CARNEGIE INVESTMENT BANK AB (Publ) ANNUAL REPORT 2008 Carnegie 2008

CARNEGIE INVESTMENT BANK AB (publ) ANNUAL REPORT 2008 CARNEGIE 2008 CONTENTS BOARD OF DIRECTORS’ REPORT 1 Note 14 Information on other financial assets 31 FIVE-YEAR SUMMARY, GROUP 5 Note 15 Shares and participations in THE FINANCIAL CRISIS IN 2008 AND Group companies 31 DEVELOPMENTS IN CARNEGIE 6 Note 16 Intangible assets 32 RISK AND CAPITAL MANAGEMENT 7 Note 17 Tangible fixed assets 32 INCOME STATEMENT 10 Note 18 Deferred tax assets/liabilities 32 BALANCE SHEET 11 Note 19 Trade and client receivables 34 CHANGES IN SHAREHOLDERS’ EQUITY Note 20 Prepaid expenses and accrued income 34 – GROUP 12 Note 21 Subordinated assets 34 CHANGES IN SHAREHOLDERS’ EQUITY 13 Note 22 Trade and client payable 34 – PARENT COMPANY Note 23 Accrued expenses and prepaid income 34 CASH-FLOW STATEMENTS 14 Note 24 Other provisions 34 ACCOUNTING PRINCIPLES 15 Note 25 Classification of financial assets NOTES and liabilities 35 Note 1 Segment reporting 21 Note 26 Pledged assets and contingent liabilities 39 Note 2 Net commission income 22 Note 27 Operational leasing agreements 39 Note 3 Net interest income 22 Note 28 Related-party transactions 39 Note 4 Other dividend income 22 Note 29 Important events after the end of the year 39 Note 5 Net profit financial items Note 30 Risk and capital management 40 at fair value 23 Note 31 Other assets and pension provisions 42 Note 6 Personnel expenses 24 CERTIFICATION 43 Note 7 Other administrative expenses 27 AUDIT REPORT 44 Note 8 Amortisation of intangible assets and depreciation of tangible fixed assets 27 BOARD OF DIRECTORS 46 Note 9 Net credit reserves and provisions for GROUP MANAGEMENT 47 doubtful receivables 27 GLOSSARY 48 Note 10 Taxes 28 Note 11 Earnings per share and number of shares 29 Note 12 Maturity information 29 Note 13 Financial assets and liabilities held for trading, information on valuation method and maturity period 30 The annual report is produced in Swedish and English. In the event of differences in the texts, the reader is referred to the Swedish text. All amounts are expressed in Swedish krona unless specified otherwise. Millions of krona are abbreviated as SEKm. Figures in parentheses refer to 2007. The name “Carnegie” in the annual report refers to the Group, unless otherwise specified. II CARNEGIE 2008 BOARD OF DIRECTORS’ REPORT BOARD OF DIRECTORS’ REPORT FOR CARNEGIE INVESTMENT BANK AB CORPORATE REGISTRATION NUMBER 516406-0138, REGISTERED OFFICE OF BOARD OF DIRECTORS: STOCKHOLM, SWEDEN. The Board of Directors and the President of EXPENSES Carnegie Investment Bank AB (publ) (referred to Expenses before profit sharing for full-year 2008 amounted to SEK below as “Carnegie”) hereby submit the annual 4,421m (1,943). The following expenses affecting comparability totalling SEK 2,472m (177) were included in earnings for 2008: SEK report for the Parent Company and the Group 1,956m in credit reserves for doubtful receivables, SEK 363m in re- for the fiscal year 2008. Carnegie Investment Bank serves for a receivable from D. Carnegie & Co AB and SEK 153m AB is the Parent Company of the Carnegie in restructuring and nonrecurring personnel expenses. Group owned by the Swedish National Debt Adjusted for these items affecting comparability, expenses amounted to SEK 1,949m (1,766). Office. On 11 February 2009, Altor Fund III and The provisions for credit reserves are primarily attributable to Bure Equity reached an agreement to acquire all a major credit commitment in Sweden and several small and medi- shares in Carnegie Investment Bank AB. um-sized clients within the Securities business area, mainly related to Equity Finance. The main activity within Equity Finance is lend- Carnegie Investment Bank AB is an independent Nordic invest- ing with shares as collateral. Several of the commitments contain ment bank with operations in the business areas Securities, Invest- collateral for which the current values cannot be fully assessed. ment Banking, Asset Management and Private Banking pursuant to banking licenses issued by the financial supervisory bodies in the PROVISION TO THE PROFIT-SHARING SYSTEM markets in which Carnegie is active. Carnegie offers financial prod- Since the introduction of the D. Carnegie & Co AB share on the ucts and services to Nordic and international clients from offices in stock exchange in 2001, Carnegie has had a remuneration model eight countries: Sweden, Denmark, Norway, Finland, Luxembourg, that is approved annually by the Annual General Meeting, where Switzerland, the UK and the US. Operations are conducted in sub- the variable remuneration is based on 50 percent of the Group’s op- sidiaries and branches of Carnegie Investment Bank AB. erating profit before profit sharing and after deduction of capital ex- Up until 10 November 2008, Carnegie Investment Bank AB and penditure. Profit sharing occurs only on the condition that full-year Max Matthiessen Holding AB were subsidiaries of D. Carnegie & Co profit after deductions for return on equity is positive. Since operat- AB. In conjunction with the Swedish National Debt Office taking ing profit before profit sharing was negative for the Group in 2008, over ownership of Carnegie Investment Bank and Max Matthiessen, the Board has resolved that no profit-sharing will occur. the link to D. Carnegie & Co was terminated. This annual report However, as a number of legal units have made provisions for only relates to the Carnegie Investment Bank Group. A detailed de- profit share in their local audited accounts, the consolidated income scription of the course of events leading to Carnegie Investment Bank statement for 2008 contains a provision for profit sharing amounting being taken over by the National Debt Office is presented on page 6. to SEK 239m. The Board will apply extensive investigation of local- ly booked profit sharing, and subsequently make a final decision as to INCOME whether profit sharing will take place. Full-year income for 2008 amounted to SEK 2,742m (3,924), a decline of 30 percent compared with 2007. All business areas recorded EARNINGS reduced income compared with 2007. Within Securities, income to- Loss before tax for full-year 2008 amounted to SEK 1,918m (profit: talled SEK 1,120m (1,533). The decline was primarily attributable to 821). Loss for 2008 includes items affecting comparability totalling lower commission, since both turnover and the value on the Nordic negative SEK 2,472m as described above. For 2007, items affecting exchanges decreased sharply. The Investment Banking business area comparability were included in a total of negative SEK 632m. Ad- recorded income of SEK 380 m (683). Activity within corporate ac- justed for these items, profit before tax in 2008 amounted to SEK quisitions and capital procurement declined as a consequence of the 554m (1,453). global financial crisis. Asset Management recorded income of SEK Net loss for 2008 amounted to SEK 2,218m (profit: 570). 794m (1,126). Income related to fixed fees from Carnegies mutal funds and discretionary asset management was relatively stable, while DIVIDEND PROPOSAL performance-based income fell sharply. Lower transaction-driven ac- The Board of Directors propose to the 2009 Annual General Meet- tivity among private customers had a negative impact on the Private ing that no dividend shall be paid. Banking business area. Income amounted to SEK 448m (581). 1 BOARD OF DIRECTORS’ REPORT CARNEGIE 2008 APPROPRIATION OF PROFITS The change in working capital during the period had a negative At the disposal of the Annual General Meeting, SEK impact on cash flow of SEK 5,261m (positive: 3,400). Investments Profit brought forward 2,300,197,137 in fixed assets amounted to SEK -41m (-60). The Board of Directors and the President propose Cash flow from financing operations amounted to SEK 1,756m that the profits be allocated such that Dividend to shareholders – (neg: 600) during the year, of which SEK -527m (-600) comprises To be carried forward 2,300,197,137 dividend paid and, for 2008, capital contribution received of SEK Total 2,300,197,137 2,283m. After adjustment for exchange-rate differences in cash and cash For a detailed specification of the change in shareholders’ equity in the Parent Company, see page 13. equivalents amounting to SEK 450m (265), the effect was that cash SHARPLY REDUCED BALANCE SHEET IN 2008 and cash equivalents declined by SEK 4,930m (increase: 3,414). During the second half of 2008, a conscious risk reduction was imple- The Group’s deposits declined by SEK 14,584m (increase: mented throughout all operations. As a consequence, the balance sheet 1,824) during the year, while lending during the corresponding pe- was sharply reduced. In relation to year-end 2007, total assets were re- riod declined by SEK 12,544m (increase: 3,669). duced from SEK 43.8 billion to SEK 14.5 billion at year-end 2008. The primary explanatory factors were a sharp reduction of granted MARKET DEVELOPMENT credit within the Equity Finance area and reduced trading operations. Carnegie’s income is strongly linked to trends on the world’s stock exchanges. 2008 was dominated by the global financial crisis, which LIQUIDITY, FINANCING AND INVESTMENTS resulted in sharply declining equity prices around the world. Carnegie’s liquidity needs result primarily from its daily operations For the full-year 2008, the Nordic index declined by 48 per- and they are satisfied by means of short-term borrowing with col- cent, compared with a decline of 41 percent for the global index. lateral. The way the market functioned during the latter part of the Of the Nordic exchanges, the Oslo exchange showed the weakest year was heavily affected by the financial crisis, and liquidity in the trend during the year with a decline of 53 percent, while the relative interbank market, for example, was extremely limited.

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