OEM INT Annual report 2004

ANNUAL GENERAL MEETING

The annual general meeting is to be held on Thursday 28 April 2005 at 16.00 at Stadshotellet i Tranås, Storgatan 22, Tranås, Sweden.

NOTIFICATION

Shareholders wishing to attend the Annual General Meeting must:

❚ be entered in the share register held by the Swedish Securities Register Centre (VPC AB) by Monday 18 April 2005.

❚ notify the company no later than Monday 25 April 2005 before 13.00 at:

OEM International AB, Box 1011, SE-573 28 Tranås, SWEDEN, Telephone: +46 (0)140-36 00 00 or E-mail: info@int.oem.se

Shareholders who have registered their shares in the name of an authorised agent must, no later than Monday 18 April 2005, temporarily register the shares in their own name with the Swedish Securities Register Centre (VPC AB) in order to participate at the Annual General Meeting.

DIVIDEND

The Board of Directors and Managing Director propose that for 2004 the Annual General Meeting issue a dividend of SEK 5.50 per share and stipulate that the record day be Tuesday 3 May 2005.

If the Annual General Meeting adopts the proposal, it is expected that dividends will be distributed on Monday 9 May 2005 to those entered in the share register on the record day.

BUSINESS

The agenda and business of the Annual General Meeting will be notified through advertisements in the daily pressand will also be available on OEM’s website (www.oem.se). The agenda can also be obtained from the company when registering to attend the meeting.

FUTURE REPORTS

Q1 Report, January-March 28 April 2005

Half-Yearly Report 12 August 2005

Interim report26 October 2005

Financial Statement, fiscal year 2005 February 2006

Annual Report March/April 2006

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TABLE OF CONTENTS

Annual General Meeting – Future Reports2

This is OEM International4

History4-5

2004 in Brief5

The Managing Director’s Comments6-7

Business Concept and Vision 8-9

Financial Objectives10 Growth Strategy11

Employees – 30 years of OEM12-13

Quality, the Environment and Ethics14-15

Warehouse Solutions for GGP Sweden 16-17

The whole is important for Sandvik Tamrock18-19

Electronic engineers of the future20-21

Group Overview22-23

■ Automation24-25

■ Electronics26-27

■ Mechanics28-29

■ Hydraulics30-31

■ Electronics production32-33

Five-Year Group Overview34

Key indicators for the last five years35

Financial Reporting

Directors’ Report36

Income Statement37

Balance Sheet38-40

Changes in Shareholders’ Equity41-42

Cash Flow Statement43-44

Notes with Accounting Principles and Notes to the Financial Statements45-63

Proposed Allocation of Profits64 Audit Report65 The Board and its Programme66-67 Senior Management68-69

OEM Shares70-71

Key Indicators for OEM Shares72-73 Addresses74-75

THIS IS OEM INTERNATIONAL

OEM has been listed on Stockholmsbörsen, the Stockholm Stock Exchange, since 1983.

More information about OEM can be found on our website.

History

1974

The agency company OEM Automatic AB is started by the Franzén and Svenberg families.

OEM International is one of Europe’s leading companies in the components and systems trade. The Group comprises 23 operational units in eight countries with its head office in Tranås, Sweden.

The operational units are divided into five corporate groups based on specific areas of product and customer focus.

Electronics. Appliance components, circuit board components and EMC/microwave components.

The business concept, in brief, is to be active in the tradingof industrial components and systems in northern Europe. Customers are offered extensive product and application knowledge and a broad spectrum of components and systems.

In simple terms, OEM becomes a local alternative to manufacturers’ own subsidiaries and thereby has responsibility for the sales and marketing of products that the company trades in.

1981 The first overseas subsidiary is established in Finland.

The company is floated on the Stock Exchange’s OTC list.

Sales amount to approx. SEK 30 million.

Industri AB Reflex is acquired.

Hydraulics. Sales of pumps, motors, valves, mini and micro powerpacks and accessories for hydraulics and production of powerpacks and systems for mobile and industrial applications.

Sales exceed SEK 100 million for the first time.

The first subsidiary outside Scandinavia is established in the U.K.

Automation. Components for industrial automation within the business areas of Electrical Machinery, Electrical Cabinets, Safety, Cables, Pressure & Flow and Pneumatics.

Mechanics. Bearings, bushings, seals for rotating and linear motion, electric motors and servomotors, drive-belt transmissions and actuators.

Electronics Production (EP). Production systems, test solutions and components for electronics production.

1991

OEM International AB is formed and becomes the Group’s parent company.

The electronics product area breaks away from OEM Automatic to form a separate company,OEM Component.

1993

The A.Karlson Group is acquired.

The continued efficiency drive and restructuring have, among other things, resulted in:

❚ Sales falling by 1% to SEK 1,406 million (1,428).

❚ Incoming orders increasing by 6% to SEK 1,445 million (1,366).

❚ The profit before tax increasing by 55% to SEK 83 million (53.4).

❚ Excluded sold-off units increasing the turnover by 4%.

SHARE TRENDS 1998-2004

THE GROUP IN FIGURES

2004 IN BRIEF

20042003

Net sales SEK million 1,4061,428 Profit after net financial items SEK million 83.053.4 Profit for the year SEK million 57.431.5

Earnings per share SEK7.594.14

Cash flow per share SEK12.2817.75

Shareholders’ equity per share SEK54.1351.44

Proposed dividend per share SEK5.504.50

Earning capacity of shareholders’ equity %14.37.8 Equity/assets ratio %60.361.0

Quoted price at the end of the period SEK118102 Market value at the end of the period SEK million911829

Average number of employeesNumber571636

*) The key indicators are calculated based on the number of shares on the market.

Automation, as a result of increased demand and improved efficiency, has seen 8% and 22% increases in its sales and profit respectively.

Electronics has increased its profit from SEK 1.6 million to SEK 20 million with an increase in sales of approx. 6%.

Mechanics’ profit falls from SEK 9.6 million to SEK 4.3 million after the expected sales increase failed to materialise.

Hydraulics’ return fell from SEK —0.6 million to SEK —1.1 million due to costs associated with the winding-up of HPI.

EP saw a drop in sales from SEK 257 million to SEK 239 million, but its return improved from SEK —6.5 million to SEK —0.6million. Jubo Mechatronics was sold off during the year and charged the profit by SEK 7.8 million.

1996

New Group structure. The companies are divided into two subgroups: OEM Industrial Components AB and OEM Systemteknik AB.

1997

OEM International AB and Cyncrona AB,also listed on the OTC list, merge.Cyncrona becomes a third subgroup.

1998

A number of corporate acquisitions are implemented.

1999

The company establishes itself in Italy though one of four corporate acquisitions made in this year.

2000

Jörgen Zahlin is appointed as new MD.

2001

Aspecs OY is acquired.

2002

The downturn in telecommunications has a negative effect on OEM with a significant reduction in sales.

2003 The Group stabilises with sales that are 30% lower than in 2001.

Industri AB Reflex is sold off.

2004

2004 OEM is 30 years old.

Continued restructuring and an efficiency drive increase the profit by 55%.

THE MANAGING DIRECTOR’S COMMENTS

2004 was a good year for OEM. Thanks to continued restructuring and an efficiency drive, which increased the profit by 55%.

Over the past 30 years, OEM has developed into a trading group that combines economies of scale, both large and small, with close relationships with customers and suppliers.

This means that we are well equipped to face even tougher competition.

30 YEARS’ DEVELOPMENT

OEM celebrated its 30th birthday in 2004. Since it started, the company has been based on a number of important foundations:

❚ working closely with our suppliers and customers.

❚ creating opportunities for our employees to realise their ambitions.

❚ a service-mindedness that is the absolute pinnacle within the industries in which the company operates.

Our ability to stick to these foundations has been of considerable significance throughout the Group’s development. This combined with

continuous adaptation to new market conditions has made us one of northern Europe’s largest trading companies within business-to-business.

One example of these changes is that our suppliers

Start-upGeographical expansionAcquisitionsRestructuring

have grown from a number of small and independent manufacturers to today’s line-up with a large number of leading international manufacturers.

Throughout its development, the Group has been through different phases, all characterised by the period in question. During the 1980s we expanded geographically. During the 1990s we made more than 20 acquisitions, and in the wake of the telecommunications hysteria at the beginning of the 21st century, restructuring and improved efficiency were catchwords within the Group.

THE OUTCOME OF RESTRUCTURING

The strategy of restructuring and improved efficiency over the last few years has produced a considerable improvement in profit, even though growth in sales has been limited.

There was a 4% increase in sales in 2004 for comparable units and a 6% increase in incoming orders. However, it is primarily the strong focus on improving efficiency that has helped increase profits by 55%.

The corporate groups Automation, Electronics and EP have seen a positive profit trend. Mechanics and Hydraulics have not developed as expected, so measures were introduced towards the end of the year to improve the profit. In accordance with restructuring activities to focus on trading in industrial components, Jubo Mechatronics and About Communication have been sold off.

HPI was wound up after the company’s most important supplier chose a new channel into the Swedish market. These changes charged the profit for 2004 by approx. SEK 13 million.

BETTER DIVISION OF DUTIES

From a decentralisation strategy where the companies largely conducted their activities independently of one another, we now have a situation where economies of scale have become an important success factor.

We have, for example, centralised IT, telephony and personnel administration, which creates cost efficiency and gives the companies the opportunity to focus on our business. Another important factor is market communication, which is now coordinated across national boundaries, as many customers are active in several countries. Today, our suppliers regard us as their extended arm on the Scandinavian market instead of a representative on the Swedish market only.

In 2005, we will be continuing to take advantage of economies of scale by coordinating logistics, range development and market communication. This work was first started in 2004 with Automation and will continue during 2005 within Electronics and EP. The companies within Hydraulics will be merged into a single company, which will strengthen its competitiveness.

CONTINUED ANALYSIS

The lessons learned from the telecommunications crisis have given us greater humility with which to face the future. Continuous work questioning activities and costs in a natural way makes us more efficient. Automation and Electronics are clear examples of where both growth in sales and our efficiency drive have been successful.

The sale and winding-up of unprofitable companies and production areas, a reduction in personnel numbers and reduced stocks mean that today’s OEM is significantly more cost efficient than before. Increased dynamics and improved control mean that we are finding it easier to adapt when conditions change.

PROACTIVE INVESTMENTS

In addition to increased cost efficiency, change work over the year has helped to strengthen our customer offers. New products, a broadening of cooperation with existing suppliers on more markets and the launch of new suppliers have all strengthened our product range and our market position.

A good example of a successful product launch is the new NXT machine from Fuji, which has contributed strongly to getting the Cyncrona companies back into the game following the telecommunications crisis.

During the year, demand has increased from parts of the market, at the same time as companies have been transferring production to low-cost countries. A strong customer offer in order to increase our market shares is a prerequisite for a long-term raison d’être.

EVER FEWER MEANS MORE AND MORE

Significant and patient investments in each part of the Group have created an effective trading company. Despite a few hundred employees having left the company since the crisis years, the aim is once more to achieve previous profitability levels. In other words, productivity has increased dramatically.

The pride that I share with our employees over the improvement work of the last few years is a good platform on which to build and thus improve our profit, even though the existing markets are not expanding. The knowledge that there are new markets and new product areas means that I am looking forward with eagerness to the continued development of OEM.

Jörgen Zahlin

“Over the past 30 years, OEM has developed into a trading group that combines economies of scale, both large and small, with close relationships with customers and suppliers. This means that we are well equipped to face even tougher competition.”

BUSINESS CONCEPT AND VISION

The OEM Group operates within trading of industrial components and systems in northern Europe.

The operating units must adapt their actions to the specific conditions that apply in each business area, and satisfy the interests of customers, suppliers, employees and shareholders in an effective manner.

VISION

OEM strives to be a leading player in the trading of industrial components and systems in northern Europe.

Being a leading player means:

❚ Having a level of knowledge and servicemindedness that is among the very best in each industry.

❚ Marketing components and systems that live up to or exceed customer expectations.

❚ Making our suppliers market leaders in their particular fields.

❚ Having a level of efficiency that makes us more profitable than our competitors.

❚ Creating opportunities for employees to realise their ambitions.

The content of the vision forms the basis for the culture within the Group. By constantly questioning and working on how well we live up to this content, we are over time building a company culture where the vision becomes our identity.

BUSINESS LOGIC

In simple terms, OEM acts as an alternative to manufacturers’ own local subsidiaries and thereby has responsibility for the sales and marketing of products that the company deals with.

For our customers, choosing OEM as a supplier means they get:

❚ access to a wider range from the same supplier

❚ high delivery capacity via our warehouses

❚ technical and commercial support via our sales organisations.

An efficient logistics apparatus enables us to adapt purchasing volumes, stock levels and transport methods for maximum competitiveness.

OEM works with a wide range of products and therefore has the potential to tailor its offers to fully satisfy customer needs, as well as enabling the manufacturers to reach customer groups they could not access themselves.

The supplier’s alternative to own sales companies

For our suppliers, cooperation with OEM means they have a partner with:

❚ competence and the financial strength to make market investments

❚ knowledge of the market in question

❚ a presence on the local markets that bridges cultural differences.

“OEM strives to be a leading player in the trading of industrial components and systems in northern Europe.”

FINANCIAL OBJECTIVES

❚ 15% annual growth in profit

❚ 20% return on equity

❚ Equity/assets ratio must not fall below 35%

Over the last three years, we have achieved the following targets:

200220032004

The Group’s growth in profit over the last few years is due mainly to greater efficiency and the restructuring of activities.

In 2005 we expect the growth in profit to be due to growth in sales to a greater degree, which over time should be between 5 and 20% for our operational units.

The growth strategy and growth target will be adjusted annually.

Changes in the surrounding world, cyclical fluctuations and potential for acquisitions are factors which mean that we must always be prepared for new conditions and not hesitate in the face of structural reforms which increase our competitiveness.

Achieving our target return on equity using the current capital structure requires an operating profit of SEK 110 million. Repurchasing of shares and any future acquisitions will affect the equity/ asset ratio, which will have a positive effecton the return on equity.

The equity/asset ratio has been stable throughout the downturn and we have been able to adapt to the new situation without experiencing any unprofitable years.

“In 2005 we expect the growth in profit to be due to rowth in sales to a greater degree.”

GROWTH STRATEGY

Continued growth is a prioritised target for 2005.

Having rid ourselves of sold-off units, our aim now is to be ableto ensure growth of 10%. We will evaluate a number of acquisition options, and we have both the resources and financial strength to make acquisitions during 2005.

1. ORGANIC GROWTH

Increased focus on developing customer/supplier relationships, product offers and service will improve competitiveness and enable us to capture further market shares. Organic growth is evidence of satisfied customers and that what we have to offer is also attractive to new customers.

2. GEOGRAPHICAL EXPANSION

Exploiting established concepts on new markets results in expansion opportunities by deepening existing supplier relationships. During 2004, work began on establishing Group Automation in the Baltic States and Group Electronics in Poland. This work will continue during 2005 and we also plan to establish Group Electronics in Denmark.

3. ACQUISITIONS

The Group has a history in which acquisitions have played an important role in our growth strategy. We continue to believe in acquisitions, but are taking a more restrictive approach when making evaluations. A clear strategy where we are able to add value as an owner is a prerequisite for successful acquisitions.

The acquisitions can be made at three different levels:

❚ Smaller companies or agencies that are incorporated into an existing company.

❚ A company that fits in and continues as an individual company within one of our five corporate groups.

❚ A brand-new corporate group that is introduced as a sixth limb.

EMPLOYEES

Many of our employees have been on a long and exciting journey as the Group has developed. 2004 was the 30th anniversary of OEM being founded in Tranås.

To celebrate 30 years in the business, we arranged an event to bring together the cultures of the different companies and countries. Over three weekends, personnel from five countries gatheredtogether to get to know each other better, understand management targets and values, improve teamwork and, last but not least, to have fun.

“By developing the people, we are also developing our companies.”

In order for OEM to be able to live up to its vision of becoming a leading player in the components and systems trade, we need to create opportunities for our employees to realise their own ambitions. Everyone in the organisation contributes to the image of OEM, and our activities are based on good relationships with suppliers and customers. In order for these relationships to function, we require employees who are happy in their work and who develop within the organisation.

STRATEGY AND COMPANY CULTURE

Our strategy is to recruit young employees to train in-house at OEM. A second target is for 75% of

managers to be recruited internally, which is a means of strengthening our company culture. Of course, company culture differs between the company we started and those that have been acquired. Our aim is over time to develop a culture that ultimately results in the content of the vision also becoming our identity.

“We don’t need to be professors, but we must be professional.”

RECRUITMENT

Vacant positions are, wherever possible, filled through internal recruitment in order to maintain continuity for the customer and to give our employees the opportunity to develop. Over the last year, for example, two corporate group managers have been recruited internally.

Our managers are responsible for the recruitment for each group. In many cases, tests are used to support the selection process in order to ensure the suitability of the applicant.

The introduction plan is an important part of helping the new employee to settle into the organisation easily.

TARGETS

We achieve our sales targets by attracting leading suppliers, among other things. Thus we have the opportunity to continue expanding, which makes it possible for our employees to develop and take on new challenges within our companies. Making dynamic changes to the organisation is a challenge in itself and so requires further training and commitment.

It is our intention not only for the company and the divisions to have targets, but also to set targets for each individual. This gives each person the opportunity to experience the satisfaction of being recognised for their input. Wherever possible, salaries will be linked to the results of the team and the individual in question. Our profits are largely due to cooperation within the group.

The ESI-index (Employee Satisfaction Index) is currently measured at most of the companies that are quality certified. Our ambition is to increase the proportion of companies that work with this type of satisfaction measurement.

“Our customers and suppliers require us to continuously develop and create added value.”

PERSONAL COMMITMENT AND RESPONSIBILITY

We believe that flat organisations create responsibility and commitment throughout the entire chain. The reason for this is annual development discussions between each employee and manager, and we have an open and continuous exchange of information in the organisation. The work is controlled based on individual targets, which gives the employee greater freedom.

IN-SERVICE TRAINING

During the annual discussions between managers and employees, the following are discussed: fulfilment of objectives, development and the need for training. The discussion includes the drawing up of an individual in-service training plan. Within the Group, there is a well-developed concept for sales training at different stages. We also have our own data

support group for Movex business systems, continually provide in-house training for administrative personnel. At management level, there are several different types of management training.

Our sellers and product managers must always be sensitive to market changes and requirements. Market information is passed on to our suppliers, which means that we form an important link in the development of future products.

Our key product personnel regularly visit our suppliers to pass on market information and ensure quality in development and production, and to receive training from the supplier.

WORKING ENVIRONMENT

A good working environment is a prerequisite for employees being happy at work. The reason is that employees must have a safe and healthy workplace. The objective is for employees to feel a sense of job satisfaction, community and security.

The companies encourage personnel to participate in various exercise activities and work with contracted preventive healthcare. There are even lectures on diet, stress and achieving balance in life in connection with conferences and training seminars.

EQUAL OPPORTUNITIES

We currently have unequal distribution between men and women. This is because most positions in the Group require technical training and there are only a few women applying for these jobs. The reason for this is the low number of women taking technical courses.

Of around 350 employees in the aforementioned positions, there is currently only a handful of women. Today, the majority of our female employees are involved in finance, administration and marketing. We are striving to ensure a more even distribution of men and women in our companies and so are pleased to see interest from female applicants increasing as regards technical jobs.

OEM 30 years. Over three weekends, personnel from five countries gathered together to get to know each other better, understand management targets and values, improve teamwork and, last but not least, to have fun.

QUALITY, THE ENVIRONMENT AND ETHICS

Quality-certified companies.

• OEM Automatic AB,

• OEM Component AB,

• Egevo Elektronik AB,

• Internordic Bearing Sweden AB,

• JMS Systemhydraulik AB,

• AB Indoma

OEM International’s overall quality policy means that products and services must meet or exceed customer expectations.

The objective is for our customers to associate us with good products, delivery reliability, good technical support and a business-like and positive reception.

The OEM Group comprises 23 operational units in eight countries, of which ten units are in Sweden. There is greater customer demand for quality certification in Sweden than abroad.

During 2004 we have continued to work on increasing delivery reliability from our suppliers. This is work that is vital to us being able to maintain our own quality objectives and live up to our quality policy. It requires constant dialogue on subjects ranging from product quality and product development to delivery time and environmental

issues. Several of the companies in the Group also carry out annual customer attitude surveys in order to be able to set targets for quality as part of our customer offer.

The subsidiaries that are not ISO certified work proactively with environmental and quality targets and continuously evaluate these based on customer and market requirements. When discussing and evaluating certification, the benefits to business are always the main focus and it is this that determines whether or not certification will be introduced.

THE ENVIRONMENT

The OEM Group’s environmental policy requires that we continually work to minimise our external environmental impact. Environmental work will be governed by legal requirements as well as what is financially feasible, technically possible and ecologically justified. The aim is to reduce the impact of our business on the environment in both the short and long term.

Today, one company in the Group is involved in production activities. The others are involved in the sale of components and systems from manufacturers the world over. This means that our greatest impact on the environment results from ❚ transport of goods and personnel

❚ the content of environmentally-damaging substances in products

❚ the printing and distribution of product catalogues

❚ packaging material

❚ the heating, lighting and cooling of offices.

OEM is participating in Folksam’s Climate Index Survey for 2004.

JMS Systemhydraulik produces hydraulic units in accordance with the ISO 9000 quality management system.

TRANSPORT AND COMPANY CARS

We exert an influence on forwarding agents to encourage the use of alternative fuel and environmentally-classified cars.

As per our own company car policy, the OEM Group must only offer cars that are classified as per Environmental Class (MK) 2005 (cf. previous environmental class 1)

REQUIREMENTS FOR OUR SUPPLIERS

Our customers often raise issues about products containing substances that have an impact on the environment. When visiting suppliers, we review their environmental work. At those companies that are already certified, the supplier review includes the use of special forms, which are completed by our product managers.

PRINTING AND DISTRIBUTION OF PRODUCT CATALOGUES

Each year the Group prints and distributes approx. 50,000 product catalogues and brochures. When purchasing printing services, we only consider environmentally-certified printers. Wherever possible we try to print items on environmentally-approved paper. Work is continuing to publish product information on the Internet, which will make it possible for us to reduce the number of printed catalogues.

NEW ENVIRONMENTAL REQUIREMENTS CREATE BUSINESS OPPORTUNITIES

On 1 July 2006, the ‘lead-free directive’ (RoHs*) will be introduced which prohibits the use of lead, mercury, cadmium and other hazardous substances in electrical or electronic products. This will have a huge impact within the EU and throughout the rest of the world. Our machinery customers have already begun converting their production facilities and we are seeing increased demand for new furnaces, wave soldering systems and other machinery functions affected by the new directive.

The new ban will also mean demand for training on the new machines. Solder paste may no longer contain lead, which means that we have to offer new products.

ETHICS

OEM International’s activities are based on longterm relationships with personnel, suppliers and customers. The values of the management and employees are evident in these relationships. It is therefore important that ethical issues be continually discussed.

One example of our efforts with regard to ethical issues is that OEM China Development certifies the factories they work with in China, and also investigates the occurrence of child labour.

Our day-to-day business is characterised by respect for employees and business partners.

Environmentallycertified companies

As the business, with regard to production, does not have a heavy impact on the environment, we currently only have three Swedish companies that are certified in accordance with ISO 14000.

• OEM Automatic AB

• OEM Component AB

• Internordic Bearing Sweden AB

Internordic Bearing and GGP Sweden AB

A SHARED JOURNEY

Christian Wildstam, MD of Internordic Bearing and Troels Nielsen, MD of GGP Sweden, verify that the cooperation concerning bearings and subsystems for lawnmowers benefits both parties.

GGP Sweden AB (previously Stiga) in Tranås has replaced its entire production facility and created Europe’s most modern production line for assembly of lawnmowers.

“Previously, we were always behind in production. Now we are ahead, and can double production if so required,” says MD Troels Nielsen. “Productivity has increased by approximately 35 per cent. At the same time, we can better ensure the high quality that characterises the Stiga brand.”

CONCEPTS FROM THE CAR INDUSTRY

Troels Nielsen has a background as a production engineering manager at Volvo’s Torslanda plant This is clearly reflected in the new assembly line, which has been designed along the lines of a modern car plant. At one end, chassis are lowered into clamps from the ceiling. The loop runs through the light and clean assembly hall, where fitters assemble more or less complete components. At the other end of the premises, the finished mowers are packed and loaded for transport to retailers around the world.

SUPPLIERS AS PARTNERS

“The remodelling of our assembly facilities also means a new approach and new demands on our suppliers,” says Troels Nielsen. “We previously only saw them as suppliers. They would deliver the right item at the right time and the right price. Now we are looking at it in a different way and see our suppliers as partners, who can use their unique competence in various areas to help us to develop our products and our production.”

“Internordic Bearing is the right partner for modern production development. They have successfully made the transition from being a supplier of bearings to being a partner involved in developing complete subsystems that include bearings. All our divisions, such as purchasing, technology, design and logistics, agree that Internordic Bearing meets our high demands.”

DEMANDING CUSTOMERS ARE GOOD

Christian Wildstam, MD of Internordic Bearing, agrees with Troels Nielsen’s comments about the cooperation.

“When GGP Sweden AB built its new production line, it also created new requirements and there was scope for expanded cooperation. Our ideas and solutions for complete subsystems were perfect for the modern production method. This challenge proved beneficial for us. Demanding customers are good for our own development. If we hadn’t been able to meet GGP Sweden’s demands, we wouldn’t be their supplier today.”

FACTS

GGP SWEDEN AB.

CONTINUOUS IMPROVEMENT

Sören Johansson, design manager for Stiga lawnmowers, sees many concrete benefits to cooperating with Internordic Bearing.

“As they supply complete subsystems, we are able to reduce assembly time on the line. We are not experts on bearings and therefore understand the value in Internordic Bearing delivering subsystems with the exact quality requirements and delivery precision we require. They know the requirements placed on the bearings in a lawnmower and we are thus able to develop the design together.”

“This cooperation is continuously strengthened and expanded,” says Sören Johansson.

“The more complete subsystems we can add to the production line, the quicker the line can run. It is an advantage that Internordic Bearing is close to us as a local company, but still has the muscle of the OEM Group to support them.”

“All our divisions, such as purchasing, technology, design and logistics, agree that Internordic Bearing meets our high demands.”

Stiga is a trademark within the GGP Group (Global Garden Products). GGP Sweden AB is Scandinavia’s largest manufacturer of garden products. The production unit in Tranås is responsible for a complete range of lawnmowers for both homeowners and professional use. GGP Sweden AB has an annual turnover of approx. SEK 1 billion and employs approx. 340 staff.

IBS INTERNORDIC BEARING SWEDEN AB.

Internordic Bearing, with its registered office in Nässjö, offers a complete range of bearings for the Scandinavian market. Special solutionsand subsystems are developed in cooperation with the customer in question. The company is owned by OEM International AB and is part of group Mechanics.

Managing Director Troels Nielsen has developed GGP Sweden’s (Stiga) production using the latest technology from the car industry.

MORE EFFICIENT CABLING FOR SANDVIK TAMROCK’S DRILLING RIGS

Sandvik Tamrock in Finland manufactures rigs for drilling and excavation. Its customers are involved in mining industries around the world.

The machines must be able to tolerate vibrations and mechanical strain in extremely tough conditions. Moisture and corrosive substances are also commonplace.

“As our drilling rigs often form part of our customers’ production process, operational reliability is extremely important,” says Timo Niemi, head of electrical development at Sandvik Tamrock.

“We have to bear this in mind when choosing materials and components from our suppliers. When designing equipment, we don’t just look at the end function; our own manufacturing processes must also be efficient and rational.”

A NEW TOTAL SOLUTION IN NO TIME

In 2004, Sandvik Tamrock enquired about a new total solution for cabling, which could be used on Tamrock’s drilling machines. In cooperation with

OEM Automatic Finland and Sandvik Tamrock

A new splitter box for cabling will now be used in all Sandvik Tamrock drilling machines. This rationalises production considerably, making it more efficient.

“Sandvik Tamrock recognized the advantages of total cost over the price of individual components early on. This means that together we can develop profitable total solutions. Something that all of our customers can benefit from.”

Woodhead Industries, as a supplier of mPmproducts, and OEM a proposal was put forward in a very short space of time.

“Normally, new product solutions intended for such demanding conditions take quite a while to develop. But in actual fact, we were able to demonstrate several possible solutions after only a few days,” says Riccardo Comini, the European Manager for Woodhead Industries communication products and the person responsible for the mPm brand. “Sandvik Tamrock’s design department chose a solution with a splitter box. This was shown to functionwell and, in the future, will be used in their machines.”

COMPLETE SOLUTIONS

OEM has been supplying products to Sandvik Tamrock since 1981, when OEM was first established in Finland.

this development.”

“We have supplied many different components from our various suppliers,” says Patrick Nyström, MD of OEM Finland. “Sandvik Tamrock recognised the advantages of total cost over the price of individual components early on. This means that together we can develop overall solutions that are profitable to both Sandvik Tamrock and our

FACTS

SANDVIK TAMROCK.

Jouni Laaksola is OEM’s contact with Sandvik Tamrock.

“The solution from Woodhead featuring a splitter box that can be used on all machines means that Sandvik Tamrock can purchase one item instead of a number of different ones. This makes their product planning, purchasing and assembly processes much easier,” says Jouni Laaksola.

the assistance of, from left, Jouni Laaksola, OEM Automatic Finland, Timo Niemi and his team at Sandvik Tamrock and Jussi Haavisto, OEM Automatic Finland.

Sandvik Tamrockis a market leader in the manufacture of surface and underground drilling and excavation products for the world’s mining and construction industries. The company forms part of the Mining and Construction business area in the Sandvik Group. This business area has a turnover of SEK 17 billion and employs over 9,600 people.

OEM AUTOMATIC FINLAND.

Since the start of 1981, OEM Automatic Finland has supplied industrial components to Finnish industry. In Finland, OEM Automatic represents approximately 40 leading suppliers; Woodhead Industries is one of the most important suppliers.

WOODHEAD INDUSTRIES.

Woodhead Industriesdevelops, manufactures and markets network and electrical infrastructure products for tough, demanding and hazardous environments. Woodhead is internationally renowned within the industry for its brands, which include mPm® Woodhead has 21 facilities in 10 countries including North America and throughout Europe and Asia.

Cyncrona Finland and HAMK

ELECTRONIC ENGINEERS OF THE FUTURE

The HAMK vocational college in Forssa in Finland has made a huge investment in a complete production line for the manufacture of electronics. The unit is called EleForssa.

HAMK (Häme Polytechnic University of Applied Sciences) is a certified university with a unique specialisation in, among other things, process technology. The investment in the new line means that students at the school can now put theory into practice and then use the latest production technology.

The manufacturing companies in Finland also have access to excellent facilities for education, process development and the manufacture of prototypes.

COOPERATION WITH CYNCRONA.

As supplier of the line, HAMK chose to cooperate with Cyncrona, which is a leading supplier of production systems for the electronics and telecommunications industry in Finland.

“For us as a supplier, the production line is significant in several ways,” says Ari Ylen, Product Group Manager at Cyncrona in Finland. “We have the opportunity to demonstrate individual machines from our various suppliers. We also have occasion

to show Finland’s large and important electronics industry that we have the competence, knowledge and resources to be a complete supplier.”

“The students at HAMK work with products and technology from our suppliers as part of their

course. Hopefully, when they then go out to work, it is this technology and these products that they will recognise and ask for.”

A RELIABLE SUPPLIER

The product line consists of machinery and software from a number of Cyncrona’s suppliers. Dispensing equipment is supplied by Asymtek Assembly machines from Fuji. Reflow furnace from SMT and software for line control from Tecnomatix

“We chose to cooperate with Cyncrona as they were able to present a financially advantageous total solution,” says Erik Rosenqvist, Production Manager at EleForssa. “They have the competence and are a reliable supplier.”

From left: Mattias Franzén, Corporate Group Manager EP Group, Ari Ylén, Product Group Manager at Cyncrona Finland and Erik Rosenqvist, Production Manager at HAMK.

Rauno Harttimo, the Product Group Manager at Cyncrona Finland, with Marja Laurén and Helena Kuusniemi, students at HAMK.

FACTS

ELEFORSSA.

The concept for the EleForssa project at HAMK (Häme Polytechnic University of Applied Sciences) was developed in 2000 after an initiative from various Finnish electronics companies. The investment was then made possible thanks to financial assistance from various electronics companies, Tavastehus TE-Centrum, the County Administrations, the Ministry for Education and EU grants.

CYNCRONA FINLAND.

Cyncrona is a market-leading supplier of production technology for the electronics and telecommunications industry and represents 20 or so leading brands. Cyncrona has had premises in Finland since 1983 and currently has 22 employees. The annual turnover for 2004 was approximately EUR 13 million.

The product line consists of machinery and software from a number of Cyncrona’s suppliers. Dispensing equipment is supplied by Asymtek. Assembly machines from Fuji. Reflow furnace from SMT and software for line control from Tecnomatix.

GROUP OVERVIEW

AUTOMATION.

Components for industrial automation within the business areas of Electrical Machinery, Electrical Cabinets, Safety, Cables, Pressure & Flow and Pneumatics.

ELECTRONICS.

Appliance components, circuit board components and EMC/microwave components.

MECHANICS.

Bearings, bushings, seals for rotating and linear motion, electric motors and servomotors, drive-belt transmissions and actuators.

HYDRAULICS.

Sales of pumps, motors, valves, mini and micro powerpacks and accessories for hydraulics and production of powerpacks and systems for mobile and industrial applications.

ELECTRONICS PRODUCTION (EP). Production systems, test solutions and components for electronics production.

AUTOMATION

ELECTRONICS

MECHANICS

HYDRAULICS EP

AUTOMATION

The objective for 2004 was to take market shares and increase efficiency. An objective we have achieved through increased customer activity and developing the product range.

Efficiency has been improved through coordination within range development, market communication and logistics. This, together with increasing demand, has led to an increase in both sales and profit.

❚ Sales increased by 8% to SEK 553 million.

❚ The profit increased by 22% to SEK 67 million.

Mikael Thörnkvist, Business Director Automation

During the year, there were a few major product launches, and we have also started to cooperate with new suppliers and have geographically expanded our existing range.

In addition, the decision was taken Q1 2005 to launch sales in Estonia through our Finnish company. We have now been given the green light by approximately 30 suppliers and expect a turnover of approx. SEK 10 million within two years.

In Sweden, which is our most important market, sales increased by 10%. The Polish company experienced the greatest growth in sales, with an increase of 34%. All units, except the Danish and Italian companies, had growth. In Denmark, significant organisational changes took place during the year to create opportunities for increased customer canvassing. All units, except the Italian company, showed a positive result.

GOALS AND STRATEGIES

Our assessment is that demand will stabilise during 2005, and our objective is to increase sales by at least 5% and profit by 8%.

We are working to sell off the Italian company during 2005. The structure and range does not fit in with the group, and we think it will be difficult to make the company profitable. The objective therefore excludes Italy.

Our ambition is to become a leading player in northern Europe. Our strong market position in Scandinavia and increased coordination means that we can quickly and inexpensively establish ourselves on new markets. During the year, we will evaluate and decide upon continued expansion in the Baltic States.

FACTS

The strategy is:

❚ A strong local presence with face-to-face sales

❚ A continued efficiency drive through coordination

❚ To enhance our customer offer by expanding our product range

❚ To represent our key suppliers in all countries

❚ Geographical expansion in northern Europe.

Our long-term aim is annual growth of 7-10%.

MARKET

During 2004, the market stabilised in Europe. In Poland, the market grew rapidly and demand within industrial automation is increasing. We expect some growth in our other countries during 2005. On the whole, the market for automation components in Europe is relatively stable and we expect that it will grow approx. 2-3% per year over a business cycle. As the majority of our customers produce small to medium-sized volumes, there is no drastic transfer of production to low-cost countries.

COMPETITORS

We compete with manufacturers such as Schneider Electric, ABB and Omron, but also with trading companies such as Addtech

ACTIVITIES. Group Automation comprises seven OEM Automation companies with activities in Sweden, Finland, Norway, Denmark, Poland, the UK and Italy. The business concept is based on the sales and marketing of components for industrial automation to machine and appliance manufacturing industries, wholesalers and strategic end-users. The group represents 60 or so suppliers that specialise and are leaders within their respective fields. Marketing is primarily through face-to-face sales wherein OEM provides the customer with product and application knowledge.

PRODUCTS. Components for industrial automation within the business areas of Electrical Machinery, Electrical Cabinets, Safety, Cables, Pressure & Flow and Pneumatics.

INCORPORATED UNITS. OEM Automatic Sweden, OEM Automatic Denmark, OEM Automatic Norway, OEM Automatic Finland, OEM Automatic UK, OEM Automatic Poland and OEM Automatic Italy.

Sales (SEK million) Profit (SEK million)

Number of employees

Share of Group sales

ELECTRONICS

Improved efficiency and restructuring as regards core activities have resulted in improved profit.

All operational units have increased both their turnover and profit, despite a large part of sales being attributable to dollar-based deals.

❚ Sales increased by 6% to SEK 285 million.

❚ The profit increased from SEK 1.6 million to SEK 20 million.

Urban Malm, Business Director Electronics.

The efficiency drives that were concluded at the end of 2003 have produced the desired effect in the form of less administration and an unchanged activity level as regards customers.

About Communication was sold off during the first quarter. The figures for Group Electronics for 2003 and 2004 do not include the figures for About Communication. The sale follows the group’s strategy of restructuring its activities in accordance with the business concept.

MARKET AND CUSTOMERS

During the first six months of 2005, the group will be restructured under the name OEM Electronics and divided into different business areas with activities in Sweden, Finland and Poland.

We expect increased competitiveness and improved conditions for becoming a leading player in each market segment.

GOALS AND STRATEGIES

The objective is to increase sales and profit by at least 5%, despite uncertainty on the market. We must follow our customers geographically, from in-designto production. During 2005, we will concentrate on Poland and expect to achieve a turnover in the first year of SEK 6 million.

We must concentrate on our core processes as regards customers and suppliers and further centralisation of ‘support processes’. We will evaluate the opportunities for centralising, finance, warehouse management and market communication, etc. We must be our customers and suppliers’ first choice as a partner.

FACTS

We are planning the continued relocation of volume production to low-cost countries. Our ability to add value to our customers is crucial to both the deals we make and the markets on which we are represented. It is also crucial if we are to be able to follow the customer if they choose to transfer production.

In addition to the systems side of telecommunications, Group Electronics also supplies the specialised vehicle industry, the medical devices industry and various industrial electronics manufacturers.

COMPETITORS

Our competitors are made up partly of the large global components distributors Arrow and Avnet, and partly of engineering firms such as Addtech, the Lagerkrantz Group and the Electronics group. In addition to these, there are also the manufacturers’ own sales companies.

PRODUCTS. Appliance components, circuit board components and EMC/microwave components.

ACTIVITIES. Group Electronics markets special components for appliance and electronics manufacturing industries in Scandinavia and Poland. The group represents some of the world’s leading manufacturers within semiconductor circuits and electromechanical components, for example Maxim/Dallas, Alps, Sharp, Eudyna and DBK.

INCORPORATED UNITS. OEM Component Sweden, Egevo Elektronik Sweden, Pronesto Sweden, Aspecs Finland, OEM Component Finland and OEM Component Poland.

2004 was a turbulent year in which we did not achieve our targets. This was due to the fact that we lost suppliers and that investment in the market did not have the expected effect.

This lack of growth means that the profit falls below last year’s level, which will, in turn, require attention during 2005.

❚ Sales fell by 8% to SEK 194 million.

❚ The profit dropped from SEK 9.6 million to SEK 4.3 million.

Andreas Fälth, Business Director Mechanics

At the end of the year, the Group was restructured and the product area Motors & Transmissions was transferred to Group Mechanics to create OEM Motor AB in Sweden and OEM Mechanics in Finland. The expected synergy effects of these measures have still not been achieved.

During the last quarter of the year, it was decided that A. Karlson Industriteknik should be restructured, which means that parts of the company have been transferred to other units in the Group, while the remaining parts have been sold off or wound up.

During the year, the group increased the amount of cooperation between the units for the purpose of rationalising costs and creating a synergy effect. During the autumn, a joint investment to develop sellers and the sales process at the Swedish companies was launched.

During 2005, a joint business and sales support system will be implemented to increase efficiency.

GOALS AND STRATEGIES

The aim for 2005 is a turnover level of SEK 210 million. This means growth of 8% with an operating margin of at least 5% for all units. The long-term aim is still for the corporate group to achieve an operating margin that exceeds 10% and growth that exceeds 15% per year.

FACTS

The group’s overall strategy is:

❚ To develop its sellers and sales process

❚ To increase sales activities in Denmark

❚ To coordinate logistics

❚ To coordinate support processes

MARKET

Sales occur mainly in Sweden and Finland. However, we regard Scandinavia as a market where our ability to be able to offer applicationbased and quality-assured components at competitive prices means that we can take market shares from our competitors.

The customers are primarily manufacturers in the automotive, materials handling and mechanical engineering industries.

COMPETITORS

Competitors are primarily manufacturers with their own distribution channels, such as SKF (bearings), Freudenberg (seals) and Bosch (motors).

ACTIVITIES. Group Mechanics comprises five units that focus on motors and mechanical components in Sweden and Finland. The group also includes a quality control center in China for production control and logistics, primarily for bearings. An important factor in the group’s success is face-to-face sales of customised solutions. Together with the manufacturer, we are involved in the customer’s design work, which ensures cost-effective product selection.

PRODUCTS. Bearings, bushings, seals for rotating and linear motion, electric motors and servomotors, drive-belt transmissions and actuators.

INCORPORATED UNITS. IBS Internordic Bearing Sweden, Indoma Sweden, OEM Motor Sweden, OEM Mechanics Finland and OEM China Development Holland / China.

HYDRAULICS

The winding up of HPI produced a reduced turnover and lower profit, although JMS Systemhydraulik has shown positive development during 2004.

The group’s turnover was negatively affected by SEK 15 million through the winding up of HPI, whichalso charges the result for the yearwith SEK 3.4 million. Hydraulic unitsand systems have seen goodgrowth during the year. Component sales have not achieved the planned growth.

Fredrik Tengstrand, Business Director Hydraulics

❚ Sales fell by 5% to SEK 139 million.

❚ The group’s return fell from SEK -0.6 million to SEK -1.1 million.

JMS Systemhydraulik has also achieved sales growth after a number of years of improved profitability and restructuring. The company has exceeded expectationsand has achieved a good level of profitability. The company has duringthe year signed an agreement with the American company Eaton, which will provide a strong range of both industrial and mobile applications.

Hydrac has not met expectations during the year and turnover fell, which meant the company reported a zero return. The number of staff has been reduced but there is still focus on developing new deals for components within mobile hydraulics.

Hydroprodukter has been wound up during the year. The company’s sales were based mainly on the product range of one supplier and rival suppliers were represented in the group. In April, the decision was taken to end the company’s partnership with this supplier. The work to switch business to our other suppliers’ products is continuing and will do so well into 2005.

During 2004 we intended to establish ourselves in Finland. However, the conditions were deemed too weak,which meant that the group chose a different strategy for establishing itself outside Sweden. Our hydraulic units and systems will form the basis for our geographical expansion via our companies in Sweden.

Group Hydraulics was acquired in November 2000 and the earnings for 2004 were burdened by SEK 5.2 million (6.5) in goodwill depreciation.

GOALS & STRATEGIES

The aim is to become one of the strongest and most profitable hydraulics companies in Sweden within three years. We intend to achieve this goal by merging the group’s two remaining units during 2005.

❚ A more efficient company that will more rapidly achieve its targets regarding operating margin and profit growth.

❚ The merger will give us one of the market’s strongest product ranges.

❚ Geographical expansion of our activities within hydraulic units and systems.

During 2005 the target is:

❚ To achieve a turnover just below the level of 2004, which means 8% growth for comparable units.

❚ To achieve an operating margin of 7%.

MARKET

Over the past few years, the hydraulics market has seen an increase in demand, but with huge variations between the various industries. Our most important industries are paper and pulp, marine/ offshore and mobile construction equipment. Customers tend to become larger through mergersand acquisitions. The market is heading towards more processed solutions.

COMPETITORS

Competition on the Swedish market comes mainly from a number of companies in the Hexagon Automation Group, but also from international players such as Bosch Rexroth, Parker Hannifin and Sauer Danfoss.

FACTS

ACTIVITIES. Group Hydraulics markets components for mobile and industrial applications as well as designing and manufacturing customised hydraulic powerpacks and complete hydraulic systems, mainly for Swedish OEM customers. We represent leading manufacturers of hydraulic components from around the world, including Eaton, SUN, Casappa and Walvoil. We are industry leaders when it comes to know-how and production of hydraulic powerpacks.

PRODUCTS. Sales of pumps, motors, valves, mini and micro powerpacks and accessories for hydraulics and production of powerpacks and systems for mobile and industrial applications.

INCORPORATED UNITS. JMS Systemhydraulik Sweden and Hydrac Sweden.

The Cyncrona companies increased their sales by 6% and their profit by 4%, which was below our target figures.

Jubo Mechatronics AB which had had profitability issues for several years was sold off in November 2004. The sale is in line with the Group’s strategy to restructure its activities. Jubo Mechatronics has burdened the result for Group EP by approximately SEK —7.8 million.

Mattias Franzén, Business Director EP

❚ Sales fell by 7% to SEK 239 million.

❚ The return amounted to SEK -0.6 million (-6.5).

Sales for the Cyncrona companies increased by 6%. The Finnish company exceeded its targets, while the Swedish and Norwegian companies were on target. Cyncrona Denmark has had a tough year with very little new business and a 30% reduction in sales as a result.

Increased cooperation between the Cyncrona companies is improving efficiency and giving us increased competitiveness. During the year, work began to create a shared IT platform for the group. This will be completed during 2005 and will further improve the conditions for cooperation.

At the beginning of the year, together with our supplier Fuji we launched a new generation of production machines. The launch has been very successful and we have sold approx. 20 machines during the year.

In our work with capital tied-up, we have succeeded in selling the majority of our secondhand stock, which has led to the stock being reduced by a total of SEK 6 million.

GOALS AND STRATEGIES

We intend to become Scandinavia’s leading distributor of equipment and materials for

FACTS

electronics production.Over time, turnover will increase by 15% per year and the operating margin will in the long term exceed 8%. This will be achieved by increased efficiency within the group, greater cooperation with existing customersand canvassing of new customers. We will also be launching a number of new products during 2005.

MARKET AND CUSTOMERS

Demand improved during 2004 and we believe that it will continue to increase over the coming year.

The transfer of electronics production from Scandinavia is continuing. Our assessment is that the market will remain relatively stable over the next three years as regards manufacturer numbers.

The technology being developed and our suppliers launching new machines will create the conditions necessary for new business. We expect to increase our market shares for our existing product areas at the same time as expanding our product range.

Today, the project base is significantly larger than the same period last year. We are looking forward to 2005 and its expected growth of over 30%.

COMPETITORS

The Cyncrona companies’ main competitors currently are Siemens and Mydata for surfacemounting machines, and a handful of distributors, for example Sincotron, for other parts of the range.

PRODUCTS. Production systems, test solutions and components for electronics production.

INCORPORATED UNITS. Cyncrona Sweden, Cyncrona Finland, Cyncrona Denmark and Cyncrona Norway.

ACTIVITIES. Group EP, Electronics production, comprises four Cyncrona companies with activities in Finland, Sweden, Denmark and Norway. The companies sell production equipment, support and materials for electronics production and test equipment for circuit boards, microelectronics and printed circuit boards. Cyncrona represents around twenty leading suppliers who are each specialists in their chosen field. Marketing is primarily through face-to-face sales wherein Cyncrona provides the customer with both product and process knowledge. Service and support is an important part of the business and involves training, installation, commissioning and servicing.

The Fuji NXT machine that was launched in 2004.

DEFINITIONS OF KEY INDICATORS

DEBT/EQUITY RATIO: Interest-bearing liabilities divided by calculated shareholders’ equity. Calculated shareholders’ equity comprises shareholders’ equity plus minority interests.

EMPLOYED: Operating income plus financial income as a percentage of average capital employed. Capital employed refers to total assets minus non-interestbearing liabilities, including deferred tax liabilities.

EARNING CAPACITY OF SHAREHOLDERS’ EQUITY: Net profit for the year as a percentage of average shareholders’ equity.

AVERAGE INTEREST PAYABLE: Financial expenses as a percentage of total liabilities.

OPERATING INCOME/SALES: Operating income before depreciation as a percentage of sales.

PROFIT PERCENT: Earnings after financial income as a percentage of sales.

PROFIT MARGIN: Profit before tax as a percentage of sales.

CAPITAL’S RATE OF TURNOVER: Sales divided by total assets.

SALES PER EMPLOYEE: Sales divided by average number of employees.

EQUITY/ASSETS RATIO: Shareholders’ equity and minority interests as a percentage of total capital.

CASH LIQUIDITY: Current assets minus inventories as a percentage of current liabilities.

EARNINGS PER SHARE: The Group’s net earnings after deductions for both paid and deferred tax dividedby the number of shares.

SHAREHOLDERS’ EQUITY PER SHARE: Shareholders’ equity divided by the outstanding number of shares.

P/E (PRICE/EARNING): Quoted price as at 31 December divided by earnings per share.

DIRECT RETURN: Dividend per share divided by the quoted price at year-end.

The Board and the Managing Director of OEM International AB (Publ) hereby submit the annual report and the consolidated accounts for the 2004 fiscal year. The annual report including the revision report covers pages 36-65.

THE GROUP

OEM International AB is represented via its subsidiaries in the Scandinavian countries as well as in Great Britain, the Netherlands, Italy and Poland.

OPERATIONS

Operations focus on the sale and marketing of components and systems for automation. The group is organised into five groups of companies: Automation, Electronics, Mechanical, Hydraulics and EP.

CONSOLIDATED SALES AND INCOME

The total sales for the Group amounted to SEK 1,406,128 thousand (1,428,119). Profit for the year after tax amounted to SEK 57,446 thousand (31,486), which is equivalent to SEK 7.42 (3.87) per share. Sold off operations negatively affect sales between the years by SEK 75 458 thousand and for comparable units the group sales consequently increased by 4%.

Increased sales to the existing customer base together with several successful product launches within the Automation Group increased sales by 8%. All the companies in the group, with the exceptions of Denmark and Italy, have experienced positive development through the year. Continued work on coordination and efficiency increased profits by 22%.

Demand within the Electronic Group continues to improve on the previous year and the sales for 2004 increased by 6%. Profit increased from SEK 1,559 thousand to SEK 19,977 thousand. All units show positive results for 2004. Establishment of a company in Poland started during the fourth quarter.

Continued problems in reaching the expected sales growth the within Mechanical Group means that results are significantly poorer. Operating income has been reduced from SEK 9,566 thousand to SEK 4,307 thousand. Increased owner commitment together with a clearer focus on growth has been introduced to turn this development around.

Sales and profit in the Hydraulic Group decreased through the year. Sales fell by SEK 7,219 thousand to SEK 138,907 thousand and the results amounted to —SEK 1,062 thousand (-555). The results have been burdened with SEK 5,199 thousand in goodwill depreciation (6,474).

Within the group, JMS Systemhydraulik developed strongly which largely compensated for the winding up of Hydroprodukter. The Swedish market showed a continued slight increase.

The Cyncrona companies in Finland and Sweden within the EP Group finished the year strongly while the Danish and Norwegian company had difficulties in meeting the anticipated sales and profit. Included in the Group was Jubo Mechatronics AB whose operations were sold off in November 2004.

The operating income of the Group amounted to SEK -555 thousand (-6,515) and Jubo Mechatronics burdened the Group results by -SEK 7 755 thousand (-13,361).

GROUP CHANGES

Operations in About Communication AB and Jubo Mechatronics AB have been sold. Hydroprodukter International AB’s operations have been wound up. Continued restructuring of the Group is underway where the objective is to achieve a simplified and clearer legal Group structure, through fusions and voluntary liquidation.

During the year the following dormant companies were liquidated; OEM Multimetal OY, Finland, ATT Europé Ltd, England, N. Erlands Petersen Trading A/S, Denmark and Nomitek AB, Hydraulik Control Förvaltning i Ängelholm AB, IRB Mechatronics AB, About Computers AB, About Vila AB, OEM Automatic Norden AB, CynCrona EDA AB, Cergotec AB, CynCrona Communication AB, MPE Semitech AB and MPE Microtech AB all Sweden.

FINANCIAL POSITION 2004

Liquid assets (incl. unused overdraft) in the Group amounted at the end of the year to SEK 415,029 thousand (358,419). The Group’s equity/assets ratio at the year-end amounted to 60.3% (61).

INVESTMENTS

Investments in the Group during the year amounted to SEK 10,088 thousand (9,955) in machinery and equipment, SEK 807 thousand (150) in buildings.

RESEARCH AND DEVELOPMENT

The Group does not support any direct research and development. Development mainly occurs at our Suppliers based on information which we have provided about the market requirements.

SWITCHING TO IFRS 2005

From and including the 1st January 2005 the consolidated accounts for OEM International will follow IFRS. This is a result of an EU regulation which applies to all registered companies within the EU.

The comparison figures given for 2004 in the reports for 2005 will also be recalculated according to IFRS. Information about future regulations and the effects for the OEM group including the opening balance and effects on the profit calculation for 2004 is presented in note 20 on pages 61-63.

ENVIRONMENTAL IMPACT

During 2004 some of the subsidiaries within the group conductoperations that require registration in accordance with the Swedish Environmental Code. This refers to engineeringindustries with a maximum of 5,000 m2 of workshop floor, including installations, in accordance with code M2B testing level C.

REPURCHASE OF OWN SHARES

OEM International AB has utilised the authority granted to the Board of Directors by the Annual General Meeting to repurchase shares with the aim of improving the Group’s return on shareholders’ equity and earnings per share. During 2004 the Company repurchased 34,000 shares at an average price of SEK 97.29 including transaction costs. Total company ownership of shares at year end was 154,000 shares, equivalent to 2% of the outstanding number of shares. The Annual General Meeting authorised the repurchase up to 10% of the total number of shares, that is, 772,310 shares.

THE WORK OF THE BOARD

The work of the board and its programme is given on pages 66-67.

THE PARENT COMPANY

The parent company must be an active owner and develop the subsidiary companies. In addition to establishing clear goals and expectations for the businesses, this also entails contributing with experience and supplying resources in the fields of IT, economic control, personnel administration, market communication, quality and environment control as well as stock management. The parent company’s sales amounted to SEK 35,090 thousand (32,077). Of this total SEK 34,855 thousand (31,909) relates to sales to subsidiary companies. Profit before appropriations and tax amounted to SEK -4,217 thousand (-22,493 ).

PROPOSED DIVIDEND

The Board of Directors and the Managing Director propose that the dividend be raised from SEK 4.50 to SEK 5.50. The complete proposal of profit allocation can be found on page 64.

FUTURE DEVELOPMENT

The Group’s objective is to increase profit by an average of 15% annually over an economic cycle. The Group with its market position, organisation and financial position is strong and well equipped for continued expansion. The growth strategy is described on page 11.

Figures for 2003 are in brackets.

INCOME STATEMENT SEK thousands

GroupParent Company

Net sales11,406,128 1,428,11935,09032,077 Change of products in production and finished goods- 3,4472,195-1,402,681 1,430,31435,09032,077

OPERATING EXPENSES

Raw materials and supplies-16,397-44,550--

Trading stock- 895,879-893,990--

Other external expenses- 108,332-101,173- 18,614-13,718 Personnel expenses2- 275,976-298,351- 23,066-17,744 Depreciation, tangible and intangible fixed assets3-26,034-36,986- 2,259-2,468

INCOME FROM FINANCIAL ITEMS

Income from shares in Group companies4--455-25,273 Income from shares in associated companies51,5181,009750450 Income from other securities and receivables which are fixed assets651-Other interest income and similar income items74,2302,9623,4375,061 Interest expenses and similar expense items8- 2,779-5,846-

APPROPRIATIONS Difference between tax depreciation and depreciation according to plan: • Buildings and land-- 176182 • Equipment, tools and installations--47419 Accruals fund, resolution--6,5837,653 Accruals fund, allocation--- 13,000-9,400

Average number of shares7,738,7958,138,778 Average number of shares after dilution7,778,7958,165,737 Dividend, SEK5.50* 4.50 * Proposal

Provisions for pensions and similar obligations162,2541,791-Deferred tax liability923,12223,051 265Guarantee provisions806590-TOTAL PROVISIONS26,182 25,432265CURRENT LIABILITIES Interest-bearing liabilities Overdraft1737,74437,215-Non interest-bearing liabilities Advances from customers4431,245-Accounts payable97,35993,5301,028523

Separate

NOTES WITH ACCOUNTING PRINCIPLES AND COMMENTS TO THE FINANCIAL STATEMENTS AMOUNTS IN SEK THOUSANDS UNLESS

OTHERWISE

GENERAL ACCOUNTING PRINCIPLES

The Annual Report has been prepared in accordance with the Swedish Annual Accounts Act and Swedish Financial Accounting Standards Council and statements issued by said council’s Akutgruppen. Adjustments have been made for RR 29, Remuneration for employees, principally concerning defined benefit pensions. RR 29 has meant that the incorporated liability for 2004 is SEK 715 thousand greater than last year’s annual report. The effect of the change has adjusted the incorporated equity for the year 2004 by SEK 515 thousand after tax deduction.

COMPANY DOMICILE

The company OEM International AB (Publ) operates in the association form of a public limited company and has a domicile at Tranås in Sweden. The address of the Head Office is Dalagatan 4, Box 1011, Tranås.

REPORTING FOR SEGMENTS

The internal reporting system of the Group is built on the idea of following up the returns on the Group’s goods and services, which is why the areas of operations are the primary basis for division.

CLASSIFICATION

Fixed assets, long term liabilities and provisions consist only of amounts that can be expected to be recovered or paid more than twelve months after the date of the balance. Current assets and current liabilities consist only of amounts that can be expected to be recovered or paid within twelve months of the date of the balance.

VALUATION PRINCIPLES

Assets, provisions and liabilities have been valued at their acquisition values unless otherwise stated below.

Intangible assets - Goodwill

Goodwill occurs in the direct and indirect acquisition of operations. The acquisition value of goodwill is determined at the time of acquisition as the difference between the purchase sum and the marketvalue of the acquired identifiable assets and liabilities. Goodwill is then reported to the acquisition value minus accumulated depreciation according to plan and any write downs. Tests for write downs are carried out as described below.

Other intangible assets

Other intangible assets acquired by the company are reported to the acquisition value minus the accumulated depreciation and write downs. The expense of internally generated goodwill and trademarks are reported in the balance sheet as costs when they occur. Additional expenses for intangible assets are added to the acquisition value only if they increase the future economic advantages which exceed the original evaluation and the expenses can be calculated reliably. All other expenses are costed when they occur.

Depreciation periods see the table below.

Tangible assets

Tangible fixed assets are reported to the historic acquisition value after deductions for accumulated depreciation according and any write downs. The acquisition price includes the purchase price including customs charges and taxes and costs directly attributable to the asset in order to bring it to the location in the condition to be used as intended by the acquisition. The purchase price has been reduced by goods discounts etc. Examples of directly attributable costs which are included in the acquisition value are delivery and handling, installation, consultancy services, legal services. Additional expenses are only activated if they generate economic advantages that exceed the original performance for the asset. Expenses for repairs and maintenance are costed continuously.

Depreciation principles for tangible fixed assets

Depreciation according to plan is based on the original acquisition values reduced by the calculatedresidual value. Depreciation occurs linearly through the asset’s calculated period of use.

Depreciation periods see the table below.

The difference between the depreciation mentioned below and the tax depreciation is reported in the parent company as accumulated excess depreciation, which is included in untaxed reserves.

Write-down

The reported values for the Group’s assets are checked on each balance sheet day in order to

assess whether there is any indication of the need for write-downs. If such an indication exists, the recoverable value of the asset is calculated as the greater of the usage value and the net sales value. A write-down is made if therecoverable value is less than the reported value.

When calculating the usage value, future cash flow is discounted at a percentage rate before tax that is deemed to consider the markets assessment of risk-free interest and the risk associated with the asset in question. An asset that with a dependency on other assets is not considered to generate independent cash flow. With such an asset it is instead attributed to the smallest cash-generating unit to which the independent cash flow can be fixed.

A write-down is reversed if a change has taken place in the calculations used to determine the recoverable value. A reversal is made only to the extent that the asset’s reported value exceeds the reported value that should have been recorded, with deductions for depreciation, if no write-down should have been made.

A write-down to goodwill is only made if the write-down is caused by a specific external occurrence of an exceptional nature which is not expected to recur and the increase of the recoverable value is attributed directly to the reposting of the effect of the specific occurrence.

Receivables and liabilities in foreign currencies

Receivables and liabilities in foreign currencies have been recalculated at the closing rate in accordance with recommendation no. 8 of the Swedish Financial Accounting Standards Council. Exchange rate differences in the operating receivables and liabilities are included in the operating income, while the differences in financial receivables and liabilities are reported in the financial items. There are no security instruments and security reports.

Inventories

Inventories, valued in accordance with the Swedish Financial Accounting Standards Council’s recommendation no. 2:02, Reporting Inventories, are entered at the acquisition value or the net sales value, whichever is the lower. For semi-manufactured and finished goods produced in-house, the acquisition value comprises direct manufacturing costs and reasonable increments for indirect manufacturing costs.

Financial instruments

The balance sheet includes all financial instruments with the exception of derivate instruments which secure the forecast flow.

A financial asset or financial liability is included in the balance sheet when the company is party to the instrument’s conditions of agreement.

Customer receivables are included in the balance sheet when the invoice has been sent. Liabilities are included when the service has been rendered and the agreed liability remains to be paid, even if the invoice has not been received. A financial asset or (part thereof) is removed from the balance sheet when the rights in the agreement are realised, expire or when the company loses control over them.

A financial liability or (part thereof) is removed from the balance sheet when the liabilities in the agreement are fulfilled, or cease in some other way.

More information about reporting principles and financial risk management can be found in note 19.

Financial investments

Financial instruments which are intended to be retained long term in the operation are classified as fixed assets. Financial fixed assets made up of shares are reported to the acquisition value after any write-downs to the net sales value. The valuation is made share for share and a write-down to the actual value is carried out when the fall in value is judged to be permanent. Current investments are valued to the lowest acquisition value and the net sales value on the balance date. Valuations are made of portfolios. This means that for instruments in the same portfolio, unrealised profits have been offset against unrealised losses. Surplus losses are reported as reduction in interest income. Surplus profits are not reported.

The net sales value is based on the official market prices at the end of the financial year or on generally accepted models such as options valuation models or discounted cash flow.

Receivables

Receivables are reported to acquisition value minus deductions of any write-downs.

Customer receivables

Customer receivables are reported to the amount expected to be due after deductions for unsecured receivables which are judged individually. The running time of the customer receivable is expected to be short, which is why the value is reported to the nominal amount without discounting.

Accounts payable

The running time of accounts payable is expected to be short, which is why the value is reported to the nominal amount without discounting.

Loans

Loans are initially reported to retained amount after deductions for transaction costs. After the time of acquisition the loan is valued to the accrued acquisition value according to the effective interest method. The accrued acquisition value is determined from the effective interest that was calculated when the loan was taken up with deductions for transaction costs.

Other interest expenses have been reported in the period to which they are attributable. Other interest expenses have been reported in the period to which they are attributable. The Group and the parent company do not activate interest in the acquisition value of assets.

Repurchased own equity instruments

Possession of own shares and other own equity instruments is reported as a reduction of the non-restricted equity. Acquisition of such instruments are reported as a deduction item from the non-restricted equity. Liquidity from the sales of own equity instruments is reported as an increase in the non-restricted equity. Any transaction costs are reported against non-restricted equity.

Provisions

A provision is reported according to RR 16 Provisions, contingent liabilities and any assets in the balance sheet when the company has a formal or informal commitment as a result of an occurrence and it is probable that an outflow of resources is required to control the commitment and for a reliable evaluation of the amount to be made. A current value calculation is carried out to take the time effect into account for future payments.

Guarantee provisions

A provision is reported when the underlying product or service has been sold. The guarantee provision is calculated from the previous year’s guarantee provision and a calculation of future guarantee risk.

Contingent liabilities

A contingent liability is reported within the line when there is a possible commitment as a result of occurring circumstances and where the circumstance are confirmed only by one or more uncertain future events, which are not completely within the control of the company, occurring or ceasing.

Alternatively that there is a commitment that originates from the circumstances but is not reported as a liability or a provision because it is not probable that an out flow of resources will be required to control the commitment or that the size of the commitment cannot be calculated with sufficient accuracy.

REMUNERATION TO EMPLOYEES

Remuneration to employees is reported in the consolidated financial statements according to Swedish Financial Accounting Standards Council’s recommendation RR 29, Remuneration to employees, which applies from and including 01.01.2004.

Remuneration to employees after completed employment

Benefits related pension plans up to and including 2003 have been included in the consolidated financial statements according to local rules and regulations without recalculation to common principles. By applying RR 29 from and including 01.01.2004the defined benefit pension plans are reported in the consolidated financial statements according to common principles and calculation methods.

For 01.01.2004 the pension liabilities have been calculated according to RR 29. The difference compared with the pensions allocation reported as of 31.12.2003 have affected incorporated shareholder’s equity 2004. In Norway and Italy all employees are covered by defined benefit pension plans. In other countries all employees are covered by money purchase pension plans. With money purchase related plans the company pays fixed contributions to a separate legal entity and has no obligation to pay further contributions. The Group’s results are burdened by costs in relation to the pace that benefits are earned.

Take up of old age pension and family pension by a small section of the employees in Sweden is secured by an insurance policy with Alecta. According to a statement from the Swedish Financial Accounting Standards Council’s Akutgruppen, URA 42, this is a defined benefit plan which covers several employers.

The company has not had access to sufficient information to make it possible to report this plan as a defined benefit plan for the 2004 financial year. The pension plan according to ITP which is secured via an insurance with Alecta is therefore reported as a contribution related plan.

The years expenses on pension insurance underwritten by Alecta amounted to 4.6 SEK million. Alecta’s surplus can be distributed to the insurance takers and /or the insured. At the end of 2004 Alecta’s surplus in the form of the collective consolidation level amounted to 128 percent. The collective consolidation level is made up of the market value of Alecta’s assets as a percentage of the insurance commitment calculated according to Alecta’s insurance technical calculation premise, which does not correspond to RR 29.

In defined benefit pension plans remuneration is paid to employees and those previously employed based on the wage at time of pension and number of years in service.

In the balance sheet the net of calculated current value of obligations and the actual value of the administration assets are reported as either a provision or a long term financial claim.

The pension cost and pensions duty for defined benefit pension plans are calculated according to the Projected Unit Credit Method. The method divides the cost of pensionsat the pace that the employees carry out service for the company which increases their right to future remuneration.

The company’s commitment is calculated annually by independent actuaries. The commitment is made up of the current value of the anticipated future payments.

The reporting principle described is only applied to the consolidated financial statement. The parent company and the subsidiaries report the defined benefit pension plans according to the local laws and regulations of each country.

Remuneration to served notice

An provision is reported in connection with serving of notice to employees only if the company is compelled to cancel employment before the normal time or when remuneration

is offered to encourage voluntary redundancy. In the event of voluntary redundancy a reserve is made based on the calculation of how many are likely to take up the offer In the event that the company serves notice to personnel, a detailed plan must be established containing at least the locations, positions and approximate number of affected persons and remuneration for each personnel category or position and the time schedule for carrying out the plan.

INCOME

The Group follows the Swedish Financial Accounting Standards Council’s recommendation no. 11 when reporting incomes where the following principles apply:

Sale of goods

Income from the sale of goods is reported as income when the following conditions are met:

• The Company has transferred any risk and benefits associated with ownership of the goods to the purchaser.

• The Company does not retain any such involvement with the ongoing administration which is usually associated with ownership and the company does not exercise any control over the goods which have been sold.

• The income can be calculated in a reliable way.

• It is likely that the economic benefits to the seller which are associated with the transaction occur.

• The costs which occur or are expected to occur as a result of the transaction can be calculated in a reliable manner.

Sales of services and similar assignments

Income from the sale of services and similar assignments is reported as income when the following conditions are met:

• The income attributable to the assignment can be calculated in a reliable way.

• It is likely that the economic benefits to the individual taking the assignment which are associated with the assignment occur.

• The costs which occur or remain to complete the assignment can be calculated in a reliable manner. If it is considered probable that the combined expenses for an assignment will exceed the total costs, the incurred loss must be reported in full as a cost immediately.

Interest income on receivables and interest costs on liabilities are calculated using the effectiveinterest method. Effective interest is the interest which means that the current value of all future in-payments and withdrawals under the interest duration will be the same as the reported value of the receivable or the liability. Other interest expenses have been reported in the period to which they are attributable. The Group does not activate interest in the acquisition value of assets.

Interest income includes a periodic amount of rebates, premiums and other differences between the original value of the receivable and the amount retained on expiry.

Dividend income is reported when the right to retain payment is considered secure.

TAXES

The company and the Group follow Swedish Financial Accounting Standards Council’s recommendation RR9 Income taxes. Total tax is made up of current tax and deferred tax. Taxes are reported in the income statement except for underlying transactions which are reported directly to shareholders’ equity where the accompanying tax effects are reported in shareholders’ equity. Current tax is tax which must be paid or is retained with reference to the current year. Adjustments of current tax for previous periods also belong here. Deferred tax is calculated according to the balance sheet method with the starting point in the temporary differences between reported and taxable values of assets and liabilities.

The amounts are calculated based on how the temporary differences are expected to be evened out and by application of the tax rates and tax rules which are decided on or notified on the date of balance. Temporary differences are not observed in Group wide goodwill and neither in differences attributable to shares in the subsidiary and associated companies which do not expect taxation within the foreseeable future. Untaxed reserves including deferred tax liabilities and shareholder’s equity are reported to a legalperson. In the consolidated financial statement however untaxed reserves are divided into deferred tax liabilities and shareholder’s equity.

Deferred tax claims concerning deductible temporary differences and deficit deduction are only reported in so far as it is likely that these will provide lower tax payments in the future.

LEASING

Existing financial leasing agreements are reported as fixed assets initially valued at the current value of the minimum lease expense at the beginning of the agreement. On the liability side, the current value of the remaining future leasing payments are reported as interest bearing long term and current liabilities.

The asset is written off over a period of use that usually corresponds to the leasing period and with the consideration of the residual value at the end of the period. Tests for write-downs are carried out according to RR 17.

The leasing payments are divided between interest and amortisation of liability.

Other leasing commitments are reported in accordance with the regulations for operational leasing, which means that the leasing payments are costed linearly over the leasing period as operating costs. There are no substantial leasing agreements at present.

REPORTING GROUP CONTRIBUTIONS

The company follows the statement issued by the Swedish Financial Accounting Standards Council’s Akutgruppen on the reporting of Group contributions, which entails Group contributions being reported according to their financial significance, namely in order to minimise the Group’s tax. As the Group contribution does not comprise payment for workcarried out, it is reported directly against retained profits after deductions for the tax effects.

CONSOLIDATED ACCOUNTS

The consolidated accounts have been prepared in accordance with the recommendation of the Swedish Financial Accounting Standards Council (RR1:00). Consolidated accounts cover the companies in which the parent company, either directly or through subsidiary companies, holds more than 50% of the votes or in some other way has a controlling influence. The consolidated accounts have been prepared in accordance with the acquisition method. The acquisition method means that the acquisition of a subsidiary company is treated as a transaction where the parent company indirectly acquires the subsidiary company’s assets and assumes the liabilities valued to the actual value at the time of acquisition.

The difference between the acquisition cost of shares and the actual value of the acquired identifiable net assetsmakes up goodwill or negative goodwill.

The Group’s shareholders’ equity covers the parent company’s shareholders’ equity and that part of the subsidiaries’ shareholders’ equity that is earned after the time of the acquisition. Companies acquired/sold during the year have affected the Group’s income statement corresponding to the time for which the companies have been part of the Group.

Recalculated overseas operations

The group’s overseas operations make up independent operations which have been recalculated according to the current rate of exchange method. The daily rate method means that all assets, provisions and liabilities are recalculated at the closing exchange rate at year-end and all items in the Income Statement at the average rate. The difference arising is moved directly to shareholders’ equity.

ASSOCIATED COMPANIES

Share ownership of associated companies in which the Group has a minimum of 20% and a maximum of 50% of the votes or in some other way has a controlling influence over the operational and financial control is reported according to the equity method. The equity method means that the book value within the Group for the shares in the associated companies corresponds to the Group’s share in the associated companies’ shareholders’ equity as well as any residual values in Group surplus and deficit values.

“Income from shares in associated companies“ in the Consolidated Income Statement is a record of the Group’s share in associated companies’ profit after financial income and expense, adjusted for any depreciation or resolution of acquired surplus or deficit values.

The Group’s share in associated companies’ reported tax is included in the Group’s tax expenses.

Profit shares built up following acquisitions of associated companies, which have not yet been realised through dividends, are allocated to the capital share fund which forms part of the Group’s restricted equity.

NOTE 1. AREAS OF OPERATION AND GEOGRAPHIC AREAS

The Group is organised into five groups: Automation, Electronics, Mechanical, Hydraulics and EP. For a description of activities in the areas of operations refer to pages 24-33 in the annual report. Parent company activities are described under the Director’ report. Other activities include the parent company, owned shares in the underlying company, and property company owned operating property where the group runs its own activities.

YEAR 2004

GroupGroupGroupGroupGroupOtherElimination/ AutomationElectronicsMechanicsHydraulicsEPOperationsUndistributedTotal INCOME

External sales549,621282,903187,337138,627239,3498,29101,406,128

Internal sales5,3691,9097,031280038,200-52,7890

Total income554,990284,812194,368138,907239,34946,491-52,7891,406,128

PROFIT

Operating income67,13419,9774,307-1,062-555-9,738080,063

Other financial items 2,9742,974 Tax expenses -25,591-25,591

Income67,13419,9774,307-1,062-555-9,738-22,61757,446

OTHER INFORMATION

Assets183,75095,93083,51953,543120,627293,317-163,993666,693 Liabilities139,77556,14459,06428,79559,30490,826-195,508238,400

Investments goodwill00000000

Investments material fixed assets1,9781431,0052344,3833,152010,895

Depreciation of goodwill01,9582,3825,1990729010,268

Depreciation material fixed assets3,8135571,1036793,4206,194015,766

YEAR 2003 GroupGroupGroupGroupGroupOtherElimination/ AutomationElectronicsMechanicsHydraulicsEPOperationsUndistributedTotal INCOME

External sales554,203319,014158,899145,815250,0551331,428,119

Internal sales6,7371,2512,7723116,80828,238-46,1170

Total income 560,940320,265161,671146,126256,86328,371-46,1171,428,119

PROFIT

Operating income57,4531,5687,013-649-6,529-3,592055,264 Other financial items -1,874-1,874 Tax expenses -21,904-21,904

Income 57,4531,5687,013-649-6,529-3,592-23,77831,486

OTHER INFORMATION

Assets185,20794,56178,32769,054121,664237,194-156,163629,844 Liabilities146,25450,88648,10937,41347,68087,202-190,171227,373

Investments goodwill00000000

Investments material fixed assets2,3192731,2635004,756994010,105

Depreciation of goodwill3,5133,6692,5736,4740730016,959

Depreciation material fixed assets4,6039191,2299745,5306,772020,027

THE GEOGRAPHIC AREAS

20042003200420032004200320042003

Sweden906,154957,829425,488395,032102,50394,3565,4694,617

Denmark67,46382,41738,67042,95522,36023,72942234

England59,55557,29344,30346,34119,65324,141178231

Finland288,248241,237115,185106,44761,19247,3854,2064,017

The Netherlands8,2608,6665,3928,5302,1035,663954

Italy19,81321,71814,46913,70613,66013,616207570

Norway33,77441,36513,2989,3977,1378,51465202

Poland22,86117,5949,8887,4369,7929,969719180

Total1,406,128

NOTE 2. EMPLOYEES AND PERSONNEL EXPENSES

1) Of the Parent Company's pension expenses, SEK 396 thousand (last

Managing Director. There are no pension obligations for this group.

2) Of the Parent Company's pension expenses, SEK 2.864 thousand (last

SALARIES

AND

OTHER

REMUNERATION DIVIDED

BETWEEN COUNTRIES AND BETWEEN BOARD MEMBERS ETC. AND OTHER EMPLOYEES

20042003

Board of OtherBoard of Other DirectorsemployeesDirectorsemployees and Managing and Managing DirectorDirector

PARENT COMPANY

Sweden 3,22610,2012,7947,911 (Whereof bonus)(436)(-)

SUBSIDIARIES

Sweden 7,62698,4747,747113,651 (Whereof bonus)(576)(194)

Denmark1,10511,9211,30913,431 (Whereof bonus)(31)(-)

England 8017,7726747,624 (Whereof bonus)(107)(-)

Finland 3,42925,8173,54124,395 (Whereof bonus)(792)(828) The Netherlands646225583170 (Whereof bonus)(-)(46)

Italy 9102,6939102,767 (Whereof bonus)(-)(-)

Norway 1,4914,8471,4805,381 (Whereof bonus)(73)(81)

China -266-149 (Whereof bonus)(-)(-)

Poland 5411,9374571,700 (Whereof bonus)(80)(-)

Subsidiaries total16,549153,952 16,701169,268 (Whereof bonus)(1 659)(1 149)

Group total19,775164,153 19,495177,179 (Whereof bonus)(2,095)(1,149)

REMUNERATION FOR SENIOR EXECUTIVES AND BOARD MEMBERS

Board of Directors

Remuneration has been paid to the Board in the amount of SEK 975 thousand, of which the Chairman Hans Franzén received SEK 350 thousand and the other members SEK 125 thousand each.

Group President/Managing Director

Salary and other benefits paid to the Managing Director amounted to SEK 2,326 thousand.

In addition, the company contributed to a retirement insurance policy in the amount of SEK 396 thousand. This is contribution limited. Bonus amounted to SEK 436 thousand but can be, based on achieved results, paid to a maximum of 50 percent of the set salary.

The period of notice for the Managing Director is 24 months from the company’s side, with the obligation to work, and 6 months from the

Managing Director’s side. Retirement age for the Managing Director is 60 years. Head of the Group/ Managing Director’s salary and remuneration is set by the Board.

Other Senior Executives

Salary and other benefits paid to the executive group excluding the Managing Director (9 people) amounted to SEK 7,582 thousand.

Contributions based pension premiums amounted to SEK 1,365 thousand. Bonus amounted to SEK 973 thousand but can be, based on achieved results, paid to a maximum of 50 percent of the set salary.

The period of notice for other senior executives is a maximum of 12 months from the company’s side, with the obligation to work, and a maximum of 6 months from the employee’s side. If the company serves notice after the age of 55 years, a further maximum of 6 months salary is paid.

Retirement age for other senior executives is between 60 and 65 years.

Shared options for the Senior executives

During 2003, OEM International introduced an incentive program in accordance with the decision taken at the Annual General Meeting. The program is an options program aimed at the other senior executives within the group. 40,000 share options have been made available on the basis of repurchased B shares held by the company. The maximum distribution is 10,000 options per person. Each purchase option gives the holder the right to purchase 1 share in the company at a price of SEK 120 between August and November 2006. The purchase options are transferred at a market price calculatedby independent valuation institutions. The retained option premium is reported as an increase in the non-restricted equity. Because the price was the market value the agreements are not associated with any costs to OEM.

DISTRIBUTION

FEES AND REIMBURSEMENT OF EXPENSES TO THE AUDITORS

KPMG Audit assignments1,2121,220228170 Other assignments31233123

Other auditors

Audit assignments612466-Total 1,827 1,809231293

NOTE 3. DEPRECIATION OF TANGIBLE AND INTANGIBLE FIXED ASSETS

NOTE 4. INCOME FROM SHARES IN GROUP COMPANIES

NOTE 5. INCOME FROM SHARES IN ASSOCIATED COMPANIES

NOTE 6. INCOME FROM OTHER SECURITIES AND RECEIVABLES WHICH ARE FIXED ASSETS

NOTE 7. OTHER INTEREST INCOME AND SIMILAR INCOME ITEMS

NOTE 10. GOODWILL

Acquired goodwill in JMS Systemhydraulik AB is amortised according to the original plan, that is, over 10 years. The residual value of the goodwill amounted to 0 SEK thousand as of 31.12.2004. Other goodwill is depreciated over five years, that is, at 20% per annum.

NOTE 11. TANGIBLE FIXED ASSETS

NOTE 12. SHARES IN GROUP COMPANIES

Corp.RegisteredAmount ofEquityNom. Book Annual numberofficesharesshare valuevalue change

OEM Industrial Components AB, Sweden556051-4514Tranås100,000100%5,00046,231

OEM Automatic AB, Sweden556187-1012 Tranås-100%

OEM Automatic AS, Norway--100%

OEM Automatic A/S, Denmark---100%

OEM Finland OY, Finland---100%

OEM Automatic Ltd, England---100%

OEM Automatic Sp.z o.o., Poland---100%

OEM Automatic S.R.L., Italy---100%

OEM China Development B.V, Netherlands---100%

IBS Internordic Bearing

Sweden AB, Sweden556493-8024Nässjö

Egevo Elektronik AB, Sweden556311-3306Stockholm-100%

OEM Component AB, Sweden556054-3828Tranås-100%

Pronesto AB, Sweden556112-6755Stockholm-100%

OEM Hydraulik AB, Sweden556398-2221Göteborg-100%

Aspecs OY, Finland---100%

OEM Källving AB, Sweden556220-5343Borlänge-100%

AB Indoma, Sweden556326-5171Jönköping-100%

SPG Motors Europe AB, Sweden556232-6198Stockholm-100%

OEM Systemteknik AB, Sweden556050-9076Stockholm1,000100%1001,500- 3,545

A. Karlson Industriteknik AB, Sweden556163-0905Stockholm-100%

Jubo Förvaltning AB, Sweden556494-7058Karlskoga-100%

Plastinvent i Karlskoga AB, Sweden556334-5486Karlskoga-100%

OEM Fastigheter AB, Sweden556194-8521Stockholm-100% Skäggriskan AB, Sweden556248-9780Stockholm-100%

OEM Electronics Production Technology AB, Sweden556038-8356Stockholm300100%30078,350

Cyncrona AB, Sweden556296-1838Stockholm-100% LIF Produkter AB, Sweden556123-2694Huddinge-100%

Cyncrona AS, Norway---100%

Cyncrona OY, Finland---100%

Cyncrona A/S, Denmark---100% Cyncrona Sp.z o.o., Poland---100% Opiab-Företagen AB, Sweden556165-6769Solna-100% Testcenter i Stockholm AB, Sweden556204-5152Huddinge-100%

MPE Microteknikka OY, Finland---100%

A. Karlson Fastigheter AB, Sweden556029-8456Stockholm10,000100%1,00010,277

Intermate Electronics AB, Sweden556266-6874Tranås1,000100%100600

OEM Ejendomsselskab A/S, Denmark--1,300100%DKK 1,3001,176

OEM Fastighetsbolag AB, Finland--1,200100%FIM 1,2001,441

OEM Property Ltd, England--400,000100%GBP 4005,147

OEM Motor AB, Sweden 556850-6498Tranås1,000100%100100 Internordic Förvaltning AB, Sweden556302-0873Nässjö1,000100%1001,300 JMS Systemhydraulik AB, Sweden556063-2134Göteborg10,000100%1,00018,461

Hydroprodukter International i Ängelholm AB, Sweden556241-1099Ängelholm2,500100%250767

Hydrac AB, Sweden556466-0875Borås2,000100%200136

Fastighets AB Hydraulen, Sweden556363-6256Borås1,000100%10042 Fotbromsen AB, Sweden556150-4282Karlskoga5,000100%5004,492

Total 170,020- 3,545

NOTE 13. SHARES IN ASSOCIATED COMPANIES Corp.RegisteredAmount ofEquityNom. Book Annual numberofficesharesshare

THE GROUP Crouzet AB, Sweden556197-1911Stockholm12,00050%1,200 5,386 353 THE PARENT COMPANY Crouzet AB, Sweden556197-1911Stockholm12,00050%1,2001,200

NOT 14. PREPAID EXPENSES AND ACCRUED INCOME

commission income etc.2,6082,260-Other prepaid expenses12,63311,2152,2141,995 TOTAL15,241 13,4752,2141,995

NOTE 15. SHARE CAPITAL The shares consist of Class A and class B. The nominal share value is SEK 5.

7,723,10322,024,391 8,132,20322,433,491 For further information, see the shares chapter, page 70-73.

PENSION EXPENSES

Benefit related plans

BALANCING OF NET AMOUNT FOR PENSIONS IN THE BALANCE SHEET

The following table explains how the net amount in the balance sheet has changed during the period

Net amount in the balance sheet as of 31.12.031,791 Effect of changing accounting principles to RR 29716 Net amount as of 01.01.20042,507

Expenses for defined benefit plans673

Payments of contributions from the company-926

Net amount in the balance sheet as of 31.12.042,254

ACTUARIAL COMMITMENTS

The following significant actuarial commitments have been applied when calculating the obligations: (weighed average values)

Discount rate6%

Expected return on administration assets6%

Future salary increases3%

Future increases of pensions3% Staff turnover10%

Expected remaining length of service 20 years

Pledged assets for pension obligationsNone

NOTE 17. OVERDRAFT

The majority of the Swedish companies are connected to a central account system with a total limit of SEK 210 million (210). The overall degree of utilisation is reported in the parent company under this item. The subsidiaries’ balance/liability in the central account system is reported in the parent company, either as a receivable from, or a liability to, the subsidiaries. The total limit in the Group is SEK 342 million (343).

ASSETS PLEDGED TO CREDIT INSTITUTES

Property mortgages42,65042,6507,5007,500 Floating charges88,40088,400-Total131,050 131,0507,5007,500

NOTE 18. ACCRUED EXPENSES AND PREPAID INCOME

Accrued holiday pay20,75522,8291,9611,603

Accrued social security expenses12,20512,5861,6931,077 Prepaid income1,5261,7003434

Accrued supplier invoices/liabilities8,65910,5071,280Other accrued expenses21,01016,9321,6721,199 Total64,155 64,5546,6403,913

The primary risks of the OEM group are connected to currencies, customer credits and customer guarantees. Through matching, however, the risks have almost been completely eliminated. A risk elimination that contributes to the group having a relatively stable coverage ratio over time. In addition to the named risks, the group has a limited interest risk in the form of a cash flow risk.

The currency risks are initially due to purchases being made in foreign currency. The risks are managed by the customer contract often prescribing that the price must be adjusted in relation to any currency changes. Alternatively the sale is carried out in the same currency as the purchase. A detailed report is given in connection with the following table.

The customer credit risks are small. Clear customer limits are carefully decided and strictly applied. Short credit periods and absence of riskconcentrations for individual customers, branches or geographical areas contribute to a good risk picture. A risk picture that is confirmed by the small historical customer losses. Further information is given below in connection with the heading customer and credit risks.

Customer guarantees have not been a cause of any risks of practical significance. There are often corresponding rights of recourse against the supplier for provided guarantees. This management has worked well in practice.

The interest risk is low. The group does not have any liabilities with fixed interest and long-term receivables with fixed interest are very small. The risk of a shift in the interest rate causing a significant change in value of the group is, in real terms, non-existent. The items cash and bank and the overdraft item are marred by cash flow risks.

FINANCIAL INSTRUMENTS

The OEM group’s holdings of financial instruments that form fixed assets are fairly limited. At the end of 2004 the book value of the financial assets of long-term securities holdings was SEK 0.8 (1.1) million, shares in Tenant-owner’s right, SEK 1 million and other long-term receivables SEK 0.8 (5.6) million. The OEM group’s holdings of financial instruments that form current assets amounted to SEK 199 (174) million and accrued income SEK 1.0 (2.3) million and other receivables SEK 13.5 (5) million.

The group does not have any liabilities with fixed interest and at year-end long-term receivables amounted to SEK 0.8 (5.6) million, which is less than one percent of total assets. The risk of a shift in the interest rate causing a significant change in value of the group is, in real terms, non-existent. The cash and bank item SEK 111 (52.6) million and the overdraft item SEK 37.7 (37.2) million move with floating interest rate and are marred by cash flow risks. Overdrafts apply for 1 year and are not combined with any specific requirements from the guarantor.

CURRENCY EXPOSURE

The currency flow of the group is attributable to imports from Europe, Asia and North America.

Purchasing is split as a percentage as follows: 20042003

EUR51%42%

USD23%35%

SEK8%6%

GBP6%6%

JPY5%6%

The currency adjustment clauses mean that only currency changes between the time of sale and the time of invoice affects the amount reported in local currency. As invoicing, in accordance with currency adjustment clauses, is carried out in SEK there is no rate of exchange difference after the point of invoice. With regard to currency risk, it can be determined that OEM also has balance exposures in the form of net investment in independent foreign operations. At present these currency risks are not secure.

Currency rates are used in the group’s consolidated accounts for recalculating foreign subsidiary’s income and net assets.

Exchange

CurrencyWeighed December average 2004 2004

As long as it is possible, the group eliminates the effects of exchange rates by using multiple currency clauses in the main contract and by purchasing and selling in the same currency. On the whole, purchasing is carried out in the supplier’s currency. From the table above it can be seen that 23% (35) for USD, 51% (42) for EUR, 5% (6) for Yen and 6% (6) for GBP, 8% (6) for SEK and 7% (5) for other currencies are attributable to purchasing in 2004.

The OEM group manages the effects of changing exchange rates by multiple currency clauses in the sales contract and by invoicing in the same currency as the corresponding purchase. OEM sells goods to Swedish and foreign customers and either invoices in the purchasing currency or in another currency with multiple currency clauses with regard to the purchase currency. The multiple currency clauses adjust the changes in the exchange rate from the sales order for the date of invoice, depending on whether OEM receives currencycompensation. There is often a threshold value, which means that the exchange rate changes that fall below 2.25% are not observed. Currency adjustments are made symmetrically for both rising and falling currency rates. There are no conditions that give debt ratios or that are similar to options.

Multiple currency clauses and sales in the purchasing currency make up approx 70% (75) of all sales contracts. Where purchasing is sales order based, economic security is achieved by the currency risk in sales and purchasing. In many cases, however, a certain amount of mismatches occur between purchase orders and sales orders. Purchase orders normally run 7-60 days prior to delivery after which there is a customer credit period of approximately 30 days.

CurrencyWeighed December average 2003 2003

CUSTOMER AND CREDIT RISKS

The group has approximately 20,000 purchasing customers in total. This means that the number of customers increased by between three and four percent during 2004. The largest individual customer accounted for approximately 3.3% (3.9) of sales. The five largest customers accounted for 12% (9) of sales and the ten largest customers accounted for 15% (13) of sales. The distribution of risk is thus very good. Customer losses during the year have amounted to SEK 1.1 million (1.1), which corresponds to 0.08 % (0.08) of sales. The average credit period rose to approximately 38 days.

NOTE 20 TRANSFER TO IFRS 2005

In 2002 the EU accepted the so called IFRS Regulation, which states that from and including financial year 2005, all registered companies within the union must establish their group consolidated accounts in full in accordance with the EU approved International Financial Reporting Standards (IFRS).

According to the Stockholm Stock Exchange’s recommendations, affected companies are responsible for providing information about the effects of the transfer to IFRS in connection with consolidated account bulletins and annual report for 2004. The regulations also require that the comparison year 2004 is reported according to IFRS. The company will monitor the changes in the standard, which cannot be omitted during 2005, and the development of the IFRS international interpretation. Below is an overview of the transfer and the initial effects of the regulations that apply as of January 2005.

THE EFFECTS ON OEM OF THE IMPENDING REGULATIONS AND THEIR EFFECTS

The regulations relating to reporting of corporate acquisitions (IFRS 3) entail changes when reporting corporate acquisitions. The identification of intangible assets in the acquired company is more extensive than before (such as brands, customer relations and customer agreements). OEM has, with support from the transfer regulations in IFRS 1, chosen not to retroactively apply IFRS 3 regarding acquisitions carried out before 1 January 2004. The new regulations mean that intangible assets with undecided economic lifetimes, such as, goodwill, cannot be amortised but must be regularly reviewed for any write-downs. A write-down test must occur annually and thereafter in the event of an indication of the need of a writedown. If the new reporting regulations had been applied in this report for 2004, the profits before tax should be raised SEK 4,957 thousand.

INCOME STATEMENT SEK thousand

Reporting of tangible fixed assets and division of the different depreciation periods of incorporated components, in accordance with IAS 16 should have positively affected the profit before tax by SEK 1,749 thousand.

IAS 39, that covers financial instruments, does not seem to have any significant effect on reported position and profit.

The regulation changes described above affect the comparable entity for 2004 that is reported in 2005.

The multiple currency clauses in OEM’s customer contracts have not been deemed to be embedded derivatives that are to be separated according to IAS 39. Information about the clauses is in NOTE 19.

Below shows how a re-calculation of 2004’s report initially affects the group’s profit and balance sheet in the comparable entity for 2005 financial reports.

CurrentEffect report2004IFRS Net sales1,406,1281,406,128

BALANCE SHEET SEK thousand

31.12.200431.12.2003

CurrentIFRSCurrent reportEffectreportEffectIFRS

SHAREHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES

SHAREHOLDERS’

NON-RESTRICTED EQUITY

Non-restricted reserves252,6758,979261,654297,2969,018306,314 Profit for the year57,4466,20863,654 310,12115,187325,308 297,2969,018306,314

PROVISIONS

Provisions for pensions and similar obligations2,2542,2541,7911,791 Deferred tax liability23,1224,05227,17423,0513,57026,621 Guarantee provisions806806590590

224,992224,992

641,49112,588654,079

THE GROUP

According to the balance sheet, non-restricted equity, including profit for the year at SEK 57,446 thousand, amounted to SEK 310,121 thousand of which it is proposed that SEK 42,477 thousand is used for dividends, with the remaining SEK 267,644 thousand carried forward.

THE PARENT COMPANY

The following surplus is at the disposal of the Annual General Meeting:

Surplus brought forward

196,712,142.85

Profit for the year- 7,985,794.42

188 726 348:43

The Board of Directors and the Managing Director propose that the surplus be disposed of in such a way

• that a dividend of SEK 5.50 per share is paid to shareholders

• that the following be carried forward

42,477,066.50

146,249,281.93

188 726 348:43

TRANÅS, 28 FEBRUARY 2005

Hans Franzén

Orvar Pantzar

Lars-Åke Rydh Chairman

Ulf BarkmanAgne Svenberg

Gunnar Eliasson

Jörgen Zahlin Managing Director

AUDIT REPORT

TO THE ANNUAL GENERAL MEETING OF OEM INTERNATIONAL AB (PUBL) ORG. NO. 556184-6691

We have examined the annual report, the consolidated financial statements and the accounting records, and have reviewed the administration of OEM International AB by the Board of Directors and the Managing Director during the year 2004. The Board and the Managing Director are responsible for the accounting documents and the administration and are responsible for following the Swedish Annual Accounts Act when establishing the annual report and the consolidated financial statements. Our responsibility is to pronounce on the annual report, the consolidated financial statements and the administration on the basis of our audit.

The audit has been carried out in accordance with auditing standards generally accepted in Sweden. It follows from this that we have planned and conducted the audit so as to give ourselves reasonable assurance that the annual report and the consolidated financial statements do not contain material errors. An audit includes

the examination of a selection of the documentation with respect to amounts and other information in the accounting records. It is also part of an audit to review the accounting principles and how the Board and the Managing Director have applied them, and to assess the significant estimates that the Board and the Managing Director have made when establishing the annual report and the consolidated financial statements and to evaluate the collected information in the annual report and the consolidated financial statements.

As a basis for our pronouncement on discharge from liability we have examined significant decisions, measures and circumstances at the company in order to be able to judge whether any Director or the Managing Director owes compensation to the Company. We have also examined the question of whether any Director or the Managing Director has otherwise acted in contravention of the Swedish Companies Act, the Swedish Annual Accounts Act or the

JÖNKÖPING 4TH MARCH 2005

KPMG Bohlins AB

Niklas Bengtsson

Authorised Public Accountant

Company’s Articles of Association. We are of the opinion that our audit gives us reasonable grounds on which to pronounce as follows.

The annual report and the consolidated financial statements have been prepared in accordance with the Swedish Annual Accounts Act and thus afford a true and fair picture of the Company’s and the Group’s results and position in accordance with auditing standards generally accepted in Sweden. The Director’s report is consistent with the other parts of the annual report and consolidated financial statements.

We recommend that the Annual General Meeting adopt the income statement and balance sheet of the Parent Company and of the Group, appropriate the Parent Company’s surplus as proposed in the Directors’ Report, and grant the Directors and the Managing Director discharge from liability for the fiscal year.

The group’s profit and balance sheet and parent company’s profit and balance sheet will be matters for approval at the Annual General Meeting.

THE BOARD AND ITS PROGRAMME

The Board of OEM International (publ) is comprised of six board members and three deputies.

No special committees are appointed, but instead the majority shareholders provide proposals to the AGM via requests from attendees. Auditors are proposed and appointed by the AGM for a four-year tenure. The auditors’ work is debited within negotiated price frames. Proposals for the Board’s remuneration are presented to the AGM for approval. Bonuses are not paid to the Board.

Amounts and other benefits are presented in note 2 in the income statement, page 50.

BOARD OF DIRECTORS

HANS FRANZÉN

born. 1940. Chairman of the Board since 1992. Board member since 1974. Group President until 31 December 2001. Engineer.

Other appointments: Chairman of the board of Tranås Resebyrå AB, Cendio AB, Ibizkit AB and the local board of Handelsbanken in Tranås. Board member of Crouzet AB and Bomarknadsbolaget AB.

Number of shares: 260,792 OEM class A and 250,450 OEM class B.

AGNE SVENBERG

born 1941. Board member since 1974.

Managing Director until 29 February 2000. Engineer.

Other appointments: Chairman of the Boards of Multitryck AB, EG:s El o Automation AB, Personality Gym AB, and ISP AB. Board member of Elektro-Mekan i Årjäng AB.

Number of shares: 260,800 OEM class A and 103,410 OEM class B.

ORVAR PANTZAR

Born 1939. Board member since 1997. Founder of CynCrona AB. Engineer. Not employed by OEM.

Other appointments: Board member, Next Generation System AB.

Number of shares: 635,440 OEM class A and 983,250 OEM class B.

ULF BARKMAN

Five Board meetings were held in 2004, all of which were recorded in the minutes. The Board’s work follows a pre-determined plan, in particular as regards current business. The treatment of other business depends on the nature of the business. Once a year, the principalauditor attends and reports on the auditing work.

Decisions and the division of responsibility between the Board and the Managing Director are regulated in written instructions for the Managing Director. The Chairman of the Board, in cooperation with the other board members, negotiates and decides on the salary and other employment conditions that apply to the Managing Director.

Born 1957. Board member since 1997. Board member CynCrona AB since 1989.

Business Administrator. Not employed by OEM.

Number of shares: 14,000 OEM Class B.

GUNNAR ELIASSON

born 1951. Board member since 2000.

Business Administrator. Not employed by OEM.

Number of shares: 2,000 OEM Class B.

LARS-ÅKE RYDH

born 1953. Board member since 2004.

Civil Engineer. Not employed by OEM.

Managing Director and Group President of Nefab AB.

Other appointments: Board member of Nefab AB and Handelsbanken Region Eastern Sweden.

Number of shares: 1,000 OEM Class B.

DEPUTY BOARD MEMBERS

TOMAS FRANZÉN

born 1962. Deputy board member since 1997. Managing Director and Group President of Eniro AB. Civil engineer. Not employed by OEM.

Other appointments: Chairman of the Boards of GRIN ABand Trust2You AB. Board member of Avisere Europe AB, B2 Bredband AB, BTS AB and Proact IT Group AB.

Number of shares: 5, 000 OEM Class B.

INGER SVENBERG

Born 1937. Board member 1974–1997. Deputy board member since 1997. Not employed by OEM. Number of shares: 216,000 OEM class A and 92,902 OEM class B.

JERKER LÖFGREN

born 1950. Deputy board member since 2003. Senior VP Legal Affairs, Carnegie Investment Bank AB.

Not employed by OEM. No shares in OEM. AUDITOR:KPMG

Gunnar Eliasson

Jörgen Zahlin

Ulf Barkman

Orvar Pantzar

Hans Franzén

Lars-Åke Rydh

Agne Svenberg

SENIOR MANAGEMENT

OEM International is to be an active holder.

In addition to establishing clear goals and expectations for the businesses, this also entails contributing with experience and supplying resources in the fields of IT, economic control, personnel administration, market communication, quality and environment control as well as stock management.

ORGANISATION

The management group consists of the staff, Business Directors and Managing Directorsof the largest of our operating companies. The staff includes, the Group President as well as the deputy Managing Director and Finance Director.

The Staff work with comprehensive issues and are active throughout the entire group. The Business Directors work directly for the operational unit’s management and operate as each Managing Director’s closest manager.

MANAGEMENT GROUP

JÖRGEN ZAHLIN

born 1964. Managing Director OEM International AB from and including 1st March 2000.

Group President since 1st January 2002.

Group employee since 1985. Engineer.

Other appointments: Board member, DK Butiken in Tranås AB.

Number of shares: 2,500 OEM class B.

Holds 100,000 options on share from the majority owner at market price.

JAN HULTMAN

born 1945. Deputy Managing Director OEM International AB from 1st January 2002.

Group employee since 1980. Engineer.

Number of shares: 7,023 OEM class B.

JAN CNATTINGIUS

Born 1955. Finance Director.

Group employee since 1985. Economist.

Number of shares: 2,000 OEM Class B.

Holds 10,000 purchase options in OEM

MIKAEL THÖRNKVIST

Born 1968. Business Director Automation.

Group employee since 1990. Engineer.

Number of shares: 3,000 OEM-B.

Holds 10,000 purchase options in OEM.

STEFAN WIK

born. 1959. Managing Director OEM Automatic AB. Civil Engineer. Group employee since 1998.

Other appointments: Board member of Landy Vent International AB and JS Computers AB.

Number of shares: 1,900 OEM class B

(partially via company)

URBAN MALM

MANAGEMENT OPERATIONAL UNITS

The corporate groups have a steering group that setsgoals and strategies. The steering group operates on the different requirements of the corporate groups. Each Business Directors is responsible for the group’s operational units.

The board of an operational unit normally consists of corporate group managers, controllers and Managing Director. In companies that need to reinforce the board within certain areas, we appoint external board members.

GROUP-WIDE RESOURCES

In addition to the staff, there are resources who work with specific functions across the entire group. There are resources for economic control, business systems, tele/data, market communication, quality and environment as well as for stock management.

Born 1962. Business Director Electronics. Previously Managing Director of OEM Component AB.

Group employee since 1983. Engineer.

Number of shares: 300 OEM Class B.

ANDREAS FÄLTH

born 1964. Business Director Mechanics. Engineer. Group employee since 1997.

Number of shares: 3,000 OEM-B.

Holds 10,000 purchase options in OEM.

FREDRIK TENGSTRAND

Born 1966. Business Director Hydraulics. Engineer. Group employee since 1991. No shares.

Holds 10,000 purchase options in OEM

MATTIAS FRANZÉN

born 1968. Business Director EP from and including 1st May 2004. Previously Managing Director of IBS Internordic Bearing Sweden AB.

Group employee since 2001. Civil engineer.

Number of shares: 5,600 OEM Class B

Andreas Fälth

Urban Malm

Jan Hultman

Fredrik Tengstrand

Jan Cnattingius

Mattias Franzén

Mikael Thörnkvist

Jörgen Zahlin

Stefan Wik

OEM SHARES

OEM INTERNATIONAL ON THE STOCK EXCHANGE

The OEM share was quoted on the Stockholm Stock Exchange’s (Stockholmsbörsen) OTC List in December 1983, and since then has displayed a healthy price trend. Anyone who purchased 100 shares in OEM for SEK 12,500 at the time they were introduced onto the market would have had a holding of 2,400 shares at a value of SEK 283,200 on 31 December 2004, equivalent to an annual yield of 16%, excluding dividends. During 2000, OEM’s shares were transferred to the O list. OEM International satisfies the demands stipulated by the Stockholm Stock Exchange for a listing on the A List.. However, as shares on the O List are exempt from capital tax, and moving them to the A List would have significant tax implications for the shareholders, the Board has decided to allow OEM’s shares to remain quoted on the O List.

PRICE TRENDS

The price of OEM International shares rose during the year by 16% to a closing price of SEK 118.00. The highest price paid during the year, SEK 119.00, was recorded on 22nd and 30th December, and the lowest price, SEK 89.00, on 11th and 12th May and 19th August. OEM’s market value at the end of 2004 amounted to SEK 911 million. If own holdings of shares are excluded, OEM’s market value amounted to SEK 893 million. During the year, the Stockholm Stock Exchange’s All Share index rose by 18% and the index for SX20 Industrialsby 19%.

SALES

During 2004, 511,760 class B shares were sold,

corresponding to a turnover rate of 8.3%.

The average shareholder in OEM therefore holds onto his shares for around 12 years.

The corresponding figure for the Stockholm Stock Exchange as a whole in 2004 was 134% and for the O list 82%. OEM’s Class B shares were sold on 85% of the trading days, with an average turnover per day in 2004 of 2,023 shares.

On 31 December 2001, OEM International had 2,834 shareholders, an increase of 48% since 1995. Institutional ownership stands at around 27%, while overseas ownership amounts to 25%.

REPURCHASE OF SHARES

The repurchase programme for shares, which was adopted for the first time by the Annual General Meeting in 2000, is intended to improve our capital structure and contribute positively to return on shareholders’ equity and earnings per share.

After implemented reductions the previous year there are 7,723,103 shares in the company at year-end. The company has acquired 154,000 shares corresponding to 2% of the total number of shares. The Board has been authorised by the Annual General Meeting to repurchase up to 10% of the total number of shares, that is, 772,310 shares.

The objective is to continue the repurchases up to 10% of the total number of shares while the Board considers the conditions to be attractive. The acquired shares will be retained, deregistered or used as payment in corporate acquisitions.

We have minimised the disadvantages which this can entail, that is, that the number of shareholders is decreased and the liquidity of the share declines, by mainly purchasing large blocks of shares.

INCREASING LIQUIDITY REMEDIES IN SHARES

OEM International has signed an agreement with Handelsbanken Capital Markets regarding liquidity guarantees for company shares. The aim is to reduce the difference between purchase and sales prices. The goal is to achieve a lower investment cost and to lower the share trading risk for present and future shareholders. Commitments lie within the frame of the Stockholm Stock Exchange system with liquidity guarantees and start on the 1st December 2004.

RISK

OEM’s beta value — a measure of how a share moves given a change in the Stockholm Stock Exchange’s All Share index — is approximately 0.54. This means that the shares can be said to have a low risk. The spread between the operations within the group entails a low business risk. At the same time, the financial risk is very low, due to the high equity/assets ratio. This means that the equity/assets ratiocan be lowered to correspond better with the business risk without the overall risk to OEM’s shares increasing significantly.

DIVIDEND POLICY

The Board of OEM International aims to propose a

reasonable dividend of profits to the shareholders, by considering the financial position, the tax situation and any need for acquisitions or investments in the operation.

DIVIDEND

The Board and the Managing Director propose a dividend of SEK 5.50 per share, equivalent to 14% of non-restricted equity in the Group.

FINANCIAL INFORMATION

OEM aims to maintain high quality as regards information to the market and the media. The goal is for the information to facilitate an accurate valuation and liquid trading of the shares.

The dates for the Annual General Meeting, interim reports and annual report for the 2005 fiscal year can be found in the information on page 2 of this annual report.

Financial information is also published on the Group’s website, www.oem.se

As a shareholder, you are also able to receive interim reports and other press releases by e-mail, at the same time as it is made public to the market. Send an e-mail to info@int.oem.se and state Corporate information“, and you will be included in our electronic mailing list in future.

AKTIEÄGARFÖRDELNING

OEM:S STÖRSTA AKTIEÄGARE PER 2004-12-30

AntalAntalProcentandel Procentandel A-aktierB-aktier aktiekapitalröster

Pantzar Orvar 635 440983 25021,4 33,6

Franzén Hans o fam.476 792504 350 13,0 24,1

Svenberg Agne o fam.476 800 196 312 8,9 22,7

SEB fonder 0424 5005,61,9

AFA Försäkring0416 2255,51,9

Lannebo fonder0 395 5675,21,8

Länsförsäkringar Jönköping0200 0002,60,9

Didner & Gerge aktiefond0195 8002,60,9

Livförsäkringsbolaget Skandia0168 1002,20,8

Industritjänstemannaförbundet0145 0001,90,7

Summa 10 ägare1 589 0323 629 10468,989,3

Övriga 02 350 96731,110,7

Totalt1 589 0325 980 071100,0100,0

Per aktie 101

I fördelningen ovan är bolagets

INDICATORS FOR OEM’S SHARES FOR THE PAST FIVE

items affecting comparability.

DEFINITIONS OF KEY INDICATORS

SALES PER SHARE: The Group’s sales divided by the number of shares on the market at year-end.

INCREASE IN SALES PER SHARE: Increase in the Group’s sales per share.

EARNINGS PER SHARE: The Group’s net earnings after deductions for both paid and deferred tax divided by the number of shares on the market at year-end.

SHAREHOLDERS’ EQUITY PER SHARE: Shareholders’ equity and minority interests divided by the number of shares on the market at year-end.

DIVIDEND/INCOME: Proposed dividend in relation to the income for the year.

DIVIDEND/SHAREHOLDERS’ EQUITY: Proposed dividendin relation to the Group’s shareholders’ equity and the minority interests.

CASH FLOW PER SHARE Cash flow for current operations divided by the number of shares on the market at year-end.

BETA VALUES: Measure of historical change in the share price in relation to the price fluctuation of the general index.

RATE OF TURNOVER FOR SHARES: The number of shares sold divided by the number of outstanding shares at year-end.

P/S RATIO: Stock market value in relation to the

Earnings per share (SEK)

Shareholders’ equity per share (SEK)

Proposed dividend (SEK)

Group’s sales.

P/E RATIO: Quoted price as at 31 December divided by earnings per share.

PRICE/SHAREHOLDERS’ EQUITY: Quoted price divided by shareholders’ equity per share.

EV/SALES: Enterprise value (stock market value + net liability + minority interest) divided by the Group’s sales.

EBIT MULTIPLE: Enterprise value divided by the Group’s operating income after depreciation.

DIRECT RETURN: Dividend per share dividedby the quoted price at year-end.

0.14.6

0.567.8

OPERATIONAL UNIT ADDRESSES

THE PARENT COMPANY

OEM International AB Box 1011, SE-573 28 Tranås, SWEDEN

Tel.: +46 140-360 000

Fax: +46 140-360 099

E-mail: info@int.oem.se www.oem.se Org. no. 556184-6691

AUTOMATION

OEM Automatic AB Box 1011, SE-573 28 Tranås, SWEDEN

Tel.: +46 140-360 000

Fax: +46 140-360 199

E-mail: info@aut.oem.se www.oemautomatic.se

OEM Automatic Telekatu 8

FIN-20360 Turku, FINLAND

Tel.: +358-2-41 20 401

Fax: +358-2-41 20 495

E-mail: info@fi.oem.se www.oem.fi

OEM Automatic AS Tomtegata 20, Postboks 564 Brakerøya N-3002 Drammen, NORWAY

Tel.: +47-32-89 72 70

Fax: +47-32-89 72 80

E-mail: info@no.oem.se www.oem.no

OEM Automatic A/S Frydensbergvej 20 DK-3660 Stenløse, DENMARK

Tel.: +45-70-27 05 27

Fax: +45-70-27 06 27

E-mail: info@dk.oem.se www.oem-automatic.dk

OEM Automatic Ltd Whiteacres, Cambridge Road Whetstone, Leicestershire LE8 6ZG, ENGLAND

Tel.: +44-116-284 99 00 Fax: +44-116-284 17 21

E-mail: information@uk.oem.se www.oem.co.uk

OEM Automatic Sp. z o. o. ul. Parowcowa 6B

PL-02-445 Warszawa, POLAND

Tel.: +48-22-86 32 722

Fax: +48-22-86 32 724

E-mail: info@pl.oem.se www.oemautomatic.com.pl

OEM Automatic SpA Via M.Kolbe. 6

I-20090 CESANO BOSCONE (MI), ITALY

Tel.: +39-02-450 51 71

Fax: +39-02-450 41 41

E-mail: sales@oemautomatic.it www.oemautomatic.it

ELECTRONICS

OEM Electronics AB Norrabyvägen 6B, Box 1025, SE-573 29 Tranås, SWEDEN

Tel.: +46 140-360 600

Fax: +46 140-360 699

E-mail: info@comp.oem.se www.oemcomponent.se

OEM Electronics OY

Telekatu 8

FIN-20360 Turku, FINLAND

Tel.: +358-2-41 20 402

Fax: +358-2-41 20 496

E-mail: info@fi.oem.se www.oem.fi

Egevo Elektronik AB Fagerstagatan 4, Box 8100, SE-163 08 Spånga, SWEDEN

Tel.: +46 8-5870 67 00

Fax: +46 8-5870 67 39

E-mail: egevo@egevo.se www.egevo.se

OEM Electronics PL ul. Parowcowa 6B

PL-02-445 Warszawa, POLAND

Tel.: +48-22-86 32 722

Fax: +48-22-86 32 724

E-mail: info@pl.oem.se www.oemautomatic.com.pl

MECHANICS

IBS Internordic Bearing Sweden AB Lerbacksgatan 3, Box 105, SE-571 22 Nässjö, SWEDEN

Tel.: +46 380-56 59 56

Fax: +46 380-56 59 59

E-mail: internordic@ibs-bearing.com www.ibs-bearing.com

OEM Mechanics FI Telekatu 8

FIN-20360 Turku, FINLAND

Tel.: +358-2-41 20 404/406

Fax: +358-2-41 20 490

E-mail: info@fi.oem.se www.oem.fi

AB Indoma

Fridhemsvägen 25, Box 319,

SE-551 15 Jönköping, SWEDEN

Tel.: +46 36-30 64 00

Fax: +46 36-16 46 97

E-mail: info@indoma.se www.indoma.se

OEM China Development BV

Aartsdijkweg 111, NL-2676 LE MAASDIJK, THE NETHERLANDS

Tel.: +31-174 52 51 00

Fax: +31-174 52 51 06

E-mail: info@oem-china.nl

OEM Motor AB Dalagatan 4, Box 1011

SE-573 28 Tranås, SWEDEN

Tel.: +46 140-36 04 00

Fax: +46 140-36 04 99

E-mail: info@oem-motor.se www.oem-motor.se

HYDRAULICS

JMS Systemhydraulik AB

Datavägen 14 A

SE-436 32 Askim, SWEDEN

Tel.: +46 31-727 68 20

Fax: +46 31-727 68 37

E-mail: sales@jmsq.se www.jmsq.se

Hydrac AB

Getängsvägen 22

SE-504 68 Borås, SWEDEN

Tel.: +46 33-23 78 80

Fax: +46 33-12 58 79

E-mail: sales@hydrac.se www.hydrac.se

ELECTRONICS PRODUCTION (EP)

Cyncrona AB Tomtbergavägen 2

SE-145 67 Norsborg, SWEDEN

Tel.: +46 8-531 94 300

Fax: +46 8-531 94 310

E-mail: info@cyncrona.se www.cyncrona.com

Cyncrona Oy Hannuksenpelto 12 FIN-02270 Espoo, FINLAND

Tel.: +358-9-887 06 70

Fax: +358-9-887 067 70

E-mail: info@cyncrona.fi www.cyncrona.com

Cyncrona A/S Sindalsvej 21

DK-8240 Riskov, DENMARK

Tel.: +45-87-42 66 66

Fax: +45-87-42 66 77

E-mail: info@cyncrona.dk www.cyncrona.com

Cyncrona AS Tomtegata 20, Postboks 905 Brakerøya N-3002 Drammen, NORWAY

Tel.: +47-32-20 25 10

Fax: +47-32-20 25 11

E-mail: info@cyncrona.no www.cyncrona.com