Semcon AB at a Develop, Both in the Various • a Number of Longer Train- Fidence

ANNUAL REPORT 1998 SSemcon annual report 1998

Product and Production Development

Industrial Information Technology

Competence and Process Development Contents 1998 in brief

2 Semcon in brief • Semcon continued to build up its infrastructure by establishing an office in Kalmar. Six new departments started during the year. 4 Hans Johansson, MD • Semcon qualified as a primary supplier to Adtranz Sweden, 7 Intellectual capital Ericsson, Scania, Telia and others.

• Important frame agreements were concluded with the County Labour 8 Human capital Board of Västra Götaland.

14 Structural capital • Semcon established a new organisation to facilitate continued growth. 18 Semcon and the environment

Business areas Significant events 20 Product and Production Development after the end of the accounting year

26 Industrial Information Technology • Semcon established in Norway and Denmark 32 Competence and Process Development • A new electronics department started in Linköping, and a new management department in Lund. 40 Reference assignment – Volvo S80 • A partnership agreement signed with Volvo Car Corporation, which 42 Semcon shares means a take-over of staff and parts of the business from the Technical Service Department. The agreement is a rolling agreement for three 44 Five year overview years with an income of around SEK 180 million during the first three years.

45 Definitions 1996 1997 1998 46 Management report Turnover (SEK million) 390.5 495.6 708.9 Operating profits (SEK million) 49.1 57.2 81.9

50 Consolidated profit and loss account Equity ratio (%) 23.7 31.0 39.3

Number shares issued (thousand) 17,338 17,338 17,338 51 Consolidated balance sheet Earnings per share (SEK) 2.11 2.31 3.44

52 Consolidated financial analysis P/E ratio 15.2 15.4 19.5 Average number employees 521 695 955 Parent company profit and loss 53 Profits per employee after financial items (SEK thousand) 98.4 83.5 88.8 account

54 Parent company balance sheet Turnover and operating profit SEK million 55 Parent company financial analysis Turnover Profit 800 80 56 Notes 700 70 600 60 500 50 61 Auditors’ report 400 40 300 30 62 The Board, auditors, management 200 20 100 10

64 Annual General Meeting 94 95 96 97 98

Address list

The Annual General Meeting will be held on Monday the 22 March, 1999 at 6 p.m. at Svenska Mässan in Gothenburg. For further information please see page 64. 1 Financial aims Semcon’s three business Semcon in brief • Our ambition is for our areas and also offering operating margin to exceed customers all-round solu- 10 percent over a trade cyc- tions which span all busi- le. ness • Our debt-to-equity ratio areas and include partners. should be low and our • Staffing – We will recruit equity ratio should be new graduates and experi- above 35 percent. enced professionals. By keep- Business idea: • Dividends should corre- ing staff, recruiting and B further developing new “Semcon sells profitable spond to 30–50 percent of members through varying development power to profits after tax, when this commissions and training leading industrial compa- equity ratio has been courses Semcon will be able nies through positive and achieved. to continue expansion. committed people with Our ambition is to offer the right skills.” Long-term strategies various types of bonus • Growth – Growth should systems and a chance to in the main continue to have occur organically, but also a stake in the company by means of the additional with the aim of motivating acquisition of smaller com- members of staff to remain panies and also through with the company and inc- taking over business from rease their personal involve- customers in the form of ment in Semcon’s long- outsourcing and partner- term development. ship. • Company culture – • The Market – Expansion Semcon will defend and should take place by estab- develop a strong company lishing new offices in culture which has been Sweden and by careful, long- built up since its inception term international expan- in 1980. This culture is sion, first and foremost in based on common values the Nordic countries and applying to personal Company aims • IT systems and networks secondly by accompanying responsibility, involvement, Semcon’s aim is to be the first (Industrial Information the customers abroad. The listening well and co- choice as a supplier of consul- Technology) continued addition of new operation. Great import- tancy and training for compa- • People and work processes sections at existing offices ance is attached to activ- nies undergoing intensive (Competence and Process is also a link in Semcon’s ities which create relation- development. Semcon’s three Development) expansion. ships. business areas focus on giving Mutual profitability is • Customers – Semcon will • IT – Semcon will always the customer an all-round achieved by providing con- strive for a long-term rela- strive to have the most up- offer which includes develop- sultants who have the right tionship with existing and to-date technology and IT ment of their: skills and by suggesting all- new customers through fast tools. All Semcon’s offices • Products and production round solutions to increase service, listening to them are linked together on a (Product and Production customers’ competitiveness. and involvement. Local network in order to facili- Development) knowledge of customers tate co-operation. Semcon Semcon’s largest customers, 1998 and their development Groups has developed an Internet- Volvo 19% tools and also proposals for based time reporting sys- Ericsson 13% new solutions are also of tem and skills databases in Saab 10% great importance. The Labour Board in Gothenburg 5% order to be able to carry out ABB 4% customer base should be in- its assignments in an Adtranz 3% creased and continue to be effective manner. Tetra Pak 2% broad and also spread over Others 44% different sectors so that Semcon may continue to be Strategies for 1999 Turnover per industry, 1998 • Increased concentra- Automotive 26% independent of any specific tion on IT and elec- Telecommunication & electronics 19% industrial cycle. tronics Training and authorities 15% • Services offered – Semcon Engineering 13% • Focus on the Foodstuffs 5% should constantly strive to Stockholm and Energy and electric power 5% provide a competitive Öresund regions Pharmaceuticals and medical technology 4% range of services. This will • Establishment in the Subcontractors 3% Nordic countries Chemical & petro-chemicals 3% be achieved by listening to Wood pulp and paper 2% the customers and further • Developing more part- Defence 1% developing services within nerships with our Others 4% customers 2 Semcon

Product and Industrial Competence Business Production areas Information and Process Development Technology Development

Management services within Mechanical engineering, Systems development, product development, Electrical/Automation, networking, communi- Main business development, Electronics, Process tech- cations, CAD, PDM, business the environment. Training nology, Testing, Analysis, technical information, within IT, technology, Industrial design web technology. business development.

Proportion of Group turnover 60 % 22 % 18 %

Proportion of Group profits 57 % 26 % 17 %

This business area offers This business area offers This business area offers consultancy services within consultancy services within companies and organisations product development and also systems development, pro- services and training so as to machine and production gramming, handling, com- increase their competitive- design. We produce tailor- munications and presenta- ness through development at made solutions within project tion of information and also the individual and organisa- management and skills the sale of IT-based tools for tional levels. Such a process strengthening, and we offer more efficient product devel- starts with Semcon charting specialists depending on each opment such as CAD and and analysing needs and then individual customer’s wishes PDM products. offering its services. These and needs. Both all-round Customers are to be found are carried out in the form of assignments and individual mainly within telecommuni- consultancy services or commissions are taken on. cations, pharmaceutics and training courses. Customers are to be found the automotive industry. Customers are to be found within telecommunications, Work within this business within telecommunications, pharmaceutics and the auto- area commenced in 1986. medical technology, pharma- motive industry with associ- ceutics and the automotive ated subcontractors, and also industry and also their sub- within petrochemicals, pack- contractors and agents. aging, engineering, process- Important customers within ing and the construction our training activities in- industry. clude the County Labour Work in this business area Board. commenced in 1980, the Work in this business area same year as Semcon’s foun- commenced in 1987. dation.

3 Semcon is pleased to Hans Johansson MD report sales up by 43 percent this year to SEK 708.9 million, and profits up by 46 percent to SEK 84.8 million. Are you pleased with the year’s results? Yes, these are the best results in Semcon’s history. We have been successful with our H sales, and our consultants have been working at full capacity. In addition, developments have been positive within our training business. Semcon Education is doing fantastically well and we’re training up to 1,700 students a day at more than 40 locations.

Semcon was originally an industrial consultancy firm, but if you look at your business today, don’t you seem rather to have become an IT company? We have deliberately concentrated on IT, and today I think we have an excellent, wide range of services on offer. We have a much better balance now between our three business areas Product and Production Develop- ment, Industrial Information Technology and Competence and Process Development. Our share of IT-related consultancy and training commissions has increased over the year and IT is the area of the Group that has grown fastest and which has been most profitable during 1998. But we have naturally continued to develop our ori- ginal business area Product and Production Develop- ment. Amongst other things we have added new skills within industrial design and concentrated further on analysis, calculation and testing. Industrial design is one area I believe will be of more and more significance in the future. We can already note increasing interest amongst our customers in how tech- “The best results nology is packaged. in Semcon’s history”

4 Does this mean that there There has been restruc- trend to outsourcing will Yes, but the change was have been changes turing amongst a number of grow stronger. I can see pos- expected. We have forecast amongst Semcon’s circle of your major customers. sibilities here for us to take that these two sectors, customers too? What do you think this will over existing units from our industrial and IT consultancy, mean for Semcon? customers. Semcon is a nat- will tend to merge more Yes, the earlier predominance ural choice for leading com- and more. When BFE was of the automotive industry We note that more companies in Swedish industry. bought out by Sigma, and has been reduced, although panies are merging or being We have been appointed Caran was bought up by total sales have increased. sold. I think this may affect primary suppliers to WM data, the difference be- This means that we have a parts of our business in the Ericsson, Volvo, Scania, tween the sectors became continued satisfactory short term, but in the Adtranz Sweden and Telia, minimal. The industrial con- customer spread, long term I think to name but some. In early sultancy sector is fragmented with customers it will be good 1999 we signed a partner- and needs structuring. There in a large for us. For ship agreement with Volvo are many small competitors number of example I Car Corporation, which and what is now happening sectors. think that means a take-over of staff and is a merger between com- It has Ford has business within technical panies. This trend is likely always been bought information. to continue and Semcon will Semcon’s aim Volvo Car I think this trend with play an active role. I believe that no cus- Corporation industry choosing fewer that restructuring will have tomer should to develop the suppliers to work with will a positive influence on us, as constitute more company, not run continue, which will favour our potential market is grow- than 15 percent of total it down. If we compare Semcon over smaller sup- ing, at the same time as we sales, since we want to avoid the time General Motors pliers. already have a clear profile being too dependent on any bought 50 percent of Saab vis-à-vis industry. There will one customer. Our broad Automobile, we noted a This development towards be fewer competitors and range of services means that drop-off initially, but now company mergers is also Semcon will be one of the we can offer specialist skills we’re five times as big in taking place amongst your major players. to companies within sectors Trollhättan due to Saab’s in- competitors. At the end of undergoing intensive devel- creased concentration with- the year did a number or opment. in product development. major changes take place I think restructuring on amongst competitors in the part of our customers your sector? will continue and that the

5 Does this mean that the tide turns and expansion ber of different sectors. Our What was the most enjoy- Semcon will buy up smaller starts. Norwegian commerce finances are strong and we able event of 1998? companies? Before is concentrating strongly on have an established trade- The most enjoyable thing was Semcon only grew organ- building up industry and mark on the market. doubtless the victory in the ically, and during 1998 you we’ll be directing our atten- Another critical factor is Whitbread Round-the-World succeeded in increasing tion to land-based and our ability to manage to get Race. I joined a large number the workforce by off-shore industry. the right staff. The big chal- of Semconites on site myself 25 percent to As for Den- lenge in the future will, I and watched EF Language 1,079 people. mark, we’ll be think, be imparting, main- coming home. It was a great starting up taining and adding skills to Yes, it may victory for Swedish engineer- there with an organisation like ours: Hans Johansson, MD be that we’ll ing. All Semcon’s broad range training, being able to change and acquire of knowledge within our but we can adapt company skills to the smaller, eight skills areas were needed see long- demands of the outside complemen- to develop and build this term poten- world and being able to train tary companies winning boat. The project tial for our two our staff. Naturally the most but Semcon will was a technical challenge and other business important thing is for us to continue to grow the victory was good for our areas too. succeed in keeping and de- organically in the main. We self-esteem. veloping our existing staff. succeeded during the year in We are now on our way to achieving our goal of more How would you sum up the the year 2000. In 1996 You often talk of the art of than 1,000 employees purely past year and how do plans Semcon’s vision was “First keeping staff. How do you through organic growth. look for 1999? to the future”, and you set manage to do that at Most appointees come into a target of being number Semcon? In 1998 we had fast, organic contact with Semcon one within a number of growth. We had positive through someone they know We try to look at the whole areas by the year 2001. changes in our range of ser- who has recommended us as person, both career-wise and How have your plans gone? vices and in the spread of employers. as a human being. We speak commissions amongst our If people are happy they We have achieved many of of 100 percent mind and 100 customers. This was due first recommend Semcon, and our goals far earlier than percent heart. We also in- of all to the increased num- that applies to both staff and expected, for example we clude consultants’ families ber of IT assignments, which customers. To enable us to have more than 1,000 staff, in the Semcon culture, now constitute almost continue to grow, we restruc- we are listed on the Stock since family rela- half of total sales. tured after the holidays and Exchange and we have a tionships and 1999 will divided up Semcon into share value of over a billion working rela- have a good smaller companies. Through Swedish kronor. We have a tionships chance, the new organisation we can very good springboard today hang to- I think, of retain the speed of the small before the next millennium gether. To being an- company whilst the new and we started work last succeed in other suc- organisation is giving us a autumn on renewing our keeping staff, cessful year greater opportunity to in- visions, targets and strategy the family feel- for Semcon, crease sales activity. up to the year 2005. We ing is import- with strong have worked out clear scen- ant, for them to demand. We will You spoke earlier about a arios for our customers’ de- feel at home at Semcon. continue to invest in the Nordic establishment for velopment and for our own As a company we have a expansion of the infrastruc- Semcon. Will this be hap- industry. These will form the personality which all who ture with more offices and pening during the coming basis for overall and local come into contact with us departments within new year? strategic work in the future. should recognise. Our staff skills and sectors. We are Our aim is to have achieved are people with strong mo- We’ll be expanding now out- focusing on the Stockholm new, long-term targets and tivation, who see possibil- side Sweden, and in early and Öresund regions, where strategies for our three busi- ities, are positive and set January 1999 we started up we expect to be able to take ness areas during the year great store by giving good in Norway and Denmark. a considerable market share. 2000. service. Even though Norway is on At the same time we will be For a skills company like the brink of recession, we can starting to expand carefully What dark clouds are there Semcon our consultants’ see potential there. We are in Norway and Denmark. on the horizon which could skills are the key to progress. going to get established I believe that 1999 will hinder Semcon’s continued We are thus continuing to there and build up business be another good year for positive growth? concentrate on our internal so that we’ll be ready when Semcon with strong growth skills development pro- If there were a genuine in turnover and profits. gramme K2001. We have slump. Then we would nat- enormous strength and urally be affected, but at the advantage in that we have same time we have never access within the Group to before been so well prepared very good training courses for market changes as we are and teachers. today. We have a very good customer spread with customers within a large num- 6 In today’s information staff have gone home. It society, with a great pro- is the company’s culture, duction of services and business idea, customers knowledge, intellectual and markets, their mode capital, i.e. human and of working and the IT sys- structural capital, is tem. important for companies. It is the combination Intellectual capital is of human and structural difficult to describe in capital which drives a terms of curves and dia- company forward. At grams. Human capital is Semcon we have our own the value possessed by completely distinct per- the staff, their know- sonality, which we call ledge, attitudes and qual- Semcon culture. This has ities. been evolved over eight- Structural capital is een successful years by what remains when the the people who work and have worked in the company.

Intellectual capital

Intellectual capital Human Structural capital capital

7 Human capital

1996 1997 1998 Average number of employees 521 695 955 Turnover per employee (SEK thousand) 750 713 742 Net value per employee (SEK thousand) 514 494 505 Profit per employee after financial items (SEK thousand) 98.4 83.5 88.8

In a service company Age distribution as per Hsuch as Semcon, the December 31, 1998 individual staff member <25 14% is at the heart. The 26-30 30% 31-35 24% skills, creativity, motiva- 36-40 14% tion and enthusiasm of 41-45 8% staff are important pre- 46-50 4% >50 6% conditions for success- fully carried out commissions and projects. Distribution men/women as per December 31, 1998 Men 82% Women 18%

Length of time employed as per December 31, 1998 <1 year 37% 1-3 years 47% >3 years 16%

Total numbers of employees “The big challenge December 31 Staff 1998 turnover, % is to be able to work 98 1.079 98 15 97 863 97 13 96 604 96 18 with enjoyment, 95 547 94 402 curiosity and envolvement.”

8 We lay great store at Semcon operate with others on pro- higher staff turnover was due Semcon co-operates with by new staff receiving a jects. This means that the to increased activity in the various student organisations proper induction and all individual must be capable overheated large city areas. to find out what today’s stu- employees have opportun- of a high rate of renewal. In order to be able to grow dents think is important as ities for on-going skills Emotional intelligence at a planned rate it is im- regards their future career. development. We are also then becomes of extra important to try to retain We also interview students keen for everyone to be kept portance. Ability to develop current staff. This can be personally and Semcon par- informed about what is hap- as a human being, to develop achieved by providing all ticipates in open recruitment pening in the company. To one’s personal targets and staff with an opportunity for days at universities and col- motivate and spur on staff, strive to work on interesting personal development and leges throughout the country. several programmes of incen- projects becomes decisive to also by training them to One obvious factor is to tives have been developed make progress possible. The meet the demands of the use IT as a tool in the re- and we often arrange differ- great challenge is to be able future. Further, successful cruitment process. “Job seek- ent types of social activity. to work with enjoyment, new recruitment is a decisive ing” is the most visited part curiosity and enthusiasm, factor as far as Semcon’s of Semcon’s web site. We Semconites and continue constantly to future growth is concerned. continually post jobs vacant Being able to work as a develop. there and applicants can sub- consultant requires vast tech- For this reason personality Recruitment mit their applications, sub- nical training and a broad and the individual person’s During 1998 Semcon carried sequently to be passed on to range of skills, but social attitudes play a decisive role out a range of different activ- the relevant section head. when we take on new staff at During 1998 Semcon had skills are just as important. ities to recruit new staff. Our Semcon. In other words the a net recruitment of 216 new Technical skills can always be recruitment campaigns are heart is just as important as staff, from 863 during 1997 improved through training, adapted depending on the the mind. skills we are seeking and we to a total of 1,079 employees but it is much harder to Semcon is a relatively turn to new graduates and at the end of the year. The teach “soft” qualities such as young company – 18 years those experienced in the number of employees thus attitudes and personal values. old, and the staff have an sector. rose by 25 percent. As a consultant one often average age of 33 (33). Of Historically speaking we Semcon seeks first and has no run-up, but one has those employed, 18 percent have been successful in our foremost to recruit internally to adapt oneself continually (17) were women at the end recruitment of new staff. An for leading positions, so as to to new situations, be able of the year. Staff turnover important stage in this work create an internal career to communicate easily with during 1998 amounted to 15 is continual monitoring of structure. customers and be able to co- percent (13). The somewhat the surrounding world.

9 Semcon has always put great effort into its marketing and been noticed for its campaigns. The autumn campaign The Spirit of Human capital Semcon has further built on Semcon’s earlier campaigns on the theme “technological heroes”. There are many strong personal- ities with differing interests at Semcon. Active consultants of all ages with interests ranging from painting to parachute jumping. Consultants with technical skills and experience from a range of interesting assignments. We wanted with our campaign to promote this combination of knowledge, service and a quite special company culture, Semcon culture.

10 Skills development • An introductory course on vital importance. They At Semcon’s AGM held on In a knowledge company taken by all staff whatever provide the basis for strong the 23 March, 1998, the share- such as Semcon, staff skills area they work in. This in- commitment and create holders passed a resolution are the basis of all progress. cludes our induction course involvement. At Semcon we that an option scheme should We know that only human and training in quality have always given priority to be offered to all employees. beings can impart knowledge and the environment. openness, and encouraged There was wide interest and and enthusiasm, give service, • Practical courses (tech- good communication at all all options were taken up by take responsibility and create nology, computing, levels – an important reason a total of 508 staff members. profits. The future involves project management) for our success. Our commu- Each option gives the holder nications are hallmarked the right to take up a many changes and new • Training courses in per- by objectivity, cred- new share in demands. Semcon staff have sonal development to constantly learn more and ibility and con- Semcon AB at a develop, both in the various • A number of longer train- fidence. It is price of SEK 75 technological fields and ing courses such as mechan- important to during the within consultancy roles. ical engineering, project begin on the period 2 May Semcon has its own pro- management, environment home front: – 31 August gramme for skills develop- management and quality what Semcon 2001. ment: K2001, which means training. wants to com- It is Semcon’s Skills Year 2001. The pro- Managers at various levels municate to the ambition to offer gramme will increase con- also continually go on intern- outside must be employees also in the sultants’ professionalism al and external courses. For understood by our own staff. future an opportunity to when they work on commis- new managers Semcon has The handling of informa- have a stake in the company, sions and projects. The rate a programme where we go tion needs always to be since the management con- of change in technological through basic values, guide- adapted to developments in siders that it motivates staff development is high, and to lines, responsibilities and society, and during the to remain with the company be at the forefront consider- powers. To meet the demands autumn we introduced a new and also makes new recruit- able resources are being of the future in IT, Semcon communications strategy ment easier. invested in internal training. offered all employees the with various channels, so that Semcon thus offers its staff a loan of a home PC during staff could quickly and easily number of different training the year. Around 600 mem- get hold of the right informa- courses: bers of staff accepted the tion. offer. During 1998 a typical Salaries and Semcon employee underwent incentive schemes training for an average of 91 At Semcon we apply a sys- hours of which 83 were paid tem of setting salaries indi- working time. vidually. Salaries are based on During 1999 we plan to the individual employee’s further develop induction education, skills and experi- courses in order to be better ence. able to prepare our staff for Semcon has different forms their career at Semcon. of incentive and bonus schemes in order to motivate Information and involve the staff. Any In a company where success one recommending a new, is highly dependent on suitable member of staff and employee performance, in- who brings in a new assign- ternal communications take ment is given a bonus.

11 Human capital

“I think there are many similarities between a consultancy role and parachute jumping. Both in jumping and in my job as a computer consultant I prepare very carefully.”

12 Induction course for all Many exciting Håkan living new employees assignments Like all other new employees, Håkan has been involved in a on hope Håkan had to start work by number of different assign- going on Semcon’s induction ments since he has been at Håkan Widlund has lofty plans, course. Hans Johansson, the Semcon. both as regards his work as a MD, runs the course, which “I had one assignment as computer consultant and as gives new employees an an on-loan computer manager leader of Team Semcon insight into the company in and IT co-ordinator. It was a Parachute. The Semcon team two days. complex job and that’s what do formation jumping “The induction course makes a consultancy job such which is Håkan’s was very good. I fun. There are new interesting great interest. learnt a lot about assignments the whole time Together they Semcon and it and I come into contact with have partici- felt as if I had many new areas and industries. pated in many landed up in At the moment I’m helping a displays and a company company to build up and staff competitions. where every- a new IT department.” “I feel there one was on the are many similar- same side. It was Wide knowledge ities between a con- fun to meet Hans and within the company sultancy role and parachute hear this thoughts and visions “As Semcon has more than jumping. Both in my jumping about the company 1,000 employees, there is a and in my job as a consultant and the future. I also met lot of knowledge on tap within I prepare very carefully and other new employees in the the company. Semconites from work in a very goal-oriented region. It was rather difficult various areas are often work- fashion. In both cases one otherwise to get to know my ing on the same project. Then needs to focus. By jumping I workmates at Semcon as I you realise what an incredible have learnt what methods are immediately landed up on a range there is within the com- required to be able to reach job with a customer. So I got pany. When it’s a matter of your goal and I use that prin- involved with a “helping-hand” meeting Semconites who have ciple in my job too,” says project to help new con- worked on similar projects and Håkan. sultants join the community problems like those I’m work- quickly,” says Håkan. ing on, I have found our New challenge internal skills database Håkan started at Semcon Lofty and a constant (Kompis™ ) very useful,” about a year ago. He had been stream of new things Håkan concludes. responsible for systems with a “I’m very happy here at company and was working on Semcon”, says Håkan. It is communications solutions and easy to get in contact with col- development for customers in leagues in the company and the building trade when he was they’re willing to listen to your offered a job as a computer thoughts and ideas. There is consultant with Semcon. no hierarchy and it’s just as “I had known about Semcon natural for me to send an e- and knew they had clever mail to the Managing Director, people. I hadn’t actually Hans Johansson, as it is to thought of changing jobs, any other Semconite. but the job seemed fun and The problem is that there is seemed like a clear challenge. so much going on at Semcon I also liked the range of skills that it can be difficult to get available within Semcon,” he everything done. Most of my goes on. free time is spent in formation jumping, but I also try to find time for courses within the Skills programme K2001. It is great that the training programme also includes personal development. So far I’ve only managed a UNIX course but there will be definitely be more”, Håkan stresses.

13 Structural capital

Semcons largest customers, 1998 Groups Volvo 19% Ericsson 13% Saab 10% Labour Board in Gothenburg 5% ABB 4% To manage and refine Adtranz 3% intellectual capital, the Tetra Pak 2% S Others 44% individual skill, human capital, has to be con- Semcons largest customers, 1998 verted into permanent Companies Volvo Car Corporation 12% capital for the company, Saab Automobile 9% i.e. structural capital. Labour Board in Gothenburg 5% Ericsson Components 4% Ericsson Radio Systems 3% Volvo Truck Corporation 3% Labour Board in Malmö 3% Adtranz Sweden 2% Others 59%

Turnover per industry, 1998 Automotive 26% Telecommunication & electronics 19% Training and authorities 15% Engineering 13% Foodstuffs 5% Energy and electric power 5% Pharmaceuticals and medical technology 4% Subcontractors 3% Chemicals & petro-chemicals 3% Wood pulp and paper 2% Defence 1% Others 4% “At Semcon we look at the whole person, family relationships and working relations are closely associated”

A strong company culture is the basis for creating stability and learning in a fast-growing service company. Thus, one of the most important tasks for Semcon’s management is to impart company values, or the company culture, to new members of staff and thus ensure that they become firmly established in the organisation.

14 At Semcon we have built up At Semcon we look at the So as always to be close by travelling less, another is our special Semcon culture whole person, we consider to the customer we have an that this can facilitate new ever since we started up in that family relationships and extensive office network and recruitment. Distance work- 1980. We have also docu- working relationships are we are to be found at twenty- ing can mean increased flexi- mented working methods closely associated. For this odd sites in Sweden. bility for staff, increased pro- and routines and also IT aids reason partners are often To assist successful com- ductivity, lower costs and to facilitate the transfer of invited to attend various pletion of commissions for fewer business trips, thereby knowledge and hence strength- events and in the summer our customers we also have e.g. making the combination en the company culture. we arrange e.g. computer our own project method of work and family life easier. courses for employees’ children. SMASH® (Swedish acronym Our employees are now Semcon culture for “Semcon’s Method for able to work from home a Semcon develops and pro- Ways of working and controlling the whole picture day or so per week to the tects a strong company cul- methods in projects”). SMASH® extent the assignment per- ture. Our approach is charac- Semcon’s organisation is char- brings the project to fruition mits. We see possibilities in terised by traditional values acterised by decentralisation on time and with the right distance working for the and a strong sense of style and goal-orientation. This quality and cost level. Our future. It will increase flexi- and quality. Everyone means that consultants work project leaders are qualified bility both for the company coming into contact with with a great measure of per- and certificated in the and the staff. Semcon will recognise our sonal responsibility. The method. Quality and the Semcon inaugurated traits of character and our company relies on the indi- environment are in focus at its first flexible office in values: viduals judgement and ethi- Semcon. This is borne out Gothenburg in autumn • Skills and attitudes – the cal and moral sense. With by companies within the 1997. The office was pur- right social and technical the Semcon culture as an Semcon Group being certifi- pose-built. The staff chose skills and also involvement ingrained response, managers cated according to ISO 9001 their workplace each morn- and a will to learn and and consultants can act and and ISO 14001. ing depending on the work develop. work independently based for the day and the Head sits • Reliability – we stand for on the customers’ wishes and Distance working and in the open-plan office. This stability and profitability needs. the flexible office type of flexible and adaptable and have always shown a As Semcon grows, we At Semcon we want to culti- office promotes openness and profit. want to try and retain small- vate distance working for the exchange of knowledge • The common weal – we company personality and several reasons. One reason is between members of staff care about and support intimacy but also make use that we wish to reduce our and is applied when Semcon each other and have fun of large Group resources. impact on the environment plans new offices. together • Freedom under responsibility – we rely on our staff and their abilities, and we delegate as far as possible. • Businesslike approach – we always give every customer the best possible service. We are open to new oppor- tunities and we tip our colleagues off about new business.

Great importance is attached to activities which create relationships. These are arranged at group, section and branch level and for the whole Group.

15 A well-established service our offices are linked system via the Internet One trend is for industrial trademark together on a network, and KOMPIS™ – A skills database. companies to have fewer but Semcon has put effort into we strive to be connected to Further, Semcon has invested larger suppliers and thus a building up a strong trade- our customers’ systems so as in all major CAD software search for partnership with mark ever since it started up to be able to create faster, packages such as Catia, primary suppliers. in 1980 and views it as a pre- more environmentally friend- Unigraphics and Pro/engin- A further trend is that condition for successful mar- ly and more efficient com- eer for commissions and customers are focusing on keting. The name and the munication. We seek continu- training, and all the normal their core activities and trademark are registered and ally to simplify our routines choosing to farm out part

Structural capital PC software. protected. Semcon’s and reduce adminis- of their other activities to trademark has a tration in order Customers primary suppliers such as strong link to to save time An important part of the Semcon. the company’s and money. structural capital is naturally The last but perhaps most soul – the Semcon the customers, who are to important trend is globalisa- Semcon cul- will con- be found amongst Sweden’s tion. Customers are seeking ture. We have tinue to leading industrial companies. new markets and new staff. linked to it invest Long-term relations provide This process has speeded up values such as resources continuity and Semcon has through mergers and pur- technical know- in order to a broad and stable customer chases. Increased globalisa- ledge, service and refine the base with many companies tion has been brought about seriousness. Accord- administrative having been present ever by amongst other things ingly as Semcon grows it systems we have and since our business started deregulation, reduction in is becoming more and more also develop new ones. in 1980. excise duty but especially important to have a unified Semcon has the following During 1998 Semcon had by stiffening competition for and consistent profile vis-à- IT-aids: around 700 customers and both customers and staff. In vis the market and to main- SEMIS – A customer support the repurchase frequency was order to be able to function tain a credible and positive system above 90 percent. Our cus- globally customers are also seeking global partners. image of our company. Intranet – Mainly a forum tomers include ABB, Astra, Semcon’s intention is to pre- for heads and secretaries Atlas Copco, Electrolux, pare to accompany its cus- IT systems Extranet – An information Ericsson, Volvo, Saab, tomers abroad over the next In order to be able to offer source for all staff Scania, Siemens-Elema, SCA few years. customers the best possible TimeIT™ – A time reporting Mölnlycke, Tetra Pak and Alfa Laval. By our customers being represented in a var- iety of different sectors, exposure to a specific industrial sector is reduced and we are thus less sensitive to changes in the trade cycle. Semcon’s aim is for no customer to constitute more than 15 percent of sales, in order not to be dependent on a particular customer. In addition to industry, Semcon Examples of also works with County customer sectors: Labour Boards and Job •Electronics Centres by providing •The automotive training courses. industry •Packaging •Defence •Chemicals and petrochemicals •Electric power distribution •Electric power supply •Foodstuffs •Pharmaceuticals •Machine tools •Wood pulp and paper •Offshore •Plastics •Telecommunications •Transport systems •Engineering 16 17 Semcon and the Environment

Semcon’s environmental Epolicy: “We want to help guide developments towards a sustainable society. To achieve this, we will continually improve our activity and always give priority to environmental aspects in our work.” “Semcon is a young consultancy company which sees opportun- ities for expansion brought about by business conversion to a sustainable

society.” Swedish Environmental Fund Environmental matters Semcon was awarded the Roburs’ environmental The Swedish Environmental have become more and more annual Environmental Prize fund Fund is a partnership be- important both for society as in Western Sweden, the rea- Semcon was chosen for the tween Banco Fonder and a whole and for business. For sons being: Roburs’ environmental fund Det Naturliga Steget (The Semcon to be able to work in “Semcon represents a company for the following reasons: Natural Step), and the list a credible fashion vis-à-vis its which, in a graphic and innova- “Semcon was the first service consists of a selection of all customers in environmental tive fashion, has incorporated company to certify a part of its Swedish companies quoted matters, a solid environmen- environmental work into the activity according to ISO 14001 on the Stockholm Stock tal policy is necessary company’s development. Semcon in July 1996. The company Exchange. amongst the workforce. was one of the first concentrates hard on There are thirty companies Environmental certifica- environmentally environmental in the top list which make tion work at Semcon started certificated ser- training for its up the investment basis of in late 1995. Less than a year vice companies staff, who are the Swedish Environmental later we were one of the first in the world, technological Fund. When assessing com- service companies in the and it has consultants, panies the Fund takes two world to be awarded an en- developed its and on the factors into account: “The vironmental certificate ac- environmental environmen- company’s dependence on cording to the international work with- tal and qual- resources and the products standard, ISO 14001. in the frame- ity assurance of (including both goods and work of a long- its projects. services) and also the com- Semcon’s environment term environmental Credibility is pany’s strategic environmen- work has attracted plan. Semcon represents a achieved by the environ- tal thinking and work”. attention new generation of companies mental adaptation of its inner In their reasoning, the During 1998 Semcon’s goal- where it has gone without saying activity.” Swedish Environment Fund orientated environmental that the environment should be a mentions that “Semcon is a work attracted attention in natural component of the com- The Swedish young consultancy company various places. pany’s development strategy.” Environmental Fund which sees possibilities in expan- The competition was ar- Semcon is one of the five new sion in and with the conversion ranged by Handelsbanken, companies to have got onto of commerce to a sustainable Arthur Andersen and The the Swedish Environmental society”. Western Swedish Chamber of Fund Top List. Commerce. 18 Semcon’s role in environmental work Linda developed an environ- The awards are confirmation that with its way of making mentally friendly package environmental matters a part of skills development, Semcon is on the right track. Linda Nilsson, who works at Europe and the US. We also suited me as I had earlier Semcon’s aim is to influ- Semcon Engineering West, check that the material does been a designer in injection ence the customers in the took technology and the en- not react with the product. In moulding, and I was also used direction of long-term, sus- vironment into account in her short, we want to be sure that to Pro/Engineer from my tainable solutions in product assignment with Pharmacia & the packaging we use is as degree work too. A combin- and production development Upjohn in Helsingborg. This is environmentally friendly as ation of skills was needed for projects. a good example of the role possible. In my view the job, in both plastic design All staff have great tech- Semcon’s consultants have in Pharmacia is very highly and the environment, so my nological skills in a number their assignments. Semcon’s environmentally aware,” environmental knowledge real- of areas. These skills are aim is to help the principal to says Linda. ly came into its own,” Linda complemented with a know- find a solution which is both Linda Nilsson studied explains. ledge of environmentally technologically advanced and mechanical engineering at “Semcon’s way of com- adapted product develop- environmentally friendly. Lund’s Technical University. bining technological skills with ment, thinking in terms of recycling when choosing Linda Nilsson has worked She read Environmental environmental skills is a very materials, and life cycle ana- on the development of pack- Technology at LTH Malmö and good idea, I think. Industry is lyses to achieve an optimal aging for over-the-counter took supplementary examin- becoming more and more combination of technology remedies. ation courses within ISO 14000 aware of the requirements and the environment. Our “In pharmaceuticals en- and Semcon’s obligatory placed on new products and aim is to use this knowledge vironmental thinking is excep- basis course in the environ- designs as regards the en- in various customer assign- tionally important. We must ment. vironment,” Linda concludes. ments, in order to achieve a make sure that the plastics “Pharmacia were looking positive effect on the envir- we use are recyclable. The for a designer experienced in onment. material should be approved plastic design and the CAD by several authorities in program Pro/Engineer. This The future Semcon’s continued work on environmental matters will be directed towards the following areas: • Putting on internal courses in technology and the environment which are adapted to Semcon’s activity, e.g. Environmentally friendly product development and Plastic design. • Marketing and selling external training courses combining technology and the environment. • Reducing the impact on the environment during our consultancy assignments by using more environmentally friendly cars, alternative fuels and increasing the proportion of distance working. • Carrying out environmental assessments of Semcon’s suppliers of product and services.

19 B USINESS AREA Product and Production Development

Key figures 1996 1997 1998 Turnover (SEK million) 277.7 331.0 421.9 Operating profit (SEK million) 38.1 38.0 46.9 Operating margin (%) 13.7 11.5 11.1 Operating profit per employee (SEK thousand) 91.6 74.2 71.9 Within the business Parea Product and Production Development we work on product development and also machine and plant design.

Business area Buiness area Average number share of share of total of employees “We produce tailor- total sales operating profit 98 652 60 % 57 % 97 512 96 416 made solutions based on each customer’s wishes Within the business area Product and needs” and Production Development Semcon works on product development and Network also machine and plant design. Here can be found skills in engineering, electrical/automation, electronics, process technology, testing, analysis and industrial design.

20 Business skills. This collaboration ap- design, which is an import- The Market and The business area Product and plies also between the different ant addition to our other customers Production Development con- companies in the Group. work. Many large companies Our customers are to be stitutes an important part of Activity in this business are concentrating a large part found within telecommuni- the Semcon Group, nearly 60 area started in 1980, the same of their product development cations, pharmaceuticals and percent. This business area year as Semcon was founded. costs on design, which has the automotive industry with saw a growth in turnover of The companies forming part thus become an important associated subcontractors, 27 percent during the year of the business area Product factor in competition within and petrochemicals, pack- from SEK 331 million during and Production Development industry. By means of these aging, engineering, process 1997 to SEK 421.9 million. are Semcon Engineering West newly acquired skills Semcon and the construction indus- Semcon is amongst the lead- AB, Semcon Engineering East is able to offer customers all- tries. Semcon has always ing companies in this field. AB and Semcon Analysis and round design solutions. striven for co-operation long- We produce tailor-made Test Center AB. Semcon Analysis & Test term with its customers, and solutions within project Center AB was relaunched in will be continuing to strength- management and skills Developments connection with our reorgan- en its good relations also strengthening, and we provide during the year isation. With enormous during 1999. specialists for each customer’s Product and Production experience and large number Semcon collaborates with wishes and needs. Within this Development developed of consultants within testing, a number of partners within area there is unique and well- strongly during the year and analysis and calculation, different areas, including developed collaboration cover- carried out assignments for Semcon Analysis & Test Albihns, Wiba, Extern ing all areas of technology, companies such as Volvo, Center can offer blanket Engineering, Chalmers, which allows all-round com- Saab, Ericsson and solutions for many types of FordonsKomponentGruppen, mitments and also guarantees Pharmacia. testing, such as for function, MSX International and ASI that the customer can During the year we con- wear, durability and fatigue. Consulting. always be offered centrated mainly on electron- During the year Semcon During the year Semcon the best pos- ics and on process technol- was appointed primary sup- will seek to widen its sible ogy, and the number of com- plier by Adtranz Sweden, customer base. Potential missions from the processing Ericsson, Volvo and Scania. customers are to be found and forestry industries in As a consequence of this, within telecommunications, northern Sweden [Norrland] Semcon has been able to electronics and the medical- increased in the second half enter into more in-depth technological sector and also of 1998. collaboration in the form of amongst the industry’s During 1998 skills were partnerships and outsourcing subcontractors. added within industrial with these customers.

Largest customers: • Volvo • Ericsson • Saab • ABB • Adtranz

21 Stiga ABB Automation Products The Stiga Bio Master, a shredder for Semcon’s consultants helped to garden waste, is the first product on the develop a new generation of the market which Semcon’s designer group Stressometer in collaboration with has helped to develop. The design is such ABB. that the new shredder is much quieter There are Stressometers at most and more efficient than its predecessor. cold-rolling mills in the world. Semcon worked on the design of the in- The meter ensures that e.g. alu- take so that material is fed in straight to minium sheeting for beer cans, the blade. Current safety regulations aluminium foil or steel for cars have also been respected. attains its correct evenness without User friendliness is very important, tension. and the handle is ergonomically It was part of the task to de- designed for different types of velop a new operator interface. use. The shredder can also With the help of Java applets and be dismantled, which client/server technology an operator makes it easier to trans- interface was designed which is Product and Production Development port and moreover simpler platform-independent. to manufacture. Thanks to the smooth exterior the shredder is easy to clean. The German company OBI ordered a large batch in its own red colour when they saw the design sketches.

22 Siemens Elema A dominant trend within The sector and competi- products are becoming ever the sector is for the major tion structure underwent shorter leading to intensified companies to use outsourcing rapid change during the final efforts on the part of com- Siemens-Elema carries on the de- to an ever greater extent. As stages of the year. Two in- panies to reduce trial periods. velopment, manufacture and sale a stage in this development, dustrial consultancy firms As to companies in the of medical technology directly on demand for all-round com- quoted on the Stock Ex- automotive industry, in- the world market. mitments with product de- change were acquired by IT creased collaboration is Semcon has been involved in the velopment has increased con- consultancy companies: BFE, expected with a number of development of electronics, both siderably. Primary supplier which was bought by Sigma, selected subcontractors. Here hard- and software, for Siemens- has become a key term with- and Caran, which was bought Semcon is seeking to develop Elema’s X-ray equipment within in the sector. When the by WM-data. During the long-term contacts and the area of mammography industrial climate hardens, same period Semcon’s IT- expand its existing network. (Mammomat). companies review the num- related business expanded There is strong potential ber of consultancy services. strongly and the difference for growth within the for- Semcon has also participated in A smaller number of com- between IT consultants and estry, paper and woodpulp the development of the electronics panies come in line for industrial consultants was industries in the north. which form part of Siemens- major, interesting volume further reduced. Both sectors There is also potential for Elema’s mobile and development are thus tending to merge to growth within processing X-ray equip- assignments. an ever greater extent. throughout the country. ment Industrial con- Our major competitors are Semcon is seeking to become (Mobilett) sultancies are Sigma, who are active within considerably stronger in for inten- expected to a large number of technical these areas during 1999. sive care show further areas in large parts of Sweden, The pharmaceuticals amongst positive de- WM-data, who through industry is continuing to other things. velopment, Caran work in the auto- expand, and Semcon sees a since industrial motive industry in Western tendency towards increased companies will Sweden and ÅF, who are demand and thus a certain also continue to con- active in the Stockholm potential for growth through centrate on product devel- region and within processing the Swedish market. opment. During 1997 the 25 in northern Sweden (Norr- One threat is a strong largest industrial companies land). downturn, but the risk of a invested around SEK 88 downturn within the indus- billion in research and deve- The future try and hence for this busi- lopment. Within the business area ness area is limited, since Product and Production product development is not The competition Development, organic growth an activity which is sensitive Total sales for the industry in volume is expected to to the trade cycle. Naturally were around SEK 16.3 billion increase within the existing a slump has a deleterious during ‘97/’98, according to infrastructure. There is poten- effect on all companies, but the Trade Organisation for tional for growth at ten or so Semcon, with its broad range Architecture and Engineer- locations. One of our ambi- and customer base, has han- ing Companies. The techno- tions is to start up electronics dled this in the past in a con- logical consultancy sector is departments at a number of structive manner. highly fragmented with locations. around 5,000 companies Concentration within having a total of 28,500 electronics, processing and employees. The sector con- analysis/testing will continue sists of building, infrastruc- during 1999. We have our ture, architectural and indus- sights on especially the Öre- trial consultants but Semcon sund and Stockholm regions. only competes with the There is potential within industrial consultants. The analysis and testing for both majority of companies are the automotive industry and one- or two-man companies. its subcontractors, and for Fewer than a third of com- other industries undergoing panies have three or four full- intensive development. time employees over the year. Development times for new

23 “My knowledge and experience have meant that we’ve been able to give Nimbus all-round

Product and Production Development support.”

24 from the outset. After taking a program. Together with Nimbus Marianne works degree in civil engineering she we dimensioned the material did research into the area of until we had a boat of optimal on virtual product design in light materials at weight with sufficient struc- KTH [Royal Technical tural strength,” Marianne development University] in Stockholm. explains. Her research led to a fil. lic. Practical tests on individual Nimbus is one of the most degree. Marianne is very know- materials and components important and most respected ledgeable about composites. with the purpose of guaran- boat manufacturers in Europe. “My knowledge of compos- teeing calculations are often The name ites as regards materials tech- carried out at Semcon Analysis Nimbus nology, composite mechanics, & Test Center. has calculation and sand- Positive solution for wich the customer design Analysis of the boat has showed that meant there was that we potential have been for redu- been able to give cing the synonym- Nimbus all-round sup- weight. The ous for dec- port in their work to improve proposed ades with well-designed boats, the boat’s structural perform- solution gave a and their high product quality ance. In the course of the reduction in weight of approxi- has given the company a good project we have taken into mately 10 percent of the struc- reputation within the boat account aspects such as tural weight. Semcon’s solu- industry. strength, rigidity, manufacture, tion also included a reduction Nimbus contacted Semcon finance and reliability. in materials and manufacturing for help with the dimensioning costs. of their new model, the Collaboration between Nimbus are very pleased Nimbus 29 Nova. The aim was Nimbus and Semcon with the result and discus- to develop a lighter, cheaper In the course of the project sions are in progress re- version of the product. Instead Nimbus contributed their ex- garding continued collabor- of building a costly series of perience derived from having ation. prototypes, Nimbus chose to manufactured quality boats for develop a virtual product with many decades. Semcon con- the aid of Semcon. tributed their experience from Nimbus chose to carry out virtual the Whitbread project amongst product development with the aid Wide knowledge of other things, and their know- of Semcon. Marianne Karlsson at composites ledge of composites in relation the analysis department in Stock- Marianne Karlsson works at to knowledge of materials, holm helped Nimbus to make their Semcon’s analysis department composite mechanics, sand- new model lighter and cheaper. in Stockholm and has been wich theory and structural cal- involved with the project right culations.

Analysis of boat structure Semcon analysed the durability of the boat’s various composite laminate/sandwich panels and loaded them into a calculation model. “The model was put through its paces against theoretical wave power in a so-called FEM

25 B USINESS AREA Industrial Information Technology

Key figures 1996 1997 1998 Turnover (SEK million) 68.9 102.1 159.0 Operating profit (SEK million) 9.2 13.4 21.2 Operating margin (%) 13.4 13.1 13.3 Operating profit per employee (SEK thousand) 131.4 108.9 100.5 In the business area IIndustrial Information Technology, we work on the development, handling and presen- tation of information, and also on the sale of IT-based tools for more efficient product development such as CAD and PDM products.

Business area Business area Average number share of share of total of employees “An ever greater total sales operating profit 98 211 22 % 26 % 97 173 96 070 part of development is centred round InfoCom, In the business area Industrial where areas such Information Technology, we work on as telecommunica- the development, handling and pre- sentation of information, and also tions, IT and the on the sale of IT-based tools for more media come efficient product development such together.” as CAD and PDM products. Our three main areas are: • Technological information (web design, illustration, editing) • IT-services (systems development, communications) • IT-products (CAD, PDM)

26 Business Ericsson and also to acquire Automotive Industry Action InfoCom, where areas such as The business area Industrial the Telia Group as a cus- Group (AIAG), where com- telecommunications, IT and Information Technology was tomer. Ericsson appointed panies such as Volvo, General the media are merging. An responsible for 22 percent Semcon as a Preferred Motors, Ford and Chrysler on-going trend is outsourc- of total Group sales during Supplier. Moreover our sales are collaborating on the mil- ing, i.e. where industrial 1998. Turnover increased to the company increased by lennium bug, Y2K. AIAG- companies focus on their by 56 percent to SEK 159 94 percent. The objective of certification means that core activities and let a small million compared with starting a partnership with Semcon scrutinises the pro- number of associates deal SEK 102.1 million in 1997. Telia also came to fruition. duction process on behalf of with all-round solutions Business within this area Our commitments to Saab the customer at the premises within e.g. IT. Focus is also is carried on by Semcon Data Automobile were extended of the automotive industry’s being directed towards more AB and commenced in 1986. as regards operations and subcontractors for the start of efficient product and process support for the developing the new millennium. development, which requires Developments environment, and also the In early 1999 Semcon new IT solutions. during the year purchase of hardware for signed a partnership agree- Further, it appears that Development was strong technological development. ment with Volvo in connec- there is a clear development during the year. Growth was The volume of product sales tion with taking over staff towards networks such as organic and the total number relating to Saab Automobile and production within the Internet and web-based of employees increased from amounted to SEK 20 million technical information. solutions becoming the 173 to 245 by the end of the during 1998, which is on a dominant environment for year. New IT sections were par with sales during 1997. The market and all information handling in set up in Sundsvall and The proportion of assign- customers companies. Especially the Kista. There was increased ments relating to Internet- Semcon functions as an agent ability of Internet technology concentration on PDM based solutions increased for various soft- and hard- to distribute information (Product Data Management). strongly during the year, ware products for concerns efficiently throughout whole PDM is strongly linked to which induced Semcon to such as Sun, IBM, Silicon organisations, even globally, all Semcon’s business areas, strong recruitment within Graphics, Adra, Novell and has meant that companies are which means that we can the area with the aim of Catia Solutions. continually increasing their provide complete knowledge satisfying customers’ future Developments within IT investment in IT. within the area. needs. proceed fast and new tools The above trends mean Two of this business During the year Semcon and solutions are continually great potential for a business area’s goals for 1998 were to acquired five consultants cer- being added. An ever larger area whose customers are strengthen partnership with tificated by the American part of development concerns mainly to be found within

27 Largest customers their services and are gro- Demand for IT services Ericsson Microwave • Ericsson wing at the cost of smaller is expected to be strong and Systems • Saab firms. Our biggest competi- recruitment of the right staff tors in this area are WM- is becoming an ever more Semcon is participating in the • Volvo data, Frontec, Mandator, important means of compet- development of a communications • Astra CAP, Enator, Guide and ing. To achieve long-term network in future car models. • Telia Sigma. profitability strong invest- Semcon’s task for Ericsson • Tetra Pak ment is required for skills Microwave Systems is to link The future development. For this reason together the car’s own communica- To live up to customers’ work on our internal skills tions network with the Internet. industry and telecommuni- requirements and keep well development programme is At the same time a system is being cations. abreast of the trends we have being intensified, and a new developed where a car owner can Potential customers are identified, Semcon will con- programme was launched in always see the car’s status via a there, especially within tele- early 1999 within this busi- tinue to strengthen its skills web page. communications, pharma- and existing relations within ness area. If for example a car is stolen, ceuticals and other industries IT as regards telecommuni- the owner will quickly be able to in the process of restruc- cations and industrial com- get information as to the time of Industrial Information Technology turing, i.e. where IT systems panies. The market is large will be integrated or de- and growing, and Semcon the alarm and also the car’s pres- veloped. has the potential to take its ent position. Another example is share of the market. the system’s SMS functions, which The competition Investment will continue mean that the car owner can send The structure of the sector within the three areas of ac- a message to the car from his in Sweden consists of various tivity which we consider to mobile phone to activate equipment sub-sectors where Semcon be growth areas. Examples such as the engine heater. comes in as a Computing/ of these are technical informa- Consultancy company. EITO tion, web-technology, systems (European Information development, networking, Technology Observatory) communications, CAD and reckons that growth in PDM. Sweden for computer ser- We are equipped to take vices will increase by 14.3 on outsourcing business and percent to a total of SEK 26.8 partnerships with customers billion in 1999. The major wanting to farm out all or consultancy companies are part of different IT activities. choosing more and more to We will be concentrating conceptualise and package intensively on new recruitment in the near future, especially in the Stockholm region.

28 Ericsson Radio Systems Saab Automobile The Customer Product Information Unit Semcon has been working since Semcon’s consultants take part autumn 1997 to help Saab in planning, system development, Automobile to overcome the millen- programming and implementing nium bug. Saab’s IT environment a web-based documentation-on- is affected varyingly by the crit- demand system. The system is ical dates which will occur up based on the fact that all to and during the transition. Ericsson’s manuals are stored on Semcon’s task is to find, avoid or a main frame, broken down into deal with events and dates which chapters. The system makes it pos- are critical for Saab’s techno- sible to compile and produce hand- logical product development. The books which deal with the parts project is 90 percent finished of a mobile telephone system which today and is expected to have been are relevant in a particular situ- finished during the first half of ation. The complete library of 1999. manuals for a GSM system li- Semcon was the first brary includes half a million Swedish company to pages of information. have five consultants The system can create manuals certified for Y2K in most formats. The tailor-made by the American handbooks are available as Automotive SGML and HTML files, on Industry Action CD-ROM or in hard copy. Group.

29 Industrial Information Technology

30 New Advanced Windows Olof’s Master’s thesis programming Olof was commissioned to fur- led to an advanced ther develop a module used by the system server. This mod- programming assignment ule’s task is to save and fetch messages from a client’s specific in-basket. Here too the programming language tion. Olof Åslund at Semcon C++ and COM technology Data, who has had great ex- were used, and also a mes- perience of sage API called MAPI. data com- “The COM technology and munica- MAPI were new to me and tion, most of the other mem- was bers on the com- project. mis- So we sioned received to create help from program experts in modules to maintain these areas. the exchange of information. Many facts have Olof studied computing for four been derived from relevant years at Karlstad University. literature on the subject, or in Ericsson Infotech AB in Karlstad His Master’s thesis on the certain cases direct from develops EVO Small Business. subject dealt with a new type Microsoft’s support depart- The product is aimed at technic- of protocol for the transfer of ment. It has been very inter- ally interested families and multimedia over the Internet esting to have been involved in small firms. with a high transfer capacity. a project embracing so many EVO Small Business handles This thesis has since formed new advanced technologies different types of messages in the basis for further research within Windows. The fact that a unified manner, which means at the university of Karlstad. the product will be sold in that the user can download his shops world-wide makes every- messages from a central site Strict requirements for thing extra great,” says Olof. wherever he or she is in the communications Olof’s newly gained experi- world. The messages can be “I created the program mod- ence with COM technology and fax, voice or e-mail. A fully util- ules for the system in C++. As MAPI meant that after he had ised system consists of a ser- communication speed is finished the commission he ver computer and a total of four limited by the capacity of the was quickly involved in a new, client computers. GSM system, efficiency require- very interesting project in the For the system to be able to ments were top priority. same department, at Ericsson work, clients and server must Communication should also Infotech AB in Karlstad. be able to exchange informa- survive unwanted interruptions which can arise in mobile telephony. When such an inter- “It has been very ruption occurs, communication should carry on afterwards interesting to have where it left off,” says Olof. been involved in a project which includes so many advanced technologies.”

31 B USINESS AREA Competence and Process Development

Key figures 1996 1997 1998 Turnover (SEK million) 43.9 62.5 128.0 Operating profit (SEK million) 1.8 5.7 13.8 Operating margin (%) 4.1 9.1 10.8 Operation profit per employee (SEK thousand) 51.4 95.0 150.0 Within the business area CCompetence and Process Development Semcon develops industry both as to individuals and organisations.

Business area Business area Average number share of share of total of employees “Our strength is our total sales operating profit 98 92 18 % 17 % 97 60 96 35 range and our ﬁrm basis in consultancy work.” Within the business area Network Competence and Process Development Semcon offers industrial countries help to increase their competitiveness through development at the individual and organisation levels. Such a process starts with Semcon charting and analysing needs, and then offering its services. This is carried out in the form of consultancy services or training courses.

32 This business area accounted tories, training, training the customer himself can Development for 18 percent of the Group’s materials and skills and tele- choose individual compon- during the year total sales during 1998. The phone support. We supply ents or a complete course. Development has been growth in sales was very training in three areas of A complete course leads to strong during the past year. strong and increased by 105 business: certification. Examples of The number of employees percent to SEK 128 million • Technology certificates are: has increased, the range of as compared to SEK 62.5 • IT • CNE (Certified Novell training courses has been million during 1997. • Business development Engineer) broadened, and we have seen Semcon Education AB Training courses include • MCSE (Microsoft Certified growth within the company’s and Semcon Industrial both basic and specialist System Engineer) three areas of activity. New Management AB are part skills and are carried on at • CIW (Certified Internet departments have opened in and parcel of Competence forty-odd locations country- Webmaster) Helsingborg and Kalmar. and Process Development. wide. The number of partici- Our strength is our range Semcon signed a five-year Work within Semcon pants per day amounts to and our firm basis in consult- agreement during the year Education AB started in roughly 1700. ancy work. The skills im- for the Swedish market with 1991 and work within Many of the company’s parted are well anchored in Internet Certification Semcon Industrial courses lead to certification working life. Many of the Institute International (ICII). Management started in which is also recognised teachers are engineers and The agreement means that 1987. Both companies are internationally. Semcon is IT specialists who structure Semcon will have sole rights presented separately. one the country’s largest their teaching with practical in Sweden to put on Internet training companies within consultancy work. This training courses leading to Novell and is moreover a means that the teaching con- the CIW certificate (Certified Semcon Novell Certified Education tent is continually modified Internet Webmaster). Education AB Center (NAEC). We are also at the same pace as the Within the framework of an authorised Sylvan Test changes occurring in the collaboration eight certifica- Business Centre and we carry out cer- business world. tion programmes are offered Semcon Education AB is one tification tests on many of The knowledge of the sub- within five different areas: of Sweden’s five largest the courses on the market. ject to be found in the Group Design, Development, training companies and is a We offer both long and short together with our size and Administration, Safety and total supplier within skills courses. Many of the com- geographical spread con- Electronic shopping. development. Amongst other pany’s courses are based on tribute to the adaptation of Collaboration included a thing we offer skills inven- the modular principal, where our teaching to customers’ total of 70 different courses. wishes and needs. We added to our range of IT

33 Saab Automobile

In 1997 a training partnership was embarked upon between Saab and Semcon, where Semcon developed a training programme for Saab Automobile’s assembly line and project managers. During 1998 more than 100 Saab employees went on Semcon’s manager development programme at three different training levels. As an addition to this Semcon has put on a special course in

Competence and Process Development Microsoft Project in order to further strengthen Saab’s skills within project planning.

Telia

During 1998 a partnership was embarked upon between Semcon Education and Telia. Semcon has been training Telia staff in systems development within the area careers training. The course included both theory and practice and lasted for 35 weeks, with the aim of giving Telia staff new careers within or outside Telia. Semcon’s network of contacts with local offices country wide has contributed to giving participants practical placements and new jobs in their respective home locations. After taking the course, trainees have been awarded a certificate in the development tool SQL server.

34 courses offered by becoming Semcon will be commissio- Largest The competition authorised to run courses lead- ned to supply training in customers The training industry can be ing to A+ certificate, which projecting and management. • County Labour divided into the following is a skills standard for PC A further agreement has Board categories: IT, technology, technicians and support staff, been signed with the County • Telia quality, the environment, and was developed and de- Labour Board in Västra • Saab management, economics, fined by the Computing Götaland County. This • SSAB marketing and languages. Technology Industry agreement means that Training companies are thus • Private individuals Association (CompTIA). Semcon Education AB will not a unified group. The Semcon has been involved be supplying IT and tech- training area of maximum with starting up PMI’s activ- nical courses in Gothenburg industry means that com- growth in the foreseeable ity in Sweden. PMI (Project in 1999. We have also signed panies’ needs for training are future is IT. According to the Management Institute) is an an agreement with SwIT, increasing. There are many international marketing international organisation which is the government’s contributory factors: more institute IDC, the world whose purpose it is to pro- contribution to IT courses. and more complicated aids market is expected to grow mote interest in projects as and tools, quicker and by around 11 percent a year a form of work. It is also the The market and quicker product develop- to reach around SEK 215 bil- intention to strengthen de- customers ment, and new forms of lion by the year 2002. velopments within the area Semcon offers courses for all working and project There are several small project management. PMI industries and areas. Private management. Training is a local competitors on the establishes the guidelines for persons, companies and insti- short-term matter requiring Swedish market but the larg- the certification of project tutions are among the com- constant renewal and devel- est are the EC group, found managers, and their certifi- pany’s customers. During opment. in southern Sweden, Lexicon cate, PMP (Project 1998 new customer contacts Members of staff too have and WM-data Education, Management Professional), were established such as: their needs for personal de- who are active throughout is a formal identification for Rexroth Mecman, Kværner velopment, which means the country. project managers. Pulping, Telia, Tetra Pak, that companies need to offer During the year we signed Norsk Hydro, Atlas Copco, training to be able to retain The future an agreement with Saab Saab Automobile, Saab valuable staff. In addition to We expect a positive devel- Automobile AB in Troll- Ericsson Space and others. the training demanded by opment to continue during hättan, which means that Rapid change within companies, the state is also the coming year. Any reces- contributing more resources sion should not influence the for training the unemployed. positive development since “It’s very hard. The trend is moving historically customers lay out towards outsourcing and on training during such Fast rate. You training activity in com- periods. panies, and Semcon is well We will continue to de- really have to prepared for this develop- velop our range of courses ment. There is also in- and our organisation. Concentration on sector- study” Jenny Åberg, student creasing interest in distance learning. Another fast- orientated courses within growing line of development telecommunications and is multimedia training, i.e. pharmaceuticals will in- interactive courses where crease. In early 1999 an information is presented office was opened in Denmark with the aid of sound, text, and it is our ambition to “The teaching is pictures and video. Training open one in Norway during with the aid of multimedia 1999. structured. It’s on technology is expected to Semcon will increase grow from around SEK 3.8 accessibility as regards train- the ball, no com- billion in 1996 to SEK 63 ing by offering distance learn- billion in 2005, according ing and holiday courses, promises - they to the Business World interactive courses and tele- concentrate on Consultancy Guide 1998. phone support. essentials” Richard Jansson, student

35 Semcon Industrial from start to ﬁnish. We The environment is the Market and customers Management AB work using tried and tested area which has shown most Semcon Industrial Manage- methods; we develop strat- growth during the year. The ment is active within tele- Business egies and make sure they are company has worked on communications, medical At Semcon Industrial carried out. forming strategies for com- technology, pharmaceuticals Management AB we work on Through our partnership panies within the environ- and the automotive industry different types of amendment with Semcon Data we can mental sphere via for exam- and their subcontractors and projects within industry. offer all-round solutions with- ple environmental reports, agents. Semcon supports company in PDM (Product Data developing action plans, Initiatives for change management with the aim of Management). introducing environmental and improvement have been achieving strict productivity, management systems and started up to a greater extent quality and environmental Developments training in the area. During than previously within indus- requirements in product and during the year the year we helped several try, which means that the process development. Our The area Quality and the companies to achieve ISO need for Semcon’s services consultants work on: Environment was previously 14001 certiﬁcation. has increased. The rate of • Process and a part of Semcon Engineering, During the year a part- change and competitive pres- project management but in conjunction with nership agreement was con- sure are expected to endure • Analyses and reports Group reorganisation in cluded with Q-structure AB, for the foreseeable future. The • The introduction of August, the section became which has long experience greatest challenge for indus- systems an independent company. within especially quality try will be to face and surviv-

Competence and Process Development • Training and follow-up Consultancy activity in development. ing in stiffening competi- systems the new company focuses At the end of 1998 a tion. We are active as advisers, more and more on working frame agreement was con- The causes of the intensi- enquirers and problem-solv- methods, routines and cluded with Göteborgs ﬁed competition amongst ers. strategic work for product Energi AB for support when customers include: Our strength is that we and process development. introducing business sys- • Globalisation offer all-round commitment Quality and environmental tems. • Market deregulation where we take responsibility aspects are becoming more Half our customers who • New players becoming for carrying out the task and more important. have previously received established due to the Developments during the advice concerning quality rapid technological and year have been good and a work have returned to ask for product development in new department has been set support in further develop- combination with a higher up in Lund. ment in environmental work. service content

36 Largest The competition intending to concentrate customers Generally speaking this is even more strongly on prod- • Ericsson a growth industry which is uct development processes • Volvo highly fragmented at this and efficiency projects. • Astra point in time. There are We will be further developing our internal • TetraPak many small competitors within the sector, often orientated structure in order to permit towards quality or the en- increased volume and more • Environmental adaptation vironment. efficient cultivation of the of products and activity Competition is expected market. Semcon Industrial Demands are also coming to increase somewhat within Management AB will be from other directions. Con- the environmental area and responsible as from 1999 for sumers are imposing higher to be stable within activity developing the Group’s pro- demands on service and qual- development. ject method SMASH® ity. Owners are demanding Major competitors are (Semcon’s method for con- higher growth and better CANEA Consulting Group, trolling the totality of the returns. Staff want to develop Det Norske Veritas, EQC, project). in the direction of more Euro Quality Consultant and Development within this interesting tasks at work. KM Miljöteknik. activity is very fast and we Altogether these factors will thus be concentrating on mean that many companies The future employees’ continual skills have resumed working on Semcon is already far ad- development. their strategically important vanced in work to combine processes. Increased customer the environment, quality and focus and more efficient productivity in the various internal routines are being processes of the company. sought. We will continue to focus on Efforts are also being industrial companies made to develop skills. working on product develop- Rapid concept and techno- ment. Moreover we are logical development and customers’ demands for quality have led companies to focus on their core skills to an ever greater extent. Amendment projects are Volvo being started, investment in IT is being carried out and Semcon lays on quality develop- organisational structures are ment programmes in conjunction being renewed with the aim with Volvo Cars, Volvo Trucks of adapting their activity to and their suppliers in the Nordic new demands. countries. Semcon has specialised Potential customers are to be found within the follow- for several years in TQM and ing industries: automotive, various technologies for efficient telecommunications, food- quality assurance in product de- stuffs, pharmaceuticals and velopment and production proces- engineering. ses. In collaboration with Volvo, Semcon is responsible for quality courses and provides instructors for some of the course modules. During 1998 Semcon trained 115 people within Volvo’s quality development programme.

37 Competence and Process Development

“My role during the project was to function as a sounding board for participants on the project and to co-ordinate all the part-projects” 38 Specialist in Project manager and Mikael sorted the quality systems skills support Mikael, a civil engineer, stud- “My role under the project was routines out ied industrial economics with to function as a sounding the emphasis on quality con- board for project participants trol. His background, which and to co-ordinate all the part- includes a good knowledge of projects. There were a max- What does it mean actually to quality systems and experi- imum of 17 projects going on develop a business activity ence as a project leader, made at the same time. I followed system? Mikael Johansson, him the right person for the up the results at the defined who works for Semcon job. stages and where necessary Industrial Management, was I updated current project plans commissioned to build up new Started in agreement with the head of business systems and further with a pilot study department concerned,” develop existing ones in nine “Before the project started I Mikael explains. units within GSM Systems carried out a pilot study where Customer Services at Kista. I interviewed all unit and sec- Project on schedule GSM Systems Customer tion heads within the current Bernt Gustin, a business Services, which is a product unit units. The purpose was to find developer with the company of Ericsson Radio Systems, has answers to the question what Hardware Services unit and around 270 staff and is a man- routines and instructions there one of the eminences grises agerial organisation with global were and what were missing. behind the project, comment- responsibility for market support, In the pilot study I took into ed as follows: development and supply of ser- account what formal routines “It is not always so rewarding vice products in connections with the units needed for the to run this sort of pro- mobile telephone systems on activity system to be ject, but the work GSM, NMT and TACS standards. able to fulfil ISO proceeded at 9001 require- a healthy Systems of routines ments,” Mikael rate. It will An activity system can be explains. be a chal- described, somewhat simpli- lenge for fied, as a system of docu- Carrying out Customer mented routines and instruc- the project Services, after tions with the aim of improving Based on the pilot the project is an organisation’s ability to study, Mikael submitted a complete, to manage achieve set aims. This normal- proposal for a project plan to the activity systems success- ly includes definitions of organ- the various unit and sections fully that we’ve built up.” isation and the distribution of heads. The objective was a responsibilities and descrip- complete activity system to be tions of processes, activities published on one of the com- and an improvement pro- pany’s intranets. When Mikael gramme. and the various heads agreed on the design of the project, work started with the creation of routines and instructions. The project was carried out with the aid of internal staff and with a small number of consultants from different companies, including two more from Semcon.

39 Reference commission – Volvo S80

In spring 1998 Volvo launched their new S80 model. Never Rbefore has any of Volvo Car’s cars had such a short development time. The project started three years ago and Semcon was involved right from the start. We are proud that our contribution in the form of skills and service should have contributed to the success of our principal. And we intend to continue in that vein. “Semcon has been privileged to work with leading vehicle manufacturers for many years”

Semcon has been privileged to New advanced form of working where each masters of the technology, we work with leading vehicle solutions team is responsible for the are familiar with co-operative manufacturers for many years. A platform makes it possible whole. In all, twelve modular models, we know the people We have endured the ups to invest in advanced techno- teams were involved in the and we know how high the and downs of the trade cycle logical solutions which would project. temperature is in the working and seen competition stiffen, be difficult to defend other- climate. Our organisation is both locally and globally. At wise for an individual project. Organisation with a ideally suited for easy collab- the same time environmental It is expected also to perfect fit oration with the automotive demands imposed by the increase efficiency, From Semcon’s side industry. Semcon can current- authorities have become more reduce between 40-50 ly offer qualified consultants and more stringent, and development consultants to aid the automotive industry consumers’ requirements as to costs and were in- in their work with pilot stud- performance and technological also shor- volved in ies, design, testing and tech- finesse have increased. This is ten de- the develop- nical information. a tough industry. velopment ment work At Semcon Analysis & Test Volvo is a company at the times. within many Center we have carried out a forefront of technological different areas number of tests on cars, based development and the S80 was Short such as body on Volvo’s own strict require- developed on a new platform development design, engine ments for safety and quality. principle. All components and time development, the interior, Semcon has been working systems will be used in future Reduced development time documentation, electrical/elec- with Volvo since 1983. models. demanded completely new tronics and not least testing. forms of working. Work on At Semcon we are equipped the car was thus carried out in for such tasks. We know what cross-functional layers, i.e. a the requirements are, we are

40 Martin Andersson Bo Wockatz

“I work on data communication design and I’ve been involved with developing a completely new, advanced communications system for the Volvo S80. The new electrical system with 18 computers replaces the old cables, which saves both space and weight. The system is also flexible and can be pro- grammed at the factory based on the customer’s wishes,” Bo explains. “I work as a project co-ordin- models, for example the Volvo Cars are really far “I’ve been mainly working ator at Volvo Design. For P1200 Amazon. The distin- advanced within the new on the engine system and everything to work, those guishing characteristic of technology and computer developing its functions, but I involved must be able to work Volvo cars, the waist-line, networking is something which have also worked on commu- efficiently together. Moreover remains,” says Martin, who is becoming more and more nications between the engine it is important for interaction believes that design will be- popular within the automotive system and the rest of the between design, testing and come an increasingly important industry. Computers have car,” Bo goes on. quality work to begin early, component in future develop- definitely made their inroads Martin explains. ment work. into the car world. For me as Advanced IT “People are not just inter- a consultant at Semcon, it is technology Design, an important ested in new mechanical solu- important to look forwards, to component tions, they want to see visible “My assignment started at keep up and to learn the new the same time as the project, “The new car, the Volvo S80, signs of change on the car or technology. To be always one so I’ve been involved during has a more rounded shape. It other products,” Martin con- step in front, quite the complete development is possible to trace back the cludes. simply,” period. It has been enor- design to earlier Volvo says Bo. mous fun and exciting.

41 Semcon’s shares

Semcon’s shares have Sbeen quoted on the Stockholm Stock Exchange O-list since Share capital Ownership structure the 26 May, 1997. Semcon’s share capital is SEK On the 31 December, 1998 The launch price was 17,338,521, distributed over Semcon had 4,695 sharehold- SEK 31.50. 17,338,521 shares, each with ers. Holdings by institutions a nominal value of SEK 1. amounted to around 70 per- All shares confer an equal cent of the share capital and right to a share of the com- votes as of the 31 December, pany’s assets and profits. Each 1998. Foreign holdings are share gives an entitlement to considerable. Foreign hold- one vote. ings amounted to around 62 percent at the end of the Option scheme year. At the AGM held on the 23 March, 1998, shareholders Dividend passed a resolution that the The Board of Directors es- company should take out a tablished a dividend policy debenture loan of not more to the effect that Semcon than SEK 900,000 through AB’s dividends should in the the issue of not more than long term correspond to 30- 900,000 promissory notes 50 percent of profits after each with a nominal value of tax. The Board of Semcon SEK 1. Each promissory note AB will propose to the 1999 included a detachable option AGM that SEK 1.40 (0.60) voucher allowing subscrip- per share be distributed as a tion to one share in Semcon dividend for the accounting AB. year 1998, making a total Each voucher confers on sum of SEK 24.3 (10.4) mil- the holder the right to sub- lion. The 25 March will be scribe to a new share in proposed as accounting day. Semcon AB during the If the AGM approves the period 2 May to 31 August, resolution, dividends are 2001, at a price of SEK 75. expected to be sent out Interest in Semcon’s under the aegis of VPC on option scheme has been high Thursday the 1 April, 1999. and 508 members of staff have taken up the offer. Of a total of 900,000 options issued, 764,300 options were reserved for present Semcon employees. The remaining 135,700 options will be offered to future employees of Semcon. Decisions concerning the issue of options to present and future employees will be taken by the Semcon Board.

42 Share capital Ownership statistics Number of Total number of Share capital Number of Date Type of emission shares issued shares after issue after issues Size Number of shares Percentage shareholders 7 March 1997 Company formed 500,000 500,000 500,000 1 – 500 732,876 4.2 2,918

14 April 1997 Cash issue 4,003,700 4,503,700 4,503,700 501 – 1,000 873,229 5.0 1,034

14 April 1997 Issue in kind 496,300 5,000,000 5,000,000 1,001 – 10,000 1,578,917 9.1 642

25 April 1997 Cash emission 12,338,521 17,338,521 17,338,521 10,001 – 100,000 2,510,876 14.5 71

100,001 – 11,642,623 67.2 30

Largest holdings as per 31/12/98 Total 17 338 521 100 4 695 Number of shares Percentage Source: VPC AB Shares Register as per 31/12/98 Henderson Investors* 2,596,111 14.97

SE-Banken, funds 715,260 4.12 Data per share

Hans Johansson and relatives 450,000 2.59 SEK 1998 1997 SPP 365,800 2.11 Shareholders’ equity per share before dividend 5.85 3.28

Uni-Invest funds 337,400 1.94 Shareholders’ equity per share inclusive of 764,300 options 5.60 3.14 Fidelity funds 323,779 1.87 Earnings per share after tax 3.44 2.31 Federated funds 263,600 1.52 Earnings per share inclusive of 764,300 options 3.30 2.21 Sonny Lindqvist and relatives 160,823 0.93 Proposed dividend 1.40 0.60 Göran Lundberg 141,177 0.81

Thomas Ohlson 129,800 0.75

Total 5,483,750 31.6

Other ownership 11,854,771 68.4

Grand total 17,338,521 100

Source: VPC AB Shares Register as per 30/12/98. *As per 20/1/99.

SEK number 120 Most recent share price Affärsvärlden General Index Shares traded incl. late dealings Carnegie small cap index

100

60 1,200,000

1,000,000

40 800,000

600,000

20 400,000

200,000

0 0 June July Aug Sept Oct Nov Dec JanFeb Mar Apr May June July Aug Sept Oct Nov Dec 1997 1998 43 Five-year summary 44 / ai 951. 52—— — 325 15.2 — 457 15.4 1.23 — 521 19.5 0.2 1.31 17.7 19.6 695 26.8 1.13 1.73 0.2 10.8 16.1 955 21.9 1.74 1.29 3.14 1.08 0.2 11.5 23.7 32.2 11.1 2.11 1.37 17,338 5.60 1.66 116.2 67.7 31.0 0.1 17,338 42.9 11.2 2.31 1.81 114.4 164.2 2.02 17,338 48.3 39.3 99.6 Average numberofemployees 49.6 0.05 12.6 3.44 3.28 P/E ratio 150.8 17,338 275.3 2.21 (times) Price pershare/equity 11.1 130.8 –310 11.5 17,338 including 764,300options(SEK) 156.3 5.85 45.4 equitypershare Shareholders’ 3.30 132.9 dividend(SEK) before 26.9 equitypershare Shareholders’ 13,134 119.9 11.6 including764,300options(SEK) pershare Earnings 51.1 90.7 aftertax(SEK) pershare Earnings –23,823 43.0 102.4 –18,014 –11,273 issued(thousand) Number ofshares 28,977 –1,037 78,280 Debt/equity ratio(times) –14,020 75.5 –28,509 Risk capitalratio(%) 55,663 109,849 13,947 –16,335 –26,389 21,802 Equity ratio(%) 11,547 22,378 84,420 114,272 18,901 onaveragecapitalemployed(%) Return 6,389 –10,333 –4,343 31,453 34,936 3,749 23,741 equity(%) onaverageshareholders’ Return 147,495 3,089 99,193 –35,487 13,614 13,639 –10,403 51,012 coverratio(times) Interest 6,389 11,113 132,346 114,272 31,431 374 (%) Operating margin 19,799 13,905 130,746 4,725 59,837 55,415 10,076 147,495 183,157 (%) inturnover Increase 6,389 56,833 21,946 16,495 Key figures 132,346 257,614 3,888 82,885 10,015 24,023 8,794 101,358 0 Change inliquidassets 21,547 19,670 27,131 183,157 247 122,585 financialactivities from Proceeds 23,116 20,193 510 12,437 257,614 investments from Proceeds 30,163 42,751 25,510 17,173 24,738 businessinhand from Proceeds 0 14,620 261 36,669 53,983 Statements ofchangesinfinancialposition 2,430 27,493 17,961 Total equityandliabilities shareholders’ 40,049 187 3,522 liabilities Current 20,441 28,464 25,111 liabilitiesandallocations Long-term 59,729 39,340 42,600 equity Shareholders’ 2,391 1,307 236,867 Total assets 51,289 351,398 2,156 Cash/bank 210,586 1,692 26,281 assets Other current 58,010 390,498 312,059 4,640 Debtors 495,613 39,339 84,840 341,413 Work inprogress 708,908 Stock 438,452 49,085 andequipment Machinery 627,016 Goodwill 57,161 Balance sheet 81,892 Net profit Tax afterfinancialitems Profit paid Interest income Interest afterdepreciation Operating profit Operating expenses Turnover andlossaccount Profit netet(E huad 5811,4 8051,3 18,014 443 729 17,730 18,085 466 769 87.6 11,342 514 750 35,891 93.2 494 713 98.4 505 742 83.5 Investment (SEKthousand) 88.8 peremployee afterfinancialitems(SEKthousand) Profit Value addedper employee(SEKthousand) Turnover peremployee(SEKthousand) (SEK thousand) (SEK thousand) 1998 pro forma pro forma pro forma pro forma pro forma pro forma pro forma pro 9719 951994 1995 1996 1997 Definitions

Operating margin Operating profit after depreciation as a percentage of net sales.

Net profit Net profit after tax.

Interest cover ratio Profits after financial items plus interest expenses divided by interest expenses.

Return on average Net profit as a percentage of average shareholders' equity shareholders' equity

Return on average Profits after financial items plus interest expenses capital employed as a percentage of average capital employed.

Capital employed Shareholders' equity plus interest bearing liabilities.

Equity ratio Shareholders' equity as a percentage of total assets.

Risk-capital ratio Shareholders' equity plus deferred tax liabilities divided by total assets.

Debt/equity ratio Interest-bearing debt divided by shareholders' equity.

Earnings per share after tax Net profit divided by the number shares issued.

Earnings per share including options Net profit divided by the number of shares issued plus options.

Shareholders' equity Shareholders' dividend equity divided per share before by the number of shares issued

Shareholders' equity per share Shareholders' equity divided including options by the number of shares

Price per share/net asset value The price per share divided by equity per share.

P/E ratio The price per share divided by earnings per share.

Average number of employees Average number of permanent employees

Turnover per employee Turnover divided by the average number of permanent employees.

Value added per employee Operating profit after depreciation plus salary expenses and national insurance divided by the average number of permanent employees.

Operating profit after Operating profit after financial items divided by the average financial items per employee number of permanent employees.

45 The Board and the Managing Director of Semcon AB (publ), corporation number 556539-9549, hereby present the following Annual Report and Group report for the year 1998. Auditors’ Report Semcon offers Swedish industry skills development A and resources within product and production development, the development of industrial information technology, and skills and process development.

Business Semcon’s customers are to be found among Sweden’s largest industrial groups and companies, which are in turn active in competitive international markets. It is important for these companies to develop products faster and more frequently than their competitors. In order to succeed, they focus on their core skills and out- source additional skills to various consultancy firms such as Semcon. To beat the competition, industrial com- The Semcon Group increased its panies need to develop their internal processes and their turnover for the eighteenth consecutive employees, and invest in information technology so as year. Demand for the Group’s services to render their product and has been high during the year. Semcon production development more efficient. has further strengthened its position as Today, Semcon has a lead- a leading provider of consultancy ing market position since the company is able to offer services to the industrial sector. All customers services within all of the above areas of expert- three business areas had strong develop- ise. ment during 1998. One illustrative Semcon operates through the following branch offices: example of this is that Semcon was Gothenburg (Head Office), appointed a primary supplier to major Helsingborg, Kalmar, Karlstad, Kista, Linköping, Swedish companies such as Ericsson, Ludvika, Lund, Oskarshamn, Oxelösund, Stenungsund, Scania, Adtranz Sweden and Telia. Stockholm, Sundsvall, Södertälje, Trollhättan, Umeå, Varberg, Västerås and Växjö.

46 Essential events in cluded in this business area. Significant events Dealing with the 1998 Among Semcon’s cus- after the year’s end millennium bug During 1998 Semcon tomers, much has happened In Linköping an electronics Semcon has taken several opened a new branch office during 1998. Semcon was division is being formed and measures to avoid problems in Kalmar. Within the busi- appointed a principal sup- a management division in with computers and systems ness area Industrial plier to among others Lund. Semcon is beginning caused by the millennium Information Technology Adtranz Sweden , Ericsson, to become established bug. An executive with three new divisions have Scania and Telia. A letter of abroad. Offices are being responsibility for this issue been formed. Competence intent was signed with opened in Norway and has accordingly been ap- and Process Development Volvo Car Corporation con- Denmark. pointed for the Semcon also increased its operations cerning the handling of edi- A partnership agreement Group. In addition, a man- with two new divisions formed tion of aftersales material. has been signed with Volvo ager has been appointed during the year. Within the Further, substantial agree- Car Corporation, which with responsibility for each business area Product and ments have been signed with involves the take-over of branch office. The objective Production Development, one Västra Götaland and staff and business pusuant is, before the end of 1999, new division was formed. Malmöhus County Labour to the letter of intent men- to eliminate all critical In order to design the Board. Semcon have received tioned above. This is a three- problems which could be organisation for continuous orders from SwIT in Västra year rolling agreement to a hindrance to business. growth, Semcon has chosen Götaland County and produce income of around A substantial part of these to reorganise certain services Malmöhus County. SEK 180 million during this measures has already been as independent subsidiary period. taken. Further, a reserve companies. This ensures Share Option Scheme routine has been developed, fast and efficient decision- At the Annual General Agenda of the Board to be used in the event of making. The Group Meeting of Semcon AB held During 1998, the Board problems caused by the mil- structure is designed to on 23 March, 1998, the share- held six meetings. New pro- lennium bug. emphasise the three business holders decided that the cedural rules were submitted Semcon has analysed and areas. This reorganisation company should issue and adopted by the Board. safeguarded all its own prod- was implemented on debentures for a sum of not These rules set out: ucts and continuous efforts August 1, 1998. more than SEK 900,000 by • Duties incumbent on the are being made to chart and Work in the business area issuing not more than Board identify all systems, pro- Product and Production 900,000 promissory notes, grams, databases and ma- Development has been allo- with a nominal value of SEK • The issues to be reported chinery containing program cated to new companies. The 1. Each promissory note had to the Board logic and imbedded systems. activities of former Semcon a detachable option voucher • How issues should be Critical dates have been ana- Engineering AB are now car- for one newly issued share in brought before the Board lysed and corrective meas- ried on in two separate com- Semcon AB at a share price ures have been taken, intern- panies, Semcon Engineering of SEK 75. Further, the Board prepared ally and externally, between West AB and Semcon Each option confers on the instructions for the the company’s critical Engineering East AB. owner the right during the Managing Director. At systems and processes. Semcon Test Lab AB, has period May 2 to August 31, ordinary board meetings a Semcon has altered pur- changed its name in order to 2001, to subscribe to one report should be presented chasing routines in order to better describe the nature of newly issued share in setting out results achieved insure that all new equip- the company’s services. The Semcon AB, at a share price by the various companies ment is millennium bug- new name is Semcon of SEK 75. and the action to be taken to proof. Furthermore, continu- Analysis & Test Center AB. Interest in Semcon’s share achieve improvements. ous efforts are being made to Within the business area option scheme was very Semcon AB has expanded ensure that the company’s Industrial Information high, and the offer to during the year and the subcontractors are safe Technology the division employees was taken up by Board has been informed and against the millennium bug. Technical Information is 508 persons. Of the total taken the necessary decisions now incorporated in Semcon amount of 900,000 options to facilitate growth. Financial overview Data AB. issued, 764,300 were allo- During the year Semcon The Semcon Group increas- Within the business area cated to present employees has conducted a developed its revenue for the eight- Competence and Process at Semcon AB. The remain- ment and scenario project een consecutive year, and Development, the Quality ing 135,700 options will with the primary objective demand for the Group’s ser- and Environment sector, a be offered to future employ- of forming future strategies. vices has been high during new company, Semcon ees at Semcon. Decisions The implementation of these the year. Semcon has further Industrial Management AB, concerning the allocation of strategies should permit strengthened its position as a has been formed. Further, options to present and future continued favorable profit- provider of consultancy ser- Semcon Education AB, employees will be made by ability even if the conditions vices to industry. All three which performs various edu- the Board of Semcon AB. for carrying out consultancy business areas have de- cational services, is also in- services should change. veloped strongly during 1998. 47 Turnover, SEK million Investments, SEK million Turnover and profits vested SEK 35.9 million Semcon Group turnover (11.3) mainly in computer 98 709 98 35.9 97 496 97 11.3 increased from SEK 495.6 equipment for the business 96 390 96 18.1 million to SEK 708.9 mil- area Competence and Process 95 351 95 17.7 lion, representing an increase Development and also for a 94 94 237 18.0 of 43 percent. Value added home PC scheme for amounted to SEK 482.3 employees. million (343.3) which cor- Auditors’ Report Operating profit, SEK million Average number of employees responds to an increase of 40 Principles and assumptions 98 82 98 955 percent over the previous used for pro forma accounts 97 57 97 695 year. Profits after depreci- The pro forma accounts are 96 49 96 521 ation rose from SEK 57.2 based on the fact that Semcon 95 39 95 457 94 26 94 323 million to SEK 81.9 million, AB has owned Semcon an increase of 43 percent. Förvaltnings AB and its sub- This substantial increase in sidiaries since 31-12-99. Value added per employee, Operating margin, % SEK thousand turnover and profits is main- Principles and assump- 98 11.6 98 505 ly due to three factors: suc- tions of pro forma accounts 97 11.5 97 494 cessful recruitment of con- are stated in the Share 96 12.6 96 514 sultants, a high utilisation Prospectus of 1996 and the 95 11.2 95 466 94 11.1 94 443 rate and significant expan- Annual Report 1997. Profits sion within training. The for 1997 were mainly af- operating margin amounted fected by the exclusion of Earnings per share Shareholders’ equity per to 11.6 percent (11.5). Profit interest paid of SEK 3.8 mil- after tax, SEK share, SEK after financial items increas- lion and SEK 6.3 million in 98 3.44 98 5.85 ed by 46 percent from SEK costs linked to the Stock 97 2.31 97 3.28 96 2.11 96 1.81 58.0 million to SEK 84.8 Exchange flotation. 95 1.74 95 1.37 million 94 1.13 94 1.29 Earnings per share after Employees tax increased by 49 percent At the end of 1998 there from SEK 2.31 to SEK 3.44. were 1079 staff, which cor- Return on average Returns on average share- responds to a net increase of Shareholders equity, % holders’ equity amounted to 25 percent over the previous 98 075.5 75.5 percent (90.7). The year. The average number of 97 090.7 equity ratio increased to employees in 1998 was 955 96 132.9 95 130.8 39.3 percent (31.0) and share- (695) of which 16 percent 94 099.6 holders’ equity amounted to were women (14). SEK 101.4 million (56.8), which corresponds to SEK Business cycle Equity ratio, % 5.85 per share (3.28) before Semcon’s client base consists 98 39.3 dividend. mainly of Swedish industrial 97 31,0 96 23.7 The Group’s liquid assets companies. Semcon’s manage- 95 16.1 amounted to SEK 10.0 mil- ment considers that the 94 19.6 lion (10.0) excluding add- breadth of the client base itional bank overdraft facil- reduces dependence on ities of SEK 45 million. individual sectors and business cycles, and that Semcon Cash-Flow and is thus influenced principally Investments by the general economic situ- During 1998, Semcon in- ation for Swedish export industry.

Turnover and operating profit SEK million

Q4/98 218 30 Q3/98 150 15 Q2/98 176 18 Q1/98 165 19 Q4/97 171 23 Q3/97 102 10 Q2/97 119 12 Q1/97 104 12

48 Seasonal variations Dividend policy Proposed appropriation of Profits (SEK thousand) As Semcon’s most common It is the Board’s opinion that form of assignment is running the size of future dividends The Annual General Meeting has the following profits at its disposal: assignments invoiced per should be fixed externally Profits brought forward 1,474 hour, income is influenced based both on Semcon’s long- Profits for the year 40,528 strongly by the number of term growth and profits, and Total 42,002 available hours. The summer also on capital needs for con- period with long holiday tinued expansion bearing in The Board of Directors propose that the profits be distributed as follows: absences is a weak period for mind financial aims. The Dividend to shareholders (SEK 1.40 / share) 24,274 all consultancy firms, and the long-term aim is to distribute To be carried forward 17,728 timing of the Christmas break between 30 and 50 percent of Total 42,002 is decisive for profits during profits after tax to Semcon’s the last quarter. shareholders. The Group During 1998, the Board’s According to the consolidated financial balance sheet non-restricted Sensitivity analysis aim for a equity ratio of 35 equity amounts to SEK 54,020 thousand. Of this amount it is pro- The number of available work- percent has been achieved. posed that SEK 97 thousand be allocated to restricted reserves. ing days varies between busi- One of Semcon’s aims for the ness years. future is to expand and hence Generally speaking, the create growth in value for the change in the number of shareholders. hours is forced along by con- If conditions are right, crete inquiries from clients, having regard for the financial resulting in assignments and aims and investment alterna- concomitant new recruit- tives for continues expansion, ment. It is thus very im- the Board intends to distrib- portant to have a knowledge ute larger dividends when cir- of local market conditions as cumstances appear right. regards available staff. The Board of Directors will The utilisation rate is a key propose to the Annual factor as regards Semcon’s General Meeting that divi- profitability and is its most dends to shareholders for the important controlling figure. year 1998 should amount to Changes in the utilisation rate SEK 1.40 per share (0.60), influence operating costs only which amounts to a total sum to a marginal extent. The of SEK 24.3 million (10.4) Future development price level is controlled by Demand for Semcon’s services is factors such as the combined expected to continue to be favourable areas of expertise of the com- during 1999 and Semcon’s manage- pany, the expertise of individ- ment thus considers that both turnover ual consultants, market and profits will turn out favourably. IT- demand and general infla- related business is expected to exceed tionary pressures. Semcon’s 50 percent of Group sales before the management considers that end of 1999. Semcon believes that the current inflation trend is restructuring on the part of clients will having a restraining effect on continue and that the trend to outsour- price development, despite cing will grow even stronger. Further, stable demand. the trend with large corporations choosing to work with fewer suppliers, Variable SEK million referred to as principal suppliers, will Utilisation rate 6.6 continue. This is an advantage to Average fee 5.7 Semcon compared to smaller suppliers. Salary costs 4.2 The company has built up a stable and broad client base, a healthy econo- my and a powerful infrastructure in Sweden. At the turn of the year business was commenced in Norway and Denmark. Growth is proceeding in a controlled manner and will primarily be organic, but will be assisted also by the acquisition of existing businesses from customers and possibly of smaller comple- mentary companies. 49 Consolidated accounts 50 E RFT5,2 00921,179 40,049 59,729 –14069 — 48,005* 58,010 — 84,840 thousand. 26,465 SEK profits acquired of exclusive items financial after profit Consolididated * NET PROFIT ofsubsidiariespriortoacquisition Profits Tax onyear’sprofit afterfinancialitems Profits items financial from Profits expenses Operating Total operatingturnover income Operating thousand) (SEK andlossaccount Consolidated Profit rft fe a 9794,4 35,248 40,049 59,729 50,936 57,161 81,892 aftertax Profits Operating profit neetpi ,9 ,0 –5,087 –1,307 –1,692 –70,398 –64,173 474,409 –63,248 –79,224 21,204 474,409 –63,248 21,204 697,676 –106,344 paid Interest 11,232 optionsscheme share Income from income Interest oftangibleandintangibleassets Depreciation costs Staffing costs Other external ofgoodsandservices Purchase Changes inworkprogress Net turnover Note 6 Note 5 Note 4 Note 7 Note 3 Note 1 2,3 9,8 –297,286 –297,286 – 424,837 01-01-1998– 31-12-1998 511–1,6 –12,757 –17,961 – 25,111 –13,745 –13,745 – 16,611 0,0 9,1 495,613 495,613 708,908 ,2 — 2,156 — 2,156 3,522 1,118 11-9707-03-1997– 31-12-1997 01-01-1997 – r om 31-12-1997 forma pro Consolidated balance sheet

31-12-1997 (SEK thousand) 31-12-1998 pro forma 31-12-1997 Assets Fixed assets

Tangible assets Note 7 Plant and machinery 6,904 8,601 8,601 Equipment 4,815 832 832 Computers 27,621 11,008 11,008 Total fixed assets 39,340 20,441 20,441

Current assets Stocks, commodities 510 3,888 3,888 Advance payments to suppliers 6,590 — —

Work in progress on behalf of others Note 9 53,983 42,751 42,751 Debtors 122,585 82,885 82,885 Other credits 381 13,329 3,324

Prepaid expenses and accrued income Note 10 10,202 9,787 10,925 Cash and bank 24,023 10,076 10,076 Total current assets 218,274 162,716 153,849

TOTAL ASSETS 257,614 183,157 174,290

Equity and liabilities

Equity Note 11 Restricted capital Share capital (17,338 521 shares nominal value SEK 1) 17,338 17,338 17,338 Restricted reserves 29,917 — 13,515 Unrestricted capital Profit brought forward -– 5,626 – 554 — Net profit 59,729 40,049 21,179 Total equity 101,358 56,833 52,032

Allocations Allocations for tax 25,510 21,776 17,710 Total allocations 25,510 21,776 17,710

Long-term liabilities Note 12 Debenture loans — 5,355 5,355 Total long-term liabilities — 5,355 5,355

Current liabilities Trade creditors 29,883 21,754 21,754 Tax liability 3,218 — — Other current liabilities 30,533 21,090 21,090

Accrued expenses and deferred income Note 14 67,112 56,349 56,349 Total current liabilities 130,746 99,193 99,193

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 257,614 183,157 174,290

Memorandum items Pledged assets — — — Contingent liabilities — — —

51 Consolidated accounts 52 e hr su 17338 — 10,076 6,020 — — –1,037 432 — 13,947 17,338 — –4,775 4,056 — –4,343 — –10,403 –1,037 –22,899 –10,403 –12,566 –11,342 13,947 –10,333 — –11,342 1,009 –35,487 9,617 –35,891 CHANGES INLIQUIDASSETS 1,009 –15,252 inliquidassetsduetoacquisitions Increase — 13,639 25,682 Changes inliquidassetsexcludingacquisitions –33,573 404 financialactivities from Proceeds 59,837 24,869 –5,087 issue New share 25,681 –22,537 –14,069 –14,671 –32,940 Adjustment items 2,156 47,212 Dividends paid –26,263 –3,286 –22,289 — –34,536 22,980 — Financial activities investments from Proceeds 2,156 –24,718 –8,651 92,777 –46,853 13,745 –1,692 andequipment disposalofmachinery from Proceeds — Investment infixedassets –9,067 — 1,118 13,745 Investments insubsidiaries’shares Investments business current from Proceeds 16,611 –275 Total 3,522 50,936 changeinworkingcapital liabilities incurrent Increase/decrease andstocks inworkprogress Increase/decrease 57,161 –275 assets incurrent Increase/decrease Changes inworkingcapital 81,892 changes inworkingcapital –23 business before current from Proceeds priortoacquisition earned Profits Income taxpaid paid Interest optionsscheme share Income from received Interest andequipment onsaleofmachinery Profit/loss Depreciation afterdepreciation Operating profit business Current (SEK thousand) Statements ofchangesinfinancialposition 01-01-1998– 31-12-1998 8407,3 64,406 70,631 98,480 01-01-1997– 11-9707-03-1997 31-12-1997 r om 31-12-1997 forma pro Semcon AB/Parent company accounts Operating profit rft fe iaca tm 99915,344 69,999 5,509 PROFIT NET 14,592 Tax onyear’sprofit tax before Profit Appropriations afterfinancialitems Profits investments from Income expenses Operating Total operatingincome income Operating (SEK thousand) andlossaccount Profit loain otxrsre 365— –13,605 — 17,000 67,726 — –3,493 –5,597 Excess depreciation Allocations totaxreserves paid Interest subsidiaries Anticipated dividendsfrom contributionsreceived Group income Interest costs Staffing costs Other external Net turnover Note 3 Note 6 528— – 15,238 01-01-1998– 31-12-1998 ,0 –3,688 – 6,702 05815,344 40,528 55,766 5,509 14,592 ,9 –1,672 2,293 2 — – 628 –71 – 266 4 87 246 07-03-1997– 31-12-1997 53 Semcon AB / Parent company accounts 54 hrsi ecnEgneigA — — 3,386 18,466 — 49,583 109,021 14,233 liabilities AB Contingent Engineering Semcon liabilities in own Shares secure to assets Pledged TOTAL SHAREHOLDERS’EQUITYANDLIABILITIES Total liabilities current liabilities Current Total untaxedreserves reserves Untaxed equity Unrestricted Restricted capital Equity Equity andliabilities TOTAL ASSETS Total assets current assets Current Total fixedassets Financial assets Tangible assets assets Fixed Assets (SEK thousand) Balance sheet Total equity urne o usdais81213,051 8,142 — — 13,605 — Guarantee forsubsidiaries 628 1,474 income expensesanddeferred Accrued liabilities Other current Tax liability Trade creditors 17,338 Tax allocationreserve 20,989 17,338 Accumulated excessdepreciation 70,945 26,081 Net profit forward brought Profit 26,081 Fixed reserves withnominalvalue1SEK) capital(17,338,521 shares Share Cash andbank income expensesandaccrued Prepaid Other credits subsidiaries from Credits insubsidiaries Shares Plant andmachinery Note 11 Note 10 Note 14 Note 8 Note 7 31-12-1998 0,2 49,583 109,021 08823,502 80,848 26,081 28,173 528— 15,238 46,197 15,344 76,322 40,528 13,515 16,982 ,3 96 1,136 ,9 1,779 1,993 ,6 2,382 8,766 — 2,092 5 739 868 458 777 135 31-12-1997 Statements of changes in financial position

01-01-1998– 07-03-1997– (SEK thousand) 31-12-1998 31-12-1997 Current business Operating profit after depreciation 2,293 – 1,672 2,293 – 1,672

Interest received 246 87 Interest paid – 266 – 71 Proceeds from current business before changes in working capital 2,273 – 1,656

Changes in working capital Increase/decrease in current assets – 50,962 – 4,120 Increase/decrease in current liabilities – 158 3,386 Total changes in working capital – 51,120 – 734 Proceeds from current business – 48,847 – 2,390

Investment Investment in fixed assets – 2,092 — Investment in subsidiaries’ shares — – 12,566 Proceeds from investment – 2,092 – 12,566

Financial activities Received group contributions 67,726 — Dividends – 10,403 — New share issue — 17,338 Proceeds from financial activities 57,323 17,338

CHANGES IN LIQUID ASSETS 6,384 2,382

55 Notes 2 ru oa 5 46586 86 33 695 692 3 84 84 57.1 20 955 81.9 950 5 495.6 5.7 13.4 708.9 38.0 21.2 13.8 46.9 102.1 62.5 total Group 331.0 159.0 Subsidiaries 128.0 company Parent 421.9 companiesamountstoSEK90,503thousand(39,601) betweenthe Group Purchase/sales Total development Competence andprocess technology Industrial information development andproduction Product (SEK million) The Group distributedasfollows: Turnover are andoperatingprofit 1 56 insubsidiariesisfirstwritten The accountedvalueofshares on thedayhasbeenapplied. subsidiaries,therateofexchangeapplying sheets offoreign equity.against unrestricted andafterthat including theequityofuntaxedreserves fortheyear.together withnetprofit isentered andlossaccount,theequityportion profit oftheseitemsisincludedinthisyear’staxesthe portion Thetaxpro- thevalueofuntaxedreserves. affect that directly reserves. and equitywhichisincludedunderrestricted RR01 oftheSwedishFinancialAccountingStandard. inRecommendation withtheprinciplessetforth cordance the valueoffixedtangibleassets. pany isallocatedasgoodwill.Negativegoodwillhasreduced com- acquisition valueishigherthantheequityofacquired arisingduetothefactthat of acquisition.Thedifference afterthetime ofthesubsidiaries’owncapitalearned portion company’sownequityandthepro- equity includestheparent method,whichmeansthat consolidated ance withthepurchase inaccord- These consolidatedaccountshavebeenprepared The principlesofconsolidatedaccountingapplied When calculating the profit andlossaccountsbalance When calculatingtheprofit equity Acquisition valueiseliminatedfirstagainstrestricted theconsolidatedstatementsexcludeallitems As aresult, taxliability(28%) dividedintodeferred are Untaxed reserves inac- These consolidatedaccountshavebeenprepared Average numberofemployees Distribution ofnetincome vrg ubrAverage number Average number fepoesMn fepoesMen, % ofemployees Men,% of employees untaxed reserves and thereafter against non-restricted capital. againstnon-restricted andthereafter untaxed reserves ofcapitalfor againstfixedequityinclusiveoftheproportion off qimn ercae vr5 3 5 over Equipment depreciated over Computers depreciated over Machines andplantdepreciated follows: plan hasbeenbasedontheitem’sestimatedworkinglifeas to according toplan.Depreciation according for depreciation pricewithdeductions ises havebeenvaluedatthepurchase prem- andequipmentaswellinvestmentinrented Machinery Fixed assets lowest value. totheprincipleof Stocks havebeenvaluedaccording Stocks ontheday. totherateofexchangepertaining ed according havebeenconvert- currencies andliabilitiesinforeign Credits currencies andliabilitiesinforeign Credits have beenapplied. loss account,thebalancesheetanditsprinciplesofvaluation and theprofit Actforpreparing oftheAnnualReport The rules The principlesofaccountingandvaluationapplied 1998 981997 1998 Operating income Operating profit Operatingprofit Operating income pro forma pro forma pro forma pro 1997 1998 Number ofyears 1997 3 Salaries, other emoluments/national insurance contributions

1998 1997

Salaries and other emoluments/ Salaries and other emoluments/ Salaries and other emoluments/ national insurance contributions - Salaries and other emoluments/ national insurance contributions - (SEK thousand) national insurance contributions (of which pensions) national insurance contributions (of which pensions)

Parent company 3,499 2,082 2,356 1,101 (731)* (321)* Subsidiaries 282,362 117,966 204,825 81,884 (14,870) (10,036) Group total 285,861 120,048 207,181 82,985 (944)** (457)**

* Parent company pension expenses include SEK 643 thousand (321) ** Group pension expenses include SEK 944 thousand (457) relating relating to the Board of Directors and the Managing Director. The to the Board of Directors and the Managing Director. The company company has no external pension obligations, except as described has no external pension obligations, except as described below. below.

In 1998 the Board of Directors received SEK 400,000. The per cent of such salary in the range of 20 to 50 basic Chairman received SEK 200,000 and the two other external amounts. Semcon is required to give the Managing Director 12 members received SEK 100,000 each. The Chairman also months’ notice of termination of employment and the received SEK 113,000 in consultancy fees (236,000). Salary Managing Director is required to give Semcon 6 months’ no- and benefits to the Managing Director amounted to SEK tice. If Semcon wishes to terminate his employment agreement, 2,060,000 (1,876,102) in 1998, of which SEK 800,000 the Managing Director will receive final compensation amoun- (549,902) related to performance based bonus for financial ting to 18 months’ salary. His employment agreement also year 1998. The Managing Director’s bonus scheme consists of includes a non-competition clause, according to which the a bonus to be paid if Semcon’s profits exceed a certain level. Managing Director may not engage in any competitive busi- The Managing Director is entitled to a retirement benefit in the ness activities within 18 months from the time of termination form of a pension scheme. The premium for such a scheme is of his employment. The Managing Director has the right to re- to 35 per cent of annual salary up to 20 basic sums (the tire at age 60 with continued compensation equivalent to 70 basic amount for national social security purposes) and to 25 per cent of annual salary and potential bonus up to age 65.

4 Other interest income 6 Tax on year’s profits

The Group (SEK thousand) 1998 1997 The Group (SEK thousand) 1998 1997 1997 pro forma Interest income 1,118 2,026 Tax for year 17,310 11,391 6,187 Changes in currency rates 130 Deferred tax 7,801 6,570 6,570 Total 1,118 2,156 Total 25,111 17,961 12,757

5 Income from share option scheme Parent company (SEK thousand) 1998 1997 Tax for year 15,238 0 This income relates to 764,300 share options at 5 SEK after deduction of issuing expenses. Total 15,238 0

57 7 Tangible assets

Notes (SEK thousand) 1998 1997 1998 1997

Plant and machinery Computers Accumulated acquisition Accumulated acquisition cost opening balance 10,738 8,543 cost opening balance 43,259 38,210 Purchases 469 2,195 Purchases 29,366 7,312 Accumulated acquisition Disposals – 584 – 2 263 cost closing balance 11,207 10,738 Accumulated acquisition cost closing balance 72,041 43,259 Accumulated depreciation opening balance 2,137 142 Accumulated depreciation Current year depreciation 2,166 1,995 opening balance 32,251 23,688 Accumulated depreciation closing balance 4,303 2,137 Disposals – 214 – 1 527 Net closing balance as per plan 6,904 8,601 Current year depreciation 12,383 10,090 Accumulated depreciation Equipment 1998 1997 closing balance 44,420 32,251 Accumulated acquisition Net closing balance 27,621 11,008 cost opening balance 10,010 8,175 Purchases 6,056 1,835 Tenant-owners rights Disposals – 12 — Accumulated acquisition cost opening balance 400 400 Accumulated acquisition cost closing balance 16,054 10,010 Current year write-down against negative goodwill – 400 – 400 Accumulated depreciation Net closing balance as per plan 0 0 opening balance 5,665 4,005 Disposals – 1 — Leases and tenant-owners rights Current year depreciation 2,062 1,660 The Group has entered into a number of leasing agreements, Accumulated depreciation mainly related to personnel vehicles. During 1998 the cost for closing balance 7,726 5,665 these rental payments amounted to SEK 1,321 thousand (1,360). Existing leasing agreements are based on market Opening balance write-downs 3,513 — conditions and fall due to mature within 1 to 3 years. Furthermore the Group rents out office space at around 20 Write-down against negative goodwill 0 3,513 locations in Sweden. All of these tenancy agreements were Accumulated write-downs signed under market conditions and for normal periods of closing balance 3,513 3,513 time. Net closing balance as per plan 4,815 832 Parent Company

Equipment 1998 1997 Accumulated acquisition cost opening balance — — Purchases 2,092 — Accumulated acquisition cost closing balance 2,092 —

Accumulated depreciation opening balance — — Current year depreciation — — Accumulated depreciation closing balance — — Net closing balance as per plan 2,092 —

58 8 Holdings in subsidiaries

(SEK thousand) Share ownership Associated votes Net accounting value Subsidiary Semcon Förvaltnings AB 100% 100% 21,081 Sub-subsidiaries Semcon Engineering AB 100% 100% Semcon Engineering West AB 100% 100% Semcon Engineeering East AB 100% 100% Semcon Engineering UK Limited 100% 100% Semcon Data AB 100% 100% Semcon Education AB 100% 100% Semcon Analysis & Test Center AB 100% 100% Semcon Industrial Management AB 100% 100% Total 21,081

Legal structure of organisation Subsidiaries, corporate identity numbers and registration offices are as follows:

Corporate identity number Registered office

Semcon AB 556539-9549 Göteborg Semcon Förvaltnings AB 556530-6403 Göteborg Semcon Engineering AB 556213-1762 Göteborg Semcon Engineering West AB 556555-8193 Göteborg Semcon Engineering East AB 556559-0337 Göteborg Semcon Data AB 556271-9129 Göteborg Semcon Education AB 556241-0638 Göteborg Semcon Industrial Management AB 556535-2332 Göteborg Semcon Analysis & Test Center AB 556534-4651 Göteborg Semcon Engineering UK Ltd 2993766 Grantham, UK

Operations of Group companies Semcon Engineering AB is also the parent company of Semcon AB is responsible for group-wide issues such as stra- Semcon Engineering UK Ltd., which is active when Semcon is tegy, information and marketing. involved in projects in Great Britain. Semcon Förvaltnings AB is responsible for group-wide Semcon Data AB is active in the areas information technol- issues such as accounting, finance and human resources. ogy consultancy services and hardware and software retailing. Semcon Education AB offers training. Semcon Förvaltnings AB has five subsidiaries: Semcon Industrial Management AB act as management Semcon Engineering AB, which is the parent company of: consultants. Semcon Engineering West AB and Semcon Engineering East Semcon Analysis & Test Center carries out analysis and AB, both active in industrial technology consultancy services. testing.

9 Work in progress 10 Prepaid expenses and accrued income Work in progress has been entered in the consolidated accounts using the current account method, at invoice value 1997 (1998: SEK 51,724 thousand, 1997: (SEK 41,036 thousand), (SEK thousand) 1998 pro forma 1997 which is related to the proportion completed. Work in progress Tax credits — 4,303 5,441 for fixed-price projects, which represents a minor share of total work in progress, has been entered as per actual direct project Accrued income 1,433 1,736 1,736 costs plus a reasonable share of the overheads. In the case of Other items 8,769 3,748 3,748 subsidiaries no value has been entered for on-going work in Total 10,202 9,787 10,925 progress. Instead these have been entered as income to match invoicing. 59 Notes 60 –10,403 40,528 ”Other liabilities”. liabilityandisincludedunder asashort-term was reclassified 42,002 ment onthe26-5-99.Atcloseofaccounts,1998,thisloan 16,982 nominal valueofSEK5,355,000SEK.Theloanisdueforpay- 17,338 issuedwitha were debentures During 1996subordinated 3,467 – 3,467 15,344 13,515 Closing balance 17,338 10,403 – 50,729 foryear Net profit Dividends 54,103 fund Allocation toreserve 29,917 17,338 Opening balance company The Parent –12,935 12,935 –3,467 Closing balance 3,467 21,179 foryear Net profit 13,515 17,338 Dividends reserves and unrestricted Transfers betweenrestricted fund Allocation toreserve Opening balance The Group 12 11 Long-term liabilities Long-term Changes in shareholders’ equity Changes inshareholders’ SKtosn)cptlrsre reserves reserves capital (SEK thousand) SKtosn)cptlrsre reserves reserves capital (SEK thousand) Chairman oftheBoard Chairman Chartered accountant Chartered accountant Chartered accountant Chartered alÅeJnsnHansJohansson Carl-Åke Jansson on idus GöranLundberg Sonny Lindquist Göran Ekström Björn Grundvall Björn Göran Ekström Ernst & Young AB Ernst &Young Ernst AB &YoungErnst AB hr-Rsrce ed Restricted Share- hr etitded Restricted Share Our audit was issued on March 2,1999 Our auditwasissuedonMarch Gothenburg, February 1999 February Gothenburg, Unrestrict- Unrestrict- te tm 0 650 1,779 309 1,993 1,129 1,684 15,924 56,349 income and prepaid 21,337 Total expenses accrued 67,112 Other items 40,425 costs Staff-related 45,775 company The parent income and prepaid Total expenses accrued Other items costs Staff-related The Group thousand (45,000). facilityamounts toSEK45,000 bankoverdraft The approved 13 14 deferred income deferred Bank Overdraft Facility Bank Overdraft Accrued expensesand Accrued (SEK thousand) (SEK thousand) Managing Director 1998 1998 1997 1997 Auditors’ Report We therefore recommend We therefore act norbeenguiltyofanyomissionwhichcouldgiverisetoliabilitytheCompany. havecommittedno andtheManagingDirector In ouropinion,themembersofBoard cordance withtheAnnualAccountsAct,and,consequentlywerecommend: cordance basis forouropinionsetoutbelow.vides areasonable ofAssociation.We believethatourauditpro- Act, theAnnualAccountsActorArticles Director, orwhethertheyhaveinanyotherwayactedcontraventionoftheCompanies member ortheManaging thepossibleliabilitytoCompanyofanyboard determine to oftheCompanyinorder takenandthecircumstances significant decisions,measures infinancialstatements.We examined ofinformation evaluating theoverallpresentation andtheManagingDirector, ofDirectors and theirapplicationbytheBoard aswell financial statements.Anauditalsoincludesassessingtheaccountingprinciplesused containedin amountsandotherinformation ining aselectionofdocumentsconcerning Anauditincludesexam- ofessentialerrors. free are sonable assurancethatfinancialreports outtheaudittoobtainrea- thatweplanandcarry require Sweden. TheseStandards on ouraudit. anopiniononthefinancialstatementsandadministrationbased bility istoexpress andtheManagingDirector. ofDirectors oftheBoard Ourresponsi- theresponsibility are ending on31December, 1998.TheseaccountsandtheadministrationofCompany forthe12monthperiod andtheManaging Director ofDirectors tration oftheBoard theaccountsandadminis- report, thegroup theannualreport, We havescrutinised Org.nr. 556539-9549 To ofSemconAB theGeneralMeetingofshareholders In our opinion, the annual report and the group report have been prepared inac- havebeenprepared report andthegroup In ouropinion,theannualreport in withGenerallyAcceptedAuditingStandards outourauditinaccordance We carried discharged from liabilityforthefinancialyear. from discharged be andtheManagingDirector ofDirectors that themembersofBoard that the profit of the parent company be distributed in accordance with companybedistributedinaccordance oftheparent the profit that company andlossaccountsbalancesheetsoftheparent the profit that Chartered accountant Chartered accountant Chartered accountant Chartered Göran Ekström Björn Grundvall Björn Göran Ekström the proposals intheManagementReport the proposals beadopted, and and theGroup Gothenburg, the 2 March, 1999 the2March, Gothenburg, 61 The Board of Directors T HE B OARD OF D IRECTORS and Senior Management Sonny Lindquist Carl-Åke Jansson Born 1940. Chairman of the Born 1943. A director since Board since 1997. Chairman 1987. Managing Director of of the Board of Zeteco AB Lindås Invest AB. (publ). A director of Carl-Åke Jansson is cur- of Partner Tech AB (publ), rently also Chairman of ABA of Sweden AB, and Precision Products Ltd. and B Expanda AB. P.E.S Ltd., both in Shareholding 160,823 Chesterﬁeld, UK. shares1. Shareholding 100,000 shares. Göran Lundberg Born 1940. A director since Hans Johansson 1997. Partner and director Born 1955. Chief Executive of Industrial Development and Managing Director of and Investment AB. Göran Semcon AB. With Semcon Lundberg is also currently since 1983. vice-chairman of the Boards Shareholding 450,000 of Studsvik AB, Posten shares1. Logistik AB, Posten Utrikes AB. Shareholding 141,177 shares.

1) including holdings by relatives

Sonny Lindquist Göran Lundberg Carl-Åke Jansson Mikael Isberg

For Board remunerat- ion and other payments to the Board and the Managing Director, see p.57, Note 3. 62 S ENIOR M ANAGEMENT A UDITORS

Staff representatives Hans Johansson Mats Lindelöf Göran Ekström Mikael Isberg Born 1955. Chief Executive Born 1958. MD Semcon Born 1943. Chartered and Managing Director of Engineering East AB. accountant, Ernst & Born 1953. Consultant elec- Semcon AB. With Semcon With Semcon since 1990. Young AB. trical/electronics. since 1983. Shareholding 50,000 With Semcon since 1989. Shareholding 450,000 shares. Björn Grundvall Shareholding 900 shares. shares1. Born 1955. Chartered Lars-Inge Sjöqvist Marie Hansson accountant, Ernst & Bengt Nilsson Born 1958. MD Semcon Young AB. Born 1970. Consultant in Born 1957. Chief Finance Data AB. With Semcon mechanical design. Executive of Semcon AB. since 1995. With Semcon since 1995. With Semcon since 1992. Shareholding 73,800 Shareholding 0. Shareholding 125,000 shares1. shares. Björn Eichmüller Caroline Krensler Born 1960. MD Semcon Born 1967. Business develop- Education AB. With Semcon ment. Semcon AB. With since 1995. Semcon since 1995. Shareholding 8,750 Shareholding 6,500 shares. shares.

Bo Axelsson Born 1961. MD Semcon Engineering West AB. With Semcon since 1998. Shareholding 33,800 shares1.

Hans Johansson Bengt Nilsson Caroline Krensler Bo Axelsson Marie Hansson Mats Lindelöf Lars-Inge Sjöqvist Björn Eichmüller Annual General Meeting

Annual General Shares registered with Important dates Meeting a trustee Annual General Meeting 22 March 1999 The Annual General Shareholders who have their Part-year report 3 months 28 April 1999 Meeting will take place on shares registered with a trust- Part-year report 6 months 16 August 1999 Monday the 22 March, 1999 ee should temporarily re- Part-year report 9 months 27 October 1999 at 6 p.m. at Svenska Mässan, register their shares in their Kjellbergsalen, Mässans own names with VPC to Gata 22, Gothenburg. The have the right to apply to premises will be open for attend the meeting. registration from 5 p.m. Shareholders desiring such when Semcon will be offer- re-registration should inform ing a buffet. their trustee in good time before Friday the 12 March, Participation 1999. Shareholders wishing to attend the AGM should: Dividend The Board of Semcon AB • have been entered in the will propose to shareholders Shares Register kept by a dividend of SEK 1.40 per Värdepappercentralen share making a total sum of VPC AB by Friday the 12 SEK 24.3 million. Thursday March 1999 at the latest. the 25 of March 1999 will • notify the company by be proposed as accounting post of their intention to day. If the AGM approves attend at: Semcon AB, the proposal, dividends are Box 14262, 400 20 expected to be sent out Gothenburg; or by fax: under the aegis of VPC on 46-31-335 82 33; Thursday the 1 April, 1999. or by telephone: +46-31-721 09 31; or by e-mail: elisabeth.batelson@ semcon.se by Wednesday the 17 March 1999, 4 p.m. at the latest. Notification should include name, National Identity or Corporation Number and daytime telephone number.

64 Addresses

GOTHENBURG LINKÖPING Nacka Strand HEAD OFFICE Box 407 Box 1177 Box 14262 S-581 04 LINKÖPING S-131 27 NACKA STRAND S-400 20 GÖTEBORG Adress: Klostergatan 19B (582 23) Address: Cylindervägen 18, Address: Mölndalsvägen 24 Tel: +46-13-31 46 30 floor 6 (131 51) Tel: +46-31-721 00 00 Fax: +46-13-31 23 46 Tel: +46-8-601 06 00 Fax: +46-31-335 81 75 Fax: +46-8-466 94 90 LUDVIKA Education Box 296 SÖDERTÄLJE Box 16025 S-771 33 LUDVIKA Box 59 S-412 21 GÖTEBORG Address: Valhallavägen 2 S-151 21 SÖDERTÄLJE Address: Ebbe Tel: +46-240-141 24 Adress: Turingegatan 26 3 tr (151 41) Lieberathsgatan 19 (412 65) Fax: +46-240-183 03 Tel: +46-8-554 224 50 Tel: +46-31-721 05 00 Fax: +46-8-550 190 32 Fax: +46-31-721 05 29 LUND Kaprifolievägen 1 SUNDSVALL P V B S-227 38 LUND Box 79 S-851 02 SUNDSVALL S-405 08 GÖTEBORG Tel: +46-46-38 61 00 Address: Södra Järnvägsgatan 37A Address: Gustav Larssons väg 1 Tel (Education): +46-46-38 61 20 (852 37) Tel: +46-31-53 19 10 Fax: +46-46-14 53 70 Tel: +46-60-744 99 40 Fax: +46-31-53 19 07 OSKARSHAMN Fax: +46-60-744 99 99 Analysis & Test Center Box 31 TROLLHÄTTAN Norra Långebergsgatan 4 S-572 21 OSKARSHAMN Kardanvägen 37 S-421 32 V FRÖLUNDA Address: Södra Långgatan 15-17 S-461 38 TROLLHÄTTAN Tel: +46-31-721 06 00 Tel: +46-491-124 00 Tel: +46-520-126 55 Fax: +46-31-709 69 38 Fax: +46-491-124 90 Fax: +46-520-176 59 OXELÖSUND Arendal UMEÅ Box 8733 Sjögatan 28 Umestans Företagspark S-402 75 GÖTEBORG S-613 33 OXELÖSUND S-903 47 Umeå Tel: +46-31-50 35 50 Tel: +46-155-25 56 04 Tel: +46-90-71 80 70 Fax: +46-31-50 35 59 Fax: +46-155-25 56 06 Fax: +46-90-12 24 67 HELSINBORG STENUNGSUND VARBERG Drottninggatan 7 Box 51 Kungsgatan 3 S-252 21 HELSINGBORG S-444 21 STENUNGSUND S-432 40 VARBERG Tel: +46-42-12 75 90 Address: Ängsvägen 7 (444 31) Tel: +46-340-140 10 Fax: +46-42-13 34 70 Tel: +46-303-880 40 Fax: +46-303-881 24 Fax: +46-340-140 10 KALMAR STOCKHOLM VÄSTERÅS Kaggensgatan 46 Box 37 S-391 01 KALMAR Johanneshov S-721 04 VÄSTERÅS Tel: +46-480-41 12 90 Box 5028 Address: Nygårdsgatan 12 Fax: +46-480-41 12 91 S-121 05 JOHANNESHOV Address: Veterinärgränd 6 Tel: +46-21-17 90 00 Fax: +46-21-12 22 76 KARLSTAD Tel: +46-8-522 250 00 Östra Torggatan 2C Fax: +46-8-522 250 25 VÄXJÖ S-652 24 KARLSTAD Kronobergsgatan 4 Tel: +46-54-14 03 00 Kista S-352 33 VÄXJÖ Fax: +46-54-15 61 24 Box 1099 S-164 21 KISTA Tel: +46-470-72 95 20 Address: Färögatan 3, floor 4 Fax: +46-470-74 99 60 Tel: +46-8-793 69 70 Fax: +46-8-793 91 40 There are offices abroad in the United Kingdom, Norway and Denmark. SEMCON AB (PUBL) Mölndalsvägen 24 Box 14262 SE-400 20 Göteborg

www.semcon.se Semcon in cooperation with Solberg Kommunikation. Photo, Thomas Johansson. Printing, Skandiatryckeriet, 1999. Semcon in cooperation with Solberg