Year-End Report 2002

Year-End Report 2002 Investor's net asset value on December 31, 2002 amounted to SEK 62,869 m. (SEK 82 per share), compared with SEK 118,284 m. on December 31, 2001 (SEK 154 per share). In the fourth quarter, Investor's net asset value increased SEK 5,955 m. The value of Investor's total assets amounted to SEK 79,103 m. on December 31, 2002, as against SEK 129,366 m. at year-end 2001. Net debt amounted to SEK 16,234 m. on December 31, 2002 (11,082 at year-end 2001), corresponding to 21 percent of total assets. The value of Investor's Core Holdings declined SEK 48,968 m. during the year, of which Ericsson and AstraZeneca accounted for a substantial part, SEK 18,730 m. and SEK 16,221 m., respectively. In the fourth quarter, the value of Core Holdings increased SEK 7,323 m. Investor increased its holding in ABB through the purchase of shares for SEK 1,122 m., and shares were sold in AstraZeneca for SEK 2,995 m., in the fourth quarter. Earlier in the year Investor increased its holdings in Ericsson, Electrolux, SEB and WM-data. The value of New Investments decreased SEK 2,071 m. during the year, of which SEK 950 m. in the fourth quarter. The holding in Syngenta was sold in its entirety during the year. Most of Investor's remaining holding in Volvo was also sold. Income of the Investor Group after tax amounted to SEK 1,610 m. in 2002, compared with SEK 8,156 m. last year. The total return on Investor shares was -52 percent in 2002, compared with -15 percent last year. In the fourth quarter, the total return was 15 percent (14). The proposed ordinary dividend to shareholders is SEK 2.25 per share (3.00). An extraordinary dividend of SEK 1.15 per share (2.50) is also proposed. 12/31 2002 12/31 2001 Assets, SEK bn. 79 129 Net debt, SEK bn. -16 -11 Net asset value, 63 118 SEK bn. Net asset value 82 154 per share, SEK Development during 2002 2001 October- October- the year/quarter December December 2002 2001 Change in net -55 -26 6 16 asset value, SEK bn. Change in net -47 -18 10 16 asset value, percent Income after tax, 2 8 2 0 SEK bn. Total return, -52 -15 15 14 percent Investor's key figures The year-end report can also be accessed on the Internet at www.investorab.com President's comments An active year in a historically weak market The year 2002 will go down in Swedish history as one of the worst ever for the Stockholm Stock Exchange (-37 percent) and the third consecutive year of market decline. Only 1931, during the Great Depression, was a poorer market year. In 2002, the global economy also weakened and confidence in financial markets dropped. At the time these comments were written, strong stimulus packages in the area of monetary policy, as well as fiscal policy measures the world over, have not yet had the intended positive impact on economic activity. Economic uncertainty was heightened by continuing international geopolitical tensions and rising oil prices. Against the background of a turbulent 2002, we believe it is important to restate Investor's ownership philosophy, which has been shaped by committed and responsible ownership that puts each company and its specific needs at the center. Important tasks for Investor, as an owner, include contributing to the composition of boards and management teams, formulating strategic and operational objectives, participating in major structural transactions, and other business issues such as capital structure and dividend policy. Efforts to increase corporate transparency, enhance professional competence and increase the diversity of boards, continue to be priority issues for Investor as an owner. During the year we had reasons to be self-critical when reviewing our ownership role in certain situations and companies. However, we remain convinced that committed and long-term work on the boards of our holdings, supported by the experience and competence present in Investor's network, provide sound support for our large and small holdings to develop profitably. We can look back on a year of high business activity. During 2002, we increased our ownership in five of our core holdings: ABB, Ericsson, Electrolux, SEB and WM-data. Investor Growth Capital closed on ten new investments, made a number of follow-on investments and divestments, and also listed Kyphon on the Nasdaq exchange. Investor Capital Partners made two new investments and sold the holding in imGO. EQT acquired five companies and listed Ballingslöv on the Stockholm Stock Exchange. Capital and business activities in Hi3G continued at an increasing pace. The entire holding in Syngenta was sold, as well as a large part of the holding in Volvo, which increased our focus on strategic holdings. We also maintained sufficient financial flexibility during the year. Personnel cutbacks were necessary and we reduced costs approximately 15 percent. For Investor, 2002 was a weak year on the whole. The fact that the fourth quarter developed strongly provided some consolation, however. AstraZeneca has entered an interesting phase with the launch of a number of new drugs and several that are showing promising results in the development stage. At the same time as the formulation patent for Prilosec® was defended in a U.S. court, one of the generic drugmakers (KUDCo) was considered not to have infringed the patent and started sales of a Prilosec generic last December. This development was balanced, however, by strong performance for Nexium, Prilosec's successor, and for a number of other pharmaceuticals. In November, the stake in AstraZeneca, which was 5.4 percent at the beginning of the year, was reduced to 5.0 percent in order to strengthen Investor's financial flexibility. Our long-term view of AstraZeneca remains very positive. During the year Ericsson's management put major efforts into its ongoing cost-savings program and carrying out its new rights issue. The company's successful completion of the SEK 30 billion issue, in the tough financial climate that prevailed in 2002, was a sign of strength. Investor participated actively in this work and is confident about Ericsson in view of the company's stronger finances, lower costs and continuing strong position in the mobile systems market. One significant factor for Ericsson's performance in 2003 will be the availability of financing for telecom operators and, consequently, their scope of investment. The SonyEricsson joint venture has started to gain momentum and we are confident about the company's future, not least because of Sony's leading position in consumer electronics. In 2002, Investor increased its holding in Ericsson to 5.3 percent of the capital and 38.3 percent of the votes. In 2002, ABB concentrated on its power and automation businesses and will continue this focus in 2003. ABB also put a major effort into resolving the asbestos claims in the U.S. and seems to be approaching a solution after the agreement that was reached in January 2003. With more sharply focused operations, lower costs and a strengthened financial position, ABB has the prerequisites to develop positively, even if its road to recovery may seem long. Against this background, Investor participated in ABB's convertible bond issue and increased its stake in ABB during the autumn to 10 percent of the capital and votes. In summary, it can be noted that Investor's core holdings as a whole, in a difficult market, have dealt with costs and profitability, and have also managed other company- specific business issues well. Among the positive news concerning our core holdings is SEB's recently upgraded credit rating. In the venture capital market, the availability of capital declined further and valuations continued to fall. Exit opportunities, such as IPOs and industrial sales, are still limited. The New Investments business continued to be characterized by a selective attitude towards new investments, as well as by hard work to develop existing holdings. More than ten new investments were made, as well as a number of follow-on investments in companies with continuing strong profit potential. During the year two companies were also listed and several were divested. A number of companies performed well and are approaching the stage when an IPO might be considered. Additional investments will be made, but it is also important to exit from companies whose profitability potential is judged to be inadequate. Investor continued to apply conservative valuation principles, which resulted in additional write- downs. Hi3G continued to develop its service offerings and build out its operations and UMTS network at the fastest possible pace. This was accomplished within the investment framework announced earlier. The year 2003 will be exciting for Hi3G as services are gradually rolled out. The company's organization, with a staff of 590 people, is firmly committed to capturing its share of the Swedish and Danish 3G market in the long term. Orange, a competitor to Hi3G, announced in the fourth quarter that it intends to withdraw from the Swedish market. Orange's withdrawal impacts the joint venture company for network infrastructure, 3GIS (of which Vodafone is also a partner), and it will change the competitive climate in the Swedish 3G market. In the beginning of 2003, an agreement was reached to establish a credit facility for Investor's share of Hi3G's financing. In conclusion, it can be stated that Investor will continue to strengthen its positions in core holdings that we believe have a strong future. We also intend to participate in the development of new companies for the future. We will surely exit from some of these investments over time, after we have secured a satisfactory return, while we will remain involved with others for longer periods. Going forward, we must also focus on developing the organization and expand and strengthen Investor's network. Our staff and network are mainstays of the process to sustain and strengthen Investor's investment activities and commitment as an owner. It seems reasonable to anticipate continued political and economic uncertainty during 2003. It is important to maintain sufficient resources for a future that is difficult to assess, even with our fundamentally positive longer-term view. Marcus Wallenberg [Removed Graphics] Change in net asset value On December 31, 2002, Investor's net asset value amounted to SEK 62,869 m. (118,284), corresponding to SEK 82 per share (154). Investor's net asset value 12/31 2002 12/31 2001 SEK/s SEK SEK/s SEK hare. m hare m . Core 83 63 144 110 Holdi 304 518 ngs New 16 12 16 12 Inves 860 410 tment s Other 4 2 7 4 Holdi 936 893 ngs Other 2 1 3 2 Opera 480 063 tions Other -2 -1 -1 -518 asset 477 s and liabi litie s Total 103 79 169 129 asset 103 366 s Net -21 -16 -15 -11 debt 234 082 Total 82 62 154 118 net 869 284 asset value During the year Investor's net asset value decreased SEK 55,415 m. (-26,149) or -47 percent (-18). In the fourth quarter, the net asset value increased SEK 5,955 m. (16,266), or 10 percent (16). [Removed Graphics] For more information: nav.investorab.com During the year Core Holdings changed the net asset value by SEK -47,379 m. (-19,907), New Investments by SEK -2,304 m. (-2,733), Other Holdings by SEK -238 m. (810) and Other Operations by SEK 371 m. (1,153). The corresponding figures for the fourth quarter were SEK 7,306 m., -1,033 m., 117 m. and 12 m. In addition, the net asset value was impacted by groupwide items totaling SEK -5,865 m. (-5,472), of which the dividend payment represented SEK -4,219 m. (-4,218). See Appendix 1, page 15, for a detailed presentation of each business segment's effect on the change in net asset value. Investor shares The total return1) on Investor shares was -52 percent during the year (-15). The total return was 15 percent in the fourth quarter (14). The annual average total return on Investor shares has been 15 percent during the past 20-year period. [Removed Graphics] The discount to net asset value was 37 percent on December 31, 2002, compared with 26 percent at year-end 2001. For more information: share.investorab.com [Removed Graphics] Total assets by sector and business segment on December 31, 2002 SEK m. Healt Techno Engine Financial Oth Tota hcare logy ering Services er l Core 29 8 449 14 283 10 723 - 63 Holdings 849 304 New 730 386 57 - - 1 Investments, 173 listed New 1 622 5 749 1 002 59 3 11 Investments, 255 687 unlisted Other - 1 421 583 - 935 2 939 Total 32 16 005 15 925 10 782 4 79 201 190 103 Core Holdings In 2002, a total of SEK 4,749 m. (15,095) was invested in shares in core holdings, of which SEK 1,122 m. was in the fourth quarter. Shares were sold during the year, in the fourth quarter, for a total of SEK 2,995 m. (13,556). In the fourth quarter, 62,316,851 shares were purchased in ABB for SEK 1,122 m. and 8,420,000 shares were sold in AstraZeneca for SEK 2,995 m. In Ericsson's new rights issue, Investor subscribed for and was allocated 441,568,236 shares, of which 410,678,896 corresponded to its pro-rata allocation of subscription rights and 27,500,000 shares were based on acquired subscription rights. In addition, Investor was allocated 3,389,340 shares without the use of subscription rights. Shares were thus purchased in Ericsson for a total of SEK 1,773 m. In the third quarter, 50,000 A-shares in Electrolux were also purchased for SEK 9 m. Purchases during the second quarter comprised 28,000,000 B- shares in Ericsson for SEK 599 m. In 2002, shares in Ericsson were purchased for a total of SEK 2,372 m. In the second quarter, 4,050,000 A-shares in SEB were acquired for SEK 384 m. In the second quarter, Investor also participated in ABB's convertible bond issue in an amount totaling approximately SEK 530 m. In the first quarter 15,000,000 A-shares were acquired in WM-data for SEK 308 m. and 250,000 A-shares in SEB for SEK 26 m. The value of Investor's core holdings changed by SEK - 48,968 m. during the year (-22,065), of which SEK +7,323 m. in the fourth quarter (+15,553). Development of Core Holdings SEK m. 2002 2001 Realized results 2 7 530 008 Write-downs - - Change in surplus value, etc. -51 -29 498 073 Change in value -48 -22 968 065 Dividends 1 2 741 351 Operating costs - - 152 193 Effect on net asset value -47 -19 379 907 The value of all core holdings developed negatively during the year. Ericsson and AstraZeneca accounted for SEK - 18,730 m. and SEK -16,221 m., respectively, of the downturn. [Removed Graphics] In the fourth quarter, the value of core holdings increased SEK 7,323 m. [Removed Graphics] During the year SEK 1,741 m. in dividends were received from the core holdings, compared with SEK 2,351 m. in 2001. The decline was partly the consequence of changes in the composition of the portfolio, and partly the effect of lower dividends, or no dividends, from a few portfolio companies. For more information: ch.investorab.com Core Holdings on December 31, 2002 Numbe Marke Marke Share Shar Sha Sha Marke Market r of t t price e of re re t value share value value perfo core of of value SEK m. s1) SEK/s SEK rm- hold cap vot SEK/s 12/31 12/31 hare m. ance ings ita ing hare 2001 2002 12/31 12/31 20022 (%) l3) rig 12/31 2002 2002 ) (%) (%) hts 2001 3) (%) Healthca re AstraZen 86 35 26 -36 42 5 5 60 45 736 eca 665 520 810 Gambro 68 4 3 329 -27 5 20 26 6 4 496 638 225 39 29 47 66 50 232 849 Technolo gy Ericsson 852 8 5 840 -85 9 5 38 29 22 198 247 132 Saab AB 21 3 2 075 -4 3 20 36 3 2 150 611 925 WM-data 70 1 534 -71 1 18 31 2 1 455 302 500 12 8 449 13 34 25 803 Engineer ing Atlas 31 7 5 347 -28 9 15 21 10 7 376 Copco 454 971 ABB4) 120 4 3 235 -75 5 10 10 7 5 833 067 731 Scania 18 4 3 020 -12 5 9 15 4 3 439 170 073 Electrol 19 3 2 681 -12 4 6 24 4 2 927 ux 663 190 18 14 23 25 19 575 283 Financia l Services SEB 139 13 10 -24 16 20 21 17 12 928 672 126 295 OM 14 1 597 -70 1 17 17 2 1 980 350 507 14 10 17 19 14 908 723 Total 83 63 100 144 110 304 518 1) Holdings, including any shares on loan. 2) Most heavily traded class of share. 3) After full dilution. 4) Market value includes holding in ABB's convertible bonds. New Investments A total of SEK 4,364 m. was invested in 2002 (6,893), of which SEK 909 m. was in the fourth quarter (2,868). Holdings were sold for a total of SEK 1,926 m. (3,820), of which SEK 263 m. was in the fourth quarter (2,796). Divestments during the year generated capital gains of SEK 228 m. (447), of which SEK 95 m. was in the fourth quarter (373). The value of New Investments decreased SEK 2,071 m. during the year (-2,474), of which SEK -950 m. was in the fourth quarter (+686). Development of New Investments SEK m. 200 2001 2 Realized 228 447 results Write-downs -1 -2 674 802 Change in - - surplus 625 119 value, etc. Change in -2 -2 value 071 474 Dividends 69 77 Operating - - costs 302 336 Effect on net -2 -2 asset value 304 733 Investor took write-downs in 2002 amounting to SEK -1,674 m. (-2,802), of which SEK -796 m. was in the fourth quarter (+123). As before, every decision concerning a write-down is based on a quarterly review of each holding. See "Valuation principles for New Investments" on page 11. [Removed Graphics] New Investments - 10 largest listed companies1) Company Owner- Share Market Market Sector ship price value2 value2 (%) perfor ) ) mance (SEK (SEK 2002 m.) m.) (%) 12/31 12/31 2002 2001 Axcan HC 6.9 -18.0 273 388 Kyphon HC 11.6 - 241 182 43.13) ASM IT 4.3 0.0 229 282 Pacific Intuitive HC 6.9 -38.6 123 242 Surgical ISTA HC 25.7 - 76 - Pharma 17.14) Amkor IT 1.1 -70.2 68 152 Lycos IT 4.9 -50.0 47 82 Europe Perlos IT 1.4 -48.4 35 77 United IT 13.4 -43.9 24 50 Pacific Nilörn OT 18.3 6.7 23 21 H Other, - - 34 721 listed Total, - - 1 173 2 197 listed Unlisted - - 11 687 10 213 Total, New Investments 12 860 12 410 1) Purchases and sales were made in certain holdings during the year. 2) After a discount of 10 or 20 percent, depending on the liquidity of the company's shares. Market value includes any exchange rate effects. 3) Refers to share price development since the listing on May 17, 2002. 4) Refers to share price development since the acquisition of the holding on November 19, 2002. During the period January 1, 1998 to December 31, 2002, the New Investments business reduced Investor's net asset value by SEK 338 m. The return on realized investments met the return requirement of 20 percent during this period. Investor Growth Capital The year 2002, as in 2001, was weak for venture capital markets. The availability of capital declined further and valuations continued to fall. Exit opportunities, such as IPOs and industrial sales, are still limited. Last year's dollar volume and number of venture capital transactions continued to return to the level that prevailed before 1998-2000. During the year Investor Growth Capital continued to be highly selective about making new investments. In the fourth quarter, Investor Growth Capital made three new investments in Åmic, Epigenesis and Wavics. Åmic, based in Sweden, develops and manufactures microstructures in plastic materials for the biotech and telecom industries. Epigenesis, based in the U.S., has developed products that are in the clinical testing phase for the treatment of asthma and other respiratory ailments. Wavics, with operations primarily in Korea, is a fabless semiconductor company providing advanced power amplifier modules for the mobile wireless handset market. During the year, investments were also made in Atrica, Cameron Health, CHF Solutions, Cellectricon, Exigen, Mahi Networks and ISTA Pharmaceuticals. In addition to these new investments, follow-on investments were made in the fourth quarter in Amkor, Endovasix, NESS Display, Optillion, White Rock Networks and Songbird Hearing, among others. Earlier in the year follow-on investments were also made in Aplion Networks, B2, Melacure and Personal Chemistry, among others. [Removed Graphics] Market value of New Investments on December 31, 2002 12/31 2002 12/31 2001 SEK/s SEK/s SEK hare SEK hare m. m. Investor Growth 10 7 10 8 Capital 1) 942 121 EQT 5 4 4 2 465 932 Investor Capital 1 453 2 1 Partners - Asia 357 Fund1) Total 16 12 16 12 860 410 1) As of the Interim Report January-September 2002, direct investments of the Investor Group in Asia are reported under Investor Growth Capital. New Investments' effect on the change in net asset value, 1998 - 2002 SEK m. 19 199 2000 2001 2002 Total 98 9 1998 - 2002 Realized 70 2 3 524 297 6 933 results (incl. 9 39 004 dividends) 9 Write-downs, - 14 -1 -2 -1 -6 034 net 34 228 802 674 4 Operating costs - - - - - -1 422 21 24 325 336 302 0 9 Result 15 2 1 -2 -1 -523 5 16 451 614 679 4 Change in 1 722 -955 -119 -625 185 surplus value 16 2 Effect on net 1 2 496 -2 -2 -338 asset value 31 88 733 304 7 6 Investor Growth Capital - new investments in 2002 Company Business Sector Atrica IT Optical Ethernet solutions for metropolitan core networks Cameron HC Implantable electronic devices to Health treat cardiac disease CHF HC Products reducing excess fluids in Solutions the body that result from congestive heart failure Cellectric HC Advanced chip-based technologies for on the discovery of drugs Epigenesis HC Products in the clinical testing phase to treat asthma and other respiratory ailments Exigen IT Business process solutions for global enterprises Mahi IT Intelligent optical networking Networks solutions for metropolitan core networks ISTA HC Proprietary products to treat Pharmaceut serious diseases and conditions of icals the eye Wavics IT Power amplifier modules for the mobile wireless handset market Åmic HC Microstructures in plastic materials for the biotech and telecom industries In the fourth quarter, Investor sold part of its holding in Esperion Therapeutics and its entire holding in Medtronic. In the fourth quarter, Mobila Gymnasiet was sold to Kunskapsskolan and Guru was sold to Unicru. Earlier in the year Investor divested its entire holding in Lerado and remaining position in Sylvan Learning Systems, among others. A few fund-related holdings were also divested during 2002. Kyphon was listed on the Nasdaq exchange in the second quarter. b-business partners, which handles new European IT investments on behalf of Investor Growth Capital, made three new investments, four follow-on investments and three divestments during 2002. b- business partners has capital commitments totaling EUR 728 m., of which Investor's commitment amounts to EUR 563 m. To date, Investor has provided EUR 207 m. in capital to b-business partners, which has so far made investments totaling EUR 91 m. For more information: igc.investorab.com EQT In the fourth quarter, EQT Finland acquired the Bewator security company, one of the leading European suppliers of products and systems for access control. EQT owns 70 percent of the new group and the former majority owners have retained the remaining 30 percent. In the third quarter, EQT Northern Europe purchased Haarmann & Reimer from Bayer. EQT also acquired Dragoco, a competitor to Haarmann & Reimer. The two are being merged into a new company, under a new name. In the second quarter, EQT Northern Europe acquired the Finnish technology companies VTI Hamlin and Finn-Power. In the second quarter the kitchen-furniture manufacturer Ballingslöv was listed on the Stockholm Stock Exchange. For more information: www.eqt.se Investor Capital Partners - Asia Fund In the fourth quarter, Investor Capital Partners - Asia Fund made a new investment in Cosmetic Group, a leading pan-Asian company that operates 100 centers in ten countries for weight reduction, hair care, skin care and body hair removal. During the second quarter the holding in imGO was sold for about SEK 820 m. The transaction generated a capital gain of approximately SEK 70 m. In the first quarter, Investor Capital Partners - Asia Fund made an investment and became the major shareholder in a leading contract manufacturer of vacuum cleaners in East China. For more information: icp.investorab.com EQT's funds on December 31, 2002 SEK m. Total Investor Investor Market Major holdings capital 's share 's share value of commitm of of Investor ent capital invested 's commitme capital1 remainin nt ) g holdings Scandina3 260 470 411 216 Duni (40%), via I FlexLink, Stenqvist, TAC (62%) Scandina6 193 928 784 762 Dahl, Thule, via HemoCue, Findus, II2) Salcomp,TAC (38%) Denmark 1 255 221 143 112 Contex, Nordic Info Group, Nederman Finland 1 265 321 92 72 ADR Haanpää, Bewator Northern18 339 5 823 3 695 3 303 Dometic, Duni Europe (60%), Plantasjen, Leybold Optics, Haarmann & Reimer Dragoco, Finn- Power, VTI Hamlin Total3) 30 312 7 763 5 125 4 465 1) Also includes capital invested in holdings that have already been sold. 2) The commitment includes SEK 457 m. in funds added in 2001. 3) The following rates were used to translate to SEK: DKK=1.2344 (EQT Denmark) EUR= 9.1695 (EQT Finland & EQT Northern Europe). [Removed Graphics] Investor Growth Capital is wholly owned by Investor and focuses on direct investments in high-growth companies in an expansion phase. The focus is on European, U.S. and Asian companies in the information technology and healthcare sectors. Investor Growth Capital has offices in Stockholm, New York, Palo Alto, Hong Kong and Amsterdam. Investor Growth Capital has committed capital totaling USD 1.8 bn. Investments in European technology companies are concentrated within b-business partners. EQT takes control positions in medium-sized companies that are normally unlisted and have high return potential through various forms of restructuring. EQT is operated in the form of a number of LBO*) funds with capital from Investor and external investors. Investor is the principal owner of the investment adviser EQT Partners AB. EQT's funds have total commitments of approximately SEK 30 bn., of which Investor's commitments total about SEK 8 bn. Investor Capital Partners - Asia Fund is a private equity fund with a focus on buyouts in Asia, excluding Japan. The investment adviser is Investor's wholly owned subsidiary Investor Asia Limited. Investor Capital Partners - Asia Fund has committed capital totaling USD 322 m., of which Investor's commitments total USD 200 m. Investor's remaining capital commitment in the Asia Fund totals USD 100 m. * ) Leveraged buyout Other Holdings A total of SEK 1,690 m. was invested during the year (697). Holdings were sold in 2002 for SEK 3,273 m. (5,869). Investor's Other Holdings affected the change in value by SEK -379 m. during the year (+649), of which SEK 119 m. in the fourth quarter (812). Other Holdings 12/31 12/31 2001 2002 SEK/s SEK SEK/s SEK/s hare m. hare hare Hi3G 2 1 1 358 421 Volvo 0 157 3 2 460 Syngenta - - 2 1 240 Other 2 1 1 835 358 Total, 4 2 7 4 893 Other 936 Holdings Hi3G Hi3G, which will market its services under the name "3", is working intensively on building out its UMTS network and on defining and developing its customer offerings. In Sweden, it is estimated that the first services will be launched on a small scale during the first half of 2003. On a step-by-step basis, offerings for customers will be broadened in terms of services, functionality and geographic coverage. Services for both enterprises and consumers will include high-quality mobile voice and person-to-person video communications, multimedia messaging, including text, picture and video messaging, e-mail, e-banking and video-based news and entertainment. Orange announced in the fourth quarter that it intends to withdraw from the Swedish market. Orange's withdrawal affects the joint venture company for network infrastructure, 3GIS (of which Vodafone is also a partner), and future competition in the market. As reported earlier, the estimated peak financing need amounts to approximately USD 2.3 bn. for Hi3G's businesses in Sweden and Denmark, of which Investor has committed itself to ensure that 40 percent is financed in accordance with its ownership stake. The owners and the company are continuously reviewing the business to further improve cost efficiency. Investor currently estimates that its capital contribution to Hi3G, in the form of a shareholder's contribution, will total between SEK 4 bn. and SEK 5 bn., including the SEK 1,448 m. that has been provided to date. In addition to the previously mentioned capital contribution of SEK 1,448 m., there is a loan to Hi3G in the amount of SEK 124 m. related to the UMTS license in Denmark. In the fourth quarter, Investor supplied SEK 460 m. in the form of a shareholder's contribution to the company. The remaining capital is expected to be provided to Hi3G over the next five-year period. After the close of the year, Investor reached an agreement for a SEK 3 bn. bank facility for Investor's share of Hi3G's loan financing. As reported earlier, the intention is to finance Hi3G over time with shareholders' equity and external project financing on an approximately 50-50 basis. For more information: www.tre.se Volvo During the year 12,864,480 shares in Volvo were sold for SEK 2,016 m., of which 9,559,780 shares were sold for SEK 1,377 m. in the fourth quarter. Investor's remaining holding in Volvo totaled 1,155,240 A-shares on December 31, 2002. Other During the year SEK 600 m. was invested in RAM One, a newly started hedge fund. The item "Other" includes, among other investments, the holding in RAM One, the holding in Fiskars, and funds managed by Lancelot. Other Operations Other Operations 12/31 2002 12/31 2001 SEK/s SEK SEK/s SEK hare m. hare m. The Grand 1 1 1 1 Group 075 075 Land and 1 350 1 350 real estate Active 0 26 1 599 portfolio management Other 0 29 0 39 Total, Other 2 1 3 2 Operations 480 063 Active portfolio management Investor's active portfolio management activities generated income totaling SEK 349 m. in 2002 (955). The active portfolio management activities were reduced in scope during the year in connection with the previously announced restructuring of the unit. The Grand Group The result after net financial items for the Grand Group was SEK - 14 m. in 2002 (+17). During the year SEK 47 m. was expensed for renovation work at the Grand Hôtel in Stockholm. The Group's capital structure was changed in 2001, which increased interest expenses by SEK 8 m. in 2002. Results were also affected by a generally weak economy. For more information: www.grandhotel.se Consolidated results Income after financial items amounted to SEK 1,925 m. in 2002 (8,646). The amount includes realized results and write-downs in holdings totaling SEK 1,283 m. (7,178). Income after financial items totaled SEK 1,667 m. in the fourth quarter (515). Operating costs declined during the year from SEK 740 m. to SEK 624 m. The decrease was attributable, among other things, to the effects of about 40 employees leaving the company in 2002. Net income for the year (after tax) was SEK 1,610 m. (8,156). Net income for the year includes a capital gain of SEK 2,530 m. on the sale of shares in AstraZeneca. For the tax assessment years 2001 and 2002, Investor AB was not granted permission to deduct all paid foreign taxes (tax on dividends) and was charged with tax totaling SEK 101 m. Investor appealed this taxation and was granted an extension of time for payment. Therefore, the tax charge has not yet been expensed. A more detailed description of operations is provided as a table in Appendix 1 on page 15. Consolidated net debt Consolidated net debt at year-end was SEK 16,234 m., as against SEK 11,082 m. at year-end 2001. Investor's net debt thereby amounted to 21 percent of total assets, compared with 9 percent at year-end 2001. In fiscal 2002, dividends totaling SEK 4,219 m. were paid to Investor's shareholders (4,218). In the first quarter, Investor issued a bond loan amounting to EUR 500 m. The loan was raised primarily for refinancing purposes and has a maturity of ten years. The average term for Investor's debt portfolio was thereby extended from 3.6 years on December 31, 2001, to 4.0 years at year-end 2002. On November 14, 2002, the rating agency Moody's announced that it had downgraded Investor from A2 till Baa1 (stable outlook). On October 3, 2002, Standard & Poor's Ratings Services announced that Investor's rating remained unchanged at AA- (stable outlook). [Removed Graphics] Share capital Investor's share capital on December 31, 2002 amounted to SEK 4,795 m. (4,795 m. on December 31, 2001). Structure of share capital Class Number Number % of % of of of of capit vote share shares votes al s A 1 311 690 311 690 40.6 87.2 vote 844 844 B 1/10 455 484 45 548 59.4 12.8 vote 186 418 Total 767 175 357 239 100.0 100. 030 262 0 Parent Company Investor AB Income after financial items was SEK 2,154 m. in 2002 (10,053). During the year net share sales amounted to SEK 2,392 m. Proposed dividend The Board of Directors and the President propose a dividend to shareholders of SEK 2.25 (3.00) per share for fiscal 2002. An extraordinary dividend of SEK 1.15 per share (2.50) is also proposed. Investor's dividend policy is to distribute a large portion of the dividends it receives in the form of an ordinary dividend to shareholders. This dividend should develop steadily over time. In addition to the ordinary dividend, extraordinary dividends can be paid, depending on the current tax situation. During the year the standard income rate was reduced, which comprises the basis for taxing holding companies, from 2 percent to 1.5 percent of the market value of shareholdings at the beginning of the year. In a report dated December 19, 2002 that is being circulated for review by the Swedish government's Council of Legislation, it is proposed, among other things, that taxation of capital gains on shares of businesses, owned by limited companies, should be discontinued and that the regulations should be changed for calculating the standard income rate of industrial holding companies. Among other things, Investor AB's standard income rate would be reduced considerably as a result. The proposed government bill will be submitted to the Swedish parliament in the spring of 2003. The new regulations for industrial holding companies might therefore be applied as of the 2004 fiscal year. Repurchase of own shares As in the past three years, the Board of Directors has decided to propose to the Annual General Meeting that it should extend the authorization of the board to decide on the repurchase of the company's shares. Under such mandate, the board would be given the opportunity until the next Annual General Meeting - provided they deem this appropriate - to decide on the repurchase of the company's shares. In accordance with current legislation, these repurchases can amount up to 10 percent of the total shares outstanding in Investor. Such purchases may be effected over the stock exchange or through offerings to shareholders. It is also proposed that the board's mandate include the possibility to transfer repurchased shares. To date, Investor has not utilized the possibility to buy back its own shares. Other Annual General Meeting The Annual General Meeting of Investor AB will be held at 3:00 p.m. on Wednesday, April 23, 2003, at Stockholmsmässan (Stockholm International Fairs), Älvsjö. Investor's audited Annual Report will be made available at the company's headquarters at Arsenalsgatan 8c in Stockholm as of April 9, 2003. Accounting principles When preparing this year-end report, the same accounting principles have been applied as those used in the preparation of the latest annual report. The year-end report has been prepared in accordance with Recommendation 20 of the Swedish Financial Accounting Standards Council. It should be noted, however, that the net asset value per share is stated instead of income per share, since it reflects the development of Investor as an industrial holding company in a more relevant way. Holdings in associated companies are reported in accordance with the acquisition value method. The consolidated accounts in accordance with the equity method (income statement, balance sheet and specification of equity) will be made available on Investor's website as of February 28, 2003. As noted in the latest Annual Report, Investor hedges its seven- year employee stock option programs only against increases in the company's share price. The decrease in Investor's share price below the average hedge price is reported on an ongoing basis as an adjustment item under shareholders' equity. To the extent that Investor's share price is lower than the hedge price, any possible negative effects on cash flow would not arise until after the seven-year term of the option programs. Valuation principles for New Investments The valuation of listed holdings is based on the share price of each company on the last business day of the reporting period, less 10 or 20 percent, depending on the liquidity of the company's shares and any limitations to the disposal rights to the company's shares. For unlisted holdings, Investor uses a valuation method in which the holdings are valued at acquisition cost, less any write-downs. The valuation, and if relevant, any need for write-downs, is determined quarterly on the basis of the market's development and the performance of each company in relation to its plan and budget. Unlisted holdings in funds are valued on the basis of the underlying value of their holdings at the lower of acquisition cost and fund manager's valuation. Listed holdings are valued as described above. For funds in which Investor has a holding of less than 10 percent, or is inactive in the fund's activities, the main rule is that Investor uses the valuation that the fund manager makes of all holdings in the fund. However, the fund is never valued higher than Investor's acquisition cost. If Investor's evaluation is that the fund manager's valuation has not given sufficient consideration to factors that can negatively affect the holdings, the value may be written down. Financial calendar 2003 April Annual General 23 Meeting April Interim Report, 23 January-March July Interim Report, 10 January-June Octobe Interim Report, r 13 January-September Stockholm, January 24, 2003 [Removed Graphics] Marcus Wallenberg President and Chief Executive Officer For information: Lars Wedenborn, Chief Financial Officer: +46 8 614 2141, +46 70 624 2141 lars.wedenborn@investorab.com Fredrik Lindgren, Vice President, Corporate Communications: +46 8 614 2031, +46 70 624 2031 fredrik.lindgren@investorab.com Investor Relations Group, +46 8 614 2800 ir@investorab.com This year-end report has not been subject to specific review by the Company's auditors. [Removed Graphics] [Removed Graphics] [Removed Graphics] APPENDIX 1 - INVESTOR'S PERFORMANCE BY SEGMENT [Removed Graphics] Annual General Meeting of Investor AB Investor AB's Annual General Meeting will be held on Wednesday, April 23, 2003, at 3:00 p.m.at Stockholmsmässan (Stockholm International Fairs), Mässvägen 1, Älvsjö, Sweden. Notification of participation can be made starting March 3, 2003 To be entitled to participate in the business of the Meeting, shareholdersmust be recorded in the register of shareholders maintained by VPC AB (the Swedish Securities Register Center) on Friday, April 11, 2003, and must notify the Company of their intention to attend the Meeting no later than 1:00 p.m. on Tuesday, April 15, 2003, by writing to Investor AB, SE-103 32 Stockholm, Sweden, or by calling +46 8 611 29 10, or by registering on Investor's website www.investorab.co.m _______________________________ 1) Total return is the sum of share price changes and reinvested dividends. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2003/01/24/20030124BIT00070/wkr0001.doc The full report http://www.waymaker.net/bitonline/2003/01/24/20030124BIT00070/wkr0002.pdf The full report