SinterCast · 22 Accounting Principles 23 Accounting Notes ... • Global technical and marketing...

SinterCast2004Annual Report

2004Annual Report 2

Table of Contents4 CEO Message6 The Market Opportunity8 SinterCast – The Management9 SinterCast – Proven 10 SinterCast in Motorsport10 SinterCast Foundries, End-Users and Partners11 SinterCast – The Board12 Directors’ Report16 Share and Shareholders

18 Five Year Summary19 Profit and Loss Accounts19 Cashflow Analysis20 Balance Sheets21 Shareholders’ Equity22 Accounting Principles23 Accounting Notes30 Auditors’ Report31 Important Dates

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f SinterCast in Brief• Agreements with and/or ongoing supply of CGI cylinder blocks to 6 of the world’s top 7 automotive OEMs• SinterCast-CGI cylinder blocks in 9 production vehicles and 6 car brands• Revenue from series production improved by 167% compared to 2003• 11,000 Sampling Cups delivered during 2004, up 40% compared to 2003• Successful ramp-up of Ford-PSA Peugeot-Citroën 2.7 litre V6 cylinder block• Successful start of series production of Audi-Volkswagen 2.7 and 3.0 litre V6 cylinder blocks• Successful development and launch of state-of-the-art Toyota Racing Development (TRD-USA) V8 cylinder block• Successful start of series production of General Electric Transportation Systems locomotive cylinder head• New System 2000 installations at Grainger & Worrall, Hyundai, Motor Castings and Tupy-Mauá• Technology Agreements established with foundry groups encompassing 25 iron foundries worldwide• Process control systems installed at 14 foundries in 9 countries• Foundry customers account for over 40% of world production capacity of cast iron cylinder blocks and heads• Over 400,000 series production castings used in service• Over 110,000 prototype castings produced, including over 33,000 cylinder blocks• Prototype production at 66 foundries in 17 countries • CGI components delivered to 55 car, truck and engine OEMs, and 68 industry suppliers• 23 patents granted or pending in 114 national phase filings

Global Support of Customer Activities• Headquarters with sales activity and group management in London, England• Technical development, customer support, finance and administration concentrated in Katrineholm, Sweden• Technical support for North and South America located in Chicago, USA• Local representation by ABB in Japan and Turkey, Pantech Engineering in Australia and STPC in Korea• Technology Partnerships with ABB Process Industries, Cincinnati Lamb and Grainger & Worrall• Global technical and marketing alliance established with Ashland Casting Solutions

Core MarketSinterCast provides process control technology for the reliable high volume production of Compacted Graphite Iron (CGI). The primary application for SinterCast-CGI is in cylinder blocks and heads used in passenger vehicles, commercial vehicles and industrial power generation, particularly for diesel engines.

MissionSinterCast will focus on providing process control solutions that enable the world iron foundry industry to reliably control the high volume production of Compacted Graphite Iron (CGI). SinterCast will promote CGI within the foundry and end-user communities to increase the overall market opportunity for CGI. SinterCast will define the forefront of CGI development, production and application. This focus and these efforts will secure Sintercast's ultimate objective of increasing and sustaining the long-term value of the Company for its shareholders.

StrategySinterCast develops, produces and supplies on-line process control systems and engineering know-how for the reliable high volume production of Compacted Graphite Iron (CGI). SinterCast will ensure the successful development and series production of CGI by providing class-leading technology and technical support, and by establishing strategic partnerships for casting technology, component design, rapid prototyping and machining to support every aspect of every CGI program. SinterCast will grow and prosper by earning the respect of its customers.

Pages 12-31 represent an unofficial translation of the official Swedish Annual Report

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SinterCast i Sammanfattning• Produktionsavtal eller pågående leveranser av CGI motorblock till sex av världens sju största personvagnstillverkare.• SinterCast CGI motorblock finns i serieproduktion i 9 olika modeller hos 6 olika personbilstillverkare• Omsättning relaterad till serieproduktion ökade med 167% jämförd med 2003• 11 000 mätsonder levererade under 2004, uppgång med 40% jämfört med 2003• Framgångsrik serieproduktionsökning av motorblocket till Ford-PSA Peugeot-Citroën 2,7 liter V6 motor• Framgångsrik serieproduktionsstart av motorblock till Audi-Volkswagen 2.7 och 3.0 liters V6 dieselmotorer• Framgångsrik utveckling och introduktion av motorblock till Toyota Racing Developments (TRD-USA) ledande V8 motor• Framgångsrik serieproduktionsstart av cylinderhuvuden för General Electric Transportation Systems GEVO-12 lokomotivmotor• Nya System 2000 installationer hos Grainger & Worrall, Hyndai, Motor Castings och Tupy-Mauá• Teknologisupportavtalen med gjuterigrupper omfattar totalt 25 järngjuterier globalt• Processtyrningssystem installerade hos 14 gjuterier i 9 länder• Gjuteripartners står för cirka 40% av världens totala produktionskapacitet av motorblock och cylinderhuvuden i gjutjärn• Mer än 400.000 serieproducerade gjutenheter används i applikationer• Mer än 110.000 prototyptillverkade gjutenheter, inklusive 33 000 motorblock• Prototyptillverkning hos 66 gjuterier i 17 länder• CGI-komponenter levererade till 55 fordons- och motortillverkare samt 68 industrileverantörer• 23 patent godkända eller i ansökningsfas i 114 länder

Global Support av Kundaktiviteter• Huvudkontor med ledning och sälj- och marknadsfunktioner i London, England• Teknisk utveckling, kundsupport, ekonomi samt administration centraliserade till Katrineholm• Teknisk support för Nord- och Sydamerika i Chicago, USA• Lokal representation genom ABB i Japan och Turkiet, Pantech Engineering i Australien samt STPC i Korea• Teknologisamarbete med ABB Process Industries, Cincinnati Lamb and Grainger & Worrall• Globalt tekniskt- och marknadsföringssamarbete etablerat med Ashland Casting Solution

MarknadSinterCast tillhandahåller processstyrningssystem för tillförlitlig storskalig serieproduktion av kompaktgrafitjärn (CGI). Nyckel-applikationer för SinterCast CGI är motorblock och cylinderhuvuden för dieselmotorer för användning i person- och lastvagnar och kraftverksindustrin.

MålsättningSinterCast är fokuserat på att tillhandahålla processtyrningslösningar för tillförlitlig storskalig produktion av kompaktgrafitjärn (CGI) till världens gjuterier. SinterCast marknadsför CGI inom gjuteri- och slutanvändarindustrin för att förbättra möjligheterna för CGI applikationer i huvudsegmentet, person- och lastvagnar, men även inom kraftverksindustrin och övriga industrier. SinterCast kommer att vara ledande inom utveckling, produktion och tillämpning av CGI. Genom dessa fokuserade insatser säkerställs SinterCasts målsättning att öka och bevara det långsiktiga aktieägarvärdet.

StrategiSinterCast utvecklar, tillverkar och marknadsför on-line processtyrningssystem och tekniskt know-how för tillförlitlig volymproduktion av CGI. SinterCast säkerställer en framgångsrik utveckling och produktion av CGI genom att tillhandahålla förstklassig teknisk support samt genom att etablera strategiska partnerskap för gjuteriteknologi, komponentkonstruktion, effektiv prototyptillverkning och maskinbearbetning. Detta möjliggör för SinterCast att erbjuda komplett CGI-support för alla CGI projekt. Genom att vinna kundernas erkänsla kommer SinterCast att växa och utvecklas.

Innehållsförteckning4 VD-kommentar6 Marknadsmöjligheter8 SinterCast – Ledningen9 SinterCast – Bevisad teknologi10 SinterCast inom motorsport10 SinterCast gjuterier, slutkunder och partners11 SinterCast – Styrelsen12 Förvaltningsberättelse16 Aktien och aktieägarna

18 Femårsöversikt19 Resultaträkningar19 Kassaflödesanalyser20 Balansräkningar21 Eget kapital22 Redovisningsprinciper23 Noter30 Revisionsberättelse31 Datum

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Sidan 12-31 är en inofficiell översättning av den officiella svenska årsredovisningen

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CEO MessageSinterCast’s technology was proven during 2004. The high volume production of the Ford-PSA 2.7 litre V6 cylinder block successfully ramped up throughout the year and high volume production of the Audi 2.7 and 3.0 litre cylinder blocks began during August. By year-end the combined Audi and Ford-PSA production of SinterCast-CGI cylinder blocks surpassed the monthly rate of 100,000 engine equivalents per year. For SinterCast, the successful high volume production provided the opportunity to demonstrate and prove the accuracy, resolution and robustness of our process control technology. Throughout the year, our average final addition of magnesium to the liquid iron was less than 20 grams per tonne, a control-measure previously unheard of in the iron foundry industry.

Compacted Graphite Iron (CGI) was also proven during 2004. The series production at the Tupy foundry in Brazil was conducted on the standard production line with the same productivity as conventional grey cast iron. For our end-user OEM customers, the CGI cylinder blocks were successfully assembled into vehicles with no quality or customer warranty issues. Indeed, many of the program engineers and managers have stated that the CGI engine programs were among the most efficient and trouble-free launches that they have ever been involved in.

The successful ramp-up of the Ford-PSA series production was highlighted by the granting of two prestigious Henry Ford Technology Awards to the design and manufacturing teams. In addition, both SinterCast and Tupy were recognised with Ford’s Vehicle Engineering and Validation Award for their contributions to the development and production launch. Most importantly, the SinterCast-CGI engines have been positively received by the public and the media. During June 2004, the first full month of Jaguar S-type sales following the release of the 2.7 litre V6 engine, S-type sales increased by 27% compared to June 2003. More recently, during February 2005, the new Land Rover Discovery 3 with the SinterCast-CGI engine was awarded “4WD

of the Year” by Australia’s Overlander magazine and “4x4 of the Year” by the UK’s What Car? awards.

The positive progress of 2004 continued during January 2005 with the signing of a new high volume production agreement with Hyundai Motor Company. With this agreement, and the ongoing supply of SinterCast-CGI cylinder blocks to the General Motors and Toyota motorsport programs, SinterCast has established production agreements with and/or ongoing supply of SinterCast-CGI cylinder blocks to six of the world’s seven largest vehicle manufacturers. In parallel with this OEM penetration, SinterCast has established technology licence agreements with foundry groups that encompass twenty five iron foundries – in fourteen different countries – that account for over 40% of the world production capacity of cast iron cylinder blocks and heads. No other CGI process control technology could claim more than 5% of the market. This penetration of the foundry and OEM markets is SinterCast’s accomplishment, and this is the foundation that we will continue to build upon. For SinterCast, successful CGI series production references are the strongest sales messages that we can deliver, in order to increase the overall size of the CGI market and to secure the future production orders together with our foundry partners.

SinterCast’s initial market is the production of CGI cylinder blocks and heads for diesel engines. Therefore, as diesel penetration grows, SinterCast’s end-user market continues to grow. Western European diesel penetration increased by approximately 5% again during 2004 to reach 48.3% of all new vehicle registrations and diesel sales are certain to exceed petrol engine sales for the first time during 2005. Globally, diesel penetration grew from 14% in 1999 to 18% in 2004 and is forecast to increase to 23% by 2010, with most of the growth coming from beyond Europe. Indeed, year-on-year diesel growth in the United States is forecast at 6% for 2010 and beyond.

We continue to view the CGI market opportunity in terms of “The Five Waves”. The first wave – V-Diesels in Europe – has evolved positively with ongoing series production for Audi-Volkswagen, Ford and PSA Peugeot-Citroën. By the end of 2004, these SinterCast-CGI V-engines could already be purchased in nine different vehicles with future planning for seventeen different vehicles. Although no public announcements have yet been made in the second wave – Commercial Vehicles – the two newest System 2000 installation agreements have been established for the commercial vehicle foundries of Tupy and Hyundai. These decisions serve as precursors to the future production commitments in the commercial vehicle sector. Pre-production activity in the third wave – In-line Diesels in Europe – increased during 2004 and SinterCast is currently supporting the production planning of its foundry partners and their OEM customers in this high volume sector. Initially, we expect CGI to be applied to a portion of the production of an engine family to provide a high performance variant. This portion will increase as the production experience, legislation and customer demand evolves. SinterCast’s optimism regarding the fourth wave – Diesels Beyond Europe – continues to grow. The first high volume commitment in this wave was successfully realised with the Hyundai-Kia CGI V6 announcement on 24 January 2005, and the continued intensification of the diesel debate and diesel development in the United States indicates an important growth opportunity for CGI. The Chinese government is also reviewing its policy for petrol, diesel and hybrid vehicles with a

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view toward preserving its strategic oil reserves, and this could potentially provide a further opportunity for CGI, especially with the adoption of Euro-style emissions legislation and the market presence of European OEMs in several industry-leading joint venture partnerships. Finally, successful series production references in the early waves will continue to increase the confidence in CGI and contribute toward the realisation of the fifth wave – Petrol Engines – where we are currently supporting upgrade evaluation programs.

Beyond the Five Waves, SinterCast is involved in series production activities in the industrial power generation sector for Daros Piston Rings, General Electric and Rolls-Royce and within the automotive sector for flywheels and clutch pressure plates for Aston Martin. We are also involved in development programs for passenger vehicle diesel engine cylinder heads – previously presented as a potential sixth wave to meet future demands for peak combustion pressures and emissions legislation – with first prototypes and engine tests planned for 2005.

With the progress of 2004, SinterCast has ongoing high volume series production in the first wave, a high volume production commitment in the fourth wave, and active development programs in the second, third, fifth and potential sixth waves. These activities, combined with new production commitments, increased series production and new System 2000 installations provide the basis for our planned breakeven during 2006, and our future growth.

As the CGI production planning of the world’s car and truck OEMs intensifies, the existing CGI foundries will respond by competing for the increased business and new foundries will enter the CGI arena. The foundries in this second stage may include those that were strategically waiting for the market to develop, those that require larger investment to become CGI capable, or the captive foundries that are owned by the OEMs and are awaiting the overall CGI production and sourcing strategies of the parent OEM. Foundry growth opportunities will also arise in new geographical regions such as Eastern Europe and Asia, either to supply the domestic demand or for export. For these reasons, new foundries will continue to enter the CGI arena and SinterCast will apply its proven technology, market

leadership position, engineering experience and respected name to secure additional foundry partnerships. Our business model, based on selling or leasing the hardware, leasing the software, selling the sampling consumables and applying a production fee per tonne of shipped castings, is accepted in the industry and forms the basis of future foundry agreements.

While 2004 provided positive production references and market growth, it also served to underline the business risks. Based on production forecasts provided by our foundry and OEM partners, the current and planned production programs are sufficient to secure our breakeven. The risk is therefore not related to the market opportunity but rather to the start dates and ramp-up rates of the series production programs. Overall, the CGI market will grow, but it is important for SinterCast that the production planning of the OEMs is not delayed. Beyond the ramp-up considerations, we also monitor foreign exchange rates and particularly the value of the US dollar. At present, the weak dollar affects revenues and therefore the breakeven volume/timing, while the strong Swedish Krona provides a positive effect on our liquidity.

Today, SinterCast stands on a proven technology supported by a respected, motivated and experienced team of employees and sales representatives. Our foundry customers are confident in our technology and service, they respect our CGI know-how and our contacts with the OEM community, and they believe in CGI as an important growth opportunity. Within the automotive industry, petrol and diesel engines will continue to compete to provide the best performance and fuel consumption together with the cleanest exhaust at the lowest price. This competition will increase the demands on engine materials and thus increase the market opportunity for CGI. While hybrids will also grow in popularity and fuel cells will eventually enter the market, industry forecasts indicate that, for the next 15-25 years, the market opportunity for SinterCast will remain large, and growing.

Dr Steve DawsonPresident & CEO

The Land Rover Discovery 3, shown at the 6 October 2004 SinterCast Shareholder Event in Stockholm, together with the 2.7 litre V6 SinterCast-CGI cylinder block, has been awarded ‘4WD of the Year’ by Australia’s Overlander magazine and ‘4x4 of the Year’ by the UK’s What Car? Awards.

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The Market OpportunityWith its focus on the manufacture of diesel engine cylinder blocks and heads, SinterCast’s market opportunity is primarily defined by the growth of the diesel engine, the development of emissions legislation – and thus the demand for CGI in comparison to conventional materials – and the potential introduction of alternative powertrain technologies.

Diesel PenetrationThe driveability, refinement and 30% improved fuel economy of diesels in comparison to petrol engines continues to drive diesel growth throughout Europe. During 2004, 48.3% of all new vehicle registrations in Western Europe were for diesel vehicles, providing a 5% growth over 2003, and effectively doubling the diesel penetration since 1998. While continental Europe remains the home of diesel development and market penetration, growth opportunities also exist in other countries. Korea, for example, has adopted pro-diesel Euro-style emissions legislation that will be phased in two years after Europe, and Korean diesel penetration already exceeds 30%. Other countries, including Sweden, are also contemplating new emissions guidelines that will favour diesel growth. While these actions represent a positive trend for CGI, the largest potential for increased CGI diesel growth depends on the future paths to be chosen by China and the United States.

Over the next ten years, Chinese automobile production is forecast to increase to 15 million vehicles per year and thus rival the European and US market volumes. The Chinese government is currently reviewing policy to establish alternatives to petrol engines in order to preserve its strategic oil reserves. The potential routes include diesels and hybrids, with diesels having near-term advantages because of the availability of existing technology. Likewise, the debate regarding diesel engines in the United States continues to intensify. Diesels are favoured by the 60% market share of pick-ups and SUVs, driving modes and distances, increased fuel prices, concerns over foreign oil dependence and the introduction of low-sulphur fuels during 2006. The main challenge to increased diesel penetration is the legislated emissions limit for nitrogen oxides (NOx) which are set to approximately one-half of the European NOx levels until at least 2010. Nonetheless, several industry studies predict significant diesel growth from the current 2% penetration, and Ricardo Consulting Engineers predicts a 6% year-on-year diesel growth in the United States beyond 2010, slightly higher than the growth rate witnessed in Europe since 1998. These predictions, together with the indications that the global diesel penetration will increase from 18% in 2004 to 23% by 2010 provide increased market opportunities for CGI.

Published predictions of future US diesel penetrationSource Penetration Year

JD Power-LMC 9% 2009

Auto Technology Research 12% 2009

International Truck & Engine 25% 2010

Bosch Automotive 20% 2014

British Petroleum 18% 2015

JD Power-LMC 16% 2015

US Environmental Protection Agency (EPA) 40% 2020

Emissions LegislationThe challenge of emissions legislation is the trade-off between carbon monoxide (CO), hydrocarbons and particulates, which are all decreased as combustion pressures and temperatures increase, and the formation of NOx, which increases as the combustion temperature is increased. This forces engine manufacturers to select one of two primary technology paths:

1. Increase the combustion pressure and temperature to reduce CO, hydrocarbons and particulates and incorporate a deNOx catalyst (Selective Catalytic Reduction – SCR) in the exhaust stream.

2. Retard the combustion event, for example by Exhaust Gas Recirculation (EGR), to minimise NOx and incorporate a particulate filter in the exhaust stream.

The advantage of the SCR route is that the higher combustion pressures and temperatures provide superior pulling power and improved fuel economy (up to 5% better than equivalent Euro 3 engines or Euro 4 engines using EGR) and the potential to eliminate the particulate filter. The disadvantage is that the SCR system requires on-board supplies of a liquid urea solution known as AdBlue that is injected into the exhaust stream to convert the NOx emissions into harmless nitrogen and water. The SCR system costs approximately € 6,000 per engine and the additional running expense for AdBlue consumption is approximately 4% of fuel consumption for Euro 4 (estimated to 6% for Euro 5). The SCR path also requires an AdBlue distribution network, although most trucks will have a range of approximately 10,000 km between refuelling.

The primary advantage of the EGR route is that it negates the need for the AdBlue SCR technology and distribution infrastructure. However, the EGR engines have up to 5% higher fuel consumption, lower pulling power, and also require a particulate filter. The added cost for the EGR systems is approximately € 3,000, so fleet owners can calculate their payback vs the SCR route as a function of fuel economy and mileage.

At present, approximately 80% of the European heavy-duty engine manufacturers have selected the SCR route to satisfy Euro 4 while the majority of North American manufacturers have opted for the EGR route to satisfy US Tier II legislation. It is generally agreed that both SCR and EGR will be universally required for 2009 emissions, however, in the near-term, the SCR-EGR divide explains why the European heavy-duty engine manufacturers will lead the introduction of CGI: the deNox catalyst allows for higher combustion pressures – and engine performance – that require the durability of CGI.

Alternative MaterialsWithin SinterCast’s core diesel sector, CGI competes with grey iron and aluminium for passenger vehicle cylinder blocks and with grey iron for commercial vehicle cylinder blocks and heads. The primary advantage of CGI is increased strength and stiffness which provides opportunities for weight reduction and power-up, together with improved durability and noise reduction. The primary advantage of grey iron and aluminium is that they are ‘known’ and OEMs have existing manufacturing facilities and competence for these materials. Nonetheless, as the demand for engine performance continues to increase, the advantages of CGI will continue to grow.

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Some grey iron foundries, particularly those that are not well-suited to high volume CGI production, continue to advocate ‘higher-strength’ or ‘alloyed’ grey iron. In comparison to conventional grey iron (GJL 25), the alloyed grey iron (GJL 27+ or GJL 30) only provides 10-20% higher strength, 10% higher stiffness and 5-15% increase in fatigue life. In parallel with the modest property increases, the addition of the alloys to grey iron decreases the heat transfer capability, reduces the machinability and impairs the castability to almost the same level as CGI. If the OEMs are willing to incur these reductions, they should directly specify CGI and obtain the full benefits of at least 75% higher strength, 45% higher stiffness and 100% higher fatigue life. While engine designers were forced to specify alloyed grey iron in the late-1990’s, before the founding and machining of CGI was proven, alloyed grey iron is no longer the correct decision for modern engine components.

The primary advantage of aluminium is its density (2.5 times less than that of cast iron), which means that an aluminium cylinder block will weigh less than a CGI cylinder block. However, due to the higher strength of CGI, a CGI cylinder block will be smaller and shorter thus allowing the cylinder heads, crankshaft, bedplate and other components to also be smaller – and lighter. The net result is that a fully assembled CGI engine can have the same total weight as an aluminium engine, as was proven by the Ford-PSA 2.7 litre V6 engine. The CGI engine will also be smaller, provide higher specific performance (kW/litre), lower oil consumption, more potential for future power-up, quieter engine operation and more recyclability, all at a lower total cost.

One example of the design limitations of aluminium diesel engines is provided by the Volkswagen 5.0 litre V10 cylinder block. To compensate for the low strength of the aluminium,

an iron base is required to hold the crankshaft and carry the mechanical loads. As shown in the figure, the cylinder head bolts, which are normally anchored directly in the cylinder block, extend through to the iron base to transfer the combustion forces into the iron. In comparison to the Ford-PSA 2.7 litre V6, the Volkswagen V10 provides relatively low specific performance of 47 kW/litre (57 kW/litre) and specific torque of 150 Nm/litre (163 Nm/litre). The CGI cylinder block also has a more simple construction, and a lower cost.

Alternative Powertrain TechnologiesWith SinterCast’s strong links to the diesel engine, the potential increase in alternative technologies such as Homogeneous-Charge Compression-Ignition (HCCI), hybrids and fuel cells can also influence the CGI market opportunity.

The HCCI concept is based on an optimal mixture of fuel and air throughout the cylinder so that the combustion event occurs simultaneously at hundreds of different locations, rather than at a single point. The distributed combustion results in complete burning of the air-fuel mixture at relatively low temperature, thereby providing diesel-like fuel economy together with low CO, particulate and NOx emissions, potentially without the need for deNOx catalysts or particulate filters. With regard to materials, the spontaneous combustion causes high peak pressure loads on the engine, and relatively high noise, particularly at full load. CGI can contribute to both of these issues and therefore, HCCI provides a future growth opportunity for CGI, once the electronic combustion control issues are resolved.

Hybrid vehicles combine internal combustion engines with electric motors and battery packs. The electric motor supports the internal combustion engine during periods of high load, such as acceleration or uphill driving, acts as an engine stop-start system during traffic stops, and recharges the battery pack. The electric motor can also be used to recover energy during braking to recharge the battery pack. The hybrid concept is most attractive in heavily congested traffic where the stop-start capability provides up to 50% improved fuel economy. However, during normal driving cycles the fuel economy is only 20-30% better than petrol engines, and thus slightly less than the diesel engine. The significant benefits in congested traffic explains why hybrid technology is currently most popular in Japan and other metropolitan centres.

The main challenges for hybrid engines are cost and packaging due to the need to manufacture and carry two engines – and a battery pack. Hybrid vehicles currently cost approximately 30% more than internal combustion vehicles of equal performance, and this cost premium cannot be offset by fuel savings over the normal life of the vehicle. Current forecasts indicate that hybrid penetration in Europe will be less than 500,000 units in 2009, or approximately 3% of the total market. Hybrids will therefore not affect SinterCast’s market development. Furthermore, with the

Constituent Limits for European, US and Japanese Emissions Legislation

Euro 3 2001-02

Euro 4 2005-06

Japan 2005

USA Tier II* 2007

Euro 5** 2008-10

California*** ULEV 2004

Particulates 0.05 0.025 0.013 0.006 0.003 0.006Nitrogen Oxides (NOx) 0.50 0.25 0.14 0.045 0.08 0.03Carbon Monoxide (CO) 0.64 0.50 0.63 2.60 0.50 0.63Hydrocarbons 0.06 0.05 0.03 0.06 0.05 0.025

* Representative of Tier II bin 5 ** Euro 5 represents proposed values *** ULEV: Ultra Low Emissions Vehicles

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Tie Rod

Aluminium Cylinder Head

Bedding of Balancer Shaft

Iron Lower End Bracket

Iron Upper End Bracket

Aluminium Cylinder Block

The Volkswagen 5.0 litre V10 engine has a aluminium cylinder block, but relies on an iron bottom-end to seat the crankshaft and carry the mechanical loads.

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Steve Dawson – President & CEOLondon, United KingdomBorn 1962, PhDNationality: CanadianEmployed since 1991No. of shares*: 25,000

demand for the internal combustion component to be as small and efficient as possible, there is an opportunity for diesels and CGI. Indeed, the Mercury Meta One SUV hybrid concept introduced by Ford at the North American International Auto Show in January 2005 was based on the SinterCast-CGI 2.7 litre V6 engine.

Fuel cells have received considerable attention over the past five years and several demonstration vehicles have been presented to the market. Fuel cell vehicles are effectively electric vehicles where the electricity is generated by a chemical reaction rather than an electric motor. Within the fuel cell, hydrogen gas is pushed against one side of a membrane while air is pushed against the other side. As the pressure increases, more hydrogen atoms pass through the membrane to react with the oxygen in the air to produce electricity and water, the only two by-products. While proponents correctly note that

hydrogen is the most abundant element in the universe, the application still requires considerable technical, logistical and economical development. The current state-of-the-art requires hydrogen refuelling every 150 km and, due to the need to store liquid hydrogen at -253ºC, refuelling requires approximately 30 minutes. Further, while the manufacture of hydrogen is relatively simple, the distribution infrastructure will be difficult and costly, with an anticipated cost of approximately € 350 billion to equip European fuelling stations. The current operating cost of a fuel cell vehicle is approximately € 500 per kilowatt while that of an internal combustion engine is € 25 per kilowatt. Costs are thus the primary obstacle and the industry targets are currently set at € 45 per kilowatt by 2010 and € 30 per kilowatt by 2015. These considerations indicate that, while fuel cell vehicles may play a significant role in the long-term future of the auto industry, they are at least 15 years in the future and do not affect SinterCast’s near-term market opportunity.

Daphner Uhmeier – Finance DirectorRönninge, SwedenBorn 1962, BSc Nationality: SwedishEmployed since 2004No. of shares*: 1,000

Steve Wallace – Operations DirectorKatrineholm, SwedenBorn 1967Nationality: BritishEmployed since 2003No. of shares*: 1,000

The SinterCast Management

* Note: As of 15 April 2005

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A Proven ProductIntroduced on 6 May 1999, the Audi V8 TDI engine provided the first series production reference for SinterCast-CGI. Since then, over 40,000 successful Audi A8 vehicles have provided the confidence for Audi to extend CGI production to its high volume 2.7 and 3.0 litre V6 engines. Together with the high volume Ford-PSA Peugeot-Citroën 2.7 litre V6 engine, SinterCast-CGI cylinder blocks are now available in nine different vehicles and six different car brands.

Following the new high volume production agreement with Hyundai Motor Company, and the ongoing motorsport activities with General Motors and Toyota, SinterCast has agreements with and/or ongoing supply of CGI cylinder blocks to six of the world’s top seven automotive OEMs.

A Proven TechnologyThe SinterCast System 2000 has been developed and continuously improved to ensure measurement accuracy, production consistency and up-time robustness. For the Operator, the System 2000 provides a user-friendly platform to control the production process. For the Supervisor, the System 2000 provides fully configurable hardware and software to customise the foundry production to the requirements of each CGI casting.

SinterCast’s automated two-step measure-and-control production strategy eliminates process variation, precludes operator error, and delivers consistency to the moulding line. The proven process control strategies are available for ladle production and for pressurised pouring furnaces. The modular System 2000 hardware and software can be configured to suit the process flow and layout of any foundry.

Through successful series production programs – plus prototype production of hundreds of different CGI castings at 66 foundries in 17 countries around the world – the SinterCast System 2000 has established Compacted Graphite Iron as a viable high volume production material.

The remodelled System 2000

A Proven MaterialThe ramp-up of high volume series production has increased the awareness of Compacted Graphite Iron throughout the automotive industry. Design engineers understand the design, performance and durability benefits provided by more than 75% increase in strength, 45% increase in stiffness and 100% increase in fatigue life. More importantly, engineering managers understand that every aspect of high volume CGI is production-ready: foundry, machining, economics.

The increased application of CGI has also been recognised by several national and international standardisation bodies. Germany (VDG) and the United States (ASTM) have published new CGI standards, as has the international Society of Automotive Engineers (SAE). The International Standards Organisation (ISO) is expected to issue its CGI standard during 2006.

Compacted Graphite Iron

Powerful, durable, efficient, refined

SinterC

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SinterCast in Motorsport

MAN B&W Diesel A/S

AP Racing – Superbike brake discs

Adam Opel – German Touring Car (DTM) Championship

Hyundai – World Rally Championship

SinterCast Foundries, End-Users and Partners

Sin

terC

ast

in M

otor

spor

t

Cifunsa VDP Fonderia

Halberg Guss (2 Foundries)

Halberg – Leipzig

Caterpillar (2 Foundries)

Tupy – Joinville

Tupy – MauáSKF – Mekan

Daros Piston Rings

ICC – Indianapolis Casting Corporation

Teksid – Crescentino

Teksid – Monclova

Teksid-Poitou

Teksid do Brazil

V. Luzuriaga

Motor Castings

Grainger & Worrall

Hyundai – Jeonju

The Teksid Group (9 Foundries)

International Truck & Engine (2 Foundries)

Audi

Ford Motor Company

Volkswagen

Halberg – Brebach

Toyota GroupGeneral Motors

Hyundai Motor Corporation

Jaguar

Land RoverPeugeot

Citroën

Rolls-Royce Power Engineering

General Electric Transportation Systems

Aston Martin

Toyota Racing Development (TRD-USA) NASCAR Craftsman Series

Sin

terC

ast

Foun

drie

s, E

nd-U

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and

Par

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s

ABB Process Industries

Ashland Casting Solutions

Cincinnati Lamb

Grainger & Worrall

General Motors – NASCAR Nextel Cup


SinterC

ast – The Board

Bertil HagmanExecutive Chairman, from 1 January 2005, ChairmanLondon, United KingdomBorn 1937, LLMNationality: SwedishFormer President and CEO of SinterCastFormer President and CEO of the Tetra Pak GroupFormer Consul General for Sweden in Lausanne, SwitzerlandOther Board duties: Euro Parking Collection plc, Arctic Island Ltd, Ecolean AB,Partner of Aldano and MVIMember of the Board since 1992No. of shares*: 166,700

Robert DoverProfessor Robert DoverBorn 1945, FR Eng, FIED, FRSANationality: BritishProfessor of Industrial Manufacturing, Warwick UniversityFormer Chairman and CEO of Jaguar and Land RoverFormer Chairman and CEO Aston Martin Other Board duties: British Motor Industry Heritage Trust (Chairman), Jaguar Daimler Heritage Trust, Cambridge University IMRC Advisory Board (Chairman) Member of the Board since 2004 No. of shares*: 9,000

Andrea FesslerHong Kong, ChinaBorn 1968, BA, JDNationality: CanadianMain duties: Asia Pacific Counsel, Cabot CorporationMember of the Board since 2003No. of shares*: 5,000

Aage FigenschouOslo, NorwayBorn 1948, LLMNationality: NorwegianMain duties: Lawyer, Aage Figenschou ASOther Board duties: Astrup Fearnley AS, B Skaugen AS, Simmons & Co InternationalInc, Stiftelsen AksjeNorge and Civita ASMember of the Board since 1998No. of shares*: 10,000

Ulla-Britt Fräjdin-HellqvistVice ChairmanStockholm, SwedenBorn 1954, MSc Eng, PhNationality: SwedishMain duties: Senior Vice President, Confederation of Swedish EnterpriseOther Board duties: Castellum AB, Finnveden AB, Ruter DamMember of the Board since 2002No. of shares*: 1,000



Directors’ ReportThe Board of Directors and the Managing Director of SinterCast AB (publ), corporate identity number 556233-6494, hereby submit the Annual Report and consolidated financial statements for 2004. SinterCast AB is the parent company of the SinterCast Group, with its registred office located in Stockholm, Sweden.

Series ProductionThe revenues from Compacted Graphite Iron (CGI) series production during 2004 increased by 167% compared to 2003. By year-end, SinterCast-CGI cylinder blocks were used in series production vehicles manufactured by the Audi-Volkswagen Group, Ford Motor Company and PSA Peugeot-Citroën and in motorsport applications for General Motors and Toyota Group racing cars. Together with the technology agreement established with the Hyundai-Kia Group during January 2005, SinterCast currently has technology agreements and/or ongoing supply of CGI cylinder blocks with six of the world’s seven largest vehicle manufacturers. SinterCast’s foundry agreements encompass a total of twenty-five iron foundries worldwide that produce over 40% of the current world production capacity for cast iron cylinder blocks and heads.

During the period, Audi began series production of SinterCast-CGI cylinder blocks for its new 2.7 and 3.0 litre V6 diesel engines at the Tupy-Joinville foundry in Brazil. The foundry production began during August 2004, with engine manufacturing and assembly at Audi’s Gyor, Hungary engine facility beginning during December. The high volume 2.7 and 3.0 litre engines will be used in the Audi A4, A6 and A8 vehicles and in Volkswagen vehicles. In addition to the new Audi production, the Tupy production of the Ford-PSA 2.7 litre V6 cylinder block continued to ramp-up. By year-end, foundry production surpassed the monthly rate of 100,000 engine equivalents per year with cylinder blocks being produced for Jaguar, Land Rover and Peugeot vehicles. The first Citroën vehicle with the SinterCast-CGI V6 engine, the C6, was launched at the International Motor Show in Geneva, 3-13 March 2005. The ramp-up will continue during 2005 as additional vehicles in the Ford and PSA Peugeot-Citroën families come on-stream.

Series production of the Audi 4.0 litre V8 diesel engine cylinder block continues at the Halberg Guss foundry in Germany. Series production continued throughout the period for engine components at the Caterpillar foundry in the USA, large piston rings at the Daros foundry in Sweden, large cylinder heads and engine frames for Rolls-Royce Power Engineering at the VDP foundry in Italy, and clutch components for Aston Martin at the SKF-Mekan foundry in Sweden. The SinterCast-CGI cylinder head production for the General Electric Transportation Systems GEVO-12 locomotive engines at the Motor Castings foundry in the USA continues its successful ramp-up, and remains on schedule to reach 35,000 engine equivalents during early-2005.

Market DevelopmentHyundai Motor Company entered into a long-term Agreement with SinterCast during January 2005 for high volume series production of SinterCast-CGI engine components, SinterCast’s first high volume contract in Asia. The SinterCast System 2000 will be installed at the Hyundai Jeonju manufacturing facility, Hyundai’s main facility for commercial vehicle production. The first CGI component, a passenger vehicle V6 cylinder block, will begin pre-production during 2005 and series production during early-2006.

Following four years of successful product development and series production, the Tupy foundry group ordered a second SinterCast System 2000 to be installed at its foundry for commercial vehicle engine component production in Mauá, Sao Paulo state. This commitment by Tupy demonstrates both their positive experience with the SinterCast technology and the expected commencement of CGI series production in the commercial vehicle sector.

Toyota Racing Development (TRD-USA) announced the use of SinterCast-CGI for its new state-of-the-art V8 NASCAR cylinder block during the Performance Racing Industry trade show in Indianapolis on 9 December 2004. The SinterCast-CGI cylinder block, produced at the Tupy-Joinville foundry, sets new technical standards for CGI in terms of minimum wall thickness, mould complexity, power-to-weight ratio and specific performance (83.5 kW/litre). This high profile CGI application

The Audi 3.0 litre V6 engine with a SinterCast-CGI cylinder block produced at the Tupy foundry in Brazil.

The Toyota Racing Development (TRD-USA) 5.8 litre V8 NASCAR cylinder block produced in SinterCast-CGI at the Tupy foundry in Brazil.

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also provides a first production reference for SinterCast within the Toyota Group.

Market Penetration and Competition SinterCast System 2000 process control systems are currently installed at the Caterpillar, Cifunsa, ICC-Indianapolis Casting Corporation, Motor Castings, Teksid do Brazil, and Tupy-Joinville foundries in the Americas, and at the Daros Piston Rings, Grainger & Worrall, Halberg Guss, SKF-Mekan, V. Luzuriaga and VDP foundries in Europe. The technology agreement with the international Teksid group extends to all nine Teksid iron foundries worldwide. The Hyundai and Tupy-Mauá installations will be effected during early-2005. SinterCast’s technology agreements encompass a total of twenty-five iron foundries worldwide and account for over 40% of the total world production capacity for cast iron cylinder blocks and cylinder heads. SinterCast’s foundry customers also produce a variety of other automotive and non-automotive CGI components ranging from 8 kg to 17 tonnes. These production activities beyond the core automotive cylinder block and head markets provide additional growth opportunities.

SinterCast continues to promote CGI product applications throughout the industry. All initiatives that stimulate the interest and confidence in CGI have the positive effect of expanding the overall CGI market potential. At present, eight of the world’s top ten car companies and eight of the top ten heavy duty engine/vehicle manufacturers have active CGI engine programs. Based on its leading technology, know-how and engineering service, SinterCast will establish new foundry installations to continue to increase its share of the world CGI cylinder block and head production capacity.

Patents and R&DSinterCast’s proprietary technology is fully protected by a total of twenty-three patents. The current SinterCast technology is primarily addressed by the ten newest patents filed since 1997, thus providing long-term security of the technology and the market position. In total, SinterCast has 114 individual national phase patents granted or pending worldwide. These patents address SinterCast’s metallurgical technology (11), sampling

technique and hardware (6), product applications (3) and CGI machining (3).

SinterCast’s Research and Development (R&D) activities are based at the Technical Centre in Katrineholm, Sweden. While the technical focus has evolved from R&D toward series production and customer support, research activities continue toward the continuous improvement of the accuracy and reliability of the sampling consumables and the expansion of the System 2000 user-friendliness and functionality.

OrganisationThe Group management and sales activities are based at the headquarter office in London. Over the past year, the Technical Centre, based in Katrineholm Sweden, has assumed increased responsibility for the technical and commercial support of existing foundry customers, in addition to its underlying responsibilities for product development, production and quality control. The finance and administration function was also transferred from London to Katrineholm during 2004. Local support of customer activities in North and South America is based at SinterCast Inc., in Chicago, with key technical support provided by the Technical Centre in Katrineholm. The SinterCast employees comprise a technology-oriented and technology-driven Team that has the knowledge, competence, experience and motivation to support all aspects of CGI product development and series production.

To expand its market reach and provide local contact bases, SinterCast has established representation agreements with ABB Elektrik Sanayi AS in Turkey, ABB KK in Japan, Pantech Engineering Pty in Australia and with the Swedish Trade Promotion Center in Korea. These representation agreements provide a familiar and respected local presence for the SinterCast technology. SinterCast has also established strategic technology partnerships with ABB Process Industries for foundry automation, Ashland Casting Solutions for moulding technology, Cincinnati Lamb for high volume machining and Grainger & Worrall for rapid prototyping.

Operating Result, Investments and Accounting PrinciplesThe Group turnover for January-December 2004 amounted to SEK 9.2 million (SEK 6.9 million for the previous year). The

The Ford-PSA 2.7 litre V6 engine with a SinterCast-CGI cylinder block produced at the Tupy foundry in Brazil.

The Audi V8 TDI engine with a SinterCast-CGI cylinder block produced at the Halberg Guss foundry in Germany.

Directors’ R

eport


turnover mainly relates to income from production, installations and engineering services. Fees for systems that have been installed under lease agreements have been accrued over the duration of the contract period. During the period, approximately 11,000 SinterCast Sampling Cups were delivered to customers (7,900). The result for the Group after calculated tax for January-December 2004 amounted to SEK -18.9 million, SEK -3.5 per share (SEK -20.0 million, SEK -4.0 per share). Other operating income and other operating expenses related to sub-letting of office space in SinterCast Ltd. Investments by the Group during the period amounted to SEK 1.3 million (SEK 2.5 million) including capitalisation of leased equipment delivered to customers. The accounting principles have not been changed during the period.

During 2004, SinterCast investigated and planned for the implementation of the new IFRS accounting standards that take effect as of 2005. Based on the initial review, the implementation of the new IFRS standards will have only limited effects on the presentation of the SinterCast accounts, with the possible exception of the revaluation of the ITP pension plan, if that information is made available by the pension provider, although this is not expected to have any significant effect on the SinterCast result. The initial review of the IFRS standards also indicates that there will be no changes to the starting balance of 1 January 2004 or the result for 2004. The rules issued by the International Accounting Standards Board (IASB) regarding 2005 and onwards may still be subject to change, and these changes may influence this initial assessment.

Foreign Exchange Exposure and Financial RiskThe majority of SinterCast’s revenues, and approximately half of its expenses, are realised in currencies other than SEK. Because the financial statements of the SinterCast Group are presented in SEK, the amount received in foreign currencies translated in SEK will vary depending on the currency rate fluctuations.

The increased value of the Swedish currency during 2004 against USD and the decreased value of the Swedish currency during 2004 against has GBP had an overall neutral effect on the consolidated profit and loss accounts compared to 2003, amounting to SEK 0.0 million (SEK 0.8 million for 2003), divided

into SEK -0.2 million for the consolidated revenues (SEK -0.8 million) and SEK 0.2 million for the consolidated expenses (SEK 1.6 million).

Foreign exchange differences during the period relating to external and internal operational transactions are accounted for in the operating results. These differences amounted to SEK -0.2 million (SEK -0.5 million) whereof SEK -0.2 million (SEK -0.5 million) relates to external transactions and SEK 0.0 million (SEK 0.0 million) relates to internal transactions.

In order to minimise external currency fluctuations, the currency exchange rate for all revenues that substantially exceed local external currency expenses will be secured once the revenue level is known. The decision to secure the rate is based on published currency market forecasts. The foreign subsidiaries have been financed by internal loans and equity. Until now, SinterCast has not made any equity hedge and has not hedged any of the results of its foreign subsidiaries.

SinterCast invests cash surplus in short-term investment consisting of Government bonds and commercial paper with a typical maturity of one month. An interest rate increase of one percentage point corresponds to an interest risk of approximately SEK 9,000 for each SEK 10 million invested, with a linear decrease to zero at the maturity date.

The Board of Directors has established SinterCast’s finance policy to provide a framework for how different types of financial risk shall be managed and to define the risk exposure with which the business may be operated. The objective of this policy is to maintain a low risk profile. Historical and present credit losses are insignificant and SinterCast operates without credit insurance in most countires. SinterCast is currently not involved in any legal disputes.

Liquidity and FinancingThe Group’s liquidity on 31 December 2004 amounted to SEK 31.2 million (SEK 40.4 million). The liquidity is invested in instruments with high availability and creditworthiness and within the determined limits for each counter-party. As of 31 December 2004, the liquidity invested in short-term Swedish

The Audi 2.7 litre V6 engine with a SinterCast-CGI cylinder block produced at the Tupy foundry in Brazil.

The Aston Martin Vanquish V12 clutch assembly with a SinterCast-CGI flywheel and clutch pressure plate produced at the SKF-Mekan foundry in Sweden.

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treasury bonds amounted to SEK 19.9 million (SEK 37.8 million). The remaining liquidity, SEK 11.3 million (SEK 2.6 million), was held in bank deposits.

Based on the current market development and the ongoing discussions for further installations and series production commitments, and in consideration of a more uncertain near term industry outlook driven by oil and steel price increases and by exchange rate volatility, the Board remains confident that the company is fully financed and does not require further financing from the equity market prior to the achievement of positive cashflow, expected during 2006.

Employee Stock Option ProgramDuring December 2004, 146,000 stock options were exercised by the SinterCast employees and an additional 17,700 warrants were exercised by the company to cover social costs related to the program, resulting in a cash injection of SEK 9.5 million. At present, there is no employee stock option program. As a result of the exercise of the stock options, the total number of SinterCast shares has increased to 5,552,900.

Working Methods of the Board of DirectorsThe Board of Directors of SinterCast consists of five members elected at the Annual General Meeting. During 2004 the Board of Directors of SinterCast carried out seven minuted meetings. At these meetings, the Board of Directors dealt with standing issues and matters concerning long-term strategies and structural organisational changes. Individual Board members also assisted the management group in various strategic matters.

A Nomination Committee elected by the Annual General Meeting 2004, consists of Bertil Hagman, Chairman, Bo C E Ramfors and Lennart Svantesson. The task of the Nomination Committee is, after consultation with major shareholders, to nominate members for election or re-election to the Board, to make recommendations on remuneration to the Board of Directors, and to establish certain other proposals for consideration at the Annual General Meeting.

A Compensation Committee elected by the Board, consists of Bertil Hagman, Bo C E Ramfors and Aage Figenschou. The task of the Compensation Committee is to decide on the employment agreement for the Managing Director. In addition, Bo C E Ramfors and Aage Figenschou decide upon the conditions of the agreement with the Chairman. No other committees exist.

Proposed Allocation of Accumulated Deficit The Annual General Meeting will decide on the treatment of the loss of SinterCast AB shown below.

Accumulated deficit SEK -21,936,547 Net loss for the year SEK -22,703,005 Total accumulated deficit SEK -44,639,552

The Board of Directors and the Managing Director propose that the loss of SEK -22,703,005 for 2004 be carried forward. No dividend and no allocation to restricted reserve is possible.

The accumulated deficit of the Group amounts to SEK -33,390,190.

Rolls-Royce Power Engineering industrial power generation engine with SinterCast-CGI engine frame and/or cylinder heads produced at the VDP foundry in Italy.

General Electric Transportation Systems “GEVO” locomotive engine with SinterCast-CGI cylinder heads produced at the Motor Castings foundry in the United States.

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eport


Share and ShareholdersThe SinterCast share has been quoted on the Swedish stock exchange, Stockholmsbörsen, O-list since 26 April 1993.

As of 2 January 2004, Erik Penser Fondkommission, Stockholm, Sweden has served as liquidity provider for the SinterCast share in order to improve the liquidity and decrease the difference between quoted prices. Under the terms of the agreement, Erik Penser Fondkommission undertakes to, in accordance with the guidelines issued by Stockholmsbörsen, quote prices in at least four trading lots, on the buy side and sell side, for the SinterCast share. The Liquidity Provider guarantees that, for a minimum of 85% of the trading time at Stockholmsbörsen, the difference between the bid and ask prices for the SinterCast share will not be more than 4%.

The SinterCast share capital on 31 December 2004 was SEK 5.6 million at par value of SEK 1 per share, including the 163,700 warrants that were exercised during December 2004. A trading lot of shares amounts to 200 shares.

SinterCast had 3,292 shareholders on 31 December 2004. The ten largest, of which four were nominee shareholders, controlled 50.65% of the capital and votes (53.5% 31 December 2003).

As of 31 December 2004, the SinterCast Board, management and other employees controlled 4.0% of the capital and votes (3.6% 31 December 2003).

Major Shareholders per 31 December 2004

Name

Country

No. of shares

Deutsche Bank (nom. shareholder) GB 663,938 11.96%

Goldman Sachs International GB 560,624 10.10%

Merrill Lynch Investment Managers Ltd (nom. shareholder) GB 321,276 5.79%

Ahlström, Lars incl. affiliates SE 308,316 5.55%

Ingelman, Carl-Gustaf incl. affiliates SE 304,700 5.49%

Bertil Hagman incl. affiliates GB 166,700 3.00%

Credit Suisse First Boston, (Europe) (nom. shareholder) GB 164,586 2.96%

Erik Penser Fondkommission AB (nom. shareholder) SE 134,600 2.42%

Persson, Urban incl. affiliates SE 116,462 2.10%

Stenbeck, Ulf SE 72,000 1.30%

Subtotal 2,813,202 50.65%

Other shareholders approx. 3,275 2,739,698 49.35%

TOTAL 5,552,900 100.00%

Total foreign shareholders 121 2,411,702 43.43%

Total Swedish shareholders 3,171 3,141,198 56.57%

Distribution of Share Ownership 31 December 2004

No. of shares No. of shareholders % of shareholders No. of shares % of share capital

1-500 2,406 73.0% 379,680 6.8%

501-10,000 815 24.8% 1,432,290 25.8%

10,001-20,000 33 1.0% 419,308 7.6%

Above 20,000 38 1.2% 3,321,622 59.8%

Total 3,292 100.0% 5,552,900 100.0%

Outstanding Warrants 31 December 2004

Exercise period Number of warrants Exercise price

Outstanding warrants 31 December 2003 1 October 2004 - 31 December 2004 200,000 58

Converted to Interim Shares * December 2004 -163,700 58

Expired warrants, not converted ** December 2004 -36,300

Outstanding warrants 31 December 2004 0

* The Chairman of the Board, the Managing Director and other employees exercised the warrants.** Held by the company to cover social costs for the employees in relation to the warrant program.

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% of total share capital

and votes


0

50

100

150

200

250

300

350

400

450

500

25

30

35

40

45

50

55

60

65

70

75

____ SinterCast ____ Afv General Index I Turnover, Number of shares in thousands

2001 2002 2003 2004

Share priceNumber of shares

in thousands

SinterCast Share Price January 2001 – March 2005

Share Data 2004 2003 2002 2001 2000

Number of shares at the end of the period * 5,552,900 5,389,200 4,900,062 4,090,950 4,090,950

Average number of shares during the period 5,402,842 4,977,418 4,760,654 4,090,950 4,090 950

Average number of shares during the period adjusted for outstanding warrants ** 5,402,842 4,977,418 4,760,654 4,090,950 4,090,950

EPS*** average number of shares, SEK -3.5 -4.0 -3.4 -7.7 -9.1

EPS*** average number of shares adjusted for outstanding warrants, SEK -3.5 -4.0 -3.4 -7.7 -9.1

Adjusted equity per share****, SEK 8.3 11.0 9.9 5.8 13.2

Adjusted equity per share**** adjusted for outstanding warrants, SEK 8.3 11.0 9.9 5.8 13.2

Dividends, SEK - - - - -

Share price at the end of the period, SEK***** 64.0 57.5 40.0 55.0 56.0

Highest share price during the period, SEK***** 74.0 70.0 74.5 74.0 86.0

Lowest share price during the period, SEK***** 50.0 39.0 34.0 36.0 44.0

B-share price at the end of the period, SEK****** - - - 52.0 47.0

Highest B-share price during the period, SEK****** - - 51.0 73.0 84.0

Lowest B-share price during the period, SEK****** - - 43.0 36.0 39.5

Number of shareholders 3,292 3,545 3,667 3,757 3,973

Non-Swedish shareholdings, % of share capital 43 46 45 44 43

Swedish shareholdings, % of share capital 57 54 55 56 57

Market value (according to VPC) 342.2 309.9 196.0 223.0 223.2

* Whereof 163,700 shares not registered and 17,700 not paid before year end

** Calculated as per the recommendations of the Accounting Standards Council

*** Net result divided by the average number of shares

**** Adjusted shareholders’ equity divided by the average number of shares

***** A-share between 2000 and 2001

****** B-shares were converted to single class shares on 11 June 2002

Current financial information can be found at www.sintercast.com

Share and

Sharehold

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Five Year Summary SinterCast Group

AMOUNTS IN SEK MILLION 2004 2003 2002 2001 2000 1999

Profit and Loss accounts

Operating income 9.2 6.9 9.7 6.2 4.0 6,1

Operating loss -19.8 -20.8 -17.4 -32.3 -39.9 -43.7

Financial net 0.9 0.8 1.1 1.0 2.5 3.0

Tax 0.0 0.0 -0.1 - - -

Loss for the period -18.9 -20.0 -16.4 -31.3 -37.4 -40.7

Cash flow analysisCash flow from operations before change in working capital

-15.9 -16.2 -15.2 -28.2 -34.6 -37.3

Change in working capital -1.8 -2.8 -2.1 -0.1 0.7 -1.4

Cash flow from operations -17.7 -19.0 -17.3 -28.3 -33.9 -38.7

Cash flow from investments -1.5 -0.1 -5.1 -3.1 -2.2 -3.0

Cash flow from financial operations 10.0 26.9 40.5 -0.1 - -

Change in cash position -9.2 7.8 18.1 -31.5 -36.1 -41.7

Balance sheet

Assets

Fixed assets 11.4 13.5 16.5 13.4 12.4 12.7

Current assets 8.5 9.0 7.4 9.5 7.9 9.6

Cash and bank deposits 31.2 40.4 32.6 14.5 46.0 82.1

Total assets 51.1 62.9 56.5 37.4 66.3 104.4

Shareholders’ equity and liabilities

Restricted capital 78.1 603.5 588.4 562.4 546.4 546.1

Accumulated deficit -33.4 -548.8 -541.3 -538.6 -492.2 -454.6

Total shareholders’ equity 44.7 54.7 47.1 23.8 54.2 91.5

Long-term liabilities 1.4 1.0 1.0 1.0 1.0 1.5

Current liabilities 5.0 7.2 8.4 12.6 11.1 11.4

Total shareholders’ equity and liabilities 51.1 62.9 56.5 37.4 66.3 104.4

Key ratios

Solidity, % 87.5 87.0 83.4 63.6 81.7 87.7

Adjusted shareholders’ equity 44.7 54.7 47.1 23.8 54.2 91.5

Capital employed 44.7 54.7 47.1 23.8 54.2 91.5

Total assets 51.1 62.9 56.3 37.4 66.3 104.4

Return on shareholders’ equity, % -38.0 -39.3 -46.3 -80.3 -51.3 -36.4

Return on capital employed, % -37.2 -38.7 -44.9 -79.1 -51.3 -36.4

Return on total assets, % -32.5 -34.0 -26.1 -59.5 -43.7 -32.6

Debt-to-equity ratio 0.0 0.0 0.0 0.0 0.0 0.0

Dividends, SEK - - - - - -

Employees

Number of employees at the end of the period 13 15 16 17 27 26

Average number of employees 14 16 16 22 25 27

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Profit and Loss AccountsGROUP PARENT COMPANY

AMOUNTS IN SEK MILLION Note 2004 2003 2004 2003

Operating income 1 9.2 6.9 10.4 5.3

Cost of goods sold -6.6 -5.4 -6.6 -3.0

Gross result 2,6 1.5 3.8 2.3

Cost of sales and marketing 4, 5, 8, 9 -9.9 -11.2 -10.3 -10.3

Cost of administration 5, 7, 8, 9 -6.6 -6.8 -7.7 -7.7

Cost of research & development 2, 5, 8, 9 -5.5 -4.7 -8.4 -8.2

Other operating income 10 2.2 2.7 - -

Other operating costs 10 -2.6 -2.3 - -

Operating result 1 -19.8 -20.8 -22.6 -23.9

Interest income and similar items 11 1.3 1.1 1.0 3.8

Interest expenses and similar items 11 -0.4 -0.3 -1.1 -1.8

Financial net 0.9 0.8 -0.1 2.0

Result after financial income and expenses -18.9 -20.0 -22.7 -21.9

Tax 12 0.0 0.0 0.0 0.0

Result for the year -18.9 -20.0 -22.7 -21.9

Average number of shares, thousands 26 5,402.8 4,977.4 5.402.8 4,977.4

Average number of shares adjusted for outstanding warrants, thousands 26 5,402.8 4.977.4 5.402.8 4,977.4

Earnings per share, SEK 26 -3.5 -4.0 -4.2 -4.4

Earnings per share adjusted for outstanding warrants, SEK 26 -3.5 -4.0 -4.2 -4.4

No dividends where proposed as at 31 December 2004.

Cashflow AnalysisGROUP PARENT COMPANY

AMOUNTS IN SEK MILLION Note 2004 2003 2004 2003

Operations

Operating result -19.8 -20.8 -22.6 -23.9

Adjustments for items not included in the cash flow

Depreciation 13, 14 3.2 2.5 4.1 3.3

Exchange rate differences -0.2 1.2 - -

Conversion intercompany balances 9 9.1 7.0

Received interest income and similar items 11 1.3 1.2 1.0 1.2

Paid interest expenses and similar items 11 -0.4 -0.3 -1.1 -0.3

Tax 0.0 0.0 0.0 0.0

Total cash flow from operations before change in working capital -15.9 -16.2 -9.5 -12.7

Change in working capital

Stock 17 0.7 1.1 1.0 0.1

Operating receivables -0.7 -2.7 -1.4 2.2

Operating liabilities -1.8 -1.2 -0.5 0.1

Total change in working capital -1.8 -2.8 -0.9 2.4

Cash flow from operations -17.7 -19.0 -10.4 -10.3

Investments

Acquisition of intangible assets 1, 13 -0.6 -0.9 -0.6 -0.9

Acquisition of tangible assets 1, 14 -0.7 -1.6 0.0 -1.2

Disposal of tangible assets 0.0 0.0 - -

Increase/decrease in long-term receivables 16 -0.2 2.4 - 0.2

Capital injections 9 - - -3.7 -2.8

Group contribution 9 - - -5.4 -4.1

Cash flow from investments -1.5 -0.1 -9.7 -8.8

Financial operations

New share issue 10.0 26.9 10.0 26.9

Cash flow from financial operations 10.0 26.9 10.0 26.9

Change in cash position* -9.2 7.8 -10.1 7.8

Cash position – opening balance 40.4 32.6 39.5 31.7

Cash position – closing balance 31.2 40.4 29.4 39.5

*The cash position comprises short-term investments, valued at the lowest of the market and purchase value as of 31 December 2004, and cash at bank and in hand.The cash position represents only short-term available liquidity.

Profit and

Loss Accounts

Cashflow

Analysis


Balance SheetsGROUP PARENT COMPANY

AMOUNTS IN SEK MILLION Note 31 Dec 2004 31 Dec 2003 31 Dec 2004 31 Dec 2003

ASSETS

Fixed assets

Intangible assets 13

Capitalised costs for patent developments 7.3 8.1 7.3 8.1

Capitalised developments 1.4 2.2 1.4 2.2

Purchased production agreements - - 1.0 2.0

Total intangible assets 8.7 10.3 9.7 12.3

Tangible assets 14

Computers, fixtures, and fittings 0.1 0.1 - -

Plant and machinery 1.3 2.0 1.4 2.4

Total tangible assets 1.4 2.1 1.4 2.4

Financial assets

Shares in subsidiaries 15 - - 0.0 0,0

Other long term receivables 16 1.3 1.1 - -

Total financial assets 1.3 1.1 0.0 0,0

Total fixed assets 11.4 13.5 11.1 14.7

Current assets

Stock 17

Work in progress 0.1 0.5 - -

Finished products 1.0 1.3 - 1.0

Total stock 1.1 1.8 - 1.0

Short-term receivables

Trade debtors 4.6 4.7 3.9 2.7

Other debtors 18 1.3 1.4 1.5 1.7

Prepaid expenses and accrued income 19 1.5 1.1 0.0 0.0

Total short-term receivables 7.4 7.2 5.4 4.4

Short-term deposits 19.9 37.8 19.9 37.8

Cash at bank and in hand 11.3 2.6 9.5 1.7

Total short-term deposits and cash 31.2 40.4 29.4 39.5

Total current assets 39.7 49.4 34.8 44.9

TOTAL ASSETS 1 51.1 62.9 45.9 59.6

Bal

ance

She

ets


GROUP PARENT COMPANY

AMOUNTS IN SEK MILLION Note 31 Dec 2004 31 Dec 2003 31 Dec 2004 31 Dec 2003

SHAREHOLDERS’ EQUITY AND LIABILITIES

Restricted capital

Share capital (nom. 5,552,900 shares at 1 SEK/share) 20 5.6 5.4 5.6 5.4

Excess profits reserve 72.5 598.1 81.2 600.1

Total restricted capital 78.1 603.5 86.8 605.5

Accumulated deficit

Loss brought forward -14.5 -528.8 -21.9 -528.2

Net loss for the year -18.9 -20.0 -22.7 -21.9

Total accumulated deficit -33.4 -548.8 -44.6 -550.1

Total shareholders’ equity 44.7 54.7 42.2 55.4

Long-term liabilities

Loan 21 1,0 1.0 1.0 1.0

Other long-term liabilities 0.4 - 0.0 0.0

Total long-term liabilities 1.4 1.0 1.0 1.0

Current liabilities

Accounts payable 1.0 1.2 0.2 0.3

Intercompany payable - - 1.6 1.3

Other current liabilities 22 1.4 1.3 0.2 0.1

Accrued expenses and prepaid income 23 2.6 4.7 0.7 1.5

Total current liabilities 5.0 7.2 2.7 3.2

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 51.1 62.9 45.9 59.6

Adjusted equity per share 26 8.3 11.0 7.8 11.1

Adjusted equity per share adjusted for outstanding warrants 26 8.3 11.0 7.8 11.1

Collateral provided - - - -

Contingent liability

Buy-back option for equipment 24 1.1 1.5 0.7 0.9

Balance S

heetsS

hareholders’ E

quity

Shareholders’ Equity GROUP

Share capital Restricted reserve Accumulated deficit Total equity

Opening balance 1 January 2003 4.90 583.47 -541.26 47.11

Exchange rate differences foreign subsidiaries 25 - -13.28 12.44 -0.84

Total differences not included in the profit and loss statements - -13.28 12.44 -0.84

Net loss for the year - - -19.98 -19.98

New share issues 0.49 27.88 - 28.37

Closing balance 31 December 2003 5.39 598.07 -548.80 54.66

Exchange rate differences foreign subsidiaries 25 - -6.66 6.10 -0.56

Transfer from restricted reserve to accumulated deficit -528.20 528.20 0.00

Total differences not included in the profit and loss statements - -534.86 534.30 -0.56


New share issues 20 0.16 9.33 - 9.49


PARENT COMPANY

Share capital Restricted reserve Accumulated deficit Total equity

Opening balance 1 January 2003 4.90 572.26 -528.20 48.96


New share issues 0.49 27.88 - 28.37


Transfer from restricted reserve to accumulated deficit -528.20 528.20 0,00

Net loss for the year - - -22.70 -22.70New share issues (163,700 shares not registered and 17,700 shares not paid before year end) 20 0.16 9.33 - 9.49



Acc

ount

ing

Prin

cip

les Accounting Principles

The Annual Report has been prepared according to the Swedish Annual Accounts Act and the Swedish Financial Accounting Standards Council’s recommendations and statements.

During 2004, SinterCast implemented accounting principles as recommended by the Swedish Financial Accounting Standards Council. The accounting principle applied is RR 29 Renumerations to Employees. Changes according to Swedish Annual Accounts Act 4:14 (valuing Financial instruments at their real value) and 6:1 (information about financial risk in the Director’s Report) have been implemented. The transition to these accounting principles is not deemed to have any effect on the financial statements or the comparison of the previous years for the Group.

The implementation of the new IFRS standards will have only limited effects on the presentation of the SinterCast accounts, with the possible exception of the revaluation of the ITP pension plan, if that information is made available by the pension provider, although this is not expected to have any significant effect on the result. SinterCast's initial review of the IFRS standards also indicates that there will be no changes to the starting balance of 1 January 2004 or the result for 2004. The rules issued by the International Accounting Standards Board (IASB) regarding 2005 may still be subject to change, and these changes may influence this initial assessment.

Principles of Consolidation

The consolidated accounts include the parent company and all companies in which the parent company controls more than 50 % of the shares and voting rights. The consolidated accounts have been prepared in accordance with the acquisition account method. The acquisition value of shares in subsidiaries has been eliminated against the market value of the assets and liabilities at the time of purchase. The internal balances and internal profits have been fully eliminated in the consolidated accounts.

Recalculation of Foreign Subsidiaries’ Balance Sheets and Income Statements

The subsidiaries in the SinterCast Group are classified as independent companies. When translating the foreign subsidiaries’ profit and loss accounts and balance sheet the current method has been used. All assets and liabilities in the balance sheet of the subsidiaries have thus been recalculated at the year-end rate, while items in the profit and loss accounts are recalculated at an average rate of the year. The exchange rate differences that consequently arise have been posted directly to shareholders’ equity.

For 2004 the following foreign exchange rates have been used

Currency Average rate Closing rate

EUR 9.14 (9.12) 9.02 (9.10) GBP 13.44 (13.18) 12.72 (12.92) MXN 0.65 (0.75) 0.59 (0.65) USD 7.35 (8.05) 6.61 (7.28)

Reporting Format

SinterCast presents the profit and loss accounts in a function format. This coincides best with how SinterCast looks upon and controls its business.

SinterCast provides only one product, process control systems for the reliable production of Compacted Graphite Iron, and related services for product development, installations, calibration, and maintenance. Because the opportunities and risks associated with the product are the same for each location, no further split of the operations other than the consolidated profit and loss accounts and the consolidated balance sheets have been made. Based on the present customer base and the geographical areas, the secondary segment has been split into Europe, Americas, and Asia. The income, operating results, assets, and investments presented are allocated based on the location of the individual customers in these geographical areas.

Revenues

Revenues from goods are accounted for when the items have been delivered to the customer in accordance with the delivery terms. Revenues exclude VAT.

Research & Development

Costs for Research & Development are accounted for in the profit and loss accounts unless the costs are related to a specific customer project generating future revenues, or when requirements as per RR 15 are fulfilled. Previously expensed development costs cannot be capitalised later. Capitalised costs related to specific customer projects are depreciated systematically over their anticipated usage period, starting when revenues are generated from the individual project. The

depreciation is included in the costs for Research & Development. If the revenue projections decrease compared to previous estimates, the capitalised development costs will either be expensed immediately or the depreciation period will decrease.Expenses for patent developments are capitalised, while the annual patent fees are expensed. Depreciation on capitalised patent development costs is included in the costs for Research & Development.

Remuneration to Employees and Pension Plans

All expenses related to the remuneration of the employees have been accounted for in the period the work has been performed and is reported as paid salaries. If notice terminating the employment has been served, expenses until termination of the employment are accounted for in the period when the notice was served.

The pension plan for employees in Sweden follows the ITP-plan with a fixed pension payment level. The contributions are based on the salary and calculated by the pension provider Alecta. The pension plan for all foreign employees is based on a 5% contribution of the salary for employees in the UK and 15% for employees in the US, without any future commitments in either country. All commitments to the employees are in the form of premium related pension plans. All pension commitments are taken over by the insurance companies. The pension age for all SinterCast employees is 65 years.

Provisions

A provision is reported in the Balance Sheet when there is an undertaking as a result of an event that has occurred, and when it is probable that a flow of resources will be required in order to regulate the undertaking and that a reliable estimation of the amount can be made.

Taxes

Tax on temporary differences is accounted for using the balance sheet method. Deferred taxes on tax losses carried forward are accounted for when the future profit level has been clearly established.

Cash Flow Analysis

The cash flow analysis is presented using the indirect method and includes only cash flow related items. The cash position represents only cash available with less than one month’s notice.

Fixed Assets

The book value of the intangible and tangible fixed assets is the purchase value minus depreciation. Expenses for improvement of the assets are included in the acquisition value, while expenses for maintenance and repair are expensed. The assets are depreciated systematically over their anticipated usage period. The rate of depreciation, after evaluation of the usage period for each asset is, for patents and similar rights 8%, purchased product agreements 24%, capitalised development 33%, machinery and equipment 33%, installed process equipment 24-33%, and office furniture 20%. If the market value of the intangible or tangible assets is less than the book value, the difference will be accounted for in the profit and loss statements.

Leasing Agreements

Leasing agreements are divided into operational and financial leasing. Financial leasing applies when the financial risks and benefits normally associated with ownership are essentially transferred to the lessee. In other cases, operational leasing applies. SinterCast has not entered into any financial leasing agreements of material importance.

Stock

Inventories are valued at the lower of cost value or net realisable value.

Financial Instruments

Long-term share holdings are presented based on acquisition value. Depreciation is made when the long-term value decreases. Short-term investment, consisting of governmental bonds and commercial paper, is presented at the lowest of the acquisition value and the market value. Loans are presented based on the nominal value. Any difference in the nominal value is accounted for as interest over the period of the loan.

Receivables and Liabilities in Foreign Currencies

Receivables and liabilities in foreign currency have been stated using the exchange rate at year-end. Receivables are reported in the amounts that on the basis of individual assessment are estimated to be received. Exchange profits or losses related to internal operational transactions are accounted for in the operating result.


Accounting N

otes

Notes to the Financial Statements

ALL AMOUNTS IN SEK MILLION UNLESS OTHERWISE STATED

1 Operating Income, Results, Assets and Investment per Geographical MarketOperating income Operating results

GROUP 2004 2003 2004 2003

Europe 3.0 3.8 -22.3 -19.8

Americas 5.9 2.9 2.4 -0.8

Asia 0.3 0.2 0.1 -0.2

Total 9.2 6.9 -19.8 -20.8

Assets Investments

2004 2003 2004 2003

Europe 50.0 59.6 0.7 2.5

Americas 1.1 3.3 0.6 -

Asia - - - -

Total 51.1 62.9 1.3 2.5

The allocation of operating income, results, assets and investments is based on where the customer is located. For the parent company, 39% (25%) of the income represents internal sales and 89% (89%) of the expenses represent internal purchases. The internal sales represent delivery to foreign subsidiaries of equipment and management services. Internal purchases represent produced equipment and services provided by the subsidiaries.

2 Research & DevelopmentGROUP PARENT COMPANY

2004 2003 2004 2003

Costs for personnel and administration 2.6 3.0 6.0 6.3

External expenses 0.7 0.4 0.2 0.4

Depreciation 2.2 1.3 2.2 1.5

Total 5.5 4.7 8.4 8.2

3 Average Number of Employees2004 2003

GROUP Total Male employees Total Male employees

United Kingdom 4 3 5 4

Sweden 9 8 10 9

USA 1 1 1 1

Total 14 12 16 14

The number of employees is calculated as the average employed during the year. The parent company has no employees based in Sweden.

4 Board and Senior Management2004 2003

GROUP Total Whereof male Total Whereof male

Board members 18 16 18 16

CEO and senior management 3 3 3 3

2004 2003

PARENT COMPANY Total Whereof male Total Whereof male

Board members 5 3 5 3

CEO and senior management 2 2 2 2

5 Salaries, Remuneration, and Social Security Costs 2004 2003

PARENT COMPANY ALL AMOUNTS IN SEK THOUSANDS

Salaries and remuneration

Social security costs

Pension costs

Salaries and remuneration

Social security costs

Pension costs

Sweden 400 130 - 400 90 -

GROUP

United Kingdom 5,235 870 418 6,093 739 227

Sweden, excluding the parent company 5,343 1,858 807 5,217 1,899 788

USA 878 54 242 934 60 133

Total 11,856 2,912 1,467 12,644 2,788 1,148

Acc

ount

ing

Not

es


Note 5 continued Salaries, Remuneration, and Social Security Costs (amounts in SEK thousands)Salaries and remuneration allocated per country and between Board, CEO and employees.

2004 2003

Board, CEO and Executive Vice President

Others

Board, CEO and Executive Vice President

Others

PARENT COMPANY

Sweden 400 400

GROUP

United Kingdom 4,839 396 5,327 766

Sweden, excluding the parent company 1,085 4,258 773 4,444

USA - 878 - 934

Total 6,324 5,532 6,500 6,144

The Board of DirectorsThe Executive Chairman, employed during the year, received remuneration of SEK 0.4 million (0.4) including benefits in the form of insurance premiums paid for life, long term disability, and medical, amounting to SEK 0.0 million (0.0). The Executive chairman is not part of any pension plan. Social costs amounted to SEK 0.1 million (0.1). The terms of employment of the Executive Chairman stipulate a mutual period of notice of one year. No bonus scheme, pension commitments, or pension liabilities exist. The Executive Chairman reverted to the position of Chairman as of 1 January 2005 and is thus no longer an employee of the company.Remuneration of the external Board members (4) has been within the limits laid down by the Annual General Meeting on 20 April 2004 and amounted to SEK 0.4 million (0.4) (excluding social security costs). No additional payment is made to the Board members or members of the Nomination and Compensation committees.During 2002 the Executive Chairman received 30,000 stock options with an exercise price of SEK 58 during the period 1 October - 31 December 2004. The stock options were allotted free of charge and were exercised in December 2004. No other employee warrant scheme or stock option plans exist. The remuneration of the Executive Chairman is decided by the Compensation Committee.

CEO and Senior ManagementThe remuneration to the CEO amounted to SEK 2.5 million (2.6) including benefits in the form of insurance premiums paid for life, long term disability, and medical and school fees amounting to SEK 0.3 million (0.3). The pension costs, which are based on contributions made without any further commitments, amounted to SEK 0.1 million (0.1) and the social costs amounted to SEK 0.3 million (0.3). No bonus scheme, pension commitments, or pension liabilities exist.The remuneration to the Senior Management presented on page 8 (excluding the CEO and including the Executive Vice President who left the company on 31 December 2004) amounted to SEK 3.1 million (3.1) including benefits in the form of school fees and transportation allowance amounting of SEK 0.3 million (0.3). The pension costs amounted to SEK 0.3 million (0.2), which is based on contributions made without any further commitments for employees employed outside Sweden, and the social costs amounted to SEK 0.4 million (0.6). No bonus scheme, pension commitments, or pension liabilities exist apart from the Senior Management members employed in Sweden, who follow the ITP-plan. The pension age for the CEO and the Senior Management is 65 years.During 2002 the CEO received 25,000 stock options and the Executive Vice President, employed at the time, received a total of 20,000 stock options with an exercise price of SEK 58 during the period 1 October - 31 December 2004. The options were allotted free of charge and were exercised during December 2004. No other employee warrant schemes or stock option plans exist.The terms of employment stipulate a mutual period of notice for the CEO of twelve months and for the Senior Management of six months. In the event of a change in the controlling interest of the company, the mutual period of notice for the CEO shall increase to twenty four months. In the case of notice by the Company, no deduction should be made for remuneration paid by another employer during the notice period if the new employment is approved by SinterCast. No other commitments regarding severance pay exist. The remuneration of the CEO is decided by the Compensation Committee. The remuneration to the other members of the Senior Management is decided by the CEO.

6 Transactions with Related Parties During 2004, no transactions of any substance that could have influenced the presented result took place between the SinterCast Group and the Board, the management, or any other related party who could influence the value of the transaction.

7 Auditors’ Fees


2004 2003 2004 2003

PricewaterhouseCoopers

Audit fees 0.2 0.2 0.2 0.2

Other services 0.0 0.1 0.0 0.1

Other auditors

Audit fees 0.1 0.1 - -

Total 0.3 0.4 0.2 0.3

8 LeasingLeasing fees for operational leasing charged to the operating result total SEK 2.2 million (1.5), and refer primarily to leased premises used for manufacturing, development, and office space. As per year-end, contracted future commitments, after deduction of contracted sub-letting, amounted to SEK 5.5 million (6.8), whereof SEK 2.2 million (2.0) was payable within one year, SEK 3.3 million (3.4) within 1-2 year and SEK 0.0 million (1.4) within 2-5 years. No operational leasing liabilities exist for the Parent company.

Leased equipment refers to Agreements with Motor Castings, Daros Piston Rings, V. Luzuriaga and Teksid. As per year-end, contracted future income amounted to SEK 3.3 million (4.5), whereof SEK 0.9 million (1.2) was payable within one year, SEK 2.2 million (2.9) within 1-5 years and SEK 0.2 million (0.4) beyond 5 years.

Accounting N

otes


9 Provision for and Capital Injections in Subsidiaries

PARENT COMPANY 2004 2003

SinterCast Ltd 1.3 3.2

SinterCast Inc 2.4 -0.5

SinterCast Technologies AB 5.4 4.1

SinterCast SA de CV - 0.1

9.1 6.9During 2004, capital injections to the subsidiaries has resulted in given share capital for SinterCast Ltd, Shareholders contribution for SinterCast Inc and group contribution for SinterCast Technologies AB.

10 Other Operating Income and Costs Rent received by SinterCast Ltd from tenants in Regal House, London, UK and associated costs.

11 Financial Income and ExpensesGROUP PARENT COMPANY

2004 2003 2004 2003

Interest

Interest 1.1 0.9 0.8 0.9

Interest Group - - 0.0 2.7

Total 1.1 0.9 0.8 3.6

Translation differences

Exchange gain 0.2 0.2 0.2 0.2

Exchange loss -0.4 -0.3 -0.4 -0.2

Exchange loss Group - - -0.7 -1.6

Total -0.2 -0.1 -0.9 -1.6

Other financial expenses

Bank charges 0.0 0.0 0.0 0.0

New share issue 0.0 0.0 0.0 0.0

Total 0.0 0.0 0.0 0.0

Total financial income and expenses 0.9 0.8 -0.1 2.0

12 TaxGROUP PARENT COMPANY

2004 2003 2004 2003

Withholding tax 0.0 0.0 0.0 0.0

Total 0.0 0.0 0.0 0.0


2004 2003 2004 2003

Difference between the tax expenses for the Group and tax expenses based on actual tax rate

Result before tax -18.9 -20.0 -22.7 -21.9

Tax calculated based on Swedish tax rate 5.3 5.6 6.4 6.1

Tax effect on non tax deductible expenses -2.5 -11.6 -2.5 -11.5

Tax effect on non taxable revenues 0.0 10.7 0.0 10.7

Tax effect on non capitalized tax losses -2.8 -4.8 -3.9 -5.3

Effect foreign tax rates 0.0 0.1 - -

Tax on the result for the period as per the profit and loss statements 0.0 0.0 0.0 0.0

The income tax rate valid for the Group amounts to 28% (28%) Based on the filed tax returns for the financial year 2003, the following carried forward tax losses were available to be used to offset future taxable profits

Country Amount SEK Valid until

Sweden 448.3 indefinitely

United Kingdom 41.0 indefinitely

USA 47.5 15 years from the year of filing

Total 536.8

The accounting principle issued by the Swedish Financial Accounting Standards Council, RR 9, regarding the handling of taxes, was Implemented in 2001. Based on the RR 9 recommendations, carried forward losses should only be accounted for once the future profit level has been clearly established. Based on the production commitments that have been announced, and the fact that the production ramp-up rate has not yet been fully established, it is not yet possible to meet the requirements of RR 9, and thereby no capitalisation has been made of the outstanding carried forward tax losses. No temporary differences exist that have any affect on the presented results.

Acc

ount

ing

Not

es


13 Intangible AssetsCapitalised cost for patent

development

Capitalised development

Total

GROUP 2004 2003 2004 2003 2004 2003

Capitalised value brought forward 18.0 17.1 2.4 2.4 20.4 19.5

Foreign exchange differences opening balance - - - - - -

Capitalisations during the year

Sales and marketing - - - - - -

Research & development 0.6 0.9 - - 0.6 0.9

Accumulated capitalisation carried forward 18.6 18.0 2.4 2.4 21.0 20.4

Depreciation brought forward 9.9 8.6 0.2 - 10.1 8.6

Foreign exchange differences opening balance - - - - - -

Depreciation for the year

Research & development 1.4 1.3 0.8 0.2 2.2 1.5

Accumulated depreciation carried forward 11.3 9.9 1.0 0.2 12.3 10.1

Book value carried forward 7.3 8.1 1.4 2.2 8.7 10.3

Capitalised cost for patent development and production agreements

Capitalised development

Total

PARENT COMPANY 2004 2003 2004 2003 2004 2003

Capitalised value brought forward 18.0 17.1 6.6 6.6 24.6 23.7

Capitalisations during the year

Research & development 0.6 0.9 - - 0.6 0.9

Accumulated capitalisation carried forward 18.6 18.0 6.6 6.6 25.2 24.6

Depreciation brought forward 9.9 8.6 2.4 1.2 12.3 9.8


Sales and marketing - - 1.0 1.0 1.0 1.0




14 Tangible Fixed Assets

Computers, fixtures and fittings Plant and machinery Total

GROUP 2004 2003 2004 2003 2004 2003

Acquisition value brought forward 6.2 6.2 11.4 10.2 17.6 16.4

Foreign exchange differences opening balance 0.0 -0.1 -0.2 -0.3 -0.2 -0.4

Acquisitions during the year

Production 0.0 0.0 0.0 0.0 0.0 0.0

Sales and marketing 0.0 0.0 0.6 1.5 0.6 1.5

Administration 0.1 0.1 - - 0.1 0.1


Disposals

Sales and marketing 0.0 0.0 - - 0.0 0.0


Accumulated acquisition carried forward 6.3 6.2 11.8 11.4 18.1 17.6

Depreciation brought forward 6.1 5.8 9.4 8.5 15.5 14.3

Foreign exchange differences opening balance 0.0 0.1 0.2 0.1 0.2 0.2


Production 0.0 0.0 0.0 0.0 0.0 0.0

Sales and marketing 0.0 0.1 0.9 0.8 0.9 0.9



Disposals

Sales and marketing 0.0 0.0 - - 0.0 0.0




Accounting N

otes


Plant and machinery Total

PARENT COMPANY 2004 2003 2004 2003

Acquisition value brought forward 3.7 2.5 3.7 2.5


Sales and marketing 0.0 1.2 0.0 1.2

Accumulated acquisition carried forward 3.7 3.7 3.7 3.7

Depreciation brought forward 1.3 0.5 1.3 0.5


Sales and marketing 1.0 0.8 1.0 0.8

Accumulated depreciation carried forward 2.3 1.3 2.3 1.3

Book value carried forward 1.4 2.4 1.4 2.4

15 Shares in Subsidiaries

(ALL AMOUNTS IN SEK)

PARENT COMPANY 2004 2003

Acquisition value brought forward 45,272,919 1,659,131


New share issue/group contribution/shareholder’s contribution 9,147,573 43,613,788

Accumulated acquisition value carried forward 54,420,492 45,272,919

Depreciation brought forward -45,272,914 -1,659,126


Write-off of equity in subsidiaries -9,147,573 -43,613,788

Accumulated depreciation carried forward -54,420,487 -45,272,914

Accumulated acquisition value carried forward 5 5

PARENT COMPANY

Registration number

Votes and percentage ofequity, %

Book Value

SinterCast Ltd. London, England 2021239 100 1

SinterCast, Inc. Chicago, USA 187363 100 1

SinterCast Technologies AB Katrineholm, Sweden 556473-1668 100 1

SinterCast SA de CV Saltillo, Mexico SIN960415AY5 100 1

SinterCast Servicios SA de CV Saltillo, Mexico SSE960408EX1 100 1

Total 5 A complete listing of the shares in subsidiaries is available from SinterCast AB (publ).

16 Other Long Term Receivables


2004 2003 2004 2003

Deposits 1.3 1.1 - -

Total 1.3 1.1 - -

17 Stock


2004 2003 2004 2003

Work in progress 0 0.5 - -

Finished products 1.1 1.3 - 1.0

Total 1.1 1.8 - 1.0

18 Other Debtors


2004 2003 2004 2003

VAT and tax receivables 0.3 0.2 0.5 0.7

Other receivables 1.0 1.2 1.0 1.0

Total 1.3 1.4 1.5 1.7

Acc

ount

ing

Not

es


19 Prepaid Expenses and Accrued Income


2004 2003 2004 2003

Prepaid rents 0.7 1.0 - -

Accrued interest 0.0 0.0 0.0 0.0

Others 0.8 0.1 0.0 0.0

Total 1.5 1.1 0.0 0.0

20 Share Capital Development

Number of SharesNominal

Value (SEK)Share

Capital (SEK) A* B** Total

Share capital as of 1 January 1993 101,200 2,660 103,860 0.50 51,930

March 1993: Share issue I 161,200 2,660 163,860 0.50 81,930

April 1993: Split 10:1 1,612,000 26,600 1,638,600 0.05 81,930

April-May: 1993: Share issue II 2,084,600 26,600 2,111,200 0.05 105,560

April-May: 1993: Share issue III 2,311,350 26,600 2,337,950 0.05 116,898

December 1993: Bonus issue 2,311,350 26,600 2,337,950 1.00 2,337,950

January 1994: Directed share issue 2,811,350 26,600 2,837,950 1.00 2,837,950

October 1994: Directed share issue 2,811,350 626,600 3,437,950 1.00 3,437,950

October 1995: Directed share issue 3,435,350 626,600 4,061,950 1.00 4,061,950

December 1995: Subscription via warrants 3,435,350 628,600 4,063,950 1.00 4,063,950

June 1996: Subscription via warrants 3,435,350 655,600 4,090,950 1.00 4,090,950

February 2002: Directed share issue 4,235,350 655,600 4,890,950 1.00 4,890,950

Number of Outstanding Shares

June 2002: Change share structure* 4,890,950 1.00 4,890,950

September 2002: Subscription via warrants 4,900,062 1.00 4,900,062

November 2003: Subscription via warrants 5,364,200 1.00 5,364,200

December 2003: Subscription via warrants 5,389,200 1.00 5,389,200

December 2004: Subscription via warrants 5,552,900 1.00 5,552,900

Share capital as of 31 December 2004*** 5,552,900 1.00 5,552,900

* One vote per share

** One tenth vote per share

*** Whereof 163,700 not registered and 17,700 not paid before year end. No dividends where proposed as at 31 December 2004

21 Long Term liabilities


2004 2003 2004 2003

Loan from Svenska Handelsbanken’s Innovationsfond* 1.0 1.0 1.0 1.0

Other long-term liabilities - - 0.0 -

Total 1.0 1.0 1.0 1.0

* The loan does not accrue interest and is due for repayment within 5 years from 31 December 2002.

22 Other Current Liabilities


2004 2003 2004 2003

Withholding tax and national insurance contributions for employees 1.0 0.8 0.2 0.1

Other current liabilities 0.4 0.5 - -

Total 1.4 1.3 0.2 0.1

23 Accrued Expenses and Prepaid Income


2004 2003 2004 2003

Accrued personnel expenses 1.4 0.0 0.4 0.1

Accrued rent* 0.6 1.9 - -

Deferred income 0.6 2.4 0.3 0.9

Others 0.0 0.4 0.0 0.5

Total 2.6 4.7 0.7 1.5

* Includes total lease fees split over the total lease period in SinterCast Ltd.

Accounting N

otes


24 Contingent Liabilities


2004 2003 2004 2003

Buy-back option for sold equipment 1.1 1.5 0.7 0.9

Total contingent liabilities 1.1 1.5 0.7 0.9

25 Foreign Exchange Differences Shareholders’ Equity

Accumulated foreign exchange differences GROUP

2004 2003

Opening balance 11.2 12.0

Exchange differences foreign subsidiaries during the year -0.6 -0.8

Closing balance 10.6 11.2

The accumulated foreign exchange gains are an affect of the negative balance between the share capital/restricted reserves and the retained deficit in the foreign subsidiaries. Until now SinterCast has not made any equity hedge and has not hedged any results of its foreign subsidiaries.

26 Definitions

Average number of shares Weighted average of the number of shares outstanding Average number of shares adjusted No outstanding warrants for outstanding warrants Adjusted equity per share Adjusted shareholders’ equity divided by the average number of shares Earnings per share (EPS) Net result divided by the average number of shares Share price at year-end Latest paid price for the SinterCast share at the Swedish stock exchange, Stockholmsbörsen Number of shareholders The total number of registered shareholders at the year-end Non-Swedish shareholdings The total share capital controlled by non-Swedish shareholders at the year-end divided by total outstanding share capital Market value The total market value of outstanding shares Capital employed Total assets less non-interest bearing liabilities including deferred tax liabilities Adjusted shareholders’ equity Shareholders’ equity plus 72 percent of untaxed reserves Solidity Adjusted shareholders’ equity expressed as percentage of total assets Return on shareholders’ equity Net result as a percentage of average adjusted shareholders’ equity Return on capital employed Net result after financial items plus financial expenses as a percentage of average capital employed Return on total assets Net result after financial items plus financial expenses as a percentage of total average assets Debt-to-equity ratio Interest bearing liabilities divided by adjusted shareholders’ equity Number of employees The number of employees employed by the SinterCast Group at the year-end Average number of employees Average number employed during the year Value presented as ”0.0” Amount below SEK 50,000 Value presented as ”-” No amount applicable

Bertil HagmanChairman

Robert Dover Aage Figenschou Ulla-Britt Fräjdin-Hellqvist

Andrea Fessler Steve Dawson Managing Director

Stockholm 18 March 2005


To the general meeting of the shareholders of SinterCast AB (publ) Corporate Identity Number 556233-6494

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the managing director of SinterCast AB (publ) for the year 2004. These accounts and the administration of the company and the application of the Annual Accounts Act when preparing the annual accounts and the consolidated accounts are the responsibility of the board of directors and the managing director. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the board of directors and the managing director and significant estimates made by the board of directors and the managing director when preparing the annual accounts and consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the managing director. We also examined whether any board member or the managing director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.

The annual accounts and the consolidated accounts have been prepared in accordance with the Annual Accounts Act and, thereby, give a true and fair view of the company’s and the group’s financial position and results of operations in accordance with generally accepted accounting principles in Sweden. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts.

We recommend to the general meeting of shareholders that the income statements and balance sheets of the parent company and the group be adopted, that the loss for the parent company be dealt with in accordance with the proposal in the administration report and that the members of the board of directors and the managing director be discharged from liability for the financial year.

Stockholm 21 March 2005

PricewaterhouseCoopers AB

Peter Clemedtson Liselott StenuddAuthorised Public Accountant Authorised Public AccountantAuditor in charge

Aud

itors

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epor

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Important Dates

Annual General MeetingThe Annual General Meeting of SinterCast AB (publ) will be held on 18 May 2005 at 16:00 at the premises of the Royal Swedish Academy of Engineering Services (IVA), Grev Turegatan 16, Stockholm.

Financial InformationThe Interim Report January-March 2005 will be published on 11 May 2005.

The Interim Report January-June 2005 will be published on 10 August 2005.

The Interim Report January-September 2005 will be published on 9 November 2005.

The Preliminary Financial Result for 2005 will be published on 15 February 2006.

This Annual Report has been sent to those shareholders who have requested such information via theSwedish Securities Register, VPC AB, or via SinterCast.

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

The Annual Report and Interim Reports can also be found on the website:

www.sintercast.com

Imp

ortant Dates

® SinterCast AB (publ) Box 10203 100 05 Stockholm tel: +46 8 660 77 50 fax: +46 8 661 79 79 e-post: [email protected]

www.sintercast.com

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