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ANNUAL REPORT 1999

75YEARS

C O N T E N T SGEVEKO 75 years 1

Interview with Jarl Ergel, Chairman 2

Comments by the Group Chief Executive 4

Review of the Group 6

GEVEKO shares 8

Management of Securities 10

Changes in Listed Portfolio 1999 15

Industrial Operations 16

Five-year review 22

Report of the Directors 23

Consolidated profit and loss account 29

Consolidated balance sheet 30

Consolidated cash flow analysis 32

Parent company profit and loss account 33

Parent company balance sheet 34

Parent company cash flow analysis 35

List of shareholdings 36

Additional information 37

Proposed treatment of unappropriated earnings 44

Report of the auditors 45

Board and auditors 46

Management 48

Share-owner information 49

Addresses 50

Definitions 52

COVER PICTURE

Water colour by Eva Müntzing

1925The international recession hits Sweden. One third of allSwedish companies are closed down during the twen-ties. Gunnar Bergendahl acquires the patent rights for“Essen asphalt” and in 1925 he forms the company ABGatu- och Vägbeläggningsämnen.

1930The building and clothing industries grow. Success for“Essen asphalt” continues. Profit margins for the lastfive years of the thirties amount to 44 %!

1940The Second World War puts the brakes on the develop-ment of the Group. Road paving operations are para-lysed. Mechanisation picks up and the use of warmasphalt mastics increases at the expense of the cold“Essen asphalt”. A laboratory for research and develop-ment of chemical products is established.

1950Europe’s recovery leads to a healthy demand forSwedish products. Industry is once again export-oriented. The Group’s research and development ofnew products result in underbody coatings for vehiclesand road marking paints.

1960The 1960s is distinguished by a strong economic rate ofgrowth - the “record years”. The growth of motoringand the extension of the motorway network increasesthe need for road marking paints. Road surfacingcontract work is recommenced.

1970Oil prices increase fourfold, driving up inflation.Industrial production falls. Geveko’s road markingoperations expand. Thermoplastic compounds start toreplace road marking paints.

1980An economic boom. The company returns healthyprofits. The stock exchange soars to unimaginableheights. A dramatic rise in motoring greatly increasesthe number of cars to about three million at the onset ofthe eighties. Geveko is listed on the stock exchange in1983, expands and becomes internationalized.

1990 TO 2000The financial and property crisis. The decline of theconstruction market leads to heavy losses for severalbuilding and construction companies. The building andconstruction operations are divested and Gevekobecomes an investment company. Its portfolio of listedsecurities expands and increases in importance. Indus-trial operations concentrate on road marking.

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4 • G e v e k o A n n u a l R e p o r t 1 9 9 9

5 0 Y E A R S W I T H G E V E K OI N T E R V I E W W I T H C H A I R M A N J A R L E R G E L

by boat throughout the country, became out-dated. Newmobile techniques meant that asphalt production couldbe brought closer to the road construction site.

What strategic choices have been necessary?As the newly appointed CEO in 1965, Jarl was facedwith an important and emotionally difficult decision:whether or not to sell the subsidiary Bergendahl ochHöckert. The building and construction company hadbeen enjoying prosperous times but was hit by agrowing administrative burden and heavy losses at theend of the fifties. The company was sold in 1966 to JohnMattson Byggnads AB, taking with it more than 1,500 ofthe 1,800 Group employees.

This was a fresh start, with three remaining companyunits, Geveko Industri AB, Gatu och Väg AB and ABUnderås, a total of 270 employees, a share capital of SKr10 million and a turnover of SKr 53 million.

An important decision at the start of the nineties waswhether Geveko Industri AB should concentrate on rustprotection or road marking paints, two business sectorsthen of equal size. Geveko had given up the role of sub-contractor to the automobile industry to concentrate onthe after markets. Through acquisition, the company’sroad marking operations had expanded to lead theNordic market: the choice fell to road marking paint.

How did plans for a stock exchange flotation evolve?There was greater public interest in share trading at thestart of the eighties - many companies had becomelisted and share prices started to rise from a period ofminor fluctuation and low trading in the seventies.

There was much intense discussion within the Groupas to how the flotation should go ahead. One importantissue was to safeguard the owner-group’s control of thecompany. This was resolved by trading only in Series“B” shares and by having the Series “A” shares carry 1vote, and the Series “B” shares 1/10 of a vote. The sharewas valued at SKr 115 when Geveko was listed on theA1 list in 1983. The reception was extremely positive andthe exchange rate rose briskly. The number of share-holders increased from about 70 to 1,600.

“Geveko experienced healthy growth in the eightiesand the stock exchange flotation was very likely animportant factor,” says Jarl.

arl Ergel can look backon almost fifty years

with the Geveko Group.As acting Group ChiefExecutive between 1965and 1991, and thereafteras Chairman, his insightand experience areunique.

He was a researchassistant at the RoyalInstitute of Technologywhen his father-in-law,Geveko’s founder GunnarBergendahl, enticed himto Göteborg in 1951.

Although Bergendahl was a civil engineer, he had apassion for chemistry. In those days, chemistry playedthe same role in society as IT does today and enabledmany contemporary problems to be solved.

“I entered a new world. At first, I considered Gevekoto be a dusty old asphalt company that could hardly bethought of as technically challenging. But once I hadgrown into it I became hooked,” says Jarl.

Early on he made trips to the USA and England tostudy road markings, a field in which both thesecountries had made considerable progress. The compa-ny’s chemists were subsequently instructed to developroad marking paints, so when Sweden introduced roadmarkings in 1956, Geveko was ready and waiting - andsoon became the main supplier to Vägverket, theNational Road Administration. Through the knowledgegathered by Geveko on asphalt based-products, thecompany was able to develop rust-protection for carchassis. A unique binding agent, manufactured underlicense from the USA, added to the company’s suc-cesses. Geveko went on to become the main supplier toa number of manufacturers, including SAAB.

This was the start of a company restructure - fromasphalt to the chemical industry.

“This was a dream come true for Gunnar Bergendahland for those involved in research and development.”

This was an essential change of direction, as thestationary asphalt plant, established in 1926 and wherecold aggregate was manufactured on site and transported

J

G e v e k o A n n u a l R e p o r t 1 9 9 9 • 5

What role has the share portfolio played?Geveko has succeeded exceedingly well with their shareportfolio over the years, which has provided a solidfinancial position. The major holding was establishedwhen Bergendahl och Höckert was divested andpayment made in shares. Even then, the founderGunnar Bergendahl was interested in share trading.

“He wanted to create Group stability by placingliquid reserves in shares,” says Jarl.

Since the becoming an investment company in 1998,the Group has focused much more on its portfolio. Lastyear, the share value increased by 79 per cent against thegeneral index of 66 per cent. The strong financialposition has meant a series of company acquisitions, ofwhich some of the larger are Purete Oy in Finland in1983, Cleanosol AB in 1998, the Danish LKF Vejmar-kering A/S in 1989, the English company Roadcare Ltdin 1994 and the Swiss Plastiroute S.A., with its mainoperations located in Germany.

What steps were taken when the construction market wasparalysed?The crisis of the nineties also hit Geveko. The Groupmade additional inroads into the road marking sectorthrough the acquisition of the English company Road-care when suddenly the market in England was halved,the consequence of political decisions. Despite this,Roadcare is well on the way towards becoming profit-able once more.

“A costly acquisition but an excellent lesson,” Jarlpoints out.

The construction crisis proved enduring and between1997 and 1998, the construction company Gatu och Vägand the ballast and concrete manufacturing companyUnderås had to be sold off. The refinement of the Groupwas thus complete.

“We were the last survivors, the only remaining familycompany of the same size. Several board members hadwanted to start this process earlier but I acted as a brake -after all, the companies had been with us a long time. Butthere’s no doubt that we did the right thing. We’re still onthe road, but now we direct the road-users.”

What has leadership involved?Jarl’s life as a corporate leader has meant considerable

commitment to both people and product development.He stresses the importance of honesty - towards theowners, towards the customers and towards the em-ployees. The fact that Geveko has only had two Groupleaders between 1926 and 1991 is unique indeed.

Jarl’s philosophy has been that employees need astrong, honest leader. The previous group leaders werefamily company men, technicians who staked their ownfunds on their own impassioned ideas.

“There was a patriarchal element to the leadership.Since the money they were investing was their own,they were careful not to waste it. Money had to beearned before it was spent. This was impressed uponme when I first started. Many will probably say that Iam the last of that generation.”

If you glance into the future - how will Geveko differ from thepresent organisation?Since the new start in 1966, Geveko has increased invalue to one billion kronor. Geveko is now one of thelargest European road marking companies and hasgrown mainly through company acquisition. But thereare still challenges to face.

“The technician who can develop a road markingmaterial that is visible in the rain and at night has beensuccessful.”

Jarl sees great potential for expansion abroad. TheGroup is now directing its gaze towards Eastern Europeand through the acquisition of the Swiss companyPlastiroute in 1999, the doors are open to Hungary andRomania, where the company has factories. The com-pany is also looking into the opportunities opened upby the development of the motorway network inPoland, as this could involve enormous expansionpotential.

How do you feel about leaving the Group after all this time?“My work with the board, management colleagues andemployees has been a time filled with excitement andstimulation. We have, on the whole, achieved ourcommon goals in terms of product development,customer care and the ability to offer our shareholders agood return. The prospects are bright and the Grouprestructuring is complete. It now feels right to hand overthe chairmanship and leave Geveko.”


G E V E K O 1 9 9 9

B U S I N E S S I D E A A N D O R I E N T A T I O N

ON THE ROAD SINCE 1925

• Operations began in 1925, when the founder GunnarBergendahl introduced the road paving materialknown as “Essen asphalt” into Sweden.

• Geveko “B” shares have been listed on the StockholmStock Exchange since 1983.

• Geveko became an investment company in 1998.

OPERATIONS

Geveko is an investment company. Approximately threequarters of the net worth consists of a Listed Portfolioand about one quarter of an unlisted sub-group ofIndustrial Operations.

MANAGEMENT OF SECURITIES

Funds are mainly invested in shares that are traded on aliquid market and are listed on the Stockholm Stock

• The Board proposes that a dividend of SKr 7 (6) pershare, and a bonus of SKr 4 (2) per share be paid for1999.

• The net worth amounted to SKr 253 (169) per shareon December 31st 1999.

• The net worth discount was 44 per cent (50) based onGeveko’s Series “B” shares’ closing price of SKr 142on December 31st 1999.

• The yield on Geveko Series “B” shares, includingpaid dividends, amounted to 76 per cent during theyear (Findata Yield Index 70 per cent).

• The Group reports a profit of SKr 103.7 million (87.5)or SKr 24.60 (20.75) per share.

• The closing equity ratio, including premium overbook value of the Securities portfolio and estimatedsurplus value in the Industrial Operations, amountedto 82 per cent (79).

• The profit on the Management of Securities, includ-ing the increase in premium over book value,amounted to SKr 381 million (54). The increase in thevalue of the Securities Portfolio after adjustment for

purchases and sales of shares, was 79 per cent(Affärsvärlden General Index +66 per cent).

• The Industrial Operations´ operating profitamounted to SKr 31.6 million (30.9). The profitmargin was 7.6 per cent (7.8). Returns on capitalemployed amounted to 18.5 per cent (19.4).

• The Swiss road marking company Plastiroute wasacquired at the end of the year. As of December 31st1999, only the balance sheet had been consolidated.

• It is proposed that the annual general meeting ofshareholders authorise the Board to decide upon therepurchase of shares.

YEAR 2000• The net worth as of February 20th 2000 amounted to

SKr 279 per share. The net worth discount was 45 percent, based on the day’s closing price of the GevekoSeries “B” share of SKr 154.

• At the request of the company, the Geveko Series “B”shares are to be listed on the stock exchange “O” listas of February 28th.

Exchange. Investments are made on the basis of a long-term placement horizon in securities for which the riskassessment is low to moderate. The target is to outper-form the Affärsvärlden General Index, AFGX.

The portfolio is concentrated to such sectors asTelecommunications and IT, Engineering, Pharmaceuti-cals and Medical Engineering as well as Banking andFinance.

INDUSTRIAL OPERATIONS

Geveko is one of the leading European companies in theRoad Marking sector. Geveko carries out contract workand develops and markets road marking paints andthermoplastic materials. Prefabricated symbols are manu-factured and marketed in Europe as well as in the USA.The financial goals include at least a 10 to 12 per centannual growth and 20 per cent yield on capital employed.


R E V I E W O F T H E G R O U P

CONSOLIDATED RESULT AND FINANCIAL POSITION

SKr million unless otherwise stated 1999 1998 1997

RESULT OF THE GROUPOperating profit, Industrial Operations 31.6 69.6 24.3Profit, Management of Securities 94.8 28.6 47.9Net interest and other central costs -18.1 -16.0 -14.9Profit before tax 108.3 82.2 57.3

Profit after tax and minority interests 103.7 87.5 45.4

BREAK-DOWN OF GROUP ’S NET WORTH 1)

Securities Portfolio (market value) 824.6 486.1 411.0Industrial Operations (estimated market value) 197.6 202.4 104.2Other assets and liabilities, net book value 45.2 23.0 -8.6Total net worth 1,067.4 711.5 506.6

BREAK-DOWN OF NET WORTH BY INDUSTRY, %

SECURITIES, ETC.Telecommunications 40 22 14Road marking 2) 19 28 21Engineering 12 13 30Banking and Finance 8 4 2Pharmaceuticals 7 5 7Other branches 10 25 28

Other assets 4 3 -2100 100 100

OPERATING PROFIT, INDUSTRIAL OPERATIONSBUSINESS IN 1999Operating profit/loss beforewrite-down in value of good will 31.6 30.9 7.6Additional write-down in value of goodwill - - -24.7Operating profit/loss 31.6 30.9 -17.1

Operating margin prior to extrawrite-downs of goodwill, % 7.6 7.8 2.3

DIVESTED DIVISIONSOperating profit/loss prior to capital gains - - -4,7Capital gain - 38.7 46.1Operating profit - 38.7 41.4Total operating profit. Industrial Operations 31.6 69.6 24.3

KEY FIGURESEarnings per share, SKr 24.60 20.75 10.75Net worth per share, SKr 253 169 120Equity ratio, including premiumsand surplus value, % 1) 82 79 691) Definition, page 522) Industrial Operations (incl Underås 1997)

800

600

400

300

200

100

Net worthSkr Million

0

Book value, Listed PortfolioPremium over book value of Listed PortfolioBook value, Industrial Operations etc

500

700

Surplus value, Industrial Operations

100

80

60

40

20

0

-20

-40

-60

Profit before taxSkr Million

95 96 97 98 99

Operating profit/loss, Industrial OperationsCentral costs and net interestCapital gains on divestment of divisions

Profit/loss, Management of Securities

Additional write-downs in value of goodwillProfit/loss before tax

95 96 97 98 99

1000

1100

900

140

120


C O M M E N T S B Y T H E G R O U P C H I E F E X E C U T I V E

on the Stockholm stock exchange),- pay out a dividend amongst the shareholders corre-

sponding to at least 4 per cent of the Group’s net worth,- develop the Industrial Operations with profitability,

growth and strong market positions as the main criteria.For investment companies whose shares trade at a

discount in relation to the net worth, there is a potentialto reduce this discount. In 1999 the discount for invest-ment companies was at an historically high level, andamounted to 44 per cent for the Geveko’s Series “B”shares by the end of the year.

The Board plans to propose at the Annual GeneralMeeting that the Board, after the new law has come intoforce, can decide on a repurchase of the company’s ownshares.

LISTED PORTFOLIODuring 1999, the increase in value and dividend incomein the Listed Portfolio amounted to SKr 381 million. Theincrease in value outperformed the AffärsvärldenGeneral Index (AFGX) by 13 per cent, primarily due toan overweighting in Nokia and Ericsson.

During the five year period from 1995 to 1999, theannual return in the Listed Portfolio, including dividendincome, was 34 per cent. In 1999 the return was 81 percent, compared to 24 per cent for the first four years.

Geveko invests primarily in shares that are listed onthe Stockholm stock exchange. In Sweden, the access toinformation and analysis is always considerably greaterfor securities that are listed in Stockholm than in stockmarkets abroad. The Stockholm stock exchange hasperformed remarkably well in recent years comparedwith many foreign stock markets, due to the fact thatthere is a high representation of successful growthcompanies in the Stockholm stock exchange.

The profitability that the Listed Portfolio has achievedduring the last five years is considerably higher than theearnings of many industrial companies. Initially theListed Portfolio was an actively invested liquidityreserve for Industrial Operations; today it is Geveko’smain business.

How can future opportunities and risks for the ListedPortfolio be assessed? Historically, the equity market hasbeen influenced by technical developments, inflation,interest rates, liquidity, economic cycles and politicalconflicts, factors which are to a certain extent inter-twined. High valuation for stock markets in the USAand elsewhere at the start of 2000 give pause forthought. On the other hand, the continued globalisationand deregulation of industry, trade and capital, lowinflation and strong flow of capital continue to create a

SUBSTANTIAL INCREASE INNET WORTH DURING 1999At the end of the year, following arise in the value of the ListedPortfolio during 1999, Geveko’snet worth increased to some 1.1million US dollars, correspondingto SKr 253 per share. The networth increased by 55 per centduring the year including divi-dend paid to the shareholders.

THE TRANSFORMATIONDURING 1997-1998 HAS STRENGTHENED THEGROUPDuring 1997 and 1998, Geveko divested Gatu och Vägand Underås, the construction-related companies ofIndustrial Operations. The freed means have been usedto pay off loans, to invest in the Listed Portfolio and topay out bonuses to the shareholders. Since the parentcompany has had investment company status from andincluding 1998, growth in value and profit in connectionwith transfers in the Listed Portfolio are not taxed.

Since the restructuring process was initiated, the networth (including shareholders dividends during theperiod from 1997-1999) has increased by SKr 175 per share,or 179 per cent. In the calculations, consideration has beengiven to the fact that deferred tax on unrealised profit inthe Listed Portfolio, amounting to SKr 9 per share as perDecember 31st 1996, does not encumber Geveko as aninvestment company. The price of Geveko’s “B” share,including dividend paid to the shareholders, rose by SKr90 per share, or 125 per cent, during the same period.

LISTED EQUITIES ACCOUNT FOR 77 PER CENT OFTHE NET WORTHSince 1998, Geveko has been an investment companymade up of the Management of Securities and the wholly-owned Industrial Operations. Quoted shares (ListedPortfolio) constitute 99 per cent of the ManagementSecurities. The Listed Portfolio’s share of the Group’s networth amounted to 77 per cent at the end of 1999. Indus-trial Operations is not listed, but its market value has beencalculated since 1998 with the help of p/e ratios. Thesurplus value is included in the Group’s net worth.

SHAREHOLDER VALUEThe main goal of the board is to promote the share-holder value. The strategy is to:

- manage the Listed Portfolio in such a way that theincrease in value surpasses the reference index (AFGX


favourable environment for the equity market.There is no knowing what the future will hold. The

stock market crashes that occurred in 1987, 1990 and 1998were not attributed to any fundamental changes inconditions, and share prices recovered relatively quickly.If there is any major change in conditions with regard tothe present focus, Geveko can rearrange its assets in theListed Portfolio. A poor liquidity in the holdings, posi-tions of power, tax effects or other obligations can notobstruct the adaptation of the strategy of investment.

In today’s perspective, the Stockholm stock exchangeis considered to be a suitable market place for the ListedPortfolio. Complementary investments on other stockmarkets in Europe are instructive and provide a certainpreparedness of action, as the process of integration inEurope and world wide accelerates.

INDUSTRIAL OPERATIONSAt the end of 1999, Geveko purchased Plastiroute, theSwiss road marking company. The company is marketleader in the development and manufacture of productsand systems within water-borne road marking paint, thematerial that is growing the fastest in Europe. Plastiroute’sfavourable position on growth markets in Central andEastern Europe is of particular interest. The calculatedpurchase sum, which has been entered on the Group’sbalance sheet for 1999, does not entail any goodwill.

In 1999, the operating profit of Industrial Operationsamounted to SKr 32 million (31). The profit marginamounted to 7.6 per cent (7.8), and the return on capitalemployed to 18.5 per cent (19.4). The marginally weak-ened profitability figures can be accounted for by theincrease in management costs that resulted fromdecisions to invest in the development and growth ofIndustrial Operations.

Following a period of reduced demand and marketturbulence from 1995 to 1997 in Great Britain andSweden (amongst others), profitability during 1998 and1999 picked up.

Road marking is a mature sector on the Scandinavianand Western European markets with over-capacity,fragmentation, stiff price competition, and insufficientprofitability affecting many areas. The pressure torestructure is considerable, with privatisation, newforms of contractor supply, and growing demands onquality and functionality. The rest of Europe consists toa varied degree of growth markets.

The demand on Industrial Operations is:- to develop new products and systems, which are re-

quested by the customers and which can help make qualityand functionality competitive tools alongside the price,

- to set up business in growing segments, for examplein Southern, Central and Eastern Europe, for productssuch as water-borne road marking paint and PREMARK,

- to increase productivity and reduce costs permanufactured unit,

- to adapt and develop business ideas to suit alteredconditions for tender and forms of operation on differ-ent markets within road marking,

- that business development occurs in line with theneeds and demands of traffic safety and accessibility onthe streets and roads.

By developing and strengthening the structure ofIndustrial Operations it should be possible to achieve orsurpass the profitability targets, i.e. 10 per cent of theprofit margin and 20 per cent of the return on capitalemployed, within the next few years.

PROSPECTS FOR 2000MANAGEMENT OF SECURITIESThe start of the year 2000 has seen a bullish trend on theStockholm stock exchange, due primarily to the healthygrowth in prices for Ericsson but also to IT companiesand a few other growth companies, while most foreignstock markets have dropped.

Developments on the Stockholm stock exchange arepartly dependent on index-heavy shares - such asEricsson, H&M and AstraZeneca - and on the USA stockmarket (Dow Jones and Nasdaq).

The high valuation of internet and biotechnologyshares at the start of the year is one of the specific risksfor 2000. For the positive development on the stockmarket to continue, the prospects and conditions of themacro-economy must be favourable, in particular asregards interest rates and company profits.

INDUSTRIAL OPERATIONSThe demand for road marking on the Group’s domesticmarkets is likely to remain at the same level as in 1999.Net turnover is expected to increase, primarily due toPlastiroute but also to rising export sales.

On the important contracting market in Scandinavia,the goal is to maintain our sales volumes and grossprofit margin during 2000. If competition allows, theprofit margin for comparable units ought to remainunchanged or improve somewhat.

Göteborg in March 2000

Sigurd WalldalGroup CEO and Managing Director

1 0 • G e v e k o A n n u a l R e p o r t 1 9 9 9

SHAREHOLDINGS BY SIZENumber of % of % of

share- share- shareNumber of shares holders holders capital1 - 1,000 2,165 87.4 14.81,001 - 5,000 227 9.2 13.35,001 - 10,000 38 1.5 6.510,001 - 50,000 33 1.3 15.050,001 - 100,000 5 0.2 7.0100,001 - 9 0.4 43.4Totalt 2,477 100.0 100.0

MAJOR SHAREHOLDERS% of % of

votes share capitalGunnar och Märtha Bergendahl Foundation 31.7 8.0Bergendala Foundation 14.6 8.4Jarl Ergel 3.9 2.4Magnus Ergel 2.2 1.6Ingvar Kamprad 2.0 5.0Gunilla Ergel 2.0 1.2Inter IKEA Investment AB 1.9 4.7David Bergendahl 1.7 0.5Henrik Bergendahl 1.7 0.4Dutch Nordic Insurance Co NV 1.6 4.1Eskil Johannesson 1.6 3.7Svolder AB 1.5 3.8Other 33.6 56.2

100.0 100.0

Swedish and international institutional investors owned 43 per cent ofGeveko’s share capital at the year-end.

The above list is based on the official register of shareholders and thelist of holdings registered in nominee names maintained by VPC atDecember 30th, 1999.

The total number of Geveko shares in issue amount to 4,219,533 since1993. Of these 720,000 are “A” shares and 3,499,533 are “B” shares. Thereexists a consortium agreement between “A” shareholders, who togethercontrol more than 50 per cent of the votes.

As of February 28th 2000, the Geveko “B” share has been listed on the“O” list (previously the “A” list) of the Stockholm stock exchange upon therequest of the company. This can reduce the level of taxation for share-holders in connection with the distribution of inherited shares.

G E V E K O - S H A R E S

G e v e k o A n n u a l R e p o r t 1 9 9 9 • 1 1

1995 1996 1997 1998 1999Geveko, ”B” - listed priceper share December 31 63 72 101 85 142Earnings per share -3.65 8.- 10.75 20.75 24.60Net worth per share 91 107 120 169 253Investment company discount, % 31 33 16 50 44Dividend per share, 1) 4.20 5.- 7.- 8.- 11.-Direct yield, % 6.7 6.9 6.9 9.4 7.7Dividend ratio, % 4.6 4.7 5.8 4.7 4.3Return on share, %, 2) -13 21 47 -9 76

For definitions, see page 52.1) Dividend proposal for 2000: SKr 7 plus a bonus of SKr 4 per share.

The dividend paid out for 1997 and 1998 includes a bonus of SKr 2 per share.2) Change in share price during the year plus dividend paid in relation to share price at start of year.

P E R S H A R E D A T A 1 9 9 5 - 1 9 9 9

225

200

175

150

125

SKr

250

100

75

50

275300325

95 96 97 98 99 00

“B” share AffärsvärldenGeneral Index

Carnegie SmallCap Index

GEVEKO SHARE PRICE

10

8

6

4

2

0

Dividend as % of net worth

%

Dividend

95 96 97 98 99

Bonus

10

8

6

4

2

0

Dividend per share

SKr

Dividend

95 96 97 98 99

Bonus

20

10

0

- 10

- 20

Earnings per share after tax

SKr30

Operating profit/loss, Industrial Operations

Central costs and net financial itemsCapital gain on divestment of division in Industrial Operations

Net profit/loss after tax

Profit, Management of Securities

Additional write-down in value of goodwill

Tax

95 96 97 98 99

12 12


BUSINESS CONCEPT

Management of Securities within the parent company,AB Geveko, invests in companies whose shares aretraded on a liquid market and are preferably noted onthe Stockholm Stock Exchange (Listed Portfolio) Place-ments are made in shares that have a low to moderaterisk on the basis of a long-term investment horizon.

STOCK MARKETS IN 1999

INTERNATIONAL

1999 was characterised by continued strong growth,declining unemployment and low price and costincreases in the USA, the start of a cyclical recovery inEurope, recovery in south east Asia from the economicand currency crises of 1998, and some progress in Japanwith structural changes in banking and industry.

There has been a rising trend in interest rates. On theone hand, both short- and long-term rates were pusheddown significantly by the financial unease in the secondhalf of 1998. On the other hand, the cyclical recoverygave rise to expectations of higher inflation, althoughstill at a moderate level. In the USA, the Federal Reserveraised the prime rate on three occasions back to the levelit was at before August 1988. The bond market experi-enced its worst year since 1994.

In 1999 most stock market indices performed strong-ly, despite rising interest rates. From an historicalperspective, this is an unusual situation. Many markets,however, showed divergent tendencies. A small numberof shares, mainly in high-tech, internet and mediacompanies, accounted for the greater part of the growthin value, while the prices of most other shares on themarket either remained stable or fell.

Among European stock markets, Helsinki showed thebest performance (HEX up 162 per cent), as Nokia andSonera have extremely high weightings in the index.Stockholm was another of the best performing stockmarkets (AFGX up 66 per cent), thanks to Ericsson,whose weighting was equivalent to around one-third atthe end of the year. Nasdaq, where shares in high-techcompanies have a high weighting, rose by 86 per cent,while Standard & Poor’s index of the 500 largest listedcompanies in the USA rose by 19 per cent. Among theother stock exchanges we may mention London, up by18 per cent (FTSE 100), and Frankfurt, which was up by39 per cent (DAX-30).

Stock markets ended the year on a very strong notewith a significant proportion of the year’s rise in equityprices taking place in November and December. Themarket’s (implicit) risk premium for equities has fallen. Itappears to be governed increasingly by flows of funds,partly due to growing volumes in the form of retirementsaving plans. Key ratios and valuations indicate eitherthat historical correlations no longer seem to apply orthat the market can expect an adjustment.

SWEDEN

Economic developments in Sweden in 1999 werecharacterised by steady growth, low inflation andstronger public finances. During the year, interest ratesmoved in line with the trend in Europe, i.e. a marginalrise in short-term rates, while the yield of five-yearbonds, for example, rose by a good 1.5 per cent.

The Affärsvärlden General Index (AFGX) rose by 66per cent in 1999. Telecom suppliers Ericsson and Nokiarose by 183 and 216 per cent respectively. SKF, Skandia,Stora Enso and H&M were other shares with a highmarket capitalisation whose value rose sharply. IT andcyclical shares generally performed strongly during theyear. Banking, pharmaceuticals and medical engineeringwere among the sectors that performed weakly.

ACTIVITIES IN 1999

LISTED PORTOLIO

The value of the Listed Portfolio at December 31st 1999was SKr 819 million (480). During the year shares werepurchased for SKr 212 million (130) and sold for SKr 245million (100); net sales of shares thus amounted to SKr33 million. After adjustment for purchases and sales, thevalue of the portfolio increased during the year by 79.1per cent (AFGX +65.9 per cent). Dividends receivedamounted to SKr 10.2 million (10.1)

The healthy return on the Listed Portfolio was due toNokia, Ericsson, ABB and Sandvik, all of which areoverweighted in comparison with the market, generat-ing a significantly higher return than the AFGX.

The total increase in the value of the Listed Portfoliowas SKr 372 million, of which Ericsson accounted forSKr 163 million, Nokia for SKr 131 million, ABB for SKr25 million, Sandvik for SKr 15 million, and SCA for SKr10 million (together 92 per cent).

The structure of the Listed Portfolio was radically

M A N A G E M E N T O F S E C U R I T I E S


altered, partly by means of active re-investment, andpartly as the performance of the blue chips on theStockholm stock market varied widely during the year.

In 1999 the weighting of telecom and IT shares on theStockholm stock market increased from 23 per cent to 39per cent. The Listed Portfolio, whose weighting in thesesectors rose from 39 per cent to 56 per cent, was there-fore heavily overweighted. In 1999 the weighting ofpharmaceuticals on the Stockholm Stock Exchangedeclined from 13 per cent to 5 per cent as a result ofweak price trends and the transfer of the trade inAstraZeneca to foreign markets. The sector weighting inthe Listed Portfolio fell from 11 per cent to 10 per cent asa result of the re-investment of part of the proceedsfrom the sale of Investor in pharmaceutical shares. Theother two large sectors represented in the Listed Portfo-lio, engineering and banking and finance, had approxi-mately the same weightings as on the Stockholm StockExchange at the end of the year.

Nokia, due to its significant overweighting (Decem-ber 31st 1999: 18 percentage points higher than theAFGX), played a particularly large role in the increase inthe value of the Listed Portfolio. Other holdings, whichare significant on account of their relatively highoverweighting, include ABB, Skanska, Pharmacia &Upjohn, Roche and Telefónica.

During the year all of the company’s shares inInvestor, Getinge, Enator, Autoliv, Cardo, HaldexHöganäs and Svedala were sold. Roche, Pharmacia &Upjohn and Aventis (formerly Rhône-Poulenc) wereobtained in exchange for shares in Novartis andAstraZeneca. All the shares in Netcom were exchangedfor shares in Telefónica and Orange, of which the latterwas divested following a bid from Mannesmann. Shareswere acquired in Volvo and Skandia.

Shares listed on foreign stock markets accounted for 5per cent (4) of the portfolio.

RISK STRATEGYThe risk associated with the Listed Portfolio is analysed inaccordance with the BARRA model for the Swedish stockmarket. Holdings that are not listed on the StockholmStock Exchange are excluded. The object of the analysis isto highlight risks and opportunities with regard to thereturn on the Listed Portfolio in relation to the AFGX,which represents the entire (Swedish) market.

The Listed Portfolio’s beta value increased from 1.04at the start of the year to 1.09 at year-end. (The betavalue of the AFGX is 1.00. The beta value is a measure ofa portfolio’s sensitivity to market fluctuations. A portfo-lio with beta >1 may be expected to fluctuate more thanthe market.)

One of the most important definitions of risk is activerisk, which indicates how the return on the portfolio canbe expected to change in relation to the market (AFGX).The Listed Portfolio’s active risk for holdings on theStockholm Stock Exchange increased from 7.4 per centat the beginning of the year to 7.9 per cent at the end.The difference in the return on the Listed Portfolio andthat on the market (AFGX) may be expected to exceed orfall short of the percentage rate calculated as active risk,in one case out of three. (Vice versa, this can be ex-pressed thus: an active risk of 7.9 per cent means thatthe Listed Portfolio’s return can be expected to be in theregion of ±7.9 per cent in relation to the AFGX in twocases out of three). By way of comparison, index fundshave an active risk of 0-2 per cent, while normal, activeportfolios are usually around 5-7 per cent.

The principal reason for the Listed Portfolio’s rela-tively high active risk is that two of the holdings,Ericsson and Nokia, accounted for 52 per cent of itsyear-end value. The overweighting of Nokia was ofparticular importance (21 per cent in the Listed Portfolioagainst 3 per cent in the AFGX). At the end of 1999, 57per cent of the value of the Listed Portfolio was distrib-uted in accordance with the weightings of the class ofstock included in the AFGX.

Generally speaking, the more concentrated theportfolio and the greater the divergence of individualholdings in relation to the market weighting, the greaterthe potential and the risk associated with the portfolio.

Most of the shares in the Listed Portfolio are amongstthose having the highest turnover on the StockholmStock Exchange. The holdings that are not listed inStockholm are among the 300 most heavily tradedshares on European stock markets. All companies arecovered in detail by analysts, have a strong position oninternational markets and a sound earnings record.

RESULTSPre-tax profit amounted to SKr 94.8 million (28.6), ofwhich capital gains accounted for SKr 84.6 million (18.5)


and dividend income (inclusive of unlisted securities)for SKr 10.2 (10.1). The premium over the book value ofthe holdings increased by SKr 286.4 million (25.7). Theaggregate profit, including growth in premium overbook value, therefore amounted to SKr 381.2 million(54.3).

As Geveko’s tax status is that of an investmentcompany, its capital gains are not taxed. A standardisedamount corresponding to 2 per cent of the market valueof the portfolio is entered as taxable income. Further-more dividend income and interest income are subjectto taxation, while interest costs, administrative costs anddividends paid are tax deductible.

GOAL

The target for the management of the Listed Portfolio isthat the rise in value, adjusted for purchases and sales,should outperform the Affärsvärlden General Index(benchmark index is AFGX) on the Stockholm StockExchange.

Between 1995 and 1999 the value rose at an averageannual rate of 31 per cent (excl. dividend income)(AFGX 30 per cent). The Stockholm Stock Exchangemore than held its own in relation to leading foreign

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NasdaqAffärsvärlden General IndexDow Jones

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exchanges during the period: New York (Dow Jones)+24 per cent, London +12 per cent and Frankfurt +27per cent per year.

STRATEGY

Geveko invests in companies with sound growthpotential and a strong market position, as well as havinglow or moderate exposure to economic fluctuations, onthe basis of a long-term investment horizon. The sharesshould be liquid and preferably have a listing on theStockholm Stock Exchange. At the end of 1999 allholdings were among the most actively traded shareson the Stockholm Stock Exchange or in the FTSEEurotop 300. The management goal is to outperform theAFGX.

Sectors that are given priority are telecom, IT, engi-neering, pharmaceuticals, medical engineering, andbanking and finance. The grouping by sector helps todiversify the risk associated with the Listed Portfolio.

The Listed Portfolio owned shares in a limitedamount of companies (19 at year-end 1999). This shouldensure that the portfolio is transparent for the marketand shareholders, as well as facilitating a selectiveapproach in investment decisions.

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CHANGES IN LISTED PORTFOLIOSKr million 1995 1996 1997 1998 1999Market value at December 31st 242.2 303.5 404.8 479.8 818.6Acquisition value 148.4 160.6 229.2 279.6 334.3Book value 160.2 169.9 239.2 288.6 341.0Premium over book value 82.0 133.6 165.6 191.2 477.6Deferred tax liability 26.3 40.0 49.1 - -Dividends 5.9 10.9 7.5 10.1 10.2Capital gains 35.9 36.9 40.4 18.5 84.6Net purchases (+)/Net sales (-) + 6.0 -26.6 +30.3 +30.0 -33.3

PERCENTAGE BREAK-DOWN BY SECTOR

GEVEKO’S LISTED PORTFOLIO IN RELATION TO STOCKHOLM STOCK EXCHANGE1999 1998Stockholm Stockholm

Geveko Stock Geveko StockExchange Exchange

Telecom suppliers 51.9 31.8 32.0 17.9Engineering 15.6 17.1 19.6 18.7Banking and finance 10.7 10.7 10.0 14.4Pharmaceuticals 9.7 5.3 10.7 13.0Property and construction 4.0 2.8 3.4 3.6Forestry 3.0 4.3 4.8 4.1IT 2.1 4.3 4.6 2.6Telecom operators 1.9 3.3 2.1 2.8Medical engineering 1.1 1.0 7.5 1.7Investment companies - 4.9 5.3 5.2Other sectors - 14.5 - 16.0Total 100.0 100.0 100.0 100.0

LISTED PORTFOLIO AT DECEMBER 31ST 1999Market value % of Value per share, SKr million portfolio SKr

Ericsson 251.1 30.6 59Nokia 174.1 21.3 41ABB Ltd 52.9 6.5 13Skanska 32.6 4.0 8Sandvik 29.8 3.6 7Skandia 28.3 3.5 7AstraZeneca (SEK) 26.6 3.2 6SCA 24.4 3.0 6Pharmacia & Upjohn (SDB) 23.2 2.8 6Atlas Copco 23.0 2.8 5Volvo 21.8 2.6 5Nordbanken 21.1 2.6 5SHB 19.7 2.4 5SEB 18.9 2.3 4Others 71.1 8.8 17Total 818.6 100.0 194


LISTED HOLDING CHANGE HOLDING

SECURITIES January 1st Jan 1st - Dec 31st December 31stPurchases, Issues, Splits, Swaps Sales

SWEDISH SHARES

ABB, ”A” 316,666 -316,666 -ABB Ltd1) 4,000 50,644 -3,644 51,000Astra, ”A” 193,000 110,000 -303,000 -AstraZeneca (SEK) 2) 152,863 -78,900 73,963Atlas Copco, ”B” 125,000 16,100 9,857 -56,000 94,957Autoliv Inc. (SDB) 15,000 16,000 -31,000 -Cardo 50,000 -50,000 -Enator 48,000 -48,000 -Ericsson,”B” 370,000 96,500 -7,500 459,000,Gambro,”B” 185,000 55,000 -120,000 120,000Getinge Industrier, ”B” 160,000, -160,000 -,Haldex 60,000 60,000 -120,000 -Höganäs,”B” 52,500 -52,500 -Investor, ”A” 70,000 -70,000 -Netcom, ”B” 30,000 -30,000 -Nokia (SDB, ”A”) 84,600 -76,400 -8,200 -Nokia (SDB) 3) 152,800 -39,800 113,000Nordbanken 422,000 422,000Pharmacia & Upjohn (SDB) 60,000 60,000Sandvik, ”B” 120,000 -10,000 110,000SCA, ”B” 130,000 15,833 -48,833 97,000SEB, ”A” 227,000 36,600 -44,000 219,600SHB, ”A” 19,000 42,500 123,000 184,500Skandia 110,000 110,000Skanska, ”B” 72,000 48,000 -17,000 103,000Svedala 42,000 -42,000 -WM-data, ”B” 32,000 32,000Volvo, ”B” 99,000 99,000

SHARES LISTED ONLY ABROAD

Aventis 26,500 26,500Novartis 650 -650 -Orange 74,000 -74,000 -Roche 163 163Telefónica 24,000 49,440 73,440Zeneca 26,200 -26,200 -AstraZeneca (GBP) 4) 26,200 -26,200 -

1) ABB Ltd acquired by means of swap against ABB “A”.2) AstraZeneca (SEK) acquired by means of swap against Astra, “A”.3) Nokia (SDB) acquired by means of swap against Nokia, “A” (SDB, “A”).4) AstraZeneca (GBP) acquired by means of swap against Zeneca.

C H A N G E S I N L I S T E D P O R T F O L I O I N 1 9 9 9


I N D U S T R I A L O P E R A T I O N S

BUSINESS CONCEPTRoad marking promotes accessibility and safety intraffic. Geveko supplies a complete range of productsand contracting services. The Group also manufacturesspeciality chemical products for Marking and SurfaceProtection in synergy with its main business.

PLASTIROUTEPlastiroute, a company group specialising in road mark-ing paints, was acquired at the end of 1999. Plastiroutehas subsidiaries in Germany and Switzerland, associatedcompanies in Hungary and Rumania, and a joint venturecompany in Russia. Germany is the prime market, wherethe company is engaged in production and technicaldevelopment. Plastiroute has extensive exports with astrong position in Central and Eastern Europe. Thecompany is recognised as being innovative and thetechnical leader in environmentally adapted, water-basedproducts and systems for road marking paints.

Plastiroute is a valuable complement to IndustrialOperations, whose net turnover will increase by some25 per cent as a result of this acquisition. The acquisitionof Plastiroute gives Industrial Operations a strongpresence on the European market and a wide productrange within both thermoplastics and paint technology.

ORGANISATIONIndustrial Operations is organised in subsidiary andassociated companies under the umbrella of GevekoIndustri Holding AB, which in turn is owned by ABGeveko. It is active in the Nordic countries, Britain,Germany, Switzerland and the USA as well as in Hun-gary and Romania. Cleanosol, LKF Vejmarkering,Roadcare, Geveko Industri and Plastiroute are well-established corporate names in their respective domesticand export markets.

MARKETSROAD MARKINGSUsesRoad markings are used for visual guidance to improveroad safety, accessibility and comfort, as well as toprovide regulatory information for ease of communica-tion of traffic regulations and reduce uncertainty atcrossings and road junctions. Road markings consist ofvarious types of longitudinal and transverse lines andalso of symbols, arrows and texts on streets, roads,bicycle tracks, parking lots, airports, and other areas ofapplication.

Geveko manufactures thermoplastic materials andpaints as well as prefabricated symbols in thermoplastics

(PREMARK®). Thermoplastic materials have the greatestresistance to wear. This material therefore predominatesin Scandinavia and Britain. Thinner layers of thermoplas-tic, known as spray plastic, and road marking paints areapplied on less heavily used roads in Scandinavia.

On the European continent and in Finland, paint isthe dominant material. Historically, volatile hydrocar-bons have been used in road marking paints. Forenvironmental reasons, the demand for these productsis declining. In recent years, Plastiroute and GevekoIndustri, among others, have developed very highquality water-borne paints with extremely short dryingtimes, for which demand is steadily growing. In theNordic countries, the conversion to water-borne systemsin virtually complete, while elsewhere in Europe theprocess is expected to accelerate.

CustomersRoad marking represents a relatively small proportionof the total cost of road building and maintenance. Themarket consists mainly of state, regional and municipalroad providers.

Procurement practices vary from country to country;they also depend on the type of project. Significantvolumes of contract work are procured by public roadowners and by private civil engineering contractors.Many road owners also buy thermoplastic materials orpaint for application by direct labour.

The market is growing more or less in line with trafficvolumes, i.e. on mature markets, such as Northern andWestern Europe, by about 3 per cent a year. As roadbuilding and maintenance are largely financed out ofpublic funds, demand can fluctuate widely from year toyear. In Southern, Central and Eastern Europe, needsare considerable and growth rates are far higher, subjectto the availability of funds.

Since the mid-1990s, there has been an increase inoperating and maintenance contracts, known as func-tional contracts, which extend over periods of severalyears. It is becoming increasingly common for roadowners to transfer responsibility for maintaining thefunctionality and quality of road markings to outsidecontractors. Contracts of this type are expected toreduce the road-owner’s costs but at the same time toincrease the demands on suppliers to step up theirproduct development.

This type of total, functional contract is possible asfunctional requirements are relatively simple to formu-late and thanks to the existence of internationallystandardised measuring methods to monitor thefulfilment of the buyers’ orders.

Cleanosol has applied thermoplastic markings on part of the runway at the Kallaxairfield, near Luleå, Sweden. The contract will be completed in 2000.


CompetitionIn Europe, there are a few multinational companies inthe road marking segment, along with numerousmedium-sized and small national, regional or localcompanies. The degree of fragmentation varies fromcountry to country. Barriers to entry are relatively lowbut are expected to rise as demands for quality andfunctional guarantees increase.

There is intense price competition as the public road-providers’ procurement practices for road markinggenerally involve a bidding procedure, where price is theonly or decisive factor, although they are taking quality, theenvironment and functionality increasingly into account.

Streamline (Prismo), a member of the UK-based Jarvisgroup, is the largest supplier in Europe. Streamline ismarket leader in Britain, and number two in France, aswell as having operations in several other countries onthe Continent. The second largest competitor is SAR, themarket leader in France, which is owned by Lafarge.Geveko, along with the Norwegian road company Rieber& Søn (Norskilt och Nordisk Vejmarkering), is marketleader in the Nordic countries as well as having a strongmarket position in Germany, and Central and EasternEurope through Plastiroute. Geveko, which ranks third interms of size among Europe’s road marking companies, ismarket leader, with PREMARK®, in Europe and the USAin the prefabricated, thermoplastic symbols sector.

In Sweden, Norway and Finland, the national roadauthorities hold strong positions as road markingcontractors. In Denmark, counties and municipalitiescarry out extensive road marking on own account, inaddition to which several local and national suppliersare also competiong on this market.

PREMARK®PREMARK® (pre-fabricated thermoplastic symbols)competes on the one hand with more expensive prefab-ricated tapes, and on the other with markings of ther-moplastic and other materials applied with the aid ofhard tools or stencil plates. LKF is the market leader inboth the USA and Europe.

MARKING AND SURFACE PROTECTIONMarking spraysMarking sprays, i.e. aerosols for marking are used in anumber of different areas, such as spot and line mark-ing, as well as temporary marking in land surveying orforestry marking, etc. Geveko Industri, which holds aleading position in the Nordic countries, suppliescustomised products. Distribution primarily takes placethrough retailers.

Red surface coatings, applied by Line Markings on asphalt, for the taxipick-up zone at the Leeds-Bradford Airport, England.

The sides of the E20 north of Göteborg, Sweden are marked withMercalin AQ 6010 water-borne road marking paint.

Cleanosol has applied Mercalin AQ 6010 markings to the taxi-ingrunways at Sturup Airport, Sweden.


Industrial paints etc.Geveko OY develops, manufactures and marketscustomised industrial paints and varnishes based onwater-borne systems for the Nordic joinery and buildingmaterials industries. The growing demand for environ-mentally friendly products means that demand on thismarket is growing.

Corrosion protection productsCorrosion protection products for the Swedish vehicleafter-sales market are mainly sold through rust-protec-tion workshops affiliated to the Mercasol chain. Theproducts are sold via retailers to petrol stations in otherNordic countries as well as to engineering workshopsand the consumer market. In recent years, the Nordicmarket has been contracting.

However, recent surveys show that newer cars alsoneed after-treatment as a result of the salt and damproad conditions prevailing in the Nordic countries.There is considerable potential in Eastern Europe. Therange also includes specialist products, such as threadgreases and waxes for the offshore industry.

OPERATIONS IN 1999ROAD MARKINGThe net turnover of the Road Marking segment increasedby 7 per cent in 1999 in relation to the previous year.

The Nordic countriesThe Swedish contract road marking market has declinedas the Swedish National Road Administration’s budgetfor operating and maintenance was cut in relation to1998. Volume growth in Norway was negative pendinga decision on the introduction of white centre lines.Cleanosol’s market share remained unchanged duringthe year. In 1999, the Swedish National Road Manage-ment agency has formulated national guidelines thatinclude strategies and plans for road marking.

The Danish contract market expanded during theyear as a result of favourable weather conditions, whichalso helped to increase productivity. There have beenfar-reaching changes in the industry. Phønix (Rieber &Søn) acquired Superfos’ interest in Nordisk Vejmar-kering and also acquired Marius Petersen’s roadsdepartment, which includes road marking.

Icopal, the asphalt paving contractor, acquired 51 percent of the County of Vejle’s contract department. LKFVejmarkering, which maintained its market shareduring the year, has been awarded a long-term contractby the County of Ribe to carry out contract markingwith more stringent functional demands.

Application of water-borne road marking paint containing a specialmix of glass beads for visibility in the dark and on wet surfaces.(Plastiroute).

Structured road marking with water-borne plastic composites forvisibility in the dark or on wet surfaces, developed by Plastiroute.

Trial application of a water-borne system, developed by Plastiroute, forvisibility in the dark and on wet surfaces and for increased durability.


The Geveko Industri group has established itself asthe leading supplier in the Nordic countries of environ-mentally friendly, water-borne road marking paints. TheFinnish National Road Administration increased theirdelivery requirements from Geveko OY during the year.The Norwegian Road Administration increased its trialsand testing of road marking paints.

Great BritainThe long-term operation and maintenance contracts(known as term maintenance contracts) that have beenintroduced for motorways and other highways in GreatBritain, including many different sub-contracts, are nowbeing applied increasingly to the minor road networksand in built-up areas. The market remained intenselycompetitive throughout the year.

Roadcare, in its capacity as a sub-contractor to road-building companies, raised its volumes in 1999, therebyimproving its capacity utilisation and productivity.Exports of thermoplastic materials have been held downby the strength of sterling.

PREMARK®The markets for PREMARK® in both Europe and theUSA continued to expand in 1999. Within Europe,marketing and distribution were intensified and mademore efficient on established markets in Western Europeas well as on new markets in South and Central Europe.In the USA, the federal road authorities have initiated amajor national programme for new technologies toimprove road safety. This focus on road safety is ex-pected to benefit sales of PREMARK®.

MARKING AND SURFACE PROTECTIONThe net turnover of the Marking and Surface Protectionproduct area fell by 4 per cent in relation to 1998.

Sales of corrosion-protection products to the car after-sales market declined in the Nordic countries as a resultof lower demand and destocking by retailers. Sales toRussia also fell. The canvassing of markets outside theNordic countries has been intensified.

Sales of marking sprays rose slightly, partly thanks to anupswing in the building industry. For other product groups,volumes continued at broadly the same level as in 1998.

TECHNICAL METHODS, QUALITY ANDENVIRONMENTTECHNICAL DEVELOPMENTImproved retro-reflection of road markings in the dark

and on wet surfaces is the priority of leading road-providers in Europe. Extensive field trials of newproducts and concepts are being carried out by Plasti-route in Germany and Switzerland, and by Cleanosol,LKF and Geveko Industri in the Nordic countries. So far,evaluations show that it is technically feasible to reachretro-reflection values in wet surfaces that are in linewith current requirements for dry surfaces.

Cleanosol has developed a sprayable thermoplasticmaterial for application in very thin layers. This producthas been approved by several major customers.

In the case of the Marking and Surface Protectionproduct range, efforts are directed towards developingenvironmentally and functionally adapted systems thatare free from solvents.

IT AND THE NEW MILLENNIUMExtensive measures were taken prior to the change ofmillennium to renew and audit the Group’s computersystems as well to ensure technical operating functionality.No operational disturbances were noted in this connection.

QUALITYThe Group companies, of which most have receivedcertificates, operate in accordance with ISO 9001.Product certifications are regularly obtained on bothdomestic and export markets.

ENVIRONMENT AND SAFETYSee Report of the Directors on page 25.

EMPLOYEESThe average number of employees in 1999 was 332 (319).The foreign Group companies had 194 employees (184).Wages, salaries and other remuneration amounted toSKr 102 million (95).

Note 3 provides information on the number ofemployees along with a specification of wages andsalaries. Note 3 also provides information on theremuneration, etc, paid to Group management.

CAPITAL EXPENDITURECapital expenditure on land, buildings and machinery,etc. amounted to SKr 39.4 million (20.1). To this may beadded the acquisition of the Plastiroute Group.

TURNOVER AND RESULTNet turnover amounted to SKr 418 million (395), i.e. anincrease of 6 per cent in relation to 1998. Contract


INDUSTRIAL OPERATIONS, THREE-YEAR REVIEWSKr million except where otherwise stated 1997 1998 1999Net turnover 330.7 394.5 418.2Operating profit/loss 7.6 1) 30.9 31.6Operating margin % 2.3 1) 7.8 7.6Capital employed 171.8 167.7 174.2 2)

Return on capital employed % 5.7 1) 19.4 18.5Capital expenditure 18.1 30.7 39.3 2)

No. of employees 323 316 3291) Excluding extra write-down in value of goodwill2) Excluding Plastiroute

Industrial Operations as currently constituted, i.e. excluding Underås in 1997Only Plastiroute’s balance sheet has been consolidated as of December 31 1999.

business accounted for 50 per cent (53). Sales outside theGroup’s domestic markets (countries where Geveko hasproduction or carries out contract work) increased by 9per cent. Export markets are estimated to possessconsiderable growth potential.

The operating profit amounted to SKr 31.6 million(30.9). The gross profit increased to SKr 102.9 million(95.1) and the gross margin was 24.6 per cent (24.1). R&Dand IT costs rose, partly due to the introduction of newcomputer systems prior to the change of millennium.

TARGETSThe financial targets for Industrial Operations are :

• an annual growth rate of at least 10-12 per cent.• a return on capital employed of at least 20 per cent.• an operating margin of 10 per cent or higher.During the 1992-1997 period, the annual growth rate

was 6 per cent. Net turnover in 1998 and1999 increasedat an average rate of 13 per cent per year.

The return on capital employed in the 1992-1994period was 21 per cent, but it then became negative in1995-1997 due to the heavy losses incurred in GreatBritain and the lower demand in Scandinavia. In 1999,the return on capital employed was 18.5 per cent (19.4).The operating margin was 7.6 per cent (7.8).

BUSINESS ORIENTATION AND STRATEGYIndustrial Operations shall develop through growth andproduct development within existing product and marketsegments. The growth potential for PREMARK® inEurope and the USA will be exploited, as will the growingdemand in Europe for environmentally friendly roadmarking paints, and for thermoplastic materials inEastern Europe. Company acquisitions that improvecompetitiveness or broaden the market for road markingand road safety products will increase the growth rate.

PROSPECTS FOR 1999Demand on Industrial Operations’ domestic markets isexpected to remain unchanged or rise slightly in relation to1999. Sales on export markets and sales of PREMARK®are also expected to grow. Following the consolidationof Plastiroute within Industrial Operations in 2000, theGroup’s net turnover is expected increase by at least 25per cent in relation to the previous year. Increases in theprices of input materials resulting from the generallystronger economic conditions could put the operatingmargin under pressure. Price competition in the RoadMarking sector is not expected to slacken in 2000.

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F I V E - Y E A R R E V I E W

SKr million except where otherwise stated 1995 1996 1997 1998 1999Net turnover 993.5 838.1 422.9 394.5 418.2Operating profit/loss,Industrial Operations -16.1 1.0 24.3 69.6 31.6of which additional write-downsand capital gains -30.0 5.9 21.3 38.7 -Profit on Management of Securities 41.6 47.8 47.9 28.6 94.8Profit/loss before tax -0.4 31.0 57.3 82.2 108.3Net profit/loss -15.3 33.8 45.4 87.5 103.7

Net worth 384.6 451.3 506.6 711.5 1,067.4Balance sheet total 702.1 688.0 565.8 593.3 707.2Equity as stated in balance sheet 302.5 317.6 341.1 398.7 468.9Capital employed inIndustrial Operations 324.9 337.4 227.6 167.7 174.2 1)

Net debt 86.4 98.8 38.9 8.4 50.0Visible equity ratio, % 43.1 46.2 60.3 67.2 66.3Equity ratio, including premiumover book value and surplus value % 49.0 54.9 69.3 78.5 81.7

Return on capital employed,Industrial Operations % 5.1 2) 2.6 4.1 2) 19.4 2) 18.5Return on equity including premiumover book value of Listed Portfolio % -4.1 22.0 16.9 22.3 54.8

No. of employees 790 763 395 319 332Wages, salaries andother remuneration 186.6 181.1 105.9 94.5 100.9Net turnover per employee,SKr thousand 1,243 1,122 1,071 1,237 1,260Fixed capital expenditure 16.9 21.8 19.0 30.7 62.6 3)

Dividend 17.7 21.1 29.5 33.8 46.4 4)

“Five-year review” includes Gatu och Väg for 1995 and 1996 and Underås for 1995-1997.1) Excluding Plastiroute.2) Excluding extra write-down in value of goodwill 1995 and 1997 and capital gains on

divestment of business areas in 1997 and 1998.3) Including Plastiroute.4) 1999, dividend proposal.

For definitions, see page 52.


Report of the directors..................................... 24

Group accounts............................................ 29-37

Consolidated profit and loss account....................29

Consolidated balance sheet..................................30

Consolidated cash flow analysis..........................32

Parent company profit and loss account...............33

Parent company balance sheet............................ 34

Parent company cash flow analysis..................... 35

Shares in other companies..................................36

Supplementary information, notes......................37

Proposed treatment of unappropriated earnings...44

Report of the auditors.........................................45


THE GROUPNET TURNOVER

In 1999, the net turnover of Industrial Operations wasSKr 418 million (395).

OPERATING PROFIT

The operating profit of Industrial Operations amountedto SKr 31.6 million (69.6). A capital gain of SKr 38.7million from the sale of Underås business division isincluded in the previous year’s figure. For comparableunits, the operating profit for 1998 was SKr 30.9million.

The gross operating profit increased to SKr 102.9million (95.1), which is equivalent to 24.6 per cent (24.1)of the net turnover.

The operating profit margin amounted to 7.6 per cent(7.8). The operating profit in Britain improved duringthe year to break even. The profit margin, excludingBritain, amounted to 8.9 per cent (10.0).

The costs of technical development, sales and admin-istration increased by a total of SKr 8.9 million (13 percent) on the previous year, of which the administrativecosts accounted for SKr 6.0 million. Apart from invest-ments in development and marketing, the increase incosts is due to additional recruitment of employees tomanagement and computer projects, partly in connec-tion with the millennium shift.


The profit for Management of Securities amounted toSKr 94.8 million (28.6). This includes SKr 10.2 million(10.1) in dividend income, and a net capital gain of SKr84.6 million (18.5) from sales of securities.

CENTRAL INCOME AND COSTS

The Group’s net interest income and sundry profit andloss account items amounted to a loss of SKr 5.2 million(loss 3.4). Central administrative costs and other costsamounted to SKr 12.9 million (12.6).

NET PROFIT FOR THE YEAR

Profit before tax and minority interest amounted to SKr108.2 million (82.2). The tax cost for the year is reportedas SKr 4.3 million (-6.3). After a minority interest of SKr-0.3 million (-1.0), the Group reports a consolidatedprofit of SKr 103.7 million (87.5) for the year.

R E P O R T O F T H E D I R E C T O R S

40

20

0

- 20

- 40

Profit/loss after tax

SKrMillion

60

Operating profit/loss, Industrial Operations

Central costs and net interestCapital gain on disposal of division

Profit/loss after tax

Result, Management of Securities

Additional write-down in value of goodwill

Tax

95 96

80

100

- 60

97 98 99

40

30

20

10

0

-10

Profitability%

Return on capital employed, Industrial Operations (excluding Plastiroute,additional write-down in value of goodwill and capital gain)

96 97 98 99

Return on equity including premium over bookvalue in Listed Portfolio

95

70

60

50

TAXES

The tax for the year concerns operating subsidiaries. TheGroup’s tax status as an investment company meansthat it has a low tax burden. The reported tax revenuefor 1998 was linked to the cancellation of a deferred taxliability in connection with the altered status of theparent company to that of an investment company.

LIQUID FUNDS

The Group’s closing liquid funds, including short-termplacements, amounted to SKr 92 million (109). The


amounted to SKr 102 million (95).Note 3 lists employees by country and specifies payroll

costs. Information is also provided in Note 3 on compen-sation etc. paid to members of the Group’s management.

ORGANISATION

Plastiroute Holding AG, Zug, Switzerland, the roadmarking company, was acquired on December 2, 1999.Plastiroute’s preliminary accounts are included in theGroup’s balance sheet as per December 31st 1999, but notin the profit and loss account for 1999. The purchaseagreement includes a clause on a supplementary pay-ment based on the profit for the years 1999, 2000, and2001. The calculated purchase price in the balance sheetdoes not give rise to goodwill.

ENVIRONMENT

EXTERNAL ENVIRONMENT

Solvents are handled at three of the Group’s productionplants. Production has taken place within the limits laiddown by the relevant supervisory authority concerningemissions into air. Other production is not subject to specificlicense certification and is classified as operations that havelittle environmental impact on their surroundings.

In Sweden, there are specific environmental zoneswith limits on emissions of exhaust gases, ranging fromtrucks to industrial vehicles. On the basis of these regula-tions, motor vehicles and contractors’ machinery arecontinuously modernised and adapted.

Action is being taken to reduce the use of packaging,amongst others of foil for the delivery of PREMARK®.Cleanosol and Geveko Industries are affiliated to theREPA register and pay a packaging fee for the collectionand recycling of such packaging that is required byexisting technology for the transportation, handling andprotection of materials and products.

HEALTH AND SAFETY

Continuous health checks are carried out at all opera-tional plants, in co-operation with the management,employees, and supervisory authorities, and measurestaken to promote the health and safety of the personnel.

RISK ASSESSMENT


All securities in Management of Securities are placed in

liquidity ratio, i.e. current assets excluding inventories inrelation to current liabilities, was 202 per cent (258).

The net turnover of the Group accumulates betweenMay and September, which gives the cash flow duringthe year a cyclical character. During periods withsurplus cash this is invested in financial instrumentswith a low risk and relatively short durations. The year-end value of short-term placements in corporate certifi-cates, which have a K-1 rating, with a maximum dura-tion of three months, was SKr 50 million (99).

CASH FLOW

The cash flow from operations before investmentsamounted to SKr 17.6 million (17.5). Investments in tangiblefixed assets, excluding Plastiroute, amounted to SKr 39.3million (20.1). The cash flow in Management of Securi-ties was SKr 42.4 (-20.7). Cash flow including investmentsthus amounted to a negative of SKr 2 million (64.9).

Dividends of SKr 33.8 million (29.5) were paid outduring the year. The Group’s debt increased by SKr 18.7(decrease 11.4). In total, the Group’s liquid fundsdecreased by SKr 17.3 million. In 1998, liquid fundsincreased by SKr 24.5 million.

CAPITAL EXPENDITURE

Investments in land, buildings and machinery etc.amounted to SKr 39.3 million (20.1).

In addition to this are the acquisitions of Plastiroutein 1999 and Svensk Fog in 1998.

FINANCING

The Group’s visible equity ratio at December 31st 1999was 66.3 per cent (67.2). The adjusted equity ratio, i.e.including the premium over book value of listed shares,and samples value in Industrial Operations is estimatedat 81.7 per cent (78.5).

The Group’s interest-bearing liabilities increased bySKr 25.4 million (decrease SKr 6.1).

Net debt, i.e. interest-bearing liabilities less long-terminterest-bearing receivables and liquid funds, amountedto SKr 50 million (7) at the end of the year.

EMPLOYEES

The average number of employees in 1999 was 336 (319).The number of employees at foreign group companieswas 194 (184). Wages, salaries and other remuneration


bank deposit accounts. All transactions, including theloan of shares, are handled by merchant banks orcommissioners who are members of the stock exchange.The internal rules of the Group state that the executivemanagement is not allowed to issue call options unlessthey relate to shares already owned. Nor does themanagement have the right to issue put options or totrade in interest-bearing options. During 1999 there wasno trading with options.

All shareholdings concern large multinationalcompanies with a considerable part of their operationsin the euro or dollar zones. As a rule the Group does nothedge holdings that are listed on a stock exchangeabroad.

The Listed Portfolio, which accounts for 48 per cent ofthe Group’s assets according to the balance sheet, and77 per cent of the net worth, is unencumbered. Thepremium over book value, i.e. the difference betweenthe market value and the book value, amounted to 140per cent of the book value as per December 31st 1999.

The Listed Portfolio consists of holdings that areamongst the most traded shares on the Stockholm stockexchange and other stock markets in Europe. The risklies primarily in a general crash on the internationalstock exchanges, and then in the business risks specifi-cally linked to Ericsson and Nokia, which accounted for52 per cent of the Listed Portfolio at the end of the year.Nokia and Ericsson have the highest market capitalisa-tion of the companies that are listed on the Europeanstock markets and the Stockholm stock exchange.

For further information, see risk analysis in thesection “Management of Securities”.

RISK ASSESSMENT IN INDUSTRIAL OPERATIONS

The following risk factors are identified for the RoadMarking division:

• The Road section is financed primarily by publicfunding. Subsidies for operations and maintenance maybe reduced due to budget constraints or disputes overpolicy targets. (A serious example of this was between1995 and 1997).

• Competition does not take place on equal terms:- If the road administrator prioritises low prices and

fails to make sure that quality and function practices areobserved, contractors who develop new technology andprovide service and quality are harmed.

Equity

600

400

200

0

EquitySKr

Million

95 96 97 98 99

800

Net worth

1000

80

60

40

20

0

Equity ratio

%

95 96 97 98 99

100

Visible equity ratioEquity ratio (including premium overbook value of Listed Portfolio andexcess value of Industrial Operations)

- If a public road maintenance operator who carriesout road marking for himself competes by loweringprices, and compensates himself with a lower yieldrequirement or by covering the costs with other busi-ness operations (cross subsidising).

- If the road marking is purchased as a part of largergeneral contracts, there is risk that the prices will bepressed down by the general contractor short-sightedlyletting the profit margin be governed by the priceelasticity in each subsection.

• New technology, new products: existing types ofmaterial and machine technology will probably last forthe next 5 to 10 years. By actively investing in newtechnology, Geveko plans to be at the forefront asregards new products and concepts.

• The inner market within the EU is opening up for


Credit riskThe credit risk is related to the counterparty’s creditworthiness and requires an assessment of whether ornot the counterparty can be expected to fulfil its com-mitments.

In order to eliminate financial credit risks in connec-tion with the placement of liquid funds, such place-ments are only permitted in liquid securities issued byborrowers with a K-1 rating.

Each subsidiary company handles the approval andmonitoring of customer credits subject to guidelinesestablished by the Group. In 1999, the Group’s baddebts were SKr 0.0 million (0.2).

Financing and liquidity risksIn the Group’s Swedish units the cash flow is controlledby means of a Group account, in which the seasonalcapital requirements of subsidiary companies arecovered by internal limits.

The loan requirements of foreign Group companiesare financed either by local banks against collateralprovided by the parent company or by short-termborrowing in Sweden in the local currency via theparent company. All lending within the Group takesplace along market conditions.

At the end of 1999, the Group had unutilised creditlimits and cheque credits amounting to SKr 141 million(103).

PROSPECTS

Within Management of Securities, the future strategy isclosely linked to the equity market, in particular theStockholm Stock Exchange, which is Geveko’s mainmarketplace. At present, the board judges that place-ment on the Stockholm stock market is the best strategyfor Geveko.

The target for Industrial Operations is to strengthenoperations by growing in selected segments (primarilyin Europe) within road marking and areas closelyassociated with road and traffic safety. Its competitivemuscle is to be strengthened through increased techni-cal development and marketing. Special priority will begiven to improvements in productivity. The manage-ment and control of an expanding operation requireresources that equate to administrative costs. The target

competition on home markets. Although this steps upthe pressure to transform, it also creates opportunitiesfor Geveko.

• The weather constitutes an item of risk in any oneyear, since road marking is done on a dry surface.

FINANCIAL RISKS

Currency risksBy currency risk is meant the risk that the Group’scommercial flows and monetary assets and liabilitieswill be adversely affected by a change in the foreigncurrency exchange rates against the Swedish krona. Thiscurrency risk can be broken down into a transaction riskand a translation risk.

Transaction risks arise when the Group companies intheir day-to-day activities buy and sell products incurrencies other than their own. The bulk of the pur-chases during the year, as well as export sales, weremade in the currency of the country in question. As thetransaction risk for the Geveko Group is consideredrelatively insignificant, measures have not been taken toprotect against such risks.

The translation risk arises when the Group invests inassets or raises loans in any currency other than theSwedish krona. Whenever the Group has made invest-ments in foreign currencies in connection with corpo-rate acquisition, loans have simultaneously been takenout in the same currency for hedging purposes. As ofDecember 31st 1999 the Group’s loans to this endamounted to NKr 3.0 million, DKr 17.5 million, FM 3.0million, £ 0.3 million, and SFr 5.6 million, which equals atotal of some SKr 56 million (67).

Interest riskBy interest risk is meant the risk that changes in theinterest rates on the Group’s loans will have an adverseeffect on the result. In 1999, the duration of the GevekoGroup’s loans varied from three months to three years.Loans with short durations were either seasonal creditsor parts of long-term loans raised in connection with theacquisition of fixed assets and subsidiary companies.Loans with long durations relate in their entirety toacquisitions of fixed assets and subsidiary companies.

The Group is able to spread the risk in respect ofinterest rates with a balance of long and short durationsin its loan portfolio.


is still, however, to reduce these to 10 per cent of the netturnover by the next couple of years.

PARENT COMPANYMANAGEMENT OF SECURITIES

The parent company’s holdings of listed shares had amarket value of SKr 819 million (480) as per December31st 1999. The book value amounted to SKr 341 million(289).

The premium over book value increased during theyear by SKr 286 million to SKr 478 million (191). Duringthe year, securities were purchased for SKr 212 million(130) and sold for SKr 245 million (100), which gives a netsale of SKr 33 million. The proportion of foreign shares atthe end of the year in the portfolio was 5 per cent (4).

THE SPREAD OF THE NET WORTH PER DIVISION

The parent company’s holdings, in shares and othersecurities, is mostly made up of the Listed Portfolio andthe wholly-owned Industrial Operations. The threelargest industries at the end of 1999 were telecomsuppliers, road marking and engineering, which ac-counted for 40 per cent (22), 19 per cent (28) and 12 percent (13) respectively of the net worth.

RESULT

The administrative costs amounted to SKr 7.1 (4.7).Dividends from companies in the Listed Portfolio andunlisted securities amounted to SKr 10.2 million (10.1)and SKr 17.5 million (0.3) from Group companies.Capital gain on sales of listed shares increased to SKr84.8 million (18.6). Capital gain on sales of subsidiarycompanies amounted to SKr 0 (92.5) million. Net interestincome decreased to SKr 0.8 million (2.2). Profit after netfinancial items is stated at SKr 105.9 million (119.0). There-entry of untaxed reserves in 1998 is a result of thechange this year in the parent company’s tax status tothat of an investment company.

Net profit before tax amounted to SKr 105.9 million(132.4). The year’s tax is stated as an income of SKr 0.6million (charge 0.9). The net profit was therefore SKr106.5 million (131.6).

THE BOARD AND ITS PROCEDURES

Geveko’s Board consists of four members and fivedeputy members elected by the Annual General Meet-

100

50

0

Net debtSKr

Million

95 96 97 98 99

150

25

125

75

40

20

0

- 20

- 40

Currency exposure

SKrMillion

Net assets

DKr NKr FM £ DM

Loans/investments in foreign currencies

FI US$ SFr EURO

ing. The directors are either related to or associated withGeveko’s major shareholders - the Bergendahl founda-tions, and the Bergendahl, Dunberger and Ergel families- or are independent of them. The managing director isalso a member of the Board. Other employees of theGroup attend the Board’s meetings to present specificitems of business.

The board met six times during the 1999 fiscal year.The Board’s work follows an established procedure,which involves a plan of meeting with a calendar,agenda, decision-making rules, principles of reportingto the Board and minuting the meetings. This set ofprocedures is subject to annual review by the Board.

The Board has appointed a special committee todecide on investments and reinvestments in the ListedPortfolio. This committee, which consists of the chair-man, a former director of finance who is also a deputymember of the Board, the managing director and theGroup’s financial manager, met ten times in 1999.

At the meeting in February for the auditing of theprevious year’s accounts, the Group’s auditors partici-pated in discussions on the annual report.


SKr thousand 1999 1998

INDUSTRIAL OPERATIONSNet turnover Note 2 418,213 394,523Costs of sold products -315,340 -299,454Gross operating profit 102,873 95,069

Development costs -7,792 -5,646Selling costs -13,569 -12,879Administrative costs -53,825 -47,804Other operating income 3,901 2,150

31,588 30,890

Profit on divestment of business area * - 38,685Operating profit Notes 3, 4, 5 31,588 69,575

MANAGEMENT OF SECURITIESDividend income 10,179 10,126Capital gains on sales of securities, net 84,572 18,522Profit from Management of Securities 94,751 28,648

CENTRAL INCOME AND COSTSInterest income and similar profit/lossaccount items Note 6 2,570 5,603Interest costs and similar profit/lossaccount items Note 6 -7,798 -9,010Administrative costs -12,880 -12,609Total central income and costs -18,108 -16,016

Consolidated profit before tax 108,231 82,207Tax Note 8 -4,279 6,346Minority interests -257 -1,025NET PROFIT FOR THE YEAR 103,695 87,528

1999: Plastiroute is not included in Geveko’s consolidated profit and loss account for 1999 (but isincluded in the consolidated balance sheet as of December 31st, 1999)1998: Divestment of Underås*

C O N S O L I D A T E D P R O F I T A N D L O S S A C C O U N T


ASSETS, SKr thousand 1999 1998

FIXED ASSETSIntangible fixed assets Note 9Goodwill 2,048 2,732

Tangible fixed assets Note 10Land and land installations 13,403 5,568Buildings 45,089 30,337Machinery and plant 56,974 42,630Equipment 13,013 8,258Fixed plant under construction 1,136 111

129,615 86,904Financial fixed assets Note 12Shares and other securities (as listed on page 36) 347,705 294,976Interests in associated companies 20,308 -

368,013 294,976Total fixed assets 499,676 384,612

CURRENT ASSETSStocksRaw materials and supplies 28,279 19,434Finished products and trading products 17,415 14,246

45,694 33,680Current receivablesAccounts receivable 52,914 45,845Other current receivables 5,728 5,811Tax receivables 7,253 9,647Prepaid costs and accrued income Note 13 3,827 4,338

69,722 65,641

Short-term placements Note 14 49,515 98,890

Cash and bank Note 14 42,630 10,514Total current assets 207,561 208,725

TOTAL ASSETS 707,237 593,337

C O N S O L I D A T E D B A L A N C E S H E E T


EQUITY AND LIABILITIES, SKr thousand 1999 1998

EQUITY Note 15Restricted equityShare capital 105,488 105,488Restricted reserves 32,720 31,508

138,208 136,996Non-restricted equityNon-restricted reserves 227,015 174,149Net profit for the year 103,695 87,528

330,710 261,677Total equity 468,918 398,673

Minority interests -397 -1,064

PROVISIONSPension provisions 2,345 1,885Tax provisions Note 16 10,669 10,403Other provisions Note 17 7,932 510Total provisions 20,946 12,798

LONG-TERM LIABILITIES Note 18Cheque account credit 29,899 21,023Other liabilities to credit institutions 92,364 93,128Other long-term liabilities 15,223 1,036Total long-term liabilities 137,486 115,187

CURRENT LIABILITIESLiabilities to credit institutions Note 18 19,862 2,586Liabilities to suppliers 22,455 22,677Tax liabilities 971 4,455Other current liabilities 16,863 15,114Accrued costs and deferred income Note 19 20,133 22,911Total current liabilities 80,284 67,743

TOTAL EQUITY AND LIABILITIES 707,237 593,337

Pledged assets Note 21 51,788 34,530Contingent liabilities Note 22 66,547 50,072

Plastiroute is included in Geveko’s consolidated balance sheet as of December 31st, 1999 (but not in theconsolidated profit and loss account for 1999). The purchase agreement, which contains the supple-mentary payment depending upon profits, does not give rise to any goodwill.



INDUSTRIAL OPERATIONSRECURRING OPERATIONSOperating profit including central administrative costs 18,708 56,966Adjustments for items not included in cash flow Note 20 20,142 -18,420Interest received, etc. 2,693 4,882Interest paid, etc. -7,879 -8,578Income tax paid -6,176 -10,330Cash flow from operations before changesin working capital 27,488 24,520

Cash flow from changes in working capital Note 20 -9,933 -6,974

Cash flow from operations 17,555 17,546

INVESTMENTS AND FIXED CAPITAL EXPENDITUREAcquisitions of tangible fixed assets, net -39,346 -20,069Acquisitions of shares in subsidiaries Note 20 -22,745 -4,119Sales of shares in subsidiaries - 92,278Cash flow from investments and fixed capital expenditure -62,091 68,090Cash flow after investments and fixed capitalexpenditure - Industrial Operations -44,536 85,636

MANAGEMENT OF SECURITIESDividends received 10,179 10,126Acquisition of shares - net -212,304 -130,414Sales of shares 244,641 99,644Cash flow from Management of Securities 42,516 -20,644

Cash flow from operations and Management of Securities -2,020 64,992

FINANCINGChange in utilised check account credits 4,744 -11,732Loans raised 64,968 43,730Amortisation of loans -51,040 -43,483Dividends to shareholders -33,756 -29,537Cash flow from financing -15,084 -41,022

TOTAL CASH FLOW Note 20 -17,104 23,970

Opening liquid funds 109,404 84,944Price differences, liquid funds -155 490Closing liquid funds Note 14 92,145 109,404

C O N S O L I D A T E D C A S H F L O W A N A L Y S I S



Administrative costs Notes 3, 4 -7,112 -4,674Dividends: from subsidiaries 17,500 293

from other companies 10,179 10,126Capital gains on sales of listed shares 84,795 18,556Capital losses on sales of shares in other companies -223 -34Capital gains on sales of shares in subsidiaries - 92,533Interest income and similar profit andloss account items Note 6 3,024 5,863Interest costs and similar profit andloss account items Note 6 -2,242 -3,675Profit after financial items 105,921 118,988Appropriations Note 7 - 13,439Tax Note 8 613 -854

NET PROFIT FOR THE YEAR 106,534 131,573

P A R E N T C O M P A N Y P R O F I T A N D L O S S A C C O U N T


ASSETS, SKr thousand 1999 1998

FIXED ASSETSFinancial fixed assetsShares in subsidiaries Note 11 72,441 72,441Receivables from subsidiaries 10,325 8,165Shares and other securities (as listed on page 36) Note 12 347,069 294,829

429,835 375,435Total fixed assets 429,835 375,435

CURRENT ASSETSCurrent liabilitiesReceivables from subsidiaries 19,646 214Other current receivables 760 23Tax receivables 4,760 4,147Prepaid costs and accrued income Note 13 243 588

25,409 4,972Short-term placements Note 14 49,515 98,890

Cash, bank Note 14 32,560 5,102Total current assets 107,484 108,964

TOTAL ASSETS 537,319 484,399

EQUITY AND LIABILITIES, SKr thousand 1999 1998

EQUITYRestricted equity Note 15Share capital 105,488 105,488Legal reserve 32,611 32,611

138,099 138,099Non-restricted equityNon-restricted reserves 219,944 122,127Net profit for the year 106,534 131,573

326,478 253,700

Total equity 464,577 391,799LONG-TERM LIABILITIESLiabilities to credit institutions 7,325 32,523

CURRENT LIABILITIESLiabilities to credit institutions 16,366 -Liabilities to suppliers 416 225Liabilities to subsidiaries 44,652 57,069Other current liabilities 13 7Accrued costs and deferred income Note 19 3,970 2,776Total current liabilities 65,417 60,077

TOTAL EQUITY AND LIABILITIES 537,319 484,399

Pledged assets Note 21 None NoneContingent liabilities Note 22 136,456 112,552

P A R E N T C O M P A N Y B A L A N C E S H E E T



RECURRING OPERATIONSAdministrative costs -7,112 -4,674Dividends from subsidiaries 17,500 40,293Interest received, etc. 3,394 5,438Interest paid, etc. -2,211 -3,637Income tax paid - -30Cash flow from recurring operations beforechanges in working capital 11,571 37,390

Cash flow from changes in working capital -31,138 -44,953

Cash flow from recurring operations -19,567 -7,563

INVESTMENTS AND FIXED CAPITAL EXPENDITUREAcquisition of tangible fixed assets - 291Sales of shares in subsidiaries - 93,730Increase in long-term receivables from subsidiaries -5,160 -3,000Decrease in long-term receivables from subsidiaries 3,000 1,000Cash flow from investment s and fixed capital expenditure -2,160 92,021

Cash flow after investments and fixed capital expenditure -21,727 84,458

MANAGEMENT OF SECURITIESDividends 10,179 10,126Acquisitions of shares - net -212,302 -130,412Sales of shares 244,641 99,644Cash flow from Management of Securities 42,518 -20,642

Cash flow from recurring operations and investments 20,791 63,816

FINANCINGLoans raised 23,306 31,426Amortisation of loans -32,258 -38,939Dividends paid -33,756 -29,537Cash flow from financing -42,708 -37,050

CASH FLOW FOR THE YEAR -21,917 26,766

Opening liquid funds 103,992 77,226Closing liquid funds 82,075 103,992

P A R E N T C O M P A N Y C A S H F L O W A N A L Y S I S


PARENT COMPANYAmounts in SKr Number Book Marketthousand of shares value value

Dec. 31st-99SWEDISH SHARESABB Ltd 51,000 16,110 52,887AstraZeneca SEK 73,963 18,277 26,627Atlas Copco, “B” 94,957 10,163 22,980Ericsson, “B” 459,000 64,150 251,073Gambro, “B” 120,000 6,091 9,240Nokia (SDB) 113,000 9,797 174,133Nordbanken 422,000 20,590 21,100Pharmacia & Upjohn 60,000 27,843 23,160Sandvik, “B” 110,000 13,192 29,810SCA, “B” 97,000 8,591 24,444SEB, ”A” 219,600 16,665 18,886SHB, ”A” 184,500 19,129 19,741Skandia 110,000 19,856 28,270Skanska, “B” 103,000 21,880 32,651WM-data, “B” 32,000 5,899 16,832Volvo 99,000 22,587 21,780Total Swedish sharesand depositary receipts 300,820 773,614

FOREIGN SHARESAventis (Rhone Poulenc) 26,500 15,070 13,063Roche 163 14,967 16,392Telefónica 73,440 10,178 15,562Total foreign shares 40,215 45,017

Total listed shares 341,035 818,631

UNLISTED SHARESCamfore AB, “B” 120,700 5,984 5,984Camfast AB 120,700 - -The Royal BachelorsClub Residence AB 20 50 50Total unlisted shares 6,034 6,034

Total parent company 347,069 824 665

S H A R E S I N O T H E R C O M P A N I E S

SUBSIDIARY COMPANY HOLDINGSAmounts in SKr Number Share Book Marketthousand of shares % value value

Dec.31st-99

Partek Oy, Finland 96 96Pargas Telefon AB, Finland 400 36 36RusLafPlast, Russia 15 21 21Plastiline, Switzerland 20 53 53Others 430 430Total subsidiaries 636 636

Total Group 347,705 825,301

At December 31st, 1999, the following listed assets wereon loan: 113,000 Nokia and 49,700 Nordbanken. Theshares on loan had a market value of SKr 176.8 million.The book value was SKr 12.2 million.

NB: The market value of unlisted shares is deemed to beequal to the book value.


NOTE 1 ACCOUNTING AND VALUATIONPRINCIPLES

The Swedish Financial Accounting Standards Council’srecommendations for the accounting treatment of cashflow are applied with effect from 1999. The cash flowanalysis of the comparative year has been adjusted inaccordance with the new rules.

The Geveko Group’s accounting and valuation princi-ples are in accordance with generally accepted accountingpractice.

PRINCIPLES OF CONSOLIDATIONThe consolidated financial statements relate to the parentcompany and subsidiary companies in which the parentcompany directly or indirectly controls more than 50 percent of the votes.

The consolidated financial statements are made up inaccordance with the purchase method, whereby subsidi-ary company equity at the time of acquisition, establishedas the difference between the actual value of assets andliabilities, is entirely eliminated. The consolidated equitythus only includes the proportion of each subsidiarycompany’s equity that is generated after the acquisition.

If the acquisition value of the shares upon consolidationexceeds the value of the company’s net assets in theacquisition analysis the difference is stated as goodwillupon consolidation.

Companies acquired or divested during the year areincluded in the consolidated financial statements for thepart of the year during which they belonged to the group.Since Plastiroute was acquired in December 1999 thecompany is only included in the consolidated balancesheet.

In case an acquisition is subject to agreement on anadditional purchase price, the acquisition analysis is basedon an estimated final purchase price.

AB Geveko applies the quoted price method fortranslating the accounts of foreign subsidiary companies,whereby the assets and liabilities of these companies aretranslated at closing date rates. All profit and loss accountitems are translated at average rates for the year. Transla-tion differences are taken direct to consolidated equity.

When the parent company or any other company in theGeveko Group raises a foreign currency loan in order tobalance and hedge against currency differences on a netinvestment in a foreign subsidiary, the currency differenceon the loan is taken direct to consolidated equity.

In the event of the value of assets and liabilities atGroup and company level differing from each other, thetax effect is taken into account and stated as a deferred taxreceivable or deferred tax liability respectively. In those

cases where a taxable unit in the Group has deferred taxreceivables these are netted off against the deferred taxliabilities within the same taxable unit. Deferred taxreceivables in excess of deferred tax liabilities are not takeninto the accounts.

Associated companies are stated in accordance with theequity method, whereby the book value of shares inassociated companies in the consolidated financial state-ments is stated as the acquisition cost with an adjustmentfor the associated companies’ share of the consolidatedprofit.

Internal profits within the Group are eliminated in theirentirety without taking minority interests into account.

In the consolidated profit and loss account minorityinterests are stated within the net profit for the year.Minority interests in subsidiary company capital are statedas a separate item on the consolidated balance sheet.

RECEIVABLESReceivables are stated at the amount that is expected to bereceived, after individual review.

RECEIVABLES AND LIABILITIES IN FOREIGN CURREN-CIESReceivables and liabilities in foreign currencies are valuedat closing date rates.

INVENTORIESInventories are valued using the first in first out principleat the lower of acquisition value and the actual value onthe closing date.

WORK-IN-PROGRESSContracting work-in-progress is mainly on a short-timescale and is invoiced on a weekly or monthly basis. Longercontract work at a fixed price is recognised in incomesuccessively as the work is completed.

FIXED ASSETSTangible and intangible assets are depreciated systemati-cally during their estimated economic lives. The followingdepreciation periods are used:Goodwill 5 yearsBuildings and land improvements 20-50 yearsMachinery and equipment 5-15 yearsComputers 3-5 years

RESERVES TO COVER LEGAL DISPUTESThe amount required to cover the cost of legal disputes istransferred to reserve after consultation with the Group’slegal advisors.

S U P P L E M E N T A R Y I N F O R M A T I O N(Amounts in thousand Swedish kronor except where otherwise stated)


NOTE 2 BREAK-DOWN OF NETTURNOVER BY MARKET

PERCENTAGE BREAK-DOWN OF NET TURNOVER BY MARKETGroup

1999 1998Nordic countries 65 68Rest of Europe 25 23Rest of the World 10 9Total 100 100

NOTE 3 WAGES, SALARIES AND OTHER REMUNERA-TIONS, AND SOCIAL SECURITY CHARGES

1999 1999 1998 1998Wages, Social secur- Wages, Social secur-salaries ity charges salaries ity charges

and other (of which and other (of whichremune- pension remune- pension

rations costs) rations costs)

Parent company 510 150 450 128(0) (0)

Subsidiary companies 100,354 22,310 94,076 21,245(817) (402)

Group 100,864 22,460 94,526 21,373(817) (402)

BREAK-DOWN OF WAGES, SALARIES AND OTHER REMUNERA-TIONS BY COUNTRY AND BETWEEN BOARD MEMBERS, ETCAND OTHER EMPLOYEES

1999 1999 1998 1998Boards and Other Boards and OtherManaging employees Managing employeesDirectors, Directors,( of which (of which

bonuses etc.) bonuses etc.)Parent company 510 (-) - 450 (-) -Subsidiary companiesin Sweden 3,266 (-) 41,800 2,431 (150) 39,170Subsidiary companiesabroad 2,081 (18) 53,207 1,978 (18) 50,497Total subsidiaries 5,347 (18) 95,007 4,409 (168) 89,667

Total Group 5,857 (18) 95,007 4,859 (168) 89,667

AVERAGE NUMBER OF EMPLOYEES

1999 1998Number of Of which Number of Of whichemployees male % employees male %

Parent companySweden - - - -Subsidiary companiesSweden 138 88 135 87Denmark 77 68 76 71Finland 16 69 15 73Norway 11 91 9 89Great Britain 55 85 51 88Germany 1 100 2 50USA 34 53 31 52

Total subsidiaries 332 79 319 79

Total Group 332 79 319 79

INFORMATION ON REMUNERATION ETC PAID TO THE COM-PANY’S TOP MANAGEMENTIn 1999 the aggregate fee paid to the board, in accordance with thedecision of the Annual General Meeting, amounted to SKr 450,000,of which SKr 120,000 was paid to the chairman, following the deci-sion of the board. No fee is paid to a member of the board who isemployed by the Geveko Group.Since January 1st 1998 Geveko Kapital AB, which functions as amanagement company for the Group, employs the Group’s seniormanagers.

TOTAL PAYMENTS TO THE FOLLOWING SENIOR EXECUTIVESWERE MADE IN 1999:Chairman of the Board:Board fee of SKr 120,000 and SKr 273,828 being specific compensa-tion for other work performed. In addition, a payment was madefrom the pension foundation.

Group chief executive and managing director:SKr 996,229 plus pension premium of SKr 336,346 and a companycar. No specific board fee has been paid. Pension is payable uponretirement at the age of 65. A temporary pension may also be paid of75 per cent of the final salary from 62 years of age until normalretirement age is reached. Severance compensation correspondingto no more than two years’ salary may be paid under certain circum-stances.

Other members of the board:Compensation has been paid for a member’s work on legal adviceetc. Compensation for board appointments in subsidiary companieshas been paid to one member and four deputy members, to a totalof SKr 370,000.


NOTE 4 AUDITORS’ REMUNERATION IN 1999

Group Parent companyPriceWaterhouseCoopersAudit 1,000 200Other Assignments 1,000 350

2,000 550

NOTE 5 DEPRECIATION AND WRITE-DOWNS

Depreciation of SKr 19,844 (19,825) is provided on the Group’s tangi-ble assets and of SKr 0 (0) on the parent company’s.

NOTE 6 INTEREST INCOME, INTEREST COSTS ANDSIMILAR PROFIT AND LOSS ACCOUNT ITEMS

Group Parent companyINCOME 1999 1998 1999 1998Premium, equity loans 182 180 182 180External interest 2,164 5,068 1,659 4,299Intra-Group interest - - 1,116 1,338Currency differences 224 355 67 46

Total 2,570 5,603 3,024 5,863

Group Parent companyCOSTS 1999 1998 1999 1998External interest 7,222 8,612 1,282 2,743Intra-Group interest - - 767 797Currency differences andbank charges 576 398 193 135

Total 7,798 9,010 2,242 3,675

NOTE 7 APPROPRIATIONS

Parent company1999 1998

Transfer to accrual accounting reserve - 9,089Re-entry of tax equalisation reserve - 4,350Total - 13,439

NOTE 8 TAX ON YEAR’S PROFIT

Group Parent company1999 1998 1999 1998

Paid tax, Sweden 123 -4,209 613 -854Paid tax, abroad -4,238 -2,989 - -Deferred tax, Sweden 6 13,812 - -Deferred tax, abroad -170 -268 - -

Total -4,279 6,346 613 -854

PARENT COMPANYPre-tax profit amounted to SKr 105.9 million. The year’s tax chargeamounted to SKr 0.6 million.As the parent company acquired investment company status in1998, capital gains on sales of shares are not subject to taxation. Nodeferred tax on the premium over the book value of the Listed Port-folio is calculated either. Two per cent of the market value of theshare portfolio is taken up as taxable income. Dividend income andinterest income are taxable, while interests costs, administrativecosts and dividends paid are deductible for tax purposes.

NOTE 9 INTANGIBLE FIXED ASSETS

GroupGOODWILL 1999 1998Opening acquisition value 3,415 -Acquisitions - 3,415Opening accumulated depreciation -683 -Depreciation for the year -684 -683Closing book value 2,048 2,732

Goodwill relates to the excess value in connection with the acquisi-tion of Svensk Fog AB in 1998.

NOTE 10 TANGIBLE FIXED ASSETS

GroupLAND AND LAND IMPROVEMENTS 1999 1998Opening acquisition value 7,423 12,758Acquisitions 5,958 -Purchases 2,326 75Sales - -5,603Re-classifications - -Translation differences -106 193Closing accumulated acquisition value 15,601 7,423

Opening depreciation -1,855 -2,987Acquisitions -323 -Sales - 1,433Re-classifications - -Depreciation during the year -92 -207Translation differences 72 -94Closing accumulated depreciation -2,198 -1,855

Opening revaluations - 10,625Sales - -10,625Closing accumulated revaluations - -

Closing book value 13,403 5,568

Assessed value of land in Sweden 5,077 4,610


BUILDINGSOpening acquisition value 55,979 67,550Acquisitions 14,361 -Purchases 7,819 730Sales - -15,287Re-classifications - -Translation differences -2,839 2,986Closing accumulated acquisition value 75,320 55,979

Opening depreciation -27,142 -31,217Acquisitions -3,770 -Sales - 7,519Re-classifications - -Depreciation during the year -2,301 -2,080Translation differences 1,482 -1,364Closing accumulated depreciation -31,731 -27,142

Opening revaluations 1,500 1,875Sales - -375Closing accumulated revaluations 1,500 1,500


Assessed value of buildings in Sweden 17,374 15,855

MACHINERYOpening acquisition value 197,993 264,663Acquisitions 10,653 6,861Purchases 24,725 14,997Sales and retirements -3,847 -95,909Re-classification -1,232 -210Translation differences -4,644 7,591Closing accumulated acquisition value 223,648 197,993

Opening depreciation -155,363 -212,582Acquisitions -6,518 -2,668Sales and retirements 3,720 80,253Re-classification 713 86Depreciation during the year -13,529 -14,016Translation differences 4,303 -6,436Closing accumulated depreciation -166,674 -155,363


EQUIPMENTOpening acquisition value 32,421 32,612Acquisitions 8,997 89Purchases 3,883 5,081Sales and retirements -1,920 -6,031Re-classification 1,232 210Translation differences -479 460Closing accumulated acquisition value 44,134 32,421

Opening depreciation -24,163 -25,985Acquisitions -5,172 -72Sales and retirements 1,678 5,153Re-classification -711 -76Depreciation during the year -3,237 -2,841Translation differences 484 -342Closing accumulated depreciation -31,121 -24,163


Parent companyEQUIPMENT 1999 1998Opening acquisition value - 1,993Purchases - -Sales and retirements - -1,993Closing accumulated acquisition value - -

Opening depreciation - -1,702Sales and retirements - 1,702Depreciation during the year - -Closing accumulated depreciation - -

Closing book value - -

NOTE 11 FINANCIAL FIXED ASSETS

Parent companySHARES IN SUBSIDIARY COMPANIES 1999 1998Opening acquisition value 72,441 49,933Purchases - 72,341Sales - -49,833Closing accumulated acquisition value 72,441 72,441


INTERESTS IN SUBSIDIARY COMPANIES

Interest in Interest in No. of Bookcapital, % votes, % shares and value

parti-cipations

Geveko Kapital AB 100 100 1 000 100Geveko Industri Holding AB100 100 1 000 72 341 Cleanosol AB 100 100 - - Svensk Fog AB 100 100 - - Cleanosol A/S 100 100 - - LKF Vejmarkering A/S 100 100 - - LKF, Inc. 67 67 - - Line Markings Ltd 100 100 - - Rommco Ltd 100 100 - - Roadcare Ltd 100 100 - - Cleanosol Ireland Ltd 100 100 - -Cleanosol HSD Ltd 100 100 - -Geveko Industri AB 100 100 - -

Geveko Oy 100 100 - - TrafikProdukter A/S 100 100 - - Geveko Industri GmbH 100 100 - -Mercab BV 100 100 - -Plastiroute Holding AG 100 100 - - Plastiroute S.A. 100 100 - - Plastimark S.A. 100 100 - - Plastiroute GmbH 100 100 - -

72,441

INFORMATION CONCERNING COMPANY REGISTRATIONNUMBERS AND REGISTERED OFFICES OF SUBSIDIARYCOMPANIES

Company registration number Registered office

Geveko Kapital AB 556121-4767 Göteborg, SwedenGeveko Industri Holding AB 556556-1981 Göteborg, Sweden Cleanosol AB 556289-1068 Kristianstad, Sweden Svensk Fog AB 556263-1092 Kramfors, Sweden Cleanosol A/S 5042010 Skedsmo, Norway LKF Vejmarkering A/S 34300 Rudkøbing, Denmark LKF, Inc. 56-1813390 Thomasville, NC, USA Line Markings Ltd 1400059 Bradford, England Rommco Ltd 1611047 Bradford, England Roadcare Ltd 1967606 Bradford, England Cleanosol (Ireland) Ltd 163630 Dublin, Ireland Cleanosol HSD Ltd 123203 Dublin, Ireland Geveko Industri AB 556031-0129 Göteborg, Sweden Geveko Oy 0135945-3 Pargas, Finland TrafikProdukter A/S 67562 Højby, Denmark Geveko Industri GmbH HRB 2785 Oberursel, Germany Mercab BV 3161390 Haag, Holland Plastiroute Holding AG CH-170.3.022.462.6 Zug, Switzerland Plastiroute S.A. CH-660-0268970-3 Geneve, Switzerland Plastimark S.A. 3119 Nyon, Switzerland Plastiroute GmbH HRB Nr 32 Mü Müllheim, Germany

The Plastiroute Group was acquired in December 1999 and con-solidated in the Geveko Group as of December 31st 1999. Conse-quently, only the consolidated balance sheet for Plastiroute affectsGeveko’s consolidated financial statements for 1999.For reasons of time, the accounts of mainly the associated compa-nies of the acquired Plastiroute Group had not been audited whenthe Geveko Group’s financial statements were prepared. Certainadjustments to the acquisition balance are expected to be madeduring the 2000 financial year. These adjustments are not expectedto have any immediate effect on the consolidated profit and lossaccount.

NOTE 12 SHARES AND OTHER SECURITIES


Opening acquisitionvalue 286,347 235,997 285,869 235,532Purchases 212,807 130,414 212,302 130,412Sales -157,816 -80,075 -157,816 -80,075Translation differences -15 11 - -

Closing accumulatedacquisition value 341,323 286,347 340,355 285,869

Opening accumulatedrevaluations 8,960 10,007 8,960 10,007Sales -2,247 -1,047 -2,246 -1,047

Closing accumulatedrevaluations 6,713 8,960 6,714 8,960

Opening accumulated

write-downs -331 -331 - -

Closing accumulatedwrite-downs -331 -331 - -

Closing book value 347,705 294,976 347,069 294,829

The associated companies Magyar Plastiroute KFT, Hungary (49.5per cent), and S.C. Plastidrum SRL, Romania (32 per cent), are statedin the accounts at SKr 11,748,000 and SKr 8,560,000 respectively.These book values correspond to the Group’s interest in the equityof the two companies.

NOTE 13 PRE-PAID COSTS AND ACCRUED INCOME


Accrued interest income 243 590 243 581Pre-paid insurancepremiums - 477 - -Pre-paid rent 295 559 - -Other items 3,289 2,712 - 7

Total 3,827 4,338 243 588


NOTE 14 LIQUID FUNDS


Cash and bank 42,630 10,514 32,560 5,102Short-term placements 49,515 98,890 49,515 98,890

Total liquid funds 92,145 109,404 82,075 103,992

Short-term placements consist of financial instruments with dura-tions of up to three months.The Group’s closing undrawn credit facilities and credit promises,which are not included in liquid funds, amounted to SKr 141 million(103) and those of the parent company to SKr 67 million (60).

NOTE 15 CHANGE IN EQUITY

Share- Restricted Non-restric-GROUP capital reserves ted equity

Opening balance 105,488 31,508 261,677Change in translation differences 306Transfer between restricted andnon-restricted equity 906 -906Dividend -33,756Net profit for the year 103,695

Closing balance 105,488 32,720 330,710

Share- Legal Non-restric-PARENT COMPANY capital reserve ted equity

Opening balance 105,488 32,611 253,700Dividend -33,756Net profit for the year 106,534

Closing balance 105,488 32,611 326,478

The shares in AB Geveko consist of Series ”A” and Series ”B” shares.The company’s share capital is as follows:

720,000 ”A” shares each having a par value of SKr 25 SKr 18,0003,499,533 ”B” shares each having a par value of SKr 25 SKr 87,4884,219,533 SKr 105,488Each ”A” share carries one vote and each ”B” share carries one-tenthof a vote. Otherwise all shares have the same rights.

NOTE 16 DEFERRED TAX

The Group’s deferred tax liability amounted to SKr 10.7 million(10.4) and is stated under Tax Provisions. Of the Group’s deferredtax liability, SKr 9.3 million (9.3) relate to the untaxed reserves ofSwedish Group companies, and SKr 1.4 million (1.1) to the deferredtax liability of foreign subsidiary companies.

NOTE 17 OTHER PROVISIONS


Guarantees 1,507 510 - -Other items 6,425 - - -

Total 7,932 510 - -

NOTE 18 LONG-TERM AND SHORT-TERM LOANS

GROUPThe breakdown of the liabilities stated under long-term liabilities isas follows:

LOANS IN FOREIGN CURRENCIES RAISED BY SWEDISH SUB-SIDIARIES TO HEDGE INVESTMENTS IN THE CORRESPOND-ING FOREIGN CURRENCIES

Long-term1999 1998

NKr 3,000 (3,000) 3,169 3,181DKr 17,505 (17,505) 20,073 22,138FM 3,000 (13,000) 4,311 19,203£ 250 (1,103) 3,440 14,622DM 5,600 (-) 24,752 -SFr - (1,500) - 8,018Total foreigncurrency loans 55,745 67,162

OTHER LOANS IN LOCAL CURRENCIESLong-term Short-term

1999 1998 1999 1998STP loans 1,195 1,482 286 307Other loans in SKr - 354 31 248NKr 2,000 (2,400) 2,113 2,593 423 428DKr 1,588 (1,809) 1,821 2,283 255 257FM 3,641 (4,076) 5,232 6,443 967 1,030£ 295 (55) 4,063 736 9,232 316DM 678 (-) 2,961 - 593 -SFr 470 (-) 2,501 - 8,027 -US$ 1,967 (1,500) 16,733 12,075 48 -Total other loans 36,619 25,966 19,862 2,586


DRAWN CHECK ACCOUNT CREDITSLong-term

1999 1998DKr 3,163 (3,793) 3,625 4,796FM - (87) - 138£ 1,176 (710) 16,180 9,577I£ 252 (275) 2,728 3,292DM 795 (-) 3,473 -SFr 92 (-) 489 -US$ 400 (400) 3,404 3,220

Total check accountcredits 29,899 21,023Other liabilities 15,223 1,036

Total 137,486 115,187

The long-term liabilities due for payment no later than five yearsafter the closing date amount to SKr 63 million, of which hedgingloans account for SKr 55.7 million. Formally, these are short-term butthey are regularly turned over.

NOTE 19 ACCRUED COSTS AND DEFERRED INCOME


Accrued interest costs 373 798 55 144Holiday pay 4,459 4,534 - -Accrued socialsecurity charges 3,741 3,514 115 107Other items 11,560 14,065 3,800 2,525

Total 20,133 22,911 3,970 2,776

NOTE 20 CASH FLOW ANALYSES

ADJUSTMENT FOR ITEMS NOT INCLUDED IN CASH FLOWGroup 1999 1998Depreciation 19,842 19,827Provisions 300 438Capital gains on sales of subsidiaries - -38,685

20,142 -18,420

CASH FLOW FROM CHANGES IN WORKING CAPITAL1999 1998

Increase (-), decrease (+) in inventories -3,926 -5,832Increase (-), decrease (+) in current receivables 3,702 -3,935Increase (+), decrease (-) in currentinterest-free liabilities -9,709 2,793

-9,933 -6,974

ACQUISITIONS OF SHARES IN SUBSIDIARY COMPANIESDuring the year, Geveko Industri Holding AB acquired all the sharesin Plastiroute Holding AG. In 1998, Cleanosol AB acquired all theshares in Svensk Fog AB. According to the acquisition analysis, thevalue of the assets and liabilities acquired amounted to:

1999 1998Goodwill - 3,415Tangible fixed assets 24,251 4,210Financial fixed assets 20,813 2Current assets 18,000 3,609Liquid assets 2,512 1,481Provisions -7,770 -668Long-term liabilities -10,017 -994Current liabilities -22,532 -5,455Paid purchase price 25,257 5,600

Liquid assets of acquired companies -2,512 -1,481Effect on Group’s liquid assets 22,745 4,119

CHANGES IN NET INTEREST-BEARING DEBTOpening net interest-bearing debt 7,333 37,878

Cash flow during the year 17,104 -23,970Changes in interest-bearing liabilities 18,672 -11,485Liabilities of acquired and divested subsidiaries 10,017 84Translation differences -3,146 4,826Total changes during the year 42,647 -30,545

Closing net interest-bearing debt 49,980 7,333

NOTE 21 PLEDGED ASSETS

ON BEHALF OF OWN PROVISIONS AND LIABILITIES Group Parent company

1999 1998 1999 1998In respect of liabilities to credit institutions Floating changes 27,418 24,081 - - Property mortgages 24,370 10,449 - -

Total pledged assets 51,788 34,530 - -

NOTE 22 CONTINGENT LIABILITIES


Contingent liabilities onbehalf of other Groupcompanies 35,594 42,207 133,390 107,484Other contingent

liabilities 30,953 7,865 3,066 5,068

Total contingent liabilities 66,547 50,072 136,456 112,552

The purchasers of Gatu och Väg and Underås respectively have sepa-rately submitted claims to the vendor, AB Geveko, in respect of a num-ber of quite separate items, for compensation under terms of guaranteesissued. The total claim, in addition to the provisions already made,amounts to some SKr 3 million. Geveko does not consider that the par-ties mentioned have any grounds for their respective claims over andabove the provisions made in the annual accounts for 1999. Contingentliabilities in other respects mainly relate to guarantees already fulfilledand possible additional payments arising from company acquisitions.


The following unappropriated earnings are at the disposal of the AnnualGeneral Meeting:

Retained earnings 219,943,919.66Net profit for the year 106,534,941.47Swedish kronor 326,478,861.13

The Board and the Managing Director propose that the unappropriatedearnings be dealt with as follows:

That shareholders be paid a dividend ofSKr 7.00 plus a bonus for 1999 of SKr 4.00per share, or a total of SKr 11.00 per share 46,414,863.00To be carried forward into the new account 280,063,998.13Swedish kronor 326,478,861.13

The Geveko Group non-restricted equity amounted to SKr 330.7 million(261.7) on December 31st 1999. It is not proposed to make any transfer torestricted reserve.

P R O P O S E D T R E A T M E N T O FU N A P P R O P R I A T E D E A R N I N G S

Göteborg, February 22nd, 2000

Jarl Ergel Johan RappChairman Deputy Chairman

Sören Sjölander Sigurd WalldalManaging Director

Our audit report was submitted on February 22nd, 2000

Nils Brehmer Lennart BerthedenAuthorised public accountant Authorised public accountant


TO THE ANNUAL GENERAL MEETING OF SHAREHOLDERS

IN AKTIEBOLAGET GEVEKO (PLC)

Co. reg. No. 556024-6844

We have examined the annual report, the consolidated financial statements and theaccounting records as well as the administration by the Board and the managingdirector of Aktiebolaget Geveko (plc) for the 1999 financial year. The Board andmanaging director have responsibility for the accounting records and the administra-tion. Our responsibility is to express our opinion on the annual report, the consoli-dated financial statements and the administration on the basis of our audit.

Our audit has been performed in accordance with generally accepted auditingstandards. This means that we have planned and carried out the audit in order toassure ourselves to a reasonable degree that the annual report and the consolidatedfinancial statements do not contain any significant errors. An audit also involvesexamining a selection of the information in the accounting records for amounts andother factual information. An audit also includes testing the auditing principles andtheir application by the Board and the managing director and assessing the totality ofthe information in the annual report and the consolidated financial statements. Wehave examined significant decisions, measures and conditions in the company inorder to be able to assess whether any member of the Board or the managing directoris liable to pay compensation to the company or has acted in any other way incontravention of the Swedish Companies Act, the Accounts Act or the company’sarticles of association. We consider that our audit gives us reasonable grounds for thecomments made below.

The annual report and the consolidated financial statements are made up inaccordance with the Annual Accounts Act and thereby give a fair picture of thecompanies and the Group’s financial position in accordance with generally acceptedaccounting principles in Sweden.

We recommend that the Annual General Meeting adopt the parent company andGroup profit and loss accounts and balance sheets and that the parent company’sunappropriated earnings be dealt with in accordance with the proposal in the reportof the directors and that the members of the Board and the managing director bedischarged from liability for the financial year.

Göteborg, February 22nd, 2000

Nils Brehmer Lennart BerthedenAuthorised public accountant Authorised public accountant

R E P O R T O F T H E A U D I T O R S


B O A R D A N D A U D I T O R S

Jarl Ergel Sören SjölanderJohan Rapp

Sigurd Walldal Lars A LewerthRune Engsheden

Magnus Ergel David BergendahlKlas Dunberger


MEMBERS OF THE BOARDJARL ERGEL, CHAIRMAN

Göteborg, Sweden, born 1924Chairman since 1991Member since 1965Shares in Geveko: 100,012

JOHAN RAPP, DEPUTY CHAIRMAN

Stockholm, Sweden, born 1939Deputy Chairman since 1994Member since 1981Other board appointments: Chairman ofPomonagruppen AB,Svolder AB, ITAB AB, Graphium AB.Member of the Board: Alfred Berg Fondkommission AB,Kjessler och Mannerstråle AB. Yxhult AB and othercompanies.Shares in Geveko: 11,931

SÖREN SJÖLANDER

Göteborg, Sweden, born 1950Professor, Chalmers Institute of TechnologyMember since 1994Other board appointments:Member of the Board of Innovationskapital AB,Chalmers Innovation AB, Chalmers Invest AB, TeliaBusiness Innovation, Real Venture Group AB, and othercompanies.Shares in Geveko: 70

SIGURD WALLDAL,MANAGING DIRECTOR AND GROUP CEOGöteborg, Sweden, born 1939Member of the Board since 1991Shares in Geveko: 2,000

DEPUTY MEMBERSRUNE ENGSHEDEN

Göteborg, Sweden, born 1929Graduate EconomistDeputy Member since 1976Shares in Geveko: 5,088

LARS A. LEWERTH

Göteborg, Sweden, born 1934AttorneyDeputy Member since 1979Shares in Geveko: 42,131

MAGNUS ERGEL

Göteborg, Sweden, born 1957Graduate EconomistDeputy Member since 1987Shares in Geveko: 68,798

KLAS DUNBERGER

Sollentuna, Sweden, born 1957Technical Director, Fujitsu Siemens Computers ABDeputy Member since 1989Shares in Geveko: 43,333

DAVID BERGENDAHL

Göteborg, Sweden, born 1962Managing Director, HammarplastgruppenDeputy member since 1993Other board appointments: Chairman of HammarplastA/S, Hammarplast a/s, Sarvis OY and Gösta Widén AB.Member of the Board of Hammarplast AB and SwedishRadiator AB.Shares in Geveko: 21,639

AUDITORSNILS BREHMER

Göteborg, Sweden, born 1934Authorised public accountant,Öhrlings PricewaterhouseCoopers AB

LENNART BERTHEDEN


DEPUTY AUDITORHANS BÖRSVIK



M A N A G E M E N T

SIGURD WALLDAL

Göteborg, Sweden, born 1939Managing director and Group CEO,AB GevekoEmployed since 1991Shares in Geveko: 2,000

BERNDT MAGNE

Göteborg, Sweden, born 1945Financial Manager, AB GevekoEmployed since 1980

STIG JÖNEGREN

Höviksnäs, Sweden, born 1949Managing director,Industrial OperationsEmployed since 1996

JIMMY OLSSON

Göteborg, Sweden, born 1954Managing director, Geveko Industri ABEmployed since 1999

HANS STARLING

Ängelholm, Sweden, born 1945Managing director, Cleanosol ABEmployed since 1978

NIS RAVNSKJAER

Svendborg, Denmark, born 1948Managing director, LKF Vejmarkering A/SEmployed since 1996

JOHN RAINEY

Oldham, Great Britain, born 1953Managing director, Roadcare LtdEmployed since 1988

HOLGER STEFFEN

Hamburg, Germany, born 1944Managing director, Plastiroute S.A.,Plastiroute GmbH, Plastimark S.A.Employed since 1996

Sigurd Walldal Berndt Magne Stig Jönegren

Hans Starling Nis Ravnskjaer John Rainey

Jimmy Olsson

Holger Steffen


PRINTED INFORMATION

Geveko’s printed information for shareholders consistsof the year-end release, the annual report, the three-monthly report, the report of the Annual GeneralMeeting, the six-monthly report and the nine-monthlyreport.

Publication dates are as shown below.

PUBLICATION DATES

First quarterly report 2000: April 27th, 2000Six-monthly report 2000: August, 2000Nine-monthly report 2000: November, 2000Year-end release 2000: February, 2001Annual report 2000: April, 2001

These reports are sent direct to those shareholders whohave notified VPC that they wish to receive financialinformation.

All reports (annual report in Swedish and English, allother reports in Swedish only) may be ordered fromAB GEVEKO (plc)Box 2137SE-403 13 Göteborg, SwedenTelephone: + 46 31 172945Fax: + 46 31 711 88 66 [email protected]

ANNUAL GENERAL MEETING

The Annual General Meeting was held at Börsen,Göteborg, Sweden, on April 27th 2000.

I N F O R M A T I O N F O R S H A R E H O L D E R S


AB GEVEKOHEAD OFFICEMarieholmsgatan 36Box 2137SE-403 13 GöteborgSwedenTelephone: + 46 31 17 29 45Fax: + 46 31 711 [email protected]

www.geveko.se

MANAGEMENT OF SECURITIESAB GEVEKOMarieholmsgatan 36Box 2137SE-403 13 GöteborgSwedenTelephone: + 46 31 17 29 45Fax: + 46 31 711 [email protected]

INDUSTRIAL OPERATIONSGEVEKO INDUSTRI HOLDING ABMarieholmsgatan 36Box 2137SE-403 13 GöteborgSwedenTelephone: + 46 31 17 29 45Fax: + 46 31 711 [email protected]

CLEANOSOL ABIndustrigatan 33Box 160SE-291 22 KristianstadSwedenTelephone: + 46 44 20 39 00Fax: + 46 44 20 39 [email protected]

CLEANOSOL A/SIndustriveien 18Postboks 57NO-2020 SkedsmokorsetNorwayTelephone: +47 64 836200Fax: +47 64 [email protected]

GEVEKO INDUSTRI ABMarieholmsgatan 36-38Box 13007SE-402 51 GöteborgSwedenTelephone: +46 31 84 46 10Fax: + 46 31 25 93 [email protected]

GEVEKO OYMuddaisvägen 261PB 96FI-21601 PargasFinlandTelephone: + 358 2458 4400Fax: + 358 2458 4406

LINE MARKINGS LTDROMMCO LTDROADCARE LTDRoadcare HouseNew Works RoadLow MoorBradfordWest Yorkshire BD120RUEnglandTelephone: + 44 1274 606770Fax: + 44 1274 602802

LKF VEJMARKERING A/SLongelsevej 34DK-5900 RudkøbingDenmarkTelephone: + 45 63 51 71 71Fax: + 45 63 51 71 [email protected]

LKF, Inc.111 Todd CourtThomasville, NC 27360USATelephone: +1 336 475 7400Fax: + 1 336 475 [email protected]

MAGYAR PLASTIROUTE KFTGát u. 4-10H-2310 Szigetszentmiklós-LakihegyHungaryTelephone: +36 243 67067Fax: +36 243 [email protected]

PLASTIDRUM SRLSos. Alexandrei nr 156 - Sector 5RO-Bucharest 76969RomaniaTelephone: +40 142 02480Fax: +40 14201 [email protected]

PLASTIMARK S.A.Impasse de Champ-Colin 14CH-1260 NyonSwitzerlandTelephone: +41 2236 14481Fax: +41 2236 15226

A D R E S S E S


PLASTIROUTE S.A.5, route de ChêneCase postale 6418CH-1211 GenevaSwitzerlandTelephone: +41 2270 71730Fax: +41 2270 [email protected]

PLASTIROUTE GmbHRenkenruns-Strasse 16D-79379 Müllheim/BadenGermanyTelephone: +49 7631 36870Fax: +49 7631 [email protected]

RUSLAFPLAST GmbHGrafskij pereulok 12a. of.101Moscow 129626RussiaTelephone: +709 5287 1144Fax: +709 5287 [email protected]

TRAFIKPRODUKTER A/SEllingevej 30Postboks 13DK-4573 HøjbyDenmarkTelephone: +45 5930 2424Fax: +45 5930 2485

Industrial OperationsManagement of Securities


The definitions issued by the Industry and Commerce StockExchange Committee have broadly been followed in Geveko’sannual report. Further ratios are also used to illustrate certainkey facts about the Group.

PROFIT

Net profit after tax less minority interests.

EARNINGS PER SHARE

Profit as defined above divided by the average numberof shares in issue during the year.

DIRECT YIELD

Dividend as a percentage of the closing listed price.

PAY-OUT RATIO

The proportion of the net worth, as defined below, thatis paid out by way of dividend at the end of the year.

NET WORTH

The difference between the Group’s assets and liabili-ties, when the Listed Portfolio is included at its marketvalue and wholly-owned subsidiaries are valued at theirestimated market value. As of December 31st 1999Industrial Operations is valued by applying a p/e ratioof 11 to the profit after net financial items less tax at thestandard rate of 28 per cent. The Affärsvärlden index forthe chemicals, building and civil engineering industriesat the same date is used as a guide when estimating thep/e ratio. (During the 1995-1997 period, the market valueof Industrial Operations did not exceed its book valuecalculated in accordance with the correspondingprinciple).

PREMIUM OVER BOOK VALUE

OF LISTED PORTFOLIO

Difference between the market value and book value ofthe Listed Portfolio (listed shares) without provision fordeferred tax. (As an investment company, capital gainon sales of shares by the parent company are not subjectto tax, with effect from 1998).

D E F I N I T I O N S

SURPLUS VALUE, INDUSTRIAL OPERATIONS

The difference between estimated market value (seedefinition of net worth) and the book value of IndustrialOperations.

NET DEBT

Interest-bearing liabilities less interest-bearing receiva-bles and liquid funds excluding listed shares.

VISIBLE EQUITY RATIO

Stated equity in relation to balance sheet total.

EQUITY RATIO INCLUDING PREMIUM OVER BOOK

VALUE OF LISTED SHARES AND SURPLUS VALUE

The equity ratio including the premium over book valueof listed shares and estimated surplus value of IndustrialOperations in relation to the balance sheet total includ-ing the premium over the book value of listed sharesand the estimated surplus value of Industrial Opera-tions.

CAPITAL EMPLOYED, INDUSTRIAL OPERATIONS

Balance sheet total less interest-free current liabilitiesand deferred tax.

RETURN ON CAPITAL EMPLOYED,

INDUSTRIAL OPERATIONS

Operating profit plus interest income excluding addi-tional write-down in value of goodwill and capital gainson divestment of business area in relation to averagecapital employed in Industrial Operations as definedabove.

RETURN ON ADJUSTED EQUITY INCLUDING

PREMIUM OVER BOOK VALUE OF LISTED

PORTFOLIO

Change in adjusted equity including premium overbook value of Listed Portfolio plus dividends paidduring the year in relation to opening adjusted equityincluding premium over book value of listed shares(excluding surplus value of Industrial Operations).

AB GEVEKO (plc), Box 2137, SE-403 13 Göteborg, SwedenTelephone: +46 31 1729 45, Fax: +46 31 711 88 66

[email protected] www.geveko.se

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