Posten Annual Report 2002 by fyx28874

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									Posten Annual Report 2002
Our fundamental mission, to provide universal mail service for everyone
in Sweden, hasn’t changed since Axel Oxenstierna founded the postal
authority in 1636. Over time we have honed this mission and reengineered
the logistics process. Posten has a historic pioneering spirit.
  Today 2,800 partners provide letter and parcel services. 400 Postal
Centers serve businesses across the country. 1,200 Swedish Cashier Service
locations provide essential financial services. And 2,600 rural carriers serve
communities lacking convenient postal facilities. Customers can pick up or
drop off a parcel at their nearest supermarket, gas station or convenience
store. Usually seven days a week. In some places 24 hours a day.
  New ideas, though, spark debate. Why is Posten changing? Does Posten
have to change? Despite the ebb and flow of public opinion, however, our
approval rating is high and customer satisfaction is steadily improving.
  We are committed to growing our core business. It’s about providing and
ensuring the delivery of traditional and electronic postal communications.
But we’re also adding customer value through service innovation.
Customers can, for instance, elect to receive treeless e-bills instead of
paper ones, or track their mail as it moves through our system.
  We are the 21st century’s leading authority on everything between
From: and To: Without the frills.
The board and chief executive officer hereby present   Message from the CEO           4        Financial section
the 2002 annual report of Posten Group and its         Directors’ report                       Consolidated
parent company, Posten AB (publ), corporate identity   Headlines                      2         income statements                         35
556128-6559. The scope of the group at December        Operating environment                     balance sheets                           36
31, 2002, is presented in note 2, page 45.              and market                    6          statements of cash flows                 38
                                                       Strategy and goals             8        Parent company
                                                       Legislative mandates          10         income statements                         39
                                                       Organization and control      12          balance sheets                           40
                                                       Messaging and logistics       14          statements of cash flows                 42
                                                         Business customers          16        Notes to the financial
                                                         Consumer customers          20
                                                                                                accounting and
                                                         Service network             22         valuation principles                      43
                                                       Cashier service               24        Five-year summary                          70
                                                       Employees                     26        Definitions                                71
                                                       Environment                   28
                                                       Risk management               30
                                                                                               Auditors’ report                           65
More information is available at         Group overview                32        Other items
Q1                         April/May 2003              Parent company                39        Glossary                                   72
Q2                         July/August 2003            Statement of retained earnings 64       Addresses
Q3                         October/November 2003       Board of directors            66
Q4 and FY                  February/March 2004         Executive management          68

                                                                                           Directors’ Report, Posten Annual Report 2002   1
             HEADLIN ES

Adjusted operating earnings were SEK –703 million

Posten attributes the negative earnings to exorbitant
administrative and development costs. Moreover, quickly
matching fixed production costs to eroding mail volumes
and waning transaction volumes in over-the-counter
cashier services has proven challenging.

Net earnings for the year were SEK –788 million (3,432).

Cash flow before financing activities was SEK –1,746
million (–1,433).

The nonsubsidized segment of the Cashier Service
operation is currently generating major losses. A
cost-cutting regime aimed at achieving a break-even
position by 2005 will be launched this year.

Net sales and operating earnings by business segment
                                                                                                                      Net sales                                       Operating earnings
SEK m                                                                                                         2002                20011                              2002            20011
Messaging and logistics business segment                                                                    22,514              21,005                                  2              397

Cashier Service business segment                                                                              1,181                 932                              –660           –444
Reimbursement2                                                                                                  400                 150                               400            150
Cashier Service business segment, total                                                                       1,581               1,082                              –260           –294
Reversal of provisions corresponding to results, cashier service                                                                                                      260            260

Group-wide                                                                                                                                                           –705           –513

Internal elimination                                                                                         –463                –419
Net sales and adjusted operating earnings                                                                   23,632              21,668                               –703           –150

Provisions/reversals                                                                                                                                                   732           293

Capital gains, Postfastigheter                                                                                                                                                     1,277
Net sales and operating earnings                                                                            23,632              21,668                                  29         1,420
1   Comparative year refers to Posten pro forma, i.e., Posten excluding Postgirot.
2 The  state appropriated SEK 200 m in 2001. Because the Cashier Service business segment began operating on April 1, 2001, the comparative year comprises only three quarters.

    2    Posten Annual Report 2002, Directors’ Report
Outlook 2003
The corporate vision we developed in 1999 provided the
foundation for the changes that have reshaped our organization.
The world has changed dramatically since then. We are
responding to the world’s new and different demands by
realigning our vision, goals and strategies. Loss-making
operations will be jettisoned, costs optimized and expenditures
rigorously prioritized. We will focus on enhancing profitability in
the core business.
                                                              2003                                          A long-term, economically sustainable solution for the
                                                                                                        cashier service business is needed. However, we do not play an
                                                                                                        agenda-setting role in the critical public policy discussion
                                                                                                        about legislative change. Dialogue and consensus, among the
                                                                                                        state (our owner), legislators and the public, must be sought to
                                                                                                        responsibly resolve our challenge.

    Planned reductions – affecting 1,000 administrative positions
across production, functional areas and business units – will
proceed on schedule. Further cutbacks could be on the hori-
zon. Escalating sick-leave benefits, an area we clearly need to
prioritize, also must be reined in.

Key data
                                                                                                     2002                                                           2001 Pro forma1
                                                                             Full year         Q4          Q3         Q2         Q1              Full year          Q4       Q3         Q2         Q1
Net sales, SEK m                                                              23,632       6,318       5,625      5,815      5,874                21,668       5,876      4,990     5,316      5,486
Adjusted operating earnings, SEK m                                               –703       –278         –79       –413           67                 –150           –7      110      –252          –1
Provisions/reversals, SEK m                                                        732      –184                     916                               293         451    –158
Operating earnings, SEK m                                                           29      –462         –79         503          67                1 420      1 570        103      –252          –1
Profit margin, %, excluding provisions/reversals                                   neg        neg         neg        neg         2.4                   6.3         21.5      6.4       neg         0.1

Total assets, SEK m                                                           13,863 13,863 14,509 15,142 15,954                                  17,311 17,311 16,210 15,980 14,927
Equity, SEK m                                                                   2,587      2,587       3,671      3,710      3,377                  3,299      3,299        110      –124          48
ROE, %                                                                             neg        neg         neg       10.6         2.3                136.6      122.6      170.4        neg         neg
ROCE, %                                                                             3.7        3.7        neg         8.6        1.5                  51.7         51.8      2.1       neg         0.2
Equity-assets ratio, %                                                            18.8       18.8       25.3        24.5       21.2                   19.1         19.1      0.7       neg         0.3
Cash flow before financing activities, SEK m                                  –1,746                                                              –1,443
Investment in tangible and
  intangible fixed assets, SEK m                                                1,740         654        356         432        298                 1,187          413      240        359         175

Customer satisfaction index, CSI                                                    61          61         62         62          62                    63          63        62         62        62
Employee dedication index, VIP                                                      60          60         59         59          59                    59          59        58         58        57
Average number of employees                                                   39,554 39,554 39,630 38,776 38,132                                  39,466 39,466 39,662 38,996 38,541
1 The   effect of the new accounting principle adopted in 2001 is explained in the 2001 annual report (page 39). Pro forma refers to Posten excluding Postgirot.

                                                                                                                                                    Directors’ Report, Posten Annual Report 2002   3

 For Posten, the year was marked by challenge and defined by            increasingly focus on the letter and parcel segments. Non-core
 change. But despite eroding mail volumes and a slump in the            or underperforming areas will be reviewed and either phased
 legislatively mandated cashier service operation, there is still       out or spun off, perhaps as joint ventures.
 cause for optimism. The heart of our business remains strong.              We have also launched E25, an efficiency improvement
 We will streamline and enhance our existing areas of excellence.       program aimed at cutting annual administrative costs by
 We will build on our strengths.                                        25 percent, or SEK 1 billion. E25 is proceeding on schedule.
                                                                        However, this is not enough. We therefore must assess
 Embracing change                                                       administrative costs in the functional areas and business units.
 Change – it’s a fact of life. It’s something Posten knows a lot        And we must respond to lighter mail volumes by looking over
 about. Our capacity to embrace change is one of our foremost           production units, including the mail terminal network.
 assets. In fact, our success hinges on it.
     It’s no different today, but the stakes are much higher.           Growth
 Historically, our mail volume growth rates have tracked increases      We’re driving growth in the heart of our business.
 in the overall communications marketplace. In the past years,              Parcels, a segment we’ve grown in recent years, are part of
 however, mail volumes have steadily declined. We do not view           our core business. We strengthened our partnership with the
 this as a blip, but a trend that is likely to continue.                French postal operator La Poste in 2002. We are now part of one
     We fully anticipated electronic diversion. But instead of trying   of Europe’s largest parcel networks, DPD. This network enables
 to stem the tide, we got onboard. We developed hybrid services         us to satisfy the demand for high-quality international parcel
 that combined conventional and electronic postal communications.       forwarding. We will continue to target growth in this segment.
 And we put new technology to work in mail processing.                      We will also focus on the market communication segment.
     The postal service is attuned to and aligned with customer         Already competitive, Posten’s targeted direct mail and bulk
 demand. For years the market for over-the-counter (OTC)                advertising mail services have the potential to deliver further
 cashier services has contracted, while the need for expanded           customer value.
 access to retail outlets with extended hours has steadily grown.
 Posten responded to this change in consumer behavior by rolling        New service network
 out a new partner-operated service network – i.e., points of           In 2002, we rolled out a new service network. In modern
 service situated in cooperating supermarkets, gas stations and         memory, only the decision to reverse the direction of motor
 convenience stores – and by scaling down its range of OTC              vehicle traffic is comparable to this tectonic shift in Sweden’s
 cashier services.                                                      infrastructure. Today we have 2,800 partner-operated service
     Competition in both the letter and parcel segments has             outlets across the country.
 necessitated change, too. Many feel that, despite ten years of             These points of service are conveniently located in neighbor-
 deregulation, few companies have stepped up to challenge the           hoods and highly trafficked commercial environments. They are
 incumbent. To be sure, Posten has a large market share in these        generally open seven days a week and, in some cases, 24 hours a
 segments. On the other hand, these competitors have forced             day. I can’t overemphasize the contributions made by our partners
 us to push business effectiveness and operational efficiency to        in this massive project. And I would like to take this opportunity
 a new level.                                                           to personally thank them for their tireless efforts.
     As I mentioned earlier, the pressure to change is unremitting.         Also included in the service network are 400 postal centers,
 We’ve taken the initial steps, but now we have to find new ways        where Posten employees serve primarily businesses, and last,
 to meet the needs of consumers, gauge trends in consumer               but not least, our 2,600 rural carriers. The important role played
 behavior and deliver value amid heightened competition.                by rural carriers in the communities they serve has been visibly
                                                                        enhanced through our new service network.
 Reappraisal and revision                                                   We recognize the need for quality assurance and fine tune
 In light of changing demand and weak earnings, we are reen-            adjustments. We are listening to our customers, and striving for
 gineering the vision and strategies developed in 1999. As of           improvement in areas where we’ve been less than successful.
 this writing, the effort is in full swing. We see a clear need to      Enhancement and simplicity are two guiding principles for the

 4   Posten Annual Report 2002
year ahead. Customer feedback is
fueling this work. We’re not satisfied
until our customers are satisfied.
Progress is being made, but there’s
still work to be done.
     The new service network is
not only necessary for expanding
availability, but also for controlling
the spiraling costs of operating a
traditional post office network.

Swedish Cashier Service
Posten has a legislative mandate to
the nation to provide over-the-counter cashier services. Our           poor working environments as well as motivational activities and
mandate means that we have a legal obligation to ensure that           initiatives targeted at people on long-term disability are some
everyone can make and receive payments as well as withdraw             key elements of the program. If we can meet the targets set by
cash anywhere in the country.                                          the government, we can improve people’s quality of life while
    We fulfill our mandate through the services provided by            drastically reducing costs.
Swedish Cashier Service, a subsidiary with locations across the
country. Transaction volumes, however, are weak and declining.         A vital organization
Despite a SEK 400 million annual reimbursement to cover costs          Letters and parcels are Posten’s core business. It’s an unmistakable
in part of the business, the company is buckling under heavy           part of the country’s infrastructure. It must be reliable, profitable
losses. A TEMO survey commissioned by the Swedish National             and trusted. Despite the hard work and difficult decisions ahead,
Post and Telecom Agency in January 2003 found that only two            there is cause for optimism about the future. Though robust and
percent of the population pays their bills and four percent with-      healthy, the heart of our business requires considerable care and
draws cash at Swedish Cashier Service.                                 attention. By building on Posten’s strengths, we will succeed.
    The communications world has changed. Swedish Cashier
Service needs to change, too. We expect earnings and volume            Stockholm, March 2003
growth to endorse the legislative changes required to achieve
a break-even position.

Posten’s role as an employer
I have worked for this organization for 40 years. Posten has been
a good employer. As a large company and one of Sweden’s                Börge Österholm
biggest employers, Posten essentially mirrors the society it           President and Chief Executive Officer
serves. The average age of our employees is relatively high,
and we will be affected more than others when the generation
born in the 1940s begins to retire. We have made considerable
pension contributions on behalf of future retirees.
    Posten is a microcosm of Sweden in terms of health and well-
being, too. Not surprisingly, long-term disability is financially
draining for Posten and emotionally debilitating for those affected.
Reducing illness absenteeism therefore is a high priority. The
cornerstone of this effort is the far-reaching workplace health
program launched this year. Health care, the identification of

                                                                                                                  Posten Annual Report 2002   5
        OPERATI N G E N V I R O N M E N T A N D M A R K E T

Several distinct trends stand out in the messaging and logistics
market: internationalization, strong demand for integrated
solutions, a renewed commitment to the core business and a
transition to more sustainable development.

Internationalization                          the regular mail market varies          can achieve enhanced security,
Sweden’s membership in the                    from country to country. This           efficiency and transparency by
European Union, the introduction              market is expected to achieve           enlisting the aid of electronic
of a single currency in many                  peak deregulation by 2009 at the        solutions. Services that allow
European countries and Internet               earliest. Apart from Sweden and         customers to monitor mail as it
advances are spurring growth in               Finland, Europe’s national postal       moves through a distribution
cross-border trade. This translates           operators have maintained their         system, so-called track-and-trace
into a growing need for international         dominating positions.                   services, are viewed as “part and
transportation and information.                   In Sweden, Posten already is        parcel” of today’s offering.
    Many businesses are part of               competing with other postal             Technological advances also mean
international corporations or                 operators in the letter mail market.    that new modes of distribution are
networks. Messaging and logistics             At the same time, current regulations   capturing an increasingly large
services are purchased at the inter-          will continue to constrain our          market share, fueling competition
national level and must provide               ability to compete with these           for mail distribution.
access to global or European                  operators outside Sweden.                   Many postal operators and
distribution systems. To meet                                                         information technology companies
these demands and strengthen                  Integrated solutions                    provide hybrid services, combining
their competitive position, postal            Though certain segments of the          the conventional and electronic
operators must grow internationally.          information technology sector           communications that are carried to
The alternative is to provide niche           suffered further setbacks in 2002,      and from businesses and consumers.
services in a local market.                   electronic communications con-          One example is the mail capturing
    The trend toward increased                tinued to see growth. Electronic        service, whereby hardcopy mail is
internationalization has led to a             alternatives, such as e-mail and        scanned and distributed to recipients
consolidation of the messaging                access to Web-based information,        via e-mail. Another such service is
and logistics market through                  are gradually diverting regular         eBrev (“eLetter”), whereby the
acquisitions and alliances, either            mail volume. E-government is one        sender presents an electronic file          Demand for third-party
self-financed or in partnership with          example of this trend. Sweden’s         and a hardcopy version is repro-        logistics, in which business-to-
others. Many formerly state-owned             public sector is expanding access       duced at the outlet nearest to each     business partners outsource tasks
postal operators, such as those in            and applying the Internet and           recipient.                              to a third party, is on the rise. These
Germany and the Netherlands,                  related technologies to provide                                                 solutions range from transportation
have begun operating under new                more convenient and effective           Focus on the core business              and inventory replenishment
ownership structures. The Danish,             government services to citizens         To boost efficiency and control         to packaging, assembly, CRM,
Austrian and Greek postal operators           and businesses.                         costs, companies are focusing on        invoicing and payment reminders.
also are considering changing their               By combining traditional and        their core business. Transportation
ownership structure.                          electronic postal communications,       as well as messaging and logistics      Sustainable development
    Despite the increasing inter-             effective solutions can be created      processes, often viewed as non-         Increasing environmental aware-
nationalization of many European              for every business and, eventually,     core areas, are either insourced or     ness is placing new demands on
postal providers, competition in              every consumer. Logistics flows         outsourced to specialists.              businesses.

  6   Posten Annual Report 2002, Directors’ Report
    ISO 14001 certified and Eco          At the same time, the scope of   government emphasizes the             DID YOU KNOW THAT...
Management and Audit Scheme          these efforts has been widened to    country’s role as a leader in the     By moving mail along
(EMAS) registered companies, for     include sustainable development,     move toward sustainable               railways, Posten has
instance, are demonstrating their    which integrates economic, social    development.                          reduced carbon dioxide
commitment by choosing to do         and environmental aspects.               For companies this means          emissions by 4,600 tons
business only with environmentally       The World Summit on Sustain-     responsible, long-sighted business    a year.
aware strategic partners.            able Development (WSSD) held         operations. It is about adopting
    Certain public sector entities   in South Africa in 2002 resulted     an ethical approach to business
are greening their operations,       in, among other things, an agree-    relationships, creating a positive
too. Many municipalities and         ment aimed at enhanced corporate     workplace and demonstrating
agencies procure only environ-       accountability for trans-national    concern for the environment as a
mentally preferable motor            companies (TNCs). The national       whole.
vehicles.                            strategy adopted by Sweden’s

                                                                                                           Directors’ Report, Posten Annual Report 2002   7

We have three core goals: profitability,                                            plays an integral role in Sweden’s          equity-assets ratio are 10 and
                                                                                    infrastructure, enabling people,            30 percent, respectively.
customer satisfaction and employee                                                  businesses and public sector                   In 2002, return on equity was
                                                                                    agencies to send and receive                negative; the equity-assets ratio
dedication. These goals work in concert                                             correspondence and merchandise              was 18.8 percent at year-end.
                                                                                    easily and effectively. The key
and play a crucial role in profitably meeting                                       to achieving this mission is                    Customer satisfaction. Posten has
                                                                                    nationwide reach. Unlike many               measured customer satisfaction
the long-term needs of customers.                                                   of its competitors, Posten cannot           using the Customer Satisfaction
                                                                                    elect to operate only in the                Index (CSI), a major service
Business idea                                 • No other postal communications      profitable major cities. Posten has         performance indicator, since 1991.
Posten connects people and                      provider matches our ability to     a commitment to the nation to               Respondents are asked general
organizations around the world                  drive value creation by combining   provide both uniform mail service           service-related questions as well as
by providing conventional and                   conventional postal services with   to everyone, everywhere as well as          specific questions spanning various
electronic postal communications                the convenience of electronic       over-the-counter cashier service.           aspects of quality, e.g., reliability,
– promptly, reliably and cost-                  solutions.                              Posten has three core goals:            service range, customer service
effectively.                                  • There is a post office in every     profitability, customer satisfaction        and complaint management.
    Posten drives value creation                home, every business and every      and employee dedication. These                  The new service network,
by combining conventional                       cellular phone.                     goals work in concert and are               rolled out in 2002, led to a decline
postal services with convenient               • We are freeing customers to         crucial to sustainably and profitably       in customer satisfaction. Posten’s
electronic solutions, and                       focus on their core business.       meeting the needs of customers.             2002 CSI score was 61. Its target
integrating these services into               • We are outpacing the industry                                                   was 62.
customers’ businesses.                          in terms of profits.                    Profitability. Posten’s owner,
                                                                                    the state, has set financial targets            Employee dedication. Since 1993,
Business vision                               Setting and achieving goals           aimed at achieving stable economic          Posten has used the VIP employee
• Posten is the natural choice for            Posten has a twin mission. We         growth as well as long-term return          dedication scorecard to follow up
  customers wanting to distribute             must meet our financial mandate       on capital and asset growth with            development targets. Employees
  messages and merchandise to                 to achieve market success, while      the opportunity to earn a dividend          are surveyed throughout the year.
  from, and within the Nordic and             fulfilling our legal mandate to       yield. The group’s targets for              Once a year, employees respond
  Baltic regions.                             offer universal services. Posten      adjusted return on equity and the           to a series of questions about their

                                                                                    Return on equity                            Equity-assets ratio
                                                                                    %                                       %
                                                                                    140                                     50


                                                                                     80                                     30

                                                                                     60                                     20
                                                                                                neg    neg          neg                           neg
                                                                                      0                                          0
                                                                                          1998 1999 2000 2001 2002                    1998 1999 2000 2001 2002
                                                                                      Target                                         Target

                                                                                    The 1998–2001 period is Posten pro forma.

  8   Posten Annual Report 2002, Directors’ Report
overall work situation. The results
are expressed in a VIP index.
VIP targets are set in all business          Many major companies are part
and operating plans. A new               of international corporations or
survey, incorporating a host of          networks. Furthermore, messaging        Reengineering our vision,              DID YOU KNOW THAT...
new questions, was introduced in         and logistics services are              goals and strategies                   Posten’s 15,300 letter
early 2001. Comparative figures,         purchased at the international level.   The changes that have reshaped         carriers serve 4.1 million
therefore, are available only            To secure and grow our position in      our organization in recent years       homes and 500,000
for the previous year. Overall           the Swedish market, we must move        were driven by the corporate           businesses every weekday.
indications for the year are positive,   into the international marketplace.     vision developed in 1999. The
however. At 60, the consolidated         We must strive to capture a share       world has changed dramatically
2002 VIP index was in line with          of import and export flows.             since then. We’re responding to
expectations.                                 Posten will form strategic         the world’s new and different
                                         alliances, with customers and           demands by realigning our vision,
Strategies                               partners, aimed at offering             goals and strategies. The work will
Posten is focused on realizing its       services and concepts tailored to       be completed by summer 2003.
vision of becoming a competitive         market requirements. Comprised
messaging and logistics company.         of simple components, these
The strategies aimed at achieving        services can be combined to create
this goal are based on a customer-       advanced solutions.
driven business model in which
profitability is ensured by the first-
and second-generation customer
value created by our services.

Customer satisfaction index, CSI                                                 Employee dedication index, VIP
Index                                                                            Index
70                                                                               70

60                                                                               60

50                                                                               50

40                                                                               40
     Q1:01 Q2:01 Q3:01 Q4:01 Q1:02 Q2:02 Q3:02 Q4:02                                  Q1:01 Q2:01 Q3:01 Q4:01 Q1:02 Q2:02 Q3:02 Q4:02
     Target                                                                        Target

                                                                                                                   Directors’ Report, Posten Annual Report 2002   9

Posten has a twin legal mandate: to provide                           with postal regulations, stipulates that Posten must provide the
                                                                      letter and parcel services required by the Postal Services Act.
universal mail delivery service – i.e., letter                        In specific terms, this includes:
                                                                      • Collecting and delivering mail across the country five days a
and parcel services – and essential cashier                             week;
                                                                      • Ensuring that 85 percent of overnight mail is delivered on
services – i.e., routine financial transactions.                        time;
                                                                      • Ensuring uniform prices for individual letters or parcels
                                                                        weighing up to 20 kg;
Letters and parcels                                                   • Ensuring that rates applied to standard or first-class mail do
Sweden’s Postal Services Act mandates the provision of high-            not exceed a level linked to the consumer price index.
quality, universal mail service at uniform and reasonable rates
to everyone, everywhere.                                              Letter and parcel services are the foundation of our commercial
    The Postal Services Act is predicated on the European             business. Yet despite a high degree of automation, 27,000 postal
Union’s Postal Directive. The directive is architected to ensure      employees are concerned with its operation.
the universal availability of affordable postal services to all           Letter mail services have been and continue to be our biggest
European Union residents, considered necessary for creating           earnings generator. During the year, mail volume declined 3.6
the internal market.                                                  percent due to increasing competition and electronic diversion.
    Posten and its counterparts in the European Union must                We are continually striving to sustain service quality while
obtain a license for the provision of postal services. Our license,   controlling costs. An important step in this effort is the transition
issued by the Swedish Post and Telecom Agency in accordance           to a new partner-operated service network.

 10   Posten Annual Report 2002, Directors’ Report
Essential cashier services                                        Key postal legislation
In compliance with the Essential Cashier Service Act, which
took effect on January 1, 2002, Posten provides daily, nation-
                                                                  The universal service mandate applies to
wide cashier service enabling everyone to receive and pay bills
                                                                  letters and packages weighing up to 20 kg.
at uniform prices.
                       Posten’s wholly owned subsidiary,
                   Svensk Kassaservice AB, fulfills               Postal operators must be licensed by
                   this mandate.                                  the Swedish Post and Telecom agency.
                       In 2002, the state appropriated            In November 2002 there were 36 postal
                   SEK 400 million to reimburse us for            operators in Sweden.
                   serving commercially unviable areas
                   lacking suitable alternatives.                 A letter is an addressed mailpiece weighing
                       Despite this reimbursement, the
                                                                  up to 2 kg.
                   operation reported a loss.

                                                                  The rate applied to individual overnight
                                                                  mailpieces weighing up to 500 grams may
                                                                  not exceed the so-called price ceiling,
                                                                  which is linked to the consumer price index.

                                                                                    Directors’ Report, Posten Annual Report 2002   11
         ORGANIZ AT I O N A N D CO N T R O L

Posten’s organization is divided into two
business segments: Messaging and
logistics and Cashier Service. We serve
customers through our Service Network and
Swedish Cashier Service as well as other
sales channels.

Business segments                              Within the business segment, the            Customer channels                       focuses on new customers, new
The business segments produce                  business units’ benchmark                   We sell our products and services       services and new markets.
services in tandem with support                performance indicators are                  via the Service Network, Swedish            Direct Sales cultivates customer
functions, such as Production,                 adjusted operating earnings and             Cashier Service and designated          relationships through personal
IT, and Support Units, and sell                the VIP employee dedication and             sales channels.                         visits.
services via the Sales, Service                CSI customer satisfaction indices.                                                      Posten also partners with other
Network and Swedish Cashier                                                                Sales                                   companies, incorporating its
Service customer channels. The                 Cashier Service                             Contact Centers generate sales          services into their proprietary
business segments’ benchmark                   The Cashier Service business                activities and handle incoming          range.
performance indicator is adjusted              segment operates a nationwide               sales calls.
operating earnings (see note 2,                network of cashier service outlets              Posten’s website,,    Service network
page 45).                                      run by the wholly owned subsidiary          is an important source of               The Service Network delivers and
                                               Svensk Kassaservice AB.                     information and a popular web           sells Posten’s services. The network
Messaging and logistics                            In addition to partnering with          shop that sells products ranging        comprises partner-operated
Messaging and logistics comprises              banks to provide essential banking          from stamps to complex business         outlets – i.e., points of service
six business units that are jointly            services, we offer a range of services      solutions.                              situated in cooperating
responsible for the operation,                 that includes daily business receipt            Key Account Managers are            supermarkets, gas stations and
from service development and                   management as well as domestic              responsible for strategic customers,    convenience stores – as well as
production to marketing and sales.             and international money orders.             and new business sales (NBS)            Postal Centers, which primarily

                                                      Executive management


   Market        Administrative International              Outsourcing       eCommerce &   Private         Cashier Service
   Communication Communication Mail                                          Logistics     Services

  IT                                          Production                             Support units

                                                                                                                                  Executive management
                                                                                                                                  Messaging and logistics business segment,
                                                                                                                                  business units
                                                                                                                                  Cashier Service business segment
  Service Network                             Sales                                  Swedish Cashier Service
                                                                                                                                  Support functions
                                                                                                                                  Customer channels

 12    Posten Annual Report 2002, Directors’ Report
                                       POSTEN’S CORE VALUES

serve business customers. Also         Every day we deliver mail to over four million       Social responsibility
included in the Service Network        homes and 500,000 businesses. And we                  Posten is actively concerned with environmental
are 15,300 letter carriers.            are one of Sweden’s largest employers. We              protection.
                                       recognize that the valued role we play in             Subcontractors engaged by partners to fulfill
Swedish Cashier Service                people’s lives places demands on the way we            the terms of an agreement with Posten must
In addition to its proprietary         approach ethical issues. Our core values reflect       satisfy Posten’s strict ethical standards.
offering, Swedish Cashier Service      a commitment to this responsibility. We intend
partners with banks to provide
                                       to distill these values into the work we do and      Diversity
essential banking services. At
                                       the services we provide. Every day.                   Gender equality is an intrinsic value at Posten
year-end 2002, Swedish Cashier
                                                                                             Posten is proactive in its efforts to combat the
Service had agreements with
                                       Respect                                                discrimination of minorities within the
Föreningssparbanken, Läns-
                                        Respect for human rights is an intrinsic part of     organization, and embraces ethnic diversity.
försäkringar Bank and Nordea.
                                         our organization. Posten does not engage in
                                         business activities with corporations or other     Openness and integrity
Support functions                        organizations that prevent individuals from         Interaction with the media and government
The IT function drives product           pursuing a dignified life, suppress opinions,        agencies will be open and factual.
development that enables the             hinder the formation of unions, or in some other    Posten does not divulge information about
move toward integrated customer          way violate human rights.                            customers, employees or other people in a
solutions, in addition to managing      All forms of sexual harassment, xenophobia, or       manner that would constitute an unwarranted
Posten’s e-services and internal         other intolerance are unacceptable.                  infringement of personal integrity.
systems.                                Posten does not exert an unfair advantage over
                                         partners and other stakeholders in its capacity
    Production is a highly automated
                                         as a large, well-known organization.
                                                                                             Managers have a particular responsibility to
unit where 9,500 employees
                                                                                              serve as ethical role models. It is unacceptable
process 22 million letters and
                                       Honesty                                                for managers to circumvent internal regulations
180,000 packages every day. There
                                        Posten complies with all international, state        or otherwise abuse their position of trust.
are 13 mail terminals and 12 bulk
                                         and local laws, ordinances, treaties and other      Employees may not engage in external business
advertising centers. The package
                                         binding agreements.                                  activities that could be deemed illicit, cause
network comprises 12 sorting
                                        Bribes and inducements are never accepted,           damage to the company’s reputation or compete
terminals, 134 distribution and
                                         regardless of the business implications.             with its operations.
collection points as well as three
                                        Posten’s marketing activities are truthful and      Posten employees may not be linked to illegal
heavy goods terminals.
                                         responsible and do not impede healthy                activities.
    Falcon Air provides postal air
transportation between Stockholm,        competition in the marketplace. Comparisons
Umeå, Gothenburg and Malmö.              with competitors are objective. Derogatory
                                         expressions or opinions are never expressed.
    The support units, such as          Posten conducts business only with legitimate
accounting, HR, legal affairs and        subcontractors and partners.
communications, serve the wider
organization. Another support unit,
Poståkeriet, is one of Sweden’s
largest trucking companies and
employs 3,200 people.

                                                                                                        Directors’ Report, Posten Annual Report 2002   13
           MESSAGI N G A N D LO G I ST I CS

The Messaging and Logistics business                                                 With the exception of Finland,            media, primarily in the form of
                                                                                     Sweden is the only European               electronic diversion, is our main
segment provides letter mail and other                                               country with a completely                 source of competition in the
                                                                                     deregulated postal market. All            domestic market. We compete
messaging products as well as parcel                                                 our domestic letter products are          with other postal operators as well
                                                                                     subject to competition.                   as IT companies.
and logistics services.                                                                  Despite dominating the market             The trend is especially
                                                                                     from a national perspective,              apparent in the financial sector
                                                                                     competition is fierce in certain          where online banking and e-billing
Adjusted operating earnings were               during the fall general elections.    highly profitable market segments,        are gaining a foothold. And the
SEK 2 million (397).                           The rate increases and election-      such as customer-sorted economy           advent of e-government is enabling
    Net sales were SEK 22,514                  season revenues offset lighter mail   mail. Furthermore, 36 postal              the public sector to communicate
million (21,005). Acquisitions and             volumes attributable to broader       operators are vying for a share of        electronically with people and
joint ventures, reported using                 usage of electronic substitutes,      the local markets.                        organizations.
the proportionate method of                    heightened competition and the            The European Union has                    Though it traditionally has
consolidation, boosted year-on-year            overall economy.                      decided to incrementally deregulate       tracked growth in international
net sales by SEK 1,505 million.                   Operating costs were               the postal market. Some countries         trade, international mail volume
Last year, net sales of SEK 422                SEK 22,634 million (21,110).          are deregulating at an accelerated        is being affected by electronic
million from the cashier service               Acquisitions and joint ventures,      rate.                                     diversion. Many organizations
operation were included in the                 reported using the proportionate          As postal markets become              are relocating their corporate
January–March period.                          method of consolidation,              partially or wholly deregulated,          headquarters, and purchasing
    Excluding structural changes,              increased costs by SEK 1,552          national postal service                   decisions therefore are frequently
net sales grew SEK 390 million,                million. Costs related to rolling     organizations will increasingly           made abroad.
despite a decline in passenger                 out the new service network were      operate in each other’s markets.              We are superbly positioned in
revenue at Posten’s air carrier,               SEK 630 million (373).                Many foreign postal operators             the domestic letter and messaging
Falcon Air, of SEK 241 million.                                                      and foreign-owned distribution            market. Moreover, our expertise
The increase primarily reflects                Market trends – letter                businesses are today operating in         and quality process focus, coupled
rate increases for business parcels,           and messaging products                Sweden, mainly in cross-border            with continuous product
bulk mail and our e-services, in               The now deregulated letter            postal communications.                    development, have positioned us
addition to revenues generated                 market is still relatively young.         Substitution by alternative           to deliver value in our target

Revenue stream,                                 Revenue stream,                      On-time domestic letters
domestic letters                                domestic parcels

Business                  Business              Business              Business                                                 Nationally, Posten has the highest
                                                                                      90                                       deliver performance quality in
              25%                                           68%
      65%                 5%
                                                     27%              3%

              5%                                             2%

Consumer                  Consumer             Consumer              Consumer              U.K.     Denmark Finland   Sweden

                                                                                             2001      2002

14   Posten Annual Report 2002, Directors’ Report
market – the neighboring Nordic        delivery is growing. To maintain    are owned by national postal              quality parcel delivery service
and Baltic countries.                  service levels, customers want      operators – and other large               throughout Europe.
                                       extended geographic reach, speed,   companies, such as Schenker and
Market trends – parcel and             reliability and customer            UPS, are our chief competitors.           Going forward
logistics services                     integration.                        Expedited delivery companies,             The foundation of our business
Though parcel and logistics                The changing needs of           as well as former heavy cargo             will continue to rest on letter and
companies greatly outnumber their      customers and significant           shippers that have branched out           messaging products, as well as
counterparts in the messaging          economies of scale in production    into parcel distribution such as          parcel and logistics services. We
market, growth is markedly higher.     and information technology          Danzas and Schenker, are also             will meet customers’ changing
    Logistics plays a key role in      have led to the restructuring of    operating in the logistics market.        demands and needs by driving
generating profits. Therefore,         the European logistics market           In the traditional parcel market,     product development and by
logistics is increasingly handled by   in recent years.                    Posten has a major presence. We           growing our geographic reach
management.                                Major international logistics   have enhanced quality over time           through strategic alliances with
    Buffer stocks are declining and    companies such as Deutsche Post/    and our franchise agreement with          postal operators and other
reserve inventories minimized,         Danzas/DHL, TNT, Royal Mail,        Direct Parcel Distribution (DPD)          partners.
while the need for just-in-time        La Poste and PNL – all of which     enables us to provide the same

                                                                                                              Directors’ Report, Posten Annual Report 2002   15
            MESSAGI N G A N D LO G I ST I CS

Letter and messaging products                                                                         Our eLetter product is an example of how Posten is embracing
The segment that serves private-sector organizations and public-                                  new technology while preserving and developing conventional
sector agencies is a large and very important part of our business.                               mail. A so-called hybrid product, eBrev (“eLetter”) allows
Letter mail – first-class and economy mail – is the core product                                  customers to electronically send letters, invoices or other mail
in this segment. Add-on services have been developed to meet                                      items to Posten. We sort the files and print them out at the
specific customer needs.                                                                          recipient’s closest eBrev center. After expanding the
    We also offer international mail products. We provide cross-                                  functionality of eBrev during the year, we now have the only
border postal service between Sweden and other countries as                                       product on the market capable of processing almost every type
well as between countries outside Sweden. In several key                                          of file format.
international markets, Posten has operations that offer effective                                     For the public sector, an important customer group, we have
and internationally competitive postal services. These                                            developed eGovernment. The service supports the public sector
operations were put in place to meet customers’ needs for                                         in its goal of creating a 24-hour agency, i.e. 24-hour access to
full-service distribution solutions.                                                              government services via the Internet. We are at the forefront in
    Mail volume, national and international, has declined                                         this area, and we see enormous market potential.
significantly in recent years. People and organizations are
switching to electronic substitutes, such as e-mail, websites                                     Going forward
and business systems.                                                                             Demand for message forwarding will remain strong and the
    We have adapted to and embraced this change. By combining                                     market will expand. The future of conventional mail as a means
conventional and electronic products, we can offer solutions                                      of correspondence appears secure. It reaches every home and
that simplify, improve or replace customers’ existing systems                                     every business, regardless of the availability of electronic
for sending, receiving, managing and distributing business                                        alternatives. There are also indications that, despite being
correspondence.                                                                                   technologically savvy, consumers in many situations prefer
    We offer products such as eSkicka (“eSend”) and eBlankett                                     conventional mail to e-mail. We therefore are emphasizing
(“eForm”). These products, together with our conventional mail                                    simplicity and enhanced choice in the business- and service-
products, enable us to offer complete, comprehensive forwarding                                   development of both conventional and electronic products, for
and management solutions. The new eArkiv (“eFile”) product,                                       mailers and recipients alike.
launched during the year, enables customers to electronically                                         We believe that we can achieve profitable growth with our
file and search among documents and records.                                                      existing systems, which provide fast and reliable distribution.

Business communications services                 Posten’s mail volume,                                   Posten’s share of Sweden’s
in Sweden, excluding advertising                 excluding parcels                                       advertising market
and newspapers
                                                 Pcs, Millions
                                                                                                          Other advertising
                                 Fixed and       6,000                                                                               Printed media 24%      The advertising
                                                                                                          activities 42%
     Other postal operators         cellular                                                                                                                market was worth
                      1%           telecom-      5,000                                                                                                      about 46 billion
        Posten                         tions                                                                                                                kronor in 2001.
        23%                             55%      4,000                                                                                                      By offering direct
                                                                                                                                            Movie           mail services,
                                                 3,000                                                                                      theaters 9%     Posten is part of
                                                                                                         Direct mail                                        (primarily) Sweden’s
Internet 7%                                      2,000                                                   via other                          Billboards 1%   advertising market.
                                                                                                         distributors 1%
                                                 1,000                                                                                 Ad production 15%    Source: Institute for
Rented network                                                                                                  Direct mail                                 advertising and media
capacity 13% SMS                                                                                                via Posten 6%                               statistics
               1%                                      0                                                                    Internet 2%
                                                           1998 1999 2000 2001 2002
                                                            Targeted mailings       BMA
                                                            Publications (including newspapers)
35 billion kronor in sales.
Source: Posten                                   Source: Posten

16     Posten Annual Report 2002, Directors’ Report
For businesses that send large volumes of cross-border invoices,          In addition to pure-play distribution, we provide integrated,
for instance, cutting transit times by one or two days can make a    one-stop shop solutions ranging from target audience selection
big difference. Another advantage is our ability to help customers   to follow-up assessments. During the year we expanded
with “intelligent channeling,” i.e., choosing the most effective     awareness of direct mail as a media among media sellers and
distribution channel for each job.                                   major advertisers. This work is beginning to bear fruit.
    Our international business is important. It allows us to offer       To make it easier for small businesses to unlock the
businesses the services they need. Retaining major customers is      opportunities presented by direct mail, we created DM Direct,
a prerequisite for maintaining quality and services levels in our    which enables them to shape mailings at
Swedish operation.                                                        Direct mail has consolidated its position as a media, and has
                                                                     even been granted its own category in the prestigious Golden
                                                                     Egg advertising awards.
Direct mail
Posten has long been the leader in Sweden’s direct mail market,      Going forward
which comprises both targeted direct mail and unaddressed, or        Knowledge about direct mail and advertising media is growing.
bulk, mail. Direct mail vies for its share of the advertising        More and more companies are incorporating direct mail into
budget alongside other media, such as newspapers, magazines,         their media mix and utilizing it to its full potential. We expect
radio, movie theaters, TV, the Internet and billboards. In 2002,     weak growth in 2003.
Sweden’s advertising market was estimated at SEK 44 billion.
Market communication is sensitive to economic fluctuations,
and growth was weak during the year.

                                                                                                  Directors’ Report, Posten Annual Report 2002   17

                                                                        Parcel and logistics services
                                                                        In the Nordic and Baltic markets, Posten offers a full-service range
                                                                        of services for effective commerce and logistics. By combining
                                                                        electronic and conventional products, we drive value creation for
                                                                        our customers and help them enhance their profitability and
                                                                        competitive position.
                                                                            Through our strategic alliance with Direct Parcel Distribution
                                                                        (DPD), which is owned by French postal operator La Poste,
                                                                        we are part of Europe’s second-largest parcel network. To
                                                                        promote this partnership with DPD, Posten has rebranded
                                                                        Företagspaket, a strong Swedish business parcel product. This
                                                                        product is now called DPD Företagspaket. Our customers can
                                                                        now send parcels within Europe just as quickly and easily as
                                                                        within Sweden. We strengthened our alliance with La Poste
                                                                        during the year. DPD franchise agreements are in place for our
                                                                        companies in Estonia, Latvia, Lithuania and Poland. And
                                                                        Geopost, a subsidiary of La Poste, has acquired a 50 percent
                                                                        stake in Poland-based Masterlink Express Sp.z.o.o.
                                                                            Apparel, footwear, office supply and other distributors to
                                                                        retailers are some of our biggest parcel customers. Mail order
                                                                        companies and book publishers are among our most important
                                                                        customers in the consumer product market.
                                                                            We continued to pursue performance excellence during the
                                                                        year. Consequently, 97 percent of our DPD Företagspaket
                                                                        parcels were delivered on time. We also offer courier service,
Periodicals                                                             expedited delivery, palletized freight forwarding, innight forwarding
Posten is Sweden’s leading distributor of newspapers and                and third party logistics.
magazines, so-called periodicals.                                           In the courier and expedited delivery segment, we provide
    The newspaper publishing market trended down in 2002,               local, national and international solutions.
primarily due to a slump in advertising. Certain publications,              We began to roll out a European palletized freight network in
however, have grown their circulation in the wake of a reduction        2002, and Posten launched PALL.ETT Utrikes for customers
in VAT from 25 to six percent that look effect January 1, 2002.         shipping palletized freight in the Nordic region, Baltic rim and
Posten’s periodicals distribution business is operating at a deficit,   Europe. At the beginning of the year, we expanded our reach
prompting us to take measures, such as price increases and              with 11 new countries and the domestic PALL.ETT Inrikes
further efficiency improvements.                                        service.
    TAB, our subsidiary, is one of Sweden’s largest distributors of         So-called innight forwarding – customized night transportation
morning newspapers. TAB has posted satisfactory results during          with scheduled drop-offs – is provided by Hultberg Inrikes
the year.                                                               Transporter (HIT), a subsidiary, and Poståkeriet. Manufacturers
                                                                        of automotive parts are key customers in this segment. In 2002,
Going forward                                                           we established a strong innight fowarding network in Europe
Posten initiated a newspaper theme day at the beginning of              with subsidiaries in Finland, Denmark and the Netherlands. We
March 2003 to stimulate dialogue with customers. Competition            have strategic partners in the other countries.
in the periodicals market is increasing, and further measures will          In the third party logistics segment, we offer quality logistics
be taken in 2003 to control the deficit over the coming years.          services that combine conventional and electronic postal flows.

18   Posten Annual Report 2002, Directors’ Report
            DID YOU KNOW THAT...
            The Nordic region and Baltic rim
            comprise Posten’s core market.

   The operation is jointly run by Säve Cargo, which provides
inventory management, pallet inventory, customs inventory,
specialized inventory and heated inventory, and Länsdepån in
Gävleborg, which distributes medical supplies to county and
municipal care facilities in Gävleborg County.

Going forward
We expect parcel, logistics and logistics-related services to be
the main drivers of growth going forward.
    We have the geographic reach and we are well on our way to
realizing our vision of being the natural choice for those wanting
to distribute messages and merchandise to, from and within the
Nordic and Baltic regions. By capitalizing on synergies in sales,
our product range, IT systems and production, we can provide
a one-stop shop for high-quality, competitively priced parcel
and logistics services.

Nordic parcel market,                 Posten’s parcel volumes
0–35 kg
                                      Pcs, Millions
Posten 22.7%
                        Other 77.3%




                                           1998 1999 2000 2001 2002

Source: Posten                        Source: Posten

                                                                      Directors’ Report, Posten Annual Report 2002   19

In 2002, we completed the major reorganization of Posten’s         management of bills and payments while promoting freedom of
service network that was launched in 2001. Many of the goods and   choice and availability. Customers can choose if and when they
services developed for consumer customers today are available      want to receive mail conventionally or electronically.
at gas stations and supermarkets. The move was aimed at                The development of consumer-oriented e-services is still in a
enhancing availability while controlling costs.                    nascent phase. The first truly hybrid consumer product – whereby
    Our new postage-prepaid products for letters and parcels       we print out and deliver electronic greeting cards selected and
have been well received by customers, boosting sales.              paid for by customers at – was launched in December
    We reinforced our organization during the year with            2002. This allows us to retain messaging streams that would
representatives who provide partner outlets with sales support.    otherwise have been entirely electronic.
    We raised rates for domestic letter mail on January 1, 2003        Hempaket (“Home Parcel”) is a convenient way for consumers
from SEK 5 to SEK 5.5; this was the first increase since 1997.     to receive ordered goods at home any weekday evening. This
The right to send mail at reasonable rates is protected by a       product will be further developed in spring 2003.
legislatively mandated price ceiling linked to the consumer
price index. The price ceiling applies to single-piece overnight   Philately
mail weighing up to 500 grams.                                     Consumer customers value our philatelic products. Because
    ePostboxen, an e-service for consumer customers, allows        Sweden is a relatively small country, our stamp issues are printed
people to securely receive, manage, file and reply to electronic   in limited numbers. This, coupled with our stamps’ superb
mail from businesses and government agencies. Recipient-           quality, makes Swedish stamps hot collector’s items.
controlled, the service improves efficiency in the daily

                                                                                                     DID YOU KNOW THAT...
                                                                                                     Posten is Sweden’s largest
                                                                                                     employer. Career guidance
                                                                                                     and individual develop-
                                                                                                     ment programs are availa-
                                                                                                     ble to all employees. Our
                                                                                                     CEO, Börge Österholm,
                                                                                                     began his tenure at Posten
                                                                                                     as a letter carrier.

20   Posten Annual Report 2002, Directors’ Report
Going forward
In 2003, we will prioritize marketing our product line
in supermarkets, in addition to further developing the
postage stamp business in the retail, consumer and
collector segments.

Private communication
consumption in Sweden

                 Posten 3%
                                                         DID YOU KNOW THAT...
Internet 16%                  Fixed and                  Czeslaw Slania, one of the world’s most famous postage
                                cellular tele-
SMS 3%
                                 communications 78%      stamp engravers, has produced more than 1,000 stamps
                                                         since he joined Posten in 1959. Though most of these
                                                         stamps are Swedish, he has engraved stamps for 28 other

29 billion kronor in sales.
Source: Posten

                                                                                 Directors’ Report, Posten Annual Report 2002   21

In 2001 we began to roll out a new retail network.
The core infrastructure was in place at the end of 2002.
The transformation has been monumental, for us as well as
the customers we serve.

Two years ago we conducted                     network has been to expand              retail outlets. An additional 1,000
extensive market research to gain              availability, in terms of both time     partners sell domestic and inter-
visibility into customers’ postal              and space.                              national stamps as well as postage-
needs. Armed with the results,                     Our network of partners             prepaid products.
we developed a strategy for a new              provide retail letter and parcel            For businesses that require local
retail letter and parcel network.              services to consumer customers.         personal service, we operate 430
                                               We have teamed up with four major       Postal Centers. Situated in busy
Letter and parcel services                     nationwide chains that operate gas      commercial areas, these centers are
Consumer and business customers                stations and stores: ICA, Axfood,       a one-stop shop for letter and parcel
have highly disparate postal                   OKQ8 and Pressbyrån/Seven               products. Furthermore, Postal
needs. Above all, consumer                     Eleven. This partner network gives      Centers are the heart of our network,
customers require services that                us access to a large number of stores   handling the day-to-day operational
allow them to send and receive                 with extended hours. Many are           contacts with our partners.
mail. Businesses have more                     open seven days a week.                     Also included in the service
complex needs, and often utilize                   Customers can send or receive       network are the 15,300 letter and
our entire product line.                       mail as well as purchase prepaid        rural carriers that daily serve our
    The primary goal of the new                postal products from one of 1,800       customers.

                                                                                                                               Fast-paced change
                                                                                                                               The new network was rolled out
                                                                                                                               quickly, while maintaining service
                                                                                                                                   We also launched a major
                                                                                                                               information campaign to raise
                                                                                                                               awareness about the new service
                                                                                                                               network. National and local
                                                                                                                               advertising was combined with
                                                                                                                               pamphlets that were distributed
                                                                                                                               to every home and business in
                                                                                                                                   For customers, the change has
                                                                                                                               been monumental. The new
                                                                                                                               network has been criticized
                                                                                                                               in various newspapers and on
                                                                                                                               television. We have been
                                                                                                                               continuously measuring customer
                                                                                                                               satisfaction throughout the year,

22   Posten Annual Report 2002, Directors’ Report
and public opinion has been           Sweden rates the new service network                                                DID YOU KNOW THAT...
increasingly positive.                                                                                                    A majority of customers
                                        Picking up parcels
    In 2003, we will focus on                                                                                             rated Posten’s new service
                                      Dropping off parcels
pushing efficiency and service                                                                                            network as “good.” Our
to new levels. It is also important        Buying stamps
                                                                                                                          ratings are improving all
to restore the public’s trust. Our         Mailing letters                                                                the time. Now we are
goal is to provide a valued and
                                                         0        20     40     60            80       100 %              making some fine tune
effective service network.
                                                             Very good   Good   Poor           No response                adjustments. Our goal is
                                                                                     Source: Mistat AB, Oct 2002
                                                                                                                          for everyone to appreciate
                                                                                                                          the new Posten better than
                                                                                                                          the old one.

                                                                                                                   Directors’ Report, Posten Annual Report 2002   23

The Cashier Service business segment
has a legal mandate to provide essential
financial services.

In compliance with the Essential               New customer channel
Cashier Service Act, which took                Transforming ourselves into a
effect on January 1, 2002, Posten              network of retail outlets meant that
provides daily, nationwide cashier             the cashier service needed to
service enabling everyone to receive           embrace change, too. Consequently,
and pay bills at uniform prices.               a new customer channel was
During the year we laid the                    rolled out parallel to the new service
foundation for a new customer                  network.
channel, Swedish Cashier Service,                  Swedish Cashier Service
to provide essential cashier service.          provides an essential line of
    Adjusted operating earnings                standard services, coupled with fast,
were SEK –260 million (–294);                  secure and quality service. 1,200
the comparative period began                   retail outlets and 2,600 rural carriers
April 1 and ended December 31.                 provide these services. Of the 400
In 2002, the state appropriated                partner-operated outlets, most are
SEK 400 million to reimburse us                located in small towns and cities.
for serving rural areas. This was
SEK 200 million more than we                   Services
received the previous year. Posten             In addition to a proprietary offering,
has approximately 75 percent of                we partner with several major
the over-the-counter payment                   banks.
and bank transaction market.                       Banking services include cash
Transaction volume continues to                withdrawal and deposit, payment
decline. Volumes have decreased                orders, postal checks and overseas
                                                                                         Sweden rates Swedish Cashier Service
by an average of 15 percent                    payments.
annually in recent years, and we                   Our proprietary services                Bill payment
believe the decline will accelerate            include daily business receipt            Cash deposits/
over time.                                     management as well as domestic
                                                                                                      0        20      40       60            80       100 %
    The nonsubsidized areas of                 and international money orders.
                                                                                                          Very good   Good      Poor           No response
the cashier business reported a                    Payment and bank transactions                                                     Source: Mistat AB, Oct 2002
loss of SEK 260 million for the                account for nearly 96 percent of
year. The board has sanctioned                 the total transaction volume.
measures aimed at achieving a
break-even position by 2005. We                Potential partner to all banks
are committed to achieving this                Any bank may partner with us
goal. While measures are needed                to provide essential services. At         and its network of savings banks,
in a number of areas, they will                year-end 2002, Swedish Cashier            and Länsförsäkringar Bank. We
primarily focus on the number of               Service had agreements with               are continually looking for new
outlets, pricing and products.                 Nordea, FöreningsSparbanken               partners.

24   Posten Annual Report 2002, Directors’ Report
Bill payment                                           Cash withdrawal                                                   DID YOU KNOW THAT...
                                                                                                                         Posten’s rural carriers do
                                     Other 5%
                                                       %                                                                 more than deliver the mail.
100                                                    100                                  Other 1%
                                     Bank 1%
                                     Swedish Cashier
                                                                                            Supermarket chains 8%
                                                                                            Swedish Cashier Service 4%
                                                                                                                         They also process simple
                                     Service 2%
 80                                  Internet           80                                  Bank 8%                      financial transactions.

 60                                                     60

 40                                                     40                                  ATM
                                     Regular mail
 20                                                     20

   0                                                      0
             1997             2002                                  1997             2002
Source: TEMO, January 2003.                            Source: TEMO, January 2003.

                                                                                                                          Directors’ Report, Posten Annual Report 2002   25
         EMPLOYE ES


Our future depends heavily on our ability                                           on four areas: Employee Citizen-       tool we use to achieve this goal.
                                                                                    ship, Leadership, Competence           Performance evaluations are held at
to attract and retain the right talent – in                                         and Health.                            least once a year, and are documented
                                                                                                                           in a contract in which employees and
all areas. We are dedicated to being a                                              Employee Citizenship                   their supervisors jointly establish
                                                                                    and Leadership                         and follow up on a set of goals.
good employer.                                                                      We believe that all employees must         Employee dedication is one of
                                                                                    be given and should assume             Posten’s three core goals. We use
Posten has changed dramatically                understanding: the upcoming          responsibility for Posten’s mission.   the VIP survey to measure our
in recent years. This change                   change process must focus heavily    Employees should therefore be          performance in this area. Once a
has undoubtedly impacted all                   on Posten’s role as “A good          equipped with the necessary            year, the survey gives employees
our employees. Their dedication                place to work.” The initiative is    resources and authority.               the opportunity to talk about their
and professionalism is a                       a joint effort with the employee        Leadership means supporting         work situation. Managers receive a
precondition for the success of                organizations and has been           employees’ ability to assume           quarterly report that helps them
this transformation. In March                  designated a priority activity for   responsibility. Employee perform-      create a road-map for improving
2002, Posten and the employee                  the operation in Sweden.             ance evaluations, a cornerstone of     and renewing their respective
organizations came to an                           “A good place to work” focuses   our employee policy, are a key         workplaces.

26   Posten Annual Report 2002, Directors’ Report
   Equal opportunity activities,                  was introduced to support                         successfully obtained gainful           who have repeatedly filed long-
important to capitalizing on our                  individuals and the company as a                  employment outside Posten.              term disability claims. Posten
diversity, are also in motion.                    whole. Mentors are employees                         75 percent of the people             Omstart aims to help employees
Our goal is for women to occupy                   who come from a wide array of                     participating in the program are        obtain the necessary qualifications
40 percent of the company’s                       backgrounds and who are interested                women, and the average age is 44.       for new employment outside
management-level positions. Today,                in developing themselves as well                                                          Posten. The focus of the program
women occupy 30 percent of the                    as others.                                        Health                                  will gradually shift from working
management-level positions,                           We are continually working                    Illness absenteeism and long-term       with individuals to improving our
38 percent of the board seats                     with leadership development,                      disability are plaguing Posten and      overall rehabilitation effort.
appointed by the annual general                   primarily through Posten’s                        society at large. In 2002, paid sick
meeting and 33 percent of the                     Leadership Academy.                               leave rose from 33.3 to 35 days.
upper-management positions.                                                                             To combat this trend, we
                                                  New horizons                                      developed and introduced a
Attracting talent                                 An important part of being a good                 method, incorporating areas
The scramble for talent is                        place to work is the way we                       ranging from leadership to early
expected to increase in intensity                 approach cutbacks.                                warning indicators, at our Årsta
when the generation born in the                       Our outplacement program,                     terminal in Stockholm. On the
1940s begins to retire. At the same               Posten Futurum, actively and                      basis of this effort, we decided to
time, recruitment needs in the                    professionally assists employees in               proceed with a pilot project
public sector are rising. Therefore,              their search for new employment                   encompassing 7,000 employees to
our ability to attract and retain the             over a period of no longer than                   determine whether this was a
right talent – from high school                   18 months. Employees who apply                    viable method for reducing sick
graduates to academics – has                      and are accepted to the program                   leave. The results will be
never been more important.                        receive personal guidance,                        evaluated at the end of 2003.
    All our employees are given                   practical support and necessary                       Beginning in February 2003,
the opportunity to advance, and                   training, as well as full pay. At the             Posten Omstart (“Posten Fresh
we offer personal guidance and                    end of 2002, a total of 1,921                     Start”) has a new collective
individual development programs.                  people had been accepted into the                 bargaining agreement. The program
    Posten’s mentoring program,                   program. During the 18-month                      provides extra support for employees
which is available to all employees,              period, 93 percent had                            on long-term disability or those

Key data
                                                                      2002              2001               2000     1999          1998

Average number of employees                                         39,554            41,669          41,522      41,825        42,108
 abroad                                                              1,658               710             552         476           202
Employees                                                           48,144            45,104          49,986      50,174        51,793
Full-time employees, %                                                  75                73              72          71            71
 women/men, %                                                        44/56             45/55           48/52       49/51         50/50
 average age                                                            41                42              40          40            40
Employees on monthly salary1                                        35,522            36,000          39,328      39,300        40,290
 under 25, %                                                            10                9.1             8.2         5.9           4.2
 over 54, %                                                           20.7              19.6            17.9        15.9          15.3
 sick leave, average no. of days                                        35              33.3            30.9        26.9          23.9
 sick leave, average no. of days, excluding benefits                  29.2              27.8            25.4
 personnel turnover, %, attrition                                       6.5               6.8             6.6         5.9           4.9
 personnel turnover, %, total                                         20.7

 Refers to employees of Posten AB, Posten Sverige AB, Poståkeriet AB, Posten Logistik AB, Posten PIC AB,
and Svensk Kassaservice AB.

                                                                                                                                     Directors’ Report, Posten Annual Report 2002   27
         ENVIRON M E N T

We take a proactive approach to the environment. So do                                                       (65,000 MWh electricity and 30,000 MWh
                                                                                                             district heating per year). The analyses revealed
many of our customers, suppliers and employees. Our                                                          considerable potential for savings both in
                                                                                                             heating and electricity. Terminal-specific action
environmental efforts promote sustainable development                                                        plans have been devised. Our goal is to reduce
                                                                                                             energy consumption by 15 percent in 2003–2005.
and demonstrate bottom-line impact.
                                                                                                             We spend about SEK 10.5 billion on goods and
The knowledge and dedication of our                 Consortium                                               services every year. We are imposing stringent
employees play a major role in the success of       Posten is a member of Nordic Partnership,                environmental requirements to reduce the
our environmental efforts. We aim to enhance        a 17-member consortium of leading Nordic                 environmental impact of the transportation
competence and drive participation by setting       businesses instigated by the World Wildlife              services, computers, manufacturing equipment
clear goals and enlisting communication             Fund. The members have signed a manifesto                and so forth that we purchase. In 2002, we
and training. Employees whose roles and             commiting them to work toward sustainable                initiated environmental assessments of suppliers
responsibilities fall within the scope of the       development and to integrate sustainable                 from whom we order goods or services valued
environmental management system – 70 percent        development into business models.                        at more than SEK 500,000 per year.
so far – have undergone environmental “basic                                                                     Our goal is for 80 percent of the purchasing
training.”                                          Competence                                               value to originate from environmentally
                                                    We have entered into a multi-year partnership            approved suppliers.
Performance                                         with the Lund Institute of Technology aimed
Stakeholders can obtain information about           at developing a web-based environmental                  Waste products
the environmental impact of first-class and         training program. The environmental                      In 2002, about 80 percent of our operations
economy mail by visiting our website,               certificate program will be compulsory for all           sorted recyclable materials, typically paper,                                      managers.                                                corrugated cardboard, soft plastic, hard plastic,
   A survey of the environmental views of                                                                    batteries, hazardous materials, electronic
our business customers revealed that,               Facilities                                               appliances, metal and wood. Our goal is to
while Posten is perceived as a credible and         In 2002, we conducted energy analyses at all             institute nine categories of recyclable materials
responsible company, it needs to more actively      the sorting terminals in Sweden, which account           where possible.
communicate environmental activities.               for about one-third of our energy consumption

Environmental management system
                                                    Carbon dioxide emissions per mailpiece                    Total carbon dioxide emissions
About 70 percent of Posten’s employees
                                                    CO2, grams                                                Tons, thousands
perform their duties in compliance with             35                                                        200
our ISO 14001 certified environmental
management system. The letter and parcel            34
systems, Falcon Air, Säve Cargo Logistik,
Tollpost Globe and Posten Postage Stamp             33
are ISO 14001 certified. The letter system
was recertified in 2002 for the upcoming
three-year period.                                                                                             50
    Our goal is to implement the environmental
management system throughout the company            30                                                           0
                                                         2000    2001     2002     2004                              1998 1999 2000 2001 2002
and its subsidiaries.                                                             Target

                                                    Posten’s carbon dioxide emission/mailpiece ratio increased 2% compared with 2001. This is
                                                    largely due to a 3% decline in the number of mailpieces, coupled with an increase in transit
                                                    distances related to the new service network.

28   Posten Annual Report 2002, Directors’ Report
                                                                                                                       Our environmental efforts support our three
                                                                                                                       core goals: Profitability, Customer
                                                                                                                       Satisfaction and Employee Dedication.
                                                                                                                       Though our environment efforts have been
                                                                                                                       primarily concentrated to our Swedish
                                                                                                                       operation, a new group-wide environmental
                                                                                                                       policy was adopted in September 2002.
                                                                                                                       A united environmental approach will be
                                                                                                                       a high priority in 2003.

                                                                                                                       Our environmental
                                                                                                                       Posten’s efforts to improve its environmental
                                                                                                                       performance will contribute to sustainable social
         Environmental targets                               reducing carbon dioxide emissions by an                   development. On the basis of laws, ordinances
         Our core environmental target is to cut             additional 1,100 tons.                                    and regulations, Posten shall contribute to the
         transportation-related carbon dioxide emissions         Furthermore, we are training our drivers to           achievement of national environmental
         in proportion to the number of mail items by        operate motor vehicles more effectively in an             objectives and targets related to the significant
         four percent in 2002–2004.                          effort to ease environmental impact. So far,              environmental impact of its operations.
             Though it plays a key role in messaging and     9,000 drivers have participated in the program.               Environmental impact from Posten’s
         logistics, transportation has a material            900 electric motor vehicles serve suburban                services originates primarily from transportation,
                                                                                                                       facility utilization, purchasing, waste
         environmental impact. Last year we drove            communities.
                                                                                                                       management and the actions of employees.
         330 million highway kilometers in Sweden.
                                                                                                                       Posten will continually and systematically use
                                We’ve expanded the           Environmentally licensed operations
                                                                                                                       energy and other natural resources efficiently
DID YOU KNOW THAT... number of retail outlets                Posten Postage Stamp is licensed according to             and strive to prevent pollution.
Our letter carriers             where we serve customers,    Sweden’s Environmental Code, to manufacture                   Efforts to improve environmental
drive 3,200,000 km in but this has increased                 printing cylinders for postage stamp printing.            performance will be integrated into all areas of
electric motor vehicles transit distances                    The printing cylinders are coated with chrome             operation, ensure that Posten’s environmental
every year.                     somewhat.                    and copper. This process produces                         targets are met, and support Posten’s core goals.
                                   We have long worked       metalliferous rinsing water, which is removed                 Environmental consideration will be taken
         to systematically reduce transportation-related     by Sydkraft-SAKAB. Posten Postage Stamp                   in decision-making at all organizational levels.
         emissions, including moving mail by rail instead    meets all environmental criteria stipulated in                Efforts to improve environmental
                                                                                                                       performance will be aimed at continual
         of over the road. The Mail Train began to roll in   the permit. No deviations occurred during the
                                                                                                                       improvement and build upon the participation
         early 2001, reducing annual transportation-         year. The operation is not deemed to pose any
                                                                                                                       of customers, suppliers, employees and other
         related carbon dioxide emissions by 3,500 tons.     risk of causing material environmental impact.
         We expanded use of the railways in 2002,                                                                          Environmental communication will be
                                                                                                                       characterized by openness and based on factual

         2002 environmental data                             Transportation emissions
                                                             Reported transportation emissions are related to          Every employee shall be aware of, and comply
         Transportation emissions, tons                      Posten’s domestic consumption of fossil fuels.            with, the environmental policy and participate
                                                             Transportation includes automobile, truck and aircraft.
                                                                                                                       in the achievement of Posten’s environmental
         Carbon dioxide         183,000                      Fossil fuels include unleaded gasoline, diesel fuel
         Carbon monoxide          1,849                      (environmental class 1) and jet fuel (class Jet A1).      objectives. Every manager shall ensure that
         Nitric oxide             1,306                      Fuel emission values per liter were provided by the       consideration for the environment and
         Hydrocarbons               393                      Transport and Environment network, The Swedish Civil      environmental efforts are a natural function of
         Particles                   30                      Aviation Administration, the Swedish Environmental        their respective divisions. Conditions should
                                                             Protection Agency and the Swedish National Road
         EURO classification, % of distance driven                                                                     be created that enable employees to assume
                                                                                                                       responsibility for and to work in line with the
         Unclassified               1.9
                                                             Euro classification, % of distance driven                 environmental policy.
         EURO-0                     5.1
                                                             EURO classification data (an environmental scale              The environmental function is responsible
         EURO-1                     7.1
                                                             where three is the highest) is reported for heavy
         EURO-2                    56.1                                                                                for the group’s environmental strategy, group-
                                                             (4.2 tons+) domestic letter and parcel transports.
         EURO-3                    29.8                                                                                wide environmental activities, environmental
                                                             Posten strives to purchase vehicles carrying at least
                                                             a Euro-2 classification, but they are in short supply.    reporting and follow-up procedures.

                                                                                                                           Directors’ Report, Posten Annual Report 2002   29
         RISK MA N A G E M E N T

Risk Management                                     Operational risk management                         Interest risk
In fall 2002, the board adopted a new Risk          During the year, we launched major initiatives      Interest is the risk that the value of assets and
Management (RM) policy. The policy states           aimed at boosting security, including extensive     liabilities or non-balance sheet items may
that the risks associated with all vital            training for service network, production and        fluctuate due to changes in the interest rate.
operations must be assessed. Risk assessment        trucking personnel as well as for partners. In      At December 31, 2002, the average fixed-
enables Posten to determine levels of               addition, production personnel have begun           interest terms for the group’s borrowing and
acceptable risk, devise preventative measures,      crisis and catastrophe training. In 2002, crime     its investment portfolio were approximately
and select appropriate insurance policies.          at our retail outlets fell 37 percent. No           5 and 1 month(s), respectively.
RM applies to all forms of organizational and       attempts to rob our fleet of armored vehicles,
operational risk. RM consequently applies to        which provide secure money transportation,          Currency risk
financial and strategic risk.                       were made during the year. This was due             Currency risk is the risk of exchange rate effects
    Managers are also responsible for risk          primarily to continued efforts to raise security,   during future payment flows or so-called
assessment of their operations. The Chief           such as the formation of new armored transport      transaction exposure, as well as the revaluation
Financial Officer (CFO) is responsible for          units.                                              of net assets in foreign subsidiaries or so-called
RM strategy and coordination at Posten.                                                                 translation exposure. The group’s transaction
                                                    Insurance                                           exposure arises mainly through customer and
Restructuring                                       The group applies a uniform methodology for         supplier flows relative to international mailings
Our restructuring and streamlining activities       risk analyses in support of preventative            in subsidiary Falcon Air’s operations, and in
have shifted our risk exposure. New routines        security measures and insurance policies. The       conjunction with larger investment programs.
designed to ensure a high degree of security        group’s insurance needs are handled through             Our goal is to eliminate transaction
were introduced in conjunction with the new         development and procurement of group-wide           exposure by matching inflows and outflows and
service network. Security played a major role in    insurance programs. The group’s two so-called       hedging the remaining net flow. We are using
screening and selecting prospective partners.       captive companies participate in a majority         central accounts to serve the group’s needs
Security audits facilitate continual follow-up.     of the insurance programs. The companies            and, in a number of cases, local bank markets
A growing dependence on information                 underwrite direct insurance and reinsurance         for respective currencies.
technology creates new and increasing risks,        policies for group units, which cover property,         Currently, translation exposure is not
both through the advent of new and advanced         white-collar crime and liability risks including    hedged.
IT customer services as well as through             traffic liability. Captive companies reinsure the
increasingly technological production               risks externally.                                   Credit risk
processes.                                                                                              Credit risk is the risk that a borrower will be
                                                    Financial risks                                     unable to partially or entirely fulfill its
Information security                                The group’s treasury policy governs the             obligation. Posten’s credit risk arises primarily
We work to ensure the integrity, privacy and        management of financial risks such as interest      in conjunction with credit sales and liquidity
access of information moving through Posten’s       risk, currency risk, credit risk, and borrowing     management. Posten has established routines
system. We place high demands on security           risk. The treasury policy comprises liquidity       for assessing creditworthiness and monitoring
technology, organization and standards.             management, capital needs, credit approval          credit sales. The group’s liquidity is invested
   The protection of mail privacy is an equally     and, consequently, financial risk management.       only in liquid instruments with highly
important requirement in both our electronic        Posten’s internal bank manages the group’s          creditworthy parties.
and physical mail environments. Integrating         financial risks and capital adequacy.
acquired companies and realigning our risk              The purpose of the centralized financial
position have been continually prioritized.         management is to exercise control over the
                                                    group’s financial risks, as well as to take
                                                    advantage of economies of scale in risk
                                                    management, liquidity management, and

30   Posten Annual Report 2002, Directors’ Report
Borrowing and borrowing risk
To meet borrowing needs, the group has access
to a Medium Term Note (term of between 1
and 15 years) and commercial paper (term of
between 7 and 360 days) programs, as well as
to bilateral agreements with credit institutions
such as the European Investment Bank. High
payment preparedness is maintained in the
form of liquid assets and confirmed credit
facilities to meet both short-term disturbances
in the money and capital markets, as well as
unforeseen needs in operating units.

                                                   Directors’ Report, Posten Annual Report 2002   31
32   Posten Annual Report 2002, Directors’ Report

Operations                                                               amounted to SEK 265 million. The price effect on other
                                                                         external expenses was SEK 275 million, an average of 2.2
The information presented in this section is Pro forma (see accounting   percent.
principles, note 1, page 43).
                                                                         Depreciation and amortization increased SEK 97 million,
Operating income                                                         primarily due to the DPD acquisition.
Net sales
Net sales were SEK 23,632 million (21,668), a SEK 1,964 million          Provisions
increase from a year ago. Acquisitions and joint ventures, reported      At December 31, 2002, provisions totaled SEK 3,752 million
using the proportionate method of consolidation, boosted                 (5,249). The change, SEK 1,497 million, is attributed to charges
year-on-year net sales by SEK 1,505 million. Price increases,            against costs of SEK 696 million, reversals totaling SEK 1,103
primarily in logistics and e-services, and robust election-season        million, and new provisions of SEK 302 million.
volumes were responsible for the remaining improvement.                      Loss provisions taken for the cashier service operation are
These developments offset the effect of dwindling volumes in             based in part on operating earnings, and in part on the financial
regular mail services and lower passenger revenue in Posten’s air        results. Other provisions on the income statement are based
carrier, Falcon Air.                                                     solely on operating earnings.
                                                                             Posten is reimbursed by the state for providing legislatively
Other operating income                                                   mandated service in sparsely populated areas where no alternatives
Other operating income was SEK 130 million (1,802). The loss             exist. This business generates an annual loss of about SEK 400
of rental income in conjunction with the divestment of                   million. The reimbursement program was reviewed and
Postfastigheter AB in 2001, coupled with last year’s capital gains       approved by the European Commission.
(SEK 1,277 million), increasingly explains the decline.                      The nonsubsidized segment of the cashier service operation
                                                                         reported an operating loss for 2002 of SEK 260 million. Posten’s
Operating expenses                                                       board has sanctioned measures aimed at achieving a break-even
Personnel costs                                                          position by 2005 at the latest. Posten will take all steps necessary
Personnel costs were SEK 12,965 million (12,787). Acquisitions           to achieve this goal. Action is required in several areas, primarily
and joint ventures, reported using the proportionate method of           in regards to the number of offices, pricing and products. The
consolidation, boosted year-on-year staff costs by SEK 310               loss provision in the cashier service operation is based on the
million. The average number of employees during the year was             assumption that a break-even position is achieved in accordance
39,554 (39,466).                                                         with the decision by the board.
   Of the average number of employees, 1,658 were employed                   A new SEK 49 million provision related to administrative
outside Sweden. The increase, 948, is due primarily to acquisitions      staff reductions, a partial effect of the E25 program, has been
and joint ventures. In Sweden, the average number of employees           made.
declined by 887. Pay raises averaged 3.8 percent, boosting staff
costs by SEK 506 million.                                                Financial items
Other external expenses                                                  The reversal of provisions related to the financial results of the
Other external expenses were SEK 10,498 million (8,653), an              cashier service operation totaled SEK 69 million (0).
increase of SEK 1,845 million. Acquisitions and joint ventures,             Tax for the year was SEK –865 million (–254), comprising
reported using the proportionate method of consolidation, raised         a SEK –95 million tax on net earnings and a SEK –770 million
costs by SEK 1,152 million. Underlying cost increases – enhanced         writedown of the group’s deferred tax credit. The valuation of
service-network rollout efforts, the E25 administrative efficiency       the deferred tax credit refers to a downward revision due to a
program and the new corporate headquarters – together                    worsened earnings outlook for coming years.

                                                                                                       Directors’ Report, Posten Annual Report 2002   33
Financial position
                                                                    Deferred tax credit
Total assets                                                        The deferred tax credit was SEK 481 million (1,269). The credit
At December 31, 2002, Posten had total assets of SEK 13,863         was revised downward in light of financial forecasts for the coming
million (17,311), a decrease of SEK 3,448 million. The change       years. The valuation takes into account forecasted earnings for the
is due primarily to a decline in short-term interest-bearing        next six years. Adjustments may be made in line with an
liabilities, and the reversal of provisions.                        improved outlook.

Equity-assets ratio
At December 31, 2002, the equity-assets ratio was 18.8 percent      Cash flow
(19.1).                                                             Cash flow from operating activities was SEK 45 million.

Intangible assets                                                   Investing activities
Goodwill amounted to SEK 1,096 million (782), an increase of        Cash flow from investing activities was SEK –1,791 million.
SEK 314 million. This year’s investments in the international       Increased group expenditures during the year are primarily
business – i.e., Businesspoint, Masterlink and Baltic Logistic      attributable to the ongoing restructuring of the service and
Systems – further capitalized goodwill of SEK 62 million.           cashier-service networks. Considerable investments have also
Acquisitions and joint ventures, reported using the proportionate   been made in IT equipment as well as in group-wide projects
method of consolidation, increased year-on-year consolidated        related to a new business support system. Investments refer
goodwill by SEK 317 million. Scheduled amortization was             primarily to tangible fixed assets.
SEK 63 million.                                                         Cash flow before financing activities therefore was
    Other intangible assets increased SEK 329 million to            SEK –1,746 million.
SEK 544 million (215). The increase reflects investments in a
new business support system (SEK 228 million), development          Financing activities
of the service network and the eSkicka (“eSend”) service            Cash flow from financing activities was SEK –617 million,
(SEK 99 million) and license agreements for the logistics and       explained primarily by the amortization of loans.
outsourcing arms (SEK 50 million). Scheduled amortization was           Liquid assets therefore have decreased by SEK 2,363 million
SEK 41 million.                                                     to SEK 3,324 million at the close of the period.

Machinery and equipment
Machinery and equipment amounted to SEK 3,339 million               Statement of retained earnings
(2,942). The new service and cashier-service networks               See page 64.
accounted for most of this year’s expenditures (SEK 634
million). Other investments, in information technology (IT),
vehicles and production machinery, totaled SEK 543 million.
Scheduled amortization was SEK 855 million.

Associated companies
Shares in associated companies amounted to SEK 4 million
(419). The difference reflects reclassifications due to an
accounting change, whereby joint ventures are reported using
the proportionate method of consolidation.

34   Posten Annual Report 2002, Directors’ Report

                                                                                      Pro forma         Posten Group
SEK m                                                                Note     2002         2001                 20011
Operating income
Net sales                                                            2       23,632     21,668                  24,072
Other operating income                                               3          130      1,802                   1,723
Total operating income                                                       23,762     23,470                  25,795

Operating expenses
Personnel expenses                                                  4       –12,965   –12,787                 –13,654
Other external expenses                                             5       –10,498    –8,653                  –9,378
Depreciation and amortization of tangible
 and intangible fixed assets                                        6         –984      –887                   –1,010
Earnings from shares of associated companies                                    –18       –16                     –16
Provisions                                                          7           732       293                     293
Total operating expenses                                                    –23,733   –22,050                 –23,765
Operating earnings                                                               29     1,420                   2,030

Financial items
Income from securities and receivables
  held as fixed assets                                               9          –3          1                           1
Other interest income and similar income items                      10         197        234                         229
Interest expense and similar expense items                          11        –223       –290                        –286
Provisions                                                           7          69
Earnings after financial items                                                  69       1,365                   1,974

Tax                                                                 12        –865         –83                   –254
Minority’s share of earnings                                                     8           1                       1
Net earnings                                                                  –788       1,283                   1,721

Transfer of Postgirot’s earnings2                                                          438                       –
Capital gain, Postgirot                                                                  1,711                   1,711
Net earnings after closures                                                   –788       3,432                   3,432

1   Includes Postgirot for 11 months in 2001.
    Transfer of Postgirot’s earnings
                                       Posten excluding Postgirot
    Pretax earnings                                         610
    Tax                                                    –172
    Net earnings                                            438

                                                                                         Posten Annual Report 2002    35

ASSETS, SEK m                            Note    12-31-2002   12-31-2001
Intangible fixed assets
Goodwill                                              1,096         782
Other intangible assets                                 544         215
Total intangible fixed assets              13         1,640         997

Tangible fixed assets
Buildings and land                                      286          130
Machinery and equipment                               3,339        2,942
Construction in progress and advances
 relating to tangible fixed assets                      117           99
Total tangible fixed assets              14,15        3,742        3,171

Financial fixed assets
Shares of associated companies             17             4          419
Bonds and other long-term securities                     11            8
Deferred tax credit                        19           481        1,269
Other long-term receivables                              64           71
Total financial fixed assets                            560        1,767
TOTAL FIXED ASSETS                                    5,942        5,935

Goods for resale, etc.                                 109          110

Current receivables
Accounts receivable                                   2,390        2,069
Interest-bearing receivables                              1          864
Other non-interest-bearing receivables                  254          252
Prepaid expenses and accrued income        20           998        1,004
Total current receivables                             3,643        4,189

Short-term investments                   21,32        1,831         474

Cash and cash equivalents                  32        2,338        6,603
TOTAL CURRENT ASSETS                                 7,921       11,376
TOTAL ASSETS                                        13,863       17,311

36   Posten Annual Report 2002
EQUITY AND LIABILITIES , SEK m                Note   12-31-2002                    12-31-2001
Restricted equity
Capital stock                                               600                             600
Restricted reserves                                       1,693                             693
Total restricted equity                        22         2,293                           1,293
Non-restricted equity
Non-restricted reserves                                   1,082                         –1,426
Net earnings                                              –788                           3,432
Total non-restricted equity                    22           294                          2,006
TOTAL EQUITY                                              2,587                          3,299

MINORITY INTEREST                                           12                                 4

Pensions                                       24           343                             243
Other provisions                               25         3,752                           5,249
TOTAL PROVISIONS                                          4,095                           5,492

Interest-bearing liabilities
Liabilities, credit institutions               26          541                                636
Other liabilities                                           14                                  0
Non-interest-bearing liabilities
Other liabilities                                           60                                 72
TOTAL LONG-TERM LIABILITIES                                615                                708

Interest-bearing liabilities
Liabilities, credit institutions                            103                               1
Other liabilities                              26         1,021                           2,962
Non-interest-bearing liabilities
Advances from customers                                    582                              598
Accounts payable                                         1,283                            1,100
Tax liabilities                                             92                                0
Other operating liabilities                              1,200                            1,189
Accrued expenses and deferred income           27        2,273                            1,958
TOTAL CURRENT LIABILITIES                                6,554                            7,808
TOTAL EQUITY AND LIABILITIES                            13,863                           17,311

Assets pledged for liabilities                 28           51                                54
Other pledged assets
Contingent liabilities
Pension commitments, not expensed              24           363                             305
Guaranty commitment for pension commitments    24         2,768                           2,892
Other contingent liabilities                   29           360                             296
Total contingent liabilities                              3,491                           3,493

                                                                  Posten Annual Report 2002   37

                                                                                                            Pro forma   Posten Group
SEK m                                                               Note                            2002         2001           2001
Earnings after financial items                                                                        69       3,0761         3,6851
Adjustments for non-cash-flow items
 Depreciation according to plan                                                                       980        887            994
 Writedowns of fixed assets, etc.                                                                       4          4             16
 Capital gain/loss on the sale of fixed assets                                                         60     –3,182         –3,182
 Provisions for cashier service/service networks as well as pensions                               –1,335      –117           –117
 Other items not affecting liquidity                                                                   90      –225             620
Tax paid                                                                                               51      –185           –287
Cash flow from operating activities
 before changes in working capital                                                                   –81         258          1,729

Cash flow from changes in working capital
 Increase/decrease in operating receivables, including inventory                                      –8         100         –1,329
 Increase/decrease in current operating liabilities                                                  134       1,306          1,306
Cash flow from operating liabilities                                                          30      45       1,664          1,706

Investments in intangible fixed assets                                                              –437       –343           –366
Investments in tangible fixed assets                                                               –1,303      –844           –890
Investments in financial fixed assets                                                                 –40         –4         –1,010
Acquisition/disposal of companies                                                             31      –70        316        –23,141
Divestment of financial fixed assets                                                                   39      4,079          3,625
Divestment of other fixed assets, etc.                                                                 20        316            316
Cash flow from investing activities                                                                –1,791      3,520        –21,466
Cash flow before financing activities                                                              –1,746      5,184        –19,760

Increase/decrease in current financial receivables                                                    868        675            976
Loans raised                                                                                          210        492          2,742
Loans amortized                                                                                    –1,628      –388           –688
Increase/decrease in pension provisions                                                               –67     –2,212         –2,212
Cash flow from financing activities                                                                 –617      –1,433            818

Cash flow for the period                                                                           –2,363      3,751        –18,942
Liquid assets at the beginning of the period                                                        5,687      3,326         26,019
Liquid assets at the close of the period                                                      32    3,324      7,077          7,077
1   Earnings after financial items includes capital gains on the sale of Postgirot in 2001.

38       Posten Annual Report 2002

SEK m                                                       Note                                2002                                   2001
Operating income
Net sales                                                                                          1                                    208
Other operating income                                         3                                   0                                     15
Total operating income                                                                             1                                    223

Operating expenses
Personnel expenses                                             4                                 –22                                    –11
External expenses                                              5                                 –81                                   –110
Depreciation and amortization of
 tangible and intangible fixed assets                          6                                 –10                                      0
Total operating expenses                                                                        –113                                   –121

Operating earnings                                                                              –112                                    102

Financial items
Earnings from shares of affiliated companies                   8                               3,624                                    869
Earnings from shares of associated companies                                                     –24                                      3
Earnings from securities and receivables
  held as fixed assets                                         9                                  –5                                   –171
Other interest income and similar items                       10                                 402                                    518
Interest expense and similar items                            11                               –150                                    –429
Earnings after financial items and before tax                                                  3,735                                    892

Tax                                                           12                                 –36                                   –38
Net earnings                                                                                   3,699                                   854

The business conducted by the parent company, Posten AB            Equity was SEK 6,143 million (3,372) and the equity-assets ratio
(publ), is limited in scope.                                       was 71.9 percent (47.4).

Sales and earnings                                                 Highlights
The parent company’s 2002 net sales were SEK 1 million (208).      The parent company sold its interest in Posten Logistik AB to
The change in net sales is attributable to the transference of     Posten Sverige AB (prior to their pending merger) and Posten AB
the reimbursement appropriated by the state for legislatively      purchased all the shares in Posten Logistik AB’s subsidiaries.
mandated services. From 2002, Svensk Kassaservice AB will report      A subsidiary corporation was formed within Posten during
this reimbursement. Net interest income was SEK 3,847 million      the year, and Posten AB’s AddressPoint AB and Svensk Adress-
(790) and earnings after financial items totaled SEK 3,735         ändring AB shares were transferred to the parent company of the
million (892). The change compared with the previous year is       new corporation, AddressPoint International AB. Posten AB
attributable to dividends from subsidiaries.                       owns 85 percent of the shares in AddressPoint International AB,
                                                                   the remainder is owned by Optimail Sweden AB.
Financial position                                                    In 2002, Posten AB assumed 100 percent of the shares in
At December 31, the parent company’s total assets amounted to      Unidas AB. The book value of Posten AB’s shareholding was
SEK 8,593 million (7,188). Cash and cash equivalents, including    written down by SEK 56 million. No investments were made in
short-term investments, totaled SEK 2,462 million (1,846).         tangible fixed assets during the year.

                                                                                                           Posten Annual Report 2002    39

ASSETS, SEK m                          Note   12-31-2002   12-31-2001
Intangible fixed assets
Goodwill                                            184          130
Other intangible fixed assets                         2
Total intangible fixed assets           13          186          130

Tangible fixed assets
Machinery and equipment                 14            7            7
Total tangible fixed assets                           7            7

Financial fixed assets
Shares of affiliated companies          16         2,222        2,204
Shares of associated companies          17             1          439
Shares of joint ventures                18           327
Bonds and other long-term securities                   5            0
Deferred tax credit                     19           382           72
Other long-term receivables                           15           20
Total financial fixed assets                       2,952        2,735
TOTAL FIXED ASSETS                                 3,145        2,872

Current receivables
Receivables, affiliated companies                  2,821        2,271
Receivables, joint ventures                          151
Tax credit                                             1           20
Other receivables                                      2          134
Prepaid expenses and accrued income     20            11           45
Total current receivables                          2,986        2,470

Short-term investments                  21         1,765         441

Cash and cash equivalents                            697        1,405
TOTAL CURRENT ASSETS                               5,448        4,316
TOTAL ASSETS                                       8,593        7,188

40   Posten Annual Report 2002
EQUITY AND LIABILITIES, SEK m                    Note   12-31-2002                    12-31-2001
Restricted equity                                22
Capital stock                                                 600                                600
Restricted reserves                                           120                                120
Total restricted equity                                       720                                720

Non-restricted equity                            22
Retained earnings                                            1,724                           1,798
Net earnings                                                 3,699                             854
Total non-restricted equity                                  5,423                           2,652
TOTAL EQUITY                                                 6,143                           3,372

UNTAXED RESERVES                                 23            49                                49

Pensions                                         24            12                                10
TOTAL PROVISIONS                                               12                                10

Interest-bearing liabilities
Liabilities, credit institutions                 26             0                                 0
Non-interest-bearing liabilities
Liabilities, affiliated companies                               0                                 0
Other liabilities                                              10                                10
TOTAL LONG-TERM LIABILITIES                                    10                                10

Interest-bearing liabilities
Liabilities, affiliated companies                             639                              766
Other liabilities                                26           144                            1,567
Non-interest-bearing liabilities
Accounts payable                                                 4                                4
Tax liability                                                    0
Liabilities, affiliated companies                            1,566                           1,308
Accrued expenses and deferred income             27             25                              98
Other liabilities                                                1                               4
TOTAL CURRENT LIABILITIES                                    2,379                           3,747
TOTAL EQUITY AND LIABILITIES                                 8,593                           7,188

Pledged assets                                   28            10                                10
Contingent liabilities
Guaranties                                       29           838                             627
Guaranties, of which SEK 174m for subsidiaries                184                             146
Guaranties for subsidiary pension commitments    24        10,397                           9,910
Total contingent liabilities                               11,419                          10,683

                                                                     Posten Annual Report 2002   41

SEK m                                                 Note    2002     2001
Earnings after financial items                                3,735     892
Adjustments for non-cash-flow items
 Anticipated dividend                                            –      –46
 Depreciation according to plan                                 10        0
 Writedowns of fixed assets                                     51      –29
 Capital gain/loss on the disposal of fixed assets               9       –3
Other items not affecting liquidity                              3        –
Tax paid                                                        19        1
Cash flow from operating activities
 before changes in working capital                            3,827     815

Cash flow from changes in working capital
 Increase/decrease in operating receivables                      45      71
 Increase/decrease in current operating liabilities          –1,090      44
Cash flow from operating activities                    30     2,782     930

Investments in intangible fixed assets                           –2    –130
Investments in tangible fixed assets                              –       –6
Investment in other stock                                       –40    –402
Divestment of shares of affiliated companies                    124      794
Divestment of other fixed assets, etc.                           20       12
Increase/decrease in current financial receivables            –721     2,127
Increase/decrease in long-term receivables                        3      539
Cash flow from investing activities                           –616     2,934
Cash flow before financing activities                         2,166    3,864

Loans raised                                                    144      302
Loans amortized                                              –1,567   –1,089
Increase in pension provisions                                    –        1
Increase/decrease in current financial liabilities            – 127   –1,297
Cash flow from financing activities                          –1,550   –2,083

Cash flow for the period                                        616    1,781
Liquid assets at the beginning of the period                  1,846       65
Liquid assets at the end of the period                        2,462    1,846

42   Posten Annual Report 2002

NOTE 1         Accounting and valuation principles                          Reporting shares of associated companies
                                                                            Shares of associated companies are reported according to the equity
Operations under liquidation                                                method. Associated companies are companies in which Posten holds no
Operations under liquidation are reported according to recommendation       less than 20 percent and no more than 50 percent of the voting rights. In
RR 19 of the Swedish Financial Accounting Standards Council, which has      accordance with the equity method, the consolidated book value of
been applied to the disposal of Postgirot in 2001. In the consolidated      shares in associated companies corresponds to the group’s proportion
income statements, balance sheets and statements of cash flows, “Pro        of equity in associated companies, as well as to any residual value of
forma” refers to Posten Group excluding Postgirot.                          consolidated surplus and deficit values. The group’s earnings from
                                                                            shares of associated companies, after financial income and expenses
Consolidated financial statements                                           have been adjusted for depreciation of acquired goodwill, are reported
The consolidated financial statements were prepared in accordance with      as “Earnings from shares of associated companies.” The group’s share of
recommendation RR 1:00 of the Swedish Financial Accounting Standards        the tax reported by associated companies is included in the group’s tax
Council, Consolidated Financial Statements. The consolidated financial      expenses. Companies accounted for in accordance with the equity
statements comprise the parent company and those companies in which         method are presented in Note 18.
Posten, at the closing day, directly or indirectly owned more than 50
percent of the voting rights, or over which the company exercised a         Reporting foreign subsidiaries
controlling influence by other means.                                       Currency is translated in accordance with recommendation RR 8, Exchange
    The consolidated income statement includes revenues and expenses        Rate Effects.
of acquired companies for the period following the acquisition.                 Posten’s foreign subsidiaries comprise autonomous foreign business
Subsidiaries disposed during the period are included in the income          entities whose income statements and balance sheets are translated in
statements for the period preceding the sale. Affiliated companies are      accordance with the current method.
presented in Note 16.                                                           According to the current method, all assets, provisions and liabilities
                                                                            are translated at the closing day and all items on the income statement
Purchase accounting method                                                  are translated according to the yearly average. Exchange differences are
The consolidated financial statements have been prepared using the          recorded directly against equity. At the sale of independently operated
purchase accounting method. According to the purchase accounting            foreign businesses, accumulated translation differences attributable to
method, acquisitions are treated as a transaction through which the         the business, less deductions for eventual hedging, are reported on the
group indirectly acquires the assets and assumes the liabilities of the     consolidated income statement.
subsidiary. The assets and liabilities of the subsidiary, at the date of
acquisition, are valued at the acquisition value from the standpoint        Impairment testing in accordance with RR 17, Amortization
of the group. The consolidated acquisition value is calculated via an       The company and group apply recommendation RR 17, Amortization.
acquisition analysis performed in conjunction with the acquisition of       Posten tests the value of assets when indications justify this action. The
shares. The analysis determines the acquisition value of the shares as      valuation is based on Posten’s assessment of future payment flows. The
well as the market value of the acquired assets and assumed liabilities.    tests take their starting point in the group’s business plans, which are
The difference between the acquisition value of the shares of the           supplemented with other relevant information used to enhance accuracy.
subsidiary and the market value of the acquired assets and assumed             In 2002, the recovery value of intangible assets as well as of certain
liabilities constitute consolidated goodwill.                               holdings in subsidiaries and joint ventures has been evaluated. Posten
                                                                            believes that indications do not justify a similar testing of tangible fixed
Proportional method, change to accounting principles                        assets.
Joint venture companies, where executive decision-making is exercised
in concert with the other partners, have been reported using the            Disclosure of associates
proportionate method of consolidation since 2002. According to the          Posten has determined that recommendation RR 23 of the Swedish
proportionate method of consolidation, joint ventures are reported as       Financial Accounting Standards Council does not apply to transactions
though they were subsidiaries; however, they are consolidated only in       between Posten and the state, as Posten is not a public company.
proportion to Posten’s ownership interest, with corresponding
proportions of the balance sheets, income statements and other              Taxes
accounting information. The method has been chosen because it               The company and group apply recommendation RR 9, Income Taxes, of
provides enhanced visibility into Posten’s operations, which increasingly   the Swedish Financial Accounting Standards Council. Total tax comprises
involve alliances with companies operating in Posten’s markets.             current tax and deferred tax. Taxes are recorded on the income statement
    The comparative period has not been restated due to the marginal        except when the underlying transaction is recorded directly against equity,
effect on the 2001 income statement. Most joint ventures were acquired      whereby the subsequent tax effect is reported in equity.
at the end of 2001 or during 2002. Due to the insignificant effect on the      Current tax is the tax calculated on the year’s taxable income. This
balance sheet, the effort involved in restating the comparative period      also includes adjustments of current tax attributable to earlier periods.
would have been unreasonable in proportion to the information gains.           Posten reports group contributions and shareholder contributions in
                                                                            accordance with the statement issued by the Swedish Financial Accounting
                                                                            Standards Council’s Urgent Task Force on group and shareholder

                                                                                                                             Posten Annual Report 2002   43

contributions. Shareholder contributions are capitalized in shares and           Bonds and other securities
participations held by the provider and reported directly against the            Interest-bearing securities to be held until maturity are classified as
non-restricted equity of the recipient. Group contributions are reported         financial fixed assets. Other negotiable securities and derivative
according to their financial impact, i.e., ordinarily in an effort to minimize   instruments are classified as financial current assets, which are reported
group tax. Because group contributions do not therefore constitute               as short-term investments in the balance sheet.
payment for services rendered, they are reported against retained                    Financial fixed assets are set at the acquisition value/accrued
earnings, less deductions for tax effects.                                       acquisition value. Because the securities are to be held until maturity,
    Deferred tax is calculated in accordance with the balance sheet method,      unrealized gains or losses are not reported on the balance sheet.
taking its starting point in the temporary differences between reported              Negotiable securities and derivative instruments, classified as financial
and taxable values of assets and liabilities. The amounts are calculated         current assets, are valued according to the lower of cost principle.
based on how temporary differences are expected to be equalized and
applying the tax rates and tax regulations that have been decided upon           Inventory
or announced at the closing day. Temporary differences are neither               Inventory is valued at the lower of cost, determined on the first-in/first-
treated as consolidated goodwill, nor as differences attributable to             out (FIFO) method, and the present value in accordance with
shares of subsidiaries and associated companies not foreseen as being            recommendation RR 2, Inventory.
taxed within the foreseeable future. Untaxed reserves including the
deferred tax liability are reported for legal entities. In the consolidated      Receivables and payables in foreign currency
financial statements, however, untaxed reserves are divided into                 Receivables and payables in foreign currency are translated at the
deferred tax liability and restricted equity.                                    closing-day rate in accordance with recommendation RR 8. Realized and
    Deferred tax receivables in deductible temporary differences and             unrealized exchange rate differences on operational receivables and
deficit deductions are reported solely to the extent that it is probable         payables are reported in operating earnings, whereas exchange rate
that these will provide lower tax disbursements in the future. This              differences on financial receivables and liabilities are reported among
probability is based on Posten’s business plans. The time horizon used           financial items.
in the assessment is six years.                                                      Accounts payable and accounts receivable hedged through forward
    At the end of 2002, deferred tax receivables were estimated according        contracts are valued at the forward currency rate.
to the abovementioned principles. This estimate has identified a
writedown requirement of SEK 770 million. The amount primarily                   Pension provisions
comprises a writedown of deferred tax receivables related to future              Directive FFFS 2000:19 of the Swedish Financial Supervisory Authority
losses in Cashier Service.                                                       was applied to the actuarial computation of the capital value of Posten’s
                                                                                 pension commitments.
Depreciation of fixed assets                                                         Under other provisions, Posten has expensed pension commitments
Depreciation according to plan has been based on the acquisition value           relating to so-called transition provisions, which are expensed in
and estimated useful life of the fixed assets. The depreciation schedules        proportion to estimated utilization. 25% of the nominal value of these
are as follows:                                                                  pension commitments is expensed, plus payroll tax.

                                                                                 Statements of cash flows
                                                                                 Recommendation RR 7 of the Swedish Financial Accounting Standards
Mail handling equipment                                          5–10 years
                                                                                 Council, Cash Flows, is applied to the preparation of the consolidated
Motor vehicles and other transportation equipment                 4– 7 years
                                                                                 and parent company statements of cash flows.
Computer equipment                                                4–7 years
Office inventory                                                     5 years     Liquid assets
Communications buildings                                           33 years      In the statements of cash flows, the so-called “storage of cash” relating
Residential and industrial buildings                            20–67 years      to the cashier service operation has not been treated as liquid assets.
Structural consolidated goodwill                                   20 years      These assets are not available to Posten and cannot be used by its
Other intangible fixed assets                                        5 years     business operations.
                                                                                     “Storage of cash” fluctuates independently of operating earnings,
Leasing                                                                          investments and other payment flows in the business operations.
Operational and material financial lease agreements are reported in the          Fluctuations are highly dependent on the day of the week at the turn of
consolidated financial statements in accordance with recommendation              the month and other major payment days. These fluctuations are not
RR 6:99, Lease Agreements.                                                       relevant to the assessment of Posten’s payment flows.
    Because the group’s financial lease agreements have been deemed
insignificant, all lease agreements have been reported as operational
lease agreements.

 44   Posten Annual Report 2002
Note 2             Net sales and operating earnings by business segment
                                                                                                                    Net sales                                          Operating income
SEK m                                                                                                       2002                 2001                                 2002           2001
Messaging and logistics business segment                                                                  22,514               21,005                                    2            397

Cashier Service business segment                                                                           1,181                   932                                –660             –444
Reimbursement*                                                                                               400                   150                                 400              150
Cashier Service business segment, total                                                                    1,581                 1,082                                –260             –294
Utilization of loss provisions corresponding to results, Cashier Service                                                                                               260              260

Group-wide                                                                                                                                                            –705             –513
Internal elimination                                                                                       –463                 –419
Net sales and operating earnings                                                                          23,632               21,668                                 –703             –150

Provisions/reversals                                                                                                                                                   732              293
Capital gains, Postfastigheter                                                                                                                                                        1,277
Subtotal, Pro forma                                                                                       23,632               21,668                                   29            1,420
Postgirot, divested business segment                                                                                            3,217                                                   610
Internal elimination, Postgirot                                                                                                 –813
Net sales and operating earnings                                                                          23,632               24,072                                   29            2,030
* In 2001, SEK 200 m was received. Because Swedish Cashier Service business area began operating on April 1, 2001, the comparative period comprises three quarters.

Note 3             Other operating income
                                                                                                                       Group                                                 Parent
SEK m                                                                                                       2002                  2001                                2002             2001
Rental income                                                                                                 20                   165
Reimbursements for improvements                                                                               20                   165
Capital gains, fixed assets                                                                                    4                 1,279
Other                                                                                                         86                   114                                   0                 15
Total                                                                                                        130                 1,723                                   0                 15

                                                                                                                                                               Posten Annual Report 2002   45

Note 4           Personnel expenses
                                                                                 2002                                        2001
Group, average no. of employees/country                        Women              Men           Total         Women           Men                  Total
Sweden                                                         17,361          20,535                         18,751        22,208
Australia                                                           1               1
Belgium                                                            28              26
Denmark                                                            83              34                              1              1
Estonia                                                            32              30                             28             21
Philippines                                                         1               1
Finland                                                            13              18                                             2
The Netherlands                                                     4               4
Iceland                                                             0               1
Latvia                                                             21              34                             21             19
Lithuania                                                          47              83                             45             69
Norway                                                             93             302
Poland                                                            207             202                           134             150
Russia                                                             89             251                            56             163
Singapore                                                           1               2
U.K.                                                               10              12
U.S.                                                               17              10
Average number of employees                                    18,008          21,546                         19,036        22,633
Average number of employees, total                                                            39,554                                           41,669
The parent company has 2 (2) employees in Sweden, both men.
The pro-forma average number of employees is presented on page 3.

                                                                                            Group                                     Parent
Personnel expenses, SEK m                                                           2002              2001                    2002              2001
Wages, salaries and other remuneration                                             8,839              8,909                     13                  6
Social security expenses                                                           3,717              4,144                       9                 5
(thereof pension expenses)                                                         (816)            (1,160)                     (4)               (6)
Other personnel expenses                                                             409                601                       0                 0
Total                                                                             12,965            13,654                      22                11
Current and former chief executive officers and executive vice presidents account for SEK 30 m (43) of pension expenses, of which SEK 4 m (6) is
related to the parent company. The group’s outstanding commitments for these individuals amount to SEK 96 m (76), of which SEK 26 m (21) is
related to the parent company.

 46   Posten Annual Report 2002
Note 4 Personnel expenses, continued
                                                                                    2002                                                 2001
Wages, salaries and other remuneration,                       Board              (thereof          Other              Board           (thereof             Other
SEK m/country                                                  CEO                bonus)       employees               CEO             bonus)          employees
Sweden                                                           34                  (2.2)         8,439                 28                (2)            8 ,819
(thereof Parent)                                               (13)                    (1)            (1)               (5)                (1)                (1)
Australia                                                                                               1
Belgium                                                            1                                  15
Denmark                                                                                               41                   0                                      0
Estonia                                                            1                                    5                  2                                      4
Philippines                                                                                             1
Finland                                                                                                 9
The Netherlands                                                                                         3
Latvia                                                            1                                     5                  1                                      4
Lithuania                                                         2                 (0.1)             16                   1                                      7
Norway                                                            2                                  197
Poland                                                            3                 (0.1)             30                   1                                      30
Russia                                                            1                                   18                   1                                      11
Singapore                                                         1                 (0.2)               1
U.K.                                                              1                                     5
U.S.                                                              1                                     5
Total                                                            48                 (2.6)          8,791                  34                (2)             8 ,875

EXECUTIVE BENEFITS                                                                  salary and automobile benefits. Income earned from new employment or
Executives are                                                                      other business activities shall be deducted from the severance pay package.
- Chairman                                                                              The chairman of the board was appointed on April 24, 2002. The chairman
- President and CEO                                                                 received SEK 0.1 m in remuneration for 2002. The former chairman received
- Executive management (18 people including the CEO)                                SEK 0.1 m in remuneration for 2002. The remuneration includes duties
                                                                                    performed as chairman of Posten Futurum.
Wage and salary ranges reflect the market rate of pay, of which a portion may           The board of the parent company received a total of SEK 1.1 m (1) in
be performance-based. The chairman of the board sets the salary of the chief        remuneration.
executive officer on condition of approval by the compensation committee.               The new chief executive officer was appointed on November 17, 2002.
The compensation committee also determines the principles on which the                  The chief executive officer received SEK 0.1 m in remuneration for 2002.
benefits of the executive management are based.                                     Performance-based pay or pension benefits are not included in the terms of
     Members of the executive management receive, in addition to their base         employment. The employment contract is time-specific and the salary has
salary, performance-based compensation.                                             been reduced in light of retirement benefits paid out due to previous employ-
     The performance-based compensation received by the chief executive             ment as the company’s executive vice president.
officer and the executive vice president may not exceed 30 percent of their             The former chief executive officer received SEK 4.0 m (3.7), comprising
annual base salary. Other members of the executive management may                   SEK 3.5 m in salary and SEK 0.5 m in performance-based pay for 2001. A
receive performance-based compensation of up to 15 or 20 percent of their           further SEK 2.2 m (2.2) was paid in premiums to an endowment insurance
annual base salary.                                                                 policy, whose value, SEK 8.0 m (5.9), corresponds to pensions commitments
     Principles for performance-based compensation have been set by the             presented in this section. There is an additional pension contribution of SEK
board’s compensation committee. The target linked to performance-based              0.5 m (0.4). Estimated residual expenses relating to employment of SEK 9.2 m
salary is set every year. The chief executive officer’s target is set by the        have been reported. The former chief executive officer is covered by Posten’s
chairman of the board. The targets set by the chief executive officer for the       executive retirement plan. The retirement benefits are future conditional. The
other members of the executive management take their starting point in the          cost amounts to 25 percent of the retirement-based compensation for salary
members’ own targets and the principles set by the compensation committee.          portions up to 20 basic amounts (for social security purposes), 50 percent of
The targets comprise financial results, performance quality and employees.          salary portions between 20 and 30 basic amounts, and 75 percent of salary
     The compensation committee has devised a retirement plan for executives,       portions over 30 basic amounts.
which is applied on condition of a decision by the chief executive officer and          The executive management, excluding the CEO, consisted of 17 (15)
with a measure of restrictiveness. Under the plan, provisions are made for a        people in December 2002. In 2002, they received salaries amounting to SEK
single-premium retirement annuity in addition to Posten’s retirement plan           23.8m. The amount includes a performance-based portion for 2001 totaling
(ITP-P).                                                                            SEK 3.6m.
     All members of the executive management have a 12-month notice period              Nine members of the executive management retire at the age of 60 in
if the employer terminates the contract and a 6-month notice period if the          accordance with Posten’s retirement plan for executives. Pension benefits for
employee terminates the contract. If the employer initiates the termination,        the remaining members of the executive management are based on the
the employee is entitled to severance pay equaling no more than 12 month’s          standard retirement plan or similar terms.

                                                                                                                                      Posten Annual Report 2002   47

Note 5          External expenses
20 percent (20) of the parent company’s purchases are made from subsidiaries.

                                                                                            Group                                     Parent
Auditors’ fees and reimbursement for expenses, SEK m                                2002             2001                     2002             2001
Auditing                                                                             8.0               6.6                      2.2              1.6
Other                                                                                6.2               5.0                      1.0              1.8
Total, KPMG                                                                         14.2              11.6                      3.2              3.4

Swedish National Audit Office
Auditing                                                                              0.3              0.3                      0.2              0.3
Total, RRV                                                                            0.3              0.3                      0.2              0.3

Auditing, other                                                                       0.6              0.2

Note 6          Depreciation and amortization of tangible and intangible fixed assets
                                                                                            Group                                     Parent
SEK m                                                                               2002              2001                    2002             2001
Trademarks and similar rights                                                         –5                –1
Goodwill                                                                             –63               –12                     –10
Capitalized expenditures for development                                             –41               –40
Machinery and equipment                                                             –855             –893                         0
Buildings and land                                                                   –16               –48
Total depreciation                                                                  –980             –994                      –10
Amortization                                                                          –4               –16
Total                                                                               –984            –1,010                     –10
Intangible assets are valued according to recommendation RR 17 (Amortization) of the Swedish Financial Accounting Standards Council. Indications
do not justify valuing tangible assets in a similar manner.

Note 7          Provisions
SEK m                                                                               2002             2001
Pension provisions
Utilization due to changed actuarial bases                                              0             300
Other provisions
Utilization/provision for development in
Cashier Service
  personnel expenses                                                                 –57              163
 other expenses                                                                       62              –47
Provisions for other personnel expenses                                            –181              –123
Reversal of loss provisions, cashier service                                       1,076
Other provisions                                                                     –99
Total provisions                                                                     801              293
The adjustments of provisions made due to new provision requirements, or due to revised estimates and so forth, are reported as provisions on the
income statement. These provisions are reported in accordance with the classification of the underlying cost. Of the SEK 801 m in total provisions/
reversals, SEK 732 m are reported under operating earnings and SEK 69 m under financial items. Loss provisions relating to the cashier service

 48   Posten Annual Report 2002
operation are based in part on the operating result and in part on the financial result. Other provisions in the income statement are based solely on
operating results.
   The reversal of loss provisions for the cashier service operation amounts to SEK 1,076 m (–), of which SEK 1,007 m (0) is linked to operating
results and SEK 69 m (0) is linked to financial results.
   The utilization of cost provisions is reported under the same type of cost as the underlying cost. This type of utilizations amounted to SEK 735 m
   Utilizations related to the cashier service operations were SEK 284 m (260), of which SEK 24 m (0) were related to financial costs. Posten’s cashier
service operation will be restructured to achieve a break-even position by 2005. The loss provision has been revised accordingly (see note 25).

Note 8         Earnings from shares of affiliated companies
SEK m                                                                                                                           2002                 2001
Dividends                                                                                                                      3,691                  869
Capital gain/loss                                                                                                                 –9
Writedowns                                                                                                                       –58
Total                                                                                                                          3,624                     869

Note 9         Earnings from other securities and receivables held as fixed assets
                                                                                             Group                                       Parent
SEK m                                                                                2002             2001                      2002                 2001
Capital gain/loss                                                                        0                0                         0                    0
Interest                                                                                 2                1                         0                    0
 (thereof affiliated companies)                                                        (–)              (–)                       (–)                  (0)
Writedowns                                                                             –5                                         –5                 –171
Total                                                                                  –3                 1                       –5                 –171

Note 10        Other interest income and similar items
                                                                                             Group                                       Parent
SEK m                                                                                2002             2001                      2002                2001
Interest income                                                                       197              143                        251                 507
 (thereof affiliated companies)                                                        (–)              (–)                     (173)               (483)
Capital gain/loss                                                                                         1                         –                   1
Exchange rate differences                                                                               85                        151                  10
Total                                                                                 197              229                        402                 518

Note 11        Interest expense and similar items
                                                                                             Group                                       Parent
SEK m                                                                                2002             2001                      2002                 2001
Interest expense                                                                     –136             –214                      –150                 –396
 (thereof affiliated companies)                                                        (–)              (–)                   (–108)               (–325)
Exchange rate differences                                                             –87
Other financial expenses                                                                               –72                                            –33
Total                                                                                –223             –286                      –150                 –429

                                                                                                                             Posten Annual Report 2002    49

Note 12         Tax
                                                                                              Group                                      Parent
SEK m                                                                                 2002             2001                      2002              2001
Current tax                                                                            –77             –231                      –346              –112
Adjustment of tax expense attributable to previous years                                 0                1                         0                 2
Total                                                                                  –77             –230                      –346              –110

                                                                                              Group                                      Parent
Deferred tax expense, SEK m                                                           2002             2001                      2002              2001
Deferred tax on untaxed reserves                                                        –6                3
Deferred tax on the difference between the book and
 written-down value of machinery and equipment                                           66               80
Deferred tax on development provisions
 within the company-operated                                                           –99               –73
Deferred tax on loss provisions
 for the cashier service operation                                                    –361               –73
Deferred tax on development expenditures reported as assets                            –66               –58
Deferred tax related to the fiscal loss for the year                                   333                72                       307               72
Deferred tax on provisions for future conditional pension benefits                      26                 6                         3
Deferred tax, other                                                                     89                19
Revision, deferred tax credit                                                         –770
Total                                                                                 –788               –24                       310               72

Total reported tax expense                                                            –865             –254                        –36              –38
Of this year’s tax expense for the group, SEK 0 m (–172) is attributable to divested operations. The value adjustment of the deferred tax credit refers
to a downward revision due to worsened earnings forecasts for the coming years (see note 19).

                                                                                               2002                                       2001
Group, reconciliation of actual tax rate, SEK m                                          %            Amount                         %            Amount
Pretax earnings                                                                                          69                                        3 685
Tax according to the parent company rate                                                28              –19                        28             –1 032
Depreciation of consolidated goodwill                                                  19.2             –13                        0.2                –8
Other nondeductible expenses                                                           70.0             –48                        0.8               –29
Tax-exempt capital gains on the sales of
  Postgirot and Postfastigheter                                                                                                  –22.3              821
Tax-exempt income                                                                      31.2               22                      –0.8               29
Increase in deficit deductions without corresponding
 capitalization of deferred taxes                                                     24.0              –17                        1.3              –48
Utilization of previously uncapitalized deficit deductions                            55.1               38                       –0.6               21
Tax attributable to previous years                                                    29.2              –20                        0.0                1
Effect of other tax rates in foreign companies                                        18.6              –13
Other                                                                                 34.7              –25                        0.3               –9
Revision, deferred tax credit                                                      1,113.1             –770
Total                                                                              1,250.5             –865                        6.9             –254
Uncapitalized deficit deductions are primarily attributable to foreign operations, as well as to Swedish companies unable to exploit the opportunity
for group contributions. 2001 pretax earnings consist of earnings after financial items of SEK 1,974 m and capital gains of SEK 1,711 m.

 50   Posten Annual Report 2002
Note 12 Tax, continued
                                                                                             2002                                         2001
Parent company, reconciliation of actual tax rate, SEK m                                %            Amount                         %             Amount
Pretax earnings                                                                                       3,735                                          892
Tax according to the parent company rate                                              28             –1,056                      28                 –250
Other nondeductible expenses                                                          0.1               –13                      0.2                  –2
Tax-exempt income                                                                    –0.0                 0                      0.0                   0
Utilization of previously uncapitalized deficit deductions                            0.0                 0                     –1.2                  11
Tax attributable to previous years                                                   –0.1                 3                     –0.2                   2
Tax attributable to previous years                                                  –27.4             1,032                    –27.3                 243
Writedowns of shares of affiliated companies                                          0.3               –13                      3.7                 –33
Other                                                                                 0.0                 0                      1.0                  –9
Total                                                                                 1.0               –36                      4.3                 –38

                                                                                             Group                                       Parent
Tax items reported directly against equity, SEK m                                    2002             2001                      2002                2001
Current tax, received/provided group contributions                                                                               346                 112
Total                                                                                                                            346                 112

Note 13        Intangible fixed assets
                                                             Trademarks and                       Ongoing                 Completed
Group, SEK m                                                    similar rights   Goodwill     development               development                 Total
Acquisition value, beginning of the period                                 20        838              208                        28                1,094
Acquisitions during the period                                             44         66              228                        99                  437
Reclassification due to the proportionate
 method of consolidation for joint ventures                                           317                                                            317
Other reclassifications                                                    1                          –208                       208                   1
Effect of changed accounting principle                                     4            6                                                             10
Divestments/disposals                                                    –14           –9                                                            –23
Translation differences                                                   –1           –1                                                             –2
Accumulated acquisition value, end of the period                          54        1,217              228                       335               1,834

Depreciation, beginning of the period                                    –16          –20                                        –19                 –55
Depreciation for the period                                               –5          –63                                        –41                –109
Divestments/disposals                                                     14                                                                          14
Reclassifications                                                          0                                                                           0
Accumulated acquisitions, end of the period                               –7          –83                                        –60                –150

Writedowns, beginning of the period                                                   –36                                          –6                   –42
Writedowns for the period                                                              –2                                                                –2
Accumulated writedowns, end of the period                                             –38                                          –6                   –44

Planned residual value, closing balance                                    47       1,096              228                       269               1,640
An impairment test has been performed on all major intangible assets. The recovery value, the highest of the net realizable value and the utilization
value, has been determined. Because the recovery value is higher than the book value, no writedown requirement exists.

                                                                                                                            Posten Annual Report 2002    51

Note 13 Intangible fixed assets, continued
                                                   Trademarks and                     Ongoing      Completed
Parent company, SEK m                                 similar rights   Goodwill   development    development       Total
Acquisition value, beginning of the period                                 130                                      130
Acquisitions during the period                                    2          –                                        2
Intercompany redistribution of goodwill                                     64                                       64
Accumulated acquisition value, end of the period                  2        194                                      196

Depreciation, beginning of the period
Depreciation for the period                                                –10                                     –10
Accumulated depreciation, end of the period                                –10                                     –10

Planned residual value, closing balance                           2        184                                      186

Note 14          Tangible fixed assets
                                                                       Buildings Machinery and     in progress
Group, SEK m                                                           and land     equipment    and advances      Total
Acquisition value, beginning of the period                                  153         7,525               99    7,777
Acquisitions during the period                                                11        1,173             119     1,303
Reclassifications                                                             –1            79            –99       –21
Effect of changed accounting method                                         147             57                      204
Divestments/disposals                                                         –1         –807              –2     –810
Translation differences                                                        9            –8                        1
Accumulated acquisition value, end of the period                            318         8,019             117     8,454

Depreciation, beginning of the period                                      –23         –4,583                    –4,606
Depreciation for the period                                                –16          –855                      –871
Reclassifications                                                            6             22                        28
Divestments/disposals                                                        1            737                       738
Translation differences                                                      –              1                         1
Accumulated depreciation, end of the period                                –32         –4,678                    –4,710

Writedowns, beginning of the period                                                         0                         0
Writedowns for the period                                                                  –2                        –2
Accumulated writedowns, end of the period                                                  –2                        –2

Planned residual value, closing balance                                    286          3,339             117     3,742
Value assessed for tax purposes                                              64
(thereof land)                                                             (22)

 52   Posten Annual Report 2002
Note 14 Tangible fixed assets, continued

                                                                               Buildings Machinery and                 in progress
Parent, SEK m                                                                  and land     equipment                and advances                     Total
Acquisition value, beginning of the period                                                           7                                                   7
Acquisitions during the period
Accumulated acquisition value, end of the period                                                        7                                                7

Depreciation, beginning of the period                                                                   0                                                0
Depreciation for the period                                                                             0                                                0
Accumulated depreciation, end of the period                                                             0                                                0

Planned residual value, closing balance                                                                 7                                                7

Note 15        Leased machinery and equipment, facility rent
The group’s financial lease agreements have been deemed insignificant and are therefore reported as operational lease agreements.

Operational lease agreements
At year-end, the group had at its disposal machinery and equipment with an estimated acquisition value of SEK 782 m (698). The group’s leasing
charges for the period totaled SEK 1,525 m (1,441). At the closing day, the group had outstanding leasing expenses, computed at the then-prevailing
exchange and interest rates, of SEK 6,244 m.

The leasing charges fall due between 2002 and 2011 as follows:
Annual leasing expenses, SEK m                                                          Machinery and equipment           Facilities
Within one year                                                                                     123                      1,060
Between one and five years                                                                          319                      2,273
Later than five years                                                                                 0                      2,469
Falcon Air holds the majority of the machinery and equipment (Boeing aircraft) put at the group’s disposal through lease agreements.
Falcon Air’s leasing contract is denominated in U.S. dollars.

                                                                                                                          Posten Annual Report 2002     53

Note 16         Shares of affiliated companies and joint ventures

Parent company, SEK m                                                                                          2002            2001
Acquisition value, beginning of the period                                                                    3,022            3,756
Investments                                                                                                     152            1,351
Reclassifications                                                                                             –114
Divestments                                                                                                     –20          –2,085
Accumulated acquisition value, end of the period                                                              3,040           3,022

Writedowns, beginning of the period                                                                           –818             –789
Writedowns for the period                                                                                         0              –29
Accumulated writedowns, end of the period                                                                     –818             –818
Book value, end of the period                                                                                 2,222            2,204

Parent company’s shareholdings in affiliated companies and joint ventures:
                                                                                                                     Book value in
                                                                                                              Parent company, SEK m
Parent company’s (Posten AB)                Corporate                             Equity, %            No.   Shares of      Shares of
direct and indirect holdings, SEK m         identity    Domicile               Direct Indirect      shares   affiliates joint ventures
Posten Sverige AB                           556451-4148 Stockholm                100                25,000      1,141
  Posten Logistik AB                        556094-0263 Stockholm                          100     228,330            –
Tollpost Globe AS                                       Oslo, Norway              50                58,785            ¨            317
  Nordisk Transport & Spedition AS                      Oslo, Norway                        50      10,000
DPD Parcel Holding A/S                                  Bröndby, Denmark         100                     1        254
  DPD Holding A/S                                       Bröndby, Denmark                   100           1
  DPD Danmark A/S                                       Bröndby, Denmark                   100           2
  DPD Nordic AB                             556528-7694 Stockholm                          100       3,000
DPD Finland OY                                          Helsingfors, Finland     100                   250        231
Poståkeriet Sverige AB                      556453-7404 Stockholm                100               100,500        142
Falcon Air AB                               556204-3702 Stockholm                100               280,000         67
Baltic Logistic System International AB     556203-9221 Stockholm                100                10,000         67
  AS Baltic Logistic System Eesti                       Tallin, Estonia                    100       1,450          –
  UAB Baltic Logistic System Vilnius                    Vilnius, Lithuania                 100         700          –
  SIA Baltic Logistic System Latvija                    Riga, Latvia                        60       1,700          –
  Masterlink Express Sp. zo.o.                          Warsaw, Poland                      50      29,302          –
    AirCargo Poland zo.o.                               Warsaw, Poland                      50         100          –
  ZAO Armadillo Business Posilka                        Moskva, Russia                      80     139,283          –
Svensk Kassaservice AB                      556615-7987 Stockholm                100                 1,000         50
Posten Försäkrings AB                       516401-8649 Stockholm                100                50,000         50
Swedgiro AB                                 556425-2913 Stockholm                100             2,500,000         38
  Eesti Maksekeskuse AS                                 Tallin, Estonia                    100       2,002          –
  A/S Nacionalais Maksajumu Centrs                      Riga, Latvia                       100       9,300          –
  UAB Nacionalinis Atsiskaitymu Centras                 Vilnius, Lithuania                 100      66,000          –
  Komercyjne Centrum Platnicze Sp. zo.o.                Warsaw, Poland                     100      80,000          –
    Logistics Sp. zo.o.                                 Warsaw, Poland                     100          80          –
  BusinessPoint S.A.                                    Warsaw, Poland                     100     165,058          –
  Netpay OY                                             Helsingfors, Finland               100       5,000          –
Posten Kredit AB                            556194-3548 Stockholm                100               200,000         28
Tidningstjänst AB                           556039-7480 Stockholm                100                 7,500         19
Adresspoint International AB                556632-7770 Stockholm                 85                 8,500         17
  Adresspoint AB                            556587-5597 Stockholm                           85         170          –
  Svensk Adressändring AB                   556476-3562 Stockholm                           85         850          –

54   Posten Annual Report 2002
Note 16 Shares of affiliated companies and joint ventures, continued                                                        Book value in
                                                                                                                     Parent company, SEK m
Parent company’s (Posten AB)                Corporate                                    Equity, %           No.    Shares of      Shares of
direct and indirect holdings, SEK m         identity         Domicile                 Direct Indirect     shares    affiliates joint ventures
Posten PIC AB                               556340-9985 Stockholm                       100              10,000            15
Posten Reinsurance S.A                                       Luxembourg                  99                4,950           13
Posten Leasing AB                           556341-0009 Stockholm                       100                5,000           10
Direct Link NV                                               Zaventem, Belgium           50                  500                           10
 Direct Link US                                              New Jersey, U.S.                      50          1
 Direct Link UK                                              Middlesex, U.K.                       50    55,000
 Direct Link Singapore                                       Singapore                             50   350,000
Länsdepån Gävleborg AB                      556514-5306 Gävle                           100                   90              9
Säve Cargo Logistik AB                      556535-0310 Stockholm                       100                5,000              7
Hultberg Inrikes Transporter AB             556042-3203 Stockholm                       100              52,000               6
Posten Logistik On Line Center AB           556485-4403 Stockholm                       100                5,000              5
Posten Express PEX AB                       556041-7098 Stockholm                       100              17,867               4
Unidas AB                                   556601-9971 Stockholm                       100              10,000               3
HIT Danmark AS                                               Copenhagen, Denmark         60                  300              1
Posten Sverige GmbH                                          Berlin, Germany            100                  150              1
DPD Sweden AB                               556371-8021 Stockholm                       100                1,000              0
Fastighets AB Penelope                      556517-0544 Stockholm                       100                1,000              0
Fastighets AB Kvasten 8                     556482-7508 Stockholm                       100                1,000              0
Posten HK Internservice AB                  556482-7177 Stockholm                       100                1,000              0
Swedish Post Group BV                                        The Netherlands            100                  200              0
 Starintex Road Cargo N.V                                    Gendringen, The Netherlands          100    21,000
 Gendringen Expeditie BV.                                    Gendringen, The Netherlands          100         80
HIT Finland OY                                               Vaanta, Finland             50                    8            0
DPD Norge AS                                                 Oslo, Norway               100              10,000             0
Dormant companies                                                                                                          44
Subsidiaries of affiliated companies and joint ventures, total                                                          2,222                  327

                                                                                                                                    Book value
Parent company’s (Posten AB) direct                 Corporate                                            Equity,     No. of            parent
holdings in dormant companies, SEK m                  identity     Domicile                                   %     shares           company
Posten Brev AB                                   556451-4114       Stockholm                               100       2,600                15.6
Posten Utrikes AB                                556451-4122       Stockholm                               100       2,000                12.0
Posten Lättgods AB                               556451-4106       Stockholm                               100       1,500                 9.1
Postbolagen AB                                   556234-1353       Stockholm                               100      25,000                 4.3
Posten Holdings International AB                 556528-1804       Stockholm                               100       1,000                 0.9
Mailvision AB                                    556451-1086       Stockholm                               100       4,150                 0.5
PostNet AB                                       556260-9437       Stockholm                               100     100,000                 0.5
Fromto AB                                        556206-0706       Stockholm                               100       2,000                 0.3
Posten Finansiella Tjänster AB                   556451-4130       Stockholm                               100          50                 0.3
Falcon Cargo AB                                  556239-5334       Stockholm                               100       5,000                 0.1
Swedish Post Group AB                            556630-6014       Stockholm                               100       1,000                 0.1
Minpost AB                                       556553-0663       Stockholm                               100       1,000                 0.1
NetMark Holding AB                               556586-1464       Stockholm                               100       1,000                 0.1
Nord Post Group AB                               556623-1790       Stockholm                               100       1,000                 0.1
Bonusmail AB                                     556490-3317       Stockholm                               100       1,000                 0.1
Posten Service AB                                556252-0485       Stockholm                               100       1,000                 0.0
Dormant Swedish subsidiaries, total                                                                                                       44.1

                                                                                                                   Posten Annual Report 2002    55

Note 17         Shares of associated companies
                                                                            Group                       Parent
SEK m                                                               2002            2001        2002             2001
Acquisition value, beginning of the period                           492             104         450               86
Investments                                                           15             402          15              402
Reclassification                                                    –439                        –405
Divestments                                                          –26            –14          –25              –38
Accumulated acquisition value, end of the period                      42            492           35              450

Share of earnings, beginning of the period                           –73            –57
Reclassification                                                      53
Share of earnings for the year                                       –18            –16
Accumulated share of earnings, end of the period                     –38            –73

Writedowns, beginning of the period                                    0                         –11              –40
Divestments/disposals                                                  0                         –23               29
Accumulated writedowns, end of the period                                                        –34              –11

Book value, end of the period                                          4            419             1             439

Parent company and group’s shareholdings in associated companies:
                                                                                           Book value      Book value
Parent company’s (Posten AB) direct holdings, SEK m                   No.             %        Group          parent
Nordic Mail AB, 556105-4411, Stockholm                              1,375            50             1               1
HOOC House of Commerce AB, 556597-7450, Stockholm                     900           49.9            0               0
Total                                                                                               1               1

                                                                                                           Book value
                                                                                           Book value directly holding
Parent company’s (Posten AB) indirect holdings, SEK m                 No.             %        Group            parent
ZAO Armadillo, Moscow, Russia                                          8            26.7            3                6
Other, Swedish associated companies                                                                 0                0
Total                                                                                               3                6

Total direct and indirect holdings in associated companies                                          4

 56   Posten Annual Report 2002
Note 18        Shares and receivables, joint ventures
Shares of joint venture are consolidated in the group accounts according to the proportionate method of consolidation.

Receivables, joint ventures, SEK m                                                                                                              2002
Accumulated acquisition value, beginning of the period
Purchasing                                                                                                                                            13
Reclassification due to changed accounting principle                                                                                                 405
Redistribution of intercompany Goodwill                                                                                                              –68
Accumulated acquisition value, end of the period                                                                                                     350

Accumulated writedowns, beginning of the period
Writedowns for the period                                                                                                                            –23
Accumulated writedowns, end of the period                                                                                                            –23

Reported value, end of the period                                                                                                                    327

The parent company’s holdings in joint ventures:
                                                                                                                                          Book value
Parent comany’s (Posten AB) direct holdings, SEK m                                  No.                       %                              parent
Tollpost Globe AS, 984 054 564, Oslo, Norway                                     58,785                       50                                317
Direct Link, HRB 518946, Zaventem, Belgium                                          500                       50                                  10
HIT Finland, Vantaa, Finland, Corp id no 1656772-2                                    8                       50                                   0
Total                                                                                                                                           327

Summary of the ownership stake of the income and balance statements for joint ventures:

                                                                  2002                                                                   12-31-2002
Income statements                                                          Balance sheets
Net sales                                                         1,075    Fixed assets                                                              199
Operating earnings                                                   14    Current assets                                                            201
Net financial items                                                 –14    Total assets                                                              400

Tax                                                                  –3    Equity                                                                     56
Net earnings                                                         –3    Provisions                                                                  4
                                                                           Long-term liabilities                                                      12
                                                                           Current liabilities                                                       328
                                                                           Total equity and liabilities                                              400

                                                                                                                         Posten Annual Report 2002    57

Note 19         Deferred tax
                                                                                 Balance,                  Reported on                       Balance,
                                                                                 year-end                   the income                       year-end
Group, SEK m                                                                        2001                     statement                          2002
Deferred tax liability
Untaxed reserves                                                                      –36                           –6                            -42
Difference between book and written-
  down value of machinery and equipment                                             –131                            66                           –65
Capitalized development expenditures                                                 –58                           –66                          –124
Deferred tax credit
Provisions for phasing out post office network                                        450                          –99                           351
Losses, cashier service                                                               586                         –361                           225
Fiscal losses carried forward                                                          72                          333                           405
Provisions for future conditional pension benefits                                    311                           26                           337
Other provisions, etc.                                                                 75                           89                           164
Adjustment, deferred tax credit                                                                                   –770                          –770
Total deferred tax                                                                  1,269                         –788                           481
As both credits and liabilities refer primarily to items in the same tax jurisdiction, the net amount has, as shown above, been reported as a deferred
tax credit. Uncapitalized deferred tax credits concerning deficits total SEK 74 m, of which SEK 34 m fall due within three years. The temporary
difference concerning shares of corporations/associated companies have not been reported, as no such company currently is for sale. The difference
is SEK 158 m, or a deferred tax credit of SEK 44 m. The deferred tax credit was revised downward in light of financial forecasts for the coming years.
The valuation takes into account forecasted earnings for the next six years. Adjustments may be made in line with an improved outlook.

                                                                                 Balance,                  Reported on                       Balance,
                                                                                 year-end                   the income                       year-end
Parent company, SEK m                                                               2001                     statement                          2002
Deferred tax credit
Fiscal losses carried forward                                                          72                          307                            379
Other                                                                                                                3                              3
Total deferred tax credit                                                              72                          310                            382

Note 20         Prepaid expenses and accrued income
                                                                                             Group                                     Parent
SEK m                                                                                2002             2001                     2002             2001
Accrued interest income                                                                 5               30                        4               30
Accrued commission income                                                                                2
Accrued postal charges                                                                160              163
Prepaid rent                                                                          219              234
Other items                                                                           614              575                         7               15
Total                                                                                 998            1,004                        11               45

 58   Posten Annual Report 2002
Note 21        Short-term investments
                                                                                             Group                                      Parent
SEK m                                                                              2002               2001                    2002                  2001
Short-term investments                                                             1,831               474                    1,765                  441
Short-term investments comprise commercial paper and interest-bearing investments under Posten’s liquidity management.

Note 22        Equity
                                                         Capital           Restricted        Non-restricted              Net
Group, SEK m                                              stock             reserves              reserves          earnings                        Total
Opening balance                                            600                   693               –1,426             3,432                        3,299
Appropriation of earnings                                                                            3,432           –3,432                            0
Transfers between restricted
  and non-restricted reserves                                                  1,000                 –1,000                                            0
Translation difference                                                                                   76                                           76
Net earnings                                                                                                           –788                        –788
Closing balance                                             600                1,693                  1,082            –788                        2,587
Accumulated translation differences reported directly against equity were SEK 0 m (–76).

                                                         Capital           Restricted        Non-restricted              Net
Parent, SEK m                                             stock             reserves              reserves          earnings                        Total
Opening balance                                            600                   120                 1,798              854                        3,372
Appropriation of earnings                                                                              854             –854                            0
Group contribution provided, after tax                                                               –887                                          –887
The capital infusion has been written down
 against equity due to connections
 with group contributions received                                                                     –41                                           –41
Net earnings                                                                                                           3,699                       3,699
Closing balance                                             600                  120                  1,724            3,699                       6,143
Capital stock comprises 600,000 shares with a nominal value of SEK 1,000.

Note 23        Itemization of untaxed reserves
                                                                                           Opening            Provision/                         Closing
Parent, SEK m                                                                              balance            Utilization                        balance
Tax allocation reserve                                                                          49                                                    49
The deferred tax liability in the parent company’s untaxed reserves was SEK 14 m (14).

                                                                                                                            Posten Annual Report 2002   59

Note 24         Pension provisions
Pension commitments were calculated according regulation FFFS 2001:13 of the Swedish Financial Supervisory Authority.

                                                                                            Group                                    Parent
SEK m                                                                             2002              2001                      2002            2001
Capital value of all pension commitments at year-end 2002                        10,164             9,677                       12              10
thereof secured via Posten’s Pension Fund                                         9,821             9,434
Secured via “Pension Provisions” FPG/SPV pensions account, etc.                     343               243                       12               10

Posten’s Pension Fund
In 1997, a group-wide pension fund was established to secure all pension commitments earned in the group through 1996. Changed in 2001, the
regulations now stipulate that the purpose of the fund is to secure pension commitments for employees of Posten Group. Coincident with the change,
the fund was renamed Posten’s Pension Fund. At the beginning of the year, provisions allocated to the pension fund related to Posten Sverige AB.
In October 2001, a debtor change was implemented, moving the pension liability from Posten Logistik On-Line Center AB to Posten Sverige AB. The
debtor change concerned all pension commitments assumed by Posten Logistik On-Line Center AB on behalf of its employees up until September 30,
2002. Posten Logistik On-Line Center AB paid Posten Sverige AB an amount corresponding to the capital value of the pension commitments that had
been assumed September 30, 2001.
    Posten Sverige AB made a provision of SEK 551 m (2,348) to the fund in December 2002. During the year, the group made payouts relating to
pensions secured by Posten’s Pension Fund totaling SEK 527 m (352). A refund was received during the year from Posten’s Pension Fund of SEK 541
m (366). After deductions for the refund, assets in Posten’s Pension Fund had a market value of SEK 10,490 m (10,595). The assets exceed the
outstanding commitments secured by Posten’s Pension Fund by SEK 669 m (1,161).

Pension liabilities reported as contingent liabilities
The so-called “final responsibility” assumed from the state is recorded as a contingent liability until benefit payments commence. At the closing
day, the final responsibility totaled SEK 283 m (286). In 2002, individual early-retirement (before the age of 65) agreements have been reached. The
amounts are expensed in conjunction with each individual retirement. The value of the future costs for people retiring in 2003 and beyond amounts
to SEK 80 m (19), of which SEK 0 m (–) is attributable to the parent company.
    The company is reporting contingent liabilities for non-expensed pension commitments of SEK 363 m (305), of which SEK 0 m (–) is attributable to
the parent company.
    In 2000, pension commitments previously secured by Posten’s Pension Fund were redeemed. Posten retains indexation and direct integration
responsibility for this component whose capital value at December 31, 2001 was SEK 452 m (565). At December 31, 2001, Posten’s full indexation
responsibility for the so-called transition provisions amounted to SEK 3,727 m (3,575), of which SEK 1,157 m (1,111) is recorded as Other Provisions
(see note 25).

Parent company guaranties
The parent company has provided guaranties for the fulfillment of pension commitments provided by subsidiary Posten Sverige AB for former
Postverket employees who at March 1, 1994 were receiving pensions totaling SEK 2,768 m (2,892). Corresponding commitments are secured by
Posten’s Pension Fund and therefore are not expensed by the group. Thus, the group also reports this guaranty commitment.
    The parent company has also provided a guaranty for the “final responsibility” assumed by Posten Sverige AB of SEK 283 m (286) at the closing
day. In addition, the parent company has provided guaranties for subsidiaries with certain pension commitments, which have been expensed and,
to a certain extent, reported as contingent liabilities in the subsidiaries of SEK 7,346 m (6,732). The parent company’s total guaranty commitment
therefore amounts to SEK 10,397 m (9,910).

 60   Posten Annual Report 2002
Note 25        Other provisions
SEK m                                                                                2002              2001
Provisions for workers’ compensation                                                  139               152
Provisions for future conditional pension benefits                                  1,157             1,111
Provisions for closures, cashier service                                            1,256             1,607
Loss provisions, cashier service                                                      803             2,093
Other provisions                                                                      397               286
Total                                                                               3,752             5,249

Provisions for future conditional pension benefits
Previously reported as contingent liabilities, pension commitments relating to the so-called transition provisions are now expensed by Posten AB.
Transition provisions refer to certain personnel who are entitled to retire at 60 or 63, provided the employee was 28 years old by January 1, 1992 and
has held the same position at Posten. Between 1998 and 2001, the degree of utilization averaged 21 percent. 25 percent of the total outstanding
commitment has been expensed, plus special payroll tax. The gross commitment, excluding payroll tax is SEK 3,727 m (3,576).

Closure provisions for the cashier service operation
In 1999, Posten made a SEK 2,100 m cost provision for closures relating to the post office network. SEK 1,256 m of this reserve remains in the 2002
year-end results. The amount refers to costs relating to personnel reductions and unutilizable facilities and fixed assets. In 2002, SEK 345 m was
released for costs. A reversal of SEK 5 m was made to adjust the reserve to the level estimated necessary at the end of 2002 to cover future costs
related to closures.

Loss provisions for the cashier service operation
Posten has a mandate to provide essential cashier service. This is a legal mandate stipulated by the Essential Cashier Service Act and therefore is
binding for Posten.
    The state appropriates SEK 400 m annually to reimburse Posten for providing cashier service in sparsely populated areas lacking suitable
alternative providers. The European Commission has reviewed and approved the state’s reimbursement program.
    The nonsubsidized segment of the cashier service operation reported an operating loss for 2002 of SEK 260 m. The board has sanctioned measures
aimed at achieving a break-even position by 2005. Posten is committed to achieving this goal. While measures are needed in a number of areas, they
will primarily focus on the number of outlets, pricing and products. The loss reserve for the cashier service operation is based on the assumption that
a break-even position will be achieved in accordance with this decision.

Note 26        Interest-bearing liabilities
SEK 331 m (412) of the group’s interest-bearing liabilities have maturity dates beyond five years.
                                                                                              Group                                     Parent
SEK m                                                                                2002             2001                      2002                2001
Long-term interest-bearing liabilities
 Other long-term liabilities                                                          541              636
Total                                                                                 541              636

Current interest-bearing liabilities
 MTN program                                                                                          1 078                                        1,078
 Commercial paper program                                                             144               489                      144                 489
 Other current liabilities                                                            877             1 395
Total                                                                               1,021             2,962                      144               1,567
The commercial paper and MTN programs have frameworks of SEK 2,000 m and SEK 3,000 m, respectively. The company has credit commitments
totaling SEK 1,000 m (SEK 0 m unutilized).

                                                                                                                            Posten Annual Report 2002   61

Note 27         Accrued expenses and deferred income
                                                                                             Group                                     Parent
SEK m                                                                                2002            2001                      2002             2001
Reserve for stamps sold but unutilized                                                320             105
Accrued payroll expenses                                                              372             320                          8                1
Vacation pay liability                                                                580             574                          1                0
Social security expenses                                                              405             393                          3                0
Severance pay reserves                                                                 10               8
Accrued interest expense                                                               15              41                         11               41
Insurance premiums                                                                     70
Other items                                                                           501              517                         2               56
Total                                                                               2,273            1,958                        25               98

Note 28         Pledged assets for own liabilities
                                                                                             Group                                     Parent
SEK m                                                                               2002             2001                      2002             2001
Capital insurance policies                                                            51               54                        10               10
Total                                                                                 51               54                        10               10

Note 29         Other contingent liabilities
                                                                                             Group                                     Parent
SEK m                                                                               2002             2001                      2002             2001
Guaranties                                                                           360              296                       838*             627
Total                                                                                360              296                       838*             627
* As of December 31, 2002, Posten AB has pledged capital adequacy guaranties for the benefit of wholly owned subsidiaries totaling SEK 294 m.
An unlimited capital adequacy guaranty has been issued for the benefit of Posten Sverige AB. Subsidiaries’ capital has been covered via group
contributions or capital infusions in conjunction with the 2002 year-end results. The commitments, however, remain until the general meeting has
adopted the 2002 annual reports.

Note 30         Interest paid/received
Included in the cash flow from operating activities is the interest that has been paid and received (see below). The comparative period refers to
interest payments excluding the operations of Postgirot Bank:
                                                                                               Group                                   Parent
SEK m                                                                                  2002             2001                    2002              2001
Interest received                                                                       224              169                     278               286
Interest paid                                                                          –158             –224                    –189              –367

 62   Posten Annual Report 2002
Note 31        Acquisition/divestment of affiliated companies and other business units
                                                                                             2002                                        2001
Group, SEK m                                                                  Acquisition      Divestment                Acquisition       Divestment
Fixed assets                                                                         –71                                    –1,244             13,488
Receivables                                                                          –24                                        –93             3,717
Liquid assets                                                                          –7                                       –15            27,871
Financial liabilities                                                                   0                                         44          –38,980
Other liabilities and provisions                                                       25                                       223            –3,284
Capital gains on affiliated companies                                                   0                                          0            2,989
Purchase price paid/received                                                         –77                                    –1,085              5,801
Liquid assets, acquired affiliated companies                                            7                                         15                0
Liquid assets, divested affiliated companies                                            0                                                     –27,872
Net effect on cash flow                                                              –70                                     –1,070           –22,071

Note 32        Liquid assets
Liquid assets include, in addition to cash and cash equivalents, securities under the heading short-term investments. Investments maturing in less
than 90 days are also included in cash and cash equivalents.
   In this year’s cash flows, liquid assets have been adjusted for an amount relating to the “storage of cash” at the cashier service operation. The
same amount has also been used to adjust the increase/decrease in financial liabilities. The amount refers to funds held on behalf of external
customers. These funds can only be transferred and cannot be used by Posten’s business operations. The 2001 figures were reported in the same
manner (see accounting principles).

SEK m                                                                                2002              2001
Cash and cash equivalents                                                           2,338             6,603
Short-term investments                                                              1,831               474
Liquid assets according to the balance sheets                                       4,169             7,077

Storage of cash                                                                     –845             –1,390
Liquid assets according to the statements of cash flows                             3,324             5,687

                                                                                                                            Posten Annual Report 2002   63

The group has non-restricted equity of SEK 294 m. Of the group’s non-restricted equity, it has been proposed
that SEK 0 m be transferred to restricted reserves.

The following earnings held by the parent company are at the disposal of the annual general meeting:

Retained earnings                                          1,723,966,486
Net earnings                                               3,699,004,061

The board of directors and chief executive officer propose that the entire amount be retained.

                                                  Stockholm, March 3, 2003

                                                       Claes Ånstrand

          Annette Brodin Rampe                         Jonas Iversen                    Åke Kihlberg

Jan Kvarnström                    Sören Lekberg                         Ulla Litzén              Curt Malmborg

             Alf Mellström                            Marianne Nivert                  Kjell Strömbäck

                                                   Börge Österholm
                                          President and Chief Executive Officer

 64   Posten Annual Report 2002

To the Annual General Meeting of Posten AB (publ)                            financial statements. To determine the liability for damages, if any,
                                                                             to the company of any members of the Board or the Chief Executive
Corporate identity number 556128-6559                                        Officer, we have examined significant decisions, actions taken and the
                                                                             circumstances of the company. We have also examined whether any
We have examined the annual report, the consolidated financial               members of the Board or the Chief Executive Officer have in any other
statements, the accounting records and the administration of Posten AB       way acted in contravention of the Swedish Companies Act, the Annual
(publ) by the Board of Directors and the President for the financial year    Accounts Act or the company’s Articles of Association. We believe that
2002. These accounts and the administration of the company are the           our audit provides us with a reasonable basis for our opinion as set
responsibility of the Board of Directors and the Chief Executive Officer.    forth below.
Our responsibility is to express an opinion of the annual report, the
consolidated financial statements and the administration on the basis        The annual report and the consolidated financial accounts have been
of our audit.                                                                prepared in accordance with the Annual Accounts Act and thereby
                                                                             provide a true and fair view of the company’s and the group’s profit
The audit has been carried out in accordance with generally accepted         and financial position in accordance with generally accepted auditing
auditing standards in Sweden. Those standards require that we plan           standards in Sweden.
and perform the audit to obtain reasonable assurance that the annual
report and the consolidated financial statements are free of material        We recommend that the Annual General Meeting adopt the income
misstatement. An audit includes examining, on a test basis, evidence         statement and the balance sheet for the parent company and the group,
supporting the amounts and disclosures in the accounts. An audit also        distribute the earnings in the parent company in accordance with the
includes assessing the accounting principles and their application by        proposal in the Board of Directors’ report, and discharge the members
the Board of Directors and the President as well as evaluating the overall   of the Board of Directors and the Chief Executive Officer from liability for
presentation of information in the annual report and the consolidated        the financial year.

                                                              Stockholm, March 3, 2003

                                    Stefan Holmström                                              Curt Öberg
                               Authorized Public Accountant                              Authorized Public Accountant
                                          KPMG                                             Auditor appointed by the
                                                                                        Swedish National Audit Bureau

                                                                                                                              Posten Annual Report 2002   65
Board of directors

Claes Ånstrand. Born 1945.                                Annette Brodin Rampe. Born 1962.                      Jonas Iversen. Born 1965.
Chairman since April 2002. State secretary, Ministry of   President, Senea AB. Board member since April 2000.   Deputy assistant under-secretary, Ministry of Industry,
Industry, Employment and Communications.                  Board member of Peab AB, Ruter Dam, Vattenfall AB     Employment and Communications. Board member
                                                          and Senea AB.                                         since April 2001.
                                                                                                                Board member of Lernia AB and Samhall AB.

Åke Kihlberg. Born 1944.                                  Jan Kvarnström. Born 1948.                            Sören Lekberg. Born 1946.
Employee representative appointed by the Swedish          Director and member of the executive management of    Chairman of the Committee on European Union Affairs
Union of Service and Communications Employees.            Dresder Bank AG. Board member since April 2001.       (SDP). Board member since April 2000.
Board member since May 1995.                              Chairman of Castellum AB and vice chairman of AB      Board member of Södertörns Högskola.
Posten employee since 1964.                               Swedcarrier. Board member of Nobel Biocare AG,
                                                          Doxa AB, Biora AB and Teraklin AG.

Board activities in 2002                                                             Svensk Kassaervice AB. The decision has also been taken to
The Board of Directors of Posten AB (publ) comprised up to                           change the group’s legal organization by acquiring Posten Logistik
November nine members and during December of eight members                           AB’s subsidiaries, transferring ownership of Posten Logistik AB
appointed by the Annual General Meeting, as well as three members                    to Posten Sverige AB, and approving the merger of Posten
and three deputy members appointed by the employees. The three                       Logistik AB and Posten Sverige AB. Furthermore, the board
deputy members are Carina Holm of the Swedish Federation of                          took the decision to acquire the Polish hybrid postal operator
Civil Servants at Posten, Ann-Marie Ross of the Swedish Union                        Business Point SA. Finally, the board decided on November 17
of Service and Communication Employees, SEKO and Björn                               to dismiss then-chief executive officer Lennart Grabe, who was
Nyström of the Federation of Salaried Employees in Industry                          succeeded by Börge Österholm.
and Services at Posten.                                                                  The board has appointed an internal subcommittee on
    At the Annual General Meeting held April 24, 2002, Claes                         remuneration to set the principles for salaries, benefits, pensions
Ånstrand was appointed to the board. At the statutory board                          and other terms for the executive management and chief executive
meeting, Mr. Ånstrand was named chairman. Board members                              officer. The committee comprises chairman of the board Claes
Ulf Spång and Lennart Grabe stepped down from the board in                           Ånstrand, Annette Brodin Rampe and Sören Lekberg. The board
August and November, respectively. At a special meeting held                         has also appointed an internal subcommittee on auditing tasked
December 3, Marianne Nivert was appointed to the board.                              with maintaining a dialogue with the company’s auditors as well
    In 2002, the board held 11 meetings at which minutes were                        as with supporting the state’s choice of auditors and continuously
kept. During the year, the board decided to transfer essential                       monitoring the impartiality of the auditors. The committee
cashier service business operations to a newly formed subsidiary,                    comprises Jonas Iversen, Ulla Litzén and Jan Kvarnström.

66   Posten Annual Report 2002, Directors’ Report
Ulla Litzén. Born 1956.                                Curt Malmborg. Born 1951.                              Alf Mellström. Born 1956.
CEO, W Capital Management AB. Board member since       State secretary, Ministry of Finance. Board member     Employee representative appointed by the Swedish
April 2001.                                            since April 2001.                                      Union of Service and Communications Employees.
Board member of AB SKF, Atlas Copco AB, AB Svensk                                                             Board member since April 2001.
Stiftelseförvaltning and W Capital Management AB.                                                             Posten employee since 1978.

Marianne Nivert. Born 1940.                            Kjell Strömbäck. Born 1950.
Board member since December 2002.                      Employee representative appointed by the Swedish
Board member of Fjärde AP-fonden, Huddinge             Federation of Civil Servants at Posten. Board member
Universitetssjukhus AB, Stiftelsen Chalmers Tekniska   since June 1999. Posten employee since 1968.
Högskola, Svensk Exportkredit AB, Wallenstams
Byggnads AB, Beijer Alnia AB, SSAB, Studieförbundet
Näringsliv och Samhälle. Serves on the government-
appointed Confidence Commission as well as
parliament’s National Audit Compensation Board.

                                                                                                                     Directors’ Report, Posten Annual Report 2002   67
Executive management

Börge Österholm. Born 1942.                            Bo Alerfeldt. Born 1946.                                Viveca Bergstedt Sten. Born 1959.
President and Chief Executive Officer of Posten AB     Senior Advisor and Senior Vice President, Process       Chief Legal Officer and Senior Vice President, Legal
(publ) since November 2002.                            Quality, Environment, Security, Purchasing as well as   Affairs. Associate member of the Executive Committee.
                                                       Properties and Facilities.

Peter Dahlén. Born 1956.                               Mats Engstrand. Born 1964.                              Susanne Flyckt Hylén. Born 1966.
Senior Vice President, Administrative Communication.   Chief Information Officer and Senior Vice President,    Senior Vice President, Outsourcing.
                                                       Information Technology.

Bo Friberg. Born 1957.                                 Lisbeth Gustafsson. Born 1947.                          Inger Holmström. Born 1948.
Executive Vice President and Chief Financial Officer   Senior Vice President, Sales.                           Senior Vice President, Corporate Communications.
since November 2002. Executive Committee member.                                                               Associate member of the Executive Committee.

68   Posten Annual Report 2002, Directors’ Report
Patrik Högberg. Born 1968.                              Maivor Isaksson. Born 1948.                     Agneta Markgren. Born 1955.
Senior Vice President, Cashier Service.                 Senior Vice President, Service Network.         Senior Vice President, Market Communication.

Bertil Nilsson. Born 1950.                              Ingemar Persson. Born 1951.                     Agne Pettersson. Born 1953.
Senior Vice President, Production since October 2002.   Executive Vice President. Executive Committee   Executive Vice President. Executive Committee
                                                        member.                                         member.

Björn Sjöström. Born 1958.                              Pär Thunström. Born 1957.                       Lars Vesterlund. Born 1946.
Senior Vice President, eCommerce & Logistics.           Senior Vice President, Private Services.        Senior Vice President, International Mail.

                                                                                                               Directors’ Report, Posten Annual Report 2002   69
Five-year summary

                                                                                                      2002     20012    20002    19992    19982
Net sales                                                                                            23,632   21,668   21,813   21,475   21,272
Adjusted operating earnings                                                                           –703     –150       192       31      360
Provisions/utilizations                                                                                 732      293   –2,148   –4,098
Capital gain, Postfastigheter                                                                                  1,277                       440
Operating earnings                                                                                      29     1,420   –1,956   –4,067     800
Net earnings                                                                                          –788     2,994   –1,525   –2,803     649
From operating activities                                                                                45    1,664      993    –136         1

From investing activities                                                                            –1,791    3,520   –1,167   –1,438        1

  thereof investments in tangible fixed assets                                                        1,303    –844    –1,008    –999         1

Cash flow before financing activities                                                                –1,746    5,184    –174         1        1

Current assets                                                                                       13,863   17,311   16,056   14,573   13,848
Working capital                                                                                       4,621    7,145    5,723    6,906    8,692
Fixed assets                                                                                          5,942    5,935    9,072    8,278    7,731
  thereof tangible fixed assets                                                                       3,742    3,171    4,688    4,641    4,752
Provisions                                                                                            4,095    5,492    7,969    4,299    1,702
Liquid assets                                                                                         4,169    7,077    3,357    2,933    2,683
Equity                                                                                                2,587    3,299      –57    1,777    4,772

Operating margin                                                                                        0.1      6.5     –9.0    –18.9      3.8
Adjusted operating margin                                                                               neg     –0.7      0.9      0.1      1.7
Return on Capital Employed, ROCE                                                                        3.7     25.7    –28.5    –51.3     13.1
Return on Adjusted Capital Employed, RACE                                                               neg      1.3      5.6      1.3      7.1
Return on Equity, ROE                                                                                   neg    136.6      neg      neg     14.7
Equity-assets ratio                                                                                    18.8     19.1      neg     12.2     34.5

Average number of employees                                                                          39,554   39,466   39,335   39,381   39,475
Employees, December 31                                                                               48,144   45,104   47,426   47,200   48,798
Net sales per employee, SEK thousands                                                                   597      549      554      545      539
Number of sick days per employee                                                                       35.0     33.3     30.9     26.9     23.9
VIP index                                                                                                60       59        1        1        1

CO2 emissions per mailpiece, grams                                                                     33.6     32.9     32.9        1        1

Customer satisfaction index (CSI)                                                                       61       63       61       62       59
  Historical statistics unavailable.
  Pro forma
  For this year’s cash flow. liquid assets have been adjusted for “storage of cash” (see note 32).

70     Posten Annual Report 2002

Average number of employees                                          Pro forma
The total number of paid employee hours divided by the               Posten excluding Postgirot.
standard number of hours for a full-time employee.
                                                                     Adjusted operating earnings
Customer Satisfaction Index (CSI)                                    Operating earnings adjusted for items not included in the
CSI is a performance indicator that reflects achievement relating    operating activities, such as Provisions/Reversals and capital
to the customer satisfaction target. 2,000 measurements are          gains on real estate sales.
regularly conducted among business and consumer customers
throughout the year. Statistical information is compiled             Working capital
quarterly. Fourth-quarter results are counted as full-year results   Total assets less non-interest-bearing liabilities or the sum
and measured against articulated targets. Units responsible          of interest-bearing liabilities, pension provisions and equity
for providing customer services set and follow up goals using        (including minority equity).
the CSI Index. The method yields information about key
improvements that will enhance customer satisfaction. The            Operating margin
results also provide an issue-specific scorecard as well as a        (EBIT margin) Operating earnings in relation to net sales.
holistic assessment of service quality.
                                                                     Adjusted operating margin
VIP Index                                                            Adjusted operating earnings in relation to net sales.
VIP is a performance indicator that measures achievement                 This measurement shows the operating margin before
relating to the employee dedication target. Measurements are         financial items in operating activities disregarding the effect
performed regularly throughout the year via surveys. At least        of items affecting comparability in the form of provisions and
once a year, employees are provided the opportunity to evaluate      utilizations for structural measures and from larger capital gains
their immediate supervisor and advancement horizons as well as       on the sale of fixed assets.
to rate their overall work situation.
                                                                     Return on Capital Employed, ROCE
                                                                     Operating earnings plus financial income in relation to average
                                                                     working capital.

                                                                     Return on Adjusted Capital Employed, RACE
                                                                     Adjusted operating earnings plus financial income in relation
                                                                     to average working capital. It is an expression of the return the
                                                                     business is realizing on capital employed disregarding the effect
                                                                     of items affecting comparability.

                                                                     Return on Equity, ROE
                                                                     Net earnings (after-tax earnings) in relation to average equity.

                                                                     Equity-assets ratio
                                                                     Equity plus the minority’s share of equity in relation to current
                                                                     assets at the end of the period.

                                                                                                               Posten Annual Report 2002   71

BMA                                              reliable and secure as within Sweden. To           making it one of the largest certifications in

                                                                                                                                                      Production: Posten Sverige AB in cooperation with Askus. Photos: Peter Jönsson, Håkan Lindgren, Stewen Quigley et al. Printer: Arkpressen in Västerås, Sweden 2003.
Bulk mail advertising (BMA) comprises            promote this partnership with DPD, Posten          Europe.
unaddressed mailpieces delivered dutifully       has rebranded Företagspaket, a strong              ISO 14001
by Posten’s letter carriers along with other     Swedish business parcel brand.                     An environmental management system that
regular mail. Though BMA reaches most            EMAS                                               complies with the international environmental
households it is also remarkably reliable in     Stands for Eco Management and Audit                standard ISO 14001 is a prestigious
terms of reaching target audiences. Posten       Scheme. A voluntary European Commission            endorsement of the environmental effort.
offers BMA Mosaic, whereby mailings are          initiative, it comprises a complete                Posten’s product and service development
delivered to selected target groups according    environmental management system,                   activities include environmental analysis and
to, for instance, gender, as well as zip-code-   environmental audits, environmental                assurance plans, where internal and external
specific mailings.                               reporting, etc.                                    environmental requirements are analyzed
BREVe and eBrev                                  ePostboxen                                         and enforced. Posten also participates in
BREVe is a service whereby Posten scans          ePostboxen is like an ordinary mailbox for         environmental networks to spread awareness
and converts inbound physical mail to            ordinary mail, apart from the fact that mail is    about our environmental efforts and to gain
electronic images and files. The information     electronically delivered to the customer’s         access to valuable knowledge and results
is then transmitted in a fully digitalized       computer. Bills, accounts statements and day       provided by others.
format for further processing in the             care information – the customer can select         Medium Term Note (MTN)
customer’s legacy accounting or other            electronic or traditional delivery.                MTN is a bond loan, Posten’s issuance of
administrative systems. The eBrev service                                                           corporate bonds.
enables customers to electronically transmit
                                                 eSkicka is the name of the message-                PALL.ETT
bulk mailings to Posten, which prints,
                                                 forwarding service Posten sells to sender          PALL.ETT is a service whereby customers
inserts, affixes postage and delivers the
                                                 organizations. eSkicka enables these               can ship a pallet weighing up to 700 kg
                                                 organizations to electronically send pay slips,    within Sweden and to about 30 key trade
Consignment                                      bills, catalogs and other messages to Posten,      partners. The shipping document’s barcode
A service whereby letters and parcels are        which forwards the mail to recipients              is unique for each pallet, which is shipped
collectively mailed to a national postal         according to their ePostbox preferences.           within a closed system, with a single
operator in another country. The operator        Customers can therefore improve the way            provider and no intermediaries, to the
then forwards the mail items to domestic         they manage their mail.                            recipient.
addresses, giving the items a national touch.First-class mail                                       Performance evaluations
Crossdocking                                 Formerly A-post. Domestic first-class mail is          Employers within Posten Group are
A service whereby Posten accepts goods       delivered anywhere in Sweden on the first              responsible for communicating business targets
from various domestic and international      weekday (Monday–Friday) after acceptance.              and requirements for Posten’s long-term
suppliers on behalf of a customer. Posten    International first-class mail should be affixed       growth. Performance evaluations provide
separates, packages and sends the goods to   with a blue label or marked “Prioritaire” and          visibility into individual employees’
the intended recipients in addition to       may be used by businesses, organizations               skills-enhancement needs. Performance
handling administration, such as billing.    and consumer customers to send messages,               evaluations, held by immediate supervisors,
DM                                           printed matter and light goods to recipients           are systematically conducted and followed up
DM, direct mail, is an all-encompassing term around the world.                                      at least once a year.
for customer mailings and serves as a media Innight Forwarding                                      Periodicals
channel within the direct marketing          A contractually binding service whereby                Reduced rate for publications registered in
discipline. Direct mail comprises targeted   goods are delivered to a recipient before the          Posten’s publication register. The publication
direct mail (TDM) and bulk mail advertising start of the business day. Goods may be shipped         must be issued publication authorization by
(BMA). Businesses and households are both from one or more senders to one or more                   the Swedish Patent and Registration Office,
intended recipients for this class of mail.  recipients according to a transportation               which requires a known office of publication
DPD                                          schedule.                                              and must be published at least four times a
Posten drives value creation for its customers   ISO 9001                                           year. Certain restrictions apply to advertising
by combining conventional and electronic         ISO stands for the International Organization      content.
postal communications. Posten is part of         for Standardization. It is a system for managing
Europe’s largest parcel network through its      and structuring day-to-day operating activities.
                                                                                                    Targeted direct mail includes all advertising
strategic alliance with Direct Parcel            ISO certification demonstrates adherence to
                                                                                                    mailings bearing the sender’s address. TDM
Distribution (DPD), owned by the French          an international standard for systematic
                                                                                                    reaches most households and can be targeted
postal service La Poste. Sending parcels         quality efforts. In 1999, Posten’s entire letter
                                                                                                    to specific demographic groups.
within Europe is therefore equally fast,         mail operation achieved ISO 9001 certification,

72   Posten Annual Report 2002
Posten was founded in 1636, during the reign of Queen Kristina. Then,
messengers known as postal peasants relayed correspondence along trails
and public roads.
  During the first 200 years of Posten’s existence, one post office served the
city of Stockholm. But this repository began to buckle under the weight of a
growing, increasingly literate population.
  An idea unfolded. Adopting a practice used abroad, small businesses were
designated as mail drops – essentially the forerunners of today’s network of
postal partners. The number of mail drops peaked in 1910 at 24.
  Rural letter carriers began delivering mail in areas where post stations
weren’t a viable option. Other postal agents, so-called “stationed rural
carriers,” accepted and presented mail in their homes.
  The general store provided to many rural communities a similar array of
services to those offered by a post station. Here customers could pick up their
magazines, newspapers, letters, parcels, registered mail, money orders and
payments as well as subscribe to periodicals and pay taxes and fire insurance
  The new service network we built in 2001 and 2002 bears striking
similarities to its historical counterpart. By partnering with highly trafficked
retail outlets, such as supermarkets and gas stations (today’s general stores),
we are saving customers an extra trip to the post office.
  Now, as then, we have many convenient locations and extended hours
for busy lifestyles. We are meeting customers’ mailing needs at all points
between From: and To: Yesterday, today and tomorrow.
Posten AB (publ)                  Posten’s Contact Center
SE-105 00 Stockholm               Box 1840
Visiting address:                 SE-171 29 Solna, Sweden
Terminalvägen 14, Solna, Sweden   Consumer +46 8 23 22 21
Telephone +46 8 781 10 00         Business   +46 8 23 22 20
Corporate identity 556128-6559    e-mail                      

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