Om London Exchange POS AM Prospectus update (post-effective amendment)

Stockholmsbörsen AB

To the Board of Directors Stockholmsbörsen AB:

     We have audited the accompanying balance sheets of Stockholmsbörsen AB as of December 31, 2002 and 2001, and the related profit and loss accounts and the statements of cash flows and movements in the shareholder’s equity each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stockholmsbörsen AB at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in Sweden which differ in certain significant respects from those followed in the United States (see Note 23 of Notes to the Financial Statements).

Stockholm, Sweden

April 28, 2003

Ernst & Young AB

Björn Fernström

STOCKHOLMSBÖRSEN AB
Corporate identity no. 556383-9058

INCOME STATEMENT

	Note		2002		2001		2000
			SEK 000 (except per share amounts)
REVENUE		1
Trading revenue				590,326		717,921		1,102,770
Issuer fees				173,174		144,022		143,942
Facility management services				14,029		36,429		33,151
Information sales				117,058		115,199		99,739
Other operating revenue				111,919		130,631		116,499
TOTAL REVENUE				1,006,506		1,144,202		1,496,101
EXPENSES		1
Premises				-48,515		-42,541		-38,115
Marketing expenses				-14,578		-29,323		-30,241
Consultant expenses				-77,703		-103,924		-133,283
Operational and maintenance expenses, IT				-170,153		-212,368		-116,858
Other external expenses				-73,654		-70,441		-69,762
Insurance premium				-60,568		-37,068		-41,731
Refunded VAT				—		—		34,200
Personnel expenses		2		-213,301		-154,553		-112,499
Depreciation		3,8		-24,430		-20,921		-3,988
Items affecting comparability		4		-73,167		—		—
TOTAL EXPENSES				-755,979		-671,139		-512,277
Income in associated companies		1,9		60		80		—
OPERATING INCOME				250,587		473,143		983,824
FINANCIAL ITEMS, NET		1,5		-43,144		-29,476		19,800
INCOME NET OF FINANCIAL ITEMS				207,443		443,667		1,003,624
Taxes		7		-97,899		-117,794		-264,515
NET INCOME				109,544		325,873		739,109
Earnings per share — basic and diluted				54,77		162,94		369,55

1

STOCKHOLMSBÖRSEN AB
Corporate identity no. 556383-9058

BALANCE SHEET

			31 December,
	Note		2002		2001
			SEK 000
ASSETS
Fixed assets
Tangible fixed assets
Equipment, net		8		138,139		152,096
Financial fixed assets
Investment in associated companies		9, 11		2,622		3,008
Deferred tax receivable				39,104		19,407
Long-term deposit				22,667		75,995
Total fixed assets				202,532		250,586
Current assets
Current receivables
Accounts receivable (Net of provision for bad debts of 2,167 (3,353)				236,829		334,642
Receivable from group companies		12		747,668		1.215,712
Tax receivable				13,383		—
Other receivables				2,493		5,925
Prepaid expenses and accrued revenue		13		79,738		90,998
Short-term investments		1		693,475		791,170
Cash at bank		1,12		125,096		179,989
Total current assets				1,898,682		2,618,436
TOTAL ASSETS				2,101,214		2,869,022

2

STOCKHOLMSBÖRSEN AB
Corporate identity no. 556383-9058

BALANCE SHEET, contd.

			31 December,
	Note		2002		2001
			SEK 000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Shareholders’ equity
Restricted reserves
Share capital (2,000,000 shares at a par value of SEK 100)				200,000		200,000
Restricted reserves				50,000		153,196
Unrestricted reserves				-73,123		-244,275
Net income				109,544		325,873
Total shareholders’ equity				286,421		434,794
Appropriations
Restructuring reserve		14		60,812		—
Deferred tax liability				4,060		62,550
Total appropriations				64,872		62,550
Long-term liabilities
Subordinated debentures to group company		15		750,000		750,000
Current liabilities
Accounts payable				233,050		223,521
Payable to parent and other group companies				643,401		634,742
Tax liabilities				—		648
Other liabilities				29,585		681,794
Accrued expenses and deferred revenue		16		93,885		80,973
Total current liabilities				999,921		1,621,678
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY				2,101,214		2,869,022
Collateral pledged		19		26,751		87,801
Contingent liabilities				*		*

* Stockholmsbörsen has issued a guarantee against OM London Exchange to cover potential losses arising as result of credit risk associated with default by counter-parties on open contracts. If losses consume all the parent company’s equity, including subordinated debentures to group company (1,036.4 m at December 31, 2002), credit insurance will cover additional losses arising (1,000) (720) m. In addition Stockholmsbörsen has issued a guarantee where Stockholmsbörsen guarantees OM London exchange obligations towards their members.

3

STOCKHOLMSBÖRSEN AB
Corporate identity no. 556383-9058

Cash Flow Statement

	2002		2001		2000
	SEK 000
Ongoing operations
Operating income after financial items		207,443		443,667		1,003,624
Adjustment for items not included in cash flow:
Depreciation, Note 3,8		24,340		20,921		3,988
Write-downs, Note 4		4,890		—		—
Appropriations		-58,490		—		—
Restructures, Note 14		60,812		—		—
Share in associated companies’ income, Note 9		-60		-80		—
Financial net		2		-2,877		1,239
		238,937		461,631		1,008,851
Income tax paid		-3,899		-1,586		-11,132
Cash flow from ongoing operations before change in working capital		235,038		460,045		997,719
Change in working capital
Operating receivables		840,652		-775,758		22,224
Operating liabilities		-1,100,357		37,886		-1,120,553
Total change in working capital		-259,705		-737,872		-1,098,329
CASH FLOW FROM ONGOING OPERATIONS		-24,667		-277,827		-100,610
Investments
Acquisitions of financial fixed assets		—		-100		—
Sale of subsidiaries		-146,855		—		—
Raise of capital and income in associated companies		—		—		4
Acquisition of tangible fixed assets, Note 8		-15,560		-136,175		-30,006
Increase in other long-term receivables		33,631		-27,780		-46,100
Decrease in other long-term liabilities		—		—		-1,465
Sale of tangible fixed assets		287		—		—
Other		576		—		—
Cash flow from investment activity		-127,921		-164,055		-77,567
Change in cash position		-152,588		-441,882		-178,177
Cash position*, opening balance		971,159		1,413,041		1,591,218
Cash position, closing balance		818,571		971,159		1,413,041

* The net cash position includes the short-term investments and cash at bank items.

4

STOCKHOLMSBÖRSEN AB
Corporate identity no. 556383-9058

Statement of Changes in Shareholders’ Equity

	Share Capital		Restricted reserves		Unrestricted Reserves		Shareholders' Equity
Balance at 31 December, 1999		200,000		54,863		93,721		348,584
Group contributions payable		—		—		-905,500		-905,500
Tax on group contribution		—		—		253,240		253,240
Net and comprehensive income		—		—		739,109		739,109
Change in equity component of untaxed reserves		—		-4,863		4,863		—
Translation differences		—		1,939		-1,771		168
Balance at 31 December, 2000		200,000		51,939		183,662		435,601
Group contributions payable		—		—		-454,500		-454,500
Tax on group contribution		—		—		127,260		127,260
Net and comprehensive income		—		—		325,873		325,873
Changes between restricted and unrestricted Equity		—		101,257		-101,257		—
Translation differences		—		—		560		560
Balance at 31 December, 2001		200,000		153,196		81,598		434,794
Group contributions payable		—		—		-419,600		-419,600
Group contribution payable not deductible		—		—		-59,000		-59,000
Group contribution receivable		—		—		250,000		250,000
Tax on group contribution		—		—		117,488		117,488
Sale of business		—		-103,196		-43,609		-146,805
Net and comprehensive income		—		—		109,544		109,544
Balance at 31 December, 2002		200,000		50,000		36,421		286,421

5

STOCKHOLMSBÖRSEN AB
Corporate identity no. 556383-9058

Notes to the financial statements
Amounts in SEK 000 unless otherwise indicated

Note 1
Description of business and accounting principles

Stockholmsbörsen (the “Company”), which is under the regulatory control of the Swedish Financial Supervisory Authority, is a wholly owned subsidiary of OM AB, the Parent company of the OM group of companies. The Company operates in a single industry as an exchange and clearing organisation to buyers and sellers of various financial instruments, primarily in Europe. The majority of the Company’s revenues are derived from transaction fees earned on exchange transactions.

The Annual Accounts Act (1995:1554)

Stockholmsbörsens Annual Report for 2002 has been established in accordance with the Annual Accounts Act (1995:1554) and the applicable standards issued by the Swedish Financial Accounting Standards Council .

Accounting principles for group contribution

Group contributions have been accounted for in accordance with the standards issued by the Swedish Financial Accounting Standards Council’s Task Force, which means that contributions are recorded to shareholders’ equity.

Principles of consolidation

The Company’s financial statements include the accounts of OM London Exchange LTD, a wholly owned foreign subsidiary, Stockholmsbörsen IT Support AB a wholly owned subsidiary. The Company’s investment in Clearing Control CCAB and Nordic Exchanges A/S are accounted for using the equity method and the Company’s share of the subsidiary’s net income (loss) is reflected separately in the income statement. The results of operations from acquired companies have been reported in the consolidated income statement since the date of acquisition. All significant intercompany transactions and balances have been eliminated.

Revenue and cost recognition

An item of revenue is posted to the income statement when it is likely that the company will receive its future financial benefits, and that these benefits can be calculated in a reliable way.

In addition to what is set out above, operating revenue also includes premiums for options written and payments for futures contracts sold. The company’s exchanges pay the same premium on the purchase of options and the same price for purchasing futures included in operating expenses, as OM’s exchanges receive for writing options and selling futures. Premium revenue and expenses as well as futures payments made and received are shown as net figures in the income statement.

Associated companies

An associated company is an operation which is neither a subsidiary nor a joint venture, but one where the company exercises a controlling influence over its management and where the company’s ownership is of a permanent nature. The company applies the equity method when accounting for associated companies and its total participation in associated companies’ income is reported net of tax. See Note 9.

6

Short-term investments and cash at bank

Stockholmsbörsen’s short-term investments and cash at bank are comprised of discount instruments, bonds and other securities issued by the Swedish government, local authorities, Swedish banks and Swedish mortgage institutions. These have been valued using the lower of cost and market value principle at the balance sheet date. Interest and dividend income earned on investments are recorded as Financial Items, Net in the accompanying Income Statement, see note 5.

In addition to pledged collateral and Stockholmsbörsen’s active risk management, the Company’s short-term investments, cash at bank and credit insurance are intended to ensure that Stockholmsbörsen is able to fulfil the exchange and clearing operations’ commitments.

Receivables and liabilities in foreign currencies

Receivables and liabilities in foreign currencies have been valued at the year-end rates quoted for each currency. The majority of the cash flows in the Company are in Swedish crowns why the exposure in foreign currencies is limited.

Items affecting comparability

Items affecting comparability relate to events and transactions that have an impact on income and are of significance when income for that period is compared with other accounting periods and other companies. The items relate to revenue and expenses of a non-recurring nature that are not part of the company’s current operations. See Note 4.

Provisions

Provisions are reported in the balance sheet when the group is set to experience future commitments as a consequence of an event that has already happened; one which is likely to incur a loss of financial benefits, the size of which can be anticipated with a reasonable degree of certainty. Provisions for restructuring expenses are reported when the group has presented a detailed plan for the implementation of the planned action and this plan has been communicated to all parties involved. See Note 14.

Taxes

Under the “Taxes” heading in the income statement the company has reported current and deferred income tax for its Swedish and foreign group companies. Group companies are liable to pay tax in accordance with relevant taxation legislation in the countries in question. The Swedish State corporate tax for 2002 was 28 percent, calculated on nominal reported income, adding non-deductible items and deducting non-taxable revenue as well as other deductions, primarily tax-free dividends from subsidiaries.

Deferred tax is reported in accordance with the balance sheet method which means that deferred tax liabilities and receivables are calculated, and reported in the balance sheet, on temporary differences between book and taxable values for assets and liabilities as well as for other tax deductibles or deficits. Deferred tax receivables are reported with caution and only when it is deemed probable that the underlying tax receivable will be realized during the foreseeable future. At each balance sheet date an assessment is made of the reported values.

Deferred tax liabilities and receivables are calculated using the anticipated tax rate at the time the reversal of the temporary difference is due to take place. The effects of the changes to applicable tax rates are reported during the period in which the changes become statutory. See Note 7.

7

Legal dispute

In June 2002 it was announced that Stockholmsbörsen had been sued by a number of members, banks and brokerage companies, on the exchange concerning a demand for the repayment of value added tax, VAT. Stockholmsbörsen has contested these demands. In the opinion of Stockholmsbörsen there is no ground for the demand from the members since they already have been compensated for the increased cost that the VAT led to. The demand from the members amounts to SEK 180 m plus interest. Stockholmsbörsen has not made any provision for the demands.

EDX London

In December 2002 OM (the parent company of Stockholmsbörsen) and London Stock Exchange, LSE, announced the formation of a new international marketplace for equity derivatives trading, EDX London. The operation will be based on the derivatives business of OMLX. EDX London will be owned by Stockholmsbörsen (24%) and LSE (76%). Upon completion of the transaction, which is estimated before June 30, 2003, EDX will pay approximately SEK 340 m in consideration to Stockholmsbörsen for the assets contained in OMLX equity derivatives business. In addition to that portion of EDX London’s future income that Stockholmsbörsen will receive through its 24% ownership, as agreed, Stockholmsbörsen will receive an annual percentage of EDX London’s future revenue from Swedish equity derivatives. Management estimates that the formation of EDX London will have a neutral effect on the operating income of Stockholmsbörsen. See also note 10.

Note 2
Personnel

	2002				2001				2000
Salary and remuneration
Sweden
CEO, Deputy CEO, (of which performance-related bonuses)		4,667	(950	)		1,438	(0	)		2,074	(170	)
Other employees		80,934				55,059				49,026
United Kingdom*1		66,620				46,447				24,724
Total salary and remuneration		152,221				102,944				75,824
Other personnel expenses
Employers’ contributions		36,582				25,693				20,891
Pension expenses*2		16,589				12,322				4,172
Other personnel expenses		16,956				13,594				11,612
Total other personnel expenses		70,127				51,609				36,675
Total personnel expenses		222,348				154,553				112,499

*1	Of which 2,303 (2,303) (2,128) to the CEO.
*2	Of which 648 (298) (437) to the CEO and Deputy CEO.

Remuneration has been paid to the Board for the period 628 (625) (625).

8

Average number of employees

	2002				2001
			Of which				Of which
	Total		men		Total		men
Parent Company
Sweden		160		89		143		75
Subsidiaries
Sweden		47		41		0		0
United Kingdom		87		57		75		49
Group total		294		187		218		124

Note 3
Depreciation

Depreciation principles

Equipment

Equipment is depreciated on the basis of the financial life span estimated by Stockholmsbörsen Group, subject to maximum of five years. Depreciation expense was 24,340 (20,921) (3,988). See note 8.

Note 4
Items affecting comparability

Closure cost Jiway 69,167 of which write-down 4,890 and 64,277 is other expenses. Cost reduction program also included with 4,000.

Jiway was launched in February 2000 as the world’s first fully integrated exchange for crossborder trading, clearing and settlement. Operations commenced in November 2000. In October 2001 OM restructured the company, thereby substantially reducing its cost base. The year 2002 saw market activity on Jiway increase, although from very low levels. Jiway’s financial performance could not justify the financial support of its operations and in October 2002 OM decided to close Jiway. Costs related to the closing of Jiway amounts to SEK 69 m.

Jiway’s part of the consolidated revenues were insignificant in 2002, 2001 and 2000. Jiway’s part of the consolidated expenses (including financial items) were SEK 176 m, SEK 30 m and nil in 2002, 2001 and 2000 respectively.

9

Note 5
Financial items

	2002		2001		2000
Other interest revenue, etc.
Interest		43,146		46,323		65,261
Group interest		12,415		19,073		23,185
Currency gains		192		2,839		2,318
Total		55,753		68,235		90,764
Interest expenses, etc.
Interest		-14,886		-17,121		-1,465
Group interest		-74,709		-79,656		-69,076
Currency losses		-9,302		-934		-423
Total		-98,897		-97,711		-70,964
Total financial items		-43,144		-29,476		19,800

Note 6
Operational leasing

Stockholmsbörsen has no financial leasing agreements. Set out below are the operational leasing agreements within the group.

	2002		2001
Leasing fees for the period
Premises		52,246		68,338
Equipment		231		304
Total		52,477		68,642

	2003		2004		2005		2006		2007		Thereafter
Contracted leasing fees
Premises		41,824		41,824		41,824		46,201		46,201		231,006
Equipment		96		81		48		—		—		—
Total		41,920		41,905		41,872		46,201		46,201		231,006

10

Note 7
Taxes

	2002		2001		2000
Current tax		-117,595		-131,855		-263,201
Deferred tax		19,696		14,061		-1,314
Total		-97,899		-117,794		-264,515

Note 8
Tangible fixed assets

	31 December,
	2002		2001
Equipment
Acquisition value, opening balance		202,797		66,622
Purchases		15,560		136,175
Disposals and obsolescence		-11,802		—
Acquisition value, closing balance		206,555		202,797

	31 December,
	2002		2001
Depreciation, opening balance		50,701		29,780
Disposals and obsolescence		-6,625		—
Depreciation for the year		24,340		20,921
Depreciation, closing balance		68,416		50,701
Book value		138,139		152,096

Note 9
Financial fixed assets

	31 December,
	2002		2001
Investment in associated companies
Acquisition value, opening balance		3,088		3,008
Termination		-576		—
Share of income		60		80
Reclassification Clearing Control CCAB		50		—
Acquisition value, closing balance		2,622		3,088
Book value		2,622		3,088

11

Note 10
Proportion of equity in group companies

	Corporation		Registered	No. of		Proportion			Book
Company	identity no.		office	Shares		of capital			Value
OM London Exchange LTD*		2340701	London		100,000		100	%		130,550
OM Stockholmsbörsen IT Support AB		556286-2069	Stockholm		4,000		100	%		500
Book value										131,050

*     Part of business sold in December 2002. The deal is conditional and is supposed to be effective in June 2003 at the latest. The deal will result in a capital gain of approximately 228 m in OM London Exchange LTD.

Note 11
Proportion of equity in associated companies

				Proportion			Book
Company	Registered office	No. of shares		of capital			value
Clearing Control
CC AB 556286-2069	Stockholm		500		50	%		50
Nordic Exchanges A/S	Copenhagen		20,000		33	%		2,572
Book value								2,622

Note 12
Receivables from group companies

Of the total receivables 748 (1,216) m 419 (746) m relates to receivables in bank accounts included in OM’s group accounts system.

Note 13
Prepaid expenses and accrued revenue

	31 December,
	2002		2001
Accrued (unbilled) revenue		49,817		60,597
Prepaid expenses and other		29,921		30,401
Total		79,738		90,998

12

Note 14
Restructuring reserve

	31 December,
	2002		2001
Cost reduction program		1,582		—
Closing Jiway		59,230		—
Total		60,812		—

Note 15
Subordinated debentures to group company

Subordinated debenture issued to OM Treasury AG10	Dec 1997
Nominal amount		750,000
Interest terms Stibor +5% with the right to convert to fixed interest
Maturity	10 Dec 2007

Note 16
Accrued expenses and prepaid revenue

	31 December,
	2002		2001
Personnel expenses		22,153		17,286
Prepaid revenue		51,132		53,385
Other		20,600		10,302
Total		93,885		80,973

13

Note 17
Due date for receivables and liabilities

Due dates for receivables and liabilities are distributed as follows:

	Within 12 months		Within 2-5 years		After 5 years
Other long-term receivables		—		—		22,667
Accounts receivable		236,829		—		—
Receivable from group companies		747,668		—		—
Other receivable		2,493		—		—
Prepaid expenses and accrued income		79,738		—		—
Tax receivable		13,383		—		—
Other long-term liabilities		—		-750,000		—
Accounts payable		-233,050		—		—
Payables to group companies		-643,401		—		—
Other liabilities		-29,585		—		—
Accrued expenses and prepaid revenue		-93,885		—		—
Total		80,190		-750,000		22,667

Note 18
Interest bearing and non-interest bearing receivables and liabilities

			Non-
	Interest bearing		interest bearing
Tangible fixed assets		—		138,139
Financial fixed assets		22,667		41,726
Other receivables		420,668		659,443
Short-term investments		693,475		—
Cash and bank balances		125,096		—
Long-term liabilities		-750,000		—
Short-term liabilities		—		-999,921
Summa		511,906		-160,613

14

Note 19
Collateral pledged

	31 December,
	2002		2001
Stockholmsbörsen collateral pledged in favour of other clearinghouse*		2,824		10,646
*additional through bank guarantee		1,260		1,160
OM London Exchange collateral pledged in favour of other clearinghouse		22,667		29,895
Leasehold deposit London		—		46,100
Total		26,751		87,801

Note 20
Collateral pledged in favour of Stockholmsbörsen and OM London Exchange

	31 December,
	2002		2001
Collateral pledged in favour of Stockholmsbörsen		5,112,063		7,040,821
Collateral pledged in favour of OM London Exchange		1,668,702		2,676,539
Other clearinghouse collateral pledged in favour of Stockholmsbörsen*		2,420		10,646
* additional through bank guarantee		1,260		1,160
Total		6,784,445		9,729,166

In their respective clearing operations, Stockholmsbörsen and OM London Exchange serve as the financial intermediary for all options and futures contracts and thereby guarantee the execution of each contract. Clients, who via options or futures agreements have a commitment vis à vis Stockholmsbörsen or OM London Exchange, are required to provide the Company with access to collateral for such commitments in accordance with a collateral list determined by the Company. The majority of the collateral provided to the Company is comprised of cash and highly liquid securities issued by the Swedish Government.

Note 21
Trading between group companies

Included in total expenses, exclusive of personnel costs, of 543 (517) (400)m, is 262 (290) (222)m relating to purchases of technology and other services from companies within the OM group.

Sales to group companies amounted to 268 (3) (2)m and consist of the sale of the subsidiary OM Reinsurance AG, 253 m.

15

Note 22
Parent company

Company	Corporate identity no.		Registered office
OM AB		556243-8001	Stockholm

Copies of the financial statements of OM AB may be obtained through written request from OM AB, Norrlandsgatan 31, SE-105 78, Stockholm, Sweden.

Note 23
U.S. accounting principles and adjustments for U.S. GAAP

The consolidated accounts for Stockholmsbörsen AB have been prepared in accordance with Swedish GAAP which differs in certain respects from generally accepted accounting principals in the United States. The following summarizes the principal differences between Swedish GAAP and US GAAP and the impact on reported results and equity of the use of US GAAP:

Income taxes

The Company provides for deferred taxation using the liability method. Deferred taxes are not provided on timing differences which, in the option of management, will not reverse. However, under U.S. GAAP, deferred taxation is provided using the liability method on all temporary differences and deferred tax assets are recognized to the extent that their realization is more likely than not.

Earnings per share

Under U.S. GAAP, Basic and diluted earnings per share is calculated in accordance with Financial Accounting Standards Board Statement No. 128, “Earnings per Share” and basic earnings per share is computed on the basis of the weighted-average number of common shares outstanding. As no potentially dilutive securities have been issued by the Company, diluted earnings per share is equal to basic earnings per share for all periods presented.

Dividend to parent

January 1, 2002 the Company transferred the ownership of all shares in a wholly owned subsidiary OM Reinsurance AG to its parent company OM AB. This has been recognized as a dividend which resulted in a reduction of cash and equity of SEK 147 m.

Options held/ options written

Under U.S. GAAP, gross options held and options written of 1,772 (2,903) m, would be recorded as an asset and liability, respectively in the balance sheet. Under Swedish GAAP the accounts are netted to zero.

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Reconciliation of income and shareholders’ equity

A calculation of income for each of the three years in the period ended December 31, 2002 and shareholders’ equity at December 31, 2002 and 2001, taking into account the significant differences between Swedish accounting practices and the U.S. GAAP standards, is provided below:

	Year ended 31 December,
	2002		2001		2000
Income as reported		109,544		325,873		739,109
Adjustment for deferred taxation		6,813		-2,996		-1,161
Adjustment for translation differences		—		560		-1,771
Income as adjusted for U.S. GAAP		116,357		323,437		736,177
Weighted-average shares outstanding — Basic and diluted		2,000,000		2,000,000		2,000,000
Earnings per share — basic and diluted		58,18		161,72		368,09

	31 December,
	2002		2001
Shareholders’ equity as reported		286,421		434,714
Adjustments for taxation (cumulative)		1,734		-5,079
Shareholders’ equity as adjusted for U.S. GAAP		288,155		429,635

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Cash flow statement

According to U.S. GAAP, cash equivalents comprise short-term highly liquid investments with maturities of 90 days or less when purchased. Cash equivalents in the accompanying balance sheet include highly liquid investments with maturities at the date purchased in excess of 90 days. U.S. GAAP requires only three categories of cash flow activity to be reported: operating, investing and financing. Also, under U.S. GAAP, dividend and interest income would be included in the operating activities category. The categories of cash flow activity under U.S. GAAP can be summarized as follows:

	Year ended 31 December,
	2002		2001		2000
Cash flows from operating activities		-24,667		-277,827		-100,610
Cash flows from investing activities		-127,921		-164,055		-77,567
Decrease in cash and cash equivalents		-152,588		-441,882		-178,177
Cash and cash equivalents, opening balance		971,159		1,413,041		1,591,218
Cash and cash equivalents, closing balance		818,571		971,159		1,413,041

Supplemental disclosures of cash flow information:

	Year ended 31 December,
	2002		2001		2000
Cash paid for taxes		6,332		7,247		8,034
Cash paid for interest		97,902		96,809		70,361

The following are additional disclosures required under U.S. GAAP:

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. The Company does not require collateral on these financial instruments.

Cash and cash equivalents and short-term investments are maintained principally with financial institutions in Sweden and in Great Britain which have high credit standings. Credit risk on trade accounts receivable is reduced through on-going evaluations of customers credit worthiness and credit restrictions.

The Company is also exposed to off-balance-sheet credit risk in the event of non-performance by counterparties to derivative instruments (options and futures contracts) for which the Company (or its subsidiaries) act as a financial intermediary and guarantor. The Company requires counterparties to derivative transactions to maintain specified levels of collateral and the Company also maintains credit insurance to limit its exposure in the event of default by a counterparties to such transactions. The Company is effectively self-insured for credit losses on existing counterparty performance guarantees for written options and futures up to an amount equal to the Company’s net equity. At December 31, 2002 the Company’s aggregate exposure to off-balance sheet credit losses under existing derivative contracts for which the Company is the guarantor (assuming the counterparties failed completely to perform and any associated collateral were of no value) would total approximately 1.8 (2.9) billion. To date the Company incurred only insignificant losses as a result of acting as the financial intermediary

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and guarantor of derivative instrument transactions.

The Company is economically dependent on entities within OM AB for the provision of services related to computerized trading systems and networks and other IT related services as well as certain management services. The Company believes that it could obtain these services from other independent sources on commercially viable terms if required.

Revenues from three individual customers exceed 10% of total revenues in all years presented.

Marketable Securities

Under US GAAP the Company would consider its short-term investments including those classified as cash equivalents to be classified as available-for-sale securities. Accordingly, these securities would be stated at fair value, with unrealised gains and losses net of applicable taxes, reported in other comprehensive income and with realized gains and losses or declines in value judged to be other-than-temporary included in earnings. At December 31, 2002, the fair value of short-term investments was substantially equal to the cost basis.

Comprehensive income

Under US GAAP comprehensive income is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. During the year ended December 31, 2002 total comprehensive income as reported under US GAAP would have equalled SEK 166.4 m.

Research and development

Research and development costs are expensed as incurred. The amount charged to expense was 14 (22) (41) m.

Advertising

The Company expenses the costs of all advertising when incurred. Advertising costs were 2 (12) (9) m.

Income taxes

Pretax income from continuing operations was taxed in the following jurisdictions for the years ended 31 December:

	2002		2001		2000
Domestic		433,272		455,200		903,909
Foreign		-225,829		-11,533		99,715
		207,443		443,667		1,003,624

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Significant components of the provision for income taxes are as follows:

		2002		2001		2000
Current:
	Domestic		-117,595		-131,709		-256,029
	Foreign		—		-146		-7,172
Total current			-117,595		-131,855		-263,201
Deferred:
	Domestic		-3,835		3,868		-444
	Foreign		23,531		10,193		-870
Total deferred			19,696		14,061		-1,314
Total provision for income taxes			-97,899		-117,794		-264,515

A reconciliation between the Company’s effective tax rate and the Swedish statutory tax rate is as follows:

	2002			2001			2000
Statutory tax rate, Sweden		28,0	%		28,0	%		28,0	%
Foreign impact on tax rate		19,2	%		-1,4	%		-1,6	%
Effective tax rate		47,2	%		26,6	%		26,4	%

The difference between the nominal Swedish rate of 28 percent and the group’s tax rate is attributable primarily to the lower income level as well as the income distribution between different countries.

Deferred tax receivables & liabilities are comprised of the following at December 31:

	2002		2001		2000
Deferred tax receivables:
Deficit allowances		36,474		16,918		—
Depreciation in advance of capital allowances		628		280		438
Other tax allowances		2,002		2,209		2,122
Total		39,104		19,407		2,560

	2002		2001		2000
Deferred tax liabilities:
Depreciation in advance of capital allowances		4,060		4,060		918
Calculated tax on untaxed reserves		—		58,490		58,612
Total		4,060		62,550		59,530

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A summary of the Company’s operations by geographic area is as follows:

		2002		2001		2000
Revenues:
	Domestic		853,787		940,947		1,280,654
	United Kingdom		152,719		175,302		187,097
	Other		—		27,953		28,350
Consolidated			1,006,506		1,144,202		1,496,101
Operating income:
	Domestic		466,436		493,417		906,339
	United Kingdom		-215,909		-47,502		49,693
	Other		60		27,228		27,792
Consolidated			250,587		473,143		983,824
Identifiable assets:
	Domestic		2,068,138		2,156,484		1,700,880
	United Kingdom		522,462		604,174		359,867
	Other		—		460,738		414,904
	Eliminations		-489,386		-352,454		-125,000
Consolidated			2,101,214		2,869,022		2,350,651

Recent accounting pronouncements

In August 2001 the FASB issued FAS-143 “Asset Retirement Obligations”, regarding the non-temporary removal of long-lived assets from service, whether by sale, abandonment, recycling or other method of disposal.FAS-143 will become effective for fiscal years beginning after June 15, 2002, which for the Company will be January 1, 2003. Management does not expect that adoption of FAS-143 will have a material impact on the Company’s results of operations or financial position.

In July 2002,FAS-146 “Accounting for Costs Associated with Exit or Disposal activities ” was issued. It addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF 94-3,“Liability Recognition for Certain Employee Termination Benefits and other Costs to Exit an Activity (including Certain Costs Incurred in a restructuring).”

The principal difference between FAS-146 and EITF 94-3 relates to FAS-146’s requirements that a liability for a cost associated with an exit or disposal activity should be recognized when the liability is incurred. The statement is effective for exit or disposal activities initiated

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after December 31,2002. Autoliv does not expect the application of FAS-146 to have a material effect on earnings or financial position.

In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45 (FIN 45),Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.FIN 45 requires the guarantor to recognize a liability for the non-contingent component of a guarantee; that is, the obligation to stand ready to perform in the event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at its inception. The recognition of the liability is required even if it is not probable that payments will occur under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple elements. FIN 45 also requires additional disclosures related to guarantees. The recognition measurement provisions of FIN 45 are effective for all guarantees entered into or modified after December 31, 2002.

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