Interim report on the operations of AB Custos for the period January 1 - September 30, 1999

INTERIM REPORT ON THE OPERATIONS OF AB CUSTOS FOR THE PERIOD JANUARY 1 - SEPTEMBER 30, 1999 · Total return on Custos shares during the period was 34.1 percent for Series A shares and 33.1 percent for Series B shares. The Findata Yield Index rose by 20.9 percent during the same period. · Custos' investments during the period amounted to SEK 2.2 billion, equivalent to 43 percent of the market value of its securities portfolio at the beginning of the year. This has included investments in the information technology company Acando, the auto distributor Bilia, the British third-party logistics company Christian Salvesen Plc, the Norwegian office materials company C. Tybring-Gjedde ASA, Custos (synthetic buy-backs), the investment company Industrivärden and the chemicals group Perstorp. · Custos carried out divestments totaling SEK 1.6 billion, including the sale of its entire holding in the transport and logistics company ASG. · As of October 28, 1999, Custos had carried out synthetic buy- backs of its own shares equivalent to 6.6 percent of share capital and 5.8 percent of voting rights. · After the close of the report period, Custos divested its entire holding in the Finnish electronics company Aspocomp Group. Total return Total return on Custos shares - taking into account share price appreciation, dividend paid and redemption of shares - was 34.1 percent for Series A shares and 33.1 percent for Series B shares. The return was thus higher than the gain in the Findata Yield Index, which was 20.9 percent. Return was also higher than the cost of shareholders' equity, which amounted to 5.5 percent during the period. Total return on Custos shares up to October 28, 1999 was 34.8 percent for Series A shares and 32.7 percent for Series B shares, compared to 28.7 percent for the Findata Yield Index. Return, January 1 - September 30, 1999, % Custos Series A Custos Series B Total return 34.1 33.1 Consists of the following components: Change in net asset value 25.0 25.0 Change in discount to net asset value -9.5 -10.2 Redemption (reinvested) 10.7 10.8 Dividend (reinvested) 7.1 7.1 Cost of shareholders' equity1) 5.5 Findata Yield Index 20.9 1) Measured as the average 12-month Swedish treasury bill rate plus a risk premium of 4 percent during the nine-month period. Most portfolio companies performed better than the Findata Yield Index during the report period. The total return for some of Custos' holdings is shown below. Return, January 1, 1999 - September 30, 1999 Portfolio holding % Salvesen 1) 68.2 Tybring-Gjedde 2) 45.6 Svedala 41.8 SCA 36.3 Aspo 33.6 Bilia 3) 27.9 Perstorp 24.2 Industrivärden 4) 16.2 1) Beginning on the initial acquisition date in early March. 2) Beginning on the initial acquisition date in mid-July. 3) Beginning on the initial acquisition date in early March. 4) Beginning on the initial acquisition date in late February. Net asset value Total net asset value on September 30, 1999 was MSEK 7,638 (Dec. 31, 1998: 7,617), which is equivalent to SEK 240 (Dec. 31, 1998: 192) per share. Comparisons with total net asset value for the preceding year must take into account that during the period January-September, the sum of MSEK 2,106 was disbursed to Custos' shareholders in the form of dividends and redemption proceeds. Net asset value on October 28, 1999 was estimated at a total of MSEK 7,474 or SEK 235 per share. Net asset value is calculated on the basis of Custos' current 31,845,613 shares outstanding, with the Custos shares included in the synthetic buy-backs valued at market value. Otherwise, in calculating net asset value, the same principles have been used as were presented in the 1998 Annual Report. On September 30, 1999, Custos' discount to net asset value was 25 percent for Series A shares and Series B shares, which was higher than at year-end 1998, when the discount was 17 percent for both types of shares. During the January-September 1999 report period, Custos entered into swap agreements (related to synthetic buy-backs of its own shares) equivalent to 1.8 million shares. If these shares were to be regarded as redeemed on September 30, 1999, total net asset value would amount to MSEK 7,318, which is equivalent to SEK 243 per share. The equivalent net asset value on October 28, 1999 was estimated at a total of MSEK 7,094 or SEK 238 per share (see "Synthetic buy-backs of Custos' own shares" below). Change in net asset value, MSEK Jan 1, 1999 - Sep 30, 1999 Net asset value, January 1 7,617 Dividends received 232 Administrative expenses -29 Items affecting comparability -3 Financial income and expenses 28 Taxes -1 227 Changes in value of securities portfolio SCA 828 ASG 512 Svedala 258 Perstorp 161 C. Tybring-Gjedde 77 Salvesen 42 Industrivärden 36 Bilia 23 Aspo 20 Other listed holdings (including securities -49 loans) Other holdings 21 1,929 Change in net asset value before dividend, 2,156 redemption etc. Dividend to shareholders -456 Amount redeemable paid to shareholders etc. -1,650 Other -29 Net asset value at end of period 7,638 Net asset value on September 30, 1999, allocated between assets and liabilities Number Market SEK per Listed companies of shares value Custos MSEK share SCA 15,228,991 3,539 1 111 ) Perstorp 11,851,237 1,056 33 Svedala 5,892,700 949 30 Industrivärden 4,728,700 636 20 Salvesen 27,090,000 479 15 C. Tybring-Gjedde 14,200,000 236 2 7 ) Bilia 2,959,050 203 6 Aspo 226,950 95 3 Others (including securities -156 -4 loans) Total portfolio of listed 7,037 221 companies Options issued -20 -1 7,017 220 Other assets and liabilities, 621 20 net Net asset value 7,638 240 1) Including subscription rights valued at a theoretical price of SEK 12.65 per subscription right. 2) Including convertible debenture loan equivalent to 4.900.000 shares. Portfolio of listed shares On September 30, 1999, the market value of the portfolio of listed shares - including securities loans and a convertible debenture loan - was MSEK 7,037 (Dec. 31, 1998: 4,870). Adjusted for net changes, the portfolio of listed shares rose by 39 percent. During the same period, the Affärsvärlden General Index of the Stockholm Stock Exchange rose by 18 percent. During the report period, Custos made net purchases of shares and a convertible debenture loan totaling MSEK 254 (purchases 1,801, sales 1,547). Other investments amounted to MSEK 6. Among other things, Custos implemented the following changes in the portfolio: As a result of net purchases, the portfolio increased by: Bilia 2,959,050 Christian Salvesen 27,090,000 C. Tybring-Gjedde 9,300,000 Industrivärden, Series A 4,728,700 Perstorp, Series B 2,305,600 Christian Salvesen is listed on the London Stock Exchange. The company is one of the leading third-party logistics providers in Europe. The exchange rate risk has been eliminated by entering into forward contracts. Custos' stake in the company amounts to 10.2 percent of share capital and voting power. C. Tybring-Gjedde is listed on the Norwegian stock exchange and is a wholesaling and retailing company engaged in sales of office materials and supplies. Custos' stake in the company totals 37.5 percent of share capital and voting power. In addition to shares, Custos acquired a convertible debenture loan equivalent to 4,900,000 shares in the company. Upon full conversion of the convertible debenture loan, Custos' stake would be 47.8 percent of capital and votes. On September 30, 1999, Custos owned 9.3 percent of the share capital and voting power in Bilia, 2.8 percent of the capital and 3.6 percent of the votes in Industrivärden and 16.6 percent of the capital and 10.3 percent of the votes in Perstorp. As a result of a conversion, the portfolio gained the following: ASG, Series B (converted from Series A) 726,749 As a result of divestments, the portfolio decreased by: ASG, Series B 4,686,020 Custos received a total of SEK 1.2 billion for its shares in ASG, equivalent to SEK 265 per share. Custos thereby divested its entire shareholding in ASG, except for one Series A share. The return on Custos' holding in ASG amounted to 123 percent, calculated from Custos' initial investment in ASG in 1997 until late April 1999. At that time, it was announced that in conjunction with a public offer that Deutsche Post/Danzas was presenting for ASG AB, Custos had signed an agreement with Danzas concerning all of Custos' shares in ASG. The transaction was conditional upon the approval of the European Commission's Directorate General for Competition, which was received in July 1999. Custos' return during the period of its holding in ASG was 107 percentage points higher than the Findata Yield Index during the same period. Late in June, Custos issued 754,000 call options to senior executives of SCA. Custos received an options premium of MSEK 15 for this. Unlisted companies On September 30, 1999, the market value of Custos' holdings in unlisted companies amounted to MSEK 251 (Dec. 31, 1998: 216). Taken together, Custos Group companies yielded positive earnings during the report period. During the period January - September 1999, Custos invested a total of MSEK 37 in unlisted associated companies, mainly in the form of shareholder contributions to the information technology (IT) company Acando. Custos carried out divestments totaling MSEK 19. In early 1999, Custos and three investment partners - Industriförvaltnings AB Kinnevik, KF Invest AB and Norway's Orkla ASA - founded the IT company Acando AB. Acando's concept is based on recruiting the best management and IT consultants in the market and on assuming overall responsibility for helping client companies achieve extensive streamlining of processes, including a heavy element of information technology. During the report period, Acando recruited about 200 persons. Its pace of recruitment remains high. So far, it has established offices in Stockholm, Gothenburg, Malmö and Sundsvall. The President of Acando is Sven Kallstenius, who comes from WM-data. The Chairman is Custos' CEO, Christer Gardell. So far, Custos has invested MSEK 33 in Acando, which is also the value at which the company is reported in Custos' net asset value. Custos estimates that its investment will total MSEK 80. Custos has also issued options to the employees of the company. On September 30, 1999, Custos' stake in Acando amounted to 49.6 percent of share capital and voting power without taking into account options issued. Securities portfolio, earnings and financial position The market value of the Parent Company's total securities portfolio on September 30, 1999, including securities loans and a convertible debenture loan, amounted to MSEK 7,288 (Dec. 31, 1998: 5,082, excluding treasury bills and liquid funds). The book value of the portfolio on the balance sheet date was MSEK 3,681 (Dec. 31, 1998: 2,927). The difference between its market value and book value, the so-called surplus value, thus amounted to MSEK 3,607 (Dec. 31, 1998: 2,155). Total investments during the period amounted to SEK 2.2 billion. Exclusive of synthetic buy-backs of Custos shares, MSEK 1,790 has been invested. Custos carried out divestments totaling MSEK 1,566. In addition, it invested MSEK 52 in a convertible debenture loan and made net payments of MSEK 9 for other investments. Altogether this represented a net investment of MSEK 285 during the report period. The Parent Company's income before taxes for the period January 1 - September 30, 1999 amounted to MSEK 686 (year-earlier period: 1.851). Dividends received totaled MSEK 232 (276) and capital gains etc. totaled MSEK 458 (1,632). Taxes on dividends from shareholdings outside Sweden totaling MSEK 1 (0) were charged to income. No further tax burden is foreseen for 1999. The adjusted equity/assets ratio on September 30, 1999 was 93 percent (Dec. 31, 1998: 96). Net interest-bearing assets (interest-bearing assets minus interest-bearing liabilities) amounted to MSEK 106 (Dec. 31, 1998: 2,414). The decrease in interest-bearing assets was mainly due to the disbursement of MSEK 2,106 to Custos' shareholders in the form of dividends and redemption proceeds as well as net investments in securities. Net asset value, September 30, 1999, MSEK Shareholders' equity 4,060 Surplus value in securities portfolio Market value of listed portfolio 1) 7,037 Market value of other securities 251 7,288 Book value -3,681 3,607 Options issued Market value of options -20 Book value 20 - 7,667 Other -29 Net asset value 7,638 1) Including convertible debenture loan. Custos shares Redemption The decision of the city court to approve the reduction in Custos' share capital gained legal force on August 17, 1999. As a result, the company's share capital amounts to MSEK 796, divided into 23,855,112 Series A shares and 7,990,501 Series B shares, for a total of 31,845,613 shares. Changes in share capital, 1997 to September 30, 1999 Year Series A shares Series B shares Share capital (1 vote each) (1/10 vote each) MSEK December 31, 1996 35,593,931 11,820,690 1,185 1997 redemption -3,212,219 -1,002,378 -105 1998 redemption -2,648,819 - 862,113 -88 1999 redemption -5,877,781 -1,965,698 -196 September 30, 1999 23,855,112 7,990,501 796 Synthetic buy-backs of Custos' own shares As provided by a mandate from the Annual General Meeting on April 14, 1999, as of October 28, 1999, Custos has entered into swap agreements equivalent to 1,368,396 Series A shares and 720,320 Series B shares, totaling 2,088,716 shares in Custos. This is equivalent to 6.6 percent of the share capital and 5.8 percent of the voting power in Custos. Events after the close of the report period On October 14, 1999, Custos sold its entire stake , equivalent to 5.2 percent of votes and capital, in the Finnish listed company Aspocomp Group Plc. The total return on Custos' investment amounted to 32 percent. The return on the Findata Yield Index during the same period was 13 percent. Custos' proceeds from the sale amounted to MSEK 89. Custos acquired 5.2 percent of Aspo Plc in June 1998. As an owner, Custos focused on achieving a streamlining of the operations. Early in 1999, Aspo decided to split the company into an electronics unit called Aspocomp Group Plc and a transport/distribution unit called Aspo Plc. The split, which was completed on October 1, 1999, was the first of its kind in Finland. After the close of the report period, Custos obtained 5,925,618 shares in Perbio Science AB through a dividend from Perstorp AB. It later purchased an additional 2,121,600 shares in accordance with disclosure of substantial acquisitions of shares. Custos' stake in Perbio Science AB thus amounts to 22.5 percent of capital and voting power. Perbio Science AB supplies bioreagents, systems and tools to players in the biotechnology industry. The company also supplies medical technology products to the health care sector. Furthermore Custos acquired additional shares in Perstorp AB and issued 640,000 options to senior executives of the company. As of October 27,1999, Custos owns 390,200 Series A shares and 11,923,339 Series B shares in Perstorp AB. If all options are exercised, this is equivalent to 10.1 percent of votes and 15.9 of capital after full conversion. Custos also subscribed for MSEK 320 worth of SCA's Series B shares, as part of the forest product company's new share issue. 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, the consolidated balance sheets and income statements of the Custos Group are only presented in the six-month and full-year accounts. Information schedule · Preliminary Report on Custos' 1999 operationsJanuary 25, 2000 · Annual General Meeting..........................................April 5, 2000 · Interim Report, January 1 - March 31, 2000 April 19, 2000 Stockholm, October 29, 1999 AKTIEBOLAGET CUSTOS (publ) Christer Gardell Chief Executive Officer 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 Parent Company Income Statement Jan - Jan - Jan - (Amounts in MSEK) Sep Sep Dec 1999 1998 1998 Income from securities management Dividends 1,2) 232 276 296 Other income from holdings in listed - 152 152 Group companies 3) associated 525 1,302 1,308 companies other listed -67 178 184 securities Items affecting comparability 4) - -15 -15 Total income from securities management 690 1,893 1,925 Administrative expenses -29 -28 -38 Items affecting comparablility 5) -3 -6 -8 Operating income 658 1,859 1,879 Financial income and expenses Other interest income and similar 34 6 33 income items Interest expenses and similar expense -6 -14 -16 items Income before taxes 686 1,851 1,896 Taxes 6) -1 - - Net income for the period 685 1,851 1,896 1) Of which, dividends from Group companies - 31 51 2) Of which, dividends from associated companies 122 185 185 3) Hufvudstaden. 4) Merger loss, Transportförvaltning. 5) Primarily Custos' redemption expenses. 6) Refers to coupon taxes on dividends. Parent Company Condensed Sep Sep Dec Balance Sheet 30, 30, 31, (Amounts in MSEK) 1999 1998 1998 Fixed assets Tangible fixed assets 2 1 1 Financial fixed assets Holdings in 87 80 87 unlisted Group companies Holdings in listed - 7 - Group companies Holdings in 806 1) 1,352 2) 1,363 3) associated companies Receivables from 52 30 (30) - associated companies (of which interest-bearing) Other long-term 3,063 1,645 1,636 holdings of securities Current assets (of which, 573 (570) 2,604 (2,601) 2,743 (2,711) interest-bearing) Total assets 4,583 5,719 5,830 Shareholders' equity 4,060 5,437 5,482 Provisions 31 31 32 Current liabilities (of 492 (464) 251 (224) 316 (297) which, interest-bearing) Total shareholders' equity 4,583 5,719 5,830 and liabilities 1) Acando, Firefly, SCA, Tybring-Gjedde etc. 2) ASG, Firefly, Sandblom & Stohne Intressenter, SCA. 3) ASG, Firefly, SCA, etc. Parent Company Condensed Cash Flow Sep 30, Sep 30, Dec 31, Analysis 1999 1998 19981) (Amounts in MSEK) Current operations Dividends 232 276 296 Other operating income 426 1,583 1,583 Operating income 658 1,859 1,879 Adjustments for items not included in -458 -1,618 -1,649 cash flow 200 241 230 Net interest received/paid 35 -10 8 Income tax paid -1 0 0 Cash flow from current operations before 234 231 238 changes in working capital Changes in working capital Increase (-)/decrease (+) in current 51 66 62 receivables Increase (+)/decrease (-) in current -4 -584 -603 liabilities Increase (+)/decrease (-) in provisions -1 -1 2 Cash flow from current operations 280 -288 -301 Investment operations Note 1 Acquisitions of holdings in companies -1,755 -685 -748 Divestments of holdings in companies 1,566 1,907 4,047 Acquisition of convertible debenture loan -52 - - Merger - -72 -72 Other investment operations -44 21 23 Cash flow from investment operations -285 1,171 3,250 Financing operations Amount redeemable paid to shareholders -1,650 - - Dividend paid -456 -313 -313 Cash flow from financing operations -2,106 -313 -313 Increase(+)/decrease(-) in liquid funds -2,111 570 2,636 Liquid funds, beginning of period 2,681 45 45 Liquid funds, end of period 570 615 2,681 Note 1 Net investment in securities -285 3,085 3,189 Increase (-)/decrease (+) in receivables - -1,913 67 related to divestments Increase (+)/decrease (-) in liabilities - -1 -6 related to acquisitions Payments disbursed -285 1,171 3,250 1) To achieve comparability, the December 31, 1998 figures have been revised. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/1999/10/29/20010412BIT00190/bit0001.doc http://www.bit.se/bitonline/1999/10/29/20010412BIT00190/bit0001.pdf