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, 2004
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 REPORTS OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
DECEMBER 31, 2004 AND 2003
ERICSSON CAPITAL ACCUMULATION AND SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
| Page | ||
| 3-4 | ||
| Financial Statements: |
||
| Statements of Net Assets Available for Benefits as of December 31, 2004 and 2003 |
5 | |
| Statement of Changes in Net Assets Available for Benefits for the year ended December 31, 2004 |
6 | |
| 7-11 | ||
| Supplemental Schedule (Note A): |
||
| Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes At End of Year |
12 | |
| 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:
We have audited the accompanying statement of net assets available for benefits of the Ericsson Capital Accumulation and Savings Plan (the “Plan”) as of December 31, 2004, and the related statement of changes in net assets available for benefits for the year then ended. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2004, and the changes in net assets available for benefits for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Our audit was performed for the purpose of forming an opinion on the 2004 basic financial statements taken as a whole. The supplemental schedules of the Plan are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are 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. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the 2004 basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the 2004 basic financial statements taken as a whole.
| /s/ BDO Seidman, LLP |
| Dallas, Texas June 3, 2005 |
3
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.
| /s/ PricewaterhouseCoopers LLP |
| Dallas, Texas June 25, 2004 |
4
ERICSSON CAPITAL ACCUMULATION AND SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2004 AND 2003
(Thousands of dollars)
| 2004 |
2003 |
|||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 1,400 | $ | 1,373 | ||||
| Investments at fair value: |
||||||||
| LM Ericsson Telephone Company, ADR, Class B |
158,777 | * | 109,385 | * | ||||
| MFO Europacific Growth Fund |
30,698 | * | 28,939 | * | ||||
| MFO Mass Investments Growth Stock Fund |
— | 29,069 | * | |||||
| Janus Risk Managed Fund |
29,457 | * | — | |||||
| Washington Mutual Investors Fund |
29,267 | * | 29,222 | * | ||||
| MFO/ SEI Stable Asset Corporate Bond Fund |
— | 71,773 | * | |||||
| JPMorgan Stable Value Fund |
64,562 | * | — | |||||
| MFB Collective Daily Stock Index Fund |
— | 37,954 | * | |||||
| SSgA S&P500 Fund |
39,350 | * | — | |||||
| PIMCO Total Return Fund |
26,044 | * | 26,935 | * | ||||
| Miscellaneous Stock Investments |
— | 2,127 | ||||||
| JPMorgan Invest Self Directed Account |
3,859 | — | ||||||
| Morgan Stanley Instl Fund Mid Cap |
32,600 | * | 31,045 | * | ||||
| Strong Equity Funds Inc Advisor Small Cap Fund |
44,451 | * | 39,607 | * | ||||
| Nasdaq 100 Fund |
— | 14 | ||||||
| Pending Trades |
— | (4 | ) | |||||
| Participant Loans |
2,733 | 3,455 | ||||||
| Total investments |
461,798 | 409,521 | ||||||
| Receivables: |
||||||||
| Employee & Employer’s contributions receivable |
||||||||
| Employees’ contributions receivable |
— | 757 | ||||||
| Employer’s contributions receivable |
309 | 699 | ||||||
| Total employer and employee contributions receivable |
309 | 1,456 | ||||||
| Dividend and other receivables |
0 | 73 | ||||||
| Total receivable |
309 | 1,529 | ||||||
| Net assets available for benefits |
$ | 463,507 | $ | 412,423 | ||||
| * | Denotes investments that represent 5% or more of net assets available for benefits |
5
ERICSSON CAPITAL ACCUMULATION AND SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2004
(Thousands of dollars)
| Changes in net assets attributed to: |
||||
| Investment income: |
||||
| Net appreciation in fair value of investments |
$ | 103,481 | ||
| Interest |
2,527 | |||
| Dividends |
8,127 | |||
| Contributions: |
||||
| Participants |
21,262 | |||
| Employer |
12,763 | |||
| Other |
528 | |||
| Transfer to Sony Ericsson 401(k) and Savings Plan |
(45,011 | ) | ||
| Benefits paid to participants |
(52,593 | ) | ||
| Net increase |
51,084 | |||
| Net assets available for benefits: |
||||
| Beginning of year |
412,423 | |||
| End of year |
$ | 463,507 | ||
6
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 was the Plan trustee (the “Trustee”) until August 31, 2004 during the year and JP Morgan Chase Bank Investor Services is the Plan Trustee since September 1, 2004. 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.
Hewitt Associates LLC was the record keeper for the Plan until August 31, 2004 during the year and JP Morgan Retirement Plan Services is the record keeper for the Plan since September 1, 2004. Sony Ericsson Inc. was participating in the Plan until August 31, 2004 and on September 1, 2004 Sony Ericsson established its own plan. Sony Ericsson’s participant balances were transferred to its own plan. Effective September 1, 2004 the Plan is a single employer plan. Until August 31, 2004 the Plan was multiemployer plan.
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 JP Morgan Invest LLC. Employees interested in SDA can contact JP Morgan Invest LLC or visit JPMorganInvest.com or Retireonline.com 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
7
ERICSSON CAPITAL ACCUMULATION AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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.
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.
Contributions and Contribution Receivables
Contributions are recorded on the accrual method of accounting. Contributions receivable are obligations arising from amounts owed to the Plan from Participants or the Employer that have not been included in the Plan’s investments at year end. Contribution receivables are recorded at cost, which approximates their fair value. Contribution receivables were $309,220 and $1,455,731 at December 2004 and 2003 respectively.
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 (depreciation) 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 or 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. Participants’ savings contributions (Note 3), and the earnings thereon, are also fully and immediately vested.
8
ERICSSON CAPITAL ACCUMULATION AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Total forfeitures, which were used to reduce future employer contributions, were approximately $657 at December 31, 2004. 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.
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 1 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, 2004 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, 2004 there were no benefit claims which had been processed and approved for payment but not yet paid. At JP Morgan Chase, benefit payments are determined, paid and taxed to participants based upon the date the check is cut. There were 12 benefit claims for a total of $634,087 which had been processed and approved for payment but not yet paid as of December 31, 2003. For financial statement purpose benefit payments are recorded 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 immediately upon hire. At December 31, 2004 and 2003, the number of active participants were 3,240 and 4,345 respectively.
Eligible Participants may contribute on a pretax basis any whole percentage from 1% to 50% of their eligible earnings up to current IRS limits into the Capital Accumulation 401(k) portion of the Plan; participants may also contribute any whole percentage from 1% to 5% of their eligible
9
ERICSSON CAPITAL ACCUMULATION AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
earnings to the Savings portion on an after-tax basis. The Company contributes 3% of a Participant’s eligible pay for employees who are not actively participating in the Defined Benefit Plan, 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 employee and employer contributions are 100% vested immediately.
Participants may change their percentage payroll deduction elections at anytime during the year using the voice response system or the web-based JP Morgan’s “Retireonline” system. Participants may change investment percentages between funds at any time during the year. Participants may transfer existing fund balances to other available investment options at any time during the year. There are no restrictions on the transfer of investment balances from L. M. Ericsson shares of Common Stock to other investment funds.
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 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, 2004 was as follows (amounts in thousands):
| Company Stock (LM Ericsson Telephone Company) |
$ | 80,544 | ||
| Common Stock, mutual and index funds |
23,417 | |||
| Bond mutual funds |
(480 | ) | ||
| $ | 103,481 | |||
| 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 $18,364,215 and sales of $34,865,648 of the Company’s stock during the year ended December 31, 2004.
Certain plan investments are shares of mutual funds managed by The Northern Trust Company and its affiliates or JP Morgan Chase Bank and its affiliates. These institutions served or are currently serving 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 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.
10
ERICSSON CAPITAL ACCUMULATION AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
The Plan as amended and restated effective as of January 1, 2002, has been amended three times with amendments 1, 2 and 3. However, management believes the Plan remains qualified under the applicable sections of the IRC and the Employee Retirement Income Security Act of 1974.
11
ERICSSON CAPITAL ACCUMULATION AND SAVINGS PLAN
SCHEDULE H, LINE 4i – SCHEDULE OF ASSETS HELD FOR INVESTMENT
PURPOSES AT END OF YEAR
DECEMBER 31, 2004
| EIN: 06-1119960 Plan Number: 006 | |||
| Name and Issuer and Description |
Current Value | ||
| Common Stock |
|||
| LM Ericsson Telephone Company (a) |
$ | 158,777,278 | |
| Miscellaneous Self Directed Stock Investments |
3,859,511 | ||
| $ | 162,636,789 | ||
| Value of Interest in Registered Investment Companies |
|||
| MFO Europacific Growth Fund |
$ | 30,698,102 | |
| Janus Risk Managed |
29,456,981 | ||
| Washington Mutual Investor Fund |
29,267,252 | ||
| JP Morgan Stable Value (a) |
64,562,033 | ||
| SSgA S&P 500 Fund |
39,349,655 | ||
| Pimco Total Return Bond Fund |
26,043,719 | ||
| Morgan Stanley Instl Fund Mid Cap Fund |
32,600,214 | ||
| Strong Equity Fund Inc. Advisor Small |
44,450,834 | ||
| 296,428,791 | |||
| Participants Loan Account (5.0% - 10.5% mature through 2020) (a) |
2,732,507 | ||
| Total Investments |
$ | 461,798,086 | |
| (a) | Indicates a party-in-interest. |
Note: Cost is not required for participant-directed investments
12
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: 06/27/05
| by |
/s/ John Moore | |
| John Moore | ||
| Vice President and General Counsel | ||
| Administrative Committee Member | ||
EXHIBIT INDEX
Exhibit No.
23.1 Consent of Independent Accountants – Filed herewith
23.2 Consent of Independent Accountants – Filed herewith