a.eng .r03 omslag · return on equity, percent 10.2 52.6 10.6 –29.9 9.0 earnings per share after...

Annual Report 2003

O I I A B Å n g p a n n e f ö r e n i n g e n 2 0 0 3

K a p i t e l r u b r i k

A leading name in technical consulting The ÅF Group provides cutting-edge expertise in IT and engineering to serve the needs of clients workingwith energy and the environment, the pulp and paperindustry, inspections, the development of industrial systems and products, the design of installations andinfrastructure technology.

The Group currently employs 2,750 people in around50 locations throughout Sweden and almost a dozenother European countries.

The year in brief

The ÅF Group at a glance

The President’s comments

Mission, vision and strategies

The market and the world around us

Human Resources

Environment

Divisions

Energy & Environment

Industry

Infrastructure

Installations

Inspection & Testing

Pulp & Paper

Systems

ÅF shares

Sensitivity analysis

Five-year financial summary

Administration report

Income statement

Balance sheets

Specification of changes in equity

Cash flow analyses

Auditor’s report

Board of Directors

Senior Management Group

Annual General Meeting

Addresses

A B Å n g p a n n e f ö r e n i n g e n 2 0 0 3 1

The year in brief

The ÅF Group at a glanceKey figures 1999 2000 2001 2002 2003

Operating income, in millions of SEK 1,612 1,747 1,963 1,916 1,995

Profit/Loss after net financial items, in millions of SEK 55 331 88 –151 47

Profit margin, percent 3.4 18.9 4.5 –7.9 2.3

Employees (FTEs) incl. associated companies 2,222 2,191 2,470 2,607 2,599

Equity/assets ratio, percent 33.1 39.1 41.3 29.7 30.5

Return on equity, percent 10.2 52.6 10.6 –29.9 9.0

Earnings per share after tax, SEK 6.35 40.04 9.91 –22.18 5.24

Dividend per share, SEK 3.50 13.00 13.00 2.00 2.60*

*As proposed by the Board of Directors to the Annual General Meeting

aprilÅF and Siemens Medical Solutionssign a strategic partnership agree-ment which sees the ÅF Group takeover a large share of Siemens’product development within med-ical X-ray technology in Stockholm.

mayÅF is awarded a contract to rehabil-itate and develop the central dis-trict-heating network in the Serbiancapital, Belgrade, which is operat-ed by the municipally owned com-pany Beogradske Elektrane.

octoberÅF is appointed consulting engi-neer for installations in conjunctionwith the extension of the countyhospital in Halmstad on the westcoast of Sweden. Three buildingswill be demolished and replaced bya new entrance hall and receptionarea with a total footprint of some16,000 square metres.

decemberÅF receives an order from StoraEnso worth approximately SEK 40million in connection with StoraEnso’s decision to build a newpaper machine for uncoated mag-azine paper at its Kvarnsvedenpaper mill in Borlänge, centralSweden.

juneÅF signs a new framework agree-ment with Ericsson covering con-sulting services in research &development, IS/IT and technicaldocumentation.

februaryIn spring 2003 the Board resolves tosell seven of the Group’s eight prop-erties in order to concentrate everyeffort on making ÅF a leading con-sulting business in its field. Theseseven properties had all been sold byJanuary 2004. The sale is expectedto have a net effect of some SEK 25million on 2004 earnings.

finances• Net sales rose to SEK 1,995 million (corresponding figure for 2002:

SEK 1,916 million)

• Profit after net financial items totalled SEK 47 million (SEK –151 million)

• Earnings after tax amounted to SEK 30 million (SEK –128 million)

• Earnings per share SEK 5.24 (SEK –22.18)

• The target for 2004 is to achieve a substantial improvement in earnings.

decemberThe Swedish National RailAdministration appoints ÅF as con-sulting engineer responsible forelectrical engineering, signallingand telecommunication systems inconjunction with the so called “CityLine” rail project in Stockholm.

The ÅF Group at a glance in March 2004

2 A B Å n g p a n n e f ö r e n i n g e n 2 0 0 3

The Energy & Environment Division offers strategic, technical and financial consultingservices within the fields of energy, the environment, plant and process technologyboth in Sweden and abroad. This covers everything from strategic studies to projectplanning and all the way through to commissioning the completed plant.

Energy & Environment employs 380 people in 18 offices in Sweden, Denmark,Poland and Guatemala.

The Industry Division offers a broad spectrum of services covering all aspects of auto-mated or industrial production – from developing ideas to putting together the plantand equipment needed to turn these into finished products. Another area of coreexpertise is safeguarding our clients’ energy supplies, based on the needs for bothuninterrupted production and the safety of personnel and other individuals

Industry employs 440 people in 23 offices in Sweden and Norway.

The Infrastructure Division supplies sophisticated solutions for the complex network ofinfrastructure in the modern world: rail, road and tram networks, airports, ports andtelecommunications. Several of the division’s assignments are funded by governmentgrants or similarly financed.

Infrastructure employs 240 people in 14 offices in Sweden and Denmark.

The Installations Division offers technical and administrative consulting services wherefunctionality is the key concern. The scope of the division’s assignments embracesboth commercial or public premises and industrial processes.

Installations employs 440 people in 23 offices in Sweden and Norway.

The Inspection & Testing Division works primarily with inspection, testing and certifica-tion, but also offers a number of related services such as training and advisory services,risk analysis, CE marking and the implementation of a variety of EU directives.

Inspection & Testing employs 210 people in 25 offices in Sweden.

The Pulp & Paper Division is an all-round technical consultant to the forest industry,offering a full range of consulting services from qualified advice in issues of strategicsignificance in the pulp and paper industry to the project engineering of complete industrialplant.

Pulp & Paper employs 670 people in 22 offices in Sweden, Finland, France,Germany, Spain, the Czech Republic and South Africa.

Energy &Environment

Industry

Infrastructure

Installations

Inspection &Testing

Pulp &Paper

Systems

Areas of expertiseDivision

The Systems Division helps innovators in industry and commerce to turn theirideas into industrially manufactured products; it is also involved in product man-agement and supplies product development services. In addition, the divisiondevelops and markets operational and business systems, including PX Control.

Systems employs 350 people in 9 offices in Sweden and Norway.

T h e Å F G r o u p a t a g l a n c e

• Power industry and industry in general• Energy companies• Aid organisations• National, regional and municipal

government• Trade organisations

• Manufacturing industry• Process industry• Power industry• Water purification & sanitation

• Public sector clients charged withmaintaining and developing transportfacilities

• The armed forces• Telecommunications operators and

network builders

• Industry – primarily the pharmaceutical,food and automotive industries

• Public sector property owners – hospitals, labs, schools etc.

• Commercial property managementcompanies – offices and shopping malls

• All industries and sectors

• Global pulp and paper industry

Clients

• Within product development: – manufacturing industries

• Within operational and business systems:– companies involved in project/assignment-based operations

Sales 2003 by division(in million of SEK)

Systems 369*

Industry 310*

* Pro forma

Installations 420

Infrastructure 198

Energy & Environment 288

Pulp & Paper305

Inspection & Testing165

Number of employees (FTEs) 2003 by division

Systems 391*

Industry 395*

* Pro forma

(incl associated companies)

Pulp & Paper636

Inspection &Testing 186

Infrastructure 212

Installations 425

Operating profit/loss 2003 by division(in millions of SEK)

Systems –7.0*

Industry –1.9*

* Pro forma

Infrastructure 9

Installations 18

Pulp & Paper 11

Inspections &Testing 15

“Ångpanneföreningenis Sweden’s largestindustrial consultingbusiness. That’s aposition we intend to retain.”

Other important events included the saleof the subsidiary ÅF-SIFU in the secondquarter and the sale of most of our proper-ties. These disposals were part of theGroup’s strategy of focusing more exclusivelyon technical consulting.

If we include the letter of intent signed inDecember 2003, seven properties weresold during the year. This is expected toincrease net profit by around SEK 25 millionduring the first half of 2004. The money willbe used to further the Group’s development,but the main reason for the sale was theneed to focus on our core business – andowning and earning money from real estateis not part of that.

Another event worth mentioning is theliquidity guarantee for our quoted shares. Inorder to increase the liquidity of the shares,the Board of Directors has, after consulta-tions with the principal shareholder, Ångpan-neföreningen’s Foundation for Research andDevelopment, reached an agreement withstockbrokers Öhman Fondkommission with-in the framework of the Stockholm StockExchange’s system for liquidity providers.The agreement, which came into effect on31 October 2003, means that Öhman Fond-kommission undertakes to quote bid andoffer prices for our “B” shares and to buyand sell the shares at these prices on itsown account.

Last, but not least, I would like to men-tion that we built the platform for a singlebusiness system for the whole ÅF Group

during the year. Among other things, thishas resulted in 16 different quality certifi-cates being replaced with a single ISO cer-tificate. The Group also now has a singleISO certificate for environmental manage-ment – previously only around 25 percent ofthe business was environmentally certified,and this was through four different certifi-cates. However, the greatest benefit of asingle business system is that all consult-ants can access all of the ÅF Group’s skillsand structural capital and so offer clientsthe whole of the Group’s accumulatedexpertise and experience.

An action programme was launched atthe end of 2002. How did it go andwhat savings were made?

It was largely thanks to this programme thatwe managed to improve our earnings andcash flow so markedly. The goal was toreview all of the Group’s costs and increasethe invoiced-time ratio. The results were fullyin line with expectations, and the savingsrelating to administration and managerswere SEK 35 million. The fact that it waspossible to do this so quickly and so suc-cessfully has a lot to do with the closeinvolvement of the unions before, during andafter the reorganisation. The unions havebeen a demanding but constructive sparringpartner and have shown considerable under-standing of the Group’s circumstances.

Over the last year the Group has beenworking on formulating values, a mis-sion and a vision. What did this involve,what are the results, and how are theyto be implemented?

We began in spring 2003 by identifying andformulating the Group’s common values.This was a real voyage of discovery into thebusiness, and a vast number of present andformer employees were interviewed. Clientsand competitors were also consulted. Themanagers’ conference I referred to earlieralso made a major contribution. The goalwas to capture the core values to be founddeeply rooted in the Group.

These values provide a firm foundationfor our mission, and this in turn was used bythe management as a basis for formulatinga vision for the Group. This vision is intend-ed to serve as a compass showing us theway forward. The idea is to be able to

What is your reaction to the ÅF Group’sresults for 2003?

Before the year began, we formulated fourgoals for our business in 2003: • Reverse the negative trend in earnings • Report a positive cash flow from consulting

activities• Generate an operating profit • Sell the bulk of the property portfolio

I am pleased that we managed to achievethese goals during the year, especially as themarket remained weak in 2003.

We had great success with our internalchanges and managed to cut costs whileadapting to the new organisation that wasintroduced on 1 January. Our earningswere much improved on 2002, even aftertaking account of the non-recurring coststhat year.

What were the most important events in 2003?

The single most important event was themanagers’ conference in May focusing onprofitability. This is when we devised themaxim “One ÅF”. We brought together morethan 200 managers and union representa-tives for a meeting which, thanks to moderntechnology, was interactive, so allowingeveryone to contribute. Together we wereable to prioritise issues which are crucial fora profitable and expansive ÅF Group. Forexample, we were able to identify both thepositive and negative aspects of our strongcorporate culture.

The President’s comments

T h e P r e s i d e n t ’ s c o m m e n t s

reconcile both small and big decisions withthe course staked out. It is important thatwe all pull in the same direction in our day-to-day work.

The project resulted not only in a newmission, vision and values but also in anexplanatory internal booklet which enablespresent and prospective employees to quicklygain an insight into the Group’s corporateculture.

We have also devised a new tagline for the Group: “Innovation by experience”. I think this neatly sums up what is uniqueabout the Group. Technical creativity andinnovation are very much our hallmark, butour experience enables us to determinewhat is actually feasible – we don’t treat our clients as guinea pigs!

A wide range of internal activities will bearranged during the first half of 2004 tospread the word. Among other things, GroupManagement will be travelling around toexplain to employees how we worked onthese issues and, above all, how all of ustogether are to use the new values, missionand vision in the future.

What do you believe to be the Group’skey success factors? What do we needto work on improving?

The Group’s key success factors are ourconsiderable technical expertise, the hightechnical quality inherent in everything wedo, and the confidence of our clients.There is also our goal of being an unbeat-able workplace. This provides a basis forrecruiting the very best people.

We are working actively to improve theway we market the ÅF Group. Given ourskills and quality standards, we can certainlyafford to be a little less modest. The ÅFGroup deserves to be much more visibleexternally than it has been.

How do you view the Group’s way oflooking after its staff?

A consulting firm’s employees are its great-est asset and need to be treated accord-ingly. I believe that we are good at provid-ing job satisfaction and a good workingenvironment here, and this was confirmedin several ways during the year. As proof ofthis we ranked highly in both 2003 and2004 in the “Sweden’s Best Workplace”competition organised by business maga-zine Veckans Affärer and Oxford Research.We also won Veckans Affärer’s specialaward for both years for the best work onequal opportunities. Another good sign isthat we always rank highly when the coun-

try’s students are asked about the employ-ers they would most like to work for.

Of course there are things that we cando to improve the working environment foreveryone here at the ÅF Group. For exam-ple, we need to become even better atrecruiting women. An even distributionbetween the sexes in the workplace resultsin a more stimulating working environment.

We are also eager to recruit women asspecialists and managers so as to get abroader perspective on all decisions.Companies that refuse to engage them-selves in this important area are wasting avery valuable resource, and this is some-thing we cannot afford. In 2003 welaunched a mentor programme as part ofour major equality project, Futura. The aimis to help women develop in their roles asconsultants and to identify potential futuremanagers and specialists. For the first yearthe programme was open only to femalecandidates.

We also need to work on improving man-agement in the Group. Managers at everylevel can always become better at theirjobs – it’s a matter of continuous develop-ment. If we have good managers, they willattract skilled workers, who will in turnattract more skilled workers, and so on. It’s a “virtuous circle”.

In the future I hope that the Group’sinternationalisation will mean that moreemployees will be able to spend short orlong periods outside their home countries,so furthering both their own personaldevelopment and that of the business.

All in all, I believe that it is our employeesthemselves who are the most important fac-tor in our unbeatable working environment.

A wave of consolidation is sweepingacross the industry. What role does theGroup plan to play in this process?

We are Sweden’s largest industrial consult-ing business, and we plan to retain this posi-tion. That means we will be actively involvedin the ongoing consolidation process, andseveral more acquisitions may be on thecards in 2004.

What are your hopes for 2004? Whatlevels of profitability is the Group aim-ing for?

Our goals for 2004 are clear. We will:• improve profitability • expand, partly through acquisitions • continue the work of building up our struc-

tural capital

• take the first steps towards becoming atruly international consulting firm.I believe that the market for industrial

consultants is due for a turnaround, and thatwe will see a reversal of the current trendduring the second half of 2004. This willlead to increased demand in large segmentsof our business. This should make it possi-ble to increase our profitability substantially.

Another important factor for our profitabil-ity is the focus on our structural capital. TheGroup has an enormous bank of experienceand skills. By making this accessible toevery consultant, we can begin our assign-ments for clients at a completely differentlevel to our competitors.

2003 was a successful year in manyways, but a great deal of work is still need-ed to exploit the Group’s considerable poten-tial. I'm looking forward to another eventfulyear of growth for the ÅF Group.

Stockholm, March 2004

Jonas Wiström

President/CEOAB Ångpanneföreningen

Mission, vision and strategies

The ÅF Group’s mission statement is predicated on the ambition and the abilityto contribute to the development of trade,industry and society in general.

We make the operations of ÅF clientsmore profitable, safer and better adaptedto environmental demands. In fact, we domuch more – but these three main issuesremain our chief concern. Every day. In-creasing profits for our clients increasesour own resilience and independence.

Experience, a passion for innovation

and a thorough understanding of each client’s business enables us to determinethe best solution in each individualinstance. The ÅF Group has expanded anddiversified with Scandinavian industry. Itshares its clients’ values and talks itsclients’ language – and that makes itunique.

Often we deliver the most sophisticatedtechnical solution, but not always. Attimes, tried and tested technology is inour clients’ best interests.

The work of formulating the ÅF Group’smission has involved a large number ofemployees, clients and competitors.Distilling the essence from so many indi-vidual opinions means that every word iscarefully weighed and pregnant with

meaning. The Mission and Vision projectsalso resulted in an internal “book of evalu-ations” where current and prospectiveemployees can quickly glean the essenceof what the ÅF Group stands for.

Our missionWe make our clients’ businesses more profitable, safer and better adapted to environmental sustainability by presenting clients with technical solutions and assessments shaped by the demands of industry. The hallmarks of the ÅF Group are:

• High levels of skills and expertise

• Innovation by experience

• An unbeatable working environment

In the spring of 2003 workbegan on a strategic projectto identify and formulate thevalues that are shared bythe entire ÅF Group – ourmission and our vision – inorder to create a unitedfront around the Group’score values, task and theroute staked out to achievethese ambitions.

M i s s i o n , v i s i o n a n d s t r a t e g i e s

Development

In concrete terms our vision meansbuilding customer relations founded onvalue added.

The time we devote to an assignmentwill continue to be important, but mostimportant of all is the relationshipbetween our time and the value to theclient. By always focusing on the valuewe add, we can make our work moreeffective and more commercially viable.

Productivity, and by extension our clients’ profitability, can be significantlyimproved by doing more business on afixed-price basis. The aim is to do thejob at the lowest possible price in theshortest possible time. By always cal-culating right and working within theparameters we have established, we cancreate confidence and the right expecta-tions in our clients.

Growth

We are proud to be Scandinavia’s leadingtechnical consulting company with anunequalled track record of experience. Itis important for us to maintain this initia-tive in our field and we believe that sizecan help us to do this.

We will grow both organically and bytakeovers, but expansion will not takeplace at the expense of profitability.

By 2010 the ÅF Group will have salesof at least SEK 5 billion. This targetrequires an increased rate of growth.

We will be number one or two in eachmarket where we choose to establish ouroperations. This will give us improvedaccess to assignments by ensuring thatwe are perceived as a consulting companyin the front rank of the industry.

Our visionDevelopment: We will spearhead the process of change in the technicalconsulting industry by introducing methods of cooperation that give a newdimension to the concept “value added” for our clients.

Growth: Sales will rise to SEK 5 billion by 2010.

Focus: We will be number one or two in the fields within which we areactive.

M i s s i o n , v i s i o n a n d s t r a t e g i e s

Environment

• 95 percent of our clients to considerwe have the right skills to safeguardenvironmental values in the assign-ments we carry out.

• The ÅF Group to increase environmentalskills among employees, specifically forthose types of assignment where thereis considerable scope for reducing envi-ronmental impact.

• 25 percent of our clients to considerthat the way we carry out our assign-ments has improved their own environ-mental skills and increased their inter-est in environmental issues.

Business support and shared processes

A unique bank of experience

A new operational system, developedduring 2003, was certified in Decemberin accordance with ISO 9001 and ISO14001. The system serves as a guide forall ÅF employees, from the IT departmentto the individual consultants, regardless ofthe company they work for or their geo-graphical location. Here we describe insimple terms best practice routines at ÅFfrom start to finish, complemented bytools in the form of checklists, templates,guidelines and forms. The system, whichalso contains descriptions of ÅF policy ona variety of common issues, is adaptedto assignments and available via internet.

Pooling our knowledge and skills inthis way enables us to make full use ofour size and our broad spectrum ofexperience. This, in turn, improves op-portunities for securing larger and betterpaid assignments that help us to evolveas an organisation.

The operational system is available viaour own Leanstream software, and thefirst external order for this program andthe implementation of a related qualityand environmental management systemwas received in the autumn of 2003.

Timesheets and financial follow-ups

PX Control is a web-based business sys-tem developed by the ÅF Group fortimesheet reports and the financial follow-up of assignments, units’ earnings andkey figures. Among the many features ofthis powerful analytical tool is a facility foraccessing data on the profitability of eachclient.

PA system

At the heart of the Group’s administra-tion is a PA system run by the Group HRdepartment together with local represen-tatives responsible for updating data foreach division. The system administerseverything from monitoring IT accesscodes to salary details, indexing detailsof skills in CVs and managing the rentalof the staff foundation’s holiday homesfor employees.

bas-IT

A common IT strategy was formulated in2003 to make IT support within the ÅFGroup more efficient. At the same timeIT Operations and IT Support weremerged into a single unit within the par-ent company. The ambition is to reducethe costs for IT support by more than10 percent compared to the precedingyear at the same time as improving re-liability and accessibility. This will im-prove data generation processes andenable consultants to use their timemore effectively.

Strategy

Operations will be carried out under oneand the same brand, with common pro-cesses and systems, shared values anda shared corporate culture in order toconcert our efforts and fully exploit thepotential of our vast bank of experience.

The Group’s acquisitions policy meansthat we always acquire a majority inter-est and are careful to select only thosecompanies that can contribute positivelyto our culture and profitability.

Our main aim

To create a return on the capital that theGroup’s owners have invested in ÅFshares.

Target for 2004

To show clear growth and a clearimprovement in earnings and cash flowcompared with 2003.

Long-term objectives

Profitability

A pre-tax profit of SEK 100,000 peremployee per year.

Market

Customer surveys to show that 90 per-cent of clients are satisfied with the service we provide.

Employees

• Better balance in the gender ratio. Aninitial target is for 20 percent of con-sultants in 2005 to be women.

• Staff turnover to be 7–13 percent.• At least 75 percent of employees to

have participated in a personal devel-opment interview each year.

The market and the world around usServices and products

In the first instance the consulting businessprovides services in the seven divisions,Energy & Environment, Industry,Infrastructure, Installations, Inspection &Testing, Pulp & Paper and Systems. Theiroperations are described on pages 18–33.

Projects can vary in duration from just afew hours to over 40,000. Total contractfees can amount to as much as SEK 200million, or even more in conjunction withmaterial deliveries.

Clients

The ten largest clients in 2003 were: ABB,the Swedish National Rail Administration,Ericsson, the Swedish Defence MaterielAdministration, the Swedish InternationalDevelopment Cooperation Agency (Sida),Siemens, the Greater Stockholm PublicTransport Authority (SL), Stora Enso,Vattenfall and Volvohandelns Utvecklings AB.Together these clients accounted for 14 per-cent of the Group’s sales.

Competitors

The ÅF Group is active in seven segments ofthe market, each with its own unique com-petitive situation.

Major competitors are:

Energy & EnvironmentJaakko Pöyry, Swedpower and Carl Bro.

IndustryProTang, Solvina, Sigma, Jaakko Pöyry,Semcon, INAC, Swedpower and Rejlers.

InfrastructureBanverket Projektering, WSP, Rambøll,Sweco, Tyréns, Aerotech Telub and Atkins DK.

InstallationsSweco, WSP, Rambøll and Carl Bro.

Inspection & TestingDet Norske Veritas Inspection, ForceTechnology Sweden, Semko-Dekra, BureauVeritas, Lloyd’s and the Swedish NationalTesting & Research Institute (SP).

Pulp & PaperJaakko Pöyry and Piesslinger.

SystemsHiQ, IFS, Intentia, Cap Gemini, Tieto Enator,Epsilon, Teleca, Sigma, Semcon and WM-Data.

Market

Technical consulting is a significant indus-try in Sweden. According to the SwedishFederation of Consulting Engineers andArchitects (STD), total sales in this fieldwere SEK 26.9 billion in 2002, with the ÅFGroup accounting for slightly more than 7percent of this amount. The industryemployed approximately 35,400 people,slightly more than 7 percent of them work-ing for the ÅF Group.

Swedish consulting companies fare well in

international comparisons. According to fig-

ures compiled by the Swedish Federation of

Consulting Engineers and Architects (STD),

four of the world’s top 100 consulting compa-

nies are Swedish:

ÅF Group ranked 42

SWECO ranked 44

TELECA ranked 52

SEMCON ranked 74

Size of projectsNumber of hours, proportion in %

– 100 101 –1,000

1,001 –10,000

10,000 –

Demand for technical consulting ser-vices remained relatively weak throughout2003, with reduced industrial investmentcontributing to a bleak climate in a marketwhich saw no increase in overall volumesfor the year. The trend is much the same inSweden, the rest of Scandinavia and themajor European markets. The ÅF Groupexpects the market for technical consultingservices to remain unchanged or show aslight improvement during 2004.

Industry forecast 2004–2005

The Swedish Federation of ConsultingEngineers and Architects (STD) forecasts aslight increase in the demand for the ser-vices of technical consultants in 2004. Thisshould lead to a slight improvement inresults despite the fact that prices areexpected to stabilise at their current lowlevel or rise only marginally.

Not until 2005 does STD see any realupturn for the industry, but then the consult-ing companies should be able to see theirnumbers of employees rise by a few per-centage points. After several years of con-certed efforts to reduce costs, profitabilityshould then return to the (admittedly mod-est) levels of 2000. With industry as a wholeworking at full capacity, industrial consultingshould once again begin to expand, albeitwith a lower annual growth rate than we wit-nessed in the late 1990s, but with moreorders on the books and improved pricing.

1 0 A B Å n g p a n n e f ö r e n i n g e n 2 0 0 3

T h e m a r k e t a n d t h e w o r l d a r o u n d u s

Sales by sectorProportion in %

Private

Local government(Sweden)

Abroad

National government(Sweden)

Earnings by sector, Swedish clientsProportion in %

Construction,property

management,HVAC & sanitation

Engineering,automotive industry

Other service industries

Public sector, finance

Other manufacturing

Pharmaceuticals, chemicals

Electric, heatings,gas, refineries

Forest industry

Electrical engineering,telecom

Assignments since 1990Own office

A B Å n g p a n n e f ö r e n i n g e n 2 0 0 3 1 1

T h e m a r k e t a n d t h e w o r l d a r o u n d u s

Of the industrial upturn upon which ÅF isso dependent, STD writes, “With signs ofthe recovery in the Swedish and internationaleconomies remaining conspicuous by theirabsence, industry has repeatedly madedownward revisions of its forecasts forinvestments in machinery and equipment tothe low-water mark we see today. 2004should see some improvement in the situa-tion, but at the same time it is more than likely that R&D investments will be reduced byat least as much as other investments rise.”

Once the wheels of industry finally beginturning again there will be plenty of potentialfor the industrial consulting companies, aslong-term trends indicate that industry isincreasingly choosing to engage externaldevelopment partners.

Industrial consultants report that the mostpositive development in consulting assign-ments can be seen in the chemical andpharmaceutical industries and in metalwork-ing and mechanical engineering.

Developments in power and energy arealso highly positive, and incoming ordersfrom the telecommunications and electron-ics industries are also beginning to recoverfrom what is historically a very low level. Inaddition, forecasts for investments from thepulp and paper industry and from the auto-motive industry also point to some improve-ment in 2004.

Long-term industry forecast

In a few years’ time, taking into account thetemporary reversals in trends caused bycyclical fluctuations in the economy, theSwedish market is expected to show agrowth potential of between 20 and 25 per-cent according to STD.

Increasing internationalisation in theÅF Group

The ÅF Group’s activities are concentratedto the Swedish and Nordic markets, but theGroup nurtures ambitions to increase thebreadth of its offer throughout the rest ofEurope.

During 2003 much effort was invested incoordinating the operations of the Group’sEuropean companies that are active in thepulp and paper industry. The aim is to cre-ate a powerful, international supplier of con-sulting services for clients working withpaper and pulp. An important step in thisdirection was taken early in 2004 with theacquisition of CTS Engineering Oy in Finland,which has 260 employees. This provides theÅF Group with a springboard to new marketsin Russia and the former eastern bloc. Inaddition to Finland, however, the Group alsohas pulp & paper consulting companies inFrance, Germany, Spain, the CzechRepublic, South Africa and Sweden.

Industry’s investments(in 2000 prices) in millions of SEK

Machinery

60,000

10,000

30,000

40,000

50,000

Buildings

20,000

Industrial production indexBased on year 2000 figures

030199

Source: Statistics Sweden Source: Statistics Sweden

The Group also has an important andgrowing international market in the fields ofenergy and the environment. Assignmentsinclude waste management consulting inFrance and other countries and the recon-struction of energy plant for the forest indus-try in South Korea in order to comply withnew environmental criteria.

The market for international developmentassignments differs from other operationalareas inasmuch as it is less susceptible tothe fluctuations of the economic climate.The ÅF Group’s assignments in this fieldtend to be concentrated to areas such asenergy and the environment, the graphicalindustry, sector reforms, organisationaldevelopment and education. Our marketsare Europe, Africa, Asia and Latin America,with much of the resources for work deriv-ing from development aid funds.

In September 2003 theSwedish business news-paper Dagens Industri pub-lished a Top Twenty list ofemployers compiled usingthe results of interviews withworking engineers. The ÅFGroup came in a creditableseventh place.

More than 15,000 graduate engineersand economists aged between 25 and40, all in full-time employment, took partin the survey company Exido’s extensiveinvestigation of the current labour market.When asked where they would most liketo work, the engineers ranked the ÅFGroup in a creditable seventh place.

The fact that so many engineers arefavourably disposed to working for theÅF Group suggests that they are alsofavourably disposed to choosing ÅF as apartner and supplier. This result encour-ages us in our long-term work of pre-senting the ÅF Group to engineeringundergraduates on “contact days” at thecountry’s major technical universities, aninitiative that was first taken in the late1980s. Over the years “contact days”have proved to be an excellent interfacewith a large portion of our target group.

Feedback is important

The ÅF Group believes a good work-place is one where employees are proudof their work and the company theywork for, where they show confidence intheir managers and experience a senseof togetherness with their co-workers.This can only be achieved by clear objec-tives and long-term commitments at alllevels in a company.

Dream job for engineers

Engineers’ dream employer

percent

Volvo PV 15

Ericsson 12

AB Volvo 10

Saab AB 10

Astra Zeneca 9

Scania 8

Ångpanneföreningen 8

Tetra Pak 7

Sony Ericsson 7

Saab Automobile 6

Source: Exido

Feedback about how successful anindividual is in his or her work is a keyfactor behind job satisfaction, and this isprovided via scheduled personal develop-ment talks between employees and theirline managers. Regular employee sur-veys, most recently in 2002, confirmthat more than 80 percent of ouremployees participate in these meet-ings, while more than 85 percent aresatisfied with the continuous feedbackthey receive.

Another important consideration ispreventive healthcare, which is cateredfor via occupational healthcare servicesand the Group’s support for employees’leisure activities.

and, with effect from 2004, two of thefour employee representatives on theboard are also women.

The ÅF School

Consultants require special tuition inmanagement, law, marketing and financein order to cope satisfactorily with theadministrative side of their work. Thistraining is generally provided by theGroup through the ÅF Academy.

The ÅF Academy runs introductorycourses and courses in sales training,presentation techniques, project man-agement and various forms of manage-ment development. In recent years theGroup has placed particular emphasis onthe role of the project manager, withmore than 600 employees graduatingfrom courses in project management.

Another initiative is training designedto provide rudimentary insights intosubjects such as contract law, financeand the consultant’s behaviour when onassignments. To date more than 450 ÅFemployees have participated in thiscourse.

As well as tuition, the ÅF Academyalso provides added benefits in the formof an exchange of experiences andknowledge transfer between the partici-pants from different parts of the ÅFGroup, something which is clearly in theinterests of our customers.

University students rank ÅF Grouphighly

In the Företagsbarometern 2004 survey,the latest of the annual surveys carriedout by the market research organisationUniversum, students at Sweden’s leadingtechnical universities ranked the ÅFGroup among the top ten most attractiveemployers – an excellent result to bearin mind when recruiting new talents forthe challenges that await in the future.

During the 2003–04 academic yearthe ÅF Group took part in around 15“contact days” at universities and col-leges throughout Sweden. Some 90 ÅFemployees met thousands of technologystudents, among whom the generalimpression seems to be that the ÅFGroup is an interesting company to workfor, and one that can offer employees awide variety of highly stimulating projects.

More female consultants and managers? Yes, please!

The ÅF Group is convinced that a betterbalance between the sexes creates abetter atmosphere at work and leads toimproved profitability. This is the basisfor the Futura project, which aims toincrease the proportion of female con-sultants at ÅF from today’s 15 percentto 20 percent by 2005.

The project discusses issues such asattitudes to women, induction pro-grammes, individual development plans,equality in terms of salary and “visibility”,more female managers and flexibleworking hours.

Another important issue is support forworking parents. In the 2002 employeesurvey 83 percent of the company’s 441employees with children under the ageof eight (88 women and 353 men) saidthat, in their opinion, managers have thepower to make life much easier for theparents of young children.

The Futura project also arranges net-working lunches for female consultants andlaunched a mentor programme in 2003.

In December 2003 women constituted15 (2002: 15) percent of the Group’sconsultants. Female consulting man-agers made up 9 (11) percent of theGroup total, and female managers as awhole 11 (16) percent. The fact thattotal number of female consultants didnot rise during the year, despite anincrease in the number of new femalerecruits over the past twelve months,can be explained by the sale of the edu-cational company ÅF-SIFU, whichemployed a very large number of femaleconsultants.

Two of the seven members of theboard of Ångpanneföreningen elected bythe annual general meeting are women,

H u m a n R e s o u r c e s

tages are located in attractive areas ofSweden, mainly in the mountains andalong the coasts. A couple of hundredfamilies take advantage of this opportu-nity every year. The Group also runsclubs offering employees a wide rangeof leisure-time activities, such as keep-fitclasses, golf, theatre visits and artappreciation.

Help to face the future

During 2003 a major restructuring pro-gramme was undertaken to restore prof-itability to the ÅF Group, which meansthat the Group now operates via sevendivisions. As a consequence of thereduction in the number of consultingcompanies, some 50 administrativeposts have disappeared.

A cost-cutting exercise that began on1 January 2003 has meant that a fur-ther 200 or so employees have beenmade redundant or taken early retire-ment. The Group’s Human Resourcesdepartment is providing special, individu-ally tailored forms of assistance toenable these employees to find a newrole in the labour market as swiftly aspossible. A survey conducted at thebeginning of 2004 shows that almostfifty percent of those made redundantare already in new jobs.

Joint ownership

AB Ångpanneföreningen sees greatvalue in involving employees as part-owners in the company. Employees havea financial stake in our operations directlythrough their ownership of shares andconvertibles, and indirectly throughÅFOND, the ÅF Group Fund Foundation.

To further encourage this sense ofinvolvement, all new employees aregiven one ÅF share to stimulate them tosave and invest in the company.

Capacity utilisation

The ÅF Group’s invoiced-time ratio forthe year – the proportion of timecharged to clients relative to the totaltime spent at work – was 67.6 (66.4)percent. Non-invoiced time includes mar-keting, training, technical development,management, administration and under-employment. 95 (93) percent of employ-ees work mainly for external clients,while the remaining five (seven) percentare employed in a purely administrativecapacity.

Bonus system

The ÅF Group operates a profit-relatedbonus system for employees. The sys-tem provides a bonus based on bothconsolidated profit and the profit of therelevant subsidiary. In 2003 employeesreceived bonuses totalling SEK 2 (1) million.

Salary system with variable component

Some 700 employees currently partici-pate in salary systems, where up to 20percent of their salary may be variableand linked directly to performance. Sofar, experiences of this have been positive.

Recreational activities

ÅF Group employees have the option ofrenting one of the cottages or apart-ments owned or leased by the Ångpan-neföreningen Staff Foundation. The cot-

Policies

To make clear its position in a number ofemployee-related issues, the ÅF Grouphas formulated policies in key areassuch as human resources, salaries,equal opportunities and the climate atwork. This latter area includes activitiesto combat discrimination of all kinds. Apersonal development plan is made foreach individual employee.

Number of employees

In 2003 the ÅF Group employed a totalof 2,599 (2,607) full-time equivalents(FTEs). The total number of FTEs exclud-ing associated companies was 2,260(2,309). The proportion of new employ-ees during the year, including those withacquired companies, stood at 16.1(17.4) percent.

Holidays, parental leave and otherabsenteeism

For ÅF Group companies in Sweden totalabsenteeism, including holidays, was17.3 (17.5) percent of normal workinghours. Holidays accounted for 10.3(10.5) percent, sick leave 3.1 (3.0) per-cent of which 61 percent was for short-term illness; and 39 percent for long-term illness, (over 60 days) and leave ofabsence 3.9 (4.0) percent.

Leave of absence includes parentalleave and time off to care for sick chil-dren. Women, who represent 20 (21)percent of the workforce, accounted for61 (65) percent of all parental leavedays during the year and 32 (22) per-cent of the total time spent caring forchildren. In general, men are more oftenabsent from work for short periods,whereas women are in the clear majorityfor absences longer than five days.

Since April 2001 the ÅF Group min-imises the financial inconvenience formen and women on parental leave byensuring they receive at least 90 per-cent of their full salary for 3 months.Earlier this scheme applied only to women.

New employees

Percentage

Age group, years 2001 2002 2003

– 29 37 33 38

30 – 39 25 20 17

40 – 49 18 15 15

50 – 59 11 8 8

60 – 3 13 4

Total 20 17 16

The percentage of new employees within therespective age group at the end of each year.

Employees in newly acquired companies are con-sidered new employees.

Staff turnover

Percentage

– 29 14 19 23

30 – 39 17 11 17

40 – 49 14 10 16

50 – 59 7 7 10

60 – 14 7 10

Total 13 11 18*

The percentage of employees within each agegroup who left during the year, in relation to theaverage number of employees in the respectiveage group.

* Of which 5 percent in companies divested.

Length of employment

Percentage

Years of employment 2001 2002 2003

0 – 2 32 32 28

3 – 5 29 33 35

6 – 10 19 18 20

11 – 20 13 12 12

21 – 4 5 5

The average length of employment is 6.0 (5.7)years.

Employees in newly acquired companies are considered new employees.

Education

Percentage

2001 2002 2003

University 44 45 44

Secondary 54 53 54

Other 2 2 2

Financial data

SEK ’000/year/employee

2001 2002 2003

Net sales 906 830 883

Profit/loss* 33 –10 23

Staff costs 549 555 570

Value added** 582 545 593

* Before net financial items, excluding the shareof profit/loss in associated companies.

** Salaries and payroll overheads including profitbefore net financial items.

Age distribution

Percentage

– 29 15 14 12

30 – 39 32 33 33

40 – 49 23 23 24

50 – 59 24 23 23

60 – 6 7 8

The average age was 42.1 (41.8) years.

Training and R&D

SEK ’000/year/employee

2001 2002 2003

Training 24 22 26

Research & development 13 15 12

Total per employee (FTE) 37 37 38

Each employee receives an average of 70 hourstraining per year.

Good environment is good business But it is when we show consideration forthe environment not only for the sake ofour grandchildren but also because it paysright here and now that the true potentialemerges. This is where the environment oftomorrow really stands to gain. And it isalready a reality that caring for the environ-ment can also mean better profitabilitytoday – both for us in the ÅF Group and forour clients. Here are a few examples.

Cooling with lake water

Even though last summer was unusuallyhot, it was business as usual for employ-ees at White Arkitekter’s prize-winningnew head office in Stockholm. The ÅFGroup was commissioned to design theheating, ventilation, sanitation and cool-ing systems for the building, which fea-tures a fully glazed façade. The solutionuses lake water for under-floor cooling,making for a comfortable indoor climateand saving electricity.

Demanding permit procedures

Managing permit applications so thatthey are approved by the environmentalcourts is also worth money. The alterna-tive can be delayed production start-ups,fines or the imposition of environmentalfees – as well as a tarnished reputation.In 2003 the ÅF Group assisted Scaniawith applications in Oskarshamn andFalun, where new, sustainable surfacetreatment systems and manufacturing

methods are being introduced for futureproduction.

Environmental impact of businesstravel

The ÅF Group has been looking into theenvironmental impact of travel andtransport for Stockholm County Council.Information on employees’ travel to andfrom work was obtained through a ques-tionnaire and additional telephone inter-views, and then used to carry out calcu-lations and sensitivity analyses. Theclient will be able to use the results as abasis for future decisions.

Development of regulatory controls

The ÅF Group not only helps companiesand local authorities to adapt their oper-ations to given rules and requirements,but also contributes to the developmentof environmental regulatory controls atgovernmental level, both in Sweden andabroad.

A new system for trading in emissionquotas is being introduced in Swedenand the rest of Europe on 1 January2005 on the basis of an EU directive.The idea is to reduce emissions ofgreenhouse gases in accordance withthe Kyoto protocol.

In 2003 the ÅF Group was commis-sioned by the Swedish government’sFlexMex2 Committee and the Ministry ofIndustry, Employment &Communications to identify facilities

Environmental work is aboutlooking after the planet forthe benefit of both currentand future generations. Weare all agreed that activeenvironmental work todaywill reap rewards tomorrow.And most of us are involvedto a greater or lesser extent– we sort our waste atsource, we buy organic milk,and so on.

E n v i r o n m e n t

which may be covered by the new quota-trading system. The Group also studiedthe consequences of the system forboth industries and individual companies.

The environment is a global issue

In 2003 the Group carried out assign-ments with environmental aspects in sev-eral countries, both as collaborative proj-ects for industrial development on acommercial basis and as aid projects.The Group’s environmental work in devel-oping countries aims to bolster thesecountries’ ability to minimise their envi-ronmental problems. Our skills make aneven greater impact in places whereenvironmental problems are more acutethan they are back home.

Common processes boost environ-mental work

The way that environment and businessgo hand in hand is also reflected in theÅF Group’s new operational system. Itcovers the entire Group and integratesenvironment and quality with the moreimmediate goals for our day-to-day con-sulting activities. Our ambition is toensure successful, sustainable long-termdevelopment for both our clients andourselves. As the system spans thewhole Group, it unites all of the variousbusinesses and areas in which the Groupoperates. All employees need to befamiliar with the policies, goals and toolsfor their own environmental work. The

system also facilitates cooperation injoint projects where we draw on thegreat breadth of expertise in the Group.By shouldering our own burden ofresponsibility for the environment, webelieve that the Group will be more com-petitive in the consulting market. Thenew business system was certified toISO 9001 and ISO 14001 in autumn2003.

If we are to retain and develop ourability to integrate care for the environ-ment with industrial progress, we needto ensure that we have the right skillshere in the ÅF Group. Our operationalsystem focuses on employees’ skillsdevelopment – not only their generalunderstanding of environmental issues,but also, above all, cutting-edge expert-ise in their own specialist areas when itcomes to how environment and qualitycan be combined with development andprofitability.

Most important network for environ-mental managers

The Swedish Association of Environ-mental Managers was set up on the ini-tiative of the ÅF Group, which also runsits secretariat. During the year some 50meetings were arranged for more than300 member companies. In a question-naire of environmental managers atlarge companies and public bodies car-ried out by magazine Dagens Miljö andFörebildsföretaget, the association was

Environmental targets

• 95 percent of our clients to con-sider we have the right skills tosafeguard environmental values inthe assignments we carry out.

• The ÅF Group to increase environ-mental skills among employees,specifically for those types ofassignment where there is consid-erable scope for reducing environ-mental impact.

• 25 percent of our clients to con-sider that the way we carry outour assignments has improvedtheir own environmental skills andincreased their interest in environ-mental issues.

named as the most important networkfor environmental managers in Sweden.Respondents mentioned among itsstrengths the way that knowledge iscompiled and distributed in an easilyaccessible manner.

– energy, the environment and the economy in equilibrium

The Energy & EnvironmentDivision provides strategic,technical and financial consulting services in thefields of energy, the envi-ronment, and process andplant technology.

The ÅF Group is one ofthe largest environmentalconsultants in the Swedishmarket, and has clients inindustry and the public sector. Environmental andenergy issues are becomingincreasingly important forall organisations.

The Energy & Environment Division has avery broad range of activities and boastsexpertise spanning technical calculations,process and plant technology, energy efficiency, management consulting andstrategic studies.

Demand for energy services wasfavourable in 2003, and demand for envi-ronmental services also picked up to-wards the end of the year.

Breadth of expertise boosts competitiveness

Energy & Environment’s clients includeall kinds of organisation: energy compa-nies, industrial companies, local authori-ties, government agencies and min-istries, and both Swedish and foreign aidorganisations.

The division has the skills andresources to combine different disciplines,which is a major competitive advantage.The business is divided into five businessareas.

Energy focuses on striking an effectivebalance between technical, financial andenvironmental requirements in varioustypes of process where energy is con-verted, distributed or consumed.

Assignments might include helping aclient to meet new environmental stan-dards or increase output.

Environment’s work mostly concernsproducing the information needed forclients to reach properly documentedenvironmental decisions. Our consultantskeep constantly abreast of new legisla-tion, regulations and the actions and procedures needed to be able to ensuresustainable long-term development forclients. Environmental issues are oftencomplex and can have a timeframe ofanything from a year or two to hundredsof millennia.

Process & Plant is home to a wide variety of in-depth expertise in processand plant technology and in distributionsystems for heating, cooling, town gasand steam. It covers the entire chain fromfeasibility and pilot studies, problem-solv-ing, process simulations and detailedplanning to construction management andcommissioning.

Investigations & Analysis carries outtechnical studies and analyses of theenergy market from a system perspec-tive. We also carry out Managementassignments as part of Swedish and inter-national development and aid pro-

“The focus over the comingyears will be on improvingprofitability.”

Jan NordlingSenior Vice President, Energy & Environment

Energy & Environment Division 2003

Sales (in millions of SEK) 288

Operating profit (in millions of SEK) 13

Operating margin, percent 4.4

Share of Group sales, percent 14

Number of employees (FTEs) 267

Operating profit/employee(in thousands of SEK) 49

Energy &Environment

E n e r g y & E n v i r o n m e n t

grammes. Most assignments arefinanced with aid from, among others,the Swedish International DevelopmentCooperation Agency (Sida), the WorldBank and the EU, and revolve aroundeverything from organisational develop-ment, infrastructure and the graphicalindustry to various types of internationaltraining programme.

2003 saw the acquisition of GöteborgEnergi International, an energy consultingcompany with an international focus andparticular expertise in district heating.And, early in 2004, the takeover ofFortum Teknik & Miljö added thestrengths of a further 150 employeesexperienced in the areas of energy, theenvironment and electric power.

Light at the end of the tunnel

The market was weak in 2003. This waslargely because many clients postponedinvestment decisions. Even environmentalissues tend to be put on the back-burnerin times of recession.

However, in the slightly longer term theoutlook for Energy & Environment isbright. New power plants need to be builtthroughout the Nordic region over thenext few years, and the importance ofenvironmental issues is increasing. Thereis also a growing need for waste man-agement.

Also of interest are the many new regulatory controls being introduced atgovernment level.

The market for international develop-ment work differs from the rest of thebusiness in that it is less sensitive to thebusiness cycle.

Ash – an exciting R&D project

One example of our R&D work from 2003is a joint project with the thermal engi-neering research institute Värmeforsk toinvestigate the recycling of ash – primarilyfrom biofuel-fired plants – for use in road-building and in the forest industry.

Focus on expansion and increasedprofitability

Our focus over the next few years will beon increasing our profitability. We alsohave plans to expand in Sweden and therest of the Nordic region. Growth willprobably come mainly on the environmen-tal side, both through acquisitions andorganically. However, we also aim to growstronger in the European market on theenergy side.

The outlook is therefore bright. TheEnergy & Environment Division operatesin a dynamic market and, thanks to thebreadth and depth of its expertise, is acompetitive player.

Natural gas projectSydkraft Gas has brought in the ÅF Group tohandle the initial project planning for around 140km of natural gas pipeline running through south-central Sweden. The assignment is part ofSydkraft Gas’s planned investment in a naturalgas pipeline: initially from southern Sweden to the area south of Stockholm, then to theMälardalen Valley west of Stockholm and finally,Stockholm itself. The initial planning workincludes route planning and an environmentalimpact analysis, together with the associatedconsultation process and the preparation of alicence application. The assignment requires collaboration between several different areas oftechnological, energy-related and environmentalexpertise in the ÅF Group.

Environmental impact analysis Drug company AstraZeneca has asked the ÅF Group to prepare the permit applicationrequired for the rapid expansion of its researchfacility in Mölndal, Sweden, should a decision onthis be made. The assignment includes a seriesof investigations and analyses, in particular anexhaustive analysis of the environmental impacts– emissions to water and air – resulting from theexpansion.

District cooling for Uppsala hospital The ÅF Group is taking part in a highly stimulatingproject to replace the existing diesel-poweredcooling systems that provide air-conditioning fora number of Uppsala Academic Hospital’s build-ings with the cheaper and more environmentallybenign alternative of district cooling. The coolingwater travels from the production plant along a 2 km pipeline running under the River Fyrisån.The Group is responsible for project planning,project management and construction manage-ment for the project, for which the principal isVattenfall.

In 2003 the market wasweak for the Automation &Industrial IT business areabut more favourable forElectric Power. At the end of2003 Industry & Systemswas split to create two newdivisions: Industry andSystems.

“2004 will see the divisionexpand via acquisitions.”

Christer KarlssonSenior Vice President, Industry

Industry

The Electric Power business area hasbeen part of the ÅF Group for manyyears. Its work includes project planning,procurement, commissioning and inspec-tion of electrical plant and equipment.Our consultants carry out measure-ments, produce analyses and implementmeasures to improve the quality of elec-tricity, and also undertake electric powercomputations, such as short-circuit cal-culations, selective plans and dynamicsimulations. The division already com-mands a strong position in the Swedishmarket, but aims to be the market leader.

Clients can be found in the manufac-turing, processing and power industriesand in various public sector organisa-tions. The breadth and depth of our tech-nical expertise enables us to offer themarket all kinds of services, rightthrough from initial idea to finished plantor process.

Subdued market as investment decisions are postponed

The key feature of the market in 2003was indecision among clients, leading to

Industry Division 2003*

Operating profit (in millions of SEK) –1.9

Operating margin, percent –0.6

Operating profit/employee(in thousands of SEK) –5

*Pro forma

The reason behind the move was thatthe synergies between the two areaswere smaller than anticipated, and prof-itability was not satisfactory.

The Industry Division consists of twobusiness areas – Automation & IndustrialIT and Electric Power – and has opera-tions in Sweden and Norway.

Two business areas with real breadthand in-depth expertise

Under the umbrella of Automation &Industrial IT we have gathered the expert-ise needed to automate processes notonly in industry but also in local govern-ment administrations. Specialists hereplan and supply plant for, among others,the chemical, processing and food indus-tries, as well as water and wastewatertreatment plants. In addition, the pro-gramming of control systems and indus-trial IT are key skills within this businessarea. The ÅF Group is one of the largestplayers in this field in Sweden.

The industrial side of the businessalso moved into Norway during the yearand performed well.

– extensive portfolio of services for industry’sdemanding clients

I n d u s t r y

the postponement of many investmentdecisions. The downturn hit Automation& Industrial IT particularly hard, whileElectric Power fared reasonably well.Electric Power’s consulting services aremore specialised in nature and less sen-sitive to the business cycle than those ofIndustrial IT & Automation, which areneeded mainly in connection with largeinvestments. However, the inflow oforders picked up in this area too at theend of 2003 and beginning of 2004.

For example, it was pleasing to seeVolvohandelns Utvecklings AB returningfor further assistance with the develop-ment of its successful IT solution forsales support. Another interesting con-tract was one from Svenska Kraftnät foran analysis of the circumstances sur-rounding the major power blackoutwhich hit southern Sweden and easternDenmark in September 2003. A majorrobot project was carried out for BellowsAutomatik-Produkter with SKF as end-client. There was also an increase in

orders from other key clients, such asABB, Atlas Copco and Stora Enso.

Generally speaking, foreign competi-tion is growing in the Swedish technicalconsulting market. Other threats includethe transfer abroad or even closure ofproduction which sometimes happenswhen large Swedish companies moveinto foreign ownership.

Interesting calibration project

An interesting R&D project was launchedin 2003 in collaboration with a numberof power companies and other partners.The project concerns remote readings ofhouseholds’ electricity consumption, andaims both to reduce the power compa-nies’ costs and to increase service levelsfor their customers, not least in the formof simpler and more comprehensible bills.

Also in the R&D field, our longstand-ing partnership with Chalmers Universityof Technology was consolidated in2003. An ÅF Group employee is nowteaching undergraduate electrical engi-

neering students and supervising post-graduates on a part-time basis.

Stable platform for strategic work

The new organisation provides a stableplatform for activities in the IndustryDivision. In 2004 strategic work is beingstepped up with a view to becoming thestrongest player in the Swedish marketin both business areas. The division aimsto be the first-choice consultant for boththe manufacturing and processing indus-tries and public-sector organisations intheir processes, right through from initialidea to finished plant or process.

Expansion in Sweden and Norway

In 2004 we aim to grow through theacquisition of companies that are activelyinvolved in as many of the division’sareas of expertise as possible. However,Electric Power is the priority businessarea in this context. Another major goalis to expand the Norwegian businessconsiderably over the coming year.

Coatings plant modernised Akzo Nobel turned to the ÅF Group for help withapplication development and system integrationof the top-level production system at its largeMalmö plant, which has 700 employees and pro-duces around 37 million litres of paint and puttyannually. The ÅF Group’s assignment coversaround 3,400 hours through to the new systembeing rolled out at the beginning of 2004.

DCS system up and runningFoster Wheeler awarded the Group a turnkeycontract covering everything from a system solu-tion to the supply of all equipment up and runningfor the existing power plant at the Kvarnsvedenpaper mill in Sweden. The system the ÅF Groupis supplying will monitor around 1,300 instrumentfunctions and 175 motors via some 100 processimages. It is to communicate with the existingsystem network.

Calculations ensure quality The ÅF Group has been commissioned by Shell’srefining company in Sweden to assure the qualityof its electrical switchgear. The Group is to imple-ment a power network in EDSA software, calcu-late short-circuit and surge currents, check themechanical durability of the switchgear, checkdisconnection times and propose the necessaryaction for switchgear that fails to meet officialrequirements.

– adopting a holistic approach

The Infrastructure Divisionprovides consulting servicesin the form of advancedsolutions for various kindsof transport network: railways, tramways, roads,airports, ports and tele-communications.

2003 began strongly, but activity slowedduring the second half. Three major con-tracts in the railway sector were wontowards the end of 2003, contributing toa strong finish to the year and ensuringhigher and stable capacity utilisation formuch of the division in 2004. Demand fortelecommunication services was weak butrising.

Infrastructure is involved throughoutthe entire life of a project, from initial pilotstudies and investigations through to project planning and commissioning. Thedivision is organised into three businessareas: Urban & Rural Planning, TrafficTechnology and Telecommunications.

Advanced solutions in three business areas

The Urban & Rural Planning business areaadopts a holistic approach to infrastructureplanning. Consultants are involved early inthe process, assisting clients with finan-cial forecasts, pilot studies and investiga-tions, analyses of environmental impacts,noise and vibration studies, risk and safetyanalyses, the application of legislation,and so on. All solutions – from short,

straightforward studies to technically,financially and environmentally sophisti-cated investigations for complex infra-structure projects – are tailored to theclient’s needs.

The business area also includesSwedeRail, which offers managementservices outside Sweden on the strengthof its international experience.

Traffic Technology works mainly onelectrical and signalling systems for vari-ous infrastructure projects. It possessesspecial expertise in contact managementand signal safety systems for railways,which is reflected in its assignments.Interest in these services has grownstrongly in recent years, as these areareas which can become bottlenecks inmany projects due to a shortage ofresources and expertise.

The consultants in Telecommunicationscarry out assignments relating to bothfixed and mobile telecoms. Most assign-ments involve implementation, projectplanning, commissioning and maintenancefor telecom tools and systems. Otherassignments include inspection, construc-tion management and commissioning.

“Sweden, an EU countrywith high criteria for equality and improvedaccessibility, needs a fullyfunctioning and well developed infrastructure.”

Åke RoseniusSenior Vice President,Infrastructure

Infrastructure

Infrastructure Division 2003

Sales (in millions of SEK)* 198

Number of employees* (FTEs) 171

* excluding associated companies

I n f r a s t r u c t u r e

Most clients are in the defence sector ortelecom operators, network builders andother large telecom-intensive companies.

Infrastructure also has operations inDenmark through the associated companyHansen & Henneberg, consulting engi-neers in road traffic information, trafficsignalling, electricity and lighting. Severaljoint projects began during the year,including risk and safety work for the CityLine rail project in Stockholm and a majortraffic safety assignment in Albania.

Government investment in infra-structure boosts market

The telecom market remained weak in2003 but there is much to suggest atentative recovery in 2004. The road andrailway market still looks to be in goodshape.

Investment in roads and railways is rising, and many major projects are beingplanned. For example, the Swedish gov-ernment is investing in the expansion ofthe high-speed train network and fasterrail freight, which is opening up many

business opportunities for the Infra-structure Division. When it comes toexpanding rail traffic, the governmentbelieves that this is not only a green andefficient mode of transport, but also animportant factor in giving more people abetter quality of life: it is easier for peopleto find work if there are faster and moreefficient connections to large towns andcities, which is an important issue giventhe rapid changes currently taking placein the labour market.

Commitment to R&D

The division is involved in a number ofdifferent R&D projects in the transportand telecom fields. One research projectundertaken in 2003 in conjunction withthe Royal Institute of Technology and theNational Swedish Rail Administrationlooked at energy consumption and modelsfor driver behaviour. Another investigatedtraffic, traffic management and trafficmanagement systems for railways, andwas run in conjunction with UppsalaUniversity and the National Swedish Rail

Inspection of 3G installations In recent years the ÅF Group has won a growingnumber of contracts in the 3G field – or UMTS asit is more correctly known. It is primarily the twolargest operators, Telia Sonera and Tele2, whoare using the Group to carry out spot checks/inspections of newly installed 3G sites. Each 3Gsite consists of a mast and radio installations.The contractors installing the sites have a duty toperform their own checks, but ÅF has beenbrought in to perform additional in-depth inspec-tions of both documentation and installations atselected sites so that the operators can verifytheir quality.

Improved rail capacity in Stockholm A shortage of track capacity in Stockholm haslong been a problem for rail traffic. The solutionchosen by the National Swedish Rail Administra-tion is the City Line, a tunnel for commuter trafficthrough the heart of Stockholm. The ÅF Grouphas been engaged to perform a large number oftechnical investigations to provide a basis for aseries of decisions on how this enormous projectis to be implemented and what licence require-ments will need to be met. The Group is respon-sible for the electrical, signalling and telecommu-nication systems, and for connecting the newsystems to the existing ones.

ÅF supports peacekeeping effortsThe Swedish Armed Forces and the DefenceMateriel Administration (FMV) are importantclients for the division. One example of an assign-ment FMV is the Group's involvement in the devel-opment of a new mobile command and communi-cation unit. Flexible solutions enable the unit tobe used in several different roles, such as com-manding Swedish forces in Kosovo. The Grouphas been involved in every phase of the project,from pilot study through to documentation andthe handover of the finished product. The Grouphas also been responsible for providing training inconnection with its introduction. The concept pro-vides further confirmation of Sweden’s pre-emi-nence in military technology.

Administration. The armed forces are alsoan active partner in the division’s develop-ment work.

Examples of in-house R&D work includesystems for traffic planning and trafficmanagement, and the development of ourown rail traffic simulator.

Maintaining our position in Sweden,expanding abroad

Infrastructure aims to maintain its positionin the Swedish market, and has its sightsset on expansion abroad, primarily inEurope. The enlargement of the EU willmake it easier to enter new markets.Poland is an interesting country in thisrespect, as are other countries in EasternEurope.

Expansion in Sweden may be on thecards for Urban & Rural Planning.

Sweden is still committed to the “zerovision” concept, eliminating death on itsroads and other transport networks, andneeds to continue to expand its infrastruc-ture if it is to assert itself in partnershipand in competition with the rest of the EU.

– taking a comprehensive view

The Installations Divisionprovides advanced technicaland administrative servicesfor the construction andmodernisation of commer-cial, industrial and public-sector buildings. Unlikemany competitors,Installations can offer thesame high level of expertisein both electrical systemsand heating, ventilation andsanitation systems.

The construction market deteriorated in2003, and the proportion of major proj-ects fell as the number of new construc-tion projects slumped. However, theeffects of this were limited thanks tofocused sales work and a generalincrease in modernisation projects.

The Installations Division hasresources for every conceivable type ofconstruction and modernisation project.Administrative services are also a majorpart of its business. Its technical expert-ise extends to every aspect of the heat-ing, ventilation, sanitation, cooling, elec-trical, telecom, transport, control andregulation, property automation, fire andsafety fields. The division’s clients canbe sure to get fully functional buildingsand processes, whether they be hospi-tals, factories or schools.

Assuming overall responsibility

The division offers a broad range of ser-vices: from assuming overall responsibilitywith a focus on the end-result to servicesof a more limited scope. The division hascome a long way in offering full-servicesolutions for installation projects.

Installation costs account for a veryhigh proportion of the cost of a con-struction project today and are crucial tothe building’s function. Ever greaterdemands are being made of the indoorclimate and communication facilities,and costs and environmental perform-ance are very much in the spotlight.

The division offers several full-serviceconcepts which aim to simplify clients’construction processes, keep a tight reinon installation costs, and steer towardsdefined functional requirements.

Investigations are another importantservice and account for around 20 per-cent of sales. Typically, they concernquestions such as the choice of technol-ogy, energy consumption, new applica-tions of technical solutions, or electricalsystems.

One common type of assignment isproject planning for construction andmodernisation projects – in other wordsplanning a building’s installations, includ-ing systems for the supply of processesin industry. Our largest industrial clientsare in the pharmaceutical, food andautomotive industries.

“There is probably thepotential to reduce energyuse in buildings by up to 50 percent.”

Per GöranssonSenior Vice President, Installations

Installations

Installations Division 2003

I n s t a l l a t i o n s

Administrative services include inspec-tions, energy efficiency, various types ofenvironmental service, and training.

Improved market for modernisations

The construction of new commercialpremises continued to fall in 2003,above all in Stockholm. However, themarket for modernisation projects wasbetter, and the division’s sales in thisarea grew. The division also enjoyedsuccess in providing consulting servicesfor energy efficiency in properties.

There is a general trend towards con-solidation among installation consultants,but 2003 was a relatively uneventfulyear in this respect.

Increasingly strong partner

In 2003 Installations took a number ofsteps towards becoming an evenstronger partner for large and moreambitious joint projects. Various serviceswere developed, mainly methods forassuring the quality of functions in build-ings and for managing the actual proj-ects. Substantial development resourceswere invested in this area in 2003, and,in purely business terms, the division is

now better than ever at delivering com-plex projects.

Growth in Norway

In 2003 the Group began to build up anorganisation in Norway similar to that inSweden. The remaining shares in sub-sidiary ÅF-Nielsen & Borge wereacquired, and another acquisition wasmade in the form of a small Norwegianheating, ventilation and sanitation com-pany, which was integrated into theNorwegian operation. Installations is alsoa shareholder in an electrical consultingfirm in Bodø. The Norwegian market isexpanding, and the division aims tobecome one of its major players.

Installations worked on an R&D proj-ect during the year together with theRoyal Institute of Technology inStockholm. The project involves develop-ing methods for the quality assurance ofconstruction projects, and is being fundedjointly by Ångpanneföreningen’sFoundation for Research and Development,the ÅF Group and Formas, the SwedishResearch Council for Environment,Agricultural Sciences and Spatial Planning.

Reduced energy consumption inGothenburg Vasakronan was keen to do something about ener-gy consumption in its newly acquired property(known locally as “The Lipstick”) at Lilla Bommenin Gothenburg. So the ÅF Group was brought into reduce consumption, ideally to the levels seenwhen the property was first built in the late 1980s.This is an incentive contract, which means thatthe Group’s fees are linked to the value of thesavings made. The Group has identified andimplemented a series of measures to reduce con-sumption and improve the indoor climate. So farthe cost of district heating has been reduced byaround 10 percent. The project is due to run fora further five years.

Training for Iranian engineers Energy consumption in Iranian properties is twoto three times as high as in Sweden. For sometime now the Iranian authorities have been focus-ing on this problem, which is particularly seriousbecause the bulk of Iranian energy comes fromnon-renewable sources: oil and gas. The ÅFGroup’s assignment involved training Iranianprofessors, engineers and technicians in energyoptimisation. Some 70 Iranians took part in thetraining, which was provided partly in Swedenand partly on site in Teheran. Other assignmentsin Iran include project planning of installations forhospitals, and investigations of energy consump-tion in buildings in Teheran.

Seawater cools new offices When White Arkitekter needed help with the instal-lations in its new offices in south centralStockholm, it announced a competition betweena number of installation consultants to find themost suitable partner. The ÅF Group triumphedand was awarded the exciting job of takingresponsibility for the installations in the attractivenew office block with its all-glass façade. Theresult was an unconventional, sophisticated solu-tion where water from the Hammarby Canal isused to cool the building through under-floorpipes. The project has attracted a great deal ofattention in the industry, and is being used as ademonstration project in a themed researchgroup in which the ÅF Group is taking part.

Higher energy-efficiency standardsgenerate business

The division’s business opportunitiesdepend heavily on levels of investment inthe market. Many government construc-tion projects are funded by foundationswhich rely on a strong stock market.

Once the construction sector takesoff again the potential for growth isexpected to be considerable. Even in aless favourable economic climate thedivision commands a strong position inthe market, not least when it comes toenergy and environmental issues, whichare becoming increasingly important.There should be scope to reduce energyconsumption in buildings by as much as50 percent. The division has consider-able potential for offering its serviceshere, partly in the form of incentive con-tracts where the final fee depends onthe financial gains made by the client.

– greatly improved earnings

The ÅF Group is the second-biggest name in Sweden intesting and inspection. TheInspection & Testing Divisionprovides services in threemain fields – inspection,testing and certification –along with various supple-mentary services.

In 2003 the division captured market share andgreatly improved its earnings.

The division’s business can be summedup as conformity assessment, a conceptwhich originated in the creation of theEuropean single market and aims toensure that fundamental health and safetystandards are met by products intendedfor sale in EU member states.

ÅF-Kontroll is accredited by SWEDACto perform design, review, manufacturinginspections and periodic inspections oftechnical equipment in accordance withSwedish legislation.

From escalators to pressure vessels

The Inspections business area carries outindependent controls and periodic inspec-tions of lifts, lifting devices, boilers, esca-lators, fairground attractions, overheadcranes, pressure vessels – practically anykind of lifting or pressurised device.

The Testing business area tests com-ponents and devices using non-destruc-tive testing techniques. It applies all typesof commonly used methods, along with arange of specially developed equipmentfor special applications such as pressurevessels, heat exchangers and boilers.The business area also offers calibrationservices.

The certification of environmental andquality management systems is carriedout under various international standardsthrough ÅF-TÜV Nord, a joint venture withGermany's TÜV Nord Group. The compa-ny also serves as a third-party inspectionbody in the nuclear power industry.

Besides these three main businessareas, the division provides various sup-plementary services, such as consultingand training, CE marking and assistingclients in the implementation of variousEU directives.

Strong growth in inspections

In 2003 the division generated salesgrowth of 15 percent and captured mar-ket share in an otherwise stable marketwhere annual growth is estimated at 2–4percent. Earnings increased by 55 per-cent, which is attributable to plannedgrowth, primarily in inspections. Inspec-tions are a high-priority field since the pro-portion of repeat business is high anddemand is unaffected by the vagaries ofthe economy.

Demand for supplementary servicesalso grew during the year, as did therange of services offered.

“Our vision is to be a pioneer and a marketleader in confirmity assess-ment in Scandinavia.”

Jörgen BackersgårdSenior Vice President, Inspection & Testing

Inspection & Testing

Inspection & Testing Division 2003

I n s p e c t i o n & Te s t i n g

International networks

To meet growth in demand, around 30new people were recruited in 2003, pri-marily inspectors and test engineers.These new jobs, combined with measuresto increase administrative efficiency, haveresulted in an increasingly competitiveorganisation and a stronger market position.

Internationally, third-party inspectionbodies is undergoing a process of consol-idation. Firstly, international directives andstandards are creating a need for playerswho operate in more than one country.Secondly, skills and accreditation areneeded in an increasing number of techni-cal fields in order to take on full-serviceassignments and conformity assess-ments. The division’s strategy is to buildnetworks with other national inspectionbodies in order to be able to offer theend-client an efficient and complete rangeof testing and inspection services.

Positive reception

2003 was the division’s first year as aninspection body for nuclear power plants.Its involvement was well received in a fieldwhere there is clearly scope for growth.

Another growth area was calibrationservices, verifying whether measuringinstruments are correctly set up.Business is relatively limited at present,but is believed to have the potential togrow rapidly.

Sights set on a leading position

One important area in 2004 is methoddevelopment, partly to improve existingmethods and partly to develop moreapplications for, among others, the petro-chemical industry.

The enlargement of the EU couldimpact on business in a number of ways:while new competitors may move intoSweden, exciting new business opportuni-ties will open up in brand new markets.

Our vision is to be a pioneer and amarket leader in technical inspections inScandinavia. Inspection & Testing is cur-rently the second biggest name in themarket but has its sights set on annualgrowth of around 15 percent.

Inspecting Sweden's nuclear power plantsNuclear power plants represent a very importantclient group for the ÅF Group’s testing andinspection business. All nuclear power plants inSweden use the Group to carry out periodicinspections and manufacturing/installation inspec-tions of mechanical equipment such as pipelinesand pressure vessels. This work is carried outmainly during the summer when the plants are shutdown for inspection, maintenance and refuelling.

Burgeoning interest in natural gas Natural gas is as yet a minor source of energy inSweden but a very important one abroad.Sweden imports natural gas from Denmark, withthe gas entering the country along a pipelinesystem which currently stretches as far asGothenburg. Nova Naturgas is heading a projectto extend the pipeline north along the coastwhere, among others, Perstorp Oxo will use thegas at its chemical plant in Stenungsund. The ÅFGroup has been given the job of testing andinspecting both mechanical components (includingthe quality of welding work) and electrical installa-tions and cathodic protection along the tens ofkilometres of pipeline.

Tests for safer rail trafficEuroMaint, previously part of SJ, the formerSwedish state railways, has commissioned the ÅFGroup to check the axles of both the X2000 high-speed train and older rolling stock. Non-destruc-tive tests are carried out at predetermined inter-vals to identify possible cracks and/or otherdamage to the trains’ axles. The inspections arecarried out using ultrasound and eddy-currenttechniques at several sites in Sweden. InStockholm the Group checks more than 8,000axles a year.

Pulp & Paper

– an international forest industry consultant withthe power to make a difference

As its name suggests, theÅF Group’s Pulp & PaperDivision works exclusivelywith the pulp and paperindustry, offering clients acomplete portfolio of con-sulting services worldwide.

Although demand from the pulp andpaper industry remained relatively weakfor consulting services throughout 2003,a slight improvement did begin to makeitself felt towards the end of the year.

Profits for the division were substan-tially better than in 2002, mainly as aresult of a good inflow of orders on theconsulting side.

Business is conducted through ÅF-Celpap in Sweden and Germany,ÅF-Chleq Froté in France, Incepal inSpain and ÅF-CTS Engineering in Finland.The year also saw the division establishbridgeheads in South Africa and theCzech Republic.

Project management and consulting

Operations are divided into two businessareas, Engineering and Consulting.

Engineering focuses chiefly on admin-istering and implementing plant andmaintenance assignments for the pulp

and paper industry, which includes proj-ect management, project engineeringand project implementation right up tothe time plant is brought into use. Thisinvolves the Group in all types of assign-ment, from participation in the engineer-ing of totally new production lines tosmaller rebuilds and extensions of existingfacilities.

A second type of assignment dealswith process automation, where ÅF canoffer a full spectrum of skills for design-ing and engineering of all sorts of differ-ent systems in the pulp and paper indus-try: process applications, maintenanceand quality systems, as well as top-levelbusiness and operational systems.

The Consulting business area worksprimarily with technical and strategicstudies and with environmental impactassessments in conjunction with expan-sions or permit applications within theindustry. Assignments include producing

“By coordinating itsEuropean companies the ÅFGroup’s Pulp & PaperDivision offers industrialclients the resources of 670employees in around adozen countries.”

Jonas WiströmActing Senior Vice President, Pulp & Paper

Pulp & Paper Division 2003

Sales (in millions of SEK)* 305

Number of employees (FTEs)* 351

*excluding associated companies

P u l p & P a p e r

data and documentation on which clientscan base their decisions, and providingadvisory consulting assistance ahead ofmajor investment programmes or strate-gic acquisitions.

Consulting therefore brings togetherworld-class expertise for all aspects ofproduction in the pulp and paper indus-try, including chemical pulp manufacture,paper manufacture, waste fibre process-ing as well as strategic issues affectingthe entire production plant, such as envi-ronmental and energy issues.

Demand for ÅF’s services despite aweak market

The market remained sluggish in 2003 andmany major investments were put on ice.

Despite this, however, demand for theservices of Consulting remained goodthroughout the year, thanks in part tothe fact that clients require these servicesas part of their processes of continuousimprovement. As the knowledge that ÅFpossesses helps clients to make sub-stantial savings, such services are muchin demand, not least when the economyis performing poorly.

By the end of 2003 the Engineeringbusiness area could also begin to seesigns of light at the end of the tunnel,and it is our opinion that demand for theservices of both business areas will riseduring 2004 and 2005.

A large number of large-scale projectsin the pulp and paper industry are cur-rently being planned in key markets suchas Sweden, Spain, Portugal and France,and the market continues to remainbuoyant in South America.

After capturing new shares of themarket in 2003 the Pulp & PaperDivision began 2004 in a stronger posi-tion than ever, both in Sweden and in therest of Europe.

Focus on strategic issues

Internal development work over the yearfocused on strategic issues with thedeclared aim of coordinating theEuropean companies even more effec-tively into a single, strong division withgood profitability and shared values andaims. This is essential if the division is toprovide the market with an alternativethat has the power to make a real differ-ence, and if it is to continue to expandon existing markets and establish abridgehead on new ones.

Another major step in this directionwas taken with the acquisition early in2004 of CTS Engineering, one ofFinland’s largest and best-known technicalconsulting companies in the pulp andpaper industry. The takeover firmlyestablishes ÅF as an international supplierof all-round consulting services and pro-vides the Group with a platform forgrowth in the Baltic and Eastern Europe.

An eventful yearLast year Pulp & Paper opened an officein South Africa, a market in which it hasbeen working for many years. The yearalso saw us open for business in theCzech Republic.

Business in Chile continues to gofrom success to success, and Pulp &Paper maintains a constant presencethere in order to work with the expansiveChilean forest industry.

The enlargement of the EU sends outvery positive signals to Pulp & Paper asthere is a great long-term potentialamong the new member states.

Strong involvement in developmentprojects

In order constantly to expand its techni-cal expertise the division is eager toinvolve itself in various types of develop-ment projects. The Swedish part of Pulp& Paper therefore collaborates closelywith the Royal Institute of Technology inStockholm, Chalmers University ofTechnology and other universities, aswell as the Swedish Pulp and PaperResearch Institute (STFI) in a number ofareas. One example is the involvementof ÅF consultants in teaching Ph.D. stu-dents about various aspects of the pulpand paper industry.

The division is also involved in a num-ber of industry projects, frequently fund-ed by the EU, and often side by side

with international players. It is notuncommon for ÅF to assume a leadingrole in this work, as it does in theNovaCell project, an international, EU-funded initiative led by the STFI whichaims to develop a sulphur-free processfor the production of pulp. The projectincludes French, German and Finnishresearch organisations together withseveral major names in the pulp andpaper industry.

Energy issues open up new opportunities

The ÅF Group stands to benefit as energyissues become an increasingly importantfactor in forest industry investments.Recent political decisions, both inSweden and within the EU as a whole,will impact dramatically on the future ofthe forest industry.

In the short term environmental taxes,certificates for “green electricity”, emis-sions quotas, the use of biofuels, etc.

P u l p & P a p e r

will create the need for companies toanalyse their current and future situation– and that is when they will call on theÅF Group for expert advice. Many ofthese investigations will later be trans-formed into investments to save andgenerate energy, and this too providesthe potential for ÅF to become involved.In a slightly longer perspective, this typeof decision may also affect the use ofdifferent types of fibres as raw materi-als, stimulating investment in building oradapting plant to deal with these. In allthese areas the ÅF Group is particularlywell equipped to help its clients.

Business in the Pulp & Paper Division isconducted through ÅF-Celpap in Swedenand Germany, ÅF-Chleq Froté in France,Incepal in Spain and ÅF-CTS Engineeringin Finland. The year also saw the divisionestablish bridgeheads in South Africa andthe Czech Republic.

ÅF involved in projects relating toStora Enso’s new paper machine The ÅF Group has received an order from StoraEnso worth approximately SEK 40 million in con-nection with Stora Enso’s decision to build a newpaper machine for uncoated magazine paper atits Kvarnsveden paper mill in Borlänge, centralSweden. ÅF’s assignment covers project manage-ment and engineering relating to process technol-ogy and plant design, and the contract will rununtil the paper machine is ready for commission-ing at the end of 2005. The ÅF Group has previ-ous experience from the Kvarnsveden paper millfollowing its involvement in the feasibility studiesand project assignments that preceded the actualinvestment decision. The work will be led fromthe ÅF Group’s offices in Karlstad, Sweden.

Major assignment in SpainThe ÅF Group has been awarded a major con-tract by Holmen Paper in conjunction with thedecision to invest in a new paper line at thenewsprint mill in Fuenlabrada (Madrid), Spain. The project will be managed by the ÅF Group’scompany, Incepal, which is based in SanSebastian, Spain. The order is the result of closecooperation between Pulp & Paper’s offices andexpertise in Spain, France and Sweden. The con-tract comprises project organisation resourcesfrom the ÅF Group to deal with project planning,process engineering of pulp production, externalwater treatment facilities, infrastructure and allconstruction planning for the new production line.It is planned that the new paper line, due to becommissioned early in 2006, will produce approxi-mately 300,000 tonnes of newsprint per year.

New energy strategy In view of developments on the energy marketand new regulations for emissions and “greenelectricity” certificates, the Billerud Group soughtthe advice of the ÅF Group for data and propos-als on which to base a new energy strategy.After charting the Swedish mills’ energy status,ÅF presented a number of proposals for reducingthe use of fossil fuels, maximising the use ofenergy from renewable sources, and derivingmaximum benefit from “green electricity” certifi-cates and the trade in CO2 emissions quotas.

P u l p & P a p e r

– turning ideas into finished industrialised products

The Systems Division provides services in productdevelopment and IT and, viathe subsidiary ÅF-Data,operational and businesssystems. Systems wascreated at the end of 2003when the former Industry &Systems Division was dividedinto its component parts.

The reason behind the move was thatthe synergies between the two areaswere smaller than anticipated, and prof-itability was not satisfactory.

The Systems Division possessesunique skills in helping innovators in vari-ous areas of trade and industry to trans-form ideas into finished products. Ourclients are found predominantly in themanufacturing industry, where successin terms of sales is utterly dependent onshort development times. The divisionalso develops and markets operationaland business systems for companieswhose activities consist mostly of proj-ect-based assignments.

Cost-effective solutions

The offer is extremely comprehensive –from design to finished product in threemain areas: mechanical engineering,electronics and software. Our aim isalways to minimise the interval betweenidea and finished product without com-promising on quality. Our broad spec-trum of skills and the ability to utilisepast experience create synergies thatlead to cost-effective solutions for ourclients.

The Systems Divisions also possessesthe necessary expertise to assume totalresponsibility for product developmentprojects throughout the entire chain,from specification and design to full pro-duction documentation, the developmentof prototypes, industrialisation andthrough to the end product.

The subsidiary ÅF-Data now repre-sents the hub for the Group’s expertisein IS/IT. Operations focus on developingand marketing business and operationalsystems as well as technical systems inthe form of CAD and PDM systems. Thelargest product is PX Control with around18,000 users in 180 companies. Theambition is to expand ÅF-Data’s opera-tions, partly through offering more mod-ules within the PX Control concept tomake it an all-in-one system for consult-ing companies, and partly by extendingthe target group for PX Control toinclude other types of company.

Tough market squeezes prices

The market for IT and product develop-ment was extremely tough in 2003 withno signs of any improvement as the yeardrew to a close. Many industry pundits

“Our size and broad-basedskills, together with our ability to undertake full-service assignments, enable us to make ourclients’ developmentprocesses more efficient.”

Matz AxelssonSenior Vice President, Systems

Systems

Systems Division 2003*

Operating profit (in millions of SEK) –7.0

Operating margin, percent –1.9

Operating profit/employee(in thousands of SEK) –18

* Pro forma

S y s t e m s

had predicted an upturn during the year,but this has yet to manifest itself. At thesame time as there are more productdevelopment consultants than are need-ed to meet current demand, many poten-tial clients are cutting down on theirdevelopment, and these factors togetherput a great deal of pressure on prices.

One clear trend that has made itselffelt over recent years is the “design tocost” concept, where the focus through-out the entire development process is onmanufacturing costs rather than innova-tive features.

More outsourcing in product development

With many of the big companies out-sourcing more and more of their productdevelopment, the prospects for Systemslook very bright, not least thanks to thebroad spectrum of skills the division can

offer its clients. One declared aim is tobroaden our interface with decision-mak-ers higher up in the client company hier-archy in order to develop together withour customers and pave the way for alarger involvement in the development oftheir business.

The breadth of the division’s offer andthe specialist expertise it possesses in anumber of key industries promises clientssolutions that are not only cost-effective,but customised to their specific needs.This enables clients to devote all theirenergies to their specific business idea.

Pan-European development project

The division is currently involved in anumber of challenging R&D projects,including one to develop a new genera-tion of ships. The pan-European FasdHTSproject, investigating the use of high ten-sile steel 690 in fast ship structures, is

paving the way for a new generation oflarge, high-speed vessels. To become acompetitive alternative to road, rail andair transport over relatively short dis-tances, tomorrow’s vessels need to beboth quicker and safer than they aretoday. Speed especially is important foroverall efficiency, both for passengertraffic and freight.

New division a springboard for future success

By concentrating all the product develop-ment resources in one division, the newcorporate organisation has provided theÅF Group with a springboard to success.It makes it easier for us to do businessand, not least, easier for our clients toknow who to do business with.

ÅF develops mammography equipmentSiemens Medical Solutions have assigned a largeshare of Siemens’ product development withindigital mammography to the ÅF Group. Theagreement has seen around 20 former Siemensemployees begin work with ÅF. Life Science isone of the areas that the ÅF Group’s SystemsDivision has chosen to prioritise, and the mam-mography project paves the way for new collabo-rative agreements with both Siemens and otherof the industry’s leading names.

Global anti-collision system at seaA new international agreement means that, witheffect from 1 July 2003 all vessels over 400tonnes must install anti-collision technology. Thesystem is based on ideas originally evolved bythe Swedish inventor, Håkan Lans. The ÅFGroup’s part in the assignment from SAABTranspondertech was to assume responsibilityfor the overall development of the system, fromthe initial specification of demands to the certi-fied, mass-produced end product. The client wasdelighted that the ÅF Group was able to accom-plish the project in just six months.

New developments in 3GThe ÅF Group was given an interesting assign-ment within the expansive 3G telecommunicationsfield when Andrew Telecom handed over respon-sibility for developing a so called picobase stationfor indoor environments. A radio base station ofthis type incorporates highly sophisticated tech-nology and consists of a printed circuit with eightprocessors and an integrated radio section. Thedevelopment from specification to prototype tooksome 20 ÅF consultants approximately threemonths to complete. The circuit board can dealwith approximately 60 conversations simultane-ously and its market potential is considered to beextremely good.

ÅF sharesAt the start of 2003 the Ångpanne-föreningen “B” share was traded for SEK92 kronor, but its value rose by 26.1over the year to close at SEK 116 on 31 December 2003. During the sameperiod the Stockholm Stock Market’s all-share index rose by 29.8 percent.

A total of 875,000 ÅF shares worthSEK 89 million were traded on theStockholm Stock Exchange during theyear, which equates to an average pertrading day of SEK 355,000.

ÅF shares were traded on 84 percentof the trading days.

Liquidity guarantee

In order to increase the liquidity of Ång-panneföreningen shares, the Board ofDirectors reached an agreement with thestockbrokers Öhman Fondkommissionwithin the framework of the StockholmStock Exchange’s system for liquidityproviders. The agreement came intoeffect on 31 October 2003.

Dividend

The ÅF share offered a yield averaging7.5 percent per annum between 1998and 2002.

The Board has adopted a dividendpolicy according to which the dividendshould correspond to approximately 50percent of the consolidated profit aftertax. For the company’s operations during2003 the Board proposes a dividend ofSEK 2.60 per share.

Shareholding and convertible bondsamong employees

ÅF Group employees are actively encour-aged to invest in ÅF shares by makinguse of various systems for facilitatingpart-ownership in the company. In onesuch system employees are offered aplan administered by AktieinvestFondkommission for saving some oftheir salary in the form of ÅF shares.With effect from 1 January 2002 eachnew employee has been given one sharein the company.

The ÅF Group’s series “B”shares have been quoted onthe Stockholm StockExchange since January1986. ÅF had previouslyoperated as a co-operativeassociation from 1895 to1980, and converted to ajoint stock company in1981. The aggregate stockmarket value of ÅF Groupshares totalled SEK 670million at the end of 2003.

99 00 01 02 03 04

Affärsvärlden’sall-share index

Number of shares traded in thousands(incl. late applications)

(c) SIX

B shareCarnegie Small Cap Index

ÅF shares

Å F s h a r e s

In 2000, employees responded posi-tively to an invitation to subscribe to aconvertible bond. More than 700 ofthem subscribed for SEK 96 million,equivalent to almost 90 percent of thetotal subscription value.

The conversion rate when the sub-scriptions were made was SEK 171per share. After an adjustment for theextraordinary dividends paid out in 2000and 2001, this has now been reducedto SEK 155 per share. If the conversionoption is fully utilised during the periodJanuary 2004 to June 2005, the additio-nal shares will represent a dilution of 6.1of the votes and 9.6 percent of capital.

Changes in the share and option programme

Year Change A shares B shares Total

1984 Convertible bonds to employees 727,460 0 727,460

1985 Investor/Providentia part-owners 684,860 42,600 727,460

1986 Floated on the A list 684,860 342,600 1,027,460

1987 Split 1:3 1,369,720 1,712,660 3,082,380

1990 After conversion 1,639,140 2,113,240 3,832,380

1994 Redesignation of A shares 828,665 3,003,715 3,832,380

1996 Bonus issue 1:2 1,242,997 4,505,572 5,748,569

1997 Redesignation of A shares 402,219 5,346,350 5,748,569

2000 Convertible bond equivalent to 609,840 B shares for conversion 2004–2005

At the end of 2003 the grand total of 5,748,569 shares was divided into 402,219 class A shares (10 votesper share) and 5,346,350 class B shares (1 vote per share). On full conversion, the total number of shareswill be 6,358,409 (2004/2005).

The ten largest owners

31 December 2003Owner A shares B shares Capital % Votes %

Ångpanneföreningen’s Foundation for Research & Development 340,472 1,107,046 25.2 48.2

Sweco AB 0 751,700 13.1 8.0

SEB unit trust funds 0 686,700 12 7.3

Lannebo funds 0 392,300 6.8 4.2

ÅFOND (Ångpanneföreningen Group Foundation) 48,352 292,780 5.9 8.3

Church of Sweden 0 130,900 2.3 1.4

Royal Swedish Academy of Sciences 0 109,200 1.9 1.2

Salaried Employees’ Union, HTF 0 82,800 1.4 0.9

Länsförsäkringar Miljöteknikfond 0 73,000 1.3 0.8

Key ratios per share (SEK)

1999 2000 2001 2002 2003

Profit after tax 6.35 40.04 9.91 –22.18 5.24

After full conversion 04/05 — 36.48 9.00 –22.18 4.87

Equity 58 94 92 57 59

Dividend 3.50 13.00(1 13.00(2 2.00 2.60(3

1 Of which SEK 7.50 from Alecta premium refunds.2 Of which SEK 8.00 from Alecta premium refunds. 3 Proposed dividend.

Shareholders in Sweden and abroad

31 December 2003 Percent of capital

Sweden 97.9

Rest of Scandinavia 0.2

Rest of Europe 1.4

USA 0.4

Rest of world 0.1

Shareholder categories

31 December 2003 Percent of capital

Foreign owners 2.1

Swedish owners 97.9

of which:

Institutions 79.2

Private individuals (incl. close companies) 20.8

Size of shareholding

31 December 2003Number Share- Percentage ofshares holders shares

<500 3,941 8.8

500–5,000 532 12

>5,000 50 79.2

Total 4,523 100

During 2003 the number of shareholders increasedby 96.

A consulting firm’s capacity utilisationrate – expressed in the ÅF Group as theinvoiced-time ratio – is crucial for its abil-ity to generate a profit. To appreciatethe significance of this, one need onlyreflect on the fact that every percentagepoint difference in the invoiced-time ratioequates to a rise or fall of SEK 22 mil-lion in profits. One percentage point isequivalent to 16 hours of a consultant’stime per year or 20 minutes of invoice-able time a week. For the Group tobreak even, invoiced-time ratio must be65 percent.

The hourly rate, of course, is also anessential component behind the prof-itability of any consulting company.Increasing the hourly rate by SEK 10would, if all other factors remainedunchanged, improve profits for the ÅFGroup by SEK 26 million a year. Theaverage hourly rate invoiced during 2003was approximately SEK 644, eventhough certain specialists can commandtwice that figure,

Various approaches are adopted toreduce sensitivity, including taking oncontracted consultants and temporarystaff for specific projects, adding a vari-able component to an increasing numberof salaries, broadening our expertiseand markets, and developing “packages”of services to increase competitivenessand reduce clients’ sensitivity to prices.

Fixed-price contracts

Fixed-price contracts for carefully speci-fied consulting services are beneficial toboth parties. Often consultants are ableto make use of past experience and arewell placed to accurately assess theamount of time and resources required.

Training and tuition in key factorssuch as project management, the provi-sion of adequate insurance protectionand the formulation of constructiveterms and conditions, can greatly reducethe risks associated with this kind ofagreement.

Financial risks

Financial risks can be divided up intoexchange rate risk, interest rate risk andcredit risk. Exchange rate risk is limited,as payments and investments are gener-ally made in local currency.

The interest rate risk for the ÅF Groupis relatively low. However, interest ratesdo stall or stimulate investment on thepart of clients, and thus influence marketconditions for the ÅF Group.

Credit risk arises because the companyhas a high number of outstandingaccounts receivable at any given time.However, the amount of credit given toclients in this way is limited throughadvance payments and by taking meas-ures to avoid clients who are likely tohave payment problems. Historically the

Companies that sell know-ledge are heavily dependenton market growth. This isbecause payroll expensesand costs for premises arefixed over the medium termand account for a substan-tial portion of total costs.Payroll expenses accountfor approximately 70 per-cent of the total costs borneby the ÅF Group.

S e n s i v i t y a n a l y s i s

Group has reported only very limitedcredit losses. Overall, therefore, theGroup’s financial risks are relatively low.

Employees

Not including staff in divested compa-nies, employees whose contracts wereterminated and those who retired during2003, staff turnover for the year stoodat seven percent – a low level for thetechnical consulting industry as a whole.

It is very unusual for large numbers ofkey members of the ÅF Group’s consult-ing team to leave the company. The riskis effectively forestalled by treatingemployees well and offering good mar-ket rates for salaries and rewardingwork. Regular attitude surveys carriedout by the ÅF Group show that employ-ees are largely happy in their work.

IT security

Current methods of doing business callfor the most scrupulous concern for ITsecurity. The ÅF Group offers high levelsof security through a number of activeinitiatives (including measures to protectagainst hacking and viruses) and hasclear rules governing channels for thedissemination of information both inter-nally and externally. The Group also runshighly developed, secure back-up systems.

Insurance

As dictated by good practice in theindustry, the Group has taken out con-sulting liability insurance. This covers theÅF Group for the liability involved in anygiven project (normally the same as theproject fee), up to a ceiling of 120 timesthe basic amount used in Sweden fornational social security purposes. In theevent of a claim, the Group itself mustbear a risk equivalent to one basicamount.

The Group is covered for loss of con-tribution to cover fixed or additionalcosts in the event that its premises/equipment are damaged, stolen or inany other way rendered unusable.

Legal disputes

The ÅF Group is involved in a small num-ber of disputes that may have to be set-tled in court. In those instances where itis likely that the court’s findings may

incur expenses for the Group, thesehave been charged to the financialaccounts.

Competitors

While foreign consulting companies haveonly a limited impact on the Swedishmarket, the ÅF Group does have numer-ous domestic competitors and is there-fore compelled to compete for the bestemployees. At the same time only ahandful of companies – among them, the ÅF Group – are in a position toundertake major full-service projects,and this is a strength that appeals topotential employees.

As demand for qualified consultantsrises, so too does the need for the ÅFGroup to present itself as an attractiveemployer, and it has therefore ear-marked considerable funds each yearfor recruitment and induction activities.

Effect on earnings SEK/Factor Change share/year (before tax)

Capacity utilisation ±1% ±3.80

Hourly rate ±1% ±2.60

Payroll costs ±1% ±1.90

Overheads ±1% ±0.55

Number of employees ±1% ±0.10

Five-year financial summaryFigures in millions of SEK unless otherwise stated 1999 2000 2001 2002 2003

Operating income and profit/loss Operating income 1,612.0 1,746.9 1,962.6 1,916.1 1,995.4Operating profit/loss after depreciation and participations in associated companies 49.3 339.3 85.0 –135.6 52.9Profit/loss after net financial items 55.1 330.9 88.0 –150.6 46.6Profit/loss after net financial items excluding items affecting comparability 55.1 90.6 76.3 –40.4 46.6Operating margin, percent 3.1 19.4 4.3 –7.1 2.7Profit margin, percent 3.4 18.9 4.5 –7.9 2.3Profit margin excluding items affecting comparability, percent 3.4 5.2 3.9 –2.1 2.3

Capital structureFixed assets 476.0 608.9 539.0 474.6 424.6Current assets 529.9 779.6 737.3 617.6 697.2Equity 332.7 542.8 527.8 324.9 341.9Minority interests 3.9 9.0 14.7 5.6 0.6Provisions 151.4 160.6 101.2 123.1 68.6Long-term liabilities 58.7 151.2 116.5 115.7 109.3Current liabilities 459.2 524.9 516.2 523.0 601.3Balance sheet total 1,005.8 1,388.5 1,276.3 1,092.3, 1,121.8Equity (31 December) 332.7 542.8 527.8 324.9 341.9Equity (annual average) 357.6 437.8 535.3 426.3 333.4Total capital (annual average) 909.7 1,197.1 1,332.4 1,184.3 1,107.0Capital employed (annual average) 519.9 654.2 754.4 626.7 520.1Equity ratio, percent 33.1 39.1 41.3 29.7 30.5Current ratio, times 1.2 1.5 1.4 1.2 1.2

ProfitabilityReturn on equity, percent 10.2 52.6 10.6 –29.9 9.0Return on total capital, percent 7.3 29.0 8.0 –11.5 5.1Return on capital employed, percent 12.8 52.9 14.1 –21.7 10.9Interest cover, times 5.7 6.6 5.1 –1.6 5.5

OtherInvoiced-time ratio, percent 68.2 69.5 69.7 66.4 67.6Gross investment in equipment 86.1 54.4 45.0 42.3 40.0Gross investment in property 39.1 15.4 8.3 5.5 3.3Employees (FTEs) excluding associated companies 2,048 2,044 2,167 2,309 2,260Employees (FTEs) including associated companies 2,222 2,191 2,470 2,607 2,599

Operating marginOperating profit/loss in relation to operatingincome.

Profit marginProfit/loss after net financial items, in relationto operating income.

Equity ratioEquity in relation to the balance sheet total.

Current ratioCurrent assets in relation to current liabilities.

Return on equityProfit/loss after tax in relation to average shareholders’ equity.

Return on total capitalProfit/loss after net financial items with re-storation of interest expense, in relation tothe average balance sheet total.

Return on capital employedProfit/loss after net financial items and re-storation of interest expense in relation to the average balance sheet total minus currentliabilities and deferred tax liabilities.

Interest coverProfit/loss after net financial items and re-storation of interest expenses, in relation tointerest expense.

Invoiced-time ratioThe time clients are charged for, in relation tothe total time all employees are present at work.

Employees (full-time equivalents: FTEs)Number of employees during the year con-verted to the equivalent number of year-long,full-time jobs. The actual number of employeesis higher owing to part-time employment andthe fact that some employees work only partof the year.

Administration report 2003

Sales and earnings

Net sales totalled SEK 1,995 (1,916)million, an increase of 4 percent. Profitafter net financial items came to SEK47 (–151) million. The profit margin was2.3 (–7.9) percent. Consolidated netprofit amounted to SEK 30 (–128)million.

Cash flow and financial position

Cash flow amounted to SEK 24 (–147)million after net repayments on borrow-ings of SEK 9 (–11) million and dividendpayments of SEK 11 (75) million.

The Group had liquid assets of SEK93 (69) million at the year-end.

Equity per share amounted to SEK59, and the equity ratio stood at 30.5percent. At the beginning of the yearthe Group had equity per share of SEK57 and an equity ratio of 29.7 percent.

Acquisitions

In July ÅF-Infrateknik acquired SwedeRailAB from SJ, Green Cargo and EuroMaint.SwedeRail was set up in 1981 as an in-dependent international advisor to createefficient rail-based transport solutions.SwedeRail has contracts with financinginstitutions and aid agencies such asSida (the Swedish International Devel-opment Cooperation Agency), and hascarried out assignments in Asia, Africa,Europe and the USA.

In August the ÅF Group acquired60 percent of the issued shares inGöteborg Energi International AB (a sub-sidiary of Göteborg Energi), with anoption to purchase the remainder of theshares in three years’ time. GöteborgEnergi International, which was estab-lished in 1994, is an energy consultingbusiness with an international focus andparticular expertise in district heating.Important clients include Sida and theWorld Bank.

In September ÅF acquired installationconsultants Andresen & Jacobsen fromSelmer Skanska. Andresen & Jacobsenis being integrated into the ÅF Group’sNorwegian operation, which, followingthis acquisition, consists of 55 employ-ees in Oslo, Moss, Alta and Bodø. ÅFNorway focuses primarily on installationtechnology solutions for properties inthe public sector and industry.

Group and parent company

The Board and President of AB Ång-panneföreningen (publ) herewith submittheir annual report for the year 2003.

AB Ångpanneföreningen, which hasits registered office in Stockholm(Swedish corporate ID no. 556120-6474), is the parent company of the ÅFGroup. The Group provides advancedtechnical consulting services in installa-tions, engineering, energy, environmentand infrastructure. The Group hasaround 2,750 (2002: 2,600) employees.

Through its subsidiaries and associ-ated companies, the ÅF Group is repre-sented in around ten European coun-tries in addition to Sweden. The numberof employees in these companies cur-rently totals 469 (416).

The basis for the ÅF Group’s consult-ing business is the development of sys-tems and products, and investment,maintenance and ongoing modificationrelating to industrial clients’ installations,processes, machinery and buildings.The majority of projects originate inSwedish and foreign industrial com-panies, service companies and the realestate sector.

The market for technical consultingservices remained at a relatively lowlevel in 2003 without any major fluctua-tions in demand. It is therefore pleasingthat the ÅF Group can report improvedearnings and substantially improvedcash flows, which were a result of re-duced costs and the commitment anddedication of employees. The invoiced-time ratio was 67.6 (66.4) percent.

The negative trend has been broken– but profitability levels are still far fromsatisfactory. Nevertheless, the actionstaken have laid the foundations for con-tinued growth in earnings. The ÅF Groupis considerably more cost-effective andhas a clearer profile – and the neworganisation affords better opportunitiesto exploit both the Group’s size and itsstructural capital.

On the strength of the changesmade, the ÅF Group is to adopt a moreaggressive stance in the marketplace in2004. One important element in thestrategy is to explore the possibilitiesfor increased growth in Sweden and/orother parts of Europe.

Divestments and disposals

In September the ÅF Group sold its edu-cational subsidiary ÅF-SIFU to theDanish Technological Institute inCopenhagen, Denmark. The DanishTechnological Institute acquired all ofthe Group’s shares in ÅF-SIFU, equiva-lent to 75% of the total number ofshares. The divestment forms part ofthe ÅF Group’s strategy of focusingmore exclusively on technical consult-ing. The Group believes the DanishTechnological Institute to be an ownerwhich can further develop the opera-tions of ÅF-SIFU.

Important events during the year

The ÅF Group and Siemens MedicalSolutions entered into a strategic part-nership agreement in mid-April underwhich the Group took over part ofSiemens’ medical X-ray product devel-opment activities in Stockholm. Theagreement led to 16 Siemens employ-ees transferring to the Group, whichthereby took over a development en-vironment with unique expertise in med-ical technology, especially when itcomes to mammography and X-rays.

In May the ÅF Group was commis-sioned to upgrade and develop the dis-trict heating grid in Belgrade, Serbia.The grid is operated by municipallyowned Beogradske Elektrane company.The Group is also to make the districtheating company more efficient, forexample through the introduction of newfinancial procedures, customer billingsystems and information systems. TheGroup won the contract as part of aconsortium consisting of the ÅF Group,Göteborg Energi International andIreland’s Helm Corporation.

In August the ÅF Group signed anagreement on application developmentand system integration for a new top-level production system for Akzo NobelDecorative Coatings in Malmö. The newsystem will manage an integrated pro-duction control system and aspects ofthe administration of the Malmö plant,which has 700 employees.

In October the ÅF Group was appoint-ed installation consultant for improve-ments to the county hospital in Halmstad,Sweden. Three buildings are to be

AB Ångpanneföreningen (publ)Corporate identity number 556120-6474

A d m i n i s t r a t i o n r e p o r t

demolished and replaced with a newentrance hall and reception area of some16,000 square metres in size. TheGroup’s contract involves project plan-ning for the heating, cooling, sprinklerand air-conditioning systems and aninstallation for medical gases.

ÅF sold its Härolden 1 property(3,500 square metres) in central Stock-holm to Humlegården with effect fromthe beginning of 2004. The sale is ex-pected to increase the Group’s net profitby around SEK 20 million in the firstquarter of 2004.

In mid-December ÅF won an orderworth around SEK 40 million from StoraEnso in connection with its decision tobuild a new paper machine for uncoatedmagazine paper at the Kvarnsveden millin Borlänge, Sweden. The contractinvolves project planning for processesand plant, and runs through to the start-up of the paper machine at the end of2005. The Group has previously workedwith the mill on feasibility studies andpreliminary project planning ahead ofthe investment. The work will be ledfrom the ÅF Group’s offices in Karlstad.

At the end of December the SwedishNational Rail Administration appointedthe ÅF Group as consulting engineerresponsible for electrical, signalling andtelecommunication systems for the CityLine rail project in Stockholm. Workbegan in December 2003.

Important events after the end ofthe reporting period

The ÅF Group has entered into an agree-ment on the sale of its properties inMalmö, Växjö, Norrköping, Luleå andSundsvall to Estancia Fastigheter AB.The sale is expected to increase theGroup’s net profit by around SEK 5 mil-lion in the second quarter of 2004.

The ÅF Group has won a major con-tract from Holmen Paper in connectionwith its decision to invest in a newpaper machine at the Fuenlabrada millin Madrid, Spain. The project will beheaded by the Pulp & Paper Division viathe subsidiary Incepal S.A. in SanSebastian, Spain. The order is the resultof close cooperation between Pulp &Paper’s offices in Spain, France andSweden.

The ÅF Group has split its Industry &Systems Division into two separate divi-sions: Industry and Systems. To safe-guard the profitability of the SystemsDivision, 50 employees have beenissued with notice that their contractswill be terminated. Altogether thechange will result in structural costs ofup to SEK 25 million, which will berecognised as expense in the first quar-ter of 2004.

As part of the reorganisation, theNew Markets Division is being woundup. ÅF-Data will become part of theSystems Division, and the remaining ÅF-Kontroll and ÅF-Infrateknik will be form-ing their own separate divisions:Inspection & Testing and Infrastructure.

Consulting activities

The Group’s consulting activities gener-ated a profit of SEK 56 (–19) million for2003. Sales totalled SEK 2,056 (2,021)million before the elimination of inter-company transactions.

Energy & Environment

Energy & Environment noted relativelygood demand on the energy side in2003. Project planning for district heat-ing systems and a series of assign-ments for power plants resulted in asatisfactory invoiced-time ratio. ForEnvironment, demand picked up

towards the end of the year after a gen-erally weak first half. Internationally thedivision fared well, winning several newcontracts, primarily in the aid field.

Industry & Systems

The market for IT & product develop-ment was generally very difficult andshowed no signs of improving in 2003.Competition was particularly fierce inthe Stockholm region, and prices cameunder sustained pressure. IT & ProductDevelopment’s operations had anextremely tough year. The division alsoencountered a weak market for IndustrialAutomation. The strongest businessarea in 2003 was Electric Power.

Installations

The Installations Division noted a deteri-oration in the construction market in2003, primarily because the proportionof large projects fell in line with a reduc-tion in the proportion of new buildings.However, Installations managed to limitthe reduction in capacity utilisationthrough focused sales work and a gen-eral increase in modernisation projects.Installations also enjoyed success withconsulting services relating to the ener-gy efficiency of commercial and indus-trial properties.

Pulp & Paper

Demand for consulting services fromthe pulp and paper industry was rela-tively weak in 2003. The Swedish mar-ket was dominated by maintenance proj-ects and relatively few new investments.An improvement was seen towards theend of the year, but it generally takes acouple of quarters before major ordersimpact on capacity utilisation. The divi-sion’s earnings growth was due to effi-ciency improvements and the closure of

Sales MSEK* Operating profit/loss MSEK Operating margin % Number of employeesDivision 2002 2003 2002 2003 2002 2003 2002 2003

Energy & Environment 320 288 –4 13 –1.2 4.4 290 267Industry & Systems 638 648 –26 –11 –4.1 –1.7 805 754Installations 399 420 26 18 6.6 4.3 420 425Pulp & Paper 282 305 –30 11 –10.5 3.5 350 351New Markets 382 395 –14 26 3.6 6.7 345 380

Figures for 2002 are proforma figuresThe figures for New Markets do not include the values for ÅF-SIFU AB as the company has now been sold.

* Before elimination of intercompany transactions.** Excl. associated companies

Financial information by division

the loss-making UK operation. TheGerman operation made a positive con-tribution to earnings. The French opera-tion made a negative contribution toearnings but made a major improve-ment during the second half of the year.

New MarketsÅF-Data

ÅF-Data recorded increased licencesales and increased consultant capacityutilisation in what still remained a weakmarket for business systems. This,together with reduced costs, explainsthe improvement in earnings. MatzAxelsson took over as managing direc-tor during the fourth quarter.

ÅF-Infrateknik

ÅF-Infrateknik won three relatively largecontracts in the rail sector during thesecond half of 2003, which resulted inimproved and more stable capacity utili-sation, although the major impact isexpected to come in 2004. The situa-tion in the telecoms market was still relatively tough, although there was aslight upswing in the fourth quarter.

ÅF-Kontroll

ÅF-Kontroll gained market share andhad a very good year. Capacity utilisa-tion was good in all business areas:Inspection, Testing and Certification.Reduced administrative expenses alsocontributed to the increase in earnings

Research and development

The divisions carry out extensive R&Dwork in conjunction with universities andtrade organisations, and also interna-tionally with EU funding. In-house methoddevelopment also forms part of thisR&D work. For the Group as a whole,investment in R&D was equivalent toSEK 12,000 per employee.

Investment

Gross investment in machinery andequipment during the year amounted toSEK 40 (42) million, excluding invest-ment through acquisitions.

Employees and salaries

The number of full-time equivalents inthe Group totalled 2,260 (2,309)excluding associated companies, or2,599 (2,607) including associatedcompanies. Of these, 469 (416) wereemployed outside Sweden. The numberof full-time equivalents in the parentcompany was 48 (40). Personnel costsfor the Group amounted to SEK 1,289(1,282) million.

Real estate management

In spring 2003 the Board resolved tosell seven of the Group’s eight proper-ties. The property in Tyresö (Snickaren6) was sold in the third quarter. Thesale boosted net profit by aroundSEK 1 million.

The property Härolden 1 (3,500square metres) in central Stockholmwas sold to Humlegården in the fourthquarter, with Humlegården taking overthe property from the beginning of2004. The sale is expected to increasethe Group’s net profit by around SEK 20million in the first quarter of 2004.

The five remaining properties to besold were sold after the year-end, inJanuary 2004, to Estancia FastigheterAB. The sale is expected to increasethe Group’s net profit by around SEK 5million in the second quarter of 2004.

The one property still in the Group’sownership is Härolden 44 (10,700square metres), which is the Group’shead office on Fleminggatan inStockholm. The property was valued atSEK 220 (240) million at the end of theyear by Forum Fastighetsekonomi AB.The book value is SEK 128 (131) million.

Shares

AB Ångpanneföreningen’s “B” shareshave been quoted on the A list of theStockholm Stock Exchange sinceJanuary 1986. Ångpanneföreningentraded as a co-operative associationfrom 1895 until 1980 and has tradedas a joint-stock company since 1981.

The combined market value of thecompany’s shares was approximatelySEK 670 million at the year-end.

Ångpanneföreningen’s “B” sharestraded at SEK 116 at the end of theyear, compared with SEK 92 at thebeginning of the year, which is anincrease of 26 percent. The Stockholmall-share index gained 30 percent duringthe same period.

The total number of issued shares atthe end of 2003 was 5,748,569:402,219 “A” shares (ten votes pershare) and 5,346,350 “B” shares (onevote per share). After full conversion in2004/05 of the convertible bond loansissued in 2000, the number of issuedshares would rise to 6,358,409. This isequivalent to an increase of 609,840“B” shares or 9.6 percent of the sharecapital and 6.1 percent of the votes inthe company. There were 4,523(4,427) shareholders at the year-end.

The parent company

The parent company generated sales ofSEK 107 (96) million and profit after netfinancial items of SEK 85 (–68) million.

Liquidity guarantee

In order to increase the liquidity of Ång-panneföreningen shares, the Board ofDirectors has, after consultations withprincipal shareholder, Ångpanneförening-en’s Foundation for Research andDevelopment, reached an agreementwith the stockbrokers Öhman Fond-kommission within the framework of theStockholm Stock Exchange’s system forliquidity providers.

The agreement, which came intoeffect on 31 October 2003, means inessence that Öhman Fondkommissionundertakes to quote bid and offerprices for Ångpanneföreningen’s “B”shares and to buy and sell the shares atthese prices on its own account.

Board of Directors and President

At AB Ångpanneföreningen’s annual gen-eral meeting in Stockholm on 7 May2003, it was resolved to re-elect Eva-Lotta Kraft, Carl-Erik Nyquist, PeterSandström, Gunnar Svedberg, HelenaSkåntorp and Magnus Grill to the Board,and to elect President Jonas Wiström tothe Board. Jan Fröjd, Leif Holmgren,

Karin Bäcker (deputy) and Lars Olsson(deputy) were appointed employee rep-resentatives on the Board by the organi-sations representing ÅF staff. At itsinaugural meeting following the generalmeeting, the Board elected Carl-ErikNyquist as its Chairman and GunnarSvedberg as its Vice Chairman.

The Board’s work

In 2003 Ångpanneföreningen’s Board ofDirectors consisted of seven memberselected by the annual general meeting.The Board held seven minuted meetingsduring the year, including its inauguralmeeting and a strategy seminar.

The Board’s work follows rules ofprocedure laid down by the Board tosafeguard the further development ofÅngpanneföreningen’s business. Therules of procedure also ensure that theBoard’s need is met to receive informa-tion on day-to-day operations and tosupervise these operations. The Boardhas also laid down rules of procedurefor the work of the President.

The Board has set up a Remune-ration Committee whose role is to drawup the principles for the remunerationof the President and Group Manage-ment on behalf of the Board.

The most important resolutions andduties of the Board during the yearwere:• Review of the ÅF Group’s mission and

vision

• Resolution to sell the bulk of theGroup’s properties

• Resolution to request authority fromthe general meeting to issue sharesin connection with acquisitions

• Resolution to sell the educationalcompany ÅF-SIFU.

Group Management

In 2003 the Group Management teamconsisted of Jonas Wiström (GroupPresident), Anders Gabrielsson(Executive Vice President and CFO),Karl-Anders Eriksson (Executive VicePresident, Corporate Resources), ViktorSvensson (Director, Corporate Infor-mation), and the Divisional ManagersJan Nordling, Christer Karlsson and Per

Göransson. From 2004 the DivisionalManagers Matz Axelsson, Åke Roseniusand Jörgen Backersgård will also bepart of the Group Management team.Gunilla Fladvad is the Group Manage-ment Secretary.

Dividend

The Board proposes a dividend for2003 of SEK 2.60 (2.00) per share.The proposed dividend is in line with thestated dividend policy, which meansthat dividends are to correspond toaround 50 percent of the Group’s netprofit.

Prospects for 2004

The ÅF Group expects the overall mar-ket for technical consulting services tobe unchanged or slightly improved in2004. It is already possible to discernan increase both in orders and in a will-ingness to invest in development in thepulp and paper industry, among others.Nevertheless the Group is prepared foranother tough year, in which its goal isto report a continued appreciableimprovement in earnings.

Adjustment to IFRS

To meet the new reporting requirementsresulting from the introduction of IFRS,we have reviewed the business andenlisted the help of external experts.Where we have found that the Group willbe affected by the new rules, action hasbeen taken. For example, the Group’sprovisions for pensions as at 31December 2003 have been recalculatedby an actuary in accordance with thenew rules. This recalculation showedthat these provisions will not have anynegative impact on equity. An internalworking party has been set up to con-tinue the work on IFRS, and ÅF expectsto complete the adjustment processduring the first quarter of 2004.

Change of accounting policies

The following recommendations fromthe Swedish Financial AccountingStandards Council have been appliedwith effect from 1 January 2003: RR22Presentation of financial statements,RR25 Segment reporting: business andgeographical segments, RR26 Events

after the balance sheet date, and RR27Financial instruments: disclosure andpresentation. The change has not led toany significant differences in the Group’sreported financial position and perform-ance.

Proposed appropriation of profits

Non-restricted profits of SEK 94,956,178are at the disposal of the Annual GeneralMeeting.

The Board and President proposethat these profits be appropriated asfollows:

Dividend of SEK 2.60 per share 14,946,279To be carried forward 80,009,899Total 94,956,178

The ÅF Group

According to the consolidated balancesheet, the Group’s non-restricted equitytotals SEK 130,852,000. None of thisequity is to be allocated to restrictedreserves.

Income statementGROUP PARENT COMPANY

(in thousands of SEK) Note 2003 2002 2003 2002

Operating incomeNet sales 2 1,993,975 1,914,136 76,728 61,951Other operating income 3 1,378 1,981 30,246 34,227

1,995,353 1,916,117 106,974 96,178

Operating expensesOther external expenses 4 –581,011 –580,058 –61,875 –37,946Personnel costs 5 –1,289,281 –1,282,173 –37,011 –38,812Depreciation and write-downs of tangible and intangible assets 6 –64 605 –69,293 –9,868 –10,158Items affecting comparability 7 — –110,201 64,481 –69,507Other operating expenses 3 –8,941 –8,244 –9,911 –9,653

–1,943,838 –2,049,969 –54,184 –166,076

Share of associated companies’ profit/loss 1,361 –1,718Operating profit/loss 52,876 –135,570 52,790 –69,898

Result from financial investmentsResult from shares in Group companies 8 34,191 17,583Result from shares in associated companies 9 –444 — –3,483 716Interest income and similar profit/loss items 10 4,377 10,062 11,385 8,289Interest expense and similar profit/loss items 11 –10,168 –25,085 –9,771 –24,890

–6,235 –15,023 32,322 1,698

Profit/loss after financial items 2 46,641 –150,593 85,112 –68,200

Appropriations 12 — — 22,381 –302Tax on result for the year 13 –16,946 17,249 –22,096 19,953Minority shareholders’ share of profit/loss 419 5,829NET PROFIT/LOSS FOR THE YEAR 30,114 –127,515 85,397 –48,549

Earnings per share before full dilution, SEK 25 5.24 –22.18 — —Earnings per share after full dilution, SEK 25 4.87 –22.18 — —Proposed dividend per share, SEK 2,60 2,00

The total number of shares is 5,748,569. After full conversion the total number of shares will be 6,358,409 (2004/2005).

Balance sheetsGROUP PARENT COMPANY

ASSETSFixed assetsIntangible assets

Goodwill 14 43,165 43,074 — —Capitalised development expenditure 15 1,661 — — —

44,826 43,074Tangible assets

Buildings and land 16 254,557 268,904 169,478 210,862Equipment, tools, fixtures and fittings 17 96,939 111,704 8,152 8,506

351,496 380,608 177,630 219,368Financial assets

Participations in Group companies 18 — — 148,113 198,731Receivables from Group companies — — 46,113 55,985Share of equity in associated companies 19 25,855 27,603 4 19,048Other securities held as fixed assets 20 1,586 1,066 110 110Receivables from associated companies 300 1,382 300 300Other long-term receivables 21 508 20,915 38 9,167

28,249 50,966 194,678 283,341Total fixed assets 424,571 474,648 372,308 502,709

Current assetsCurrent receivables

Accounts receivable 327,788 408,297 2,192 1,508Receivables from Group companies — — 284,507 187,528Receivables from other related legal persons 320 160 320 160Income taxes recoverable 32,256 15,555 16,099 —Revenue generated but not invoiced 208,121 43,215 3,117 429Other receivables 21 10,492 53,870 396 12,426Prepaid expenses and accrued income 25,670 27,621 10,955 18,431

604,647 548,718 317,586 220,482

Investments 22 — 174 — —

Cash and bank balances 92,548 68,751 57,500 9,344

Total current assets 697,195 617,643 375,086 229,826

TOTAL ASSETS 1,121,766 1,092,291 747,394 732,535

GROUP PARENT COMPANY

EQUITY AND LIABILITIESEquity 24Restricted equity

Share capital (402 219 series A shares and 5,346,350 series B shares: 5,748,569 shares at par value SEK 20) 114,971 114,971 114,971 114,971Restricted reserves 96,087 130,705 23,324 23,324

211,058 245,676 138,295 138,295Non-restricted equity

Non-restricted reserves 100,738 206,755 9,559 78,159Profit/loss for the year 30,114 –127,515 85,397 –48,549

130,852 79,240 94,956 29,610

Total equity 341,910 324,916 233,251 167,905

Minority shareholding 612 5,645 — —Untaxed reserves 26 — — 75,464 97,845

ProvisionsProvisions for pensions 27 35,925 32,377 17,909 17,526Provisions for deferred tax 32,707 21,227 –622 –19,462Provisions for restructuring 27 — 69,507 — 69,507

68,632 123,111 17,287 67,571

Long-term liabilities 28Interest-bearing

Liabilities to credit institutions 12,065 18,975 — 18,925Convertible bond loan 96,006 96,006 96,006 96,006

Non-interest-bearingLiabilities to Group companies 40,116 43,845Liabilities to associated companies 1,275 —Other long-term liabilities — 652 — —

109,346 115,633 136,122 158,776

Current liabilitiesLiabilities to credit institutions 28 163,795 165,735 161,200 164,285Work invoiced but not yet carried out 63 953 —Accounts payable – trade 94,552 73,157 11,325 6,667Liabilities to Group companies — — 80,874 51,711Tax liability — — — 3,251Other liabilities 75,922 72,253 18,176 982Accrued expenses and prepaid income 29 203,044 211,841 13,695 13,542

601,266 522,986 285,270 240,438

TOTAL EQUITY AND LIABILITIES 1,121,766 1,092,291 747,394 732,535

Pledged assets 30 16,587 18,930 None NoneContingent liabilities 31 34,905 26,914 34,611 23,787

GROUP PARENT COMPANY

Share Restricted Non-restricted Share Restricted Non-restricted capital reserves equity capital reserves equity

Balance brought forward 1 January 2002 114,971 140,838 271,954 114,971 23,324 119,384Translation differences — –517 –83Total changes in equity not reported in the income statement — –517 –83Adjustment between non-restricted and restricted equity — –9,616 9,616Net loss for the year — — –127,515 — — –48,549Dividend — — –74,732 — — –74,732Group contribution — — 46,538Tax effect of Group contribution –13,031Equity on 31 December 2002 114,971 130,705 79,240 114,971 23,324 29,610

Translation differences — –515 –1,107Total changes in equity not reported in the income statement — –515 –1,107Adjustment between non-restricted and restricted equity — –34,103 34,103Net profit for the year — — 30,114 — — 85,397Dividend — — –11,498 — — –11,498Group contribution — — –11,879Tax effect of Group contribution — — 3,326Equity on 31 December 2003 114,971 96,087 130,852 114,971 23,324 94,956

For additional information, please refer to note 24.

Specification of changes in equity

Cash flow analysesGROUP PARENT COMPANY

Operating activities 33Profit/loss after financial items 46,641 –150,593 85,112 –68,200Liquidation of/transfers to structural reserve –69,507 69,507 –69,507 69,507Adjustment for items not included in the cash flow 33 52,306 89,567 41,919 4,654

29,440 8,481 57,524 5,961Taxes paid –20,886 –27,441 –19,280 –14,503Cash flow from operating activities before changes in working capital 8,554 –18,960 38,244 –8,542

Cash flow from changes in working capitalChange in receivables –49,941 15,473 –31,085 –58,825Change in accounts payable – trade 24,582 –39,820 4,658 –10,820Change in other liabilities 63,521 6,262 3,402 –32,526

Cash flow from operating activities 46,716 –37,045 15,219 –110,713

Investing activitiesAcquisition of subsidiaries 33 –2,291 –37,560 — —Acquisition of intangible assets –7,463 –2,756 — —Acquisition of tangible assets –36,038 –47,803 –5,031 –6,433Acquisition of financial assets — –7,283 –4,323 –52,733Shareholders’ contribution provided –53,200 —Sales of subsidiaries 33 14,064 — — —Sales of tangible assets 12,836 3,153 30,126 80Sales of financial assets 23 — 86,623 27,992Change in long-term receivables 15,947 50,333 19,001 75,103Change in long-term liabilities 177 –4,900 5,128 –49,032Cash flow from investing activities –2,745 –46,816 78,324 –5,023

Financing activitiesDividends paid –11,498 –74,732 –11,498 –74,732Group contribution — — –11,879 46,538Proceeds from borrowing 7,077 12,004 — 21,210Amortisation of loans –15,927 –800 –22,010 –7,714Cash flow from financing activities –20,348 –63,528 –45,387 –14,698

Cash flow for the year 23,623 –147,389 48,156 –130,434

Liquid assets and investments brought forward 68,925 216,314 9,344 139,778Liquid assets and investments carried forward 92,548 68,925 57,500 9,344

Notes and accounting policies Values in tables in thousands of SEK unless otherwise stated

General accounting policies The annual report has been prepared in accordance with the SwedishAnnual Account Act, the recommendations of the Swedish FinancialAccounting Standards Council and the statements of the Council’sEmerging Issues Taskforce.

The company’s registered office etc.AB Ångpanneföreningen trades as a joint-stock company and has itsregistered office in Stockholm, Sweden.

Segment reporting The Group’s internal reporting system is designed to follow up the returnon the Group’s services, and so business segments are the main basisfor segmentation.

Classification etc. Fixed assets, long-term liabilities and provisions consist essentially ofamounts expected to be recovered or paid more than 12 months fromthe balance sheet date.

Current assets and current liabilities consist essentially of amountsexpected to be recovered or paid within 12 months of the balance sheetdate.

Valuation policies etc.Assets, provisions and liabilities are reported at cost unless otherwisestated below.

Intangible assets Intangible assets are reported in accordance with the Swedish FinancialAccounting Standards Council’s recommendation RR15 Intangible assets.This recommendation means, among other things, that an intangibleasset is recognised only where the asset is identifiable, control is exercised over the asset, and the asset is expected to provide futureeconomic benefits.

The Group and parent company’s research expenditure is recognisedas expense in the period in which it arises. Research expendituredenotes expenditure on research intended to obtain new scientific andtechnical knowledge.

The Group reports development expenditure as an intangible assetonly if, over and above the general requirements above, it is technicallyand financially feasible to complete the asset, and there is both an intention and the potential for the asset to be used in the business.

Development expenditure denotes expenditure on research results orother knowledge which is applied to achieve new or improved processes.The Group reports development expenditure at cost less accumulatedamortisation and impairment. The parent company recognises develop-ment expenditure as expense as it arises.

Other intangible assets acquired by the Group are reported at costless accumulated amortisation and impairment. Expenditure on internallygenerated goodwill and brands is recognised as expense as it arises.

Subsequent expenditure relating to an intangible asset is added to the cost of the asset only if it increases the future economic benefitsand the expenditure can be measured reliably.

Amortisation according to plan is calculated on the basis of cost lessany residual value, and is recognised as expense on a straight-line basisover the useful life of the asset.

Amortisation periods applied: Useful life

Group Capitalised development expenditure 3 yearsGoodwill 10 years

Goodwill is amortised over ten years as all acquisitions are consideredto be strategic

Tangible fixed assetsTangible fixed assets are reported as assets in the balance sheet if, onthe basis of the information available, it is likely that the future economicbenefits attributable to the asset will flow to the Group and that the costof the asset can be measured reliably.

Subsequent expenditure is added to the cost of an asset if the per-formance of the asset is improved relative to its original performance.All other subsequent expenditure is recognised as expense in the periodin which it arises.

Depreciation is calculated on the basis of cost less any residual value,and is recognised as expense on a straight-line basis over the useful lifeof the asset.

Depreciation periods applied: Useful life

Group Parent company Buildings 50 years 50 yearsIT and ultrasound equipment 3 years 3 yearsVehicles and other equipment 5 years 5 yearsOffice furniture 10 years 10 yearsX-ray equipment 10 years 10 years

Borrowing costsBorrowing costs are recognised as expense in the period to which theyrelate, irrespective of how the borrowings are used.

Impairment of assets The reported values of the Group’s assets are reviewed at each balancesheet date to look for any indication of an asset being impaired. If thereis such an indication, the asset’s recoverable amount is calculated,namely the higher of its value in use and net selling price. The asset iswritten down if the recoverable amount is less than the carrying amount.When calculating value in use, future cash flows are discounted at a pre-tax discount rate which aims to take account of the market’s view ofthe risk-free interest rate and the risk associated with the specific asset.An asset which is dependent on other assets is not deemed to generateany independent cash flows. Such an asset is linked instead to the smallestcash-generating unit for which independent cash flows can be determined.Impairment losses are reversed if there is a change in the calculationsused to determine the recoverable amount.

Receivables Receivables are reported at cost less any impairment. Receivables arerecognised if the economic benefits attributable to the asset flow to theGroup.

Receivables and liabilities in foreign currencyReceivables and liabilities in foreign currency are translated at the closingrate in accordance with the Swedish Financial Accounting StandardsCouncil’s recommendation RR8. Exchange differences relating to operatingreceivables and liabilities are included in operating profit, while thoserelating to financial receivables and liabilities are reported under financialitems.

There are no hedged receivables or liabilities in foreign currency at the balance sheet date. Where receivables and liabilities in foreigncurrency have been hedged during the year, they have been translatedat the forward rate.

Holdings of securitiesSecurities are reported at cost less any impairment. Securities arerecognised as assets if the economic benefits attributable to them flowto the Group.

Recognition of revenue and work in progressRevenue from services provided is reported in accordance with theSwedish Financial Accounting Standards Council’s recommendationRR11. This recommendation means that the percentage of completionmethod is applied for all assignments whose outcome can be measuredreliably. Fees and expenditure are reported in the income statement asthe work is carried out. The majority of assignments are performed on a cost-plus basis. Where assignments are carried out on a fixed-pricebasis, an individual assessment of the degree of completion is made. In principle clients are invoiced one month after work is carried out.

The valuation procedure applied to uninvoiced consulting assignmentsmeans that they are reported net of individually assessed provisions forlosses.

TaxThe “Tax” item in the Income Statement comprises both actual tax anddeferred tax for units in Sweden and abroad. The rate of income tax forthe relevant country is applied. In Sweden the statutory rate is 28%.

Deferred tax is accounted based on the differences known as “tempo-rary differences”, which can arise between the taxable values of assetsand liabilities and the values shown in the accounts. Temporary differ-ences of this nature occur when the due date for taxation differs fromthe date on which, according to generally accepted accounting practice,the transaction should be entered in the accounts. Deferred tax mayalso be used to describe fiscal loss carry-forwards when it seems likelythat the loss carry-forward can be offset against future surpluses.

Swedish tax legislation enables companies to postpone tax paymentsby allocating funds to untaxed reserves. On the consolidated balancesheet these untaxed reserves are divided up into restricted equity (72%)and deferred tax liability (28%).

Provisions Provisions are reported in the balance sheet in accordance with theSwedish Financial Accounting Standards Council’s recommendationRR16 where the Group has a formal or informal obligation as a result ofa past event, it is likely that an outflow of resources will be required tomeet this obligation, and a reliable estimate of the amount can be made.A present value calculation is undertaken to reflect material time effectson future payments.

Provisions for loss-making contracts are made where the expectedeconomic benefits which the Group expects to obtain from a contractare lower than the unavoidable costs of meeting its obligations underthe contract.

Provisions for restructuring are made once a detailed plan has been adopted and the restructuring has either begun or been publiclyannounced.

Pensions Most of the pensions in the ÅF Group are defined-contribution plans. Thecosts for these are recognised as expense in the period in which theyarise. Provisions for pensions are based on information from the insur-ance companies PRI and SPP. The year’s pension cost is divided intoservice cost and interest cost.

Liabilities Financial liabilities are carried at cost. A liability is recognised wherethere is a financial obligation to an external party.

LeasesLeases are reported in accordance with the Swedish FinancialAccounting Standards Council’s recommendation RR6:99. In the consoli-dated financial statements, leases are classified as either finance leasesor operating leases. A lease is classified as a finance lease if it transferssubstantially all the risks and rewards incident to ownership. All otherleases are classified as operating leases.

Assets leased under finance leases are reported as assets in the consolidated balance sheet. Future lease payments are reported aslong-term and current liabilities. The leased assets are depreciated,while lease payments are reported as interest and as a reduction of the liabilities.

With operating leases, lease payments are recognised as expenseover the term of the lease on the basis of the user’s benefit, which may depart from the actual payments made during the year.

The parent company reports all leases in line with the rules for ope-rating leases.

Items affecting comparabilityThe Swedish Financial Accounting Standards Council’s recommendationRR4 is applied, which means that material effects on profit of unusualevents and transactions are itemised in the notes. One example of suchan event is restructuring.

Consolidated financial statementsThe consolidated financial statements have been prepared in accor-dance with the Swedish Financial Accounting Standards Council’s recom-mendation RR 1:00.

SubsidiariesSubsidiaries are companies in which the parent company directly or indirectly holds more than 50% of the votes or in some other way has acontrolling influence. Subsidiaries are normally reported using the pur-chase method. This means that the acquisition of a subsidiary is treatedas a transaction where the parent company indirectly acquires the com-pany’s assets and assumes its liabilities.

GoodwillGoodwill on consolidation arises when the cost of acquiring interests in asubsidiary exceeds the fair value of the identifiable net assets acquired.Goodwill is reported at cost less accumulated amortisation and anyimpairment.

Translation of foreign subsidiaries Currency translation is undertaken in accordance with the SwedishFinancial Accounting Standards Council’s recommendation RR8. All ofÅngpanneföreningen’s subsidiaries outside Sweden are independent for-eign undertakings. Their annual financial statements are translated usingthe current-rate method, which means that their assets and liabilities aretranslated at the closing rate and their income statements at the aver-age rate for the year. Translation differences do not impact on theGroup’s profit but are included directly in equity.

Associated companies Associated companies are companies in which AB Ångpanneföreningenor its subsidiaries directly or indirectly hold 20–50% of the votes or insome other way have a significant influence. The associated companiesÅF-TÜV Nord AB, Hansen & Henneberg AS, CTS-Engineering OY and ÅF-Proinstall Sp.z.o.o have been accounted for using the equity method.This means that the carrying amount of the investment in the associatedcompany is increased or reduced in line with AB Ångpanneföreningen’sshare of the company’s profit/loss. Adjustments are then made for anydividends received. The income statement includes the pre-taxprofit/loss made by associated companies in the operating profit/loss.Tax paid by associated companies is shown in the accounts under theheading “Tax expense”.

Elimination of intercompany transactionsIntercompany receivables and liabilities and intercompany transactionsand any related unrealised gains are eliminated in their entirety.

Group contributions The company reports group contributions in accordance with the state-ment from the Swedish Financial Accounting Standards Council’sEmerging Issues Taskforce.

Related-party disclosuresDuring the year Ångpanneföreningen’s Foundation for Research andDevelopment had the following financial relations with the ÅF Group:lease of office space in the ÅF Group’s properties, purchase of officeservices, etc. All transactions took place on open-market terms, and thetotal payments involved amounted to SEK 370,000 (SEK 1,387,000).The ÅF Group received allocations from the Foundation totalling SEK3,892,000 (SEK 5,974,000). These allocations are for projects adminis-tered by the ÅF Group.

Associated companies in the ÅF Group leased office space and pur-chased administrative and consulting services from companies in theGroup during the year to the value of SEK 4,217,000, and sold themconsulting services to the value of SEK 2,082,000. All transactions took place on open-market terms. In 2002 the volumes for associatedcompanies were identical.

Change of accounting policiesThe following recommendations from the Swedish Financial AccountingStandards Council have been applied with effect from 1 January 2003:RR22 Presentation of financial statements, RR25 Segment reporting:business and geographical segments, RR26 Events after the balancesheet date, and RR27 Financial instruments: disclosure and presentation.

RR22 Presentation of financial statements The comparative figures in the Group’s financial reports have beenrestated in accordance with the recommendation’s requirements for thepresentation of financial statements.

RR25 Segment reporting: business and geographical segments.RR25 requires a more detailed breakdown of income statement and bal-ance sheet items by segment. The primary segments for the purposesof RR25 are Energy & Environment, Industry & Systems, Installations,Pulp & Paper and New Markets. The secondary segments are the geo-graphical segments of Sweden and outside Sweden.

RR27 Financial instruments: disclosure and presentation Comparative information for previous periods is not available and socomparative figures for previous periods have not been provided in theadditional information.

Events after the balance sheet datThe Group has entered into an agreement on the sale of its properties inMalmö, Växjö, Norrköping, Luleå and Sundsvall to Estancia FastigheterAB. The sale is expected to increase the Group’s net profit by aroundSEK 5 million in the second quarter of 2004.

The Group is splitting the Industry & Systems Division into two sepa-rate divisions: Industry and Systems. To safeguard the profitability of theSystems Division, 50 employees have been issued with notice that theircontracts will be terminated. Altogether the change will result in structuralcosts of up to SEK 25 million, which will be recognised as expense inthe first quarter of 2004.

As part of the reorganisation, the New Markets Division is beingwound up. ÅF-Data will become part of the Systems Division, and theremaining ÅF-Kontroll and ÅF-Infrateknik will be forming their own sepa-rate divisions: Inspection & Testing and Infrastructure.

N o t e s

Secondary segments – by geographical area 2003. (in millions of Swedishkronor, MSEK)

OutsideSweden Sweden Total

Sales to external customers 1,683.6 310.4 1,994.0Assets 1,044.8 77.0 1,121.8Investment for the year in intangible assets 7.8 2.1 9.9Investment for the year in tangible assets 41.6 1.7 43.3

Note 1 Segment reporting

Primary segments - by division 2003 (in millions of Swedish kronor, MSEK)

Energy & Industry & Installations Pulp & New OthersEnvironment Systems Paper Markets & elim. Total

IncomeSales to external customers 269.6 607.4 399.0 297.3 365.5 55.2 1,994.0Other operating income — — — — — 1.4 1.4Sales between segments 18.3 40.7 20.7 8.0 29.2 –116.9 0.0Total income 287.9 648.1 419.7 305.3 394.7 –60.3 1,995.4

Operating expenses –269.9 –643.3 –391.3 –288.5 –356.2 71.3 –1,877.9Depreciations and write-downs of intangible fixed assets –0.5 –1.8 –1.0 0.0 –1.5 –1.9 –6.7Depreciations and write-downs of tangible fixed assets –4.9 –14.3 –9.2 –6.2 –10.7 –12.6 -57.9Operating profit/loss 12.6 –11.3 18.2 10.6 26.3 –3.5 52.9Of which participations in profit/loss of associated companies 1.1 0.3 1.4Operating margin, % 4.4 –1.7 4.3 3.5 6.7 5.8 2.7

Assets and liabilitiesIntangible fixed assets 5.2 14.5 6.3 0.0 11.7 7.1 44.8Tangible fixed assets 9.4 26.7 16.1 8.9 22.5 267.9 351.5Other assets 95.6 219.3 133.0 125.6 152.7 –0.7 725.5Total assets 110.2 260.5 155.4 134.5 186.9 274.3 1,121.8Total liabilities 87.6 213.9 125.8 111.3 156.4 84.9 779.9

Other segment informationInvestment for the year inintangible fixed assets 3.5 0.0 2.1 0.0 2.1 2.2 9.9Investment for the year in tangible fixed assets 2.4 15.1 7.1 2.5 10.5 5.7 43.3

Note 2 Net sales and profit/lossNet sales and profit/loss after financial items by areas of technicalexpertise:

Net sales Profit/lossGroup 2003 2002 2003 2002

Energy & Environment 287,933 320,100 11,260 –4 500Industry & Systems 648,067 637,600 –15,817 –25,100Installations 419,730 398,700 18,023 28,100Pulp & Paper 305,276 282,400 10,173 –29,400New Markets 394,754 381,900 24,779 11,600Items affecting comparability — — — –110,201Others and group adjustments –61,785 –106,564 –1,777 –21,092

1,993,975 1,914,136 46,641 –150,593

The figures for 2002 are pro forma figures.Net sales by geographical market:

2003 2002Sweden 1,683,588 1,681,225Rest of Scandinavia 52,156 61,060Rest of Europe 143,013 79,846Other markets 115,218 92,005

1,993,975 1,914,136

Parent companyDuring the year, the parent company sold services to Group companiesfor an amount equivalent to 98 (98) % of operating income and boughtservices from Group companies for an amount equivalent to 22 (18) %of operating expenses.

Note 3 Other operating income and expenses

Other operating income and other operating expenses refer to incomeand expenses relating to property management.

Rental income in the Group amounted to SEK 33,693,000 (2002:36,345,000) and in the parent company to SEK 30,246,000(34,227,000), of which the sums of SEK 32,315,000 (35,356,000) andSEK 28,874,000 (32,246,000) respectively were rent from subsidiaries.

Note 4 Other external expenses

Fees and remuneration of auditors

Group Parent company2003 2002 2003 2002

Accountants KPMGaudit assignments 1,604 — 220 —other assignments 341 — 144 —Accountants Ernst & Youngaudit assignments 190 1,999 23 270other assignments 104 328 18 64Accountants Deloitte & Toucheaudit assignments — 54 — 54Other accounting companiesOther accounting companies 248 379 — —

2,487 2,760 405 388

Operating leasesLeasing fees during the year Premises 45,312 43,147 4,465 —Other 15,833 12,146 2,295 1,873

The Group’s agreed future lease payments amount to SEK 55,270,000(SEK 37,437,000) for 2004, SEK 105,242,000 (SEK 25,289,000) for2005–2008 and SEK 12,500,000 (SEK 0) for 2009 onwards. TheGroup’s operating leases cover not only properties but also vehicles andsome office equipment.

N o t e s

A new leasing contract for vehicles has been signed during the year.This is shown as an operating lease as all financial risks and benefitshave been transferred to the employees concerned.

Vehicles are generally leased for three years. The outstanding leasingstock is worth around SEK 20,000,000.

Note 5 Personnel

Average number of employees by gender

2003 2002Women Men Women Men

Parent companySweden 23 25 21 19SubsidiariesSweden 396 1,683 439 1,706Other countries 21 112 21 103

417 1,795 460 1,809

Group total 440 1,820 481 1,828Total average number of employees 2,260 2,309Total for associated companies 339 298Total average number of employees including associated companies 2,599 2,607

Proportion of women in leading management positions2003

Parent company Percentage of women

Board members 22%Other senior officers 11%

Group overallBoard members 12%Other senior officers 8%

Salaries, other remuneration and payroll overheads

2003 2002Salaries and Social Salaries and Social

remunerations costs remunerations costs

Parent companyBoard & President/CEO 3,854 1,627 7,578 7,954(of which pension expenses) (388) (5,191)Other employees 16,817 8,733 11,435 7,343(of which pension expenses) (3,022) (3,125)

20,671 10,360 19,013 15,297GroupBoards & Managing Directors 21,534 13,014 37,110 25,125(of which pension expenses) (5,948) (12,987)Other employees 801,412 403,586 796,849 378,666(of which pension expenses) (135,261) (115,261)

822,946 416,600 833,959 403,791

Salaries and other remuneration by country

2003 2002Boards Other Boards Other

and MDs employees and MDs employees

Parent CompanySweden 3,854 16,817 7,578 11,435(of which bonus and performance-related earnings) 515 — — —

SubsidiariesSweden 14,373 736,246 23,664 732,818(of which bonus and performance-related earnings) (1,515) (4,751) (1,765) (3,583)

Other countries 3,307 48,349 5,868 52,596(of which bonus and performance-related earnings) (83) — (96) (122)

17,680 784,595 29,532 785,414

Group total 21,534 801,412 37,110 796,849

In addition a profit-related bonus of SEK 1,600,000 (0) has been paidout. This relates to provisions for future pensions made to the stafffoundation ÅFOND.

The profit-related bonus is paid out to all permanent employees of theGroup.

Remuneration to senior executivesThe BoardAs resolved by the Annual General Meeting, a total of SEK 700,000(740,000) was paid to the Board of Directors. Of this amount, theChairman received SEK 300,000 (315,000) as resolved by the Board.Remuneration to the employee representatives totalled SEK 80,000(50,000). With the exception of an agreement with the President, noother agreements have been signed concerning future pensions or sev-erance pay for the Chairman or other members of the Board.

President/CEOIn 2003 salary payments, bonus and other remuneration totalling SEK3,074,000 (6,788,000) were made to the Chief Executive Officer andPresident of AB Ångpanneföreningen, as well as social costs of SEK1,009,000 (7,419,000). Company car benefits are payable. A bonus ofSEK 335,000 (0) was paid which will impact on the current year’s accounts.

Former President Gunnar Grönkvist reached retirement age during theyear, triggering an unfunded defined-benefit pension cost, including tax,of SEK 1,750,000 in 2003. Remuneration and social costs of SEK6,800,000 relating to Gunnar Grönkvist were recognised as an expensein 2002.

The President of the parent company is subject to two years’ noticefrom the company and has the right to a pension five years before theretirement age specified under the SAF/PTK agreement.A monthly salary is paid out as usual during the period of notice.

Group Boards of Directors and Managing DirectorsSalary payments, bonus and other remuneration to Boards of Directorsand Managing Directors in the Group totalled SEK 21,534,000(37,110,000). Company car benefits are payable. For managers of sub-sidiaries and two senior staff executives in the parent company, the peri-od of notice varies, depending on age and length of service, from 12 to18 months. These officers have a right to a pension two years beforethe retirement age specified under the SAF/PTK agreement.

Group Management, excluding PresidentFor salaries and remuneration to Group Management, consisting of eight(four) executives excluding the President, a total of SEK 8,960,000(2,909,000) was expensed, as well as social costs of SEK 6,208,000(2,043,000). A bonus will be paid out amounting to SEK 722,000 (0) forthe current year. Benefits to Group Management include company cars.

Determination of remunerationThe level of remuneration paid to the President/CEO for financial year2003 was set by the Board of Directors. Remuneration paid to othersenior executives was set by the President/CEO in consultation with theChairman of the Board.

Absence from work due to illnessParent company

Total sick leave as a percentage of ordinary working time 2.6%Portion of the total sick leave that is accounted for by absences of 60 consecutive days or more 0.4%

Sick leave as a percentage of total ordinary working time:By gender:Men 3.1%Women 2.1%

By age group:29 years old or below 4.0%30–49 years 2.0%50 years or above 2.7%

Note 5 cont’dNote 4 cont’d

N o t e s

Note 6 Depreciation

Depreciation for the year consists of the following elements:

Goodwill –6,705 –8,723 — —Equipment –51,943 –54,002 –5,012 –5,379Buildings –5,957 –6,568 –4,856 –4,779

–64,605 –69,293 –9,868 –10,158

Note 7 Items affecting comparability

Restructuring costs — –85,000 64,481 –69,507Impairment of goodwill — –20,471 — —Impairment of share of equity in associated companies — –4,730 — —

–110,201 64,481 –69,507

Note 8 Results from participations in Group companies

Parent company2003 2002

Dividends 53,871 16,000Result of divestments 13,355 9,503Impairment of assets –33,035 –7,920

34,191 17,583

Note 9 Results from participations in associated companies

Dividends — — 901 716Result of divestments –444 — –4,384 —

–444 — –3,483 716

Note 10 Interest income and similar profit/loss items

Dividends from other securities 17 5 7 5Interest income from Group companies — — 8,986 4,280Dividends from investments — 361 — 343Present-value correction relating to claims on Alecta 221 4,357 — 1,414Other interest income

and similar profit/loss items 4,139 5,339 2,392 2,2474,377 10,062 11,385 8,289

Note 11 Interest expenses and similar profit/loss items

Loss on disposal of investments — –10,347 — –9,881Interest expenses to Group companies — — –1,830 –3,348Other interest expenses *) –10,168 –14,738 –7,941 –11,661

–10,168 –25,085 –9,771 –24,890*) including interest on PRI liability

Note 12 Appropriations

Parent company2003 2002

Liquidation of tax allocation reserve 16,844 12,500Transfer to tax allocation reserve — –14,250Difference between book depreciation and depreciation according to plan 5,537 1,448

22,381 –302

Note 13 Tax

Actual tax expenseTax for the year –3,399 –18,397 — –12,331Adjustment of tax with regard to previous years –64 –4 601 70 –209Tax on Group contributions made/received — — –3 326 13,031Deferred tax –12,712 41,062 –18 840 19,462Share of associated companies’ tax –771 –815 — —

–16,946 17,249 –22,096 19,953Reconciliation of income taxResult for the year before tax 46,641 –150,593 107,493 –68,502Tax at current standard rate (28%) 13,059 –42,166 30,098 –19,181Correction for previous year 64 4 601 –70 209Tax effect of:non-deductible costs 39,716 12,204 14,373 6,602non-taxable income –37,952 –1,388 –22,305 –7,583depreciation of goodwill in Group 2,825 9,861 — —other items –766 –361 — —

16,946 –17,249 22,096 –19,953

Note 14 GoodwillGroup

2003 2002

Acquisition value brought forward 106,208 110,513Investment for the year 8,153 30,984Divestments — –1,074Disposal of fully-depreciated goodwill –39,688 –34,215Translation differences –59 —Acquisition value carried forward 74,614 106,208

Accumulated depreciation brought forward –42,662 –68,540Depreciation for the year –6,705 –8,723Divestments — 386Disposal of fully-depreciated goodwill 39,688 34,215Translation differences 6 —Accumulated depreciation carried forward –9,673 –42,662

Accumulated impairment brought forward –20,472 —Impairment of assets over the year –1,304 –20,472Accumulated impairment carried forward –21,776 –20,472

Residual value carried forward 43,165 43,074

Note 15 Capitalised development expenditure

Acquisition value brought forward — — — —Investment for the year 1,661 — — —Acquisition value carried forward 1,661 — — —Accumulated depreciation brought forward — — — —Depreciation for the year — — — —Accumulated depreciation carried forward — — — —Residual value carried forward 1,661 — — —

Note 16 Buildings and land

BuildingsAcquisition value brought forward 312,383 309,803 241,957 238,398Investment for the year 3,280 5,503 325 3,559Divestments –16,234 –2,923 –35,938 —Write-downs — — –2,222 —Acquisition value carried forward 299,429 312,383 204,122 241,957

Accumulated depreciation brought forward –67,336 –60,768 –51,862 –47,083Depreciation for the year –5,957 –6,568 –4,856 –4,779Divestments 5,026 — 6,661 —Accumulated depreciation carried forward –68,267 –67,336 –50,057 –51,862Residual value carried forward according to plan 231,162 245,047 154,065 190,095Accumulated accelerated depreciation –1,358 –6,703Fiscal residual value 152,707 183,392of which impairment reversalsOpening values 4,857 4,988 — —Acquisitions — — — —Divestments –2,034 — — —Depreciation for the year on reversed impairment value –79 –131Closing values 2,744 4,857 — —

LandAcquisition value brought forward 23,857 24,012 20,767 20,767Investment for the year — — — —Divestments –462 –155 –5 354 —Translation difference — — — —Acquisition value carried forward 23,395 23,857 15,413 20,767Residual value according to plan for properties in total 254,557 268,904 169,478 210,862

Assessed value 284,262 285,194 265,041 255,939(of which land) (69,187) (68,615) (66,780) (64,365)

In 2003 a property was sold which had a book value of SEK 9,637,000at 31 December 2002.

A further six properties were sold in 2004. Four of these propertieshad a book value in the parent company’s accounts of SEK 78,128,000at 31 December 2003. In the Group accounts the book value of all sixproperties was entered as SEK 111,360,000 at 31 December 2003.

Note 17 Equipment

Acquisition value brought forward 442,766 405,388 32,774 30,181Investment for the year 40,306 46,418 4,706 2,873Divestments/disposals –116,797 –9,011 –60 –280Translation differences –1,234 –29 — —Acquisition value carried forward 365,041 442,766 37,420 32,774Accumulated depreciation brought forward –331,062 –284,523 –24,268 –19,170Divestments/disposals 114,061 7,463 12 280Depreciation for the year –51,943 –54,002 –5,012 –5,378Translation differences 842 — — —Accumulated depreciation carried forward –268,102 –331,062 –29,268 –24,268Residual value according to plan 96,939 111,704 8,152 8,506Accumulated accelerated depreciation — –192Fiscal residual value 8,152 8,314

Equipment covered by finance leases is expensed under the Groupaccounts at SEK 7,131,000. .

N o t e sNote 16 cont’d

Note 18 Participations in Group subsidiaries2003 2002

Number Interest, Book Interest, BookCorporate ID Reg’d office of shares percent (1 value percent (1 value

ÅF-Data AB 556205-6050 Stockholm 10,000 100 2,400 100 1,000Ångpanneforeningen-Data A/S Norway — 100 — — —

ÅF-Elprojekt AB 556074-0416 Karlstad 30,000 100 9,300 100 9,300Elbesiktningar i Borås AB (liq’d 2003) 556573-4604 Borås — — — 100 —Eltekn Projekteringsbyrån AB (liq’d 2003) 556267-5420 Borås — — — 100 —Add IN AB (liq’d 2003) 556574-6335 Karlstad — — — 100 —Byggledning & Kontroll i Åmål AB 556140-2909 Åmål — — — 100 —ÅF-Nielsen og Borge A/S Norway — — — –86 —

ÅF-Installation AB 556070-5039 Stockholm 60,000 100 15,970 100 15,970ÅF-VVS Projekt AB 556069-7004 Stockholm — 100 — — —Intriso It AB 556582-3910 Stockholm — 100 — 100ÅF-Nielsen og Borge A/S Norway — 100 — — —ÅF-Elektro Rådgiverne A/S Norway — 50 — — —ÅF-Andresen & Jacobsen A/S Norway — 100 — — —ÅF-INR AB 556203-3984 Malmö — 100 — — —ÅF-Funktionspartner AB 556099-8071 Malmö — 100 — — —ÅF-Teleplan AB 556078-4489 Solna — — — 100 —Elreko AB 556276-5924 Sollentuna — — — 100 —ELIKAB Elkonsulenter i Kristianstad AB (liq’d 2003) 556312-9906 Kristianstad — — — 100 —

N o t e s

2003 2002Number Interest, Book Interest, Book

Corporate ID Reg’d office of shares percent (1 value percent (1 valueElcontrol i Söderköping AB (liq’d 2003) 556379-4808 Söderköping — — — 100 —

ÅF-Energi & Miljö AB 556329-2159 Stockholm 300,000 100 20,100 100 3,000ÅF-International AB 556426-2292 Stockholm — 100 — — —Graphium Consult AB 556056-2018 Stockholm — 100 — — —ÅF-Miljöforskargruppen AB 556245-3893 Kil — 100 — — —Göteborg Energi International AB 556317-6014 Göteborg — 100 — — —ÅF-Processdesign AB 556329-5186 Malmö — 100 — — —Cresita AB 556279-2837 Helsingborg — 100 — — —

ÅF-Fastighets AB 556040-7651 Stockholm 18,460 100 26,376 100 31,576ÅF-Fastighet i Luleå AB 556238-5996 Stockholm — 100 — 100 —ÅF-Fastighet i Norrköping AB 556418-6509 Stockholm — 100 — 100 —Alfredeen-Rako Fastigheter AB 556190-2452 Tyresö — — — 100

ÅF-Industri & System AB 556092-4044 Stockholm 60,000 100 41,409 100 14,509Holotech CAD/CAM AB 556547-0225 Köping — 100 — 100 —K.O.M. Industridesign AB 556575-9767 Stockholm — 100 — 100 —3 D Teknik Sverige AB 556457-7327 Mölndal — 100 — 100 —A/S Norsk Kvalitetskontroll Norway — 100 — — —ÅF-Systemdesign AB 556158-7261 Stockholm — 100 — — —ÅF-Communicator AB 556495-0409 Solna — 100 — — —Arjano Data AB 556257-0563 Stockholm — 100 — — —Inometer AB 556313-1837 Sollentuna — 100 — — —RealFast Software Consulting AB 556593-7157 Västerås — 100 — — —ÅF-Rateko AB (liq’d 2003) 556227-8829 Tyresö — — — 100 —ÅF-Trafikkompetens AB 556402-4726 Stockholm — — — 100 —

ÅF-Infrateknik AB 556185-2103 Stockholm 1,000 100 11,314 100 5,614ÅF-Trafikkompetens AB 556402-4726 Stockholm — 100 — — —ÅF-Teleplan AB 556078-4489 Solna — 100 — — —SwedRail AB 556209-1644 Stockholm — 100 — — —

ÅF-Celpap AB 556101-7384 Stockholm 50,000 100 6,809 100 6,809Chleq Froté & Cie S.A. France — 65 — 65 —ÅF-Celpap Engineering GmbH Germany — 60 — 60 —ÅF-SPEAB AB 556147-9022 Sundsvall — 100 — — —ÅF-Miljöforskargruppen AB 556245-3893 Kil — — — 100 —Svenska Miljöforskargruppen Invest AB (liq’d 2003) 556501-4015 Kil — — — 100 —Finska Miljöforskargrupp OY (liq’d 2003) Finland — — 100 58 —

ÅF-Kontroll AB 556033-5977 Stockholm 20,000 100 5,379 100 3,279Nordiska Certifieringsinstitutet AB 556136-0560 Halmstad — 100 — 100 —

ÅF i Sjöbefälsskolan AB 556074-0408 Göteborg 2,500 100 162 100 162ÅF-INR AB 556203-3984 Malmö — — — 100 3,262

ÅF-Funktionspartner AB 556099-8071 Malmö — — — 100 —ÅF-Processdesign AB 556329-5186 Malmö — — — 100 7,000

ÅF-PPA AB (liq’d 2003) 556180-6794 Göteborg — — — 100 —Cresita AB 556279-2837 Helsingborg — — — 100 —Cresita Engineering AB (liq’d 2003) 556185-2681 Helsingborg — — — 100 —Cresita Development AB (liq’d 2003) 556550-7091 Helsingborg — — — 100 —

ÅF-RNK AB (liq’d 2003) 556329-2001 Stockholm — — — 100 2,000ÅF-SIFU AB 556456-9894 Borås — — — 75 7,400ÅF-SPEAB AB 556147-9022 Sundsvall — — — 100 6,221Swedish Management Group Lidingö AB (liq’d 2003) 556496-0390 Stockholm — — — 100 6,331

ÅF-International AB 556426-2292 Stockholm — — — 100 —Graphium Consult AB 556056-2018 Stockholm — — — 100 —

ÅF-Systemdesign AB 556158-7261 Stockholm — — — 100 26,056ÅF-Communicator AB 556495-0409 Solna — — — 100 —Arjano Data AB 556257-0563 Stockholm — — — 100 —Arjano Invest AB 556590-9115 Stockholm — — — 100 —Inometer AB 556313-1837 Sollentuna — — — 100 —RealFast Software Consulting AB 556593-7157 Västerås — — — 100 —

ÅF-VVS Projekt AB 556069-7004 Stockholm — — — 100 9,503VVS-Tema AB (liq’d 2003) 556231-9615 Linköping — — — 100 —

AB Energikonsult 556208-9879 Stockholm 1,000 100 83 100 83Celpap AB 556199-5597 Stockholm — 100 — 100 —Scanmanagement AB 556397-7163 Stockholm — 100 — 100 —SIKOB Svensk Industris Konstruktions- och Beräkningskontor AB 556196-6531 Stockholm — 100 — 100 —AB Sveriges Tekniska Kontrollinstitut 556361-2737 Stockholm — 100 — 100 —Swetec Konsult AB 556348-6397 Stockholm — 100 — 100 —

Note 18 cont’d

N o t e s

Note 18 cont’d 2003 2002Number Interest, Book Interest, Book

Corporate ID Reg’d office of shares percent (1 value percent (1 valueÅF-Totalprojekt AB (liq’d 2003) 556260-1129 Borås — — — 100 —

AB Svensk Energiförsörjning 556158-1249 Stockholm 2,000 100 500 100 500WO Konsult AB 556155-8338 Nacka 55,000 100 493 100 493Communicator AB 556559-1483 Solna 1,000 100 6,984 100 34,483Byggledning & Kontroll i Åmål AB 556140-2909 Åmål 1,000 100 734 — —Kungspannan AB 556650-5011 Stockholm 1,000 100 100 — —ÅF-Futura AB (liq’d 2003) 556148-1549 Stockholm — — — 100 168Ingenjörsgruppen Tre E AB (liq’d 2003) 556324-7393 Borlänge — — — 100 1,975Lundstrom Engineering AB (liq’d 2003) 556369-8603 Sundsvall — — — 100 682Sveriges Tekniska Kontrollinstitut i Luleå AB (liq’d 2003) 556407-8516 Luleå — — — 100 830Communicator Netension AB (liq’d 2003) 556594-0334 Solna — — — 100 101Ångpanneforeningen-Data A/S Norway — — — 100 423A/S Norsk Kvalitetskontroll Norway — — — 100 1

148,113 198,7311 Participating interest refers to both the voting share and the proportion of the total number of shares.

Specification of the changes in book values during the year2003 2002

Book value brought forward 198,731 178,541Acquisitions 4,323 52,733Shareholders’ contribution 53,200 -—Impairments –33,035 –7,920Divestments –75,106 –24,623Book value carried forward 148,113 198,731

Note 19 Share of equity in associated companies2003 2002

Number Interest, Book Interest, BookGroup of shares percent (1 value percent (1 value

AF-Proinstall Sp.z.o.o., Poland 38 48 –19 48 4CTS Engineering Oy 178 20 10,098 20 10,757Hansen & Henneberg AS 3,267 49 14,161 49 15,561ÅF-Tüv Nord AB 5,000 50 1,615 50 672Calvia Datakonsult AB — — — 30 609

25,855 27,603Parent companyAF-Proinstall Sp.z.o.o., Poland 38 48 4 48 4Hansen & Henneberg AS — — — 49 19,044

4 19,0481 Participating interest refers to both the voting share and the proportion of the total number of shares.

Specification of the changes in book values during the year

Book value brought forward 27,603 29,461 19,048 19,048Acquisitions — 7,283 — —Translation differences –161 –346 — —Divestments –458 — –19,044 —Impairment of share of capital — –4,730Share in profit/loss for the year:AF-Proinstall Sp.z.o.o., Poland –22 — — —Hansen & Henneberg AS –434 –1,025 — —CTS Engineering 248 225 —ÅF-TÜV Nord AB 943 –1,065 — —Calvia Datakonsult AB –145 –668 — —Less dividend –1,719 –1,532 — —Book value carried forward 25,855 27,603 4 19,048

N o t e s

Note 20 Other long-term securities held2003 2002

Group Qty Par value Book value Par value Book value

CompanyShare in IVL Foundation 1 100 100 100 100OM-Gruppen 5,347 10 10 10 10Parent company total 110 110AB Scandinavian Engineering Corporation SEC 2,500 50 50 50 50Miljöforskargr. Danmark ApS 43 31 DKK 31 31 DKK 31NB Östeuropafond 3,248 414 300 —- 400NB Optimafond 1,639 400 300 400 400Gensidige NOR 1,795 — 468 — —Incepal S/A — 200 — —UAB Terma IR KO 135 — 35 — 35HVR Water 5,280 — 54 — —Others — 38 — 40Group total 1,586 1,066

Specification of the change in book values during the year

Group Parent Company2003 2002 2003 2002

Book value brought forward 1,066 1,085 110 157Acquisitions 720 40 — —Divestments/write-downs –200 –59 — –47Book value carried forward 1,586 1,066 110 110

Note 21 Other long-term and current receivables

Long-term claim on Alecta — 10,758 — —Other long-term receivables 508 10,157 38 9,167

508 20,915 38 9,167

Current claim on Alecta — 32,419 — 830Other current receivables 10,492 21,451 396 11,596

10,492 53,870 396 12,426

Note 22 Investments

Book value Shares and participations — 174 — —

— 174 — —Market value Shares and participations — 174 — —

— 174 — —

Note 23 Financial instrumentsThrough its operations the Group is exposed to various kinds of financialrisk. Financial risks denote fluctuations in the company’s earnings andcash flow as a result of changes in exchange rates, interest rates, re-financing and credit risks. Responsibility for the Group’s financial transac-tions and risks is handled centrally by the parent company through theCorporate Finance department. The overall aim is to ensure cost-effec-tive financing while minimising negative effects on the Group’s earningsfrom market fluctuations.

Financial risks can be divided into exchange rate, interest rate andcredit risks.

Exchange rate risk is the risk of fluctuations in the value of a financialinstrument due to movements in exchange rates. This risk is relativelylimited at the ÅF Group because loans and investments are made in thelocal currency. If this is not the case, larger amounts are hedged usingderivatives. There were no derivatives at the year-end. Exchange raterisks relating to changes in expected and contractual payment flows arealso relatively limited at the ÅF Group because most payments aremade in the local currency. The effects of revaluing foreign subsidiaries’assets and liabilities in foreign currency (translation exposure) are rela-tively limited because foreign subsidiaries account for only a small pro-portion of the Group’s balance sheet.

Interest rate risk is relatively limited at the ÅF Group. The Group’s liquid resources are mainly deposited in accounts at local banks. Loansfrom credit institutions are mainly bank loans. However, the Group isexposed to interest rate risk in that interest rates may hamper or stimu-late investment by the company’s clients and so impact on the marketfor the Group’s services.

Credit risk relates to the substantial accounts receivable that theGroup will have at all times, in other words the credit granted to clients.This risk is limited through advance payments and by aiming to avoidclients with a poor capacity to pay. Historically the Group has recordedvery limited bad debts.

Altogether the Group’s financial risks are relatively small.

Exchange rate differences that have affected the result

Group Parent company2003 2003

Exchange rate differences that have affected operating profit/loss None NoneFinancial exchange rate differences None None

Note 24 Shareholders’ equityRestricted reservesRestricted reserves may not be reduced through profit distributionStatutory reserveThe aim of the statutory reserve is to set aside part of net profit, which is not required to cover losses brought forward.

Non-restricted equityProfits brought forwardThese consist of the preceding year’s non-restricted equity, after anytransfers to statutory reserves, and after any profit distribution. Added tothe net profit for the year, this item represents total non-restricted equity,i.e. the amount available for distribution to shareholders

The share capital is divided into 402,219 series A shares (10 votes pershare) and 5,346,350 series B shares (1 vote per share). The total num-ber of shares is 5,748,569, and the total number of votes is 9,368,540.

The Board of Directors and the President propose that, of the profits at the disposal of the annual general meeting, SEK 14,946,279.40 shallbe distributed to the shareholders.

The accumulated translation differences in foreign operations at theclose of the financial year amounted to SEK 847,000.

Note 23 cont’d

N o t e s

Specification of accumulated translation differences in equity:

2003 2002Accumulated translation difference at the start of the year 2,469 3,069Trans. diff. for year for foreign subsidiaries –1 461 –254Trans. diff. for year for foreignassociated companies –161 –346

Total trans. diff. for the period –1,622 –600Accumulated translation difference at close of year 847 2,469

Note 25 Earnings per share

2003 2002Earnings per share before dilutionProfit/loss for the period 30,114 – 127,515Number of outstanding shares 5,748,569 5,748,569Earnings per share before dilution, SEK 5.24 –22.18Earnings per share after dilutionProfit/loss for the period 30,114 –127,515Interest expense on convertible debt instruments 1,190 1,421Tax attributable to interest expense –333 –398Adjusted income 30,971 –126,492Number of outstanding shares 5,748,569 5,748,569Adjustment for conversions of convertible debt instruments exercised 609,840 609,840Number of shares included in thecalculation of earnings per share 6,358 409 6,358 409Earnings per share after dilution, SEK 4.87 –22.18

Since the company made a loss in 2002, and earnings per share afterdilution must not exceed earnings per share before dilution, the samevalue is recorded for both of the items.

Note 26 Untaxed reservesParent company

2003 2002

Tax allocation reserve, 1999 — 7,900Tax allocation reserve, 2001 41,856 50,800Tax allocation reserve, 2002 18,000 18,000Tax allocation reserve, 2003 14,250 14,250Difference between book depreciation and depreciation according to plan 1,358 6,895

75,464 97,845

Note 27 ProvisionsProvisions for pensions relate mainly to FPG/PRI pensionsChanges during the year:

PensionsProvisions brought forward 32,377 43,609 17,526 27,549Utilised provisions during the year –446 –11,232 –329 –10,023New provisions 3,994 — 712 —Provisions carried forward 35,925 32,377 17,909 17,526

RestructuringProvisions brought forward 69,507 — 69,507 —Utilised provisions during the year –69,507 — –69,507 —New provisions — 69,507 — 69,507Provisions carried forward — 69,507 — 69,507

Note 28 LiabilitiesLiabilities to credit institutions

Due for payment within1 yr of accounting year end 163,795 165,735 161,200 164,285Due for payment 2–5 yrsafter accounting year end 12,065 10,975 — 10,925Due for payment more than5 yrs after accounting year end — 8,000 — 8,000

175,860 184,710 161,200 183,210

Convertible bondDuring 2000 AB Ångpanneföreningen gave its employees in the Swedishorganisation the opportunity to subscribe to a convertible bond. Thebond will attract an annual interest of 12 month’s STIBOR less 2.70 per-centage points. The conversion rate is, after a recalculation in 2002,SEK 155.00. The bond may be converted to shares during the period21 January 2004 up to and including 20 May 2005. If fully converted,this will result in the issue of a further 609,840 shares, which corre-sponds to 9.6% of the share capital and 6.1% of the votes.

Note 29 Accrued expenses and prepaid incomeGroup Parent company

2003 2002 2003 2002

Personnel-related liabilities 155,497 135,584 4,945 2,966Other accrued expensesand prepaid income 47,547 76,257 8,750 10,576

203,044 211,841 13,695 13,542

Note 30 Pledged assets

For own liabilitiesBlocked bank accounts 587 630 — —Property mortgages 16,000 16,000 — —Floating charges — 2,300 — —

16,587 18,930 — —

Note 31 Contingent liabilities

Guarantees in favour of Group companies — — 25,256 14,444Sureties 25,256 14,444 — —Other contingent liabilities 9,649 12,470 9,355 9,343

34,905 26,914 34,611 23,787

The ÅF Group is involved in a small number of disputes which may eventually be heard in a court of general jurisdiction. These include asuit from the owner of a restaurant business (Chaplins Bar), which waspreviously run in a property owned by the Parent Company. In caseswhere it is considered likely that the outcome of these disputes willinvolve costs, these have been charged to results. “Other contingent liabilities” includes an amount equivalent to the estimated outcome in aworst-case scenario for the Group

Note 32 Contingent assetsAccording to the ÅF Group’s assessment, there are no contingent assetsto be taken into account.

Note 24 cont’d

N o t e s

Note 33 Cash flow analysesDuring the year the interest paid by the Group amounted to SEK10,168,000 (13,014,000) and that by the parent company to SEK9,073,000 (13,620,000). The interest received by the Group totalledSEK 2,379,000 (5,339,000) and that received by the parent companytotalled SEK 10,120,000 (6,527,000).

Adjustment for items not included in the cash flow

Present-value correction of claim on Alecta — –4,357 — –1,414Interest calculation on PRI liability 1,062 1,724 698 1,389Depreciation 64,605 69,283 9,868 10,158Impairment of goodwill 1,304 25,202 — —Other write-downs — — 35,305 —Result of divestments –7,960 — –4,466 —Other –6,705 –2,285 514 –5,479

52,306 89,567 41,919 4,654

Note 33 cont’d

Stockholm, Sweden, 17 February 2004

Carl-Erik Nyquist Magnus Grill Eva-Lotta KraftChairman of the Board

Peter Sandström Helena Skåntorp Gunnar SvedbergVice Chairman

Jan Fröjd Leif Holmgren Jonas WiströmPresident & CEO

Acquisition/Divestment of subsidiariesValue of acquired companies’ and divested companies’ assets and liabilities

Acquisitions Divestments2003 2002 2003 2002

Intangible assets –2,351 –28,228 — —Tangible assets –297 –4,118 1,961 —Financial assets –934 –5 5,956 —-Operating receivables –3,465 –38,767 14,900 —Liquid assets –3,337 –9,289 936 —Loan from AB Ångpanneföreningen — 4,097 –3,000 —Provisions 511 483 - —Operating liabilities 5,471 29,153 –13,354 —Minority shareholding –1,226 –175 –3,359 —Profit on sales — — 7,960 —Purchase price paid –5,628 –46,849 12,000 —Repayment of loan (see above) — — 3,000 —Liquid assets in companies acquired 3,337 9,289 –936 —-Effect on the Group’s liquid assets –2,291 –37,560 14,064 —

Auditors’ report

We have audited the annual accounts,the consolidated accounts, the account-ing records and the administration ofthe Board of Directors and thePresident of AB Ångpanneföreningen forthe financial year 2003.

These accounts and the administra-tion of the company are the responsibilityof the Board and the President. Ourresponsibility is to express an opinionon the annual accounts, the consolidatedaccounts and the administration basedon our audit.

We conducted our audit in accor-dance with generally accepted auditingstandards in Sweden. Those standardsrequire that we plan and perform theaudit to obtain reasonable assurancethat the annual accounts and the con-solidated accounts are free of materialmisstatement. An audit includes examin-ing, on a test basis, evidence support-

ing the amounts and disclosures in the accounts. An audit also includesassessing the accounting principlesused and their application by the Boardand the President, as well as evaluatingthe overall presentation of informationin the annual accounts and the consoli-dated accounts.

As a basis for our opinion concerningdischarge from liability, we examinedsignificant decisions, actions taken andcircumstances of the company in orderto be able to determine the liability, ifany, to the company of any BoardMember or the President.

We also examined whether any BoardMember or the President has, in anyother way, acted in contravention of theSwedish Companies Act, the SwedishAnnual Accounts Act or the articles ofassociation of the company. We believethat our audit provides a reasonablebasis for our opinion set out below.

The annual accounts and the consoli-dated accounts have been prepared inaccordance with the Annual AccountsAct and, thereby, give a true and fairview of the company’s and the Group’sfinancial position and results of opera-tions in accordance with generallyaccepted accounting standards inSweden.

We recommend to the general meet-ing of shareholders that the incomestatements and balance sheets of theparent company and the Group beadopted, that the profit of the parentcompany be dealt with in accordancewith the proposal in the administrationreport, and that the members of theBoard of Directors and the President be discharged from liability for the financial year.

Bo Ribers Björn FlinkAuthorised Public Accountant Authorised Public Accountant

KPMG KPMG

Stockholm, Sweden, 26 March 2004

To the AGM of AB Ångpanneföreningen (publ) Swedish corporate ID no. 556120-6474

Carl-Erik NyquistBorn 1936. M.Sc.Former CEO of Vattenfall AB. Chairman of the Board and Board member of AB Ångpanneföreningen since 2002. Board member of Vitec AB, Maingate AB and Kraftkommission AB. Holding: 500 shares.

Jonas WiströmBorn 1960. M.Sc. President and Board member of AB Ångpanne-föreningen since 2002. Board member of theAssociation of the Swedish IT and TelecomIndustry and the Confederation of SwedishEnterprise. Member of the Royal SwedishAcademy of Engineering Sciences, IVA.Holding: 1,000 shares Convertibles: SEK 0.

Jan FröjdBorn 1956. Design engineer, communicationsand safety systems. Employee representativeat AB Ångpanneföreningen since 2000.Employed by ÅF-Installation AB. Holding: 0 shares. Convertibles: SEK 0.

Magnus GrillBorn 1945. Graduate business administrator.President Öresundskraft AB. Board member ofAB Ångpanneföreningen since 2002. ViceChairman of Ångpanneföreningen’s Foundationfor Research and Development since 2002.Chairman of the Board of VÄRMEK (the SwedishHeating Plant Association) and SweHeat (theSwedish District Heating Association). Boardmember of Elforsk AB. Holding: 100 shares.

Leif HolmgrenBorn 1942. Engineer.Employee representative for AB Ångpanne-föreningen since 1999. Employed by ÅF-Energi & Miljö AB. Holding: 110 shares. Convertibles: SEK 200,000.

Eva-Lotta KraftBorn 1951. M.Sc, MBA.Employed by Siemens Elema AB. Board member of AB Ångpanneföreningensince 2002. Holding: 500 shares.

The Board of Directors

Peter SandströmBorn 1948. M.Sc. Board member of AB Ångpanneföreningen since 2002. Chairman ofthe ÅFOND Trust. Employed by ÅF-Industri AB. Holding: 486 shares. Convertibles: SEK 0.

Helena SkåntorpBorn 1960. Graduate business administrator.CEO Jarowskij Enterprises AB. Board memberof AB Ångpanneföreningen since 2002. Boardmember of Stockholm Football Association.Holding: 0 shares.

Gunnar SvedbergBorn 1947. PhD (Engineering).Vice Chancellor of Göteborg University.Professor of Energy Technology at the SwedishRoyal Institute of Technology. Board memberof AB Ångpanneföreningen since 2001.Chairman of Ångpanneföreningen’s Foundationfor Research and Development since 2002.Chairman of the Swedish National DefenceCollege. Board member of IRECO Holding AB(Institute for Research and Competence).Member of the Royal Swedish Academy ofEngineering Sciences (IVA).Holding: 300 shares.

Karin BäckerBorn 1952. Engineer.Employee representative (deputy) for AB Ångpanneföreningen since 2003.Employed by ÅF-Energi & Miljö AB.Holding: 24 shares. Convertibles: SEK 20,000.

Lars OlssonBorn 1957. Engineer.Employee representative (deputy) for AB Ångpanneföreningen since 2000.Employed by ÅF-Celpap AB.Holding: 0 shares. Convertibles: SEK 400,000.

Senior Management Group

Jonas WiströmBorn 1960, M.Sc.President and CEO since 2002.Acting Senior Vice President, Pulp & Paper since 2004. Employed by ÅF since 2002.Shareholding: 1,000. Convertibles: SEK 0.

Matz AxelssonBorn 1961, EngineerSenior Vice President, Systems since 2004. Employed by ÅF since 2003.Shareholding: 0. Convertibles: SEK 0.

Jörgen BackersgårdBorn 1964, M.Sc.Senior Vice President, Inspection & Testing since 2004.Employed by ÅF since 2002.Shareholding: 50. Convertibles: SEK 200,000.

Karl-Anders ErikssonBorn 1950, Graduate business administrator.Executive Vice President CorporateResources since 1989.Employed by ÅF since 1988.Shareholding: 260. Convertibles: SEK 300,000.

Gunilla FladvadBorn 1947, DIHM Marketing & Communication.PA to the President since 1979.Employed by ÅF since 1979.Shareholding: 560. Convertibles: SEK 500,000.

Anders GabrielssonBorn 1948, Graduate business administrator.Executive Vice President and CFO since1986. Employed by ÅF since 1980.Shareholding: 3,000. Convertibles: SEK 1,000,000.

Other senior executives

Jean-Paul BernateauBorn 1944, Graduate engineer.Président-Directeur Général, Chleq Froté,France

Elisabeth Ekener-PetersenBorn 1963, Graduate business administrator.Environmental Director since 2002.Employed by ÅF since 1997.Shareholding: 0. Convertibles SEK 0.

Jean-Paul Fraysse Born 1949, Engineer.Directeur Général Délégué, Chleq Froté,France.

Peter GitzenBorn 1959, Dipl.-Ing.Geschäftsführer, ÅF- Celpap, Germany.

Timo JuvonenBorn 1955, M.Sc.Managing Director, ÅF-CTS Engineering OyFinland

Ralf TeuchertBorn 1965, Dipl.-Ing.Geschäftsführer, ÅF- Celpap, Germany.

Arnold Risa Born 1965, EngineerManaging Director, ÅF-Nielsen og Borge,Norway.

Per GöranssonBorn 1953, Graduate engineer.Senior Vice President, Installations since 2003.Employed by ÅF since 1987.Shareholding: 0. Convertibles: SEK 1,000,000.

Christer KarlssonBorn 1958, Engineer.Senior Vice President, Industry since 2004.Employed by ÅF since 1984.Shareholding: 100. Convertibles: SEK 250,000.

Jan NordlingBorn 1949, M.Sc.Senior Vice President, Energy & Environmentsince 2003.Employed by ÅF since 1982.Shareholding: 400. Convertibles: SEK 500,000.

Åke RoseniusBorn 1957, Engineer.Senior Vice President, Infrastructure since 2004.Employed by ÅF since 1994.Shareholding: 0. Convertibles: SEK 300,000.

Viktor SvenssonBorn 1975, Graduate business administrator.Director, Corporate Information since 2003.Employed by ÅF since 2003.Shareholding: 600. Convertibles: SEK 0.

Annual General MeetingShareholders in AB Ångpanne-

föreningen (publ) are invited to the

General Meeting of the company that

will take place at 17.00 (5.00 pm)

on Tuesday 11 May 2004 at

AB Ångpanneföreningen’s head

office at number 7 Fleminggatan

in Stockholm, Sweden.

Entitlement to attend

Shareholders who wish to participate inthe Annual General Meeting must

• have their names entered in the share-holders’ register maintained by theSwedish Securities Register Centre(VPC AB) by Friday 30 April 2004 atthe latest, and

• confirm their intention to participateto the company’s head office by16.00 (4.00 pm) on Thursday 6 May2004 at the latest.

Shareholders who have elected to use anominee for their shareholding musttemporarily re-register their shares intheir own name if they wish to exercisethe right to participate in the AnnualGeneral Meeting. Shareholders wishingto re-register in this way must informthe nominee of this in good time priorto 30 April 2004.

Registration

Notice of an intention to participate inthe Annual General Meeting must bemade to:AB Ångpanneföreningen,Corporate Information, Box 8133, SE-104 20 Stockholm, SwedenTel. +46 (0)8-657 10 00,Fax +46 (0)8-653 56 13, or by e-mail via www.af.se

Please specify your name, personal orcorporate identity number, address,phone number and your registeredshareholding. The notification of attend-ance must be accompanied by docu-mentary proof of entitlement to attendthe meeting (power of attorney, regis-tration certificate etc).

Dividend

The Board of Directors proposes a divi-dend to shareholders of SEK 2.60 pershare. It is proposed that Friday 14 May2004 be made the record day for theright to receive this dividend. It is antici-pated that payment will be made viaVPC on Wednesday 19 May 2004.

Financial information – schedule for 2004

Interim report (3 months): 11 May.Interim report (6 months): 20 August.Interim report (9 months): 27 October.

These reports will be published inSwedish and English.

Financial information about the ÅFGroup is also posted on the Group’swebsite www.af.se

KilKirunaKistaKristianstadKöpingLinköpingLjusdalLuleåLundMalmöNorrköpingNynäshamnOskarshamnPiteåSkaraSkellefteåSkövdeSolna

StenungsundStockholmStrömstadSundsvallSöderhamnSöderköpingSödertäljeTrollhättanTyresöUddevallaUmeåUppsalaVarbergVästeråsVäxjöÅmålÖrebroÖrnsköldsvik

International Offices

DenmarkFinlandFranceCzech RepublicGermanyGuatemalaNorwayPolandPortugalSouth AfricaSpain

Group Head OfficeAB ÅngpanneföreningenFleminggatan 7Box 8133SE-104 20 Stockholm SwedenTel +46 8 657 10 00

Fax ÅF Group Management +46 8 653 56 13Fax Reception +46 8 650 91 18

For further information aboutaddresses and contact details, see www.af.se

Offices in Sweden

AvestaArbogaBorlängeBoråsEdEnköpingFalunGävleGöteborgHalmstadHelsingborgHudiksvallHässleholmJönköpingKalmarKarlshamnKarlskronaKarlstad

Addresses

ÅF co-workers were photographed in their office in Göteborg, Karlstad and Åmål (Sweden), Kouvola (Finland), Oslo (Norway) and Paris (France). Solberg in collaboration with the ÅF Group’s Corporate Information Dept. Printed by Strokirk-Landströms. This Annual Report has been printed using environmentally adapted technology on Arctic Silk paper 130 gsm and 250 gsm, which meets the criteria for the Nordic Swan mark. The paper has been manufactured by Håfreströms, which, like the printing company used, is environmentally certified in accordance with ISO 14001.Photos: Peter Bartholdsson, Leif Erik Nygårds, Getty Images, Johnér, Pix Gallery and Tiofoto.Translation: AB Språkman.

The ÅF Group is a leading name in tech-

nical consulting. We provide cutting-edge

expertise in IT and engineering to serve

the needs of clients working with energy

and the environment, the pulp and paper

industry, inspections, the development of

industrial systems and products, the

design of installations and infrastructure

technology. The Group currently employs

2,750 people in around 50 locations

throughout Sweden and almost a dozen

other European countries.

www.af.se

a.eng .r03 omslag · return on equity, percent 10.2 52.6 10.6 –29.9 9.0 earnings per share after...

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