Ericsson Capital Accumalation and Savings Plan

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 11-K

 


 

ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2003

 


 

ERICSSON CAPITAL ACCUMULATION AND SAVINGS PLAN

(Title of Plan)

 


 

ERICSSON INC

Formerly Anaconda-Ericsson Inc. and Ericsson North America Inc.

 


 

6300 Legacy Drive

Plano, TX 75024

(Name and address of principal executive offices of the employer sponsoring the Plan)

 


 

TELFONAKTIEBOLAGET LM ERICSSON

(Exact name of Issuer as specified in its Charter)

 


 

LM ERICSSON TELEPHONE COMPANY

(Translation of Issuer’s Name into English)

 


 

Kingdom of Sweden

(Jurisdiction of Incorporation)

 

(Telefonplan, S-126-25 Stockholm Sweden)

(Name and address of principal executive offices of the issuer of the securities)

 



Ericsson Capital Accumulation and Savings Plan

 

Financial Statements, Supplemental Schedule and

Report of Independent Auditor

December 31, 2003 and 2002

 


Ericsson Capital Accumulation and Savings Plan

Index to Financial Statements and Supplemental Schedule


 

     Page(s)

Report of Independent Registered Public Accounting Firm

   1

Financial Statements

    

Statement of Net Assets Available for Benefits as of December 31, 2003 and 2002

   2

Statement of Changes in Net Assets Available for Benefits for the year ended December 31, 2003

   3

Notes to Financial Statements

   4-7

Supplemental Schedule (Note A)

    

Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes (At End of Year)

   8

 

Note A

  —        Other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under ERISA not included herein have been omitted as there were no transactions of the type required to be disclosed in such schedules.

 


Report of Independent Registered Public Accounting Firm

 

To the Participants and Administrative

    Committee of the Ericsson Capital

    Accumulation and Savings Plan:

 

In our opinion, the accompanying statement of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Ericsson Capital Accumulation and Savings Plan (the “Plan”) at December 31, 2003 and 2002, and the changes in net assets available for benefits for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes at end of year is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

 

 

LOGO

Dallas, Texas

June 25, 2004

 

1


Ericsson Capital Accumulation and Savings Plan

Statement of Net Assets Available for Benefits

December 31, 2003 and 2002

(thousands of dollars)


 

     2003

    2002

 

Assets

                

Cash and cash equivalents

                

Cash and cash equivalents (non-interest bearing)

   $ 310     $ 304  

Cash and cash equivalents (interest bearing)

     1,063       1,499  
    


 


Total cash and cash equivalents

     1,373       1,803  
    


 


Investments at fair value

                

LM Ericsson Telephone Company, ADR Class B

     109,385 *     39,546 *

MFO Europacific Growth Fund

     28,939 *     21,507 *

MFO Mass Investments Growth Stock Fund

     29,069 *     20,103 *

Washington Mutual Investors Fund

     29,222 *     21,866 *

MFO/SEI Stable Asset Corporate Bond Fund

     71,773 *     71,373 *

MFB Collective Daily Stock Index Fund

     37,954 *     27,557 *

Pimco Low/Duration Corporation Bond Fund

     26,935 *     26,466 *

Miscellaneous Self Directed Stock Investments

     2,127       1,049  

Morgan Stanley Instl Fund Mid Cap Fund

     31,045 *     19,975 *

PBHG Mid Cap Value Fund

     —         1  

Strong Equity Funds Inc. Advisor Small

     39,607 *     26,903 *

Wasatch Small Cap Growth Fund

     —         4  

Nasdaq 100 Fund

     14       2  

Pending trades

     (4 )     31  

Ericsson Savings Plan Loan Asset

     3,455       3,589  
    


 


Total investments

     409,521       279,972  
    


 


Receivables:

                

Employer and employee contributions receivable

                

Employee’s contributions receivable

     757       29  

Employer’s contributions receivable

     699       142  
    


 


Total employer and employee contributions receivable

     1,456       171  
    


 


Dividend and other receivables

     73       99  
    


 


Total receivable

     2,985       270  
    


 


Net assets available for benefits

   $ 412,423     $ 282,045  
    


 


 

* Denotes investments that represent 5% or more of net assets available for benefits.

 

The accompanying notes are an integral part of these financial statements.

 

2


Ericsson Capital Accumulation and Savings Plan

Statement of Changes in Net Assets Available for Benefits

Year Ended December 31, 2003

(thousands of dollars)


 

Changes in net assets attributed to:

        

Investment income:

        

Net appreciation in fair value of investments (Note 4)

   $ 117,560  

Interest

     4,131  

Dividends

     1,342  

Contributions:

        

Participants

     28,955  

Employer

     16,116  

Benefits paid to participants

     (36,888 )

Other changes in net assets

     (838 )
    


Net increase

     130,378  

Net assets available for benefits:

        

Beginning of year

     282,045  
    


End of year

   $ 412,423  
    


 

The accompanying notes are an integral part of these financial statements.

 

3


Ericsson Capital Accumulation and Savings Plan

Notes to Financial Statements


 

1. The Plan

 

The following description of the Ericsson Capital Accumulation and Savings Plan (“The Plan”) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provision. The Plan was created by action of the board of directors of Ericsson Inc. (the “Company” or “Ericsson”) on May 27, 1983, effective July 1, 1983. The Plan is a defined contribution plan and is administered by an Administrative Committee (the “Committee”).

 

Northern Trust Company is the Plan trustee (the “Trustee”). The Trustee receives all participating employee (the “Participant”) and Company contributions to the Plan and holds, manages, and invests the same in accordance with the investment election of each participating employee, the terms and conditions of the Plan, and the instructions and directions of the Committee.

 

Participant contributions are made to the Trustee for investment each month. There are currently eleven separate funds to which Participants may direct their investments in addition to a self-directed brokerage account (“SDA”). The SDA allows access to a wide variety of mutual funds, stocks and bonds. Brokerage services are provided through Northern Trust Securities, Inc. (“NTSI”). Employees interested in the SDA can contact NTSI to request an enrollment kit which includes application information. Participants can choose these options for their contributions as well as the Company matched contributions.

 

2. Summary of Significant Accounting Policies

 

Basis of Accounting

 

The Plan’s financial statements are presented using the accrual method of accounting in conformity with generally accepted accounting principles.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

 

Risks and Uncertainties

 

The Plan provides for various investment options of specified registered investment companies. The underlying investments held by the registered investment companies may include stocks, bonds, fixed income securities, mutual funds and other investment securities. Such investments are exposed to various risks, such as interest rate, market and credit risk. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in the values of investment securities in the near term could materially affect Participants’ account balances and the amounts reported in the statement of net assets available for benefits.

 

4


Ericsson Capital Accumulation and Savings Plan

Notes to Financial Statements


 

Cash and Cash Equivalents

 

For purposes of the statement of net assets available for benefits, the Plan considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

 

Valuation of Investments

 

The Plan’s investments are carried at fair value as determined by closing market prices on the last day of the Plan year.

 

Security Transactions and Investment Income

 

The Plan presents in the statement of changes in net assets available for benefits the net appreciation in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments. Realized gains or losses on security transactions are determined on the trade date (the date the order to buy or sell is executed) as the difference between proceeds received and historical cost. Unrealized gains or losses represent the net change in market value of investments held during the year which are presented at fair value, with adjustments for investments sold.

 

Dividend income is accrued on the ex-dividend date. Interest income from other investments is accrued as earned.

 

Upon withdrawal from the Plan, Participants invested in Company stock may elect to receive cash, Company stock. Whenever a Participant receives stock, the difference between the cost of such stock and the market value on the applicable valuation date is reflected as a realized gain or loss of the Plan. Gains or losses are also realized whenever stocks are sold in satisfaction of the Participants’ election to take cash upon withdrawal.

 

Forfeitures

 

Company and Participants’ capital accumulation contributions (Note 3), and the earnings thereon, are fully and immediately vested. Company and participants’ savings contributions (Note 3), and the earnings thereon, are also fully and immediately vested.

 

Total forfeitures, which were used to reduce future employer contributions, were approximately $5,256.16 at December 31, 2002. There were no forfeitures in 2003.

 

Expenses of the Plan

 

All costs and expenses of the Plan and its administration, including all fees and expenses of the Trustee, are paid by the Company. All taxes, commissions and other charges on purchases, sales and transfers of Company stock and other securities are paid by the Trustee out of the fund or account involved in such purchase or sale.

 

Administration

 

The Committee is responsible for the general administration of the Plan and for carrying out its provisions. Members of the Committee serve without compensation from the Plan.

 

5


Ericsson Capital Accumulation and Savings Plan

Notes to Financial Statements


 

Loans

 

Loans may be granted to participants in an amount not to exceed 50% of the participant’s contribution account. The maximum loan amount is $50,000 minus the participant’s highest loan balance (if any) during the previous 12 months; the minimum loan amount is $1,000. Loans may be repaid through payroll deductions over a selected period between 12 months and 60 months. An employee is allowed only one loan at a time. If an employee misses payments, he/she will be required to make up the payments and accrued interest immediately. Failure to keep the loan current could result in the loan being classified as a ‘deemed distribution’, which is taxable income to the employee. Interest on the loan is set at the time of issuance, and the rate is the prime rate plus 1%. At December 31, 2003 interest rates range from 5-10.5%. Loans are considered a directed investment of participant accounts and all repayments of principal and interest are invested among investment funds in accordance with the participant’s current investment direction.

 

Termination Priorities

 

The Company reserves the right, by action of the board, to amend, suspend or terminate the Plan. In the event that the Plan is terminated or the Company discontinues its contributions, all amounts allocated to the Participants’ accounts and all assets held under the Plan will be held for distribution to the Participants.

 

Benefit Payments

 

At December 31, 2003, there were 12 benefit claims for a total amount of $634,087 which had been processed and approved for payment but not yet paid. There were no such benefit claims as of December 31, 2002. For financial statement purposes benefit payments are expensed when paid.

 

3. Plan Participation

 

The Company offers the Plan for eligible U.S. employees to which qualified employees may elect to contribute stated percentages of eligible pay. Participation by eligible employees is voluntary. All eligible employees may participate in the Plan the first day of any calendar quarter following the date they become eligible. At December 31, 2003 and 2002, the number of active participants was 4,345 and 6,226, respectively.

 

Eligible Participants may contribute on a pretax basis any whole percentage from 1% to 13% of their eligible earnings into the Capital Accumulation 401(k) portion of the Plan; participants may also contribute any whole percentage from 1% to 5% of their eligible earnings to the Savings portion on an after-tax basis. The Company contributes 1% of a Participant’s eligible pay, whether or not the employee contributes. The Company also matches 100% of the first 3% and an additional 50% on the 4th and 5th % contributed. The match may be applied to either the 401(k) contribution or to the after-tax savings contribution, or to a combination of both. As of January 1, 2001, all contributions are 100% vested immediately.

 

Participants may change their percentage payroll deduction elections or company match at any time during the year using the voice response system or the web-based Northern Trust Retirement passport system. Participants may change investment percentages between funds at any time during the year, up to six times per calendar year. Participants may transfer existing fund balances to other available investment options at any time during the year with a limit of six transfers per calendar year. There are no restrictions on the transfer of investment balances from L.M. Ericsson shares of Common Stock to other investment funds.

 

6


Ericsson Capital Accumulation and Savings Plan

Notes to Financial Statements


 

Participants may, at any time, request an in-service withdrawal in the form of a normal or hardship withdrawal. Normal withdrawals may be requested from the Employee Savings account and Company Savings account for money that has been in the Plan for two full calendar years. Hardship withdrawals must meet certain requirements including approval by the Committee.

 

4. Investments

 

The net appreciation in fair value of investments for the year ended December 31, 2003 was as follows (amounts in thousands):

 

Company stock (LM Ericsson Telephone Company)

   $ 146,651  

Common stock, mutual and index funds

     (2,243 )

Bond mutual funds

     (26,848 )
    


     $ 117,560  
    


 

5. Party-in-Interest Transactions

 

Certain plan investments are Common Stock shares of LM Ericsson Telephone Company, a related party of Ericsson, Inc. Ericsson, Inc. sponsors the plan; therefore, this investment qualifies as party-in-interest transactions. The Plan recorded purchases of $11,815,867 and sales of $8,677,827 of the Company’s stock during the year ended December 31, 2003.

 

Certain plan investments are shares of mutual funds managed by The Northern Trust Company or its affiliates. This institution serves as trustee to the Plan and, therefore, these investments qualify as party-in-interest transactions.

 

6. Tax Status of the Plan

 

Management believes that the Plan is qualified under section 401(a) of the Internal Revenue Code (“IRC”) and therefore, the trust is exempt from taxation under section 501(a). The Internal Revenue Service granted a favorable letter of determination to the Plan covering its first four amendments on September 13, 2002. Generally, contributions to a qualified plan are deductible by the Company when made, earnings of the trust are tax exempt and participants are not taxed on their benefits until withdrawn from the Plan.

 

The Plan has been amended twice since receiving the determination letter. Amendment Number 5 was executed on December 30, 2002 and effective on January 1, 2003 and Amendment Number 6 was executed on February 19, 2004 and effective on April 1, 2004. However, management believes the Plan remains qualified under the applicable sections of the IRC and the Employee Retirement Income Security Act of 1974.

 

7


Ericsson Capital Accumulation and Savings Plan

Schedule H, line 4i – Schedule of Assets (At End of Year)

December 31, 2003


 

Name and Issuer and Description


  

Current

Value


 

Company Stock Common

        

LM Ericsson Telephone Company

   $ 109,385,434  

Miscellaneous Self Directed Stock Investments

     2,127,054  
    


     $ 111,512,488  
    


Value of Interest in Registered Investment Companies

        

MFO Europacific Growth Fund

   $ 28,938,774  

MFO Mass Investments Growth Stock Fund

     29,068,610  

Washington Mutual Investors Fund

     29,222,343  

MFO/SEI Stable Asset Corporate Bond Fund

     71,772,629  

MFB Collective Daily Stock Index Fund

     37,954,122  

Pimco Low/Duration Corporation Bond Fund

     26,935,449  

Morgan Stanley Instl Fund Mid Cap Fund

     31,045,022  

Strong Equity Funds Inc. Advisor Small

     39,607,488  

Nasdaq 100 Fund

     13,673  

Pending Trades

     (4,496 )
    


       294,553,614  
    


Participants Loan Account (5.0% - 10.5% mature through 2020)

     3,455,395  
    


Total investments

   $ 409,521,497  
    


 

The information in this schedule has been certified as to its completeness and accuracy by the Trustee

 

8


SIGNATURES

 

The Plan. Pursuant to the requirements of the Securities and Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Ericsson Capital Accumulation and savings Plan

 

Date: 06/29/04

 

John Moore


John Moore

Vice President and General Counsel

Administrative Committee Member


EXHIBIT INDEX

 

Exhibit No.

 

23.1 Consent of Independent Auditors