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Semi-annual report 2003

Total return of 6.9 percent Jan-June 2003.

The equity market rebound and the fall in global bond yields has been positive for the absolute return of the Third Swedish National Pension Fund (AP3) for the first six months of this year. Total return for the period amounted to 6.9 per cent after expenses.

The market value of AP3’s assets stood at SEK 129.7 billion at mid-year, compared to SEK 120.2 billion at end-2002. The Fund received a net inflow of capital of SEK 1.4 billion during the period.

With the exception of real estate, all assets in the portfolio have generated a positive absolute return during the Jan to June period. The best asset class has been Swedish equities which generated a positive absolute return of 10.6 percent.

The Fund’s foreign currency exposure was 10.4 percent of the portfolio at mid-year, compared to 8.3 per cent at the beginning of the year.

Since the start of AP3’s new asset management mandate (Jan 1, 2001) the Fund’s accumulated absolute return now amounts to -11 per cent. During this period AP3 has outperformed its benchmark by an accumulated 0.8 percentage points. During the first six months of 2003 the Fund outperformed its benchmark by 0.1 per cent.

– I am content with the fact that the Fund continues to generate a positive active return in relation to its benchmark, says Tomas Nicolin CEO of AP3.

– AP3’s reference portfolio consists of 54.5 per cent equities, which is less than the other AP-funds. In an environment where equities outperform other assets, AP3’s portfolio will therefore show a lower absolute return than the other funds. But this is a deliberate choice. Our board has preferred a portfolio mix with a lower absolute risk, concludes Tomas Nicolin.