Interim Report, Q2, 2006

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Interim Report, Q2, 2006 Industrivärden, August
3, 2006
2
Industrivärden
A long-term industrial developer of listed
companies
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Company in brief

• Established 1944
• Stock 193 million shares, listed on SSEX
• Market cap Approx. USD 5.5 bn (SEK 39 bn)
• Free float Approx. 40 of shares
• No. shareholders 38,000
• Average daily trading vol. Approx. 130,000
  shares
• Coverage Carnegie, Björn Enarson, 46 8 676 88
  00
• Enskilda Securities, Andreas Joelsson, 46 8
  52 2295 00
• Danske Equities, Fasial Kalim Ahmad, 45 33
  4404 26
• Low administrative expenses, USD 10 M or less
  than 0.2 of AUM
• Holding company tax status no tax on capital
  gains, dividends received/rendered are
  taxable/deductible

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Mission and goal
Business mission Create shareholder value based
on a professional investment operation and active
ownership
Our goal Generate high growth in net asset value
over time ? Industrivärdens stock will deliver a
high total return to shareholders
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Professional organization
Quality portfolio
High class methods and models
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Investment focus
Nordic companies
Public sector
Expansion phase
Management phase
Restructuring phase
Startup phase
Private equity investor in mature companies
Venture capitalists
Industrivärden
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Our investment criteria
Conditions
Portfolio
Scope Concentrated portfolio
Sectors Sector generalist Ownership Possibility
to be major or structure largest
owner Investment horizon 3-8 years Geography N
ordic companies Requirement Major potential for
value creation
Individual investments
Market value Large and midcap companies Type
Mainly listed Exit Appropriate exit
once target value has been created
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Investment case comparable advantages

• Proven track record excess returns over a long
  period of time
• Cost-efficient organization less than 0.2 in
  management costs
• High quality portfolio of blue-chip companies
• Good financial resources and long-term
  perspective
• First-rate model for exercising value
  enhancement by active ownership
• Professional management team and organization
• Experienced directors nominated in our active
  holdings
• Valuable contact network with Nordic ties

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Ownership structure
Number of shareholders 38 000
Source VPC as per June 30, 2006
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First seven months 2006 in summary

• Net asset value SEK 47.7 bn, a decrease of
  
  -SEK 0.6 bn or -1
• Total return for the stock 15 for Class
  A-shares
• (last 12 months) 18 for Class C-shares
• 17 for return index
• Stocks were purchased for SEK 2,885 M and sold
  for SEK 840 M.

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Favorable development of net asset value...
SEK/share
SEK M
Jul 06
jul 06
Net debt
Net asset value
Portfolio
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... and long-term excess returns
The average annual excess return was
-0-points/year for last five years 5-points/y
ear for last ten years
Total return index (Index)
700
600
Industrivärdenaktien
500
400
300
200
Total Return Index (SIXRX)
100
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
As per July 31, 2006
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Good long-term growth in value
Annual average total return
Industrivärden A SIXRX Difference 12 months,
2006/05 15 17 -2 pts 5 years 9 9 -0
pts 10 years 18 13 5 pts 61 years 16 14
2 pts
As per July 31, 2006
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Major transactions in recent years
INVESTMENTS
SALES
ACTIVE OWNERSHIP
Identified value potential
Value creation
Realization of value

• Lundbeck
• Besam
• Skandia
• Indutrade
• Ossur
• Others

• Subscription in Ericssons new issue
• Investment in Munters
• Investment in Höganäs
• Increase of ownership in Sandvik,
• SHB, SCA and SSAB
• Others (Ossur, etc.)

• For example
• Capital structure
• Strategy operational matters
• Board/management
• Market position, etc.

Continuous development of work methods and
models ?Strong ability moving forward
Amount SEK 15.9 bn Cap. gain SEK 4.2 bn
Amount SEK 14.7 bn
Value creation enables growth in net asset value

• Result of short-term derivative transactions and
  equity trading approx. SEK 470 M

Jan. 2002 July 2006
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Major transactions during the last years
SEK M
Jan. 2002 July 2006
16
High activity good return
July 31, 2006 Dec. 31, 2000 Dec. 31,
1995 Equities portfolio (SEK bn)
Handelsbanken 13 Ericsson 20 Ericsson 3 Sandvik
10 Handelsbanken 8 AGA 3 Ericsson 9 Skandia 7 SCA
2 SCA 7 Sandvik 5 PLM 2 SSAB 6 SCA 4 Handelsbank
en 2 Skanska 4 Skanska 3 Besam 1 Indutrade 1 Bes
am 2 Indutrade 1 Munters 1 Indutrade 2 Skanska lt1
Isaberg Rapid lt1 SSAB 1 SSAB lt1 Other 3
Isaberg Rapid lt1 Other subsidiaries 2 Other 7
Other lt1 Total 54 Total 59 Total 18 Net
debt -6 -5 -1 Net asset value 48 54 17 Pe
rcentage listed companies 99 93 78 12
months, 05/06 5 yrs, 01/06 10 yrs,
96/06 Major 5 transactions (gtSEK 500 M),
period 15 40 Annual total
return 15 9 18 Return index, yearly
17 9 13 Excess return IV (pts/year)
-2... 0... 5...
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Strong financial position
Net debt (SEK M)
Net debt equity ratio
18
Equities portfolio as per July 31, 2006
Trading (3)
Other (3)
Construction (7)
Engineering (33)
Sandvik SSAB Munters Höganäs
Indutrade
Skanska
Forestry and consumer products (14)
SCA
Ericsson
Telecom (16)
Handelsbanken
Banking (23)
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Equities portfolio as per July 31, 2006
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A transparent portfolio of leading companies
June 30, 2006
July 31, 2006
Total return,
Total return,
Value distri- bution, SEK M
Annual average June 96-June 06
Jan.-June 2006
Value distri- bution, SEK M
Portf. share,
No. shares
No. shares
Stock
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Industrivärdens dividend
Bonus dividend Ordinary dividend SSEX dividend
yield Dividend yield
3.2
2.8
Dividend 3.25 3.75 4.50 6.20 8.40 8.35 5.80 5.50
6.00 7.00 SEK/share Of which ordinary 3.25 3.75 4
.50 5.00 5.00 5.00 5.00 5.50 6.00 7.00
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The strength of our strategy

• Focus and transparency
• Lean, efficient and professional organization
• Short-term trading

- Concentrated portfolio - Primarily listed
holdings - Significant influence a requirement -
Long-term perspective
- Active ownership - Investment activities -
Market operations
- Current market information - Financing of
management costs
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Business model
Value creation through structured processes
Organization
Lean, efficient and professional organization.
Team-oriented work by uniform methods.
New investments
Active ownership
Exit evaluation

• Participation in nominating committees
• Participation of AGMs
• Board members with ties to IV
• A direct dialogue with management, board
  members and other owners
• Company analysis including research, visits,
  market- and competitor analyse, etc.

• Aims to identify new investments
• Focus on potential for value growth
• Scanning of 930 Nordic listed companies
• Continuous monitoring of 100 companies
• Swift action when opportunities arise

• Aim is to optimize the realization of built-up
  value

Market operations
Transaction execution, market contacts,
short-term trading and derivative transactions
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Investments based on good market knowledge
Listed companies in the Nordic region approx.
830 Total market cap SEK 9,900 billion (June
2006)
Ability for quick entries
Continuous scanning of all companies
Structured monitoring of all interesting
companies
Continuous analysis of selected companies that
meet investment criteria. Documentation in
database
Interesting companies
Companies to evaluate (Approx. 100)
Investments
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Active ownership
Board
Guidelines for active ownership
Presentations
Feedback
Investment organization
Information exchange
Active work
Team / investment manager
Active holdings
Action plans
Networks
AGM Nominating committee Board Committees
Dialog / visits / action plans
Management
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Active ownership

• Value potential
• Business model, growth, profitability, other
  value-creating measures
•  
• Market potential
• Organic growth for the market and company.
  Entrance obstructions. Acquisition opportunities
•  
• Strategic positioning
• Strategy, acquisitions or divestments
•  
• Capital rationalization
• Dividend, capital reduction, stock buybacks,
  refinancing, working capital
•  
• Board and management, business culture
• Competence and capacity
• Operational improvements
• Cost-cutting, market position, etc.

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Industrivärden online
?
? Reuters code INDUa.ST Bloomberg code INDUA
SS Datastream code W IU ? www.industrivarden.ne
t ? info_at_industrivarden.se ? 46-8-666 64
00 ? 46-8-661 46 28 ? Box 5403, SE-114 84
Stockholm, Sweden
www.industrivarden.net / IR / Ask /
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