SAAB 2003 FINANCIAL REPORT - Defence and Securitysaabgroup.com/.../financial-reports/2003_annual_report_part2.pdf · activities,SEK m. 545 –92 1,642 ... In 2003 Saab continued to

SAAB 2003F INANCIAL REPORT

2 SAAB – DEFENCE, AVIATION AND SPACE

CONTENTS

3 2003 in brief

3 Key financial ratios

4 The Saab Group

6 Comment by the Chairman of the Board

MANAGEMENT REPORT

8 Financial review

18 Financial risk management

21 Corporate governance

FINANCIAL INFORMATION

23 Five-year overview

24 Income statement

25 Quarterly information

26 Balance sheet

28 Changes in shareholders’ equity

29 Statement of cash flows

30 Accounting principles

33 Notes to the financial statements

48 Proposed disposition of earnings

49 Auditors’ report

INVESTOR AND SHAREHOLDER INFORMATION

50 Board of Directors and Auditors

52 Group Management

54 The Saab share

57 Investor and shareholder information

57 Financial information dates 2004

SaabSaab is one of the world’s leading high-technology

companies, with its main operations focusing on

defence, aviation and space.The Group covers a

broad spectrum of competence and capability in

systems integration.

Saab develops, manufactures and delivers

advanced products and services for the defence

market, as well as for those commercial markets

where its capabilities create business opportunities.

The Group’s own strength and strategic part-

nerships enable it both to compete and collaborate

in international markets.

Saab has the world as its market, but research,

development and production are carried out

principally in Sweden.The Group has a total of

approximately 13,000 employees.Total annual sales

are SEK 17,250 million. Research and development

corresponds to about 20 percent of turnover.

DEFENCE

Saab combines its ability to assume systems

integration responsibility at the highest level with

the development of world-class products and

systems.As a result, Saab’s products and systems

are well suited to today’s defence missions, at the

same time that they are adapted to be a part of

the future network-based defence systems.

AVIATION

Saab has extensive experience in commercial

aviation and cooperates with the world’s largest

aircraft manufacturers.The company also has

considerable support operations and a global

leasing portfolio consisting of commercial aircraft

previously manufactured by Saab.

SPACE

Saab’s space operations, which are on the cutting

edge of high-tech research, are managed by Saab

Ericsson Space, Europe’s leading independent

supplier of high-quality equipment to the global

space industry.

Saab’s business concept:

Develop, manufacture and maintain broad defence

systems solutions in our home market and provide

related advanced technical products and services

within defence, aviation, space and similar areas

for public authorities and industries in the global

market.

S A A B 2 0 0 3

SAAB – DEFENCE, AVIATION AND SPACE 3

2003 in brief

Sales, SEK m. 17,250 16,538 15,689

Operating income, SEK m. 1,293 1,220 1,594

Operating margin, % 7.5 7.4 10.2

Operating income excl. capital gains, SEK m. 1,293 1,220 944

Operating margin excl. capital gains, % 7.5 7.4 6.0

Income after financial items, SEK m. 1,073 993 1,554

Net income, SEK m. 746 732 1,127

Earnings per share, SEK 7.00 6.87 10.59

Dividend per share, SEK 1) 3.50 3.50 3.25

Cash flow from operating activities, SEK m. 545 –92 1,642

Return on capital employed, % 12.7 11.6 15.5

Return on shareholders’ equity, % 10.8 10.8 18.3

Equity/assets ratio, % 24.4 24.3 22.3

Order bookings, SEK m. 19,606 19,521 15,274

Order backlog at year-end,SEK m. 45,636 43,082 40,034

Capital expenditures for property, plant and equipment,SEK m. 472 623 532

Research and development,SEK m. 3,690 4,138 3,819

No. of employees at year-end 13,316 14,036 14,028

1) 2003 Board proposal.

For definitions, see page 32.

2003 2002 2001■ In 2003 Saab continued to deliver good financial results and reported high order bookings.

■ The Czech Republic became the fourth country to selectGripen as its future air defence system, and contractnegotiations have begun. Hungary confirmed andextended its previous order.

■ Saab received orders for the Meteor air-to-air missilevalued at a total of SEK 1.4 billion.

■ Åke Svensson was appointed President and CEO of Saabon July 14. In July Saab appointed Ingemar AnderssonExecutive Vice President, joining Executive Vice PresidentGöran Sjöblom.

■ In June Saab and Airbus signed an agreement on thedevelopment and production of the mid and outer fixedleading edge of the A380 wing. The agreement is estimatedto be worth USD 1 billion during a twenty year period.

■ Saab, Patria of Finland and France’s Group SNPEestablished a leading European propellants and explosivescompany, EURENCO, by merging their operations. Themerger was completed in January 2004. Saab owns 19.9percent of the new company.

■ In October Saab and Ericsson received an order from theSwedish Defence Materiel Administration for the first stagein the development of Sweden’s new network-baseddefence. Saab thereby attained a key position as a systemsintegrator in the development work involving network-based defence.

■ In December Saab received orders from several countries,among others Norway and Finland, for Ceros 200 naval firecontrol directors valued at a total of approximately SEK 350million.

■ Saab announced an offer to acquire 21 percent of Grintek, a South African company that supplies electronics-relatedproducts and services in, among other areas, telecommu-nications and defence. The acquisition was formallyapproved in January 2004.

■ In December Saab was awarded the Ultra LightweightCamouflage Net Systems (ULCANS) general agreement for the U.S. Army. The contract, which extends throughDecember 2008, can amount to approximately USD 25million a year.

■ Saab received orders for portable anti-armour systemsvalued at over SEK 1.5 billion.

■ Saab received orders from the UK and Germany, amongother countries, for simulation and training systems valuedat SEK 1.1 billion.

■ Saab gave notice of termination to a total of approximately1,000 employees, and in the process allocated approxi-mately SEK 300 million for structural costs.

Photo: ESA/J. Hart

T H E S A A B G RO U P


Saab’s business areas

Primarily armed forces around the world.TheSwedish defence is the single largest customer.Other major customers include the armed forcesin the U.S.,Germany,Australia, the UK,Switzerlandand the other Nordic countries.

Gripen competes in fighter aircraft procurementsaround the world.The program involving UnmannedAerial Vehicles,UAV’s, has attracted considerable in-ternational interest. In commercial operationsAirbus is the largest customer.

Major customers include the Swedish defence,government agencies in Sweden, the defenceindustry and other high-technology companies in Sweden and abroad.

MARKET MARKET MARKET

SalesOperating income

Order backlogOrder bookings

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2003 2002 2001 2000

Sales 4,677 4,499 3,964 4,364Operating income 327 311 260 289Operating margin, % 7.0 6.9 6.6 6.6Order bookings 4,293 5,327 4,262 5,523Order backlog 9,249 9,703 8,590 8,689Capital expenditures 80 109 118 85R&D 1,084 1,340 1,060 1,136No. of employees 2,651 3,026 2,744 3,023Depreciation/amortization 194 198 168 170

2003 2002 2001 2000

Sales 5,151 4,782 4,097 3,921Operating income 573 579 351 333Operating margin, % 11.1 12.1 8.6 8.5Order bookings 6,974 3,139 4,122 12,171Order backlog 26,749 24,675 27,122 27,097Capital expenditures 181 287 125 137R&D 1,280 1,557 1,449 1,513No. of employees 4,160 4,379 4,121 4,146Depreciation/amortization 148 143 154 161

2003 2002 2001 2000

Sales 3,032 2,922 3,144 2,932Operating income 232 207 195 182Operating margin, % 7.7 7.1 6.2 6.2Order bookings 2,950 2,946 3,062 3,103Order backlog 868 1,006 1,046 1,268Capital expenditures 96 89 119 75R&D 45 119 123 91No. of employees 2,905 2,760 3,061 3,147Depreciation/amortization 120 113 116 106

HIGHLIGHTS OF THE YEARSaab and Ericsson received an order to developSweden’s new network-based defence.South Africa’s Grintek and Saab established acommand and control systems business in SouthAfrica, and Saab acquired 21 percent of Grintek.The Ceros 200 fire control director was ordered by several countries for a combined value ofapproximately SEK 350 m.Saab received additional orders for the furtherdevelopment of the Swedish Armed Forces’ airdefence system.Significant orders were received for combat trainingfacilities and laser simulators from the UK andGermany, among other countries.Saab signed a new, five-year framework agreementwith the U.S.Army, consolidating its position as thesole provider of ultra lightweight camouflage netsystems.

HIGHLIGHTS OF THE YEARThe Czech Republic selected Gripen and contractnegotiations have begun. Hungary confirmed andexpanded its previous order.Saab and Airbus signed an agreement worth inexcess of USD 1 bn over the next 20-year period.Saab delivered the first Mid & Outer Fixed LeadingEdge for the Airbus A380 wing.The Swedish state showed support for the A380project through a conditional loan.A Memorandum of Understanding was signed withDassault Aviation of France to cooperate on UCAVdemonstrators.Saab and BAE Systems signed an agreement on anew Helmet Mounted Display (HMD) for Gripen.A contract was received for Meteor’s integration onGripen.Slightly over 270 employees were served their noticein Linköping.

HIGHLIGHTS OF THE YEARSaab, Nokia and Swedia Networks formed a consortium to offer a national radio communication system.

AerotechTelub signed a new, multi-yearcooperation agreement with Elekta oncontinued production of the Leksell GammaKnife.

Saab Aviocomp signed new maintenanceagreements with the airlines Aeroliteral, LOT,and Mandarin, among others.

Saab Contracting received a turn-key contractfrom Banverket, the Swedish rail administration,to replace switchgear on the rail line betweenSödertälje and Katrineholm.

SAAB SYSTEMS AND ELECTRONICS SAAB AEROSPACE SAAB TECHNICAL SUPPORT AND SERVICES

The business area accounts for approximately27 percent ofSaab’s total sales.


The business area accounts for approximately18 percent of Saab’s total sales.

T H E S A A B G RO U P


Customers include armed forces around the world.The single largest customer is the Swedish defence.Other major customers include the British,U.S.,German, Finnish, French, Australian and Brazilianarmed forces.

Customers are in publicly financed space research,such as ESA and NASA, and among commercialspace companies, such as Alcatel, Astrium,Boeingand Lockheed Martin.

MARKET MARKETMARKET



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2003 2002 2001 2000

Sales 3,113 2,825 2,493 2,348Operating income 172 102 85 46Operating margin, % 5.5 3.6 3.4 2.0Order bookings 4,574 7,000 2,280 2,853Order backlog 9,793 8,300 4,088 4,219Capital expenditures 65 63 62 57R&D 1,020 845 934 788No. of employees 1,718 1,904 1,903 1,884Depreciation/amortization 85 97 77 80

2003 2002 2001 2000

Sales 624 605 800 713Operating income –15 – 62 29 53Operating margin, % –2.4 –10.2 3.6 7.4Order bookings 528 641 757 765Order backlog 639 736 772 816Capital expenditures 12 12 29 25R&D 196 222 218 205No. of employees 537 634 678 663Depreciation/amortization 32 35 36 33

2003 2002 2001 2000

Sales 1,095 1,328 1,539 3,859Operating income 87 136 137 150Operating margin, % 7.9 10.2 8.9 3.9Order bookings 1,202 1,423 1,454 4,026Order backlog 340 210 139 540Capital expenditures 20 10 15 45R&D 0 0 0 6No. of employees 799 815 842 1,631Depreciation/amortization 541 543 540 570

HIGHLIGHTS OF THE YEAROrders were received for RBS 15 from theFinnish Navy and for the Swedish Navy’s Visby-class corvettes.

The international cooperation on the develop-ment of Meteor generated major orders.

Australia ordered additional air defencesystems from Saab.

Saab received new orders for anti-armourweapons from the French and U.S. armedforces, among others.

Saab Bofors Underwater Systems signed a newcontract with the Swedish Defence MaterielAdministration for new remotely operatedunderwater vehicles.

HIGHLIGHTS OF THE YEARSaab Ericsson Space was awarded an order for equipment for the Aeolus meteorologicalsatellite.

An order was signed for the separation ofthree satellites from the Ariane-5 launcher.

Saab Ericsson Space received a contract forsignal generators for the Galileo navigationsatellite system.

Saab Ericsson Space delivered key equipmentto the Mars Express mission.

HIGHLIGHTS OF THE YEARSaab Aircraft AB signed an agreement with theSwedish Defence Materiel Administration formodification of the Saab 340 for use in theOpen Skies program.

During the year Saab Aircraft AB receivedauthorization to maintain the Embraer 145.

Saab Aircraft Leasing signed an agreement withthe Swedish Defence Materiel Administrationon the sale of two Saab 340B+ aircraft fordelivery in the spring of 2004.

Saab’s regional aircraft are leased to and operated by aircarriers around the world,with an emphasis on NorthAmerica.Maintenance is provided wherever customersoperate.Commercial aircraft maintenance for other opera-tors is provided primarily in Australia and Southeast Asia.

SAAB AVIATION SERVICES SAAB ERICSSON SPACE SAAB BOFORS DYNAMICS


The business area accounts for approximately 6 percent of Saab’s total sales.

The business area accounts for approximately 4 percent of Saab’s total sales.

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Saab’s business units report directly to Group Management. Saab’s business areas are used strictly for financialreporting. Business area Saab Ericsson Space is reported in Saab Aerospace effective 2004.

C O M M E N T B Y T H E C H A I R M A N O F T H E B OA R D


Saab – a high-tech resource for society

The last decade has radically changed the prerequisites that guide Sweden’ssecurity and defence policy as well as its defence and the defence industry.During the same period the Swedish defence industry has undergone arestructuring unlike any before. Saab has every prospect of remaining a strong high-tech locomotive for Swedish business.

The well-documented upheaval in the1990’s dramatically changed securitypolicy in Europe and necessitated a re-structuring of the Swedish defence. Therestructuring leeds to a more internationaloutlook and change over to a network-based defence in which informationtechnology is utilized to more flexiblylink command, information and weaponsystems from all branches of the military.Commercial systems also play a role and,together, they increase the opportunitiesof quickly and accurately assessing situa-tions as they arise and using various re-sources to achieve an optimal response.

Swedish defence industry plays a key roleThe Swedish defence industry has animportant role to play in this transition,and Saab already commands a leadingposition in terms of systems integrationexpertise – the ability to manage majorprojects and coordinate many differentsystems into a working whole. This makesus well suited as a systems partner to themilitary as it undergoes major changes.

During the post-war period large-scale, advanced development projectsconducted by the Swedish defenceindustry in close cooperation with thenation’s defence have built up uniquecompetences in a number of areas. Theseinvestments have led not only to sales ofadvanced systems to the Swedish DefenceMateriel Administration but also signifi-cant export revenues through their spreadto other industries. It is vital for severalreasons to retain this competence, notleast of all because of its importance ifSweden is to take part in strategicallyinteresting international developmentprojects. Saab has formed a number ofstrategic international alliances and co-operations covering a broad spectrum of

competencies. The only way to maintainthis competence, however, is throughcontinued development orders from theSwedish defence.

Pending the upcoming defence deci-sion that Sweden’s parliament willmake in 2004, there have been no suchorders, because of which Saab has beenforced to reduce its capacity and person-nel. Since the absence of developmentorders has been due more to delay thana conscious prioritization, Swedish in-dustry has lost competence and expertisethat took many years to build up with-out consideration for the strategic rami-fications.

It is therefore my hope that defencedecision 2004 will give the defence in-dustry the long-term prospects it needsso that the competence essential toSwedish security policy can be retainedand developed. It is also important toidentify competencies that are strategicto Sweden and use them as a guide inchoosing the collaborations Sweden par-ticipates in internationally.

Advanced defence industry fills a broader functionIt is important to consider the defenceindustry’s role as a growth engine spread-ing technology in Swedish society. This isdone through well-established coopera-tions with a number of colleges and uni-versities, as well as the business ideasand products that have been generatedthrough research and development inthe defence industry and later spun offand commercialized based on their ownmerits. In addition to providing a plat-form for the military’s new directionand future development, Saab also hasexcellent potential to serve as a high-techengine for Swedish business develop-ment.

Saab becoming increasingly internationalAt the same time that it can fill the roleof systems integrator for the Swedishdefence, Saab also has a portfolio of world-leading products and systems. Salesefforts in the international market haveincreased and produced results. Todaycustomers outside Sweden account for60 percent of order bookings and 46 per-cent of sales, partly compensating forthe lower volume of orders from theSwedish defence while at the same timehelping to spread development costs forsystems and products. The need fornew, focused development projects stillremains, however.

Board work with long-term perspectiveThe work of Saab’s Board is mainlyfocused on the long term. Day-to-dayoperations are the responsibility of thecompany’s management.

The Board essentially has five responsi-bilities:

■ Set the company’s strategy and direc-tion together with management

■ Formulate operating and financialobjectives together with management

■ Make overall decisions on how thecompany’s assets are used – invest-ments, acquisitions, divestments,dividends, etc.

■ Monitor the company’s operationaland financial development

■ Ensure that management has thestrength and competence to developthe company, including the establish-ment of an overall organization.

Anders Scharp, Chairman of the Board.

Saab’s financial objectivesThe Board has set as financial objectivesover a business cycle to generate anoperating margin (EBIT) of 10 percent, areturn on shareholders’ equity of 15 per-cent and an equity/assets ratio of 30percent. The goal is to distribute 20–40percent of income to shareholders. TheBoard is proposing a dividend of SEK373 million, or SEK 3.50 per share.

Board and new presidentThe Annual General Meeting in 2003 de-cided to adopt a nomination process forthe Board of Directors according towhich the four largest owners in thefourth quarter each appoint a represen-tative who, in consultation with theChairman, drafts a proposal for a newBoard to be presented to the AnnualGeneral Meeting.

During the year Saab appointed a newpresident. After great success, Bengt


Anders Scharp

Halse stepped down from the positionon July 14, 2003. On behalf of the entireBoard, I would like to warmly thankBengt for the outstanding way in whichhe fulfilled the duties of President ofSaab for eight years, dating back to 1995.

The Board worked diligently on therecruitment process to find a new Presi-dent. Based on a detailed discussion ofthe challenges Saab faces in the yearsahead, a requirement list was drawn upand potential candidates were interviewedand evaluated. The Board is confidentthat Åke Svensson is the right person tolead Saab in the years ahead.

The high level of competence of itsemployees is the main reason for Saab’sleading position. The last year has meantdifficult adjustments and lay-offs, how-ever. I would like to join the other mem-bers of the Board in expressing our grat-itude for the efforts made in 2003 andfor the positive cooperation that has made

it possible to implement changes. Saabis and will remain a unique high-techresource that benefits Sweden’s securitypolicy and Swedish society as a whole.

M A N AG E M E N T R E P O RT


Saab AB, Corporate Identity No. 556036-0793, registered office in Linköping, hasbeen listed on the O-list at the Stock-holm Stock Exchange since 1998 and onthe Attract 40 section of the O-list since2002. The principal owners are InvestorAB, with 20 percent of the shares, corre-sponding to 36 percent of the votes, andBAE Systems, with 35 percent of theshares, corresponding to 35 percent ofthe votes. The remaining 45 percent ofthe shares are traded on the StockholmStock Exchange.

Saab GroupSaab is one of the world’s leading high-technology companies, with its mainoperations focused on defence, aviationand space. Saab has the world as itsmarket, but research, development andproduction are carried out principally inSweden. Saab consists of the businessareas Saab Systems and Electronics, SaabAerospace, Saab Technical Supportand Services, Saab Bofors Dynamics,Saab Ericsson Space and Saab AviationServices.

STRUCTURAL CHANGESAcquisitions and divestments duringthe year and internal restructuringSaab has expanded its cooperation withSouth Africa’s Grintek by establishingGrIDS, Grintek Integrated DefenceSolutions, a command and controlsystems business that organizationallyfalls under the company Grintron,which in turn is owned to 51 percent by Grintek and 49 percent by Saab.

Saab announced an offer to acquire 21 percent of Grintek, a South Africancompany that supplies electronics-related products and services primarilyin defence and telecommunications. The acquisition was formally approvedin January 2004.

Work on divesting non-core operationscontinues. On July 10, 2003 the Frenchcompany SNPE Materiaux Energétiquessigned an agreement with Saab and Patriaof Finland, which jointly own NexploIndustries, to merge their propellantand explosives operations into a newcompany, EURENCO (European Ener-getics Corporation). The merger, which

Financial reviewcreates one of Europe’s leading propel-lant and explosives companies, was fi-nalized on January 22, 2004. Saab owns19.9 percent of the new company.

Effective January 1, Combitech Systemswas transferred from Saab Systems andElectronics to Saab Technical Supportand Services as part of the coordinationof the Group’s commercial consultingoperations.

The Group’s operations in commandand control systems, electronic warfareand avionics were merged as of January1, 2003 in the SaabTech business unit.

RestructuringIn 2003 lay-offs were announced foraround 1,000 employees, primarily dueto lower development orders from theSwedish defence. The lay-offs affect alldefence-oriented business areas. SaabEricsson Space has also faced continuedcutbacks as a result of lower demand fortelecommunication satellites and lowerappropriations for Sweden’s spacebudget.

OPERATIONSBusiness area Saab Systems andElectronics focuses on information,command and control and simulationsystems, as well as avionics, electronicwarfare and signature managementsystems and commercial electronics. The business area, which accounted for 27 percent of the Group’s total sales,has good prospects of playing a centralpart in the development of new network-based defence. Operations are character-ized by a high level of export activity,with products and systems delivered toabout 40 countries.

The business area includes thecompanies SaabTech, Saab Training Systems,Saab Barracuda, Saab TransponderTech,Saab Systems Pty Ltd in Australia and theassociated company Grintron (Pty) Ltd(49 percent) in South Africa.

The most important products of thebusiness area are naval command andfire control systems, electronic warfaresystems such as radar warners, jammers,decoys and chaff dispensers mainly forfighter aircraft, avionic systems, tacticalcommand systems, laser simulation

systems and combat training centers,signature management equipment andautomatic identification systems (AIS)for ships and aircraft.

Order bookings during the year weregood and included the Ceros 200 navalfire control system and the further devel-opment of the military’s StriC air defencesystem.

Saab and Ericsson received an orderfrom the Swedish Defence MaterielAdministration for the first stage in thedevelopment of a new network-baseddefence.

In the area of simulation and trainingsystems, a support contract was receivedfor the Germany battle training centerGÜZ, as were orders for anti-armourweapon simulators for NLAW and Javelinand tank simulators for Germany. The keyorder in signature management was forultra lightweight camouflage-net systems(ULCANS) from the U.S. defence.

A five-year framework agreementwas signed in the U.S. for Ultra Light-weight Camouflage Systems (ULCANS)potentially worth USD 25 m. per year.This agreement makes Saab Barracudathe sole provider of ULCANS to the U.S.Army.

In December 2003 Australia’s Ministerfor Defence approved programs forupgrading the ANZAC ships. This willbe carried out by the ANZAC Alliancecomprising Australia’s Defence Authority,Tenix and Saab. The total value of theprogram for the alliance is estimated atAUD 500 m.

Major deliveries by the business areainclude laser simulator systems forGerman military vehicles, combat train-ing equipment and systems to Norway,maintenance of simulator equipment for the British Army, further deliveriesof display systems and avionics forGripen, countermeasure equipment, thedevelopment and delivery of commandand control and electronic warfare systems for the Swedish defence’s NH90helicopter, and the further developmentof the naval command and control systemfor the Australian ANZAC program.

Business area Saab Aerospace, whichhas the systems integration capabilityneeded to design complete aircraft and



defence systems, develops and manu-factures military aircraft systems andacts as a partner and supplier in sub-systems to manufacturers of largecommercial aircraft. The business area,which accounted for 30 percent of theGroup’s total sales, includes the busi-ness units Saab Aerosystems, Saab Aero-structures and Saab Nyge Aero.

The single largest product in Aero-systems is the fighter Gripen, an inte-grated and flexible information, commandand weapon system that will remainmodern for many years to come. Theworld’s first fourth-generation combataircraft is operational in the Swedish Air Force. South Africa has ordered 28Gripen and Hungary has leased 14 fromthe Swedish government. A tender hasbeen presented to the Czech Air Forceon the modification of Gripen C aircraft.The offer constitutes a loan of 14 aircraftfrom the Swedish state to the CzechRepublic. In December the Czech Republicannounced its selection of Gripen forfurther negotiations. Net sales for 2003include 18 Gripen delivered to the SwedishAir Force. Thus, 154 of the 204 orderedby the Defence Materiel Administrationhave now been delivered.

Aerosystems is the systems coordinatorfor Saab’s role in the Swedish standardhelicopter program and will supply 270forward fuselages to the main supplier,NH Industries.

In December a Memorandum ofUnderstanding was signed by Saab andDassault Aviation of France to jointlydefine a program for developing a UCAVdemonstrator (Unmanned Combat AerialVehicle). Saab is also participating in the European Technology AcquisitionProgramme, ETAP, which is developingkey technologies for future manned andunmanned aviation systems, as well as participating in studies on a new,advanced pan-European pilot trainingsystem.

Gripen International, which is jointlyowned with BAE Systems, handlesexport marketing and sales of Gripen. In cooperation with the Swedish Govern-ment, there is also the option of leasingGripen to export customers. As part ofthe long-term effort to market Gripeninternationally, information and tenders

were supplied to several countriesduring the year. Marketing and sales workcan stretch over several years and ischaracterized by a long-term approachwhere success leads to cooperation overseveral decades.

Defence materiel decisions are bytheir very nature political, which meansthat they are subject to lengthy, compre-hensive processes. In addition, majorinvestments are involved in some cases.As a result, demands are often placedon offsetting investments, technologytransfers and industrial collaborationsover and above the actual product de-livery. Saab has such commitments inseveral export contracts.

Saab Aerostructures is a partner and sub-contractor to Airbus as well as an internalsupplier to Gripen and spares supplierto Saab Aircraft. As a partner in theAirbus consortium, Saab is responsiblefor the development and production ofthe leading edge of the wing of theA380. Through the National Debt Office,the Swedish state is supporting theproject with a conditional loan. In 2003Saab and Airbus signed an agreementon the development and production ofthe fixed leading edge of wing of theA380. The total contract value is estimatedat USD 1 bn over a 20-year period.

Saab Nyge Aero is active in targettowing, special flight operations andaircraft maintenance.

Business area Saab Technical Supportand Services focuses on the growingmarket for high-technology services inaviation, command and control, informa-tion, communications and sensors, andsupplies these services to both militaryand commercial customers. Operationsalso include component maintenance forcommercial aircraft as well as measure-ment and materials technology. Thebusiness area accounted for 18 percentof the Group’s total sales. Two thirds of its sales are defence-related. SaabTechnical Support and Services isdominated by AerotechTelub, which spe-cializes in advanced technical services,maintenance and customized systemssolutions in information technology,communications, electronics and medicaltechnology. The business area also in-

cludes Saab Aviocomp, with operations in component maintenance for regionalaircraft, Celsius Metech, which is activein measurement technology and providesfull-service solutions to large industrialcompanies, and CSM Materialteknik, aleading consulting company in materialstechnology. From 2003 the business areaalso includes Combitech Systems, withconsulting operations in defence, medicaland vehicle technology.

Order bookings were good during theyear, particularly in the defence-relatedoperations and medical technology. Inthe latter area, a new, long-term contractwas signed with Elekta on the manufac-ture of the Leksell Gamma Knife. SaabAviocomp had success in the market,signing new maintenance agreementswith a number of airlines, includingAeroliteral, LOT, and Mandarin. On theother hand, investment levels were lowin telecommunications and the publicsector.

As a result of order bookings, sales indefence-related operations and the medicaltechnology area developed positively,while invoicing was weak in telecom-munications and the public sector.

Saab’s operations in precision engage-ment have been gathered in businessarea Saab Bofors Dynamics, which de-velops and produces missile systems,portable anti-armour systems and under-water systems. Today the business areais a complete missile systems supplieroffering air-to-air, air defence, anti-armour,anti-ship and ground target missiles,portable anti-armour systems, torpedoesand underwater vessels. The businessarea, which maintains a presence inmany export markets around the world,accounted for 18 percent of the Group’stotal sales. In 2003 systems were deliveredto around 30 countries.

Saab Bofors Dynamics is taking partin several international collaborativemissile projects, such as the five-nationproject involving the IRIS-T short-rangeIR air-to-air missile and the six-nationcooperation on the Meteor medium-range air-to-air missile. Together withGerman EADS-LFK, Saab is participatingin development work on Taurus, a cruisemissile also designed to be integrated



with Gripen. Among the products developed internally are the RBS 23BAMSE and RBS 70 air defence missiles,the RBS 15 anti-ship missile, the next-generation light anti-armour systemNLAW, the BILL 2 anti-armour missile,the Carl-Gustaf mortar system and AT4anti-armour munitions.

Dynamics achieved great success andsecured a number of important ordersduring the year. In portable anti-armoursystems, significant orders were received,primarily from the export market. Orderswere awarded by the UK and Swedenfor development work on Meteor. TheAustralian Army placed an order for theRBS 70/Bolide missile system for inte-gration in Lockheed Martin’s PSTAR airdefence radar. Major orders were placedfor the RBS 15 anti-ship missile, the larg-est from the Swedish Defence MaterielAdministration for integration of RBS 15on the Visby-class corvette. The samecustomer also ordered remotely opera-ted vehicles (ROV) for the Visby-classcorvette.

Deliveries during the year includedCarl Gustaf-ammunition and anti-armourmunitions to several export countries.Additionally, development of the lightanti-armour system NLAW was deliveredto the UK and the RBS 70 to a number ofexport countries. Systems developmentwork was done for Meteor and IRIS-T,along with series preparations for theSwedish BAMSE project. In underwatersystems, torpedoes delivered to Swedenand Brazil have been invoiced.

Business area Saab Ericsson Space,which is 60-percent owned by Saab and40-percent by Ericsson, develops andmanufactures computers, antennas,microwave electronics and mechanicalsystems for the space industry. Abouthalf its operations involve commercialtelecommunications projects and theother half is focused on publicly fundedprojects from, among others, the Euro-pean Space Agency, ESA, as well as bi-lateral and national programs. Publiclyfunded operations have increased inimportance, while the internationalmarket for commercial telecommuni-cation satellites remains weak.

Order bookings during the year related

primarily to publicly funded projects,including data handling system for theAeolus meteorological satellite forAstrium, on-board computers for Vegaand signal generating equipment fromESA for the Galileo navigation satellite,Europe’s answer to the U.S. GPS system.In January 2004 a major order was receivedfrom EADS-Astrium for data handlingsystems for the Pleiades satellites, thenext generation of earth observationsatellites.

The most important projects in theinstitutional market in 2003 involvedthe ESA Herschel/Planck projects, datahandling systems for two scientificsatellites and the French earth observa-tion satellite Proteus. Work was alsodone as part of the SMART 1 scientificsatellite project. Deliveries were made to the ATV project, an unmanned vehiclefor transports to and from the inter-national space station, and of measure-ment instrument for the GRAS andGPSOS projects. In the commercialmarket, one of the projects involvedSpaceway, a satellite system for Internettraffic. Frequency converters have beensupplied for the Amazonas and Thurayasatellites. In addition, separation systemswere delivered for a number of launchrockets.

From 2004 Saab Ericsson Space willbe included as a unit of business areaSaab Aerospace.

Saab Aviation Services’ core consists of Saab’s leasing and customer supportoperations in regional aviation. As aformer manufacturer of regional aircraft– Saab 340 and Saab 2000 – Saab has agreat interest in ensuring that these air-craft are utilized in the best way possible.Over 500 of them are in service andaround 280 are in Saab’s leasing portfolio.To reduce risk exposure in its leasingoperations, Saab has obtained variousforms of protection for its portfolio. The55 aircraft delivered to American Eaglein the early 1990’s have non-recoursefinancing, which limits Saab’s risk to 7percent of the aircrafts’ aquisition value.Another 42 aircraft are financed withguarantees from the Swedish ExportCredits Guarantee Board, which limitsSaab’s risk exposure to approximately

15 percent of the aircrafts’ market value.The insurance Saab obtained in 2000comprises 185 aircraft. This policy co-vers the market risk in the portfolio andlimits Saab’s exposure to 10 percent ofestimated future leasing revenue at thetime the policy was signed. Throughcontinued effective management, Saabcan maximize lease revenue and therebyminimize the first loss in the insurance.Previous provisions cover Saab’s esti-mated risk.

At the end of 2003 the leasing port-folio consisted of 282 (291) Saab regionalaircraft. At year-end 37 (29) aircraft werenot contracted to any operator.

The business area includes Saab Air-craft Leasing, Saab Aircraft and a 75-percentinterest in the Australian companyHawker Pacific, which is active in themodification and maintenance of com-mercial aircraft.

Other operations comprise a number of small niche companies. In order torealize values and place these in moreappropriate environments, Saab is seek-ing out structural solutions for theseoperations.

FUTURE DEVELOPMENTOne of the world’s leading high-technology companiesSaab is one of the world’s leading high-technology companies, with its mainoperations focused on defence, aviationand space.

In 2004 the future direction of Swedishdefence appropriations will be determinedin large part through the government’s“defence decision.” The main focus will be on a network-based task force andthe ability to take part in internationalmissions. The boundary between militaryand commercial systems will graduallybe erased as the focus shifts to protectingvulnerable infrastructure and creating asafer society.

Saab’s focus is on growing in exportmarkets, while at the same time remain-ing the obvious partner in its Swedishhome market with top-flight expertisein systems integration. Saab’s productportfolio consists of internationally de-signed systems and products, such as



Gripen, naval tactical command systems,signature management, combat trainingand electronic warfare systems, navaltransponders, anti-armour systems, air-to-air and air-to-surface missiles, andniche products for the space industry.Saab also has a significant share of itsoperations in advanced technical servicesand aftermarket solutions, an area wherethe customer orders a complete systemssolution, including responsibility through-out its technical life. This market willaccount for a growing share of Saab’sbusiness.

Close to half of Saab’s current salesare in markets outside Sweden.

Products and systemsSaab has a competitive, future-orientedproduct portfolio well-positioned to meetthe trend we anticipate in the defencemarket as more and more countries,among them Sweden, increase their focuson network-based defence. From aglobal perspective, our various inter-national partnerships are of great im-portance.

Continued order bookings have pro-vided Saab with a very strong orderbacklog, corresponding to over twoyears’ sales. In systems and defenceelectronics, Saab today is an internation-ally competitive center for the develop-ment of advanced defence systems,partly based on information technologyand with a large share of exports.

The order backlog for Gripen is animportant base for future operations.Deliveries to the Swedish Air Force arecurrently at a pace of around 18 aircrafta year, in addition to further develop-ment of the aircraft system, maintenanceand add-on orders. Deliveries of thecustomized Swedish Gripen to Hungarywill begin in 2006, as will deliveries of28 new Gripen to South Africa. The CzechRepublic has recommended Gripen asits future air defence system, as a resultof which Sweden may lease it 14 newGripen fighters. If the transaction isfinalized, Saab’s role will be to providecustomization work and support. Aero-structures’ cooperation with Airbus hasled to a contract for the developmentand production of the leading edge ofthe wing of Airbus’ A380.

By utilizing systems integrationexpertise from Gripen together with arange of competencies in commandsystems, Saab has been able to assumeturn-key responsibility for the tacticalsystem in Sweden’s new medium-weight helicopter, an important newarea of operations.

The British order for NLAW develop-ment, Germany’s series order for Taurus,Finland’s order for an air defence system,the development order for Meteor andprevious orders for BAMSE and RBS 15,among others, have helped Saab to re-main internationally competitive in anti-tank and missile systems.

Saab develops advanced electronicwarfare systems that protect againstdetection by sensors and weapons. Anincreasingly important component toachieve maximum defence capabilities isinformation and command and controlsystems, where Saab has long experienceand a leading position in naval commandand control and fire control systems. Inthe air battle area, Saab has developedcombat command systems for the SwedishAir Force. Similar, smaller systems havebeen developed for export.

As defence systems become morecomplex, there is a growing need totrain cost-effectively, and Saab there-fore offers great breadth in training andsimulation systems. In signature man-agement for camouflage, Saab hasworld-leading products that span theentire electromagnetic spectrum.

In the space industry, Saab has astrong position as an independentsupplier of such niche products as on-board computers, data handlingsystems, microwave electronics andantennas. In separation systems forlaunchers, Space commands a dominantshare of the global commercial market.

THE SAAB GROUP IN 2003OrdersGroup order bookings were in line withthe previous year and amounted to SEK19,606 m. (19,521). Approximately 60percent (72) of orders came from cus-tomers outside Sweden and 76 percent(78) were attributable to defence-relatedoperations. The order backlog at year-

end thus amounted to SEK 45,636 m.(43,082). Defence orders account for 91percent (94) of the order backlog.

Order bookingsSEK m. 2003 2002Saab Systems & Electronics 4,293 5,327

Saab Aerospace 6,974 3,139

Saab Technical Support & Services 2,950 2,946

Saab Bofors Dynamics 4,574 7,000

Saab Ericsson Space 528 641

Saab Aviation Services 1,202 1,423

Corporate/Other 439 369

Internal –1,354 –1,324

Saab Group 19,606 19,521

Order bookings for Saab Systems andElectronics declined by 19 percent to SEK4.3 bn compared with the previous year,which was the best year ever for com-parable units. In 2002 an order worthSEK 1.3 bn was received for the tacticalcommand system for the Swedish multi-role helicopter NH90. Order bookingswere good in 2003, however, and a num-ber of important contracts werereceived. In simulation and trainingsystems, orders were received primarilyfrom Germany and the UK totalingslightly over SEK 1 bn. Germany ordered,among other things, laser simulatorsand support for the GÜZ battle trainingcenter. The UK ordered simulators forthe NLAW and Javelin anti-tank systems.Late in the year Norway and Finlandplaced orders for the Ceros 200 navalfire control system valued at a total ofapproximately SEK 350 m. Saab Systemsin Australia received an order for theSHORAD (Short Range Air Defence)system from the Australian defence va-lued at slightly over SEK 200 m. Signa-ture management operations reportedmajor success, signing orders for slight-ly over SEK 500 m., primarily from theU.S. market.

Order bookings for Saab Aerospacerose by 122 percent to approximatelySEK 7 bn. Hungary ordered modificationwork on the 14 Gripen it has leased forslightly over SEK 2 bn. Airbus placed aSEK 1.2 bn order as part of its A380program for the development and pro-duction of the leading edge of the wingof the new A380. The Swedish DefenceMateriel Administration placed an orderfor integration of Meteor air-to-air



missiles on Gripen valued at slightlyover SEK 400 m. This will make Gripenthe first aircraft to test the new medium-range missile. Order bookings otherwiserelate primarily to further developmentand add-on orders for the SwedishGripen program.

Bookings for Saab Technical Supportand Services, which were in line with theprevious year, consist of a large numberof small orders with short throughputtimes. Lower orders during the year inthe telecom area as well as from civiland government authorities were com-pensated by higher orders from custom-ers in defence and medical technology.

Saab Bofors Dynamics’ order bookingsdeclined by 35 percent during the year toSEK 4.6 bn compared with the previousyear. Order bookings for 2002 included aSEK 4 bn order from the UK for the next-generation anti-armour system NLAW.During the year Dynamics receivedorders for anti-armour systems worthapproximately SEK 1.5 bn, primarilyexports, including an order from theFrench defence for additional AT4CSanti-tank weapons worth approximatelySEK 300 m. As part of the Meteor pro-ject, development orders were receivedfrom the UK and Sweden worth SEK 1.1bn. The Australian Army placed an or-der worth approximately SEK 400 m. tointegrate the RBS 70/Bolide air defencemissile in its SHORAD (Short Range AirDefence) system. Further, orders wereplaced for the RBS 15 anti-ship missileworth approximately SEK 400 m. Thelargest order was for integration of theRBS 15 on the Visby-class corvette. Inunderwater systems, a major order wasreceived for remotely operated vehicles(ROV) for the Visby-class corvette worthslightly over SEK 200 m.

Saab Ericsson Space’s order bookingsdecreased by 18 percent compared withthe previous year to SEK 528 m., mainlydue to a decline in activity in the tele-com industry and lower appropriationsfor the Swedish space budget. Orderbookings during the year include thedata handling system for the Aeolusmeteorological satellite, on-board com-puters for Vega and signal generatingequipment for the Galileo navigationsatellite. The commercial market’s share

of order bookings declined to 30 percent(48) of total bookings.

Order bookings for Saab AviationServices declined by 16 percent duringthe year to SEK 1.2 bn due to the down-turn in the turboprop market. Ordersrelated mainly to spares and customersupport for the fleet of Saab 340 andSaab 2000 aircraft, and commercial air-craft maintenance in Australia.

Order bookings for Other operationsrelated mainly to explosives for Nexplo.

Order backlogSEK m. 2003 2002Saab Systems & Electronics 9,249 9,703


Saab Technical Support & Services 868 1,006

Saab Bofors Dynamics 9,793 8,300


Saab Aviation Services 340 210


Internal –2,257 –1,772

Saab Group 45,636 43,082

The order backlog includes:■ Gripen: 50 aircraft (68) to Sweden and

28 aircraft (28) on export to SouthAfrica

■ tactical command systems, sonarsystems, warner and countermeasureequipment, and forward fuselages forhelicopters

■ Airbus A380, A320/A340■ command and control, avionics and

electronic warfare systems■ combat training equipment and laser

simulator systems■ air-defence and anti-tank systems■ torpedo and anti-ship missile systems

SalesGroup sales in 2003 were 4 percenthigher than the previous year andamounted to SEK 17,250 m. (16,538).The increase was the result of organicgrowth. Sales for defence-related opera-tions rose by approximately 6 percent,while commercial aircraft operationswere adversely affected by currentmarket conditions. 80 (76) percent ofsales was related to defence. Sales toforeign markets rose by 16 percent toSEK 7,902 m. (6,831), or 46 percent (41)of total sales. Total exports from theGroup’s Swedish companies were SEK

6,235 m. (5,199). The Group’s exports tothe EU market amounted to SEK 3,560m. (2,955) and total sales within the EU,excluding Sweden, were SEK 3,921 m.(3,280).

Sales by geographic marketSEK m. 2003 2002 ChangeSweden 9,348 9,707 – 4%

Rest of EU 3,921 3,280 20%

Rest of Europe 794 616 29%

Total, Europe 14,063 13,603 3%North America 1,013 1,267 – 20%

Latin America 175 185 – 5%

Asia 948 536 77%

Australia, etc. 1,039 937 11%

Africa 12 10 20%

Saab Group 17,250 16,538 4%

Sales by business areaSEK m. 2003 2002 ChangeSaab Systems & Electronics 4,677 4,499 4%

Saab Aerospace 5,151 4,782 8%

Saab Technical Support & Services 3,032 2,922 4%

Saab Bofors Dynamics 3,113 2,825 10%

Saab Ericsson Space 624 605 3%

Saab Aviation Services 1,095 1,328 –18%

Corporate/Other 407 493 –17%

Internal – 849 – 916

Saab Group 17,250 16,538 4%

Sales of all operations in Saab Systemsand Electronics rose to SEK 4,677 m.(4,499) compared with the same periodlast year. Barracuda and Transponder-Tech substantially raised their salescompared with the previous year, Barra-cuda through acquisitions in the U.S.and TransponderTech through substan-tial growth in the transponder market.SaabTech and Training Systems reportedmoderate growth. During the yearCombitech Systems, which generates aturnover of approximately SEK 200 m.(245) on an annual basis, was transferredto Technical Support and Services.

The sales increase in Saab Aerospace,from SEK 4,782 m. to SEK 5,151 m., is dueto the upgrade of Gripen aircraft whichwill be delivered to Hungary and thehigher sales value of batch 3 of Gripen.Sales include 18 (20) Gripen aircraft.Deliveries to Airbus amounted to SEK221 m. (188) during the year.

Sales of Saab Technical Support andServices rose compared with the previous



year, due in its entirety to the internaltakeover of Combitech Systems. Thebusiness area otherwise experiencedweak growth owing to delayed orderbookings and continued weakness inthe telecom market. In total, sales for thebusiness area amounted to SEK 3,032 m.(2,922) in 2003.

Saab Bofors Dynamics’ sales increase toSEK 3,113 m. (2,825) is mainly attribut-able to higher volumes for anti-armourweapons and development work onNLAW, the next generation of portableanti-armour systems.

Saab Ericsson Space has been affectedby the continued difficulties in the com-mercial telecom market and for publiclyfinanced space programs. Sales rose toSEK 624 m. (605), which is approximately20 percent lower than in 2001, however.

Lower sales for Saab Aviation Servicesare the result of generally lower pas-senger traffic and thus lower capacityutilization for the aircraft fleet. Salesdeclined to SEK 1,095 m. (1,328).

Income, margin and profitabilityOperating income amounted to SEK1,293 m. (1,220), corresponding to amargin of 7.5 percent (7.4). Income fromdefence-related operations continued toimprove compared with the previousyear. At the same time, income wasaffected by structural charges totalingSEK 309 m. (40). Measures to finalize the integration of the Celsius operationsamounted to SEK 130 m. (0). Structuralcharges also related to the adaptation ofresources in Aerospace, Technical Sup-port and Services and Space. Operatingincome before structural costs improvedto SEK 1,602 m. (1,260), correspondingto a margin of 9.3 percent (7.6).

Income statementSEK m. 2003 2002Sales 17,250 16,538Cost of goods sold –12,997 –12,496

Gross income 4,253 4,042Margin 24.7% 24.4%

Marketing expenses –1,250 –1,325

Administrative expenses – 983 –1,043

Research and development costs – 414 – 457

Other operating income 157 282

Other operating expenses – 517 – 274

Share in income of associated cos. 47 – 5

Operating income 1) 1,293 1,220Margin 7.5% 7.4%

Result from financial investments – 220 – 227

Income after financial items 1,073 993Taxes – 315 – 273

Minority interest –12 12

Income for the year 746 732Income per share, SEK 2) 7.00 6.87

after full conversion, SEK 3) 6.91 6.78

1) Includes depreciation of –1,147 –1,168

of which depreciation of lease assets –528 –528

of which goodwill amortization –169 –176

2) Average number of shares 2003: 106,513,969 and2002: 106,487,407

3) Number of shares after full conversion 109,247,175

The gross margin rose slightly from theprevious year to 24.7 percent (24.4),which is the result of continued costcuts and an improved margin in orderbookings. Depreciation for the yearamounted to SEK 1,147 m. (1,168), ofwhich goodwill amortization was SEK169 m. (176).

Administrative and marketingexpenses decreased slightly comparedwith the previous year. The period’sinternally funded investments in re-search and development amounted toSEK 798 m. (812), of which SEK 395 m.(360) has been capitalized and SEK 414 m. (457) has been charged to incomefor the period, including amortization ofSEK 11 m. (5). Other operating incomeduring both the present and previousyears consists mainly of capital gains,currency gains and income from second-ary activities. Other operating expensesconsist of currency and capital losses.The present year also includes structuralchanges of SEK 309 m. (40).

Net financial income and expensesamounted to SEK –220 m. (–227). Theaverage return on external investmentswas 3.95 percent (4.84). Compared with

the previous year, the financial net hasbeen positively affected by a lower interestrate on pension debt but negativelyaffected by lower returns on invest-ments and the revaluation of financialreceivables. Project interest on unutilizedadvance payments reduced the financialnet by SEK 114 m. (200) and is reportedin gross income. The Group’s incomeafter financial items amounted to SEK1,073 m. (993).

Current and deferred taxes amountedto SEK –315 m. (–273); see also Note 13Taxes on page 38. The change in theminority interest in income comparedwith the previous year is due to improvedresults from Saab Ericsson Space andNexplo.

Income for the year was SEK 746 m.(732), corresponding to an income pershare of SEK 7.00 (6.87).

The pre-tax return on capital employedwas 12.7 percent (11.6). The after-taxreturn on shareholders’ equity was 10.8percent (10.8).

To increase transparency in the re-porting, the structural provisions total-ing SEK 309 m. (40) are reported bothseparately by business area and at theaggregate level in the accounting ofresults of operations.

Operating income by business area% of % of

SEK m. 2003 sales 2002 salesSaab Systems & Electronics 327 7.0% 311 6.9%

Saab Aerospace 573 11.1% 579 12.1%

Saab Technical Support & Services 232 7.7% 207 7.1%

Saab Bofors Dynamics 172 5.5% 102 3.6%

Saab Ericsson Space –15 neg – 62 neg

Saab Aviation Services 87 7.9% 136 10.2%

Corporate/Other – 83 – 53

Saab Group 1,293 7.5% 1,220 7.4%

Operating income by business area,excl. structural costs

% of % of SEK m. 2003 sales 2002 salesSaab Systems & Electronics 410 8.8% 311 6.9%

Saab Aerospace 674 13.1% 579 12.1%

Saab Technical Support & Services 267 8.8% 207 7.1%

Saab Bofors Dynamics 227 7.3% 102 3.6%

Saab Ericsson Space 20 3.2% – 22 neg

Saab Aviation Services 87 7.9% 136 10.2%

Corporate/Other – 83 – 53

Structural costs – 309 – 40

Saab Group 1,293 7.5% 1,220 7.4%

Total depreciation/amortization by business areaSEK m. 2003 2002Saab Systems & Electronics 194 198

Saab Aerospace 148 143

Saab Technical Support & Services 120 113

Saab Bofors Dynamics 85 97


Saab Aviation Services – lease assets 528 528

Saab Aviation Services – other 13 15


Saab Group 1,147 1,168

Operating income for Saab Systems andElectronics improved to SEK 327 m. (311)and the operating margin was 7.0 per-cent (6.9). The improvement in incomewas due to volume gains for Barracuda, amore favorable product mix for SaabTechand TransponderTech’s positive resultfor 2003. Training Systems continued togenerate good results. Structural costsamounted to SEK 83 m. (0).

Operating income for Saab Aerospacedecreased slightly to SEK 573 m. (579). The business unit’s income was affectedcompared with the previous year bystructural costs of SEK 101 m. Incomeimproved due to higher volumes and an improved result from Nyge Aero,which had reported a significant loss in the previous year. The operatingmargin was 11.1 percent (12.1).

The higher operating income for SaabTechnical Support and Services – SEK 232 m.(207) – is the result of a higher capacityutilization and cost cuts at AerotechTelub.The operating margin amounted to 7.7percent (7.1). Structural costs for thebusiness area amounted to SEK 35 m.

Saab Bofors Dynamics’ income im-provement to SEK 172 m. (102) is mainly



attributable to volume increases, a morefavorable product mix and continuedefficiency measures. The operating marginwas 5.5 percent (3.6). Structural costs forDynamics amounted to SEK 55 m. andrelated to underwater systems.

Income for Saab Ericsson Space amountedto SEK –15 m. (– 62). Structural measuresand efficiency improvements at Spacecontinued, leading to a positive result ofSEK 20 m. (–22) before structural costsof SEK 35 m. (40).

Operating income for Saab AviationServices was affected by lower volumeand amounted to SEK 87 m. (136). Theoperating margin decreased to 7.9 per-cent (10.2).

Operating income for Corporate/OtherOperations consists of shared Groupexpenses, trading results, results fromoperating companies and results inconnection with liquidations. Resultscan therefore vary between years.

Financing and liquidityBalance sheet

Dec. 31, Dec. 31,SEK m. 2003 2002AssetsGoodwill and other intangible assets 2,497 2,297

Property, plant and equipment, etc. 4,230 4,325

Lease assets 5,038 5,672

Long-term interest-bearing receivables 765 1,053

Shares, etc. 415 413

Deferred tax receivables 981 1,279

Inventories, etc. 4,133 3,745

Short-term interest-bearing receivables 39 55

Other receivables 6,363 5,413

Cash and marketable securities 4,243 3,857

Total assets 28,704 28,109

Shareholders’ equity and liabilitiesShareholders’ equity 7,003 6,833

Minority interest in subsidiaries 147 110

Provision for pensions 3,458 3,411

Other provisions 2,234 2,600

Liabilities to credit institutions 862 972

Convertible debenture loan 232 230

Lease obligations 2,597 2,926

Advance payments from customers, net 3,990 3,775

Other liabilities 8,181 7,252

Total shareholders’ equity and liabilities 28,704 28,109

The Group’s goodwill amounts to SEK1,627 m., of which SEK 1,430 m. is attrib-

utable to the acquisition of Celsius. Theremainder, SEK 197 m., relates primarilyto SaabTech, Combitech Systems andBarracuda. All goodwill is allocated tothe business areas. The increase in good-will and intangible assets comparedwith the previous year relates to thecapitalization of product development.Property, plant and equipment are usedmainly in the core business. Lease assetsrelate mainly to the regional aircraftleasing portfolio. Long-term interest-bearing receivables consist of an oilplatform on lease, among other things.Shares and participations consist of,among others, the shares in Nammo,Grintron, b-business partners and IteksaVenture AB. Receivables for deferredtaxes are reported net after deductingdeferred tax liabilities and relate mainlyto unutilized tax deductions for pre-vious provisions and unutilized tax losscarryforwards. Inventories are reportednet after deduction of utilized advancepayments of SEK 2.8 bn. Just over halfof other receivables consists of accountsreceivable; the remainder includes VATreceivables and interim items. Liquidfunds increased mainly due to a positivecash flow. The minority interest in sub-sidiaries increased due to a capital contri-bution to Nexplo and consists thereaftermainly of the minority interests in SaabEricsson Space, Nexplo and HawkerPacific. Provisions for pensions increasedslightly during the year. Other provisionsconsist mainly of the phase-out reservefor Regional Aircraft, provisions for theleasing portfolio and restructuring andproject reserves in connection with theacquisition of Celsius. The convertibledebenture loan is issued to personnel.Lease obligations refer to the leasingportfolio of regional aircraft. Otherliabilities include supplier and VATliabilities and accrued costs.

Liquid funds, including interest-bearing receivables, less liabilities tocredit institutions and the convertibledebenture loan, rose by SEK 190 m. toSEK 3,953 m. (3,763) compared with thebeginning of the year. The Group’s netliquidity after deduction of provisionsfor pensions rose to SEK 495 m. fromSEK 352 m. at the beginning of the year.



Shareholders’ equityThe Group’s shareholders’ equity rosein 2003 by SEK 170 m. to SEK 7,003 m.due to the following factors:

SEK m. TotalBalance at beginning of year 6,833

Income for the year 746

Dividend – 373

Translation difference, etc. – 203

Shareholders’ equity as of December 31, 2003 7,003

The Group’s equity/assets ratio was24.4 percent, compared with 24.3 per-cent at the beginning of the year. Share-holders’ equity amounted to SEK 7,003m. (6,833), corresponding to SEK 65.75(64.17) per share.

Subdivided balance sheet,December 31, 2003

SaabAircraft Elimi- Saab

SEK m. Saab Leasing nations GroupAssetsGoodwill and other intangible assets 2,497 0 0 2,497

Property, plant and equipment, etc. 4,228 2 0 4,230

Lease assets 0 5,038 0 5,038

Long-term interest-bearing receivables 765 0 0 765

Shares, etc. 1,915 0 –1,500 415

Deferred tax receivables 1,267 0 – 286 981

Inventories, etc. 4,129 4 0 4,133

Short-term interest-bearing receivables 39 0 0 39

Other receivables 5,513 850 0 6,363

Cash and market-able securities 3,956 287 0 4,243

Total assets 24,309 6,181 –1,786 28,704

Shareholders’ equity and liabilitiesShareholders’equity 6,757 1,746 –1,500 7,003

Minority interests in subsidiaries 150 –3 0 147

Provision for pensions 3,458 0 0 3,458

Other provisions 1,941 579 –286 2,234

Liabilities to credit institutions 862 0 0 862

Convertible deben-ture loan 232 0 0 232

Lease obligations 0 2,597 0 2,597

Advance payments from customers,net 3,990 0 0 3,990

Other liabilities 6,919 1,262 0 8,181

Total shareholders’equity and liabilities 24,309 6,181 –1,786 28,704

Cash flowOperating cash flow was positive duringthe year, amounting to SEK 545 m. (–92).

The Group’s cash flow from operat-ing activities remained good. Workingcapital continued to develop negativelydue mainly to a substantial increase inreceivables and disbursements ofprevious years’ provisions. Cash flowfrom investing activities decreasedowing mainly to lower investments infixed assets.

Operating cash flow amounted toSEK 545 m. (–92), distributed betweencash flow from operations of SEK 675 m.(154), acquisitions/divestments SEK 42 m. (–80) and the regional aircraftbusiness SEK –172 m. (–166).

Condensed statement of cash flowsSEK m. 2003 2002Cash flow from operating activitiesIncome after financial items 1,073 993

Adjustments for items not affecting cash flow 1,170 1,207

Tax paid – 57 –25

Cash flow from operating activitiesbefore changes in working capital 2,186 2,175

Working capitalInventories etc. – 378 – 55

Receivables – 855 – 72

Advance payments from customers, net 215 – 419

Other liabilities 875 9

Lease obligations – 329 – 195

Provisions – 366 – 383

Change in working capital – 838 –1,115Cash flow from operating activities 1,348 1,060Investments in intangible fixed assets – 397 – 492

Investments in tangible fixed assets – 472 – 623

Investments in lease assets – 37 – 72

Investments in/Sales of long-term securities 30 16

Sales of intangible and tangible fixed assets 73 19

Cash flow from investing activities – 803 –1,152Operating cash flow 545 –92

Cash flow by business areaSEK m. 2003 2002Saab Systems & Electronics 223 – 641




Saab Ericsson Space 102 – 32

Saab Aviation Services –18 137

Corporate/Other –171 – 258

Saab Group 545 – 92

Financial objectivesOver a business cycle, Saab’s objective isto achieve an average operating marginof at least 10 percent. The objective forreturn on equity is 15 percent, based oncurrent interest rate levels. The equity/assets ratio objective is to exceed 30 per-cent.

Capital expendituresThe Group’s gross capital expendituresin property, plant and equipment, ex-cluding lease assets, amounted to SEK472 m. (623). Net investments, includinglease assets and intangible fixed assets,amounted to SEK –597 m. (–1,002).

Gross capital expenditures SEK m. 2003 2002Saab Systems & Electronics 80 109







Saab Group 472 623

Research and developmentIn order to maintain a leading positionin its business areas, the Group allocatesconsiderable resources to research anddevelopment, where approximately2,700 persons are employed. Invest-ments in research and development aremade primarily for customers in thebusiness areas Saab Systems and Elec-tronics, Saab Aerospace and Saab BoforsDynamics. The year’s total expendituresfor research and development amoun-ted to SEK 3,690 m. (4,138), of whichSEK 2,892 m. (3,287) relates to customer-funded development.

Research and development expendituresSEK m. 2003 2002Saab Systems & Electronics 1,084 1,340



Saab Bofors Dynamics 1,020 845




Saab Group 3,690 4,138as % of sales 21 25

Internally financed development relatedmainly to the export version of the Gripen,but also further development of combattraining centers, electronic warfare andmissile systems, and investments in theanti-tank area. From 2002 part of thecompany-funded development expend-itures are capitalized in the balancesheet due to a change in accountingprinciples. Of the year’s developmentexpenditures, a total of SEK 395 m. (360)was carried forward and SEK 414 m.(457) was charged against income forthe year. After the year’s capitalizationand depreciation of SEK 11 m. (5), theclosing balance of capitalized productdevelopment amounted to SEK 778 m.(394).

Capitalized development work in2002 included a reclassification of in-ventories of SEK 39 m.

PersonnelAt the end of the period the Group had13,316 employees, against 14,036 at thebeginning of the year.

During the year lay-offs were an-nounced affecting a total of approxi-mately 1,000 employees, of whomapproximately 800 have been let go.

Personnel by business areaDec. 31, Dec. 31,

Number 2003 2002 ChangeSaab Systems & Electronics 2,651 3,026 – 375

Saab Aerospace 4,160 4,379 – 219

Saab Technical Support & Services 2,905 2,760 145

Saab Bofors Dynamics 1,718 1,904 –186

Saab Ericsson Space 537 634 – 97

Saab Aviation Services 799 815 –16

Corporate/Other 546 518 28

Saab Group 13,316 14,036 – 720

Outlook for 2004For full-year 2004 Saab anticipatescontinued organic growth of approxi-mately 5 percent and an improvedmargin, which means that the 10-percentobjective is within reach, though withthe reservation that Saab may be forced to further adapt resources depending on capacity utilization in developmentoperations.

Highlights following the conclusion of the yearIn January 2004 Saab sold 17 percent ofits shareholding in Nexplo to Patria ofFinland for EUR 1 m. Following the sale,Saab owned 50 percent of the shares inNexplo. On January 22 a stock swap wasimplemented in connection with theestablishment of EURENCO, wherebythe shares in Nexplo were exchangedfor shares in EURENCO. Saab sub-sequently owns 19.9 percent of thecapital in EURENCO. The stock swaphas no material impact on earnings.

In January 2004 Saab acquired 21percent of Grintek Pty Ltd in SouthAfrica. Grintek supplies electronics-related products and services to compa-nies in telecommunications, defence,aviation, air traffic control, security andpower generation in South Africa andselect export markets.

Share repurchaseThe Board of Directors will propose asin the previous year that the AnnualGeneral Meeting authorize the Board to decide to repurchase up to 10 percentof the company’s outstanding shares. As proposed, the mandate would bevalid until the next Annual GeneralMeeting. The purpose of the authoriza-tion is to provide the Board with in-creased scope for action in working with the company’s capital structureand to enable acquisitions where con-sidered appropriate. Such repurchasesmay be effected over the stock exchangeor through offerings to shareholders. It is also proposed that the Board’s man-date include the possibility to transferrepurchased shares in accordance withcurrent legislation.

Preparations for harmonizationwith International AccountingStandards (IAS/IFRS)According to the EU’s IAS directive, asof 2005 all listed companies in the EUmust prepare their consolidated finan-cial statements in accordance with Inter-national Accounting Standards (IAS) –now known as IFRS. The EU has not yetdecided on standards for financial in-struments (IAS 32 and IAS 39). TheInternational Accounting StandardsBoard (IASB) is currently conducting acomprehensive review of a number ofcurrent IAS recommendations. As aresult, it is still not completely certainhow this will affect the application ofIFRS/IAS 2005. IASB has announcedthat only those recommendations thatare published by the first quarter of 2004will apply in 2005.

In 2003 Saab conducted a review ofIFRS/IAS recommendations. A projectorganization has been formed to imple-ment the new recommendations.

The recommendations of the SwedishFinancial Accounting Standards Councilagree in large part with current IASrecommendations. Since the Group’sfinancial reports comply with the SwedishFinancial Accounting Standards Council’srecommendation, the consequences of atransition are not considered significant,aside from the reporting of financial in-struments. According to IAS 39 Financialinstruments, they must be reported atfair value in the balance sheet, whichmeans that unrealized gains and lossesare reported as assets or liabilities, incontrast to the current lowest value prin-ciple. The scope of financial instrumentsin the Group is attributable primarily tohedges of flow exposure in dollars, euroand pounds. As indicated in the sectionon financial risk management, forwardcover corresponds to future deliveries of goods. Saab will revalue receipts anddisbursements from firm orders inforeign currency to closing-day rates ineach accounting period. The above-mentioned flows are hedged throughforward exchange contracts or currencyoptions which are revalued at marketvalue. This means that the effects onshareholders’ equity and income will besmall. Other than IAS 39, which entails





an increase in total assets, Saab has notidentified any significant areas in itsreporting that are affected by the transi-tion to IFRS.

Through harmonization with RR29 oncompensation to employees, reportingfor 2004 will conform to IAS 19; see alsoNote 37 on page 46.

ENVIRONMENTAL IMPACTProduction of aircraft and aircraft com-ponents by the Parent Company, SaabAB, in Linköping is subject to licensingaccording to the Swedish EnvironmentCode due to the surface treatment pro-cesses, the manufacture of compositeparts, handling of chemical substances,airport operation and size of the manu-facturing facilities. The environmentalimpact of these operations arises prima-rily from emissions of organic solventsinto the atmosphere and of metals andde-icing agents into waterways, thegeneration of industrial wastes andnoise disturbing local surroundings. The operations subject to licensing pre-dominantly entail manufacturing.

The National Licensing Board forEnvironmental Protection granted thelicense for aircraft manufacture in 1990.Saab AB has been granted an exemptionfrom the Chemicals Inspectorate for useof trichloroethylene until 2006.

The operations carried on by SaabBofors Dynamics AB, Saab EricssonSpace AB and CSM Materialteknik ABin Linköping are not subject to licensingor notification according to the Environ-ment Code, but are covered by the licensegranted in 1990 for aircraft manufactureand the collective operations of Saab ABat Råberga-Tannefors in Linköping. The operations of Saab Aircraft AB inLinköping are subject to licensingaccording to the Environment Code and are covered by the license for air-craft manufacture.

Saab Bofors Dynamics AB, NexploBofors AB and Saab Bofors Test Center ABcarry on operations in Karlskoga whichare subject to licensing according to theEnvironment Code. Saab Bofors DynamicsAB and Saab Bofors Underwater SystemsAB carry operations in Eskilstuna andMotala, respectively, which are subject

to licensing. AerotechTelub AB carrieson similar operations in Arboga andLinköping. In addition, SaabTech AB andSaab Barracuda AB carry on operationssubject to licensing in Järfälla, Jönkö-ping and Gamleby.

The environmental impact fromsubsidiaries subject to licensing consistsprimarily of emissions of organic sol-vents into the atmosphere, emissions of metals, etc. into water, generation ofindustrial wastes and noise disturbinglocal surroundings.

Operations subject to notification requirementsThe Group has operations subject to notification in accordance with theEnvironment Code at five Swedishsubsidiaries: Saab Ericsson Space AB(Gothenburg), Saab Training SystemsAB (Huskvarna), SaabTech AB (Kista),AerotechTelub AB (Östersund) and SaabAviocomp AB (Linköping). The environ-mental impact of the operations subjectto notification is very limited.

PARENT COMPANYSales and incomeSales of the Parent Company amountedto SEK 5,094 m. (4,788). Operating incomewas SEK 315 m. (418). Net financial in-come and expenses amounted to SEK552 m. (221) and income after financialitems was SEK 867 m. (639). Of thefinancial net, SEK 707 m. (403) consistsof Group contributions and dividendsand write-downs of shares in subsidia-ries. After appropriations of SEK –23 m.(–23) and paid and deferred tax of SEK–103 m. (–154), income for the yearamounted to SEK 741 m. (462).

Liquidity, finance and investmentsLiquid funds less liabilities to creditinstitutions amounted to SEK –727 m.(775). The year’s gross capital expendi-tures in property, plant and equipmentamounted to SEK 179 m. (278). At year-end the Parent Company had 4,136employees, compared with 4,308 at thebeginning of the year.

Financial risk management



Organization and operationsThe Group’s operations are continuouslyexposed to various financial risks involv-ing foreign currencies, interest rates,liquidity and credit. In addition, theseoperations consist to a large extent oflong-term projects, which increases thecomplexity of the financial structure.The Group has a financial policy, asestablished by the Board of Directors,with rules and guidelines for managingfinancial risks and financial operationsin general. The financial policy statesthat financial risks associated withnormal business operations should beminimized, i.e. financial risk neutralityshould be sought.

To take advantage of economies ofscale and synergy effects and minimizemanagement risks, all external trans-actions are made through Saab Treasury,the Group’s internal bank. The internalbank assumes no risks, and all trans-actions with internal companies arenetted or made simultaneously withexternal counterparties. In the processSaab has established a structure withdecentralized hedging responsibilityand centralized trading responsibility.

Saab Treasury is responsible for theGroup’s liquidity management, internalbank, trading and external managementof interest rate and foreign currencyrisks. Operations, which are carried out on the basis of the financial policyestablished by the Board, are dividedinto four portfolios:

■ liquidity management

■ internal banking

■ tender to contract

■ proprietary trading.

Customer finance, guarantee and financeissues and the development of methodsand principles to manage financial risksare decided on and managed by theCorporate Treasury function.

Foreign currency risksForeign currency risk refers to the riskfluctuations in exchange rates whichwill have an effect on Group income.Exchange rate fluctuations affect Saab’sincome and shareholders’ equity invarious ways:

■ Income is affected when sales revenueand production costs are in differentcurrencies (transaction exposure).

■ Income is affected when the incomeof foreign subsidiaries is translated toSwedish kronor (translation exposure).

■ Income or shareholders’ equity isaffected when the assets and liabilitiesof foreign subsidiaries are translatedto Swedish kronor (translation expo-sure).

Transaction exposure The commercial currency flow after netcalculations of opposite flows in thesame currencies – the transaction expo-sure is indicated in the table below. TheGroup’s primary invoicing currenciesare SEK, EUR, USD and GBP.

EUR 8%

USD13%

GBP 10%Other 1%

SEK68%

Contract currenciesin the order backlog

-250

0

250

500

750

Net currency flowstranslated to SEK m.

EUR USD GBP Other

EUR 9%

USD 10%GBP 4%

Other 0%

SEK77%

Currency distribution,inflows

EUR 6%

USD 12%GBP 4%

Other 2%

SEK76%

Currency distribution,outflows

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Forward exchange contracts *nominal amount

’04 ’05 ’06 ’07 ’08 ’09

SEK m.

*) This does not reflect the length of the orderbacklog, since several forward contracts thatmature in 2004, for example, will be extendedto match the underlying cash flows.

Saab’s finance policy prescribes that the flow in foreign currency – the trans-action exposure – for firm orders mustbe hedged. The first hedge is always toutilize incoming currency to pay forpurchases in the same currency, i.e.netting. Moreover, foreign currency riskneutrality is achieved through either con-tract formulations or forward contractand option transactions in the foreignexchange market. The purpose of thesecurrency hedges is to ensure estimatedgross margins in order backlog.

As of December 31, 2003 the nominalamount of forward exchange contractsand options was SEK 19,247 m. (13,619).

2003 2002 2001 2000 1999Currency options 1,109 1,322 1,855 248 20

Forward exchange contracts 18,138 12,297 7,890 5,296 3,119

Total 19,247 13,619 9,745 5,544 3,139

The market value of the currency optionsand forward exchange contracts wasSEK 759 m. (237) as of December 31,2003.



Management of the foreign currencyrisk in bids at fixed prices in foreigncurrencies is handled centrally withinthe framework of Saab Treasury’s tenderto contract portfolio. This is a result of a growing trend toward fixed-price bidsin foreign currency. The purpose of theportfolio is to minimize the Group’sforeign currency risk during the tenderperiod and reduce hedging costs. Operat-ing units can sign tender insurance withSaab Treasury when submitting a fixed-price bid. Saab Treasury manages theforeign currency risk by combining for-ward contracts and options based on thelikelihood of the deal. The operation iscontrolled by a policy and risk measurebased on probability-weighted VaR, asdescribed below.

Translation exposure Only a small portion of the Group’soperations is conducted by foreignsubsidiaries. The value of foreign sub-sidiaries’ shareholders’ equity amountedto approximately SEK 2,000 m. at year-end.

Net assets translated Otherto SEK USD EUR AUD currenciesSEK m. 1,190 469 186 93

The foreign currency risk to the Group’sincome and shareholders’ equity fromtranslation effects – the translation expo-sure – is normally not hedged.

Interest rate risksDepending on the liquidity situation,Saab’s income is directly affected bychanges in market interest rates througha change in net financial items andthrough the impact on gross income of the interest rate effects on advancefinancing. In 2003 average interest-bearing receivables, cash and market-able securities less liabilities to creditinstitutions and other interest-bearingliabilities amounted to SEK 3,782 m.(3,975).

Dec. 31, Dec. 31,Assets 2003 2002Long-term interest-bearing receivables 765 1,053

Current interest-bearing receivables 39 55


Total assets 5,047 4,965LiabilitiesLiabilities to credit institutions 395 511

Other borrowing and other interest-bearing liabilities 467 461


Total liabilities 1,094 1,202Net liquidity 3,953 3,763Pension liabilities 3,458 3,411Net liquidity after deductingpension liabilities 495 352

Saab tries to achieve risk neutrality withregard to interest rate risks by seekingsimilar interest terms on the assets andliabilities sides of the balance sheet.Management of the Group’s interest rateexposure is centralized, which meansthat Saab Treasury is responsible foridentifying and managing this exposure.

Liquidity management and financial credit risksLiquidity management is handledcentrally within the framework of aninvestment policy determined by theBoard of Saab AB. The investment policyis based on a benchmark, from whichthe following deviations are permittedin regard to duration and credit risk:

Bench Min. Max. Dec. 31, Dec. 31,mark risk risk 2003 2002

Government 80% 100% 40% 58% 56%

Mortgage (min A) 20% 40% 32% 39%

Corporate (min A) 20% 10% 5%

Duration 15 mos. 0 mos. 27 mos. 12 mos. 21 mos.

The interest rate risk in the investmentsgiven a 1 bp parallel shift in the yieldcurve was SEK 0.36 m. (0.54) as ofDecember 31, 2003.

Investments are made in securities withminimum short- and long-term creditratings of A1/P1 and A-1/A or higheraccording to Moody’s and Standard &Poor’s. The credit risk calculation isbased on actual and anticipated creditrisk, according to the recommendationsof the Bank of International Settlement(BIS). As of December 31, 2003 counter-

party risks amounted to SEK 4,333 m.(4,143), of which mortgage institutionsSEK 1,224 m. (1,232). In 2003 averageinvested capital was SEK 2,989 m. (3,069).The average return on external invest-ments was 3.95 percent (4.84).

Refinancing risksRefinancing risk refers to the risk thatthe company will not be able to meet itspayment liabilities due to insufficientliquidity or difficulties raising externalloans.

As of December 31, 2003 Saab had net liquidity of SEK 495 m. (352) afterdeducting liabilities to credit institutionsand other interest-bearing liabilities ofSEK 1,094 m. (1,192) and provisions forpensions of SEK 3,458 m. (3,411).

0

100

200

300

400

500Liabilities to credit institutionsOther interest-bearing liabilities

Liabilities to credit institutions and other interest-bearing liabilities

’04 ’05 ’06 ’07 ’08 ’09 >10

SEK m.

In addition to its net liquidity, Saab is able to obtain financing in part byexternally refinancing all or parts of itsregional aircraft fleet, which at presentis internally financed for approximatelySEK 2.4 billion, as well as by utilizingbinding credit facilities. Saab centralizesmanagement of the Group’s financing. It has no rating at present.

Customer credit riskOutstanding accounts receivable consti-tute a credit risk where the Group canlose money. As of December 31, 2003accounts receivable amounted to SEK3,071 m. (2,682). The majority of salesare defence-related corresponding to 80percent of total sales, due to which thecounterparties in accounts receivable are nations with high creditworthiness.The Group’s receivables are mainly inWestern Europe, which accounts for



79 percent of the total, compared withthe Group’s sales in the same region ofapproximately 81 percent. In WesternEurope the largest receivables are inSweden, the UK, France and Germany,representing 71 percent of the total.

Where counterparties’ creditworthinessis deemed unsatisfactory, guarantees aresecured.

Supplier credit riskAdvances paid to suppliers constitute a credit risk where the Group can losemoney. As of December 31, 2003 theGroup had paid advances to suppliersof SEK 347 m. (427). The Group’s policyis to always maintain bank-guaranteedsecurity for any advances it pays.

Customer financeCustomer finance provides an importanttool for marketing the company’s products.Export customers are placing increasingdemands on finance. Normally Saabworks together with banks and guaranteeinstitutions to find various solutions tomeet customers’ needs. This is doneprimarily by the bank granting the buyercredit or by providing supplier credits.To limit risk exposure, the risks are soldon the market to banks and governmentguarantee institutions, such as the ExportCredits Guarantee Board in Sweden.

TradingThe Board of Saab has issued a riskmandate for proprietary trading inforeign exchange and money marketinstruments of SEK 20 m., expressedaccording to Value at Risk (VaR). VaR, a probability-based method based onhistoric exchange rate fluctuations andcorrelations, is an established practice in the financial field. The method mea-sures the maximum loss during a specificnumber of days with a certain probability.Within Saab, three days and 99 percentprobability are used. With VaR, the risks for various types of assets can beaggregated to a single measure. If theaccumulated result during the year isnegative, the mandate is reduced by acorresponding amount. In 2003 tradingincome was SEK 3 m. (11). The averageutilized risk mandate (VaR) during theyear was SEK 3.1 m. (1.9).

Financial derivativesVarious financial derivatives such as for-ward contracts, options and swaps arefrequently used to manage and controlfinancial risks. Futures and interest rateswaps and options in SEK are used forinterest risk management in the liquidityand trading portfolios. Interest rateswaps in foreign currency are used forinterest risk management in the aircraftleasing portfolio. Currency forwardcontracts and options are used mainlyfor firm orders for the Group and out-standing bids in the tender to contractportfolio. The large increase in currencyforward contracts in 2003 is primarilyattributable to new business in the SaabBofors Dynamics and Saab Aerospacebusiness areas.

Saab Treasury’s holdings of derivativesas of December 31, 2003 amounted toSEK 22,865 m. (16,887) in nominal terms,distributed as follows:

2003 2002 2001 2000 1999Interest rate swaps, SEK 1,252 884 2,029 2,250 3,750

Interest rate swaps,foreign currencies 2,366 2,384 3,232 3,340 4,056

Interest rate futures, SEK 0 0 1,650 4,165 4,750

Interest rate options, SEK 0 0 2,000 0 0

Currency options 1,109 1,322 1,855 248 20

Forward currency contracts 18,138 12,297 7,890 5,296 3,119

Total 22,865 16,887 18,656 15,299 15,695

Risk Management – InsuranceRisk Management identifies, assessesand limits non-financial risks, preventsdamage and assumes responsibility forthe Group’s central purchases of risk, lifeand pension insurance. This insurance ispurchased on the open market and fromSaab’s own insurance company, LansenFörsäkrings AB.

All insurance signed with the Group’sown insurance company with risksexceeding the self-retention is reinsuredon the external market on an excess ofloss basis in order to limit the company’sexposure for each claim and in total. In total, the Saab Group’s insurance pre-miums in 2003 amounted to SEK 116 m.

(133), of which SEK 79 m. (76) was obtai-ned from the Group’s own insurancecompany.



Board of DirectorsSaab’s Board of Directors consists of ninemembers elected at the Annual GeneralMeeting and three members with depu-ties appointed by employee unions.

The Annual General Meeting onApril 7, 2003 reelected Anders Scharp,Erik Belfrage, Stephen Henwood, PeterNygårds, George Rose, Björn Svedberg,Marcus Wallenberg and Alison Wood.At the statutory Board meeting in con-nection with the Annual General Meeting,Anders Scharp was reelected Chairmanof Saab.

Åke Svensson was elected to the Boardat Saab’s Annual General Meeting onApril 7.

Board workThe Board’s work is regulated by rulesof procedure that are revised annually.The rules of procedure and special Pres-ident’s Instruction govern the delega-tion of responsibilities between the Boardand its two committees and between theBoard and the President. According tothe working instructions adopted by theBoard, five ordinary meetings are nor-mally held each year, in addition to thestatutory meeting. The Board may alsomeet whenever circumstances demand.According to the rules of procedure, thecompany’s auditors shall be present atthe meeting held in conjunction with theapproval of the company’s annual re-port.

The rules of procedure also set outthe items to be treated at every Boardmeeting and the special decisions to betaken at the statutory meeting. The Pres-ident’s Instruction sets out his dutiesand authority and includes policies forinvestments, financing and reporting.

During the year the Board held onestatutory meeting, per capsulam and fiveordinary meetings. On these occasions

Corporate Governance

the Board treated, among other things,Saab’s strategic direction, structural andacquisition issues, and key operatingobjectives.

The Board’s Compensation CommitteeSaab’s Board of Directors has a specialCompensation Committee responsiblefor ensuring that Executive Manage-ment receives competitive and reason-able compensation in terms of both leveland the split between fixed and variablecomponents.

The Compensation Committee in-cludes Anders Scharp, Marcus Wallen-berg and George Rose. The committee’swork is preparatory. Saab’s Board ofDirectors makes the ultimate decisions.

Compensation Compensation paid to Saab’s seniorexecutives is indicated in Note 2.

The Board’s Audit CommitteeThe Audit Committee consists of threenon-employee Board members appoint-ed by the Board. The current committeemembers are Anders Scharp (Chairman),Peter Nygårds and Björn Svedberg.

The Audit Committee participates inprocuring auditing services and prepar-ing proposals for auditors’ elections,handles issues regarding the scope andfocus of the audit, maintains continuouscontact with the auditors and is re-sponsible for ensuring that the auditors’proposals and recommendations areimplemented.

AuditsAudits are performed by the accountingfirms and accountant elected by the An-nual General Meeting. Auditing entailsthe review of the annual report of theParent Company and the Group as well

as the administration by the Board ofDirectors and the President. The scope ofthis review is tied to generally acceptedauditing standards within the frameworkof the auditors’ determination of thescope and direction needed to fulfill hisassignment. Auditing assignments alsoinclude reviewing and suggesting im-provements with regard to the company’sorganization, accounting, calculations,etc. Emphasis is placed in this regard onensuring that satisfactory routines forinternal control are used by both theParent Company and subsidiaries.

Nomination workAccording to the decision of the AnnualGeneral Meeting in 2003, the four largestowners during the fourth quarter eachappoint one representative who, in con-sultation with the Chairman of the Board,draft a proposal for a new Board that ispresented to the Annual General Meeting.BAE Systems and the Wallenberg foun-dations decided not to appoint represen-tatives, due to which the owners’ repre-sentatives consist of Adine Grate Axén(Investor), Marianne Nilsson (Robur),Christer Elmehagen (AMF Pension) andMats Gustafsson (SEB Fonder).

Saab’s role in societyThe right of every nation to defend itselfis written into the United Nations’ Charter.And self-defence requires military mate-riel. It is therefore important from anethical and moral perspective that acompany like Saab, based in a parlia-mentary democracy like Sweden, cancontribute to global security and stabilitythrough controlled exports.

In Sweden, the production and exportof military materiel are governed bylaws, ordinances and the guidelinesadopted by parliament. Supervision ishandled by the National Inspectorate of

The duties and responsibilities of Saab’s governing bodies and executives are regulatedby Saab’s internal rules of procedure, Saab’s articles of association and Swedish law.Saab’s Board of Directors, Chief Executive Officer and Group Management areresponsible for managing the company.



Strategic Products. All transactions madeby Saab outside Sweden and which fallunder this legislation therefore must beapproved by the Swedish state.

Ethics and social responsibilitySaab supports and strives to complywith the nine principles of the UN’sGlobal Compact and the OECD’s guide-lines for multinational companies.

Saab’s own guidelines can be sum-marized in four key areas:

■ Responsibility to customersThrough research, development andproduction, Saab supplies products, ser-vices and systems solutions that meet

our customers’ expectations in terms offunction, quality, safety, economy andthe environmental requirements.

■ Responsibility to employeesSaab respects its employees and theirrights, offers safe, pleasant working conditions, actively discourages discri-mination and helps to develop profes-sional skills and competence to ensureemployees’ job satisfaction and develop-ment.

■ Responsibility to shareholdersSaab protects its shareholders’ invest-ments and strives for consistent, growingreturns. It complies with generally accept-ed accounting principles and stock ex-change rules.

■ Responsibility to the communitySaab acts in accordance with the laws ofthe countries in which it conducts busi-ness, helps to protect human rights andpays heed to considerations of health,safety and the environment.

Saab defends free and fair trade, pro-motes free competition and good busi-ness ethics, and supports transparencyand openness. Compensation paid toagents, suppliers and partners must bebased solely on the products and ser-vices procured.

Saab’s aim is to ensure that everyemployee, while on the job, is aware ofthese guidelines and that the company isdistinguished by human respect, sharedresponsibility and consideration for theenvironment.

HUMAN RESOURCE POLICY

In a knowledge company like Saab, the

collective competencies of the em-

ployees are our main competitive

advantage. In addition to continuous

competence development, it is impor-

tant that improvements are made in

work environments, attitudes and

routines. Every day at Saab is dis-

tinguished by stimulating responsibili-

ties, commitment, teamwork, mutual

respect and good leadership.A good

working environment also includes

diversity, high ethical standards and

morals, and a balance between work

and leisure.This, as well as leadership

and relationships between employees,

is spelled out in Saab’s human resource

policy.

ENVIRONMENTAL POLICY

Saab will comply with applicable envi-

ronmental regulations and through

continuous improvements in its opera-

tions minimize the environmental im-

pact of its plants, production and prod-

ucts as far is it is technically possible

and financially feasible. Environmental

work will be actively pursued. Business

units with operations or products that

can impact the environment will main-

tain an environmental management

system that complies with ISO 14001.

Employees will be kept informed and

provided with the necessary training in

environmental issues. Saab will show

openness and cooperate with custo-

mers, authorities and other parties with

an interest in environmental issues.

Saab’s own guidelines can be summarized in four key areas:

Responsibility to customers, employees, shareholders and community.

EmployeesCustomers

Shareholders Community

F I N A N C I A L I N F O R M AT I O N


Five-year overviewPro forma

SEK m., unless otherwise indicated 1) 2003 2002 2001 2000 1999 1999

Order bookings 19,606 19,521 15,274 28,141 15,267 6,849Order backlog at year-end 45,636 43,082 40,034 41,091 29,891 23,637

Net sales 17,250 16,538 15,689 17,840 18,018 9,053Foreign market sales, % 46 41 40 48 48 38Defence sales, % 80 76 70 62 66 68

Operating income 1,293 1,220 1,594 1,533 1,125 1,104Operating margin, % 7.5 7.4 10.2 8.6 6.2 12.2Operating margin before depreciation excluding leasing, % 11.1 11.2 14.4 13.5 10.7 17.1Operating income excluding capital gains 1,293 1,220 944 895 870 849Operating margin excluding capital gains, % 7.5 7.4 6.0 5.0 4.8 9.4Income after financial items 1,073 993 1,554 1,448 1,116 1,377Net income for the year 746 732 1,127 1,038 735 939

Total assets 28,704 28,109 29,901 31,119 36,641 28,079of which Saab Aircraft Leasing 6,181 4,869 5,445 6,456 8,877 8,877of which advance payments, net 3,990 3,775 4,194 3,619 4,631 4,055of which shareholders’ equity 7,003 6,833 6,679 5,670 4,700 4,708equity per share, SEK 2) 65.75 64.17 62.74 53.26 44.15 44.23

Net liquidity after provisions for pensions 495 352 885 415 2,412 8,398Cash flow from operating activities 1,348 1,060 1,973 –1,406 n/a – 588Operating cash flow 545 –92 1,642 –1,908 n/a – 2,368

Average capital employed 11,629 11,926 12,253 12,183 n/a 6,866Return on capital employed, % 12.7 11.6 15.5 14.6 n/a 21.3Return on equity, % 10.8 10.8 18.3 20.0 n/a 21.5Profit margin, % 8.5 8.4 12.1 10.0 n/a 16.1Capital turnover rate, multiple 1.48 1.39 1.28 1.46 n/a 1.32Equity/assets ratio, % 24.4 24.3 22.3 18.2 12.8 16.8Interest coverage ratio, % 3.70 3.55 5.50 5.32 n/a 16.8

Income per share, SEK 3) 7.00 6.87 10.59 9.75 6.90 8.82Income per share after full conversion, SEK 4) 6.91 6.78 10.40 9.58 6.81 8.68Income per share before amortization of goodwill, SEK 3) 8.59 8.52 12.11 11.47 8.62 9.36Dividend, SEK 5) 3.50 3.50 3.25 3.00 n/a 2.50

Capital expenditures for plant and equipment, gross 472 623 532 1,077 652 447Net capital expenditures, total 597 1,002 331 502 n/a 1,780of which shares and intangible fixed assets 342 472 62 16 n/a 1,389of which lease assets –106 97 120 – 476 n/a 83

Research and development costs 3,690 4,138 3,819 3,808 4,462 3,081Number of employees at year-end 13,316 14,036 14,028 15,453 16,665 8,031

Aside from the pro forma figures for 1999, the figures have not been revised and match those in the published information for each year. Saab has applied Recommendation RR 9 of theSwedish Financial Accounting Standards Council on reporting of income taxes for the entire five-year period.As of 2002, Saab applies Recommendation RR 15 of the Swedish FinancialAccounting Standards Council on intangible assets. For practical reasons, figures for previous years have not been revised for RR 15. Other recommendations that have entered into forceand have begun to be applied during this five-year period have not necessitated the revision of previous periods, since their effect is not considered material.

In 2000, Saab acquired Celsius, which was consolidated in the Saab Group as of January 1, 2000. Pro forma figures for 1999 refer to the Saab Group including Celsius, i.e. as if Celsiushad been included in the Saab Group from January 1, 1999.

1) For definitions of key ratios, see page 32.2) Number of shares as of December 31, 2003: 106,517,563; 2002: 106,510,374 and 1999–2001: 106,459,6753) Average number of shares 2003: 106,513,969; 2002: 106,487,407 and 1999–2001: 106,459,6754) Number of shares after full conversion 1999–2003: 109,247,1755) 2003 proposed dividend.

Income statement



Group Parent Company2003-01-01 2002-01-01 2003-01-01 2002-01-01

SEK m. Note – 2003-12-31 – 2002-12-31 – 2003-12-31 – 2002-12-31

Sales 3 17,250 16,538 5,094 4,788

Cost of goods sold –12,997 –12,496 – 3,878 – 3,611

Gross income 4,253 4,042 1,216 1,177

Marketing expenses –1,250 –1,325 –165 –188

Administrative expenses –983 –1,043 – 314 – 327

Research and development costs – 414 – 457 – 272 – 283

Other operating income 5 157 282 12 54

Other operating expenses 6 – 517 – 274 –162 –15

Share in income of associated companies 47 – 5 – –

Operating income 8 1,293 1,220 315 418

Result from financial investments

Result from securities and receivablesaccounted for as fixed assets 9 –47 – 58 707 368

Other interest income and similar items 10 225 220 288 307

Interest expenses and similar items 11 – 398 – 389 – 443 – 454

Income after financial items 1,073 993 867 639

Appropriations 12 – – – 23 – 23

Income before taxes 1,073 993 844 616

Taxes 13 – 315 – 273 –103 –154

Minority interest –12 12 – –

Net income for the year 746 732 741 462

Income per share, SEK 1) 35 7.00 6.87

After full conversion 2) 6.91 6.78

Operating income includes depreciation of 8 –1,147 –1,168 –134 –129

of which depreciation of lease assets –528 – 528 – –

of which amortization of goodwill and other intangible assets –169 – 176 – –

1) Average number of shares 2003: 106,513,969, 2002: 106,487,407.2) Number of shares after full conversion 109,247,175 see note 35 page 45.



Quarterly information

1) Average number of shares 2003: 106,513,969 and 2002: 106,487,407

January – March April – JuneSEK m. 2003 margin 2002 margin 2003 margin 2002 margin

SalesSaab Systems and Electronics 981 893 1,208 1,245Saab Aerospace 1,145 1,086 1,151 1,502Saab Technical Support and Services 676 671 834 795Saab Bofors Dynamics 882 580 723 777Saab Ericsson Space 149 135 140 165Saab Aviation Services 267 362 264 336Corporate/Other 98 136 103 127Internal sales –165 – 333 –183 –193

4,033 3,530 4,240 4,754

Operating incomeSaab Systems and Electronics 51 5.2% 34 3.8% –3 neg 72 5.8%Saab Aerospace 158 13.8% 133 12.2% 161 14.0% 173 11.5%Saab Technical Support and Services 59 8.7% 41 6.1% 60 7.2% 54 6.8%Saab Bofors Dynamics – 36 neg –5 neg 49 6.8% 17 2.2%Saab Ericsson Space 0 – – 42 neg –29 neg 2 1.2%Saab Aviation Services 19 7.1% 29 8.0% 29 11.0% 32 9.5%Corporate/Other – 25 N/a – 44 N/a –52 N/a – 22 N/a

226 5.6% 146 4.1% 215 5.1% 328 6.9%

Net financial income – 48 – 48 –31 – 52

Income after financial net 178 98 184 276

Net income 119 78 121 185

Income per share 1) 1.12 0.73 1.13 1.74

July – September October – DecemberSEK m. 2003 margin 2002 margin 2003 margin 2002 margin

SalesSaab Systems and Electronics 968 879 1,520 1,482Saab Aerospace 1,005 977 1,850 1,217Saab Technical Support and Services 618 550 904 906Saab Bofors Dynamics 574 581 934 887Saab Ericsson Space 131 107 204 198Saab Aviation Services 275 321 289 309Corporate/Other 105 93 101 137Internal sales – 227 – 84 – 274 – 306

3,449 3,424 5,528 4,830

Operating incomeSaab Systems and Electronics 58 6.0% 20 2.3% 221 14.5% 185 12.5%Saab Aerospace 59 5.9% 111 11.4% 195 10.5% 162 13.3%Saab Technical Support and Services 45 7.3% 44 8.0% 68 7.5% 68 7.5%Saab Bofors Dynamics 37 6.4% 49 8.4% 122 13.1% 41 4.6%Saab Ericsson Space – 4 neg –20 neg 18 8.8% – 2 negSaab Aviation Services 24 8.7% 23 7.2% 15 5.2% 52 16.8%Corporate/Other – 35 N/a – 23 N/a 29 N/a 36 N/a

184 5.3% 204 6.0% 668 12.1% 542 11.2%

Net financial income – 39 15 –102 –142

Income after financial net 145 219 566 400

Net income 87 147 419 322

Income per share 1) 0.82 1.38 3.93 3.02

Balance sheet



Group Parent CompanySEK m. Note 2003-12-31 2002-12-31 2003-12-31 2002-12-31

ASSETSFixed assetsIntangible fixed assetsCapitalized development costs 14 778 394 – –Goodwill 15 1,627 1,772 – –Other intangible assets 16 92 131 – –

2,497 2,297 – –Tangible fixed assetsBuildings and land 17 3,037 3,057 1,209 1,172Plant and machinery 18 714 806 225 264Equipment, tools, fixtures and fittings 19 415 309 186 92Lease assets 20 5,038 5,672 – –Construction in progress and advance

payments for tangible fixed assets 21 64 153 32 1199,268 9,997 1,652 1,647

Financial fixed assetsParticipations in Group companies 22 – – 11,246 9,799Receivables from Group companies 23 – – 148 144Participations in associated companies 24 275 256 81 4Receivables from associated companies, interest-bearing 25 7 13 – –Participations in joint ventures 26 – – 32 22Other securities held as fixed assets 27 139 157 60 97Deferred tax receivables 28 981 1,279 1,032 1,273Other long-term receivables, interest-bearing 29 758 1,040 – –Other long-term receivables, non-interest-bearing 29 758 851 – 34

2,918 3,596 12,599 11,373Total fixed assets 14,683 15,890 14,251 13,020

Current assetsInventories, etc. 30Inventories 6,541 6,326 3,076 2,425Advance payments to suppliers 347 427 100 89Less utilized advance payments from customers – 2,755 –3,008 – 2,302 –1,758

4,133 3,745 874 756Current receivablesAccounts receivable 3,071 2,682 605 390Receivables from Group companies – – 5,301 4,951Receivables from associated companies, non-interest-bearing 477 204 476 203Tax receivables 122 26 – –Other receivables, interest-bearing 39 55 – –Other receivables, non-interest-bearing 359 361 37 33Prepaid expenses and accrued income 31 1,577 1,289 165 298

5,645 4,617 6,584 5,875Cash and marketable securitiesShort-term investments 32 3,805 3,369 3,642 3,244Cash and bank balances 438 488 149 192

4,243 3,857 3,791 3,436Total current assets 14,021 12,219 11,249 10,067TOTAL ASSETS 28,704 28,109 25,500 23,087

1) In addition to the above lease assets pledged, the balance sheet contains assets reported in accordance with financial leases; see also Note 20.

Assets pledged 45For own liabilities and provisions

Property mortgages 388 388 388 388Chattel mortgages 2,177 2,177 2,101 2,101Lease assets 1) 1,744 1,914 – –Other long-term receivables 464 506 – –Accrued income 58 58 – –Bonds and other securities 1,898 2,443 1,880 2,425Other assets 166 312 – –

Total assets pledged 6,895 7,798 4,369 4,914

Assets pledged



Group Parent CompanySEK m. Note 2003-12-31 2002-12-31 2003-12-31 2002-12-31

SHAREHOLDERS’ EQUITY AND LIABILITIESEquity 34Restricted equityCapital stock (106,517,563 shares with a par value of SEK 16 each) 1,704 1,704 1,704 1,704Share premium reserve 6 8 6 8Revaluation reserve 500 500 500 500Legal reserve 360 357 341 341Other restricted reserves 586 754 – –

3,156 3,323 2,551 2,553Unrestricted equityNon-restricted reserves 3,101 2,778 2,758 2,345Net income for the year 746 732 741 462

3,847 3,510 3,499 2,807

7,003 6,833 6,050 5,360Minority interest 147 110 – –Untaxed reserves 36Accumulated accelerated depreciation – – 418 431Tax allocation reserves – – 234 234

– – 652 665ProvisionsProvisions for pensions and similar commitments 37 3,458 3,411 1,764 1,737Other provisions 38 2,234 2,600 1,248 1,556

5,692 6,011 3,012 3,293Long-term liabilitiesLiabilities to credit institutions and other interest-bearing liabilities 39 273 533 180 213Liabilities to Group companies – – 1,843 848Convertible debenture loan 40 232 230 247 245Lease obligations 41 2,179 2,597 – –Other long-term liabilities, non-interest-bearing 41 433 533 – –

3,117 3,893 2,270 1,306Current liabilitiesLiabilities to credit institutions and other interest-bearing liabilities 42 512 396 13 38Advance payments from customers 3,990 3,775 2,438 2,485Accounts payable 996 1,185 292 321Liabilities to Group companies – – 8,014 7,314Liabilities to associated companies, non-interest-bearing 4 – 4 –Liabilities to joint ventures, non-interest-bearing – 7 – 5Liabilities to joint ventures, interest-bearing 77 43 155 87Tax liabilities 194 158 87 115Other liabilities, non-interest-bearing 43 1,101 830 523 256Lease obligations 418 329 – –Accrued expenses and deferred income 44 5,453 4,539 1,990 1,842

12,745 11,262 13,516 12,463

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 28,704 28,109 25,500 23,087

1) Of which USD 334 m. (374) comprises guarantees for sureties of leases on 138 (144) Saab 340 and Saab 2000; see also Note 7.

Guarantees to the insurance company, FPG/PRI 62 61 62 61Guarantees for subsidiaries’ commitments to customers 1) – – 6,760 7,188Fulfillment guarantees, other 838 974 66 83Sureties for associated companies 246 254 211 217Total contingent liabilities 1,146 1,289 7,099 7,549

Contingent liabilities

Changes in shareholders’ equity



Capital Restricted UnrestrictedSEK m. stock reserves equity Total

GROUP

Closing balance according to balance sheet as of December 31, 2001 1,703 1,679 3,297 6,679

Exchange rate differences – 27 – 181 – 208Other changes 1 2 –27 –24

Total changes in shareholders’ equity not reported in the income statement 1 – 25 – 208 – 232

Transfers between unrestricted and restricted shareholders’ equity – 35 35 0Net income for the year 732 732Dividend – 346 – 346

– – 35 421 386

Shareholders’ equity on December 31, 2002 1,704 1,619 3,510 6,833

Exchange rate differences – 30 –149 – 179Other changes – 2 – 22 – 24

Total changes in shareholders’ equity not reported in the income statement – 32 –171 – 203

Transfers between unrestricted and restricted shareholders’ equity –135 135 –Net income for the year 746 746Dividend – 373 – 373

– – 135 508 373

Shareholders’ equity on December 31, 2003 1,704 1,452 3,847 7,003

PARENT COMPANY

Closing balance according to balance sheet as of December 31, 2001 1,703 848 2,873 5,424

Other changes 1 1 – 2

Total changes in shareholders’ equity not reported in the income statement 1 1 – 2

Net income for the year 462 462Dividend – 346 – 346Group contributions – 253 – 253Tax effect on Group contributions 71 71

– – – 66 –66

Shareholders’ equity on December 31, 2002 1,704 849 2,807 5,360

Other changes – 2 4 2

Total changes in shareholders’ equity not reported in the income statement – – 2 4 2

Net income for the year 741 741Dividend – 373 – 373Group contributions 444 444Tax effect on Group contributions –124 –124

– – 688 688

Shareholders’ equity on December 31, 2003 1,704 847 3,499 6,050

Note 34 on page 45 provides further information on shareholders’ equity.

Statement of cash flows




SEK m. –2003-12-31 –2002-12-31 –2003-12-31 –2002-12-31

Operating activitiesIncome after financial items 1,073 993 867 639

Adjustments for items not affecting cash flowDepreciation and write-downs charged against income 1,210 1,249 327 274Capital gains/losses –18 –1 –11 38Share of income in associated companies – 47 5Minority interest 25 – 46Dividends and Group contributions – 353 407

Tax paid – 57 – 25

Cash flow from operating activities beforechanges in working capital 2,186 2,175 830 1,358

Cash flow from changes in working capitalIncrease(–)/Decrease(+) in inventories, etc. – 378 – 55 – 118 – 231Increase(–)/Decrease(+) in current liabilities – 855 – 72 – 325 –155Increase(+)/Decrease(–) in advance payments from customers 215 – 419 – 47 371Increase(+)/Decrease(–) in other current and long-term liabilities 875 9 371 – 538Increase(+)/Decrease(–) in lease obligations – 329 –195Increase(+)/Decrease(–) in provisions – 366 – 383 – 308 – 38

Changes in working capital – 838 –1,115 – 427 – 591

Cash flow from operating activities 1,348 1,060 403 767

Investing activitiesInvestments in intangible fixed assets – 397 – 492Investments in tangible fixed assets – 472 – 623 –179 – 278Investments in lease assets – 37 – 72Investments in/Sales of other long-term securities 30 16 – 937 – 901Sales of intangible and tangible fixed assets 73 19 58 288

Cash flow from investing activities – 803 –1,152 –1,058 – 891

Operating cash flow 1) 545 – 92 – 655 –124

Financing activitiesChange in interest-bearing receivables 233 418Change in receivables and liabilities to Group companies 1,344 – 452Dividend paid to shareholders – 373 – 346 – 373 – 346Amortization of debt –110 – 567Loans raised 12 179Change in pension provisions 47 – 267 27 61

Cash flow from financing activities – 203 – 762 1,010 – 558

Cash flow for the year 342 – 854 355 – 682

Liquid assets at beginning of year 3,857 4,706 3,436 4,118Exchange rate difference in liquid assets 44 5

Liquid assets at year-end 4,243 3,857 3,791 3,436

1) The Group's operating cash flow last year is adjusted for translation differences, etc. as follows:Operating cash flow according to last year's annual report 92Effects of translation difference, etc. –184Operating cash flow – 92

ACCOUNTING PRINCIPLES AND COMMENTS ON THE FINANCIALSTATEMENTSAmounts in SEK m. unless otherwise stated.Amounts in parentheses refer to the previousyear.

General accounting principlesThe Saab Group’s annual report is prepared inaccordance with the Annual Accounts Act andthe Swedish Financial Accounting Council’srecommendations and pronouncements.

In conformance with the Annual AccountsAct, the income statement is classified accord-ing to function, pursuant to internal reporting.The functions are as follows: Cost of goodssold comprises costs for goods handling and manufacturing (including payroll andmaterials), purchased services, premises anddepreciation of fixed assets. Administrativeexpenses relate to costs for the Board, com-pany management and corporate staff func-tions. Marketing costs comprise the costs forthe company’s sales organization, includingsales subsidiaries, as well as advertising andexhibitions. Research and development costsare reported separately and comprise costsfor new and further development of prod-ucts; see below. Other operating income and expenses relate to secondary activities,exchange rate differences on items of anoperating character and capital gains/losseson sales of tangible fixed assets. Also includedat the Group level are capital gains/lossesfrom the divestment of subsidiaries.

Change in accounting principlesIn 2003 several new recommendations issuedby the Swedish Financial Accounting StandardsCouncil took effect. The new recommendationshave not had a material impact on the Group’sfinancial results and position. Further disclo-sures are provided under the appropriate note.

As of 2002 Saab applies the new recom-mendation on intangible assets. Previousyears have not been revised.

Consolidated accounts The consolidated accounts comprise the ParentCompany and all subsidiaries, associatedcompanies and joint ventures in Sweden andabroad. Subsidiaries are companies in whichthe Parent Company has a decisive influenceon the voting rights of the shares, companiesin which the Parent Company owns sharesand is entitled to appoint or dismiss more thanhalf the members of the board, or companiesin which the Parent Company otherwise hasa decisive influence and a significant share inthe income generated from their operations.Associated companies are companies in whichthe Parent Company directly or indirectly has a signifficant influence. Joint ventures arecompanies in which the Parent Companydirectly or indirectly has a long-term owner-ship interest and which are operated by two


so-called goodwill is amortized over 5 to 10years, while goodwill arising from strategic,long-term acquisitions is amortized over 20years. Saab applies an amortization period of 20 years for the goodwill that arose fromthe strategic acquisition of Celsius and thestep-by-step acquisition of AerotechTelub.

Goodwill is evaluated for impairment on a regular basis; see the principles under theheading Write-downs.

Translation of foreign subsidiaries and associated companiesIntegrated operations refer to foreign salescompanies and companies that broker servicesfor the Swedish operations. Independentoperations are companies that primarilyoperate in their own markets with their ownproducts. Independent companies are gener-ally self-financed, and the local currency isnormally used for the company’s businesstransactions.

The financial statements of integratedforeign operations, subsidiaries and associatedcompanies are translated to Swedish kronorusing the monetary method. The financialstatements of independent foreign subsidiariesare translated to Swedish kronor using thecurrent method.

With the monetary method, monetary itemsare translated at the year-end rate, while non-monetary items are translated at the rate ineffect on the acquisition date. Inventories,property, plant and equipment and share-holders’ equity are translated at the acquisitiondate rate and other assets and liabilities atyear-end rate. With the exception of con-sumption of goods and depreciation of prop-erty, plant and equipment, which are trans-lated at the acquisition date rate, income andexpenses are translated at a weighted averageexchange rate for the year. The translationdifference on monetary assets and liabilitiesis included in net income for the year andreported in the income statement as follows.The portion of the translation differenceattributable to operating items, primarilytrade accounts receivable and payable, isincluded in operating income. The portion of the translation difference attributable tointerest-bearing items is included in financialincome and expenses.

With the current rate method, assets andliabilities are translated at the year-endexchange rate, while income and expensesare translated at the average exchange ratefor the year. The translation difference, whicharises in part when translating the net assetsof foreign companies at a different rate at thebeginning of the year than at year-end and inpart when net income is translated at otherthan the year-end rate, is reported directly inshareholders’ equity in the balance sheet.

or more parties under an agreement thatstipulates shared control of the business.

The consolidated financial statements areprepared in accordance with Recommendationof the Swedish Financial Accounting Stan-dards Council and by applying the purchasemethod. This means that a subsidiary’s assetsand liabilities are accounted for at marketvalue according to an analysis of the acquisi-tion. If the acquisition value of the shares inthe subsidiary exceeds the estimated marketvalue of the company’s net assets, afteranalysis, the difference is considered Groupgoodwill. Depending on the degree ofrestructuring required in the acquired com-pany, provision is made in the acquisitionanalysis for anticipated allocations to thestructural reserve.

Associated companies are accounted for in accordance with the equity accountingmethod. This means that the book value ofthe shares and participations in associatedcompanies is valued in the consolidatedbalance sheet at the Group’s share of theequity of those companies after adjusting for its share of surplus or deficit values. Thus,consolidated income includes only Saab’sshare in income of associated companies,provided this does not result in a negativebook value of the shares.

Joint ventures are accounted for inaccordance with the proportional method.This means that the Group’s share of theassets, liabilities, income and costs in a jointlycontrolled company is added item by item to the corresponding items in the consolidatedincome statement and balance sheet.

Minority interest comprises the minorityshare in net income and shareholders’ equity.

Companies acquired during the year areincluded in consolidated income for the periodfollowing their acquisition. Revenues andcosts of companies sold during the year areincluded in consolidated income until theirdate of sale.

Internal transactions and unrealized intra-Group profits are eliminated. Prices of intra-Group supplies of goods are determined byapplying commercial principles and marketprices.

GoodwillAcquisitions within Saab’s core areas are an important component of the Group’sexpansion. In acquisitions of well-establishedcompanies active in an international environ-ment, the acquisition price normally exceedsthe tangible net worth by a substantial amount.The market price is determined primarily byfuture expectations, which are based on thecompany’s market position and know-how.

An acquisition in which the purchase priceexceeds the market value of the company’snet assets results in intangible assets, whichare amortized on a straight-line basis overtheir estimated useful life. Normally this


Accounting principles

Revenue and income recognitionSales are generated primarily from projectactivities, where hardware, software and con-sulting work are integrated in the deliveredproduct.

Income from long-term contracts for thedevelopment and delivery of hardware isrecognized by percentage of completion,determined either based on when a milestoneis reached or delivery is made or based onthe relation between the costs incurred on theproject and estimated total costs. From thecalculated total revenue from a project, in-cluding interest on advances, a deduction is made during each period in an amountcorresponding to the incurred costs’ share oftotal calculated costs at the end of the period.

Sales and income on the sale of goods andshort-term projects are reported when deliveryis made and essentially all the risks andrights are transferred to the buyer. Sales in-clude the sales value less VAT (Value-AddedTax), specific sales taxes, returns and tradediscounts.

Disclosures per income category are notconsidered meaningful and are not calculatedby the company.

Changes in anticipated total revenues andcosts per contract are reported in the sameperiod as they are noticed.

Gross marginFor orders whose manufacturing cost isfinanced to a significant extent by advancesfrom customers, the effect of advance-paymentfinancing on interest is reported in the grossmargin; see Note 10.

Amortization and depreciation of intangible and tangible fixed assetsAmortization and depreciation are based onthe historical cost and estimated useful life of each asset. Write-downs are applied on astraight-line basis to the calculated residualvalue and are distributed by function in theincome statement according to how the assetis used.

The following schedules are applied:Intangible fixed assetsCapitalized costs for R&D, etc. matched against

future revenue

Computer software, non-standard 5 yearsGoodwill and other intangible assets 5–20 years

Tangible fixed assetsProperty 20–25 yearsAircraft 20–25 yearsRevaluation of property 20 yearsLand improvements 20 yearsMachinery and other technical installations 5–10 yearsComputers, equipment, tools and installations 3–10 years

The difference between the above depreciationand fiscal depreciation is reported in individ-ual companies as accumulated accelerateddepreciation, which is included in untaxedreserves.

Write-downsThe book value of the Group’s assets, exclud-ing inventories, subcontracting assignmentsand deferred taxes, is examined on a regularbasis to determine whether write-downs arenecessary. If there is an indication that a write-down is needed, the asset’s recovery value is estimated. Recovery value is the higher ofsales value and useful value. In estimatinguseful value, future cash flows are discountedto present value with the use of a discountingfactor before tax to reflect the current marketestimate of the time value of money and thespecific risks associated with the asset.

A write-down is reported whenever the re-ported value of the asset or its cash-generatingunit exceeds the recovery value. Write-downsare reported in the income statement.

Research and development costsCosts for company-funded research anddevelopment in an effort to gain new scientificand technological knowledge are expensedwhen incurred and shown under the heading“Research and development costs” in theincome statement. From 2002 the Groupapplies Recommendation of the SwedishFinancial Accounting Standards Council onintangible assets. According to this recom-mendation, development costs are capitalizedif the product in question is considered tohave a future economic value. Costs that arecapitalized include the cost of materials,direct labor costs and a reasonable share of indirect costs. Capitalized developmentcosts are reported at acquisition value lessaccumulated amortization and write-downs.Amortization of capitalized developmentcosts is booked after the asset is completedand over its estimated useful life, which ismatched against future revenue. Capitalizeddevelopment costs are reported only in theconsolidated financial statements, not bylegal unit.

Guarantee costsCalculated costs for product guarantees are charged against cost of goods sold and accounted for when the products areinvoiced.

Lending costsLending costs are reported as costs in theperiod they arise, regardless of how theborrowed funds are used.

Hedging commercial flowsThe Group uses commercial flow hedges forcontracted future currency flows. Unrealizedgains and losses on such hedges are reportedagainst income at the same time as the resultof the hedged flow.

Non-contracted flows related to provisionsfor restructuring costs where settlement ismade in foreign currency are hedged so thatno exchange rate difference occurs uponsettlement.

Valuation principles, etc.Assets, provisions and liabilities have beenvalued at acquisition value unless otherwisestated below.

Intangible and tangible fixed assetsFixed assets are reported at acquisition valueless accumulated amortization/depreciationand write-downs.

InventoriesInventories are valued at the lower ofacquisition value according to the first in,first out principle and net realizable value.Fair value is estimated sales value less theestimated cost of completion and estimatedmarketing costs. Inventories include acquisi-tion, repatriation and completion costs andare reported net after deducting obsolescenceand intra-Group gains. For internally producedsemi-manufactured and finished goods,acquisition value consists of direct manu-facturing costs plus a reasonable markup for indirect manufacturing costs. Inventoriesinclude advances to suppliers. From 1999inventories are reported net, which meansthat advances from customers are offsetagainst incurred costs in each project.

ReceivablesReceivables have been valued in the amountsthat are expected to be received after individualvaluation.

Convertible debenture loanDuring the autumn 1998 a convertible de-benture loan was issued to the Group’semployees. The loan bears below-marketinterest, which means that it is a liability withimplicit interest. The convertible debentureloan is gradually indexed over its duration to account for interest, so that the reportedliability at maturity corresponds to thenominal loan amount. The present value ofthe difference between the reported liabilityand the nominal loan amount is reported as a share premium reserve.

LeasingAccording to the Recommendation of theSwedish Financial Accounting StandardsCouncil, leases are classified as financial oroperating.

A financial lease implies that the lessee,even if he does not receive the legal rights of ownership of an object, in all significantrespects enjoys the financial rewards andaccepts the risks associated with the object.Objects held as part of a financial lease arereported in the lessee’s balance sheet as fixedassets, and the future commitment to payleasing charges is reported as a liability. Thelessor reports the net investment in the lease,i.e. the present value of future leasing charges,as a receivable in its balance sheet.

In an operating lease, the financial rewards



and risks associated with ownership mainlyaffect the lessor, who reports the object as afixed asset.

For anticipated or real deficits accordingto leases related to aircraft financing carriedon by Saab Aircraft Leasing, provisions aremade using the discounted present value ofthe calculated deficit. Since the leasing port-folio is regarded as a financial asset, which in principle must be divestible at any givenpoint in time, a market valuation of the leasesis also made. Surpluses and deficits betweenleases are offset within the portfolio.

Other rented assets, such as personal com-puters, are capitalized and accounted for asassets (leasing assets), and the future commit-ment to pay leasing charges is reported as aliability (leasing obligations) if the leasetransfers virtually all benefits and risks to the Group. Other rentals are charged againstincome over their term.

Receivables and liabilities in foreign currencyReceivables and liabilities in foreign currencyhave been valued at the year-end exchangerate. Exchange rate differences in short-termreceivables and liabilities are included inoperating income, while differences in financialreceivables and liabilities are reported amongfinancial items. Receivables and liabilitieshedged by forward contracts are valued atthe current forward rate.

Short-term investmentsIn accordance with the Annual Accounts Act,short-term investments are valued at the lowerof acquisition value and fair value (marketvalue).

Liquid assetsLiquid assets consist of cash and bank balancesas well as short-term investments that can beeasily converted to cash equivalents at aknown amount.

TaxesThe Group’s total taxes consist of current tax and deferred tax. Current tax is calculatedon taxable income for the year. Deferred taxrepresents the difference between the fiscalvaluation of assets and liabilities and theirvaluation in the accounts, but only if thedifference is of a temporary nature. Deferredtax is also calculated on unutilized tax losscarryforwards. If the calculations result in adeferred tax receivable, it is accounted for asan asset only if it is likely that a sufficienttaxable surplus will be available. Deferredtax is calculated in accordance with the taxrates in each country that have been set orannounced as of the closing day. For incometaxes, Saab applies Recommendation No. 9 ofthe Swedish Financial Accounting StandardsCouncil, in accordance with which deferredtax related to untaxed reserves has not been



Definitions of key ratios

Operating margin Operating income as a percentageof sales.

Capital employed Total capital less non-interest-bearing liabilities, other provisions and deferred taxliability.

Pre-tax return on capital employed Operatingincome plus financial income as a percentage ofaverage capital employed.

After-tax return on equity Net income for the year as a percentage of average shareholders’ equity.

Profit margin Operating income plus financial incomeas a percentage of sales.

Capital turnover Sales divided by average capitalemployed.

Net liquidity Short- and long-term interest-bearingreceivables, short-term investments and cash and bank balances less short- and long-term liabilities tocredit institutions as well as convertible debentureloan and other interest-bearing liabilities.

Equity/assets ratio Shareholders’ equity in relation to total assets.

Interest coverage ratio Operating income plusfinancial income divided by financial expenses.

Equity per share Shareholders’ equity divided by the number of shares at the end of the period.

reported in individual companies due to theconnection between accounting and taxation.

Untaxed reservesTax regulations in Sweden and certain othercountries permit allocations to special reservesin legal entities. In this manner, companies,within certain limits, can apportion andretain earnings in their business withoutsubjecting them to immediate taxation. Un-taxed reserves are not subject to taxationuntil they are utilized. However, in the eventthe business should incur a loss, the reserves,sometimes within certain limits, may beutilized to cover the loss without taxation.The total value of the untaxed reserves cantherefore be considered risk capital, becauseany losses can be covered to a significantextent through use of the reserves.

In the consolidated balance sheet, untaxedreserves in legal entities are divided intoshareholders’ equity (restricted reserves) and deferred tax liability. In the income state-ment, tax attributable to the year’s change in untaxed reserves is reported as deferredtax.

ProvisionsProvisions are defined as obligations relatedto the current or previous fiscal years that asof year-end are known or likely as to theirorigin but uncertain as to their final amountor settlement date. Pensions, deferred taxes,restructuring reserves and similar items areclassified as provisions in the balance sheet.

Provisions for pensions are calculatedbased on local legislation and rules in eachcountry.

Transactions with related partiesRelated parties that Saab has transactionswith consist mainly of BAE Systems, whichholds 35 percent of the capital in Saab, andthe jointly owned marketing companyGripen International. Since 1995 Saab has acooperation with BAE Systems on Gripen’sdevelopment and marketing for the export.Transactions with BAE Systems, GripenInternational and other related parties, if any,are conducted in accordance with commercialprinciples.

Income per shareEarnings per share before dilution are calcu-lated by dividing net income by the averagenumber of shares outstanding during theyear. Income per share after dilution arecalculated by dividing net income adjustedfor the interest on outstanding convertiblesby the number of shares after full conversion,i.e. if all convertibles are exercised.

Pro forma financial statements Celsius is consolidated in the Saab Group asof January 1, 2000. The pro forma figures for1999 refer to the Saab Group including Celsius,

i.e. as if Celsius had already been included inthe Group from January 1, 1999.

Exchange rates for SEK used in the financial statements

Year-end rate Average rateCountry Currency 2003 2002 2003 2002Australia AUD 1 5.43 4.98 5.26 5.28

Canada CAD 1 5.56 5.63 5.77 6.19

Denmark DKK 100 122.15 123.75 122.80 123.26

Euro EUR 1 9.09 9.19 9.13 9.16

Japan JPY 100 6.80 7.40 6.98 7.76

Norway NOK 100 108.05 125.95 114.18 121.97

UK GBP 1 12.91 14.15 13.19 14.58

USA USD 1 7.28 8.83 8.09 9.73

Estimates and assumptionsPreparation of the annual report in accordancewith generally accepted accounting principlesrequires that the company’s managementmake estimates and assumptions that affectassets and liabilities, revenue and expenses,and contingent liabilities. Actual outcomesmay deviate from these estimates.



NOTE 1EMPLOYEES AND STAFF COSTS

Average no. of employees03-01-01 of whom 02-01-01 of whom

–03-12-31 men –02-12-31 men

Parent CompanySweden 4,163 81% 4,196 81%Austria – – 2 100%South Africa – – 2 100%Poland – – 1 100%Thailand 1 100% 1 100%

Parent Company, total 4,164 81% 4,202 81%

SubsidiariesSweden 7,579 81% 7,937 80%Australia 604 81% 586 82%USA 204 57% 191 54%Finland 174 70% 172 70%Austria 116 81% 117 80%Denmark 74 82% 72 83%Singapore 63 79% 60 78%Germany 31 87% 26 88%UK 21 76% 6 67%New Zealand 18 11% – –Norway 13 100% 11 100%Netherlands 12 100% 12 100%India 11 73% 16 81%South Africa 10 40% 10 50%United Arab Emirates 6 67% 5 80%Hungary 3 67% – –Canada 2 50% 5 80%Japan 1 100% 1 100%Philippines 1 100% – –France 1 100% 1 100%

Subsidiaries, total 8,944 80% 9,228 80%

Joint venturesSweden 18 61% 16 63%South Africa 1 100% – –

Joint ventures, total 19 63% 16 63%

Group, total 13,127 80% 13,446 80%

Gender distribution of corporate management03-12-31 02-12-31

% of women % of women

Parent CompanyBoard of Directors 8% 8%Other senior executives 8% 7%

GroupBoard of Directors 5% 3%Other senior executives 13% 11%

Salaries, other remuneration and social security expenses03-01-01– 03-12-31 02-01-01– 02-12-31

Salaries Social Salaries Socialand other security and other security

remuneration expenses remuneration expenses

Parent Company 1,432 694 1,369 671of which pension costs 1) 223 1) 219Subsidiaries 3,475 1,757 3,519 1,744of which pension costs – 647 – 624Joint ventures 9 5 3 1

Group, total 4,916 2,456 4,891 2,416of which pension costs 2) 870 2) 843

1) Of the Parent Company’s pension costs, SEK 6 m. (4) relates to the board and president, including deputies andthe executive vice president.The company’s outstanding pension commitments for these individuals amount toSEK 63 m. (64), of which SEK 59 m. (62) relates to former board members and presidents.

2) Of the Group’s pension costs, SEK 31 m. (17) relates to boards, presidents, deputies and executive vice presidentsof the Group and its subsidiaries.The Group’s outstanding pension commitments for these individuals amountto SEK 87 m. (73), of which SEK 59 m. (62) relates to former board members and presidents.

Notes to the financial statements

Salaries and other remuneration distributed by country and between Board members, etc. and other employees

03-01-01– 03-12-31 02-01-01– 02-12-31Board and Other Board and OtherPresident empl. President empl.

Parent CompanySweden 13 1,418 13 1,352of which bonuses, etc. 2 – 2 –South Africa – – – 1Poland – – – 1Austria – – – 1Thailand – 1 – 1

Parent Company, total 13 1,419 13 1,356of which bonuses, etc. 2 – 2 –

Subsidiariesin Sweden 40 2,914 47 2,974of which bonuses, etc. 3 – 2 –

Subsidiariesoutside SwedenAustralia 6 210 6 185USA 8 89 9 90Austria 2 60 2 58Finland 2 44 2 43Denmark 2 29 2 31Germany 3 20 2 18Singapore – 14 – 16UK 1 11 1 11Norway 2 5 2 7Canada 2 – 1 3Netherlands 1 4 1 2United Arab Emirates – 3 – 3Japan – 1 – 2France – 1 – 1Hungary – 1 – –

Subsidiaries, total 69 3,406 75 3,444of which bonuses, etc. 3 – 2 –

Joint ventures in Sweden – 9 – 3

Group, total 82 4,834 88 4,803of which bonuses, etc. 5 – 4 –

Sick leave absences03-01-01– 03-12-31

Parent CompanyTotal sick leave as a percentage of normal working hours 4%Percentage of total sick leave that relates to extended

absences of 60 days or more 54%

Sick leave absences by gender as a percentage of normal working hours:Men 3%Women 6%

Sick leave absences by age as a percentage of normal working hours:29 years or younger 2%30–49 years 3%50 years or older 5%

Saab has an ambitious occupational health and rehabilitation program.Management’s responsibility for rehabilitation is underscored in a directive.Occupational health reviews and inspections are conducted on a regularbasis, and a systematic program with current plans is in place at all levelsof the organization. Sick leave is monitored carefully, and areas with highabsenteeism are given special attention. All Saab employees have access toprofessional occupational health services, including technical, medical andpsychosocial expertise – in Linköping through in-house resources. Rehabil-itation is conducted internally and purchased from outside providers suchas Svenska Re, Rygginstitutet (“The Back Institute”) and psychotherapyservices. All Saab employees have access to wellness programs that includeexercise in groups or individually.

SEK m. unless otherwise indicated.



NOTE 2INFORMATION ON REMUNERATION TO SENIOR EXECUTIVES

Remuneration to Board membersIn accordance with the resolution of the Annual General Meeting, the feespaid to the members of the Board amount to SEK 1,800,000 (1,800,000),consisting of SEK 700,000 (700,000) to the Chairman and SEK 275,000(275,000) to each of the other members elected by the Annual GeneralMeeting, with the exception of the President. The Members of the Boardnominated by BAE Systems – Stephen Henwood, George Rose and AlisonWood – all of whom are employees of BAE Systems, have declined theirfees with respect to BAE Systems’ policy. The Chairman and Boardmembers Peter Nygårds and Björn Svedberg also received fees of SEK50,000 for services rendered for committee work.

Remuneration to PresidentOn July 14, 2003 President and CEO Bengt Halse exercised his right toretire at age 60. His salary, bonus and other benefits during the periodJanuary 1 – July 14 totaled SEK 8,231,270 (7,670,037). This amount includesSEK 3,640,800 (0) in benefits that arose when Bengt Halse decided to sellthe employee options he had held since 1999. Further, the total amountincludes bonuses, etc. of SEK 1,350,000 (2,500,000) as well as housing andcar allowances of SEK 76,083 (113,120). Bengt Halse will remain involveduntil further notice in certain issues on behalf of the company in return forannual compensation of SEK 1.5 m.

The salary paid to the President and CEO, Åke Svensson, who took overon July 14, 2003, consists of a fixed portion and variable portion. The fixedportion amounts to SEK 4 m. a year in 2003 and 2004. The variable portionis based on a performance bonus with predetermined quantitative andqualitative objectives each year. A performance bonus agreement is draftedannually and signed by the Chairman. The bonus can amount to a maxi-mum of 50 percent of the President’s fixed salary. The preparation anddecision-making process for compensation issues regarding the Presidentis handled by the Board’s compensation committee. During the period July14 – December 31, 2003 the President received a salary, bonus and otherbenefits totaling SEK 1,916,972 (0), of which SEK 42,554 (0) in housing andcar allowances.

During the first half year until July 14 Åke Svensson was includedamong “Other senior executives.”

Pension termsThe retirement age for the President is 60. The President has a premium-based pension plan. He may decide himself on the term of payment withinthe provisions of Swedish income tax law. The pension cost for Saab ABconsists of pension premiums amounting to 35 percent of the fixed salaryas long as the President remains an employee of the company. To this is added the cost of pension premiums according to the ITP plan. The pensioncommitment is transferable. For 2003 the cost of the President Åke Svensson’spension, including ITP, was SEK 892,126 (0).

For 2003 the cost of the President Bengt Halse’s pension, including ITP,was SEK 3,051,952 (2,157,348).

Severance termsIn the event of termination of employment by the company, the Presidentwill receive a salary and pension benefits for a period of six months (periodof notice). Thereafter he will receive severance pay amounting to one year’ssalary, based on his current fixed salary. If the President does not obtainnew employment, he will receive an additional 12 months’ severance pay.Salary during the period of notice and severance will be deducted fromincome received from other during the same period. If the Presidentresigns voluntarily, there is a six months notice time period with salary and pension benefits. No additional severance can be asked for.

Remuneration to other senior executivesThe 11 other senior executives in 2003 consisted of the executive vicepresident, heads of corporate functions, etc. The salaries paid to othersenior executives consist of a fixed portion and a variable portion. Thevariable portion is based on a performance bonus with predeterminedobjectives for each year. The performance bonus normally amounts to amaximum of 25 percent of each executive’s fixed salary. A performancebonus agreement is drafted annually and signed by the President. Theperformance bonus is based on three factors: consolidated operating income,business area operating income (for heads of business areas or their equiva-

lent) and qualitative objectives. For executives without business area re-sponsibility, parts 1 and 3 apply. The rules for the performance bonus arestipulated in a document issued by the President. Compensation issuesregarding these other senior executives are prepared by the head of humanresources and presented to the President, who makes a decision pendingthe approval of the Board’s compensation committee.

In 2003 the other senior executives received salaries, bonuses and otherbenefits totaling SEK 30,143,381 (32,847,208), of which bonuses of SEK3,840,800 (4,954,400) and housing and car allowances of SEK 1,010,296(1,223,358).

Pension termsThe pension age for all other senior executives is 60.

In addition to ITP, eight of the group are affiliated with the Saab plan,which is premium-based and transferable. The Saab plan provides pensionsbenefits over and above ITP on salary segments between 20 and 30 basicamounts as well as on salary segments over 30 basic amounts. The indivi-duals themselves can decide on the term of payment, though within theprovisions of Swedish income tax law. Moreover, an insurance policyfinances the period between the ages of 60 and 65.

The pension cost for Saab AB consists of pension premiums, which are based on a percentage of qualifying salaries. The percentage rate isdetermined by the time remaining until age 60 when joining the plan. Theaggregate insurance balance should cover a targeted pension of approxi-mately 32.5 percent of salary segments between 20 and 30 basic amountsand approximately 50 percent of segments over 30 basic amounts of quali-fying salaries. Premium payments continue as long as the individuals inquestion remain employees of the company.

Two other senior executives are entitled to pension benefits from age 65in accordance with the ITP plan. In their case, the pension benefits paid onsalary segments between 20 and 30 basic amounts according to the ITPplan will also be paid on salary segments over 30 basic amounts. Betweenthe ages of 60 and 65, the pension is 70 percent of their salary at the time of retirement. The cost of this is financed with insurance or is booked as aliability.

Pension obligations are transferable. In 2003 pension costs for othersenior executives, including ITP and its equivalent, amounted to SEK12,230,460 (14,578,648).

Other senior executives are entitled, or obliged if the company sorequests, to retire on pension at the age of 60, or in certain cases 62. Theirretirement pension up to the ordinary pension age of 65 follows Saab’spremium-based pension plan, while several receive 70 percent of theirsalary at the time of retirement.

New pension agreements are being drafted according to Saab’s premium-based pension plan.

Severance termsEssentially the same termination and severance rules apply to other seniorexecutives as to the President.

Incentive programThere are no other incentive programs.

Summary of compensation and other benefits during the year

Base salary/ Variable OtherAmounts in SEK Director’s fees compensation benefitsChairman of the Board 700,000 – 50,000Other Board members 1,100,000 – 100,000President and CEO Bengt Halse 3,164,387 1,350,000 67,083President and CEO Åke Svensson 1,874,418 – 42,554Other senior executives (11) 25,292,285 3,840,800 1,010,296

Total 32,131,090 5,190,800 1,269,933

FinancialPension instruments

Amounts in SEK cost Employee options TotalChairman of the Board – – 750,000Other Board members – – 1,200,000President and CEO Bengt Halse 2,665,550 3,640,800 11,283,222President and CEO Åke Svensson 841,600 – 2,809,098Other senior executives (11) 12,440,410 – 42,373,841

Total 15,947,560 3,640,800 58,416,161

NOTE 3SALES BY OPERATING AREA AND GEOGRAPHIC MARKET


–03-12-31 –02-12-31 –03-12-31 –02-12-31

Sales by operating areaSaab Systems & Electronics 4,677 4,499 – –Saab Aerospace 5,151 4,782 5,094 4,788Saab Technical Support & Services 3,032 2,922 – –Saab Bofors Dynamics 3,113 2,825 – –Saab Ericsson Space 624 605 – –Saab Aviation Services 1,095 1,328 – –Corporate/Other 407 493 – –Less intra-Group sales – 849 – 916 – –

Saab Group 17,250 16,538 5,094 4,788


–03-12-31 –02-12-31 –03-12-31 –02-12-31

Sales by geographic marketSweden 9,348 9,707 4,615 4,437Rest of EU 3,921 3,280 345 285Rest of Europe 794 616 134 30

Total, Europe 14,063 13,603 5,094 4,752North America 1,013 1,267 – 36Latin America 175 185 – –Asia 948 536 – –Australia, etc. 1,039 937 – –Africa 12 10 – –

Saab Group 17,250 16,538 5,094 4,788

NOTE 4INFORMATION ON OPERATING AREAS / GEOGRAPHIC MARKETS

Primary segments (operating areas)

Saab Systems Saab Technical& Electronics Saab Aerospace Support&Services

2003 2002 2003 2002 2003 2002

RevenueExternal sales 4,369 4,225 5,080 4,701 2,739 2,706Internal sales 308 274 71 81 293 216

Total revenue 4,677 4,499 5,151 4,782 3,032 2,922

Operating income 410 311 674 579 267 207of which share in income of associated companies 10 – 32 – 1 5 2

Saab Bofors Saab Ericsson Saab AviationDynamics Space Services

2003 2002 2003 2002 2003 2002

RevenueExternal sales 2,992 2,602 621 603 1,078 1,313Internal sales 121 223 3 2 17 15

Total revenue 3,113 2,825 624 605 1,095 1,328

Operating income 227 102 20 – 22 87 136of which share in income of associated companies – 2 – – – –

Corporate/Other Elimination Total2003 2002 2003 2002 2003 2002

RevenueExternal sales 371 388 – – 17,250 16,538Internal sales 36 105 – 849 – 916 – –

Total revenue 407 493 – 849 – 916 17,250 16,538

Operating income – 392 – 93 – – 1,293 1,220of which share in income of associated companies 32 22 – – 47 – 5



Saab Systems Saab Technical& Electronics Saab Aerospace Support&Services

2003 2002 2003 2002 2003 2002

Other disclosuresAssets 7,192 5,833 8,424 7,186 2,258 2,136Equity interests 74 67 – 3 11 8

Total assets 7,266 5,900 8,424 7,189 2,269 2,144

Liabilities 6,396 4,323 7,958 6,645 1,361 1,084

Capital employment 3,501 3,211 3,172 2,235 1,628 1,536

Investments 80 109 181 287 96 89

Depreciation 194 198 148 143 120 113

Saab Bofors Saab Ericsson Saab AviationDynamics Space Services

2003 2002 2003 2002 2003 2002

Other disclosuresAssets 3,213 2,880 691 759 10,105 11,480Equity interests 12 12 – – 9 10

Total assets 3,225 2,892 691 759 10,114 11,490

Liabilities 2,506 2,119 564 616 8,486 8,993

Capital employment 1,614 1,214 342 442 3,106 3,516

Investments 65 63 12 12 20 10

Depreciation 85 97 32 35 541 543

Corporate/Other TotalElimination Saab Group

2003 2002 2003 2002

Other disclosuresAssets – 3,454 – 2,421 28,429 27,853Equity interests 169 156 275 256

Total assets – 3,285 – 2,265 28,704 28,109

Liabilities – 5,570 – 2,504 21,701 21,276

Capital employment –1.661 – 598 11.702 11.556

Investments 18 53 472 623

Depreciation 27 39 1,147 1,168

Secondary segments (geographic markets)

Rest Rest of Total,Sweden of EU Europe Europe

External sales 9,348 3,921 794 14,063Assets 24,370 2,043 370 26,783Investments 412 31 1 –

North LatinAmerica America Asia Australia

External sales 1,013 175 948 1,039Assets 1,055 2 2 852Investments 7 – – 21

Total,Africa Saab Group

External sales 12 17,250Assets 10 28,704Investments – 472

Internal prices between the Group’s various segments are set based on the “arm’s length” principle. Each segment’s income, assets and liabilities(including provisions) include directly attributable items and items thatcan be allocated by segment in a reasonable and reliable manner. Eachsegment’s investments in tangible and intangible fixed assets include allinvestments other than those in short-term equipment and equipment oflesser value.



Operating areasOperating areas are the Group’s primary basis of classification. The businessactivities of the various operating areas are described on page 2 and page4–5.

Geographic marketsGeographic markets are the Group’s secondary basis of classification.

The information presented on the segments’ revenue refers to geographicmarkets grouped on the basis of the customer’s location. Information onthe segments’ assets and investments during the period in tangible andintangible fixed assets refers to geographic markets grouped on the basisof the asset’s location.

The Group’s segments are divided into the following geographicmarkets:

EU: Sales to EU member states relate primarily to deliveries fromSwedish subsidiaries. In Finland the manufacture of propellants andexplosives is carried out by a wholly owned subsidiary, and in Austria the development and manufacture of space equipment is also carried out by a wholly owned subsidiary.

North America: In the U.S. aircraft leasing operations and sales ofspares for the regional aircraft Saab 340 and Saab 2000 are carried out bywholly owned subsidiaries, and the customers of these companies are anumber of large U.S. airlines. Further, a wholly owned subsidiary manu-factures and sells signature management systems, for which the U.S. Army is a customer.

Australia: Sales of command and control systems for the AustralianNavy and Army are made primarily through the wholly owned subsidiarySaab Systems Pty Ltd. Hawker Pacific Pty, which is 75 percent owned,provides maintenance for regional aircraft.

NOTE 5 OTHER OPERATING INCOME


–03-12-31 –02-12-31 –03-12-31 –02-12-31Result from secondary operations 45 46 – –Reversal of structural reserves 50 165 – –Capital gains on sales of subsidiaries 13 20 – –Capital gains on sales of tangible 8 6 – –Trading income 3 11 3 11Guarantee fees – – – 28Revaluation of liabilities – – 8 –Exchange rate differences – – 1 6Other 38 34 – 9

Total 157 282 12 54

NOTE 6 OTHER OPERATING EXPENSES


–03-12-31 –02-12-31 –03-12-31 –02-12-31

Allocation to structural reserves – 309 –123 –156 –Write-down of receivables – 38 –16 – –Exchange rate differences –15 –19 – – 1Write-down of participations –10 –13 –Disposal of tangible fixed assets –10 – 9 – 2 – 4Capital losses on sales of subsidiaries – – 9 – –Result from secondary operations – 8 – 3 – –Other –127 – 82 – 4 –10

Total – 517 – 274 –162 –15

NOTE 7LEASES

Through wholly owned subsidiaries, Saab leases commercial aircraft itpreviously manufactured – Saab 340 and Saab 2000 – along spares for theseaircraft. These leasing operations are carried out in the global market, withan emphasis on North American and European customers. The terms ofboth operational and financial leases entered into conform with customaryterms in the international aircraft leasing market, which may entail the

right to early termination, purchases and extensions, as well as security,geographic and tax-related limitations on the allocation of the aircraft inquestion. The operations are carried out in USD.

Leasing fees for assets obtained via operating leases

Group Parent CompanyPremises Machinery Premises Machinery

and and and andbuildings equipment buildings equipment

Outcome2002 37 55 12 322003 49 60 17 31

Contracted2004 38 59 13 312005 31 40 10 232006 27 8 9 –2007 14 1 – –2008 9 – – –2009 and onwards 30 – – –

Total, contracted 149 108 32 54

Leased aircraft obtainedvia operating leases

Payments Payments Paymentsto lessors from airlines 1) from airlines 2)

Outcome2002 694 552 8102003 528 404 710

Contracted2004 455 356 6832005 390 291 5372006 410 277 3332007 365 201 1962008 328 140 1802009 and onwards 1,441 491 1,093

Total, contracted 3,389 1,756 3,022

1) Receipts from airlines for aircraft held and leased out via operating leases.2) Receipts from airlines for owned aircraft leased out via operating leases.

The above commitments relate mainly to the lease of Saab 340 to Americaninvestors and operators. Depreciation for the year on owned aircraft leasedout through operating leases amounted to SEK 408 m. (393).

Leased aircraft obtainedvia financial leases

2003 2002

Accumulated aquisition valueAt beginning of year 1,988 2,214Intra-Group transfers –71 –110Sales and revaluations –116

Total 1,917 1,988

Accumulated depreciationsAt beginning of year -838 – 847Intra-Group transfers 42 66Sales and revaluations 63Depreciations of year –104 –120

Total – 900 – 838

Accumulated write-downsAt beginning of year – 627 –1,078Sales and revaluations 60 451

Total – 567 – 627Residual value at year-end 450 523

Leasing fees for the year 147 235Contracted future leasing fees 1) 618 923

1) The above financial leases relate to 27 (28) Saab 340 and Saab 2000.



Nominal value Present valuePayments Payments Payments Payments

to from to fromlessors airlines2) lessors airlines2)

Outcome2002 235 234 – –2003 147 138 – –

Contracted2004 133 98 130 912005 131 71 123 562006 124 33 109 212007 82 16 68 62008 66 9 51 32009 and onwards 82 – 57 –

Total, contracted 618 227 538 177

2) Receipts from airlines for aircraft held via financial leases that have been leased out via operating leases.

Saab is not the lessor in financial leases.

AIRCRAFT FINANCINGIncome statement Saab Aircraft Leasing

Group03-01-01 02-01-01

–03-12-31 –02-12-31

Leasing revenue 1,298 1,583Interest revenue 207 196Other revenue 164 200

Total revenue 1,669 1,979

Leasing expenses – 585 – 755Interest expenses – 426 – 390Depreciation – 528 – 528Other expenses –400 – 542

Total expenses – 1,939 – 2,215Utilization of loss risk reserve 270 236

Operating income – –

Condensed balance sheet Saab Aircraft Leasing

Group03-12-31 02-12-31

AssetsLease assets 5,040 5,674Receivables 1,133 1,305Inventories 4 –Liquid assets 35 17


Shareholders’ equity and liabilitiesEquity 1,743 1,820Provisions 582 809Lease obligations 1) 2,597 2,926Liabilities to Group companies 31 329Other liabilities 1,259 1,112

Total equity and liabilities 6,212 6,9961) of which long-term obligations 2,178 2,597

Saab Aircraft Leasing’s income statement and balance sheet are mainlydollar-related, since aircraft sales and leases are always made in USD. The exchange rates used in the financial statements are shown on page 32.

In 2000 the aircraft on the balance sheet were written down by SEK1,451 m., of which SEK 1,030 m. against the loss risk reserve and theremaining portion against other liabilities. Because of divestments andrevaluations in 2003, accumulated write-downs amount to SEK 1,105 m., of which SEK 754 m. against the loss risk reserve. The total value of theportfolio on and off the balance sheet, excluding the 55 aircraft financedwith non-recourse funding, amounted to SEK 4.0 billion at year-end. Thereserve that adjusts the portfolio to market value amounted to SEK 0.3billion at year-end. The net value of the portfolio thus amounts to SEK 3.7billion.

The reserve is calculated based on future, contracted and projectedreceipts and disbursements as well as the value of the portfolio as reportedin the balance sheet. Since future disbursements are supported by currentinsurance policies, all guarantees are included in the allocation. Conse-quently, no contingent liabilities are reported in the Group.

NOTE 8DEPRECIATION/WRITE-DOWNS OF TANGIBLE AND INTANGIBLE FIXED ASSETS


–03-12-31 –02-12-31 –03-12-31 –02-12-31

Depreciation/amortization by asset

Capitalized development costs –11 – 5 – –Goodwill –139 –145 – –Other intangible assets – 30 – 31 – –Buildings and land –136 –133 – 51 – 48Plant and machinery –191 – 216 – 44 – 63Equipment, tools, fixtures and fittings –112 –110 – 39 –18Lease assets – 528 – 528 – –

–1,147 –1,168 –134 –129

Write-downsGoodwill – – 8 – –Other intangible assets – 4 – – –

Total –1,151 –1,176 –134 –129

Depreciation and amortization are based on each asset’s acquisition valueand estimated useful life as stated in the accounting principles on page 31.

NOTE 9INCOME FROM SECURITIES AND RECEIVABLES HELD AS FIXED ASSETS


–03-12-31 –02-12-31 –03-12-31 –02-12-31

Capital gains on sales of Group companies – – – – 34

Capital gains on sales of other securitiesheld as fixed assets 20 4 13 –

Dividends and contributions received from Group companies – – 900 547

Other dividends received – 1 – –Write-down of participations in Group companies – – –193 –144

Write-down receivables and other securities held as fixed assets – 59 – 73 – –1

Exchange rate differences, etc. – 8 10 –13 –

Total – 47 –58 707 368

NOTE 10OTHER INTEREST INCOME AND SIMILAR ITEMS


–03-12-31 –02-12-31 –03-12-31 –02-12-31

Interest income, Group companies – – 210 227Interest income, other 339 417 138 192Translation and exchange rate differences – 3 – –Less project interest accounted for in gross margin –114 – 200 – 60 –112

Total 225 220 288 307



NOTE 11INTEREST EXPENSES AND SIMILAR ITEMS


–03-12-31 –02-12-31 –03-12-31 –02-12-31

Interest expenses, Group companies – – –199 – 227Interest expenses, convertible debenture loan –13 –14 –13 –14

Translation and exchange rate differences –11 – – –Interest expenses other –198 –176 –146 –116Interest on pension debt – 176 –199 – 85 – 97

Total – 398 – 389 – 443 – 454

NOTE 12APPROPRIATIONS

Parent Company03-01-01 02-01-01

–03-12-31 –02-12-31Difference between book depreciation and depreciation according to plan

– Buildings and land –10 –10– Plant and machinery –13 –13

Total – 23 – 23

NOTE 13TAXES

Group03-01-01 02-01-01

–03-12-31 –02-12-31

Current tax expense (–)/tax recoverable (+)Tax expense for the year – 57 – 25Taxes related to previous years 49 7

Total – 8 –18

Deferred tax expense (–)/tax recoverable (+)Deferred tax related to temporary differences 24 –167Deferred tax related to tax amount in tax loss carryforwards not previously capitalized 9 115

Deferred tax expense related to utilization of previouslycapitalized tax amount in tax loss carryforwards – 332 –191

Total – 299 – 243

Tax on share in associated companies’ income – 8 –12

Total reported tax expense in Group – 315 – 273

Due to the utilization of tax loss carryforwards, no tax is paid by Saab ABand its wholly owned Swedish subsidiaries. The tax charge for the year isattributable primarily to the U.S. (38 percent tax) and Australia (30 percenttax).


–03-12-31 –02-12-31

Current tax expense (–)/tax recoverable (+)Tax expense for the year 124 –74Taxes related to previous years 14 –

Total 138 –74

Deferred tax expense (–)/tax recoverable (+)Deferred tax related to temporary differences – 72 –10Deferred tax related to tax amount in tax loss carryforwards not previously capitalized 3 –

Deferred tax expense related to utilization of previouslycapitalized tax amount in tax loss carryforwards –172 – 70

Total – 241 – 80

Total reported tax expense in Parent Company –103 –154

Current tax expense for the year relates in its entirety to tax on Groupcontributions received.

Reconciliation of effective tax rate Group03-01-01 02-01-01

–03-12-31 –02-12-31Percent Amount Percent Amount

Income before taxes 1,073 993Tax according to current tax rate forParent Company 28.0% – 300 28.0% – 278

Effect of other tax rates forforeign subsidiaries – 0.4% 4 0.3% – 3

Amortization of Group goodwill 3.5% – 38 4.3% – 43Other non-deductible expenses 5.4% – 58 8.5% – 84Tax-exempt income – 1.8% 19 – 2.7% 27Utilization of tax loss carryforwardsnot previously capitalized –0.8% 9 –14.1% 140

Tax related to previous years – 4.6% 49 1.5% –15Revaluation of deferred tax in foreign

subsidiaries – – 1.7% –17

Reported effective tax rate 29.4% – 315 27.5% – 273


–03-12-31 –02-12-31Percent Amount Percent Amount

Income before taxes 844 616Tax according to current tax rate forParent Company 28.0% – 236 28.0% –172

Non-deductible expenses 8.1% – 68 6.0% – 37Tax-exempt income – 22.6% 191 – 6.0% 37Tax related to previous years –1.7% 14 – –Utilization of tax loss carryforward not previously capitalized – 0.4% 3 – 4.1% 25

Other 0.8% –7 1.1% – 7

Reported effective tax rate 12.2% –103 25.0% –154

NOTE 14CAPITALIZED DEVELOPMENT COSTS

Group03-12-31 02-12-31

Accumulated acquisition valueAt beginning of year 399 –Purchases 394 360Reclassification 1 39

Total 794 399

Accumulated amortization At beginning of year – 5 –Amortization for the year –11 – 5

Total –16 – 5

Residual value carried forward 778 394

Amortization of capitalized development costs begins after the asset iscompleted and continues over its useful life, which is matched againstfuture revenues.

Amortization for the year is reported in the income statement on theline Research and development costs.

Development costs are capitalized only in the consolidated financialstatements. In legal units, on the other hand, all expenditures for develop-ment work are expensed. This means that the Parent Company does notcarry forward any expenditures for development work.



NOTE 15GOODWILL

Group03-12-31 02-12-31

Accumulated acquisition valueAt beginning of year 2,210 2,126Purchases –3 114Sales and disposals of business operations – –30Translation differences for the year –3 –

Total 2,204 2,210

Accumulated amortizationAt beginning of year –383 –245Sales and disposals of business operations – 7Amortization for the year –139 –145

Total –522 –383

Accumulated write-downsAt beginning of year – 55 – 47Write-downs for the year – – 8

Total – 55 – 55

Residual value carried forward 1,627 1,772

Amortization for the year is reported on the following lines in the income statement:

Cost of goods sold –135Marketing expenses – 4

Goodwill is normally amortized on a straight-line basis over 5–10 years,while goodwill arising from strategic, long-term acquisitions is amortizedover 20 years.

Of the reported goodwill value, SEK 1,430 m. relates to the acquisitions of Celsius and AerotechTelub and is mainly amortized over 20 years. The remaining amortization period is 15–16 years. The acquisitions areconsidered long-term and strategic, since the acquired companies hadestablished competencies, longstanding custome relationships and high-tech product ranges in the defence area.

Write-down requirements are estimated regularly through a calculationof discounted future cash flows for the business operations to which thegoodwill is attributable.

Purchase for the year include the write-down of a previously estimatedsupplemental purchase price.

NOTE 16OTHER INTANGIBLE ASSETS


Accumulated acquisition valueAt beginning of year 456 438 – –Purchases 6 18 – –Reclassification –11 – – –

Total 451 456 – –

Accumulated amortizationAt beginning of year – 244 –213 – –Amortization for the year – 30 –31 – –

Total – 274 –244 – –

Accumulated write-downsAt beginning of year – 81 –81 – –Amortization for the year – 4 – – –Total – 85 –81 – –

Residual value carried forward 92 131 – –

Amortization is booked on a straight-line basis over 5–10 years and reportedin the income statement on the line Cost of goods sold.

Of the reported value, SEK 82 m. refers to product and technology rightsthat are amortized over 10 years. The remaining amortization period is 3–4 years. The amortization period is based on estimated future revenues.

Write-down needs are estimated regularly through a calculation ofdiscounted future cash flows for the business operations to which thegoodwill is attributable.

NOTE 17BUILDINGS AND LAND


Accumulated acquisition valueAt beginning of year 4,323 4,180 1,311 1,273Purchases 218 167 126 48Acquisitions of companies and intra-Group acquisitions – 18 – –

Sales and disposals –97 –37 –15 –10Reclassifications –23 – – –Translation differences for the year 8 –5 – –

Total 4,429 4,323 1,422 1,311

Accumulated depreciationAt beginning of year –1,804 –1,693 – 669 –626Sales and disposals 48 20 13 5Depreciation for the year –136 –133 – 51 –48Translation differences for the year – 2 2 – –

Total –1,894 –1,804 – 707 –669

Accumulated net revaluationAt beginning of year 538 575 530 566Depreciation for the year on revaluated amount – 36 –37 – 36 –36

Total 502 538 494 530

Residual value carried forward 3,037 3,057 1,209 1,172

Tax assessment value, buildings (Sweden) 1,491 1,438 516 501Tax assessment value, land (Sweden) 483 586 193 1901) Acquisition value includes capitalized interest of 11 11 – –

Group Parent CompanyOf which land 03-12-31 02-12-31 03-12-31 02-12-31

Accumulated acquisition value 174 176 23 23Accumulated revaluations 16 17 7 7

Reported value at end of period 190 193 30 30

Buildings are depreciated on a straight-line basis over 20–25 years.Depreciations for the year are allocated by function in the income state-ment according to each asset’s use.

No properties are possessed via financial leases.

NOTE 18PLANT AND MACHINERY


Accumulated acquisition valueAt beginning of year 3,160 3,278 1,009 1,061Purchases 164 272 55 118Acquisitions of companies – 26 – –Sales and disposals –179 – 411 – 22 –170Reclassifications – 277 – –187 –Translation differences for the year 6 – 5 – –

Total 2,874 3,160 855 1,009

Accumulated depreciationAt beginning of year – 2,354 –2,398 – 745 –822Sales and disposals 153 259 21 140Depreciation for the year –191 –216 – 44 –63Depreciation of reclassification 236 – 138 –Translation differences for the year – 4 1 – –

Total 2,160 –2,354 – 630 –745

Residual value carried forward 714 806 225 264

Plant and machinery are depreciated on a straight-line basis over 5–10years. Depreciations for the year are allocated by function in the income sta-tement according to each asset’s use.

No assets are possessed via financial leases.



NOTE 19EQUIPMENT, TOOLS, FIXTURES AND FITTINGS


Accumulated acquisition valueAt beginning of year 1,381 1,429 683 669Purchases 154 110 84 19Acquisitions of companies – – – 2 –5Sales and disposals –148 –152 – 347 –Reclassifications 314 – 187 –Translation differences for the year – 3 – 6 – –

Total 1,698 1,381 605 683

Accumulated depreciationAt beginning of year –1,072 –1,099 – 591 – 578Acquisitions of companies – – 2 –Acquisitions of companies 135 130 347 5Depreciation for the year –112 –110 – 39 –18Depreciation of reclassification – 236 – –138 –Translation differences for the year 2 7 – –

Total –1,283 –1,072 – 419 – 591

Residual value carried forward 415 309 186 92

Equipment, tools, fixtures and fittings are depreciated on a straight-linebasis over 3–10 years. Depreciations for the year are allocated by functionin the income statement according to each asset’s use.

No assets are possessed via financial leases.

NOTE 20

LEASE ASSETS


Accumulated acquisition valueAt beginning of year 10,027 10,428 – –Purchases 37 72 – –Sales and disposals –154 – 223 – –Translation differences for the year – 288 – 250 – –

Total 9,622 10,027 – –

Accumulated depreciationAt beginning of year – 3,150 – 2,874 – –Sales and disposals 73 130 – –Depreciation for the year – 528 – 528 – –Translation differences for the year 126 122 – –

Total – 3,479 – 3,150 – –

Accumulated write-downsAt beginning of year –1,205 –1,451 – –Sales for the year and revaluations 100 246 – –

Total –1,105 –1,205 – –

Residual value carried forward 5,038 5,672 – –

Lease assets possessed via financial leases

Estimated acquisition value of assets 1,917 1,988 – –Leasing fees paid during the fiscal year 147 235 – –Contracted future leasing fees 618 923 – –

Lease assets are depreciated on a straight-line basis over 20–25 years. The results from leasing operations including depreciation are reported in the income statement on the lines Other operating expenses or Otheroperating income.

NOTE 21CONSTRUCTION IN PROGRESS AND ADVANCE PAYMENTS FOR TANGIBLE FIXED ASSETS

Group Parent Company2003 2002 2003 2002

At beginning of year 153 97 119 27Purchases and transfer to purchases of other asset classes – 64 72 – 87 92

Sales and disposals – 11 – 3 – –Reclassifications –14 –11 – –Translation differences for the year – – 2 – –

Residual value according to plancarried forward 64 153 32 119

NOTE 22PARTICIPATIONS IN GROUP COMPANIES


Accumulated acquisition valueAt beginning of year 10,184 9,617New issues/shareholders’ contributions 1,054 144Purchases 631 711Sales – 35 – 258Reclassifications –10 – 30

Total 11,824 10,184

Accumulated write-downsAt beginning of year and end –385 –241Write-downs for the year –193 –144

Total –578 –385

Closing book value 11,246 9,799

Write-downs for the year are reported in the income statement on the lineResult from securities and receivables accounted for as fixed assets.



AB Celsius Finance, 556284-6047, Stockholm 25,000 100.0% 3Celsius AB, 556194-4652, Stockholm 28,066,038 100.0% 5,050

AerotechTelub Holding AB, 556206-7131,Arboga 2,850 100.0% –AerotechTelub AB, 556218-6790,Arboga 500,000 100.0% –

Celsius Metech AB, 556080-0210,Arboga 60,000 100.0% –Celsius Metech Oy, Finland 1,200 100.0% –Celsius Metech A/S, Denmark 5,000 100.0% –Celsius Metech GmbH, Germany – 100.0% –

Telub Holding AB, 556153-9924, Stockholm 9,152,108 100.0% –Saab Contracting AB, 556246-0419,Arboga 5,000 100.0% –

Celsius Fastighets AB, 556274-5090, Stockholm 1,000 100.0% –Celsius Invest AB, 556164-6588, Stockholm 1,720,000 100.0% –

Fastighets AB Elektra, 556042-4102, Stockholm 20,000 100.0% –Fastighets AB Geväret, 556291-8424, Stockholm 1,000 100.0% –AB Götaverken, 556205-5615, Göteborg 3,000,000 100.0% –

Götaverken Regalia AB, 556249-8583, Göteborg 500 100.0% –Götaverken Rig AB, 556292-3044, Göteborg 1,000,000 100.0% –Kockums Holdings AB, 556036-4100, Malmö 48,000 100.0% –

Kockums Engineering AB, 556277-1658, Malmö 2,000 100.0% –Alpha Thames Engineering Ltd, United Kingdom – 100.0% –Alpha Thames Ltd, United Kingdom 12,000 100.0% –

Celsius Materialteknik CMT AB, 556354-6349, Linköping 20,000 100.0% –Celsius Weapon Systems AB, 556258-2352, Stockholm 10,000 100.0% –Saab Aviocomp AB, 556347-9251, Linköping 163,000 100.0% –

Saab Aviocomp R.I.A.S. B.V., the Netherlands 100 100.0% –Saab Communication AB, 556181-4418, Stockholm 21,000 100.0% –Saab Facilities Stockholm AB, 556244-5683, Järfälla 170,000 100.0% –

Fastighets AB Järfälla Veddesta 2:81, 556475-4785, Järfälla 5,000 100.0% –Saab International AB, 556267-8994, Stockholm 50,000 100.0% –

Saab International Chile S.A., Chile 999 99.9% –Saab International Canada Ltd, Canada 25,765 100.0% –Saab International Danmark A/S, Denmark 5,000 100.0% –Saab International Deutschland GmbH, Germany – 100.0% –Saab International Finland Oy, Finland 50 100.0% –Saab International Norge A/S, Norway 50 100.0% –Saab International Singapore Pte Ltd, Singapore 25,000 100.0% –

Saab Pacific Pty Ltd,Australia 9 100.0% –Saab Pacific Development Pty Ltd,Australia 4,050,000 100.0% –Saab Systems Pty Ltd,Australia 1,512,002 100.0% –

Saab Professional Pty Ltd,Australia 2 100.0% –Saab ITS Pty Ltd,Australia 740 74.0% –

Saab Bofors Dynamics Australia Pty Ltd,Australia 2,000 100.0% –Saab Pacific Investment Holdings Pty Ltd,Australia 2 100.0% –

SaabTech Systems AB, 556363-6785, Järfälla 2,051,230 100.0% –Combitech Systems AB, 556258-8862, Jönköping 5,000 100.0% 109Cromarty Ltd, Ireland 2 100.0% 40

Servanda Co Ltd, Cayman Islands 2,000,000 100.0% –CSM Materialteknik AB, 556517-3951, Linköping 40,000 100.0% 7Fastighets AB Bataljonsgatan, 556378-6267, Jönköping 100 100.0% –Glasnamanagh Holdings Ltd, Ireland 10,000 100.0% 341

Redstone Management Ltd, Jersey 11,000 100.0% –Scaraden Investments Ltd, Jersey 11,000 100.0% –

Hawker Pacific Pty Ltd,Australia 10,000,000 75.0% –Australian Aerospace Pty Ltd,Australia 5,608,483 100.0% –Australian Avionics Pty Ltd,Australia – 100.0% –Hawker Pacific (Australia) Pty Ltd,Australia 10,500,001 100.0% –Hawker Pacific Asia Pte Ltd, Singapore 1,300,000 100.0% –Hawker Pacific (Malaysia) Sdn Bhd, Malaysia 200,000 100.0% –HPP Aviation Services Inc., Australia – 100.0% –

HS Memory AB, 556165-9326, Linköping 900 100.0% 2Lansen Försäkrings AB, 516401-8656, Linköping 100,000 100.0% 30MX Composites AB, 556291-6857, Linköping – 54.5% 11Nexplo Industries AB, 556559-8801, Karlskoga 600 60.0% 104

Nexplo Bofors AB, 556267-9372, Karlskoga 250,000 100.0% –Bofors BEPAB AB, 556392-7325, Karlskoga 80,000 100.0% –Saab Bofors Test Center AB, 556035-3558, Karlskoga 7,200 9.0% –Nexplo Bofors Inc., USA 1,000 100.0% –

Nexplo Vihtavuori Oy, Finland 160,000 100.0% –Saab Aerospace Overseas AB, 556628-6448, Linköping 100 100.0% 3

Saab Aerospace Marketingservice GmbH,Austria – 100.0% –SANIP (Pty) Ltd, South Africa 200,000 100.0% –Saab-Gripen Hungary Industrial Cooperation and Consulting Ltd,Hungary – 96.7% –

Saab Aircraft AB, 556062-7647, Linköping 100,000 100.0% 10

Saab Aircraft Leasing Holding AB, 556124-3170, Stockholm 30,000 100.0% 2,203Saab-Scania Rental AB, 556056-9807, Stockholm 1,000 100.0% –Fairbrook Inc., USA 100 100.0% –

Fairbrook Leasing Inc., USA 100 100.0% –Lambert Leasing Inc., USA 100 100.0% –Saab Aircraft Leasing Inc., USA 100 100.0% –

2000 Aircraft Credit AB, 556464-6031, Stockholm 787,000 100.0% –SF340 Leasing AB, 556258-8847, Linköping 1,000 100.0% –

Aero Three AB, 556258-8920, Linköping 1,000 100.0% –Swedish Aircraft Two KB, 916691-8194, Stockholm – 50.3% –Swedish Aircraft Three KB, 916694-4384, Linköping – 100.0% –Swedish Aircraft Four KB, 916694-4372, Stockholm – 50.3% –

Swedish Aircraft Holdings AB, 556573-7805, Stockholm 1,000 100.0% –Saab Military Aircraft Ltd., United Kingdom 100 100.0% –Saab Barracuda Holding AB, 556627-4998, Linköping 1,000 100.0% 70

Saab Barracuda AB, 556045-7391,Västervik 200,000 100.0% –Barracuda Canada Inc., Canada 100 100.0% –Barracuda Camoflage (P) Ltd, India 81,400 95.0% –Saab Barracuda Pty Ltd,Australia 75,000 100.0% –Saab Barracuda S.A., France 4,996 99.9% –

Saab Dynamics AB, 556055-9691, Linköping 1,000,000 100.0% 120Saab Hangaren Förvaltning AB, 556047-0873, Linköping 20,000 100.0% 2Saab Holding B.V., the Netherlands 180 100.0% 674

Saab Finance B.V., the Netherlands – 100.0% –Saab Training System B.V., the Netherlands – 100.0% –Götaverken Netherlands B.V., the Netherlands – 100.0% –

Saab Holding One AB, 556094-0909, Linköping 1,000 100.0% 69Saab Bofors Underwater Systems AB, 556439-6884, Karlskoga 250,000 100.0% –

Saab Holding U.S. Inc., USA 10 100.0% 822Saab Aircraft of America LLC, USA 100 100.0% –Saab Barracuda LLC, USA 100 100.0% –Saab International USA LLC, USA 100 100.0% –Saab Training LLC, USA 100 100.0% –Celsius Holding Florida Corp., USA 10 100.0% –

Celsius Holding Delaware Corp., USA 100 100.0% –Saab International (Thailand) AB, 556378-6275,Linköping 2,000 100.0% –Saab IRS AB, 556055-0773, Linköping 200 60.0% 6Saab Scandinavian Holding AB, 556080-5771, Linköping 1,000 100.0% 357

Saab Bofors Dynamics AB, 556264-6074, Karlskoga 500,000 100.0% –Saab Bofors AB, 556267-9455, Karlskoga 2,000,500 100.0% –

Saab Bofors Industrier AB, 556331-5463, Karlskoga 22,250 100.0% –Wikers AB, 556014-2126, Karlskoga 5,900 100.0% –

Saab Bofors Support AB, 556016-3247, Karlskoga 176 66.0% –Bofors Personalbutiker AB, 556338-1564, Karlskoga 1,000 100.0% –

Saab Bofors Test Center AB, 556035-3558, Karlskoga 48,800 61.0% –Saab Bofors Dynamics Deutschland GmbH, Germany 500 100.0% –Bofors (UK) Ltd, United Kingdom 10,000 100.0% –

Saab Nyge Aero Holding AB, 556036-0207, Linköping 1,100,000 100.0% 120Saab Nyge Aero AB, 556043-5413, Nyköping 5,000 100.0% –

Norsk Flygtjenste A/S, Norway 4,519 100.0% –Saab Space Holding AB, 556627-6118, Linköping 1,000 100.0% 9

Saab Ericsson Space AB, 556134-2204, Göteborg 90,000 60.0% –Saab Ericsson Space Fastighets AB, 556230-7404, Göteborg 1,000 100.0% –Saab Ericsson Space Inc., USA 100 100.0% –Austrian Aerospace GmbH,Austria – 100.0% –

Saab Supporter Ett AB, 556121-2597, Linköping 1,000 100.0% 95SaabTech AB, 556460-1655, Stockholm 1,000 100.0% 647

EMC Service Elmiljöteknik AB, 556315-6636, Mölndal 400 100.0% –Saab Technologies Inc., USA – 100.0% 1Saab Training Systems AB, 556030-2746, Jönköping 150,000 100.0% 42

Saab Training Systems Canada Ltd, Canada 300,000 100.0% –Saab Training Systems GmbH, Germany 4,000 100.0% –Saab Training Systems UK Ltd, United Kingdom 100,000 100.0% –

Saab TransponderTech Holding AB, 556627-6217, Linköping – 100.0% 32Saab TransponderTech AB, 556535-9790, Solna – 100.0% –

Saab Treasury AB, 556147-5939, Linköping 30,000 100.0% 3Shipknow AG, Switzerland 240 100.0% 7

Götaverken International N.V., Curacao – 100.0% –Bounty Corp., Liberia 10 100.0% –

SMM Medical AB, 556123-6414, Linköping 600 60.0% 4Dormant companies, real estate companies, etc. – – 253

Reported value at year-end 11,246

Note 22, cont.Specification of Parent Company’s and Group’s participations in Group companies

Re-No. of Share, ported

Subsidiary/Corp. ID no./Reg. office shares % 1) value

Re-No. of Share, ported

Subsidiary/Corp. ID no./Reg. office shares % 1) value

i) Ownership interest refers to the share of capital, which also coincides with the share of votes for Total number ofshares.

NOTE 23RECEIVABLES FROM GROUP COMPANIES


Accumulated acquisition valueAt beginning of year 144 518Additional receivables 12 –Cleared receivables – 8 –374

Reported value at year-end 148 144

NOTE 24PARTICIPATIONS IN ASSOCIATED COMPANIES


Accumulated acquisition valueAccumulated acquisition value 256 241 4 3Purchases – 16 77 1Sales – –38 – –Reclassifications –8 51 – –Exchange rate/exchange differences for the year –12 2 – –

Net income for the year 39 –16 – –

Reported value at year-end 275 256 81 4

Specification of Parent Company’s and Group’s participations in associated companies

Share of ReportedAdjusted equity value for

Associated company/ equity/ Share, for ParentCorp. ID no./Reg. office net income 1) % 2) Group Company

A2 Acoustics AB,556052-5601, Linköping 1/0 40.0 1 –

Aero Systems Engineering Inc.,USA 3) 9/0 29.0 9 9

Booforsen Fastighets AB,556381-0539, Karlskoga 12/0 50.0 12 11

Caran Saab Engineering AB,556615-7581, Linköping 3/0 50.0 3 2

Grintron (Pty) Ltd,South Africa 74/6 49.0 74 77

Industrikompetens i Östergötland AB,556060-5478, Linköping 2/–2 33.0 2 1

Nammo A/S,Norway 163/30 27.5 163 55

Sörman Information AB,556221-2034,Växjö 11/5 25.3 11 6


1) Adjusted equity relates to the owned share of the company´s equity, including equity in untaxed reserves. Netincome relates to the owned proportion of the company´s income after tax, including the portion of equity inthe year’s change in untaxed reserves.

2) Ownership interest refers to the share of capital, which also coincides with the share of votes for total numberof shares.

3) The company is not reported according to the equity method, as the holding in the company is not consideredlong-term.

NOTE 25RECEIVABLES FROM ASSOCIATED COMPANIES


Accumulated acquisition valueAt beginning of year 13 50 – 33Additional receivables – – – –Cleared receivables –6 –37 – –33

Reported value at year-end 7 13 – –



NOTE 26PARTICIPATIONS IN JOINT VENTURES


Accumulated acquisition valueAt beginning of year 22 –Reclassification 10 –Other changes – 22


Specification of Parent Company’s and Group’s participations in joint venturesShare, Reported value for

Company/Corp. ID no./Reg. office % Parent CompanyGripen International KB,969679-8231, Linköping 50.0 22

Gripen Venture Capital AB,556298-6629, Linköping 50.0 10

SAAB-BAE Systems Gripen AB,556527-6721, Linköping 50.0 –

Saab Ericsson NBD Innovation AB,55628-6406, Linköping 60.0 –

Reported value at year-end 32

Joint ventures are accounted for in accordance with the proportional method.This means that the Group’s share of assets, liabilities, income and costs ina jointly controlled company is added item by item to the correspondingitems in the consolidated income statement and balance sheet.

NOTE 27OTHER SECURITIES HELD AS FIXED ASSETS


Accumulated acquisition valueAt beginning of year 157 225 97 77Purchases 33 27 1 20Sales – 43 –1 – 38 –Write-downs –16 –73 – –Reclassifications 8 –21 – –


Specification of the Group’s other securities held as fixed assetsNo. of Share, Report.

Company shares % value

1428 Sopranu (Pty) Ltd – 45.0 –Arbustum Invest AB 10,000 4.0 6Ariane Space Participation 1,621,745 0.8 –Atelsat (Pty) Ltd – – –Aviation Financial Services AG 100 20.0 –b-business partners B.V. 100,000 – 33Biological Control Products No 1 (Pty) Ltd – 28.5 7Caviditech AB 58,065 13.2 9Ecoship Engineeering AB 625 12.5 –Ericsson Saab Surveillance Systems AB 500 50.0 –Fastighets AB Inedal 1,575 10.5 4Fusion Lighting Inc. 625,000 7.5 –Global Geo Services A/S 795,486 2.8 3Industriellt Utvecklingscentrum i Karlskoga AB 100 15.0 –Industriellt Utvecklingscentrum i Skåne AB 750 26.8 –Intospace GmbH – 1.0 –Iteksa Venture AB – 20.0 19Länsteknikcentrum AB 300 1.8 –MI Factory Latin America S.A. – 12.5 7Micro Z Sweden AB 110 9.9 –Raufoss Ammunisjionsfabrikker A/S 1,125,000 15.0 –Silplat (Pty) Ltd – 11.0 16Smaaland Project Venture AB 330 33.0 –SN Technologies S.A. 100 50.0 1Societe Ariane Space 3,862 0.8 –Stiftelsen Alfred Nobels Björkborn 1 25.0 –Swiss International Airlines 6 – –Taurus System GmbH 1 33.0 –Wah Nobel (Pvt) Ltd 122,515 27.2 23Österreichische Gesällschaft für Weltraumfragen GmbH – 6.8 –Other – – 11


NOTE 28DEFERRED TAX RECEIVABLES

Deferred tax consists of tax on temporary differences between reported andfiscal valuations of assets and liabilities. The Group’s temporary differenceshave resulted in receivables and liabilities related to the following items:

Group, Dec. 31, 2003Deferred tax Deferred tax

receivables liabilities Net

Capitalized development work – 218 – 218Buildings and land 12 – 229 – 217Machinery and equipment, etc. 2 –1,090 –1,088Inventories 105 – 105Accounts receivable 18 – 18Provisions for pensions 60 – 60Other provisions 961 –169 792Tax allocation reserve – –106 –106Other 71 – 71Tax loss carryforwards 1,564 – 1,564

2,793 –1,812 981Net accounting –1,812 1,812 –

Net deferred tax receivables 981 – 981

Group, Dec. 31, 2002Deferred tax Deferred tax


Capitalized development work –110 –110Buildings and land 8 – 251 – 243Machinery and equipment, etc. 14 –1,194 –1,180Inventories 56 – 56Accounts receivable 21 – 21Provisions for pensions 67 – 67Other provisions 814 – 814Tax allocation reserve – –111 –111Other 69 – 69Tax loss carryforwards 1,896 – 1,896

2,945 –1,666 1,279Net accounting –1,666 1,666 –

Net deferred tax receivables 1,279 – 1,279

Parent Company Dec. 31, 2003Deferred tax Deferred tax


Buildings and land – –136 –136Provisions for pensions 41 – 41Other provisions 557 – 557Tax loss carryforwards 570 – 570

1,168 –136 1,032Net accounting –136 136 –


Parent Company Dec. 31, 2002Deferred tax Deferred tax


Buildings and land – –146 –146Provisions for pensions 44 – 44Other provisions 633 – 633Tax loss carryforwards 742 – 742

1,419 –146 1,273Net accounting –146 146 –


Differences between the years are accounted for as deferred tax expenses ordeferred tax recoverable except amounts reported directly against share-holders’ equity.

Deferred tax liabilities within the Group amount to SEK 1,812 m. (1,666),of which SEK 1,183 m. (1,299) relates to accumulated accelerated deprecia-tion and SEK 136 m. (146) to the revaluation of property.

Of the Parent Company’s deferred tax liabilities, SEK 136 m. (146) relatesto the revaluation of property.

Of the tax loss carryforwards of SEK 5,200 m. (6,300), SEK 4,080 m.(5,000) has no time limit, while SEK 1,120 m. (1,300) has a limit of 20 yearsand expires between the years 2018 and 2023.



NOTE 29OTHER LONG-TERM RECEIVABLES


Interest-bearingAt beginning of year 1,040 1,246 – 11Additional receivables 99 51 – –Cleared receivables – 381 – 257 – –11

Reported value at year-end 758 1,040 – –

Interest-bearing receivables within the Group relate to an installmentreceivable of SEK 322 m. (452), corresponding to the present value offuture lease payments for the oil rig Petrobras XXIII. The remainderconsists mainly of receivables for disposals of assets.

Non-interest-bearingAt beginning of year 851 926 34 –Additional receivables 15 21 – 34Cleared receivables –108 –96 – 34 –

Reported value at year-end 758 851 – 34

Non-interest-bearing receivables consist mainly of deposits for Saab Air-craft Leasing.

NOTE 30INVENTORIES


Raw materials and consumables 1,813 1,389 382 254Work in progress 3,780 3,474 2,687 2,167Finished goods and goods for resale 948 1,463 7 4Advance payments to suppliers 347 427 100 89Less utilized advances from customers –2,755 –3,008 –2,302 –1,758

Reported value at year-end 4,133 3,745 874 756

The inventory is valued at the lower of acquisition value and net realizablevalue. The value of the inventory reported at net realizable value is SEK875 m.

Inventories have been written down by SEK 189 m. during the year for spares for the regional aircraft Saab 340 and Saab 2000.

Saab has reached agreement with the Ministry of Industry and Com-merce that the National Debt Office will co-finance Saab’s participation in the Airbus 380 project. The co-financing is a royalty loan maximized at SEK 350 m. Repayment will take the form of a royalty on each deliveryto Airbus. In 2003 the National Debt Office paid out SEK 150 m., whichreduces inventory in the financial statements.

NOTE 31PREPAID EXPENSES AND ACCRUED INCOME

Prepaid expenses and accrued income amounted to SEK 1,577 m. (1,289) inthe Group and SEK 165 m. (298) in the Parent Company. Prepaid expensestotaled SEK 282 m. (407) in the Group and SEK 967 m. (643) related to accruedincome according to the percentage and completion method. SEK 102 m.(118) is attributable to accrued leasing fees for Saab Aircraft Leasing.

NOTE 32SHORT-TERM INVESTMENTS


Interest-bearing securities 3,290 3,116 3,290 3,116Other 515 253 352 128

Reported value at year-end 3,805 3,369 3,642 3,244

The market value of interest-bearing securities amounted to SEK 3,297 m.(3,130) in the Group and SEK 3,297 m. (3,130) in the Parent Company.

Financial investments are made in Swedish Government bonds, mortgagebonds and commercial paper. The investment policy calls for fixed interestterms of 0–27 months to avoid excessive fluctuations due to interest ratechanges. At year-end, the average interest term was 12 months (21).

NOTE 33FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

Foreign currency risksForeign currency risk refers to the risk fluctuations in exchange rateswhich will have an effect on Group income. Exchange rate fluctuationsaffect Saab’s income and shareholders’ equity in various ways:• Income is affected when sales revenue and production costs are in differ-

ent currencies (transaction exposure). • Income is affected when the income of foreign subsidiaries is translated

to Swedish kronor (translation exposure).• Income or shareholders’ equity is affected when the assets and liabilities of

foreign subsidiaries are translated to Swedish kronor (translation exposure).

Transaction exposure The commercial currency flow after net calculations of opposite flows inthe same currencies – the transaction exposure – amounted to SEK 326 m.(1,406) in 2003. The Group’s primary invoicing currencies are SEK, EUR,USD and GBP.

Translation exposure Only a small portion of the Group’s operations is conducted by foreignsubsidiaries. The value of foreign subsidiaries’ shareholders’ equityamounted to approximately SEK 2,000 m. at year-end.

Net assets USD EUR AUD Other currencies

SEK m. 1,190 469 186 93

The foreign currency risk to the Group’s income and shareholders’ equityfrom translation effects – the translation exposure – is not hedged.

Interest rate risksDepending on the liquidity situation, Saab’s income is directly affected bychanges in market interest rates through a change in net financial items andthrough the impact on gross income of the interest rate effects of advancefinancing. In 2003 the average of interest-bearing receivables cash andmarketable securities less liabilities to credit institutions and other interest-bearing liabilities was SEK 3,782 m. (3,975). Saab tries to achieve risk neutral-ity with regard to interest rate risks by seeking similar interest terms on theassets and liabilities sides of the balance sheet. Management of the Group’sinterest rate exposure is centralized, which means that Saab Treasury isresponsible for identifying and managing this exposure.

Assets 03-12-31 02-12-31

Long-term interest-bearing receivables 765 1,053

Current interest-bearing receivables 39 55



Liabilities

Liabilities to credit institutions 395 511

Other borrowing and other interest-bearing liabilities 467 461


Total liabilities 1,094 1,202

Net liquidity 3,953 3,763

Pension liabilities 3,458 3,411

Net liquidity after deducting pension liabilities 495 352

Liquidity management and financial credit risksLiquidity management is handled centrally within the framework of aninvestment policy determined by the Board of Saab AB. The investmentpolicy is based on a benchmark, from which the following deviations arepermitted in regard to duration and credit risk:

Bench- Min. Max. Dec. 31, Dec. 31,mark Risk Risk 2003 2002

Government 80% 100% 40% 58% 56%Mortgage (min A) 20% 40% 32% 39%Corporate (min A) 20% 10% 5%Duration 15 mos. 0 mos. 27 mos. 12 mos. 21 mos.

The interest rate risk in the investments given a 1 bp parallel shift in theyield curve was SEK 0.36 m. (0.54) as of December 31, 2003.

Investments are made in securities with minimum short- and long-termcredit ratings of A1/P1 from Moody’s and A-1/A from S&P. The credit risk

calculation is based on actual and anticipated credit risk, according to therecommendations of the Bank of International Settlement (BIS). As ofDecember 31, 2003 counterparty risks amounted to SEK 4,333 m. (4,143), ofwhich mortgage institutions SEK 1,224 m. (1,232). In 2003 average investedcapital was SEK 2,989 m. (3,069). The average return on external invest-ments was 3.95 percent (4.84). The average return including changes inmarket value amounted to 4.11 percent (5.24).

Refinancing risksRefinancing risk refers to the risk that the company will not be able to meet its payment liabilities due to insufficient liquidity or difficulties raisingexternal loans.

As of December 31, 2003 Saab had net liquidity of SEK 495 m. (352) after deducting liabilities to credit institutions and other interest-bearingliabilities of SEK 1,094 m. (1,192) and provisions for pensions of SEK 3,458 m.(3,411). In addition to its net liquidity, Saab is able to obtain financing in partby externally refinancing all or parts of its regional aircraft fleet, which atpresent is internally financed for approximately SEK 2.4 billion, as well asby utilizing binding credit facilities. Saab centralizes management of theGroup’s financing. It has no rating at present.

Customer credit riskOutstanding accounts receivable constitute a credit risk where the Groupcan lose money. As of December 31, 2003 accounts receivable amounted toSEK 3,071 m. (2,682). Defence-related sales account for 80 percent of totalsales, and as such the counterparties in accounts receivable are primarilynations with high creditworthiness. The Group’s receivables are mainly inWestern Europe, which accounts for 79 percent of the total, compared withthe Group’s sales in the same region of approximately 81 percent. In WesternEurope the largest receivables are in Sweden, the UK, France and Germany,representing 71 percent of the total.

Where counterparties’ creditworthiness is deemed unsatisfactory,guarantees are secured.

Supplier credit riskAdvances paid to suppliers constitute a credit risk where the Group canlose money. As of December 31, 2003 the Group had paid advances tosuppliers of SEK 347 m. (427). The Group’s policy is to always maintainbank-guaranteed security for any advances it pays.

Customer financeCustomer finance provides an important tool for marketing the company’sproducts. Export customers are placing increasing demands on finance.Normally Saab works together with banks and guarantee institutions tofind various solutions to meet customers’ needs. This is done primarily bythe bank giving the buyer credit or by providing supplier credits. To limitrisk exposure, the risks are sold on the market to banks and governmentguarantee institutions, such as the Export Credits Guarantee Board in Sweden.

TradingThe Board of Saab has issued a risk mandate for proprietary trading inforeign exchange and money market instruments of SEK 20 m., expressedaccording to Value at Risk (VaR). VaR, a probability-based method basedon historic exchange rate fluctuations and correlations, is an establishedpractice in the financial field. The method measures the maximum lossduring a specific number of days with a certain probability. Within Saab,three days and 99 percent probability are used. With VaR, the risks forvarious types of assets can be aggregated to a single measure. If the accu-mulated result during the year is negative, the mandate is reduced by acorresponding amount. In 2003 trading income was SEK 3 m. (11). Theaverage utilized risk mandate (VaR) during the year was SEK 3.1 m. (1.9).

Financial derivativesVarious financial derivatives such as forward contracts, options and swapsare frequently used to manage and control financial risks. Futures andinterest rate swaps and options in SEK are used for interest risk manage-ment in the liquidity and trading portfolios. Interest rate swaps in foreigncurrency are used for interest risk management in the aircraft leasingportfolio. Currency forward contracts and options are used mainly for firm orders for the Group and outstanding bids in the tender to contractportfolio. The large increase in currency forward contracts in 2003 isprimarily attributable to new business in the Saab Bofors Dynamics andSaab Aerospace business areas.





Saab Treasury’s holdings of derivatives as of December 31, 2003 amountedto SEK 22,865 m. (16,887) in nominal terms, distributed as follows:

2003 2002 2001 2000 1999

Interest rate swaps, SEK 1,252 884 2,029 2,250 3,750Interest rate swaps,foreign currencies 2,366 2,384 3,232 3,340 4,056

Interest rate futures, SEK 0 0 1,650 4,165 4,750Interest rate options, SEK 0 0 2,000 0 0Currency options 1,109 1,322 1,855 248 20Forward currency contracts 18,138 12,297 7,890 5,296 3,119

Total 22,865 16,887 18,656 15,299 15,695

Unrealized market value of financial instrumentsThe table shows unrealized market values not included in each year’sbalance sheet. The following valuation principles have been applied:Forward currency contracts: Future payment flows in each currency arediscounted at current market interest rates to valuation date and valued in SEK at year-end exchange rates.Options: Accepted valuation models (Black and Schols) are used to calculatemarket value.Interest rate swaps: In the floating leg, the next interest payment is discountedto valuation date together with underlying capital using current marketinterest rates. In the fixed leg, the entire payment flow, including under-lying capital, is discounted to valuation date using current market interestrates. Interest rate swaps in foreign currency relate to the aircraft leasingportfolio. The purpose of interest rate swaps is to protect the financing ofcontracts with fixed rent. The result from interest rate swaps is therebyneutralized by the leasing contract.Other interest rate derivatives: Other interest rate derivatives are valued atmarket rates and included in the reported result.Bonds: Bonds are valued at current market prices and reported at the lowerof acquisition value and replacement cost. This means that they are writtendown to market value if it is lower than acquisition value. On the other hand,if market value is higher than acquisition value, the holding is reported atthe latter value.

Unrealized result 03-12-31 02-12-31 01-12-31

Forward currency contracts 752 203 – 386Options 7 34 – 41Interest rate swaps, SEK 16 15 13Interest rate swaps, foreign currency –186 – 283 –116Treasury bonds 6 0Mortgage bonds 5 6 0

Total unrealized result 594 –19 – 530

NOTE 34SHAREHOLDERS’ EQUITY

The shares in the Parent Company are divided into two series, A and B. Bothclasses of shares carry equal rights, with the exception that each Series Ashare is entitled to ten votes and each share of Series B one vote. Each sharehas a par value of SEK 16.

Number of shares Number % of % ofas of December 31, 2003: of shares shares votes

Series A 6,454,303 6% 39%Series B 100,063,260 94% 61%

Total 106,517,563 100% 100%

In 1998 the Parent Company issued a convertible debenture loan with anominal value of SEK 254 m. The conversion price is set at SEK 91. The con-version to Series B shares is permitted from December 4, 2001 to July 15,2004 at a conversion price of SEK 91. Through December 31, 2003 a total of 57,888 shares had been converted. After full conversion the number ofSeries B shares will increase by 2,787,500 and the capital stock by SEK 45 m.

Series A Series B Series C

Number of shares outstandingat beginning of period 6,454,303 100,056,071 106,510,374

Conversion to shares – 7,189 7,189

Number of shares outstandingat end of period 6,454,303 100,063,260 106,517,563

Change in shareholders’ equitySpecification of the change in shareholders’ equity compared with theprevious year’s balance sheet is covered on page 28.

Description of shareholders’ equity itemsRestricted reserves: Restricted reserves may not be reduced through profitdistribution.Revaluation reserve: When a tangible or financial fixed asset is revaluated,the revaluation amount is allocated to a revaluation reserve.Legal reserve: The allocation to the legal reserve is at least 10 percent of netincome for the year, until the legal reserve amounts to 20 percent of theshare capital.Share premium reserve: When shares are issued at a premium the amountreceived in excess of par value is transferred to the share premium reserve.Unrestricted equity / Retained earnings: Consists of last year’s unrestrictedequity after profit distribution.

Specification of the year’s exchange rate difference in shareholders’ equity 03-12-31 02-12-31

The year’s exchange rate difference in foreign subsidiaries –179 –208The year’s realization of accumulated exchange rate differences through sale of foreign business operations – –

Total exchange rate difference for the period –179 –208

Specification of accumulated exchange rate difference in shareholders’ equity 03-12-31 02-12-31

Accumulated exchange rate difference at beginning of year 336 544

The year’s exchange rate difference in foreign subsidiaries –179 –208The year’s realization of accumulated exchange rate differences through sale of foreign business operations – –

Accumulated exchange rate difference at year-end 157 336

The disclosure of accumulated exchange rate differences in foreign businessoperations began after the acquisition of the subsidiary.

The Board of Directors and the President propose that SEK 372,811,470from disposable earnings be distributed to shareholders.

NOTE 35EARNINGS PER SHARE

03-01-01 02-01-01–03-12-31 –02-12-31

Earnings per share before dilutionIncome for the period, SEK m. 746 732Weighted number of common shares outstanding 106,513,969 106,487,407

Earnings per share before dilution, SEK 7.00 6.87

Earnings per share after dilutionIncome for the period, SEK m. 746 732Interest expense on convertible debentures, SEK m. 12 13Tax attributable to interest expense, SEK m. –3 – 4

Adjusted earnings, SEK m. 755 741

Weighted number of common shares outstanding 106,513,969 106,487,407Adjustment for assumed conversion of convertible debentures 2,733,206 2,759,768

Adjustment for options – –

Number of shares used in the calculation of earnings per share 109,247,175 109,247,175

Earnings per share after dilution, SEK 6.91 6.78

NOTE 36UNTAXED RESERVES


Accumulated accelerated depreciation

Buildings and land 333 340 231 258Machinery and equipment 396 445 187 173Lease assets 987 2,378 – –

Tax allocation reservesAllocated 1997 – 18 – –Allocated 1998 82 82 56 56Allocated 1999 70 70 39 39Allocated 2000 173 173 139 139Allocated 2001 52 52 – –Allocated 2002 2 2 –Allocated 2003 – – – –

Contingency reserve 17 22 – –Foreign untaxed reserves – 1 – –

Reported value at year-end 2,112 3,583 652 665

NOTE 37PROVISIONS FOR PENSIONS AND SIMILAR COMMITMENTS

Provisions for pensions in the balance sheet correspond to equivalentactuarially computed pension obligations.


Allocated for pensions according to law on safeguarding pension commitments

FPG/PRI pensions 2,978 2,871 1,612 1,577Other pensions 377 473 77 102Other provisions for pensions 103 67 75 58


Of which with credit guarantees via FPG/PRI 3,009 2,903 1,642 1,609

Assets pledged for this liability amounted to SEK 784 m. (784); see Note 45,page 47. The Pension Registration Institute (PRI) is a public organizationresponsible for the administration of employee pensions. Other pensionliabilities relate to transferable commitments not covered by the rules forthe law on safeguarding pension commitments.

Change in accounting principles for pension commitments 2004, theSwedish Financial Accounting Standards Council’s Recommendation 29Employee compensation Saab reports the Group’s pension commitments according to the rules thatapply in the law on safeguarding pension commitments, whereby the com-mitments in effect as of the closing day are reported as pension liabilities.This principle conforms to Swedish accounting standards.

According to RR 29, the future commitment at the time of retirement isreported as the liability. The pension commitment is classified as eitherdefined-benefit or defined-contribution. The reporting of defined-benefitplans is complicated, since it requires actuarial assumptions such as lifespan,employee turnover, discount rate and future wage increases.

Saab currently has both defined-benefit plans – primary the ITP plan –and defined-contribution plans, which were reviewed in 2003; a valuationof these plans has begun. The accounting recommendation enters into forceon January 1, 2004, and Saab will, in its interim report for the first quarterof 2004, report any effects on the income statement and balance sheet thathave arisen from the calculation according to RR29. Reporting for 2003 hasnot been affected.



NOTE 38OTHER PROVISIONS


Cost of restructuring Regional Aircraft 1) 1,157 1,442 1,157 1,442Anticipated deficit in future leasing revenues 293 512 – –Other provisions for restructuringsand project losses 550 487 87 107

Other 234 159 4 7


1) Cost to maintain airworthiness of Saab 340 and Saab 2000 regional aircraft for approximately 20 years.

Costs for restructuring measures Group Parent Companyfor Regional Aircraft 03-12-31 03-12-31

Reported value at beginning of the year 1,442 1,442Provisions allocated during the period –134 –134Utilized for write-down –189 –189Increase in discounted amount during the period 38 38

Reported value at year-end 1,157 1,157

Anticipated deficit in future leasing Grouprevenues from regional aircraft 03-12-31

Reported value at beginning of the year 512Amount utilized during the period –288Reclassifications 69


Provisions for restructurings,project losses and other provisions Group Parent Company

03-12-31 03-12-31

Reported value at beginning of the year 646 114Provisions allocated during the period 513 87Amount utilized during the period –260 –3Unutilized amount reversed during the period –173 –107Reclassifications 58 –


NOTE 39LIABILITIES TO CREDIT INSTITUTIONS AND OTHER INTEREST-BEARING LIABILITIES, LONG-TERM


Liabilities to credit institutionsDue date 1–5 years from closing day 72 298 – –Due date more than 5 years from closing day – – – –

Other interest-bearing liabilitiesDue date 1–5 years from closing day 69 160 65 155Due date more than 5 years from closing day 132 75 115 58


NOTE 40CONVERTIBLE DEBENTURE LOAN

In 1998 the Parent Company issued a convertible debenture loan with anominal value of SEK 254 m. Of the total loan, debentures amounting toSEK 231 m. were sold to employees, while SEK 23 m. was sold to the whollyowned subsidiary Saab Hangaren Förvaltning AB. The convertible deben-ture loan, which bears a fixed annual interest rate equal to the 12-monthSTIBOR rate less 0.45 bps, can be converted to Saab Series B shares fromDecember 4, 2001 to July 15, 2004 at a conversion price of SEK 91. In 2003 a nominal SEK 1 m. was converted to shares

The convertible debentures have been listed on the Stockholm StockExchange since 2001. The loan will fall due on July 30 if not converted. A capital discount of SEK 2 m. (5) has been calculated based on a fixedmarket rate of 4.1 percent (5.7). In the financial statements of both theGroup and the Parent Company, the capital discount has been accountedfor among restricted reserves, as a share premium reserve. The capitaldiscount is expensed as interest during the term of the loan.


Convertible debenture loan 254 254 254 254Capital discount – 2 – 5 – 2 – 5Redemptions – 5 – 4 – 5 – 4Holdings within the Group – 15 –15 – –

Total 232 230 247 245

NOTE 41OTHER LONG-TERM LIABILITIES


Lease obligations 2,179 2,597 – –Other liabilities 433 533 – –

Reported value at year-end 2,612 3,130 – –

Liabilities with due dates more than 5 years from the closing day amountto SEK 177 m. (301). Security pledged for leasing obligations amounted toSEK 2,208 m. (2,420); see Note 45.

NOTE 42LIABILITIES TO CREDIT INSTITUTIONS AND OTHER INTEREST-BEARING LIABILITIES, SHORT-TERM


Approved credit limit 671 268 671 268Unutilized portion – 671 – 268 – 671 – 268Utilized portion – – – –Short-term borrowing 323 213 13 38Other interest-bearing liabilities 189 183 – –


NOTE 43OTHER CURRENT LIABILITIES, NON-INTEREST-BEARING


Value-added tax 526 291 445 167Payroll withholding 208 172 41 55Deposits for leasing operations 155 170 – –Other 212 197 37 34

Total 1,101 830 523 256

NOTE 44ACCRUED EXPENSES AND DEFERRED INCOME


Accrued expensesCost of customer commitmentsin Regional Aircraft 641 839 572 698

Vacation pay liability 600 619 200 187Accrued exchange rate differences 433 18 18 –Social security expenses 334 314 122 131Expected invoices 293 247 62 84Accrued interest 244 226 239 225Personnel liabilities 242 212 47 45Accrued leasing costs 212 231 – –Royalties and commissions 67 38 – –Early retirement and redundancies 54 27 54 27Reserve for remaining costs in military business 54 158 13 –

Claims reserve 49 54 – –Warrenty provision 27 15 – –Other 218 182 1 36

Deferred incomeAdvance invoicing 1,858 1,064 628 378Leasing fees 75 172 – –Other 52 33 34 31




NOTE 45ASSETS PLEDGED FOR OWN LIABILITIES AND PROVISIONS


For pension provisions:Chattel mortgages 396 396 350 350Real estate mortgages 388 388 388 388

To credit institutions:Chattel mortgages 30 30 – –Other assets 166 312 – –

For lease obligations:Lease assets 2,208 2,420 – –

For other long-term liabilities:Bank deposits 18 18 – –

For accrued expenses:Accrued income 58 58 – –

For advance payments from customers:Chattel mortgages 1,751 1,751 1,751 1,751Bonds and other securities 1,880 2,425 1,880 2,425

Total 6,895 7,798 4,369 4,914

NOTE 46TRANSACTIONS WITH RELATED PARTIES

Related parties that Saab has transactions with consist mainly of BAESystems, which holds 35 percent of the capital and votes in Saab, and the jointly owned marketing company Gripen International. Since 1995Saab has a cooperation with BAE Systems on Gripen’s development andmarketing for the export.

Transactions with BAE Systems, Gripen International and other relatedparties, if any, are conducted in accordance with commercial principles.

Of the Parent Company’s sales, 4 percent (2) related to sales to Groupcompanies, while 25 percent (30) of the Parent Company’s purchases werefrom subsidiaries.

NOTE 47AUDITORS’ FEES


Ernst & YoungAudit assignments 8 9 3 3Other assignments 3 5 – –

KPMGAudit assignments 2 3 – 1Other assignments 1 1 1 –

PricewaterhouseCoopersAudit assignments 2 2 – –Other assignments 1 1 – 1

OtherAudit assignments – – – –Other assignments 2 – – –

Total 19 21 4 5Audit assignments 12 14 3 4Other assignments 7 7 1 1

Audit assignments involve examination of the annual report and financialaccounting as well as the administration by the Board and the President,other tasks related to the duties of the company's auditors and consultationor other services that may result from observations noted during suchexaminations or implementation of such other tasks. All other tasks aredefined as other assignments.



Linköping, February 12, 2004

Anders ScharpChairman

Marcus Wallenberg Erik Belfrage Stephen Henwood Peter Nygårds

George Rose Björn Svedberg Alison Wood Ragnar Ludvigsson

Lars Höök Claes Trolle Åke SvenssonPresident and CEO

Proposed disposition of earningsThe Board of Directors and the Presidentpropose that the unappropriated earningsat disposal of the Annual General Meetingin the Parent Company, amounting to:

SEKRetained earnings 2,758,652,062

Income for the year 740,737,137

Total 3,499,389,199

To be disposed as follows:

To the shareholders, a dividend of SEK 3.50 per share 372,811,470

Funds to be carried forward 3,126,577,729

Total 3,499,389,199

After the proposed disposition, share-holders’ equity in the Parent Companywill be as follows:

SEKCapital stock 1,704,281,008

Premium reserve 5,904,655

Revaluation reserve 500,000,000

Legal reserve 340,670,960

Retained earnings 3,126,577,729

Total 5,677,434,352

The company’s policy is to issue a divi-dend of 20–40 percent of net incomeover a business cycle. The Board ofDirectors and the President propose that SEK 373 m. (373), or SEK 3.50 pershare (3.50), corresponding to 50 percent(51) of the Group’s net income for theyear, be issued as a dividend. Saab’sequity/assets ratio is currently 24.4 percent (24.3) and after the proposeddisposition of earnings will be 23.4 per-cent (23.3).



Auditors’ report

We have audited the annual accounts, the consolidated accounts, theaccounting records and the administration of the Board of Directorsand the President of Saab AB for the year 2003. These accounts andthe administration of the company are the responsibility of the Boardof Directors and the President. Our responsibility is to express anopinion on the annual accounts, the consolidated accounts and theadministration based on our audit.

We conducted our audit in accordance with generally acceptedauditing standards in Sweden. Those standards require that we planand perform the audit to obtain reasonable assurance that the annualaccounts and the consolidated accounts are free of material misstate-ment. An audit includes examining, on a test basis, evidence support-ing the amounts and disclosures in the accounts. An audit also in-cludes assessing the accounting principles used and their application by the Board of Directors and the President, as well as evaluating the overall presentation of information in the annual accounts and theconsolidated accounts. As a basis for our opinion concerning dis-charge from liability, we examined significant decisions, actions taken

and circumstances of the company in order to be able to determine theliability, if any, to the company of any Board member or the President.We also examined whether any Board member or the President has inany other way acted in contravention of the Companies Act, the An-nual Accounts Act or the Articles of Association. We believe that ouraudit provides a reasonable basis for our opinion set out below.

The annual accounts and the consolidated accounts have beenprepared in accordance with the Annual Accounts Act and, thereby,give a true and fair view of the financial position of the company’sand the Group’s financial position and of the results of operations inaccordance with generally accepted accounting principles in Sweden.

We recommend that the general meeting adopt the income state-ments and the balance sheets of the Parent Company and the Group,that the profit in the Parent Company be dealt with in accordancewith the proposal in the administration report and that the membersof the Board of Directors and the President be discharged fromliability for the financial year.

Linköping, February 12, 2004

Ernst & Young AB Caj NackstadBjörn Fernström Authorized Public Accountant

Authorized Public Accountant KPMG Bohlins AB

To the general meeting of the shareholders of Saab AB (publ) Corporate Identity No. 556036-0793


I N V E S TO R A N D S H A R E H O L D E R I N F O R M AT I O N

Board of Directors and AuditorsAnders ScharpChairman since 1990,born 1934, M.Sc.Chairman of AB SKF and AB Nederman.Board member of Investor AB.Shares in Saab: 31,000Convertibles in Saab: –

Marcus WallenbergDeputy Chairman since 1993 and Boardmember since 1992, born 1956, Bachelor ofScience of Foreign Service, Lieutenant in RoyalSwedish Naval Academy. Deputy Chairman ofTelefonaktiebolaget L M Ericsson and SEB.Board member of AstraZeneca PLC,Investor AB, Scania AB, Stora Enso Oyj and the Knut and Alice Wallenberg Foundation.Shares in Saab: 67,977Convertibles in Saab: –

Erik BelfrageBoard member since 1991,born 1946, MBA.Director of SEB. Chairman of the SwedishInstitute of International Affairs (UI) andSigtuna Skolstiftelse. Board member of ErametSteel, BIAC (OECD), the International Councilof Swedish Industry (NIR) and the Centre forEuropean Policy Studies (CEPS). Member ofthe Trilateral Commission.Shares in Saab: 100Convertibles in Saab: –

Åke SvenssonPresident, CEO and Board member since 2003,born 1952, M.Sc.Shares in Saab: 2,145Convertibles in Saab: –

Stephen HenwoodBoard member since 2002,born 1953, B.A.Group Managing Director, InternationalPartnerships of BAE Systems.Shares in Saab: –Convertibles in Saab: –

Peter NygårdsBoard member since 2000,born 1950, B.A.Director of Föreningssparbanken.Board member of the Swedish EnvironmentalResearch Institute.Shares in Saab: 1,000Convertibles in Saab: –

George RoseBoard member since 1998,born 1952, B.A.Finance Director of BAE Systems and Non Executive Director of National GridTransco Plc.Shares in Saab: –Convertibles in Saab: –

Björn SvedbergBoard member since 1998,born 1937, M.Sc.Board member of Investor AB and theKnut and Alice Wallenberg Foundation.Shares in Saab: 1,100Convertibles in Saab: –

A n d e r s S c h a r p

E r i k B e l f r a g e S t e p h e n H e n wo o d

B j ö r n S ve d b e r g

R a g n a r L u d v i g s s o n



Alison WoodBoard member since 2002,born 1963, MA and MBA.Group Managing Director,Network Enabled Capability (NEC).Shares in Saab: –Convertibles in Saab: –

Lars HöökBoard member since 2001 and deputy since 2000,born 1944, B.Sc.E.E.Representative of the Industrial SalariedEmployees’ Association,AerotechTelub AB,ArbogaShares in Saab: 400Convertibles in Saab: –

Ragnar LudvigssonBoard member since 1995,born 1946, technical vocational school.Chairman of the Engineering Workers’ Union local at Saab AB, Linköping.Shares in Saab: 60Convertibles in Saab: SEK 119,574

Claes TrolleBoard member since 2001,born 1940, Royal Institute of Technology andSwedish National Defence College.Chairman of the Swedish Association of Graduate Engineers’ local, SaabTech Systems AB, Järfälla.Shares in Saab: –Convertibles in Saab: –

DEPUTY BOARD MEMBERSConny HolmDeputy since 1995,born 1947, upper secondary engineeringeducation.Chairman of the Engineering Workers’ Unionlocal at SaabTech in Jönköping.Shares in Saab: 100Convertibles in Saab: –

Lars KarlssonDeputy since 2002,born 1945, upper secondary engineeringeducation.Chairman of the Union for Service and Communication Employees’ local at SaabBofors Underwater Systems AB, Motala.Shares in Saab: –Convertibles in Saab: –

Johan LöflingDeputy since 2001,born 1962, technical upper secondary school.Chairman of the Industrial Salaried Employees’Association local at Saab AB, Linköping.Shares in Saab: –Convertibles in Saab: –

AUDITORS

Ernst & Young AB

Björn FernströmAuditor since 1993, born 1950.Authorized Public AccountantErnst & Young AB

Caj NackstadAuditor since 1991, born 1945.Authorized Public AccountantKPMG Bohlins AB

Deputy AuditorBo RibersAuditor since 1993, born 1942.Authorized Public AccountantKPMG Bohlins AB

M a rc u s Wa l l e n b e r g Å ke S ve n s s o n

Pe t e r N y g å rd s

G e o r g e R o s e L a r s H ö ö k

A l i s o n Wo o d C l a e s Tro l l e



Group ManagementÅke SvenssonPresident and CEO.Born 1952, M.Sc.Employed 1976.Shares in Saab: 2,145Convertibles in Saab: –

Göran SjöblomExecutive Vice President.Born 1943, M.Sc. and MBA.Employed 1995.Shares in Saab: 17,500Convertibles in Saab: SEK 182,000

Ingemar AnderssonExecutive Vice President.Business Group Chairman.Born 1951, Military Academy.Employed 1982.Shares in Saab: 3,000Convertibles in Saab: –

Jan NygrenGroup Senior Vice President.Born 1950, upper secondaryschool graduate, former memberof government and ministerialofficial.Employed 2000.Shares in Saab: –Convertibles in Saab: –

Hans KrügerGroup Senior Vice President.Business Group Chairman.Born 1944, M.ScEmployed 1994.Shares in Saab: 75Convertibles in Saab: SEK 182,000

Dan JangbladGroup Senior Vice President.Strategy and Business Development.Born 1958, M.Sc.Employed 2000.Shares in Saab: –Convertibles in Saab: –

Kenth-Åke JönssonGroup Senior Vice President.Business Group Chairman.Born 1951, M.Sc.Employed 2002.Shares in Saab: –Convertibles in Saab: –

J a n N y g re n Å ke S ve n s s o n I n g e m a r A n d e r s s o n

H a n s K r ü g e r D a n J a n g b l a d Ke n t h - Å ke J ö n s s o n



Lars WahlundGroup Senior Vice President.Financial Control, born 1953, MBA.Employed 1983.Shares in Saab: 2,100Convertibles in Saab: –

Per ErlandssonGroup Senior Vice President.Legal Affairs, Secretary of the Board ofDirectors.Born 1947, LLB.Employed 1980.Shares in Saab: 2,247Convertibles in Saab: SEK 182,000

Mats LindmanGroup Senior Vice President.Human Resources.Born 1945, MA.Employed 1986.Shares in Saab: 2,000Convertibles in Saab: –

Iréne SvenssonGroup Senior Vice President.Communication.Born 1950, M.Sc.Employed 1993.Shares in Saab: –Convertibles in Saab: SEK 91,000

Peter SandehedGroup Senior Vice President.Treasury.Born 1952, MBA.Employed 1981.Shares in Saab: 2,000Convertibles in Saab: SEK 182,000

G ö r a n S j ö b l o m L a r s Wa h l u n d Pe r E r l a n d s s o n

M a t s L i n d m a n I r é n e S ve n s s o n Pe t e r S a n d e h e d



Share capital and number of sharesOn December 31, 2003 Saab’s share capi-tal amounted to SEK 1,704,281,008 andconsisted of 100,063,260 listed Series Bshares and 6,454,303 unlisted Series Ashares. Series A shares have ten votes each,while Series B shares have one voteeach. The par value per share is SEK 16.The Series B share has been listed on theStockholm Exchange’s O list since 1998and on the Attract 40 section of the Olist since January 2002. Approximately47,500,000 Series B shares, correspondingto 45 percent of the share capital and 29percent of the votes, are available viathe stock market. A round lot consists of100 shares. Of the company’s Series Ashares, 4,207,123 are owned by Investorand 2,247,180 by BAE Systems.

Trading volume and statisticsIn 2003 a total of 30,203,126 shares weretraded, corresponding to 64 percent of theshares available. The share price reacheda high of SEK 117.00 on September 18and a low of SEK 82.00 on February 13.

Beta shows how much a share fluctu-ates in relation to the market as a whole.A low beta (<1) indicates a low risk inrelation to other stocks in the market. A high beta (>1) means a higher risk.According to the Delphi Economics’ cal-culations, the beta for Saab’s Series Bshare was 0.32, indicating that it fluctuated68 percent less than the market averagemeasured according to the AffärsvärldenGeneral Index over a 48-month period.Saab’s stock covariance was 0.11, whichmeans that 11 percent of the share’s priceperformance is due to the market’s de-velopment as a whole.

The Saab share

Saab’s market capitalization was SEK 11.6 billion at year-end 2003, which corresponds to 0.4 percent of the total capitalization of Stockholm Exchange.The price of the Series B sharerose by 14 percent during the year, compared with a 30-percent increase for the StockholmExchange’s general index.The total return on Saab’s Series B share – i.e. the dividend plusappreciation in the share price – has been 45 percent over the last five years.

For more information on the Saabshare, visit www.saab.se

Swedish and foreign ownersShare of capital, %

Foreign ownersSwedish owners

BAE Systems

JP Morgan Chase Bank

Bank of New York

Barclays Capital Securities

Citibank N A London

Nordea Bank Finland

Other foreign

InvestorWallenbergfoundationsRobur fundAMF PensionAMF PensionfundsEikos fundOther Swedish

Ownership structureAs of year-end Saab had around 38,000shareholders. Swedish and internationalinstitutional investors owned approxi-mately 76 percent of the share capitaland 85 percent of the votes. Swedishmutual funds owned 15 percent of theshare capital and 10 percent of the votes.Individual Swedish investors held 8percent of the share capital and 5 per-cent of the votes.

Dividend and dividend policyThe Board of Directors is recommendingthat the Annual General Meeting ap-prove an unchanged dividend of SEK3.50 (3.50) per share, corresponding to50 percent (51) of net income. Saab’slong-term dividend policy is to distribute20–40 percent of income after tax duringa business cycle.

Convertible debenture In 1998 a convertible debenture loanwas issued to Saab’s employees. Theloan amounts to SEK 254 m. and if fullyconverted raises the number of Series Bshares by 2,787,500, corresponding to adilution of 2.55 percent of the share cap-ital and 1.67 percent of the votes. Con-versions to Series B shares are permittedbetween December 4, 2001 and July 15,2004 at a conversion price of SEK 91.During the year 7,189 convertibles wereconverted to shares, which means that a

total of 57,888 have been converted. Thiscorresponds to a total dilution of 0.05percent of the capital and 0.04 percent ofthe votes. In 2001 the convertible deben-ture loan was listed on the StockholmExchange. The interest rate on the loanis equivalent to the 12-month STIBORrate less 0.45 bps. The current rate forthe period May 31, 2003 – May 30, 2004is 2.80 percent.

Share repurchase programThe Board of Directors received authori-zation from the 2003 Annual GeneralMeeting to decide, until the followingAnnual General Meeting, to acquire andtransfer up to 10 percent of the company’soutstanding shares. The authorizationwas not utilized during the year.

Ticker symbols:

Reuters SAABb.ST Bloomberg SAABB SS



Series B share data 1999–20032003 2002 2001 2000 1999

Closing pricesat year-end, SEK 109.00 96.00 99.50 78.00 82.00high for the year, SEK 117.00 130.50 112.00 94.50 91.50low for the year, SEK 82.00 81.00 71.00 64.50 58.00

Average daily turnover, no. of shares 1) 121,787 113,068 133,705 81,959 107,732

Yield, % 3.2 3.6 3.3 3.8 3.0Price/equity, % 164 150 159 146 185

P/E ratio 14.5 14.0 9.4 8.0 9.3P/EBIT, multiple 8.9 8.4 6.6 5.4 7.9

Sales before conversion, SEK 161.95 155.30 147.37 167.60 85.00after full conversion, SEK 157.90 151.38 143.61 163.30 82.90

Net income before conversion, SEK 7.00 6.87 10.59 9.75 8.82after full conversion, SEK 6.91 6.78 10.40 9.58 8.68

Equity before conversion, SEK 65.75 64.17 62.74 53.26 44.23after full conversion, SEK 66.89 64.83 63.46 54.22 45.43

Cash flow from operating activitiesbefore conversion, SEK 12.08 10.27 18.53 –13.20 –5.50after full conversion, SEK 11.78 10.01 18.06 –12.85 –5.40

Dividend (Board’s proposal), SEK 3.50 3.50 3.25 3.00 2.50Dividend /net income, % 50 51 31 31 28

Total dividend, SEK m. 373 373 346 319 266Dividend growth, % 0 8 8 20 25

No. of shareholders 37,688 38,062 38,932 40,987 45,296Share of foreign ownership, capital, % 39 43 51 54 54Share of foreign ownership, votes, % 37 40 45 47 47

Average number of shares 106,513,969 106,487,407 106,459,675 106,459,675 106,459,675Number of shares at year-end 106,517,563 106,510,374 106,459,675 106,459,675 106,459,675Number of shares after full conversion 109,247,175 109,247,175 109,247,175 109,247,175 109,247,175

1) Saab B on Stockholm Exchange.

40

60

80

100

120

140

160

'98 '99 '00 '01 '02 '03 '04

2,000

4,000

6,000

8,000

Saab B, June 18, 1998 – January 31, 2004

General index 000s of share traded(incl. off-floor trading)

B share, high/lowB share, last paid

J F M A M J J A S O N DJ F M A M J J A S O N DJ F M A M J J A S O N DJ J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J

©SIX

Profit and dividend per share

SEK

’99 ’00 ’01 ’02 ’030

2

4

6

8

10

ProfitDividend

Equity per share

SEK

’99 ’00 ’01 ’02 ’030

25

50

75

100



Alfred Berg, StockholmGustaf [email protected]

Carnegie, StockholmBjörn [email protected]

CDC Ixis Securities, ParisPierre-Antony [email protected]

Crédit Agricole Indosuez Cheuvreux,ParisRémi [email protected]

Credit Suisse First Boston, LondonSteve [email protected]

Deutsche Bank, LondonBen [email protected]

Enskilda Securities, StockholmStefan [email protected]

Goldman Sachs International, LondonSash [email protected]

Merrill Lynch, LondonCharles [email protected]

Morgan Stanley, LondonTimm [email protected]

Société Générale, ParisPhilippe [email protected]

Swedbank, StockholmMats [email protected]

UBS Warburg, LondonColin [email protected] [email protected]

Analysts who cover Saab

Largest shareholders

As of December 31, 2003 No. of shares, % of share % of according to Securities Register Center thousands capital votes

BAE Systems, UK 37,367 35.1 35.0Investor 21,612 20.3 36.1Wallenberg foundations 9,469 8.9 5.8Robur funds 7,663 7.2 4.7AMF Pension 3,375 3.2 2.1AMF Pension funds 2,097 2.0 1.3Eikos fund 2,066 1.9 1.3Nordea funds 1,955 1.8 1.2SEB funds 1,751 1.6 1.1SEB-Trygg Försäkring 959 0.9 0.6JP Morgan Chase Bank, USA 1) 697 0.7 0.4Skandia 577 0.5 0.4Banco funds 496 0.5 0.3Catella funds 431 0.4 0.3Bank of New York 1) 426 0.4 0.3Citibank N A, London 1) 371 0.3 0.2J. Österberg and family 346 0.3 0.2Nordea Bank, Finland 1) 334 0.3 0.2Barclays Capital Securities, UK 1) 294 0.3 0.2FPG/AMFK 278 0.3 0.2

Subtotal, 20 largest shareholders 92,564 86.9 91.9Other Swedish shareholders 9,458 11.4 7.0Other international shareholders 4,495 1.7 1.1

Total 106,517 100.0 100.0

Maximum dilution, outstanding convertibles 2,730 2.5 1.7

Total after dilution 109,247

1) Nominee-registered, primarily U.S. and U.K. funds

Distribution of shareholdingsNumber Number of % of share- Number % of shareof shares shareholders holders of shares capital

1– 500 34,780 92.3 2,639,745 2.5501 – 1,000 1,467 3.9 1,228,339 1.21,001– 5,000 1,109 2.9 2,457,551 2.45,001– 10,000 129 0.3 985,256 0.910,001– 50,000 112 0.3 2,329,390 2.250,001–100,000 32 0.1 2,392,187 2.2100,001– 10,000,000 57 0.2 35,505,824 33.310,000,001– 2 – 58,979,271 55.3

Total 37,688 100.0 106,517,563 100.0

Shares and votes, December 31, 2003

Number % of total Number % of total Share class of shares shares of votes votes

Series A 6,454,303 6.1 64,543,030 39.2Series B 100,063,260 93.9 100,063,260 60.8

Total 106,517,563 100.0 164,606,290 100.0

Share issues, etc.Increase in share Paid-in amount,

capital, SEK m. SEK m.

2002, Conversion1) 50,699 shares 0.8 4.6

2003, Conversion1) 7,189 shares 0.1 0.7

1) 1998 convertible debenture loan.



Annual General MeetingThe Annual General Meeting will be held at 6:00 p.m. (CET)on Tuesday, March 30, 2004 at Kungliga Tennishallen in Stock-holm.

NotificationShareholders must notify the company of their intention toparticipate in the meeting not later than 12:00 noon on Wednes-day, March 24, 2004:

■ by telephone: +46-13-18 20 55

■ by fax: +46-13-18 33 50

■ by mail with separate invitation

■ by mail: Saab AB, Avd CJ-MG, SE-581 88 Linköping, Sweden

■ online: www.saab.se (follow the instructions on the homepage)

Please indicate your name, personal or corporate registrationnumber (Swedish citizens or companies), address and tele-phone number. If you are attending by power of proxy, regis-tration certificate or other authorization, please submit yourdocumentation well in advance of the meeting. The informa-tion you provide will be used only for the Annual GeneralMeeting.

Shareholders or their proxies may be accompanied at theAnnual General Meeting by a maximum of two people. Theymay only attend, however, if the shareholder has notified SaabAB as indicated above.

Investor and shareholder informationRight to participateOnly shareholders recorded in the share register maintainedby VPC AB (the Swedish Securities Register Center) on Friday,March 19, 2004 are entitled to participate in the meeting.

Shareholders registered in the names of nominees throughthe trust department of a bank or a brokerage firm must tem-porarily re-register their shares in their own names to partici-pate in the meeting. This re-registration must be recorded inthe share register by March 19, 2004.

DividendThe Board of Directors is recommending a dividend of SEK 3.50per share and Friday, April 2, 2004 as the record day for thedividend. With this record day, VPC is expected to distributethe dividend on Wednesday, April 7, 2004.

Financial informationThe following financial information will be released in 2004:April 19 Interim report January–MarchJuly 9 Interim report January–JuneOctober 22 Interim report January–September

Financial information can be ordered by telephone +46-13-18 58 11 or accessed online at www.saab.se

ContactIréne Svensson, Senior Vice President, Communication, Telephone +46-8-463 01 30, [email protected]

Saab AB (publ)SE-581 88 Linköping, SwedenTel: +46-13-18 00 00www.saab.se

HEAD OFFICE:Saab ABBox 70 363SE-107 24 Stockholm, SwedenTel: +46-8-463 00 00

Saab’s Annual Report 2003consists of two parts,a presentation of Saab and a financial report.

The Saab presentation can beordered via www.saab.se/ir orby telephone +46-13-18 58 11.

For more information on Saab,visit www.saab.se

Saab 2003

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Documents

SAAB 2003 FINANCIAL REPORT - Defence and Securitysaabgroup.com/.../financial-reports/2003_annual_report_part2.pdf · activities,SEK m. 545 –92 1,642 ... In 2003 Saab continued to