Studsvik — Annual Report 2007

Apr 10, 2008

Annual Report 2007

Calender

GENERAL MEETING a pril 22, 2008

The General Meeting will be held at 4 p.m. on Thuesday, April 22, 2008 at The World Trade Center, Klarabergsviadukten 70 / Kungsbron 1, Stockholm, Sweden.

Notification

Shareholders wishing to participate must be registered in VPC AB's share register, by no later than April 16, 2008, and must submit a notification of their intention to attend by no later than April 15:

• By telephone on + 46 155 22 10 33,
• By mail to Studsvik AB, P.O. Box 556, SE- 611 10 Nyköping, Sweden,
• By e-mail to studsvik@studsvik.se,
• By fax on + 46 155 26 30 00 or
• From Studsvik's Website, www.studsvik.se.

Shareholder's notification should state

• Name
• Personal / corporate identity number
• Address and telephone number
• Number of shares.

For entitlement to vote at the General Meeting of Shareholders, shareholders with nominee-registered holdings must apply to the bank or stockbroker managing their shares for temporary re-registration a couple of banking days before April 16, 2008.

Studsvik's Nomination Committee

Studsvik's Nomination Committee consists of:

• Anders Oscarsson, SEB Fonder (Chairman)
• Björn C Andersson, Handelsbanken Fonder
• Jan Barchan, Briban Invest
• Anders Ullberg, Chairman of the Board

The task of the Nomination Committee is to submit proposals to the General Meeting of Shareholders regarding Board members, auditors, alternate auditors and their fees.

Nomination Committee's nominees for election to the Board

The Nomination Committee will propose to the AGM that Jan Barchan, Ingemar Eliasson, Anna Karinen, Alf Lindfors and Anders Ullberg, chairman, be re-elected to the Board. Leif Nilsson is not standing for re-election. The Nomination Committee further proposes that Per Ludvigsson, currently deputy member of the Board, and Lars Engström be elected to the Board. Lars Engström is president and CEO of Munters.

F o rt hcoming F inan c ial I nfo rmation

Publication Dates

•	Interim Report, first quarter, as of March 31	April 22, 2008
•	Interim Report, first six months, as of June 30	July 22, 2008
•	Interim Report, first three quarters, as of September 30	October 29, 2008
•	Financial Statement 2008	February 2009
•	Annual Report, 2008	March 2009

The reports will be available at www.studsvik.se on the publication dates.

The Annual Report and six-month Interim Report will be sent directly to shareholders.

Contents

Comments by the President	6
Business concept, objectives and strategies	8
Markets	10
Business overview	14
Studsvik's key offerings	16
Organisation	18
Operating segments	20
Sweden	20
United Kingdom	23
Germany	26
USA	28
Global Services	31
Sustainability, the environment and safety	34
Human resources	36
The Studsvik share	39
Risk factors	41
Administration report	45
Consolidated income statement	52
Consolidated balance sheet	53
Consolidated cash flow statement	55
Parent company income statement	56
Parent company balance sheet	57
Parent company cash flow statement	59
Accounting policies and valuation principles	60
Notes to the consolidated accounts	68
Notes to the parent company accounts	79
Audit report	82
Five-year review	83
Corporate governance	86
Board of directors and auditors	91
Senior executive management	93

Nuclear renaissance favourable to Studsvik There is every reason to view Studsvik's future with optimism. Nuclear power is experiencing a renaissance, and the favourable market trends we have been referring to for many years are strengthening.

Specialist services to the international nuclear industry

Studsvik's services are based on a very well defined offering that involves a high degree of harmonisation with each customer's specific requirements.

Experience, safety, innovation and reliability Studsvik is a knowledge-intensive service enterprise on the international nuclear technology market. The success rests on the knowledge of our employees.

Studsvik in two minutes

Studsvik offers a range of advanced technical services to the international nuclear power industry in such areas as waste treatment, decommissioning, engineering & services, and operating efficiency. The company has 60 years experience of nuclear technology and radiological services. Studsvik is a leading supplier on a rapidly expanding market. The business is conducted through five segments: Sweden, United Kingdom, Germany, USA and Global Services. Studsvik has 1,200 employees in 7 countries and the company's shares are listed on the OMX Nordic Stock Exchange Stockholm AB, MidCap.

Studsvik' s operating segment s

Sweden

Waste treatment services provided at the Group's facilities in Sweden. The segment serves customers in northern Europe, with the main focus on Sweden, Germany with neighbouring countries and the UK.

UK

Waste treatment and decommissioning services in the UK.

Germany

Business conducted within decommissioning and engineering & services in Germany and neighbouring countries.

United States

Waste treatment and logistic services that are provided at the Group's two facilities in the USA. Serves customers in the USA and Canada. Also includes THOR Treatment Technologies (TTT), a joint venture together with Washington group, which offers waste treatment facilities for nuclear waste.

Global Services

Is active in operating efficiency, i.e. materials technology and fuel analysis, as well as software for reactors and nuclear fuel. The business is global and serves customers in many countries.

Operating profit by segment

• Sweden 7% UK 6% Germany 49% USA 21% Global Services 10%
• Other 7%

2007 in brief

High growth – net sales up by 18 per cent. Sustained strong growth in the UK. Well filled order books in most segments at end of 2007. Group facility for treatment of metallic waste in the UK received environmental and nuclear permits. Contract signed with WCS for storage of waste

– strengthens Studsvik's market position in the USA.

• The Group target for organic growth is being raised from 5 to 10 per cent.
• Market developments will create an environment favourable to healthy organic growth in most segments 2008.
• The Board of Directors proposes a dividend of SEK 2.00 per share.

Key figures and ratios1)	2007	2006	2005
Consolidated net sales, MSEK	1,314.7	1,219.6	1,088.3
O perating profit, MSEK	62.1	71.3	78.8
Profit after net financial items, MSEK	46.0	57.1	76.2
E arnings per share before dilution, SEK	5.65	4.24	5.81
E arnings per share after dilution, SEK	5.65	4.24	5.81
O perating margin, %	4.7	5.8	7.2
E quity-asset ratio, %	42.5	41.2	47.9
E quity per share, SEK	69.58	67.97	68.90
Average number of employees	1,141	1,279	1,278

1) Comparative figures for 2006 and 2005 refer to continuing operations.

Nuclear renaissance favourable to Studsvik

The market is going Studsvik's way. The demand for electricity is continuing to rise faster than the supply. Parallel to this, more and more people are becoming aware that we cannot go on polluting our environment with increasing carbon dioxide emissions. Public opinion is shifting increasingly in favour of nuclear power; many people are coming to realise that it is compatible with challenging goals for the climate.

There is every reason to view Studsvik's future with some optimism. Nuclear power is experiencing a renaissance, and the favourable market trends we have been referring to for many years are strengthening. Nuclear power plants are being modernised and updated. At the time of writing, 34 new reactors are under construction around the world, and even more are being planned. A recent case in point is the British government's statement at the beginning of 2008 to the effect that nuclear power will assume an important role in Britain's future energy supply.

We can also see a new attitude in the nuclear power industry, regardless of whether it relates to modernisation, extending service lives, or the building of new power plants. The industry's plans reflect a sense of responsibility towards coming generations by integrating a consistent sustainable approach. The facilities that are presently being planned include detailed plans for their entire life cycle, from how production waste is to be treated to how they will be decommissioned.

Environmental issues have priority

The environment has high priority. Nuclear waste has to be dealt with in a responsible way; it is not just a matter of reducing the volume of waste produced. Just as important is to recover valuable metals, reduce volumes and stabilise waste not only from power production but also from the decommissioning of the facilities.

In these areas, Studsvik is well placed with its own methods, its own facilities and a strong brand name.

Studsvik is very well positioned in the UK, the fastest growing market in Europe, where we realised at an early stage the importance of having a strong presence. After a build-up phase of three years, we are now well established in the country. At the end of 2007 we had more than 130 employees, compared with five at the beginning of 2005.

The treatment of radioactive waste has high priority in the UK. In February, Studsvik obtained the first nuclear engineering licence the British authorities have issued for more than 20 years. This covers the construction of a facility for treating metallic waste located close to Sellafield. I expect that we will be able to commission this facility towards the end of 2008.

Final storage of great interest

Operating facilities for the final storage of radioactive waste is new for Studsvik and of great interest for the future. A first important, strategic step was to acquire a 15 per cent interest in Nuclear Waste Management (NWM). This company is in final negotiations for a long-term contract for the management of the UK low level waste repository. The contract also includes developing a national strategy for how low-level radioactive waste from nuclear facilities is to be dealt with in the UK.

The overall picture in the UK is that Studsvik has established a unique position on the market. We are running extensive decommissioning projects that give rise to waste that can be treated in our own facilities and then be sent to the repository, which is managed by NWM, in which Studsvik has an equity interest.

Growing consulting business

This renaissance for nuclear power is leading to higher demand for specialists and stiffer competition to acquire their services. This represents a challenge for the nuclear power industry, where so many people are approaching retirement.

The ability to hire specialists and offer them attractive development prospects has long been one of Studsvik's strengths. We are now well to the fore as a result of our internal development programmes and external alliances with leading educational and research institutions.

Studsvik is also investing in growth in a variety of consulting disciplines, both organically and by acquisition. In 2007, we completed an acquisition in Germany and another in the UK. Our aim is to expand in Germany, the UK and Sweden.

During the 60 years Studsvik has been in business, we have built up cutting-edge competence in materials and fuel technology. Beginning in 1947 Studsvik has been actively involved, from the very first steps into the atomic age and through to today's modern and efficient energy production.

Studsvik's offering to power companies and equipment suppliers comprises a complete portfolio of fuel and materials testing services. Following the closure of our own materials testing reactor in 2005, we have entered into an alliance with Norway's Institute for Energy Engineering. We carried out our first joint project in the autumn of 2007. Our reactor software leads the world and is based on knowledge accumulated over many years. In 2007 Mitsubishi selected Studsvik as its supplier for the licensing of its new ATMEA 1 type of reactor.

Volume reduction more important in the USA in the long run

The USA is the world's largest single nuclear power market. Studsvik has been established for many years in waste treatment, but without achieving the profitability we expected.

There are several reasons for this. The most important is that volume reduction and stabilisation of waste have not had the same priority in the USA as in Europe, which is due to the lower cost of final storage in the USA. My assessment is that the growing use of nuclear power and growing concern for the environment will eventually stimulate higher demand for our services.

The USA's only repository for intermediate level radioactive waste will close at the end of June 2008.

This closure will create a problem for the entire nuclear industry, and for the pharmaceutical and healthcare industries, which have to find a solution. Studsvik has adopted a forward-looking position through its joint-venture agreement with Waste Control Specialists (WCS). Studsvik and WCS can now also offer treatment and storage of

the intermediate-level waste that has been treated in our Erwin facility.

We have also broadened our offering to include more types of treatment of aqueous waste in the facility. This means that the immediate threat presented by the closure of Barnwell has been turned into an opportunity – in both the long and the short term.

The Board has raised Studsvik's annual growth target from 5 to 10 per cent for 2008. With annual organic growth in sales of 18 per cent in 2007 we exceeded our new growth target. This means that the operating margin of 4.1 per cent is not high enough, and is below than our target of 8 per cent. The equity ratio of 42.5 per cent does, however, show that Studsvik has the financial strength needed for our ambitious plans for the future.

In 2007 we strengthened our offering, our organisation and our position on important markets. We have strengthened our order books in several areas. In addition, the market is developing in our favour.

All in all, this means that we are in a favourable position as we move into 2008.

Nyköping, March 2008

Magnus Groth President and CEO

Business concept, objectives and strategies

Studsvik's business concept is to supply specialist services characterised by innovation, efficiency and safety to the international nuclear industry.

Financial targets

Studsvik's aim is to grow organically and by acquisitions with maintained profitability. This is reflected in the Group's financial targets, which are seen in a three-year perspective:

• Organic growth in net sales shall be at least 10 % a year on average over a threeyear period.
• The operating margin shall be at least 8 %.
• The equity ratio shall be at least 40 %.

The Board has raised the target for organic growth from 5 to 10 per cent for 2008. The diagrams on the next page show the company's performance in respect of these parameters over the past five-year period.

Profitability targets by segment

Studsvik's reporting by segment will be based as of 2008 on the operative organisation. The segments operate in different environments, on account of the different breakdown of sales and services, the maturity of the market, competition, etc. Separate targets have therefore been formulated for the operating margin of each segment, i.e. profitability excluding central costs borne by the parent company. These targets should also be seen from a three-year perspective:

• Sweden 20 %
• UK 10 %
• Germany 9 %
• USA 10 %
• Global Services 15 %

Business objectives

In addition to attaining its financial targets, a number of specific objectives have been formulated for the business in 2008:

• Expansion of long-term order book.
• Minimal outage or shutdowns at the Group's production facilities.
• Sustained rapid growth in the UK.
• Completion of new waste treatment facility in the UK.
• Higher profitability in the USA.
• Continued cutting-edge expertise by means of competence development and hirings.

Strategy

Studsvik's strategy is to offer specialist services to the nuclear industry with a high rate of innovation.

Growth strategy

The demand for nuclear services is growing on many markets. Studsvik is strengthening its position on priority markets by means of a combination of organic growth by alliances and acquisitions.

Products and services strategy

The group is concentrating on products and services that strengthen the customers' profitability, help to improve safety, and make it easier for customers to accept their environmental responsibility. Studsvik has a long tradition of maintaining a high innova-

HISTORY

1950s R1 – Sweden's first test reactor is completed. 1960s The R2 and R2-0 test reactors are built in Studsvik. The Swedish state 1947 AB Atomenergi is set up. The Swedish state initially owns a 57 per cent interest.

buys the rest of AB Atomenergi.

AB Atomenergi is renamed Studsvik Energiteknik AB.

1970s

Several new lines of business are started or acquired. Sales companies are set up in the USA and Japan. The business is extensively

restructured.

1980s

1990s

Sharper focus on nuclear engineering. SINA & Scandpower are acquired. The Erwin facility is constructed. Vattenfall (Swedish State Power Board) takes over Studsvik but soon resells the company.

2000 Production starts at the Erwin facility.

STUDSVIK AB (PUBL) Ann ual Re p o rt 2007

tion rate, and it is engaged in proprietary technological and methods development in response to specific customer requirements.

Market strategy

Studsvik has long experience of doing business on geographical markets with high barriers to entry. As a consequence, therefore, it has created a strong position on these markets, which will provide a platform for further development of its offering to them.

Studsvik has a strong global market position in certain segments. This geographical diversity will be an advantage when more full-scale moves into new individual markets are being considered. The occasion for such moves into new geographical growth markets will come when the demand for Studsvik's services is deemed to be sufficient.

Partnership strategy

Studsvik operates independently on the market and develops proprietary services in close cooperation with customers and public authorities. In connection with the development of new services or of major project procurements, Studsvik's competitive position can be strengthened by the use of strategic partnerships together with highly specialised niche companies or large global organisations.

Organisational strategy

Studsvik's organisation typically has short decision lines and a clearly defined geographical management structure with a sharp focus on profitability and customer satisfaction. The business is carried on through five operating segments with their own geographical areas of responsibility. The company's services are marketed within the framework of Groupwide "key offerings".

2001

Studsvik's shares are floated on the Stockholm Stock Exchange. Rationalisation programme begins.

2002 TTT is set up as a joint venture with Washington Group. 2003 IFM, Germany, is acquired.

2004 Six business areas are formed, and become the foundation for today's market-oriented organisation.

2005 R2 and R2-0 test reactors are closed down, and the business is concentrated in four business areas. Studsvik UK is set up via the acquisition of ERS, UK. 2006 Acquisition of RACE, an American company.

2007

Stensand nuclear services business in Sweden, is divested. Two nuclear engineering companies, Alpha Engineering and Dr Fary are acquired.

Markets

In recent years, the global nuclear industry has become much more proficient at dealing with residual products and waste efficiently and responsibly. This is creating a market for advanced services, in which Studsvik is a pioneer. This process is accentuated since there is a steadily growing interest all over the world in expanding nuclear production. New reactor types are being developed and old facilities are being successively phased out.

Driving forces

The market for specialist services for the nuclear industry is developing strongly:

• Many operational commercial reactors are being modernised.
• Old reactors are being decommissioned.
• Waste left behind from civil and military research programmes is being dealt with.
• There is a shortage of facilities for storing low- and intermediate-level radioactive waste, and storage costs are high.
• New power plants are once again being built and planned on several important markets.

Nuclear power is increasingly perceived to be a safe, environmentally friendly and efficient source of energy. In order to live up to this reputation, the industry must be able to deal with its waste in a responsible way. As in any other industry, this responsibility extends throughout the entire life cycle from the first planning phase through modernisation, during the operational phase, and in connection with decommissioning and restoration of used land. In these respects the nuclear industry has made considerable progress in recent years. Studsvik's role is to take the lead in this process and act as a driving force.

At present, nuclear power accounts for some 15 per cent of the world's production of electricity (2007), and there are 439 commercial reactors in operation around the world. At the beginning of 2008 another 34 new reactors were under construction, and on several markets, plans are in hand for the further expansion of nuclear power. This is an important force driving the industry's need to find safe and efficient means of dealing

with the low- and intermediate-level radioactive waste it produces.

The market created by these needs will give rise to demand for many services in connection with the processing of radioactive waste prior to final storage or reclassification and recovery. The decommissioning of old reactors and other nuclear facilities is a growing market on which waste treatment is an important element.

In connection with these two areas there will be a growing demand for consulting and service when nuclear power producers will need outside support to develop their own processes.

The nuclear power plants that are in operation are constantly endeavouring to find ways to improve operating efficiency and optimise the yield from the fuel. Studsvik has developed cutting-edge services in niches such as software for fuel optimisation and core monitoring and various types of laboratory tests for fuel and materials. These areas complement Studsvik's market for waste treatment and decommissioning.

Sweden

Long-term modernisation programmes are underway at several Swedish nuclear power plants, where they are producing large quantities of low- and intermediatelevel radioactive waste. Studsvik, as a result of its technical advances, has opened up a new market for the treatment of large components such as steam generators and reactor tank covers, in addition to a stable flow of scrap and retired components. These projects are very large and could last for a long time, which lengthens order books and makes possible a stable level of capacity utilisation.

Reactors in operation by country

The demand for treatment of combustible materials is relatively stable, with only small fluctuations over time. Radioactive, but not nuclear waste, from hospitals, for example, is still a stable segment. The modernisation of nuclear power plants is also creating firm demand for fuel tests and other materials testing.

UK

The British market is developing strongly and passed several key milestones during the year. The market for decommissioning services has expanded and several large contracts were finalised during the year.

2007 was the second financial year for the Nuclear Decommissioning Authority (NDA), which coordinates the management of decommissioning projects and historic waste. NDA's guidelines and budgets were revised during the year, which made its priorities more transparent. The projects that have now been given high priority match quite closely the profile and focus on which Studsvik has concentrated for strategic reasons. Studsvik's portfolio is therefore well positioned to take coming contracts.

The quantity of waste that has so far come onto the market has not matched expectations. A perceived uncertainty regarding the rules and the most appropriate choice of method held down demand. At the end of June, new statutory rules came into effect, which are making it easier to ship British waste abroad for treatment. Studsvik is a member of a consortium that during the year reached the final negotiations for a long-term contract to operate a low-level waste repository in the West of England. The contract includes providing the NDA with support in the development of a strategy that includes general guidelines as to how waste shall be treated and processed. With clearer guidelines, and as the uncertainty regarding the issue of waste can be expected to disappear, the demand for waste treatment services should revive.

Rest of Europe

On the Continent, Germany is Studsvik's largest market. The mood on the German decommissioning market remained cautious. Given that public finances are still tight and the negotiating process drawn out, little progress is being made. A number of small contracts have, however, been completed.

The planning for major projects to come has continued, and the level of activity is expected to pick up gradually in coming years. A repository for low-level waste is at the planning stage and is expected to open in 2013. As a consequence of this, the demand for engineering and consulting services is already rising in the fields of waste treatment and safety. The demand for the treatment of German waste is stable in the case of combustible and metallic waste. Apart from the types of waste that have so far been fairly common, steam generators have also been handed in for treatment for the first time.

Several prolonged, unplanned outages at nuclear power plants meant that the demand for services remained high throughout the year. However, the general trend is still for power plants to endeavour to minimise their planned shutdowns, which has meant that small competitors are being forced off the market. The structuring programmes that Studsvik has carried out in recent years have resulted in a degree of flexibility and a cost structure that will put the company in a good position in this segment.

Reactors under construction by country

Reactors in operation by age

The Group also has customers in Belgium, Finland, France, Holland, Spain and Austria, of which France is the largest nuclear market. Studsvik has direct customer relationships in France within operating efficiency. Studsvik

is taking a long-term stance on the question of opening up in France within other business areas. To date it is considered that establishing a presence on the market would come up against major barriers to entry, on account of national traits within the organisation, financing and technology. There has been some canvassing of the market via the German subsidiary and some partners.

The growing interest in developing nuclear power is reflected in a number of small new materials technology contracts in countries such as Spain and Slovenia. However, this business is so far of limited financial significance.

North America

The predominant share of Studsvik's sales in North America goes to customers in the USA, although the business also canvasses potential customers in Canada.

The American market for waste treatment was characterised by continued fierce competition. After the process of consolidation in the industry in recent years, with profitability problems throughout the sector, prices are now depressed. Studsvik is responding to the competition by developing cost-effective and environmentally sound and safe solutions.

The demand for waste management services has been dominated by the uncertainty regarding the repository for low- and intermediate-level radioactive waste in Barnwell, South Carolina. According to the plans, Barnwell is expected to close for incoming deliveries in 2008. The practical implications of this are that most of the nuclear industry in the United States will have no intermediate-level waste depository. This will create problems for many of Studsvik's customers who have been sending their low-level waste to Barnwell after processing. Studsvik's aim is to play an active part in resolving these challenges.

During the year, Studsvik worked in close co-operation with its customers to identify solutions for temporary storage of their waste. In addition, an agreement between Studsvik and Waste Control Systems (WCS) will create the conditions of opening a new temporary storage facility, provided all the necessary licences can be obtained.

Continued interest in the THOR technology was noted during the year. New areas of application are being discussed and concrete business discussions have been going on regarding the sale of waste treatment facilities that use this technology.

In the field of materials technology, Studsvik's position strengthened slightly during the year as the competition from old stateowned facilities declined. On the software side, Studsvik has increased its technical lead.

Japan

Japan is well to the fore when it comes to the technical development of nuclear power. In this respect, Studsvik has several strategically important customer relationships, above all in the operating efficiency segment. In Japan, the industry is adopting a systematic and long-term approach to advanced technical development, in which Studsvik is a partner in joint development projects.

During the year, this resulted in higher demand for Studsvik's software in new applications, as well as a joint development project together with Japan's JAEA with the object of arriving at specific solutions to the Japanese industry's waste problems. In the long run the latter project could see some demand emerging for Studsvik's waste management services.

Rest of the world

There are a number of large nuclear nations, where Studsvik is at present not represented. They include China and Russia, which for strictly geographical reasons could quite conceivably be destinations for new establishments. In these countries the need for Studsvik's services may be assumed to be quite significant.

However, the nuclear industry is characterised by strong, special national features in such areas as organisation, ownership, financing, and technology. These present major barriers to entry, which means that

to break into the market would require the investment of considerable resources. Therefore, Studsvik has at present no plans to enter these markets.

Competitors

The nuclear power industry is relatively young, having only really become established during the past 60 years. However, for several reasons it was not until quite recently that the treatment of low- and intermediate-level radioactive waste has emerged as a separate services segment.

• Growing volumes of waste have to be dealt with.
• New methods have been developed for volume reduction and stabilisation of waste before final storage, as well as for recovery from contaminated materials.
• Given the growing importance of sustainability and the ecocycle, efforts are being made to minimise environmental impact.

Studsvik has earned a reputation as a leading innovator in this field thanks to its many years of experience of materials technology and its ability to operate in radioactive environments.

In the short term, customers can store waste without treating it, which involves competition against the method of trading, volume reducing and stabilising the waste. In the long run, however, some form of treatment will become necessary owing to the lack of storage facilities, the high cost of storage and government demands that environmental impact be minimised.

The competitors in waste treatment, like Studsvik, often have some connection with the nuclear industry, normally locally in each country. At the international level Studsvik comes up against competition from Energy Solutions, which is the result of several mergers and acquisitions.

NUKEM is a conglomerate that offers various types of service in the nuclear industry. The company is active in several of Studsvik's areas of activity. NUKEM's British business was acquired during the year by Vinci Construction, a large French building company.

On individual markets, there are occasional, strong local competitors, such as Energie Werke Nord (EWN) in Germany. Otherwise, they mostly comprise small, local companies that offer some services in waste treatment and companies that offer intermediate and final storage.

In decommissioning, the competition mainly comes from contractors and technical consultants who can offer large contract solutions. However, since most of them rarely possess specialised expertise in the decommissioning of nuclear facilities, Studsvik can be an attractive partner for them,

In engineering & services the bulk of the business is in Germany, where it competes with several small and medium-sized companies. More stringent requirements regarding flexibility and deliver capacity at times of peak demand had in recent years forced several small suppliers off the market and Studsvik's market share is rising.

In operating efficiency Studsvik has two lines of business. Studsvik's software dominates the global market, and around half of all the commercial reactors in the world are customers. The competition here comes from fuel suppliers themselves such as GE, Westinghouse, AREVA. In materials testing most of the competition is provided by stateowned research organisations.

Competitors

Waste treatment	EnergySolutions
	Local waste treatment centers, final repositories
Decommissioning	NUKEM
	Construction and engineering companies
Engineering & services M	any local players, Germany, engineering consultants
Operating efficiency	Software: GE, Westinghouse och AREVA
	Materials Testing: Government research organisations

Business overview

Studsvik is a leading supplier of specialist services to the international nuclear industry. The main customers are operators of nuclear power plants and other nuclear facilities. A nuclear power plant can continue as a customer of Studsvik throughout its entire life cycle.

Operating profit/loss by segment

Operating margin by segment

Studsvik offers specialist services to the international nuclear power industry in four main areas: waste treatment, decommissioning, engineering & services and operating efficiency.

Studsvik has developed a broad and competitive range of services for nuclear facilities, while they are in operation or in the decommissioning phase. A nuclear power plant can continue as a customer of Studsvik throughout its entire life cycle.

The business has increasingly come to be concentrated on waste treatment and decommissioning. In recent years Studsvik has invested heavily in these areas in the form of acquisitions and substantial market investments on new geographical markets. One effect of this is that the business has become more international and that waste treatment and decommissioning now account for 60% of sales. Engineering & services includes related services for nuclear power plants in production, but also includes a growing element of consulting services.

The business is conducted through five operating segments:

• Sweden
• The UK
• Germany
• The USA
• Global Services

Global Services comprises the operating efficiency business area. It is the Group's most research-intensive area of activity and includes software for fuel optimisation and specialist services in materials technology and fuel analysis. This business area is the most widely diversified in geographical terms, and is active on most geographical markets.

Studsvik's services are based on a very well defined offering that involves a high degree of harmonisation with each customer's specific requirements. At present, Studsvik markets 10 "key offerings".

• Processing of radioactive waste
• On-site waste services
• Waste management consulting services
• Health physics services
• Transport and logistics
• Decommissioning services
• Operation and outage support
• Fuel and materials performance
• Materials integrity and water chemistry
• Nuclear fuel analysis software

These key offerings are described in detail on the next page.

Studsvik's key offerings

Studsvik offers an extensive and competitive range of services for nuclear power facilities, either in operation or in the decommissioning phase. The offering is based on customer requirements and includes waste treatment, decommissioning, engineering & services, and operating efficiency. In these areas the Group has developed 10 key offerings.

Processing of radioactive waste

Studsvik offers processing of low- and intermediate-level radioactive waste at its own facilities in Studsvik, outside Nyköping, Sweden, and in Erwin and Memphis, Tennessee, USA. Further facilities are at the planning stage in Workington in the UK, where Studsvik has received a licence to engage in the processing of low-level radioactive waste. The facility in Studsvik processes dry and metallic waste from nuclear facilities, mainly in Europe, by means of incineration and melting. The Erwin plant processes aqueous waste using the unique, proprietary THORSM pyrolysis process. Low-level radioactive waste is volume reduced in Memphis by other methods. The primary reason for treating the waste is to reduce its volume and stabilise it before final storage.

On-site waste services

Waste is also treated on-site at each customer's facilities; this includes characterisation, sorting and packaging, stabilisation and solidification of aqueous waste, compacting of dry waste, measuring the radioactivity of the waste prior to processing and recovery.

Waste management consulting services

Studsvik's consulting services in the treatment of radioactive waste and environmental technology include investigation and surveys of costs and environmental aspects, prior to the treatment and processing of radioactive waste.

Health physics services

There is a risk that personnel at nuclear facilities could be exposed to radioactive radiation. In connection with work in classified radioactive environments it is always a requirement that radiation levels are measured and analysed, and that dosages

are minimised. Studsvik provides radiation protection services, including supervision, planning, manufacture of individual dosimeters, registration of radiation levels and servicing of personal dosimeters.

Transport and logistics

The transportation of radioactive materials is circumscribed by strict national and international rules. Studsvik handles the transportation of waste and other materials to and from customer facilities, in the USA for the most part using its own vehicles.

Decommissioning services

The decommissioning process is long and complex. Studsvik's services include everything from feasibility studies, planning and project management to the practical task of dismantling and subsequent waste treatment.

Operations and outage support

The service and maintenance requirements at a nuclear power plant are considerable and become more so as the plant ages. All systems and components in classified radioactive environments need regular maintenance and cleaning to ensure reliable operating throughout the entire life cycle of the facility. The services include mechanical service, decontamination (removal of radioactivity), and the general janitorial services needed at nuclear power plants.

Fuel and materials performance

Fuel rods and other materials in use in the reactor environment are subject to intense stress while in operation. To ensure that the fuel and fuel cladding retain the properties that are necessary for safe and stable operating as long as possible these properties are tested in Studsvik's laboratories. Material tests to verify their resistance in various oper-

ating situations and conditions until the end of their lifetime are also performed in Studsvik's own laboratories. Studsvik also offers testing in reactor environments in association with the Institute of Energy Engineering (IFE), Norway.

Materials integrity and water chemistry

Measurements of crack propagation and other materials integrity studies are carried out on irradiated and non-irradiated materials with the object of reducing fuel- and materials-related outages, to ensure the service life of materials, and to prevent and reduce radioactive dosages in nuclear power plants.

Nuclear fuel analysis software

Fuel is a significant cost item at nuclear power plants. Consequently, worthwhile gains can be made from optimising fuel efficiency. Studsvik's software for computerised optimisatsion of reactor efficiency is a world leader. The software includes applications performing core calculations, core monitoring, transient analyses, simulation and analyses of spent nuclear fuel. It is used in connection with the licensing and design of light-water reactors as well as for real-time calculations of reactor efficiency.

Organisation

Studsvik's organisation is characterised by short decision-lines and business acumen with emphasis on innovation, efficiency and safety. In recent years the business has become more international, and has at the same time been streamlined around a small number of integrated offerings for the nuclear power industry.

Studsvik has offices and subsidiaries in seven countries and is active in far more. The Group has more than 1,100 employees, most of them outside Sweden. The President/CEO, some members of Group management and central functions for administration, finance and business development are all located at the head office in Nyköping.

The Group's subsidiaries have responsibility for the business on their respective geographical markets, which form the operating segments used in the Group's reporting system. The Group management team consists of the President/CEO, the CFO, who is the President's deputy, the Presidents of the subsidiary companies, and one Director each from commercial development and technical development.

The company's facilities are located outside Nyköping in Sweden and in Memphis and Erwin in the USA. A further facility in Workington in the UK is at the planning stage. This received all the necessary licenses in February 2008. Software development mainly takes place in the USA.

The business is based on a strong safety culture and high quality standards, which is only possible with well-documented and functioning processes.

Operating segments

As of 1 January 2008 the business reporting is based on five operating segments. This new segmental structure will sharpen the organisation's focus on individual markets and at the same time create a clearer picture of the Group's activities and performance.

Centra l proce ss e s

Studsvik's business is based on Groupwide working practices and common procedures that enable information on needs, problems and successes to be picked up and communicated between widely varying parts of the organisation.

The Group's activities are based on a uniform quality system, which makes possible consistent and unified communication. Information can be interpreted and evaluated in order to achieve best practice throughout the whole organisation.

Studsvik's operations in Sweden, the UK and Germany are certificated in accordance with ISO 9000 and ISO 14000, which means that the business's supportive processes are documented. The group's activities in other countries are certificated in accordance with other standards, eg ASME NQA-1 in the USA.

As Studsvik is expanding, both organically and via acquisitions, new individuals and new organisations are being regularly absorbed into the Group. An important aspect of this integration process is to maintain and develop the critical, value-creating processes while ensuring that the various parts of the organisation remain properly co-ordinated.

Studsvik takes regular action to improve and develop the documentation and communication relating to the Groupwide processes in the organisation, the most important of which are described in brief below.

Research and development

Innovation and technical development are key means of competition for Studsvik.

Technical and methods development projects are normally based on specific customer needs, and this process is then followed by broader commercial application. All of the Group's R&D represents

capital invested in know-how that has to be managed, developed and made available throughout the Group. Internal systems for knowledge transfer enable most research reports and other material to be searched for and readily accessible in databases.

Studsvik engages in R&D on own account and in joint projects with customers in the nuclear industry. Straightforward contract research is also carried out in the field of nuclear engineering. This results in specific solutions for specific customers, whose need can be quite complex. Often the solutions can be developed, at the next stage, into more flexible services that can then be offered to Studsvik's other customers.

Business development

Studsvik's business development processes are documented in manuals and other control documents. This enables the tempo of the decision-making process to be maintained without compromising on quality.

Recruitment and training

To succeed on a global market, Studsvik's local organisations strive to reflect the diversity of the market. However, consistency is a further objective, both with regard to competence, and also to the further development of the Group's personnel.

During the past year a project was carried out in the HR field that involved auditing the competence and recruitment status of the various companies in the Group. The result of the project will serve as a basis for drawing up a plan as to how the Group should tackle competence and management succession. The best methods and practices will be deployed, while the sourcing of competent personnel will be assured and internal mobility within the Group be promoted.

Sales and marketing

The customer focus of the organisation and the sales functions around the world are critical for the company's performance and development. Each segment has its own sales organisation. The co-ordination of these functions is particularly demanding in terms of clear and well-documented goals and strategies that are regularly assessed and reviewed.

In 2007 the sales organisation was reinforced by means of further hirings and organisational changes.

The Group operates under a uniform profile and brand name platform in combination with central guidelines and resources for market communication. Groupwide customer meetings and trade show participations are arranged on a project basis on the initiative of either group management or individual companies.

Project management

Most of Studsvik's contracts are carried out as projects. The resources and competence needed are selected specifically for each project to correspond optimally to the contract specifications. Project control is assured by means of documentation and reporting in accordance with given guidelines before, during and after completion of each project.

Project control is particularly important in the case of on-site projects at each customer's facilities as quality assurance and technology transfer are more difficult to implement than if the project were to be performed in Studsvik's own facilities.

Sweden

Studsvik's facility in Sweden treat metallic and organic waste. The facility has a large catchment area thanks to its location and its own harbour. Just over half of the income comes from waste treatment at the facility on behalf of foreign customers.

Eva Halldén, head of segment Sweden.

Leif Andersson, head of segment Sweden from July 1, 2008.

Business overview

The facilities at Studsvik in Sweden treat low- and intermediate-level radioactive waste with the object of reducing its volume, stabilising the end product, and recovering valuable materials, which once they are free released, can be used as raw materials in industry. Metallic waste is decontaminated, segmented and melted, which removes the radioactivity and minimises the volume of residual waste for disposal. Valuable metals are separated and recovered after a rigorous free-release procedure.

Dry organic waste, such as protective clothing, plastics, paper and similar materials, is reduced in volume through incineration. Incineration minimises the radioactive waste-volume, which is returned to the customer in the form of ash. Studsvik has developed a world-leading technique for incineration, which means that emissions are reduced to levels well below the official threshold values.

The facility at Studsvik is located on Sweden's east coast with its own harbour, which makes it readily accessible for transportation. This is important when it comes to arriving shipments of large components. The facility serves customers in Sweden, Germany and other nuclear countries on the Continent as well as in the UK.

Direct disposal is the primary competitor of waste treatment. However the customers' interest in treating waste is growing as a result of the rising cost of both intermediate storage and final storage, as well as the growing concern for the environment.

Comments on the year

Income increased, mainly due to a stronger order intake for treating metallic waste, and the treatment of large components, despite an unplanned outage in the third quarter.

Almost half of the income comes from customers in Sweden and just over half from abroad, mostly from Germany.

Capacity utilisation in the incineration facilities was relatively stable but slightly lower than in the previous year. Several new customers were acquired, including some in the Czech Republic and the UK.

The order intake for metallic waste was firm. Modernisation programmes, e.g. at the Oskarshamn nuclear power plant, are creating substantial quantities of replaced components requiring treatment.

In August an unplanned outage occurred in the smelting unit, which radically restricted production in August and September. The melter was brought back into operation in September. Order books for metallic and combustible waste were well filled at the year-end.

Business development during the year

Studsvik has a licence to melt up to 5,000 tonnes per year in the company's Swedish facilities. An enlargement to the melting facilities was completed during the second quarter, mainly with the object of improving logistics and enabling the unit to process large components of up to 600 tonnes in weight.

In 2007, 1,850 tonnes were processed in the unit.

Studsvik's technique for treating steam generators reached its commercial phase during the year, when delivery was taken of six steam generators, of which four were from Germany's Stade nuclear plant, and two from Ringhals in Sweden. The lead-time for a large steam generator has been reduced from the original twelve months or more, to the present four.

Trial melting for British customers was carried out with good results. Since the British rules

Net sales MSEK 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2006 2007

Operating profit

were changed during 2007, the licensing process for transportation for treatment has been simplified, resulting in an ingreased interest in waste treatment. Negotiations on commercial volumes have been started on the basis of the results of completed tests.

Threats and opportunities

Modernisation programmes, especially those at Swedish nuclear power plants, are still in progress and will continue to produce significant volumes of components for treatment. The decommissioning market in Germany is

Key figures

	2007	2006
Net sales, MSEK	135.4	126.2
Share of Group sales, %	10.3	10.3
Operating profit, MSEK	28.2	26.3
Operating margin, %	20.8	20.8
Fixed capital expenditure, MSEK	33.9	13.4
Average no. of employees	78	75

another important source of waste for treatment, and it is expected that large volumes will have to be treated. However, since German decommissioning projects have so far been subject to numerous delays, only relatively small volumes have become available by comparison with what is expected when the projects get going properly.

The British market also has substantial quantities of waste awaiting treatment. The simplified regulations, which came into effect in 2007, are creating worthwhile potential for the transportation of suitable metallic waste to Sweden for treatment at Studsvik.

The facility that Studsvik is planning to build near Sellafield is expected to function as a complement to the facilities in Sweden. When the facility is brought into production the waste can be divided between the two

facilities from case to case so that it can be treated where it is most cost effective. Studsvik also handles sorting, packing and the administration associated with the transportation of waste and its treatment abroad.

One alternative for customers is not to treat their waste. In the short term, this can be financially worthwhile, but from a totalcost perspective the financial arguments are in favour of treatment. In Europe, treatment, volume reduction, and recovery enjoy widespread support both within the industry and among the authorities.

Large band-saw cuts lead times

More or less everything is new in the Swedish facility for treating large components. Heat exchangers, steam generators and the like of up to 600 tonnes in weight have to be replaced when a nuclear power plant is modernised. These components are treated at Studsvik so that at least 80 percent of the metal is recovered and the remaining waste is minimised.

Studsvik leads the world with its technology that makes this possible. Just when delivery was first taken on a commercial scale of steam generators from nuclear power plants in Ringhals, Sweden, and Stade, Germany, significant technical advances were made during the year.

The efficiency of the entire process has been raised, as has capacity. The time needed for treating a stream generator has been reduced markedly as a result of several improvements.

A new 1,250 m2 segmenting hall has been built. A powerful band-saw has been developed so that the entire generator can be sliced up, rather like a enormous loaf of bread, all of which significantly raises the efficiency of the next stages in the process.

Improvements have been made to the remote-controlled robotics equipment that segments and treats the components. The blasting equipment has also been improved and a new high-pressure compactor has been purchased. Studsvik is now very well placed to further increase the level of materials recovery and to minimise waste.

United Kingdom

The UK market has experienced dramatic growth in recent years. In particular, the formation of NDA (Nuclear Decommissioning Authority) has paved the way for the extensive clean-up of the historic heritage from the early years of nuclear power. Studsvik has quickly established a strong platform on this market.

Business overview

Studsvik moved into the British market in 2005, since when it has quickly become a leading player in decommissioning and waste treatment. The activities are largely performed at the customers' facilities and to some extent also by transporting the waste to the Swedish waste treatment facility.

The contracts that are awarded by NDA were initially concentrated on the removal of radioactive waste deemed to present a particularly high environmental hazard from nuclear power plants, reprocessing plants and research facilities, known as high hazard projects. Most of the measures related to the plant at Sellafield, one of Europe's largest nuclear facilities. NDA's annual budget currently amounts to GBP 2.8 billion.

Apart from the NDA, Studsvik's services are also in demand in the private nuclear industry, where the customers include British Energy and General Electric. A third type of customer for decommissioning projects is the defence sector, where both government agencies, such as AWE (Atomic Weapons Establishment), and private sector customers, such as Babcock and Rolls Royce, have awarded contracts to Studsvik.

There has been some consolidation involving mergers and acquisitions among Studsvik's partners and competitors. Studsvik also made one acquisition during the year.

Comments on developments

2007 was the second full financial year for the British unit. The income comes largely from decommissioning projects. Around one-third comes from waste treatment services.

In 2007, a number of significant contracts were carried out at Sellafield, comprising dismantling and early decommissioning. Studsvik was awarded the largest decommissioning contract yet in the UK. The project represents a breakthrough for the decommissioning and treatment of historic heritage from the B243 facility at Sellafield, which is serving as a repository for historic waste. The contract also reflects great confidence in Studsvik.

The process of launching the project placed great demands on the newly-formed organisation. So far, the results are good, and the project is running according to plan, after initially being a few months behind the original schedule.

As a result of concentrated selling efforts during the second half of the year Studsvik received several new orders within decommissioning and waste treatment. In the latter case, new technical solutions had been successfully developed for the recovery of lead by means of melting and the volumereduction of oil by combustion.

One important event was that the Nuclear Waste Management (NWM) consortium, in which Studsvik has a 15 percent interest, went on to the final negotiations for a very long-term management agreement for the final storage of the UK's low-level radioactive waste. The agreement initially runs for a term of five years with options to extend it for a further twelve years in total. The initial contract period is worth MGBP 125. If all options are exercised the contract is estimated to be worth up to MGBP 500. The contract includes developing a strategy for treating low- and intermediate-level radioactive waste in the UK.

Business developments in 2007

Studsvik's challenge since the very start has been to compete on a fast-growing market, while at the same time building up enough delivery capacity to handle dramatic growth. To this end, a number of new employ-

Mark Lyons, head of segment United Kingdom.

ees were hired during the year. Strategic measures were also taken to ensure access to competent personnel. Joint activities together with universities, flexible benefit packages, and a comprehensive internal competence development programme put Studsvik in a position to bring the necessary specialist competence to bear. This also makes Studsvik an attractive workplace for ambitious specialists who will be given the right conditions for their personal and professional development.

In August, Studsvik acquired Alpha Engineering, which has 30 employees and sales in 2006 of MGBP 1.5. The acquisition complements Studsvik range of products and services with a number of specialist nuclear engineering services in ventilation and structural engineering. The company integrated well with Studsvik and showed robust growth during the rest of the year.

The possibility of shipping low-level waste from the UK for treatment at the facility in Sweden improved during the year, when the

British government issued new regulations that favoured this practice, provided that the remaining radioactive waste is returned to the UK. The British government has thus made it quite clear with its ordinance that it wishes to stimulate waste treatment and the recovery of materials, which is fully in line with the services Studsvik has to offer.

The new facility for the treatment of metallic waste (MRF) that Studsvik is planning in Workington, near to Sellafield, underwent a further licensing review in accordance with British and European regulatory systems. At the beginning of 2008 Studsvik received all the necessary licences to engage in commercial treatment of low-level radioactive waste at the facility. Further planning is in progress with the aim of commissioning the new facility towards the end of 2008.

Studsvik is developping the business in terms of its sustainability. During the year Studsvik developed its CSR reporting system and received several public awards in the UK in recognition of its activities in this field.

Installation of active ventilation in B204 keeps Sellafield on schedule for NDA

Back in December 2006 Studsvik was awarded a contract to plan, manufacture and install a supplementary, active ventilation system in B204, the main building at Sellafield. The building is being decommissioned and this project had to be completed for the decommissioning process to be carried out as planned. This required a high level of efficiency in all aspects of the project.

The newly manufactured components for the system were delivered to Sellafield in August 2007 and the critical installation stage was performed by Studsvik's personnel in October. So as not to have to interrupt other work in progress most

of the work was carried out after normal working hours. The final installation work was completed in December 2007, which is remarkably fast for such an extensive installation project. Consequently, Sellafield could report to its customer, NDA, that one of the most important checkpoints in their contract had been reached.

The project was successfully carried out in close cooperation by Sellafield's project manager and Studsvik. The customer's responsible personnel have expressed their great satisfaction that Studsvik was able to adhere to the time schedule even though the order and project start were delayed by two months and various extensive but unforeseen tasks also had to be performed.

Threats and opportunities

Market developments in the UK are expected to remain positive. The interest in decommissioning redundant nuclear facilities and treating the waste they leave behind is supported by plans to develop new nuclear power plant. Studsvik has established a strong position on the market within its specialist fields.

The waste treatment market offers substantial business potential. More and more factors suggest that the UK will adopt the general strategy of treating low-level radioactive waste as far as possible to minimise the volumes that need to be sent to final storage. Studsvik is in a good position to commercialise these needs. Studsvik's equity stake in NWM provides a strong platform for this. Both the Swedish facility and the one planned for Workington mean that Studsvik is ready to deal with these growing volumes of radioactive waste.

Studsvik's ability to expand further is dependent on its ability to continue to attract the necessary specialist competence. The

lack of qualified personnel is a problem throughout the industry. This also creates openings for Studsvik, which already possesses strategic specialist expertise and is meeting steadily growing demand for straightforward consulting services.

There is also long-term potential in areas that have so far not been marketed in the UK, such as the THORSM technology. However, these opportunities still involve a great deal of uncertainty and they are deemed to be further down the pipeline.

Key figures

	2007	2006
Net sales, MSEK	129.1	30.9
Share of Group sales, %	9.8	2.5
Operating profit, MSEK	3.0	–11.3
Operating margin, %	2.3	neg
Fixed capital expenditure, MSEK	42.4	19.3
Average no. of employees	65	36

Share of Group's net sales 2007

Operating profit/loss

Germany

Studsvik's activities on the Continent are based in Germany. Most of the sales take place there and in neighbouring countries that have nuclear power. The contracts are mainly performed on-site at customer facilities, and there is a growing element of consulting work.

Ulf Kannengiesser, head of segment Germany.

Business overview

The business concentrates on the decommissioning of redundant facilities and the provision of consulting services for nuclear power plants still in operation. The segment has just over 600 employees, or almost half of the Group's total head count. The services provided comprise:

• Decommissioning
• Service and maintenance
• Health physics services
• Engineering and consulting
• Other consulting services

From its base in Germany Studsvik serves customers in Germany, Switzerland, Belgium, France and the Netherlands. All of Germany's nuclear power plants are customers of Studsvik. In addition, Studsvik provides services for research institutions, universities, and fuel manufacturers.

The contracts are mainly carried out on the customers' premises and the German company's only facility consists of a technical workshop where many of Studsvik's methods and systems have been developed, including a method for cutting tubing from the inside as well as Studsvik's system for the decontamination of surfaces in buildings.

Germany's last nuclear reactor is to be closed down by 2021, according to the nuclear industry's agreement with the government. A number of reactors have been shut down and initial dismantling activities have begun.

Waste from the German market is treated in the Swedish waste treatment facility, after which stable, volume-reduced waste is returned to the customer. This service is reported in the segment Sweden.

Comments on developments

The main factor behind the increase in sales and result was a high level of capacity utilisation within engineering and service throughout the year. Several lengthy, unplanned outages at customer facilities resulted in an unexpectedly high level of demand for maintenance services.

In April Studsvik received an important order to decommission a turbine hall in the Obrigheim nuclear power plant. This contract represents the first of a series of decommissioning contracts that are expected to be received from Obrigheim, Würgassen, Mülheim-Kärlich and Stade.

During the year there was also some canvassing of the market in France, which resulted in the first contract for CEA in Cadarache involving the application of Studsvik's "wall shaving system" for decontamination.

Business development in 2007

During the year the German units were merged into a single company, from the two formerly separate ones. Together with the Studsvik Group's decision to introduce geographical reporting by segment, this has increased transparency for customers and employees alike.

During the year, additional resources were devoted to marketing and sales, and this is believed to have strengthened Studsvik's position in the face of persistent competition for coming contracts.

By acquisition and hiring more personnel, Studsvik further strengthened its engineering organisation. Ingenieurbüro Dr Fary, a nuclear safety consultant, was acquired in March. This acquisition has brought additional expertise within engineering services, safety analysis and consulting, which are in growing demand among customers. The

Growing number of decommissioning contracts in Germany

In addition to decommissioning projects at Obrigheim, Mulheim-Kärlich and Stade in Germany, Studsvik has recently received a major order from E.ON's nuclear division. The order includes feasibility studies, preplanning and planning, and dismantling of sections of the walls of a cooling water basin for nuclear fuel and an evaporation unit. Scrupulous analysis and planning have been completed and with all the necessary licences having been obtained at the beginning of 2008, the actual dismantling of the parts can begin.

The focus of the project is the dismantling and treatment of the materials surrounding the cooling water basin. They comprise 150 tonnes of steel and 150 m3 of concrete. In addition a further 130 tonnes of concrete piping and 145 tonnes of metal components have to be treated. The project involves working on several floors at the same time. In some sections, E.ON has recently completed a decontamination process to reduce the collective radiation dosage. Elsewhere the work involves the use of remote-controlled tools and machines.

acquisition contributes to increasing the proportion of consulting services in Studsvik's sales mix, with a high added value.

Studsvik is market leader in health physics and decontamination, and its business has a high degree of flexibility, partly a result of purposeful measures carried out in recent years to develop the competence of the personnel. This, together with the growing demand for more specialist services has improved Studsvik's margins in Germany. Further competence development is successively improving the unit's ability to increase its added value and margins.

Threats and opportunities

The business has long-term growth potential in decommissioning in Germany, where high-volume contracts are still awaiting negotiation. Customers have adopted differing strategies for decommissioning contracts, and in some cases large, complex contracts are expected, while other facilities will use numerous small procurements.

In this context, Studsvik is a medium-sized company with the state-of-the-art competence that is also the key to the really large contracts. Studsvik's size can limit its ability

to compete on its own for these. However, Studsvik is considered to be in a good position to compete as a supplier, either on its own, or as a specialist partner.

The negotiation of contracts is circumscribed by extensive rules that are not infrequently rather prolonged. Last year's high capacity utilisation in engineering and services is not expected to sustain, since it was partly an effect of unplanned outages. On the other hand, a large proportion of the workforce can be redeployed to coming decommissioning contracts, where demand is expected to rise successively.

A growing element of specialist engineering and consulting services represents another growth area with generally higher margins than standard maintenance contracts.

Key figures

	2007	2006
Net sales, MSEK	341.3	308.7
Share of Group sales, %	26.0	25.3
Operating profit, MSEK	25.3	25.8
Operating margin, %	7.4	8.4
Fixed capital expenditure, MSEK	17.6	5.9
Average no. of employees	564	534

Share of Group's

Operating profit/loss

USA

On the North American market, Studsvik is primarily engaged in waste treatment in the USA, where it is the second largest supplier and leader in the treatment of radioactive waste. The business also involves a substantial element of transportation and logistical services, associated with the waste treatment.

Lewis Johnson, head of segment USA.

Business overview

In North America, Studsvik markets its services primarily to the commercial nuclear industry in the USA. It also has customers in research, at state and other institutions in the USA, and nuclear power producers in Canada. Studsvik owns facilities in Memphis and Erwin, both in Tennessee. Sales are dominated by three of Studsvik's key offerings:

• Treatment of radioactive waste.
• Waste management services at customers.
• Transport and logistics.

The logistics business uses a fleet of more than 60 vehicles with the capacity and competence to transport radioactive materials. The Erwin facility processes wet, low- and intermediate-level radioactive waste from operating nuclear power plants utilising Studsvik's patented pyrolysis technology, known as THORSM. The Memphis facility treats other organic waste and metallic waste.

The services of the waste treatment units using Studsvik's THORSM method are marketed to the federal market in the USA by THOR Treatment Technologies (TTT), in which Studsvik and Washington Group each have a 50 per cent interest.

Studsvik's software business also has important functions in the USA, which are reported in the section on Global Services.

Comments on developments

The business in Erwin made further good progress with high capacity utilisation and healthy margins, despite some operating disturbances at the beginning the year. Upgrading of the facility at the end of 2006, together with sales campaigns, were among the factors enabling the business at Erwin to report its best full-year result ever. The business carried on at Memphis in waste treatment and logistics noted low profitability. Persistent stiff competition meant that prices were still depressed and that higher costs had to be incurred on defending the company's market position.

The income was generated fairly evenly by Erwin and Memphis, of which the latter includes the logistics and transport lines of business.

The intense competition has highlighted the fact that the customer can choose between treating waste or storing it untreated.

Year-end order books were well filled as far as the Erwin business is concerned, but unsatisfactory in the case of Memphis.

THOR Treatment Technologies developed according to plan with a positive cash flow. In the fourth quarter, TTT received an order worth MUSD 7.5 from the US Department of Energy. The contract extends over 22 months during which TTT will demonstrate THOR's ability to treat high-level radioactive waste. TTT's result is stated in accordance with the equity method and is expected to make a positive contribution to the Studsvik Group's result once the accumulated losses have been worked off.

Business developments in 2007

The business is characterised by a concentration of resources in response to the stiff competition on the market. The organisation has been developed and strengthened, marketing drives and ventures were carried out, as were some investments in product development in order to raise productivity and the value of the customer offering. A new management team was appointed at the beginning of the year to put the business in the right shape to face the competition. Lewis Johnson was appointed president and he then appointed a new management

group including in a new CFO and new unit managers.

Memphis

The Memphis facility is mainly engaged in the treatment of only dry, metallic radioactive waste. Technical developments have enabled the facility to treat two reactor vessel heads from the Calvert Cliffs nuclear power plant and one from the nuclear power plant at St Lucie, from which a pressure tank was also treated. This is the first time ever that such components have been treated in the USA.

Apart from the application of Studsvik's proprietary technology, systematic measures have already been going on relating to the transfer of technology from other industries that can minimise the volumes of waste the customer has to send to final storage. A local rail siding has been installed, which will provide the facility with a direct link to the rail network. Studsvik now employs 60 trucks in its logistical operations, which primarily serve the needs of Studsvik's own facilities. Its sophisticated specialist expertise in the transportation of hazardous materials is also made available as an independent service to the nuclear industry.

Erwin

The Erwin facility treats wet radioactive waste from the commercial nuclear power industry. Important key components were replaced in connection with the shutdown at the end of 2006, maintenance measures were carried out and several technical improvements were made. The measures have improved the facility's efficiency and margins, ensured its operating reliability, and minimised the risk of outages.

The unit had a healthy level of capacity utilisation and a firm order situation last year. A new technique for spray drying raised productivity and opened new scope for the treatment of new types of waste at the facility.

A co-operation agreement was signed in September with Waste Control Specialists

Key figures

	2007	2006
Net sales, MSEK	427.7	364.3
Share of Group sales, %	32.5	29.9
Operating profit, MSEK	6.3	11.4
Operating margin, %	1.5	3.1
Fixed capital expenditure, MSEK	21.4	288.8
Average no. of employees	234	199

Share of Group's net sales 2007

Operating profit/loss

Q1 2006 2007 Q2 Q3 Q4 Q1 Q2 Q3 Q4

(WCS). Provided the necessary licences can be obtained this will open up an entirely new market for the storage of Class B and Class C waste. According to the agreement, Studsvik will offer waste treatment and stabilisation and WCS will provide storage for Class B/C waste at its repository in Texas.

Threats and opportunities

Studsvik is technical leader in the treatment of radioactive waste and has enjoyed considerable commercial success for many years by stabilising and reducing the volume of the customers' radioactive waste. At present radioactive waste is being sent for storage without any measures in contrast to treating it, which would result in better overall longterm economy, minimise the impact of the business on the environment and improve safety. In the short term this represents a serious commercial threat. Studsvik must therefore, by continuing with its technical development and marketing activities, become even better at demonstrating the superiority of the treatment option in terms of economic benefit as well as environmental sustainability.

The intention of the power sector to expand its nuclear power production, not least, means that the industry needs to adopt a sustainability perspective, for example by telling the public that it takes responsibility for its impact on the environment.

The closure of the Barnwell final repository will make it even harder than in the past to store intermediate-level radioactive waste, which means there is a risk that reactor owners will have to store untreated waste at their own facilities. However, it may turn out that Studsvik's agreement with WCS will mean that a third option becomes feasible, by which Studsvik can offer customers a storage solution at WCS for waste that has been treated by Studsvik. Provide the business gets all the necessary licences, this will be an important opportunity for the future.

The agreement will also open up opportunities to do business with those companies that have so far stored their waste at Barnwell, but which are not at present customers of Studsvik's. Finally, the agreement will also provide new business openings for the logistics business.

New technology changes attitudes towards large components in the USA

Studsvik has processed two large reactor vessel heads from the Calvert Cliffs nuclear power plant. This is the first time in the history of the USA that components of this size have been treated. In less than 100 working days, Studsvik's team reduced the volume of the two immense components and the accompanying scrap metal by no less than 50 per cent. The measure will facilitate waste storage and reduce the customer's costs. The project began in 2006 by separating one of the vessel heads during the first of two planned shutdowns. The vessel head was then stood on its end pending the arrival of a vehicle to remove it. Studsvik dismantled the ancillary components and fittings, and filled ten containers with miscellaneous metal scrap.

In May 2007, Studsvik's team returned to dismantle the second vessel head, which resulted in another 25 well-filled containers. Then both vessel heads were transported, mainly by sea. The shipment from Calvert Cliffs to the terminal at Memphis took three weeks. Once in Memphis the enormous vessel heads were driven the final stage on Studsvik's specially designed truck-trailers for heavy goods.

Global Services

Studsvik is one of the world's foremost independent suppliers of software for fuel optimisation as well as materials technology and analysis. These services are provided through the Global Services segment and its customers include nuclear power plants and fuel manufacturers in many countries.

Business overview

Global Services includes specialist services for operating efficiency, viz. materials technology and software for reactor operations. The segment offers the following services:

• Fuel and materials performance
• Materials integrity and water chemistry
• Nuclear fuel analysis software
• Transport logistics

Studsvik is the world's leading supplier of software for fuel optimisation by means of core monitoring and analysis of nuclear fuel. In practice, it is the only independent supplier on the world market. The software is used by about half of the world's nuclear power plants, and also by fuel manufacturers. The competing software on the market is supplied by the fuel manufacturers.

Studsvik is also one of the world's foremost independent suppliers of tests, investigations and analyses of nuclear fuel and materials. These tests are performed in Studsvik's laboratories in Sweden and in the research reactor in Halden, Norway.

Comments on developments

The segment's income is generated fairly evenly by the software business and the services in materials technology.

The product area software for fuel optimisation performed well and reported higher net sales and operating result than in the previous year. A relatively large share of the sales takes the form of stable license fees, which are being successively broadened as a result of developments to the software's functionality and applications.

The accelerated development rate and readiness to invest in the nuclear industry has generated a growing interest in Studsvik's software. In 2007 Studsvik's software was

sold to Mitsubishi Heavy Industries (MHI) for the first time to be used for the licensing of new nuclear power plants. This is described in more detail on pages 32–33.

The financial performance of the materials technology operations was weaker than in the previous year. An unfavourable product mix caused a decline in profitability despite a maintained level of sales. In April an outage occurred at a laboratory at the Studsvik facility, which temporarily reduced capacity.

The services were in firm demand among new customers in the USA and the UK. Laboratory capacity is declining generally in these two countries, and the closure of redundant, old laboratories in the UK has helped to strengthen Studsvik's position there for coming years. The order intake and capacity utilisation improved during the later part of year.

Business developments 2007

The software business opened a new development office in Wilmington, NC., after Studsvik had hired some of the world's leading specialists in the field, who have been successively integrated into the development process.

During the year, Studsvik launched a new version 5 of its original Casmo physics code. This was well received, which suggests that the product still enjoys firm demand on the market.

In the materials technology product area, the first joint ramp tests were carried out at the end of the year in the test reactor at Halden. This represents a milestone for the partnership with the Norwegian Institute for Energy Technology, and means that the jointly developed test activities can be launched commercially on the market. The tests result in radiated fuel rods that can then be further analysed at Studsvik's Hot Cell

Eva Halldén, head of Materials Technology within Global Services.

Thomas Smed, head of Software within Global Services.

laboratory. Consequently, Studsvik can now offer a comprehensive range of tests and analyses for reactor fuel, which has not been possible since its own materials testing reactor was decommissioned in 2005. A highly complex project carried out

during the year involved the treatment of a small quantity of corroded metallic fuel from a research reactor. Corroded parts were removed for separate treatment. The project was technically demanding but could be completed safely with the desired result.

Third-generation reactors licensed for use with Studsvik's software

Mitsubishi Heavy Industries chose Studsvik's software for core monitoring (CMS) for use with new advanced reactors of the ATMEA-1 type. This agreement means that Studsvik's technology will achieve a prominent position in the development of the new reactor technology.

The ATMEA-1 reactor is a result of a joint venture between Japan's Mitsubishi and France's Areva. A mediumsized compressed water reactor with an output of 1100 MWe is being developed, marketed and licensed by ATMEA, a newly-formed joint venture company. It is expected that reactors of this type will be used in newly built power plants around the world.

The licensing of the reactor involves performing a detailed simulation of the effect in the reactor core. The reactor design and fuel are analysed together as a means of determining to what extent the established safety requirements are satisfied.

ATMEA estimates that the first reactor will be ready for delivery as early as 2009.

A new autoclave was brought into production during the year for the analysis of crack propagation in radiated materials, thereby radically increasing the capacity for tests of this type. A new creep test has also been developed for analysing the behaviour of fuel in empty reactor tanks.

The sales organisation for materials technology was reinforced and sales activities were stepped up during the year.

Threats and opportunities

Demand within Global Services is driven by the nuclear industry's efforts to optimise operating efficiency and output. Modernisation programmes and plans to build new power plants also generate demand for software as well as specialised materials technology services.

Within materials technology, Studsvik's technical advances and high-value added offering are creating the potential for additional sales in the future.

The product area competes in some areas with national research institutions whose approach includes competing on noncommercial terms.

In the software product area Studsvik's market share is already so high that growth potential is relatively limited in the short term. The greater readiness to invest in the nuclear industry means, however, that there is a growth potential. The development of new applications and new functionality will also provide further growth potential.

At the customers' top executive level, Studsvik's brand name and the expertise associated with it are well known and enjoy a very good reputation. This is very much the result of Studsvik's activities within operating efficiency. In the long range, this can help to create openings on new markets for Studsvik's other product areas, even in the absence of direct synergies with the product areas.

Share of Group's net sales 2007

Key figures

	2007	2006
Net sales, MSEK	178.8	167.7
Share of Group sales, %	13.6	13.8
Operating profit, MSEK	14.4	36.4
Operating margin, %	8.1	21.7
Fixed capital expenditure, MSEK	5.3	10.3
Average no. of employees	118	114

Sustainability, the environment and safety

For the first time Studsvik has published a Group report on sustainability, the environment, and safety. This report has been developped in accordance with the requirements of Global Reporting Initiative (GRI), level "B". The following section summarises the most important information from the complete report. The complete report is available on Studsvik's website: www.studsvik.se.

Studsvik applies the principle of materiality in GRI, which means that the reporting concentrates on the financial, environmental and social factors where Studsvik's impact has the greatest importance. This extract of the report focuses on:

• Radiation doses to the environment from Studsvik's nuclear facilities in Studsvik, Sweden, and Erwin and Memphis, USA
• Radiation to personnel
• Accidents involving lost time

Radiation to the environment can be measured both in the form of dose rate levels at the fence-line of the site and via emissions of radioactive substances to air and water. The Sustainability report shows that the dose rates by the fence-line and in the form of releases to air and water are well within applicable values.

Neither have the radiation doses to the personnel at Studsvik's nuclear facilities exceeded applicable limits. However, the levels at the American facilities do tend to be higher than those at the Swedish facility.

In segment Germany further measures and follow-up are required to reduce the number of accidents. This will involve ensuring there is a sound work environment and that the safety activities are organised in the optimal manner.

r a d i oac t i v e r e l e a s e s to the environment

The Studsvik facility gives rise to releases of radioactive substances into air and water. At the facilities in Memphis and Erwin, there are only releases to air.

Studsvik facility

The doses reported for the Swedish facility relate to total emissions to air and water. Their level in 2007 amounted to less than 0.5 per cent of the applicable threshold value.

The doses in the vicinity of Studsvik are followed up regularly. Through dosimeters located on the fence-line. No levels in excess of the applicable limits have been reported.

Erwin

Releases of radioactive substances from Erwin are very low.

After the dose level at fence-line reached a peak in 2005, measures have been taken. These measures had the desired effect by 2007, and no levels in excess of applicable limits were registered during the year.

Memphis

Like the Group's other two facilities, Memphis reports radioactive releases within the applicable limits. Doses at the fence-line were also applicable limits.

R a d i at i o n d os e s to per soN nel

Studsvik facility

The report covers all of Studsvik's activities on the site, by which is meant both segment Sweden and Global Services.

The highest individual dose in 2007 was higher than in the previous year, but was still well within the applicable limits. Both this and the collective dose were affected by the treatment of large components with higher radioactivity than other metallic waste. A special programme will reduce the doses to the personnel from this source.

Erwin

The radiation dose to personnel varies from one year to another, mainly as an effect of what measures and repairs were necessary on the facility's process systems. The outcome for 2007 is 10–20 per cent lower than for the previous three years. No regulatory limits were exceeded.

Memphis

The outcome was affected by the treatment of large components with a high radioactive content and consequently higher radiation levels. Moreover, time-consuming sorting of waste contributed to an increased collective dose. However, no regulatory limits were exceeded.

indu s t r i a l S a fe t y

The safety of our employees is a Group issue that is monitored within each business segment and analysed at Group level. All employees in the nuclear activities undergo training in radiology and safety engineering before they are allowed to start working for the Group. They then receive regular further training.

All business segments are required to meet all relevant legal requirements. In addition, national authorities and international bodies also carry out regular inspections of the business. All in all this guarantees a high standard of safety. At Studsvik's Swedish facilities safety reviews are carried out ahead of any changes to the business or the organisation. Accidents are always followed up, the caused investigated and the need for complementary measures assessed.

The number of accidents in segment Germany rose markedly in 2007 from what was already a relatively high level, compared to the Group average. An action programme has been launched with concrete targets for reducing the number of accidents, following up and dealing with accidents and incidents. Follow-up and analysis will be made more efficient with the object of improving the organisation's ability to prevent accidents.

Ot h e r i m pac t on the environment

Waste and conventional emissions

Studsvik's facilities are small and utilise effective methods for emissions control. Conventional, non-radioactive emissions arise, above all in the form of carbon dioxide, in the American business's logistics sector, which uses its own trucks to transport waste.

Residues from the treatment of foreign radioactive waste at the Swedish facility are returned to their country of origin. Domestic radioactive waste is prepared for final disposal.

Utilisation of resources

The consumption of thermal energy, electricity, oil, petrol, natural gas, water and chemicals is followed up locally and reported on Group level to the extent that they are of material significance. Material values were measured for electricity consumption by the waste treatment facilities, water consumption in Sweden and at Erwin, and fuel consumption by the logistics sector.

L egal compliance

Studsvik operates worldwide and is required to meet prevailing national and international legal requirements and agreements. Some business operations require licences and are subject to significant regulatory supervision. Comprehensive annual reports are submitted to the Swedish Radiation Protection Authority and the Swedish Nuclear Power Inspectorate. The safety programme at the Group's American facilities is in compliance with relevant demands of the American authorities; however, it has largely the same structure as in Sweden.

Emissions to air and water, % of applicable limit	2007	2006
Studsvik, Sweden	0.01	0.08
Erwin, USA	0.14	0.003
Memphis, USA	4	0.4
Maximum dose rate at fence-line, mSv	2007	2006
Studsvik, Sweden	0.4	0.4
Erwin, USA	0.7	0.8
Memphis, USA	2.1	3.7
Dose rates to personnel, mSv (collective/max individual)	2007	2006
Studsvik, Sweden	158 /14.2	164 / 7.2
Erwin, USA		1,578 /31.3 1,858 /34.8
Memphis, USA	1,230 /34.0	866 /35.5

Human resources

Experience, safety, innovation and reliability are cornerstones in Studsvik's business. In order to protect these Studsvik invests in its employees' development and designs workplaces for secure people with great enthusiasm for nuclear technology. The degree of specialisation is high and the disciplines differ, but underlying this are shared core values and a feeling of team spirit.

Average number of employees

2003	1,313
2004	1,353
2005	1,278
2006	1,279
2007	1,141

Studsvik is a knowledge-intensive service enterprise on the international nuclear market. The success rests on the knowledge of our employees. In today's renaissance for nuclear power the demand for people with nuclear competence has grown rapidly and there is a distinct shortage of qualified nuclear technicians. The shortage of nuclear engineers is particularly marked in Germany and the UK.

Studsvik's aim is to function as an integrated enterprise throughout the entire organisation. The common core values shared by Studsvik's employees rest on four concepts.

EXPERIENCE

"We have a genuine interest in nuclear technology and our customers. We document our work and we learn from each other. Our accumulated knowledge is systematically updated and is accessible to all. It has been like this since 1947."

S AFETY

"It is always safety first here. We have the ability to see developments and to foresee the course of events. We maintain wide margins and never cut corners when it comes to quality."

INNOVATION

"We try out new approaches and have a positive attitude to change. We question and propose new paths for reaching agreed goals."

RELIA BILITY

"We know what is expected of us, and see to it that we can always deliver it. We are reliable, honest and straight. We think ahead and keep our promises in all situations."

An important aspect of Studsvik's strategy is to maintain a healthy corporate culture and offer an attractive workplace. As Studsvik is growing via acquisition, a mature older structure will often meet younger, newly established and fast-growing cultures. This means that a common corporate culture has to be actively developed.

This process takes place in a structured fashion in a number of well-defined areas, which are described below.

Personnel development

Studsvik, like the entire nuclear industry, is facing an extensive generation succession. A wide-ranging action programme has been launched to handle this.

In 2006 a group of around 200 employees – managers, supervisors, specialists, project managers and other key personnel in the company – was surveyed. This gave us a clear picture of who the people are behind each position.

During 2007 this process continued by analysing the results. Concrete plans for HR activities have been drawn up, one each for Sweden, the UK, Germany and the USA. The plans describe the current situation and the need for measures in the following areas:

• Recruitment
• Competence and training
• Leadership and management succession
• Programme for personal development
• Retirements and generation succession
• Salaries and benefits

A platform has thus been established for continuing the process, whose main purpose is to ensure competence and skills development as well as management succession within Studsvik.

Competence Development

In 2007 priority was given to sales training, leadership, specialist technical expertise, and language skills.

Competence development is guaranteed through competence plans, competence groups and training. A personal development plan is drawn up for each employee. This is based partly on the employee's development needs and partly on their wish to broaden or deepen their knowledge. The purpose of these plans is to match each employee's abilities with the needs of the company. The plan, which is revised annually, states goals and measures for the employee's further development and other personal development.

News, advice and research findings can be shared among specialists within the framework of a number of competence groups. This also contributes to competence development and the dissemination of knowledge. Courses and training are arranged regularly within a variety of subject areas.

An international exchange programme was introduced in 2007. Employees in different countries exchange jobs with each other for a period of three months. This spreads knowledge within the Group and improves the potential for cooperation by increasing the understanding of what other units do. It also creates new communication lines for individuals and working groups and helps to build up internal networks.

Leadership

Developing staff and competence within critical specialist fields presents a great challenge, as does ensuring management succession.

The role of managers at Studsvik is to create sound conditions for cooperation and the exchange of expertise and also to ensure that every individual's knowledge and competence are utilised to the full. Managers absorb new thinking, support innovation and determine the direction in which the business units develop.

To achieve Studsvik's overriding goals the company needs to attract, develop and retain the best managers in the nuclear power industry. Sound management will enable Studsvik to guarantee three things:

• High customer value
• Personal development for all
• Healthy profitability

Employees by gender

Average no. of employees by segment

Recruitment

Studsvik's recruitment activities are intended to continuously strengthen its total competence. A further aim is to achieve a balanced gender structure as well as a sound age distribution. In general the employees have long experience of nuclear technology and broad expertise within Studsvik's areas of activity. In order to maintain and complement this experience with new specialist expertise, the company is actively seeking new young employees straight from school or university or with a couple of years of work experience, particularly nuclear engineers and technicians.

In 2007 trainee programmes were launched in Germany and the UK and an existing programme was re-launched in Sweden. The programmes are based on cooperation with higher education institutes and offers students support and resources to complete their studies and exam work. Studsvik is one of few employers within the nuclear sector that can offer modern, well-equipped workplaces with access to specialist competence and opportunities for fieldwork. It provides a network of contacts for young people for later recruitment to trainee programmes and employment.

In 2007 Studsvik took part in the Jobs Fairs organised by technical universities in Sweden and the UK.

Similar programmes were launched in the USA as well during the later part of the year.

Salary and benefits

To be able to attract and retain qualified employees Studsvik offers competitive salaries. The variable component is based on a combination of individual performance and collective targets for their own business unit. Conditions on the labour market vary from one country to another each subsidiary has a relatively independent model that suits its own conditions.

Studsvik has bonus programmes for managers and sales personnel, whose purpose is to reward sales success and a focus on profitability. In Sweden, the USA and parts of the UK a broader bonus programme has been introduced for all employees.

The Studsvik share

Share price and trading

Stockholmsbörsen's Small Cap Index fell by 9.7 per centin 2007. Studsvik's share price fell by 39 per cent during the year, from an opening price of SEK 253 to a closing price of SEK 155 at the end of 2007, equivalent to a closing market capitalisation of MSEK 1,274. During the year the share price fluctuated between a high of SEK 290 on 15 January and a low of SEK 150 on 21 December.

Earnings per share before dilution amounted to SEK 5.65 (4.24), and after dilution to SEK 5.65 (4.24). See page 94 for definitions.

In 2007, two million Studsvik shares were traded for a value of MSEK 472. This corresponds to 37 per cent of the free float (the value of shares that are available for trading), which consisted of 828 million shares. Shareholders controlling more than 10 per cent of the share capital are not included in the free float.

Number of shares and share capital

On 31 December 2007, Studsvik AB (publ) had 8,218,611 shares in issue. Each share

carries one vote and entitles the owner to share equally in the company's assets and earnings. Each share has a par value of SEK 1.0 and the share capital amounts to MSEK 8.2.

Dividend policy and dividend

The Board's goal is that on average the dividend should correspond to at least 30 per cent of the consolidated profit after tax. Decisions on dividend proposals will, however, depend on Studsvik's growth potential, the strength of its balance sheet, liquid funds, and financial situation in general.

The Board proposes that the Annual General Meeting resolves in favour of paying a dividend of SEK 2.00 for the 2007 financial year.

External analysts

Research is published by:

• Jefferies International Ltd, Ian Macleod and Alex Barnett
• Remium Securities

The Studsvik share

Data per share

Amount, SEK	2007	2006	2005	2004	2003
Number of shares at the end
of the period	8,218,611	8,218,611	8,218,611	8,116,611	8,114,211
Average number of shares
before dilution	8,218,611	8,218,611	8,167,611	8,115,411	8,114,211
Average number of shares
after dilution	8,218,611	8,218,611	8,167,611	8,217,411	8,218,611
Price, December 31	155.00	253.00	204.00	92.50	98.00
Earnings per share before dilution	5.65	4.24	7.48	–8.19	3.93
– of which, from continuing operations	5.65	4.24	5.81	2.99	3.93
Earnings per share after dilution	5.65	4.24	7.48	–8.09	3.88
– of which, from continuing operations	5.65	4.24	5.81	2.95	3.88
Equity per share	69.58	67.97	68.90	54.60	65.48
P/E ratio	27	60	27	neg	25

Shareholder structure, December 31, 2007

No. of shareholders	No. of shares	% of total shares
		3.7
235	243,657	3.0
94	407,046	5.0
27	608,053	7.4
15	1,096,027	13.3
18	5,556,764	67.6
3,800	8,218,611	100.0
	3,411	307,064

Major shareholders, December 31, 2007

	Number of shares	Holding, %
Karinen Family	1,589,012	19.3
Briban Invest AB	1,283,492	15.6
Allianz global Inv	714,561	8.7
Goldman Sachs International Ltd	472,750	5.8
Invus Investment AB	184,800	2.2
SEB Sverigefond Småbolag	157,200	1.9
Citibank NA London	154,268	1.9
Morgan Stanley & Co Inc	149,750	1.8
SEB Sverige Småbolag Chans/Risk	145,500	1.8
The Northern Trust Co	133,550	1.6
Total, 10 largest shareholders – holdings	4,984,883	60.6
Other shareholders	3,233,728	39.4
Total	8,218,611	100.0

Change in share capital

Year	Transaction	Increase in no. of shares	Share capital SEK	Total number of shares
1994	Founding	500,000	500,000	500,000
2001	Bonus issue	5,300,000	5,800,000	5,800,000
2001	Directed issue	2,314,211	8,114,211	8,114,211
2004	New issue1)	2,400	8,116,611	8,116,611
2005	New issue1)	102,000	8,218,611	8,218,611

1) Conversion of stock options.

Risk factors

Studsvik is active on an international, competitive market. With activities in seven countries, Studsvik is exposed to operational and financial risks. Responsibility for risk assessment rests primarily on each subsidiary; however, this is monitored and followed up by the parent company. An overall assessment of the Group's risks and risk control is submitted to the Board each year, and followed up regularly. The Group has a particularly safety-conscious culture that is based on a long tradition of clearly expressed procedures for quality assurance and followup within the framework of various quality certification systems.

The fact that Studsvik is active in the nuclear power sector involves special risks that are regulated and supervised by national authorities and international agencies.

An overall risk assessment must include all sections in the annual report and a general analysis of the external situation. Selected risk factors are explained below without any ranking. Financial risks are covered in the section on "Accounting policies and valuation principles" on page 66.

Market

The demand for Studsvik's services depends on a number of factors, and in the long term is dependent on developments in the nuclear power industry and factors influencing them. By tailoring its services to the nuclear power industry's needs throughout plant life-cycles, Studsvik's business is only dependent in the very long term on the survival of the nuclear power industry.

Public opinion

Issues relating to nuclear technology are of public interest. A range of factual matters may become subject to expressions of opinion and public debate. In this context, the possibility that opinions emerge on issues that directly or indirectly limit Studsvik's commercial freedom of action cannot be ruled out. Studsvik is acting consistently to maintain public confidence by doing what it can not to conduct its business in conflict with public opinion. Its relationship with these outside interests is based on dialogue and the principle of maximum transparency.

Ex t e r n a l r i sk s

Licensing and permits

Studsvik treats radioactive materials and waste, which means that some of the company's business activities require a licence and are subject to official regulation and supervision. Therefore, there is a risk that the prospects for the business could change as a result of alterations to, or the revocation of licences, changes in regulations, or political decisions. This could entail additional safety measures that Studsvik may need to enable its business to conform to the requirements. Regulators could notify Studsvik of possible transgressions of its license conditions or regulations. In so far as its Board and management can judge, Studsvik satisfies the stipulations in such regulations. The Group's very highly safety-conscious culture means that it is well placed to adapt to new regulations and directives.

Co m m e rc i a l r i sk s

Technology

Software, laboratory activities, waste treatment and certain specialist services provided by Studsvik's business segments are based on proprietary technology that is constantly exposed to competitive challenges. The possibility that other methods may be developed that reduce the competitiveness of Studsvik's technologies therefore cannot be ruled out.

Studsvik controls this risk by patenting its proprietary technology whenever it is considered possible and financially justifiable. Risks are also controlled by means of continuous product development in close co-operation with customers as well as by, in the main, offering customers one-stop solutions based on Studsvik's extensive experience. This reduces Studsvik's exposure to the replication of individual services and products.

Transportation

Much of Studsvik's business, especially in the fields of materials testing and waste treatment, involves the transportation of material to and from Studsvik's facilities, which could be hindered by new legislation or amendments to international conventions. Studsvik's transportation already complies with high safety standards, frequent inspections by supervisory authorities, and a low risk of harmful consequences in the event, say, of an accident.

Operation of company facilities

Studsvik conducts its business at its own facilities. Technical failures that cause unplanned outages cannot be ruled out, and may have an adverse affect on income and cause costs. Studsvik's quality and monitoring systems, as well as its competence development processes, are intended to minimise the risk of unplanned outages and improve contingency planning to minimise the effect of any outage that does occur.

Dependence on employees

The running of Studsvik's facilities depends on its work force doing its job well. However, labour conflicts that may affect the business and cause loss of income cannot be ruled out, which can impact on production and cause loss of revenue. Studsvik takes active steps to create stable, healthy relationships with its employees and trade unions. A proactive human resources policy with the means and systems required for employee development creates a high level of job satisfaction. Pursuant to Swedish law, the trade unions are represented on the parent company's Board.

Dependence on key personnel

Studsvik offers proprietary technical solutions and services that depend on various types of specialist expertise. To some extent, this makes the company dependent on key personnel. This risk is limited continually by systematising processes, recruitment and competence development.

Fixed-price projects

In connection with decommissioning projects and other service contracts, Studsvik sometimes accepts fixed-price commitments. Such projects require effective risk management and project management. Studsvik trains its project managers and applies special procedures that are integrated into the Group's quality systems (ISO 9001:2000) to ensure that these risks are managed professionally.

Supplier liability

Studsvik supplies services with a high technical content to demanding customers. As a supplier, Studsvik is responsible for ensuring that the ordered services are delivered on time and for the functionality and other characteristics of its services. If a service is delivered late or does not satisfy the customer's legal requirements, Studsvik risks of loss of income owing, for example, to costs incurred on replacements or on payment of damages. Studsvik makes regular assessments of potential exposures and makes provisions in the balance sheet to cover them should they be material.

Dependence on suppliers

One element in Studsvik's strategy is to design unique customer offerings in association with selected suppliers, which can result in a measure of natural dependence on these suppliers. Studsvik uses contracts that make possible close relationships based on trust, while retaining the option to engage alternative suppliers.

Financing and political decisions

In most countries, nuclear decommissioning and the treatment of radioactive waste require the active involvement of the authorities by means, for instance, of decisions on financing, decommissioning permits, and rules regulating final storage. On many markets, such activities are funded through complex systems involving a combination of accumulated earnings, income from the operations of nuclear power plants, and taxes. Consequently, political decisions have an effect on the demand for Studsvik's services, primarily within waste treatment and decommissioning. The possibility cannot be excluded that regulatory processes and consequently projects, may be subject to delay.

I n su r a bl e r i sk s

Accidents

Studsvik is engaged in business at its own laboratories and facilities. The possibility of an accident at a site, or in connection with transportation to and from these sites, cannot be ruled out. Potential risks of accident are monitored regularly by subsidiaries. Preventive measures are integrated into the Group's quality and safety systems.

Theft, sabotage or attack

A company handling radioactive materials can never completely exclude the possibility of these materials being stolen. The transportation of radioactive materials, like storage and processing facilities, could be subject to sabotage or other types of attack. Studsvik takes active measures to maintain physical protection in close consultation with the police and official bodies. The level of physical protection is regularly adjusted to conform to assessments by the police and official bodies of the threat situation. In 2006 and 2007 Studsvik invested in upgrading security at its Swedish facilities. Studsvik adheres to plans drawn up by the licensing and supervisory authorities.

Group's insurance policies

The Group has global liability and product liability Insurance cover. Studsvik's liability and property insurance for its Swedish

nuclear business is insured with Nordic Nuclear Insurers and two mutual insurers EMANI and ELINI. On the US market, the corresponding risks have been covered through a local atomic insurance pool, and partly through EMANI. The cover for the nuclear business is regulated by the Swedish nuclear liability act and is at present MSEK 4,100. However, the possibility that internationally regulated insurance amounts will be increased or that the cost of insurance cover rises as a result cannot be excluded.

Property insurance for non-nuclear activities is usually arranged locally. The scope and amount of the insurance are determined after individual assessment and risk analyses, but the insurance is always procured under the supervision of the parent company.

Ot h e r r i sk s

Liability for decommissioning costs

As the operations carried on at Studsvik's Swedish facilities are conducted in accordance with a permit pursuant to the Swedish Act on Nuclear Activities, Studsvik is responsible for decommissioning the facilities. In accordance with US regulations, Studsvik is technically and financially responsible for decommissioning the Group's facilities in the USA. The scope and implications of these undertakings and a risk assessment of them are described in more detail in the Administration report on page 45.

Environmental debt

Studsvik only generates very limited volumes of waste that have any environmental impact. In those cases where Studsvik treats radioactive waste on customers' account, liability for any radioactive waste products rests on the customer.

Sen s itivity A nalys i s

Variations in prices to customers and the Group's costs affect the consolidated result. The Group's largest single cost item is personnel, which accounts for 56 per cent of total costs. The Group's largest currency exposure is to USD, EUR and GBP.

Sensitivity analysis

	Change	MSek
Price to customer	1 %	+/– 13.1
Personnel costs	1 %	+/– 6.1
Exchange rates USD/EUR /GBP	1 %	+/– 0.3
Interest rates	1 percentage point	+/– 1.4

Effects on operating result computed on basis of result for 2007.

Annual accounts

Administration report	45
Consolidated income statement	52
Consolidated balance sheet	53
Consolidated statement
of changes in equity	54
Consolidated cash flow statement	55
Parent company income statement	56
Parent company balance sheet	57
Parent company statement
of changes in equity	58
Parent company cash flow statement	59
Accounting policies
and valuation principles	60

Notes

Notes to the consolidated accounts

Note 1	Primary segments (new structure)	68
Note 1	Secondary segments (primary segments in previous organisational structure)	69
Note 2	Costs of employee benefits	70
Note 3 O	perating expenses	70
Note 4 O	ther operating income	70
Note 5 O	ther operating expenses	70
Note 6	Financial income	70
Note 7	Currency gains/losses – net	70
Note 8	Financial expenses	70
Note 9	Income tax	71
Note 10 E	arnings per share	71
Note 11	Property, plant and equipment	71
Note 12	Intangible assets	72
Note 13	Deferred income tax	73
Note 14	Joint ventures	73
Note 15	Derivative financial instruments	73
Note 16	Inventories	74
Note 17	Trade and other receivables	74
Note 18	Cash and cash equivalents	74
Note 19	Share capital	74
Note 20 O	ther reserves	74
Note 21	Borrowings	74
Note 22	Pension obligations	75
Note 23	Trade and other payables	75
Note 24 O	ther provisions	76

Note 25	Pledged assets	76
Note 26	Cash flow from operating activities	76
Note 27	Commitments	76
Note 28	Contingent liabilities	76
Note 29	Acquisitions	77
Note 30	Average number of employees etc	77
Note 31	Benefits to senior management personnel	77
Note 32	Transactions with related parties	78

Notes to the parent company accounts

Note 33 N	et sales	79
Note 34	Salaries, other benefits and social security contributions	79
Note 35 O	perating costs	79
Note 36	Depreciation	79
Note 37 O	perational lease contracts	79
Note 38	Interest income and similar income statement items	79
Note 39	Interest costs and similar income statement items	79
Note 40	Appropriations	79
Note 41	Tax on profit for the year	79
Note 42	Deferred tax	79
Note 43	Property, plant and equipment	80
Note 44	Financial assets	80
Note 45	Prepaid expenses and accrued income	80
Note 46	Shares and participations in subsidiary companies	80
Note 47	Untaxed reserves	80
Note 48	Liabilities to credit institutions	80
Note 49	Accrued costs and deferred income	81
Note 50	Pledged assets	81
Note 51	Contingent liabilities	81
Note 52	Derivative financial instruments	81
Note 53	Investments in property, plant and equipment	81
Note 54	Adjustments for non cash items	81
Note 55	Transactions with related parties	81
Note 56	Average number of employees etc	81
Note 57	Investment in subsidiary companies	81
Audit report		82

Five-year review	83

Administration report

The Board and President of Studsvik AB (publ), co reg no 556501-0997, herewith submit their annual report for 2007.

Business overview

Studsvik is a leading supplier of services to the international nuclear power industry. Its customers mainly comprise nuclear power plants and suppliers to the nuclear power industry. The Group's largest markets are the USA, Germany, the UK and Sweden. The business is carried out at the company's own facilities in Sweden and the USA, and on site at customers' installations. Studsvik offers specialist services and technical solutions throughout the entire life cycle of a nuclear power plant with an emphasis on the operative and reinvestment phases as well as decommissioning.

In 2007, the Group conducted its business through four business areas: Waste treatment, Decommissioning, Service and maintenance and Operating efficiency. As of 1 January 2008, the business is conducted through five operating segments. The new segmental organisation will sharpen the company's focus on individual markets while at the same time creating a clearer picture of the Group's activities and development. The Group's new segmental structure is geographical, consisting of five operating segments: Sweden, the UK, Germany, the USA, and Global Services.

The previous business area organisation is being abolished, although the names will be retained in slightly modified form as overall descriptions of the Group's customer offering. Service and Maintenance is changing its name to Engineering & services to better reflect the greater relative importance of consulting.

Segment Sweden comprises the Waste treatment activities that are provided both in Sweden and abroad. The segment serves customers in Northern Europe. The vast majority of the customers are in Sweden, Germany and neighbouring countries, and the UK.

Segment UK consists of the waste treatment and decommissioning activities that are carried out in the UK.

Segment Germany comprises the decommissioning and engineering & services activities carried out in Germany and neighbouring countries.

Segment USA comprises the business that is conducted in waste treatment at the Group's facilities in the USA. The bulk of the customer base is at present in the USA but the company also canvasses the Canadian market. The segment also includes THOR Treatment Technologies (TTT), Studsvik's joint-venture company with Washington Group, which provides facilities for the treatment of radioactive waste on the federal market in the USA.

Global Services consists of the business that is conducted through operating efficiency, that is to say materials technology and software for reactor operation. This segment has a global customer base, and it is therefore active in numerous countries.

In order to harmonise more effectively with the operative organisation, Studsvik's business reporting in this annual

report is already based on segments, in accordance with the new structure. The comparative figures based on the previous business area structure are provided in Note 1.

The company's shares are listed on OMX Nordic Exchange Stockholm, Midcap.

Markets

Energy prices are high throughout the world and the demand for electricity is rising. The use of fossil fuels gives rise to a serious impact on the environment and there is growing interest in electricity produced from nuclear power. In view of this, existing nuclear power plants are being modernised, and their capacity increased. At the same time new production capacity is being planned and constructed. Old power plants which, for technical, financial or other reasons, are not being modernised, are being decommissioned and prepared for decommissioning. In the USA and the UK extensive state programmes are being put into effect to process waste and decommission facilities formerly used for civil and military nuclear activities. These two countries are investing substantial resources in these programmes, which are expected to go on for very long periods of time. In certain countries storage facilities for low- and intermediatelevel radioactive waste are in very short supply storage costs are high. Since the generation of engineers that developed today's reactors is now successively retiring, there is also a shortage of certain specialist functions at electricity producers as well as at reactor and system suppliers.

Market developments are moving to Studsvik's advantage and are creating new business opportunities in all segments.

S t u d s v i k ' s b u s ine s s and market position

Waste treatment

The generation of electricity at nuclear power plants gives rise to low- and intermediate-level radioactive waste that has to be dealt with. By treating the material using a variety of methods, Studsvik can recover large quantities of metallic materials, as well as reducing the volume of and stabilising residual products, thereby lowering the customers' waste treatment costs considerably.

Raising the capacity of and modernising a power plant normally involves replacing large opponents, such as turbines and steam generators. The replaced components have to be dealt with cost effectively, and an in environmentally friendly way. Studsvik's waste treatment facilities and methods are designed for this very purpose.

When nuclear installations are being decommissioned, considerable volumes of waste of various types have to be treated before being sent to final storage. Studsvik uses state-of-the-art technology for treating such materials. Organic waste is normally treated with a variety of thermal processes to produce a chemically stable product that is suitable for final storage, and it is also measured and sorted in order to reduce the volume that has to go to final storage. Metallic materials are cleaned using a variety of mechanical or chemical methods, normally in combination with melting to enable significant volumes of waste to be recovered.

Decommissioning

Several countries have begun decommissioning their nuclear installations. Studsvik has been involved in decommissioning in Sweden and Germany for more than 20 years and is well established on these markets. During the past couple of years or so Studsvik has also been establishing a business in the UK, where and extensive decommissioning programme has been launched by the government. The decommissioning phase creates demand for services in various specialist disciplines from complex calculations and project management to dismantling and demolition.

Engineering & services

In response to high electricity prices in combination with rising electricity consumption the nuclear power industry is taking steps to maintain the highest possible levels of capacity utilisation. The industry is therefore attaching great importance to improving efficiency, and shortening planned shutdowns for maintenance and service. Studsvik has established a strong position on the Continent on the basis of a high market share coupled with long-term contracts with its customers.

When renewing and upgrading its operating licenses, the nuclear power industry needs to carry out safety and process testing and draw up waste treatment plans. Studsvik has many years' experience of such projects, and is applying itself to expanding this and related areas of business by means of recruitment and via acquisition.

Operating efficiency

During the operating and re-investment phases the nuclear power industry is in need of specialist technical services, for instance, to determine the strength and service life of structural materials and fuel rods. Studsvik has more than 60 years' experience of these issues and possesses the necessary competence and laboratory capacity for handling irradiated and non-irradiated materials. For its day-to-day operations the nuclear power industry needs to be highly fuel-efficient. Increasing capacity in the nuclear industry normally means that the power plant aims to increase the yield from the reactor fuel, i.e. to generate more energy from each fuel rod without jeopardising operating reliability. Studsvik's software for fuel and core optimisation leads the market in this respect.

F inancial tar g e t s and tar g e t ach i e v ement

Studsvik's long-term target was up until 2007 to achieve organic growth of at least 5 per cent a year, an operating margin for the Group of 8 per cent, and an equity ratio of at least 40 per cent. The growth target has been raised to 10 per cent as of 2008. See also page 8.

For 2007 as a whole growth amounted to 18 per cent for comparable unit. The operating margin amounted on the same basis to 5 per cent, which is a decline in comparison with 2006. This can largely be explained by developments in North America. The equity ratio for 2007 was 42.5 per cent, which may be compared with 41.2 per cent in 2006.

Important event s

Acquisition of safety consultants in Germany

In March, Studsvik acquired Dr Fary, a German firm of nuclear engineering consultants, specialising in licensing and supervision, safety and technical documentation for the nuclear power industry. Following the acquisition the business has been integrated with Studsvik had reported healthy organic growth.

Decommissioning contract in Germany

In April, Studsvik booked an order for project responsibility for the dismantling of all components and installations in the turbine building at the Obrigheim nuclear power plant in Germany. The total value of the contract, including the proceeds of the sale of recoverable metal, amounted to MEUR 3.5.

Decommissioning contract in the UK

In April, Studsvik signed a contract for a major decommissioning project at Sellafield in the UK. The contract included the planning and construction of a waste storage facility. The total value of the contract amounts to some MSEK 190 over a two-year period.

Discontinued acquisition process

During the second quarter, Studsvik took part in a tender process to acquire a nuclear engineering company in the UK that was in some respects a competitor. The intended acquisition was a rather large company that would have fitted in with Studsvik's growth strategy. However, the acquisition process came to a halt when the price reached a level that Studsvik could not justify. The cost of the process has been charged against the parent company's result for the year.

Acquisition of consultants in the UK

In August, Studsvik acquired all the shares in Alpha Engineering, a British firm of nuclear engineering consultants specialising in ventilation and construction engineering in the nuclear sector.

Studsvik consortium selected as preferred bidder

In August, the Nuclear Decommissioning Authority (NDA)

selected a consortium, in which Studsvik has a 15 per cent interest, to enter the final round of negotiations for the administration of the UK's final storage facility for radioactive waste.

Joint-venture agreement

In September, Studsvik signed a teaming agreement with Waste Control Specialists LLL (WCS) covering the treatment and storage of low-level radioactive waste of class B and C in the USA. Under the terms of the agreement, Studsvik will provide waste treatment and stabilisation, and WCS will store the waste in the company's installation in Texas.

Order from Mitsubishi (MHI) for advanced software

In December, Studsvik delivered software to Mitsubishi Heavy Industries for use in connection with the licensing of a new, advanced type of reactor known as ATMEA-1.

Net sales and result

The Group's net sales amounted to MSEK 1,314.7 (1,219.6). For comparable units, net sales rose by MSEK 191.8, or 18 per cent. All the segments contributed to the increase. Currency effects in connection with the translation of foreign subsidiaries' net sales amounted to MSEK –44.9.

The foreign sales ratio was 80 per cent (72).

The consolidated operating profit amounted to MSEK 62.1 (71.3). The year's profit includes capital gains of the sale of Studsvik Stensand on 1 January 2007. This result also includes the cost of the discontinued acquisition process in the UK. For comparable units and after adjustment for capital gains on the sale of Studsvik Stensand and the cost of the discontinued acquisition process, the operating profit declined by MSEK 12.1.

Currency effects in connection with the translation of foreign subsidiary companies' operating results amounted to MSEK –0.6 (–0.5).

Pr of i tability

The Group's operating margin was 4.7 per cent (5.8) and the profit margin was 3.5 per cent (4.7).

Capital employed declined by MSEK 15.3 to MSEK 890.5. The rate of turnover in capital employed was 1.5 (1.5) and the return on capital employed was 7.9 per cent (11.3).

C omment s on t h e Gr o u p ' s operat ing segment s

Sweden

Studsvik is one of the major commercial players in the treatment of radioactive waste in Europe, and is engaged in waste treatment mainly at its own facilities, but also to a certain extent on-site at customers. By separating and volume reducing the waste, separating recoverable metal scrap, and thus minimising the quantity of residual waste that needs to

be sent to final storage Studsvik helps its customers to lower their costs. Within the segment Studsvik mainly serves the European market, with the incineration of dry waste and the treatment of metal scrap.

Despite limited production capacity during the third quarter owing to a breakdown in the smelter, the segment noted growth in 2007, largely due to the treatment of metallic waste and large reactor components. In 2007, a new production line was brought into production for the treatment of reactor components of up to 600 tonnes in size. The new production line has helped to reduce lead times for the treatment of large components from the original 12 months to four. The treatment of large components achieved its commercial breakthrough during the year, when it took delivery of six steam generators, of which two came from Sweden and four from Germany.

The incineration unit's customers are mainly located on the Continent. The volumes of waste are relatively stable, but variations from one year to the next do occur, on account of the varying operating conditions at the customers.

The incinerator unit treated a slightly lower volume in 2007 than during the previous year. Both the incineration unit and the metallic waste treatment unit entered 2008 with well filled order books. All installations have the capacity to process higher volumes.

The UK

After two years of build up, Studsvik has established a strong position on the UK market for Decommissioning and Waste treatment. In 2007 the activities within the Decommissioning sector tended to predominate with a long-term contract for Sellafield, but in relative terms Waste treatment increased successively. The British rules for the transportation of radioactive waste for treatment abroad have been reformed. During the year, the new rules, which have simplified the licensing process, resulted in a number of trial orders for Studsvik, which involved small volumes of waste being shipped to Sweden for treatment. During the year, Studsvik, acquired Alpha Engineering, a firm of ventilation and construction engineering consultants. The business developed in line with expectations and reported a healthy cash flow.

After the reporting period, Studsvik received environmental and nuclear licenses to engage in the treatment of metallic waste at the company's facilities in Workington. Nuclear Waste Management (NWM), a consortium in which Studsvik has a 15 per cent interest, was selected preferred bidder for an operating agreement in respect of the UK low-level repository. The contract period is initially five years with options to extend it for a further total of 12 years. In the initial phase, the contract is estimated to be worth in MGBP 125. If all options are exercised it is estimated that the value of the contract will rise to a maximum of MGBP 500. The contract includes developing a strategy for the handling of low- and intermediate-level radioactive waste in the UK.

Germany

In this segment, Studsvik offers a broad range of services for operational nuclear reactors as well as for reactors and other nuclear facilities that have been taken out of production and are at varying phases of decommissioning. A significant part of the commercial volume is generated while the various power plants are closed for refuelling and maintenance outages. In 2007 German nuclear power plants were shutdown for audit for far longer periods than in previous years, which contributed to the high capacity utilisation within Engineering & services. Dr Fary, the firm of consultants acquired during a year, whose business includes safety analyses, had a good year and the business has expanded organically since it was acquired. The level of activity on the decommissioning market in Germany was lower than in the previous year, although it recovered slightly towards the end of the year.

USA

Studsvik is engaged in waste treatment at two facilities located in Erwin and Memphis, Tennessee, respectively. Over and above this, the company is engaged, from its base Memphis, in the provision of logistical services, with its own fleet of some 60 vehicles and having the capacity and competence to handle the transportation of radioactive materials. In Erwin, wet, low- and intermediate-level radioactive waste is treated in a facility that uses Studsvik's patented THOR pyrolysis technique. The Memphis facilities treat other organic and metallic low-level radioactive waste.

The business in Erwin continued to make good progress. A healthy level of capacity utilisation and a sound price structure for treated materials were among the reasons why the business, despite some production problems at the beginning of the year, reported its best full-year result since it started. The Barnwell storage facility for low- and intermediate-level radioactive waste in the USA will, as far as can be judged, close down at the end of June 2008. The practical impact of this is that most American nuclear power plants will have nowhere to store their immediate-level radioactive waste, including ion-exchange resins that have been treated at the Erwin facility. Thanks to the alliance set up together with Waste Control Specialists in Texas, Studsvik can offer the American nuclear power industry a competitive storage facility when Barnwell closes.

The business in Memphis reported poor profitability. 2007 was a year characterised by tough competition with depressed prices, which resulted in the incurrence of higher costs to defend its market position. The Memphis unit invested during the year in building up its capacity to treat large metallic components. Order books at Erwin are well filled but at Memphis they are unsatisfactory.

In 2007, THOR Treatment Technologies booked an order from the US Department of energy worth MUSD 7.5. Within the scope of the contract, which runs for 22 months, THOR is to demonstrate that the technology can be applied to a high-level radioactive waste. TTT reported a profit and a positive cash flow for 2007.

Global Services

Studsvik is one of the world's leading independent suppliers of tests, investigations and analyses of nuclear fuel and materials, as well as being world leader in software for fuel optimisation. The test and research activities are carried out at Studsvik's laboratories in Sweden.

Software development mainly takes place in the USA.

The core optimisation software product area made positive progress in 2007 with solid growth in both sales and operating profit. During the year, Studsvik completed a major delivery of software to Mitsubishi Heavy Industries (MHI). This is the first time that Studsvik's software has been sold for use in the development of new types of reactors.

The materials technology business had a weak year owing to a combination of low capacity utilisation in some areas of the business and technical outages in one of the unit's laboratories during the second quarter. However, the order intake and the capacity situation improved towards the end of the year. During the year a development project was carried out in association with Norway's Institute for Energy Engineering to qualify the Norwegian materials testing reactor at Halden for what are known as ramp tests. In December, the first ramp tests were successfully completed at Halden, which represents a milestone in the collaboration between Studsvik and the Halden reactor. Ramp tests are performed on reactor fuel and normally combined with laboratory investigations in what are known as hot cells. Studsvik can now once again offer a complete test and analysis service for reactor fuel, which has not been possible since the closure of the company's own materials testing reactor in 2005.

F inancial position and liquidity

Cash and cash equivalents amounted to MSEK 176.9 (247.6).

The company's equity amounted to MSEK 571.8 (558.7). The equity ratio was 42.5 per cent (41.2). Interest-bearing liabilities amounted to MSEK 318.7 (347.2).

All of the borrowing was raised in foreign currencies in order to finance investments and company acquisitions in the USA, Germany and the UK.

The Group's internally generated cash flow is regarded as adequate for its day-to-day operations. Higher borrowing and an increase in equity may be needed in the event of one or more large acquisitions. The parent company has full access to the subsidiary companies' cash flow.

Fixed capital expenditure

The Group's fixed capital expenditure amounted to MSEK 127.3 (344.7). Among the years investments in growth may be mentioned the expansion of the installations for treating large components in both Sweden and the USA.

A sum of MSEK 46.2 (278.2) is included in the year's investments in respect of acquisitions of subsidiaries.

At the end of 2007, the Group's commitments in respect of investment projects still in progress amounted to MSEK 9.3 (19.8). It is estimated that all these investments will be financed using internal funds.

The cash flow from current operations before changes in working capital amounted to MSEK 76.7 (105.5). The change in working capital amounted to MSEK –37.7 (–1.4). The cash flow from current operations after investment activities amounted to MSEK –83.4 (–240.6).

Research and development

Research and development projects are launched and carried out either in co-operation with customers as straightforward customer contracts or as part of the company's own product development programme. Research expenditure is stated as a cost as and when it arises. Identifiable expenses on the development of new processes and products are capitalised to the extent it is considered likely they will generate economic and financial benefits.

In 2007, the total cost of company-financed R&D amounted to MSEK 41.8 (39.8). The bulk of the resources were allocated to Studsvik's software for core optimisation and reactor operation. The expenditure on software development has the dual purpose of maintaining existing programs and developing new ones. As the financial benefits of new development projects are spread over a very long time the costs incurred on them are taken into the income statement as and when they are incurred.

S i gni f icant r i s k s and uncertainty factors

Studsvik is active on an international market that is exposed to intense competition. With operations in seven countries, Studsvik is exposed to both operational and financial risks. The Group's financial risk management is described under Accounting and valuation principles on page 66. Other risks are described with comments under Risk factors on page 41. Responsibility for risk assessment rests primarily on each subsidiary, but it is monitored and followed up by the parent company. The Group has a high safety culture, which rests on a long tradition of clearly expressed procedures for quality assurance and follow up within the framework of various quality certification system. The fact that Studsvik is also engaged in the nuclear power sector gives rise to particular risks that are regulated and supervised by national authorities and international bodies.

L icens ing requirement s

The Group is engaged in areas of activity in Sweden and the USA that require licenses. The activities at the Group's Swedish facilities are conducted on the basis of licenses granted in accordance with the Code of Environmental Statutes and the Nuclear Technology Act, and the Radiation Protection Act. The business in the USA is carried out in a similar way in accordance with national laws there. The Swedish business is subject to inspection in accordance with the environmental code and licenses are granted on the basis of decisions made by the Environmental Court and the Supreme environmental Court in 2004. The Swedish nuclear facilities that require a license under the terms of the Nuclear Technology Act include nuclear reactors, active laboratories, installations for the treatment and intermediate storage of low- and intermediate-level radioactive waste, and installations for the storage of nuclear fuel. The Group's main impact on the environment takes the form of emissions from the installations into air and water. The licenses upon which the operation of the nuclear facilities is based stipulate threshold and target values for emissions into the external environment. During the year emissions remained below the threshold values.

In March 2007, the Environmental Court handed down a decision granting the Group a license to dismantle and decommission the R2 and R2-0 reactors that had been taken out of production in 2005.

Substantial resources were applied at the Swedish facilities to improving it is physical security.

Decommissioning of nucl ear facilities

As the activities at Studsvik's nuclear installations in Sweden are conducted on the basis of the license granted pursuant to the Nuclear Technology Act, it is incumbent on Studsvik to decommission the facilities. According to this Act, the license holder has both a technical and financial responsibility for decommissioning. However, pursuant to the Act (1988: 1597) concerning the Financing of the Treatment of certain Radioactive Waste etc ("Studsvik act"), Swedish nuclear energy producers pay a fixed fee per KWh of electricity produced to the state. The fees are consolidated with the object of defraying the cost of decommissioning most of Studsvik's nuclear installations in Sweden. As regards the Group's other installations in Sweden, the Group makes transfers to reserve in its own balance sheet to cover this undertaking, as well as providing completion guarantees in the form of bank guarantees to the Swedish Nuclear Power Inspectorate and the County Administrative Authority. A new act (2006:647) came into effect in 2007 that will replace the Studsvik act at the end of 2009. It is the intention of Parliament and the government that at that time the undertakings pursuant to the Studsvik act shall be paid in full. Those of the Group's facilities that are not at present covered by the Studsvik act will be covered by the new legislation. The Group considers that its undertakings in respect of these facilities in the future and within the framework of the new legislation will also be secured by the provision of bank guarantees to the relevant authorities.

The decommissioning of nuclear facilities that have been taken out of production, and that is financed in accordance with the Studsvik act, is largely handled by AB SVAFO, a subsidiary company. This company also has responsibility for restoring the Ranstad installation for uranium mining located in the south of Sweden, which ceased production in 1987. AB SVAFO is a wholly owned subsidiary whose operations are financed in their entirety by means of funds from the

Nuclear Waste Fund. Funds from this Fund cover the cost of its operations. Funds from the Nuclear Waste Fund are also used to finance the future decommissioning of the Group's materials testing reactor, which was withdrawn from production in 2005. The license holder for this facility is Studsvik Nuclear AB, a wholly owned subsidiary that thereby has responsibility for carrying out the decommissioning.

Insurance

As result of its geographical diversification and the nature of its various lines of business Studsvik is exposed to several types of liability risk. The purpose of Studsvik's liability insurance is to cover the company against the financial risks and consequences of its business. Studsvik's business is insured from two risk perspectives: nuclear liability and non-nuclear liability. The nuclear liability insurance is regulated by the Atomic Liability Act in Sweden and by the corresponding foreign legislation in each country. The nuclear liability insurance for the Swedish activities is provided by Nordic Nuclear Insurance (NNI) and European Liability Insurance for the Nuclear Industry (ELINI). In the case of the American activities a liability insurance has been taken out with American Nuclear Insurers (ANI) Liability Insurance Pool. The non-nuclear activities are at present insurance through a global liability insurance taken out with the Zürich insurance company.

Property and business interruption insurance for the Swedish nuclear risks are taken out through Nordic Nuclear Insurance (NNI) and European Mutual Association for Nuclear Insurance (EMANI). For The American facilities in Erwin, a nuclear property and business interruption insurance is taken out through EMANI.

Non-nuclear property and business interruption insurance is taken out in each country.

Par ent company

The parent company's activities consist of Group co-ordination, and its assets largely consist of shares in subsidiaries. The parent company's net sales amounted to MSEK 5.6 (8.0). The operating result was a loss of MSEK 38.3 (loss 27.3). The full-year result includes capital gains of MSEK 35.0 on the sale of Studsvik Stensand AB and the cost of the discontinued acquisition process in the UK of MSEK 10.5. The parent company's fixed capital expenditure amounted to MSEK 0.5 (2.3). Cash and cash equivalents amounted to MSEK 91.2 (149.7) and interest-bearing liabilities to MSEK 154.2 (182.9).

Bene f i t s t o s eni o r manag ement personne l

The AGM held on 19 April 2007 adopted the following principles for the remuneration and other benefits of senior management personnel.

They shall be offered a fixed salary that is competitive and

based on their responsibility and authority. The salary shall be determined for each calendar year.

Senior management personnel may be offered a bonus. Such a bonus may amount to no more than 20 per cent of the fixed salary. Senior management personnel are entitled on their own initiative to convert their bonus into an extra pension contribution. The bonus shall be primarily based on the Group's financial targets. The bonus plan shall be determined for each financial year.

Over and above what is laid down in any collective or other agreement, senior management personnel are entitled to make their own individual pension arrangements by refraining from drawing salary or bonus and using the amount to increase their pension contributions, provided the cost to Studsvik remains unchanged.

Senior management personnel and Studsvik are each entitled to a mutual period of notice of no more than 12 months. Severance pay, over and above salary during the period of notice, may also be paid subject to a maximum amount corresponding to 12 months' salary.

The Board intends to propose to the 2008 AGM that a bonus of up to 50per cent of the fixed salary may be paid, but that the principles for the remuneration and other benefits of senior management personnel shall otherwise remain unchanged.

Further information regarding the benefits of senior management personnel is provided in Note 31.

Dividend

The Board proposes that a dividend of SEK 2.00 per share (2.00) be paid for the 2007 financial year. On 31 December 2007, Studsvik AB (publ) had 8,218,611 shares in issue. Each share carries one vote and entitles the owner to share equally in the company's assets and earnings.

Prospects for 2008

The overall assessment of the nuclear power market suggests that it is an expanding market. Modernization and upgrading/expansion programmes are underway in several countries. Within the framework of such projects, services of the type provided by Studsvik are in demand, including waste treatment, materials testing, and consulting services. Decommissioning activities are expected to continue growing in scope and size in the UK market and to increase slightly in Germany. It is estimated that the number of outage days in the German nuclear power industry will be fewer in 2008 than in 2007, which was characterized by unplanned and long outages in several plants. The fi erce competition on the American waste treatment market is expected to persist and leave its mark on some parts of the business. Market develop ments will create an environment favorable to healthy organic growth in most segments of the business in 2008.

Proposed distribution of prof its

The total profits at the disposal of the annual general meeting comprise of the Parent Company's non-restricted equity of SEK 599,595,757.

The Board of Directors proposes that the profits be distributed so that:

– SEK 2.00 per share is distributed

	to the shareholders, a total of	SEK 16,437,222
–	to be carried forward	SEK 583,158,535

Boar d comment on the dividend proposal

The proposed dividend will reduce the parent company's equity ratio to 76.1 per cent and the Group's equity ratio to 41.8 per cent. Given that the company's and the Group's activities will continue to be carried out profitably these equity ratios are adequate. The parent company's and the Group's cash and cash equivalents are estimated to be maintained at a satisfactory level.

The Board's view is that the proposed dividend will not prevent the parent company or any other company belonging to the Group, from fulfilling its commitments in both the short and the long term.

The consolidated income statement and balance sheet and the parent company income statement and balance sheet will be adopted at the Annual General Meeting to be held on 22 April 2008. We regard the consolidated financial statements to be prepared in accordance with international accounting standards IFRS as adopted by the EU and give a true and fair view of the financial position and results of the Group. The Annual Report has been prepared in accordance with generally accepted accounting principles in Sweden and gives a true and fair view of the financial position and results of the parent company. The administration report for the Group and parent company provides a true and fair overview of the development of the Group's and parent company's business activities, financial position and results of operations as well as the significant risks and uncertainties which the parent company and its subsidiaries are exposed to.

Nyköping March 10, 2008

Anders Ullberg Anna Karinen Jan Barchan

Chairman Vice Chairman Board member

Ingemar Eliasson Maria Lindberg Alf Lindfors Board member Employee representative Board member

Roger Lundström Leif Nilsson Employee representative Board member

Magnus Groth President and CEO

Consolidated income statement

	Note	2007	2006
Net sales	1	1,314,647	1,219,611
Costs of services sold	3	–1,000,017	–906,537
Gross profit		314,630	313,074
Other operating income	4	25,088	14,277
Selling and marketing costs	3	–53,817	–44,567
Administrative expenses	3	–180,415	–164,190
Research and development costs	3	–41,754	–39,787
Other operating expenses	5	–1,628	–7,528
Operating profit	1, 2, 3, 4, 5	62,104	71,279
Financial income	6	8,716	23,094
Financial expenses	7, 8	–24,834	–37,249
Profit before tax		45,986	57,124
Income tax	9	1,234	–22,302
Profit fo r the yea r		47,220	34,822
Attributable to
– Parent Company's shareholders		46,475	34,822
– minority interest		745
Earnings per share	10
– before dilution		5.65	4.24
– after dilution		5.65	4.24

Consolidated balance sheet

	Note	2007	2006
Assets
Non-current assets
Property, plant and equipment	11	406,594	400,647
Intangible assets	12	368,718	355,574
Deferred tax assets	13	41,608	44,402
Derivative financial instruments	15	356	634
Trade and other receivables	17	25,372	27,029
Total non-current assets		842,648	828,286
Current assets
Inventories	16	22,459	6,873
Trade and other receivables	17	303,043	272,397
Derivative financial instruments	15	933	2,229
Cash and cash equivalents	18	176,873	247,574
Total current assets		503,308	529,073
TOTAL ASSETS		1,345,956	1,357,359
Equit y
Capital and reserves attributable to
Parent Company's shareholders
Share capital	19	8,219	8,219
Other contributed capital		225,959	225,959
Other reserves	20	–9,932	7,653
Retained earnings		344,130	316,534
Equity attributable to the Parent Company's shareholders		568,376	558,365
Minority interests		3,457	286
Total shareholders' equity		571,833	558,651
Liabilities
Non-current liabilities
Borrowings	21	196,368	307,398
Derivative financial instruments	15	52
Deferred tax liabilities	13	40,889	44,387
Pension obligations	22	5,961	5,939
Other provisions	24	55,280	55,357
Other non-current liabilities	23	7,942	4,044
Total non-current liabilities		306,492	417,125
Current liabilities
Trade and other payables	23	301,552	250,680
Current tax liabilities		11,502	8,714
Borrowings	21	122,287	39,782
Derivative financial instruments	15	158	7,217
Other provisions	24	32,132	75,190
Total current liabilities		467,631	381,583
Total liabilities		774,123	798,708
Total equit y and lia bilities		1,345,956	1,357,359

Consolidat ed S tat ement of Change s in Equit y

		Other
	Share capital	contributed capital	Other R reserves	etained earnings	Minority interest	Total equity
Opening balance
at January 1, 2006	8,219	225,959	34,047	298,149	254	566,628
Change in translation differences			–26,394		32	–26,362
Total transactions
taken direct to equity			–26,394		32	–26,362
Profit for the year
stated in the income statement				34,822		34,822
Total income and costs
stated for the period				34,822		34,822
Dividend				–16,437		–16,437
Closing balance
at December 31, 2006	8,219	225,959	7,653	316,534	286	558,651
Opening balance
at January 1, 2007	8,219	225,959	7,653	316,534	286	558,651
Redistribution within equity				–2,442	2,442	0
Change in translation differences			–17,585		–16	–17,601
Total transactions
taken direct to equity			–17,585	–2,442	2,426	–17,601
Profit for the year
stated in the income statement				46,475	745	47,220
Total income and costs
stated for the period				46,475	745	47,220
Dividend				–16,437		–16,437
Closing balance
at December 31, 2007	8,219	225,959	–9,932	344,130	3,457	571,833

Consolidated cash flow statement

	Note	2007	2006
Cash flow from operating activities
Operating profit		62,104	71,279
Adjustment for non-cash items	26	37,504	50,694
		99,608	121,973
Interest received		8,716	16,522
Interest paid		–24,834	–30,594
Income tax paid		–6,811	–2,399
Cash flow from operating activities
before change in working capital		76,679	105,502
Change in working capital
– Current assets		–52,309	9,772
– Other current liabilities		14,589	–11,122
Cash flow from operating activities		38,959	104,152
Cash flow from investing activities
Acquisition of subsidiary	29	–41,869	–278,181
Sale of subsidiaries		45,766
Disposal, other financial assets		-	13,612
Purchases of property, plant and equipment	11	–80,512	–66,222
Sale of property, plant and equipment		1,225	5,992
Purchases of intangible assets	12	-	–334
Cash flow from investing activities		–75,390	–325,133
Cash flow from financing activities
Loans raised		15,444	181,203
Repayments of loans		–34,525	–13,049
Dividend		–16,437	–16,437
Cash flow from financing activities		–35,518	151,717
Decrease in cash and cash equivalents		–71,949	–69,264
Cash and cash equivalents at beginning of the year		247,574	323,386
Translation difference		1,248	–6,548
Cash and cash equivalents at end of the year	18	176,873	247,574

Parent company income statement

	Note	2007	2006
Net sales	33	5,634	7,960
Costs of services sold	35	–5,395	–6,151
Gross profit		239	1,809
Selling and marketing costs	35	-
Administrative expenses	35	–39,340	–31,281
Other operating income		795	2,147
Other operating expenses		-	–34
Operating profit	33, 34, 35, 36, 37	–38,306	–27,359
Interest income and similar profit/loss items	38	51,326	58,461
Interest expense and similar profit/loss items	39	–15,631	–32,464
Profit before tax		–2,611	–1,362
Appropriations	40	329	28,540
Income tax	41	10,460	–896
Profit fo r the yea r		8,178	26,282

Parent company balance sheet

	Not	2007	2006
Assets
Non-current assets
Property, plant and equipment	43
– Equipment and tools, buildings, land		1,664	2,121
Financial assets	44
– Deferred tax assets		2,680	2,697
– Shares in subsidiaries	46	779,397	762,356
– Receivables from Group companies		154,094	200,881
Derivative financial instruments	52	-	188
Trade and other receivables		10,918	11,682
Total non-current assets		948,753	979,925
Current assets
Inventories and items held for sale		423
Trade and other receivables		12,279	11,105
Derivative financial instruments	52	71
Receivables from Group companies		42,312	41,703
Prepaid expenses and accrued income	45	1,045	3,548
Cash and cash equivalents Total current assets		91,210 147,340	149,651 206,007
TOTAL ASSETS		1,096,093	1,185,932
Equit y
Equity
Share capital		8,219	8,219
Restricted reserves		225,272	225,272
Total restricted equity		233,491	233,491
Non-restricted equity
Non-restricted reserves		591,418	554,770
Profit for the year		8,178	26,282
Total non-restricted equity		599,596	581,052
Total equity		833,087	814,543
Untaxed reserves	47	6,874	7,203
Liabilities
Non-current
Liabilities to credit institutions	48	137,113	165,770
Deferred tax liabilities		20	74
Liabilities to Group companies		48,106	67,340
Other liabilities		7,942
Other provisions Total non-current liabilities		- 193,181	4,044 237,228
Current liabilities
Liabilities to Group companies Trade payables		34,821 2,747	83,476 1,415
Liabilities to credit institutions	48	17,125	17,125
Other liabilities		1,357	252
Accrued expenses and deferred income	49	6,901	24,690
Total current liabilities		62,951	126,958
Total liabilities		256,132	364,186
Total equit y and lia bilities		1,096,093	1,185,932

Parent Company S tat ement of Change s in Equit y

	Share capital	Statutory reserve	Non-restricted equity	Total equity
Opening balance at January 1, 2006	8,219	225,272	539,962	773,453
Dividend to shareholders			–16,437	–16,437
Merger difference			2,651	2,651
Group contribution received			39,714	39,714
Tax effect of group contributions			–11,120	–11,120
Profit for the year			26,282	26,282
Closing balance at December 31, 2006	8,219	225,272	581,052	814,543
Opening balance at January 1, 2007	8,219	225,272	581,052	814,543
Group contribution received			37,226	37,226
Tax effect of group contributions			–10,423	–10,423
Dividend			–16,437	–16,437
Profit for the year			8,178	8,178
Closing balance at December 31, 2007	8,219	225,272	599,596	833,087

Parent company cash flow statement

	Note	2007	2006
Cash flow from operating activities
Operating profit		–38,306	–27,359
Adjustment for non-cash items	54	–849	281
		–39,155	–27,078
Interest received		16,121	20,762
Dividends received		-	18,578
Interest paid		–14,526	–39,098
Income tax paid		–133
Cash flow from operating activities
before change in working capital		–37,693	–26,836
Change in working capital
– Current assets		–1,447	8,194
– Other current liabilities		–46,962	4,765
Cash flow from operating activities		–86,102	–13,877
Cash flow from investing activities
Investment in subsidiaries	57	–32,875	–83,160
Sale of subsidiary		47,999
Sale of property, plant and equipment		1,352	117
Loans to subsidiaries		17,376	–134,229
Disposal of other financial assets		587	13,612
Purchases of property, plant and equipment	53	–533	–2,305
Cash flow from investing activities		33,906	–205,965
Cash flow from financing activities
Repayments of loans		–269,746
Loans raised		251,019	117,820
Dividend paid		–16,437	–16,437
Group contribution received/given		28,919	69,872
Cash flow from financing activities		–6,245	171,255
Decrease in cash and cash equivalents		–58,441	–48,587
Cash and cash equivalents at beginning of the year		149,651	198,238
Cash and cash equivalents at end of the year		91,210	149,651

Accounting policies and valuation principles

Amounts in SEK '000 except where otherwise stated

P rinciples underlying preparation of financial reports

The consolidated financial statements for the Studsvik Group are made up in accordance with the Annual Accounts Act, the Swedish Financial Accounting Standards Council's recommendation RR:30, Supplementary accounting rules for groups, and International Financial Reporting Standards (IFRS) as adopted by the EU. The consolidated accounts are made up in accordance with the historical cost convention except as regards available for sale financial assets and financial assets and liabilities (including derivative instruments) valued at fair value in the income statement.

Preparing financial reports in accordance with IFRS requires the use of a number of important accounting estimates. Furthermore, the management must make certain assessments when applying the company's accounting principles. The areas that entail a high degree of assessment, that are complex or such areas where assumptions and estimates are of material importance for the consolidated accounts are listed under the heading "Important estimates and assumptions for accounting purposes" on page 66.

The most important accounting principles applied in preparing these consolidated financial statements are stated below. These principles have been applied consistently for all years presented, except where otherwise indicated.

Changes in standards effective in 2007

• IFRS 7, Financial instruments: Disclosures, and the supplementary amendment to IAS 1, Presentation of financial statements – Capital disclosures, introduces new disclosure rules for financial instruments. IFRS 7 has no effect on the classification and valuationof the Group's financial instruments.
• IFRIC 8, Scope of IFRS 2 requires that transactions concerning the issue of equity instruments – where the consideration received is less than the fair value of the equity instruments issued – be examined to determine whether they fall within the scope of IFRS 2. This interpretation has no impact on the Group's financial reports.
• IFRIC 10, Interim financial reporting and impairment does not permit the reversal as of a later closiong date of impairment losses recognised on the balance sheet in a previous interim period in respect of goodwill, investments in equity instruments or in financial assets carried at cost. This interpretation has no impact on the Group's financial reports.

Standards, amendments and interpretations effective in 2007 but having no relevance to the Group

The following standards, amendments and interpretations of published standars are obligatory for financial years starting on January 1, 2007 or later, but are not relevant to the Group:

– IFRS 4 Insurance contracts.

• IFRIC 7 Applying the restatement approach under IAS 29 Financial reporting in hyperinflationary economies.
• IFRIC 9 Reassessment of embedded derivatives.

Interpretations and amendments to existing standards that are not yet effective and that are not applied in advance by the Group

The following new standards, and interpretations and amendments to existing standards have been published and are obligatory for the Group's accounting for the financial year starting on 1 January 2008 or later, but have not been applied in advance by the Group.

• IAS 1 (amendment) Presentation of financial reports (effective 1 January 2009). This amendment is still working its way through the EU's approvals process.
• The effect of the amendment is that the presentation and nomenclature of financial reports will be altered. The Group's presentation of its financial reports in the future will therefore be affected by the introduction of this standard.
• IAS 27 (amendment), Consolidate financial statements and separate financial reports (effective 1 July 2009). This amendment is still working its way through the EU's approvals process. The effect of the amendment includes the result attributable to minority shareholders always being stated, even if this results in minority interests being negative, in transactions with minority shareholders always being stated within equity, and, in the event of a parent company losing control, in any remaining interest being revalued at fair value. The amendment will have an effect on the reporting of transactions in the future.
• IFRS 2 (amendment), Share-based payment, vesting conditions and cancellations (effective 1 January 2009). This amendment is still working its way through the EU's approvals process. The amendment will affect the definition of vesting conditions and introduces a new concept, namely non-vesting conditions (conditions that are not defined as vested). The standard stipulates that non-vesting conditions shall be taken into account in estimates of the fair value of equity instruments. Goods and services received from a counterparty that satisfy all other vesting conditions shall be stated regardless of whether non-vesting conditions are satisfied or not. This amendment has no effect on the consolidated financial statements.
• IFRS 3 (amendment), Business combinations (effective 1 July 2009). This amendment is still working its way through the EU's approvals process. The amendment will affect acquisitions after the date on which it comes into effect. Its application will mean a change in how future acquisitions are reported, including the reporting of transaction costs, any conditional purchase sum, and successive acquisition. The Group will apply the standard from and including the financial year beginning on 1

January 2010. The amendment will not have any effect on previous acquisitions, but will affect the reporting of transactions in the future.

• IFRS 8 Operating segments (comes into effect on 1 January 2009). IFRS 8 replaces IAS 14 and harmonises segment reporting with the requirements in US standard SFAS 131 Disclosures about segments of an enterprise and related information. The new standard requires segment information to be presented from management's perspective, which means that it is presented in the way used in the internal reporting system.
• IAS 23 (Amendment). Loan costs (comes into effect 1 January 2009). This amendment is still going through the EU's approvals process. The amendment requires a company to capitalise as part of the acquisition value of an asset loan costs that are directly attributable to the purchase, construction or production of an asset that involves a lengthy period of time to make it ready for use or sale. The alternative, to state these loan costs as a cost, will no longer be permitted. The Group will apply IAS 23 (Amendment) with effect from 1 January 2009, but it is not at present relevant to the Group as it has no assets for which loan costs can be capitalised.
• IFRIC 14, IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction 1(comes into effect on 1 January 2008). IFRIC 14 provides guidance for assessing the limit in IAS 19 on the amount of the surplus that can be stated as an asset. It also explains how pension assets or liabilities can be influenced by a statutory or contractual minimum financing requirement. The Group will apply IFRIC 14 with effect from 1 January 2008 but this is not expected to have any effect on the Group's accounts.

Interpretations of existing that are not yet effective and not relevant to the Group

The following interpretations of existing standards have been published and are obligatory for the Group for the financial years beginning on 1 January 2008 or later, but are not relevant to the Group.

• IFRIC 11 addresses share related transactions involving an entity's own equity instruments or equity instruments of another entity in the same group (eg options of its parent). IFRIC 11 provides guidance on whether such transactions should be accounted for as share related and equity-settled in the entity's financial statements or cashsettled in separate financial reports for the parent and subsidiaries respectively.
• IFRIC 12 Sevice conession arrangements 1 (comes into effect on 1 January 2008) IFRIC 12 applies to contractually regulated arrangements whereby an operator in the private sector participates in the development, financing, operation and maintenance of the infrastructure for public sector services. IFRIC 12 is not relevant to the Group as none of the companies in the Group supply services to the public sector.
• IFRIC 13 Customer loyalty programmes 1 (comes into effect on 1 July 2008). IFRIC 13 explains that when goods and services are sold together with some form of

incentive to develop customer loyalty (e.g. points or free products), this is a case of a multiple element arrangement. The compensation received from the customer is allocated to the various elements in the arrangement on the basis of the actual value of each element. IFRIC 13 is not relevant to the Group as no companies in the Group have loyalty programmes.

Par ent Company

The Parent Company makes up its annual report in accordance with the Annual Accounts Act (1995:1554) and the Swedish Financial Accounting Standards Council's recommendation RR 32, Accounting for Legal Entities (Separate financial statements). RR 32 means that the Parent Company, in its separate financial statements, must apply all the IFRS and statements adopted by the EU as far as is possible within the framework of the Annual Accounts Act and taking into account the connection between accounting and taxation. The recommendation specifies the exemptions and additions that must be made in relation to IFRS. The differences between the Group's and the Parent Company's accounting principles are presented below.

The main differences between the accounting principles applied by the Group and those of the Parent Company are:

Shares and participations in subsidiaries

Investments in subsidiaries are stated at the lower of cost and fair value. Assessments are made as to whether the book value corresponds to fair value and the book value is written down if the impairment is considered to be permanent.

Revenue

The Parent Company's revenue includes dividends received from subsidiaries and other internal transactions that are eliminated in the consolidated accounts.

Leases

All leases, regardless of whether they are financial or operational leases, are recorded as rental agreements (operational leases).

Pensions

Pension obligations relate to defined contribution plans and are covered by insurance arrangements.

Taxes

The parent company's untaxed reserves include deferred tax liabilities. In the consolidated accounts, however, untaxed reserves are divided into deferred tax liability and equity.

Group contributions and shareholders' contributions for legal entities

The Company states group contributions and shareholders' contributions in accordance with the statements of the Swedish Financial Accounting Standards Council's Emerging Issues Task Force. Shareholders' contributions are taken direct to the equity by the recipient and capitalised under shares and participations by the donor, to the extent there is no impairment loss. Group contributions are stated in accordance with their financial implications. This means that group contributions made for the purpose of minimising the Group's total tax are stated direct against retained earnings less the current tax effect.

C onsolidated f inancial stat ement s

Subsidiary companies

Subsidiaries are all the companies in which the Group has the right to decide on financial and operational strategies as normally accompanies a shareholding of more than half of the voting rights. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date when control ceases.

The purchase method is used for the accounting recognition of acquisitions of subsidiaries by the Group. The excess amount that consists of the difference between the acquisition cost and the fair value of the Group's share of the identifiable net assets acquired is stated as goodwill. If the acquisition cost is less than the fair value of the net assets of the subsidiary acquired, the difference is stated directly in the income statement.

Intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated, unless the transaction provides evidence of impairment of the asset transferred.

Transactions with minority shareholders

The Group policy is to state transactions with minority shareholders as transactions with a third party. Divestments to minority shareholders generate gains and losses that are stated in the income statement.

S e gment reporting

A business segment is a group of assets and businesses engaged in providing products or services that are exposed to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

In the Group, geographical areas are classified as primary segments. Strategic Business Areas are classified as secondary segments.

Inter-segment transfers or transactions are entered into on normal commercial terms and conditions that also apply to unrelated third parties.

Foreign currency trans lation

Functional and presentation currency

Items included in the financial reports of each of the Group's entities are valued using the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in SEK, which is the Parent Company's functional and presentation currency.

Transactions and balance sheet items

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the transaction date. Currency gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are stated in the income statement. An exception is made when the transactions are hedges that qualify as cash flow hedging or net investment hedging, in which case the gains/losses are stated within equity.

Group companies

The results and financial position of all Group companies (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the Group's presentation currency as follows:

• Assets and liabilities for each balance sheet presented are translated at closing date rates.
• Income and costs for each income statement are translated at average exchange rates.
• All resulting currency differences are stated on their own line within equity.

On consolidation, currency differences arising from the translation of net investments in foreign operations, and of borrowings and other currency instruments identified as hedging of such investments, are taken to equity. When a foreign business is sold, such currency differences are stated in the income statement as part of the gain or loss on the sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign business are treated as assets and liabilities of the foreign business and translated at closing date rates.

Property, P lant and equipment

Property, plant and equipment is stated at historical cost less depreciation.

Additional costs are included in the asset's book value or stated as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other types of repair and maintenance are stated as costs in the income statement for the period in which they are incurred.

An increase in the book value arising in connection with

the revaluation of buildings and land is transferred to reserve within equity. Decreases that offset earlier increases in the same asset are charged to reserve, all other decreases are stated in the income statement. Each year the difference between depreciation based on the asset's revalued carrying amount (depreciation stated as a cost) and depreciation based on the asset's original cost is transferred from reserve to retained earnings.

Land is not depreciated. Other assets are depreciated using the straight-line method to allocate their acquisition value or revalued amounts to their residual value over their estimated useful lives as follows:

• Buildings 0–50 years
• Machinery and other technical installations 3–20 years
• Equipment and tools 3–15 years

The assets' residual values and useful lives are reviewed each closing date, and adjusted when appropriate.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing sales proceeds with the carrying amount and the difference is included in the income statement. When revalued assets are sold, the amounts included in reserves are transferred to retained earnings.

Intangible assets

Goodwill

Goodwill consists of the amount by which the acquisition cost exceeds the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associated company at the date of acquisition. Goodwill arising on the acquisition of subsidiaries is stated among intangible fixed assets. Goodwill on the acquisition of associated companies is included in the value of investments in associated companies. Goodwill is allocated to cash-generating units and tested for impairment annually. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Software

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire the specific software and bring it to use. These costs are depreciated over the estimated useful life, which normally means a 10-year depreciation period.

Costs associated with the development or maintenance of computer software programs are stated as a cost as incurred.

Leases and similar rights

Leases and similar rights consist for the most part of customer relations and contracts. Records to verify their capitalisation could include business plans, budgets and the company's assessments of future outcomes. An individual assessment it made for each item. Depreciation begins when the asset is ready for use and is then provided throughout the estimated utility period.

Impai rment losses

Assets that have an indeterminate useful life are not depreciated but are tested annually for impairment. Assets that are depreciated are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is stated at the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less selling costs and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

F inancial instrument s

The Group classifies its financial instruments in the following categories:

• Financial assets at fair value via the income statement.
• Loans and accounts receivable.
• Financial instruments held to maturity.
• Financial assets available for sale.

The classification depends on the purpose for which the financial asset was acquired. The management determines the classification of financial assets when they are first reported and reviews this decision on each reporting occasion.

Financial assets at fair value via the income statement

This category has two sub-categories: financial assets held for trading and those originally classified in the category valued at fair value via the income statement. A financial asset is classified in this category if acquired principally for the purpose of selling in the near future or if designated as such by management. Derivatives are also classified as held for trading unless they are identified as hedges.

Loans and accounts receivable

Loans and accounts receivable are non-derivative financial assets with established or determinable payments that are not quoted in an active market. Typically, they arise when the Group provides money, goods or services direct to the customer with no intention of trading in the resulting receivable. They are included in current assets, except for items maturing later than 12 months after the closing date. These are classified as fixed assets.

Financial instruments held to maturity

Financial instruments held to maturity are non-derivative financial assets with established or determinable payments and established maturities, which the Group intends and has the ability to hold to maturity.

Available for sale financial assets

Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in fixed assets, unless management intends to dispose of them within 12 months of the closing date.

Studsvik has no financial assets that can be classified as available for sale.

Inv entories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling costs.

Trade receivables

Trade receivables are initially stated at fair value and thereafter at accrued historic cost, applying the effective interest method, less any provision for impairment. A provision for impairment of accoiunts receivable is made when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. Significant financial difficulties of the debtor, the probability that the debtor will go bankrupt or become subject to financial reconstruction, default and late payment (more than 30 days overdue) are regarded as indicators of impairment of an account receivable. The amount of the provision is the difference between the carrying amount of the asset and the present value of estimated future cash flows, discounted using the original effective interest rate. The carrying amount of the asset is reduced by using an impairment account and the loss is stated in the income statement under "Selling costs". When an account receivable cannot be collected it is written off against the impairment account for accounts receivable. The recovery of amounts previously written off is credited to "Selling costs" in the income statement.

Cash and cash equival ent s

Cash and cash equivalents consist of cash in hand, money at bank, and other short-term investments with maturities of three months or less.

Share capital

Ordinary shares are classified as equity.

Transaction costs directly attributable to the issue of new shares or options are stated in equity as a deduction, net of tax, from the issue proceeds.

Trade payables

Trade payables are initially stated at fair value and thereafter at amortised cost, applying the effective interest method, less any provision for impairment.

Borrowing s

Borrowings are stated at fair value, net after transaction costs. Borrowings are thereafter recognized at amortized cost and any difference between the amount received (net of transaction costs) and the repayment amount is stated in the income statement periodised over the period of the loan, applying the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the closing date.

De f erred tax

Deferred tax is stated in its entirety, using the balance sheet method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated accounts. However, the deferred tax is not stated if it arises as a consequence of a transaction constituting the initial recognition of an asset or liability in a transaction other than a company acquisition that, at the time of the transaction, affects neither the stated nor the taxable result. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the closing date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax receivables are stated to the extent it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Deferred tax is calculated on all temporary differences arising on participations in subsidiaries, except when the time of reversal of the temporary difference can be determined by the Group and it is probable that the temporary difference will not be reversed in the foreseeable future.

Employee bene f its

Pension obligations

The Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, on the basis on periodic actuarial calculations. The Group has both defined benefit and defined contribution plans.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment commitments once the contributions have been paid. The contributions are stated under personnel costs when they fall due. Prepaid contributions are stated as an asset to the extent that a cash refund or a reduction in the future payments will accrue to the Group.

A defined benefit pension plan is a plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service or salary. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate legal entity.

The liability stated in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit commitments at the closing date less the fair value of plan assets, after adjustment for unstated actuarial gains or losses on past periods of service. The defined benefit pension commitment is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit commitment is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension provision.

Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably obliged either to terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to pay termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to present value.

Profit-sharing and bonus plans

The Group states a liability and a cost for bonuses and profitsharing, based on a formula that takes into consideration the profit attributable to the Parent Company's shareholders after certain adjustments. The Group makes a provision when there is a legal obligation or when past practice has created aninformal obligation.

Provisions

Provisions for future waste management costs, restructuring and other costs are stated when the Group has an existing legal or informal obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated.

The provisions are recognised at the present value of the amount expected to be needed to settle the obligation, which is arrived at usinga discounting rate before tax that reflects a current market assessment of the time-dependent value of money and the risks associated with the provision. The increase in the provision as a result of the passing of time is stated as an interest cost.

REVENUE RECOGNITION

Revenue comprises the fair value of the services sold exclusive of value added tax and discounts and after elimination of intra-Group sales. Revenue is recognised as follows.

The Group uses the percentage of completion method to determine the appropriate amount to recognize in a given period. The degree of completion is defined as the contract costs incurred up to the closing date as a percentage of the total estimated costs for each contract.

The Group states as an asset the amount receivable from customers for contract work for all contracts in progress for which costs incurred plus recognised profit exceed progress billings. Progress billings not yet paid by customers and retentions are included in "Accounts receivable and other current receivables."

The Group states as a liability the gross liabilities due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profit.

Sales of services are recognised as revenue in the accounting period in which the services are rendered, using the percentage of completion method on the closing date as a proportion of the total services to be provided.

Interest revenue is recognised on a periodised basis using the effective interest method.

Dividend revenue is recognised when the right to receive payment is established.

Acco unt ing r eco gni t i on of Joint Ventures

Joint ventures are business over which Studsvik, together with one or more co-owners, has a joint controlling influence. The Group is only involved in joint ventures that are independent legal entities and these are reported in the consolidated accounts in accordance with the equity method.

L eases

A distinction is made between financial and operational leases. Leases that involve a significant part of the risk and benefits associated with ownership being retained by the lessor is classified as operational lease, in which case no asset or liability items are stated in the balance sheet. The lease charges are stated as a cost in the income statement linearly throughout the lease period. The accounting recognition of financial lease involves the asset being stated as an asset in the balance sheet and the lease commitment being stated as a liability in the balance sheet. The assets are depreciated according to plan throughout the utility period, while the lease charges are stated as interest costs and amortisation of liabilities.

Dividend

Dividends payable to the Parent Company's shareholders are stated as a liability in the consolidated financial statements in the period in which the dividend is approved by the Parent Company's shareholders.

F inancial Risk Management

F inancial risk factors

The business of the Studsvik Group is exposed to financial risks and other operating risks that may be important for the future development of the Group. By financial risk is meant the fluctuations in the consolidated profit and cash flow that arise as a result of changes in exchange rates, interest rates and customer payment capacity. By operating risk is meant official permits, patents or political decisions.

The Studsvik Group's financial policy, which is drawn up by the Board, is a framework of rules, guidelines and recommendations for financial risk management. The Parent Company's treasury function has responsibility for supporting the operative business in its financial risk management. The Group's borrowing and investment of surplus cash and cash equivalents are handled by the Group's treasury function.

A summary is provided below of the principles applied in the management of financial risk.

Currency risk

The Studsvik Group's result is affected by fluctuations in the currencies in which sale and purchase agreements (transaction exposure) are denominated and by fluctuations in the subsidiaries' accounting currencies (translation exposure). The Group's most important trading and accounting currencies in 2007 were USD, EUR and JPY.

Transaction exposure

The main rule for the Group is that subsidiaries shall sign contracts of both sale and purchase in their own accounting currency. Where this is not possible, a potential currency risk arises. This can be hedged by different measures, the most common of which are currency clauses and forward sale/ purchase of currency (forward exchange contract). These measures may also be combined. Most of the Group's sales are project oriented, for which the rule is to hedge all contracted and known exposures in respect of the sales and/or purchase. Where sales involve regular flows, 75 per cent of the estimated flow shall be hedged on a moving 12-month basis. The hedging instrument used is the forward contract.

Translation exposure

The annual accounts of foreign subsidiaries are translated into SEK and included in the consolidated financial statements. The consolidated result is affected by fluctuations in the local accounting currencies in connection with the translation of the subsidiaries' income statements. Translation differences arising on the translation of the subsidiaries' balance sheets are taken to equity in the Group. In connection with the establishment of its busineses in Germany and the USA, the Group raised loans in local currency in these markets, as a means of limiting the risk to the Group's equity.

Interest rate risk

Interest rate risk is defined as the risk of changes in interest rates having an impact on the result. The Group is exposed to interest rate risk in respect of its net interest-bearing debt defined as interest-bearing loans less cash and cash equivalents. Interest rate risk can be changed by shortening or extending the duration of the relevant borrowing. Decisions on this are made by the Group's treasury function, on the basis of the Board's guidelines and the Group's own assessment of likely interest rate trends.

Counterparty risk

Counterparty risk is the risk of losses arising in connection with the insolvency of a business counterparty. This includes bad debts and losses associated with the placement of cash and cash equivalents. Historically, the Studsvik Group has had a very low level of bad debts. Its customers are for the most part major established companies and government authorities. There is at present no indication of any radical change in this customer profile or a drastic deterioration in customer solvency. The risk associated with placements of cash and cash equivalents are limited by detailed rules regarding counterparties' credit rating, limits for total placements with any one counterparty, the type of instrument allowed etc.

Capital risk

The Group's goal for is capital structure is to safeguard the Group's ability to continue its business to enable it to earn a return for its shareholders and value for other stakeholders and to maintain an optimal capital structure as a means of controlling the cost of capital.

To retain or adjust the capital structure the Group can alter the dividend it pays to shareholders, repay capital to shareholders, issue new shares, or sell assets to reduce its liabilities.

Just like other companies in the industry, the Group assesses its capital on the basis of the debt/equity ratio. This ratio is defined as net debt divided by total capital.

Net debt is defined as total borrowing (including Short term borrowing and Long-term borrowing in the consolidated balance sheet) less cash and cash equivalents. Total capital is defined as equity in the consolidated balance sheet plus net debt. In 2007 the Group's strategy, which was unchanged from 2006, was to keep its debt/equity ratio between 20 and 30 per cent. The debt/equity ratio at 31 December 2007 was 25 per cent (18).

Acco unt ing r eco gni t i on of d e r i vat i v e ins t r ument s and hedging activities

Derivatives are recognised in the balance sheet on the contract date at fair value, both initially and on subsequent revluations. Revaluations are recognised in the income statement on a current basis. The Group did not used hedge accounting in 2007. Hedge accounting means that day-today changes in market values of forward contracts are taken direct to equity and do not affect the income statement. In order to apply hedge accounting the company's procedures and systems for following up forward contracts must satisfy strict requirements as to precision and documentation. As the extent of the Group's financial hedges is not significant it has been decided not to apply hedge accounting other than in special cases where the amounts are substantial and the maturities of the futures exceed three years.

Fair Value E stimation

The fair value of financial instruments traded on active markets is based on listed market prices at the closing date. The listed market price used for financial assets held by the Group is the current bid price. The listed market price used for financial liabilities is the current offer price.

The fair value of forward currency contracts is determined using listed market prices for currency futures on the closing date.

The nominal value, less any estimated credits, for accounts receivable and trade payables, is assumed to approximate to their fair value.

Important E stimates and Assumptions for Accounting Purposes

Estimates and assumptions are continually evaluated and rest on historical experience and other factors, including expectations of future events regarded as reasonable under the circumstances.

The Group makes estimates and assumptions about the future. The estimates for accounting purposes that result will, by definition, seldom correspond to the actual outcome. The estimates and assumptions that involve a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

Impairment testing of goodwill

Each year the Group examines whether goodwill is impaired, in accordance with the accounting policy described under the heading "Intangible fixed assets". Recoverable amounts for cash generating units are determined by calculating value in use. Certain estimates must be made for these calculations (Note 12).

If the estimated discounting rate before tax that is used for discounting cash flows had been 10 per cent higher than the management estimate, the Group would still not have needed to write down the value of goodwill.

Deferred taxes

Deferred taxes are computed on the basis of temporary differences between the book and fiscal values of assets and liabilities. There are two main types of assumptions and estimates that influence the deferred tax stated in the accounts. These are the assumptions and estimates needed to determine the book value of various assets and liabilities, as well as regarding the future taxable profit, in those cases where the utilisation of deferred tax receivables in the future is dependent on this.

Deferred tax receivables are stated to cover loss allowances to the extent it is considered likely that they can be credited against taxable profits in the future. Most of the Group's loss allowances are related to the business conducted by Studsvik Holding, Inc., in the USA. At the end of each quarter in connection with the closing of the books, an assessment is made of Studsvik Holding, Inc.'s likely future earnings and the deferred tax is adjusted regularly to take this assessment into account.

Notes

N ot e s to the Consolidat ed Accounts

Amounts in sek '000 unless otherwise stated

Note 1 Primary segments (new structure)

Financial year 2007

	Global
	Sweden	UK	Germany	USA	Services	Other	Eliminations	Total
Income
External sales	104,372	125,771	339,561	427,689	167,170	150,084	-	1,314,647
Intra-Group sales	31,066	3,349	1,728	0	11,582	9,006	–56,731	0
Total income	135,438	129,120	341,289	427,689	178,752	159,090	–56,731	1,314,647
Result
Operating profit/loss	28,200	2,986	25,345	6,247	14,440	–38,298	23,184	62,104
Financial net								–16,118
Tax attributable								1,234
Net profit for the year								47,220
Attributable to parent company shareholders								46,475
Minority interests								745
Other information
Total assets	121,080	89,910	244,369	624,588	183,293	389,477	–306,761	1,345,956
Total liabilities	58,810	47,800	179,087	326,288	158,719	285,017	–281,598	774,123
Fixed capital expenditure	33,886	42,444	17,647	21,400	5,267	6,683	-	127,327
Depreciation	5,778	2,434	5,258	35,456	8,122	3,097	-	60,145

Financial year 2006

		Global
	Sweden	UK	Germany	USA	Services	Other	Eliminations	Total
Income
External sales	87,393	24,987	303,913	364,330	167,740	271,248	-	1,219,611
Intra-Group sales	38,780	5,880	4,750	-	-	8,482	–57,892	0
Total income	126,173	30,867	308,663	364,330	167,740	279,730	–57,892	1,219,611
Result
Operating profit/loss	26,266	–11,314	25,770	11,362	36,373	–18,976	1,798	71,279
Financial net								–14,155
Tax for the year								–22,302
Net profit for the year								34,822
Attributable to parent company shareholders								34,822
Minority interests								-
Other information
Total assets	112,020	41,103	206,344	695,623	215,465	513,851	–427,047	1,357,359
Total liabilities	41,064	28,675	165,656	374,860	196,075	397,573	–405,195	798,708
Fixed capital expenditure	13,403	19,341	5,915	288,815	10,269	6,994	-	344,737
Depreciation	4,468	556	4,056	33,411	7,412	3,935	-	53,838

Other operations mainly refer to the parent company and AB SVAFO, and in 2006 Studsvik Stensand AB. AB SVAFO is responsible for management of older state-owned research waste and decommissioning of facilities related to previous state property operations. The costs of the operations are covered by the Nuclear Waste Fund.

Note 1 Secondary segments (primary segments in previous organisational structure)

Financial year 2007

	Waste treatment	Decommissioning	Operating efficiency	Service & maintenance	Other operations	Eliminations	Total
Income
External sales	565,296	268,669	167,170	163,428	150,084	-	1,314,647
Intra-Group sales	34,415	1,460	11,582	65	9,056	–56,578	0
Total income	599,711	270,129	178,752	163,493	159,140	–56,578	1,314,647
Result
Operating profit	35,577	13,526	14,440	13,675	–38,298	23,184	62,104
Financial net							–16,118
Tax for the year							1,234
Net profit for the year							47,220
Attributable to parent company shareholders							46,475
Minority interests							745
Other information
Total assets	799,982	153,389	183,293	159,147	389,477	–339,332	1,345,956
Total liabilities	425,127	72,228	158,719	148,158	285,017	–315,126	774,123
Fixed capital expenditure	63,264	37,282	5,267	14,831	6,683	-	127,327
Depreciation	42,311	3,408	8,122	3,207	3,097	-	60,145

Financial year 2006
	Waste treatment	Decommissioning	Operating efficiency	Service & maintenance	Other operations	Eliminations	Total
Income
External sales	469,948	186,998	167,740	260,761	134,164	-	1,219,611
Intra-Group sales	38,780	2,024	-	8,025	9,775	–58,604	0
Total income	508,728	189,022	167,740	268,786	143,939	–58,604	1,219,611
Result
Operating profit/loss	33,574	11,871	36,373	17,307	–27,846	-	71,279
Financial net							–14,155
Tax for the year							–22,302
Net profit for the year							34,822
Attributable to parent company shareholders							34,822
Minority interests							-
Other information
Total assets	830,177	114,663	215,465	179,798	487,023	–469,767	1,357,359
Total liabilities	439,932	63,337	196,075	165,600	388,380	–454,616	798,708
Fixed capital expenditure	321,200	4,043	10,269	2,580	6,645	-	344,737
Depreciation	38,285	3,204	7,412	2,232	2,705	-	53,838

Other operations mainly refer to the parent company and AB SVAFO. AB SVAFO is responsible for management of older state-owned research waste and decommissioning of facilities related to previous state property operations. The costs of the operations are covered by the Nuclear Waste Fund.

Breakdown of sales by market

Sales figures are based on the countries in which the customers are located.

	2007	2006
Sweden	258,662	336,509
Europe, excluding Sweden	564,323	424,394
North America	463,560	433,242
Asia	25,853	20,259
Other countries	2,249	5,207
Total	1,314,647	1,219,611

Note 2 Costs of employee benefits

	2007	2006
Salaries	481,561	490,937
Social security costs	84,851	116,161
Pension costs – defined contribution plans	25,066	26,659
Pension costs – defined benefit plans (note 22)	284	773
Total	591,762	634,530

Salaries and other benefits by country and between Board members and presidents and other employees

	Boards and Presidents	(of which bonuses etc)	2007 Other employees	Boards and Presidents	(of which bonuses etc)	2006 Other employees
Parent company	5,033	(110)	6,926	4,437	(-)	9,123
Subsidiaries in Sweden	1,913	(72)	93,175	3,642	(323)	158,465
Subsidiaries abroad
– Norway	-	(-)	2,388	1,253	(103)	1,368
– Germany	1,644	(148)	236,378	2,883	(305)	202,800
– United Kingdom	1,399	(108)	27,505	1,342	(68)	19,390
– USA	3,993	(510)	99,451	3,694	(51)	80,470
– Japan	571	(-)	287	631	(-)	279
– Switzerland	-	(-)	898	-	(-)	1,160
Total, subsidiaries	9,520	(838)	460,082	13,445	(850)	463,932
Group total	14,553	(948)	467,008	17,882	(850)	473,055

For information on benefits to senior management personnel, see Note 31.

Note 3 Operating expenses

	2007	2006
Purchased materials and services	552,063	391,708
Personnel	610,289	649,922
Energy	21,705	22,142
Depreciation	60,502	53,838
Other costs	31,444	37,471
Total	1,276,003	1,155,081

Services include fees and remuneration to auditors as follows

	2007	2006
Öhrlings PricewaterhouseCoopers
– Auditing	2,071	2,361
– Other contracts	6,786	2,545
Other auditors
– Auditing	192	182
– Other contracts	-	41

By "Auditing" is meant the examination of the annual report, the accounting records and the administration by the Board and the President. It also includes other duties that are incumbent on the company's auditors as well as advisory services and other types of support arising out of observations made in the course of such an examination. All other tasks are classified as "Other contracts".

Note 4 Other operating income

	2007	2006
Divestment of subsidiaries	23,184	-
Divestment of tangible fixed assets	733	-
Revaluation of forward contracts	-	2,595
Revaluation of other operating receivables and liabilities	599	8,488
Refund of value added tax	-	2,147
Other	572	1,047
Total	25,088	14,277

Note 5 Other operating expenses

	2007	2006
Revaluation of forward contracts	1,425	7,217
Revaluation of other operating receivables and liabilities	203	311
Total	1,628	7,528

Note 6 Financial income

	2007	2006
Fair value losses (realised and unrealised)	-	–1,068
Fair value gains (realised or unrealised)	255	-
Interest income	8,293	24,162
Other	168	-
Total	8,716	23,094

Note 7 Currency gains/losses – net

Currency differences are stated in the income statement as follows.

	2007	2006
Cost of goods sold	–1,029	1,741
Net financial costs (Notes 6, 8)	–918	–19,735
Total	–1,947	–17,994

Note 8 Financial expenses

	2007	2006
Interest costs – bank loans	22,207	14,480
Net currency gains/losses (Note 7)	1,173	19,735
Other financial costs	1,454	3,034
Total	24,834	37,249

Note 9 Income tax

2007	2006
11,319	–17,733
–10,085	–4,569
1,234	–22,302

Income tax in Sweden amounts to 28 per cent (28). The main reasons for the difference between the Swedish income tax rate and the weighted average tax rate are shown in the table below. In 2007 the Group had income not liable to taxation amounting to MSEK 35, primarily as a result of the divestment of a subsidiary. Over and above this, deferred tax liabilities were adjusted as a consequence of a change in the tax rate in Germany with effect from 1 January 2008. These items are included in Other effects below. A tax audit in Germany has resulted in the reversal of tax provisions for prior years.

	2007	2006
Profit before tax	45,987	57,124
Tax in accordance with the current tax rate	–12,876	–15,995
Non-taxable income	10,053	640
Non-deductible costs	–983	–970
Unstated tax receivable in respect of loss allowances	328	–3,021
Adjustment for foreign tax rate	–2,733	–3,223
Adjustment for prior years' tax assessment	3,089	267
Other effects	4,356	-
Tax charge	1,234	–22,302

The weighted average tax rate was –3 per cent (39).

Note 10 Earnings per share

Before dilution

Earnings per share before dilution are calculated by dividing the profit for the year by the weighted average number of shares in issue (see Note 19).

	2007	2006
Profit for the year	46,475	34,822
Weighted average number of ordinary shares
in issue	8,218,611	8,218,611
Earnings per share before dilution (SEK per share)	5.65	4.24

After dilution

Diluted earnings per share are calculated by adjusting the weighted average number of shares in issue assuming full conversion of the potential shares. The company had no unconverted stock options or convertible debt instruments in issue on the closing date.

	2007	2006
Profit for the year	46,475	34,822
Weighted average number of ordinary shares
in issue	8,218,611	8,218,611
Diluted earnings per share (SEK per share)	5.65	4.24

Note 11 Property, plant and equipment

	Land and buildings	Plant and machinery	Equipment and tools	Construction in progress and advance payments for property, plant and equipment	Total
Opening balance 1 January 2006
Cost of acquisition	129,799	587,180	281,285	27,863	1,026,127
Accumulated depreciation	–70,485	–326,731	–196,036	-	–593,252
Accumulated impairment losses	–3,551	–43,857	–6,436	–6,992	–60,836
Book value	55,763	216,592	78,813	20,871	372,039
1 January – 31 December 2006
Opening book value	55,763	216,592	78,813	20,871	372,039
Exchange rate differences	–1,814	–26,852	–8,076	–946	–37,688
Acquisitions of subsidiaries	19,955	-	33,044	7,240	60,239
Investments	16,456	6,924	18,368	24,474	66,222
Other	-	–2	39	-	37
Redistribution during the year	–9	7,179	63	–13,148	–5,915
Disposals and retirements	-	–2,657	–2,326	–208	–5,191
Depreciation	–3,671	–26,256	–19,169	-	–49,096
Closing book value	86,680	174,928	100,756	38,283	400,647
As at 31 December 2006
Cost of acquisition	160,183	357,600	252,984	38,283	809,050
Accumulated depreciation	–73,503	–182,672	–152,228	-	–408,403
Book value	86,680	174,928	100,756	38,283	400,647
1 January – 31 December 2007
Opening book value	86,680	174,928	100,756	38,283	400,647
Exchange rate differences	–2,453	–8,810	–4,581	–834	–16,678
Acquisition of subsidiaries	-	-	401	-	401
Divested subsidiaries	–1,549	–236	–461	-	–2,246
Investments	3,714	6,124	15,784	54,890	80,512
Redistribution during the year	29,818	13,826	4,726	–51,132	–2,762
Disposals and retirements	–491	–95	–669	–483	–1,738
Depreciation	–3,850	–25,968	–21,724	-	–51,542
Closing book value	111,869	159,769	94,232	40,724	406,594

Note 11 (continued)

	Land and buildings	Pland and machinery	Equipment and tools	Construction in progress and advance payments for property, plant and equipment	Total
31 December 2007
Cost of acquisition	188,307	350,764	257,732	40,724	837,527
Accumulated depreciation	–76,438	–190,995	–163,500	-	–430,933
Book value	111,869	159,769	94,232	40,724	406,594

Depreciation costs include SEK 51,542,000 for Cost of goods sold, SEK 47,843,000 for Selling and marketing costs, SEK 344,000 for Administrative expenses, and SEK 455,000 for Research and development expenses. Interest of SEK – (10,638,000) is included in the acquisition value of buildings, plant and machinery.

Note 12 Intangible assets

Leases

	Goodwill	Software rights	and similar rights	Total
1 January 2006
Cost of acquisition	132,824	21,710	2,562	157,096
Accumulated amortization and
impairment	-	–16,887	–2,348	–19,235
Accumulated write-downs	–5,386	-	-	–5,386
Book value	127,438	4,823	214	132,475
1 January – 31 December 2006
Opening book value	127,438	4,823	214	132,475
Exchange rate differences	–23,807	–12	–4,606	–28,425
Acquisitions	201,112	-	48,652	249,764
Fixed capital expenditure	-	-	334	334
Re-classifications	-	-	5,915	5,915
Divestments	-	-	253	253
Depreciation	-	–2,158	–2,584	–4,742
Closing book value	304,743	2,653	48,178	355,574
31 December 2006
Cost of acquisition	310,129	21,698	53,110	384,937
Accumulated depreciation	-	–19,045	–4,932	–23,977
Accumulated write-downs	–5,386	-	-	–5,386
Book value	304,743	2,653	48,178	355,574
1 January – 31 December 2007
Opening book value	304,743	2,653	48,178	355,574
Exchange rate differences	–2,503	1	–2,430	–4,932
Acquisitions	28,959	-	11,827	40,786
Divested subsidiaries	–11,250	-	-	–11,250
Adjustment to acquisition costs	–2,857	-	-	–2,857
Re-classifications	–5,386	10	5,376	0
Depreciation	-	–2,186	–6,417	–8,603
Closing book value	311,706	478	56,534	368,718
31 December 2007
Cost of acquisition	317,092	21,732	67,067	405,891
Accumulated depreciation	-	–21,254	–10,533	–31,787
Accumulated write-downs	–5,386	-	-	–5,386
Book value	311,706	478	56,534	368,718

Leases and similar rights mainly consist of customer relations/contracts. Depreciation of SEK 8,603,000 (4,742,000) is included in "Cost of goods sold" in the income statement.

Note 12 (continued)

Impairment tests of goodwill

Goodwill is allocated to the Group's cash generating units (CGUs) identified by primary segment. A summary of the allocation of goodwill at segment level is provided below.

	2007	2006
Sweden	-	-
UK	27,143	7,599
Germany	113,504	103,944
USA	171,059	181,950
Global Services	-	-
Other	-	11,250
Total	311,706	304,743

Goodwill is tested annually to identify any impairment requirements. The calculation is carried out for each cash generating unit and is based on estimated future cash flows according to historical trends and business plans for the next three years. Cash flows beyond the three-year period are extrapolated with the aid of an estimated growth rate of 3 per cent per year. For each cash generating unit a recoverable amount is determined as the present value of estimated future estimated cash flows. The recoverable amount for the Group's cash generating units is determined on the basis of utility value estimates.

The discounting rate used is a weighted capital cost calculated for the Group and consisting of the cost of borrowed capital and the cost of equity. The cost of borrowed capital is determined as the average interest rate on the Group's borrowings. The cost of equity is calculated as the return on risk-free investments plus a risk premium that is estimated to reflect investors' requirements with regard to listed companies in Studsvik's sector. The weighted capital cost used in calculating the recoverable amount is 8 per cent after tax. Based on the assumptions and estimates made, there are no impairment requirements for goodwill. A deterioration in the gross margin of 10 per cent or an increase in the weighted cost of capital of 10 per cent does not give rise to any impairment requirements for goodwill.

Note 13 Deferred income tax

Deferred tax assets and tax liabilities are netted off when there is a legally enforceable right to net off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority.

Offset amounts	2007	2006
Deferred tax assets
Deferred tax assets to be
utilised after more than 12 months	36,160	36,634
Deferred tax assets to be
utilised within 12 months	5,448	7,768
Total	41,608	44,402
Deferred tax liabilities
Deferred tax liabilities to be
utilised after more than 12 months	38,391	44,387
Deferred tax liabilities to be
utilised within 12 months	2,498	-
Total	40,889	44,387

Change in deferred tax assets and liabilities during the year

Deferred tax assets	Tax deficit	Other	Total
As at 1 January 2006	57,285	1,648	58,933
Stated in income statement	–10,152	2,711	–7,441
Reposting to current tax	-	–1,274	–1,274
Exchange rate differences	–5,816	-	–5,816
As at 31 December 2006	41,317	3,085	44,402
Stated in income statement	2,397	–2,792	–395
Change as result of divestment
of subsidiaries	-	–145	–145
Exchange rate differences	–2,254	-	–2,254
As at 31 December 2007	41,460	148	41,608
	Accelerated
Deferred tax liabilities	tax depreciation	Other	Total
As at 1 January 2006	0	22,376	22,376
Stated in income statement		16,508	16,508
Charged to equity	5,503	-	5,503
As at 31 December 2006	5,503	38,884	44,387
Stated in income statement	–72	–6,961	–7,033
Change as result of acquisitions		3,741	3,741
Exchange rate differences		–206	–206
As at 31 December 2007	5,431	35,458	40,889

Note 13 (continued)

Deferred tax assets are stated against tax loss allowances to the extent that it is considered likely that they can be netted off against taxable profits in the future. The main part of the Group's tax loss allowances is related to the operations carried on by Studsvik Holding Inc., USA. These loss allowances amount to MUSD 37.2, and they made be utilised within a 20-year period. The Group's stated deferred tax assets include tax loss allowances of MSEK 36.2 (35.3) in the USA.

Note 14 Joint ventures

Indirectly owned	Co. reg. no	Registered office	Interest in equity, %
THOR Treatment Technologies, LLC	-	Delaware	50

The above company is a joint venture in which Studsvik is a partner pursuant to an agreement providing for joint control. THOR Treatment Technologies LLC is engaged in waste treatment activities on the federal waste market in the USA.

The following amounts comprise the Group's interests in the joint venture company's assets, liabilities, income and costs.

	2007	2006
Fixed assets	5,072	6,593
Current assets	22,643	19,930
Total assets	27,715	26,523
Equity	14,194	12,097
Liabilities	13,521	14,426
Total equity and liabilities	27,715	26,523
Net sales	76,262	70,555
Operating costs	–73,327	–67,033
Operating profit	2,935	3,522
Income from financial items	-	-
Profit after financial net	2,935	3,522
Tax	-	-
Net profit for the year	2,935	3,522

The Group has no contingent liabilities attributable to the holding in TTT. The joint venture in which the Group has interests has no investment commitments. The joint venture is stated in the consolidated financial statements at cost of acquisition in accordance with the capital interest method.

Note 15 Derivative financial instruments

	2007		2006
	Assets	Liabilities	Assets	Liabilities
Forward exchange contracts	1,289	210	2,863	7,217

Revaluation of currency futures is via the income statement.

Outstanding currency futures 31 December 2007

					Inflow currencies		Outflow currencies
Maturity year	CHF 000	EUR 000	GBP 000	JPY 000	NOK 000	USD 000	NOK 000
2008 Amount	74	542	419	196,720	450	1,016	3,090
E xchange rate1)	5.648	9.269	13.075	0.059	1.185	5.842	1.183
2009 Amount				7,970		541
E xchange rate1)				0.075		6.656
2010 Amount				7,970		63
E xchange rate1)				0.077		6.344
Translated to fair value, SEK	421	5,107	5,290	12,051	531	10,049	3,657

1) Average contractual rate.

Note 16 Inventories

	2007	2006
Raw materials	5,096	3,404
Work in progress	15,820	2,351
Finished goods Total	1,543 22,459	1,118 6,873

Expenditure on inventories that is stated as a cost is included in "Cost of goods sold" and amounts to SEK 19,339,000 (9,159,000).

Note 17 Trade and other receivables

	2007	2006
Trade receivables	213,554	190,027
Less provision for impairment of receivables	–7,583	–863
Trade receivables – net	205,971	189,164
Shares in other companies	5,645	5,558
Other securities	9,103	9,238
Work in progress	16,741	13,876
Tax assets	24,022	-
Other receivables	35,465	54,964
Prepaid costs and accrued income
– Accrued income	16,857	9,663
– Accrued interest income	225	-
– Prepaid rent	746	647
– Prepaid lease charges	177	323
– Prepaid insurance premiums	5,299	6,488
– Other	8,164	9,505
Total	328,415	299,426
Non-current portion	25,372	27,029
Current portion	303,043	272,397
Total	328,415	299,426

Trade receivables and other current receivables are stated at fair value. It is considered that there is no need to write down the value of those accounts receivable that have been due for less than three months. As of 31 December 2007 trade receivables amounting to SEK 68,349,000 (35,254,000) had fallen due without any write-down being considered necessary. They relate to a number of customers who are independent of each other and who did not have a previous poor payments record. The age analysis of these trade

	2007	2006
Less than 3 months	40,668	28,123
3–6 months	24,546	6,063
Longer than 6 months	3,135	1,068
Total	68,349	35,254

Trade and other current receivables by currency

receivables are shown below.

	2007	2006
SEK	87,920	97,170
EUR	66,175	55,922
GBP	37,362	12,952
USD	107,909	98,462
Other currencies	3,677	7,891
Total	303,043	272,397

Change in reserve for possible bad debts

1 January	–863	–267
Provision for possible bad debts	–7,200	–632
Receivables written off as unrecoverable	–593	-
Re-entry of unused provision	802	36
Divestment of subsidiary	271	-
31 December	–7,583	–863

2007 2006

Note 17 (continued)

Transfers to and re-entries from reserves for possible bad debts are stated under Other costs in the income statement. Amounts stated in the bad debt reserve are normally written off when the Group does not expect to recover any more liquid funds.

The item Other within accounts receivable and other current receivables does not include any assets requiring impairment.

Note 18 Cash and cash equivalents

	2007	2006
Cash and bank	176,873	247,574
Total	176,873	247,574
Note 19 Share capital	Number of shares (thousands)	Total (SEK)
1 January 2006	8,218,611	8,218,611
31 December 2006	8,218,611	8,218,611

All shares are ordinary shares having a par value of SEK 1.0.

The Board proposes that a dividend of SEK 2.00 (2.00) per share be paid for the 2007 financial year.

31 December 2007 8,218,611 8,218,611

Note 20 Other reserves

	Currency translation reserve
Opening balance 1 January 2006	34,047
Currency differences	–26,394
Closing balance 31 December 2006	7,653
Currency differences	–17,585
Closing balance 31 December 2007	–9,932

Note 21 Borrowings

	2007	2006
Bank borrowings
Non-current portion	196,368	307,398
Current portion	122,287	39,782
Total borrowings	318,655	347,180

Shares in Studsvik GmbH and SINA Verwaltungs GmbH have pledged as collateral for the Group's bank borrowings.

Exposure of Group borrowings to interest rate changes and contractual repricing dates

	6 months or less	6–12 months	1–5 years	More than 5 years	Total
31 December 2006 Total borrowings	165,770	70,765	22,914	47,949	307,398
31 December 2007 Total borrowings	-	137,113	5,171	54,084	196,368

Note 21 (continued)

Maturities of non-current borrowings
	2007	2006
Between 1 and 2 years	47,130	77,908
Between 2 and 5 years	75,866	147,016
More than 5 years	73,372	82,474
Total	196,368	307,398

The bank loans will mature between now and 2013. Total borrowings include bank loans and secured borrowing of SEK 166,473,000 (136,871,000). The collateral for the bank loans consists of shares in subsidiaries owned by the Group.

Group's borrowings by currency

	2007	2006
EUR	-	85,035
USD	180,924	222,303
GBP	15,444	-
Other currencies	-	60
Total	196,368	307,398

Average effective interest rate on closing date,

bank borrowings

	2007	2006
EUR	-	4.52 %
USD	5.74 %	5.68 %
GBP	6.89 %	-
Other currencies	-	4.50 %

Note 22 Pension obligations

Defined benefit pension plans

There are a few defined benefit pension plans within the Group, which are primarily based on final salary. The plans that are considered to be material are in Germany. A reclassification has been made of a defined benefit plan in Sweden, which became a defined contribution plan in 2005. As other pension commitments are not deemed to have any material effect, they have not been restated in accordance with IAS 19.

Pension insurance with Alecta

Commitments for old-age pension and family pension for employees in Sweden are secured by means of insurance with Alecta. According to a statement by the Swedish Financial Accounting Standards Council's Urgent Issues Task Force, URA 42, this is a defined benefit plan covering several employers. For the 2007 financial year the Group has not had access to such information as would enable this plan to be reported as a defined benefit plan. The pension plan under ITP, which is secured by means of insurance with Alecta, is therefore reported as a defined contribution plan.

The year's contributions for pension insurance taken out with Alecta amount to SEK 6,970,000 (8,325,000). Alecta's surplus can be distributed to the policy-holders and/or the insured. At the end of 2007 Alecta's surplus in the form of a collective solvency level was 141 (128) per cent. The collective solvency level comprises the market value of Alecta's assets as a percentage of its insurance commitments calculated in accordance with Alecta's actuarial assumptions, which do not comply with IAS 19.

2007	2006
5,961	5,939
25,350	27,432
	Stated in the income statement In respect of (note 2)

Note 22 (continued)

Pension benefits

Amounts stated in the balance sheet

Amounts stated in the income statement

Defined benefit plans	2007	2006
Current service costs	142	653
Interest costs	142	120
Total, included in personnel costs	284	773

Of the total cost, SEK 28,000 (77,000) was included in "Cost of goods sold" and SEK 256,000 (696,000) in "Administrative costs". The actual return on the plan assets was SEK – (–).

Changes in the liability stated

in the balance sheet 2007 2006

Opening balance	5,939	5,786
Currency differences	–109	–509
Total costs stated in income statement	284	773
Contributions paid	–153	–111
Closing balance	5,961	5,939

Total pension costs stated in

consolidated income statement

	2007	2006
Total costs for defined benefit plans	284	773
Total costs for defined contribution plans	21,467	22,090
Costs of special employer's contribution and
tax on returns from pension funds	3,599	4,569
Total pension costs (note 2)	25,350	27,432
Actuarial assumptions
	2007	2006
Discounting rate	5.30 %	4.50 %
Expected return on plan assets	-	-
Future salary increases	3.00 %	3.00 %
Future pension increases	1.90 %	1.75 %

Note 23 Trade and other payables

	2007	2006
Trade payables	63,333	41,825
Liabilities for work in progress	35,292	18,261
Payments in advance from customers	37,716	16,778
Social security charges and other taxes	29,490	7,566
Other current liabilities	9,218	28,768
Accrued costs and deferred income
– Deferred income	17,425	20,491
– Accrued interest costs	312	7,248
– Accrued wages and salaries	50,291	40,192
– Accrued pension costs	10,574	8,707
– Accrued tax costs	769	63
– Other items	55,074	64,825
Total	309,494	254,724
Non-current portion	7,942	4,044
Current portion	301,552	250,680
Total	309,494	254,724

Note 24 Other provisions

	Future waste management costs	Restruct- uring	Other provisions	Total
1 January 2007	87,378	15,316	27,853	130,547
Stated as cost in consolidated
income statement
– Additional provisions	4,116	-	355	4,471
Currency differences	2,629	-	-	2,629
Effects of changed conditions
for discounting	1,133	-	–1,894	–761
Other	–590	-	–803	–1,393
Utilised during year	–41,529	–4,099	–934	–46,562
Translation difference	-	-	–1,519	–1,519
31 December 2007	53,137	11,217	23,058	87,412
Non-current portion	33,075	-	22,205	55,280
Current portion	20,062	11,217	853	32,132
Total	53,137	11,217	23,058	87,412

Future waste treatment costs

The Group's activities generate nuclear waste and radioactive waste that has to be sent for final disposal within the framework of the systems and rules in effect in those countries where Studsvik carries on operations in its own production facilities. Provisions are made for operational waste, spent reactor fuel and also to some extent for decommissioning of facilities and the resulting decommissioning waste. The main part of the cost of decommissioning and decommissioning waste from the Group's Swedish nuclear facilities is financed, pursuant to the provisions of Act 1988:1597, by way of a charge on nuclear generated electricity, which is payable by Sweden's nuclear energy producers. When paid in, these charges are administered by the Nuclear Waste Fund. Funds for decommissioning and waste treatment can be withdrawn from the Fund by Studsvik, as holder of the nuclear permit for the facilities in question. Studsvik has no payment responsibility under the Act in question. Studsvik's responsibility for decommissioning and waste treatment for its own nuclear facilities is limited to buildings, systems and components that came into existence after 30 June 1991. Studsvik estimates these commitments regularly and makes provisions to cover them. The provision stated in the accounts includes waste treatment and decommissioning of MSEK 33. It also includes MSEK 20 for the treatment of spent reactor fuel. Of the total provisions it is expected that MSEK 20 will be utilised successively, and starting no earlier than at the beginning of 2008.

Restructuring

In December 2004 Studsvik AB's Board decided that the Group's reactor operations should cease in 2005. Operations ceased in June 2005 since when the restructuring of the business commenced. This is expected to be entirely completed in 2008.

Other provisions

Other provisions mainly refer to future costs associated with the decommissioning of the American waste treatment facilities.

Note 25 Pledged assets

	2007	2006
For own liabilities and provisions
Shares in subsidiaries	166,473	136,871
Floating charges	15,000	15,000
Total pledged assets	181,473	151,871

Note 26 Cash flow from operating activities

Items not included in the cash flow for 2007 consist of capital losses of MSEK 23.4 on sales of subsidiaries, capital losses of MSEK 0.7 on the sale of a property, a change of MSEK 1.5 in provisions, and depreciation of MSEK 60.1.

Items not included in the cash flow for 2006 consist of changes of negative MSEK 3.1 in provisions and depreciation of MSEK 53.8.

Note 27 Commitments

Investment commitments

Capital expenditure contracted on the closing date but not yet stated in the financial reports is as follows.

	2007	2006
Tangible fixed assets	9,309	19,782
Total	9,309	19,782

Commitments relating to operational leases

The year's lease costs in respect of operational lease contracts amounted to SEK 7,646,000 (17,448,000).

Future aggregate minimum lease charges

	2007	2006
Within 1 year	5,240	14,478
Between 1 and 5 years	13,416	20,276
Total	18,656	34,754

Commitments relating to financial lease

Assets capitalised as financial lease

		Equipment and tools
Opening book value 1 January 2006		-
Arising via acquisition of subsidiaries		12,221
Closing book value 31 December 2006		12,221
Opening book value 1 January 2007		12,221
Depreciation during the year		–3,978
Closing book value 31 December 2007		8,243
Future aggregate minimum lease charges
	2007	2006

Total	8,520	11,563
More than 5 years	-	-
Between 1 and 5 years	5,397	8,590
Within 1 year	3,123	2,973

The year's lease costs in respect of financial lease amounted to SEK 64,000 (630,000). The Group's financial leases consist for the most part of vehicle lease contracts in the USA.

Note 28 Contingent liabilities

The Group has contingent liabilities in respect of bank guarantees and other guarantees as well as other items arising in the normal course of business. No material liabilities are expected to arise as a result of these contingent liabilities. In the normal course of business the Group has provided guarantees amounting to SEK 93,257,999 (35,322,000) to third parties. No further payments are expected as of the date of these financial reports.

Note 29 Acquisitions

On 1 April 2007 Studsvik AB acquired 100 per cent of the shares in Dr Fary GmbH Delta Phi and Dr Fary Ing Büro GmbH & Co. KG, both engaged in business in Germany. On 1 August 2007 Studsvik AB acquired 100 per cent of the shares in Alpha Engineering in the UK.

The acquired businesses made a net contribution to sales of SEK 22,950,000 and earned an operating profit of SEK 2,406,000 for the period 1 May – 31 December 2007.

Had the acquisition taken place on 1 January the Group's sales would have been SEK 1,343,947,000 and the operating profit for the year would have been SEK 66,304,000.

These amounts are calculated on the basis of the Group's accounting principles and adjustment of the subsidiary companies' result to include additional depreciation that would have been made if fair value adjustments for tangible fixed assets and intangible fixed assets had been made as of 1 January 2007, together with associated tax consequences.

Information on acquired net assets and goodwill

Purchase price	Dr. Fary GmbH	Alpha Engineering
Cash payment	11,578	34,425
Direct costs relating to acquisition	658	578
Total purchase price	12,236	35,003
Fair value of acquired net assets	–7,595	–10,685
Goodwill	4,641	24,318

Goodwill is attributable to the market position of the acquired operations and synergies expected to be generated by integration with Studsvik's other companies after the acquisition.

Assets and liabilities as a consequence of the acquisition

	Dr. Fary GmbH Acquired			Alpha Engineering Acquired
	Fair value	Book value	Fair value	Book value
Intangible fixed assets	8,798	5	3,029	-
Tangible/financial fixed assets	29	29	372	372
Accounts receivable and
other current receivables	3,877	3,877	9,515	9,515
Total	12,704	3,911	12,916	9,887
Liabilities to suppliers	1,986	1,986	69	69
Other current liabilities	573	573	1,239	1,239
Provisions	-	-	14	14
Deferred taxes	2,550	-	909	-
Total	5,109	2,559	2,231	1,322
Acquired net assets	7,595	1,352	10,685	8,565
Cash flow from acquisition of subsidiaries
Purchase price paid in cash				47,239
Liquid funds of acquired subsidiaries				–5,370
Change in the Group's liquid funds
as result of acquisitions				41,869

Note 30 Average number of employees etc

Average number of employees

	Male	2007 Female	Total	Male	2006 Female	Total
Parent company	6	4	10	6	3	9
Subsidiaries in Sweden 170		63	233	340	130	470
Subsidiaries abroad
– Norway	3	-	3	3	-	3
– Germany	499	68	567	475	62	537
– USA	232	28	260	198	23	221
– Japan	1	1	2	1	1	2
– Switzerland	1	-	1	1	-	1
– UK	57	8	65	26	10	36
Total, subsidiaries	963	168	1,131	1,044	226	1,270
Group total	969	172	1,141	1,050		229 1,279

	Number on Of whom	2007	Number on Of whom	2006
	closing date	Male	closing date	Male
Board members President and other	11	9	12	10
senior management	8	7	10	9
Group total	19	16	22	19

Note 31 Benefits to senior management personnel

Salaries and other benefits, 2007

	Basic salary/ V Board fee component	ariable	Other benefits	Pension cost	Total
Chairman of the board
– Anders Ullberg	300	-	-	-	300
– Per Wahlström*	275	-	-	-	275
Members of the Board (8)
– Jan Barchan	200	-	-	-	200
– Ingemar Eliasson	200	-	-	-	200
– Håkan Johansson**	150	-	-	-	150
– Anna Karinen	275	-	-	-	275
– Alf Lindfors	200	-	-	-	200
– Per Ludvigsson	100	-	-	-	100
– Leif Nilsson	200	-	-	-	200
– Henry Sténson**	100	-	-	-	100
Employee representatives (4)	112	-	-	-	112
President	2,679	127	121	858	3,785
Vice president	1,371	38	77	644	2,130
Other senior management
personnel (6)	7,902	292	461		1,444 10,099
– of which outgoing (1)	470	-	-	-	470
Total	14,064	457	659		2,946 18,126

* Chairman until 19 April 2007.

**Chairman from 19 April 2007.

Note 31 (continued)

Salaries and other benefits, 2006

	Basic salary/ V Board fee component	ariable	Other benefits	Pension cost	Total
Chairman of the board
Per Wahlström	525	-	-	-	525
Members of the board (7)
– Jan Barchan	190	-	-	-	190
– Ingemar Eliasson	190	-	-	-	190
– Håkan Johansson	240	-	-	-	240
– Anna Karinen	190	-	-	-	190
– Alf Lindfors	100	-	-	-	100
– Leif Nilsson	190	-	-	-	190
– Henry Sténson	190	-	-	-	190
Employee representatives (4)	63	-	-	-	63
President	2,372	167	78	912	3,529
Vice president	1,294	269	71	590	2,224
Other senior management
personnel (8)	9,128	888	396		1,446 11,858
Total	14,672	1,324	545		2,948 19,489

Salaries, fees and other benefits of Board members and

other senior management personnel

	2007	2006
Parent company
Salaries, fees and other benefits	8,772	8,768
– of which bonuses	204	189
Pensions	2,429	2,341
Number of individuals	18	17
Subsidiary companies
Salaries, fees and other benefits	5,749	7,228
– of which bonuses	230	371
Pensions	517	607
Number of individuals	5	7
Group
Salaries, fees and other benefits	14,521	15,996
– of which bonuses	434	560
Pensions	2,946	2,948
No of individuals	23	24

Principles

The members of the Board receive a fee as resolved by the Annual General Meeting. Members appointed by the trade unions receive a preparation fee for each meeting. The benefits of the President and other senior management personnel consist of a basic salary, variable component, other benefits, pension etc. The Group's senior management personnel are presented on page 93. By senior management personnel is meant the management group, which consists of the President, the Vice President and the Directors for business development and Groupwide development, as well as the Presidents of Group companies. The distribution between basic salary and variable component shall be in proportion to the responsibility and authority of the person holding the position. The variable component is based on actual performance in relation to individually established targets. In 2007 the members of the Board did not receive any remuneration other than their board fee. The salary and other benefits of the President and other senior management personnel are determined by the Board.

Profit sharing and bonuses

The President is entitled to a bonus. The form of the variable salary component is established annually. For 2008 the variable salary component will be based on the Group's operating result and capital efficiency and maximised at 20% of the annual salary. For other senior management personnel the bonus for 2008 will be based on actual outcome in relation to individually specified targets, usually including the performance of the unit in question, the performance of the Group and other individual non-monetary targets. For 100 per cent target fulfilment in all parameters a bonus of 10 per cent of the basic salary becomes payable.

Note 31 (continued)

To the extent the targets are monetary, target fulfilment may exceed 100 per cent, in which case a total bonus may exceed 10 per cent of the basic salary in exceptional cases.

Financial instruments

Under his employment contract the President is entitled to acquire options in respect of up to 100,000 shares in Studsvik AB from Briban Invest AB, Heureka Invest AB and Blue Whale Ltd. The option premium is determined in accordance with Black & Scholes formula. On 31 December 2007 the President's holding of options corresponded to a total of 40,000 shares, distributed between two option agreements for 20,000 options each. The President can exercise 20,000 options by no later than 31 December 2008 and 20,000 options by no later than 31 December 2009. The calculation of the option premium was based on the following data:

Parameter	Exercise 2008 Exercise 2009
Share price	172.50	172.50
Exercise price	250.00	250.00
Assumed dividend per year	3.00	3.00
Interest	2.6%	2.75%
Volatility	25%	25%

Based on the above assumptions the option premium was set at SEK 10.80 per share for the shorter maturity and SEK 15.00 per share for the longer maturity.

Pension

The retirement age of the President is 65 years. The President receives a pension under the ITP plan. In addition to this, the company pays an annual pension premium equivalent to 17 per cent of the fixed salary to an endowment insurance owned by the company. The premium is paid up to the age of 65 provided that the employment has not ceased before then. The old age pension is paid from the month after the President reaches the age of 65 and for a period of 20 years. The amount of the pension depends on the capital formation, including the return received at any time. As a rule, other senior management personnel receive a pension from the age of 65 in accordance with collective agreements on the Swedish labour market. The pension commitments are vested.

Termination and severance pay

The President's period of notice is 6 months for his own termination of employment and 12 months for termination by the company. In the case of termination of employment by the company, salary is payable during the period of notice as well as severance pay corresponding to 12 months' salary. If Studsvik AB should be acquired by way of a stock market buyout or if the company is acquired by a new principal owner (more than 50 per cent of the shares) the President is entitled to termination pay as though the termination was on the part of the company. For other members of the Group's management group, the main rule is that the period of notice is 6 months when employment is terminated by the employee and 12 months when terminated by the company. In the event of termination of employment by the company, over and above the salary payable during the period of notice, severance pay equivalent to 12 months' salary is also normally paid.

Note 32 Transactions with related parties

Studsvik, Inc. owns 50 per cent of THOR Treatment Technologies, LLC (TTT). In accordance with a "Joint Venture Operating Agreement" the owners are to provide management, technical and marketing services to TTT.

	2007	2006
Sale of services, USD '000	1,069	3,357
According to an agreement between the owners, the services are priced at cost price.
	2007	2006

Receivable from related parties	142	-

N ot e s to the Parent Company Accounts

Note 33 Net sales

	Net sales by geographical market

2007	2006
	3,296
1,800	4,416
1,900	248
5,634	7,960
	1,934

Note 34 Salaries, other benefits and social security contributions

		2007		2006
	Salaries and other benefits (of which profit sharing)	Social costs (of which pension costs)	Salaries and other benefits (of which profit sharing)	Social costs (of which pension costs)
Board and President	5,033	2,692	4,437	2,538
	(110)	(1,045)	(-)	(1,136)
Other employees	6,926	4,756	9,123	6,562
	(94)	(2,483)	(189)	(2,999)
Total	11,959	7,448	13,560	9,100
	(204)	(3,528)	(189)	(4,135)
See also Note 31.

Note 35 Operating costs

	2007	2006
Purchased materials and services	24,188	15,169
Personnel costs	20,225	21,982
Depreciation	322	281
Total	44,735	37,432

Services include fees and remuneration to auditing companies as follows

	2007	2006
Öhrlings PricewaterhouseCoopers
Audit contracts	391	798
Consulting contracts	6,173	413

By "Audit contracts" is meant the examination of the annual accounts, the accounting records and the administration by the Board and the President. It also includes other duties that are incumbent on the company's auditors as well as advisory services and other types of support arising out of observations in connection with such an examination. All other tasks performed by the auditors are classified as "Other contracts".

Note 36 Depreciation

	2007 According to plan	Book	2006 According to plan	Book
Equipment and tools	322	322	281	281
Total	322	322	281	281

Note 37 Operational lease contracts

	2007	2006
Maturity < 1 year	1,268	1,062
Maturity 1 < 5 years	1,617	1,246
Maturity > 5 years	-	-
Total	2,885	2,308

The Parent Company's lease contracts mainly relate to vehicles and premises with traditional terms and conditions.

Note 38 Interest income and similar income statement items

	2007	2006
Interest	16,121	40,965
Dividends received	-	18,578
Capital gains/losses on sales of shares	35,022	-
Price differences	183	–1,082
Total	51,326	58,461
Of which, in respect of Studsvik Group companies
Interest	11,154	19,044
Dividends received	-	18,578
Total	11,154	37,622

Note 39 Interest costs and similar income statement items

	2007	2006
Interest	14,526	13,260
Price differences	1,105	19,204
Total	15,631	32,464
Of which, in respect of Studsvik Group companies
Interest	3,553	3,210
Total	3,553	3,210

Note 40 Appropriations

	2007	2006
Reversal of tax allocation reserve	329	28,540
Total	329	28,540

Note 41 Tax on profit for the year

	2007	2006
Actual tax for the year	-	-
Deferred tax	37	–12,016
Tax effect on group contributions Total	10,423 10,460	11,120 –896

Note 42 Deferred tax

	2007	2006
Deferred tax cost in respect of temporary differences	54	–13,515
Deferred tax in the income statement	–17	1,499
Total	37	–12,016

Difference between the company's tax charge and

tax charge based on current tax rate

	2007	2006
Profit before tax	–2,282	27,178
Tax in accordance with current tax rate	639	–7,610
Tax effect of non-deductible costs	–242	–66
Tax effect of untaxed income	10,311	1,579
Tax effect of dividend received	-	5,201
Other	–248	-
Total	10,460	–896

Note 43 Property, plant and equipment

	2007	2006
Land, buildings and equipment
Opening acquisition value	2,647	2,654
Investments during the year	533	2,305
Sales and retirements	–764	–2,312
Closing accumulated acquisition value	2,416	2,647
Opening depreciation	–526	–2,177
Depreciation during the year	–322	–281
Sales and retirements	96	1,932
Closing accumulated depreciation	–752	–526
Closing residual value according to plan	1,664	2,121

2007 2006

Note 44 Financial assets

Shares in subsidiaries
Opening acquisition value	805,305	479,511
Merger	-	–6,684
Acquisitions	32,875	-
Conversion into share capital	-	332,478
Sales	–12,977	-
Share issue	–2,857	-
Closing acquisition value	822,346	805,305
Opening impairment losses	–42,949	–42,949
Closing impairment losses	–42,949	–42,949
Closing value	779,397	762,356
Receivable from other Group companies
Loans to Studsvik Holding Inc. group
– Opening acquisition value	184,472	290,424
– Items added/deducted during the year	–30,378	–105,952
Closing value	154,094	184,472
Loan to Studsvik UK Ltd
– Opening acquisition value	16,409	-
– Items added/deducted during the year	–16,409	16,409
Closing value	0	16,409
Other non-current receivables
Opening acquisition value	11,870	21,952
Added during the year	-	188
Deducted during the year	–952	–10,270
Closing accumulated acquisition value/
Closing residual value according to plan	10,918	11,870

Note 45 Prepaid expenses and accrued income

	2007	2006
Accrued income, Alecta funds	-	1,789
Other	1,045	1,759
Total	1,045	3,548

Note 46 Shares and participations in subsidiary companies

			Number of partici-
	Interest in V equity, %	oting rights, %	pations/ shares	Nominal value	Book value
Parent Company's holdings
Studsvik Holding, Inc.	100	100	2,000	kUSD 25,372 568,747
Studsvik Nuclear AB	100	100	5,000	kSEK 50,000 133,400
Studsvik Scandpower, Inc.	79	79	1,503	149 kUSD	984
Studsvik Scandpower AB	91	91	910	91 kSEK	603
Studsvik Japan Ltd	100	100	10,000	kJPY 10,000	373
Studsvik Germany GmbH	100	100		26 kEUR	241
Studsvik Verwaltungs
GmbH	100	100		26 kEUR	261
AB SVAFO	100	100	10,000	1,000 kSEK	1,000
Studsvik UK Ltd	100		100 1,022,500	1,023 kGBP	55,682
Studsvik Instrument
Systems AB	100	100	17,000	kSEK 17,000	18,106
Total					779,397

Information on subsidiaries' registration numbers and registered offices

	Company registration number	Registered office
Studsvik Nuclear AB	556051-6212 N	yköping, Sweden
Studsvik Scandpower, Inc.	-	Boston, USA
Studsvik Scandpower AB	556137-8190 N	yköping, Sweden
Studsvik Scandpower AS	008797.45012	Kjeller, Norway
Studsvik Scandpower GmbH H		RB 4839 Norderstedt, Germany
Studsvik Scandpower	CH-400.4.021.112.4	Fischbach-Göslikon,
Suisse GmbH		Switzerland
Studsvik Japan Ltd	-	Tokyo, Japan
Studsvik Holding, Inc.	35-3481732	Erwin, USA
Studsvik, Inc.	36-2999957	Erwin, USA
Studsvik Processing Facility Erwin, LLC	36-4063922	Erwin, USA
Studsvik Development, Inc.	75-3154955	Erwin, USA
RACE Holding LLC	20-2472653	Erwin, USA
Studsvik Processing Facility
Memphis, LLC	62-1801098	Erwin, USA
Studsvik Logistics LLC	77-0631902	Erwin, USA
Studsvik Germany GmbH H	RB 504467	Mannheim, Germany
Studsvik Verwaltungs GmbH H	RB 504468	Mannheim, Germany
Studsvik GmbH & Co. KG	HRA 503411	Mannheim, Germany
Studsvik Holding GmbH & Co. KG H	RA 503806	Mannheim, Germany
Studsvik Industrieanlagen
Verwaltungs GmbH H	RB 505432	Mannheim, Germany
Studsvik Industrieanlagen
GmbH & Co. KG	HRA 503808	Mannheim, Germany
AB SVAFO	556446-3411 N	yköping, Sweden
Studsvik UK Ltd	0477 2229 N	ewcastle, UK
Studsvik Alpha Engineering Ltd	03658198 N	ewcastle, UK
Studsvik Instrument Systems AB	556197-1481 N	yköping, Sweden

Note 47 Untaxed reserves

	2007	2006
Tax allocation reserve	6,874	7,203
Total	6,874	7,203

Note 48 Liabilities to credit institutions

	2007	2006
Bank borrowings
Non-current portion	137,113	165,770
Current portion	17,125	17,125
Total	154,238	182,895

Note 49 Accrued costs and deferred income

	2007	2006
Holiday pay liability	1,389	1,643
Accrued social security charges	3,006	3,955
Accrued interest costs	312	7,248
Other	2,194	11,844
Total	6,901	24,690

Note 50 Pledged assets

	2007	2006
Shares in subsidiaries	502	502
Guarantees	-	6,887
Total	502	7,389

Note 51 Contingent liabilities

	2007	2006
Guarantees	6,609	-
Contingent liabilities relating to insurance policies	11,713	10,817
Total	18,322	10,817

Note 52 Derivative financial instruments

	2007			2006
	Assets Liabilities		Assets	Liabilities
Currency futures	71	-	188	-

Currency futures are revalued via the income statement.

Outstanding currency futures, 31 December 2007

Maturity year	Inflow currency GBP 000
2007 Amount	250
Average exchange rate	13.094
Translated to fair value	3,199

Note 53 Investments in property, plant and equipment

	2007	2006
Equipment and tools	533	1,303
Land	-	201
Buildings	-	801
Total	533	2,305

Note 54 Adjustments for non cash items

In 2007, depreciation of MSEK 0.3, capital losses of MSEK 0.7 and Other items of neg MSEK 0.5.

In 2006, depreciation of MSEK 0.3.

Note 55 Transactions with related parties

Intra-Group purchases and sales

The percentage of the year's transactions other companies within the Studsvik Group is shown below.

	2007	2006
Purchases	10 %	25 %
Sales	100 %	100 %

The same pricing principles are applied to purchases and sales between group companies as apply to transactions with external parties.

Agreements on severance pay and other commitments to members of the Board and the President

The President's period of notice is 6 months for his own termination of employment and 12 months for termination by the company. In the case of termination of employment by the company, salary is payable during the period of notice, as well as severance pay equivalent to 12 months' salary. Should Studsvik AB be acquired by way of a stock exchange buyout or should it be acquired by a new principal owner (more than 50 per cent of the shares) the President is entitled to the same termination compensation as for termination by the company.

Note 56 Average number of employees etc

	2007	2006
Female	4	3
Male	6	6
Total	10	9

Board members and senior management personnel

		2007		2006
	Number on Of whom closing date	Male	Number on Of whom closing date	Male
Board members	11	9	12	10
Presidents and other
senior management personnel	4	4	4	4

Note 57 Investment in subsidiary companies

	2007	2006
Shareholder's contribution	32,875	83,160
Conversion of loan into share capital	-	249,318
Total	32,875	332,478

Audit report

To the annual meeting of the shareholders of Studsvik AB (publ) Corporate identity number 556501-0997

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 Studsvik AB (publ) for the year 2007. The company's annual accounts are included in the printed version on pages 44–81. The board of directors and the managing director are responsible for these accounts and the administration of the company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. 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 have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company's financial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidated accounts have been prepared in accordance with international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act and give a true and fair view of the group's financial position and results of operations. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts.

We recommend to the annual meeting of shareholders that the income statements and balance sheets of the parent company and the group be adopted, that the profit of 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 March 17, 2008

Magnus Brändström Göran Tidström Authorized Public Accountant Authorized Public Accountant Auditor in charge

Five-year review1)

In the past five-year period Studsvik has increased its net sales by 5 per cent per year on average. Adjusted for discontinued operations, the average net sales increase is 7 per cent. The increase is a result of organic growth and acquisitions.

The financial data in this section is based on Studsvik's consolidated accounts for the financial years 2003–2007. The profit/loss for divested companies and operations is included up to the date of divestiture, while acquired

companies' profit/loss is included as of the date of acquisition. In 2005 two Strategic Business Areas were discontinued and the income statements for 2005 and 2004 have been adjusted accordingly. These operations are accounted in the income statement as "profit/loss from discontinued operations". Balance sheets and cash flow statements have not been adjusted. Those key financial figures and ratios fully or partially sourced from the income statement have been adjusted.

CONDENSED INCOME STATEMENTS 2)

Amounts, MSEK	2007	2006	2005	2004	2003
Net sales	1,314.7	1,219.6	1,088.3	1,025.4	1,113.8
Cost of services sold	–1,000.1	–906.5	–802.9	–839.3	–842.5
Gross profit	314.6	313.1	285.4	186.1	271.3
Selling expenses	–53.8	–44.6	–41.9	–36.6	–34.8
Administrative expenses	–180.4	–164.2	–146.4	–143.4	–141.2
Research and development costs	–41.8	–39.8	–35.5	–34.6	–42.1
Other operating income	25.1	14.3	19.8	1.7	1.5
Other operating expenses	–1.6	–7.5	–2.6	–0.1	–0.6
Pre-tax result from participation in associated company	-	-	-	2.6	7.3
Operating profit	62.1	71.3	78.8	–24.3	61.4
Interest income and similar profit/loss items	8.7	23.1	8.5	7.6	6.8
Interest expense and similar profit/loss items	–24.8	–37.3	–11.1	–15.1	–15.9
Profit after financial items	46.0	57.1	76.2	–31.8	52.3
Tax on profit for the year	1.2	–22.3	–28.7	56.1	–20.4
Profit/loss from discontinued operations	-	-	13.6	–90.8	-
Profit /loss for the year	47.2	34.8	61.1	–66.5	31.9

1) 2004–2007 accounted pursuant to IFRS.

2) The Strategic Business Areas Irradiation Services and Nuclear Medicine were discontinued in 2005, and comparative figures for 2005 and 2004 have been adjusted accordingly. These operations are accounted as "Profit/loss from discontinued operations".

CONDENSED BALANCE SHEETS

Amounts, MSEK	2007	2006	2005	2004	2003
Assets
Goodwill	311.7	304.7	127.4	120.8	123.4
Other non-current assets	530.9	523.6	476.1	420.8	516.5
Trade receivables	206.0	189.2	167.3	139.9	163.6
Other non-interest-bearing current assets	120.5	92.3	89.1	151.4	79.0
Cash, cash equivalents and short-term investments	176.9	247.6	323.4	319.2	299.9
Total assets	1,346.0	1,357.4	1,183.3	1,152.1	1,182.4
Equity and liabilities
Equity	568.4	558.7	566.6	443.4	531.3
Minority interests	3.4	-	-	-	0.3
Long-term interest-bearing liabilities	196.4	307.4	192.8	186.3	213.9
Long-term non-interest-bearing liabilities	110.2	109.7	172.2	251.8	171.9
Current interest-bearing liabilities	122.3	39.8	0.1	7.8	4.9
Current non-interest-bearing liabilities	345.3	341.8	251.6	262.8	260.1
Total equity and iabilities	1,346.0	1,357.4	1,183.3	1,152.1	1,182.4

CONDENSED CASH FLOW STATEMENTS

Amounts, MSEK	2007	2006	2005	2004	2003
Operating profit	62.1	71.3	92.4	–119.7	61.4
Adjustment for depreciation	60.1	53.8	47.1	78.3	95.3
Other non-cash items	–22.6	–3.1	–6.5	146.4	–0.2
	99.6	122.0	133.0	105.0	156.5
Financial items, net	–16.1	–14.1	–4.8	–8.0	–9.6
Tax	–6.8	–2.4	–28.2	–12.5	–17.3
Cash flow before changes in working capital	76.7	105.5	100.0	84.5	129.6
Changes in working capital	–37.7	–1.4	–82.0	19.9	28.5
Cash flow before investments	39.0	104.1	18.0	104.4	158.1
Investments	–122.4	–344.7	–45.0	–52.4	–119.6
Cash flow after investments	–83.4	–240.6	–27.0	52.0	38.5

DATA PER SHARE

	2007	2006	2005	2004	2003
After new share issue and shareholders' contribution
Number of shares at the end of the period	8,218,611	8,218,611	8,218,611	8,116,611	8,114,211
Average number of shares	8,218,611	8,218,611	8,167,611	8,115,411	8,114,211
Earnings per share before dilution, SEK	5.65	4.24	7.48	–8.19	3.93
– of which, from continuing operations	5.65	4.24	5.81	2.99	3.93
Earnings per share after dilution, SEK	5.65	4.24	7.48	–8.09	3.88
– of which, from continuing operations	5.65	4.24	5.81	2.95	3.88
Equity per share, SEK	69.58	67.97	68.90	54.60	65.48

KEY FINANCIAL FIGURES AND RATIOS

	2007	2006	2005	2004	2003
Margins
Operating margin before depreciation, %	9.3	10.3	11.6	4.7	14.1
Operating margin before goodwill amortization, %	9.3	10.3	7.2	neg	6.9
Operating margin, %	4.7	5.8	7.2	neg	5.5
Profit margin, %	3.5	4.7	7.0	neg	4.7
Profitability
Return on operating capital, %	9.0	13.0	20.9	neg	12.3
Return on capital employed, %	7.9	11.3	12.5	neg	9.6
Return on equity, %	8.2	6.2	12.1	neg	6.4
Capital structure
Operating capital, MSEK	713.6	658.3	436.2	318.0	450.4
Capital employed, MSEK	890.5	905.8	759.5	637.2	750.4
Equity, MSEK	571.8	558.7	566.6	443.4	531.3
Interest-bearing net debt, MSEK	141.8	99.6	–130.4	–125.2	–81.1
Net debt-equity ratio	0.2	0.2	–0.2	–0.3	–0.2
Interest cover ratio	2.9	2.5	7.9	neg	4.3
Equity-assets ratio, %	42.5	41.2	47.9	38.5	44.9
Cash flow
Self financing ratio	0.3	0.3	0.4	2.1	1.3
Investments, MSEK	127.3	344.7	45.0	52.4	119.6
Employees
Average number of employees	1,141	1,279	1,278	1,353	1,313
Net sales per employee, MSEK	1.2	1.0	0.9	0.8	0.8

Corporate governance

Studsvik AB is a Swedish public company, whose registered office is in Nyköping. The company was set up in 1947, since when it has been engaged in business on the international market for nuclear services. The shareholders' governance of the company is based on its articles of association, the Swedish Companies Act and other Swedish and foreign laws and ordinances. It is also regulated in the listing agreement between the company and OMX Nordic Exchange Stockholm, the stock market where its shares are listed. Although Studsvik has taken note of the Swedish Code of Corporate Governance it does not apply all aspects of the Code, since the company's market capitalisation is less than MSEK 3,000. However, Studsvik will begin to apply the Swedish Code of Corporate Governance with effect from 1 July 2008, in accordance with OMX Nordic Exchange's rules.

This corporate governance report has not been reviewed by the company's auditors.

General Meeting of Shareholders

The General Meeting of Shareholders is Studsvik's supreme decision-making body, at which the shareholders exercise control by means of discussions and decisions. All shareholderss who are entered in the register of shareholders five days before a General Meeting are entitled to attend the Meeting and participate, either personally or via a proxy. They should inform the company of their intention in the manner prescribed in the notice of meeting.

Studsvik's Annual General Meeting may be held in Nyköping or Stockholm, and shall be held within six months of the end of the financial year. The Notice of General Meeting shall be published in Svenska Dagbladet and Post och Inrikes Tidningar, and on the company's website, www.studsvik.se. The Annual General Meeting elects the company's Board and auditors and decides on their fees. The Annual General Meeting also adopts the annual report and accounts and resolves on the treatment of unappropriated earnings, as well on the discharge of the members of the Board and President from

liability. The Annual General Meeting decides on the procedures for appointing a Nomination Committee. Shareholders representing 48.7 per cent (45.3) of the votes participated in the 2007 Annual General Meeting. The company has 3,800 shareholders. An analysis as of 31 December 2007 of the ownership of the company's shares is provided in the table on page 40. The minutes of the Annual General Meeting are available on the company's website.

Nomination Committee

The principal task of the Nomination Committee is to nominate candidates for election to the Board and as Chairman, to nominate auditors, and to propose fees for the above, to enable the Annual General Meting to make soundly based decisions. The Nomination shall also submit proposals for the new Nomination Committee or propose a model for how the Nomination Committee shall be appointed. The 2007 Annual General Meeting decided that the Nomination Committee should consist of the Chairman and one representative of each of the three largest shareholders. The Chairman was requested to contact these shareholders during the third quarter of 2007 and together with them appoint a Nomination Committee.

Pursuant to the Annual General Meeting's decision the membership of the Nomination Committee were announced in October 2007 on the basis of the voting rights registered before the announcement. The members of the Nomination Committee have been, with effect from October 2007:

• Björn C. Andersson, SHB Funds
• Jan Barchan, Briban Invest (also a member of Studsvik's Board)
• Anders Oscarsson, SEB Funds
• Anders Ullberg, Chairman of Studsvik AB

Two of the four members of the Nomination Committee are also members of the Board, which is not in compliance with the rules in the Code of Corporate Governance. The reason for this is that the company's

two largest shareholders are members of the Board. The Nomination Committee thus reflects the ownership structure, whilst also complying with the Annual General Meeting's decision and the rules regarding its size.

The Nomination Committee held three meetings during the year. Its mandate lasts until the next Nomination Committee is appointed.

Board

The role of the Board is to administer the company's affairs in the best possible way and to do so in the shareholders' best interests. Studsvik AB's Board has six members elected by the Annual General Meeting, one deputy member, also elected by the Annual General Meeting, and two members and two deputy members who are appointed by the local branches of Unionen and the Swedish Engineering Employees Union. The following were elected to the Board by the 2007 Annual General Meeting.

• Anders Ullberg, Chairman
• Jan Barchan
• Ingemar Eliasson
• Anna Karinen, Vice Chairman
• Alf Lindfors
• Leif Nilsson
• Per Ludvigsson, deputy member

Further details regarding the Board are provided on page 91.

Chairman

The Chairman administers the activities of the Board. This includes specific responsibility for following the company's progress between Board meetings and ensuring that the members of the Board regularly receive the information they need for the due performance of their duties. The Chairman maintains contact with the President and the Executive Vice President and holds formal meetings with them to deal with issues arising when necessary.

Activities of the Board

The President participates in the activities of the Board except when his own performance is being evaluated. Other members of the Group management team participate when required to provide the Board with information. The CFO, who is also Executive Vice President, acts as secretary of the Board.

In 2007 the Board held seven minuted ordinary meetings, including the statutory Board meeting in connection with the Annual General Meeting, and an additional seven

extra meetings. The Board's activities adhere to a set of procedures that are adopted each year at the first board meeting following the election. The procedures establish the division of duties between the Board and the President, the responsibilities of the Chairman and President respectively, and practices for financial reporting.

In 2007, the Board devoted particular interest to the Group's further development in the UK, which in the event involved the acquisition of Alpha Engineering, a firm of consultants. The Board also discussed in detail the developments within Waste Management in the USA, where the competition has intensified and market conditions have changed. During the year it was decided to alter the organisational structure within the American waste treatment business. The competence and management succession project that began in 2006 was further discussed and concrete measures have been decided on and followed up. The Board has also assessed the Group' strategic position and opportunities, as well as drawing up a strategic plan for the 2008–2012 period. During the first half of the year Studsvik participated in a bidding process regarding the acquisition of a large nuclear business in the UK. Five of the extra meetings of the Board were devoted to this issue.

The Board's activities are evaluated on an annual basis, and this evaluation is presented and considered at one meeting of the Board.

Policies, guidelines and instructions

The Board reviews and adopts Group policies and guidelines. These are dealt with, in accordance with Board procedures, at the October meeting or, if the circumstances so require, at a different meeting. The President establishes guidelines and operative instructions based on the policies and guidelines adopted by the Board. The guidelines and operative instructions issued by the President mainly relate to financial reporting and IT.

Board members elected by AGM, attendance, independence and fee	year	Elected Meetings attended		Independent of company shareholders	Fee SEK '000
Jan Barchan	2004	13 /14	Yes	No	200
Ingemar Eliasson	2002	14 /14	Yes	Yes	200
Anna Karinen, Vice Chairman	2003	14 /14	Yes	No	350
Alf Lindfors	2006	12 /14	Yes	Yes	200
Per Ludvigsson, alternate	2007	3 / 9	Yes	No	200
Leif Nilsson	2001	13 /14	Yes	Yes	200
Anders Ullberg, Chairman	2007	9 / 9	Yes	Yes	600

Remuneration committee

The Board has appointed a remuneration committee from within itself. The role of this committee is to submit to the Board proposals for the President's salary and other conditions of employment as well as to approve, on the basis of proposals from the President, the salaries and other employment conditions of the Group management committee. The remuneration committee also drafts the Board's proposals for submission to the Annual General Meeting concerning the remuneration and other employment conditions of the Group management committee. The members of the remuneration committee are Anders Ullberg Chairman, Jan Barchan and Anna Karinen. During the year the committee held three minuted meetings.

Auditing and audits

Audits and auditing are dealt with by the Board as a whole. It is the Board's considered opinion that this is most suitable in view of Studsvik's size and the nature of its business.

A separate audit committee has therefore not been appointed. In order to ensure that the Board obtains information and can exercise control it is given opportunity once a year to comment on the planning of the scope and focus of the audit. Once the internal control system and accounting records have been examined in the third quarter, the auditors report their observations to the December meeting of the Board, when the board also meets the auditors in the absence of the President. Over and above this, the auditors are invited to Board meetings whenever the Board or the auditors consider this to be necessary.

Board fees

The total Board fee paid by Studsvik AB for 2007 amounted to SEK 2,112,000 (1,878 300). Pursuant to the Annual General Meeting's decision, the Chairman receives SEK 600,000 per year, the Vice Chairman SEK 350,000 per year and ordinary and deputy members SEK 200,000 each; a preparation fee per meeting is paid to the members appointed by the union organisations.

Auditors

At the 2007 Annual General Meering, the authorised auditing company PricewaterhouseCoopers AB was elected as auditors for the period up until the 2011 Annual General Meeting. The responsible auditors are authorised public accountants Magnus Brändström and Göran Tidström.

President and Group management.

Studsvik's board has appointed a President and Chief Executive Officer (CEO), who has a responsibility for the day-to-day management of the company and who runs its the operative activities. The President drafts information and material for decisions for the Board and presents business at the Board meetings. The President has appointed a Group management team consisting of the Executive Vice President (also the CFO), the heads of Group functions, and the Presidents of subsidiary companies. The Group management team convenes monthly to consider the results and financial position of the Group and its subsidiary companies as well as questions pertaining to strategy, budget follow-up, forecasts and the general progress of the business.

The President and Group staffs are located in Nyköping. Taking into account the Board's procedures and policies and guidelines established by the Board, the Group functions have responsibility for formulating the Group's overall strategy, the overall development of the Group' business, the allocation of financial resources to the units in the Group, capital structure and risk management. Its role also includes questions relating to Groupwide acquisitions, certain major projects, the Group's financial reporting, communication with the stock market, internal and external information, IT, and co-ordination and follow-up of safety and security, the environment, the work environment and quality.

Operative control

The Group's operative business is largely performed by subsidiary companies of Studsvik AB, which broadly coincide with the group's operating segments. At each subsidiary the board plays and active role under the leadership of the CEO or Vice President. The subsidiary companies' boards follow the dayto-day operations, and established business plans and budgets.

The business is carried on in accordance with the rules, guidelines and policies established by the parent company, and with local rules established by each subsidiary company board. The heads of each subsidiary have responsibility for their company's result, for ensuring growth within their company, and responsibility for taking advantage of synergies between the different companies in the Group. Investment capital is allocated within the Group following decisions by Studsvik's Board.

Internal control

The object of the internal control system is to ensure

• that the company's strategies and goals are reviewed,
• that the shareholders' invested capital is protected,
• that the external financial reporting reflects the situation with a reasonable degree of reliability,
• that the financial reports are produced in accordance with generally accepted accounting standards, laws, ordinances and other demands relating to listed companies.

The Board has overall responsibility for ensuring that the Group has an effective internal control system. The President has responsibility for ensuring that processes and an organisation are in place to ensure the effectiveness of the internal controls and the quality of the financial reporting.

Scrutiny of internal control system

Studsvik has no separate internal audit function. The internal control system is scrutinised by Group Staff Finance as an integrated aspect of the work of the controllers. The controllers report to the CFO. The external audit each year involves an examination of the internal control system. This examination is based on checklists and question lists in self appraisal material that are later verified on the basis of materiality by means of a direct examination. The outcome of the

examination is reported to the Board. The Board intends in 2008 to make a decision on how the internal control system should be organised in the future.

Control environment

The Group consists of relatively few operative units with, for the most part, well established processes. Structure and control documents in the form of policies, guidelines and instructions have been drawn up to ensure a common view and working practices within the Group. These include the example:

• Authorization manual
• Financial reporting system
• Investments and acquisitions
• Budget and business plans
• Financing
• Currency hedging
• Cash management
• Risk management and insurance

All policies, guidelines and manuals are available on the intranet. Information about changes is provided at regularly recurring meetings of finance managers. The internal control system was one of the key points on the agenda for the meeting of finance managers in the autumn of 2007.

Risk analysis

The examination of the internal control system performed by the external auditors is based on the assessment of risk and materiality that is made jointly each year by Group Staff Finance and the external audit function.

In 2007 a risk and vulnerability analysis was carried out by the Group's IT environment. In the light of this analysis a central IT function has been set up for the Group, based within Group Staff Finance. And extensive process has been launched with the object of coordinating the Group's IT activities and drawing up Groupwide procedures and guidelines focusing on safety, quality and availability.

Control activities

Control activities are carried out regularly by the Group's controller unit, and at company level within various parts of the accounting and reporting process. The control activities focus on known risks, but they are also intended to identify and correct any errors and non-conformities. Processes and systems are examined regularly with a view to identifying areas for improvement.

90 Board of directors and auditors

Board of directors and auditors

B oa rd member s

Anders Ullberg

Danderyd, born 1946. Chairman of the Board since 2007. Former President and CEO of SSAB. Chairman of the Board of Boliden and Eneqvistbolagen, Vice Chairman of TietoEnator and Board member of Atlas Copco, Beijer Alma and Sapa Holding. Education: M.Sc. (Business Administration and Economics). Holding: 6,000 shares.

Anna Karinen

Sparreholm, born 1963. Board member since 2003. Vice Chairman since 2007. Self-employed status in commercial real estate management. Board member of Handelsbanken, Flen office. Education: Bachelor of laws. Holding: 1,225,952 shares.

Jan Barchan

Malmö, born 1946. Board member since 2004. CEO of Briban Invest AB, Chairman of the Board of AudioDev AB and ConnectBlue AB and board member of Arcam AB, Assistera AB and TAT AB. Education: Graduate Business Administrator, Lunds Universitet. Holding: 1,283,492 shares.

Ingemar Eliasson

Drottningholm, born 1939. Board member since 2002. Marshal of the Realm. Former county governor, minister and Member of the Swedish Parliament. Chairman of the Board of Stiftelsen Centralfonden and Prins Eugens Waldemarsudde. Former Chairman of the Board of SBAB, Stockholm Stock Exchange and Cancerfonden. Former Board member of SAS and SAS Sweden, Radio Sweden, the Swedish Central Bank and National Agency for Government Employers. Education: Graduate Business Administrator DHS. Holding: 600 shares.

Alf Lindfors

Östhammar, born 1946. Board member since 2006. Senior advicer, former Head of the Power Generation business area and and COO of Vattenfall AB. Chairman of the Board of Vattenfall Inlandskraft AB. Education: Graduate engineer with post-graduate qualifications in reactor technology. Holding: 0 shares.

Leif Nilsson

Västervik, born 1945. Board member since 2001. Management consultant. Former President of ABB STAL and former head of global business areas at ABB and ALSTOM. Education: Doctor of engineering and senior lecturer in mechanical components. Member of IVA. Holding: 0 shares.

A lt er nat e boa rd member

Per Ludvigsson

Råå, born 1943. Alternate board member since 2007. Chairman of the Board of InterIKEA group. Board member of IKANO, Catella, AudioDev and Briban Invest. Education: Graduate Business Administrator. Holding: 0 shares.

E mployee repre s en tat ive s

Maria Lindberg

Gateshead, UK, born 1964. Board member since 2006, Alternate board member 1999–2006. Employee representative for The Swedish Association of Graduate Engineers. Active within Technical Services Management. Education: Ph. D. in physical chemistry. Holding: 200 shares.

Roger Lundström

Nyköping, born 1966. Board member since 2005, Alternate board member 2003–2005. Employee representative for Unionen. Works on microscopy and damage surveys at Studsvik Nuclear AB. Education: Laboratory technician. Holding: 0 shares.

Per Ekberg

Nyköping, born 1959. Alternate board member since 2006. Employee representative for Unionen. Works in the materials research department at Studsvik Nuclear AB. Education: Power generation technology. Holding: 0 shares.

Tim Lundström

Nyköping, born 1974. Alternate board member since 2006. Employee representative for The Swedish Association of Graduate Engineers. Supervisor within waste management R&D. Education: Ph. D. in physical chemistry. Holding: 0 shares.

Au d i tors

Magnus Brändström

Born 1962.

Authorized Public Accountant, Öhrlings PricewaterhouseCoopers, Stockholm. Auditor of Studsvik since 2003.

Göran Tidström

Born 1946. Authorized Public Accountant, Öhrlings PricewaterhouseCoopers, Stockholm. Auditor of Studsvik since 2003.

Jerry

Mark Lyons

Senior executive management

Magnus Groth

President and CEO of Studsvik AB. Born: 1963. Employed: 2005. Education: Master of Engineering and Graduate Business Administrator. Background: Vattenfall AB, Enron Nordic Energy AS, Boston Consulting Group. Board member of Hägglunds Drive AB. Holding: 500 shares, 40,000 options. No other important commissions / holdings /partnerships.

Jerry Ericsson

Executive Vice President and CFO. Born: 1951. Employed: 1984. Education: Graduate Business Administrator. Background: Controller and CFO of companies of various industries, at top management level since 1978. Holding: 16,600 shares.

Leif Andersson

Head of Technological Development. Born: 1950. Employed: 1975. Education: Engineer. Background: Nuclear Industry since 1975, the last 18 years within the Waste Management sector, President of Studsvik subsidiaries. Holding: 5,500 shares.

Sten-Olof Andersson

Head of Business Development. Born: 1955. Employed: 1996. Education: Upper Secondary Engineering. Background: Project Management and Sales internationelly within ABB's segment Power production, President of Studsvik subsidiaries. Holding: 5,800 shares.

Eva Halldén

President of Studsvik Nuclear AB. Born: 1959. Employed: 2003. Education: Master of Engineering, Industrial Chemistry. Background: Vice President of ABB Atom AB and Westinghouse Atom AB. Holding: 400 shares.

Lewis Johnson

President of Studsvik, Inc. Born: 1962. Employed: 2007. Education: Master of International Business Administration. Background: President and CEO of Radatec, Inc. Holding: 0 shares.

Ulf Kannengießer

Geschäftsführer of Studsvik GmbH & Co. KG and Studsvik Industrieanlagen GmbH & Co. KG. Born: 1961. Employed: 1990. Education: Dipl.-Kfm. Background: President of constructions company. Holding: 1,000 shares.

Mark Lyons

President of Studsvik UK Ltd. Born: 1971. Employed: 2005. Education: Bachelor of Science, Applied Chemistry. Background: Business Manager at Rolls-Royce Nuclear Engineering Services Ltd, Business Development Director at MB Nuclear Ltd. Holding: 1,000 shares.

Definitions of key figures and ratios

Ma rg in s

Operating margin before depreciation

Operating profit before depreciation as a percentage of net sales.

Operating margin before

goodwill amortization Operating profit before goodwill amortization as a percentage of net sales.

Operating margin

Operating profit after depreciation as a percentage of net sales.

Profit margin

Profit after financial items as a percentage of net sales.

Prof i tabili t y

Return on operating capital

Operating profit as a percentage of average operating capital.

Return on capital employed

Profit after financial items, with financial expenses added back, as a percentage of average capital employed.

Return on equity

Profit for the year as a percentage of average equity.

C api tal struc t u re

Operating capital

Balance sheet total, less non-interestbearing liabilities, current investments, cash and bank balances. The average operating capital has been calculated as opening balance plus closing balance of operating capital, divided by two.

Capital employed

The balance sheet total less non-interest-bearing liabilities. The average capital employed has been calculated as opening balance plus closing balance of capital employed, divided by two.

Equity

The total of non-restricted and restricted equity at the end of the year. The average equity capital has been calculated as opening balance plus closing balance of equity capital, divided by two.

Net interest-bearing debt

The total of current and long-term interest-bearing liabilities less current investments and cash and bank balances.

Net debt-equity ratio

Interest-bearing net liabilities divided by equity, including minority interests. A negative debt-equity ratio means that the total of current investments plus cash and bank balances exceeds interest-bearing liabilities.

Interest cover ratio

Profit after financial items, plus financial expenses, divided by financial expenses.

Equity-assets ratio

Equity including minority interests as a percentage of the balance sheet total.

C api tal t u r nover r at e

Turnover rate of capital employed

Invoicing for the year divided by average capital employed.

C a sh f lo w

Self-financing ratio

Cash flow before investments divided by investments.

Investments

The total of the acquisition of businesses/subsidiaries as well as the acquisition of intangible assets and property, plant and equipment.

E mployee s

Average number of employees

Average number of employees at the end of each month.

Net sales per employee

The net sales for the year divided by the average number of employees.

Data per sh a re

Earnings per share

Profit for the year divided by the average number of shares. The average number of shares has been calculated as a weighted average of all shares in issue for the year.

Equity per share

Equity divided by the number of shares at the end of the period.

P/E ratio

The share price divided by earnings per share.

Addresses

Studsvik AB

Visiting address: Västra Trädgårdsgatan 38 P.O. Box 556 SE-611 10 Nyköping Sweden Tel +46 155 22 10 00 Fax +46 155 26 30 00 studsvik@studsvik.se www.studsvik.com

Studsvik GmbH & Co. KG / Studsvik Industrieanlagen GmbH & Co. KG

Karlsruher Str 20 D-75179 Pforzheim Germany Tel +49 7231 5 86 95 01 Fax +49 7231 5 86 95 02

Studsvik UK Ltd

Unit 14, Princes Park Fourth Avenue Team Valley Trading Estate Gateshead Tyne & Wear NEII ONF United KIngdom Tel +44 191 482 1744 Fax +44 191 482 1747

Studsvik Processing Facility Memphis, LLC / Studsvik Logistics, LLC 2550 Channel Avenue P.O. Box 13143 Memphis, TN 38113 USA Tel +1 901 775 0690 Fax +1 901 775 0629

Studsvik, Inc. / Studsvik Processing Facility Erwin, LLC

100 Nolichucky Avenue Erwin, TN 37650 USA Tel +1 423 735 6300 Fax +1 423 735 4143

Studsvik Nuclear AB

SE-611 82 Nyköping Sweden Tel +46 155 22 10 00 Fax +46 155 26 30 70

Studsvik Scandpower, Inc.

1087 Beacon Street, Suite 301 Newton, MA 02459-1700 USA Tel +1 617 965 7450 Fax +1 617 965 7549

Studsvik Japan Ltd

Nakamura Bldg. 3F 2-7-14 Shibuya, Shibuya-ku Tokyo 150-0002 Japan Tel +81 3 5464 3771 Fax +81 3 5464 3708

Studsvik AB (publ) Annual Report 2007 Corporate identity no 556501-0997

© 2007 Studsvik AB (publ)

This report is a translation of the Swedish statutory report. In the event of any discrepancies between this document and the Swedish original, the latter shall govern. The content of this annual report may not, in whole or part, be reproduced or stored in a machine-readable medium without the previous permission of Studsvik AB (publ).

Production: AB Taurus Kommunikation Photo: Jan Lindblad, Janne Höglund and others Printing: Trosa Tryckeri AB 2008

Studsvik AB (publ)

Västra Trädgårdsgatan 38 P.O. Box 556, SE-61110 Nyköping Tel +46155 2210 00 www.studsvik.com