Year-end report January 1–December 31, 2011

-- Net asset value on December 31, 2011, was SEK 104 per share, compared with
SEK 149 per share at the start of the year. Net asset value on February 6,
2012, was SEK 128 per share, an increase of 23% during the year to date.
-- The equities portfolio was worth SEK 56.9 billion on December 31, 2011,
compared with SEK 71.1 billion at the start of the year. On February 6,
2012, the equities portfolio was worth SEK 66.2 billion, an increase during
2012 of 16%.
-- The total return for the year was -25% for the Class A shares and -28% for
the Class C shares, compared with -14% for the return index.
-- Income for the year was SEK -15.6 billion (14.9), or SEK -40.51 per share
(38.50).
-- During the year, shares were purchased in portfolio companies for a total
of SEK 4.5 billion, net, including purchases of stock in Volvo,
Handelsbanken and Sandvik.
-- At the start of 2011 Industrivärden issued six-year convertible bonds worth
EUR 550 M, for which the conversion price was set at a premium to net asset
value.
-- The Board of Directors proposes a dividend of SEK 4.50 (4.00) per share.



CEO’s message

The second half of 2011 came to be overshadowed by two government financial
crises – the euro crisis in Europe and the galloping federal budget deficit in
the U.S. Serious crises create anxiety and feed pessimism for the future. This
pattern is repeating itself and is now being expressed in two interrelated
effects – downward adjustments of growth forecasts and falling stock prices.
The world’s stock markets, and the Swedish market in particular, fell sharply
and as the crisis reached its culmination in early October 2011 there were many
who feared a collapse, among other things as a result of the disintegrating
euro cooperation. The stock markets, which normally focus on evaluating
company-specific factors, now shifted over to judging macro risks, with sharply
falling prices as a result. Now a growing number of observers believe that the
actions taken as ECB’s bank financing program and the euro pact are moving the
development in the right direction. Signs of more normal growth figures in the
U.S. is setting the stage for reduced budget deficits. A strengthened
confidence is reflected in the stock market. Since hitting bottom in October
2011, the Stockholm Stock Exchange has gained 25%, and Industrivärden’s Class C
stock has risen more than 50%.

2011 was characterized by a high level of activity and a number of important
events in our portfolio companies.

SCA announced in rapid succession the acquisition of Georgia Pacific’s European
tissue business and the sale of its European packaging operation. Through this
shift SCA has obtained a fine operation that has substantial synergies with its
other hygiene businesses. SCA has thereby become a consumer products company
backed up by a well-run forest products business. Its ownership of Europe’s
largest private forest holdings is a vital source of raw material and tempers
the sensitivity of fluctuations in commodity prices for the hygiene business.

Sandvik – under the direction of CEO Olof Faxander, who took office in February
2011 – has further developed its strategy. The objective is to achieve sharper
profitability targets, efficiency improvements and greater synergies between
the company’s different business areas, mainly in administration. The announced
ambition to divest Medtech and the acquisition of Seco Tools are clear
expressions of Sandvik’s efforts to strengthen its core business. The new group
management that has been installed represents a rejuvenation with added
international breadth.

Also Volvo, under the direction of its new CEO, Olof Persson, who took office
in September 2011, has announced changes in the form of a new organization. Its
goal has been to achieve efficiency improvements and a greater focus on
profitability. The declared ambition to sell Volvo Aero is an expression of a
greater concentration on the core business. Volvo’s nominating committee has
proposed Carl-Henrik Svanberg to succeed Louis Schweitzer as Chairman, who has
declined re-election.

Handelsbanken continues to perform well. The bank is standing firmly on its own
legs and did not need state support or subsidies to manage its funding during
this bank crisis, either. It is worth noting that in 2011 alone, Handelsbanken
paid SEK 1.1 billion in government fees, of which the Swedish Stability Fund
accounted for the greater share. This is an added burden for the company and
its shareholders. The new calculation bases for calculating the bank’s capital
adequacy, under Basel III, have now been set. It is gratifying and impressive
that Handelsbanken, with slightly more than 14% in core tier 1 capital, is one
of the most well capitalized banks in Europe. It would be unfortunate from a
competition perspective if Handelsbanken and other Swedish banks would have
greater demands from the Swedish FSA than their European competitors.
Handelsbanken’s organic growth with good profitability in the UK is a textbook
example of how a company – step-by-step, with limited risk and a successful
business model – can gain a foothold in a new market.

Ericsson is today an industry leader in mobile telecom systems and related
services. While Ericsson has strengthened its position over time, most of its
European and American competitors have been diminished or disappeared, and its
lead over the Chinese competitors has widened. The company is today a major
player in terms of both volume and profitability in the important U.S. market.
During the year, Ericsson invested in capturing market shares in Europe at a
time when the European operators were modernizing their networks. This
investment in market shares has put pressure on profitability in the near term.
Ericsson’s sale of its 50% stake in Sony Ericsson to Sony and the acquisition
of Telcordia are good examples of investments in the core business. In April
2011 Leif Johansson was elected as Ericsson’s new chairman.

Skanska is pursuing further expansion – both in scope and geographically – of
its highly successful project development business. Currently it is concluding
the first commercial property development projects in the U.S., with good
results. At the same time, Skanska’s success, which is the result of a large
and profitable construction operation combined with a successful project
development business, has enabled the company to deliver a favorable total
return over time.

A second convertible loan was successfully issued in January 2011. Through
these loans we have obtained a favorable form of financing for stock purchases
in quality companies with historically low multiples.

In 2011 we bought shares in portfolio companies worth SEK 4.5 billion, net.
Among other things, we continued to strengthen our ownership position in Volvo
– a portfolio company that we believe has good future opportunities with major
value potential. In total we bought Volvo stock for SEK 2.9 billion, after
which our ownership now amounts to slightly more than 15% of the votes.

Earnings from our short-term trading amounted to SEK 152 M, compared with our
management costs of SEK 105 M, or 0.18% of managed assets. We have now passed
SEK 1 billion in profits from our short-term trading since the start in 2003.

Industrivärden has a proven ability to create shareholder value, and over the
last fifteen years, Industrivärden has delivered an annual total return that is
2 percentage points higher than the Stockholm Stock Exchange, which for a long
time has been a strong performer in an international comparison. In 2011 we
were affected by the negative trend in the stock market and the portfolio’s
exposure to the industrial and banking sectors. The portfolio value fell by
slightly more than SEK 14 billion, to SEK 57 billion, and net asset value was
SEK 104 per share, or SEK 106 per share after full conversion. The total return
for Industrivärden’s stock was -28%, compared with -14% for the return index.
During the start of 2012, the stock market has assigned a higher value to our
portfolio companies, and to date this year Industrivärden’s stock has risen by
25%, compared with 10% for the Stockholm Stock Exchange.

The Board proposes a dividend of SEK 4.50 per share, which entails that – as in
previous years – we will fulfill our goal of paying a dividend yield that is
higher than the average for the Stockholm Stock Exchange.

Anders Nyrén