News; Jul 7, 2004 CET

Record attendance at AGM

Attendance at Swedish Match’s Annual General Meeting earlier this year broke all records. More than 600 shareholders had registered to attend and, as usual, demonstrated their strong commitment to the company and its operations. They were to hear about yet another year of outstanding share performance and an average annual increase of 20 percent in earnings per share over the past five years, which in turn ensured that the proposed increase in the dividend to SEK 1.70 was approved. “Not a bad pi

This year’s AGM contained additional new elements compared with previous years. On this occasion, the shareholders had the opportunity to listen to reports, not only on the work of the Board of Directors, but also on the activities of the Audit Committee, Remuneration Committee and Nomination Committee - a consequence of the desire for increased openness and clarity in issues concerning corporate governance, auditing and controls, and remuneration policies.

The incentive programs in exchangelisted companies in Sweden have been the subject of animated debate during the past year, and Board Chairman Bernt Magnusson informed the Meeting about the basic principles that apply within Swedish Match.

“Our programs must be designed so as to combine the interests of management and shareholders,” he noted.

“Moreover, they must be communicated with the greatest possible openness, must be simple to understand, measurable and reasonable, and have a ceiling. In addition, only favorable returns and earnings per share will be rewarded.”

According to Swedish Match’s options program, for the maximum allotment of options to occur, the return on shares must be 20 percent better than an index comprising a number of comparable tobacco-company shares, and earnings per share must be 20 percent higher than the average over the past three years.

The Board of Directors had proposed to the Annual General Meeting a new purchase option program for 2004 with essentially the same conditions that had applied previously. According to the proposal, the program will cover 58 senior executives and not exceed a ceiling of 24,150,000 SEK, which corresponds to 30 percent of the total remuneration payable to the persons in question.

The options system prompted a certain amount of discussion at the Meeting, and some delegates were of the opinion that the options program should be scrapped altogether. However, an overwhelming majority of votes were in favor of the program, which was described by several major shareholders is the best in the Swedish market.

“I have been a Swedish Match shareholder for four years and directly or indirectly control 32.7 million shares - and am very pleased about it. It is an extremely well-managed company with an admirable focus,” commented Nick Booth, Board
Chairman of Boston-based Wellington Asset Management. “Based on an international comparison, I do not therefore believe that the Swedish Match management is adequately compensated.”

Bernt Magnusson agreed that the amounts were low in an international perspective.

“But we must view this issue from a Swedish viewpoint, and in that context they are reasonable,” he said. “However, I also wish to emphasize that the requirements for receiving the full allotment are very stringent - I have never seen anything comparable in any other company - and this accounted for the fact that the allotment last year was only half the maximum amount.”

Tore Lidholm, from the Swedish Shareholders’ Association, was critical of how little is happening in the company.

“It is an excellent and financially successful
company, but I see no clear development, no vision,” he said.

Bernt Magnusson countered that it was a deliberate policy on the part of the Board to be cautious with the shareholders’ money:

“We have consciously refrained from high-risk empire-building and focused primarily on organic growth. As a general rule, there are few acquisition targets that are worth considering, and they are often extremely costly. We do not want to risk the shareholders’ money through excessively large-scale expansion.”

The Meeting reelected Jan Blomberg, Tuve Johannesson, Arne Jurbrant, Bernt Magnusson and Meg Tiv贳 to the Board. Karsten Slotte, President of Cloetta Fazer, was newly elected to the Board. Klaus Unger, who had declined reelection, was warmly applauded for his services (see also separate article). Chief Legal Counsel Bo Aulin also received enthusiastic applause for the settlement reached with UST, whereby Swedish Match will receive 200
MUSD in compensation.