Annual Report • Mar 28, 2018
Annual Report
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2017 was a strong year for Investor. Our adjusted net asset value grew by 16 percent and our total shareholder return amounted to 13 percent, which exceeded our return requirement and the general market. Our focus on generating a competitive total return remains firm.
| Letter from the Chairman 2 Letter from the CEO 3 Financial development 4 Objective and operating priorities 7 Value creation by active ownership 8 Sustainable business 10 Listed Core Investments14 Patricia Industries 18 EQT 23 The Investor share 24 Investor's employees 26 Corporate Governance Report 27 Board of Directors 34 Management Group 36 Proposed Disposition of Earnings 38 List of contents of Financials 39 Statements for the Group 40 Notes for the Group 44 Statements for the Parent Company 80 Notes for the Parent Company 84 Auditor's Report 91 Five-Year Summary 94 Definitions 95 Our history 96 Shareholder information 97 |
Investor in brief 1 |
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Production: Investor and Addira. Photos: Jeanette Hägglund, Johan Lind and photos from Investor's portfolio companies.
Print: Åtta.45 Tryckeri AB, Sweden, 2018. Paper: Profimatt, 250 g/115 g. NORDIC ECOLABEL 3041 0001
The Annual Report for Investor AB (publ.) 556013-8298 consists of the Administration Report on pages 4-6, 10-13, 24-38 and the financial statements on pages 39-90.
The Annual Report is published in Swedish and English.
Sustainability information can be found on pages 8-13, 19-22, 26, 28 and 48, bearing a green mark. Definitions of applied sustainability KPIs can be found on Investor's website.
Investor, founded by the Wallenberg family in 1916, is an engaged owner of high-quality, international companies. We have a long-term investment perspective and through board participation, as well as industrial experience, our network and financial strength, we strive to make our companies best-in-class.
As a long-term owner, we actively support the building and development of best-in-class companies.
Investor owns significant stakes in leading, high-quality, global companies. Through board participation, we work for continuous improvement of the performance of our companies. With our industrial experience, broad network and financial strength, we strive to make and keep our companies best-in-class.
We always look at the opportunities and challenges facing each individual company. Our cash flow allows us to support strategic initiatives in our companies, capture investment opportunities and provide our shareholders with a steadily rising dividend.
We are committed to generating an attractive long-term total return, exceeding the market cost of capital. Our long-term return requirement is the risk free interest rate plus an equity risk premium, in total 8-9 percent annually.
Our operating priorities are to grow our net asset value, operate efficiently and pay a steadily rising dividend.
1) Adjusted value based on estimated market values for the major wholly-owned subsidiaries and partner-owned investments within Patricia Industries. For a detailed description of the valuation overview, see page 5.
Stability and consistency are hallmarks of Investor AB. In 2017, our total shareholder return of 13 percent beat the Swedish market. More importantly, we have continued to outperform the market over 20 years. While this makes us proud, we are strongly committed to ensuring that the Investor share remains an attractive investment.
The rebound of the global economy has brought new optimism and higher demand in many of our companies. While this is encouraging, one must never forget that it is in good times that we need to build strength and stamina to handle longer-term challenges.
This is why we support several initiatives to remain at the forefront of economic and societal change. We need to be prepared for disruptive technologies that offer opportunities and challenges to our portfolio companies. Together with companies in and outside our network, we have supported the creation of Combient, a company that, among other things, analyzes the effects of digitalization on business models, all in order to be at the front of the development curve.
In addition, we are engaged in a study on the long-term effects of new technologies on jobs, as well as the consequent need for skills development. In my view, this is of great importance as our companies need to engage in societal discussions about the future of work.
We participate in these initiatives because the future of our companies and their long-term profitability depends on innovation.
We work with our companies, in good times and in bad. In 2017, we continued to invest in Ericsson because it is at the technological forefront in some areas. 5G, for example, has huge value-creation potential, enabling companies to move into new markets, building new revenue streams and applications. This is why our companies continuously invest in R&D
and innovation. Our ultimate goal remains for each of them to become or stay bestin-class.
Companies and their headquarters are sometimes taken for granted. However, for Swedish companies to continue to develop, and to recruit the best talent, we need to work to make Sweden more attractive, with better education, infrastructure and a positive spirit toward entrepreneurship.
Innovation and competitiveness remain at the core of the Swedish export success, and this is why I am deeply concerned about some threats to our companies' ability to trade freely.
The threat to global free trade, the single-most important condition for the free flow of goods and services, remains my key concern. Every year I have repeated this message. This time I am more concerned than ever. Gradually, the vision of a global multilateral order of trade is eroded by shortsighted national protectionism.
It has taken decades for the EU to develop a single market, and despite its huge advances and effect on prosperity, it still is no way near completion. The EU has successfully concluded a free trade agreement with Canada, and finalized negotiations with Japan, making it a formidable champion of global free trade, working hard to do the same with Mercosur and India.
As a small but highly successful country, strongly dependent on exports and global trade, I believe that we need to make our voice heard on fair competition. We need to fight to maintain a level play-
ing field on all markets whether it is the U.S., China or even the EU, be it technological standards or hidden rules which impact trade and investments.
I am very pleased that Investor continued to generate a strong cash flow during 2017. Supported by a strong balance sheet, the Board proposes a dividend of SEK 12, the eighth consecutive increase of SEK 1 per share.
On behalf of the board, I would like to thank our CEO Johan Forssell for his consistent professional leadership and relentless focus on operational excellence. I would also like to thank his management team and everyone at Investor and Patricia Industries for their hard work and commitment.
Finally, I would particularly like to thank you, dear fellow shareholders, for your continuous support. With a clearly defined strategy and long-term commitment, we will continue to focus on capturing the opportunities of the future and generating an attractive total return to you.
Jacob Wallenberg Chairman of the Board
During 2017, our adjusted net asset value grew by 16 percent, well ahead of the Swedish stock market and our return requirement. Many of our companies made important progress and several strategic initiatives were launched. Going forward, we will continue to work relentlessly to generate attractive long-term value for you.
In 2017, the macro economy developed favorably, supporting demand in many of our companies. While the economy's direction is a hot topic also for us, we focus on supporting our companies to steadily improve their agility to manage swings in demand and rapid technology change.
Our adjusted net asset value grew 16 percent. As dividends from Listed Core Investments, distribution to Patricia Industries and net cash flow from EQT exceeded our dividend paid and investments, our financial capacity improved further. We aim to use this capacity by investing in existing and new companies.
For us as an engaged owner striving to create long-term value, having the right person at the right place is critical. During 2017, we spent considerable time nominating new board members, including the chairs of Ericsson and Electrolux. We are convinced that diverse teams in terms of age, gender, background, and experience outperform homogenous teams. Therefore, further improving diversity remains key. In this context, I am very pleased that three out of seven non-executive board members in the newly formed Epiroc, active within mining and infrastructure, are women.
We work through the boards, driving strategic initiatives in the companies. During 2017, we put extra focus on sustainability and technology change. We formed a network, bringing our companies together to share ideas and best practice within sustainability. We also invested significant time and resources to improve our understanding of the potential impact of technology change on our companies.
Listed Core Investments' total return amounted to 17 percent, clearly ahead of the market and our 8-9 percent return requirement. All companies generated positive returns, with Wärtsilä and Atlas Copco close to 30 percent each.
Activity was high, with several companies, including ABB, Wärtsilä and Nasdaq, making significant strategic acquisitions. Ericsson announced a new strategic direction, Ronnie Leten was nominated new Chair and we strengthened our ownership by investing SEK 1.2 bn. With the management changes, the new strategy, and the announced board proposals, we believe that important steps have been taken for the company to be able to realize its long-term potential. We fully support Ericsson on this journey. In Atlas Copco, the preparations for the split of the company, while maintaining focus on the customers, remained intense.
For Patricia Industries, focus remains on developing our existing companies, finding new subsidiaries in the Nordics and in North America, as well as realizing proceeds from Financial Investments.
In 2017, performance was mixed. On the positive side, Permobil performed strongly, driven partially by well-received product launches. The company also made several acquisitions, adding significantly to group sales and profits. Mölnlycke is stepping up the efforts to return to higher growth. Encouragingly, the investments made in recent years in Emerging Markets expansion started to pay off. While sales growth in the more mature markets slowed, growth in Emerging Markets was around 25 percent. Although still a limited part of total sales, these markets are starting to have a real impact. Within Aleris, overall performance
remained unsatisfactory, and therefore, actions to improve its operations were intensified.
EQT's activity remained high, and several new funds were launched. The value of our investments grew by 21 percent in constant currency, well above our overall return requirement, and the net cash flow to Investor amounted to SEK 1 bn. Based on the strong team, its successful track record and the attractive return potential, we will continue to invest in EQT's funds.
Our operating priorities are to grow net asset value, operate efficiently and pay a steadily rising dividend. During 2017, we accomplished this, with net asset value growth well above our return requirement, management costs below our guidance and a proposed dividend increase of 9 percent. Our total shareholder return was 13 percent for the third consecutive year, ahead of the overall market. With a well-defined strategy and a strong financial position, I believe that we have a solid platform for further value creation in place. However, it is our people who do the job, which is why I would like to thank all the professional and dedicated colleagues at Investor and in our companies for their great contributions during 2017. I would also like to thank you, dear fellow shareholders, for investing in us.
Johan Forssell President and Chief Executive Officer
At year-end, adjusted net asset value, based on estimated market values for the major wholly-owned subsidiaries and partner-owned investments within Patricia Industries, amounted to SEK 384.7 bn., an increase of 16 percent, compared to the SIX Return Index's (SIXRX) 9 percent. Reported net asset value amounted to SEK 336.3 bn., an increase of 15 percent.
The contribution to reported net asset value from the business areas during 2017 amounted to SEK 42,636 m. from Listed Core Investments (30,936), SEK 766 m. from Patricia Industries (4,438) and SEK 3,144 m. from EQT (1,986).
| Overview of net asset value | |||||||
|---|---|---|---|---|---|---|---|
| Reported values | Adjusted values3) | ||||||
| 12/31 2017 |
12/31 2016 |
12/31 2017 |
12/31 2016 |
||||
| Owner ship, % (capital) |
Share of total assets |
Value SEK m. |
Contribu tion to net asset value |
Value SEK m. |
Value SEK m. |
Value SEK m. |
|
| Listed Core | |||||||
| Investments | |||||||
| Atlas Copco | 16.9 | 21 | 72,877 | 16,852 | 57,437 | 72,877 | 57,437 |
| ABB | 10.7 | 15 | 50,891 | 7,882 | 44,592 | 50,891 | 44,592 |
| SEB | 20.8 | 13 | 43,705 | 2,489 | 43,725 | 43,705 | 43,725 |
| AstraZeneca | 4.1 | 8 | 29,302 | 4,806 | 25,732 | 29,302 | 25,732 |
| Wärtsilä | 17.7 | 5 | 18,013 | 4,189 | 14,257 | 18,013 | 14,257 |
| Saab | 30.0 | 4 | 13,033 | 2,024 | 11,181 | 13,033 | 11,181 |
| Electrolux | 15.5 | 4 | 12,613 | 2,125 | 10,846 | 12,613 | 10,846 |
| Nasdaq | 11.7 | 4 | 12,268 | 643 | 11,842 | 12,268 | 11,842 |
| Sobi Ericsson |
39.5 6.6 |
3 3 |
12,051 11,737 |
570 309 |
11,480 10,378 |
12,051 11,737 |
11,480 10,378 |
| Husqvarna | 16.8 | 2 | 7,542 | 847 | 6,883 | 7,542 | 6,883 |
| Total Listed | |||||||
| Core Investments | 82 284,030 | 42,6361) 248,354 | 284,030 248,354 | ||||
| Patricia Industries | |||||||
| Mölnlycke | 99 | 6 | 19,681 | 2,880 | 21,067 | 58,637 | 54,298 |
| Permobil | 94 | 1 | 4,402 | 469 | 3,923 | 8,784 | 7,297 |
| Laborie | 97 | 1 | 4,492 | –436 | 4,928 | 4,657 | 4,657 |
| Aleris | 100 | 1 | 3,008 | –947 | 3,940 | 3,493 | 4,686 |
| BraunAbility | 95 | 1 | 2,921 | –215 | 3,136 | 3,002 | 2,820 |
| Vectura | 100 | 1 | 2,552 | 386 | 2,161 | 2,902 | 2,338 |
| Grand Group | 100 | 0 | 197 | 11 | 181 | 701 | 648 |
| 11 | 37,252 | 2,147 | 39,336 | 82,176 | 76,743 | ||
| 3 Scandinavia Financial |
40 | 1 | 4,197 | 474 | 5,446 | 7,758 | 8,144 |
| Investments | 2 | 7,164 | –1,630 | 10,024 | 7,164 | 10,024 | |
| Total Patricia Industries | |||||||
| excl. cash | 48,614 | 7661) | 54,806 | 97,099 | 94,911 | ||
| Total Patricia Industries incl. cash | 67,982 | 69,195 | 116,467 | 109,300 | |||
| EQT | 4 | 16,165 | 3,1441) | 13,996 | 16,165 | 13,996 | |
| Other assets & liabilities | 0 | –323 | –10,3621,2) | –327 | –323 | –327 | |
| Total Assets excl. Patricia | |||||||
| Industries' cash | 100 348,486 | 316,829 | 396,971 356,934 | ||||
| Gross debt | –31,123 | –33,461 | –31,123 | –33,461 | |||
| Gross cash | 18,899 | 16,710 | 18,899 | 16,710 | |||
| Of which Patricia Industries Net debt |
19,368 –12,224 |
14,389 –16,752 |
19,368 –12,224 |
14,389 –16,752 |
|||
| Net Asset Value | 336,262 | 36,185 | 300,077 | 384,747 | 340,183 | ||
1) Including management costs, of which Listed Core Investments SEK 100 m., Patricia Industries SEK 225 m., EQT SEK 9 m. and Groupwide SEK 121 m.
2) Including paid dividends of SEK 8,411 m.
3) As supplementary information, major wholly-owned subsidiaries and partner-owned investments within Patricia Industries presented at estimated market values.
| SEK m. | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|
| 42 636 Changes in value 350 000 |
766 36,054 |
3 144 22,057 |
8,538 | 336 262 41,960 |
| Dividends 300 077 |
8,404 | –1 951 8,351 |
–8 411 7,821 |
7,228 |
| Other operating income 300 000 |
17 | 40 | 58 | 177 |
| Management costs | –455 | –465 | –483 | –368 |
| 250 000 Other items |
277 | 3,682 | 1,500 | 1,691 |
| Profit (+)/Loss (–) | 44,298 | 33,665 | 17,434 | 50,688 |
| 200 000 Non-controlling interest |
20 | 0 | –1 | –32 |
| Dividends paid | –8,411 | –7,635 | –6,856 | –6,089 |
| 150 000 Other effects on equity |
278 | 2,246 | 262 | 979 |
| Contribution to | ||||
| 100 000 net asset value |
36,185 | 28,276 | 10,838 | 45,546 |
1) Inkl. finansnetto, återköp av egna aktier, påverkan på eget kapital och förvaltningskostnader. investeringar 2016 The consolidated net profit amounted to SEK 44,298 m. (33,665). Management costs amounted to SEK 455 m. (465).
Investor's net debt amounted to SEK 12,224 m. at year-end (16,752), corresponding to leverage of 3.5 percent (5.3). Gross cash amounted to SEK 18,899 m., of which Patricia Industries SEK 19,368 m. Our target leverage range is 5-10 percent over a business cycle. While leverage can fluctuate above and below the target level, it should not exceed 25 percent for any longer periods. Our leverage policy allows us to capture investment opportunities and support our companies.
The debt financing of the wholly-owned subsidiaries within Patricia Industries is ring-fenced and hence not included in Investor's net debt. Investor guarantees SEK 0.7 bn. of 3 Scandinavia's external debt, which is not included in Investor's net debt.
The average maturity of the debt, excluding the debt of the wholly-owned subsidiaries within Patricia Industries, was 9.9 years as of year-end (10.0).
| SEK m. | Consolidated balance sheet |
Deductions related to Patricia Industries |
Investor's net debt |
|---|---|---|---|
| Other financial investments | 5,389 | –139 | 5,251 |
| Short-term investments, cash and cash equivalents |
20,450 | –6,802 | 13,648 |
| Receivables included in net debt | 1,894 | – | 1,894 |
| Loans | –57,396 | 24,472 | –32,924 |
| Provision for pensions | –865 | 773 | –93 |
| Total | –30,528 | 18,304 | –12,224 |
| SEK m. | 2017 |
|---|---|
| Opening net debt | –16,752 |
| Listed Core Investments | |
| Dividends | 8,319 |
| Investments, net of proceeds | –1,246 |
| Management cost | –100 |
| Total | 6,972 |
| Patricia Industries | |
| Proceeds | 7,739 |
| Investments | –412 |
| Internal transfer to Investor | –1,605 |
| Management cost | –225 |
| Other1) | –517 |
| Total | 4,979 |
| EQT | |
| Proceeds (divestitures, fee surplus and carry) | 4,757 |
| Draw-downs (investments and management fees) | –3,773 |
| Management cost | –9 |
| Total | 976 |
| Investor Groupwide | |
| Dividend paid | –8,411 |
| Internal transfer from Patricia Industries | 1,605 |
| Management cost | –121 |
| Other2) | –1,472 |
| Closing net debt | –12,224 |
1) Including currency related effects on investments in foreign currency.
2) Including currency related effects, revaluation of net debt and net interest paid.
% 0 10 20 30 Results after financial items were SEK 37,056 m. (29,275), mainly related to Listed Core Investments, which contributed with dividends of SEK 7,657 m. (7,731) and value changes of SEK 30,242 m. (19,388). The Parent Company invested SEK 2,447 m. (18,286) in financial assets, of which SEK 1,184 m. (17,084) in group companies, and SEK 1,246 m. (1,135) in Listed Core Investments. At year-end, shareholders' equity amounted to SEK 279,149 m. (250,404).
Skuldsättningsgrad Målnivå för skuldsättning, 5-10% Maximal skuldsättningsgrad 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Within Listed Core Investments, we focus on making more companies best-in-class, and on gradually strengthening our ownership in selected holdings. Within Patricia Industries, we focus on continued profitable growth in the existing companies and finding new platform companies in the Nordics and in North America. Within EQT, we will continue to invest in selected funds.
We will continue to focus on operating efficiently and stay committed to paying a steadily rising dividend over time.
In addition to reported values, which are in accordance with IFRS, Investor provides estimated market values of the whollyowned subsidiaries and partner-owned investments within Patricia Industries in order to facilitate the evaluation of Investor's net asset value. This supplementary, non-GAAP, information also increases the consistency between the valuation of Listed Core Investments and our major wholly-owned subsidiaries and 3 Scandinavia.
While the estimated market values might not necessarily reflect our view of the intrinsic values, they reflect how the stock market values similar companies.
The estimated market values are mainly based on valuation multiples, typically Enterprise Value (EV)/LTM1) operating profit, for relevant listed peers and indices. While we focus on EBITA when evaluating the performance of our companies, for valuation purposes, EBITDA multiples are more commonly available, and therefore often used. From the estimated EV, net debt is deducted, and the remaining equity value is multiplied by Patricia Industries' share of capital.
Operating profit is adjusted to reflect, for example, pro forma effects of closed add-on acquisitions and certain non-recurring items. An item is only viewed as non-recurring if it exceeds a certain amount set for each company, is unlikely to affect the company again, and does not result in any future benefit or cost. Investments made less than 18 months ago are valued at the invested amount.
Risk management is an integral part of Investor's board's and management's governance and follow-up of operations. The board is responsible for setting appropriate risk levels and establishing authorities and limits. The boards and the management
teams in the wholly-owned subsidiaries manage the risks in their respective businesses and decide on appropriate risk levels and limits. Commercial and financial risks are the most significant risks and uncertainty factors affecting the Group and the Parent Company.
Commercial risks primarily consist of a high level of exposure to a particular industry or an individual portfolio company, as well as stock market volatility that impacts our net asset value, limits investment potential or prevents divestments at a chosen time. The overall portfolio risk is mitigated by investments in several different industries and geographies. Commercial risks in the wholly-owned subsidiaries are managed by continuous focus on, for example, agile and flexible business models, product development, customer needs, market analysis and cost efficiency.
The main financial risks are market risks, i.e. the risks associated with changes in the value of a financial instrument. For Investor, share price risk is clearly the largest financial risk. When it comes to fluctuations in exchange rates and interest rates, Investor partly uses hedging to manage these risks.
For a more detailed description, see note 3, Risks and risk management, page 45.
| Business area | Valuation methodology | |
|---|---|---|
| Reported net asset value | Adjusted net asset value | |
| Listed Core Investments |
Share price for the class of shares held by Investor. | Share price for the class of shares held by Investor. |
| Patricia Industries | ||
| Subsidiaries | Reported value based on the acquisition method. | The estimated market values are mainly based on valuation mul tiples for relevant listed peers and indices. Other methodologies may also be used, for example relating to real estate assets. New investments are valued at the invested amount during the first 18 months following the acquisition. |
| Partner-owned investments |
Reported value based on the equity method. | The estimated market values are mainly based on valuation multiples for relevant listed peers and indices. New investments are valued at the invested amount during the first 18 months following the acquisition. |
| Financial investments |
Unlisted holdings at multiple or third-party valuation, listed shares at share price. |
Unlisted holdings at multiple or third-party valuation, listed shares at share price. |
| EQT | Unlisted holdings at multiple or third-party valuation, listed shares at share price. |
Unlisted holdings at multiple or third-party valuation, listed shares at share price. |
1) Last twelve months.
We are committed to generating an attractive long-term total return, exceeding the market cost of capital. Our long-term return requirement is the risk free interest rate plus an equity risk premium, in total 8-9 percent annually. Our operating priorities are to grow our net asset value, operate efficiently and pay a steadily rising dividend.
To achieve attractive net asset value growth, we must own high-quality companies and be a good owner, supporting our companies to achieve profitable growth. We also need to allocate our capital successfully.
2017: Our reported net asset value amounted to SEK 336.3 bn. at year-end 2017 (300.1), an increase, with dividend added back, of 15 percent (13). The SIXRX total return index rose by 9 percent (10). The average annualized return on net asset value including dividends added back has been 10 percent over the past ten years and 9 percent over the past 20 years. During 2017, 85 percent of our portfolio companies contributed positively to the reported net asset value.
700 We maintain cost discipline to remain efficient and in order to maximize our operating cash flow.
500 600 0,5 0,6 2017: Management costs were SEK 455 m. (465), corresponding to 0.14 percent of our reported net asset value (0.15).
Mkr % 600 700 0,6 Our dividend policy is to distribute a large percentage of the dividends received from the listed core investments, as well as to make a distribution from other net assets corresponding to a yield in line with the equity market. The goal is to pay a steadily rising dividend.
1) Including restructuring cost of SEK 150 m.
100 200 300 400 2011 2012 2013 1) 2010 2011 0,1 0,2 0,3 0,4 2017: The Board of Directors proposes a SEK 12.00 dividend per share (11.00), to be paid in two installments, SEK 8.00 per share in May, 2018, and SEK 4.00 per share in November, 2018. Based on this proposal, our dividend has increased by 11 percent annually over the past five years and 10 percent over the past ten years.
We are an active, engaged, long-term owner. Through substantial ownership and board participation, we drive the initiatives that we believe will create the most value for each individual company.
We work with our companies to make them best-in-class
We have strong ownership positions, exercise our influence through the boards and develop and implement value creation plans
We act in the best interest of each company from an industrial and long-term perspective
We have a long-term investment perspective and support our companies in their efforts to create sustainable value. Our goal is to build best-in-class companies, aspiring for all of them to outperform their peers and reach their full potential. As our companies operate in different industries and therefore face different opportunities and challenges, we work with each company individually and independently.
Our active ownership model builds on substantial ownership. We own significant minority stakes in our listed core investments, and are often the largest shareholder, as it creates a solid base for active ownership and is a prerequisite for being able to influence the board composition and to impact key strategic decisions. Our subsidiaries are owned by Patricia Industries. The aim is to exceed 90 percent ownership, with the companies' management and board of directors as co-owners, to ensure full alignment. While we are convinced of the merits of our model, successful execution is what ultimately creates value.
We exercise our influence through our representation on the companies' boards. We depend on the boards to ensure the building of strong and healthy companies for the longterm, while at the same time creating the needed urgency around short-term performance. In order for the companies to become or remain best-in-class, it is imperative that they, in accordance with their respective needs, have strong and well-functioning boards.
We believe in boards of limited size, which still allow for sufficient breadth of capabilities while ensuring a high level of individual accountability. Our experience is that a well-functioning board is diverse in terms of age, gender and background. The board should include individuals with relevant industrial, functional and geographic knowledge which is not too narrow or specific. Most importantly, the board should have the experience and competence necessary to support the company's long-term ambitions.
Based on our experience, some areas are particularly important when forming high-performing boards: agenda setting and time allocation, board dynamics, interaction with management, knowledge and capability building, and annual board evaluations.
The value added by the board is dependent on how well it carries out a set of key activities. We place particular emphasis on, e.g.: CEO appointment, strategic planning, investments and M&A, performance management, corporate health including sustainability, talent management and management remuneration, as well as risk management and compliance.
In our listed core investments, we prefer to head the nomination committees and use our professional network to find the best board candidates. We strive to have two board representatives, including the chair.
A clear division of responsibilities between the owners, the boards and the management teams is important. The owners are responsible for ownership-related issues, for example the appointment of the board. The board appoints the CEO, approves the strategy and large investments, and monitors the performance of the company, while the CEO is responsible for executing the strategy and day-to-day operational matters with the mangement team.
The boards of Patricia Industries' companies are typically composed of independent directors from our network and investment professionals from Patricia Industries, led by an independent, non-executive, chair.
Patricia Industries' subsidiaries are wholly-owned, and as such, Patricia Industries and the respective boards have full responsibility to set the direction and follow up on the performance of the companies.
Ownership position
Board composition Benchmarking & fundamental analysis
Value creation plan Continuous follow-up
Interaction with the company
We own companies mainly within engineering, healthcare, financial services and technology; industries we understand well, and in which we can use our experience, network, and financial expertise. Companies in which we invest should be high-quality companies with, e.g., strong market positions, flexible business models, strong corporate cultures, exposure to growth markets, strong cash flow, continuous focus on innovation and R&D, exposure to service and after-market sales and sustainable business models. This goes for our existing companies as well as for potential new investments.
Our investment philosophy is "buy-to-build", and our base case is to develop our companies over time, as long as we see further value creation potential. Our business teams are responsible for regularly updating our view of the long-term fundamental values of our companies, serving as the starting point for our investment decisions.
If we arrive at the conclusion that a certain company no longer offers attractive potential, or that it would be better off with another main owner, we would actively drive an exit process in order to find a better owner for the company and to maximize the value for our shareholders.
We actively support our companies in making attractive investments, and are willing to sacrifice short-term profitability for longer-term value creation. We firmly believe that to become or remain best-in-class, companies must have the ability to invest in innovation, regardless of pressure from the stock market or from other external forces. However, our long-term perspective is never an excuse for weak short-term performance.
Our ownership work is mainly carried out by our business teams consisting of our board representatives, investment managers and analysts.
The business teams analyze the industries and benchmark the companies' performance versus their peers. Based on our analysis, we develop and constantly refine value creation plans for each company. These plans identify strategic key value drivers that we want the companies to focus on over the next three to five years, in order to maximize long-term value and maintain or
achieve best-in-class positions. While our ownership horizon is long-term, we believe in shorter-term plans to create clear focus on execution. The plans typically focus on operational excellence, profitable growth, capital structure, industrial structure and corporate health. During 2017, we continued our efforts to better integrate sustainability into our value creation plans, as it is an integral part of long-term value creation.
We communicate our value creation plans to each listed core investment's board chair at least annually, and encourage the chair to discuss the plan with the rest of the board. Patricia Industries maintains a continuous dialog around value creation with the wholly-owned subsidiaries' management teams and boards.
Within Listed Core Investments, we focus on continuing to strengthen our ownership in selected companies when we find valuations attractive. We are also prepared to participate in rights issues in our companies, providing they are value-creative. While we do not actively seek new investments, we do not rule out additional investments should attractive opportunities arise.
Within Patricia Industries, we focus on investing through our existing wholly-owned subsidiaries, for example to finance organic growth initiatives or complementary acquisitions. While the main priority is to further develop the existing companies, we also look for new platform companies offering attractive long-term profitable growth opportunities, both in the Nordics and in North America.
Regarding EQT, we will continue to invest selectively in its funds, as we expect they will continue to offer attractive returns and cash flow potential over time.
Over the past decade, we have established a strong cash flow generation based on dividends from our listed core investments, distribution from Patricia Industries' wholly-owned subsidiaries and net proceeds from our investments in EQT. This cash flow allows us to finance investments in both existing and new companies without divesting assets and to pay a steadily rising dividend.
Investor has a long tradition of being a responsible owner, company and employer, and firmly believes that sustainability is a prerequisite for creating long-term value. Companies that are best-in-class when it comes to operating in a sustainable way, will be able to provide superior products and services, and recruit the best employees, thereby outperforming competitors long-term.
As a company, Investor continuously works to improve our social, environmental and economic impact. For information about our business model, see pages 8-9.
As an employer, Investor focuses on providing a best-in-class working environment where ethical behavior and respect for each individual is key. This enables us to recruit and retain the best talents. For more information, see page 26.
Investor's direct environmental impact is limited, but we actively strive to limit our impact and carbon footprint. For 2017 we will report our carbon emissions to CDP. The report will be available on our website. Our largest source of emissions is business trips, why we carbon offset all flights.
We are committed to the UN Sustainable Development Goals and have identified contributions to a number of them. Number 8, Decent Work and Economic Growth, is the most central one, as it focuses on how we can contribute to sustainable and long term economic growth, while ensuring safe and fair working conditions. Among other things, Investor has been involved in a working group together with other Swedish investors, with the aim of developing more efficient performance indicators and processes.
Investor's Board of Directors, in cooperation with the Management Group, has formulated an internal framework for how Investor should act as a responsible owner, company and employer. These topics are addressed in our Code of Conduct and in our internal policies for Anti-Corruption, Sustainability and Whistleblowing. Investor's Code of Conduct can be found on our website. All employees and company representatives are expected to comply with our policies. We hold regular trainings and all documentation is available on Investor's intranet. In 2017, a company-wide conference about corporate culture was held, during which discussions about our core values and our Code of Conduct were important parts. Investor's internal regulations are monitored continuously and updated at least annually.
Investor has conducted an in-depth materiality assessment, taking material risks into account. Sustainability risks are further described in note 3, Risks and risk management, on page 48. Our most significant sustainability issues have been identified and prioritized via analyses, ongoing dialogs and interviews with internal and external stakeholders. Investor's most relevant stakeholders are, among others, shareholders, portfolio companies, employees, partners, and society, as they affect how well
Influence on Investors business success
The matrix illustrates Investor's main sustainability priorities and below is a description of our highest priorities.
Investor performs from an economic, environmental and social perspective. The assessment is based on Investor's investing activities and our impact as an owner is covered in "Active ownership for sustainable business models" and "Indirect influence on sustainability related issues". The results from the assessment are used to further pinpoint our sustainability priorities and reporting.
During the past years, Investor has developed a more structured approach to sustainability as a long-term, responsible, and active owner, as this is where we have the most impact. Our most important contribution is when our companies improve their competitiveness by, for example, developing innovative products and services that reduce energy and water consumption, as well as improving waste management, human conditions and decreasing carbon emissions. We have high expectations on our companies' sustainability efforts, guided by Investor's sustainability guidelines and the company specific focus areas.
REPORTING
is included in our
Investor's sustainability guidelines describe our basic expectations which are applicable to all our companies. We expect them to;
Company specific focus areas
Sustainability is included in each of our listed core investments' value creation plans, with an overview of the sustainability performance, our view and two to three company specific focus areas. These differ depending on the risks and opportunities that are relevant for each company. Examples of focus areas are innovation, energy efficiency and diversity. The company specific focus areas are presented annually to Investor's Board of Directors, and we communicate the plan, at least annually, to the chairs and encourage them to discuss it with the rest of the boards. Our sustainability work Annual Report, on our website and in the Communication of Progress (UN Global Compact).
Investor considers sustainability matters in all investing activities. Through the annual sustainability questionnaire, sent out to all portfolio companies for self-assessment, we follow-up and monitor their progress. Our analysts track the development continuously and the company specific focus areas are monitored through the same process and principles as for the value creation plans.
If a serious sustainability related issue occurs in one of our companies, the business team is responsible for raising the matter internally within Investor and for monitoring the steps the company in question takes to address the issue. The business team is also responsible for reporting the process and actions taken within Investor. Investor's board representatives are responsible for ensuring that relevant actions are taken within the company.
Reporting
Our sustainability efforts are disclosed in our Annual Report, on our website and in the Communication of Progress to the UN Global Compact. The listed portfolio companies, a number of the whollyowned subsidiaries within Patricia Industries and EQT publish their own separate sustainability reports, which can be found on their respective websites. Our sustainability KPIs
Are included in the value creation plan for each listed core investment and vary depending on each company's opportunities and challenges.
Reduce risks and costs
INVESTOR'S SUSTAINABILITY GUIDELINES Describe our ten basic expectations, applicable to all our companies.
Create business opportunities
Long-term, responsible and active owner
Through a sustainability questionnaire, we annually monitor our sustainability guidelines, and the company specific focus areas are monitored by our analysts on an ongoing basis and reported annually to Investor's Board of Directors. We compile the companies' sustainability work in an internal index, to evaluate, monitor and develop our companies long-term.
include aggregated data per business area, to give a better understanding of our companies' sustainability efforts. The wholly-owned subsidiaries within Patricia Industries have sustainability sections focusing on the material aspects for each company, taking significant risks into account, and describing policies, activities and outcomes, see pages 19-22.
We support our companies' efforts to create sustainable business models, continuous development and the improvement of their social, environmental and economic impact. Measuring sustainability performance is an important tool to understand the development in our portfolio companies. In the following section, key indicators for the most relevant sustainability areas are presented, for Listed Core Investments, Patricia Industries (wholly-owned subsidiaries and partner-owned investments) and EQT (EQT Group, referring to EQT AB and EQT Partners AB, excluding funds).
To ensure long term competitiveness, the continuous improvement of our companies is highly important. Innovation is a key component in the development of new and increasingly efficient products and services, and, consequently, sustainable business models. The share of resources spent on R&D varies.
1) Aggregated R&D expenses/aggregated sales.
Acting responsibly and ethically is crucial for Investor's companies to maintain high levels of credibility among business partners and other stakeholders. The Code of Conduct and policy frameworks are important components for employees and stakeholders to act responsibly and in accordance with corporate values. 2016 2017 e.t. 0 5 Noterade Patricia Industries EQT Totalt
100%of our portfolio companies have a Code of Conduct.
Dedicated, skilled and healthy employees are fundamental to our companies' development. With nearly 500,000 coworkers worldwide, it is crucial that our companies work with competence development, employee engagement and ensuring a healthy work environment. These figures refer to the number of employees per year-end and are not adjusted for investments or divestments within the companies.
| 2015 | 2016 | 2017 | |
|---|---|---|---|
| Total | 499,074 | 497,074 | 491,777 |
| Listed Core Investments | 478,204 | 475,015 | 468,991 |
| Patricia Industries | 20,500 | 21,602 | 22,275 |
| EQT | 370 | 457 | 511 |
95%of our portfolio companies measure employee satisfaction on a regular basis.
In our history of more than 100 years, Investor has created value through our companies' activities, rendering returns for our companies' shareholders as well as our own. We aim to set a good example when it comes to conducting business in a sustainable way. Our indirect economic influence contributes to job creation and technological innovation in our companies.
In 2017, our total dividend amounted to SEK 8.4 bn., whereof almost SEK 2 bn. was distributed to the Wallenberg Foundations. These foundations' purpose is to grant funding to scientific research in Sweden, which in turn benefits many companies, including ours.
Investor does not tolerate bribery or corruption under any circumstances. We refrain from giving and receiving any inducements, including gifts or other benefits, that could risk creating an unhealthy loyalty or be perceived to do so. Investor expects all our companies to assess the risk for bribery and corruption and have applicable policies, trainings and compliance procedures in place to mitigate the identified risks.
100%of our portfolio companies have an Anti-corruption policy and training in place.
Our companies within Patricia Industries have intensified their work against bribery and corruption during the year. Among others, BraunAbility, Laborie, Permobil and Vectura have strengthened their policies and guidelines and have conducted company-wide trainings, e.g. classroom training, e-Learnings and dilemma discussions, to further increase awareness.
Environmental and climate impact are significant issues. As owners, we support our companies in their pursuit of efficient and sustainable products and services, as well as energy efficient processes. In order to contribute to a more environmentally oriented society, we expect our companies to have environmental and sustainability policies which map how they take responsibility for these issues.
1) Tonnes carbon emissions in relation to sales in SEK m. Figures are based on direct and indirect emissions in Scope 1 and 2, for the two latest available years as reported by our portfolio companies. Sobi's carbon emissions (within Listed Core Investments) only include its Swedish operations.
2016 0 1 Noterade Kärninvesteringar Patricia Industries EQT 2015 2016 2017 The companies within Patricia Industries have focused on improving their measurement of carbon emissions to have a better basis for their prioritization and target setting for reducing the emissions from their operations. Permobil, BraunAbility, Laborie, The Grand Group, Aleris and Vectura subsequently made their first measurement of company-wide emissions during the year.
Investor expects all of our companies to comply with all applicable laws, regulations, and appropriate standards in the markets in which they operate. Respect for human rights, reasonable working conditions and freedom of association are key aspects. Investor supports the UN Global Compact and its ten principles as well as the ILO conventions and the OECD guidelines for Multinational Enterprises. We also support and respect internationally proclaimed human rights. This applies to both the companies' and their suppliers' and partners' operations.
85%of our portfolio companies have signed the UN Global Compact.
100% of our portfolio companies have a whistleblowing system in place to report violations.
Ericsson has defined its salient human rights issues as the right to privacy, the right to freedom of expression and labor rights. They were the first Information, Technology and Communications company to report according to the UN Guiding Principles Reporting Framework. Ericsson conducts regular due diligence processes, identifying, preventing and mitigating its human rights' risks in the countries where it is present.
Atlas Copco has increased its focus on opportunities to partner with customers, in order to further understand and address human rights risks in the value chain. The existing customer assessment tool is complemented by in-depth dialog regarding human rights, and field visits, if relevant.
4 We are convinced that diversity is key to success and expect our companies to encourage and promote diversity in their organizations. Over the last years, diversity has improved. However this remains an important area for improvement. In Investor's Board of Directors and Management Group, female representation amounts to 40 percent and 40 percent respectively.
Female representation in the portfolio companies' Board of Directors amounts to 25 (23) percent. The average age is 57 (57). In total, there are 18 (16) nationalities represented. %
Female representation in the portfolio companies' Management Groups amounts to 25 (25) percent. The average age is 51 (51). In total, there are 23 (19) nationalities represented.
Listed Core Investments, representing 72 percent of our total adjusted assets as of year-end 2017, consists of our listed portfolio companies in which we are a significant minority owner.
Our listed core investments are ABB, AstraZeneca, Atlas Copco, Electrolux, Ericsson, Husqvarna, Nasdaq, Saab, SEB, Sobi and Wärtsilä. These are multinational companies with strong market positions and proven track records. In general, these companies are well positioned and we work continuously to support them to remain or become best-in-class.
During 2017, the total return of Listed Core Investments was strong, amounting to 17 percent. The contribution to reported net asset value was SEK 42.6 bn. Given the proposals ahead of the Annual General Meetings 2018, dividends to be received in 2018 for the fiscal year 2017 are currently estimated at SEK 8.5 bn., an increase of some 2 percent compared to 2017.
We continued our work to further develop the companies with strong focus on opportunities and challenges driven by digitalization.
ABB announced a number of strategic acquisitions, including B&R and GE Industrial Solutions. Wärtsilä received several
important orders within the energy segment, and strengthened its position as an energy systems integrator through the acquisition of Greensmith. Nasdaq also made important acquisitions, including eVestment, a mutual fund data provider.
In Atlas Copco, the preparations for the separate listing of Epiroc, focusing on mining and infrastructure customers, continued. During the autumn, the management team and board of Epiroc were appointed. Assuming approval of the split, Epiroc will become a new listed core investment during 2018.
Following weak performance, Ericsson presented a new strategy. The nomination committee in Ericsson proposed a new Chair and a new board member, to support the company in the execution of the strategy. As a long-term, engaged owner, we fully support the new strategy and the board proposals.
In line with our strategy to gradually increase our ownership in selected listed core investments when we find attractive investment opportunities, we invested SEK 1.2 bn. in Ericsson during the year.
Net Asset Value contribution by company 2017, SEK m.
Provides electrification products, robotics and motion, industrial automation and power grids, pushing the industrial digitalization
| Atlas Copco AstraZeneca Husqvarna Wärtsilä Electrolux Saab ABB SEB |
Nasdaq | Ericsson Sobi |
|---|---|---|
| Key figures, USD m. | 2017 | |
| Net sales | 34,312 | |
| Operating margin, % (operational EBITA) | 12,1 | |
| Market capitalization | 57,120 | |
| Number of employees | 136,000 | |
| Website: www.abb.com | ||
| Chair: Peter Voser | ||
| CEO: Ulrich Spiesshofer | ||
| Board member from Investor: Jacob Wallenberg (Vice Chair) | ||
| Average annual return, % | 5 years | 10 years |
| ABB | 14.2 | 4.9 |
| Peers: Siemens, Schneider, Emerson, Eaton, Rockwell | 12.3 | 7.9 |
| SIXRX | 14.4 | 8.8 |
value of holding
SEK 73 bn. 18% 16.9% / 22.3% of capital / of votes
Provides compressors, vacuum and air treatment systems, construction and mining equipment, power tools and assembly systems
of total adjusted assets
| Key figures, SEK m. | 2017 |
|---|---|
| Net sales | 116,421 |
| Operating margin, % | 20.8 |
| Market capitalization | 420,076 |
| Number of employees | 47,599 |
| Website: www.atlascopco.com | |
| Chair: Hans Stråberg | |
| CEO: Mats Rahmström |
Board members from Investor: Hans Stråberg, Johan Forssell
| Average annual return, % | 5 years | 10 years |
|---|---|---|
| Atlas Copco | 18.3 | 17.7 |
| Peers: Ingersoll-Rand, Sandvik, Caterpillar, Stanley Black & Decker | 16.7 | 11.1 |
| SIXRX | 14.4 | 8.8 |
SEK 44 bn. 11% 20.8% / 20.8% of total adjusted assets of capital / of votes
A financial services group with main focus on the Nordic countries, Germany and the Baltics
value of holding
| Key figures, SEK m. | 2017 |
|---|---|
| Total operating income | 45,609 |
| Operating profit (excl. EO) | 22,702 |
| Market capitalization | 211,293 |
| Number of employees | 14,946 |
| Website: www.seb.se | |
| Chair: Marcus Wallenberg | |
| CEO: Johan Torgeby | |
Board members from Investor: Marcus Wallenberg, Helena Saxon, Sara Öhrvall
| Average annual return, % | 5 years | 10 years |
|---|---|---|
| SEB | 17.5 | 5.1 |
| Peers: Svenska Handelsbanken, Danske Bank, Nordea, Swedbank, DNB | 17.7 | 7.7 |
| SIXRX | 14.4 | 8.8 |
value of holding
SEK 29 bn. 7% 4.1% / 4.1% adjusted assets of capital / of votes
of total
A global, innovation-driven, biopharmaceutical company
| Key figures, USD m. | 2017 | |
|---|---|---|
| Net sales | 22,465 | |
| Operating margin, % (core) | 30.5 | |
| Market capitalization | 87,455 | |
| Number of employees | 61,100 | |
| Website: www.astrazeneca.com | ||
| Chair: Leif Johansson | ||
| CEO: Pascal Soriot | ||
| Board member from Investor: Marcus Wallenberg | ||
| Average annual return, % | 5 years | 10 years |
| AstraZeneca | 18.5 | 13.1 |
| Peers: Merck, Pfizer, Eli Lilly, Novartis, Roche, Sanofi, GlaxoSmith | ||
| Kline, Bristol-Myers Squibb | 10.3 | 7.3 |
| SIXRX | 14.4 | 8.8 |
SEK 13 bn. 3% 30.0% / 39.5% value of holding of total adjusted assets of capital / of votes
Provides products, services and solutions for military defense and civil security
| Key figures, SEK m. | 2017 | |
|---|---|---|
| Net sales | 31,394 | |
| Operating margin, % | 6.9 | |
| Market capitalization | 42,790 | |
| Number of employees | 16,427 | |
| Website: www.saab.com | ||
| Chair: Marcus Wallenberg | ||
| CEO: Håkan Buskhe | ||
| Board members from Investor: Marcus Wallenberg, Daniel Nodhäll | ||
| Average annual return, % | 5 years | 10 years |
| Saab | 26.9 | 14.7 |
| Peers: BAE Systems, Leonardo, Thales | 21.5 | 4.0 |
| SIXRX | 14.4 | 8.8 |
SEK 18 bn. 5% 17.7% / 17.7% adjusted assets of capital / of votes
Provides complete lifecycle power solutions for the marine and energy markets
of total
| Key figures, EUR m. | 2017 | |
|---|---|---|
| Net sales | 4,923 | |
| Operating margin, % (excl. EO) | 12.0 | |
| Market capitalization | 10,375 | |
| Number of employees | 18,065 | |
| Website: www.wartsila.com | ||
| Chair: Mikael Lilius | ||
| CEO: Jaakko Eskola | ||
| Board members from Investor: Tom Johnstone, CBE, Johan Forssell | ||
| Average annual return (EUR), % | 5 years | 10 years |
| Wärtsilä | 13.0 | 12.2 |
| Peers: Rolls-Royce, Alfa Laval | 5.8 | 8.9 |
| SIXRX | 14.4 | 8.8 |
SEK 13 bn. 3% 15.5% / 30.0% of total adjusted assets of capital / of votes
Provides household appliances and appliances for professional use
| Key figures, SEK m. | 2017 | |
|---|---|---|
| Net sales | 122,060 | |
| Operating margin, % | 6.1 | |
| Market capitalization | 81,642 | |
| Number of employees | 55,692 | |
| Website: www.electrolux.com | ||
| Chair: Ronnie Leten | ||
| CEO: Jonas Samuelsson | ||
| Board member from Investor: Petra Hedengran | ||
| Average annual return, % | 5 years | 10 years |
| Electrolux | 12.9 | 12.9 |
| Peers: Whirlpool, Midea, Haier, Arcelik | 25.1 | 19.2 |
| SIXRX | 14.4 | 8.8 |
of total adjusted assets
SEK 12 bn. 3% 11.7% / 11.7%1) of capital / of votes
Provides trading, information and exchange technology services holding
value of
| Key figures, USD m. | 2017 | |
|---|---|---|
| Net sales | 2,428 | |
| Operating margin, % (non-GAAP) | 47.3 | |
| Market capitalization | 13,100 | |
| Number of employees | 4,325 | |
| Website: www.nasdaq.com | ||
| Chair: Michael R. Splinter | ||
| CEO: Adena Friedman | ||
| Board member from Investor: Jacob Wallenberg nominated member ahead of AGM 2018 | ||
| Average annual return (USD), % | 5 years 10 years | |
| Nasdaq | 27.3 | 5.6 |
| Peers: London Stock Exchange, Deutsche Boerse, Intercontinental Exchange | 25.7 | 5.8 |
| SIXRX | 14.4 | 8.8 |
1) No single owner is allowed to vote for more than 5 percent at the AGM.
SEK 12 bn. 3% 6.6% / 22.2% value of holding of total adjusted assets of capital / of votes
Provides communications technology and services
| Key figures, SEK m. | 2017 | |
|---|---|---|
| Net sales | 201,303 | |
| Operating margin, % | –18.9 | |
| Market capitalization | 179,387 | |
| Number of employees | 100,735 | |
| Website: www.ericsson.com | ||
| Chair: Leif Johansson (Ronnie Leten proposed as of AGM 2018) | ||
| CEO: Börje Ekholm | ||
| Board member from Investor: Jacob Wallenberg (Vice Chair) | ||
| Average annual return, % | 5 years | 10 years |
| Ericsson | –0.2 | –0.5 |
| Peers: Amdocs, Nokia, ZTE Corporation | 16.0 | 1.8 |
| SIXRX | 14.4 | 8.8 |
of total
value of holding adjusted assets
SEK 12 bn. 3% 39.5% / 39.5% of capital / of votes
Develops and delivers innovative therapies and services to treat rare diseases
| Key figures, SEK m. | 2017 |
|---|---|
| Net sales | 6,511 |
| Operating margin, % (EBITA) | 31.5 |
| Market capitalization | 30,603 |
| Number of employees | 850 |
Website: www.sobi.se
Chair: Håkan Björklund CEO: Guido Oelkers
Board members from Investor: Lennart Johansson, Helena Saxon
| Average annual return, % | 5 years | 10 years |
|---|---|---|
| Sobi | 25.1 | 12.7 |
| Peers: Shire | 16.1 | 13.6 |
| SIXRX | 14.4 | 8.8 |
SEK 8 bn. 2% 16.8% / 33.0% of total adjusted assets of capital / of votes
Provides outdoor power products, consumer watering products, cutting equipment and diamond tools
value of holding
| Key figures, SEK m. | 2017 | |
|---|---|---|
| Net sales | 39,394 | |
| Operating margin, % | 9.6 | |
| Market capitalization | 46,014 | |
| Number of employees | 13,252 | |
| Website: www.husqvarnagroup.com | ||
| Chair: Tom Johnstone, CBE | ||
| CEO: Kai Wärn | ||
| Board members from Investor: Tom Johnstone, CBE, Daniel Nodhäll | ||
| Average annual return, % | 5 years | 10 years |
| Husqvarna | 18.3 | 4.7 |
Peers: Toro, Emak, Briggs & Stratton 19.2 8.1 SIXRX 14.4 8.8
Patricia Industries, representing 24 percent of our adjusted total assets as of year-end 2017, consists of our wholly-owned and partner-owned companies, as well as financial investments. During 2017, reported revenue growth for the major subsidiaries amounted to 9 percent, of which approximately 2 percent organically. EBITA amounted to approximately SEK 4,737 m., a decline of 4 percent compared to last year.
Patricia Industries' key focus is to invest in and develop whollyowned companies in the Nordics and in North America. With full responsibility for managing the ownership, we operate from offices in Stockholm, New York and Palo Alto, and have a separate investment mandate and a specially appointed Board of Directors.
Our wholly-owned subsidiaries are Aleris, BraunAbility, Laborie, Mölnlycke, Permobil, the Grand Group and Vectura. 3 Scandinavia was founded together with CK Hutchison Holdings in 2000, and has been co-owned since. These companies generally have strong market positions and corporate cultures in industries with long-term growth potential.
Patricia Industries' portfolio also includes Financial Investments, stemming from our former venture capital arm, Investor Growth Capital. Our objective is to maximize the value of these companies and use realized proceeds for investments in existing and new subsidiaries. However, some holdings could become long-term investments.
During 2017, Patricia Industries' companies continued to grow, driven by investments in new products and geographies and sales forces. In addition, more than SEK 1.5 bn. was deployed in add-on acquisitions.
The boards were strengthened in several companies, and new CEOs were appointed in three companies. Furthermore, improvements were made regarding sustainability and compliance in the subsidiaries and in 3 Scandinavia.
Corporate debt markets were benign and our portfolio companies raised or refinanced approximately SEK 15 bn. worth of debt at attractive terms. Mölnlycke distributed SEK 4.3 bn. to Patricia Industries and 3 Scandinavia distributed SEK 1.7 bn.
The search for new subsidiaries continued, but no new companies were added to the portfolio.
Within Financial Investments, divestitures of nine companies, totaling SEK 1.7 bn., were made, further strengthening the capacity to invest in existing or new subsidiaries.
| SEK 59 bn. | 15% | 99.0% / 99.0% |
|---|---|---|
| Estimated value of holding |
of total adjusted assets |
of capital / of votes |
Designs, manufactures and supplies single use products and solutions for managing wounds, improving surgical safety and efficiency, and preventing pressure ulcers
| Key figures, EUR m. | 2017 | 2016 |
|---|---|---|
| Net sales | 1,443 | 1,429 |
| EBITDA | 400 | 428 |
| EBITDA, % | 28 | 30 |
| EBITA | 355 | 392 |
| EBITA, % | 25 | 27 |
| Operating cash flow | 326 | 346 |
| Net debt | 1,084 | 909 |
| Number of employees | 7,570 | 7,505 |
website: www.molnlycke.com
Lennart Johansson (Deputy)
Chair: Gunnar Brock CEO: Richard Twomey
Board Members from Patricia Industries: Gunnar Brock, Christer Eriksson,
| Key performance indicators | 2017 | 2016 |
|---|---|---|
| Emission reduction (Tonnes CO2/tonnes finished product) | 0.38 | 0.39 |
| Employees trained on Code of Conduct, % | 93 | 90 |
| Number of accidents per million working hours (LTA) | 2.5 | 2.4 |
Estimated value of holding adjusted assets
of total
SEK 9 bn. 2% 94.0% / 90.0% of capital / of votes
Provides advanced mobility and seating rehab solutions through development, production and sale of, via distributors, powered and manual wheelchairs as well as cushions and accessories
| Key figures, SEK m. | 2017 | 2016 |
|---|---|---|
| Net sales | 3,649 | 3,335 |
| EBITDA | 692 | 682 |
| EBITDA, % | 19 | 20 |
| EBITA | 558 | 552 |
| EBITA, % | 15 | 17 |
| Operating cash flow | 605 | 687 |
| Net debt | 2,141 | 2,501 |
| Number of employees | 1,620 | 1,375 |
website: www.permobil.com
Chair: Martin Lundstedt CEO: Jon Sintorn
Board Members from Patricia Industries: Christian Cederholm, Thomas Kidane (Deputy)
The principles are primarily addressed in the core values, Code of Conduct, Anti-Corruption Policy and Supplier Code of Conduct.
Launched M3, a power wheelchair with improved comfort, high quality and innovative technology.
| Key performance indicators | 2017 | 2016 |
|---|---|---|
| Delivered medical products, units | 540,000 | 470,000 |
| Employees trained on core values, % | 70 | n/a |
| R&D intensity (R&D / sales), % | 3.2 | 3.0 |
Estimated value of holding
SEK 5 bn. 1% 97.0% / 97.0% of capital / of votes
Develops, designs and distributes innovative capital equipment for the urology and gastroenterology sectors, with complementing and recurring high-volume sales of disposable catheters
of total adjusted assets
| Key figures, USD m. | 2017 | 2016 |
|---|---|---|
| Net sales | 134 | 123 |
| EBITDA | 29 | 23 |
| EBITDA, % | 22 | 19 |
| EBITA | 26 | 20 |
| EBITA, % | 19 | 17 |
| Operating cash flow | 23 | 10 |
| Net debt | 57 | 67 |
| Number of employees | 470 | 425 |
website: www.laborie.com
Chair: Bo Jesper Hansen CEO: Michael Frazette
Board Members from Patricia Industries: Yuriy Prilutskiy, Fred Wallenberg (Deputy)
| Key performance indicators | 2017 | 2016 |
|---|---|---|
| Employees trained on Code of Conduct, % | 96 | 0 |
| Employees trained on Anti-Corruption, % | 99 | 0 |
| R&D intensity (R&D/sales), % | 4.0 | 3.3 |
SEK 3 bn. 1% 100% / 100% Estimated value of holding of total adjusted assets
of capital / of votes
A private health care and care services provider for the Scandinavian market. The ambition is to be a first rate long-term partner to the public health and care systems
| Key figures, SEK m. | 2017 | 2016 |
|---|---|---|
| Net sales | 10,445 | 9,896 |
| EBITDA | 472 | 494 |
| EBITDA, % | 5 | 5 |
| EBITA | 215 | 288 |
| EBITA, % | 2 | 3 |
| Operating cash flow | 259 | 281 |
| Net debt | 2,597 | 2,584 |
| Number of employees | 8,665 | 8,690 |
website: www.aleris.se
Chair: Rickard Gustafson CEO: Alexander Wennergren Helm Board Member from Patricia Industries: Christian Cederholm
The principles are addressed in the overall quality policy, HR handbooks, Code of Conduct and ethical guidelines, as well as general policy documents.
Establishing a way-of-working which includes strengthening the customer quality and experience, by initiating managerial training.
| Key performance indicators | 2017 | 2016 |
|---|---|---|
| Absentee rate, % | 7.3 | 7.1 |
| Customer satisfaction, NPS (within Healthcare in Sweden) | 85 | 83 |
| Hours spent on strengthening customer experience | 12,500 | n.a. |
| SEK 3 bn. | 1% | 95.0% / 95.0% |
|---|---|---|
| Estimated value of holding |
of total adjusted assets |
of capital / of votes |
Global manufacturer of automotive mobility products engaged in the design, development and distribution of wheelchair accessible vehicles (WAV) and wheelchair lifts
| Key figures, USD m. | 2017 | 2016 |
|---|---|---|
| Net sales | 531 | 454 |
| EBITDA | 38 | 40 |
| EBITDA, % | 7 | 9 |
| EBITA | 32 | 36 |
| EBITA, % | 6 | 8 |
| Operating cash flow | 15 | 38 |
| Net debt | 106 | 59 |
| Number of employees | 1,308 | 1,075 |
website: www.braunability.com
Chair: Keith McLoughlin CEO: Staci Kroon
Board Members from Patricia Industries: Noah Walley, Yuriy Prilutskiy (Deputy)
| Key performance indicators | 2017 | 2016 |
|---|---|---|
| Customer Satisfaction, NPS | 78 | 77 |
| Employees trained on Anti-Corruption, % | 99 | 0 |
| First-Time Pass Rate (Quality), % | 89 | 83 |
| Injury Rate, TCIR | 1.9 | 4.0 |
SEK 3 bn. 1% 100% / 100% Estimated value of holding of total adjusted assets
of capital / of votes
Develops, owns and manages real estate with a long-term focus on community service, office and hotels. Manages the whole value chain, from land acquisition to development and management
| Key figures, SEK m. | 2017 | 2016 |
|---|---|---|
| Net sales | 208 | 184 |
| EBITDA | 134 | 115 |
| EBITDA, % | 65 | 62 |
| EBITA, adjusted | 48 | 41 |
| EBITA, adjusted, % | 23 | 22 |
| Operating cash flow | –194 | –142 |
| Net debt | 1,809 | 1,456 |
| Number of employees | 17 | 16 |
website: www.vecturafastigheter.se
Chair: Gustaf Hermelin CEO: Susanne Ekblom
Board Members from Patricia Industries: Lennart Johansson, Thomas Kidane
The principles are addressed in the Environmental- and Sustainability Policy and in the Code of Conduct.
Implemented an energy monitoring system to control and reduce energy consumption.
| 2017 | 2016 |
|---|---|
| 38 | n/a |
| 68 | 77 |
| 63 | 65 |
| 63 | 51 |
of capital / of votes
SEK 0.7 bn. <1% 100% / 100%
of total adjusted assets Estimated value of holding
SEK 8 bn. 2% 40.0% / 40.0% of capital / of votes
Provides mobile voice and broadband services in Sweden and Denmark
of total adjusted assets
| Key figures, SEK m. | 2017 | 2016 |
|---|---|---|
| Net sales | 11,444 | 11,480 |
| Sweden, SEK m. | 7,723 | 7,374 |
| Denmark, DKK m. | 2,865 | 3,242 |
| EBITDA | 2,639 | 3,063 |
| Sweden, SEK m. | 2,280 | 2,255 |
| Denmark, DKK m. | 292 | 633 |
| EBITDA, % | 23 | 27 |
| Sweden | 30 | 31 |
| Denmark | 10 | 20 |
| Net debt | 4,101 | 1,372 |
| Subscribers | 3,297,000 | 3,303,000 |
| Sweden | 1,986,000 | 2,067,000 |
| Denmark | 1,311,000 | 1,236,000 |
| Number of employees | 2,070 | 2,160 |
website: www.tre.se
Chair: Canning Fok
CEO, Sweden: Johan Johansson Denmark: Morten Christiansen
Board Members from Patricia Industries: Christian Cederholm, Lennart Johansson
Financial Investments SEK 7 bn. 2% Estimated value of total adjusted assets
Financial Investments consists of investments in which the investment horizon has not yet been defined. Our objective is to maximize the value and use realized proceeds for investments in existing and new subsidiaries. However, some holdings could become long-term investments.
As of December 31, 2017, European, U.S. and Asian holdings represented 23, 53, and 24 percent of the total value of the Financial Investments. 27 percent of the net asset value of the Financial Investments is represented by investments in publicly listed companies.
The five largest investments represented 47 percent of the total value of the Financial Investments.
The Grand Group offers accommodation, food & beverage, spa, conference and banqueting. It consists of Scandinavia's leading hotels Grand Hôtel and Lydmar Hotel
Estimated value of holding
| Key figures, SEK m. | 2017 | 2016 |
|---|---|---|
| Net sales | 646 | 635 |
| EBITDA | 55 | 51 |
| EBITDA, % | 9 | 8 |
| EBITA | 24 | 24 |
| EBITA, % | 4 | 4 |
| Operating cash flow | –52 | 1 |
| Net debt | –42 | –89 |
| Number of employees | 355 | 360 |
website: www.grandhotel.se and www.lydmar.com
Chair: Peter Wallenberg Jr CEO: Pia Djupmark
Board Members from Patricia Industries: Hanna Eiderbrant, Jenny Ashman Haquinius (Deputy)
The principles are described in the core values, Code of Conduct, Environmental Policy and HR manual.
Extensive work with the core values was conducted and the Code of Conduct updated accordingly.
| Key performance indicators | 2017 | 2016 | |
|---|---|---|---|
| Absentee rate, % | 4.0 | 3.9 | |
| Carbon emissions, tonnes (Scope 1 and 2) | 389 | 387 | |
| Customer satisfaction, NPS | 72 | 73 |
EQT is a leading investment firm. Our investments in its funds and our 19 percent ownership in EQT AB represent 4 percent of our assets as of yearend 2017. Over time, our investments in EQT have generated strong returns, and we will continue to invest in EQT's funds.
EQT was founded in 1994, with Investor as one of its three founders. EQT operates in Europe, the U.S. and Asia within several different asset classes: equity, mid-market, infrastructure, credit and ventures. Since inception, EQT has raised approximately EUR 49 bn. from more than 500 institutional investors, invested in 210 companies and made 100 exits in a variety of industries and markets.
EQT has always focused on the industrial development of its companies, and the clear majority of the returns generated is attributable to operational improvements such as increased sales and efficiency gains. On average, portfolio companies have increased the number of employees by 9 percent, sales by 10 percent and earnings by 11 percent annually, during EQT's ownership.
As a sponsor since inception, Investor has committed capital to the vast majority of the funds that EQT has raised, and today, Investor owns 19 percent of EQT AB, which allows us to receive carried interest and fee surplus on top of the returns received as a limited partner. This represents a significant enhancement of the return from each respective fund over time.
An investment firm with portfolio companies in Europe, Asia and the U.S.
| Impact on Investor's net asset value, SEK m. | 2017 | 2016 |
|---|---|---|
| Net asset value, beginning of the year | 13,996 | 13,021 |
| Contribution to net asset value (value change) | 3,144 | 1,986 |
| Draw-downs (investments and management fees) | 3,781 | 2,864 |
| Proceeds to Investor (divestitures, fee surplus and carry) | –4,757 | –3,874 |
| Net asset value, end of year | 16,165 | 13,996 |
| Number of employees | 511 | 457 |
Website: www.eqt.se Chair: Conni Jonsson
CEO: Thomas von Koch Board Member from Investor: Johan Forssell
| % SEK m. |
Fund size, EUR m. |
Investor's share, % |
Investor's remaining commit ment, SEK m. |
Reported value, Mkr SEK m. |
|---|---|---|---|---|
| 35 Fully invested funds1) |
17,561 | 1,336 | 5 000 9,659 |
|
| EQT VII | 6,817 | 5 | 1,335 | 2,492 3 600 |
| 25 EQT Infrastructure II |
1,938 | 8 | 276 | 1,354 |
| EQT Infrastructure III | 4,000 | 5 | 1,523 | 498 2 200 |
| 15 EQT Credit Fund II |
845 | 10 | 379 | 355 |
| EQT Credit Opportunities III | 1,272 | 10 | 1,173 | 107 800 |
| 5 EQT Ventures2) |
461 | 11 | 366 | 102 |
| 0 EQT Midmarket US |
616 | 30 | 785 | 0 826 –600 |
| –5 EQT Midmarket Europe |
1,616 | 9 | 1,240 | 212 |
| EQT Real Estate I | 420 | 16 | 452 | 203 −2 000 |
| –15 EQT new funds 2010 2011 2012 |
2013 2014 |
2015 | 7,746 2016 |
236 2017 |
| EQT AB | 19 | 122 | ||
| Värdeförändring (konstant valuta), % Total |
35,545 | 16,610 | 16,165 |
1) EQT III, EQT IV, EQT V, EQT VI, EQT Expansion Capital I and II, EQT Greater China II, Nettokassaflöde, Mkr
EQT Infrastructure, EQT Credit Fund, EQT Opportunity, EQT Mid Market. 2) Fund commitment excluding the EQT Ventures Co-Investment Schemes and the EQT Ventures Mentor Funds.
The total return for the Investor B-share in 2017 was 13 percent, while the SIXRX total return index rose by 9 percent. The average annualized total return has been 14 percent over the past ten years and 11 percent over the past 20 years, compared to 9 percent for the SIXRX Return Index for both periods. The price of Investor's A share increased by 9 percent during the year from SEK 336.80 to SEK 367.50. The B share increased by 10 percent from SEK 340.50 to SEK 374.10.
During 2017, the turnover of Investor shares on Nasdaq Stockholm totaled 289 million (321), of which 23 million were A-shares (23) and 266 million were B-shares (298). This corresponded to a turnover rate of 7 percent (7) for the A- share and 58 percent for the B-share (65), compared with 48 percent for Nasdaq Stockholm as a whole (69). On average, 1.3 million Investor shares were traded daily (1.3). Investor was the 10th most traded name on Nasdaq Stockholm in 2017 by total turnover (16th). Additional Investor shares were also traded on other exchanges, see page 25.
At year-end, our share capital totaled SEK 4,795 m., represented by 767,175,030 registered shares, of which 2,392,938 owned by the company, each with a quota value of SEK 6.25. We had a total of 196,900 shareholders at year-end 2017 (175,478). In terms of numbers, the largest category of shareholders is private investors, and in terms of the percentage of share capital held, institutional owners dominate. The largest single shareholder category is foundations, of which the three largest are the Wallenberg foundations, whose aggregated holding amounts to 23.4 percent of the capital and 50.1 percent of the votes in Investor.
Within the framework of our long-term share based remuneration, all employees are given the opportunity to invest approximately 10-15 percent (or in some cases more) of their gross base salary in Investor shares. Approximately 95 percent of Investor's employees participated in the Long-Term Variable Remuneration program 2017 (93).
For more information on remuneration, see Investor's employees, page 26 and note 9, Employees and personnel costs, page 52.
In 2017, no shares were repurchased. However, 400,449 B-shares were transferred. The net decrease in holdings of own shares is attributable to repurchase of own shares and transfer of shares and options within Investor's long-term variable remuneration program.
| 2017 | Number of shares held by Investor |
Share of total number of outstanding shares, % |
Nominal value, SEK m. |
Trans action price, SEK m. |
|---|---|---|---|---|
| Opening balance B-shares |
2,793,387 | 0.36 | 17.5 | |
| Repurchased | ||||
| B-shares | 0 | 0.00 | 0.0 | |
| Transferred B-shares | –400,449 | –0.05 | –2.5 | –52.2 |
| Closing balance | 2,392,938 | 0.31 | 15.0 |
The board proposes a dividend to shareholders of SEK 12.00 per share (11.00), to be paid in two installments, SEK 8.00 per share in May, 2018, and SEK 4.00 per share in November, 2018, corresponding to a maximum of SEK 9,206 m. to be distributed (8,439), based on the total number of registered shares.
Our dividend policy is to distribute a large percentage of the dividends received from the listed core investments, as well as to make a distribution from other net assets corresponding to a yield in line with the equity market. The goal is to pay a steadily rising dividend.
| % of | % of | |
|---|---|---|
| 12/31 2017 | capital | votes |
| Knut and Alice Wallenbergs Foundation | 20.0 | 43.0 |
| Alecta Pension Insurance | 5.9 | 3.1 |
| AMF Insurance & Funds | 4.2 | 8.6 |
| SEB Foundation | 2.3 | 4.9 |
| First Eagle Investment Management | 2.2 | 3.0 |
| Marianne and Marcus Wallenbergs | ||
| Foundation | 1.9 | 4.1 |
| SEB-funds | 1.8 | 0.5 |
| Norges Bank | 1.7 | 0.4 |
| BlackRock | 1.5 | 0.3 |
| Vanguard | 1.4 | 0.3 |
| Marcus and Amalia Wallenbergs | ||
| Memorial Fund | 1.4 | 3.1 |
| Swedbank Robur funds | 1.3 | 0.6 |
| AFA Insurance | 1.0 | 0.6 |
| Life Insurance Skandia | 0.9 | 1.2 |
| Harbor Capital Advisors | 0.8 | 0.2 |
1) Swedish owners are directly registered or registered in the name of nominees. Foreign owners through filings, custodian banks are excluded. Source: Modular Finance.
| Number of shares | Number of shareholders |
Holding, % |
|---|---|---|
| 1–500 | 155,411 | 3 |
| 501–1,000 | 18,530 | 2 |
| 1,001–5,000 | 17,968 | 5 |
| 5,001–10,000 | 2,363 | 2 |
| 10,001–15,000 | 725 | 1 |
| 15,001–20,000 | 426 | 1 |
| 20,001– | 1,477 | 86 |
| Total | 196,900 | 100 |
• Kepler Cheuvreux • Nordea • Pareto Securities
• SEB
Firms publishing analyses of Investor AB
Distribution of ownership by country,
Lit: Traditional trading, buy- and sellorders are public Off-book: trading outside the exchange, registered afterwards Auction: auctionprocedure at excange Dark pool: buy- and sellorders are not public
Magnus Dalhammar: +46 8 614 2130 [email protected]
IR Group: +46 8 614 2131 www.investorab.com
Our employees are central to our value creation model. It is only with their determination and dedication that we can create long-term value for our shareholders and run our operations efficiently. We focus on creating a sustainable and attractive workplace that emphasizes competence, professionalism and quality awareness.
We focus on the long-term development of our employees and offer opportunities to continuously learn and build skills and knowledge. We offer external training, such as leadership and mentor programs, as well as rotations internally and to our portfolio companies. In addition, we regularly organize internal activities to provide information, increase competence and share knowledge. Such activities could be theme meetings, conferences and leadership development for the leaders at Investor.
To ensure that we offer targeted and relevant development opportunities, all employees participate in Performance & Development discussions. The overall objective is to develop our people and support them to reach their full potential, as well as to create a feedback-rich environment and encourage new ideas. Feedback is given frequently and individual goals are reviewed throughout the year including two formal check-ins.
A strong corporate culture is important if we are to successfully achieve our vision and goals as well as be able to recruit and retain key competence. We set high ethical standards and our core values; Create value, Continuous improvement, Contribute your view and Care for people, are well-known in our organization and an integral part of our way of doing business. During the year, Investor held a group-wide employee conference, with the overall theme to further develop our corporate culture. We conduct employee surveys regularly to ensure that the values are relevant and that we continue to offer an attractive workplace.
We believe that diversity and inclusion, making use of the total talent base available, build stronger and more dynamic teams. Our organization is well diversified in terms of age, gender and expertise. We conduct an annual salary survey to ensure marketbased and equal compensation and we focus our efforts to increase diversity among internship applicants. Our ambition is to continue to have at least one man and one woman in the final process for every recruitment.
In conjunction with the debate about #MeToo, we reminded our employees on several occasions of our zero tolerance policy against all forms of harassment and discrimination.
As part of finding and attracting future employees and strengthening our employer brand, we offer talented students internships at our different departments. During 2017, 14 interns worked at Investor. We also host student presentations and meet with students at selected university fairs on a regular basis.
Högskole-1) Excluding the operating subsidiaries. 2) Does not include Patricia Industries North America.
Corporate governance practices refer to the decision making systems through which owners, directly or indirectly, govern a company. Investor's business model of active ownership is to create value in the portfolio companies. Good corporate governance is not only an important matter for Investor's own organization, it is an important part of Investor's core business.
Investor is a Swedish limited liability company, publicly traded on Nasdaq Stockholm, and adheres to the Swedish Code of Corporate Governance (the Code). The Code is published on www.corporategovernanceboard.se, where a description of the Swedish Corporate Governance model can be found.
This Corporate Governance Report is submitted in accordance with the Swedish Annual Accounts Act and the Code. It explains how Investor has conducted its corporate governance activities during the 2017 financial year.
Investor did not deviate from the Nasdaq Stockholm Rule Book for Issuers nor from good stock market practice. Regarding deviation from the Code, see detailed information under section Deviation from the Code, page 32.
The Corporate Governance Report has been reviewed by Investor's auditor, as presented on page 93.
1) Within given mandate from Investor's Board of Directors the operation within Patricia Industries is run independently. The Board of Patricia Industries consists of Gunnar Brock, Sune Carlsson, Johan Forssell, Jacob Wallenberg (Vice Chair) and Marcus Wallenberg (Chair).
2) The CEO of Investor has the overall responsibility for the whole Investor Group. In the daily operations, the CEO of Investor, however works closer to the two business areas Listed Core Investments and EQT, as Patricia Industries has a Board of Directors that independently makes investment and management decisions, within a given mandate from Investor's Board of Directors, regarding the companies within Patricia Industries. The CEO of Investor is a member of the Patricia Industries' Board.
The 2018 Annual General Meeting (AGM) of Investor will take place on May 8 at the City Conference Centre in Stockholm. Shareholders who would like to have a particular matter discussed at the AGM should have submitted such request to the Nomination Committee before March 13 and to the company before March 20, 2018. Contact information is available on the company website.
Each Investor shareholder entitled to vote may vote for the entire number of the shares owned and represented by the shareholder without restrictions to the number of votes. A-shares are entitled to one vote and B-shares are entitled to 1/10 vote.
In addition to what follows from applicable law regarding shareholders' right to participate at General Meetings, under Investor's Articles of Association shareholders must (within the time stated in the convening notice) give notice of their attendance and notify the company of any intention to bring assistance.
The documents from the AGMs and the minutes recorded at the AGMs are published on the website.
At year-end 2017, Investor had 196,900 shareholders according to the register of shareholders maintained by Euroclear Sweden. Shareholdings in Investor representing at least one tenth of the votes of all shares in the company is Knut and Alice Wallenberg Foundation with 20.0 percent of the capital and 43.0 percent of the votes.
Since year 2000, the Board has requested and been granted a mandate by the AGM to repurchase and transfer Investor shares. The 2018 AGM is proposed to grant a corresponding authorization to the Board to repurchase and transfer Investor shares as was granted by the 2017 AGM.
For more information about the Investor share and the largest shareholders, see page 24.
According to the current instruction for the Nomination Committee, the Committee shall consist of one member from each of the four shareholders or groups of shareholders controlling the largest number of votes that desire to appoint a member and the Chair of the Board. The Nomination Committee is obliged to perform its tasks according to the Code. For further information regarding instruction for the Nomination Committee, see the website. The members of the Nomination Committee for the 2018 AGM:
• Ramsay Brufer, Alecta
• Jacob Wallenberg, Chair of the Board of Directors
The composition of the Nomination Committee meets the requirements concerning the independence of the Nomination Committee.
The AGM documents related to the Nomination Committee are published on the website.
Pursuant to its Articles of Association, Investor must have one or two auditors, and no more than two deputies. A registered firm of auditors may be appointed as the company's auditor. The auditor is appointed by the AGM for a mandate period of one year, as nothing further is stated in Investor's Articles of Association.
At the 2017 AGM, the registered auditing company, Deloitte AB was re-elected as auditor for the period until the end of the 2018 AGM. Deloitte AB has been the auditor in charge since 2013. The Authorized Public Accountant Thomas Strömberg is since 2013 the auditor in charge for the audit.
For details on fees to auditors, see note 10, Auditor's fees and expenses.
The Board of Directors is ultimately responsible for Investor's organization and administration. Pursuant to the Articles of Association, the Board must consist of no less than three and no more than thirteen Directors, as well as no more than four deputies. Since the 2017 AGM, the Board has consisted of eleven members and no deputies. The CEO is the only Board member employed by the company.
The Nomination Committee applied rule 4.1 of the Swedish Corporate Governance Code as diversity policy in its nomination work with the aim to achieve a well functioning composition of the Board of Directors when it comes to diversity and breadth, as relates to i.a. gender, nationality, age and industry experiences. The current Board composition is the result of the work of the Nomination Committee prior to the 2017 AGM. The Nomination Committee is of the opinion that the Board of Directors has an appropriate composition and size and reflects diversity and good variety regarding qualifications and experiences within areas of strategic importance to Investor, such as industrial business development, corporate governance and the financial and capital market. In respect of gender balance, excluding the CEO, 40 percent of the Board of Directors are women and in respect of nationality, 30 percent are non-Swedish citizens and 20 percent are non-Nordic citizens of the Board of Directors, excluding the CEO.
The composition of Investor's Board meets the requirements concerning the independence of Directors. Several of the Board members are Directors of Investor's holdings and they receive remuneration from these companies. This consideration is not considered to entail a dependence of these members on Investor or its Management. Investor is an industrial holding company and works actively through the Boards of its holdings to identify and drive value-creating initiatives. The work of the Board of Directors in Investor's holdings is the core of Investor's active ownership model. For Investor, where a fundamental component is to have the right Board in each company, it is natural that Members of Investor's Board of Directors and Management have Board assignments in Investor's holdings.
A more detailed presentation of the Board is found on page 34 and on the website.
Pursuant to the Rules of Procedure, the Chair of the Board initiates an annual evaluation of the performance of the Board. The objective of the evaluation is to provide insight into the Board members' opinions about the performance of the Board and identify measures that could make the work of the Board more effective. A secondary objective is to form an overview of the areas the Board believes should be afforded greater scope and where additional expertise might be needed within the Board.
The 2017 evaluation was answered by each Board member. In addition, the Chair met with each Board member separately to discuss the work done by the Board during the year.
The Board discussed the results of this year's evaluation and the Chair of the Board reported them to the Nomination Committee.
Investor's Board continuously evaluates the performance of the CEO by monitoring the development of the business in relation to the established objectives. A formal performance review is carried out once a year.
During the year, the Board held 15 meetings (of which three per capsulam). The Board members' attendance is shown in the adjacent table. The secretary of the Board meetings was, with a few exceptions, General Counsel, Petra Hedengran. Prior to each meeting, Board members were provided with written information on the issues that were to be discussed. Each Board meeting has included an item on the agenda during which Board members had the opportunity to discuss without representatives of the company's Management being present.
The Board devoted considerable time to value creation plans in the portfolio companies, acquisition of shares in, inter alia, Ericsson, investments in EQT funds and other strategic matters.
The Board devoted time to both internal and external presentations of the financial markets. The Board discussed the development and the effects on industries, markets and individual companies, paying particularly close attention to Investor's holdings and the long-term strategies of such holdings. The CEOs of ABB, Electrolux and Husqvarna presented their companies. The Board also visited Atlas Copco's plant in Antwerp and met repre-
| Attendance record, Board and Committee meetings 2017 |
Board remuneration resolved by the 2017 AGM, SEK t. | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Member | Position | Board meetings1) |
Audit and Risk Committee |
Remuneration Committee1) |
Board fee2) | Audit and Risk Committee |
Remuneration Committee |
Total | |
| Jacob Wallenberg | Chair | 12/12 | 6/6 | 6/6 | 2,450 | 175 | 165 | 2,790 | |
| Marcus Wallenberg | Vice Chair | 12/12 | 1,420 | 1,420 | |||||
| Josef Ackermann | Member | 11/12 | 655 | 655 | |||||
| Gunnar Brock | Member | 10/12 | 5/6 | 655 | 175 | 830 | |||
| Johan Forssell | Member/CEO | 12/12 | |||||||
| Magdalena Gerger | Member | 12/12 | 6/6 | 655 | 175 | 830 | |||
| Tom Johnstone, CBE | Member | 11/12 | 6/6 | 655 | 85 | 740 | |||
| Grace Reksten Skaugen | Member | 12/12 | 6/6 | 655 | 260 | 915 | |||
| Hans Stråberg | Member | 12/12 | 655 | 655 | |||||
| Lena Treschow Torell | Member | 12/12 | 6/6 | 655 | 85 | 740 | |||
| Sara Öhrvall | Member | 12/12 | 655 | 655 | |||||
| Total | 9,110 | 785 | 335 | 10,230 |
1) Per capsulam not included.
2) Non-employee Directors can choose to receive part of their Board remuneration (excluding Committee remuneration) in the form of synthetic shares.
For total value of the Board fee including synthetic shares and dividends at year-end, see note 9, Employees and personnel costs.
sentatives of the EU Commission and the EU Parliament in Brussels. Furthermore, the Management for Patricia Industries held a presentation on the development of this business area and its portfolio companies including the key points in Patricia Industries' value creation plans.
An important part of the Board's work is the financial reports presented at every regular Board meeting, including those prior to the interim report, the interim management statements and the year-end report. The Board also receives regular monthly reports about the companies within the business area Patricia Industries. At regular Board meetings reports are delivered on the ongoing operations in the business areas, together with indepth analyses and proposed actions regarding holdings. Succession planning is also evaluated yearly by the Board.
Committee work is an important task performed by the Board. For a description of the work conducted by the Committees during 2017, see the adjacent table.
During the year, the company's Management presented value creation plans for Listed Core Investments, including analyses of the holdings' operations and development potential in the business areas where they are active. These analyses were discussed and assessed by the Board with a focus on the individual companies as well as in the context of overall strategic discussions. The Board also discussed the overall strategy for Investor thoroughly at the yearly strategy review.
The Board regularly received and discussed reports on the composition of portfolios and developments within Patricia Industries and Investor's involvement in EQT.
In addition to participating in meetings of the Audit and Risk Committee, the company's auditor also attended a Board meeting during which Board members had the opportunity to pose questions to the auditor without representatives of the company's Management being present.
In order to increase the efficiency of its work and enable a more detailed analysis of certain issues, the Board has formed Committees. The Board Committees are the Audit and Risk Committee and the Remuneration Committee. The members of the Committees are appointed for a maximum of one year at the statutory Board meeting. The Committee's duties and decision making authorities are regulated in the annually approved Committee instructions.
The primary objective of the Committees is to provide preparatory and administrative support to the Board. The issues considered at Committee meetings are recorded in minutes and reported at the next Board meeting. Representatives from the company's specialist functions always participate in Committee meetings.
| Board Committees' work 2017 | ||
|---|---|---|
| Audit and Risk Committee | Remuneration Committee | |
| Members | Grace Reksten Skaugen (Chair) Gunnar Brock Magdalena Gerger Jacob Wallenberg |
Jacob Wallenberg (Chair) Tom Johnstone, CBE Lena Treschow Torell |
| Number of meetings |
6 | 8 (of which 2 per capsulam) |
| Focus areas in 2017 |
• Analyzed each interim report, interim management statement the year-end report and the Annual report for completeness and accuracy. • Evaluated accounting and valuation principles, incl. impair ments and estimated market values for Patricia Industries. • Followed-up on the new Sustainability reporting. • Followed-up Audit reports. • Followed-up on the internal control in the financial reporting process. • Evaluated risk for errors in the financial reporting and followed-up recommendations on improvements. • Evaluated the auditor performance and presented to the Nomination Committee. • Followed-up on limits, mandates and risk exposure. • Approved updates of Group policies. • Assessed the effect on Investor regarding new and coming regulations. |
• Evaluated and approved remuneration structures for personnel and salary reviews for Extended Management Group. • Evaluated and assessed the CEO's goals and terms and condi tions for remuneration, which were then approved by the Board. • Discussed strategic personnel and compensation related issues. • Monitored and evaluated guidelines for salary and other remuneration including the long-term variable remuneration programs, both ongoing and those that have ended during the year. • Monitored and evaluated the application of guidelines for sal ary and other remuneration that were approved by the AGM. • Proposed to the Board to submit to the AGM 2018 long-term variable remuneration programs, both for Investor and Patricia Industries. |
The Audit and Risk Committee is responsible for assuring the quality of the financial reporting and the efficiency in the internal control system. The Audit and Risk Committee also evaluates financial strategies, risk exposure and that the company's compliance efforts are effective. The Audit and Risk Committee is the primary way in which the Board and the company's auditor communicate with each other.
The responsibilities of the Remuneration Committee are, among other things, to monitor, evaluate and prepare guidelines for salary and other remuneration and to decide remuneration to the members of the Extended Management Group, except for the CEO for whom the Board as a whole sets the remuneration.
The Board appoints the CEO and approves the Instruction for the CEO. The CEO, Johan Forssell, is responsible for the day to day business of the company. The responsibilities include, among other things, ongoing investments and divestments, personnel, finance and accounting issues and regular contact with the company's stakeholders, such as public authorities and the financial market. The CEO ensures that the Board is provided with the requisite material for making well-informed decisions.
For his support the CEO has appointed a Management Group consisting of Petra Hedengran, General Counsel and Head of Corporate Governance and EQT, Daniel Nodhäll, Head of Listed Core Investments, Helena Saxon, CFO, and Stefan Stern, Head of Corporate Relations, Sustainability and Communications. Four to five times a year the Management Group holds meetings focused on the company's strategy and risk assessment.
The Management Group regularly works with specific business transactions, follow-up on value creation plans, sustainability issues, the company's financial flexibility and organization and personnel related matters.
During the year an Extended Management Group was established, which also includes the Co-heads of Patricia Industries; Christian Cederholm and Noah Walley and the Head of Human Resources; Jessica Häggström. The Extended Management Group meets approximately six times a year. For members of the whole Extended Management Group, see page 36.
The Risk Control function is responsible for coordinating the internal reporting of Investor's significant risks at the aggregate level. The Risk Control function reports to the Audit and Risk Committee.
The Compliance function supports Investor's compliance with laws and regulations, and maintains internal regulatory systems and education to this end. The Compliance function reports to the Audit and Risk Committee.
The review function, Internal Control, provides objective support to the Board on matters relating to the internal control
structure, partly by investigating major areas of risk and partly by performing reviews and follow-ups in selected areas. The Internal Control function regularly provides reports on its work to the Audit and Risk Committee during the year.
The total remuneration to the Board approved by the 2017 AGM was SEK 10,230 t. Since the 2008 AGM, it is possible for Board members to receive a portion of their remuneration in the form of synthetic shares. Information on specific remuneration is provided in the adjacent table and in note 9, Employees and personnel costs.
At the statutory Board meeting in May 2017, the Board adopted, as in 2011-2016, a policy stating that Board members, who do not already have such holdings, are expected to, over a five-year period, acquire an ownership in Investor shares (or a corresponding exposure to the Investor share, e.g. in the form of synthetic shares) with a market value equivalent to at least one year's Board remuneration, before taxes, excluding remuneration for Committee work.
The total remuneration for the CEO is determined by the Board. Remuneration issues concerning other members of the Extended Management Group are decided by the Remuneration Committee, after which the Board is informed.
Investor's policy is for the Extended Management Group to own shares in Investor corresponding to a market value of at least one year's gross salary for the CEO and at least half of one year's gross salary for the other members of the Extended Management Group.
See note 9, Employees and personnel costs, and on the website, for the most recently approved guidelines on remuneration and for a description on the long-term variable remuneration programs. See also the website for the information and evaluation that have to be reported according to the Code.
The Board of Directors' proposal regarding guidelines for salary and other remuneration for the CEO and other members of the Extended Management Group to the 2018 AGM corresponds in substance with the guidelines for remuneration decided by the 2017 AGM.
The Board of Directors' proposal regarding long-term variable remuneration programs to the 2018 AGM are substantially the same as the programs decided by the 2017 AGM.
Noah Walley, one of the members who joined the newly formed Extended Management Group in January 2017, participates in programs for variable remuneration, the outcome of which is related to old investments within the IGC business area, which is being phased out. When Noah Walley joined the Extended Management Group, the Board of Directors concluded that his already agreed rights under the old IGC programs should remain valid and therefore used the possibility to deviate, when special cause exists, from the guidelines decided by the AGM in this individual case, insofar that Noah Walley in addition to shortterm variable remuneration and long-term variable remuneration according to the guidelines also has the right to variable cash remuneration under the terms of the old programs. When determining the total compensation to Noah Walley as Member of the Extended Management Group, the value of the remaining programs has been taken into consideration. For more information about the programs, see Note 31, Related party transactions.
The 2017 AGM decided on a new long-term variable remuneration program for employees within Patricia Industries with the purpose that employees within Patricia Industries should have a long-term variable remuneration directly aligned with the value creation within the business area Patricia Industries. The program for employees within Patricia Industries is based on the same structure as Investor's program for long-term variable remuneration and contains corresponding performance criteria, but the outcome is depending on the development of the underlying assets of Patricia Industries. Since these assets are not listed, the total cost of the program, which is cash-settled, cannot in an efficient way be capped by hedging arrangements. In order for the program to correspond as closely as possible and create a corresponding incentive profile as the Investor program, the total outcome for each individual participant in the program is limited by a maximum number of instruments that can be allocated, but not by any other type of predetermined limit. To the extent the program is not compliant with Code rule 9.5, i.e. that variable remuneration paid in cash should be subject to a predetermined limit, this is consequently a deviation from the Code for the above stated reasons. Similarly, Noah Walley's rights under the old variable remuneration programs for IGC (see above under "Deviation from the remuneration guidelines decided by the AGM") are not subject to any predetermined limit. To the extent these programs are not compliant with the above-mentioned Code rule 9.5, this is also a deviation from the Code. The reason for such deviation is that the Board of Directors has considered that Noah Walley's already agreed rights should be honored and remain valid also after his appointment to the Extended Management Group rather than being re-negotiated.
This description of the internal control over the financial reporting is based on the framework set by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Investor's internal control over the financial reporting is focused primarily on ensuring efficient and reliable control of, and accounting for purchases, sales and valuation of securities as well as correct consolidation of the operating subsidiaries.
The Board and Management of each operating subsidiary is responsible for ensuring the efficiency of the subsidiary's internal control structures, risk management and financial reporting. Patricia Industries' Board representative provides this information to Patricia Industries' Board, where analysis and follow-up take place. Patricia Industries' Board ensures that Investor's Board and Management receive information on any issues that could affect Investor's business or financial reporting.
The control environment is built around an organization with clear decision-making channels, powers and responsibilities and a corporate culture based on shared values. It also requires each individual's awareness of his/her role in maintaining effective internal control.
All of Investor's business areas have policies, instructions and detailed process descriptions. These documents establish rules on responsibilities for specific tasks, mandates and powers and how validation is to be carried out. Accounting and reporting rules and routines are documented in Investor's Financial Handbook. All governing documents are presented on the intranet for all employees. The documents are updated yearly or when needed. During 2017 the subsidiaries have continued their work with completing importance steering documents. The Compliance and the Internal Control functions have followed-up on this work.
Risk assessment is conducted continuously in the day to day business at Investor. Annually the Finance department assesses risk for major errors in the financial reporting and sets action plans to reduce identified risks. Focus is placed on significant Income Statement and Balance Sheet items, which have a higher risk because of the complexity, or where there is a risk that the effects of a potential error may become significant because of the high transaction values involved. Conclusions drawn from the risk assessments on risks for errors in the financial reporting are reported to and discussed with the Audit and Risk Committee.
Using the risk assessment as a starting point to ensure the reliability of the financial reporting, the Audit and Risk Committee determines which of the identified risks should be prioritized by the Internal Control function. Suggestions for improvements are identified and implemented on an ongoing basis. During 2017 each holding company has added a materiality analysis of sustainability risks to the yearly risk assessment, with regards to the new requirements on Sustainability reporting as from 2017.
For a more detailed description of risks and other risk assessments, see note 3, Risks and Risk management.
To ensure that the financial reporting gives a true and fair picture on each reporting date, every process incorporates a number of control activities. These involve all levels of the organization, from the Board and company Management to other employees.
Financial controls in the company include approval of business transactions, reconciliation with external counterparties, daily monitoring of risk exposure, daily account reconciliation, monthly custody reconciliation, performance monitoring and analytical monitoring of decisions. Investor's financial reports are analyzed and validated by the company's control function within Finance. Frequent analysis of the operating subsidiaries' financial reports are also performed. This year special focus has been on the foreign subsidiaries' documentation of key controls in the financial reporting process.
For the purpose of ensuring that the external information is correct, complete and timely, Investor's Board has adopted a Communication policy. Within the company, there are also instructions regarding information security and how to communicate financial information between the Board, Management and other employees as well as from Patricia Industries to Investor. During 2017, continued focus has been on efficient information flow in the financial reporting process between Investor, Patricia Industries, and subsidiaries.
Investor has an established process for whistleblowing, accessible for all employees. It can be used anonymously.
Both the Board and the Management Group regularly follow-up on the effectiveness of the company's internal controls to ensure the quality of processes for the financial reporting. Investor's financial situation and strategy regarding the company's financial position are discussed at every Board meeting and the Board is provided with detailed reports on the development of the business to this end. The Board reviews all interim reports before public release.
The Audit and Risk Committee plays an important role in ensuring and monitoring that control activities are in place for important areas of risk inherent in the processes for financial reporting and regularly reports the results from the committee work to the Board. The Audit and Risk Committee, Management Group and Internal Control function regularly follow-up reported deviations.
| Jacob Wallenberg | Marcus Wallenberg | Josef Ackermann | Gunnar Brock | Johan Forssell | |
|---|---|---|---|---|---|
| Position | Chair Chair: RC Member: ARC |
Vice Chair | Director | Director Member: ARC |
Director Chief Executive Officer |
| Elected | 1998 (Chair since 2005) |
2012 (Vice Chair since 2015) |
2012 | 2009 | 2015 |
| Year of birth | 1956 | 1956 | 1948 | 1950 | 1971 |
| Nationality | Swedish | Swedish | Swiss | Swedish | Swedish |
| Education | B.Sc. in Economics and M.B.A., Wharton School, University of Pennsylvania Reserve Officer, Swedish Navy |
B.Sc. of Foreign Service, Georgetown University |
Dr. oec, economics and social sciences, University of St. Gallen |
M.Sc. in Economics and Business Administration, Stockholm School of Economics |
M.Sc. in Economics and Business Administration, Stockholm School of Economics |
| Current assignments | Vice Chair: ABB, Ericsson, FAM, Patricia Industries, SAS Director: The Knut and Alice Wallenberg Foundation, Tsinghua School of Economics Advisory board, Steering Committee ERT 2) Member: IBLAC 1), ERT 2), IVA 3) |
Chair: FAM, Patricia Industries, Saab, SEB Vice Chair: The Knut and Alice Wallenberg Foundation Director: AstraZeneca, Temasek Holding Member: IVA 3) |
Chair: Bank of Cyprus Honorary Chair: St. Gallen Foundation for International Studies Director: Renova Management International Advisory Board: Akbank |
Chair: Mölnlycke, Stena Director: Patricia Industries, Stockholm School of Economics, Syngenta Member: IVA 3) |
Director: Atlas Copco, Epiroc, EQT AB, Patricia, Industries, Stockholm School of Economics, Wärtsilä Member: IVA 3) |
| Work experience | Chair: SEB Vice Chair: Atlas Copco, Investor, Stora President and CEO: SEB Director: The Coca-Cola Company, Electrolux, Stora, WM-data Executive VP and CFO: Investor |
Chair: Electrolux, International Chamber of Commerce, LKAB President and CEO: Investor Executive VP: Investor Director: Citibank, Citicorp, Deutsche Bank, EQT Holdings, SEB, SG Warburg, Stora Enso, Stora Feldmühle |
Chair: Zurich Insurance Group Chair Management Board and the Group Executive Committee: Deutsche Bank President Executive Board: Schweizerische Kreditanstalt |
Chair: Rolling Optics, Stora Enso CEO: Alfa Laval, Atlas Copco, Tetra Pak Group, Thule International Director: Lego, SOS Children's Villages, Total |
Director: Saab Project Director: Aleris Head of Core Investments: Investor Head of Research: Investor Head of Capital Goods and Healthcare sector: Investor Head of Capital Goods: Investor |
| Independent to Investor and its Management |
Yes | Yes | Yes | Yes 6) | No 7) |
| Independent to major shareholders |
No 5) | No 5) | Yes | Yes | Yes |
| Shares in Investor 8) | 146,669 A shares 315,572 B shares |
536,000 A shares 16,223 B shares |
6,006 synthetic shares | 6,006 synthetic shares | 40,000 A shares 52,000 B shares |
ARC: Audit and Risk Committee, RC: Remuneration Committee.
1) BLAC: Mayor of Shanghai's International Business Leaders Advisory Council.
2) ERT: The European Round Table of Industrialists.
3) IVA: The Royal Swedish Academy of Engineering Sciences.
4) IFN: The Research Institute of Industrial Economics.
5) Member of Knut and Alice Wallenberg Foundation.
6) In conjunction with taking over as the Chair of Mölnlycke 2007 (which was prior to joining the Board in Investor), Gunnar Brock acquired shares (ordinary and preferred) in Mölnlycke as part of the stock investment program for the Board and senior executives of that company. A part of this holding was reinvested in connection with the new program set in place during 2014 and the remainder was exited. However, it has been concluded that this does not make Gunnar Brock dependent on Investor or its Management.
7) President and CEO.
8) Holdings in Investor AB are stated as of December 31, 2017 and include holdings of close relatives and legal entities.
| Magdalena Gerger | Tom Johnstone, CBE | Grace Reksten Skaugen | Hans Stråberg | Lena Treschow Torell | Sara Öhrvall |
|---|---|---|---|---|---|
| Director Member: ARC |
Director Member: RC |
Director Chair: ARC |
Director | Director Member: RC |
Director |
| 2014 | 2010 | 2006 | 2011 | 2007 | 2015 |
| 1964 | 1955 | 1953 | 1957 | 1946 | 1971 |
| Swedish | British | Norwegian | Swedish | Swedish | Swedish |
| M. Econ., and M.B.A., Stockholm School of Economics M.B.A. exchange, McGill University |
M.A., University of Glasgow Honorary Doctorate in Business Administration, University of South Carolina Honorary Doctorate in Science, Cranfield University |
M.B.A., BI Norwegian School of Management, Careers in Business Program, New York University Ph.D. and B.Sc., Laser Physics, Imperial College of Science and Technol ogy, London University |
M.Sc. in Engineering, Chalmers University Reserve Officer, Swedish Army |
Ph.D., Physics, University of Gothenburg Docent, Physics, Chalmers University |
M.Sc. in International Business, Umeå University |
| President and CEO: Systembolaget Director: Ahlsell, IVA 3) Member: IFN 4) |
Chair: Combient, Husqvarna Vice Chair: Wärtsilä Director: Volvo Cars Member: IVA 3) |
Founder and Director: Norwegian Institute of Directors Deputy Chair: Orkla Director: Euronav, Lundin Petroleum |
Chair: Atlas Copco, CTEK, Nikkarit, Roxtec Vice Chair: Orchid Orthopedics, Stora Enso Director: Hedson, IVA 3) Mellbygård, N Holding |
Chair: Chalmers University, The Swedish Postcode Foundation International Advisory Board: Sustainable Development Solutions Network Member: IVA 3) |
Co-Founder and Senior Advisor: MindMill Network Director: Bonnier Books, Bonnier News, Bisnode, SEB Member: Nobel Museum, Umeå University, Vinnova |
| Chair: IQ-initiativet Director: Husqvarna, IKEA (Ingka Holding), Svenska Spel Vice President, responsible for Fresh Dairy, Marketing and Innova tion: Arla Foods Management consultant: Futoria Category Director: Nestlé Marketing Director: ICI Paints, Procter & Gamble |
President and CEO: SKF Director: Electrolux, SKF, The Association of Swedish Engineering Industries Executive Vice President: SKF President, Automotive Division: SKF |
Chair: Entra Eiendom, Ferd, Norwegian Institute of Directors Deputy Chair: Statoil Director: Atlas Copco, Corporate Finance Enskilda Securities, Opera Software, Renewable Energy Corporation, Storebrand, Tandberg |
President and CEO: Electrolux Director: The Confedera tion of Swedish Enter prise, The Association of Swedish Engineering Industries COO: Electrolux Various positions within Electrolux |
Chair: Euro-CASE Chair and President: IVA 3) Research Director: Joint Research Centre, European Commission Professor in Physics: Chalmers University, Uppsala University Director: Ericsson, Gambro, Getinge, Imego, IRECO, Micronic, Saab, SKF, ÅF |
Chair: Newsmill, Workey, Feber Director: Adlibris, Bonnier Publications, Dagens Industri, Lunarstorm, Mag+, SF Bio, TV4 Executive VP, R&D: Bonnier Director of Product Development: Volvo Cars Partner and CEO: Differ |
| Yes | Yes | Yes | Yes | Yes | Yes |
| Yes | Yes | Yes | Yes | Yes | Yes |
| 4,441 B shares 4,276 synthetic shares |
6,006 synthetic shares | 2,000 A shares | 8,300 B shares 6,006 synthetic shares |
2,500 B shares 6,006 synthetic shares |
3,008 synthetic shares |
Investor's Management Group consists of five members; Johan Forssell, CEO, Petra Hedengran, General Counsel and Head of Corporate Governance and responsible for investments in EQT funds, Daniel Nodhäll, Head of Listed Core Investments, Helena Saxon, CFO, and Stefan Stern, Head of Corporate Relations, Sustainability and Communications.
| Johan Forssell | Petra Hedengran | Daniel Nodhäll | Helena Saxon | Stefan Stern | |
|---|---|---|---|---|---|
| Position | Chief Executive Officer | General Counsel, Head of Corporate Governance and responsible for investments in EQT funds |
Head of Listed Core Investments |
Chief Financial Officer | Head of Corporate Relations, Sustainability and Communications |
| Member of MG since | 2006 (CEO since 2015) |
2007 | 2015 | 2015 | 2015 |
| Employed since | 1995 | 2007 | 2002 | 1997 | 2013 |
| Year of birth | 1971 | 1964 | 1978 | 1970 | 1970 |
| Nationality | Swedish | Swedish | Swedish | Swedish | Swedish |
| Education | M.Sc. in Economics and Business Administration, Stockholm School of Economics |
Master of Law, Stockholm University |
M.Sc. in Economics and Business Administration, Stockholm School of Economics |
M.Sc. in Economics and Business Administration, Stockholm School of Economics IMD, INSEAD |
Political science, Stockholm University |
| Current assignments | Director: Atlas Copco, Epiroc, EQT AB, Patricia Industries, Stockholm School of Economics, Wärtsilä Member: IVA 1) |
Director: Alecta, Electrolux, The Associa tion for Generally Accepted Principles in the Securities Market |
Director: Husqvarna, Saab | Director: SEB, Sobi | Director: Demoskop |
| Work experience | Director: Saab Project Director: Aleris Head of Core Investments: Investor Head of Research: Investor Head of Capital Goods and Healthcare sector: Investor Head of Capital Goods sector: Investor |
Director: EQT Partners, Lindorff Group Partner and Head of Banking and Financing Group: Advokatfirman Lindahl Legal Counsel and General Counsel: ABB Financial Services, Nordic Region |
Investment Manager, Head of Capital Goods: Investor |
Director: Aleris, Gambro, Mölnlycke Investment Manager: Investor CFO: Hallvarsson & Halvarsson, Syncron International Financial analyst: Goldman Sachs |
State Secretary on Energy and Sustainability, Ministry of Sustainable Development: Government of Sweden Senior Advisor: Magnora CEO: Swedish District Heating Association Head of Planning, Prime Minister's Office: Government Offices of Sweden |
| Shares in Investor 2) | 40,000 A shares | 1,500 A shares | 8,074 A shares | 9,635 B shares | 4,427 B shares |
| 52,000 B shares | 15,500 B shares | 4,213 B shares |
See note 9, Employees and personnel costs, for shares and share-related instruments held by the Management Group members.
1) IVA: The Royal Swedish Academy of Engineering Sciences.
2) Holdings in Investor AB are stated as of December 31, 2017 and include holdings of close relatives and legal entities.
Investor's Extended Management Group consists of the Management Group and three additional members; Jessica Häggström, Head of Human Resources and the Co-Heads of Patricia Industries, Christian Cederholm and Noah Walley.
Jessica Häggström Christian Cederholm Noah Walley Position Head of Human Resources Co-head Patricia Industries
Co-head Patricia Industries
| Member of Extendend MG since |
2017 | 2017 | 2017 |
|---|---|---|---|
| Employed since | 2017 | 2001 | 2003 |
| Year of birth | 1969 | 1978 | 1963 |
| Nationality | Swedish | Swedish | American / British |
| Education | Master's degree in Human Resources and Labour Relations, University of Linköping and University of Uppsala |
M.Sc. in Economics and Business Administration, Stockholm School of Economics |
B.A. and M.A. in History, Oxford University J.D. Stanford University Law School |
| Current assignments | – | Director: Aleris, Hi3G Scandinavia, Nasdaq Nordic, Permobil |
Director: BraunAbility, Better Finance, Conductor, Pulsepoint, Retail Solutions, Spigit |
| Work experience | Head of HR R&D Business Unit IT & Cloud, Head of Talent Effectiveness, Head of HR Finance and other various HR positions: Ericsson Consultant: Watson Wyatt |
Head of Patricia Industries Nordics Investment Manager: Investor |
Head of Patricia Industries U.S. President: IGC Managing Director: IGC General Partner: Morgan Stanley Venture Partners Consultant: McKinsey Investment Banker: N M Rothschild & Sons |
| Shares in Investor 1) | – | 27,618 A shares 4,132 B shares |
12,359 B shares |
See note 9, Employees and personnel costs, for shares and share-related instruments held by the Management Group members.
1) Holdings in Investor AB are stated as of December 31, 2017 and include holdings of close relatives and legal entities.
The Board of Directors proposes that the unappropriated earnings in Investor AB:
| Total available funds for distribution | To be allocated as follows: | ||
|---|---|---|---|
| Retained earnings | 223,357,661,335 | Dividend to shareholders, SEK 12.00 per share | 9,206,100,3601) |
| Net profit for the year | 37,056,120,829 | Funds to be carried forward | 251,207,681,804 |
| Total SEK | 260,413,782,164 | Total SEK | 260,413,782,164 |
The consolidated accounts and annual accounts have been prepared in accordance with the international accounting standards in Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of July 19, 2002 on the application of international accounting standards and generally accepted accounting standards in Sweden and give a true and fair view of the Group's and Parent Company's financial position and results of operations. The Administration Report for the Group and the Parent Company gives a true and fair view of the operations, position and results, and describes significant risks and uncertainty factors that the Parent Company and Group companies face. The annual accounts and the consolidated financial statements were approved for release by the Board of Directors and the President on March 23, 2018. The consolidated Income Statement and Balance Sheet, and the Income Statement and Balance Sheet of the Parent Company, will be presented for adoption by the Annual General Meeting on May 8, 2018.
1) Calculated on the total number of registered shares. No dividend is paid for the Parent Company's holding of own shares, whose exact number is determined on the record date for cash payment of the dividend. On December 31, 2017, the Parent Company's holding of own shares totaled 2,392,938. The proposed dividend is proposed to be paid with SEK 8.00 per share in May, 2018 and SEK 4.00 per share in November, 2018.
Stockholm, March 23, 2018
Jacob Wallenberg Chair
Marcus Wallenberg Josef Ackermann Gunnar Brock
Lena Treschow Torell Sara Öhrvall Johan Forssell
Vice Chair Director Director
Tom Johnstone, CBE Magdalena Gerger Grace Reksten Skaugen Hans Stråberg
Director Director Director Director
Director Director President and Chief Executive Officer
Our Audit Report was submitted on March 23, 2018 Deloitte AB
Thomas Strömberg
Authorized Public Accountant
| Note | Page | |
|---|---|---|
| 1 | Significant accounting policies | 44 |
| 2 | Critical estimates and key judgments | 45 |
| 3 | Risks and risk management | 45 |
| 4 | Business combinations | 49 |
| 5 | Operating Segments | 50 |
| 6 | Changes in value | 51 |
| 7 | Operating costs | 51 |
| 8 | Revenues | 52 |
| 9 | Employees and personnel costs | 52 |
| 10 | Auditor's fees and expenses | 59 |
| 11 | Operating leases | 59 |
| 12 | Shares and participations in associates | 59 |
| 13 | Net financial items | 61 |
| 14 | Income tax | 61 |
| 15 | Earnings per share | 63 |
| 16 | Intangible assets | 63 |
| 17 | Buildings and land | 65 |
| 18 | Long-term receivables and other receivables | 66 |
| 19 | Inventories | 66 |
| 20 | Machinery and equipment | 67 |
| 21 | Prepaid expenses and accrued income | 67 |
| 22 | Other financial investments, short-term investments and cash and cash equivalents |
67 |
| 23 | Equity | 68 |
| 24 | Interest-bearing liabilities | 69 |
| 25 | Provisions for pensions and similar obligations | 69 |
| 26 | Other provisions | 71 |
| 27 | Other long-term and short-term liabilities | 72 |
| 28 | Accrued expenses and deferred income | 72 |
| 29 | Financial instruments | 72 |
| 30 | Pledged assets and contingent liabilities | 78 |
| 31 | Related party transactions | 79 |
| 32 | Subsequent events | 79 |
| Note | Page | |
|---|---|---|
| P1 | Accounting policies | 84 |
| P2 | Operating costs | 84 |
| P3 | Results from other receivables that | 84 |
| are non-current assets | ||
| P4 | Interest expenses and similar items | 84 |
| P5 | Participations in Group companies | 85 |
| P6 | Participations in associates | 85 |
| P7 | Intangible assets | 86 |
| P8 | Property, plant and equipment | 86 |
| P9 | Other long-term holdings of securities | 86 |
| P10 | Receivables from Group companies | 86 |
| P11 | Prepaid expenses and accrued income | 86 |
| P12 | Provisions for pensions and similar obligations | 87 |
| P13 | Other provisions | 87 |
| P14 | Interest-bearing liabilities | 87 |
| P15 | Accrued expenses and deferred income | 87 |
| P16 | Financial instruments | 88 |
| P17 | Pledged assets and contingent liabilities | 90 |
| P18 | Related party transactions | 90 |
Net financial items –2,891 –862
Profit/loss before tax 44,542 34,118
Tax 14 –244 –453 Profit/loss for the year 5 44,298 33,665
Owners of the Parent Company 44,318 33,665 Non-controlling interest –20 0 Profit/loss for the year 44,298 33,665
Basic earnings per share, SEK 15 57.96 44.09 Diluted earnings per share, SEK 15 57.90 44.02
Attributable to:
| SEK m. | Note | 2017 | 2016 | |
|---|---|---|---|---|
| Dividends Other operating income |
8 8 |
8,404 17 |
8,351 40 |
|
| Changes in value Net sales Cost of goods and services sold Sales and marketing costs |
6 8 7,9,11,16,17,20 7,9,11,16,17,20 |
36,054 34,381 –22,060 –4,157 |
22,057 31,742 –20,102 –3,802 |
the year, including taxes profit/loss for the year |
| Administrative, research and development and other operating costs Management costs |
7,9-11,16,17,20 7,9-11,16,17,20 |
–5,142 –455 |
–3,357 –465 |
Remeasurements of profit/loss for the year |
| Share of results of associates Operating profit/loss |
12 5 |
390 47,433 |
516 34,980 |
Foreign currency |
| Financial income Financial expenses |
13 13 |
55 –2,946 |
1,429 –2,291 |
| SEK m. | Note | 2017 | 2016 |
|---|---|---|---|
| Profit/loss for the year | 44,298 | 33,665 | |
| Other comprehensive income for the year, including taxes |
|||
| Items that will not be recycled to profit/loss for the year |
|||
| Revaluation of property, plant and equipment |
400 | 428 | |
| Remeasurements of defined benefit plans |
14 | –39 | |
| Items that may be recycled to profit/loss for the year |
|||
| Cash flow hedges | 20 | 13 | |
| Foreign currency translation adjustment |
–334 | 1,410 | |
| Share of other comprehensive income of associates |
76 | 68 | |
| Total other comprehensive income for the year |
175 | 1,880 | |
| Total comprehensive income for the year |
44,473 | 35,545 | |
| Attributable to: | |||
| Owners of the Parent Company | 44,494 | 35,544 | |
| Non-controlling interest | –21 | 1 | |
| Total comprehensive income for the year |
23 | 44,473 | 35,545 |
| SEK m. | Note | 12/31 2017 | 12/31 2016 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Goodwill | 16 | 33,859 | 34,852 |
| Other intangible assets | 16 | 15,966 | 16,423 |
| Buildings and land | 17 | 6,350 | 5,558 |
| Machinery and equipment | 20 | 2,821 | 2,787 |
| Shares and participations recognized at fair value |
12, 29 | 307,535 | 272,869 |
| Shares and participations in associates |
12 | 4,340 | 3,875 |
| Other financial investments | 22 | 5,389 | 3,709 |
| Long-term receivables | 18 | 2,215 | 4,419 |
| Deferred tax assets | 14 | 703 | 907 |
| Total non-current assets | 379,179 | 345,399 | |
| Current assets | |||
| Inventories | 19 | 3,343 | 3,086 |
| Tax assets | 136 | 100 | |
| Trade receivables | 4,004 | 3,813 | |
| Other receivables | 18 | 262 | 303 |
| Prepaid expenses and accrued income |
21 | 927 | 882 |
| Shares and participations in trading operation |
266 | 46 | |
| Short-term investments | 22 | 4,190 | 5,094 |
| Cash and cash equivalents | 22 | 16,260 | 11,250 |
| Total current assets | 29,387 | 24,574 | |
| TOTAL ASSETS | 408,567 | 369,973 |
| SEK m. | Note | 12/31 2017 | 12/31 2016 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 23 | 4,795 | 4,795 |
| Other contributed equity | 13,533 | 13,533 | |
| Reserves | 4,897 | 4,752 | |
| Retained earnings, including | |||
| profit/loss for the year | 313,036 | 276,997 | |
| Equity attributable to share holders of the Parent Company |
336,262 | 300,077 | |
| Non-controlling interest | 64 | 64 | |
| Total equity | 336,326 | 300,141 | |
| Liabilities | |||
| Non-current liabilities | |||
| Long-term interest-bearing liabilities |
24 | 55,303 | 53,313 |
| Provisions for pensions and similar | |||
| obligations | 25 | 865 | 838 |
| Other provisions | 26 | 174 | 276 |
| Deferred tax liabilities | 14 | 4,241 | 4,992 |
| Other long-term liabilities | 27 | 1,947 | 1,952 |
| Total non-current liabilities | 62,531 | 61,371 | |
| Current liabilities | |||
| Current interest-bearing | |||
| liabilities | 24 | 2,092 | 1,634 |
| Trade payables | 1,849 | 1,954 | |
| Tax liabilities | 319 | 205 | |
| Other liabilities | 27 | 1,608 | 915 |
| Accrued expenses and prepaid income |
28 | 3,583 | 3,579 |
| Provisions | 26 | 258 | 174 |
| Total current liabilities | 9,710 | 8,461 | |
| Total liabilities | 72,240 | 69,832 | |
| TOTAL EQUITY AND LIABILITIES | 408,567 | 369,973 |
For information regarding pledged assets and contingent liabilities see note 30, Pledged assets and contingent liabilities.
| Equity attributable to shareholders of the Parent Company | Non controlling interest |
Total equity |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| SEK m. Note 23 |
Share capital |
Other contri buted equity |
Trans lation reserve |
Revalua tion reserve |
Hedging reserve |
Retained earnings, incl. profit/loss for the year |
Total | ||
| Opening balance 1/1 2017 | 4,795 | 13,533 | 2,649 | 1,638 | 465 | 276,997 | 300,077 | 64 | 300,141 |
| Profit/loss for the year | 44,318 | 44,318 | –20 | 44,298 | |||||
| Other comprehensive income for the year | –258 | 400 | 20 | 14 | 175 | –1 | 174 | ||
| Total comprehensive income for the year |
–258 | 400 | 20 | 44,332 | 44,494 | –21 | 44,473 | ||
| Release of revaluation reserve due to depreciation of revalued amount |
–17 | 17 | |||||||
| Dividend | –8,411 | –8,411 | –8,411 | ||||||
| Change in non-controlling interest | 21 | 21 | |||||||
| Stock options exercised by employees | 52 | 52 | 52 | ||||||
| Equity-settled share-based payment transactions |
49 | 49 | 49 | ||||||
| Closing balance 12/31 2017 | 4,795 | 13,533 | 2,390 | 2,022 | 485 | 313,036 | 336,262 | 64 | 336,326 |
| Equity attributable to shareholders of the Parent Company | Non controlling interest |
Total equity |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| SEK m. Note 23 |
Share capital |
Other contri buted equity |
Trans lation reserve |
Revalua tion reserve |
Hedging reserve |
Retained earnings, incl. profit/loss for the year |
Total | ||
| Opening balance 1/1 2016 | 4,795 | 13,533 | 1,152 | 1,229 | 440 | 250,652 | 271,801 | 176 | 271,977 |
| Profit/loss for the year | 33,665 | 33,665 | 0 | 33,665 | |||||
| Other comprehensive income for the year | 1,497 | 433 | 25 | –76 | 1,879 | 1 | 1,880 | ||
| Total comprehensive income for the year |
1,497 | 433 | 25 | 33,589 | 35,544 | 1 | 35,545 | ||
| Release of revaluation reserve due to depreciation of revalued amount |
–24 | 24 | |||||||
| Dividend | –7,635 | –7,635 | –7,635 | ||||||
| Change in non-controlling interest | 37 | 37 | |||||||
| Reclassification of non-controlling interest | –150 | –150 | |||||||
| Stock options exercised by employees | 312 | 312 | 312 | ||||||
| Equity-settled share-based payment transactions |
55 | 55 | 55 | ||||||
| Closing balance 12/31 2016 | 4,795 | 13,533 | 2,649 | 1,638 | 465 | 276,997 | 300,077 | 64 | 300,141 |
.
| SEK m. | Note | 2017 | 2016 |
|---|---|---|---|
| Operating activities | |||
| Dividends received | 8,411 | 8,352 | |
| Cash receipts | 33,738 | 31,093 | |
| Cash payments | –28,919 | –25,643 | |
| Cash flow from operating activities before net interest and income tax | 13,230 | 13,802 | |
| Interest received1) | 599 | 903 | |
| Interest paid1) | –2,446 | –2,007 | |
| Income tax paid | –520 | –437 | |
| Cash flow from operating activities | 10,863 | 12,261 | |
| Investing activities | |||
| Acquisitions2) | –5,270 | –4,729 | |
| Divestments3) | 6,435 | 6,185 | |
| Increase in long-term receivables | –70 | – | |
| Decrease in long-term receivables | 1,714 | 950 | |
| Acquisitions of subsidiaries, net effect on cash flow | –1,042 | –7,175 | |
| Increase in other financial investments | –11,852 | –5,446 | |
| Decrease in other financial investments | 10,221 | 8,387 | |
| Net changes, short-term investments | 986 | –3,321 | |
| Acquisitions of property, plant and equipment | –1,377 | –1,545 | |
| Proceeds from sale of other investments | 59 | 48 | |
| Net cash used in investing activities | –196 | –6,648 | |
| Financing activities | |||
| New share issue | 170 | 189 | |
| Borrowings | 5,689 | 1,585 | |
| Repayment of borrowings | –2,981 | –1,815 | |
| Dividend | –8,411 | –7,635 | |
| Net cash used in financing activities | –5,533 | –7,676 | |
| Cash flow for the year | 5,134 | –2,062 | |
| Cash and cash equivalents at beginning of the year | 11,250 | 13,180 | |
| Exchange difference in cash | –124 | 132 | |
| Cash and cash equivalents at year-end | 22 | 16,260 | 11,250 |
1) Gross flows from interest swap contracts are included in interest received and interest paid.
2) Acquisitions include investments in listed and non listed companies not defined as subsidiaries.
3) Divestments include sale of listed and non listed companies not defined as subsidiaries.
| 12/31 2017 | Opening balance |
Cash flows | Aquisitions | Foreign exchange movements |
Fair value changes |
Other | Amount at year-end |
|---|---|---|---|---|---|---|---|
| Long-term interest-bearing liabilities | 53,165 | 4,211 | 248 | –523 | –1,907 | 55,1941) | |
| Current interest-bearing liabilities | 1,779 | –1,482 | 91 | –3 | 2,143 | 2,5282) | |
| Long-term financial leases | 148 | –21 | –18 | 1091) | |||
| Current financial leases | 16 | 3 | 192) | ||||
| Assets held to hedge long-term liabilities | –2,402 | 508 | –1,8943) | ||||
| Total liabilities from financing activities | 52,706 | 2,708 | – | 325 | –18 | 236 | 55,957 |
1) Included in Consolidated Balance Sheet item Long-term interest-bearing liabilities.
2) Included in Consolidated Balance Sheet item Current interest-bearing liabilities and Other liabilities.
3) Included in Consolidated Balance Sheet item Long-term receivables.
The most significant accounting policies applied in this annual report are presented in this note and, where applicable, in the following notes to the financial statements. Significant accounting policies for the Parent Company can be found on page 84.
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. In addition the Swedish rules, RFR 1 Supplementary Accounting Policies for Groups, was applied.
The financial statements are presented in SEK, which is the functional currency of the Parent Company. All amounts, unless otherwise stated, are rounded to the nearest million (SEK m.). Due to rounding, numbers presented throughout these consolidated financial statements may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
The majority of the consolidated assets are financial assets and the majority of these as well as the majority of the real estate property within the Group are measured at fair value. Other assets and liabilities are in essence measured at historical cost.
Non-current assets and non-current liabilities consist primarily of amounts that are expected to be settled more than 12 months from the Balance Sheet date. Other assets and liabilities are presented as current assets and current liabilities.
The accounting policies have been consistently applied to all periods presented in the financial statements, unless otherwise noted. The accounting policies have also been consistently applied to the reporting and consolidation of the Parent Company, subsidiaries and associates.
Certain comparative figures have been reclassified in order to conform to the presentation of the current year's financial statements. In cases where reclassifications pertains to significant amounts, special information has been provided.
The following is a description of the revised accounting policies applied by the Group and Parent Company as of January 1, 2017.
Changes in accounting policies due to new or amended IFRS
Amendments to IAS 7 Statements of Cash Flows: The Group and Parent Company have applied these amendements for the first time in the current year. The amendements require to provide disclosures that enables users of financial statements to evaluate changes in liabilities arising from financing activities, including both cash and non-cash changes, see page 43 and 83. Consistent with the transition provision, the Group and Parent Company have not disclosed comparative information for 2016. Apart from additional disclosures, the amendment has no impact on the Groups consolidated financial statements or the Parent Company's financial statements.
Other new or revised IFRSs and interpretations from the IFRS Interpretations Committee, with effective date from January 1, 2017, have had no material effect on the accounting for the Group or Parent Company.
The new or revised standards described below will be applied from when application is mandatory. Earlier adoption is not planned.
IFRS 9 Financial Instruments will replace IAS 39 Financial Instruments Recognition and Measurement: with mandatory effective date of January 1, 2018. IFRS 9 presents a model for classification and measurement of financial instruments, an expected loss model for the impairment of financial assets and significant changes to hedge accounting.
Classification and measurement under IFRS 9 is based on the entity's business model for managing the financial asset and the characteristics of the contractual cash flows of the asset. Besides some changes in category names, this change will have no effect on the valuation of Investor's financial instruments.
A loss allowance shall be recognised for all financial assets classified as measured at amortized cost and at fair value through other comprensive
income. This loss allowance will not be significant for the Group nor the Parent Company.
There will be a change in hedge accounting due to the new definition for currency basis spread as cost of hedging. It will then be accounted for in Other Comprehensive Income instead of in financial net as before. In the opening balance for 2018, the amount to be reclassifed from retained earnings to a separate reserve for hedging cost, will be SEK –307 m. for the Group and SEK 7 m. for the Parent Company.
IFRS 15 Revenue from Contracts with Customers is a new standard for revenue that will replace all existing standards and interpretations about revenue. Revenue shall be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Mandatory effective date is January 1, 2018. The new standard will not have any significant effect neither with regards to the amounts recognized as revenues, nor the timing of when revenues are recognized. Areas most impacted are classification and accrual of variable discounts. At initial application Investor will recognise the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings.
IFRS 16 Leases is a new standard that concerns the accounting for rental and lease agreements for both lessors and lessees. Effective date is expected to be January 1, 2019, subject to EU approval. Investor have started an implementation project regarding IFRS 16 but yet there are no finished analyze of the quantitative effects of the new standard. As presented in Note 11, Operating leases, the non-cancellable future lease payments amounts to SEK 3,523 m. as of December 31, 2017. The major part of these consist of rent of premises.
Other known changes to IFRS and IFRIC to be applied in the future are not expected to have any significant impact on the Group's reporting.
The consolidated financial statements comprise of the Parent Company, subsidiaries and associates.
Intra-group receivables, payables and transactions as well as gains arising from transactions with associates, that are consolidated using the equity method, are eliminated when preparing the consolidated financial statements.
Foreign currency transactions are translated at the exchange rate in existence on the date of the transaction. Assets and liabilities in foreign currency are translated at the exchange rate in existence on the balance sheet date, except for non-monetary assets and liabilities which are recognized at historical cost using the exchange rate in existence on the date of the transaction. Exchange differences arising on translation are recognized in the income statement with the exception of effects from cash-flow hedges, see Note 29, Financial Instruments.
Assets and liabilities of foreign operations, including goodwill and other consolidated surpluses/deficits are translated to SEK using the exchange rate in existence on the balance sheet date. Revenues and expenses in a foreign operation are translated to SEK using an average exchange rate that approximates the exchange rates on the dates of the transactions. Translation differences arising when translating foreign operations are recognized directly in other comprehensive income and are accumulated in the translation reserve, which is a separate component of equity.
The following symbols IS and BS show which amounts in the notes that can be found in the Income Statement or Balance Sheet.
In order to close the books and prepare the financial statements in accordance with IFRS, management must make estimates and assumptions that affect the application of the accounting policies and the amounts recognized for assets, liabilities, income and expenses.
Estimates and judgments are based on historical experience, market information and assumptions that management considers to be reasonable based on the circumstances prevailing at the time. Changes in assumptions may result in adjustments to reported values and the actual outcome may differ from the estimates and judgments that were made.
Judgments in relation to the application of accounting policies Within the scope of IFRS, there are some instances where management must either choose between accounting policies, or choose whether to apply a particular accounting policy, in order to provide a fair view of the Group's activities. The development relating to accounting and the choice of policies are discussed in the Audit and Risk Committee.
Significant items for which a special judgment has been made in order to define the Group's accounting policies are presented below.
| Judgments | See note | |
|---|---|---|
| Participations in Group companies |
Control over investment or not | Note P5 |
| Participations in associates | Fair value or equity method | Note 12 |
| Owner-occupied property | Revaluation or cost model | Note 17 |
| Interest-bearing liabilities and related derivatives |
Application of hedge accounting | Note 29 |
The most significant estimation uncertainties in relation to the preparation of the consolidated financial statements are presented below. Changes in assumptions may result in material effects on the financial statements and the actual outcome may differ from estimated values. For more detailed descriptions of the judgments and assumptions, please refer to the specific notes referenced below.
| Estimates and assumptions | See note | |
|---|---|---|
| Valuation of unlisted holdings |
Appropriate valuation method, comparable companies, EBITDA multiples and sales multiples |
Note 29 |
| Valuation of interest bearing liabilities and derivatives |
Yield curve for valuation of financial instruments for which trading is limited and duration is long-term |
Note 29 |
| Valuation of owner occupied property |
Comparable properties, long-term inflation rate, projected cash flows, real interest rate and risk premium |
Note 17 |
| Impairment test of intangible assets |
Projected cash-flows, growth rate, margins and discount factor |
Note 16 |
| Reporting of deferred tax assets |
Future possibilities to benefit from tax loss carry forwards |
Note 14 |
| Valuation of pension liabilities |
Discount rate and future salary increase |
Note 25 |
| Purchase Price Allocation | Valuation of acquired intangible assets | Note 4 |
| Contingent liabilities | Provision or contingent liability depending on probability |
Note 30 |
In its business, the Investor group is exposed to commercial risks and financial risks such as share price risk, credit risk, liquidity and financing risk. Investor is also exposed to operational, political, legal and regulatory risks.
Investor's most significant risk is the share price risk. There has been no significant change in the measurement and follow-up of risks compared with the preceding year.
Risk management is part of the Board's and management's governance and follow-up of the business. At Investor, risk management is an integral part of the Group's processes, meaning that control and responsibility for control is close to the business operations. Investor's Board decides on risk levels, mandates and limits for the parent company and its business areas, while the Boards of the wholly-owned subsidiaries decide and follow up on policies that have been adapted to manage the risks in their respective businesses.
Investor's Risk policy sets measurement and mandates for market risks for the short-term trading, excess liquidity and financing activities. The policy also outlines principles for foreign exchange risk management in connection with investments and cash flows in foreign currency, measurements and limits for credit risks and principles to minimize legal, regulatory and operational risks in the business.
The Board follows up frequently on limits and risk exposure to ensure the ability to reach business strategies and goals. The CEO is responsible for ensuring that the organization complies with the Risk policy and for the continuous management of all risks within the business. The Board's and the Management's support function for managing and identifying risks and activities required, is the Risk Control Function.
Risk measurement is performed daily regarding the Treasury and Trading businesses and provided to the Management Group. The financial reports are compiled monthly and provided to the Management Group. Risk assessment is carried out yearly in the form of a self-evaluation and includes the establishment of action plans to mitigate identified risks. Risk assessment encompasses the entire organization and all of its processes. All types of risks are covered. Representatives from the Management Group, the investment organization, the support organization and the control functions together assess the risks. The assessment takes into consideration such things as systems, control activities and key individuals. When needed, action plans are implemented to minimize the probability and impact of identified risks. The identified risks are compiled in a company-wide risk map. Conclusions drawn from the risk assessments are reported to the Management Group and to the Board. The CEO and Management Group follow up on the implementation of action plans and report back to the Board. Using each business area's risk map as a starting point, the Audit and Risk Committee determines which of the identified risks for the financial reporting should be prioritized by the Internal Control function.
Maintaining long-term ownership in Listed Core Investments and the whollyowned subsidiaries as well as a flow of smaller investments and divestments involves commercial risks. These risks include, for instance, having a high exposure to a certain sector or an individual holding, changed market conditions for finding attractive investment candidates and barriers that arise and prevent exits at a chosen time. In order to manage its various commercial risks, Investor focuses on such factors as diversification of the company portfolio, process development and development of knowledge, experience and expertise.
Investor's subsidiaries operate within the healthcare sector on different geographical markets for products and services. To remain competitive, all subsidiaries need to continuously develop innovative products and services that satisfy customer needs in a cost efficient way. New products, services and techniques developed and promoted by competitors can also affect the ability to achieve business plans and objectives. An important component of the subsidiaries' strategies for growth is to make strategic acquisitions and enter strategic alliances that complement their current businesses. A subsidiary's failure to identify appropriate targets for strategic acquisitions, or unsuccessfully integrate its acquisitions, could have a negative impact on competitiveness and profitability.
The main category of financial risks that the Investor Group is exposed to is market risks. These are primarily risks associated with fluctuations in share prices, as well as interest rate risks and foreign exchange rate risks.
Derivative instruments are used to manage financial risks. All derivative transactions are handled in accordance with established guidelines and limits stated in financial policies. The financial risks in the subsidiaries are managed by each subsidiary's Treasury function.
Market risks refer to the risk of a change in value of a financial instrument because of changes in share prices, exchange rates or interest rates.
Investor's most significant risk is share price risk. The majority of Investor's share price risk exposure is concentrated to Listed Core Investments. At yearend 2017, Listed Core Investments accounted for 82 percent of total assets of reported values (78). For further information about Listed Core Investments, see pages 14-17. The companies and their share prices are analyzed and continuously monitored by Investor's analysts. Thus, a large portion of share price exposure in a Listed Core Investment does not necessarily lead to any action. It is the long-term commitment that lays the groundwork for Investor's strategic measures. Investor does not have defined goals for share price risks, as share prices are affected by short term fluctuations. The share price risk for Listed Core Investments is not hedged. If the market value of Listed Core Investments was to decline by 10 percent, the impact on income and equity would be SEK –28.4 bn. (–24.8).
Patricia Industries including wholly-owned subsidiaries but excluding Patricia Industries' cash, 3 Scandinavia and financial investments accounted for 14 percent of total assets of reported values (17). There is no share price risk associated with the wholly-owned subsidiaries. However, Patricia Industries' listed financial investments face a share price risk. A 10 percent decline in share prices for the financial investments would imply a loss of SEK –0.2 bn. for the financial investments (–0.5).
The EQT fund investments are partly exposed to share price risk. EQT accounted for 4 percent of total assets of reported values (5) as per year-end 2017. Should the market value and the valuation parameters, in accordance with the guidelines of the International Private Equity and Venture Capital Association, decline with 10 percent, the impact on the values of the EQT fund investments would be SEK –1.6 bn. (–1.4).
Investor has a trading operation for the purpose of executing Listed Core Investments transactions and obtaining market information. The trading operation conducts short-term equity trading and deals in equity derivatives (primarily for hedging market risk in the portfolio). The market risk in this activity is measured and monitored in terms of cash delta. Limits on gross, net and maximum position size are measured as well as liquidity risk. At year-end 2017, the trading operation accounted for less than 0.5 percent of total assets of reported values (0.5). If the market value of the assets belonging to the trading operation were to decline by 10 percent, the impact on income would be SEK –1 m. (–3).
If the market value of listed holdings in all business areas were to decline by 10 percent, the impact on income and equity would be SEK –28.6 bn. (–25.3), which equals 8.5 percent of Investor's reported net asset value (8.5). Market risks associated with listed shares constitute the greatest risk for Investor.
Currency exposure arises from cash flows in foreign currencies (transaction exposure), the translation of Balance Sheet items to foreign currencies (balance sheet exposure) and the translation of foreign subsidiaries' Balance Sheets and Income Statements to the Groups accounting currency (translation exposure).
Since the majority of Listed Core Investments are listed in SEK, there is a limited direct exchange rate risk that affects Investor's Balance Sheet. However, Investor is indirectly exposed to exchange rate risks in Listed Core Investments that are listed on foreign stock exchanges or that have foreign currency as their pricing currency. In addition, there are indirectly exchange rate risks since the majority of the companies in the Listed Core Investments business area are active in several markets. These risks have a direct impact on the respective companies' Balance Sheet and Income Statement, which indirectly affects valuation of the shares.
The wholly-owned subsidiaries are exposed to exchange rate risks in businesses and investments made in foreign companies. Also the EQT fund investments are exposed to exchange rate risks.
There is no regular hedging of foreign currency since the investment horizon is long-term and currency fluctuations are expected to equal out over time. This hedging policy is subject to continuous evaluation and deviations from the policy may be allowed if judged beneficial from a market economic perspective.
Exchange rate risks for investments in the trading operation are minimized through currency derivative contracts at the portfolio level.
Total currency exposure for the Investor Group is provided in the table in the next column. If the SEK were to appreciate 10 percent against the EUR (holding all other factors constant), the impact on income and equity would be SEK –2.6 bn. (–2.2). If the SEK were to appreciate 10 percent against the USD (holding all other factors constant), the impact on income and equity would be SEK –3.1 bn. (–3.1).
| Gross exposure in | Gross assets | Gross liabilities | ||
|---|---|---|---|---|
| foreign currencies, SEK m. | 12/31 2017 | 12/31 2016 | 12/31 2017 | 12/31 2016 |
| EUR | 61,601 | 53,043 | –40,552 | –36,109 |
| USD | 37,918 | 37,995 | –7,711 | –8,565 |
| Other European and | ||||
| North American | ||||
| currencies | 7,994 | 19,972 | –10,503 | –11,044 |
| Asian currencies | 2,767 | 4,178 | –2,392 | –2,735 |
| Total | 110,280 | 115,187 | –61,159 | –58,453 |
Exchange rate risk in excess liquidity resulting from investments in foreign currency is managed through currency derivative contracts.
Exchange rate risk arising in connection with loans in foreign currency is managed by, among other things, exchanging the loans to SEK through currency swap contracts. The objective is to minimize the exchange rate risk in excess liquidity and the debt portfolio. This strategy is applied considering the holdings in foreign currency.
The net exposure in foreign currencies after hedge is presented in the table below:
| Net exposure in foreign currencies after hedge, SEK m. | 12/31 2017 | 12/31 2016 |
|---|---|---|
| EUR | 25,844 | 21,819 |
| USD | 31,237 | 30,637 |
| Other European and North American currencies | 4,634 | 16,381 |
| Asian currencies | 2,618 | 3,895 |
| Total | 64,333 | 72,731 |
The net exposure increase in EUR is primarily explained by value increase of the Wärtsilä holding. The reduced net exposure in other European currencies relates mainly to conversion of Investor's ABB shares, previously denominated in CHF, into SEK during the year. The decrease in Asian currencies relates to value change in Patricia Industries' Asian holdings.
Investor AB's guideline is, for future known cash flows in foreign currency exceeding the equivalent of SEK 50 m., to be hedged through forward exchange contracts, currency options or currency swaps.
Group companies with larger transaction exposure are Mölnlycke and Permobil. Mölnlycke's operational cash flows in foreign currency are estimated at the equivalent of EUR 501 m. (446), corresponding to SEK 4.8 bn. (4.2), for the next 12 months. These cash flows are not hedged. For outstanding currency hedging as of December 31, 2017, an immediate 10 percent rise in the value of each currency against the EUR would impact net income by EUR 14.4 m. during the next 12 month period (9.6). Permobil's operational cash flows in foreign currency are estimated to corresponding SEK 1,269 m. for the coming 12 months (1,184). An immediate 10 percent rise in the value of each currency against the SEK would impact net income and equity for Permobil by SEK 89 m. the coming 12 months (96).
Currency exposure associated with net investments in foreign operations Currency exposure associated with investments made in independent foreign entities is considered as a translation risk and not an economic risk. The exposure arises when the foreign net investment is translated to SEK on the balance sheet date and it is recognized in the translation reserve under equity. Net investments are partly neutralized by loans in foreign currencies. Currency exposure due to net investments in foreign operations is normally not hedged. The table below show the exposure, in main currencies, arising from net investments in foreign subsidiaries (in investment currency).
| Currency exposure in equity | 12/31 2017 | 12/31 2016 |
|---|---|---|
| DKK m. | 545 | 438 |
| EUR m. | 2,526 | 3,610 |
| GBP m. | 216 | 185 |
| NOK m. | 0 | 701 |
| USD m. | 1,968 | 2,042 |
The decrease of equity in EUR relates to conversion of a group company's accounting currency from EUR to SEK during the year. The decrease in NOK relates to write-down of goodwill in Aleris.
If the SEK were to appreciate by 10 percent this would decrease equity by SEK –4.8 bn. due to translation effects of currency exposure in net investments in foreign subsidiaries (–5.9).
The Group's interest rate risk is primarily associated with long-term borrowings. In order to minimize the effects of interest rate fluctuations, limits and instructions have been established for example regarding fixed interest rate periods.
Investor AB's Treasury manages interest rate risks, exchange rate risks, liquidity risks and financing risks associated with the administration of the excess liquidity portfolio and financing activities.
For excess liquidity exposed to interest rate risks, the goal is to limit interest rate risks while maximizing return within the established guidelines of the risk policy. High financial flexibility is also strived for in order to satisfy future liquidity needs. Investments are therefore made in interest-bearing securities of short duration and high liquidity. For further information, see note 22, Other financial investments, short-term investments and cash and cash equivalents. A one percentage point parallel movement upward of the yield curve would reduce the value of the portfolio and affect the Income Statement by SEK –155 m. (–91).
On the liability side, Investor strives to manage interest rate risks by having an interest rate fixing tenor within the established limits and instructions of the Risk Policy. Fixed rates are established to provide flexibility to change the loan portfolio in step with investment activities and to minimize loan costs and volatility in the cash flow over time. Investor uses derivatives to hedge against interest rate risks (related to both fair value and cash flow fluctuations) in the debt portfolio. Some derivatives do not qualify for hedge accounting, but are still grouped together with loans since the intention of the derivative is to achieve the desired fixed-interest term for each loan. The total outstanding carrying amount of hedged loans, including fair value, was at year-end SEK 13,997 m. (16,340).
The table below shows the value of fair value derivatives by the end of 2017. The effect of fair value hedges is recognized in the Income Statement. The remaining maturities of fair value hedges vary between 2 and 20 years. For further information on the maturity structure, see schedule, "Investor AB's debt maturity profile".
| 12/31 2017 | 12/31 2016 | ||||
|---|---|---|---|---|---|
| Fair value | Nominal amount |
Fair value | Nominal amount |
||
| Assets Liabilities |
1,894 –587 |
12,752 –6,235 |
2,402 –570 |
13,362 –6,260 |
|
| Interest rate derivatives, cash flow hedges, SEK m. |
Fair value | Nominal amount |
Fair value | Nominal amount |
|
| Assets Liabilities |
– – |
– – |
– –19 |
– –1,500 |
The table below shows the effect of a parallel movement of the yield curve down with one percentage point (100 basis points) for the Group's fair value loans and derivatives.
| 12/31 2017 | 12/31 2016 | ||||
|---|---|---|---|---|---|
| Interest sensitivity of loans and derivatives at fair value, SEK m. |
Effect on income state ment |
Effect on other com prehensive income |
Effect on income state ment |
Effect on other com prehensive income |
|
| Interest rate risk: | |||||
| – hedged loans – swaps for hedges – other swaps |
–1,123 1,282 –73 |
– – – |
–1,257 1,463 –106 |
–4 –4 – |
|
| Net interest rate sensitivity |
86 | – | 100 | –8 |
During the year all cash flow hedges matured. The effect on other comprehensive income during 2017 has been SEK 19 m. (32).
In each subsidiary the interest cost effect related to instruments with floating interest is non-material at a parallel movement of the yield curve with one percentage.
Liquidity risk refers to the risk that a financial instrument cannot be divested without considerable extra costs, and to the risk that liquidity will not be available to meet payment commitments.
Liquidity risks are reduced in Treasury operations by limiting the maturity of short-term cash investments up to two years and by always maintaining a higher than 1:1 ratio between cash and credit commitments/current liabilities. Liquid funds are invested in deposit markets and short-term interest-bearing securities with low risk and high liquidity. In other words, they are invested in a well-functioning second-hand market, allowing conversion to liquid funds when needed. Liquidity risk in the trading operations is restricted via limits established by the Board.
Financing risks are defined as the risk that financing can not be obtained, or can only be obtained at increased costs as a result of changed conditions in the capital market. To reduce the effect of refinancing risks, limits are set regarding average maturities for loans. In order to minimize financing risks, Treasury works actively to ensure financial preparedness by establishing loan and credit limits for both long-term and short-term borrowing. Financing risks are further reduced by allocating loan maturities over time (please refer to the chart below) and by diversifying sources of capital. An important aspect, in this context, is the ambition to have a long borrowing profile. Furthermore, proactive liquidity-planning efforts also help limit both liquidity and financing risk.
Mkr År Förfallostruktur för Investor AB:s lån 7 000 Investor's funding is primarily done through long-term loan programs in the Swedish and European capital markets. Investor has a European Medium Term Note Program (EMTN), which is a loan program intended for long-term financing. The program is for EUR 5.0 bn. (SEK 49.2 bn.), of which EUR 2.8 bn. (SEK 27.3 bn.) has been utilized. For short-term financing, Investor has an uncommitted Swedish and a European Commercial Paper program (CP/ECP) for SEK 10.0 bn. and USD 1.5 bn. (SEK 12.3 bn.), respectively. At year-end 2017 these facilities were unutilized.
4 000 5 000 6 000 8 10 12 Investor has a committed syndicated bank loan facility of SEK 10.0 bn. This facility is available until 2022, with an option of another two years additional extension. This facility was unutilized at year-end. In contrast to an uncommitted credit facility, a committed loan program is a formalized commitment from the credit grantor. There are no financial covenants in any of Investor AB's loan contracts, meaning that Investor does not have to meet special requirements with regard to key financial ratios for the loans it has obtained.
0 1 000 2 000 3 000 Förfallostruktur, nominellt värde, Mkr Genomsnittligt förfall, år 0 2 4 6 2018 2019 20212022 2023 2029 2033 2034 2036 2037 2044 The wholly-owned subsidiaries ensure their financial preparedness by keeping credit facilities, should there be a need for additional working capital or minor acquisitions. As of December 31, 2017, Mölnlycke had a total credit facility of EUR 1,846 m. (1,196), of which EUR 1,496 m. was utilized (1,001). At the same time, Aleris had total credit facilities amounting to SEK 3,423 m. (3,480) of which SEK 2,908 m. (2,782) had been utilized. Also at year-end 2017, Permobil had total credit facilities of SEK 3,154 m. (3,437) of which 3,106 m. was used (3,037). Vectura had a total credit facility of SEK 2,500 m. (1,767), of which 2,021 m. was used as per year-end (1,767). BraunAbility had a total credit facility of USD 248 m. (196), of which USD 150 m. was used (123). Laborie had at year-end a total credit facility of USD 120 m. (120) of which USD 118 m. was used (120). The terms of the credit facilities require the companies to meet a number of key financial ratios. The subsidiaries fulfilled all financial ratios during 2017.
With an equity/assets ratio of 82 percent at year-end (81), Investor has considerable financial flexibility, since leverage is low and most assets are highly liquid.
The following table shows the Group's contracted cash flow of loans including other financial payment commitments and derivatives.
| 12/31 2017 | 12/31 2016 | ||||
|---|---|---|---|---|---|
| Cash flow of financial liabilities and derivatives1), SEK bn. |
Loans and other financial debts and commitments |
Derivatives | Loans and other financial debts and commitments |
Derivatives | |
| < 6 months | –2,777 | –20 | –2,459 | –7 | |
| 6-12 months | –2,214 | –20 | –1,700 | –52 | |
| 1-2 years | –1,930 | –148 | –3,658 | –39 | |
| 2-5 years | –23,371 | 446 | –11,964 | –209 | |
| > 5 years | –41,350 | 3,313 | –49,342 | 4,256 |
1) Interest payments included.
For information on the Group's excess liquidity and how it is invested, see note 22, Other financial investments, short-term investments and cash and cash equivalents.
Exposure from guarantees and other contingent liabilities also constitutes a liquidity risk. For such exposure as per December 31, 2017, see note 30, Pledged assets and contingent liabilities.
Credit risk is the risk of a counterparty or issuer being unable to repay a liability to Investor. Investor is exposed to credit risks primarily through investments of excess liquidity in interest-bearing securities. Credit risks also arise as a result of positive market values in derivative instruments (mainly interest rate, currency swaps).
Investor applies a wide-ranging limit structure with regard to maturities, issuers and counterparties in order to limit credit risks on single counterparties. With a view to further limiting credit risks in interest rate and currency swaps, and other derivative transactions, agreements are established with counterparties in accordance with the International Swaps and Derivatives Association, Inc. (ISDA), as well as netting agreements. Credit risk is monitored daily and the agreements with various counterparties are continuously analyzed.
The following table shows the total credit risk exposure by rating category as of December 31, 2017.
| Exposure per rating category | Nominal amount, SEK m. |
Average remaining maturity, months |
Number of counter parties |
Percentage of the credit risk exposure |
|---|---|---|---|---|
| Swedish government | ||||
| papers (AAA) | 1,150 | 1.9 | 1 | 4 |
| AAA | 8,295 | 14.5 | 6 | 28 |
| AA | 4,041 | 2.2 | 24 | 13 |
| A | 14,250 | 0.4 | 48 | 48 |
| Lower than A | 2,040 | 4.2 | 36 | 7 |
| Total | 29,776 | 4.9 | 115 | 100 |
The total credit risk exposure at the end of 2017 amounted to SEK 29,776 m. (22,291). The credit risks resulting from positive market values for derivatives, which are included in the total credit risk, amounted to SEK 1,894 m. (2,402) and is reported in the Balance Sheet.
The credit risk in the wholly-owned subsidiaries relates mainly to trade account receivables. Mölnlycke's, Aleris' and Permobil's credit risks are limited due to the fact that a significant portion of their customers are public hospitals/care institutions.
The maximum exposure related to commercial credit risk corresponds to the carrying amount of trade receivables.
The following table shows the aging of trade receivables and other shortterm receivables within the Group.
| 12/31 2017 | 12/31 2016 | |||||
|---|---|---|---|---|---|---|
| Aging of receivables, SEK m. | Gross carrying amount |
Impair ment |
Net | Gross carrying amount |
Impair ment |
Net |
| Not past due | 3,479 | –2 | 3,477 | 3,311 | –2 | 3,309 |
| Past due 0-30 days | 405 | –1 | 404 | 459 | –2 | 457 |
| Past due 31-90 days | 218 | –2 | 216 | 174 | –12 | 162 |
| Past due 91-180 days | 118 | –13 | 104 | 97 | –9 | 88 |
| Past due 181-360 days | 73 | –8 | 65 | 51 | –9 | 41 |
| More than 360 days | 43 | –42 | 1 | 81 | –23 | 58 |
| BS Total | 4,336 | –70 | 4,266 | 4,173 | –57 | 4,116 |
Concentrations of risk are defined as individual positions or areas accounting for a significant portion of the total exposure to each area of risk.
Because of the global nature of its business and sector diversification, the Group does not have any specific customers representing a significant portion of receivables.
The concentration of credit risk exposure related to fair value reported items, is presented in the adjacent table. The secured bonds issued by Swedish mortgage institutions have the primary rating category of AAA. The proportion of AAA-rated instruments accounted for 32 percent of the total credit risk exposure (39).
Investor is exposed to sustainability risks in all parts of its business operations. Sustainability risks imply that unethical or unsustainable behavior leads to negative impact on Investor or Investor's stakeholders. Material sustainability risks within the Group are identified, analyzed and mitigated through the annual enterprise risk assessment process as well as within the daily operations. Most of the risks are derived from operations in Investor's holdings. Subsidiaries operating in emerging markets have an increased focus on sustainability related risks such as the risk of bribery and corruption, environmental risks and the risk for poor working conditions. Investor has clear expectations that all holding companies always act responsibly and ethically, and it is the responsibility of each holding and its management to analyze and take systematic action to reduce these risks. These risks are observed in the materiality analysis presented in the section Sustainable business, see page 10.
The Group is also exposed to political risks. To a large extent, spending on healthcare products and services is regulated by various governments. This applies to most markets around the world. Funds are made available or withdrawn from healthcare budgets due to different types of political decisions. In most of the major markets, pricing of products and services is controlled by decisions made by government authorities. Activities within Health care companies are also heavily regulated. Examples of such laws are the Health and Medical Service Act, the Social Services Act and environmental legislation.
There is a high awareness of legal and regulatory risks within the Investor Group. Risks associated with selling and operating healthcare services are dealt with by the different levels of management for each area of operations. Continuous quality improvement is performed in accordance with ISOstandards.
Property risks, liability risks and interruption risks are covered by insurance policies. Up to this date, very few incidents have occurred.
Follow-up on processes is performed on an ongoing basis to determine and strengthen appropriate control measures aimed at reducing operational risks.
In connection with a business combination, the Group's acquisition cost is established through a purchase price allocation. In the analysis, the fair value of the identifiable assets and the assumed liabilities is determined. For business combinations where the cost exceeds the net carrying amount of the acquired identifiable assets and the assumed liabilities, the difference is reported as goodwill in the Balance Sheet. The purchase price allocation identifies assets and liabilities that are not reported in the acquired company, such as trademarks and customer contracts. Identified intangible assets that have been identified when making the purchase price allocation are amortized over the estimated useful life. Goodwill and strong trademarks that are considered to have an indefinite useful life, are not amortized but tested annually for impairment, or whenever there is any indication of impairment.
Consideration that is contingent upon the outcome of future events is valued at fair value and the change in value is recognized in the Income Statement.
The financial statements of subsidiaries are reported in the consolidated financial statements as of the acquisition date and until the time when a controlling interest no longer exists.
At the time of an acquisition, the Group must choose to either recognize non-controlling interest at fair value, meaning that goodwill is included in the non-controlling interest or recognize the non-controlling interest as the share of the net identifiable assets. The choice between the two methods is made individually for each acquisition.
If a business combination achieved in stages results in a controlling influence, the prior acquired shares are revalued at fair value and the resulting profit or loss is recognized in the Income Statement. Acquisitions that are made subsequent to having obtained a controlling influence and divestments that do not result in a loss of the controlling influence are reported under equity as a transfer between equity attributable to the Parent Company's shareholders and non-controlling interests. For information regarding put options to non-controlling interests, see note 23, Equity.
During the fourth quarter 2017, Permobil acquired 100 percent of Durable Medical Equipment ltd. and Orbit One ltd. based in New Zealand, as well as U.S. based The Comfort Companies LLC. The acquisitions are in-line with Permobil's strategy to drive access to care and to expand its product offering.
The aggregated consideration amounted to SEK 330 m., whereof SEK 314 m. was paid in cash and SEK 16 m. relates to a potential earnout. The potential earnout is based on revenue and EBITDA targets during 2 years leading up to December 31, 2019 and maximized to SEK 16 m.
In the aggregated purchase price allocation, goodwill amounts to SEK 88 m. The goodwill recognized for the acquisitions corresponds to the complementary strengths of the companies in the field of complex rehabilitation and long-term care markets. The goodwill recognized is not expected to be deductible for income tax purposes.
Identifiable assets acquired and liabilities assumed
| SEK m. | Purchase Price Allocation |
|---|---|
| Intangible assets | 251 |
| Property, plant and equipment | 15 |
| Inventories | 29 |
| Trade receivables | 37 |
| Other current receivables | 3 |
| Cash and cash equivalents | 5 |
| Deferred tax liabilities | –58 |
| Other provisions | –17 |
| Other current liabilities | –22 |
| Net identifiable assets and liabilities | 242 |
| Consolidated goodwill | 88 |
| Consideration | 330 |
Transaction related costs amounted to SEK 13 m. and derive from external legal fees and due diligence expenses. The costs have been included in the item Administrative, research and development and other operating costs in the Group's consolidated income statement.
For the respective period from the acquisition dates until December 31, 2017, the companies contributed net sales of SEK 84 m. and profit of SEK 0 m. to the Group's result. If the acquisitions had occurred on January 1, 2017, management estimates that consolidated net sales for the Investor Group would have increased by SEK 251 m. and consolidated profit for the period would have increased by SEK 5 m.
After the end of the period Permobil acquired MAX Mobility and Ottobock´s OBSS and NUTEC custom seating business lines. The aggregated consideration amounted to SEK 549 m.
During the first quarter 2017, the preliminary purchase price allocation related to the acquisition of Laborie in 2016, was changed and goodwill and deferred tax liability was reduced with SEK 400 m. due to a finalization of analysis of local tax consequences as a result of the acquisition.
During the year, BraunAbility, Aleris, Vectura and Laborie acquired ten smaller entities. In the purchase price allocations the aggregated purchase price amounted to SEK 541 m. and preliminary goodwill amounted to a total of SEK 312 m. For the periods from the acquisition date until December 31, 2017, the acquisitions contributed net sales of SEK 944 m. and loss of SEK –14 m. to the Group's result. If the acquisitions had occurred on January 1, 2017, management estimates that consolidated net sales for the Investor Group would have increased by SEK 104 m. and consolidated profit for the period would have increased by SEK 16 m.
Investor´s acquisition of Sarnova after the end of the financial year On March 12, 2018, Patricia Industries, a part of Investor AB, signed an agreement to acquire Sarnova Holdings Inc., the leading U.S. speciality distributor of healthcare products in the emergency preparedness and acute care markets. The acquisition is subject to approval by the relevant competition authorities.
Closing is expected during the second quarter 2018. The enterprise value amounts to USD 903 m. For the 12-month period ending in December 2017, sales amounted to USD 555 m. and the EBITDA margin was approximately 12 percent. A preliminary purchase price allocation has up to now not been prepared.
Investor is divided into operating segments based on how operations are reviewed and evaluated by the CEO. Investor's presentation of operating segments corresponds to the internal structure for management and reporting.
The operations are divided into the three business areas Listed Core Investments, Patricia Industries and EQT.
Listed Core Investments consists of listed holdings, see page 14.
Patricia Industries includes the wholly-owned subsidiaries, 3 Scandinavia and the former IGC portfolio and all other financial investments, except EQT and Investor's trading portfolio, see page 18.
The business area EQT consists of the holdings in EQT, see page 23. The reported items in the operating segment profit/loss for the year, assets
and liabilities, are presented according to how they are reviewed by the CEO.
In the operating segment presentation, items directly attributable and items that can be reliably and fairly allocated to each respective segment are included. Non-allocated items are presented in Investor Groupwide and are related to the investing activities and consist, within profit/loss, of management costs, net financial items and components of tax. Assets and liabilities within investing activities are included in Investor Groupwide as well. Market prices are used for any transactions that occur between operating segments.
For information about goods, services and geographical areas, see note 8, Revenues.
| Total | |
|---|---|
| Performance by business area 2017 Investments Industries EQT Groupwide |
|
| Dividends 8,319 5 81 |
8,404 |
| Other operating income 17 |
17 |
| Changes in value 34,418 –1,099 2,703 331) |
36,054 |
| Net sales 34,381 |
34,381 |
| Cost of goods and services sold –22,060 |
–22,060 |
| Sales and marketing costs –4,157 |
–4,157 |
| Administrative, research and development and other operating costs –5,112 –5 –25 |
–5,142 |
| Management costs –100 –225 –9 –121 |
–455 |
| Share of results of associates 403 –13 |
390 |
| IS Operating profit/loss 42,636 2,153 2,770 –126 |
47,433 |
| Net financial items –986 –1,905 |
–2,891 |
| Tax –210 –34 |
–244 |
| IS Profit/loss for the year 42,636 957 2,770 –2,066 |
44,298 |
| Non-controlling interest 20 |
20 |
| Net profit/loss for the period attributable to the Parent Company 42,636 977 2,770 –2,066 |
44,318 |
| Dividend –8,411 |
–8,411 |
| Other effects on equity2) –211 374 114 |
278 |
| Contribution to net asset value 42,636 766 3,144 –10,362 |
36,185 |
| Net asset value by business area 12/31 2017 | |
| Shares and participations 284,033 11,433 16,403 272 |
312,141 |
| Other assets 74,971 662 |
75,633 |
| Other liabilities –3 –37,790 –238 –1,256 |
–39,288 |
| Net debt/-cash3) 19,368 –31,592 |
–12,224 |
| Total net asset value including net debt/-cash 284,030 67,982 16,165 –31,915 |
336,262 |
| Shares in associates reported according to the equity method 4,338 1 |
4,340 |
| Cash flow for the year 6,961 10,438 1,051 –13,316 |
5,134 |
| Non-current assets by geographical area4) | |
| Sweden 37,845 17 |
37,862 |
| Europe excl. Sweden 6,632 |
6,632 |
| Other countries 14,480 23 |
14,503 |
1) Includes proceeds from the trading operation amounting to SEK 2,263 m.
2) Refers mainly to revaluation reserve, effects of long-term share-based remuneration, changes in non-controlling interest and changes in the hedging and translation reserves. 3) Net debt/-cash refers to other financial investments, short-term investments, cash and cash equivalents, interest-bearing liabilities with related derivatives
and defined benefit pensions within investing activities.
4) Non-current assets consists of intangible and tangible assets. Information regarding associates by geographical area is not presented because Investor,
as a minority owner, can not access information that can be compiled in a meaningful way.
| Listed Core | Patricia | Investor | |||
|---|---|---|---|---|---|
| Performance by business area 2016 | Investments | Industries | EQT | Groupwide | Total |
| Dividends | 8,307 | 10 | 33 | 1 | 8,351 |
| Other operating income | 40 | 40 | |||
| Changes in value | 22,719 | –2,029 | 1,374 | –71) | 22,057 |
| Net sales | 31,742 | 31,742 | |||
| Cost of goods and services sold | –20,102 | –20,102 | |||
| Sales and marketing costs | –3,802 | –3,802 | |||
| Administrative, research and development and other operating costs | –3,343 | –6 | –7 | –3,357 | |
| Management costs | –89 | –263 | –8 | –105 | –465 |
| Share of results of associates | 521 | –5 | 516 | ||
| IS Operating profit/loss | 30,936 | 2,774 | 1,393 | –123 | 34,980 |
| Net financial items | –408 | –454 | –862 | ||
| Tax | –509 | 56 | –453 | ||
| IS Profit/loss for the year | 30,936 | 1,857 | 1,393 | –521 | 33,665 |
| Non-controlling interest | 0 | 0 | |||
| Net profit/loss for the period attributable to the Parent Company | 30,936 | 1,857 | 1,393 | –521 | 33,665 |
| Dividend | –7,635 | –7,635 | |||
| Other effects on equity2) | 2,582 | 592 | –928 | 2,246 | |
| Contribution to net asset value | 30,936 | 4,438 | 1,986 | –9,084 | 28,276 |
| Net asset value by business area 12/31 2016 | |||||
| Shares and participations | 248,356 | 14,138 | 14,191 | 104 | 276,790 |
| Other assets | 73,394 | 677 | 74,071 | ||
| Other liabilities | –2 | –32,727 | –195 | –1,109 | –34,032 |
| Net debt/-cash3) | 14,389 | –31,141 | –16,752 | ||
| Total net asset value including net debt/-cash | 248,354 | 69,195 | 13,996 | –31,468 | 300,077 |
| Shares in associates reported according to the equity method | 5,566 | 15 | 5,581 | ||
| Cash flow for the year | 6,729 | 1,499 | 1,036 | –11,326 | –2,062 |
| Non-current assets by geographical area4) | |||||
| Sweden | 37,155 | 15 | 37,170 | ||
| Europe excl. Sweden | 6,760 | 6,760 | |||
| Other countries | 15,660 | 29 | 15,689 |
1) Includes proceeds from the trading operation amounting to SEK 1,774 m.
2) Refers mainly to revaluation reserve, effects of long-term share-based remuneration, changes in non-controlling interest and changes in the hedging and translation reserves. 3) Net debt/-cash refers to other financial investments, short-term investments, cash and cash equivalents, interest-bearing liabilities with related derivatives
and defined benefit pensions within investing activities. 4) Non-current assets consists of intangible and tangible assets. Information regarding associates by geographical area is not presented because Investor,
as a minority owner, can not access information that can be compiled in a meaningful way.
Changes in value consist mainly of realized and unrealized result from long-term and short-term holdings in shares and participations recognized at fair value. Other includes transaction costs, profit-sharing costs and management fees for fund investments.
For shares and participations that were realized during the period, the changes in value consist of the difference between the consideration received and the value at the beginning of the period. Profit or loss from the divestment of a holding is recognized when the risks and benefits associated with owning the instrument are transferred to the buyer and the Group no longer has control over the instrument.
| 2017 | 2016 | |
|---|---|---|
| Realized results from long-term and short-term investments |
2,329 | 3,057 |
| Unrealized results from long-term and short-term investments |
34,226 | 19,518 |
| Realized result from associates valued at equity method | – | 82 |
| Other IS Total |
–501 36,054 |
–601 22,057 |
| Total | 31,814 | 27,726 |
|---|---|---|
| Other operating expenses | 5,923 | 6,633 |
| Depreciation, amortization and impairment | 2,558 | 1,348 |
| Personnel costs | 12,244 | 11,412 |
| Raw materials and consumables | 11,087 | 8,333 |
| 2017 | 2016 |
Costs related to research and development amounts to SEK 722 m. (531).
Revenues included in operating profit are dividends, other operating income and net sales.
Dividends received are recognized when the right to receive payment has been established. Other operating income consists primarily of interest on shareholder loans to associates and it is calculated using the effective interest rate method.
Revenue from the sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer. Services provided as part of healthcare activities are sold via multi-year operating contracts and, in some cases, framework agreements. Revenue from services is recognized based on the stage of completion on balance sheet date. Completion is determined by an assessment of the work done, on the basis of performed examinations.
Revenue is not recognized if it is probable that economic benefits will not flow to the Group. No revenue is recognized if there is significant uncertainty regarding the payment, associated costs or the risk of returns. Neither is revenue recognized if the seller remains involved in day-to-day management activities that are typically associated with ownership. Revenue is recognized at the fair value of consideration received or expected to be received, less any discounts. Revenue shall be recognized when the amount of revenue can be measured reliably.
A provision is made for the risk of loss if the total directly attributable costs during the entire term of the contract are expected to exceed the total revenues, including indexation.
| By category: | 2017 | 2016 |
|---|---|---|
| Sales of products | 23,053 | 21,048 |
| Sales of services | 11,276 | 10,504 |
| Other income | 52 | 190 |
| IS Total | 34,381 | 31,742 |
| By field of operation: | ||
| 2017 | 2016 | |
| Health care equipment | 22,057 | 20,730 |
| Health care services | 11,651 | 10,360 |
| Hotel | 646 | 629 |
| Real estate | 27 | 23 |
| IS Total | 34,381 | 31,742 |
| By geographical market: | 2017 | 2016 |
| Sweden | 6,481 | 6,421 |
| Scandinavia, excl. Sweden | 6,502 | 5,936 |
| Europe, excl. Scandinavia | 7,319 | 7,497 |
| U.S. | 11,165 | 9,862 |
| North America, excl. U.S. | 548 | 436 |
| South America | 624 | 164 |
| Africa | 325 | 248 |
| Australia | 634 | 547 |
| Asia | 781 | 631 |
| IS Total | 34,381 | 31,742 |
External revenues are presented on the basis where the customer is resident. Net sales are attributable to wholly-owned subsidiaries. No customer exceeds 10 percent of total net sales.
Accounting policies on employee benefits such as short-term benefits, termination benefits and share-based payment transactions are presented below. Post-employment benefits are presented in note 25, Provisions for pensions and similar obligations.
Short-term employee benefits are measured on an undiscounted basis and are expensed as the related services are provided. A provision is made for the anticipated cost of variable cash salary and profit-sharing contracts when the Group has a current obligation to make such payments (because services have been provided by employees) and when the obligation can be reliably estimated.
The cost of termination benefits is recognized only if the company is demonstrably committed (without any realistic possibility of withdrawing the commitment) by a formal plan to prematurely terminate an employee's employment.
Within the Investor Group both equity-settled and cash-settled stock option and share programs and cash-settled (synthetic) shares have been issued.
The fair value of stock options and share programs issued is determined at the grant date in accordance with the Black & Scholes valuation model, taking into consideration the terms and conditions that are related to the share price. The value is recognized in the income statement as a personnel cost allocated over the vesting period with a corresponding increase in equity. The recognized cost corresponds to the fair value of the estimated number of options and shares that are expected to vest. This cost is adjusted in subsequent periods to reflect the actual number of vested options and shares. However, no adjustment is made when options and shares expire only because share price related conditions do not reach the level needed for the options to vest.
When equity-settled programs are exercised, shares are delivered to the employee. The delivered shares are treasury shares that are repurchased when needed. When exercised, the payment of the exercise price that was received from the employee is reported as an increase in equity.
Equity-settled programs issued to employees in Group companies In the Parent Company, the value of equity instruments, which is offered to employees of other companies belonging to the Group, is reported as a capital contribution to subsidiaries. The value of participations in subsidiaries increases simultaneously to the Parent Company's reporting of an increase in equity. The costs related to employees in companies concerned are invoiced to the subsidiaries. The cash settlement of the invoices then neutralizes the increase of participations in subsidiaries.
Cash-settled stock option and share programs and cash-settled (synthetic) shares result in an obligation that is valued at fair value and recognized as an expense with a corresponding increase in liabilities. Initial fair value is calculated and the grant value is recognized over the vesting period as a personnel cost, which is similar to the recognition of equity-settled programs. However, cash settled programs are revalued at fair value every balance sheet date and at final settlement. All changes in the fair value as a result of changes in share price or fair value of the underlying instruments are recognized in the financial net with a corresponding change in liabilities.
When cash-settled programs are exercised, the liability to the holder of the synthetic shares is settled.
Accounting for social security attributable to
share-based payment transactions
Social security expenses attributable to share-based remuneration are recognized and accrued in accordance with the same principles as the costs for synthetic shares.
| 2017 | 2016 | |||
|---|---|---|---|---|
| Total | Of which women |
Total | Of which women |
|
| Parent Company, Sweden | 71 | 37 | 71 | 36 |
| Sweden, excl. Parent Company | 6,206 | 4,719 | 6,295 | 4,797 |
| Europe excl. Sweden | 6,931 | 4,737 | 6,616 | 4,680 |
| North- and South America | 3,147 | 1,090 | 2,626 | 875 |
| Africa | 6 | 5 | 6 | 4 |
| Asia | 3,549 | 2,524 | 3,593 | 2,562 |
| Australia | 144 | 69 | 85 | 59 |
| Total Group | 20,054 | 13,181 | 19,292 | 13,011 |
| 2017 | 2016 | |||
|---|---|---|---|---|
| Men Women |
Men | Women | ||
| Gender distribution in percent | ||||
| Board of the Parent Company | 64 | 36 | 64 | 36 |
| Extended Management Group of the Parent | ||||
| Company incl. the President | 57 | 43 | 60 | 40 |
| Boards in the Group1) | 74 | 26 | 70 | 30 |
| Management Groups in the Group | 63 | 37 | 60 | 40 |
1) Based on all Group companies including small, internal companies with minor activity.
Management Group and other employees in Investing activities The AGM 2017 decided on guidelines for salary and other remuneration for the President and other Members of the Extended Management Group. The Board of Directors may, where particular grounds exist in the individual case, decide to deviate from the guidelines.
Investor strives to offer a total remuneration that is competitive and in line with market conditions, thereby enabling it to attract and retain the right type of expertise to the company. The total remuneration should be based on factors such as position, performance and individual qualifications. The total remuneration for the Extended Management Group may consist of: basic salary, variable cash salary, long-term variable remuneration, pension and other remuneration and benefits.
Basic salary is reviewed annually for all Investor employees. Basic salary constitutes the basis for calculating variable salary.
Investor's employees can have a portion of their salary as variable cash salary. The variable portion of salary differs between business areas. For the President Johan Forssell, it amounts to a maximum of 30 percent of basic salary. For other employees, the maximum variable salary ranges between 0 and 60 percent of their basic salary, although for a very limited number of key personnel, the variable portion of salary can be a maximum of 100 percent of their basic salary. The President may award additional variable salary to company employees who he feels have made an exceptional contribution during the year. However, any such additional variable salary must be approved by Investor's Remuneration Committee.
The established goals must also be reached in order to receive the variable salary. Goals are reviewed at the end of the year. The focus of the President's goals for the year is determined through a dialog between the President and the Chairperson of the Board. The goals for the President are proposed by the Remuneration Committee and later approved by the Board. Goals for other employees are established by each employee's manager.
For long-term variable remuneration programs, it is the Board's ambition to create a structure that results in employee commitment and is based on the long-term development of Investor. As a result, part of the remuneration to employees is related to the long-term performance of Investor and the Investor share, which exposes the employee to both increases and decreases of the share price. In 2006, a Stock Matching Plan was introduced for Investor employees, as well as a performance based share program for Senior Management. "Senior Management" is defined as the President, other members of the Extended Management Group and a maximum of 20 other senior executives. The structure of the programs for 2007-2017 correspond in all material aspects to the program for 2006.
During 2017 a specific long-term variable remuneration program for Patricia Industries was introduced. Employees within Patricia Industries do not therefore participate, from 2017, in Investor's program for long-term variable remuneration. The employee is required to invest his or her own funds, or commit shares, in order to participate in the programs for long-term variable remuneration.
For more details regarding the programs, see page 54-57.
Pension benefits for the President and other Members of the Extended Management Group consists of a premium based pension plan of which the ratio of pension provisions to fixed cash salary depends on the age of the executive. In respect of employees working abroad, pension benefits shall be adjustable in line with local pensions practice. The age of retirement for the President and other Members of the Extended Management Group is 60 years.
Profit-sharing program for the trading operation
This program includes participants both from the trading organization and the investment organization. The participants in this program receive, in addition to their base salary, a variable salary equivalent to 20 percent of the trading function's net result. The program includes a clawback principle by which 50 percent of the variable salary allotment is withheld for one year and will only be paid out in full if the trading result for that year is positive. In order to receive full allotment, two consecutive profitable years are thus required. Approximately 10-15 employees in total participate in the program.
Investor and Members of the Extended Management Group may mutually terminate employment contracts subject to a six months´ notice. Fixed cash salary during the notice period and severance pay shall, for Members of the Extended Management Group with employment contracts entered into after the Annual General Meeting 2010, in aggregate not exceed the fixed cash salary for two years. For members of the Management Group employed before the Annual General Meeting of 2010 the contracts already entered into shall apply. For these Members a mutual termination period of six month applies and severance payment is maximized to 24 months of fixed cash salary.
Investor allows Extended Management Group members to keep any fees that they have received for work done on the Boards of the Company's Listed Core Investments. One reason for allowing this practice is that the employee assumes personal responsibility by having a Board position. Fees received for Board work are taken into account by Investor when determining the employee's total remuneration.
Investor offers all employees a variety of non-monetary benefits, including corporate health service, health insurance, subsidized lunches, employee fitness programs and the possibility to rent vacation homes. Managers and employees with young children are also offered in-home services in the form of cleaning and baby-sitting.
| Year | Basic salary | Vacation remuneration |
Variable salary for the year |
Total cash salary |
Change of vacation pay liability |
Pension premiums |
Benefits | Long-term share-based remuneration value at grant date |
Total | Own investment in long-term share based remuneration |
Own investment, % of CEO basic salary pre-tax |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 7,600 | 253 | 2,052 | 9,905 | 217 | 2,845 | 178 | 6,080 | 19,226 | 2,472 | 32.5 |
| 2016 | 7,150 | 104 | 1,877 | 9,131 | 314 | 2,729 | 205 | 5,720 | 18,099 | 2,252 | 31.5 |
The amounts in the table below are calculated according to the accruals concept, in which the terms basic salary and variable salary refer to expensed amounts, including any changes to the reserve for variable salary, vacation pay provisions, etc. Variable salary refers to the approved variable salary for the current financial year, unless specified otherwise.
| Total remunerations 2017 (SEK t.) | Basic salary |
Vacation remu neration |
Change of vacation pay liability |
Variable salary for the year |
Cost of long-term share-based remuneration1) |
Total | Pension costs2) | Other remuneration and benefits |
Total expensed remuneration |
|---|---|---|---|---|---|---|---|---|---|
| President and CEO | 7,600 | 253 | 217 | 2,052 | 6,388 | 16,511 | 2,845 | 178 | 19,534 |
| Extended Management Group, excl. the President3) |
21,991 | 345 | 465 | 10,753 | 12,250 | 45,805 | 7,106 | 2,438 | 55,348 |
| Total | 29,591 | 598 | 682 | 12,805 | 18,639 | 62,315 | 9,951 | 2,616 | 74,882 |
| Total remunerations 2016 (SEK t.) | |||||||||
| President and CEO | 7,150 | 104 | 314 | 1,877 | 4,788 | 14,232 | 2,729 | 205 | 17,166 |
| Management Group, excl. the President | 10,750 | 156 | 370 | 4,094 | 5,415 | 20,785 | 5,739 | 331 | 26,854 |
| Total | 17,900 | 260 | 684 | 5,970 | 10,203 | 35,017 | 8,468 | 536 | 44,021 |
1) There is a deviation from the value at grant date according to the previous table on page 53. In the table above the cost is calculated based on the principles in IFRS 2 and allocated over the vesting period. The calculation is also adjusted for the actual outcome of allotted performance shares, whereas in the previous table the value is based on an assumed allotment.
2) There are no outstanding pension commitments for the Management Group.
3) From 2017 Investor has established an Extended Management Group including the two Co-heads of Patricia Industries and the Head of Human Resources.
| 2017 | 2016 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total remuneration (SEK m.), Group |
Basic salary1) |
Variable salary |
Long-term share-based remuneration |
Pension cost |
Cost for employee benefits |
Social security contribu tions |
Total | Basic salary1) |
Variable salary |
Long-term share-based remuneration |
Pension cost |
Cost for employee benefits |
Social security contribu tions |
Total |
| Parent Company | 82 | 18 | 30 | 25 | 12 | 46 | 213 | 84 | 18 | 28 | 23 | 12 | 44 | 208 |
| Subsidiaries | 8,446 | 477 | 39 | 679 | 339 | 1,613 | 11,593 | 7,722 | 593 | 28 | 614 | 306 | 1,569 | 10,832 |
| Total | 8,528 | 495 | 70 | 704 | 351 | 1,6592) 11,806 | 7,806 | 611 | 56 | 637 | 318 | 1,6132) 11,040 |
1) Includes vacation remuneration and change of vacation pay liability.
2) Of which SEK 23 m. refers to social security contribution for long-term share-based remuneration (21).
| 2017 | 2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| Remuneration (SEK m.), Group | Salary Senior executives, Presidents and Boards in subsidiaries1, 2) |
Of which variable salary1) |
Other employees |
Total | Salary Senior executives, Presidents and Boards in subsidiaries1, 2) |
Of which variable salary1) |
Other employees |
Total |
| Parent Company | 39 | 7 | 61 | 100 | 35 | 6 | 67 | 102 |
| Subsidiaries | 80 | 25 | 8,842 | 8,923 | 119 | 36 | 8,196 | 8,315 |
| Total | 119 | 32 | 8,904 | 9,023 | 154 | 42 | 8,263 | 8,417 |
1) The number of people in the Parent Company is 17 (15) and in subsidiaries 57 (55).
2) Pension costs relating to senior executives, Presidents and Boards in subsidiaries amount to SEK 17 m. and are in addition to the amounts presented in the table (25).
Through the long-term variable remuneration programs, part of the remuneration to employees becomes linked to the long-term performance of the Investor share. Investor has two programs for long-term variable remuneration: Investor's program and the program for Patricia Industries.
Through the Stock Matching Plan, an employee could acquire or commit shares in Investor at the market price during a period (determined by the Board) subsequent to the release of Investor's first quarterly report for each year, respectively (the "Measurement Period"). After a three-year vesting period, two options (Matching Options) are granted for each Investor share acquired or committed by the employee, as well as a right to acquire one Investor share (Matching Share) for SEK 10. The Matching Share may be acquired during a four-year period subsequent to the vesting period. Each Matching Option entitles the holder to purchase one Investor share, during the corresponding period, at a strike price corresponding to 120 percent of the average volumeweighted price paid for Investor shares during the Measurement Period. The President, other members of the Management Group and a maximum of 20 other senior executives ("Senior Management") are obligated to invest at least 5 percent of their annual basic salary in Investor shares according to the Stock Matching Plan. Other employees are not obligated to invest, but they
are still entitled to invest to the extent that the value of the allotted Matching Options and Matching Shares amounts to a maximum of either 10 or 15 percent of their basic salary. Senior Management has the right to invest to such an extent that the value of the allotted Matching Options and Matching Shares amounts to a maximum between 10 and 27 percent of their respective basic salary. In order to participate fully in the Stock Matching Plan for 2017, the President had to invest or commit approximately 32 percent of his basic salary in Investor shares. If the President, through the investment mentioned above, participates fully in the Stock Matching Plan, the theoretical value of the right to receive a Matching Share and two Matching Options per acquired share under the Stock Matching Plan is 27 percent of the basic salary.
Senior Management has, in addition to the Stock Matching Plan, the right (and obligation) to participate in a Performance-Based Share Program. Under this program, which presumes participation in the Stock Matching Plan, Senior Management, after a three-year vesting period, has the right during four years to acquire additional Investor shares ("Performance Shares") for a price that corresponds to, in 2017 year's program, 50 percent of the price of the shares acquired by the employee ("Acquisition Price"). This right is conditional upon whether certain financial goals related to the total return of the Investor share are met during the vesting period. Total return is measured over a three-year qualification period. The average annual total return (including reinvested dividends) must exceed the interest on 10-year government bonds by more
than 10 percentage points in order for Senior Management to be entitled to acquire the maximum number of Performance Shares that they were allotted. If the total return does not exceed the 10-year interest on government bonds by at least 2 percentage points, Senior Management is not entitled to acquire any shares. If the total return is between the 10-year interest on government bonds plus 2 percentage points and the 10-year interest on government bonds plus 10 percentage points, a proportional (linear) calculation of the number of shares that may be acquired is made. The total return is measured quarterly on running 12-month basis during the qualification period, where the total outcome is estimated as the average total return during the threeyear period based on 9 measurement points.
At the time when Matching Shares and Performance Shares are acquired, employees are entitled to remuneration for dividends paid during the vesting period and up until the acquisition date. This is done so that the program will not be affected by dividends and to avoid the risk that a decision on dividends is affected by the long-term variable remuneration program.
Hedge contracts for employee stock option and share programs Investor's policy is to implement measures to minimize the effects on equity from the programs in the event of an increase in Investor's share price. For programs implemented in 2006 and later, Investor has previously been repurchasing its own shares in order to guarantee delivery.
| Year issued |
Number of Matching Shares granted |
Number at the beginning of the year |
Adjustment for dividend 2017 |
Matching Shares for feited in 2017 |
Matching Shares exer cised in 2017 |
Weighted aver age share price on exercise |
Number of Matching Shares at year-end |
Theoretical value1), SEK |
Fair value2), SEK |
Strike price, SEK |
Maturity date | Vesting period (years)3) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 28,482 | – | 330 | 28,1524) | 355.53 | 359.69 | 10.00 | 12/31 2023 | 3 | |||
| 2016 | 49,948 | 49,574 | 1,379 | 1,682 | 600 | 359.76 | 48,6714) | 246.40 | 274.01 | 10.00 | 12/31 2022 | 3 |
| 2015 | 37,671 | 38,535 | 1,066 | 492 | 1,445 | 361.14 | 37,6644) | 293.33 | 326.18 | 10.00 | 12/31 2021 | 3 |
| 2014 | 55,451 | 55,185 | 1,188 | 21 | 17,929 | 372.24 | 38,423 | 219.51 | 244.29 | 10.00 | 12/31 2020 | 3 |
| 2013 | 72,378 | 35,908 | 709 | – | 13,594 | 372.17 | 23,023 | 167.90 | 187.33 | 10.00 | 12/31 2019 | 3 |
| 2012 | 120,160 | 35,891 | 816 | 19 | 8,106 | 383.64 | 28,582 | 109.60 | 122.17 | 10.00 | 12/31 2018 | 3 |
| 2011 | 88,959 | 12,530 | 257 | 16 | 12,222 | 387.85 | 549 | 127.15 | 141.66 | 10.00 | 12/31 2017 | 3 |
| Total | 453,049 | 227,623 | 5,415 | 2,560 | 53,896 | 205,064 |
1) The value of Matching Shares on the grant date was based on a theoretical value calculated in accordance with the Black & Scholes valuation model.
2) The fair value on the grant date was calculated in accordance with IFRS 2, which was also used for calculating recognized value. See page 56 for specification of the basis of calculation. 3) Under certain circumstances, in conjunction with the end of employment, Matching Shares can be exercised before the end of the vesting period. Matching Shares that have already vested must be exercised within 3 months from the end of employment if the employment lasted less than 4 years and 12 months if the holder has been employed longer.
4) Matching Shares not available for exercise at year-end.
4) Matching Options not available for exercise at year-end.
| Year issued |
Number of Matching Options granted |
Number at the beginning of the year |
Matching Options for feited in 2017 |
Number of Matching Options exercised in 2017 |
Weighted aver age share price on exercise |
Number of Matching Options at year-end |
Theoretical value1), SEK |
Fair value2), SEK |
Strike price, SEK |
Maturity date | Vesting period (years)3) |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 56,964 | – | 661 | 56,3034) | 27.57 | 30.70 | 486.90 | 12/31 2023 | 3 | ||
| 2016 | 99,896 | 99,147 | 3,256 | 962 | 392.86 | 94,9294) | 28.32 | 32.69 | 340.90 | 12/31 2022 | 3 |
| 2015 | 75,342 | 74,330 | 2,431 | 1,237 | 411.89 | 70,6624) | 38.77 | 44.76 | 403.30 | 12/31 2021 | 3 |
| 2014 | 110,902 | 103,643 | 36,031 | 371.59 | 67,612 | 29.86 | 34.41 | 304.50 | 12/31 2020 | 3 | |
| 2013 | 144,756 | 58,550 | 19,864 | 385.36 | 38,686 | 22.63 | 24.97 | 236.10 | 12/31 2019 | 3 | |
| 2012 | 240,320 | 78,528 | 22,276 | 399.78 | 56,252 | 14.70 | 16.87 | 157.80 | 12/31 2018 | 3 | |
| 2011 | 177,918 | 37,570 | 37,570 | 393.47 | – | 19.78 | 22.82 | 180.30 | 12/31 2017 | 3 | |
| Total | 906,098 | 451,768 | 6,348 | 117,940 | 384,444 |
1) The value of Matching Options on the grant date was based on a theoretical value calculated in accordance with the Black & Scholes valuation model.
2) The fair value on the grant date was calculated in accordance with IFRS 2, which was also used for calculating recognized value. See page 56 for specification of the basis of calculation. 3) Under certain circumstances, in conjunction with the end of employment, Matching Options can be exercised before the end of the vesting period. Matching Options that have already vested must be exercised within 3 months from end of employment if employment lasted less than 4 years and within 12 months if the holder has been employed longer.
Performance Shares 2011-2017
| Year issued |
Maximum number of Performance Shares granted |
Number at the beginning of the year |
Adjustment for dividend 2017 |
Performance Shares, for feited in 2017 |
Performance Shares exercised in 2017 |
Weighted aver age share price on exercise |
Number of Per formance Shares at year-end |
Theoretical value1), SEK |
Fair value2), SEK |
Strike price, SEK |
Maturity date | Vesting period (years) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 121,591 | – | 121,5913) | 92.81 | 102.77 | 202.89 | 12/31 2023 | 3 | ||||
| 2016 | 231,067 | 231,067 | 6,288 | 1,991 | 235,3643) | 66.74 | 74.26 | 138.28 | 12/31 2022 | 3 | ||
| 2015 | 163,585 | 169,416 | 4,611 | 174,0273) | 80.59 | 89.84 | 157.98 | 12/31 2021 | 3 | |||
| 2014 | 258,017 | 272,089 | 3,287 | 115,197 | 41,266 | 365.24 | 118,913 | 62.79 | 70.03 | 116.08 | 12/31 2020 | 3 |
| 2013 | 320,473 | 106,359 | 2,592 | 15,105 | 369.55 | 93,846 | 49.33 | 54.26 | 87.29 | 12/31 2019 | 3 | |
| 2012 | 457,517 | 151,212 | 3,574 | 44,385 | 404.08 | 110,401 | 32.69 | 36.41 | 56.31 | 12/31 2018 | 3 | |
| 2011 | 663,784 | 126,210 | 1,647 | 127,857 | 388.51 | – | 20.56 | 23.14 | 123.03 | 12/31 2017 | 3 | |
| Total | 2,216,034 | 1,056,353 | 21,999 | 117,188 | 228,613 | 854,142 |
1) The value of Performance Shares on the grant date was based on a theoretical value calculated in accordance with the Black & Scholes valuation model.
2) The fair value on the grant date was calculated in accordance with IFRS 2, which was also used for calculating recognized value. See page 56 for specification of the basis of calculation. 3) Performance Shares not available for exercise at year-end.
The difference between the theoretical value and fair value is mainly due to the fact that the anticipated personnel turnover is taken into consideration when determining the theoretical value. When estimating the fair value in
accordance with IFRS 2, personnel turnover is not taken into account; instead the anticipated number of vested shares or options is adjusted. The adjustment is based on average historical outcome.
The calculation of the fair value on the grant date, according to IFRS 2, was based on the following conditions:
| 2017 | 2016 | |||||
|---|---|---|---|---|---|---|
| Matching Share |
Matching Option |
Performance Share |
Matching Share |
Matching Option |
Performance Share |
|
| Averaged volume-weighted price paid for Investor B shares | 405.77 | 405.77 | 405.77 | 284.09 | 284.09 | 284.09 |
| Strike price | 10.00 | 486.90 | 202.89 | 10.00 | 340.90 | 142.05 |
| Assumed volatility1) | 23% | 23% | 23% | 28% | 28% | 28% |
| Assumed average term2) | 5 years | 5 years | 5 years | 5 years | 5 years | 5 years |
| Assumed percentage of dividend3) | 0% | 3.0% | 0% | 0% | 3.0% | 0% |
| Risk-free interest | –0.17% | –0.17% | –0.17% | –0.16% | –0.16% | –0.16% |
| Expected outcome4) | 50% | 50% |
1) The assumed volatility was based on future forecasts based on the historical volatility of Investor B shares, in which the term of the instrument is an influencing factor.
The historical volatility has been in the interval of 15 to 30 percent.
2) The assumption of average term for the instruments at grant is based on historical exercise patterns and the actual term of the instruments within each remuneration program.
3) The dividend for Matching Shares and Performance Shares is compensated for by increasing the number of shares. 4) Probability to achieve the performance criteria is calculated based on historic data and verified externally.
Patricia Industries' program for long-term variable remuneration is based on the same structure as Investor's program for long-term variable remuneration, but is related to the value growth of Patricia Industries' ("PI").
The instruments in the PI long-term variable remuneration program are granted under two different Plans as further described below: the PI Balance Sheet Plan (the "PI-BS Plan"); and the PI North America Subsidiaries Plan (the "PI-NA Plan"). The instruments have a duration of up to seven years and participants will, conditional upon making a personal investment in Investor shares, be granted instruments that may vest after a three-year vesting period and may be exercised and/or settled during the four-year period thereafter (subject to applicable US tax laws).
Two categories of employees are offered to participate in the program: (i) PI Senior Management and (ii) Other PI Employees. Participants employed within the PI Nordic organization are only offered to participate in the PI-BS Plan whereas participants employed within the PI North America organization are offered to participate with 60 percent of their grant value (determined as described below) in the PI-BS Plan and 40 percent of their grant value in the PI-NA Plan.
General terms of instruments
The instruments granted under the PI-BS Plan and the PI-NA Plan are governed by the following terms and conditions:
Vest three years after grant (the "Vesting Period").
May not be transferred or pledged.
Instruments granted under the PI-BS Plan: In order for participants to be awarded the maximum number of instruments the compounded annual growth of the fair market value of PI's balance sheet must exceed the interest on 10-year Swedish government bonds by more than 10 percentage points. If the applicable compounded annual growth is between the 10-year interest on Swedish government bonds plus 2 percentage points and the 10-year interest on Swedish government bonds plus 10 percentage points, then a proportional (linear) calculation of the award shall be made.
Instruments granted under the PI-NA Plan: In order for participants to be awarded the maximum number of instruments the compounded annual growth of the North American wholly-owned subsidiaries of PI must exceed the interest on 10-year US government bonds by more than 12 percentage points. If the applicable compounded annual growth is between the 10-year interest on US government bonds plus 4 percentage points and the 10-year interest on US government bonds plus 12 percentage points, then a proportional (linear) calculation of the award shall be made.
Matching shares 2017
| Total | 9,218 | 9,218 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 9,218 | 9,2184) | 31.51 | 44.00 | 486.90 | 12/31 2023 | 3 | ||||||||
| Year issued |
Number of Matching Options granted |
Number at the beginning of the year |
Matching Options for feited in 2017 |
Matching Options exercised in 2017 |
Number of | Weighted aver age share price on exercise |
Number of Matching Options at year-end |
Theoretical | value1), SEK |
Fair value2), SEK |
Strike price, SEK |
Maturity date | Vesting period (years)3) |
||
| Matching options 2017 | |||||||||||||||
| Total | 4,609 | 4,609 | |||||||||||||
| 2017 | 4,609 | 4,6094) | 355.52 | 395.77 | 10.00 | 12/31 2023 | 3 | ||||||||
| Year issued |
Number of Matching Shares granted |
Number at the beginning of the year |
Adjustment for dividend 2017 |
Matching Shares for feited in 2017 |
Matching Shares exer cised in 2017 |
Weighted aver age share price on exercise |
Matching Shares at year-end |
Number of | Theoretical value1), SEK |
Fair value2), SEK |
Strike price, SEK |
Maturity date | Vesting period (years)3) |
||
1) The value of Matching Shares and Matching Options on the grant date was based on a theoretical value calculated in accordance with the Black & Scholes valuation model. 2) The fair value on the grant date was calculated in accordance with IFRS 2, which was also used for calculating recognized values. See page 57 for specification of the basis of calculation.
3) Under certain circumstances, in conjunction with the end of employment, Matching Shares and Matching Options can be exercised before the end of the vesting period. Instruments that have already vested must be exercised within 3 months from end of employment if employment lasted less than 4 years and within 12 months if the holder has been employed longer.
4) Matching Shares and Matching Options not available for exercise at year-end.
Performance Shares 2017
| Total | 23,899 | 23,899 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 23,899 | 23,8994) | 92.81 | 106.11 | 202.89 | 12/31 2023 | 3 | |||||
| Year issued |
Performance Shares granted |
the beginning of the year |
for dividend 2017 |
forfeited in 2017 |
exercised in 2017 |
age share price on exercise |
Shares at year-end |
value1), SEK |
value2), SEK |
price, SEK |
Maturity date | period (years)3) |
| Number of | Number at | Adjustment | Performance Shares |
Performance Shares |
Weighted aver | Number of Performance |
Theoretical | Fair | Strike | Vesting |
1) The value of Performance Shares on the grant date was based on a theoretical value calculated in accordance with the Black & Scholes valuation model.
2) The fair value on the grant date was calculated in accordance with IFRS 2, which was also used for calculating recognized values. See below for specification of the basis of calculation. 3) Under certain circumstances, in conjunction with the end of employment, Performance Shares can be exercised before the end of the vesting period. Performance Shares that have already vested must be exercised within 3 months from end of employment if employment lasted less than 4 years and within 12 months if the holder has been employed longer. 4) Performance Shares not available for exercise at year-end.
Matching shares 2017
| Year issued |
Number of Matching Shares granted |
Number at the beginning of the year |
Adjustment for dividend 2017 |
Matching Shares for feited in 2017 |
Matching Shares exer cised in 2017 |
Weighted average share price on exercise |
Number of Matching Shares at year-end |
Theoretical value1), SEK |
Fair value2), SEK |
Strike price, SEK |
Maturity date | Vesting period (years)3) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 10,430 | 10,4304) | 356.31 | 396.95 | 10.00 | 12/31 2023 | 3 | |||||
| Total | 10,430 | 10,430 |
Matching options 2017
| Year | Number of Matching |
Number at the beginning of |
Matching Options forfeited |
Number of Matching Options |
Weighted average share price |
Number of Matching Options at |
Theoretical value1), |
Fair value2), |
Strike price, |
Vesting period |
|
|---|---|---|---|---|---|---|---|---|---|---|---|
| issued | Options granted | the year | in 2017 | exercised in 2017 | on exercise | year-end | SEK | SEK | SEK | Maturity date | (years)3) |
| 2017 | 20,860 | 20,8604) | 29.85 | 39.19 | 486.90 | 12/31 2023 | 3 | ||||
| Total | 20,860 | 20,860 |
Performance Shares 2017
| Year issued |
Number of Performance Shares granted |
Number at the beginning of the year |
Adjustment for dividend 2017 |
Performance Shares forfeited in 2017 |
Performance Shares exercised in 2017 |
Weighted average share price on exercise |
Number of Performance Shares at year-end |
Theoretical value1), SEK |
Fair value2), SEK |
Strike price, SEK |
Maturity date | Vesting period (years)3) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 67,237 | 67,2374) | 99.89 | 114.75 | 202.89 | 12/31 2023 | 3 | |||||
| Total | 67,237 | 67,237 |
1) The value of Matching Shares, Matching Options and Performance Shares on the grant date was based on a theoretical value calculated in accordance with the Black & Scholes valuation model.
2) The fair value on the grant date was calculated in accordance with IFRS 2, which was also used for calculating recognized values. See below for specification of the basis of calculation. 3) Under certain circumstances, in conjunction with the end of employment, Matching Shares, Matching Options and Performance Shares can be exercised before the end of the vesting period. Instruments that have already vested must be exercised within 3 months from end of employment if employment lasted less than 4 years and within 12 months if the holder has been employed longer.
4) Matching Shares, Matching Options and Performance Shares not available for exercise at year-end.
The calculation of the fair value on the grant date, according to IFRS 2, was based on the following conditions:
| PI-BS Plan | PI-NA Plan | |||||
|---|---|---|---|---|---|---|
| Matching Share |
Matching Option |
Performance Share |
Matching Share |
Matching Option |
Performance Share |
|
| Averaged volume-weighted price paid for Investor B shares | 405.77 | 405.77 | 405.77 | 405.77 | 405.77 | 405.77 |
| Strike price | 10.00 | 486.90 | 202.89 | 10.00 | 486.90 | 202.89 |
| Assumed volatility1) | 23% | 23% | 23% | 23% | 23% | 23% |
| Assumed average term2) | 5 years | 5 years | 5 years | 5 years | 5 years | 5 years |
| Assumed percentage of dividend3) | 0% | 2.3% | 0% | 0% | 4.0% | 0% |
| Risk-free interest | –0.17% | –0.17% | –0.17% | 1.79% | 1.79% | 1.79% |
| Expected outcome4) | 50% | 50% |
1) The assumed volatility was based on future forecasts based on the historical volatility of Investor B shares, in which the term of the instrument is an influencing factor.
The historical volatility has been in the interval of 15 to 30 percent.
2) The assumption of average term for the instruments at grant is based on historical exercise patterns and the actual term of the instruments within each remuneration program. 3) The dividend for Matching Shares and Performance Shares is compensated for by increasing the number of shares.
4) Probability to achieve the performance criteria is calculated based on historic data and verified externally.
Participation/incentive programs in Investor Growth Capital (IGC) Within IGC, selected senior staff and other senior executives were, to a certain extent, allowed to make parallel investments with Investor, or else receive profit-sharing. For more information regarding the programs see note 31, Related party transactions.
Board members and senior executives in unlisted investments, including Mölnlycke, Aleris, Permobil, Vectura, BraunAbility and Laborie are offered the opportunity to invest in the companies through management participation programs. For more information regarding the programs see note 31, Related party transactions.
At the 2017 Annual General Meeting (AGM), it was decided that Board remuneration should total SEK 10,230 t. (9,995), of which SEK 9,110 t. (8,910) would be in the form of cash and synthetic shares and SEK 1,120 t. (1,085) would be distributed as cash remuneration for committee work done by the Board of Directors.
Since 2008, Board members have been given the opportunity to receive a part of their gross remuneration, excluding committee fees, in synthetic shares. AGM's decision regarding synthetic shares 2017 is essentially identical to the decision of the AGM 2016. In 2017, Board Members were entitled to receive 50 percent of the proposed remuneration before tax, excluding remuneration for committee work, in the form of synthetic shares and 50 percent in cash (instead of receiving 100 percent of the remuneration in cash). A synthetic share carries the same economic rights as a class B Investor share, which means that the value of the Board of Director's remuneration in synthetic shares, just like for class B shares, is dependent upon value fluctuations as well as the amount of dividends during the five-year period until 2022, when each
synthetic share entitles the Board member to receive an amount corresponding to the share price, at the time, of a class B Investor share.
At the statutory meeting in May 2017 the Board approved, as in 2016, establishment of a policy pursuant to which members of the Board (who do not already have such holdings) are expected to, over a five-year period, acquire ownership in Investor shares (or a corresponding exposure to the Investor share, for example in synthetic shares) for a market value that is expected to correspond to at least one year's remuneration for board work, before taxes and excluding remuneration for committee work.
The Director's right to receive payment occurs after the publications of the year-end report and the three interim reports, respectively, during the fifth year following the general meeting which resolved on the allocation of the Synthetic Shares, with 25 percent of the allocated Synthetic Shares on each occasion. In case the Director resigns as Board Member prior to a payment date the Director has a right, within three months after the Director's resignation, to request that the time of payment shall be brought forward, and instead shall occur, in relation to 25 percent of the total number of allocated Synthetic Shares, after the publications of each of the year-end report and the three interim reports, respectively, which are made during the year after the year when such request was received by the Company.
| Total | 6,818 | 2,293 | 1,120 | 10,230 | 1,549 | –191 | 1,687 | 13,275 | 61,705 | 5,616 | 1,663 26,941 | 42,044 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sara Öhrvall | 328 | 328 | 655 | 94 | –27 | 721 | 2,147 | 802 | 58 | 3,008 | |||
| Peter Wallenberg Jr.4) | 128 | 145 | 273 | 5,177 | 139 | 2,317 | 2,999 | ||||||
| Lena Treschow Torell | 328 | 328 | 85 | 740 | 221 | –27 | 145 | 1,079 | 7,324 | 802 | 197 | 2,317 | 6,006 |
| Hans Stråberg | 328 | 328 | 655 | 221 | –27 | 145 | 994 | 7,324 | 802 | 197 | 2,317 | 6,006 | |
| Grace Reksten Skaugen | 655 | 260 | 915 | 915 | |||||||||
| Carola Lemne5) | 74 | 145 | 219 | 3,941 | 106 | 2,317 | 1,730 | ||||||
| Tom Johnstone, CBE | 328 | 328 | 85 | 740 | 221 | –27 | 145 | 1,079 | 7,324 | 802 | 197 | 2,317 | 6,006 |
| Johan Forssell Magdalena Gerger |
328 | 328 | 175 | 830 | 148 | –27 | 950 | 3,383 | 802 | 91 | 4,276 | ||
| Sune Carlsson4) | 145 | 145 | 2,257 | 61 | 2,317 | – | |||||||
| Gunnar Brock3) | 328 | 328 | 175 | 830 | 221 | –27 | 145 | 1,169 | 7,324 | 802 | 197 | 2,317 | 6,006 |
| Josef Ackermann | 328 | 328 | 655 | 221 | –27 | 127 | 976 | 7,042 | 802 | 190 | 2,028 | 6,006 | |
| Marcus Wallenberg2) | 1,420 | 1,420 | 1,420 | ||||||||||
| Jacob Wallenberg2) | 2,450 | 340 | 2,790 | 544 | 3,334 | 8,463 | 228 | 8,691 | – | ||||
| Total remuneration for 2017 (SEK t.) |
Cash Board fee |
Synthetic Shares as at grant date |
Commit tee fee |
Total Board fee as at grant date |
change in market value of previous years Synthetic Shares |
change in market value of Synthetic Shares issued 2017 |
Synthetic Shares exercised 2017 |
Total fee, actual cost |
Synthetic Shares at the beginning of the year |
Synthetic Shares granted 20171) |
Adjust ment for dividend |
Exercised Synthetic Shares, 2017 |
Synthetic Shares on December 31, 2017 |
| Value of | Effect from | Effect from | Effect from |
Number of | Number of | Number of |
1) Based on weighted average stock price for Investor B in the period May 5 to May 11 2017: SEK 408.20.
2) Remunerations including pertinent statutory social charges and VAT are invoiced through a company. This procedure is not affecting the cost for Investor.
3) Additional remunerations of SEK 1,040 t. to Gunnar Brock have been expensed in the subsidiaries.
4) Member of the Board until 5/12 2015.
5) Member of the Board until 5/6 2014.
| Total | 6,670 | 2,240 | 1,085 | 9,995 | 2,083 | 542 | 72 | 12,692 | 72,997 | 8,170 | 2,662 | 22,124 | 61,705 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sara Öhrvall | 320 | 320 | 640 | 38 | 77 | 756 | 946 | 1,167 | 34 | 2,147 | |||
| Peter Wallenberg Jr.4) | 201 | 7 | 208 | 6,980 | 255 | 2,058 | 5,177 | ||||||
| Lena Treschow Torell | 320 | 320 | 80 | 720 | 240 | 77 | 7 | 1,044 | 7,926 | 1,167 | 289 | 2,058 | 7,324 |
| Hans Stråberg | 320 | 320 | 640 | 240 | 77 | 7 | 964 | 7,926 | 1,167 | 289 | 2,058 | 7,324 | |
| Grace Reksten Skaugen | 640 | 255 | 895 | 895 | |||||||||
| Carola Lemne5) | 153 | 7 | 160 | 5,788 | 211 | 2,058 | 3,941 | ||||||
| Tom Johnstone, CBE | 320 | 320 | 80 | 720 | 240 | 77 | 7 | 1,044 | 7,926 | 1,167 | 289 | 2,058 | 7,324 |
| Johan Forssell Magdalena Gerger |
320 | 320 | 170 | 810 | 87 | 77 | 974 | 2,138 | 1,167 | 78 | 3,383 | ||
| Sune Carlsson4) | 88 | 7 | 94 | 4,163 | 152 | 2,058 | 2,257 | ||||||
| Gunnar Brock3) | 320 | 320 | 170 | 810 | 240 | 77 | 7 | 1,134 | 7,926 | 1,167 | 289 | 2,058 | 7,324 |
| Josef Ackermann | 320 | 320 | 640 | 229 | 77 | 946 | 5,668 | 1,167 | 207 | 7,042 | |||
| Marcus Wallenberg2) | 1,390 | 1,390 | 1,390 | ||||||||||
| Jacob Wallenberg2) | 2,400 | 330 | 2,730 | 329 | 25 | 3,084 | 15,612 | 569 | 7,718 | 8,463 | |||
| Total remuneration for 2016 (SEK t.) |
Cash Board fee |
Value of Synthetic Shares as at grant date |
Commit tee fee |
Total Board fee as at grant date |
Effect from change in market value of previous years Synthetic Shares |
Effect from change in market value of Synthetic Shares issued 2016 |
from Synthetic Shares exercised 2016 |
Total fee, actual cost |
Number of Synthetic Shares at the beginning of the year |
Number of Synthetic Shares granted 20161) |
Adjust ment for dividend |
Exercised Synthetic Shares, 2016 |
Number of Synthetic Shares on December 31, 2016 |
| Effect |
1) Based on weighted average stock price for Investor B in the period May 12 to May 18 2016: SEK 274.17.
2) Remunerations including pertinent statutory social charges and VAT are invoiced through a company. This procedure is not affecting the cost for Investor.
3) Additional remunerations of SEK 1,174 t. to Gunnar Brock have been expensed in the subsidiaries.
4) Member of the Board until 5/12 2015.
5) Member of the Board until 5/6 2014.
| Costs relating to share-based payment transactions, SEK m. | 2017 | 2016 |
|---|---|---|
| Group | ||
| Costs relating to equity-settled share-based payment transactions |
76 | 56 |
| Costs relating to cash-settled share-based payment transactions |
18 | 5 |
| Social security relating to share-based payment transactions |
23 | 21 |
| Total | 117 | 82 |
| Parent Company | ||
| Costs relating to equity-settled share-based payment transactions |
23 | 23 |
| Costs relating to cash-settled share-based payment transactions |
7 | 5 |
| Social security relating to share-based payment transactions |
22 | 20 |
| Total | 52 | 48 |
| Other effects of share-based payment transactions, SEK m. | 2017 | 2016 |
| Group | ||
| Effect on equity relating to Stock-Options exercised by employees |
52 | 312 |
| Carrying amount of liability relating to cash-settled instruments |
51 | 33 |
| Parent Company | ||
| Effect on equity relating to Stock-Options exercised by employees |
52 | 312 |
| Carrying amount of liability relating to cash-settled instruments |
22 | 27 |
| 2017 | 2016 | |
|---|---|---|
| Auditor in charge | Deloitte | Deloitte |
| Auditing assignment | 36 | 25 |
| Other audit activities | 1 | 2 |
| Tax advice | 4 | 5 |
| Other assignments | 3 | 3 |
| Total Auditor in charge | 44 | 35 |
| Other auditors | ||
| Auditing assignment | 1 | 4 |
| Total other auditors | 1 | 4 |
| Total | 45 | 39 |
Costs related to operating leases are recognized in the Income Statement on a straight-line basis over the lease term.
Operating leases mainly consist of rent of premises, leasing of company cars and office furniture.
| 2017 | 2016 | |
|---|---|---|
| Less than 1 year from balance sheet date | –892 | –797 |
| 1-5 years from balance sheet date | –1,597 | –1,539 |
| More than 5 years from balance sheet date | –1,034 | –1,067 |
| Total | –3,523 | –3,403 |
| Costs for the year | ||
|---|---|---|
| Minimum lease payments | –985 | –829 |
| Contingent rent | 0 | 0 |
| Total | –985 | –829 |
| Non-cancellable future lease revenue | ||
| 2017 | 2016 | |
| Less than 1 year from balance sheet date | 21 | 21 |
| 1-5 years from balance sheet date | 33 | 26 |
| More than 5 years from balance sheet date | 22 | 24 |
| Total | 76 | 71 |
| Revenue for the year | ||
| Minimum lease revenue | 22 | 21 |
| Contingent rent | 1 | 2 |
| Total | 24 | 22 |
Associates are companies in which Investor, directly or indirectly, has a significant influence, typically between 20 and 50 percent of the votes. Accounting for associates is dependent on how Investor controls and monitors the companies' operations. The Group applies the equity method for unlisted holdings in those cases where Investor is significantly involved in the associate's operations.
Certain unlisted associates within Patricia Industries and all listed associates are controlled and monitored based on fair value and are accounted for as financial instruments at fair value through profit/loss, according to IAS 39 and IAS 28 p.18-19.
Reporting of associates in accordance with the equity method Associates are reported in the consolidated financial statements as of the date when significant influence was obtained. When applying the equity method, the carrying amount of the investments in associates that is reported in the consolidated financial statements, corresponds to the Group's share of the associates' equity, consolidated goodwill, and any consolidated surpluses/ deficits.
In the consolidated Income Statement, the Group's share of the associates' profit/loss that is attributable to the owners of the Parent Company (adjusted for any depreciation, impairment losses or reversals of acquired surpluses/ deficits) is recognized as "share of results of associates". These shares of profit/loss (less any dividends received from associates) are the primary component of the change in reported value of participations in associates. The Group's share of other comprehensive income in associates is reported as a separate component of other comprehensive income.
Upon acquisition of an associate, any difference between the cost of the holding including transaction costs and the investor's share of the net fair value of the associate's identifiable assets and liabilities is reported as goodwill corresponding to principles for acquisition of subsidiaries.
If the Group's share of reported losses in the associate exceeds the carrying amount of the participations in the Group, the value of the participations is reduced to zero. Losses are also offset against long-term financial receivables without collateral, the economic substance of which is comprised of part of the investor's net investment in the associate. Continuing losses are not recognized, unless the Group has an obligation to cover the losses incurred by the associate. The equity method is applied until such time when the Group no longer has significant influence.
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| At the beginning of the year | 3,875 | 3,336 |
| Acquisitions | 20 | 2 |
| Divestments | – | –30 |
| Share of results of associates | 390 | 516 |
| Exchange rate differences, etc. | 55 | 51 |
| BS Carrying amount at year-end | 4,340 | 3,875 |
Note12. cont'd Shares and participations in associates
Hi3G Holdings AB, Stockholm, 556619-6647 3 Scandinavia is an operator providing mobile voice and broadband services in Sweden and Denmark. Investor's share of votes are 40 percent and the investment is included in Patricia Industries.
3 Scandinavia is consolidated using the equity method and no dividends were distributed to Investor for 2016 or 2017. However during 2017, SEK 1,714 m. was distributed to Patricia Industries as repayment of shareholder loans (774). Investor guarantees SEK 0.7 bn of 3 Scandinavia's external debt.
| Hi3G Holdings AB | Total | |
|---|---|---|
| 12/31 2017 | 12/31 2016 | |
| Ownership capital/votes, % | 40/40 | 40/40 |
| Net sales | 11,444 | 11,480 |
| Profit/loss for the year | 952 | 1,282 |
| Total other comprehensive income for the year | 189 | 174 |
| Total comprehensive income for the year | 1,141 | 1,456 |
| Investor's share of total comprehensive income for the year | 456 | 582 |
| Total share of total comprehensive income | 456 | 582 |
| Non-material associates | ||
| Share of profit/loss for the year | 9 | 3 |
| Share of total other comprehensive income | –21 | –19 |
| Share of total comprehensive income for the year | –11 | –15 |
| Total share of total comprehensive income | 445 | 567 |
| Hi3G Holdings AB | ||
| Total non-current assets | 14,611 | 14,954 |
| Total current assets | 4,579 | 12,112 |
| Total non-current liabilities | –283 | –4,564 |
| Total current liabilities | –8,413 | –13,150 |
| Total net assets (100 %) | 10,493 | 9,352 |
| Investor's share of total net assets | 4,197 | 3,741 |
| Carrying amount of Hi3G Holdings AB | 4,197 | 3,741 |
| Carrying amount of non-material associates | 143 | 134 |
| BS Carrying amount of associates at year-end | ||
| valued using the equity method | 4,340 | 3,875 |
| Investor's share of | 100% of reported values of the associate | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 12/31 2017 Company, Registered office, Registration number |
Ownership capital/votes (%) |
Carrying amount1) |
Dividends received |
Net sales | Profit/loss for the year |
Other comprehensive income for the year |
Total comprehensive income for the year |
Total assets | Total liabilities |
| SEB, Stockholm, 502032-9081 | 21/21 | 43,705 | 2,509 | 45,609 | 16,244 | –1,036 | 15,208 | 2,559,596 | 2,415,671 |
| Atlas Copco, Stockholm, 556014-2720 | 17/22 | 72,877 | 1,412 | 116,421 | 16,693 | –609 | 16,084 | 125,738 | 65,015 |
| Ericsson, Stockholm, 556016-0680 | 7/22 | 11,737 | 196 | 201,303 | –35,063 | –2,799 | –37,862 | 260,544 | 160,368 |
| Electrolux, Stockholm, 556009-4178 | 16/30 | 12,613 | 359 | 122,060 | 5,745 | –365 | 5,380 | 89,679 | 69,083 |
| Swedish Orphan Biovitrum AB, | |||||||||
| Stockholm, 556038-9321 | 40/40 | 12,051 | – | 6,511 | 1,149 | 148 | 1,297 | 10,903 | 4,201 |
| Saab, Linköping, 556036-0793 | 30/40 | 13,033 | 172 | 31,394 | 1,438 | 90 | 1,528 | 44,677 | 30,300 |
| Husqvarna, Jönköping, 556000-5331 | 17/33 | 7,542 | 189 | 39,394 | 2,660 | –99 | 2,561 | 35,418 | 19,751 |
| Total participations in material associates valued at fair value |
173,558 | 4,837 | 562,692 | 8,866 | –4,670 | 4,196 | 3,126,555 2,764,389 |
| Investor's share of | 100% of reported values of the associate | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 12/31 2016 Company, Registered office, Registration number |
Ownership capital/votes (%) |
Carrying amount1) |
Dividends received |
Net sales | Profit/loss for the year |
Other comprehensive income for the year |
Total comprehensive income for the year |
Total assets | Total liabilities |
| SEB, Stockholm, 502032-9081 | 21/21 | 43,725 | 2,395 | 43,251 | 10,618 | –946 | 9,672 | 2,620,646 | 2,479,670 |
| Atlas Copco, Stockholm, 556014-2720 | 17/22 | 57,437 | 1,308 | 101,356 | 11,948 | 2,785 | 14,733 | 115,892 | 62,715 |
| Ericsson, Stockholm, 556016-0680 | 6/22 | 10,380 | 648 | 222,608 | 1,895 | 2,619 | 4,514 | 283,347 | 142,855 |
| Electrolux, Stockholm, 556009-4178 Swedish Orphan Biovitrum AB, |
16/30 | 10,846 | 311 | 121,093 | 4,493 | 77 | 4,570 | 85,848 | 68,110 |
| Stockholm, 556038-9321 | 40/40 | 11,480 | – | 5,204 | 801 | –170 | 631 | 9,974 | 4,608 |
| Saab, Linköping, 556036-0793 | 30/40 | 11,181 | 164 | 28,631 | 1,175 | –309 | 866 | 41,211 | 27,910 |
| Husqvarna, Jönköping, 556000-5331 | 17/33 | 6,883 | 160 | 35,982 | 2,104 | 171 | 2,275 | 32,978 | 18,613 |
| Total participations in material associates valued at fair value |
151,933 | 4,986 | 558,125 | 33,034 | 4,227 | 37,261 | 3,189,896 2,804,481 |
1) Carrying amount for associates valued at fair value, equals the quoted market price for the investment.
3 Scandinavia is through its operational companies in Sweden and in Denmark involved in discussions with the Swedish Tax Authorities (STA) and with the Danish Tax Authorities (DTA), respectively, with regards to the interpretation of the underlying and applicable Swedish, Danish and EU law associated with the application of taxes on sales. These discussions have been ongoing for some time in both countries and a dispute arose in December 2016 in Sweden and in October 2017 in Denmark.
3 Sweden decided to challenge the STA´s decision in the administrative court. Despite this, in order to adopt a prudent approach, a risk analysis has been produced and 3 Sweden has decided to record an accrual of SEK 500 m. on the balance sheet, representing 31.5 percent of the overall uncertainty. This reflects the risk according to the Company´s best estimate of the final financial position in this matter.
3 Denmark decided to challenge the DTA's decision in the Danish National Tax Tribunal. Due to local legislation, 3 Denmark has during the fourth quarter paid SEK 563 m. to the DTA.
The assessment made by the management of 3 Scandinavia is that the process is in line with current legislation.
Note 13. Net financial items
Financial income and financial expenses consists mainly of interest, exchange rate differences on financial items and changes in the value of financial investments, liabilities and derivatives used to finance operations.
Interest is calculated using the effective interest rate method. The effective interest rate is the rate that discounts estimated future payments or receipts throughout the expected life of the financial instrument to the net carrying amount of the financial asset or liability. Transaction costs, including issuing costs, are expensed at the same point in time that receivables or payables are measured at fair value through profit/loss. When valued at amortized cost, amortization takes place over the remaining life using the effective interest rate. Borrowing costs are recognized in profit/loss using the effective interest rate method except to the extent that they are directly attributable to the acquisition, construction or production of assets that take considerable time to prepare for their intended use or sale. In such cases, they are included in the acquisition cost of the asset. Costs related to unused credit facilities are recognized as interest and are amortized on a straight-line basis over the term of the facilities. Other financial items consist mainly of changes in the value of derivatives and loans that are subject to fair value hedging, and foreign currency result.
| 2017 | 2016 | |
|---|---|---|
| Interest | ||
| Interest income | 55 | 40 |
| Interest expense | –1,531 | –1,470 |
| Total interest | –1,476 | –1,430 |
| Other financial items | ||
| Changes in value, gains | – | 25 |
| Changes in value, losses | –75 | –36 |
| Realized results from loans/swaps | – | 16 |
| Exchange gain | – | 1,348 |
| Exchange loss | –1,269 | –448 |
| Other items | –71 | –337 |
| Total other financial items | –1,415 | 568 |
| IS Net financial items | –2,891 | –862 |
Other financial items consists of unrealized market value changes and realized results of financial items excluding interest. Net financial items include the changes in value attributable to long-term share-based remuneration SEK –17 m. (–15) and revaluations of financial assets and liabilities established with valuation techniques totaling SEK –75 m. (–11). Liabilities accounted for as hedges have been revalued by SEK 392 m. (–371) and the associated hedging instruments have been revalued by SEK –522 m. (325). Derivatives included in cash flow hedges are not recognized in the Income Statement but have affected Other Comprehensive income by SEK 19 m. (17). For more information see note 29, Financial instruments.
The amount reported as the Group's total income tax for the year consists of current tax and deferred tax. Current tax is tax that must be paid or refunds that will be received for the current year and adjustments to current tax attributable to earlier periods. Deferred tax is based on the temporary differences between the tax base of an asset or liability and its carrying amount. Temporary differences attributable to goodwill are not recognized. Furthermore, temporary differences attributable to investments in subsidiaries or associates are not recognized unless they are expected to reverse within the foreseeable future. The valuation of deferred tax is based on the extent to which underlying assets and liabilities are expected to be realized or settled. Deferred tax is calculated using the tax rates and tax regulations that have been decided or announced at year-end. If the calculations result in a deferred tax asset, it will only be reported as such if it is probable that it will be realized.
Income taxes are reported in the Income Statement unless the underlying transaction is reported as part of Other Comprehensive income or as a component of equity. In such cases, the associated tax effect is also reported as part of Other Comprehensive income or as a component of equity.
Part of the difference between the effective tax rate and the Parent Company's tax rate that occurs upon reconciliation is due to the fact that the Parent Company is taxed in accordance with the rules that apply to industrial holding companies.
For a description of matters relating to tax contingencies, see note 30, Pledged assets and contingent liabilities.
Income tax for the year in Other Comprehensive income
| 2017 | 2016 | |
|---|---|---|
| Income tax for the year in Other Comprehensive income | –130 | 10 |
| Total | –130 | 10 |
Information about the connection between tax expense for the period and reported income before tax
| 2017 (%) | 2017 | 2016 (%) | 2016 | |
|---|---|---|---|---|
| Reported loss/profit before taxes | 44,542 | 34,118 | ||
| Tax according to applicable tax rate | 22.0 | –9,799 | 22.0 | –7,506 |
| Effect of other tax rates | ||||
| for foreign subsidiaries | 0.0 | 11 | –0.1 | 46 |
| Tax from previous years | 0.0 | –16 | 0.0 | –7 |
| Tax effect of non-taxable income | –25.2 | 11,239 | –28.4 | 9,700 |
| Tax effect status as an industrial | ||||
| holding company1) | –1.2 | 517 | –1.6 | 537 |
| Tax effect of non-deductible expenses | 4.8 | –2,121 | 10.4 | –3,560 |
| Controlled Foreign Company taxation | 0.0 | –9 | 0.0 | –5 |
| Standard interest on tax allocation | ||||
| reserve | 0.0 | 0 | 0.0 | 0 |
| Tax effect of not recognized losses or | ||||
| temporary differences | 0.9 | –386 | –0.3 | 96 |
| Tax effect of recognized losses or | ||||
| temporary differences | –0.3 | 150 | –0.9 | 318 |
| Other | 0.1 | –56 | 0.1 | –42 |
| Current tax expense | 1.1 | –471 | 1.2 | –423 |
| Tax effect of recognition and | ||||
| derecognition of tax losses or | ||||
| temporary differences | 0.2 | –70 | 0.5 | –167 |
| Tax effect of not recognized losses or | ||||
| temporary differences | –0.1 | 50 | 0.1 | –31 |
| Tax effect of changed tax rates | –0.6 | 2642) | –0.5 | 159 |
| Tax effect impairment of goodwill | 0.0 | – | 0.0 | –2 |
| Other | 0.0 | –16 | 0.0 | 11 |
| Deferred tax expense | –0.5 | 227 | 0.1 | –30 |
| IS Reported tax expense | 0.5 | –244 | 1.3 | –453 |
1) For tax purposes, industrial holding companies may deduct the dividend approved at the Annual General Meeting.
2) Tax effect of changed tax rates was SEK 264 m., whereof SEK 260 m. was related to the lowered US corporate tax rate.
Deferred taxes refer to the following assets and liabilities
| 12/31 2017 | 12/31 2016 | ||||||
|---|---|---|---|---|---|---|---|
| Asset | Liability | Net | Asset | Liability | Net | ||
| Intangible assets1) | 85 | –3,386 | –3,301 | 130 | –4,061 | –3,931 | |
| Property, plant and equipment | 99 | –837 | –738 | 12 | –755 | –743 | |
| Financial assets | – | –169 | –169 | – | –335 | –335 | |
| Inventory | 155 | –9 | 146 | 225 | – | 225 | |
| Interest-bearing liabilities | 7 | –6 | 1 | 10 | –6 | 4 | |
| Pension provisions | 223 | – | 223 | 220 | 0 | 220 | |
| Provisions | 51 | –1 | 50 | 21 | –1 | 20 | |
| Losses carry-forward1) | 282 | – | 282 | 463 | –2 | 461 | |
| Tax allocation reserves | 1 | –31 | –29 | 2 | –28 | –26 | |
| Other | 93 | –97 | –4 | 114 | –94 | 20 | |
| Total deferred tax assets and liabilities | 997 | –4,535 | –3,538 | 1,197 | –5,283 | –4,085 | |
| Net of deferred tax assets and liabilities2) | –294 | 294 | – | –290 | 290 | – | |
| BS Net deferred tax | 703 | –4,241 | –3,538 | 907 | –4,992 | –4,085 |
1) The amounts as per 12/31 2016 have been amended slightly compared to the annual report for 2016. This is mainly due to a finalization of analysis of local tax consequenses as a result of the acquisition of Laborie.
2) Deferred tax assets and tax liabilities are offset if a legal right exists for this.
Taxes relating to temporary differences for which deferred tax assets have not been recognized amounted to SEK 224 m. on December 31, 2017 (584). The amount refers to the tax amount of unrecognized losses carry-forward. The amount does not include the Parent Company due to its status as an industrial holding company for tax purposes.
Change in deferred taxes related to temporary differences and losses carry-forward
| 12/31 2017 | Amount at the beginning of the year |
Business combinations |
Recognized in the Income Statement |
Recognized in Other Comprehensive income |
Amount at year-end |
|---|---|---|---|---|---|
| Intangible assets | –3,931 | 394 | 212 | 24 | –3,301 |
| Property, plant and equipment | –743 | 0 | 100 | –95 | –738 |
| Financial assets | –335 | – | 138 | 29 | –169 |
| Inventory | 225 | – | –79 | 0 | 146 |
| Interest-bearing liabilities | 4 | – | –3 | 0 | 1 |
| Pension provisions | 220 | – | 10 | –7 | 223 |
| Provisions | 20 | – | 29 | 1 | 50 |
| Losses carry-forward | 461 | – | –156 | –23 | 282 |
| Tax allocation reserves | –26 | –1 | –2 | 0 | –29 |
| Other | 20 | 0 | –21 | –2 | –4 |
| Total | –4,085 | 394 | 227 | –74 | –3,538 |
| 12/31 2016 | Amount at the beginning of the year |
Business combinations |
Recognized in the Income Statement |
Recognized in Other Comprehensive income |
Amount at year-end |
|---|---|---|---|---|---|
| Intangible assets1) | –2,697 | –1,145 | 44 | –132 | –3,931 |
| Property, plant and equipment | –561 | –9 | –43 | –130 | –743 |
| Financial assets | –472 | – | 168 | –31 | –335 |
| Inventory | 145 | – | 69 | 11 | 225 |
| Interest-bearing liabilities | 8 | –2 | –2 | 0 | 4 |
| Pension provisions | 208 | –1 | –2 | 15 | 220 |
| Provisions | 27 | 7 | –5 | –8 | 20 |
| Losses carry-forward1) | 593 | 170 | –320 | 18 | 461 |
| Tax allocation reserves | –90 | – | 63 | 0 | –26 |
| Other | 4 | 6 | –1 | 12 | 20 |
| Total | –2,836 | –975 | –30 | –244 | –4,085 |
1) The amounts as per 12/31 2016 have been amended slightly compared to the annual report for 2016. This is mainly due to a finalization of analysis of local tax consequences as a result of the acquisition of Laborie.
The calculation of basic earnings per share is based on the profit/loss for the year attributable to shareholders of the Parent Company and on the weighted average number of shares outstanding during the year. When calculating diluted earnings per share, the average number of shares is adjusted to take into account the effects of dilutive potential ordinary shares, originating during the reported periods from stock option and share programs that have been offered to employees. Dilutions from stock option and share programs affect the number of shares and only occur when the strike price is less than the share price. The potential ordinary shares are not viewed as dilutive if they would result in better earnings per share after dilution, which occurs when net income is negative.
| 2017 | 2016 | |
|---|---|---|
| Profit/loss for the year attributable to the holders of ordinary shares in the Parent Company, SEK m. |
44,318 | 33,665 |
| Weighted average number of ordinary shares | ||
| outstanding during the year, millions | 764.6 | 763.5 |
| IS Basic earnings per share, SEK | 57.96 | 44.09 |
| Change in the number of outstanding shares, | ||
| before dilution | 2017 | 2016 |
| Total number of outstanding shares | ||
| at beginning of the year, millions | 764.4 | 761.9 |
| Repurchase of own shares during the year, millions | 0.0 | 0.0 |
| Sales own shares during the year, millions | 0.4 | 2.5 |
| Total number of outstanding shares | ||
| at year-end, millions | 764.8 | 764.4 |
| Diluted earnings per share | ||
| 2017 | 2016 | |
| Profit for the year attributable to the holders of ordinary shares in the Parent Company, diluted, SEK m. |
44,318 | 33,665 |
| Weighted average number of outstanding ordinary shares, millions |
764.6 | 763.5 |
| Effect of issued: Employee share and stock option programs, millions |
0.8 | 1.3 |
| Number of shares used for the calculation of diluted earnings per share, millions |
765.4 | 764.8 |
| IS Diluted earnings per share, SEK | 57.90 | 44.02 |
Outstanding options and shares in long-term share-based programs are to be considered dilutive only if earnings per share was less after than before dilution. Some options are out of money due to a lower average share price (SEK 401.15) compared to exercise price and potential value per option to be expensed in accordance to IFRS 2. Finally there are Performance Shares for which performance terms and conditions are to be met before they can be dilutive. There have been no changes in the number of outstanding shares after the balance sheet date. See note 9, Employees and personnel costs, for exercise price and a description of performance terms and conditions.
Intangible assets, except for goodwill and trademarks with indefinite life, are reported at cost after a deduction for accumulated amortization or any impairment losses. Goodwill and the majority of the Groups trademarks have an indefinite life and are reported at cost after any impairment losses.
Goodwill arises when the acquisition cost in a business combination exceeds the fair value of acquired assets and liabilities according to the purchase price allocation.
Trademarks are valued as part of the fair value of businesses acquired from a third party. The trademark must have long-term value and it must be possible to sell it separately.
Costs attributable to the development of qualifying assets are capitalized as a component of the asset's acquisition cost. An internally generated intangible asset is reported by the Group only if all of the following apply; it is possible to identify the asset that was created, it is both technically and financially feasible to complete the asset, there is both intent and ability to use the asset, it is likely that the asset will generate future economic benefits and it is possible to calculate the expenses in a reliable way. Amortization of the asset begins as soon as it is put into use. All other expenditure is immediately recognized in the Income Statement.
Proprietary technology consists of assets such as patents and licenses and is valued as part of the fair value of acquired businesses.
Customer contracts and relations are valued as part of the fair value of acquired businesses (less any amortization or impairment losses). The useful life of these assets are sometimes long, which reflects the long-term nature of the underlying business. Customer contracts and relations are based on the period of time over which net payments are expected to be received from the contract, as well as legal and financial factors.
Costs for software intended for own administrative use are recognized as an asset in the Balance Sheet when the costs are expected to generate future economic benefits in the form of more efficient processes. Capitalized expenditure for software is amortized from the date it became available for use.
Amortizations are made linearly over the asset's estimated useful life. Goodwill and trademarks with an indefinite useful life are not amortized.
| 6-8 years |
|---|
| 1-8 years |
| 3-20 years |
| 4-18 years |
| 1-10 years |
The recoverable amount of an asset is calculated whenever there is an indication of impairment. The recoverable amount is calculated once per year or more often if there are any indications of impairment for goodwill, trademarks and other intangible assets with an indefinite useful life and intangible assets that are not yet available for use. The recoverable amount is the higher of the fair value less selling expenses and the value-in-use. When determining the value-in-use, future cash flows are discounted using a discount rate that takes into account the risk-free interest rate and risk associated with the specific asset. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. The loss is reported in the Income Statement.
| 12/31 2017 | Goodwill | Trademarks | Capitalized development expenditure |
Proprietary technology |
Customer contracts and relations |
Software and other |
Total |
|---|---|---|---|---|---|---|---|
| Accumulated costs | |||||||
| Opening balance | 35,792 | 7,262 | 850 | 3,267 | 9,706 | 1,457 | 58,333 |
| Business combinations | –17 | 62 | 26 | 279 | 17 | 367 | |
| Internally generated intangible assets | 75 | 75 | |||||
| Acquisitions | 85 | 12 | 2 | 116 | 215 | ||
| Disposals | –193 | –14 | –207 | ||||
| Reclassifications | 45 | –9 | 18 | 53 | |||
| Exchange rate differences | –12 | 100 | –4 | –19 | –222 | –88 | –244 |
| At year-end | 35,763 | 7,424 | 883 | 3,251 | 9,765 | 1,506 | 58,592 |
| Accumulated amortization and impairment losses | |||||||
| Opening balance | –940 | –18 | –335 | –727 | –4,664 | –373 | –7,058 |
| Disposals | 146 | 14 | 0 | 160 | |||
| Impairment loss | –964 | –964 | |||||
| Amortizations | –16 | –121 | –228 | –405 | –60 | –831 | |
| Reclassifications | –22 | 21 | –1 | ||||
| Exchange rate differences | 2 | –1 | –13 | –63 | 2 | –73 | |
| At year-end | –1,904 | –32 | –333 | –969 | –5,119 | –410 | –8,767 |
| BS Carrying amount at year-end | 33,859 | 7,392 | 550 | 2,282 | 4,646 | 1,097 | 49,825 |
| Allocation of amortization and impairment in Income Statement |
|||||||
| Costs of goods and services sold | 0 | –9 | –58 | –16 | –83 | ||
| Sales and marketing costs | –116 | –32 | 0 | –148 | |||
| Administrative, research and development | |||||||
| and other operating costs | –964 | –15 | –113 | –112 | –315 | –43 | –1,562 |
| Management costs | –1 | –1 | |||||
| Total | –964 | –16 | –121 | –228 | –405 | –60 | –1,795 |
| 12/31 2016 | Goodwill | Trademarks | Capitalized development expenditure |
Proprietary technology |
Customer contracts and relations |
Software and other |
Total |
|---|---|---|---|---|---|---|---|
| Accumulated costs | |||||||
| Opening balance | 30,002 | 6,818 | 686 | 1,954 | 7,741 | 456 | 47,657 |
| Business combinations | 4,222 | 162 | 1,150 | 1,537 | 872 | 7,943 | |
| Internally generated intangible assets | 52 | 8 | 60 | ||||
| Acquisitions | 96 | 12 | 37 | 145 | |||
| Disposals | –2 | –8 | –10 | ||||
| Reclassifications | –44 | 14 | 1 | –1 | 22 | –8 | |
| Exchange rate differences | 1,611 | 282 | 4 | 150 | 421 | 79 | 2,546 |
| At year-end | 35,792 | 7,262 | 850 | 3,267 | 9,706 | 1,457 | 58,333 |
| Accumulated amortization and impairment losses | |||||||
| Opening balance | –940 | –7 | –216 | –528 | –4,242 | –276 | –6,209 |
| Disposals | 8 | 8 | |||||
| Impairment loss | –8 | –8 | |||||
| Amortizations | –10 | –110 | –172 | –287 | –91 | –670 | |
| Reclassifications | 33 | –8 | 25 | ||||
| Exchange rate differences | –1 | –1 | –28 | –168 | –5 | –204 | |
| At year-end | –940 | –18 | –335 | –727 | –4,664 | –373 | –7,058 |
| BS Carrying amount at year-end | 34,852 | 7,243 | 515 | 2,540 | 5,041 | 1,084 | 51,275 |
| Allocation of amortization and impairment in Income Statement |
|||||||
| Costs of goods and services sold | 0 | –58 | –16 | –74 | |||
| Sales and marketing costs | –106 | –32 | 0 | –138 | |||
| Administrative, research and development | |||||||
| and other operating costs | –10 | –110 | –66 | –196 | –74 | –456 | |
| Management costs | –1 | –1 | |||||
| Total | –10 | –110 | –172 | –287 | –91 | –670 |
Goodwill and other intangible assets with an indefinite useful life originating from acquisitions are divided between five cash-generating entities; Mölnlycke, Aleris, Permobil, BraunAbility and Laborie. Investor makes regular tests to determine that the carrying values of these assets do not exceed the value in use. The method for impairment testing is based on a discounted cash flow forecast to determine the value in use. Various assumptions are used to suit the different companies and its business. The calculated value in use is then compared to the carrying amount.
Value in use is calculated as Investors share of present value of future estimated cash flow generated from the subsidiaries. The estimate of future cash flows is based upon reasonable assumptions and best knowledge of the company and future economic conditions. The base for the estimate is an assumption of the future growth rate, budgets and forecasts. The chosen discount factor reflects specific risks that are assignable to the asset and marketable assessments of the time value of money. The base for calculation of the discount rate is the company's weighted average cost of capital, where the assumption of the risk free interest rate, market risk premium, leverage, cost of debt and relevant tax rate are important components. The ambition is to use a discount rate which is not dependent on short term market sentiment, but instead reflects a long-term cost of capital corresponding to Investor's long-term investment horizon.
Impairment testing of goodwill and trade names for Mölnlycke is based on a calculation of value in use in which assumptions of future growth and operating margins are important components. The estimated value is based on the budget for 2018 and financial forecasts until year-end 2022. A growth rate of 1.8 percent has been used to extrapolate the cash flows for the years beyond 2022 (1.8), which is considered reasonable given the company's historical growth, geographical positioning and industry fundamentals. Estimated cash flows have been discounted using a discount rate of 10.1 percent pre tax (10.0). No impairment requirement has been identified since the carrying value is lower than calculated value in use. The assessment is that no reasonably possible change in any key assumption will lead to a calculated recoverable amount that is lower than the carrying amount. Trademarks of SEK 5,348 m. is included in intangible assets (5,195). Mölnlycke's trademarks, which have a long history, have an indefinite useful life as Mölnlycke has a strong position on all its core markets and will continue to actively use them, expecting continued growth with increased net profit margins. Consolidated goodwill attributable to Mölnlycke amounts to SEK 21,647 m. (21,041).
Impairment testing of goodwill for Aleris is based on a value in use calculation in which assumptions of future growth rate and operating margins are important components. The estimated value in use is based on the 2018 budget and financial forecasts until year-end 2027. The relatively long forecast period is justified given the restructuring phase the company will be facing the coming years and the forecast period thereafter being the best projection of the future long-term profitability. A growth rate of 1.4 percent has been used to extrapolate the cash flows for the years beyond 2027 (0.41)), which is based on the company's historical growth and the sector's long term growth drivers, such as demographics and lifestyle aspects. Estimated cash flows have been discounted using a discount rate of 9.8 (10.1) percent before tax.
Parts of Aleris' businesses are performing well, delivering high-quality services to customers in a cost efficient manner. Some areas, however, are not performing in line with expectations. To sustainably improve the profitability, management has developed a plan with focus on stability and operational improvements. The plan comprises a more decentralized organization with clearer focus on Care and Healthcare respectively, contract reviews and closure of unprofitable business. These actions, in combination with some profitable contracts coming under pressure, will have a negative impact on profitability short- to medium-term. Our view of the company's long-term potential remains intact. As a consequence of the revised short- to medium-term forecast, a write-down of SEK 964 m. has been made. The impairment loss is reported in the Income Statement as an administrative, research and development costs within the operating segment Patricia Industries. Consolidated goodwill attributable to Aleris amounts to SEK 4,991 m (5,904).
Impairment testing of goodwill for Permobil is based on a calculation of value in use in which assumptions of future growth and operating margins are important components. The estimated value is based on the budget for 2018 and financial forecasts until year-end 2022. A growth rate of 1.7 percent has been used to extrapolate the cash flows for the years beyond 2022 (1.2), which is considered reasonable given the company's historical growth, the market structure and industry fundamentals. Estimated cash flows have been discounted using a discount rate of 10.6 percent pre tax (10.6). No impairment requirement has been identified since the carrying value is lower than calculated value in use. The assessment is that no reasonably possible change in any key assumption will lead to a calculated recoverable amount that is lower than the carrying amount. Consolidated goodwill attributable to Permobil amounts to SEK 3,084 m. (3,084).
1) Based on a ten year forecast period.
Impairment testing of goodwill for BraunAbility is based on a calculation of value in use in which assumptions of future growth and operating margins are important components. The estimated value is based on the budget for 2018 and financial forecasts until year-end 2022. A growth rate of 1.9 percent has been used to extrapolate the cash flows for the years beyond 2022 (1.1), which is considered reasonable given the company's historical growth, the underlying market fundamentals and the company's market position. Estimated cash flows have been discounted using a discount rate of 12.2 percent pre tax (11.7). No impairment requirement has been identified since the carrying value is lower than calculated value in use. Consolidated goodwill attributable to BraunAbility amounts to SEK 1,449 m. (1,458).
Impairment testing of goodwill for Laborie is based on a calculation of value in use in which assumptions of future growth and operating margins are important components. The estimated value is based on the budget for 2018 and financial forecasts until year-end 2022. A growth rate of 3.0 percent has been used to extrapolate the cash flows for the years beyond 2022 (2.2), which is considered reasonable given the company's historical growth, the underlying market fundamentals and the company's market position. Estimated cash flows have been discounted using a discount rate of 10.5 percent pre tax (11.1). No impairment requirement has been identified since the carrying value is lower than calculated value in use. The assessment is that it is not very likely that a reasonably change in a key assumption will lead to a calculated recoverable amount that is lower than the carrying amount. Consolidated goodwill attributable to Laborie amounts to SEK 2,674 m. (3,351).
The majority of owner-occupied property within the Group is reported according to the revaluation model less accumulated depreciation and revaluation adjustments. Industrial property is reported at cost less accumulated depreciation and any impairment losses.
Owner-occupied property has been categorized based on their characteristics:
| Hotel property | Revaluation model |
|---|---|
| Care property | Revaluation model |
| Office property | Revaluation model |
| Industrial property | Cost model |
Cost includes the original purchase price and directly attributable costs, including borrowing costs, required to bring the asset to working condition for its intended use. Property consist of parts with different useful lives (such as the framework, roof and basic installations), the parts are treated as separate components of property.
Subsequent expenditure is capitalized only if it is probable that future economic benefits associated with the asset will flow to the company and if the cost can be measured reliably. All other subsequent costs are expensed in the period they arise. Any undepreciated carrying amount of replaced components, or parts of components, are retired and expensed in connection with the exchange. Repairs are expensed as incurred.
Owner-occupied property is recognized according to the revaluation model less accumulated depreciation and revaluation adjustments. Property is revalued with sufficient regularity to ensure that the carrying amount does not differ materially from the amount established as fair value on the balance sheet date. When an asset's carrying amount is increased as a result of a revaluation, the increase is reported in Other Comprehensive income and accumulated in a separate component of equity, called the Revaluation reserve. When an asset's carrying amount is decreased as a result of a revaluation and there is a balance in the revaluation reserve attributable to the asset, the decrease in value is recognized in Other Comprehensive income and the amount in the revaluation reserve is also decreased. The difference between depreciation based on the revalued amount, and depreciation based on the original cost, is transferred from the revaluation reserve to retained earnings.
At the time of a revaluation the accumulated depreciation is recalculated in proportion to the change in the asset's increased cost so that the carrying amount of the asset (the net of the adjusted cost and adjusted depreciation) after revaluation corresponds to the revalued amount. When an asset is divested, the value attributable to the asset in the revaluation reserve is transferred to retained earnings, without having any effect on profit/loss or Other Comprehensive income.
Depreciation is made linearly over the asset's estimated useful life. Land is not depreciated.
| Estimated useful lives: | |
|---|---|
| Frameworks | 20-100 years |
| Land improvements | 15-40 years |
| Building components | 5-40 years |
The recoverable amount of an asset is calculated whenever there is an indication of impairment. An impairment loss is recognized in the income statement if the carrying amount exceeds the recoverable amount and there is no value relating to the asset to release from the revaluation reserve.
Owner-occupied property recognized with the revaluation model is classified in level 3, according to the definition in IFRS 13. Property valuations are regularly conducted by external appraisers. Fair value has been determined based on current market prices for comparable property and by using a return model based on a calculation of the present value of future cash flows.
The discount rate has been estimated at 5.5-7.65 percent and consists of an estimated long-term inflation rate of 2 percent, a risk-free long-term real rate of interest and a risk premium. Payments for operations and maintenance have been assessed following the rate of inflation during the calculation period.
The residual value has been assessed by the long-term, normalized net operating income for the year after the calculation period divided by an estimated long-term yield. The long-term yield requirement has been assessed to be in a span of 3.6 percent to 7.40 percent. Value determined on an earnings basis nominal development during the calculation period will then be around 2 percent.
All valuations in level 3 are based on assumptions and judgments that management consider to be reasonable based on the circumstances prevailing at the time. Changes in assumptions may result in adjustments to reported values and actual outcome may differ from the estimates and judgments that were made. The valuation of owner-occupied property recognized with the revaluation model is dependent on the level of the discount rate and the long-term yield requirement. A 0.5 percent change of the discount rate would have an effect on the value of the owner-occupied property recognized with the revaluation model of approximately SEK 177 m. Respectively a 0.5 percent change of the long-term yield requirement would have an effect on the value of approximately SEK 372 m.
The majority of the properties was revalued during 2017. The Hotel properties and some Office properties have been revalued by December 31, 2017.
| 12/31 2017 | 12/31 2016 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Revaluation model | Cost model | Revaluation model | Cost model | |||||||
| Buildings | Land | Buildings | Land | Total | Buildings | Land | Buildings | Land | Total | |
| Revalued cost | ||||||||||
| Opening balance | 2,893 | 1,847 | 1,517 | 89 | 6,345 | 2,503 | 1,310 | 1,104 | 86 | 5,003 |
| Business Combinations | 57 | 5 | 2 | 64 | 3 | 3 | ||||
| Other acquisitions | 301 | 57 | 77 | 1 | 435 | 413 | 60 | 359 | 0 | 833 |
| Sales and disposals | –7 | –5 | –11 | –2 | –14 | –3 | –19 | |||
| Reclassifications | 0 | –64 | –65 | –92 | 0 | 1 | –91 | |||
| Effect of revaluations on revaluation reserve | 570 | –84 | – | 485 | 71 | 476 | –4 | 543 | ||
| Exchange rate differences | 5 | 1 | 5 | –2 | 9 | 0 | 67 | 4 | 71 | |
| At year-end | 3,818 | 1,825 | 1,532 | 87 | 7,262 | 2,893 | 1,847 | 1,517 | 89 | 6,345 |
| Accumulated depreciation | ||||||||||
| Opening balance | –534 | –253 | 0 | –787 | –676 | –204 | 0 | –881 | ||
| Sales and disposals | 0 | 5 | 5 | 0 | 7 | 1 | 8 | |||
| Depreciation for the year | –98 | –54 | 0 | –152 | –103 | –42 | 0 | –146 | ||
| Reclassifications | 23 | 23 | 246 | 0 | 0 | 246 | ||||
| Exchange rate differences | 0 | 0 | 0 | 0 | 0 | –13 | 0 | –14 | ||
| At year-end | –609 | –302 | 0 | –912 | –534 | –253 | 0 | –787 | ||
| BS Carrying amount at year-end | 3,209 | 1,825 | 1,229 | 87 | 6,350 | 2,359 | 1,847 | 1,263 | 89 | 5,558 |
| Carrying amount if acquisition cost | ||||||||||
| model had been used | 1,919 | 459 | 1,229 | 87 | 3,695 | 1,641 | 406 | 1,263 | 89 | 3,399 |
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Non-current receivables | ||
| Receivables from associates1) | 1 | 1,705 |
| Derivatives | 1,894 | 2,402 |
| Other | 320 | 311 |
| BS Total | 2,215 | 4,419 |
| 12/31 2017 | 12/31 2016 | |
| Other receivables | ||
| Derivatives | 14 | 10 |
| Incoming payments | 30 | 25 |
| Other | 218 | 268 |
| BS Total | 262 | 303 |
1) Refers to shareholder loans including capitalized interest. Shareholder loans are valued at amortized cost.
Inventory is valued at the lower of net realizable value (NRV) and cost. The cost of finished goods and work-in-progress includes a reasonable portion of the indirect costs based on normal capacity utilization. The cost of inventories is calculated using the FIFO (first in, first out) method.
Net realizable value is based on the estimated sales price in the ordinary course of business less the estimated costs to bring about a sale.
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Raw materials and consumables | 1,488 | 1,423 |
| Work in progress | 117 | 118 |
| Finished goods | 1,690 | 1,490 |
| Supplies | 48 | 55 |
| BS Total | 3,343 | 3,086 |
Items of machinery and equipment are reported at cost after a deduction for accumulated depreciation and any impairment losses.
Depreciation is made linearly over the assets estimated useful life: Machinery 3-15 years Furniture, fixtures and fittings 3-10 years Expenditure on leased property 3-28 years or over the remaining lease period if shorter
| 12/31 2017 | 12/31 2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| Machinery | Furniture, fixtures and fittings |
Expenditure on leased property |
Total | Machinery | Furniture, fixtures and fittings |
Expenditure on leased property |
Total | |
| Accumulated costs | ||||||||
| Opening balance | 1,557 | 2,666 | 517 | 4,740 | 1,338 | 2,198 | 393 | 3,929 |
| Business combinations | 22 | 11 | 5 | 38 | 5 | 238 | 50 | 294 |
| Other acquisitions | 137 | 519 | 76 | 732 | 117 | 564 | 82 | 762 |
| Sales and disposals | –17 | –183 | –35 | –235 | –27 | –131 | –16 | –173 |
| Reclassifications | 333 | –348 | 25 | 10 | 55 | –336 | –14 | –294 |
| Exchange rate differences | –6 | –86 | –11 | –104 | 69 | 132 | 21 | 222 |
| At year-end | 2,027 | 2,579 | 576 | 5,182 | 1,557 | 2,666 | 517 | 4,740 |
| Accumulated depreciation and impairment | ||||||||
| Opening balance | –570 | –1,104 | –280 | –1,954 | –432 | –905 | –232 | –1,569 |
| Sales and disposals | 4 | 134 | 30 | 168 | 20 | 99 | 15 | 135 |
| Reclassifications | –5 | 3 | 0 | –3 | 0 | 123 | –7 | 116 |
| Depreciation | –150 | –399 | –68 | –617 | –133 | –357 | –42 | –532 |
| Exchange rate differences | –8 | 46 | 7 | 45 | –25 | –65 | –13 | –103 |
| At year-end | –729 | –1,320 | –312 | –2,361 | –570 | –1,104 | –280 | –1,954 |
| BS Carrying amount at year-end | 1,298 | 1,258 | 265 | 2,821 | 988 | 1,561 | 237 | 2,787 |
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Accrued interest income | 306 | 369 |
| Other financial receivables | 12 | 2 |
| Customer income | 212 | 222 |
| Other | 397 | 290 |
| BS Total | 927 | 882 |
Other financial investments and short-term investments consist of interestbearing securities which are recognized at fair value through profit/loss.
Short-term investments with a maturity of three months or less from the date of acquisition have been classified as cash and cash equivalents provided that:
• there is an insignificant risk of changes in value
• they are readily convertible to cash
For more information regarding accounting policies, see note 29, Financial instruments.
Excess liquidity is to be invested for maximum return within the framework of given limits for foreign exchange, interest rate, credit and liquidity risks, see note 3, Risks and risk management.
| Total | |||||
|---|---|---|---|---|---|
| 0–3 | 4–6 | 7–12 | 13–24 | carrying | |
| 12/31 2017 | months | months | months | months | amount |
| Short-term investments | 4,153 | 788 | 3,402 | 8,343 | |
| Cash and bank | 12,107 | 12,107 | |||
| Other financial investments | 5,389 | 5,389 | |||
| BS Total | 16,260 | 788 | 3,402 | 5,389 | 25,839 |
| Total | |||||
| 0–3 | 4–6 | 7–12 | 13–24 | carrying | |
| 12/31 2016 | months | months | months | months | amount |
| Short-term investments | 3,513 | 4,365 | 729 | 8,608 | |
| Cash and bank | 7,737 | 7,737 | |||
| Other financial investments | 3,709 | 3,709 | |||
| BS Total | 11,250 | 4,365 | 729 | 3,709 | 20,054 |
Of the total carrying amount, SEK 18,899 m. is readily available for investments (16,710).
Cash and bank include an amount of SEK 64 m. that is only available for use within China (–). An application has been submitted to SAFE for regulatory approval to transfer the funds out of China.
Share capital in the Parent Company.
Refers to equity contributed by shareholders. It also includes premiums paid in connection with new stock issues.
The translation reserve includes all foreign exchange differences arising on the translation of financial statements from foreign operations reported in a currency different from the reporting currency of the Group. The translation reserve also comprises exchange rate differences arising in conjunction with the translation of swap contracts reported as hedging instruments of a net investment in a foreign operation. Changes in translation reserve had no impact on reported tax.
The revaluation reserve includes changes in value relating to owner-occupied property and related taxes.
The hedging reserve includes the effective component of the accumulated net change of fair value and related taxes, of an instrument used for a cash flow hedge, relating to hedging transactions not yet accounted for in the Profit/ loss.
| Specification of reserves in equity | 12/31 2017 12/31 2016 | |
|---|---|---|
| Translation reserve | ||
| Opening balance | 2,649 | 1,152 |
| Translation differences for the year, subsidiaries | –334 | 1,410 |
| Change for the year, associates | 75 | 87 |
| 2,390 | 2,649 | |
| Revaluation reserve | ||
| Opening balance | 1,638 | 1,229 |
| Revaluation of non-current assets for the year | 513 | 531 |
| Tax relating to revaluations for the year | –113 | –98 |
| Release of revaluation reserve due to | ||
| depreciation of revalued amount | –17 | –24 |
| 2,022 | 1,638 | |
| Hedging reserve | ||
| Opening balance | 465 | 440 |
| Cash flow hedges: | ||
| Change in fair value of cash flow hedges for the year | – | –15 |
| Recycled to Income Statement | 19 | 32 |
| T ax relating to changes in fair value of |
||
| cash flow hedges for the year | – | 5 |
| Change for the year, associates | 0 | 3 |
| 485 | 465 | |
| Total reserves | ||
| Opening balance | 4,752 | 2,821 |
| Change in reserves for the year: | ||
| T ranslation reserve |
–258 | 1,497 |
| Revaluation reserve | 383 | 409 |
| H edging reserve |
20 | 25 |
| Carrying amount at year-end | 4,897 | 4,752 |
Repurchased shares included in retained earnings under equity, including profit/loss for the year
| Number of shares | equity, SEK m. | Amounts affecting | ||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Opening balance, repurchased own shares |
2,793,387 | 5,270,322 | –526 | –838 |
| Sales/repurchases for the year | –400,449 –2,476,935 | 521) | 3121) | |
| Balance at year-end, repurchased own shares |
2,392,938 | 2,793,387 | –474 | –526 |
1) In connection with transfer of shares and options within Investors' long-term variable remuneration program, the payment of strike price has had a positive effect on equity.
Repurchased shares include the cost of acquiring own shares held by the Parent Company. On December 31, 2017 the Group held 2,392,938 of its own shares (2,793,387). Repurchases of own shares are reported as a deduction from equity. Cash proceeds from the sale of such equity instruments are reported as an increase in unrestricted equity. Any transaction costs are recognized directly under equity.
The Board of Directors proposes that the unappropriated earnings in Investor AB:
| Total available funds for distribution (SEK m.): | |||
|---|---|---|---|
| Retained earnings | 223,358 |
|---|---|
| Net profit for the year | 37,056 |
| Total | 260,414 |
| To be allocated as follows (SEK m.): | |
| Dividend to shareholders, SEK 12.00 per share | 9,2061) |
|---|---|
| Funds to be carried forward | 251,208 |
| Total | 260,414 |
1) Calculated on the total number of registered shares.
For more information, see the Administration Report page 38. The dividend is subject to the approval of the Annual General Meeting on May 8, 2018.
The dividend for 2016 amounted to SEK 8,411 m. (SEK 11.00 per share) and the dividend for 2015 amounted to 7,635 m. (SEK 10.00 per share). Dividends paid out per share for 2016 and 2015 correspond to proposed dividend per share. Dividends are recognized as a liability as soon as the Annual General Meeting has approved the dividend for the year.
In order to be able to act upon business opportunities at any point in time, it is vital for Investor to maintain financial flexibility. The Group's goal is to have leverage (net debt as a percentage of total assets) of 5-10 percent over an economic cycle. The ceiling for Investor's leverage has been set at a maximum of 25 percent, which may only be exceeded on a short-term basis. Investor´s leverage at the beginning of the year was 5.3 percent and at the end of the year 3.5 percent. The change is mainly due to cash flows arising from dividends from Listed Core Investments, proceeds from EQT and Patricia Industries, investments in Ericsson and EQT funds and dividends paid to shareholders. For more information, see the Administration Report page 4-5.
The Group's total shareholder return objective (sum of the share price change and dividend) is to exceed the risk-free interest rate plus a risk premium, i.e. 8-9 percent. The total shareholder return for 2017 was 13 percent. Capital is defined as total recognized equity.
| BS Total | 336,326 | 300,141 |
|---|---|---|
| Attributable to non-controlling interest | 64 | 64 |
| Attributable to shareholders of the Parent Company | 336,262 | 300,077 |
| Equity | 12/31 2017 | 12/31 2016 |
Non-controlling interest are presented in the equity separately from the equity attributable to the shareholders of the Parent Company. In the Consolidated Income Statement and Consolidated Statement of Comprehensive Income, the part attributable to the non-controlling interest are included and separately disclosed in conjunction with the statements.
For more information regarding non-controlling interests, see note P5, Participation in Group companies.
Agreements with non-controlling interests exists, that obliges Investor to purchase equity instruments in subsidiaries if the counterparty wants to divest them. The agreement, put option, is a contract to purchase the group's own equity instruments and thus gives rise to a financial liability. The liability is included in Other long-term liabilities, see note 27, Other long-term and shortterm liabilities. The obligation under the put option is valued at the estimated redemption amount at the time when the equity instrument can be put to Investor. The put option is valued at the proportionate value in relation to the fair value of the subsidiary. At remeasurement of the liability, the change of value is recognized in net financial items.
At initial recognition of the put option as a liability, equity is reduced by an amount corresponding to its fair value. Firstly equity attributable to the noncontrolling interests are reduced and if this is insufficient in retained earnings attributable to shareholders of the Parent Company.
For more information relating to accounting policies for financial liabilities see note 29, Financial instruments.
In the consolidated financial statements, leases are classified as either finance or operating leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership to the lessee. Assets that are classified as financial leases are reported as assets in the consolidated Balance Sheet. Obligations to pay future lease payments are reported as a liability. Leased assets are depreciated according to plan, whereas the leasing payments are apportioned between the finance charge and a reduction of the outstanding liability.
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Long-term interest-bearing liabilities | ||
| Bond loans | 45,057 | 43,191 |
| Bank loans | 9,570 | 9,383 |
| Interest rate derivatives with negative value | 567 | 570 |
| Finance lease liabilities | 109 | 148 |
| Other long-term interest-bearing liabilities | – | 21 |
| BS Total | 55,303 | 53,313 |
| Short-term interest-bearing liabilities | ||
| Bond loans | 1,969 | 1,500 |
| Bank loans | 83 | 91 |
| Interest rate derivatives with negative value | 16 | 19 |
| Finance lease liabilities | 19 | 16 |
| Other short-term interest-bearing liabilities | 5 | 8 |
| BS Total | 2,092 | 1,634 |
| Total interest-bearing liabilities and derivatives | 57,396 | 54,946 |
| Long-term interest rate derivatives positive value | –1,894 | –2,402 |
| Short-term interest rate derivatives positive value | – | – |
| Total | –1,894 | –2,402 |
Total interest-bearing liabilities and derivatives 55,502 52,545
| Maturity, 12/31 2017 | Future minimum lease payments |
Interest | Present value of mini mum lease payments |
|---|---|---|---|
| Less than 1 year from | |||
| balance sheet date | 25 | –6 | 19 |
| 1-5 years from balance sheet date | 49 | –19 | 31 |
| More than 5 years from | |||
| balance sheet date | 102 | –24 | 78 |
| Total | 176 | –48 | 128 |
| Maturity, 12/31 2016 | Future minimum lease payments |
Interest | Present value of mini mum lease payments |
| Less than 1 year from | |||
| balance sheet date | 22 | –7 | 16 |
| 1-5 years from balance sheet date | 77 | –21 | 56 |
| More than 5 years from balance sheet date |
123 | –31 | 92 |
Note 25. Provisions for pensions and similar obligations
Defined contribution plans
Defined contribution plans are plans under which the company's obligations are limited to the premium of fixed contributions. In such cases, the size of the employee's pension depends on the contributions the company makes to the plan, or to an insurance company, along with the return that the capital contributions generate. Consequently, the employee carries both the actuarial risk (i.e. the risk that benefits will be lower than expected) and the investment risk (i.e. the risk that invested assets will be insufficient for providing the expected benefits). The company's obligations to pay contributions to defined contribution plans are recognized as an expense in the Income Statement at the rate that employees provide services to the company during a period.
In defined benefit pension plans, payments are made to employees and former employees based on their salary at the time of retirement and the number of years of service. The Group carries the risk for making the payments. The net obligation under defined benefit plans is measured separately for each plan, by estimating the future benefits earned, including taxes, by the employees, in current and prior periods.
This benefit is discounted to a present value with a discount rate representing the closing day rate on high quality corporate bonds, mortgage backed bonds or government bonds with a life corresponding to the duration of the pension obligations. The measurement is made by a qualified actuary using the projected unit credit method. The fair value of any plan assets is calculated on the closing date.
When determining the present value of the obligation and the fair value of plan assets, actuarial gains and losses may arise. This is either because the actual outcome differs from the previous assumption or because the assumptions have changed. Remeasurements of defined benefit obligations are recognized as income or expenses in other comprehensive income.
The value presented in the Balance Sheet for pensions and similar commitments corresponds to the obligation's present value at year-end, less the fair value of plan assets. When the calculation results in a Group asset, the carrying amount of the asset is limited to the present value of future repayments from the plan or decreased future payments to the plan (asset ceiling).
The net of the interest on pension liabilities and the yield on adherent management assets is recognized in net financial items. Other components are recognized in operating profit/loss.
The defined benefit obligation is calculated using discount rates with references to, for example, corporate bond yields. If assets in funded plans under perform this yield, it will increase the amount of deficit. Allocation of assets among different categories is important to reduce the portfolio risk. The time horizon for the investments is also an important factor.
A decrease in corporate bond yields will increase the value of the defined benefit obligation for accounting purposes.
The majority of the obligations are to provide benefits for the life of the plan member, so increases in life expectancy will result in an increase in the defined benefit obligation.
The majority of the obligations are to provide benefits for plan members based on annual salaries. If salaries increase faster than has been assumed, this will result in an increase in the defined benefit obligation.
Employees in Group companies have various kinds of pension benefits. These benefits are either defined contribution plans or defined benefit plans. In Sweden the total retirement benefit package is often a mixed solution with some parts being defined contribution pension plans and others being defined benefit pension plans. Salaried employees' plans comprise of the defined benefit plan ITP and the additional defined contribution plan ITPK.
The ITP plan is secured with the insurance company Alecta. Since the information provided by Alecta is not sufficient to be able to account for as a defined benefit plan, the Alecta plan has been reported as a defined contribution plan (multi-employer plan).
The ITP plan has contracts with a premium, where benefits continue unchanged until retirement. This means that premiums can not be changed to the policyholder's or the insured's disadvantage.
The Group operates defined contribution plans in Sweden, Australia, Canada, the Czech Republic, Denmark, Finland, Malaysia and the UK. The plans imply that the Group obtains pension insurances or makes payments to foundations.
59 percent of the Group's defined benefit plans exist in Sweden. Other defined benefit plans exist in the U.S., Belgium, Germany, the Netherlands, Thailand, Italy, Norway, France and Austria. The plans in Belgium, the U.S. and the Netherlands are funded. In Sweden and Norway there are funded and unfunded plans and the plans in other countries are unfunded.
| Components of defined benefit cost (gain –) | 2017 | 2016 |
|---|---|---|
| Current service cost Past service cost and gains/losses from settlements |
84 –13 |
98 –4 |
| Additional pension obligations | 3 | – |
| Other values | –1 | 1 |
| Total operating cost | 73 | 95 |
| Net interest expense | 23 | 27 |
| Exchange rate differences | –5 | –8 |
| Total financial cost | 18 | 34 |
| Components recognized in profit/loss | 91 | 129 |
| Remeasurement on the net defined benefit liability (gain –) | 2017 | 2016 |
| Return on plan assets (excl. amounts in interest income) | –6 | –17 |
| Actuarial gains/losses, demographic assumptions | –6 | –7 |
| Actuarial gains/losses, financial assumptions | 20 | 41 |
| Actuarial gains/losses, experience adjustments | –30 | 31 |
| Components in Other Comprehensive income | –22 | 49 |
| The amount included in the consolidated Balance Sheet | ||
|---|---|---|
| arising from defined benefit plans | 12/31 2017 | 12/31 2016 |
| Present value of funded or partly funded obligations | 835 | 817 |
| Present value of unfunded obligations | 597 | 564 |
| Total present value of defined benefit obligations | 1,432 | 1,380 |
| Fair value of plan assets | –567 | –543 |
| NPV of obligations and fair value of plan assets | 865 | 838 |
| Restriction on asset ceiling recognized | – | – |
| BS Net liability arising from | ||
| defined benefit obligations | 865 | 838 |
| Changes in the obligations for defined benefit plans | ||
|---|---|---|
| recognized during the year | 12/31 2017 | 12/31 2016 |
| Defined benefit plan obligations, opening balance | 1,380 | 1,200 |
| Current service cost | 87 | 78 |
| Interest cost | 31 | 33 |
| Remeasurement of defined benefit obligations | ||
| Actuarial gains/losses, demographic assumptions | –6 | –7 |
| Actuarial gains/losses, financial assumptions | 20 | 41 |
| Actuarial gains/losses, experience adjustments | –30 | 31 |
| Contributions to the plan from the employer | –1 | –2 |
| Past service cost and gains/losses from curtailments | –13 | –33 |
| Liabilities extinguished on settlements | – | –89 |
| Liabilities assumed in a business combination | – | 90 |
| Benefit paid | –16 | –14 |
| Other | 0 | –7 |
| Exchange rate difference | –20 | 58 |
| Obligations for defined benefit plans at year-end | 1,432 | 1,380 |
| Changes in fair value of plan assets during the year | 12/31 2017 | 12/31 2016 |
| Fair value of plan assets, opening balance | 543 | 457 |
| Interest income | 11 | 10 |
| Remeasurement of fair value plan assets Return on plan assets (excl. amounts in interest income) |
6 | 17 |
| Contributions from the employer | 36 | 36 |
| Contributions from plan participants | 1 | 4 |
| Assets distributed on settlements | –9 | –80 |
| Assets acquired in a business combination | – | 68 |
| Exchange differences on foreign plans | –21 | 27 |
| Benefit paid | –3 | –3 |
| Other | 0 | –3 |
| Exchange rate difference | 4 | 10 |
| Fair value of plan assets at year-end | 567 | 543 |
| Total fair value of plan assets | 567 | 543 |
|---|---|---|
| Other values2) | 169 | 167 |
| Properties | 22 | 35 |
| Debt investments1) | 246 | 226 |
| Equity investments | 100 | 88 |
| Cash and cash equivalents | 30 | 26 |
| each category are as follows | 12/31 2017 | 12/31 2016 |
| The fair value of the plan asset at the end of the reporting period for |
1) The Majority of the debt investments represents of Swedish government bonds.
2) Includes insurance contracts from countries where the liabilities are insured (the Netherlands, Belgium and Norway). There are no split of the underlying assets available.
| Changes in restriction asset ceiling in the current year | 12/31 2017 | 12/31 2016 |
|---|---|---|
| Restriction asset ceiling, opening balance | – | – |
| Interest net | – | – |
| Changes asset ceiling, OCI | – | – |
| Restriction asset ceiling at year-end | – | – |
The Group estimates that SEK 48 m. will be paid to defined benefit plans during 2018 (57).
Note 25. cont'd Provisions for pensions and similar obligations Note 26. Other provisions
| Assumptions for defined benefit obligations 2017 |
Sweden | Norway | Other (weighted average) |
|---|---|---|---|
| Discount rate | 2.5 | 2.3 | 2.1 |
| Future salary growth | 1.8 | 2.3 | 2.4 |
| Future pension growth | 2.0-2.4 | 1.5 | 1.2 |
| Mortality assumptions used | DUS14, PRI | K2013, K2013BE Local mortality tables | |
| Assumptions for defined benefit obligations 2016 |
Sweden | Norway | Other (weighted average) |
| Discount rate | 2.5 | 2.3 | 1.7 |
| Future salary growth | 2.4 | 2.4 | 2.6 |
| Future pension growth | 2.0-2.4 | 1.2-2.3 | 1.1 |
| Mortality assumptions used | DUS14, PRI | K2013, K2013BE Local mortality tables |
The discount rate has been set separately for each country by reference to market rates on high quality corporate bonds with a duration and currency that is consistent with the duration and currency of the defined benefit obligation. This may involve interpolation of bond yield curves where there is no direct match for duration or the market is not deep for matching bond durations. The market for high quality Swedish and Norwegian mortgage backed bonds is considered to be deep and thereby fulfills the requirements of high quality corporate bonds according to IAS 19. Swedish and Norwegian mortgage backed bonds have therefore served as reference when determining the discount rate used for the calculation of the defined benefit obligations in Sweden and Norway. In countries where there is no deep market for high quality corporate bonds, government bonds are used as a reference when determining the discount rate.
| Maturity profile | 0-3 year | 4-6 year | 7-15 year Over 15 year | Total | |
|---|---|---|---|---|---|
| Cash flows | 57 | 80 | 296 | 1,474 | 1,9071) |
1) Based on 87 percent of the Groups total defined benifit obligation.
The Swedish ITP plan is secured with the insurance company Alecta, which is a mutual life insurance company, owned by its customers, i.e. businesses and their employees. The company form means that any surplus in operations is returned to the customers and the insured population is responsible for any deficit. For the fiscal year 2017 the Investor Group did not have access to information that would make it possible to recognize it as a defined benefit plan. The ITP pension plan secured through insurance from Alecta is therefore recognized as a defined contribution plan. The premium for the defined benefit pension plan is calculated individually and depends on salary, pension already earned and expected remaining period of service. For 2018, the Investor Group expect to pay SEK 140 m. for premiums to Alecta (139). Alecta's total premiums per year for defined benefit pensions is about SEK 15 bn. (15).
A measure of the financial strength of a mutual insurance company is the collective funding ratio, which shows the relationship between the assets and the total insurance undertaking. The collective funding ratio is based on the market value of Alecta's assets as a percentage of insurance obligations calculated using Alecta's actuarial assumptions, which do not conform to IAS 19. Alecta aims to have a collective funding ratio varying between 125 and 155 percent, with a target level of 140 percent. The assets that exceed the insurance undertaking are a surplus to policyholders' behalf. Surplus can be used to increase future pensions, reduce future premiums or reimbursement for already-made premium payments. The collective funding ratio in Alecta was 154 percent December 31, 2017 (149).
| Defined contribution plans | 2017 | 2016 |
|---|---|---|
| Expenses for defined contribution plans | 550 | 336 |
Valuation of provision for pensions and similar obligations are estimates of present and future values. There are always uncertainty involved. Alternative assumptions will give different present values.
The sensitivity analysis below shows the impact of discount rate changes, from the current rate used.
| Discount rate | 1 percent age point increase |
1 percent age point decrease |
|---|---|---|
| Present value of defined benefit obligations | 1,291 | 1,516 |
| Current service cost | 31 | 56 |
| Interest expense | 23 | 15 |
The Group reports a provision in the Balance Sheet when there is a formal or informal obligation as a result of a past event for which it is probable that an outflow of resources will be needed to settle the obligation and when a reliable estimate of the amount can be made.
A restructuring provision is recognized when the Group has a detailed, formal plan for the restructuring, and the restructuring plan has commenced or has been publicly announced.
For medical care and health care operations, a provision is made for the risk of loss if the total directly attributable costs during the entire term of the contract are expected to exceed the total revenues, including indexation. Provisions are reviewed at each balance sheet date.
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Provisions expected to be paid after more than 12 months | ||
| Restructuring reserve | – | – |
| Provision for social security contributions for LTVR | 13 | 64 |
| Other | 161 | 212 |
| BS Total non-current other provisions | 174 | 276 |
| Provisions expected to be paid within 12 months | ||
| Reserve related to business combinations | – | – |
| Restructuring reserve | 113 | 41 |
| Provision for social security contributions for LTVR | 40 | 0 |
| Other | 106 | 133 |
| BS Total current other provisions | 258 | 174 |
| Total other provisions | 432 | 450 |
Relates mainly to the discontinuation of the rental model for negative pressure wound therapy pumps within Mölnlycke.
Provision for social security contributions for long-term share-based remuneration (LTVR)
Investor operates LTVR programs which are offered to all employees. Provision is made for social security contributions connected to these programs. The provision will be used during the years 2018-2024.
In the category Other a provision of SEK 46 m. for potential additional compensation to be paid related to sold associated company is included. The provision is expected to be settled in 2019 at the earliest. The remaining part of Other comprises mainly of provisions for guarantees, but also other provisions that have been considered immaterial to specify. These provisions intend to be settled with SEK 106 m. in 2018, SEK 100 m. in 2019 and SEK 15 m. in 2020 or later.
| 12/31 2017 | Reserve related to business combinations |
Restruc turing reserve |
Social security LTVR |
Other | Total other provi sions |
|---|---|---|---|---|---|
| Opening balance | – | 41 | 64 | 345 | 450 |
| Provisions for the year | – | 84 | 30 | 147 | 261 |
| Reversals for the year | – | –12 | –41 | –226 –279 | |
| Carrying amount at year-end | – | 113 | 53 | 266 | 432 |
| 12/31 2016 | |||||
| Opening balance | 30 | 38 | 176 | 225 | 469 |
| Provisions for the year | – | 15 | 6 | 254 | 275 |
| Reversals for the year | –30 | –12 | –118 | –134 –294 |
Carrying amount at year-end – 41 64 345 450
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Acquisition related liabilities Non controlling interest1) Other |
321 1,294 332 |
406 1,296 250 |
| BS Total other long-term liabilities | 1,947 | 1,952 |
| 1) Fair value of issued put options' over non-controlling interest. | ||
| Derivatives | 41 | 8 |
| Shares on loan | 247 | 13 |
| Incoming payments | 4 | 9 |
| VAT | 178 | 165 |
| Vehicle Floorplan liabilities | 455 | 161 |
| Personnel-related | 365 | 328 |
| Other | 290 | 230 |
| BS Total other current liabilities | 1,608 | 915 |
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Accrued interest expenses | 895 | 842 |
| Personnel-related expenses | 1,597 | 1,829 |
| Customer bonuses | 224 | 77 |
| Other | 866 | 832 |
| BS Total | 3,583 | 3,579 |
Financial instruments recognized in the consolidated Balance Sheet include assets such as the following: shares and participations recognized at fair value, other financial investments, loan receivables, trade receivables, short-term investments, cash and cash equivalents, and derivatives. Liabilities recognized in the Balance Sheet include the following: loans, shares on loan, trade payables and derivatives.
A financial asset or financial liability is recognized in the Balance Sheet when the Group becomes party to the instrument's contractual terms.
Trade receivables and trade payables are recognized in the Balance Sheet when an invoice is sent or received.
A financial asset or part thereof is derecognized in the Balance Sheet when the rights in the agreement have been realized, upon maturity, or when the Group loses control over them. A financial liability or part thereof is derecognized in the Balance Sheet when the obligations in the contract have been fulfilled or no longer exist for some other reason.
A financial asset and liability are offset against one another and the net amount is reported in the Balance Sheet only when there is a legally enforceable right and an intention to set off the recognized amounts.
A purchase or sale of financial assets is recognized on the trade date, which is the date that an entity commits itself to purchase or sell an asset.
Financial instruments are allocated to different categories. A financial instrument is classified upon initial recognition based on the purpose for which it was acquired. The classification determines how the financial instrument is measured after initial recognition, as described below.
Financial instruments belonging to the category, "Financial assets recognized at fair value through profit/loss", are initially recognized at fair value (excluding transaction costs). Other financial instruments are initially recognized at cost, which corresponds to the instrument's fair value (including transaction costs).
Cash and cash equivalents consists of cash and demand deposits in banks and similar institutions and short-term investments with a maturity of three months or less from the acquisition date, which are subject to an insignificant risk of changes in value.
This category consists of two subcategories: financial assets that are initially placed in this category (via the fair value option) and held-for-trading financial assets. Financial assets in this category are continuously measured at fair value and value changes are reported in the Income Statement.
Financial assets recognized in accordance with the fair value option This category primarily includes short-term investments, other financial assets and shares/participations recognized at fair value. In this category, the Group has chosen, on initial recognition, to designate financial assets that are managed and measured on the basis of fair values, in accordance with the risk management and investment strategies.
Shares and participations belonging to the trading operation are recognized as held-for-trading financial assets. The same applies to derivatives with a positive fair value (except for derivatives identified as effective hedging instruments).
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. These assets are recognized at amortized cost. Trade receivables are recognized at net realizable value less any deductions for bad debts, which are assessed on an individual basis. Trade receivables are short term in nature, which is why they are reported at nominal amounts without any discounting.
To the available-for-sale financial assets category, Investor has allocated a few financial assets that do not belong to any of the other categories.
Financial liabilities at fair value through profit/loss
This category includes financial liabilities held for trading. For example, this includes shares on loan in the trading operation. When shares on loan are sold, an amount corresponding to the fair value of the shares is recorded as a liability. The category also include any derivatives with a negative fair value (except for identified derivatives that are effective hedge instruments).
This category includes loans and other financial liabilities. Loans are recognized at amortized cost, except when they are used for fair value hedging. For more information, see the heading below, "Hedging of the Group's interest rate exposures – fair value hedges". Amortized cost is calculated based on the effective interest that was determined when the loan was obtained. This means that surpluses/deficits, as well as direct issuing costs, are amortized over the life of the liability. Trade payables are short-term in nature, which is why they are recognized at nominal amounts without any discounting.
Derivatives, such as forwards, options and swaps, are used to offset the risks associated with fluctuations in exchange rates and share prices, as well as the exposure to interest rate risks. Derivatives are initially recognized at fair value through profit/loss, which means that transaction costs are charged to profit/ loss for the period. In the following periods, the derivative instrument is recognized at fair value and changes in the value are recognized in the Income Statement as income or expense (part of operating profit) or as part of net financial items. Where they are reported is based on the purpose of the derivative and whether its use is related to an operating item or a financial item. The interest rate coupon from an interest rate swap is recognized as interest and value changes are recognized as other financial items as a component of financial net, provided that the interest rate swap is not part of a cash flow hedge, which is accounted for according to the description below.
Investor applies hedge accounting in order to reduce fluctuations in profit/ loss related to hedging of interest rate risks and currency risks. When hedge accounting is applied, value changes related to the hedging instrument is presented in profit/loss at the same time as the result from the hedged item. The effective part of the hedge is presented in the same component of the income statement as the hedged item.
Currency derivatives are used to hedge receivables and liabilities against foreign exchange rate risks. Hedge accounting is not used to protect against foreign exchange risk since an economic hedge has already been reflected in the financial statements. This occurs by recognizing the underlying receivable or liability at the closing rate and the hedge instrument at fair value in the Income Statement.
In order to hedge currency risks from forecast transactions, derivatives are used. These derivatives are often subject to hedge accounting. The derivatives are recognized at fair value in the Balance Sheet. Changes in value for the period are recognized in Other Comprehensive income and the accumulated changes in value are recognized in the Hedging Reserve until the hedged cash flow affects profit for the period, whereas the accumulated value changes of the hedging instrument are recycled to profit/loss for the period.
The Group uses interest rate swaps to control the uncertainty of future interest rate fluctuations for loans with a variable interest rate. In the Balance Sheet, interest rate swaps are valued at fair value. The interest rate coupon is recognized on an on-going basis in the Income Statement as a component of interest expense. Unrealized changes to the fair value of interest rate swaps are recognized in Other Comprehensive income and are included as a component of the hedging reserve until the hedged item has an effect on the Income Statement and as long as the criteria for hedge accounting and effectiveness are met. The gain/loss attributable to the ineffective component of the unrealized value changes on interest rate swaps is recognized in the Income Statement.
Hedging of the Group's interest rate exposure – fair value hedges The Group uses interest rate swaps to hedge the risk of changes in the fair value of its own borrowings that have a fixed rate of interest. The interest rate swaps are recognized at fair value in the Balance Sheet and the hedged item is recalculated at the fair value of the hedged risk (the risk-free interest rate). Changes in the fair value of the derivative and hedged item are recognized in the Income Statement.
The interest rate coupon is recognized on an on-going basis in the Income Statement as a component of interest expense.
In the consolidated Balance Sheet, investments in foreign operations are reported as net assets in subsidiaries. To a certain extent, currency risks associated with such investments are reduced by entering into forward contracts in the same currency as the net investments. In order to match the translation differences relating to the net investments in the hedged foreign operations, the effective component of the period's exchange rate fluctuations for hedging instruments is reported under Other Comprehensive income, and the cumulative changes are reported under Translation reserve. The amount in the Translation reserve, which is related to currency changes in both the net investment and the hedging instrument is reversed and recognized in the Income Statement when a foreign operation is divested. When hedging has not been effective, the ineffective component is recognized in the Income Statement.
On each reporting date, an assessment of the need for impairment of a financial asset or group of assets is performed. Since the majority of the Group's assets are included in the category "Financial assets at fair value through profit/loss", most negative changes in value affect the Income Statement on an on-going basis. If any event has occurred that might have a negative impact on the collectability of assets belonging to the category "Loans and Receivables", the recoverable amount is calculated. The recoverable amount is calculated as the present value of future cash flows discounted at the effective interest rate upon initial recognition of the asset. Assets with short maturities are not discounted. Impairment losses are reported in the Income Statement.
Impairment losses on loans and trade receivables (which are recognized at amortized cost) are reversed if the prior reasons for the impairment no longer exist and full payment is expected.
Financial guarantee contracts commit the Group to reimburse the holder of a debt instrument for the losses incurred when a specified debtor fails to make payment when due, in accordance with the contract terms. Financial guarantee contracts are initially recognized at fair value less the fair value of contracted guarantee fees. However, an asset will not be reported in the Balance Sheet if the difference is positive.
Subsequent to initial recognition, financial guarantee contracts are continuously recognized at the higher of:
Following is a description of the methods and assumptions used to determine the fair value of financial assets and liabilities shown in this Annual Report. Changed conditions regarding the determination of fair value of financial instruments cause transfer between levels described below.
Listed holdings
Listed holdings are valued on the basis of their share price (bid price, if there is one quoted) on the balance sheet date.
Shares and participations
Shares and participations in level 2 consist of holdings in listed shares for which the classes are not actively traded. The measurement of these shares is based on the market price for the most traded class of shares for the same holding.
Derivatives in level 2 consist mainly of currency and interest rate swaps for which the valuation is based on discounted future cash flows according to the terms and conditions in the agreement and based on the market rate of interest for similar instruments with different durations.
Unlisted holdings and fund holdings
Unlisted holdings are measured on the basis of the "International Private Equity and Venture Capital Valuation Guidelines". For directly owned holdings (i.e. those owned directly by a company in the Investor Group), an overall evaluation is made to determine the measurement method that is appropriate for each specific holding. It is first taken into account whether a recent financing round or "arm's length transaction" has been made. As a secondary measure, a valuation is made by applying relevant multiples to the holding's key ratios, derived from a relevant sample of comparable companies, with deduction for individually determined adjustments as a consequence of the size difference between the company being valued and the sample of comparable companies. In those cases when other measurement methods better reflect the fair value of a holding, this value is used.
Unlisted holdings in funds are measured at Investor's share of the value that the fund manager reports for all unlisted fund holdings (Net Asset Value) and is normally updated when a new valuation is received. If Investor's assessment is that the fund manager's valuation does not sufficiently take into account factors that affect the value of the underlying holdings, or if the valuation is considered to deviate considerably from IFRS principles, the value is adjusted.
When estimating the fair value market conditions, liquidity, financial condition, purchase multiples paid in other comparable third-party transactions, the price of securities of other companies comparable to the portfolio company, and operating results and other financial data of the portfolio company are taken in consideration as applicable. Representatives from Investor's management participate actively in the valuation process within Investor Growth Capital (IGC) and evaluate the estimated fair values for holdings in IGC and the EQT funds in relation to their knowledge of the development of the portfolio companies and the market. Listed holdings in funds are measured in the same way as listed holdings, as described above.
The valuation of currency interest rate swaps with long duration and limited liquidity is based on discounted cash flows according to the terms and conditions of the agreement and based on an estimated market rate for similar instruments with diverse durations.
The value of unlisted options is calculated in accordance with the Black & Scholes valuation model.
The fair value would be classified in level 3 and is based on market prices and generally accepted methods, in which future cash flows have been discounted at the current interest rate, including Investor's current credit rating, for the remaining life.
The carrying amounts of loans, trade receivables and trade payables are considered to reflect their fair value.
The table below indicates which valuation technique and which important unobservable input that has been used in order to estimate the carrying amounts of financial instruments in level 3. The inputs in the table below are not indicative of all the unobservable inputs that may have been used for an individual investment.
| Fair value | Range | |||||
|---|---|---|---|---|---|---|
| 12/31 2017 | 12/31 2016 | Valuation technique | Input | 12/31 2017 | 12/31 2016 | |
| Shares and participations | 21,383 | 19,367 | Last round of financing Comparable companies Comparable companies Comparable transactions NAV |
N/A EBITDA multiples Sales multiples Sales multiples N/A |
N/A N/A 1.6–7.6 0.4–5.5 N/A |
N/A N/A 1.5–3.6 0.4–5.7 N/A |
| Long-term receivables Long-term interest bearing liabilities Other long-term liabilities |
1,509 45 1,700 |
1,948 47 1,624 |
Discounted cash flow Discounted cash flow Discounted cash flow |
Market interest rate Market interest rate |
N/A N/A N/A |
N/A N/A N/A |
All valuations in level 3 are based on assumptions and judgments that management consider to be reasonable based on the circumstances prevailing at the time. Changes in assumptions may result in adjustments to reported values and the actual outcome may differ from the estimates and judgments that were made.
The unlisted part of Financial Investments portfolio companies, corresponds to 73 percent of the portfolio value (52). Part of the unlisted portfolio is valued based on comparable companies, and the value is dependent on the level
of the multiples. The multiple ranges provided in the note show the minimum and maximum value of the actual multiples applied in these valuations. A 10 percent change of the multiples would have an effect on the Financial Investments portfolio value of approximately SEK 200 m. (200).
For the derivatives, a parallel shift of the interest rate curve upwards by one percentage point would affect the value positively by approximately SEK 1,000 m. (1,100).
Financial liabilities
Financial assets and liabilities measured at fair value through profit/loss 12/31 2017 Fair value option Held for trading Derivatives used in hedge accounting Loans and receivables Financial assets available-for-sale Other financial liabilities Financial assets Shares and participations recognized at fair value 307,520 14 2 307,535 307,535 Other financial investments 5,286 104 5,389 5,389 Long-term receivables 1,894 321 2,215 2,215 Accrued interest income 318 318 318 Trade receivables 4,004 4,004 4,004 Other receivables 14 248 262 262 Shares and participations in
| Financial assets and liabilities measured at fair value through profit/loss |
||||||||
|---|---|---|---|---|---|---|---|---|
| 12/31 2016 | Fair value option | Held for trading |
Derivatives used in hedge accounting |
Loans and receivables |
Financial assets available-for-sale |
Other financial liabilities |
Total carrying amount |
Fair value |
| Financial assets | ||||||||
| Shares and participations | ||||||||
| recognized at fair value | 272,863 | 5 | 2 | 272,869 | 272,869 | |||
| Other financial investments | 3,656 | 53 | 3,709 | 3,709 | ||||
| Long-term receivables | 2,402 | 2,017 | 4,419 | 4,419 | ||||
| Accrued interest income | 371 | 371 | 371 | |||||
| Trade receivables | 3,813 | 3,813 | 3,813 | |||||
| Other receivables | 10 | 293 | 303 | 303 | ||||
| Shares and participations in trading operation |
46 | 46 | 46 | |||||
| Short-term investments | 5,094 | 5,094 | 5,094 | |||||
| Cash and cash equivalents | 11,250 | 11,250 | 11,250 | |||||
| Total | 292,863 | 56 | 2,402 | 6,551 | 2 | – | 301,874 | 301,874 |
| Financial liabilities | ||||||||
| Long-term interest-bearing liabilities | 526 | 44 | 52,743 | 53,313 | 58,4641) | |||
| Other long-term liabilities | 1,624 | 328 | 1,952 | 1,952 | ||||
| Current interest-bearing liabilities | 19 | 1,615 | 1,634 | 1,6431) | ||||
| Trade payables | 1,954 | 1,954 | 1,954 | |||||
| Other current liabilities | 21 | 894 | 915 | 915 | ||||
| Accrued interest expenses | 842 | 842 | 842 | |||||
| Total | – | 2,171 | 63 | – | – | 58,375 | 60,609 | 65,770 |
trading operation 266 266 266 Short-term investments 4,190 4,190 4,190 Cash and cash equivalents 16,260 16,260 16,260 Total 333,255 279 1,894 5,009 2 340,439 340,439
Long-term interest-bearing liabilities 444 123 54,736 55,303 60,2071) Other long-term liabilities 1,689 258 1,947 1,947 Current interest-bearing liabilities 16 2,076 2,092 2,1441) Trade payables 1,849 1,849 1,849 Other current liabilities 316 1,292 1,608 1,608 Accrued interest expenses 895 895 895 Total – 2,465 123 – – 61,106 63,695 68,650
1) The Groups loans are valued at amortized cost. Fair value on loans are presented. For other assets and liabilities
there are no differences between carrying amount and fair value.
Total carrying
amount Fair value
| Financial assets and liabilities measured at fair value through profit/loss |
||||||
|---|---|---|---|---|---|---|
| 2017 | Fair value option | Held for trading | Derivatives used in hedge accounting |
Loans and receivables |
Other financial liabilities |
Total |
| Operating profit/loss | ||||||
| Dividends | 8,405 | –1 | 8,404 | |||
| Changes in value, including currency | 36,526 | 29 | 36,555 | |||
| Cost of sales, distribution expenses | –1 | 33 | 32 | |||
| Net financial items | ||||||
| Interest | 55 | –107 | 436 | 6 | –1,867 | –1,476 |
| Changes in value | –15 | 132 | –489 | –2 | 299 | –75 |
| Exchange rate differences | –212 | –101 | –73 | –46 | –783 | –1,215 |
| Total | 44,760 | –49 | –126 | –9 | –2,351 | 42,226 |
| Financial assets and liabilities measured at fair value through profit/loss |
||||||
|---|---|---|---|---|---|---|
| 2016 | Fair value option | Held for trading | Derivatives used in hedge accounting |
Loans and receivables |
Other financial liabilities |
Total |
| Operating profit/loss | ||||||
| Dividends | 8,350 | 1 | 8,351 | |||
| Other operating income | 40 | 40 | ||||
| Changes in value, including currency | 22,311 | –6 | 22,305 | |||
| Cost of sales, distribution expenses | 19 | –2 | 17 | |||
| Net financial items | ||||||
| Interest | 29 | –118 | 417 | 15 | –1,773 | –1,430 |
| Changes in value | 2 | 34 | 325 | –373 | –11 | |
| Exchange rate differences | –38 | 91 | 311 | 643 | –106 | 900 |
| Total | 30,654 | 21 | 1,052 | 696 | –2,251 | 30,172 |
The table below indicates how fair value is measured for the financial instruments recognized at fair value in the Balance Sheet.
The financial instruments are categorized on three levels, depending on how the fair value is measured:
Level 1: According to quoted prices (unadjusted) in active markets for identical instruments
Level 2: According to directly or indirectly observable inputs that are not included in level 1
Level 3: According to inputs that are unobservable in the market
| 12/31 2017 | Level 1 | Level 2 | Level 3 | Other1) | Total |
|---|---|---|---|---|---|
| Financial assets | |||||
| Shares and participations recognized at fair value | 283,423 | 2,714 | 21,383 | 16 | 307,535 |
| Other financial instruments | 5,286 | 104 | 5,389 | ||
| Long-term receivables | 385 | 1,509 | 321 | 2,215 | |
| Other receivables | 14 | 248 | 262 | ||
| Shares and participations in trading operation | 266 | 266 | |||
| Short-term investments | 4,190 | 4,190 | |||
| Cash and cash equivalents | 16,260 | 16,260 | |||
| Total | 309,424 | 3,112 | 22,893 | 688 | 336,117 |
| Financial liabilities | |||||
| Long-term interest-bearing liabilities | 523 | 45 | 54,736 | 55,303 | |
| Other long-term liabilities | 1,700 | 247 | 1,947 | ||
| Short-term interest-bearing liabilities | 16 | 2,076 | 2,092 | ||
| Other current liabilities | 274 | 38 | 1,296 | 1,608 | |
| Total | 274 | 577 | 1,745 | 58,354 | 60,951 |
1) To enable reconciliation with balance sheet items, financial instruments not valued at fair value as well as other assets and liabilities
that are included within balance sheet items have been included within Other.
| 12/31 2016 | Level 1 | Level 2 | Level 3 | Other1) | Total |
|---|---|---|---|---|---|
| Financial assets | |||||
| Shares and participations recognized at fair value | 251,164 | 2,332 | 19,367 | 6 | 272,869 |
| Other financial instruments | 3,656 | 53 | 3,709 | ||
| Long-term receivables | 454 | 1,948 | 2,017 | 4,419 | |
| Other receivables | 10 | 293 | 303 | ||
| Shares and participations in trading operation | 46 | 46 | |||
| Short-term investments | 5,094 | 5,094 | |||
| Cash and cash equivalents | 11,250 | 11,250 | |||
| Total | 271,210 | 2,796 | 21,314 | 2,369 | 297,689 |
| Financial liabilities | |||||
| Long-term interest-bearing liabilities | 523 | 47 | 52,743 | 53,313 | |
| Other long-term liabilities | 1,624 | 328 | 1,952 | ||
| Short-term interest-bearing liabilities | 19 | 1,615 | 1,634 | ||
| Other current liabilities | 13 | 9 | 894 | 915 | |
| Total | 13 | 551 | 1,671 | 55,579 | 57,813 |
1) To enable reconciliation with balance sheet items, financial instruments not valued at fair value as well as other assets and liabilities
that are included within balance sheet items have been included within Other.
The table below shows a reconciliation between opening and closing balance for the financial instruments recognized at fair value in the Balance Sheet derived from a valuation technique of unobservable input (level 3). No transfers have been made between level 1 and 2.
| 12/31 2017 | Shares and participations recognized at fair value |
Long-term receivables |
Total financial assets |
Long-term interest bearing liabilities |
Other long-term liabilities |
Total financial liabilities |
|---|---|---|---|---|---|---|
| Opening balance | 19,367 | 1,948 | 21,314 | 47 | 1,624 | 1,671 |
| Total gains or losses | ||||||
| in profit/loss | 3,742 | –438 | 3,304 | –2 | 60 | 58 |
| in other comprehensive income | 78 | 78 | –10 | –10 | ||
| Acquisitions | 3,714 | 3,714 | 26 | 26 | ||
| Divestments | –5,542 | –5,542 | ||||
| Transfers into level 3 | 24 | 24 | ||||
| Carrying amount at year-end | 21,383 | 1,509 | 22,893 | 45 | 1,700 | 1,745 |
| Total gains or losses for the period included in profit/loss for assets and liabilities held at the end of the period (unrealized results) |
||||||
| Changes in value | 1,489 | –438 | 1,051 | –2 | –2 | |
| Net financial items | –23 | –23 | ||||
| Total | 1,489 | –438 | 1,051 | –2 | –23 | –25 |
| 12/31 2016 | Shares and participations recognized at fair value |
Long-term receivables |
Total financial assets |
Long-term interest bearing liabilities |
Other long-term liabilities |
Total financial liabilities |
| Opening balance | 19,406 | 1,640 | 21,046 | 38 | 1,194 | 1,232 |
| Total gains or losses | ||||||
| in profit/loss | 1,121 | 308 | 1,429 | 9 | 219 | 228 |
| in other comprehensive income | 1,067 | 1,067 | 53 | 53 | ||
| Acquisitions | 3,047 | 3,047 | 272 | 272 | ||
| Divestments | –5,187 | –5,187 | –115 | –115 | ||
| Transfers from level 3 | –87 | –87 | ||||
| Carrying amount at year-end | 19,367 | 1,948 | 21,314 | 47 | 1,624 | 1,671 |
| Total gains or losses for the period included in profit/loss for assets and liabilities held at the end of the period (unrealized results) |
||||||
| Changes in value | –1,028 | –1,028 | 0 | 0 |
Net financial items 2 308 310 –9 –232 –239 Total –1,026 308 –718 –9 –232 –240
No financial assets and liabilities have been set off in the Balance Sheet.
| 12/31 2017 | 12/31 2016 | |||
|---|---|---|---|---|
| Financial assets | Financial liabilities | Financial assets | Financial liabilities | |
| Gross and net amount Not set off in the balance sheet |
2,623 –832 |
880 –831 |
2,608 –561 |
581 –561 |
| Cash collateral received/pledged | – | – | – | – |
| Net amounts | 1,7901) | 492) | 2,0471) | 212) |
1) Shares SEK 449 m. (183) and Derivatives SEK 1,341 m. (1,864).
2) Derivatives SEK 40 m. (21) and Security lending SEK 9 m. (–).
The Groups derivatives are covered by ISDA agreements. For repurchase agreements GMRA agreements exist and for securities lending there are GMSLA agreements. According to the agreements the holder has the right to set off the derivatives and keep securities when the counterparty does not fulfill its commitments.
A contingent liability exists when there is a possible obligation depending on whether some uncertain future event occurs, or, when there is a present obligation, but payment is not probable or the amount cannot be measured reliably. A provision must be recognized if and only if a present obligation (legal or constructive) has arisen as a result of a past event (the obligating event), the payment is probable (more likely than not), and the amount can be estimated reliably.
| Pledged assets | 12/31 2017 | 12/31 2016 |
|---|---|---|
| In the form of pledged securities for liabilities and provisions |
||
| Real estate mortgages Shares etc.1) |
391 9,018 |
391 9,434 |
| Other pledged and equivalent collateral Real estate mortgages |
24 | 39 |
| Total pledged assets | 9,432 | 9,864 |
| 1) Pledged shares for loans in subsidiaries. | ||
| Contingent liabilities | 12/31 2017 | 12/31 2016 |
| Guarantee commitments to FPG/PRI | 1 | 1 |
| Guarantees on behalf of associates Other contingent liabilities |
700 2,567 |
700 2,372 |
| Total contingent liabilities | 3,268 | 3,073 |
Other contingent liabilities consist of warranties within the wholly-owned subsidiaries and appeals regarding deducted interest expenses. Three of Investor AB's subsidiaries have historically claimed deduction for certain interest expenses which has been denied by the tax authorities and the Swedish Administrative Court. Investor believes that these deductions have been claimed rightfully and has appealed the denial. No provision has been made. If the appeals would not be successful, it would result in an additional tax expense of SEK 740 m. (530). This amount is reported as an other contingent liability.
The credit facilities within the wholly-owned subsidiaries are subject to financial covenants.
In addition, the Group's share of contingent liabilities related to the associated companies amounts to SEK – m. (–).
The following additional information about related parties is being provided in addition to what has been reported in other notes to the financial statements.
The Wallenberg foundations have significant influence over Investor (in accordance with the definition in IAS 24 Related Party Disclosures). The largest of these foundations are the Knut and Alice Wallenberg Foundation, the Marianne and Marcus Wallenberg Foundation and the Marcus and Amalia Wallenberg Memorial Fund.
Investor's support functions provide a limited scope of services for FAM AB and Foundation Administration Management Sweden AB, which are owned by the Wallenberg foundations. Transactions with these companies are priced according to market terms.
In addition to the above-noted relations with related parties, there are a number of companies in which Investor and the company have common board members. Information has not been provided in this note because these situations are either not considered to involve influence of the type described in IAS 24, or the transactions refer to non material amounts.
Transactions with related parties are priced according to market terms, for information about the Parent Company see note P18, Related party transactions.
See note 9, Employees and personnel costs for information about salaries and other compensation, costs and commitments regarding pensions and similar benefits, and severance payment agreements for the board, President and other senior executives.
Participation/incentive programs IGC
Within Investor Growth Capital (IGC), selected senior staff and other senior executives have had the opportunity for a number of years to make parallel investments to some extent with Investor. The plans are designed in accordance with market practice in the venture capital market and are evaluated periodically against similar programs in Europe, the U.S. and Asia. Carried interest plans provide an economic incentive for managers and encourage personal commitment to analysis and investment work since the result is directly connected to the financial performance of the business.
Carried interest plans are linked to realized growth in the value of holdings, after deduction for costs, seen as a portfolio. This means that when an investment is realized with a profit, each parallel investor receives his or her share of the profit, after provisions for any unrealized declines in value or write-downs of other investments. The plans allow a maximum share of 16 percent that can be given to parallel investors, which is in line with practice in the venture capital market.
During the year, a total of SEK 40 m. was paid out from these programs (35). The provision (not paid out) on unrealized gains amounted to SEK 458 m. at year-end (680). Expensed amounts were reported in the item "Changes in Value" in the Income Statement.
Due to the restructuring of IGC, a limited number of employees also participate in a profit sharing program that is better adapted to reflect the decision to restructure IGC. This program is linked to the realized proceeds of holdings, where the share that can be credited to program participants is set with the holding's market value taken into account.
During 2016 Investor entered into an option agreement with former Head of Patricia Industries Börje Ekholm. The option agreement was entered into on market terms and Investor has issued 1,000,000 call options in the Ericsson Class B share. Each option initially entitled the purchase of one Ericsson B share at a strike price of SEK 80 per share during one year after a seven-year period. At exercise the strike price will be adjusted if dividends deviate from market expectations at the time of entering the contract, in order to ensure that the option is dividend neutral. The valuation has been conducted, using the Black & Scholes model, by an independent third party. At year-end the liability of the option amounted to SEK 3 m. and is included in Other liabilities (2).
Board members and senior executives in unlisted investments, including Mölnlycke, Laborie, Aleris, Permobil. Vectura and BraunAbility are offered the opportunity to invest in the companies through management participation programs. The terms of the programs are based on market valuations and are designed to yield lower return to the participants than that of the owners if the investment plan is not reached but higher return to the participants than that of the owners if the plan is exceeded.
Related party transactions
| Associates | Other related party | |||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Sales of products/services | 23 | 37 | 21) | 21) |
| Purchase of products/services | 8 | 11 | ||
| Financial expenses | 130 | 89 | ||
| Financial income | 10 | 168 | ||
| Dividends/redemptions | 4,855 | 5,024 | ||
| Capital contributions | – | – | ||
| Receivables | 7,201 | 4,519 | ||
| Liabilities | 4,118 | 3,714 | 3 | 2 |
1) Wallenberg foundations
On January 8, 2018, Investor announced that Stefan Stern will leave Investor and its management group to assume advisory assignments, among others for the Wallenberg Foundations AB.
On March 12, 2018, Patricia Industries, a part of Investor AB, signed an agreement to acquire Sarnova Holdings Inc., the leading U.S. specialty distributor of healthcare products in the emergency preparedness and acute care markets. The acquisition is subject to approval by the relevant competition authorities. Closing is expected during the second quarter 2018.
| SEK m. | Note | 2017 | 2016 |
|---|---|---|---|
| Dividends | 7,657 | 7,731 | |
| Changes in value | P6, P9 | 30,242 | 19,388 |
| Net sales | 13 | 11 | |
| Operating costs | P2 | –365 | –334 |
| Result from participations in Group companies |
– | 2,628 | |
| Operating profit/loss | 37,548 | 29,425 | |
| Profit/loss from financial items | |||
| Results from other receivables that are non-current assets |
P3 | 1,173 | 3,573 |
| Interest income and similar items | 7 | 21 | |
| Interest expenses and similar items | P4 | –1,672 | –3,744 |
| Profit/loss after financial items | 37,056 | 29,275 | |
| Tax | P1 | – | – |
| Profit/loss for the year | 37,056 | 29,275 |
| SEK m. | 2017 | 2016 |
|---|---|---|
| Profit/loss for the year | 37,056 | 29,275 |
| Other Comprehensive income for the year, net taxes |
||
| Items that will not be recycled to profit/loss for the year |
||
| Remeasurements of defined benefit plans |
3 | –14 |
| Total Other Comprehensive income for the year |
3 | –14 |
| Total Comprehensive income for the year |
37,060 | 29,261 |
| SEK m. | Note | 12/31 2017 | 12/31 2016 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | |||
| Capitalized expenditure for software |
P7 | 6 | 3 |
| Property, plant and equipment | |||
| Equipment | P8 | 11 | 12 |
| Financial assets | |||
| Participations in Group companies |
P5 | 45,607 | 53,797 |
| Participations in associates | P6 | 173,560 | 151,933 |
| Other long-term holdings of securities |
P9 | 80,197 | 70,327 |
| Receivables from Group companies |
P10 | 24,600 | 30,560 |
| Total non-current assets | 323,981 | 306,633 | |
| Current assets | |||
| Trade receivables | 1 | 3 | |
| Receivables from Group companies |
481 | 526 | |
| Receivables from associates | 1 | 2 | |
| Tax assets | 9 | 24 | |
| Other receivables | 0 | 0 | |
| Prepaid expenses and accrued income |
P11 | 56 | 44 |
| Cash and cash equivalents | – | – | |
| Total current assets | 548 | 599 | |
| TOTAL ASSETS | 324,529 | 307,232 | |
| SEK m. | Note | 12/31 2017 | 12/31 2016 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Restricted equity | |||
| Share capital | 4,795 | 4,795 | |
| Statutory reserve | 13,935 | 13,935 | |
| Reserve for development expenditures |
5 | 2 | |
| 18,735 | 18,732 | ||
| Unrestricted equity | |||
| Accumulated profit/loss | 223,358 | 202,397 | |
| Profit/loss for the year | 37,056 | 29,275 | |
| 260,414 | 231,673 | ||
| Total equity | 279,149 | 250,404 | |
| Provisions | |||
| Provisions for pensions and similar obligations |
P12 | 92 | 99 |
| Other provisions | P13 | 77 | 233 |
| Total provisions | 169 | 332 | |
| Non-current liabilities | |||
| Interest-bearing liabilities | P14 | 28,274 | 31,231 |
| Liabilities to Group companies | 13,339 | 14,158 | |
| Total non-current liabilities | 41,613 | 45,389 | |
| Current liabilities | |||
| Interest-bearing liabilities | 1,969 | 1,500 | |
| Trade payables | 9 | 12 | |
| Liabilities to Group companies | 889 | 8,888 | |
| Liabilities to associates | 1 | 0 | |
| Tax liabilities | – | 1 | |
| Other liabilities | 21 | 26 | |
| Accrued expenses and deferred | |||
| income | P15 | 669 | 680 |
| Other provisions | P13 | 40 | – |
| Total current liabilities | 3,598 | 11,107 | |
| TOTAL EQUITY AND LIABILITIES |
324,529 | 307,232 |
For information regarding pledged assets and contingent liabilities see note P17, Pledged assets and contingent liabilities.
| Restricted equity | Unrestricted equity | Total equity | ||||
|---|---|---|---|---|---|---|
| SEK m. | Share capital |
Statutory reserve |
Reserve for devel opment expendi tures |
Accumulated profit/loss |
Profit/loss for the year |
|
| Opening balance 1/1 2017 | 4,795 | 13,935 | 2 | 231,672 | 250,404 | |
| Profit/loss for the year | 37,056 | 37,056 | ||||
| Other Comprehensive income for the year | 3 | 3 | ||||
| Total Comprehensive income for the year | 3 | 37,056 | 37,060 | |||
| Dividend | –8,411 | –8,411 | ||||
| Stock options exercised by employees | 52 | 52 | ||||
| Equity-settled share-based payment transactions | 43 | 43 | ||||
| Reclassification | 3 | –3 | – | |||
| Closing balance 12/31 2017 | 4,795 | 13,935 | 5 | 223,358 | 37,056 | 279,149 |
| Restricted equity | Unrestricted equity | |||||
|---|---|---|---|---|---|---|
| SEK m. | Share capital |
Statutory reserve |
Reserve for devel opment expendi tures |
Accumulated profit/loss |
Profit/loss for the year |
|
| Opening balance 1/1 2016 | 4,795 | 13,935 | – | 209,703 | 228,433 | |
| Profit/loss for the year | 29,275 | 29,275 | ||||
| Other Comprehensive income for the year | –14 | –14 | ||||
| Total Comprehensive income for the year | –14 | 29,275 | 29,261 | |||
| Dividend | –7,635 | –7,635 | ||||
| Stock options exercised by employees | 312 | 312 | ||||
| Equity-settled share-based payment transactions | 33 | 33 | ||||
| Reclassification | 2 | –2 | – | |||
| Closing balance 12/31 2016 | 4,795 | 13,935 | 2 | 202,397 | 29,275 | 250,404 |
The Parent Company's share capital on December 31, 2017, as well as on December 31, 2016, consists of the following numbers of shares with a quota of SEK 6.25 per share.
| Share in % of | ||||
|---|---|---|---|---|
| Share class | Number of shares | Number of votes | Capital | Votes |
| A 1 vote B 1/10 vote |
311,690,844 455,484,186 |
311,690,844 45,548,418 |
40.6 59.4 |
87.2 12.8 |
| Total | 767,175,030 | 357,239,262 | 100.0 | 100.0 |
For information regarding repurchased own shares, see the Administration Report page 24.
For the Board of Director's proposed Disposition of Earnings, see note 23, Equity.
| SEK m. | 2017 | 2016 |
|---|---|---|
| Operating activities | ||
| Dividends received | 7,657 | 7,731 |
| Cash payments to suppliers and employees | –404 | –96 |
| Cash flow from operating activities before net interest and income tax | 7,253 | 7,635 |
| Interest received | 1,734 | 1,987 |
| Interest paid | –929 | –1,707 |
| Income tax paid | 20 | –11 |
| Cash flow from operating activities | 8,078 | 7,904 |
| Investing activities | ||
| Share portfolio | ||
| Acquisitions | –1,268 | –1,211 |
| Divestments | 15 | 65 |
| Other items | ||
| Capital contributions to/from subsidiaries | 8,190 | 5,800 |
| Acquisitions of property, plant and equipment/intangible assets |
–5 | –3 |
| Net cash used in investing activities | 6,932 | 4,652 |
| Financing activities | ||
| Repayment of borrowings | –2,797 | –2,281 |
| Change, intra-group balances | –3,802 | –2,640 |
| Dividends paid | –8,411 | –7,635 |
| Net cash used in financing activities | –15,010 | –12,556 |
| Cash flow for the year | 0 | 0 |
| Cash and cash equivalents at beginning of the year | 0 | 0 |
| Cash and cash equivalents at year-end | 0 | 0 |
The Parent Company does not report cash and cash equivalents since liquidity needs are covered by funds in the joint bank account for the Group. These funds are reported as balances with the Group's internal bank, AB Investor Group Finance.
| Non-cash changes | |||||||
|---|---|---|---|---|---|---|---|
| 12/31 2017 | Opening balance |
Cash flows | Aquisitions | Foreign exchange movements |
Fair value changes |
Other | Amount at year-end |
| Long-term interest-bearing liabilities | 31,231 | –1,301 | 284 | –94 | –1,846 | 28,2741) | |
| Current interest-bearing liabilities | 1,500 | –1,496 | 126 | 1,840 | 1,9692) | ||
| Total liabilities from financing activities | 32,730 | –2,797 | – | 410 | –94 | –6 | 30,243 |
1) Included in Consolidated Balance Sheet item Long-term interest-bearing liabilities.
2) Included in Consolidated Balance Sheet item Current interest-bearing liabilities.
The Annual Accounts Act and RFR 2 Accounting for Legal Entities has been applied for the Parent Company. The Parent Company applies the same accounting policies as the Group unless otherwise noted. Any differences between the accounting policies of the Parent Company and those of the Group are caused by limitations to the application of IFRS in the Parent Company because of the Swedish Annual Accounts Act. Significant accounting policies for the Parent Company that differs from the Group are presented in this note. Other significant accounting policies are presented in note 1, Significant accounting policies and in connection to respective note to the consolidated financial statements.
Subsidiaries are companies in which Investor AB is able to exert a controlling influence. Controlling influence is the power to, either directly or indirectly, govern the financial and operating policies of an entity in order to obtain economic benefits from its activities.
In the Parent Company, participations in Group companies are recognized in accordance with the cost method and in legal entities, transaction costs attributable to business combinations will be included in the acquisition cost.
Contingent consideration is valued based on the likelihood that the consideration will be paid. Any changes to the provision/receivable result in an increase/decrease in the cost of acquisition. On each balance sheet date, the carrying amounts are reviewed to determine if there are any indications of impairment. Dividends from subsidiaries are included in the Parent Company's operating profit/loss.
Shareholders' contributions are recognized directly in equity by the receiver and are capitalized in participations by the giver to the extent that no impairment loss is required.
Based on how Investor controls and monitors the companies' operations, Participations in associates are recognized at fair value in accordance with IAS 39. For further information see note 12, Shares and participations in associates.
In the Parent Company, borrowing costs are charged to profit/loss during the period they pertain to. Borrowing costs are not capitalized.
The Parent Company's financial guarantee contracts consist primarily of guarantees on behalf of subsidiaries and associates.
The Parent Company applies RFR 2 IAS 39 item 2, to account for financial guarantee contracts issued on behalf of associates, which is somewhat more lenient than the rules in IAS 39, due to the relationship between accounting and taxation. The Parent Company recognizes financial guarantee contracts as a provision in the Balance Sheet when the company has a commitment for which payment will most likely be required.
The Parent Company is taxed in accordance with the Swedish rules for certain holding companies. The purpose of these rules is to allow re-allocations of its holdings without tax consequences. To be eligible for these rules, the company should, almost exclusively, manage an equity portfolio providing the shareholders risk allocation. The regulations for industrial holding companies imply that capital gains on shares are not taxable and corresponding capital losses are non-deductible. Dividends received and interest income are both taxable items, while administrative costs, interest expenses and dividend paid are all deductible. Moreover, the Parent Company declares a standard income of 1.5 percent on the market value of listed shares when the voting rights at the beginning of the year are less than 10 percent, or when they exceed 10 percent but, at the beginning of the year, had been owned for less than one year. As a consequence of these tax regulations, the Parent Company typically does not pay income tax. For the same reason, the Parent Company does not report deferred tax attributable to temporary differences. The regulations for industrial holding companies also imply that the Parent Company may neither give nor receive Group contributions.
Operating costs includes amortizations and depreciation of SEK 3 m. (4) of which SEK 2 m. relates to property, plant and equipment (3) and SEK 1 m. to other intangible assets (1).
Expensed wages, salaries and other remunerations amounted to SEK 213 m. (208), of which social costs SEK 46 m. (44).
The average number of employees 2017 was 71 (71). For more information see note 9, Employees and personnel costs.
| 2017 | 2016 | |
|---|---|---|
| Auditor in charge | Deloitte | Deloitte |
| Auditing assignment | 1 | 1 |
| Other audit activities | 0 | 0 |
| Total | 2 | 2 |
| Minimum lease payments Total |
–14 –14 |
–15 –15 |
|---|---|---|
| Costs for the year | ||
| Total | 11 | 11 |
| 1-5 years from balance sheet date | 1 | – |
| Less than 1 year from balance sheet date | 11 | 11 |
| Non-cancellable future lease payments | 2017 | 2016 |
Note P3. Results from other receivables
| τnaτ | |||
|---|---|---|---|
| c | |||
that are non-current assets
| 2017 | 2016 | |
|---|---|---|
| Interest income from Group companies | 1,645 | 1,873 |
| Changes in value | –398 | 437 |
| Other interest income | 41 | 46 |
| Exchange rate differences | –115 | 1,217 |
| IS Total | 1,173 | 3,573 |
Note P4. Interest expenses and similar items
| 2017 | 2016 | |
|---|---|---|
| Interest expenses to Group companies | –418 | –500 |
| Changes in value | 286 | –423 |
| Changes in value attributable to long-term | ||
| share-based remuneration | –17 | –15 |
| Net financial items, internal bank | –2 | 0 |
| Interest expenses, other borrowings | –1,331 | –1,366 |
| Exchange rate differences | –164 | –1,412 |
| Other | –26 | –29 |
| IS Total | –1 672 | –3,744 |
| Ownership interest in %1) | Carrying amount | ||||
|---|---|---|---|---|---|
| Subsidiary, Registered office, Registration number | Number of participations | 12/31 2017 | 12/31 2016 | 12/31 2017 | 12/31 2016 |
| Investor Holding AB, Stockholm, 556554-1538 | 1,000 | 100.0 | 100.0 | 5,793 | 13,793 |
| Patricia Industries AB, Stockholm, 556752-6057 | 100,000 | 100.0 | 100.0 | 23,239 | 23,239 |
| Invaw Invest AB, Stockholm, 556270-6308 | 10,000 | 100.0 | 100.0 | 12,099 | 12,099 |
| Patricia Industries II AB, Stockholm, 556619-6811 | 1,000 | 100.0 | 100.0 | 1,682 | 1,682 |
| Innax AB, Stockholm, 556619-6753 | 1,000 | 100.0 | 100.0 | 2,379 | 2,569 |
| AB Investor Group Finance, Stockholm, 556371-99872) | 100,000 | 100.0 | 100.0 | 416 | 416 |
| BS Carrying amount | 45,607 | 53,797 |
1) Refers to share of equity, which also corresponds to the share of voting power.
2) The Group's internal bank.
| Ownership interest in %1) | ||
|---|---|---|
| Subsidiary, Registered office | 12/31 2017 | 12/31 2016 |
| Aleris Group AB, Stockholm | 100.0 | 100.0 |
| Braun Holdings Inc., Indiana | 94.9 | 94.6 |
| Investor Growth Capital AB, Stockholm2) | 100.0 | 100.0 |
| Investor Investment Holding AB, Stockholm3) | 100.0 | 100.0 |
| Laborie, Toronto | 97.1 | 97.1 |
| Mölnlycke AB, Gothenburg | 98.8 | 98.8 |
| Permobil Holding AB, Timrå | 88.0 | 87.6 |
| The Grand Group AB, Stockholm | 100.0 | 100.0 |
| Vectura Fastigheter AB, Stockholm | 100.0 | 100.0 |
1) Refers to share of equity.
2) Holding company of Investor Growth Capital Inc.
3) Holding company of EQT.
The Investor Group consists of 6 wholly-owned subsidiaries to Investor AB, see table above, and a number of indirect holdings of which the material indirect holdings in subsidiaries are stated in the table above. In the subgroups Mölnlycke, Permobil, BraunAbility and Laborie non-controlling interests exists. None of these are considered material for Investor. Investor have assessed control over all subsidiaries due to the high ownership interest and Investor
| Changes in participations in Group companies | 12/31 2017 | 12/31 2016 |
|---|---|---|
| Accumulated costs | ||
| Opening balance | 54,938 | 58,107 |
| Acquisitions and capital contributions | – | 3,962 |
| Liquidation of Group company | – | 2,619 |
| Divestments and repaid capital contributions | –8,190 | –9,750 |
| At year-end | 46,748 | 54,938 |
| Accumulated impairment losses | ||
| Opening balance | –1,140 | –1,140 |
| Impairment losses | – | – |
| At year-end | –1,140 | –1,140 |
| BS Carrying amount at year-end | 45,607 | 53,797 |
AB having direct or indirect power of the companies and has the right and ability to affect the returns. Investor also continuously assess whether it controls companies with ownership interests below 50 percent. The assessment is based on whether Investor has the practical ability to direct relevant activities unilaterally either through the boards or the annual general meetings of the companies. No companies where de facto control exists have been identified.
| 12/31 2017 | 12/31 2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| Investor's share of | Investor's share of | |||||||
| Company, Registered office, Registration number | Number of shares | Ownership capital/votes (%) |
Carrying amount1,2) |
Equity3) | Profit/loss for the year4) |
Carrying amount1,2) |
Equity3) | Profit/loss for the year4) |
| Listed Core Investments: | ||||||||
| SEB, Stockholm, 502032-9081 | 456,198,927 | 21/21 | 43,705 | 29,936 | 3,379 | 43,725 | 29,323 | 2,209 |
| Atlas Copco, Stockholm, 556014-2720 | 207,645,611 | 17/22 | 72,877 | 10,262 | 2,821 | 57,437 | 8,934 | 2,207 |
| Ericsson, Stockholm, 556016-0680 | 220,347,348 | 7/22 | 11,740 | 6,612 | –2,314 | 10,380 | 8,289 | 112 |
| Electrolux, Stockholm, 556009-4178 | 47,866,133 | 16/30 | 12,613 | 3,192 | 890 | 10,846 | 2,749 | 696 |
| Swedish Orphan Biovitrum, Stockholm, 556038-9321 | 107,594,165 | 40/40 | 12,051 | 2,647 | 454 | 11,480 | 2,120 | 253 |
| Saab, Linköping, 556036-0793 | 32,778,098 | 30/40 | 13,033 | 4,313 | 431 | 11,181 | 3,990 | 353 |
| Husqvarna, Jönköping, 556000-5331 | 97,052,157 | 17/33 | 7,542 | 2,632 | 447 | 6,883 | 2,413 | 353 |
| BS Total participations in associates | 173,560 | 151,933 |
1) Carrying amount includes acquisition cost, additional investments and divestments for the period and value changes due to write-downs to correspond with the fair value of the investments valued at cost and fair value for participations in associates valued at fair value, respectively.
2) Carrying amount for associates valued at fair value, equals the quoted market price for the investment.
3) Equity refers to the ownership interest in the equity of a company including the equity component in untaxed reserves and after adjustments to Investor's accounting policies.
4) Profit/loss for the year refers to the share of the company's results after tax including the equity component in the change for the year in untaxed reserves after adjustments to Investor's accounting policies.
Specification of carrying amount for participations in associates valued at fair value
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Opening balance | 151,933 | 136,350 |
| Acquisitions | 1,246 | 1,135 |
| Revaluations disclosed in Income Statement | 20,381 | 14,448 |
| Carrying amount at year-end BS |
173,560 | 151,933 |
| Capitalized expenditure for software | 12/31 2017 | 12/31 2016 |
|---|---|---|
| Accumulated costs | ||
| Opening balance | 32 | 30 |
| Acquisitions | 4 | 2 |
| At year-end | 36 | 32 |
| Accumulated amortization and impairment losses | ||
| Opening balance | –29 | –28 |
| Amortizations | –1 | –1 |
| At year-end | –30 | –29 |
| BS Carrying amount at year-end | 6 | 3 |
| Allocation of amortizations in Income Statement | ||
| Operating costs | –1 | –1 |
| Total | –1 | –1 |
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Opening balance | 70,327 | 65,295 |
| Acquisitions | 17 | 67 |
| Divestments | –15 | –65 |
| Revaluations disclosed in Income Statement | 9,869 | 5,031 |
| BS Carrying amount at year-end | 80,197 | 70,327 |
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Opening balance | 30,560 | 31,679 |
| New lending | 1,184 | 1,023 |
| Divestments/due/redeemed | –5,738 | –3,414 |
| Unrealized change in value | –1,406 | 1,272 |
| BS Carrying amount at year-end | 24,600 | 30,560 |
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Interest | 32 | 34 |
| Other financial receivables | 12 | 1 |
| Other | 12 | 9 |
| BS Total | 56 | 44 |
| Equipment | 12/31 2017 | 12/31 2016 |
|---|---|---|
| Accumulated costs | ||
| Opening balance | 37 | 37 |
| Acquisitions | 1 | 2 |
| Sales and disposals | – | –2 |
| At year-end | 38 | 37 |
| Accumulated depreciation and impairment | ||
| Opening balance | –25 | –24 |
| Sales and disposals | – | 2 |
| Depreciation for the year | –2 | –3 |
| At year-end | –28 | –25 |
| BS Carrying amount at year-end | 11 | 12 |
For more information see note 25, Provision for pensions and similar obligations.
| Components of defined benefit cost (gain –) | 2017 | 2016 |
|---|---|---|
| Net interest expense | 2 | 3 |
| Total financial cost | 2 | 3 |
| Components recognized in profit or loss | 2 | 3 |
| Remeasurement on the net defined benefit liability (gain –) | 2017 | 2016 |
| Actuarial gains/losses, financial assumptions | –6 | 10 |
| Actuarial gains/losses, experience adjustments | 2 | 4 |
| Components in Other Comprehensive income | –4 | 14 |
The amount included in the Balance Sheet arising from defined
| benefit plan | 12/31 2017 | 12/31 2016 |
|---|---|---|
| Present value of unfunded obligations | 92 | 99 |
| Total present value of defined benefit obligations |
92 | 99 |
| BS Net liability arising from defined benefit obligations |
92 | 99 |
Changes in the obligations for defined benefit plans
| during the year | 12/31 2017 | 12/31 2016 |
|---|---|---|
| Defined benefit plan obligations, opening balance | 99 | 85 |
| Interest cost | 2 | 3 |
| Remeasurement of defined benefit obligations | ||
| Actuarial gains/losses, financial assumptions | –6 | 10 |
| Actuarial gains/losses, experience adjustments | 2 | 4 |
| Exchange difference on foreign plans | 0 | 0 |
| Benefit paid | –3 | –3 |
| Other | –2 | 0 |
| Obligations for defined benefit plans at year-end | 92 | 99 |
| Assumptions for defined benefit obligations | 12/31 2017 | 12/31 2016 |
|---|---|---|
| Discount rate | 2.2 | 2.4 |
| Future pension growth Mortality assumption used |
2.0 DUS14 |
2.0 DUS14 |
In the Parent Company Swedish mortgage backed bonds have been used as reference when determining the discount rate used for the calculation of the defined benefit obligation. The market for high quality Swedish mortgage backed bonds is considered to be deep and thereby fulfill the requirements of high quality corporate bonds according to IAS 19.
| Defined contribution plans | 2017 | 2016 |
|---|---|---|
| Expenses for defined contribution plans | 25 | 23 |
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Provisions expected to be paid after more than 12 months | ||
| Provision for social security contributions for LTVR | 10 | 9 |
| Other | 67 | 160 |
| BS Total non-current other provisions | 77 | 169 |
| Provisions expected to be paid within 12 months | ||
| Provision for social security contributions for LTVR | 40 | 50 |
| Other | – | 14 |
| BS Total current provisions | 40 | 64 |
| Total other provisions | 117 | 233 |
Provision for social security contributions for long-term share-based remuneration (LTVR)
Investor operates LTVR programs which are offered to all employees. Provision is made for social security contributions connected to these programs. The provision will be used during the years 2018-2024.
In the category Other a provision of SEK 46 m. for potential additional compensation to be paid related to sold associated company is included. The provision is expected to be settled in 2019 at the earliest. Other provisions are considered immaterial to specify and intend to be settled with SEK 21 m. in 2019.
| Social security | Total other | ||
|---|---|---|---|
| 12/31 2017 | LTVR | Other | provisions |
| Opening balance | 59 | 174 | 233 |
| Provisions for the year | 29 | 8 | 37 |
| Reversals for the year | –38 | –115 | –153 |
| Carrying amount at year-end | 50 | 67 | 117 |
| 12/31 2016 | |||
| Opening balance | 171 | 100 | 271 |
| Provisions for the year | 41 | 80 | 121 |
| Reversals for the year | –153 | –6 | –159 |
| Carrying amount at year-end | 59 | 174 | 233 |
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Interest-bearing liabilities | ||
| Long-term interest-bearing liabilities | 28,035 | 31,043 |
| Related interest rate derivatives with negative value | 239 | 188 |
| BS Total | 28,274 | 31,231 |
| 12/31 2017 | 12/31 2016 | |
| Carrying amounts | ||
| Maturity, 1-5 years from balance sheet date | 7,950 | 5,429 |
| Maturity, more than 5 years from balance sheet date | 20,324 | 25,802 |
| BS Total | 28,274 | 31,231 |
Note P15. Accrued expenses and deferred income
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Interest | 572 | 583 |
| Other financial receivables | 75 | 84 |
| Other | 21 | 13 |
| BS Total | 669 | 680 |
For accounting policies see note 29, Financial instruments.
| Financial assets and liabilities measured at fair value through profit/loss |
||||||||
|---|---|---|---|---|---|---|---|---|
| 12/31 2017 | Fair value option | Held for trading | Derivatives used in hedge accounting |
Loans and receivables |
Other assets and liabilities |
Total carrying amount |
Fair value | |
| Financial assets Other long-term holdings of securities Participations in associates Receivables from Group companies (non-current) Accrued interest income Trade receivables Receivables from Group companies (current) Receivables from associates Other receivables |
80,197 173,560 |
537 | 24,063 44 1 481 1 0 |
80,197 173,560 24,600 44 1 481 1 0 |
80,197 173,560 24,600 44 1 481 1 0 |
|||
| Total | 253,757 | – | 537 | 24,590 | – | 278,884 | 278,884 | |
| Financial liabilities Loans (non-current) Liabilities to Group companies (non-current) Loans (current) Trade payables Liabilities to Group companies (current) Liabilities to associates (current) Accrued interest expenses Other liabilities |
239 3 |
1,443 | 28,035 11,896 1,969 9 889 1 572 18 |
28,274 13,339 1,969 9 889 1 572 21 |
34,7931) 13,339 2,0211) 9 889 1 572 21 |
|||
| Total | – | 242 | 1,443 | – | 43,389 | 45,074 | 51,645 |
| Financial assets and liabilities measured at fair value through profit/loss |
|||||||
|---|---|---|---|---|---|---|---|
| 12/31 2016 | Fair value option | Held for trading | Derivatives used in hedge accounting |
Loans and receivables |
Other assets and liabilities |
Total carrying amount |
Fair value |
| Financial assets Other long-term holdings of securities Participations in associates Receivables from Group companies (non-current) Accrued interest income Trade receivables Receivables from Group companies (current) Receivables from associates Other receivables |
70,327 151,933 |
912 | 29,648 35 3 526 2 0 |
70,327 151,933 30,560 35 3 526 2 0 |
70,327 151,933 30,560 35 3 526 2 0 |
||
| Total | 222,260 | – | 912 | 30,213 | – | 253,386 | 253,386 |
| Financial liabilities Loans (non-current) Liabilities to Group companies (non-current) Loans (current) Trade payables Liabilities to Group companies (current) Liabilities to associates (current) Accrued interest expenses Other liabilities |
188 2 |
1,876 | 31,043 12,282 1,500 12 8,888 0 583 24 |
31,231 14,158 1,500 12 8,888 0 583 26 |
38,5901) 14,158 1,5091) 12 8,888 0 583 26 |
||
| Total | – | 190 | 1,876 | – | 54,332 | 56,398 | 63,767 |
1) The Parent Company's loans are valued at amortized cost, fair value on loans are presented in the table.
For other assets and liabilities there are no differences between carrying amount and fair value.
| Financial assets and liabilities measured at fair value through profit/loss |
||||||
|---|---|---|---|---|---|---|
| 2017 | Fair value option | Held for trading | Derivatives used in hedge accounting |
Loans and receivables |
Other financial liabilities |
Total |
| Operating profit/loss Dividends Changes in value, including currency |
7,657 30,249 |
–1 | 7,657 30,248 |
|||
| Net financial items Interest Changes in value Exchange rate differences |
9 12 –63 |
–37 58 |
1,538 –162 32 |
–1,609 56 –240 |
–99 –36 –271 |
|
| Total | 37,906 | –43 | 21 | 1,408 | –1,793 | 37,500 |
| 2016 | Fair value option | Held for trading | Derivatives used in hedge accounting |
Loans and receivables |
Other financial liabilities |
Total |
| Operating profit/loss Dividends Changes in value, including currency |
7,731 19,389 |
–1 | 7,731 19,388 |
|||
| Net financial items Interest Changes in value Exchange rate differences |
14 –13 29 |
–38 –3 |
1,779 200 965 |
–1,722 –184 –1,189 |
33 0 –195 |
|
| Total | 27,120 | 29 | –41 | 2,944 | –3,096 | 26,956 |
The table below indicates how fair value is measured for the financial instruments recognized at fair value in the Balance Sheet.
The financial instruments are categorized on three levels, depending on how the fair value is measured:
Level 1: According to quoted prices (unadjusted) in active markets for identical instruments
Level 2: According to directly or indirectly observable inputs that are not included in level 1
Level 3: According to inputs that are unobservable in the market
| 12/31 2017 | Level 1 | Level 2 | Level 3 | Other1) | Total |
|---|---|---|---|---|---|
| Financial assets | |||||
| Participations associates Receivables from Group companies (non-current) Other long-term holdings of securities |
170,846 80,192 |
2,714 | 537 5 |
24,063 | 173,560 24,600 80,197 |
| Total | 251,038 | 2,714 | 542 | 24,063 | 278,357 |
| Financial liabilities | |||||
| Liabilities to Group companies (non-current) Interest-bearing liabilities (non-current) Other current liabilities |
239 3 |
1,443 | 11,896 28,035 18 |
13,339 28,274 21 |
|
| Total | – | 242 | 1,443 | 39,949 | 41,634 |
| 12/31 2016 | Level 1 | Level 2 | Level 3 | Other1) | Total |
| Financial assets | |||||
| Participations associates Receivables from Group companies (non-current) Other long-term holdings of securities |
149,601 70,324 |
2,332 | 912 3 |
29,648 | 151,933 30,560 70,327 |
| Total | 219,925 | 2,332 | 915 | 29,648 | 252,820 |
| Financial liabilities | |||||
| Liabilities to Group companies (non-current) Interest-bearing liabilities (non-current) Other current liabilities |
188 2 |
1,876 | 12,282 31,043 24 |
14,158 31,231 26 |
|
| Total | – | 190 | 1,876 | 43,349 | 45,415 |
1) To enable reconciliation with balance sheet items, financial instruments not valued at fair value as well as other assets and liabilities that are included within balance sheet items have been included within Other.
The table below shows a reconciliation between opening and closing balance for the financial instruments recognized at fair value in the Balance Sheet derived from a valuation technique of unobservable input (level 3). No transfers have been made between level 1 and 2.
| 12/31 2017 | Other long-term holdings of securities |
Long-term receivables |
Total financial assets |
Long-term interest bearing liabilities |
Total financial liabilities |
|---|---|---|---|---|---|
| Financial assets and liabilities | |||||
| Opening balance | 3 | 912 | 915 | 1,876 | 1,876 |
| Total gains or losses | |||||
| in profit/loss | –375 | –375 | –433 | –433 | |
| Acquisitions | 2 | 2 | |||
| Divestments Carrying amount at year-end |
5 | 537 | 542 | 1,443 | 1,443 |
| Total gains or losses for the period included in profit/loss for assets and liabilities held at the end of the period (unrealized results) |
|||||
| Changes in value | – | –375 | –375 | –433 | –433 |
| Total | – | –375 | –375 | –433 | –433 |
| 12/31 2016 | Other long-term holdings of securities |
Long-term receivables |
Total financial assets |
Long-term interest bearing liabilities |
Total financial liabilities |
| Financial assets and liabilities | |||||
| Opening balance | 2 | 423 | 425 | 1,384 | 1,384 |
| Total gains or losses | |||||
| in profit/loss | 489 | 489 | 492 | 492 | |
| Acquisitions | 1 | 1 | |||
| Divestments | |||||
| Carrying amount at year-end | 3 | 912 | 915 | 1,876 | 1,876 |
| Total gains or losses for the period included in profit/loss for assets and liabilities held at the end of the period (unrealized results) |
|||||
| Changes in value | – | 489 | 489 | 492 | 492 |
| 12/31 2017 | 12/31 2016 | |
|---|---|---|
| Pledged assets | ||
| In the form of pledged securities for liabilities and provisions |
||
| Shares | 287 | 22 |
| Total pledged assets | 287 | 22 |
| Contingent liabilities | ||
| Guarantees on behalf of Group companies Guarantees on behalf of associates |
101 700 |
101 700 |
| Total contingent liabilities | 801 | 801 |
The Parent Company is related with its subsidiaries and associated companies see note P5, Participations in Group companies and note P6, Participations in associates.
For related party transactions with other related party, see note 31, Related party transactions.
| Group companies | Associates | Other related party | |||||
|---|---|---|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||
| Sales of | |||||||
| products/services | 6 | 3 | 6 | 8 | 21) | 21) | |
| Purchase of | |||||||
| products/services | 10 | 9 | 5 | 8 | |||
| Financial expenses | 418 | 500 | 17 | 21 | |||
| Financial income | 1,645 | 1,873 | |||||
| Dividends/redemptions | 4,837 | 4,986 | |||||
| Capital contributions Receivables Liabilities |
8,190 25,081 14,228 |
5,800 31,086 23,046 |
1 | 2 | 3 | 2 |
1) Wallenberg foundations
In addition to the above stated information, guarantees on behalf on the associate 3 Scandinavia amounts to SEK 0.7 bn. (0.7).
To the annual general meeting of the shareholders of Investor AB (publ.) CORP. ID 556013-8298
We have audited the annual accounts and consolidated accounts of Investor AB (publ) for the financial year January 1, 2017 – December 31, 2017 except for the corporate governance statement on pages 27-33 and the statutory sustainability report on pages 10-13, 26, 28 and 48. The annual accounts and consolidated accounts of the company are included on pages 4-6, 10-13 and 24-90 in this document.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of 31 December 2017 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2017 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance statement on pages 27-33 and the statutory sustainability report on pages 10-13, 26, 28, 48. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.
Our opinions in this report on the the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company's audit committee in accordance with the Audit Regulation (537/2014) Article 11.
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.
With Investor's focus on high quality financial reporting a well-controlled financial reporting process is important. The investments within Patricia Industries are independent with separate internal control systems in place for their operating activities as well as processes for financial reporting.
Our audit focused on the governance over financial reporting for several reasons. Firstly, it is important to ensure that the information reported by each entity is prepared in accordance with IFRS. Secondly, it is important to have well established procedures to ensure timely and correct financial reporting. Thirdly, monitoring controls are important to ensure high quality reporting.
Investor AB's information regarding consolidation principles are included in Note 1 Significant accounting policies and Note 12 Shares and participation in associates on pages 44 and 59 respectively, providing further explanation on the method for accounting for associates.
The valuation process of unlisted investments requires estimates by management and is therefore more complex compared to the valuation of listed investments. The total carrying value of unlisted investments recognized at fair value amounted to SEK 21,383 million as of December 31, 2017.
Investor's valuation policy is based on IFRS 13 and the International Private Equity and Venture Capital Valuation Guidelines. Inappropriate judgements made in the assessment of fair value, in particular, in respect of selection of valuation multiples could have a significant impact on the value of the unlisted investment.
We focused on the unlisted investments since the carrying value is material, the investment portfolio comprises a large number of unlisted securities and since the assessments made to arrive at the fair value is sensitive to judgements and estimates made.
Investor AB's principles for accounting for unlisted investments are described in note 29 on page 72 and detailed disclosures regarding these investments are included in Note 29 Financial instruments on page 72-78, see detailed description in section Measurement of financial instruments in level 3.
Our audit procedures included, but were not limited to:
We tested that the methodology and consistency applied in the valuation of the portfolio companies is in accordance with IFRS 13 and the International Private Equity and Venture Capital Valuation Guidelines.
We recomputed the calculation of the enterprise value for a selection of portfolio companies in Patricia Industries including agreeing currency rates to independent sources.
There is a lower degree of judgment involved in the valuation process for listed investments compared to unlisted investments. However, a substantial portion of Investor's total assets is embedded in the holdings in listed investments. The total carrying value of listed investments amounted to SEK 283,423 million as of December 31, 2017.
We focused on the listed investments since the carrying value is significant, there is a risk that changes in ownership might not be properly recognized, and effects of dividend received might not properly be reflected in the fair value.
Investor AB's principles for accounting for listed investments are described in note 29 on page 72 and detailed disclosures regarding listed investments are included in Note 29 Financial instruments on page 72-78, see detailed description in section Measurement of financial instruments in level 1.
Our audit procedures included, but were not limited to:
Investor's acquisitions of Mölnlycke, Aleris, Permobil, BraunAbility and Laborie have led to a portion of the purchase price being allocated to intangible assets including goodwill. Changes in economic conditions or lower than expected improvement in performance may be indicators of potential impairment of the recoverable amount of these assets and hence the consolidated net asset value of Investor. The total carrying amount of goodwill relating to these holdings amounted to SEK 33,859 million as of December 31, 2017.
We focused on the assessments of the carrying value for the holdings above since the carrying value of intangible assets are material and as the assessment may be sensitive to changes in assumptions.
Investor disclosures regarding intangible assets are included in Note 16 Intangible assets on page 63-65, which specifically explains key assumptions used in the assessment of the recoverable amounts.
Our audit procedures included, but were not limited to:
Investor manages its foreign currency exchange rate and interest rate exposures with derivatives such as forward contracts, options and swaps. We focused on the treasury and hedge accounting since the risk mitigating relationships and contracts can be complex and it is essential to understand the financial effects of these instruments and that they are accurately presented.
Investor's disclosures regarding treasury and hedge accounting are included in Note 3 Risks and risk management on page 45-48, see detailed description in section Exchange rate risk and Interest rate risk and in Note 29 on page 72-78.
Our audit procedures included, but were not limited to:
This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1-3, 7-9, 14-23 and 94-97. The Board of Directors and the Managing Director are responsible for this other information.
Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of Director's responsibilities and tasks in general, among other things oversee the company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.
A further description of our responsibilities for the audit of the annual accounts and consolidated accounts is located at the Swedish Inspectorate of Auditors website: www.revisorsinspektionen.se/revisornsansvar. This description forms part of the auditor´s report.
In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Investor AB (publ) for the financial year January 1, 2017 – December 31, 2017 and the proposed appropriations of the company's profit or loss.
We recommend to the general meeting of shareholders that the profit to be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.
We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group's equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company's financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfill the company's accounting in accordance with law and handle the management of assets in a reassuring manner.
Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:
Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's profit or loss are not in accordance with the Companies Act.
A further description of our responsibilities for the audit of the management's administration is located at the Swedish Inspectorate of Auditors website: www.revisorsinspektionen.se/revisornsansvar. This description forms part of the auditor´s report.
The Board of Directors is responsible for that the corporate governance statement on pages 27-33 has been prepared in accordance with the Annual Accounts Act.
Our examination of the corporate governance statement is conducted in accordance with FAR´s auditing standard RevU 16 The auditor´s examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions.
A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2-6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act.
The Board of Directors is responsible for the statutory sustainability report on pages 10-13, 26, 28 and 48, and that it is prepared in accordance with the Annual Accounts Act.
Our examination has been conducted in accordance with FAR:s auditing standard RevR 12 The auditor´s opinion regarding the statutory sustainability report. This means that our examination of the statutory sustainability report is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinion.
A statutory sustainability report has been prepared. Deloitte AB, was appointed auditor of Investor AB (publ) by the general meeting of the shareholders on the 2017-05-03 and has been the company's auditor since 2013-04-15.
Stockholm March 23, 2018 Deloitte AB
Thomas Strömberg
Authorized Public Accountant
| Annual average growth |
|||||||
|---|---|---|---|---|---|---|---|
| 5 years, % | |||||||
| SEK m. | 2013 | 2014 | 2015 | 2016 | 2017 | ||
| Net asset value1) | Net asset value2) | ||||||
| Core Investments | Listed Core Investments | 224,143 | 248,354 | 284,030 | |||
| Listed | 175,174 | 218,396 | Patricia Industries | 51,095 | 54,806 | 48,614 | |
| Subsidiaries Financial Investments |
29,531 32,256 |
31,922 35,506 |
EQT Other assets & liabilities |
13,021 –565 |
13,996 –327 |
16,165 –323 |
|
| Other assets and liabilities | 1,560 | –29 | Total assets | 287,695 | 316,829 | 348,486 | |
| Total assets | 238,521 | 285,795 | Net cash (+) / Net debt (–) | –15,892 | –16,752 | –12,224 | |
| Net debt (–)/Net cash (+) | –23,104 | –24,832 | Of which Patricia Industries cash | 14,616 | 14,389 | 19,368 | |
| Net asset value | 215,417 | 260,963 | Net asset value | 271,801 | 300,077 | 336,262 | |
| Change in net asset value with dividend added back, % |
26 | 24 | Change in net asset value with dividend added back, % |
7 | 13 | 15 | 17 |
| Condensed Balance Sheet | Condensed Balance Sheet | ||||||
| Shares and participations | 202,859 | 246,891 | Shares and participations | 254,054 | 276,790 | 312,141 | |
| Other | 64,291 | 76,596 | Other | 82,536 | 93,183 | 96,426 | |
| Balance Sheet total | 267,150 | 323,487 | Balance Sheet total | 336,590 | 369,973 | 408,567 | |
| Profit and loss | Profit and loss | ||||||
| Profit/loss for the year attributable to | Profit/loss for the year attributable to | ||||||
| Parent Company shareholders Comprehensive income |
45,165 46,161 |
50,656 52,657 |
Parent Company shareholders Comprehensive income |
17,433 17,604 |
33,665 35,545 |
44,318 44,473 |
|
| Dividends | Dividends | ||||||
| Dividends received | 6,052 | 7,228 | Dividends received | 7,821 | 8,351 | 8,404 | |
| of which from Core Investments Listed | 5,441 | 6,227 | of which from Listed Core Investments | 7,681 | 8,307 | 8,319 | 12 |
| Contribution to NAV1) | Contribution to NAV2) | ||||||
| Contribution to NAV, Core Investments Listed | 38,433 | 41,311 | Contribution to NAV, Listed Core Investments | 8,804 | 30,936 | 42,636 | |
| Total return, Core Investments Listed, % | 27 | 24 | Total return, Listed Core Investments, % | 4 | 14 | 17 | |
| Contribution to NAV, Core Investments Subsidiaries Contribution to NAV, Financial Investments, |
668 | 2,386 | Contribution to NAV, Patricia Industries | 4,855 | 4,438 | 766 | |
| Partner-owned | 4,109 | 4,221 | Contribution to NAV, EQT | 3,995 | 1,986 | 3,144 | |
| Contribution to NAV, IGC and EQT | 3,788 | 6,543 | |||||
| Transactions1) | Transactions2) | ||||||
| Investments, Core Investments Listed | 719 | 8,233 | Investments, Listed Core Investments | 5,783 | 1,488 | 1,245 | |
| Divestments & redemptions, Listed Core Investments | – | 101 | Divestments & redemptions, Listed Core Investments | 1,241 | – | – | |
| Investments, Core Investments Subsidiaries | 7,558 | 1,121 | Investments, Patricia Industries | 4,176 | 6,127 | 406 | |
| Divestments, Core Investments Subsidiaries Investments, Partner-owned financial investments |
– 15 |
1,197 3,011 |
Divestments, Patricia Industries Distributions to Patricia Industries |
2,896 5,089 |
2,360 4,763 |
1,725 6,014 |
|
| Divestments, Partner-owned financial investments | 7,646 | 8,712 | Draw-downs, EQT | 1,590 | 2,864 | 3,781 | |
| Investments, IGC and EQT | 1,914 | 2,389 | Proceeds, EQT | 6,086 | 3,874 | 4,757 | |
| Divestments, IGC and EQT | 5,005 | 5,737 | |||||
| Key figures per share | Key figures per share | ||||||
| Net asset value, SEK | 283 | 343 | Net asset value, SEK | 357 | 393 | 440 | |
| Basic earnings, SEK | 59.35 | 66.55 | Basic earnings, SEK | 22.89 | 44.09 | 57.96 | |
| Diluted earnings, SEK | 59.25 | 66.40 | Diluted earnings, SEK | 22.82 | 44.02 | 57.90 | |
| Equity, SEK | 284 | 343 | Equity, SEK | 357 | 393 | 440 | |
| Key ratios | Key ratios | ||||||
| Leverage, % | 10 | 9 | Leverage, % | 6 | 5 | 4 | |
| Equity/assets ratio, % Return on equity, % |
81 23 |
81 21 |
Equity/assets ratio, % Return on equity, % |
81 7 |
81 12 |
82 14 |
|
| Discount to reported net asset value, % | 23 | 17 | Discount to reported net asset value, % | 13 | 14 | 16 | |
| Management costs, % of net asset value | 0.2 | 0.1 | Management costs, % of net asset value | 0.2 | 0.2 | 0.1 | |
| Share data | Share data | ||||||
| Total number of shares, million | 767.2 | 767.2 | Total number of shares, million | 767.2 | 767.2 | 767.2 | |
| Holding of own shares, million | 6.3 | 5.8 | Holding of own shares, million | 5.3 | 2.8 | 2.4 | |
| Share price on December 31, SEK 3) | 221.3 | 284.7 | Share price on December 31, SEK 3) | 312.6 | 340.5 | 374.1 | 17 |
| Market capitalization on December 31 Dividend paid to Parent Company shareholders |
166,451 6,089 |
215,705 6,856 |
Market capitalization on December 31 Dividend paid to Parent Company shareholders |
236,301 7,635 |
259,119 8,411 |
284,048 9,2064.5) |
|
| Dividend per share, SEK | 8.00 | 9.00 | Dividend per share, SEK | 10.00 | 11.00 | 12.005) | 11 |
| Dividend payout ratio, % | 112 | 110 | Dividend payout ratio, % | 99 | 101 | 1115) | |
| Dividend yield, % 3) | 3.6 | 3.2 | Dividend yield, % 3) | 3.2 | 3.2 | 3.25) | |
| Total annual turnover rate, Investor shares, % 3) | 62 | 58 | Total annual turnover rate, Investor shares, % 3) | 66 | 64 | 57 | |
| Total return, Investor shares, %3) | 35 | 33 | Total return, Investor shares, %3) | 13 | 13 | 13 | 21 |
| SIXRX (return index), % | 28 | 16 | SIXRX (return index), % | 10 | 10 | 9 | 14 |
| OMXS30 index, % | 21 | 10 | OMXS30 index, % | –1 | 5 | 4 | 7 |
| Foreign ownership, capital, % | 34 | 34 | Foreign ownership, capital, % | 35 | 30 | 32 |
1) This business area reporting was implemented in 2011.
2) New business area reporting as of 2015.
3) Pertains to class B shares.
4) Based on the total number of registered shares. 5) Proposed dividend of SEK 12.00/share.
Investor applies the Esma Guidelines on Alternative Performance Measures (APM). An APM is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. For Investor's consolidated accounts, this typically means IFRS.
APMs are disclosed when they complement performance measures defined by IFRS. The basis for disclosed APMs are that they are used by management to evaluate the financial performance and in so believed to give analysts and other stakeholders valuable information.
Definitions of all APMs used are found below. Reconciliations to the financial statements for the APMs that are not directly identifiable from the financial statements and considered significant to specify, are disclosed on page 26 in the Year-End Report 2017 for Investor AB.
Net asset value based on estimated market values within Patricia Industries.
Profit/loss for the year attributable to the Parent Company´s shareholders in relation to the weighted average number of shares outstanding.
Acquisitions of tangible and intangible assets during the period.
Change in the carrying value of total assets less net debt for a period.
Changes in the carrying value of total assets less net debt (corresponds to the group´s change in equity attributable to shareholders of the Parent Company).
Profit/loss for the year attributable to the Parent Company´s shareholders, in relation to the weighted average number of shares outstanding after full conversion and adjusted for the effect of share-based payments.
The difference between net asset value and market capitalization as a percentage of net asset value. If market capitalization is lower than net asset value, the share is traded at a discount. If market capitalization is higher, it is traded at a premium.
Repayment of shareholder loans.
Dividend per share in relation to share price at the balance sheet date.
Dividends paid in relation to dividends received from Listed Core Investments.
EBIT
Earnings before interest and taxes.
Earnings before interest, taxes and amortizations.
Earnings before interest, taxes and amortizations divided by sales (%).
Earnings before interest, taxes, depreciations and amortizations.
Shareholders´ equity as a percentage of the weighted average number of shares outstanding.
Shareholders´ equity as a percentage of the
Gross cash
The sum of cash and cash equivalents, shortterm investments and interest-bearing current and long-term receivables. Deductions are made for items related to subsidiaries within Patricia Industries.
The sum of interest-bearing current and longterm liabilities, including pension liabilities, less derivatives with positive value related to the loans. Deductions are made for items related to subsidiaries within Patricia Industries.
A company that offers shareholders the possibility to spread their risks and get attractive returns through long-term ownership of a well-distributed holdings of securities. Its shares are typically owned by a large number of individuals.
Acquisitions of financial assets.
Acquisitions of financial assets net of sales proceeds received.
placements
Leverage Net debt/Net cash as a percentage of total assets.
Defined as the risk-free interest rate plus the market´s risk premium.
A method for determining the fair value of a company by examining and comparing the financial ratios of relevant peer groups.
Equity attributable to shareholders of the Parent Company in relation to the number of shares outstanding at the balance sheet date.
The carrying value of total assets less net debt (corresponds to the group´s equity attributable to shareholders of the Parent Company).
Net invested capital and sales proceeds.
Interest-bearing current and long-term liabilities, including pension liabilities, less cash and cash equivalents, short-term investments and interestbearing current and long-term receivables. Deductions are made for items related to subsidiaries within Patricia Industries.
Cash flow from operating activities.
Cash payments obtained from sale of investments plus cash proceeds from distributions.
Net asset value per investment.
The sum of realized and unrealized result from long-term and short-term holdings in shares and participations, net of transaction costs, profitsharing costs and management fees for fund investments.
Profit/loss for the rolling 12 months as a percentage of average shareholders´ equity.
The surplus yield above the risk-free interest rate that an investor requires to compensate for the higher risk in an investment in shares.
The interest earned on an investment in government bonds. In calculations, Investor has used SSVX 90 days.
A Swedish all shares total return index calculated on share price change and reinvested dividends.
The net of all assets and liabilities not included in net debt.
The sum of change in share price including reinvested dividend.
Number of shares traded during the year as a percentage of the total number of shares outstanding.
Reported value in relation to the number of shares outstanding on the Balance Sheet date.
Majority-owned companies within Patricia Industries, for ownership stake see page 4.
Investor has operated with the same business philosophy since the company was founded in 1916 – to invest in companies and actively contribute as a leading shareholder to their long-term success. Over the years, we have steadily evolved in step with boom times, depressions and recessions, with globalization trends and with constantly changing capital markets, all to capture new opportunities and create value. For more information about our history, visit www.investorab.com.
1916 Investor is founded by Stockholms Enskilda bank (SEB). Holdings in Atlas Diesel (Atlas Copco) and Scania, among other companies.
1919 Investor is listed on the Stockholm Stock Exchange.
1924 The pharmaceutical company Astra is bought for SEK 1 (AstraZeneca).
1925 Investor becomes a large owner of Asea (ABB).
1937 Svenska Aeroplan AB is formed (Saab).
1940 Investor's New York office is established.
1950 Investor becomes a major owner of Ericsson.
1956 Investor becomes a large owner of Electrolux. 1963 Incentive is founded to buy and develop small companies with interesting technologies.
1969 Saab and Scania-Vabis merge to form Saab-Scania.
1971 Stockholms Enskilda bank and Skandinaviska Banken merge.
1984 Investor takes an active part in founding the Stockholms Optionsmarknad (OM).
1991 Saab-Scania is acquired and delisted from the stock exchange.
1994 The private equity company EQT is founded.
1996 Investor sells 55 percent of its stakes in Scania for SEK 19 bn., the world's largest private IPO at the time.
1999 The merger of Astra and Zeneca is completed. 2002
Investor participates in ABB's convertible bond issue and Ericsson's rights issue, to help them restore their balance sheet strength.
The mobile operator Hi3G ("3 Scandinavia") begins offering mobile broadband services in Sweden and Denmark.
2006 Husqvarna is spun out of Electrolux.
2007 Mölnlycke Health Care is acquired.
Investor invests in Biovitrum and supports the merger of Biovitrum and Swedish Orphan International (Sobi).
Aleris is acquired and becomes a wholly-owned subsidiary. Investor becomes a large owner of Nasdaq OMX.
2012 Investor acquires shares in Wärtsilä.
2013 Permobil is acquired and becomes a whollyowned subsidiary.
A new division, Patricia Industries, is formed to focus on creating a portfolio of wholly-owned subsidiaries and makes its first U.S. acquisition; the wholly-owned subsidiary BraunAbility.
Laborie is acquired and becomes a whollyowned subsidiary. Investor celebrates 100 years of being an active, long-term and responsible owner of high-quality companies.
Financial information about Investor can be accessed and ordered (information by sms, e-mail or printed annual report) on our website: www.investorab.com, or by calling +46 8 614 2131.
Printed annual reports are distributed to shareholders who have requested it. All new shareholders will receive a letter asking how they would like to receive information.
Magnus Dalhammar: +46 8 614 2130 [email protected] IR Group: +46 8 614 2131 www.investorab.com
Investor AB invites shareholders to participate in the Annual General Meeting on Tuesday, May 8, 2018, at 3:00 p.m. at the City Conference Centre, Barnhusgatan 12-14, in Stockholm.
Shareholders who would like to attend the Annual General Meeting must be recorded in the register of shareholders maintained by Euroclear Sweden AB on Wednesday, May 2, 2018, and must notify the company of their intention to attend the Meeting no later than Wednesday, May 2, 2018.
Shareholders can give their notice of participation by:
Notice convening the Annual General Meeting and proxy forms are available on Investor's website, www.investorab.com.
The Board of Directors proposes a dividend to the shareholders of SEK 12.00 per share for fiscal year 2017 (11.00). To better reflect Investor's cash flow profile, as of this year, the dividend is proposed to be paid in two installments, SEK 8.00 per share with record date May 11, 2018, and SEK 4.00 per share with record date November 12, 2018. If the proposal is approved by the Annual General Meeting, the dividend is expected to be distributed by Euroclear Sweden AB on Wednesday, May 16, 2018 and Thursday, November 15, 2018.
As a long-term owner, we actively support the building and development of best-in-class companies.
INVESTOR AB (PUBL)
SE-103 32 Stockholm Sweden Visiting address: Arsenalsgatan 8C
Phone: +46 8 614 2000 Fax: +46 8 614 2150
www.investorab.com
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