Investor's Interim Report, January - September 2001

Interim Report, January - September 2001 Investor's net asset value* on September 30, 2001 amounted to SEK 102,018 m. (SEK 133 per share), compared with SEK 144,433 m. on December 31, 2000 (SEK 188 per share). The value of all Investor's holdings was SEK 113,617 m. on September 30, 2001, as against SEK 154,561 m. at year-end 2000. Net debt amounted to SEK 11,599 m., corresponding to 10 percent of total assets. The value of Investor's Core Holdings decreased SEK 37,618 m. during the period, of which Ericsson and ABB accounted for a substantial part, SEK 21,887 m. and SEK 9,514 m., respectively. AstraZeneca contributed positively with appreciation of SEK 1,917 m. The value of New Investments decreased SEK 3,160 m. during the period. Shares were purchased for a total of SEK 4,025 m. and shares were sold for a total of SEK 1,024 m. The Investor Group's income for the period amounted to SEK 7,673 m., compared with SEK 14,783 m. in the corresponding period last year. The result for the third quarter was SEK -1,498 m. The total return on Investor shares was -25 percent during the nine- month period, compared with 17 percent in the corresponding period of 2000. *During the year Investor eliminated its holding of own convertibles. Comparative figures have been adjusted in net asset value calculations to take this into account. 9/30 2001 12/31 2000 9/30 2000 Assets, SEK bn. 114 154 168 Net debt, SEK bn. -12 -10 -11 Net asset value, SEK 102 144 157 bn. Net asset value per 133 188 204 share, SEK Development during Jan.-Sept. Jan.-Sept. July-Sept. July- the period/quarter 2001 2000 2001 Sept. 2000 Change in net asset -42 7 -26 0 value, SEK bn. Change in net asset -29 5 -18 0 value, percent Income, SEK bn. 8 15 -1 1 Total return, percent -25 17 -27 13 Investor's key figures The interim report can also be accessed on the Internet at www.investorab.com Investor AB is Sweden's largest listed industrial holding company with a total net asset value of approximately USD 10 billion (September 30, 2001). The company's business concept is to create shareholder value through long-term active ownership and investment activities. The average annual total return to shareholders has been in excess of 20 percent during the past 20 years. Investor is a leading shareholder in a number of public multinational companies, including Ericsson, AstraZeneca, Scania, ABB, Atlas Copco, WM-data, SEB, Gambro, Electrolux, OM and Saab AB. Investor is headquartered in Stockholm and has offices in Amsterdam, Hong Kong, London, New York and Palo Alto. President's comments Third-quarter economic and financial market activities have been overshadowed by the events of September 11 in the United States, which not only affected individuals and families, but will also have an impact on all of society and the global economy from a longer-term perspective. Although there were clear indications of a business slowdown beforehand, the economic outlook is now clouded with even greater uncertainty. The decline on stock exchanges around the world has directly affected valuations of Investor's holdings. As a consequence, Investor's net asset value has decreased during the year, which is also reflected in our share price. As an active and committed owner, it is important for Investor to sharpen its focus on actively supporting companies, their managements, development and value creation, particularly in times of economic uncertainty. Investor's goal is to grow net asset value in excess of market cost of capital over a business cycle in order to deliver sustainable value for shareholders in the long term. Investor therefore stands behind portfolio companies during economic slumps and actively works to strengthen them in preparation for the next upturn. AstraZeneca, Investor's largest holding in terms of value, has withstood the general market downturn, therefore its share of Investor's portfolio has increased further. The company's ambitious and long-term concentration on research and development is an asset and supports the opinion that AstraZeneca will continue to achieve sound results going forward. ABB, which has entered a transformation phase, has performed weakly for a period of time, although the company is working intensely on improving profitability and growth. Saab has performed favorably on the stock market this year and is being increasingly recognized as a leading high-tech knowledge company in the aeronautics, aerospace and defense industries. In September, the planned merger between SEB and Swedbank was aborted. The boards of both banks decided to terminate the merger process when they realized that the concessions required by the EU Commission would eliminate many of the merger's anticipated synergies, of which cost savings was one. As the largest single owner of SEB, Investor regrets that the merger process could not proceed but also supports SEB and its customer-driven, growth-oriented strategy for Northern Europe. Ericsson, the 2G market leader that is championing the development of 3G systems and terminals, will have attractive growth and profit potential when the market accelerates. However, to achieve solid, long-term earnings growth, the company must complete its restructuring and cost- savings programs, and the world economy as a whole will have to resume growth. The formal establishment of Sony Ericsson Mobile Communications was an important step in Ericsson's transformation process. In Investor's judgment, 3G has attractive return potentials, principally due to its higher transmission speeds and continuous connection which enable brand-new services and applications. 3G, which involves technological and commercial shifts, will emerge gradually. In addition to today's voice and messaging services, 3G will add e-mail, on-demand services, radio, video and advertising, among other services. These new services will also put new demands on mobile terminals. Hi3G, which now has one of the four UMTS licenses in Denmark in addition to one in Sweden, has strong potential to become a leading mobile operator, not only through its dedicated 3G strategy, but also through its participation in Hutchison Whampoa's international network of UMTS operators. By coordinating operations between the Swedish and Danish 3G markets, Hi3G will be able to offer cost-effective and innovative services. The company is working intensely to meet its ambitious business plan and time schedule. Rolling out the network, purchasing IT systems, and developing services and applications with other Hutchison 3G operators, are currently priority projects. The prevailing climate in the capital markets, with reduced financing possibilities, lower valuations and fewer exit opportunities, has made conditions more difficult for young companies and for investors. Recently, activity in the venture capital marketplace has also decreased considerably and there is a risk that the trend will continue downward. In view of the present uncertainty, Investor has chosen to write down the book values of a number of portfolio companies that are expected to require additional financing within the next year. Investor continues to believe in the longer term return potentials of the venture capital market but will continue to be selective about new commitments because of the current market uncertainty. However, an increased flow of attractive investment opportunities may lead to a higher rate of investment going forward. At the same time, Investor will also continue to work actively and consistently to provide support to existing portfolio companies that are judged to have attractive potential. Nonetheless, an investor must also be prepared to terminate projects that fail to develop. Despite write-downs, new investments have had a positive impact on Investor's net asset value growth during the past few years. The New Investments business has grown Investor's net asset value by approximately SEK 1.4 billion since 1998. During this period the average annualized return on divested holdings has exceeded the return requirement of 20 percent. It is pleasing to note that Investor's active portfolio management operations (securities trading) are continuing to report positive income, despite unstable financial markets. In times of economic weakness, it is even more important to work in a focused manner to reach long-term goals. Investor is convinced that, long term, the company's business model will be successful and that the charted course is appropriate. Investor has a professional organization with a strong financial base and extensive network, which provide the prerequisites, as an active owner, to create long-term, sustainable values in companies. Historically, this has been proven to generate high returns for Investor shareholders. Marcus Wallenberg ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/11/20011011BIT00050/bit0001.pdf Full Report low resolution http://www.waymaker.net/bitonline/2001/10/11/20011011BIT00050/bit0002.doc Full Report http://www.waymaker.net/bitonline/2001/10/11/20011011BIT00050/bit0003.pdf Full Report