Interim report on the operations of AB Custos for the period january 1 - september 30, 2000

INTERIM REPORT ON THE OPERATIONS OF AB CUSTOS FOR THE PERIOD JANUARY 1 - SEPTEMBER 30, 2000 · Total return on Custos shares during the report period was 37.6 percent. The SIX Return Index rose by 1.3 percent during the same period. Total return Total return on Custos shares for the report period - taking into account share price appreciation, dividend paid and redemption of shares - was 37.6 percent. The equivalent return up to October 17, 2000 was 30.2. percent. Return, January 1, 2000 - September 30, 2000 % Total return 37.6 Consists of the following components: Change in net asset 8.4 value Change in discount to 20.8 net asset value Dividend (reinvested) 5.1 Cost of shareholders' 6.4 equity1) SIX Portfolio Return -1.6 Index SIX Return Index 1.3 1) Measured as the average 12-month Swedish treasury bill rate plus a risk premium of 4 percent during the nine-month period. The total return for some of Custos' shareholdings is shown below. Return, January 1, 2000 - September 30, 2000 Portfolio % holding Perbio Science 151. 3 Perstorp 54.7 Christian 43.7 Salvesen Bilia 22.8 Svedala 8.4 C. Tybring- - Gjedde 13.7 SCA - 30.0 Net asset value Total net asset value on September 30, 2000 was MSEK 7,376, or SEK 299 per share. Net asset value per share was calculated on the basis of 24,629,280 Custos shares, thereby assuming that the synthetically repurchased shares, as provided by a mandate from the Annual General Meeting on April 5, 2000, have been redeemed (see "Synthetic buy-backs of Custos' own shares"). On September 30, 2000, Custos' discount to net asset value was 10 percent. If the Custos shares included in the synthetic buy-backs had been valued at market value, net asset value would have totaled MSEK 8,219 on September 30, 2000, or SEK 296 per share. In this case, net asset value is calculated on the basis of 27,758,803 Custos shares. Total net asset value on December 31, 1999 was MSEK 7,896, or SEK 276 per share. Net asset value per share is calculated on the basis of 28,573,037 shares, thereby assuming that the synthetic buy-backs on December 31, 1999 had been redeemed. If the Custos shares included in the synthetic buy-backs had been valued at market value, net asset value would have totaled MSEK 8,568 on December 31, 1999, or SEK 269 per share. Net asset value per share is calculated on the basis of 31,845,613 shares. Assuming that the synthetically repurchased shares had been redeemed on October 17, 2000, net asset value would have totaled an estimated MSEK 6,817, or SEK 277 per share. The discount to net asset value in that case was an estimated 8 percent. Change in net asset value, MSEK Jan. 1, 2000- Sep. 30, 2000 Net asset value, January 11) 7,896 Dividends 253 Administrative expenses -27 Other income and expenses 11 Financial income and expenses 22 Taxes -3 256 Changes in value of securities portfolio Perbio Science 766 Perstorp 601 Christian Salvesen 167 Industrivärden 63 Bilia 44 Svedala 36 C. Tybring-Gjedde -37 SCA (including securities loans) -1,124 Other holdings -5 511 Change in net asset value before 767 dividend, redemption etc. Change in value from synthetic buy- 54 backs of Custos' own shares (swap agreement 1)2) Disbursed redemption payment (swap -875 agreement 1)3) Transfer of market value of synthetic 672 repurchased shares on December 31, 1999 (swap agreement 1) Change in value from synthetic buy- 118 backs of Custos' own shares (swap agreement 2)2) Market value of synthetic share buy- -843 backs on September 30, 2000 (swap agreement 2)4) Dividend to shareholders -366 Other items -47 Net asset value at end of period 7,376 1) The Custos shares that were included in synthetic buy-backs as provided by a mandate from the Annual General Meeting on April 14, 1999 (swap agreement 1) are assumed to have been redeemed at market value. 2) Surplus value (based on market value) of synthetic share buy- backs taking into account dividend paid, broker commissions and interest. 3) Targeted to Svenska Handelsbanken in order to settle swap agreement 1 4) The Custos shares that are included in synthetic buy-backs as provided by a mandate of the Annual General Meeting on April 5, 2000 (swap agreement 2) are assumed to have been redeemed at market value. Net asset value on September 30, 2000, allocated by assets and liabilities Listed companies Number Price Market SEK per per value, Custos 1 share, MSEK share ) SEK SCA Series A 15,844, 170.00 2,694 2 109 691 ) SCA Series B - 170.00 -384 3 -16 2,261,1 ) 02 Perstorp Series A 390,200 122.00 48 2 Perstorp Series B 14,996, 118.00 1,770 72 939 Perbio Science 14,161, 94.00 1,331 54 226 Svedala 5,495,1 162.00 890 36 00 Christian Salvesen 27,090, 22.70 615 25 000 Bilia 3,826,3 85.00 325 13 63 C. Tybring-Gjedde 13,200, 16.40 216 4 9 000 ) Others 118 5 Total portfolio of 7,623 309 listed companies Options issued -49 -2 7,574 307 Shares in unlisted 179 5 7 companies ) Surplus value of 127 6 5 synthetic share buy- ) backs Other assets 553 23 Total assets 8,433 342 Liabilities -214 7 -9 ) Preliminary redemption -843 8 -34 funds for synthetic buy- ) backs Net asset value 7,376 299 1) Calculated on the basis of 24,629,280 shares, i.e. the synthetic repurchased Custos shares are asssumed to be redeemed. 2) Effective from January 1, 2000, SCA Series A is equated in value with SCA Series B, which is more liquid. Furthermore, it is possible to convert from SCA Series A to SCA Series B. 3) Divested borrowed securities. 4) Including convertible debenture loan equivalent to 4,900,000 shares. 5) Of which, Acando MSEK 68 (valued at acquisition value). 6) Surplus value (based on market value) taking into account broker commissions. 7) Adjusted for divested borrowed securities, options issued and other items. 8) The Custos shares that are included in synthetic buy-back programs as provided by a mandate of the Annual General Meeting on April 5, 2000 are assumed to have been redeemed at market value on September 30, 2000. Portfolio of listed shares On September 30, 2000, the market value of the portfolio of listed shares, including divested borrowed securities and a convertible debenture loan, was MSEK 7,623 (Dec. 31, 1999: 7,883). During the period, Custos carried out net sales of shares totaling MSEK 802 (purchases MSEK 506, sales MSEK 1,308). In addition, Custos disbursed MSEK 15 in dividend compensation for divested borrowed securities. 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 Bilia 670,500 Perbio 1,984,164 Science SCA Series 515,000 A As a result of net sales, the portfolio decreased by: Company Number of shares C. Tybring- 1,000,000 Gjedde Industrivärden 4,501,700 Series A SCA Series B 500,000 Svedala 321,000 During the report period, Custos issued further call options equivalent to 180,000 shares in Bilia, 250,000 shares in Firefly and 198,500 shares in Svedala to senior executives of each respective company. In mid-April 2000, the Swedish-based private equity investment company Industri Kapital announced a public offer to acquire all shares and convertible debentures in Perstorp. Industri Kapital offered SEK 124 per Series B share and SEK 136 per Series A share in Perstorp. After the close of the report period, Industri Kapital withdrew its offer. Furthermore, during June 2000 the Finnish-based engineering group Metso Corporation announced an offer to acquire all shares and convertible debentures in Svedala. Metso Corporation is offering SEK 185 per share. This offer is contingent, among other things, on the requisite approvals from competition authorities. The application period has been extended until November 30, 2000. Custos has accepted the offer. The arbitration dispute between Regular Capital Inc. - which is wholly owned by Sweden Post and was formerly a major shareholder in ASG - and Custos, has now been decided in Custos' favor. Last year Regular Capital tried to prevent Custos from selling its holding of ASG shares to the Deustche Post subsidiary Danzas Sweden AB by arguing that there was a shareholders' agreement between the two parties to the dispute. Regular Capital initiated arbitration against Custos, requesting that Custos be held liable for damages to Regular Capital because of this share transfer. The arbitration tribunal has now announced its ruling, declaring that Regular Capital's request shall be dismissed because no shareholders' agreement existed between the parties. This represents a final decision on the dispute between Regular Capital and Custos before the arbitration tribunal. Unlisted companies On September 30, 2000, the market value of Custos' holdings in unlisted companies amounted to MSEK 179 (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. An initial public offering of Acando is planned during 2001. In conjunction with this IPO, Acando plans an issue of new shares, among other things to finance its expansion in Europe. During the report period, Custos invested a total of MSEK 35 in Acando, mainly by means of shareholder contributions. Custos has invested a total of MSEK 68 in Acando, which is also, the value at which the company is reported in Custos' net asset value. Custos is the largest single shareholder in Acando, with 30 percent of the share capital and voting power, 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, 2000, including divested borrowed securities and a convertible debenture loan, amounted to MSEK 7,802 (Dec. 31, 1999: 8,047). The book value of the portfolio on the balance sheet date was MSEK 3,407 (Dec. 31, 1999: 3,776). The difference between its market value and book value, the so-called surplus value, thus amounted to MSEK 4,395 (Dec. 31, 1999: 4,271). During the period, Custos invested MSEK 546 in securities. It carried out divestments totaling MSEK 1,308. In addition, it paid a net amount of MSEK 13 for other investments. Altogether this represented a net divestment of MSEK 749 during the period. Custos also invested a total of MSEK 889 in synthetic buy-backs. The Parent Company's income before taxes for the period January 1 - September 30, 2000 amounted to MSEK 641 (year-earlier period: 686). Dividends received totaled MSEK 253 (232) and capital gains etc. totaled MSEK 382 (year-earlier period: 458). Taxes totaling MSEK 3 (1) on shareholdings abroad were charged to income. No further tax burden for 2000 is foreseen. The adjusted equity/assets ratio on September 30, 2000 was 97 percent (Dec. 31, 1999: 93). Net interest-bearing liabilities (interest-bearing assets minus interest-bearing liabilities) totaled MSEK 92 (Dec. 31, 1999: net interest-bearing assets 123). Custos shares Redemption of Shares in Custos with payment in SCA shares The Board of Custos intends to propose an Extraordinary General Meeting to vote for a right to redeem every fourth share in Custos with payment consisting of two SCA shares. A detailed schedule will be presented before the end of October. Change to O-list The Board of Custos has decided to request the removal of Custos shares from the A-list of the OM Stockholm Stock Exchange and to request that they be quoted on the O-list of the same Exchange. One class of Custos shares An Extraordinary General Meeting on July 25, 2000 approved an amendment to the Articles of Association under which Custos would only issue one class of shares (ordinary shares). Redemption The redemption of Custos shares targeted to Svenska Handelsbanken in order to settle the synthetic buy-back program, as provided by a mandate of the Annual General Meeting on April 14, 1999, has now been completed. Change in share capital, 1997-2000 Year Series A Series B Ordinary Share shares shares shares (1 capital, (1 vote (1/10 vote vote each) MSEK each) each) 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 Change in share -23,855,112 -7,990,501 31,845,613 - classes 2000 redemption - - -4,086,810 -102 2000 27,758,803 694 Synthetic buy-backs of Custos' own shares As provided by a mandate from the Annual General Meeting on April 5, 2000, Custos had entered into swap agreements equivalent to a total of 3,129,523 shares by October 17, 2000. This was equivalent to 11.3 percent of the share capital and voting power in Custos, based on 27,758,803 shares outstanding 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. Information schedule · Preliminary Report on Custos' 2000 operationsJanuary 25, 2001 · Annual General Meeting April 5, 2001 Only Interim Reports attributable to the six-month and full-year accounts will be distributed to the shareholders. Other reports will be available at the Company's office and will be sent to shareholders who request them. All reports are also available on the Company's website, www.custos.se. Stockholm, October 18, 2000 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, website: www.custos.se Jan. - Jan.- Jan. - Parent Company Income Statement Sep. Sep. Dec. (Amounts in MSEK) 2000 1999 1999 Income from securities management Dividends1,2 253 232 269 Other income from holdings in - - 30 Group companies associated 4 525 529 companies other listed 378 -67 116 securities Total income from securities 635 690 944 management Administrative expenses -27 -29 -42 Other income and expenses 11 -3 -8 Operating income 619 658 894 Financial income and expenses 22 28 30 Income before taxes 641 686 924 Taxes -3 -1 -1 Net income for the period 638 685 923 1 Of which, - - 35 dividends from Group companies. 2 Of which, 108 122 122 dividends from associated companies. Parent Company Condensed Balance Sep Sep. Dec. Sheet . 30, 31, (Amounts in MSEK) 30, 1999 1999 200 0 Fixed assets Tangible fixed assets 2 2 2 Financial fixed assets Holdings in Group companies 24 87 24 Holdings in associated companies 1,4 1 806 2 558 3 90 Receivables from associated 52 52 52 companies Other long-term holdings of 2,3 3,063 3,586 securities 62 Other long-term receivables (of 22 (16) - - which, interest-bearing) Current assets (of which, interest- 529 (524 572 (570 672 (636 bearing) ) ) ) Total assets 4,4 4,582 4,894 81 Shareholders' equity4 3,7 4,058 4,292 91 Provisions 30 31 33 Current liabilities (of which, 660 (632 493 (464 569 (513 interest-bearing) ) ) ) Total shareholders' equity and 4,4 4,582 4,894 liabilities 81 1 Acando, C. Tybring-Gjedde, Firefly, Perbio Science, SCA etc. 2 Acando, C. Tybring-Gjedde, Firefly, SCA etc. 3 Acando, C. Tybring-Gjedde, Firefly, Perbio Science etc. 4 At the beginning of the period 4, 5,48 5,4 29 1 81 2 Dividend - -456 - 36 456 6 Redemption - - - 87 1,65 1,6 5 0 50 Ongoing transactions 10 -2 -6 attributable to buy-backs of 2 Custos' own shares Net income for the period 63 685 923 8 At the end of the period 3, 4,05 4,2 79 8 92 1 Sep. Sep. Dec. 30, 30, 31, Parent Company Condensed Cash Flow 2000 1999 1999 Analysis (Amounts in MSEK) Current operations Dividends 253 232 269 Other operating income 366 426 625 Operating income 619 658 894 Adjustments for items not included in -390 -458 -709 cash flow 229 200 185 Net interest received/paid and similar 21 35 37 items Taxes paid -3 -1 -2 Cash flow from current operations 247 234 220 before changes in working capital Changes in working capital Increase (-)/decrease (+) in current 32 52 53 receivables Increase (+)/decrease (-) in current 34 -4 -66 liabilities Increase (+)/decrease (-) in -3 -1 1 provisions Cash flow from current operations 310 281 208 Investment operations Note 1 Acquisitions of holdings in companies -512 -1,755 -2,572 Divestments of holdings in companies 1,298 1,566 2,513 Acquisition of convertible debenture - -52 -52 loan Other investment operations 39 -45 -42 Cash flow from investment operations 825 -286 -153 Financing operations Dividend paid -366 -456 -456 Amount disbursed to shareholders for -875 -1,650 -1,650 redemptions Cash flow from financing operations -1,241 -2,106 -2,106 Increase (+)/decrease (-) in liquid -106 -2,111 -2,051 funds Liquid funds, beginning of period 630 2,681 2,681 Liquid funds, end of periodNote 2 524 570 630 Note 1 Net investment in securities 749 -285 -160 Net investments in synthetic buy-backs 102 -2 -6 of Custos' own shares (swap agreement) Net investments in equipment - - -1 Increase (-)/decrease (+) in -10 - -6 receivables related to divestments Increase (+)/decrease (-) in -16 1 20 liabilities related to acquisitions Payments disbursed 825 -286 -153 Note 2 Short-term investments 521 570 630 Cash and bank balances 3 0 0 Liquid funds at end of period 524 570 630 ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/04/03/20010403BIT00560/bit0003.doc http://www.bit.se/bitonline/2001/04/03/20010403BIT00560/bit0003.pdf