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StudsvikAnnual Report

2003

2003 in Brief 2

Facts and Figures 3

Statement of the Chief Executive

Officer 4

Objectives and Strategies 6

Studsvik – A Leading, InternationalGroup Providing Specialist Services 7

Business in 2003, per SBU 8

Market Development 10

The Studsvik Share 14

Operating Efficiency and Safety 16

Service and Maintenance 20

Waste Treatment 24

Decommissioning 28

Irradiation Services 32

Nuclear Medicine 36

Environment, Safety and Quality 40

Human Resources 42

Administration Report 44

Income Statements 47

Balance Sheets 48

Cash Flow Statements 51

Accounting Policies and Valuation Principles 52

Notes to the Accounts 55

Proposed Distribution of Profits 75

Audit Report 76

Senior Executive Management 77

Board of Directors and Auditors 78

Corporate Governance 79

Five-year Review 80

Definitions of Key Figures andRatios 82

Glossary of Technical Terms 83

Calendar 84

1

STUDSVIK ANNUAL REPORT 2003

Studsvik supplies services of a high technical content to

customers world-wide, primarily nuclear power plants and

suppliers to the nuclear industry including fuel vendors.

Customers also comprise industrial companies and

organizations in the health care sector. The main markets

of the Studsvik Group are Germany, the USA, Japan and

Sweden. Studsvik’s operations are conducted at its own

facilities in Sweden and in the USA as well as at customer

sites, particularly nuclear power plants and nuclear fuel

vendors. Studsvik has just over SEK 1,100 million in net

sales and 1,300 employees in seven countries. In Sweden,

Studsvik AB’s share is listed on Stockholmsbörsen’s

(the Stockholm stock-exchange) O list.

2


Net sales for the Group amounted to SEK 1,113.8 million (1,002.3).

Profi t before tax improved and amounted to SEK 52.3 million (–1.1).

Profi t after tax amounted to SEK 31.9 million (–8.6).

Earnings per share after tax amounted to SEK 3.93 (–1.06).

At December 31, 2003, equity per share amounted to SEK 65.48 (57.45)

and the equity-assets ratio was 45 (44) per cent.

The German company, IFM, Industrieanlagen Fritz & Marx, was acquired

on April 1, 2003. IFM has an estimated SEK 140 million per year in net

sales.

On May 1, 2003, Studsvik acquired, from Vattenfall Fastigheter AB, all

of the real-estate at the Studsvik site, outside Nyköping, Sweden. At the

same time, Studsvik took over Vattenfall’s organization for operation and

maintenance of the real-estate and Studsvik also acquired AB SVAFO.

Liquidity was substantially reinforced and, at December 31, 2003, amoun-

ted to SEK 299.9 million (120.5).

In January 2004, the Swedish Nuclear Power Inspectorate (SKI) approved

the continued operation of Studsvik’s reactors.

2003 in Brief

IrradiationServices

6%

33%

21%

6%

14%

26%

3


Facts and Figures

Key Figures and Ratios 2003 2002 2001Net sales for the Group, SEK m 1,113.8 1,002.3 882.7 Operating profit, SEK m 61.4 2.8 –125.7 Profit after net financial items, SEK m 52.3 –1.1 –132.4 Earnings per share before dilution, SEK 3.93 –1.06 –17.86 Earnings per share after dilution, SEK 3.88 –1.06 –17.86 Operating margin, % 5.5 0.3 neg Equity-assets ratio, % 44.9 43.9 41.9 Equity per share, SEK 65.48 57.45 67.98 Average number of employees 1,313 1,128 1,134

Operating profit, per SBUNet sales, per SBU

Decommis-sioning

14%

Nuclear Medicine0%

Waste Treatment26%

Operating Efficiency and Safety21%

Service andMaintenance33%

Decommis-sioning

21%

Nuclear Medicine neg

Waste Treatment41%

Operating Efficiency and Safety28%

Service andMaintenance23%

IrradiationServices

0%41%

28%

21%

23%

4

Two years ago, we launched a program to improve our profi tability and to establish fi nancial stability in the Group. As I look back on what we have achieved in 2003, I am satisfi ed to say that we have come a long way. Our balance sheet and liquidity have improved considerably and we have reached a stable profi tability. We have attained the targets that we established for the year, primarily due to the show of strength from all of our employees.

We have introduced a new Strategic Business Unit (SBU) structure with six SBUs in order to better describe Studsvik’s business activities from a market perspective. The new SBUs are a better refl ection of present and future market development and will there-fore provide better guidance for our strategic work. The new structure will also improve the stock market’s understanding of our business.

Studsvik’s mission is to deliver products and services that contribute to enhancing the safety and profi tability of our customers in the nuclear industry. For decades, Studsvik has delivered specialist expertise of the high-est quality. The Studsvik brand has become synonymous with world-class competence and

quality within nuclear technology. Now that the first generation of nuclear

power plants is ageing, we can distinguish two mar ket trends that are both favorable for Studsvik:

– The modernization and upgrading of exis-ting plants to extend their operating life-times and to improve safety and efficiency.

– A greater focus on the environment, waste and nuclear facility decommissioning.

I believe that the first trend will entail a renais-sance for our core competences. Also, there is much to indicate that a new generation of nuclear power plants will be developed. There-fore, I am optimistic about the future of our Operating Efficiency and Safety SBU. This busi-ness activity is mainly being conducted at our facilities outside Nyköping in Sweden.

We are also expecting that substantial quanti-ties of waste, for decades to come, will be gene-rated from the modernization of existing nuclear power plants and from the de commissioning of facilities that have closed down. In Germany, Studsvik is participating in a number of decom-missioning projects through our subsidiary SINA

A Show of Strength from Our 1,300 Employees

In 2003, our business volume, performance and financial position

improved substantially. Operating profit amounted to SEK 61.4 million

(2.8) and net sales increased by 11 per cent to SEK 1,113.8 million

(1,002.3).


5


which, in 2003, acquired IFM, Industrieanla-gen Fritz & Marx. With the acquisition of IFM, Studsvik became a major player in Germany within this segment.Studsvik’s two main investments in the THORSM method in the USA have progressed well during 2003. Our facility in Erwin, Tennessee, which treats ion-exchange resins from nuclear power plants has consolidated its position on the market and reports a positive operating profit and a very strong cash flow. Our joint venture with Washington Group, THOR Treat-ment Technologies, TTT, has also consolidated its position with the Department of Energy, DOE. The projects that TTT is focusing on last for many years and are substantial in financial terms. This has an impact on the decision-making process which can tend to be lengthy.The outlook for TTT continues to be positive, but I do not expect that a positive cash flow will be generated in the coming year.

The Nuclear Medicine SBU uses Studsvik’s nuclear expertise for medical applications. Our major development work on Boron Neutron Capture Therapy (BNCT), for treating tumors with neutron irradiation, continued with undi-

minished intensity during the year. The project entails high development costs but the con-siderable potential and the promising results from the recently completed Phase 2 study provide the justification for us to continue. The project is at the periphery of Studsvik’s core competences and we are actively looking for partners for this business.

In 2004, we shall continue to focus on developing our market position and our orga-nization. We shall set our sights on new mar-kets, cost savings, on improving our business acumen, leader ship development, strategic recruitment, improved communication, alli-ances and acquisitions.

Studsvik has a strong position on a developing market, a robust corporate mission and competent human resources. It is because of these factors that I am confident about Studsvik’s future.

Nyköping, February 2004Hans-Bertil HåkanssonPresident and Chief Executive Officer

6


Objectives and Strategies

Studsvik’s financial targets are:– An organic net sales growth rate of a

minimum of 5 per cent per year.– An operating margin of a minimum of

7 per cent, which corresponds to an operating margin of about 8 per cent before amortization of goodwill.

– A return on capital employed in new projects, facilities and companies of a minimum of 15 per cent.

– An equity-assets ratio of a minimum of 40 per cent.

Strategies

Studsvik has formulated a number of strategies that focus on improving business volumes, increasing margins and on making Studsvik attractive for customers and employees.

Expansion

Studsvik will consolidate its position on the global market through a combination of organic growth, joint ventures, strategic alliances and acquisitions. Growth will be based on organic growth and will be driven by product and ser-vice development. Growth will also be based on the establishment, by Studsvik itself or through strategic alliances, of business units and facilities in new markets. Studsvik will con-duct acquisitions on strategic markets when possible and suitable.

Products and Services

Studsvik will focus on products and services that increase safety and improve profitability for its customers. We will deliver added value to customers by providing one-stop solutions rather than individual, standardized products and services. The Group’s products and services will be perceived as providing greater value for money in comparison with the competition. Studsvik will constantly improve its competi-tiveness by conducting cutting-edge research and product development.

Efficient Production

Studsvik’s facilities will be characterized by a high availability and few unplanned outages in order to ensure a high and efficient production.

Competence Development

The combined competence of the organi zation must be continuously developed. Consequently, Studsvik is focusing on competence develop-ment and especially on enhancing business acumen, technical expertise and marketing skills. This is achieved through training, new recruitment and continuous exchange with private and public sector research institutions.

Organizational Development

Studsvik’s aim is to develop an organization that is characterized by short-decision making routes, strong profitability, business acumen and a focus on customer satisfaction. The aim is to create an atmosphere of creativity and intra-preneurship where the individual is empowered.

Studsvik’s objective is to create growth in shareholder value by being a

leading supplier of products and services within nuclear technology.

7


Studsvik’s main markets are Germany, the USA, Japan and Sweden. Business is conducted at our own facilities in Sweden and the USA as well as at our customers’ facilities.

The Group is divided into six SBUs:

– Operating Efficiency and Safety– Service and Maintenance– Waste Treatment– Decommissioning – Irradiation Services – Nuclear Medicine

Operating Efficiency and Safety’s customers are mainly within the nuclear industry. Studsvik tests and analyzes nuclear fuel and materials, develops in-core fuel management codes and provides consulting services.

Service and Maintenance provides deconta-mination, health physics, dosimetry services, chemical cleaning, waste treatment, mechanical service and process cleaning. Operations are primarily conducted in Sweden and Germany.

Waste Treatment treats low and intermediate-level waste, at its own facilities at Studsvik, outside Nyköping and in Erwin, USA, primarily from nuclear power plants and also from other nuclear facilities.

Decommissioning provides services in connection with the decommissioning of nuclear facilities.

Irradiation Services produces radioisotopes for the major diagnostic and pharmaceutical com-panies and other industries.

Nuclear Medicine develops Boron Neutron Capture Therapy (BNCT) in co-operation with the health care services. BNCT is a method for treating patients with brain tumors.

At year-end, Studsvik had 1,375 employees, of which 598 were in Sweden and 684 in Germany. Studsvik has subsidiaries in Sweden, Germany, the USA, Japan, Norway, Great Britain and Switzerland.

Since May 4, 2001, the Studsvik share has been listed on Stockholmsbörsen’s (the Stock-holm stock-exchange) O list.

Studsvik – A Leading, International Group Providing Specialist ServicesStudsvik supplies specialist services to customers world-wide, primarily

nuclear power plants and suppliers to the nuclear industry including

fuel vendors. Customers also comprise industrial companies and

organizations in the health care sector.

Irradiation Services

Pages 32–35

Waste Treatment

Pages 24–27

8


Business in 2003, per SBU

Net sales

SEK 246.4 million / 21%

Operating profit


Operating capital


Cash flow*


Average number of employees






214 / 17%

Operating Efficiency and Safety

Pages 16–19

Net sales


Operating profit


Operating capital


Cash flow*

SEK 39.9 million / 20% 542 / 43%

Service andMaintenance

Pages 20–23

Net sales


Operating profit


Operating capital


Cash flow*

SEK 73.2 million / 38% 81 / 6%

Net sales


Operating profit


Operating capital


Cash flow*

SEK 27.1 million / 14% 418 / 33%

Decommission-ing

Pages 28–31

Net sales


Operating profit


Operating capital


Cash flow*

SEK 1.7 million / 1% 16 / 1%

Net sales


Operating profit

SEK –12.1 million / neg

Operating capital


Cash flow*

SEK –12.0 million / neg 5 / 0%

SEK 1,113.8 million SEK 61.4 million SEK 450.4 million SEK 156.7 million 1,313

Nuclear Medicine

Pages 36–39

Total for the Group

* Operating profit after depreciation and write-downs are added back.

Net sales, operating profit and cash flow per SBU have been calculated as a percentage of the SBUs’ combined net sales, operating profit and cash flow.

9


Products and ServicesTesting, investigations and analysesCodes (software)Safety technology

MarketGlobal market leader in in-core fuel management codes, with a market share of about 50 per cent. Leading in testing, investigations and analyses of fuel and materials. Future expansion will occur within existing product and service segments all over the world. In-core fuel management codes are mainly conducted in the USA. Testing is mainly carried out at the R2 reactor at Studsvik, Sweden.

Products and ServicesDecontamination and chemical cleaningMechanical serviceHealth physics and dosimetry servicesProcess cleaning

MarketThe leading player in Germany and Sweden. Some operations in other parts of Europe. Future expansion is expected to largely take place on the German mar-ket. Expansion is also expected in Italy and England. Operations are mainly conducted at customer sites.

Products and ServicesTreatment of– low-level dry waste– low-level metallic waste– low and intermediate-level wet wasteConsulting

MarketA market leader in low and intermediate-level wet waste in the USA. Small market shares in other segments. Future growth is expected to occur in the DOE segment, namely the mar-ket for federal waste in the USA. Studsvik conducts operations at facilities in Sweden and the USA.

Products and ServicesPreparatory studiesProject planningProject managementImplementationWaste treatmentDecontamination

MarketStrong position in Europe. No operations in the rest of the world. Growth primarily in the German market. Japan, Italy and Britain are also growth markets due to the fact that decisions have been made to phase out nuclear power in Germany and Italy and due to the fact that a number of nuclear power plants in Japan and England are to be decommissioned and the sites returned to greenfield status. Business is conducted through the German subsidiary, SINA.

Products and ServicesMedical radioisotopesIndustrial radioisotopesSilicon doping

MarketOne of a few major suppliers of neutron-doped silicon and a small player in the radioisotope market. The business in medical radioisotopes, used for therapy and diagnostics, is growing. Operations are conducted at Studsvik’s R2 reactor.

Products and ServicesTreatment of malignant brain tumors with BNCT

MarketIn Western Europe and the USA, just over 70,000 people are diagnosed with primary brain tumors every year. The survival time is about 10 months. Since ongoing clinical studies show continued positive results, the demand for treatment at the Studsvik facility is expected to increase. Operations are conducted in co-operation with the Swedish health care services. The treatment facility is situated at Studsvik’s R2-0 reactor. Similar facilities can also be constructed at other sites.

10


Strong GrowthDemand for electrical power is increasing at the same time that there is a lack of viable alternative energy sources for nuclear power. This has resulted in the continued expansion of nuclear power in large parts of the world. At the end of 2003, 32 new reactors were under construction, of which 7 were in India, 4 in China, 4 in the Ukraine, 3 in Russia and 3 in Japan. Future growth in the number of reactors is expected to mainly occur in Asia.

The 441 commercial reactors that are in operation world-wide account for just over 16 per cent of global electricity generation. 146 are located in Western Europe, 128 in North America and the rest in Asia. The USA is the largest single market with 104 reactors in operation, followed by France with 59 and Japan with 54. In addition, there are about 250 research reactors and just over 150 nuclear-powered submarines. At present, the average age of the world’s nuclear reactors is 20 years, while a modern reactor has a lifetime of at least 40 years.

During the entire lifetime of a nuclear power plant, from construction to dismantling, differ-ent types of services are required in operational efficiency, safety, maintenance, waste treat-ment and decommissioning. These services are provided by Studsvik. Nuclear fuel fabrication plants, hospitals and institutions for technical research also require some of these services.

Nuclear power plant owners are increas-ingly investing in plant to extend operating lifetimes. This means that the need for mainten-ance, materials testing and waste treatment is increasing. At the same time, there is a grow-ing demand for specialist expertise in decom-missioning, for those reactors which have reached their maximum lifetimes. Studsvik operates in all of these areas.

Development of Studsvik’s Market SegmentsOperating Efficiency and SafetyCustomers mainly comprise nuclear power plants and fuel vendors. In order to reduce prod-uction costs, nuclear power plants are increas-ingly outsourcing operations-related services. Studsvik expects this trend to continue to drive business in this segment.

Some of the operations-related services require access to a test reactor. Studsvik esti-mates that there are about 10 test reactors in the world that are sufficiently powerful to con-duct materials and fuel testing. These include Studsvik’s R2 reactor, the Halden reactor in Norway, HFR Petten in the Netherlands, OSIRIS in France and JMTR in Japan. Studsvik expects competition in the operating efficiency and safety segment to decline as government sub-sidies to certain reactors decrease.

Service and Maintenance

In all nuclear facilities, surfaces and compon-ents become contaminated and emit ionizing radiation. The owners of nuclear facilities are responsible for ensuring that radiation levels are registered and controlled, while measures are also implemented to minimize occupational exposure. Studsvik controls, registers and removes radioactive contamination. Studsvik also provides other maintenance services within classified areas.

The leading market players in Europe are Studsvik, Cosmos and KEI in Germany, Serco and AEA in Great Britain and Cogema in France.

Market Development

Metallic WasteIf certain measures are not adopted, scrap metal from reactor component replacement and reactor dismantling must be disposed of as radioactive waste. By decontaminating and melting the metal, Studsvik can reduce the radioactive inventory so that the metal can be recovered.

Dry WasteNuclear power plants generate radioactive combustible waste, in the form of packaging, rags, plastic and protective clothing. Studsvik can incinerate this low-level waste to reduce its volume for final disposal.

DecontaminationIn all nuclear power plants, surfaces and components become contaminated, emitting ionizing radiation. Studsvik removes the radioactivity by various cleaning methods known as decontamination.

Materials Testing Materials used in reactor components are subjected to extreme loads. Studsvik conducts materials testing to investigate the material’s strength under different operating conditions as well as the condition of the material at the end of its lifetime.

Fuel TestingFuel rods are tested in the reactor to ensure that the fuel and cladding retain the properties required for safe and stable operation as well as to achieve an opti-mum fuel burnup.

In-core Fuel Management CodesFuel is the most important resource in a nuclear reactor. Considerable savings can be achieved by optimizing fuel utilization. Studsvik develops advanced in-core fuel management codes to optimize reactor operation.

DosimetryNuclear power plant personnel run the risk of exposure to ionizing radiation. Studsvik provides personal dosimeters that measure radiation doses.

Wet WasteCertain types of nuclear power plants generate wet waste comprising ion-exchange resins from filtering systems. Studsvik reduces the volume of and stabi-lizes the wet waste before final disposal.

Some of the services and products that Studsvik provides to the nuclear industry.

12


Number of commercial reactors in operation

65 70 75 80 85 90 95 03

100

200

300

400

500

Year

Number of reactors per country

USA

Franc

e

Great B

ritain

Russi

a

Germ

any

North

Kor

eaInd

ia

Canad

a

Ukrain

eOth

er

Japa

n0

25

50

75

100

125

Waste TreatmentThe disposal of radioactive waste is a major cost item for waste producers. Volume reduction is a profitable means of reducing this cost. The treatment methods used by Studsvik also result in an end-product that complies with regulat-ory requirements on chemical stability. Certain types of contaminated waste can be treated so that they can be subsequently “free-released” and re-used.

Studsvik is one of the leading players in Europe within dry waste treatment and a signi-ficantly smaller player in the metallic waste segment. Other major players in these seg-ments include Cilva in Belgium, Forschungs-zentrum in Karlsruhe and Siempelkamp in Germany, GTS Duratek in the USA and Socodei in France.

Wet waste is primarily generated through reactor coolant cleaning with ion-exchange resins. Studsvik has developed a unique process called THORSM (Thermal Organic Reduction), which reduces the volume of the ion-exchange resins prior to disposal. The method, which also converts the waste into a stable chemical form, is used at Studsvik’s facility in Erwin, USA. Alternative methods are marketed by ATG (Advanced Technology Group) and GTS Duratek.Studsvik’s THORSM is a leading process on the market for ion-exchange resin treatment in the USA. Studsvik also considers THORSM to have a considerable market potential for federal waste. For this reason, a joint venture, THOR Treatment Technologies, has been formed with Washington Group International Inc. (WGI) to treat the federal nuclear waste on behalf of the US Department of Energy. Studsvik and WGI each have an equal stake in the company.

DecommissioningNuclear facility decommissioning has started in a number of countries. In Germany, the Government and the power industry have signed an agreement regarding the successive decommissioning of nuclear power plants and other nuclear facilities. The dismantling of a number of nuclear facilities has begun and this has opened up a major market opportunity for Studsvik. At the same time, the next growth market in decommissioning is gaining momentum now that the Italian Government has established a budget for the dismantling of nuclear facilities and nuclear power plants over the next few years. The growth of the nuclear facility dismantling market is driven by a com-bination of national political decisions and the fact that old nuclear power plants are often inefficient compared to modern reactors.

Studsvik is currently conducting projects in Germany and Sweden. Projects normally last several years and are interdisciplinary, compri-sing different stages from planning and deter-mination of radioactivity to actual dismantling work. The Studsvik Group aims to play a prom-inent role on the decommissioning market.

Irradiation Services

Radioisotopes are a fast-growing market. Studsvik supplies radioisotopes to the major diagnostic and pharmaceutical companies. These companies use the isotopes as essential components in their diagnostic products, thera-peutic medicines and for cancer treatment.

Radioisotopes are also used for the control and monitoring of industrial processes. An example of a practical application is measure-ment instruments to detect cracks.

13


Number of reactors under construction

Slova

kiaIran

Argen

tina

Russi

a

North

Kor

eaInd

iaChin

a

Rum

ania

Ukrain

eOth

er

Japa

n0

2

4

6

8

10

Age profile of reactors

0 30

0–56–10

11–1516–2021–2526–3031–3536– 40

> 40

60 90 120 150Number

1. Sweden 31%2. Europe, excluding Sweden 42%3. North America 24%4. Asia 3%

2

13

4

Studsvik’s net sales per geographical market

Nuclear MedicineIn Western Europe and the USA, just over 70,000 people are diagnosed with primary brain tumors every year. At present, patients with primary brain tumors usually undergo surgery to remove as much as possible of the tumor. This is then followed by conventional radiation therapy. The average survival time for these patients is about ten months.

In co-operation with the health care services, Studsvik provides an alternative treatment modality, Boron Neutron Capture Therapy (BNCT). The purpose of BNCT is to extend the survival time of patients with brain tumors and, at the same time, to improve their quality of life. Operations are situated next to one of the two reactors at the Studsvik site outside Ny köping, Sweden, where there is also a com-plete clinical facility.

So far, about 250 patients have been treated by BNCT outside Sweden. There are currently four BNCT facilities in Europe, two in Japan and one in the USA. In addition, several facilities are being completed around the world.

In Sweden, Studsvik is the sole provider of BNCT. 41 patients have so far been treated. The results of the first clinical study show that BNCT is at least as effective as conventional radiation therapy. It is reasonable to assume that, in the future, the method can be much improved through further refinement of the boron carrier substances.

14


The Studsvik Share

Number of Shares and Share CapitalOn December 31, 2003, the number of shares in Studsvik AB (publ) amounted to 8.1 million. The number of outstanding options was 104,400, on the same date. This means that the number of shares, if the option rights had been exercised in full, would be 8,218,611, corresponding to a dilution of 1.3 per cent. Each share carries one vote and entitles the holder to an equal portion of the company’s assets and profits. Each share has a par value of SEK 1 and the share capital amounts to SEK 8.1 million.

Share Price and Trading

In 2003, stock-exchanges around the world were buoyant. On Stockholmsbörsen, the All Share Index increased by 29.82 per cent. The Studsvik share outperformed Stockholmsbörsen’s All Share Index. The Studsvik share rose by 118 per cent during the year, from SEK 45.00 on January 2 to SEK 98.00 on December 31, entailing a mar-ket value of SEK 795 million on December 31. During the year, the price fluctuated between

SEK 44.00 on March 3 and SEK 101.00 on December 22. On January 31, 2004, the price was SEK 93.50. Earnings per share before dilu-tion for the year was SEK 3.93 (–1.06) and, after dilution, SEK 3.88 (–1.06). See definitions on page 82.

In 2003, 2.9 million Studsvik shares were sold for a value of SEK 183 million. This corresponds to a turnover rate of free shares (defined as all shares besides those owned by Euroventures Nordica II B.V.) of 50 per cent, compared with 124 per cent for Stockholmsbörsen as a whole.

Dividend Policy and Dividend

The Board of Director’s objective is for the average dividend to correspond, over time, to a minimum of 30 per cent of the Group’s profit after tax. However, Studsvik’s opportunities for expansion, need for consolidation, liquidity and its financial position will also be taken into con-sideration when deciding on the proposed dist-ribution of profits. The Board proposes that no dividend be made for the financial year of 2003.

Number of shares sold (in thousands)

Studsvik

Stockholmsbörsen's All Share Index

The Studsvik share, May 2001–January 2004

Source: Ecovision Finansanalys

1. Swedish private investors 33%2. Swedish institutions 33%3. Foreign owners 34%

2

13

Ownership profile The Studsvik share was listed on Stockholmsbörsen’s O list on May 4,

2001. One block comprises 200 shares.

0

10

20

30

40

50

60

70

80

90

100

m a o d f a j a o d f a j a o d j0

300

600

900

1200

1500

j j s n j m m j s n j m m j s n

2001 2002 2003 2004

15


Ownership StructureDuring the second quarter of the year, an offer for the brokerage fee-free sale or purchase of shares was directed to shareholders with a holding of less than one block, namely 200 shares. The sale offer was accepted by just over 1,400 shareholders and just over 670 sharehol-ders chose, at a reduced brokerage fee, to buy shares in order to bring their holding up to one block after the transaction. The availability of shares was guaranteed by Euroventures Nordica II B.V. which, thereby, sold just over 49,000 shares. Altogether, the transactions were con-ducted at a price of SEK 52.05.

At year-end, the number of shareholders in Studsvik was 5,042 (6,663). Of these, 94 per cent owned 1,000 shares or less. The ten largest owners accounted for 68 (66) per cent of the shares. The share of institutional Swed-ish ownership amounted to about 33 (23) per cent of the share capital. The share of foreign ownership was 34 (48) per cent.

Options

On April 22, 2002, Studsvik launched an option program which is still ongoing. The aim of the option program is for Studsvik to promote its long-term interests by stimulating the Group’s employees to have an ownership commitment to the company. A total of 104,400 option rights were subscribed for. The subscription premium, which was calculated in accordance with Black & Scholes’s formula, amounted to SEK 6.60. Each option right entitles the holder to subscribe for a share in Studsvik AB at a par value of one (1) SEK during the period from June 1, 2004 to May 31, 2005 at a price of SEK 61.50.

Contact with the Stock Market

D. Carnegie continuously publishes analyses of Studsvik. In addition, Studsvik is monitored by Kaupthing Bank and Remium Securities.

The annual report and interim reports are pub-lished in Swedish and English. Reports and press releases are published on Studsvik’s web site.

CHANGE IN SHARE CAPITAL Increase in number Share Total numberYear Transaction of shares capital SEK of shares1994 Founding 500,000 500,000 500,0002001 Bonus issue 5,300,000 5,800,000 5,800,0002001 Directed issue 2,314,211 8,114,211 8,114,211

OWNERSHIP STRUCTURE Number of Number of Number of % of total shares shareholders shares shares 1 – 500 4,502 411,924 5.0 501 – 2,000 368 387,500 4.8 2,001 – 10,000 111 551,170 6.8 10,001 – 50,000 44 916,259 11.3 50,001 – 100,000 5 364,550 4.5100,001 – 12 5,482,808 67.6Total 5,042 8,114,211 100.0

DATA PER SHAREAmount, SEK 2003 2002 2001Number of shares at the end of the period 8,114,211 8,114,211 8,114,211Average number of shares before dilution 8,114,211 8,114,211 7,581,625Average number of shares after dilution 8,218,611 8,114,211 8,114,211Rate at December 31 98.00 45.00 40.00Earnings per share before dilution 3.93 –1.06 –17.86Earnings per share after dilution 3.88 –1.06 –17.86Equity per share 65.48 57.45 67.98P/E-ratio 25 neg neg

MAJOR SHAREHOLDERSShareholder Number of shares Share,%Euroventures Nordica II B.V. 2,281,230 28.1Karinen family 836,120 10.3Briban Invest 1) 784,000 9.7Handelsbankens Småbolagsfond 376,400 4.6Jan Bengtsson 312,600 3.9Didner & Gerge Aktiefond 270,000 3.3SEB Sverige Småbolag 243,400 3.0Euroclear Bank SA/NV 160,158 2.0SIF 120,000 1.5Banque Luxembourg SA 109,800 1.3Total, 10 largest shareholders – holdings 5,493,708 67.7Other shareholders 2,620,503 32.3Total 8,114,211 100.0

1) After balance sheet date, Briban Invest has a holding of 10.7%, according to the disclosure notification.

Studsvik’s R2 test reactor.

17

OPERATING EFFICIENCY AND SAFETY

The general market situation for reactor and laboratory services improved towards the end of the year. The program that was launched in 2002 to improve the quality and efficiency of operations is progressing as planned. Business in the in-core fuel management code segment continued to show a satisfactory profitability and new in-core fuel management codes were successfully launched during the year. USD is the dominant foreign currency for the SBU. However, the balance between expenses and income in USD meant that the declining USD rate only had a marginal impact on profit.

Investments

In 2003, the SBU’s investments amounted to SEK 45.1 million (32.9), of which fuel elements for the reactors amounted to SEK 22.3 million (21.6).

Market and Products

The power industry is currently investing in extending reactor lifetimes. The need for the verification of materials data and the categor-ization of materials to further improve safety and avoid costly downtime is thereby increas ing. Studsvik conducts advanced materials testing and investigations and other services.

Reactor fuel is a significant cost item for the nuclear industry. Therefore, most nuclear power plant owners around the world are channeling considerable resources into increas-ing their fuel burnup. Extensive testing of fuel properties and advanced in-core fuel manage-ment codes are required in order to enhance burnup. To further rationalize operation, addi-tives are often used in the reactor coolant. Due to the changed operating conditions, there is a need to verify the properties of the fuel, cladding and structural materials under the new conditions. Studsvik is a world leader with respect to nuclear fuel testing in the R2 test reactor and reactor fuel investigations in the Studsvik Group’s Hot Cell Laboratory. Studsvik also has a leading position in materials testing in lead cells and autoclaves.

The market for fuel and materials testing is expected to increase since most of the nuclear power plant owners are improving their fuel burnup to achieve a better fuel economy and are starting to use additives in their reactor coolant.

Market Position

The SBU’s customers mainly comprise nuclear power plants on the international market.

Slight Positive Development

Net sales for the SBU amounted to SEK 246.4 million (266.0). Operating

profit amounted to SEK 27.0 million (22.5). USD is the dominant

foreign currency for the SBU. However, the balance between expenses

and income in USD meant that the declining USD rate only had a

marginal impact on profit.

The R2 reactor is primarily used for the irradiation and testing of nuclear fuel and reactor material as well as for neutron irradiation services. In Studsvik’s assessment, there are about ten test reactors in the world that are sufficiently powerful to conduct materials and fuel testing.

COMPANIES IN THE SBU

Studsvik Nuclear ABPresident: Jean-Marc Holt

Studsvik ScandpowerPresident: Malte Edenius

Studsvik Japan LtdPresident: Toshio Yamazaki

The Operating Efficiency and Safety SBU offers products and services related to nuclear power plant operation. The services include tes-ting and investigation of nuclear fuel and materials, in-core fuel manage-ment codes and consulting in safety analysis. Nuclear power plants are the largest customer category. Others include fuel vendors and government authorities.

18


Testing and Investigation of Nuclear Fuel and MaterialsStudsvik conducts extensive testing of reactor fuel and materials properties under different operating conditions. The material’s resistance to damage and its end-of-lifetime state are investigated. The tests are conducted with great precision, under realistic conditions and are followed by investigations and analyses in special radiation-shielded lead or concrete cells.

The purpose is to: – Increase reactor availability by reducing fuel

and materials-related operating limitations– Reduce fuel costs by increasing fuel burnup – Verify material lifetimes and thereby enhance

safety and avoid unnecessary fuel replacement– Collect data that optimize operation and that

are valuable from the standpoint of safety– Obtain data which can provide a basis for

decision-making regarding the use of materials.

The fuel and materials tests are divided into well-defined stages where pre-irradiation is carried out in a nuclear power plant or in Studsvik’s R2 reactor so that post-irradiation examinations can be conducted at different stages.

Fuel testing in the R2 reactor is usually conducted on fuel which is 200–600 mm in length. The fuel is refabricated from full-length rods in the Hot Cell Laboratory or irradiated in short pieces in the reactor. Typical tests show fuel behavior during power transients, fuel corrosion and fuel behavior after fuel failure.

Materials testing often begins with irradiation of the material in the R2 reactor or in the customer’s reactor. The irradiation is conduc-ted in water, liquid metal or gas environments under controlled temperatures and with speci-fied neutron doses. The tests are conducted in temperatures from 50 to 1,400 degrees and, in certain cases, chemicals are added. Some

irradiation is conducted with some form of load on the test material to simulate realistic reactor conditions.

The fuel and materials are subsequently characterized through non-destructive or destructive testing at Studsvik’s laboratories where advanced technical investigations, testing and microscopic characterization are performed.

In-core Fuel Management CodesStudsvik’s in-core fuel management codes (software) contain technically advanced neut-ronics and hydraulic models and are used by nuclear power plants and fuel vendors to calculate the best fuel and core configuration for safe and optimal operation. The position of each fuel rod in a fuel assembly and the position of the assembly in the core determine the operating characteristics and economic performance of the reactor. The codes are also used for in-core fuel monitoring and in simu-lators for reactor operator training. The codes are continuously being developed for new applications as well as to improve their existing functionality.

Of the world’s 441 reactors, just over 200 currently use Studsvik’s codes and services. In the USA, Studsvik’s market share is over 80 per cent and, in Europe, excluding France, the market share is 50 per cent.

Consulting in Safety AnalysisStudsvik conducts thermohydraulic analyses of industrial process systems, such as investiga-tions of transient thermohydraulic processes in reactors. The analyses comprise detailed eval-uation of processes in systems that are often highly complex. The feedback from core kine-tics as well as regulation, control and safety systems are an essential part of the analysis.

1. Testing and investigation of nuclear fuel and materials 47%2. In-core fuel management codes 31% 3. Consulting in safety analysis 8%4. Other 14%

Income distribution

1

2

34

In the Irradiated Materials Laboratory, which has been in operation since the early 1960’s, reactor component materials and fuel cladding are tes-ted and investigated in lead cells, partly with the help of several newly developed methods.

In addition, postulated severe accidents are ana-lyzed for customers. The aim of such ana lys es is to investigate the possible consequences of reactor system damage. It is particularly impor-tant to investigate the integrated effect of dif-ferent systems and designs, including systems to mitigate radioactive re leases to the environ-ment. Advanced computer codes are used to calculate thermohydraulic conditions in the reactor systems and containment, reactor core degradation and meltdown, the impact of the core melt on the reactor pressure vessel and concrete structures and the release of radioac-tive gases and particles from the reactor core and connected systems. Customers are mainly from the Swedish and German markets.

OutlookSeveral of Studsvik’s competitors, which are all state-owned, are undergoing business trans-formation with increasing demands on profit-a bility. The number of facilities is expected to decrease in the future due to the inadequate efficiency of some facilities. This trend is expec-ted to be favorable for the pricing of Studsvik’s products.

19


Key FiguresAmounts, SEK m 2003 2002 2001Net sales 246.4 266.0 265.9Share of net sales for the Group, % 21 25 28Operating profit before amortizationof goodwill 27.0 22.5 –29.7Operating profit 27.0 22.5 –29.7Investments 45.1 32.9 20.0 of which R2 fuel 22.3 21.6 18.1Average number of employees 214 206 213

Facilities

The SBU’s operations are mainly conducted at the company’s facilities outside Nyköping, Sweden. These facilities comprise the R2 and R2-0 reactors, the Hot Cell Laboratory for nuclear fuel investigations, the Irradiated Materials Laboratory for testing and investigation of irradiated materials (cladding and structural materials) as well as the Autoclave Hall where corrosion and water che-mistry in unirradiated and irradiated materials are investigated.

Fuel for the R2 reactor in radiation shielding.

The combined experience built up in safety technology is documented and refined in a number of tools which are used for simulation and analysis.

The Hot Cell Laboratory is primarily used for the analysis of irradiated nuclear fuel.It can also be used for the analysis of other irradiated materials.

Chemical cleaning in a classified environment.

21

SERVICE AND MAINTENANCE

In 2003, the number of refueling outage days was high in both Sweden and Germany, resulting in a high capacity utilization for the Service and Maintenance SBU. All parts of the SBU reported growth and improved profitability. The shareholding in the associated company, MSI, Marieholm Stensand Industrirengöring AB, which targets the automotive industry in Sweden and Belgium, was sold to Skanska MIAB. Capital gains of SEK 4.5 million are included in operating profit. The SBU’s main foreign currency exposure comes from the EUR. The EUR rate of exchange has been stable and foreign exchange effects on net sales and operating profit are marginal.

InvestmentsIn 2003, the SBU’s investments amounted to SEK 14.1 million (8.1).

Market and ProductsMeasurement and analysis of radiation must be conducted when operations are carried out in classified environments. Furthermore, measures must be established to limit radiation doses to personnel.

Nuclear power plants and other players in the nuclear industry increasingly outsource these tasks to companies which, with licensed health physics personnel, conduct radiation and dose measurements, determine dose reduction measures and establish and follow up dose budgets for personnel working in classified environments.

Market PositionThe SBU’s main market is the nuclear industry in Europe, particularly Germany and Sweden. Through SINA Industrieservice and SINA’s subsidiary, IFM, Studsvik is currently Germany’s leading player in its market segments. The companies were founded over 20 years ago and headquarters are in Pforzheim, Germany. Business is conducted all over Europe and the companies have about 700 employees. The second major company in the SBU, Stensand Specialserviceföretaget, operates exclusively on the Swedish market. Stensand primarily has Swedish nuclear power plants as customers. The company is a medium-sized player in its market segments.

Decontamination and Chemical Cleaning The radiation levels in facilities are registered and checked and radioactive deposits are removed, thereby maintaining a low radiation level for the personnel and a safer environment.

Contaminated metal is decontaminated primarily at customer sites and/or the volume is reduced through high-pressure compaction which is a cost-effective method for temporary storage or permanent disposal of solid radio-active waste. Certain material that cannot be decontaminated is transported to Studsvik’s melting and incineration facilities outside Nyköping where the Studsvik RadWaste sub-sidiary treats the waste in order to reduce its volume and to create a chemically stable end-product.


Stensand Specialserviceföretaget ABPresident: Jan Bjerler

SINA Industrieservice GmbH & Co. KG President: Kjell Westerberg

Studsvik Rosyth Nuclear Services LtdPresident: Jan Bjerler

The Service and Maintenance SBU provides decontamination, health physics services, dosimetry services, chemical cleaning, mechanical service and process cleaning. Customers are from the nuclear, process and manu-facturing industries, and nuclear power plants are the largest customer category.

1

2

3

4

Income distribution

1. Decontamination and chemical cleaning 49% 2. Mechanical service 3%3. Health physics and dosimetry services 34%4. Process cleaning 14%

Dominant on the German MarketNet sales for the SBU amounted to SEK 375.9 million (335.4).

Operating profi t amounted to SEK 22.1 million (8.9). The SBU’s main

foreign currency exposure comes from the EUR. The EUR rate has

been stable and the foreign currency effects on net sales and operating

profi t are marginal.

22


The SBU also carries out measurements so that buildings, tools and other material can be “free-released” and re-used. The SBU also separates and classifies nuclear waste.

In certain cases, Studsvik runs facilities, on behalf of customers, including casting and compaction facilities for radioactive waste as well as decontamination workshops.

Mechanical Service Mechanical parts in classified environments must be maintained and cleaned on a recur-rent basis. This work must be conducted by personnel who are skilled and experienced in working in classified environments. The SBU has qualified personnel who carry out these services.

Health Physics and Dosimetry ServicesControls and measurements must be carried out by licensed personnel when operations are conducted in classified environments. Health physics technicians ensure compliance with safety regulations and monitor the work of maintenance technicians in order to minimize their exposure to radiation. For example, radiation and dose measurements are performed, dose reduction measures are determined and dose budgets for personnel working in classified environments are prepared and followed up.

Studsvik also provides large-scale and cost-effective dosimetry services, including the manufacturing of dosimeters. The target group mainly comprises hospitals, dentists, vets and industrial companies where the personnel run the risk of being exposed to ionizing radiation. This business currently focuses exclusively on the Swedish market.

Process Cleaning Studsvik conducts process cleaning services for non-nuclear industries where the requirements on quality, timeliness and safety are high. The same personnel working at nuclear power plants can, to advantage, be used for process cleaning in such industries.

OutlookNuclear power plants are increasingly focusing on their core business with the result that tasks of the type offered by the SBU are increasingly outsourced. Studsvik’s growth in Europe is expected to occur through a combination of organic growth and acquisitions of companies offering knowledge-intensive services. The margins for such services are considerably higher than for services with a small knowledge content.

Chemical cleaning in a German nuclear power plant.

Studsvik has considerable experience from major decontamination projects.

Studsvik has personnel who are skilled and trained in crane operation, fuel handling and transport.

23


Key FiguresAmounts, SEK m 2003 2002 2001 Net sales 375.9 335.4 332.4Share of net sales for the Group, % 33 32 35 Operating profit before amortization of goodwill 34.1 15.0 16.8 Operating profit 22.1 8.9 10.7 Investments 14.1 8.1 18.6 Average number of employees 542 533 556

Facilities

Service and Maintenance provides services and, therefore, is not depend-ent on having its own facilities.

Studsvik provides dosimetry servi-ces. Personnel doses are measured and registered in a central data-base in compliance with regulatory requirements.

Studsvik’s personnel is skilled in the classification of radioactive material.

Volume reduction of ion-exchange resins is controlled from the control room at Erwin.

25

WASTE TREATMENT

Capacity utilization at the Group’s waste treatment facilities was high and the price level stable. Availability was also high. In 2003, production in the Erwin facility increased by 12 per cent, compared to the previous year. Both the Swedish and US operations contributed to the improved profit. Foreign exchange effects, excluding the effects of hedging, had an impact on net sales and operating profit amounting to SEK –38.6 million and SEK –2.7 million respect-ively, compared to the previous year.

In July, Metric Duke paid the amount due in accordance with the arbitration decision from the end of January, whereby Studsvik was awarded compensation for construction costs for the Erwin facility that were higher than agreed. For this reason, the acquisition value of the facility was corrected by SEK –31.9 million. The compensation received corresponds to the adjustment of the value of the facility and, there fore, operating profit is not affected.


Market och ProductsWaste from nuclear reactors and nuclear fuel fabrication plants can be classified as high-level waste and low and intermediate-level waste. Studsvik treats low and intermediate-level waste. Low and intermediate-level waste comprises dry waste (such as packaging, clothing and other protective gear), scrap metal and wet waste

(such as ion-exchange resins from nuclear power plant cleaning filters).

The expenses for the disposal of radioactive waste are high and it is profitable to treat the waste in order to minimize waste volumes and to classify or “free-release”, and re-use certain materials. The end-product must also comply with regulatory requirements regarding chemi-cal stability.

The international market for the handling and treatment of low and intermediate-level waste is growing. The prime reason is that nuclear power plant owners are investing in order to extend the operating lifetimes of the plants and this is resulting in growing quanti-ties of waste. Furthermore, large quantities of scrap metal are being generated in connec-tion with the decommissioning of the nuclear power plants that have now reached an age where it is no longer profitable to operate them. In addition to this, large quantities of legacy waste have been placed in temporary storage, awaiting treatment.

Germany is the SBU’s single largest market in Europe within the scrap metal and combustible waste segment. The USA is the SBU’s second largest market, although this is within the segment for the treatment of wet waste. Wet waste arises from nuclear reactor operation, for example when radioactive coolant is cleaned in ion-exchange resin filters. Ion-exchange resins are powders or granules of organic material. When the coolant is filtered, the ion-exchange resins become radioactive. The resins are changed


Studsvik RadWaste ABPresident: Leif Andersson

Studsvik, Inc.President: Thomas W Oliver III

THOR TreatmentTechnologies, LLCPresident: Michael Cowen

Studsvik ProcessingFacility, LLCPresident: George M Hill

The Waste Treatment SBU treats low and intermediate-level waste in its own facilities at Studsvik and at Erwin, USA. Nuclear power plants are the largest customer category and other customers include fuel vendors, health care organizations and research stations.

1. Treatment of low-level dry waste 12%

2. Treatment of low-level metallic waste 9%

3. Treatment of low and intermediate-level wet waste 65%

4. Consulting 14%

Income distribution

3

4 1

2

Strong Growth and Increased ProfitNet sales for the SBU amounted to SEK 295.5 million (294.5). Oper-

ating profi t amounted to SEK 40.0 million (5.4). Foreign exchange

effects, excluding the effect of hedging measures, affected net sales

and operating profi t by SEK –38.6 million and SEK –2.7 million,

respectively, compared to the previous year.

26

WASTE TREATMENT

regularly and used resins must be disposed of as radioactive waste.

Furthermore, in the USA, there are large quantities of legacy nuclear waste from the US nuclear weapons program and other nuclear development work which will have to be treated and disposed of. The US Department of Energy (DOE) and the US Department of Defense (DOD) are responsible for large quantities of such federal waste. The total cost of the treatment and disposal of this waste is estimated at USD 150–300 billion. Similar legacy waste exists in Great Britain, France, Russia, China and India.

Market PositionTreatment of Low-level Dry WasteLow-level combustible waste is treated at Studsvik’s incineration facility outside Nyköp-ing, Sweden. The purpose of incineration is to reduce the waste volume and to obtain a chem-ically stable end-product in the form of ash. Prior to disposal, the volume can be further reduced by high-pressure compaction.

Due to the high incineration efficiency, a volume reduction of more than 95 per cent is achieved. Customers comprise European power plants, government authorities and waste management organizations.

Treatment of Low-level Metallic WasteAt the Studsvik melting facility, contaminated scrap metal from nuclear power plants and other nuclear facilities in Sweden and Europe is treated. Prior to melting, much of the radio-activity is removed. During melting, some radioactive substances are separated out in the slag. The purpose of the decontamination and subsequent melting is to “free-release” and re-use the metal.

The fraction of the waste that cannot be “free-released” directly after treatment can be stored for a maximum of 20 years to allow the radioactivity to decay before the waste is “free-released” and re-used. Scrap metal that cannot be “free-released” within a 20-year period is returned to the customer.

Treatment of Low and Intermediate-level Wet WasteRadioactive waste, in the form of ion-exchange resins, is treated at Studsvik’s facility in Erwin, Tennessee, USA. The method used is called THORSM (Thermal Organic Reduction), and was developed and patented by Studsvik. The ther-mal process converts the organic material in the ion-exchange resins to carbon dioxide and water, which results in a considerable reduc-tion in waste volume. Special inorganic addi-tives bind the radioactivity to an exceptionally stable end-product.

THORSM is also highly suitable for treating other types of radioactive waste. Therefore, together with the US company, Washington Group International, Inc. (WGI), Studsvik has formed a company to treat federal legacy waste from nuclear research, development and other activities in the USA. The purpose of the treatment is the same as that for ion-exchange resins, namely, volume reduction and to obtain a chemically stable end-product prior to disposal.

The disposal of low-level waste in the USA is carried out at Barnwell in South Carolina and at Envirocare in Utah. However, the avail-able capacity of the storage facilities in South Carolina is being successively reduced. This improves Studsvik’s opportunities to provide an attractive treatment alternative since the cost of disposal is based on the waste volume.

Certain radioactive waste in the USA is stored in disposal facilities where nuclear power plants pay for the storage volume used by the waste.

Studsvik’s deep harbor can receive large components.

27

WASTE TREATMENT

ConsultingThe SBU has a team of consultants that carry out investigations prior to the treatment and handling of radioactive waste. The team also conducts environmental studies and environ-mental consequence analyses and prepares environmental impact statements for nuclear installations and conventional industry. Con-sulting services also include major outsourcing contracts for AB SVAFO which involve opera-tional responsibility for the waste management facilities at the Studsvik site.

OutlookStudsvik is operating on a growing market. Reinvestment in nuclear power plants to extend their lifetimes means that the quantity of radioactive waste is increasing. In addition, a large number of nuclear facilities will be decommissioned in the future, generating large quantities of waste.

Studsvik is well-positioned on the market for federal waste in the USA through its co-operation with Washington Group International. Studsvik also considers that there is a good potential for the future establishment of the THORSM process on other geographic markets.

Key FiguresAmounts, SEK m 2003 2002 2001 Net sales 295.5 294.5 206.5Share of net sales for the Group, % 26 28 22Operating profit before amortization of goodwill 40.0 5.4 –59.6Operating profit 40.0 5.4 –59.6Investments 3.2 4.7 12.8Average number of employees 81 54 51

Radioactive waste is stored in a rock cavern at Studsvik pending shipment to a repository.

Ingots in storage for up to 20 years to allow radioactivity to decay.

The end-product from melting consists of the radioactive waste in the form of slag and dust which is returned to the customer for final disposal and metal which can most often be re-used.

Studsvik participated in the decommissioning of the R1 reactor in Stockholm.

29

DECOMMISSIONING

Business continued to grow organically and through acquisitions. On April 1, the German group, IFM, Industrieanlagen Fritz & Marx, was acquired. The acquisition provides valuable complementary competence to the SBU. IFM, which has considerable decommissioning experience, primarily from the Karlsruhe research center, is the base of the SBU’s opera-tions. Following the acquisition, SINA and IFM’s operations have been co-ordinated under SINA’s management. Since the SBU mainly operates on the German market, the main foreign currency exposure comes from the EUR. The rate of exchange has been stable and foreign exchange effects on net sales and oper-ating profit are marginal.


Market and ProductsNuclear power plant owners have two choices when a decision is made to close down a reac-tor – immediate decommissioning or a long shutdown period of up to 50 years or more to allow the radioactivity to decay before dis-mantling starts. Factors affecting the choice include the availability of disposal facilities, political considerations, the need for the land where the facility is located, the assessment of the risk of working in the facility before the radioactivity has had time to decay etc.

In recent years, the tendency has been to make decisions for immediate dismantling. The

French utility, Electricité de France, has changed its previous policy to postpone dismantling to one of early dismantling. Germany has decided to immediately dismantle the nuclear power plant in Greifswald and will apply the same strategy to other German nuclear power plants. Italy is moving in the same direction and Japan has decided to dismantle nuclear power plants 5–10 years after closure in order to save space. In the USA, a number of nuclear power plants have also been dismantled – or will be dismantled – shortly after they have been closed down. The International Atomic Energy Agency (IAEA) estimates that this trend is so strong that the number of reactors to be dismantled will amount to about 160 over the period of 2010–2015.

The segment for the decommissioning of nuclear facilities is, thereby, one of the fastest growing in the nuclear market. Germany in particular, and in the near future, Italy are the most attractive segments in Europe, although countries such as England, Japan and Lithuania are also of interest for Studsvik.

EuropeIn Germany, the work on decontaminating and dismantling facilities is expected to start in the near future. Examples of facilities to be dismant-led are the Mülheim-Kärlich nuclear power plant in Stade, that is in its final operating cycle, and the Obrigheim nuclear power plant, where decommissioning will probably start within a few years’ time. At present, it looks as though most of the nuclear power plants in


SINA Industrieservice GmbH & Co. KG President: Kjell Westerberg

The Decommissioning SBU has 20 years of experience of decommis-sioning nuclear facilities. For each project, the SBU provides customized solutions, including preparatory studies, project planning, project management, implementation, waste handling, decontamination and health physics.

Well-positioned on a Growing MarketNet sales for the SBU amounted to SEK 156.1 million (76.8). Opera-

ting profi t amounted to SEK 20.8 million (5.4). The SBU mainly oper-

ates in Germany and, therefore, foreign currency exposure comes

from the EUR. The EUR rate has been stable and the foreign currency

effects on net sales and operating profi t are marginal.

The Bolero robot is used to decon-taminate concrete surfaces. Small compressed-air hammers remove the contaminated layer of concrete ten times as fast as manual tools.

Studsvik has considerable experience from decommissioning, primarily from the Karlsruhe research facility in Germany.

30

DECOMMISSIONING

Germany will be decommissioned so that the sites where they are located are returned to greenfield status (so that no trace of the previ-ous activity remains).

In Italy, several nuclear power plants and other nuclear facilities have been closed down since the 1980’s without any decision regarding dismantling being made. However, recently, the Italian parliament set up a budget for dismantling and an organization, SOGIN, has been formed to manage the dismantling work. Studsvik’s objective is to establish oper-ations in Italy so that it can, together with an Italian partner, provide dismantling services to the Italian market.

In England, the first dismantling project is expected to start in a few years’ time. For the time being, Sweden has postponed the dis-mantling of closed down facilities in order to allow the radioactivity to decay.

AsiaJapan’s official policy is to dismantle nuclear power plants 5–10 years after closure in order to save space. The first nuclear facility that was approved for dismantling was a demonstra-tion reactor that was dismantled in1996. At present, there is a decision to decommission a recently closed down gas-cooled reactor in Tokai and several decommissioning decisions are expected over the next five years.

Market PositionStudsvik’s subsidiary, SINA, is an obvious mar-ket leader in the nuclear facility decommission-ing segment. Since the 1990’s, the company has conducted decommissioning projects in research facilities such as Forschungszentrum, Karlsruhe and Forschungszentrum, Rossendorf in the former Federal Republic of Germany. SINA is currently also conducting a project in

Hanau where Siemens is decommissioning a uranium fuel and MOX fuel fabrication faci-lity. Another current project is the Würgassen nuclear power plant.

Studsvik also has considerable experience from decommissioning projects on the Swed-ish market, including the Ågesta nuclear power and heat plant, the uranium mine in Ranstad and several major laboratories at the Studsvik site.

Unlike conventional dismantling work, the services provided by Studsvik are conducted in classified environments, which places demands on personnel and methods. Conventional dismantling methods are combined with radio-logical safety, waste treatment and transport. Work includes preparatory studies, project planning, project management, implementa-tion, waste treatment, decontamination and health physics.

The dismantling process can be described as follows: 1. Regulatory approval for different project

stages. Together with the customer, an engineering firm develops a concept for dismantling.

2. A request for quotation is then directed to a number of sub-contractors – including Studsvik – to conduct different parts of the dismantling work.

3. All of the material is “free-released” or registered and transported for further treatment at Studsvik’s facilities in Sweden, or sent for disposal.

4. Building components are decontaminated and measured so that they can be “free-released”.

5. The authorities approve the start of conven-tional dismantling.

Decommissioning projects differ in nature. Certain nuclear power plants manage the

Studsvik can reduce the volume of metallic waste through high-pressure compaction at the customer site.

In addition to performing decon-tamination and compaction at the customer site, Studsvik transports the waste to the company’s own facilities. The waste is then separated into radioactive and non-radioactive fractions.

31

DECOMMISSIONING

Equipment for moving components prior to decontamination.

Key FiguresAmounts, SEK m 2003 2002 2001 Net sales 156.1 76.8 63.6Share of net sales for the Group, % 14 7 7Operating profit before amortization of goodwill 23.0 8.3 5.6 Operating profit 20.8 5.4 2.7 Investments 56.0 2.4 2.8 Average number of employees 418 286 267

decommissioning themselves and subcont-ract individual projects to companies such as Studsvik while others opt for a main contractor which, in turn, subcontracts individual projects to companies. In all cases, the purpose of the work is to decontaminate material – for example by removing oxide deposits that emit radiation – in order to as far as possible “free-release” the material.

Since the cost of the final disposal of radio-active material is often high, volume reduction is also important. Depending on the mat erial that is treated, Studsvik can offer several diffe rent methods for volume reduction, such as decontamination with subsequent “free-release”, high-pressure compaction, melting or incineration.

In addition, a large portion of a decom-missioning project consists of documentation. Each component that leaves the facility must be registered and documented and each stage in the decommissioning process requires a regulatory permit.

OutlookIn Studsvik’s assessment, a large number of decommissioning decisions will be made around the world and implemented in the future. Germany has decided to start decommissioning research reactors and commercial reactors earlier than in other countries. For this reason, Studsvik is developing cutting-edge expertise in the country. Acquiring knowledge and exper-ience in Germany establishes the basis for a continued expansion on other markets as well.

Internationally, Studsvik’s competitive advantage lies in those segments where the demand for technical competence is high. Establishment on each market is expected to occur through a combination of independent market entry and the acquisition of existing

local consultancy companies. The time from the start to the end of a

decommissioning project is about 15 years. During this time, large quantities of waste are generated which cannot be treated on site at the nuclear facility. The cost of transporting the waste is only a marginal fraction of the total cost. Consequently, the prospects for Studsvik providing waste treatment in Studsvik’s facili-ties are good, as they are for decommissioning projects on other continents besides Europe. An example of such waste is heavy compon-ents such as heat-exchangers and steam generators. The components are shipped to Studsvik where they are dismantled into smal-ler segments and treated as well as, in some cases, melted. The small radioactive fraction is returned to the customer after treatment.

Studsvik is in the vanguard with respect to decommissioning and this, along with the market development, means a very positive outlook.

The use of isotopes for medical applications is rapidly growing. Methods where isotopes are used are often effective, have few side-effects and are profitable compared to conventional methods.

33

IRRADIATION SERVICES

The underlying market for radioisotopes continued to develop positively although the growth in volume in the SBU was less than the market growth. Significant efforts have been put into new technology and methods to increase the production capacity for neut-ron-doped silicon and to enable larger silicon ingots to be irradiated and with greater preci-sion than before. The SBU’s main foreign cur-rency exposure comes from the USD. Foreign exchange effects, excluding the effects of hed-ging, had an impact on net sales and operating profit amounting to SEK –4 million, compared to the previous year.


Market and ProcuctsThe use of radioisotopes for medical purposes is rapidly increasing. The applications include diagnostics and therapy for different forms of cancer. The radioisotopes are designed so that, on their own or bound to carrier substances, they can be taken up by tissue in the body, either to locate a tumor or to destroy a tumor with ionizing radiation. Radioisotopes can also be implanted in or next to the tumor. Medical radioisotopes are therefore used because they are effective, result in few side-effects and are cheaper than conventional methods.

Studsvik produces industrial radioisotopes which are used for radiography. Radiography is industry’s answer to medical X-ray investigations.

Silicon doping is also a fast-growing market.

Market PositionMedical RadioisotopesStudsvik produces medical radioisotopes in the company’s R2 reactor and delivers them to diagnostic and pharmaceutical companies. The short half-life for many radioisotopes places great demands on fast and reliable customer deliveries. Studsvik is therefore looking to co-operate with reactors on local markets in order to guarantee uninterrupted deliveries.

Together with its partner, Studsvik is the world’s second largest producer of the iodine-125 radioisotope which is mainly used to treat cancer of the prostate. During the treatment, the isotope is placed inside the prostate. The isotope emits radiation locally thereby destroy-ing the tumor with a limited impact on the surrounding tissue. Compared to conventional surgical methods, this method results in signifi-cantly less side-effects.

The method whereby radioisotopes are used to treat prostate cancer has a number of advantages compared with other methods of treating prostate cancer. Consequently, the method is expected to be increasingly used.

Conventional prostate cancer therapy invol-ves systematic chemotherapy. All tissue, can-cerous and healthy, comes into contact with the cytotoxins and this can lead to side-effects such as nausea, hair loss, fatigue etc.

Radioisotope therapy involves irradiating a very limited area around the prostate. Cancer cells proliferate much faster than normal tis-sue, which means that they are damaged by radiation to such an extent that cell division ceases and the cells disappear after some time.


Studsvik Nuclear ABPresident: Jean-Marc Holt

The Irradiation Services SBU produces medical radioisotopes for the major diagnostic and pharmaceutical com-panies and industrial radioisotopes for use in other industries. Pharma-ceutical companies use the radio-isotopes as essential components in their diagnostic products, therapeutic medicines and for the treatment of cancer. Studsvik produces radio-isotopes that are used by industry for radiography, which is a form of high-sensitivity X-ray investigation, often used in the oil extraction and aviation industries. In addition, the SBU conducts silicon doping to produce semi-conductors.

1. Medical radioisotopes 27%2. Industrial radioisotopes 19%3. Silicon doping 15%4. Neutron research 39%

Income distribution

2

41

3

Major Development Potential


profi t amounted to SEK 0.2 million (0.2). The SBU’s main foreign

currency exposure comes from the USD. Consequently, foreign currency

effects have affected net sales and operating profi t by SEK –4.0 million.

34


Normal cells, which divide more slowly, mana-ge to repair the damage from the radiation and continue to function normally.

Another application for medical precision irradiation is pain relief for cancer patients. Samarium-153, which is produced by Studsvik, is among the isotopes used.

Industrial Radioisotopes For industrial applications, Studsvik produces radioisotopes that are used in radiography. Iridium-192, which Studsvik produces, is the most common radioisotope produced for the radiography of load-bearing structures, critical connections and other equipment that is sub-ject to mechanical loads. Another industrial application for iridium-192 is the determina-tion of the thickness of different materials and structures.

Radioisotopes are also used to verify prod-uct and material integrity and this results in cost savings in connection with production and enables the continuous control of materials and systems to be conducted in operating environments.

Silicon DopingStudsvik irradiates silicon for all leading producers of semi-conductors in the world. Through neut-ron doping (irradiation), the material acqui res semi-conducting properties for application in power electronics. Specific requirements, such as a very narrow resistivity variation in the silicon crystal, mean that neutron doping is often the only alternative for these applications.

Neutron ResearchStudsvik is the only supplier of neutrons to uni-versities in Sweden for research purposes. The Swedish state compensates Studsvik each year for neutrons used for this purpose. The compen-sation for costs is decided every year by the Swed-ish Riksdag (parliament). For 2003, the level of compensation was SEK 29.7 million (29.7).

OutlookMedical radioisotopes is a fast-growing mar-ket and an attractive segment for the Group. The potential for continued growth in radio-isotopes for medical purposes is good. Added to this, is the potential for increasing the value-added by delivering radioisotopes to the end-consumer segment.

Studsvik irradiates silicon for the manufacturing of semi-conductors.

35


Key FiguresAmounts, SEK m 2003 2002 2001 Net sales 74.9 75.0 66.0Share of net sales for the Group, % 6 7 7Operating profit before amortization of goodwill 0.2 0.2 0.2 Operating profit 0.2 0.2 0.2 Investments 0.9 0.8 0.9 Average number of employees 16 17 15

Isotopes are also used to verify the properties of products and materials.

Studsvik’s R2 reactor has been used since the 1960’s to irradiate certain elements in order to produce radioisotopes.

BNCT is short in comparison with conventional therapy. Treatment lasts a total of about 3 days with a single irradiation session of about 30 minutes on Day 2.

37

NUCLEAR MEDICINE

During the year, a Phase 2 study for the treat-ment of malignant gliom with BNCT was com-pleted. The study confirms previous preliminary observations that BNCT is at least as effective as conventional therapy. Considerable develop-ment work has been put into refining the boron substance used in the therapy. In the light of the positive results from the Phase 2 study, Studsvik is considering applying for a permit from the Swedish Medical Products Agency to conduct routine clinical BNCT. Studsvik is actively looking for partners for the business in order to develop BNCT for new applications and to launch it on markets outside Sweden.

InvestmentsIn 2003, the SBU’s investments amounted to SEK 0 million (0.1).

Market and ProductsIn Western Europe and the USA, just over 70,000 people are diagnosed every year with brain tumors of the glioblastoma multiforme type. Today, patients are treated by surgically removing as much of the tumor as possible. After the operation, conventional radiation therapy is administered with a radiation dose that is close to the maximum allowable dose. The effect is based on the fact that glioblast-oma cells are somewhat more sensitive to radiation than healthy brain cells. The treatment can also be supplemented by chemotherapy. After about six months, the tumor usually starts to grow again. At that time, additional radiation therapy cannot be provided since, during the first round of radiation therapy, the

brain was already exposed to the full dose that it can withstand. The only alternative then is to accept that the disease will progress and that the patient will die.

Studsvik provides an alternative treatment modality, Boron Neutron Capture Therapy (BNCT), which aims at improving the quality of life and at extending the survival time of patients suffering from brain tumors.

BNCT is based on a method whereby the sensitivity of the cell to neutron irradiation essentially increases through the delivery of the boron-10 isotope. At Studsvik’s facility, a modi-fied amino acid, boronophenylalanine (BPA) is used together with boron-10. The boron is car-ried by the amino acid and transported from the blood through the vessel walls to the brain tissue and to the tumor cells.

The tumor tissue can take up 3–4 times as much BPA as normal brain tissue. The high uptake of amino acid is due to the division of cancer cells whereas normal cells in an adult brain do not divide. The effect of subsequent neutron irradiation is that the tumor receives a radiation dose that is 3–4 times as high as the surrounding brain tissue. Radiation doses at this level are lethal for individual cells.

So far, about 250 patients have been treated by BNCT outside Sweden. There are currently four BNCT facilities in Europe, two in Japan and one in the USA. Furthermore, several facilities are under completion around the world.

In Sweden, Studsvik is the only provider of BNCT.


Studsvik Medical ABPresident: Kurt Sköld

In co-operation with the health care services, Studsvik develops the alternative treatment modality, Boron Neutron Capture Therapy (BNCT). BNCT aims to extend the survival time of patients suffering from brain tumors and to improve their quality of life. Operations are conducted at one of the Studsvik Group’s reactors at Studsvik and include a complete medical clinic.

Phase 2 Study Completed


profit amounted to SEK –12.1 million (–11.5). The Phase 2 study was

completed and the conclusions for BNCT were positive.

The Phase 2 study was conducted on 30 patients with primary brain tumors.

38

NUCLEAR MEDICINE

Market PositionStudsvik has developed the BNCT method, mainly through the addition of a patented lit-hium filter. The filter allows the neutron beam to be adjusted so that only tissue at a predeter-mined depth, where the tumor is located, is damaged, thereby sparing superficial or under-lying healthy tissue. Studsvik also employs a longer infusion time which results in a higher quantity of boron in the cancer cells and which may enhance the effect.

Today, the results obtained with BNCT are at least as good as those achieved through conventional radiation therapy at the same time that the healthy brain tissue is subjected to a lower radiation dose. In principle, this means that therapy could be repeated, which is usually not possible with conventional radia-tion therapy.

BNCT is short compared to conventional therapy. BNCT takes a total of about 3 days with one (1) radiation treatment session of about 30 minutes. Conventional therapy takes about 6 weeks with about 30 radiation treat-ment sessions.

Ongoing Clinical TrialsClinical trials of pharmaceuticals and medical methods are usually conducted in three conse-cutive phases, each with a specific purpose.

Phase 1. Determination of the risks and side-effects of the treatment.

Phase 2. Determination of the clinical effect of the treatment.

Phase 3. Determination of the relative advantages of the treatment, through the ran-dom referral of patients for the treatment and for conventional treatment.

Phase 1 studies have already been carried out at Brookhaven Laboratory in the USA for the treatment of glioblastom with BNCT and with BPA as a boron carrier. Studsvik was therefore able to proceed directly to Phase 2 studies which have now been conducted at the Studsvik facility between March 2001 and February 2003. The protocol comprised 30 patients. Results show that BNCT is at least as effective as conventional radiation therapy.

In addition, a Phase 2 study is underway to evaluate BNCT as a palliative treatment for patients with tumor regrowth after primary treatment with conventional therapy.

OutlookBNCT is being continuously improved. In the clinical trials completed in 2003, a procedure was applied for delivering boron through intra-venous infusion for six hours instead of the usual two hours. It is likely that this will lead to an increased boron uptake in the cancer cells and this is thereby the main reason why longer survival times are obtained with Studsvik’s method than those obtained in previous BNCT studies.

BNCT is conducted in close co-opera-tion with the health care services.

39

NUCLEAR MEDICINE

Key FiguresAmounts, SEK m 2003 2002 2001 Net sales 1.2 2.1 3.7 Share of net sales for the Group, % 0 0 0 Operating profit before amortization of goodwill –12.1 –11.5 0.5 Operating profit –12.1 –11.5 0.5 Investments 0 0.1 0 Average number of employees 5 6 6

Boron-10, an isotope of boron, absorbs a neutron and is split into two fragments. If one of the frag-ments hits the nucleus of a cancer cell, the DNA strand is broken up, thereby preventing cell division. The growth of the tumor can be halted if a sufficiently large number of cancer cells are inactivated in this way. Since the fragments have a penetrating power of about one cell diameter, surrounding healthy tissue is spared from the neutron-boron reaction in the cancer cell.

An important component in Studsvik’s BNCT is a patented lithium filter. The filter adapts the neutron beams allowing the neutrons to penetrate to a pre-determined tissue depth where the tumor is located, thereby sparing healthy super-ficial or underlying tissue.

40


Studsvik considers that farsighted environmental work is essential to sustain the confidence of customers and society in the company.

The nature of Studsvik’s operations means that safety-related issues are the focus of all parts of the business. Furthermore, Studsvik’s largest customer category, the nuclear industry, places high demands on the safety, environ-mental and quality work of its suppliers. In order to meet customer requirements, for some years now, Studsvik has been implementing integrated management systems where issues relating to the environment, nuclear safety, quality and occupational health and safety are co- ordinated.

Most of the operations in the Group are conducted in accordance with management systems that are certified in accordance with ISO 14001 (environmental management), ISO 9001 (quality management) or similar standards. In Sweden, Stensand Specialservice-företaget AB, Studsvik Nuclear AB, Studsvik RadWaste AB and Studsvik AB are certified in accordance with ISO 14001 and ISO 9001. In Germany, SINA Industrieservice GmbH & Co. KG is certified in accordance with ISO 9001 and, in the USA, Studsvik, Inc. has been approved in accordance with US ASME NQA-1 (Quality Assurance Requirements for Nuclear Facility Applications).

Environmental WorkContinuous improvements are implemented within the framework of the Group’s integrated management system. In order to further reduce the environmental impact, overall objectives and detailed targets are established.Releases and emissions to air and water

from Studsvik’s facilities at Studsvik outside Nyköping and abroad are monitored and environ mental controls are conducted.

As the certification agency for the certified Swedish companies, Integria Certifiering AB, regularly conducts environmental audits to verify compliance with ISO 14001.

Activities Requiring a LicenseActivities at Studsvik must be licensed in accor-dance with the Act on Nuclear Activities, the Radiation Protection Act and the Environmental Code. The Environmental Code requires the licensing of certain activities that were previously not required to be licensed under environmental legislation. An application for these activities was submitted to the Environmental Court at the end of 2002. In addition, applications for renewed licenses for the operation of the R2 and R2-0 reactors were submitted to the Swedish Nuclear Power Inspectorate (SKI). In January 2004, in a statement to the Ministry of the Environment, SKI approved the renewal of the operating licenses for the reactors. The actual licensing decision is made by the Government.

Certain licenses (such as the licenses for the R2 and R2-0 reactors) are regularly reviewed. The dates of expiry for important licenses are shown on the next page.

Environmental DebtStudsvik has no known disputes or events in the environmental area that can result in costs for the Group.

Environment, Safety and QualityFor several decades, Studsvik has worked actively to reduce the

environmental impact of its operations. Work is continuing with the

aim of minimizing the already highly limited environmental impact

of operations.

Studsvik has its own water cleaning facility to minimize both radioactive and non-radioactive emissions.

Most companies in the Studsvik Group are certified in accordance with environmental and quality standards.

41


Additional facts on Studsvik’s environmental and safety workStudsvik publishes annually environ-mental and safety facts concerning the activities at Studsvik’s site.

Safety WorkAll nuclear activities are regulated by law and by detailed regulations. Compliance is monitored through a system for internal controls in combi-nation with supervision by national authorities and international bodies, including the Inter-national Atomic Energy Agency.

Safety analyses are conducted prior to each major change in the organization or work procedure. Each year, safety reports for the activities at Studsvik, Nyköping, are submitted to the regulatory and supervisory authorities, the Swedish Radiation Protection Authority (SSI) and the Swedish Nuclear Power Inspectorate (SKI).

Quality WorkIn order for Studsvik to be internationally competitive, it is of the utmost importance that the Group’s products and services comply with customers’ requirements. Quality work at Studsvik is conducted within the framework of integrated management systems and is thereby subject to internal controls as well as external controls and audits.

Measures during the YearDuring the year, work on ongoing licensing actions were given high priority in the Group’s activities at Studsvik.

Work has started at the newly founded subsidiary, Studsvik Partner AB, to develop an integrated management system. The aim is for Studsvik Partner AB to be certified in accordance with ISO 9001 and ISO 14001.

Stensand Specialserviceföretaget AB was certi fied in accordance with ISO 14001 and ISO 9001.

View of Studsvik’s facilities outside Nyköping, Sweden.

Important Licenses (Expiry Date)Operation of the Hot Cell Laboratory No time-limitActivities involving ionizing radiation at the Isotope Unit June 30, 2004License for the R2 reactor June 30, 2004 1)

License for the R2-0 reactor June 30, 2004 1)

Operation of the melting facility No time-limitOperation of the incineration facility No time-limitRadioactive materials license, Erwin November 30, 2006

1) The license is normally granted for ten-year periods. The Swedish Nuclear Power Inspectorate (SKI) has approved the extension of the operating license. A licensing decision will be made by the Government in spring 2004.

43


In a business such as Studsvik’s, which is highly reliant on technology, the technical expertise of the personnel is of decisive importance. Today, it is as important for a Studsvik employee to have sound business acumen and an interest in and the ability to thrive in different cultures.

Finding new employees and developing and inspiring the existing organization is Studsvik’s highest priority. The responsibility for this rests with the president of each Studsvik subsidiary, not only to underline the importance of these issues but also because the commitment and expertise of its human resources is the key to the subsidiary’s success.

Attracting the Right EmployeesSeveral companies in the Group have under-gone a generation change in the past few years and this has led to a great need for new recruitment. Studsvik has managed this pro-cess successfully and has recruited both new graduates and senior employees. A close rela-tionship with universities and an international network are important tools in the recruitment process. Due to Studsvik’s positive image in the media, more people are making spontaneous contact with the Group.

The nuclear industry in Europe is facing a generation change. This will provide Studsvik with business opportunities and Studsvik is conducting strategic recruitment. In Studsvik’s assessment, the interest for outsourcing will increase as a result of the generation change.

The ongoing focus on developing nuclear power in Asia is expected to continue or even increase. Therefore, Studsvik intends to reinforce its presence in Asia, thereby further empha sizing the importance of an internatio-nal perspective in connection with recruitment and access to expertise.

Competence and Career DevelopmentStudsvik aims to stimulate mobility in the Group’s internal job market by making it easier, in different ways, for employees to change jobs and geographical location. A greater under-standing of the entire business of the Group and of the different cultures involved is not just desirable, it is a priority. In the Group, managers and their employees work with individual development plans which are prepared during annual performance appraisal interviews. Much of the competence and career development of Studsvik’s employees is achieved through their work on interesting and challenging customer projects. Furthermore, a technical ladder scheme has been introduced to ensure that specialist competence is maintained in strategi-cally important areas and to provide technical experts with career advancement opportunities.

Leadership and Management DevelopmentLeadership and management development is achieved through joint and individual programs. Studsvik’s ambition is to develop and prepare its employees for a management position, and also to ensure that the Group’s managers maintain their enthusiasm and vigor after several years in a leadership position.

Salaries and Reward SystemsStudsvik sets salaries on an individual basis and, in several companies, there are incentive schemes which are based on a combination of financial and other business targets. A stock option program was launched in spring 2002 to boost the involvement of employees in the development of the Studsvik Group.

Maintaining a Profile with UniversitiesStudsvik maintains close contact with universities to encourage students to choose nuclear- oriented education and training. The long-term goal is to attract young employees to the Group.

At year-end 2003, Studsvik had 1,375 employees, of which 598 were in Sweden and the rest, in other countries. This corresponds to an increase of 27 per cent, compared with year-end 2002. The personnel turnover was about 8 per cent.

Number of employees1999 1,1842000 1,1942001 1,1002002 1,0852003 1,375

Employees per SBUParent company + others 3%Operating Efficiency and Safety 16%Service and Maintenance 42%Waste Treatment 6%Decommissioning 32%Irradiation Services 1%Nuclear Medicine 0%

Age distribution

<30 31–40 41–50 51–60 61–65

Human ResourcesStudsvik has successfully undergone a generation change over the

past few years. Now that the European nuclear industry is faced

with the same challenge, Studsvik is well-positioned and prepared to

offer the nuclear industry functional services as an alternative to the

recruitment of in-house personnel.

Level of education

1. Doctor or equivalent 4%2. University degree or

equivalent 10%3. High school or equivalent 86%

3

2

1

44

Administration Report

The Board of Directors and the President of Studsvik AB (publ), company registration number 556501-0997, herewith submit the annual report for 2003.

Business Studsvik supplies specialist services to customers world-wide, primarily nuclear power plants and suppliers to the nuclear industry, including fuel vendors. Customers also comprise industrial companies and organizations in the health care sector. The main markets of the Studsvik Group are Germany, the USA, Japan and Sweden. Studsvik’s operations are conducted at its own facilities in Sweden and in the USA as well as at customer sites, particularly nuclear power plants and fuel vendors’ facilities.

With effect from 2004, the Group’s Strategic Business Units (SBUs), which are also the primary market seg-ments, have been redefi ned and increased to six from the previous four. The aim is to better describe the busi-ness in terms of market segments as well as to describe how operational control of the Group is achieved and how strategic decisions and priorities are made.

The Studsvik share is listed on Stockholmsbörsen’s (Stockholm stock-exchange) O list.

The GroupProfi t for the Group continued to improve in 2003. The improvement is the result of increased sales volumes through organic growth, acquisitions and rationalization.

The demand for reactor and laboratory services has been weak for a number of years, but increased during 2003. Sales of Studsvik’s in-core fuel manage-ment code package, Studsvik CMS, increased and, during the year, new codes (programs) and applications were launched with great success. Capacity utilization was high at the Group’s waste treatment facilities and price levels, which vary depending on the complexity of the waste, were stable. Facility availability was high and few unplanned outages occurred. In 2003, the number of refueling and maintenance outages was high in both Sweden and Germany, which resulted in a high capacity utilization for the Service and Maintenance SBU. Business in the Decommissioning SBU increased through organic growth and through the acquisition of the German group, IFM, Industrie-anlagen Fritz & Marx. The acquisition was made on April 1. The Irradiation Services SBU continued to grow, but net sales and profi t were negatively affected by the declining USD rate. Most of the SBU’s sales are in USD and most of its expenses are in SEK. The Phase 2

study of the treatment of malignant gliom by Boron Neutron Capture Therapy (BNCT) was completed during the year. The study confi rms the previous preli-minary observations that the BNCT method is at least as effective as conventional treatment.

The rationalization program that was initiated in 2002 also continued in 2003. The focus has been on improving effi ciency, organizational structure and on reducing the amount of capital tied up in fi xed assets. Tangible results have been achieved in all of these areas. As part of the program, a service company for the Group, Studsvik Partner AB, was founded in connection with the acquisition of all of the real-estate at the Studsvik site from Vattenfall on June 1. The company will comprise technical and administrative support functions for the companies in the Group that are located at the Studsvik site. In connection with the real-estate acquisition, Studsvik also acquired all of the shares in AB SVAFO, which administers the handling of old research waste and the future decommissioning of the majority of the nuclear facilities at the Studsvik site and the closed-down Ågesta plant. Operations are fi nanced by a special fee for nuclear power-generated electricity. Studsvik Eco & Safety AB’s business operations ceased on July 1 in connection with the transfer of the business to other group companies. The associated company, Marieholm Stensand Industrirengöring AB (MSI), which targets the automotive industry in Sweden and Belgium, was sold to Skanska MIAB.

An offer for the brokerage fee-free sale or purchase of shares was directed to Studsvik shareholders with holdings of less than one block, namely 200 shares. The sale offer was accepted by just over 1,400 share-holders while just over 670 shareholders chose to buy shares at a reduced brokerage fee. The supply of shares was guaranteed by Euroventures Nordica II B.V., which thereby sold 49,000 shares.

The dispute with Metric Duke, lasting several years and concerning the construction of the Erwin facility was fi nally concluded early in 2003 when Metric Duke paid Studsvik the compensation specifi ed in the arbitration verdict. The acquisition value of the facility was reduced by SEK 31.9 million, which corresponds to the compen-sation received. The contingent liability of just over SEK 40.0 million, which applied to the Group during the arbitration process, was removed.

The Group is involved in two legal tax processes. One concerns the dispute concerning the accounting policy for R2 reactor fuel. The second concerns the dispute

45

ADMINISTRATION REPORT

regarding tax on per diem allowance. The company does not agree with the tax authorities’ assessment and has appealed against the tax authorities’ decision. In both cases, provisions have been made in respect of the disputed accounts.

An account of other business developments is provided in connection with the description of each SBU.

Net Sales and Profi tNet sales amounted to SEK 1,113.8 million (1,002.3), which is an increase of about 11 per cent. Net sales are mainly sensitive to variations in USD and EUR rates of exchange, primarily in connection with the translation of the income statements of foreign subsidiaries. Foreign exchange effects had a negative impact of about SEK 48.8 million on net sales.

Sales abroad declined and amounted to 69 (70) per cent. The decline is mainly attributable to decreasing USD rates.

Operating profi t amounted to SEK 61.4 million (2.8), which is an improvement in profi t that is in line with the forecasts made during the year. The improvement is pri-marily attributable to the operations at Erwin and to the business in two SBUs, Service and Maintenance as well as Decommissioning. Foreign exchange effects had a nega-tive impact on operating profi t of about SEK 3.1 million.

Profi tabilityThe operating margin for the Group amounted to 5.5 (0.3) per cent and the profi t margin to 4.7 (neg).

The return on capital employed increased by SEK 84.1 million to SEK 750.4 million.

The investment turnover was 1.6 (1.3) and the return on capital employed was 9.6 (1.2) per cent.

Financial PositionLiquid assets amounted to SEK 299.9 million (120.5), which corresponds to 27 per cent of net sales. During September, forward contracts in USD were converted, generating SEK 64.7 million in cash for the Group. The redemption and conversion of forward contracts in USD have furthermore been conducted on a continuous basis throughout the year, which has added further liquidity. Altogether, these measures have reinforced liquidity by SEK 90.3 million.

Equity amounted to SEK 531.3 million (466.2).

The equity-assets ratio amounted to 45 (44) per cent.

Interest-bearing liabilities amounted to SEK 218.8 million

(199.9). Borrowing was wholly conducted in foreign currencies and largely related to investments in the Erwin facility as well as the acquisition of SINA Industrie-service and IFM, Industrieanlagen Fritz & Marx. During the year, a loan was raised for the acquisition of IFM. The change for the year includes a foreign exchange effect from the translation of the liability to SEK which reduces the liability by SEK 17.3 million. The change has no impact on profi t.

The provision for the future management of spent nuclear fuel for the R2 reactor is reported as a non- interest- bearing provision. The provision, which amount-ed to SEK 69.5 million (66.1), is calculated as the present value of estimated future spent nuclear fuel management payments. The costs, which are mainly in USD, are hedged against currency risk.

InvestmentsThe Group’s investments amounted to SEK 119.6 million (53.2). Investments for the year include SEK 22.3 million (21.6) in purchases of nuclear fuel for the R2 reactor. Cash FlowThe cash fl ow from operating activities before changes in working capital improved by SEK 77.1 million to SEK 129.6 million. Working capital changed by SEK 28.5 million. The cash fl ow from operating activities after investments amounted to SEK 38.5 million (–47.3).

Research and DevelopmentDevelopment projects are initiated and conducted partly in co-operation with customers in the form of customer contracts and within the framework of Studsvik’s internal product development. Research and development costs are reported as an expense as they are incurred. Identifi -able expenditure for the development of new processes and products are capitalized to the extent that they are expected to give economic advantages.

In 2003, the cost of internally-funded research and development amounted to SEK 42.1 million (46.3). Most of the resources were allocated to Studsvik’s in-core fuel management codes. All of the expenditure was recognized as an expense.

Activities Requiring a LicenseActivities conducted at the Group’s site at Studsvik, Sweden must be licensed under the Swedish Envi-ronmental Code, the Act on Nuclear Activities and the Radiation Protection Act. The activities must be reviewed under the Code. License applications were

46

ADMINISTRATION REPORT

submitted to the Environmental Court at the end of 2002. The nuclear facilities that require a license under the Act on Nuclear Activities include nuclear reactors, laboratories where radioactive materials are handled, a facility for scrap metal melting and a facility for low-level waste incineration. The license for the operation of Studsvik’s two nuclear reactors must be reviewed before it expires in June 2004. The application for an extended operating license, which is usually granted for periods of 10 years at a time, was submitted during the year. In January 2004, the Swedish Nuclear Power Inspectorate (SKI), which is the regulatory and supervisory authority, approved continued operation for 10 years. The main environmental impact from the Group’s facilities is from emissions and releases to air and water. During the year, emissions and releases were within the regulatory limits.

InsuranceThe Group has global liability and product liability. Liability and property insurance for the Swedish nuclear business has been signed with the Swedish nuclear insurance organization, Svenska Atomförsäkringspoo-len, and with the mutual insurance company, EMANI, where Studsvik AB is a member. Insurance covering the risks on the US market has been signed with a local insurance pool in the USA.

Corporate GovernanceStudsvik AB’s Board of Directors comprises 8 board members elected by the general meeting of share-holders as well as 2 members and 2 alternates appointed by the local trade unions, SIF and CF. The Board has a broad commercial, technical and public affairs exper-ience. At the general meeting of shareholders on April 23, 2003, Anna Karinen was elected after the retiring Göran Lundberg.

During 2003, the Board held 9 meetings for which minutes were kept, including the meeting immediately following the election.

In 2003, the Board considered the issue of establishing a special audit committee but came to the conclusion that those control-related issues that are to be handled by the Board must be handled by the Board as a whole.

Changeover to IFRSFrom 2005, Studsvik will conduct fi nancial reporting in accordance with International Financial Reporting Stan-dards (IFRS, previously IAS). Therefore the annual report for 2004 will be the fi nal report prepared in accordance with the Swedish Financial Supervisory Council’s recom-

mendations. In the interim report for the fi rst quarter of 2005 and in the annual report for 2005, the 2004 balance sheets and income statements (Studsvik’s fi nancial statements) will be reconciled in accordance with IFRS and with the company’s current accounting policies. Based on current knowledge, the major differences bet-ween the current accounting policies and IFRS will be:– Accounting for pensions (however, this difference will

disappear through the introduction of RR 29 in 2004).– Accounting for fi nancial instruments, which means

that more instruments will be accounted for at fair value, and which also reinforces demands for allowing hedge accounting.

– Goodwill will no longer be amortized on a straight line basis. Instead, an investigation of the need for write-downs will be compulsory every year.

The company’s fi nancial reports will also be affected by changes in requirements on classifi cation and disclosu-res in accordance with IFRS. These changes are expected to have a minor impact on our key fi gures and ratios. However, the company has not progressed in the intro-duction of IFRS to the stage where these differences can be quantifi ed and expects that this will be implemen-ted in spring 2004. Since October 2003, a task force headed by the Chief Financial Offi cer of the Group and a number of working groups have worked on these issues. Introductory training of the relevant personnel has been conducted and will be supplemented throughout 2004.

Parent CompanyParent company operations comprise the co-ordination of tasks for the Group and assets mainly consist of shares in subsidiaries. Net sales for the parent company amounted to SEK 3.0 million (11.6). Operating profi t amounted to SEK –31.4 million (–29.6). The decrease in net sales is attributable to internal group service operations which were transferred to Studsvik Partner AB as of April 1.

DividendThe Board of Directors propose that no dividend should be distributed for the 2003 fi nancial year.

OutlookIn general, the favorable market conditions are expec-ted to continue in 2004. However, there will be fewer and shorter refueling and maintenance outages in the German and Swedish nuclear industry. Nevertheless, on the whole, the Group is expected to report a profi t for 2004 that is on a par with 2003.

47

Income StatementsAMOUNTS IN SEK ’000

GROUP PARENT COMPANY

NOTE 2003 2002 2003 2002

Net sales 1 1,113,785 1,002,252 2,988 11,564

Cost of services sold –842,465 –773,444 –3,231 –9,441

Gross profi t 271,320 228,808 –243 2,123

Selling expenses –34,761 –40,503 –127 –

Administrative expenses 3 –141,188 –139,456 –31,040 –31,305

Research and development costs –42,108 –46,329 – –

Other operating income 1,496 429 – 32

Other operating expenses –581 –2,400 –3 –478

Result from participation in associated companies 7 7,252 2,300 – –

Operating profi t 1, 2, 4, 5 61,430 2,849 –31,413 –29,628

Result from participation in group companies 8 – – 16,909 92,598

Interest income and other similar profi t/loss items 8 6,774 6,602 24,729 36,626

Interest expense and other similar profi t/loss items 9 –15,887 –10,546 –21,498 –39,119

Profi t after fi nancial items 52,317 –1,095 –11,273 60,477

Appropriations 10 – – –2,514 –4,363

Tax on profi t for the year 11, 12 –20,460 –7,513 8,476 –895

Minority interests in profi t for the year 0 0 0 0

NET PROFIT FOR THE YEAR 31,857 –8,608 –5,311 55,219

Earnings per share before dilution 3.93 –1.06

Earnings per share after dilution 3.88 –1.06

48

Balance SheetsAMOUNTS IN SEK ’000


ASSETS NOTE 2003 2002 2003 2002

Fixed assets

Intangible fi xed assets 13

Software rights 9,114 11,263 – –

Renting and similar rights 648 268 – –

Goodwill 123,440 77,193 – –

133,202 88,724 – –

Tangible fi xed assets 14

Land and buildings 55,197 45,367 – –

Plant and machinery 270,862 366,021 – –

Fuel elements for R2-reactor 42,141 39,614 – –

Equipment and tools 93,736 119,426 332 1,157

Construction in progress and advance

payments for tangible fi xed assets 13,534 28,127 – –

475,470 598,555 332 1,157

Financial fi xed assets 15

Shares in subsidaries 16 – – 421,887 421,106

Receivables from group companies – – 296,934 368,933

Participations in associated companies 17, 18 10,294 9,923 11,782 11,782

Deferred income tax recoverable 12 1,515 33 – –

Other long-term receivables 19,469 21,600 6,029 5,467

31,278 31,556 736,632 807,288

TOTAL FIXED ASSETS 639,950 718,835 736,964 808,445

Current assets

Inventories etc.

Consumables 3,252 3,986 – –

Finished goods and trading goods 13,321 735 – –

Advance payments to suppliers 247 4,757 – –

16,820 9,478 – –

Current receivables

Accounts recievable – trade 163,626 155,236 21 145

Receivables from group companies – – 63,586 130,717

Receivables for work-in-progress 19 24,712 7,124 – –

Other receivables 19,642 27,269 8,978 7,424

Prepaid expenses and accrued income 20 17,723 23,284 3,771 9,864

225,703 212,913 76,356 148,150

Cash and bank 299,930 120,492 201,539 64,219

TOTAL CURRENT ASSETS 542,453 342,883 277,895 212,369

TOTAL ASSETS 1,182,403 1,061,718 1,014,859 1,020,814

49


EQUITY AND LIABILITIES NOTE 2003 2002 2003 2002

Equity 21

Restricted equity

Share capital (8,114,211 shares at SEK 1 each) 8,114 8,114 8,114 8,114

Restricted reserves 300,426 258,115 218,956 218,956

308,540 266,229 227,070 227,070

Non-restricted equity

Non-restricted reserves 190,933 208,573 560,984 483,148

Net profi t for the year 31,857 –8,608 –5,311 55,219

222,790 199,965 555,673 538,367

TOTAL EQUITY 531,330 466,194 782,743 765,437

Untaxed reserves 22 – – 56,105 53,591

Minority interests 254 254 – –

Provisions

Provisions for pensions and similar commitments 23 5,097 4,523 – –

Deferred taxes 12 24,800 26,346 – –

Other provisions 24 132,757 129,855 – –

TOTAL PROVISIONS 162,654 160,724 – –

Long-term liabilities

Liabilities to credit institutions 25 213,860 188,950 76,650 84,075

Other liabilities 9,237 – – –

Liabilities to group companies – – 67,000 67,000

TOTAL LONG-TERM LIABILITIES 223,097 188,950 143,650 151,075

Current liabilities

Liabilities to credit institutions 25 4,923 10,931 – 8,850

Liabilities to group companies – – 17,659 20,971

Advance payments from customers 17,917 3,886 – –

Accounts payable – trade 40,732 46,219 336 6,025

Liabilities in respect of work-in-progress 19 16,587 13,241 – –

Income tax liability 10,482 6,371 – –

Other liabilities 51,229 52,461 185 285

Accrued expenses and deferred income 26 123,198 112,487 14,181 14,580

TOTAL CURRENT LIABILITIES 265,068 245,596 32,361 50,711

TOTAL EQUITY AND LIABILITIES 1,182,403 1,061,718 1,014,859 1,020,814

Pledged assets 27 165,143 115,558 13,089 13,089

Contingent liabilities 28 5,532 43,192 73,980 109,640

BALANCE SHEETS

50

Changes in Equity, GroupAMOUNTS IN SEK ’000

Share Restricted Non-restricted Total NOTE capital reserves reserves equity

Equity, December 31, 2002 8,114 258,115 199,965 466,194

Equity method reserve 1,400 –1,400 –

Change in translation difference 33,279 – 33,279

Re-allocation between restricted and non-restricted equity 7,632 –7,632 –

Net profi t for the year 31,857 31,857

Equity, December 31, 2003 21 8,114 300,426 222,790 531,330

Share Restricted Non-restricted Total capital reserves reserves equity

Equity, December 31, 2002 8,114 218,956 538,367 765,437

Group contribution received 57,754 57,754

Group contribution paid –19,945 –19,945

Tax effect of group contribution –10,592 –10,592

Shareholders’ contribution –4,600 –4,600

Total changes in equity not reported on

the income statement 22,617 22,617

Net profi t for the year –5,311 –5,311

Equity, December 31, 2003 8,114 218,956 555,673 782,743

Changes in Equity, Parent CompanyAMOUNTS IN SEK ’000

51

Cash Flow StatementsAMOUNTS IN SEK ’000


NOTE 2003 2002 2003 2002

Operating activities

Operating profi t 61,430 2,849 –31,413 –29,628

Depreciation/write-downs 95,256 95,580 282 1,892

Adjustment for non-cash items etc. 29 –145 –37,611 5,346 –428

156,541 60,818 –25,785 –28,164

Interest received 6,229 6,591 23,323 25,609

Dividend received – – 17,712 94,455

Interest paid –15,828 –10,454 –7,961 –4,331

Income tax paid –17,326 –4,481 –3,673 –11,822

Cash fl ow from operating activities

before changes in working capital 129,616 52,474 3,616 75,747

Changes in working capital

– Current assets 15,647 2,111 17,513 –5,286

– Other current liabilities 12,839 –48,693 –12,948 –4,271

Cash fl ow from operating activities 158,102 5,892 8,181 66,190

Investing activities

Acquisitions of intangible fi xed assets –739 – – –

Acquisitions of tangible fi xed assets –57,874 –53,154 –154 –487

Tangible fi xed assets sold – – 701 –

Investment in subsidiaries 30 –60,937 – –1,000 –95,352

Withdrawals by associated companies 803 2,003 – –

Associated companies sold 4,600 – – –

Change in fi nancial fi xed assets 12,761 –4,008 –606 –

Decrease/increase in receivables from group companies – – 21,907 –222,034

Cash fl ow from investing activities –101,386 –55,159 20,848 –317,873

Financing activities

Stock options – 689 – 689

Loans raised 48,435 84,831 – 84,075

Repayment of interest-bearing liabilities –13,272 –170,632 – –1,840

Group contribution – – 18,021 –1,443

Exchange rate gains realized on forward contracts 90,270 – 90,270 –

Cash fl ow from fi nancing activities 125,433 –85,112 108,291 81,481

Change in liquid assets 182,149 –134,379 137,320 –170,202

Liquid assets at the beginning of the year 120,492 257,992 64,219 234,421

Translation difference in liquid assets –2,711 –3,121 – –

Liquid assets at year-end 299,930 120,492 201,539 64,219

52

Studsvik AB’s (publ) annual accounts are prepared in accordance with the Swedish Annual Accounts Act and the Swedish Financial Accounting Standards Council’s recommendations.

From this year, the company is applying new recommen-dations issued by the Council:

• RR 2:02 Inventories• RR 22 Presentation of fi nancial statements • RR 24 Investment property• RR 25 Segment reporting• RR 26 Events after the balance sheet date • RR 27 Financial instruments: Disclosure and classifi cation• RR 28 Government subsidies

Consolidated AccountsThe consolidated accounts relate to Studsvik AB and the companies where Studsvik AB had a direct or indirect interest at the end of the fi nancial year in more than 50 per cent of the votes for all shares.

The consolidated accounts have been prepared in accor-dance with the purchase method, whereby the acquisi-tion value for the Group of shares and interests in subsi-diaries is eliminated against the acquired equity including the capital interest in untaxed reserves at the time of acquisition. Consequently, only the profi t earned after the time of acquisition is included in the consolidated equity. The equity of the acquired subsidiary companies is determined on the basis of a valuation at the actual value of assets and liabilities established in an acquisition analy-sis at the time of acquisition. The difference between the acquisition value of shares in subsidiaries and the value of the equity determined by the acquisition analysis is stated as goodwill which is amortized on a straight line basis over the expected economic life.

All of Studsvik AB’s subsidiaries are classifi ed as independent subsidiaries. Consequently, the closing date exchange rate method is applied when translating their accounts. This means that the foreign subsidiaries’ assets and liabi-lities are translated at the rate prevailing at the balance sheet date. All items in the income statements are trans-lated to the average rate for the year. Translation diffe-rences arising are reported among consolidated equity.

Accounting for Associated CompaniesAssociated companies are companies that are not subsidia-ries and where the parent company, directly or indirectly, holds at least 20 per cent of the votes for all participations.

In the accounts, participations in associated companies are accounted for in accordance with the equity method. The equity method means that participations in a company are reported at acquisition value at the time of acquisition and are subsequently adjusted by the Group’s participation in the change in the associated company’s net assets.

Accounting for Joint VenturesJoint ventures are operations where Studsvik, together with one or more co-owners, has a joint controlling infl uence. The Group is only involved in joint ventures that are independent legal units and these are reported in the consolidated accounts in accordance with the equity method.

Receivables and Liabilities in Foreign CurrenciesReceivables and liabilities in foreign currencies are valued at closing date exchange rates. Where they have been hedged by means of forward contracts, the hedging rates are used instead and the premium is distributed over the life of the contract. Unrealized exchange rate gains and losses are included in the year’s result. In the case of forward contracts to hedge fl ow exposures, the effect on the result is reported on the due date of the forward contract.

Revenue Recognition Income from the sale of goods and services are recogni-zed at the time that they are provided. Sales are reported after deduction of value-added tax and exchange rate differences in connection with sales in foreign currencies.

For services that have been carried out as a result of special agreements as well as started and completed during different accounting periods, income and expen-ses attributable to the project are reported as revenue and expenses, respectively, in relation to the percentage of completion at the time of reporting. The percentage of completion is determined by comparing expenses incurred at the time of reporting with the total estimated expenses and the degree of completion. A probable loss arising in connection with a project is reported immedia-tely as an expense.

Intangible and Tangible Fixed AssetsTangible fi xed assets are reported at acquisition value after deduction of accumulated depreciation according to plan and write-downs. The acquisition value of facilities and installations constructed on own account includes direct material and labor costs.

Fuel elements for Studsvik’s reactors are reported as tangible fi xed assets.

Where required by concession decisions or equivalent, provisions are made for the estimated future cost of restoring land where buildings have been erected.

Intangible fi xed assets such as software rights, leases and goodwill arising from the purchase of the net assets of a business are valued at acquisition value after deduction of accumulated depreciation according to plan. Software rights relate to acquired rights to in-core fuel manage-ment codes, etc. that are used within the Studsvik

Accounting Policies and Valuation Principles

53

Scandpower group. In the case of in-house development of computer programs, expenses incurred are recognized at the time they are incurred. See also under Research and Development below.

Depreciation according to plan is calculated on the acqui-sition value of the assets. Depreciation is performed on a straight-line basis, based on the estimated economic life of the assets in question.

The amortization period for goodwill arising in con-nection with acquisitions is determined on the basis of individual assessment. Goodwill is amortized over 4–15 years. The longer period of amortization is applied in connection with the acquisition of companies where market and technical conditions are stable and where the acquisition is long term and strategic in nature. The ten-year depreciation period for software rights is based on the estimated lifetime of the software in question.

The following depreciation/amortization periods are used:

Year

Software rights 10Goodwill 4 –15Buildings and land 0 –50Plant and machinery 0 –20Equipment and tools 3 –15Fuel elements for the R2 reactor 5

Depreciation of tangible and intangible fi xed assets is included under the cost of services sold to the extent that the depreciation relates to fi xed assets that are used in the production of the services in question. Deprecia-tion of assets that are used in connection with sales is included in selling expenses, while the depreciation of assets attributable to administration and research and development is reported under administrative expenses and research and development costs respectively. Amor-tization of goodwill is generally attributed to the cost of services sold.

Accounting for Interest in Connection with Investments in Tangible Fixed AssetsInterest expense is included in the acquisition value in the case of acquisitions that are long-term in character.

Write-downsWhen there is an indication that an asset has decreased in value, an assessment is made of the reported value of the asset, including goodwill. Where the reported value exceeds the calculated recovery value, the asset is im-mediately written down to its recovery value.

InventoriesInventories are valued according to the lower of cost

or net realizable value, i.e. the lower of acquisition or production cost and actual value, applying the fi rst in, fi rst out principle.

ProvisionsTransfers to reserves are made for known commitments or possible risks after individual review.

The expenses for the future management of radioactive waste and spent fuel for the R2 reactor are reported as a provision. The provision for the R2 fuel is made on the basis of the number of spent nuclear fuel elements, the cost that has been agreed for reprocessing as well as transportation to the reprocessing facility. The provision is calculated on the basis of the pricing principles for the processing of spent nuclear fuel that have been agreed with the US Department of Energy and, in the case of transport and handling, on the basis of a best estimate based on available data. The provision is established as the discounted present value of future payments for the spent nuclear fuel elements at balance sheet date.

PensionsThe Group’s employees receive pension benefi ts in accordance with local rules and agreements for those countries where group companies operate.

The Group’s pension commitments concern essentially fee-based plans and are covered by insurance, with minor deviations. Commitments for the benefi t of former senior executives in Sweden as well as commitments on behalf of a small number of senior executives abroad are also stated in the balance sheet as a provision.

From 2004, Studsvik intends to apply RR 29, Remunera-tion to Employees, in its fi nancial accounting. By applying RR 29, benefi t-based schemes for pension and sickness in all of the Group’s subsidiaries will be accounted for in accordance with the same policies. In Studsvik’s fi nancial reporting up to 2003, such plans are reported in accor-dance with local rules and regulations in each country in question. In accordance with the transitional rules of the recommendation, an opening liability is determined at January 1, 2004, in accordance with RR 29. This opening liability is expected to be immaterial.

Research and DevelopmentExpenditure on research and development is recognized as an expense as incurred. Where there is a diffi culty in distinguishing the research phase from the development phase in a project, the entire project is accounted for as research and carried directly as an expense. Identifi able expenditure for new product and process development is capitalized to the extent that it is expected to provide future economic advantages. Otherwise the development expenditure is recognized as an expense when it occurs.

ACCOUNTING POLICIES AND VALUATION PRINCIPLES

54

Development expenditure reported in the income statement for a period is never capitalized during future periods.

TaxesReported income tax covers tax to be paid or received for the current year, adjustments of previous years’ actual tax, changes in deferred tax and participations in the tax of associated companies. The valuation of all tax liabilities/assets is at a nominal amount and is done in accordance with the tax regulations and tax rates that apply at balance sheet date.

In the case of items reported on the income statement, the related tax effects are reported on the income statement. Tax effects for items reported directly against equity are reported against equity.

Deferred tax is estimated in accordance with the balance sheet method on all temporary differences arising bet-ween the reported and written-down values for assets and liabilities. The temporary differences have largely arisen through the depreciation of buildings, provisions to untaxed reserves, capitalization of intragroup interest during the construction period of the facility in the USA, translation differences on intragroup receivables and liabilities, to the extent that these are reported against equity as well as tax defi cits.

Deferred tax assets concerning loss carryforwards or other future tax-related deductions are reported to the extent that it is probable that the deduction can be set-tled against surpluses in connection with future taxation.

The deferred tax liability concerning temporary differ-ences attributable to investments in subsidiaries and associated companies is not reported in Studsvik’s conso-lidated accounts since the parent company, in all cases, can determine the time of the reversal of the temporary differences and it is not considered probable that a rever-sal will occur in the foreseeable future.

Due to the relationship between accounting and taxation, in the parent company the deferred tax liability on untaxed reserves is reported as a part of the untaxed reserves.

LeasingThe Group’s policy is to distinguish between fi nancial and operating leasing. The Group only has operating lease agreements.

Financial InstrumentsFinancial instruments reported on the balance sheet include liquid assets, receivables, operating liabilities and borrowing.

Financial liabilities are reported at nominal value.

The Group utilizes derivatives to hedge risks associated with changes in foreign exchange rates.

Forward contracts protect the Group against foreign exchange rate changes by establishing the rate at which an asset or liability denominated in foreign currency will be realized. An increase or decrease in the amount required to settle the asset/liability is compensated for by a corresponding value change in the forward contract. These gains and losses are therefore offset and are not presented in the fi nancial reports.

For hedge accounting, the hedge must have an explicit hedging purpose, it must have an unambiguous link to the hedged item and the hedge must effectively protect the hedged position.

Segment ReportingLines of business contain products or services that are exposed to risks and returns that are different from other lines of business. Geographic markets have products and services within specifi c economic environment that entail risks and returns that are different from the risks and returns that apply to units that operate in other economic environments. In the Group, lines of business are classifi ed as primary segments and geographic areas are classifi ed as secondary.

Cash Flow StatementThe cash fl ow statement is prepared in accordance with the indirect method. The reported cash fl ow only includes transactions that entail payments and disbursements.

In addition to cash and bank balances, the following are classifi ed as liquid assets: current fi nancial investments which are only exposed to an insignifi cant risk of value fl uctuation and which:

– are dealt with on an open market for known amounts or– have a shorter remaining maturity than three months

from the date of acquisition.

Parent CompanyThe parent company’s accounts have been prepared in accordance with generally accepted accounting principles in Sweden. Investments in subsidiaries and associated companies are reported at the lower of cost or market.

The parent company’s income includes dividends received from subsidiaries and other intragroup transactions that are eliminated in the consolidated accounts. Otherwise, the same accounting policies that are applied within the Group apply.

ACCOUNTING POLICIES AND VALUATION PRINCIPLES

55

Notes to the Accounts AMOUNTS IN SEK ’000 UNLESS OTHERWISE SPECIF IED

Note 1 Primary segments – Strategic Business Units (SBUs)

From 2004, the primary segments of the Group have been changed. Net sales and operating profi t are reported below in accordance with the segmentation that applied throughout 2003.

Net sales GROUP

2003 2002

Nuclear Technology 300,991 323,130

Waste & Decommissioning 295,496 294,470

Industrial Services 533,460 412,166

Nuclear Medicine 21,506 20,014

Studsvik AB/Studsvik Partner AB/AB SVAFO 57,278 11,565

Consolidation adjustments –94,946 –59,093

Total 1,113,785 1,002,252

Operating profi t GROUP

2003 2002

Nuclear Technology 27,023 22,465

Waste & Decommissioning 42,664 7,561

Industrial Services 40,221 12,049

Nuclear Medicine –11,929 –11,281

Studsvik AB/Studsvik Partner AB/AB SVAFO –38,195 –29,628

Consolidation adjustments 1,646 1,683

Total 61,430 2,849

NOTES

56

Note 1, cont’d Pro forma reporting of SBUs

The primary segments of the Group are reported below in accordance with the classifi cation applying from 2004.

Financial year 2003

Income

External sales 205,268 365,044 269,760 156,071 74,908 1,202 41,532 – 1,113,785

Internal sales 41,119 10,885 25,736 – – – 17,206 –94,946 –

Total income 246,387 375,929 295,496 156,071 74,908 1,202 58,738 –94,946 1,113,785

Profi t

Profi t per line of business 27,023 22,092 39,952 20,841 150 –12,079 –38,195 1,646 61,430

Undistributed costs – – – – – – – – –

Operating profi t 27,023 22,092 39,952 20,841 150 –12,079 –38,195 1,646 61,430

Interest income 6,774

Interest expense –15,887

Tax expense for the year –20,460

Net profi t for the year 31,857

Other disclosures

Assets 309,846 128,766 434,395 155,323 40,045 16,028 1,145,172 –1,057,466 1,172,109

Share of equity – – – 10,294 – – – – 10,294

Undistributed assets – – – – – – – – –

Total assets 309,846 128,766 434,395 165,617 40,045 16,028 1,145,172 –1,057,466 1,182,403

Liabilities 207,771 179,583 440,666 73,975 39,895 15,908 302,804 –609,529 651,073

Undistributed liabilities – – – – – – – – –

Total liabilities 207,771 179,583 440,666 73,975 39,895 15,908 302,804 –609,529 651,073

Investments 45,060 14,117 3,231 56,003 895 24 220 – 119,550

Depreciation/amortization 37,592 17,759 33,212 6,283 1,517 31 508 –1,646 95,256

Operating Effi c

iency and Safety

Service and M

aintenance

Waste Tr

eatment

Decommiss

ioning

Irradiatio

n Services

Nuclear M

edicine

OtherElim

ination

Group

NOTES

57

Note 1, cont’d

Financial year 2002

Income

External sales 229,880 325,886 290,443 76,822 75,047 2,100 2,074 – 1,002,252

Internal sales 36,117 9,458 4,027 – – – 9,491 –59,093 –

Total income 265,997 335,344 294,470 76,822 75,047 2,100 11,565 –59,093 1,002,252

Profi t

Profi t per line of business 22,465 8,888 5,359 5,363 187 –11,468 –29,628 1,683 2,849

Undistributed costs – – – – – – – – –

Operating profi t 22,465 8,888 5,359 5,363 187 –11,468 –29,628 1,683 2,849

Interest income 6,602

Interest expense –10,546

Tax expense for the year –7,513

Net profi t for the year –8,608

Other disclosures

Assets 332,886 184,855 563,748 24,920 38,860 12,616 1,117,100 –1,223,190 1,051,795

Share of equity – 131 – 9,792 – – – – 9,923

Undistributed assets – – – – – – – – –

Total assets 332,886 184,986 563,748 34,712 38,860 12,616 1,117,100 –1,223,190 1,061,718

Liabilities 224,765 166,653 567,074 17,642 38,673 12,516 294,851 –726,650 595,524

Undistributed liabilities – – – – – – – – –

Total liabilities 224,765 166,653 567,074 17,642 38,673 12,516 294,851 –726,650 595,524

Investments 32,914 8,081 4,684 2,440 783 109 4,143 – 53,154

Depreciation/amortization 36,596 12,161 40,587 4,769 1,200 21 1,892 –1,646 95,580

The Group is organized into six main SBUs. Other operations mainly comprise the parent company and an internal service company for the Group.

Undistributed costs represent joint costs. SBU assets primarily comprise tangible fi xed assets, intangible assets, inventories, receivables and operating cash items. SBU liabilities comprise operating liabilities but not items such as tax and certain corporate borrowings. Investments comprise purchases of tangible fi xed assets and intangible assets, including increases as a result of acquisitions.

Operating Effi c

iency and Safety

Service and M

aintenance

Waste Tr

eatment

Decommiss

ioning

Irradiatio

n Services

Nuclear M

edicine

OtherElim

ination

Group

NOTES

58

Note 1, cont’d Secondary segments – geographical areas

The Group’s operations are mainly conducted in four geographical areas.

The sales fi gures are based on the country of the customer. Assets and investments are reported in the country of the asset.

SALES ASSETS INVESTMENTS

2003 2002 2003 2002 2003 2002

Sweden 344,386 305,847 563,411 384,293 47,351 41,346

Europe, not including Sweden 471,933 358,395 266,826 181,176 72,442 8,905

North America 262,465 276,847 348,599 489,358 2,059 2,903

Asia 29,981 55,180 3,567 6,891 – –

Other countries 5,020 5,983 – – – –

Total 1,113,785 1,002,252 1,182,403 1,061,718 121,852 53,154

Note 2 Salaries, other remuneration and social security expenses

2003 2002

Salaries and Social (of which Salaries and Social (of which other security pension other security pension remuneration expenses costs) remuneration expenses costs)

Parent company 11,442 6,820 (2,901) 13,594 7,242 (2,173)

Subsidiaries 463,899 134,897 (23,477) 381,743 114,246 (21,253)

Group 475,341 141,717 (26,378) 395,337 121,488 (23,426)

Of the parent company’s pension costs, SEK 1,577k (1,464) concerns the company’s President. The cor-responding amount for the Group is SEK 4,671k (2,943). In addition to salaries and other remuneration as well as social security expenses, the table above includes the cost of the profi t-sharing system, SEK 1,430k (0) for the parent company and SEK 11,998k (8,090) for the Group, in the total personnel costs.

Salaries and other remuneration distributed per country and between board members and presidents as well as other employees. 2003 2002

Board and (of which Other Board and (of which Other presidents bonuses etc.) employees presidents bonuses etc.) employees

Parent company,Sweden 4,705 (1,150) 6,737 3,348 (–) 10,246

Total, parent company 4,705 (1,150) 6,737 3,348 (–) 10,246

Subsidiaries in Sweden 4,823 (406) 176,868 4,327 (155) 156,646

Subsidiaries abroad– Norway 1,196 (367) 2,190 865 (242) 1,729

– Germany 4,373 (714) 227,158 1,109 (82) 178,537

– Great Britain – (–) 1,942 – (–) 1,585

– USA 7,865 (2,922) 35,154 6,643 (3,094) 27,260

– Japan 1,348 (–) 285 2,195 (–) 161

– Switzerland – (–) 697 – (–) 686

Total, subsidiaries 19,605 (4,409) 444,294 15,139 (3,573) 366,604

Group, total 24,310 (5,559) 451,031 18,487 (3,573) 376,850

Pension commitments and similar benefi ts to boards of directors and presidentsPension provisions include SEK 120k (120) in commitments to previous presidents.

For information on benefi ts to senior management executives, see Note 35.

NOTES

59

NOTES

Note 2, cont’d Stock option programOn April 22, 2002, a stock option program was issued within which 104,400 option rights were subscribed for. The subscription premium amounted to SEK 6.60. Each option right gives the holder the right to subscribe for a share in Studsvik AB for a par value of one (1) SEK during the period of June 1, 2004 until May 31, 2005 at a price of SEK 61.50.

Note 3 Reimbursement of auditors


2003 2002 2003 2002

Öhrlings PricewaterhouseCoopers– Audit assignments 1,223 1,114 250 250

– Other assignments 2,154 528 656 420

Other auditors– Audit assignments 119 210 – –

– Other assignments 596 86 – –

“Audit assignments” refers to the examination of the annual accounts, the accounting records and

the administration by the Board of Directors and the President. It also includes other duties that are incumbent on the company’s auditors as well as advisory services and other types of support as a result of observations made through such an examination. All other tasks performed by the auditors are classifi ed as “Other assignments”.

Note 4 Exchange rate differences

Exchange rate differences concerning operating receivables and liabilities are included in operating profi t as follows.

GROUP

2003 2002

Other operating income 238 51

Other operating expenses –718 –1,340

Total –480 –1,289

Note 5 Depreciation and amortization


2003 2002 2003 2002

Software rights 2,158 2,176 – –

Renting and similar rights 119 – – –

Goodwill 15,119 9,905 – –

Buildings 3,007 2,877 – –

Plant and machinery 34,240 38,516 – –

Fuel elements 19,760 18,803 – –

Equipment and tools 20,853 23,303 282 1,892

Total 95,256 95,580 282 1,892

Depreciation is included in the followingitems in the income statement

Cost of services sold 91,882 91,846 19 926

Selling expenses 447 248 – –

Administrative expenses 2,208 2,777 263 966

Research and development costs 719 709 – –

Total 95,256 95,580 282 1,892

60

Note 6 Operating lease agreements 2003


Payment due within one year 7,756 1,008

Payment due after one year but within fi ve years 17,235 965

Payment due after fi ve years 2,073 –

Total 27,064 1,973

During the year, leasing expenses concerning operating lease agreements amounted to SEK 11,811k for the Group and SEK 1,081k for the parent company. During the year, leasing expenses (excluding rent for premises) amounted to SEK 4,576k for the Group and SEK 513k for the parent company. Leasing expenses concerning premises are usually adjusted to the consumer price index. The Group’s lease agreements mainly concern premises and vehicles and carry conventional terms.

Note 7 Result from participation in associated companies

GROUP

2003 2002

Result from participation in associated companies, profi t before tax 2,712 2,300

Capital gains from divestments 4,540 –

Total 7,252 2,300

Note 8 Interest income and other similar profi t/loss items


2003 2002 2003 2002

Interest 6,229 6,591 23,323 25,609

Dividends – – 17,712 94,455

Exchange rate differences 545 11 603 9,160

Total 6,774 6,602 41,638 129,224

Of which, in respect of Studsvikgroup companies

Interest 20,509 22,955

Dividends 16,909 92,598

Exchange rate differences 603 9,160

Total 38,021 124,713

Note 9 Interest expense and other similar profi t/loss items


2003 2002 2003 2002

Interest –15,215 –10,454 –5,479 –6,759

Exchange rate differences –59 –92 –15,756 –

Other fi nancial expenses –613 – – –

Write-down of shares in subsidiaries – – –263 –32,360

Total –15,887 –10,546 –21,498 –39,119

Of which, in respect of Studsvik group companies

Interest –3,566 –4,041

Total –3,566 –4,041

NOTES

61

Note 10 Appropriations

PARENT COMPANY

2003 2002

Appropriations to tax allocation reserve –2,514 –4,363

Total –2,514 –4,363

Note 11 Tax on profi t for the year


2003 2002 2003 2002

Actual tax for the year –20,299 –10,626 –2,111 –3,665

Actual tax attributable to previous years 1,461 9,701 –6 –

Deferred tax –310 –5,414 – –2,875

Tax on profi t from participation in associated companies –1,312 –1,174 – –

Tax effect on group contributions – – 10,593 5,645

Total –20,460 –7,513 8,476 –895

Note 12 Deferred tax


2003 2002 2003 2002

Deferred tax expense with respect to temporary differences –6,832 –9,200 – –2,875

Deferred tax income with respect to temporary differences 6,522 3,786 – –

Deferred tax in the income statement –310 –5,414 – –2,875

Difference between the tax expense of the Groupand the tax expense based on the tax rate

Profi t before tax 52,317 –1,095 –13,787 56,114

Tax in accordance with the tax rate –14,640 307 3,860 –15,712

Tax effect of non-deductible expenses –930 –4,832 –494 –11,749

Tax effect of untaxed income 587 173 157 119

Unreported tax asset in respect of loss carryforward –1,014 –11,140 – –

Adjustment for foreign tax rate –5,924 –2,351 – –

Adjustment for previous years’ tax assessment 1,461 9,701 –6 –

Utilized, previously not reported tax assets concerning loss carryforward – 629 – –

Tax effect of dividend received – – 4,959 26,447

Total reported tax expense –20,460 –7,513 8,476 –895

Tax rate The tax rate applied is the income tax rate for the Group. The tax rate is 28 (28) per cent.

Temporary differences Temporary differences arise where there is a difference between the repor-ted values of assets or liabilities. Temporary differences concerning the following items have resulted in deferred tax liabilities and deferred tax assets.

Deferred tax liabilitiesFixed assets 2,624 1,968 – –

Additional depreciation for tax purposes 11,601 10,552 – –

Tax allocation reserve 15,709 16,629 – –

Total deferred tax liabilities 29,934 29,149 – –

NOTES

62

Note 12, cont’d GROUP PARENT COMPANY

2003 2002 2003 2002

Deferred tax assetsProvision for guarantee commitments 1,193 1,986 – –

Accrued expenses 5,456 850 – –

Total deferred tax assets 6,649 2,836 – –

Deferred tax liabilities, net 23,285 26,313 – –

Deferred tax assets and liabilities are set off when a legal right of set off exists for tax assets and liabilities as well as when deferred tax concerns the same tax authority. After such set-offs, thefollowing amounts have arisen and are reported on the balance sheet.

Deferred tax assets 1,515 33 – –

Deferred tax liabilities 24,800 26,346 – –

Deferred tax liabilities, net 23,285 26,313 – –

The difference in the parent company between, on the one hand, the income tax reported on the income statement during the fi nancial year and previous fi nancial years as well as, on the other hand, the income tax arising on activities for these years, comprises deferred tax on untaxed reserves amounting to SEK 704k (–1,222), and a deferred tax asset on expenses reversed to taxation and deductible in future years, amounting to SEK 4,622k (0).

Unutilized loss carryforwards in the USA, expiring within a 20 year period, amounted to USD 38.4 million. Unutilized loss carryforwards in Japan, expiring within a 5 year period, amounted to JPY 8.8 million.

Note 13 Intangible fi xed assets

GROUP

2003 2002

Software rightsAcquisition value brought forward 21,671 21,671

Investments for the year 46 –

Sales and disposals –36 –

Translation differences –1 –

Accumulated acquisition value carried forward 21,680 21,671

Depreciation brought forward –10,408 –8,226

Depreciation for the year –2,158 –2,176

Translation differences – –6

Accumulated depreciation carried forward –12,566 –10,408

Residual value according to plan carried forward 9,114 11,263

Renting and similar rightsAcquisition value brought forward 530 538

Investments for the year 693 –

Translation differences –4 –8

Accumulated acquisition value carried forward 1,219 530

Depreciation brought forward –262 –271

Depreciation for the year –119 –

Sales and disposals –192 –

Translation differences 2 9

Accumulated depreciation carried forward –571 –262

Residual value according to plan carried forward 648 268

NOTES

63

Note 13, cont’d GROUP

2003 2002

GoodwillAcquisition value brought forward 130,743 132,804

Investments for the year 62,208 –

Translation differences –906 –2,061







Note 14 Tangible fi xed assets

GROUP

2003 2002

Land and buildingsAcquisition value brought forward 105,779 103,002

Investments for the year 14,560 1,529

Reclassifi cations during the year – 3,665

Translation differences –2,088 –2,417




Reclassifi cations – –



Write-downs brought forward –315 –315

Accumulated write-downs carried forward –315 –315


Book value of real-estate in Sweden 45,262 33,452

Tax assessment value 7,525 7,378

Plant and machinery Acquisition value brought forward 567,222 601,404


Reclassifi cations during the year 8,943 43,976

Compensation received from arbitration –20,258 –

Sales and disposals –2,999 –533



NOTES

64

Note 14, cont’d GROUP PARENT COMPANY

2003 2002 2003 2002


Sales and disposals 1,436 532


Translation differences 14,833 12,079



Fuel elements for the R2 reactorAcquisition value brought forward 94,781 73,193







Equipment and toolsAcquisition value brought forward 248,651 256,002 12,297 12,030

Investments for the year 6,539 7,966 154 524

Reclassifi cations during the year 2,927 11,535 – –

Sales and disposals –2,166 –1,706 –10,241 –257

Translation differences –21,459 –25,146 – –

Accumulated acquisition value carried forward 234,492 248,651 2,210 12,297

Depreciation brought forward –129,225 –113,473 –11,140 –9,468

Sales and disposals 2,020 864 9,544 220

Depreciation for the year –20,853 –23,303 –282 –1,892

Translation differences 7,302 6,687 – –

Accumulated depreciation carried forward –140,756 –129,225 –1,878 –11,140

Residual value according to plan carried forward 93,736 119,426 332 1,157

Construction in progress and advance payments for tangible fi xed assets Balance brought forward 28,127 74,542

Expenses accrued during the year 7,959 16,585

Reclassifi cations during the year –11,869 –59,176

Compensation received from arbitration –8,716 –


Balance carried forward 13,534 28,127

SEK 11,337k (13,744) in interest is included in the acquisition value for buildings, plant and machinery.

NOTES

65

Note 15 Financial fi xed assets GROUP PARENT COMPANY

2003 2002 2003 2002

Shares in subsidiariesAcquisition value brought forward 453,466 369,888

Intragroup acquisitions 1,044 83,578

Liquidation –263 –

Acquisition value carried forward 454,247 453,466

Write-downs brought forward –32,360 –

Write-downs for the year – –32,360

Write-downs carried forward –32,360 –32,360

Value carried forward 421,887 421,106

Receivables from other Studsvik group companiesLoans to Studsvik Holding, Inc. group

– Acquisition value brought forward 368,933 140,338

– Deducted/added items during the year –71,999 228,595

Value carried forward 296,934 368,933

Participation in associated companiesAcquisition value brought forward 11,842 11,842 11,782 11,782

Sales and disposals –60 – – –

Accumulated acquisition value carried forward 11,782 11,842 11,782 11,782

Accumulated participation in resultsbrought forward –1,919 –899 – –

Change in participation in results 1,400 1,126 – –

Dividend –803 –2,003 – –

Translation differences –166 –143 – –

Accumulated participation inresults carried forward –1,488 –1,919 – –

Residual value according to plancarried forward 10,294 9,923 11,782 11,782

Other long-term receivablesAcquisition value brought forward 21,600 660 5,467 –

Added during the year 1,008 21,111 562 5,467

Deducted during the year –392 –171 – –

Translation differences –2,747 – – –

Accumulated acquisition value carried forward/residual valueaccording to plan carried forward 19,469 21,600 6,029 5,467

NOTES

66

Note 16 Shares and participations in subsidiaries

Number of Share of Share of participations/ Nominal Book equity % voting rights % shares value (’000) value (’000)

Parent company’s holdingsStudsvik Holding, Inc. 100 100 2,000 USD 25,372 236,269

Studsvik Nuclear AB 100 100 5,000 SEK 50,000 133,400

Studsvik Scandpower, Inc. 79 79 1,503 USD 149 984

Studsvik Scandpower AB 91 91 910 SEK 91 603

Studsvik Japan Ltd 100 100 10,000 JPY 10,000 373

Studsvik RadWaste AB 100 100 33,000 SEK 3,300 13,005

Stensand Specialserviceföretaget AB 100 100 12,000 SEK 1,200 12,586

Studsvik GmbH 100 100 EUR 26 241

SINA Verwaltungs GmbH 100 100 EUR 26 261

Studsvik Rosyth Nuclear Services Ltd 100 100 30,000 GBP 50 692

Studsvik Medical AB 100 100 1,000 SEK 100 151

Studsvik Partner AB 100 100 1,000 SEK 100 246

AB SVAFO 100 100 10,000 SEK 1,000 1,000

Studsvik BNCT AB 100 100 1,000 SEK 1,000 1,568

Studsvik Eco & Safety AB 100 100 10,000 SEK 1,000 2,402

Studsvik Instrument Systems AB 100 100 17,000 SEK 17,000 18,106

Total 421,887

Holdings of other group companiesStudsvik Scandpower AS 100 100 100

Studsvik Scandpower GmbH 100 100

Studsvik Scandpower Suisse GmbH 100 100

Studsvik, Inc. 100 100 1,000

Studsvik Processing Facility, LLC 90 90 9

SINA Industrieservice GmbH & Co. KG 100 100

IFM Holding GmbH Co. KG 100 100

IFM Verwaltungs GmbH 100 100

IFM Industrieanlagen GmbH Co. KG 100 100

Information concerning company registration numbers and registered offi ces of subsidiaries.

Company reg. no. Registered offi ce

Studsvik Nuclear AB 556051-6212 Nyköping, Sweden

Studsvik Scandpower, Inc. – Boston, USA

Studsvik Scandpower AB 556137-8190 Nyköping, Sweden

Studsvik Scandpower AS 008797.45012 Kjeller, Norway

Studsvik Scandpower GmbH HRB 4839 Norderstedt, Germany

Studsvik Scandpower Suisse GmbH CH-400.4.021.112.4 Fischbach-Göslikon, Switzerland

Studsvik Japan Ltd – Tokyo, Japan

Studsvik RadWaste AB 556194-2862 Nyköping, Sweden

Studsvik Holding, Inc. – Erwin, USA

Studsvik, Inc. – Erwin, USA

Studsvik Processing Facility, LLC – Erwin, USA

Stensand Specialserviceföretaget AB 556049-4675 Varberg, Sweden

Studsvik GmbH – Pforzheim, Germany

NOTES

67

Note 16, cont’d Company reg. no. Registered offi ce

IFM Verwaltungs GmbH – Pforzheim, Germany

IFM Industrieanlagen GmbH Co. KG – Pforzheim, Germany

Studsvik Rosyth Nuclear Services Ltd – Rosyth, Scotland

Studsvik Medical AB 556540-7979 Nyköping, Sweden

Studsvik Partner AB 556478-7769 Nyköping, Sweden

AB SVAFO 556446-3411 Nyköping, Sweden

Studsvik BNCT AB 556209-5694 Nyköping, Sweden

Studsvik Eco & Safety AB 556301-2615 Nyköping, Sweden

Studsvik Instrument Systems AB 556197-1481 Nyköping, Sweden

Note 17 Participations in associated companies


Directly owned Company Registered Share of Book value Book value reg. no offi ce equity 2003 2002 2003 2002

Wissenschaftlich-TechnischeIngenieurberatung GmbH DE-122.627.804 Jülich 30% 10,294 9,923 11,782 11,782

The difference between the book value of the participations in the Group and Studsvik AB’s participa-tion in the equity of the associated company amounts to SEK 1,488k and entirely comprises con-solidated goodwill and dividends. The associated company does not have any liabilities, contingent liabilities or commitments concerning future investments that the Group can be liable to pay.

Note 18 Joint ventures

Indirectly owned Company Registered Share of reg. no. offi ce equity

THOR Treatment Technologies,LLC – Delaware 50%

The above company is a joint venture where Studsvik is a joint owner in accordance with a co-opera-tion agreement concerning joint controlling infl uence. THOR Treatment Technologies, LLC conducts waste treatment operations on the US federal waste market.

Note 19 Work-in-progress

GROUP

2003 2002

Accumulated expenses from work-in-progress and reported profi t less reported losses 151,108 82,700

Advance payments received 142,983 88,817

Receivables from customers, work-in-progress 24,712 7,124

Liabilities to customers, work-in-progress 16,587 13,241

NOTES

68

Note 20 Prepaid expenses and accrued income


2003 2002 2003 2002

SPP refund – – 2,167 7,517

Prepaid expenses 9,102 16,872 1,604 2,347

Accrued income 8,621 6,412 – –

Total 17,723 23,284 3,771 9,864

Note 21 Equity

The specifi cation of changes in equity is provided in “Changes in equity” presented in connection with the balance sheets. The restricted reserves for the Group include an SEK 5,959k (4,725k) equity method reserve. The total translation difference included in equity was SEK 14,625k (18,654k) at year end. This includes the change for the year amounting to SEK 33,279k. The change primarily concerns the translation differences occurring in the consolidated accounts in connection with the translation of an intragroup loan between Studsvik AB and the subsidiary, Studsvik, Inc.

Note 22 Untaxed reserves

PARENT COMPANY

2003 2002

Tax allocation reserve 56,105 53,591

Total 56,105 53,591

Note 23 Pension provisions and similar commitments

GROUP

2003 2002

Provisions, opening balance 4,523 3,665

Provisions for the period 574 858

Provisions, closing balance 5,097 4,523

Note 24 Other provisions

Future waste Guarantee management Other commitments expenses items Total

Provisions, opening balance 7,094 112,653 10,108 129,855

Provisions for the period – 6,536 952 7,488

Utilized during the period –2,860 – – –2,860

Effects of changed conditions for discounting – 3,305 – 3,305

Translation differences – –5,031 – –5,031

Provisions, closing balance 4,234 117,463 11,060 132,757

NOTES

69

Note 25 Liabilities to credit institutions

The Group’s long-term liabilities amounted to SEK 213.9 million, of which SEK 213.9 million com-prised interest-bearing liabilities with a maturity exceeding 5 years. The weighted average effective interest rate for the long-term loan liability was 3.4 per cent.

The breakdown of the Group’s liabilities to credit institutions in different currencies, by group com-pany and translated into SEK is shown below. Current Long-term Currency portion portion Total

Studsvik AB USD – 76,650 76,650

SINA group EUR 1,897 137,210 139,107

Studsvik Scandpower AS NOK 1,783 – 1,783

Studsvik Rosyth Nuclear Services Ltd GBP 1,243 – 1,243

Total 4,923 213,860 218,783

Note 26 Accrued expenses and deferred income


2003 2002 2003 2002

Deferred income 46,474 19,403 – –

Accrued personnel costs 56,167 51,680 6,519 6,287

Accrued waste management expenses 6,066 8,646 – –

Other accrued expenses 14,491 32,758 7,662 8,293

Total 123,198 112,487 14,181 14,580

Note 27 Pledged assets


2003 2002 2003 2002

On behalf of own liabilities and provisionsShares in subsidiaries 150,143 100,558 13,089 13,089

Chattel mortgages 15,000 15,000 – –

Total pledged assets 165,143 115,558 13,089 13,089

Note 28 Contingent liabilities


2003 2002 2003 2002

Guarantee for subsidiary – – 68,448 66,448

Other contingent liabilities 5,532 43,192 5,532 43,192

Total contingent liabilities 5,532 43,192 73,980 109,640

The fi gures for 2003 and 2002 include a site restoration guarantee issued to the State of Tennessee, USA reported under “Other contingent liabilities”. The fi gures for 2002 include a contingent liability for the benefi t of Metric Duke, reported under “Other contingent liabilities”.

Note 29 Adjustment for non-cash items

Non-cash items comprise participation in associated companies and capital gains of SEK –7.2 million, changes in provisions of SEK 5.2 million and disposals of SEK 2.1 million.

NOTES

70

Note 30 Acquisition of subsidiaries

The following subsidiaries were acquired during the year.

Share of Share ofCompany Acquisition date equity % voting rights %

AB SVAFO May 1, 2003 100 100

IFM group April 1, 2003 100 100

For the subsidiaries acquired during the year, the total value of the acquired assets and liabilities, purchase sums and impact on liquid assets for the Group are shown below.

Goodwill 62,208

Other intangible fi xed assets –

Tangible fi xed assets 1,031

Financial fi xed assets 55

Inventories 5,235

Other current assets 31,995

Provisions –3,748

Long-term liabilities –

Current liabilities –33,568

Total purchase sum 63,208

Portion of purchase sum not disbursed –

Liquid assets in the acquired companies –2,271

Impact of the year’s acquisitions on liquid assets for the Group 60,937

Payment of purchase sum for previous years’ acquisitions –

Total cash fl ow attributable to investments in subsidiaries 60,937

Note 31 Outstanding currency forward exchange contracts/futures at December 31, 2003

The Group hedges risk exposure in currency fl ows through the following contracts.

INFLOW OUTFLOW

USD JPY EUR CHF USD EUR Maturity year ’000 ’000 ’000 ’000 ’000 ’000 Total

2004 Amount 1,329 49,971 327 60 9,300 1,189

Exchange rate 1) 7.70 7.1879 9.006 5.81 7.4965 9.11

2005 Amount 221

Exchange rate 1) 7,92

Translated to actual value SEK ‘000 11,989 3,592 2,941 349 –69,717 –10,830 –61,676

Translated to SEK ‘000 at closing date rate, Dec. 31, 2003 11,316 3,408 2,978 350 –67,890 –10,842 –60,680

Difference between actual value and closing date rate 673 184 –37 –1 –1,827 12 –996

Closing date rate, Dec. 31, 2003 7.30 6.82 9.12 5.84 7.30 9.121) Average contractual rate.

NOTES

71

Note 32 Financial risk management The business of the Studsvik Group is exposed to fi nancial risk and other operating risks that may be important for the future development of the Group. Financial risk refers to the fl uctuations in the profi t and cash fl ow of the Group which arise as a result of changes in exchange rates, interest levels and customer solvency. Operating risk refers to regulatory licensing, patents or political decisions.

The treasury policy of the Studsvik Group, which is established by the Board, is a framework of rules, guidelines and recommendations for fi nancial risk management. The parent company’s treasury function is responsible for supporting the Group’s operations through fi nancial risk management. The Group’s borrowing and investment of surplus liquidity is managed by the Group’s treasury function.

The principles applied to the management of fi nancial risk are summarized below.

Currency riskThe profi t of the Studsvik Group is affected by fl uctuations in the currencies specifi ed in sales and purchase agreements (transaction exposure) as well as by fl uctuations in the subsidiaries’ accounting currencies (translation exposure). In 2003, the major trading and accounting currencies were USD, EUR and JPY.

Transaction exposureThe main rule for the Group is for subsidiaries to sign agreements for both sales and purchases in the subsidiary’s accounting currency. Where this is not possible, a potential currency risk arises. Cur-rency risk can be hedged by different measures, where the most common are currency clauses and sales/purchases of currency contracts. The measures may be combined. Most of the Group’s sales are project-oriented. The rule is to hedge all contractual and known exposures with respect to sales and purchases. Where sales involve current fl ows, 75 per cent of the estimated fl ow is hedged on a moving 12-month horizon. The hedging instrument used is the currency contract.

Translation exposureThe annual accounts of foreign subsidiaries are translated into SEK and consolidated into the accounts for the Group. The Group’s profi t is affected by fl uctuations in the local accounting currencies at the time when subsidiaries’ income statements are translated into SEK. Translation differences that occur in connection with the translation of subsidiaries’ balance sheets are carried against equity for the Group. In connection with the establishment of operations in Germany and the USA, the Group con-ducted borrowing in local currencies on these markets, thereby limiting the exposure of group equity.

Interest rate riskInterest rate risk is defi ned as the risk of changes in interest rates impacting on profi t. The Group is exposed to interest rate risk with respect to the interest-bearing net debt defi ned as interest-bearing loans less liquid assets. Interest rate risk can be limited by shortening or extending the interest rate adjustment periods for borrowings. A decision to do this is made by the Group’s treasury function, on the basis of the Board’s guidelines, and is based on the Group’s own assessment of future interest rate trends.

Counterparty riskCounterparty risk is the risk of losses arising in connection with the insolvency of a business counter-party. This includes customer losses and losses in connection with liquid asset investments. Histori-cally, the Studsvik Group has had very low customer losses, since customers mainly comprise major established companies and government authorities. At present, nothing indicates a radical change in this customer profi le or a drastic deterioration in customer solvency. The risk associated with liquid asset investments is limited by detailed rules concerning requirements on counterparty creditworth-iness, ceilings for investments with any single counterparty, the type of investment instrument that may be used etc.

NOTES

72

Note 33 Average number of employees

2003 2002

Men Women Total Men Women Total

Parent company 7 6 13 14 11 25

Subsidiaries in Sweden 402 159 561 405 163 568

Subsidiaries abroad

– Norway 3 1 4 4 1 5

– Germany 616 63 679 459 37 496

– USA 40 9 49 27 2 29

– Japan 1 1 2 1 1 2

– Switzerland 2 – 2 1 – 1

– Great Britain 3 – 3 2 – 2

Total, subsidiaries 1,067 233 1,300 899 204 1,103

Total, Group 1,074 239 1,313 913 215 1,128

Board members and senior management executives

2003 2002

Number at Of which Number at bal- Of which balance sheet date men % ance sheet date men %

Group (incl subsidiaries)

Board members 67 87 50 90

Presidents and other senior executives 13 92 14 93

Parent company

Board members 12 75 12 83

Presidents and other senior executivies 3 100 4 75

Note 34 Sick leave

PARENT COMPANY

2003 2002

Total sick leave 3.6% 6.5%

Long-term sick leave 2.3% 4.7%

Sick leave, men 3.1% 8.4%

Sick leave, women 4.3% 3.9%

Employees –29 years 8.5% 9.9%

Employees 30–49 years 5.8% 12.1%

Employees 50 years – 2.6% 1.3%

NOTES

73

Note 35 Benefi ts to senior management executives

Salaries and other benefi ts Basic salary/ Variable re- Other Pension Board fee muneration benefi ts costs Total

Chairman of the Board 300 – – – 300

Board members (7) 750 – – – 750

Employee representatives (4) 28 – – – 28

President 2,443 1,150 109 1,577 5,279

Other senior executives 14,456 3,846 744 2,250 21,296

Financial instruments – stock-options

PROGRAMS FROM PREVIOUS YEARS

Purchase Number Value price Benefi ts

President 25,000 165 165 –

Other senior executives 43,200 285 285 –

Total 68,200 450 450 –

Principles The members of the Board receive a fee in accordance with the decision of the general meeting of shareholders. Employee representatives do not receive a board fee. Remuneration to the President and other senior executives comprises a basic salary, variable remuneration, other benefi ts, pensions etc. The senior executive management is presented on page 77. The distribution between the basic salary and the variable remuneration must be in proportion to the responsibility and auth-ority of the person holding the position. The variable remuneration is based on actual performance in relation to individually established targets. In 2003, the board members did not receive any remun-eration in addition to the board fee. Remuneration to the President is decided by the Board. Remun-eration to other senior executives is decided by the Chief Executive Offi cer of the Group.

Bonus In the case of the President, the bonus for 2003 was based on targets concerning net sales, performance and capital effi ciency for the Group. The bonus sum for 2003 corresponded to 47 per cent of the basic salary. In the case of other senior executives, the bonus for 2003 was based on actual performance in relation to individually specifi ed targets, which usually include the performance of the unit in question, the performance of the Group and other individual non-monetary targets.

Financial instruments December 31, 2003, senior executives held stock options from programs from previous years (2002).

Pensions The President’s retirement age is 65. However, the President/company is entitled to take/demand early retirement when the President reaches the age of 60. The pension is benefi t-based. Essentially the pension plan means that, for the period between 60–65, 65 per cent of the basic salary that applies at the age of 60 is paid out as pension. From 65 onwards, the pension is in accordance with collective agreements on the Swedish labor market. In addition, 30 per cent of the portion of the salary exceeding 30 basic amounts is paid out. If Studsvik is acquired by a new principal owner, the President has agreed to be fully active in the company for a maximum of two years, depending on the President’s age at the time of the takeover. Studsvik has agreed, after that time and before he turns 60, if the President terminates employment, to pay a pension premium up to the age of 60 that is based on a pension-based salary of 1.3 x the salary. As a rule, other group management executives receive a pension from the age of 65 in accordance with collective agreements on the Swedish labor market. The pension commitments are unalterable. Remuneration to the President is decided by the Board. Remuneration to senior executive management is decided by the CEO.

NOTES

74

Note 35, cont’d Termination of employment and severance pay Should employment be terminated by the Presi-dent, he is entitled to a period of notice of 6 months. Should employment be terminated by the com-pany, the period of notice is 12 months. In the case of termination of employment by the company, salary is disbursed during the period of notice as well as an additional severance pay corresponding to 12 months’ salary.

For other members of the group executive management, the period of notice is 6 months when employment is terminated by the employee and 12 months when employment is terminated by the company. In the case of termination of employment by the company, in addition to salary during the period of notice, an additional severance pay corresponding to 12 months is usually disbursed. Certain contracts require reduction of the severance payments by other income received.

Options At balance sheet date, the President of Studsvik Scandpower, Inc. had an option to acquire a maximum of 12 per cent of the shares in Studsvik Scandpower AB for an amount corresponding to 12 per cent of the taxed equity.

Note 36 Transactions with related parties

Studsvik, Inc. owns 50 per cent of THOR Treatment Technologies, LLC (TTT). In accordance with a “Joint Venture Operating Agreement”, the owners are to provide management, technical and mar-keting services to TTT. During the year, Studsvik, Inc. billed USD 412k for these services. According to an agreement between the owners, the services are priced at cost price.

Apart from these transactions, no transactions with related legal or physical persons have occurred.

NOTES

75

Proposed Distribution of Profi ts

The total profi ts at the disposal of the General Meeting of Shareholders comprise the parent company’s non-restricted equity, SEK 555,672,062.38.

The Board and President propose that the profi ts be distributed so that SEK 555,672,062.38 is carried forward.

The non-restricted equity of the Group in accordance with the consolidated balance sheet amounts to SEK 222.8 million. No allocation to restricted reserves is required.

Nyköping, February 23, 2004

Per Wahlström Roland Bengtsson Ingemar Eliasson Chairman

Håkan Johansson Anna Karinen Leif Nilsson

Mariella Nilsson Kjell Norring Henry Sténson Employee representative Employee representative

Hans-Bertil Håkansson President

76

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the President of Studsvik AB (publ) for the year 2003. These accounts and the administration of the company are the responsibility of the Board of Directors and the President. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the Board of Directors and the President, as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts.

As a basis for our opinion concerning discharge from liability, we examined signifi cant deci-sions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the President. We also examined whether any board member or the President has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.

The annual accounts and the consolidated accounts have been prepared in accordance with the Annual Accounts Act and, thereby, give a true and fair view of the company’s and the Group’s fi nancial position and results of operations in accordance with generally accepted accounting principles in Sweden.

We recommend to the general meeting of shareholders that the income statements and balance sheets of the parent company and the Group be adopted, that the profi t of the parent company be dealt with in accordance with the proposal in the administration report and that the members of the Board of Directors and the President be discharged from liability for the fi nancial year.

Nyköping, February 23, 2004

Göran Tidström Magnus Brändström

Authorized Public Accountant Authorized Public Accountant

Audit ReportTo the General Meeting of Shareholders of Studsvik AB (publ) company reg. no. 556501-0997

77

Senior Executive ManagementHans-Bertil Håkansson [1]Born 1951. President and Chief Executive Offi cer of Studsvik AB. Employed 2001. Holding: 5,000 shares, 25,000 options.

Jerry Ericsson [2]Born 1951. Chief Financial Offi cer of Studsvik AB. Employed 1984. Holding: 11,600 shares, 5,000 options.

Sten-Olof Andersson [3]Born 1955. Vice President Business Develop-ment. Employed 1996. Holding: 23,200 shares.

Leif Andersson [4]Born 1950. President of Studsvik RadWaste AB. Employed 1975. Holding: 1,500 shares, 10,000 options.

Jan Bjerler [5]Born 1953. President of Stensand Special-serviceföretaget AB. Employed 1987. Holding: 0 shares, 1,000 options.

Malte Edenius [6]Born 1944. President of Studsvik Scandpower, Inc. Employed 1980. Holding: 8,000 shares.

Robert Hedvall [7]Born 1952. Radiation Protection Manager and Safety Manager for Studsvik AB. Employed 1988. Holding: 410 shares, 200 options.

George M Hill [8]Born 1962. President of Studsvik Processing Facility, LLC. Employed 1995. Holding: 1,000 shares.

Jean-Marc Holt [9]Born 1956. President of Studsvik Nuclear AB. Employed 1999. Holding: 0 shares, 10,000 options.

Thomas W Oliver III [10]Born 1946. President of Studsvik, Inc. Employed 1995. Holding: 0 shares.

Eva Halldén [11]Born 1959. President of Studsvik Partner AB. Employed 2003. Holding: 400 shares.

Kurt Sköld [12]Born 1938. President of Studsvik Medical AB. Employed 2001. Holding: 0 shares, 10,000 options.

Kjell Westerberg [13]Born 1962. President of SINA Industrieservice GmbH & Co. KG. Employed 1999. Holding: 0 shares, 5,000 options.

[2]

[8]

[5] [7][6]

[4][3]

[10][9]

[13][12][11]

[1]

78

Per Wahlström [1]Born 1946. Chairman. Senior advisor to Euroventures Nordica II B.V. Board member since 1994. Chairman of the Board of Biora AB. Board member of Stiftelsen IK and Volvo Technology Transfer AB. Holding: 0 shares.

Håkan Johansson [2]Born 1941. Vice Chairman. Board member of Göteborg Energi AB, Partille Energi AB and Alingsås Energi AB. Board member since 1996. Holding: 2,000 shares.

Roland Bengtsson [3]Born 1955. CFO Scandinavian LifeScience Ventures. Board member since 1998. Alternate 1996–1998. Board member of Envac Centralsug AB. Holding: 1,660 shares.

Ingemar Eliasson [4]Born 1939. Marshall of the Realm. Chair-man of the Swedish Cancer Society and Svensk-norska Industrifonden. Board mem-ber since 2002. Holding: 600 shares.

Anna Karinen [5]Born 1963. Board member since 2003. Board member of Handelsbanken Flen Branch Offi ce since 2002. Holding: 405,060 shares.

Leif Nilsson [6]Born 1945. Responsible for the Industrial Turbines segment of ALSTOM Power up to the end of 2003. Board member since 2001. Holding: 0 shares.

Mariella Nilsson [7]Born 1963. Employee representative, SIF trade union. Board member since 2003. Alternate 2000–2003. Holding: 400 shares.

Kjell Norring [8]Born 1946. Employee representative CF trade union. Board member since 1992. Holding: 0 shares, 200 options.

Henry Sténson [9]Born 1955. Responsible for Corporate Communications and member of the executive group management of Ericsson. Chairman of ECPA (European Centre for Public Affairs). Board member since 2002. Holding: 0 shares.

Hans-Bertil Håkansson [10]Born 1951. President and Chief Executive Offi cer of Studsvik AB. Employed 2001. Holding: 5 000 shares, 25,000 options.

Alternates

Maria LindbergBorn 1964. Employee representative, CF. Alternate since 1999. Holding: 0 shares, 200 options.

Roger LundströmBorn 1966. Employee representative, SIF. Alternate since 2003. Holding: 0 shares, 200 options.

Auditors

Göran TidströmBorn 1946. Authorized Public Accoun-tant. Öhrlings PricewaterhouseCoopers, Stockholm. Auditor of Studsvik since 2003.

Magnus BrändströmBorn 1962. Authorized Public Accoun-tant. Öhrlings PricewaterhouseCoopers, Stockholm. Auditor of Studsvik since 2003.

Board of Directors and Auditors

[1] [3][2]

[6]

[7] [8]

[9] [10]

[4]

[5]

79

Corporate Governance

The Board of Directors appoints the President and Chief Executive Offi cer, who is responsible for the operational management and control of the Group. The presidents of the Group companies report to him. The Chief Executive Offi cer has appointed an executive management group to deal with Group-related issues. The management group comprises the executive management of the parent company and the presidents of the subsidiaries.

The Board of Directors and Their WorkStudsvik AB’s Board of Directors has 8 members who jointly possess broad commercial, technical and public affairs experience. The local trade unions have appointed 2 board members and 2 alternates. The President is a member of the Board and other executives from the Group participate in board meetings as rap-porteurs or in an administrative capacity. The Board normally meets 7 times a year, including the board meeting following the election which is held directly after the general meeting of shareholders. Additional meetings are held when necessary. In 2003, the Board held 9 meetings for which minutes were kept. Four of the year’s meetings coincide with deadlines for providing fi nancial information to the stock market.

The work of the Board follows rules of procedure which are adopted at the board meeting immediately following the election. The rules of procedure esta-blish the allocation of duties between the Board and the executive management, the responsibilities of the Chairman and those of the President and establish how the fi nancial reporting will be conducted.

The board meetings follow a standardized agenda with fi xed items for decision-making. In addition to the fi xed items, each meeting is devoted to a special theme, such as an in-depth presentation of a specifi c area of activity in the Group. Furthermore, every year, market-related and strategic issues, budgets and group policies and guidelines are handled. Safety and security-related issues are dealt with at each meeting and the Vice Chairman has been appointed to monitor these issues on behalf of the Board.

Documents for the board meetings are compiled and distributed at least one week prior to the meeting. In addition, every month the President reports on the Group’s fi nancial situation and performance to the Board.

In 2003, the Board considered the issue of esta-blishing a special audit committee but came to the conclusion that those control-related issues that must be handled by the Board should be handled by the Board as a whole. To ensure that the Board has insight into audit and control activities, the Board is given the opportunity, every year, to submit viewpoints regard ing the auditors’ plans and the scope and focus of the audits. Following the hard close and review of the internal audit, the auditors report on their observations at the board meeting in December.

CommitteesThe general meeting of shareholders decided in 2003 to appoint a nominating committee comprising 4 members. The general meeting decided to appoint 3 members and charged the Board with the task of appointing a fourth member to represent the minority shareholders.

The general meeting also decided that the Board should appoint a remuneration committee to handle issues concerning the employment and pension condi-tions of employees.

Board FeeThe total board fee for Studsvik AB amounted to SEK 1,078,000 in 2003. The Chairman receives a fee of SEK 400,000 and board members, SEK 150,000. Members appointed by the trade unions receive a preparation fee for each meeting.

The Group Executive FunctionsThe Group executive functions, comprising the President and staff functions are stationed at Studsvik outside Nyköping. In accordance with the rules of procedure of the Board and the policies and guidelines established by the Board, the group executive functions are responsible for formulating the Group’s overall strategy, group business development, allocation of fi nancial resources among the Group’s activities, capital structure and risk management. Tasks also include issues relating to com-pany acquisitions affecting the Group as a whole, other major projects, group fi nancial reporting and communi-cation with the stock market.

Other group-related issues, such as the environment, safety and quality, are handled by a network of individu-als from different parts of the Group.

Corporate governance and development is affected by decisions made in a number

of decision-making bodies. At the annual general meeting, the shareholders exercise

their voting rights and make decisions on a number of issues, including the composition

of the Board of Directors. The Board of Directors of the parent company, which is also

the Board of Directors of the Group, makes decisions concerning the focus of work

and investments, strategic plans, budgets and group management and organization.

80

CONDENSED INCOME STATEMENTS

AMOUNTS, SEK MILL ION 2003 2002 2001 2000 1999

Net sales 1,113.8 1,002.3 882.7 818.8 773.3

Cost of services sold –842.5 –773.5 –748.9 –680.0 –548.1

Gross profi t 271.3 228.8 133.8 138.8 225.2

Selling expenses –34.8 – 40.5 –41.0 –45.2 –37.0

Administrative expenses –141.2 –139.5 –172.7 –131.3 –92.2

Research and development costs –42.1 –46.3 –48.7 –39.3 –39.5

Other operating income 1.5 0.4 0.5 0.9 –

Other operating expenses –0.6 –2.4 – 0.1 –0.2 –0.1

Result from participation in associated

companies before tax 7.3 2,3 2.5 2.0 2.3

SPP refund – – – 130.8 –

Operating profi t 61.4 2.8 –125.7 56.5 58.7

Interest income and similar profi t/loss items 6.8 6.6 10.8 3.1 6.1

Interest expense and similar profi t/loss items –15.9 –10.5 –17.5 –16.2 –5.7

Profi t after fi nancial items 52.3 –1.1 –132.4 43.4 59.1

Tax on profi t for the year –20.4 –7.5 –3.0 –43.6 –19.0

NET PROFIT FOR THE YEAR 31.9 –8.6 –135.4 –0.2 40.1

CONDENSED BALANCE SHEETS


Assets

Goodwill 123.4 77.2 88.9 87.8 77.5

Other fi xed assets 516.5 641.6 750.5 716.6 523.7

Receivables – trade 163.6 155.2 131.7 104.6 105.6

Other non-interest-bearing current assets 79.0 67.2 88.9 194.7 58.4

Current investments – – – – 41.0

Cash and bank 299.9 120.5 258.0 31.8 73.9

TOTAL ASSETS 1,182.4 1,061.7 1,318.0 1,135.5 880.1

Equity and liabilities

Equity 531.3 466.2 551.6 358.0 318.5

Minority interests 0.3 0.3 0.2 0.3 0.3

Long-term interest-bearing liabilities 213.9 189.0 313.6 281.2 206.7

Long-term non-interest-bearing liabilities 171.9 160.7 159.9 161.4 107.8

Current interest-bearing liabilities 4.9 10.9 16.8 61.3 1.5

Current non-interest-bearing liabilities 260.1 234.6 275.9 273.3 245.3

TOTAL EQUITY AND LIABILITIES 1,182.4 1,061.7 1,318.0 1,135.5 880.1

Over the past fi ve-year period, Studsvik has increased its net sales by 10 per cent

per year on average. The increase is a result of both organic growth and acquisitions.

Five-year Review

The fi nancial information in this section is based on Studsvik’s consolidated accounts for the fi nancial years of 1999–2003. Profi ts for companies sold have been included up to the date of divestment while the profi ts of acquired companies have been included

from the date of acquisition. The fi gures for 1999 have not been adjusted for changes in accounting policies applying from 2001, since the fi gures are not available.

81

CONDENSED CASH FLOW STATEMENTS


Operating profi t 61.4 2.8 –125.7 56.5 58.7

Adjustment for depreciation 95.3 95.6 91.9 73.0 43.1

Other non-cash items –0.2 –37.6 –23.2 58.1 34.8

156.5 60.8 –57.0 187.6 136.6

Financial items, net –9.6 –3.9 –7.8 –11.9 0.7

Tax –17.3 –4.4 –30.9 –28.9 –8.1

Cash fl ow before changes in working capital 129.6 52.5 –95.7 146.8 129.2

Changes in working capital 28.5 –46.6 56.6 –59.0 –25.0

Cash fl ow before investments 158.1 5.9 –39.1 87.8 104.2

Investments –119.6 –53.2 –74.2 –219.5 –178.5

Cash fl ow after investments 38.5 –47.3 –113.3 –131.7 –74.3

KEY FINANCIAL FIGURES AND RATIOS

AMOUNTS, SEK MILL ION 2003 2002 2001 20001) 1999

Margins

Operating margin before depreciation, % 14.1 9.8 neg neg 13.2

Operating margin before goodwill amortization, % 6.9 1.3 neg neg 8.5

Operating margin, % 5.5 0.3 neg neg 7.6

Profi t margin, % 4.7 neg neg neg 7.6

Profi tability

Return on operating capital, % 12.3 0.5 neg neg 17.8

Return on capital employed, % 9.6 1.2 neg neg 12.9

Return on equity, % 6.4 neg neg neg 13.7

Capital structure

Operating capital 450.4 545.8 624.3 669.0 412.0

Capital employed 750.4 666.3 882.3 700.8 526.9

Equity 531.3 466.2 551.6 358.0 318.5

Interest-bearing net debt –81.1 79.4 72.5 310.7 93.2

Net debt-equity ratio, times –0.2 0.2 0.1 0.9 0.3

Interest cover, times 4.3 0.9 neg neg 11.4

Equity-assets ratio, % 44.9 43.9 41.9 31.5 36.2

Cash fl ow

Degree of self-fi nancing, times 1.3 0.1 neg 0.4 0.6

Investments 119.6 53.2 74.2 219.5 178.5

Employees

Average number of employees 1,313 1,128 1,134 1,204 1,194

Net sales per employee 0.8 0.9 0.8 0.7 0.61) The SPP refund etc has been excluded from the calculation of margins, profi tability and interest cover for 2000.

DATA PER SHARE

AMOUNTS, SEK 2003 2002 2001 2000 1999

After new share issue and shareholders’ contribution

Number of shares at the end of the period 8,114,211 8,114,211 8,114,211 500,000 500,000

Average number of shares 8,114,211 8,114,211 7,581,625 500,000 500,000

Earnings per share before dilution 3.93 –1.06 –17.86 –0.05 6.91

Earnings per share after dilution 3.88 –1.06 –17.86 –0.05 6.91

Equity per share 2) 65.48 57.45 67.98 61.73 54.922) The amounts for 1999–2000 have been adjusted for the bonus issue in 2001.

FIVE-YEAR REVIEW

82

MarginsOperating margin before depreciationOperating profi t before depreciation as a percentage of net sales.

Operating margin before amortization of goodwillOperating profi t before amortization of goodwill as a percentage of net sales.

Operating marginOperating profi t after depreciation as a percentage of net sales.

Profi t marginProfi t after fi nancial items as a percentage of net sales.

Profi tabilityReturn on operating capitalOperating profi t as a percentage of average operating capital.

Return on capital employedProfi t after fi nancial items, with fi nancial expenses added back, as a percentage of average capital employed.

Return on equityProfi t for the year as a percentage of average equity.

Capital StructureOperating capitalBalance sheet total, less non-interest-bearing liabili-ties, current investments, cash and bank balances. The average operating capital has been calculated as the opening balance plus the closing balance of operating capital divided by two.

Capital employedThe balance sheet total, less non-interest-bearing liabilities. The average capital employed has been calculated as the opening balance plus the closing balance of capital employed divided by two.

Equity capitalThe total of non-restricted and restricted equity at the end of the year. The average equity has been calcula-ted as the opening balance plus the closing balance of equity divided by two.

Net interest-bearing debtThe total of current and long-term interest-bearing liabilities less current investments as well as cash and bank balances.

Net debt-equity ratioInterest-bearing net liabilities divided by equity, includ-ing minority interests. A negative net debt-equity ratio means that the total of current investments plus cash and bank balances exceeds interest-bearing liabilities.

Interest coverProfi t after fi nancial items plus fi nancial expenses, divided by fi nancial expenses.

Equity-assets ratioEquity including minority interests as a percentage of the balance sheet total.

Capital Turnover RateCapital employed turnover rateNet sales for the year divided by average capital employed.

Cash FlowDegree of self-fi nancingCash fl ow before investments divided by investments.

InvestmentsThe total of the acquisition of businesses/subsidiaries as well as the acquisition of intangible and tangible fi xed assets.

EmployeesAverage number of employeesAverage number of employees at the end of each month.

Net sales per employeeNet sales for the year divided by the average number of employees.

Data per ShareEarnings per shareProfi t for the year divided by the average number of shares. The average number of shares has been calculated as a weighted average of the number of outstanding shares for the year.

Equity per shareEquity divided by the number of shares at the end of the period.

P/E ratioThe share price divided by earnings per share.

Defi nitions of Key Figures and Ratios

83

Alfa radiation Alfa particles emitted during radio-active decay.

Beta radiation Radiation comprising beta particles.

BNCT Boron Neutron Capture Therapy. Applied to the treatment of tumors.

Boron An element. Boron-10 is used in Boron Neu-tron Capture Therapy (BNCT).

Cyclotron Equipment to accelerate heavy particles at high energies. For the production of radioactive substances for patient investigations.

Decontamination Removal of radioactivity from surfaces and materials.

DOD US Department of Defense.

DOE US Department of Energy.

Dosimeter Instrument for measuring the radiation dose to a person.

Gamma radiation Electromagnetic radiation emit-ted in a nuclear process.

Glioblastoma multiforme; glioblastom Malignant brain tumors.

IAEA International Atomic Energy Agency.

In-core fuel management A method involving the deliberate confi guration of individual fuel elements inside a nuclear reactor core to optimize fuel burnup at the lowest cost.

Infusion Addition of liquid, blood products etc. in the form of an intravenous drip.

Glossary of Technical Terms

Ion-exchange resins An organic substance that can be used in coolant cleaning fi lters at nuclear power plants or in analysis at a chemical laboratory.

Ionizing radiation Electromagnetic radiation or particle radiation that can emit ions directly or indi-rectly when it penetrates matter.

MWt 1 million watts as thermal energy.

Palliative care Care for terminally ill patients.

R2-0 reactor Studsvik’s 1 MWt research reactor, mainly used for Boron Neutron Capture Therapy (BNCT).

R2 reactor Studsvik’s 50 MWt materials testing reac-tor, mainly used for isotope production as well as fuel and materials testing.

Radioisotope Radioactive element.

Radiotherapy Radiation treatment of illness.

Semi-conductor Material whose electrical conducti-vity is between that of a conductor and insulator.

THORSM Thermal Organic Reduction, Studsvik’s proprietary process for volume reduction, mainly of ion-exchange resins.

84

Calendar

Notifi cationShareholders wishing to participate must be registered in VPC AB’s share register, no later than by April 8, 2004 and must submit a notifi cation of their intention to attend no later than by April 15, 2004:

• by phone, +46 155 22 10 25• by post, to Studsvik AB, SE-611 82 Nyköping, Sweden• by e-mail, [email protected]• by fax, +46 155 26 30 00

The shareholder’s notifi cation should include the following information about the shareholder:

• name• personal identity number (date of birth)• address and telephone number• number of shares

To have voting rights at the General Meeting of Shareholders, nominee shareholders must apply to the bank or stockbroker managing the shares for temporary share registra-tion a couple of banking days before April 8, 2004.

Studsvik’s Nomination Committee Studsvik’s nomination committee consists of:

Björn C AnderssonMagnus HardmeierSamme LindmarkPer Wahlström

The task of the nomination committee is to submit proposals to the General Meeting of Shareholders for nominee board members, auditors, alternate auditors and their fees.

The reports will be available at www.studsvik.se on the publication dates. The annual report and six-monthly interim report will be sent directly to the shareholders.

The General Meeting will be held on Thursday April 22, 2004 at 16.00 (4 p.m.) at Salén Konferens & Matsalar, Norrlandsgatan 15, Stockholm, Sweden.

Forthcoming Financial InformationPUBLICATION DATES

Interim report, fi rst quarter, per March 31, 2004 April 22, 2004

Interim report, fi rst six-months, per June 30, 2004 August 17, 2004

Interim report, fi rst three quarters, per September 30, 2004 October 27, 2004

Press release, results 2004 February 2005

Annual report 2004 March 2005

General Meeting of Shareholders, April 22

85

Studsvik AB (publ) Annual Report 2003. Company registration no. 556501-0997.

This report is a translation of the Swedish statutory report. In the event of any differences between this document

and the Swedish original, the latter shall govern. The content of this annual report may not, in whole or part, be

copied or stored in a machine-readable medium without the permission of Studsvik AB (publ).

© Studsvik AB (publ).

Production: Hähnel Group AB.

Graphic design: Okidok KB.

Photo: Janne Höglund and others.

Translation: Monica Bowen-Schrire, EnergiTek.

Printing: Österbergs & Sörmlandstryck AB 2004.

Studsvik ABSE-611 82 NyköpingSwedenTel +46 155 22 10 00Fax +46 155 26 30 [email protected]

SINA Industrieservice GmbH & Co. KGKarlsruher Str 20DE-75179 PforzheimGermanyTel +49 7231 58 695 01Fax +49 7231 58 695 [email protected]/sina

Studsvik, Inc./StudsvikProcessing Facility, LLC151 T.C Runnion RoadErwin, TN 37650USATel +1 423 735 6300Fax +1 423 743 [email protected]/processingfacility

Studsvik Japan LtdNakamura Bldg. 3F2-7-14 Shibuya, Shibuya-kuTokyo 150-0002JapanTel +81 3 5464 3771Fax +81 3 5464 [email protected]

Studsvik Medical ABSE-611 82 NyköpingSwedenTel +46 155 22 10 00Fax +46 155 26 30 [email protected]/medical

Studsvik Nuclear ABSE-611 82 NyköpingSwedenTel +46 155 22 10 00Fax +46 155 26 30 [email protected]/nuclear

Studsvik RadWaste ABSE-611 82 NyköpingSwedenTel +46 155 22 15 00Fax +46 155 26 31 [email protected]/radwaste

Studsvik Rosyth Nuclear Services Ltd13 Colquhoun StreetHelensburghDunbartonshireScotland G84 8ANTel +44 1436 676 580Fax +44 1436 670 [email protected]

Studsvik Scandpower ABSE-611 82 NyköpingSwedenTel +46 155 22 19 70Fax +46 155 22 19 [email protected]@soa.comwww.studsvik.se/scandpower

Stensand Specialservice-företaget ABBox 46SE-430 24 VäröbackaSwedenTel +46 340 66 12 80Fax +46 340 66 17 [email protected]/stensand