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Annual Report 1999

Gas injection moulded handle for Whirlpool Talent Compact.

➔ Strong earnings growth (+36%).

➔ The fourth quarter was the bestever, with earnings of SEK 62 M.

➔ Continued internationalization inline with Group strategy. Establish-ment of operations in Estonia, expan-sion in Texas and acquisition of amobile telephone component compa-ny in Chicago, Illinois.

➔ New business plans focus ongrowth and reinforcement of Nolato’srole as a high-tech systems supplier.

➔ Greater proximity to global cus-tomers, thanks to a new marketingorganization.

➔ Earnings for 2000 (excluding non-recurring items) are expected to bebetter than for 1999.

GROUP FINANCIAL HIGHLIGHTS 1999 1998

Sales, SEK M 2,145 1,888Income after financial items, SEK M 226 166Return on shareholders’ equity after tax, % 20 19Operating margin, % 10 10 Equity/assets ratio, % 47 47 Earnings per share after full tax, SEK 8.65 6.20Cash flow from operations, SEK M 140 207Cash flow before investment activities, SEK M – 6 42

High-tech systems supplier of polymer

components to globally leading customers

in mobile telephones and other telecommu-

nications, the automotive industry, medical

technology and other industrial sectors.

ContentsCEO Tomas Sjölin . . . . . . . . . . . . . . . . . . . 4From subcontractor to systems supplier . . 6Mobile Communication business area . . . . 8Industrial Components business area . . . 14Branded Products business area . . . . . . . 18Medical Components business area . . . . 20Five-Year Review . . . . . . . . . . . . . . . . . . 22Report of the Directors, Income Statements,Balance Sheets and Notes . . . . . . . . . . . 24The Nolato Share . . . . . . . . . . . . . . . . . . 35Board of Directors . . . . . . . . . . . . . . . . . 36Group Executive Management . . . . . . . . . 37Addresses . . . . . . . . . . . . . . . . . . . . . . . 38

3

4

Right now, Nolato is in a veryexciting phase, characterized byinternationalization, growth andconstant change.

Both internationalization andgrowth place heavy demands onall of us who work for the NolatoGroup. We must not be contentwith our current successes, butmust constantly adapt to thechanging circumstances in theworld around us.

Once we have adopted long-term strategies, we must steer thestraightest possible course towardour established goals. So far, wefeel that we have succeeded. Earn-ings are growing steadily, ourshare price has risen substantially,and the proportion of sales outsideSweden has climbed from 27 to 43percent in three years, while totalsales have tripled.

EXPANSION AND STRATEGIC ACQUISITIONS

Since my first comments as Presi-dent and CEO in last year’s Annu-al Report, we have acquired onemore unit in the U.S., built up anew company in Estonia andmade far-reaching plans for thecontinued establishment of new

operations, primarily in Europeand Asia.

The acquisition of ShieldmateRobotics of Itasca, Illinois (Chica-go), U.S.A., is a well plannedstrategic step because it meansthat, aside from the company’sadditional production capacityand knowledge, we will have oneof the world’s largest mobilephone manufactures, Motorola, asa customer.

Following this acquisition,Nolato is probably the only com-pany in the world to have all threeof the largest global mobile phonemanufacturers – Ericsson, Nokiaand Motorola – as customers.

However, our internationalinvestments do not imply that weare forgetting our Swedish opera-tions. We still generate more thanhalf our sales in Sweden, and westill have 16 of our total of 21companies in Sweden.

The acquisition of GotaPlast isa good example of our continuinginvestments in Sweden. Thisacquisition is completely in linewith the strategy we adopted dur-ing 1999 for the Industrial Com-ponents business area. It strength-ens our position with two strategic

We have entered an exciting phase,

characterized by internationalization,

growth and constant change.

Housings etc. for Flextronics.

Shieldings for mobile phones.

Components for Volvo, Saab and other.

5

industrial customers, Electroluxand Husqvarna, while allowing usto reassign production within theGroup and thus free up resourcesfor continued strong growth in theMobile Communication businessarea.

And all signs point toward acontinuation of our enormous vol-ume growth. Thanks to our closecooperation with the big three –but also with other importantmobile phone-related companiessuch as Allgon, Siemens, Salcomp,Denso and Qualcomm – thisgrowth will be very positive for usand will lay a foundation for avery exciting future at Nolato.

HIGH-TECH SYSTEMS SUPPLIER

Having previously been more orless traditional suppliers that –simply put – manufacture whattheir customers order, Nolatocompanies are increasingly becom-ing high-tech systems suppliers.

This means that we are not onlydeveloping much closer relation-ships with our customers, but weare also being assigned responsi-bility for portions of their develop-ment work and can thereby do

business with our customers evenbefore actual production begins.In the long run, we expect anincreasing percentage of our salesto be based on our knowledge anddevelopment efforts.

FOCUS ON GROWTH AREAS

As previously stated, during 1999Nolato focused its operations onhigh-growth areas where it has astrong market position. We conse-quently sold Nolato VVS andphased out our Automotive Com-ponents business area during thespring of 1999 and transferred itsoperations to other business areas.

This phase-out does not meanthat we are cutting off contactwith our automotive customers.But we are not planning to aim forinternational growth in this field.

TWO NEW BOARD MEMBERSThe nominating committee hasproposed Roger Holtback, Presi-dent and CEO of Investment ABBure, and Carl-Gustav Gejde, for-mer head of Nolato Mobile Com-munication, for election to Nola-to’s Board of Directors by theAnnual General Meeting.

CONTINUING GOOD GROWTH

The overall outlook for Nolato isbright. We expect earnings for thefull year 2000 to be better than for1999 (excluding nonrecurringitems), even after taking intoaccount the acquisition of Shield-mate and its impact in the form ofgoodwill depreciation and financ-ing costs.

Torekov, Sweden, March 2000

Tomas SjölinPresident and CEO

Enclosures for the C Pen from C-Tech.Fronts etc. for Ericsson’s mobile phones. Housings, wheels etc. for Electrolux.

6

Historically, Nolato always usedto be a typical subcontractor. Ourcustomers became aware of uswhen their product developmentwork had been completed. At thatpoint we were allowed to bid on agiven quantity of a certain speci-fied component and then – hope-fully – we received an order tomanufacture it. This means thatthe key to our success was ourability to produce the right qualityat the right cost.

Today, in many cases the situa-tion is totally different. We havebecome a strategic systems suppli-er that participates at an earlystage in the customer’s develop-ment efforts.

This means that we and ourorganization face completely newchallenges. One of our primarytasks is to help customers shortenthe time from idea to finishedproduct as much as possible.Meanwhile, we must take some ofthe pressure off them by acceptingresponsibility for joint projects.This gives our customers moretime to develop new ideas andvisions for their products.

This trend is especially pro-nounced in the Mobile Communi-

cation business area. Large manu-facturers want us to contributeour own development resourcesand knowledge right from the pre-liminary evaluation stage. Theywant us to help them design poly-mer component systems, buildprototypes and verify that thedesign meets their criteria.

To fulfill the wishes of thesecustomers, we have thus started toinvest even more heavily in ourown research and developmentresources. Strengthening theseresources is a prerequisite forkeeping our factories busy in thefuture, but we also see the poten-tial to achieve good profitabilityright from the design phase, with-out tying our efforts to a produc-tion contract.

This is why we plan to devote alarge proportion of our develop-ment resources to exploring newtechnologies and productionmethods consistent with tomor-row’s trends in mobile communi-cations. By making our customer’sproduct less costly, improvingtheir next product generation andhelping them innovate, we willfurther strengthen our position astheir business partners.

From subcontractor to international

systems supplier with in-house

development responsibility.

8

Complete, assembled fronts for the Ericsson T28.

9

1999 1998

Sales outside the Nolato Group, SEK M 1,241 927

Income after financial items, SEK M 134 101

Investments, SEK M 118 101

Return on capital employed, % 27 25

Number of employees 998 910

The business area’s share of Groupsales and earnings, 1999

SALES EARNINGS

BUSINESS AREA EARNINGS ETC.

Mobile CommunicationNolato Mobile, Kristianstad; Nolato Silikonteknik, Hallsberg; Nolato Mobitec,Lomma; Nolato Lövepac, Skånes Fagerhult; Nolato Texas, U.S.; Nolato Tallinn, Estonia and Nolato Shieldmate, Chicago, U.S.

Over the past few years, the Nola-to Mobile Communication busi-ness area has expanded rapidly.Sales during 1999 were about SEK1.25 billion.

The business area works closelywith the world’s largest mobiletelephone manufacturers –Motorola, Ericsson and Nokia – aswell as with other mobile phone-related companies such as Allgon,Salcomp, Denso and Qualcomm.

WORLD-LEADINGThis means that we are one of theworld’s premier players in thisrapidly growing market. As far aswe know, for example, we are theonly manufacturer of polymer sys-tem components that has all threeof the biggest mobile phone mak-ers as important customers.

However, our main task is not theactual manufacture and delivery ofcomponents, although for naturalreasons this occupies most of oureveryday life.

Rather, the ability to ensure thatthe time between idea and finishedproduct is as short as possible isour foremost competitive advan-tage.

In our marketing communica-tions, we call this providing ourcustomers with “Time for Innova-tion,” by simply taking some of thepressure off them by acceptingresponsibility for joint projects.This gives them more time todevelop new ideas and visions.

After all, time is one of the mostimportant parameters in themobile phone industry. A productshould preferably be ready for dis-

tribution even before people realizethey need it. Production should beup to full speed right from thestart, and the future always startstomorrow. To adapt to the realitywe live in, during 1999 we devel-

Electro Magnetic shieldings for Nokia.

10

oped a new business plan forMobile Communication. This planrequires that we invest aggressivelyin an expanded marketing organi-zation, devote more resources toR&D and establish operations in anumber of new locations.

GLOBALLY LOCALHistorically, the various Nolatocompanies have always had theirown complete marketing organiza-tions. This has meant that majorcustomers buying from several dif-ferent Nolato companies mightdeal with as many as five differentsalespeople, one from each compa-ny.

This is still a successful way ofoperating in some parts of theNolato Group, but it does notwork at Mobile Communication,where customers view all the com-panies in the business area as partsof one single company. To them, itis uninteresting which of our com-panies manufactures their prod-ucts, as long as we deliver theagreed quality at the agreed time.

Nor do mobile phone manufac-turers recognize any geographiclimitations. For instance, they havea number of development centersaround the world that design newtelephones. The same model canthen be manufactured simultane-ously in different countries.

This is why the new MobileCommunication business planincorporates a marketing organiza-tion that is shared by the entirebusiness area. A single GlobalAccount Manager (GAM) willhave primary responsibility for agiven customer. A number of KeyAccount Managers (KAM) will

Assembly of Ericsson mobile phones at Nolato Mobile in Kristianstad, Sweden.

11

report to the GAM, each responsi-ble for one or more of the cus-tomer’s units and for marketingour business area’s collective tech-nical expertise to that unit.

In practical terms, this systemdoes not mean that we are going tobuild large headquarters for thebusiness area and then concentrateeverything there. Such a stepwould be out of character forNolato. Instead, the various Glob-al and Key Account Managers willbe stationed either at one of theproduction companies in the busi-ness area or near the customer thathe or she is responsible for.

One hallmark of the new or-ganization is that it is both globaland local. Because our customerswant the products that they buyfrom their systems suppliers to bedeveloped and made where theydevelop and make their own prod-ucts, proximity to the customer isoften a decisive competitive advan-tage.

For this reason, one element ofthe business plan is to create mar-keting and developmentalresources, as well as productioncapacity, close to major customersin Europe, the United States andAsia.

CLOSE TO CUSTOMERSDuring 1999, we took taken anumber of big steps toward achiev-ing this goal, among other thingsby starting production at our newfactory in Fort Worth, Texas. Wechose Fort Worth due to its prox-imity to such major customers asNokia and Allgon.

Following rapid construction,the plant was inaugurated in the

Nolato Shieldmate manufactures mobile phones for Motorola, Denso and Qualcomm.

12

summer of 1999. However, aplanned expansion will increaseproduction space from 4,000 m2

(43,000 sq ft) to 13,000 m2

(140,000 sq ft) as early as thespring of 2000.

Another step is the new plant inTallinn, the capital of Estonia. Fol-lowing an intensive period ofpreparation during the autumn of1999, production began in January2000. The plant, which has about50 employees, is initially beingused for the assembly of fronts formobile telephones. During the sec-ond quarter of 2000, productionwill be expanded to include injec-tion moulding of plastic compo-nents.

Besides providing greater totalcapacity, the newly establishedplant in Estonia makes it possibleto perform semi-manual assemblyof mobile phones with great flexi-bility and at competitive cost.

ACQUISITION IN THE U.S.In early February, 2000, Nolatosigned a contract to acquire theAmerican plastic component man-ufacturer Shieldmate Robotics ofItasca, Illinois (Chicago), for USD25.5 M. The company, whichfocuses exclusively on customers inthe mobile telephone field, employs450 people. Sales for 2000 areforecast at about USD 40 M.

The acquisition is an importantpart of the execution of the newbusiness plan, because it meansthat Motorola, Qualcomm andDenso are becoming importantcustomers in the business area.Operationally and strategically, thecompany, to be named NolatoShieldmate, will be a major asset –

Advanced injection moulding for the Ericsson T28.

13

both by adding new customers andthrough its extensive know-how inthe mobile phone field.

EXPANSION IN SWEDEN TOOWe are increasing capacity in Swe-den as well. During the spring of2000, Nolato Mobile’s assemblyplant in Norrköping, which for thelast two years has performed finalassembly of mobile telephone com-ponents for Ericsson, will expandproduction to include injectionmoulding, that is, the actual manu-facturing of the subcomponents.This means that equipment can bemoved from the plant in Kris-tianstad, creating further expan-sion opportunities at that locationfor Nolato’s growing mobile tele-phone operations. The expansionin Norrköping will involve the cre-ation of 25 new technical jobs anda tripling of the factory area.

The Industrial Components busi-ness area’s acquisition of Gota-Plast, which is described on page16, will also have a positive impacton the Mobile Communicationbusiness area. This because theacquisition creates opportunities toreassign production within theGroup and thus free up resourcesfor production of mobile telephonecomponents.

SPLIT OF NOLATO GEJDEDuring a large part of 1999, Nola-to Gejde has been split into twooperational areas, one for mobiletelephones and one for medicaltechnology.

At the end of 1999, this splitwas formalized by changing thename of the mobile phone opera-tions to Nolato Mobitec AB, whilethe medical technology areabecame a limited liability company

using the old name Nolato GejdeAB.

Nolato Mobitec will continue tobe part of the Mobile Communica-tion business area, while the newNolato Gejde has joined the Med-ical Components business area.

CONTINUING INVESTMENTS IN A STRONG FUTURE

Mobile Communication has setambitious goals.

We will continue our aggressiveinvestments and thus furtherstrengthen our position as a globalsystems supplier to the leadingmanufacturers of mobile tele-phones.

We expect continued stronggrowth for the business area byestablishing operations in addi-tional locations and by increasingthe production volume of ourexisting plants.

The new factory in Tallinn, Estonia, performs semi-manual assembly of mobile phones.

14

Enclosures for C Pen handheld scanner from C-Tech.

15

1999 1998

Sales outside the Nolato Group, SEK M 618 652






SALES EARNINGS


The companies in the businessarea operate across a very broadspectrum that includes the devel-opment and production of compo-nents made of plastic, rubber andthermoplastic elastomer (TPE) forindustrial manufacturers of homeappliances, telecommunicationsdevices, electronics and vehicles.

STRONG EUROPEAN PARTNERNolato Industrial Components hasa strong position in Sweden. Ourcompanies are often market lead-ers and work closely with cus-tomers such as Electrolux, Hus-qvarna, Ericsson, Volvo, Sanitec,FCI, Flextronics, Whirlpool,Lindab, C-Tech and Axis.

Today, the business area has allits operations in Sweden. Howev-er, in most cases our customers are

highly international and carry outsignificant development and pro-duction outside Sweden as well.

For this reason, the new busi-ness plan developed during 1999includes a vigorous effort to posi-tion Nolato Industrial Compo-nents as a European partner toindustry for the development andproduction of components madeof polymer materials.

Our goal is to use our Swedishoperations as a strong base andfollow a number of selected indus-trial customers into other coun-tries of Europe.

The first step will be to establishproduction of plastic componentsin Hungary. The reason we areselecting Hungary as the base forour investment is that the countryhas become an attractive location

for the operations of many of ourpotential customers. Hungaryoffers good opportunities for cost-effective production, while at thesame time having a good infra-structure.

In particular, companies in thefields of electronics, telecommuni-

Industrial ComponentsNolato Alpha, Kristianstad; Nolato Plastteknik, Gothenburg; Nolato Sunnex, Sunne; Nolato Polymer, Torekov; Nolato Gota, Götene; Nolato STG, Lönsbodaand Nolato Termoform, Ängelholm.

Fronts, handels, buttons etc. for Whirlpool.

16

cations and home appliances haveestablished new operations inHungary. For this reason, ourinvestment will primarily encom-pass customers in these sectors.

These are also fields we knowwell from our Swedish operationsand in which we have well estab-lished contacts.

In order to work this new mar-ket effectively, we will build up aregional marketing organizationespecially for Central Europe.

However, our investments else-where in Europe do not mean thatwe are forgetting our Swedishoperations. This is where ourroots are, and we must continue toprovide our Swedish companieswith good preconditions for con-tinuing to work in their markets.

The base of our organization is

the individual companies in thebusiness area, a system that fitsour customer structure. For largeprojects, we will coordinate mar-keting activities, create multi-company customer teams andform active networks with outsideorganizations whose expertisecomplements our own knowledge.

In this way, we will be betterable to offer our customers theknowledge and resources theywant.

ACQUISITION OF GOTAPLASTIn February, 2000, GotaPlast inGötene, Sweden, was acquired.The company is a very strong,modern and well-functioningmanufacturer of plastic compo-nents for Electrolux and Husqvar-na, among others.

The acquisition is entirely con-sistent with the strategy that wasadopted in the business plan. Itgives us an even better focus onsome of the business area’s largestrategic customers. It is also animportant addition to the Group’soverall production capacity, sinceit opens up opportunities to reas-sign production within the Group,thereby freeing up resources forthe rapidly growing manufactureof components for mobile tele-phones.

CONTRACT MANUFACTURERSContract manufacturers have late-ly become an increasingly impor-tant customer category for thecompanies in the business area.Contract manufacturers base theiroperations on being so attractivethat other companies outsourcetheir own production to them.They are rapidly buying up manu-facturing operations, especiallyfrom electronics and telecom com-panies.

Even today, we are substantialsuppliers of plastic telephone com-ponents to the Flextronics plant inKarlskrona, Sweden, among oth-ers. In our judgment, given ourknowledge of materials and pro-duction, we have a lot to offercontract manufacturers. We thusexpect them to play an importantpart in our future growth.

STRONG FAITH IN THE FUTUREWe expect increasing internation-alization, along with acquisitionsand increasing customer activity,to generate good growth in thebusiness area over the next fewyears.

Front and back pieces for the Axis 1200 Network Camera.

17

Plastic and TPE components for Electrolux vacuum cleaners.

18

Workplace lighting for demanding applications.

19

1999 1998







SALES EARNINGS


Branded ProductsNolato Elastoteknik, Åmål; Nolato Sunnex Equip-ment, Sunne; Sunnex Equipement, Aix-en-Provence,France and Sunnex Inc., Boston, Mass., U.S.

The Branded Products businessarea consists of four companiesthat work with different kinds ofproprietary products.

NOLATO ELASTOTEKNIKNolato Elastoteknik is a Europeanleader in the development andproduction of raw materials forTPE. Thermoplastic elastomer(TPE) is a cross between plasticand rubber. It resembles and hasthe same properties as rubber, butit can be injection moulded likeplastic, thereby creating betterproduction economy. In addition,products made from TPE can berecycled, which rubber normallycannot.

Nolato Elastoteknik sells TPEraw material in granular formunder the Dryflex label, a trade-

mark that is registered throughoutthe European Union. The materialis developed in close collaborationwith the company’s customers,which are plastic and rubber man-ufacturers throughout Europe.The product line includes materi-als for bonding, vibration isola-tion, medical applications, mobilephones, vehicles, toys etc.

During the past few years, thecompany has made significantinvestments aimed at raising quali-ty and productivity further. It isthus well equipped for the future.

NOLATO SUNNEX EQUIPMENTThe three companies in the Equip-ment group develop, assemble andmarket machinery mounts (“feet”made of metal and rubber thatsupport machines) and workplace

lighting for industry and otherheavy-duty applications. Theseproducts are sold under the Sun-nex label through our own compa-nies in Sweden, the U.S. andFrance, and via distributorsworldwide. They are manufac-tured by subcontractors, largelyoutside the Nolato Group.

The Sunnex Equipment compa-nies carried out an investment pro-gram totaling SEK 30 M duringthe three-year period 1997 – 99This will result in improved distri-bution channels, more effectiveagents and a new, broadenedproduct line.

In keeping with the accountingprinciples of the Nolato Group,costs for 1999 were expenseddirectly. This had an adverse effecton earnings for the financial year.

Machinery mounts for vibration isolation etc.

20

Inhalation device for asthma treatment.

21

1999 1998




Return on capital employed before tax, % — —



SALES EARNINGS


Medical ComponentsNolato Medevo, Torekov and Nolato Gejde, Lomma.

During 1999, the Medical Com-ponents business area includedNolato Medical and the medicaloperations of Nolato Gejde.

Early in 2000, Nolato Medicalchanged its name to Nolato Mede-vo in order to distinguish betweenthe business area and the compa-ny. Meanwhile, Nolato Gejde’smedical division became a limitedliability company and took overthe name Nolato Gejde.

The companies in this businessarea have long experience ofdeveloping and manufacturingsmall precision plastic and rubbercomponents for the pharmaceuti-cal and medical technology fields.Some of the production takesplace in sanitary clean rooms. Thisapplies to implants, i.e. compo-nents that will be surgically insert-

ed into the human body. Thecleanliness standards for theseproducts are very high.

Customers include such leadinginternational companies asAstraZeneca, Pharmacia &Upjohn, Hemocue, Maersk Med-ical and Novo Nordisk.

The companies in the businessarea are located in the importantbiotechnology and medicalresearch region popularly knownas Medicon Valley, which encom-passes Skåne province in southernSweden and nearby areas of Den-mark. Sixty percent of Scandi-navia’s pharmaceutical industry islocated in this region, creating asubstantial base, because majorcustomers view proximity to theirdevelopment and production part-ners as an important precondition.

The business plan for MedicalComponents includes acquisitionsof additional companies andtakeovers of outsourced produc-tion facilities. Together with a vig-orous marketing drive, this willprovide good sales growth overthe next few years.

Tines to attach electrodes to the heart.

Penetration membrane for toxic cytostatics.

22

GROUP FINANCIAL HIGHLIGHTS

(SEK M)

Sales and earningsSalesSales growth, %Proportion outside Sweden, %Operating income before depreciationDepreciationOperating incomeFinancial itemsIncome after financial itemsIncome after taxNonrecurring items

Financial positionTotal assetsShareholders' equityInterest-bearing assetsInterest-bearing liabilities and provisionsNet liabilitiesEquity/assets ratio 1 ,%Liquidity 2 ,%

Cash flowCash flow from operationsInvestment activitiesCash flow before financing activities

Profitability *)

Return on total assets before tax 3 ,%Return on capital employed before tax 4 ,%Return on operating capital before tax 5 ,%Return on shareholders' equity after tax 6 ,% ***Operating margin 7 ,%Profit margin 8 ,%Interest coverage ratio 9 times

PersonnelNumber of employeesSales per employee, SEK KIncome after financial items per employee, SEK K ***

Per share dataEarnings per share after full tax 10, SEK ***Earnings per share after full tax,

including nonrecurring items 10, SEK ***Earnings per share after full tax 11, SEK ***Share price on December 31, SEKPrice/earnings ratio, times 12 ***Proposed dividend, SEKYield 13, %Dividend as a percentage of earnings per share

1997

1,558117

27265

– 90175

– 10165110

—

1,172513

12256244

44148

134– 391– 257

17262524111115

1,664936

99

5.90

—27

11019

1.501.426

1998

1,8882135

317– 137

180– 14166118

—

1,292603

16248232

47163

207– 165

42

14.722.322.619.4

9.58.812

1,7781,062

93

6.20

—35

11719

1.801.529

1999

2,1451443

387– 151

236– 10226164

26

1,566734

14282268

47182

139– 146

– 6

14.822.622.920.1

9.89.320

1,8691,148

107

7.65

8.6541

16519

2.201.325

1996

718– 727

122– 50

72– 27047—

614412

6540

– 2567

218

102– 57

45

12171812101017

7141,006

98

2.50

—225221

0.751.430

1995

7711632

153– 46107– 3

10472—

589379

3745

864

194

112– 91

21

19272921141319

7411,040

141

3.80

—2026

70.75

2.820

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

**

**

****

23

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

1. Shareholders’ equity as a percentage of total assets in thebalance sheet.

2. Total current assets divided by total current liabilities.3. Income after financial items, plus financial expense, as a per-

centage of average total capital in the balance sheet.4. Income after financial items, plus financial expense, as a per-

centage of average capital employed. Capital employed consistsof total assets less non-interest-bearing liabilities andprovisions.

5. Operating income as a percentage of average operating capital.Operating capital consists of total assets less non-interest-bear-ing liabilities and provisions, less Interest-bearing assets.

6. Income after tax as a percentage of average shareholders'equity.

7. Operating income as a percentage of sales.8. Income after financial items as a percentage of sales.

9. Income after financial items, plus financial expense, divided byfinancial expense.

10. Income after tax divided by the number of shares.11. Reported shareholders' equity divided by the number of shares.12. Quoted share price on December 31 divided by earnings per

share after full tax.13. Dividend for the year divided by the share price quoted on

December 31 of that year. * Computed excluding nonrecurring items** Calculated for 1997 as if the Kristianstad operations had been

acquired on December 31, 1996.*** Adjustments have been made for any new share issues and have

been calculated based on full conversion of convertible deben-tures issued to employees, starting in 1998.

DEFINITIONS

Equity/ Return on cap empl. Operating marginassetsratio

Machinery and equipment Plant Sales Income after financial items

Sales in Sweden Sales outside Sweden

SALES(SEK M)

EARNINGS(SEK M)

NUMBER OF EMPLOYEES

KEY FINANCIAL RATIOS%

CAPITAL EXPENDITURES(SEK M)

SALES AND EARNINGSPER EMPLOYEE, SEK K

0

500

1000

1500

2000

2500

1995 1996 1997 1998 19990

50

100

150

200

250

1995 1996 1997 1998 19990

500

1000

1500

2000

1995 1996 1997 1998 1999

0

100

200

300

400

500

1995 1996 1997 1998 19990

200

400

600

800

1000

1200

1995 1996 1997 1998 1999

Omsättning Sverige Omsättning utomlands

0

10

20

30

40

50

60

70

1995 1996 1997 1998 1999

24

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

OPERATIONS IN BRIEFThe subsidiaries of Nolato AB, a company whose shares are tradedon the OTC list of the OM Stockholm Stock Exchange, are primarilysuppliers of polymer components to customers in mobile telephonesand other telecommunications, the automotive industry, medicaltechnology and other industrial sectors. In operational terms, theNolato Group consists of 21 companies organized into the followingbusiness areas: Mobile Communication, Industrial Components,Branded Products and Medical Components.

SIGNIFICANT EVENTS DURING 1999In March 1999, the Board of Directors authorized the establishmentof a new plant in Tallinn, Estonia, to manufacture plastic componentsfor mobile telephones. Following an intensive period of preparationduring the autumn of 1999, the new plant was able to start opera-tions by year-end 1999.

SIGNIFICANT EVENTS AFTER THE END OF 1999 In February 2000, the company decided to expand Nolato Mobile’sproduction in Norrköping to also include injection moulding. Theexpansion will involve the creation of 25 new jobs and a tripling ofthe factory area.

In February 2000, Nolato also signed a definitive agreement toacquire Shieldmate Robotics of Itasca, Illinois (Chicago), U.S.A. Thecompany has annual sales of some USD 40 million and focusesexclusively on customers in the mobile telephone field. It is part ofNolato’s Mobile Communication business area.

In February, Nolato also acquired GotaPlast AB, with sales ofabout SEK 150 million. GotaPlast manufactures plastic componentsfor Swedish industrial companies. The closing date of the acquisitionwas March 1, 2000.

FUTURE PROSPECTSEarnings for the full year 2000 are expected to be better than for1999 (excluding nonrecurring items), even after taking into accountthe acquisition of Shieldmate and its impact in the form of goodwilldepreciation and financing costs.

RESEARCH AND DEVELOPMENTThe Group's research and development expenses equaled approxi-mately 7 (10) percent of net sales. These costs consist almost entire-ly of development expenses in conjunction with project and productdevelopment undertaken in partnership with Group customers. Theyinclude development of tools, materials, designs and technology.

ENVIRONMENTAL INFORMATIONThrough its subsidiaries, the company operates processes thatrequire permits under the provisions of the Swedish EnvironmentalCode. These operations consist mainly of the manufacture of poly-mer materials, which only cause limited emissions into the air andwater.

PROPOSED DISTRIBUTION OF EARNINGSThe earnings at the disposal of the Annual General Meeting are as fol-lows.

(SEK M)

Retained earnings 127.2Net income for the year 71.9

199.1

The Board of Directors proposes that these earnings be distributedas follows:

Dividend of SEK 2.20 per share to shareholders 41.3To be carried forward 157.8

199.1

THE GROUPAccording to the consolidated balance sheet, unrestricted equitytotals SEK 420.0 M. The sum of SEK 1.0 M is to be allocated torestricted equity.

25

1999

8.1—

8.1

—– 36.4

5.1—

– 31.3

– 23.2

94.011.4

– 10.295.2

72.0

—– 0.1

71.9

1999

2,144.8– 1,690.7

454.1

– 57.7– 181.7

26.3– 4.6

– 217.7

236.4

—0.7

– 10.6– 9.9

226.5

—– 62.2

164.3

1998

7.3—

7.3

—– 18.0

——

– 18.0

– 10.7

41.915.6

– 15.242.3

31.6

0.42.2

34.2

1998

1,888.0– 1,492.6

395.4

– 61.1– 148.2

—– 6.1

– 215.4

180.0

—0.7

– 14.6– 13.9

166.1

—– 48.2

117.9

I N C O M E S T A T E M E N T S

Net sales (Note 2)Costs of goods and services sold

Gross income

Sales expensesAdministrative expenses (Note 5)Items affecting comparability (Note 6)Other operating expenses

Operating income

Financial items:Dividends from subsidiariesInterest revenue and similar income itemsInterest expense and similar expense items

Income after financial items

Appropriations (Note 8)Tax on earnings for the year (Note 9)

Net income for the year

(SEK M) Group Parent Company

26

1999

1.1——

1.1

——

0.6

—0.6

216.18.7———

224.8

226.5

——————

—421.0

0.11.0

422.1

0.2

422.3

648.8

1999

6.3—

15.722.0

178.5475.9

45.2

5.9705.5

———

8.20.89.0

736.5

97.637.345.668.5

0.4249.4

535.5—

18.712.1

566.3

13.8

829.5

1,566.0

1998

1.3——

1.3

——

0.5

—0.5

215.610.0

———

225.6

227.4

——————

—323.7

—1.5

325.2

9.9

335.1

562.5

1998

3.80.2

20.324.3

175.2449.8

42.5

18.3685.8

——

0.4—

0.10.5

710.6

82.019.146.452.9

1.1201.5

332.9—

15.714.1

362.7

16.7

580.9

1,291.5

Fixed assetsIntangible fixed assets (Note 10)Capitalized expendituresLeaseholds and similar rightsGoodwill

Tangible fixed assets (Note 11)Buildings and landMachinery and other technical facilitiesEquipment, tools, fixtures and fittingsConstruction in progress and advances

on tangible fixed assets

Financial fixed assetsShares in Group companies (Note 12)Receivable from Group companiesHoldings in associated companies (Note 13)Deferred taxes recoverableOther long-term receivables

Total fixed assets

Current assetsInventory etc.Raw materials and suppliesProducts in processFinished goods and goods for resaleWork in progress on subcontractAdvances to suppliers

Current receivablesAccounts receivableReceivable from Group companiesOther receivablesPrepayments and accrued income

Cash and bank balances

Total current assets

Total assets

B A L A N C E S H E E T S

ASSETS (SEK M) Group Parent Company

27

B A L A N C E S H E E T S

1999

94.019.3

113.3

127.271.9

199.1

312.4

4.3

——

—

60.0101.2

85.0——

246.2

12.5—

0.862.8

—0.69.2

85.9

648.8

—

31.6

1999

94.0219.6313.6

255.7164.3420.0

733.6

—

31.6107.6

139.2

51.3101.2

85.0—

0.7

238.2

12.50.7

244.8—

14.125.9

157.0

455.0

1,566.0

7.6

5.0

1998

94.019.3

113.3

127.334.2

161.5

274.8

4.3

——

—

60.058.797.5

0.1—

216.3

12.5—

2.142.8

0.42.07.3

67.1

562.5

—

27.7

1998

94.0189.7283.7

201.9117.9319.8

603.5

—

28.095.9

123.9

50.058.897.5

—1.1

207.4

12.51.4

159.1—

9.431.5

142.8

356.7

1,291.5

5.7

2.9

Shareholders’ equity (Notes 14, 15)Restricted equityShare capital (18,791,006 shares with a par value

of SEK 5 each)Restricted reserves/Statutory reserve

Unrestricted equityUnrestricted reserves/Retained earningsNet income for the year

Total shareholders’ equity

Untaxed reserves (Note 16)

Provisions Provisions for pensionsProvisions for taxes (Note 17)

Total provisions

Long-term liabilities (Note 18)Convertible loan (Note 19)Overdraft facilities utilizedLong-term liabilities to financial institutionsLong-term liabilities to Group companiesOther long-term liabilities

Total long-term liabilities

Current liabilitiesCurrent liabilities to financial institutionsAdvances from customersAccounts payableLiabilities to Group companiesTax liabilitiesOther current liabilitiesAccrued expenses and prepayments (Note 20)

Total current liabilities

Total shareholders' equity and liabilities

Collateral pledged (Note 21)

Contingent liabilities (Note 22)

SHAREHOLDERS’ EQUITY AND LIABILITIES (SEK M) Group Parent Company

28

S T A T E M E N T S O F C H A N G E S I N F I N A N C I A L P O S I T I O N

1999

– 23.2

0.6– 5.1

– 27.794.011.4

– 10.4– 0.5

66.8

——

– 1.30.8

66.3

—– 0.5– 0.5

—5.1—

4.1

70.4

—– 12.5

42.5– 76.0

—– 33.8

– 0.3– 80.1

—

– 9.7

9.9

0.2

1999

236.4

151.2– 26.3361.3

—0.8

– 10.6– 54.1

297.4

– 47.9– 202.6

85.76.9

139.5

– 3.4– 177.3

—5.15.5

24.3– 145.8

– 6.3

1.3– 12.5

57.7—

– 8.9– 33.8

—3.8

– 0.4

– 2.9

16.7

13.8

1998

– 10.7

0.3– 0.5

– 10.941.915.6

– 13.0– 0.5

33.1

——

0.8– 11.4

22.5

– 1.3– 0.3

————

– 1.6

20.9

60.0– 61.4

—9.2—

– 28.29.2

– 11.2

—

9.7

0.2

9.9

1998

180.0

137.2– 0.5

316.7—

0.7– 12.4– 34.7

270.3

– 10.7– 62.4

11.3– 1.6

206.9

– 3.8– 168.3

—6.7——

– 165.4

41.5

50.0– 61.7

2.2——

– 28.2—

– 37.7

0.8

4.6

12.1

16.7

OperationsOperating incomeAdjustments for items not affecting cash flow

DepreciationCapital gains

Dividends from subsidiariesInterest receivedInterest paidIncome tax paidCash flow from operations before changes in working capital

Changes in working capitalChanges in inventoryChanges in accounts receivableChanges in accounts payableOther changes in working capital

Cash flow from operations

Investment activitiesAcquisition of intangible fixed assetsAcquisition of tangible fixed assetsAcquisition of financial fixed assetsSale of tangible fixed assetsSale of financial fixed assetsSale of operationsCash flow from investment activities

Cash flow before financing activities

Financing activitiesConvertible loan raisedPayments of loan principalChanges in other long-term liabilities and provisionsChanges in receivables from Group companiesChanges in financial fixed assetsDividends paidNet Group contributionsCash flow from financing activities

Other changesTranslation differences

Increase/decrease in liquid funds

Liquid funds on January 1

Liquid funds on December 31

(SEK M) Group Parent Company

29

Note 1. ACCOUNTING AND VALUATION PRINCIPLESThe accounting and valuation principles used in this report conformwith the Swedish Annual Accounts Act as well as recommendationsand opinions issued by the Swedish Financial Accounting StandardsCouncil, the Swedish Accounting Standards Board and the SwedishInstitute of Authorized Public Accountants (FAR).

CONSOLIDATED ACCOUNTSThe consolidated financial statements have been drawn up in com-pliance with the recommendation of the Swedish Financial Account-ing Standards Council regarding consolidated financial statementsand by applying the purchase method of accounting.

The accounts of subsidiaries outside Sweden are translated intoSwedish kronor employing the current method of accounting. Thismeans that all items in the balance sheet are translated using therate prevailing on the closing date, while the average rate for the yearis applied for all items in the income statement. Any resulting trans-lation differences in the shareholders' equity of subsidiaries are notreported in the income statement but directly affect the Group'sunrestricted equity.

DEPRECIATIONDepreciation has been calculated on the basis of original acquisitionvalue and applied on a straight-line basis throughout the technicaland economic life of the assets.Capitalized expenditures 5 yearsGoodwill 10 yearsBuildings 25 yearsLand improvements 20–27 yearsMachinery and other technical facilities 3–10 yearsEquipment, tools, fixtures and fittings 3–10 years

Extensive 1997 and 1998 capital expenditures (roughly SEK 140M) on automated assembly equipment for the manufacture of mobiletelephone cases are being depreciated at 33 percent annually.

INTANGIBLE AND TANGIBLE FIXED ASSETSFixed assets are reported at acquisition value less accumulateddepreciation.

Goodwill related to acquired subsidiaries is reported as a fixedasset and is written off over its expected economic life. Goodwillacquired to date is estimated to have an economic life of 10 years.

INVENTORYInventory is valued at acquisition value or actual value, whichever islower. The Company applies the FIFO (first in, first out) principle.

RECEIVABLES AND LIABILITIES IN FOREIGN CURRENCIESReceivables and liabilities in foreign currencies are appraised andreported at rates prevailing on the closing date. Earnings and losseson operating receivables and liabilities are reported as revenue orcharged to earnings, respectively.

UNTAXED RESERVESThe proportion of untaxed reserves attributable to shareholders'equity equals 72 percent of restricted reserves. The proportion ofuntaxed reserves attributable to tax is reported under provisions asdeferred provisions for tax at a rate of 28 percent.

Note 2. DISTRIBUTION OF NET SALESNet sales and income after financial items, excluding nonrecurringitems, were distributed among business areas as follows:

Net sales Income after financial items

(SEK M) 1999 1998 1999 1998

Mobile Communication business area 1,240.6 927.0 133.8 101.2

Industrial Components business area 617.9 651.6 51.1 47.0

Branded Products business area 171.1 178.6 14.3 16.1

Medical Components business area 61.5 64.2 8.2 10.8

Intra-Group adjustments,Parent Companyand Nolato Autec 53.7 66.6 – 7.1 – 9.0

Total 2,144.8 1,888.0 200.3 166.1

The accounting principles for reporting of results by business areahave been changed. Joint business area management and market-ing expenses have been allocated to the respective business areas.The reason for this change of accounting principles is that theseexpenses are increasing as the management teams for each businessarea are enlarged, as well as a management decision to centralizecertain marketing functions. Previously, these costs have been allo-cated to the Parent Company, which has employed business area per-sonnel. The change affects the Mobile Communication and Industri-al Components business areas. Other business areas are not affect-ed. Historic comparative figures have been restated to conform to thecurrent accounting principle.

Net sales were distributed among geographic markets as follows:

Net sales

(SEK M) 1999 1998

The Nordic region 1,410.7 1,390.6Europe excl. Nordic region 373.7 318.0North America 142.3 116.9Other markets 218.1 62.5

Total 2,144.8 1,888.0

N O T E S

30

Note 3. AVERAGE NUMBER OF EMPLOYEES

1999 1998

Name Number Of whom, Number Of whom,of employees men of employees men

Parent CompanyNolato AB, Torekov 10 100% 7 100%SubsidiariesNolato Polymer AB, Torekov 90 78% 96 78%Nolato STG AB, Lönsboda 65 70% 55 71%Nolato Termoform AB, Ängelholm 39 58% 34 48%Nolato Alpha AB, Kristianstad 158 74% 171 70%Nolato Plastteknik AB, Gothenburg 124 36% 126 36%Nolato Mobile AB, Kristianstad 657 64% 655 64%Nolato Silikonteknik AB, Hallsberg 180 62% 141 69%Nolato Gejde AB, Lomma 75 78% 78 74%Nolato Texas Inc., U.S.A. 50 57% 1 100%Nolato Tallinn AS, Estonia 8 19% — —Nolato Autec AB, Kristianstad 78 71% 74 63%Nolato Sunnex AB, Sunne 137 78% 145 74%Nolato Lövepac AB, Skånes Fagerhult 47 62% 43 61%Nolato Medical AB, Torekov 51 44% 53 46%Nolato Elastoteknik AB, Åmål 32 74% 30 80%Nolato VVS AB, Lönsboda 4 100% 10 90%Nolato Sunnex Equipment AB, Sunne 29 70% 27 70%Sunnex Inc., U.S.A. 26 55% 23 60%Sunnex Equipement Sarl, France 9 56% 9 67%Group total 1,869 65% 1,778 65%

Note 4. SALARIES, OTHER REMUNERATIONAND EMPLOYER PAYROLL FEES

1999 1998

Salaries Employer Salaries Employer( SEK M) and other payroll fees and other payroll fees

remuneration (of which, remuneration (of which,non-statutory non-statuery

pension expenses) pension expenses)

Parent Company 13.1 4.9 7.8 4.1(2.0 )* (1.4 )*

Subsidiaries 467.9 187.5 437.4 176.4(34.3 )** (27.3 )**

Group total 481.0 192.4 445.2 180.5( 36.3 ) (28.7 )

*Of the Parent Company's non-statutory pension expenses, SEK557 K (previous year 321) pertains to the category "Board ofDirectors and President." **Of the Group's non-statutory pension expenses, SEK 3,918 K(4,138) pertains to the category "Board of Directors and Presi-dent."

Salaries and other remuneration

1999 1998

(SEK M) Board and Other Board and OtherPresident employees President employees

Parent Company 2.3 * 10.8 2.6 * 5.2Subsidiaries 15.1 452.8 14.3 423.1

Group total 17.4 463.6 16.9 428.3

*Of the Parent Company's salaries and other remuneration, SEK2,004 K (2,317) was for the CEO's salary.

Total remuneration to the Board was SEK 320 K (280), of which110 (100) was paid to the Chairman.

The members of the Group Executive Management and the man-agement teams of subsidiaries receive customary pension benefits,within the framework of public sector pension plans. In case of ter-mination by the Company, they are entitled to salaries during noticeperiods of no more than two years.

Nolato has been notified that its allocation of surplus premium fundsto be repaid by the Swedish Staff Pension Society (SPP) and its lifeinsurance arm SPP Liv to their client companies will total approxi-mately SEK 20 M. Because the form of payment of these funds toNolato remains uncertain, this amount is not reflected in the 1999income statement.

Note 5. INFORMATION ON REMUNERATION TO AUDITORS

The company’s auditors have been remunerated:

– for auditing and other examinations in accordance with theSwedish Companies Act etc.

Group Parent Company(SEK K) 1999 1999

Ernst & Young AB 1,555 300Others 76 —

1.631 300

– for independent consulting, assistance, etc.

Group Parent Company(SEK K) 1999 1999

Ernst & Young AB 490 92Others — —

490 92

Note 6. ITEMS AFFECTING COMPARABILITY

Group Parent Company(SEK M) 1999 1998 1999 1998

Capital gain onoperations sold 24.3 — — —Capital gain onfixed assets sold 10.0 — 5.1 —Provision torestructuring reserve – 8.0 — — —

Total 26.3 — 5.1 —

N O T E S

31

Note 7. DEPRECIATION

Depreciation is included in operating expenses as follows:


Capitalized expenditures 1.3 — 0.2 —Goodwill 4.6 6.1 — —Buildings and land 9.6 9.4 — —Machinery

and equipment etc. 135.7 121.7 0.4 0.3

Total 151.2 137.2 0.6 0.3

Depreciation has been distributed according to utilization as follows:


Costs of goods and services sold 136.0 123.1 — —

Sales expenses 2.5 2.0 — —Administrative expenses 8.1 6.0 0.6 0.3Other operating expenses 4.6 6.1 — —

Total 151.2 137.2 0.6 0.3

Note 8. APPROPRIATIONS, PARENT COMPANY

(SEK M) 1999 1998

Withdrawal of unappropriated pension funds — 0.4

Total — 0.4

Note 9. TAX ON EARNINGS FOR THE YEAR


Tax paid 58.7 36.7 — 0.4Deferred tax 3.5 11.5 — —Tax on Group contributions — — 0.1 – 2.6

Total 62.2 48.2 0.1 – 2.2

Note 10. INTANGIBLE FIXED ASSETS

Group(SEK M) 1999 1998

Capitalized expendituresAcquisition value on January 1 3.8 —Purchases 3.8 3.8Acquisition value on December 31 7.6 3.8

Depreciation on January 1 — —Depreciation for the year 1.3 —Depreciation on December 31 1.3 —

Residual value on December 31 6.3 3.8


GoodwillAcquisition value on January 1 75.2 75.2Purchases — —Acquisition value on December 31 75.2 75.2

Depreciation on January 1 54.9 48.8Depreciation for the year 4.6 6.1Depreciation on December 31 59.5 54.9


Note 11. TANGIBLE FIXED ASSETS


Buildings and landAcquisition value on January 1 251.2 246.1Purchases 4.2 4.8Reclassifications 8.7 0.3Acquisition value on December 31 264.1 251.2


Residual value on December 31 178.5 175.2Tax assessment value of properties 113.2 115.1

Machinery and other technical facilitiesAcquisition value on January 1 897.7 805.1Purchases 145.2 127.3Divestments and disposals – 39.6 – 36.1Reclassifications 7.3 1.4Acquisition value on December 31 1,010.6 897.7

Depreciation on January 1 447.9 370.5Divestments and disposals – 33.0 – 29.2Depreciation for the year 119.8 106.6Depreciation on December 31 534.7 447.9


Equipment, tools, fixtures and fittingsAcquisition value on January 1 105.4 92.7Purchases 22.4 17.9Divestments and disposals – 17.8 – 5.2Reclassifications 1.9 —Acquisition value on December 31 111.9 105.4

Depreciation on January 1 62.9 54.6Divestments and disposals – 12.1 – 6.9Depreciation for the year 15.9 15.2Depreciation on December 31 66.7 62.9


N O T E S

N O T E S


Construction in progress and advances on tangible fixed assetsAcquisition value on January 1 18.3 1.7Purchases 5.5 18.3Reclassifications – 17.9 – 1.7Acquisition value on December 31 5.9 18.3


Parent Company(SEK M) 1999 1998

Capitalized expensesAcquisition value on January 1 1.3 —Purchases — 1.3Acquisition value on December 31 1.3 1.3

Depreciation on January 1 — —Depreciation for the year 0.2 —Depreciation on December 31 0.2 —


EquipmentAcquisition value on January 1 1.1 0.8Purchases 0.5 0.3Acquisition value on December 31 1.6 1.1



Note 12. SHARES IN GROUP COMPANIES

Information on subsidiaries’ corporate identity numbersand registered offices: Corp. ID no. Reg. office

Parent CompanyNolato Polymer AB 556380-2890 TorekovNolato STG AB 556098-4584 LönsbodaNolato Termoform AB 556135-9695 ÄngelholmNolato Alpha AB 556207-0036 KristianstadNolato Plastteknik AB 556198-4385 GothenburgNolato Mobile AB 556164-1050 KristianstadNolato Silikonteknik AB 556137-5873 HallsbergNolato Gejde AB 556077-6766 LommaNolato Autec AB 556205-2406 KristianstadNolato Sunnex AB 556101-2922 SunneNolato Lövepac AB 556120-6052 Sk FagerhultNolato Medical AB 556309-0678 TorekovNolato Elastoteknik AB 556191-5777 ÅmålNolato VVS AB 556545-5549 LönsbodaNolato Sunnex Equipment AB 556147-1177 SunneSunnex Inc. — Boston, MA, U.S.A.Sunnex Equipement Sarl — Aix, France

Nolato i Göteborg AB 556042-2858 GothenburgNolato Kristianstad AB 556542-7845 KristianstadNolato Tallinn — Tallinn, Estonia

SubsidiaryNolato Texas Inc. — Texas, U.S.A.

Shares in Group companies Proportion Proportion Book(SEK M) of equity of votes value

Parent CompanyNolato Polymer AB 100% 100% 5.0Nolato STG AB 100% 100% 4.4Nolato Termoform AB 100% 100% 6.0Nolato Alpha AB 100% 100% 5.0Nolato Plastteknik AB 100% 100% 61.5Nolato Mobile AB 100% 100% 12.0Nolato Silikonteknik AB 100% 100% 19.1Nolato Gejde AB 100% 100% 7.1Nolato Autec AB 100% 100% 3.0Nolato Sunnex AB 100% 100% 35.2Nolato Lövepac AB 100% 100% 10.0Nolato Medical AB 100% 100% 3.0Nolato Elastoteknik AB 100% 100% 7.0Nolato VVS AB 100% 100% 1.0Nolato Sunnex Equipment AB 100% 100% 15.0Sunnex Inc., U.S.A. 100% 100% 10.3Sunnex Equipement Sarl, France 100% 100% 4.4Nolato i Göteborg AB 100% 100% 6.5Nolato Kristianstad AB 100% 100% 0.1Nolato Tallinn AS 100% 100% 0.5 Total 216.1

SubsidiaryNolato Texas Inc., U.S.A. 100% 100% —

Note 13. HOLDINGS IN ASSOCIATED COMPANIES


Acquisition value on Jan. 1 0.4 0.4 — —Divestments – 0.4 — — —Acquisition value on Dec. 31 0 0.4 — —Residual value on Dec. 31 0 0.4 — —

Note 14. CHANGE IN SHAREHOLDERS' EQUITY, GROUP

Share Restricted Unrestricted Net income(SEK M) capital reserves reserves for the year

Amount on January 1 94.0 189.7 201.9 117.9Transfers between restricted

and unrestricted reserves — 29.9 54.2 – 84.1Dividends — — — – 33.8Translation differences — — – 0.4 —Net income for the year — — — 164.3

Amount on December 31 94.0 219.6 255.7 164.3

32

N O T E S

TOREKOV, SWEDEN, MARCH 2, 2000

Bo C E Ramfors Krister Jorlén Gun Boström-SvenssonChairman of the Board

Henrik Jorlén Claes Warnander Tomas SjölinPresident

Göran Hellström Magnus Bergqvist Mats EngvieEmployee representative Employee representative Employee representative

We submitted our auditors’ report on March 2, 2000.

Ernst & Young AB

Sven Santesson Lars-Bertil NilssonChief Auditor and Authorized Public Accountant Authorized Public Accountant

Note 15. CHANGE IN SHAREHOLDERS’ EQUITY, PARENT COMPANY

Share Statutory Retained Net income(SEK M) capital reserve earnings for the year

Amount on January 1 94.0 19.3 127.3 34.2Allocated to earnings

brought forward — — 0.4 – 0.4Dividends — — — – 33.8Group contribution — — – 0.5 —Net income for the year — — — 71.9

Amount on December 31 94.0 19.3 127.2 71.9

Note 16. UNTAXED RESERVES, PARENT COMPANY

(SEK M) 1999 1998

Tax equalization reserve, ‘95 0.6 0.6Tax equalization reserve, ‘96 3.6 3.6Tax equalization reserve, ‘98 0.1 0.1

Total 4.3 4.3

Note 17. DEFERRED TAX, GROUP

(SEK M) 1999 1998

Amount on January 1 95.9 84.4Appropriations for the year 12.3 11.7Other changes – 0.6 – 0.2

Total 107.6 95.9

Note 18. LONG-TERM LIABILITIES

Total confirmed lines of credit in the Group are SEK 582.5 M(230.0). As of the balance sheet date, the amount utilized was SEK198.7 M (168.8).

Note 19. CONVERTIBLE LOAN

The convertible loan is in the amount of SEK 60.0 M. Of this amount,SEK 8.7 M (10.0) has been deposited with a subsidiary for the pur-pose of future subscriptions by senior executives. The loan runsfrom February 16, 1998 to February 14, 2003. The conversion peri-od runs from February 17, 2001 to January 31, 2003. The conversionprice is SEK 169.50 and the loan carries an interest rate set at theStockholm Interbank Offered Rate (STIBOR) less 0.50 percent.

Note 20. ACCRUED EXPENSES AND PREPAYMENTS


Salary liabilities 74.1 68.9 3.2 1.5Employer payroll fees 47.8 41.4 2.5 1.1Other items 35.1 32.5 3.5 4.7

Total 157.0 142.8 9.2 7.3

Note 21. COLLATERAL PLEDGED FOR OWN LIABILITIESAND PROVISIONS


Chattel mortgages 4.6 2.7 — —Real estate mortgages 3.0 3.0 — —

Total collateral pledged 7.6 5.7 — —

Note 22. CONTINGENT LIABILITIES


Guarantees on behalf of subsidiaries — — 31.6 27.7Other contingent liabilities 5.0 2.9 — —

Total contingent liabilities 5.0 2.9 31.6 27.7

33

34

To the Annual Meeting of Shareholders in Nolato AB (publ)Swedish corporate identity number 556080-4592

We have audited the Parent Company and consolidated financialstatements, the accounts and the administration of the Board ofDirectors and the President of Nolato AB (publ) for 1999. Theseaccounts and the administration of the Company are the responsi-bility of the Board of Directors and the President. Our responsibilityis to express an opinion on the financial statements and the admin-istration based on our audit.

We conducted our audit in accordance with generally accepted audit-ing standards in Sweden. Those standards require that we plan andperform the audit to obtain reasonable assurance that the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and dis-closures in the financial statements. An audit also includes assess-ing the accounting principles used and their application by the Boardof Directors and the President, as well as evaluating the overallpresentation of information in the financial statements. To form a

basis for our opinion regarding discharge of liability, we examinedsignificant decisions, actions taken and circumstances of the Com-pany in order to be able to determine the possible liability to the Com-pany of any Board member or the President. We also examinedwhether any Board member or the President in some other way hasacted in contravention of the Companies Act, the Annual Accounts Actor the Articles of Association. We believe that our audit provides areasonable basis for our opinion set out below.

In our opinion, the Parent Company and consolidated financial state-ments have been prepared in accordance with the Annual AccountsAct, thus providing a true and fair view of the Company’s and theGroup’s earnings and financial position, in accordance with gener-ally accepted accounting principles in Sweden.

We recommend that the Annual General Meeting adopt the ParentCompany and consolidated income statements and balance sheets,distribute the profit in the Parent Company in accordance with theproposal in the Report of the Directors and discharge the members ofthe Board of Directors and the President from liability for the financial year.

March 2, 2000Ernst & Young AB

Sven Santesson Lars-Bertil NilssonChief Auditor and Authorized Public Accountant Authorized Public Accountant

A U D I T O R S ' R E P O R T

0

50

100

150

200

250

300

1995 1996 1997 1998 1999

35

N O L A T O S H A R E D A T A

HISTORYNolato AB was founded in 1938. The name Nolato was adopted in1982 as a shorter form for Nordiska Latexfabriken i Torekov, whichthe company was named before.

The company's Class B shares have been listed on the OTC list ofwhat is now called the OM Stockholm Stock Exchange since 1984.

SHAREHOLDERSAt the end of January 2000, the number of shareholders was 8,676,an increase of 9 percent. Managed funds and other institutionalinvestors owned shares representing 33 percent of capital, while for-eign investors accounted for 3 percent.

The total number of shares is 18,791,006, of which 1,971,000 areClass A shares with 10 votes each and 16,820,006 are Class Bshares with one vote each.

DIVIDEND POLICYThe Board’s goal is to increase the dividend at the same pace as theCompany’s growth. For fiscal 1999, a dividend of SEK 2.20 (1.80) pershare is proposed, corresponding to 25 percent (28) of earnings pershare after full tax.

TRADING ON THE STOCK EXCHANGEAt the end of 1999, the company’s Class B shares were quoted atSEK 165. This corresponds to a P/E ratio of 19. On March 9, 2000,Nolato’s market capitalization was SEK 5,600 M.

CONVERTIBLE NOTE ISSUE FOR EMPLOYEESNolato AB’s Extraordinary Meeting of Shareholders on December17, 1997 approved an issue of convertible promissory notes toemployees of the Nolato Group.

The debenture loan totals approximately SEK 60 M, running fromFebruary 16, 1998 through February 14, 2003. The loan carries anannual interest rate corresponding to 12-month STIBOR minus 0.5percentage points. The notes can be converted into series B sharesfrom February 17, 2001 through January 31, 2003. The conversionprice is SEK 169.50.

Full conversion would create 354,000 new shares, diluting thenumber of shares by 1.85 percent and the number of votes by 0.96percent.

PER SHARE DATASee under the five-year review on page 22.

SHARE PRICES, JANUARY 1, 1995 TO MARCH 9, 1999

Nolato B

Affärsvärlden General Index

Stockholm OTC Index

OWNERSHIP STRUCTURE on Jan 29, 2000 Total shares Class B shares Class A shares % of capital % of votesJorlén family 2,963,050 2,127,550 835,500 15,8 28.7Boström family 2,509,250 1,673,750 835,500 13.4 27.5Nordbanken mutual funds 1,841,600 1,841,600 0 9.8 5.0SEB mutual funds 986,100 986,100 0 5.2 2.7Sixth National Pension Insurance Fund Board 712,900 712,900 0 3.8 2.0Skandia 577,100 577,100 0 3.1 1.6Handelsbanken mutual funds 477,200 477,200 0 2.5 1.3Carlson small-cap fund 336,800 336,800 0 1.8 0.9E&M Paulsson family and assoc. companies 313,450 13,450 300,000 1.7 8.2Svolder 272,300 272,300 0 1.4 0.7Sw. Building Workers’ Union pension fund 263,000 263,000 0 1.4 0.7Robur mutual funds 179,000 179,000 0 1.0 0.5Others 7,359,256 7,359,256 0 39.1 20.2Total 18,791,006 16,820,006 1,971,000 100.0 100.0

36

■ MEMBERS

BO C E RAMFORS ChairmanBorn 1936, GothenburgShareholding in Nolato: 2,000Board member since 1984Other directorships:Svenska Mässans StiftelseSinterCast AB, Bure Vård ochOmsorg AB, Ruben RausingFoundation, Gothia Hotel ABVästkustens Skogs HoldingAB, Insite AB

GUN BOSTRÖM-SVENSSONBorn 1942, Torekov, EngineerShareholding in Nolato, incl.family holdings: 1,198,120.Board member since 1971

KRISTER JORLÉNBorn 1933. TorekovShareholding in Nolato, incl.family holdings: 514,860.Convertible notes correspond-ing to 2,950 shares. Boardmember since 1969

HENRIK JORLÉNBorn 1948. TorekovExecutive Vice President andhead of Industrial Compo-nents business area, Nolato ABShareholding in Nolato, incl.family holdings: 645,500.Convertible notes correspond-ing to 2,950 shares. Boardmember since 1974

CLAES WARNANDERBorn 1943. StockholmPresident, Haldex ABShareholding in Nolato: 500Board member since 1999Other directorships:Atle, Karolin Verkstadsindus-tri, Zeteco and Haldex.

TOMAS SJÖLINBorn 1949. MalmöPresident and CEO of theNolato Group since January 1,1999. Shareholding in Nolato,incl. family holdings: 2,000

MAGNUS BERGQVISTBorn 1955. Sunne. Employee

Representative, LO. NolatoSunnex. Shareholding inNolato: 0. Board membersince 1990

GÖRAN HELLSTRÖMBorn 1949. KristianstadEmployee Representative, SIF,Nolato Mobile. Shareholdingin Nolato: 0. Board membersince 1997

MATS ENGVIEBorn 1964. KristianstadEmployee Representative, LO,Nolato Mobile. Shareholdingin Nolato, incl. family hold-ings: 600. Board membersince 1997

■ DEPUTY MEMBERS

EWA NORRMANBorn 1951. GothenburgEmployee Representative, SIF,Nolato Plastteknik ABShareholding in Nolato: 0Board member since 1997

REGINA HÖGBERGBorn 1955. Skånes FagerhultEmployee Representative, SIF,Nolato Termoform AB. Share-holding in Nolato: 0. Boardmember since 1998

PETER LANNBorn 1968. Skånes FagerhultEmployee Representative, LO,Nolato Lövepac AB. Share-holding in Nolato: 0. Boardmember since 1998

■ AUDITORS

ERNST & YOUNG AB

SVEN SANTESSONBorn 1936. HelsingborgAuthorized Public AccountantChief Auditor

LARS-BERTIL NILSSONBorn 1953. HelsingborgAuthorized Public Accountant

B O A R D O F D I R E C T O R S

Bo C E Ramfors

Krister Jorlén

Gun Boström-Svensson

Henrik Jorlén

Claes Warnander

Tomas Sjö l in

Göran Hellström

Magnus Bergqvist

Mats Engvie

37

G R O U P E X E C U T I V E M A N A G E M E N T

TOMAS SJÖLINPresident and CEO since January 1, 1999Joined Nolato on December 1, 1998Born 1949Shareholding in Nolato, including familyholdings: 2,000

JOHNNY STÅHLHead of Mobile Commu-nication business areasince February 1, 2000.Joined Nolato on February 1, 2000Born 1949

HENRIK JORLÉNExecutive Vice Presi-

dent and head of Indus-trial Components busi-ness area since 1998.Joined Nolato in 1968.

Born 1948Shareholding in Nolato,

including familyholdings: 645,500

Convertible notes cor-responding to 2,950

shares

THOMAS HÅKANSSON

Director of Marketing,Mobile Communica-tion business area,

since 1998. Joined Nolato

in 1988.Born 1959

Convertible notes corresponding to

2,950 shares

PER-OLA HOLMSTRÖMChief Financial Officer, Nolato AB,since 1995. Joined Nolato in 1995.Born 1964Shareholding in Nolato, includingfamily holdings: 510Convertible notes corresponding to1,476 shares

JÖRGEN BRANDTDirector of Marketing and BusinessDevelopment, Industrial Componentsbusiness area, since 1998. JoinedNolato in 1988.Born 1962Shareholding in Nolato: 2.000Convertible notes corresponding to1,476 shares

38

T H E N O L A T O G R O U P

Nolato ABSE-260 93 TorekovStreet address: NolatovägenTelephone: 0431- 44 22 90Telefax: 0431- 44 22 91Internet: www.nolato.seE-mail: [email protected]

■ MOBILE COMMUNICATIONHead of business area: Johnny Ståhl

Nolato MobileAnnual sales: SEK 728 MEmployees: 657President: Tommy JohanssonBox 2072, SE-291 02 Kristianstad, SwedenStreet address: Tegelbruksvägen 15Phone: +46 44 18 60 00Fax: +46 44 12 70 80E-mail: [email protected]

Nolato SilikonteknikAnnual sales: SEK 388 MEmployees: 180President: Jan-Erik LansBergsmansvägen 4, SE-694 91 Hallsberg,SwedenPhone: +46 582 889 00Fax: +46 582 889 99E-mail: [email protected]

Nolato MobitecAnnual sales: SEK 83 MEmployees: 56President: Bjarne LindbladBox 5, SE-234 21 Lomma, SwedenStreet address: Koppargatan 13Phone: +46 40 41 97 70Fax: +46 40 41 97 95E-mail: [email protected]

Nolato LövepacAnnual sales: SEK 78 MEmployees: 47President: Glenn SchmidingerRingvägen 5, SE-280 40 Skånes Fagerhult,SwedenPhone: +46 433 323 00Fax: +46 433 323 02E-mail: [email protected]

Nolato TexasAnnual sales: SEK 30 MEmployees: 50President: Per Åhlund15001 Peterson CourtAlliance Commerce Center 2Fort Worth, TX 76177, U.S.A.Phone: +1 817 430 4744Fax: +1 817 430 2889E-mail: [email protected]

Nolato TallinnEstablished during 1999President: Peeter MördPeeterburi tee 47,EE-11 415 Tallinn, EstoniaPhone: +372 6 052 181Fax: +372 6 062 185E-mail: [email protected]

Nolato ShieldmateAcquired March, 2000Employees: 250President: Torsten Nilson761 District DriveItasca, IL 60143, U.S.A.Phone: +1 630 773 8801Fax: +1 630 773 8807E-mail: [email protected]

■ INDUSTRIAL COMPONENTSHead of business area: Henrik Jorlén

Nolato AlphaAnnual sales: SEK 161 MEmployees: 158President: Torleif HanssonBox 2107, SE-291 02 Kristianstad, SwedenStreet address: Tegelbruksvägen 15Phone: +46 44 20 51 00Fax: +46 44 20 51 02E-mail: [email protected]

Nolato PlastteknikAnnual sales: SEK 118 MEmployees: 124President: Leif ThörnebyBox 4123, SE-422 04 Hisings Backa, SwedenStreet address: Exportgatan 59Phone: +46 31 58 84 00Fax: +46 31 52 69 82E-mail: [email protected]

Nolato SunnexAnnual sales: SEK 118 MEmployees: 137President: Ulf HildingBox 116, SE-686 23 Sunne, SwedenStreet address: Bråruds IndustriområdePhone: +46 565 173 00Fax: +46 565 173 73E-mail: [email protected]

Nolato PolymerAnnual sales: SEK 111 MEmployees: 90President: Peter KrikströmSE-260 93 Torekov, SwedenStreet address: NolatovägenPhone: +46 431 44 22 00Fax: +46 431 44 22 01E-mail: [email protected]

Nolato GotaAcquired March 1, 2000Employees: 100President: Hans GranlöfBox 29, SE-533 21 Götene, SwedenStreet address: Alsborgsgatan 2Phone: +46 511 34 21 00Fax: +46 511 34 21 01E-mail: [email protected]

T H E N O L A T O G R O U P

Nolato STGAnnual sales: SEK 69 MEmployees: 65President: Håkan HillqvistBox 44, SE-280 70 Lönsboda, SwedenStreet address: HammarvägenPhone: +46 479 252 00Fax: +46 479 252 10E-mail: [email protected]

Nolato TermoformAnnual sales: SEK 43 MEmployees: 39President: Christer LandgrenFramtidsg. 6, SE-262 73 Ängelholm, SwedenPhone: +46 431 44 90 50Fax: +46 431 44 90 51E-mail: [email protected]

■ BRANDED PRODUCTSHead of business area: Tomas Sjölin

Nolato ElastoteknikAnnual sales: SEK 80 MEmployees: 32President: Per G. HellbergBox 51, SE-662 22 Åmål, SwedenStreet address: Gamla Örnäsgatan 15Phone: +46 532 60 75 00Fax: +46 532 60 75 99E-mail: [email protected]

NolatoSunnex EquipmentAnnual sales: SEK 42 MEmployees: 29President: Lars BackmanBox 555, SE-686 28 Sunne, SwedenStreet address: Bråruds IndustriområdePhone: +46 565 177 00Fax: +46 565 107 00E-mail: [email protected]

Sunnex EquipementAnnual sales: SEK 18 MEmployees: 9President: Gilles de Vautibault6 Allé des Banquiers, ActimartZ I les Milles BP 1540013794 AIX Cedex 3, FrancePhone: +33 4 42 39 78 96Fax: +33 4 42 39 78 77E-mail: [email protected]

Sunnex Inc.Annual sales: SEK 36 MEmployees: 26President: Lars-Arne Lundholm3 Huron Drive Natick, MA 01760 U.S.A.Phone: +1 508 651 0009Fax: +1 508 651 0099E-mail: [email protected]

■ MEDICAL COMPONENTSHead of business area: Henrik Jorlén

Nolato MedevoAnnual sales: SEK 35 MEmployees: 51President: Peter StåhlSE-260 93 Torekov, SwedenStreet address: NolatovägenPhone: +46 431 44 22 60Fax: +46 431 44 22 61E-mail: [email protected]

Nolato GejdeAnnual sales: SEK 26 MEmployees: 20President: Anders JidorfBox 28, SE-234 21 Lomma, SwedenStreet address: Koppargatan 13Phone: +46 40 41 95 50Fax: +46 40 41 95 51E-mail: [email protected]

Not included inany business area:

Nolato AutecAnnual sales: SEK 82 MEmployees: 78President: Björn SundgrenBox 9044, SE-291 09 KristianstadStreet address: Estrids väg 9, Öllsjö, SwedenPhone: +46 44 28 13 00Fax: +46 44 28 13 01E-mail: [email protected]

Copy, design and graphic production: Strategisk Information AB.Translation by Dag Forssell and Victor Kayfetz.

Repro: LithoMontage. Printing: MCT, Limhamn, Sweden, 2000.

Nolato AB, SE-260 93 Torekov, Sweden Phone: +46 431 44 22 90 Fax: +46 431 44 22 91E-mail: [email protected] http: //www.nolato.com

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