipment as well as intan-gible fixed assets include all investmentsexcept investments in short-term equipmentand equipment of a lesser value.

The Group is organised into four segments,OEM Automatic, OEM Electronics, Cyncronaand Development. The Hydraulik segment wasdivested on 30 November 2006 and is report-ed as divested business unit below.

For a description of activities in the businesssegments refer to pages 20-29 in the AnnualReport. Parent Company activities aredescribed in the Directors’ Report.

Other operations include the Parent Compa-ny, owned shares in underlying companies,property companies owning operating proper-ties where the Group conducts its own business.

NOTE 2. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

YEAR 2007 Other Total DivestedOEM OEM business Elimination/ remaining business

Automatic Electronics Cyncrona Development units Undistributed business units units Total

INCOME

External sales 806.3 274.8 187.7 212.0 1.4 1 482.2 - 1 482.2

Internal sales 7.0 1.2 0.6 9.2 26.1 -44.1 0.0 - 0.0

Total income 813.3 276.0 188.3 221.2 27.5 -44.1 1 482.2 0.0 1 482.2

PROFIT

Operating income 94.5 15.0 4.3 16.3 6.9 - 137.0 137.0

Other financial items 2.1 2.1 2.1

Tax expenses -38.3 -38.3 -38.3

Profit divested business unit 2.0 2.0

Profit/Loss 94.5 15.0 4.3 16.3 6.9 -36.2 100.8 2.0 102.8

OTHER INFORMATION

Assets 368.8 110.2 140.7 108.0 622.5 -460.5 889.7

Liabilities 225.4 75.0 90.4 59.9 348.7 -460.5 338.9

Investments intangible

fixed assets 27.3 - - - 1.1 - 28.4

Investments property, plant

and equipment 6.4 0.8 2.6 0.5 21.7 - 32.0

Amortisation of goodwill - - - - - - 0.0

Amortisation of intangible

fixed assets -2.2 - - - - - -2.2

Depreciation of property,

plant and equipment -3.8 -0.4 -1.2 -1.2 -6.0 - -12.6



YEAR 2006 Other Total DivestedOEM OEM business Elimination/ remaining business

Automatic Electronics Cyncrona Development units Undistributed business units units Total

INCOME

External sales 691.3 305.2 244.4 205.0 2.0 1 447.9 142.2 1 590.1

Internal sales 6.5 1.4 0.2 7.7 45.5 -61.3 0.0 - 0.0

Total income 697.8 306.6 244.6 212.7 47.5 -61.3 1 447.9 142.2 1 590.1

PROFIT

Operating income 89.4 18.8 14.2 13.0 -8.7 - 126.7 15.5 142.2

Other financial items 0.8 0.8 -0.3 0.5

Tax expenses -36.7 -36.7 -4.3 -41.0

Profit divested business unit 79.9 79.9

Profit/Loss 89.4 18.8 14.2 13.0 -8.7 -35.9 90.8 90.8 181.6

OTHER INFORMATION

Assets 248.9 102.9 134.3 107.0 562.8 -211.6 944.3

Liabilities 157.5 72.5 82.3 57.5 147.9 -231.4 286.3

Investments intangible

fixed assets 10.2 - - - - - 10.2

Investments property, plant

and equipment 4.1 0.8 0.8 1.6 33.0 - 40.3

Amortisation of goodwill - - - - - - -

Amortisation of intangible

fixed assets -1.5 - - - - - -1.5

Depreciation of property, plant

and equipment -2.5 -0.5 -1.5 -1.5 -5.7 - -11.7

GEOGRAPHIC AREAS

External sales Assets Liabilities Investments

2007 2006 2007 2006 2007 2006 2007 2006

Remaining business units

Sweden 894.5 851.3 441.1 610.3 98.1 97.3 24.8 22.4

Denmark 82.9 67.0 133.0 39.3 71.3 24.9 0.3 0.2

United Kingdom 77.4 65.9 51.0 50.0 20.3 18.9 0.5 0.4

Finland 272.5 320.8 147.9 153.4 97.5 101.1 3.7 16.5

The Netherlands 3.8 6.8 9.8 8.2 2.2 2.4 - 0.0

Norway 78.5 80.7 45.3 43.5 26.1 27.4 0.1 0.3

Poland 42.7 34.7 17.0 11.0 10.0 6.4 1.9 0.1

Estonia - - 4.0 3.5 3.1 3.1 - 0.4

Latvia - - 0.4 - 0.7 - 0.2 -

Lithuania - - 0.0 - 0.1 - - -

Czech Republic 29.9 20.7 40.1 25.1 8.9 4.8 0.5 0.0

Slovakia - - 0.1 - 0.1 - - -

Total remaining business units 1 482.2 1 447.9 889.7 944.3 338.4 286.3 32.0 40.3

Divested business units

Sweden - 142.2 - - - - - -

Total 1 482.2 1 590.1 889.7 944.3 338.4 286.3 32.0 40.3



NOTE 5. ACQUISITION OF OPERATIONS

The acquired companies’ net assets at the time of acquisition in accordance with a preliminary assessment. In terms of Crouzet AB, the assessment is definite.

2007 2006

Trademarks 9.5 -

Customer relations - 11.1

Property, plant and equipment 20.5 11.8

Financial assets 0.1 -

Deferred tax claims 0.6 -

Inventories 20.3 4.6

Accounts receivable and other receivables 27.6 4.4

Cash and cash equivalents 11.9 7.3

Deferred tax liability -3.8 -4.1

Long-term liabilities -19.8 -

Current liabilities -30.2 -5.2

Net 36.4 29.9

Deduction of 50% ownership previously recognised using the equity method -5.6

-Net identifiable assets and liabilities 30.8 29.9

Group goodwill 17.8 -

Purchase price -48.6 -29.9

Due in accordance with agreement 10.3 3.0


Net effect of cash and cash equivalents -26.4 -19.6

Other information about intangible assets, refer to Note 16.

NOTE 3. OTHER OPERATING INCOME

THE GROUP PARENT COMPANY

2007 2006 2007 2006

Capital gain tenant-owner right - 1.8 - 1.8

Capital gain property 13.2 0.7 - -

Total 13.2 2.5 - 1.8

NOTE 4. AVAILABLE-FOR-SALE ASSETS

THE GROUP

2007 2006

Property in Denmark 7.1 -

Total 7.1 0.0

Agreement signed 13 Dec 2003 for the sale of property owned by Cyncrona Denmark. Effective from this date, the property is treated as an asset availablefor sale. According to the terms of the agreement, the property is to be vacated 1 March 2008. The property is part of the Cyncrona business segment, andthe company will rent smaller facilities after relinquishing possession. The estimated gain incurred from relinquishing the property is about SEK 5.4 million.



ACQUISITIONS 2007On 2 January 2007, OEM acquired the remaining 50% of the shares in Crouzet AB, name changed to OEM Control AB, for EUR 0.6 million in cash.The company trades in automation components. The business has been integrated into OEM Automatic AB and OEM Motor AB. The acquisitionmeans an annual increase in sales of about SEK 30 million but had an insignificant impact on the Group’s profits in 2007.

Effects of the acquis i t ion Net assets of the acquired company on acquisition (SEK m): Booked value Fair value Fair value

in Crouzet AB adjustment in the Group


Inventories 4.1 4.1



Accounts payable and other liabilities -13.1 -13.1

Net identifiable assets and liabilities 11.3 0 11.3

Deduction of 50% ownership previously recognised using the equity method -5.6

Group goodwill -

Purchase price* -5.7

Cash and cash equivalents 11.6

Net effect of cash and cash equivalents 5.9

*Including the fee for acquisition expenses in the amount of SEK 0.1 million.

On 1 September 2007, OEM acquired 100% of the shares in MPX Elektra ApS in Denmark for DKR 4 million. 75 % was paid cash in 2007 and theremaining 25% will be paid in 2008 in accordance with the agreement. The company trades in a broad selection of industrial batteries for the Danishmarket. The acquired unit contributed sales of SEK 7.7 million and profit before tax of SEK 0.4 million for the 1 September to 31 December period.Had the acquisition occurred as per 1 January, impact on the Group’s sales would have been SEK 16.7 million and profit SEK 1 million. Goodwill isattributable to the benefits of co-ordination with existing units within the Group OEM Automatic and good profitability.

Effects of the acquis i t ion Net assets of the acquired company on acquisition (SEK m): Booked value in Fair value Fair value

MPX Elektra ApS adjustment in the Group


Financial assets 0.1 0.1

Inventories 4.2 4.2




Net identifiable assets and liabilities 0.5 0 0.5

Group goodwill 4.5


Due in accordance with agreement 1.2


Net effect of cash and cash equivalents -3.5



(CONT. NOTE 5)

On 10 December 2007 OEM acquired 100% of the shares in Klitsö Processtechnic A/S in Denmark for DKR 28.2 million plus a maximum DKR 6 mil-lion in additional purchase price. 75% was paid cash in 2007 and the remaining 25% will be paid in 2008 in accordance with the agreement. Whererelevant, addition purchase prices will be paid 2009 and 2010. The company trades in valves and pneumatic systems for Danish industrial customersprimarily and represents several important suppliers for the group OEM Automatic, which gives significant synergy effects. The acquired unit contribu-ted sales of SEK 5.5 million and profit before tax of SEK 0.2 million for December. Had the acquisition occurred as per 1 January, impact on theGroup’s sales would have been SEK 87.8 million and profit SEK 5.6 million. Goodwill is attributable to the benefits of co-ordination with existing unitswithin the Group OEM Automatic and good profitability.

EFFECTS OF THE ACQUISITION Net assets of the acquired company on acquisition (SEK m): Recognised value Fair value Fair value

of Klitsö adjustment in the GroupProcesstechsnic A/S

Trademarks - 9.5 9.5

Property, plant and equipment 12.8 5.7 18.5



Cash and cash equivalents - 0.0

Deferred tax liability - -3.8 -3.8

Long-term liabilities -19.8 -19.8


Net identifiable assets and liabilities 13.2 11.4 24.6

Group goodwill 13.3



Cash and cash equivalents 0



ACQUISITIONS 2006On 12 April 2006, the Group acquired 100% of the shares in EIG spol. s.r.o., name changed to EIG — OEM Automatic spol. s.r.o. for EUR 3.2 million. The company operates in the Czech Republic. 90% was paid cash in 2006 and the remaining 10% paid in 2007 in accordance with the agreement.The company trades in automation components and has been in business since 1990. It represents several of company group OEM Automatic’s mostimportant suppliers, thereby generating significant synergy effects. During the first nine months that followed the acquisition, the subsidiary contributedSEK 1.8 million to the Group’s profit in 2006. If the acquisition had been made per 1 January, the effect on the Group’s profit would have been SEK4.3 million. Goodwill is attributable to the benefits of co-ordination with existing units within the Group OEM Automatic and good profitability.

EFFECTS OF THE ACQUISITION Net assets of the acquired company on acquisition (SEK m): Recognised value Fair value Fair value

of OEM Automatic adjustment in the Groupspol.s.r.o.

Customer relations - 11.1 11.1

Property, plant and equipment 6.1 5.7 11.8

Inventories 4.6 4.6



Deferred tax liability - -4.1 -4.1


Net identifiable assets and liabilities 17.2 12.7 29.9

Group goodwill -

Purchase price -29.9







NOTE 6. DIVESTED BUSINESS UNITS

On 30 November, the Group sold the Hydraulik group comprised of JMS Systemhydraulik AB and affiliated property company, Fastighets AB Hydrau-len, where the company conducts its business activities in Borås. Hydraulik was an independent business segment. The Board’s plan to divest thebusiness unit was adopted during the second half of 2006 in conjunction with a decision that JMS Systemhydraulik AB is a relatively small player on alarge market, one which is restricted to a few major players. In calculating the profit of divested business units, SEK 3 million was reserved based onthe fact that the final payment of SEK 11.4 million in accordance with the agreement in would be made 31 December 2007. The agreement includedprovisions for accounts receivable and deliveries, etc. The settlement has been made and the provision was SEK 2 million in excess which has a posi-tive effect on profits for 2007.

The purchase price was SEK 120 million.

PROFIT FROM DIVESTED BUSINESS UNITS

2007 2006

Income - 142.2

Trading goods - -92.6

Other expenses - -8.9

Personnel expenses - -24.4

Depreciation of property, plant and equipment - -0.8

Financial expenses - -0.3

Profit before tax - 15.2

Tax - -4.3

Profit after tax but before the profit of selling the divested business units - 10.9

Profit from selling divested business units after tax 2.0 79.9

Profit from divested business units, net after tax 2.0 90.8

Earnings per share from remaining business units



EFFECT OF INDIVIDUAL AND LIABILITIES IN THE GROUP OF THE SALE

2007 2006

Intangible fixed assets - -6.4

Property, plant and equipment - -10.1

Inventories - -28.1

Accounts receivable - -27.2

Other receivables - -2.0

Deferred tax liabilities - 0.5

Accounts payable, trade - 17.0

Other liabilities - 28.4

Divested assets and liabilities, net - -27.9

Purchase price - 120.0

Deducted: Not paid 2006, to be paid 2007 - -45.6

- 74.4

Paid purchase sum 2007 43.9 -

Impact on cash and cash equivalents 43.9 74.4



SALARIES AND OTHER REMUNERATION DISTRIBUTED PER COUNTRY AND BETWEEN SENIOR

EXECUTIVES. AND OTHER EMPLOYEES

2007 2006Senior Others Senior Others

executives employees executives employees

PARENT COMPANY

Sweden, of which senior executives 12 people (11) 7.1 6.4 7.6 6.5

(Whereof bonus) (0.3) (1.2)

NOTE 7. EMPLOYEES AND PERSONNEL EXPENSES

AVERAGE NO. OF EMPLOYEES 2007 Whereof men 2006 Whereof men

PARENT COMPANY

Sweden 24 79% 19 79%

SUBSIDIARIES

Sweden 308 76% 299 79%

Denmark 28 71% 22 73%

United Kingdom 29 86% 29 90%

Estonia 5 100% 3 100%

Finland 93 82% 90 81%

The Netherlands 2 50% 2 50%

China 19 84% 18 89%

Latvia 1 100% - -

Lithuania 1 100% - -

Norway 19 84% 18 83%

Poland 27 74% 23 78%

Slovakia 1 100% - -

Czech Republic 12 92% 8 88%

Total in subsidiaries 545 80% 512 80%

Group total 569 78% 531 80%

SALARIES, OTHER REMUNERATION AND SOCIAL SECURITY EXPENSES

2007 2006

Salaries and Social security Salaries and Social securityremuneration expenses remuneration expense

Parent company 13.5 7.6 14.1 7.2

(Whereof pension expenses) (2.5) (2.4)

Subsidiaries 175.6 60.1 160.8 56.0


Group total 189.1 67.7 174.9 63.2




2007 2006Senior Other Senior Other

executives employees executives employees

SUBSIDIARIES

Sweden 5.9 94.1 5.1 86.5


Denmark 1.7 12.3 0.8 9.9

(Whereof bonus) (-) (0.1)

United Kingdom 0.9 9.2 0.8 8.4


Estonia - 0.9 - 0.4

(Whereof bonus) (-) (-)

Finland 3.2 29.9 3.2 28.0


The Netherlands 0.7 0.3 0.2 0.3


China - 0.4 - 0.4

(Whereof bonus) (-) (-)

Latvia - 0.1

(Whereof bonus) (-)

Lithuania - -

(Whereof bonus) (-)

Norway 2.2 7.3 1.9 9.5


Poland 0.7 4.0 0.7 3.1


Slovakia - -

(Whereof bonus) (-)

Czech Republic 0.4 1.4 0.4 0.8

(Whereof bonus) (-) (0)

Subsidiaries total, of which senior executives 18 people (18) 15.7 159.8 13.1 147.3(Whereof bonus) (1.2) (1.6)

The Group total, of which senior executives 30 people (29) 22.8 166.2 20.7 153.8(Whereof bonus) (1.2) (2.8)

Pension premiums in the amount of SEK 3.1 million (2.8) have been paid for the category senior executives.

REMUNERATION FOR SENIOR EXECUTIVES AND BOARD MEMBERSGROUP MANAGEMENT

2007 2006Base pay, Variable Other Pension Base pay, Variable Other Pension board fee remuneration benefits expenses Total board fee remuneration benefits expenses Total

Jan Svensson Chairman of the Board 0.2 - - - 0.2 - - - - -

Hans Franzén Chairman of the Board - - - - - 0.4 - - - 0.4

Hans Franzén Board member 0.1 - - - 0.1 0.1 - - - 0.1

Ulf Barkman Board member 0.1 - - - 0.1 0.1 - - - 0.1

Gunnar Eliasson Board member 0.1 - - - 0.1 0.1 - - - 0.1

Orvar Pantzar Board member 0.1 - - - 0.1 0.1 - - - 0.1

Lars-Åke Rydh Board member 0.1 - - - 0.1 0.1 - - - 0.1

Agne Svenberg Board member 0.1 - - - 0.1 - - - - 0.0

Jörgen Zahlin CEO 2.3 - - 0.4 2.7 2.1 0.6 - 0.4 3.1

3.3 0.0 0.0 0.4 3.7 3.1 0.6 0.0 0.4 4.1

Other senior executives

(7 people)* 5.2 0.5 0.2 1.0 6.9 4.9 0.9 0.2 0.9 6.9

Total 8.5 0.5 0.2 1.4 10.6 8.0 1.5 0.2 1.3 11.0

* Of the other senior executives, two people receive remuneration from subsidiaries. This remuneration is included at an amount of SEK 1.9 million (1.9).Pension expenses correspond to SEK 0.3 million (0.2).



SICK LEAVE PARENT COMPANY

2007 2006

Total sick leave as a proportion of normal working hours 0,8% 1,3%

Proportion of total sick leave that refers to continuous sick leave of 60 days or more 0,0% 0,0%

SICK LEAVE AS A PROPORTION OF

EACH GROUP’S NORMAL WORKING HOURS

Sick leave by gender:

Men 0.3% 0.4%

Women 2.6% 4.4%

SICK LEAVE BY AGE CATEGORY:

29 years old or younger 0.3% 0.0%

30-49 years 0.5% 0.7%

50 years old or older 2.8% 4.3%

GENDER DISTRIBUTION


(Share of women) (Share of women)

2007 2006 2007 2006

Board of Directors 0% 0% 0% 0%

Other Senior Executives 0% 0% 0% 0%

NOTE 8. FEES AND REIMBURSEMENT OF EXPENSES TO THE AUDITORS


2007 2006 2007 2006

KPMG

Audit assignments 1.1 1.1 0.2 0.2

Other assignments 0.2 0.1 0.2 0.1

OTHER AUDITORS

Audit assignments 0.6 0.6

Total 1.9 1.8 0.4 0.3

Audit assignments refers to examining the annual report and accounts, and the administration by the Board and the Managing Director, any othertasks that fall to the Company’s auditors, and providing counsel or any other contribution brought about by observations during that review, or in performing other such tasks. All else falls under other assignments.

(CONT. NOTE 7)

CEO/Managing Director

Pension expenses are defined contribution.There are no other pension obligations. The variable remuneration is as in prior yearsbased on the attained profit levels and gave noresult for 2007. SEK 0.6 million was paid in vari-able remuneration based on attained profit levelwhich gave a 28% result for 2006. Bonus couldbe paid at a maximum of 50% of the basic pay.The period of notice for the Managing Director is24 months from the Company’s side, with theobligation to work, and 6 months from the Man-aging Director’s side. Retirement age for theManaging Director is 60 years. CEO/ ManagingDirector’s salary and remuneration is set by theBoard.

Other Senior Executives

Pension expenses are defined contribution.There are no other pension obligations. Variableremuneration for the amount of SEK 0.5 millionwas paid in 2007 and SEK 0.9 million for 2006.Variable remuneration can, based on theattained profit level, be paid at a maximum 40%of the basic pay. The period of notice for othersenior executives is maximum 12 months fromthe company’s side, with the obligation to work,and maximum 6 months from the employee’sside. If the company serves notice after the ageof 55 years, a further maximum of 6 monthssalary is paid. Retirement age for other seniorexecutives is between 60 and 65 years.

Guidelines for remuneration and other

employment conditions for senior executives

The Annual General Meeting decided on guidelinesfor senior executives by which management is toapply salaries adjusted to market conditions andother remuneration terms. In addition to a basesalary, management can also receive variable remu-neration which can amount to a maximum 50% ofthe basic pay. Senior executives are to have definedcontribution pension terms that are adjusted tomarket conditions and amount to a maximum 20%of the basic pay. All share-related incentive schemesare to be resolved by the Annual General Meeting.The levels of remuneration coincide mainly with pre-vious years. The period of notice will not exceed 24months and involves the obligation to work duringthe period of notice. No employment agreementsare to contain conditions for severance pay.



NOTE 10. INCOME FROM SHARES IN GROUP COMPANIES

PARENT COMPANY

2007 2006

Dividends received 42.0 2.7

Result of liquidation 3.1 -

Capital gain sold shares -1.0 101.5

Total 44.1 104.2

NOTE 11. SHARES IN EARNINGS OF ASSOCIATED COMPANIES/

Income from participation in associated companies


2007 2006 2007 2006

Dividends received - - - 1.0

Income from shares in associated companies - 1.0 - -

Total 0.0 1.0 0.0 1.0

NOTE 12. F INANCIAL INCOME/

OTHER INTEREST INCOME AND SIMILAR PROFIT ITEMS


2007 2006 2007 2006

Interest income on bank balance 6.8 2.7 4.9 2.3

Other financial income 1.5 0.8 - -

Total 8.3 3.5 4.9 2.3

NOTE 13. F INANCIAL EXPENSES/

INTEREST EXPENSES AND SIMILAR LOSS ITEMS


2005 2004 2005 2004

Interest expenses on other liabilities -3.5 -2.4 - -0.3

Other financial expenses -2.7 -1.3 -0.1 -

Total -6.2 -3.7 -0.1 -0.3

NOTE 9. DEPRECIATION/AMORTISATION/IMPAIRMENT OF PROPERTY, PLANT AND

EQUIPMENT AND INTANGIBLE FIXED ASSETS


2007 2006 2007 2006

Goodwill, impairment - - - -

Customer relations, amortisation -2.0 -1.5 - -

Trademarks, amortisation -0.2 - - -

Buildings and land, depreciation -2.8 -2.8 -0.6 -0.6

Equipment, tools and installations, depreciation -9.8 -9.2 -0.9 -1.2

Total -14.8 -13.5 -1.5 -1.8



NOTE 14. TAXES


2007 2006 2007 2006

Current tax -39.0 -33.9 1.5 3.7

Deferred tax 0.7 -2.8 -0.1 0.0

Total recognised tax expenses -38.3 -36.7 1.4 3.7

Tax relating to items recognised directly against capital -26.2 -16.3

LINK BETWEEN TAX EXPENSES FOR THE YEAR AND INCOME BEFORE TAX

Reported income before tax 139.1 127.5 37.9 91.4

Applicable tax rate for income tax in Sweden -38.9 -35.7 -10.6 -25.6

Non-taxable share dividends - - 11.8 1.0

Non-taxable gain from sale of shares in subsidiaries - - 0.6 28.4

Other taxable income/non-deductible items 0.6 -1.0 -0.4 -0.1

Total recognised tax expenses -38.3 -36.7 1.4 3.7

DEFERRED TAX CLAIMS

Deficit deductions 2.7 1.9 - -

Goodwill 1.4 1.4 - -

Other 2.3 0.6 - -

Total deferred tax claims 6.4 3.9 - -

DEFERRED TAX LIABILITY

Intangible fixed assets 4.0 2.3 - -

Buildings and land 6.6 5.5 1.8 1.7

Untaxed reserves 21.2 18.8 - -

Total deferred tax liability 31.8 26.6 1.8 1.7

The Group has SEK 0.5 million (2.3) in inactive deferred tax claims corresponding to deficit deduction, which, when measured in accordance with the probabili-

ty principle, cannot be assumed to be usable as it is not possible to offset the surpluses against these within a reasonable period of time. Deficit deductions that

are not calculated and can be used within 3 years have not been activated. The acquisition of subsidiaries affected the deferred tax liability in the amount of

SEK 3.8 million while translation differences recognised directly in shareholders’ equity affected deferred tax liability in the amount of SEK 0.4 million.

NOTE 15. GOODWILL

THE GROUP

2007 2006

ACCUMULATED ACQUISITION VALUES

At the start of the year 9.2 15.6

New acquisitions 17.9 -

Divestments - -6.4

Total acquisition value 27.1 9.2

ACCUMULATED IMPAIRMENTS

At the start of the year -6.2 -6.2

Impairments - -

Total impairments -6.2 -6.2

Residual value at year-end 20.9 3.0



GOODWILL AND INTANGIBLE ASSETS WITH AN INDETERMINABLE USEFUL LIFE

Companies 2007 2006

Indoma AB 3.0 3.0

MPX Electra ApS 4.6 -

Klitsö Processtechnic AS 13.3 -

20.9 3.0

Telfa AB 8.8 8.8

Total 29.7 11.8

Impairment test for intangib le assets

The companies have performed impairmenttests on cash-generating units containinggoodwill and intangible assets that have anindeterminable useful life, based on the usagevalues of the units.

The above amounts relate to goodwill for theamount of SEK 20.9 million and acquired sup-plier relations for Telfa AB in the amount of SEK8.8 million. These are long-standing supplierrelations that are appraised as stable over theforeseeable future.

The usage values are based on estimatedfuture cash flows for a total of twenty (20) years

with the starting point in the existing businessplans for the next three (3) years. The principalassumptions for the measurement for all cash-generating units are assumptions about mar-gins and volume growth.

The business plans are based on experiencefrom previous years. Current market shares areexpected to increase marginally in the forecastperiod. According to the business plans, opera-tional growth is expected to reach between 5 and10% each year. Growth is expected to be 3 to 5%each year for other years in the period of use.

The gross profit margins are expected to reachthe same level as at the end of 2007. The forecast cash flows have been convertedto a present value using a discount rate of 12%before tax.

The recoverable values for the units aregreatly in excess of their reported values. TheCompany management is of the opinion thatno reasonable changes in the key assumptionswill lead to the estimated recoverable values forthe units being lower than the reported values.

When Klitsö Processtechnic A/S was acquired in2007, a purchase sum was paid that exceededthe net of assets and liabilities in the Company bySEK 28.5 million with deductions for deferred taxliabilities of SEK 3.8 million. The surplus value wasanalysed and distributed as SEK 5.7 million tobuildings, SEK 9.5 million to trademarks and SEK13.3 million to goodwill. Trademarks amounting toSEK 9.5 million are assessed to have a useful lifeof five (5) years, which means that these will beamortised by 20% every year.

Other acquisitions made in 2007 have notaffected the intangible fixed assets.

The Parent Company’s purchase relates todevelopment costs for software amounting toSEK 1.1 million, which is written off during itsassessed useful life of five (5) years. Amortisa-tion begins January 2008.

The purchase sum paid for the acquisition ofEIG — OEM Automatic spol.s.r.o. in 2006exceeded the net of assets and liabilities in thecompany by SEK 11.1 million. The surplusvalue was analysed and distributed as SEK 0.9million to orders on hand and SEK 10.2 millionto customer relations. The value of orders onhand relates to contribution margin and is

amortised in line with invoicing. At the end of2006, all invoicing had been completed andSEK 0.9 million amortised. The amount hasbeen charged to costs for trading goods. Customer relations amounting to SEK 10.2 million are assessed to have a useful life of five(5) years, which means that these will be amortised by 20% every year. Impairment testfor other intangible assets, refer to Note 15.

NOTE 16. OTHER INTANGIBLE ASSETS


2007 2006 2007 2006

Accumulated acquis i t ion va lues

At the start of the year 21.0 9.9 - -

New acquisitions 10.5 11.1 1.1 -

Total acquisition value 31.5 21.0 1.1 -

ACCUMULATED AMORTISATION

At the start of the year -3.5 -1.1 - -

Amortisation -2.2 -2.4 - -

Total amortisation -5.7 -3.5 - -

Residual value acc. to plan at year-end 25.8 17.5 1.1 -

ACCUMULATED EXCESS AMORTISATION

At the start of the year - - - -

Annual change - - -0.3 -

- - -0.3 -

Booked value 25.8 17.5 0.8 -



NOTE 17. PROPERTY, PLANT AND EQUIPMENT

2007 2006

THE GROUP Buildings Equipment, Buildings Equipment, and land tools and and land tools and

installations installations


At the start of the year 141.1 116.5 125.6 126.1

New acquisitions 16.0 16.0 25.8 15.3

Acquired through business acquisitions 18.4 10.8 13.4 0.9

Sales and disposals -25.8 -21.3 -22.3 -25.2

Reclassifications -0.9 - 0.6

Translation differences for the year 2.8 1.0 -1.4 -1.2

Total acquisition value 152.5 122.1 141.1 116.5

ACCUMULATED DEPRECIATION ACCORDING TO PLAN

At the start of the year -31.1 -86.7 -33.0 -96.2

Acquired through business acquisitions -2.5 -5.2 -1.6 -0.9

Sales and disposals 9.1 17.5 5.8 19.2

The year’s depreciation according to plan

at acquisition values -2.8 -9.9 -2.8 -9.2

Reclassifications 0.3 - -0.7

Translation differences for the year -2.3 -0.8 0.5 1.1

Total depreciation according to plan -29.6 -84.8 -31.1 -86.7

Booked value at end of the year 122.9 * 37.3 109.8 * 29.8

*The value of the buildings amounts to 99.0 (100.8) for the Group and 17.3 (17.6) for the Parent Company.

2007 2006

PARENT COMPANY Buildings Equipment, Buildings Equipment, and land tools and and land tools and

installations installations


At the start of the year 27.1 19.0 26.9 19.5

New acquisitions 0.1 0.4 0.2 0.6

Sales and disposals - -6.9 - -1.1

27.2 12.5 27.1 19.0

Accumulated depreciat ion according to p lan

At the start of the year -8.7 -16.4 -8.1 -16.1

Sales and disposals - 6.9 - 0.9

The year’s depreciation according to plan at acquisition values -0.6 -0.9 -0.6 -1.2

-9.3 -10.4 -8.7 -16.4

Residual value acc. to plan at year-end 17.9 * 2.1 18.4 * 2.6

ACCUMULATED EXCESS AMORTISATION

At the start of the year 0.0 -0.4 0.0 -0.6

Annual change 0.0 - 0.0 0.2

0.0 -0.4 0.0 -0.4

Booked value 17.9 1.7 18.4 2.2

TAXATION VALUE

Buildings 11.2 8.6

Land 1.5 1.0

Total taxation value 12.7 9.6



NOTE 18. SHARES AND PARTICIPATION IN GROUP COMPANIES

OEM Industrial Components AB, Sweden 556051-4514 Tranås 100 000 100% 5 000 46.2

OEM Automatic AB, Sweden 556187-1012 Tranås - 100%

OEM Automatic AS, Norway - - - 100%

OEM Automatic A/S, Denmark - - - 100%

OEM AutomaticOY, Finland - - - 100%

OEM Automatic Ltd, UK - - - 100%

OEM Automatic sp.z o.o., Poland - - - 100%

OEM China Development B.V, Netherlands - - - 100%

Internordic Bearings AB, Sweden 556493-8024 Nässjö

Egevo Elektronik AB, Sweden 556311-3306 Stockholm - 100%

OEM Electronics AB, Sweden 556054-3828 Tranås - 100%

Pronesto AB, Sweden 556112-6755 Stockholm - 100%

OEM Electronics OY, Finland - - - 100%

Indoma AB, Sweden 556326-5171 Jönköping - 100%

OEM Systemteknik AB, Sweden 556050-9076 Stockholm 1 000 100% 100 1.5

A. Karlsson Industriteknik AB, Sweden 556163-0905 Stockholm - 100%

Jubo Förvaltning AB, Sweden 556494-7058 Karlskoga - 100%

IBEC Bearings AB, Sweden 556194-8521 Stockholm - 100%

Skäggriskan AB, Sweden 556248-9780 Stockholm - 100%

OEM Electronics Production

Technology AB, Sweden 556038-8356 Stockholm 300 100% 300 78.4

Cyncrona AB, Sweden 556296-1838 Stockholm - 100%

Cyncrona AS, Norway - - - 100%

Cyncrona OY, Finland - - - 100%

Cyncrona A/S, Denmark - - - 100%

Cyncrona Sp.z.o.o, Poland - - - 100%

A. Karlsson Fastigheter AB, Sweden 556029-8456 Stockholm 10 000 100% 1 000 10.3

Intermate Electronics AB, Sweden 556266-6874 Tranås 1 000 100% 100 0.6

OEM Ejendomsselskab A/S, Denmark - - 1 300 100% DKK 1 300 - -1.2

OEM Fastighetsbolag AB, Finland - - 1 200 100% FIM 1 200 1.4

OEM Property Ltd, UK - - 400 000 100% GBP 400 5.1

OEM Motor AB, Sweden 556650-6498 Tranås 1 000 100% 100 0.1

Internordic Förvaltning AB, Sweden 556302-0873 Nässjö 1 000 100% 100 1.3

Hydroprodukter International

i Ängelholm AB, Sweden 556241-1099 Ängelholm 2 500 100% 250 - -0.8

Hydrac AB, Sweden 556466-0875 Borås 2 000 100% 200 0.1

Fotbromsen AB, Sweden 556150-4282 Karlskoga 5 000 100% 500 1.0

Telfa AB, Sweden 556675-0500 Göteborg 1 000 100% 100 10.0

OEM Eesti Ou., Estonia - - 10 000 100% EEK 40 0.0

EIG - OEM Automatic spol.s.r.o. , Czech Republic - - - 100% CZK 100 29.8 -0.1

OEM Control AB (formerly Crouzet AB) 556197-1911 Stockholm 24000 100% 2 400 6.9 6.9

OEM Automatic UAB, Lithuania - - 100 100% LTL 100 0.1 0.1

OEM Automatic SIA, Latvia - - 20 100% LVL 200 - -

OEM Automatic s.r.o., Slovakia - - - 100% SKK 200 0.1 0.1

MPX Electra ApS, Denmark - - 125 100% DKK 1,000 5.1 5.1

Klitsö Processtechnic AS, Denmark - - 1000 100% DKK 1,000 37.9 37.9

Total 235.9 48.0

Corp. Registered No. of Share of Face Booked Annual id.no. office shares capital value value change



NOTE 19. SHARES IN ASSOCIATED COMPANIES

Corp. Registered No. of Share of Face Booked Annual id.no. office shares capital value value change

THE GROUP

Crouzet AB, Sweden 556197-1911 Stockholm 12 000 - - - -5.6

PARENT COMPANY

Crouzet AB, Sweden 556197-1911 Stockholm 12 000 - - - -1.2

SPECIFICATION FOR GROUP VALUES RELATED TO OWNED SHARE OF INCOME, PROFIT,

ASSETS AND LIABILITIES.

Owned share as % Country Income Profit/Loss Assets Liabilities Shareholders’ equity

2006

Crouzet AB 50% Sweden 25.8 1.0 12.2 6.6 5.6

NOTE 20. PREPAID EXPENSES AND ACCRUED INCOME


2007 2006 2007 2006

Accrued commission income, etc. 0.8 1.8 - -

Other prepaid expenses 13.5 11.2 3.9 2.8

Total 14.3 13.0 3.9 2.8

NOTE 21. SHAREHOLDERS’ EQUITY

The shares consist of Class A and Class B. The face value is SEK 1.67 (5).

2007 2006

Shares Votes Shares Votes

Class A shares 10 votes 4 767 096 47 670 960 1 589 032 15 890 320

Class B shares 1 vote 18 402 213 18 402 213 6 134 071 6 134 071

Total 23 169 309 66 073 173 7 723 103 22 024 391

A 4:1 share split combined with an automatic redemption process was carried out in 2007. This process gave each shareholder three (3) new shares

and one (1) redemption share, which was redeemed. This means that the number of shares in the company has tripled.

For further information, see the section on share on pages 84-87.



REPURCHASED SHARES INCLUDED IN THE EQUITY ITEM

SURPLUS BROUGHT FORWARD INCLUDING THE YEAR’S PROFIT

Amounts that affected Number of shares: shareholders’ equity

2007 2006 2007 2006

Opening repurchased shares - 154 000 26.6 -12.2

The year’s purchase - 455 400 - -74.5

The year’s sales - -609 400 - 113.3

Closing repurchased shares - - 26.6 26.6

CAPITAL MANAGEMENTThe Board’s ambition is to achieve a good return on shareholders’ equity with limited financial risks during a period of stable growth. The targets for one business cycle are: - 15% annual growth in profit- 20% return on equity- Equity/assets ratio not lower than 35%

The last three years, the following results have been realised in terms of the targets:

2007 2006 2005

Growth of profit 1% 15% 25%

Return on shareholders’ equity: 18% 33% 20%

Equity/assets ratio: 59% 67% 63%

DIVIDENDSAfter balance sheet date, the Board proposed a dividend of SEK 3 per share (2.83).

The Board aims to propose a reasonable dividend of profits to the shareholders, by taking into account the financial position, the tax situation and anyneed for acquisitions or investments in the operation.

NOTE 22. F INANCIAL LEASING LIABILITIES

THE GROUP

2007 2006

Financial leasing liabilities fall due for payment as shown below:

Within one year 3.2 2.9

Between one and five years 9.8 9.3

Later than in five years - -

Total 13.0 12.2

The financial leasing liabilities relate to leasing of cars.



NOTE 23. PROVISIONS FOR PENSIONS AND SIMILAR OBLIGATIONS

DEFINED-BENEFIT OBLIGATIONS AND VALUE OF ADMINISTRATION ASSETS.

31.12.2007 31.12.2006

Current value of entirely or partially funded obligations 10.8 8.6

Fair value of plan assets -8.7 -8.3

Net of entirely or partially funded obligations 2.1 0.3

Current value of non-funded defined-benefit obligations - -

Net obligations before adjustments 2.1 0.3

Accumulated unrecognised actuarial gains (+) and losses (-) -2.5 -0.3

Net amount in balance sheet (obligations + assets -) -0.4 0.0

The net amount recognised in the following items in the balance sheet:

Other financial assets -0.7 0.0

Provisions for pensions and similar obligations 0.3 0.0


The net amount is split over plans in the following countries:

Norway -0.4 0.0


CHANGE IN CURRENT VALUE OF THE OBLIGATION

FOR DEFINED-BENEFIT PLANS

Obligation for defined-benefit plans as of 1 January 8.6 7.9

Pensions earned during the period 0.7 0.6

Interest on obligations 0.4 0.4

Paid benefits -0.3 -0.5

Actuarial gain or loss 1.4 0.2

Obligation for defined-benefit plans as of 31 December 10.8 8.6

CHANGE IN PLAN ASSETS’

FAIR VALUE

Fair value of plan assets as of 1 January 8.3 7.5

Contributed funds from employer 1.0 0.5

Paid benefits -0.3 -0.2

Expected return on plan assets 0.5 0.5

Actuarial gain or loss -0.8 -

Fair value of plan assets as of 31 December 8.7 8.3

EXPENSE RECOGNISED IN THE INCOME STATEMENT

Expenses for pensions earned during the year 0.8 0.6

Interest expenses 0.5 0.4

Expected return on plan assets -0.5 -0.5

Total net expenses in the income statement 0.8 0.5

ACTUARIAL ASSUMPTIONS

The following significant actuarial assumptions have been applied when

calculating the obligations: (weighed average values)

Discount rate 5.0% 5.5%

Expected return on plan assets 5.8% 6.5%

Future salary increases 4.5% 3.0%

Future increases of pensions 2.0% 2.0%

Employee turnover 4.3% 3.0%

Expected remaining length of service 19 years 18 years



In Norway, all employees are covered by defined-benefit pension plans. SEK 0.9 million is expected to be paid in contributions for the plans and theexpected return on the pension funds is expected to total SEK 0.6 million. In countries other than Sweden, all employees are covered by defined-contribution plans for which the Company pays fixed contributions to a separate legal entity and has no obligation to pay further contributions. The Group’s results are charged by costs as the benefits are earned.

The obligation of old age pension and family pension by a small section of the employees in Sweden is secured by an insurance policy with Alecta.According to a statement from the Swedish Financial Accounting Standards Council’s Emerging Issues Task Force, URA 42, this is a defined benefitplan which covers several employers. The Company has not had access to sufficient information to make it possible to report this plan as a definedbenefit plan for financial years 2007 and 2006. The pension plan according to ITP, which is secured via insurance with Alecta, is therefore reported asa defined-contribution plan. Contributions this year for pension insurance with Alecta amount to SEK 1.3 million (1.9). Alecta’s excess can be allocatedto the policy holders and/or the insured. At the end of 2007, Alecta’s excess in the form of the collective consolidation level was 152% (143). The collective consolidation level is made up of the market value of Alecta’s assets as a percentage of the insurance commitment calculated accordingto Alecta’s insurance calculation premise, which does not comply with IAS 19.

Most of the employees in Sweden are covered by defined-contribution plans. The Group’s total cost for defined-contribution plans is SEK 15.8 million (14.9). The Group’s total cost for defined-contribution plans is SEK 2.5 million (2.4).

(CONT. NOTE 23)

NOTE 24. OVERDRAFT

The majority of the Swedish companies are connected to a central account system with a total limit of SEK 125 million (150). The overall degree of utilisation is reported in the Parent Company under this item. The subsidiaries’ balance/liability in the central account system is reported in the ParentCompany, either as a receivable from, or a liability to, the subsidiaries. The total limit in the Group is SEK 259 million (260).

PLEDGED ASSETS TO CREDIT INSTITUTES


2007 2006 2007 2006

Property mortgages 10.0 20.0 7.5 7.5

Business mortgages 55.1 55.1 - -

Total 65.1 75.1 7.5 7.5

NOTE 25. ACCRUED EXPENSES AND PREPAID INCOME


2007 2006 2007 2006

Accrued holiday pay 23.5 19.4 2.0 1.8

Accrued social security expenses 11.9 11.3 1.4 1.7

Prepaid income 2.0 1.6 - -

Accrued supplier inv./commercial debts 4.7 5.2 - -

Other accrued expenses 26.0 22.2 2.4 4.1

Total 68.1 59.7 5.8 7.6


INTEREST RISKSThe interest risk is low. The Group does nothave any liabilities with fixed interest, and long-term receivables with fixed interest are verysmall. The risk of a shift in the interest ratecausing a significant change in fair value for theGroup is thus non-existent. The cash and bankitems, the overdraft item and other interest-bearing liabilities (finance leases) are marred bycash flow risks. A one per cent change in inter-est would on the balance sheet date entail achange of SEK 0.4 million (2.2) in the profit.

CURRENCY RISKS The currency risks are primarily due to pur-chases being made in foreign currency. Therisks are managed by the customer contractoften prescribing that the price must be adjust-ed in relation to any currency changes. Alterna-tively, the sale is carried out in the same cur-rency as the purchase. A detailed report isgiven in connection with the below table.

The currency flow of the Group is attributableto imports from Europe, Asia and North America.

Purchasing is split as a percentage as follows:

2007 2006

EUR 53% 53%

USD 21% 11%

JPY 8% 12%

GBP 5% 5%

SEK 2% 7%

Other currencies 11% 12%

100% 100%

Exchange rate changes significant currencies

Currency Weighed Weighed Changeaverage average

2006 2007

EUR 1 9.22 9.24 0%

USD 1 6.72 7.35 -9%

GBP 1 13.45 13.54 -1%

JPY 1 5.71 6.33 -10%

As long as it is possible, the Group eliminatesthe effects of exchange rate fluctuations by

using currency clauses in the customer contractand by purchasing and selling in the same cur-rency. On the whole, purchasing is carried out inthe supplier’s functional currency. From the tableabove it can be seen that 21% (11) for USD,53% (53) for EUR, 8% (12) for Yen and 5% (5) forGBP, 2% (7) for SEK and 11% (12) for other cur-rencies are attributable to purchasing in 2007.

The OEM Group manages the effects ofchanging exchange rates by currency clausesin the sales contract and by invoicing in thesame currency as the corresponding purchase.OEM sells goods to Swedish and foreign cus-tomers and either invoices in the purchasingcurrency or in another currency with currencyclauses with regard to the purchase currency.The currency clauses adjust 80-100% of thechanges in the exchange rate from the salesorder to the date of invoicing, depending onwhether OEM receives currency compensationfor the profit margin or not. There is often athreshold value, which means that exchangerate changes below 2.25% are not taken intoaccount. Currency adjustments are made

NOTE 26. F INANCIAL RISKS AND RISK MANAGEMENT

The OEM Group’s primary risks are connected to cur-rencies, customer credits and customer guarantees. Through matching, however, the risks havealmost been completely eliminated, through riskelimination that contributes to securing a relative-ly stable coverage ratio over time for the Group.In addition to the named risks, the Group has alimited interest risk in the form of a cash flow risk.

Customer guarantees have not been a causeof any risks of practical significance. There areoften corresponding rights of recourse againstthe supplier for provided guarantees. This man-agement has worked well in practice.

The OEM Group’s financial activities and management of financial risks is primarily per-formed in the Parent Company. There are plansfor risk management and how the risks are tobe limited. The plans are distinguished by a lowlevel of risk. The basis is a structured andeffective management of the financial risks thatarise in the business units.

FINANCIAL INSTRUMENTSThe OEM Group’s holdings of financial instrumentsthat constitute fixed assets are fairly limited. At theend of 2007, the book value of the financial assetsof long-term securities holdings was SEK 1.4 mil-lion (1.3) and other long-term receivables SEK 1.2million (0.5). The Group’s holding of financial instru-ments that represent current assets amounted atyear end to SEK 261 million (206) and accruedincome to SEK 0.8 million (1.8) and other receiv-ables to SEK 15.9 million (55.0).

As is evident above, the financial assets arecategorised as loans receivable and accountsreceivable to 99%. The financial liabilities aremeasured at accrued acquisition value. TheGroup does not have any liabilities with fixedinterest and at year-end long-term receivablesamounted to SEK 1.2 million (0.5), which isless than one percent of total assets. The riskof a shift in the interest rate causing a signifi-cant change in fair value is thus non-existent.The item cash and bank balance SEK 127

million (288), the overdraft item SEK 71.3 mil-lion (53.1) and other interest-bearing liabilities(finance leases) SEK 13.0 million (12.2) havevariable interest rates and are thus marred bycash flow risks. Overdrafts apply for one (1)year and are not combined with any specificrequirements from the guarantor.

LIQUIDITY RISKSLiquidity risk relates to the risk that the Groupwill not be able to fulfil its obligations associat-ed with financial liabilities. This is preventedwhenever possible by ensuring an age struc-ture that makes it possible to take any neces-sary alternative capital procurement measuresshould it be needed. Cash and bank balanceat the end of the year was SEK 127 million(288) and financial current assets were SEK261 million (206). The Group’s financial liabilitiesat the end of the year totalled SEK 266 million(223) and the age structure is presented in thetable below.

2007 2006

(SEK m) Within 1-3 3 months- 1 year Within 1-3 3 months- 1 year Total 1 month months 1 year and longer Total 1 month months 1 year and longer

Overdraft* 71.3 - - 71.3 - 53.1 53.1

Accounts payable, etc. 181.8 122.1 58.3 1.4 - 157.4 116.2 41.2 - -

Finance

leasing liabilities 13.0 0.3 0.5 2.4 9.8 12.2 0.2 0.5 2.2 9.3

266.1 122.4 58.8 75.1 9.8 222.7 116.4 41.7 2.2 62.4

* Overdraft runs for one (1) year at a time.




NOTE 27. OPERATING LEASES


2007 2006 2007 2006

Leases where the Company is the lessee

Non-redeemable lease payments amount to

Within one year 10.1 8.7 0.9 0.4

Between one and five years 18.8 22.0 0.9 0.2

Longer than five years - - - -

Total 28.9 30.7 1.8 0.6

Most of the above operating leases relate to rent for premises.

symmetrically for rising and falling currency rates.There are no conditions that give debt ratios or thatare similar to options. Currency clauses and sales inthe purchasing currency make up about 71% (75) ofall sales contracts. Where purchasing is based onsales orders, economic hedging of currency risks isachieved in sales and purchasing. However, in manycases there is a mismatch in timing between pur-chase orders and sales orders. Purchase ordersnormally run 7-60 days prior to delivery. The cus-tomer credit period is about 30 days.

The currency adjustment clauses means that onlycurrency changes between the time of sale and thetime of invoicing affect the amount reported inSwedish Kronor. Since invoicing, in accordance withcurrency adjustment clauses, is carried out in SEK,there is no exchange rate difference after the date ofinvoicing.

OEM applies the same terms and conditions foradjusting currencies and prices for its Swedish andoverseas customers. The changes in values relatedto the currency clauses are therefore treated consis-tently from the points of view of risk and accounting.

A ten per cent change in exchange rates for theEUR and USD would, using a simplified model,mean about SEK 80 million in change in earnings.

With regard to currency risk, it can be determinedthat OEM also has balance exposures in the form ofnet investment in independent foreign operations. At present, these currency risks are not hedged.

The sensitivity of the change in exchange ratesis described below:

Nominal Sensitivity analysis amount +/- 5% i exchange

SEK million rate Impact onthe Group’s share-

holders’ equity

CZK 25.6 1.3DKK 26.1 1.3EEK 0.9 0.0EUR 62.1 3.1GBP 28.9 1.4NOK 16.5 0.8PLN 7.5 0.4

Total 167.6 8.4

Currency rates are used in the Group’s consolidated accounts for recalculating foreignsubsidiary’s income and net assets.

Currency Weighed December average 2007

2007

NOK 100 115.06 118.45

DKK 100 123.90 126.85

EUR 1 9.2235 9.4485

GBP 1 13.4454 12.8700

PLN 1 2.4351 2.615

EEK 1 0.5891 0.6035

CZK 1 0.3316 0.3537

Currency Weighed December average 2006

2006

NOK 100 114.99 109.49

DKK 100 123.97 121.03

EUR 1 9.2366 9.0138

GBP 1 13.5376 13.4178

PLN 1 2.3625 2.3455

EEK 1 0.59 0.5757

CUSTOMER AND CREDIT RISKSThe customer credit risks are small. Definedcustomer limits are carefully decided and strictlyapplied. Short credit periods and absence ofrisk concentrations for individual customers,segments or geographic areas contribute to agood risk picture, one that is confirmed by thesmall historical customer losses.

The Group has approximately 22,000 pur-chasing customers in total. The largest individ-ual customer accounted for approximately4.5% (6.6) of sales. The five largest customersaccounted for 9.9% (12.1) of sales and the tenlargest customers accounted for 13.7% (15.8)of sales. The distribution of risk is thus verygood. Customer losses during the yearamounted to SEK 1.1 million (0.5), which corre-sponds to 0.07% (0.03) of sales. The averagecredit period rose to approximately 45 days.

AGE ANALYSIS, ACCOUNTS RECEIVABLE NOT WRITTEN DOWN (SEK MILLION)

2007 2006

Accounts receivable not matured 219.7 153.5

Accounts receivable matured 0-30 days 29.0 31.1

Accounts receivable matured > 30 - 90 days 6.5 16.0



Accounts receivable matured >360 days 0.2 0.2

Total 260.7 205.8

PROVISIONS FOR LOSS (SEK M)

Opening balance 0.6 0.6

Group changes 0.6 0.1

Provision for suspected losses 0.7 0.3

Confirmed losses -0.5 -0.4

Closing balance 1.4 0.6



NOTE 28. CASH FLOW STATEMENT

ADDIT IONAL INFORMATION CONCERNING CASH FLOW STATEMENTS: THE GROUP PARENT COMPANY

2007 2006 2007 2006

SPECIFICATION FINANCIAL ITEMS

Interest received 6.8 2.7 4.9 2.3

Capital gain profits - - 2.1 101.5

Dividends received 0.0 0.0 42.0 3.7

Interest paid -3.5 -2.4 - -0.3

SPECIFICATION ITEMS NOT INCLUDED IN THE CASH FLOW

Depreciation 14.8 13.5 1.5 1.8

Capital gain profits -15.3 -2.0 -2.1 -103.3

Other 2.1 1.1 2.1 0.3

Write-off shares - - - -

Total 1.6 12.6 1.5 -101.2

ACQUISITION OF SUBSIDIARY COMPANIES - GROUP

ACQUIRED ASSETS AND LIABILITIES

Intangible fixed assets 27.3 11.1



Operating receivables 28.4 4.4


Total assets 108.4 39.2

Deferred tax liability 3.8 4.1

Long-term operating liabilities 19.8 -

Current operating liabilities 30.6 5.2

Total liabilities 54.2 9.3

Deduction of 50% ownership previously recognised

using the equity method -5.6 -

Net 48.6 29.9

PURCHASE PRICE

Purchase price 48.6 29.9

As yet unsettled purchase price -10.3 -3.0

Deducted: Cash and cash equivalents acquired business units -11.9 -7.3


DIVESTMENT OF SUBSIDIARY COMPANIES - GROUP

DIVESTED ASSETS AND LIABILITIES:

Intangible fixed assets - 6.4

Property, plant and equipment - 10.1

Inventories - 28.1

Operating receivables - 29.2

Cash and cash equivalents - -

Total assets 0.0 73.8

Current operating liabilities - 0.5

Current interest-bearing liabilities - 45.4

Total liabilities 0.0 45.9



NOTE 29. INFORMATION ABOUT THE PARENT COMPANY

OEM International AB (Publ) is a Swedish-registered public limited company with its headquarters in Tranås, Sweden. The Parent Company shares arelisted on the OMX Nordic Exchange Stockholm. The address of the head office is Norrabyvägen 6B, Box 1009, Tranås, Sweden. The consolidated financial statements for 2007 incorporate the financial statements of the Parent Company and its subsidiaries, jointly referred to asthe Group. The Group also includes shareholdings in associated companies.

NOTE 31. IMPORTANT ESTIMATES AND ASSUMPTIONS

NOTE 30. EVENTS AFTER BALANCE SHEET DATE

No significant events have occurred after the balance sheet date.

Executive management has together with thechairman of the Board and the auditors discussedthe developments, the choices and the informationregarding the Group’s most important accountingprinciples and estimates, as well as the applicationof these principles and estimates. The recognisedvalues for certain assets and liabilities are based inpart on assessments and estimates. Executivemanagement does not however find that therecognised assets and liabilities amount are associ-ated with substantial risks mitigating the need tomake significant adjustments over the course ofnext year. The presentation below discusses theareas that may mitigate significant adjustments, butwhere the risk that so will occur during the courseof next year is not deemed significant.

Impairment test of goodwillIn calculating the recoverable value of cash-generating units for the company’s assessmentif amortisation is required for goodwill, futurecircumstances and estimates of parametershave been assumed. An account of these isdescribed in Note 15. The management is ofthe opinion that no reasonable changes in thekey assumptions will lead to the estimatedrecoverable values for the units being lowerthan the reported values.

Valuation other intangible fixed assetsOther intangible fixed assets consist primarilyof the values arising at acquisition, divided intoSEK 8.8 million for supplier relations, SEK 6.6

million for customer relations and SEK 9.3 mil-lion for trademarks. Supplier relations havecontinued to develop positively, explaining theassessment that impairment is not necessaryfor 2007. Customer relations entail establish-ments on new markets and the assessment isthat these will be written-down over a five-yearperiod. 39 months remain of the amortisationperiod. Trademarks include the companyname Klitsö which is well established on theDanish market in the sector of valve and pneu-matic trading and the assessment is that thisbe written off over a five-year period.

PURCHASE PRICE

Sale price - 120.0

Sale price adjusted -1.0 -

Outstanding receivables 44.6 -

Due in accordance with agreement -0.7 -45.6

Purchase sum received 43.9 74.4


CASH AND CASH EQUIVALENTS

Cash and cash equivalents currently only cover cash and bank balance.



NOTE 32. EARNINGS PER SHARE

Calculations of earnings per share before and after dilution are based on the year’s profit attributable to the Parent Company’s shareholders. (SEK m)

2007 2006

Total business units 102.8 181.6

Remaining business units 100.8 90.8

Divested business units 2.0 90.8

Earnings per share for total, remaining and divested business units is based on the following number of shares before and after dilution*.

2007 2006

Weighted average number of shares before dilution 23 169 309 23 169 309

Dilution effect options - 99 945

Weighted average number of shares after dilution 23 169 309 23 269 254

** Corrected for the 4:1 share split and automatic redemption of each fourth share carried out Q2 2007.

Adjusted with a factor of 3 since the financial implication of the transaction is a 3:1 split combined with an extra dividend.

At the close of 2007 and throughout the year, the Group had no outstanding potential ordinary shares.

2007 2006

EARNINGS PER SHARE TOTAL



EARNINGS PER SHARE FROM REMAINING BUSINESS UNITS



EARNINGS PER SHARE FROM REMAINING BUSINESS UNITS



NOTE 33. INFORMATION ABOUT ASSOCIATED PARTIES

The OEM Group’s associated parties consist primarily of senior executives and major shareholders. Details are provided in Note 7.


PROPOSED ALLOCATION OF PROFITS ❚ OEM ANNUAL REPORT 2007 81

PROPOSED ALLOCATION OF PROFITS

PARENT COMPANY

The following profits are at the disposal of the Annual General Meeting

Profit brought forward 205 661 944,80

Profit for the year 39 309 516,31

244 971 461,11

The Board of Directors proposes that the profit be disposed of in such a way

• that a dividend of SEK 3 per share is paid to shareholders 69 507 927,00

• that the following be carried forward 175 463 534,11

244 971 461,11

The consolidated financial statements and the annual report have been prepared in accordance with the International Financial Reporting Standards as app-roved by the European Commission for application within the EU, Regulation (EC) No. 1606/2002 of 19 July 2002 regarding the application of internationalaccounting standards and generally accepted accounting practice and gives a fair and true view of the Group’s and Parent Company’s financial position andresults. The Directors’ Report for the Group and Parent Company gives a true and fair summary of the Group’s and Parent Company’s business operations,financial position and results and describes significant risks and uncertainties faced by the Parent Company and companies included in the Group.

TRANÅS, 28 FEBRUARY 2008

Jan Svensson Orvar Pantzar Lars-Åke RydhChairman of the Board Board member Board member

Ulf Barkman Agne Svenberg Gunnar EliassonBoard member Board member Board member

Hans Franzén Jörgen ZahlinBoard member CEO

A statement by the Board concerning the dividend proposal will be published on the Company’s website and can be obtained on request.

The Annual Report and the consolidated financial statements have been approved for issue by the Board of Directors on the above date. The consolidated income statement and balance sheet and the Parent Company’s income statement and balance sheet will be matters for approval at the Annual General Meeting on 24 April 08.

The information in the report is such that OEM International AB (publ) is obliged to publish in accordance with the Securities Act.The information was released to the media for publication on 20 March 2008 at 08.00.


82 OEM ANNUAL REPORT 2007 ❚ AUDITORS’ REPORT

We have examined the Annual Report, the consol-idated financial statements, the accountingrecords and the administration of the Board ofDirectors and the Managing Director of OEM Inter-national AB (Publ.) for the financial year 2007. TheCompany’s Annual Report is included in the print-ed version of this document on pages 36-81.

The Board of Directors and the ManagingDirector are responsible for the accounts andthe administration of the Company, and forensuring that the Swedish Annual AccountsAct is applied when preparing the AnnualReport and for ensuring that the internationalaccounting standards IFRS, as approved bythe European Union, and the Annual AccountsAct are applied when preparing the consolidat-ed financial statements. Our responsibility is toexpress an opinion on the Annual Report, theconsolidated financial statements and theadministration based on our audit.

We conducted our audit in accordance withgenerally accepted accounting standards inSweden, which meant that we planned and per-formed the audit to obtain reasonable, but notabsolute, assurance that the Annual Report and the consolidated financial statements are free of

material misstatement. An audit includesexamining a selection of the documentationwith respect to amounts and other informationin the accounting records.

An audit also includes assessing the account-ing principles used and their application by theBoard of Directors and the Managing Director,as well as evaluating the important assess-ments made by the Board of Directors and theManaging Director when preparing the AnnualReport and the consolidated financial state-ments, as well as appraising the overall pres-entation of information in the Annual Reportand the consolidated financial statements.

As a basis for our pronouncement on dis-charge from liability, we have examined signifi-cant decisions, actions taken and circum-stances at the Company in order to determinethe possible liability to the Company of anyBoard Member or the Managing Director. We have also examined the question ofwhether any Director or the Managing Directorhas otherwise acted in contravention of theSwedish Companies Act, the Swedish AnnualAccounts Act or the Company’s Articles ofAssociation. We are of the opinion that our

audit gives us reasonable grounds on which topronounce as follows.

The Annual Report has been prepared inaccordance with the Swedish Annual AccountsAct and, consequently, provides a true pictureof the Company’s income and position inaccordance with generally accepted account-ing practice in Sweden. The consolidated finan-cial statements have been prepared in accor-dance with international accounting standardsIFRS, in line with the requirements of the Euro-pean Union and the Swedish Annual AccountsAct, and provide a true picture of the Group’sincome and position. The Directors’ Report isconsistent with the remainder of the AnnualReport and the Consolidated Financial State-ments.

We recommend that the Annual GeneralMeeting adopt the income statement and thebalance sheet of the Parent Company and ofthe Group, appropriate the Parent Company’ssurplus as proposed in the Directors’ Reportand grant the Members of the Board and theManaging Director discharge from liability forthe financial year.

TRANÅS, 3 MARCH 2008

KPMG Bohlins AB

Niklas BengtssonAuthorised Public Accountant

AUDITORS’ REPORT

TO THE ANNUAL GENERAL MEETING OF OEM INTERNATIONAL AB (PUBL. )

CORPORATE IDENTITY NUMBER 556184-6691


NOTES ❚ OEM ANNUAL REPORT 2007 83

NOTES


Shares

84 OEM ANNUAL REPORT 2007 ❚ OEM SHARES

Anyone who purchased 100 shares in OEM for

SEK 12,500 at the time of introduction onto

the market had a holding of 7,200 shares at a

value of SEK 308,880 on 31 December 2007,

equivalent to an annual yield of about 15%,

excluding dividends. In 2000, the OEM share

was transferred to the O list and is as 2006 listed

on OMX Small Cap for the OMX Nordic

Exchange Stockholm.

4:1 SHARE SPLIT COMBINED WITH AN

AUTOMATIC REDEMPTION PROCESS.

To facilitate trading of company shares and alter

the company’s capital structure, a 4:1 share split

combined with an automatic redemption proce-

dure was carried out in 2007. This process gave

each shareholder three (3) new shares and one

(1) redemption share, which was redeemed for

SEK 20. This means that about SEK 154 mil-

lion was distributed to the shareholders.

PRICE TRENDS

The price of OEM International shares rose

during the year by 32% to a closing price of

SEK 42.90. The highest price paid during the

year was SEK 65.34* recorded on 22 February,

and the lowest price was SEK 40.50, recorded

on 28 December.

OEM’s market value at the close of 2007 was

SEK 994 million. During the year, the market

index for OMXS PI dropped 6% and index for

OMXS Industrials rose 7%.

SALES

In 2007, 2,049,225 Class B shares were sold

corresponding to a turnover rate of 17%.

The average shareholder in OEM therefore

retains their shares for about six (6) years.

The corresponding figure for the OMX Nordic

Exchange Stockholm as a whole in 2007 was

139% and 74% for the Stockholm Small Cap.

OEM’s Class B shares were sold on 96% of the

trading days, with an average turnover per day

in 2007 of 8,503 shares. OEM International

had 2,434 shareholders as of 28 December

2007. Institutional ownership comprises 37%

and foreign ownership amounts to 25%.

REPURCHASE OF SHARES

The repurchase programme for shares, which was

adopted for the first time by the Annual General

Meeting in 2000, is intended to improve our capi-

tal structure and contribute positively to return on

shareholders’ equity and earnings per share.

After implemented reductions the previous

year there are 23,169,309 shares in the Com-

pany at year-end. The Company held no

company shares at year-end. The Board has

been authorised by the Annual General Meet-

ing to repurchase up to 10% of the total num-

ber of shares, that is, 2,316,931 shares.

The objective is to continue the repurchases

up to 10% of the total number of shares while

the Board considers the conditions to be attractive.

The acquired shares will be retained, deregistered

or used as payment in corporate acquisitions.

We have minimised the disadvantages which this

can entail, that is, that the number of shareholders

is decreased and the liquidity of the share declines,

by mainly purchasing large blocks of shares.

LIQUIDITY BOOSTING MEASURES

OEM International has signed an agreement

with Handelsbanken Capital Markets for

liquidity guarantees for Company shares.

This comes to a close on 29 February 28 and

will be replaced by a new agreement signed

with Remium AB effective 1 March 2008.

The purpose is to reduce the difference

between buy and sell price. The goal is to

achieve a lower investment cost and to lower the

share trading risk for present and future shareholders.

The obligation falls within the scope of the

OMX Nordic Exchange Stockholm’s system

with liquidity guarantees and started on

1 December 2004.

OEM sharesOEM’s shares were quoted on the Stockholm Stock Exchange’s OTC List in December 1983, and since then have displayed a healthy price trend.

* Recalculated after split and redemption.


OWNERSHIP STRUCTURE

OEM’S LARGEST SHAREHOLDERS AS OF 28 DECEMBER 2007

Class A Class B Percentage Percentage shares shares shares capital votes

Pantzar Orvar 1 627 320 2 802 360 19.1% 28.9%

Franzén Hans and family 1 280 376 1 381 590 11.5% 21.5%

Svenberg Agne and family 1 223 400 475 986 7.3% 19.2%

Investmentaktiebolaget Latour 636 000 1 100 000 7.5% 11.3%

Lannebo equity funds 1 555 701 6.7% 2.4%

AFA Försäkringar 1 214 525 5.2% 1.8%

Livförsäkringsaktiebolaget 619 800 2.7% 0.9%

AB Traction 609 000 2.6% 0.9%

Länsförsäkringar Jönköping 420 000 1.8% 0.6%

Fjärde AP-Fonden 376 200 1.6% 0.6%

Total 10 owners 4 767 096 10 555 162 66.1% 88.1%

Others 7 847 051 33.9% 11.9%

Total 4 767 096 18 402 213 100.0% 100.0%

Votes per share 10 1

RISK

OEM’s beta value - a measure of how a share

moves given a change in the stock exchange’s

OMXS PI index - is approximately 0.75.

This means that the shares can be said to have

a low risk. The spread between the operations

within the Group entails a low business risk.

At the same time, the financial risk is very low,

due to the high equity/assets ratio.

This means that the equity/assets ratio can be

lowered to correspond better with the business

risk without the overall risk to OEM’s shares

increasing significantly.

DIVIDEND POLICY

The Board of OEM International aims to

propose a reasonable dividend of profits to the

shareholders, by considering the financial

position, the tax situation and any need for

acquisitions or investments in the operation.

DIVIDENDS

The Board proposes a dividend of SEK 3 per

share, equivalent to 15% of distributable

equity in the Group.

FINANCIAL INFORMATION

OEM aims to maintain high quality as regards

information to the market and the media.

The goal is for the information to facilitate an

accurate valuation and liquid trading of the shares.

The dates for the Annual General Meeting, inter-

im reports and annual report for the 2008

financial year are shown on page 2 of this

Annual Report. Financial information is also

published on the Group’s website, www.oem.se.

The Company offers shareholders the oppor-

tunity to receive interim reports and other press

releases by e-mail, at the same time as they are

made public to the market. Send an email to

[email protected] and write “Company information” and

you will be placed on our list for future mailings.

OEM SHARES ❚ OEM ANNUAL REPORT 2007 85


86 OEM ANNUAL REPORT 2007 ❚ OEM SHARES

KEY INDICATORS FOR OEM’S SHARES

FOR THE PAST F IVE YEARS

2007 2006 2005 2004 2003

PERFORMANCE KEY INDICATORS

Sales per share** SEK 64 62 60 62 63

Increase in sales per share % 2.4 3.3 8.1 -1.0 -4.1

Earnings per share* ** SEK 4:34 3:92 3:59 2:80 1:38

Shareholders’ equity per share* ** SEK 22:88 27:65 21:04 18:71 17:14

Proposed dividends** SEK 3:00 2:83 2:33 1:83 1:50

Dividend/Income % 69.1 72.2 64.9 65.4 109

Dividend/Shareholders’ equity % 13.1 10.2 11.1 9.8 8.7

Cash flow per share* ** SEK 1:91 4:89 3:26 3:96 5:91

RISK KEY INDICATORS

Beta values (48 months) 0.78 0.36 0.44 0.54 0.41

Rate of turnover for shares % 17 34 10 8 7

VALUATION KEY INDICATORS

Quoted price as per 31 December** SEK 42:90 63:00 54:50 39:33 34:00

Quoted price as per 31 December* SEK m 994 1 460 1 238 893 776

P/S ratio times 0.7 1.0 0.9 0.6 0.5

P/E ratio times 9.7 16.1 15.2 14.0 24.6

Price/Shareholders’ equity % 188 228 259 210 198

EV/Sales times 0.6 0.8 0.8 0.6 0.5

EBIT multiple times 6.9 9.7 10.3 9.3 13.4

Direct return % 7.0 4.5 4.3 4.7 4.4

* Calculated on the number of shares, excluding own holding

** The key indicators are corrected for the 4:1 share split and automatic redemption of each fourth share carried out Q4 2007.

Prior periods have been adjusted with a factor of 3 since the financial implication of the transaction is a 3:1 split combined with an extra dividend.

The key indicators are based on the remaining business units. In order to present a comparison, the figures for 2006 and 2005 have also been recalculated.

Earnings per share (SEK) Shareholders’ equity per share (SEK) Proposed dividend (SEK)


OEM SHARES ❚ OEM ANNUAL REPORT 2007 87

SHARE CAPITAL TREND

Year Transaction Change in share Total share cap- Average no. Face value capital, SEK million ital, SEK million of shares per share SEK

Opening value 0.1 0.1 500 100.00

1981 Bonus issue 0.3 0.4 4 000 100.00

1983 Split - 0.4 40 000 10.00

1983 Bonus issue 0.4 0.8 80 000 10.00

1983 New issue 0.8 1.6 160 000 10.00

1983 New issue 0.4 2.0 200 000 10.00

1986 Bonus issue 4.0 6.0 600 000 10.00

1986 New issue through conversion 0.4 6.4 636 000 10.00

1994 Split - 6.4 1 272 000 5.00

1994 Bonus issue 6.4 12.7 2 544 000 5.00

1996 Bonus issue 12.7 25.4 5 088 000 5.00

1997 New issue through subscription in kind 20.1 45.5 9 113 703 5.00

2001 Reduction -3.9 41.6 8 332 203 5.00

2003 Reduction -1.0 40.6 8 132 203 5.00

2004 Reduction -2.0 38.6 7 723 103 5.00

2007 Split - 38.6 30 892 412 1.25

2007 Redemption -9.6 29.0 23 169 309 1.25

2007 Bonus issue 9.6 38.6 23 169 309 1.67

OWNERSHIP DATA

AS PER 28.12.07*

Percentage of Percentage ofno. of owners share capital

Size class

1-500 39.1 0.8

501-1 000 20.4 1.5

1 001-2 000 16.0 2.4

2 001-5 000 13.2 4.4

5 001-10 000 5.3 3.9

10 001-20 000 2.8 4.2

20 001-50 000 2.0 6.2

50 001-100 000 0.2 2.0

100 001-5 000 000 0.9 74.7

Total 100.0 100.0

Total number of shareholders in OEM is 2,434.

*) Source: VPC AB. Directly and fund manager registered. In the table, ownership details may be a combination of several items in VPC’s statistics.

This combination is intended to show an institution’s or a private individual’s total ownership in OEM.


88 OEM ANNUAL REPORT 2007 ❚ ADDRESSES

PARENT COMPANY

OEM International ABNorrabyvägen 6B, Box 1009, SE-573 28 TRANÅS SwedenTel: 075-242 40 00Fax: 075-242 40 [email protected]

Corp.id.no. 556184-6691

OEM AUTOMATIC

OEM Automatic ABBox 1011, Dalagatan 4SE-573 28 TRANÅS SwedenTel: +46-75-242 41 00Fax: +46-75-242 41 [email protected]

OEM Automatic OYBox 9, FI-20101 ÅBO, Finland Fiskarsinkatu 3FI-20750 ÅBO, FinlandTel: +358-207-499 499Fax: +358-207-499 [email protected]

OEM Automatic ASPostboks 2144, STRØMSØBjørnstjerne Bjørnsonsgate 110NO-3003 DRAMMEN, NorwayTel: +47-32-21 05 00Fax: +47-32-21 05 [email protected]

OEM Automatic A/SMøllehaven 8 DK-4040 JYLLINGE DenmarkTel: +45-70-27 05 27Fax: +45-70-27 06 [email protected]

Klitsö Processtechnic ASEngholm Parkvej 4DK-3450 ALLERØD, DenmarkTel: +45-70-15 05 25Fax: +45-70-75 05 [email protected]

OEM Automatic LtdWhiteacres, Cambridge Road Whetstone, LEICESTERSHIRE LE8 6ZG, UKTel: +44-116-284 99 00Fax: +44-116-284 17 [email protected]

OEM Automatic Sp. z o. o.ul. Postepu 2PL-02-676 WARSZAWA PolandTel: +48-22-863 27 22Fax: +48-22-863 27 [email protected]

OEM Automiatic OÜKanali tee 1-328EE-10112 TALLIN EstoniaTel: +372-6550 871Fax: + 372-6550 [email protected]

OEM Automatic UABPaliuniskio g. 1LT-35113 PANEVEZYS, LithuaniaTel: +370-6550 0323Fax: +370-4557 [email protected]

OEM Automatic SIAGanibu dambis 24a-620LV-1005 RIGA, LatviaTel: +371-6738 2926Fax: +371-6738 [email protected]

EIG - OEM Automatic spol.s.r.o. Baarova 3a CZ-140 00, PRAG 4 Czech RepublicTel: +420-241-484 940Fax: +420-241-484 [email protected]

OEM Automatic, s.r.o. Tamaskovicova 17SK-917 01 TRNAVA, SlovakiaTel: +421-911-122 009Fax: +421-335-331 [email protected]

OEM Motor ABBox 1011, Dalagatan 4SE-573 28 TRANÅS SwedenTel: +46-75-242 41 00Fax: +46-75-242 44 [email protected]

Addresses of operating units

^

^

^ ^

.


OEM ContentsAnnual General Meeting – future reports .... 2This is OEM International ..................... 3-4History ..................................................... 3-42007 in brief ............................................... 5Comments from the CEO ..................... 6-7Vision, business concept and business logic .................................. 8-9Growth strategy ........................................ 10Financial targets....................................... 11Employees ........................................... 12-13Quality, the environment and ethics .. 14-15Board of Directors ............................... 16-17Senior Management ........................... 18-19

GROUP STRUCTURE ..........................20-21

■ OEM Automatic .......................... 22-23■ OEM Electronics ........................ 24-25■ Cyncrona ..................................... 26-27■ Development ............................... 28-29

OEM Electronics – an important partner ................................................. 30-31Positive path for Telfa.......................... 32-33OEM Automatic strengthens its position .......................................... 34-35

FINANCIAL REPORTING

Five-year Group summary ...................... 38Key indicators for the last fi ve years ......... 39Directors’ report .................................. 40-41

FINANCIAL REPORTS – THE GROUP


FINANCIAL REPORTS –

THE PARENT COMPANY



and comments to the fi nancial

statements ..................................52-80

Proposed allocation of profi ts .................. 81Auditors’ report ......................................... 82

OEM shares ........................................ 84-85Ownership structure ................................ 85Key indicators for OEM shares ................ 86Ownership data ........................................ 87Share capital trend ................................... 87

Addresses ............................................. 88-89Defi nitions ............................................... 90

1974 The agency company OEM Automatic AB is founded by the Franzén and Svenberg families.

1983The company is introduced on the Stock Exchange’s OTC list. Sales amount to SEK 30 million.

1988Sales exceed SEK 100 million for the fi rst time.

1998Three corporate acquisitions completed.

2000Jörgen Sahlin is appointed new MD. Acquisition of the group JMS Systemhydraulik

2003The Group stabilises at sales 30% lower than

2001. Industri AB Refl ex is sold.

2005Acquisition

of Telfa.

2007Acquisition of Crouzet,

MPX Electra and Klitsö.

1993The A. Karlson

Group is acquired.

1997OEM International and Cyncrona

(also listed on the OTC list) merge. Cyncrona becomes a

third subgroup.

1981The fi rst overseas subsidiary is

established in Finland.

1986Industri AB Refl ex

is acquired.

1989The fi rst

subsidiary outside

Scandinavia is set up in

the UK.

1991OEM International is formed and be-comes the Group’s parent company.

The electronics product area breaks away from OEM Automatic to form a separate company, OEM Component.

1996New Group structure. The companies are divided into two sub-groups: OEM Industrial Components and OEM Systemteknik.

2002OEM suffers signifi cant decline in sales due to telecom downturn.

1999Four corporate acquisitions completed.

2004OEM celebrates 30th anniversary Continued restructuring and stream-lining. Profi t climbs 55%.

2006The Group establishes itself in the Czech Republic via the acquisition of EIG. Divestment of JMS System-hydraulik group

OEM’s History

Defi nitions

This is OEM InternationalOEM International is one of Europe’s leading industrial trading companies. The Group is comprised of 26 operating units with activities in 13 countries.

The business concept is to offer the industry components and systems from

leading manufacturers to industrial companies by utilising our excellent product

and application expertise. OEM is a local alternative to the manufacturers’ own

subsidiaries and can provide better marketing and sales conditions.

The Group is organised into four company groups. Three of the groups are

organised according to a concept with a well defi ned range of products that targets

a specifi c market. The fourth group is a collection of other business activities

organised under Development.




OEM ElectronicsAppliance and circuit

board components and EMC/ microwave components


CyncronaProduction systems and components for

electronics production





10

20

40

30

50

80

70

60

OMX Nordic EUR PI

2003 2004 2005 2006 2007 2008

(SEK)

OEM International B

Share trends

OEM has been listed on the Stockholm Stock Exchange Small Capital since 1983.More information about OEM is available at www.oem.se


OEM ELECTRONICS

OEM Electronics AB Box 1025, Norrabyvägen 6B SE-573 29 TRANÅS SwedenTel: +46 (0)75 242 45 00Fax: +46 (0)75 242 45 [email protected]

OEM Electronics OYP O Box 122, Telekatu 6FI-020101 TURKU FinlandTel: +358-207 499 300Fax: +358-207 499 [email protected] www.oemelectronics.fi

OEM Electronics PLul. Parowcowa 6BPL-02-445 WARSZAWA PolandTel: +48-22-86 32 722Fax: +48-22-86 32 [email protected]

CYNCRONA

Cyncrona ABTomtbergavägen 2SE-145 67 NORSBORG, SwedenTel: +46 (0)75 242 46 50Fax: +46 (0)75 242 46 [email protected]

Cyncrona OyHannuksenpelto 12FI-020101 TURKU FinlandTel: +358-(0)20 7528700 Fax: +358-(0)20 [email protected] www.cyncrona.fi

Cyncrona A/SSindalsvej 21 DK- 8240 RISKOV, DenmarkTel: +45-87-42 66 66Fax: +45-87-42 66 [email protected]

Cyncrona ASPostboks 2144 Bjørnstjerne Bjørnsonsgate 110NO-3003 STRØMSØ NorwayTel: +47-32-21 05 80Fax: +47-32-21 05 [email protected]

Cyncrona Baltic StatesSuur-Jõe 62EE-80042 PÄRNU EstoniaTel: +372 510 05 [email protected] www.cyncrona.com

DEVELOPMENT

Internordic Bearings ABBox 105SE-571 22 NÄSSJÖ SwedenTel: +46 (0)75 242 49 40Fax: +46 (0)75 242 49 [email protected]

IBECAartsdijkweg 111NL-2676 LE MAASDIJKNetherlandsTel: +31-174 52 51 00Fax:+31-174 52 51 [email protected]

Indoma ABBox 319, Fridhemsvägen 25 SE-551 15 JÖNKÖPING, SwedenTel: +46 (0)75 242 43 50Fax: +46 (0)75 242 43 [email protected]

Telfa ABBox 120 SE-402 41 GÖTEBORG SwedenGoods terminal address: Karl Johansgata 158, SE-414 51 GÖTEBORG, SwedenTel: +46 (0)75 242 44 50Fax: +46 (0)75 242 44 [email protected]

ADDRESSES ❚ OEM ANNUAL REPORT 2007 89 DEFINITIONS ❚ OEM ANNUAL REPORT 2007 90

Earning capacity of total capital: Operating

income plus fi nancial income as a percentage

of average total capital.

Earning capacity of capital employed:

Operating income plus fi nancial income as a

percentage of average total capital.

Capital employed refers to total assets minus

non interest-bearing liabilities including deferred

tax liabilities.

Earning capacity of shareholders’ equity:

Net profi t for the year as a percentage of

average shareholders’ equity.

Average interest payable: Financial expenses

as a percentage of interest-bearing liabilities.

Debt/equity ratio: Interest-bearing liabilities

divided by calculated shareholders’ equity.

Calculated shareholders’ equity comprises

shareholders’ equity plus minority interests.

Operating income/Sales: Operating income

before depreciation/amortisation as a


Profi t percent: Earnings after fi nancial

income as a percentage of sales.

Profi t margin: Profi t before tax as a


Capital’s turnover rate:

Sales divided by total assets.

Sales per employees: Sales divided by average

number of employees.

Equity/assets ratio: Shareholders’ equity as a

percentage of total capital.

Quick ratio: Current assets minus inventories

as a percentage of current liabilities.

Earnings per share: The Group’s net profi t

after deductions for both paid and deferred tax


Shareholders’ equity per share:

Shareholders’ equity and minority interests


Price / Earning (P/E) ratio: Quoted price as

per 31 December divided by earnings per share.



Sales per share: The Group’s sales divided by

the number of shares on the market at year-end.

Sales increase per share: Increase of the

Group’s sales per share.

Dividend/Profi t payout ratio: Proposed

dividend in relation to the year’s profi t.

Dividend/Shareholders’ equity: Proposed

dividend in relation to the Group’s sharehold-

ers’ equity and the minority interests.

Cash fl ow per share: Cash fl ow for current

operations divided by the number of shares.

Beta values: Measure of historical change

in the share price in relation to the price

fl uctuation of the general index.

Rate of turnover for shares: The number

of shares sold during the year divided by the

number of outstanding shares at year-end.

P/S ratio: Stock market value in relation to the

Group’s sales.

P/E ratio: Quoted price as per 31 December

divided by earnings per share.

Price/Shareholders’ equity: Quoted price

divided by shareholders’ equity per share.

EV/Sales: Enterprise value (stock market value

+ net liability + minority interest) divided by the

Group’s sales.

EBIT multiple: Enterprise value divided by the

Group’s operating income after depreciation/

amortisation.












SE-573 28 TRANÅS

Tel. +46 (0)75 242 40 00








DIVIDEND









date of issue.

BUSINESS








FUTURE REPORTS


24 April 2008


24 July 2008


24 October 2008


February 2009


VISIT OUR WEBSITE



(www.oem.se).



▼

Annual Report 2007

Box 1009, SE-573 28 Tranås • Tel. +46 (0)75 24 24 000 • Fax +46 (0)75 24 24 029 • Email [email protected] • www.oem.se 07 C

CJ

Ko

mm

unik

ati

on

• P

hoto

s Pa

trik

Sved

berg

and

oth

ers

OE

M A

NN

UA

L R

EP

OR

T 2

00

7



▼


annual report 2007

Documents

annual report marchapril

share register

future reportsinterim

oem international ab

date of issue

halfyearly report

lay fl

notifi cationshareholders