Offering to Acquire Shares in Hakon Invest AB (Publ) Contents Terms and Conditions in Brief

This document is a translation of the Swedish original prospectus. In the event of any differences between this translation and the Swedish original, the latter shall prevail.

Offering to acquire shares in Hakon Invest AB (publ) Contents Terms and conditions in brief

1 Hakon Invest in brief SELLING PRICE 5 Offering to acquire shares in Hakon Invest Expected to be set in the interval SEK 68–77 per share. The selling price to the 6 Terms, conditions and instructions public will not exceed SEK 77 per share. 9 Background and reasons Application period for the public November 23 – December 2, 2005 10 President’s message Application period for 12 Hakon Invest institutional investors November 23 – December 5, 2005 23 Hakon Invest’s holdings and financial management Setting of selling price On or about December 6, 2005 24 ICA AB Payment date for the public December 8, 2005 32 ICA Sverige Expected first day for trading 37 ICA Norge on Stockholm Stock Exchange O-List On or about December 8, 2005 40 ICA Meny 42 ICA Banken FINANCIAL INFORMATION 44 Etos FROM HAKON INVEST 46 Netto Year-end report January–December 2005 February 27, 2006 48 Rimi Baltic Annual General Meeting May 10, 2006 51 Financial overview ICA AB 54 Forma Publishing Group AB OTHER 58 Financial overview Forma ISIN code SE0000652216 59 Financial Management Trading symbol Stockholm Stock Exchange HAKN 63 Financial overview Hakon Invest Trading post 200 shares 68 Comments on financial development 80 Supplementary information NOTE 86 Risk factors Note that the notice of allotment to the general public is made through forwarding 90 Board of Directors, Group Management, auditors of transactions notes, which is expected to occur on December 6, 2005. After pay- 98 Share capital and ownership structure ment for the allotted shares is received by Handelsbanken Capital Markets, the paid shares will be transferred to the securities account or VP-account specified by 102 Tax considerations in Sweden the buyer. The time required by Sweden Post to deliver the sent transactions notes 105 Articles of Association and the time to transfer payments and the paid shares to buyers in the general 107 Interim Report, January–September 2005 public could result in certain of these buyers will not have acquired shares available 119 Financial Statements in the specified securities account or VP-account before trading in Hakon Invest’s 133 Consolidated financial statements in accordance with IFRS common shares has begun on the Stockholm Stock Exchange O-List. Refer to the for the 2004 fiscal year chapter “Terms, conditions and instructions,” section “Offering to the public,” under 156 Audit report the headline “Payment and receipt of shares.”

In this prospectus, “Hakon Invest,” “the Company ” or “the Group” refers to Hakon Invest AB or the group in which Hakon Invest AB is the parent company, depending on context. In this prospectus “ICA AB” refers to ICA AB or the group in which ICA AB is the parent company, depending on the context. “Forma Publishing Group” or “Forma” in this prospectus refers to Forma Publishing Group AB or the group in which Forma Publishing Group AB is the parent company, depending on context. The shares in this offering in accordance with this prospectus (“the Offering”) have not been and will not be registered in accordance with the United States Securities Act of 1933 in its present form, nor in accordance with any securities legislation in any state in the US nor in accordance with any securities legislation in any province in Canada, and may not, other than in cases that do not require registration, be offered for sale or transfer in the US or Canada to persons domiciled there. Neither is the Offering directed to persons whose participation would require additional prospectuses, registration or other measures than those pursuant to Swedish law. The prospectus may not be distributed in any country in which distribution or the Offering requires measures pursuant to the preceding sentence or would be in conflict with any law or regulations in such country. Application for the acquisition of shares contrary to the above may be deemed invalid. In conjunction with the Offering, the principal owner in Hakon Invest ICA-handlarnas Förbund (ICA-handlarnas Förbund,“ the Association” or “the Seller”) issued an option (“Over-allotment option”) to Handelsbanken Capital Markets. The Over-allotment option, which can be exercised up to and including the date 30 days after the first day of trading, gives Handelsbanken Capital Markets the right to request that the seller sells another maximum of 1,300,000 shares in Hakon Invest, with the aim of covering any over-allotment. In conjunction with the Offering, Handelsbanken Capital Markets can carry out transactions on the Stockholm Stock Exchange and in a potential, unofficial trading that stabilizes the shares’ market price or supports this price at a level that would vary from what would otherwise apply. Such measures, at any given time without warning, can be discontinued and can be taken up to and including 30 days from the earlier of the day when the selling price in the Offering is made public and the first day of trading on the Stockholm Stock Exchange. Any guarantee that stabilization measures will be taken up cannot be given. Statements in this prospectus about future outlook and other forward-looking statements are based on current market conditions and in other respects prevailing external factors. The reader is advised that these statements, as well as all forward-looking assessments, are related to risks. Disputes relating to the Offering pursuant to this prospectus shall be settled exclusively in accordance with Swedish law and by a Swedish court. This prospectus has been registered by the Swedish Financial Supervisory Authority pursuant to the provisions of Chap 2, Section 4 of the Financial Instruments Trading Act (1991:980). Note that such registration does not constitute a guarantee from the Swedish Financial Supervisory Authority that the factual content of the prospectus is accurate or complete. Hakon Invest in brief

Hakon Invest conducts active and long-term investment operations tion of the ICA retailers in Sweden, and about 25% owned by in retail-oriented companies in the Nordic region. about 3,400 private shareholders, of which most are ICA retailers Hakon Invest owns 40% of ICA AB, the leading retail company or former ICA retailers. with focus on food. The remaining 60% is owned by the Dutch com- In conjunction with the listing, Hakon Invest’s share structure will pany Royal Ahold (“Ahold”). Through the shareholders’ agreement change to comprise 49% common shares and 51% Series-C between Hakon Invest and Ahold, and which is valid through and shares. All C shares will be owned by ICA-handlarnas Förbund and including 2040, the two owners have equal influence in ICA AB. will not be listed. Prior to the listing of the Company’s common ICA AB is a central holding for Hakon Invest. Through being an shares, ICA-handlarnas Förbund intends to offer investors the oppor- active owner with significant influence, Hakon Invest shall contribute tunity to acquire about 8 percentage points of Hakon Invest’s exist- to the development and strengthening of the ICA concept and cre- ing common shares. After the sale, ICA-handlarnas Förbund will ate value growth for ICA AB.1) own at least a total of 67% of the shares in Hakon Invest, distributed In addition to the holding in ICA AB, Hakon Invest owns 100% among 16 percentage points of common shares and 51 percent- of the shares in Forma Publishing Group, which is one of Sweden’s age points of C shares, of which the latter are not entitled to divi- largest publishers. Forma also conducts operations in Finland and dends.2) This means that the total cash dividend each year is only the Baltic States. distributed among 49% of the shares.

OPERATIONS Hakon Invest is debt-free and has financial assets amounting to about SEK 2.8 billion as of September 30, 2005. These financial assets are for use for investments, mainly in unlisted companies in the Nordic retail sector. Hakon Invest has substantial expertise, experience as well as access to a comprehensive network within retail and retail- related businesses. The Company has established an investment Overview of ownership and operations structure organization that works actively with existing holdings as well as evaluation of new, attractive investment objects. Based on a substantial and active ownership, Hakon Invest shall contribute to the company Hakon Invest AB having the conditions and resources to develop and grow profitably. Hakon Invest’s investment strategy builds on a tradition of entrepreneurship and a long-term focus. Investment shall be made mainly 40%1) in companies that have an existing market position, with a distinct concept, stable, favourable cash flow and a strong and motivated Portfolio companies management. In addition, the company shall have favorable growth and return potential that can be realized by an active, committed and long-term owner. ICA AB2) In total, this means that Hakon Invest offers the parties in the Forma Publishing Group 100% equity market a unique possibility to invest in unlisted retail-oriented Future Investment companies in the Nordic region, with ownership in ICA AB as a 1) According to the shareholders’ agreement with strong foundation. Ahold, Hakon Invest has a common controlling interest in ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors. OWNERS, SHARE STRUCTURE AND DIVIDENDS 2) See section about ICA AB under “Hakon Prior to the Offering, Hakon Invest is 75% owned by ICA-handlar- Invest’s holdings and ﬁnancial management” for an overview of the company’s organization. nas Förbund , a non-profit association that is the member organiza-

1) See section about Hakon Invest for description of the ICA concept. 2) See section “Articles of Association” for a description of the possibility for ICA-handlarnas Förbund to convert Series C shares to common shares. This can be done in 2016 at the earliest.

1 GOALS and the partly owned companies Rimi Baltic and Netto, which com- • The dividend payout ratio for Hakon Invest shall normally amount bined have a large network of stores in Sweden, Norway and the to at least 50% of the Parent Company’s profit after taxes. Baltic States. It also includes ICA Meny AB, which specializes in • The Hakon Invest Group strives for an equity/assets ratio over distribution to restaurants, caterers and convenience stores. ICA AB time that is not less than 70%. also offers financial services to Swedish customers through ICA • The goals set for ICA AB are: Banken AB. – to be the market leader in those countries in which ICA AB is The ICA group originated in the ICA concept, where individual represented, retailers join together in areas such as sourcing, IT and logistics to – to over the long term to increase sales faster than the total achieve the same economies of scale as wholly owned chains. market increases in each submarket, Local retailers and ICA AB’s various areas of operation serve cus- – an operating margin (EBIT-margin) of 3.5–4.0%, tomers in their own markets through locally adapted stores and – that return on equity over a business cycle shall be at offerings, while the group coordinates functions that customers do least 14–16%, not see. The ICA concept is ICA AB’s greatest strength in meeting – that the equity ratio long term shall be 30–35%. the challenges and opportunities currently facing the company. The • In accordance with the shareholders’ agreement between the par- key is to utilize economies of scale combined with local adapta- ties, Hakon Invest and Ahold have undertaken to ensure that ICA tions as close to customers as possible. AB distributes at least 40% of the ICA group’s profit after taxes. ICA AB’s operations include the management of sourcing and However, a condition, among others, is that this is not in conflict logistics, the development of strategies for various store concepts with good business practice and that due consideration is taken and marketing, the management of communications and human with regard to the ICA group’s investment plans and operational resources issues, as well as the development of sales, operations needs. and store establishment. Sales development should stimulate sales to • The average total return on Hakon’s own invested capital, for consumers. ICA AB’s activity takes place in cooperation with the ICA Forma and future investments in portfolio companies, shall exceed retailers, who often own and operate the stores. ICA AB’s efforts in 15% over the holding period for each specific holding. these areas are aimed at increasing sales to consumers and, hence, to the stores, as well as increasing the profitability of the stores and of HOLDINGS ICA AB in order to ensure that the operations will be successful in the ICA AB long-term. Sales in 2004 amounted to about SEK 72 billion, with ICA AB is the Nordic regions leading retail company with focus on profit after tax of SEK 1.5 billion. Some of the most important areas food and meals. ICA AB comprises ICA Sverige, ICA Norge, Etos of operations are described in general below.

2 Hakon Invest in brief Overview ICA AB1)

SALES NO. OF EMPLOYEES PARENT COMPANY (SEK M) (AVERAGE) 2) ICA AB 3) The operations of the parent company are described below: 547 474 Finance Finance includes financial control, accounting, shared services, treasury & tax, legal, internal audit and strategic projects. Retail Retail includes marketing, business development, market analysis, corporate communications, human resources, etc. Supply Chain Supply Chain includes sourcing, logistics development and IT.

WHOLLY OWNED OPERATIONS ICA Sverige 4) ICA Sverige is one of the leading retail companies in the country with focus on food and meals. ICA Sverige’s operations comprise sales, operations and new establishments 5) 43,373 4,407 ICA Norge 4) ICA Norge is one of the leading retail companies in the country with focus on food and meals with stores operated on a proprietary basis or as franchises. ICA Norge’s operations comprise sales, operations and new establishments 5) 19,896 5,540 ICA Meny ICA Meny is one of Sweden’s leading food-, beverage- and kitchen equipment suppliers to restaurants, caterers and convenience stores. 4,355 899 ICA Banken ICA Banken shall make it easier for the ICA stores’ customers to manage their economy and as a result strengthen customer loyalty. 58 121

PARTLY OWNED OPERATIONS Rimi Baltic (ICA Baltic) 6) As of 2005, Rimi Baltic is equally owned by ICA AB and Kesko Livs, who jointly are developing one of the most modern retail chains in the Baltic with wholly owned stores. 3,307 5,286 Netto 7) Netto is equally owned by ICA AB and Dansk Supermarked A/S. Netto operates on a hard discount basis. The concept was developed in Denmark, where Dansk Supermarked A/S manages the chain. 1,194 540 1) Figures in the table pertain to 2004. 2) Refers to the average number of employees calculated based on 1,800 hours of working time. 3) Includes the specialty retail chain Etos with sales of about SEK 31 million and 23 employees. Etos has wholly owned stores and combines products for health and beauty. Also includes some subsidiaries within importing and finance. 4) Within each national operations area, the consumer goods operations are reported integrated with property management. 5) Sales refer to ICA Sverige and ICA Norway shall help to stimulate sales to consumers. Operations means providing the stores with advise and measures to achieve efficient store operations. Establishments involves identifying and developing new store locations and to participate in the development of existing stores through renovation and expansion. 6) Figures in the table refer to the wholly owned operations ICA Baltic developed by ICA AB during 2004. Rimi Baltic is a joint venture with Kesko Livs (50/50) formed in 2005. 7) ICA AB’s share amounts to 50%.

FINANCIAL OVERVIEW, ICA AB ADJUSTMENT 2004 2004 2005 2002 2003 2004 IFRS IFRS JAN–SEP JAN–SEP Net sales, SEK M 70,908 71,980 71,811 1,720 73,531 53,996 52,514 Operating profit (EBIT), SEK M 2,535 2,120 1,866 111 1,977 1,621 1,341 Profit/loss for the year, SEK M 1,710 1,777 1,518 –3 1,515 1,221 1,068 Total assets, SEK M 34,071 31,554 29,683 1,405 31,088 29,820 32,257 Equity, SEK M 11,939 12,169 7,399 –305 7,094 12,293 7,937 Dividend, SEK M 589 664 6,228 – 6,228 Operating margin (EBIT-margin) 3.6% 2.9% 2.6% 2.7% 3.0% 2.6% Equity ratio 35.8% 38.7% 25.0% 22.8% 41.2% 24.6% Interest-bearing net debt excluding ICA Banken, SEK M 6,323 3,188 7,161 – 7,161 1,602 7,032 Net debt/equity ratio, excluding ICA Banken, multiple 0.5 0.3 1.0 1.0 0.1 0.9

Hakon Invest in brief 3 Facts about Forma Publishing Group

BUSINESS CONCEPT To provide people with knowledge and inspiration in their private and professional lives through publishing operations in the Nordic and Baltic markets.

2002 2003 2004 JAN–SEP 2005 Sales (SEK M) 658.9 630.8 596.2 433.3 Operating profit/loss (SEK M) –4.3 36.4 59.3 23.3 No. of employees (average) 349 321 303 299

FORMA PUBLISHING GROUP AB Forma Publishing Group AB is a wholly owned subsidiary of Hakon Forma also produces customer magazines and assignments Invest and one of Sweden’s largest publishers focusing on produc- include some of Sweden’s largest customer magazines. Among oth- tion and distribution of consumer periodicals, trade magazines and ers, Forma produces the food magazine Buffé, which is sent to ICA books. The predominant topics are food, the home, recreation and AB’s 2.3 million active regular customers. Forma has leading-edge retailing. Among other periodicals, Forma’s consumer magazine expertise in food and retailing gathered within the leading trade operations publish Sweden’s largest weekly magazine, ICA-kuriren, magazines in the field. and Sweden’s largest monthly magazine, Hus & Hem. Forma also Forma works after a new strategy with a focus on profitability conducts operations in Finland (including Kotivinki, the country’s and growth, organically as well as through acquisitions. In 2004, largest home magazine), in Estonia (the country’s largest monthly the company reported sales of SEK 596 million, with an operating magazine) and in Latvia (the country’s largest monthly magazine). profit of SEK 59 million.

FINANCIAL OVERVIEW, HAKON INVEST 2004 2004 2005 2000 2001 2002 2003 2004 ADJUSTMENT IFRS JAN–SEP JAN–SEP Net sales, SEK M 905.2 778.0 658.9 630.8 621.9 – 621.9 459.0 445.7 Result from participation in associated companies, gross, SEK M 523.1 469.9 635.6 544.5 511.6 – – – – Share in profits from companies reported according to the equity method, SEK M – – – – – – 466.2 349.4 416.5 Operating profit/loss (EBIT), SEK M 488.7 418.3 563.3 528.0 496.4 –11.1 485.3 331.6 392.2 Profit/loss for the year, SEK M 1,717.2 274.3 –975.7 352.7 497.3 81.3 578.6 333.3 608.1 Total assets, SEK M 8,304.5 8,527.8 7,443.4 7,295.7 7,639.0 –73.6 7,565.4 7,355.9 8,077.6 Equity, SEK M 7,832.1 7,854.0 7,050.3 6,947.7 7,277.4 –33.7 7,243.6 7,007.4 7,682.5 Minority interests, SEK M 5.0 – – – – – – – – Interest-bearing net debt, average, SEK M –4,919.8 –4,869.1 –4,110.7 –3,334.6 –2,975.0 –5.6 –2,969.4 --- –3,049.9 Net debt/equity ratio, average, multiple –0.6 –0.6 –0.6 –0.5 –0.4 –0.4 – –0.4 Earnings per share in the Group, SEK 12.17 1.70 –6.06 2.19 3.09 – – 2.07 3.78 Equity per common share in the Group according to IFRS, SEK1) – – – – – – 2.38 – – Equity per share, SEK 48.67 48.81 43.81 43.18 45.22 –0.21 45.01 43.55 47.74

1) Earnings per preference share in the Group according to IFRS: SEK 7.31.

4 Hakon Invest in brief Offering to acquire shares in Hakon Invest

Hakon Invest’s principal owner, ICA-handlarnas Förbund, has The Seller has undertaken, without the approval of decided that in conjunction with the common shares in the Handelsbanken Capital Markets, not to divest additional shares in Company being listed on the Stockholm Stock Exchange’s O-List to the Company for at least 300 days after the first day of trading. The carry out a further broadening of ownership in the Company in Board of Directors and senior executives in Hakon Invest as well as addition to the Company’s approximately 3,400 shareholders. The the Board of Directors and senior executives in the principal owner broadening will be effected through an offering from the Seller for ICA-handlarnas Förbund, have agreed to a similar undertaking. acquisition of at maximum of 11,700,000 existing common An offering is hereby made to acquire a maximum of shares, each at a par value of SEK 2.50. The Offering is being 11,700,000 common shares in Hakon Invest in accordance with made to the public in Sweden and institutional investors in Sweden the terms and conditions in this prospectus, corresponding to a max- and internationally. Hakon Invest’s common shares have been imum of 7.3% of the capital and votes, if the Offering is fully sub- approved by the Stockholm Stock Exchange for listing on the O-List scribed. If the Over-allotment option is exercised in full, the Offering of the Exchange. The first day for trading in the Company’s common comprises a maximum of 13,000,000 common shares, correspon- shares is expected to be on or about December 8, 2005. ding to a maximum of slightly more than 8% of the capital and votes ICA-handlarnas Förbund has undertaken, at the request of in Hakon Invest. Handelsbanken Capital Market, up to the date that is 30 days after The selling price for all common shares in the Offering will be the first day of trading, to sell an additional maximum of determined through a book-building process among institutional 1,300,000 common shares to cover any over-allotment (“Over- investors within the interval SEK 68–77 per share. The selling price allotment option”) in conjunction with the Offering. to the general public will not exceed SEK 77 per share. At full acceptance of the Offering, the Seller’s remaining hold- Assuming that the Offering is accepted in its entirety and that ing will represent about 68.1% of the shares and votes outstanding the Over-allotment option is exercised in full, the value of the in Hakon Invest. If the Over-allotment option is exercised in full, the Offering will amount to between SEK 884 and 1,001 million. Seller’s remaining holding will represent about 67.3% of the shares In other respects, reference is made to the presentation in this and votes outstanding in Hakon Invest. In addition, when the prospectus, which has been prepared by the Board of Directors of Offering is made, there are about 3,400 other owners who hold Hakon Invest in conjunction with the Offering and the listing of the slightly less than 25% of the shares in the Company. Company’s common shares on the O-List of the Stockholm Stock Exchange.

Stockholm, November 17, 2005

Hakon Invest AB (publ) ICA-handlarnas Förbund Board of Directors Board of Directors

5 Terms, conditions and instructions

THE OFFERING ALLOTMENT The Offering covers a maximum total of 11,700,000 shares of com- A decision regarding the allotment of shares will be made by the mon shares1), corresponding to about 7.3 % of the total number of Seller in consultation with Handelsbanken Capital Markets. The shares in Hakon Invest. The Offering is divided into two parts. The objective of the allotment is to attain a solid institutional ownership first part is directed towards institutional investors in Sweden and base and a broad spread of shares among the public as parts of abroad; the second part is focused on the public in Sweden, includ- efforts to permit regular and liquid trading in the shares in Hakon ing members of the ICA-handlarnas Förbund and certain employees Invest on the Stockholm Stock Exchange. in companies in which the ICA-handlarnas Förbund directly or indirectly holds shares2). The price at which the shares of common shares OFFERING TO THE PUBLIC are offered is referred to as the selling price. Applications Applications from the public to acquire shares shall cover at least OVER-ALLOTMENT OPTION 200 shares. Application for purchase may be made only for round The Offering will include an additional maximum 1,300,000 lots of 200 shares. Application is to be made using the printed shares of common shares, if the Over-allotment option is utilized application form and must be undertaken during the period (refer to “Offering to acquire shares in Hakon Invest” for a more November 23 – December 2, 2005 and submitted to any of detailed description). If the over-allotment option is fully exercised, Handelsbanken’s offices. the Offering will encompass a total of 13,000,000 shares. Customers of Handelsbanken who are connected to Internet services may apply for the purchase of shares via the Internet in DISTRIBUTION OF SHARES accordance with instructions on the bank’s website, www.handels- The Offering to institutional investors is intended to involve banken.se. 5,850,000 shares of common shares and the Offering to the pub- Applications must be received by a Handelsbanken office not lic 5,850,000 shares. In the Offering to the public, certain employ- later than December 2, 2005 before closing hours. ees in companies whose shares are owned directly or indirectly by Application via Handelsbanken’s Internet services can be made ICA-handlarnas Förbund are entitled to acquire common shares in from 12:00 p.m. midnight, Sunday December 4. Application via multiples of 100 shares, with, however, a maximum of the number the Internet requires that the person submitting the application has a of shares that is equivalent to SEK 30,000, based on the final price VP-account in any Swedish account-handling institution of choice or of common shares and members of ICA-handlarnas Förbund have a securities account in Handelsbanken. preferential rights to acquire a maximum of 1,400 shares of com- The application is binding. Late applications may be dis- mon shares in the Company. Members may make application to regarded without any further action. Applications via telefax will not subscribe for additional shares within the framework of their prefer- be approved. No amendments or addendums may be made to the ential rights, whereby such application will be taken into account in printed text. Incomplete or incorrectly filled in application forms may the manner described in the section “Allotment”. Members who are be disregarded without further action. Application forms and partners have similar preferential rights to subscribe for up to 1,400 prospectuses are available from all Handelsbanken offices and via shares of common shares. In such cases, members may elect to Internet; www.hakoninvest.se or www.handelsbanken.se/ utilize the Offering through the company operating the member aktuellaerbjudanden. store. Otherwise, the aforementioned employees and members Those making application to purchase shares must have a securi- may not transfer their rights to buy shares. If the rights of employees ties (VP) account or a securities depot at a Swedish account-handling and members are fully utilized, these rights will encompass a total of institution. Those who do not have a securities account or securities 2,340,000 shares or 20% of the common shares covered by the depot must open one prior to submitting the application. Note that Offering, or almost 1.5% of the shares in the Company. Retailers the opening of a securities account or securities depot can take time. and employees may also acquire shares in the Offering to the pub- A securities account with restricted utilization rights, such as a lic without preferential rights. pledge account or reconfiguration (so called VKI-account) may not The distribution of common shares to each part of the Offering be used. will be performed on the basis of demand and, thus, redistribution may be conducted. Applications from members of the ICA-handlarnas Förbund and certain employees SELLING PRICE Application from members of ICA-handlarnas Förbund and employ- The selling price in the Offering is expected to be set within the ees of companies whose shares are held directly or indirectly by the interval of SEK 68–77 per share. The selling price is determined in ICA-handlarnas Förbund are to be made using the form designed the bidding procedure described below and is planned to be for this purpose, which are to be made available to Hakon Invest announced on or about December 6, 2005. The selling price to not later than November 30 in accordance with special instructions. the public will not exceed SEK 77 per share. Commission will not Applications are binding. Late applications may be disre- be charged. garded without further action. Applications via telefax will not be approved. No amendments or addendums may be made to the printed text. Incomplete or incorrectly filled in application forms may be disregarded without further action. Application forms for the aforementioned employees and members of ICA-handlarnas

1) Excluding the shares that may be sold in connection with over-allotment. 2) All employees in Hakon Invest AB and ICA-handlarnas Medlemsservice AB and executive management groups in Forma Publishing Group and ICA AB.

6 Förbund will be posted to them. Additional application forms may Buyers from the general public who have specified a debiting be received from ICA-handlarnas Förbund. Prospectuses are avail- account in Handelsbanken and have a VP-account in Handels- able from all Handelsbanken offices and via Internet; www.hakon- banken or other Swedish account-handling institution, and had invest.se or www.handelsbanken.se/aktuellaerbjudanden. funds available in the debiting account not later than 12:00 mid- Those making application to purchase shares must have a securi- night on Thursday, December 8, are expected to have the acquired ties (VP) account or a securities depot at a Swedish account-handling Hakon Invest common shares available in the specified VP-account institution. Those who do not have a securities account or securities on Thursday, December 8, however, not earlier than 10:00 a.m. depot must open one ahead prior to submitting the application. Buyers from the general public who have specified a debiting Note that the opening of a securities account or securities depot can account in Handelsbanken and have specified a securities account take time. at another trustee and had funds available in the debiting account A securities account with restricted utilization rights, such as a not later than 12:00 midnight on Thursday, December 8, are pledge account or reconfiguration (so called VKI-account) may not expected to have the acquired Hakon Invest common shares avail- be used. able in the specified VP-account on Thursday, December 8, however, not earlier than 10:00 a.m. Each trustee will then registers the Allotment shares in the respective customer’s securities account in accordance Allotment is not dependent on when during the application period with each trustee’s routines. the application is received. Only one application per person will be Buyers from the general public who pay for allotted shares in considered. Allotment will be made only in round lots of 200 accordance with the instructions on the transactions note, that is, shares. Allotment to certain employees in companies in which ICA- have not specified a debiting account in Handelsbanken, will have handlarnas Förbund directly or indirectly owns shares will, how- allotted and paid shares transferred to the specified VP account or ever, be done in round lots of 100 shares. In the event of over-allot- securities account, when payment has been received by ment, allotment may not be conducted (for other than members) or Handelsbanken Capital Markets. Depending on where, how and may be performed with a lower number of shares than that at what time of the day payment is made, this may take two to three requested in the application, as a result of which allotment may be bank days from the payment date. done fully or partly by lottery. Allotment to those who receive shares If full payment is not made within the prescribed time or funds will be initially to the aforementioned employees and to members are not available in the indicated account, the allotted shares may up to the number of shares indicated above under “Distribution of be re-allotted and sold to another party. If the selling price in con- shares.” junction with such sale is less than the price according to the If, using preferential rights, members apply for amounts above the Offering, the party who first received the allotment may be com- stated amount of 1,400 common shares while other members have pelled to pay the difference. applied for fewer, redistribution among members will be made within After payment has been made and registered, a securities (VP) the total of 2,340,000 common shares. Such redistribution will be note will be mailed showing that the paid-up shares are available in conducted so that a certain number of shares are allotted per applica- the buyer’s securities account. Although certain buyers will have tion. paid shares available on December 8, no buyer, however, will In the event of over-subscription by the public, allotment will pri- have received a VP-notice on December 8 that shows that paid marily be conducted so that a certain number of shares are allotted shares are available in the buyer’s VP-account since the shares are per application and subsequently primarily with a similar percent- booked in the VP-account not earlier than December 8. age share of the excess number of shares covered by the application, rounded off to the nearest multiples of 200 shares. OFFERING TO INSTITUTIONAL INVESTORS In addition, certain customers of Handelsbanken will be given Bidding procedure special consideration. Allotment may also be made to certain As part of efforts to attain a market-based pricing of the shares encom- employees in Handelsbanken, although these will not have priority. passed by the Offering, institutional investors will be given the oppor- Allotment in these cases will be performed in accordance with the tunity to participate in a bidding procedure based on their expression rules of the Swedish Securities Dealers Association and the instruc- of interest. The bidding procedure will extend from November 23 to tions of the Swedish Financial Supervisory Authority1). December 5, 2005. The selling price will be fixed within the framework of this procedure. The bidding procedure may be suspended Notice of allotment earlier. Notification of any such suspension of the procedure will be Following the allotment of shares, a transactions note will be mailed to provide via one or several news agencies. Bids are to be presented those receiving allotment. This is expected to occur on or around to Handelsbanken Capital Markets in accordance with special December 6, 2005. Those who have not been allotted shares will instructions. not be notified. Allotment Payment and receipt of shares The intention is that expressions of interest, which are essentially Full payment for allotted shares is to be made in cash not later than deemed to be equal, will be treated equally. Expressions of interest December 8, 2005 in accordance with the instructions in the by institutional investors who are deemed to be long-term sharehold- mailed transactions note. In conjunction with application, those ers in Hakon Invest will be given priority. No guarantee of allotment wishing to pay via the debiting of their account in Handelsbanken is provided for certain institutional investors. should indicate the account number on the application form. Buyers from the general public who have specified a securities account in Notification of allotment Handelsbanken are expected to have their allotted, but unpaid, Institutional investors are expected to be notified of allotment on or shares available in the securities account on Wednesday, about December 6, 2005, following which a transactions note will December 7, 2005. be mailed.

1) The Seller, ICA-handlarnas Förbund , approves the participation of employees of Handelsbanken on these conditions.

7 Payment to take place on Wednesday, December 7. Therefore, trading on Full payment for allotted shares is to be made in cash not later than the Stockholm Stock Exchange is estimated to start on Thursday, December 9, 2005. Special routines, terms and conditions govern- December 8, 2005. A trading lot consist of 200 shares. However, ing notification of allotment, payment and delivery may apply. the purchase and sale of shares will also be possible in smaller lots. If full payment is not made within the prescribed time or if funds With normal post, it is expected that most persons who are not available in the indicated account, the allotted shares may received an allotment will have received notification about the allot- be re-allotted to and sold to another party. If the selling price in con- ment prior to when trading in Hakon Invest’s common shares begins junction with such transfer is less than the selling price according to on the Stockholm Stock Exchange. the Offering, the party first receiving allotment may be compelled to For some persons, depending on when and how payment for pay the difference. allotted shares is made and where the shares are to be delivered, the acquired shares may be available after trading on the DIVIDEND RIGHTS Stockholm Stock Exchange begins – see section “Offering to the Shares acquired via the Offering carry rights to participation in public,” under the headline “Payment and receipt of shares” earlier Hakon Invest’s earnings as of the 2005 fiscal year. Any dividend for in this chapter. the 2005 fiscal year will be set at the 2006 Annual General Before trading in Hakon Invest’s common shares commences on Meeting of shareholders and will be distributed by VPC (Swedish the Stockholm Stock Exchange, which is expected to happen on Central Securities Depository & Clearing Organization). Thursday, December 8, an unofficial trading may start with Handelsbanken Capital Markets or another securities institution. TERMS AND CONDITIONS FOR FULFILLMENT Such unofficial trading will be conditional upon the required regis- The Offering is conditional on the non-emergence of circumstances trations being made with Bolagsverket and VPC. This is expected to that may entail that the date for the completion of the Offering is happen on Wednesday, December 7. If the required registrations deemed inappropriate. Such circumstances may be of an eco- do not take place, any shares delivered shall be returned and any nomic, financial or political nature and may pertain to circum- payments shall be returned. stances in Sweden as well as abroad, or that interest in participation in the Offering is viewed by the Seller as being insufficient. SHARE PRICE STABILIZATION Accordingly, the Offering may be partly or fully revoked. In conjunction with the Offering, Handelsbanken Capital Markets Notification in this respect will be provided as soon as possible via may conduct transactions in a potential, unofficial trading and on a press release. the Stockholm Stock Exchange that stabilize, support or in some other manner affect the share price of the Hakon Invest share. Such MARKET LISTING AND commenced measures may be suspended at any time without CONDITIONAL UNOFFICIAL TRADING notice and may not extend beyond 30 days following the earlier of A listing of the common shares in Hakon Invest on the O-List of the the day when the selling price in the Offering is announced and the Stockholm Stock Exchange will take place when required registra- first trading day on the Stockholm Stock Exchange. No guarantee is tions have been made with Bolagsverket and VPC. This is expected provided that these stabilization measures will be undertaken.

SUMMARY DESCRIPTION OF THE EFFECT OF THE OFFERING AND MARKETING LISTING ON THE SHARE OWNERSHIP AND SHAREHOLDER STRUCTURE

Share ownership and shareholder structure prior to the Offering Share ownership and shareholder structure after the Offering

Hakon Invest is made up of shares of common shares Hakon Invest is made up of shares of common shares and Series-C shares

ICA-handlarnas Förbund holds slightly more than 75% Series-C shares may be issued in an amount representing a maximum 51% of all shares

All shares confer equal rights in the Company ICA-handlarnas Förbund has transformed common shares, representing almost 51% of the total number of shares in the Company, to Series-C shares

Other shareholders, All Series-C shares are held by ICA-handlarnas Förbund Other shareholders, 25% 25% Series-C shares do not confer entitlement to cash dividends

ICA-handlarnas Förbund is entitled to reclassify Series-C shares to common 25% shares and thereby receive a cash dividend no earlier than 2016. 25% However, ICA-handlarnas Förbund has refrained from taking a dividend over a protracted period and there are currently no plans to reclassify Series-C 51% shares to common shares and thus receive a cash dividend after 2016 8% New shareholders, 8% 75% The common shares are listed on the O-List of the Stockholm Stock Exchange. 16% Series-C shares are not listed

Pursuant to the Offering, ICA-handlarnas Förbund has sold about 8% (corresponding to 13,000,000 shares) of its common shares and thus ICA-handlarnas Förbund, it is assumed that the over-allotment option is utilized ICA-handlarnas Förbund, 75% 67%1) Both the public and institutional investors have acquired these shares Series-C Common shares Common shares

1) Requires that ICA-handlarnas Förbund sells about 8% of its holding.

8 Terms, conditions and instructions Background and reasons

Hakon Invest is one of two principal owners in ICA AB. Over the investment primarily in unlisted retail companies in the Nordic region. years, ICA AB has developed favorably and is one of the Nordic Based on a significant and active ownership, Hakon Invest shall con- region’s leading retail companies with focus on food and meals. tribute to ensuring that the companies in which it invests are provided Hakon Invest’s holding of 40% of the shares in ICA AB will continue the conditions and resources to develop and grow profitably. In total, to be a central holding for Hakon Invest who shall be a strong owner this means that Hakon Invest is offering the parties on the stock market with significant influence through which to safeguard, strengthen and a unique opportunity to invest in unlisted retail-oriented companies in develop the ICA concept1) and thereby increase ICA AB’s value. the Nordic region, with ICA AB as a strong base. In addition to the holding in ICA AB, Hakon Invest owns 100% of Prior to the Offering, Hakon Invest is about 75.4% owned by of the shares in Forma Publishing Group (formerly ICA Förlaget AB). the ICA-handlarnas Förbund, a non-profit association that is the Moreover, Hakon Invest has a substantial liquidity management member organization for the ICA retailers in Sweden, and by amounting to about SEK 2.8 billion as of September 30, 2005. slightly less than 25% by about 3,400 private shareholders, of Management of these assets has previously been focused on having which most are ICA retailers or former ICA retailers. Until the listing, a good liquidity as preparedness prior to any ownership change in the Hakon Invest share is covered by a preemptive clause and has ICA AB. The reason for this was that Hakon Invest needed to have the until September 30, 2005 been traded between shareholders possibility to take action due to the as of 2004 earliest expected sale through ICA-handlarnas Förbund. of Canica AS’s 20% holding in ICA AB. In May 2004 Canica At the Annual General Meeting in ICA-handlarnas Förbund on May announced that the company wished to sell their shares in ICA AB. 10, 2005, and at Hakon Invest’s Annual General Meeting on May 11, After concluding an agreement with Ahold, which in accordance with 2005, the required decisions were made to facilitate an application for the shareholders’ agreement acquired Canica’s shareholding, to listing of the Hakon Invest common share on the O-List of the Stockholm acquire half off the shareholding, Hakon Invest increased its owner- Stock Exchange as well as a concurrent broadening of ownership of the ship in ICA AB in 2004 by 10% to 40% of the shares in ICA AB. The shares in the Company. The ownership broadening will be effected remaining 60% is owned by Ahold. However, as the result of a share- through the principal owner, ICA-handlarnas Förbund, selling a maxi- holders’ agreement, the owners have equal influence over ICA AB. mum of about 8%, corresponding to 13,000,000 common shares After Hakon Invest’s and Ahold’s acquisition of Canica’s share- including the over-allotment option, so that ICA-handlarnas Förbund’s holding, a stable ownership situation is foreseen in ICA AB. Against ownership thereafter is not less than 67%. this background, Hakon Invest’s principal owner and Board of The purpose of the Offering and the listing of common shares in Directors during the past year reviewed the Company’s future direc- the Company on the O-List of the Stockholm Stock Exchange is to stimu- tion. With the aim of securing a long-term favorable ownership struc- late trading in the Hakon Invest share, to make the share more liquid, ture in the Company, it was decided in the spring of 2005 to prepare and to obtain a distinct market price determination of the share and for a listing of Hakon Invest on the Stockholm Stock Exchange O-List. that the Company gains access to capital markets. In addition, the Furthermore, it was decided that Hakon Invest’s operations shall be Board of Hakon Invest assesses that a market listing of the Company’s broadened and move in a partly new direction based on the expert- common shares will result in increased awareness from the capital mar- ise and the network the Company has in retailing. In the future, kets, mass media and the general public, which in turn will further Hakon Invest shall, while retaining a significant owner influence in increase knowledge about and interest in Hakon Invest and its invest- ICA AB and with the successful ICA concept as a base, conduct an ments and thereby have a positive impact on Hakon Invest’s operations active and long-term investment operation with a focus on retail- and conditions for future development. oriented companies. The Company’s financial assets shall be used for

This prospectus has been prepared in conjunction with the listing of the Hakon Invest share on the O-List of the Stockholm Stock Exchange and the sale of Hakon Invest shares that ICA-handlarnas Förbund is effecting in conjunction herewith. The Board of Directors of Hakon Invest is responsible for the content of the prospectus. The Board of Hakon Invest hereby assures that, to the knowledge of the Board, the information in the prospectus complies with the factual circumstances and that nothing of material significance has been omitted that could influence the image of the Company as conveyed by the prospectus.

Stockholm, November 17, 2005

Hakon Invest AB (publ) Board of Directors

1) See section “Hakon Invest” for a description of the ICA concept.

9 President’s message

ACTIVE OWNERSHIP AND We see clear links between exercising and leveraging entrepre- ENTREPRENEURSHIP CREATE VALUE neurship and the dynamics thus arising. We therefore consider it an In conjunction with Ahold’s entry as owner in ICA AB in 2000, advantage in future investments that those who have built up the Hakon Invest was established to insure a significant and long-term business continue to be its owners. influence in ICA AB. In that it was possible together with Ahold to create an ownership structure in ICA AB during 2004 that we con- Stable foundation in ICA AB with substantial opportunities sider stable over the long term, prerequisites were created for devel- At the same time as I am enthusiastic about an exciting future with oping Hakon Invest’s operations. Against this background, we are new investments, I also wish to emphasize the value and the oppor- now working with a partially new business focus and strategy. tunities inherent in our existing holdings in ICA AB and Forma Hakon Invest is today a company for investors who with indirect Publishing Group. ownership ICA AB as the foundation wish to invest in Nordic retail With a 40% ownership share, Hakon Invest is one of two princi- operations. We will continue to be a significant owner in ICA AB pal owners of ICA AB. As a long-term and active owner, we have with the objective of strengthening the ICA concept. However, we contributed to developing ICA AB into one of the Nordic region’s will now become more aggressive in investing the Company’s finan- leading retail companies with focus on food and meals. ICA AB cur- cial assets, currently amounting to about SEK 2.8 billion, and in rently has a strong position in Sweden and Norway, as well as in the leveraging the substantial expertise and extensive network that the Baltic countries through joint-venture stores in all countries. At the Company possesses in the retail sector. same time, ICA AB, in part through its 50% ownership share in the I am very enthusiastic about leading the development of our Netto chain and the introduction of a new, cost-effective organiza- business. I strongly believe in retail as a sector for investment, as tion, has taken a position that allows it to meet the increased compe- well as in our capacity to create value in this area. During the past tition from low-price chains. The major successes noted by ICA AB year, we have built up an organization that is well prepared for the during the year with its broad price-reduction campaigns are further task, and we have a Board of Directors with a background, knowl- proof of this. Given the company’s Nordic strategy, there is also edge and a contact network that will open many doors. scope for geographic expansion, and the goal is to be the market leader in all markets in which the company is active. We see sub- Owner responsibility and long-term commitment stantial opportunities for continued creation of value within ICA AB. A significant component in Hakon Invest’s investment philosophy is a belief in owner responsibility and long-term commitment. The com- The ICA concept – entrepreneurship and collaboration panies in which we invest should be able to feel secure in the An important underlying reason for ICA AB’s success lies in what we knowledge that we are in for the long term and that we will take call the ICA concept in which local retailers operate their own stores active part in development of the business. The fact that Hakon but collaborate in the areas of logistics, sourcing and administra- Invest has a strong financial position and that we in turn are sup- tion, thus achieving economies of scale. Through combining the ported by a clearly identifiable, long-term and responsible owner in driving force of entrepreneurship and collaboration with others, the form of ICA-handlarnas Förbund further increases credibility. opportunities are increased for achieving both short- and long-term Another important component is the approach to entrepreneurship. profits for individual stores, as well as the ICA group. ICA-handlar-

10 nas Förbund, Hakon Invest and ICA AB therefore have a strong as trading on the Stockholm Stock Exchange, will ensure a more liq- common interest in strengthening and continuing to enhance the uid share. An additional positive consequence of the listing is that ICA concept. Successful retailers benefit ICA AB and thereby also Hakon Invest will gain access to the capital market. At present, create increased value for Hakon Invest. however, we see no need for new capital, since our existing funds The ICA concept thus reflects a belief in the individual and what are more than adequate. The Company is also debt-free. committed individuals can accomplish both on their own and As a listed company, we will create clear added value for our through cooperation. This also implies a belief that ownership, shareholders, and we will do so in several ways. One way will be responsibility and involvement in daily operations provide the best through our collective expertise and capacity to create growth in foundation for a successful business. This approach will also value in the retail sector both in existing and future investments. characterize Hakon Invest’s work with new investments. Another way will be through pursuing a policy of a high and stable dividend level based on Hakon Invest’s strong financial position Stable and aggressive Forma and the fact that our principal owner has We also see excellent prospects for growth and value creation in elected to refrain from cash dividends Forma, in which Hakon Invest is the sole owner. With publications for the major share of its holding. I see that include ICA-kuriren, Hus & Hem and such customer magazines much that indicates that Hakon Invest as Stadium Magazine, Tiebreak etc. Forma is one of Sweden’s will be an attractive addition to the largest magazine publishers. In addition, Forma is the leader in spe- Stockholm Stock Exchange and cialist books. The company is also active in Finland with several welcome both existing and leading publications. We view media as an attractive sector in new investors to be a part of which the restructuring now in progress will create future opportuni- our future development. ties. Today, Forma is a stable company with sound finances that has excellent prospects for playing an active role in creating new structural solutions in this sector.

Creating value for existing and new owners With the spreading of ownership now about to take place and the exchange listing of the share being planned, we are at a milestone in the development of Hakon Invest. I see many advantages with this. Up until now, the share has only been traded within a closed group of current or former ICA retailers. With the listing, Hakon Invest will achieve a broader and more varied shareholder structure. In previous trading of the share, the price has always been determined by a technical model, but I see a great advantage in Claes-Göran Sylvén that the share will now have a market price. New owners, as well President

11 Hakon Invest

The name Hakon Invest, which was adopted by the 2005 Annual businessmen operate the stores but that they realize that coopera- General Meeting, derives from Hakonbolaget, which was founded tion increases their ability to achieve short- and long-term profitabil- by Hakon Swenson in 1917 and which constitutes the foundation ity both for the stores and for the ICA group. for today’s ICA AB. With ICA-handlarnas Förbund as principal owner, ICA AB developed into one of the Nordic region’s leading retail companies with a BACKGROUND AND HISTORY focus on food and meals. In 1992, ICA AB acquired a minority share Hakon Swenson founded Hakonbolaget in 1917 in Västerås, of the Norwegian company that owned and operated the Rimi stores Sweden. His idea was that individual store owners could join in Norway and later also in Latvia. On January 1, 1999, the remain- together in purchasing centers to achieve economies of scale via ing shares in the Norwegian company were acquired from Stein Erik joint purchases, store establishments and joint marketing. ICA AB Hagen’s family-owned company Canica AS. Payment was effected Inköpscentralernas Aktiebolag) then developed from the purchasing through newly issued shares in ICA AB. ICA-handlarnas Förbund centers that had adopted Hakon Swenson’s ideas. remained as principal owner in ICA AB with about 38% of the shares ICA-handlarnas Förbund, the non-profit members’ organization and about 55% of the voting rights. Canica AS received about 26% for Sweden’s ICA retailers, was established in 1940. Through an of the shares and 19% of the voting rights. Other owners at that time organizational change in 1972, ICA-handlarnas Förbund became were ICA retailers and former ICA retailers. the principal owner of ICA AB, with about 60% of the capital and During 1999, ICA-handlarnas Förbund and the Dutch food about 70% of the voting rights. In other respects, there were a large retailer Ahold began discussions on ownership in ICA AB, with the number of passive owners in ICA AB at that time. One of ICA-hand- result that the plans then current for a listing of ICA AB were dis- larnas Förbund’s tasks was and remains to exercise owner influence continued. Instead, the ICA group in 2000 underwent the greatest in ICA AB, thus ensuring the company’s long-term development change in ownership up until that date when Ahold entered as through refinement of the ICA concept. The ICA concept is defined owner. After the transaction, which was effected formally as a pur- as “voluntary cooperation of individual retailers between their share chase of ICA AB as it existed then by a newly established company, (the store) and the whole (the ICA group).“ This means that local the owners of the ICA group were Ahold with a 50% share, Hakon

Hakon Invest

40% 1) 50% Rimi Baltic Portfolio companies ICA AB 50% Netto

ICA Sverige ICA Norge ICA Meny ICA Banken Etos Forma Publishing Group 100%

Future Investment 1) According to the shareholder agreement with Ahold, Hakon Invest has a common controlling interest in ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.

12 Invest1) with a 30% share and Canica with a 20% share. Prior to the was acquired by ICA-handlarnas Förbund in 1999 in anticipation change in ownership in 2000, Hakon Invest received as assignment of the planned exchange listing of ICA AB, which thus focused its from ICA-handlarnas Förbund to exercise an active ownership role in operations on food retailing. ICA AB and to strengthen and develop the ICA concept. In conjunc- Hakon Invest’s assets also include a securities portfolio consist- tion with the ownership change, a target new share issue in Hakon ing of short-term investments in interest-bearing securities and Invest was implemented such that shares were issued to former own- shares. The management of these assets was previously focused on ers of ICA AB. Following that share issue, ICA-handlarnas Förbund maintaining high liquidity as a contingency in the event of possible owned some 75% of the shares in Hakon Invest, while other owners, changes in ownership in ICA AB. The value of managed financial primarily ICA retailers and former ICA retailers, owned about 25%. assets, which are without pledges, amounted to some SEK 2.8 bil- As a result of the change in ownership of the ICA group, a lion at September 30, 2005. shareholders’ agreement was established in 2000 between Hakon Invest, Canica and Ahold. The agreement, which extends until year- FUTURE ORIENTATION end 2040, contains clear rules for when and how changes in the Following the acquisition of Canica’s shareholding by Hakon parties’ ownership may take place. Among other restrictions, the Invest and Ahold, a stable ownership structure is anticipated in ICA agreement prevented the parties from transferring shares during the AB. Against this background, Hakon Invest’s principal owner and first four years after the agreement was signed. After April 24, the Board of Directors reviewed the Company’s future direction 2004, any party that so wished could reduce or completely divest during the past year. In order to ensure a favorable ownership its ownership, whereby the remaining owners had the right, and in structure over the long term, a decision was taken during the spring certain cases, the obligation to acquire the offered shares subject to of 2005 to prepare for a listing of Hakon Invest on the O-List of the certain conditions. Stockholm Stock Exchange. Furthermore, it was decided that With the support of the ownership agreement, Canica extended Hakon Invest’s operations should be expanded and given a par- an offer to Hakon Invest in May 2004 to acquire its 20% of the tially new focus based on the expertise and the contact network shares in ICA AB. Hakon Invest decided to decline the offer. Canica that the Company possesses in the retail sector. In future, Hakon then extended an offer to Ahold to acquire the shares in accordance Invest shall pursue an active and long-term investment strategy with the shareholders’ agreement. Ahold and Hakon Invest entered based on the successful ICA concept and with a focus on retail-ori- an agreement in which Hakon Invest pledged to purchase half of the ented companies while continuing to exercise significant owner- shares that Canica offered. On October 25, 2004, Ahold and ship influence in ICA AB. The Company’s financial assets shall be Canica finally agreed on the terms for the transaction, and Hakon used for investments primarily in unlisted companies in the Nordic Invest acquired half of the shares that Ahold acquired from Canica. region. With significant and active ownership as the starting point, After these transactions, Ahold owns 60% and Hakon Invest Hakon Invest will contribute to providing the conditions and 40% of the shares in ICA AB. The shareholders’ agreement from resources for the operations in which the Company invests to 2000 still applies between Hakon Invest and Ahold with a number develop and grow profitably. of supplements and amendments from 2004. According to the In summary, this means that Hakon Invest offers stock market agreement, as long as each party’s ownership amounts to between players a unique opportunity to invest in unlisted retail companies in 30% and 70%, the parties have equal influence in ICA AB through the Nordic region, with ownership in ICA AB as a strong foundation. a stipulation in the agreement that decisions by the Annual General The name change to Hakon Invest, which was formally imple- Meeting and the Board of Directors must be in unity. Neither Hakon mented in May 2005, is a step towards clarifying the new direction Invest’s nor Ahold’s influence in ICA AB was thus changed through in which the Company is working, as well as contributing to empha- the share transaction during 2004. See Supplementary information sizing that its operations are separate from ICA AB. for further information regarding the shareholders’ agreement. In addition to the 40% holding in ICA AB, Hakon Invest cur- Vision rently also includes the wholly owned subsidiary Forma (formerly Hakon Invest, with ownership in ICA AB as a foundation, shall be ICA Förlaget AB). Forma was previously included in ICA AB but one of the Nordic region’s leading companies investing in the retail

1) Hakon Invest at this time was named ICA Förbundet Invest AB.

13 sector. Hakon Invest shall be the natural partner for retail companies The following guidelines apply for Hakon Invest’s investments: that wish to develop their business. • Type of holding Hakon Invest will primarily invest in unlisted companies, in part Mission as new investments and in part as supplementary acquisitions to Hakon Invest, with its origins and ideals in the ICA concept and existing investments. through its financial capacity, shall create prerequisites for entrepre- • Industrial sector neurship, growth and profitability in retailing. Hakon Invest will primarily invest in retail-oriented companies, which is the sector in which the Company has the best prerequi- Business concept sites for being able to contribute to value-generating growth. Hakon Invest shall make long-term investments, primarily in the retail • Investment size sector in the Nordic region, with a sound spreading of risk and Hakon Invest indends to build a portfolio of 8–10 companies, shall secure the ICA concept over the long term. Added value for where the initial equity investment is estimated to amount to shareholders will be created through growth in value in the invest- around SEK 100–500 million. ments and favorable direct returns achieved through being an • Geographical focus active and responsible owner. Hakon Invest will primarily invest in the Nordic and Baltic countries. Goals • Investment phase • The dividend level for Hakon Invest shall normally amount to at Hakon Invest prioritizes investments in companies that require least 50% of the Parent Company’s profit after tax. external capital, expertise and networks for continued expan- • The Hakon Invest Group strives to maintain an equity/assets ratio sion, in companies that need to implement structural changes or of at least 70% over time. in companies that need a change of ownership, for example in • The goals established for ICA AB are: conjunction with a change in generations. – to be the market leader in the countries in which ICA AB is rep- • Company characteristics resented Hakon Invest will invest in companies with a clear concept, stable – to increase sales over the long term faster than the total market positive cash flows, favorable growth opportunities and strong is increasing in each sub-market and motivated management. Furthermore, it is important that the – to achieve an operating margin (EBIT) of 3.5% to 4.0% companies have an entrepreneurial culture or that the introduction – to achieve a return on shareholders’ equity of at least 14% to of such a culture is deemed to be able to create such values. 16% over a business cycle • Investment horizon – to maintain an equity/assets ratio of 30% to 35% over the long Hakon Invest will work with its investments over the long term. term Consequently, there is no established time period within which • Hakon Invest and Ahold have pledged in the shareholders’ an investment must be divested. Divestments will take place when agreement to ensure that at least 40% of the ICA group’s earn- the time is considered right. ings after tax will be paid as a dividend. A prerequisite among other, however, is that this does not contradict sound business practice and that due consideration is taken to the ICA group’s investment plans and operational requirements. • The average total return on Hakon’s own invested capital, for Forma and future investments in portfolio companies, shall exceed 15% over the holding period for each specific holding.

INVESTMENT CRITERIA Investment focus Hakon Invest’s investment strategy is based on a tradition of family- • Unlisted • Favorable growth owned businesses, entrepreneurship and a long-term perspective. • Retail-oriented prospects Investments will primarily be made in unlisted Nordic retail compa- • Nordic and Baltic • Clear concept nies that are characterized by an existing market position with a countries • Entrepreneurship clear concept, stable and sound cash flows and strong and moti- • Positive cash flow • Strong and motivated vated management. Investments will be made in companies that management/owner have favorable growth and return potential that can be realized by an active and committed long-term owner.

14 Hakon Invest • Ownership role Hakon Invest as an active and responsible owner with representa- Hakon Invest will exercise clear owner control, thereby being a tion on the companies’ boards of directors. responsible and active owner. This demands that Hakon Invest At September 30, 2005, the Parent Company had an organi- has a significant ownership share, normally between 20 and zation consisting of 11 employees, of whom four constitute Group 49%. Hakon Invest also sees it as an advantage if previous own- management. In the new investment organization that was estab- ers remain in the company in some way. Being a long-term, lished in line with Hakon Invest’s new focus, there are four employ- responsible and active owner is an important part of Hakon ees (two investment managers and two controllers) reporting to the Invest’s investment strategy. Chief Financial Officer. Three persons work with accounting and Other criteria that Hakon invest takes into consideration are finance plus administration. All employees in the Parent Company strategy, previous performance, the organization’s competence, work in the head office in Solna, Sweden. company culture, entrepreneurial drive and financial and operative During 2004, the Parent Company had an average of 15 risks. With a scope for investment of SEK 2.8 billion, Hakon Invest’s employees. However, as part of the preparations for exchange list- portfolio will consist of and be focused on primarily unlisted holding, the new investment organization was built up and the organi- ings of varying sizes. The ambition is to keep financial risk at a low zation was strengthened, while service operations for members of level through low borrowing and high liquid capacity. ICA-handlarnas Förbund were transferred as of July 1, 2005 to the Hakon Invest’s long-term perspective on ownership will enable independent company ICA-handlarnas Medlemsservice AB. portfolio companies and their management to work over the long Hakon Invest considers that the Company at present has suffi- term to develop market positions and competitiveness. cient personnel. If Hakon Invest at some future date should require additional personnel, the Company expects to be able to recruit BUSINESS STRUCTURE, suitable personnel without difficulty. ORGANIZATION AND PERSONNEL Hakon Invest is managed by the President, who is responsible The Group consists of the Parent Company and the wholly owned for ensuring that daily administration of the Group takes place in subsidiary Forma plus the holding in ICA AB, which is a joint-ven- accordance with the guidelines and instructions established by the ture company owned together with Ahold. The companies operate Board of Directors. Furthermore, it is the President’s responsibility to independently with responsibility for earnings and profits and with ensure that the Group’s accounts are maintained in accordance

Overview of ownership and operations structure AGE DISTRIBUTION IN THE PARENT COMPANY (SEPTEMBER 30, 2005)

4 Hakon Invest AB

40%1) 2

Portfolio companies 1

0 25–35 35–45 45–55 55–65

ICA AB2) Forma Publishing Group 100% GENDER DISTRIBUTION IN THE PARENT COMPANY

Future Investment (SEPTEMBER 30, 2005) 1) According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in ICA AB in that it stipulates unity in decisions at the Annual General Meeting and Women in the Board of Directors. 3 persons 2) See section about ICA AB under “Hakon Invest’s holdings and ﬁnancial management” for an overview of the company’s organization.

Men 8 persons

Översiktlig ägar och verksamhetsstruktur

Hakon Invest 15 with laws and recommendations and to ensure that there is a well Selection: Hakon Invest will work actively to identify investment functioning accounting and reporting system. The President is also objects in line with the above strategy and investment mandate. The responsible for personnel matters. The President is the chairman of network that exists in and around Hakon Invest offers excellent oppor- the management group, which meets regularly with minutes tunities for identifying investment objects. Developing its own initia- recorded for each meeting. tives and business flows are strategically important for Hakon Invest. Hakon Invest’s investment organization consists as described above of four persons reporting to the Chief Financial Officer. The Evaluation: New investments are preceded by an intensive exami- Company’s investment managers have strong industrial and financial nation of the investment object. The evaluation includes company expertise. These persons work actively with existing holdings while visits, interviews with the management group and a review of their continuously evaluating attractive new investment objects. In addition, qualifications, estimation of potential market growth, analysis and external financial and legal counsel will be engaged as required. valuation of the company’s strategy, positioning and concept. In The Finance and Accounting function consists of two persons addition, an analysis of the company’s financial position is per- reporting to the Chief Financial Officer. The function’s personnel are formed that provides the basis for the investment calculation and its responsible for preparing the Group’s accounts, forecasts and assumptions regarding such factors as future sales growth, margins, budgets, for central finance operations and for rationalization and working capital and cash flow. When a basic scenario has been increasing the efficiency of finance and accounting work within the established, the opportunities for creating added value through Group. The Finance and Accounting function is also responsible for operational improvements, structural changes and financial meas- management of financial assets, which at September 30, 2005 ures are analyzed. This analysis constitutes an important part of were valued at SEK 2.8 billion. Hakon Invest’s investment plan and its role as owner. Persons in The Legal function consists of the Chief Legal Officer, who is Hakon Invest’s broad network with the appropriate expertise and responsible for matters of a legal nature. The Chief Legal Officer assists experience are included in the evaluation phase. associated companies with legal services as required on market terms. The result of the evaluation phase together with an analysis of The Information function consists of the information manager, legal commitments, the company’s financial reporting and social who is responsible for the Group’s external and internal communica- responsibility, provide the foundation for the final investment decision. tion. In addition, Hakon Invest has employed an IR manager who will be responsible for investor relations and similar issues. Investment: If the company is deemed attractive, a more thorough Hakon Invest assesses that the Parent Company’s ongoing analysis is performed with respect to certain factors. After this analy- expenses, excluding transaction costs, amount to about SEK 35 mil- sis, supporting materials are compiled for an investment decision and lion on an annual basis. decision is taken. If the decision is positive, the financial structure and circumstances are adjusted in each individual case to allow an active INVESTMENT PROCESS AND OWNERSHIP ROLE and committed ownership role on the part of Hakon Invest. Investment process Hakon Invest works actively to identify potential investment objects. Owner control: To achieve favorable long-term growth in value, Work with investments follows a structured process. Hakon Invest focuses on each individual holding, stimulates entre-

INVESTMENT PROCESS

Selection Evaluation Investment Owner control Divestment

16 Hakon Invest preneurial thinking, uses and develops the network and contributes more frequently than the Board of Directors and monitors the ongo- capital. Active ownership is primarily exercised through work on the ing operations of ICA AB and its various business areas, in part with board of directors and is adapted to the company’s specific require- the support of a special reporting package. The committee has been ments and challenges. formed with the purpose to prepare items to be discussed and Together with any other owners and company management, decided by the Board of Directors and to support the CEO of the Hakon Invest develops a strategy and business plan that includes Group to carry out the decisions made by the Board. The Board may specific measures and milestones intended to improve the com- delegate to the committee to take action or decide on certain issues. pany’s strategic position, growth and profitability. This plan will then The committee has received mandate from the Board to decide on be followed up continuously and adapted to prevailing market con- investments and divestments of a maximum of SEK 100 million and ditions. Companies in which Hakon Invest invests should feel secure of financial positions beyond ICA AB’s financial policy. The com- in having Hakon Invest as an owner. As a result, the company and mittee has not received any other decision mandate. The committee its management should be able to focus all energy and resources prepares minutes on the decisions taken and reports regularly to the on further development of operations. Board. The Board has the overall responsibility and exclusive com- Divestment: Divestment of companies will take place when the time petence to decide in more important matters affecting the Company. is deemed appropriate and take place in a responsible manner that Board members nominated by Hakon Invest also participate in the takes the company’s long-term development into consideration. The work of the Board’s Remuneration Committee and its Audit sale should always take place with the objective of generating as Committee. great a return as possible for Hakon Invest’s shareholders. Forma has also shown strong growth with Hakon Invest as owner. Hakon Invest’s owner role in Forma is actively exercised Owner control in ICA AB and Forma through work on the Board of Directors and through support in In all work with its holdings, Hakon Invest will strive to leverage its strategic matters. Claes-Göran Sylvén is the Board Chairman and experience and industrial networks and to contribute to the sharing Göran Hesseborn is a Board member. The Board actively works of knowledge, ideas and methods among the portfolio companies. with strategic questions and business development. Hakon Invest Hakon Invest’s owner role in ICA AB is primarily exercised also carefully monitors Forma’s financial and operative development through active work on the Board of Directors, where Hakon Invest’s through well-established reporting routines. In addition to work on President Claes-Göran Sylvén is the Board Chairman and its Chief the Board of Directors and meetings, Claes-Göran Sylvén and Legal Officer Fredrik Hägglund is a Board member. Ahold and Göran Hesseborn both work together with the President and man- Hakon Invest each appoint four of the eight members of the Board of agement on major issues. Directors of ICA reserved for the owners. In addition to Claes-Göran Sylvén and Fredrik Hägglund, Hakon Invest appointed the ICA retail- Shareholders’ agreement with Ahold ers Peter Berlin and Per-Anders Olofsson as Board members. Ahold During 1999, ICA-handlarnas Förbund and the Dutch food retail appointed Anders Moberg, CEO and President of Ahold, Dirk group Ahold initiated discussions regarding ownership in ICA AB. Anbeek and Arthur Brouwer as Board members in ICA AB. As a result of these discussions, the plans for an exchange listing of Previously, Hannu Ryöppönen was also a member of the Board of ICA, which were being considered at the time, were terminated. Directors of ICA AB, but this assignment was terminated when he Instead, the ICA group underwent the most extensive change in its resigned his employment in Ahold. There is thus at present on posi- ownership to date, when Ahold became an owner in 2000. The tion vacant on the Board. Hakon Invest monitors ICA AB’s financial transaction was formally implemented as an acquisition of the then and operational development carefully through established reporting ICA AB via a company that was newly formed by the owners and routines for ICA AB and frequent meetings with ICA AB’s group man- which directed an offering to shareholders of ICA AB at that time agement. The Board of Directors of ICA AB appointed Chairman through a targeted share issue, whereupon the newly established Claes-Göran Sylvén, Vice Chairman Anders Moberg and President company called for compulsory redemption of outstanding shares Kenneth Bengtsson as an Executive Committee. This committee meets and obtained preferential rights to them. After the transaction, 50%

Hakon Invest 17 of the ICA group was owned by Ahold, 30% by Hakon Invest1), the • ICA AB’s operations shall be further developed in the Nordic and company through which ICA-handlarnas Förbund’s ownership of ICA Baltic region, with the exception of Denmark, which since 2004 AB was exercised, and 20% by Canica. In conjunction with this, a is no longer included in the agreed geographical area of activity. private placement in Hakon Invest was implemented, which resulted • ICA AB’s Board of Directors shall consist of eight members in preference shares being issued to the former owners of ICA AB, elected by the Annual General Meeting and four deputy mem- who mainly consisted of ICA retailers and former ICA retailers. The bers. Of these, Hakon Invest and Ahold each have the right to newly established company and the former ICA AB were merged in nominate four members and two deputy members. The Board 2002 and comprise the company that is currently ICA AB. shall also include representatives of the employees. As a result of the ICA group’s ownership change, Hakon Invest, • The parties are subject to a right-of-first-refusal clause permitting Canica and Ahold formulated ashareholders’ agreement in 2000. them to acquire shares at market price in connection with the Among other points, the agreement, which expires at the end of transfer of shares. Shares may only be transferred to a party who 2040, contains clear-cut rules for when and how changes in any of the signs the shareholders’ agreement. Hakon Invest may exercise its parties’ ownership may be conducted. The agreement prevented the right of first refusal for all shares or for a portion of the shares, so parties from transferring their shares during the first four years after the that the Company’s holding would amount to 50% of the shares agreement was signed. After April 27, 2004, any party who so in ICA AB. Since 2004, Hakon Invest no longer has an option to desired was permitted to reduce or completely terminate its ownership, sell its shares to Ahold. whereby the remaining owners were entitled, and in certain cases • The parties may not directly or indirectly engage in operations obliged, to acquire the shares on offer, subject to certain conditions. that compete with ICA AB in the geographical markets covered In May 2004, supported by a provision in the shareholders’ by the agreement. The term “operations that compete with ICA agreement, Canica offered Hakon Invest the opportunity to acquire AB” is not intended to include operations that to a material extent Canica’s 20% interest in ICA AB. Hakon Invest decided not to accept (in terms of more than 95% of profits or sales) pertain to activities this offer. Canica subsequently invited Ahold, in accordance with the other than food wholesale or retail operations. shareholders’ agreement, to acquire the shares. Ahold and Hakon • If a party’s ownership falls below 30%, the requirement for con- Invest entered into an agreement pursuant to which Hakon Invest sensus in respect of all resolutions made by the Annual General undertook to acquire half of the ICA AB shares offered by Canica. By Meeting and the Board of Directors no longer applies and only October 25, 2004, Ahold and Canica had finally agreed on the applies to certain typical intervention decisions. terms and conditions for the transaction, and Hakon Invest acquired • If a party’s ownership falls below 20%, the agreement ceases to half of the shares that Ahold had acquired from Canica. apply. Following these transactions, Ahold owns 60% and Hakon • The earliest date that notice may be served terminating the Invest 40% of ICA AB. The shareholders’ agreement from 2000 is agreement is at the end of 2040. still in effect, subject to a number of supplements and revisions • If ICA-handlarnas Förbund should sell additional shares in Hakon agreed during 2004. According to the agreement, as long as both Invest, or if the Förbund’s ownership interest is reduced in any of the parties’ ownership amounts to between 30% and 70%, the another manner and another party secures an ownership interest parties retain equal influence over ICA AB through a contractual that exceeds 50% of the shares or votes in Hakon Invest, this requirement of consensus on resolutions made by the Annual would be a breach of the shareholders’ agreement. In the event General Meeting and by the Board of Directors. Accordingly, nei- of such a breach of agreement, Ahold would be entitled to ther Hakon Invest’s nor Ahold’s influence over ICA AB was changed acquire Hakon Invest’s shares in ICA AB. ICA-handlarnas by the share transaction implemented in 2004. Förbund’s Articles of Association state that the Förbund shall own In other respects, the shareholders’ agreement, with the supple- a minimum of 51% of the shares in Hakon Invest. ments and revisions agreed during 2004, has the following main implications:

1) Hakon Invest was at this time named ICA Förbundet Invest AB.

18 Hakon Invest • From the end of 2004 and during a subsequent maximum period SECTOR FOCUS of five years, the parties are obliged, at the request of either With its roots in the ICA sphere, Hakon Invest possesses substantial party and in certain agreed situations relating to company acqui- retail expertise and has an extensive network. This core compe- sitions and in the event of a serious financial situation for the ICA tence means that Hakon Invest is primarily focused on Nordic Group, to contribute, to an extent proportional to their sharehold- unlisted retail companies. ing in ICA AB, a total of not more than SEK 1.8 billion through the issue of new shares. For Hakon Invest, the conditional under- The Nordic retail sector – market trends taking corresponds to a maximum of SEK 720 million. Neither of The market for retail sales and infrequently purchased goods shows the parties has raised the matter of such a new issue of shares stable and favorable growth over the entire Nordic region driven by and nor is such a matter the subject of discussion between the the increase in private consumption in recent years. The positive trend parties or in ICA AB’s Board of Directors. The probability of this is expected to continue, primarily as a result of low interest rates, antic- conditional undertaking actually being realized is deemed to be ipated tax reductions and somewhat lower unemployment. very unlikely, but is under continual review. • Since 2004, each party has the right to initiate the matter of an Nordic retail sector today exchange listing of shares in ICA AB, including the sale of all or There is a tradition in the Nordic countries of developing new, suc- part of such a party’s shares. cessful retail companies. An important reason for the success of • Since 2004, the parties have contributed to ensuring that ICA AB’s these players is that they have built a business on a clear and internal control and financial reporting are adapted to Ahold’s obli- uniquely formulated concept that appeals to many consumers and gations in accordance with US Sarbanes-Oxley legislation pertain- that has proven to be sustainable over a longer period. Many ing to Ahold’s ownership in ICA and to Hakon Invest’s obligations Nordic retail companies have also been successful in establishing in accordance with generally accepted accounting practice. their concepts outside their home countries. Examples include IKEA; H&M, Jysk, Elkjöp, Clas Ohlsson, K-Rauta and Mekonomen. Purchase guarantee in accordance with Retail sales in the Nordic region are still to a high degree a Framework Agreement on behalf of Ahold local phenomenon, however. The presence of international retail In the agreement, named the Framework Agreement, which regu- chains is low, compared with the rest of Europe. One reason for this lated the terms and conditions for Ahold’s acquisition of shares in is that the Nordic countries, with their small populations and large the ICA Group in 2000, Hakon Invest made certain guarantees, distances between population centers, have not been prioritized by including guarantees pertaining to certain relationships concerning retail companies in international expansion. The presence of inter- ICA’s dealings with Ahold. With respect to most of these guarantees national retailers is increasing constantly, however, particularly and special undertakings, the period within which Ahold is to for- through Nordic companies expanding in the Nordic region. In ward any such claims has now expired without any such claims these cases, Sweden is particularly attractive, given its geographic having been made. Claims may possibly be made up to May location and its large population relative to its Nordic neighbors. 2010 with respect to a certain environmental matter in the US What is also characteristic of Nordic retailing is the geo- related to a company in the former Hakon Gruppen AS Group. graphic concentration to major cities, a trend that has accelerated There is also a possibility that claims relating to the right of owner- with the strong growth of shopping centers and hypermarkets over ship to the transferred shares in ICA AB or to ICA AB’s subsidiaries the past 15 years. This is most evident in Sweden and Norway. In may still be made. Hakon Invest’s liability is formally limited to SEK the other countries, the number of shopping centers is lower due to 1,340 million. Hakon Invest is not aware of any circumstance that geographic prerequisites and legal restrictions with regard to local- entails a significant risk that Ahold could make a claim for which the ization and size. Company would be responsible. The market is also influenced by the fact that a few players have gained a strong position in various segments where low prices are often a significant factor.

Hakon Invest 19 Trends – When many of the major retailers’ concepts are based on price as There are many indications that the presence of international play- the primary competitive factor, at the cost of location, quality, ers will continue to increase, as will the concentration of retail sales product selection and service level, scope is also created for play- to population centers and their shopping centers. Consumers are ers who place the primary emphasis on an attractive shopping increasingly price conscious, and many retail companies will con- environment for the consumer. This may mean offering a more per- tinue to build successful businesses on clear concepts with price as sonal relation, for example, or investing in store fittings and prod- the primary means of competition. To be able to offer lower prices ucts design and attracting customers with store activities. to the consumer, companies must continue their work to reduce pur- – The Internet’s share of total retail sales remains limited but is chasing costs, centralize such functions as purchasing, marketing expected to continue to increase. Internet retailing is most preva- and product development and utilize sales space and personnel lent in Sweden, and the most popular goods sold on the Internet more effectively. The concept-driven retail companies are expected are CDs/music, books, electronics and travel. Here there are to continue taking market shares from specialty retailers. also substantial opportunities for new players with innovative, Apart from these general trends in the Nordic retail market, clear and economically viable concepts. there are a number of more or less evident trends. The following are some examples: HAKON INVEST AND THE MARKET FOR – Standardization of the major retail companies’ stores is expected INVESTMENTS IN UNLISTED COMPANIES to continue, with an increasingly uniform image, store layout, Since Hakon Invest will invest primarily in unlisted companies in the location, etc. Clarity of concept is strengthened to achieve Nordic retail sector, this means that Hakon Invest will be active in greater recognition and a more similar experience for the con- the market for unlisted companies, which is called the private equity sumer, which is assumed to increase customer loyalty. Individual market. stores tend to be larger but fewer in number. – Vertical integration in the retail value chain is increasing. Risk capital Suppliers strive for forward integration and to take control over the customer relation, at the same time as retailers integrate back- wards and to an increasing degree market products under their

own brands. Risk capital – Retail companies’ use of customer loyalty systems, such as customer cards and membership cards linked to bonus systems is also expected to increase. This phenomenon is for the time being Public Equity Private Equity Venture capital Venture capital most prevalent in Sweden. for listed companies for unlisted companies – At the same time, the increasingly uniform offering, in which the same stores are found in more and more cities and in the same shopping centers, creates opportunities for innovative new players with new concepts. There is always room for new concepts Business Angles Venture Capital Buyout Investments by Investments in seed or Buyout deals that are developed in pace with changes in people’s life styles private persons start-up companies or supplemented by and preferences. Notable examples are the increasing number expansion phases loan ﬁnancing of single-person households and the trend towards a 24x7 society in which consumers want to be able to make their purchases at different times during the day and in the week. Source: Swedish Private Equity & Venture Capital Association.

20 Hakon Invest Market for investments in unlisted companies Venture Capital Buyout What characterizes a private-equity company is that it works with risk capital investments in unlisted companies. The private equity concept is usually considered to include investment both in the earlier and later phases of a company’s development. Private-equity compa-

Cash ﬂow Maturity nies can be divided into two types, which are private-equity companies that manage private-equity funds and private-equity companies Decline that use funds available in operations for investments in various com- Expansion panies. Characteristic of private-equity funds is that they are owned by several different investors (such as banks, pension funds and insurance companies) and a management company. Usually the fund is limited both in its amount and its duration. The management company is then responsible for managing the fund, which includes acquisitions of portfolio companies, their development and in the Time final stage divestment. Examples of private-equity companies respon- Seed and start-up sible for private-equity funds are Altor, EQT, Industri Kapital, Nordic Capital, Procuritas, Segulah and Priveq. Characteristic of the second type of private-equity companies is that they are often limited liability Source: Swedish Private Equity & Venture Capital Association. companies that obtain capital for investments via share capital from the owners or borrowed capital from credit institutions. Some examples of companies of this type is Ratos, 3i, Stena Adactum and Novax. This is also the structure that is most comparable with the AMOUNT INVESTED IN EUROPEAN UNLISTED COMPANIES structure that Hakon Invest will have. However, Hakon Invest differs from private-equity companies in general in that Hakon Invest will EUR have a more long-term perspective on its investments and work with- billion 40 out any established time limit for divestments and that it will have a clear sector focus for its investments. 35 Hakon Invest considers that likely competitors are found both 30 among the privat-equity funds and among the limited liability companies. 25

20 Development of market for investments in unlisted companies 1999 2000 2001 2002 2003 2004 The private-equity market has shown variable growth over the past six years, both in Europe and in Sweden. The average increase in Source: EVCA/Thomson Venture Economics/PriceWaterhouseCoopers. investments between the years 1999 to 2004 amounted to 8% per year in Europe, while the corresponding figure for Sweden was 9%. In 2004, capital managed by private-equity companies in Sweden amounted to about SEK 215 billion, of which some SEK AMOUNT INVESTED IN SWEDISH UNLISTED COMPANIES 115 billion was invested. During that year, about SEK 17 billion

SEK billion 20

5 1999 2000 2001 2002 2003 2004

Source: Swedish Private Equity & Venture Capital Association.

Hakon Invest 21 was invested in unlisted companies, corresponding to 0.58% of RISK CAPITAL INVESTMENTS AS % OF GDP 2004 GDP. This put Sweden in second place in Europe after the UK. The

figure above left shows the ten European countries with the highest % share of venture capital investments. The figure also shows the 1.2 European average. 1.0 The buyout segment, meaning investments in more mature and 0.8 established companies, accounts for the largest share of the 0.6 invested capital. The fact that the buyout segment is larger than the 0.4 venture-capital segment in which capital is invested in companies in 0.2 early stages of development is natural, since buyout investments 0.0 PortugalFinlandNorgeTysklandDanmarkEuropaSpanienain genomsnittHollandFrankrikenceSverigeStorbritannienUK lands often take place in companies that have had time to build up sub- Sp verage Fra PortugalFinlandNorway Sweden GermanyDenmark n a stantial value in comparison with newly started companies. ea Nether With respect to the number of players active in the Swedish pri- Europ vate-equity market, the number has increased sharply in recent Source: EVCA/Thomson Venture Economics/PriceWaterhouseCoopers. years. Although buyout players account for the major share of the total invested capital, most players are active in the venture capital segment. DISTRIBUTION OF THE NUMBER OF INVESTMENT IN DIFFERENT PHASES, UNLISTED COMPANIES 2004 The venture capital market and private-equity companies are an important source of financing for many companies and thus for both No. growth and development of industry. The availability of venture cap- 800 ital, however, is not the only thing that private-equity companies 700 contribute. What characterizes private-equity companies is that they 600 500 contribute to a company’s development in other ways. Private-equity 400 companies are often active in their portfolio companies, particularly 300 with respect to strategic and financial issues and recruitment. 200 100 Characteristic of companies supported by a private-equity com- 0 t t Phases pany is that they often make significant investments and show rapid Sådd Start-upExpansiononReplacementBuyoutFas okändTotalt Seed emen hase Total Start-up Buyou Expansi growth, which naturally creates jobs. In this way, private-equity Replac Unknown p companies also perform an important social function. Source: Swedish Private Equity & Venture Capital Association.

DISTRIBUTION OF CAPITAL INVESTED IN UNLISTED COMPANIES, SEK M 2004

SEK M 20,000

15,000

10,000

5,000

0 t Phases Sådd Start-upup ExpansionReplacementBuyoutou Fas okändse Totalt Seed ha Total Buy Start- lacement Expansion own p Rep Unkn Source: Swedish Private Equity & Venture Capital Association.

22 Hakon Invest financial management Hakon Invest’s holdings and Hakon Invest’s

23 Hakon Invest has holdings in ICA AB and the Forma Publishing Group, as well as financial investments to manage the Company’s cash flow.

ICA AB Hakon Invest’s holding in ICA AB is a joint-venture company with Ahold. The description of ICA AB is based on information published by ICA AB and information provided by ICA AB at the request of Hakon Invest. After consultation with ICA AB, Hakon Invest has decided how the information would be presented in the prospectus. Hakon Invest’s Board of Directors is responsible for the contents of this prospectus.1) As a part of the Stockholm Stock Exchange’s review process prior to the exchange listing of Hakon Invest, a legal review of ICA AB has been conducted.

ICA AB is one of the Nordic region’s leading retail companies with ICA AB comprises ICA Sverige, ICA Norge, Etos and the partly focus on food and meals, with slightly more than 2,600 of its own owned companies Rimi Baltic and Netto Marknad, which combined and associated stores in Sweden, Norway and the Baltic countries. have a large network of stores in Sweden, Norway and the Baltic coun- The company has net sales of more than SEK 71 billion and is 40% tries. It also includes ICA Meny, which specializes in distribution to owned by Hakon Invest and 60% by Ahold. However, by agree- restaurants, caterers and convenience stores. ICA AB also offers finan- ment, the owners have equal influence over ICA AB. cial services to Swedish customers through ICA Banken.

Hakon Invest

40% 1) 50% Rimi Baltic Portfolio companies ICA AB 50% Netto

ICA Sverige ICA Norge ICA Meny ICA Banken Etos Forma Publishing Group 100%

Future Investment 1) According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.

About ICA AB

HAKON INVEST AHOLD Ownership share 40% 60% Influence1) 50% 50%

BOARD MEMBERS APPOINTED BY: HAKON INVEST AHOLD Claes-Göran Sylvén (President, Hakon Invest) Anders Moberg (President and CEO, Ahold) Fredrik Hägglund Dirk Anbeek (Chief Legal Officer Hakon Invest) (Senior Vice President Business Control, Ahold) Peter Berlin (ICA retailer) Arthur Brouwer (Chief Business Support Officer, Ahold) Per-Anders Olofsson (ICA retailer) Vacant

20022) 20032) 20042) 2004 (IFRS)2) JAN–SEP 2005 (IFRS) Sales (SEK M) 70,908 71,980 71,811 73,531 52,514 Operating profit (SEK M) 2,535 2,120 1,866 1,977 1,341 Number of employees (average) 3) 15,732 16,836 17,206 18,781 12,295 Number of stores (at year-end) 4) 2,955 2,829 2,628 2,628 2,581

1) According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors. 2) The figures include business areas that were divested during the year. 3) Refers to the average number of employees calculated on the basis of 1,800 annual working hours. 4) Also includes joint venture stores (Netto and Rimi Baltic).

1) See section “Background and reasons”.

24 Hakon Invest’s holdings and financial management ICA AB’s geographic market and operations ICA AB views the Nordic region and Baltic countries as its primary geographic market. ICA AB is currently represented in Sweden, Norway, Estonia, Latvia and Lithuania. The goal is to be the market leader in the countries where ICA AB is represented. The following table provides a general description of ICA AB and its various areas of operation. The areas of operation are described in more detail later in this prospectus.

Overview of ICA AB1)

SALES NO. OF EMPLOYEES PARENT COMPANY (SEK M) (AVERAGE) 2) ICA AB 3) The operations of the parent company are described below: 547 474 Finance Finance includes financial control, accounting, shared services, treasury & tax, legal, internal audit and strategic projects. Retail Retail includes market, business development, market analysis, corporate communications, human resources, etc. Supply Chain Includes sourcing, logistics development and IT.

WHOLLY OWNED OPERATIONS ICA Sverige 4) ICA Sverige is one of the leading retail companies with focus on food and meals. ICA Sverige’s operations comprise sales, operations and new establishments. 5) 43,373 4,407 ICA Norge 4) ICA Norge is one of the leading retail companies with focus on food and meals with stores operated on a proprietary basis or as franchises. ICA Norge’s operations comprise sales, operations and new establishments. 5) 19,896 5,540 ICA Meny ICA Meny is one of Sweden’s leading food, beverage and kitchen equipment suppliers to restaurants, caterers and convenience stores. 4,355 899 ICA Banken ICA Banken shall make it easier for Swedish ICA stores’ customers to manage their economy and as a result strengthen customer loyalty. 58 121

PARTLY OWNED OPERATIONS Rimi Baltic (ICA Baltic) 6) As of 2005, Rimi Baltic is equally owned by ICA AB and Kesko Livs, who jointly are developing one of the most modern retail chains in the Baltic with wholly owned stores. 3,307 5,286 Netto 7) Netto is equally owned by ICA AB and Dansk Supermarked A/S. Netto operates on a hard discount basis. The concept was developed in Denmark, where Dansk Supermarked A/S manages the chain. 1,194 540 1) Figures in the table refers to 2004. 2) Refers to the average number of employees calculated based on 1,800 hours of working time. 3) Includes the specialty retain chain Etos with sales of about SEK 31 million and 23 employees. Etos has wholly owned stores and combines products for health and beauty. Also includes some subsidiaries within importing and finance. 4) Within each national operations area, the consumer goods operations are reported integrated with property management (see more information under ”Finance group function” below). 5) Sales refer to ICA Sverige and ICA Norway shall help to stimulate sales to consumers. Operations means providing the stores with advise and measures to achieve efficient store operations. Establishments involves identifying and developing new store locations and to participate in the development of existing stores through renovation and expansion. 6) Figures in the table refer to the by ICA AB during 2004 wholly owned operations ICA Baltic. Rimi Baltic is a joint venture with Kesko Livs (50/50) formed in 2005. 7) ICA AB’s share amounts to 50%.

Hakon Invest’s holdings and financial management 25 Business model Revenue sources The ICA group originated in the ICA concept, where individual ICA AB’s main revenue sources can be divided into retail sales, retailers join together in areas such as sourcing, IT and logistics to product supply, ICA agreements/franchising and property, services achieve the same economies of scale as wholly owned chains. and bank – as shown in the following table. Local retailers and ICA AB’s various areas of operation serve customers in their own markets through locally adapted stores and Retailing. Through certain of its areas of operation, ICA AB conducts offerings, while the group coordinates functions that customers do retailing operations – that is, sales to consumers. ICA Sverige receives not see. The ICA concept is ICA AB’s greatest strength in meeting revenue from the consumer by operating Maxi Special. Maxi Special the challenges and opportunities currently facing the company – is a special department of the Maxi stores that sells home and leisure from new competitors, the growing popularity of eating out and articles. As of 2005, revenues are also consolidated from the retail increased consolidation among suppliers. The key is to utilize companies in which ICA AB during the start-up period following the economies of scale combined with local adaptations as close to store establishment owns more than 50% of the shares. Retail sales customers as possible. are also a key area in Norway, where ICA AB owns many of the ICA AB’s operations include the management of sourcing and stores, as well as in Rimi Baltic and Netto, in which the stores are logistics, the development of strategies for various store concepts owned by the particular company. As regards Etos, ICA AB owns all and marketing, the management of communications and human stores and consequently consolidates all retail sales. resources issues, as well as the development of sales, operations and store establishment. Sales development should stimulate sales Product supply. ICA AB functions both as a purchaser and product to consumers. In developing its operations, ICA AB aims to assist coordinator that purchases goods and coordinates logistics and dis- the stores by providing advice and undertaking specific measures tribution and then sells these goods and services to the company’s to achieve more efficient store operations. In conjunction with store customers, which are the ICA stores in Sweden and Norway. establishment, ICA AB will identify and develop entirely new store Goods are also supplied via ICA Meny to restaurants, caterers and locations and help develop existing store locations through re- convenience stores. furbishment, modernization and additions. ICA AB’s activity takes According to prevailing business terms, sale of consumer goods place in cooperation with the ICA retailers, who often own and takes place from ICA Sverige to the stores with a fixed, specific operate the stores. ICA AB’s efforts in these areas are aimed at markup on the goods with the exception of private label goods that increasing sales to consumers and, hence, to the stores, as well as the stores may only purchase from ICA AB and for which the increasing the profitability of the stores and of ICA AB in order to markup varies among different items. In Norway, the markup occurs ensure that the operations will be successful in the long-term. at the item level.

Sources of revenue

ICA SVERIGE ICA NORGE ICA MENY ICA BANKEN ETOS RIMI BALTIC NETTO Retail sales From Maxi Special From wholly – – From From From and stores where owned stores wholly wholly wholly ICA Sverige owns more owned owned owned than 50% of the shares stores stores stores Product supply From deliveries to From wholly From – – – – ICA stores and owned franchise restaurants, Maxi Special and associated catering and stores service sales ICA Agreement/ From royalties From – – – – – Franchising and/or profit franchise sharing fees Real estate From rental From rental – – – – – income and income and real estate sales real estate sales Services From sales of such – – – – – – services as advertising production, training and store technology Banking – – – From sales – – – of financial services

26 Hakon Invest’s holdings and financial management Stores in Sweden also pay a sales-based fee to ICA Sverige to Vision cover the costs of joint resources and development of ICA’s opera- ICA AB’s aim is to make every day a little easier. tions. In Norway, the corresponding fee is included in the franchise fee described below. Mission ICA AB’s mission is to be the leading retail company focusing on ICA agreements/Franchise. One source of revenue is the royalty food and meals. and/or portion of profit or franchise fee that ICA AB receives from the stores that are not wholly owned by ICA Sweden or Norway. Strategies The stores pay for using ICA AB’s brand name and store locations. ICA AB should be a farsighted, dynamic company with solid The royalty and the franchise fee are sales-based – which implies finances and a commitment to the environment and social issues. that it is in ICA AB’s interests that these stores perform as well as pos- The keys to ICA AB’s approach are prioritization, coordination, sim- sible. In Sweden, the stores pay a royalty and/or a portion of their plicity and cost reduction. In specific terms, this means the group profit, whereas the stores in Norway pay a franchise fee. has formulated the following strategies for its operations:

Properties. ICA AB’s property operations own the franchise stores in • Utilize ICA AB’s economies of scale by many cases or hold leases on the store premises. For using the store coordinating central functions and concepts premises, the individual retailers in both Sweden and Norway thus ICA AB will increase coordination of central functions and con- pay rent on market terms. The sale of properties is another source of cepts at the Nordic level to take advantage of synergies between revenue for ICA AB. companies. These efficiencies will be largely reinvested in lower prices, to strengthen ICA AB’s profitability and position in the Services. ICA AB sells services to those retailers who so desire. ICA Nordic food retail market. AB offers such services as advertising production, training and store technology. Most of the services currently offered are only available • Locally adapted concepts in the Swedish market. At the same time that it uses its scale to coordinate and benefit from synergies, ICA AB will continue to adapt its local offerings Bank. The sale of financial services is ICA Banken’s source of rev- to consumers’ wishes. These local adjustments can be made by enue. the individual retailer or through concepts designed for various geographic markets. Financial targets ICA AB’s long-term goal is to increase sales faster than the total mar- • Cost efficiency ket is growing in each sector. The ICA group is working to improve the efficiency of its opera- The profitability goal is an operating margin (EBIT) of tions and reduce costs. 3.5–4.0%. The return on equity over a business cycle should be at least 14–16% and the long-term equity/assets ratio 30–35%. • Common format strategy According to the shareholders’ agreement, Hakon Invest and The ICA group has adopted a format strategy for its operations in Ahold have pledged to ensure that ICA AB will pay a dividend of at Sweden and Norway consisting of concepts for hypermarkets, least 40% of the ICA group’s profit after tax. This assumes, however, supermarkets, convenience stores and discount stores. that the dividend does not contradict sound business practice and that due consideration is taken to the ICA group’s investment plans • Price and assortment and operational requirements. ICA AB will increasingly focus on cutting prices while developing its product range and improving efficiencies.

ICA’s private labels One of the ICA group’s strategies is to increase the ICA is the umbrella brand and should be Euroshopper is ICA AB’s low-price assort- share of its own labels. The range of ICA private- associated with the core values simple, personal, ment. Euroshopper was developed in cooperation label (PL) products should offer customers quality safe, inspiring and modern. The products are sold with nine European companies in 15 countries, products at low prices while strengthening cus- in ICA stores in Sweden and Norway. including Kesko, Albert Heijn, Dansk tomer loyalty. Supermarked and ICA AB.

Hakon Invest’s holdings and financial management 27 • Adapt to changing consumer buying habits ICA Sverige, ICA Norge and ICA Meny, as well as the individual By improving its stores and offerings, ICA will adapt to changing stores, in various matters. The three overall group functions are consumer buying habits. described in further detail below. Detailed descriptions of the other areas of operation are provided in subsequent sections. • Offer an attractive product range focused on private labels, fresh foods and non-food items Finance group function ICA AB will continue to emphasize fresh foods, non-food items The group’s Finance function includes Financial Control, and private label (PL) products. The group’s range of PL products Accounting, Shared Services, Treasury & Tax, Legal, Internal Audit gives consumers greater choice, high quality and lower prices. and Strategic Projects. The Finance unit is a group support function These measures will increase sales and profitability for the ICA but it is also a support function that individual retailers can take group and the retailers. advantage of, for a fee. The products profile ICA AB by representing quality and Financial Control’s areas of responsibility cover all parts of the value for money. Many of the products also have added value ICA group – that is, the Finance, Retail and Supply Chain group that other products lack. ICA AB has ecological and fairly functions, as well as the sales companies. The Accounting unit labeled products, for example, as well as alternatives for persons includes all employees involved in the preparation of reports to with allergies. The share of sales continues to increase. In management and the Board of Directors. The Shared Services unit Sweden, it amounts to about 12% and in Norway to 6.5%. handles accounting, payments, and payroll administration, and the unit’s services are purchased by a large proportion of the individual • Social responsibility retailers. The Treasury & Tax unit handles borrowing, cash flow and The ICA group contributes to a sustainable society by minimizing tax issues, whereas Legal is responsible for legal issues. The Internal the negative impact of its operations on the environment and tak- Audit unit reports directly to the ICA AB’s audit committee, so indi- ing responsibility for the conditions under which its own products rectly it reports to the Board as well. The Strategic Projects unit eval- are produced. ICA AB also promotes the health of its customers uates acquisitions and sales of various operations. and employees by offering safe and nutritious products and During 2004, the group completed a major restructuring of the through continuous improvements in its working environments. internal bank function. This function, which was previously provided through ICA Finans and to a certain extent in ICA AB, now operates Organization as a Swedish branch of one of the group’s Dutch subsidiaries. The ICA group’s goal is to be the market leader in the areas in Several treasury functions are handled by employees in this branch. which it competes. To meet the increasingly challenging competi- The branch office has in turn acquired ICA Finans AB from a Dutch tion, ICA AB is focusing even more on sales-enhancing measures subsidiary with the objective of managing group lending through this and cost effectiveness in all operations. Coordination within and subsidiary. The branch office and ICA Finans together comprise the between the group’s different operations is a top priority. group’s entire internal banking function. See also the heading A joint venture in the Baltic region with Finnish Kesko Livs was established in a bid to attain market leadership in this region more ICA AB’s organization quickly. ICA Sverige and ICA Norge are strictly sales companies with responsibility for operations, sales and new establishments. ICA ICA AB Meny is also focused on sales. The underlying operations Finance, CEO and President Retail Sales and Supply Chain function as support functions for the Rimi Baltic AB sales companies. 50% ICA AB is the parent company of the ICA group. The parent company, including the wholly-owned Etos and certain import and Netto Marknad AB finance-oriented subsidiaries that comprise the ICA AB operations 50% segment, have net sales of SEK 547 million, of which external net sales account for SEK 202 million and internal net sales for SEK 345 Finance Retail Supply Chain million. The external net sales consist of IT services and sales in Etos. The internal net sales consist of fruit import. The internal net sales are ICA Fastig- Etos AB eliminated in conjunction with the preparation of consolidated heter AB accounts. The parent company also includes several cost items. ICA Banken AB These are mainly costs for personnel and external services. Other- wise, revenues and expenses that arise in ICA AB are distributed among the subsidiaries. ICA Sverige AB ICA Norge AS ICA Meny AB ICA AB includes three overall group functions: Finance, Retail and Supply Chain. These functions support the sales companies 28 Hakon Invest’s holdings and financial management “Supply chain group function” where sourcing operations in the portion of the store properties through its real estate operations, or Dutch subsidiary are described. holds the leases on the store premises in Sweden and Norway. The ICA group’s real estate operations report to the Finance These premises are then leased out at market terms to individual ICA function. Real estate operations are an integral part of ICA AB’s stores and to Maxi Special AB in Sweden, which is one of the business model and provide important support for retail operations wholly owned subsidiaries of ICA AB that is in charge of the special in which success is essential for ICA AB’s long-term success. The pur- product range sold in the Maxi stores. There are also a small number pose of the real estate operations is to provide serviceable premises of tenants that are not ICA retailers. The total proportion of rent rev- and strategically located business locations for the ICA group and enue that derives from ICA retailers accounts for approximately 93%. the ICA retailers by developing, buying, selling and actively man- Rental revenue is reported under ICA Sverige and ICA Norge. aging properties. Attractive store locations provide an important On September 30, 2005, ICA Fastigheter Sverige AB owned basis on which to achieve strong store profitability, so the real estate approximately 264 properties1) occupying a total of approximately operations play a key role in the group. 606,000 square meters of store floor space, and leased approxi- Real estate operations follow ICA AB’s store-opening plans, mately 480,000 square meters of office and warehouse space meaning that the real estate portfolio increases when the rate of store and approximately 822,000 square meters of store space distrib- openings is greater than property divestments and vice versa. In con- uted among approximately 535 stores. The rental revenue from the junction with store openings, it is the real estate operations that han- owned properties amounts to approximately SEK 680 million annu- dle the actual acquisition of the site and the construction of the prop- ally. Over the next three years, ICA Fastigheter Sverige AB as part erty, whereas the store-opening unit finds an appropriate location. of ICA Sverige’s business plan intends to continue its extensive Negotiations with the municipality and property owner are handled investments in opening and building new stores. by ICA AB’s store-opening unit or the real estate unit, depending on On September 30, 2005, ICA Eiendom Norge AS owned which unit has the best prerequisites in the individual case. approximately 120 properties2) occupying a total of approxi- Accordingly, there is a clear division of roles between the real estate mately 372,000 square meters and leased approximately operations and the other units of the ICA group – even though in 600,000 square meters of store floor place, distributed among terms of their operations they are very dependent upon one another. approximately 540 properties throughout Norway. The rental rev- The real estate operations are conducted under market-level return enue from the owned properties amounts to approximately SEK requirements, which implies that all stores pay market-level rent and 360 million annually. In accordance with ICA Norge’s business that new store establishments or renovations are never carried out if plan, ICA Eiendom plans to continue its extensive investments over the store cannot subsequently carry market-level rent, which results in the next three years in the opening and building of new stores as an acceptable return on the real estate operations. well as in modernizing existing stores. The investments are integral The real estate operations supporting business operations are part of ICA Norge’s restructuring of its store holdings and store pro- conducted in Sweden through ICA Fastigheter Sverige AB and in filing, which will also involve property divestments. Norway through ICA Eiendom Norge AS. ICA AB owns a large pro- Retail group function The purpose of the group Retail function is to create profitability in Positioning of store concept the ICA group by leading and developing customer-driven offer- ce stores ien ings. In specific terms, this implies that Retail deals with business PRICE n ve n o development – developing store layouts and formats, as well as C marketing. As regards store format, Retail is in charge of developing strategies for the market positioning of the stores and store pro- arkets erm up S files in a manner that is optimal for the group (see figure to the left) and assisting the other operations in, for example, streamlining and more clearly positioning store concepts. ICA Sverige has four store

arkets formats: ICA Nära, ICA Supermarket, ICA Kvantum and Maxi ICA erm yp H Stormarknad. ICA Norge also has four store profiles – ICA Nær,

stores ICA Supermarked, ICA Maxi and Rimi. The different store formats unt co is D meet customer needs in different ways. In addition to business development, the Retail group function is responsible for market communications in Sweden and Norway, market analysis, consumer and quality issues, corporate information RANGE (including various forms of communication strategies, and the devel-

1) On September 30, 2005, the book value of these properties amounted to SEK 5,431 million. 2) On September 30, 2005, the book value of these properties amounted to SEK 4,648 million.

Hakon Invest’s holdings and financial management 29 opment of an intranet), as well as human resources issues (such as be strengthened so that the Supply Chain function can accumulate skills development and the identification of potential future executives). in-depth knowledge about the value chain for each specific product ICA AB’s customer card base consists of some 3.1 million and product group, thereby enabling greater efficiency in terms of active customers. Of the active customers, 1.4 million pay with production and logistics chains from producer to store. This, in turn, cards, while the remainder only register bonus points. The customer is expected to reduce sourcing costs for ICA AB, thereby enhancing card database is a significant asset for ICA AB that contributes to the ICA system’s competitiveness. customer loyalty. It allows offers to be specially matched to cus- Operations in PL products, produce, goods not for resale (e.g. tomers while providing overall knowledge of buying patterns. The store fixtures) and home & leisure are currently managed jointly customer database provides important support for decisions in all of within ICA AB at the Nordic level. However, there is further potential ICA AB’s business areas. for cooperation with other companies in the supply chain. In PL prod- In terms of corporate structure, Etos AB and ICA Banken AB are ucts, for example, synergies can be achieved by consolidating pur- also part of the Retail group function. ICA Banken, however, does not chases with each supplier and coordinating package design, while report to the group function, but instead to ICA Banken’s Board of the products themselves can be sold under different brand names in Directors. The bank’s operations are under the supervision of the different countries. Another example is the Euroshopper brand, Swedish Financial Supervisory Authority. Both Etos AB and ICA which is the result of cooperation between nine European compa- Banked are described in more detail further on in the prospectus. nies in 15 countries, including Kesko, Albert Heijn, Dansk Supermarked A/S and ICA AB. Euroshopper is the ICA group’s dis- Supply Chain group function count product brand and is available in Sweden, Norway and the The group’s Supply Chain function includes sourcing, logistics and Baltic countries. The brand is also used by other companies involved IT. The purpose of the Supply Chain function is to achieve coordina- in the cooperation. Supply Chain devotes considerable efforts to tion and economies of scale in the group in these areas. developing private labels since these strengthen the group’s negoti- An important area for coordination within the group is sourcing, ating power with brand suppliers, and also provide the stores with where it is estimated that additional major savings can be an opportunity to offer good value alternatives while at the same time achieved. By consolidating purchasing volumes for ICA Sverige also generating considerable revenue for ICA AB and the stores. In and ICA Norge as a first step, ICA AB will become a stronger 2004, private labels accounted for about 12% of retail sales in negotiating partner, and thus obtaining better terms. ICA AB Sweden. This figure is low compared with many international play- believes there is considerable potential for more efficient purchases ers, implying that there is still considerable potential in this area. and product range since a relatively small proportion of the prod- Through its companies in the Netherlands (ICA Sourcing and ucts, both within food and non-food, account for a large percent- Services BV and ICA International Services BV), ICA AB also coop- age of the retail sales volume. Supply Chain will therefore focus on erates with Ahold, to facilitate sourcing of fresh goods with an creating a more customer-oriented product range, whereby pur- emphasis on fruit, vegetables, fish, shellfish, meat and flowers as chases are steered more by customer preferences than today well as sourcing of private label items. As part of this cooperation, instead of by what suppliers can offer. In conjunction with this, a number of sourcing agreements have been negotiated with vari- Supply Chain will also improve the efficiency of the product range ous suppliers that can be utilized by all subsidiaries and companies to save costs. A key component in this respect involves assessing associated with Ahold. These contracts normally extend for one how deep and broad the range must be in order for consumers to year with certain rights with respect to extension and termination be satisfied. To succeed in this task, the sourcing organization will period. Furthermore, the company’s cooperation with the Ahold- owned chain Albert Heijn includes the development of IT systems for retail stores. Investments in IT systems are often substantial. By coop- New distribution network erating with other companies, ICA AB is able to considerably reduce its portion of these investments. TODAY ICA warehouse In addition to sourcing and IT, Supply Chain is responsible for the entire logistics flow and works actively with logistics development, an area in which ICA AB has gained firmer control by setting Suppliers ICA stores up a new distribution network in Sweden. The new distribution network is expected to lead to cost savings and reduced environmental 2008 impact and will improve ICA AB’s standing with suppliers. With its ICA warehouse new distribution network, ICA AB takes responsibility for a larger share of shipments. Goods that individual suppliers previously drove

Suppliers directly to stores will now be shipped to a greater extent via ICA ICA stores AB’s warehouses. From there, ICA AB will coordinate goods from

30 Hakon Invest’s holdings and financial management various suppliers on route to its stores, leading to more efficient become much more flexible. Consumer habits even differ depend- transportation, fewer emissions and thereby less harm to the envi- ing on the day of the week. One day a customer might go to a ronment. The change is also positive for the stores. The number of hypermarket or discounter for a major shop, then the next day stop deliveries is reduced for the same amount of goods, and stores can at a local store for fresh deli items. Customers want shopping to be work more efficiently with the reception of goods when these are easy, which is why location and convenience are still important fac- delivered more collectively. To make its distribution network more tors that determine where people choose to shop. efficient, ICA AB will keep more goods in stock. As a result, five The highly successful ICA customer card is one example of a warehouses (Helsingborg, Malmö, Växjö and two in Stockholm) measure introduced to increase customer loyalty at ICA stores. will be shut down and four others (Borlänge, Kungälv, Umeå and Västerås) will be rebuilt to handle larger volumes. The Board of Purchasing negotiations Directors also approved an investment of SEK one billion for a new Suppliers are also affected by growth among discounters and in automated warehouse in Helsingborg. Furthermore, there are plans retailers’ PL offerings. To meet the rising price pressures and be more for a new warehouse in the Mälardal region for which the invest- competitive, many food suppliers are merging forces. Several suppli- ment will be the same – SEK one billion for full automation. ers in the Nordic region have been acquired by larger international groups. In some product categories, two or three suppliers account Market for 80-100% of the ICA group’s purchases. As ICA AB increases its Conditions in the Nordic food retail market are changing at an ever share of PL products, however, the brand suppliers’ bargaining faster pace. Competition is growing and customer behavior is power is reduced, as is ICA AB’s dependence on these suppliers. becoming more difficult to predict. This is also one reason why many suppliers have also begun to produce PL products for retailers. For small suppliers, this can offer a Increased competition in the Nordic region way to survive the competition – and slow the trend toward consoli- Discounters continue to expand in the food retail market and also in dation. other sectors. The German discount chain Lidl has established operations in Sweden, Norway and Finland, and Germany’s Aldi has stores ICA AB cuts prices to strengthen its market position in Denmark. Together with Dansk Supermarked A/S, ICA AB operates The emergence of new discount players in recent years has intensi- the discount chain Netto in Sweden. In the longer term, other global fied competition in the Nordic food retail market. This trend has led market leaders may make a move to the Nordic region as well. to an increased focus on price. One measure taken by ICA AB in response to this change involves implementing extensive strategic More people are eating out price cuts in Norway and Sweden. It is also becoming more common to eat out at restaurants and fast In Sweden, ICA AB and the individual ICA stores reduced the food chains instead of at home, and many restaurants directly target prices on two occasions, in March and August, on between 3,000 families. In the Nordic region, restaurants account for 26% of the and 4,000 items, depending on the store size. Since ICA retailers total value of food consumption, a figure that is expected to continue own their own business, they set their own prices and determine to rise. In the rest of Europe, the corresponding figure is 35% and in their own assortment. Price reductions at the store level were mainly the US it is 51%. Food retailers have long had a tendency to under- possible through offering the stores lower purchasing prices from estimate the competition from restaurants, but ICA AB has taken up ICA AB. The total value of the price cuts in the ICA stores in Sweden the fight, in part by expanding its range of prepared foods. was on the order of SEK one billion on an annual basis. In Norway, ICA AB and the Rimi stores lowered the prices of Food is becoming less expensive about 300 items in May 2005. The total value of the retail price Since 1995, Swedish food prices have risen by only 0.4% per cuts in Norway amounted to NOK 350 million on an annual basis. year, while the annual inflation rate during the same period is 1.2%. The price reductions were financed retroactively through Swedes are spending less of their disposable income on food. The increased cost efficiency in the individual stores, cost rationalization same trend is evident in Norway, where food prices have risen by within the ICA group and more favorable purchase prices from sup- 1.6% annually since 1995, while inflation has averaged 2.2%. A pliers. This had an initially negative effect on ICA AB’s earnings dur- basket of groceries costs no more today than it did ten years ago. A ing the first half of 2005. The initially negative effect on earnings for growing share of private label products has contributed to lower ICA AB will gradually improve as the gains from negotiations with prices, as has the increased competition. suppliers are realized and cost reductions produce effects. Since the price reductions in Sweden began in March, Customers are less loyal sales in the ICA stores increased each month by more than the Due to these changes in the market, customers are no longer as industry average1). loyal to a particular chain of stores or brand. Instead they have

1) This applies to the period until September 30, 2005.

Hakon Invest’s holdings and financial management 31 ICA SVERIGE ICA Sverige is one of the country’s leading retail companies, with a focus on food and consumables. ICA Sverige is the main supplier to the ICA retailers. All ICA retailers own and manage their stores as independent businesses. Annual sales in the more than 1,500 stores amount to around SEK 79 billion, including VAT. Sales revenues for ICA Sverige total approximately SEK 43 billion. ICA Sverige is in an aggressive development phase and is continuing its successful focus on private label products, non-food items and fresh foods. ICA Sverige will continue its efforts to reduce retail prices and lower costs, making the ICA stores more competitive and improving ICA Sverige’s sales. The rate of new store openings will remain high.

Hakon Invest

40% 1) 50% Rimi Baltic Portfolio companies ICA AB 50% Netto

100% ICA Sverige ICA Norge ICA Meny ICA Banken Etos Forma Publishing Group

ICA Sverige in brief

BUSINESS CONCEPT

ICA Sverige will be the leading retail chain in Sweden with a focus on food and meals. Market share 2) 36.3%

2002 2003 2004 2004 (IFRS) JAN–SEP 2005 (IFRS) Sales (SEK M) 42,505 43,086 43,373 45,039 34,333 Operating profit (SEK M) 1,884 2,794 1,892 1,774 1,054 Number of employees (average)1) 4,189 4,384 4,407 5,982 5,768 Number of stores (year-end) 1,764 1,668 1,506 1,506 1,421

1) Refers to average number of employees based on 1,800 annual working hours. 2) Based on the ICA stores’ share of retail sales of food and consumables.

32 Hakon Invest’s holdings and financial management Operations with any decision-making authority from ICA AB or ICA Sverige. The food retailer ICA Sverige operates throughout Sweden, The role of the committees and their ICA retailers is advisory and together with the independent retailers who own and manage their therefore provides ICA AB with valuable information. Neither are stores. ICA Sverige’s activities include sales, operations and new the ICA retailers permitted to disclose matters with binding effect dis- establishments. “Sales” means that ICA Sverige shall stimulate sales cussed in the committees to other ICA retailers. to consumers. “Operations” entails that ICA Sverige shall assist the stores with advice and tangible measures to help them operate Business model more efficiently. “New establishments” involves researching and ICA Sverige’s operations are based on “ICA agreements” with ICA developing new store locations and helping to develop existing retailers. This is complemented by profiling agreements with ICA stores through modernization or store enlargement. retailers, through which the stores join forces under the ICA name to ICA retailers in Sweden undertake on average 70% of their pur- secure better purchasing terms and create a clearer image in the chases directly or indirectly via ICA Sverige. The remaining 30% marketplace. mainly comprises fresh produce, fruit and vegetables, colonial produce and bread, which in many cases come from local producers or ICA agreements suppliers. Since there is no requirement for independent retailers’ pur- Many of the approximately 1,500 Swedish ICA stores have an ICA chases from ICA AB, the group has always been exposed to compe- agreement, which is a shareholder and financing agreement tition from other suppliers. The fact that ICA retailers in Sweden pur- whereby ICA AB retains the rights to the store location while the chase as much as 70% from ICA Sverige serves as proof that the retailer – either by himself or jointly with ICA AB – owns and runs the economies of scale and efficiency that have been achieved over store through a limited company. ICA Fastigheter Sverige owns a time satisfy the earnings targets of ICA AB and the independent large proportion of the store properties or holds leases for the store retailers, as well as customers’ wishes in terms of product range, premises, meaning that the stores also pay rent to the ICA group. quality and price. The fact that ICA AB competes with other suppliers Normally, all stores with sales exceeding SEK 20 million or that are means that it is always in ICA AB’s best interests to develop competi- considered to have a strategic location have an ICA agreement. The tive prices and provide consumers with an attractive produce range. ICA agreement contains a clause on right of first refusal if the ICA It is also in individual ICA retailers’ best interests to make their pur- retailer wishes to sell the business and specifies the annual compen- chases via ICA Sverige and thereby help ICA AB achieve a high sation that the store must pay to ICA Sverige, in the form of royalty level of efficiency and lower costs. and/or profit sharing. The agreements are entered on market terms. It is this cooperation, the entrepreneurial spirit of ICA retailers New stores are usually established by ICA Sverige which in and the mutual understanding that both parties’ ultimate aim is to conjunction with the establishment offers the retailer financing for make money, that forms the core of the entire ICA concept and that taking the store into operation. Since the individual retailer often has made the system so successful. cannot afford to acquire the entire store at the time of establishment, the retailer initially owns only a small portion of the limited company Dealings between ICA AB and the independent retailers through which the store is operated, while ICA Sverige owns the Ever since the inception of Inköpscentralernas AB (now ICA AB) in remainder. As cash flows from the store improve, the retailer can 1939, the importance of the retailer’s role has been emphasized in the then acquire all shares but one of the limited company from ICA dealings between retailer and the product supply. Through their aware- Sverige. Pursuant to the terms of the ICA agreement, the retailer then ness of consumer demand, the retailers possess important knowledge pays a royalty and in some cases a profit share to ICA Sverige, that can improve the efficiency of product supply operations. related to the store’s size and annual sales. As of 2005, the store is The interplay between ICA Sverige AB and the retailers is an consolidated by ICA Sverige as long as the ownership share important success factor in the Swedish operations. exceeds 50%. This however does not affect ICA Sverige’s reported A “Sweden committee” has been set up to provide support for profit after tax. ICA Sverige AB’s overall strategic efforts. The committee is made up of the chairmen from each of the store profile areas. The Sweden Maxi agreements committee acts as an advisor and a sounding board for ICA ICA Maxi is ICA AB’s hypermarket concept, comprising 37 stores Sverige AB with regard to overall strategic issues. There are four at the end of 2004. An ICA Maxi hypermarket consists of two legal store profiles within ICA Sverige AB: Nära, Supermarket, Kvantum entities: a subsidiary that is wholly owned by ICA Sverige AB (“the and Maxi. Each profile area has a “profile committee” of elected subsidiary”) and that sells specialty/non-food items, and a contrac- retailer representatives. These committees act as advisors for impor- tual company that is owned and operated by an independent ICA tant issues relating to their particular store profile. retailer and that sells food retail and convenience goods (“the con- Neither the committees nor the independent ICA retailers who tractual company”). The consumer, however, perceives ICA Maxi as are members of committees within the ICA group have been issued being one company with a comprehensive customer offering.

Hakon Invest’s holdings and financial management 33 The ICA Sverige subsidiary ICA Maxi Special AB (“Maxi profit share that ICA Sverige receives from the independent retailers. Special”) is responsible for all non-food operations in ICA Maxi The stores pay for the right to use the ICA brand and for use of the stores. For example, the subsidiary has its own lease agreement store location. In many cases, ICA AB’s property operations either with the store owner for the shop floor space that is at the sub- own the store properties or hold the leases on them. The independ- sidiary’s disposal. The contractual company assumes responsibility ent retailers pay rent at market prices for use of shop premises. for joint services, such as checkouts and customer services, and the Another source of revenue is the property operations’ sale of proper- subsidiary compensates the contractual company at market rates for ties. In addition, ICA Sverige also certain optional services for retail- its share of these joint services. This is regulated in detail through a ers, which are charged at a fee. partnership agreement (Maxi agreement). The contractual company’s ICA agreement with ICA Sverige AB Store concepts contains a pre-emption clause for the event that the ICA retailer ICA Sverige has four store concepts – ICA Nära, ICA Supermarket, wishes to sell his business. The agreement also states the annual ICA Kvantum and Maxi ICA Stormarknad – that meet customer compensation that the contractual company must pay ICA Sverige demand in different ways. for the right to use the shop location. This compensation takes the During 2004, ICA stores in Sweden decreased their share of form of a royalty based on a pre-determined percentage of the con- the Swedish food retail market to 36,3%, compared with 36,6% tractual company’s net sales. the preceding year. The number of customers rose by 2%, as did the number of goods sold. However, the average sales amount Sources of revenue dropped. This is a general trend affecting all players in the Swedish ICA Sverige’s earnings are derived from retail sales, product supply, market. royalty and/or profit sharing, property, and the sale of services. The ICA Nära convenience stores increased their sales by Retail earnings derive from Maxi Special, which sells home and non- 3.7% in 2004. During the year, 75 new ICA Nära stores were food items in the Maxi stores. In addition, some retail revenue is added as a result of many previously non-profiled ICA stores attributable to the Swedish stores in which ICA Sverige during the becoming computerized and being profiled as ICA Nära. ICA start-up period after establishment owns more than 50% of the Supermarket noted a sales decrease in 2004 of 3.0%, compared shares. Revenues from the supply chain derive from ICA Sverige’s with 2003. This was in large part due to the number of ICA wholesale operations, in which ICA Sverige purchases goods and Supermarket stores declining by 19 stores in 2004 from 532 to then sells these goods to the independent ICA retailers in Sweden. 513. The ICA Kvantum stores increased sales by 1.9% in 2004. The stores in Sweden also pay a sales-based fee to ICA Sverige to ICA Sverige’s hypermarket concept Maxi ICA Stormarknad has con- cover the costs for joint resources and the development of ICA’s oper- tinued to develop positively, with sales rising by more than 11% in ations. Another source of income is the royalty payments and/or 2004. This is partly the result of the one-stop shopping trend, where

ICA Sverige’s store profiles

NO. OF STORES, SALES INCL. VAT NO. OF ITEMS STORE PROFILE DESCRIPTION DEC. 31, 2004 (SEK M), 2004 1) PER STORE ICA Nära are smaller and easily accessible food stores with good service, a limited selection and good fresh foods Many ICA Nära stores function as agents for Apoteket, Systembolaget and ATG. 830 12,623 3,000–5,000 At ICA Supermarket, customers can do most of their shopping for both daily needs and parties. There is a high level of personal sevice, and the stores have a wide range of fresh foods. 513 29,878 6,000–10,000 ICA Kvantum are larger food stores with both daily food, products for people with allergies, environmental products and delicacies from the whole world. ICA Kvantum also offers nearly everything in beauty, health and media. 126 22,003 15,000 Maxi ICA Stormarknad offers everything in a single location at low prices. In addition to the wide range of food procucts, Food: there are books, clothes, household items, sporting goods and 12,000–18,000 articles everything for gardening. The stores have generous opening Special: hours and are easily accessible for shoppers with cars. 37 14,192 20,000–25,000 articles

1) Total store sales (including specialty items).

34 Hakon Invest’s holdings and financial management customers prefer to buy everything in one place. Maxi ICA hyper- 1.3 million visitors each month, ranking it among Sweden’s 20-30 markets were Sweden’s leading hypermarket chain in the beginning most popular sites overall. Customers of ICA Banken can also per- of 2005. form bank transactions via the site.

Brand and customer relations Market According to independent and internal surveys, ICA Sverige has The Swedish food retail market is dominated by three nationwide the industry’s highest ranking in terms of customer satisfaction. In the chains – ICA AB, Coop and Axfood – while a fourth, latest Swedish Quality Index survey, for example, ICA ranked BergendahlsGruppen, is mainly active in southern Sweden. higher than both Axfood and Coop – as has been case since the However, BergendahlsGruppen recently opened a store in the surveys were first begun. The 2004 Confidence Barometer com- Stockholm region and signed a wholesale agreement with piled by the Media Academy at Göteborg University showed that VI-handlarna. seven out of ten Swedes have great confidence in ICA AB. Internal customer satisfaction surveys also prove year after year the strong competitive strength of ICA stores compared with the industry in general. To find out what customers think about their ICA stores, ICA Sverige launched a survey in 2004 called the Customer Overview of the Swedish convenience goods market 2004 Compass. ICA AB’s card customers are asked to award grades for No. of stores 4,500 (plus a number of smaller stores) price, product selection and service in their local store. Their Total market, conveniece goods, responses are fed back to ICA Sverige centrally and to the store, including VAT (SEK M) 207,160 which can resolve any issues right away. Growth 2.7% In 2004, for the third consecutive year, ICA Sverige won the Store structure*– proportion of sales prestigious Golden Egg Award presented by the Swedish advertis- in different store sizes <400m2 – 12.7% ing industry for the best ad of the year. In terms of brand recogni- 400–999m2 – 27.4 % 2 tion, nearly 100% of viewers recognized the company behind the 1,000–2,499m – 38.5% >2,500m2 – 21.3 % ads. ICA AB also received a prize for its consistent long-term brand- Low-price retailers (soft and hard discount) 9% (soft) ing in the “100 Wattaren” contest arranged by the business daily 2% (hard) Dagens Industri in cooperation with the Association of Swedish Proportion own brands* 12.9% Advertisers and the Advertising Association of Sweden. Source: ICA AB and AC Nielsen/Nordic Grocery Market Insight 2005 figures ICA Sverige’s website, www.ica.se, is Sweden’s largest food marked with *). site, containing more than 5,000 recipes. The site attracts around

ICA Sverige and the largest competitors

ICA SVERIGE COOP SVERIGE AXFOOD BERGENDAHLS LIDL SVERIGE NETTO SVERIGE Owner ICA AB (100%) Coop Norden Exchange-listed, Bergendahl Lidl Schwarz Stiftung Dansk (100%) of which principal owner family (100%) Supermarked AB, KF owns 42% Axel Johnson AB (100%) ICA AB (50/50%) (45%) No. of stores (Dec. 31, 2004) 1,506 821 487 140 76 58 Store profiles ICA Nära Coop Nära Hemköp AG:s Lidl Netto ICA Supermarket Coop Konsum Willys City Gross ICA Kvantum Coop Extra Willys Hemma Eko Maxi ICA Stormarknad Coop Forum Vivo (up until 2004) Vi (as of 2005) Market share (2004) 36.3%1) 17.1% 16.7% 2.9% 0.8% 0.6%

Source: ICA AB. 1) Based on the ICA stores’ share of retail sales of food and consumables.

Hakon Invest’s holdings and financial management 35 Higher demand for prepared and healthy foods MARKET SHARES, Another of ICA AB’s focuses is prepared meals, which are becom- SWEDISH FOOD MARKET, 2004 ing increasingly popular among customers. In connection with the Other launch of its own fresh meats, ICA Sverige reorganized its infrastruc- 25% ture to better handle refrigerated products. This also makes it easier

Netto 1% ICA1) to provide customers prepared foods of consistently high quality. Lidl 1% 36% The increasing health consciousness of consumers has spurred Bergendahl 3% interest in healthy foods. To meet this demand, ICA launched a spe- Axfood cial line of products, ICA Gott Liv, in Sweden in 2005 to make it 17% Coop easier and less expensive to eat nutritiously. 17% Source: ICA AB. 1) Based on the ICA stores’ share of retail sales of food and consumables. Establishment policy ICA Sverige is always looking for opportunities to open new stores and expand its presence in the market. The new store department has been strengthened and is working to find new locations and prepare the necessary documentation for building permits. A number of new permits have been received and ICA Sverige is expected to expand substantially in the near future. The focus will The Swedish food retail sector grew 2.7% in 2004, compared remain on new stores in growth areas and near large cities. with 2.6% in 2003. Sales in 2004 amounted to slightly more than SEK 207 billion, including VAT. The favorable growth was Stores in rural and sparsely populated areas achieved despite many companies cutting their prices to counter ICA stores account for the largest share of grocery stores in rural competition from discounters. Increased PL sales are also contribut- areas. In communities with only one grocery store, about 40% are ing to lower food prices. Consumer goods prices were 0.5% lower run by ICA. Many of these stores also provide other services to their at year-end 2004 than at the beginning of the year. communities, including pick-ups for Systembolaget and Apoteket, the Pure discount stores, known as hard discount, are increasing state-run alcohol and pharmacy monopolies, and postal services. their presence in Sweden. Typically these stores offer prices below To strengthen its smallest stores, ICA invested approximately SEK what are regarded as the standard level in the food retail sector 30 million in 2003 in computerization, among other things. and usually carry a more limited product range. They are also distin- Technology helps small stores to work more efficiently and fully utilize guished by their very low costs. Axfood’s discount chain, Willys, the support available centrally from ICA Sverige. These measures currently has some 90 stores. In the discount segment, Axfood has have helped to stabilize the situation for stores in rural communities also developed another concept, Willys Hemma, with 45 wholly and reduce the number of stores that have been forced to close. owned stores as its base. The Willys Hemma concept is based on a limited product range. The German chain Lidl, which started opera- Outlook tions in Sweden in September 2003, continues to gain ground and ICA Sverige will continue its focus on private labels, non-foods and now has around 80 stores that generally carry a narrow range of fresh foods. The company will also continue to work with cost about a thousand items at very low prices. ICA AB’s discount chain rationalization and measures to reduce price levels in the stores. In Netto, which is jointly owned with Dansk Supermarked A/S, was late 2004, a savings program was presented that entails cutting the launched in Sweden in 2002 and had grown to 72 stores at number of employees in ICA Sverige in 2005. This is part of an September 30, 2005. effort to reduce costs and create an efficient organization focused on higher sales and more satisfied retail customers. Ongoing efforts within ICA Sverige The rate of new store openings is high. Three new Maxi ICA ICA Sverige’s strategy for tackling the competition from discounters hypermarkets, one ICA Kvantum, one ICA Supermarket and two is to focus on fresh foods, private labels and non-foods. Fresh foods ICA Nära were opened during the period December 31, 2004 accounted for about 54% of ICA Sverige’s sales in 2004, while pri- until September 30, 2005, and a further two Maxi ICA hypermar- vate labels contributed about 12% and non-food about 6%. It was kets, two ICA Kvantum, one ICA Supermarket and two ICA Nära also decided to launch a price offensive together the ICA retailers. are scheduled to open during the year. As of September 2005, the In Sweden, this initiative was initiated in March 2005. The aim is to sales area had increased by 35,000 square meters since the end reduce prices on a large number of common products by squeezing of 2004. The ambition is to maintain the rate of new store openings costs at every level and negotiating lower purchasing prices. at the same level during 2006.

36 Hakon Invest’s holdings and financial management ICA NORGE ICA Norge is one of Norway’s leading retailers, with a focus on food and consumables and nearly 1,000 stores. The stores are operated as wholly owned subsidiaries or as franchises. Store sales amount to approximately NOK 22 billion, excluding VAT. ICA Norge’s sales were more than NOK 18 billion in 2004. ICA Norge will focus actively on generating cost savings and improving efficiency. In addition, a large number of existing stores will be updated and several new stores opened.

Hakon Invest

40% 1) 50% Rimi Baltic Portfolio companies ICA AB 50% Netto

100% ICA Sverige ICA Norge ICA Meny ICA Banken Etos Forma Publishing Group

ICA Norge in brief

BUSINESS CONCEPT

ICA Norge will be the leading retail chain in Norway with a focus on food and meals. Market share 22.4%2)

2002 2003 2004 2004 (IFRS) JAN–SEP 2005 (IFRS) Sales (SEK M) 20,930 20,740 19,896 19,896 13,836 Operating profit (SEK M) 782 200 214 382 353 Number of employees (average)1) 5,545 5,465 5,540 5,540 4,234 Number of stores (year-end) 1,079 1,028 978 978 911

1) Refers to average number of employees based on 1,800 annual working hours. 2) Based on the share of ICA Norge’s wholly owned stores, franchise stores and associated stores of all types of sales in Norway’s food stores.

Operations Business model ICA Norge’s activities include sales, operations and new establish- Ownership and operation of ICA Norge’s stores is divided into two ments. “Sales” means that ICA Norge shall stimulate sales to con- main models: wholly owned branch stores and retailer-owned fran- sumers. “Operations” entails that ICA Norge shall assist the stores chises. There are also associated stores. with advice and tangible measures to help them operate more efficiently. “New establishments” involves researching and developing Wholly owned stores new store locations and helping to develop existing stores through The stores that are wholly owned by ICA Norge comprise approxi- modernization or store enlargement. All stores are supported by an mately one third of the Rimi stores and nearly all ICA Supermarked integrated system for sourcing, product range, product supply, and ICA Maxi stores. administration and marketing.

Hakon Invest’s holdings and financial management 37 Stores with franchise agreements At the same time as consumers are becoming more price con- In this form, the retailers operate their stores as independent franchises scious, many are also asking for larger stores and a wider range of and pay a fee based on a percentage of sales to ICA Norge. ICA prepared and fresh foods. With its four store concepts, ICA Norge Norge provides the ICA and Rimi brands, as well as a number of cen- tries to meet these needs and cover every position in the market. tral services including marketing, concept development and adminis- ICA Norge is working on the introduction of a long-term pricing tration. ICA Norge owns or holds leases on most of the franchise strategy that will make Rimi competitive in the discount segment, while properties. Franchise stores are operated within ICA Nær, which is ICA-branded stores will remain competitive in their segments. ICA primarily a franchise chain, and within Rimi. At the end of 2004, Norge is also raising the number of franchise stores (currently more approximately 60% of Rimi stores were operated as franchises. than 500), since it sees entrepreneurship as an important driving force. In 2004, the share of Rimi franchises rose from 40% to 60% of Rimi Associated stores stores. The goal is to increase that figure to 75% by year-end 2005. There are also associated store chains that ICA Norge assists prima- A growing number of ICA-branded stores are also being operated as rily with sourcing and distribution. Examples of associated stores franchises, including both the small and medium-sized store formats. include Livi and Servicemat. Market Sources of revenue The Norwegian food retail market (excluding convenience stores and ICA Norge’s revenues are derived from retail sales, product supply, gas stations) increased by about 4% in 2004 compared with the pre- franchise operations and properties. Retail earnings derive from the ceding year. Total sales exceeded NOK 100 billion (excluding VAT). wholly owned stores. Revenues from goods supply derive from ICA ICA Norge’s market share declined slightly in 2004 to 22.4%, com- Norge’s wholesale operations, in which ICA Norge buys in goods, pared with 23.6% the preceding year. ICA Norge and its largest and then sells these goods and services to the stores in Norway. competitors – Coop Norge, NorgesGruppen and Rema – together Another source of income is the franchise fees that ICA Norge receives account for practically all the sales in the market in Norway, a market from the franchise holders as payment for the right to use the ICA where about half of sales take place via discount chains. In 2004, brand. In most cases, ICA AB’s property operations either own the the German chain Lidl opened its first discount stores in Norway and store properties or hold the leases on them. The retailers pay rent at at year-end had around twenty stores around the country. market prices for the use of the shop premises. Another source of revenue is the property operations’ sale of properties. Ongoing efforts within ICA Norge Cost adjustments and efficiency improvements Store concepts ICA Norge has been working to adjust its cost level in order to maintain ICA Norge has a format strategy consisting of hypermarkets, super- and develop a strong competitive position. This work has involved every markets, convenience stores and discount stores. In recent years, ICA function in administration and the stores. The number of employees in Norge has worked to streamline and more clearly position its store ICA Norge decreased in 2004 by around 120, mainly in Rimi. The for- concepts – ICA Maxi, ICA Supermarked, ICA Nær and Rimi – and mer regional offices have been replaced by five local sales offices and build a strong store structure for the future. the store profile areas now have joint management and staff and support functions. The efforts to adjust costs and improve efficiency will continue for some time.

ICA Norge’s store profiles

NO. OF STORES, SALES INCL. VAT NO. OF ITEMS STORE PROFILE DESCRIPTION DEC. 31, 20041) (NOK M), 20042) PER STORE ICA Nær are smaller and easily accessible food stores with good service, an adapted selection and local suppliers. 357 2,572 3,000–6,000 ICA Supermarked stores are designed for customers who appreciate good food and a wide variety. Personal service is high, and there is a wide range of fresh foods, including deli counters offering the latest in food trends. 70 2,010 about 10,000 Maxi ICA Stormarknad offers everything in a single location at affordable prices. In addition to the wide range of food procucts, there are books, clothes, household items and media items. Conveniently located for customers traveling by car. 16 2,046 20,000–24,000 Rimi is a discount chain that makes it easy and convenient for customers to do their daily shopping. With modern, conveniently laid out stores, Rimi offers customers what they need at affordable prices. 374 14,918 about 3,000 1) In addition, there were 161 associated stores as of December 31, 2005. Sales were about NOK 894 million in 2004. 2) Total store sales.

38 Hakon Invest’s holdings and financial management Overview of the Norwegian convenience goods market 2004 MARKET SHARES, NORWEGIAN FOOD MARKET, 2004 No. of stores 4600 (increasing) Total market, convenience goods, Other including VAT (NOK M) 101,000 1% Rema Growth 4% 17% 2 Store structure* – proportion of sales <400 m – 25.4% NorgesGruppen in different store sizes 400–999 m2 – 48.7 % 35% 1,000–2,499 m2 – 20.3% ICA 22% >2,500 m2 – 5.7 % Low-price retailers (soft and hard discount) 51.5% (soft) 0.5% (hard)” Coop Proportion own brands* 8.5% 25% Source: ICA AB. Source: ICA AB and AC Nielsen/Nordic Grocery Market Insight 2005 figures marked with *).

Store network Outlook ICA Norge is working to optimize the store network. Several stores ICA Norge expects strong growth and is planning to invest NOK 2-2.5 are too small and many stores need modernizing (see also billion in the next few years. There are plans to renovate a large number “Outlook”). The opening of ICA Maxi Sjølyst, ICA Norge’s first of Rimi stores and modernize several ICA Supermarked and ICA Nær Nordic compact hypermarket, in 2004 was part of this moderniza- stores. Many new stores will therefore be opened in the near future and tion strategy. The store concept is based on a platform developed by several smaller stores will be shut down or sold. Despite the fact that the ICA in the Baltic countries, where it has proven very successful. It net total number of stores is expected to decline, the sales area, on the offers a diverse product range with an emphasis on fresh foods, com- other hand, is intended to increase. At September 30, 2005, sales plemented by a well-balanced assortment of non-foods. The new store floor space had increased by 9,745 square meters since December is an expression of ICA Norge’s long-term aim to become the market 31, 2004. It is also the company’s ambition to increase sales floor leader by offering value. space at a significantly higher rate during 2006 than in 2005. Three ICA Maxi stores, two ICA Nær stores and four Rimi stores Investments in product assortment have been opened to date in 2005 (as per September 30) and there ICA Norge is also working with a number of projects that will create are plans to open an additional ICA Maxi store, one ICA a better range of fresh and prepared foods. For instance, it is looking Supermarked and five Rimi stores during the year. into opportunities to offer a larger selection of prepackaged meals, With a clearer store concept, ICA Norge has a good platform to including better solutions for fresh fish. meet the competition from new and established players.

ICA Norge and the largest competitors

ICA NORGE COOP NORGE NORGESGRUPPEN REMA 1000 LIDL NORGE Owner ICA AB (100%) Members Johan Johannson AS Odd Reitan Lidl Schwarz Stiftung Wholly owned stores, franchise (approx. 900,000), (78%) and and family (100%) stores and associated stores 241 cooperatives three smaller chains (100%) No. of stores (Dec. 31, 2004) 978 940 1,911 381 20 Store profiles ICA Naer Coop Marked Bunnpris + other smaller chains REMA 1000 Lidl ICA Supermarked Coop Mega Joker ICA Maxi Coop OBS! Kiwi RIMI Coop Prix Meny/Meny Champion Spar Ultra/Centra Market share (2004) 22.4% 24.6% 34.8% 17.5% 0.1% Source: ICA AB & AC Nielsen.

Hakon Invest’s holdings and financial management 39 ICA MENY ICA Meny is one of the Nordic region’s leading suppliers to restaurants, caterers and convenience stores and has sales exceeding SEK 5.2 billion. ICA Meny will focus on increasing its share of private labels and improving operational efficiency.

Hakon Invest

40% 1) 50% Rimi Baltic Portfolio companies ICA AB 50% Netto

100% ICA Sverige ICA Norge ICA Meny ICA Banken Etos Forma Publishing Group

ICA Meny in brief

BUSINESS CONCEPT ICA Meny shall provide customers with increased profitability and growth through a broad product range and a portfolio of value-added products and services.

2002 2003 2004 2004 (IFRS) JAN–SEP 2005 (IFRS) Sales (SEK M) 4,042 4,030 4,355 4,355 4,353 Operating profit/loss (SEK M) –46 –19 –37 –36 –1 Number of employees (average) 1) 903 921 899 899 1,016 1) Refers to average number of employees based on 1,800 annual working hours

Operations primarily IT, logistics and premises, as well as pricing, cost levels ICA Meny is one of the Nordic region’s leading suppliers to restau- and controls, which have not functioned satisfactorily given the rants, caterers and convenience stores. Restaurants and caterers demands placed on ICA Meny by its complex customer and logis- account for more than 80% of sales, and convenience stores for the tics environment. remainder. In parallel with these efforts and in accordance with a decision In recent years, ICA Meny has worked to increase the focus on in 2002 to expand operations through acquisitions, ICA Meny operational efficiency and assets to support increased efficiency, acquired the companies Restaurangpartner with sales of about SEK

40 Hakon Invest’s holdings and financial management 200 million in 2002 and Arvid Nordqvist with sales of about SEK Sources of revenue 300 million in 2003. Neither of these companies contributed posi- ICA Meny’s derives its income entirely from product supply opera- tively to ICA Meny’s earnings at the time of the acquisitions. In tions, since the company acts as a wholesaler, buying in food and 2004, ICA Meny Norge with sales of about NOK 809 million was alcoholic beverages for resale to restaurants, caterers and conven- transferred to ICA Meny. ICA Meny Norge was previously a part of ience stores. ICA Norge but is consolidated as of January 1, 2005 in ICA Meny. The objective was to coordinate operations, thus achieving Market economies of scale. During 2004, a two-year contract valued at The Swedish and Norwegian market for supplies to restaurants, more than SEK 300 million was signed with Compass Group, the caterers and convenience stores amounts jointly to approximately world’s largest catering company. The company acquisitions and SEK 63 billion. The market is fragmented and consists partly of the transfer of ICA Meny Norge has affected the internal efficiency large companies that also have retail operations and partly of small work and required resources and resulted in costs for integration wholesalers and food producers at the local level. and restructuring of operations. The loss-generating acquired opera- In 2004, the Swedish restaurant and catering market was relations also had a direct negative effect on ICA Meny’s earnings. tively stable. ICA Meny raised its volume in this segment by 15% in ICA Meny continues to have a need to focus efforts on improving 2004. Other suppliers to the restaurant and catering sector in profitability, but the work completed to date, the measures already Sweden include Servera, Martin Olsson and Servicegrossisterna. implemented and investments during 2005 have begun to show The Swedish market for convenience stores was stable in effect. 2004, while ICA Meny’s sales in this segment dropped 9%. Other major suppliers to this sector include Axfood, Servicegrossisterna, Restaurants and caterers Svensk Snabbmat and Privab. ICA Meny supplies food, spirits and restaurant equipment to restau- The Norwegian catering market was stable in 2004. rants and catering ﬁrms. ICA Meny is distinguished from the compe- However, ICA Meny increased its volumes by as much as 25%. tition by its nationwide presence and one-stop offering of food, bev- Also in 2004, ICA Meny commenced deliveries to convenience erages and equipment. Other competitive advantages include stores, and now has a market share of about 25%. The conven- ICA’s Meny’s competence in wine and spirits and in delicatessen ience market is judged to be stable. Three main players dominate products. Low operating costs and ICA AB’s purchasing power are the Norwegian catering and convenience market. These are ICA the cornerstones of its strategy. Meny, NorgesGruppen and Servicegrossisterna. Much of the development in the culinary arts takes place in restaurants. The trends make their way to the retail sector over time. Outlook Through ICA Meny, ICA AB’s has insight into the restaurant industry, Lower costs and an increased share of private labels, an improved picking up on new trends that can be transferred to the stores. pricing model, more efficient IT systems and a changed customer mix are important components for developing ICA Meny and Convenience stores achieving stable profit. However, operational efficiency will con- ICA Meny is also one of the leading suppliers to convenience tinue to remain in focus. Rationalization of the warehouse structure stores, including service stations and other local shops. ICA Meny will continue and the number of warehousing units in Stockholm will Convenience focuses on small stores. Low operating costs, competi- be reduced. ICA Meny Norge will be integrated with the Swedish tive prices and a range of services make it an attractive partner to operations and a joint Nordic offering will be developed. In addi- both individual stores and chains. In addition, ICA Meny serves as tion, ICA Meny will work to develop synergies with other compa- a supplier of specialty/non-food items to certain ICA stores. ICA nies in ICA AB’s, mainly in the supply chain, sourcing and admin- Meny has two service concepts: Nära Dej and TIME, both of which istrative systems. are available for independent retailers with smaller stores.

Business model ICA Meny is one of Nordic region’s leading suppliers to restaurants, caterers and convenience stores. ICA Meny not only offers goods, but also logistics matched to customer needs, consumption statistics for individual customers and other services related to ICA Meny’s delivery of goods. ICA Meny is what is called a Food Service Provider in the industry.

Hakon Invest’s holdings and financial management 41 ICA BANKEN ICA Banken offers financial services that make life a little easier for ICA AB’s customers and in the process strengthen their loyalty to ICA AB and ICA retailers. As a result of various marketing initiatives in the past years, ICA Banken experienced a very strong flow of customers. ICA Banken will continue its marketing activities, with the goal of further raising business volume.

Hakon Invest

40% 1) 50% Rimi Baltic Portfolio companies ICA AB 50% Netto

100% ICA Sverige ICA Norge ICA Meny ICA Banken Etos Forma Publishing Group

ICA Banken in brief

BUSINESS CONCEPT To make life a little easier for ICA’s customers through its financial services and to increase their loyalty to ICA and to reduce transaction costs for ICA stores and ICA AB from customers who use other bank and credit cards.

2002 2003 2004 2004 (IFRS) JAN–SEP 2005 (IFRS) Business volume (deposits + lending incl. mortgage loans), SEK M 4,480 6,288 9,672 9,672 11,885 Deposits, SEK M 3,789 4,451 5,219 5,219 5,958 Operating profit/loss, SEK M –174 –166 –123 –123 –58 Number of employees, average 1) 141 130 121 121 134 Equity, SEK M 604 Total assets, SEK M 5,925 Risk-weighted assets, SEK M 3,605 Tier 1 capital, SEK M 425 Return on equity, % –18.3 Capital coverage, % 11.8 1) Refers to average number of employees based on 1,800 annual working hours.

42 Hakon Invest’s holdings and financial management Operations Internet bank A fair interest rate on current accounts, unambiguous terms and low ICA Banken continued to improve its Internet bank, which now fees are the philosophy at ICA Banken. The bank offers the simpli- includes functionalities such as e-giro, autogiro and mortgage loans fied services customers want and which increase their loyalty to with quick loan decisions. ICA’s Swedish stores. When customers use their ICA AB card, it also reduces the processing fees paid by ICA retailers and ICA AB. Loans ICA Banken began its operations in 2001. As one of the first ICA Banken provides customers with unsecured loans and through measures, the deposit limit for the previous deposit card was elimi- its cooperation with SBAB, mortgage loans. The bank has also nated. In 2002, other bank services were offered after basic invest- started offering second mortgages as an alternative, which is likely ments in systems and operations were completed. Over the past to further increase mortgage sales. few years, ICA Banken has focused on market communications, ICA Banken experienced unsatisfactory levels of credit losses which has resulted in a significant increase in both business volume on unsecured lending in 2003 and 2004. As a result, ICA Banken and the number of bank cards. For example, in 2004 lending by has adjusted the criteria for this type of lending, thus also adapting ICA Banken grew by 300% and total business volume increased by its product portfolio. However, there is some delay before these 54% during the same period. measures are expected to achieve full effect. In terms of earnings, ICA Banken reported a loss during its first years of operation while its operations were being built up. The ATMs change during 2005 of the model for credit management together ICA Banken in collaboration with ICA retailers has established with a continued positive trend for lending contributed to continued ATMs adjacent to stores. By the end of 2005, some 40 ATMs are improvements in earnings. To this will be added accounting effects expected to be in operation. as a result of the final write-offs of the major share of implemented investments being completed by year-end 2006 and year-end Cooperation with Nordea and FöreningsSparbanken 2007, respectively. The rage of depreciation of investments that In late 2003, ICA Banken signed a cooperation agreement with will be completely written off by year-end 2006 amounts to about Nordea whereby Nordea’s customers can withdraw cash in SEK 40 million per year, while depreciation on investments to be around 1,500 ICA stores that provide banking services. In 2004, written off by year-end 2007 is about SEK 17 million per year. ICA Banken signed a similar agreement with FöreningsSparbanken. Source of revenue The sale of financial services is ICA Banken’s source of revenues. Market Traditionally, customers in Sweden tend to stick with the same bank. Bank cards The four major banks – SEB, Handelsbanken, FöreningsSparbanken As of December 31, 2004 ICA AB had a base of about 3.1 mil- and Nordea – account for about 80% of the market. Smaller niche lion active card customers. Of them, 1.4 million pay with their ICA banks such as ICA Banken, Skandiabanken and Länsförsäkringar cards; the rest use them to accumulate bonus points. The number of Bank continue to slowly but surely capture market share from the banking customers – those who utilize ICA Banken’s banking serv- bigger four in specific product segments. ices – is nearly 200,000. The customer database is a significant More transparent pricing of banking services is putting pressure asset for ICA AB and contributes to loyal customers. It allows offers on the major established banks. Through its product offering and to be specially matched to customers, while providing overall pricing, ICA Banken has helped to improve terms for many cus- knowledge of buying patterns. The customer database provides tomers of other banks as well. important support for decisions in all of ICA AB’s business areas. In 2004, ICA Banken increased its number of bank cards in Outlook issue by 61,500, to nearly 142,000. The category of customers To make its services more accessible, ICA Banken will continue to who have an ICA Banken bank card shop an average of 30% install ATM’s in selected ICA stores. ICA Banken will also continue more at ICA stores than the average regular ICA-card customers. its marketing activities, with the goal of further raising business vol- In 2004, ICA-Banken received an award for “Bank Card of the ume. Year” from the magazine Privata Affärer. The award was given to ICA Bankkort Plus in part because it does not charge fees, including exchange fees, on purchases in foreign currency.

Hakon Invest’s holdings and financial management 43 ETOS The specialty retail chain Etos has eight stores that bring health and beauty products together under one roof. Etos is also a strategic development company that provides its experience to other parts of the ICA group. In the past year, the company continued to prepare for the expected deregulation of the market for non-prescription medications. The company can in many respects be regarded as ICA AB’s development unit for a deregulated pharmaceuticals market

Hakon Invest

40% 1) 50% Rimi Baltic Portfolio companies ICA AB 50% Netto

100% ICA Sverige ICA Norge ICA Meny ICA Banken Etos Forma Publishing Group

Etos in brief

BUSINESS CONCEPT Etos shall be the customer’s natural choice with regard to well-being and rejuvenation.

2002 2003 2004 2004 (IFRS) JAN–SEP 2005 (IFRS) Sales (SEK M) 11 26 31 31 24 Operating profit/loss (SEK M) –15 –24 –34 –34 –15 Number of employees (average) 1) 13 23 23 23 25 Number of stores (year-end) 6 9 8 8 8 1) Refers to average number of employees based on 1,800 annual working hours.

44 Hakon Invest’s holdings and financial management Operations Etos stores are inspired by the drugstore concept popular in Etos is the first company in Sweden to clearly offer health and other countries. The product range is divided into four segments: beauty products as part of a unified concept. The concept comes beauty, body, health and gifts. The stores sell products under the from the Netherlands, where there are around 430 Etos stores Etos label as well as products from the leading suppliers in the mar- today. In Sweden, Etos is a subsidiary of ICA AB and its stores are ket. Etos also holds the sole right to sell products from British drug- operated as an integrated specially chain. store chain Boots in Sweden. Within the ICA group, Etos serves as a development company specialized in health and beauty. This means that Etos symbolizes Market knowledge, new sales solutions, range development and relation- The health trend is growing stronger. In 2004 the Swedish market ships in the field that can and must be used in other parts of the for health and beauty products generated sales of approximately group. SEK 14 billion1) including VAT. Etos is alone in offering health and In addition to product synergies, Etos is cooperating closely beauty products as part of the same concept and has no clear-cut with other companies in the ICA group to find common solutions in competitor. In health products, the closest competitors are the state- logistics, IT and human resources, among other areas. run pharmacy chain Apoteket and health food chains such as Hälsa För Alla Sverige AB and Naturapoteket. In beauty products, the Business model main competitors are Kicks, Åhléns, H&M and Body Shop. Etos is a specialty retail chain that operates eight stores that combine products in the areas of health and beauty. Outlook The focus is on working with the current stores, getting them to grow Sources of revenue and testing new concepts. At the same time, there is considerable Etos’ revenues are entirely attributable to the stores in the area of its development potential for ICA in the area of Health & Beauty, operations – that is, to retail sales. which means Etos is well placed to contribute to many internal projects and earnings in this area. Non-prescription medications may Store concept be part of this area in the future. Etos was launched in Sweden in 2002 and operates eight stores in greater Stockholm, Linköping and Västerås. Stores have been opened in attractive locations in city centers or popular shopping centers.

1) Source: Chemical-Technical Suppliers’ Association and the Health Food Council.

Hakon Invest’s holdings and financial management 45 NETTO ICA AB’s joint venture with Dansk Supermarked A/S for the discount segment is Netto, which offers customers high-quality goods at a low price. Netto has recently undergone sharp expansion and will continue to expand the Swedish operations by adding another 20–25 stores per year in southern Sweden and Mälardalen in central Sweden.

Hakon Invest

40% 1) 50% Rimi Baltic Portfolio companies ICA AB 50% Netto

ICA Sverige ICA Norge ICA Meny ICA Banken Etos Forma Publishing Group 100%

Facts Netto

BUSINESS CONCEPT Netto offers customers high-quality products at low price. The stores are simple and rationally organized for fast and efficient daily shopping.

SEP 2001– SEP 2002– AUG 2002 DEC 2003 2004 2004 (IFRS) JAN–SEP 2005 (IFRS) Sales (SEK M) 142 822 1,194 1,194 Not public Operating profit/loss (SEK M) –33 –111 –119 –119 Not public Number of employees (average) 1) 90 238 540 540 Not public Number of stores (year-end) 11 28 58 58 72 1) Refers to average number of employees based on 1,800 annual working hours.

46 Hakon Invest’s holdings and financial management Operations Sources of revenue The discount chain is jointly owned by ICA AB and Dansk ICA AB’s revenue from Netto is attributable to retail. Since Netto’s Supermarket A/S in Sweden. Netto maintains a strictly hard dis- operations are conducted as a joint venture with Dansk Super- count profile in Sweden and offers high-quality products at the low- marked A/S, ICA AB receives 50% of the company’s earnings. est food prices in the market. The concept, which comes from Denmark, where Dansk Supermarket A/S operates the chain, is to Store concept offer quality products at low prices close to where customers live. Netto’s concept is based on self-service and its stores are very sim- Because of its locations, Netto serves as the convenience store for ply and efficiently designed. The product range is limited to popular many of its consumers, making it easy for them to shop inexpen- products, which is one reason why prices can be kept so low. It is sively every day. believed that the approximately 1,000 articles in Netto’s range In contrast to other discounters, Netto prefers to be close to resi- cover approximately 90% of consumers’ requirements. dential areas, although it also prioritizes stores that are easy to Netto offers a mix of private label and brand name products reach by car or in city centers by mass transit. The typical Netto familiar to Swedish consumers. Since the strategy is to always offer store is about 1,000 square meters in size, of which 750 square low prices, there are no discounts. Each week, however, new prod- meters is sales area. This is in addition to 60–80 parking spaces – ucts are purchased in lots and sold under the “Bargain of the week” a requirement that does not apply to city centers. Netto prefers to banner. build new, but will move into an existing property if the location and logistics are right. Market Netto acts independently in relation to the owners since the low- In 2004, discounters continued to gain a larger share of the food price concept places other demands on purchasing, logistics and retail market. Price pressure is coming mainly from new discounters, distribution. Today, while there is some cooperation on purchasing one of which is Netto. Netto expects that the price pressure in the to achieve volume advantages, these functions are not coordinated market will continue and the discounters’ market share will increase. with ICA AB. Netto also compares itself with Netto in Denmark, to Lidl and Willy’s are the main competitors here. develop and optimize its operations. Outlook Business model The falling price trend is expected to continue in 2005. Netto sees Netto is a food retail chain that through its stores offers customers no indications of a slowdown in sales and expects a further goods of high quality at a low price. increase in revenues. Netto will expand its Swedish operations by a further 20–25 stores a year in southern Sweden and Mälardalen.

Hakon Invest’s holdings and financial management 47 RIMI BALTIC In January 2005, ICA AB and the Finnish company Kesko Livs AB formed a joint venture that combines both companies’ operations in the region, creating one of the leading and most modern food chains in the Baltic regions. The name of the new company is Rimi Baltic AB. ICA AB and Kesko Livs AB each own 50% of the combined operations. The near-term focus will be on developing Rimi Baltic and establishing new stores throughout the region.

Hakon Invest

40% 1) 50% Rimi Baltic Portfolio companies ICA AB 50% Netto

ICA Sverige ICA Norge ICA Meny ICA Banken Etos Forma Publishing Group 100%

Operations families with average to high incomes that demand and appreciate The purpose of the formation of Rimi Baltic is to achieve strong a wide range of fresh foods and high quality. growth and profitability and eventually to become the market leader in the region with a combined market share of 25% within three Business model years. Synergies will be gained mainly in sourcing, logistics and Rimi Baltic owns all stores and operates a coordinated supply chain new store openings. At present Rimi Baltic has a market share of for them. approximately 13% and a strong second-place position in the Baltic food retail market. The two companies complement each other in Sources of revenue the region, with Kesko being the strongest in Estonia while ICA the Revenue in the Baltic region is attributable to retail operations. Since strongest presence in Latvia, creating an excellent foundation for Rimi Baltic’s operations are conducted as a joint venture with Kesko cooperation through Rimi Baltic. Livs, ICA AB receives 50% of the company’s earnings. The Baltic region is ICA AB’s fastest growing geographic market within food retail. The majority of Rimi Baltic’s customers are

48 Hakon Invest’s holdings and financial management RIMI Baltic in brief1) Store concept ICA Baltic introduced the store concepts Rimi Supermarket and Rimi BUSINESS CONCEPT Hypermarket to the cooperation with Kesko Livs. Rimi originated Rimi Baltic’s stores should be the customer’s first choice in the fast growing with the Norwegian Rimi stores but has been locally adapted to the markets in Estonia, Latvia and Lithuania. Together with Kesko Livs, ICA AB Baltics. In the supermarket concept, the focus is on fresh foods and aims to make Rimi Baltic the leading retail food chain in the Baltic countries. good service, and the stores have deli, meat, hot and cold meal solutions and fresh fish counters. Several hypermarkets were con- JAN–SEP 2005 (IFRS) verted in 2004 to the new Compact Hypermarket concept, which Sales (EUR M) 581 was launched in 2003. Operating profit/loss (EUR M) –4 The stores focus on fresh foods and non-food products, with an Number of employees (average) 2) 8,584 emphasis on atmosphere, comfort and efficient use of space. The Number of stores (year-end) 169 new concept has been successful, and new Compact 1) Rimi Baltic was established in 2005 as a joint venture between ICA AB and Kesko Livs AB, meaning that there are no historical figures for the company. Hypermarkets have also been opened in Tallinn (Estonia), 2) Refers to the average number of employees based on 1,800 annual working hours. Daugavpils and Liepaja (Latvia) and Kaunas (Lithuania). Expansion of the concept will continue. At the time of the formation of the joint venture with ICA Baltic, Kesko Livs had a total of eleven Citymarket stores located in Estonia and Latvia. In Estonia, Kesko Livs also owned Säästumarket, the country’s largest low-price chain with 47 stores. Kesko Livs also had 25 SuperNetto stores – some in Estonia, but most in Latvia. The new company Rimi Baltic operates in six formats.

Rimi Baltic

NO. OF STORES, NO. OF PRODUCTS STORE PROFILE DESCRIPTION DEC. 31, 2004 PER STORE Customers do their daily shopping at Rimi Supermarket, where they can find high-quality fresh food. These stores are conveniently located close to where customers live and work. 68 8,000 –10,000

At Rimi Compact Hypermarket and Rimi Hypermarket, customers can find everything RIMI COMPACT HYPERMARKET at reasonable price in a single location. In addition to food, these stores sell apparel, 5 20,000–25,000 housewares, multimedia, toys, sporting goods and cosmetics. The stores are conveniently RIMI HYPERMARKET located for customers traveling by car and have extended opening hours. 5 35,000 Super Netto is a discount chain in Latvia. 25 1,200

Säästumarket is the first discount chain in the Estonia retail sector. The first store opened in 1999 to give customers an opportunity to save money. Strong price focus with limited range and acceptable quality. 47 1,200 Citymarket In this hypermarket concept, the customer should be able to find everything under one roof. A wide range of food products is mixed with a non-food assortment with the focus on apparel, textiles and shoes. The concept is used in Estonia and Latvia. 11 25,000–30,000 Cash & Carry The Cash and Carry concept is focused on smaller restaurants and companies. 1

Hakon Invest’s holdings and financial management 49 Market MARKET SHARES, Approximately 7.5 million people live in the three Baltic countries: LATVIAN RETAIL FOOD MARKET, 2004 Estonia, Latvia and Lithuania. Lithuania, with a population of nearly 3.5 million, is the largest geographic market, followed by Latvia

with 2.5 million inhabitants and Estonia with 1.5 million inhabi- Other Rimi Baltic tants. The Baltic countries became full-fledged members of the EU 56% 20% on May 1, 2004. Membership has led to higher inflation in all three countries due to the inflow of goods from other EU member Vilnius Prekyba states. The economic growth rate in the countries is high, ranging 16% between 6 and 8%. Mego 4% The Baltic market for consumer goods grew by just over 9% in Elvi 4% 2004, to approximately SEK 47 billion including VAT. The discount market continued to develop strongly. Households spend about Source: ICA AB. 35% of their disposable income on food, compared with Sweden, for example, where the corresponding figure is 15%. As incomes rise, there is also a growing interest in more sophisticated products MARKET SHARES, and international brands in all areas. LITHUANIA RETAIL FOOD MARKET, 2004 In Latvia, in 2004 ICA Baltic had sales corresponding to approximately 14% of the total market. Kesko Livs’s share of the market in 2004 amounted to approximately 6%, so Rimi Baltic’s total Other Vilnius Prekyba market share amounted pro forma to approximately 20%. Its largest 32% 37% competitor is Lithuania-based Vilnius Prekyba, with approximately 16% of the market, followed by Mego and Elvi with approximately 4% of the market each. Rimi Baltic 6% In 2004, ICA Baltic was the fourth largest player in Lithuania, with approximately 6% of the market. Kesko Livs, on the other hand, Norfa 11% IKI 14% had no operations in Lithuania. Vilnius Prekyba was clearly domi- Source: ICA AB. nant, with approximately 37% of the market, followed by the domestic chain IKI, with 14% and Norfa with approximately 11%. In Estonia, ICA Baltic had a limited market share in 2004, while Kesko was the market leader, with a market share of approxi- MARKET SHARES, mately 26%. Cooperative ETKs were the second-largest player in ESTONIAN RETAIL FOOD MARKET, 2004 the Estonian market, with a market share amounting to approximately 23%. The Selver chain had a market share of 7%, while the Finnish Prisma company had a market share of approximately 6%. Other Rimi Baltic 26% As a whole, Vilnius Prekyba was the market leader in the region 38% in 2004, with around 20%, followed by ICA Baltic with approximately 7%, Kesko Livs with slightly more than 6% and IKI with slightly more than 5%. ETKs Prisma 6% 23% Outlook Selver 7%

In the near future, the focus will be on developing Rimi Baltic Source: ICA AB. together with Kesko Livs. Expansion efforts will continue and new stores will be opened throughout the region. Expansion focus will be placed in the fastest growing formats of hard-discount and Compact Hypermarkets. The German hard-discount chain Lidl is expected to establish operations in the Baltic region in 2005/2006.

50 Hakon Invest’s holdings and financial management FINANCIAL OVERVIEW ICA AB1)

INCOME STATEMENT ACCORDING TO IFRS IFRS ADJUST- 2004 2005 SEK M 2002 2003 2004 MENT 2004 JAN–SEP JAN–SEP Net sales 70,908 71,980 71,811 1,7202) 73,531 53,996 52,514 Cost of goods sold –61,988 –63,130 –62,810 –1,2952) –64,105 –47,095 –45,812 Gross profit 8,920 8,850 9,001 425 9,426 6,901 6,702

Selling- and administration expense –6,652 –7,430 –7,626 –3033) –7,929 –5,753 –5,620 Other operating income 435 1,292 544 –2284) 316 300 356 Result from participation in associated companies 124 30 426 – 426 435 –97 Goodwill amortization and write-down –292 –622 –480 2185) –262 –262 – Operating profit (EBIT)6) 2,535 2,120 1,866 111 1,977 1,621 1,341

Financial income 115 154 114 – 114 81 59 Financial expenses –566 –466 –251 –997) –350 –260 –242 Profit before tax (EBT) 2,084 1,808 1,729 12 1,741 1,442 1,158

Tax on income for the year –350 –32 –213 –138) –226 –221 –90 Minority interests –24 1 1 –1 – – – NET PROFIT FOR THE YEAR 1,710 1,777 1,518 –3 1,515 1,221 1,068

BALANCE SHEET ACCORDING TO IFRS IFRS ADJUST- 2004 2005 SEK M 2002 2003 2004 MENT 2004 JAN–SEP JAN–SEP Goodwill 2,422 2,009 1,548 2179) 1,765 1,695 1,609 Other intangible non-current assets 340 279 250 – 250 331 365 Tangible non-current assets 14,469 11,639 12,118 1,0677) 13,185 13,081 13,125 Financial non-current assets 4,047 3,936 1,706 –1412) 1,565 1,731 2,384 Total non-current assets 21,278 17,863 15,623 1,143 16,765 16,838 17,483

Inventory and current receivables 7,120 7,502 9,648 1012) 9,749 8,517 11,339 Cash, bank and other current investments 3,967 4,476 3,111 1162) 3,227 3,318 3,079 Other current assets 1,706 1,713 1,301 45 1,346 1,147 356 Total current assets 12,793 13,691 14,061 262 14,323 12,982 14,774 TOTAL ASSETS 34,071 31,554 29,683 1,405 31,088 29,820 32,257

Equity 11,939 12,169 7,399 –30510) 7,094 12,293 7,937 Minority interests 258 34 33 –33 – – – Interest-bearing provisions 645 672 730 – 730 659 846 Non-interest bearing provisions 1,009 884 803 4 807 890 678 Interest-bearing liabilities 11,387 8,855 13,005 1,23111) 14,236 8,245 15,378 Non-interest bearing liabilities 8,833 8,940 7,713 5082) 8,221 7,733 7,418 TOTAL EQUITY AND LIABILITIES 34,071 31,554 29,683 1,405 31,088 29,820 32,257

1) Due to rounding off, some of the columns may not total exactly. 2) Consolidation of stores. SUMMARY OF EFFECTS OF IFRS 2004 3) Consolidation of stores, goodwill and sale/lease-back of properties. 4) Sale lease-back of properties. INCOME STATEMENT SEK M BALANCE SHEET SEK M 5) Reversal of goodwill. IFRS 3 179 IFRS 3 193 6) Net items of non-recurring nature amounted to around SEK +160 million in 2004 and around SEK +230 million in 2003. In 2002 the net effect was around SEK +250 million. IFRS 5 8 IFRS 5 3 7) Consolidation of stores and sale/lease-back of properties. IFRS 18 –183 IFRS 18 873 8) Tax on reported adjustments. IFRS 27 –5 IFRS 27 318 9) Reversal of goodwill amortization. 10) Sale/lease-back of properties and reporting of financial instruments. IFRS 39 –2 IFRS 39 18 11) Sale/lease-back of properties.

Hakon Invest’s holdings and financial management 51 CASH-FLOW STATEMENT ACCORDING TO IFRS IFRS ADJUST- 2004 2005 SEK M 2002 2003 2004 MENT 2004 JAN–SEP JAN–SEP Cash flow from operating activities before working capital changes 2,969 2,968 2,524 37 2,561 1,935 1,873 Working capital changes –268 –99 –2,849 72 –2,776 –1,715 –1,010 Cash flow from operating activities 2,702 2,869 –324 109 –215 220 863

Investments in non-current assets –3,287 –2,676 –2,500 –122 –2,622 –2,119 –1,829 Divestments of non-current assets 1,263 3,742 1,138 – 1,138 233 627 Other items from investing activities –263 –93 2,398 36 2,435 2,746 –57 Cash flow from investing activities –2,287 973 1,037 –86 951 860 –1,259

Changes in loans 828 –2,369 4,199 – 4,199 –1,475 1,074 Shareholder contributions – 73––––– Dividend –589 –664 –6,228 – –6,228 –728 –607 Other items from financing activities –199 –400 32 –2 30 – – Cash flow from financing activities 40 –3,359 –1,997 –2 –1,999 –2,203 467 CASH FLOW FOR THE YEAR 455 484 –1,285 211) –1,263 –1,123 71

KEY DATA ACCORDING TO IFRS IFRS ADJUST- 2004 2005 2002 2003 2004 MENT 2004 JAN–SEP JAN–SEP Operating profit before depreciation and write-downs (EBITDA) 4,103 4,437 3,570 –303 3,267 2,671 2,159 Operating profit before amortization of goodwill (EBITA) 2,827 2,742 2,346 –369 1,977 1,883 1,341 Operating margin before depreciation and write-downs (EBITDA margin) 5.8% 6.2% 5.0% 4.4% 4.9% 4.1% Operating margin before amortization of goodwill (EBITA margin) 4.0% 3.8% 3.3% 2.7% 3.5% 2.6% Operating margin (EBIT margin) 3.6% 2.9% 2.6% 2.7% 3.0% 2.6% Profit margin (EBT margin) 2.9% 2.5% 2.4% 2.4% 2.7% 2.2% Return on shareholders’ equity, excluding ICA Banken2) 16.5% 15.7% 16.5% 16.9% – 14.1% Return on capital employed, excluding ICA Banken2) 15.6% 13.1% 12.8% 12.9% – 11.0% Equiry/assets ratio 35.8% 38.7% 25.0% 22.8% 41.2% 24.6% Interest-bearing net debt, excluding ICA Banken3), SEK M 6,323 3,188 7,161 – 7,161 1,602 7,032 Net debt/equity ratio, excluding ICA Banken, multiple 0.5 0.3 1.0 1.0 0.1 0.9 Proportion of risk-bearing capital 38.4% 41.0% 27.4% 25.1% 43.7% 26.5% Interest coverage ratio, multiple 4.7 4.9 7.9 6.0 6.5 5.8 Untaxed reserves in the parent company, SEK M 1,492 1,573 1,671 – 1,573 1,671 Average number of employees 15,732 16,836 17,206 18,781 – 4) 12,295 Dividend, SEK M 5) 589 664 6228 – 6,228 Dividend ratio 34.4% 37.4% 410.3% 411.1%

ICA AB’S OPERATING MARGIN (EBIT) ICA AB’S RETURN ON EQUITY ICA AB’S EQUITY/ASSETS RATIO COMPARED WITH TARGET OF 3.5–4.0% COMPARED WITH TARGET OF 14.0–16.0% COMPARED WITH TARGET OF 30.0–35.0%

% % % 4 20 40

3 15 30

2 10 20

1 5 10

0 0 0 02 03 04 02 03 04 02 03 04 Target interval Target interval Target interval EBIT margin Return on equity Equity/assets ratio

1) Consolidation of stores. bearing provisions) minus interest-bearing liabilities from 4) Not available. 2) For quarterly figures, the key data are calculated on a real estate transactions reported as financing (sale-lease 5) Dividend refers to dividend paid during the year. In 2004, rolling twelve-month basis. back with sublease to ICA retailers) minus cash, bank and the dividend included an extraordinary dividend of SEK 3) Interest-bearing liabilities (excluding pensions and interest- short-term investments. Everything excluding ICA Banken. 5,500 million.

52 Hakon Invest’s holdings and financial management Note to the financial overview of ICA AB Comments on adjustments attributable to IFRS In conjunction with the changed ownership structure of the ICA The accounts according to IFRS for 2004 and the periods from January group in 2000, ICA Ahold AB was established and acquired all to September 2004 and 2005 were prepared in accordance with the shares of ICA AB (publ). During 2002 ICA AB (publ) and ICA IFRS principles expected to apply as of December 31, 2005. IFRS is Ahold AB were merged and during 2003 the company changed subject to ongoing review and interpretation by the EU, whereby name to ICA AB. Neither Swedish nor international accounting changes may arise that affect the accounts for the specified periods. recommendations have previously provided guidelines for how this The company has provided long-term financing or guarantees to a transaction should be reported. The company has previously number of ICA retailer and franchisees. The company does not con- elected to treat this transaction as a company acquisition in accor- sider that it controls the operations in these stores. In accordance with dance with Swedish accounting practice. In March 2004, a new IFRS (IAS 27 and SIC 12), however, the determination is that ICA has international recommendation regarding reporting of company control over about 100-150 ICA retailers and franchisees, which, acquisitions was issued (IFRS 3 and IAS22). As a result of interna- accordingly, should be consolidated by ICA. A consolidation of these tional guidance becoming available, the company elected in ICA retailers and franchisees would result in an increase in net sales, 2004 to change the reporting of ICA Ahold’s acquisition of ICA AB gross profit and total assets, but not significantly affect earnings for the (publ). The change entailed the elimination of goodwill in the con- period and equity. The company plans to divest the financing opera- solidated balance sheet which affected goodwill, amortization on tions during the fourth quarter of 2005, which means that the consoli- goodwill, and equity, but had no effect on consolidated cash flow. dation requirement ceases for most of these ICA retailers and fran- The years 2002 and 2003 were also recalculated retroactively. chisees. Accordingly, the company assesses that a consolidation of these ICA retailers and franchisees for 2004 and part of 2005 would not provide a correct view of the company’s operations. Consequently, the company has decided not to consolidate them.

Hakon Invest’s holdings and financial management 53 Forma Publishing Group AB

Hakon Invest

40% 1) 50% Rimi Baltic Portfolio companies ICA AB 50% Netto

ICA Sverige ICA Norge ICA Meny ICA Banken Etos Forma Publishing Group 100%

Forma Publishing Group in brief

BUSINESS CONCEPT Through publishing operations in the Nordic and Baltic markets, to give people knowledge and inspiration in their private and working lives.

2002 2003 2004 JAN–SEP 2005 Sales (SEK M) 658.9 630.8 596.2 433.3 Operating profit/loss (SEK M) –4.3 36.4 59.3 23.3 Number of employees (average) 349 321 303 299

Forma Publishing Group AB (Forma) is one of Sweden’s largest pub- Sweden’s largest food magazine Buffé, which is sent to ICA’s 2.3 lishers focused on production and distribution of consumer periodi- million active customers. Forma has leading expertise in food and cals, trade magazines and books. The dominant subject areas are retail, which is focused in the leading trade magazines. Operations food, home, recreation and retailing. are currently conducted in Sweden, Finland, Estonia and Latvia. Forma’s consumer magazine operations produce such publica- In recent years, the company has undergone an extensive tions as Sweden’s largest weekly magazine ICA-kuriren and change program with favorable results. In addition to a positive Sweden’s largest monthly magazine Hus&Hem. The editorial staff of financial trend, the company has won a number of awards, such as Hus&Hem also produces Sweden’s largest home buyer’s magazine Magazine of the Year and the Year’s One-shot from the industry Metro Hus&Hem in collaboration with the free newspaper Metro. magazine Resumé. Forma was then also nominated as Publisher of Forma also produces customer magazines, with assignments the year. The company has also been nominated as Sweden’s best that include Sweden’s largest customer magazines. These include workplace by the Alecta insurance company.

54 Hakon Invest’s holdings and financial management Background and history Magazine operations are organized in a matrix in which each Hakon Invest’s subsidiary Forma (formerly ICA Förlaget AB) was pre- magazine is built up around three functions: Editorial Board, viously included in ICA AB, but in conjunction with the preparations Marketing and Advertising. The Editorial Board delivers the journal- for the planned exchange listing of ICA AB in 2000, ICA decided to istic content. Marketing and Advertising are central functions that focus operations on food retailing. This resulted in ICA AB decided exploit economies of scale within the organization. The Advertising to divest Forma. Hakon Invest acquired Forma in 1999 and has department’s sales staff are thus integrated, meaning that advertise- since developed the company so that it now generates a profit. ment sales personnel represent Forma as a whole, not an particular Forma changed its name in 2004, but since ICA has a strong magazine or publication. The Marketing department is organized and well-established brand, the company decided to continue in the same manner and is responsible for subscriptions and single- using it in its operations (i.e. ICA-kuriren, ICA Bokförlag) with the copy sales. In addition, the company has staff functions for support of ICA-handlarnas Förbund’s agreement with ICA AB which Personnel, Accounting and IT and purchasing. regulates the use of the brand. The agreement also includes ICA- Forma places great emphasis on its employees and was handlarnas Förbund’s subsidiaries and their subsidiaries. Forma is recently nominated by Alecta as Sweden’s best workplace. In not dependent on ICA AB in other respects. In 2004, for example, recent year, Forma has sharply improved profitability, reduced sales to ICA AB comprised less than 15% of Forma’s sales. absence due to illness and increased employee satisfaction.

Business concept and strategy Business areas To provide people with knowledge and inspiration in their private Consumer magazines and professional lives through publishing operations in the Nordic ICA-kuriren and Baltic markets. This means that Forma’s primary arena in the Forma publishes Sweden’s largest weekly magazine, ICA-kuriren, media industry is printed materials. which is a broad magazine focused on food and leisure. ICA- Forma’s strategy consists of developing existing and new busi- kuriren has a circulation of 272,300 copies and is read each week ness. The positive earnings trend in recent years was possible by by some 861,000 readers.1) focusing on profitable core operations. Extensive development work During 2004, Forma published a number of special editions of is in progress both in trade magazine publishing and in consumer its ordinary magazines. The editors of ICA-kuriren published the magazines, which has resulted in completely new magazines, as travel magazine Columbus, the dog magazine Vovve and the food well as more efficient use of the brands that already exist. magazine Smak, which will be published twice during 2005 and is Furthermore, Forma will grow by implementing acquisitions in the planned for publication five times next year. The magazine Vovve areas in which Forma is currently active. will be published four times during 2005, and eight issues are planned for 2006. The launch form one-shot titles as a method for Financial targets live tests of a magazine with low financial risk will be increasingly Forma has established the following targets: common for Forma over the coming years. • Sales shall amount to SEK 1,000 million by 2010. • Profit before tax shall amount to SEK 100 million by 2010. Hus&Hem • Growth over time shall be 10% per year. Hus&Hem is Sweden’s largest monthly magazine with a circulation of 142,1002) and a focus on good living and home decoration. The Organization magazine, which is intended to inspire, provide tips and illustrate cur- Forma conducts operations in Sweden, Finland, Estonia and Latvia rent topics, has some 625,000 readers1). Hus&Hem also produces with around 300 employees. The major share of operations are Sweden’s largest home buyer’s magazine, Metro Hus&Hem, in collab- conducted in Västerås. oration with the newspaper Metro. The editorial board of Hus&Hem produces all editorial material, and it is hoped that it will be possible to The company’s business areas are: expand the partnership with more magazines in additional markets. In • Consumer magazines competition with 117 new magazines, Metro Hus&Hem received the • Specialty magazines award as the Best Magazine of 2004 from the industry magazine • Customer magazines Resumé. During 2005, the editorial board of Hus&Hem will also test • ICA Bokförlag three new one-shot titles: Antik nu, Bohem and December. • Finland and Baltic countries

1) Source: Orvesto. 2) Source: TS.

Hakon Invest’s holdings and financial management 55 Specialty magazines million active regular customers. Buffé is ICA’s most important Within the framework of Forma’s operations, specialty magazines medium for promoting the joy of cooking. The magazine should in the areas of food and retail are also published. Knowledge of strengthen the ICA brand while rewarding customer loyalty, but also retailing in general and food retailing in particular are utilized for encourage retailers to implement loyalty-enhancing measures. development in a broader perspective. New products emerge and existing media are enriched with supplementary distribution chan- ICA Bokförlag nels. Forma’s specialty magazines are Snabba köp, Praktiskt butiks- Forma includes ICA Bokförlag, which is one of Sweden’s largest arbete, ICA-nyheter, Restaurang & Storhushåll and Supermarket. specialty book publishers with more than 450 titles in its catalogue. Specialty trade magazine operations also publish books and Publication is very broad and comprises primarily practical hand- guides linked to food and retailing. books in the areas of cooking, home decoration, gardening, health and leisure. Among the unit’s successes is the baking book Sju Customer magazines sorters kakor, which is Sweden’s best-selling book after the Bible. Forma’s customer magazine operations, Idé & Media, are the market leader in assignments towards consumers. Together with cus- Finland and Baltic countries tomers, the unit works to develop solutions that are customized for Three successful magazines are published in Finland: Kotivinki, different reader groups. This includes editorial work, advertising Trendi and Talo & Koti. These all have strong positions with substan- sales, purchasing of printing services, distribution and Internet solu- tial circulation. In Estonia, the magazines Kodu & Aed and Trend tions. In addition, analyses and effectiveness measures are per- are published. In Latvia, Forma only publishes Majas & Därtz. formed for the product. These operations even include production on assignment focused on business-to-business, primarily in retail Revenue model and food sales. Customers include Stadium, Swedish Houseowners Some 33% of Forma’s revenues in Sweden derive from advertising, Association, the Swedish Tennis Association, the Swedish while 47% come from readers through subscription fees and news- Equestrian Federation and ABB. stand sales. The remaining 20% includes revenues from book sales On assignment from ICA AB, Forma also publishes Buffé, and customer magazine operations. Sweden’s largest food magazine, which is distributed to ICA’s 2.3

START OF COUNTRY PUBLICATION CIRCULATION DESCRIPTION

CONSUMER MAGAZINES ICA Kuriren Sweden 1942 272,300 Sweden’s largest weekly Hus & Hem Sweden 1987 142,100 Sweden’s largest monthly Vovve Sweden 2004 30,000 Sweden’s first life-style magazine for dog owners Kotivinki Finland 1983 186,000 Finland’s largest magazine for the home Trendi Finland 1989 62,000 Magazine for young women Talo & Koti Finland 2000 55,000 Finland’s Hus & Hem Kodu & Aed Estonia 1999 30,000 Estonia’s largest monthly Trend Estonia 2003 12,000 Magazine for young women Majas & Därtz Lettland 2000 26,000 Latvia’s largest monthly

TRADE MAGAZINES ICA-nyheter Sweden 1968 19,600 News magazine for food retailers Snabba köp Sweden 1998 14,300 Magazine for convenience stores Praktiskt Butiksarbete Sweden 1941 9,300 Magazine for store employees Restaurang & Storhushåll Sweden 1979 6,900 Magazine for the hotel and restaurant sector Supermarket Sweden 1960 4,600 Magazine for retailing decision makers Source: Forma Publishing Group.

56 Hakon Invest’s holdings and financial management Market and outlook1) for the purpose of creating relations. Customer magazine produc- Advertising is an important source of revenue for Forma. Growth in tion thus gains from this regrouping of advertisers’ marketing efforts this market is driven by generic and cyclical factors. The generic and constitute a method for Forma to increase its exposure to the tra- factors drive develop over the long term and consist of structural ditional advertising market. Forma has excellent prospect for taking changes in the market, such as the emergence of new media, prod- additional market shares in the segment for customer and company uct development in existing media and changes in competition. The magazines, and the trend towards increased demand is expected market for media and publishing is currently undergoing structural to continue with growth in 2006 anticipated to amount to 2.4%. change. In addition to changing consumer patterns as a result of Forma’s share of the advertising market is 10.6% in the popular new media, a consolidation is in progress in which the players are press, 5% in the consumer magazine segment and 2.4% in the spe- becoming larger and fewer in number. Growth through acquisitions cialty press2). Other major players in the customer magazine market is therefore a prioritized area for Forma, and its future competitive- are Hachette Filipacchi Sverige AB and OTW. Hachette Customer ness and profitability will depend on the company’s growth capac- Publishing produces customer magazines for external business part- ity. ners and is part of the magazine publishing company Hachette The cyclical factors dominate growth in a shorter perspective Filipacchi Sverige AB, with sales of some SEK 164 million in and are in turn dependent on general economic conditions. 2004.3) OTW is an associated company to Forma and has sales Growth, particularly in private consumption, and business profitabil- of about SEK 75 million.4) ity are important factors in the advertising market. The cyclical pre- The largest competitors in the publishing market are Prisma requisites are expected to remain stable during 2006 with a growth (within the KF Media Group) and Bonnier. The KF Media Group is rate of 5.2% for total advertising investments. owned by Kooperativa Förbundet (KF) and has five main business The market for advertising investments in specialty magazines areas: book stores, book publishing, magazines, interactive media amounted to SEK 1,435 million during 2004, with growth and Internet book sales. The group has sales of some SEK 2 billion expected to amount to 4.5% due to a strengthening of the economy. with about 1,000 employees.5) The popular press market amounted to SEK 678 million in Bonnier AB is a family-owned media group with its base in 2004. The influx of new titles, which has been great in recent years, Sweden. The company’s business areas Bonnier Magazine Group as well as a large number of one-shot titles, has probably saturated and Bonnier Books had sales of SEK 3,248 million and SEK 4,573 the market and made greater discounts necessary. In addition, com- million, respectively, in 2004.6) petition is fierce from free newspapers and the evening newspapers’ Forma has a strong market position with several products that supplements, which in large part have the same editorial content as are the market leaders in their respective area and customer seg- the popular press. The strengthening of private consumption, how- ments. Customer magazine operations within the Idé & Media busi- ever, should provide prerequisites for anticipated growth in the mar- ness area lead the market for contracted magazines towards con- ket for advertising investments in the popular press of 2.9% during sumers. ICA Bokförlag is the leader in the segment for practical 2006. handbooks for consumers. The launch of Metro Hus&Hem in the beginning of 2004 con- Forma works continuously to retain and enhance its competitive tributed strongly to a redistribution of advertising revenues from pri- position in the market. Forma’s management and its Board of marily metropolitan dailies to free newspapers during the year. Directors conducted a comprehensive review of the company’s busi- Advertising in free newspapers and magazines amounted to SEK ness strategy, assignments, business concept, vision, values, goals 2,153 million and is expected to continue to show stronger growth and strategy during 2004. Forma will strive to pursue the new direc- than the average for the media market, amounting to some 7%. tion and strategy for developing existing operations while making The free publication segment also includes customer and com- acquisitions and developing new business. The company will also pany magazines. During 2004, advertising revenues in this seg- continue to develop work methods and increase efficiency in the ment declined by 0.8% to SEK 450 million due to price pressures. organization. Opportunities still remain for improving financial con- During the first quarter of 2005, however, advertising revenues trol, for example, and increase sales of publications and advertising. increased by 4.2%. Customer and company magazines benefit from the advertisers’ desire to profile their brands by starting their own customer magazines. Many companies also start magazines

1) Source for information in this section is unless otherwise specified: Institute for Advertising and Media Statistics, Advertising and Media Forecast, June 2005. 2) Source: IRM. 3) Source: Hachette Filipacchi Sverige AB’s Annual Report. 4) Ownership share 12.5%. Source: Forma Publishing Group. 5) Source: www.kf.se 6) Source: Bonnier’s 2004 Annual Report.

Hakon Invest’s holdings and financial management 57 FINANCIAL OVERVIEW FORMA1)

INCOME STATEMENT CASH-FLOW STATEMENT 2004 2005 2004 2005 SEK M 2002 2003 2004 JAN–SEP JAN–SEP SEK M 2002 2003 2004 JAN–SEP JAN–SEP Net sales 658.9 630.8 596.2 439.9 433.3 Cash flow from operating Cost of goods sold –357.6 –346.1 –300.9 –194.3 –230.1 activities before working capital changes –22.9 39.9 52.6 35.0 48.5 Gross profit 301.2 284.7 295.4 245.6 203.2 Working capital changes 12.0 24.9 –101.5 –59.1 –53.3 Selling expense –206.5 –161.2 –153.8 –133.7 –110.5 Cash flow from Administration expense –109.5 –90.3 –87.5 –77.7 –71.0 operating activities –10.9 64.8 –48.9 –24.1 –4.8 Other operating income 10.5 3.1 5.3 3.5 1.5 Investments –11.7 –9.8 –24.6 –14.7 –10.0 Operating profit (EBIT) –4.3 36.4 59.3 37.7 23.3 Divestments 92.2 7.8 5.5 0.8 0.5 Cash flow from Result from participation in investing activities 80.5 –2.0 –19.2 –13.9 –9.5 associated companies –5.0 1.9 0.2 1.0 1.8 Income from other securities Changes in long-term and receivables –10.5 ––––liabilities 4.1 –20.3 5.9 –62.1 – Interest income and Changes in long-term similar items –1.7 8.7 5.9 4.1 5.1 receivables 8.6 0.2 0.5 0.6 0.0 Interest expense and Group contributions and similar items –8.0 –7.8 –6.0 –4.7 –1.9 other cash flow items 0.5 –14.4 –21.6 –20.0 – Profit before tax (EBT) –29.6 39.1 59.4 38.1 28.3 Cash flow from financing activities 13.1 –34.5 –15.1 –81.5 0.0 Tax on profit for the year –0.8 –10.0 –16.5 –10.7 –7.8 Cash flow for the year 82.7 28.3 –83.2 –119.5 –14.3 Minority interests 0.5 –––– Cash equivalents on the NET PROFIT FOR opening date 103.4 174.52) 202.9 203.2 119.2 THE YEAR –29.9 29.1 42.9 27.4 20.5 CASH EQUIVALENTS AT YEAR-END 186.1 202.9 119.7 83.7 105.0

BALANCE SHEET KEY DATA 2004 2005 2004 2005 SEK M 2002 2003 2004 JAN–SEP JAN–SEP 2002 2003 2004 JAN–SEP JAN–SEP Goodwill 0.1 ––––Operating profit before Tangible non-current assets 63.4 63.0 75.2 71.4 74.9 depreciation and write-downs (EBITDA) 3.0 45.6 69.0 28.0 14.1 Financial non-current assets 26.2 16.9 13.5 14.7 5.9 Operating profit before Total non-current assets 89.7 79.9 88.7 86.1 80.7 amortization of goodwill (EBITA) –4.3 36.3 59.3 37.7 23.3 Inventory and current receivables 141.0 107.1 152.8 188.7 181.2 Gross margin 45.7% 45.1% 49.5% 55.8% 46.9% Cash, bank and other Operating margin before current investments 186.1 216.5 132.1 95.7 128.1 depreciation and write-downs (EBITDA margin) 0.5% 7.2% 11.6% 6.4% 3.3% Total current assets 327.1 323.6 284.9 284.4 309.2 Operating margin before TOTAL ASSETS 416.8 403.5 373.6 370.5 390.0 amortization of goodwill Equity 43.7 59.5 80.6 86.3 101.6 (EBITA margin) –0.7% 5.8% 9.9% 8.6% 5.4% Interest-bearing provisions 103.0 110.6 115.4 118.8 119.8 Operating margin (EBIT margin) –0.7% 5.8% 9.9% 8.6% 5.4% Non-interest bearing provisions 2.5 2.6 3.7 13.4 11.5 Profit margin before tax (EBT margin) –4.5% 6.2% 10.0% 8.7% 6.5% Interest-bearing liabilities 27.9 –––– Return on equity3) –50.0% 56.4% 61.2% 42.2% 31.8% Non-interest bearing 3) liabilities 239.7 230.8 173.9 152.0 157.1 Return on capital employed –3.2% 27.2% 35.7% 27.3% 20.5% TOTAL EQUITY AND Equity/assets ratio 10.5% 14.7% 21.6% 23.3% 26.1% LIABILITIES 416.8 403.5 373.6 370.5 390.0 Interest-bearing net debt, SEK M –81.5 –122.8 –30.2 8.4 –14.2 Net debt/equity ratio, multiple –1.9 –2.1 –0.4 0.1 –0.1 1) Due to rounding off, some of the columns may not total exactly. Proportion of risk-bearing capital 11.1% 15.4% 22.6% 26.9% 29.0% 2) Changed definition in the 2003 Annual Report meaning that current investments totaling Interest coverage ratio, multiple –2.7 6.0 10.9 9.1 15.7 SEK 11.6 million were excluded from liquid funds in 2003. 3) For quarterly figures, the key data are calculated on a rolling twelve-month basis. Average number of employees 349 321 303 – 4) 299 4) Not available.

58 Hakon Invest’s holdings and financial management Financial Management

Hakon Invest

40% 1) 50% Rimi Baltic Portfolio companies ICA AB 50% Netto

ICA Sverige ICA Norge ICA Meny ICA Banken Etos Forma Publishing Group 100%

Hakon Invest AB has a substantial liquidity management, which at The funds invested under external and internal management, September 30, 2005 amounted to about SEK 2.8 billion including including the funds used in the daily operations, shall be distributed cash and bank balances of around SEK106 million used in the daily within the following framework: operations. Liquid funds not used in current operations are managed externally and internally. External management is handled by Cash and bank balances >5% of total funds under management Carlson Investment Management. Proprietary management is car- Proprietary management <25% ried out in accordance with the Company’s existing investment policy External management < 80% and financial policy. The aim of proprietary management is to handle the Company’s holding in Ahold shares as well as cash and The aim is an average return of 5% annually. bank balances. As a consequence of Hakon Invest via Ahold acquiring half of 30 SEP SEK M 2002 2003 2004 2005 Canica AS’s 20% interest in ICA AB in 2004, a stable ownership Result from financial management –1,463 –161 65 284 situation in ICA AB is foreseen. This means that Hakon Invest no Return on financial management –44% –5% 3% 11% longer needs to hold as high a liquidity position as previously, when Value of total capital under management the Company wanted to have the possibility to acquired Canica’s (end of period) 3,314 3,114 2,567 2,716 shareholding that was expected to be divested in 2004. In turn, this – of which, value under external management 2,152 2,631 1,974 2,195 means that the liquidity in financial management can now be – of which, value under reduced, which increases the conditions for achieving a higher proprietary management 1,162 483 593 521 return. As a result, Carlson Investment Management’s assignment was realigned in January 2005. Previously, the management was PROPRIETARY FINANCIAL MANAGEMENT evaluated against index, but now an absolute target is applied. The Financial situation and structure goal is as a minimum to achieve a return that corresponds to the At September 30, 2005, proprietary financial management change in the CPI (Consumer Price Index) plus 4 percentage points. amounted to SEK 521 million. Investments were distributed 94% in The rules for financial management are set in a financial policy equities and 6% in hedge funds. and attest procedure adopted by the Board of Directors. The Board’s Audit Committee monitors compliance. Return goal Trading in equities is carried out within the framework of the The goal is a return of 5% annually. management. In total, around 78% of the management of the liquid funds not used in operations is managed externally, while around 20% is handled internally.

Hakon Invest’s holdings and financial management 59 Equities Single-party undertakings The equities holding is largely in shares in Ahold (8,341,326 The market value of directly owned shares, bonds and other finan- shares). The shares in Ahold are a financial investment. The value of cial instruments attributable to a single issuer, or issuers in the same the Ahold shares at September 30, 2005 amounted to SEK 490 group, may only amount to a maximum of 10% of the portfolio’s million, which is 17% of the financial management at that date. total market value, with the exception of the current investment in Ahold shares. Hedge funds Exceptions to this limit are issuer categories 1, 2 and 3 in the The hedge fund holdings are entirely in the Amplus hedge fund. The table below (see column “Maximum share of portfolio per issuer, %”). value at September 30, 2005 was SEK 31 million. Fixed-income securities Other The limits in the table below apply for directly owned fixed-income During the first half of 2005, the Company divested its interest in securities in Swedish and foreign currencies. The percentages in the the Skandia Investment venture capital fund. The investment in table refer to the share of the assets’ (proprietary management) total Skandia Investment has yielded a positive return since 1998. market value. In addition, there are smaller investments in Swedish equities funds in the Forma subsidiary. The value of the fund units at Interest risk September 30, 2005 amounted to SEK 14 million. These units The portfolio’s fixed-income securities, both directly owned and were transferred to the Parent Company in the third quarter. through fixed-income funds, may have a duration of not more than five years. Investment rules Permitted asset types Equities The portfolio’s funds may be invested in the following asset cate- At least 90% of the portfolio’s investments in Swedish and foreign gories: shares, certificates of deposit and equity-related instruments must be a) Fixed-income securities denominated in Swedish and foreign cur- exchange listed, that is, subject to regular trading on a marketplace rencies. open to the public and which is supervised by an authority or other b) Swedish and foreign equities, certificates of deposit and equity- regulatory body. related instruments. A maximum of 50% of the assets under proprietary manage- Mutual funds including hedge funds may be used in the management must be invested in shares, of which 50% in foreign shares ment of so-called structured products. (corresponding to 25% of the assets under proprietary management, with the exception of the investment in the Ahold shares). Derivatives May only be used to hedge exchange rates in foreign currencies.

Issuer category

ISSUER MAX. SHARE OF PORTFOLIO MAX. SHARE OF CATEGORY ISSUER/SECURITY1) PER ISSUER CATEGORY % PORTFOLIO PER ISSUER, % 1. Securities issued by the Swedish State or guaranteed by Swedish State; securities with rating AAA / Aaa 100 100 2. Swedish mortgage institutions 70 30 3. Swedish municipalities and counties securities with rating AA / Aa 50 20 4. Securities with rating A / A 40 10 1) Rating according to Standard & Poor’s and/or Moody´s. As appropriate, issuers/securities should be rated by at least one of this institutes. In the event of a “split rating,” the lowest rating shall be applied.

60 Hakon Invest’s holdings and financial management Liquidity risk a) Fixed-income securities denominated in Swedish and foreign cur- Liquidity risk is managed through specifying that 90% must be in rencies. listed securities. b) Swedish and foreign equities, certificates of deposit and equity- related instruments, Currency risk Mutual funds including hedge funds may be used in the manage- Ahold shares at a value of EUR 55 million as of September 12, ment as well as so-called structured products. 2005, are hedged at a rate of SEK/EUR 9.26 through to January 13, 2006. Derivatives With the aim of enhancing the efficiency of management and for Evaluation the purpose of increasing returns or hedging an investment, the port- Evaluation of management is carried out continuously against the goal folio’s manager may use derivatives, that is, options, futures, swaps of 5% that applies to the return on proprietary management. This is and FRAs (Forward Rate Agreement), related to currencies and carried out by the CFO, who reports to the Board at each Board securities in which the manager is permitted to invest funds, or meeting. indexes related to such securities. The manager may also enter into repo agreements pertaining to fixed-income securities. There is no EXTERNAL FINANCIAL MANAGEMENT limit on how much that may be invested in derivative instruments in External financial management, which as of 2005 is carried out accordance with the above. Carlson Investment Management, amounted at September 30, 2005 to SEK 2,196 million. Distribution of the investments was 37% Single-party undertakings equities, 23% hedge funds, fixed-income securities 39% and bank The market value of directly owned shares, bonds and other finan- funds 1%. cial instruments attributable to a single issuer, or issuers in the same group, may only amount to a maximum of 10% of the portfolio’s Return goal total market value. The management goal is to achieve an annual average real return Exceptions to this limit are issuer categories 1, 2 and 3 in the over a rolling five-year period of 4% on the portfolio’s assets. Real table below (see column “Maximum share of portfolio per issuer, %”). return is defined as nominal return adjusted for inflation in Sweden, measured as the change in CPI. The managements’ benchmark Fixed-income securities return is CPI plus 4% per year. The limits in the table below apply for directly owned fixed-income securities in Swedish and foreign currencies. The percentages in the Investment rules table refer to the share of the assets’ (external management) total Permitted asset types market value. The portfolio’s funds may be invested in the following asset categories:

Issuer categories

ISSUER MAX. SHARE OF PORTFOLIO MAX. SHARE OF CATEGORY ISSUER/SECURITY1) PER ISSUER CATEGORY % PORTFOLIO PER ISSUER, % 1. Securities issued by the Swedish State or guaranteed by Swedish State; securities with rating AAA / Aaa 100 100 2. Swedish mortgage institutions 70 30 3. Swedish municipalities and counties securities with rating AA / Aa 50 20 4. Securities with rating A / A 40 10 5. Securities with rating BBB / Baa 30 10 6. Securities with rating BB / Ba; issuers without a rating but with a assessed creditworthiness corresponding to at least BB / Ba 20 10 1) Rating according to Standard & Poor’s and/or Moody´s. As appropriate, issuers/securities should be rated by at least one of this institutes. In the event of a “split rating,” the lowest rating shall be applied.

Hakon Invest’s holdings and financial management 61 Interest risk Liquidity risk The portfolio’s fixed-income securities, both directly owned and All funds under external management are available to Hakon Invest through fixed-income funds, may have a duration of not more than within a maximum of five days. ten years. Currency risk Equities The table below presents the portion of the portfolio that is exposed At least 90% of the portfolio’s investments in Swedish and foreign against various currencies at September 30, 2005. All currencies shares, certificates of deposit and equity-related instruments must be that represent more than 1% of the portfolio are shown in the table. exchange listed, that is, subject to regular trading on a marketplace open to the public and which is supervised by an authority or other CURRENCY AMOUNT (SEK M) SHARE OF PORTFOLIO regulatory body. SEK 1,910 87.0% USD 146 6.7% Risk in the portfolio EUR 42 1.9% The risk in the fixed-income securities is measured continuously and GBP 29 1.3% defined as the value risk in the event of a one (1) percentage unit YEN 27 1.2% change. At September 30, 2005, the value risk was SEK 20 Other 42 1.9% million. Total 2,196 100% Investments in hedge funds have been made in which the goal for the standard deviation is 4%. Evaluation Investments in Swedish and foreign equities is carried out with Evaluation of management is carried out continuously against the at least 90% in exchange-listed shares and with a favorable goal that applies to the portfolio’s return in the form of the change in spread. Accordingly, the risk in this part of management is not less the CPI plus 4 percentage points per year. This is carried out by the the exchange in general. CFO, who reports to the Board at each Board meeting.

62 Hakon Invest’s holdings and financial management Financial overview Hakon Invest Financial overview Hakon Invest

INCOME STATEMENT1) ACCORDING TO IFRS ADJUSTMENT2) 2004 2005 SEK M 2000 2001 2002 2003 2004 IFRS 2004 JAN–SEP JAN–SEP Net sales 905.2 778.0 658.9 630.8 621.9 – 621.9 459.0 445.7 Cost of goods sold –666.9 –521.4 –357.6 –346.1 –300.9 – –300.9 –194.3 –230.1 Gross profit 238.2 256.6 301.2 284.7 321.1 – 321.1 264.7 215.6 Selling expenses –152.1 –204.1 –206.3 –161.2 –153.8 – –153.8 –133.7 –110.5 Administrative expenses –151.2 –138.5 –155.4 –159.0 –187.7 34.33) –153.4 –152.3 –131.0 Result from participation in associated companies, gross4) 523.1 469.9 635.6 544.5 511.6 – – – – Share in profit from companies reported according to the equity method4) ––––– –466.2 349.4 416.5 Other operating income 18.3 37.4 13.8 18.9 5.3 – 5.3 3.5 1.5 Other operating expenses –3.6 –2.9 –0.1 – – – – – – Items affecting comparability 16.0 – –25.4 – – – – – – Operating profit (EBIT) 488.7 418.3 563.3 528.0 496.4 –11.15) 485.3 331.6 392.2 Financial income 108.4 151.0 170.9 732.3 159.0 –99.8 59.1 18.57) 295.97) Result from the sale of associated companies6) 1,794.3–––– – ––– Change in value due to fair valuation ––––– 58.6 58.6 – – Financial expense –182.0 –195.6 –1,633.5 –893.6 –94.3 85.1 –9.2 –5.97) –11.97) Result from financial investments 1,720.7 –44.6 –1,462.7 –161.3 64.7 43.98) 108.6 12.6 284.0 Profit before tax (EBT) 2,209.4 373.7 –899.3 366.7 561.1 32.8 593.9 344.2 676.1 Tax on profit for the year –491.3 –99.4 –76.8 –14.0 –63.8 48.59) –15.3 –10.8 –68.0 Minority interests –0.9 – 0.5 – – – – – – NET PROFIT FOR THE YEAR 1,717.2 274.3 –975.7 352.7 497.3 81.3 578.6 333.3 608.1

1) Due to rounding off, some of the columns may not total exactly. 2) IFRS accounts for full-year 2004 and the interim periods January–September 2004 and 2005 have been prepared in accordance with the IFRS principles expected to apply on December 31, 2005. Since IFRS is subject to continual review and interpretation as well as EU approval, changes may occur that affect the accounting for the above-stated periods. For comments regarding adjustments attributable to IFRS, refer to the section entitled “2004 accounts in accordance with IFRS.” 3) Differences in net present value and pension costs in accordance with defined benefit pension plans. Net present value and pension cost pertaining to pension commitments not reported previously. Goodwill adjustment for acquisitions. 4) Share in profit from associated companies are reported above in operating profit, while in the annual reports for 2000–2004 they were included in result from financial investments. Result from participation in associated companies are reported gross for the years 2000–2004, but net in accordance with IFRS 2004. 5) See note 3 above and “Goodwill amortization for investments in companies reported according to the equity method.” Regrouping of tax expense in companies reported according to the equity method. 6) After estimated standard tax, the net gain regarding the sold shares in ICA AB amounted to SEK 1,464 million. 7) Includes change in value due to fair valuation. 8) Change in the fair value of financial instruments. 9) Deferred tax on pension expenses. Regrouping of tax expense in companies reported according to the equity method.

64 BALANCE SHEET ACCORDING TO IFRS ADJUSTMENT1) 2004 2005 SEK M 2000 2001 2002 2003 2004 IFRS 2004 JAN–SEP JAN–SEP Goodwill 78.9 72.3 65.9 61.7 57.6 4.12) 61.7 61.7 61.7 Tangible and other intangible non-current assets 125.4 133.6 63.5 63.1 75.2 – 75.2 71.4 74.9 Participations in companies reported according to the equity method 2,806.1 3,119.7 3,619.7 3,657.5 4,592.7 –91.73) 4,501.0 3,666.2 4,828.6 Other financial assets 69.2 49.3 44.0 59.5 105.1 –14.94) 90.2 70.5 15.0 Total non-current assets 3,079.6 3,374.9 3,793.1 3,841.7 4,830.5 –102.4 4,728.1 3,869.8 4,980.1 Inventories 38.5 38.2 29.4 21.7 22.5 – 22.5 23.8 25.3 Current receivables 212.2 222.5 120.3 101.0 85.8 – 85.8 99.7 122.7 Securities under special management5) 2,727.4 2,646.1 2,163.9 2,644.9 1,986.4 –187.66) 1,798.8 2,531.7 2,231.8 Other shares7) 2,082.7 2,144.3 1,137.0 456.5 425.2 – 425.2 388.8 490.0 Cash and bank balances/cash equivalents 164.1 101.8 199.8 229.9 288.5 216.56) 505.0 442.1 227.6 Total current assets 5,224.8 5,152.8 3,650.3 3,454.0 2,808.4 28.9 2,837.3 3,486.1 3,097.4 TOTAL ASSETS 8,304.5 8,527.8 7,443.4 7,295.7 7,639.0 –73.6 7,565.4 7,355.9 8,077.6

Equity 7,832.1 7,854.0 7,050.3 6,947.7 7,277.4 –33.8 7,243.6 7,007.4 7,682.5 Minority interests 5.0 –––– – ––– Interest-bearing provisions 84.3 91.8 113.7 124.7 121.4 5.78) 127.1 177.8 120.0 Interest-free provisions 17.8 8.5 2.5 2.6 50.1 –45.63) 4.5 5.8 23.2 Interest-bearing liabilities 39.3 31.4 27.9 – – – – – – Interest-free liabilities 326.0 542.1 249.1 220.8 190.2 – 190.2 164.9 251.9 TOTAL EQUITY AND LIABILITIES 8,304.5 8,527.8 7,443.4 7,295.7 7,639.0 –73.6 7,565.4 7,355.9 8,077.6

CASH-FLOW STATEMENT ACCORDING TO IFRS ADJUSTMENT1) 2004 2005 SEK M 2000 2001 2002 2003 2004 IFRS 2004 JAN–SEP JAN–SEP Cash flow from operating activities before working capital changes 22.9 106.0 –13.8 39.0 1,918.2 –1,659.1 259.1 262.0 389.4 Working capital changes –403.7 –9.8 99.0 –1.3 –16.1 0.6 –15.5 –60.4 –32.9 Cash flow from operating activities –380.7 96.3 85.2 37.6 1,902.1 –1,658.5 243.6 201.6 356.5 Investments in non-current assets –2,184.3 –65.6 –30.1 –20.7 –2,419.2 – –2,419.2 –32.6 –10.0 Sale of non-current assets and other items 2,497.0 16.0 77.3 7.8 20.6 1,648.2 1,668.8 13.5 0.5 Change in current investments –––––706.0 706.0 –43.4 –300.6 Cash flow from investing activities 312.7 –49.5 47.3 –12.9 –2,398.5 2,354.2 –44.4 –62.5 –310.1 Change in long-term liabilities and provisions 13.1 225.5 –211.8 –27.9 43.0 –43.0 – – – Change in current investments9) –2,695.6 13.0 136.7 199.5 689.8 –689.8 – – – Dividend paid and shareholders’ contribution 2,761.8 –343.7 33.7 –166.3 –140.6 – –140.6 –140.6 –324.7 Other items from financing activities –10.8 –3.9 6.9 0.2 –37.1 37.1 – – 0.9 Cash flow from financing activities 68.5 –109.1 –34.5 5.4 555.1 –695.7 –140.6 –140.6 –323.8 Cash flow for the year 0.4 –62.3 98.0 30.1 58.7 – 58.7 –1.4 –277.4 Cash and cash equivalents at January 1 163.6 164.1 101.8 199.8 229.9 – 229.9 229.9 505.0 CASH AND CASH EQUIVALENTS AT DECEMBER 31 164.1 101.8 199.8 229.9 288.5 216.5 505.010) 442.111) 227.6

1) IFRS accounts for the full year 2004 and the interim periods January–September 2004 and 2005 have been prepared in accordance with the IFRS principles expected to apply on December 31, 2005. Since IFRS is subject to continual review and interpretation as well as EU approval, changes may occur that affect the accounting for the above-stated periods. For comments regarding adjustments attributable to IFRS, refer to the section entitled “2004 accounts in accordance with IFRS.” 2) Reversed goodwill amortization. 3) Recalculation for companies reported according to the equity method. 4) Change in the fair value of financial instruments. 5) Market values: SEK 2,020.6 million (2004), SEK 2,644.9 million (2003). 6) Reclassification of current investments with an original maturity of less than 3 months. 7) Refers to shares in Ahold reported at market value on the closing date. 2004: 8,341,376 shares at EUR 5.66; 2003: 8,341,376 shares at EUR 6.04; 2002: 10,004,826 shares at EUR 11.93; 2001: 10,004,826 shares at EUR 32.68. 8) Differences in net present value and pension costs in accordance with defined benefit pension plan. 9) Changed definition in the 2001 annual report entails that current investments of SEK 2,695 million were excluded from cash and cash equivalents from year 2000. 10) Includes reclassification to cash and cash equivalents in an amount of SEK 216.4 million. 11) Includes reclassification to cash and cash equivalents in an amount of SEK 213.6 million.

65 KEY DATA ACCORDING TO IFRS ADJUSTMENT1) 2004 2005 SEK M 2000 2001 2002 2003 2004 IFRS 2004 JAN–SEP JAN–SEP Gross margin 26.3% 33.0% 45.7% 45.1% 51.6% 51.6% 57.7% 48.4% Operating margin before depreciation and write-downs (EBITDA margin) 57.9% 58.3% 87.2% 85.8% 82.1% 79.3% 73.9% 90.1% Operating margin before goodwill amortization (EBITA margin) 54.7% 54.6% 86.1% 84.4% 80.5% 78.0% 72.2% 88.0% Operating margin (EBIT margin) 54.0% 53.8% 85.5% 83.7% 79.8% 78.0% 72.2% 88.0% Profit margin (EBT margin) 244.1% 48.0% –136.5% 58.1% 90.2% 95.5% 75.0% 151.7% Return on equity2) 21.9% 3) 3.5% –13.1% 5.0% 7.0% 8.2% – 11.6% Return on capital employed2) 30.0% 3) 7.1% 9.7% 17.7% 9.1% 9.4% – 17.3% Capital employed, SEK M 7,960.6 7,977.2 7,191.9 7,072.4 7,398.7 –28.0 7,370.7 7,185.2 7,802.5 Equity/assets ratio 94.4% 92.1% 94.7% 95.2% 95.3% 95.7% 95.3% 95.1% Average interest-bearing net debt, SEK M4) –4,919.8 –4,869.1 –4,110.7 –3,334.6 –2,975.0 –5.6 –2,969.4 – –3,049.9 Net debt/equity ratio, average4) –0.6 –0.6 –0.6 –0.5 –0.4 – –0.4 – –0.4 Proportion of risk-bearing capital 95.3% 92.8% 94.8% 95.3% 95.3% 95.8% 95.3% 95.4% Interest coverage ratio, multiple 13.1 2.9 0.4 1.4 6.9 65.5 Average number of employees 409 417 363 336 318 318 –5) 237 Earnings per share in the Group, SEK 12.17 1.70 –6.06 2.19 3.09 2.07 3.78 Earnings per common share in the Group according to IFRS, SEK6) 2.38 Earnings per share in the Parent Company, SEK 14.13 0.73 –7.27 –0.06 11.64 Equity per share, SEK 48.67 48.81 43.81 43.18 45.22 –0.21 45.01 43.55 47.74 Dividend, SEK M 10.2 343.7 332.6 166.3 140.6 Dividend per preference share, SEK7) 0.25 8.40 8.40 4.20 3.55 Dividend ratio 1.2% 20.0% 121.3% – 39.9% n.m. 8) Dividend received from ICA AB, SEK M n.m. 9) 142 147 199 1,868

2004 2005 2000 2001 2002 2003 2004 JAN–SEP JAN–SEP Number of preference shares on closing date 40,917,436 40,917,436 39,599,936 39,599,936 39,599,936 39,599,936 – Total number of shares on closing date 160,917,436 160,917,436 160,917,436 160,917,436 160,917,436 160,917,436 160,917,436 Average total number of shares 141,117,468 160,917,436 160,917,436 160,917,436 160,917,436 160,917,436 160,917,436 Sale price, SEK 68.0–77.0 P/E ratio calculated on sale price, multiple10) 12.8–14.5 Sale price/Equity per share, % 142.4–161.3

1) IFRS accounts for the full year 2004 and the interim periods January–September 2004 and 2005 have been prepared in accordance with the IFRS principles expected to apply on December 31, 2005. Since IFRS is subject to continual review and interpretation as well as EU approval, changes may occur that affect the accounting for the above-stated periods. For comments regarding adjustments attributable to IFRS, refer to the section entitled “2004 accounts in accordance with IFRS.” 2) For quarterly figures, the key data are calculated on a rolling twelve-month basis. 3) Calculated on basis of closing balance in 2000. 4) Net debt and equity are calculated as the average of the opening and closing balances. Calculated on basis of closing balance for 2000. 5) Not available. 6) Earnings per preference share in the Group according to IFRS: SEK 7.31. 7) Based on other dividend criteria than those applicable today. The dividend criteria were established in an older Articles of Association. The share structure during those years was also different from the structure that will be implemented in conjunction with the market listing. 8) Not measurable. No information on net profit according to IFRS 2003. 9) Not measurable. Reorganization took place in 2000. IFAB’s (current Hakon Invest) annual report does not report any dividend but only profit share. 10) Refers to the period September 30, 2004 – September 30, 2005.

66 Financial overview Hakon Invest KEY DATA DEFINITIONS The definitions apply to Hakon Invest, Forma, and ICA unless otherwise specified.

Gross margin Interest-bearing net debt Gross profit/loss as a percentage of sales. Interest-bearing provisions and liabilities reduced by financial assets and liquid funds. Calculated on the closing date unless otherwise Operating margin before depreciation and write-downs specified. (EBITDA margin) Operating profit before depreciation and write-downs as a percent- Net debt/equity ratio age of sales. Interest-bearing net debt as defined above divided by equity including minority interests. Calculated on the closing date unless other- Operating margin before goodwill amortization (EBITA margin) wise specified. Operating profit before goodwill amortization as a percentage of sales. Proportion of risk-bearing capital The total of equity including minority interests and deferred tax liabil- Operating margin (EBIT margin) ity divided by total assets. Operating profit as a percentage of sales. Interest coverage ratio Profit margin (EBT margin) Profit before tax plus financial expense divided by financial Profit before tax as a percentage of sales. expense.

Return on equity (ROE) Average number of employees Net profit calculated on a rolling 12-month basis, as a percentage New employees, part-time employees, etc. are restated as full-time of average equity during the same period. Equity does not include positions based on total working time of 1,800 hours per year. minority shares in subsidiaries. Earnings per share Return on capital employed (ROCE) Profit after tax divided by the average number of shares. Profit after net financial items plus financial expense, calculated on a rolling 12-month basis, as a percentage of average capital Equity per share employed during the same period. Equity divided by the number of shares on the closing date.

Capital employed Dividend ratio Total assets reduced by non interest-bearing liabilities and non Dividend as a percentage of net profit for the year. interest-bearing provisions. P/E ratio calculated on sale price Equity/assets ratio Sale price divided by earnings per share. Equity including minority shares, as a percentage of total assets.

Financial overview Hakon Invest 67 Comments on financial development

OVERVIEW In conjunction with the above transaction, ICA AB granted an Hakon Invest owns 40% of the shares1) in ICA AB and 100% of the extra dividend of SEK 5,500 million, of which Hakon Invest shares in Forma and had assets under management totaling some received SEK 2,200 million. SEK 2.8 billion at September 30, 2005. Pro forma accounts as a result of Hakon Invest’s increased own- ICA AB is one the leading retail companies in the Nordic region ership in ICA AB have not been prepared. focusing on food and meals, with operations in Sweden and Nor- way, as well as in the Baltic region through its 50% holding in Rimi FACTORS AFFECTING HAKON INVEST’S NET SALES Baltic with operations in Estonia, Latvia and Lithuania. The wholly Hakon Invest’s consolidated sales for 2002–2004 comprised primarily owned subsidiary Forma is consolidated in the Hakon Invest Group. Forma’s sales, as well as the Parent Company’s now separate service Forma is a publishing company with operations in Sweden, Finland, operations for members of ICA-handlarnas Förbund. Sales in the service Estonia and Latvia. Financial management has historically been han- operations in the form of membership and service fees amounted to SEK dled by external asset managers but is now also conducted under 25.7 million in 2004 and SEK 15.8 million in 2003. The service oper- the company’s own auspices. ations were separated from Hakon Invest on July 1, 2005 and placed Hakon Invest conducts active and long-term investment operations in a subsidiary wholly owned by ICA-handlarnas Förbund. in retail-oriented companies in the Nordic region. Hakon Invest is also one of two principal owners in ICA AB and currently has an extensive Forma financial management. Conducting trading in securities is also Hakon Invest’s consolidated sales consist primarily of Forma’s publishing included in the scope of these operations. Up until June 30, 2005, activities in consumer magazines, trade magazines, customer maga- Hakon Invest was also responsible for certain service operations for zines and book publishing. Of Forma’s revenues in 2004, 33% were members of ICA-handlarnas Förbund. The Group’s sales and operat- attributable to advertising sales and 47% to revenues from subscriptions ing profit thus include the operations of Forma and the Parent Com- and newsstand sales. The remaining 20% derived from publishing oper- pany. From 2000 to 2004, ICA AB was reported as an associated ations and customer magazines. Forma’s sales depend primarily on the company according to the equity method and was reported together advertising market, subscription demand, single-copy sales of consumer with results from financial management under the heading “Income and trade magazines, and demand for specialist books. from financial investments.” As of 2005, income from shares in ICA AB is reported on a separate line in Hakon Invest’s income statement. Advertising market In the “Financial Overview Hakon Invest” and “The consolidated The advertising market is largely driven by general economic conditions, financial statements in accordance with IFRS for the 2004 fiscal which in turn affect private consumption as well as profitability among the year”, income from shares in ICA AB is reported on a separate line in companies that are the largest advertisers. In addition, Forma’s advertis- Hakon Invest’s income statement with the purpose of making compar- ing revenues are affected by the share of the total advertising market isons over time easier. occupied by various media, since Forma is only active in certain segments of the total market, which includes daily, weekly and monthly publi- ACQUISITION OF 10% OF ICA AB cations, TV, radio, outdoor advertising and other advertising channels. On November 4, 2004, Ahold acquired 20% of the shares in ICA AB from Canica AS for SEK 7.35 billion, whereupon Hakon Invest Demand for subscriptions and single-copy sales of consumer and acquired 10% of the shares in ICA AB from Ahold for SEK 2.89 bil- trade magazines lion. Prior to these transactions, Ahold owned 50% of the shares in Demand in Forma’s Consumer Magazines and Trade Magazines ICA AB, Hakon Invest 30% and Canica AS the remaining 20%. business areas is affected by the general economic trend, which After the transactions, Ahold owns 60% and Hakon Invest 40% of influences private consumption, and also by magazine consumption the shares in ICA AB. A shareholders’ agreement between Ahold trends and earnings trends in the segments that Forma’s trade maga- and Hakon Invest dating from 2000 still applies, however. See also zines target, primarily the food retail, hotel and restaurant sectors. the “Supplementary information” section. This agreement stipulates that for a shareholding of 30–70% between Hakon Invest and Demand for specialist books Ahold, each party has equal influence in ICA AB, meaning that nei- Demand for the products of Forma’s subsidiary ICA Bokförlag AB is ther party currently consolidates ICA AB. Influence in ICA AB was primarily steered by general economic conditions and private con- thus not changed by the share transactions. sumption, as well as trends in demand for books, particularly hand-

1) According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in ICA AB in that it stipulates unity in decisions at the Annual General Meeting and by the Board. 68 books. ICA Bokförlag primarily publishes practical handbooks in a amounted to SEK 96.1 million in 2004, SEK 64.6 million in 2003 large number of areas, with leisure, food, home furnishing and gar- and SEK 71.0 million in 2002. The normal cost level on the adminis- dening as important subject areas. trative costs of the companies is SEK 35–40 million per year.

FACTOR’S AFFECTING Goodwill HAKON INVEST’S OPERATING EXPENSES Hakon Invest’s goodwill is attributable to the acquisition of Forma Hakon Invest’s primary costs are attributable to Forma’s operations from ICA AB in 1999 and amounted to SEK 57.6 million on Decem- and costs for operating the Parent Company. ber 31. Goodwill is amortized over 20 years with respect to the acquisition of Forma, since it was an acquisition of well-established Forma operations of strategic value. Goodwill amortization for the period Forma’s costs primarily comprise cost of goods sold, selling from 2002 to 2004 amounted to around SEK 4.1 million net per expenses and administrative expenses. year. Gross amortization amounted to SEK 5.9 million per year. Since Hakon Invest owned 30% of ICA AB on the date of the trans- Cost of goods sold action relating to Forma, an internal gain arose that reduced the Cost of goods sold primarily comprises costs relating to personnel, annual goodwill amortization for Forma by SEK 1.8 million. IT, printing and distribution. Cost of goods sold is the largest cost As previously, goodwill is reported in 2005 as an intangible asset in item, amounting to 50.5% of net sales in 2004. the balance sheet. According to IFRS, goodwill is not amortized, but instead the value is impairment tested each year to establish possible Selling expenses write-down needs. The value of goodwill is also tested with respect to Selling expenses consist primarily of costs for personnel and the cost write-down requirements when events or changed circumstances indi- of advertising directed toward readers and the advertising market. cate that it may not be possible to recover the reported value. Goodwill Selling expenses amounted to 25.8% of net sales in 2004. was not recalculated as per January 1, 2004, but is instead reported on the opening date at the value as per December 31, 2003. Administrative expenses Administrative expenses consist mainly of personnel and IT costs, as OTHER FACTORS AFFECTING well as direct costs for infrastructure. Administrative expenses HAKON INVEST’S OPERATING PROFIT amounted to 14.7% of net sales in 2004. Result from participation in ICA AB The earnings level in the ICA group depends on many factors, Depreciation/amortization including the general economic situation, development of the ICA Depreciation of non-current assets is distributed among the above cost group’s market position, price trends in the convenience goods items. Depreciation relates to depreciation of buildings and land, industry, ICA AB’s ability through the initiated cost-reduction program machinery and equipment (including IT systems) and new construction and negotiations with suppliers to further increase their competitive- in progress. In 2004, depreciation corresponded to 1.6% of net sales. ness and in appropriate cases profit sharing and/or royalties in Computer equipment is depreciated over three years and other equip- accordance with the ICA agreement. ment over five to ten years. Intangible assets are amortized over five Hakon Invest’s result from participation in ICA AB amounts to 40% of years and industrial buildings are depreciated over 33 years. ICA AB’s profit after taxes. This 40% after amortization of surplus values comprises ICA AB’s contribution to Hakon Invest’s consolidated earnings. Parent Company Hakon Invest’s earnings in the Parent Company as well as cash The Parent Company’s costs consist primarily of personnel costs for flow in the Parent Company and the Group regarding earnings attrib- management and operation of the Parent Company and costs for utable to ICA AB comprise dividends received. In accordance with external consultants. The Parent Company’s administrative expenses the shareholders’ agreement between parties, Hakon Invest and

ICA AB’s proﬁt after taxes Hakon Invest’s consolidated earnings Hakon Invest’s earnings in the Parent Company 100 and cash ﬂow in the Parent Company and Group

Hakon Invest’s share 40 Normally at least 16 40% less amortization of surplus values1)

Ahold’s share 60%

1) These amount to around SEK 15 million after taxes on a yearly basis in Hakon Invest.

69 Ahold have undertaken to ensure that ICA AB distributes at least 40% operating profit. Result from participation in 2004 according to of the ICA group’s profit after taxes. However, a condition, among IFRS and in the financial overview is reported according to the others, is that this is not in conflict with good business practice and same principle. that due consideration is taken with regard to the ICA group’s invest- Hakon’s tax rate amounted to 11.4% in 2004, 3.8% in 2003 ment plans and operational needs. As a result of Hakon Invest’s and 8.5% in 2002. Please refer to section ”Consolidated financial share in ICA AB of 40%, Hakon Invest receives 16% of ICA AB’s statements in accordance with IFRS for the 2004 fiscal year”, foot- profit after taxes in dividend. The correlation between ICA AB’s profit note 10 for more information. This is partly because Hakon Invest after taxes and Hakon Invest’s consolidated earnings, earnings in AB’s subsidiaries and joint ventures conduct operations in several Hakon Invest’s Parent Company and cash flow in the Parent Com- European countries with different national tax rates. In addition, pany and the Group is illustrated on the preceding page. non-taxable revenue both of a recurring and non-recurring nature has arisen. Hakon Invest’s current assessment is that the Company’s Non-recurring items effective tax rate is not temporary. Several items of a non-recurring nature are included in ICA AB’s earn- Unutilized tax loss carryforwards in Hakon Invest at September ings during 2002–2004. Such items include property write-downs, 30, 2005 amounted to SEK 0 million. capital gains from property sales and divestments of associated compa- Hakon Invest does not have a tax status as an investment com- nies. The net effect of such items in 2004 amounted to around SEK pany. +160 million and around SEK +230 million in 2003. In 2002, the Hakon Invest’s current assessment is that there is probably no approximate net effect was SEK +250 million. possibility to obtain tax status as an investment company. Hakon Invest assesses that the Company’s securities trading FACTORS AFFECTING activities are not of such a nature that permits tax deductions for RESULT FROM FINANCIAL INVESTMENTS write-downs. Hakon Invest’s income from financial investments consists foremost of result from financial management. CURRENCY EFFECTS Hakon Invest Result from financial management Currency risk is defined as the risk of unfavorable exchange-rate Result from financial management are linked both to interest-rate movements affecting the Group’s earnings and equity in SEK. Trans- and share-price trends and to Hakon Invest’s ability to successfully action exposure arises when expenses and revenues for a product direct the management of capital for that part of asset management or service are not matched. that is handled by external managers. Hakon Invest’s net cash flows in foreign currency amounted in Dividends, interest income, capital gains from sales and the 2004 to SEK 21 million, of which SEK 9 million was in EUR, SEK 5 reversal of previously made write-downs of securities as a result of million in NOK, SEK 2 million in DKK and SEK 5 million in other cur- the sale of the written-down securities are all reported under the rencies. Net foreign currency exposure in 2004 amounted to SEK heading “Financial income.” 14 million, nearly all of which pertained to EUR. Normally, cash The “Financial expense” heading primarily includes capital losses flows in foreign currency are not to be hedged. The Company on sales but also interest expense and exchange-rate differences. could, however, decide to deviate from this policy. The currency dis- Capital losses are reported gross when the entire capital loss is tribution within financial management at September 30, 2005 reported under “Financial expense” and the previously made write- entailed foreign currency exposure of SEK 286 million. down is reversed and reported under “Financial income.” Balance-sheet exposure arises when Hakon Invest has net Result from the sale of associated companies in 2000 primarily assets and liabilities in foreign currency and these are translated to refer to the sale of shares in ICA AB. SEK. The Company hedges balance-sheet exposure by using forward contracts, loans and options. TAX On the reporting date, income statements and balance sheets Hakon Invest’s tax expense 2000–2004 derives both from the are translated from foreign currencies to SEK, which means that Hakon Invest Group and ICA AB, since Hakon Invest reports its Hakon Invest’s earnings and financial position are affected by fluctu- share of ICA AB’s tax expense. Tax consists primarily of Swedish ations among the above currencies. corporate taxes, but also of corporate taxes in Finland, Estonia and Assets and liabilities are translated at the closing rate, while rev- Latvia through Hakon Invest. ICA AB conducts operations in Swe- enues and expenses are based on average exchange rates for the den, Norway, the Netherlands (see section entitled “Group function period. Supply Chain” under the description of ICA AB) and through Rimi Ahold shares valued at EUR 55 million at September 12, 2005 Baltic, in Estonia, Latvia and Lithuania. are hedged at a SEK/EUR rate of 9.26 until January 13, 2006. From 2005 the result from participation in ICA AB, including During 2004, 75% of the Group’s revenues were in SEK, 23% the tax portion, is reported on a separate line in Hakon Invest’s in EUR and 2% in other currencies.

70 Comments on financial development ICA AB lion, or 38%. The decline in profit was due to previous expenses for Of ICA AB’s sales of SEK 71,811 million in 2004, 66% were gen- subscription campaigns, shutdown of unprofitable publications and erated in SEK, 28% in NOK and 6% were distributed among sales investments in new products. in Denmark, Estonia, Latvia and Lithuania. ICA AB’s Danish operations were sold, however, and as a result of the establishment of a Parent Company joint venture, Rimi Baltic, with the Finnish company Kesko Livs, the Operating profit at the Parent Company amounted to SEK 190 mil- Baltic operations are no longer consolidated. The currency risk aris- lion for the period January–September 2005, compared with SEK ing as a result of a portion of ICA AB’s equity being invested in for- 163 million for the corresponding period the preceding year, an eign subsidiaries, which constitutes translation exposure, is not increase of SEK 27 million or 17%. The dividend from ICA AB is hedged with financial instruments. There are natural hedges, how- included in the Parent Company’s operating profit according to ever, since assets and liabilities are matched in the various curren- IFRS. The Parent Company’s administrative expenses remained at cies. The ICA group is thus exposed to the various interest-rate levels the same level as the preceding year, however, earnings in both in the countries in which operations are conducted. years were charged with non-recurring expenses. The normal cost Transaction exposure in foreign currency arises when a selling level for the Parent Company’s administrative expenses is SEK price is stated in a currency different from the purchase currency. 35–40 million per year. The risk norm stipulated in ICA AB’s financial policy is that 100% of the outstanding currency risk shall be hedged, although the finance Hakon Invest’s result from participation in ICA AB department has the authority to deviate from this norm, depending Hakon Invest’s result from participation in ICA AB amounted to SEK on cost and currency trends. Approved instruments for currency 416.5 million for the period January–September 2005, compared hedging are spot, currency forward and currency swap contracts. with SEK 349.4 million for the corresponding period in the preceding year, an increase of SEK 67.1 million, or 19%. Hakon Invest’s JANUARY–SEPTEMBER 2005 COMPARED WITH ownership interest as of September 30, 2005 amounted to 40%, JANUARY–SEPTEMBER 2004 (IFRS) compared with 30% on the corresponding date in 2004. Sales Hakon Invest posted sales of SEK 445.7 million in January–Septem- Information about ICA AB ber 2005, compared with SEK 459.0 million for the corresponding FINANCIAL DATA ICA AB period in 2004, a decline of SEK 13.3 million or 3%. SEK M JAN–SEPT 2004 JAN–SEPT 2005 Net sales 53,996 52,514 Forma Operating profit before depreciation Forma had sales of SEK 433.3 million in January–September and write-downs (EBITDA) 2,671 2,159 2005, compared with SEK 439.9 million in the corresponding Operating profit (EBIT) 1,6211) 1,341 period a year earlier, a decline of SEK 6.6 million or 2%. The Profit before tax (EBT) 1,4421) 1,158 decline was due mainly to lower subscription rates on consumer Net profit 1,2211) 1,068 publications as well as lower advertising revenues. Total capital employed 29,820 32,257 Operating margin, % 3.0 2.6 Parent Company Equity/assets ratio, % 41.2 24.6 The Parent Company had sales of SEK 12 million in January–Sep- 1) Including gain on the sale of Statoil Detaljhandel AB. tember 2005, compared with SEK 19 million for the corresponding period in the preceding year. The Parent Company’s lower sales Sales were due to the transfer of service operations for ICA-handlarnas January–September Förbund members to one of ICA-handlarnas Förbund’s wholly- ICA AB had sales of SEK 52,514 million during the period Janu- owned subsidiaries on July 1, 2005. ary–September 2005, compared with SEK 53,996 million for the corresponding period in 2004, a decline of SEK 1,482 million, or Operating profit (EBIT) 2.7%. The decline is attributable to ICA Baltic no longer being con- Operating profit at Hakon Invest amounted to SEK 392.2 million for solidated since ICA Baltic’s operations were transferred in January the period January–September 2005, compared with SEK 331.6 2005 to a joint venture with Finnish Kesko Livs Ab, as well as the million for the period January–September 2004, an increase of SEK sale of the Danish operation in August 2004. Adjusted for these 60.6 million, or 18%. transactions, revenues rose by 3.7% for the period. ICA Banken, ICA Meny and ICA Sverige experienced better sales trends compared Forma with their competitors, thereby increasing their market shares. ICA Operating profit at Forma amounted to SEK 23.3 million for the Norge had lower sales due to increased competition and the conver- period January–September 2005, compared with SEK 37.7 million sion of wholly-owned stores into franchises, as well as the disposal of for the corresponding period in 2004, a decline of SEK 14.4 mil- stores.

Comments on financial development 71 Third quarter Third quarter For the period July–September 2005, ICA AB had sales of SEK For the period July–September 2005, ICA AB’s operating profit 18,029 million, compared with SEK 18,189 million for the corre- amounted to SEK 683 million, compared with SEK 470 million for sponding period in 2004, a decline of SEK 160 million, or 1%. the corresponding period in 2004, an increase of SEK 213 million, Adjusted for the changes mentioned above regarding ICA Baltic or 45%. The operating margin increased to 3.8% during July–Sep- and ICA Danmark, revenues increased by 5.2% during the third tember 2005, compared with 2.6% for the corresponding period quarter of 2005, compared with the corresponding quarter the pre- in 2004. Improvements during the third quarter were made accord- ceding year. The price offensive that was initiated in Sweden’s ICA ing to plan and were achieved through increased sales volumes stores in March and in Norway’s Rimi stores in May has been a suc- and cost reductions in Sweden and Norway, improved earnings cess. ICA’s volumes in the Swedish market have been growing from property management and increased volumes at ICA Banken. faster, on average, than its competitors, since March. In Norway, ICA Baltic improved its earnings both through lower losses in Rimi price differences between Rimi and Rema have diminished and Baltic and through gains on the sale of remaining ICA Baltic AB market share stabilized. properties. During the third quarter of 2005, revenues were received by Operating profit/loss (EBIT) ICA Norge related to supplier negotiations that are partly attribut- OPERATING PROFIT/LOSS able to prior quarters in 2005. Since these effects lack significance SEK M JAN–SEP 2004 JAN–SEP 2005 for the period January-September 2005, this period is more repre- ICA Sverige 1,238 1,054 sentative for the underlying margin pertaining to ICA Norge. It is ICA Norge 434 353 assessed that the effects of the above time lag of revenues in ICA ICA Baltic –104 19 Norge is not significantly important to an evaluation of ICA AB’s ICA Danmark –268 0 margin during the third quarter 2005. ICA Meny –26 –1 ICA Banken –94 –58 Profit after tax ICA AB 4411) –26 ICA AB’s profit after tax for the period January–September 2005 amounted to SEK 1,068 million, compared with SEK 1,221 million 1,621 1,341 for the corresponding period the preceding year, a decline of SEK 1) Including gain on the sale of Statoil Detaljhandel AB. 153 million, or 13%. For the third quarter of 2005, profit after tax increased by SEK 104 million, or 27%, to SEK 492 million, up from January–September SEK 388 million for the corresponding period in 2004. ICA AB’s operating profit for the period January–September 2005 amounted to SEK 1,341 million, compared with SEK 1,621 million Result from financial investments for the corresponding period in 2004, a decline of SEK 280 mil- Result from financial investments for the period January–September lion, or 17%. Earnings in 2004 included earnings participations 2005 amounted to SEK 284.0 million, compared with SEK 12.6 and the gain on the sale of ICA AB’s 50% ownership interest in million for the corresponding period in 2004, an increase of SEK Statoil Detaljhandel AB of SEK 457 million, as well as a write-down 271.4 million. to market value of ISO ICA A/S. ICA Sverige and ICA Norge Financial investments under own management as of September reported lower earnings due to the implementation of price reduc- 30, 2005, amounted to SEK 521 million. Return for the period Jan- tions. ICA Baltic earnings for 2004 included the wholly-owned ICA uary–September was 11%, or SEK 59 million. Investment distribu- Baltic AB operation. In January 2005, it was transferred, together tion as of September 30, 2005, was 94% equities and 6% hedge with Kesko’s Baltic operations, to the jointly owned company Rimi funds. During the second quarter, the Company divested its invest- Baltic, which is accounted for applying the equity method. Rimi ments within the framework of Skandia Investment. Earnings refer to Baltic’s sales during the period January-September 2005 amounted positive development of Ahold shares, compared with a sharp to EUR 581 million, an increase of 21.5% compared with the corre- downturn during the period January–September 2004. sponding period in the preceding year. Financial investments under external management as of Septem- ICA Meny and ICA Banken had considerably improved earn- ber 30, 2005, amounted to SEK 2,195 million. Return for the ings compared with the preceding year. Those earnings improve- period was 11%, or SEK 222 million. Investment allocation as of ments were the result of increased volume. Net profit for the year September 30, 2005, was 37% equities, 23% hedge funds, 39% was impacted by expenses relating to the implementation of the fixed-income securities and 1% cash equivalents. Development on new Nordic organization. Due to organizational changes, the num- both the Swedish and international exchanges positively affected ber of employees will drop by approximately 500 fulltime positions earnings. through the end of 2006, 300 of which will be achieved by the Other financial revenues totaled SEK 3 million. end of third quarter 2005.

72 Comments on financial development Profit before tax (EBT) ment in these systems totaled SEK 5 million, which will be amortized Profit before tax for the period January–September 2005 amounted over five years. to SEK 676.1 million, compared with SEK 344.2 million for the corresponding period in 2004, an increase of SEK 331.9 million, Parent Company or 96%. The Parent Company generated an operating loss of SEK 70.4 mil- The increase is attributable mainly to a larger share in profits lion in 2004, compared with a loss of SEK 48.8 million in 2003. from ICA AB amounting to SEK 67.1 million, as well an improved The SEK 21.6 million deterioration compared with the preceding result from financial investments amounting to SEK 284.0 million. year was primarily attributable to non-recurring pension costs, but also to costs in conjunction with the acquisition of 10% of ICA AB 2004 COMPARED WITH 2003 from Ahold. (NOT ACCORDING TO IFRS) Sales Hakon Invest’s result from participation in ICA AB Hakon Invest generated sales of SEK 621.9 million in 2004, com- Hakon Invest’s result from participation in ICA AB amounted to SEK pared with SEK 630.8 million in 2003, a decline of SEK 8.9 mil- 511.6 million in 2004, compared with SEK 544.5 million in lion or 1%. 2003, a decrease of SEK 32.9 million or 6.0%. Hakon Invest’s participating interest was 40% at December 31, 2004, compared Forma with 30% at December 31, 2003. Forma had sales of SEK 596.2 million in 2004, compared with SEK 630.8 million in 2003. This represents a decline of SEK 34.6 Information about ICA AB million or 5% compared to the preceding year, attributable primarily FINANCIAL DATA, ICA AB to discontinuation of unprofitable products and lower advertising SEK M 2003 2004 revenues. Net sales 71,980 71,811 Operating profit before depreciation Parent Company and write-downs (EBITDA) 4,437 3,570 The Parent Company reported sales of SEK 25.7 million in 2004, Operating profit (EBIT) 2,120 1,866 which consisted primarily of membership and service fees for mem- Profit before tax (EBT) 1,808 1,729 bers of ICA-handlarnas Förbund. In 2003, service fees amounted Net profit for the year 1,777 1,518 to SEK 15.8 million but were reported under the heading “Other Total assets 31,554 29,683 income” and were therefore not included in net sales. The increase Operating margin, % 2.9 2.6 between sales for 2004 and other income for 2003 was primarily Equity/assets ratio, % 38.7 25.0 the result of the introduction from July 1, 2003 of a service charge for service operations provided to ICA-handlarnas Förbund mem- Sales bers. The service charge is calculated based on store sales. Service ICA AB’s net sales in 2004 amounted to SEK 71,811 million, a fees were received throughout 2004. decline of SEK 169 million or 0.2% compared with the sales of SEK 71,980 million reported in 2003. The decline was due to lost sales Operating profit (EBIT) during a transport worker conflict in Norway, the sale of Danish Hakon Invest reported an operating profit of SEK 496.4 million in operations on August 31, 2004 and a stronger Swedish currency. 2004, compared with SEK 528.0 million in 2003. Goodwill Adjusted for these factors, sales increased by 1.7% during 2004. amortization amounting to a net of around SEK 4.1 million per year was charged against the Hakon Invest Group’s operating profit in Operating profit (EBIT) 2004 and 2003. OPERATING PROFIT, SEK M 2003 2004 Forma ICA Sverige 2,794 1,892 Operating profit in Forma amounted to SEK 59.3 million during ICA Norge 200 214 2004, compared with SEK 36.4 million in 2003, an increase of ICA Baltic –471 –112 SEK 22.9 million or 63%. The improvement was primarily attributa- ICA Danmark –273 –263 ble to a comprehensive action program implemented during 2003 and 2004 entailing personnel reductions, discontinuation of unprof- ICA Meny –19 –37 itable products, investments in IT systems and more efficient prem- ICA Banken –166 –123 ises. Actions taken during 2004 included new systems for subscrip- ICA AB 55 295 tions, sales support, booking of advertising and payroll. The invest- 2,120 1,866

Comments on financial development 73 ICA AB reported operating profit of SEK 1,866 million in 2004, ices. Operating earnings deteriorated by SEK 18 million to a loss of compared with SEK 2,120 million in 2003, a reduction of SEK 254 SEK 37 million in 2004, compared with a loss of SEK 19 million in million or 12.0%. The decline in earnings for ICA Sverige compared 2003. The deterioration was primarily due to a combination of with 2003 was largely attributable to significant capital gains from weaker margins, increased distribution costs and restructuring costs. the sale of 14 distribution properties and three shopping centers ICA Banken experienced a strong inflow of customers, with being included in earnings for 2003. ICA Norge reported an some 61,000 newly issued bank cards and a 54% increase in the improvement in earnings. The five-week long transport worker strike total business volume. Operating earnings improved by SEK 43 mil- had a negative impact on earnings for 2004, but profit was lion to a loss of SEK 123 million, compared with a loss of SEK 166 nonetheless higher than in 2003, when write-downs of properties million in 2003. ICA Banken received the “Banking Card of the were charged against earnings. The earnings improvement for ICA Year” award from Swedish business magazine Privata Affärer. Baltic was largely attributable to write-downs of properties, goodwill The specialty retail chain Etos with eight stores in the Stockholm and stores being charged against earnings in 2003. ICA Banken area, Västerås and Linköping prepared for a possible deregulation reduced its loss compared with the preceding year, while ICA Meny of the sale of non-prescription drugs. showed somewhat poorer earnings. In addition, profit for ICA AB for Netto, a joint venture between ICA AB and Dansk Supermarked 2004 was affected positively by a capital gain from the sale of the A/S, opened 30 stores in 2004 and had 58 stores in Sweden at ownership stake in Statoil Retail Stores to Statoil and negatively by a the end of the year. Particularly in Stockholm, the stores were very capital loss from the sale of ISO-ICA A/S to the Danish company well received by customers. Dagrofa A/S. Profit after tax Development of ICA AB’s subsidiaries Profit after tax amounted to SEK 1,518 million in 2004, compared ICA Sverige’s operating profit for 2004 amounted to SEK 1,892 mil- with SEK 1,777 million in 2003, a decline of SEK 259 million or lion, compared with SEK 2,794 million in 2003, a decline of SEK 14.6%. 902 million or 32%. During 2004, two new ICA Maxi hypermarkets, two ICA Kvantum stores and two ICA Nära stores were Result from financial investments opened. In addition, intensive work was devoted to the re-profiling Result from financial investments amounted to a profit of SEK 64.7 and development of stores. During the year, ICA Sverige laid the million in 2004, compared with a loss of SEK 161.3 million in groundwork for an intensive year of new establishments during 2003, an improvement of SEK 226.0 million. 2005. In 2004, ICA Sverige decided that the new central warehouse for southern Sweden would be located in Helsingborg. 2004 For ICA Norge, 2004 was a year during which the store con- The SEK 64.7 million in result from financial investments for 2004 is cept was streamlined and cost adjustments were made in all opera- the net of financial income of SEK 159.0 million and financial tive functions. Of the largest and smallest Rimi stores, 240 were con- expense of SEK 94.3 million. verted to ICA Supermarkets and ICA Nær stores. Three new ICA Financial income primarily comprised dividends, interest income Maxi were opened during the year. ICA Norge was negatively and capital gains on the sale of securities, at a combined total of affected, as were other major competitors except Coop Norway, by SEK 121.1 million, as well as an adjustment of SEK 37.9 million in the transport worker conflict during the spring, when distribution to previously made write-downs of securities. The adjustment in the pre- the stores stood still for five weeks. In spite of this, profit improved viously made write-down should be linked to the capital loss reported compared with 2003, when earnings were charged with property under “Financial expense.” write-downs. Operating profit increased by SEK 14 million or 7.0%, Financial expense primarily consisted of a capital loss of SEK from SEK 200 million in 2003 to SEK 214 million in 2004. 84.9 million on the sale of securities. Interest expense and ICA Baltic’s operating result improved by SEK 359 million to an exchange-rate differences totaled SEK 9.4 million. operating loss of SEK 112 million in 2004, compared with an operating loss of SEK 471 million for 2003, when earnings were nega- 2003 tively affected by write-downs of property, goodwill and stores. Income from financial investments in 2003 amounted to a loss of During 2004, the company completed all preparations for starting a SEK 161.3 million. This is the net of financial income of SEK 732.3 joint venture, Rimi Baltic, together with Kesko Livs AB in January million and financial expense of SEK 893.6 million. 2005. At the start, Rimi Baltic had 160 stores and some 8,300 Financial income primarily comprised dividends, interest income employees. and capital gains on the sale of securities, at a combined total of ICA Meny achieved sales successes in the Restaurant and Cater- SEK 101.9 million, as well as an adjustment of SEK 630.4 million in ing business area and a strong increase was noted in the number of previously made write-downs, notably the Ahold shares. The adjust- stores adopting the Nära Dej service concept. Market share ment in previously made write-downs should be linked to the capital increased in the restaurant and catering sector, but declined in serv- loss reported under “Financial expense.” After the estimated stan-

74 Comments on financial development dard tax, the net loss regarding the Ahold shares amounted to SEK 2004 of SEK 496.4 million means a decrease of SEK 31.6 million 289 million. compared to 2003. Financial expense primarily consisted of a capital loss of SEK 884.7 million on the sale of securities. Interest expenses totaled SEK 2003 COMPARED WITH 2002 (NOT ACCORDING TO IFRS) 8.9 million. Sales Hakon Invest reported sales of SEK 630.8 million in 2003, com- Change between the years pared with SEK 658.9 million in 2002, a decline of SEK 28.1 mil- The largest change between the years is attributable to capital losses lion or 4%. Sales were attributable in their entirety to Forma. and the adjustment in previously made write-downs in 2003 that arose upon the sale of 5,000.000 shares in Ahold for SEK 392 mil- Forma lion. In addition, Ahold implemented a new share issue, in which Forma reported sales of SEK 630.8 million, compared with SEK Hakon Invest subscribed for shares for SEK 145 million. The above 658.9 million in 2002, a decline of SEK 28.1 million or 4%. The changes, combined with a sharp price drop for the Ahold share, led decline was a consequence of the structural program that was estab- to a write-down of SEK 433 million in the year-end accounts for lished during the year and that comprised personnel reductions, dis- 2003. At December 31, 2003, the value of the Ahold shareholding continuation of unprofitable products, investments in IT systems and amounted to SEK 456 million. more efficient premises.

Financial management Parent Company At December 31, 2004, cash and bank balances accounted for The Parent Company’s revenues in the form of member fees for serv- SEK 288.5 million of the Company’s liquid funds, compared with ice operations for members of ICA-handlarnas Förbund amounted to SEK 229.9 million at December 31, 2003. The value of the Ahold SEK 15.8 million in 2003 and were reported under “Other operat- shareholding (8,341,376 shares) at December 31, 2004 ing income”in 2003. The Parent Company had no sales in 2002. amounted to SEK 425.2 million, compared with SEK 456 million at year-end 2003. Other liquid funds amounted to SEK 1,986.4 mil- Operating profit (EBIT) lion at December 31, 2004, compared with SEK 2,644.9 million Operating profit in Hakon Invest amounted to SEK 528.0 million in at year-end 2003. The decline of SEK 658.5 million is attributable 2003, a decrease of SEK 35.3 million, or 6%, from SEK 563.3 mil- to the acquisition of 10% of the shares in ICA AB from Ahold for SEK lion in 2002. Net goodwill amortization of around SEK 4.1 million 2,887.2 million and the extra dividend of SEK 2,200 million from per year was charged against Hakon Invest’s earnings in 2003 and ICA B, giving a net negative effect of SEK 687.2 million. 2002. The Company has no established management organization for other liquidity, which was instead handled by Carlson Investment Forma Management and Handelsbanken during 2004. By purchasing Forma reported operating profit of SEK 36.4 million in 2003, com- management services, the Company gained access to professional pared with a loss of SEK 4.3 million in 2002. This represented an management processes and expertise that would have been difficult earnings improvement of SEK 40.7 million, primarily as a result of to maintain in its own organization, which has relatively limited the extensive action program that was initiated in 2003 and that assets under management. Investments were made in the Group’s comprised personnel reductions, discontinuation of unprofitable own name according to guidelines that were identical for each man- products, investments in IT systems and more efficient premises. ager. The guidelines for asset types during 2004 were 50% fixed- income, 25% Swedish equities and 25% foreign equities. Asset liq- Parent Company uidity increased gradually during the year, in anticipation of The Parent Company’s operating loss in 2003 amounted to SEK Canica’s sale of ICA AB shares. 48.8 million, compared with a loss of SEK 63.8 million in 2002. The stock market developed positively during 2004. The Stock- The earnings improvement in the Parent Company was primarily holm Stock Exchange index, for example, rose by about 18%. attributable to the introduction of a service fee for services targeting members of ICA-handlarnas Förbund. Profit before tax (EBT) Profit before tax amounted to SEK 561.1 million in 2004, compared Hakon Invest’s result from participation in ICA AB with SEK 366.7 million in 2003, an increase of SEK 194.4 million Hakon Invest’s result from participation in the gross earnings of ICA or 53%. AB amounted to SEK 544.5 million in 2003, compared with SEK The increase is primarily attributable to improved result from 635.6 million in the preceding year, a decline of SEK 91,1 million or financial management 2004, where a profit of SEK 64.7 million 14.3%. At December 31, 2003, Hakon Invest’s participating interest was reported for 2004, compared with a loss of SEK 161.3 million in ICA AB was 30%, which was unchanged from December 31, in 2003, an improvement of SEK 226.0 million. The operating profit 2002.

Comments on financial development 75 Information about ICA AB decline in earnings in ICA Norge, ICA Baltic and ICA Denmark was

FINANCIAL DATA, ICA AB an effect of write-downs. ICA Meny and ICA Banken improved their SEK M 2002 2003 earnings in comparison with the preceding year. Net sales 70,908 71,980 Operating profit before depreciation Developments in ICA AB’s subsidiaries and write-downs (EBITDA) 4,103 4,437 ICA Sverige noted greater sales increases than its main competitors Operating profit (EBIT) 2,535 2,120 Axfood and Coop. During the year, eight new ICA stores were Profit before tax (EBT) 2,084 1,808 opened. ICA Sverige also presented plans for a new distribution net- Net profit for the year 1,710 1,777 work that will be completed by 2008. The distribution network will Total assets 34,071 31,554 entail an investment of slightly less than SEK 2 billion. Operating profit Operating margin, % 3.6 2.9 in 2003 amounted to SEK 2,794 million, compared with SEK 1,884 Equity/assets ratio, % 35.8 38.7 million in 2002, an increase of SEK 910 million or 48.3%. Operat- ing profit included a capital gain of SEK 845 million deriving from property sales. Sales During 2003, ICA Norge continued its intensive repositioning ICA AB’s net sales in 2003 amounted to SEK 71,980 million, an work. Operating profit amounted to SEK 200 million after property increase of SEK 1,072 million or 1.5% compared with 2002, write-downs of SEK 346 million. Compared with operating profit of when sales amounted to SEK 70,908 million. Adjusted for SEK 782 million in 2002, this was a decrease of SEK 582 million or exchange-rate movements, sales increased by 4.5%, despite price 74.4%. The name change was the first step toward relaunching the reductions in Sweden. ICA Banken and the new operations in Etos ICA brand in Norway. ICA Norge’s new store platform strategy was showed the greatest percentage increases. In the Baltic region, scheduled for presentation during the spring of 2004. sales developed favorably in Estonia and Latvia but declined some- ICA Baltic reported an operating loss of SEK 471 million after what in Lithuania. In calculating sales growth for ICA Baltic, Rimi write-downs of SEK 349 million pertaining to properties, goodwill Lithuania’s sales for the whole of 2002 were included. Sales in and stores. This compares with a loss of SEK 36 million for 2002. Norway developed favorably. During the year, a successful new compact hypermarket concept was launched under the Rimi brand. In December 2003, ICA AB Operating profit (EBIT) and Kesko Livs AB signed a letter of intent to form a joint venture for OPERATING PROFIT, SEK M the Baltic consumables markets. 2002 2003 ICA Meny reported an operating loss of SEK 19 million in ICA Sverige 1,884 2,794 2003, compared with a loss of SEK 46 million in 2002, continuing ICA Norge 782 200 the positive trend, and gained several new customers such as ICA Baltic –36 –471 Scandic Hotels Sverige AB and O’Leary’s Trademark AB. During the ICA Danmark –16 –273 year, ICA Meny acquired Arvid Nordquist’s restaurant division. ICA Meny –46 –19 During 2003, ICA Banken focused on cost control and effi- ICA Banken –174 –166 ciency improvements, as well as on increasing sales. An operating ICA AB 141 55 loss of SEK 166 million was reported, compared with a loss of SEK 2,535 2,120 174 million in 2002. ICA Banken was named “Bank of 2003” by the Swedish magazine Privata Affärer. ICA AB’s operating profit before goodwill amortization related to the During 2003, Etos opened three stores in Haninge, Linköping acquisition of ICA AB in 2003 amounted to SEK 2,120 million, and Västerås, bringing the chain’s total number of stores in Sweden compared with SEK 2,535 million in 2002, a decline of SEK 415 to nine. million or 16.4%. During the year, properties with 14 distribution In November, ICA Danmark A/S became a wholly owned sub- centers and three ICA Maxi hypermarkets were sold. These sales sidiary of ICA AB. ICA AB stated in 2003 that it intended to sell the resulted in capital gains of SEK 1.1 billion. According to Swedish company.Netto, in which Dansk Supermarked A/S owns 50%, and international accounting principles, a comparison is made each opened ten stores in Sweden during 2003, bringing the total num- year between the fair value and the book value of all assets. These ber of stores to 28. Most Netto stores in Stockholm were scheduled comparisons resulted in consolidated earnings in 2003 being to open after the summer of 2004. charged with SEK 0.9 billion in write-downs related to goodwill, Statoil Detaljhandel Skandinavia AS continued to establish ICA properties and stores in the Baltic countries, Denmark and Norway. Express stores (convenience stores at Statoil’s gasoline stations). ICA The substantial improvement in earnings in ICA Sverige was predom- AB announced that it intended to sell its 50% share in Statoil inantly attributable to capital gains from property sales. Most of the Detaljhandel Skandinavia AS. ICA AB and Statoil negotiated a sale

76 Comments on financial development of shares and a partnership agreement regarding product sales and shareholding amounted to SEK 456 million. Also in 2002, the value concept development for the ICA Express stores. of the Ahold shareholding fell sharply, resulting in a write-down of SEK 1,007.3 million being made. This write-down was partly Profit after tax reversed in 2003 in conjunction with the sale of 5,000,000 Ahold In 2002, profit after tax amounted to SEK 1,777 million, compared shares. In addition, the securities portfolio was written down by SEK with SEK 1,710 million in 2002, an increase of SEK 67 million or 4%. 345.6 million in 2002 and a capital loss of SEK 254.9 million arose on the sale of securities in the portfolio. Result from financial investments Financial investments in 2003 generated a loss of SEK 161.3 mil- Financial management lion, compared with a loss of SEK 1,462.7 million in 2002, corre- Liquid assets under management at December 31, 2003 amounted sponding to an improvement in earnings of SEK 1,301.4 million. to SEK 2,644.9 million, compared with SEK 2,163.9 million at year- end 2002. In 2002 and 2003, liquidity management was handled 2003 by Carlson Investment Management and Handelsbanken, giving the Financial investments in 2003 generated a loss of SEK 161.3 mil- Company access to professional management processes and expert- lion, the net of financial income of SEK 732.3 million and financial ise that would have been difficult to maintain in its own organization, expense of SEK 893.6 million. given the relatively limited assets under management. Investments Financial income primarily comprised dividends, interest income were made in the Company’s own name according to guidelines that and capital gains on the sale of securities, in a combined total of SEK were identical for each manager. The guidelines for asset types were 101.9 million, as well as an adjustment of SEK 630.4 million of the 50% fixed-income, 25% Swedish equities and 25% foreign equities. previously made write-down of Ahold shares. The adjustment in the The stock market had developed negatively for several years, previously made write-down should be linked to the capital loss but the markets rose during 2003 when the Stockholm Stock reported under “Financial expense.” After the estimated standard tax, Exchange climbed around 30%. At the end of 2003, however, the the net loss regarding the Ahold shares amounted to SEK 289 million. stock exchange index was half the value of March 2000, despite Financial expense primarily consisted of a capital loss of SEK the sharp upturn. 884.7 million on the sale of securities. Interest expense amounted to SEK 8.9 million. Profit before tax (EBT) Profit before tax improved by SEK 1,266.0 million, from a loss of 2002 SEK 899.3 million in 2002 to a profit of SEK 366.7 million in Financial investments in 2002 generated a loss of SEK 1,462.7 mil- 2003. lion, the net of financial income of SEK 170.9 million and financial The improvement was primarily attributable to an improved result expense of SEK 1,633.5 million. from financial management, where the loss of SEK 1,462.7 million Financial income primarily comprised dividends, interest income posted in 2002 was reduced by SEK 1,301.4 million to a loss of and capital gains in a combined total of SEK 185.8 million, as well SEK 161.3 million in 2003. The operating loss of SEK 528.0 mil- as an adjustment of SEK 14.9 million of the previously made write- lion was a decrease of SEK 35.3 million compared to the operating down. The adjustment of the previously made write-down should be profit of SEK 563.3 million in 2002. linked to the capital loss reported under “Financial expense.” Financial expense primarily consisted of write-downs of securi- SENSITIVITY ANALYSIS ties holdings in an amount of SEK 1,352.8 million, a capital loss of Hakon Invest’s earnings are affected by a number of factors. SEK 254.9 million on the sale of securities and interest expense Reported effects should only be seen as an indication and do not amounting to SEK 25.8 million. The write-down of SEK 1,352.8 mil- include any effect of the compensating measures that could be taken lion was mainly attributable to the decline in the value of the Ahold if certain events were to occur. holding. After the estimated standard tax, the net loss regarding the The table on the following page is based on the revised accounts Ahold shares amounted to SEK 1,007 million. The capital loss of for 2004 and shows the hypothetical effect of changes in a number SEK 254.9 million derived from sale of other shares. of factors. A corresponding table based on 2004 according to IFRS would give an equivalent outcome. The table should be interpreted Change between the years cautiously, since it is improbable that any individual factor would In 2003, substantial capital losses arose as well as a significant change in isolation or that no compensatory measures would be adjustment in the previously made write-down as a result of the sale taken. With regard to most fresh goods within ICA AB, full compensa- of Ahold shares. In addition, a sharp price drop for Ahold shares led tion is for instance normally obtained through adjustment of prices for to a write-down of SEK 433 million being included in the year-end end consumers. accounts for 2003. At December 31, 2003, the value of the Ahold

Comments on financial development 77 FINANCIAL 200 million in 1999 and the supplementary investment in ICA AB SEK M FORMA ICA AB1) MANAGEMENT of SEK 2,887.2 million in 2004. Effect on earnings of: 2) +/–1% change in sales +/– 3 +/– 25 Non-current assets excluding acquisitions +/–1% change in cost of During the period January to September 2005, Hakon Invest goods sold –/+ 3 –/+ 626 invested SEK 10.0 million in non-current assets. Investments in non- +/–1% change in personnel costs –/+ 2 –/+ 53 current assets in 2004 amounted to SEK 19.9 million. Depreciation +/–1% change in transport costs –/+ 14 of non-current assets, excluding goodwill amortization in the Hakon +/–1% change in SEK +/– <1 +/– 23) +/– 7 Group, amounted to SEK 9.8 million in 2004 and SEK 9.2 million +/–1% change in interest rates +/– 4 during January to September 2005. +/–1% change in share index +/– 5 Hakon Invest is of the opinion that, above and beyond investing 1) The above figures relate to ICA AB. Hakon Invest owns 40% of ICA AB. activities, investments in non-current assets over the next three years 2) Not including royalty and profit share from stores. 3) Pertains to SEK/NOK. will consist of replacement investments for existing assets in an amount of SEK 2–3 million per year and investments in a new Hakon Invest’s sensitivity with respect to interest-rate and exchange- accounting system and changes in terms of premises in Stockholm rate movements is considered limited, since the Company’s borrow- for an additional SEK 1–2 million per year. ing is low and the Group’s revenues are predominantly denominated in SEK. However, ICA AB has significant exposure to NOK, ICA AB since 28% of ICA AB’s sales in 2004 were in NOK. During January to September 2005, ICA AB invested SEK 1,829 million. Investments comprised mainly store properties and store

FINANCING AND FINANCIAL POSITION fittings in Norway and Sweden. Hakon Invest has a strong financial position, with assets in the form of In 2004, ICA AB invested SEK 2,500 million in non-current financial investments and shares in Ahold with a total value of SEK 490 assets, mainly related to store properties and store interiors in Nor- million at September 30, 2005. On the same date, Hakon Invest had way and Sweden. Over the most recent four-year period, ICA AB a bank credit facility of SEK 300 million, of which SEK 0 million was has invested an average of SEK 3,100 million in non-current assets utilized. The company’s total interest-bearing liabilities and provisions annually. at the same date amounted to SEK 120.0 million, resulting in a net Future major investments during the coming three-year period debt of –2,844.4 million on the closing date. within ICA AB, in addition to the normal replacement investments that ICA AB’s net debt at the same date amounted to SEK 7,032 are currently known, will consist primarily of the establishment of a new million. distribution network in Sweden, modernization of the store network in Norway and the establishment of new stores in Sweden and Norway.

CREDIT FACILITIES The company has an overdraft facility of SEK 300 million, of which New distribution network SEK 0 million had been utilized at September 30, 2005. Two new warehouse facilities with a high degree of automation will Pledged assets amount to less than SEK 3 million and primarily be built in Helsingborg and the Stockholm area. The new distribu- pertain to pension commitments. tion network is expected to be completed by 2008, with the investment totaling nearly SEK 2 billion. In addition to the two new ware-

INVESTMENTS houses, five warehouses will be closed and four facilities will be Hakon Invest expanded to handle larger volumes. These investments are intended Acquisitions and supplementary investments to make it possible to meet increased demand for fresh goods and Historically, Hakon Invest’s acquisitions and supplementary invest- frozen foods. ments have primarily consisted of the acquisition of Forma for SEK

78 Comments on financial development Modernization of the store network in Norway Cash flow from investing activities Large portions of the store network will be renewed over the coming During January through September 2005 the cash flow from invest- years. This will include renewal of all Rimi stores over a two-year ing activities was a negative SEK 310 million and in the correspon- period, and a large number of ICA Supermarked and ICA Nær ding period in 2004 a negative SEK 62.5 million. stores will also be modernized. In total, the modernization of the store During 2004, an additional 10 percentage points of the shares network is expected to require investments of about SEK 500 million. in ICA AB were acquired from Ahold for SEK 2,887.2 million. This, together with sales of non-current assets and other items, resulted in Establishment of new stores in Sweden and Norway a negative cash flow of SEK 2,398.5 million, compared with a In Sweden, the focus will be on establishing new stores in growth negative figure of SEK 12.9 million for 2003 and a positive cash areas close to major cities. In Norway, new establishments will pri- flow of SEK 47.3 million for 2002. No major investments were marily be ICA Maxi and Rimi stores. New store establishment is implemented during 2002 and 2003. expected to require investments averaging SEK 1,000 million per year over the coming years. Financing activities ICA AB currently intends to finance these investments through Cash flow from financing activities January through September internally generated cash flows. 2005 amounted to a negative SEK 323.8 million and in the corresponding period in 2004 a negative SEK 140.6 million. CASH FLOW Cash flow from financing activities for 2004 amounted to SEK Hakon Invest 555.1 million and was primarily attributable to changes in current Cash flow from operating activities before working capital investments. A dividend to shareholders totaling SEK 140.6 million changes was paid in 2004. In 2003, cash flow from financing activities Cash flow during the period January through September 2005 amounted to SEK 5.4 million, since the dividend to shareholders of amounted to SEK 389.4 million and SEK 262.0 million in the corre- SEK 166,3 million largely corresponded to net changes in current sponding period of 2004. investments, long-term liabilities and provisions. In 2002, cash flow Cash flow from operating activities before working capital from financing activities was a negative SEK 34.5 million, mainly changes amounted to SEK 1,918.2 million in 2004, compared as a consequence of debt repayment. with SEK 39.0 million in 2003 and a negative cash flow of SEK 13.8 million in 2002. Cash flow for the year Cash flow during the January–September 2005 period amounted Working capital changes to a negative SEK 277.4 million and in the corresponding period a The working capital changes during the period January through year earlier to a negative SEK 1.4 million. September 2005 amounted to SEK –32.9 million and in the The cash flow for 2004 amounted to SEK 58.7 million, com- corresponding period in 2004 SEK –60.4 million. pared with SEK 30.1 million in 2003 and SEK 98.0 million in The working capital changes during 2004 amounted to SEK 2002. –16.1 million. The reduction in working capital was primarily attributable to decreased sales in Forma. This can be compared CASH AND BANK BALANCES with a reduction of SEK 1.3 million in 2003, another year in which Hakon Invest’s cash and bank balances amounted to SEK 288.5 Forma’s sales declined. The working capital changes in 2002 million at December 31, 2004, compared with SEK 229.9 million amounted to SEK 99.0 million and was mainly due to the transfer of at December 31, 2003. At September 30, 2005, cash and bank funds from current investments to bank accounts. balances amounted to SEK 227.6 million and at September 30, 2004 to SEK 442.1 million.

Comments on financial development 79 Supplementary information

HAKON INVEST holding in ICA AB, Hakon Invest will maintain, develop and strengthen the ICA concept. This matter is also specifically regulated RELATIONSHIP BETWEEN HAKON INVEST in the shareholders’ agreement between Hakon Invest and Ahold. AND ICA-HANDLARNAS FÖRBUND Hakon Invest’s largest owner is ICA-handlarnas Förbund, a non- HAKON INVEST’S POSITION IN RELATION TO THE profit organization with some 1,580 ICA retailers as members. As MAJORITY OWNER, ICA-HANDLARNAS FÖRBUND with other non-profit organizations, ICA-handlarnas Förbund is gov- Prior to the implementation of the Offering, ICA-handlarnas För- erned by its Articles of Association. These Articles of Association bund, the non-profit organization for Sweden’s ICA retailers, owns contain provisions, inter alia, stipulating that ICA-handlarnas För- about 75% of the capital and votes in Hakon Invest. Hakon Invest is bund must own at least 51% of the share capital and voting rights in therefore consolidated in ICA-handlarnas Förbund’s consolidated Hakon Invest and that the Förbund shall propose Board members accounts. One of ICA-handlarnas Förbund’s main tasks is to exer- for ICA-handlarnas Förbund’s subsidiaries and ICA AB, which is a cise ownership influence in ICA AB and thereby ensure the com- joint venture with Ahold. Against this background, the formal work pany’s development by developing the ICA concept. plan for Hakon Invest’s Board of Directors contains a provision stipu- In addition to its holding in Hakon Invest, ICA-handlarnas För- lating that nomination of members to the Board of ICA AB shall take bund has a wholly owned subsidiary, ICA-handlarnas Medlemsser- place after consultation with ICA-handlarnas Förbund. vice AB, which has 10 employees. These were earlier employed by By the provisions of the agreement with ICA Sverige AB (see the the Company but as a preparation for the listing these are now fol- section below entitled “ICA agreements”), the ICA retailers are obli- lowing an agreement between the Company and ICA-handlarnas gated to be members of ICA-handlarnas Förbund. ICA-handlarnas Medlemsservice AB, employed by ICA-handlarnas Medlemsservice Förbund has, both independently and through the subsidiary com- AB. ICA-handlarnas Medlemsservice AB conducts operations tar- pany ICA-handlarnas Medlemsservice AB, also entered into a num- geting members of ICA-handlarnas Förbund and finances these ber of agreements, including agreements with Hakon Invest and operations through a service fee payed by the members. Net sales Forma, as described below under the headings “Agreements with for the Parent Association, ICA-handlarnas Förbund, amounted to related parties, etc.” and “Intellectual rights.” some SEK 2.7 million in 2004 and total assets amounted to From 2000 to the spring of 2005, the Boards of Directors and approximately SEK 563.8 million. The major portion of assets com- the management of Hakon Invest and ICA-handlarnas Förbund con- prised the holding in Hakon Invest and liquid funds of approxi- sisted of the same persons. As part of the preparations for an mately SEK 36.6 million. exchange listing, the composition of Hakon Invest’s Board was changed during the spring of 2005, and company management DISPUTES AND OTHER LEGAL ISSUES was gradually supplemented and strengthened. For both Hakon Hakon Invest, its subsidiaries and joint ventures are involved in vari- Invest AB and ICA-handlarnas Förbund, the Company’s sharehold- ous legal disputes that occasionally arise within operations. None ing in ICA AB is particularly important, both from a purely financial of the disputes individually or the disputes as a whole are of mate- standpoint, since it is by far the largest asset, and as a means of rial importance to the Hakon Invest Group. maintaining and developing the ICA concept, particularly in the Swedish operations. As described in greater detail in the section TAX MATTERS “Hakon Invest’s holdings and financial management,” the basic Correspondence has taken place between the National Tax Board premise in this concept is to combine the ICA store owner’s local and Hakon Invest regarding the right to deduct input VAT attributable knowledge and commitment with the ICA group’s collective to certain services for financial and strategic counseling and service resources. Higher sales in the stores result in increased sales and rev- fees for services provided to ICA stores. The National Tax Board has enues for ICA Sverige, which in turn results in greater profit for ICA decided that it will not grant Hakon Invest the right to deduct approxi- AB, thus providing favorable dividend capacity for the benefit of mately SEK 1.3 million of VAT. The Company intends to appeal Hakon Invest and its dividend-entitled owners. The ICA concept and against this decision. the ICA group’s business models have proven successful for both the group and the stores for several decades. Within the framework of SIGNIFICANT AGREEMENTS its basic objective of generating profit for shareholders in accor- Hakon Invest’s current operations consist mainly of the management of dance with the Articles of Association and, in part, through its share- the holdings in ICA AB and Forma and the management of the Com-

80 pany’s financial investments. The Company’s operations depend on mercial. Hakon Invest has not accounted for any investment related the shareholders’ agreement entered into with Ahold, which regulates to the new property. Hakon Invest assesses that the property is in the Company’s ownership in ICA AB. This shareholders’ agreement is good condition and is well suited for the Company’s operations. described under the heading “Shareholders’ agreement with Ahold.” There is room for expansion, although there is currently no need for Apart from this agreement, Hakon Invest does not significantly any comprehensive expansion. depend on any individual commercial agreement. However, the most Forma Publishing Group is the owner of the Linaberg 11 prop- important agreements are summarized below. erty in Stockholm city. The property is currently for sale. Previous val- uations have shown that the market value does not materially devi- Shareholders’ agreement with Ahold ate from the book value. This is also the assessment of the company. For more information please refer to section “Hakon Invest” under the heading ”Agreements with Ahold”. IMMATERIAL PROPERTY RIGHTS Hakon Invest has Swedish and international trademark applications Guarantee in accordance with regarding the “Hi Hakon Invest” logotype. The application refers to purchase law on behalf of Royal Ahold the classes 35 (services regarding business management, organi- For more information please refer to section “Hakon Invest” under zational development, etc.) and 36 (financial affairs, etc.). The reg- the heading ”Agreements with Ahold”. istered trademark “HAKON,” however, is owned by ICA AB. Hakon Invest’s applications refer, however, to classes other than Agreement with B. Carlson Investment Management AB those included in ICA AB’s registration. The Company has entered into an agreement regarding the discre- Forma has the necessary publication authorization for the mag- tionary management of financial assets with an initial value of azines that the company issues. In addition, Forma has trademark approximately SEK 2 billion with B. Carlson Investment Manage- protection for the “Forma Publishing Group” trademark. Forma also ment AB as manager. The agreement applies from January 2005 has the right to use the “ICA” trademark under an agreement until further notice, with a mutual right for both parties to give notice entered into between ICA-handlarnas Förbund and ICA AB (see of immediate termination of the agreement. For these management description under “ICA AB” and “Agreements with related parties, services, the Company pays B. Carlson Investment Management etc.” below.) AB a fee depending on the volume of assets managed. USE OF THE SALES PROCEEDS OBLIGATIONS AND OTHER COMMITMENTS Hakon Invest will not receive any portion of the sales proceeds for Apart from investment commitments and issued surety and guaran- the common shares sold by ICA-handlarnas Förbund in accordance tees, the Group has no obligations that could have a material nega- with this prospectus. tive financial impact on the Group.

INSURANCE AGREEMENTS WITH RELATED PARTIES, ETC. Hakon Invest has commercial insurance covering the companies The Company has entered into an agreement with ICA-handlarnas and operations included in the Hakon Invest Group. The insurance Medlemsservice AB, a wholly owned subsidiary of ICA-handlarnas was arranged by the subsidiary, Forma. The insurance covers Förbund, according to which the parties have agreed to purchase assets/property, consequential loss, liability for pure damage to legal, financial and information services from each other. Each property, crime against property, personal liability of the managing party is entitled to charge the opposite party a certain number of director and board, global liability and legal protection. In the opin- hours per year. The Company assesses that the agreement is based ion of Hakon Invest, the Company is adequately insured to cover on strictly commercial terms. the liabilities resulting from its ordinary operations. Agreement between Forma and ICA AB PROPERTIES Forma has entered into a number of agreements with different com- In August 2005, Hakon Invest relocated to a new head office in panies within the ICA AB group. Such agreements include an Solna, which is in the same building as ICA AB’s head office. The agreement between Forma and ICA Sverige AB concerning edito- premises are leased by ICA Fastigheter Sverige AB from the prop- rial and technical production of the “Buffé” magazine and an erty owner, Fastighets AB Alrum. In turn, Hakon Invest subleases cer- agreement between Forma and ICA AB concerning the procure- tain premises in part of the property from ICA Fastigheter Sverige ment of printing and distribution suppliers and associated services. AB. In addition, agreements concerning additional services related All of these agreements are on strictly commercial terms. to the lease exist with ICA AB. Terms and conditions are strictly com-

81 SIGNIFICANT DIVESTMENTS AND ACQUISITIONS, ETC. bonus to which these retailers are entitled. The parties have agreed During the current year and the three most recent fiscal years, that Deloitte & Touche will investigate the matter further, but no Hakon Invest completed the following significant divestments and agreement has been reached regarding the formal aspects of the acquisitions of companies. All of the transactions were implemented investigation. on strictly commercial terms. In November 2004, the Company acquired an additional SIGNIFICANT AGREEMENTS 10% of the shares in ICA AB from Ahold, which had in turn ICA agreements acquired the shares from Canica AS. This acquisition is described A large number of the approximately 1,500 Swedish ICA stores have in more detail under the heading “Shareholders’ agreement with entered into “ICA agreements.” These agreements are shareholder Ahold.” and financing agreements, the terms of which among other things In April 2005, Hakon Invest divested its holding in Skandia entail that ICA AB owns the rights to the store’s location but that the Investment Fond II, a venture capital fund in which investments were retailer, either alone or jointly with ICA Sverige AB during a transition made in part through Skandia Investment KB and in part through period, owns and operates the store through a limited liability com- Skandia Investment I AB, to Pulsen Fastighets AB. The total final pur- pany. Stores with sales exceeding SEK 20 million or which are chase price for the Company’s shareholdings and commitments in deemed as having strategic locations normally have an ICA agree- Skandia Investment Fond II amounted to approximately SEK 60 ment. The terms of agreement require the ICA retailer to be a member million. The Company’s guarantee commitments are limited. Any of ICA-handlarnas Förbund. In addition to the rights and obligations guarantee claims must be issued in writing not later than December following from the ICA agreement, the ICA retailer is also obligated to 30, 2005. The Company is not aware of any circumstance that follow the Articles of Association of ICA-handlarnas Förbund applying could give rise to a guarantee claim. at any given time. See also the section “Hakon Invest’s holdings and financial management” in the “ICA Sverige” section. ICA AB Joint venture in the Baltic countries DISPUTES AND OTHER LEGAL ISSUES In the Baltic countries, ICA Baltic AB (“ICA Baltic”) – a wholly Sweden owned subsidiary of ICA AB – has entered into a joint venture In connection with a comprehensive organizational change within the agreement with Ruokakesko Oy (“Kesko Livs”) pertaining to ICA’s former ICA AB (publ) group, shareholders of the three regional com- operations in the Baltic countries. The agreement became effective panies – ICA Eol AB, ICA Essve AB and ICA Hakon AB – were on January 3, 2005, following approval by the competition authori- offered an opportunity to divest their shares in the regional companies ties. Via a joint venture agreement, ICA Baltic and Kesko Livs in exchange for either becoming shareholders of ICA AB (publ) or for formed RIMI Baltic AB (“RIMI Baltic”), a jointly owned company. cash. In November 1989, ICA AB (publ) called for compulsory Kesko Livs and ICA Baltic each own 50% of the shares and voting redemption of the shares and was granted advance access to the rights in RIMI Baltic and neither of the parties has a controlling influ- shares in the regional companies in May 1990. The arbitration rul- ence. A shareholders’ agreement regulates how the operations of ings in these three cases were announced in June 1997 after a pro- the jointly owned company are to be conducted, how the company tracted process, following which the claim made by ICA AB (publ) shall be managed and how a sale of the shares in the company or with respect to the size of the redemption amount was accepted in the issue of new shares should be conducted. The shareholders’ full. However, the trustee representing the minority shareholders of the agreement also specifies the financial commitments of each share- three regional companies appealed the arbitration rulings to the dis- holder. A shareholder may not, without the consent of the other trict court. In April 2004, the district court announced its verdict, party, transfer the shares to anyone outside his own group. Accord- reaching the same conclusion as the arbitration boards. The trustee ing to the shareholders’ agreement, the parties, or companies has appealed the district court’s ruling to the court of appeal. The related to the parties (including Hakon Invest), may not conduct hearing in the court of appeal has yet to take place. If the trustee’s operations that compete with RIMI Baltic’s operations in the Baltic claim for the redemption amount is approved in full, this would mean countries or own more than 5% of the share capital in companies that ICA AB may be forced to pay up to approximately SEK 85 mil- that directly or indirectly compete with RIMI Baltic’s operations. lion. Interest will be added to this amount and may exceed the amount itself. Joint venture agreement pertaining to Netto Marknad, ICA & DSG AB Norway In August 2001, ICA AB entered into a joint venture agreement with A discussion is underway between ICA Detalj AS and an alliance the Danish company Dansk Supermarked A/S (“DSG”). DSG is a of retailers in Møre, Norway, concerning the calculation of the retail trading company that operates food retail operations in Den-

82 Supplementary information mark through the Netto discount chain. Through the joint venture arranged five different credit facilities with five different banks for a agreement, ICA AB and DSG formed the joint venture company total SEK 3.75 billion. Netto Marknad, ICA & DSG AB (“Netto Marknad”). The aim of the partnership is to spread and develop the Netto discount chain. ICA IMMATERIAL RIGHTS AB and DSG each own 50% of the shares and voting rights in To a material extent, ICA AB’s operations depend on the right to use Netto Marknad and neither of the parties has a controlling influ- the “ICA” trademark, which is owned by the company. ICA AB has ence. The agreement regulates how the company is to be managed granted ICA-handlarnas Förbund the license to use the “ICA” trade- and how a sale of the shares in the company or the issue of new mark. The license agreement is described below under the heading shares should be implemented. The agreement also specifies the “Agreements with related parties, etc.” financial commitments of each shareholder. If a shareholder wishes ICA AB’s operations also depend to a material extent on the to transfer its shares to a third party outside of its own group, the right to use trademarks in which the “ICA” trademark is included, shareholder must first offer the other party an opportunity to acquire such as “ICA Nära,” “ICA Supermarket,” “ICA Kvantum”, “ICA the shares. DSG owns the intellectual property rights to the Netto Maxi” and “Maxi ICA Stormarknad”. These trademarks are owned trademark. However, the joint venture company Netto Marknad and held by ICA AB. Otherwise, ICA AB’s operations do not, to and its subsidiaries are legally entitled through a licensing agree- any material extent, depend on any individual immaterial property ment to use and market the trademark in their operations. right. However, ICA AB’s immaterial property rights are, when considered as a whole, of material importance to ICA AB’s operations. Agreements with suppliers ICA AB owns or alternatively holds the license on the use of the intel- ICA AB has entered into agreements with a large number of differ- lectual property rights that the company considers necessary for its ent suppliers. These are generally agreements with relatively short operations. contractual periods or which are valid until further notice based on The “Euroshopper” brand represents the ICA AB group’s low- a short mutual period of termination. The agreements apply gener- price range. Euroshopper has been developed in cooperation with ally to both groceries and fresh products and to private label and nine European companies in 15 countries. These companies non-food products. The supplier agreements are generally based on include Kesko, Albert Heijn, Dansk Supermarked A/S and the ICA certain standard agreements and general delivery terms formulated group. The Euroshopper trademark is owned by AMS Marketing by ICA AB. Prices are generally renegotiated on an annual basis. Service AG. The Etos trademark is owned by Ahold. Since 2003, ICA Sverige AB has an agreement with Hilton Food Group relating to deliveries of meat from the Hilton Food SWEDISH COMPETITION AUTHORITY’S INVESTIGA- Group’s meat refinement facility in Västerås. The agreement, which TION OF THE CONTRACTUAL RELATIONSHIP BETWEEN runs initially for a period of ten years, gives ICA Sverige AB some ICA AB AND THE ICA RETAILERS influence over operations both with respect to purchasing and other The Swedish Competition Authority is currently investigating meat processing. The agreement also contains certain exclusivity whether the ICA cooperation is compatible with competition regula- obligations for each party, as well as the right to terminate the tions. The investigation started in December 2003 and the Compe- agreement prematurely under certain conditions. The agreement tition Authority has not indicated when the investigation might be can be terminated prematurely in the event that ICA Sverige AB expected to be completed nor has it specified in detail what the does not attain certain agreed volumes. This would lead to certain Authority is investigating. Judging from the questions being asked by costs for ICA Sverige AB. the Competition Authority, the investigation appears primarily to be an assessment of whether the cooperation between the ICA group Financing agreements and the individual ICA retailers is in compliance with competition ICA AB manages the financing of the group through its subsidiary regulations. The Authority’s questions have concerned pricing, ICA Finans AB, which in April 2005 entered into an agreement including price profiles and maximum prices, purchasing activities, with a bank syndicate concerning a credit limit of SEK 5 billion. control of the ICA stores’ product range and the right of first refusal Certain regulations in the agreement pertain to the bank syndicate’s upon the sale of the company’s stores. right to premature repayment in connection with a change in owner- ICA AB and ICA-handlarnas Förbund have expressed the view ship/control corresponding to more than 50% of the voting rights in that the ICA cooperation cannot be considered to violate competi- the borrower (ICA Finans AB) or the guarantor (ICA AB). A number tion regulations. Hakon Invest shares this view and also makes the of financial covenants also exist as well as certain restrictions on fur- assessment that the ICA cooperation is in compliance with competi- ther increases in indebtedness. In addition, ICA Finans has tion regulations. (See also the section on “Risk factors”).

Supplementary information 83 AGREEMENTS WITH RELATED PARTIES, ETC. SIGNIFICANT DIVESTMENTS AND ACQUISITIONS Licensing agreement between ICA AB and ICA-handlarnas From time to time, ICA AB completes acquisitions and divestments Förbund pertaining to licensing of the “ICA” trademark as part of its operations. The most significant divestments and acqui- In April 2000, ICA AB and ICA-handlarnas Förbund entered into a sitions of companies and operations are presented below. All of licensing agreement under which ICA AB grants ICA-handlarnas these divestments and acquisitions took place on market terms. Förbund a non-exclusive right to use, free of charge, all trademarks containing the word ICA (“the Trademarks”) in Sweden, Denmark, Sale of shares in Norway, Finland, Iceland, Estonia, Latvia and Lithuania. ICA-hand- Statoil Detaljhandel Skandinavia AS to Statoil ASA larnas Förbund is entitled to grant sublicenses to its subsidiaries and ICA AB sold all of its shares in Statoil Detaljhandel Skandinavia AS members. Each sublicensee and the terms and conditions that are to (“SDS”), corresponding to 50% of the total number of shares, to Sta- apply for each sublicense must be approved in advance by ICA toil ASA (“Statoil”) in May 2004. Cooperation between ICA and AB. Use of the Trademarks is limited to the operations that ICA- Statoil was initiated in 1999 and Statoil owned the remaining 50% handlarnas Förbund and the ICA retailers conduct and may not of the shares in SDS. The EU’s competition authorities approved the deviate from the “ICA Concept.” The license agreement applies transfer on July 1, 2004 and ICA AB received payment for the without any time limitations. ICA AB may terminate the agreement shares on July 8, 2004. The agreement contains customary guaran- with immediate effect if Hakon Invest ceases to be a shareholder of tees from ICA AB. ICA AB also undertakes not to own, purchase or ICA AB. Hakon Invest’s subsidiary, Forma, uses various combina- develop, either in its own name or through a related company, a tions of the Trademarks in its operations, supported by this licensing proprietary gasoline/fuel-station network in Scandinavia during a agreement. period of four years after the transaction. However, ICA AB will be entitled to invest in the fuel-related operations required to be able to Leasing contracts in Norway compete efficiently in the markets in which the ICA group is active. ICA Norge AS’s head office in Norway was previously leased from As part of the divestment of the SDS shares, ICA AB and Statoil a party that was associated with ICA AB at the time the leases were also entered into a cooperation agreement and a number of related signed. The leases were concluded on relatively long durations; the agreements. The agreements were mainly concluded in order to lease with the longest duration expires on December 31, 2015. regulate ICA AB’s continued supply of products to Statoil’s retailing Under these leases, ICA Norge AS is subject to obligations in operations in Norway and Sweden. The cooperation is conducted excess of normal obligations according to the Norwegian Rental on a non-exclusive basis, meaning that Statoil is not obliged to Act and the rent can to a certain extent be considered to exceed order products from ICA AB. The cooperation agreement has an ini- market rents. The property in question was acquired during 2005 tial duration of three years. ICA Sverige AB undertakes not to grant by a Norwegian syndicate of private investors. The leasing contract to any party other than Statoil the right to establish gasoline stations remains unchanged, however. at hypermarket locations without the consent of Statoil. There are additional leasing contracts pertaining to store premises, warehouses and offices which were signed with parties asso- Divestment of ISO-ICA A/S ciated with ICA AB at the time when the leases were signed. These In July 2004, ICA Danmark A/S sold all of the shares in ISO-ICA also contain aspects that could be argued deviate from conditions A/S to Dagrofa A/S. ISO-ICA A/S had constituted ICA AB’s store on the market. operation in Denmark and, following this divestment, ICA AB does

84 Supplementary information not conduct any operations in Denmark. The transfer amount was SEK 1.6 billion. The existing leases have an average remaining approximately DKK 250 million, of which some DKK 70 million duration of approximately 11 years. constituted the purchase price and the remaining amount was the In September 2003, ICA Fastigheter sold three subsidiaries company’s cash balance. ICA Danmark A/S’s liability for damage containing three properties to Eurocommercial Properties Sweden resulting from non-fulfillment of guarantees is limited to the purchase AB. The total purchase price for the shares was approximately SEK price. The agreement includes customary guarantees and ICA AB 320 million. The existing leases have an average remaining dura- has entered into a surety for ICA Danmark A/S for the fulfillment of tion of approximately 15 years. its guarantees. In June 2004, ICA Fastigheter sold two subsidiaries containing three properties to Alecta Retail Holding AB. The total purchase ICA Fastigheter Sverige AB price for the shares was approximately SEK 285 million. ICA ICA AB’s property operations are an integral part of ICA AB’s busi- Fastigheter provided customary guarantees for the sale. The guaran- ness model and provide important support for retail operations. As tees expire in January 2006, with the exception of guarantees for a result of this, property operations follow ICA AB’s store-opening taxes and fees. The existing leases have an average remaining plan. Ownership of properties is not regarded as strategically duration of approximately 12 years. important, as long as store operation can be assured through long- In May 2005, ICA Fastigheter sold all of the shares in Fastic term leases. The property unit thus divests properties when attractive Holding AB, including the shares in its 20 subsidiaries, to Kungsle- terms are achieved. As a result, the property portfolio increases den Lövet AB. All of the transferred companies contained one or when the rate of store openings is greater than the rate of divest- more properties or leaseholds. The total purchase price for the ments and decreases when the opposite situation applies. shares was approximately SEK 437 million. ICA Fastigheter pro- ICA Fastigheter Sverige AB (“ICA Fastigheter”) has continuously vided customary guarantees for the sale. The guarantees expire in divested a large number of incorporated properties in order to May 2006, with the exception of guarantees for taxes and fees. finance investments in new properties intended for ICA stores. ICA The existing leases have an average remaining duration of approxi- Fastigheter, or alternatively ICA Sverige AB, thereafter concludes mately 7 years. leases with the companies concerned pertaining to the current ICA- store premises at the particular property. In turn, ICA Fastigheter or Divestment of holding in Linstow Senterutvikling ICA Sverige AB subleases the existing ICA-store premises to the During February 2004, the ICA AB’s wholly owned subsidiary, ICA retailers who operate the actual ICA store at the particular property. Baltic AB, sold its 25% shareholding in Linstow Senterutvikling AS to In the past three years, ICA Fastigheter has divested a large number Linstow International AS and Varner-gruppen AS. The sales price for of companies containing properties. An account of the most signifi- the shares was approximately NOK 135 million. cant divestments is presented below. In July 2003, ICA Fastigheter sold all of the shares in a number Divestment of Åsane Holding AS of subsidiaries to a joint venture formed between LR Swedish Proper- In October 2002, ICA Detalj AS sold its shares in Åsane Holding ties AB and GE Capital Real Estate (Sweden) AB. The transferred AS to Nordea Liv Norge AS for approximately NOK 330 million. companies contained 11 properties, which were transferred to the ICA has undertaken not to establish store operations or a shopping companies concerned from various companies in the ICA group. center on the site covered by the agreement for a period of ten The purchase price for the total shares amounted to approximately years from the date of the sale.

Supplementary information 85 Risk factors

All securities investments are associated with risk, which means that will be preceded by careful analyses to determine the scope of an invested amount could increase or decrease in value or be lost future guarantee commitments. Such guarantees may vary in scope entirely. Accordingly, prior to investing in securities in Hakon Invest, with respect to both their amount and duration. Any possible need the following risk factors should be carefully considered, together to fulfill such guarantees could affect Hakon Invest negatively. with all the other information in this prospectus. The list of risk factors below is not intended to be complete, nor are the risk factors and Financing of future investments considerations described listed in any particular order of priority. At present, Hakon Invest has significant liquid assets. In addition, Due to differences between the operations of ICA AB and Forma, current investments and holdings are unencumbered. the risk factors associated with these companies differ. A compre- However, external financing may be needed in the future to hensive evaluation of the Offering and Hakon Invest should include finance investments. At present, Hakon Invest has significant poten- other information in this prospectus along with an overall analysis of tial for obtaining loans from credit institutions. The Company may external factors. also elect to implement new cash issues or to use its own shares to finance in full or in part business operations or new investments, HAKON INVEST which could lead to dilution of existing shareholdings. This also applies to investors who invest in Hakon Invest’s shares within the RISKS RELATED TO BUSINESS OPERATIONS framework of the Offering. Implementation of new share issues Dependency on company management and other key persons requires a decision by a General Meeting of shareholders. Hakon Invest’s future development depends on the knowledge, However, the ability to finance investment cannot be guaran- experience and commitment of management and other key per- teed, and depending on the terms for an investment, investments sons. Hakon Invest could be negatively affected if one or more of may be limited by conditions in the loan agreement or the market’s these key persons leave the Group. If Hakon Invest is unable to view and assessment of the Hakon Invest share. In addition, it is recruit new qualified employees, this could affect Hakon Invest’s possible that the sellers of potential investment objects will not be ability to develop the business. willing to accept shares in the Company as payment. If liquid funds are insufficient and the Company cannot use its own shares as pay- Hakon Invest’s new investment organization ment, investment opportunities may be limited or prevented. Two experienced and skilled investment managers have been recruited to the newly established organization for investments in Operations in several countries unlisted companies. This organization already contains personnel Since Hakon Invest and its subsidiaries and associated companies from Hakon Invest. Although each of these persons has a solid are active in several countries, the operations are exposed to the background and extensive experience, the organization is as yet type of risks to which international business operations are associ- unproven in that no investments have yet been made. If the organi- ated. Hakon Invest is subjected to different regulatory systems within zation does not function as expected, the return on Hakon Invest’s different jurisdictions and is exposed to changes in such regulations. investments in unlisted companies may be negatively affected. The regulations pertain to such matters as trading restrictions, such as import duties and tariffs, requirements for import and export Hakon Invest’s investments and sales licenses and other trading impediments, restrictions affecting capital All investments are associated with uncertainty. Prior to an invest- mobility, withholding tax on transfers and payments made by sub- ment, an evaluation will be performed that is intended to identify sidiaries, the potentially negative effect of changes in tax regula- and, if possible, reduce the risks that may be associated with the tions and, in certain countries or regions, political and economic investment. Among other measures, Hakon Invest will carefully eval- conditions. These changes could have a materially adverse impact uate the company’s development with respect to personnel, busi- on Hakon Invest’s operations, earnings and financial position. ness concept and customer relations, as well as administrative and legal issues. However, performing such an evaluation prior to an RISKS RELATED TO HOLDINGS AND INVESTMENTS investment is not always sufficient to ensure success. Stock exchange trends and interest rates In conjunction with the sale of an investment, Hakon Invest may Negative stock market trends could affect the estimated value of undertake guarantees in its capacity as the seller. Future divestments both Hakon Invest’s listed shareholdings and the value of Hakon

86 Invest’s unlisted holdings. Interest rates are another factor that could tion of their disposable income on consumables, approximately affect the estimated value of holdings. Interest rates also affect the 35% – compared with about 15% in Sweden – which could cost of loan financing. change as the industry consolidates and new discounters establish themselves in the marketplace, resulting in lower prices. Decrease in the value of financial portfolio and shareholdings Adjustments are made to the book value of Ahold’s financial port- Review of ICA cooperation by the Swedish Competition Authority folio and shareholding, which had a combined value of SEK As mentioned under the section “Supplementary information,” the 2,670 million on September 30, 2005, to reflect changed share Swedish Competition Authority is currently investigating whether col- prices and exchange rates, which could have a negative impact on laboration between the ICA group and ICA retailers violates com- Hakon Invest. petition regulations. Should the Swedish Competition Authority con- clude that this collaboration violates competition regulations, the Factors related to holdings Authority could act against the ICA group. In such a case, the mat- Hakon Invest’s earnings are affected significantly by its portion of ter would be definitively determined in a court of law. The most far- the earnings of its holdings. Consequently, factors that could nega- reaching consequence of a negative outcome from such a process tively affect the operations, financial position or earnings of a sub- would be that the form of cooperation between the ICA group and sidiary or associated company would therefore affect, to a not ICA retailers would have to be changed significantly and, in the insignificant degree, Hakon Invest. event that the transgression is regarded as serious, that the ICA The future trend for unlisted holdings and/or changes in external group would be forced to pay damages for restricting competition. factors could affect assessments of the value of these holdings and – According to the Swedish Competition Authority, the damages for in those instances when an assessment leads to an estimate of a restricting competition could be as low as SEK 5,000 or as high as reduction in value – could require impairments of the book values. SEK 5 million or a higher amount not exceeding 10% of the company’s sales. In that case, Hakon Invest’s operations, earnings and financial Operational risk associated with holdings position would be negatively affected to a material degree. ICA AB and Forma have different specific operational risks, just as other future holdings will have. Since ICA AB currently comprises Economic trends and taxes such a large portion of Hakon Invest’s assets, ICA AB’s development Developments within the food retail industry are closely linked to and operational risks are especially important when assessing general economic trends, the GDP trend and real wage trends. Hakon Invest. Consequently, operational risks related to ICA AB are Political factors such as taxes (VAT) are also important to the eco- described in greater detail below. nomic development of the food retail industry. A downward economic trend and higher taxes (VAT) could negatively affect ICA AB’s ICA AB sales and earnings. In a June 2005 progress report – “Uniform or differentiated value Operational risks added tax” SOU 2005:57 – the Value Added Tax Commission pro- Greater competition results in downward price pressure posed lowering the normal VAT rate from 25% to 21.7%, financing In recent years, discounters in the food retail sector have made the change through the elimination of the current system of reduced advances in the Swedish and Norwegian food retail markets. New tax rates. Among other proposed changes, VAT would be increased competitors such as Lidl and Netto have established a presence, and from the current 12% to the proposed 21.7%. According to the Com- have been singled out as one of the causes for falling real prices for mission’s calculations, food prices would increase by 8.4% over the food and convenience goods in recent years. The trend towards a long term and demand would drop by just under 3.5% on average. greater focus on price could result in further price reductions and thus Differences would arise between various categories of products, how- to lower margins in the retail food industry if no measures are taken ever. The Commission’s proposal will now be circulated for considera- to compensate for those falling price levels, which, however, ICA AB tion. Reactions from various political parties to this proposal have is doing. Swedish and Norwegian consumers are spending increas- been mixed and the Company currently believes that, over the short ingly less of their disposable income on consumables. or medium term, it would be unlikely that the proposal in its entirety The food retail industry in the Baltic countries is relatively uncon- would serve as the basis for new legislation. solidated and immature. Consumers spend a relatively high propor-

87 Customers Financing of investments and future expansion ICA retailers in Sweden decide independently about which suppli- Historically, ICA AB has invested significant sums in opening new ers they choose to use. In those instances where ICA AB does not stores and has recently decided to modernize its distribution net- offer competitive terms, the company risks losing its customers to work by, among other measures, building new, centralized ware- competitors. Currently, however, ICA retailers in Sweden make an houses in Helsingborg and Stockholm. In order to maintain and average of 70% of their overall purchases directly or indirectly via strengthen ICA AB’s position in its respective markets, significant ICA AB. The remaining 30% consist primarily of perishable items – investments will continue to be made in the above areas. fruits and vegetables, produce and bread – that, in many instances, originate from local producers and suppliers. OTHER

Suppliers RISKS RELATED TO THE OFFERING Structural changes are under way among ICA AB’s suppliers, Previously, the shares have only been traded through the agency whereby increased consolidation has occurred in recent years and of ICA-handlarnas Förbund is anticipated to continue into the future as well. In the event that the Prior to the Offering, there was no general trading in the shares of suppliers’ negotiating strength vis-à-vis ICA AB increases, this could Hakon Invest. The previous unofficial share turnover may have taken result in less favorable purchase terms and higher purchase prices, place at prices that are no longer representative. Although the which could have a negative impact on ICA AB’s earnings. How- shares have been approved for listing on the Stockholm Stock ever, ICA AB occupies a very strong position in those markets Exchange’s O List, no undertakings can be given regarding the where the company is active, and suppliers in turn are therefore future trend of trading in the share, or the share price. Liquidity in the dependent on being able to sell their goods in ICA stores. share may turn out to be limited and the share price could fall below With respect to meat supplies, ICA Sverige AB is relatively signif- the selling price in the Offering. There is no guarantee that investors icantly dependent on deliveries from Hilton Food Group’s meat-pro- will recoup their invested capital. cessing plant in Västerås. If problems were to arise at this plant, whereby no deliveries were received for a protracted period of time, ICA-handlarnas Förbund a controlling shareholder this could have a negative impact on ICA Sverige’s earnings. There are 160,917,436 shares in the Company, of which the Seller will hold at least 109,617,500 shares after the Offering, Risks associated with acquisitions corresponding to at least around 68.1% of the shares outstanding Historically, ICA AB has implemented a number of acquisitions and (at least around 67.3% if the Over-allotment option is fully utilized). could also be expected to do so in the future. As a result, ICA AB This means that, at General Meetings, the Seller will be able to could be exposed to acquisition-related risks, such as the integration secure the passage of most of the resolutions that require approval of acquired companies, which, in some instances, could be costly from the Company’s shareholders. and time-consuming. Often, this could also require management resources that could otherwise be focused on current operations. Present shareholders’ future sale of shares There is also the risk that an acquired company might not develop If a large number of shares are offered in the market after the Offer- according to plan in terms of growth and margins, and that antici- ing, or if the market perception is that a comprehensive sell-off could pated synergies would not be achieved. Potential acquisitions occur, this could have a materially adverse impact on the share could also require external financing. There is no guarantee that it price. Apart from the direct negative impact that a lower share price will be possible to receive such financing in the future. has for a shareholder, such a price decline could have a negative impact on Hakon Invest’s ability to procure capital or acquire other Key individuals assets through additional issues of shares or securities. However, a ICA AB depends on a number of key individuals continuing to make fall in the share price resulting from these factors would probably strong contributions. ICA AB could be adversely affected should only be temporary. any of these key individuals leave the company.

88 Risk factors It is important to note that by being a major shareholder in ground, the reader’s attention is drawn to the fact that the market sta- Hakon Invest, ICA-handlarnas Förbund’s main purpose is to have a tistics presented in this prospectus are subject to uncertainty, and major influence over ICA AB and thus be in a position to preserve, that no guarantee of their accuracy can be given. develop and strengthen the ICA concept. A shareholding in Hakon Invest is thus strategically important for ICA-handlarnas Förbund. Fur- Forward-looking information thermore, ICA-handlarnas Förbund does not anticipate, within the Hakon Invest and, in certain instances, the Seller provide forward- foreseeable future and following the divestment of shares in Hakon looking information in this prospectus. Any statement that does not Invest in accordance with the terms of this prospectus, having any consist exclusively of historical facts constitutes such forward-looking additional need for liquid funds. information. Forward-looking information comprises assertions about The Seller has undertaken not to divest any additional shares in what Hakon Invest “believes”, “expects”, “anticipates” or “intends” to the Company, without the consent of Handelsbanken Capital Mar- happen in the future. Against this background, any such statements kets, until at least 300 days after the first day of trading. The Board should be regarded as currently applicable judgments as to what is of Directors and senior executives of Hakon Invest and the Board of expected to happen in the future, with full awareness that such expec- Directors and senior executives of the principal shareholder ICA- tations may not be fulfilled and that intentions can change. handlarnas Förbund, have made a corresponding undertaking. For Neither Hakon Invest, the Seller, nor any other party participat- further information regarding the shares in Hakon Invest, see also ing in the Offering gives any undertakings or provides any guaran- “Share capital and ownership structure.” tee that the anticipated market conditions, transactions (including acquisitions and divestments), results (including operational and SPECIAL CONSIDERATIONS financial targets), decisions (including notice and payment of divi- Limited value of historical financial information dends), or other future events and circumstances that may be Hakon Invest’s operations and structure have recently undergone inferred from the forward-looking information in this prospectus, will substantial changes, mainly as a result of the formation of an invest- take place as described or will take place at all. ment organization. The financial information given in this prospec- It is hereby brought to the attention of potential investors that tus does not reflect the financial situation as it would have been if actual future results may diverge from what is explicitly or indirectly this organization had existed historically. Accordingly, Hakon stated in the forward-looking information in this prospectus. With Invest’s historical audited consolidated financial reports and the the exception of what is required by law or by the terms of the listing financial information given in this prospectus are not necessarily a agreement with the Stockholm Stock Exchange, neither Hakon reliable guide regarding Hakon Invest’s future earnings trend and Invest, the Seller, nor any other party intends to update the forward- financial position. looking information, even if the business relations between Hakon Invest and the Seller should change in the future. Market statistics subject to uncertainty Market statistics are inherently subject to uncertainty and do not necessarily reflect actual market conditions. The value of comparisons of statistics for different markets is limited for several reasons – for example, due to the fact that markets are defined differently, and that data is gathered using different methods and based on different assumptions. Some of the statistics in this prospectus were compiled by Hakon Invest, with a number of assumptions made by the Com- pany in the process. While Hakon Invest maintains that the compila- tion method and assumptions are reasonable, it has been possible only to a limited extent to secure from independent sources confir- mation or verification of the assertions made. Against this back-

Risk factors 89 Board of Directors, Group Management, auditors

BOARD OF DIRECTORS HOLDING BEFORE THE OFFERING NAME YEAR OF BIRTH POSITION SHARES1) Lars Otterbeck 1942 Chairman – Anders Fredriksson 1954 Deputy Chairman 350,000 Cecilia Daun Wennborg 1963 Board Member – Jan-Olle Folkesson 1939 Board Member – Stig Lundström 1948 Board Member 64,380 Lars Otterbeck Olle Nyberg 1956 Board Member 14,172 Jan Olofsson 1948 Board Member – 1) Including holdings of relatives and companies.

Lars Otterbeck, born 1942, Chairman of the Board

Anders Fredriksson Lars is Chairman of the Swedish Industry and Commerce Stock Exchange Committee, Deputy Chair- man of the Corporate Governance Council and the Third AP Fund and Member of the Board of Lin- dex AB, Aberdeen Property Investors AB and Kaupthing Bank Sverige. Formerly, Lars was President and Chief Executive Officer of D & D Dagligvaror AB (currently Axfood). Lars has also been Presi- dent and Chief Executive Officer of Alecta Pensionsförsäkring. Lars was elected Member of the Hakon Invest Board at the 2005 Annual General Meeting.

Cecilia Daun Wennborg Anders Fredriksson, born 1954, Deputy Chairman of the Board Anders is Chairman of the Board of ICA-handlarnas Förbund and ICA retailer in ICA Kvantum Hjertbergs in Lidköping. Anders was elected Member of the Hakon Invest Board at the 1997 Annual General Meeting.

Cecilia Daun Wennborg, born 1963 Jan-Olle Folkesson Cecilia is a Board Member of companies including Skandiabanken AB and Nefab AB. Until April 2005, Cecilia was Acting President of Skandiabanken and previously she was in charge of Skan- dia’s Swedish operations, President of SkandiaLink Livförsäkrings AB and Financial and Administra- tive Director of SkandiaLink Livförsäkrings AB. Cecilia was elected Member of the Hakon Invest Board at the 2005 Annual General Meeting.

Jan-Olle Folkesson, born 1939 Stig Lundström Jan-Olle is Chairman of the Board of the Sixth AP Fund, CBN AB, Sporthaus Mexter AB and a number of other companies. He is also a Board Member of Lennart Wallenstam Byggnads AB. Jan-Olle has extensive experience of ICA’s operations, gained in the capacity of President of ICA EOL in 1986–1990 and President of ICA Företagen in 1990–1991. Jan-Olle was elected Mem- ber of the Hakon Invest Board at the 2005 Annual General Meeting.

Olle Nyberg Stig Lundström, born 1948 Stig is Deputy Chairman of ICA-handlarnas Förbund and ICA retailer in MAXI ICA Stormarknad Torslanda, Gothenburg. Formerly, Stig was Chairman of AB Lindex and Affärshälsan i Göteborg AB, Deputy Chairman of Ellos and Member of the Board of Stena Line. Stig was elected Member of the Hakon Invest Board at the 1999 Annual General Meeting.

Jan Olofsson Olle Nyberg, born 1956 Olle is Member of the Board of ICA-handlarnas Förbund and ICA retailer in ICA Kvantum in Söder- hamn. Olle was elected Member of the Hakon Invest Board at the 2000 Annual General Meeting.

Jan Olofsson, born 1948 Jan is a bank director and Senior Advisor at Handelsbanken Capital Markets. Between 1992- 2005 Jan was Head of Mergers & Acquisitions within Handelsbanken. Prior to that he held a number of leading positions within Esselte AB, including Deputy CEO between 1985–91. Jan is Chair- man of Silva Sweden AB and Init AB. Jan was elected Member of the Hakon Invest Board at the 2005 Annual General Meeting. 90 WORKING PROCEDURES When necessary, extraordinary meetings will be held to address FOR THE BOARD OF DIRECTORS specific issues. In preparation for Hakon Invest’s market listing, the Board of Direc- The rules of procedure for the Board, which are adopted for tors has undergone major changes since the end of the 2004 fiscal one year at a time, govern such matters as the division of responsi- year (see also the “Supplementary information” section). bilities among the Board of Directors, the Chairman of the Board, In 2004, Hakon Invest’s Board of Directors consisted of 19 the President and the Board’s Remuneration Committee, Investment members and held 15 Board meetings at which minutes were kept; Committee and Audit Committee. According to the rules of proce- 11 physical meetings and four telephone meetings. In addition, an dure, the Board of Directors shall resolve upon issues that do not Extraordinary General Meeting was held. The Board also held a concern the ongoing management and also issues of major impor- joint Board conference with ICA-handlarnas Förbund, at which ICA tance, such as significant financial undertakings and agreements AB’s areas of operation were studied in-depth and a review was and significant organizational changes. The Company’s finance made of the competitors that are active or may become active in the and investment policies are adopted by the Board. market in the future. Hakon Invest’s scheduled Board meetings address such matters The two overall issues addressed by Hakon Invest’s Board dur- as the business status, financial reporting, personnel matters and ing 2004 were the change in ICA AB’s ownership and the market legal issues. They also address matters including the annual listing of the Hakon Invest share. The working climate within the accounts, interim reports, budget, raising of loans, acquisitions and Board of Directors was good during 2004, unanimity concerning investments, as well as such overall matters as strategy and busi- major issues addressed was great and cooperation with Hakon ness-intelligence analyses. At the Board meeting that addresses the Invest’s Group Management was excellent. annual report, the Company’s auditors present the observations According to a resolution made at the 2005 Annual General made from their examination of Hakon Invest’s internal controls and Meeting, Hakon Invest’s Board currently comprises seven regular annual accounts. Strategic and operational matters are presented members. The Board’s statutory meeting was held after the Annual by the Chief Executive Officer and accounting and financial matters General Meeting. The Board must hold at least five meetings a by the Chief Financial Officer. year, one of which must be devoted to the budget and to long-term Hakon Invest intends to comply with the Swedish Code of planning issues. In the future, the timing of Board meetings will coin- Corporate Governance. cide with the dates announced for release of financial information.

91 GROUP MANAGEMENT HOLDING BEFORE EMPLOYEE OF COMPLETION OF HAKON INVEST YEAR OF THE OFFERING NAME SINCE BIRTH POSITION SHARES Claes-Göran Sylvén 2003 1959 President and CEO 317,196 Göran Hesseborn 2005 1960 CFO 1,500 Fredrik Hägglund 2002 1967 Senior Legal Counsel 2,000 Anders Hallgren 2000 1952 Vice President Corporate Communications 3,000 Claes-Göran Sylvén

Claes-Göran Sylvén, born 1959, President and Chief Executive Officer Claes-Göran has been employed since 2003. Claes-Göran is President of ICA-handlarnas Förbund and ICA-handlarnas Medlemsservice AB. He is Chairman of the Board of ICA AB and Forma Pub- lishing Group AB and Member of the Board of Svensk Handels and UGAL. Claes-Göran was origi-

nally an ICA retailer, and together with his family he owns ICA Kvantum Flygfyren in Norrtälje. Göran Hesseborn

Göran Hesseborn, born 1960, Chief Financial Officer Göran has been employed since 2005. He joined Hakon Invest from Spendrups AB, where he was Deputy President and CFO in 2001–2005. From 1995 to 2001, Göran was Deputy Presi- dent and CFO of Servera R&S. Göran is a Member of the Board of Forma Publishing Group AB.

Fredrik Hägglund, born 1967, Senior Legal Counsel Fredrik Hägglund Fredrik has been employed since 2002. He has a Bachelor of Law degree and worked as a lawyer at Clifford Chance, Brussels (1999–2002) and assistant lawyer at Linklaters (1996–1999). Fredrik was also a trainee within Anita Gradin’s cabinet for the European Commission. Since 2004, he has been a Member of the ICA AB Board and of the Board of Directors of Eurocommerce and Institutet Mot Mutor (Anti-bribery Institute). Anders Hallgren Anders Hallgren, born 1952, Vice President Corporate Communications Anders has been employed since 2000. Anders was previously information manager at ICA (1990–2000) and was previously a journalist at VLT and ICA Nyheter (1972–1990).

92 Board of Directors, Group Management, auditors President and Chief Executive Officer Claes-Göran Sylvén and his family own all of the shares in the Claes-Göran Sylvén has been employed as President of Hakon Sycava AB Group. Sycava has two subsidiaries: (i) Varuhuset Flyg- Invest since 2003. As a result of his position within Hakon Invest, fyren AB, which is owned to 99.7%, engages in grocery retailing Sylvén is also Chairman of the Board of ICA AB and Forma Publish- through ICA Kvantum Flygfyren in Norrtälje. The other shares in ing Group, and Member of the Board of the Swedish Federation of Flygfyren are owned, according to contract, by ICA Sverige AB Trade (Svensk Handel) and UGAL. and by the ICA retailer Conny Holmlund. Sylvén is not actively Since 2003, Sylvén has also been President of ICA-handlarnas engaged in the store operation but is a Member of the Board; (ii) Förbund and its subsidiary ICA-handlarnas Medlemsservice AB, SYFA AB, which is 100% owned, engages in property leasing but which conducts the business operations related to the provision of is currently dormant. Sycava also has two associated companies: (i) services to ICA-handlarnas Förbund’s members, their stores and Centrumfastigheter i Norrtälje AB, which is owned to 20%, and store companies. During 2005, Göran Nygren was appointed engages in real estate management; and (ii) Grand Arctic Sweden Chief Operating Officer of ICA-handlarnas Medlemsservice AB. AB, which is owned to 33.3%, and conducts hotel operations in Management of ICA-handlarnas Förbund’s assets, apart from the Överkalix. Sylvén is not actively engaged in the associated compa- shares in Hakon Invest, is conducted by external managers (also nies; nor is he a Member of the Board of these companies. Finally, refer to the “Supplementary information” section). Sylvén’s assign- Sylvén is a partner of Grand Arctic Stockholm HB investors’ club. ment for ICA-handlarnas Förbund’s and Medlemsservice mainly Sylvén was formerly partner and Chairman of the Board of entails managing the head of operations and participation by con- Skärgårdsupplevelser på Lidö AB but has terminated both his own- ducting representative duties at member meetings and other internal ership and involvement in this company. The Hakon Invest share- meetings and through external contacts. Sylvén is remunerated by holding reported in the table above is owned personally by Sylvén. ICA-handlarnas Förbund for these duties. Hakon Invest’s Board of Directors has approved Sylvén’s signifi- Hakon Invest’s significant holdings in ICA AB and the financial cant assignments and financial involvement outside the Company. importance of the continued development of business operations The Board of Directors’ rules of procedure and working instruc- based on the ICA concept and the commercial links with the ICA retail- tions for the President and Chief Executive Officer particularly regu- ers warrant a close relationship between Hakon Invest and ICA-hand- late the handling of and decisions regarding agreements and other larnas Förbund. Accordingly, holding the position of President of ICA- transactions between Hakon Invest and ICA-handlarnas Förbund. handlarnas Förbund/ICA-handlarnas Medlemsservice AB in parallel with the employment as President of Hakon Invest has been regarded REMUNERATION TO THE BOARD OF DIRECTORS as beneficial to Hakon Invest and its shareholders, as part of efforts to AND SENIOR EXECUTIVES develop the strategic holding in ICA AB. In addition, following the The Chairman and Board Members receive director fees resolved stock-exchange listing, Hakon Invest will need to uphold the confi- by the Annual General Meeting. The remuneration paid to the Presi- dence of the members of ICA-handlarnas Förbund. For more detailed dent and other senior executives consists of a fixed basic salary, information, refer to the section “Supplementary Information” under other benefits and remuneration and pensions. Other senior execu- “Relationship between Hakon Invest and ICA-handlarnas Förbund”. tives are defined as those employees who, together with the Presi- dent, comprise Group Management; see “Group Management.”

Board of Directors, Group Management, auditors 93 Remuneration and other benefits which time the aforementioned gross salary framework may be dis- The table below contains a specification of remuneration and other posed of by 1/12 per month. The President is not entitled to sever- benefits pertaining to the 2004 fiscal year. Since the Board of ance pay. Directors and Hakon Invest’s Group Management have changed during the current year, the table below also shows the estimated Pensions payments that will be made to the Board of Directors, President and The Company and the President have a mutual right to request that other senior executives during 2005. the President retires at age of 65. Within the aforementioned gross No director fees are paid to Hakon Invest personnel represent- salary framework, the President decides the size of the pension pro- ing the Company on the Boards of Directors of companies owned visions to be made. by Hakon Invest. Principles for remuneration to other senior executives Principles for remuneration paid to the President, as of 2005 Remuneration Remuneration For other senior executives, remuneration will be paid in accor- The President will be remunerated in accordance with the amounts dance with the table. No variable remuneration will be paid in shown in the table. An agreement has been reached with the Presi- 2005. dent regarding a gross salary framework of SEK 4.5 million for 2005. The framework includes vacation payments, social security Termination notice and severance pay fees, pension costs and other overheads in the form of cars and so The Company and other senior executives within the Hakon Invest forth. The President will not receive any variable payment in 2005. Group have a mutual six months period notice. In addition, the The President is entitled to freely dispose of amounts within the other senior executives are under certain circumstances entitled to framework in a manner that is cost-neutral for the Company. severance pay corresponding to 18 monthly salaries if notice is served by the Company. The severance pay is not deductible Termination notice and severance pay against other income. If notice is served by the executive, entitle- The President is entitled to termination notice of six months both if his ment to compensation arises in certain cases, due to a ban on employment is terminated by the Company and by himself, during engaging in competitive activities for a period of six months from

FIXED ANNUAL SALARY/ PENSION OTHER 2004 (SEK THOUSANDS)1) DIRECTOR FEES BENEFITS2) COST REMUNERATION TOTAL Chairman of the Board 250 – – – 250 Other Members of the Board (total)3) 1,447 – – – 1,447 President4) 1,238 100 1,935 8 3,281 Other senior executives (total)5) 8,788 462 9,395 38 18,683 11,723 562 11,330 46 23,661 1) Remuneration, excluding social security fees. 2) Pertains to company car benefit. 3) In 2004, the Board had 18 members (apart from the Chairman of the Board) up to the Annual General Meeting. Subsequently, it had six members. 4) The President disposes of a gross salary framework totaling SEK 4.4 million, including vacation payment, social security fees, pension costs and other overheads in the form of a free car, etc. 5) There were five other senior executives in 2004.

FIXED ANNUAL SALARY/ PENSION OTHER 2005 (SEK THOUSANDS)1) DIRECTOR FEES BENEFITS2) COST REMUNERATION TOTAL Chairman of the Board 500 – – – 500 Other Members of the Board (total)3) 1,300 – – – 1,300 President4) 1,200 – 2,279 – 3,479 Other senior executives (total)5) 4,095 397 1,719 48 6,259 7,095 397 3,998 48 11,538 1) Remuneration, excluding social security fees. 2) Pertains to company car benefit. 3) In 2005, the Board had six members (apart from the Chairman of the Board). 4) The President disposes of a gross salary framework totaling SEK 4.5 million, including vacation payment, social security fees, pension costs and other overheads in the form of a free car, etc. 5) The other senior executives are Göran Hesseborn (employed since April), Ulf Nyström (employed up to March), Fredrik Hägglund and Anders Hallgren.

94 Board of Directors, Group Management, auditors the date upon which employment is terminated. The maximum meaning that if the share price on redemption exceeds 200% of the amount of such compensation is 60% of fixed cash salary and it is share price during the measurement period (“the cap”), the option only payable during the period when the ban on competitive activi- holder will receive only half of the value appreciation exceeding the ties is applicable. cap. ICA-handlarnas Förbund intends to subsidize the offer. Hakon Invest will not participate in the incentive program. ICA-handlarnas Pensions Förbund will make the payments and ultimately bears the cost for The other senior executives are covered by a defined-contribution the program. According to IFRS 2, however, amounts will also be pension plan, under which the Company today pays a maximum of reported within Hakon Invest, by means of a cost in the income 35% of the pensionable salary, or not more than 10 price base statement corresponding to an increase in equity. amounts annually. The pensionable salary is calculated in accordance with the rules for the ITP plan. In addition, the other senior BOARD COMMITTEES executives are entitled to retire at the age of 62. If they retire at the Remuneration Committee age of 62, 75% of the senior executives’ salary immediately prior to The role of the Remuneration Committee is to formulate and propose retirement is payable for the period that remains until normal retire- principles for remuneration to the Company’s management team, in ment age. Pension for the period after normal retirement age is terms of, for example, salary structure, pension plans, incentive pro- payable in the amount the executives would have received had they grams and other terms and conditions of employment etc. The pro- continued to work until the age of 65. Pension benefits are vested, posed remuneration principles will be presented by the Board of which means they are not conditional upon future employment. Directors to the Annual General Meeting for approval. The principles will include the relationship between fixed and variable remuneration TRANSACTIONS WITH RELATED PARTIES and the relationship between performance and remuneration, the Apart from what is stated in the “Supplementary information” sec- main terms for bonus and incentive programs, the main terms for non- tion above, there are no contractual relationships or transactions monetary benefits, pensions, employment termination and severance between Hakon Invest and related parties. No Board Member or pay, as well as which circle of senior executives that is covered. senior executive has, or has had, any direct or indirect participation The Committee will be viewed as a subcommittee of the Board in any business transaction with the Company or the Group during of Directors and will not assume any responsibility assigned to the the current or preceding fiscal year that is or was unusual by nature Board as a whole with respect to remuneration, etc. or with respect to terms and conditions, and which in any respect The Remuneration Committee will comprise the number of mem- remains unsettled or incomplete. Nor have the auditors been bers thought fit by the Board, but never fewer than two. Committee involved in the type of business transaction described above. Nor members will comprise Board Members and may not comprise has the Company granted any loans, issued guarantees or entered Company employees. At least one Committee member must be into sureties with, or on behalf of, any Board Member, senior execu- independent of the Company’s major shareholders. The chairman tive or auditor of the Company. will be appointed by the Board and shall, in consultation with the other members, establish the number of Committee meetings to be INCENTIVE PROGRAM held and the times of these meetings. However, the number of meet- As soon as the exchange-listing of Hakon Invest has been com- ings must not be less than two per year (of which, one must be held pleted, ICA-handlarnas Förbund has decided to implement an in December). If necessary, the HR manager or the person assigned incentive program aimed at all employees of the Parent Company responsibility for HR matters will be invited to attend meetings. Hakon Invest AB and ICA-handlarnas Medlemsservice AB. The The Remuneration Committee must issue regular reports to the incentive program will comprise an offer to acquire a total of Board on the progress of its activities and the decisions it has made, 480,000 call options, corresponding to 0.3% of the share capital and must issue the minutes of the Committee’s meetings to all Board and voting rights in the Company, assuming full acceptance of the Members and to the Board’s secretary. offer and full exercise of the call options, which will carry entitle- The Remuneration Committee will consist of Lars Otterbeck and ment to the purchase of common shares in Hakon Invest. Each call Anders Fredriksson. Lars Otterbeck is Chairman. option will carry entitlement to the purchase of one common share during the period July 1, 2008 to December 31, 2008 at an exer- Investment Committee cise price corresponding to 110% of the average stock-exchange The Investment Committee is appointed annually by the Board, pri- price of the Hakon Invest share during a period of five trading days marily to, on behalf of the Board, examine the decision-making that begins six trading days after the listing and up to and including basis for acquisition matters, recommend decisions and monitor the tenth trading day after the listing (“the measurement period”). compliance with the Company’s investment policy. The financial outcome of the call options will be limited by a cap,

Board of Directors, Group Management, auditors 95 The Committee shall be viewed as a subcommittee of the Board with respect to reporting matters and internal controls, nor will it and will not assume any responsibility assigned to the Board as a reduce the requirement regarding the auditor’s communication with whole with respect to investment decisions or the management of the Board as a whole, which must take place at least once annually. portfolio companies. The Committee’s duties are to: The Investment Committee’s duties are to: • be responsible for preparing the Board’s work on quality assuring • examine the decision-making basis for acquisitions, supplemen- the Company’s financial reporting and formulating proposals for tary investments and the divestment of portfolio companies the Board’s annual report on the evaluation of internal control • recommend decisions about investments, acquisitions and the over financial reporting. financing of acquisitions and divestments • obtain information about the Company’s risk situation and evalu- • review the terms and conditions for agreements regarding acqui- ate the President’s (where applicable, Group Management’s) risk sitions or divestments assessment and risk management systems. • assess compliance with the Company’s investment policy • engage in in-depth discussions with the President and the legal • quality assure the Company’s decision-making basis and the affairs unit, or other concerned personnel, regarding the design work conducted on investment operations. of internal controls and follow up observations made by auditors and others. The Investment Committee will comprise the number of members as • annually assess compliance with the Group’s finance policy, deemed appropriate by the Board, but never fewer than four. Com- investment policy and the overall management of policies. mittee members will comprise Board Members and may not com- • monitor and assess the handling of complex accounting issues prise Company employees. At least two members of the Committee and the choice of accounting principles, and in this context to must be independent of the Company’s major shareholders. The take the auditors’ opinions into account. chairman will be appointed by the Board and will convene meet- • establish guidelines for services other than the audit that may be ings when investment decisions need to be addressed. The number procured from the Company’s auditors. of meetings must never be less than one per year, at which working • estimate whether the total information provided to the market suit- instructions and the Company’s investment policy will be revised. ably reflects the Company’s operations and risk situation, and in The Investment Committee must issue regular reports to the this context to take the auditors’ opinions into account. Board on the progress of its activities and the decisions it has made, • annually discuss the auditing input proposed by the auditors, the and must issue the minutes of the Committee’s meetings to all Board scope of their work, coordination between the external and inter- Members and to the Board’s secretary. nal audits and views on the Company’s risks. The Board has decided that the Investment Committee will con- • annually evaluate the auditors’ work and inform the Company’s sist of the entire Board at present. Lars Otterbeck is chairman. Nomination Committee of the results of such evaluation. • assist the Nomination Committee in proposing auditors and audit Audit Committee fees, based on proposals from the auditors. The Audit Committee is appointed annually by the Board, primarily • obtain and review the written assignment letter from the auditors, to, on behalf of the Board, monitor the accounting and reporting of which clarifies the division of responsibility between the auditors financial information and obtain information about the audit of the and company units, etc. Group. The Committee shall also monitor risk analyses within the • be responsible for the procurement process for the audit, if this is Company. decided. The Committee shall be viewed as a subcommittee of the Board • inform the Board and propose the measures to be decided by and will not assume responsibility assigned to the Board as a whole the Board as a result of the duties described above.

96 Board of Directors, Group Management, auditors The Audit Committee will comprise the number of members as abstain from its right to appoint a representative to the Nomination deemed appropriate by the Board, but never fewer than two. Since Committee, this right reverts to the shareholder who following the ICA AB has its own Audit Committee on which the Company is rep- aforementioned shareholder has the largest shareholding. Members resented, it is estimated that two members will suffice. Committee of the Board shall not constitute a majority of the Nomination Com- members will comprise Board Members and may not comprise mittee. The President or any other member of Company Manage- Company employees. At least one member must be independent of ment must not be a member of the Nomination Committee. The the Company’s major shareholders. The chairman will be Chairman or another Member of the Board must not be chairman of appointed by the Board and shall, in consultation with the other the Nomination Committee. members, establish the number of Committee meetings to be held Unless the members agree on another course of action, the chair- and the times of these meetings. However, the number of meetings man of the Nomination Committee shall be one of the members rep- must never be less than three per year. resenting the shareholder with the greatest number of voting rights, The Audit Committee must issue regular reports to the Board on ICA-handlarnas Förbund. The chairman shall have the casting vote. the progress of its activities and the decisions it has made, and must The Nomination Committee shall have a term of office extend- issue the minutes of the Committee’s meetings to all Board Members ing until a new Nomination Committee has been appointed. and to the Board’s secretary. The names of the shareholder representatives and the names of The Audit Committee comprises Cecilia Daun Wennborg and the shareholders they represent must be disclosed no later than six Stig Lundström. Cecilia Daun Wennborg is chairman. months prior to the Annual General Meeting. Ahead of the 2006 Annual General Meeting, these names must be disclosed no later NOMINATION COMMITTEE than three months before the Meeting. The role of the Nomination Committee is to formulate proposals regarding the following matters prior to their presentation for resolu- AUDITORS tion at the Annual General Meeting: Ire Lindstrand, born 1943, and Authorized Public Accountant from • motion concerning chairman of the meeting. SET Revisionsbyrå AB, is the Company’s auditor. Ire Lindstrand has • motion concerning Members of the Board. been auditor of the Company since 2000. At the 2005 Annual • motion concerning Chairman of the Board. General Meeting, Erik Åström, born 1957 and Authorized Public • motion concerning the fees to be paid to Members of the Board Accountant from Ernst & Young AB, and Ire Lindstrand were elected (divided among the Chairman of the Board, Deputy Chairman and Hakon Invest’s joint auditors until the 2007 Annual General Meeting. other members, and any remuneration to be paid for the Nomina- In 2004, the Company’s auditors received payment of SEK 0.7 tion Committee’s work, plus other remuneration for Board work). million for auditing the Parent Company. No consultation payment was • where applicable, motion concerning the election of an auditor made by the Parent Company to the auditors in 2004. For the Group, or auditors, or motion concerning the fees to be paid to the Com- total payment to the Company’s auditors amounted to SEK 1.2 million, pany’s auditors. of which SEK 1.0 million was for the audit and SEK 0.2 million for consultation. The Nomination Committee’s proposals must be presented in the notice convening the meeting and on the Company’s website. The Nomination Committee shall comprise four members representing the Company’s shareholders. Two members are to be nominated by the largest shareholder, ICA-handlarnas Förbund, and two members are to be nominated by the two next largest shareholders. In the event that any of the three largest shareholders decides to

Board of Directors, Group Management, auditors 97 Share capital and ownership structure

GENERAL SHARE CAPITAL Hakon Invest is a public limited liability company. The Company’s The table below describes the changes in the Company’s share corporate registration number is 556048-2837. Hakon Invest was capital that have occurred since Hakon Invest’s formation and that registered at the Swedish Companies Registration Office on Sep- will occur up to the listing of the Company’s shares. tember 23, 1946 under the registered name of AB Hakonett and Hakon Invest’s Board resolved on May 24, 2005 to convert all has conducted its current operations since 2000. The current regis- the preference shares issued in 2000 into common shares. The res- tered name was registered June 23, 2005, following a Annual olution was registered by the Swedish Companies Registration General Meeting resolution made on May 11, 2005. The Com- Office on June 23, 2005. Subsequently, all Company shares are pany’s legal form of business identity is governed by the Swedish common shares. Also see under “Types of shares” and “Conversion Companies Act (1975:1385). The Company is a VPC company of shares between classes of share” below. whose share register is maintained by VPC (the Swedish Securities Register Center). TYPES OF SHARES According to the Articles of Association, the Company’s share Assuming that all of the criteria are in place for a listing on the Stock- capital must amount to not less than SEK 300,000,000 and not holm Stock Exchange’s O List, the Annual General Meeting held on more than SEK 1,200,000,000. Hakon Invest’s share capital May 11, 2005 resolved to amend the Company’s Articles of Asso- amounts to SEK 402,293,590, represented by 160,917,436 ciation, which will result in the following share capital structure. shares, each with a par value of SEK 2.50. At General Share- Shares may be issued in two series, common shares and Series- holder Meetings, all shareholders can vote for the full number of C shares. Common shares may be issued in a number not exceed- shares owned or represented, without any restrictions in terms of voting 100% of all of the shares in the Company and Series-C shares ing rights. In connection with votes, each share carries entitlement to in a number not exceeding 51% of all of the shares in the Com- one vote. pany. The intention is that the Articles of Association will be submit-

CHANGE CHANGE CHANGE CHANGE CHANGE IN NUMBER OF IN NUMBER OF IN NUMBER OF IN NUMBER OF IN NUMBER OF PREFERRED PREFERRED SERIES SERIES SERIES SHARES SERIES SHARES SERIES TIME TRANSACTION A SHARES (COMMON) B SHARES C SHARES A SHARES B SHARES Before 1990 ––––– 1990 New issue – 130––– 1996 Bonus issue 2:1 200 130––– 1997 Restamping 260 –260––– 1997 New issue 1,199,340–––– 1998 New issue (preference shares A) – – – 13,175 – 1998 Split 100:1 118,800,000 – – 1,304,325 – 2000 New issue (preference shares B) ––––39,599,936 2002 Conversion (preference shares A) 1,317,500 – – –1,317,500 – 2005 Conversion (preference shares B) 39,599,936––––39,599,936 2005 Conversion (common shares)1) –82,067,892 – 82,067,892 – – 1) Subject to the condition that all of the criteria for a listing on Stockholm Stock Exchange’s O List are satisfied.

98 ted to the Swedish Companies Registration Office for registration as CONVERSION OF SHARES soon as the said conditions have been met. BETWEEN CLASSES OF SHARES Holders of common shares are entitled to request conversion of their RIGHT TO PROFIT DISTRIBUTION common shares to Series-C shares by making a written request to this AND SHARES IN THE COMPANY’S ASSETS effect to the Company’s Board. The Board must address matters involv- Series-C shares do not carry entitlement to cash profit distribution. ing the conversion of shares in the order in which the requests are However, Series-C shares carry the same rights as common shares received. Decisions regarding conversions must be announced without to profit distribution that takes the form of a distribution in kind of div- delay. ICA-handlarnas Förbund has requested the conversion of a num- idend of shares or other participations in ICA AB (Corp. Reg. No. ber of its Hakon Invest common shares, corresponding to 51% of the 556582-1559) or in the current or future subsidiaries or associated shares in Hakon Invest, to Series-C shares. The conversion will be companies of the ICA AB group or in companies that may take over effected prior to the listing and after the application period for the the operations conducted or that may be conducted in the future by Offering expires. Since the number of Series-C shares may not exceed the ICA AB group. 51% of all the shares in Hakon Invest, this means that subsequently In the event of the Company’s liquidation, Series-C shares carry there will not be any scope remaining for conversions. the same rights as common shares to participation in the Com- As of 2011, holders of Series-C shares are entitled to request pany’s assets. If the Company’s restricted equity is reduced through conversion of their Series-C shares into common shares by making a payment to the Company’s shareholders or by means of the repur- written request to this effect to the Company’s Board. The Board of chase of shares, Series-C shares only carry entitlement to payment Directors must make a decision regarding conversion as soon as pos- or compensation in accordance with the regulations for profit distri- sible during the month of January in the fifth year after the conversion bution described in the preceding paragraph. request was received, meaning not earlier than in January 2016.

TOTAL TOTAL TOTAL TOTAL NUMBER OF CHANGE IN INCREASE IN NUMBER OF NUMBER OF NUMBER OF PREFERRED TOTAL TOTAL NUMBER OF SHARE CAPITAL, COMMON SERIES SERIES SHARES SERIES A NUMBER OF PAR SHARE CAPITAL, SHARES SEK SHARES B SHARES C SHARES AND B SHARES SHARES VALUE, SEK SEK – – 200 – – – 200 250.00 50,000 130 32,500 200 130 – – 330 250.00 82,500 130 82,500 400 260 – – 660 250.00 165,000 – – 660 – – – 660 250.00 165,000 1,199,340 299,835,000 1,200,000 – – – 1,200,000 250.00 300,000,000 13,175 3,293,750 1,200,000 – – 13,175 1,213,175 250.00 303,293,750 120,104,325 – 120,000,000 – – 1,317,500 121,317,500 2.50 303,293,750 39,599,936 98,999,840 120,000,000 – – 40,917,436 160,917,436 2.50 402,293,590 – – 121,317,500 – – 39,599,936 160,917,436 2.50 402,293,590 – – 160,917,436 – – – 160,917,436 2.50 402,293,590 – – 78,849,544 – 82,067,892 – 160,917,436 2.50 402,293,590

99 PREFERENTIAL RIGHTS IN as soon as possible after the exchange-listing of Hakon Invest, which CONNECTION WITH SHARE ISSUES will be directed to all employees of Hakon Invest and ICA-handlarnas Preferential rights in connection with future share issues are regu- Medlemsservice AB and will correspond to 0.3% of the Company’s lated in the Articles of Association; see Paragraph 5 under the “Arti- share capital and voting rights. Also refer to the “Incentive program” cles of Association” section. section. Series-C shares are not included in the Offering. The table below shows how Hakon Invest’s ownership structure SHAREHOLDER STRUCTURE prior to the completion of the Offering is distributed among the vari- ICA-handlarnas Förbund is the principal owner of Hakon Invest, ous size categories, based on the Company’s share register on Sep- holding approximately 75.4% of the shares prior to the Offering. tember 30, 2005. The remaining nearly 25% of the shares are held by about 3,400 (AT SEPTEMBER 30, 2005) individual shareholders, most of them current or former ICA retailers. NUMBER NUMBER OF The table below is a specification of major shareholders prior to SIZE CATEGORIES OF SHARES % SHAREHOLDERS % completion of the Offering. 1–500 245,801 0.1 738 21.7 As a result of completion of the Offering, which comprises 501–1,000 320,974 0.2 391 11.5 13,000,000 common shares corresponding to slightly more than 8 1,001–10,000 5,956,433 3.7 1,467 43.1 percentage points of all of the shares in Hakon Invest, assuming that 10,001–50,000 14,377,861 8.9 641 18.9 the Over-allotment option is utilized in full, ICA-handlarnas Förbund’s 50,001–100,000 7,493,272 4.7 108 3.2 holding will be reduced to a total of 108,317,500 common shares, 100,001–150,000 3,211,327 2.0 26 0.8 corresponding to approximately 67.3 percentage points of all of the 150,001–200,000 1,862,398 1.2 11 0.3 shares in Hakon Invest. If the Over-allotment option is not utilized, ICA- 200,001–250,000 1,110,430 0.7 5 0.1 handlarnas Förbund’s holding will be reduced to a total of 250,001–300,000 830,600 0.5 3 0.1 109,617,500 common shares, corresponding to approximately 300,001– 125,508,340 78.0 11 0.3 68.1 percentage points of all of the shares in Hakon Invest. ICA- 160,917,436 100.0 3,401 100.0 Handlarnas Förbund has decided to implement an incentive program

SHAREHOLDER NUMBER OF PORTION OF NUMBER OF PORTION OF TOTAL PORTION OF COMMON CAPITAL AND SHARES OF CAPITAL AND NUMBER OF CAPITAL AND (ON SEPTEMBER 30, 2005)1) SHARES VOTES, %2) SERIES C3) VOTES, %2) SHARES VOTES, %2) ICA-handlarnas Förbund, Solna 39,249,608 24.4 82,067,892 51.0 121,317,500 75.4 Samuelsson, Tomas, Stockholm 745,000 0.5 745,000 0.5 Jönsson, Leif, Stockholm 538,280 0.3 538,280 0.3 Ottosson, David, Sigtuna 416,032 0.3 416,032 0.3 Andersson, Lars & Mats, Tyresö 404,950 0.3 404,950 0.3 Persson, Sverker, Eskilstuna 400,516 0.2 400,516 0.2 Olofsson, Håkan, Boden 398,000 0.2 398,000 0.2 Ehn, Karl-Gustav, Jönköping 366,500 0.2 366,500 0.2 Carlson, Rolf, Uppsala 354,344 0.2 354,344 0.2 Davidson, Ulf, Danderyd 350,772 0.2 350,772 0.2 Fredriksson, Anders & Doris, Lidköping 350,000 0.2 350,000 0.2 Lönnroth, Markus, Ekerö 325,776 0.2 325,776 0.2 Sylvén, Claes-Göran, Sollentuna 317,196 0.2 317,196 0.2 Öhlander, Lars, Stockholm 304,200 0.2 304,200 0.2 Hero, Lennart, Gothenburg 290,000 0.2 290,000 0.2 Johansson, Mai, Gothenburg 290,000 0.2 290,000 0.2 Others 33,748,370 21.0 33,748,370 21.0 Total 78,849,544 49.0 82,067,892 51.0 160,917,436 100.0 1) Including related parties and companies. 2) Series-C shares do not carry entitlement to cash dividends; also refer to “Entitlement to cash dividends and participation in the Company’s assets.” 3) Conversion of certain of ICA-handlarnas Förbund’s common shares to Series-C shares is subject to the condition that all of the criteria for a listing on Stockholm Stock Exchange’s O List are satisfied.

100 Share capital and ownership structure SHAREHOLDERS’ AGREEMENTS value of the share was formerly established with the help of a prede- AND SHAREHOLDER ASSOCIATIONS termined valuation model and not on the basis of supply and As far as the Board of Directors of Hakon Invest is aware, there are demand. In other words, historical share trading and price setting no shareholders’ agreements or shareholder associations involving cannot be used as a guide to share trading and price setting involv- Hakon Invest. ing the Hakon Invest share. During 2004, 433 transactions involving the share were com- THE SHARE pleted. In total, 1,629,891 shares were traded. Trading in the Hakon Invest’s share has not previously been listed officially, share was suspended on September 30, 2005. During 2005, although it has been possible for the shareholders to sell their hold- 182 transactions were completed. In total, 280,772 shares were ings through ICA-handlarnas Förbund, whereby ICA-handlarnas traded. Förbund’s subsidiary, ICA-handlarnas Medlemsservice AB, has functioned as an intermediary. Previously, the value of the share has CONVERTIBLE DEBENTURES AND OPTIONS not been set continuously on the basis of changes in the value of the No convertible debentures or options related to the Hakon Invest assets of Hakon Invest (ICA AB, Forma Publishing Group and other share have been issued by Hakon Invest. Nor are there currently financial assets). The largest asset, ICA AB, is not listed and, in any plans to issue such financial instruments. order obtain a continuous valuation of ICA AB, an index was designed and applied, which was based on the share performance of six listed publicly traded European food retail groups, following which ICA AB’s earnings during the most recently reported fiscal year was related to this index. Subsequently, the estimated value of the shares in the subsidiary Forma and the daily market value of the financial assets was added to the value obtained. Accordingly, the

Share capital and ownership structure 101 Tax considerations in Sweden

This is a summary of the primary tax implications that may rise in Capital losses on shares and other listed ownership rights are fully conjunction with the ownership of common Hakon Invest shares deductible against capital gains in the same year on shares and other listed on the Stockholm Stock Exchange’s O List or as a result of the listed ownership rights, except for units in Swedish fixed income Offering. The summary is not designed as an exhaustive account funds. Capital gains that cannot be offset in this manner are covering all tax implications arising from the holding of shares, but deductible in an amount of 70% against other income from capital. If is instead meant as general information on current tax rules for hold- a loss arises in income from capital, a reduction of tax on income from ers of common shares in Hakon Invest who are subject to unlimited employment and business operations and property tax is permitted. tax liability in Sweden, unless otherwise stated. This tax reduction is granted in an amount of 30% of the deductible The summary does not cover situations in which shares are held loss that does not exceed SEK 100,000 and in an amount of 21% of as inventory in business operations or by a partnership. Also, the any subsequent loss. The loss may not be saved for later fiscal years. rules governing tax exemption for capital gains and dividends on In the case of individuals who have unlimited tax liability in shares in business-related shares in the corporate sector and the Sweden, preliminary tax of 30% on dividends is withheld. The pre- accompanying prohibition of deductions for capital losses are dealt liminary tax is normally withheld by VPC or, in the case of shares with only summarily1). held by a trustee, by the trustee. The tax implications for individual shareholders may also depend on special circumstances in individual cases. Each shareholders or EXEMPTION RULES other interested party is thus advised to consult a tax advisor regard- For individuals (and the estates of deceased persons), there are pro- ing the tax implications that the Offering may entail for them. visions that entail a certain limit on the reporting for tax purposes of dividends and capital gains on shares in unlisted companies. If a INDIVIDUALS: INCOME FROM CAPITAL company’s shares are listed, the exemption rules apply through the In the case of individuals (and the estates of deceased persons) who tenth calendar year after the company has been listed. After listing, have unlimited tax liability in Sweden, income from capital, such as the rules apply only to shares that were distributed prior to the listing interest, dividends and capital gains, is taxed as income from capi- date or prior to the announcement of a prospectus and which, after tal at a tax rate of 30%. What are referred to as exemption rules, listing, have not been transferred to a new owner through pur- which primarily apply to holdings in unlisted companies and which chases, exchange or in some similar manner. The exemption rules entail that dividends and capital gains – to a certain extent and sub- thus continue to be applicable to the shares that are not acquired ject to certain detailed conditions – are not reported as income are after listing. However, the rules also apply to shares acquired by commented on below. means of shares distributed prior to listing, such as through a rights Capital gains and capital losses are calculated as the differ- issue or a bonus issue. The rules cease to apply if Hakon Invest is ence between the sales proceeds after deductions for selling deemed an investment company. expenses, and the acquisition cost. The acquisition cost for shares According to the exemption rules, dividend distribution is to be acquired through purchases consists of the purchase payment and reported only when it exceeds a certain exemption amount, which any purchase expenses, such as commission. The acquisition cost consists of the total base for the exemption amount multiplied by for all shares of the same type and class is aggregated and calcu- 70% of the interest rate on government loans at the end of Novem- lated jointly using the average method. This means that the average ber in the year preceding the taxation year (on November 30, acquisition cost for the shares held is normally affected through the 2004, this rate was, for example, 3.95 % and 70% of this is acquisition of additional shares of the same type and class. Com- 2.77%) and any saved scope for exemption. The basis for the mon shares and shares of Serie C are not considered to be of the exemption amount is the total of the acquisition cost that the owners same type and class. As an alternative to the average method, the would have used if their shares had been sold, any saved exemp- standard rule may be used for listed shares. This rule entails that the tion scope and a payroll amount made up of the payroll expense- acquisition cost – if the tax subject so desires – may be calculated based pay and other remuneration in the Hakon Invest Group dur- as 20% of the sales price, after deductions for selling expenses. The ing the year prior to the taxation year, distributed among all shares standard rule may be applied to the sale of listed common shares in in the Company. In recent years, Hakon Invest has paid dividends Hakon Invest. to such an extent that there are no saved dividends.

1) Listed shares are viewed as being related to business operations if, among other considerations, the holding represents a capital asset for certain types of legal entities and the holding either amounts to 10% of the voting rights or the shareholding is required by the operations pursued by the owner or if another company can be viewed as being closely related to the holding company.

102 On October 27, 2005, the Swedish Government referred to a employed members of the Hakon Invest and in its subsidiary Forma Law Council proposal involving a reform of taxation rules for own- Publishing Group who acquire shares in Hakon Invest from the För- ers of closely held companies. The proposal also suggests the bund based on preferential right or who refrain from doing so. removal of exemption rules for the taxation of dividends and capital However, ICA AB is not part of the Hakon Invest Group. The gains from unlisted shares. The proposal is planned to come into special exemption rule is thus not directly applicable to the employed effect on January 1, 2006. members of ICA AB who acquire shares based on preferential rights. Neither is the exemption rule directly applicable to members who MEMBERS OF ICA-HANDLARNAS FÖRBUND are employed in ICA-handlarnas Medlemsservice AB, a wholly Presuming that application is completed at the right time and in the owned subsidiary of the Förbund. However, the preferential rights for correct manner, members of ICA-handlarnas Förbund have preferen- these members are also limited and the acquisition of shares is tial rights to acquire 1,400 shares in Hakon Invest on the same effected at the same price and on the same conditions that apply to terms and conditions that apply to the public or otherwise accord- the public and for employed members of Hakon Invest Group. In ing to the Offering. Preferential rights may be used either by the addition, those employees who are encompassed by the Offering member personally or through the store that is a member of the ICA- have not been able to affect the scope of the Offering or the condi- handlarnas Förbund. However, members are not entitled to transfer tions. In view of this and supported by certain older legal practices, the preferential rights to another party. Hakon Invest is of the opinion that the members of ICA AB’s group According to Chapter 42, Section 18 of the Income Tax Act, management and the employees of ICA-handlarnas Medlemsservice any distribution – above and beyond membership fees paid – who use or refrain from using the Offering of preferential rights and made to members on the dissolution of a non-profit association or acquire shares in Hakon Invest should not be taxed for benefits. when a member leaves the association or in similar cases should be taxed as a dividend. In view of the limited scope and purpose of LEGAL ENTITIES – INCOME FROM CAPITAL the preferential rights, Hakon Invest does not expect any special tax For limited liability companies and other legal entities, except for consequences to arise for members who use their preferential rights the estates of deceased people, interest, dividends and capital or who refrain from them, pursuant to the aforementioned provision. gains are taxable and capital losses are deductible. The capital Furthermore, there is possibly a question as to whether the tax legis- gains and capital loses are essentially calculated in the same man- lation includes a general basis for taxing members who utilize the ner as that for individuals. Taxation of income from capital for legal preferential rights for any positive difference between the market entities is calculated as income from business operations and is sub- value of the acquired shares and the purchase price of the shares ject to a tax rate of 28%. pursuant to the Offering. Hakon Invest believes that the risk of such Certain rules apply to shares that are viewed as being related taxation is relatively low. to business operations. Capital gains and dividends on such shares are tax-exempt if certain other conditions are fulfilled, such as a EMPLOYEES holding period of at last one year in the case of listed shares. Capi- The main rule is that not only salary but also benefits and all other tal losses on business-related shares are not deductible. For limited income received through employment must be reported as a tax- liability companies, deductions are granted for capital losses on able income. This also applies if the benefit is received from, or is shares and subscription rights only against taxable capital gains on paid by a party other than, the employer. However, Chapter 11, shares and other participating rights. If certain conditions are ful- Section 15 of the Income Tax Act includes a provision that exempts filled, a capital loss may be offset against such capital gains in certain acquisitions of shares from taxation. The provision means companies within the same group, provided that group contribu- that for closely held companies, benefits are not to be taxed if the tions are permitted among the companies. Capital losses that can- employee acquires shares in the company or in another company in not be utilized in any year may be saved and deducted from tax- the same group on the same conditions as those applying to the able capital gains on shares and other participating rights during public or otherwise pursuant to the Offering, if the employees and subsequent taxation years, with no limits in terms of time. For certain the shareholders in the company with preferential rights do not corporate categories, such as investment companies, securities acquire more than 20% of the shares on offer and the employee funds and limited partnerships, special rules apply. does not acquire shares for more than SEK 30,000. In view of the extent of the preferential rights for members of the CONVERSION OF PREFERENCE SHARES Förbund, who are also largely shareholders in the Company, and AS COMMON SHARES for the employees, Hakon Invest believes that there is a basis for The Board of Hakon Invest decided on May 24, 2005 to convert applying the exemption from special tax consequences for the preference shares issued in 2000 as common shares. The deci-

103 sion was registered by the Swedish Companies Registration Office NON-SWEDISH SHAREHOLDERS on June 23, 2005 and VPC AB shortly thereafter reregistered the Shareholders with limited tax liability in Sweden and who do not shares as common shares. A conversion of this type is deemed to conduct operations from a permanent location in Sweden are not have been completed when the conversion is registered by the normally taxed for capital gains on the sale of shares. However, Companies Registration Office. these shareholders may be subject to tax in their country of domi- According to a preliminary decision from the Revenue Law cile. According to a special rule, individuals with limited tax liability Commission in February 2005, regarding a request from a share- in Sweden can be subject to capital gains tax in Sweden from the holder in Hakon Invest, this conversion of preference shares to com- sale of, for example, Swedish shares if they at any time during the mon shares is to be viewed as a sale. Three of the seven members year of sale or the ten calendar years preceding that year had been differed and did not believe that the conversion of the shares should residing or permanently domiciled in Sweden. The applicability of be viewed as a taxable transaction. The preliminary decision has the rule is, however, in most cases limited through double taxation been appealed to Supreme Administrative Court and is ready for a agreements concluded by Sweden with other countries. decision, but a final decision is not expected before the second half In the case of shareholders who are not domiciled in Sweden for of 2005 or during 2006. tax purposes, Swedish withholding tax is normally paid on dividends For those shareholders who are individuals (or estates of from Swedish limited liability companies. However, the tax rate of deceased people) the preliminary decision, if it gains legal force, 30% is largely reduced via double taxation agreement concluded by means that taxable income, or in certain cases essentially a Sweden with other countries for the purpose of avoiding or reducing deductible capital loss, may have arisen. The payment for the con- double taxation. Deductions for withholding tax are normally made verted shares is regarded as the market value of the common shares by VPC, or by the trustee in the case of shares lodged with a trustee. at the time of the conversion. Any capital gain or capital loss should In the event that 30% withholding tax is withheld on dividends to a be calculated as the difference between the market value and the person who is entitled to be taxed according to a lower rate, repay- acquisition cost. If such taxation is applied, the acquisition expense ment of the excess amount can be requested from the Swedish Tax for the acquired shares will be the amount used for providing the Board before the end of the fifth year after the dividend. basis for taxation. At the time of the decision concerning the conversion, ICA-handlarnas Förbund bought and sold common shares in WEALTH TAX Hakon Invest for SEK 77.85 per share and ICA-handlarnas För- The intention is that the common shares in Hakon Invest be listed on bund and Hakon Invest are of the opinion that this amount should the Stockholm Stock Exchange’s O List and, based on current rules, be viewed as the market value of the shares. However, the valua- shares listed on this list are exempt from wealth tax, with certain tion question has not been examined by the Swedish Tax Board or exemptions that Hakon Invest does not regard as applicable to by a court. For the many previous owners of preference shares who shareholders in Hakon Invest. Wealth tax of 1.5% is levied on part acquired these in the share issue of 2000, this entails that a taxable of the taxable estate that exceeds a tax liability threshold, which is gain of about SEK 7.85 arose per share. The actual acquisition SEK 1.5 million for individuals and the estate of deceased persons. cost of the preference shares must be used, however. Spouses and co-habitants with the joint custody of children are For shareholders who are limited liability companies, prefer- taxed jointly and as of the 2006 tax year have a tax liability thresh- ence shares normally represent so called business-related shares old of SEK 3 million. Children living at home and under the age of and no taxable capital gain (or deductible capital loss) arises as a 18 are taxed jointly with their parents. result of the conversion. INHERITANCE AND GIFT TAX Inheritance and gift tax ceased as of December 17, 2004.

104 Tax considerations in Sweden Articles of Association

Hakon Invest would like to emphasize that the Articles of Association shares following a written request to the Company’s Board. The entail that all of the shares, both common shares and Series-C shares, request shall stipulate the number of shares to be converted and, if the carry the same voting rights. While the common shares carry unlimited request does not pertain to the entire shareholding, exactly which dividend entitlement, Series-C shares carry no right to cash dividends. shares are to be converted. The Board shall address matters pertain- Such a right may accrue to Series-C shares in 2016 at the earliest. ing to the conversion of shares in the order in which the requests However, Series-C shares carry entitlement to dividends in kind. See arrive. Conversion decisions shall be announced without delay. Con- below for more detailed information. The Annual General Meeting on versions shall be reported to the Companies Registration Office for May 11, 2005 passed the resolution adopting this wording of the Arti- registration without delay and conversion is effective as soon as regis- cles of Association. The resolution concerning an amendment of Article tration in the Companies Register has been completed and a notation 5, regarding the share capital structure (introduction of Series-C shares) has been made in the VPC Register. and the removal of the right-of-first-refusal clause are subject to the con- In connection with votes, each share entitles the holder to one vote. dition that all of the criteria for a listing on Stockholm Stock Exchange’s Series-C shares do not carry entitlement to cash profit distribu- O List are satisfied. The revised Articles of Association presented below tion. However, Series-C shares carry the same rights as common will have been registered before the Offering has been completed and shares to profit distribution that takes the form of a cash-in-kind divi- before trading in the common shares commences. dend of shares or other participations in ICA AB (Corp. Reg. No. 556582-1559) or in the current or future subsidiaries or associated ARTICLE 1 companies of the ICA AB group or in companies that may take over The registered name of the Company is Hakon Invest Aktiebolag. the operations conducted or that may be conducted in the future by The Company is a public limited liability company. the ICA AB group. In the event of the Company’s liquidation, Series- C shares carry the same rights as common shares to participation in ARTICLE 2 the Company’s assets. If the Company’s restricted equity is reduced The object of the Company is to purchase, manage and sell fixed prop- through payment to the Company’s shareholders or by means of the erty and chattels and to engage in other associated activities. repurchase of shares, Series-C shares only carry entitlement to pay- Within the framework of the fundamental objective of generating ment or compensation in accordance with the regulations for profit profits for the shareholders, the Company shall also, either directly or distribution described in the preceding paragraph. through shareholdings in ICA AB or interests in other companies, main- Series-C shares may be converted into common shares in the fol- tain, develop and strengthen the ICA concept, which entails that retailers lowing manner: As of 2011, holders of Series-C shares are entitled to own and operate stores that have access to economies of scale and request conversion of their Series-C shares into common shares by mak- intangible rights through the ICA AB Group or through other companies. ing a written request to this effect to the Company’s Board. The request shall stipulate the number of shares to be converted and, if the request ARTICLE 3 does not pertain to the entire shareholding, exactly which shares are to The registered office of the Board of Directors shall be in Stockholm be converted. The Board must make a decision regarding conversion Municipality, Sweden. as soon as possible during the month of January in the fifth year after the conversion request was received, meaning not earlier than in Janu- ARTICLE 4 ary 2016. Conversions shall be reported to the Companies Registra- The Company’s share capital shall not be less than three hundred mil- tion Office for registration without delay and conversion is effective as lion Swedish kronor (SEK 300,000,000) and not more than twelve soon as registration in the Companies Register has been completed hundred million Swedish kronor (SEK 1,200,000,000). and a notation has been made in the VPC Register. In the event that the Company decides to issue new common ARTICLE 5 shares and Series-C shares through a cash issue, owners of both share The par value of the shares shall be SEK 2.50 each. classes shall have preferential rights to the subscription of new shares of The shares may be issued in two series, designated common the same type in relation to the number of shares already held (primary shares and Series-C shares. Common shares may be issued in a preferential right). Shares not subscribed for on the basis of primary number not exceeding 100% of all of the shares in the Company preferential rights shall be offered for subscription to all shareholders and Series-C shares in a number not exceeding 51% of all of the (subsidiary preferential right). If the number of shares offered in this shares in the Company. manner is insufficient for subscription based on subsidiary preferential Common shares may be converted into Series-C shares. Owners rights, the shares shall be distributed in relation to the number of shares of common shares are entitled to have them converted into Series-C already held and, to the extent that this is not possible, by lottery.

105 In the event that the Company decides that new common shares 7. Motions concerning the adoption of the income statement and or new Series-C shares alone shall be issued through a cash issue, all balance sheet and, where applicable, of the consolidated shareholders, irrespective of whether they own common shares or income statement and consolidated balance sheet; Series-C shares, shall have preferential rights to the subscription of 8. Motions concerning the disposition to be made of the Com- new shares in relation to the number of shares already held. pany’s profits or losses as shown in the balance sheet adopted The aforementioned stipulation shall not constitute any infringe- by the Meeting and, where applicable, taking into account ment on the possibility to make a decision regarding a cash issue in profits or losses shown in the consolidated balance sheet; which the preferential rights of shareholders are disapplied. Notwith- 9. Motions concerning the discharge of the members of the Board standing the regulations pertaining to dividends, in the event of an of Directors and of the President from personal liability; increase in share capital through a bonus issue, new shares of each 10. Determination of the number of Board Members and, where series shall be issued in relation to the number of shares of the same applicable, the number of auditors; series already held. In such cases, shares of a specific series carry 11. Determination of the fees to be paid to the Board members and, entitlement to new shares of the same series. The aforementioned stip- where applicable, to the auditors; ulation shall not constitute any infringement on the possibility, following 12. Election of Board Members and, where applicable, the auditors. the requisite amendment in the Articles of Association, to issues shares 13. Other business to be addressed by the Meeting in accordance of a new series through a bonus issue. with the Swedish Companies Act or the Articles of Association.

ARTICLE 6 ARTICLE 10 In addition to the members who, according to law, are to be elected At a General Meeting, each person is entitled to exercise unlimited vot- by a body other than a General Shareholder Meeting, the Board of ing rights on the full number of shares that he or she owns or represents. Directors shall consist of not fewer than five (5) and not more than nine (9) members. The Board members are elected annually at the ARTICLE 11 Annual General Meeting for the period extending to the close of the Those persons registered in the share register, or the type of list speci- following Annual General Meeting. fied in Chapter 3, Section 12 of the Swedish Companies Act (1975:1385), on the stipulated record date shall be deemed to be ARTICLE 7 entitled to receive dividends and, in connection with bonus issues, For the purpose of examining the Company’s annual report and finan- new shares to which the shareholder is entitled, and to exercise cial accounts and the administration of the Board of Directors and the shareholder’s preferential right to participate in the issue. President, the Annual General Meeting shall elect at least one and not more than two auditors, or one or two authorized firm of accountants, ARTICLE 12 for the period extending to the close of the Annual General Meeting Notice of a General Meeting of Shareholders shall be made in the held during the fourth fiscal year after the election of auditors. form of an announcement in an advertisement in the Official Gazette (Post och Inrikes Tidningar), and in Dagens Nyheter, Svenska Dag- ARTICLE 8 bladet or another national Swedish newspaper. The Company’s fiscal year shall extend from January 1 to December Notice of the Annual General Meeting and of Extraordinary 31. General Meetings convened to address amendments to the Articles of Association shall be issued not earlier than six weeks and not later ARTICLE 9 than four weeks prior to the Meeting. Notice of other General Meet- The Annual General Meeting shall be held once a year in Stock- ings shall be issued not earlier than six weeks and not later than two holm, Nacka, Sigtuna, Sollentuna or Solna. weeks prior to the Meeting At the Annual General Meeting, the following items of business To be entitled to participate in the business of a General Meet- shall be addressed: ing, shareholders shall, firstly, be registered in the transcript of the 1. Election of Chairman of the Meeting; entire share register pertaining to the conditions prevailing ten days 2. Preparation and approval of the list of shareholders entitled to prior to the Meeting and, secondly, notify the Company of their inten- vote at the Meeting; tion to attend the Meeting not later than the day stipulated in the 3. Approval of the agenda; notice convening the General Meeting. The latter mentioned day 4. Election of the secretary and two minute-checkers who, in addi- must not be a Sunday, any other public holiday, a Saturday, Midsum- tion to the Chairman, are to sign the minutes; mer’s Eve, Christmas Eve or New Year’s Eve and must not be more 5. Determination of whether the Meeting has been duly convened; than the five weekdays before the Meeting. 6. Presentation of the annual report and the auditors’ report and of Shareholders are only entitled to be accompanied by assistants if the consolidated financial accounts and the auditor’s report on the shareholder notifies the Company of the number of assistants, not the consolidated financial accounts; more than two, in the manner stated in the preceding paragraph.

106 Articles of Association Interim report January – September 2005 Hakon Invest AB, Interim report, January – September 2005

• Net sales amounted to SEK 446 million (459) Overview, operating structure • Profit after tax amounted to SEK 608 million (333) • Earnings per share amounted to SEK 3.78 (2.07)

• Work on exchange listing continuing according to plan Hakon Invest AB • ICA increases market share • ICA AB’s sales increased by 3.7% for comparable units 40%

This interim report relates to the period from January through Portfolio companies September 2005.

HAKON INVEST IN BRIEF ICA AB Hakon Invest AB (formerly ICA Förbundet Invest AB) conducts active Forma Publishing Group 100% and long-term investment activities with a focus on retail-oriented companies in the Nordic region. Future investments Hakon Invest owns 40% of ICA AB, the Nordic region’s leading retail company with a focus on food. The remaining 60% is owned by the Dutch company Royal Ahold. Through the shareholders’ agreement between Hakon Invest and Ahold that extends through the year 2040, the two owners have joint influence in ICA. The Hakon Invest Group also includes the wholly owned subsidiary Forma Publishing Group. OWNERSHIP STRUCTURE HAKON INVEST AB (SEP. 30, 2005) In addition, Hakon Invest’s assets include securities consisting of current investments in interest-bearing commercial paper and Översiktlig ägar- och verksamhetsstruktur25% shares. efter marknadsnoteringendistributed among slightly more than ICA AB is a central investment for Hakon Invest. By being an 3,400 shareholders active owner with significant influence, Hakon Invest will contribute to strengthening and enhancing the ICA concept and creating value 75% in ICA AB. ICA-handlarnas In addition to being a strong owner of ICA AB, Hakon Invest will Förbund strive to create value for shareholders by making long-term investments, primarily in unlisted companies in the Nordic retail sector. Hakon Invest has significant expertise and experience, as well as access to an extensive network in retail and associated operations. – to adopt new Articles of Association that create prerequisites for a Hakon Invest is 75% owned by ICA-handlarnas Förbund, a listing of the share on the O-List of the Stockholm Stock Exchange, non-profit organization for Sweden’s ICA retailers. The remaining – to elect a new Board of Directors with broader competence, and shares are owned individually by current and former ICA retailers. – to change the Company’s share capital structure. ICA-handlarnas Förbund has decided to sell shares, thus reduc- Against the background of the planned listing of the Hakon Invest ing its ownership in Hakon Invest to 67% and thereby spreading share on the O-List of the Stockholm Stock Exchange, operations in ownership in the Company. For this reason, the Annual General the Company during the year were characterized by work to meet Meeting on May 11 decided the requirements and expectations on the Company from the stock – to change the name from ICA Förbundet Invest AB to Hakon exchange and the market. Work with the exchange listing continues Invest, to proceed according to plan.

108 Interim report January – September 2005 For the core holding in ICA AB, positive effects are now evident The holding was hedged from declines in the exchange rate to from the major price initiative started during the spring. During the 9.26 SEK/EUR until January 2006. third quarter, ICA captured market shares in the Swedish market ICA-handlarnas Förbund has an important mission to support and increased both sales and earnings. During the period from Jan- and stimulate ICA retailers as independent business owners and to uary through September, ICA AB increased sales by 3.7%, after utilize ICA’s expertise and resources with respect to both sourcing adjustment for the sale of operations in Denmark and the fact that and specialist support functions. This assignment was performed by operations in the Baltic countries are no longer consolidated. The Hakon Invest during the first six months of 2005 and financed by reported net sales declined. Operating profit increased during the the ICA stores paying a service fee that during the first half of the third quarter to SEK 683 million (470), an increase of 45%. year amounted to SEK 12 million (13). As of July 1, 2005, this The participation in ICA AB’s earnings amounted to SEK 415 assignment and the associated revenues and costs were transferred million (348). The capital share increased from 30% to 40%. to Hakon Invest’s associated company ICA-handlarnas Medlemsser- Forma’s sales during the period declined somewhat by SEK 7 vice AB. The effect of this change on earnings is negligible. million due to the discontinuation of unprofitable magazines and a The Parent Company Hakon Invest’s administrative expenses lower subscription rate for consumer magazines. Operating income were at the same level as last year, although there were additional was also adversely affected by lower advertising revenues. non-recurring costs during the period of SEK 18 million related to Financial management was positively affected by generally favor- the forthcoming exchange listing. able stock market trends and reported a profit of SEK 284 million During the first six months of the year, the Group conducted (13). operations in two segments, service operations and publishing operations, while operations in the third quarter consisted entirely of SIGNIFICANT EVENTS DURING THE THIRD QUARTER publishing. In addition, there were holdings in ICA AB and the Work with the planned exchange listing continued. financial management. The Company strengthened its organization during the autumn The trends in publishing operations and in ICA AB are through recruitment of a number of employees, particularly with a described under the heading ”Holdings”. focus on investment operations. FINANCIAL POSITION CONSOLIDATED SALES AND EARNINGS The current value of the Group’s liquid funds and short-term invest- DURING THE PERIOD ments amounted to SEK 2,949 million at September 30, 2005, Consolidated revenues declined during the period to SEK 446 mil- compared with SEK 2,729 million at January 1. Liquid funds lion from SEK 459 million for the corresponding period in the pre- declined to SEK 228 million. ceding year. The decline was due to lower advertising and sub- The Group and the Parent Company have a strong financial scription revenues for Forma’s consumer magazines and the discon- position. tinuation of unprofitable specialty magazines. In addition, no serv- The Company had no long-term liabilities, SEK 0 million (0). ice fee was received from member service operations during the The equity/assets ratio was 95.1% (95.3) at September 30, third quarter, since these operations were separated. 2005. Hakon Invest’s profit for the period was SEK 608 million (333) There were no changes in contingent liabilities during the quarter. after tax. The share of ICA AB’s income increased to SEK 415 million CASH FLOW (348) on the closing date, due to rising stock market prices and an The change in liquid funds during the period was a deficit of SEK increasing EUR/SEK exchange rate. During September, the holding 277 million. Cash flow was primarily affected by the dividend total- was hedged at SEK/EUR 9.26 until January 2006. ing SEK 8.20 per share, which amounted to SEK 325 million and The value of the shares in Ahold has during 2005 increased was paid during May 2005. from SEK 425 million by year-end 2004 to SEK 490 million at the end of the period thanks to a rising stock price and a rising euro.

Interim report January – September 2005 109 FINANCIAL ACCOUNTS

Condensed consolidated income statement

FULL-YEAR (SEK 000s) Q1–Q3 2005 Q1–Q3 2004 Q3 2005 Q3 2004 2004

Revenue 445,695 458,993 136,563 136,475 621,945 Cost of sales –230,100 –194,297 –66,771 –28,403 –300,850 Gross profit 215,595 264,696 69,792 108,072 321,095

Other income 1,520 3,525 309 2,149 5,279 Selling expenses –110,492 –133,726 –41,520 –64,410 –153,822 Administrative expenses –130,967 –152,300 –35,802 –70,916 –153,400 Shares in companies reported in accordance with the equity method 416,530 349,394 174,953 98,811 466,167 Operating profit 392,186 331,589 167,732 73,706 485,319

Net financial items 283,954 12,564 22,300 –124,523 108,571

Profit after financial items 676,140 344,153 190,032 –50,817 593,890

Income tax expense –68,001 –10,838 –59,310 3,107 –15,285 Profit for the period 608,139 333,315 130,722 –47,710 578,605 Profit for the year attributable to equity holders in the Parent Company 608,139 333,315 130,722 –47,710 578,605

Earnings per share (SEK) Basic 3.78 2.07 0.81 –0.30 3.60 Diluted 3.78 2.07 0.81 –0.30 3.60

110 Interim report January – September 2005 Condensed consolidated balance sheet

(SEK 000s) SEPT. 30, 2005 SEPT. 30, 2004 DEC. 31, 2004 ASSETS Fixed assets Goodwill 61,666 61,666 61,666 Participation in earnings of companies reported according to equity method 4,828,580 3,666,249 4,501,033 Other non-current assets 89,900 141,903 165,444 Total non-current assets 4,980,146 3,869,818 4,728,143

Current assets Other current assets 147,955 123,523 108,286 Current investments 2,721,902 2,920,500 2,224,023 Cash equivalents 227,554 442,073 504,952 Total current assets 3,097,411 3,486,096 2,837,261 TOTAL ASSETS 8,077,557 7,355,914 7,565,404

EQUITY AND LIABILITIES Equity 7,682,450 7,007,413 7,243,642 Long-term liabilities and provisions 143,220 183,601 131,581 Current liabilities 251,887 164,900 190,181 TOTAL EQUITY AND LIABILITIES 8,077,557 7,355,914 7,565,404

CHANGES IN CONSOLIDATED EQUITY FULL-YEAR (SEK 000S) Q1–Q3 2005 Q1–Q3 2004 2004 Opening equity 7,243,642 6,848,479 6,848,479 Translation differences 2,624 –120 Items booked directly under equity from companies reported in accordance with the equity method 152,764 –33,801 –42,742 Dividend –324,719 –140,580 –140,580 Profit for the period 608,139 333,315 578,605 Closing equity 7,682,450 7,007,413 7,243,642

Condensed consolidated cash flow statement FULL-YEAR (SEK 000S) Q1–Q3 2005 Q1–Q3 2004 2004 Cash flow from operating activities 356,479 201,636 243,628 Cash flow from investment activities –310,067 –62,488 –44,396 Cash flow from financing activities –323,810 –140,580 –140,580 Cash flow for the period –277,398 –1,432 58,652

Cash and cash equivalents at January 1 504,952 229,875 229,875 Reclassification of cash and cash equivalents 213,630 216,425 Cash and cash equivalents at September 30 227,554 442,073 504,952

Interim report January – September 2005 111 ACCOUNTING PRINCIPLES THE COMPANY’S SHARE Hakon Invest’s financial reports up to and including 2004 were pre- According to the Articles of Association, the Company’s share capi- pared according to the Annual Accounts Act and the general rec- tal shall amount to not less than SEK 300 million and not more than ommendations issued by the Swedish Financial Accounting Stan- SEK 1,200 million. Hakon Invest’s share capital amounts to SEK dards Council. These principles also apply for the Parent Company 402,293,590 distributed among 160,917,436 shares, each for 2005. As of 2005, the consolidated accounts were prepared with a par value of SEK 2.50. On May 24, 2005, the Board of according to the International Financial Reporting Standards (IFRS). Directors of Hakon Invest decided to convert all preferential shares How the transition to IFRS should be reported is described in IFRS 1 issued in 2000 to common shares. After implementation of this First-Time Adoption of IFRS. The basic rule is that the new principles decision, the Company has only common shares. must be applied retroactively and that comparison figures must be The total number of outstanding shares amounts to recalculated. The most significant effects for the Group of the transi- 160,917,436 (160,917,436), of which ICA-handlarnas Förbund tion to IFRS relate to the reporting of goodwill, pensions and finan- owns 75%. Hakon Invest’s share has not been officially listed, but cial instruments. These effects are presented according to the new ICA Förbundet Intressenter AB has conducted unofficial trading. accounting principles in restated consolidated accounts for 2004 in During the period from January to September 2005, 182 (335) which the new principles are also described. There the valuation trades were implemented involving 280,772 (1,299,988) shares. methods and the additional information that should be provided The bid and ask prices were based on a technical valuation model. according to IFRS is also described. For more complete information, At September 30, 2005, the bid price was SEK 81.25 (68.45). see Consolidated accounting for the 2004 fiscal year on the Com- During the second quarter, a dividend of SEK 8.20 per share pany’s website. was paid. ICA-handlarnas Förbund declined the dividend on its The application of IFRS for the 2005 accounts means that the 121,317,500 common shares. This was not subject to any condi- accounts must be prepared in accordance with the standards that tions. applied as of December 31, 2005 and which were approved by Unofficial trading ceased on October 1, 2005. the EU. The effects of the transition to IFRS that are described in the Earnings per share amounted to SEK 3.78 (2.07). consolidated accounts mentioned above and in this interim report ICA-handlarnas Förbund has taken a decision to implement an are based on the prevailing standards and their interpretation. incentives program targeted to all employees in the Parent Com- These may change with subsequent effects on the reported figures, pany Hakon Invest and ICA-handlarnas Medlemsservice AB directly which are thus preliminary. Certain adjustments were made in the after the exchange listing. The incentives program includes an offer presentation of effects in the documents for 2004 mentioned above to acquire a total of 480,000 call options, corresponding to 0.3% in relation to the published six-month report. of the share capital and voting rights in the Company, assuming full This interim report was prepared in accordance with the Annual subscription and full exercise of the call options entitling the holder Accounts Act and IAS 34 Interim Financial Reporting, which is in to purchase of common shares in Hakon Invest. agreement with the Swedish Financial Accounting Standards Coun- As of September 30, 2005, there is only one type of share. The cil’s recommendation RR 31 Interim Reporting for Corporate preferential shares that were converted to common shares carried Groups. The accounting principles applied are those described in preferential rights to dividends. Earnings per share for previous peri- the recalculated consolidated accounts for 2004. During 2004, no ods were based on outstanding shares at the 30th September interim report was prepared for the period from January to Septem- 2005, meaning as if conversion had taken place before the begin- ber, meaning that there is no reconciliation against previous princi- ning of 2004. ples in this report.

112 Interim report January – September 2005 PARENT COMPANY marked A/S and offers a network of discount stores in Sweden. In The Parent Company’s revenues amounted to SEK 12 million (19) the Baltic countries, ICA has a joint venture, Rimi Baltic AB, together during the period and SEK 0 (5) during the quarter following the with the Finnish company Kesko Livs AB. transfer of service operations. Profit after tax amounted to SEK 410 million (172). The current value of the Parent Company’s liquid Market funds and current investments amounted to SEK 2,821 million at The Nordic retail market for consumer goods has been character- September 30, 2005, compared with SEK 2,597 million at Janu- ized by increasingly fierce competition in recent years, both in the ary 1. No investments were made except within financial manage- form of new players and through intensified marketing – price ment. reductions – from established players. In Sweden, the ICA stores launched a price campaign in which prices were reduced on two Holdings occasions during the period in March and August. These price ICA AB reductions were made possible by ICA AB reducing prices to the • Revenues increased by 3.7% for comparable units during the stores, while implementing rationalization measures at both the period and by 5.2% during the quarter. group and store levels. • Operating profit declined to SEK 1,341 million (1,621) during The effect of the price reductions in Sweden thus far has been the period but increased during the third quarter to SEK 683 mil- that the ICA stores have attracted more customers and increased lion (470), an increase of 45%. sales by more than the industry average. Overall, the ICA stores • Total assets amounted to SEK 32,257 million (29,820). increased their market share in the Swedish retail market. • Market share increased in the Swedish market. The price campaign had positive effects on all ICA store profiles and on ICA Supermarket and ICA Nära in particular. Ownership share Price cuts were also implemented in Norway in ICA and Rimi Hakon Invest AB’s ownership share amounts to 40% of the shares. stores during the period which have had a positive effect on sales The remaining 60% are owned by Royal Ahold. Through a share- thus far. Above all, however, price levels in the Rimi stores moved holders’ agreement, the parties have joint influence over the com- closer as planned to those of the Rema 1000 stores, which are the pany and equal voting rights. nearest competitor, and market shares were stabilized.

Operations Important events during the period ICA AB is the parent company of the ICA group. Within ICA AB, – The price cuts begun in March in the Swedish stores and in May there are three joint corporate functions for Finance, Retail and Sup- in Norwegian Rimi stores were successful. ICA’s volumes in the ply Chain. ICA Sverige and ICA Norge are exclusively sales com- Swedish market increased more rapidly than the industry aver- panies with responsibility for operations, sales and establishment. age since March. Additional price cuts were implemented in ICA Meny is today exclusively a sales company for restaurants, August. caterers and convenience stores. ICA Banken offers financial serv- – ICA’s new organization took effect on June 1. The organizational ices for Swedish customers. ICA AB has two joint ventures. One is changes affected both the Swedish and Norwegian organizations Netto Marknad AB, which is owned jointly with Dansk Super- and were intended to simplify daily work while improving coordi-

SALES TREND SALES TREND, ICA’S PROFILES

% % 6 20 5 15 4 3 10 2 5 1 0 0 –1 –5 Jan Feb March Apr May June July Aug Sep Jan Feb March Apr May June July Aug Sep Industry ICA Retailers ICA Retailers Maxi Kvantum Supermarket Nära

Interim report January – September 2005 113 nation within the Group. Against the background of the organiza- responding period in the preceding year. tional changes, the number of employees will be reduced by some ICA Meny and ICA Banken reported sharply improved earn- 500 full-time positions by the end of 2006. As of September 30, ings, compared with the preceding year. The earnings improvement 2005, a level of about 300 had been attained. was the result of increased volumes. Costs for implementation of the – In January, the subsidiary ICA Baltic’s operations were transferred new organization were charged against the year’s earnings. to a joint venture with Finland’s Kesko Livs AB. During the quarter, sales declined by SEK 160 million or 0.9%. – During the period, three Maxi ICA Hypermarkets, one ICA Kvan- However, after correction for ICA Baltic and ICA Denmark (see tum, one ICA Supermarket and two ICA Nära stores were above), sales increased by 5.2% during the third quarter. opened in Sweden. In Norway, three ICA Maxi, two ICA Nær Operating profit for the third quarter increased by SEK 213 mil- and four Rimi stores were opened during the same period. lion and was primarily due to increased sales volumes and cost reductions in Sweden and Norway, improved income from prop- Sales and earnings erty management, increased volumes in ICA Banken and improved The ICA group’s sales declined to SEK 1,482 million or by 2.7% earnings in the Baltic countries, all of which was according to plan. during the period to SEK 52,514 million (53,996). The decline was due to the fact that ICA Baltic was no longer consolidated and to the sale of Danish operations in August 2004. Adjusted for these changes, sales increased by 3.7% during the period. ICA Banken, Summary of ICA AB’s income statement ICA Meny and ICA Sverige reported higher sales growth than their (SEK M) Q1–Q3 2005 Q1–Q3 20004 competitors and thus increased market share. Sales in ICA Norge Revenue 52,514 53,996 declined due to stiffer competition, as well as the conversion of Cost of sales –45,812 –47,095 wholly owned stores to franchise stores and the sale of stores. Gross profit 6,702 6,901 Operating profit for the period declined by SEK 280 million or Other operating income 356 300 17.3% to SEK 1,341 million (1,621). Income for the comparison Selling and administrative expenses –5,620 –6,015 period included an earnings share and a capital gain from the Participation in earnings of companies sales of the 50% owned company Statoil Detaljhandel amounting reported according to equity method –97 4351) to SEK 457 million and an impairment of the market value of ISO- Operating profit 1,341 1,621 ICA A/S. ICA Sverige and ICA Norge reported lower earnings as a result of price cuts. ICA Baltic included the wholly owned com- Net financial items –183 –179 pany ICA Baltic AB in 2004. On January 1, 2005, these opera- Profit after financial items 1,158 1,442 tions were transferred together with Kesko’s Baltic operations to the Income tax expense –90 –221 jointly owned company Rimi Baltic, which is reported according to Profit for the period 1,068 1,221 the equity method. Rimi Baltic’s sales during the period amounted to 1) Includes a capital gain from the sale of the 50% share in Statoil Detaljhandel AB, as well as EUR 581.1 million, an increase of 21.5%, compared with the cor- an impairment of ISO A/S.

114 Interim report January – September 2005 ICA’s sales and operating profit/loss by segment January – September 2005

SALES OPERATING PROFIT/LOSS (SEK M) Q1–Q3 2005 Q1–Q3 2004 Q1–Q3 2005 Q1–Q3 2004 ICA Sverige 34,333 33,092 1,054 1 238 ICA Norge 13,836 13,884 353 434 ICA Baltic 15 2,355 19 –104 ICA Danmark 0 1,011 0 –268 ICA Meny 4,353 3,711 –1 –26 ICA Banken 67 42 –58 –94 ICA AB 562 375 –26 4411) Internal sales –652 –474 Total 52,514 53,996 1,341 1 621

1) Includes a capital gain from the sale of the 50% share in Statoil Detaljhandel AB, as well as an impairment of ISO A/S.

Summary of ICA AB’s balance sheet Summary of ICA AB’s cash flow statement

SEPT. 30, SEPT. 30, DEC. 31, (SEK M) 2005 2004 2004 (SEK 000s) Q1–Q3 2005 Q1–Q3 2004 ASSETS Cash flow from operating activities 863 220 Intangible non-current assets 1,974 2,026 2,015 Cash flow from investment activities –1,259 860 Tangible non-current assets 13,125 13,081 13,185 Cash flow from financing activities 467 –2,203 Financial non-current assets 2,384 1,731 1,565 Cash flow for the period 71 –1,123 Total non-current assets 17,483 16,838 16,765 Cash and cash equivalents at January 1 3,228 4,571 Other current assets 11,695 9,664 11,095 Translation differences –220 –130 Current investments 2,527 3,019 2,705 Cash and cash equivalents at September 30 3,079 3,318 Cash and cash equivalents 552 299 523 Cash flow during the 2004 fiscal year includes non-recurring effects from the sale of operations Total current assets 14,774 12,982 14,323 and redemption of loans. TOTAL ASSETS 32,257 29,820 31,088

EQUITY AND LIABILITIES Equity 7,937 12,293 7,094 Long-term liabilities and provisions 7,175 3,073 3,205 Current liabilities 17,145 14,454 20,789 TOTAL EQUITY AND LIABILITIES 32,257 29,820 31,088

Interim report January – September 2005 115 FORMA PUBLISHING GROUP Summary of Forma’s income statement • Sales were stable and amounted to SEK 433 million (440). (SEK M) Q1–Q3 2005 Q1–Q3 20004 • Operating profit amounted to SEK 23 million (38). Revenue 433 440 • Total assets increased by SEK 20 million to SEK 390 million Cost of sales –230 –194 (370). Gross profit 203 246 • Several new assignments were received by Idé and Media. • The magazine Vovve was introduced as a periodical. Other operating income 1 4 Selling and administrative expenses –181 –212 Ownership share Operating profit 23 38

Hakon Invest AB’s ownership share in Forma Publishing Group AB Net financial items 5 0 amounts to 100% of the capital and voting rights. Profit after financial items 28 38

Operations Income tax –7 –11 Forma Publishing Group is the parent company of a group consist- Profit for the period 21 27 ing of wholly and partially owned subsidiaries in Sweden, Finland, Estonia and Latvia. In addition, there are associated companies in Summary of Forma’s balance sheet Sweden and Norway. The group’s business areas comprise con- SEPT. 30, SEPT. 30, FULL-YEAR sumer magazines, specialty magazines, customer magazines, (SEK M) 2005 2004 2004 books and test kitchens. ASSETS ICA Bokförlag is a specialty book publisher with a catalogue of Tangible non-current assets 75 71 75 some 450 titles that publishes around 80 new titles each year. Con- Financial non-current assets 6 15 14 sumer magazines include ICA-kuriren and Hus&Hem, which are the Total non-current assets 81 86 89 most prominent and largest products. Among specialty magazines, ICA-Nyheter is the largest and targets the owners of food stores. Idé Other current assets 181 189 153 & Media works on assignment from external customers and pro- Current investments 23 12 12 duces primarily customer and employee magazines. Cash and cash equivalents 105 83 120 During the spring of 2005, the consumer magazine Vovve was Total current assets 309 284 285 started as a periodical for dog owners. In addition, a number of con- TOTAL ASSETS 390 370 374 sumer-oriented special edition editions were published in Sweden and Finland. Operations within Idé & Media were developed EQUITY AND LIABILITIES through new assignments from the Swedish Lawn Tennis Association, Equity 102 86 81 the Swedish Equestrian Federation, ABB and other customers. During Long-term liabilities and provisions 131 132 119 the period, Forma received considerable publicity as a result of sev- Current liabilities 157 152 174 eral nominations and awards, including Magazine of the Year, the TOTAL EQUITY AND LIABILITIES 390 370 374 Year’s One-shot, Publisher of the Year and Sweden’s Best Workplace.

Summary of Forma’s cash flow statement Sales and earnings Sales declined from SEK 440 million to SEK 433 million, compared (SEK M) Q1–Q3 2005 Q1–Q3 20004 Cash flow from operating activities –5 –24 with the period from January to September in 2004. This was largely due to a lower subscription rate for consumer publications Cash flow from investment activities –10 –14 and lower advertising revenues. Forma therefore decided to inten- Cash flow from financing activities 0 –82 sify its efforts to develop additional new magazines and new con- Cash flow for the period –15 –120 cepts for magazine supplements. Cash and cash equivalents at January 1 120 203 Operating profit amounted to SEK 23 million (38). The decline Cash and cash equivalents at September 30 105 83 in earnings was due to earlier booking of costs for subscription campaigns, costs for the discontinuation of unprofitable magazines and costs for investments in new products, such as Vovve. Other business areas, as well as central units, reported an earnings improvement, compared with the preceding year. Net financial items amounted to SEK 5 million (0). Tax expenses declined during the period to SEK –8 million (–11). Total assets increased by SEK 20 million, primarily through an increase in liquid funds.

116 Interim report January – September 2005 Financial management in Hakon Invest Key data

Financial investments under own management amounted to SEK FULL-YEAR 521 million at September 30, 2005. Return for the period from Jan- (SEK M) Q1–Q3 2005 Q1–Q3 2004 2004 uary through September was 11% (SEK 59 million). At September Revenues 446 459 622 30, 2005, the investments were distributed among shares (94%) Operating profit 392 332 485 and hedge funds (6%). During the second quarter, the Company’s Operating margin, % 88.0 72.2 78.0 investments within the framework of Skandia Investment were Profit after financial items 676 344 594 divested. The earnings were attributable to a positive trend for the Profit after tax 608 333 579 Ahold share, compared with a sharp decline during the period from Earnings per share, SEK 3.78 2.07 3.60 January–September 2004. Total assets 8,078 7,356 7,565 Financial investments under external management amounted to Equity/assets ratio, % 95.1 95.3 95.2 SEK 2,195 million at September 30, 2005. The investment return for Return on capital employed, % 17.3 –--- 9.4 the period January to September 2005 amounted to 11% (SEK 222 Return on shareholders’ equity, % 11.6 –--- 8.2 million). At that date, these investments were distributed among equities Equity per share, SEK 47.74 43.55 45.01 (37%), hedge funds (23%), fixed-income securities (39%) and liquid Number of shares 160,917,436 160,917,436 160,917,436 funds (1%). Development of the Swedish and foreign stock markets has Dividend per preferential share 8.20 3.55 3.55 a positive effect on earnings. Other financial income was SEK 3 million.

Reporting by segment PUBLISHING SERVICE OTHER JAN.-SEPT. 2005 OPERATIONS OPERATIONS (INCL. ELIMINATIONS) TOTAL (SEK 000s) External revenues 433,288 12,407 0 445,695 Operating profit/loss 23,254 –1,755 370,687 392,186 Profit after financial items 28,676 –1,755 649,219 676,140 Profit after tax 20,912 –1,755 588,982 608,139

Assets 390,330 0 7,687,227 8,077,557 Liabilities 288,328 0 106,778 395,106

Investments 10,011 0 0 10,011 Depreciation 9,236 0 31 9,267

PUBLISHING SERVICE OTHER JAN.-SEPT. 2004 OPERATIONS OPERATIONS (INCL. ELIMINATIONS) TOTAL (SEK 000s) External revenues 439,858 19,135 0 458,993 Operating profit/loss 37,686 –10,768 304,671 331,589 Profit after financial items 38,060 –10,768 316,861 344,153 Profit after tax 27,339 –10,768 316,744 333,315

Assets 370,508 0 6,985,406 7,355,914 Liabilities 284,167 10,603 53,731 348,501

Investments 24,601 0 –5,525 19,076 Depreciation 7,711 0 15 7,726

Interim report January – September 2005 117 DEFINITIONS REPORTING DATES Hakon Invest’s year-end report for 2005 will be published on Febru- Equity/assets ratio Shareholders’ equity including minority interests ary 27, 2006. as a percentage or total assets The Annual General Meeting will be held in Solna, Sweden on May 10, 2006. Return on shareholders’ equity Net profit based on rolling 12- month figures as a percentage of average shareholders’ equity during the same period. Shareholders’ equity does not include minority interests in subsidiaries Solna, October 27, 2005

Return on capital employed Profit after financial items plus financial expenses calculated on a rolling 12-month basis as a percent- Claes-Göran Sylvén age of average capital employed during the same period President

Capital employed Total assets reduced by non-interest bearing liabilities including deferred tax REVIEW REPORT We have reviewed this interim report in accordance with the recom- Earnings per share Profit after tax divided by the average number mendations issued by FAR, the Institute for the Accounting Profession of shares in Sweden. A review is considerably limited in scope compared with an audit. Nothing has come to our attention that causes us to believe that SIGNIFICANT EVENTS AFTER THE CLOSING DATE the interim report does not comply with the requirements of the The Board of Directors of ICA-handlarnas Förbund decided that the Exchange and Clearing Operations Act and the Annual Accounts unofficial trading of Hakon Invest shares would cease as of Octo- Act. ber 1 pending the exchange listing.

Solna, October 27, 2005

Erik Åström Ire Lindstrand Authorized Public Accountant Authorized Public Accountant Ernst & Young AB SET Revisionsbyrå AB

118 Interim report January – September 2005 Financial Statements Income Statements

PARENT GROUP COMPANY SEK 000s NOTE 2004 2003 2002 2004 Net sales 2, 3 621,945 630,784 658,856 25,734 Cost of goods sold 4 –300,850 –346,118 –357,641 – Gross profit 321,095 284,666 301,215 –

Selling expense 4, 6 –153,822 –161,153 –206,321 – Administrative expenses 5 –187,696 –158,982 –155,384 –96,086 Other operating income 5,279 18,911 13,776 – Other operating expenses – – –142 – Items affecting comparability – – –25,375 – Operating loss 2 –15,144 –16,558 –72,231 –70,352

INCOME FROM FINANCIAL INVESTMENTS Result from participation in associated companies 7, 17 511,570 544,537 635,569 1,868,520 Income from other securities and receivables classed as non-current assets 8 –1,229 8,258 –14,729 –1,229 Other interest income and similar items 9 160,236 724,072 185,583 156,670 Interest expense and similar items 10 –94,307 –893,633 –1 633,534 –90,653 Total income from financial investments 576,270 383,234 –827,111 1,933,308 Profit/loss after financial items 561,126 366,676 –899,342 1,862,956

Profit/loss before tax 561,126 366,676 –899,342 1,862,956

Tax on profit for the year 11 –63,831 –14,020 –76,838 9,699 Minority share – – 487 – Net profit/loss for the year 497,295 352,656 –975,693 1,872,655

The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.

120 Financial Statements Cash flow statements

PARENT GROUP COMPANY SEK 000s NOTE 2004 2003 2002 2004

OPERATING ACTIVITIES Profit/loss after financial items 561,126 366,676 –899,342 1,862,956 Depreciation charged against earnings 13,871 13,413 11,454 62 Profit/loss from other non-current assets –10,012 – – – Changes in write-downs 11,408 –4,796 1,367,823 11,408 Adjustment for items not affecting cash flow – 3,137 – – Profit/loss from other non-current assets – – – –10,012 Cash flow from operating activities 576,393 378,430 479,935 1,864,414

Share in profit from associated companies not paid as dividend – –335,243 –360,009 – Dividend in addition to income from associated companies 1,356,950 – – – Income tax paid –15,117 –4,221 –133,738 –8,072 Cash flow from operating activities before working capital changes 1,918,226 38,966 –13,812 1,856,342

Working capital changes Inventories, etc. –721 7,633 8,811 – Receivables 15,175 19,328 102,219 27,813 Liabilities –30,596 –28,300 –11,986 88,721 Cash flow from operating activities 1,902,084 37,627 85,232 1,972,876

INVESTMENT ACTIVITIES Investment in non-current assets* –2,419,162 –20,720 –30,060 –2,394,561 Divestment of non-current assets 20,615 7,788 77,322 15,004 Cash flow from investment activities –2,398,547 –12,932 47,262 –2,379,557

FINANCING ACTIVITIES Change in minority share of capital – – 487 – Change in long-term receivables –37,120 167 8,567 –37,658 Change in long-term liabilities and provisions 43,033 –27,913 –211,757 38,179 Change in current investments 689,782 199,453 136,662 688,556 Adjustment of deferred tax – – –2,462 – Translation difference – – 357 – Shareholder contribution received – – 366,320 – Dividend paid –140,580 –166,320 –332,640 –140,580 Cash flow from financing activities 555,115 5,387 –34,466 548,497

Cash flow for the year 58,652 30,082 98,028 141,816 Cash and cash equivalents at Jan. 1 229,875 199,793 101,765 27,008 Cash and cash equivalents at Dec. 31 288,527 229,875 199,793 168,824 * of which investment in ICA AB 2,376,608

Financial Statements 121 Balance sheets

ASSETS PARENT GROUP COMPANY SEK 000s NOTE 2004 2003 2002 2004

NON-CURRENT ASSETS Intangible non-current assets Goodwill 12 57,555 61,666 65,883 –

Tangible non-current assets Buildings and land 13 40,574 41,462 41,872 – Equipment 14 25,047 16,764 20,610 31 Construction in progress 15 9,576 4,835 1,019 – Total tangible non-current assets 75,197 63,061 63,501 31

Financial non-current assets Participations in Group companies 16 – – – 200,000 Participations in associated companies 17 4,592,719 3,657,460 3,619,650 2,959,608 Other securities held as non-current assets 18 57,260 58,238 42,572 48,863 Deferred tax asset 9,371 – – 9,371 Other long-term receivables 19 38,430 1,310 1,477 38,358 Total financial non-current assets 4,697,780 3,717,008 3,663,699 3,256,200 Total non-current assets 4,830,532 3,841,735 3,793,083 3,256,231

CURRENT ASSETS Inventories, etc. 22,463 21,742 29,375 –

Current receivables Accounts receivable – trade 45,921 51,773 53,220 – Receivables from Group companies 3,827 7,420 141 3,827 Receivables from associated companies 1,142 – – 1,142 Other current receivables 12,453 17,194 32,902 2,117 Prepaid expenses and accrued income 20 22,480 24,611 34,049 727 Total current receivables 85,823 100,998 120,312 7,813

Current investments Securities under separate management 21 1,986,376 2,644,938 2,163,851 1,974,014 Other shares 23 425,240 456,460 1,137,000 425,240 Total current investments 2,411,616 3,101,398 3,300,851 2,399,254

Cash and bank balances 288,527 229,875 199,793 168,824 Total current assets 2,808,429 3,454,013 3,650,331 2,575,891 Total assets 7,638,961 7,295,748 7,443,414 5,832,122

122 Financial Statements EQUITY AND LIABILITIES PARENT GROUP COMPANY SEK 000s NOTE 2004 2003 2002 2004

EQUITY 24 Restricted equity Share capital 402,294 402,294 402,294 402,294 Share premium reserve – – – 2,689,402 Statutory reserve – – – 83,202 Restricted reserves 4,400,645 5,841,660 5,794,816 – Total restricted equity 4,802,939 6,243,954 6,197,110 3,174,898

Non-restricted equity Profit/loss brought forward 1,977,143 351,078 1,828,873 663,619 Profit/loss for the year 497,295 352,656 –975,693 1,872,655 Total non-restricted equity 2,474,438 703,734 853,180 2,536,274 Total equity 7,277,377 6,947,688 7,050,290 5,711,172

Provisions Provisions for pensions and similar commitments 25 167,717 124,684 113,686 52,277 Provision for deferred tax liability 3,686 2,599 2,462 – Total provisions 171,403 127,283 116,148 52,277

Long-term liabilities Liabilities to credit institutions – – 27,913 – Liabilities to Group companies – – – – Total long-term liabilities – – 27,913 –

Current liabilities Advance payments from customers 88,821 88,057 109,475 – Liabilities to associated companies 224 – – – Accounts payable – trade 35,085 41,909 34,989 2,482 Liabilities to Group companies – – – 52,350 Liabilities to associated companies – – – 223 Tax liability 7,052 – – 6,408 Other current liabilities 13,238 38,906 68,872 1,355 Accrued expenses and deferred income 26 45,761 51,905 35,727 5,855 Total current liabilities 190,181 220,777 249,063 68,673 Total equity and liabilities 7,638,961 7,295,748 7,443,414 5,832,122

Pledged assets 27 37,708 None 30,000 37,708 Contingent liabilities 28 2,923 2,451 2,280 115,504

Financial Statements 123 Notes and accounting principles

INTRODUCTION The annual accounts were prepared in accordance with the Annual Accounts Act and the general recommendations issued by the Swedish Accounting Standards Board, unless otherwise indicated. The principles were unchanged from previous years. Amounts are in SEK 000s, unless otherwise indicated.

NOTE 1 Accounting and valuation principles

GROUP COMPOSITION The principal owner of the Parent Company, ICA Förbundet Invest AB, is ICA-handlarnas Förbund, Corporate Registration No. 802001-5577, Stockholm, which owns 75%. As of December 31, 2004, ICA Förbundet Invest AB has a wholly owned subsidiary, Forma Publishing Group AB (the former ICA Förlaget AB). Forma Publishing Group AB, in turn, has 14 subsidiaries and two associated companies. The consolidated accounts include companies in which the shareholding directly or indirectly amounts to more than 50% of the voting rights or in which there is otherwise a controlling influence. ICA Förbundet Invest’s 40% holding in ICA AB is reported as an associated company, in accordance with the equity method.

CONSOLIDATED ACCOUNTS The consolidated accounts include subsidiaries in which at the close of the fiscal year the Parent Company directly or indirectly held over 50% of the voting rights or otherwise had a controlling interest. Acquired companies are consolidated from the date of their acquisition and divested companies are consolidated up to and including the date of their divestment. The consolidated accounts were prepared in accordance with the acquisition method. This method implies that the assets and liabilities that the acquired company owns at the time of acquisition are valued at market value – that is, the consolidated acquisition values. Any differences between the purchase price of the shares and the consolidated acquisition value are reported as consolidated goodwill. Only the portion of the subsidiary’s non-restricted equity that can be distributed to the Parent Company without requiring a write- down are included in the consolidated non-restricted equity. Untaxed reserves are not reported as such on the consolidated balance sheet, but rather subdivided into deferred tax liability and restricted equity. Consequently, the consolidated accounts do not include appropriations that imply a change in untaxed reserves. The tax portion of this change is reported as a part of the year’s net tax expense, whereas the equity portion is included in the net profit/loss for the year.

FOREIGN SUBSIDIARIES The foreign subsidiaries are classified as independent or integrated. This classification determines the translation method to be applied. All subsidiaries are classified as independent. The income statements and balance sheets of independent subsidiaries are translated in accordance with the current method. This implies that assets and liabilities are translated at the closing rate. Equity items are translated at the rates that applied at the time of acquisition. Income statement items are translated at the average rate during the year. The translation difference is reported under consolidated equity.

REPORTING OF ASSOCIATED COMPANIES Shares in associated companies are reported in accordance with the equity method for the companies in which ICA Förbundet Invest AB has significant influence, meaning a shareholding considered as long-term and consisting of not less than 20% and not more than 50% of the voting rights. The equity method implies that the consolidated book value of the shares in the associated company corresponds to the Group’s share of the associated company’s equity, consolidated surplus or deficit values, and the owned share of unreal- ized internal gains. The Group’s share of the associated company’s profit after financial income and expenses and adjusted for depreciation/reversal of acquired surplus or deficit values is reported under Income from shares in associated companies in the consolidated income statement. The Group’s share in the associated company’s reported tax expenses in included in consolidated tax expenses.

GENERAL ACCOUNTING PRINCIPLES The Group’s inventories, etc., are valued at the lower of acquisition value reduced by obsolescence and fair value. Receivables are reported in the amounts in which they are expected to be received after individual assessment. Financial assets are reported at their acquisition value, unless otherwise indicated. Liabilities are reported at their acquisition value, with the customary provisions for accrued expenses. Provisions are made for known or anticipated risks after individual assessment.

124 Financial Statements DEPRECIATION/AMORTIZATION ACCORDING TO PLAN Depreciation/amortization according to plan is based on the assets’ acquisition value. The depreciation period is based on the estimated useful life. Goodwill 5–20 years Buildings 20–33 years Computer equipment 3 years Other equipment 5–10 years

Goodwill relating to Forma Publishing Group AB, as well as the additional investment in ICA AB, are amortized over 20 years, since the acquisitions in question are well-established operations of strategic value.

NOTE 2 Net sales and operating profit/loss distributed by operating areas and geographic markets

The subsidiary Forma Publishing Group has one area of operation, which is media production. ICA Förbundet Invest’s net sales and operating profit/loss are distributed among geographic markets as follows:

NET SALES OPERATING PROFIT/LOSS

2004 2003 2002 2004 2003 2002 Sweden 461,967 473,644 511,665 –23,920 –17,809 –76,558 Denmark 3,463 4,128 4,306 105 62 40 Finland 145,837 140,348 127,035 7,101 999 3,262 Norway 4,726 6,443 8,166 1,417 97 872 Other countries 5,952 6,221 7,684 153 93 153 Total 621,945 630,784 658,856 –15,144 –16,558 –72,231

NOTE 3 Sales to affiliated companies

Of net sales, SEK 5,800 (5,924) pertains to revenues from the other Group companies. Of other operating revenue in 2002, SEK 7,120 pertains to revenues from the other Group companies.

NOTE 4 Average number of employees, salaries, other compensation and social fees

The number of employees is calculated based on the Group’s measure of normal working time, which is 1,800 hours.

GROUP PARENT COMPANY 2004 2003 2002 2004

GROUP Sweden Women 134 144 156 3 Men 117 127 141 12 Total 251 271 297 15 Finland Women 52 49 49 – Men 15 16 16 – Total 67 65 65 – Norway Women – – 1 – Men – – – – Total – – 1 –

Total number of women 186 193 206 3 Total number of men 132 143 157 12 Total number of employees 318 336 363 15

Financial Statements 125 GROUP PARENT COMPANY

2004 2003 2002 2004

WAGES, SALARIES AND OTHER REMUNERATION Board of Directors, President and Vice President Sweden 10,334 9,089 7,404 8,274 Finland 2,083 1,203 1,452 – Norway – – 347 – Total 12,417 10,292 9,203 8,274

Other employees Sweden 98,328 105,007 107,503 8,790 Finland 20,436 18,549 16,607 – Total wages, salaries and other compensation, Group 131,181 133,848 133,313 17,064

Statutory and negotiated social fees 52,605 48,305 39,119 16,252 Pension expenses 40,428 25,096 40,781 24,618 Total social fees and pension expenses 93,033 73,401 79,900 40,870

BENEFITS FOR SENIOR EXECUTIVES During the year, a fee of SEK 250 was paid to the Chairman of the Board of Directors. In 2003, this fee amounted to SEK 253 and in 2002, to SEK 201. Of the pension amount, SEK 22,770 was paid to the Group’s Board of Directors, the President and the Vice President of the Parent Company, and SEK 22,936 to the Group. The corresponding amounts were 3 485 and 3 692 in 2003 and 6 348 and 7 015 in 2002. Salary to the Company´s President amounted to 1 246 during the year. A yearly gross salary of SEK 4,4 M has been contracted with the President. The benefits package includes holiday pay, social fees, pension expenses and other overhead expenses in the form of a company car, etc. The retirement age is 65. The required period of notice is six months, during which time the employee is entitled to 1/12 of his or her gross salary package per month. No bonuses were paid. PARENT COMPANY, 2004 NUMBER ON OF WHOM MEN, CLOSING DAY %

BOARD MEMBERS AND SENIOR EXECUTIVES Board members 19 89 President and other senior executives 2 100

% 2004

ABSENCE DUE TO ILLNESS Long-term absence due to illness 0 Absence due to illness, men 1.54 Absence due to illness, women 1.15 Employees under 29 0 Employees aged 30–49 0 Employees over 50 1.84 Total absence due to illness 1.47

NOTE 5 Fees to auditors GROUP PARENT COMPANY

2004 2003 2002 2004 SET audit assignments 1,024 1,298 921 680 Other, audit assignments 155 131 122 – Total 1,179 1,429 1,043 680

126 Financial Statements NOTE 6 Depreciation GROUP PARENT COMPANY

2004 2003 2002 2004 Cost of goods sold 8,103 7,784 5,593 – Selling expenses 202 131 112 – Administrative expenses 5,566 5,498 5,749 62 Total 13,871 13,413 11,454 62

NOTE 7 Result from participation in associated companies PARENT COMPANY 2004 Dividends 1,868,520 1,868,520

NOTE 8 Income from other securities and receivables classed as non-current assets

GROUP PARENT COMPANY 2004 2003 2002 2004 Dividends 166 437 246 166 Capital gains from sales 10,013 3,025 – 10,013 Change in write-down –11,408 4,796 –14,975 –11,408 Total –1,229 8,258 –14,729 –1,229

NOTE 9 Other interest income and similar items GROUP PARENT COMPANY

2004 2003 2002 2004 Dividends 22,322 30,744 76,162 22,322 Interest income 36,826 42,086 70,639 33,803 Capital gains from sales 51,822 25,669 38,782 51,822 Change in write-down of current investments 49,266 625,573 – 48,723 Total 160,236 724,072 185,583 156,670

NOTE 10 Interest expense and similar items GROUP PARENT COMPANY 2004 2003 2002 2004 Interest expense –6,853 –8,910 –13,863 –849 Interest expense to Group companies – – –11,966 –2,350 Exchange-rate differences –2,516 – – –2,516 Change in write-down of current investments – – –345,565 – Write-down of other shares – – –1,007,283 – Capital gains from sale of securities –84,938 –884,723 –254,857 –84,938 Total –94,307 –893,633 –1,633,534 –90,653

NOTE 11 Tax on profit for the year GROUP PARENT COMPANY

2004 2003 2002 2004 Current tax for the year –15,117 –4,221 829 –8,072 Share of tax in associated companies –56,998 –9,662 128,832 – Deferred tax 8,284 –137 –52,823 9,371 Tax effect of Group contributions – – – 8,400 Total –63,831 –14,020 76,838 9,699

Financial Statements 127 NOTE 12 Goodwill 2004 2003 2002

GROUP Acquisition value on opening date 91,149 91,149 140,457 Changes during the year – Sales and scrappings – – –49,308 Accumulated acquisition value on closing date 91,149 91,149 91,149

Depreciation on opening date –29,483 –25,266 –68,170 Changes during the year – Sales and scrappings – – 47,180 – Depreciation –4,111 –4,217 –4,276 Accumulated depreciation on closing date –33,594 –29,483 –25,266 Residual value according to plan on closing date 57,555 61,666 65,883

NOTE 13 Buildings and land 2004 2003 2002

GROUP Acquisition value on opening date 43,929 43,770 43,152 Changes during the year – Purchases – 159 618 Accumulated acquisition value on closing date 43,929 43,929 43,770

Depreciation on opening date –2,822 –1,898 –1,036 Changes during the year – Sales and scrappings – – –60 – Depreciation –861 –901 –802 – Translation differences –27 –23 – Accumulated depreciation value on closing date –3,710 –2,822 –1,898

Write-ups on opening date 355 – – Changes during the year – Write-ups – 355 – Accumulated write-ups on closing date 355 355 – Residual value according to plan on closing date 40,574 41,462 41,872

Value for tax purposes of buildings in Sweden 12,400 29,440 30,590 Value for tax purposes of land in Sweden 6,051 9,681 10,059 18,451 39,121 40,649

NOTE 14 Equipment GROUP PARENT COMPANY

2004 2003 2002 2004

EQUIPMENT Acquisition value on opening date 102,058 98,175 224,413 169 Changes during the year – Purchases 19,864 5,442 10,173 17 – New facilities – – 3,090 – – Sales and scrappings –42,677 –1,422 –139,501 – – Translation differences – –137 – – Accumulated acquisition value on closing date 79,245 102,058 98,175 186

128 Financial Statements Depreciation on opening date –85,294 –77,565 –136,016 –93 Changes during the year – Sales and scrappings 40,016 432 64,827 – – Depreciation –8,899 –8,295 –6,376 –62 – Translation differences –21 134 – – Accumulated depreciation on closing date –54,198 –85,294 –77,565 –155 Residual value according to plan on closing date 25,047 16,764 20,610 31

NOTE 15 Construction in progress 2004 2003 2002

GROUP Acquisition value on opening date 4,835 1,019 3,090 Changes during the year – Purchases 4,741 3,816 1,019 – Transferred to Machinery and equipment – – –3,090 Accrued expenses on closing date 9,576 4,835 1,019

NOTE 16 Participations in Group companies CAPITAL AND BOOK BOOK BOOK VOTING PAR VALUE VALUE VALUE CORP. REG. NO. DOMICILE NUMBER RIGHTS, % VALUE 12/31/04 12/31/03 12/31/02 Forma Publishing Group AB 556045-0297 Västerås 30,000 100 30,000 200,000 200,000 200,000

Subsidiaries to Forma Publishing Group AB Idé-förlaget i Västerås AB 556306-7783 Västerås 100 HB Tapplina 969632-5050 Stockholm 100 Tidskriften Hus o Hem AB 556609-2010 Västerås 100 Idé & Mediaproduktion i Västerås AB 556279-4940 Västerås 100 ICA Kuriren AB 556609-2234 Västerås 100 ICA Förlaget Annonsservice AB 556351-2531 Västerås 100 ICA Facktidningar AB 556372-6529 Västerås 100 ICA Bokförlag AB 556071-2241 Västerås 100 Hemma Bäst AB 556609-2028 Västerås 100 Bokklubben Hemma AB 556586-2363 Västerås 100 Kustannus OY Forma 0503546-4 Helsinki 100 Forma Publishing International OY 1510258-7 Helsinki 70 ICA Media A/S 10 555 124 Tallinn 70 ICA Media S/A 348 490 Riga 70

2004 2003 2002 Acquisition value on opening date 200,000 200,000 200,000 Accumulated acquisition value on closing date 200,000 200,000 200,000

NOTE 17 Participations in associated companies GROUP PARENT COMPANY 2004 2003 2002 2004 Acquisition value on opening date 3,657,460 3,619,650 3,119,678 583,000 Changes during the year – Purchases 2,376,608 – – 2,376,608 – Sales –495 – –153 – – Net income from associated companies not paid as dividend –1,413,948 325,581 360,009 – – Exchange-rate differences –26,906 –287,771 140,423 – – Reclassifications – – –307 – Accumulated acquisition value on closing date 4,592,719 3,657,460 3,619,650 2,959,608

Financial Statements 129 BOOK BOOK BOOK PAR SHARE VALUE VALUE VALUE PROFIT NUMBER VALUE % 12/31/04 12/31/03 12/31/02 SHARE

GROUP ICA AB 2,000,000 200,000 40.0 4,587,649 3,652,056 3,605,212 511,409 (30.0) Bra Förlag AB 250 25.0 750 750 750 Radio 106,1 KB 1,267 Kruunuhaan Mediatehtas OY 5,375 Västerås Reklamradio AB 33 Elektronikkforlaget AS 40 20.0 334 495 161 Trade Press AS 40 40.0 4,320 4,320 5,040 Svenska Internetbokhandeln AB 1,478 Total 4,592,719 3,657,460 3,619,650 511,570

PARENT COMPANY ICA AB 2,000,000 200,000 40.0 2,959,608 1,500,000 150,000 30.0 583,000 583,000

Ownership share above refers to voting rights and is in all cases also the same as the equity share.

CORP. REG. NO. REG. OFFICE ICA AB 556582-1559 Stockholm Bra Förlag AB 556424-7921 Stockholm Elektronikkforlaget AS 975 341 550 Norway, Oslo Trade Press AS 966 705 086 Norway, Oslo

NOTE 18 Other long-term security holdings GROUP PARENT COMPANY

2004 2003 2002 2004 Acquisition value on opening date 94,324 83,376 65,204 72,867 Change during the year – Investment 17,950 10,948 18,172 17,937 – Divestments –4,992 – – –4,992 Accumulated acquisition value on closing date 107,282 94,324 83,376 85,812

Write-downs on opening date –36,086 –40,804 –25,907 –25,541 Change during the year – Write-down –13,936 4,796 –14,975 –11,408 – Reclassifications – –78 78 – Accumulated write-downs on closing date –50,022 –36,086 –40,804 –36,949 Book value on closing date 57,260 58,238 42,572 48,863

The Parent Company’s holdings consist mainly of investments within the framework of Skandia Investment. The book value for Skandia Investment is SEK 47,333 (45,796), while the estimated market value is SEK 70,226 (53,652). In 2002, the book value was 30.052, which corresponded to the market value.

NOTE 19 Other long-term receivables GROUP PARENT COMPANY

2004 2003 2002 2004 Acquisition value on opening date 1,310 1,477 10,044 700 Changes during the year – Investment 37,708 574 532 37,708 – Sales –529 –532 – – – Transferred to current receivables –9 –9 –9,099 – – Amortization –50 –200 – –50 Accumulated acquisition value on closing date 38,430 1,310 1,477 38,358 Reported value on closing date 38,430 1,310 1,477 38,358

Of which pledged endowment assurance policies amounting to SEK 37,708.

130 Financial Statements NOTE 20 Prepaid expenses and accrued income GROUP PARENT COMPANY

2004 2003 2002 2004 Production and distribution expenses 13,737 14,139 22,068 – Other prepaid expenses 727 1,100 823 727 Other accrued income 8,016 9,372 11,158 – 22,480 24,611 34,049 727

NOTE 21 Securities under separate management GROUP PARENT COMPANY

2004 2003 2002 2004 Shares 514,366 1,370,296 1,101,334 502,004 Hedge funds 395,181 – – 395,181 Interest-bearing securities 1,076,829 1,274,642 1,062,517 1,076,829 Book value 1,986,376 2,644,938 2,163,851 1,974,014 Market value 2,020,555 2,644,938 2,163,851 2 ,007,983

NOTE 22 Change in Parent Company equity SHARE PREMIUM STATUTORY ACCUMULATED YEAR’S NET TOTAL CAPITAL RESERVE RESERVE PROFIT/LOSS PROFIT/LOSS EQUITY Amounts at Jan. 1 402,294 2,689,402 83,202 791,773 –9,174 3,957,497 Allocation of earnings of the preceding year –9,174 9,174 Dividend –140,580 –140,580 Group contribution 30,000 30,000 Tax effect of Group contribution –8,400 –8,400 Net profit/loss for the year 1,872,655 1,872,655 Amounts at Dec. 31 402,294 2,689,402 83,202 663,619 1,872,655 5,711,172

The share capital consists of 121,317,500 common shares with a par value of SEK 2.50 and 39,599,936 preference shares with a par value of SEK 2.50. All classes of shares carry the same number of voting rights.

NOTE 23 Other shares

Other shares consisted in 2004 of 8,341,376 shares in Royal Ahold at the price of EUR 5.66, SEK/EUR 9.01. In 2003, the holding was 8,341,376 shares at the price of EUR 6.04, SEK/EUR 9.06. In 2002, the holding was 10,004,826 shares at the price of EUR 11.93, SEK/EUR 9.53.

NOTE 24 Change in consolidated equity NON- SHARE RESTRICTED SHARE OF RESTRICTED YEAR’S NET TOTAL 2002 CAPITAL RESERVES EQUITY RESERVES PROFIT/LOSS EQUITY Amounts at Jan. 1 402,294 2,908,436 2,517,365 1,751,577 274,313 7,853,985 Transfer between restricted and non-restricted equity –135,832 364,293 45,852 –274,313 0 Exchange-rate difference 140,554 226 140,780 Deferred tax liability –2,462 – 2,462 Dividend –332,640 –332,640 Shareholder contribution received 366,320 366,320 Net profit/loss for the year –975,693 –975,693 Amounts at Dec. 31 402,294 2,772,604 3,022,212 1,828,873 –975,693 7,050,2901) 1) Due to rounding off a difference in equity has arisen between Jan. 1 and Dec. 31.

Financial Statements 131 NON- SHARE RESTRICTED SHARE OF RESTRICTED YEAR’S NET TOTAL 2003 CAPITAL RESERVES EQUITY RESERVES PROFIT/LOSS EQUITY Amounts at Jan. 1 402,294 2,772,604 3,022,210 1,828,873 –975,693 7,050,2881) Appropriation of profits –975,693 975,693 Dividend –166,320 –166,320 Transfer between restricted and non-restricted equity –355 333,771 –333,416 Exchange-rate difference –286,925 –2,366 –289,291 Write-up of property 355 355 Net profit/loss for the year 352,656 352,656 Amounts at Dec. 31 402,294 2,772,604 3,069,056 351,078 352,656 6,947,688 1) Due to rounding off a difference in equity has arisen between Jan. 1 and Dec. 31.

NON- SHARE RESTRICTED SHARE OF RESTRICTED YEAR’S NET TOTAL 2004 CAPITAL RESERVES EQUITY RESERVES PROFIT/LOSS EQUITY Amounts at Jan. 1 402,294 2,772,604 3,069,056 351,078 352,656 6,947,688 Appropriation of profits 352,656 –352,656 Dividend –140,580 –140,580 Transfer between restricted and non-restricted equity –1,414,109 1,414,109 Exchange-rate difference –26,906 –120 –27,026 Net profit/loss for the year 497,295 497,295 Amounts at Dec. 31 402,294 2,772,604 1,628,041 1,977,143 497,295 7,277,377

NOTE 25 Provision for pensions and similar commitments GROUP PARENT COMPANY

2004 2003 2002 2004 Provision, PRI pensions 116,534 113,477 103,694 3,192 Provision, other pensions 51,183 11,207 9,992 49,085 Total 167,717 124,684 113,686 52,277

NOTE 26 Accrued expenses and prepaid income GROUP PARENT COMPANY

2004 2003 2002 2004 Accrued vacation pay 14,407 13,237 13,846 1,610 Accrued social fees 4,979 4,492 6,753 526 Other accrued expenses 26,375 34,176 15,128 3,719 Total 45,761 51,905 35,727 5,855

NOTE 27 Pledged assets GROUP PARENT COMPANY

2004 2003 2002 2004 Pledged endowment insurance as security for pension commitments 37,708 – – 37,708 Real-estate credits – – 30,000 – 37,708 – 30,000 37,708

NOTE 28 Contingent liabilities GROUP PARENT COMPANY 2004 2003 2002 2004 Guarantees for subsidiaries – – – 115,440 Guarantees and contingent liabilities 2,923 2,451 2,280 64 Total 2,923 2,451 2,280 115,504

132 Financial Statements Consolidated financial statements in accordance with IFRS for the 2004 fiscal year Consolidated income statement prepared in accordance with IFRS

SEK 000s NOTE 2004 Revenue 2, 3 621,945 Cost of sales 4, 6 –300,850 Gross profit 321,095

Other income 5,279 Selling expenses 4, 6 –153,822 Administrative expenses 4, 5, 6 –153,400 Share in profits of companies reported in accordance with the equity method 16 466,167 Operating profit 2 485,319

Finance revenue 7 59,148 Finance cost 8 –9,203 Change in value in valuation at fair value 9 58,626

Profit after financial items 593,890

Profit before tax 593,890

Income tax expense 10 –15,285 Profit for the year 578,605 Profit for the year attributable to equity holders in the Parent Company 578,605

EARNINGS PER SHARE (SEK) 11 PREFERENCE SHARES COMMON SHARES Basic 7.31 2.38 Diluted ––

134 Consolidated financial statements in accordance with IFRS for the 2004 fiscal year Consolidated balance sheet prepared in accordance with IFRS

SEK 000s NOTE 31 DEC, 2004

ASSETS NON-CURRENT ASSETS Intangible assets other than goodwill 12 9,576 Goodwill 13 61,666 Land and buildings 14 40,574 Equipment 15 25,047 Participation in companies reported in accordance with the equity method 16 4,501,033 Other securities held as non-current assets 17 80,154 Deferred tax asset 10 9,371 Other long-term receivables 722 Total non-current assets 4,728,143

CURRENT ASSETS Inventories, etc. 18 22,463 Accounts receivable – trade 45,921 Receivables from Group companies 3,827 Receivables from companies reported in accordance with the equity method 1,142 Other current receivables 12,453 Prepaid expenses and accrued income 19 22,480 Investments 20 2,224,023 Cash equivalents 21 504,952 Total current assets 2,837,261 Total assets 7,565,404

EQUITY AND LIABILITIES EQUITY 24 Share capital 402,294 Other reserves 2,772,604

Profit brought forward 3,490,139 Profit for the year 578,605 Total equity 7,243,642

Long-term liabilities and provisions Provision for pensions and similar commitments 22 127,073 Deferred tax liability 10 4,508 Total long-term liabilities and provisions 131,581

Current liabilities Advance payments from customers 88,821 Liabilities to companies reported in accordance with the equity method 224 Accounts payable 35,085 Income tax liability 7,052 Other current liabilities 13,238 Accrued expenses and prepaid income 23 45,761 Total current liabilities 190,181 Total equity and liabilities 7,565,404

Consolidated financial statements in accordance with IFRS for the 2004 fiscal year 135 Consolidated statement in changes in equity prepared in accordance with IFRS

Share Other Accumulated Year’s net Total SEK 000s capital reserves profit/loss profit/loss equity Opening equity, Jan. 1, 2004 402,294 2,772,604 3,320,925 352,656 6,848,479 Items booked directly under equity from companies reported in accordance with the equity method –42,7421) –42,742 Appropriation of profits 352,656 –352,656 Dividend –140,580 –140,580 Currency translation difference –120 –120 Net profit for the year 578,605 578,605 Closing equity, Dec. 31, 2004 402,294 2,772,604 3,490,139 578,605 7,243,642 For itemization of equity, see Note 24. For reconciliation of Opening equity in accordance with IFRS, refer to Note 29.

1) The amount consists primarily of the change in value of cash flow hedges (interest swaps) and exchange-rate differences from the translation to Swedish kronor of operations with functional currencies other than Swedish kronor.

136 Consolidated financial statements in accordance with IFRS for the 2004 fiscal year Consolidated cash flow statement prepared in accordance with IFRS

SEK 000s NOTE 2004

OPERATING ACTIVITIES Profit after financial items 593,890 Adjustment for items not affecting cash flow 25 –545,201 48,689 Dividends from companies reported in accordance with the equity method 16 218,520 Income tax paid –8,065 Cash flow from operating activities before working capital changes 259,144

Working capital changes Inventories, etc. –721 Current receivables 22,853 Current liabilities –37,648 Cash flow from operating activities 243,628

Investing activities Investments in non-current assets * –2,419,162 Dividends from companies reported in accordance with the equity method 16 1,650,000 Sale of non-current assets 18,759 Change in current investments 706,007 Cash flow from investment activities –44,396

Financing activities Dividend paid 24 –140,580 Cash flow from financing activities –140,580

Cash flow for the year 58,652 Cash and cash equivalents at the beginning of the year 229,875 Reclassification of cash equivalents ** 216,425 Cash and cash equivalents at the end of the year 26 504,952 * of which investment in ICA AB represented SEK 2,376,608. ** previously included in current investments.

INFORMATION ON INTEREST PAID During the period, interest paid amounted to SEK 6,852,000. Interest received during the period amounts to SEK 30,309,000.

Consolidated financial statements in accordance with IFRS for the 2004 fiscal year 137 Notes and comments

COMPANY REGISTERED OFFICE, ETC. Hakon Invest AB conducts operations as a limited liability company and its registered office is in the City of Stockholm. It is a public company. The address of the Company’s Head Office is Hakon Invest AB, Box 1508, SE-171 29 Solna, Sweden. The Company’s website is www.hakoninvest.se and its telephone number is +46-8-55 33 99 00. The Corporate Registration Number is 556048-2837. The Company’s operations are described in Note 2.

NOTE 1 ACCOUNTING PRINCIPLES These consolidated accounts have been prepared as an Appendix to the prospectus accompanying the Company’s public listing in the autumn of 2005. Hakon Invest’s Annual Report for 2004 dated March 1, 2005, on which this consolidated report is based, was prepared in accordance with the rules of the Annual Accounts Act and the general standards of the Swedish Accounting Standards Board. Determinations were made on the date of the publication of the original Annual Report for 2004, and subsequent events are not reflected in these consolidated financial statements. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and the statements issued by the International Financial Reporting Interpretation Committee (IFRIC) and adopted by the EU Com- mission, with the exception, however, of items for comparison with preceding years, which are consequently not included. The accounts in accordance with IFRS have been prepared in accordance with IFRS principles which are in force on December 31, 2005. IFRS is subject to ongoing review and interpretation, as well as to the approval of the EU, which is why changes that affect the preparation of accounts can occur. While the accounting principles described apply to the Hakon Invest Group, a fair number of the principles are only applicable within ICA AB. All amounts are in SEK 000s, unless otherwise indicated.

VALUATION OF ASSETS AND LIABILITIES AS PER JANUARY 1, 2004 Under IFRS 1, First-time application of international accounting standards, an enterprise preparing its financial statements for the first time must establish a so-called opening balance. The valuation of assets and provisions and liabilities in the opening balance on Janu- ary 1, 2004, has, with certain exceptions that are approved by IFRS, occurred with retroactive application of the valuation principles set forth in IFRS 1. The exceptions concern business combinations, pension expenses and translation differences that arise from the translation of foreign operations. This implies that acquisitions carried out prior to January 1, 2004, are not translated in accordance with the new rules, that actuarial gains and losses pertaining to the period prior to January 1, 2004 are reported in their entirety in the balance sheet, and that translation differences accumulated to and including January 1, 2004, are not documented.

BASIS OF THE FINANCIAL STATEMENTS The consolidated financial statements are based on historical acquisition values, except for derivative financial instruments and certain financial assets, which are valued at their fair value. The reported values of assets and liabilities that have been hedged and that belong to the categories reported at accrued acquisition value are adjusted for changes in the values of the risks hedged.

CONSOLIDATED ACCOUNTS The consolidated accounts include the Parent Company, Hakon Invest AB, and its subsidiaries. A subsidiary is included in the consolidated accounts from the date on which the Parent Company acquires a controlling interest in the enterprise and is no longer included from the date on which the Parent Company’s controlling interest in the enterprises ends. Forma Publishing Group AB is a subsidiary of Hakon Invest AB.

138 Consolidated financial statements in accordance with IFRS for the 2004 fiscal year Forma Publishing Group AB includes the following subsidiaries: EQUITY AND CORP.REG.NO. REG. OFFICE VOTING RIGHTS, % Idé-förlaget i Västerås AB 556306-7783 Västerås 100 HB Tapplina 969632-5050 Stockholm 100 Tidskriften Hus o Hem AB 556609-2010 Västerås 100 Idé& Mediaproduktion i Västerås AB 556279-4940 Västerås 100 ICA Kuriren AB 556609-2234 Västerås 100 ICA Förlaget Annonsservice AB 556351-2531 Västerås 100 ICA Facktidningar AB 556372-6529 Västerås 100 ICA Bokförlag AB 556071-2241 Västerås 100 Hemma Bäst AB 556609-2028 Västerås 100 Bokklubben Hemma AB 556586-2363 Västerås 100 Kustannus OY Forma 0503546-4 Helsinki 100 Forma Publishing International OY 1510258-7 Helsinki 70 ICA Media A/S 10.555.124 Tallinn 70 ICA Media S/A 348.490 Riga 70

All units included in the consolidated accounts are subject to the same set of uniform accounting principles. This also applies to enterprises reported in accordance with the equity method. All Group-internal transactions have been eliminated.

Investments in associates Holdings in associated companies are reported in accordance with the equity method. An associated company is a unit in which the Group holds a significant, but not controlling, interest. The application of the equity method implies that investments in associated companies are reported in the balance sheet at their acquisition value, with the addition of changes in the Group's share of the associated company’s net assets and with the deduction of any write-down and dividend. The income statement reflects the Group’s share of the associated company’s profit after tax. The Group’s investments in associated companies includes goodwill treated in accordance with the accounting principles for goodwill stated below. Any impairment in reported shares in associated companies is considered in the light of possible indications of decline in value.

Investments in joint ventures A joint venture is a financial operation driven by two or more partners whose cooperation is contractually regulated and where the contract implies that the parties share a controlling interest in the operation. ICA AB is operated as a joint venture of Hakon Invest and Royal Ahold N.V. ICA AB has two joint ventures – Netto Marknad AB and RIMI Baltic AB. Hakon Invest reports joint ventures in accordance with the equity method. Impairment tests are applied in the same manner as described above, for associated companies.

Group companies “Group companies” refers to the Parent Company and sister subsidiaries of Hakon Invest AB.

TRANSLATION OF FOREIGN CURRENCIES Transactions in foreign currencies are reported in the accounts at their spot rate on the transactions date. Monetary assets and liabilities denominated in foreign currencies are reported in the balance sheet as per the closing date, translated at the exchange rate that applies at that time. Such exchange-rate differences are reported over the income statement. Income, expenses, assets and liabilities of operations having a functional currency other than Swedish kronor – that is, normally, foreign subsidiaries – are reported and valued according to the functional currency. The consolidated balance sheet shows these assets and liabilities translated into Swedish kronor according to the closing rates. Income and expenses are reported on the consolidated balance sheet translated at the average exchange rate. The exchange-rate differences that arise in the translation are reported directly as equity. When such an operation is divested, the accumulated exchange-rate differences are reported in the income statement together with the gain or loss on the divestment. Goodwill and adjustments to fair value that are attributable to the acquisition of operations with functional currencies other than Swedish kronor are treated as assets/liabilities of the acquired operations.

Consolidated financial statements in accordance with IFRS for the 2004 fiscal year 139 TANGIBLE ASSETS Tangible assets are reported at their acquisition value less accumulated depreciation and any impairment that may apply. The acquisition value of tangible assets is written off to its estimated residual value. Straight-line depreciation is applied over the estimated useful life. Residual value and useful life are tested in conjunction with every period-end report and adjusted if the testing results in a new assessment. The reported value of tangible assets is impairment tested with a view to the possible need for an impairment when events or changes in circumstances indicate that the reported value may not be recoverable. The review entails a comparison of the reported value with the higher of the asset’s net sale value and its value in use. The asset’s value in use consists of the present value of the future net cash flows generated by the asset. If a particular asset does not generate a cash flow that is independent of other assets, the cash flow is calculated for a group of assets – a cash-generating unit. It is calculated in accordance with a discount factor before tax that reflects the current market value of the time value of money and the risks associated with the particular asset. If the reported value exceeds the higher of the asset’s net sale value and its value in use, the asset is written down to the highest of the net sale value and value in use. The impairment loss is reported in the income statement.

COMPONENT ACCOUNTING Properties are split into components. Each part of a property that has a cost that is significant in relation to the total cost of the property is depreciated separately. Costs for parts of properties are significant if they exceed 10% of the total cost of the property. Without giving any consideration to significance, properties are divided into the following components: Land Land improvement Building Permanent equipment, service facilities, etc., in building

GOODWILL AND OTHER INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIFE Goodwill represents the portion of the acquisition cost that exceeds the fair value of the acquired share in the subsidiary’s net assets on the date of acquisition. “Net assets” refers here to the difference between identifiable assets and liabilities in an acquired subsidiary, associated company or joint venture. In accordance with IFRS 3, it is assumed that the useful life of the goodwill is indefinite. Intangi- ble assets with indefinite useful life are not amortized. The reported value of intangible assets that are not amortized is tested annually with a view to the possible need of an impairment. Any impairment loss is reported in the income statement. The goodwill amount calculated on any corporate acquisition is attributed, in conjunction with the acquisition, to assets that generate a cash flow that is independent of other assets. If the reported value of the cash-generating unit’s assets exceeds the present value of the future cash flow or the sale value less selling expenses, the reported value is impaired to the higher of the present value of the cash flow and the sale value.

OTHER INTANGIBLE ASSETS Intangible assets are reported in the balance sheet at their acquisition value. Regarding identifiable intangible assets acquired as a part of a corporate acquisition, the acquisition value consists of the estimated fair value at the time of acquisition, if it can be reliably estimated. The reported value of the intangible assets is impairment tested with a view to the possible need for reporting an impairment loss, when events or changes in circumstances indicate that the value may not be recoverable or in the case of indications of a decline.

DEPRECIATION Depreciation is based on the assets’ acquisition values. The depreciation period is based on an estimate of the assets’ useful life.

Buildings 20–33 years Computer equipment 3 years Equipment, other 5–10 years Other intangible assets 5–10 years

DEVELOPMENT EXPENSES Expenses pertaining to development are reported as a cost when they arise. However, development expenses attributable to a single project are reported as IT Systems – that is, as assets in the balance sheet – when the amount is likely to be recovered in the future. The asset is depreciated during the period in which it is used. The reported value of the development costs reported as assets in the balance sheet is tested annually with a view to the possible need for an impairment, as long as the asset has not yet been placed in use, and subsequently when events or changed in circumstances indicate that the reported value may not be recoverable.

140 Consolidated financial statements in accordance with IFRS for the 2004 fiscal year CURRENT INVESTMENTS AND SECURITIES HELD AS NON-CURRENT ASSETS. All investments are valued at acquisition value the first time they are reported in the balance sheet. The acquisition value corresponds to the fair value of the consideration remitted, including expenses attributable to the acquisition. After an investment has been reported in the accounts for the first time and classified as a financial asset, it is reported at its fair value in the income statement or as an asset that can be sold, whereupon it is valued at its fair value. Changes in the value of assets that can be sold are reported as a separate portion of equity until the investment has been sold, payment has been received, or the asset has been divested in some other manner, or when the investment has been written down, when the accumulated change in value previously reported under equity is transferred to the income statement. For investments that are actively traded on organized finance markets, fair value is established when the market closes on the closing day. For investments that have no market listing, fair value is established as the current market price for another instrument that is essentially the same, or as a calculated value based on expected cash flows. All normal acquisitions of financial assets are reported in the balance sheet on the date of the transaction – that is, the date on which the Group commits to purchase the asset. All normal sales of financial assets are reported on the settlement day – that is, the date on which the asset is delivered to the counterparty. “Normal acquisitions or sales” refers to acquisition or sales of financial assets that require that the assets are delivered within the time limits customarily imposed by law or market convention.

INVENTORIES, ETC. Inventories, etc., are valued at the lower of acquisition value and net sale value. The net sale value corresponds to the estimated sale price under normal circumstances, less estimated manufacturing and selling costs.

ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES Receivables are reported in the amounts in which they are expected to be received. Accounts receivable, for which payment is normally due after 10–90 days, are initially reported in the invoiced amounts. An assessment of uncertain receivables is made when it is no longer probable that the full amount will be received.

LIQUID FUNDS (CASH AND CASH EQUIVALENTS) Liquid funds include cash and bank balances, as well as current investments with an original maturity of not more than three months.

INTEREST-BEARING LOANS AND BORROWING All loans are initially reported at their acquisition value, which corresponds to the fair value of the amount received, less expenses related to the procurement of the loan. The loan debt is subsequently reported at the accrued acquisition value, implying that the value is adjusted in that any discounts or premiums in connection with the loan are taken up or redeemed and that costs in connection with the procurement of the loan are distributed over the term of the loan. The distribution over time is calculated on the basis of the effective interest of the loan. Any gain or loss arising when the loan is redeemed is reported in the income statement. Interest expenses are reported in the income statement for the period to which they refer.

PROVISIONS Provisions are reported in the balance sheet when the Group has a contractual or informal commitment on account of an event that has occurred and when it is likely that an outflow of resources associated with financial advantages will be required to fulfill the commitment and the commitment can be estimated in a reliable manner. If it is likely that reimbursement corresponding to a provision that has been made – for example through an insurance policy – will be received, the reimbursement is reported as an asset in the balance sheet, but not until the reimbursement is almost certain. If the effect of the time value of the future payment is considered significant, the value of the provision is determined through a calculation of the present value of the expected future cash flow based on a discount factor (before tax) that reflects the current market valuation of the time value. The gradual increase in the allocated amount that results from the present value calculation is reported as an interest expense in the income statement. Provisions are reviewed in conjunction with every period-end report.

PENSIONS AND OTHER COMMITMENTS CONCERNING POST-RETIREMENT BENEFITS Pension commitments are classified as defined-contribution or defined-benefit plans. It is the responsibility of the entity to provide the contractual benefits specified in the defined-benefit plans to current and former employees. The actuarial and investment-related risks are borne by the entity, whereas under defined-contribution plans, the entity’s responsibility amounts to making payments to an insurance company. The present value of defined-benefit commitments for current or former employees is calculated based on actuarial assumptions and its carried out at least once a year. Actuarial assumptions consist of the entity’s best assessment of the various variables that determine the cost of providing the benefits. Since actuarial assumptions are used, the actual outcome will probably differ from the anticipated outcome. These differences comprise actuarial gains and losses. They may be caused, for example, by high or low personnel turnover, salary changes and changes in the discount rate. Hakon reports current actuarial gains and losses directly as they arise.

Consolidated financial statements in accordance with IFRS for the 2004 fiscal year 141 LEASE Leases in which essentially all risks and advantages associated with ownership fall to the lessor are classified as operational leasing contracts. Leasing fees relating to operational leases are reported in the income statement as a cost, distributed straight-line over the term of the contract. Key financial leasing contracts are reported in the balance sheet as non-current assets or liabilities, and the cost is reported in the income statement as operating expense or interest. ICA AB annually constructs a number of store properties in attractive retail locations. At the same time, older store properties are being sold and leased back by ICA AB to be sublet to the ICA retailers on identical terms. This sale and re- and subletting is treated as sale-lease back arrangements – that is, the proceeds from sale are distributed over the lease period, while the lease is considered as a financial lease.

REVENUE Income is reported to the extent to which the financial advantages are likely to accrue to the Group and income can be estimated in a reliable manner.

Sale of goods Income is reported when the significant risks and advantages associated with ownership of the goods have been transferred to the purchaser and when the income amount can be estimated in a reliable manner.

Sale of services, etc. This income consists, for example, of royalty, franchise fees, income for various forms of consulting services to ICA retailers, and bonuses from suppliers. The income is distributed over time in the income statement as it is earned.

Interest Interest income is reported as it is earned. Interest income is calculated on the basis of the return on the underlying asset, according to the effective interest rate. Borrowing costs and loan interest are reported in the income statement for the period to which they refer.

Dividends Dividend income is reported in the income statement when the right to receive the payment is established.

Rental income Rental income from the properties is reported straight-line over the term of the lease or based on the tenant’s sales.

INCOME TAX Deferred tax is reported in accordance with the balance-sheet method This implies that deferred taxes are calculated as per the closing date – that is, the difference between the tax values of the assets or the liabilities on the one hand and the values reported in the consolidated balance sheet on the other.

Deferred tax liabilities are reported in the balance sheet for all taxable temporary differences, except

• when the temporary difference refers to goodwill or to an asset or liability in a transaction that is not a corporate acquisition and that at the time of the transaction affected neither the reported nor the taxable profit or loss for the period, and • when the temporary difference is attributable to investments in subsidiaries, associated companies and interests in joint ventures in which the Group has influence on when the reversal of the temporary difference is to take place, and it is likely that the temporary difference will not be reversed during the foreseeable future.

Deferred tax assets are reported for all deductible temporary differences and unutilized loss carry-forwards, to the extent to which future taxable profits are likely to be available and against which the temporary differences or unutilized loss carry-forwards may be utilized, • except when the deferred tax assets refer to a deductible temporary difference for an asset or liability in a transaction that is not a corporate acquisition and that at the time of the transaction affected neither the reported nor the taxable profit or loss, and • as regards deductible temporary differences attributable to investments in subsidiaries, associated companies and interests in joint ventures, deferred tax assets are reported to the extent to which the temporary differences are likely to be reversed during the foreseeable future and a taxable profit, against which the temporary difference can be utilized, is likely to become available.

The reported value of the deferred tax assets is reviewed in conjunction with every closing date and is reduced to the extent to which it is no longer likely that sufficiently large taxable profit will be available to permit utilization of all or parts of the recoverable taxes. Deferred tax assets and tax liabilities are calculated on the basis of tax rates (and legislation) currently applicable or applicable in practice on the closing date.

142 Consolidated financial statements in accordance with IFRS for the 2004 fiscal year Hakon Invest’s current tax consists of tax that is to be paid or received in relation to the current year. It refers to the Parent Company, which has operations in Sweden only, and to Forma, which has operations in Sweden, Finland, Estonia and Latvia. The current tax rate in Sweden is 28%; Finland 29%; Estonia 0%; and Latvia 15%.

DERIVATIVES PERTAINING TO FINANCIAL INSTRUMENTS The Group uses derivatives of financial instruments such as currency forward contracts and interest swaps to a limited extent to reduce the risks involved in interest and exchange-rate fluctuations. These derivatives are reported at fair value.

FINANCIAL INSTRUMENT RECOGNITION AND DERECOGNITION Financial instruments are recognized in the balance sheet when the Group becomes a party to the contractual conditions of the instrument. Financial assets are derecognized from the balance sheet when the contractual rights to cash flows from the asset cease to exist. Financial liabilities are derecognized from the balance sheet when the associated commitment is fulfilled, annulled or ceases to exist.

CASH FLOW STATEMENT The cash flow statement is prepared in accordance with the indirect method, which implies that cash flow from operating activities is adjusted for transactions that did not result in payment receipts or disbursements during the period and for possible income or expenses attributable to investment activities.

FINANCIAL RISKS Hakon Invest’s operations involve exposure mainly to currency risk, interest risk and share price risk. “Currency risk” refers to the risk that disadvantageous exchange-rate movements will affect the Group’s earnings and equity, measured in Swedish kronor. Currency risk consists of transaction exposure and translation exposure. Hakon Invest uses derivatives of financial instruments such as currency forward contracts and interest swaps to a limited extent, to reduce the risks involved in interest and exchange-rate fluctuations. Hakon Invest has prepared guidelines and a finance policy to indicate how financial risks should be managed and restricted.

NOTE 2 SEGMENT INFORMATION Hakon Invest has two segments: publishing operations and service operations. All internal reporting and follow-up is based on the areas of operation. Therefore, for the purposes of segment reporting, the areas of operation are the Company’s primary basis of subdivision and countries its secondary basis of subdivision. The risks and opportunities facing the joint venture ICA AB have been identified in the following areas of operation: ICA Sverige, ICA Norge, ICA Baltic, ICA Danmark, ICA Meny and ICA Banken. The first four refer to retail and wholesale operations in the particular geographic areas, while the fifth refers to wholesale operations in catering and service operations in Sweden. The sixth refers to banking operations. Hakon Invest has two segments: publishing operations and service operations. All internal reporting and follow-up is based on this division. Additional to these segments are the holdings in the ICA AB joint venture and financial management – that is, all other operations. The service operations refer to services to ICA retailers and have been transferred to the sister subsidiary ICA-handlarnas Medlemsservice as of July 1, 2005.

PUBLISHING SERVICE OTHER INCLUDING OPERATIONS OPERATIONS ELIMINATIONS TOTAL External sales 596,211 25,734 0 621,945 Operating profit 59,319 –14,562 440,562 485,319 Net profit 42,860 –14,562 550,307 578,605 Assets 373,593 7,191,811 7,565,404 Liabilities 292,984 41,822 –13,044 321,762 Investments 24,601 4 24,605 Depreciation 9,698 62 9,760

The publishing operations are divided in secondary segments according to the below: PUBLISHING OPERATIONS SWEDEN FINLAND OTHER COUNTRIES External sales 459,573 124,528 12,110 Operating profit 52,377 7,479 –537 Net profit 38,138 5,497 –775 Assets 327,272 40,124 6,197 Liabilities 260,661 24,295 8,028 Investments 23,720 785 96 Depreciation 8,478 1,030 190

Consolidated financial statements in accordance with IFRS for the 2004 fiscal year 143 NOTE 3 SALES TO RELATED PARTIES Of net sales, SEK 5,800 (5,924) refers to revenue from ICA-handlarnas Förbund.

NOTE 4 AVERAGE NUMBER OF EMPLOYEES, WAGES, SALARIES, OTHER REMUNERATIONS AND SOCIAL SECURITY CONTRIBUTIONS The number of employees is calculated based on the Group’s measure of normal work time, which amounts to 1,800 hours. GROUP 2004 Sweden Women 134 Men 117 251

Finland Women 52 Men 15 67

Women 186 Men 132 Total 318

Wages, salaries and other remunerations amounted to Board of Directors, President and Vice President Sweden 10,334 Finland 2,083 12,417

Other employees Sweden 98,328 Finland 20,436 Total wages, salaries and other remunerations, Group 131,181

Social security contributions stipulated by law and contract 45,812 Pension expense 17,037 Total social security contributions and pension expense 62,849

Remuneration to senior executives The Chairman of the Board and Board members are paid fees determined by decision of the Annual General Meeting. Remuneration to the President and other senior executives consists of a base salary, other benefits and remunerations, and pension. “Other senior executives” refers to the individuals who, with the President, comprise Group management.

BASE ANNUAL SALARY/ PENSION OTHER 2004 (SEK 000S)* BOARD FEE BENEFITS* COST REMUNERATION** TOTAL Chairman of the Board 250 250 Other Board members (total)*** 1,447 1,447 President**** 1,238 100 1,935 8 3,281 Other senior executives***** 8,788 462 9,395 38 18,683 11,723 562 11,330 46 23,661 * Remuneration excluding social security contributions ** Refers to reimbursement for parking and business entertainment *** In 2004 the Board consisted of 18 members in addition to the Chairman. **** The gross salary framework of SEK 4.4 million includes vacation pay, social security contributions, pension costs and other overhead in the form of company car, etc. ***** In 2004, other senior executives amounted to five individuals.

144 Consolidated financial statements in accordance with IFRS for the 2004 fiscal year A gross salary framework of SEK 4.4 million has been negotiated with the President. The framework includes vacation pay, social security contributions, pension costs and other overhead in the form of company car, etc. The retirement age is 65. The requirement period of notice is six months during which time 1/12 of the gross salary framework is available per month. No variable remuneration has been paid. No contracts concerning variable remuneration exist. For the President, cancellation of employment initiated by either the Company or the President is subject to a period of notice of six months, during which a monthly allotment of 1/12 of the aforementioned gross salary framework is available. The President is not entitled to any severance pay. The Company and the President are both entitled to demand that the President retire at 65. Within the gross salary framework described above, the President determines the size of the pension provisions to be made. Other senior executives received remuneration in accordance with the table: No variable remuneration was paid in 2004. Between the Company and other senior executives of the Hakon Invest Group, termination of employment initiated by the Com- pany is subject to a period of notice of 12 months, whereas termination initiated by the senior executives is subject to a period of notice of six months. The other senior executives are entitled to a pension under the ITP plan (supplementary pensions for salaried employees). More- over, the other senior executives have the right to retire at 62. An employees retiring at 62 is entitled to 75% of his or her regular salary immediately prior to retirement, during the period until the employee reaches the regular retirement age. During the period after the regular retirement age, the other senior executives shall receive the same amount of pension he or she would have received if he or she had continued to work up to the age of 65.

NOTE 5 FEES TO AUDITORS 2004 SET, audit assignments 1,024 Other, audit assignments 155 1,179

NOTE 6 DEPRECIATION 2004 Cost of goods sold 8,103 Selling expenses 202 Administrative expenses 1,455 Total 9,760 Depreciation refers mainly to equipment but also includes building additions, new buildings and cars.

NOTE 7 FINANCE REVENUE 2004 Dividends 22,322 Interest income 36,826 Total 59,148

NOTE 8 FINANCE COST 2004 Interest expense –6,687 Exchange-rate differences –2,516 Total –9,203

NOTE 9 CHANGE IN VALUE IN VALUATION AT FAIR VALUE 2004 Long-term securities holdings 13,643 Current investments 44,983 Total 58,626

Consolidated financial statements in accordance with IFRS for the 2004 fiscal year 145 NOTE 10 INCOME TAX The items included in the tax expense for 2004 are listed below:

CONSOLIDATED INCOME STATEMENT 2004 Current income tax Current income tax for the year –15,117

Deferred tax Deferred tax referring to change in temporary differences –168

Tax expense reported in the income statement –15,285

Reconciliation of effective tax expense for 2004 Profit before tax 593,890

Tax in accordance with current tax rate in Sweden, 28% 166,289

Tax effect of: Utilized loss carry-forwards previously not reported –20,092 Earnings participation in accordance with the equity method –130,482 Other non-taxable revenue –1,988 Non-deductible expenses 1,094 Other 464 The Group’s effective tax expense (2.6%) 15,285

Deferred taxes at Dec. 31 refer to the following: Deferred tax liability Depreciation for tax purposes in excess of plan –1,223 Properties –2,463 Pensions –822 Deferred tax liability, gross –4,508

Deferred tax assets Temporary differences from other securities held as non-current assets –755 Provision for pensions 10,606 Lending to employees –480 Deferred tax assets, gross 9,371

Hakon Invest AB suffered capital losses totaling SEK 680,476,000 on its holding of Ahold shares. In terms of tax, these losses can only be offset against gains on the sale of securities, which is why deferred tax assets are not reported.

NOTE 11 EARNINGS PER SHARE The Company’s Articles of Association state that preference shares have a preferential right to a dividend before common shares, amounting to SEK 4.20 annually. If it is decided to distribute an additional dividend, an amount corresponding to the total amount distributed for Series-B preference shares will be distributed among common shareholders, after which an additional dividend will be distributed equally among holders of common shares and preference shares.1) The number of shares has remained constant during the year. Basic earnings per share for common shares and preference shares is calculated by dividing the earnings for the year that accrue to the holders with the weighted average number of shares outstanding during the year, for each class. Diluted earnings per common share is not stated since a conversion of preference shares to common shares implies an increase in earnings per share.

1) The Articles of Association were amended in 2005, which is why the distribution of earnings no longer occurs as described here. The new Articles of Association may be found in the section of the prospectus entitled “Articles of Association.”

146 Consolidated financial statements in accordance with IFRS for the 2004 fiscal year The tables below show the earnings and number of shares used in the calculation of earnings per share for each share class: 2004 Net earnings that accrue to the holders of preference shares 289,303 Net earnings that accrue to the holders of common shares 289,303

THOUSANDS 2004 Weighted average of the number of common shares 121,317 Weighted average of the number of preference shares 39,600 160,917 The Board of ICA-handlarnas Förbund, which owns the common shares, has decided to propose to the Annual General Meeting of its members to abstain from a dividend on its holdings of 121,317,500 common shares. Therefore, a dividend will be paid only to holders of preference shares. No other transactions with common shares or potential common shares took place during the period from the closing date to the date of preparation of these financial reports.

NOTE 12 CONSTRUCTION IN PROGRESS DEC. 31, 2004 Opening acquisition value 4,835 Changes during the year – Purchases 4,741 Closing paid expenses 9,576 Construction in progress consists of IT systems.

NOTE 13 GOODWILL Goodwill amounting to SEK 61,666,000 refers to the acquisition of Forma Publishing AB, the former ICA-förlaget. The publishing operations for newspapers, magazines and other publications are fully integrated and comprise the cash-generating unit of Forma to which the goodwill amount refers. The recoverable amount for goodwill has been estimated on the basis of its value in use, which exceeded the book value. The present value has been calculated based on the future cash flow from the cash-generating unit. The future cash flow has been calculated based on four-year forecasts issued by Company management. The discount factor used is 10%. Estimates of cash flow beyond the four-year period are based on an annual growth of 2%.

NOTE 14 LAND AND BUILDINGS DEC. 31, 2004 Opening acquisition values 44,284 Opening depreciation –2,822

Changes during the year – Depreciation –861 – Translation differences –27 Closing accumulated depreciation –3,710

Closing reported value 40,574

Ratable values of building in Sweden 12,400 Ratable values of land in Sweden 6,051 18,451 The land accounts for SEK 1,990,000 of the acquisition value.

Consolidated financial statements in accordance with IFRS for the 2004 fiscal year 147 NOTE 15 EQUIPMENT DEC. 31, 2004 Opening acquisition values 102,058 Changes during the year – Purchases 19,864 – Sales and scrapping –42,677 Closing accumulated acquisition values 79,245

Opening depreciation –85,294 Changes during the year – Sales and scrapping 40,016 – Depreciation –8,899 – Translation differences –21 Closing accumulated depreciation –54,198

Closing reported value 25,047

NOTE 16 PARTICIPATION IN COMPANIES REPORTED IN ACCORDANCE WITH THE EQUITY METHOD 2004-12-31 Opening reported value 3,570,015

Changes during the year – Acquisitions 2,376,608 – Sales –495 – Dividend –1,868,520 – Profit from participations reported in accordance with the equity method 466,167 – Items reported directly under Equity –42,742 Closing reported value 4,501,033

BOOK VALUE SHARE IN GROUP NUMBER PAR VALUE PERCENTAGE % DEC. 04 EARNINGS ICA AB 2,000,000 200,000 40.0 4,495,963 466,006 Bra Förlag AB 250 25.0 750 Elektronikkforlaget AS 40 20.0 161 Trade Press AS 40 40.0 4,320 Total 4,501,033 466,167 The ownership interest above indicates the share of voting rights, which is also the same, in all cases, as the share of equity.

CORP. REG. NO. DOMICILE ICA AB 556582-1559 Stockholm Bra Förlag AB 556424-7921 Stockholm Elektronikkförlaget AS 975 341 550 Norway, Oslo Trade Press AS 966 705 086 Norway, Oslo ICA AB is one of the leading retail companies focusing mainly on food in the Nordic countries. Included in ICA AB are the subsidiaries ICA Sverige AB, ICA Norge AS, ICA Baltic AB, ICA Meny AB, ICA Banken AB and Etos AB. Netto marknad is 50/50 jointly owned with Dansk Supermarked A/S, while the newly formed RIMI Baltic AB is 50/50 jointly owned, as of January 2005, with Kesko Livs AB. The following table shows the income statement and balance sheet for the ICA AB group;

148 Consolidated financial statements in accordance with IFRS for the 2004 fiscal year BALANCE SHEET, SEK M DEC. 31, 2004 Intangible assets 2,015 Tangible assets 13,185 Financial assets 1,565 Inventories, etc. 3,509 Current receivables 7,586 Current investments 2,704 Cash and bank balances 524 Total assets 31,088

Equity 7,094 Provisions 1,548 Long-term liabilities 1,657 Current liabilities 20,789 31,088

INCOME STATEMENT 2004 Income 73,531 Gross profit 9,500 Operating profit 1,977 Profit after financial items 1,741 Profit after tax 1,515

In 2004, Hakon Invest AB carried out an additional acquisition of 10% of the shares in ICA AB. The difference between the purchase price paid and the acquired stake in ICA AB’s reported equity is calculated in accordance with the accounting principles applied within the Hakon Group and amounts to SEK 1,679,775. This amount is distributed among:

Properties 250,754 The ICA brand name 770,400 The ICA Meny brand name 21,600 The Rimi brand name 129,600 The ICA Meny customer database 3,600 Customer loyalty programs 20,160 ICA Banken software 15,120 Profit-sharing contracts 77,040 Goodwill 391,501 Total 1,679,775

Consolidated financial statements in accordance with IFRS for the 2004 fiscal year 149 NOTE 17 OTHER SECURITIES HELD AS NON-CURRENT ASSETS Other securities held as non-current assets consist mainly of investments within the framework of Skandia Investment.

NOTE 18 INVENTORIES, ETC. DEC. 31, 2004 Finished products: At acquisition value 22,463 At net sale value 0 Total inventories, etc., valued at the lower of acquisition value and net sale value 22,463 The inventory consist mainly of books. For the inventory, the cost of goods sold amounts to SEK 40,806,000. Revenue from book sales amounts to SEK 75,381,000.

NOTE 19 PREPAID EXPENSES AND ACCRUED INCOME DEC. 31, 2004 Production and distribution expenses 13,737 Other prepaid expenses 727 Accrued income 8,016 22,480

NOTE 20 INVESTMENTS Hakon Invest AB has significant liquidity management operation based partly on shares in Royal Ahold and partly on a finance portfolio that in 2004 was management by Carlson Investment Management and Handelsbanken. At year-end, Hakon Invest’s total liquidity amounted to approximately SEK 2.5 bn. The primary focus of the Company’s financial investments in Carlson Investment Management and Handelsbanken in 2004 was that the distribution should be 50% interest-bearing, 25% Swedish equities and 25% foreign equities. In 2004, the liquidity of the financial investments was gradually increased because of Canica’s anticipated sale of ICA AB shares and Hakon Invest’s interest in purchasing the same. The Ahold shareholding, which consists of 8,341,376 shares, was initially of a strategic nature, but in 2001 it turned into a purely financial investment. At year-end, the fair value of the Ahold shares amounted to SEK 425 million. The Ahold shares are listed in Euros, which implies a currency exposure.

Distribution of current investments: Shares 540,988 Hedge funds 397,391 Fixed-income securities 860,404 Ahold shares 425,240 2,224,023 A total of SEK 859 million of the financial investments was invested in Swedish fixed-income securities, of which 99% were issued by the Swedish state, housing finance institutions or banks. Only 7% had a remaining maturity of more than six months.

NOTE 21 LIQUID FUNDS Liquid funds consist of cash and bank balances amounting to SEK 288,527,000 and current investments amounting to SEK 216,425,000. The bank balance is invested with Handelsbanken. The investment carries floating interest based on SHB’s prime rate. Unutilized overdraft facilities amounted at December 31 2004 to SEK 300 million.

150 Consolidated financial statements in accordance with IFRS for the 2004 fiscal year NOTE 22 PROVISION FOR PENSIONS AND SIMILAR COMMITMENTS Hakon Invest has established a provision on its own balance sheet in accordance with the Pension Registration Institute (PRI) system. Its commitments are insured through the Pensionsgaranti company (FPG). For supplementary pensions for salaried employees (the ITP plan), the Company applies to so-called ten-point solutions involving vested premiums. Commitments over and above PRI and ITP have been insured through endowment insurance policies. Prior to 2005, Hakon Invest applied accounting principles in accordance with the Swedish Accounting Standards Board (BFN). This implied that the RR 29 recommendation would not be applied. Consequently, the company-owned endowment insurance policies and corresponding pension commitment were reported in gross. After the introduction of IFRS, these items were reported net.

The ITP plan Pension expense Defined-benefits plans: Expense relating to employment during the current year 2,577 Interest expense 5,702 Return on managed assets –23 Other 437 Total cost of defined-benefit plans 8,693 Cost of defined-contribution plan 8,344 Total pension expense 17,037

WHOLLY OR PARTIALLY INVESTED IN MUTUAL FUNDS Present value of commitments 128,082 Fair value of managed assets –1,009 Provisions at year-end 127,073 Opening balance 122,377

Cost of defined-benefit plans 8,693 Provisions taken into account –4,158 Reclassifications –31 Cost of defined-contribution plans 192 Closing balance 127,073

Assumptions for actuarial calculations: Discount rate 5% Return on managed assets 0% Future annual salary increases 3% Future annual pension increases 2%

Other pension commitments Other pension commitments are paid in amounts corresponding to the value of funds in mortgaged endowment insurance policies. The capital value of the commitment amounted on December 31, 2004, to SEK 37,708,000, thus corresponding to the value of the endowment insurance.

NOTE 23 ACCRUED EXPENSES AND PREPAID INCOME DEC. 31, 2004 Accrued vacation pay 14,407 Accrued social security contributions 4,979 Other accrued expenses 26,375 Total 45,761

Consolidated financial statements in accordance with IFRS for the 2004 fiscal year 151 NOTE 24 SHARE CAPITAL AND OTHER EQUITY Equity per December 31, 2004, subdivided in accordance with the Annual Accounts Act. 2004-12-31 RESTRICTED EQUITY Share capital 402,294 Restricted reserves 4,308,959

NON-RESTRICTED EQUITY Non-restricted reserves 1,953,784 Profit for the year attributable to equity holders of Parent Company 578,605 7,243,642

2004 SHARE CAPITAL NUMBER OF SHARES Common shares with a par value of SEK 2.50 per share 121,317 Preference shares (B) with a par value of SEK 2.50 per share 39,600 160,917

The shares have the same value (2.50) and the same number of voting rights. The share capital amounts to a total of SEK 402,294,000. Series-B preference shares must carry preferential rights to a dividend ahead of the common shares, by an annual amount of SEK 4.20 per share. If it is decided to issue an additional dividend for the specific year, an amount corresponding to the total amount payable for Series-B preference shares is to be distributed among the common shares. Any additional dividend shall be subsequently distributed equally among all of the Company’s common shares and preference shares of Series-B. Since the Series-B preference shares have received a dividend of not less than SEK 4.20 per share for at least three fiscal years starting in the year 2000, the Board may decide that all Series-B preference shares are to be converted to an equal number of common shares. The policy on the regular dividend on the Company’s preference shares is that the Company must distribute at least 70% of the dividend it has received from ICA AB for the fiscal year for which ICA Förbundet Invest distributes a dividend. The policy presupposes that the Company’s position and liquidity permit the distribution of a dividend of the scope specified.

RESTRICTED RESERVES 2004 Share premium reserve 2,689,402 Statutory reserve 83,202 Equity method reserve 1,536,355 4,308,959

The restricted reserves – that is, the reserves that may not be distributed – consist of the share premium reserve, the statutory reserve and the proportion of equity. In a limited liability company, the proceeds from subscription for shares, over and above the par value, are to be added to the share premium reserve. A portion of the reported net profit for the year shall be appropriated to the statutory reserve of the Parent Company, provided it is less than 20% of the share capital. The appropriation must be not less than 10% of the portion of the net profit for the year that is not used to cover the loss brought forward. Hakon Invest applies the equity method to calculate its participation for holdings for which the Company has a significant interest or joint controlling interest. An amount corresponding to the amount by which participations in companies reported in accordance with the equity method change compared with the preceding consolidated balance sheet is thus allocated to the equity method fund. PAID AND PROPOSED DIVIDEND 2004 Adopted and distributed during the year: Dividend on preference shares: Dividend for 2003, adopted by the Annual General Meeting in 2004: SEK 3.55 per share 140,580

Proposal for dividend presented to the Annual General Meeting: Dividend on preference shares: Dividend for 2004: SEK 8.20 per share (of which bonus of SEK 4 per share) 324,719

152 Consolidated financial statements in accordance with IFRS for the 2004 fiscal year ICA-handlarnas Förbund has decided to abstain from the dividend on 121,317,500 common shares, so a dividend will only be distributed for preference shares (39,599,936). The Board of Hakon Invest AB has decided to propose to the Annual General Meeting on May 11, 2005, that a dividend of SEK 4.20 be distributed. The Board also proposes a bonus dividend of SEK 4.00 per share. This implies that the Board is proposing that the Annual General Meeting approve a dividend totaling SEK 8.20. Refer also to Earnings per share, Note 11, regarding the rules on dividends in the Articles of Association.

NOTE 25 ADJUSTMENTS FOR ITEMS NOT INCLUDED IN CASH FLOW 2004 Depreciation of equipment 9,760 Valuation at fair value –58,626 Unpaid interest income –5,894 Change in provisions –24,274 Participations reported in accordance with the equity method –466,167 –545,201

Hakon Invest has not applied the RR7 recommendation of the Swedish Financial Accounting Standards Council previously, so reclassifications have now been carried out to achieve compliance with IAS 7.

NOTE 26 CASH EQUIVALENTS The consolidated cash flow statement includes cash equivalents at year-end 2004, amounting to DEC. 31, 2004 Cash and bank balances 288,527 Current investments (maturities of max. 3 months) 216,425 504,952

NOTE 27 COMMITMENTS AND CONTINGENT LIABILITIES

CONTINGENT LIABILITIES 2004 – Försäkringsbolagets Pensionsgaranti/guarantee 2,373 – Guarantee, loan to employees 142 2,515

Operational leasing contracts – Group as lessee Future minimum lease fees payable under operation leasing contracts amount to: 2004 Expense for the year 19,882

Within one year 10,869 After one year but within five years 29,686 After five years 6,828 47,383 The operational leasing contracts specified above pertain to rent for premises, renting of office machines and car rental. In addition to the above, Hakon Invest also rents office premises from ICA AB, for which the rental expense in 2004 amounted to SEK 1,419,000.

Consolidated financial statements in accordance with IFRS for the 2004 fiscal year 153 NOTE 28 INFORMATION ABOUT RELATED PARTIES

SALE PURCHASE AMOUNT AMOUNT TO CLOSE FROM CLOSE TO RECEIVE FROM TO PAY TO CLOSE CLOSELY ASSOCIATED PERSON ASSOCIATE ASSOCIATE CLOSE ASSOCIATE ASSOCIATE OR CORPORATE ENTITY SEK 000S SEK 000S SEK 000S SEK 000S ICA-handlarnas Förbund 2004 5,800 – 3,678 – ICA-handlarnas Medlemsservice AB 2004 200 – 150 – ICA AB 2004 80,481 3,911 1,206 953 Board members (other transactions) 2004 – 199 20 82 86,481 4,110 5,054 1,035

ICA-handlarnas Förbund ICA-handlarnas Förbund owns 75% of the common shares in Hakon Invest AB.

ICA-handlarnas Medlemsservice AB (formerly ICA Förbundet Intressenter AB) ICA-handlarnas Förbund owns 100% of ICA-handlarnas Medlemsservice AB.

ICA AB Hakon Invest owns 40% of ICA AB.

Transactions with Board members During the year, consulting fees for assistance in corporate and legal issues were paid to the law firm of Jan Lundberg, which is owned by Jan Lundberg. The consulting fees paid in 2004 amount to SEK 198,710.

Benefits to employees in management positions For information on benefits to senior executives, see Note 4.

NOTE 29 TRANSITION TO IFRS (See also Note 1)

The effect of changed accounting principles on reported earnings and on opening and closing equity.

EQUITY PROFIT/LOSS EQUITY ON DEC. 31 JANUARY 1, 2004 IN 2004 DECEMBER 2004 In accordance with previously applied accounting principles 6,947,688 497,295 7,277,377 A Differences in capital value and pension expense in accordance with defined-benefit pension plan 2,307 3,372 5,679 B Capital value and pension expense relating to pension commitments previously not reported –29,557 26,813 –2,744 Deferred income tax pertaining to the above items 7,630 –8,452 –822 C Change in fair value of financial instruments 7,856 43,871 51,727 D Translation to IFRS accounting for companies that are reported in accordance with the equity method –87,445 –15,837 Result from participation in companies reported in accordance with the equity method –27 E Goodwill amortization pertaining to investment in the company reported in accordance with the equity method 11,622 –75,850 Reclassification of tax expense in companies reported in accordance with the equity method –56,998 E Goodwill amortization, acquisition of operations 4,111 4,111 D Reclassification of tax expense in companies reported in accordance with the equity method 56,998 In accordance with IFRS 6,848,479 578,605 7,243,641

154 Consolidated financial statements in accordance with IFRS for the 2004 fiscal year A Defined-benefit pension commitments were previously reported in accordance with the Law on safeguarding pension commitments. Consequently, Hakon Invest AB has not applied the RR29 recommendation of the Swedish Financial Accounting Standards Council, Employee benefits. The Group has mainly defined-benefit pension plans. Under IAS 19, the commitment to pay pension in accordance with defined-benefit plans is reported separately for each plan via the so-called projected unit credit method (PUCM), which takes future salary increases into account. Recalculation to comply with IAS 19 implies a reduction of the balance sheet item. Provision for pensions and similar commitments. In the income statement, administrative expenses decrease by SEK 3,372,000.

B In December 2004, Hakon Invest AB absorbed a SEK 29,557,000 pension expense on its income statement. Since this pension expense referred to earnings attributable to prior years, the pension expense – that is, administrative expenses for 2004, and the balance-sheet item Provision for pensions and similar commitments – has been adjusted.

C Investments have previously been reported in accordance with the general recommendation of the Swedish Accounting Standards Board, which implies valuation at the lower of acquisition value and fair value. Under IAS 39, certain financial assets are reported at fair value. For Hakon Invest, this implies that investments are valued at fair value. Hakon Invest has opted to apply the valuation rules stipulated in IAS 39 to the recalculation of its 2004 figures as well. Under IAS 39, all investments are valued at acquisition value the first time they are reported in the balance sheet. The acquisition value corresponds to the fair value of the consideration remitted, including expenses attributable to the acquisition. After the first time an investment is accounted for and classified as financial assets reported at fair value or as assets that may be sold, it is valued at fair value. Changes in the fair value of “financial assets reported at fair value via the income statement” are reported as revenue or expenses. Changes in the value of assets that may be sold are reported as a separate part of equity until the investment has been sold, payment has been received or the asset has been divested in some other way, or when the investment is written down, when the accumulated change in value reported previously under equity is transferred to the income statement. In the income statement, the value of financial instruments increases by a total of SEK 43,871,000 (share portfolio SEK 28,832,000 and long-term securities SEK 15,038,000). A total of SEK 7,856,000 referring to long-term securities has been booked against the opening balance.

D The financial reports for companies reported in accordance with the equity method (ICA) have been recalculated in accordance with IFRS. In 2004, Hakon Invest AB increased its ownership of ICA AB by 10%. The analysis of this acquisition has been adjusted in accordance with IFRS 3. The reporting of acquisitions in accordance with IFRS 3 implies that to a greater extent than previously intangible assets may be identified and valued separately from goodwill. Such assets, assumed, and other assets and liabilities assumed, such as commitments that may lead to payments are valued at their fair value at the time of acquisition. The same valuation method applies to acquisitions of participations in companies reported in accordance with the equity method. The net effect of the recalculation to achieve compliance with IFRS is SEK 27,000, the sum of SEK 2,500,000 pertaining to the effect of ICA AB’s IFRS-related changes plus a loss of SEK 2,527,000 pertaining to additional amortization of identified surplus values. For specification of surplus values, see Note 16. Unlike previously, the Group’s share in the tax expense of companies reported in accordance with the equity method under the income-statement item Result from participation in companies reported in accordance with the equity method. In accordance with the previously applied principle, this was included in the consolidated tax expense.

E As previously, goodwill is reported as an intangible asset in the balance sheet. In accordance with IFRS, goodwill is not amortized – however, the value is impairment tested annually to determine whether it should be written down. The amortization carried out in 2004 in accordance with previously applied principles is reversed, reducing administrative expenses relating to goodwill in Forma and result from participation in companies reported in accordance with the equity method with respect to goodwill in ICA. The value of goodwill is also reviewed with respect to a possible need of an impairment when events or changes in circumstances indicate that the reported value may not be recoverable. As of January 1, 2004, the value of goodwill was not recalculated but rather reported in the opening balance at its value on December 31, 2003. No need of an impairment has been identified.

Consolidated financial statements in accordance with IFRS for the 2004 fiscal year 155 Audit report

In our capacity as the auditors of Hakon Invest AB, we have examined this prospectus. The examination has been carried out in accordance with the recommendation issued by the institute for the accounting profession in Sweden, FAR. The Annual Reports for the 2002 and 2003 fiscal years have been audited by Ire Lindstrand and Jan Eriks- son and the Annual Report for the 2004 fiscal year has been audited by Ire Lindstrand and Klas Alm, without qualification in the Audit Reports. The information in the prospectus extracted from these annual reports is reproduced correctly. We have reviewed the interim report for January to September 2005. Forward-looking information has not been reviewed by us. Nothing has come to our attention that causes us to believe that the prospectus does not comply with the requirements of the Swedish Companies Act and the Financial Instruments Trading Act.

Stockholm, November 17, 2005

Ire Lindstrand Erik Åström Authorized Public Accountant Authorized Public Accountant SET Revisionsbyrå AB Ernst & Young AB

156

Hakon Invest AB (publ) Box 1508 SE-171 29 Solna, Sweden Visiting address: Svetsarvägen 16 Tel. +46 8 55 33 99 00 www.hakoninvest.se