Interim report for the first quarter 1999

INTERIM REPORT ON PARENT COMPANY OPERATIONS FOR THE PERIOD JANUARY 1 - MARCH 31, 1999 Total return on Custos shares during the period was 9.6 percent for Series A shares and 10.0 percent for Series B shares, while the Findata Yield Index rose by 6.6 percent during the same period. Custos made new investments in the information technology company Acando and the auto distributor Bilia and increased its holding in Perstorp. The dividend for 1998 was fixed at SEK 11.50 per share. In late April it was announced that Custos has undertaken to sell all of its ASG shares to Danzas for SEK 265 per share plus dividend. Total return Total return on Custos shares @ taking into account share price appreciation, dividend paid and redemption of shares @ was 9.6 percent for Series A shares and 10.0 percent for Series B shares. Return on shares was thus about 8.0 percent above the cost of shareholders' equity, which was 1.7 percent during the period. The return was also higher than the Findata Yield Index, which rose by 6.6 percent. Total return on Custos shares up to April 28, 1999 was 30.2 percent for Series A shares and 29.9 percent for Series B shares compared to 13.0 percent for the Findata Yield Index. Return, January 1 - March 31, 1999 Custos Custos Series A Series B Total return 9.6% 10.0% Consists of the following components: Change in net asset 4.7% 4.7% value Change in discount to -4.8% -4.5% net asset value Redemption (reinvested) 9.9% 10.0% Cost of shareholders' 1.7% 1 equity Findata Yield Index 6.6% 1 Measured as the average 12-month Swedish treasury bill rate plus a risk premium of 4 percent during the three-month period. The total return for some of Custos' shareholdings is shown below. Return, January 1, 1999 - March 31, 1999 Portfolio % holding Svedala 26.4 Aspo 23.6 ASG 17.3 1 Bilia 15.5 Perstorp 9.4 SCA 3.8 1 Beginning on the acquisition date in early March. After the report period ended on March 31, 1999, Danzas, the international transport and logistics Group made a public offer for ASG. The return on Custos´ holding in ASG for the period January 1-April 28, 1999 amounted to 75.9 percent. Net asset value Total net asset value on March 31, 1999 was MSEK 6,399 (Dec. 31, 1998: 7,617), or SEK 201 (Dec. 31, 1998: 192) per share. In calculating net asset value on March 31, 1999, the 7.8 million Custos shares on which shareholders have applied for redemption have been taken into account (see "Decisions by the Annual General Meeting" below). Net asset value on April 28, 1999 was SEK 223 per share or a total of MSEK 7,115. In calculating net asset value, the same principles have been used as reported in the 1998 Annual Report. On March 31, 1999, Custos' discount to net asset value was 21 percent for Series A shares and 20 percent for Series B shares, which was higher than at year-end 1998 (17 percent for both Series A and Series B shares). Change in net asset value, MSEK Jan. 1, 1999- Mar. 31, 1999 Net asset value, January 1 7,617 Dividends received 132 Administrative expenses -10 Items affecting comparability -3 Financial income and expenses 13 132 Changes in value of securities portfolio 153 Svedala ASG 122 74 Perstorp 18 Aspo 12 Bilia 0 SCA Other listed holdings -3 Other holdings 13 389 Change in net asset value before 521 dividend, redemption etc. Payment for share redemption, current -1,731 1 value Other -8 Change in net asset value -1,218 Net asset value at end of period 6,399 Net asset value, March 31, 1999, MSEK Shareholders' equity Reported shareholders' equity, 5,588 Parent Company Payment for share redemption, -1,731 3,857 current value 2 Surplus value in securities portfolio Market value of listed portfolio 5,949 Market value of other securities 220 6,169 Book value -3,619 2,550 6,407 Other -8 Net asset value 6,399 1 Current value is calculated on total redemption amount plus dividend for redemption shares. 2 Excluding treasury bills. Net asset value on March 31, 1999, allocated between assets and liabilities Shares Number Market SEK per Listed companies value Custos 1 MSEK share SCA 15,203,5 2,706 85 91 ASG 4,601,02 828 26 1 Perstorp 11,581,0 945 30 37 Svedala 5,967,70 856 27 0 Others 614 19 Total portfolio of listed 5,949 187 companies Options issued -9 0 5,940 187 Other assets and 459 14 2 liabilities, net Net asset value 6,399 201 1 Taking into account Custos' ongoing redemption procedure, the number of shares has been reduced by 7,843,479 till 31,845,613. 2 Including payment for the share redemption, current value. Portfolio of listed shares On March 31, 1999, the market value of the portfolio of listed shares was MSEK 5,949 (Dec. 31, 1998: 5,029). Adjusted for net changes, the portfolio of listed shares rose by MSEK 376, or 7.5 percent. During the period, Custos made net purchases of shares totalling MSEK 544 (purchases MSEK 684, sales MSEK 140). Among other things Custos implemented the following changes in the portfolio: As a result of net purchases, the portfolio increased by: Bilia, Series A2,752,850 Perstorp, Series B2,100,000 On March 31, 1999, Custos owned 8.7 percent of the share capital and voting power in Bilia and 9.8 percent of the votes and 16.2 percent of the capital in Perstorp. Unlisted companies On March 31, 1999, the market value of Custos' holdings in unlisted companies amounted to MSEK 220 (Dec. 31, 1998: 216). During the period January - March 1999, Custos invested a total of MSEK 21 in shares of unlisted companies, mainly in the form of shareholder contributions to the information technology (IT) company Acando. In addition, Custos received a supplementary payment of MSEK 11 for the shares in Sandblom & Stohne Intressenter that it divested late in 1998. Taken together, Group companies yielded positive earnings during the first quarter of 1999. Shares in unlisted Number Market SEK per companies value Custos 1 MSEK share Shares in unlisted Group 219 companies Anticipated dividend -20 199 6 Shares in unlisted associated companies: Acando 169,663 17 1 Others 4 0 Total unlisted companies 220 7 1 Taking into account Custos' ongoing redemption procedure, the number of shares has been reduced by 7,843,479 till 31,845,613. In early 1999, Custos and three investment partners @ Industriförvaltnings AB Kinnevik, KF Invest AB and Norway's Orkla ASA @ founded the information technology (IT) company Acando AB. Acando's concept is based on recruiting the best management and IT consultants and on assuming overall responsibility for helping client companies achieve extensive streamlining of processes, including a heavy element of information technology. During the first three months of 1999, Acando recruited about 100 of Sweden's foremost management and IT consultants. The objective is to achieve a stock market listing for the company within a three-year period. So far, Custos has invested MSEK 17 in Acando. Custos estimates that its investment will total MSEK 80. Custos has also issued stock options to senior managers. Securities portfolio, earnings and financial position The market value of the Parent Company's total securities portfolio on March 31, 1999, excluding treasury bills and liquid funds, amounted to MSEK 6,169 (Dec. 31, 1998: 5,241). The book value of the portfolio on the balance sheet date was MSEK 3,619 (Dec. 31, 1998: 3,086). The difference between its market value and book value, the so-called surplus value, thus amounted to MSEK 2,550 (Dec. 31, 1998: 2,155). In all, Custos invested MSEK 709 in shares. It sold MSEK 151 worth of shares. Altogether this represented a net investment of MSEK 558. The Parent Company's income before taxes for the period January 1 - March 31, 1999 amounted to MSEK 106 (year-earlier period: 217). Dividends received totaled MSEK 132 (57). Income during the period was adversely affected by capital losses of MSEK 26 (capital gains of 176). No tax burden is foreseen for 1999. The adjusted equity/assets ratio on March 31, 1999 was 95 percent (Dec. 31, 1998: 96). Adjusted for the redemption the adjusted equity/assets ratio was 94 percent. Net interest-bearing assets (interest-bearing assets minus interest- bearing liabilities) declined, mainly due to purchases of shares, and totaled MSEK 1,984 (Dec. 31, 1998: 2,414), adjusted for the redemption MSEK 253. The Group Custos is a non-diversified investment company, best analyzed on the basis of the Parent Company's accounts, in which the investment portfolio is valued at market value. Because the consolidated accounts for this type of investment company only serve as a complement to the Parent Company accounts, consolidated balance sheets and income statements are only drawn up for the full-year and six-month accounts. Decisions by the Annual General Meeting The Annual General Meeting on April 14, 1999 re-elected Per-Olof Eriksson, Christer Gardell, Leif Gustafsson, Sven Hagströmer, Sten K Johnson and Mats Qviberg to the Board of Directors and elected Magnus Henrekson as a new member of the Board. Mats Lederhausen and Björn Savén had declined re-election. At its subsequent statutory meeting, the Board re-elected Sven Hagströmer as its Chairman. The Annual General Meeting fixed the dividend for the 1998 financial year at SEK 11.50 (for 1997: 7.25) per share. The Annual General Meeting also approved in accordance with the decision in principle of the Extraordinary General Meeting of January 26, 1999 a reduction of Custos' share capital by MSEK 196.1 to MSEK 796.1 by redeeming 7,843,479 shares: 5,877,781 Series A shares and 1,965,698 Series B shares. The Annual General Meeting approved a redemption payment of SEK 210 per share, or a total of MSEK 1,647.1. Payment of the redemption amount is expected to occur about May 4, 1999 The Annual General Meeting also approved a proposal to authorize the Board of Directors to implement synthetic buy-backs of a maximum of 5,000,000 of Custos' own shares by the date of the next Annual General Meeting. Offer for ASG - event after March 31, 1999 On April 26, 1999 in conjunction with a public offer by Danzas for Sweden´s ASG AB it was announced that Custos has signed an agreement with Danzas to sell all of Custos´ 3.9 million ASG Series B shares conditional upon the approval of the European Commission´s Directorate for Competition. Danzas has also received an option to purchase all 0.7 million of Custos´ Series A shares. The main points of the transaction are: ASG will become part of Danzas and thus part of the Deutsche Post Group, Europe's leading logistics and transport company This is an attractive proposition for ASG's shareholders, customers, suppliers and employees The purchase price is SEK 265 per Series A and Series B share. In addition, 1 these shares will entitle their existing holders to the dividend for 1998 The transaction will increase Custos' net asset value by approximately SEK 8 2 per Custos share The transaction will add a total of SEK 1.2 billion to Custos' liquidity, including the dividend The total return to Custos since its first investment in ASG in 1997 will be 123 percent, 107 percentage points higher than the Findata Yield Index during the same period 1 The proposed dividend is SEK 5 per share 2 Based on a value of SEK 265 + 5 per share, compared to the SEK 214 closing price paid per ASG share on April 22, 1999 Information schedule Interim Report, January 1 - June 30July 30, 1999 Interim Report, January 1 - September 30October 29, 1999 Preliminary Report on Custos´ 1999 operationsJanuary 25, 2000 Stockholm, April 29, 1999 AKTIEBOLAGET CUSTOS (publ) Christer Gardell Chief Executive Officer This Interim Report has not been subject to special examination by Company's auditors. This Interim Report is published in Swedish and English. In the event of any difference between the English version and the Swedish original, the Swedish version shall govern. AB Custos, P.O. Box 1738, SE-111 87 Stockholm. Phone +46 8 440 57 70, fax +46 8 440 57 80, Web site: www.custos.se Jan - Jan - Jan - Parent Company Income Statement Mar Mar Dec (Amounts in MSEK) 1999 1998 1998 Income from securities management 1,2 Dividends 132 57 296 Other income from holdings in listed - 63 152 3 Group companies associated 10 - 1,308 companies other listed -36 113 184 securities 4 Items affecting comparability - - -15 Total income from securities management 106 233 1,925 Administrative expenses -10 -8 -38 5 Items affecting comparablility -3 -2 -8 Operating income 93 223 1,879 Financial income and expenses Other interest income and similar 21 1 33 income items Interest expenses and similar expense -8 -7 -16 items Income before taxes 106 217 1,896 Taxes - - - Net income for the period 106 217 1,896 1Of which, dividends from Group - - 51 companies. 2Of which, dividends from associated 99 - 185 companies. 3Hufvudstaden. 4Merger loss, Transportförvaltning. 5Primarily Custos´ redemption expenses. Parent Company Condensed Balance Mar. Mar. Dec. Sheet 31, 31, 31, (Amounts in MSEK) 1999 1998 1998 Fixed assets Tangible fixed assets 1 1 1 Financial fixed assets Holdings in unlisted 87 411 87 Group companies Holdings in listed - 621 - Group companies 1 2 3 Holdings in associated 1,371 2,615 1,363 companies Other long-term holdings of 2,161 1,556 1,636 securities Current assets (of which, 2,349(2,3 62 (59) 2,743(2,7 interest-bearing) 17) 11) Total assets 5,969 5,266 5,830 Shareholders' equity 5,588 4,608 5,482 Provisions 31 30 32 Current liabilities (of which, 350(333 628 (607 316(297 interest-bearing) ) ) ) Total shareholders' equity and 5,969 5,266 5,830 liabilities 1Acando, ASG, Firefly, SCA etc. 2ASG, Firefly, Sandblom & Stohne Intressenter, SCA, Skanska. 3ASG, Firefly, SCA, etc. Mar. Mar. Dec. 31, 31, 31, 1 Parent Company Condensed Cash Flow 1999 1998 1998 Analysis (Amounts in MSEK) Current operations Dividends received 132 57 296 Other operating income -39 166 1,583 Operating income 93 223 1,879 Adjustments for items not included in -107 -205 -1,649 cash flow -14 18 230 Net interest received/paid 16 -7 8 Income tax paid - - - Cash flow from current operations 2 11 238 before changes in working capital Changes in working capital Increase (-)/decrease (+) in current 34 66 62 receivables Increase (+)/decrease (-) in current 24 -142 -448 liabilities Increase (+)/decrease (-) in 0 0 2 provisions Cash flow from current operations 60 -65 -146 Investment operations Note 1 Acquisitions of holdings in companies -685 -488 -748 Divestments of holdings in companies 151 503 3,892 Merger - - -72 Other investment operations -21 5 23 Cash flow from investment operations -555 20 3,095 Financing operations Dividend paid - - -313 Cash flow from financing operations - - -313 Increase (+)/decrease (-) in liquid -495 -45 2,636 funds Liquid funds, beginning of period 2,681 45 45 Liquid funds, end of period 2,186 0 2,681 Note 1 Net investment in securities -558 -49 3,034 Increase (-)/decrease (+) in - 67 67 receivables related to divestments Increase (+)/decrease (-) in 3 2 -6 liabilities related to acquisitions Payments disbursed -555 20 3,095 1 To achieve comparability the December 31, 1998 figures have been revised ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/04/29/19990429BIT00170/bit0001.doc http://www.bit.se/bitonline/1999/04/29/19990429BIT00170/bit0002.pdf