Interim Report on the operations of AB Custos for the period January 1 - March 31, 2000

INTERIM REPORT ON THE OPERATIONS OF AB CUSTOS FOR THE PERIOD JANUARY 1 - MARCH 31, 2000 · Total return on Custos shares for the period was 11.4 percent for Series A shares and 9.8 percent for Series B shares. · Bid for Perstorp from Industri Kapital. · The Board of Directors is proposing a single series of Custos shares. · Total return Total return on Custos shares for the period - taking into account share price appreciation, dividend paid and redemption of shares - was 11.4 percent for Series A shares and 9.8 percent for Series B shares. Total return on Custos shares up to April 13, 2000 was 13.8 percent for Series A shares and 13.3 percent for Series B shares. Return, January 1 - March 31, 2000, percent Custos Series A Custos Series B Total return 11.4 9.8 Consists of the following components: Change in net asset value 2.0 2.0 Change in discount to net asset value 9.2 7.6 Cost of shareholders' equity1 2.1 Findata Yield Index 13.9 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, 2000 - March 31, 2000 Portfolio holding % Perbio Science 73.8 Perstorp 27.8 C. Tybring-Gjedde 24.2 Christian Salvesen 12.2 Bilia 11.4 Svedala -18.3 SCA -19.0 Net asset value Total net asset value on March 31, 2000 was MSEK 8,741 (Dec. 31, 1999: 8,568), or SEK 274 (Dec. 31, 1999: 269) per share. Net asset value per share was calculated on the basis of 31,845,613 shares, with the Custos shares included in the synthetic buy-backs being valued at market value. On March 31, 2000, Custos' discount to net asset value was 16 percent for Series A shares and 18 percent for Series B shares. This was lower than at year-end 1999, when the discount amounted to 23 percent for Series A shares and 24 percent for Series B shares. During 1999 and the first quarter of 2000, Custos entered into swap agreements, related to synthetic buy-backs of its own shares, equivalent to 4,086,810 shares. If these shares were to be regarded as redeemed on March 31, 2000, total net asset value would amount to MSEK 7,811, which is equivalent to SEK 281 per share. The discount to net asset value would amount to 18 percent for Series A shares and 20 percent for Series B shares. Net asset value on April 13, 2000 was estimated at a total of MSEK 7,535, or SEK 271 per share. In this case, net asset value per share was calculated on the basis of 27,758,803 Custos shares (see "Synthetic buy- backs of Custos' own shares"). Change in net asset value, MSEK Jan. 1, 2000- Mar. 31, 2000 Net asset value, January 1 8,568 Dividends 22 Administrative expenses -9 Other income 2 Financial income and expenses 10 Taxes -1 24 Changes in value of securities portfolio Perbio Science 364 Perstorp 338 C. Tybring-Gjedde 65 Industrivärden 63 Christian Salvesen 44 Bilia 15 Svedala -165 SCA (including securities loans) -662 Other listed holdings 17 Other holdings -4 75 Change in net asset value before dividend, 99 redemption etc. Change in value from synthetic buy-backs of 76 Custos' own shares (swap agreements)1 Other items -2 Change in net asset value 173 Net asset value at end of period 8,741 1 Surplus value (based on market value) of synthetic share buy- backs taking into account broker commissions and accrued interest. Net asset value on March 31, 2000, allocated by assets and liabilities Listed companies Number Price Market SEK per per value Custos 5 share, MSEK share SEK SCA Series A 15,844,691 204.00 3,232 1 101 SCA Series B -2,261,102 204.00 -461 2 -14 Perstorp Series A 390,200 100.00 39 1 Perstorp Series B 14,996,939 101.00 1,515 48 Perbio Science 13,864,126 65.00 901 28 Svedala 5,816,100 127.50 742 23 Christian Salvesen 27,090,000 18.15 492 15 C. Tybring-Gjedde 14,200,000 23.60 335 3 11 Bilia 3,155,863 80.00 252 8 Others 223 7 Total portfolio of listed 7,270 228 companies Options issued -41 -1 7,229 227 Shares in unlisted 175 4 6 companies Other assets 1,520 47 Total assets 8,924 280 Liabilities -183 -6 Net asset value 8,741 274 1 Effective from January 1, 2000, SCA Series A is equated in value with SCA Series B, which is more liquid. Furthermore, there are possibilities to convert from SCA Series A to SCA Series B. 2 Divested borrowed securities. 3 Including convertible debenture loan equivalent to 4,900,000 shares. 4 Of which, Acando MSEK 68. 5 Calculated on the basis of 31,845,613 shares. 6 Portfolio of listed shares On March 31, 2000, the market value of the portfolio of listed shares, including divested borrowed securities and a convertible debenture loan, was MSEK 7,270 (Dec. 31, 1999: 7,883). During the period, Custos carried out net sales of shares totaling MSEK 692 (purchases MSEK 336, sales MSEK 1,028). Among other things Custos implemented the following changes in the portfolio: As a result of net purchases, the portfolio increased by: Company Number of shares Perbio Science 1,687,064 SCA Series A 515,000 As a result of net sales, the portfolio decreased by: Company Number of shares Industrivärden Series A 4,501,700 SCA Series B 500,000 During the report period, Custos divested its entire holding in Industrivärden. The proceeds from the sale amounted to MSEK 896. The capital gain, including dividends received, was MSEK 331. The total return on Custos' investment in Industrivärden amounted to 64.3 percent, compared to the Findata Yield Index, which rose by 49.9 percent during the period from the average acquisition date until divestment. In addition, Custos sold 500,000 SCA Series B shares, which had been borrowed in the market. Custos has also issued further call options equivalent to 100,500 shares in Svedala and 250,000 shares in Firefly to senior executives of these companies. Unlisted companies On March 31, 2000, the market value of Custos' holdings in unlisted companies amounted to MSEK 175 (Dec. 31, 1999: 164). In early 1999, Custos and three investment partners - Kinnevik, Nordico Invest (successor to KF Invest) and Norway's Orkla - founded the Internet/e-Business consulting company Acando AB. Acando supplies innovative business and technical solutions that generate value for client companies in the digital economy. By recruiting the best management and IT consultants in the market, and by making extensive use of information technology, Acando assumes overall responsibility for its client companies' strategy and business development in the new economy. Acando has nearly 350 employees, with an average age of 35. The President and CEO of Acando is Sven Kallstenius. The Chairman is Custos' CEO, Christer Gardell. During the period January - March 2000, Custos invested a total of MSEK 35 in Acando, mainly by means of shareholder contributions. Additional call options were issued to the employees of Acando. Taking into account the options issued, on March 31, 2000 Custos owned 30.0 percent of the share capital and voting power in the company. So far Custos has invested MSEK 68 in Acando, which is also, the value at which the company is reported in Custos' net asset value. Securities portfolio, earnings and financial position The market value of the Parent Company's total securities portfolio on March 31, 2000, including divested borrowed securities and a convertible debenture loan, amounted to MSEK 7,445 (Dec. 31, 1999: 8,047). The book value of the portfolio on the balance sheet date was MSEK 3,485 (Dec. 31, 1999: 3,776). The difference between its market value and book value, the so-called surplus value, thus amounted to MSEK 3,960 (Dec. 31, 1999: 4,271). During the period, Custos invested MSEK 371 and carried out divestments totaling MSEK 1,028. Altogether this represented a net divestment of MSEK 657 during the period. Custos also received MSEK 2 for options issued. The Parent Company's income before taxes for the period January 1 - March 31, 2000 amounted to MSEK 391 (year-earlier period: 106). Dividends received totaled MSEK 22 (132) and capital gains etc. totaled MSEK 366 (year-earlier period: capital losses of 26). Taxes totaling MSEK 1 (0) were charged to income. The adjusted equity/assets ratio on March 31, 2000 was 93 percent (Dec. 31, 1999: 93). Net interest-bearing assets (interest-bearing assets minus interest-bearing liabilities) totaled MSEK 689 (Dec. 31, 1999: 123). The increase in interest-bearing assets was mainly due to net sales of securities. 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 six-month and full-year accounts. Synthetic buy-backs of Custos' own shares As provided by a mandate from the Annual General Meeting on April 14, 1999, Custos entered into swap agreements equivalent to a total of 4,086,810 shares in Custos during 1999 and the first quarter of 2000. This is equivalent to 12.8 percent of the share capital and 10.6 percent of the voting power in Custos. This synthetic buy-back program will now be finally settled via a share redemption targeted to Svenska Handelsbanken. After the redemption is completed, Custos' share capital will amount to MSEK 694.0, divided into 27,758,803 shares: 21,405,742 Series A shares and 6,353,061 Series B shares. Change in share capital, 1997-2000 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 2000 redemption1 -2,449,370 -1,637,440 -102 2000 21,405,742 6,353,061 694 1 Underway Events after the close of the report period Early in April, it was announced that AB Custos and the American-based Explorer Global Investments have reached a preliminary agreement to invest approximately MSEK 400 in small companies in the information technology (IT) and Internet growth fields. It has also been announced that the Board of Directors of Custos intends to call an Extraordinary General Meeting in order to propose a transition to a single series of shares in Custos. Decisions by the Annual General Meeting The Annual General Meeting on April 5, 2000 fixed the dividend for the 1999 financial year at SEK 11.50 (for 1998: 11.50) per share. The Annual General Meeting also approved a reduction of Custos' share capital by MSEK 102.2 to MSEK 694.0 through the redemption of 4,086,810 shares: 2,449,370 Series A shares and 1,637,440 Series B shares (see "Synthetic buy-backs of Custos' own shares"). The Annual General Meeting also approved a proposal to give the Board of Directors a mandate to implement synthetic buy-backs of a maximum of 10,000,000 of Custos' own shares by the date of the Annual General Meeting in 2001. All Members of the Board were re-elected. Furthermore Jonas Wahlström was elected as a new Member of the Board. At its subsequent statutory meeting, the Board re-elected Sven Hagströmer as its Chairman. Information schedule · Interim Report, January 1 - June 30July 19, 2000 · Interim Report, January 1 - September 30October 18, 2000 · Preliminary Report on Custos' 2000 operationsJanuary 25, 2001 · Annual General Meeting April 5, 2001 · Stockholm, April 19, 2000 AKTIEBOLAGET CUSTOS (publ) Christer Gardell Chief Executive Officer This Interim Report has not been subject to special examination by the 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) 2000 1999 1999 Income from securities management Dividends1,2 22 132 269 Other income from holdings in Group - - 30 companies associated - 10 529 companies other listed 366 -36 116 securities Total income from securities management 388 106 944 Administrative expenses -9 -10 -42 Other expenses 2 -3 -8 Operating income 381 93 894 Financial income and expenses Other interest income and similar 12 21 37 income items Interest expenses and similar expense -2 -8 -7 items Income before taxes 391 106 924 Taxes -1 - -1 Net income for the period 390 106 923 1 Of which, dividends - - 35 from Group companies. 2 Of which, dividends - 99 122 from associated companies. Parent Company Condensed Mar. Mar. Dec. Balance Sheet 31, 31, 31, (Amounts in MSEK) 2000 1999 1999 Fixed assets Tangible fixed assets 2 1 2 Financial fixed assets Holdings in Group 24 87 24 companies Holdings in 1,468 1 1,371 2 558 3 associated companies Receivables from 52 - 52 associated companies Other long-term 2,462 2,161 3,586 holdings of securities Current assets (of which, 1,376 (1,335) 2,349 (2,317) 672 (636) interest-bearing) Total assets 5,384 5,969 4,894 Shareholders' equity 4,675 5,588 4,292 Provisions 30 31 33 Current liabilities (of 679 (646) 350 (333) 569 (513) which, interest-bearing) Total shareholders' equity 5,384 5,969 4,894 and liabilities 1 Acando, C. Tybring-Gjedde, Firefly, Perbio Science, SCA etc. 2 Acando, ASG, Firefly, SCA etc. 3 Acando, C. Tybring-Gjedde, Firefly, Perbio Science etc. Mar. 31, Mar. 31, Dec. 31, 2000 1999 1999 Parent Company Condensed Cash Flow Analysis (Amounts in MSEK) Current operations Dividends 22 132 269 Other operating income 359 -39 625 Operating income 381 93 894 Adjustments for items not included in -377 -107 -709 cash flow 4 -14 185 Net interest received/paid 6 16 37 Income tax paid -1 - -2 Cash flow from current operations before 9 2 220 changes in working capital Changes in working capital Increase (-)/decrease (+) in current -1 34 53 receivables Increase (+)/decrease (-) in current 38 24 -66 liabilities Increase (+)/decrease (-) in provisions -2 - 1 Cash flow from current operations 44 60 208 Investment operations Note 1 Acquisitions of holdings in companies -336 -685 -2,572 Divestments of holdings in companies 1,033 151 2,513 Acquisition of convertible debenture loan - - -52 Other investment operations -48 -21 -42 Cash flow from investment operations 649 -555 -153 Financing operations Dividend paid - - -456 Amount disbursed to shareholders for - - -1,650 redemptions Cash flow from financing operations - - -2,106 Increase (+)/decrease (-) in liquid funds 693 -495 -2,051 Liquid funds, beginning of period 630 2,681 2,681 Liquid funds, end of periodNote 2 1,323 2,186 630 Note 1 Net investment in securities 659 -558 -160 Net investments in synthetic buy-backs of -8 - -6 Custos' own shares Net investments in equipment - - -1 Increase (-)/decrease (+) in receivables related 5 - -6 to divestments Increase (+)/decrease (-) in liabilities related -7 3 20 to acquisitions Payments disbursed 649 -555 -153 Note 2 Short-term investments 1,323 2,186 630 Cash and bank balances 0 0 0 Liquid funds at end of period 1,323 2,186 630 ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/04/19/20010409BIT00560/bit0002.doc http://www.bit.se/bitonline/2000/04/19/20010409BIT00560/bit0002.pdf