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Local Presence Global Reach

2008 Annual Report

(2)

Annual Report 2008 Introduction

Contents

Introduction

CEO's report 1

Business concept, goals, and strategies 3

History 5

Director's report

Important events in 2008 6

Customers and projects 7

Performance and position 8

Market 9

Cybercom's areas of operation 11

Global sourcing 14

Business processes 15

Corporate responsibility 17

Organisation 18

Employees 20

The share 22

Risk and risk management 24

Outlook 25

Parent company 26

Financial statements

Consolidated income statement 27

Consolidated statement of changes in equity 28

Consolidated balance sheet 29

Consolidated cash flow statement 30 Income statement – parent company 31 Statement of changes in equity – parent company 31

Balance sheet – parent company 32

Cash flow statement – parent company 33

Five-year overview 34

Notes 36

Proposed allocation of profit 66

Auditor's report 67

Corporate governance

Corporate governance report 68

Internal control 71

Board of directors 73

Executive management 74

Auditors 75

Information

Definitions 76

Annual general meeting 77

2008 in brief

Key figures for 2008 Sales

+ 62%

SEK 1,781 m

Profit

+ 100%

SEK 134 m

Operating profit, EBIT

+ 50%

SEK 156 m

Earnings per share

+ 24%

SEK 5.51

Cybercom pursued its strategic initiatives through continued expansion into key geographic markets, and it focused on

international delivery capabilities – to keep pace with the continued globalisation trend.

In a short time, the number of Group employees more than quadrupled, from 481 in early 2007 to 1,982 at year-end 2008. Cybercom has evolved from a mid-sized Swedish consultancy into a leading Nordic consulting corporation with major inter- national operations. In 2008, the number of employees rose 57% – from 1,262 to 1,982.

Sales rose 62% to SEK 1,781.1 million (1,099.5)

EBIT increased 50% to SEK 156.0 million (104.1)

Profit climbed 100% to SEK 134.0 million (67.0)

Operating cash flow was strong at SEK 198.8 million (60.1)

Profit per share rose to SEK 5.51 (4.46)

Operating margin – EBIT – was 8.8% (9.5)

Operating margin – EBITDA – was10.9% (11.0)

Acquisitions: Plenware and Nexus Consulting

British subsidiary sold

Cybercom in brief

The Cybercom Group is high-tech consultancy that offers global sourcing for end-to-end-solutions. The Group is a world-class supplier of security solutions, portals, mobile solutions, embedded systems, telecom management. Thanks to its extensive industry and operations experience, Cybercom offers strategic and technological expertise to these markets: telecom, industry, media, banking and financial services, retail, and the public sector.

The Group employs about 2,000 persons and runs projects worldwide. Cybercom has 24 offices in 10 countries. Since 1999, Cybercom’s share has been quoted on the NASDAQ OMX Stockholm exchange.

The director's report pertains to continuing operations if not otherwise indicated.

(3)

Annual Report 2008 Introduction

CEO's report

Cybercom accomplished a lot in 2008. We continued international expansion, followed customers to new geographic markets, and boosted our brand and market position via two valuable acquisitions.

Cybercom has a strong Nordic platform and presence in Asia and eastern Europe; this enables our global sourcing business model – a highly sought-after model by world-leading players, authorities, and organisations for managing major projects.

We enhanced relationships with our major customers, increased the proportion of turnkey projects, and further broadened our customer base.

In line with our strategy and conviction that globalisation will continue to play a key role in the future, we're building a geographic organisa- tion based on long-term goals. Our strategy of local presence and global delivery capacity positions Cybercom to be one of the strongest companies to emerge from the economic downturn.

Two acquisitions carved global growth path in 2008

Cybercom acquired Nexus Consulting in 2008. The acquisition fortified our position as the leading Nordic consultancy in IT security, which is a globally expanding market. Cybercom offers unrivalled IT security skills that are in demand internationally. Our expert security consultants work on assignments worldwide, from South America to Iceland. They serve an extensive range of customers, from banks in Thailand to intelligence services in Europe.

Acquisition of Plenware, a Finnish consultancy, was the next step in Cybercom's growth strategy. Plenware fortified our stronghold in the Nordic market and sharpened our telecom proposition. We also gained eastern European nearshore operations in Estonia, Romania, and Poland. We established a presence in China, which is very valuable and follows our strategy to expand the company, particularly in Asia. Right now, we have a presence in China, India, and Singapore.

Asia – vital on an increasingly global market

India and China are expanding markets for many Cybercom customers.

The IT market is progressively becoming more global, and there is a

clear trend among our customers to search for partners that support their organisations with outsourcing and global sourcing.

Customers demand 24/7 availability and increased productivity, which also accelerate upscaling and cost efficiency. Customers can focus on their core business and growth, while cutting total costs.

We took a key strategic decision in 2008 when we began to seriously invest in growth in Asia. Besides our Beijing presence, we opened a second office in Chengdu, China. Chengdu is a university town.

We're close to customers such as Ericsson and Nokia.

Doubled earnings in Singapore

Our Singapore operation, Indian operations, and operation in southern and western Sweden were the most successful in 2008.

In Singapore, we doubled sales and earnings in 2008. We're one the most sought-after companies for telecom management in the region.

Singapore serves as a base for our African and Middle Eastern rollout projects for new mobile networks and audits of existing networks to improve performance and cost efficiency.

We also opened a Dubai office to establish presence closer to our cus- tomers – a successful strategy that generated new business.

Focus – corporate culture

Our growth strategy is well-defined, and during the past two years, we chose growth via acquisitions rather than organic growth. Our acquisi- tion strategy allowed us to quickly penetrate new geographic markets, which we see as favourable for business in the long term. Expansion in existing markets is now mainly organic. We fully realise that acquisitions require time for integration. So during the year, Peter Keller-Andreasen, Cybercom's COO, and I devoted considerable effort to travelling around to our companies and conducting seminars on Cybercom's vision, strate- gies, objectives, and values – to build a unified corporate culture. Our consistent focus is to create one company, one team, and one culture.

I believe the best strategy for successful integration is joint business deals, and we made several during the year.

Local presence – global delivery capacity

“+1 means always adding a little extra

to everything we

(4)

Annual Report 2008 Introduction

We have a strong value proposition in our niche core services: telecom management, security, mobile services, portals, and embedded systems.

We have strong Nordic presence and almost 1,500 employees, which qualifies us for most framework agreements and procurements that place requirements on local and global delivery capacity.

We have international delivery capacity in China, eastern Europe, and India that is unique for a company our size. Our consultants have 10 years of experience in global sourcing.

We're a preferred supplier to all major purchasers of consultant services in the Nordics. We have well-established, long-term customer relation- ships and solid expertise in our customers' products, technologies, and industries – expertise our customers demand.

Cybercom is +1 – we add something extra

Cybercom employees have extensive technical expertise, we're accus- tomed to managing complete solutions, and we're a business-driven organisation. A few years ago we internally adopted the +1 concept. It describes who we are and what we stand for: +1 means always adding a little extra to everything we do – for customers, colleagues, and business partners.

The +1 concept spread like wildfire internally and everyone, from Mumbai and Beijing to Stockholm, Linköping, and Copenhagen proudly use it.

Strong growth despite an unsettled finish to 2008

The start of 2008 was great for business, and we made good progress toward our targets. We expanded our customer base and reduced dependence on individual customers; no single customer accounts for more than 17% of sales.

In 2008, we grew 62%, and our liquidity was good. We enhanced our cash flow and profit. We succeeded at this while we launched an asser- tive initiative to expand our presence in China and go onshore in Poland.

We sold our UK subsidiary because its operations and main proposition had few synergies with the rest of the Group. The time was right to sell the company, and we did so successfully.

The recession's full force hit the Nordics in Q4, which affected our mar- ket and operations. Demand in the Nordics declined due to cutbacks by major purchasers of consultant services, but demand is rising in Africa, Asia, and the Middle East.

Considering the situation, I'm pleased with 2008, but I'd naturally prefer to see a better bottom line. Our long-term objective is an EBIT of 13%.

Today’s market situation is also a driving force for Cybercom's global sourcing proposition through our structure of local presence and global reach – business-critical project elements stay close to the customer while parts of production are placed in low-cost countries. This allows our customers to focus on their core businesses and services to secure their competitiveness – a priority for many companies today.

Future winners can manage change

Going forward, winners will be companies that have a clear value propo- sition, a local market and presence, framework agreements and long- term assignments, flexible business models, and attractive global sourc- ing offerings. Other critical success factors are a strong sales culture, proximity to customers, and very fast adaptation to market changes. We made major changes in 2008 to create an inspiring future for employees and to increase shareholder value. We substantially strengthened the brand and became even more internationally conspicuous.

I'm convinced that Cybercom is well-positioned to meet customer needs and the challenges that lie ahead. We're building a strong team with a common culture and common values.

When I visit our operations worldwide and meet all of our talented, dedi- cated employees, I’m struck by the fact that this is the most enjoyable and exciting job I've ever had!

CEO's report

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Annual Report 2008 Introduction

Business concept, goals, and strategies

From its shareholders' perspective, Cybercom is charged with creating the right conditions for value development.

This main task forms the foundation of its vision, business concept, objectives, and strategy.

Business concept

Through world-leading global delivery capacity, local presence, and close co-operation with customers, Cybercom strengthens its customers' operations using end-to-end solutions that bring technology and reality together.

Vision

Cybercom will successfully dominate its selected markets and hold a leading position to the advantage of customers, employees, and owners.

Operation objectives

Cybercom established these long-term objectives:

Become a well-known brand among customers, employees,

and job seekers

Strengthen company presence on existing markets and continue

to expand outside the Nordics

Broaden the customer base; no individual customer will represent

more than 15% of Group sales

Global sourcing services will comprise a larger part of sales

Values

Satisfied customers

Satisfied customers guarantee success.

Personal motivation Cybercom:

Values a healthy, unpretentious workplace – characterised by trust,

respect, professional pride, openness, and honesty Stands for job satisfaction and positive energy

Appreciates the balance between family and leisure time, customer

assignments, and company activities – and the balance between hard work and good health

Encourages initiative and expects employees to take responsibility

Believes in one company – one culture – one team

Profitability

Cybercom understands that only profitable companies survive in the long-term, grow, and determine their own paths.

Financial targets

Cybercom aims for profitability and growth. The board established these financial targets for operating margin and organic growth:

13% long-term earnings before interest and taxes (EBIT)

15% organic growth, average per year over a business cycle

2004 2005 2006 2007 2008

4.5 7.5

9.5 9.5 8.8

TARGET

13% long-term earnings before interest and taxes (EBIT).

Target 13%

TARGET

15% organic growth, average per year over a business cycle.

Target 15%

2004 2005 2006 2007 2008

-1

10 12

2 8

2004 2005 2006 2007 2008

32 34 35

21 17

TARGET

The largest customer will not account for more than15% of total sales.

Target 15%

TARGET

Long-term: 50% of employees will be located outside of the Nordics.

Target 30–50%

2004 2005 2006 2007 2008

3 3

11 14 16

(6)

Annual Report 2008 Introduction

Strategies

Cybercom’s customers have stringent demands, and customer satisfac- tion is crucial in a highly competitive market. This satisfaction ensures future sales and enables good profitability. So, close customer co-opera- tions are necessary – to better understand their needs and to meet their expectations.

The quality of Cybercom’s proposition is closely tied to how customers are treated and services are delivered. While project quality is signifi- cant, Cybercom's employees and their knowledge, values, attitudes, and behaviours constitute its number-one success factor. Cybercom must always be able to offer its customers commercially sound solu- tions. Consequently, Cybercom continually develops its organisation to improve customer-related services.

Cybercom will achieve its targets by focusing on profitability and growth, by building a strong brand, and by enabling these main strategies:

Be fast-paced and concentrate on strong growth markets; Cybercom

must expand its operation to cover more market segments and geographic markets via organic growth and strategic acquisitions

Focus on:

Customers that have strategic operational needs for IT and -

expand in these areas: portals, mobile services, security, embedded systems, and telecom management.

Profitability and growth, in that order -

Service through expertise, concepts, and methods -

Creation of lasting value for customers via close, long-term -

partnerships

Reinforce our reputation and attraction among customers,

employees, and labour market participants – via brand-boosting activities

Form a decentralised Group organisation with short decision paths

and global delivery capacity

Recruit the best employees with the right attitudes

Act as one company, one culture, and one team – internally

and externally

Cybercom was founded in March 1995 with a strategy to create an expert consultancy with the best consultants in the industry. Since its start, Cybercom has focused on organic growth and strategic, acquisition-based growth, and in line with this strategy, Cybercom was listed on the O list of the Stockholm Stock Exchange (now the NASDAQ OMX Stockholm) in 1999.

(7)

Annual Report 2008 Introduction

1995

Cybercom is founded.

1996

Cybercom’s Stockholm office opens. Its first customers include Telia.

1998

The company employs more than 200 persons.

1999

Cybercom works on mobile services and is quoted on the O list of the Stockholm Stock Exchange (now the NASDAQ OMX Stockholm exchange) in December. The company employs 270.

2000

Cybercom focuses on services aimed at the telecom and finance sectors.

2001

Cybercom establishes operations in Denmark that concentrate on e-business solutions. The company employs 300.

2002

Cybercom acquires Stratum Project Management with operations in financial solutions and with Reuters as its largest customer and thus establishes presence in the UK. Sony Ericsson grants global application management responsibility for its portal.

2003

Cybercom acquires Consafe Infotech and gains a strong telecom-serv- ices position in the Öresund region. In conjunction with the acquisition, the JCE Group and J. Christer Ericsson become major Cybercom shareholders. The company employs 375.

2004

Cybercom reinforces its position in the telecom market and in selected technologies. Among other achievements, it is chosen as a partner in SIMS, an EU research project, for development of mobile services and 3G applications. The company employs 358. Sales rise 26% to SEK 391 million. Operating profit totals SEK 17.6 million.

2005

Cybercom acquires Netcom Consultants, which operates in telecom management. The acquisition gives Cybercom additional offices in Singapore and these major international customers: Millicom and Tele2. The company employs 414. Sales rise 19% to SEK 466 million.

Operating profit totals SEK 34.7 million.

2006

Cybercom starts a joint venture with Datamatics Ltd in Mumbai, India.

In December, Cybercom phases out its Norwegian operation. The company employs 481. Sales rise 15% to SEK 536 million. Operating profit totals SEK 50.9 million.

2007

Cybercom acquires Varchar and auSystems in Denmark, Poland, and Sweden. The auSystems acquisition more than doubles Cybercom’s sales and staff. In May, Patrik Boman takes over as president and CEO of the company. The company employs 1,262. Sales rise 105% to SEK 1,099 million. Operating profit totals SEK 104.1 million.

2008

In January, Cybercom acquires Plenware, a Finnish IT consultancy with about 550 employees and operations in China, Estonia, Finland, and Romania. In April, Cybercom acquires Nexus Consulting, a security consultancy, which included key skills in security. Cybercom opens an office in Chengdu, China and a sales office in Dubai, UAE. In October, Cybercom sells its UK operation. The company employs 1,982. Sales rise 62% to SEK 1,781 million. Operating profit totals SEK 156 million.

History

“Cybercom is fast-paced and focuses on

strong growth

markets.”

(8)

Director's report Annual Report 2008

Important events 2008

Acquisition of Plenware

Geographic expansion to Finland, Estonia, Romania, and China

In January 2008, Cybercom acquired Plenware Oy, a Finnish IT consultancy with 550 employees. The acquisition was consolidated on 1 January 2008 and included Plenware's operations in China, Estonia, Finland, and Romania. Cybercom paid SEK 374.8 million and took over liabilities of about EUR 14 million. No additional purchase price was payable for 2008. The acquisition was financed via credit facilities and via a directed issue of Cybercom shares to current Plenware share- holders; the issue amounted to 2,200,478 shares and resulted in 10%

dilution. See note 30 for more information. The acquisition strengthened Cybercom's position in telecom and, in line with the company's strategy, reinforced its global sourcing structure.

Middle-eastern and Asian investments Building operations in China and Singapore;

launching new office in Dubai

Cybercom expanded its Singapore operation with more employees.

An office was opened in Dubai for proximity to customers in the region, which is an emerging market. The Plenware acquisition enabled Cybercom to set up operations in China, which were further developed in 2008. Cybercom invested in recruiting and training, and it opened an office in the university city of Chengdu. The year's set-up expenses in the Chinese operation amounted to SEK 19.2 million. At year-end, Cybercom had 167 employees in China. Several testing assignments

and software development for mobile applications and Bluetooth®

solutions are managed from Beijing and Chengdu – for industrial and telecom customers.

Nexus Consulting acquisition Adding leading IT security expertise

Acquisition of the consultancy operation in Nexus Technology, an informa- tion and IT security company, took place in Q2 and included 43 employ- ees in Sweden. Cybercom paid SEK 30 million for the operation; no additional purchase price was paid in 2008. Nexus Consulting was consolidated on 1 April 2008. Integration costs in 2008 amounted to SEK 2 million. This acquisition boosts Cybercom's position in this market and brings Cybercom into demand as an expert IT-forensics consultancy, which enables sophisticated analyses of intrusion and other IT-related crimes. Cybercom is an internationally recognised supplier for investiga- tion of industrial espionage, economic crime, and fraud.

Focusing operations British subsidiary divested

In Q4, the Cybercom Group UK Ltd subsidiary (37 employees) was sold to Digital Marketing Group plc., a British company. The purchase price was SEK 73.9 million, which generated SEK 41.5 million in capital gain.

The final consolidation date was 30 September 2008. So Cybercom Group UK Ltd is disclosed separately in the accounts as a disposal;

comparative figures for profit/loss items and numbers of employees were adjusted.

Director's report

The board and CEO of Cybercom Group Europe AB (publ), corporate ID 556544-6522, hereby submit their annual report for the 1 January 2008 – 31 December 2008 period.

All amounts are recognised in SEK thousands, unless otherwise specified. Numbers enclosed in parentheses refer to 2007.

Asia sales rolling 12 months, SEK million

0 20 40 60 80 100

Q408 Q308 Q208 Q108

Q407

Cybercom sales rolling 12 months, SEK million

0 500 1,000 1,500 2,000

Q408 Q308 Q208 Q108 Q407

(9)

Director's report Annual Report 2008

Cybercom’s sales per industry, 2008

The majority of Cybercom’s sales are from the telecom industry, but the customer base is constantly expanding, to develop spin-off busi- ness in specialist expertise areas.

A major portion of Cybercom’s sales are from turnkey assignments and service management. These are long-term assignments and Cybercom enters into a close partnership with its customers.

Telecom 58%

Industry 16%

Public sector 10%

Media 5%

Banking & financial services 3%

Retail 2%

Other 6%

Telekom 56%

Industri 16%

Offentlig sektor 12%

Media 5%

Bank & finans 3%

Handel 3%

Övrigt 5%

Sales per assignment type, 2008

Turnkey projects and service management 52%

Consulting services 48%

Helhetsåtaganden och SM 52%

Konsulttjänster 48%

Sales per type of agreement, 2008

Ramavtal 70%

Customers and projects

In 2008, Cybercom's recognized technical expertise extends interna- tionally into mobile services, portal solutions, security, and embedded systems – which are all cross-sector areas. For example, Cybercom can function as a catalyst between the telecom and automotive industries, provide reliable solutions, and apply lessons learned in one sector to another sector. Cybercom's public sector, media, and telecom projects multiplied during the year. The company broadened its customer base and reduced dependency on individual customers; no customer accounted for more than 17% of sales.

Frame agreements (master contracts) became more important in 2008;

customers with such agreements account for about 70% of sales.

Several new frame agreements were signed with, for example, two Danish state operations: AMS – the National Labour Market Board and SKI – a procurement company for state and local operations; IKANO Bank; two Swedish county councils: Jämtland and Uppsala; Linköping municipality; Saab; SAS; Swedish National Road Administration;

TeliaSonera; and TDC (communications solutions provider).

Cybercom’s ten largest customers, 2008

Cybercom’s 10 largest customers 63%

Other customers 37%

Cybercom’s ten largest customers account for 63% of total sales in 2008. Cybercom’s major customer list is stable: Alma Media, ASSA ABLOY, Ericsson, Kone, Millicom, Nokia, PFA Pension, SAAB, Sand- vik, Sony Ericsson, the Swedish National Labour Market Board, the Swedish Road Administration, Telenor, TeliaSonera, and Volvo.

(10)

Director's report Annual Report 2008

Performance and position

Sales for 2008 totalled SEK 1,781.1 million (1,099.5), a 62% rise in revenue compared with 2007. The revenue rise is due to the higher number of employees, primarily through the two acquisitions carried out during the year. The percentage of subcontractors remained high during the period.

Operating profit rose 50% compared with the same period in 2007 and reached SEK 156.0 million (104.1), which corresponds to an operating margin of 8.8% (9.5).

Net financial items stood at a negative SEK 39.4 million (-22.1); this figure includes SEK 39.6 million (-20.4) in interest expenses for loans raised for the auSystems and Plenware acquisitions. Profit after net financial items was SEK 116.6 million (82.1), which yields a 6.5%

profit margin (7.5).

Investments

Net investments in property, plant, and equipment during 2008 reached SEK 10.4 million (7.4). Net investments in intangible non-current assets totalled SEK 3.4 million (0.9).

Liquidity and cash flow

On 31 December 2008, Group cash and cash equivalents stood at SEK 169.7 million, compared with SEK 82.0 million on 31 December 2007. During the period, cash flow before changes in working capital amounted to SEK 128.9 million. Changes in working capital stood at SEK 69.9 million for the period, so cash flow from operating activities totalled SEK 198.8 million (60.1).

Financial position

Equity on 31 December 2008 stood at SEK 998.1 million (708.4), which corresponds to a 49.2% equity/assets ratio (51.0). Equity per share amounted to SEK 40.60 (31.65).

New share issues were implemented during Q1 and Q2 with prefer- ential rights for Plenware's former shareholders. The first new share issue, at SEK 53.72 per share, concerned the initial Plenware acquisi- tion. The second issue concerned the additional purchase price paid to Plenware for profit in 2007, in which half of the additional purchase price was paid in shares at SEK 42.65 per share. Due to these issues, the number of Cybercom shares rose by 2,200,478 shares. After the issues, Cybercom's share capital was SEK 24,584,840 distributed over 24,584,840 shares.

0 50 100 150 200 250 300 350 400 450 500 SEK m

Q1 2005 2006

2007 2008

Q2 Q3 Q4

SEK m

2005 2006

2007 2008 0

10 20 30 40 50

Q4 Q3 Q2

Q1 0

10 20 30 40 50 60 70 SEK m

Q1 2005 2006

2007 2008

Q2 Q3 Q4

Sales per quarter EBIT per quarter Profit per quarter

(11)

Director's report Annual Report 2008

According to the European Information Technology

Observatory (EITO), the total market for ICT services in Europe was worth about EUR 150 billion in 2008. The EITO estimates that the Nordic market for IT services grew 5% in 2008 to about EUR 10 billion. Growth was strongest in outsourcing.

Up to the end of 2008, Cybercom's market continued to be positive.

The economic downturn, right at year-end, resulted in a general slow- down, with many customers demonstrating increased caution. The trend of gradually rising prices broke, and customer requests to renegotiate contracts with price cuts replaced the trend.

More and more customers are concentrating their purchases to fewer vendors through efforts such as framework agreements that have steered purchasing to fewer vendors, which has enabled Cybercom to expand its commitments. In several cases, Cybercom was selected as the main supplier of sophisticated consulting services, which further strengthened its position as a high-quality service provider.

Stefan Wård, IT analyst at Handelsbanken

To obtain an objective market description, Cybercom asked Stefan Wård, IT analyst at Handelsbanken, to share the bank's view of Cybercom's market. Stefan Wård based his analysis on the Swedish market.

The Swedish economy has been severely hit by the global recession, and the economy entered into recession during the second quarter last year. Handelsbanken forecasts GDP growth to be -2.7% in 2009 which should make it the weakest year since 1940. The decline in GDP is even sharper now than at the onset of the last deep recession in 1991–1993.

In the final quarter of 2008 the contraction in the Swedish economy was a record decline of 4.9%.

Looking at the Q4 GDP from the production side, industrial production, which accounts for around 20% of total production, fell by 13% y-o-y.

Furthermore, total services production, which represents some 45% of GDP, fell by 6% y-o-y. The decline within services was broadly based on severe contractions for transport, business services, wholesale and retail trade. Construction activity also weakened substantially in Q4 on the back of increased financing difficulties. Personal services and serv- ices related to the public sector held up better. Looking at the demand side, the volume of export goods fell by close to 12% while the fall in imports was around 9% implying a negative contribution from net trade of around 1.5%.

Regarding fixed investment, the plunge in industrial production, a deterioration of profits, and the credit squeeze all point to lower levels of investment. Handelsbanken expects fixed investments to contract by 7.0% in 2009 from a growth rate of 7.5% in 2007 and 2.8% in 2008.

The weak outcome of the fourth quarter means that 2009 was entered with a very weak growth momentum. Demand for important export mar- kets is falling dramatically, and the Swedish industry, with its big focus on investment goods and vehicles, has been hit especially had. The recent marked weakening of the SEK should dampen the effect, but the net contribution from exports is expected to be a drag on GDP growth of close to one percentage point in 2009.

The fundamentals for investments are also looking bad despite lower sovereign rates. The profit outlook has become gloomy, leaving little room for big investments. Also, the need for investments is not as big since capacity utilisation is low and continues to decline. Furthermore, financing is expensive and hard to find as the credit squeeze continues.

Handelsbanken also expects household consumption to decline in 2009 despite several positives, such as lower inflation and expansionary economic policy. The key to consumption is the labour market, and as Handelsbanken sees it, the unemployment rate is about to rise mark- edly. The weakness on the labour market will put a damper on wage

Market

Cybercom

Mobile phone users System suppliers

Content providers Service providers

Users:

- Companies - Individuals - Organisations

Market The European IT market 2008

Telecom services 41%

IT services & software 29%

Hardware 12%

Data communications &

network hardware 10%

(12)

Director's report Annual Report 2008

growth, and disposable income growth will be lower in 2009 than in 2008.

Moreover, the stock market crash has led to huge wealth destruction for households; and net financial assets are down 25% y-o-y. On top of this we have the concurrent decline in house prices and against this back- drop we foresee a dramatic increase in the savings rate.

Percentage change y-o-y 2007 2008 2009 2010

GDP 2.5 0.2 -2.8 1.0

GDP, calendar adjusted 2.7 -0.1 -2.7 0.7

Household consumption 3.0 0.6 -0.8 1.1

Public consumption 0.4 1.2 1.0 1.4

Fixed investment 7.5 2.8 -7.0 2.5

Exports 5.7 0.7 -4.1 2.4

Imports 9.4 2.1 -3.2 3.3

CPI 2.2 3.4 -0.6 0.0

CPIF 1.5 2.5 1.1 0.3

Unemployment* 6.2 6.2 8.3 10.3

Employment 2.4 1.1 -2.5 -2.5

* Percent of labour force.

The Swedish and Nordic IT sector

We at Handelsbanken believe that 2009 will be characterised as a weak year also for the Nordic IT markets. In this review we have chosen to focus on the Swedish market as it accounts for the major part of both earnings and sales for Cybercom.

Our previously communicated aggregate forecast for the Swedish IT market has been for a flat development in 2009. Given the continued weakness witnessed in the first couple of months in 2009 we now believe that a small decline, measured as value of the market, is a probable scenario.

In the telecom segment where Cybercom has most of its activities we expect additional downwards adjustments to budgets which are likely to result in cancellations of projects and continued price pressure on activi- ties still scheduled for execution. Despite this rather gloomy outlook we believe the decline in value of the market will be modest at around a few percentage points. We emphasise that most of the activities carried out today are difficult to cancel or reduce substantially without affecting the overall performance of the organisation.

In a medium to long-term perspective we consider the underlying demand for IT-services in the Swedish market to be robust. The use and importance of IT within corporations and organisations continue to increase. Drivers for IT spending also include motives for efficiency improvements and cost savings which could be argued to increase in importance in a situation were the underlying market conditions are weakening.

Even though we foresee weaker spending we expect this downturn to be less severe for the IT-services companies compared with the previ- ous downturn seen in the wake of the dot.com crash in post 2000. We believe that both price levels and salaries are at a comparably lower level than in the last downturn which should work against a similar collapse in price and consequently profitability levels that we see witnessed last time.

We expect clients to continue to lower the number of preferred suppliers making it increasingly important to secure enough of strategic rela- tionships as the number of projects is likely to be reduced. A likely consequence will be that the providers that are a successful in securing preferred supplier status will have a clear advantage when it comes to defending topline and profitability.

In summary

We expect 2009 to be a challenging year for the Swedish IT-services industry. We believe that the overall value of the market could see a decline in the range of 2–4%. The importance of having strong client relationships will be of high importance. The increased competition for the outstanding business is likely to result in continued price pressure.

Utilisation rates are likely to come down from the historically high levels seen in the past few years. Despite this gloomy picture we believe that the underlying demand for IT-services, driven by the increased importance of IT within companies and organisations, remains robust in a medium to long term perspective. We also believe that the status of the supply side is in better condition compared with the previous downturn.

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Director's report Annual Report 2008

Cybercom's areas of operation

Cybercom develops services, applications, systems, products, and software on behalf of its customers worldwide. The company is contracted to run turnkey projects, in the form of service management, or provide expert services, such as consulting, testing, and development using leading technologies.

Cybercom can deliver services globally – onshore, nearshore, or offshore. Operations are divided into these five areas: portals, mobile solutions, security, embedded systems, and telecom management.

Portals

Cybercom provides portal-related services. For years, Cybercom has run and developed portals for several international companies. Drawing on its years of experience, Cybercom helps customers create new digital services and value propositions for online or mobile applications.

The portal concept can have many definitions. At Cybercom, portals refer to web sites, extranets, intranets, communities, and mobile solu- tions, which in a single location, provide access to vast quantities of information and functions. The role of portals has become increasingly important as trading venues and as meeting places for enterprises that want to build customer relationships.

Cybercom helps its customers with everything from business analysis to portal solution management. Such projects may involve establish- ing clear objectives, defining and evaluating the customer's services, and developing and implementing the solution. Through its extensive experience, Cybercom has acquired a wealth of knowledge that is tough to beat when it comes to capturing and converting users' needs into new digital services. Integrating users in the process results in a solution with more accurate services and greater customer loyalty.

Based on the business model

A portal solution can have multiple purposes and applications. But portals that deliver the desired business value share a few common denominators. They have a clear objective, are developed close to the intended target group, and are based on a clear business model. That's why Cybercom always begins with a thorough analysis of purpose, competition, target group, services, and technical requirements.

From concept to solution

One clear trend is the accelerated pace from concept to solution. By offering a combination of standard and tailored solutions, Cybercom can meet its customers' diverse needs, while reducing development time.

As a result, Cybercom can help its customers turn their ideas into reality much faster than was possible in the past. Cybercom's portal-related services:

External web sites

Mobile portals

Mobile solutions

Cybercom provides turnkey mobile services solutions to help its custom- ers succeed in their mobile operations. Companies that embrace this new technology are finding new business opportunities in an increasing- ly mobile world. Cybercom has been developing mobile services since 1998 and is now one of the leading players in mobile solutions.

As a total provider of mobile services, Cybercom helps enterprises and organisations to succeed with their mobile solutions. Cybercom's value proposition covers the entire product life-cycle – from strategies, concept studies, and development to operation and management.

Cybercom's value proposition spans the entire field of mobile services:

Advisory services

Mobile portals

Mobile clients

Mobile payment solutions

Bluetooth applications

Design services

• Hosting

Security

Cybercom is Sweden's leading player in information and IT security consulting services. Cybercom offers a full range of services, from strategic consulting and analysis to full responsibility for implementation and change processes.

Cybercom runs an extremely successful business with customers who greatly appreciate its expertise and delivery capacity. Cybercom has the expertise and the capacity to provide the full range of required services and fulfils stringent requirements for security solutions that the market currently demands. Cybercom’s sophisticated service offering is extensive – from strategic consulting and analysis to full responsibility for complex implementation and change processes.

Cybercom has experts in many areas ranging from:

System architecture to cryptology

Online security to legal affairs and security management

Business issues to project management

Legislation and regulations to technological solutions

Cybercom is successful in IT forensics; here, Cybercom analyses and investigates IT incidents and secures evidence of digital crime. These skills enable Cybercom to secure customers' business-critical systems, where information and knowledge must not only be protected but must also be productively and cost-effectively managed.

To take maximum advantage of its consulting project experience, Cybercom has created several areas of focus consisting of bundled services in specific areas. These bundles are backed by Cybercom's

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Director's report Annual Report 2008

Embedded systems

Cybercom offers expertise that covers the entire embedded systems area. Cybercom provides its customers with innovative solutions that contain tomorrow's mobile and wireless technologies.

Telecom and product companies in any industry experience increasing product complexity and escalating market requirements regarding short- ened development cycles, and reduced cost. Cybercom, an independent R&D partner, improves its customers’ abilities to meet these challenges.

Cybercom offers expertise that covers the entire embedded systems area – from development of analogue electronic products to interaction, design, and usability. Cybercom has developed embedded systems since the 1980s and now has ongoing projects with customers around the globe. Its customers include automotive OEMs and system sup- pliers, consumer electronics vendors, mobile phone manufacturers, telecom operators, medical device manufacturers, and stakeholders in the defence and security industries.

With combined technical expertise and industry know-how, Cybercom enables current and future technologies that provide customer value.

Cybercom facilitates innovation, shortened time to market, and minimum product cost. Cybercom's expertise covers areas such as:

Outplacement of entire projects

Development of entire products and devices, where Cybercom takes responsibility from specification to qualification and industrialisa- tion – plus product maintenance. Cybercom operates within a strong partnership network of mechanical designers, industrial designers, and manufacturing companies. Cybercom's speciality is wireless equip- ment in general, and Bluetooth® devices in particular.

End-to-end device management

Cybercom participates in standardisation within device management – the workflow that involves terminal manufacturers, operators, and distributors. This enables users to easily update mobile phones with software updates.

Test services

Cybercom works extensively with platform and mobile-terminal testing and verification. Consequently, Cybercom developed a concept that includes regression testing management, interoperability, and network signalling – besides its other services.

Core network and multimedia application R&D

Cybercom offers customers a flexible expert centre for R&D within core network and multimedia application areas. Cybercom understands the entire process – from strategic decision and specifications (via develop- ment) to customisation and integration of all new network components in the core network and application warehouse.

Telecom management

Cybercom offers expertise, consulting, and services within telecom management and network services. Cybercom's consultants work on projects worldwide, helping customers to expand their businesses by exploiting new technologies.

The Cybercom delivery model provides a general overview of company methodology – from concept to implementation and customer delivery.

Cybercom delivers throughout the service and product life cycle. The model shows where in the cycle Cybercom is most research-driven and approximate time requirements for various undertakings.

Cybercom's delivery model

System development

Strategy Decision

Procurement Project mgmt

Revision

0.5–1 yr Strategies Investigations

End user mgmt Information mgmt Change mgmt

Configurations mgmt Support

Problem mgmt Project mgmt

System architecture

Adaption Test Integration

8–10 yr 0.5–1.5 yr

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Director's report Annual Report 2008

Cybercom's highly-respected consultants deliver world-class services and help international customers improve their productivity by using the latest technology. Cybercom's consultants have customers worldwide – they work with telecom, service, and content providers to develop their businesses by exploiting new technologies. Cybercom maintains strong customer relationships by delivering the highest quality consulting serv- ices, expertise on various telecom technologies, and in-depth knowledge of current and future trends. Cybercom's strategy and advisory services are divided into these expertise areas:

Business applications

Network solutions

Technology and innovation

Telecom management

Delivery process

Service management (SM) and projects

Developing and managing IT projects takes a lot of time and money.

Since the late 1990s, many Nordic companies have developed into international corporations. A few have become global players in rapidly growing markets. At the same time, several new economies and new superpowers, such as China and India, have emerged.

These countries also offer low-cost skilled labour. New technology is another important driving force for development, which makes it easier to share resources across national boundaries – through efforts such as improved communication infrastructure, security architecture, and control systems.

A large part of gains associated with globalisation have been made pos- sible by using IT. To meet customer demand and keep costs competitive, Cybercom has rapidly expanded its capacity and expertise in global sourcing. To stay within budget, it is important to maintain cost control at all levels. Cybercom offers system management, a service that guaran- tees high quality and service levels at a fixed price.

Cybercom takes on maintenance and development of already operation- al IT systems, whether developed in-house or using third-party applica- tions. The concept clarifies responsibilities, activities, and costs related to support, development, and operation of the system or an application.

Better overview and follow-up

Cybercom's system management model focuses on key business processes required for maximum use of an application – from busi- ness development and management to technical support. The model is soundly structured and enables contracted service levels and accurate cost forecasting.

One or more service-level agreements drive each service. Cybercom’s management team, together with customer and supplier representatives, regularly follow up on system management services to ensure customer satisfaction.

Tools and methods

Access to the latest technologies enables Cybercom to help customers benefit from new business opportunities. Thanks to extensive technologi- cal expertise, Cybercom specialises in serving leading enterprises in commercial growth phases.

The ability to balance technology's cutting edge and commercial feasibility requires a combination of technical know how and thorough understanding of customers' business operations. Expertise in support- ing technologies forms the foundation for selecting, implementing, and developing the best solutions for each customer. With a solid under- standing of customer operations, Cybercom can contribute its expertise and function as a discussion partner.

Faster development

Today, product development has more technical content and a shorter life cycle, while customers place stringent demands on productivity, security, and quality. Cybercom uses modern tools and methods for system development, project management, and testing – to assure that all requirements are met, including established commercial tools and custom-developed tools.

Cybercom has years of experience with recognized methods and offers certified consultants in each method, for example:

Agile

Extreme programming

• RUP

• PPS

• PROPS

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Director's report Annual Report 2008

The IT market is progressively becoming more global, and multinational companies search for partners that can support their organisations with outsourcing and global sourcing.

These questions inevitably arise for big projects: Stay local?

Or move to less expensive countries? Cybercom provides the best solutions for its customers.

More and more international companies want attractive, cost-effective solutions – and thanks to its operations in Asia, Cybercom can transition all or parts of projects to low-cost countries to meet this rapidly growing demand. IT development operations are highly suitable for outsourcing to low-cost countries. As part of its global sourcing concept, Cybercom pulled together benefits of onshore, nearshore, and offshore operations – to offer a flexible, economical package with delivery reliability.

Cybercom carefully evaluated its outsourcing experience over a ten-year period to create a value proposition that meets customer needs. Primary key factors that weigh into partner selection include price, efficiency, and technical expertise. Several Cybercom outsourcing projects involve business-critical applications for major customers. To manage these projects and deliver products and services that meet customer's demands, Cybercom developed processes that enable maximum quality and delivery reliability – at attractive prices.

Optimal solutions

Cybercom offers global sourcing – a method for optimising outsourcing and for selecting the best onshore, nearshore, or offshore options. In glo- bal sourcing, Cybercom's project management works locally – close to

customers – and creates and manages teams that develop, implement, test, or administer operations at the location that is best for the customer.

For projects that:

Demand daily flexibility, it's natural and most often cost efficient to be

geographically close to customers.

Reached maturity and perhaps apply standardised processes,

geographic presence isn't as important, and implementation can be moved to another country – if advantages outweigh disadvantages.

Depending on customer needs, Cybercom takes on various global sourcing roles. Central aspects of global sourcing include 24/7 avail- ability, increased productivity, high quality, and cost savings – with focus on core operations and business development. Cybercom runs sourcing projects for mature standardised processes for the entire chain – from development and testing to administration and support.

In February 2009, Cybercom announced the launch of a new business division in Stockholm to strengthen the Group's global sourcing proposi- tion. Initially 55 persons will join the division. They will manage a project for one of Cybercom's major customers – to improve cost effectiveness while maintaining high quality. The project includes purchasing plus man- aging deliveries for the customer's internal and external web solutions with associated systems.

Cybercom offers project management in China, Estonia, India, Poland, and Romania. Once companies start using these services, outsourcing expands to cover larger, more complex aspects of the operation.

Global sourcing

“ With local presence and global

delivery capacity, Cybercom meets market demands for

quality and

cost-effectiveness. ”

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Director's report Annual Report 2008

Business processes

Cybercom implements these main processes in its operation:

Business development – development of Cybercom's services,

solutions, and assignments

Sales – planning, sales, and customer relations

Delivery – production and delivery of services, solutions, and projects

to the customer, plus follow-up and evaluation with the customer.

Several supportive functions, such as PR, marketing, HR, IT, and accounting departments, supplement the main processes.

The main processes and supporting functions were developed so that Cybercom can retain and use the knowledge and experience that the company continually develops. Results of development efforts are documented on an ongoing basis.

Clear, user-friendly business processes boost the quality of analysis and decision-making, and facilitate knowledge transfer among Cybercom's employees. So risk of losing important experience and knowledge if employees leave the company is reduced.

Business development

Development of new product solutions normally takes 6-18 months from concept to finished, ready-to-use solution. Cybercom consultants develop in close co operation with customers – primarily in the areas of embedded systems, portals, and billing. Cybercom has gradually developed close relationships with its customers and is often a business- critical part of customers' development initiatives. Development is usually customer-specific, although sometimes a general product solution is created that is suitable for many customers.

Sales and customer relations

Each customer has special needs and requests, so each sale is unique.

The sales process is long, and often begins with a frame agreement (master contract) procurement. Then discussions are begun about the usage areas for the intended solution, and Cybercom gets a require- ment specification for the project. The entire sales process – from initial consultation to order – usually takes 6 to 12 months.

In nearly all sectors that Cybercom serves, frame agreements are business critical due to the trend in which customers procure increas- ingly large volumes from a smaller number of suppliers. Cybercom now has frame agreements with all major customers.

Cybercom's account managers are responsible for their key accounts in all geographic markets in which a customer operates, because most customers in telecom operate in several countries.

Delivery

Once specifications are agreed on and approved, Cybercom implements the specified service or project. This process consists of several phases, the contents of which depend on the nature of the project and the meth- od used. Comprehensive project phases cover analysis and planning, execution, delivery, wrap-up, and follow-up. The time from acceptance to completed delivery varies depending on project scope and type.

Recruitment

Recruitment is one of the most critical factors required to ensure Cybercom's continued profitability and growth. Cybercom concentrates on systematically identifying its future skills needs with the aim of secur- ing access to skilled staff. In 2008, the company grew primarily outside the Nordic region's borders.

Keeping key employees and attracting new ones is a strategic issue for the company. Cybercom continually addresses issues, such as working conditions, leadership, and professional skills development, to ensure that the company is a good workplace for its employees. It measures progress annually in an employee survey. Cybercom has a broad recruit- ment base that covers all industries. Its staff must possess experience and expertise that customers demand and that are aligned with services the company provides. The company has a detailed recruitment process based on these criteria. Cybercom has increased the percentage of recent graduates hired due to its collaboration with colleges and universi- ties. Read more in the “Employees” section.

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Director's report Annual Report 2008

IT

Operation and change procedures are well-documented in Cybercom's information security policy and in the business support system.

Cybercom continually conducts systematic work to protect data and systems against judged threats. The company's goal is to constantly improve use of IT support in all processes. To accomplish this goal, Cybercom uses frameworks such as the Information Technology Infrastructure Library (ITIL) and its internal global sourcing resources for cost-effective solutions.

Brand

Cybercom's branding committee, comprised of subsidiaries, is respon- sible for its branding strategy, which is primarily based on the brand platform, the communication platform, and the graphic standards. The brand platform defines fundamental values of the Cybercom brand. The communication platform defines how the brand is to be communicated to its various target groups. And the graphic profile defines how the brand's visual identity should be perceived and controlled. The goal of Cybercom's branding initiative is to focus on the company's solutions and their unique value, distinguish the company from its competitors, stimulate positive brand associations and expectations, and contribute to a clear internal focus.

Financial reporting

Cybercom continuously carries out financial reporting and profitability follow-ups – to ensure correct evaluation of planned and implemented measures. Financial reporting is based on the annual budget, which is followed up monthly. Ongoing reporting provides a sound foundation for Cybercom's quarterly forecasts.

R&D

Cybercom is an experienced outsourcing partner for many European customers. The company works in all product life-cycle phases. It focuses on technology-driven business areas and customers' entire value chains. Cybercom's services cover full staffing and equipping of R&D departments and opportunities for hosting some online services.

Quality

Cybercom complies with international quality standards, and most of its services and solutions comply with ISO 9001. One of its most important quality objectives is security of delivery. Cybercom's goal is to have 100% satisfied customers. With the aim of maintaining Cybercom's international competitive strength, it is business-critical that the company meet customer requirements for service, quality, and precision.

“At Cybercom, account managers

work with their key accounts in

all geographic

markets in which a

customer operates.”

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Director's report Annual Report 2008

Cybercom strives to behave responsibly in all countries and in all contexts in which the Group is active. For example, the Group is always interested in cooperating with stakeholders and with the community.

Cybercom's social accountability initiatives – and its view of humankind, working conditions, and the environment – are based on its values and the UN Global Compact. Global Compact is a programme for companies and organisations that want to contribute to the international work with 10 global principles on human rights, labour law, environmental prob- lems, and anticorruption. Cybercom has supported this work since 2004.

By becoming involved in these issues and supporting the UN's efforts, Cybercom has agreed to protect and support human rights, while work- ing against corruption, discrimination, and all forms of forced labour.

In 2004, Cybercom's board adopted the first edition of its Code of Conduct. This code applies to the entire Group. It is updated regu- larly and contains rules for Cybercom's business behaviour and for its responsibility in relation to colleagues, customers, vendors, sharehold- ers, regulatory authorities, and the world at large.

Cybercom's business concept is to strengthen its customers' operations via world-leading global delivery capacity, local presence, and close co operation with customers, using end-to-end solutions in which technol- ogy and reality meet.

At Cybercom, quality means that its services meet or exceed customer expectations, its production is carried out under acceptable conditions, and its customers are satisfied with Cybercom as a company. Accepting responsibility for the impact of the company's operations on people and the environment is also essential for Cybercom – to be able to grow with continued good profitability.

Environmental programme

Cybercom strives to minimise its impact on the environment. The single most significant environmental issue is carbon dioxide emissions from personal transportation. Cybercom tries to reduce the impact of such travel in various ways. Cybercom is also engaged in green IT to reduce its environmental impact by using smart IT.

Transportation is key

As a global supplier of IT services, personal transportation is the single most pressing environmental issue that also has the greatest impact on the climate. Providing consulting services involves a substantial amount of travel by car, air, rail, and public transportation. Cybercom tries in various ways to reduce the scope of such travel and to influence its employees' choice of transportation mode.

To reduce travel, the organisation is encouraged to hold telephone and video conferences whenever possible. Video conferences are possible in

vehicle. Most of Cybercom's offices are centrally located close to train and bus connections for convenient public transportation.

Energy consumption and environmental awareness

Besides reducing environmental impact of personal transportation, Cybercom is working on raising employee awareness of environmental issues, which are accounted for in all Cybercom operations.

Overall, Cybercom's operations have a rather low impact on the environ- ment, and other than carbon dioxide emissions from personal transporta- tion, its impact mainly involves consumption of office supplies and scrap- ping of computers. The company requires that (i) its suppliers of office materials and computers comply with TCO 95 and TCO 99, environmen- tal standards, and (ii) all material can be recycled. In addition, Cybercom implements/encourages:

Energy-saving efforts, such as timers to turn out lights after office

• hours.

Proper disposal of old IT equipment. Equipment is sold for reuse

whenever possible; otherwise equipment goes to partners for recycling.

Default double-sided printing is set on all printers; employees are

encouraged to avoid printouts as much as possible.

Sorting paper and other waste for recycling.

Purchase of products, consumables, and services that meet high

environmental standards whenever possible.

Green IT increasingly crucial for the environment

Because climate issues have grown increasingly urgent, the green IT concept has become commonly accepted. But more ecofriendly, power- saving computers are only a small part of green IT. Using IT to reduce environmental impact in totally different areas is much more important.

To some extent, green IT involves reducing the IT sector's own energy consumption, but the really significant environmental gains associated with IT involve how it can help reduce the burden on the environment elsewhere in society, for example, IT:

Provides new opportunities to direct, regulate, monitor, and optimise

various courses of events – from industrial processes and traffic flows to indoor climate and printer queues.

Can replace physical products and activities with electronic

information. We shop online instead of driving to the store, and increasingly we want goods in electronic format (e.g., downloaded music, movies, and software). Electronic documents are replacing paper, and video conferences replace travel. Teleworking a day or so a week cuts commuting.

Provides R&D with calculation capabilities that facilitate more

sophisticated data modelling of everything from energy-efficient vehicles to new energy sources.

Corporate responsibility and good citizenship

References

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