annual report - sintercast · this annual report has been sent to those shareholders ... pouring...

1999Annual Report

SINTERCAST - The Market Leader of Process Control for Production of CGI

The Annual General Meeting

This Annual Report has been sent to those shareholders who have requested suchinformation via the Swedish securities register, VPC AB.

Interim Reports and the official Annual Report in Swedish can be obtained by contactingSinterCast AB (publ).

Annual Report and Interim Reports can also be found at the SinterCast Website:

Financial Information

The Annual General Meeting of SinterCast AB (publ) will beheld on Monday 8 May 2000 at 15.00 at the Royal SwedishAcademy of Engineering Sciences, (IVA), Grev Turegatan 16,Stockholm.

Interim Report for three months 8 May 2000Interim Report for six months 23 August 2000Interim Report for nine months 14 November 2000Preliminary Financial Report for 2000 22 February 2001

A Shareholders’ Day will be held at SinterCast Technologies AB,Katrineholm, on 7 June 2000.

www.sintercast.com

©SINTERCAST ANNUAL REPORT 1999 1

COMPACTED GRAPHITE IRON

THE OPPORTUNITY

Compacted Graphite Iron (CGI) provides at least 75%higher tensile strength, 35-40% higher stiffness andapproximately double the fatigue strength of conventionalgrey cast iron. In comparison to aluminium alloys, CGIprovides double the strength and stiffness and up to fivetimes higher fatigue strength at operational temperatures.

THE STRATEGY

SinterCast develops, manufactures and markets ProcessControl Systems for the industrial production of Compacted Graphite Iron (CGI). The SinterCast Process ismarketed to foundries primarily for the manufacturing ofengines for the vehicle and marine industries.The applicationof CGI in these areas has the potential to provide economic,technical and environmental benefits compared toconventional grey iron and aluminium.

The properties of CGI allow engine designers to reduce wallthickness thus reducing weight compared to conventionalgrey iron. CGI simultaneously provides new opportunities toincrease horsepower or improve fuel economy andemissions by increasing cylinder pressure and workingtemperature beyond that which grey iron or aluminium willtolerate. CGI also has positive noise and vibrationcharacteristics. As an aluminium engine block costs morethan twice that of an iron engine block, there are also strongeconomic incentives for building engines in CGI which canbe cast in existing iron foundries and can be machined inexisting machining lines without major investments.

50 µm

Grey Iron CGI Ductile Iron

COMPACTED GRAPHITE IRON

The graphite particles in Compacted Graphite Iron (CGI)appear as individual ‘worm-shaped’ or vermicular particles.The particles are elongated and randomly oriented as ingrey iron, but are shorter and thicker and have roundededges. Deep-etched SEM micrographs show the complexcoral-like graphite morphology with rounded edges andirregular bumpy surfaces.The entangled shape and irregularsurfaces provide a strong adhesion between the graphiteand the iron matrix to impart strength and stiffness whileinhibiting crack initiation and propagation.

©SINTERCAST ANNUAL REPORT 19992

FLEXIBILITY

SinterCast offers the most flexible, reliable and economicalprocess control technologies to the foundry industry.

To meet foundry requirements for complex automotivecomponents, SinterCast has developed its two-stepmeasure-and-correct control technology to ensureoptimum yield and reliability.

The SinterCast thermal analysis measurement capability andprocess control system have also been developed for one-step measure-and-confirm CGI production in ladlefoundries and for continuous CGI production in pouringfurnaces.

MEASURE-AND-CORRECT

To avoid the risk of excess nodularity or shrinkage defects,the two-step ladle process is based on an intentionalundertreatment of magnesium and inoculant during thebase treatment. The SinterCast thermal analysis is thenobtained by immersing the patented Sampling Cup into thetreated iron, which is a simple one-man job. Based on thethermal analysis results, the necessary amounts of correctivemagnesium and/or inoculant cored-wire are automaticallyadded and the ladle is released for pouring.Further sampling and deslagging are not required.The entireon-line measure-and-correct process requires 3.5 minutes.

MEASURE-AND-CONFIRM

SinterCast can also support a one-step process in which thebase treatment is controlled to aim to bring the iron directlyto the CGI window. However, despite all good foundry effortsand discipline, variation in the recovery of magnesium andinoculant is inevitable. Regardless of the state of knowledge ofthe base iron and its history, one-step alloy addition techniquescannot be relied upon to always fall within the narrow CGIwindow.Therefore, the 3 minute SinterCast sample is obtainedafter the addition of magnesium and inoculant to directlydetermine the success of each base treatment. The thermalanalysis results provide an on-line GO/NO-GO confirmation todecide whether to pour or reject the ladle and also feedbackinformation to optimise the base treatment alloy additions forsubsequent ladles.

POURING FURNACES

The core strategy of evaluating the iron after magnesiumand inoculant addition can also be applied to productionfrom tilting or pressurised pouring furnaces. The processbegins by immersing the Sampling Cup directly into thepouring basin of a newly-filled mould.The analysis results areused to determine control actions at one or more of threepossible alloy addition stations:

• increase/decrease next Mg base treatment addition

• increase/decrease inoculant addition to pouring spout

• add Mg directly to the furnace body at start-up

Control techniques are also available for pouring furnacesthat hold untreated iron, and for in-mould production.

ALLOY CALCULATOR

Based on the thermal analysis results from previous ladles,the SinterCast Alloy Calculator invokes a series ofalgorithms and Statistical Process Control (SPC) rules torecommend optimal alloy addition amounts for subsequentladles. The foundry supervisor has fullaccess to alter parameters for thealgorithms, modify the SPC logic orto assign melt data default values.The Alloy Calculator reduces thepotential for operator errors byreplacing Standard OperatingProcedure (SOP) charts and guesswork with direct results.

THE SINTERCAST PROCESS IN FOUNDRIES


TECHNOLOGY STATUS

THE SINTERCAST SAMPLING CUP

The SinterCast thermal analysis is obtained by immersingthe patented Sampling Cup into the magnesium andinoculant treated iron. During the three-second immersiontime, the walls of the Sampling Cup are heated to thermalequilibrium with the molten iron sample. This preheatingprevents the formation of a solidified chill layer and ensuresthat the probe walls remain in direct contact with themolten iron until true solidification begins.

The Sampling Cup and its twin thermocouple measurementsystem accurately measures the solidification behaviour ofthe iron both near the centre of the probe and at the walls.The SinterCast thermal analysis and control system thenallows accurate determination of the iron metallurgy and microstructure.

THE SINTERCAST STAND-ALONE SYSTEM 2000

The SinterCast System 2000 is composed of individualhardware modules that can be configured to suit the layout,process flow and production volume of each specificfoundry. The SinterCast Stand-Alone System 2000(pictured) is the basic configuration of the System.It comprises of one Sampling Module (SAM), one OperatorControl Module (OCM), a Power Supply Module and a Wirefeeder.

The basic SinterCast Stand-Alone System 2000 can beexpanded to include either one additional SAM or oneadditional OCM depending on the specific foundryrequirements. The System can be further expanded byupgrading the Power Supply Module and adding a networkServer and as many additional SAM and OCM modulesas required.

THE CHALLENGE

CGI brings 35-40% higher elastic modulus, at least 75%higher tensile strength and significantly improved wearresistance to component design. However, CGI brings thesesame properties also to the machining operation, resulting inincreased tool wear.

High volume state-of-the-art cylinder block transfer linesand cutting tools designed for grey iron have been optimisedto achieve as little as 20-22 second cycle times andmaximum cutting times of 8-14 seconds for any oneoperation. CGI must conform to these cycle times, and mustprovide at least one full 8-hour production shift betweentool changes.

THE STARTING POINT

During interrupted cutting (milling) and drilling, the tool lifefor CGI is approximately one-half that of grey iron. This issufficient to satisfy tool life and productivity criteria.However, during high speed polycrystalline cubic boronnitride (PCBN) or ceramic cylinder boring operations, thetool life for CGI is 10-20 times less than that of grey iron.In these cases, conventional grey iron machining techniqueswere not able to satisfy cycle times and tool life criteria.

THE WAY FORWARD

Building on the improved longevity of carbide inserts, severalmachine tool suppliers have developed multiple insertcylinder boring tools for both roughing and finishing.Although the speed is reduced from approximately 800 to100 m/min, the use of six or more inserts allows forsignificantly higher feed rates. These concepts have beenshown to satisfy cycle time, durability and cylinder boredimensional requirements during extensive laboratorytesting.Additionally, the rotating insert principle from RotaryTechnologies offers a radically new approach with a verypromising tool life.

The cylinder boring solutions have been developed andevaluated jointly between the automotive industry, toolingcompanies, research institutes and SinterCast and will beassessed during planned transfer line tests during the year 2000.

SinterCast Products Machining


PRESIDENT’S COMMENTS

SINTERCAST CGI – A COST EFFECTIVE SOLUTION

TO THE ENVIRONMENTAL CHALLENGE NOW AND

TEN YEARS AHEAD…

The first ten years of the 21st century will imposedemanding challenges on the automotive industry to meetenvironmental legislation, consumer expectation andinternational competition.

Worldwide emissions standards have already been set formuch of the first decade. Europe, for instance, will encounterthree ever-tougher emissions standards, with Euro III in2000, Euro IV in 2005 and Euro V in 2007. In addition tothese standards the European Automotive IndustryAssociation (ACEA) has committed to reduce average CO2

emissions from 180 g/km to 140 g/km by 2008.These newstandards will require new technologies. The new Dieseltechnology is one example.

Current forecasts indicate that asmuch as 50% of all newEuropean passenger carsales will be equipped withDiesel engines in 2005.This growth not onlycontributes to thereduced fuel consumptionand to the CO2

reduction require-ments,but also reflects consumeracceptance of the dieselengine and theadvantages it brings tofuel economy. Designersuniversally agree that peakcylinder pressures must increasesignificantly in order for the nextgeneration of car and truck diesels tosatisfy the forthcoming emissions standards.As that can be achieved, the Diesel engine has a verypromising future and so has CGI.The associated increases in operating loads pave the wayfor increased use of CGI not only in cylinder blocks, butalso in cylinder heads and liners.

As demonstrated in the 3.3 litre Audi V8 TDI Diesel engine,on sale as from spring 2000, the unique properties ofCompacted Graphite Iron allow designers to realise class-leading specific power output. With productionreferences established in the car, truck and marine industries,CGI is destined to become the growth material for enginedesign of the next decade.

SinterCast is making this development possible.

…AFTER TEN YEARS OF EVALUATION...

Leading automotive and engine manufacturers have studied

CGI as an engine construction material for decades.However, as no process was available to produce thismaterial on a large scale and in an economically justifiableway, commercial interest was limited.

The industry’s needs and the development of the SinterCastprocess control technology for the production ofCompacted Graphite Iron has stimulated the interest toexplore this material as a new engine design material.A wealth of experience has been accumulated byautomotive and engine manufacturers in collaboration withSinterCast over the past ten years. It has been, and still is, atime consuming and costly effort by SinterCast (and itscustomers!) to promote Compacted Graphite Iron as a newengine design material and to explain SinterCast’s ability tocontrol this material in continuous and large volumeproduction whilst maintaining desired material specification

with highest demands on quality, productivity andeconomy. Today’s interest in SinterCast CGI is a

direct result of these ten years of testcastings, prototype development and

engine evaluation programsperformed by large foundries andtechnology leading automotive andengine manu-facturers around

the world.

Approximately 13,500prototype engine

blocks, 1,500 cylinderheads and over

15,000 other prototypecomponents have been cast

during these ten years at 43 foundriesand have been delivered to 42 car and

truck OEMs and 20 other suppliers.

Some 4,000 CGI test pieces have been supplied to 27tooling companies and research institutes in a contributiontowards the search for optimal machining and machine toolsolutions. Combined efforts by these companies andautomotive manufacturers have resulted in tools andconcepts to machine CGI engine components. Theseconcepts are now being subject to evaluation on transferlines. Some car companies have already concluded thatmachining is no longer an obstacle to make a positivedecision about volume production.

…WORLDWIDE...

The SinterCast technology has been used to produceprototype components at 43 foundries, of which 19 arelocated in Europe, 13 in North and South America and 11in the Far East.

Of the 42 automotive and engine manufacturers involved inSinterCast CGI evaluation, 23 are in Europe, 7 in NorthAmerica and 12 in the Far East.


PRESIDENT’S COMMENTS

…AND NOW FINALLY COMMERCIAL PRODUCTION

The ultimate evidence that SinterCast CGI is not onlygenerating interest but also is providing value is thatcommercial production has started. Allen Diesels (part ofthe Rolls-Royce Group) is producing CGI engine blocks forlarge stationary and marine Diesels. In January 1999,Caterpillar started producing truck CGI Diesel enginecomponents. In March 2000 the Halberg foundry inGermany started series production of the CGI engine blockfor the new 3.3L V8 TDI Diesel to be introduced in the Audi A8 passenger car, for sale in Spring 2000.

SinterCast enjoys the interaction with its customers.Their demands play an important role in SinterCast´stechnical development and its understanding of the needs offoundries and automotive manufactures alike.Tupy Fundições joined SinterCast´s team of collaboratingpartners at the end of 1999 when a SinterCast System 2000was ordered. This was subsequently installed andcommissioned and on 17 March 2000 Tupy was ready forcommercial production. In connection herewith WalmorKrause,Technical Director of Tupy, stated:

"Tupy Fundições, Latin America’s largest foundry, knownworldwide for its products and services of quality and state-of-the-art technology, now offers its customers CompactedGraphite Iron (CGI) technology, using the SinterCast Process,for the production of cylinder blocks and heads.Tupy has beenproducing CGI since 1992, which is evidence of our extensivefamiliarity with Compacted Graphite Iron castings.

Tupy strongly believes in the potential of CGI for engineblocks, especially for high compression diesel engines fortrucks and cars.

We believe that this trend is irreversible.

By joining forces withSinterCast, Tupy hasonce again positioneditself as a leadingdevelopment foundry,offering state-of-the-art technology andknow-how in the field

of metallurgy to its customers. We evaluated the othercommercially available technologies for producingCompacted Graphite Iron and found the SinterCast measure-and-correct technology superior for the production of CGIcylinder blocks and heads.

Together with SinterCast, Tupy has developed variousprototypes of cylinder blocks for its customers, givingemphasis to a project in process with Mercedes-Benzof Brazil."

SinterCast expects others to follow, once the firstpioneering productions have proven successful.

SINTERCAST: OPPORTUNITIES AND RISKS FOR

ITS CUSTOMERS

To start with a new design and a new material offers thefoundry and the automotive/engine customers a challengeand a risk. If successful, the change constitutes a leap forwardcompared to competition. It can mean increased sales,improved profits and expanded market shares. To be apioneer and a market leader very often pays off.However, some companies believe in reducing risks by notchallenging new technologies and innovations but rathercautiously follow already established trends. CGI andSinterCast can offer the challenge to those who wish to bepioneers. We can also offer the comfort of reduced risks tothose who wish to follow, now when the viability of thematerial and the process have been proven.

We can assure all our customers – old and new – thatSinterCast has the required resources – to be a long-termreliable partner.

SINTERCAST: OPPORTUNITIES AND RISKS FOR

ITS SHAREHOLDERS

The SinterCast share is connected with high risk until largescale series production commences.This is the opinion of theBoard and of the Management.

The SinterCast risk elements have altered over the years.Initially it was the technology, until it was proven. Later it wasmachining, now largely resolved.Then it was commercial, untilthe business concept, terms and conditions were accepted andabove all, the industry’s needs for a new material and for theSinterCast Process became evident.And finally, the time factor:will the market needs develop sufficient volumes and incomeswithin the financial time frame of SinterCast?Without revenues and with the present ambition level andcost mass, SinterCast’s liquidity will be consumed by end 2001.

However, SinterCast is not only about risks.Volume productionof heavy duty truck engine components in CGI is now plannedto commence during 2001. These production commitmentsare required to meet engine performance criteria, andSinterCast is actively pursuing the implementation of itsproduction process control technology to meet these plans.

In addition automotive passenger car makers are now at thepoint where they are planning to create new families of EURO IV and EURO V compliant engines beginning in 2003.

Further, high performance derivatives of existing Diesel enginepassenger vehicles are expected.These engines will utilise everincreasing cylinder pressures and material substitution to CGIfor strength requirements, as improved economic machiningviability of CGI is being realised by the automakers.

SinterCast sees a buoyant growth in the CGI Diesel enginemarket and is aiming to become the leading provider ofvolume CGI production technology throughout the industry.

MERCEDES-BENZ 12 LITRE BLOCK


AN EXAMPLE FROM 1999 PROMOTIONAL MATERIAL

Halberg Guss and its Process Technology Partner SinterCast

are proud to be providing the engine block for the new Audi V8 TDI

in Compacted Graphite Iron (CGI).

We jointly wish Audi every successwith their outstanding new engine.

SinterCast AB (publ): (tel) +46 8 660 77 50(fax) +46 8 661 79 79http://www.sintercast.com

Halberg Guss GmbH: (tel) +49 681 870 50(fax) +49 681 870 5632

V8 TDI


AN EXAMPLE OF SINTERCAST 1999 EXHIBITIONS


FIVE YEAR SUMMARY

Profit and Loss accounts1999 1998 1997 1996 1995

Operating income 6 066 4 063 3 203 2 748 766Operating loss -43 714 -46 572 -75 068 -71 470 -76 798Financial net 2 958 6 242 7 849 15 720 12 358Tax - - - - -190Loss for the year -40 756 -40 330 -67 219 -55 750 -64 630

Cash flow analysis1999 1998 1997 1996 1995

Cash flow from operations -37 295 -36 166 -61 851 -52 260 -52 898Change in working capital -1 442 -4 608 2 866 -3 018 -3 919Cash flow from operations -38 737 -40 774 -58 985 -55 278 -56 817Cash flow from investments -2 958 -2 501 -3 369 -9 764 -3 740Cash flow from financial operations 0 155 - 6 750 194 067Change in cash position -41 695 -43 120 -62 354 -58 292 133 510

Balance sheets1999 1998 1997 1996 1995

Fixed assets 12 736 13 122 13 371 14 500 9 152Current assets 9 535 7 671 3 812 7 274 8 377Cash and bank deposits 82 113 123 809 166 929 229 283 287 575Total assets 104 384 144 602 184 112 251 057 305 104

Restricted capital 546 114 543 003 541 281 533 311 522 789Retained capital -454 599 -410 805 -369 319 -295 129 -235 113

Long term liabilities 1 485 1 440 1 000 1 000 1 000Current liabilities 11 384 10 964 11 150 11 875 16 428Total shareholders' equity and liabilities 104 384 144 602 184 112 251 057 305 104

Key ratios1999 1998 1997 1996 1995

Solidity, % 87,7 91,4 93,4 95,0 94,0Adjusted shareholders' equity, SEK million 91,5 132,2 172,0 238,2 287,7Capital employed, SEK million 91,5 132,2 172,0 238,2 287,7Total assets, SEK million 104,4 144,6 184,1 251,1 305,1Return on shareholders' equity, % -36,4 -26,5 -32,8 -21,2 -28,9Return on capital employed, % -36,4 -26,5 -32,6 -21,1 -28,7Return on total assets % -32,6 -24,6 -30,7 -19,9 -26,9Debt-to-equity ratio, % 0,0 0,0 0,0 0,0 0,0

EmployeesNumber of employees at the year-end 26 30 36 49 41Average number of employees 27 31 48 50 37

Data per shareAverage number of shares, thousands 4 241,0 4 153,5 4 091,0 4 078,0 3 542,0Number of shares at year-end, thousands 4 241,0 4 241,0 4 091,0 4 091,0 4 064,0Adjusted equity 21,6 31,2 42,0 58,2 70,8Earnings, SEK -9,6 -9,5 -16,4 -14,0 -18,0Dividends, SEK - - - - -Share price SinterCast A-share at year-end, SEK 60,0 61,0 65,5 178,5 390,0Highest share price SinterCast A-share during the year, SEK 89,0 110,0 206,0 550,0 425,0Lowest share price SinterCast A-share during the year, SEK 52,0 50,0 46,0 138,0 180,0Share price SinterCast B-share at year-end, SEK 57,5 50,0 60,0 173,0 394,0Highest share price SinterCast B-share during the year, SEK 78,0 95,0 220,0 490,0 400,0Lowest share price SinterCast B-share during the year, SEK 45,0 40,0 50,0 135,0 180,0Number of shareholders 4 495 5 905 4 965 1 425 788Non-Swedish shareholdings, % of share capital 43 46 52 88 91Market value, SEK million 243,5 242,6 267,3 728,8 1 600,1Turnover rate SinterCast A, % 87 167 196 42 74Turnover rate SinterCast B, % 126 214 82 8 94Turnover rate OM Stockholm Stock Exchange, % 94 77 66 66 61Approximate average of A-shares traded per day 11 900 20 700 33 200 6 500 8 400Approximate average of B-shares traded per day 3 300 5 100 3 800 255 2 500Aggregated turnover of number of SinterCast shares, per year A+B 3 814 308 6 450 107 9 255 599 1 695 592 2 721 844Beta value SinterCast A-share 0,39 0,51 1,19 1,03 1,22Beta value SinterCast B-share 0,71 0,82 1,53 1,03 -Definitions of key ratios can be found in Note 18.

Amounts in SEK (Thousands)

Turnover rate OM Stockholm Exchange, %


THE SINTERCAST SHARE

Name Country Number of shares Total % of total % of totalA B share capital votes

Goldman Sachs International Limited (nominee shareholder US 318 700 113 350 432 050 10,56% 9,43%Den Norske Bank (nominee shareholder NO 173 330 0 173 330 4,24% 4,95%

UK 161 700 0 161 700 3,95% 4,62%Bank Sal Oppenheim Jr & CIE (nominee shareholder CH 160 000 0 160 000 3,91% 4,57%Ahlström, Lars including Affiliates SE 131 450 22 100 153 550 3,75% 3,82%Chase Manhattan Bank (nominee shareholder GB 152 200 0 152 200 3,72% 4,35%Credit Suisse First Boston, (Europe) (nominee shareholder GB 68 800 26 100 94 900 2,32% 2,04%Boston Safe Deposit and Trust Co (nominee shareholder US 73 700 0 73 700 1,80% 2,11%Orkla Finans ASA (nominee shareholder NO 59 000 10 000 69 000 1,69% 1,71%Plastic Form GF AB SE 54 300 1 100 55 400 1,35% 1,55%

(nominee shareholder NO 50 025 0 50 025 1,22% 1,43%

Sub total 1 403 205 172 650 1 575 855 38,52% 40,57%

Other shareholders approx. 4,485 2 032 145 482 950 2 515 095 61,48% 59,43%

TOTAL 3 435 350 655 600 4 090 950 100,00% 100,00%

Whereof total foreign shareholders 1 585 624 186 375 1 771 999 43,32% 45,82%Whereof total Swedish shareholders 1 849 726 469 225 2 318 951 56,68% 54,18%

Bertil Hagman (including indirectly owned)

Christiania Bank & Kreditkasse

MAIN SHAREHOLDERS AS OF 31 DECEMBER 1999

The SinterCast Share is quoted on the OM StockholmExchange O-list. The share has been traded there since 26 April 1993.

SHARE STRUCTURE

SinterCast’s share capital at the end of 1999 was SEK 4.1million, divided on 3.4 million A-shares and 0.7 million B-shares at par value of SEK 1.

The A-share carries a right to 1 vote and the B-share to1/10 vote, (see note 14).

SinterCast had 4,495 shareholders at the end of 1999.The 10 largest shareholders, whereof 7 were nomineeshareholders, controlled at the end of 1999 41% of thevotes and 39% of the capital.

SinterCast Board, Management andemployees controlled 5.1% of the votesand 4.3% of the capital, excludingoutstanding warrants.

No of shares No of shareholders% of shareholders No of shares % of share capital1-500 3 709 82,5% 564 803 14%501-10,000 743 16,5% 1 349 341 33%10,001-100,000 38 0,8% 1 107 526 27%100,001- 5 0,1% 1 069 280 26%Total 4 495 100,0% 4 090 950 100%

DISTRIBUTION OF SHARE OWNERSHIP

Class of share Number of shares Number of votes % of total % of total votesshare capital

A (1 vote) 3 435 350 3 435 350 84 98B (1/10 vote) 655 600 65 560 16 2Total 4 090 950 3 500 910 100 100

SHARE STRUCTURE


DIRECTORS’ REPORT

The Board of Directors of SinterCast AB (publ), corporateidentity number 556233-6494, hereby submit the AnnualReport and consolidated financial statements for 1999.SinterCast AB (publ) is the parent company of theSinterCast Group.

CGI FOR AUTOMOTIVE ENGINES

The next few years will impose a demanding task on theautomotive industry to meet environmental legislation andconsumer expectations.

World wide emissions standards are becoming drasticallymore severe. In Europe for example, the challenges of EUROIII in 2000 and EURO IV in 2005 will significantly change thedesign philosophy of the car and truck engines, especially theDiesel engine, which will play an even more important rolecompared with the gasoline engine. The agreement onreduced fuel consumption between the European carmanufacturers and the European Union further underlines this.

The new Audi V8 TDI engine, with an engine block cast inSinterCast CGI, which was presented in May 1999, isexpected to go on sale in the Audi A8 in Spring 2000.The Audi engine leads the way in Diesel engine design,achieving a state-of-the-art 50 kW/litre and 480 Nm oftorque from a displacement of only 3.3 litres. It’s remarkablysmall dimensions indicate the future of a new generation ofcompact, highly efficient, high power density engines, whereCGI is needed in engine blocks and other components.

Many car, truck and engine manufacturers and foundries nowhave considerable experience of prototype CGI productionfor engine blocks and cylinder heads and many are involved inproduction plans. Some are already using or planning to usethe SinterCast Process Control technology, especially as theyevolve from today’s limited activity to volume production.

It is an exciting time for the evolution of the high performanceDiesel engine in which SinterCast will play a major role.

MACHINING

During 1999, significant results were achieved by SinterCastand leading companies within the European industry toidentify technically and economically optimal solutions for highspeed cylinder boring.

A machining consortium comprising Audi, BMW,DaimlerChrysler, Ford, Opel and Scania and the Europeanfoundries Brühl, Fritz Winter and Halberg, has undertaken twomajor programmes, the first at PTW of the DarmstadtUniversity of Technology and the second at the FraunhoferInstitute in Dresden.These programmes are being conductedin parallel with the individual research programmes of theautomakers and the machine tool and cutting materialcompanies, including one ongoing programme betweenSinterCast, Ford Europe and Brühl.

Machining principles are generally in place to allow fordecision on volume production start-up. Detailed testing isnow ongoing, supported by machine and machine toolcompanies at transfer lines facilities.

INSTALLATIONS

A SinterCast System 2000 was delivered to Tupy Fundiçõesin Joinville, Brazil at the end of 1999. Tupy was productionready by mid March and is aggressively pursuing businessthroughout the world, especially in the Americas, wherework is ongoing with several engine manufacturers.Of these, three are considering CGI as an alternativematerial to grey iron as a means of increasing power outputand achieving significant weight reduction. In addition to theinstallation at Tupy, five SinterCast process control systemsare installed at the foundries Halberg in Germany, VDP inItaly, Sakana in Spain, Cifunsa in Mexico and Caterpillar in theUSA. One smaller SinterCast System for prototype castingand tests is installed with Isuzu in Japan.An installation of theSystem 2000 has been made at the SKF foundry inKatrineholm, Sweden, for SinterCast’s development activitiesand for demonstration to potential customers.

DELIVERY OF PROBES

During 1999, approximately 4,300 units of the newSinterCast sampling probe, released in early 1999, have beendelivered to customers. These probes are being used forprototype castings and some limited production.The SinterCast probe is the most accurate of its kind in theworld, which is critical for the successful volume productionof CGI engine blocks and cylinder heads, that require anarrow CGI specification to avoid shrinkage defects and tooptimise machinability and performance.

CUSTOMER PRODUCTION

During the year, production has taken place at VDP andSakana for Allen Diesels, part of the Rolls-Royce Group,United Kingdom, who have decided to expand theirproduction of CGI components to include cylinder headsfor the company’s new 5000 Series of stationary Dieselengines. Series production of Audi’s new V8 Diesel enginecylinder block at Halberg has started in March 2000.Since early 1999, Caterpillar has been producing truckengine cylinder heads.

Although the above production activities have as yetresulted in limited volume only, they represent importantreferences for SinterCast vis-à-vis the automotive and heavyDiesel engine industries.

ORGANISATION

The SinterCast decentralised organisation with commercialand technical customer support in Germany, UK, USA andJapan and the resourceful technology centre in Katrineholm,Sweden, offers valuable support to customers now planningfor commercial production. In March 2000, the number ofemployees was 26, of which 19 were men and 7 women.6 are employed in United Kingdom, 9 in Sweden, 4 inGermany, 1 in Switzerland, 2 in Japan, 3 in USA and 1 inMexico. The average age was 38 and the average time ofemployment was 5 years. A majority of the employees havegraduated from university. In March 2000, 18% worked insales, 58% in technical development and service and 24% inmanagement, finance and administration.


DIRECTORS’ REPORT

PATENTS

SinterCast owns 24 patents and patent applications.

COMPETITION

SinterCast enjoys the highest respect among the world’sfoundries and automotive companies for it’s process controltechnology. No other method has as yet been provensuitable for CGI volume production of engine blocks andcylinder heads.

OPERATING RESULT AND INVESTMENTS

The Group’s turnover for 1999 amounted to SEK 6.1 million(SEK 4.1 million for the previous year).The turnover mainlyrelates to income from production and installations.The result for the Group, after calculated tax, amounted toSEK –40.7 million, SEK –9.6 per share (SEK –40.3 million, SEK–9.5 per share). Other operating income and otheroperating expenses relate to sub-letting of office space inSinterCast Ltd.The financial net is SEK 3.2 million lower thanthe previous year, primarily due to changes in the Group’sresults and a lower interest rate. Items affectingcomparability in the Parent Company for 1998 and 1999consist of provisions for receivables and conditionalshareholders’ contributions to Group companies, amountingto SEK 19,7 million (SEK 36.2 million).

SinterCast has accumulated losses carried forward in all its subsidiaries.

Investments by the Group during the period amounted toSEK 3.3 million (2.2 million).

LIQUIDITY AND FINANCE POLICY

The Group’s liquidity on 31 December 1999 amounted toSEK 82.1 million (SEK 123.8 million). The present marketsituation still presents limited possibilities to estimate thefuture liquidity situation of SinterCast. The Board ofDirectors continuously assesses the anticipated liquiditysituation and considers different possibilities to increase theliquidity should such needs arise. However, with the presentexpense level, excluding estimated revenues, the existingliquidity will cover the company’s operation up to andinclusive of the year 2001.

SinterCast is as long as possible, aiming to reduce thefinancial risks which emerge in the operative business, inaccordance with the finance policy determined by the Board.

The major parts of SinterCast’s costs are realised outsideSweden.The financial department covers the net-exposureof the Group against the subsidiaries by continuouslyfollowing up the budget and by analyses of the currencymarkets. The principle effect thereof is that between threeand twelve months’ money flow is continuously secured.

The liquidity is invested in instruments with high liquidity andcreditworthiness and within determined limits for eachcounter party, mainly in the form of short-term treasurybonds in order to achieve the highest possible flexibility.

EURO

SinterCast’s position is that the introduction of EMU hasbeen essentially beneficial.The costs for currency exchangeswithin EMU countries have decreased and theadministration has been simpler with fewer currencies. It hasalso been easier to directly compare prices and costsbetween the different EMU countries. Our Europeantransactions can be conducted either in euros or in nationalcurrencies, depending on customers’ preferences.

SinterCast has as yet no plans to be quoted in euros on theOM Stockholm Exchange. The Group has no intention toconsolidate in euros before the year 2002.

Y2KSinterCast was not affected in any way by the millennium shift.

WORKING METHODS OF THE

BOARD OF DIRECTORS

The SinterCast AB (publ) Board of Directors consists of fiveMembers elected by the Annual General Meeting.

During 1999 the SinterCast Board of Directors held nineminuted meetings.At these meetings, the Board of Directorsdealt with the standing issues and matters concerning long-term strategies and structural organisational changes.Individual Board Members also assisted the ManagementGroup in various strategic matters.

Part of the Board of Directors form a NominationCommittee, which before the Annual General Meeting(AGM) 2000 consists of Bo C E Ramfors, Chairman andBertil Hagman, Managing Director. It’s task is to submitproposals to each AGM, for the election of Board Membersand remuneration to the Board of Directors after havinghad contact with the larger shareholders of the company.No other committees exist.

HIGH RISK

The commercial risk remains high until large-scaleproduction commences.

PROPOSED ALLOCATION OF ACCUMULATED LOSS

The accumulated loss of the Group amounts to SEK–454,599,524. No allocation to restricted reservesis proposed.

The Annual General Meeting has to decide on the allocationof the loss of SinterCast AB (publ) shown below.

Retained loss -408,562,756Net loss for the year -42,111,522 Accumulated loss -450,674,278

The Board of Directors and the Managing Director proposethat the accumulated loss of SinterCast AB (publ) be carried forward.


PROFIT AND LOSS ACCOUNTS

CASH FLOW STATEMENTS

THE GROUP THE PARENT COMPANYAMOUNTS IN SEK THOUSANDS Note 1999 1998 1999 1998

Operating income 1 6 066 4 063 6 864 5 853Cost of goods sold -11 038 -11 189 -4 521 -4 350Gross loss/profit -4 972 -7 126 2 343 1 503

Cost of Sales and Marketing -16 591 -14 402 -9 201 -3 690Cost of Administration 4,5 -12 447 -14 763 -10 059 -9 210Cost of Research & Development 2 -10 074 -10 615 -10 665 -10 350Items affecting comparability 6 - - -19 703 -36 206Other operating income 7 2 310 2 079 - -Other operating costs 7 -1 940 -1 745 - -Operating loss 1 -43 714 -46 572 -47 285 -57 953

Interest income and similar items 8 3 527 6 618 5 254 9 881Interest expenses and similar items -569 -376 -81 -56Financial net 2 958 6 242 5 173 9 825Loss after financial income and expenses -40 756 -40 330 -42 112 -48 128

Tax - - - -Loss for the year -40 756 -40 330 -42 112 -48 128

THE GROUP THE PARENT COMPANYNote 1999 1998 1999 1998

OPERATIONSOperating loss -43 714 -46 572 -47 285 -57 953Adjustments for items not included in the cash flow Depreciation 9,10 3 307 3 611 1 028 947 Exchange rate differences 366 -67 - - Write-down of shares, internal debts - - 2 493 3 903Financial items 2 747 6 862 2 905 6 946Total cash-flow from operationsbefore change in working capital -37 294 -36 166 -40 859 -46 157

Change in working capitalStock -779 -548 - -Operating receivables -1 085 -3 874 -2 227 47 841Operating liabilities 420 -186 2 789 -49 558Total change in working capital -1 444 -4 608 562 -1 717

CASH-FLOW FROM OPERATIONS -38 738 -40 774 -40 297 -47 874

INVESTMENTSAcquisition of equipment and patent 9,10 -3 266 -2 210 -1 588 -1 465Disposal of tangible assets 19 141 - -Increase/decrease in long term receivables 289 -432 0 6 059CASH FLOW FROM INVESTMENTS -2 958 -2 501 -1 588 4 594

FINANCIAL OPERATIONSDebenture loan 0 155 0 155CASH FLOW FROM FINANCIAL OPERATIONS 0 155 0 155

Change in cash position* -41 696 -43 120 -41 885 -43 125Cash position - opening balance 123 809 166 929 121 574 164 699Cash position - closing balance 82 113 123 809 79 689 121 574*The cash position is comprised from short-term investments and cash at bank and in hand.

AMOUNTS IN SEK THOUSANDS


BALANCE SHEETS

THE GROUP THE PARENT COMPANY31 Dec 31 Dec 31 Dec 31 Dec

AMOUNTS IN SEK THOUSANDS Note 1999 1998 1999 1998ASSETS

FIXED ASSETSIntangible assets 9Patent and other intangible assets 7 651 7 091 7 651 7 091Total intangible assets 7 651 7 091 7 651 7 091

Tangible assets 10Machinery and equipment 2 683 3 340 - -Total tangible assets 2 683 3 340 - -

Financial assetsShares in subsidiaries 11 - - 0 0

- - 0 02 402 2 691 - -

Total financial assets 2 402 2 691 0 0TOTAL FIXED ASSETS 12 736 13 122 7 651 7 091

CURRENT ASSETSStockRaw material, work in progress and finished products 2 355 1 576 - -Total stock 2 355 1 576 - -

Short term receivablesTrade debtors 4 946 3 635 2 475 24

- - 0 0Other debtors 488 591 874 1 621Prepaid expenses and accrued income 12 1 746 1 869 529 6Total short term receivables 7 180 6 095 3 878 1 651

Short term deposits 78 514 114 936 78 226 114 489

Cash at bank and in hand 3 599 8 873 1 463 7 251TOTAL CURRENT ASSETS 91 648 131 480 83 567 123 391

TOTAL ASSETS 104 384 144 602 91 218 130 482

SHAREHOLDERS' EQUITY AND LIABILITIES

SHAREHOLDERS' EQUITY 13Restricted capitalShare capital (nom. 4,090,950 shares at 1 SEK/share) 14 4 091 4 091 4 091 4 091Excess profits reserve 542 023 538 912 532 541 532 541Total restricted capital 546 114 543 003 536 632 536 632

Retained deficitLoss brought forward -413 843 -370 475 -408 563 -360 435Net profit/loss for the year -40 756 -40 330 -42 112 -48 128Total retained deficit -454 599 -410 805 -450 675 -408 563TOTAL SHAREHOLDERS' EQUITY 91 515 132 198 85 957 128 069

Long term liabilitiesLoan 15 1 485 1 440 1 655 1 596Total Long term liabilities 1 485 1 440 1 655 1 596

Current liabilitiesAccounts payable 2 755 1 648 779 490Intercompany payable - - 2 568 -Other current liabilities 1 250 911 109 110Accrued expenses and prepaid income 16 7 379 8 405 150 217Total Current liabilities 11 384 10 964 3 606 817

TOTAL LIABILITIES ANDSHAREHOLDERS' EQUITY 104 384 144 602 91 218 130 482

Contingent liability 17Buyback option for equipment 3 242 1 504 - -Capital cover guarantee for subsidiary - - 60 982 44 115

Intercompany receivablesOther long term receivables

Intercompany receivables


ACCOUNTING PRINCIPLES

NOTES TO THE FINANCIAL STATEMENTS

Currency Average rate Closing rateGBP 13.39 (13.16) 13.74 (13.52)USD 8.24 (7.96) 8.49 (8.07)DEM 4.53 (4.51) 4.38 (4.83)CHF 5,56 (5.49) 5.34 (5.90)JPY 0.072 (0.065) 0.083 (0.070)MXN 0.86 (0.88) 0.90 (0.81)

1 Operating income and operating loss per geographical markets.

OPERATING INCOME OPERATING LOSS1999 1998 1999 1998

Europe 1 727 1 679 -38 987 -40 931Americas 3 858 2 384 -3 286 -4 418Asia 481 - -1 441 -1 223Total 6 066 4 063 -43 714 -46 572

2 Research & DevelopmentTHE GROUP THE PARENT COMPANY1999 1998 1999 1998

Cost for Personnel and Administration 7 180 7 723 8 533 7 672Development and basic research* 1 757 1 613 1 104 1 254Depreciation 1 137 1 279 1 028 1 424Total: 10 074 10 615 10 665 10 350* External consultants and expensed equipment

3 Average number of employees1998

Total Whereof men Total Whereof men

The Group

United Kingdom 7 5 9 7Germany 4 2 4 2Japan 2 2 2 2Mexico 1 1 1 1Sweden 9 7 11 9Switzerland 1 1 1 1USA 3 2 3 2Total 27 20 31 24The number of employees is calculated as the average employed during the year. The parent company has no employees.

THE GROUP

1999

(1995:1554), the Accounting ActSinterCast’s Annual Report for 1999 has been prepared in accordancewith the Accounting Act.

Fixed assetsTangible and intangible fixed assets are depreciated systematically overtheir anticipated economic life. The rate of depreciation for patents andsimilar rights is 7-10% and for machinery and equipment 20-33%.

Recalculation of foreign subsidiaries’ balance sheets andincome statementsWhen translating the foreign subsidiaries’ Profit and Loss Accounts andBalance Sheet the current method has been used.All assets and liabilitiesin the Balance Sheet of the subsidiaries have thus been recalculated at theyear end rate while items in the Profit and Loss Accounts are recalculatedat an average rate of the year.

The translation differences that consequently arise have been posteddirectly to shareholder’s equity.

Principles of consolidationSinterCast presents the Profit and Loss Accounts in a function format.This coincides best with how SinterCast looks upon and controls theirbusiness. In a company with SinterCast’s structure it gives, in theCompany’s opinion, the reader a clear picture of the processes and result.

The consolidated accounts include the Parent Company and all companiesin which the Parent Company controls more than 50% of the number ofshares and voting rights.

The consolidated accounts have been prepared in accordance with theaquisition account method.The acquisition value of shares in subsidiarieshas been eliminated against the market value of the assets and liabilities atthe time of purchase. Inventories are valued at the lower of cost accordingto the first in, first out principle (FIFO) or market value.

Receivables and liabilities in foreign currenciesReceivables and liabilities in foreign currency have been stated using theexchange rate at year-end. Receivables are stated with the amount theyare expected to receive.



4 Salaries, remuneration and social security costs

Salaries and Social security costs Salaries and Social security costsremuneration (whereof pension costs) remuneration (whereof pension costs)

Parent CompanySweden 500 165 500 165

(0) (0)The Group

sUnited Kingdom 11 157 2 244 11 876 2 071

(339) (314)Germany 1 911 458 2 083 472

(97) (77)Japan 1 002 69 1 026 39

(45) (25)Mexico 185 36 144 35

(7) (6)Sweden 3 695 1 553 3 778 1 647

(287) (241)Switzerland 761 148 741 159

(38) (37)USA 2 935 861 2 890 799

(342) (305)Total 22 146 5 534 23 038 5 387

(1,155)* (1,005)** The pensions costs for the Group include the costs for the President amounting to SEK 104,455 (SEK 151,499).

1999 1998Board and Others Board and OthersManaging Director Managing Director

Parent CompanySweden 500 500

The Group

United Kingdom 2 807 8 350 2 865 9 010Germany 1 911 2 083Japan 1 002 1 026Mexico 185 144Sweden 3 695 3 778Switzerland 35 726 34 707USA 2 935 2 890

Total 3 342 18 804 3 399 19 638

The Board of Directors:Remuneration of the external Board of Directors has been within the limits laid down by the Annual General Meeting on19 April 1999 and amounts to SEK 0.5 million excluding social security costs, of which the Chairman received SEK 0.2 million.

Managing Director and Management:

commitments regarding severance pay exist.

5 Auditor feesTHE GROUP THE PARENT COMPANY1999 1998 1999 1998

PricewaterhouseCoopersAudit fees 520 518 321 316Other services 296 257 24 19

KPMGAudit fees - - - -Other services 11 50 - 18

Total: 827 825 345 353

6 Items affecting comparability

Items affecting comparability consists of the provisions for receivables and conditional shareholders contribution to the subsidiariesSinterCast Inc, SinterCast GmbH, SinterCast KK, SinterCast Technologies AB and SinterCast SA de CV.

7 Other operating income and costs

Rent received from tenant to SinterCast Ltd in Regal House, Twickenham, London and the cost hereto.

Management has received salaries and benefits amounting to a total of SEK 11.5 million, of which the Managing Director received SEK 2.8 million.

The outstanding pension liabilities for the Group to the Board of Directors, and the Managing Director are 0 (0).

Salaries and remunerations allocated per country and between Board Members and employees.

The Managing Director and Management received pension benefits in line with those of other employees in their respective countries.The terms of employment of the Managing Director and Management stipulate a mutual period of notice of one year. No other

19981999

The outstanding pension liabilities for the Group to the Board of Directors, and the Managing Director are 0 (0).

Managing Director and Management:

commitments regarding severance pay exist.

The Managing Director and Management received pension benefits in line with those of other employees in their respective countries.The terms of employment of the Managing Director and Management stipulate a mutual period of notice of one year. No other

The Management has received salaries and benefits amounting to a total of SEK 11.5 million, of which the Managing Director received SEK 2.8 million.



8 Financial income and expensesTHE GROUP THE PARENT COMPANY1999 1998 1999 1998

InterestInterest 3 131 6 174 3 075 6 089Interest - Group - - 3 259 1 649Total 3 131 6 174 6 334 7 738

Translation differencesExchange gain/loss 30 292 -6 461

-203 -224 -1 156 1 626Total -173 68 -1 162 2 087

Total financial income and expenses 2 958 6 242 5 173 9 825

9 Patents and other intangible assetsTHE GROUP THE PARENT COMPANY1999 1998 1999 1998

Acquisition value brought forward 11 361 9 896 11 361 9 896Acquisitions during the year 1 588 1 465 1 588 1 465Accumulated acquisition carried forward 12 949 11 361 12 949 11 361

.Depreciation brought forward 4 270 3 323 4 270 3 323Depreciation for the year 1 028 947 1 028 947Accumulated depreciation carried forward 5 298 4 270 5 298 4 270

Book value carried forward 7 651 7 091 7 651 7 091

10 Tangible fixed assetsTHE GROUP

Plant & Totaland fittings machinery

1999 1998 1999 1998 1999 1998

Acquisition value brought forward 7 563 7 934 13 494 10 945 21 057 18 879Acquisitions during the year 377 186 1 324 2 834 1 701 3 020Disposals -390 -557 -673 -285 -1 063 -842Accumulated acquisition carried forward 7 550 7 563 14 145 13 494 21 695 21 057

Depreciation brought forward 7 022 5 384 10 695 8 956 17 717 14 340Depreciation for the year 403 1 185 1 876 1 479 2 279 2 664Disposals -311 453 -673 260 -984 713Accumulated depreciation carried forward 7 114 7 022 11 898 10 695 19 012 17 717

436 541 2 247 2 799 2 683 3 340

11 Shares in subsidiaries (Amounts in SEK)PARENT COMPANY

1999 1998Acquisition value brought forward 8 8New share issue in subsidiaries 106 868 -Write-off of sharecapital in subsidiaries -106 868 -Accumulated acquisition value carried forward 8 8

PARENT COMPANYVotes and

percentage ofequity, % Book Value

SinterCast Ltd. London, England 100 1SinterCast, Inc. Detroit, USA 100 1SinterCast GmbH Friedrichsdorf, Germany 100 1SinterCast S.A. Lausanne, Switzerland 100 1SinterCast Technologies AB Katrineholm, Sweden 100 1SinterCast KK Tokyo, Japan 100 1SinterCast SA de CV Saltillo, Mexico 100 1SinterCast Servicios SA de CV Saltillo, Mexico 100 1Total 8A complete listing of the shares in subsidiaries is available from SinterCast AB (publ)

12 Prepaid expenses and accrued incomeTHE GROUP THE PARENT COMPANY1999 1998 1999 1998

Prepaid rents 591 529 - -Prepaid suppliers 950 - -Accrued interest 498 - 498 -Others 657 390 31 6Total 1 746 1 869 529 6

Computers, fixtures

Book value carried forward

Exchange gain/loss Group

The Parent Company has no tangible fixed assets.



13 Shareholders' equitySHARE RESTRICTED RETAINED

CAPITAL RESERVE DEFICITThe GroupOpening balance 1 January 1999 4 091 538 912 -410 805Exchange rate difference - 3 053 -3 038Present value of interest calculated on Warrants - 58 -Net loss for the year - - -40 756Closing balance 31 December 1999 4 091 542 023 -454 599

SHARE RESTRICTED RETAINEDCAPITAL RESERVE DEFICIT

The parent companyOpening balance 1 January 1999 4 091 532 541 -408 563Present value of interest calculated on Warrants - - -Net loss for the year - - -42 112Closing balance 31 December 1999 4 091 532 541 -450 675

14 Share capital developmentNOMINAL SHARE

A* B** TOTAL VALUE (SEK) CAPITAL (SEK)

Share capital as of 1 January 1993 101 200 2 660 103 860 0,50 51 930March 1993: Share issue I 161 200 2 660 163 860 0,50 81 930April 1993: Split 10:1 1 612 000 26 600 1 638 600 0,05 81 930April-May: 1993: Share issue II 2 084 600 26 600 2 111 200 0,05 105 560April-May: 1993: Share issue III 2 311 350 26 600 2 337 950 0,05 116 898December 1993: Bonus issue 2 311 350 26 600 2 337 950 1,00 2 337 950January 1994: Directed share issue 2 811 350 26 600 2 837 950 1,00 2 837 950October 1994: Directed share issue 2 811 350 626 600 3 437 950 1,00 3 437 950October 1995: Directed share issue 3 435 350 626 600 4 061 950 1,00 4 061 950December 1995: Subscription via warrants 3 435 350 628 600 4 063 950 1,00 4 063 950June 1996: Subscription via warrants 3 435 350 655 600 4 090 950 1,00 4 090 950Share capital as of 31 December 1999 3 435 350 655 600 4 090 950 1,00 4 090 950Share capital as of 31 December 1999 after full dilution, 3 585 350 655 600 4 240 950 1,00 4 240 950see note 15* One vote per share ** One tenth vote per share

15 Long term liabilitiesTHE GROUP THE PARENT COMPANY1999 1998 1999 1998

Loan from Svenska Handelsbanken's Innovationsfond.The loan does not accrue interest and is due for repaymentwithin 5 years. 1 000 1 000 1 000 1 000

A debenture loan of SEK 750,000 with 150,000 detachablewarrants with an exercise price of SEK 129 during the periodof 27 April 2001 - 30 May 2001. SinterCast Technologies ABcontrols SEK 237,500 with 47,500 detachable warrants. 543 565 750 750

Present value of interest calculated on the aforementionedwarrants. -58 -125 -95 -154Total 1 485 1 440 1 655 1 596

16 Accrued expenses and prepaid incomeTHE GROUP THE PARENT COMPANY1999 1998 1999

Accrued personnel expenses 405 364 83 83Accrued rent* 3 398 3 323 - -Deferred income 3 219 3 654 - -Others 357 1 065 67 134Total 7 379 8 405 150 217* Includes total lease fees split over the total lease period in SinterCast Ltd.

17 Contingent liabilitiesTHE GROUP THE PARENT COMPANY1999 1998 1999 1998

Buy-back option for equipment 3 242 1 504 - -

Capital cover guarantee for subsidiary: SinterCast Ltd. - - 9 151 8 363SinterCast Inc. - - 7 712 3 616SinterCast GmbH - - 21 309 15 400SinterCast S.A. - - - -SinterCast Technologies AB - - 7 281 3 983SinterCast KK - - 14 400 11 666SinterCast SA de CV - - 1 129 1 088Total Contingent liabilities 3 242 1 504 60 982 44 115

NUMBER OF SHARES



AUDIT REPORT

18 Definitions

Solidity Adjusted shareholders' equity expressed as percentage of total assetsAdjusted shareholders' equity Shareholders' equity plus 70 percent of untaxed reservesCapital employed Total assets less non-interest bearing liabilities including deferred tax liabilitiesReturn on shareholders' equityReturn on capital employed Income after financial items plus financial expenses as a percentage of average capital employedReturn on total assets Income after financial items plus financial expenses as a percentage of total average assetsDebt-to-equity ratio Interest bearing liabilities divided by adjusted shareholders' equity

Number of employeesAverage number of employees Average employed during the year

Average number of shares Weighted average of the number of shares outstanding in the respective yearNumber of shares at year-end The number of shares at the end of the year adjusted for 150,000 warrants issued in June 1998,

which can be exercised in May 2001.Adjusted equity Adjusted shareholders' equity divided by the number of shares at year-endEarnings Net result divided by the number of shares at year-end adjusted for warrants.Share price at year-endNumber of shareholdersNon-Swedish shareholdings

total outstanding share capitalMarket valueTurn over rate Total turnover of shares divided by the total market value of outstanding sharesBeta value A share's correlation in conjunction with the average development of the market.

At a Beta value higher than 1.0, the share yield of the company is varying more than the general index.The calculation is carried out on a monthly basis. 48 months' yield is used whenever possible

Latest paid price for SinterCast A at the OM Stockholm Exchange O-list.

The total share capital controlled by non-Swedish shareholders at the year-end divided by

The number of employees employed by the SinterCast Group at the year-end.

The total number of registered shareholders at the year-end

The total market value including A- and B-shares at the year-end

Net result as a percentage of average adjusted shareholders' equity

Stockholm, 29 March 2000

BO C E RAMFORSCHAIRMAN

LENNART SVANTESSON ROD MANSFIELD AAGE FIGENSCHOU

BERTIL HAGMANMANAGING DIRECTOR

To the General Meeting of the shareholders of SinterCast AB(publ), Corporate Identity Number 556233-6494.

I have audited the annual accounts, the consolidated accounts,the accounting records and the administration of the board ofdirectors and the managing director of SinterCast AB (publ) forthe year 1999. These accounts and the administration of thecompany are the responsibility of the board of directors andthe managing director. My responsibility is to express an opinionon the annual accounts, the consolidated accounts and theadministration based on my audit.

I conducted my audit in accordance with generally acceptedauditing standards in Sweden. Those standards require that Iplan and perform the audit to obtain reasonable assurance thatthe annual accounts and the consolidated accounts are free ofmaterial misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in theaccounts. An audit also includes assessing the accountingprinciples used and their application by the board of directorsand the managing director, as well as evaluating the overallpresentation of information in the annual accounts and theconsolidated accounts. As a basis for my opinion concerningdischarge from liability, I examined significant decisions, actionstaken and circumstances of the company in order to be able todetermine the liability, if any, to the company of any boardmember or the managing director. I also examined whether anyboard member or the managing director has, in any other way,

acted in contravention of the Companies Act, the AnnualAccounts Act or the Articles of Association. I believe that myaudit provides a reasonable basis for my opinion set out below.

The annual accounts and the consolidated accounts have beenprepared in accordance with the Annual Accounts Act and,thereby, give a true and fair view of the company’s and thegroup’s financial position and results of operations inaccordance with generally accepted accounting principlesin Sweden.

I recommend to the general meeting of shareholders that theincome statements and balance sheets of the parent companyand the group be adopted, that the loss for the parent companybe dealt with in accordance with the proposal in theadministration report and that the members of the board ofdirectors and the managing director be discharged from liabilityfor the financial year.

Stockholm, 29 March 2000

Peter ClemedtsonAuthorised Public AccountantÖhrlings PricewaterhouseCoopers


BOARD OF DIRECTORS

Bertil Hagman

London, United Kingdom

Born 1937, LL.M.

Managing Director

Former President and CEO of theTetra Pak Group

Former Consul General for Swedenin Lausanne, Switzerland

Member of the Board since 1992

Number of shares: 161,700 A-shares

Number of warrants: 16,000

Aage Figenschou

Oslo, Norway

Born 1948, LL.M.

Other board duties:

Astrup Fearnley ASB. Skaugen Shipping ASBrovig Offshore ASASimmons & Co International IncUnitas Mutual Insurance CompanyStiftelsen AksjeNorge



Bo C E Ramfors, Chairman

Gothenburg, Sweden

Born 1936, LL.M.

Lord in Waiting

Other board duties:

Svenska Mässans Stiftelse, (Chairman)Nolato AB (Chairman)Gothia Hotel AB (Chairman) The Royal Bachelors Club (Chairman)Insite AB (Chairman)AB Havsfrun (Chairman)Bure Vård & Omsorg AB (Member)Västkustens Skogs Holding AB(Member)Ruben Rausing’s Foundation (Member)



Lennart Svantesson

Gothenburg, Sweden

Born 1953, M.Sc.

Managing Director of Arthur D Little ScandinaviaCEO of Scribona AB (as from 5 May 2000)

Other board duties:

Essex AB (Chairman)Scribona ABNimbus Boats AB


Number of shares: 100 A-shares

Rod Mansfield

Billericay, United Kingdom

Born 1934, CEng, FIMechE.

President of Mechadyne plc

Other board duties:

Haydon Group Limited (Chairman)


Number of shares: 0


GROUP MANAGEMENT

Paul Assarsson

Born 1955

Head of Finance andAdministration

Employed since 1994


Number of Warrants: 12,000

Bertil Hagman

Born 1937 LL.M

President and CEO

Employed since 1992



Malcolm McDonald

Born 1947 MA M.Sc

Sales Director Europe

Employed since 1997

Number of shares: 0


Steve Dawson

Born 1962 Ph. D

Head of Technology

Employed since 1991

Number of shares: 250 A-shares


C. Douglas Brown Jr.

Born 1946

Sales Director Americas

Employed since 1997

Number of shares: 0



SINTERCAST SYSTEM 2000 IN THE FOUNDRY

WIREFEEDER SAM OCM

CORRECTION

LADLE PREP

POURINGSAMPLING & ANALYSIS

FURNACE TAPPING

The sample is obtained by

immersing the patented

Sampling Cup into the

liquid iron to fill the 200g

sample chamber.

Sampling requires

less than 10 seconds.

The necessary

additions of inoculant and

magnesium are prescribed

and automatically added in

cored-wire form to provide

an ideal CGI structure.

After wirefeeding, the ladle

is transported to the

pouring area for casting.

Final de-slagging is

not required.

Carbon equivalent,

modification and inoculation

results from each ladle are

presented as histogram run-

charts. The feedback

information is used to

optimise base treatment

addition amounts.

CORRECTION POURING FEEDBACKSAMPLING

SINTERCAST WORLDWIDE OPERATIONS

ISO9001CertifiedDet NorskeVeritas

Internet:www.sintercast.comE-mail:[email protected]

Parent Company

SinterCast AB (publ)Box 10203S-100 55 StockholmSwedenTelephone: +46 8 660 77 50Telefax: +46 8 661 79 79

Head Office

SinterCast Ltd.Regal House, 70 London RoadTwickenham, Middlesex, TW1 3QSUnited KingdomTelephone: +44 20 8891 8900Telefax: +44 20 8891 8990

R&D Centre

SinterCast Technologies ABKungsgatan 2S-641 30 KatrineholmSwedenTelephone: +46 150 79 440Telefax: +46 150 79 444

Sales Offices

SinterCast GmbHBahnstrasse 42-46D-61381 FriedrichsdorfGermanyTelephone: +49 6172 757 800Telefax: +49 6172 757 810

SinterCast Inc.1000 N Opdyke, Suite AAuburn Hills, MI 48326-2672USATelephone: +1 248 370 0310Telefax: +1 248 370 0370

SinterCast KKDai 2 Kazu Building, 2nd floorShimbashi 5 chome 31-6Minato-ku, Tokyo 105JapanTelephone: +81 3 3438 4435Telefax: +81 3 3438 4436

SinterCast AB (publ)Stockholm, Sweden

Parent Company

SinterCast Technologies ABKatrineholm, Sweden

R&D & Production

SinterCast Ltd.Twickenham, London, UKOperational Headquarters

SinterCast Inc.Auburn Hills, Detroit, MI, USA

Sales & Technical Service

SinterCast GmbHFriedrichsdorf, Frankfurt, Germany


SinterCast KKTokyo, Japan


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