PDF Document 2.46 MB - Geveko

Annual report 2007

ContentsHighlights of the year . . . . . . . . . . . . . . . . . . . . . . . . . .3CEO’s review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Shares and shareholders . . . . . . . . . . . . . . . . . . . . . . .6Business concept, strategy and financial targets . . .10Industrial Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12The Pan-European road network . . . . . . . . . . . . . . .16Road Marking business area . . . . . . . . . . . . . . . . . . .18Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Subsidiary companies . . . . . . . . . . . . . . . . . . . . . . . . .22Products and product development . . . . . . . . . . . . .34ITS – Intelligent Transport Systems . . . . . . . . . . . . . .36ChemTech business area . . . . . . . . . . . . . . . . . . . . . .38Subsidiary companies . . . . . . . . . . . . . . . . . . . . . . . . .40Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44Management of Securities . . . . . . . . . . . . . . . . . . . . . . . .46Report of the directors . . . . . . . . . . . . . . . . . . . . . . . . . . . .48Financial reportsConsolidated profit and loss account . . . . . . . . . . . .52Consolidated balance sheet . . . . . . . . . . . . . . . . . . . .53Consolidated cash flow analysis . . . . . . . . . . . . . . . .54Change in consolidated equity . . . . . . . . . . . . . . . . .55Parent company profit and loss account . . . . . . . . . .56Parent company balance sheet . . . . . . . . . . . . . . . . . .57Parent company cash flow analysis . . . . . . . . . . . . . .58Change in parent company equity . . . . . . . . . . . . . .58Accounting and valuation principles . . . . . . . . . . . . .59Supplementary information and notes . . . . . . . . . . .64Proposed treatmentof unappropriated earnings . . . . . . . . . . . . . . . . . . . .76Report of the auditors . . . . . . . . . . . . . . . . . . . . . . . . .77Financial risk managementand sensitivity analysis . . . . . . . . . . . . . . . . . . . . . . . .78Five-year review . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80Quarterly review and definitions . . . . . . . . . . . . . . . .81Members of the Board and auditors . . . . . . . . . . . . .82Managing director andother senior management personnel . . . . . . . . . . . .84Company organs and management . . . . . . . . . . . . .85Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89Geveko in briefSince 1998 Geveko has been a mixed investmentcompany with activities in IndustrialOperations as well as Manage ment ofSecurities. As of 2008 Geveko has become anoperating industrial group with its focus onhorizontal road markings.Geveko is Europe’s leading road markingcompany with a strong brand name on mostmarkets in Europe. Products and services ofthe highest quality help to create safer conditionson the roads and consequently supportGeveko’s mission of being a serious player inimproving road safety. Geveko maintainssustained competitiveness and profitability bymeans of cost effective production, acquisitionsand organic growth and also by playing anactive role in the development and restructuringof the road marking industry. Geveko’s“B” share is listed on the Stock holm StockExchange, Sweden.Financial information• Annual General Meeting 2008• Interim report January - March• Interim report January - June• Interim report January - September24 April24 April17 July27 OctoberCover picture: Poland, A1 MotorwayThe A1 Motorway is part of one of the pan-Europeantransport corridors that link Poland together with theCzech Republic, Slovakia and Austria. The A1 Motorwayis included in the priority “European Action for Growth”project that was adopted by the EU in 2003 with the aimof strengthening Europe’s long-term growth potentialthrough investments in the infrastructure, for example.The A1 Motorway will run from Gdansk inNorthern Poland to the Czech border and connect upwith the D1 Motorway in the Czech Republic. Themotorway will also link up with the planned A2 and A4motorway projects, which will connect the EU withRussia and the Ukraine. Ninety kilometres of the A1Motorway are expected to be completed in 2008. Theaim is for the motorway to be ready by 2013; a total of582 km. Around 75% of the cost of the motorway isbeing financed by the European Investment Bank.Photo: Skanska - NDI2

CEO’s reviewAn Eventful YearFrom investment trustto an operating industrial groupNow as we put 2007 behind us, itis an eventful and in many ways anexciting year that we are to reporton. The Board announced in Januarythat priority would be given to thedevelopment and growth ofIndustrial Operations rather thanManagement of Securities. That setus off on the road away from aninvestment trust and back to afocused industrial enterprise. Duringthe year, we reviewed the capitalstructure, started divestment of theEquities Portfolio, and expanded theIndustrial Opera tions division; thesewere some of the steps during theyear towards a focused industrialenterprise. As I now write this commentthe tax authority has just notifiedGeveko that the company nowhas operating status.Divestment of Equities PortfolioGoing ahead with this change ofstrategy meant that Geveko’s portfolioof listed equities would have to bedivested. This process began just atthe time the Swedish stock marketbegan to turn down after rising forfour years and ended up with a negativeperformance in 2007. Beforeprices collapsed in the late autumnwe completed the sale of some twothirdsof the Equities Portfolio. Bymaking use of a variety of optionsolutions many of the holdings werehedged at prices prevailing duringthe first half of 2007. Despite thesemeasures, we found ourselves havingto report a loss on the Equities Port -folio. The remaining holdings in theportfolio will be retained pendingrecovery on the stock market.Growth viaacquisition in Central EuropeFor Industrial Operations, the yeargot off to a promising start with ahealthy order intake and an earlystart to the road-marking season,particularly in Northern Europe. Thebusiness in Norway and Swedendeveloped very well as did exports to4

CEO’s reviewCentral Europe. Major acquisitionswere carried out in Poland andSlovakia and the equity stake in ourHungarian company was raised viathe acquisition of the HungarianNational Road Administration’sminority interest in the company.Adverse factors during the year werethe difficult weather conditionsduring the summer, especially inGreat Britain, and the municipalreform process in Denmark, as resultof which the Danish contractingmarket fell by 20%. The road-markingindustry’s dependence on goodweather is a challenge for the future,namely to succeed in developingproducts or application methods or acombination of the two that makesthe activities less dependent on theweather. We can estimate that overthe past few years the annual shortfallin the result owing to poorweather conditions during thesummer season amounted to aroundSKr 20-30 million.The European market for horizontalroad markings is worth someSKr 10 billion per year and theindustry has a highly fragmentedstructure. Although Geveko is themarket leader it only has a 10% marketshare. The next largest companyin the industry is only half as large asGeveko. The structure of the industryin many ways reflects the market,which is also fragmented with differentprocurement practices, qualityrequirements and certification systems.National rules have governedthe industry, and still do so.We can expect to see a higherdegree of industrialisation within theindustry, more efficient processesand probably a process of consolidationthat will lead to fewer and largerplayers. This is the background tothe decision to continue to developIndustrial Operations and strengthenour position as a market leader withinthe road-marking sector inEurope. Geveko is well placed toplay an active role in the necessaryrestructuring of the industry byvirtue of its position as marketleader, broad geographical coverage,long experience and technicalexpertise, as well as its strong financialposition after the sale of theEquities Portfolio.Moreover, Geveko has a verypromising market position on all therapidly expanding markets in CentralEurope, namely Poland, Slovakia, theCzech Republic, Hungary andRomania. Together with the Ukraine,these markets have around 140 millioninhabitants. They also have aconsiderable need for investments inimproving their infrastructure forreasons of road safety. Since the1970s the number of traffic relateddeaths in Sweden has fallen by 65%whilst the number of vehicles on theroads has almost doubled. In manycountries in Central and EasternEurope traffic fatalities are very high.In Poland more than 5,000 peoplewere killed in traffic accidents in2007, and in the Ukraine the numberof deaths on the roads increased byaround 30% to 9,500. The nationalroad safety targets that these countrieshave set require immenseinvestments to improve the infrastructure.Major infrastructure projects,mainly to be financed by the EuropeanInvestment Bank and the EU’s structuralfunds, have been planned andare expected to continue until 2015in Central and Eastern Europe.Geveko’s aim is to create a networkof competitive contracting companiesfrom the Baltic Sea in the north tothe Black Sea in the south, wheretransport corridors of motorwaystandard are under construction andshall link up Western Europe withCentral and Eastern Europe.Business planwith many challengesGeveko’s Board has adopted a businessplan for the coming three years.One target is to achieve an operatingmargin of 8%. The ambition is togrow, both organically and via acquisition,and raise profitability at thesame time. The organic growth isplanned to take place partly on newmarkets where we see considerabledevelopment potential, and partly bylaunching new products, such asPremark ® , whose sales have beenrising by 20-25% a year during thelast few years. The main challenge isto improve profitability. We intend tocontinue as a highly decentralisedcompany with decision-makingauthority close to the customer, butat the same time to harmonise andstandardise processes and workingpractices. Economies of scale andsynergies within the contractingactivities as well as material production,gives us an edge when it comesto improving profitability. Our productionstructure has been designedfor industrial activities that for a longtime have been concentrated inNorthwest Europe. Countries inCentral Europe now account formore than one-third of the company’sinvoiced sales. The production structurenow needs to be adapted tohandle the growing business in therest of Europe.The business plan does involvechallenges and will require patience,dedication and flexibility. The changesbeing made in the structure, workingpractices and the organisation willproduce results, but the process willtake a few years.I am convinced that the chosenstrategy is the right direction to bemoving and I look forward to beingable to report on good progress in2008. As for the past year, I wouldlike to express thanks to the company’sshareholders and business partnersand to all our employees whosegreat dedication and loyalty havecontributed to the progress of theGroup.Göteborg, Sweden, March 2008Hans LjungkvistManaging director and Group CEO5

Shares and ShareholdersLarge transfer of capital to shareholders andcapital restructuring into operating enterpriseIn 2007 a decision was made tochange the strategic direction fromthat of investment trust to an operatingindustrial enterprise. In consequence,Geveko’s shares will bevalued more on the basis of thebusiness’s ability to earn a profitthan on changes in its net worth.Geveko’s aim is for its shares to berecognised as an attractive alternativeinvestment for private investors andsmall institutional investors.ListingGeveko’s Series “B” shares were firstlisted on Stockholmsbörsen’s “A” listin 1983. In 2000, they were movedup to the “O” list instead. Geveko’sshares are since October 2006 listedon the Small Cap list on the Stock -holm Stock Ex change. The code forGeveko’s Series “B” shares is GVKO“B”. A trading block consists of 100shares.Share structureSince 1993 the number of shares inissue has been 4,219,533, of which720,000 are Series “A” shares and3,499,533 are Series “B” shares. EachSeries “A” share carried one vote andeach “B” share 1/10th of a vote.ShareholdersThe number of shareholders on31 December 2007 was 3,328 (3,452),according to VPC’s list of shareholders.Institutional shareholdersincreased during the year from 50%to 54% of the capital and from 59%to 62% of the votes. Shareholdersregistered abroad accounted for 27%of the capital and 11% of the votes,which is broadly unchanged fromthe previous year.“A” shareholder consortiumA consortium agreement has beenreached by owners of Series “A”shares who together control morethan 50% of the votes.Share price and turnoverThe price of Geveko’s shares on31 December 2007 was SKr 125.50(218). During the year the highestlisted transaction price was SKr 323and the lowest was SKr 114. Duringthe year shares were traded for SKr312 (224) million, with an averagedaily turnover of SKr 1.2 (0.9) million.The turnover rate was 30% andtransactions were completed on 99%of all trading days.Total returnThe return on Geveko’s Series “B”shares, including dividend andredemption of shares, was neg. 3.0%,which may be compared with thereturn on the SIX Return Index ofneg. 3.6%. During the five-year period2003-2007, Geveko’s average totalreturn was 25.6% per year. The correspondingfigure for the SIX ReturnIndex was 22.6%.Dividend policyGeveko’s dividend policy has beenadapted to the company’s change ofdirection from investment trust tooperating company with effect from2008. The new dividend policymeans that some 50% of the profitafter tax will be paid out by way ofordinary dividend.The previous dividend policymeant that 4% of the net worthshould be paid out by way of dividendeach year. This policy applies to thedividend in respect of the 2007financial year.DividendA dividend of SKr 11 was paid out inApril 2007 for the 2006 financialyear. For the 2007 financial year theBoard proposes that the AGMresolves in favour of paying a dividendof SKr 6 per share. This dividendcorresponds to a direct yield of 4.8%,based on Geveko’s closing shareprice on 31 December 2007.Redemption programmeThe 2007 Annual General Meetingdecided in favour of an automaticshare redemption scheme wherebyeach share was split into two shares(2:1 split), one of which was thenredeemed for a cash payment of SKr75.Shareholder informationGeveko’s aim is to regularly providedetailed and timely information forshareholders and the stock marketon the company’s progress andfinancial position. The provision ofexternal information consists ofregu lar reports, viz. year-end communiqués,annual report, interimreports and AGM decisions. Geveko’sreports and press releases are dis -tribu ted via Huginonline, a specialistdistributor, and are accessible onGeveko’s website, www.geveko.se atthe time of publication. It is possible,on Geveko’s and Huginonline’s websites,for shareholders and otherstakeholders to subscribe to informationvia email.All the reports are published inSwedish and English and printedversions are distributed to all registeredshareholders who have notspecifically requested not to receivesuch information. The reports canalso be ordered by post from:AB Geveko, Box 2137, SE-403 13Göteborg, Sweden, telephone:+46 31172945, fax: +46 317118866and email: info@geveko.seContacts with the capital marketGeveko made presentations duringthe year at the Swedish Society ofFinancial Analysts meetings as wellas at a number of events organisedby local shareholders’ associations.Analyses of GevekoIn 2007 independent equity analystsRedeye and its equity analyst HenrikAlveskog followed Geveko’s performance.6

Shares and ShareholdersShareholders at 31 December 2007No. of No. of Capital, Votes,A-shares B-shares % %Gunnar and Märtha Bergendahls Foundation 341,018 376 8.1 31.9Bergendala Foundation 139,085 222,200 8.5 15.1Ergel, Jarl 34,720 65,292 2.4 3.8Dunberger, Klas with family 20,600 32,933 1.2 2.2Ergel, Magnus 18,000 53,000 1.7 2.2Dunberger, Marie 20,600 13,000 0.8 2.0Dunberger, Ulf 20,600 0.6 2.0Ergel, Gunilla with family 18,000 33,335 1.2 2.0SSB CL Omnibus AC Fund, USA 209,858 5.0 2.0Bank of New York, London 202,550 4.8 1.9Kamprad, Ingvar 200,000 4.7 1.8Bergendahl, David 18,500 2,500 0.5 1.7Mellon AAM Omnibus Fund, USA 156,000 3.7 1.5Bergendahl, Henrik 15,000 0.4 1.4Lewerth, Lars 9,600 32,531 1.0 1.2Mattsson, Anders 12,180 740 0.3 1.2Mattsson, Claes-Göran 9,700 0.2 0.9Bergwall, Lars 8,640 0.2 0.8Svenska Handelsbanken S.A. Luxembourg 73,350 1.7 0.7Wernroth, Inga-Britt 4,896 7,830 0.3 0.5Other 28,861 2,194,038 52.7 23.2720,000 3,499,533 100.0 100.0Source: VPC AB, direct holdings and registered in nominee names.Per share data 2003-20072007 2006 2005 2004 2003Market capitalisation 527 920 882 758 633Geveko Series “B”– listed price SKr per share 30 December 125 218 209 175 150Highest/lowest price, SKr per share 323/114 233/175 209/170 181/141 150/95Earnings/loss per share, SKr -4.85 28.20 37.70 16.45 34.95Cash flow per share, SKr -7.40 9.20 17 -5.25 -1.90Dividend, SKr per share, 1) 6 11 11 10 10Direct yield, % 4.8 5.0 5.3 5.7 6.7Return on share, % 2) -3 10 25 23 73SIX Return Index -4 +26 +36 +21 +34Average turnover per trading day, SKr ‘000 1,255 896 639 470 354Average value per transaction, SKr ‘000 73 73 69 47 50Number of trading days with transactions, % 99 99 99 99 96Number of shares traded, % 30 31 19 17 22Number of shareholders 3,328 3,452 3,482 3,358 3,153Number of shares in issue at year end 4,219,533 4,219,533 4,219,533 4,219,533 4,219,533Source: VPC AB, direct holdings and registered in nominee names.1) Dividend proposal for 2007, SKr 6 per share.2) Change in share price during the year plus dividend paid in relation to opening share price.7

Shares and ShareholdersShareholders by size of shareholding, 31 December 2007Size of shareholding No. of shareholders Number of “A” shares Number of “B” shares % of capital % of votes1- 500 2,640 312 429,283 10.2 4.0501- 1,000 346 613 295,836 7.0 2.81,001- 5,000 245 22,736 523,305 13.0 7.05,001-10,000 44 33,140 295,373 7.7 5.910,001-15,000 17 32,076 180,860 5.0 4.715,001-20,000 5 0 87,101 2.1 0.820,001- 31 631,123 1,687,775 55.0 74.83,328 720,000 3,499,533 100.0 100.0Source: VPC AB, direct holdings and registered in nominee names.Dividend per shareShareholdersby category at 31 December 2007SKr1210864202003 2004 2005 2006 2007Financial companies 4.4%State andSwedish privatemunicipalshareholderscompanies 1.8%40.1%Other Swedishlegalentities 7.7%Overseasprivate shareholders26.8%Foundationsetc. 19.2%Holdings %Financial companies 4.4State and municipal companies 1.8Foundations etc. 19.2Other Swedish legal entities 7.7Overseas private shareholders 26.8Swedish private shareholders 40.1Total 100.0Source: VPC AB, direct holdings and registeredin nominee names.Number of shareholders: privateindividuals and legal entities 2007Geographical locationof shareholders by country 2007ShareholdersPrivate individuals 3,021Of which resident in Sweden 2,996Legal entities 307Of which resident in Sweden 230Total number of shareholders 3,328Source: VPC AB, direct holdings and registeredin nominee names.Other 2.5%Luxembourg 1.9%GreatBritain 5.4%Switzerland5.9%USA 11.2%Sweden 73.1%Holdings %Sweden 73.1USA 11.2Switzerland 5.9Great Britain 5.4Luxembourg 1.9Other 2.5Total 100.0Source: VPC AB, direct holdings and regi -stered in nominee names.8

Shares and ShareholdersDividends paid 1998-2007Geveko shares, including dividend,in relation to SIX Return Index 2003-2007SKr12%12400350“B” shares (including dividend)SIX Return IndexTotal share turnoverthousands10861086300250200441502240001998 1999 2000 2001 2002 2003 2004 2005 2006 20070100300200DividendDirect yield, %5003 04 05 06 0708100(c) OMX ABGeveko shares in relation toSIX General Index 1/1 2007-29/2 2008Geveko shares in relation toSIX General Index 1/1 2003- 29/2 2008350350300300250250200200150150100100JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB20072008(C) OMX AB5003 04 05 06 07 08(c) OMX AB“B” shares, highest and lowest per monthSIX General index“B” shares, highest and lowest per monthSIX General IndexShare redemption in June SKr 75. Share redemption, for SKr 75 per share, in June 2007.9

Business concept, strategy and financial targetsBusiness concept, strategy and financial targetsBusiness conceptGeveko’s business concept is to generatevalue for shareholders by offeringinnovative products and systemsof the highest quality, playing anactive role in the industry’s restructuringand establishing operationson new and existing markets.Strategic goalsGeveko’s strategy is to strengthen andconsolidate its position of marketleadership within Europe by activelyparticipating in the restructuring ofthe industry, systematically developingnew products and product systemswhich gives it a competitive advantageand a higher level of added value aswell as improved productivity andefficiency in all areas.As of 2008 Geveko is an operatingindustrial group that focuses onhorizontal road markings, whereGeveko is market leader in Europe.The European industry for road markingsis highly fragmented and characterisedby the existence of numerousnational and local companies whichmainly only operate on their respectivedomestic markets. Geveko considersthat there is great potential forimproving the industry’s profitabilityby increasing the degree of industrialisation.Geveko gives priority to three areas inorder to reach its strategic goals:• Organic growth• Growth via acquisition• Operational excellenceStrategic goalsOrganic growthNew products• Purposeful investments in new productsthat generate higher customer value.• Water-based, environmentally friendly paints.• Development of pre-fabricated symbols.• Electronic road markings on the road surface.Growth via acquisitionBolt-on acquisitions• Bolt-on acquisitions on markets whereGeveko is already established and whichcreate synergies.Operational excellenceCost effective production• Take advantage of economiesof scale and synergies.• Improve processes within both productionof materials and contracting.• Introduce benchmarks and best practice.New markets• Move into new markets withhigh potential for Geveko.• Fast-growing markets in Central Europe.• Markets where Geveko is not at present established.Structural acquisitions• Acquisition of large companies on markets where Gevekois either established or not currently active.High standard of service• Decentralised structure with closeness to customers.• Develop employees competence.Follow up of strategic goalsPriority areas Result 2007• Organic growth • Stepped up marketing activities within the product area Premark ®.Move into the Ukraine. New products, including Safer@work andSolcellsbrikken.• Growth via acquisition• Acquisition of Polish contractors Dartom, Gik and Technom,the Slovakian company Osfer and consolidation of Magyar Plastiroute,Hungary.• Operational excellence• Acquisition of 50% of glass bead manufacturer Allglass Reprocessors.10

Business concept, strategy and financial targetsFinancial targetsThe Group’s overriding objective isto earn a return on equity of at least13% per year and an equity ratio thatdoes not fall below 35%.In 2007 a business plan wasadopted for the Group’s developmentover the next three years. The objectiveis to achieve an operating marginof 8%.The operating margins for 2004-2007 were reduced by the depreciationof goodwill arising in connectionwith acquisitions. Excluding thisdepreciation, the margin is increasingby 1.5 to 1.8 percentage points ayear.The results for 2007 and 2006were adversely affected by disturbancesto the activities in GreatBritain, Denmark and Romania.Financial targets – Follow-up 2007-2003Outcome 2007 2006 2005 2004 2003Operating margin, % 4.0 3.7 5.1 6.5 9.5EBITA, % 5.3 5.3 6.3 8.3 9.5Return on:Operating capital, % 6.8 6.9 9.6 - -Capital employed, % - - - 14.3 20.9ForecastBusiness Area Road Markings’ activitiesare highly seasonal, withemphasis on the second and thirdquarters. Much of the volume in theroad marking industry is decided onthe basis of procurements that takeplace during the first half of the year.The full-year effects of acquisitionscompleted during the second half of2007 are expected to have afavourable effect on turnover. Theseasonal character of Business AreaRoad Markings means that most ofGeveko’s result is generated duringthe second half of the year. For thisreason, Geveko does not forecast itsresult for the full year before, at theearliest, the publication of the company’sinterim report for the firsthalf-year.The A1 Motorway will run from Gdansk on Poland’s Baltic coast to the Czech border where it will join the D1 Motorway in the CzechRepublic. The contractor Technom, which was acquired by Geveko in 2007, has carried out application of road markings on the A1Motorway. Some 90 km of the motorway are expected to be ready in 2008.11

Industrial OperationsIndustrial OperationsHead office: Göteborg, SwedenTurnover 2007: SKr 1,079(1,035) millionOperating profit 2007: SKr 43(39) millionNumber of employees: 633 (607)Road Marking business areaProducts: Road Marking productsand contracting.Customers: National roadauthorities, aviation authoritiesand municipalities, as well asbuilding and civil engineeringcompanies.Competitors: See section RoadMarking business area.ChemTech business areaProducts: Rust protection andmarking sprays, industrial anddomestic paints.Customers: Building and constructionindustry, board industry, automotiveafter market and consumermarket.Competitors: See section onChemTech business area.SKr million160140120100806040200Q1Net turnoverper month 2007Q2Q3Q4Stronger presence on growthmarkets in Central and Eastern EuropeNature of businessGeveko’s Industrial Operations segmentis divided into two businessareas: Road Marking and ChemTech.The Road Marking businessarea accounted for some 90% ofIndustrial Operations’ turnover in2007. The remaining 10% comesfrom the ChemTech business area.The companies are 100% owned,except for Plastidrum in Romania,which is 69% owned and MagyarPlastiroute, the Hungarian companyin which Geveko’s interest wasraised from 50% to 78% in 2007 viathe acquisition of the Hungarianroad administration’s shareholding.Magyar Plastiroute has been consolidatedwith effect from 31 December2007.The business is active in mostcountries in Europe, through subsidiariesin the Nordic countries,Poland, Romania, Russia, Switzer land,Slovakia, Great Britain, the CzechRepublic, Germany, the Ukraine, andHungary.Road Marking business areaThe Road Marking business areamainly manufactures road markingmaterials and road marking products.Geveko is Europe’s largestmanufacturer of horizontal roadmarking products.ChemTech business areaThe ChemTech business area manufacturesrust protection products,marking sprays, and industrial anddomestic paints. The business areais active in segments with highdemands for customer-specifiedproducts. The business area possessesconsiderable chemical-technicalcompetence, which permits productionsynergies with other companieswithin Industrial Operations.Net turnover and resultNet turnover amounted to SKr 1,079million (1,035), an increase of 4.2%in relation to 2006. The gross profitamounted to SKr 221.1 million(207.9), and the operating profit wasSKr 43.0 million (38.6). The operatingmargin was 4.0% (3.7). The return oncapital employed was 6.8% (6.9).To be better able to judge thebusiness’s underlying earningsGeveko will in future report theoperating profits/losses, but also theoperating profit/loss before depreciationof intangible fixed assets arisingin connection with acquisitions. Thisconcept is defined as EBITA(Earnings before interest, tax andamortisation). In 2007 EBITAamounted to SKr 57.0 million, whichgives an EBITA margin of 5.3%.The activities carried on by theRoad Marking business area arehighly seasonal with a focus on thesecond and third quarters. The salesvolume increased by 3.5% andamounted to SKr 979 million for2007. On the mature markets inWestern Europe turnover declinedby 1.2%.In the ChemTech business areaco-operation with Russian vehiclemanufacturers with the RustProtection product area resulted ina positive sales trend in 2007. In theNordic countries, the building andconstruction sector remained strongthroughout 2007, which resulted inhealthy growth for the MarkingSpray product area. All in all, thebusiness area’s turnover increasedby 12.4%.Market andproduct developmentThe European road-marking market,which is estimated to be wortharound SKr 10,000 million per year,is highly fragmented and characterisedby numerous players, most ofwhich are active in only one or a fewmarkets. Geveko is the only companythat has achieved a position of leadershipon several markets. Geveko’sshare of the European market isestimated at around 10%.The markets in the Nordicregion and Western Europe for roadmarking products and contracting12

Industrial OperationsDropOnLine is an application system that has been developed to improve the visibility of road markings on both wet and dry drivingconditions.are subject to intense competition. In2007, Geveko maintained its leadingmarket position in Sweden, Denmarkand Norway. In Sweden Geveko’scompany Cleanosol lost its singlelargest materials customer, VägverketProduktion, which started productionon own account of thermoplasticmaterials. However, Cleanosolmanaged to compensate for the lossvolume in Sweden by increasing itsexports to Central Europe. In Den -mark the market for road markingcontracts declined by some 20% asa result of municipal reform that wasimplemented in 2007. The contractingmarket is expected to recover inDenmark in 2008. The Germanmarket remained under pressure asa result of limited public funds andexcess production system capacityand an overpopulated market forroad marketing contractors. InHungary, the market was subdued in2007 following the completion ofseveral large motorway projects in2006. Serious flooding affected GreatBritain during the summer, whichcaused problems for the road markingindustry. In 2007 the road markingindustry developed strongly inSlovakia and the Czech Republic.Conditions in Poland, Romania andSwitzerland were stable.Product development activitiesare carried on with a focus on environmentallyfriendly products. Newroad marking products and productsystems shall help to improve roadsafety and satisfy the highest demandsfor functionality, environmentalsecurity, delivery precision and technicaldevelopment. Electronicallycontrolled products, such as opticalwarning systems, are being developedin the ITS area – Intelligent TransportSystems. Geveko has developed systemssuch as Safer@work to improveroad safety for road workers. Thissystem will be tested in Sweden in2008.Acquisitions in 2007Extensive investments in road constructionin Central and EasternEurope, financed with state fundsand via EU financial organisations,are expected to continue until 2015,which will impact the growth ratewithin road marking. In 2007Geveko acquired three Polish contractors,Dartom, GiK and Technom.These Polish companies have a goodgeographical spread and cover areasin which large infrastructure projectsare taking place or being planned forthe coming years. Geveko also carriedout an acquisition in Slovakiaduring 2007. The company, Osfer,which is also involved in contractingactivities, is situated in easternSlovakia near the borders withPoland, the Ukraine and Hungary.The acquired companies have beenconsolidated into Geveko’s subsidiarycompany Cleanosol, whichalready has responsibility for thebusinesses in Poland and the CzechRepublic. The acquisitions in Polandand Slovakia will strengthen Geveko’sposition on Central Europeanmarkets.Geveko is a major user of glassbeads, and in 2007 it acquired 50%of the shares in Allglass, a glass beadmanufacturer with activities in GreatBritain. The acquisition ensuresaccess to one of the most importantraw materials used in the manufactureof road marking materials. Theacquisition also gives Geveko scopeto engage in development work inthis area.13

Industrial OperationsCost structureThree quarters of Industrial Operation’scosts consist of production costs.Within Road Marking’s material productionthe cost of purchased rawmaterials amounts to 60%. The mostimportant raw materials in the manu -facture of road marking materials aretitanium dioxide, binding agent andglass beads. Effective procurementprocedures are therefore vital forachieving cost efficiency. In the contractingsector material costsrepresent about a quarter of totalproduction costs. The remainingshare consists of labour costs andthe cost of machines and equipment.A benchmarking system to measurethe efficiency of all areas withinIndustrial Operations will be introducedin 2008 with the object offurther improving productivity withinthe contracting activities as wellas in materials production.IT systems andoperational reliabilityIf operational efficiency is to beraised, the IT environment mustmaintain a high standard in respectof usesfulness, accessibility and security.In order to create standardisedprocedures and working practiceswithin the Group a groupwide financialreporting system has been introduced.The system offers advantageswhen it comes to control and followup of the various subsidiary companiesand ensures that internal re porting isof a high quality.Forecast for 2008Demand for road markings isexpected to match last year’s on theNordic markets and in WesternEurope. In Central and EasternEurope the growth rate is higher andsubstantial investments in the infrastructureare boosting the growthpotential. Geveko’s companies arewell placed in Central Europe andare expected to take their full shareof this growth. The full-year effectof the acquisitions completed duringthe first half of 2007 will have apositive impact on turnover. In 2008working practices and the organisationwill be modified to take betteradvantage of economies of scale. Theeffect of these changes on the resultcan be expected to show throughduring the coming two or threeyears. On the downside there areweather conditions and the intenselycompetitive market situation inWestern Europe. The seasonality ofthe road marking industry meansthat most of the profit is generatedduring the second half of the year.For this reason, Geveko does notpublish an earnings forecast beforethe date of the second quarterreport, at the earliest.Cost structure 2007Depreciationaccording to plan 7%Administrativecosts 7%Sellingcosts 9%Developmentcosts 1%Productioncosts 76%Five-year review 2007-2003SKr million, except where otherwise stated 2007 2006 2005 2004 2003Net turnover 1,078.8 1,035.0 991.0 940.3 650.2Operating profit 1) 43.0 38.6 51.0 61.0 61.6Operating margin, % 4.0 3.7 5.1 6.5 9.5EBITA 57.0 54.3 62.8 78.0 61.6EBITA, % 5.3 5.3 6.3 8.3 9.5Operative capital, average 628.4 561.0 532.7 - -Return on operative capital, % 6.8 6.9 9.6 - -Return on capital employed, % - - - 14.3 20.9Operative cash flow before investment activities 111.3 73.3 82.9 109.0 35.6Investments in tangible fixed assets, net 70.2 41.4 61.7 107.4 20.3No. of employees 633 602 598 555 3571) Excluding capital gains on divestment of subsidiary in 2003.14

Industrial OperationsAcquisitions 2007Company Country Nature of business % holding Turnover 2007, SKr million No. of employeesTechnom Poland Road marking 100 23.2 50contractorGiK Poland Road marking 100 29.6 48contractorDartom Poland Road marking 100 11.7 27contractorOsfer Slovakia Road marking 100 7.2 12contractorAllglass Great Britain Manufacturer 50 19.5 23of glass beadsMagyar Hungary Road marking 78 * 112.3 65PlastiroutecontractorTotal 203.5 225* Geveko’s interest has been raised from 50% to 78%.TechnomTechnom was established in 1990and is engaged in both vertical andhorizontal road marking. Technombegan to work together with Gevekoin 1994. It is one of the leading companiesin Poland within the roadmarking industry and applies some200,000 m 2 of thermoplastic roadmarkings per year.GiKGiK was founded in 2001 as theresult of a merger of two horizontalroad marking contractors. The businessnow includes the erection ofvertical road signs and barriers toindicate motorway exit roads. GiK isISO 9001 certificated and is involvedin contracting activities in Poland,mainly for road authorities.DartomDartom was set up in 1991 and hasbeen active in horizontal road markingcontracting since 1995. Dartomperforms road-marking contractsthroughout Poland and is ISO 9001certificated.OsferOsfer is one of the leading companiesin the road marking industry inSlovakia. Osfer mainly carries outroad marking maintenance for theSlovakian road authority but alsoprovides contracting services forprivate road building companies.Allglass ReprocessorsAllglass, whose business is located inGreat Britain, was founded in 2001.The company manufactures glassbeads for road marking materialsand also for reinforcing plastic materialsand for companies that useblasting techniques in their production.Allglass has the capacity tomanufacture 12,000 tonnes of glassbeads per year.15

Industrial Operations / Road Marking business areaThe Pan-European highway network – essential forsafe and environmentally friendly road transportation in EuropeFINLANDRUSSIANizhny NovgorodIXINORWAYSWEDENHelsinkiMoscowTallinnESTONIALATVIARigaDENMARKGERMANYDresdenIVIIXIIIBerlinVIPragueOstravaCZECH REPUBLICVIISalzburgAUSTRIA GrazPOLANDViennaGdanskKaliningradZilinaSLOVAKIASWITZERLANDLjubljanaV SLOVENIA ZagrebCROATIAVeniceRijekaBelgradeBOSNIA ANDHERZEGOVINA SERBIAITALYSarajevoPloceLITHUANIAVilniusWarszawBratislavaBudapestHUNGARYKrakowVIIITiranaDurresALBANIABELARUSLvivROMANIASkopjeMACEDONIAGREECEMinskUKRAINEBucharestBULGARIASofiaKievLjubasevkaMOLDAVIAChisinauVarnaOdessaIstanbulTURKEYSource: PAN-Eurostar-Final Report,European Commission, DG Energy & Transport16

Industrial Operations / Road Marking business areaThe Pan-Europeanhighway networkAt the Pan-European conference onCrete in 1994 discussions werelaunched regarding the need for awell-functioning infrastructure thatincluded road, rail and sea transportin the Central and East Europeancountries. In 1997 a decision wasmade to go ahead with the constructionof 10 Pan-European transportcorridors, which, it was estimated,would be completed by 2015.Following the enlargement ofthe EU in 2004 and 2007 it wasnoted that priority should be givento a transport network cross theborders between Western andEastern Europe. The projected Trans-European Transport Network (TEN-T) in the 15 original countries of theEU is now being combined with theplanned 10 Pan-European transportcorridors in order to realise a Pan-European Transport Network (PAN).The countries in Central andEastern Europe occupy a particularlystrategic geographical position. Thisfurther accentuates the importanceof creating a modern road infrastructurein order to facilitate road transportationbetween countries inWestern and Central Europe as wellas to countries in the Nordic region,the Baltic states, Russia and theUkraine.Corridor I-VThe following road projects areincluded in the Pan European Trans -port Network:• Corridor I, named Via Baltica, consistsof a 670 km highway fromTallinn to Warsaw, which will constitutethe transport link betweenFinland, Estonia, Latvia, Lithuaniaand Poland as well as neighbouringcountries in Eastern and WesternEurope. Half of the highway hasbeen completed, of which over 100km consists of newly laid road.• Corridor II consists of a 2,200 kmlong motorway that is of greatimportance for trade relations withRussia. The primary purpose ofCorridor II is to connect Germanyand Poland with Belarus andRussia. The total length of motorwayin Poland is 868 km while inRussia it is 880 km. Road buildingis in progress in both Poland andRussia and the target is for themotorway to be finished by 2015.• Corridor III which will consist of1,700 km of motorway, is partlycomplete and runs from Berlin viaKrakow to Kiev. It will become animportant link between the industrialisedregions in Germany, Polandand the Ukraine. The EuropeanInvestment Bank has grantedUkraine a loan of 200 million euroto finance the M06 motorway projectthat is included in Corridor III.The project will raise the standardof Ukraine’s highway infrastructure,improve road safety, and leadto better connections withHungary, Slovakia and Poland, forexample. The project is being cofinancedby EBRD.• Corridor IV includes 3,640 km ofmotorway in Germany, the CzechRepublic, Slovakia, Hungary,Romania, Bulgaria, Greece andTurkey. The construction of around500 km of motorway betweenDresden and Prague is one of themost important links in the projectand some stretches of motorway inGermany are already finished. Theproject cost is estimated at 1.3 billioneuro; it is being financed by EIBand with state funds. In Hungaryand Romania some of the plannedstretches of motorway were completedduring the 2000-2007 period.• Corridor V includes road, rail, airand sea transport in Italy, Croatia,Slovenia, Hungary, Slovakia, theUkraine and Bosnia-Herzegovina.The project will involve building of2,850 km of roads, mainly the constructionof motorways. Corridor Vwill link Central Europe with theMediterranean countries. Stretchesof the motorway have been completedin some of the countries.Construction is in progress inHungary and Slovenia, for instance.Most of the motorway projects inSlovakia will begin in 2008 and areplanned for completion by 2015.Financing of thePan-European Transport NetworkThe cost of the European transportnetwork is estimated to amount to350 billion euro up until 2010,ex cluding the newly acceding membercountries’ need for infrastructureinvestments. In the EU Commission’sbudget for 2007-2013 8 billion eurois being earmarked for infrastructureimprovements, which is twice asmuch as for the 2000-2006 period.Over the past five years, theEuropean Investment Bank hasinvested some 87 billion euro in thetransport network.Infrastructure financing is also providedby:• EBRD (European Bank forReconstruction and Development)• ERDF (European RegionalDevelopment Fund)• Cohesion Fund (Structure andSolidarity Fund)• TACIS (Technical Assistance forCommonwealth of IndependentStates), which finances suchprojects as the development ofinfrastructure networks in theCommon wealth of IndependentStates, including Russia and theUkraine.Geveko andPan-European Road ProjectsIn Central and Eastern European theroad marking market is expected togrow by 5-10% over 3-5 years. Thedriving forces are large infrastructureinvestments and the need to im proveroad safety. The West Europeanmarket is subject to fierce competitionand is experiencing limited growth of1-2% per year.In order to create a platform forhigher and profitable volumesGeveko has acquired and establishedbusinesses with leading positions onseveral markets in Central andEastern Europe. In 2007 furtheracquisitions were made in Polandand Slovakia. Geveko’s road markingcompanies in Central Europe have agood geographical spread from thePolish Baltic coast in the north to theBlack Sea in the south. Geveko hasthereby strengthened its position onthose markets where large roadprojects within the Pan-EuropeanTransport Network will take place.17

Industrial Operations / Road Marking business areaBusiness area’s share ofIndustrial Operations’ salesAcquisitions in Central Europe generate growthBusiness area’s revenueby market areaCentralEurope 22.3%WesternEurope31.2%91%Nordicregion 46.5%Business area’s revenueby product groupOther 3.9%Glass beads 1.2%Road-markingpaint 11.5%Premark ®9.3%Thermoplastic14.1%Contracting60%OperationsGeveko produces some 55,000tonnes of road marking materials peryear and is the market leader withinhorizontal road markings in Europe.Horizontal road markings includetransverse and longitudinal lines,symbols, arrows and words on streets,roads, bicycle tracks, parking spaces,airport runways, and other suchareas of application. Around onethirdof Geveko’s output is used inits own contracting business, whilearound two-thirds are sold to outsideusers. The business is mainlycarried on in Scandinavia and CentralEurope. Geveko’s contracting businessis highly decentralised and operatesunder its own brand names on eachmarket. Cleanosol, Dartom, GiK,LKF Vejmarkering, Magyar Plasti -route, Osfer, Plastiroute, Plastidrum,Roadcare, Superco and Technom areall strong brand names on theirrespective European markets.Magyar Plastiroute manufacturesvertical road signs and othertraffic engineering products for theHungarian market. Vertical roadsigns are also manufactured, in thefirst instance for the Romanianmarket, by a joint-venture companyowned by Geveko’s subsidiaryPlasti drum and the French companySignaux Girod.Within the Intelligent TransportSystems (ITS) segment Gevekodevelops electronically controlledproducts that help to improve roadsafety, such as the Safer@workwarning system, which offers activeprotection to increase safety at roadworks.Allglass, an associated companythat was acquired in 2007, manufacturesglass beads, which are one ofthe most important raw materials inroad marking materials. Geveko’sinterest in Allglass is 50%. The acquisitionwill ensure Geveko’s access toglass beads and will also enable it toinfluence quality by means of itsown research and development inthis area.MarketsNordic countries and Western EuropeThe road marking industry in WesternEurope is highly fragmented andcharacterised by considerable excesscapacity and intensely competitivepricing. The market is estimated tobe worth around SKr 8,000 millionper year. Growth is weak, and severalcompanies on the market have notedpoor profitability. Restructuring ofthe industry is therefore necessary,and this process is underway in theform of acquisitions and mergers.Geveko has a strong position in theNordic region and its main strategyis to maintain its market share whilealso maintaining a close eye onopportunities for expansion via theacquisition of European players.Central and Eastern EuropeThe market for horizontal roadmarking products in Central andEastern Europe is worth about onequarterof the estimated value forWestern Europe, but it is growingfaster. The forces driving growthinclude a real need to improve roadsafety in combination with largeinfrastructure investments. Growth isestimated to amount to 5-10% overthe coming 3-5 years. In recentyears, Geveko has strengthened itsposition on the markets in CentralEurope via the acquisition of roadmarking contractors in Poland, theCzech Republic and Slovakia. In2007 Geveko acquired one Slovakianand three Polish contracting companiesactive in the road-markingsegment.The road-marking products thatare used in these countries mainlyconsist of road paints with a highcontent of solvents that represent ahazard to the environment and tohealth. There is considerable interestin the environmentally friendly roadmarking products produced byGeveko, which meet the perfor -mance requirements that have beenstandard in the Nordic region andWestern Europe.18

Industrial Operations / Road Marking business areaMarket factorsPolitical decisions and the allocationof public funds are the key to infrastructureinvestments and the developmentof the road marking industry.In Western Europe very little is beinginvested at present in the building ofnew roads. However roads are beingrebuilt to improve road safety. Inmost countries in Central andEastern Europe there is an acuteneed to increase both road securityand road standards in general. Inthese countries, the country’s ownfinancial resources are most ofteninadequate. EIB (European Invest -ment Bank) and the EU’s structuralfunds contribute financial aid toenable these countries to achievetheir infrastructure goals. Anotherfactor with an influence on the levelof investment in the infrastructure isthe cost of road accidents, which hasamounted to some 200 billion europer year in the EU since 2005.CompetitionAccording to Geveko’s estimates, themarket for horizontal road markingsin Europe is worth some SKr 10,000million per year. There are a few largecompanies in Europe with some oftheir business in the road markingsegment, as well as numerous smalland medium-sized national, regionaland local companies. Among themajor companies in Europe, Gevekois the one that has concentrated onhorizontal road-marking products.Other companies tend to have moreof their business in vertical roadsigns and traffic engineering. Gevekois the largest company in Europe inhorizontal road marking with anestimated market share of 10%.Geveko is the market leader in theNordic countries and Great Britainas well as in several countries inCentral Europe.Competitors in the Nordic RegionVägverket Produktion, SwedenVägverket, which is owned by theSwedish state, is responsible for theplanning, building, operation andmaintenance of state roads and high -ways. Vägverket Produktion is en -gaged in building, operational andmaintenance activities in the roadbuildingand civil engineering sectorsand in 2007 it began to manufactureroad-marking materials on ownaccount. Vägverket Produktion has amarket share of around 30% of theSwedish market for contract roadmarking.Saferoad with subsidiaries Eurostarand EKC, Norway and DenmarkEurostar is part of Saferoad, a privatelyowned, Norwegian group. Saferoad’sproduct range includes road-markingproducts. The subsidiaries Eurostarin Norway and Denmark and EKC inSweden are active in the road markingindustry. Eurostar is one of themajor players in road marking inNorway with a market share ofaround 30% and a lower share of themarkets in Denmark and Sweden.Tielinja and Destia, FinlandTielinja Oy is engaged in contractroad marking on the Finnish marketand to some extent in municipalitiesin northern Sweden. Destia is marketleader on the infrastructure marketin Finland and its services in cludethe construction, operation andmaintenance of roads and the trafficenvironment, and it also providescontract road-marking services.Tielinja and Destia each have around45% of the Finnish market for contractroad marking.Competition in Western EuropeCompagnie Signature, FranceCompagnie Signature is one ofEurope’s largest manufacturers ofroad safety products, it is marketleader in France, and one of thelargest com panies on the Germanmarket.Signature was acquired in 2007 byEurovia, which is part of the FrenchVinci Group.Swarco with subsidiaries LimburgerLack, Vestglas and IMS, GermanyGermany, with its extensive roadnetwork, number of vehicles andhigh traffic intensity, is one of thelargest markets for road safety products.The Swarco Group is privatelyowned and has its head office inAustria. Swarco manufactures andmarkets the glass beads that areincorporated into road-markingmaterials, road-marking productsand other traffic engineering products.Road-marking materials are manufacturedby Swarco’s subsidiariesLimburger Lack and Vest glas.Limburger Lack is Germany’s largestmanufacturer of road-marking productsand is market leader on theGerman and Austrian markets withmarket shares of some 30% and 40%respectively. IMS (InternationalMarking Systems GmbH) manufacturesprefabricated road-markingsymbols under the Eurotherm brandname.Ennis Paint (Prismo), Great BritainThe British market is dominated byeleven domestic companies thatproduce thermoplastic materials.Great Britain is the largest marketfor thermoplastics in Europe with avolume of some 45,000 tonnes ayear. Prismo, which manufacturesroad-marking products and carriesout contract road marking services,used to be a subsidiary of Jarvis, aBritish listed company, but it wasacquired in December 2006 by EnnisPaint, an American company. Prismois one of the largest manufacturers ofthermoplastics in Europe and thelargest company on the British roadmarking market with a market shareof around 25%.19

Industrial Operations / Road Marking business areaThe A1 motorway is a priority project in the European Action for Growth project that was adopted by the EU in 2003 with the objectof raising Europe’s long-term growth potential by means of infrastructure investments, for example.Poland – an important link in the Pan-European road networkPoland is centrally located in Europebetween the southern coast of theBaltic Sea and the Sudetes andCarpathian mountain ranges. It hasborders with Russia, Lithuania,Belarus, the Ukraine, Slovakia, theCzech Republic and Germany. Polandhas a population of some 40 millionand a land area of around 312,685 km 2 .Poland’s economyPoland’s economy was, until the endof the 80s, a planned Socialist economy.By comparison with the otherEast bloc states Poland had a relativelyhealthy economy. The People’sRepublic of Poland was dissolved in1989 and Poland became a democraticstate, with a parliament and apresidential form of government.Entry into the EU in 2004 has hadgreat significance for its economicdevelopment. Structural reforms andthe strengthening of the financialsector have helped to stabilise Poland’seconomy. State-owned companieshave been privatised, which hasresulted in greater efficiency in manybranches of industry. Poland occupiesa strategic geographical position inthe heart of Europe, and foreigninvestments are steadily rising withinmanufacturing industry as well as inthe service sector. Strong domesticdemand and rising exports haveresulted in GDP growth in recentyears of 5-6%. Unemployment hasfallen, although it is still high ataround 14-15%. Inflation was estimatedto be around 2% at the endof the year.The Polish road networkIn 2004 Poland adopted a strategyfor developing its transport infrastructurein accordance with EUstandards. The public road networkin Poland, which is around 372,000km in extent, is of a highly unevenstandard. National and regionalroads are in need of much improvementand the Polish road networkis being extensively renovated. Atpresent, Poland has around 665 kmof motorway and new constructionhas been planned for the next fewyears. The cost of raising the standardof the Polish road network is estimatedat around one billion euro peryear between now and 2020. Newconstruction and improvements tothe Polish road network are financedfor the most part by loans from theWorld Bank, the European Invest -ment Bank, EBRD (European Bankfor Reconstruction and Develop ment)and the EU’s structural funds. InPoland’s national infrastructureprogramme priority is given to anumber of road projects, includingexpressways and ring-roads, whichare expected to be ready by 2009.In 2012 Poland and the Ukraine willhost UEFA Euro 2012. For this reason,the construction of the roads be -tween Gdansk and Poznan andGdansk, Warsaw and Krakow is tobe brought forward. The EU is contributingfinancing of 11 billion euro.The European road networkPoland’s geographical location inEurope makes the country a par -ticularly important link in the Pan-European road network. The expansionof this network includes a roadbetween Tallin, Riga and Warsaw,20

Industrial Operations / Road Marking business areaand another from Berlin via Warsawto Minsk and Moscow.The A1 Motorway, which is partof the Pan-European TransportNetwork, is one of the largest roadprojects in Poland and is of greatimportance for the country’s socialand economic development. The A1is included in the priority “EuropeanAction for Growth” project, whichwas adopted by the EU in 2003 withthe object of strengthening Europe’slong-term growth potential bymeans of infrastructure investment,for example.The A1 motorway runs fromGdansk in Poland via the CzechRepublic and Slovakia to Vienna.The motorway will also link up withthe planned A2 and A4 motorwayprojects, which will connect the EUcountries with Russia and theUkraine. The Polish section of theroad extends for 568 km. Ninety kmof the motorway between Gdanskand Nowe Marzy will be completedby the end of 2008.Poland’s road safety programmePoland’s economic growth and transitionto a market economy havecontributed to a sharp increase inthe number of vehicles on the roads,which makes it even more urgent toexpand the road network and takeaction to improve road safety.After Poland’s entry into the EU theNational Road Safety Programmewas altered. The programme focuseson the road infrastructure and roadsafety in order to achieve the goal ofhalving the number of fatalities by2013. The number of traffic fatalitiesin Poland is over 5,000 per year andthe cost of traffic accidents is estimatedat around 7 billion euro.Poland is one of the countries withinthe EU with the highest number oftraffic fatalities. The main reasons forthis are careless driving, a lack ofroad safety measures for children,pedestrians and cyclists, poor qualityroads, and ineffective roads safetysystems.Poland’s national road safety programmehas established five targetsfor 2013:• Create effective and long-termroad safety systems.• Develop and maintain a safe trafficenvironment by raising the standardof the road infrastructure.• Increase road safety for children,pedestrians and cyclists.• Change drivers’ behaviour when itcomes to speeding, drinking anddriving and the use of seatbelts.• Increase the effectiveness of theemergency services.Geveko in PolandGeveko’s goal is to build a networkof competitive road-marking companiesin Central Europe, from Polandin the north to Romania and Turkeyin the south.Geveko has been established inPoland since 2004. Three contractroad marking companies wereacquired in 2007: GiK, Technom andDartom. They have a good geographicalspread and therefore complementeach other.The acquisitions in Poland areimportant components in the overridingstrategy. With these acquisitionsGeveko has achieved a position asPoland’s second largest road-markingcompany. The Polish business’sturnover is estimated to reach SKr100 million in 2008.Targets - Poland’s National Road Safety ProgrammeTraffic fatalitiesin Poland by categoryNumberof fatalities8,0006,0004,0007,9015,6404,3003,5002,800Motorbikes 3%Trucks 6%Bicycles/mopeds13%Pedestrians33%Cars 45%2,000019912003200720102013Source: NRSC(National Road Safety Council), Poland0Source: NRSC(National Road Safety Council), Poland21

Road Marking business area / CleanosolCleanosolAcquisition of contract road-markingcompanies in Poland and Slovakia strengthenmarket position in Central EuropeHead office: Kristianstad, SwedenMD: Stig JönegrenTurnover 2007: SKr 449 (401)millionNumber of employees: 303 (174)Products: Road-marking productsand contracting services.Markets: Sweden, Norway, Finland,Iceland, Poland, the Czech Republic,Solvakia, the Baltic States, Russiaand Turkey.Competitors: Saferoad (Euroskilt),Vägverket Produktion, Mesta,Trafikmarkering, Visafo, SkanskaAsfalti Oy, Swarco and Ennis Paint(Prismo).Share ofbusiness area’s turnoverOthers 2%2-componentpaints 2%Water-basedpaints 6%Thermoplastics14%46%Revenue by productContracting76%Nature of businessCleanosol AB was founded in 1948and has a position of market leadershipin Sweden. The head office,development department andmarketing units are located inKristianstad. The production of roadmarkingproducts takes place inKristianstad and Göteborg in Sweden,Moss in Norway, and Turku inFinland.Outside the Nordic countriesthe company is concentrating particularlyon Poland, the Czech Republic,Slovakia and Turkey.Cleanosol manufactures mate -rials and speciality road-markingproducts and carries out contractroad-marking services. Productdevelopment and the manufactureof materials in combination withextensive contracting activities areamong the factors behind the marketleading products and innovativeapplication and packaging systems.Cleanosol focuses on customers whoare particularly demanding when itcomes to functionality, the environment,delivery reliability, and technicaldevelopment.MarketWithin the Road-Marking businessarea Cleanosol has responsibility forsales and marketing in Sweden,Norway, Finland, Iceland, Poland, theCzech Republic, Slovakia, Russia,and Turkey. Cleanosol also hasresponsibility for the developmentand export of water-based roadmarkingpaints and thermoplasticsto Russia and Central and EasternEurope. The sale of water-basedroad-marking paints in Finland ishandled by Geveko Trading Oy, awholly owned subsidiary.The Scandinavian market iscontrolled by state and local governmentroad owners as well as civilengineering contractors, and procurementinvolves a tender procedure.The markets in Norway andFinland have been deregulated inrecent years. In relative terms, functionprocurements are increasing inScandinavia.The market for road-marking productsand contract road marking inthe Nordic countries and WesternEurope is characterised by a con -tinued high level of excess capacity,which is putting pressure on prices.The authorities’ focus on the qualityand function of road-marking productsvaries from one Nordic countryto another. In Sweden and Finlandthe inspection of completed projectsis declining. This can lead to poorerquality work by contractors, whichdoes not benefit Cleanosol. InNorway, on the other hand, moreattention is being given to the qualityand functionality of road markings.In 2007 Cleanosol successfullyconsolidated its position of leadershipon the contract road-markingmarket in Sweden and Norway.Cleanosol has had an exclusiveproduct supply contract with Mesta,the state roadbuilding company inNorway. Vägverket Produktion inSweden, which has in the past beena thermoplastics customer, started itsown production during the year.However, Cleanosol continued asVägverket Produktion’s main supplierof water-based road-marking paintsin 2007.The Finnish, Norwegian andSwedish road-marking markets arecharacterised by a small number oflarge suppliers together with a fewsmall, local contractors. In SwedenCleanosol is market leader. In additionthere are Vägverket Produktion,EKC (Euroskilt), and Trafikmarkering.Among the main suppliers inNorway are Mesta (state-owned)and Saferoad (Euroskilt), a privatecompany. The contractors on theFinnish market are Destia (formerlyVägaffärsverket), Tielinja andSkanska Asfalti Oy.Large government investmentsin road building in Poland, which areexpected to continue until 2015, haveresulted in strong growth on thePolish road-marking market. Tostrengthen Cleanosol’s position inPoland three leading road-markingcontractors were acquired in 2007,Dartom in Bialystok, GiK in Rybnik22

Road Marking business area / CleanosolCleanosol has applied road markings on the HGV lane on the E4/E20 motorway south of Stockholm, Sweden, on behalf of the NationalRoad Administration.and Technom in Wloclawek. Similarprogrammes of government investmentsin improving the road infrastructureare underway in the CzechRepublic and Slovakia. Cleanosol hasalready owned Superco, a contractingcompany in Prague, and in 2007it acquired Osfer in Kosice, which isone of the leading road-markingcontractors in Slovakia.Export sales during 2007 experiencedboth positive and negativeevents. Water-based road-markingpaints have replaced solvent-basedpaints in Sweden, Norway andFinland, and, in recent years, also inIceland. The Russian market remainsproblematic. However, Cleanosol hasestablished several new customercontacts and set up a sales companyin St Petersburg.In 2006, in order to improve itschances of bidding for public ordersfor materials and road-marking contractsin Turkey, Cleanosol set up ajoint venture road-contracting company,Cleanosol Yol, Istanbul, inassociation with a local partner.Cleanosol Yol has established itself asa major player in Turkey.Outlook for 2008The intensely competitive pricing onCleanosol’s domestic markets willpersist in 2008. Increased profitabilitywill require greater cost efficiency.Cleanosol is continuing its rationalisationprogramme within both productionand contracting. On exportmarkets there is some potential forvolume growth. In Finland, sales ofwater-based paints are expected tocontinue and there is some potentialto raise sales of thermoplastics. Anew expansive strategy and theacquisition of contractors in Polandare creating the necessary conditionsfor favourable developments on astrongly growing market. Plans arein hand for further expansion in theCzech Republic and Slovakia as wellmore active canvassing of the marketin Turkey.Future prospectsFunction procurements account for asteadily growing share of Europeanroad-owners’ procurements of roadmanagement and maintenance services.The road-owner hands over tothe contractor, for the duration of thecontract, responsibility for maintainingthe quality and safety standard ofthe roads in a particular area. Therequirements are specified by theroad-owner in terms of functionalityrather than choice of material andspecification. This means contracts oflonger duration and stronger incentivesto develop specific products foreach individual customer. This is tothe advantage of large companiessuch as Cleanosol. The road-owneralso benefits from this system as thecontractors can improve the productivityby better production planningand product optimisation.In Sweden the government hasannounced its intention of dealingwith the neglected investment andmaintenance requirements on thenational road network. New financingsolutions have been proposed in theform of Public Private Partnerships(PPP) to speed up measures on theSwedish road network, which in turnwill benefit the road-marking market.Environmental demands onproduction processes and productsvary in different parts of Western,Central and Eastern Europe. In theNordic region, the demands are rigorous.In Central and Eastern Europethere is growing interest in ecofriendlyproducts. Cleanosol satisfiesall of these demands, which will putit in a strong position as the environmentalrequirements are graduallytightened.23

Road Marking business area / LKF VejmarkeringLKF VejmarkeringInnovative product developmentand rational production boost competitivenessHead office: Langeland, DenmarkMD: Nis RavnskjaerTurnover 2007: SKr 267(271) millionNumber of employees: 142 (142)Products: Premark ® , prefabricatedroad marking symbols, DecoMark ® ,prefabricated road decorationmarkings, TacPad ® and TacGuide ® ,prefabricated warning and assistancemarkings for the blind andvisually impaired. ViaTherm ® thermoplasticroad marking products.These products are mainly sold inWestern Europe.Markets: Western Europe, Denmarkin particular.Competitors: Eurostar, Veluvine,Limburger Lack, TEWE, Berlack,IMS and Ennis Paint (Prismo).Other 6%Glass beads 1%Water-basedpaints 4%24Share ofbusiness area’s turnoverPremark ®34%27%Revenue by productContracting29%Thermoplastics26%Nature of businessLKF Vejmarkering A/S is located onLangeland, Denmark, and has morethan 40 years of experience in theroad-marking sector.LKF is the leading supplier ofroad-marking products in WesternEurope and offers products, servicesand expertise to road-marking companiesvia local sales offices. Differ -ences in climate, traffic and nationalrules for the application of roadmarkings create a demand for customisedproducts. With modern productionfacilities, high capacity andlogistics, LKF has specialised inmeeting the specific needs of eachindividual customer quickly andefficiently.In Denmark LKF is the largestsupplier of contract road-markingservices, which it performs on behalfof state and municipal road authoritiesand large contracting companies.Expertise and dedication from eachproject’s development phase, throughthe manufacturing process, and duringthe application of the productuntil the expiry of the guaranteeperiod, create strength and continuityin the product development process.ProductsLKF’s main competence lies withinthe area of thermoplastics. Thedevelopment of thermoplastic materialsby evaluating different components,additives and methods hasresulted in numerous high qualityproducts on the market.LKF’s core activities lie in prefabricatedproducts, which are soldthroughout the whole of Europe andin many non-European countries aswell.Premark ® pre-fabricated roadmarkingsymbols are LKF’s mainproduct. These symbols provideimportant functions for road safetyand information on the road surfacefor road users. Thanks to its highvisibility, durability and simple applicationmethod Premark ® is ideal formarking roads in heavily traffickedareas. The Premark ® range includesall official and registered traffic symbolsand letters.The DecoMark ® range consists ofproducts intended for “decoratingthe asphalt”. DecoMark ® providesdesigners, planners and architectswith a broad spectrum of colouredmarkings which make it possible togive an individual design to touristinformation, logos, advertising, playgrounds,art adornment etc on thestreet. It is possible to manufacturepractically any shape and smalldetails can be cut-out accurately.The products have high durability,are UV-resistant and thereforecolour-fast for a very long time.TacPad ® and TacGuide ® productshave been developed to aid theblind or partially sighted in the trafficenvironment. The products have beensuccessfully introduced at railwaystations and pedestrian crossings inFrance, Great Britain and Norway.Each country has its own specificrules, which depend on climate, roadpaving and tradition. LKF has thelogistical capacity needed to meetthese individual requirements.TacPad ® and TacGuide ® will belaunched in other countries whenthe time is right.LKF is the largest supplier inWestern Europe of thermoplasticroad-marking products. The productsare marketed under the brand nameViaTherm ® . The market is verydemanding with regard to the visibilityof road markings in the darkand on wet roads. LKF has developednumerous ViaTherm ® productsand systems that increase visibilityon both wet and dry driving conditionsand which have a long servicelife. LKF’s ViziSpot ® road-markingsystem has been further improved.If a vehicle passes over the roadmarking, the driver is warned by avibrating and acoustic effect.The sales office in Denmark isTrafikProdukter, which offers servicesto municipalities, road-markingcompanies, and civil engineeringcontractors based on the productsmentioned above as well as Geveko’sMercalin ® marking sprays. Trafik-Produkter also markets benches andwaste paper baskets as well as productsfor cordoning off areas in a widevariety of situations.

Road Marking business area / LKF VejmarkeringViziSpot ® is an application system that has been developed to improve the visibility of road markings.The thermoplastic material is applied in pattern consisting of round drops that are 4-5 mm high.MarketsIn 2006 the Danish market was characterisedby a high level of activityand stiff competition. In 2007 themarket there was affected bychanges in the responsibility andworking practices of the public sectorand decreased by 15%. At the sametime unemployment was at a historicallylow level and road-markingcompanies were not willing to lowertheir levels of activity, which resultedin lower prices than in 2006.LKF’s turnover on the contractroad-marking market declined by16% and the profit margin also fell.However, the season ended betterthan it started, and it seemed as ifthe new municipal structure wasgaining acceptance.The market for thermoplasticroad markings in Western Europe ischaracterised by excess capacity withmany competitors and highly competitivepricing. On those marketswhere LKF is active there arenumerous companies, both large andsmall, including Veluvine, LimburgerLack, TEWE and Berlack. Althoughsales of ViaTherm ® fell in Denmarkas a results of the local governmentreform, they rose on export markets.The more rigorous requirements foraccessibility and road safety are givingrise to a development trendtowards road-marking products andsystems with higher functionality.The development of ViaTherm ®Type II (wet roads) and ViziSpot ® hasenabled LKF to take higher sharesof the market.The pre-fabricated specialityproducts Premark ® , DecoMark ® andTacPad ® , which have a high technicalcontent, are less exposed to competition.Price is still decisive, but technologyand service have a highervalue factor. The two largest competitorsare IMS (Swarco) andPrismo (Ennis Paint). Investments inmarketing and sales resources, directcontact with end customers and roadowners are all having a favourableeffect on sales of Premark ® .Outlook for 2008Sales of pre-fabricated products suchas Premark ® are expected to increase.LKF has established an extensivesales organisation and selling costsare not expected to rise in 2008. Thedemand for ViaTherm ® thermoplasticmaterials, which are soldprimarily in North-West Europe, isexpected to remain much the sameas in 2007.The markets for contract roadmarkingservices in Denmark couldimprove in relation to 2007, providedthat the local government reform isfully implemented.With increasing sales and marketingactivities, coupled with theintroduction of new products, Trafik-Produkter is well placed to increaseits sales.Future prospectsThe infrastructure is a recurrentpolitical issue in Denmark. Traffichas increased considerably and iscausing problems on many roads. Astudy ordered by the Danish governmentrecommended major infrastructureinvestments in both roadsand railway over the next 20 years.This could result in growth on theDanish market.On export markets there isgrowing demand for more functionalroad markings, such as a longerservice life, retroreflection and durability.There is also a growing needfor road safety products, that provideinformation for drivers and otherroad users, which will benefit LKFand its ViaTherm ® , Premark ® ,DecoMark ® and TacPad ® products.25

Road Marking business area / Magyar PlastirouteMagyar PlastirouteNew traffic engineering productsboost competitive positionHead office: Budapest, HungaryMD: Sándor PálTurnover 2007: SKr 112(173) millionNumber of employees: 65 (66)Products: Contract road-markingservices, manufacture and installationof vertical signs, traffic diversionservice, and winter road maintenance.Markets: HungaryNature of businessMagyar Plastiroute, which has itshead office in Budapest and severalsubsidiaries in Hungary, was set upin 1990 as a joint venture betweenthe Hungarian road authority andPlastiroute, a subsidiary of Geveko.Geveko has owned 50% since thecompany was established, and itacquired the Hungarian road authority’s28% interest in 2007. MagyarPlastiroute has formally become asubsidiary of the Geveko Group in2008.Magyar Plastiroute providescontract road-marking services andwinter road maintenance on motorwaysand public highways inHungary. Winter road maintenancealso includes the sale of road salt.Magyar Plastiroute makes considerableuse of environmentally friendlyroad-marking products for its roadmarkingservices and manufactureswater-based road-marking paintsunder licence from Plastiroute inGermany.The business also includes themanufacture and erection of trafficdirection markings and signboards.The traffic engineering segment alsoincludes various types of reflectors,“cats-eyes” for lane separation,barriers to separate slip roads frommotorways, protective railings, portalsfor signs, crash barriers to protectcontractors’ vehicles. Magyar Plasti -route has become a retailer for a newproduct area, namely electronic trafficsurveillance systems, such asadjustable messaging signs. More ofthese products are steadily beinglaunched on the Hungarian market.MarketsMagyar Plastiroute is market leaderin its field, and retained its marketposition in 2007. Major infrastructuralinvestments have been carried out inHungary since it joined the EU.Magyar Plastiroute makes considerable use of environmentally friendly road markingproducts and systems, such as water-based road-marking paints.26

Road Marking business area / Magyar PlastirouteSeveral new motorways have beencompleted and Magyar Plastirouteprovided both vertical and horizontalroad marking services both for theHungarian road authority and forprivate contract road-marking companies.The technical level of thecontracting services provided byMagyar Plastiroute is up to WestEuropean standards. Magyar Plasti -route is certificated in accordancewith ISO 9001 and ISO 14001.Magyar Plastiroute’s largestcustomer is State MotorwayManagement Company Limited.Contracting services are also carriedout for other customers includingprivate companies such as StrabagRt, Colas group and Gyárépszer Rt.In 2007 the co-operation withVolkmann Rossbach in Germany andthe Hungarian company Dunaferintensified, which resulted in a largernumbers of services being providedwithin the traffic-engineering sector.To complement its traditional trafficengineeringproducts MagyarPlastiroute broadened its range ofproducts in 2007 to include electronictraffic control systems including acamera system for traffic surveillance,which should eventually make apositive contribution to the salesperformance. The products havebeen installed, for example, on thenewly built section of the M7 motorway.Outlook for 2008Further investments in the constructionof new motorways are plannedin Hungary. Magyar Plastirouteintends to successively increase itsinvolvement in future motorwayconstruction and take an active partin maintenance contracts. In 2007new types of organisation wereintroduced for the maintenance ofthe regional road network, whichcould result in growing number ofcontracts. Strong demand for electronictraffic surveillance systems canhelp strengthen Magyar Plastiroute’smarket position not only in Hungarybut also in markets elsewhere inEurope.Future prospectsMagyar Plastiroute’s aim is to furtherstrengthen its position on theHungarian market by consolidatingits existing customer relations, takingpart in new types of joint venture,entering new markets and expandingthe range of products within thetraffic engineering area. All in all,this should create the right conditionsfor Magyar Plastiroute to continueto deliver high quality contractroad-marking services in the traffic -engineering sector to existing andnew customers.Magyar Plastiroute manufactures and erects vertical roadsigns and provides traffic engineering services onmotorways in Hungary.27

Road Marking business area / PlastidrumPlastidrumInvesting in new customersand new market segmentsHead office: Bucharest, RomaniaMD: Razvan StoicaTurnover 2007: SKr 108(104) millionNumber of employees: 111 (132)Products: Contract road-markingand winter maintenance.Markets: RomaniaCompetitors: SC Spid, SCMarcatin SA and Anduna SRL.Share ofbusiness area’s turnover11%Nature of businessPlastidrum was set up in 1996 as ajoint venture company between theRomanian Road Administration andGeveko’s subsidiary Plastiroute, andit is the largest road-marking contractorin Romania. The head officeis located in Bucharest. With fivebranches in the provinces of Bucha -rest, Brasov, Ploiesti, Cluj-Napocaand Timisoara, Plastidrum has thecapacity to carry out road-markingcontracts anywhere on the Romanianroad network. Apart from contractroad marking on national highways,Plastidrum also carries out winterroad maintenance for the Romanianroad authorities. In 2007 winter roadmaintenance accounted for some 7%of turnover. In 2007 Plastidrum starteda new line of business, whichinvolves the maintenance of roadverges during the spring season. Thisbusiness is being built up and has sofar made only a marginal contributionto the profit although there arebright prospects for raising incomewithin this area.The production of road signs, whichwas started in 2006 through a companythat is jointly owned by Plasti -drum and the French companySignaux Girod, had its first fullfinancial year in 2007. Valuable synergiesbetween the two will provideworthwhile opportunities to increasesales capacity and create a competitivegroup of companies within thisarea.MarketPlastidrum is market leader in itssector in Romania and is the onlycompany in the country with theorganisation required to carry outcontract road marking throughoutRomania. The Romanian roadauthority is Plastidrum’s largestcustomer. In 2006 the Romanianroad authority awarded a contractfor maintenance of road markingson the national road network for aperiod of five years. Plastiroute submitteda tender and was awarded thecontract. Despite very low road standardsand a marked increase in theRevenue by productOther 10%Solventbasedpaints 1%Contracting89%Plastidrum is a specialist in contract road marking in Romania and carries out roadmarkingservices on the national road network.28

Road Marking business area / PlastidrumPlastidrum carries out winter road maintenance for the Romanian road authority. In 2007, these services accounted for some 7% ofPlastidrum’s turnover.volume of traffic only 12 km of newroads were built in Romania in 2007.Large maintenance projects have notbeen carried out as planned. Con -sequently, Plastidrum was only ableto complete around 80% of the contractedservice on the national roadnetwork for the Romanian roadauthority. Plastidrum is thereforetaking active steps to increase itscustomer base and its share of thebusiness on municipal road networksand for civil engineering companiesin the road-building sector. The competitioncomes from companieswithin contract road marking, suchas Marcatin SA and Anduna ARL,and civil engineering contractors.Outlook for 2008 and beyond2008 is the third year of the five-yearcontract with the Romanian roadauthority, which Plastidrum receivedand which is worth a total of SKr 600million. Poorer conditions for theexpansion of the road network andthe fact that 2008 is an election yearin Romania could mean that evenmore contracted volumes for theRomanian road authority will notmaterialise. 80 km of new motorwayhave been planned for 2008, butthere is great uncertainty as towhether the road-building projectwill take place. In response to thissituation, Plastidrum is planning tomove into new market and customersegments.The Romanian road authorityis expected to introduce long-termcontracts for the maintenance of thenational road network. This newstrategy will affect Plastidrum, whichwill therefore be compelled to adaptits existing business to a broadercustomer segment or go into partnershipwith other companies.Thanks to its strategic geographicalposition on the Romanianmarket, its experience in the sector,and its financial stability, Plastidrumis well placed for the furtherfavourable development of its business,regardless of what happens tothe road maintenance problems inRomania. At present, Plastidrummakes extensive use of environmentallyfriendly road-marking productsand also complies with environmentalregulations in its winter roadmaintenance activities. Plastidrumhas been certificated in accordancewith ISO 9001 since 2004 and willobtain ISO 14001 and OHSAS 18001certification in February 2008.The strong performance of theRomanian economy will probablycompel the Romanian governmentto speed up the construction of thecountry’s infrastructure. 5.7 billioneuro have been approved and allocatedfor infrastructural investmentsbetween 2007 and 2013. TheRomanian state will only contribute1.09 billion euro with the remaindercoming from the EU’s structural andcohesion funds.Romania’s membership of theEU and demands for improved roadsafety will also have an effect onwhen the infrastructural investmentstake place. All in all, this will be ofgreat importance and offer manyadvantages for the positive progressof Plastidrum’s business in thefuture.29

Road Marking business area / PlastiroutePlastirouteEco-friendly road-marking productsoffer advantages on highly competitive marketsHead office: Müllheim, GermanyMD: Karsten VeltmannTurnover 2007: SKr 124(118) million (excluding associatecompanies)Number of employees: 31 (31)Products: Paints and 2-componentproducts for road marking andaerosols sprays.Markets: Central EuropeCompetitors: Limburger Lack,Basler Lack, Rembrandtin,Signature, Veluvine, Color andTriflex.Share ofbusiness area’s turnover2-componentpaints 40%6%Revenue by productOther 10%Premark ® 1%Glassbeads7%Solventbasedpaints 31%Waterbasedpaints11%Nature of businessWith more than 50 years of experiencefrom the development, manufactureand sale of road-marking products,Plastiroute has an extensive exportbusiness and a strong market positionin Central Europe. Plastiroute GmbH,Germany, is the centre for productdevelopment, production andmarketing. Plastiroute SA, Switzer -land, is the sales organisation forSwitzerland and other export markets.Plastiroute manufactures andmarkets a complete range of waterandsolvent-based road-markingpaints, 2-component systems forhorizontal road marking and anextensive range of marking paints forairports. Plastiroute has no contractroad-marking activities of its own,but participates selectively in tendersin Germany and provides roadmarkingservices in association withpartners. Plastiroute’s own mechanicalequipment is mainly used fortesting new road-marking systems.MarketsThe German market continues to becharacterised by stiff competition,which has put pressure on the pricesof material suppliers. By contrast,growth rates have risen on exportmarkets. Synergies with other companiesin the Geveko Group havestrengthened Plastiroute’s positionon most of its markets in Europe.Two-component materials have continuedto sell well, and demand forsolvent-based paints has remainedstable. Despite further intensificationof marketing activities and regularproduct development of water-basedroad-marking systems, the Germanmarket remains unreceptive to ecofriendlyproducts.In Switzerland, on the otherhand, water-based road-markingsystems and 2-component systemshave replaced solvent-based paints,which benefits Plastiroute, which iswell to the fore in eco-friendly roadmarkingproducts and systems.Plastiroute is one of the leadingcompanies on the German market.Plastiroute’s customers primarilyconsist of contractors serving thepublic sector in the federal states inGermany and the cantons inSwitzerland.In recent years the Germaneconomy has been plagued by weakgrowth, whereas the market inSwitzerland has remained buoyant.Despite fierce price competition,Plastiroute has maintained its marketposition in Germany and strengthenedits position in Switzerland.On both the German and the Swissmarkets there are numerous suppliers,both large and small, among themLimburger Lack, Basler Lack,Rembrandtin and Triflex.Exports to Central Europe aregrowing steadily, and in 2007 theyaccounted for 50% of Plastiroute’sturnover. Plastiroute’s aim is to furtherstrengthen its position inHungary, Romania, the CzechRepublic, Poland and Turkey. Inseveral of these countries Plastirouteoperates in association with its associatecompany Cleanosol. In WesternEurope the markets in the Nether -lands, Belgium and France are ofparticular interest. In these countriesinterest in 2- and 3-componentpaints in particular is growing.Outlook for 2008The German market will remaintight on account of public spendingconstraints and excess capacity forproduct systems as well as amongroad-marking contractors. Contrac -tors are generally in a weak positionand the market is dominated by twolarge groups of companies. In 2007the leading company on the Germanmarket for road-marking productsacquired the largest German roadmarkingcontractor. This was the firsttime that a manufacturer becameshareholder in a large contractor.Plastiroute is ready to deal with theconsequences of this acquisition.Plastiroute intends to continue toparticipate in tenders in 2008 as ameans of enabling it to sell in itsnew product systems on the marketthereby avoiding becoming dependenton major customers.30

Road Marking business area / PlastiroutePlastiroute manufactures a comprehensive range of water-based and solvent-based road-marking paints as well as a complete range ofpaints for marking airport runways and taxiways. Plastiroute applied markings at Sofia airport in Bulgaria.In recent years, the Swiss sales companyhas strengthened its salesresources, which has resulted inencouraging market developments.Plastiroute will continue to extend itssales on new markets in Europe bystepping up its marketing and salesactivities. In 2007, Plastiroute benefitedfrom the cost and efficiencyprogramme that was launched in2006 and will continue with the programmewith the aim of becomingmarket leader in terms of costs.Product tests will be carried outwith the object of obtaining approvalfor Plastiroute’s road-marking systemson key markets. The patentedAquaflex TM Intermix road-markingsystem, which was launched in 2005,has aroused great interest both inGermany and on other markets. Thesystem, which provides high functionalityand visibility in dark andwet conditions as well as greater costefficiency for contractors, will begiven further marketing support in2008. The paint used for markings atairports will be tested in accordancewith the specific requirements of airportsand obtain certification fromindependent laboratories.Plastiroute will take active stepsto increase sales of its road-markingsystems based on 2-componentmaterials. Marketing activities forwater-based systems will continue inassociation with suppliers of bindingagents.A new 2-component paint,based on an epoxy binding agent,was developed in 2006 and launchedin 2007. This type of paint is used onroad surfaces where chemical impact(e.g. pryoligneous acid or petrol)requires high quality. The materialalso functions as the base for anumber of different indoor-markingproducts that were developed in 2007together with a new water-basedbase paint that improves the performanceof the marking material onnew surfaces or on coated surfaces inproduction workshops or storagepremises.Future prospectsPlastiroute provides high quality,eco-friendly road-marking productsthat already satisfy the latest EUrules. The need for improved functionalityand for road markings tobe visible in the dark and on wetsurfaces are still main focus areas.Plastiroute already has a comprehensiverange of products that satisfythese requirements, which will in thelonger range benefit the company.31

Road Marking business area / RoadcareRoadcarePoor weather in Great Britain pulled down resultHead office: Bradford, Great BritainMD: John RaineyTurnover 2007: SKr 102(117) millionNumber of employees: 71 (70)Products: Thermoplastic roadmarkingproducts and contractingservices.Markets: Great Britain, Irelandand Portugal.Competitors: Ennis Paint (Prismo)and WJ Group.Share ofbusiness area’s turnoverContracting91%10%Revenue by productThermoplastics9%Nature of businessRoadcare is one of Great Britain’sleading road-marking companieswith nearly thirty years’ experiencewithin this specialised area. As asubsidiary of AB Geveko since 1994,the business has concentrated on themanufacture and application ofthermoplastic road-marking materials.Roadcare has developed a comprehensiverange of products and contractingservices that meet theincreasingly demanding conditionsfor road markings in Great Britain.Roadcare’s contracting business alsoprovides services as part of fixedtermmaintenance contracts (usuallyfive to seven years), which wereintroduced several years ago in GreatBritain. These long-term contractsinvolve the maintenance of motorwaysand other heavily traffickedstretches of road.The British business’s headoffice is in Bradford and the premisesalso serve as the base for one of thethree contracting units. The other twoare in Airdrie and West Bromwich.Formerly, Roadcare’s contract roadmarkingbusiness, Line MarkingsLimited, was limited to the northwith few activities elsewhere inGreat Britain. A focus on cost effectivenessand coordination has generatedgrowth in the contracting business,despite an unchanged numberof employees, and this has resultedin higher capacity and the capabilityto offer a comprehensive and extensiverange of services to customersthroughout Great Britain.Rommco (UK) Limited, thecompany that manufactures roadmarkingmaterials, is located at thepremises in Bradford. Rommco offersquality guaranteed thermoplasticproducts, not only for its associatecompany, Line Markings Limited,but also for customers on the Irishand Portuguese markets.MarketsThere are eleven manufacturers andmore than 200 road-marking contractorson the British market allcompeting for their share of the45,000 tonnes of thermoplasticroad-marking materials used eachyear, which means the competitionis fierce. Great Britain is one ofEurope’s largest road-markingmarkets, although for those in thisbusiness the intensely competitivesituation provides many challenges.As the differences in road-markingmaterials and application methodsare not particularly large, price andstandard of service are importantfactors.British customers know, giventhe current situation, that they canget value for money from their roadmarkingsupplier. However, manycustomers expect even more. Closecooperation with customers, with theaim of jointly identifying innovativeand economic solutions has becomethe norm for Line Markings Ltd.Developing close relationships andbuilding confidence has turned outto be not only successful but financiallyrewarding for all parties. Thecost efficiency that has been achievedin the customer/contractor relationhas attracted the attention of theHighway Agency, the British roadauthority, which rewards successfulpartnerships with further contracts.Outlook for 2008The American company EnnisInternational’s entry onto the Britishmarket via the acquisition of Prismohas further intensified competitionon the British market, which wasalready suffering from excess capacity.The effect is that the British marketnow has a large competitor that isoffering thermoplastic materials atprices only slightly above their productioncost and doing all it can togain a strong market position.Increased competition, aggressivepricing and acquisitions on thecontracting market are creatingunsettled conditions among thecompanies on the British road-32

Road Marking business area / Roadcaremarking market. This development,which reflects similar activities elsewherein Europe, has resulted in thestart of a process of consolidation onthe British contracting market. Inorder to survive and grow, a numberof British road-marking companieshave carried out acquisitions ormergers to position themselves tohandle the intensifying competition.Roadcare will play an active role inthis process. However, the roadmarkingmarket in Great Britainwill probably remain turbulent in2008, with the risk of narrowermargins.Future prospectsThe British market is dominated bythermoplastic road-marking materials,which will continue in the shortterm. There is growing interest inwater-based paints and other materials,as a consequence of long-termcontracts, which means that the lifetimecost of the products is assuminggreater importance for the customer.Demand for this type of product willtherefore increase. Rommco does notmanufacture water-based paints, butassociate companies in the GevekoGroup offer a broad range, whichwill strengthen the competitive positionas demand builds up.On European markets a processof consolidation is taking place, andthis tendency looks set to continue.It is hardly likely that Britain will bean exception. The changes will probablytake place on the market overthe next few years. The necessarysteps will be taken to ensure thatRoadcare maintains its position asa major player on the British roadmarkingmarket.Great Britain will host the 2012Olympic Games and the governmenthas announced that its road maintenancebudget for 2008 will be reduced,in particular for local authorities andmunicipalities, whilst other taxfundedareas will be given higherpriority. There is a risk that this willbe reflected in the level of maintenancework on motorways in thenext few years during the run up tothe Olympic Games in 2012.One possible way of compensatingfor any shortfall within themaintenance sector during this periodand to continue generating growthon the British market could be tooffer products and services to othercategories of customer.Roadcare has developed a comprehensive range of products and contracting services that satisfy more demanding customers for roadmarking in Great Britain. Roadcare’s road-marking contractor, Line Markings Ltd, has applied road markings on the M6 motorway inLune Valley, Cumbria.Freefoto.com33

Road Marking business area / Products and product developmentLKF Vejmarkering and the Danish Education Authority have jointly launched the “Play and Learn” project to improve learning opportunitieswhilst playing. Amager School in Skjern is the first school in Denmark to have the activity game Hopla ® applied to its playground.New road-marking products and systems will help to improve road safetyThe object of Geveko’s product andprocess development within materialsproduction and contract road markingis to create added value for the customersby offering high-qualityroad-marking products and systemswith a high degree of functionality.Higher added value creates a solidbasis for increasing profitability andimproving competitive strength.The Road Marking businessarea carries out research and developmentactivities in co-operationwith customers, standardisationbodies, road authorities and otherorganisations in the Nordic regionand Europe. The aim is to developnew road-marking products and systemsthat help to improve road safetyand satisfy the functional requirementsof European standards.The development activities arefocused on water-based, environmentallyfriendly road-markingproducts and on the visibility of roadmarkings in the dark and on wetsurfaces. New materials are oftenevaluated for several seasons, andapplication tests are arranged inassociation with road authorities andcustomers, or by the company as partof its own road marking activities.The introduction of IntelligentTransport Systems (ITS) into theroad transport sector leads to moreeffective use of the road network,greater road safety and environmentalimprovements. Each year thenumber of vehicles in Europe in -creases by around three million.The cost of traffic jams in the EU isestimated at around 40 billion euro ayear. Within the ITS area, Geveko isdeveloping electronically controlledproducts. The technique can amongothers be used to alert road users,for example with the Safer@workwarning system.The company’s R&D costs in2007 amounted to SKr 15.3 million,which corresponds to around 1.4% ofIndustrial Operations’ net turnover.Road-marking productsIn Europe, there are differences inthe design of the normal road profile,road standards, road markings andapplication methods. There are alsowide differences in traffic intensity,paving quality and geographical conditions.Within the EU, new specificationsare being worked out toenable functional requirements forroad markings to be harmonisedthroughout Europe.Water-based road-marking paintsWater-based road-marking paints areenvironmentally friendly productsthat are available in a wide range ofproduct versions and colours. Theability of road-marking paint toadhere to glass beads embedded inthe surface permits the use of largerglass beads. This gives the markingsa very high level of visibility in thedark and on wet surfaces. Waterbasedroad-marking paints havemore or less replaced all solventbasedpaints in Sweden, Norway andFinland, and they are used extensivelyin Switzerland, Romania andHungary. The interest in water-basedroad-marking paints is also growingin Great Britain and France.Road marking with thermoplasticsThermoplastic products for roadmarking do not contain solvents.Climatic conditions, type of road andapplication method together determinein what form thermoplasticproducts are manufactured. As thermoplasticshave superior wear strengththey offer advantages when appliedon heavily trafficked roads. In orderto achieve high retroreflection valuesthe markings incorporate glass beadsin their outer layer.34

Road Marking business area / Products and product developmentHopla® consists of a variety of different number and letter games combined with roads so that children can, at the same time, learnhow to behave in traffic.2- and 3-component materialsThese materials consist of severalcomponents and a peroxide activatorthat are blended together immediatelybefore or during application. Thecomponents react quickly with eachother to form a very strong roadmarking with excellent features. 2-component systems are manufacturedfor the German market in particular.Premark ®Premark ® products are prefabricatedsymbols manufactured from thermoplasticmaterials by LKF Vejmarkering,Geveko’s subsidiary in Denmark.Premark ® products are mainly usedfor marking of traffic information onthe road surface and consist of officialand registered traffic symbols andletters as well as countless othersymbols and figures. Some of theproducts are described on this page.DecoMark ®DecoMark ® products are manufacturedin a broad spectrum of sizesand colours for use as tourist information,logos, advertising, games inschool playgrounds, decoration etc.The products are UV-resistant andtherefore retain their colour over along period of time.Hopla ®LKF Vejmarkering and the DanishEducation Authority have jointlylaunched the “Play and Learn” projectto improve learning opportunitieswhilst playing. Danish pupils nowhave a way to learn about figuresand letters in combination with outdoorphysical activities. The productsare permanently applied in schoolplaygrounds. Amager School inSkjern is the first school in Denmarkwhere the activity game Hopla ® hasbeen introduced. It consists of avariety of different number and lettergames combined with roads so thatchildren can, at the same time, learnhow to behave in traffic. LKF plansto launch the Hopla ® conceptthroughout the rest of Europe.TacPad ® and TacGuide ®Road signs, traffic lights and roadmarkings are traffic aids for themajority of people. However, othertraffic products are required to createa safe environment for the blind orpartially sighted. LKF Vejmarkeringhas developed its TacPad ® andTacGuide ® ranges of products to aidpeople with impaired vision in traffic.TacPad ® informs the visuallyimpaired of where they are in relationto steps, pedestrian crossings or a liftdoor. TacGuide ® ‚ warns and guidesthe visually impaired through hazardoustraffic environments such asbus stops and railway platforms.Although the products are mainlyintended for application on asphaltsurfaces, they can also be used onother surfaces such as concrete andstone. Markings for blind people aremanufactured to satisfy the specificrules that apply in individual countries.They have been applied at railwaystations in France, Norway andGreat Britain, for example.Road-marking systemsAccident statistics show that mosttraffic accidents occur in the darkand/or on wet roads. Road markingsare therefore being developed with afocus on their visibility in the darkand on wet surfaces. Nitebrite-Checkerboard , DropOnLine ,Aquaflex and ViziSpot ® ‚ are applicationsystems that have been developedto improve the visibility of roadmarkings.Road signsRoad signs are manufactured for theRomanian market by a joint-venturecompany between Plastidrum inRomania and Signaux Girod, France.The business of the Hungarian subsidiaryMagyar Plastiroute consists,apart from the production of verticalroad signs, of the erecting of trafficdirection signs and signboards. In2007 Magyar Plastiroute also startedmanufacture of VMS (Variable Mes -saging Signs) products and systems.35

Road Marking business area / Products and product developmentSerious accidents that occur at road work zones are attracting increasing attention in Europe. Geveko has developed its Safer@work systemto provide active protection for increased safety for road workers.ITS – Intelligent Transport Systems – a way to improve road safetyThe EU countries face serious challengeswhen it comes to creating asafe, environmentally friendly andcost-effective transport system thatis pan-European in scope. Despiteconsiderable improvements in theroad infrastructure and the developmentof safer vehicles, around 40,000people die on the roads every year inEurope.IntelligentTransport Systems – EuropeThe enlargement of the EU, in -creased goods traffic and passengertransport as well as the decision toimplement the extension of theEuropean transport network haveresulted in a review of Europeantransport policy. The updated version“Sustainable transport for Europe onthe Move” emphasises, in particular,the need for development and cooperationwithin the ITS area. Severalcompanies in the member stateshave long been actively engaged inroad safety-related technical developmentwithout recognising theadvantages of co-ordinating projectsin order to achieve the common goalof reducing the number of trafficfatalities.Ertico-ITS Europe is an EUorgan that was set up on the initiativeof the EU together with the Trans -port Ministers from most countries.Ertico’s goal is to increase road safety,create environmentally friendly andeffective transport through nationaland international cooperation for thedevelopment of intelligent vehiclesand vehicle-infrastructure communication.Ertico’s members are authoritiesat local, regional and national level,the vehicle industry, electronicsbasedindustries, and IT and communicationenterprises, as well asuniversities, industrial organisationsand research institutes.Numerous ITS-related projectsare underway within Ertico, includingroad based and vehicle basedproducts and systems, including theCVIS (Cooperative Vehicle Infra -structure Systems) R&D projectwhose role is to evaluate differenttechniques that will make possiblevehicle-to-vehicle communicationand vehicle to infrastructure communication.The CVIS project is part of theEU’s sixth framework programme,which is intended to stimulateresearch and development in themember states, thereby providing afoundation for a high level of internationalcompetitiveness in the fieldof intelligent vehicles/systems.The seventh framework programmebegan in 2007. This programme,which includes the “Easy -way” project, is intended to lead to asingle plan for the development andimplementation of ITS in Europe.Road organisations in several membercountries will be taking part in theproject. By 2020 the results of thecompleted “Easyway” project willmean greater mobility, a 10% reductionin carbon dioxide emissions on36

Road Marking business area / Products and product developmentthe European transport network,improved road safety and consequentlya reduction of 25% in thenumber of traffic fatalities.Intelligent TransportSystems – GevekoWithin the ITS area Geveko is developingelectronically controlled productsto make possible vehicleinfrastructurecommunication. Useof the technique will enable roadmarkings, for instance, to communicatewith vehicles and road usersand help to further improve roadsafety. Some of the developmentprojects are expected to be ready forproduction in 2008.Safety at road works in EuropeMuch more attention in Europe isnow being paid to serious accidentsthat occur at road works. Studieshave therefore been carried out toinvestigate the way in which safetyis being handled for road workers inEurope. The first investigation onsafety at road works carried outwith in the EU was Arrows (Ad -vanced Research on Road WorkZone Safety Standards) which hasresulted in a handbook with recommendationsfor a common Europeansafety standard for road work zones.Euro Test, which is a consortiumof European motoring organisations,completed a study in 2007 concerningthe safety of road users and roadworkers during the construction ofmotorways in Europe. In 2007 aresearch report entitled “Safer workon roads” was published, whichanalyses the importance of ITS forsafety at road work zones in Europe.ERF (the European RoadFederation) has also drawn attentionto the road works environment. TheERF published a discussion paper inSeptember 2007 to encourage commonactive commitment on behalf ofroad workers and to promote roaduserssafety at road work zones.The National Road Authority inSweden launched a project in 2004called, “Safer road work zones” aspart of the National Road Authority’smeasures to increase safety for roadworkers and motorists passing bywork zones on roads. The projectcontinued until the end of 2007 andfocused on studying the speed ofpassing vehicles as well as evaluatingthe results of speed reduction measures.Safer@work – a product toincrease safety in road work zonesRoad workers’ work environmentand the increasing incidence of fatalitiesat road work places are amongthe reasons why Geveko’s ITS businessarea has developed Safer@workfor active protection to increase safetyat road work zones.The system consists of threeunits: a transmitter, a receiver and apanel fitted with lamps. The lampsare activated by the transmitter, carriedby the road worker. The flashinglights increase motorists’ awarenessas they pass road work zones andalso have the effect of reducing thespeed of passing cars. The productshould be seen as the first step in thedevelopment of active road workzone protection.37

Industrial Operations / ChemTech business areaBusiness area’s share ofIndustrial Operations’ turnover9%Strong position on domestic marketsand business openings in Eastern EuropeBusiness area’srevenue by productOthers 7.7%Paint (subcontract)20.4%Markingsprays18.4%Industrial paints29.3%Corrosionprotection24.2%Nature of businessThe ChemTech business area consistsof Geveko Industri, Sweden,Geveko Oy, Finland, and GevekoIndustri BV, in the Netherlands.Geveko Industri is the market leaderin the Nordic countries in Corrosionprotection and Marking sprays.Geveko Oy has an established positionon the Finnish market for industrialand domestic paints and exports tothe other Nordic and Baltic countries,Poland and Russia. Geveko IndustriBV has responsibility for sales ofmarking sprays in the Beneluxcountries and Germany, Austria andSwitzerland. The subsidiaries have astrong position on their respectivedomestic markets. During 2007 asales organisation for Corrosion protectionwas set up in Norway withinthe subsidiary Geveko Industri AS.The ChemTech business areadevelops, manufactures and marketsMercalin ® marking sprays, Mercasol ®corrosion protection products, andindustrial and domestic paints.Road-marking paint is manufacturedon behalf of sister companiesCleanosol and LKF Vejmarke ringfor the Scandinavian market. Cooperationwith other companies inIndustrial Operations generatesbusiness openings on new markets.Market developmentsIn the Nordic region and westernEurope, the market for markingsprays is highly dependent on developmentsin the building and civilengineering industries. Markingsprays are used, for example, in connectionwith tunnel building andother extensive ground activities. Theuse of marking sprays is growing inEastern Europe in the forest industry,for instance. New areas of applicationare emerging where paint can beused as a marking and where markingsprays have advantages as ameans of application.The corrosion protection marketin the Nordic region is affected byglobalisation and standardisation inthe automotive industry. Conditionsin the Nordic region, with moistureand salt for much of the year, meanthat some models/marques aredesigned and have rust-proofingthat is better suited to other climaticconditions. The corrosion protectiontreatment of vehicles to meet Nordicconditions has attracted growinginterest in connection with importsor on the after sales market as ameans of ensuring the long guaranteesthat are now provided. Theinterest in rust-proofing is increasingin Russia and new rust-proofingproducts with considerably less environmentalimpact will be introducedin 2008.The market for domestic andindustrial paints is stable and subjectto stiff competition, with a distincttrend towards water-based paints,which benefits Geveko, whose productionof domestic and industrialpaints has long been focused onenvironmentally friendly waterbasedpaints.Product developmentEnvironmental demands are constantlybeing tightened on mostmarkets. The business area’s environmentpolicy covers the environmentin the production process andin product development, where environmentaladaptation is a key factor.In the marking spray productarea, product development activitiesare based on product use and customerspecifications. To enable thedevelopment of products with lowercontents of volatile organic substancescompromises sometimeshave to be made with other productcharacteristics.The debate on the quality ofvehicle rust-proofing, varying climaticconditions and environmental factorsis having an influence on the developmentof corrosion protectionproducts. More rigorous demands foran emission-free work and externalenvironment at corrosion protectionstations are driving the trend to -wards products with a lower solventcontent and that produce lesswastage and spillage from the treatedvehicle.38

Industrial Operations / ChemTech business areaThere is a growing interest in the rust-proofing of vehicles in Russia. Geveko Industri supplies Mercasol ® corrosion protection productsto GAZ (Gorkij Automobile Plant) in Nizjnij Novgorod, Russia.Svensk Bilvård AB, which is a subsidiaryof Geveko Industri, hasaround 40 corrosion protectionstations. For most of them corrosionprotection treatment is their mainline of business and, using a methodbased on fibre optics, they can determinethe degree of corrosion on thevehicle. The treatment can then beadapted to the vehicle’s condition.Competitors, corrosion protectionThe Nordic corrosion protectionmarket is dominated by two companies:Dinol and Geveko Industri.The Russian market, by contrast, ismore fragmented with both Russianand West European competitors,including Tectyl/Valvoline.DinolThe Swiss-based global group EMS-TOGO includes a company calledEFTEC, which is the leading supplierof corrosion-protection products forthe vehicle industry. Dinol is a sistercompany of EFTEC. It is active onthe after sales market for corrosionprotection under the Dinitrol brandname and is represented in Swedenby retailers and around 40 corrosionprotection stations operating underthe name of Dinitrol Center.ValvolineValvoline Europe markets Tectyl, acorrosion protection product that isdistributed via retailers and/or whollyowned subsidiaries in western andeastern Europe as well as in Den mark,Norway, Finland and Sweden.Competitors, industrialand domestic paintsGeveko Oy has positioned itselfwith customer-specific, water-basedproducts on markets that are subjectto intense competition. The Finnishmarket for industrial and domesticpaints is dominated by two largedomestic suppliers: Tikkurila andTeknos as well as Akzo Nobel.TeknosTeknos manufactures and marketspaints for the industrial and consumermarkets. The parent company,Teknos Group Oy, has its head officein Helsinki and subsidiaries inScandinavia, Germany, Great Britainand Poland and well-establishedpaint sales through agents in othercountries in Europe. Teknos is theleading supplier of industrial paintsin Scandinavia and one of the largestcompanies on the consumer andprofessional paint markets.TikkurilaTikkurila Oy is a member of KemiraOy, a Finnish group. Industrial andconsumer paint, which is sold underthe Tikkurila, Alcro and Beckersbrand names, is one of four productareas within Kemira. Tikkurila, whichis market leader in Finland andSweden, the Baltic countries andRussia, has production in sevencountries and is represented throughits own sales organisation in anothersix countries.39

ChemTech business area / Geveko IndustriGeveko Industri2007 – a good year forCorrosion protection and Marking spraysHead office: Göteborg, SwedenMD: Jimmy OlssonTurnover 2007: SKr 69 million (67)Number of employees: 25 (24) inGöteborg, Sweden, 3 in Leiden,the Netherlands and 1 in Oslo,Norway.Products: Marking sprays, corrosionprotection products, andmanufacture of road-markingpaints.Markets: The Nordic countries,the Benelux countries, Germany,Switzerland, Austria and Russia.Competitors: Dinol and Valvo line.40Share ofbusiness area’s turnoverPaint (subcontract)21%Markingsprays34%52%Revenue by productCorrosionprotection45%Nature of businessGeveko Industri AB develops, manufacturesand markets chemical productsand has achieved a leadingposition on the Nordic market in itstwo main product areas, namelyMarking sprays and Corrosion protectionproducts. Expansion andgrowth are taking place on theNordic domestic market as well as inthe Benelux countries, Germany andRussia. The head office and productionare located in Göteborg, Sweden.The subsidiary Geveko Industri B.V.has responsibility for the sale ofmarking sprays in the Benelux countries,and for developing the marketsin Germany, Austria and Switzer -land. In 2007 a sales organisation forCorrosion protection was acquired inNorway and then transferred to thesubsidiary Geveko Industri AS.Geveko Industri’s markingsprays are used for point, line andtemporary marking in numerousmarket segments, such as surveying,forestry, sawmills, building and civilengineering, road marking and energy,telephony and heating, ventilationand air-conditioning. They are distributedvia a network of retailers inthe various segments in each individualcountry.Corrosion protection productsare mainly used for vehicle aftersalestreatment. On this market inSweden, the products are used bycar-care stations that are members ofthe Svensk Bilvård AB Group, whichis jointly owned by the affiliatedstations and Geveko Industri AB. Onthe Norwegian market GevekoIndustri has a far-reaching partnershipwith Norsk Antirust Förening(NAF), the corrosion protectionchain, which was strengthened whenGeveko Industri established its ownsubsidiary in Norway in 2007 for thedistribution and sale of several productlines on the Norwegian market.Elsewhere in the Nordic region andin Russia the products are distributedvia local partners or retailers.Geveko Industri’s developmentand production also include nicheproducts for the engineering andvehicle industries as well as for theoffshore industry. The company alsomanufactures road-marking paintsfor the Scandinavian market onbehalf of two sister companies,Cleanosol and LKF Vejmarkering,which belong to the Road Markingbusiness area.The strong sales performance inGeveko Industri’s Marking spraysand Corrosion protection productareas was a result of stepped upmarketing activities in Norway,Russia and elsewhere.MarketsMercalin ® marking spraysConditions on the market forMercalin ® marking sprays dependon developments in building andcivil engineering on the various geographicalmarkets. Geveko Industrihas a position of market leadershipin the Nordic region and theNetherlands, as well as establishedretailers in Germany, Austria andSwitzerland. Geveko Industri is alsoexpanding via the establishment ofretailers in several other countries inEurope. The building and civilen gineering industries experiencedstrong conditions throughout theNordic region in 2007 and growthpotential has been good. 2007 wasalso a year of relatively healthygrowth for the marking spray productarea with sales in creasing by 5%from a high level.Product development activitieshave been focused for some time onformulating the products so as tominimise environmental impactwhile retaining functionality. Productformulations with a lower content ofvolatile organic compounds (VOCcontent) have been developed andlaunched on a trial basis. In preparationfor coming new EU rules forsolvents, tests have shown that theproducts satisfy the intended newcriteria by a wide margin. Within theforest-marking segment newly-devel -oped formulations have been certificatedafter a lengthy test procedureat Germany’s KWF test institute.Mercasol ® corrosion protection productsIn the case of Mercasol ® corrosion

ChemTech business area / Geveko IndustriWithin the corrosion protection product area Geveko Industri has entered into a partnership with the manufacturer of Lada cars inTogliatti, Russia.protection products, the transition tomore eco-friendly products andapplication methods continued in2007, particularly in Sweden andNorway. Tests have also been performedin the rest of the Nordicregion and in Russia, and the productswill be launched in 2008.More and more people in theautomotive industry are realisingthat a supplementary anti-corrosiontreatment will be needed sooner orlater on the Nordic market owing tothe harsh conditions, seen from acorrosion viewpoint, with salt andplenty of moisture. This has inducedmore carmakers to go into partnershipwith Geveko Industri and itssubsidiary Svensk Bilvård AB in 2007in order to complement their corrosionprotection.The demand for professionalanti-corrosion treatment has r e -mained firm throughout the Nordicregion. Sales of Mercasol ® have continuedto expand as a result of partnershipswith a number of carmakerson the Russian vehicle after-salesmarket. The corrosion protectionproduct area, which also includesproducts for Industry and Offshore,noted sales growth of more than20% in 2007.The corrosion protection productshave also shown that they morethan satisfy the new EU regulationson solvents.Outlook for 2008The Nordic building and civil engineeringeconomy is expected toshow sustained strength with infrastructureinvestments in Norway,Sweden and Finland. Economic conditionsgained momentum in theBenelux countries in 2007 and areexpected to show further growth in2008, whereas the Germany economyslowed down in the second halfof 2007 and growth is expected to belower in 2008.Further investments to broadenthe market in Sweden and theNetherlands primarily will continuein 2008 All in all, our view is thatMercalin ® marking sprays will continueto do well in 2008.Sales of Mercasol ® corrosionprotection products are expected tomake further good progress in 2008,as a result of growth in the Nordiccountries, Svensk Bilvård’s plannedmarketing drive in Sweden, and ahigher market share in Russia. Ecofriendlyproducts and corrosion protectionmethods are being launchedand will result in a growing numberof stations in the Nordic regionchanging products. There is interestin Russia in these products as well asin products adapted to the Russianautomotive market.Commodity prices also rosemore strongly than expected in 2007owing to higher oil prices, since thepricing of most commodities is energyrelated or based on oil derivatives. Itis difficult to predict prospects for2008, but commodity prices areexpected to remain stable, albeit at ahigh level. However, a variety ofglobal factors, which impact on oilprices, could alter the picture at shortnotice.The process of harmonisationwith REACH (Registration, Evalua tionand Authorisation of Chemicals), theEU’s new rules, is in progress. Theimpact on Geveko Industri willdepend mainly on the way in whichsuppliers of raw materials act as thecompany is a secondary user anddoes not need to carry out its ownregistration. New and modifiedproducts are being launched successivelyin order to satisfy the environmentalrequirements of the EU andour customers. In 2007, GevekoIndustri’s environmental managementsystem was certificated in accordancewith ISO 14001. Geveko Industrinow has integrated certification inboth quality and the environment.Future prospectsGeveko Industri’s aim is to take continuousaction to improve productivityand profitability, and to furtherdevelop products that satisfy varyingcustomer needs and requirements.The demand for environmentaladaptation involves regular day-todayeffort on the internal and externalenvironment and the reformulationof products with retained userfunctionality. It is by responding tothe wishes of customers, authoritiesand organisations that we can createnew business opportunities for moreadapted products.41

ChemTech business area / Geveko OyGeveko OyDevelopment of innovativeproducts gives a competitive edgeHead office: Pargas, FinlandSales office: Vantaa, FinlandMD: Anssi SeppinenTurnover 2007: SKr 61 (58) millionNumber of employees: 28 (22)Products: Industrial paints,domestic paints, and road markingpaint.Markets: Finland, Sweden,Estonia, Latvia, Lithuania, Polandand Russia.Competitors: Akzo Nobel AB,Becker Acroma AB, RemmersGmbH, Teknos Oy and TikkurilaOy.Share ofbusiness area’s turnover48%Revenue by productPaint (subcontract)21%Industrialpaints63%Nature of businessGeveko Oy, whose head office andproduction facilities are located inPargas, Finland, was founded in 1946and has an established position onthe Finnish market as well as exportsto Sweden, the Baltic countries,Poland and Russia.Geveko Oy manufactures nicheproducts using advanced paintchemistry. The products are mainlywater based and production is to alarge extent based on specific customerrequirements. The products’specific, customer-adapted characteristicsmean that sales are largelyhandled by distributors with a highlevel of technical competence.Customers include the hardboard,joinery and building industries.Geveko Oy develops, manufacturesand markets domestic paintsfor the consumer market. Geveko Oybegan production of domestic paintsin 1959. The first product was analkyl oil paint for outdoor use.Geveko Oy has been manufacturingwater-based industrial paints since1987. Thanks to the use of innovativeproduction methods these matchcustomers’ specific needs andrequirements, which gives an edgeon intensively competitive markets.The company also manufactureswater-based road-marking paint forthe Scandinavian market on behalfof Cleanosol, a sister company thatis a member of the Road Markingbusiness area.MarketsThe market for industrial paints forthe joinery and hardboard industrieshas declined in Finland. In all probabilitythis will result in a process ofconsolidation and lower margins.Geveko Oy is, therefore, focusing itsbusiness on the development ofniche products in close co-operationwith customers on most markets.Outlook 2008Geveko Oy has been successful inreplacing customers’ solvent-basedproducts with water-based systems.In addition, Geveko Oy has replacedits older range of water-based paintswith new products, which hashelped to reduce costs and raiseproductivity in the customers’ productionprocess. The acceleratingtransition from solvent-basedproducts to water-based or solventfreesystems will benefit Geveko Oyin 2008, particularly on exportmarkets.Future prospectsGeveko Oy will focus more on salesof niche products with a high levelof value added. There is clearly agrowing trend towards fewer paintcompanies on this market. In orderto boost its ability to launch inno -vative products, Geveko Oy willinvest more in R&D. At the sametime, the aim is to further raiseprofitability by means of cost-effectivesolutions for the use of raw materialsand production technology.Domesticpaints16%42

Industrial Operations / EnvironmentInfrastructure and the environmentIn 2007 the European Road Feder -ation (ERF) published a discussionpaper entitled “Sustainable Roads”to stress the importance of environmentalconsiderations when planningthe maintenance and constructionof roads. Road design combinedwith environmental aspects has beenpractised for some considerable time.Environmental impact analyses arecarried out, environment-friendlyconstruction materials are used,noise levels are lowered, and theintroduction of Intelligent TransportSystems is accelerating.Environmental activitiesin the Geveko GroupThe Geveko Group’s environmentalactivities include safety, health andthe environment, and are handledlargely at subsidiary company level.The employees are trained andreceive regular information on theenvironment. These activities arecarried out in accordance with laws,ordinances and, in relevant cases,special permits in each country.Advice and instructions given bylocal supervisory authorities areadhered to in the practical application.Environment and work environmentplans are revised and improvedby means of internal audits.The Group’s aims are to:• Adopt a proactive approach toimprovements in order to preventand limit the impact of the businesson people, the environment andproperty.• Prevent damage and other impacton the health of employees andother people.• Develop operating methods andtechnologies that reduce the environmentalimpact of production,transportation and contractingactivities and, through third-partyuse, of the manufactured products.• Design products and processes tothe highest environmental standards.• Select environmentally adaptedand recoverable materials.External environmentThe Geveko Group mainly manufactureseco-friendly, water-based paints.The environmental requirementsrelating to manufacturing processesand products vary across Europe.In the Nordic region and WesternEurope these requirements are veryhigh. The companies in the GevekoGroup that have operations in thoseCentral European countries thathave become members of the EU arecontinuously adapting their activitiesinto line with EU rules regarding ecofriendlyproducts and systems. Inthese countries the introduction ofwater-based, eco-friendly road-markingproducts has advanced furtherthan in certain countries in WesternEurope, such as Germany and France.The Group’s companies are certificatedand operate in accordancewith ISO 9001 and ISO 14001.Products are certificated regularly onboth the domestic and export markets.In 2007 the Geveko Group had productionunits in Sweden, Norway,Denmark, Finland, Germany andGreat Britain. All production unitscooperate with local supervisoryauthorities regarding the externalenvironment, protection and safety.Regular reviews of the business arecarried out in consultation with localsupervisory authorities and whennecessary improvement measuresare implemented. The thermoplasticmaterial used for road marking ispackaged in meltable packaging.Measures are taken regularly toreduce the use of packaging. Forexample, Geveko’s subsidiary companiesare affiliated to the Reparegister in Sweden, the Pyr registerin Finland and Grüne Punkte inGermany. Packaging fees are paid forthe collection and recovery of suchpackaging as is required, usingexisting technology to transport,handle and protect materials andproducts.One result of the rapid technicaladvances is that more chemicals aremanufactured and the occurrenceof hazardous chemicals in the environmentis rising rapidly. A newEuropean chemicals act came intoeffect on 1 June 2007 and is a singlelaw for all EU member states.Industry shall evaluate and assessthe risks the registered chemicalsinvolve and describe how they canbe handled safely. Geveko is atpresent engaged in the evaluationand registration of the chemicals ituses.43

Industrial Operations / EmployeesAverage number of employeesNumber70060050040030020010002003 2004 2005 2006 2007Employees by age, 2007Number200150100500Employees by genderNumber70060050040030020010002003 2004 2005 2006 2007Men20-2930-3940-4950-59Women60-Added value per employeeSKr ’00070060050040030020010002003 2004 2005 2006 2007Focus on safer workenvironment for road workersThe average number of employees inthe Geveko Group in 2007 was 638,of whom 479 are employed by foreignsubsidiaries.The number of employees withinIndustrial Operations varies owingto the seasonal nature of the industry.In 2007 the number of employeespeaked at 704 and was 521 at itslowest level (excluding associatedcompanies). Geveko’s employeeswithin Industrial Operations are inSweden, Norway, Denmark, Finland,Belgium, The Netherlands, France,Poland, the Czech Republic, Germany,Slovakia, Switzerland, Great Britain,Romania, Russia, Hungary andUkraine. Other employees in theGeveko Group are employed inSweden.The Geveko Group’s businessrequires competence in severaldifferent areas. The stiff competitionfor contracts and customers withinIndustrial Operations means that notonly knowledge and experience butalso flexibility and motivation arefundamental if the Group is to retainits competitive edge. Specialistexpertise within the areas of tech -nology and chemicals is essential forthe development of existing and newproducts that are capable of meetingtough demands in a highly competitiveinternational arena.Personnel developmentAt Geveko, responsibility for personnelissues rests mainly on the subsidiaries,which handle such mattersas the work environment, competencedevelopment and recruitment,as well as having responsibility forensuring that the employees haveconfidence in the management andare motivated. The Group makesregular use of performance reviewsat which individual targets are establishedand evaluated. Wage andsalary increments are increasinglyrelated to individual performance.Competence developmentEmployees can be motivated largelyby means of clear, open and inspirationalleadership. Valuing, stimulatingand developing employees createsgood conditions for turning competenceinto value for the company.Individually-adapted courses are runwithin the Group, but also generaltraining within technology, theenvironment, quality assurance andtransport safety.Contacts with universitiesGeveko is closely associated withChalmers University of Technologyin Gothenburg, Sweden. Severalstudents have carried out their examinationwork with Geveko. 2007 sawthe conclusion of an examinationproject, the aim of which was tostudy developments in Europe withinthe field of Intelligent TransportSystems (ITS) and to analyze theprospects of finding markets for theproducts Geveko is developing withinthis field. Geveko also launchedan ITS partnership with LuleåUniversity in 2007. This will helpcontribute to greater road safety withthe aid of technical developments,which involve road markings beingable to communicate by means ofsignals with road-users.Leadership programmeManagers in top positions participatein seminars, which look at the themeof leadership from various anglesand how the dialogue betweenemployees and managers can beimproved. Geveko has implementeda leadership programme in cooperationwith Chalmers, focusingon identifying and training to -morrow’s managers to ensure effectivemanagement succession withinthe Group.Code of behaviourIn 2007 Geveko introduced an EthicsPolicy defining four areas of responsibility,which each employee shallfollow, in order to be perceived aseconomically, socially and ethicallyresponsible.44

Industrial Operations / Employees• Responsibility towards customers.To have and keep customers bymeans of continual developmentand to have the ability to provideproducts, services and solutionsthat meet customers’ expectationswith regard to quality, safety andconcern for the environment.• Responsibility towards employees.To respect employees and theirrights, to provide safe and goodworking conditions, to offer nondiscriminatoryterms and to continuouslydevelop skills and competenceto ensure that each individualis satisfied and has careeropportunities.• Responsibility towards shareholders.To protect our shareholders’ investedcapital and to aim for a sustainablereturn that grows steadily.• Responsibility towards society.To run the business as a respon -sible member of society and to actin accordance with the laws in thevarious countries in which we arerepresented, to express our supportand to show respect in protectinginternationally declared humanrights. We shall always heedhealth, safety and environmentalissues in order to contribute tosustainable development.HealthAs part of the Geveko Group’shealth programme employees areregularly offered medical check-upsand, should the need arise, rehabilitationprogrammes. As a preventivemeasure the company subsidiseskeep-fit and exercise activities. Incooperation with management, thepersonnel and the supervisoryauthorities, controls are carried outregularly of all workplaces and whennecessary measures to improvehealth and safety are implemented.Industrial Operations’ activitiesare largely carried on in the trafficenvironment. This means that greatattention is paid to safety. In order toimprove safety for contractors’personnel, vehicles are fitted withenergy-absorbing shock absorbers.During 2007 Sweden’s RoadAdministration prepared a “Hand -book for work on roads”, partly as aresult of the attention given to theroad worker’s environment.SafetyIn Sweden the Road Administrationrequires all those conducting abusiness on the national highways tohave undergone training. The trainingis called “Safety on the Road” and isobligatory for contractors. The certi fi -cate issued after passing the traininghas to be renewed after five years.There are similar training courses inother countries in western Europe inwhich Geveko is active, including acorresponding course in Great Britain,“Construction Skills CertificationScheme”, the object of which is tomaintain industry-wide industrialcompetence; the scheme also coversthe area of safety.45

Management of SecuritiesWinding up of Equities Portfolio started in 2007Role of Managementof Securities in GevekoGeveko’s portfolio of securities hasbeen built up over many years. SinceGeveko acquired investment truststatus in 1998 the aim has been,through active management, tocreate financial stability and diversificationof risk for the Geveko Group.The Securities Portfolio has largelybeen managed by the parent com -pany AB Geveko. Investments havebeen made in shares with goodliquidity, preferably those listed onthe Stockholm Stock Exchange. Inaddition to this, Geveko has, to alesser extent, invested in unlistedshares through the InnKap Fund 3and InnKap Fund 4 venture capitalfunds, as well as in fixed-incomesecurities and derivatives.Winding up of Equities PortfolioIn 2007 a decision was made tochange Geveko’s strategic directionfrom that of investment trust to anoperating industrial enterprise. Oneconsequence of this change is thatGeveko’s Securities Portfolio is to besold and financial capacity created tobe used to develop the industrialside of the Group. The changes willbe made successively over a periodof 1-2 years. The first step was takenin the spring of 2007 when Gevekoadjusted its capital structure by thetransfer of SKr 75 per share to theshareholders. The winding up of theEquities Portfolio started in the secondhalf of 2007, when several companieswere acquired within IndustrialOperations. For purposes of taxation,Geveko has, with effect from 2008,the status of operating industrialenterprise. In view of the unusuallyweak performance of the stock marketonly a few holdings in the EquitiesPortfolio have been sold since themiddle of December 2007. Theremaining holdings will be sold,although the time frame has beenextended as a result of the tur bu lenceon the stock market.Activities in 2007Geveko’s Management of Securitieswas largely based on analyses ofmarket factors that affect the returnon shares and have a decisive effecton stock market performance, suchas general economic conditions,interest rates and crude oil prices.The Swedish stock market, with itslarge export enterprises, mainly inengineering and telecommunications,is dependent on the state of theAmerican economy.After rising steadily for fouryears the Swedish share marketturned down in 2007 and SIXGeneral Index was down by 6.9%on the year as a whole. The marketbegan to turn down during thesecond half of the year and wastriggered by the American sub primecredit crisis. The declining trendgathered momentum towards theend of the year. Between 1 July 2007and the middle of February 2008 theSwedish stock market index fell bysome 30%.Geveko’s Securities Portfoliowas overweighted in listed equitiesthroughout 2007. At the beginningof the year shares accounted forapproximately 95% of the value ofthe Securities Portfolio. Prioritysectors were Industrials and Health -care. After the second quarter theprocess of sales of the EquitiesPortfolio started. At the same timemore than half of the market valueof the portfolio’s holdings washedged at the prices prevailing inJune. Net sales of shares and othersecurities amounted to SKr 166 millionduring the third quarter and to afurther SKr 157 million in the fourthquarter. Net sales of shares andsecurities in 2007 amounted to SKr323 million.The market value of the listedequities in the Securities Portfolio on31 December 2007 amounted to SKr234 (563) million. The number ofdifferent shares on 31 December2007 was 12 (24).ResultThe result of Management ofSecurities was a loss of SKr 8.4(profit 108.8) million, of which dividendincome accounted for SKr 14.8(13.0) million and changes in thevalue of the Equities Portfolio fornegative SKr 18.2 (profit 100.4) million.Man age ment costs amounted to SKr5.0 (4.6) million.46

Management of SecuritiesChanges in Equities Portfolio 2007No. changes Holding MarketListed shares and Holding Purchases, 1 Jan-31 Dec 31st value % ofother securities 1st January issues Split, swap Sales December SKr million portfolioListed SharesHennes & Mauritz, B 170,000 70,000 100,000 39.4 16.8SCA, B 70,000 20,000 180,000 50,000 220,000 25.2 10.8Gunnebo 372,000 60,000 72,000 360,000 23.4 10.0Cardo 120,000 20,000 40,000 100,000 20.1 8.6Sandvik 190,000 30,000 160,000 17.8 7.6Transatlantic, B 280,000 145,000 25,000 400,000 17.2 7.3Trelleborg, B 300,000 150,000 350,000 100,000 13.6 5.8SKF, B 200,000 106,000 94,000 10.3 4.4Getinge, B 300,000 250,000 50,000 8.7 3.7Transcom, B 50,000 50,000 2.4 1.0Midelfart Sonesson, B 200,000 200,000 2.0 0.9Cision (former Observer) 200,000 100,000 100,000 1.7 0.7ABB Ltd. 100,000 100,000 - - -Assa Abloy 150,000 10,000 160,000 - - -AstraZeneca 110,000 10,000 120,000 - - -Ericsson, B 1,200,000 300,000 1,500,000 - - -Intrum Justitia 100,000 100,000 - - -Lundin Petroleum 100,000 50,000 150,000 - - -NCC, B 25,000 25,000 - - -Nederman Holding 9,700 9,700 - - -Nordea 300,000 300,000 - - -Norsk Hydro (Norway) 60,000 60,000 - - -Sandvik IL 70,000 70,000 - - -SEB, A 75,000 75,000 - - -Securitas 300,000 300,000 - - -SHB, A 130,000 50,000 180,000 - - -SKF IL 150,000 150,000 - - -Statoil (Norway) 60,000 40,000 100,000 - - -Stora Enso, R 100,000 100,000 - - -Teleca, B 100,000 100,000 - - -TeliaSonera 150,000 150,000 - - -Other securitiesAGI East Asia Fund 16,213 16,213 31.9 13.6Healthinvest Fund 91,274 91,274 5.8 2.5AIO SEB 06/10 13,000,000 3,000,000 10,000,000 9.4 4.0AIO Kaupthing 5,000,000 5,000,000 5.4 2.3AIO SHB 06/10 5,000,000 5,000,000 - - -Total listed sharesand other securities 234.3 100.0Changes in Equities PortfolioSKr million 2007 2006 2005 2004 2003Market value, 31 December 234.3 562.7 533.7 410-0 381.4Dividends received 14.8 13.0 10.9 11.5 9.1Change in value of portfolio -18.2 100.4 135.0 38.3 70.0Net purchases (+)/sales(-) -323 -68.9 -11.2 -13.6 -18.3Change in value over year, % -2.3 21.2 34.2 11.1 28.1Change in value over year, SIX General index, % -6.9 24.5 32.6 17.5 29.747

Report of the directorsProfit/Loss after tax andbefore minority interestsSKr million200150100500-50-100-1502003 2004 2005 2006 2007Operating profit/loss,Industrial OperationsCentral costsand net interestTaxProfit/loss, Managementof SecuritiesCapital gains on divestmentof subsidiariesProfit/loss beforeminority interestsEquity ratio%7060504030201002003 2004 2005 2006 2007Report of the directorsThe Board and managing director ofAB Geveko (publ), company reg. no.556024-6844, herewith submit theirreport on the operations of the parentcompany and the Group during thefinancial year 2007.Nature of businessAB Geveko has been an investmenttrust since 1998. In 2007 Geveko’sbusiness consisted of the managementof a portfolio of securities anda predominantly wholly ownedIndustrial Operations division. TheSecurities Portfolio consisted mainlyof Swedish listed shares with highliquidity. Industrial Operations conductsits business through the RoadMarking business area and theChemTech business area, with RoadMarking accounting for more than90% of the turnover.Significant events inthe Geveko Group in 2007In 2007 Geveko decided that thedevelopment and expansion of thewholly owned, unlisted IndustrialOperations division should havepriority over the company’s Man age -ment of Securities. One consequenceof this is that Geveko’s tax status willchange from that of investment trustto operative industrial enterprise. Thefirst step was taken in the spring of2007 when Geveko’s capital structurewas altered by means of an extrapayment of SKr 316 million to itsshareholders. The divestment of theEquities Portfolio began during thesecond half of 2007, when also severalcompany acquisitions were madewithin Industrial Operations. By theend of 2007 net sales of sharesamounted to SKr 323 million, andthe consequent reduction in theSecurities Portfolio meant that itwas not longer considered that thecompany satisfied the criteria forinvestment trust status. The taxauthority has notified that it considersthat Geveko ceased to have investmenttrust status as of 30 November2007.Changes in theGeveko Group in 2007During the second half of 2007 theGroup acquired the Polish contractingcompanies Dartom, GiK andTechnom as well as the contractingcompany Osfer in Slovakia. Theacquired companies have been consolidatedinto Geveko’s subsidiaryCleanosol. The acquisitions havestrengthened Geveko’s position onthe fast-growing road-markingmarkets in Central and EasternEurope.Geveko’s interest in the Hun -garian company Magyar Plastiroute,was raised from 50% to 78% inDecember 2007 via the acquisitionof the Hungarian road authority’sshares. Magyar Plasti route has beenconsolidated in the Geveko Groupwith effect from 31 December 2007.Geveko is Europe’s largestcompany in horizontal road markingsand a major user of glass beads.In 2007, Geveko acquired 50% of theshares in Allglass Reprocessors Ltd,which is based in Glasgow, Scotland.The acquisition will secure access toone of the most important rawmaterials used in the manufacture ofroad-marking materials.OrganisationIn 2007, the Geveko Group’s businessconsisted of two operative units:Industrial Operations and Manage -ment of Securities. IndustrialOperations conducts its businessthrough Geveko Industri HoldingAB. Operatively, the IndustrialOperations division is divided intothe Road Marking business area andthe ChemTech business area. Thesecurities portfolio was managedduring the year by the parent company,AB Geveko. The subsidiaryGeveko Kapital AB manages theGroup’s holdings in the InnKap 3and InnKap 4 private equity funds.Result and financial positionGroupThe consolidated operating profitamounted to SKr 15.2 million(133.7), of which SKr 43.0 million48

Report of the directors(38.6) is attributable to IndustrialOperations and a deficit of SKr 8.4million (profit 108.8) is attributableto Management of Securities. Un -absorbed costs amounted to SKr 19.5million (13.7).The Group’s net result frominterest and other financial earningsand costs was negative SKr 32.9million (neg 9.0). Of the deteriorationof SKr 23.9 million in relation to theprevious year, SKr 12.6 million wasattributable to currency fluctuationsbetween 2006 and 2007.The consolidated result after taxwas a loss of SKr 24.6 million (profit116.3). The year’s tax charge amountedto SKr 6.9 million (8.4). After adjustmentfor minority holdings of SKr4.0 million (2.7), the year’s resultattributable to the parent company’sshareholder is a loss of SKr 20.5million (profit 119.0).The Group’s liquid funds in -cluding short-term placementsamounted to SKr 106 million (134)at the end of the year. As of 31December 2007, listed shares arestated as current assets. The liquidityratio, i.e. current assets excludinginventories in relation to currentliabilities, was 142 (112) %.The Group’s equity ratio at 31December 2007 was 37.0 (60.2) %.The main reason for the reduction isthe share redemption scheme carriedout in 2007.The Group’s cash flow fromoperations before investmentsamounted to SKr 11.7 million (54.7).Investments in tangible fixed assetsamounted to SKr 77.8 million (41.4).Net sales of securities amounted toSKr 323 million (69).A dividend of SKr 11 per share(11) was paid, amounting in total toSKr 46.4 million (46.4). In addition,a further SKr 75 per share, or SKr316.4 million was paid to share -holders by way of a share redemptionscheme. The Group’s net debton 31 December 2007 amounted toSKr 216 million (240).Industrial OperationsIndustrial Operations’ net turnoveramounted to SKr 1,079 million(1,035) in 2007. Turnover increasedby 4.2 (4.4) %. The increase is attributableto acquisitions. The grossprofit rose by 6.3% to SKr 221.1million (207.9).Industrial Operations’ operatingprofit amounted to SKr 43.0 million(38.6). The operating margin was 4.0(3.7) % and the return on operativecapital was 6.8 (6.9) %. The contri -bution to the result from associatecompanies is included in the operatingprofit as these companies arefully integrated into IndustrialOperations. The cost of technicaldevelopment, sales, administrationand management amounted to SKr194.0 million (187.4).Management of securitiesManagement of Securities’ resultdeclined by SKr 100.4 million to aloss of SKr 8.4 million (profit 108.8).The holding of listed securitieshad a market value at 31 December2007 of SKr 234 million (563), whichwas also the book value. The value ofthe Equities Portfolio, includingcapital gains/losses, declined by SKr18.2 million (increase 100.4).During the year shares werepurchased for SKr 179 million (272)and sold for SKr 502 million (341),i.e. net sales of SKr 323 million (69).TaxationThe tax for the year relates to operatingsubsidiaries. The parent companyhad no tax charge.Future outlookIndustrial Operations is primarilyinvolved in the road-marking business.In Western Europe this is amature industry with growth mainlyvia acquisition. In Central andEastern Europe organic growth predominates.Geveko’s mainmarkets are subject to intenselycompetitive pricing. Geveko’s aim isto generate profitable growth andconsolidate its position as the leadingsupplier of horizontal road markingsSKr million300250200150100500Net debt2003 2004 2005 2006 2007in Europe. This will be accomplishedby having cost-effective production,a highly decentralised organisationthat is characterised by flexibility,and the provision of high-qualityand innovative products.EmployeesThe average number of employees in2007 was 638 (611). The number ofemployees in Geveko’s foreign companieswas 479 (444). Wages, salariesand other benefits amounted to SKr231 million (210). Notes 4, 34 and35 provide information about thenumber of employees per countryand a specification of payroll costs.Guidelines for benefits ofsenior management personnelThe Board will propose that theAGM to be held on 24 April 2008establishes the following guidelinesfor the remuneration and otherbenefits of senior management personnel.The company aims to offer acompetitive remuneration package,the criteria for which are based onthe importance of the tasks, competencerequirements, experience andperformance. The package shall consistof the following components:fixed basic salary, variable salary,pension benefits, other benefits andseverance conditions.The variable component shallamount to no more than 40% of thefixed annual salary, and be based onthe result in relation to agreed indi-49

Report of the directorsvidual targets. The company has nooptions or share-based incentiveschemes.In Sweden the basic pensionbenefits consist of the ITP plan. Inaddition, a defined premium pensionis also paid. All in all, the total costshall not exceed 36% of the annualsalary. Retirement age is 65. Foreignsubsidiaries use the generally acceptedpension plans in the respectivecountry.Total salary during notice andseverance pay for senior managementpersonnel shall not exceed 24months’ salary.Notes 4 and 34 also providedetails regarding the benefit etc ofBoard members, the managing directionand other senior managementpersonnel. Note 34 provides informationon variable remuneration(bonuses) for 2007 and 2006.Research and developmentThe Industrial Operations division isengaged in research and development(R&D) through several companies.The R&D relates to the developmentof new products and methodsas well as improvements and modificationsto existing products andmethods.EnvironmentAll production units co-operate withlocal supervisory authorities withregard to the external environment,safety and security. Three of thegroup’s factories handle solvents forwhich there are established thresholdvalues for emissions into air. Theactivities are regularly reviewed inconsultation with the respectivesupervisory authority and improvementmeasures are made whennecessary. In relative terms, solventbasedproducts are declining steadilyand they now amount to around10% of the Industrial Operations’turnover.In Sweden, there are specialenvironmental zones with specificthreshold values for exhaust emissionsfrom trucks and contractors’vehicles. The modernisation andadaptation of the fleet of vehiclesand contractors’ machinery is on thebasis of these rules.Risk managementand uncertainty factorsCommercial risks – IndustrialOperationsThe following risks have beenidentified within the Road Markingbusiness area:Political risks• Investments in new roads and roadmaintenance in the Nordic regionand Western Europe are largelydependent on political decisionsand the distribution of publicfunds.• In the Nordic region and WesternEurope, state funds for new investmentsare distributed for operationand maintenance on the nationalroad network.• In Central and Eastern Europe, thestate often funds road maintenance,while expansion of the road networkis largely financed by externalinstitutions, such as the EuropeanInvestment Bank (EIB) and theEU’s structural funds.• Weak public finances can have anegative impact on the level ofinfrastructure investment.Market risks• Non-European players are on thelook out for sales opportunitieswithin the EU, which may lead tostiffer price competition.• On many of Geveko’s markets thecustomers are for the most part asmall number of public sectorclients, which can result in a highlevel of dependence on individualcustomers.• Raw material costs correspond toaround 60% of the turnover. Risingraw material prices have an effecton the Group’s result and can,depending on the formulation ofroad-marking contracts also in -volve the passing on cost increasesto the customer.• In individual years, the weathercan be a risk as road markings areapplied to dry road surfaces.Financial risks• Information about financial risksand risk management is providedin Note 33 and the section entitledFinancial risk management andsensitivity analysis on pages 78-79.Parent companyApart from the management ofthe Securities Portfolio, the parentcompany has responsibility as soleshareholder for the running ofIndustrial Operations.The value of the Equities Port -folio declined by SKr 18.2 million(100.4). Dividends from the EquitiesPortfolio and unlisted securitiesamounted to SKr 14.8 million (13.0)and from subsidiaries to SKr 0 million(25.0).Administrative costs amountedto SKr 23.0 million (16.4). The parentcompany had five employees in 2007.The year’s tax charge was SKr 0million (0). The net result was a lossof SKr 30.8 million (profit 126.3).Geveko’s tax statusAB Geveko had investment truststatus in 2007, which means, in brief,that:• Capital gains on sales of listedshares are not liable to taxation.• The company pays tax on a standardisedincome of 1.5% of theopening market value of its listedshares.• Dividends received and interestincome are subject to taxation.• Management costs and interestcosts are deductible for tax purposes.• Dividends paid are also deductible.In practice, this means that ABGeveko, which pays a high dividendto its shareholders, does not pay in -come tax. The Industrial Ope ra tionsdivision, which conducts its businessthrough a sub-group of whichGeveko Industri Holding is theparent company, pays income tax onits business.In 2007, Geveko announcedthat it would give priority to thedevelopment and expansion of thewholly owned, unlisted Industrial50

Report of the directorsOperations rather than its Manage -ment of Securities. The first step inthis process, which was taken in thespring of 2007, involved a review ofthe capital structure as a result ofwhich a transfer of SKr 316 millionwas made to shareholders, over andabove the ordinary dividend of SKr46 million. A large part of theEquities Portfolio was sold in 2007. Itwas then considered that the criteriafor investment trust status were nolonger satisfied. The tax authority hasnotified Geveko that the companyceased to have investment truststatus with effect from 30 November2007. No tax liability is expected toarise as a result of the change in taxstatus.ShareholdersGeveko’s Series “B” shares obtaineda listing on the Stockholm StockExchange “A” list in 1983, and theyhave been listed on the “O” list since2000. Geveko’s share have been listedon the Small Cap List on the Stock -holm Stock Exchange Nordic Listsince October 2006. On 31 December2007 the company had 3,328 shareholders(3,452). The principal shareholdersare the Gunnar & MärthaBergendahl Foundation, with 31.9%of the votes and 8.1% of the capital,and the Bergendala Foundation, with15.1% of the votes and 8.5% of thecapital.Swedish Code ofCorporate GovernanceWith effect from 1 July 2005, theStockholm Stock Exchange introduceda rule requiring all Swedishcompanies with a market capitali -sation of more than SKr 3 billionto apply the Code of CorporateGovernance. Companies not coveredby the requirement could decide tocomply with the Code on a voluntarybasis.Geveko’s Board decided thatGeveko would not voluntarilyaffiliate to the Code. On the otherhand, Geveko, when it turns out tobe suitable, would harmonise itsactivities with sections of the Code.In order to comply with the Codechanges were made to procedures intwo areas: “Integrity and EthicalValues” and “Selection of controlactivities and control activities linkedto risk analysis”.The scope of the Swedish Codeof Corporate Governance will bebroadened with effect from 1 July2008, as a result of which the Codewill apply to all listed companies.SharesThe total number of shares in issuehas been 4,219,533, of which 720,000are Series “A” shares and 3,499,533are Series “B”, since 1993. Each “A”share carries one vote and each “B”share 1/10th of a vote. The highestprice noted by the shares in 2007was 323 kronor per share, and thelowest price was 114 kronor pershare. The price on 31 December2007 was 125.50 kronor. A dividendof SKr 11 per share was paid in 2007.Over and above this a share redemptionscheme was carried out, whichcorresponded to SKr 75 per share.51

Financial ReportsConsolidated profit and loss accountSKr thousand Notes 2007 2006Net turnover 2, 3 1,078,802 1,035,008Cost of sold products -857,672 -827,092Gross operating profit 221,130 207,916Development costs -15,261 -17,194Selling costs -89,298 -89,414Administrative costs 5 -113,807 -99,020Interest in earnings of associate companies 206 10,951Other operating income 3 15,593 6,962Dividends received 14,801 13,022Change in value of Equities Portfolio -18,177 100,440Operating profit 15,187 133,664Financial income 7 7,084 5,683Financial costs 8 -39,944 -14,632Consolidated profit/loss before tax -17,673 124,714Income tax 9, 10 -6,857 -8,404Net profit/loss for the year -24,530 116,310Attributable to:Parent company shareholders -20,552 119,047Minority interests -3,978 -2,737-24,530 116,310Earnings per share, kronor 12 -4.85 28.20(attributable to parent company shareholders)In 2007 and 2006 the company had 4,219,533 shares in issue.52

Financial ReportsConsolidated balance sheetSKr thousand Notes 2007 2006ASSETSFixed assetsIntangible fixed assets 13 77,586 40,197Tangible fixed assets 14Land and buildings 159,734 109,927Machinery and plant 189,479 144,376Fixed plant under construction 5,180 13,333354,393 267,636Financial fixed assetsInterests in associate companies 15, 17 31,466 75,809Shares and other securitiesListed shares 1 - 562,731Other shares and participations 1 15,368 12,328Other long-term receivables 15 17,243 11,030Deferred tax receivables 10 5,545 5,91869,622 667,816Total fixed assets 501,601 975,649Current assetsStocks 18 134,537 94,312Accounts receivable 19 221,996 134,825Other current receivables 78,824 39,163Listed shares 1 234,257 -Liquid funds 21 105,710 134,139Total current assets 775,324 402,439Total assets 1,276,925 1,378,088EQUITY AND LIABILITIES 22EquityCapital and reserves attributableto parent company shareholdersShare capital 105,488 105,488Other injected capital 30,000 30,000Reserves 23,381 23,542Retained earnings 262,464 644,670421,333 803,700Minority interests 23 51,315 26,391Total equity 472,648 830,091Long-term liabilitiesBorrowing 26 309,632 244,365Deferred tax liabilities 10 27,820 16,295Pension provisions 24 7,955 6,887Other provisions 25 6,158 4,963Total long-term liabilities 351,565 272,510Current liabilitiesBorrowing 26 286,138 146,859Other current liabilities 27 166,574 128,628Total current liabilities 452,712 275,487Total equity and liabilities 1 276 925 1 378 088Pledged assets 28 27,849 47,106Contingent liabilities 29 24,264 19,81453

Financial ReportsConsolidated Cash Flow AnalysisSKr thousand Notes 2007 2006Continuing operationsOperating profit/loss for the period -24,530 116,310Adjustments 31 107,135 -38,266Dividends received from associate companies - 4,301Dividends received 14,081 13,022Interest received 7,084 5,683Interest paid -39,944 -14,632Income tax paid -12,228 -9,34852,318 77,070Change in working capital 31 -40,602 -22,383Cash flow from continuing operations 11,716 54,687Investment activitiesAcquisitions of subsidiariesafter deduction of acquired liquid funds 32 -63,753 -18,497Acquisition of interests in associate companies -18,866 -9,632Acquisition of intangible fixed assets -1,259 -7,293Acquisition of tangible fixed assets 14 -77,815 -41,390Sales of tangible fixed assets 9,466 7,476Acquisition of securities -199,793 -288,231Sales of securities 506,343 355,294Increase in long-term receivables 812 -3,480Cash flow from investment activities 155,135 -5,753Financing activitiesChange in utilised check account credits 31,423 14,409Loans raised 608,143 244,220Amortisation of loans -468,316 -213,903Dividends paid to parent company shareholders -46,415 -46,415Dividends paid to minority shareholders in subsidiaries -6,359 -8,327Redemption of shares in parent company -316,465 -Cash flow from financing activities 197,989 -10,016Cash flow for the year -31,138 38,918Opening liquid funds 134,139 95,771Currency differences, liquid funds 2,709 -550Closing liquid funds 21 105,710 134,13954

Financial ReportsChanges in consolidated equityOtherShared injected Retained Minority TotalSKr thousand Notes capital capital Reserves earnings interests equityEquity 1 January 2006 22 105,488 30,000 31,038 566,458 35,331 768,315Transfer ofunappropriated earnings -5,580 5,580Currency differences ontranslation of foreign operations -1,916 -1 2,124 207Dividend -46,415 -8,327 -54,742Total transactions stateddirect against equity -7,496 -40,836 -6,203 -54,535Net profit for the year - 119,048 -2,737 116,311Equity 1 December 2006 105,488 30,000 23,542 644,670 26,391 830,091Minority interestsin acquired business 29,300 29,300Currency differencesin minority interests 5,961 5,961Transfer of unappropriated earnings -1,226 1,226Currency differences ontranslation of foreign operations 1,065 1,065Scrip issue 52,744 -52,744Redemption of shares -52,744 -263,721 -316,465Dividend -46,415 -6,359 -52,774Total transactions stateddirect against equity -161 -361,654 28,902 -332,913Net profit/loss for the year - -20,552 -3,978 -24,530Equity 31 December 2007 105,488 30,000 23,381 262,464 51,315 472,64855

Financial ReportsParent company profit and loss accountSKr thousand Notes 2007 2006Dividends: from subsidiaries 0 25 000from other companies 14,801 13,021Change in value in Equities Portfolio -18,618 99,859Profit/loss on Management of securities -3,817 137,880Management costs -22,982 -16,451Operating profit/loss -26,799 121,421Financial income 7 12,388 7,076Financial costs 8 -16,420 -2,159Profit/loss before tax -30,831 126,346Tax 9 - -Net profit/loss for the year -30,831 126,34656

Financial ReportsParent company balance sheetSKr thousand Notes 2007 2006ASSETSFixed assetsTangible fixed assetsEquipment 14 175 196Financial fixed assetsShares in subsidiaries 16 74,941 74,941Shares and other securitiesListed shares 1 - 562,731Other security 1 75 5075,016 637,722Total fixed assets 75,191 637,918Current assetsCurrent receivablesReceivable from subsidiaries 121,052 83,459Other current receivables 8,159 2,809Listed shares 234,257 -Tax receivables 564 319Prepaid costs and accrued income 20 206 764364,238 87,351Liquid fundsShort-term placements 18,112 -Cash and bank 21 27,808 92,12845,920 92,128Total current assets 410,158 179,479Total assets 485,349 817,397EQUITY AND LIABILITIESEquityRestricted equity 22Share capital 105,488 105,488Legal reserve 32,611 32,611Non-restricted equity138,099 138,099Retained earnings 172,962 409,495Net profit/loss for the year -30,831 126,346142,131 535,841Total equity 280,230 673,940ProvisionsOther provisions 25 3,132 3,132Long-term liabilitiesBorrowing 26 18,997 39,908Liabilities to subsidiaries 2,500 2,500Total long-term liabilities 21,497 42,408Current liabilitiesBorrowing 26 114,277 51,859Liabilities to suppliers 397 487Liabilities to subsidiaries 60,249 41,138Other current liabilities 228 402Accrued costs and deferred income 27 5,339 4,031Total current liabilities 180,490 97,917Total equity and liabilities 485,349 817,397Pledged assets 28 None NoneContingent liabilities 29 426,814 293,75157

Financial ReportsParent company cash flow analysisSKr thousand Notes 2007 2006Continuing operationsOperating profit/loss for the period -30,831 126,346Adjustments for items not included in cash flow 31 7,871 -142,766Dividends received from subsidiary companies - 25,000Other dividends received 14,801 13,021Interest received etc 12,388 7,076Interest paid etc -16,420 -2,159Income tax paid/received - -Cash flow from continuing operationsbefore changes in working capital -12,191 26,518Change in working capital 31 1,646 465Cash flow from continuing operations -10,545 26,983Investment activitiesAcquisition of tangible fixed assets - -45Acquisition of securities -195,063 -275,472Sales of securities 504,894 344,919Cash flow from investment activities 309,831 69,402Cash flow after investment activities 299,286 96,385Financing activitiesLoans raised 492,817 200,077Amortisation of loans -445,725 -195,085Change in current borrowing/lending, subsidiary companies -47,818 12,787Dividends paid -46,415 -46,415Redemption of shares -316,465 -Cash flow from financing activities 363,606 -28,636Cash flow for the year -64,320 67,749Opening liquid funds 92,128 24,379Closing liquid funds 21 27,808 92,128Changes in parent company equityNon-Share Legal restricted TotalSKr thousand capital reserve equity equityEquity 1 January 2006 105,488 32,611 455,910 594,009Dividend -46,415 -46,415Net profit for the year 126,346 126,346Equity 31 December 2006 105,488 32,611 535,841 673,940Scrip issue 52,744 -52,744 -Redemption of shares -52,744 -263,721 -316,465Dividend -46,415 -46,415Net loss for the year -30,831 -30,831Equity 31 December 2007 105,488 32,611 142,130 280,22958

Financial Reports / Accounting and valuation principlesAccounting and valuation principles(Amounts in thousand Swedish kronor, except where otherwise stated)AB Geveko’s consolidated financial statementsare made up in accordance with theAnnual Accounts Act, RR30 SupplementaryAccounting Regulations for Groups andInternational Financial Reporting Standards(IFRS) as adopted by the EU. The consolidatedfinancial statements are made up in accordancewith the acquisition value method,except as regards financial assets and liabilities(including derivative instruments) valued atfair value via the profit and loss account.Making up the report in accordancewith IFRS requires the use of some keyestimates for accounting purposes. It alsorequires management to make certainassessments when applying the Group’saccounting principles. The areas that requirea high level of assessment due to their complexity,or such areas where the assumptionsand estimates are of great significance forthe consolidated financial statements, arelisted in note 36.Standards, amendments and interpretationsthat came into effect in 2007IFRS 7, Financial instruments, disclosures,and the complementary amendment to IAS 1Presentation of Financial Statements, Dis -closure of Capital, introduce new disclosurerules for financial instruments. IFRS 7 has noeffect on the classification and valuation ofthe Group’s financial instruments.IFRIC 8, Scope of IFRS 2 requires thattransactions that affect the issue of equityinstruments – where the proceeds receivedfall short of the fair value of the issued equityinstrument – be reviewed to determine ifthey fall within the scope of IFRS 2. Thisinterpretation has no effect on the consolidatedfinancial statements.IFRIC 10, Interim Financial Reportingand Impairment does not permit the impairmentof goodwill, placements in equityinstruments and placements in financialassets that are stated at historic cost in oneperiod to be accounted for as of a closingdate in a later period. This interpretation hasno effect on the consolidated financial reports.Standards, amendments and inter -pretations that came into effect in 2007but that are not relevant to the GroupThe following standards, amendments andinterpretations of published standards aremandatory for financial years beginning after1 January 2007 or later, but are not relevantto the Group:IFRS 4, Insurance contracts, IFRIC 7,Application of inflation-adjustments methodsin accordance with IAS 29, Financial reportingin Hyperinflationary Economies, and IFRIC 9Reassessment of Embedded Derivatives.New IFRS standards and IFRIC interpretationsthat have not yet come into effect orbeen applied by Geveko but that are consideredlikely to have an effect on the Group.IFRS 8, Reporting by Segment (applicable from1 January 2009). IFRS 8 replaces IAS 14 andadapts reporting by segment to the criteria inUS standard SFAS 131 Disclosures aboutsegments of an enterprise and related information.The new standard requires the informationby segment to be presented from theperspective of the company’s management,which means that it is presented in the sameway as in the internal reporting. The company’smanagement is currently examining whateffect the standard will have on the company’sorganisation of its activities. The Group willapply IFRS 8 with effect from 1 January 2009.Parent company accounting principlesThe parent company has made up thisannual report in accordance with the AnnualAccounts Act (1995:1554) and the SwedishFinancial Accounting Standards Council’srecommendation RR 32 Financial ReportingJuridical Persons. RR 32 means that theparent company, in the annual report for thejuridical person shall apply all IFRS andrecommendations approved by the EU insofaras this is possible within the framework ofthe Annual Accounts Act and taking intoconsideration the connection between theaccounts and taxation. The recommendationstates which exceptions from and additionsto IFRS are to be made. The parent company’saccounting principles are unchanged fromthe previous year. In the event of any discrepanciesbetween the Group’s accountingprinciples and those of the parent company,attention will be drawn to them in therespective section below.Basic definitionsAn asset is a resource that is controlled bythe Group as a consequence of past eventsand that is expected to generate financialbenefits for the Group in the future.A liability is an existing commitmentthat is a consequence of past events and thatis expected to lead to an outflow of resourcesfrom the Group that will involve financialcosts in the future.Equity consists of the Group’s netassets, i.e. it is the difference between itsassets and liabilities.Income is an increase in financial valueduring an accounting period as a consequenceof payments received, an increase inthe value of assets, or a decrease in the valueof liabilities, the consequence of which thereis an increase in the equity, except for suchin creases in equity as are the result of injectionsof capital by the shareholders.A cost is a decrease in the financialvalue of the Group during an accountingperiod as a consequence of payments made,a decrease in the value of assets, or anincrease in liabilities, the consequence ofwhich there is a decrease in equity, exceptfor such reductions in equity as are the resultof payments to shareholders.An item is included in the accounts ifit is covered by the definitions of asset, lia -bility, equity, income or cost, when:a) the financial benefits associated with theitem will probably be received by or withdrawnfrom the Group in the future, andb) the item’s cost or value can be measuredin a reliable way.Consolidated financial statements andcompany acquisitions IAS 27, IFRS 3The consolidated financial statements in -clude subsidiary companies over which theparent company exercises control, direct orindirect, which normally means control overmore than 50 per cent of the votes.Companies acquired during the yearare included in the consolidated financialstatements at an amount that relates to thepost-acquisition period. The results of companiesdivested during the year are includedin the consolidated profit and loss accountfor the period up until the divestment date.The purchase method is used foraccounting for the Group’s acquisitions ofsubsidiaries. The purchase cost of an acquisitionconsists of the fair value of assetsacquired and accrued or taken over liabilitiesas of the transfer date, plus costs directlyattributable to the acquisition.Identifiable acquired assets andassumed liabilities and any commitmentsassociated with an acquisition are initiallyvalued at their fair value on the acquisitiondate, regardless of the extent of any minorityinterests. The surplus, which consists of thedifference between the historic cost and thefair value of the Group’s share of the identifiableacquired net assets, is stated as goodwill.If the historic cost falls short of the fairvalue of the acquired subsidiary company’snet assets, the difference is taken direct intothe profit and loss account.In the case of successive acquisitions,when control is attained and the net assetsof the acquired business are consolidated attheir fair value, an adjustment, if any, to thefair value of those assets that had alreadybeen consolidated is made in the form of arevaluation, and the amount of the increaseis stated among Reserves within Equity.Internal profits within the Group areeliminated in their entirety. Intra-Grouptransactions and balance sheet items, andunrealised profits on transactions betweenGroup companies are eliminated.Unrealised losses are also eliminatedexcept when the transaction serves as evidenceof the need for impairment of thetransferred asset. The accounting principlesfor subsidiary companies have, in applicablecases, been altered to guarantee consistentapplication of the Group’s principles.59

Financial Reports / Accounting and valuation principlesThe minority interest in net assets valued atfair value is included in Minority interests,which is stated on its own line with in Equity,in connection with the creation of the Grouprelationship. Minority interests are thereafteradjusted to include the minority’s interest inthe result for the year and other changes inreserves.Accounting treatment ofassociate companies IAS 28Companies that are not subsidiaries, butover which the parent company has a significantdirect or indirect influence, whichnormally means control over 20-50% of thevotes, are stated as associate companies.In the consolidated financial statements,interests in associate companies arestated in accordance with the equity interestmethod, whereby the shares in the associatecompany are stated at their historic cost atthe time of acquisition and then adjusted forthe Group’s interest in the change in the netassets of the associate company. The value ofthe shares includes goodwill and otherexcess value (after deduction of accumulateddepreciation) arising on the acquisition.The Group’s interest in the profit/lossof associate companies after the time ofacquisition is stated in the consolidatedprofit and loss account, and its interest inchanges in reserves since the acquisition isstated among Reserves. Accumulatedchanges since acquisition are stated as achange in the book value of the holding.When the Group’s interest in an associatecompany’s losses amounts to or exceeds itsholding in the associate, including any un -secured receivables the Group ceases to stateany further losses, unless it has acceptedcommitments or executed payments onbehalf of the associate.Unrealised profits on transactionsbetween the Group and its associate com -panies are eliminated in relation to theGroup’s interest in the associate company.Unrealised losses are also eliminated, exceptwhen the transaction serves as evidence ofthe need to impairment of the transferredasset. The accounting principles for associatecompanies have been changed in relevantcases to guarantee consistent application ofprinciples within the Group.Interests in the earnings of associatecompanies are stated in the parent company’saccounts at historic cost. Only the dividendreceived from the earnings generated sincethe acquisition is stated as income fromassociate companies.The after-tax result from associatecompanies is included in the operating result,since associate companies are considered toconstitute part of Industrial Operations.The Geveko Group had no interests injoint ventures during the financial year.Foreign currencies IAS 21Functional currency and reporting currencyItems in the financial reports of the variousunits in the Group are valued in the currencyused in the economic environment whereeach unit largely conducts its business (functionalcurrency). For all companies in theGroup, the functional currency is identical tothe currency of the country where it is active.The currency used in the consolidated financialstatements is the Swedish krona, whichis the parent company’s functional currencyand its reporting currency.Transactions and balance sheet itemsTransactions in foreign currencies are translatedinto the functional currency at theexchange rates applying on the transactiondate. Currency profits and losses arising inconnection with the settlement of suchtransactions and in the translation of monetaryassets and liabilities in foreign currenciesat closing date exchange rates are stated inthe profit and loss account. Exceptions aremade when the transactions are hedges thatsatisfy the conditions for hedge accountingof cash flows or of net investments, in whichcase profits/losses are stated within equity.Translation differences arising on nonmonetaryitems, such as the valuation ofshares at actual value across the profit andloss account, are stated as part of theprofit/loss on valuation at actual value.Group companiesThe result and financial position of allGroup companies (none of which use ahigh-inflation currency) that have a differentfunctional currency from the reportingcurrency are translated into the Group’sreporting currency as follows:• Assets and liabilities for each of the balancesheets are translated at closing date ex -change rates.• Income and costs for each of the profitand loss accounts are translated at averageexchange rates for the year.• All currency differences arising are statedamong Reserves within Equity.Upon consolidation currency differencesarising as a result of the translation of netinvestments in foreign businesses and ofborrowing and other currency instrumentsthat have been identified as hedges for suchinvestments, are taken to Equity. Upon thedivestment of a foreign business such currencydifferences are stated in the profit andloss account as part of capital gains/losses.Goodwill and adjustments to fair value arisingon the acquisition of a foreign businessare treated as the assets and liabilities of thebusiness in question and translated at closingdate rates.Accounting treatment ofincome IAS 11, IAS 18Accounting treatment of incomeby Industrial OperationsProduct salesProduct sales are recognised as incomewhen risks and benefits are transferred tothe buyer, which is normally upon delivery.Sales are stated net after value added tax,rebates and discounts, and currency differencesin the case of sales in foreign currencies.Contracting activitiesContracting work in progress is largely ofshort duration, and is invoiced on accounton a weekly or monthly basis.In the case of contracts performed overlonger periods of time the income and costsattributable to the contract are recognised asincome and costs respectively pro rata inrelation to the degree of completion of thecontract on the closing date (successiverecognition). A contract’s degree of completionis determined by comparing the costsincurred on the closing date with the estimatedtotal costs.In cases where contract costs cannotbe estimated reliably, income is only recognisedto an extent that corresponds to thecontract costs incurred that will probablybe reimbursed by the customer. If a loss isexpected on a contract this is recognisedimmediately as a cost.At the end of each year, there are fewuncompleted contracting activities that havenot been recognised in the result.Other income that is earned is recognised asfollows:• Royalties and the like: in accordance withthe financial implications of the relevantagreement.• Interest income: in accordance with theeffective yield.• Dividends: when they become due forpayment.Recognition of incomefrom the Securities PortfolioThe Securities Portfolio of listed equities,options and other shares and capital interestsis classified as “valued at fair value via theprofit and loss account” in accordance withIAS 39 (see also Financial Instrumentsbelow). Each item in the portfolio is valuedindividually at market value. The differencebetween the opening and closing values ofthe portfolio is stated under “Income fromsecurities” in the profit and loss account.Transactions within Management ofSecurities are stated on the day the transactiontakes place, at which time risks andbenefits are transferred to the buyer.60

Financial Reports / Accounting and valuation principlesPremiums received in connection with theissue of call options are stated as liabilitiesuntil the option has definitely been closed.Changes in the market value of options arestated under “Income from Securities”. Theoptions are stated as income when theymature.Premiums paid in connection with thepurchase of put options are stated togetherwith the value of the share to which theoption relates. Changes in the market valueof options are stated under “Income fromSecurities”. The options are stated as a costwhen they mature.Current assets and liabilitiesAssets are classified as current assets whenthey are expected to be sold or realised within12 months or are assets comprising liquidfunds. All other assets are classified as fixedassets.Liabilities are classified as currentwhen they are expected to be settled or tomature within 12 months. All other liabilitiesare classified as long-term assets.Income tax IAS 12Industrial OperationsStated income tax includes tax that is to bepaid or received in respect of the reportingyear, adjustments to previous years’ tax, andchanges in deferred tax.All tax liabilities/receivables are valuedat nominal amounts in accordance with thetax rules and at the tax rates that have beendecided on or announced and that will mostprobably be applied.The tax effects associated with items inprofit and loss accounts are also stated in theprofit and loss account. The tax effects ofitems that are not stated in the profit andloss account are taken direct against equity.Deferred tax is calculated using thebalance sheet method on all periodisationdifferences arising between the book andfiscal values of assets and liabilities. Thesedifferences largely arise as a result of transfersto untaxed reserves, excess values arisingupon consolidation, and taxable losses.Deferred tax receivables in respect ofloss allowances or other future deductionsfor tax purposes are stated to the extent thatfactors exist that make it likely that the itemcan be deducted against a taxable surplus inthe future.Deferred tax liabilities in respect ofperiodisation differences that are attributableto investments in subsidiary and associatecompanies are not stated in Geveko’s consolidatedfinancial statements when theprofits are not liable to taxation or whenthe parent company can determine when theperiodisation differences are to be re-entered.Parent companyFor purposes of taxation AB Geveko hasinvestment trust status, from which it followsthat the parent company is not liable totaxation on capital gains on sales of shares.Instead the company takes up in its taxreturn, income at a standard level of 1.5% ofthe opening market value of its listed shares.Dividends received and interest income areliable for taxation. Interest costs and managementcosts as well as dividends paid aredeductible costs.Intangible fixed assetsIAS 38, IAS 36, IAS 23Research and development: Expenditure onresearch is stated as a cost when it is in -curred. Expenditure on development projects(attributable to the development and testingof new or improved products) is capitalisedas an intangible fixed asset to the extent thatthis expenditure is expected to generatefinancial benefits in the future and the acquisitionvalue of the asset can be determinedreliably. Other development expenditure isstated as a cost as it is incurred. Developmentcosts that have once been taken into theprofit and loss account are not capitalised asassets in later periods. Interest on capitalborrowed to finance a development projectis not included in the acquisition value.The parent company has no expenditureon research and development.Capitalised development costs aredepreciated linearly over the period that theexpected benefits are estimated to accrue tothe Group, and from the date when commercialproduction starts. The depreciation perioddoes not exceed five years. The depreciationis stated in the profit and loss account underResearch and Development costs.Goodwill: Goodwill is the amount bywhich the acquisition value exceeds theactual value of the Group’s interest in anacquired subsidiary company’s net assets atthe time of acquisition. Goodwill is testedannually for impairment and stated at itshistoric cost less accumulated write-downs.Capital gains or losses on the divestmentof a unit include the residual book value ofthe goodwill relating to the divested unit.Geveko had no goodwill in its consolidatedfinancial statements for 2006 or 2007.Other intangible assets: Expenditure onacquired patents, brand names, licences andcustomer contracts is capitalised and depreciatedlinearly over the contractual economiclife, normally no more than five years. Thedepreciation is included in the profit and lossaccount under Cost of sold products.Write downs in the value of intangiblefixed assets: When there is an indication thatthe value of an asset has diminished an estimateis made of the recoverable value of theasset. In the event that this value falls shortof the book value of the asset, the asset isimmediately written down to that value.Tangible fixed assetsIAS 16, IAS 36, IAS 23Tangible fixed assets are stated at theirhistoric cost less depreciation. Additionalexpenditure that leads to an increase in thefuture financial benefits associated with theasset is capitalised as an asset, while anyremaining undepreciated residual value ofthe replaced equipment is stated as a cost.Expenditure on repairs and maintenance isstated as a cost. The cost of borrowing inconnection with investments is not capitalised.The Group has no managementproperty.Tangible fixed assets are depreciatedsystematically over the estimated utility periodof the asset. In applicable cases, componentdepreciation is used; this means that eachsignificant part of a fixed asset is depreciatedaccording to a separate plan. When determiningthe depreciable value of the asset,the residual value of the asset is taken intoaccount where relevant. Linear depreciationis used for all types of tangible fixed asset.The following depreciation periods are used:Buildings andland installations20-50 yearsMachinery andother technical facilities 5-15 yearsEquipment, toolsand installations5-15 yearsComputers3-5 yearsIn the event that the book value of an assetexceeds its estimated recoverable value theasset is immediately written down to itsrecoverable value. The recoverable value isthe higher of the asset’s net sales value andits utility value. The utility value is the discountedvalue of the asset’s future cash flow.If the contribution of the asset to the cashflow cannot be identified a review is insteadmade of whether any write-down in thevalue of the cash-generating unit is needed.Provisions, contingent liabilitiesand contingent assets IAS 37Provisions are liabilities that are uncertain inrespect of amount or time. They shall bestated when the company has made a formalor informal undertaking that results in anoutflow of resources that can be reliably estimated.An informal undertaking has beenmade when the company, from practice or ina public statement, has explicitly given anundertaking. Transfers to restructuringreserve may only be made when there is anundertaking and a detailed plan for therestructuring. The reserve may only be used61

Financial Reports / Accounting and valuation principlesfor its original intended purpose. Provisionsare made for loss-making contracts.A contingent liability is defined as:• A possible undertaking that originates inpast events and whose existence will beconfirmed only by the occurrence or failureto occur of one or more uncertain eventsin the future or by events that are notentirely within the company’s control.• An undertaking that originates in pastevents but which is not stated as a liabilityor provision as it is not likely that it willlead to an outflow of resources, orbecause the amount of the undertakingcannot be estimated reliably.A contingent reliability becomes a provisionwhen the undertaking is no longer dependenton future events. This is also the case if anyuncertainty remains regarding the amountor time.A contingent asset is a possible assetthat originates in past events and whoseexistence will be confirmed only by theoccurrence or failure to occur of one or moreuncertain events or by events that are notwithin the company’s control.Leasing agreements IAS 17When a leasing agreement means that theGroup as lessee in all essentials enjoys thefinancial benefits and bears the financialrisks that are attributable to the leasingproduct, the product is stated as a fixed assetin the consolidated balance sheet. The correspondingundertaking to pay leasing chargesin the future is stated as a liability.Leasing where a significant part of therisk and benefits of ownership is retained bythe leasing company is classified as operationalleasing. Payments made during theleasing period (after deduction of any in -centives offered by the leasing company)are stated linearly as a cost in the profit andloss account throughout the duration of theleasing period.The Group has not entered into anyfinancial leasing contracts where the contractualamount is material. All of the Group’sleasing contracts are therefore treated asoperational.All of the parent company’s leasingcontracts are stated as operational leasingcontracts in accordance with the rules inRR 32:06.Financial instruments IAS 32, IAS 39Financial instruments stated in the balancesheet include securities, receivables, operatingliabilities, leasing commitments andborrowing.The Group classifies its financial assetsin the following categories: financial assetsvalued at fair value via the profit and lossaccount, loan receivables and accountsreceivable, financial instruments held untilmaturity, and financial instruments availablefor sale. The classification depends on thepurpose for which the asset was acquired.The management decides on the classificationof instruments on the first occasion theyare taken into the accounts and then reviewsthis decision on each reporting occasion.Financial assets valued at fairvalue via the profit and loss accountThis category consists of financial assetsthat are held for trading and assets that areoriginally classified as “valued at fair valuevia the profit and loss account”. The Group’sSecurities Portfolio is classified as “valued atfair value via the profit and loss account”.Listed securities that have been lent arestated as owned and the premium is statedas financial income. For further informationregarding the principles for stating theSecurities Portfolio via the profit and lossaccount, see Recognition of Income above.Derivative instruments are also classifiedas held for trading if they have not beenidentified as hedges.The parent company states changesin the value of financial instruments in theprofit and loss account in accordance withChapter 4 §14d of the Annual Accounts Act.The principles applied by the parent companyto the accounting treatment of the SecuritiesPortfolio are therefore identical to thoseapplied by the Group.Loan receivables and accounts receivableLoan receivables and accounts receivable arenon-derivative financial assets with determinedor determinable payments that arenot listed on an active market. Their distinguishingfeature is that they arise when theGroup provides money, goods or servicesdirect to a customer without any intentionof trading in the receivable that arises. Theyare included in current assets, except foritems with maturities more than 12 monthsafter the closing date, which are classified asfixed assets.Financial instruments held until maturityFinancial instruments that are held untilmaturity are non-derivative financial assetswith determined or determinable paymentsand determined durations that the Group’smanagement has the intention and ability toretain until maturity. The Group did not haveany such instruments during the financialyear. Loan receivables and accounts receivable,as well as financial instruments helduntil maturity are stated at their accrued historiccost applying the effective yield methodand taking into account any impairmentrequirements.Financial instruments available for saleFinancial instruments that are available forsale are non-derivative assets that are eitherattributable to this category or not classifiedin any other category. They are included infixed assets if the management has no intentionof divesting them within 12 months ofthe closing date.Purchases and sales of financial instrumentsare taken into the accounts on thetransaction date – the date when the Groupundertakes to buy or sell the asset. Financialinstruments are initially valued at fair valueplus transaction costs, which applies to allfinancial assets that are not valued at fairvalue via the profit and loss account.Financial instruments are removedfrom the balance sheet when the right toreceive the cash flow from the instrumenthas expired or been transferred and theGroup has transferred more or less all of therisks and benefits associated with the rightof ownership.Financial assets that are available forsale and financial instruments valued at fairvalue via the profit and loss account are statedafter the date of acquisition at fair value.Realised and unrealised capital gainsand losses arising from changes in fair valuein respect of financial assets valued at fairvalue via the profit and loss account are statedin the profit and loss account for the periodwhen they arise.Unrealised capital gains and lossesresulting from changes in fair value inrespect of non-monetary instruments classifiedas instruments that are available forsale are stated in equity. When instrumentsclassified as instruments that are availablefor sale are sold or when there is an impairmentrequirement, the accumulated adjustmentsin fair value are stated in the profitand loss account as Income from FinancialInstruments.Borrowing is initially stated at fairvalue, net after transaction costs. Borrowingis then stated at accrued historic cost, andany difference between the amount received(net after transaction costs) and the amountto be repaid is stated in the profit and lossaccount and allotted over the duration of theloan, using the effective interest rate method.Derivative instruments are stated inthe balance sheet as of the contract date andvalued at fair value, both initially and whentheir value is later tested. The method usedto state the profit or loss that arises in connectionwith the impairment test dependson whether or not the derivative is identifiedas a hedging instrument, and, if this is thecase, the character of the item that has beenhedged.The Group identifies certain derivatives aseither:1) hedging of the fair value of an identifiedasset or liability or a binding commitment(hedging of fair value);62

Financial Reports / Accounting and valuation principles2) hedging of a very likely forecast transaction(cash flow hedge); or3) hedging of a net investment in a foreignsubsidiary.If the derivative has been identified as ahedge the Group makes a record of whenthe transaction takes place, of the relationshipbetween the hedge and the hedgeditem, as well as of the purpose of the hedge,and the strategy upon which various typesof hedging action are based. The Group alsorecords its assessment, when entering intothe hedging contract and regularly thereafter,of the extent to which the derivativeinstruments used for hedging are effective inoffsetting changes in the fair value or cashflow associated with hedged items.The Group currently uses hedgeaccounting to reduce the currency risk associatedwith net investments in foreign businesses.The hedges used are loans in thecurrency in question. Profits and losses onhedges that are attributable to the effectivepart of the hedge are stated in equity, profitor losses attributable to the ineffective partare stated immediately in the profit andloss account. Accumulated profits andlosses in equity are stated in the profit andloss account when the foreign business isdivested.The Group also uses derivatives toreduce the risks associated with theSecurities Portfolio. Changes in the value ofsuch derivatives are stated without the useof hedge accounting direct in the profit andloss account where they match changes inthe value of the Securities Portfolio, whichare also stated direct in the profit and lossaccount.Inventories IAS 2Inventories are valued using the first in firstout principle at the lower of their historiccost and closing net sales value. Homo ge -neous product groups are valued collectively.The historic cost comprises all costsrelating to purchasing, production costs andother costs incurred in bringing the productto its condition and position on the closingday.The net sales value is the estimatedsales price for an asset between knowledgeableparties who are independent of eachother and who have an interest in carryingout the transaction. Deductions shall bemade for selling costs and settlement.Reporting by segment IAS 14Lines of business contain products or servicesthat are subject to risks and returns thatdiffer from other lines of business. Geo -graphical markets supply products or serviceswithin a specific economic environment thatis subject to risks and returns that differ fromthe risks and returns that apply to unitsactive in other economic environments. Inthe Group, Industrial Operations andManagement of Securities are classified asprimary segments, and the geographicalregions within Industrial Operations assecondary segments.Industrial Operations consists of twolines of business: Road Marking and Chem -Tech. They are treated as one business areain the reporting by segment as RoadMarking is invoiced internally for a notinsignificant proportion of ChemTech’s sales,and ChemTech’s operating result and externalsales account for less than 10% of the correspondingfigures for Industrial Operations asa whole.Cash-flow analysis IAS 7The cash-flow analysis is drawn up using theindirect method. The cash flow stated in -cludes only transactions that involve receiptsor disbursements.By liquid funds is meant, apart fromcash and bank deposits, short-term financialplacements that are exposed only to aninsignificant risk of fluctuations in value, aretraded on an open market at knownamounts, or have a shorter outstandingduration than three months from the dateof acquisition.Remuneration to employees IAS 19The Group has both defined benefit anddefined premium pension plans. Salariedemployees of Swedish companies havedefined benefit plans. The contractual pensionsof other Group employees are of thedefined premium type.A defined benefit plan stipulates whatbenefits the employee will receive afterretirement. They normally depend on age,years of employment, and remuneration paidduring the employee’s active employment.A defined premium plan is a plan inwhich the Group pays an agreed premium,normally to an insurance company. Over andabove this, the Group has no commitmentsto the employee. The premiums are statedamong personnel costs when they fall duefor payment.The Group’s main pension plan forsalaried employees in Sweden is the ITPplan, which is secured by the payment ofpremiums to Alecta. This plan is of thedefined benefit type and includes manyemployers. Alecta has not been able to providesuch information for the 2006 or 2007financial years as would enable the Group totreat the plan as a defined benefit plan. Thepension commitments are therefore stated inaccordance with IAS 19.30 in accordancewith the principles for defined premiumplans. See also Notes 4 and 24.Over and above the defined benefitITP plan secured by payment of premiums toAlecta, the Group has a few, small definedbenefit pension commitments. The liabilitythat is stated in the consolidated balancesheet for defined benefit pension plans is thecurrent value of these commitments on theclosing date after adjustment for non-statedactuarial profits/losses for service duringprior periods.The defined benefit commitments arecalculated annually by independent actuariesusing the projected unit credit method. Thecurrent value of the defined benefit commitmentsis determined by discounting the estimatedfuture cash flow using the interestrate for first-class corporate bonds issued inthe same currency as that in which the pensionbenefit will be paid and with durationsthat are comparable to the pension liabilityin question. Actuarial profits and lossesarising from adjustments and changes inactuarial assumptions made on the basis ofexperience that exceed the higher of 10% ofthe value of the managed assets and 10% ofthe defined benefit commitment, are statedas costs or income over the employee’s estimatedaverage remaining period of employment.All pensions (apart from temporarypensions) are vested, which means they arenot conditional on future employment. Seealso notes 4 and 24.EquityThe Group’s equity has the following components:• The share capital corresponds to the parentcompany’s nominal share capital.• Other injected capital consists of all capitalinjected by shareholders over and aboveshare capital. This includes the legalreserve included in the parent company’saccounts to the extent that it was contributedby the shareholders.• Reserves, include such amounts which areto be taken direct to equity as a consequenceof the rules in IFRS. This categoryincludes, for example, certain revaluationsto fair value and translation differences.• Retained earnings consist of the accumulatedprofits on the Group’s business afterdeduction of dividends. In the parentcompany’s accounts, it includes the legalreserve to the extent that it consists oftransfers from each year’s profit.• Minority interests are stated as part ofequity.• In the parent company accounts, equityhas two headings in compliance with therules in the Annual Accounts Act, namelyRestricted equity and Non-restricted equity.63

Financial Reports / NotesNote 1 Shares and other securitiesMarketMarketNo. of value No. of valueshares 31-12-2007 shares 31-12-2006Listed sharesABB Ltd - - 100,000 12,275Assa Abloy, B - - 150,000 22,350AstraZeneca - - 110,000 40,425Cardo 100,000 20,100 120,000 31,200Cision 100,000 1,700 - -Ericsson, B - - 1,200,000 33,180Getinge, B 50,000 8,675 300,000 46,050Gunnebo 360,000 23,400 372,000 29,388Hennes & Mauritz, B 100,000 39,350 170,000 58,820Lundin Petroleum - - 100,000 7,950Midelfart Sonesson, B 200,000 2,000 - -NCC, B - - 25,000 4,687Nordea - - 300,000 31,650Sandvik 160,000 17,800 - -SCA, B 220,000 25,190 70,000 25,025SEB, A - - 75,000 16,313Securitas, B - - 300,000 31,875SHB, A - - 130,000 26,910SKF, B 94,000 10,293 - -Stora Enso, R - - 100,000 10,800Teleca, B - - 100,000 2,790Transatlantic, B 400,000 17,240 280,000 14,280Transcom, B 50,000 2,420 - -Trelleborg, B 100,000 13,550 300,000 49,200AGI ChinaEast Asia Fund 16,213 31,893 16,213 22,342HealthinvestGlobal L/S Fund 91,274 5,798 91,274 10,000SEB 06/10 EquityIndex bond 10,000,000 9,414 - 11,728Kaupthing EquityIndex Bond 5,000,000 5,434 - -TotalSwedish securities 234,257 539,238Norsk Hydro (Norway) - - 60,000 12,672Statoil (Norway) - - 60,000 10,821Totalforeign securities - - 23,493Totallisted securities 234,257 562,731Unlisted securities - 75 - 50Total parent company 234,332 562,781Subsidiary companiesInnKap 3 Partners Sweden KB 13,935 11,144InnKap 4 Partners LP 942 471Option premiums - 323Other holdings 416 340Total subsidiary company holdings 15,293 12,278Total Group holdings 249,625 575,059Issued call options have the effect of reducing the market value bySKr 0 million (0).Note 1 Shares and other securities, cont’dListed securities Group Parent companyOpening value 562,731 562,731Acquisitions 179,192 179,192Sales -502,124 -502,124Change in value -5,542 -5,542Closing value 234,257 234,257Unlisted securitiesand optionsOpening value 12,328 50Acquisitions 20,601 15,871Sales -4,219 -2,770Change in value -13,357 -13,076Translation differences 15 -Closing value 15,368 75Listed securities are valued at their market value in accordance withthe amendment to the Annual Accounts Act that came into effect on1 January 2004. The book value exceeds the acquisition value bysome SKr 19 million.Pursuant to a decision that the Equities Portfolio is to bedivested, the Portfolio is classified in the parent company ABGeveko’s accounts under Current Assets as of 31 December 2007,prior to which it was classified under Fixed Assets.The units in the InnKap funds are valued at their marketvalue. Each of the funds manages a portfolio of shares in developingcompanies, many of which are in the early phase of their development.They are valued in accordance with normal methods used inthe venture capital industry for valuing companies in their earlydevelopment phase. Geveko’s total commitment to invest furthercapital amounts to 3,500.000 euro. Remaining commitments as of31 Dec 2007 amount to 1,200,000 euro or SKr 11,3 million. In thecase of other unlisted shares and securities, their book value isdeemed to be the same as their market value.Note 2 Reporting by segmentPrimary segments – lines of businessThe Group is organised into two lines of business: IndustrialOperations and Management of Securities.Industrial Operations consists of two business areas: RoadMarking and ChemTech. The Road Marking business area comprisesthe manufacture and sale of thermoplastic material and paint forroad marking, as well as a contract road-marking sector, mainlyusing thermoplastics and paint. The ChemTech business area comprisesthe manufacture and sale of corrosion protection agents,industrial paints and marking sprays. As ChemTech’s turnover, resultand assets represent less than 10% of the corresponding figures forthe Group, the business area is not treated as a separate segment.Management of Securities comprises the Group’s securitiesmanagement activities.Central items represent common costs. The assets used in theIndustrial Operations division consist mainly of tangible fixedassets, intangible fixed assets, inventories, receivables, and operatingfunds. Industrial Operations’ liabilities consist of operating liabilities,but not items such as tax and some corporate borrowing. Capitalexpenditure consists of purchases of tangible fixed assets and intangiblefixed assets. The assets used by Management of Securities consistof the share portfolio and units in venture capital funds.64

Financial Reports / NotesNote 4 Wages, salaries, other benefits andsocial security charges cont’dThe retirement age is normally 65, and a pension is paid in accordancewith generally accepted practice in each country. All of thepension benefits (except temporary pension) are vested, i.e. not conditionalon future employment. Pension schemes abroad are of thedefined premium type.Pension and family pension commitments on behalf ofsalaried employees in Sweden are secured by an insurance policywith Alecta. Pursuant to a statement (URA 42) by the Acute Groupof the Swedish Financial Accounting Standards Council, this is adefined benefit plan that covers several employers. The company didnot have access to such information for the 2007 financial year aswould enable it to state this plan as a defined benefit plan.The pension plan of the ITP type that is secured by an insurancepolicy with Alecta is therefore stated as a defined premiumplan. The year’s premiums for pension insurances taken out withAlecta amounted to SKr 2.7 million (2.8). Alecta’s surplus can beallotted to policyholders and/or the insured persons.At the end of 2007, Alecta’s surplus in the form of the collectivesurplus amounted to 152.0% (143.1). This surplus consists ofthe market value of Alecta’s assets as a percentage of the estimatedinsurance commitments, computed using Alecta’s actuarial assumptions,which are not in accordance with IAS 19Wages, salaries and other benefits by country,and for board members, etc and other employees2007 2006Board andBoard andmanagingmanagingdirectordirector(of which Other (of which Otherbonuses etc) employees bonuses etc) employeesParent company 3,410 2,866 3,465 2,029(0) (0)Subsidiarycompanies Sweden 2,389 68,883 3,178 63,364(429) (138)Subsidiarycompanies abroadDenmark 1,436 60,245 1,376 56,781(0) (229)Finland 620 8,265 666 6,486(0) (0)Norway 0 16,579 0 13,961(0) (0)Netherlands 506 1,405 0 791(0) (0)Poland 2,004 4,330 0 1,598(84) (0)Romania 4,820 8,643 590 8,852(3,753) (0)Switzerland 84 1,760 1,936 2,384(0) (0)Slovakia 49 1,149(0)Great Britain 1,924 26,164 1,682 25,103(0) (363)Czech Republic 560 875 536 2,636(0) (0)Germany 1,042 10,870 997 11,335(166) (166)Total subsidiarycompanies abroad 13,045 140,285 7,783 129,927(4,003) (758)Total Group 18,844 212,034 14,426 195,320(4,432) (896)Note 5 Auditors’ feesGroupParent company2007 2006 2007 2006AuditingPricewaterhouseCoopers1,698 1,597 265 290Other contracts 857 179 - -Total 2,555 1,776 265 290Other contractsPricewaterhouse-Coopers 1,870 2,386 557 500Other 129 498 28 621,999 2,884 585 562Total 4,554 4,660 850 852Note 6 Depreciation, write-downs and reversalof depreciation, tangible andintangible fixed assetsThe Group’s depreciation of tangible and intangible fixed assetsamounted to SKr 70,331,000 (73,850,000), and that of the parentcompany to SKr 22,000 (31,000). There were no write-downs orreversals of write-downs.Note 7 Financial incomeGroupParent company2007 2006 2007 2006Interest, external 5,089 3,603 3,126 1,391Interest, Group 0 0 9,137 5,568Premiums,lending of shares 124 117 124 117Currency differencesand similar profitand loss items 1,871 1,963 1 0Total 7,084 5,683 12,388 7,076Note 8 Financial costsGroupParent company2007 2006 2007 2006Interest, external 31,746 18,802 12,311 4,338Interest, Group 0 0 1,637 605Currency differences(revaluation) 7,254 -5,324 2,394 -2,786Currency differencesand similar profitand loss items 944 1,082 78 2Total 39,944 14,632 16,420 2,159Note 9 Tax on profit for the yearGroupParent company2007 2006 2007 2006Actual tax for the year -6,923 -12,062 0 0Deferred tax(Specified in Note 10) 66 3,658 0 0Total -6,857 -8,404 0 066

Financial Reports / NotesNote 9 Tax on profit for the year, cont’dParent companyThe loss before and after tax amounts to SKr 30,831,000 (profit:126,346,000). According to the rules for companies with investmenttrust status no tax charge is stated.Industrial Operations 2007 2006Difference between Industrial Operations’tax charge and tax charge basedon standard tax rate.Industrial operations, pre-tax profit 14,928 24,365Less result of associate companies including tax -206 -10,951Result on which tax is calculated 14,722 13,414Estimated tax at applicable rate -4,122 -3,756Tax effect of non-deductible costs -583 -2,117Correction to previous year’s tax 122 -83Effect of change in tax rate on subsidiarycompanies’ deferred tax liability 0 0Tax effect of income not liable to taxation 989 869Reduction in previous years’ taxreceivables attributable to loss allowances 0 2,386Utilised, not previously stated taxreceivables attributable to loss allowances -253 -680Effect of foreign tax rates -3,002 -4,999Tax on Industrial Operations’ net profit *) -6,849 -8,379Tax, other Group companies, not beingpart of Industrial Operations -8 -25Tax on consolidated profit -6,857 -8,404*) Of which actual tax -6,907 -12,034*) Of which deferred tax 58 3,655Tax rateThe standard tax rate applicable to the Group is 28% (28%).Note 10 Deferred taxGroup 2007 2006Deferred tax charge/incomeDeferred tax cost in respectof periodisation differences -87 5,666New assessment of possibility ofutilising loss allowances 153 -2,008Deferred tax as stated in profitand loss account (see note 9) 66 3,658Periodisation differencesPeriodisation differences arise in cases where the book and fiscalvalues of assets or liabilities differ. Periodisation differences inrespect of the following items have resulted in deferred tax liabilitiesand deferred tax receivables:Group 2007 2006Deferred tax receivablesLoss allowances 6,462 6,793Total deferred tax receivables 6,462 6,793Deferred tax receivables in respect of loss allowances relate largelyto the subsidiaries in Great Britain, Sweden and Germany. Since theconditions exist for them to become profitable in the future, some ofthe loss allowances are stated as a receivable.Note 10 Deferred tax, cont’dGroup 2007 2006Deferred tax liabilitiesDifference between book andfiscal values of fixed assets 22,492 12,058Deferred tax component of untaxed reserves 6,245 5,112Total deferred tax liabilities 28,737 17,170Net deferred tax liabilities 22,275 10,377Deferred tax receivables and liabilities are netted off when there is alegal right to do so in respect of the tax receivables and liabilities inquestion, and when the deferred taxes relate to the same taxableentity. The amounts that result from this netting off process are statedin the balance sheet as follows:Group 2007 2006Deferred tax receivables 5,545 5,918Deferred tax liabilities 27,820 16,295The amounts stated inthe balance sheet include the following:Deferred tax receivable that can beutilised after more than 12 months 4,700 4,980Deferred tax liability that becomespayable after more than 12 months 27,820 16,295Tax-deductible differences for which nodeferred tax receivable is statedLoss allowances in accounts offoreign subsidiary companies 28,692 36,665Loss allowances for which no deferred tax receivable is stated areincluded in the accounts of subsidiaries in Poland, Great Britain andGermany. It is not considered that sufficiently convincing conditionsexist for stating such a receivable that corresponds to the total lossallowances.Parent companyAB Geveko has accumulated loss allowances of SKr 185 million.So long as the company had investment trust status for tax purposesit was not possible to utilise them. The company’s tax status waschanged to that of an operative company as of 30 November 2007,in connection with which a tax receivable on change of status willarise. The tax receivable will amount to approx. SKr 90 million,which will reduce the accumulated loss allowances.Note 11 Dividend per shareIt will be proposed to the AGM on 24 April 2008 that a dividendof SKr 6 per share, totalling SKr 25,317,000, be paid for 2007. Thisamount is not stated as a liability but will be stated as an allocationof non-restricted equity during the 2008 financial year. The dividendsfor 2006 and 2005 each amounted to SKr 46,415,000, or SKr11 per share.Note 12 Earnings per shareThe net consolidated loss amounted to SKr 24,530,000 (profit:116,310,000), of which a loss of SKr 20,552,000 (profit: 119,047,000)is attributable to the parent company’s shareholders.AB Geveko has 4,219,533 shares in issue, of which 720,000 areSeries “A” shares and 3,499,533 are Series “B” shares; this is un changedfrom last year. The loss per share amounted to SKr 4.85 (profit: 28.20).The company has no option schemes or similar commitmentsthat could dilute the earnings per share.67

Financial Reports / NotesNote 13 Intangible fixed assetsGroup 2007 2006Customer contracts and relationsOpening acquisition value 79,612 55,901Acquisition of subsidiaries 46,340 5,191Supplementary purchase price 0 13,645Purchases, including acquisitions of assets 1,259 6,717Re-classifications 0 1,000Translation differences 6,261 -2,842Closing accumulated acquisition value 133,472 79,612Opening depreciation -39,415 -24,632Acquisition of subsidiaries 0 0Depreciation during the year -14,086 -15,735Reclassifications 0 -400Translation differences -2,385 1,352Closing accumulated depreciation -55,886 -39,415Closing residual value 77,586 40,197Note 14 Tangible fixed assetsGroup 2007 2006Land and installationsOpening acquisition value 26,106 27,341Acquisition of subsidiaries 6,652 0Purchases, including acquisitions of assets 1,188 0Sales and retirements -706 -519Reclassifications 576 82Translation differences 1,111 -798Closing accumulated acquisition value 34,927 26,106Opening depreciation -3,597 -3,385Acquisitions of subsidiaries -10 0Sales and retirements 0 8Depreciation during the year -364 -260Reclassifications 0 0Translation differences -30 40Closing accumulated depreciation -4,001 -3,597Closing residual value 30,926 22,509BuildingsOpening acquisition value 147,321 149,729Acquisition of subsidiaries 28,729 0Purchases, including acquisitions of assets 16,304 0Sales and retirements -2,003 -8,492Reclassifications 2,108 10,466Translation differences 6,679 -4,382Closing accumulated acquisition value 199,138 147,321Opening depreciation -59,903 -55,269Acquisitions of companies -1,327 0Sales and retirements 33 84Depreciation during the year -6,922 -6,381Reclassifications 0 0Translation differences -2,211 1,663Closing accumulated depreciation -70,330 -59,903Closing residual value 128,808 87,418Total book value: Land and buildings 159,734 109,927Note 14 Tangible fixed assets, cont’dGroup 2007 2006Buildings and landBook value of buildings in Sweden 5,563 6,046Book value of land in Sweden 2,684 2,602Assessed value of buildings in Sweden 25,845 14,856Assessed value of land in Sweden 9,792 6,547MachineryOpening acquisition value 457,671 445,655Acquisitions of subsidiaries 47,472 426Purchases, including acquisitions of assets 51,414 28,995Sales and retirements -31,644 -9,898Reclassifications 12,113 -366Translation differences 10,933 -7,141Closing accumulated acquisition value 547,959 457,671Opening depreciation -323,396 -290,748Acquisitions of subsidiaries -20,279 0Sales and retirements 26,945 8,965Depreciation during the year -47,410 -47,725Reclassifications -3,002 255Translation differences -6,427 5,857Closing accumulated depreciation -373,569 -323,396Closing residual value 174,390 134,275Group Parent company2007 2006 2007 2006EquipmentOpening acquisition value 58,439 58,613 346 300Acquisition of subsidiaries 6,188 47 0 0Purchases, includingacquisitions of assets 7,257 3,476 0 46Sales and retirements -1,734 -2,109 0 0Reclassifications -3,223 -625 0 0Translation differences 1,048 -963 0 0Closing accumulatedacquisition value 67,975 58,439 346 346Opening depreciation -48,338 -47,169 -149 -117Acquisitionsof subsidiaries -6,344 0 0 0Sale and retirements 1,424 1,580 0 0Depreciationduring the year -1,550 -3,749 -22 -32Reclassifications 3,002 145 0 0Translation differences -1,080 855 0 0Closing accumulateddepreciation -52,886 -48,338 -171 -149Closing residual value 15,089 10,101 175 197Total book valuemachinery andequipment 189,479 144,376 175 197Fixed plant underconstruction and paymentsin advance fortangible fixed assetsOpeningacquisition value 13,333 6,668 0 0Re-distributionduring the year -11,574 -10,557 0 0Costs incurredduring the year 3,246 17,073 0 0Translation differences 175 149 0 0Closing value 5,180 13,333 0 0Interest costs have not been capitalised and are consequently notincluded in the acquisition value68

Financial Reports / NotesNote 15 Financial fixed assetsGroupParent company2007 2006 2007 2006Interests inassociate companiesOpeningacquisition value 75,809 61,492 0 0Shares acquired 18,866 473 0 0Shares in companiesconsolidated duringthe year -66,088 - - -Share issue - 9,159 0 0Interest in resultfor the year after tax 206 10,951 0 0Dividend received - -4,301 0 0Translationdifferences etc. 2,673 -1,965 0 0Book value 31,466 75,809 0 0See also Note 17.GroupParent company2007 2006 2007 2006Other long-termreceivablesOpeningacquisition value 11,030 10,644 0 0Increase in receivables 6,828 3,237 0 0Amortisations,repaid receivables -615 -2,851 0 0Book value 17,243 11,030 0 0All long-term receivables fall due for payment within five years.Note 16 Shares in subsidiary companiesCompany Registered Interest inGroup reg. no. office capital, %Geveko Kapital AB 556121-4767 Göteborg, Sweden 100Geveko IndustriHolding AB 556556-1981 Göteborg, Sweden 100Cleanosol AB 556289-1068 Kristianstad, Sweden 100Cleanosol AS 5042010 Moss, Norway 100Cleanosol Rus LLC 1077847519430 St Petersburg, Russia 100Geveko Trading Oy 19661079 Pargas, Finland 100Osfer 00691542 Kosice, Slovakia 100SupercoICO47547065 Prague,Czech Republic 100Cleanosol Polska KRS0000092174 Gdansk, Poland 100Dartom KRS0000189425 Bialystok, Poland 100GiK KRS0000003784 Rybnik, Poland 100Technom KRS0000266981 Wloclawek, Poland 100Geveko Industri AB 556031-0129 Göteborg, Sweden 100Geveko Industri BV 3161390 The Hague,Netherlands 100Geveko Oy 01359453 Pargas, Finland 100Geveko Industri AS 991110461 Moss, Norway 100Svensk Bilvård AB 556658-5047 Göteborg, Sweden 60Line Markings Ltd 140059 Bradford, Great Britain 100Rommco (UK) Ltd 1611047 Bradford, Great Britain 100Roadcare Ltd 1967606 Bradford, Great Britain 100LKF Vejmarkering A/S 38562614 Rudkøbing, Denmark 100Preformed Markings Ltd 3541377 Chertsey, Great Britain 100LKF Nederland BV 1292104 Elst, Netherlands 100PlastirouteHolding AG CH170.3.022.462.6 Zug, Switzerland 100Plastiroute S.A. CH-660-0268970-3 Gland, Switzerland 100Plastiroute GmbH HRB Nr 32 Mü Müllheim, Germany 100Magyar Plastiroute Kft 13-09-061038 Budapest, Hungary 78SC Plastidrum SRL J40/6701/1996 Bukarest, Romania 69Note 16 Shares in subsidiary companies, cont’dInterest Interest No. ofin in shares and BookParent company capital, % votes, % participations valueGeveko Kapital AB 100 100 1,000 2,600Geveko IndustriHolding AB 100 100 1,000 72,341Total 74,941Note 17 Shares in associate companiesInterest InterestCompany Registered in capi- inIndirectly owned reg. no. office tal, % votes, %Allglass Repro- SC226505 Paisley,cessors (UK) Ltd Great Britain 50.0 50.0Cleanosol TradingCompany LLC 34048050 Kiev, Ukraine 51.0 51.0CleanosolIstanbul,Yol AS,581395/528977 Turkey 30.0 30.0Girod SemnalizareTimisoara,Rutiera SRL J35/3600/02.12.04 Romania 50.0 50.0BakonyPlastiroute Kft 19-09-500211 Hungary 53.1 53.1PlastirouteVac Kft 13-09-061190 Hungary 46.8 46.8Recyclen Kft 01-09-062430 Hungary 42.9 42.9Book BookIndirectly owned value 2007 value 2006Allglass Reprocessors (UK) Ltd 5,513 -Cleanosol Trading Company LLC - -Cleanosol Yol AS ,1,614 433Girod Semnalizare Rutiera SRL 8,689 9,288Magyar Plastiroute Kft - 66,088Bakony Plastiroute Kft 7,235 -Plastiroute Vac Kft 3,610 -Recyclen Kft 4,805 -31,466 75,8092006 Assets Liabilites Income Profit/LossMagyar Plastiroute Kft 83,451 17,363 86,758 12,128Girod SemnalizareRutiera SRL 9,678 390 422 -1,136Cleanosol Yol AS,469 250 1,202 -412007Allglass Reprocessors(UK) Ltd 18,126 12,163 240 -436CleanosolTrading Company LLC 1,249 1,334 6,127 -429Cleanosol Yol AS,7,967 6,353 7,994 -59Girod SemnalizareRutiera SRL 10,355 1,666 3,920 -244In December 2007, a further 28% of the shares in Magyar Plasti -route Kft were acquired, as a result of which the company’s balancesheet was consolidated as of 31 December 2007.Owing to the voting right rules, Cleanosol Trading CompanyLLC is not consolidated.As of the closing date, the associate companies had no liabilities,contingent liabilities or commitments relating to investments in thefuture, for which the Group might have a payment liability. See alsoNote 15.69

Financial Reports / NotesNote 18 InventoriesGroup 2007 2006Raw materials 60,041 39,446Finished products 74,496 54,866Total 134,537 94,312Note 19 Accounts receivableThe Group’s accounts receivable have the following maturity structure.The parent company has no accounts receivable.Days dueNot due 134,6560-30 days 39,33431-60 23,64861-90 7,106>90 17,252Total 221,996Note 20 Other current receivablesOf which pre-paid costs and accrued incomeGroupParent Company2007 2006 2007 2006Pre-paid rent 851 688 0 0Prepaid insurance 1,684 1,863 0 680Accruedcontracting income 4,867 374 0 0Other items 6,481 6,057 206 84Total 13,883 8,982 206 764Note 21 Liquid fundsGroupParent Company2007 2006 2007 2006Cash and bank 105,710 134,139 6,948 83,453Short-termgroup loans - 0 20,859 8,675Liquid funds 105,710 134,139 27,808 92,128In the parent company’s balance sheet short-term group loansamounted to SKr 20,859,000 (8,675,000) and consisted in theirentirety of Swedish subsidiaries’ share of the Group check account.The parent company’s short-term placements amounted toSKr 18,112,000 (0).Note 22 EquitySeries “A” Series “B” Total no.Shares shares shares of sharesShares31 Dec 2006 - 31 Dec 2007 720,000 3,499,533 4,219,533Each share has a par value of SKr 25. Each Series “A” share carriesone vote and each Series “B” share 1/10th of a vote. All the sharesare fully paid up.Buyback of company sharesThe company has no share buyback programme.Option programmesThe company has no option programmes.Effect of currency fluctuations on equityGroupParent company2007 2006 2007 2006Change in connectionwith year’s translationof accounts ofexisting subsidiaries 1,065 -1,916 0 0The Group reduced its currency fluctuations for the period by SKr1,674,000 (3,955,000) by hedging transactions, and the parent companyreduced its by SKr 0 (0).Note 23 Minority interestsThe consolidation of the associate companies Plastidrum SRL,Magyar Plastigoute Kft and Svensk Bilvård AB has given rise to aminority interest in the result and the equity. In the profit and lossaccount, the interest in the result amounts to SKr 3,978,000. Theminority interest in equity amounts to SKr 51,315,000, of whichPlastidrum accounts for SKr 21,952,000, Magyar Plastiroute for SKr29,192,000 and Svensk Bilvård for SKr 171,000.Note 24 Pension provisions andsimilar commitmentsGroup 2007 2006FPG/PRI pensions 2,495 2,661Other pension commitments 5,460 4,2267,955 6,887The costs stated in the profit andloss account are the following:Costs for service during current year 992 823Interest costs 76 107Costs for service during previous years - -1,132Total, included in personnel costs, Note 4 1,068 -382Note 25 Other provisionsGroupParent company2007 2006 2007 2006Guarantees 1,298 1,575 0 0Provision for guaranteesin connection withcompany divestments 3,132 3,132 3,132 3,132Other items 1,728 256 0 0Total 6,158 4,963 3,132 3,13270

Financial Reports / NotesNote 26 BorrowingInterest-bearing liabilitiesGroupParent company2007 2006 2007 2006Long-termLiabilities tocredit institutions 309,632 244,365 18,997 39,908Total 309,632 244,365 18,997 39,908Current liabilitiesCheque account credit 114,537 83,114 0 0Liabilities tocredit institutions 171,601 63745 114,277 51,859Total 286,138 146,859 114,277 51,859Total interestbearingliabilities 596,270 391,220 133,274 91,767MaturitiesLong-term liabilitieswith durations inexcess of five yearsLiabilities tocredit institutions 52,337 80,058 0 0Total 52,337 80,058 0 0The Group’s liabilities to credit institutions include foreign currencyloans equivalent to SKr 174 million (114), which have been raised bythe parent company and Swedish subsidiaries as currency hedgesfor investments in the corresponding currencies. In some cases,these loans are formally short term, but are rolled over regularly.The Group’s borrowing (except for cheque account credits atfloating rates of interest) is exposed to interest rate renegotiationsand maturity dates as follows:Less thanMore thanGroup one year 1-5 years five years TotalAt 31 December 2007 369,827 77,356 33,870 481,232Parent companyAt 31 December 2007 133,274 - - 133,274The Group does not use interest swaps or similar instruments.The weighted average effective interest rates were:GroupParent company2007 2006 2007 2006Long-term liabilitiesto credit institutions 5.55% 4.88% - -Current liabilitiesto credit institutions 6.00% 4.05% 5.11% 4.06%The interest on cheque account credits is at floating rates based oneach bank’s base rate in the respective currency.Cheque account creditThe credit granted on the Group’s cheque account credit amounts toSKr 110,866,000 (100,696,000), and on the parent company’s it isSKr 19,450,000 (19,025,000).Note 27 Other current liabilitiesOf which contracts in progressGroup 2007 2006Income from contracts recognised asincome during the accounting period 5,789 13,075Accumulated contract costs and statedprofit after deduction of recognised losses -1,047 -9,345Advance payments received 10,827 14,087Liabilities to customers inrespect of work in progress 9,780 4,742The above items relate to contracting services recognised in accordancewith the rules for successive recognition of profit.Of which accrued costs and deferred incomeGroupParent company2007 2006 2007 2006Accruedinterest costs 3,085 1,823 981 503Accrued wages,salaries and fees 5,570 4,764 1,719 1,520Accrued bonuses 1,287 1,906 0 0Holiday pay 18,845 16,972 1,347 1,043Accrued socialsecurity charges 5,907 5,289 156 270Other items 14,530 20,102 1,137 695Total 49,224 50,856 5,340 4,031Note 28 Pledged assetsGroupParent company2007 2006 2007 2006For own provisionsand liabilitiesIn respect of liabilitiesto credit institutions:Floating charges 0 0 0 0Property mortgages 27,849 47,106 0 0Total pledged assets 27,849 47,106 0 0Note 29 Contingent liabilitiesGroupParent Company2007 2006 2007 2006Contingent liabilitieson behalf of otherGroup companies 0 0 423,814 290,751Other contingentliabilities 24,264 19,814 3,000 3,000Total contingentliabilities 24,264 19,814 426,814 293,751The contingent liabilities mostly consist of performance guarantees.The buyers of Gatu och Väg AB and AB Underås have each, independentlyof each other and regarding several items that are independentof each other, expressed demands to the vendor, ABGeveko, for compensation for guarantees issued.71

Financial Reports / NotesNote 29 Contingent liabilities, cont’dThe total demands over and above transfers to reserve, amount tosome SKr 3 million. Geveko’s assessment is that the parties concernedhave no grounds for their claims over and above the provisionsmade.No significant liabilities are expected to arise as a consequenceof any of the above types of contingent liability.Contingent assetsThe Group has tax-deductible loss allowances for which no deferredtax receivables are stated (see Note 10). They amount to SKr28,692,000 (36,665,000).Note 31 Adjustments for items notincluded in cash flow, cont’dCash flow from changes in working capitalGroup Parent company2007 2006 2007 2006Increase(-)/Decrease(+)in inventories -13,026 -17,628 - -Increase(-)/Decrease(+)in current receivables -14,839 -17,274 567 -342Increase(+)/Decrease(-)in current,interest-free liabilities -12,737 12,519 1,079 807-40,602 -22,383 1,646 465Note 30 UndertakingsThe Geveko Group has no current operational leasing contracts ofmaterial importance, except for rental agreements and site leasesrelating to property used in the business. Information on theGroup’s significant rental agreements is provided below.Group 2007 2006Fall due for payment within one year 4,931 3,945Fall due for paymentbetween one and five years 8,057 10,435Fall due for payment after five years 0 0Rent for site leases per year 388 382Rental costs and site lease rental costs inrespect of property used in the businessamounted during the year to:Rental costs 4,578 4,160Site lease rent 388 382Geveko’s undertaking to pay in capital amounts in total to 3.5 millioneuro. The remaining commitment as of 31 December 2007 amountsto 1.2 million euro, or SKr 11.3 million.Note 31 Adjustments for items notincluded in cash flowGroupParent company2007 2006 2007 2006Tax 6,857 8,404 - -Depreciation 70,331 73,850 22 31Write-downin value of intangiblefixed assets - - - -Capital gains/losseson sales of fixed assets 12,529 -24,826 14,722 -19,492Change in valueof securities 3,896 -80,367 3,896 -80,367Dividends -14,801 -13,022 -14,801 -38,021Financial income -7,084 -5,683 -12,388 -7,076Financial costs 39,944 14,632 16,420 2,159Pension provisions 1,068 -382 - -Change inother provisions -3,899 79 - -Interest in earningsof associate companies -205 -10,951 - -Unrealisedprice changes -1,501 - - -Total 107,135 -38,266 7,871 -142,766Note 32 Acquisition of subsidiariesIn 2007, all the shares in LKF Nederland BV, Holland, were acquiredfor SKr 0.2 million, in Dartom Sp z oo, Poland, for SKr 18.4 million,in GiK Sp z oo, Poland, for SKr 16.1 million, in Technom Sp z oo,Poland, for SKr 20.9 million, and in Osfer sro, Slovakia, for SKr 12.3million. Moreover, two subsidiaries, Geveko Industri A.S., Norway,and Cleanosol Rus LLC, Russia, have been set up, each of whichwith equity of SKr 0.1 million. Finally, 28% of the shares in MagyarPlastiroute Kft, Hungary, have been acquired for SKr 33.0 million.This company was formerly an associated company.All of the acquired companies are engaged in contract roadmarking and the sale of materials. Their sales in 2007 amounted toSKr 192.3 million and their net profit to SKr 1.5 million. Their salessince the acquisition dates in 2007 amounted to SKr 47.6 million,while their net result was a loss of SKr 1.9 million.The difference between their book values and market values isattributable to the excess value of land, buildings, equipment andplant, and to customer contracts and relations.The Group has acquired the following assets and liabilities asa result of consolidating the above companies.Market Bookvalue valueIntangible fixed assets 46,943 -Tangible fixed assets 65,969 50,022Financial fixed assets 17,071 17,071Current assets 103,102 103,102Liquid funds 37,403 37,403270,488 207,598Minority interests 29,300 -Provisions 16,073 40Interest-bearing liabilities 8,592 8,592Interest-free liabilities 49,126 49,126103,091 57,758Purchase price paid during the year - -101,156Liquid funds of acquired companies - 37,403Effect on Group’s liquid funds - -63,75372

Financial Reports / NotesNote 33 Financial risk managementand derivate instrumentsFinancial risksThe Group’s business is exposed to numerous different financialrisks, including the effects of changes in prices on credit and capitalmarkets, exchange rates and interest rates. The Group’s overall riskmanagement programme focuses on the unpredictability of financialmarkets and endeavours to minimise potentially unfavourableeffects on the Group’s financial result. The Group uses derivativeinstruments, such as forward currency contracts, to a limited extentto hedge some risks.Risk management is handled by a Central Finance Departmentin accordance with principles approved by the Board. The FinanceDepartment identifies, evaluates and hedges financial risks in closeco-operation with the Group’s operative units. The Board draws upwritten principles for overall risk management and for specific areassuch as currency risk, interest rate risk, credit risk, the use of derivativeinstruments and the placement of surplus cash.Currency risksBy currency risk is meant the risk that the Group’s commercial flowsand monetary assets and liabilities will be adversely affected bychanges in the exchange rates of foreign currencies in relation to theSwedish krona. This currency risk can be divided into a transactionrisk and a translation risk.A transaction risk arises when Group companies in their dayto-dayactivities buy and sell goods in a currency other than theirown. A large proportion of the purchases, as well as of export sales,are denominated in the currency of the respective country. As theGroup’s transaction risks are considered to be relatively limited inextent, measures to hedge against such losses are not normallytaken.A translation risk arises when the Group invests in assets orraises loans in currencies other than Swedish kronor. When theGroup makes a foreign currency investment in connection with acompany acquisition, a loan is raised in the same currency at thetime of the investment as a means of reducing the currency risk.Information on the principles underlying hedge accounting is providedin Accounting Principles. As of 31 December 2007 the Group’shedging loans for this purpose corresponded in total to some SKr174 million (114). These hedges are arranged for each subsidiaryindividually and have terms of between one and five years.Interest rate risksBy interest rate risk is meant the risk that a change in interest rateson the Group’s loans will have an adverse effect on the result. In2007 the Group had loans with durations from 3 months and up to5 years. Short duration loans are seasonal credits or the short partof long-term loans raised to finance fixed assets and subsidiarycompanies. Loans with long durations relate entirely to the acquisitionof fixed assets and subsidiary companies.Around 77% of the Group’s interest-bearing liabilities havedurations of less than 365 days.Credit riskMany of the Group’s customers are public authorities and stateownedcompanies, and there are some deliveries to independentdistributors. The credit risk on sales to the first group is judged tobe very low, whereas it is higher for the latter group. The Group hasestablished guidelines for ensuring that products and services areonly sold to customers with a suitable credit status. The grantingand monitoring of customer credits is handled by each subsidiaryseparately within limits laid down by the Group. In 2007 theGroup’s bad debts amounted to SKr 1.0 million (2.7).Counterparties to derivative contracts and cash transactionsare limited to financial institutions with a high credit rating. TheGroup has principles that limit the credit exposure to each individualfinancial institution.Note 33 Financial risk managementand derivate instruments, cont’dLiquidity riskIn the Swedish part of the Group liquidity flows are channelledthrough central Group accounts denominated in Swedish kronorand euro, for which the subsidiary companies’ seasonal capitalrequirements are covered by internal limits. The borrowing requirementsof foreign subsidiaries are financed either by local banks orthrough short-term borrowing in local currencies via the parentcompany’s finance department. All financing of subsidiary companiesrequires the approval of the parent company. All lending within theGroup takes place on market conditions.The Group’s internal rules stipulate that only the parentcompany AB Geveko is entitled to issue guarantees on behalf ofsubsidiary company commitments (except for small loans topersonnel).Given the seasonal fluctuations in Industrial Operations, theGroup aims to arrange its financing on flexible terms by reachingagreements on drawable lines of credit. At the end of 2007 the Grouphad undrawn lines of credit and cheque account credits amountingto SKr 111 million (165).Fair value of financial instrumentsThe securities portfolio and other shares and participations are nowstated at their fair value. The book value of all other financial assetsand liabilities, excluding interests in subsidiary and associate companies,corresponds to their market value.Derivative instrumentsOnly the parent company and the Geveko Kapital AB subsidiaryenter into transactions in derivative instruments.Note 34 Transactions with related partiesInformation on other related parties than the parent companyA consortium agreement has been entered into between holders ofSeries “A” shares who together control more than 50% of the votes.Purchases and sales between theparent company and other Group companiesThere were no purchases or sales between the parent company andother Group companies in 2007 and 2006.Purchases of goods and services fromassociated companies to Group companiesThere were no purchases during 2007 and 2006.Sales of goods to associated companies by Group companiesGroup 2007 2006Sales of goods:Magyar Plastiroute Kft 3,674 5,972Total 3,674 5,972Sales to the former associated company Magyar Plastiroute Kft(consolidated with effect from 31 December 2007) took place onmarket conditions and at market prices.73

Financial Reports / NotesNote 34 Transactions with related parties, cont’dInformation on compensation, etc of senior management personnelPursuant to the AGM’s decision, a fee is paid to the Chairman and members of the Board, in addition to which compensation is paid forcommittee activities. No fee is paid to a Board member who is employed within the Geveko group.Salary/ Variable salary Committee Other Other PensionBoard fee component fees remuneration benefits costs TotalChairmanO Mattsson 400,000 3,000 403,000MembersD Bergendahl 150,000 43,000 193,000K Dunberger 150,000 3,000 153,000T Landeström 150,000 3,000 153,000H Levander 150,000 20,333 170,333S Sjölander 150,000 49,000 199,000Å Söderström Jerring 150,000 150,000Deputy memberL Lewerth 1) - - -Total Board fee 1,300,000 - 121,333 - - - 1,421,333Managing director H Ljungkvist 2,110,062 - - - 90,967 1,123,623 3,324,652Total Board and MD 3,410,062 - 121,333 - 90,967 1,123,623 4,745,985NB. Contractual pension premiums and cost of temporary pension.1) The Board secretary is paid on the basis of approved invoices. In 2007 remuneration consisted of fees for legal counselling of SKr 745,000.Guidelines for benefits of board and managementRemuneration Committee – planning and decision-making processDuring the year, the Remuneration Committee submitted proposals to the Board on conditions for the variable remuneration (bonuses) ofthe managing director and other senior management personnel. The managing director’s remuneration for the 2007 financial year – fixedsalary and conditions for variable salary component – are decided by the AGM on the basis of proposals submitted by the RemunerationCommittee. The Committee met once in 2007. Reports on its meetings are submitted regularly to the next Board meeting.The Board will recommend to the AGM on 24 April 2008 that it adopt the following guidelines for the benefits of the managing directorand other senior management personnel. The company shall aim to provide a competitive benefits package, the criteria for this being basedon the importance of the duties, competence requirements, experience and performance; the benefits shall consist of: fixed basic salary,variable component (bonus), pension benefits, other benefits and severance conditions.Managing director and CEOA bonus of up to 40% of the fixed salary may be payable depending on the result achieved. No specific Board fee is paid. Pension is payablefrom a retirement age of 65. In addition, a temporary pension of 50% of the final salary may be payable between the age of 60 on the initiativeof the employer, and between the age of 62 on the initiative of the employee, and the normal retirement age. Notice of termination ofemployment by the company is 12 months, in addition to which severance pay of 12 months’ salary is payable, from which may be deductedcompensation for gainful employment paid by another employer. There are no options or equity-related incentive programmes. The managingdirector’s holding of call options was not issued by Geveko.Other senior management personnelBasic pension benefits in Sweden consist of the ITP plan. Complementary to this is a defined premium pension. In all, the total cost shall notexceed 36% of the annual salary. The retirement age is 65. In foreign companies, a pension is paid in accordance with generally acceptedpractice in each country.The variable component shall not exceed 40% of the fixed annual salary and is based on the result in relation to agreed and individualperformance targets. There are no options or share-based incentive schemes.Salary during notice and severance pay for a senior management employee shall not exceed 24 monthly salaries in total.74

Financial Reports / NotesNote 35 Average no. of employees, etc.2007 2006OfOfAverage no whom Average no whomof employees male, % of employees male, %Parent companySweden 5 60 4 75Total parent company 5 60 4 75Subsidiary companiesSweden 154 89 163 88Denmark 136 75 138 75Finland 28 71 27 81Norway 27 81 26 81Netherlands 3 32 2 50Poland 59 89 5 40Romania 111 82 132 83Switzerland 3 63 4 75Slovakia 2 100 - -Great Britain 76 88 74 93Czech Republic 7 100 9 100Germany 27 81 27 81Total subsidiary companies 633 83 607 83Total Group 638 83 611 83Board members and senior management personnel2007 2006No. on Of No. on Ofclosing whom closing whomdate male, % date male, %Group(including subsidiaries)Board members 24 92 24 92Managing directorsof Group companies 9 100 9 100Parent companyBoard members 7 86 7 86Managing director ofparent and subsidiariescompanies 1 100 1 100Sick leaveThe parent company has fewer than 10 employees and is thereforenot required to provide information on sick leave.Note 36 Important estimates and assessmentsfor accounting purposesEstimates and assessments are evaluated regularly and based onpast experience and other factors that appear reasonable under prevailingconditions.The estimates and assumptions that involve a serious risk ofsignificant adjustments to the book values of assets and liabilitiesduring the following financial year are discussed below.Valuation of intangible item Customer contractsWhen the Romanian company Plastidrum became a subsidiary in2004, all its assets and liabilities were revalued to market value, atwhich point this intangible item was stated for the first time. Thebalance sheet item relates to the value of customer contracts, contactsand information on the Romanian market for road-markingcontracts and will be written off over a 5 to 10-year period.In 2007 three Polish contract road-marking companies –Dartom, GiK and Technom – were acquired, as well as Osfer inSlovakia. The balance sheet item reflects the value of customerrelations and will be depreciated over three years.Deferred tax receivables and loss allowancesThe Geveko Group had deferred tax receivables of SKr 5,545,000(5,918,000) as of 31 December 2007 relating to the businesses inGreat Britain, Sweden and Germany. The Group has further lossallowances in Great Britain, Germany and Poland amounting toSKr 28,692,000 (36,665,000). See also Note 10.The value of this item may be adjusted in 2008 depending onnew estimates of future profits.Note 37 Events after the end of the financial yearIn 2007, Geveko announced that the development and expansion ofIndustrial Operations, which is wholly owned and unlisted, wouldbe given priority rather than Management of Securities. In the secondhalf of 2007 six companies were acquired within Industrial Operations.The reduction in Management of Securities meant that the criteria forinvestment trust status was deemed no longer to be satisfied. The taxauthority has announced that it considers that Geveko ceased to haveinvestment trust status as of 30 November 2007.Note 38 Information on AB GevekoThe registered office of AB Geveko (publ) (co. reg. no. 556024-6844)is in Gothenburg, Sweden. The visiting address of the company’shead office is Marieholmsgatan 36, and the postal address isBox 2137, 403 13 Gothenburg, Sweden.The parent company is listed on the Stockholm StockExchange, Sweden.Note 39 Publication of annual reportThese consolidated financial statements were approved by the Boardfor publication on 25 February 2008.75

Proposed treatment of unappropriated earningsProposed treatment of unappropriated earningsThe following unappropriated earningsare at the disposal of theAnnual General Meeting:Retained earnings 172,961,091.23Net loss for the year - 30,830,729.77142,130,361.46The Board proposes that the un -appropriated earnings be dealt withas follows:To be paid out toshareholdersby way of dividendof SKr 6 per share 25,317,198.00to be carried forwardinto the new account 116,813,163.46142,130,361.46The Board proposes that 29 April2008 shall be the date of record forentitlement to dividend. Providedthe Annual General Meeting resolvesin favour of this proposal it is estimatedthat the dividend will be distributedby VPC on 5 May 2008.Board’s commenton dividend proposalPayment of the proposed dividendwill reduce the company’s equityratio to 59.4% and the Group’s equityratio to 35.7%. Given that the businesscarried on by the company andthe Group has remained profitable,these equity ratios are adequate. It isconsidered that the company’s andthe Group’s liquid funds can be maintainedat a similarly adequate level.The company’s equity includesunrealised capital gains of SKr 19.4million, arising from the stating offinancial instruments at their marketvalue.It is the opinion of the Boardthat the proposed dividend will notprevent the parent company or anyother company in the Group fromfulfilling their obligations in both theshort and the long term, or fromfinancing any necessary investments.The dividend proposal can thereforebe justified on the basis of the provisionsof The Swedish CompaniesAct, Chapter 17 §3 paras 2-3 (prudencerule).CertificationThe Board and the managing directorherewith certify that this annualreport is made up in accordance withInternational Financial ReportingStandards (IFRS) as adopted by theEU and that it provides a true andfair picture of the Group’s financialposition and result. The annualreport is made up in accordancewith generally accepted accountingpractice and provides a true and fairpicture of the parent company’sfinancial position and result.The report of the directors onthe Group and the parent companyprovides a true and fair picture of thedevelopment of the parent companyand Group’s development, financialposition and result and describessignificant risks and uncertainties towhich the parent company and thecompanies in the Group are exposed.This annual report will be submittedto shareholders at the AGMon 24 April 2008 for their approval.Göteborg, Sweden, 25 February 2008Ove Mattsson David Bergendahl Klas DunbergerChairmanTomas Landeström Åsa Söderström Jerring Helena LevanderSören SjölanderHans LjungkvistManaging directorOur audit report was submitted on 25 February 2008ÖhrlingsPricewaterhouseCoopers ABBror FridAuthorised public accountantBirgitta GranquistAuthorised public accountant76

Report of the auditorsAudit reportTo the Annual General Meeting of the shareholders of AB Geveko (publ)Corporate identity number 556024-6844We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of theboard of directors and the managing director of AB Geveko for the year 2007. The company’s annual accounts and theconsolidated accounts are included in the printed version on pages 48-76. The board of directors and the managingdirector are responsible for these accounts and the administration of the company as well as for the application of theAnnual Accounts Act when preparing the annual accounts and the application of international financial reportingstandards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. Ourresponsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration basedon our audit.We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidatedaccounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and theirapplication by the board of directors and the managing director and significant estimates made by the board of directorsand the managing director when preparing the annual accounts and consolidated accounts as well as evaluating theoverall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinionconcerning discharge from liability, we examined significant decisions, actions taken and circumstances of the companyin order to be able to determine the liability, if any, to the company of any board member or the managing director.We also examined whether any board member or the managing director has, in any other way, acted in contraventionof the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides areasonable basis for our opinion set out below.The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fairview of the company’s financial position and results of operations in accordance with generally accepted accountingprinciples in Sweden. The consolidated accounts have been prepared in accordance with international financial reportingstandards IFRS as adopted by the EU and the Annual Accounts Act and give a true and fair view of the group’sfinancial position and results of operations. The statutory administration report is consistent with the other parts of theannual accounts and the consolidated accounts.We recommend to the annual meeting of shareholders that the income statements and balance sheets of theparent company and the group be adopted, that the profit of the parent company be dealt with in accordance withthe proposal in the administration report and that the members of the board of directors and the managing directorbe discharged from liability for the financial year.Göteborg, Sweden 25 February 2008ÖhrlingsPricewaterhouseCoopers ABBror FridAuthorised Public AccountantBirgitta GranquistAuthorised Public Accountant77

Financial risk management and sensitivity analysisFinancial risk management and sensitivity analysisThe parent company, AB Geveko,decides on all financing, investments,and currency risk management,while each company handlesits own transactions. A further role ofthe parent company is to support thesubsidiaries, when necessary, withloans or guarantees for loans raisedor guarantees issued by subsidiaries,as well as with the placement of surplusfunds. There is a central cashmanagement unit for the Swedishbusiness, which ensures efficientmanagement of all payment flows asa means of optimising net interest.The financial side of the businessis carried on in accordance with theGroup Control rules and financialpolicy adopted by the Board. Theseregulate how financial risks are to bemanaged, and within what limits theGroup’s companies may operate.Financial risk managementThe objective of Geveko’s financialactivities is to manage the Group’sshort- and long-term financing, aswell as effectively monitoring financialrisks.Liquidity riskBy financing risk is meant the riskthat it could become difficult or moreexpensive to finance the Group’scapital requirements or to refinanceits outstanding loans.BorrowingIndustrial Operations’ financing re -quirements follow a seasonal patternwhich means that more workingcapital is required in the first half ofthe year, when stocks and accountsMaturity structurereceivable are rising, followed by adecline in the second half of theyear. Geveko arranges these workingcapital credits for one year at a time.In 2007, the agreed credits totalledSKr 632 million. As of 31 December2007, undrawn lines of credit forSKr 111 million were available.Seasonal credits are primarilyraised by the parent company andpassed on to subsidiaries in the formof intra-group loans or capital in -jections. The parent company alsoguarantees local cheque accountcredits and loans. Loans are alsoraised against collateral in the formof property mortgages.Liquid fundsLiquid funds consist of short-termplacements and cash at bank. Liquidfunds are largely placed in highlyliquid, fixed income securities issuedby issuers with a high credit rating.Interest riskInterest risk refers to the effect onthe Group’s net interest of changesin market interest rates. Most of theGroup’s financing takes the form ofseasonal working capital creditsraised for Industrial Operations.All of these credits have a maximumduration of six months. Long-termloans, which amounted to SKr 310million on 31 December 2007, havean average duration of three years.The average rate of interest on theseloans was 5.6% at the end of 2007.Currency riskGeveko keeps its accounts in Swedishkronor, but the Group carries on itsInterest-bearing loansSKr millionMaturing in 2008 152Maturing in 2009 52Maturing in 2010 2Maturing in 2011 24After 2011 251business in many countries. Thismeans that the Group is exposedto currency risks as changes in ex -change rates can have an adverseimpact on its result and equity.Currency risks can arise fromowning shares denominated inforeign currencies or from currencyfluctuations that affect IndustrialOperations’ operative companiesin the form of transaction exposureand translation exposure.Transaction exposureTransaction exposures arise in theoperative companies’ commercialflows, since foreign sales account forsome 73% of Industrial Operations’total turnover. Since a large proportionof the costs are incurred in thesame currency as the income, transactionexposure is marginal. Gevekodoes not hedge this risk.The largest individual foreigncurrency is the Danish krone, whichaccounts for just over 23% of totalturnover.Translation exposureForeign subsidiary companies’ assetsafter deduction of liabilities representa net investment in foreign currency,which upon consolidation gives riseto a translation difference. In orderto limit the negative impact of translationdifferences on consolidatedequity, hedges are arranged by raisingloans in the currency in question.The effect of this is that a decline inthe value of the net investmentcaused by a higher krona exchangerate is offset by the currency gain onthe parent company’s borrowing. Thehedging of the Group’s net assets isarranged via the respective Swedishparent company. Geveko’s currencyrisk and its impact on the result arejudged to be low.78

Financial risk management and sensitivity analysisTranslation exposureCurrency Net assets Equity hedge %CZK 16,286 15,000 109DKK 30,510 20,000 153EUR 1,921 2,000 96GBP 3,198 3,000 107HUF 2,765,000 865,000 31NOK 12,751 15,000 85PLN 1,000 3,000 33SKK 42,766 31,800 134The amounts are stated in the respective currency.Sensitivity analysisEffect onconsolidatedFactor Change, % result, SKr millionSelling price +1 10.8Labour costs +1 2.3Raw material costs +1 5.5Interest rates +1 2.2Sensitivity analysisSelling pricesA change of 1% in selling prices willaffect the consolidated result afterfinancial items by SKr 10.8 million.Raw material costsIndustrial Operations’ raw materialcosts correspond to some 55% of itsturnover. A change of 1% in rawmaterial prices will affect the consolidatedresult after financial items bySKr 5.5 million.Labour costsA change of 1% in labour costs,including payroll charges, will affectthe consolidated result after financialitems by SKr 2.3 million.Interest ratesBased on the average net debt duringa year, and taking into accountthe actual duration of the loans, achange of 1% in interest rates wouldaffect the consolidated result afterfinancial items by SKr 2.2 million.CurrenciesA change of 10% in the exchangerate of the Swedish krona in relationto other currencies when translatingthe profit and loss accounts of foreignsubsidiaries would affect theconsolidated result after financialitems by some SKr 0.1 million.Corresponding changes against theEuro and the Danish krone wouldaffect the result by SKr 0.8 millionand SKr 1.0 million respectively.Risk managementExternal risk factors Impact Measures• Economic situation deteriorates.Does not have a direct impact onthe road-marking market which ismainly financed by means of public funds.• Interest rates change. As Geveko is a net borrower an The Cash Pool system makes payment andincrease in interest rates would have interest rate exposure more efficient.a negative impact on the result.Interest rates can also be tied for variousperiods.• Raw material prices increase. Geveko’s purchases of raw materials Different clauses in contractor contracts canamount to some SKr 600 million annually. pass on cost increases to the customer.• Political decisions on the infrastructure.Investments in the infrastructure are positive,both at time of construction and throughhigher maintenance later.• Weak public finances. Have a negative impact on the road marking Sub-contractors are used to some extentsector as investments in the infrastructure on those markets experiencing aare often postponed when public finances temporary downturn or where aare weak.declining market is expected.• Increase in establishment of competing, The European road marking business is Geveko’s objective is to be the mostnon-European competitors. over-established. New competitors cost-effective company in the sector.increase capacity and competition.Economies of scale and synergies shallbe utilised.79

Five-year reviewFive-year review 2007-2003SKr million except where otherwise stated 2007 2006 2005 2004 2003Profit and loss accountNet turnover 1,078.8 1,035.0 991.2 940.3 650.2Operating profit, Industrial Operations 43.0 38.6 51.0 61.0 99.91 1)Profit/loss, Management of Securities -8.4 108.8 142.0 45.3 79.2Net interest and other central costs -52.4 -22.7 -26.5 -21.0 -21.5Profit/loss before tax -17.7 124.7 166.5 85.3 157.5Profit/loss after tax -24.6 116.3 162.9 75.6 143.7Balance sheetBalance sheet total 1,276.9 1,378.1 1,275.5 1,032.8 819.2Equity as stated in balance sheet 472.6 830.1 768.3 658.2 547.4Net debt 216.0 239.7 255.8 201.2 140.2Cash flow analysisCash flow from continuing operations 11.7 54.7 62.6 93.4 19.0Cash flow from investment activities 155.2 -5.8 -53.9 -95.1 1.6Cash flow from financing activities -198.0 -10.0 63.0 -20.4 -28.7Cash flow for the year -31.1 38.9 71.7 -22.1 -7.9Key ratios, GroupEquity ratio, % 37.0 60.2 60.2 63.7 66.8Return on equity, % -3.8 14.6 23.1 28.0 31.8Key ratios, Industrial OperationsOperating margin 4.0 3.7 5.1 6.5 9.5 2)EBITA 57.0 54.3 62.8 78.0 61.6EBITA, % 5.3 5.3 6.3 8.3 9.5Return on capital employed, % - - - 14.3 20.9Return on operative capital, % 6.8 6.9 9.6 - -Operative capital, average 628.4 561.0 532.7 - -Fixed capital expenditure 77.8 41.4 61.7 107.4 20.3Per share dataEarnings after tax, SKr/share -4.85 28.20 37.70 16.45 34.05Cash flow, SKr/share -7.40 9.20 17.00 -5.25 -1.90Dividend, SKr/share 6:- 3) 11:- 11:- 10:- 10:-Total dividend 25.3 46.4 46.4 42.2 42.2Direct yield, % 4.7 5.0 5.3 5.7 6.7Total yield, % -3 10 25 23 73PersonnelNumber of employees 638 611 602 559 360Wages, salaries and other benefits 230.9 209.7 202.9 182.5 129.8Value added per employee, SKr thousand 528 493 529 518 603Net turnover per employee, SKr thousand 1,691 1,694 1,647 1,682 1,8061) Including capital gains on divestment of subsidiary.2) Excluding capital gains on divestment of subsidiary.3) Proposed dividend for 2007 SKr 6 per share.See page 81 for definitions.80

Quarterly review and definitionsQuarterly review 2007-2006SKr million 2007 2006except where otherwise stated Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1Profit and loss accountNet turnover 267.1 375.1 346.1 90.4 232.8 413.6 310.8 77.8Operating profit/loss, Industrial Operations -0.1 48.3 47.3 -52.5 -11.4 78.8 27.5 -56.3Result, Management of Securities -31.4 -20.0 19.1 23.8 45.6 39.4 -34.3 58.1Net interest income and other central costs -14.7 -17.2 -8.9 -11.3 -3.8 -6.0 -7.9 -5.1Pre-tax profit/loss -46.2 11.1 57.5 -40.0 30.4 112.2 -14.7 -3.3Balance sheetBalance sheet total 1,276,9 1,555.3 1,541.5 1,396.1 1,378.1 1,487.0 1,457.9 1,299.3Equity as stated in balance sheet 472.6 492.1 496.0 808.1 830.1 794.5 715.1 786.5Net debt 216.0 616.0 760.2 329.5 239.7 367.6 429.7 246.8Key ratiosConsolidated equity ratio, % 37.0 31.6 32.2 57.9 60.2 53.3 49.1 60.5Profit/loss after tax, SKr per share -4.85 5.60 5.10 -5.60 28.80 19.75 1.05 3.60Operating margin, Industrial Operations 4.0 5.3 -5.2 -58.1 -4.9 19.1 8.8 -72.4Number of employees 638 704 620 521 611 629 658 537DefinitionsThe definitions published by the SwedishAssociation of Financial Analysts have beenfollowed fairly closely in Geveko’s annualreport. Further ratios are also used to illustratecertain key facts about the Group.Added valueOperating profit plus wages, salaries andpayroll-related costs.Added value per employeeAdded value divided by the average numberof employees.Balance sheet totalTotal assets.Cash flow per shareCash flow for the year divided by weightedaverage of the number of shares in issueduring the year.Direct yieldDividend as a percentage of the closingshare price.Earnings/Loss per shareProfit/Loss as defined above divided by theaverage number of shares in issue duringthe year.EBITA (Earnings beforeinterest, tax and amortisation)Operating result before depreciation attributableto intangible fixed assets arising fromcompany acquisitions.Equity ratioStated equity as a percentage of the balancesheet total.Market capitalisationGeveko’s share price multiplied by the totalnumber of shares in issue.Net debtInterest-bearing liabilities less interestbearingreceivables and liquid funds excludinglisted shares. As of 31 December 2007listed shares are stated as a turnover assetand reduce the net debt.Net turnover per employeeNet turnover divided by the average numberof employees.Operative capitalSum of net debt and equity or assets lesscash, financial assets and interest-free liabilities.For Geveko’s Industrial Operations,operative capital is calculated as the averagebalance sheet value over twelve months inorder to eliminate seasonal variations.Geveko includes shares in associate companiesin operative capital, since these areconsidered to be operatively integrated intoIndustrial Operations.Operating marginOperating profit as a percentage of theyear’s net turnover. The operating marginshows how much of the net turnover is leftto cover interest, taxation and profit.Profit/LossNet profit/loss after tax.Return on equityChange in equity plus dividend paid duringthe year as a percentage of opening equity.Return on operative capitalin Industrial OperationsThe operating result after depreciation as apercentage of the average operative capital.Shows the return on the business independentlyof financial assets and financing.Return on capital employedin Industrial OperationsOperating result plus income interest as apercentage of average capital employed inIndustrial Operations according to theabove definition.Share priceLatest transaction price of Geveko’s Series“B” shares on 30 December each year.SIX General IndexA value-weighted index of all companieslisted on the Stockholm Stock Exchange.SIX Return IndexAn equity index for the Stockholm StockExchange calculated on the basis of changesin prices including dividends.Total yieldPercentage change in share price over theyear plus dividend paid.Turnover rateTotal number of shares traded during theperiod, divided by the number of tradingdays in the period multiplied by 250 anddivided by the average market capitalisationduring the period.81

Members of the Board and auditorsMembersDavidBergendahlTomasLandeströmOveMattssonKlasDunbergerHelenaLevanderOVE MATTSSON, born 1940ChairmanElected to the Board 2006Other board appointmentsChairman: Aromatic AB, Biotage AB and Exel Oyj.Member: Arctic Island Ltd, Ecolean International A/S, Kemira Oyjand Mydata Automation AB.Geveko CommitteesRemuneration CommitteeEducationPh. D., Asst professor in organic chemistryShares in Geveko: 0DAVID BERGENDAHL,born 1962CEO, Hammarplastgruppen ABElected as deputy member of theBoard 1993.Member 2000Other board appointmentsChairman: Hammar plast A/S,Hammarplast a/s and Sarvis OY.Member: Hammarplast AB andHammarplastgruppen AB.Geveko CommitteesNomination CommitteeEducationGraduate economist, School ofEconomics, Göteborg, Sweden.Shares in Geveko: 21,000KLAS DUNBERGER, born 1957Technical Director, FujitsuSiemens Computers.Elected as deputy member of theBoard 1989.Member 2000Geveko CommitteesRemuneration CommitteeEducationEngineerShares in Geveko: 51,333TOMAS LANDESTRÖM,born 1957Partner AJL & Wadner ABElected to the Board 2000Other board appointmentsMember: AJL & Wadner AB etc.Geveko CommitteesRemuneration CommitteeEducationGraduate economist, School ofEconomics, Stockholm, Sweden.Shares in Geveko: 1,500HELENA LEVANDER,born 1957CEO, Nordic Investor Services AB.Elected to the Board 2006Other board appointmentsMember: Transatlantic AB, SBAB,Svensk Exportkredit (SEK),Nordisk Energiförvaltning ASand Stampen AB.Geveko CommitteesAudit CommitteeEducationGraduate economistShares in Geveko: 082

Members of the Board and auditorsDeputy memberHonorary chairman AuditorsBROR FRID, born 1957Authorised public accountant,ÖhrlingsPricewaterhouse-Coopers ABAppointed deputy auditor 2006.Auditor 2007.Other audit appointments:Broström AB, Gunnebo AB,Gunnebo Industrier AB,KappAhl Holding AB and VGBGroup AB.ÅsaSöderström JerringLarsLewerthLARS LEWERTH, born 1934LawyerElected as deputy member of theBoard 1979.EducationBachelor of LawShares in Geveko: 42,131JarlErgelJARL ERGEL, born 1924Member of the Board 1965-2000Chairman of the Board 1991-2000Honorary chairman 2000Shares in Geveko: 100,012BIRGITTA GRANQUIST,born 1964Authorised public accountant,ÖhrlingsPricewaterhouse-Coopers ABAppointed deputy auditor 2004.Auditor 2006.Other audit appointments:Broström AB, Vitrolife AB andsupervisory auditor for audit ofthe parent company and Groupcoordination of Gunnebo AB.SörenSjölanderÅSA SÖDERSTRÖMJERRING, born 1957Elected to the board 2006Other board appointmentsChairman: Infotain & InfobooksAB. Member: JM AB, Rejlers AB,ELU Konsult AB and Geosigma AB.Other appointments: Chairman ofthe Swedish Construction ClientsForum, FIA, (Renewal in Buildingand Construction sector) andCERBOF, the Centre for Energyand Resource Efficient Con struc -tion and Faci li ties Manage ment.EducationGraduate economistShares in Geveko: 0SÖREN SJÖLANDER, born 1950Professor, Chalmers Institute ofTechnologyElected to the Board 1994Other board appointmentsMember: Arboritec AB, IcomeraAB and AB Chalmersinvest etc.Geveko CommitteesAudit Committee andNomination Committee.EducationGraduate Engineer, GraduateEconomist, Ph. D. in engineering,Assistant Professor.Shares in Geveko: 220CommitteesNomination CommitteeSigurd Walldal, chairman, David Bergendahl and Sören Sjölander.Remuneration Committee(for contract and salary issues relating to the Managing Director and variablepay schemes for senior management personnel)Ove Mattsson, Tomas Landeström and Klas Dunberger.Audit Committee(for day-to-day contacts with Geveko’s auditors)Helena Levander and Sören Sjölander.Deputy auditorsJOHAN RIPPE, born 1968Authorised public accountant,ÖhrlingsPricewaterhouse-Coopers ABAppointed as deputy auditor 2007.Other audit appointments:West Siberian Resources Ltd,Tehtys Oil AB, AcadeMedia ABand supervisory auditor for theAB Volvo Group, Volvo TreasuryAB, Volvo Financial Services andVolvo Penta.HELEN OLSSONSVÄRDSTRÖM, born 1962Authorised public accountant,ÖhrlingsPricewaterhouse-Coopers ABAppointed as deputy auditor 2007.Other audit appointments:Rederi AB Transatlantic, ABTingstad Papper, NordicManagement of Clinical TrialsAB, Logistik Resturanger AB andsupervisory auditor for the parentcompany and Group coordinationof Investment AB Latour.83

Managing director and other senior management personnelManaging director an other senior management personnelBerndt MagneGöran WolffJohnas LindblomStig JönegrenHans LjungkvistJimmy OlssonJohn Nis Ravnskjaer RaineyNis RavnskjaerAnssi SeppinenHANS LJUNGKVIST, born 1952Managing director and CEO, AB GevekoEmployed 2001Education: EconomistShares in Geveko: 0Options Geveko: 25,000BERNDT MAGNE, born 1945CFO, AB GevekoEmployed 1980Education: Graduate economistShares in Geveko: 0Razvan StoicaHans StarlingKarsten VeltmannGÖRAN WOLFF, born 1955Business Controller, Geveko IndustriHolding ABEmployed 2004Education: Graduate economistShares in Geveko: 0JOHNAS LINDBLOM, born 1963Portfolio managerEmployed 2005Education: University studies in economicsShares in Geveko: 10STIG JÖNEGREN, born 1949MD, Cleanosol ABEmployed 1996Education: Graduate engineerShares in Geveko: 0JIMMY OLSSON, born 1954MD, Geveko Industri ABEmployed 1999Education: Graduate engineerShares in Geveko: 0JOHN RAINEY, born 1953MD, Roadcare LtdEmployed 1988Education: Extensive experiencein the industryShares in Geveko: 0NIS RAVNSKJAER, born 1948MD, LKF Vejmarkering A/SEmployed 1996Education: Graduate engineerShares in Geveko: 0ANSSI SEPPINEN, born 1969MD, Geveko OyEmployed 2007Education: Graduate engineerShares in Geveko: 0RAZVAN STOICA, born 1967MD, S.C. Plastidrum S.R.L.Employed 2007Education : Graduate engineer,graduate economistShares in Geveko: 0HANS STARLING, born 1945Marketing Director Eastern EuropeEmployed 1978Education: EngineerShares in Geveko: 0KARSTEN VELTMANN, born 1969MD, Plastiroute GmbHEmployed 2006Education: EconomistShares in Geveko: 084

Company organs and managementCompany organs and managementGeveko’s corporate bodies are the AnnualGeneral Meeting, the Board, the ManagingDirector, and the Auditors. At the AnnualGeneral Meeting the shareholders elect thechairman and the Board, which, accordingto the company’s articles, shall consist of upto seven members and up to five deputymembers. It is incumbent on the auditors,as mandated by the Annual GeneralMeeting, to examine the accounts and theadministration by the Board and theManaging Director during the financialyear. The auditors report to the AnnualGeneral Meeting by submitting a separateaudit report.Annual General MeetingThe Annual General Meeting (AGM) isGeveko’s supreme decision-making body,in which every shareholder is entitled toparticipate personally or via a proxy. At theAGM, which is normally held in April, butin any case within six months of the end ofthe financial year, the shareholders adoptthe annual report, decide on the date ofrecord for entitlement to dividend andapprove the dividend. The AGM elects thechairman and the Board for a period of oneyear and the auditors every fourth year.The AGM also decides on their fees andguidelines for the salaries and other benefitsof the company’s managing director andother senior management personnel.The notice convening the AnnualGeneral Meeting is sent out no later thanfour weeks before the Meeting and is publishedin Svenska Dagbladet and Göteborgs-Posten, as well as in Post & Inrikes Tid -ningar and on Geveko’s website.According to the Swedish CompaniesAct, shareholders are entitled to have itemsof business discussed at the AGM. In suchcases the Board shall be given adequatenotice. Shareholders are entitled to askquestions at the AGM.The minutes of the AGM are availableat Geveko’s office and on the company’swebsite about two weeks after the Meeting.AGM 2007The AGM for shareholders in AB Gevekowas held on April 26, 2007, in Gothenburg,Sweden. The AGM was attended by 138shareholders, representing 30.3% of thenumber of shares and 69.7% of the votes.David Bergendahl, Klas Dunberger, HelenaLevander, Tomas Landeström, Ove Mattssonand Sören Sjölander were re-elected to theboard and Åsa Söderström Jerring waselected as new member of the Board.Magnus Ergel was not standing for re-election.Ove Mattsson was elected chairman.In a complementary election of auditors forthe period until the 2008 AGM Bror Fridwas elected as ordinary auditor and JohanRippe and Helen Olsson Svärdström wereelected deputy auditors. The AGM decidedon a dividend of SKr 11 per share and ashare split and redemption procedurewhere by a further SKr 75 was paid out toshareholders.AGM 2008The 2008 AGM will be held on April 24 inGothenburg, Sweden. Notice convening theAnnual General Meeting will be sent outduring week 12 (18-23 March).Articles of AssociationAccording to Geveko’s Articles of Asso -ciation the company’s business involvesowning and managing shares in subsidiariesand other companies, bonds andother valuable documents, as well as engagingin therewith related business activities.The company’s shares can be issued in twoseries, “A” and “B”. “A” shares carry the rightto one vote, while “B” shares carry the rightto one-tenth of a vote. The completeArticles of Association are available onGeveko’s website, www.geveko.se.Attendance at Board meetingsBoardThe Board is accountable to the AnnualGeneral Meeting for the company’s organisationand such administration as is incumbenton the Board statutorily and accordingto applicable regulations and the registrationcontract with Stockholmsbörsen. It also hasresponsibility for ensuring that the goalslaid down for the company by legislation, inthe company’s articles and by the AGM arerealised. To this end, the Board issues guidelinesfor general policies and strategiesincluding the approval of business plans,and keeps itself regularly informed aboutthe Group’s financial position and the stateof its business. The Board also has responsibilityfor appointing and discharging theManaging Director.In 2007 Geveko’s Board had sevenmembers and one deputy member, all electedby the AGM. The members include individualswho are associated with Geveko’smajor shareholders - the Bergendahl foundationsand the Bergendahl and Dunbergerfamilies – as well as individuals independentof these groups. Attorney Lars Lewerth,who is a deputy member, served as secretaryto the Board during 2007.Main points on agenda at Board meetings in 2007February 22 Annual report and accounts July 17 Q2 reportApril 26 Q1 report September 19 Business planApril 26 Statutory meetingafter AGM October 26 Q3 reportJune 12 Business plan, strategyand structure, visits December 12 Budget and finalto subsidiariesbusiness planRemuneration,Holdings, Inde-Present Committees SKr 1) Geveko pendent 2)MembersOve Mattsson, Chairman 8/8 x 403,000 0 xDavid Bergendahl 8/8 x 193,000 21,000Klas Dunberger 8/8 x 153,000 51,333Tomas Landeström 8/8 x 153,000 1,500 xHelena Levander 7/8 x 170,333 0 xSören Sjölander 7/8 x 199,000 220Åsa Söderström Jerring 6/8 150,000 0 xTotal 1,421,333Deputy memberLars Lewerth 8/8 - 42,1311) The amount relates to the board fee and remuneration for committee work. No otherremuneration has been paid in addition to this. Deputy member Lars Lewerthreceived SKr 745,000 for legal consultation.2) Independent is defined as independent of the company, its management and majorshareholders, pursuant to the Swedish Code of Corporate Governance.85

Company organs and managementBoard meetingsThe Board normally meets six times a year.During the 2007 financial year the Boardheld eight ordinary meetings, at which itdiscussed the business situation, financialreporting, liquidity and investments. Inaccordance with its set of procedures theBoard also dealt with matters pertaining tothe annual accounts, interim reports andbudgets. In 2007 the Board devoted particularattention to business planning as a consequenceof the change in Geveko’s statusto that of operative industrial enterprise.Attendance at Board meetingsApart from Board member Åsa SöderströmJerring, who was absent from two meetings,and Helena Levander and Sören Sjölander,who were absent from one meeting, theBoard members participated in all eightmeetings. Other employees in the groupparticipate in the board meetings to reporton specific items of business.Board’s proceduresAt the statutory meeting on 26 April 2007the Board adopted a set of procedures thatregulate the division of labour and responsibilitybetween the Board, the Chairmanand the Managing Director, and an instructionfor the Managing Director. The Board’sset of procedures and the instruction for theManaging Director are subject to annualreview by the Board. The set of proceduresincludes a meeting plan and calendar,agenda, decision making rules that definethe Managing Director’s responsibility inrelation to that of the Board, and principlesfor reporting to the Board and keepingminutes of meetings. The Board shall in thefirst instance have responsibility for generaland long-term business and matters thatare out of the ordinary or otherwise ofmajor importance. The Board shall regularlymonitor the Managing Director’s fulfilmentof his responsibility for the day-to-daymanagement.Role of the ChairmanAt the AGM on 26 April 2007 Ove Mattssonwas elected Chairman of the Board.The Chairman shall manage theactivities of the Board and see to it that theBoard performs its statutory duties and suchduties as are incumbent on it according toits set of procedures. The Chairman and theManaging Director shall together assurethemselves that Board members receiveadequate information well ahead of eachmeeting for all business that is presentedto the Board and that requires decision.Regular business at Board meetingsAt the statutory meeting, which is heldimmediately after the Annual GeneralMeeting, the Board’s set of procedures, theinstruction for the MD and authorisedsignatories are adopted. The Board alsoappoints members to the Audit andRemuneration Committees.The Group’s auditors attend the ordinarymeeting of the Board in February inconnection with the audit of the previousyear’s accounts to discuss the annual report.At ordinary meetings later in the year interimreports are approved and published.A report is submitted to each ordinarymeeting on the current state of the company’saffairs. The Managing Director submitsseparate reports on the progress, liquidityand financing of Industrial Operations andthe Securities Portfolio and on changes innet worth and the share price.Financial year 2007In 2007 the Board devoted a good deal oftime to adopting the Geveko Group’sbusiness plan in connection with the parentcompany’s change of status from investmenttrust to operating industrial enterprise.Geveko announced firstly in Januarythat priority would be given to developingIndustrial Operations rather than Manage -ment of Securities and then in connectionwith the publication of the third quarterreport that one consequence of the developmentof Industrial Operations could bethat Geveko would lose its investment truststatus.As a result of company acquisitionsand the divestment of holdings from theSecurities Portfolio the criteria for investmenttrust status were deemed no longer tobe satisfied. The tax authority has informedthe company that it considers that Gevekohad ceased to have investment trust statuswith effect from 30 November 2007.Board’s assessment of its workA regular assessment of the Board’s work ismade once a year. The assessment is madevia a survey that is sent to each Boardmember. In 2007 this assessment was madein December by Geveko’s NominationCommittee. The results of the survey will beanalysed by the Board in the spring of 2008.Board feeThe total fee paid to the members of theBoard in 2007 amounted SKr 1,300,000. Afee of SKr 400,000 was paid to the chairman,and of SKr 150,000 to each member.The Company Secretary, also a deputymember of the Board received a fee followingapproval of submitted invoices. Remu -neration for committee work amounted toSKr 3,000 per meeting. Remuneration waspaid to external members of the ShareCouncil in the form of a fixed fee of SKr25,000 for 2007.Nomination Committee’s feeA fee of SKr 60,000 was paid to the chairmanof the Nomination Committee for2007 and of SKr 40,000 to each of the othermembers.Role of the Managing DirectorThe Managing Director has responsibilityfor the day-to-day management of thecompany in accordance with the guidelinesand instructions issued by the Board. TheManaging Director shall take such measuresas are required to ensure that the company’sbooks are kept in accordance with the law,and that its funds are administered in asatisfactory manner. The MD shall keepthe Board regularly informed regarding theprogress of the business by providing financialreports, forecasts and audit reports, andsuch other information as may be requiredto enable the Board regularly to assess theprogress and financial situation of the companyand the Group.Audits and auditorsThe auditing of limited companies is regulatedby the Swedish Companies Act, whichrequires the auditor to examine the company’sannual report and accounting, and theadministration by the Board and – if onehas been appointed – the ManagingDirector. If the company is the parent companyof a group the auditor shall also examinethe consolidated financial statementsand the internal relations between the companiesin the group. The audit shall be asdetailed and extensive as generally acceptedauditing standards require. The auditor submitsa separate report on the audit to theAGM.Birgitta Granquist, ÖhrlingsPricewaterhouseCoopers AB, elected as deputy auditorin 2004. Elected auditor in 2006 by means ofa complementary election for the perioduntil the 2008 AGM.Bror Frid, ÖhrlingsPricewaterhouseCoopersAB, elected as deputy auditor in 2006.Elected auditor in 2007 by means of a complementaryelection for the period unit the2008 AGM.Helen Olsson Svärdström, ÖhrlingsPrice -water houseCoopers AB. Elected deputyauditor in 2007 by means of a complementaryelection for the period until the 2008AGM.Johan Rippe, ÖhrlingsPricewaterhouse-Coopers AB. Elected as deputy auditor bymeans of a complementary election for theperiod until the 2008 AGM.The role of the auditor also includes examiningwhether the company has fulfilled itsobligations pursuant to certain key ordi-86

Company organs and managementnances regarding taxes and fees. In connectionwith the audit the auditor endeavoursalso to propose improvements to the company’sorganisation, accounting practices,cost estimates and budgeting etc. In suchcases, the auditor submits a separatememorandum on his observations to thecompany.In 2007 the auditors participated inGeveko’s Board meeting in connection withthe finalisation of the accounts for 2006.Over and above this, the auditors attendedall the meetings of Geveko’s audit committeeduring the year.CommitteesNomination Committee 2007Pursuant to the decision made by Geveko’sAGM on 26 April 2007, the names of themembers of the Nomination Committee forthe period until the AGM on 24 April 2008are as follows:Nomination Committee members:Sigurd Walldal, former CEO of Geveko,chairman.David Bergendahl, CEO Hammarplast gruppen,member of the Board of AB Geveko.Sören Sjölander, Professor, ChalmersInstitute of Technology, member of theBoard of AB Geveko.The Nomination Committee shall submitproposals to the 2008 AGM on the followingmatters:1. Election of chairman of Meeting.2. Determination of Board fee.3. Election of chairman and other membersof the Board.4. Determination of auditors’ fee.5. Election of auditors.6. Appointment of Nomination Committeefor period until 2008 AGM.Activities of Nomination CommitteeThe Nomination Committee met on threeoccasions in 2007.Remuneration CommitteeGeveko’s Remuneration Committee isappointed for one year at a time by theBoard and in 2007 it consisted of boardmembers Ove Mattsson (chairman), TomasLandeström and Klas Dunberger. The roleof the committee is to enter into agreementswith, scrutinise the salary and benefits of,and attest expenditure by the ManagingDirector. Incentive programmes for seniormanagement personnel also require theapproval of the committee. Reports ondecisions made are submitted to the nextmeeting of the Board. In 2007 the Remu -neration Committee held one minutedmeeting.Audit CommitteeGeveko’s Audit Committee is appointed forone year at a time by the Board and con -sisted in 2007 of board members HelenaLevander (chairman) and Sören Sjölander.The Audit Committee has responsibility forthe Board’s regular contacts with its auditors.In 2007 the Audit Committee heldthree minuted meetings. Reports on decisionsmade are submitted to the followingmeeting of the Board.Share CouncilGeveko’s Share Council is appointed forone year at a time by the Board and consistedin 2007 of: Jarl Ergel, Magnus Ergel,Helena Levander, Hans Ljungkvist, BerndtMagne and Johnas Lindblom. The ShareCouncil prepares and makes recommendationsto the Board regarding the strategicdirection of the Securities Portfolio. TheBoard meeting held in June 2007 revisedthe instruction relating to the SecuritiesPortfolio. At the same meeting the Boarddecided that the Share Council’s advisoryfunction should be discontinued. Con -sequently, the Share Council only met onfour occasions in 2007.Policies and guidelinesThe Board has adopted the following guidelines,all of which are subject to annualreview.• Financial policy• Insurance policy• Pension policy• Information policy• Ethical policySwedish Code of Corporate GovernanceOn 1 July 2005 Stockholmsbörsen introduceda condition that all Swedish companieswith a market capitalisation in excessof SKr 3 billion should apply the SwedishCode of Corporate Governance. Companiesthat are not covered by this condition candecide to comply with the Code on a voluntarybasis. However, a company that hasnotified Stockholmsbörsen of its voluntarycompliance may change its mind and applyto withdraw.Geveko’s Board has decided that thecompany will not affiliate on a voluntarybasis. However, Geveko, when it deems itto be appropriate, will harmonise its activitieswith sections of the Code. In 2007 inorder to satisfy the requirements of theCode, procedures were changed in twoareas, namely “Integrity and Ethical values”and “Selection of control activities andcontrol activities linked to risk analysis”.The requirements of the Code will beextended as of July 1 2008, as a result ofwhich it will apply to all listed companies.87

MapParent company GevekoHead office Göteborg, SwedenRoad marking business areaChemTech business areaSWEDEN FINLAND RUSSIANORWAYDENMARKGREAT BRITAINNETHER-LANDSPOLANDGERMANYUKRAINECZECH REPUBLICSLOVAKIAHUNGARYROMANIASWITZERLAND88

AddressesAB GEVEKOMarieholmsgatan 36Box 2137SE-403 13 GöteborgSwedenTelephone +46 31172945Telefax +46 317118866info@geveko.sewww.geveko.comINDUSTRIAL OPERATIONSBusiness Area Road markingCLEANOSOL ABIndustrigatan 33Box 160SE-291 22 KristianstadSwedenTelephone +46 44203900Telefax +46 44203901info@cleanosol.sewww.cleanosol.comCLEANOSOL ASSolgaard Skog 116NO-1599 MossNorwayTelephone +47 69240650Telefax +47 69240626norway@cleanosol.nowww.cleanosol.comCLEANOSOLPOLSKA Spz.o.o.Al. Zwyciestwa 250PL-81-540 GdyniaPolandTelephone +48 586649796Telefax +48 586248713info@cleanosol.plwww.cleanosol.plCLEANOSOL TRADINGCOMPANY LLC18, Ivana Kudri St., ap. 10UA-Kiev 01042UkraineTel./fax: +38 044 503 99 28kiev@cleanosol.com.uawww.cleanosol.com.uaP.P-H. DARTOM Sp. z o.o.ul. Warsztatowa 1 DPL-15-637 BialystokPolandTelephone +48 856629373Telefax +48 856629375dartom@dartom.plwww.dartom.plGiK Sp. z o.o.ul. Lipowa 19APL-44-207 RybnikPolandTelephone +48 324246828Telefax +48 324265081biuro@gik.plwww.gik.plZIR TECHNOM Sp. z o.o.ul.Chopina 1EPL-87-800 WloclawekPolandTelephone +48 542313959Telefax +48 542313959technom@onet.plwww.technom.plOSFER s.r.o.Prúdová 12SK-040 01 KošiceSlovakiaTelephone +421 556338872Telefax +421 556338778osfer@stonline.skwww.osfer.skSUPERCO s.r.o.Ke Statenicím 156CZ-252 67 TuchomêriceCzech RepublicTelephone +420 220 950 531Telefax +420 220 951 146superco@superco.czwww.superco.czLINE MARKINGS LTDROMMCO LTDROADCARE LTDRoadcare House,New Works RoadLow Moor, BradfordWest Yorkshire BD12 0RUGreat BritainTelephone +44 1274606770Telefax +44 1274602802info@roadcare-group.comwww.linemarkings-ltd.comLKF VEJMARKERING A/SLongelsevej 34DK-5900 RudkøbingDenmarkTelephone +45 63517171Telefax +45 63517172admin@lkf.dkwww.lkf.dkLKF NEDERLAND B.V.De Woerd 15NL-6662 ZD ElstNetherlandsTelephone +31 481351166Telefax +31 481351730axel@kerstenmarkeer.nlPREFORMEDMARKINGS LTDUnit 1, Silverlands ParkHolloway HillChertsey Surrey KT 16 0AEGreat BritainTelephone +44 1932566698Telefax +44 1932566641sales@preformedmarkings.co.ukwww.preformedmarkings.co.ukS.C. PLASTIDRUM S.R.L.Sos Alexandriei no. 156RO-051543 BucharestRomaniaTelephone +40 214202480Telefax +40 214201207office@plastidrum.rowww.plastidrum.roMAGYARPLASTIROUTE KFTGát u. 4-10HU-2310 Szigetszentmiklós-LakihegyHungaryTelephone +36 24475275Telefax +36 24475278magyar.plastiroute@axelero.huPLASTIROUTE GmbHRenkenrunsstrasse 16Postfach 1348DE-79371 Müllheim/BadenGermanyTelephone +49 763136870Telefax +49 7631368736info@plastiroute.dewww.plastiroute.dePLASTIROUTE SA8, Route des AvouillonsCH-1196 Gland/VDSwitzerlandTelephone +41 223544510Telefax +41 223544514info@plastiroute.chwww.plastiroute.comAssociated companyALLGLASSREPROCESSORS (UK) LTD49 Burnbrae Brae RoadLinwood Industrial EstateLinwoodRenfrewshirePA3 3BDScotlandTelephone +44 10505333511Telefax +44 10505333519roy.webster@wmtracey.co.ukwww.allglass.org.ukBusiness Area ChemTechGEVEKO INDUSTRI ABMarieholmsgatan 36-38Box 13007SE-402 51 GöteborgSwedenTelephone +46 31844610Telefax +46 31259342info@geveko-industri.sewww.geveko-industri.comGEVEKO INDUSTRI B.V.Hoge Rijndijk 14NL-2313 KJ LeidenNetherlandsTelephone +31 715127813Telefax +31 715120252info@geveko-industri.nlwww.geveko-industri.nlGEVEKO OYMuddaisvägen 261PB 96FI-21600 PargasFinlandTelephone +358 207498770Telefax +358 207498771info@geveko.fiwww.geveko.fi89

AB GEVEKO (publ)Co. reg. no. 556024-6844Box 2137SE-403 13 Göteborg, SwedenTelephone +46 31172945Telefax +46 317118866info@geveko.sewww.geveko.com