Interim Report January 1 – September 30, 2008

Value development

* Net asset value on October 30, 2008, was SEK 64 per share, a decrease of 53% since the start of the year including reinvestment of the dividend. On September 30, 2008, net asset value was SEK 87 per share.
* The total return for the Class A shares was -47% for the first ten months of the year.
* Consolidated earnings per share for the first nine months of the year were SEK -48.81 per share (26.14).

Long-term return

* During the last ten-year period, the average annual return for Industrivärden’s Class A shares has exceeded the return index by one percentage point.

CEO’s Message

The crisis in the world’s credit markets that has been unfolding for more than a year intensified further during the third quarter. After the U.S. investment bank Lehman Brothers went bankrupt on September 15, the storm gained more momentum. During the final weeks of September and in early October, the global credit markets came to a virtual standstill, with clear effects for the investment plans of companies and households as well as for consumption. There is an understanding that several structural problems must be solved, and I welcome the vigorous initiatives that have been taken by central banks and governments around the world to jumpstart the interbank market, which makes up the actual hub of the credit system. Spreads on borrowing are on their way down, and today there are signs that the markets are beginning to function again, but they are still far from functioning normally. Concerns about repercussions of the financial crisis on the real economy are now a reality with tangible effects. The question is how deep and lasting the economic downturn will be. However, during periods of great uncertainty, it is important to maintain perspective. The world has experienced several difficult crises in the past, and given time, the world economy – and thus also the stock markets – will reverse their negative trend.

All of the world’s stock markets have reacted negatively to the major, prevailing uncertainty. The Swedish stock market has been one of the hardest hit. Industrivärden’s business concept is to be a long-term active owner in listed companies. That is why the current turmoil has affected the development of our net asset value. During the first ten months of the year, our net asset value decreased by SEK 30 billion to SEK 25 billion – a drop of 55% since the start of the year. During the first ten months the total return for Industrivärden’s Class A and Class C shares was -47% and -48%, respectively, compared with -39% for the total return index. Shares in our major portfolio companies have fallen sharply during the last twelve-month period. Earnings are generally still good, albeit softening.

Industrivärden’s debt-equity ratio was 30.0% on October 30. Our debt has decreased during the year, but it is the denominator – the value of our shareholdings – that has decreased by SEK 30 billion to 35 SEK billion. We have locked in our interest rates at an average rate of 4.7%, a level that is widely below the dividend yield of approximately 10% received at unchanged dividends. In 2008 we have a positive cash flow, before net stock purchases, of SEK 0.5 billion after we have paid the dividend, all interest and overheads. Our loans have average terms of 5 years. On the whole, we thus have good control over our financial situation even going forward.

During the last ten-month period we have been restrictive regarding changes in the equities portfolio. However, we have increased our holding in Volvo and now own 7.5% of the votes and 3.0% of the capital. The upweighting in Volvo has been financed through changes in the portfolio.

Our focus is now on ensuring that the companies that we are involved in as active owners are able to handle the economic downturn and the difficult situation on the credit markets. What really makes an impact over time are well-defined and implemented strategies, good market positions and adept management. In these respects I feel confident about the quality of our portfolio companies.

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