SinterCast Limited - Limited company accounts 11.4

REGISTERED NUMBER: 02021239 (England and Wales)

Strategic Report, Report of the Directors and

Financial Statements

for the Year Ended 31 December 2013

for

SinterCast Limited

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

6

Profit and Loss Account

8

Balance Sheet

9

Notes to the Financial Statements

10

DIRECTORS:

Dr S Dawson

U B Frajdin-Hellqvist

SECRETARY:

D Uhmeier

REGISTERED OFFICE:

Kingswick House

Kingswick Drive

Sunninghill

Berkshire

SL5 7BH

REGISTERED NUMBER:

02021239 (England and Wales)

AUDITORS:

Gorman Darby & Co Limited

Chartered Certified Accountants

Registered Auditors

39 Hatton Garden

London

EC1N 8EH

The directors present their strategic report for the year ended 31 December 2013.

The principal activity of SinterCast Ltd is providing marketing, business and management services

to the parent company SinterCast AB (publ). SinterCast AB (publ) also engage SinterCast Ltd as a

distributor for the marketing and sale of the products and the provision of after-market technical

services to existing and potential future customers in SinterCast Ltd.'s local market. The defined

strategy for the entire SinterCast Group is:

SinterCast will focus primarily on providing process control technology and know-how for the

reliable high volume production of Compacted Graphite Iron. SinterCast will promote CGI within

the foundry and end-user communities to increase the overall market opportunity for CGI and to

define the forefront of CGI development, production and application. This focus and these efforts

will secure SinterCast's global leadership in the field of CGI. SinterCast will also build upon its

technical expertise in thermal analysis and cast iron process control to develop and launch new

technologies beyond the core CGI market. These focused activities will provide the foundation for

increasing the long-term value of the Company for its shareholders. As a technology lead

Company, SinterCast will grow and prosper by earning the respect of its customers.

REVIEW OF BUSINESS

The principal activity during the year under review was providing marketing, business and

management services to the parent company SinterCast AB (publ). The services supported the

development for the entire SinterCast Group and can be summarised as follows:

The highlight for SinterCast was the start of series production of the first high volume CGI petrol

engine during late-2013. And, with application in the model year 2015 Ford F-150 pick-up - North

America's best-selling vehicle for the last 32 years - it is difficult to imagine a better first

reference. The petrol engine is a clear breakthrough for SinterCast, with the potential to spark a

follower reaction in the industry. The North American pick-up sector provided another exciting first

reference for SinterCast in 2013, as the Ram 1500 became the first full-size pick-up to offer a

diesel engine. Nissan has already responded with the announcement of a SinterCast-CGI 5.0 litre

V8 diesel in the next generation Titan pick-up, and we watch with great anticipation to see how

the other OEMs will react. We continue to believe that North American pick-ups are ideally suited

to increased diesel use, and we support this conviction through our foundry and OEM activities.

With the Ram, Ford and Nissan announcements, SinterCast will be present in three of the five

full-size pick-ups in North America's fastest growing sector. Together with the SinterCast-CGI 6.7

litre V8 diesel in Ford Super-Duty applications, the pick-up sector has the clear potential to provide

more than one million Engine Equivalents per year. While the pick-up sector provided excitement

and promise in 2013, commercial vehicles were again the workhorse. With resumed production

and the launch of new high volume programmes, commercial vehicle volume doubled in 2013 and

accounted for 75% of the total growth. This growth restored the balance in our product mix, with

approximately 50% of the production for passenger vehicle engines, 40% for commercial vehicle

engines, and 10% for industrial power and automotive components other than engines. This

diversification broadens our footprint and provides respected production references in every

sector. While our technology is complex, our market strategy remains simple. The market has

embraced the benefits of CGI: we don't need to do anything differently; we only need to do more.

The starting point for doing more is to secure more foundries into the SinterCast camp and three

consecutive years of record installations has substantially increased our production base. We will

continue to seek new installations.

PRINCIPAL RISKS AND UNCERTAINTIES

The main uncertainty factor for SinterCast continues to be the timing of the CGI market ramp-up.

This primarily depends on OEM decisions for new CGI products, the global economy for new

vehicle sales, and the individual sales success of vehicles equipped with SinterCast-CGI

components. The European and Asian economies continue to be uncertain and this may impact

passenger vehicle and commercial vehicle sales. SinterCast’s diversification between V-diesel

engines for passenger vehicles, commercial vehicle engines, exhaust components, industrial power

engines and most recently, the launch of the first high volume CGI petrol engine, combined with

its presence in Europe, Asia and the Americas, reduces the dependence on individual product

applications and geographical regions. SinterCast enjoys global brand recognition and respect as

the CGI technology leader and is welcomed by the industry as a reliable and trustworthy partner.

However, virtually every company encounters competition, and SinterCast is no exception.

SinterCast judges that its technology and engineering know-how provide the most reliable and

cost effective solution for series production of high quality CGI. New powertrain technologies, such

as vehicle electrification (hybrid and plug-in vehicles) and fuel cells attract significant media

attention; however, the development and implementation of these technologies remain a

long-term prospect and SinterCast does not expect these technologies to have a significant effect

on the Company’s competitive position for the foreseeable future.

ON BEHALF OF THE BOARD:

Dr S Dawson - Director

18 August 2014

The directors present their report with the financial statements of the company for the year ended

31 December 2013.

DIVIDENDS

No dividends will be distributed for the year ended 31 December 2013.

DIRECTORS

Dr S Dawson has held office during the whole of the period from 1 January 2013 to the date of this report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Report of the Directors and the financial statements

in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under

that law the directors have elected to prepare the financial statements in accordance with United

Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and

applicable law). Under company law the directors must not approve the financial statements

unless they are satisfied that they give a true and fair view of the state of affairs of the company

and of the profit or loss of the company for that period. In preparing these financial statements,

the directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show

and explain the company's transactions and disclose with reasonable accuracy at any time the

financial position of the company and enable them to ensure that the financial statements comply

with the Companies Act 2006. They are also responsible for safeguarding the assets of the

company and hence for taking reasonable steps for the prevention and detection of fraud and

other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418

of the Companies Act 2006) of which the company's auditors are unaware, and each director has

taken all the steps that he or she ought to have taken as a director in order to make himself or

herself aware of any relevant audit information and to establish that the company's auditors are

aware of that information.

AUDITORS

The auditors, Gorman Darby & Co Limited, will be proposed for re-appointment at the

forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

Dr S Dawson - Director

18 August 2014

We have audited the financial statements of SinterCast Limited for the year ended

31 December 2013 on pages eight to seventeen. The financial reporting framework that has been

applied in their preparation is applicable law and United Kingdom Accounting Standards (United

Kingdom Generally Accepted Accounting Practice).

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of

Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to

the company's members those matters we are required to state to them in a Report of the

Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the company and the company's members as a body,

for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements

sufficient to give reasonable assurance that the financial statements are free from material

misstatement, whether caused by fraud or error. This includes an assessment of: whether the

accounting policies are appropriate to the company's circumstances and have been consistently

applied and adequately disclosed; the reasonableness of significant accounting estimates made by

the directors; and the overall presentation of the financial statements. In addition, we read all the

financial and non-financial information in the Strategic Report and the Report of the Directors to

identify material inconsistencies with the audited financial statements and to identify any

information that is apparently materially incorrect based on, or materially inconsistent with, the

knowledge acquired by us in the course of performing the audit. If we become aware of any

apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 December 2013 and of its profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Report of the Directors for the

financial year for which the financial statements are prepared is consistent with the financial

statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006

requires us to report to you if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Andrew Darby (Senior Statutory Auditor)

for and on behalf of Gorman Darby & Co Limited

Chartered Certified Accountants

Registered Auditors

39 Hatton Garden

London

EC1N 8EH

18 August 2014

TURNOVER

2

595,458

644,825

Cost of sales

25,312

9,543

GROSS PROFIT

570,146

635,282

Administrative expenses

539,104

602,728

OPERATING PROFIT and

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

4

31,042

32,554

Tax on profit on ordinary activities

5

-

-

PROFIT FOR THE FINANCIAL YEAR

31,042

32,554

CONTINUING OPERATIONS

None of the company's activities were acquired or discontinued during the current year or previous

year.

TOTAL RECOGNISED GAINS AND LOSSES

The company has no recognised gains or losses other than the profits for the current year or

previous year.

CURRENT ASSETS

Debtors

7

969,777

742,317

Cash at bank

18,864

26,911

988,641

769,228

CREDITORS

Amounts falling due within one year

8

241,309

61,926

NET CURRENT ASSETS

747,332

707,302

TOTAL ASSETS LESS CURRENT LIABILITIES

747,332

707,302

CAPITAL AND RESERVES

Called up share capital

10

3,884,093

3,884,093

Other reserves

11

286,775

277,787

Profit and loss account

11

(3,423,536

)

(3,454,578

)

SHAREHOLDERS' FUNDS

14

747,332

707,302

The financial statements were approved by the Board of Directors on 18 August 2014 and were signed on its behalf by:

Dr S Dawson - Director

1.	ACCOUNTING POLICIES

Accounting convention

The financial statements have been prepared under the historical cost convention and are in

accordance with applicable accounting standards.

Financial Reporting Standard number 1

Exemption has been taken from preparing a cash flow statement on the grounds that the

parent company includes the subsidiary in its published financial statements.

Turnover

Turnover represents amounts receivable for goods and services net of VAT and trade

discounts

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Fixtures and fittings

-

20% on cost

Computer equipment

-

33% on cost

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of

exchange ruling at the balance sheet date. Transactions in foreign currencies are translated

into sterling at the rate of exchange ruling at the date of transaction. Exchange differences

are taken into account in arriving at the operating result.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the

company's pension scheme are charged to the profit and loss account in the period to which

they relate.

Share based compensation plan

The Group has an equity-settled, share-based compensation plan. The fair value of the

employee services received in exchange for the grant of the options is recognised as an

expense. The total amount to be expensed over the vesting period is determined by

reference to the fair value of the options granted. At each balance sheet date, the Company

revises its estimates of the number of options that are expected to vest.

It recognises the impact of the revision of original estimates, if any, in the income statement

as salary costs, with a corresponding adjustment to equity. The proceeds received net of

any directly attributable transaction costs are credited to share capital (nominal value) and

share premium when the options are exercised.

Provisions for social security costs are calculated by applying the same valuation model used

when the options were issued. The provision is re-valued at the end of each accounting

period on the basis of the calculation of the expenditure that may arise when the

instruments are exercised and accounted for as social security costs. The calculated amount

is accrued in relation to the vesting period.

SinterCast conducts valuation pursuant to the Black & Scholes model, which considers

factors such as share price, remaining time to exercise, volatility and risk-free interest rates.

The payment of social security costs coincident with the employees’ exercise of options is

offset against the provisioning pursuant to the above.

Stock options attributable to the staff of the subsidiary SinterCast Ltd. are accounted for

pursuant to IFRIC 11, now included in IFRS2. In this context, the issuance of options is

regarded as a shareholders’ contribution from Parent Company to the subsidiary, and

accordingly, this is accounted as an investment in subsidiaries. Like other contributions, this

investment is then subject to an impairment test. If there is a need for write-downs on

shares in subsidiaries, the effect is a financial cost posted to the SinterCast AB Income

statement.

2.

TURNOVER

The turnover and profit before taxation are attributable to the one principal activity of the

company.

An analysis of turnover by geographical market is given below:

2013

2012

£

£

United Kingdom

32,462

23,927

Europe

562,996

620,898

595,458

644,825

3.	STAFF COSTS

2013

2012

£

£

Wages and salaries

289,620

302,891

Social security costs

63,712

44,439

Other pension costs

89,417

132,467

442,749

479,797

The average monthly number of employees during the year was as follows:

2013

2012

Administration and management

1

1

4.	OPERATING PROFIT

The operating profit is stated after charging/(crediting):

2013

2012

£

£

Auditors' remuneration

4,475

4,312

Foreign exchange differences

492

(25

)

Directors' remuneration

289,620

302,891

The number of directors to whom retirement benefits were accruing was as follows:

Money purchase schemes

1

1

One director exercised share options during the year (2012 - one director).

Information regarding the highest paid director is as follows:

2013

2012

£

£

Emoluments etc

289,620

302,891

5.

TAXATION

Analysis of the tax charge

No liability to UK corporation tax arose on ordinary activities for the year ended

31 December 2013 nor for the year ended 31 December 2012.

Factors affecting the tax charge

The tax assessed for the year is lower than the standard rate of corporation tax in the UK.

The difference is explained below:

2013

2012

£

£

Profit on ordinary activities before tax

31,042

32,554

Profit on ordinary activities

multiplied by the standard rate of corporation tax

in the UK of 20% (2012 - 20%)

6,208

6,511

Effects of:

Expenses not deductible for tax purposes

365

628

Utilisation of tax losses

(6,573

)

(7,139

)

Current tax charge

-

-

Factors that may affect future tax charges

The company has estimated losses of £3,023,912 (2012 - £3,056,781) available for carry

forward against future trading profits.

6.	TANGIBLE FIXED ASSETS

Fixtures

and

Computer

fittings

equipment

Totals

£

£

£

COST

At 1 January 2013

and 31 December 2013

2,914

1,343

4,257

DEPRECIATION

At 1 January 2013

and 31 December 2013

2,914

1,343

4,257

NET BOOK VALUE

At 31 December 2013

-

-

-

At 31 December 2012

-

-

-

7.

DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2013

2012

£

£

Trade debtors

13,900

6,220

Amounts owed by group undertakings

935,098

713,945

Other debtors

3,144

841

Prepayments and accrued income

17,635

21,311

969,777

742,317

8.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2013

2012

£

£

Trade creditors

15,050

9,062

Social security and other taxes

119,985

10,625

Other creditors

9,679

8,021

Accruals and deferred income

96,595

34,218

241,309

61,926

9.	OPERATING LEASE COMMITMENTS

The following operating lease payments are committed to be paid within one year:

Land and buildings

2013

2012

£

£

Expiring:

Between one and five years

6,000

6,000

10.	CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:

Number:

Class:

Nominal

2013

2012

value:

£

£

3,884,093

Ordinary

1

3,884,093

3,884,093

11.

RESERVES

Profit

and loss

Other

account

reserves

Totals

£

£

£

At 1 January 2013

(3,454,578

)

277,787

(3,176,791

)

Profit for the year

31,042

31,042

Movement during the year

-

8,988

8,988

At 31 December 2013

(3,423,536

)

286,775

(3,136,761

)

12.	ULTIMATE PARENT COMPANY

13.	RELATED PARTY DISCLOSURES

14.	RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

2013

2012

£

£

Profit for the financial year

31,042

32,554

Movements on other reserves

8,988

21,935

Net addition to shareholders' funds

40,030

54,489

Opening shareholders' funds

707,302

652,813

Closing shareholders' funds

747,332

707,302

15.	INCENTIVE PROGRAMME

Incentive Programme 2013

The Board of Directors used the authorisation given at the 2011 AGM to compensate the

employees in cash instead of exercising the options, from the second subscription period. In

consideration of the current market conditions and the daily turnover, coupled with the

dilution effects and administrative costs, the Board

preferred to follow the AGM authorisation and to compensate the employees in cash.

The cash alternative resulted in remuneration to the employees amounting to SEK 0.3

million, including social contributions. The remuneration was accounted as equity and the

social contribution was accounted as social costs. The social costs are presented in the table

above. The Board retains the authorisation given at

the 2011 AGM for the third and fourth years of the 2010-2013 incentive programme. The

cash exercise was based on SEK 49 per option.

Exercise of the Stock Option Programme

The programme can either be exercised by subscribing for options or settled with cash. The

option exercise means that the employees purchase shares from the company and the

proceeds increase the liquidity and equity. The cost of the programme is defined as the fair

value and the social contribution costs.

The cash exercise means that the option exercise is mirrored and the corresponding value is

paid in cash to the employee. In this case the liquidity is reduced by the payment to the

employees and the cost is accounted for as equity which means that the profit and loss

statement is unaffected, except for the social

contribution costs. The cost of the programme is defined as the fair value and the social

contribution costs.