Long-term value is generated by creative business ideas and the ability to execute them. ANNUAL REPORT 2007 REPORT ANNUAL Investor 2007 Net asset value: – 0.4% HIGHLIGHTS OF 2007 of total � After a strong first six months, the second half of the year CORE INVESTMENTS 80% assets was characterized by major turbulence in financial markets that was precipitated by a credit market crisis. We have prepared for this environment by increasing our financial flexibility over the past few years. INVESTMENT FOCUS � The board proposes that the dividend be increased by � Well-established, global companies that are listed. SEK 0.25 to SEK 4.75 per share. � Investment cycle: long-term. � The net asset value, including reinvested dividends, was � Ownership through significant minority position. basically unchanged in 2007 (–0.4 percent). The net asset � Returns through value appreciation and dividends. value amounted to SEK 155 bn. on December 31, 2007. � Affärsområdernas The total return utveckling, on Investor 3 shares år was –10 percent. STRATEGY � Maintain an attractive mix of investments. TDEVELOPMENTen-year% development OF of NET net ASSETasset value VALUE (December 31) � Be a substantial owner with strategic influence so we can 100 develop and implement value creation plans. SEK bn. 210 210 80 GOAL 170 170� The return is to exceed the risk-free interest rate plus a risk 60 premium over a business cycle. This currently corresponds 130 130to 8 to 10 percent per year. 40 90 90 Private Equity-investeringar 20 Operativa investeringar 50 50 Kärninvesteringar 97 98 99 00 01 02 03 04 05 06 07 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2005Net asset value,2006 including reinvested2007 dividends, SEK bn. Net asset value, SEK bn. Investor’s net asset value developed negatively during the year but outperformed the Stockholm Stock Exchange. % PERCENTAGE OF ASSETS BY BUSINESS AREA % 100 100 Private Equity 80 80 Investments 60 60 Operating Investments Core Investments 40 40 20 20 0 0 2005 2006 2007 The percentage of unlisted holdings (Operating Investments and PrivateFÄRG PÅ GRAFER, FÄRGORDNING FR VÄNSTER TILL HÖGER Equity Investments) has increased in line with our strategy. In addition to the business areas described on these pages, Financial Investments represents FÄRG PÅ KÄRNINNEHAV 2 percent of total assets. Dividend FÄRG PÅ NYA INVESTERINGAR HIGHLIGHTS OF 2007 DIVIDEND � Investor successfully rejected MAN’s hostile bid for Scania since it SEK/share FÄRG PÅ ÖVRIGT % did not reflect Scania’s value and potential. At year-end, the mar- 6 6 FÄRG PÅ HÄLSOVÅRD ket value of Scania was considerably higher than MAN’s bid level. 7 5 5 � Investor agreed to sell OMX to Borse Dubai. According to the FÄRG PÅ TEKNIK 4 4 terms of the agreement,6 the Nasdaq Exchange will combine with OMX. The transaction forms the basis for a sound industrial solu- FÄRG PÅ VERKSTAD 5 3 3 tion that will generate an attractive return to OMX’s shareholders. 2 FÄRG PÅ FINANS 2 � Investor increased4 its positions in Atlas Copco, Electrolux, Ericsson, Husqvarna and SEB. 1 ÖVRIGA FÄRGER 1 3 � Dividends received totaled SEK 3.2 bn. 2 0 0 � To create efficient capital structures, redemption programs were 98 99 00 01 02 03 04 05 06 071) carried out in Atlas1 Copco, Electrolux and Scania. A total of SEK Dividends received from 1) Proposed dividend 5.2 bn. was distributed to Investor. Core Investments, SEK/share 0 � Ordinary dividend, SEK/share Core Investments had98 an impact99 00 of SEK01 –4.502 bn. 03on income04 05for 06 07 Extraordinary dividend, SEK/share Yield, % the year as an effect of declining stock prices. 7 6 6 5 5 4 4 3 2 3 1 2 0 1 98 99 00 01 02 03 04 05 06 07 0 Substansvärdeutveckling 10 år (31 december) 200 150 100 50 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Substansvärde med återinvesterad utdelning, Mdr kronor Substansvärde, Mdr kronor Total return on Investor shares: –10% of total of total OPERATING INVESTMENTS 7% assets PRIVATE EQUITY INVESTMENTS 11% assets INVESTMENT FOCUS INVESTMENT FOCUS � Medium-sized to large companies with international operations. Investor Growth Capital � Mainly unlisted companies in industries with stable growth and � Small and medium-sized young growth companies in the U.S., potential for high profitability. Northern Europe and Asia. � I nvestment cycle: longer than five years. � Mainly unlisted companies in the healthcare, IT and � Ownership through majority or significant minority position. technology sectors. � Returns through value appreciation and cash flow. � Investment cycle: three to seven years. � Ownership through minority position. STRATEGY � Returns normally realized when investments are sold. � Develop existing holdings utilizing methods similar to those EQT’s funds (partly owned) employed in private equity. � Buyout investments in unlisted companies in Northern Europe � Grow the business area’s share of total assets by actively and Greater China. seeking new investments. � Investment cycle: three to seven years. � Ownership through majority position. GOAL � Returns normally realized when investments are sold. � The return is to clearly exceed the risk-free interest rate plus a risk premium over a business cycle. This currently corresponds STRATEGY to more than 15 percent per year. � Drive and develop existing holdings. � Invest in attractive new companies with sizeable value creation potential. GOAL � Average annualized return (IRR) of 20 percent or more on realized investments, before administrative expenses, over the course of a business cycle. Investor Growth Capital HIGHLIGHTS OF 2007 HIGHLIGHTS OF 2007 � The medical technology company Mölnlycke Health Care was � Investor Growth Capital invested a total of SEK 2.0 bn. dur- acquired in partnership with Morgan Stanley Principal Investments. ing 2007 and sold holdings for SEK 1.7 bn. Sunny Optical � Gambro was streamlined into three independent units and was listed on the Hong Kong Stock Exchange and Aerocrine Gambro Healthcare, the dialysis clinics business, was sold. The on the Stockholm Stock Exchange. import ban was lifted for Gambro Renal Products in the U.S. � EQT’s funds invested SEK 1.6 bn. and sold holdings for Gambro BCT launched its new Atreus and Mirasol products in SEK 5.7 bn. Three initial public offerings were carried out: selected markets. Tognum on the Frankfurt Stock Exchange and Nederman � 3 Scandinavia reported a net increase of 229,000 customers in and Duni on the Stockholm Stock Exchange. 2007, up 34 percent. Average revenue per user (ARPU) increased by � Private Equity Investments contributed SEK 6.0 bn. to income 7 percent to SEK 431. in 2007 and generated a positive cash flow of SEK 3.8 bn. � Grand Hôtel joined InterContinental Hotel Group’s sales and reservation system to further boost its occupancy rate. � Operating Investments had an effect of SEK –879 m. on income, due primarily to investments and action programs that have a short- term negative effect on profitability. >> Welcome to Investor – Investor 2007 Contents President’s comments. 1 Vision, goal and strategies . 4 Welcome to Investor Investor shares . .6 Development of the net asset value . 8 Investor AB is the largest industrial Core Investments. 10 holding company in the Nordic region. For Operating Investments. 18 Private Equity Investments . 26 almost a century, Investor’s business concept Employees and network. 30 has been to generate solid long-term returns Letter from the Chairman. 32 Corporate Governance Report . 34 by investing in companies with attractive Management Group. 49 potential for value creation. Board of Directors. 50 We are an active owner who applies our FINANCIALS experience, knowledge and network to Contents of Financials . 52 develop both listed and unlisted holdings Administration Report . 53 Proposed Disposition of Earnings . 58 and make them best-in-class. Investor Consolidated Income Statement. 59 conducts investment activities from Consolidated Balance Sheet. 60 Consolidated Statement of Northern Europe, the United States and Asia. Changes in Equity. 61 Consolidated Statement of Cash Flows. 62 Parent Company Income Statement. 63 Parent Company Balance Sheet. 64 Parent Company Statement of Changes in Equity. 66 Parent Company Statement of Cash Flows. 67 Notes to the Financial Statements . 68 Audit Report . 103 Ten-Year Summary. 104 History. Foldout Definitions . Foldout >>07Shareholder information. Foldout This annual report has been prepared in Swedish and translated into English. In the event of any discrepancies between the Swedish and the translation, the former shall have precedence. Investor 2007 – President’s comments 1 President’s comments Strong financial position in a declining market Regrettably, 2007 was an unsatisfactory year to be a shareholder of Investor AB. After a strong first six months, the second part of the year was characterized by turbulent financial markets and our total return to shareholders ended at –10 percent. This can be compared with our net asset value, including reinvested dividends, which was only marginally down for the year. This means that the NAV discount of the Investor share widened. Our net asset value actually outperformed the general market as a result of several positive events during 2007. We are entering 2008 with a strong balance sheet that positions us well to act on attractive investment opportunities. A challenging year in financial markets tions for higher inflation, the central banks face counter- Overall, 2007 turned out to be eventful. The year started vailing forces, not an enviable position to be in. very strongly with rising stock markets. Access to liquidity It is worth noting that the turbulence in the financial in the financial system was high and risk premiums fell to markets so far has had very limited impact on the demand unusually low levels. However, the risks associated with for products and services of companies. Companies subprime mortgages in the United States became apparent exposed, for example, to the construction sector or con- during the summer, triggering concerns in global credit sumer market in the U.S.